Square Inc (SQ) Q1 2019 Earnings - Revenue Grows, Cash App Users Grow, Stock Price Declines

Square Inc. reported its 2019 first-quarter earnings on Tuesday, May 1, 2019, after the market closing bell. Here is a paraphrase of the key highlights from the call and our analysis below.

Key Highlights for Q1 2019 Earnings Calls for Square Inc.

Call Presenter	Key Points
CEO Jack Dorsey	The ecosystem is the strongest competitive differentiator: Benefits employees and customers Launched Square for retail in 2019 Q1 Launched Square Online Store in 2019 Q1 to enable an omni-channel experience for sellers. Launched in Australia, Canada, UK, and the US. Square Invoices launched globally in all markets  Japan market presents growth opportunity in 2020 due to: Government focus on improving the digital payment economy. New partnership with a bank to improve market share. Two new products for better customer experience.
CFO Amrita Ahuja	Strong revenue growth at scale. Continue to build out the seller ecosystem. Raising net revenue guidance by $60m (2% higher than prior) for the full year 2019. Focus on reinvesting back in business and ecosystem.

Questions by Audience:

• What is fueling the upside of the cash app? Where are you prioritizing the investments? (JP Morgan).
• How many of "Cash App" users being monetized? How is the "Cash Card" business coming along? (Wolfe Research)
• What is the strategy for adding payroll to the Square register? (Chang's Pizza Cone)
• How should we think about the seller card adoption curve and pipeline of opportunities in general? (KeyBanc)
• What is the further development and traction on the vertical-specific software? (Goldman Sachs)
• How is the online store adoption in the current seller population? (Moffett Nathanson)
• What is Square's progress in the international markets? (Evercore ISI)
• What is Square's strategy to win mid-size and large sellers over the competition? (Deutsche Bank)
• What is Square's strategy to integrate a larger e-commerce market? (Barclays)
• Is Square seeing more competition? (William Blair)
• Should the market track trend of Cash App closely as it is helping with better results? (RBC Capital Markets)
• How Square thinks about market consolidation, mergers, acquisitions? (Morgan Stanley)

Links to the Square Inc Q1 2019 Earnings call

Audio Transcript

Next Quarter Earning Call - August 1, 2019

Why Stock Fell?

From the call, there were no indications of the business weakness of Square Inc. In spite of stellar growth, on May 2, 2019, investors reacted adversely on the Square Inc. stock and stock closed 8% lower. I believe that investors reaction is over-reaction and a scare for small investors to run out. The reinvestment theme was all over Jack's and Amrita's comments. When the company is reinvesting in strengthening its business ecosystem and deepening its relationship with the current customer base, it is bound to widen the loss in short term, however it positions the company strongly for growth in the long run. 

Key highlights for me were:

1) Cash App active user volume grew 2.5 times.

2) 20% cash card utilization.

3) Employee payroll management within the ecosystem.

4) Low customer acquisition costs.

5) Focus on markets and customers where Square sees the strength

Disclosure:

I own Square Inc.(SQ) stocks and remain bullish as a long term investment on Sqaure Inc.