Square beats the street thanks to growth of new products

While Twitter continues to struggle as a public company, Jack Dorsey’s other business seems to be doing pretty well. Today payments company Square announced earnings, beating the street with a narrower loss than expected — $0.04 per share — on revenues of $452 million for the fourth quarter 2016.

These results are a vast improvement over last year’s fourth quarter, when the company lost $0.34 per share on revenues of $374.4 million. It also was better than Wall Street’s forecast of $0.09 loss per share on revenues of $450 million for the quarter. Thanks to better-than-expected results, Square’s share price increased 5 percent in after-hours trading.

Square saw growth in all vectors of its business, with traditional payment processing growing at a 30+ percent clip year-over-year. But it’s the acceleration of Square Capital and other new-ish products that are dominating its growth strategy.

Square’s revenues come off of gross payment volume of $13.7 billion, which is up 34 percent from the prior year. For the full year, the company processed $50 billion worth of payments, up 39 percent from 2015.

Growth in payments volumes ticked up as the company continued to move further away from its original business of serving mom-and-pop shops and sole sellers to larger businesses. Square’s GPV from that segment of larger sellers grew 47 percent year-over-year.

While transaction volume was driven by its bigger partners, the company also sees an opportunity to better serve small and medium-sized businesses with the introduction of new products and services. A good example of this is its Square Capital lending business, where the company facilitated more than 40,000 business loans totaling $248 million over the quarter, an increase of 68 percent from a year ago.

Square Capital is just one part of its “new products” category, which the company designates as things launched since 2014. That includes Invoices, Instant Deposits, API access and other services, which together represented 25 percent of its adjusted revenue for the quarter.

Square made a small change in how it accounts for revenues, splitting it into “transaction-based revenues,” which includes money it makes from payment processing, and “subscription and services-based revenue,” which is comprised of Square Capital, Caviar and Instant Deposit revenue.

On the transaction-based side of things, Square saw revenues increase 35 percent, to $402 million in the quarter. Subscription and services-based revenue, while smaller, grew 81 percent, to $41 million in the same quarter. Hardware sales, which represent the smallest portion of its revenue mix, grew to $8.9 million as more vendors continue to upgrade to contactless and chip-card readers.