Earnings Results: Square gives a rosier revenue forecast after Caviar sale, but earnings outlook is light

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Square Inc. has a rosier view of revenue for the rest of the year after shedding an underperforming business unit and seeing better-than-expected momentum in its seller and consumer units.

The stock was up about 1% in after-hours trading.

The company’s top-line forecast is made more complicated by Square’s sale of its Caviar food-delivery business in late October, but management raised its full-year outlook both including and excluding Caviar’s impact.

Square SQ, +0.46%  now projects $4.560 million to $4.580 million in total net revenue for 2019, up from a prior forecast of $4.410 million to $4.470 million. Excluding Caviar, it expects $4.415 million to $4.435 million, compared with an earlier forecast of $4.220 million to $4.280 million.

See also: Square rolling out zero-fee stock trading on its Cash App

The company said it was raising its outlook “due to underlying trends in our Seller and Cash App businesses as well as bitcoin outperformance in the third quarter.” Square’s profit forecast came up light, however, as the company projects 19 cents to 21 cents in adjusted earnings per share. The FactSet consensus was for 25 cents. Square topped profit expectations in its latest quarter.

Management plans to reinvest in its business following the Caviar sale, and Chief Financial Officer Amrita Ahuja cited three priorities for the seller business. Speaking on a media call following the report, she said that marketing campaigns are driving “strong early results” and driving an uplift in “revenue contribution from new cohorts.” Marketing will remain a priority, as will “dynamic” pricing decisions on hardware following success with recent price reductions. The company will also expand its sales and account management teams.

On the Cash app, Square also plans to invest in sales and marketing. The company recently rolled out equity-trading on the Cash app and Ahuja said that Square views the feature as “an engagement driver at this point in time” meant to bring more people into the company’s ecosystem. She disclosed that those using Square for bitcoin trading, a feature launched over a year ago, are twice as likely to have a Cash debit card, and Square is able to monetize that product through interchange fees. The company sees instant deposits as another monetization arm of the Cash app.

Read: Roku shares slump 15% on widening loss

Square said that total net revenue for its Cash app was $307 million in the third quarter, while gross profit for the app was $123 million. Excluding bitcoin, revenue was $159 million and gross profit was $121 million.

Overall, the company posted third-quarter net income of $29 million, or 6 cents a share, after recording net income of $20 million, or 4 cents a share, in the year-prior quarter. Adjusted earnings per share climbed to 25 cents from 13 cents, whereas analysts surveyed by FactSet were modeling 20 cents.

Square posted total revenue of $1.27 billion for the quarter, or $602 million after subtracting transaction-based costs and bitcoin costs. Excluding those costs, the company generated $431 million in revenue a year ago, and analysts were expecting $597 million for this latest quarter.

Gross payment volume increased to $28.2 billion from $22.5 billion and came just above the FactSet consensus, which called for $27.9 billion. Square disclosed that 55% of volume came from sellers doing more than $125,000 in annualized gross payment volume. These sellers accounted for 54% of volume in the June quarter.

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Square shares have risen 9.3% so far this year, while the S&P 500 SPX, +0.07%  has climbed 23%.

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