Case Study About Financial Analysis of Square, Inc.

Subject: Company Analysis
Pages: 2
Words: 587
Reading time:
3 min

Introduction

The current high-level case study provides a thorough financial analysis of Square, Inc. (SQ). SQ is an American company specializing in financial operations, digital payments, and merchant services (Cussen, 2021). The organization was established by Jack Dorsey and Jim McKelvey in 2009 (Cussen, 2021). The underlying principle that initiated the development of the company is an easy-to-use service (Cussen, 2021). At the moment of establishment, digital and card payment types were still in the initial phases of expansion and were associated with complex procedures and time-consuming operations (Rauch, 2015). Dorsey and McKelvey wanted to implement an easy-to-use system that would allow merchant services and digital payments without additional complications (Rauch, 2015). As a result, a square-shaped card reader was developed that could be inserted into most types of electronic devices and enable credit and debit card payments (Rauch, 2015). Even though the company was established in 2009, SQ went public only in 2015 after receiving seven private funding rounds equal to approximately $500 million (Crunchbase, 2021). At present, SQ is a global company operating in several countries, including America, Australia, Japan, and others.

The Mission of the Company

The primary financial problem that the company is trying to solve is the issues associated with digital payments. At present, SQ has two major products, namely, Cash App and the Point-of-Sale system (Cussen, 2021). The former includes the software service, which is a peer-to-peer payment system (Eckstein, 2021). The Point-of-Sale model refers to the hardware, which SQ is distributing to businesses of all sizes and revenue (Eckstein, 2021). The Cash App model charges up to 2,75% per payment either via the software application or a prepaid Visa card (Eckstein, 2021). The intended customer base of SQ comprises individuals and businesses of all sizes (Eckstein, 2021). Digital payments are becoming more popular, and SQ has a large number of competitors, including PayPal, Google Pay, and Apple Pay (Eckstein, 2021). To gain a competitive advantage in the market, SQ allowed bitcoin exchange in 2017, Cash Boost (discounts in restaurants) in 2018, and Square Card in 2019 (Eckstein, 2021). Ultimately, the company continually proposes innovative ways to achieve competitive positions in the market.

Financial Domain

As mentioned before, SQ primarily operates in financial services and online payments. The two major business segments are Cash apps and selling services, such as hardware solutions and payment operations (Reiff, 2021). During the past ten years, the industry of digital payments has changed significantly, and SQ has also undergone major developments during the period (Reiff, 2021). Recent developments include the rise of cryptocurrency and innovative integration systems (Reiff, 2021). However, due to the density of the market populated by PayPal, Google, and Apple, SQ needs to find even more creative ways to attract customers.

Business Impact

Nevertheless, despite the high levels of competition in the market, SQ has achieved significant results in the past five years. The overall revenue of the company has increased by approximately 500% in the last five years, and the earnings of SQ continually exceed analysts’ expectations (Johnston, 2021). For instance, the SQ Q1 2021 report demonstrates that earnings per share (EPS) have surpassed expectations by almost 400%, the revenue exceeded the expectation by 266%, and gross payment value (GPV) – by 210% (Johnston, 2021). The constant increase in the key metrics transparently demonstrates the thoughtful financial policies of the company and product development course. The extensive investments in bitcoin and other types of cryptocurrency have also been highly beneficial for SQ and might further separate the company from its competitors.

References

Crunchbase. (2021). Square. Web.

Cussen, M. P. (2021). What is Square, Inc.? Web.

Eckstein, J. (2021). How Square’s cash app makes money. Web.

Johnston, M. (2021). Square Q1 2021 earnings report recap. Web.

Rauch, C. (2016). Square, Inc. – Business model, venture financing and valuation: A case study. SSRN Electronic Journal. Web.

Reiff, N. (2021). How Square makes money. Web.