01—Abstract
Summary
Summary of the 10-K filed March 10, 2016. Cited figures are marked; the original filing is the authoritative source.
Square, Inc. (now Block, Inc.) reported total net revenue of $1,267.1 milliona for 2015, up 49% from $850.2 million in 2014, while its net loss widened to $179.8 million from $154.1 million.
Adjusted Revenue, a non-GAAP measure that excludes Starbucks activity and transaction costs, grew to $452.2 millionb, up 64%. Gross Payment Volume reached $35.6 billion across 712 million card payments. The company stated its Starbucks payment processing agreement will expire in the third quarter of 2016 and that Starbucks will transition to another processor, so total net revenue may decrease meaningfully going forward.
Transaction revenue remained about 83% of total net revenue, while software and data product revenue, led by Square Capital and Caviar, rose to 5% of total net revenue from 1%. The company's accumulated deficit was $607.6 millionc at year-end 2015. Its IPO on the New York Stock Exchange closed in November 2015, generating net proceeds of $245.7 million, and cash and cash equivalents stood at $470.8 million.
Class B shareholders held approximately 99.0%d of voting power as of December 31, 2015, and the company has never paid cash dividends. The filing also discloses ongoing litigation with Robert E. Morley and REM Holdings 3, LLC over patent inventorship and a claim of an alleged joint venture in the formation of Square, for which the company stated it was unable to estimate a possible loss.
The filing states that the company expects its rate of revenue growth to decline, and it reports ongoing investment in product development, sales and marketing, and international expansion. Management described the company as not yet profitable and said existing cash and credit facility availability are sufficient to meet working capital and planned capital expenditures for at least the next 12 months.
02—Key points
Key Highlights
- Total net revenue of $1,267.1 million in 2015, up 49% from $850.2 million in 2014
- Net loss of $179.8 million in 2015, compared with $154.1 million in 2014; accumulated deficit of $607.6 million
- Adjusted Revenue (non-GAAP) of $452.2 million, up 64%; Gross Payment Volume of $35.6 billion
- Starbucks has announced it will move to another payment processor and cease using Square's services before the agreement expires in Q3 2016, so total net revenue may decrease meaningfully
- Software and data product revenue grew to 5% of total net revenue from 1%, driven by Square Capital and Caviar
- IPO closed November 2015 with net proceeds of $245.7 million; cash and cash equivalents of $470.8 million at year-end
- Dual-class structure: Class B holders controlled approximately 99.0% of voting power as of December 31, 2015
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2015, Block lost $0.14.
- Revenue$1.27B100.0%
- Cost of revenue−$897.1M70.8%
- Gross profit$370.0M29.2%
- Operating costs−$544.5M43.0%
- Operating income−$174.5M13.8%
- Interest, other & tax−$5.4M0.4%
- Net income−$179.8M14.2%
04—Financials
Financial Highlights
Figures from 10-KFY2015filed March 10, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $1.27B$850.19M | +49.0% |
| Cost of Revenue | $897.09M$624.12M | +43.7% |
| Gross Profit | $370.03M$226.07M | +63.7% |
| R&D Expenses | $199.64M$144.64M | +38.0% |
| Operating Expenses | $544.49M$376.56M | +44.6% |
| Operating Income | -$174.46M-$150.49M | −15.9% |
| Net Income | -$179.82M-$154.09M | −16.7% |
| EPS (Basic) | $-1.24$-1.08 | −14.8% |
| EPS (Diluted) | $-1.24$-1.08 | −14.8% |
| Shares Outstanding (Basic) | 170.50M142.04M | +20.0% |
| Shares Outstanding (Diluted) | 170.50M142.04M | +20.0% |
05—Questions
Frequently Asked Questions
How much revenue did the company generate and how fast did it grow?
Total net revenue was $1,267.1 million for 2015, up 49% from $850.2 million in 2014, and $850.2 million in 2014 was up 54% from the prior year. Transaction revenue made up 83% of total net revenue in both 2015 and 2014.
Is the company profitable?
No. The company reported net losses of $179.8 million in 2015, $154.1 million in 2014 and $104.5 million in 2013, and it stated that it intends to keep investing substantially in its business, so it may not achieve or maintain profitability.
What is the risk from the Starbucks relationship?
Starbucks has announced it will transition to another payment processor and stop using Square's payment processing services before the agreement expires in the third quarter of 2016. Starbucks was the only customer above 10% of total net revenue in 2013 through 2015, and the company said its total net revenue may decrease meaningfully going forward.
What ongoing litigation does the filing disclose?
The company is litigating with Robert E. Morley and REM Holdings 3, LLC over patent inventorship and in a complaint alleging that Square's formation constituted a breach of an alleged joint venture and other claims. The company stated it is unable to estimate a possible loss or range of loss, and it is also defending a putative class action by Caviar couriers over classification as independent contractors.
Who controls voting power at the company?
Holders of Class B common stock, which carries ten votes per share, held approximately 99.0% of the voting power of outstanding capital stock as of December 31, 2015. Executive officers and directors and their affiliates held approximately 58.2%.
06—Continue