 "Jack Dorsey")
For months, a prime question facing Jack Dorsey has been how he will juggle being the chief executive of two complicated companies he helped found — Square, the recently public mobile-payments company, and Twitter, the ailing social network in search of new users.
It looks as if leading Square may be giving Dorsey a bit less difficulty than rejuvenating Twitter. On Wednesday, Square posted a 49 per cent increase in revenue in its first earnings report as a public company, with sales rising to $374 million in the fourth quarter and beating analysts' expectations. And while Square's net loss more than doubled from a year ago, the company, which is based in San Francisco, also highlighted growth in a number of its ancillary software businesses.
Contrast that to the difficulties facing Dorsey at Twitter. Twitter is struggling to attract more users, while fighting to keep its old ones from leaving. In recent weeks, Dorsey has also grappled with prominent departures from Twitter's executive team.
And the company must fight off huge competitors like Facebook, Instagram and Snapchat, which are nibbling away at features that make Twitter so delightful to more than 320 million people.
“As long as the business is growing and the numbers are like what we saw today, his two jobs are not going to be a concern,” Gil Luria, managing director at Wedbush Securities, said of Dorsey and Square. “It might be an issue for Twitter investors, but not for Square investors.”
Dorsey has repeatedly said that he splits his time between his companies, meeting with executives from Square and Twitter every Monday. He said he maintained a strict schedule thereafter, with checkpoints on Wednesday and Friday to keep him on track throughout the week.
“I can split my time and be present at both companies every single day,” Dorsey said in an interview on Wednesday, noting that Square and Twitter are across the street from each other. “It's not something I stress out about.”
Square's earnings on Wednesday were also being scrutinised for the greeting that other technology companies might receive if they go public. Square's initial public offering in November on the New York Stock Exchange occurred during a tumultuous climate for tech offerings. Etsy, the online marketplace, now trades at about $8, a little more than half its offering price last April.
Other companies that went public last year, like the online storage company Box, are also trading well below their stock prices a year ago. Box's shares rose on Wednesday in after-hours trading after it posted better-than-anticipated quarterly results. In 2016, seven IPOs have been made from across all industries, the least since 2009, according to data compiled by Dealogic. The dearth is largely because of volatile markets that make pricing and selling new shares more difficult. In the meantime, investor attitudes have grown more conservative.
“If you look over the past few years at a lot of recent tech IPOs, there was an almost myopic focus on growth,” said Josh Beck, a research analyst for Pacific Crest Securities. “We've seen a correction and a different focus in the last year. Now everyone is really looking for a path to profitability.”
Square executives said on Wednesday that they were also looking for it to become profitable and that they expect to reach that goal this year.
While the company's net loss in the fourth quarter widened to $80.5 million from $37.1 million a year earlier, that was largely because of a one-time charge.
And there were high points. Square processed $10.2 billion in global payments, up 47 per cent from a year ago.
Its software and services businesses - like Caviar, Payroll and Appointments, which are offered to small businesses with Square’s core payments processing — are also growing at a healthy clip, generating $22 million in fourth-quarter revenue, more than triple from a year earlier. Square is also bullish on Square Capital, its cash-advance program for small businesses, which is another high growth area.
Square said it made $150 million in cash advances in the fourth quarter through Square Capital; the company earns a fixed fee on each advance.
Perhaps what investors appreciate most about Dorsey's leadership at Square are his choices in executive staff. He has brought in former Facebook, Amazon and Google executives. Wall Street particularly praises Square's chief financial officer, Sarah Friar, a former Goldman Sachs technology analyst.
“It's very important given this arrangement to have someone like that that provides another important layer of leadership,” Mark Palmer, a financial analyst at BTIG LLC, said of Friar. “Frankly Square is wise to highlight her role. It's not just Jack out there.”
