Square beats estimates, showing it's more than a payments player

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Square Inc. reported earnings that exceeded analysts’ expectations and raised its full-year forecast, bolstered by larger merchants that are increasingly using its platform for payment transactions and buying business software services.

Adjusted revenue rose 45 percent to $257 million in the third quarter, compared with the average estimate of $245.3 million. The San Francisco-based company processed $17.4 billion in gross payment volume, an increase of 31 percent from a year before and more than analysts’ anticipated.

Square shares have more than tripled in the past year as investors see value in its all-in-one hardware products for small and medium-sized businesses. In addition to processing payments, Square has been adding services -- like employee and inventory management -- that make running a company easier. Square’s merchant-lending businesses has also grown rapidly, and those higher-margin services have been contributing a growing share of revenue, offsetting the slowdown in payments transaction growth.

Square has tried to attract new sellers by creating products specific to different merchant groups. Last month, it unveiled a counter-top device built for larger customers. Square has also rolled out point-of-sale services for retailers and restaurants.

Chief Executive Officer Jack Dorsey, who also runs Twitter Inc., has expanded Square’s ambitions in the banking industry. Earlier this year Square filed for an industrial loan company charter, which could save Square money by eliminating the need for a loan-origination partner. With the charter, Square would be allowed to raise deposits, thereby increasing Square’s flexibility to keep or sell loans and reduce its reliance on investors, according to David Ritter, a Bloomberg Intelligence analyst.

Adjusted earnings before interest, tax, depreciation and amortization were $34 million, or 7 cents a share, compared with an average analyst estimate of 5 cents a share. For the full year, Square predicted adjusted revenue of as much as $966 million, up from a previous forecast of as much as $935 million. Earnings per share excluding some items are expected to be 24 cents to 25 cents, up from an earlier forecast of as much as 23 cents.

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