Square Is Adding 100,000 Sellers Per Quarter

Mobile merchant Square has more than 2 million active sellers and is adding about 100,000 per quarter, according to CFO Sarah Friar.

Square had a solid quarter and should break even by mid-2016, investors heard yesterday on the company’s earnings call. The company processed transactions worth $10.2 billion in 4Q, up 47% over the year-ago quarter, and total net revenue was $374 million, up 49% year over year.

Fourth-quarter adjusted EBITDA at Square was a loss of $6 million, compared to a loss of $11 million in the fourth quarter of 2014.

Square also extended more than $400 million on 70,000 loans through its lending arm, Square Capital in 2015, with $150 million coming in the fourth quarter. More than 90% of those who have been offered an additional loan have accepted, the company said. The 70,000 loans went to about 50,000 sellers, Friar said.

The average loan duration is six to nine months, and the average loan size is $6,000, she said.

Friar noted that Square Capital had cost the company little to date:

So, products like Square Capital, we’ve grown to the scale with almost zero customer acquisition costs. It doesn’t mean at some point we won’t do customer acquisitions, maybe use Square Capital as its own on ramp to Square, maybe not payment processing, but starting out with something like Capital to bring you onto the platform to do things like payments.

She later expanded on the company’s privileged position in the world of small business lending due to the data it has access to from core business:

There are two sides to capital and we feel very good about the demand coming from seller base and we’re fulfilling a real need that they have. On the investor side, I think a couple of points. First of all, we started to work with investors so that we could both accelerate the product, but it also helps us manage the risk on our balance sheet and we want to continue that motion. We are absolutely going to keep working with third parties, as well as utilizing our balance sheet to some degree….

So, we do have the data that you want, if you’re going to underwrite well. And that is the payment data. So, we’re really able to understand how someone’s business is trending and it’s almost a daily market that we get. Where we get it almost every single day, how business across the United States is trending.

It appears that most of Square’s future growth looks like it might come from Square Capital.