Square Vs. Clover: How Their POS Growth Differs

Restaurants and food ordering, along with hardware sales, boosted the point-of-sale strength of Square in the second quarter — trends that could help the company in its competition against First Data-owned Clover.

Days after First Data released its Q2 financial results, Square did so after the market close on Wednesday (Aug. 1). It said that Caviar, the food ordering system being integrated into the Square for Restaurants point-of-sale offering, was a main contributor to the 127 percent year-over-year growth in subscription and services-based revenue, to $134 million.

Overall gross payment volume reached $21.4 billion during the second quarter of 2018, up 30 percent year over year. Square did not break down GPV further. By comparison, Clover has been processing in excess of $65 billion in transaction volume on a global basis, up 50 percent year over year.

“Caviar is growing rapidly,” said Square CEO Jack Dorsey during Wednesday’s post-earnings conference call with investors. “The revenue in the second quarter of 2018 more than doubled year-over-year.” He did not release detailed figures but added that “25 percent of food order volume is from restaurants that are exclusive to Caviar.”

The integration of Caviar with Square for Restaurants promises to lead more POS-related growth for Square, he said, as food businesses “constrained by the number of tables they have in their physical space or how quickly they can turn them over” rely more on Caviar for fresh revenue. “We think there’s a lot of potential around that.”

Larger Sellers

He also noted that 60 percent of Square for Restaurants sellers have installed the technology on their own, which is “rather unusual for the industry. Typically, restaurants go to the point-of-sale provider, and they need help to set everything up.”

For businesses that use Square for Restaurant, the average annualized gross payment volume stands at more than $650,000, Dorsey said, which he said demonstrates that the product is resonating with larger sellers.

In fact, larger sellers — those defined as doing more than $125,000 of annual GPV — played a bigger part in Square’s overall Q2 financials than they have historically. Those sellers accounted for 50 percent of overall volume during the second quarter, up from 46 percent from the same period last year.

That appears to stand in contrast to the situation with First Data’s Clover point-of-sale operation, which remains “primarily an SMB solution,” said First Data chief financial officer Himanshu Patel during that company’s post-earnings conference call earlier this week.

The Square Stand and Square Register POS products drove the 78 percent year-over-year growth in hardware revenue in the second quarter, to $18 million. “Square Register does bring on slightly larger sellers, so we see an average GPV of about $300,000,” said Square CFO Sarah Friar during Wednesday’s call. And “about one-third of those orders are coming from new-to-Square sellers, and we’d expect that to continue to grow over time because the base will ultimately fully upgrade.”

Future Outlook

So what’s next?

For Clover, international expansion is on tap. After launching in Germany and Austria earlier this year, Clover will debut in Argentina and Canada during the coming months, First Data said this week.

For Square, the plans offered during the conference call were more vague than that, but aggressive in scope. Friar said the United States has some 300,000 restaurants, which together produce $300 billion in gross receipts annually. “When you get outside the U.S., it’s about double that,” she said. “So clearly, tons of opportunity.”

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