Square Pitch Deck

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Transcript of Square Pitch Deck

  • 1. The Simplest Way to Make MoneyElizabeth Cheng | Jing-Jing Li | Irwin Liu | Jessica Lukrich

2. The Square Proposition Simple pricing: Huge market Inspiring and2.75%2 75% per swipeopportunityexperienced in mobile management paymentsteamZero friction: no commitment and daily depositHigh future SolidS lid valuationbusinessand ROImodel withFree iPhone, iPad, even withhigh revenue Android app andlater stageg generation ca d eadecard readerinvestment Defensiblebusiness and strongThe simplest way executionto make moneystrategy1 3. Management Team Theteamhasthebackground,proventrackrecordandvisiontosucceedJack Dorsey Co-Founder, CEO Successfully Managing Co-Founder, Chairman of Twitter Advisor at UstreamKeith Rabois COO VP of Strategy & Business f St t B iDevelopment for Slide VP of Business & CorporateDevelopment at LinkedIn EVP of Business Development and fB i D ltdPolicy for PayPalBob Lee CTO Founder at Twubble Software Engineer at Google Other Key AdvisorsGideon YuRoelof BothaJim McKelvey Co-Founder Ryan Gilbert Owner at Mira Alyssa Milano Co-founder at Third Degree GlassGreg KiddFactory Andrew Rasiej2 4. The Market Mobilepaymentsisamassive,rapidlygrowingbutunderpenetratedindustry$250 $214 CAGR 10 14: 68%$200 $162$150 $119$$100$81$46 $50$16 $0201020112012 201320142015Dollar Amount of Mobile Payments In The U.S. (billions)*OpportunityMarket Changes Square Positioning Traditional card readers Rapidly burgeoning interest First mover advantage are unwieldy & expensivein mobile payments Scalable across Difficult for small business NFC tech adoption butmultiple platforms owners to use card services credit card usage prevails Low costs address Alternative online services Capturing a loyal user basetarget customer needs are expensive has huge revenue potential*Source:Aite Group 3 5. The ProductSquaresatisfiesbuyersandvendorsthroughaneasytoadoptplatform Consumer DesiresDesignate amount Use credit cards Swipe and goVendor Desires e do es es Swipe credit card Accept credit cards Save on processing feesEnter tip and sign Simple and intuitivewith finger on-screeninterfaceTransactioncompleted The TechnologyTransactionMagnetic reader that plugs into headphone jack of smartphoneData ConversionOnce card is swiped, data is converted into an audio signalInformation Processing Processors route signal to Square software applicationTransmission Encrypted data sent through Wi-Fi or 3G to back-end serversCommunicationNo info stored on devices, auto-communication with payment network 4 6. Value to UserSquareoffersthesimplestandmostcompellingwaytoacceptcreditcards Traditional Card Online Card Processing Firms ProcessingEase ofTied to computer;Scan and go;Requires some training;Use Manual inputIntuitive interface Problems require technician of card informationE Expensive reader; Costs Free card reader;Up to 5% variable + 30 flat rate;Up to 3.5% variable rate Flat 2 75% fee2.75%Expensive upda e a d pe s e update and + 30 flat rate a ae C maintenance feesSaves money; nefitsCheaper than traditional; Saves time;Familiar to user; Only requires computer and Accessible across Technical support Ben internet multiple devices5 7. Customer AcquisitionThroughwideexposure,Squaretargetsanyonethatseekseasypayment Target Customer Small businesses, independent workers, individuals selling goods Market: anyone who accepts payments SSquares C t gaining customer awareness + free card reader Cost: i it f ddSelling Points AdvertisementRetail Easy convenient Social media and Selling througheveryday usageinternet advertising g online registration g No surprise fees Traditionaland Apple stores Adaptable acrossmediums with max Follows razor blademultiple devicesexposure/min costretail modelAcquiring 100,000+ customers per month6 8. Competition and Defensibility ItsestablishedpresenceandnichemarketgiveSquareacompetitiveedge Square Characteristics Advantages Direct Competitors: Similar technologygy Established clienteleGoPayment, PAYware applicationas first mover Higher fees and rates No credit check for certain options No monthly fees Intuit or VeriFone Device compatibility service support Apple partnershipEmerging Market: Built-in hardware for Built in POS experience Near Field NFi ldphones Compatible acrossCommunications Potentially eliminatediffering hardware use of credit cards Unique market focus Cross interaction with Can integrate NFC other phone appsthh technologyt h l7 9. Financial Model and Projections SquarewillmakeforalucrativeinvestmentevenwithconservativeprojectionsBy Year End2011E2012E2012E2014E2015EPayments Processed Per Day ($ y y ($mm) ) 1.1 7.7 23.1 41.6 49.5 Growth Rate1000% 600% 200% 80%19%Annual Revenue$ 10.59 $ 74.11 $ 222.34 $ 400.21 $ 476.25EBITDA0.534.4520.0144.0252.39g EBITDA Margin 5%6% 9%11%11%EBIT0.322.9613.3428.0133.34 EBIT Margin 3%4% 6% 7% 7% $120 Assumptions p $100 Investment: $20m$80 Stake: 20%$60 Hurdle Rate: 15%$40$20 $- IRR of 55%2011E 2012E 2013E 2014E 2015E Sale or IPO at 2.5x BestBaseWorst 2015 Revenue8 10. Why Invest NowAdditionalinvestmentwillgenerateoutsizereturnsduetogrowthprospectsNeed for Additional InvestmentHigh Potential for Growth Additional resources Potential for growth will needed to maintain allow new investors to first mover advantagesee an outsized return Competitive pressuresCustomer adoption will increasing scale up exponentially Expected spe d in pec ed spend The key to success will y advertising andbe in locking in a loyal customer acquisition customer base early * Additional $27.5 capital from Sequoia and$20.0new investor $ $10.0 co so u consortium ProposedSeries ASeries BSeries C9 11. Exit Strategies SquarewillhavemultipleexitopportunitiesthatwillresultinahighROI Highly Viable M&A ProspectsIPO Considerations Depends on user base Multiple buyers possible competitive biddingexpansion success and Valuable user base with recurring revenue streamconsideration of M&A Clear fit into product portfolios High standalone potential Large Companies Competing in Potential Valuation Mobile SpaceService Providers 2 $700mm-$1.4bnRev and Hardware ManufacturersEBITDA $450mm-1 $800mm $800Payment Processors$400 0 $700 500 $1000 1000 $1300 $160015002000($mm) 10 12. Appendix IndexofPresentationandAppendixSlidesPresentation SlidesAppendix S desppe d Slides1. The Square Proposition Financial Assumptions2. Management Team Financial Model3. h3 The Market k t Assumptions from A tif4. The Product Comparables5. Value to User Future Valuation Perspective6. Customer Acquisition Concerns and Responses CdR7. Competition and Partnerships Defensibility Company Vision8. Financial Model and Market Analysis Projections9. Why Invest Now10. Exit Strategies 13. Financial Assumptions GrowthexpectedtoscaleexponentiallyandvaluationwillincreaseM DGrowth Assumptions Expected to process $40 million in transactions in Q1 of 2011O R Currently signing up 100,000 merchants per month y g g p,p Compare to 30,000 monthly signups last Fall.D I $1 million in payments per day Processing a few million in mobile transactions per week as of last fallE VL EValuation Assumptions Valued at $240m after last round of funding in January 2011 ($27.5m)g ()R Valued at $40m at first round of funding in December 2009 ($10.0m)S Sources DealBook, TechCrunch, Wall Street Journal, VentureBeat, Capital IQ 14. Financial ModelBy Year End By Year End2011E 2011E2012E 2012E 2012E2013E 2014E 2014E2015E 2015EPayments Processed Per Day y ( ) ) Payments Processed Per Day ($mm) yyy ($ ($mm)1.11.1 7.77.7 23.1 23.1 41.641.58 49.5 49.4802 Growth RateGrowth Rate1000%1000% 600% 600% 200% 200% 80% 80%19%19%Annual Revenue Annual Revenue$ 10.59 $ $ 10.59 $74.11 $ 222.34 $ 400.21 $ 476.25 74.11 $ 222.34 $ 400.21 $ 476.25EBITDA MarginEBITDA5%0.536%4.459%20.0111% 44.0211%52.39 EBITDA Margin EBITDA$0.53 $ 5% 4.45 $ 6% 20.01 $ 9%44.02 $11%52.3911%EBIT MarginEBIT a g0 3%0.32324% %2.962 966%13.3413 34 7% 28.01 28 0133 7%33.3434 EBIT$0.32 $2.59 $13.34 $29.22 $ 34.77 EBIT Margin 3%4%6% 7% 7% Growth Assumptions2011E 2012E 2013E 2014E2015E Best Case1000%800%400%100%50% Base Case1000%600%200% 80%19% Worst Case 1000%200%100% 20% 5% EBIT2011E 2012E 2013E 2014E2015E Best$0.32 $3.34 $ 28.59 $ 69.56 $ 104.34 Base$0.320 32 $2.592 59 $ 13.34 13 34 $ 29.22 29 22 $34.7734 77 Worst $0.32 $1.11 $3.81 $5.56 $ 5.84NPV & IRR Calculation2011E 2012E 2013E 2014E 2015ESale$(20.00) (20 00) $0.060 06 $0.520 52 $2.672 67 $5.845 84 $6.956 95 $238.12238 12NPV @ 15%$ 79.95IRR 55% * represents 20% stake 15. Assumptions from Comparables MarginprojectionsderivedfrommedianofcomparablecompaniesCompany NameLTM Gross LTM EBITDALTM EBITLTM Net LTM TotalMargin % Margin %Margin % Income Revenues, 1 Yr Margin %Growth %Ebay Inc.72.0% 31.0%22.7% 19.7%4.9%Gerber Scientific Inc. 30.7%4.5% 2.9%(3.0%)21.0%Iltron IncInc. 30.9% 30 9% 14.0% 14 0% 8.2% 8 2%4.6% 4 6%33.9% 33 9%Iteris Inc.43.5%8.3% 6.4%(8.3%)(1.2%)Mastercard Incorporated 100.0% 53.3%50.7% 33.3%8.6%PAR Technology Corp. 26.1%2.7% 1.6%1.3%7.6%Perceptron Inc.37.3%0.8% (1.0%)1.9%30.4%VeriFone Systems Inc Inc.37.7% 37 7% 14.8% 14 8%11.3%11 3% 11.3%11 3%24.3% 24 3%Veritec Inc. 60.8% (64.2%)(67.8%) (86.5%) 108.0%Visa Incorporated84.4% 60.0%56.8% 37.0%17.0%Summary StatisticsLTM Gross LTM EBITDALTM EBITLTM NetLTM TotalMargin %MiMargin %Mi Margin % M iIncome RIRevenues, 1 Y Yr Margin %Growth %High100.0% 60.0%56.8%37.0% 108.0%Low26.1% (64.2%)(67.8%)(86.5%)(1.2%)Mean 52.3% 12.5% 9.2% 1.1%25.5%Median 40.6%11.2%7.3%3.3%19.0% 16. Future Valuation Perspective SquaresvaluationwouldpriceatpremiumtomultiplesduetoearlystageCompany Name TEV/Total TEV/EBITDA LTMTEV/EBIT LTM -NTMNTM NTM ForwardRevenues LTM -- Latest LatestTEV/Forward TEV/ForwardP/ELatestTotal Revenue EBITDAEbay Inc.3.83x12.34x16.88x3.3x9.4x15.9xGerber Scientific IG b S i tifi Inc.0.49x 0 49 10.95x10 95 16.80x16 80 0.5x057.9x7921.9x21 9Iltron Inc.0.71x 8.55x11.10x0.7x6.3x16.5xIteris Inc.1.18x 8.47x14.51x1.2x7.7x13.0xMastercard Incor