In a letter to shareholders, Square announced: “We are currently negotiating an amendment that may extend the agreement beyond the third quarter to allow Starbucks additional time to complete its transition, which has been taking longer than anticipated.”
Announced nearly four years ago to the day, Square struck a partnership with one of the world’s top companies, powering its credit and debit card payments across the U.S. In return, Starbucks invested $25 million into the commerce company and placed its president and chief executive Howard Schultz on the board. At the time it was billed as being Square’s first major partnership with a national chain, driving itself on as the company pursued a public offering.
However, when Square filed paperwork with the U.S. Securities and Exchange Commission (SEC) for its initial public offering, it revealed that the partnership was a bust, and the company shared that the deal would come to an end in the third quarter: “We … anticipate that Starbucks will transition to another payment processor and will cease using our payment processing services prior to the scheduled expiration of our payment processing agreement with them in the third quarter of 2016.”
In its S-1 filing, Square revealed that in 2012, it received $9.47 million in revenue from Starbucks, with the amount increasing to $114.45 million a year later and $123 million in 2014. But if you looked at the transaction costs, it’s was a very telling story: Square paid $12.54 million in fees in 2012, $139.8 million in 2013, and $150.96 million in 2014.
This quarter, Square said that $33 million in revenue was generated through its Starbucks deal with a profit of $4 million. This is different from a year ago when there was $34 million in revenue and a loss of $7 million.
Updated at 2:11 p.m. Pacific on Wednesday: Headline has been clarified to state that Square is working with Starbucks to handle payment processing while transition is in place.