UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-K
______________________

(Mark One)
☒
FORM 10-K
(Mark One)
ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
OR
For the fiscal year ended December 31, 2017
OR
☐
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to
 Commission File Number 001-37622

For the transition period from  ________ to ________
Commission File Number 001-37622
______________________
BLOCK, INC.
(Exact name of registrant as specified in its charter)
______________________
Delaware
SQUARE, INC.
(Exact name of registrant as specified in its charter)
Delaware80-0429876
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)

1955 Broadway, Suite 600
Oakland, CA 946121
(Address of principal executive offices, including zip code)

(415) 375-3176
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
1455 Market Street, Suite 600
San Francisco, CA 94103
(Address of principal executive offices, including zip code)
(415) 375-3176
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.0000001 par value per shareSQNew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ý NO o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES o NO ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ý NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ý NO o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b‑2 of the Exchange Act. (Check one):
Large accelerated filer ý
Non-accelerated filer o (Do not check if a smaller reporting company)
Accelerated filer o
Smaller reporting company o
     Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES o NO ý
Securities registered pursuant to Section 12(g) of the Act: None


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b‑2 of the Exchange Act.

Large accelerated filer ☒Accelerated filer ☐Non-accelerated filer ☐Smaller reporting company ☐Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐No ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, based on the closing price of a share of the registrant’s Class A common stock on June 30, 20172023 as reported by the New York Stock Exchange on such date was approximately $6.4$38.5 billion. Shares of the registrant’s Class A common stock and Class B common stock held by each executive officer, director and holder of 5% or more of the outstanding Class A common stock and Class B common stock have been excluded in that such persons may be deemed to be affiliates. This calculation does not reflect a determination that certain persons are affiliates of the registrant for any other purpose.


As of February 22, 2018,16, 2024, the number of shares (in thousands) of the registrant’s Class A common stock outstanding was 283,432,014and the number of shares of the registrant's Class B common stock outstanding was 112,924,272.were 555,180and 60,513, respectively.


Portions of the registrant’s Definitive Proxy Statement relating to the Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. Such Definitive Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year ended December 31, 2017.2023.

1We have adopted a distributed work model and, therefore, have no formal headquarters. This address represents our "principal executive office," which we are required to identify under Securities and Exchange Commission rules.






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SPECIALCAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS


This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “appears,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Annual Report on Form 10-K include, but are not limited to, statements about our future financial and operating performance, our expectations regarding transaction and loan losses, the adequacy of our allowance for loan losses on loans held for investment, or increased delinquencies, and the impact of inaccurate estimates or inadequate reserves, our anticipated growth and growth strategies and our ability to effectively manage that growth, our ability to invest in and develop our products and services to operate with changing technology, the expected benefits of our anticipated expansionproducts to our customers and growththe impact of our products on our business, our expectations regarding product launches, the expected impact of the integration of Afterpay Limited ("Afterpay"), trends in Gross Payment Volume (GPV)our markets and revenue,the continuation of such trends, our expectations related to our plans for international expansion,to cap our employee base, our plans with respect to patents and other intellectual property, our expectations regarding litigation and regulatory matters and the adequacy of reserves for such matters, our expectationexpectations regarding future revenue from Starbucks,share-based compensation, our expectations regarding the impacts of accounting guidance and the timing of our compliance therewith, our expectations regarding restricted cash, and the sufficiency of our cash and cash equivalents and cash generated from operations to meet our working capital and capital expenditure requirements.

We have based these forward-looking statements on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, prospects, business strategy, and financial needs. The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties, and other factors described in the section titled “Risk Factors” and elsewhere in this Annual Report on Form 10-K. We operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Annual Report on Form 10-K. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

All forward-looking statements are based on information and estimates available to us at the time of filing this Annual Report on Form 10-K and are not guarantees of future performance. We undertake no obligation to update any forward-looking statements made in this Annual Report on Form 10-K to reflect events or circumstances after the date of this Annual Report on Form 10-K or to reflect new information or the occurrence of unanticipated events, except as required by law.



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PART I
ItemITEM 1. BUSINESS



Our Business


At Block, Inc. (together with its subsidiaries, "Block" or "we"), we are building an ecosystem of ecosystems, each focused on distinct customer audiences. We define an ecosystem as a set of tools and services that work together cohesively, often positively reinforcing one another. This helps create resilient relationships with customers as they use our tools and services to satisfy multiple needs. Our ecosystems are united by our shared purpose of economic empowerment, with each ecosystem serving different people — sellers, consumers, artists, fans, and developers. As we scale, we are focused on investing in developing connections between our ecosystems and by creating more connections to increase the resilience of our overall company.

On December 1, 2021, we changed our corporate name from Square, Inc. to Block, Inc. Block is the name for the company as a corporate entity. Since our start in 2009 with the Square business, we have added Cash App, TIDAL, and TBD as businesses.

Our two reportable segments are Square, formerly referred to as Seller, and Cash App, which reflects our two primary ecosystems and the manner in which the Company's chief operating decision maker ("CODM") reviews and assesses performance. We have historically allocated the financial results from our buy now, pay later ("BNPL") platform equally to the Cash App and Square segments. In the fourth quarter of 2023, we changed our management reporting structure and moved the business activities and management of our BNPL platform fully under Cash App. We believe that this transition will allow us to better focus on consumer based commerce as well as the development of its financial tools within Cash App.

Square Ecosystem

We started Block with the Square ecosystem in February 2009 to enable businesses (sellers)("sellers") to accept card payments, an important capability that was previously inaccessible to many businesses. However,As our company grew, we recognized that sellers also need innovativea variety of solutions to thrive and saw how we could apply our strength in technology and innovation to help sellers. We have since expanded to provide additional products and services to give these businesses access to the same tools as large businesses. This approach aligns with our purpose of economic empowerment, as everything we do should give sellers accessible, affordable tools to grow their businesses and participate in the economy.

Square isinto a cohesive commerce ecosystem that helpsprovides more than 30 distinct products and services to help our sellers start, run, and grow their businesses. We combine sophisticated software, with affordable hardware, to enable sellers to turn mobile and computing devices into powerful payment and point-of-sale solutions. We have high seller acceptance rates and fast onboarding, while maintaining low risk and fraud losses as a result of our approach to risk management that emphasizes data science and machine learning. We focus on technology and designfinancial services to create products and services that are cohesive, fast, self-serve, and dependable.elegant. These attributes differentiate usSquare in a fragmented industry that traditionally forces sellers to stitch together hardware, software,products and payments services from multiple vendors.vendors, and often rely on inefficient non-digital processes and tools. Our ability to add new sellers efficiently, help them grow their business, and cross-sell our products and services has historically led to continued and sustained long-term growth.


The foundation of our ecosystem is a full service, managed payments offering. Once a seller downloads the Square Point of Sale mobile app, they can quickly and easily take their first payment, because we can typically bring them onto our system in minutes. With our offering, a seller can accept payments in person via magnetic stripe (a swipe), EMV (Europay, MasterCard, and Visa) (a dip), or NFC (Near Field Communication) (a tap); or online via Square Invoices, Square Virtual Terminal, or the seller’s website or app. Once on our system, sellers gain access to technology and features such as reporting and analytics, next-day settlements, digital receipts, payment dispute and chargeback management, security, and Payment Card Industry (PCI) compliance. In the same way that we have empowered businesses with fast, simple, and cohesive tools, we see an opportunity with Cash App to build a similarEcosystem

Cash App provides an ecosystem of financial products and services for individuals. Currently, ourto help consumers manage their money. Cash App’s goal is to redefine the world’s relationship with money by making it more relatable, instantly available, and universally accessible. While Cash App offers individuals access to a fast, easy waystarted with the single ability to send and receive money, electronically to and from individuals and businesses. We also offer Cash App customers the ability to useit now provides an ecosystem of financial services focused on helping consumers make their funds via a Visa debit card. We have also recently added functionality to Cash App to enablemoney go further by enabling customers to buystore, send, receive, spend, invest, borrow or save their money with Cash App.

Emerging Ecosystems

We are also making modest investments in two relatively nascent and sell bitcoin.emerging ecosystems related to TIDAL and bitcoin, in order to serve new audiences.


TIDAL Ecosystem

In 2021, we completed the acquisition of a majority ownership interest in TIDAL, expanding our purpose of economic empowerment to artists. TIDAL is a global platform for musicians and their fans that uses unique content, experiences, and features to bring fans closer to artists and to provide artists with tools to succeed as entrepreneurs. TIDAL offers an extensive catalog of more than 132 million songs and 774,000 high-quality videos. TIDAL has a global presence with listeners in more than 60 countries and relationships with more than 200 labels and distributors.

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Bitcoin Ecosystem

Our commercebitcoin ecosystem also includes powerful point-of-sale software and services that help sellers make informed business decisions through the use of analytics and reporting. As a result, sellers can manage orders, inventory, locations, employees, and payroll; engage customers and grow their sales ; and gain access to business loans through our Square Capital service. We monetize these features through either a per transaction fee, a subscription fee, or a service fee. Some of these advanced point-of-sale features are broadly applicable to our seller base and include Employee Management and Customer Engagement. We have also extended our ecosystem to serve sellers with more specific needs. Our Build with SquareTBD, which is an open developer platform (application programming interface or APIs) allows businessesfocused on making the decentralized financial world accessible for everyone, our bitcoin hardware projects, which include Bitkey, a self-custody bitcoin wallet, a bitcoin mining system, Spiral, an independent team focused on contributing to bitcoin open source work. We believe our bitcoin ecosystem can help address inefficiencies in the current financial system, especially with individualized needsrespect to customize their business solutions, including integration with third-party applications, while processing payments onidentity and trust.

Our Customers

Our Square and taking advantage of all the services in our ecosystem. In addition, certain verticals, such as services and retailSellers

Square sellers benefit from specific features such as Invoices, Appointments, and Square for Retail. We also serve sellers through Caviar, a food ordering service for pickup and delivery that helps restaurants reach new customers and increase sales without additional overhead.

We have grown rapidly to serve millions of sellers that represent a diverse setrange of industries including(including services, food-related, and retail services, and food-related businesses,businesses) and sizes, ranging from a single vendor at a farmers’ marketsole proprietors to multi-locationmultinational businesses. TheseSquare sellers also span geographies, including the United States, Canada, Japan, Australia, andNew Zealand, the United Kingdom.Kingdom, Ireland, France, and Spain. We believe the diversity of our sellers underscores the accessibility and flexibility of our offerings. We are also increasingly serving mid-market sellers, which we define as sellers that generate more than $500,000 in annualized Square Gross Payment Volume (“Square GPV”), due to our ability to offer more flexible and complex solutions than traditional alternatives, as well as a growing product suite. For the years ended December 31, 2023, 2022, and 2021, none of our customers accounted for greater than 5% of Square GPV. We define Square GPV as the total dollar amount of all card payments processed by sellers using Square, net of refunds, and ACH transfers.

In the year ended December 31, 2017, we processed $65.32023, more than 4 million sellers used the Square ecosystem to make 4.0 billion individual sales transactions totaling $209.6 billion of Gross Payment Volume (GPV), which was generated by 1.4 billion card paymentsSquare GPV. These sales transactions originated from approximately 287733 million payment cards. We processed $49.7 billioncards, across 271 million buyer profiles.

The charts below show the percentage mix of our Square GPV by seller industry and $35.6 billion of GPV in 2016 and 2015, respectively.seller size for the year ended December 31, 2023:


Our ability to add new sellers efficiently, and help them grow their business after they join our platform, has led to continued and sustained growth. Our existing sellers also represent a sizable opportunity to up-sell and cross-sell products and services with little incremental sales and marketing expense.Square GPV by Industry Chart 2023 (1).jpg





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5






GPV Mix by Seller 2023 (1).jpg

Operating Metric Overview (
Our Cash App Customers

As of December 2023, Cash App had 56 million monthly transacting actives across the United States and the U.K. In 2023, across the iOS App Store and Google Play, Cash App was the number one finance app and the number ten app overall in thousands, except for GPV, percentagesthe United States, based on downloads. Cash App has a diverse mix of customers, and perin the United States, Cash App had monthly transacting actives in each of the 50 states and nearly every county as of December 2023.

In 2023, Cash App transacting actives brought more than $248 billion in inflows into Cash App. Customers can fund their Cash App accounts with inflows in a variety of ways, including by receiving money from another Cash App customer through the app’s core peer-to-peer transfer service, transferring money from a bank account, depositing mobile checks, adding physical cash at participating retailers, and receiving a recurring paycheck by direct deposit. In 2023, each Cash App monthly transacting active brought in an average of $384 of inflows in a given month during the year. A transacting active is a Cash App account that has at least one financial transaction using any product or service within Cash App during the specified period. Examples of transactions include sending or receiving a peer-to-peer payment, transferring money into or out of Cash App, making a purchase using Cash App Card, earning a dividend on a stock investment, and paying back a loan, among others. Certain of these accounts may share data)an alias identifier with one or more other transacting active accounts. This could represent, among other things, one customer with multiple accounts or multiple customers sharing one alias identifier (for example, families).



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 Year Ended December 31, 2016 to 2017 2015 to 2016
 2017 2016 2015 % Change % Change
Gross Payment Volume (GPV) (in millions)$65,343
 $49,683
 $35,643
 32% 39%
Total net revenue$2,214,253
 $1,708,721
 $1,267,118
 30% 35%
Adjusted Revenue$983,963
 $686,618
 $452,168
 43% 52%
Net loss attributable to common stockholders$(62,813) $(171,590) $(212,017) 
 
Adjusted EBITDA$139,009
 $44,887
 $(41,115) 
 
Net loss per share attributable to common stockholders:         
Basic$(0.17) $(0.50) $(1.24)    
Diluted$(0.17) $(0.50) $(1.24)    
Adjusted Net Income (Loss) Per Share:         
Basic$0.30
 $0.04
 $(0.39)    
Diluted$0.27
 $0.04
 $(0.39)    
Cash App Transacting Actives Chart 2023 (1).jpg




Cash App Annual Inflows 2023 (1).jpg

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Our Products and Services

Managed Payments SolutionsSquare Ecosystem


The foundationOur Square ecosystem consists of more than 30 distinct software, hardware, and financial services products that provide cohesive Commerce, Customer Relationship Management, Staff Management, and Banking capabilities. Our products are designed to be self-serve and intuitive to make initial setup and new employee training fast and easy, although we also offer full-service setup and support. They are also flexible enough to serve the needs of both small, single location and large, complex multi-location sellers. Our products are integrated to create a seamless experience and enable a holistic view of sales, customers, employees, and finances. We believe the breadth and depth of our products and services provide us unique advantages in best serving the needs of our sellers through a holistic view of their businesses. We supplement these first party capabilities with our open developer platform that enables integrations with third-party applications. We monetize these products through a combination of transaction, subscription, and service fees.

Strategic Priorities: Our focus for Square is on four priorities: maintaining our secure, and flexible multi-product platform, providing a “local” experience to sellers of all sizes, growing with artificial intelligence (“AI”), and further developing our banking offering.

•Platform: It is critical that we have a strong foundation to build upon to serve external customers through our developer platform and partner ecosystem, and our internal team's first party products. This includes increasing reliability of our platform and also introducing products and features that are most important to our customers.

•Local: Our go-to-market strategy is focused on verticals with a local approach, specifically restaurants and services-based businesses. Growing upmarket has shown us that even larger sellers want to feel authentic to their buyers. We can enable this type of robust offering through our technology and by improving the onboarding process through sales and account management.

•Artificial Intelligence (AI): We are focused on enabling growth by leveraging AI to increase productivity and outcomes for our sales and marketing, customer service, and engineering efforts, in addition to building features that help sellers grow their businesses.

•Banking: Our robust banking offering primarily helps our sellers manage cash flow and grow their business through our lending capabilities. We will continue to drive trust with our sellers, and build products and features that help with sellers accessing funds securely and timely.
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Product Slide_Jan 2024.jpg


Commerce

Square's commerce products help sellers make sales and track orders, inventory, and fulfillment across in-person and online channels, as well as first-party and third-party channels. Most of our Square software products have a free tier (without a subscription fee), which we monetize only through transaction fees on card payments. Most software products also have premium tiers with additional functionality, which we monetize through subscription fees in addition to transaction fees on payments.

•Square for Restaurants is a fullvertical solution tailored for both quick-service and full-service restaurants. It includes table, order, and course management; a kitchen display system; and revenue and cost reporting.

•Square Appointments is a vertical solution tailored for appointment-based businesses that need a point-of-sale application with integrated booking capabilities. Square Appointments includes a free online booking site so buyers can easily schedule appointments and select their preferred time, service, and staff member. It is also integrated with Square Assistant, an AI-enabled automated messaging tool that responds to buyers efficiently and professionally, saving sellers' time and helping prevent missed appointments.

•Square for Retail is a vertical solution tailored for sellers in the retail industry. It includes advanced inventory management, cost of goods sold reporting, purchase orders, vendor management, and barcode scanning.

•Square Point of Sale is a general purpose point-of-sale application for businesses that need an easy-to-use, customizable point-of-sale solution that adapts across business types and stages.

•Square Online makes it easy to build a website and online store as well as sell on Instagram and Facebook. The online store is mobile responsive, delivering an app-like ordering experience on a buyer’s phone. With integrated support for QR code ordering, sellers can also streamline their in-store operations by posting the QR code and having their buyers order from their own phones. Fulfillment options include pickup, delivery managed by our sellers, and integrations with partner delivery platforms. Orders, items, inventory, and customer data stay in sync when selling both online and in-person.

•Square Online Checkout makes it easy to sell online without a website by allowing sellers to create a checkout link with only a name and price for their good or service.
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•Square Invoices is a customizable digital invoicing solution with integrated and secure online payment acceptance. This eliminates the need to print and mail statements to customers and wait for checks to arrive. Sellers use Square Invoices for upcoming, recurring, or previously delivered goods and services, such as catering orders, contractor services, lessons, and retail orders. Square Invoices also lets sellers send estimates and collect partial payments offering. Sellers can onboard to Square in minutesfor goods and once onboarded, accept payments in person via swipe, dip, or tap of a card; online via services.

•Square Virtual Terminal or theallows sellers to use a computer as a card terminal. Sellers can take a payment, set up recurring billing, record sales, and send digital receipts for payments, including those made by check and bank transfer.

•Risk Manager gives sellers insight into online payment fraud patterns and enables them to set custom rules and alerts to manage risk. Machine-learning algorithms automatically identify fraud patterns and adapt to fit a seller's operations.

•Order Manager allows sellers to manage online orders that originate from Square Online, their own website on another platform, and third-party websites including online marketplaces such as DoorDash. Order Manager enables tracking open orders, managing prep times and busy times, and marking orders as completed.

•Payment APIs (application programming interfaces) and SDKs (software development kits) support in-person, online, and mobile payments. Square Reader SDK enables developers to seamlessly integrate Square hardware with a seller’s custom point of sale, allowing them to build unique checkout experiences such as self-ordering kiosks powered by Square’s managed payments service. With Square's online payments APIs, developers can integrate Square payments into a seller’s e-commerce website or app; oronline store. Square's In-App Payments SDK enables developers to build consumer mobile apps that use Square to process payments. These products are monetized primarily through transaction fees on payment volumes.

•Commerce APIs: Square offers more than 30 commerce APIs, through which developers can create and manage orders, subscriptions, product catalogs, inventory, customer profiles, employees, loyalty programs, gift cards, and more to build applications that enrich and integrate with Square's ecosystem of products. In addition, these APIs enable developers to build integrations with their existing business systems such as accounting, customer relationship management (“CRM”), employee management, and enterprise resource planning (“ERP”) software.

For card payments, Square acts as the Cash App. By payingmerchant of record for the transaction as well as the payment service provider (“PSP”). As the merchant of record, Square is the party responsible for settling funds with the seller and helps manage transaction risk loss on behalf of the seller. Square’s managed payments offering for sellers includes payment dispute management, data security, and PCI compliance for a transparent transaction fee paid by sellers. Square has negotiated terms and entered into contractual arrangements directly with other service providers of transaction processing services, including the acquiring processors and card networks, and indirectly with issuing banks. These contracts include negotiated terms, such as more favorable pricing, that are generally not available to sellers receive technologyif they were to contract directly with these sub-service providers. Square's position as the merchant of record helps us better serve our sellers. For example, as the merchant of record, we can more efficiently onboard new sellers through our website, leveraging our risk assessment models, and featureswe have insights into transaction-level data that allow themwe use to manage the entire payment lifecycle, including reportinginform our sellers and analytics, next-day settlements (or instant settlement for an additional transaction fee via Instant Deposit), digital receipts, payment dispute and chargeback management, security, and PCI compliance. Transaction-based revenue as a percentage of GPV was 2.94%, 2.93%, and 2.95% in the years ended December 31, 2017, 2016, and 2015, respectively.launch new products.

Hardware

Hardware
Our affordable, custom-designed
Square custom-designs hardware that can process all major card payment forms, including magnetic stripe, EMV chip, and NFC technology.(contactless). Sellers canare able to accept cards issued by Visa, MasterCard,Mastercard, American Express, or Discover, for one transaction fee. Additionally,JCB, Interac Flash (in Canada), e-Money (in Japan), and eftpos (in Australia). Square hardware can be integrated with additional accessories such as cash drawers, receipt printers, scales, and barcode scanners to provide sellers in Canada can accept Interac Flash, and sellers in Japan can accept JCB. Ourwith a comprehensive point-of-sale solution. Square's hardware portfolio includes the following products:following:


Magstripe reader: Our magstripe reader enables swiped transactions of magnetic stripe cards by connecting with an iOS or Android smartphone or tablet.

Contactless and chip reader: This reader accepts EMV chip cards and NFC payments, enabling acceptance via Apple Pay, Android Pay, and other mobile wallets. The reader connects wirelessly or via USB.

Chip card reader: Our chip card reader accepts EMV chip cards and enables swiped transactions of magnetic stripe cards by connecting with an iOS or Android smartphone or tablet.

Square Stand: This hardware enables an iPad to be used as a payment terminal or full point of sale solution. It features an integrated magnetic stripe reader, provides power to a connected iPad, and can connect to the contactless and chip reader wirelessly or via USB. Square Stand also connects to various peripheral devices that brick-and-mortar businesses need, such as barcode scanners and receipt printers.

Square Register: During the fourth quarter of 2017, we launched •Square Register our firstis an all-in-one offering that combines our hardware, point-of-sale software, and payments technology. Square Register does not require a third-

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party mobile phone or tablet, and it contains connections for Ethernet, Wi-Fi, and a USB hub so sellers can integrate with peripheral devices. The dedicated hardware consists of two screens: a seller display and a customer display with a built-in card reader that accepts tap, dip, and swipe payments.


Software
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•Square Terminal is a portable, all-in-one payments device and receipt printer to replace traditional keypad terminals. It accepts tap, dip, and swipe payments and has a battery that lasts all day, enabling payments anywhere in the store.

•Square PointStand enables an iPad to be used as a payment terminal or full point-of-sale solution. It features an integrated contactless and chip reader.

•Square Reader for contactless and chip accepts EMV chip cards and NFC payments, enabling acceptance via Apple Pay, Google Pay, and other mobile wallets.

•Square Reader for magstripe enables swiped transactions of Sale is our point-of-sale software that can be downloaded tomagnetic-stripe cards by connecting with an iOS or Android device, is pre-installed on Square Register, and is designed to get a seller (and their employees) up and running quickly. It consists of managed payments solutions and advanced software products, all of which are integrated with one another to provide both sellers and their buyers with a cohesive experience that is fast, self-serve, and dependable. Square Point of Sale includes Square Dashboard, our cloud-based reporting and analytics tool that provides sellers with real-time data and insights about sales, items, customers, and employees. This enables sellers to make informed decisions about their business.smartphone or tablet via the headphone jack or Lightning connector.


Within Square Point of Sale or Square Dashboard, a seller can use Square Invoices to securely collect payments by creating a custom digital invoice and then sending it to their customer. Square Invoices is integrated withCustomers

Square’s Customer Directory and synced across Square Point of Sale and Square Dashboard, allowing the seller to easily track invoices, send payment reminders to the customer, and set recurring billing. Sellers may use Square Invoices for upcoming or previously-delivered goods and services, such as catering orders, contractor services, and retail orders. Sellers pay only a transparent transaction fee for this managed payments solution.

For sellers with a more complex business or multiple employees and/or locations, we offer additional advanced functionality. Location and employee management allows a seller to track sales by location, device, or employee; customize employee permissions; and create employee timecards. Square Payroll empowers sellers to grow by making it easy to hire, onboard, and pay wages and associated taxes for employees. Square Customer Directory, Feedback, Loyalty, and Marketing provide CRM (customer relationship management) tools thatcapabilities help sellers engage their buyers to grow their business. By linking customer data together with point-of-saleonline and in-person commerce data, Square can offer sellers integrated omnichannel capabilities to acquire, engage, and retain customers. Square transaction data we can offer our sellers targeted marketing campaigns and a closed-loop system thatreporting allows sellers to easily assess theperformance and return on investment of their marketing efforts.investment. We typically monetize all these features through either a per transaction fee, a subscription fee, or aproducts via service fee.and software fees.


Additionally, we continue•BNPL helps drive net new demand to build vertical solutions to better meet the needs of specific industries, such as services, retail, and food-related sellers. With our Square Appointments app, sellers via discovery in the services industry have one integrated solution from which theyAfterpay app and has historically increased average conversion rates and average transaction sizes for new and existing customers across online and in-store channels.

•Square Loyalty helps sellers keep their buyers coming back. Buyers that enroll in a Square Loyalty program are twice as likely to be repeat customers and spend 50% more, on average.

•Square Marketing helps sellers drive traffic by sending emails or texts to promote in-store events, new products, last-minute deals, or seasonal offers. Sellers can createset up recurring automated campaigns to welcome new customers, wish them a seamless experience from bookinghappy birthday, send abandoned-cart reminders, or reach out to payment. Customers can easilylapsed customers.

•Square Gift Cards help sellers bring in new buyers when their customers purchase gift cards for their friends and family.

Staff

Square's staff management products give sellers digital tools to streamline their operations. These tools seamlessly integrate with other Square products eliminating the latent, time-consuming, and error-prone processes typically used to copy and sync data between disparate systems. We typically monetize these products via software fees.

•Square Team Management makes it easy to schedule appointments with their preferred time, service,staff and staff member,view team performance and sellers can send invoices to their customer’s email address. With Square for Retail, sellerssales analytics in the retail industry have an end-to-end point-of-sale solution with sophisticated inventory management that fully integrates with our managed payments and hardware.real time. It has a search-based user interface and fast barcode scanning; advanced inventory management that supports tens of thousands of items, cost of goods sold, purchase orders, vendor management; and employee management capabilities that allow retail sellers to better understand their customers’ habits.

Open Developer Platform

We have opened Square to reach sellers who wantalso enables limiting access to our ecosystem but also want flexibilitySquare software features per employee or role. The Square Team App enables team members to clock in and out, view and adjust their solutions to meetschedules, and see timecards, hours worked, and estimated pay from their individualized business needs. Build with mobile phone.

•Square is our developer platform, consisting of APIs that allow sellers and their developers to customize business solutions. Our Point-of-Sale APIPayroll allows sellers to integrate any iOS or Android pointpay wages and associated employee taxes, and offer employee benefits (e.g. 401(k) accounts). The Square ecosystem drives competitive differentiation for our Payroll product with the ability to use Payroll in conjunction with our point-of-sale products, Team Management, and Cash App.

Banking

We offer a growing number of sale with Square to accept payments and access all otherbanking services in the ecosystem. This is particularly useful for sellers with highly-individualized point-of-sale needs. With our e-commerce API, sellers can integrate Square with their e-commerce website or app.

As we continue to expand Build with Square, sellers tell us they want to connect Square to more of their business systems. We have APIsthat make it easier for sellers to manage their item catalog more effectively, such as implementing real-time price changes at scale (e.g., for holiday promotions),cash flow and get faster access to connect their inventoryfunds.

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•Square Lending provides a platform of lending products to their online sales. This generates integrated reporting across sales channels,qualified Square sellers. Square Loans (formerly Square Capital) facilitates loans to qualified Square sellers through our subsidiary Square Financial Services, Inc. (“SFS Financial Services”), which is especially important for businesses that sell online and in person and share inventory between channels. Build with Square also has APIs for sellers to integrate Square with other business solutions such as accounting, CRM software, customer databases, employee management and ERP software. And through the Square App Marketplace, sellers can integrate Square with third-party apps, such as QuickBooks or BigCommerce, that create extensions to our point-of-sale functionality and other back office solutions, and enables sellers to integrate all of their business data.


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Cash App

Cash App is empowering individuals by providing access to the financial system, allowing customers to electronically send, store, and spend money. Individuals and businesses can sign up for a Cash App account simply using a debit card, bank account, or credit card and an email address or a phone number. Businesses can use Cash App to accept payments from their customers (Cash for Business). Cash App originally enabled customers to send and track P2P (peer-to-peer) payments and deposit stored funds into their bank account. We have added features to provide individuals with more ways to add and spend stored funds. Customers can receive direct deposit payments (such as those from an employer) or ACH payments from a financial institution. And customers can use their Cash Card, a Visa debit card, to make purchases or to withdraw funds at ATMs (automated teller machines)industrial loan company (“ILC"). Square receives a fee when customers elect to have their funds instantly deposited to their bank accounts and for transactions conducted with Cash Card or a credit card. Additionally, in the fourth quarter of 2017, we added functionality to the Cash App that enables individuals to use their stored funds to buy bitcoin. Customers can also sell their bitcoin to us. As of December 31, 2017, the value of bitcoin transactions was immaterial as was the impact of bitcoin transactions on our consolidated financial statements. In the same way that we have provided businesses with fast, simple, and cohesive tools, we see an opportunity with Cash App to build a similar ecosystem of services for individuals.

Caviar

Caviar is our food ordering platform, which is another service we offer that helps sellers grow and provides a differentiated way to service restaurants, a large target market for managed payments and point-of-sale solutions. This service makes it easy for restaurants to offer food ordering, both pickup and delivery, to their customers, enabling them to expand their sales and grow revenue without additional overhead. Individuals can order food from local restaurants through the Caviar website or mobile app, which is purpose-built to make delivery and pickup fast and easy. Caviar is currently available in many U.S. markets, including but not limited to New York, San Francisco, and Philadelphia, with thousands of partner restaurants. Caviar charges consumers a delivery and service fee per order. We also charge our partner restaurants a seller fee as a percentage of total food order value.

Square Capital

Square Capital, through a partnership with an industrial bank, facilitates the offering of loans to pre-qualified sellers based on real-time payment and point-of-sale data. These customized loan offers eliminateLoans eliminates the lengthy (and often unsuccessful) loan application processprocess. We are able to approve sellers for these loans by using our unique data set of the seller, while facilitating prudent risk management. The terms are straightforward for sellers,seller’s Square transactions to help facilitate loan underwriting and once approved, they get their funds quickly, often the next business day. Sellers can use these funds to make investments in their business, such as purchasing inventory or equipment, hiring additional employees, expanding their stores, or opening new locations.

collections, which mitigates risks. Generally, loan repayment occurs automatically through a fixed percentage of every card transaction a seller takes. ByLoans are sized to be less than 20% of a seller's expected annual Square GPV and, by simply running their business, sellers repayhistorically have repaid their loanloans within an average of nine months.months on average. We currently fund a majority of these loans from arrangements with institutional third-party investors who purchase these loans on a forward-flow basis. This funding significantly increases the speed withbasis, which we can scale Square Capital services and allows us to mitigatemitigates our balance sheet and liquidity risk.

Since its public launch in May 2014, Square CapitalLoans has facilitated over 400,000more than 2.2 million loans and advances, representing $2.5 billion.more than $16.2 billion in principal amount loaned or advanced. This includes approximately 150,000 loans to small businesses representing more than $1.5 billion of Paycheck Protection Program (“PPP”) loans facilitated in 2020 and 2021, excluding canceled loans. We launched Square Credit Card in 2023 to provide another lending option.



Our Sellers•Instant Transfer enables sellers to receive funds from their payments instantly or later that same day. Instant Transfer is an important tool for sellers that need faster access to their funds in order to better manage their cash flow or working capital.


Our•Square Checking provides sellers representwith an FDIC-insured account that gives them instant access to their sales and the ability to immediately use those funds via a diverse rangedebit card (Square Debit Card), withdraw funds from an ATM, or transfer funds via ACH.

•Square Savings is a high-yield business savings account, with no monthly fees or minimums, designed to make cash flow management easier for sellers. With Square Savings, sellers can easily and automatically put aside a portion of industries, including retail,their sales in their savings account while also organizing their money within folders, streamlining the process of saving funds for specific goals and priorities, such as quarterly tax obligations.

Cash App Ecosystem

With Cash App, we are building an ecosystem of financial products and services that helps consumers manage their money by making it more relatable, instantly available, and food-related businesses. We serve sellers of various sizes, ranging from a single vendor at a farmers’ market to multi-location businesses. These sellers also span geographies includinguniversally accessible. Cash App is primarily in the United States Canada, Japan, Australia,and has a diverse set of customers across demographics and regions. We use our inflows framework to assess the performance of Cash App across actives, inflows per active, and the United Kingdom.monetization rate on inflows.

Strategic Priorities

Cash App sits at the intersection of three traditionally-distinct use cases: financial services, community based transactions (peer-to-peer payments) and commerce. Our approach for Cash App is to combine these three areas together in a unique manner to define a new product category and reinvent banking for our customers. Our primary focus with Cash App, in alliance with our bank partners, is on earning the primary banking relationship of our existing customer base in the U.S.

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Customers can use Cash App to inflow funds in a variety of ways, including by receiving money from another Cash App customer through the app’s core peer-to-peer transfer service, transferring money from a bank account, depositing mobile checks, adding physical cash at participating retailers, receiving a recurring paycheck by direct deposit, and through other inflow channels. These funds can then be sent to another customer through the app, spent anywhere that accepts Visa cards or Cash App Pay, withdrawn from an ATM using the Cash App Card, invested in stocks or exchange-traded funds (“ETFs”), used to buy bitcoin, or transferred to a bank account (either instantly for a fee or for free in one to three days).

Cash App Inflows Framework.jpg

Financial Services

We serve our customers through a broad suite of financial services, and earning their trust is a key factor in how we can deepen our financial relationship with them. The breadth of our financial service offerings allows us to increase our share of wallet as well as expand our customer base to serve a wider variety of demographics. We develop trust with customers by offering reliable, easy, and secure access to their accounts and convenient support. We also adapt the amount of funds a customer can bring in through specific channels based on risk profile, and as we improve our understanding of a customer’s identity. We believe building and maintaining deep trust with our customers will drive greater product adoption and increased inflows into our ecosystem.

Banking Services

•Cash App Card is a debit card, issued by our bank partner, and linked directly to a customer’s Cash App balance. Customers can order a Cash App Card for free and use it anywhere that accepts Visa cards to make purchases, drawing down from the diversityfunds stored in their Cash App balance. Cash App earns interchange fees when individuals make purchases with their Cash App Card. Customers can select new or promotional Cash App Card designs for a fee, and can also withdraw funds from an ATM using the Cash App Card. Customers can also purchase and send gift cards at specific merchants to other customers, and recipients can spend them with their Cash App Card.

•Direct deposit capabilities, in alliance with our partner bank and system processor, allow customers to receive their recurring paycheck, tax refund, or government disbursement into their Cash App account, which they can then use to send, spend, store, or invest.

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•Savings allows customers to hold a separate savings balance at our bank partner, and easily set and track towards financial goals. Customers can add money to Savings using their Cash App balance, a linked debit card, or through Round Ups on purchases with Cash App Card.

•Cash Boost is a free and instant rewards program that offers customers discounts at specific businesses (e.g., 10% off a purchase on DoorDash) or at certain business types (e.g., grocery stores). Customers can select the Cash Boost they want to apply to their Cash App Card, and the discount is instantly applied to their Cash App balance for eligible transactions. Some Cash Boosts are selected and funded by Cash App, while others are funded by our partners. Costs related to the Cash Boost rewards program that are funded by Cash App are recognized as reductions to revenue.

Lending

We believe credit is an area within our financial services offerings where we can provide simple, fair, and accessible products that promote financial health. Cash App Borrow, our first credit product for consumers, allows customers to access short-term loans for a small fee. The product offers eligible Cash App customers up to $500 during a given month that they can pay back in scheduled installments or as a percentage of what they receive into Cash App. We determine a Cash App customer’s eligibility based on prudent risk management by using our unique data set that includes a customer’s inflows and engagement on Cash App. The average Cash App Borrow loan was repaid in less than four weeks in 2023.

Tax Preparation

Cash App Taxes provides a seamless, mobile-first solution for consumers to file their taxes for free.

Stock Brokerage

Customers can also use Cash App to invest their funds for free in U.S. listed stocks and ETFs. We believe this makes investing more accessible by giving customers access to hundreds of listed stocks and ETFs that they can purchase using their Cash App balance or a linked debit card for as little as $1. Once the order is filled, all investments are viewable through the stocks applet.

Bitcoin

We have a simple bitcoin exchange and custody solution that provides customers with an onramp and offramp to buy and sell bitcoin with Cash App for as little as $1 and a custodial account to store it securely without needing to keep track of any private keys. Our solution offers features that allow customers to complete auto buys and custom limit orders, as well as direct deposit to auto-convert their paycheck into bitcoin and earn instant bitcoin rewards on Cash App Card purchases.

We have also focused on payments through bitcoin. Given our network scale, we believe Cash App can help bitcoin evolve beyond an asset class to an investment that possesses real transactional utility, which is why we launched our offering in 2018 with the ability to deposit and withdraw bitcoin across the blockchain. We have since added the ability for customers to send bitcoin across the Cash App network to any phone number or $Cashtag, creating an easy-to-use off-chain network for bitcoin payments that settles instantly between transacting actives. We also allow U.S. actives to send and receive bitcoin to/from anyone with a compatible wallet via the Lightning Network. The Lightning Network is a second layer technology applied to the bitcoin blockchain that enables faster transactions with little to no fees.

Community

Peer-to-peer payments form the basis of our sellers underscoresCommunity development pillar because customers engage in financial transactions with other members of the accessibilityCash App community. When customers use peer-to-peer, they are inviting their friends, family, and flexibilitycoworkers to download Cash App so that they can send each other money. Peer-to-peer becomes more useful for our customers as their communities expand, so our customers are naturally incentivized to bring more people into their networks. We offer the peer-to-peer service to our Cash App customers for free when a linked debit account is used to fund a transaction, as we consider peer-to-peer to be a marketing tool to encourage Cash App usage. We charge a fee to the sender when transactions are funded using a credit card, and a fee to the recipient if it is a business account.

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Instant Deposit was the first feature we started monetizing on Cash App. Customers are able to instantly transfer funds from Cash App to a bank account for a small fee. We believe our customer base values fast access to funds, and this speed is one example of how we differentiate our ecosystem.

Commerce

Cash App is focused on driving greater commerce between consumers and merchants. Our BNPL platform facilitates commerce between retail merchants and consumers by allowing its retail merchant clients to offer their customers the ability to buy goods and services on a BNPL basis. Our BNPL platform serves as a connection point between our Square and Cash App ecosystems as we build out a marketplace that acts as a shopping destination for consumers to search for merchants and find offers. Our BNPL platform provides consumers the ability to get desired items now but pay for them later, while simultaneously helping merchants increase sales and order values. We have a range of products across our BNPL platform.

•Pay in 4: Through the use of our offerings.BNPL platform, consumers can split their purchases into generally three or four installments, typically due in two-week increments, without paying fees (if payments are made on time). We pay retail merchants the full order value up front (less a percentage fee) and assume the risk of non-payment from the consumer.


•Monthly Payment Solution:We are increasingly servingalso offer the ability for consumers to pay for larger sellers,transaction sizes over a six- or twelve-month period using a monthly payment option. The structure of the product includes no late fees and no compounding interest with a cap on total interest owed.

•Advertising and affiliate: Our BNPL platform generates hundreds of millions of leads each year for merchants and has channeled this demand towards scaling an ads and affiliate program for its merchants: for affiliate relationships, we receive a commission when a consumer begins their shopping journey in the Afterpay App and makes a purchase. We may also receive digital advertising revenue based on clicks to a merchant site from the Afterpay App as well as flat fees for premium ad placements.

•Shop directory: We operate an online shop directory, which we defineallows consumers to search by product category for stores that offer Afterpay as a payment option.

•Afterpay Card, Afterpay Plus Card: We offer two in-store cards that allow consumers to pay in 4 for in-person transactions at a merchant’s point of sale. The Afterpay Card allows consumers to shop in-store at Afterpay merchants and is free for the consumer. The Afterpay Plus Card is currently available to select Afterpay consumers for a monthly fee and allows them to shop in-store anywhere that Apple Pay or Google Pay is accepted.

Cash App Pay

Cash App Pay is a simple, mobile-friendly way for Cash App customers to pay at merchants across online and in-person channels. As of December 2023, Cash App Pay is enabled for a subset of Square sellers that generate more than $125,000 in annualized GPV. GPV from larger sellers represented 48%are using certain Square hardware and software products, as well as a subset of total GPV in the fourth quarter of 2017, up from 43% in the fourth quarter of 2016Afterpay merchants, and 39% in the fourth quarter of 2015. For the years ended December 31, 2017most recently launched with large payment service providers who can offer it to their merchants. With Cash App Pay, Cash App customers can pay by simply scanning a QR code or tapping a button on their mobile device at checkout.

Business Accounts

Cash App allows business accounts to collect payments for their business by accepting peer-to-peer transactions for a fee, while allowing higher weekly limits and 2016, we had no customer who accountedproviding relevant tax reporting forms.


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for greater than 10% of our GPV or our total net revenue. For the year ended December 31, 2015, we had no customer other than Starbucks who accounted for greater than 10% of our GPV or our total net revenue.
The chart below shows the mix of our GPV by seller size:


Sales and Marketing


We haveSquare Ecosystem

The Square ecosystem has a strong brand and continue to increase awareness of Squareaffinity among sellers by enhancing our services and fostering rapid adoption through brand affinity, direct marketing, public relations, and strategic partnerships.its sellers. Our Net Promoter Score (NPS)(“NPS”) has averaged nearly 7054 over the past four quarters, which is nearly double the average score for banking providers. Our high NPS means ourSquare sellers recommend our services to others, strengthening ourwhich we believe strengthens the Square brand and helping tohelps drive efficient customer acquisition.


Direct marketing, online and offline, has also been an effective customer acquisition channel. This includesThese tactics include online search engine optimization and marketing, online display advertising, direct mail campaigns, direct response television advertising, mobile advertising, and affiliate and seller referral programs. Total advertising costs for the years ended December 31, 2017, 2016, and 2015 were $81.9 million, $58.3 million, and $58.3 million, respectively. Additionally, Square hardware products, such as our contactless and chip reader or Square Stand, are available at over 30,000 retail stores (including Apple, Amazon, Best Buy, Staples, Target, and Walmart). Our direct sales and account management teams also contribute to the acquisition and support of larger sellers. In addition to direct channels, we work with third-party partners and developers who offer our solutions to their customers.


Our direct, ongoing interactions with our sellers help us tailor offerings to them, at scale, and in the context of their usage. We use various scalable communication channels such as email marketing, in-appin-product notifications and messaging, dashboard alerts, and Square Communities, our online forum for sellers, to increase the awareness and usage of our products and services with little incremental sales and marketing expense. Our customer support team also helps increase awareness and usage of our products as part of helping sellers address inquiries and issues.


In addition to direct channels, we work with third-party developers and other partners who offer our solutions to their customers. Partners expand our addressable market to sellers with individualized or industry-specific needs. Through the Square App Marketplace, Square partners are able to expand their own addressable market by reaching the millions of sellers using Square. As of December 31, 2023, Square had nearly 1,000 managed partners connected to its platform.

Cash App Ecosystem

Cash App has also developed a strong brand, which can be traced back to our compelling features, self-serve experience, unique design, and engaging marketing.

Peer-to-peer transactions serve as the primary acquisition channel for Cash App. Peer-to-peer transactions have powerful network effects as every time a customer sends or requests money, Cash App can potentially acquire a new customer or re-engage an existing customer. We have enhanced the efficiency of peer-to-peer transfers by streamlining the onboarding process for Cash App, enabling customers to sign up in minutes. We offer the peer-to-peer service to our Cash App customers for free, and we consider it to be a marketing tool to encourage the usage of Cash App. We do not generate revenue on the majority of peer-to-peer transactions and for these transactions we characterize card issuance costs, peer-to-peer costs, and risk loss as a sales and marketing expense.

Cash App also uses paid marketing, including referrals, advertising spend, partnerships, and social media campaigns, to expand its network, as these programs help reach new customers, enhance its brand, and improve retention among existing customers.

Additionally, we see the launch and advertising of new Cash App features as an important way to attract new customers and engage existing customers. Features such as Cash App Card and Boost rewards, bitcoin buying and selling, investing in stocks and ETFs, cross-border payments, Cash App Pay, and a tax preparation service enhance Cash App’s utility for customers and provide reasons for consumers to try Cash App.

Product Development and Technology


We design both our Square and Cash App products and services to be cohesive, fast, self-serve, and dependable,elegant, and we organize our product teams accordingly, combining individuals from product management, development and engineering, data science, analytics, design, and design.

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product marketing. Our products and services are mobile-firstplatform-agnostic with most supporting iOS, Android, and platform-agnostic, and we are able to continuously optimize them because our hardware, software, and payments processing are integrated.web. We frequently update our software products and have a regularrapid software release schedule with improvements deployed generally twice a month, ensuring our sellers get immediate access to the latest features.regularly. Our services are built on a scalable technology platform, and we place a strong emphasis on data analytics and machine learning to maximize the efficacy, efficiency, and scalability of our services. This

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In our Square ecosystem, this technology platform enables us to capture and analyze over a billionbillions of transactions per year and automate risk assessment for more than 99.95% of all transactions. Our hardware is designed and developed in-house, and we contract with third-party manufacturers for production. Our product development expenses were $321.9 million, $268.5 million and $199.6 million for the years ended December 31, 2017, 2016, and 2015, respectively.


Transaction Processing Overview

Processing card transactions requires close coordination among a number of industry participants that provide the services and infrastructure required to enable such transactions. These participants consist of payment service providers, acquiring processors, card networks, and issuing banks. Within this landscape, Square serves as a payment service provider, acting as the touch point for the seller to the rest of the payment chain. The definitions and graphic below outline this payment chain and the typical flow of a Square transaction, along with the types of fees typically paid and received at each stage.

Payment Service Provider (PSP): Provider of the payment services that holds the direct relationship with the seller and facilitates the rest of the transaction on behalf of the seller. A PSP is also the merchant of record for the transaction. The merchant of record is liable for the settlement of transactions processed and accordingly enters into contractual arrangements and negotiates terms, including pricing, with the acquiring processors and card networks. The merchant of record is also contractually responsible for settling the costs incurred in the process and is compensated by the seller for the services provided.

Acquiring Processor: Provider of the back-end technology that facilitates the flow of payment information through the Card Networks to the Issuing Bank. Our agreements with acquiring processors typically have terms of two to four years.

Card Networks (e.g. Visa, MasterCard): Provider of the infrastructure for card payment information to flow from the Acquiring Bank to the Acquiring Processor.

Issuing Bank: The financial institution that issues the buyer’s payment card.

Acquiring Bank: The financial institution associated with the Acquiring Processor.

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1.Once the buyer is ready to make a purchase, the seller inputs the transaction into the Square Point of Sale and presents the buyer with the amount owed.

2.For in-person transactions, the buyer pays by swiping or dipping their payment card, or by tapping their NFC-enabled payment card or mobile device on a Square Reader, Square Stand or Square Register, as applicable, which captures the buyer’s account information. For card not present transactions the seller can either use the customers' card on file or the card information is keyed in manually by either the buyer or seller into the Square Point of Sale app, Square Invoices, Square Virtual Terminal, or the seller's e-commerce website.

3.The Square Point of Sale sends the transaction information to Square, which acts as the PSP.

4.Square passes the transaction information to the Acquiring Processor via an internet connection. Square pays a small fixed fee per transaction to the Acquiring Processor.


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5.The Acquiring Processor routes the transaction to the appropriate Card Network affiliated with the buyer’s card such as Visa, Mastercard, Discover, or American Express. Square pays a variety of fees to the Card Network, the most significant of which are assessment fees that are typically less than 0.15% of the transaction amount.

6.The Acquiring Processor then routes the transaction through the Card Network to the Issuing Bank, which authorizes or declines the transaction for the buyer’s payment card.

7.Upon authorization, the Issuing Bank sends a notification back through the Card Network to the Square Point of Sale to inform the seller that the transaction has been successfully authorized.

8.The Square Point of Sale sends a digital receipt for the transaction to the buyer, enabling a persistent communication channel between the seller and the buyer. For example, this is how the buyer can send feedback to the seller about the service provided.

9.The Issuing Bank then triggers a disbursement of funds to the Acquiring Bank through the Card Network for the transaction amount. Square will ultimately pay the Issuing Bank an interchange fee as a percentage of the amount of the transaction plus a fixed fee per transaction, which together average between 1.5% to 2.0% of the transaction amount. However, this percentage can vary significantly based on the buyer's card type, transaction type, and transaction size.

10.Square transfers the funds to the seller’s bank account, net of the fee charged by Square. Square provides sellers with fast access to funds, typically settling with them by the business day after the date of the transaction via Automated Clearing House (ACH) transfers, or the same day via its Instant Deposit service for an additional transaction fee. Square pays a very small fee for each ACH transfer.

11.The funds are settled from the Acquiring Bank to Square, typically in one to two business days after the date of the transaction.

12.At the end of each monthly billing cycle, the Issuing Bank sends a statement to the buyer showing their monthly charges. The statement includes a reference to Square as the merchant of record on the billing statement as a prefix to the seller name (denoted as SQ).
Our Competition


Square Ecosystem

The markets in which we operateour Square ecosystem operates are competitive and evolving. Our competitors range from large, well-established vendors to smaller, earlier-stage companies.

We seek to differentiate ourselves from competitors primarily on the basis of our extensive commerce ecosystem and our focus on building remarkable products and services that are cohesive, fast, self-serve, and dependable.elegant. In addition, we differentiate ourselves by offering transparent pricing, no long-term contracts, and our ability to innovate and reshape the industries we operate in to expand access to traditionally unserved or underserved sellers. With respect to each of these factors, we believe that we compare favorably to our competitors.

For payments and point-of-sale services, we compete primarily with traditional acquiring processors and payment processors who sell costly card terminal and point-of-sale systems, often tied to long-term contracts, through direct sales or Independent Sales Organization (ISO) channels. Many competitors offer payments and point-of-sale services that have features tailored to particular industries or business types but require sellers to stitch together technology from multiple hardware, software, and payments vendors.

Some sellers may elect to use individual point-of-sale solutions from other companies Competitors that overlap with certain functions and features that we provide including:include:


•Business software providers such as those that provide point of sale, website building, inventory management, analytics,employee management, customer relationship management and marketing, e-commerce,invoicing, and appointment booking solutions;

•Payment terminal vendors;
•Merchant acquirers;
•Banks that provide payment processing, checking, savings, loans, and payroll;
•Pen and paper, manual processes, and paper currency;
•Payroll processors; and
•Established or new alternative lenders;lenders.


Delivery service providers;Cash App Ecosystem

Cash App competes with other companies in peer-to-peer payments, debit and prepaid cards, credit card rewards, stock trading, tax filing, digital wallet, bitcoin exchanges, BNPL providers, and shopping and consumer demand generation. Our competitors include money transfer apps, prepaid debit card offerings, brokerage firms, tax firms, financial technology apps, banks, and crypto trading services.


Peer-to-peer payment providers.We compete primarily on our differentiated lifestyle brand, the breadth of our network, the range of products in our ecosystem, and the simplicity and quality of our customer experience. We invest in brand, design, and technology to keep our products fast and simple, while also improving and expanding our features.

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Intellectual Property


We seek to protect our intellectual property rights by relying on a combination of federal, state, and common law rights in the United States and other countries, as well as on contractual measures. It is our practice to enter into confidentiality, non-disclosure, and invention assignment agreements with our employees and contractors, and into confidentiality and non-disclosure agreements with other third parties, in order to limit access to, and disclosure and use of, our confidential information and proprietary technology. In addition to these contractual measures, we also rely on a combination of trademarks, trade dress, copyrights, registered domain names, trade secrets, and patent rights to help protect our brand and our other intellectual property.


We have developed a patent program and strategy to identify, apply for, and secure patents for innovative aspects of our products, services, and technologies where appropriate. AsWe also actively pursue registration of December 31, 2017, we had 379 issued patents in forceour trademarks, logos, service marks, trade dress, and 605 filed patent applications pendingdomain names in the United States and in foreign jurisdictions relating to a variety of aspects of our technology. Our issued patents in force will expire between 2032 and 2042.other jurisdictions. We intend to file additional patent applications as we continue to innovate through our research and development efforts and to pursue additional patent protection to the extent we deem it beneficial and cost-effective.

We actively pursue registration of our trademarks, logos, service marks, trade dress, and domain names in the United States and in other jurisdictions. We are the registered holder of a variety of U.S. and international domain names that include the term “Square” and variations thereof.

From time to time, we also incorporate certain intellectual property licensedcost-effective, including acquiring patent assets or licensing patent rights from third parties, including under certain open source licenses. Even if anyparties. In addition, we participate in a number of industry organizations that facilitate patent pools or non-assertion commitments, such third-party technology did not continue to be available to us on commercially reasonable terms,as the Cryptocurrency Open Patent Alliance that we believe that alternative technologies would be available as needed in every case.co-founded, LOT Network, and Open Invention Network.


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Government Regulation


Foreign and domestic laws and regulationslegal requirements apply to many key aspects of our business. Any actual or perceived failure to comply with these requirements may result in, among other things, revocation of required licenses or registrations, loss of approved status, private litigation, regulatory or governmental investigations, administrative enforcement actions, sanctions, civil and criminal liability, monetary penalties, and constraints on our ability to continue to operate. It is also possible that current or future laws or regulations could be interpreted or applied in a manner that would prohibit, alter, or impair our existing or planned products and services, or that could require costly, time-consuming, or otherwise burdensome compliance measures from us.


Payments Regulation


Various laws and regulations govern the payments industry in the United States and globally. For example, certain jurisdictions in the United States require a license to offer money transmission services, such as ourCash App’s peer-to-peer payments, product, Cash App, and we maintain a license in each of those jurisdictions and comply with new license requirements as they arise. We are also registered as a “Money Services Business” with the U.S. Department of Treasury’s Financial Crimes Enforcement Network.Network ("FinCEN"). These licenses and registrations subject us, among other things, to record-keeping requirements, reporting requirements, bonding requirements, limitations on the investment of customer funds, and inspectionexamination by state and federal regulatory agencies.


Outside the United States, we provide localized versions of some of our services to customers, including through various foreign subsidiaries. For example, in Canada, Japan, Australia and the United Kingdom, Square Point of Sale is the sole payments service we offer. The activities of those non-U.S. entities are, or may be, supervised by regulatory authorities in the jurisdictions in which they operate. For instance, we are registered withhold an Australian Financial Services License issued by the Australian Transaction ReportsSecurities and Analysis Centre (AUSTRAC), as required by anti-money laundering rules,Investments Commission to provide non-cash payments services in Australia, and we are licensed as an Authorised PaymentElectronic Money Institution to provide payments services and electronic money in the United Kingdom by the Financial Conduct Authority to provide payments servicesand in the United Kingdom.European Union by the Central Bank of Ireland and the Bank of Lithuania.


Our payments services may be or become subject to regulation by other authorities, and the laws and regulations applicable to the payments industry in any given jurisdiction are always subject to interpretation and change.


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Consumer Financial Protection


The Consumer Financial Protection Bureau and other federal, local, state, and foreign regulatory and law enforcement agencies regulate financial products and enforce consumer protection laws, including those applicable to credit, deposit, and payments services, and other similar services. These agencies have broad consumer protection mandates, and they promulgate, interpret, and enforce rules and regulations that affect our business.


Anti-Money Laundering, Anti-Corruption, and Sanctions


We are subject to anti-money laundering (AML)("AML"), anti-corruption, and economic, trade and sanctions laws and regulations in the United States and other jurisdictions. We have implementedjurisdictions in which we operate. The anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act, generally prohibit companies from making or offering improper payments to foreign government officials and political figures for the purpose of obtaining or retaining business or to gain an AML program designed to prevent our payments network from being used to facilitate money laundering, terrorist financing,unfair business advantage. Economic and other illicit activity. Our program is also designed to prevent our network from being used to facilitate business in countries, or with persons or entities, included on designated lists promulgatedtrade sanctions programs that are administered by the U.S. Department of the Treasury’s Office of Foreign Assets Controls and equivalent applicable foreign authorities. Our AML compliance program includes policies, procedures, reporting protocols,authorities prohibit or restrict transactions to or from, or dealings with, specified countries, governments, individuals and internal controls,entities that are specially designated nationals of those countries, including the designation ofnarcotics traffickers and terrorists or terrorist organizations. We have implemented an AML program designed to comply with the laws and regulations to which we are subject.

Bank Regulation

We obtained approval from the Federal Deposit Insurance Corporation ("FDIC") and the Utah Department of Financial Institutions to open an ILC. The opening of Square Financial Services, Inc., our ILC, in March 2021 subjects us to direct state and federal regulatory supervision and requires compliance officer,with applicable banking regulations and requirements.

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Lending Regulation

Various laws and regulations govern lending in the United States and internationally. In the United States, Square Capital, LLC holds and maintains lending and collections licenses with state regulators to support lending products offered across the United States. Afterpay US Services, LLC holds and maintains lending licenses to support its product offerings. These lending licenses subject us to the supervision and examination authority of state regulators, and our partnerships with FDIC-insured financial institutions to offer certain lending products to customers subjects us to federal regulatory supervision.

Outside the United States, we provide localized versions of some of our lending services to customers, including through our various foreign subsidiaries. The activities of our foreign subsidiaries are, or may be, supervised by regulatory authorities in the jurisdictions in which they operate. For example, we hold an Australian Credit Licence issued by the Australian Securities and Investments Commission.

Our lending services may be, or may become, subject to regulation by other applicable authorities or jurisdictions, and the laws and regulations applicable to the lending industry in any given jurisdiction are always subject to interpretation and change.

Broker-Dealer Regulation

Our subsidiary, Cash App Investing LLC ("Cash App Investing"), operates as a broker-dealer and is designedtherefore registered with the Securities and Exchange Commission ("SEC") and a member of the Financial Industry Regulatory Authority ("FINRA"). As a broker-dealer, Cash App Investing is subject to address these legalSEC and FINRA laws and regulations including, without limitation, how it markets its services, handles customer assets, keeps records, and reports to the SEC and FINRA. Cash App Investing is also registered in each state where we conduct business, and subject to those states’ securities laws and regulations.

Virtual Currency Regulation

We are subject to certain licensing and supervisory frameworks as a result of our Cash App offering, through which customers can use their stored funds to buy, hold and sell bitcoin, and transfer bitcoin to and from Cash App. We currently hold a New York State BitLicense and a Virtual Currency Business License in Louisiana. The laws and regulations applicable to virtual currency are evolving and subject to interpretation and change. Therefore, our current and future virtual currency services may be or become subject to additional licensing, regulatory requirements and to assist in managing risk associated with money launderingoversight by other state and terrorist financing.federal authorities.


Protection and Use of Information


We collect and use a wide variety of information for various purposes in our business, including to help ensure the integrity of our services and to provide features and functionality to our customers. This aspect of our business, including the collection, use, disclosure, and protection of the information we acquire from our own services as well as from third-party sources, is subject to laws and regulations in the United States, the European Union, and elsewhere. Accordingly, we publish our privacy policies and terms of service, which describe our practices concerning the use, transmission, and disclosure of information. As our business continues to expand in the United States and worldwide, and as laws and regulations continue to be passed and their interpretations continue to evolve in numerous jurisdictions, additional laws and regulations may become relevant to us.


Communications Regulation


We send texts, emails, and other communications in a variety of contexts, such as when providing digital receipts.receipts and marketing. Communications laws and regulations, including those promulgated by the Federal Communications Commission, apply to certain aspects of this activity in the United States and elsewhere.


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Additional Developments


Various legislative bodies and regulatory agencies in the United States and elsewhere in our international markets continue to examine a wide variety of issues that could impact our business, including products liability, import and export compliance, accessibility for the disabled, insurance, marketing, privacy, data protection, information security, virtual currencies, identity theft, tax, marketing, and labor and employment matters. As our business continues to develop and expand, additional laws, rules and regulations may become relevant. For example, if we choose

Seasonality

Historically, transaction-based revenue for our Square ecosystem has been strongest in our fourth quarter and weakest in our first quarter, as our sellers typically generate additional GPV during the holiday season. Subscription and services-based revenue generally demonstrates less seasonality than transaction-based revenue. Hardware revenue generally demonstrates less seasonality than transaction-based revenue, with most fluctuations tied to offer Square Payrollperiodic product launches, promotions, or other arrangements with our retail partners.

Historically, our Cash App ecosystem has experienced improvements in revenue and gross profit related to the distribution of government funds as customers have deposited more jurisdictions,funds into Cash App during these times, including during the first quarter when U.S. tax refunds are typically distributed. Certain products within Cash App may also experience stronger fourth quarters and weaker first quarters, such as our BNPL platform, which typically generates additional regulations, including tax rules, will apply.revenue and gross profit during the holiday season. Typical seasonality trends for the Cash App ecosystem are also impacted by bitcoin revenue, which is driven by customer demand and the current market price of bitcoin, and as such, may not be indicative of future performance and skew typical seasonality trends in the Cash App ecosystem.


Information about Segment and Geographic RevenueHuman Capital

Information about segment and geographic revenue is set forth in Note 15 of the Notes to Consolidated Financial Statements under Item 8 of this Annual Report on 10-K.


Our Employees

employees are a driving force behind our purpose of economic empowerment. Attracting, developing, and retaining top talent remain a focus in the development of our human capital programs. As of December 31, 2017,2023, we had 2,33812,985 full-time employees.employees worldwide with 3,154 full-time employees outside the US. We also engage temporary employees and consultants as needed to support our operations. NoneIn November 2023, we announced we would implement an absolute cap of 12,000 on the number of employees we have at our company. We plan to operate below this cap through a combination of performance management, centralizing teams and functions to reduce duplication, and prioritization of our employees are either represented by a labor union or subjectscope. We expect to a collective bargaining agreement. keep this cap in place until we believe the growth of the business has meaningfully outpaced the growth of our company.

We have a purpose-driven culture, with a focus on employee input and well-being, which we believe enables us to attract and retain exceptional talent. We offer learning and development programs for all employees, as well as a robust manager training program. Employees have the opportunity to actively voice their questions and thoughts through many internal channels, including our company townhall meetings and bi-annual employee engagement surveys. Our distributed work model means that we no longer have a designated headquarters location and, for the vast majority of roles, employees have the flexibility to work within or outside a Block office space. Our distributed work model has unlocked opportunities to hire and retain talent in more locations, as we can hire employees in locations where we do not experienced anyhave office space, and employees can continue to work stoppages,for us if they need or want to relocate.

A key focus of our human capital management approach is our commitment to promoting inclusion and diversity in our workplace. In 2023, we considerequipped managers with tools to build and lead inclusive teams, expanded professional development opportunities for employees from traditionally underrepresented backgrounds, and continued to elevate diversity as a central component of our relationsrecruiting strategy. Each year, we publish our workforce demographics to show how far we have come, where there is room to grow, and how our workforce is evolving. The 2023 report is available at: https://block.xyz/inside/report-workforce-data-2023. The contents of the report and our websites are not incorporated by reference into this Annual Report on Form 10-K.

From a total rewards perspective, Block offers a competitive compensation and benefits package, which is reviewed and updated each year. Our annual compensation planning coincides with our feedback cycle during which employees and managers have performance conversations to be good.facilitate learning and career development. As part of our compensation review program, pay equity analyses are conducted annually.

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Corporate Information
    

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SquareBlock was incorporated in Delaware in June 2009. In 2020, we adopted a distributed work model and we no longer have a designated headquarters location. Our headquartersprincipal executive office, which we are located at 1455 Market Street,required to identify under Securities and Exchange Commission rules, is 1955 Broadway, Suite 600 San Francisco, California 94103.Oakland, CA 94612. Our telephone number is (415) 375-3176. Our website is located at www.squareup.com,www.block.xyz, and our investor relations website is located at www.squareup.com/about/investors.investors.block.xyz. The information contained in, or accessible through, our website is not part of and is notor incorporated into, this Annual Report on Form 10-K.


We use various trademarks and trade names in our business, including “Square”“Block,” “Square,” “Cash App” and Square®,“Afterpay,” which we have registered in the United States and in various other countries. This Annual Report on Form 10-K also contains trademarks and trade names of other businesses that are the property of their respective holders. We have omitted the ® and ™ designations, as applicable, for the trademarks we name in this Annual Report on Form 10-K.


Available Information

Copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (Exchange Act), are available, free of charge, on our investor relations website as soon as reasonably practicable after we electronically file or furnish such material electronically with or furnish it to the Securities and Exchange Commission (SEC)("SEC"). The SEC also maintains a website that contains our SEC filings. The address of the site is www.sec.gov. Further, a copy of this Annual Report on Form 10-K is located at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330.

We webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations website. Additionally, we provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases, and blogs as part of our investor relations website. We have used, and intend to continue to use, our investor relations website, as well as the TwitterX (formerly known as Twitter) accounts @Square@Blocks and @SquareIR,@BlockIR, as means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Further corporate governance information, including our board committee charters, code of business conduct and ethics, and corporate governance guidelines, is also available on our investor relations website under the heading “Governance Documents.” The contents of our websites are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.


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ItemITEM 1A. RISK FACTORS


Investing in our securities involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including the section titled “Management’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations”Operations and our consolidated financial statements and related notes, before making any investment decision with respect to our securities. The risks and uncertainties described below may not be the only ones we face. If any of the risks actually occur, our business could be materially and adversely affected. In that event, the market price of our Class A common stock could decline, and you could lose part or all of your investment.


Risk Factors Summary

Our business operations are subject to numerous risks and uncertainties, including those outside of our control, that could cause our actual results to be harmed, including risks regarding the following:

Risks related to our business and our industry:
•our ability to retain existing sellers and customers, attract new sellers and customers, and increase sales to both new and existing sellers and customers;
•our investments in our business and ability to maintain profitability;
•our ability to maintain, protect, and enhance our brands;
•our efforts to expand our product portfolio and market reach;
•our ability to develop products and services to address the rapidly evolving market for payments and financial services;
•competition in our markets and industry;
•risks related to disruptions in or negative perceptions of the cryptocurrency market;
•any acquisitions, strategic investments, new businesses, joint ventures, divestitures, and other transactions that we may undertake;
•the ongoing integration of Afterpay with our business;
•risks related to our majority interest in TIDAL;
•operating or expanding our business globally;
•risks related to our BNPL platform;
•risks related to the banking ecosystem, including through Square Financial Services, our bank partnerships, and FDIC and other regulatory obligations; and
•additional risks of Square Loans related to the availability of capital, seller payments, interest rate, deposit insurance premiums, and general macroeconomic conditions.

Operational risks:
•real or perceived improper or unauthorized use of, disclosure of, or access to sensitive data;
•real or perceived security breaches or incidents or human error in administering our software, hardware, and systems;
•systems failures, interruptions, delays in service, catastrophic events, and resulting interruptions in the availability of our products or services or those of our sellers;
•any failure to safeguard the bitcoin we hold on behalf of ourselves and other parties;
•our risk management efforts;
•our dependence on payment card networks and acquiring processors;
•our reliance on third parties and their systems for a variety of services, including the processing of transaction data and settlement of funds;
•our dependence on key management and any failure to attract, motivate, and retain our employees;
•our operational, financial, and other internal controls and systems;
•any shortage, price increases, tariffs, changes, delay or discontinuation of our key components;
•the integration of our services and our products with a variety of operating systems; and
•difficulties estimating the amount payable under TIDAL's license agreements.

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Economic, financial, and tax risks:
•a deterioration of general macroeconomic conditions;
•any inability to secure financing on favorable terms, or at all, or comply with covenants in our existing credit agreement, the indentures, or future agreements;
•our ability to service our debt, including our convertible notes and our Senior Notes (as defined below);
•counterparty risk with respect to our convertible note hedge transactions;
•our bitcoin investments being subject to volatile market prices, impairment, and other risks of loss;
•foreign exchange rates risks; and
•any greater-than-anticipated tax liabilities or significant valuation allowances on our deferred tax assets.

Legal, regulatory, and compliance risks:
•extensive regulation and oversight in a variety of areas of our business;
•complex and evolving regulations and oversight related to privacy, data protection, and information security;
•litigation, including intellectual property claims, government investigations or inquiries, and regulatory matters or disputes;
•obligations and restrictions as a licensed money transmitter;
•regulatory scrutiny or changes in the BNPL space;
•regulation and scrutiny of our subsidiary Cash App Investing, which is a broker-dealer registered with the SEC and a member of FINRA, including net capital and other regulatory capital requirements;
•changes to our business practices imposed by FINRA based on our ownership of Cash App Investing;
•regulation and scrutiny of our subsidiary Square Financial Services, which is a Utah state-chartered industrial loan company, including the requirement that we serve as a source of financial strength to it;
•supervision and regulation of Square Financial Services, including the Dodd-Frank Act and its related regulations;
•any inability to protect our intellectual property rights;
•assertions by third parties of infringement of intellectual property rights by us; and
•increased scrutiny from investors, regulators, and other stakeholders relating to environmental, social, and governance issues.

Risks related to ownership of our common stock:
•the dual class structure of our common stock;
•volatility of the market price of our Class A common stock;
•the dual-listing of our Class A common stock on the NYSE and our CHESS Depositary Interests ("CDIs") on the Australian Securities Exchange ("ASX");
•our convertible note hedge and warrant transactions;
•anti-takeover provisions contained in our amended and restated certificate of incorporation, our amended and restated bylaws, and provisions of Delaware law; and
•exclusive forum provisions in our bylaws.

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Risks Related to Our Business and Our Industry


Our business depends on a stronggrowth rate has slowed at times and trusted brand, and any failure to maintain, protect, and enhance our brand would hurt our business.

We have developed a strong and trusted brand that has contributed significantly to the success of our business. Our brand is predicated on the idea that our customers will trust us and find value in building and growing their businesses with our products and services. We believe that maintaining and promoting our brand in a cost-effective manner is critical to achieving widespread acceptance of our products and services and expanding our base of customers. Maintaining and promoting our brand will depend largely on our ability to continue to provide useful, reliable, secure and innovative products and services, as well as our ability to maintain trust and be a technology leader. We may introduce,slow or make changes to, features, products, services, or terms of service that customers do not like, which may materially and adversely affect our brand. Our brand promotion activities may not generate customer awareness or increase revenue, and even if they do, any increase in revenue may not offset the expenses we incur in building our brand. If we fail to successfully promote and maintain our brand or if we incur excessive expenses in this effort, our business could be materially and adversely affected.

The introduction and promotion of new services, as well as the promotion of existing services, may be partly dependent on our visibility on third-party advertising platforms, such as Google, Twitter, or Facebook. Changes in the way these platforms operate or changes in their advertising prices or other terms could make the maintenance and promotion of our products and services and our brand more expensive or more difficult. If we are unable to market and promote our brand on third-party platforms effectively, our ability to acquire new customers would be materially harmed.

Harm to our brand can arise from many sources, including failure by us or our partners and service providers to satisfy expectations of service and quality; inadequate protection of sensitive information; compliance failures and claims; litigation and other claims; employee misconduct; and misconduct by our partners, service providers, or other counterparties. We have also received a significant amount of media coverage since our formation. We have also been from time to time in the past, and maydecline in the future, be, the target of incomplete, inaccurate, and misleading or false statements about our company, our business, and our products and services that could damage our brand and deter people and enterprises from adopting our services.Any negative publicity about our industry or our company, the quality and reliabilitygrowth rates in each of our productsreporting segments may vary. Future revenue and services, our risk management processes, changes to our products and services, our ability to effectively manage and resolve customer complaints, our privacy, data protection, and information security practices, litigation, regulatory activity, and the experience of our customers with our products or services, could adversely affect our reputation and the confidence in and use of our products and services. If we do not successfully maintain a strong and trusted brand, our business could be materially and adversely affected.

As our revenue has increased, our growth rate has slowed. Future revenuegross profit growth depends on our ability to retain existing sellers and customers, attract new sellers and customers, and increase sales to both new and existing sellers.sellers and customers.


Our total net revenue grew from $1,267.1 million in 2015 to $1,708.7 million in 2016 and to $2,214.3 million in 2017. As our revenue has increased, our rate of revenue and gross profit growth has slowed at times and may decline in the future, and it may slow or decline more quickly than we expect for a variety of reasons, including the risks described in this Annual Report on Form 10-K. Additionally, our rate of revenue and gross profit growth may vary between our reporting segments. For example, in recent periods our Cash App segment revenue has grown at a high rate, which has varied and may continue to vary from the growth rate of our Square segment. Our sellers and customers have no obligation to continue to use our services, and we cannot assure you that they will. We generally do not have long-term contracts with our sellers and customers, and the difficulty and costs associated with switching to a competitor may not be significant for many of our services.the services we offer. Our sellers’ payment processing activity with us may decrease for a variety of reasons, including sellers’ level of satisfaction with our products and services, the effectiveness of our support services, our pricing and the pricing and quality of competing products or services, the effects of global economic conditions, or reductions in the aggregate spending of our sellers’ customers. Growth in transacting actives on Cash App and customers’ level of engagement with our products and services on Cash App are essential to our success and long-term financial performance. However, the growth rate of transacting actives has fluctuated over time, and it may slow or decline in the future. A number of factors have affected and could negatively affect Cash App customer spending levels. In addition,growth, inflows, and engagement levels, including our ability to introduce new products and services that are compelling to our customers and that they adopt, changes to our systems, processes or other technical or operational requirements that impact how customers use or access our products and services, the impact on our network of other customers choosing whether to use Cash App, our decision to expand into or exit certain markets, technical or other problems that affect customer experience, failure to provide sufficient customer support, fraud and scams targeting Cash App customers, and harm to our reputation and brand. Further, certain events or programs, such as government stimulus programs may correlate with periods of significant growth, but such growth may not be sustainable. Additionally, the growth rate of Cash App revenue may be distorted by the prices of bitcoin, as bitcoin revenue may increase or decrease due to changes in the price of, and demand for, bitcoin and may not correlate to customer or engagement growth rates.

The growth of our business depends in part on our existing sellers and customers expanding their use of our products and services. If we are unable to encourage sellers to broaden theirbroader use of our products and services within each of our ecosystems by our existing sellers and customers, our growth may slow or stop, and our business may be materially and

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adversely affected. The growth of our business also depends on our ability to attract new sellers and customers, to encourage larger sellers and customers to use our products and services, and to introduce successful new products and services. We have invested and will continue to invest in improving our Square platformbusiness in order to offer better or new features, products, and services and to adjust our product offerings to changing economic conditions, but if those features, products, services, and serviceschanges fail to be successful on the expected timeline or at all, our growth may slow or decline.


Our business hasWe have generated significant net losses in the past, and we intend to continue to invest substantially in our business. Thus, we may not be able to achieve or maintain profitability.


We generated net losses of $62.8 million, $171.6 million, and $212.0 million forDuring the yearsyear ended December 31, 2017, 2016 and 2015, respectively.

2023, we generated a net income of $9.8 million. As of December 31, 2017,2023, we had an accumulated deficit of $842.7$528.4 million.

We intend to continue to make significant investments in our business, including with respect to our employee base;base, sales and marketing, including expenses relating to increased direct marketing efforts, referral programs, and free hardware and subsidized services; development of new products, services, and features; acquisitions; expansion of office space and other infrastructure; expansion of international operations;operations, and general administration, including legal, finance, and other compliance expenses related to being a public company.our business. If the costs associated with acquiring and supporting new or larger sellers, attracting and supporting new Cash App customers, or with developing and supporting our products and services materially riseincrease in the future, including the fees we pay to third parties to advertise our products and services, our expenses may rise significantly. In addition, increases in our seller base could cause us to incur increased losses because costs associated with new sellers are generally incurred up front, while revenue is recognized thereafterin future periods as sellers utilize our services.products and services are used by our sellers. Moreover, businesses we acquire may have different profitability than our existing business, which may affect our overall profitability, particularly until we are able to realize expected synergies. For example, prior to its acquisition, Afterpay historically generated net losses. If we are unable to generate adequate revenue growth and manage our expenses, we may continue to incur significant losses and may not achieve or maintain profitability.profitability on a consistent basis.


We frequently
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From time to time, we have made and may make decisions that will reducehave a negative effect on our short-term operating results if we believe those decisions will improve the experiences of our customers, which we believe will improve our operating results over the long term. For example, from time to time, we have implemented expense cuts and reduced the size of our workforce to, among other things, align our cost structure with our business and longer term strategies, which may increase expenses in the short term and impact our ability to grow or quickly develop and introduce products. These decisions may not be consistent with the expectations of investors and may not produce the long-term benefits that we expect, in which case our business may be materially and adversely affected.


Our business depends on our ability to maintain, protect, and enhance our brands.

Having a strong and trusted brand has contributed significantly to the success of our business. We believe that maintaining, promoting, and enhancing the Square, Cash App, TIDAL, Afterpay, and our other brands, in a cost-effective manner is critical to achieving widespread acceptance of our products and services and expanding our base of customers. Maintaining and promoting our brands will depend largely on our ability to continue to provide useful, reliable, secure, and innovative products and services, as well as our ability to maintain trust and be a technology leader. We may introduce, or make changes to, features, products, services, privacy practices, or terms of service that customers do not like, which may materially and adversely affect our brands. Our brand promotion activities may not generate customer awareness or increase revenue, and even if they do, any increase in revenue may not offset the expenses we incur in building our brands. If we fail to successfully promote and maintain our brands or if we incur excessive expenses in this effort, our business could be materially and adversely affected.

The introduction and promotion of new products and services, as well as the promotion of existing products and services, may be partly dependent on our visibility on third-party advertising platforms, such as Google, Facebook, or X. Changes in the way these platforms operate or changes in their advertising prices, data use practices or other terms could make the maintenance and promotion of our products and services and our brands more expensive or more difficult. If we are unable to market and promote our brands on third-party platforms effectively, our ability to acquire new customers would be materially harmed. We also use retail partners to sell hardware and acquire sellers for Square. Our ability to acquire new sellers could be materially harmed if we are unable to enter into or maintain these partnerships on terms that are commercially reasonable to us, or at all.

Harm to our brands can arise from many sources, including failure by us or our partners and service providers to satisfy expectations of service and quality; inadequate protection or misuse of sensitive information; fraud committed by third parties using our products or applications; compliance failures and claims; litigation, regulatory and other claims; errors caused by us or our partners; and misconduct by our partners, service providers, or other counterparties. We have also been from time to time in the past, and may in the future be, the target of incomplete, inaccurate, and misleading or false statements about our company and our business that could damage our reputation and brands and deter customers from adopting our services or our products. In addition, negative statements about us can cause and have caused a decline in the market price of our Class A common stock, divert our management’s attention and resources, and could cause other adverse impacts to our business. Partners and influencers or other third parties with whom we maintain relationships could engage in behavior or use their platforms to communicate directly with our sellers and customers in a manner that reflects poorly on our brands and such behavior or communications may adversely affect us. Further, negative publicity or commentary regarding the partners and influencers or other third parties who are, or are perceived to be, affiliated with us may also damage our reputation, even if the negative publicity or commentary is not directly related to us. Any negative publicity about the industries we operate in or our company, the quality and reliability of our products and services, our risk management processes, changes to our products and services, our ability to effectively manage and resolve customer complaints, our privacy, data protection, and information security practices, litigation, regulatory activity, policy positions, and the experience of our sellers and customers with us, our products or services could adversely affect our reputation and the confidence in and use of our products and services. If we do not successfully maintain, protect or enhance our brands, our business could be materially and adversely affected.

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Our efforts to expand our product portfolio and market reach, including through acquisitions, may not succeed and may reduce our revenue growth and profitability.

We intend to continue to broaden the scope of products and services we offer. However, we may not be successful in maintaining or growing our revenue, or deriving any significant new revenue streams from these products and services. Failure to successfully broaden the scope of products and services that are attractive may inhibit our growth and harm our business. Furthermore, we expect to continue to expand our markets in the future, and we may have limited or no experience in such newer markets. We cannot assure you that any of our products or services will be widely accepted in any market or that they will grow in revenue or contribute to our profitability. Our offerings may present new and difficult technological, operational, and regulatory risks, and other challenges, and if we experience service disruptions, failures, or other issues, our business may be materially and adversely affected. Our expansion into newer markets may not lead to growth and may require significant investment of financial resources and of management time and attention, and we may not be able to recoup our investments in a timely manner or at all. If any of this were to occur, it could damage our reputation, limit our growth, and materially and adversely affect our business.

Our long-term success depends on our ability to develop products and services to address the rapidly evolving market for payments and financial services, and, if we are not able to implement successful enhancements and new features for our products and services, our business could be materially and adversely affected.

Rapid and significant technological changes continue to confront the industries in which we operate, including developments in omnichannel commerce, proximity payment devices (including contactless payments via NFC technology), digital banking, mobile financial apps, cryptocurrencies, tokenization (e.g., replacing sensitive data such as payment card information with symbols (tokens) to keep the data safe), blockchain, and artificial intelligence ("AI"), including machine learning.

These new and evolving services and technologies may be superior to, impair, or render obsolete the products and services we currently offer or the technologies we currently use to provide them. Our ability to develop new products and services may be inhibited by industry-wide standards, payment card networks, existing and future laws and regulations, resistance to change from our customers, which includes our sellers and their customers, or third parties’ intellectual property rights. Incorporating new technologies into our products and services may require substantial expenditures and take considerable time, and we may not be successful in realizing a return on our efforts in a timely manner or at all.

Our success will depend on our ability to develop new technologies, to adapt to technology changes and evolving industry standards, to incorporate new technologies into our products and services, and to provide products and services that are tailored to specific needs and requirements of our customers. For example, generative AI has become more publicly available and enterprise adoption of generative AI has grown. We have incorporated and expect to continue to incorporate AI features into our products and technologies and our success will depend in part on our ability to do so in a way that is compelling to our customers. If we are unable to provide enhancements and new features for our products and services or to develop new products and services that achieve market acceptance or that keep pace with rapid technological developments and evolving industry standards, our business would be materially and adversely affected.

We often rely, not only on our own initiatives and innovations, but also on third parties, including some of our competitors, for the development of and access to new technologies and development of a robust market for these new products and technologies. Failure to accurately predict or to respond effectively to developments in our industry may significantly impair our business. In addition, because our products and services are designed to operate with a variety of systems, infrastructures, and devices, we need to continuously modify and enhance our products and services to keep pace with changes in technologies. Any failure of our products and services to continue to operate effectively with third-party infrastructures and technologies could reduce the demand for our products and services, result in dissatisfaction of our customers, and materially and adversely affect our business.

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Substantial and increasingly intense competition in our markets and industry may harm our business.

We compete in markets characterized by vigorous competition, changing technology, evolving industry standards, changing customer needs, and frequent introductions of new products and services. We expect competition to intensify in the future as existing and new competitors introduce new services or enhance existing services. For example, companies not traditionally associated with the payments industry have introduced products or services that are or may become competitive with our business. We compete against many companies to attract customers across our products and services, and some of these companies have greater financial resources and substantially larger bases of customers than we do, which may provide them with significant competitive advantages. These companies may devote greater resources to the development, promotion, and sale of products and services, may achieve economies of scale due to the size of their customer bases, and may more effectively introduce their own innovative products and services that adversely impact our growth. For example, a number of competitors offer BNPL products. Competitors in the BNPL space have engaged in, and may continue to engage in, aggressive consumer acquisition campaigns, may develop superior technology offerings, or consolidate with other entities and achieve benefits of scale. Such competitive pressures may materially erode our existing market share in the BNPL space and may hinder our expansion into new markets. In addition, mergers and acquisitions by, and collaborations between, the companies we compete against may lead to even larger competitors with more resources.

Certain sellers have long-standing exclusive, or nearly exclusive, relationships with our competitors to accept payment cards and other services that compete with what we offer. These relationships can make it difficult or cost-prohibitive for us to conduct material amounts of business with them. Competing services tied to established brands may engender greater confidence in the safety and efficacy of their services. If we are unable to differentiate ourselves from and successfully compete with our competitors, our business will be materially and adversely affected.

We may also face pricing pressures from competitors. Some competitors may offer lower prices by cross-subsidizing certain services that we also provide through other products they offer. Such competition may result in the need for us to alter our pricing and could reduce our gross profit. Also, sellers may demand more customized and favorable pricing from us, and competitive pressures may require us to agree to such pricing, reducing our gross profit. We currently negotiate pricing discounts and other incentive arrangements with certain large sellers to increase acceptance and usage of our products and services. If we continue this practice and if an increasing proportion of our sellers are large sellers, we may have to increase the discounts or incentives we provide, which could also reduce our gross profit.

Developments in the cryptocurrency market subject us to additional risks.

Our investments in bitcoin, our bitcoin ecosystem, and our Cash App feature that permits customers to transact in bitcoin, subject us to additional risks related to any further developments in the cryptocurrency markets and the resulting impact on customer and investor behavior. We may experience adverse impacts to our business as a result of the downstream effects of the bankruptcies filed by certain cryptocurrency market participants, its severity, and the actions taken by regulators to address its impact. Enforcement actions by U.S. regulators against major crypto asset platforms and negative publicity associated with crypto asset activities may, among other things, result in a decline in confidence or interest in crypto assets. If the cryptocurrency environment deteriorates, our customers may wish to sell their bitcoin at a price or volume that exceeds the market demand for bitcoin, which could cause disruptions in our operations and have a material and adverse effect on our business and financial condition. If our customers experience losses due to market fluctuations in the prices of bitcoin, they may reduce or cease their use of Cash App and our results of operations may be adversely impacted. Further, our customers could attempt to seek compensation from us for their financial investment losses, and those claims, even if unsuccessful, would likely be time-consuming and costly for us to address.

Deteriorations in the cryptocurrency markets may also have an adverse effect on our reputation, and any negative perception by our customers of one or more cryptocurrencies may lead to a loss of customer demand for our products and services, any of which could have an adverse impact on our business and financial condition. We may also suffer a decline in the market price of our Class A common stock due to any negative perception by our customers, investors, or the general public, of bitcoin or the cryptocurrency markets.

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Acquisitions, strategic investments, new businesses, joint ventures, divestitures, and other transactions we enter into could fail to achieve strategic objectives, disrupt our ongoing operations or result in operating difficulties, liabilities and expenses, harm our business, and negatively impact our results of operations.

In pursuing our business strategy, we routinely conduct discussions and evaluate opportunities for possible acquisitions, strategic investments, new businesses, joint ventures, divestitures, and other transactions. We have in the past acquired or invested in, and we continue to seek to acquire or invest in, businesses, technologies, or other assets that we believe could complement or expand our business, including acquisitions of new lines of business that are adjacent to or outside of our existing ecosystems or geographic territories. As we grow, the pace and scale of our acquisitions may increase and may include larger acquisitions than we have done historically. The identification, evaluation, and negotiation of potential acquisition or strategic investment transactions may divert the attention of management and entail various expenses, whether or not such transactions are ultimately completed. There can be no assurance that we will be successful in identifying, negotiating, and consummating favorable transaction opportunities. In addition to transaction and opportunity costs, these transactions involve large challenges and risks, whether or not such transactions are completed, including risks that:

•the transaction may not advance our business strategy or may harm our growth, profitability, or reputation;

•we may not be able to secure required regulatory approvals or otherwise satisfy closing conditions for a proposed transaction in a timely manner, or at all;

•the transaction may subject us to additional regulatory burdens that affect our business in potentially unanticipated and significantly negative ways;

•we may not realize a satisfactory return on our investment or increase our revenue;

•we may experience difficulty, and may not be successful in, integrating technologies, IT or business enterprise systems, culture, or management or other personnel of the acquired business;

•we may incur significant acquisition costs and transition costs, including in connection with the assumption of ongoing expenses of the acquired business;

•we may not realize the expected benefits or synergies from the transaction in the expected time period, or at all, which may result in impairment charges, costs of winding down acquired operations or other negative impacts to our business;

•we may be unable to retain key personnel;

•acquired businesses or businesses that we invest in may not have adequate controls, processes, and procedures to ensure compliance with laws and regulations, including with respect to data privacy, data protection, and information security, and our due diligence process may not identify compliance issues or other liabilities. Moreover, acquired businesses’ technology stacks may add complexity, resource constraints, and legacy technological challenges that make it difficult and time consuming to achieve such adequate controls, processes, and procedures.

•we may fail to identify or assess the magnitude of certain liabilities, shortcomings, or other circumstances prior to acquiring or investing in a business, which could result in additional financial, legal, regulatory, or tax exposure and may subject us to additional controls, policies, procedures, liabilities, litigation, costs of compliance or remediation, or other adverse effects on our business, operating results, or financial condition;

•we may have difficulty entering into new market segments or new geographic territories;

•we may be unable to retain the customers, vendors, and partners of acquired businesses;

•there may be lawsuits or regulatory actions resulting from the transaction;

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•there may be risks associated with undetected security weaknesses, cyberattacks, or security breaches or incidents at companies that we acquire or with which we may combine or partner;

•there may be local and foreign regulations applicable to the international activities of our business and the businesses we acquire; and

•acquisitions could result in dilutive issuances of equity securities or the incurrence of debt.

We have experienced certain of these risks in connection with our past acquisitions, and any of the foregoing could harm our business and negatively impact our results of operations.

We have in the past, and may in the future, also choose to divest certain businesses or product lines. If we decide to sell assets or a business, we may have difficulty obtaining terms acceptable to us in a timely manner, or at all. Additionally, we may experience difficulty separating out portions of, or entire, businesses, incur loss of revenue or experience negative impact on margins, or we may not achieve the desired strategic and financial benefits. Such potential transactions may also delay achievement of our strategic objectives, cause us to incur additional expenses, disrupt customer or employee relationships, and expose us to unanticipated or ongoing obligations and liabilities, including as a result of our indemnification obligations. Further, during the pendency of a divestiture, we may be subject to risks such as a decline in the business to be divested, loss of employees, customers, or suppliers and the risk that the transaction may not close, any of which would have a material adverse effect on the business to be divested and our retained business. If a divestiture is not completed for any reason, we may not be able to find another buyer on the same terms, and we may have incurred significant costs without any corresponding benefit.

Joint ventures and minority investments inherently involve a lesser degree of control over business operations, thereby potentially increasing the financial, legal, operational, regulatory, and/or compliance risks associated with the joint venture or minority investment. In addition, we may be dependent on joint venture partners, controlling shareholders, management, or other persons or entities who control them and who may have business interests, strategies, or goals that are inconsistent with ours. Business decisions or other actions or omissions of the joint venture partners, controlling shareholders, management, or other persons or entities who control them may adversely affect the value of our investment, result in litigation or regulatory action against us, and may otherwise damage our reputation and brand.

The ongoing integration of Afterpay could disrupt our business and adversely affect our future results of operations.

Our ability to benefit from our acquisition of Afterpay depends on our ability to complete the integration of Afterpay with our business in a timely and effective manner. Difficulties that we have encountered and may continue to encounter in the integration process include the following:

•challenges and difficulties associated with managing the larger, more complex, combined company;

•conforming standards and controls and consolidating corporate infrastructures between the companies;

•integrating personnel from the two companies while maintaining focus on developing, producing and delivering consistent, high quality products and services;

•loss of key employees;

•coordinating geographically dispersed organizations;

•potential unknown liabilities and unforeseen expenses; and

•the diversion of management’s attention caused by integrating the companies’ operations.

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TIDAL subjects us to risks and uncertainties related to the music industry.

TIDAL’s business is dependent on the various rights holders. We cannot provide assurances that we or TIDAL will be able to maintain or expand arrangements with partners and other third parties on acceptable terms, if at all. Further, the music industry is highly concentrated, which means we rely on a small number of entities that may take adverse actions or take advantage of their market power to pursue arduous financial or other terms that may adversely affect us or may restrict our ability to innovate and improve our streaming service. Our streaming service also competes for listeners on the basis of the presence and visibility of our app, which is distributed via app stores operated by Apple and Google. We face significant competition for listeners from these companies, which also promote their own music and content. In addition, our competitors’ streaming products may be pre-loaded or integrated into consumer electronics products or automobiles more broadly than our streaming product, which makes such competitors more visible to consumers. If we are unable to compete successfully for listeners against other media providers, then our TIDAL business may suffer.

We expect that the operation of our TIDAL business will require continued investment and management time and attention, none of which will ensure that we will be successful. If we fail to successfully operate and grow our TIDAL business, we will not realize the benefits anticipated when we acquired a majority interest in the business, and any such failure could result in adverse effects on our business and financial results, including substantial impairment charges.

Operating or expanding our business globally subjects us to new challenges and risks.

We offer our services and products in multiple countries and we may continue expanding our business further globally. Expansion, whether in our existing or new global markets, will require additional resources and new or expanded controls, and offering our services and products in new geographic regions often requires substantial expenditures and takes considerable time. We may not be successful enough in these new geographies to recoup our investments in a timely manner or at all. Such expansion, and the ongoing operation of our global business, subject our business to substantial risks, including:

•difficulty in attracting sellers and customers, or a lack of acceptance of our products and services in foreign markets;

•failure to anticipate competitive conditions and competition with service providers or other market-players that have greater experience in the foreign markets than we do;

•failure to conform with applicable business customs, including translation into foreign languages, cultural context, and associated expenses;

•increased costs and difficulty in protecting intellectual property and sensitive data;

•changes to the way we do business as compared with our current operations;

•inability to support and integrate with local third-party service providers;

•difficulties in staffing and managing foreign operations in an environment of diverse cultures, laws, and customs, challenges caused by distance, language, and cultural differences, and the increased travel, infrastructure, and legal and compliance costs associated with global operations;

•difficulties in recruiting and retaining qualified employees and maintaining our company culture;

•difficulty in gaining acceptance and maintaining compliance with industry self-regulatory bodies;

•compliance with multiple complex, potentially conflicting and changing governmental laws and regulations, including with respect to payments, privacy, data protection, information security, and tax;

•compliance with U.S. and foreign anti-corruption, anti-bribery, and anti-money laundering laws;

•enactment of tariffs, sanctions, fines, or other trade restrictions;

•exchange rate risk;
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•increased exposure to public health issues such as pandemics, and related industry and governmental actions to address these issues; and

•regional economic and political instability and other geopolitical risks.

As a result of these risks, our efforts to expand our global operations may not be successful, which could limit our ability to grow our business.

Our BNPL platform increases our exposure to consumer defaults and merchant insolvency.

Revenue generated from BNPL products depends on our ability to recoup the purchase value of the goods or services that consumers have purchased using our BNPL platform. Although we rely on technology to assess consumers’ repayment capability for our BNPL products, there can be no guarantee that such processes will always accurately predict repayments. Miscalculation of consumers’ repayment ability or a material increase in repayment failures, whether due to inflation, macroeconomic uncertainty and downturn, market volatility, or otherwise, may adversely affect our business, results of operations, and financial condition. In addition, if consumers who have purchased products or services using our BNPL platform do not receive the products or services, they may cease payment on their outstanding balances or request a refund on previous payments, and our business may be negatively impacted.

The performance of our BNPL platform depends also on the sales of products and services by retail merchants. Merchants’ sales may decrease as a result of factors outside of their control, including deteriorating macroeconomic conditions and supply chain disruptions. If a merchant ceases its operations, closes some or all of its locations, or fails to deliver goods or services to our consumers, the merchant may not be able to reimburse us for chargebacks or refunds or may not be able to repay the funds we have advanced to them, all of which could result in higher charge-off rates than anticipated. Moreover, if the financial condition of a merchant deteriorates significantly such that the merchant becomes subject to a bankruptcy proceeding, we may not be able to recover any amounts due to us from the merchant, and our financial results would be adversely affected.

We are subject to risks related to the banking ecosystem, including through Square Financial Services, our bank partnerships, and FDIC and other regulatory obligations.

Volatility in the banking and financial services sectors may impact our bank partnerships and could negatively impact our business. For example, we offer certain FDIC-insured products through our partnerships with banks that are members of the FDIC. We believe our banking programs, including records maintained by us and our bank partners, comply with all applicable requirements for each eligible participant's deposits to be covered by FDIC insurance, up to the applicable maximum deposit insurance amount. However, if the FDIC were to disagree, the FDIC may not recognize the participants’ claims as covered by deposit insurance in the event a bank partner fails and enters receivership proceedings under the Federal Deposit Insurance Act (“FDIA”). If the FDIC were to determine that funds held at a bank partner are not covered by deposit insurance, or if one or more of our bank partners were to fail and enter receivership proceedings under the FDIA, our sellers and customers may seek to withdraw their funds, or may not be able to withdraw all their funds in a timely manner, which could adversely affect our brand, business and results of operations, and may lead to claims or litigation, which may be costly to address. Additionally, in instances where we are a service-provider to or are otherwise in a third-party relationship with our bank partners in connection with these programs, we are subject to certain risk-management standards for third-party relationships in accordance with federal bank regulatory guidance and examinations by the federal banking regulators.

Further, as a FDIC-insured institution, our subsidiary Square Financial Services is subject to regulatory obligations, including the assessment of a quarterly deposit insurance premium, calculated based on its average consolidated total assets. We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance. If there are additional bank or financial institution failures, we may be required to pay higher deposit insurance assessments or higher fees associated with FDIC-insured products offered through our bank partnerships, or we may be subject to higher capital requirements imposed by the FDIC, our bank partners, or federal banking regulators with authority over our bank partners, which could reduce our profitability, and negatively impact our business and operations.

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We intend to continue to explore other products, models, and structures for our product offerings, including with bank partners. Certain of our current product offerings subject us to reporting requirements, bonding requirements, and inspection by applicable federal or state regulatory agencies, and our future product offerings may potentially require, or be deemed to require, additional data, procedures, partnerships, licenses, regulatory approvals, or capabilities that we have not yet obtained or developed. Should we fail to successfully expand and evolve our product offerings, or should our new products, models or structures, or new laws or regulations or interpretations of existing laws or regulations, impose requirements on us that are cumbersome or that we cannot satisfy, our business may be materially and adversely affected.

Square Loans are subject to additional risks related to availability of capital, seller payments, interest rate, deposit insurance premiums, and general macroeconomic conditions.

Square Loans is our commercial lending program. Square Financial Services, as the originator of the loans provided by Square Loans in the U.S., is subject to risks in addition to those described elsewhere in this Annual Report on Form 10-K. Maintaining and growing our Square Loans business is dependent on institutional third-party investors purchasing the eligible business loans originated by us. If such third parties fail to continue to purchase such business loans or reduce the amount of future loans they purchase, then we may need to reduce originations, or we would need to fund the purchase of additional business loans from our own resources. We then may have to reduce the scale of Square Financial Services, which could have a direct impact on our ability to grow. Additionally, Square Financial Services has certain customary repurchase obligations in its loan purchase and servicing agreements with such institutional third-party investors for breaches of certain eligibility representations and warranties. If third parties reduce the price they are willing to pay for these business loans or reduce the servicing fees they pay us in exchange for servicing the business loans on their behalf, then the financial performance of Square Financial Services would be harmed.

The business loans provided by Square Loans are generally unsecured obligations of our sellers, and they are not guaranteed or insured in any way. Adverse changes in macroeconomic conditions or the credit quality of our sellers could cause some sellers who utilize Square Loans to cease operating or to experience a decline in their payment processing volume, thereby rendering them unable to make payment on the business loan and/or extend the repayment period beyond the contractual repayment terms on the business loan. To the extent a seller breaches a contractual obligation, such as the requirement to make minimum payments or other breach, the seller would be liable for an accelerated business loan repayment, where our recourse is to the business and not to any individual or other asset. In addition, because the servicing fees we receive from third-party investors depend on the collectability of the business loans, if there is an increase in sellers who utilize Square Loans who are unable to repay their business loans, we will be unable to collect our entire servicing fee for such loans. While our exposure to loans that we sell to third parties is more limited, if the sellers who utilize Square Loans are unable to repay their loans, the risk of loss in our owned loan portfolio will increase and our business may be adversely affected.

Adverse changes in macroeconomic conditions may lead to a decrease in the number of sellers eligible for Square Loans and may strain our ability to correctly identify such sellers or manage the risk of non-payment or fraud as servicer of the business loans. If we fail to correctly predict the likelihood of timely repayment or correctly price such business loans, our business may be materially and adversely affected.

Square Financial Services’ profitability depends, in part, on its net interest income. Net interest income is the difference between interest income earned on interest-bearing assets, such as loans and securities, and interest expense paid on interest-bearing liabilities, such as deposits and borrowed funds. Changes in interest rates and monetary policy can impact the demand for new loans, the credit profile of our borrowers, the yields earned on loans and securities, and the rates paid on deposits and borrowings. The impact of any sudden and substantial move in interest rates and/or increased competition may have an adverse effect on our business, financial condition and results of operations, as our net interest income may be adversely affected.

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Operational Risks

We, our sellers, our partners, and others who use our services obtain and process a large amount of sensitive data. Any real or perceived improper or unauthorized use of, disclosure of, or access to such data could harm our reputation as a trusted brand, as well as have a material and adverse effect on our business.


We, our sellers, and our partners, including third-party vendors and data centers that we use, obtain and process large amounts of sensitive data, including data related to our sellers, theircustomers, our sellers’ customers, and their transactions, as well as other users of our services, such as Cash App and Square Payroll.transactions. We face risks, including to our reputation as a trusted brand, in the handling and protection of this data, and thesedata. These risks will increase as our business continues to expand to include new products and technologies.technologies, such as AI, and as we and our third-party vendors rely on an increasingly distributed workforce. Our operations involve the storage and transmission of sensitive informationdata of individuals and businesses using our services, including their names, addresses, social securitysecurity/tax ID numbers (or their foreign equivalents), government IDs, payment card numbers and expiration dates, bank account information, loans they have applied for or obtained, and data regarding the performance of our sellers’ businesses. We also obtain sensitive information regarding our sellers’ customers, including their contact information, payment card numbers and expiration dates, and purchase histories. Additionally, certain of our products and services are subject to the Health Insurance Portability and Accountability Act of 1996 (and the rules and regulations thereunder, as amended, including with respect to the HITECH Act) (HIPAA), and therefore we are required to take measures to safeguard protected health information of our health care entity-sellers' customers when using those products and services. Our services also provide third-party developers the opportunity to provide applications to sellers in the Square and Weebly app marketplaces. Sellers who choose to use such applications can grant permission allowing the applications to access content created or held by sellers in their customers.

We have administrative, technical, and physical security measures in place,Square or Weebly account. Should our internal or third-party developers experience or cause a breach, incident, or technological bug, that could lead to a compromise of the content of data held by such sellers, including personal data, our reputation may be harmed and we may be subject to significant fines, penalties or judgments. The growing use of AI in our products and services presents additional risks. AI algorithms or automated processing of data may be flawed, and datasets may be insufficient or may use third party AI with unclear intellectual property rights or interests. Inappropriate or controversial data practices by us or others could subject us to lawsuits, regulatory investigations, legal and financial liability, or reputational harm. Additionally, our use of AI may create additional, or increase the risk of, cybersecurity breaches and incidents.

Our products and services operate in conjunction with, and we are dependent upon, third-party products and components across a broad ecosystem. There have policiesbeen and proceduresmay continue to be significant attacks on third-party providers, and we cannot guarantee that our or our third-party developers or vendors’ systems and networks have not been breached or that they do not contain exploitable defects or bugs that could result in placea breach of or disruption to contractually requireour systems and networks or the systems and networks of third parties that support us and our products and services. If there is a security vulnerability, error, or other bug in one of these third-party products or components and if there is a security exploit targeting them, we could face increased costs, claims and liability, proceedings and litigation, reduced revenue, or harm to whomour reputation or competitive position. The natural sunsetting of third-party products and operating systems that we transfer datause requires our personnel to implementreallocate time and maintain appropriateattention to migration and updates, during which period potential security measures. However,vulnerabilities could be exploited.

More generally, if our privacy, data protection, or information security measures or those of the previously mentioned third partiesthird-party developers or vendors are inadequate or are breached as a result of third-party action, employee error, malfeasance, malware, phishing, hacking attacks, system error, trickery, or otherwise compromised, and, as a result, there is improper disclosure of or someone obtains unauthorized access to or exfiltrates funds, cryptocurrencies,bitcoin, investments, or other assets, or other sensitive information, including personally identifiable information or protected health information,data on our systems or our partners’ systems, or if we, our third-party developers or vendors suffer a ransomware or advanced persistent threat attack, or if any of the foregoing is reported or perceived to have occurred, our reputation and business could be damaged.damaged, and we could face liability and financial losses. If the sensitive information isdata or assets are lost or improperly accessed, misused, disclosed, destroyed, or altered or threatened to be improperly accessed, misused, disclosed, destroyed, or altered, we could incur significant financial losses and costs and liability associated with remediation and the implementation of additional security measures and be subject to claims, litigation, regulatory scrutiny, and penalties, includinginvestigations. For example, in April 2022 we announced that we determined that a former employee downloaded certain reports of our subsidiary Cash App Investing in December 2021 that contained some U.S. customer information without permission after the former employee’s employment ended, as disclosed in our Current Report on Form 8-K filed with the SEC on April 4, 2022. We have incurred costs associatedrelated to our investigation and response to this incident, and we could incur other losses, costs, and liabilities in connection with remediation.such incident.


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Under payment card rules and our contracts with our card processors and other counterparties, if there is a breach of payment card information that we store or that is stored by our sellers or other third parties with which we do business, we could be liable to the payment card issuing banks for certain of their cost of issuing new cardscosts and other related expenses. Additionally, if our own confidential business information were improperly disclosed, accessed, or breached, our business could be materially and adversely affected. A core aspect of our business

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is the reliability and security of our payments platform.platforms. Any perceived or actual breach of security or other type of security incident or any type of fraud perpetrated by bad actors such as account takeovers or fake account scams, regardless of how it occurs or the extent or nature of the breach, incident, or fraud, could have a significant impact on our reputation as a trusted brand, cause us to lose existing sellers or other customers, prevent us from obtaining new sellers and other customers, require us to expend significant funds to remedy problems caused by breaches and incidents and to implement measures in an effort to prevent further breaches and incidents, and expose us to legal risk and potential liability including those resulting from governmental or regulatory investigations, class action litigation, and costs associated with remediation, such as fraud monitoring.monitoring and forensics. Any actual or perceived security breach or incident at a company providing services to us or our customers on our behalf could have similar effects. Further, any actual or perceived security breach or incident with respect to the bitcoin and blockchain ledger, regardless of whether such breach or incident directly affects our products and services, could have negative reputational effects and harm customer trust in us and our products and services.


While we maintain cybersecurity insurance, our insurance may be insufficient to cover all liabilities incurred by such attacks. We cannot be certain that our insurance coverage will be adequate for data handling or information security liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, premiums, or deductibles could have a material adverse effect on our business, including our financial condition, operating results, and reputation.

Our products and services may not function as intended due to errors in our software, hardware, and systems, product defects, or due to security breaches or incidents or human error in administering these systems, which could materially and adversely affect our business.

Our software, hardware, systems, and processes may contain undetected errors or vulnerabilities that could have a material adverse effect on our business, particularly to the extent such errors or vulnerabilities are not detected and remedied quickly. We have from time to time found defects and errors in our customer-facing software and hardware, internal systems, external facing communications, manual processes, and technical integrations with third-party systems, including as a result of ordinary course updates to our software and systems, and new errors or vulnerabilities may be introduced in the future. From time to time, such errors or defects in our software, hardware, systems, or external facing communications, including as a result of human errors, have negatively impacted our customers’ experience with us and led to negative publicity and harm to our brand and reputation. In connection with any such defects or errors, we may also face government inquiries or investigations, claims and litigation, and we may incur additional costs or expenses to remediate the issues. Additionally, we rely on a limited number of component and product suppliers located outside of the U.S. to manufacture our products. As a result, our direct control over production and distribution is limited, and it is uncertain what effect such diminished control will have on the quality of our products. If there are defects in the manufacture of our hardware products, we may face similar negative publicity, investigations, and litigation, and we may not be fully compensated by our suppliers for any financial or other liability that we suffer as a result. As our hardware and software services continue to increase in size and complexity, and as we integrate new, acquired subsidiaries with different technology stacks and practices, these risks may correspondingly increase as well.

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In addition, we provide frequent incremental releases of product and service updates and functional enhancements, which increase the possibility of errors. The products and services we provide are designed to process complex transactions and deliver reports and other information related to those transactions, all at high volumes and processing speeds. Any errors, data leaks, security breaches or incidents, disruptions in services, or other performance problems with our products or services caused by external or internal actors could hurt our reputation and damage our and our customers’ businesses. Software and system errors, or human errors, could delay or inhibit settlement of payments, result in oversettlement, cause reporting errors, cause pricing irregularities or prevent us from collecting transaction-based fees, or negatively impact our ability to serve our customers, all of which have occurred in the past. Similarly, security breaches or incidents, which may be caused by or result from cyber-attacks by hackers or others, computer viruses, worms, ransomware, other malicious software programs, security vulnerabilities, employee or service provider theft, misuse or negligence, phishing, identity theft or compromised credentials, denial-of-service attacks, or other causes, have from time to time impacted our business and could disrupt the proper functioning of our software products or services, cause errors, allow loss or unavailability of, unauthorized access to, or disclosure of, proprietary, confidential or otherwise sensitive data of ours or our customers, and other destructive outcomes. Moreover, security breaches or incidents or errors in our hardware or software design or manufacture could cause product safety issues typical of consumer electronics devices. Any of the foregoing issues could lead to product recalls and inventory shortages, result in costly and time-consuming efforts to redesign and redistribute our products, give rise to regulatory inquiries and investigations, and result in reimbursement obligations, lawsuits and other liabilities and losses, any of which could have a material and adverse effect on our business.

Additionally, electronic payment, hardware, and software products and services, including ours, have been, and could continue to be in the future, specifically targeted and penetrated or disrupted by hackers and other malicious actors. Because the techniques used to obtain unauthorized access to data, products, and services and to disable, degrade, or sabotage them change frequently and may be difficult to detect or remediate for long periods of time, we and our customers may be unable to anticipate these techniques or implement adequate preventative measures to stop them. If we or our sellers or other customers are unable to anticipate or prevent these attacks, our sellers' or other customers may be harmed, our reputation could be damaged, and we could incur significant liability.

Systems failures, interruptions, delays in service, catastrophic events, and resulting interruptions in the availability of our products or services, or those of our sellers, could harm our business and our brand, and subject us to substantial liability.

Our systems and those of our third-party vendors, including data center facilities, may experience service interruptions, outages, cyber-attacks and security breaches and incidents, human error, earthquakes, hurricanes, floods, pandemics, fires, other natural disasters, power losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks and other geopolitical unrest, computer viruses, ransomware, and other malicious software, changes in social, political, or regulatory conditions or in laws and policies, or other changes or events. Our systems and facilities are also subject to break-ins, sabotage, and acts of vandalism. Some of our systems are not fully redundant, and our disaster-recovery planning is not sufficient for all eventualities. In addition, as a provider of payments solutions and other financial services, we are subject to increased scrutiny by regulators that may require specific business continuity and disaster recovery plans and more rigorous testing of such plans. This increased scrutiny may be costly and time-consuming and may divert our resources from other business priorities.

We have experienced and will likely continue to experience denial-of-service and other cyber-attacks, system failures, outages, security incidents, and other events or conditions that interrupt the availability, data integrity, or reduce the speed or functionality of our products and services. These events have resulted and likely will result in loss of revenue. In addition, we may incur significant expense to repair or replace damaged equipment and remedy resultant data loss or corruption. The risk of security incidents is increasing as we experience an increase in electronic payments, e-commerce, and other online activity. Additionally, due to political uncertainty and military actions associated with Russia’s invasion of Ukraine, we and our service providers are vulnerable to heightened risks of security incidents and security and privacy breaches from or affiliated with nation-state actors, including attacks that could materially disrupt our systems, operations, supply chain, products, and services. We cannot provide assurances that our preventative efforts against such incidents will be successful. A prolonged interruption in the availability or reduction in the speed or other functionality of our products or services could materially harm our reputation and business. Frequent, persistent or significant interruptions in our products and services could cause customers to believe that our products and services are unreliable, leading them to switch to our competitors or to avoid our products and services, and could permanently harm our reputation and business. Moreover, to the extent that any system failure or similar event results in damages to customers or contractual counterparties, these customers and contractual counterparties could seek compensation from us for their losses, and those claims, even if unsuccessful, would likely be time-consuming and costly for us to address.
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A significant natural or man-made disaster could have a material and adverse impact on our business. Certain of our offices and data center facilities are located in the San Francisco Bay Area, a region known for seismic activity. Despite any precautions we may take, the occurrence of a natural disaster or other unanticipated problems at our offices or data centers could result in lengthy interruptions in our services or could result in related liabilities. We do not maintain insurance sufficient to compensate us for the potentially significant losses that could result from disruptions to our services.

Significant natural or other disasters, including pandemics, could also have a material and adverse impact on our sellers or other customers, which, in the aggregate, could in turn adversely affect our results of operations.

The theft, loss, or destruction of private keys required to access the bitcoin we hold on behalf of ourselves and other parties, such as our customers and our trading partners, may be irreversible, and any failure to safeguard such bitcoin could materially and adversely affect our business, operating results, and financial condition.

We hold bitcoin on behalf of ourselves and other parties such as our customers and our trading partners. Bitcoin can be accessed by the possessor of the unique cryptographic keys relating to the digital wallet in which the bitcoin is held. While the bitcoin and blockchain ledger require a public key relating to a digital wallet to be published when used in a transaction, private keys must be safeguarded and kept private in order to prevent a third-party from accessing the bitcoin held in such digital wallet. To the extent any of our private keys are lost, destroyed, or otherwise compromised and no backup of such private key is accessible, we will be unable to access the bitcoin we hold on behalf of ourselves and other parties. The vast majority of bitcoin we hold for ourselves and our customers is held in offline and air-gapped cold storage. To facilitate transactions, we hold a small portion of bitcoin in a networked hot wallet. At times, we may also utilize third-party custodians to custody our bitcoin or a portion of the bitcoin held for our customers on our behalf.

Any inappropriate access or theft of bitcoin held by us or any third-party custodian, or the third-party custodian’s failure to maintain effective controls over the custody and other settlement services provided to us, could materially and adversely affect us. We cannot provide assurance that the digital wallets used to store our and other parties’ bitcoin will not be hacked or compromised. The bitcoin and blockchain ledger, as well as other cryptocurrencies and blockchain technologies, have been, and may in the future be, subject to security breaches or incidents, hacking, or other malicious activities. Any loss of private keys relating to, or hack or other compromise of, digital wallets used to store our customers’ bitcoin could adversely affect our customers’ ability to access or sell their bitcoin and could harm customer trust in us and our products, require us to expend significant funds for remediation, and expose us to litigation, regulatory enforcement actions, and other potential liability. Additionally, any loss of private keys relating to, or hack or other compromise of, digital wallets used by third parties to store bitcoin or other cryptocurrencies could have negative reputational effects on us and harm customer trust in us and our products and could materially and adversely affect our business, operating results, and financial condition.

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Our risk management efforts may not be effective, which could expose us to losses and liability and otherwise harm our business.


We offer managed payments and other products and services to a large number of customers,customers. We have programs to vet and we are responsible for vetting and monitoringmonitor these customers and determining whether the transactions we process for them are legitimate.as part of our risk management efforts, but such programs require continuous improvement and may not be effective in detecting and preventing fraud and illegitimate transactions. When our products andpayments services are used to process illegitimate transactions, and we settle those funds to sellerscustomers and are unable to recover them, we suffer losses and liability. These typesAs a greater number of illegitimatelarger sellers use our services, our exposure to material risk losses from a single seller, or from a small number of sellers, will increase. Illegitimate transactions can also expose us to governmental and regulatory sanctions as well asenforcement actions and potentially prevent us from satisfying our contractual obligations to our third partythird-party partners, which may cause us to be in breach of our obligations. The highly automated nature of, and liquidity offered by, our payments and peer-to-peer services make us and our customers a target for illegal or improper uses, including scams and fraud directed at our customers, fraudulent or illegal sales of goods or services, money laundering, and terrorist financing. Identity thieves and those committing fraud using stolen or fabricated credit card, debit card, or bank account numbers, or other deceptive or malicious practices such as account takeovers, potentially can steal significant amounts of money from businesses like ours. In configuringours or from our payments services, we face an inherent trade-off between security and customer convenience.customers or third parties. Our risk management policies, procedures, techniques, and processes may not be sufficient to identify all of the risks to which we are exposed, to enable us to prevent or mitigate the risks we have identified, or to identify additional risks to which we may become subject in the future. As a greater number of larger sellers use our services, our exposure to material risk losses from a single seller, or from a small number of sellers, will increase. Our current business, the changing and uncertain economic, geopolitical and regulatory environment, and our anticipated domestic and international growth will continue to place significant demands on our risk management and compliance efforts,efforts. As our ecosystems grow and our business becomes more complex, we will need to continue developing, improving, and improvingmaking investments into our existing risk management infrastructure, techniques, and processes. In addition, when we introduce new products or services, expand existing services, including online payment acceptance and expanded methods of instantly moving money, focus on new business types,areas, including consumer financing and loans, or begin to operate in markets where we have a limited history of fraud loss, we may be less able to forecast and carry appropriate reserves inon our books for those losses. Furthermore, ifAdditionally, certain Cash App functions are available to customers between the ages of 13 through 17 with the authorization of a parent or guardian. The risks and the potential harm to our risk management policies and processes contain errorsreputation are magnified in instances of fraud or are otherwise ineffective,unauthorized or inappropriate transactions involving minors.

While we maintain a program of insurance coverage for various types of liabilities, we may suffer large financial losses,self-insure against certain business risks and expenses where we may be subject to civilbelieve we can adequately self-insure against the anticipated exposure and criminal liability, and our business may be materially and adversely affected.risk or where insurance is either not deemed cost-effective or unavailable.


We are currently, and will continue to be, exposed to risks associated with chargebacks and refunds in connection with payment card fraud or relating to the goods or services provided by our sellers. In the event that a billing dispute between a cardholder and a seller is not resolved in favor of the seller, including in situations where the seller engaged in fraud, the transaction is typically “charged back” to the seller and the purchase price is credited or otherwise refunded to the cardholder. The risk of chargebacks is typically greater with our sellers that promise future delivery of goods and services. Moreover, chargebacks typically increase during economic downturns due to sellers becoming insolvent or bankrupt or otherwise unable to fulfill their commitments for goods or services. Global supply chain disruptions and shortages may also negatively affect sellers' ability to deliver goods and services on time or at all, which increases the risk of chargebacks. If we are unable to collect chargebacks or refunds from the seller’s account, or if the seller refuses to or is unable to reimburse us for chargebacks or refunds due to closure, bankruptcy, or other reasons, we, as the merchant of record, may bear the loss for the amounts paid to the cardholder. Since October 2015,We collect and hold reserves for a limited number of sellers whose businesses are deemed higher risk in order to help cover potential losses from chargebacks and refunds, but this practice is limited and there can be no assurances that we will be successful in mitigating such losses. Our financial results would be adversely affected to the extent sellers do not fully reimburse us for the related chargebacks and refunds. In addition, if more of our sellers, or a number of our larger sellers, become insolvent or bankrupt, our potential losses from chargebacks and refunds may increase and exceed our reserves, in which case we may suffer financial losses and our business may be adversely affected. Moreover, businesses that cannot process EMV chip cards are held financially responsible for certain fraudulent transactions conducted using chip-enabled cards. This has shifted an increased amount of the risk for certain fraudulent transactions from the issuing banks to these sellers, which has resulted in our having to seek an increased level of reimbursement for chargebacks from our sellers that do not deploy EMV-compliant card readers. Not all of the readers we offer to merchants are EMV-compliant. Our financial results would be adversely affected to the extent sellers do not fully reimburse us for the related chargebacks. We do not collect and maintain reserves from our sellers to cover these potential losses, and for customer relations purposes we sometimes decline to seek reimbursement for certain chargebacks. The risk of chargebacks is typically greater with those of our sellers that promise future delivery of goods and services, which we allow on our Square platform. If we are unable to maintain our losses from chargebacks at acceptable levels, the payment card networks could fine us, increase our transaction-based fees, or terminate our ability to process payment cards. Any increase in our transaction-based fees could damage our business, and if we were unable to accept payment cards, our business would be materially and adversely affected.

We derive a significant portion of our revenue from managed payments services. Our efforts to expand our product portfolio and market reach may not succeed and may reduce our revenue growth.

We derive a significant portion of our revenue from transaction-based fees we collect in connection with managed payments services. While we intend to continue to broaden the scope of products and services we offer, we may not be successful in deriving any significant revenue from these products and services. Failure to broaden the scope of products and services that are attractive may inhibit the growth of repeat business and harm our business, as well as increase the vulnerability of our core

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payments business to competitors offering a full suite of products and services. Furthermore, we may have limited or no experience in our newer markets. For example, we cannot assure you that If any of our productsrisk management policies and processes, including self-insurance or services outside of managed payments services willholding seller reserves, are ineffective, we may suffer large financial losses, we may be as widely accepted or that they will continuesubject to grow in revenue. These offerings may present newcivil and difficult technological, operational, regulatorycriminal liability, and other challenges, and if we experience service disruptions, failures, or other issues, our business may be materially and adversely affected. Our newer activities may not recoup our investments in a timely manner or at all. If any of this were to occur, it could damage our reputation, limit our growth, and materially and adversely affect our business.

Our success depends on our ability to develop products and services to address the rapidly evolving market for payments and point-of-sale, financial, and marketing services, and, if we are not able to implement successful enhancements and new features for our products and services, our business could be materially and adversely affected.

We expect that new services and technologies applicable to the industries in which we operate will continue to emerge and evolve. Rapid and significant technological changes continue to confront the industries in which we operate, including developments in omnichannel commerce, proximity payment devices (including contactless payments via NFC technology), as well as developments in cryptocurrencies and in tokenization, which replaces sensitive data (e.g., payment card information) with symbols (tokens) to keep the data safe in the event that it ends up in the wrong hands.

These new services and technologies may be superior to, impair, or render obsolete the products and services we currently offer or the technologies we currently use to provide them. Incorporating new technologies into our products and services may require substantial expenditures and take considerable time, and we may not be successful in realizing a return on these development efforts in a timely manner or at all. There can be no assurance that any new products or services we develop and offer to our customers will achieve significant commercial acceptance. Our ability to develop new products and services may be inhibited by industry-wide standards, payment card networks, existing and future laws and regulations, resistance to change from our customers, which includes our sellers and their buyers, or third parties’ intellectual property rights. Our success will depend on our ability to develop new technologies and to adapt to technological changes and evolving industry standards. If we are unable to provide enhancements and new features for our products and services or to develop new products and services that achieve market acceptance or that keep pace with rapid technological developments and evolving industry standards, our business would be materially and adversely affected.

The success of enhancements, new features, and products and services depends on several factors, including the timely completion, introduction, and market acceptance of the enhancements or new features, products or services. We often rely not only on our own initiatives and innovations, but also on third parties, including some of our competitors, for the development of and access to new technologies and development of a robust market for these new products and technologies. Failure to accurately predict or to respond effectively to developments in our industry may significantly impair our business.

In addition, because our products and services are designed to operate with a variety of systems, infrastructures, and devices, we need to continuously modify and enhance our products and services to keep pace with changes in mobile, software, communication, and database technologies. We may not be successful in either developing these modifications and enhancements or in bringing them to market in a timely and cost-effective manner. Any failure of our products and services to continue to operate effectively with third-party infrastructures and technologies could reduce the demand for our products and services, result in dissatisfaction of our customers, and materially and adversely affect our business.

Substantial and increasingly intense competition in our industry may harm our business.

We compete in markets characterized by vigorous competition, changing technology, changing customer needs, evolving industry standards, and frequent introductions of new products and services. We expect competition to intensify in the future as existing and new competitors introduce new services or enhance existing services. We compete against many companies to attract customers, and some of these companies have greater financial resources and substantially larger bases of customers than we do, which may provide them with significant competitive advantages. These companies may devote greater resources to the development, promotion, and sale of products and services, and they may offer lower prices or more effectively introduce their own innovative products and services that adversely impact our growth. Mergers and acquisitions by these companies may lead to even larger competitors with more resources. We also expect new entrants to offer competitive products and services. Certain sellers have long-standing exclusive, or nearly exclusive, relationships with our competitors to accept payment cards and other services that we offer. These relationships may make it difficult or cost-prohibitive for us to conduct material amounts of business with them. Competing services tied to established brands may engender greater confidence in the safety and efficacy of their


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services. If we are unable to differentiate ourselves from and successfully compete with our competitors, our business will be materially and adversely affected.

We may also face pricing pressures from competitors. Some potential competitors are able to offer lower prices to sellers for similar services by cross-subsidizing their payments services through other services they offer. Such competition may result in the need for us to alter the pricing we offer to our sellers and could reduce our gross profit. In addition, as we grow, sellers may demand more customized and favorable pricing from us, and competitive pressures may require us to agree to such pricing, further reducing our gross profit. We currently negotiate pricing discounts and other incentive arrangements with certain large sellers to increase acceptance and usage of our products and services. If we continue this practice and if an increasing proportion of our sellers are large sellers, we may have to increase the discounts or incentives we provide, which could also reduce our gross profit.

We are dependent on payment card networks and acquiring processors, and any changes to their rules or practices could harm our business.


Our business depends on our ability to accept credit and debit cards, and this ability is provided by the payment card networks, including Visa, MasterCard,Mastercard, American Express, and Discover. InFor a majority of these cases,our transactions, we do not directly access the payment card networks that enable our acceptance of payment cards. As a result, we must rely on banks and acquiring processors to process transactions on our behalf. Our acquiring processor agreements have terms ranging from two to six years. Our three largest such agreements expire between the first quarter of 2020 and the third quarter of 2022. These banks and acquiring processors may fail or refuse to process transactions adequately, may breach or terminate their agreements with us, or may refuse to renegotiate or renew these agreements on terms that are favorable or commercially reasonable terms.reasonable. They might also take actions that degrade the functionality of our services, impose additional costs or requirements on us, or give preferential treatment to competitive services, including their own services. If we are unsuccessful in establishing, renegotiating, or maintaining mutually beneficial relationships with these payment card networks, banks, and acquiring processors, our business may be harmed.


The payment card networks and our acquiring processors require us to comply with payment card network operating rules, including special operating rules that apply to us as a “payment service provider”facilitator” providing payment processing services to merchants. The payment card networks set these network rules and have discretion to interpret the rules and change them at any time. Changes to these network rules or how they are interpreted could have a significant impact on our business and financial results. For example, changes in the payment card network rules regarding chargebacks may affect our ability to dispute chargebacks and the amount of losses we incur from chargebacks. Any changes to or interpretations of the network rules that are inconsistent with the way we or our acquiring processors currently operate may require us to make changes to our business that could be costly or difficult to implement. If we fail to make such changes or otherwise resolve the issue with the payment card networks, the networks could fine us or prohibit us from processing payment cards. In addition, violations of the network rules or any failure to maintain good relationships with the payment card networks could impact our ability to receive incentives from them, could increase our costs, or could otherwise harm our business. If we were unable to accept payment cards or were limited in our ability to do so, our business would be materially and adversely affected.


We are required to pay interchange and assessment fees, processing fees, and bank settlement fees to third-party payment processors, payment networks, and financial institutions. From time to time, payment card networks have increased, and may increase in the future, the interchange fees and assessments that they charge for each transaction processed using their networks. In addition,some cases, we have negotiated favorable pricing with acquiring processors and networks that are contingent on certain business commitments and other conditions. If we fail to meet such conditions, the fees we are charged will rise, and we may be required to pay back some or all of the favorable pricing benefits. Moreover, our acquiring processors and payment card networks may refuse to renew our agreements with them on terms that are favorable, commercially reasonable, terms or at all. Interchange fees or assessments are also subject to change from time to time due to government regulation. Because we generally charge our sellers a flat rate for our managed payments services, rather than passing through interchange fees and assessments to our sellers directly, anyAny increase or decrease in interchange fees or assessments or in the fees we pay to our acquiringthird-party payment processors, payment networks, or financial institutions could increase our costs, make our pricing look less competitive, lead us to change our pricing model, or adversely affect our margins.margins, all of which could materially harm our business and financial results.


We could be, and in the past have been, subject to penalties from payment card networks if we fail to detect that sellers are engaging in activities that are illegal, contrary to the payment card network operating rules, or considered “high risk.” We must either prevent high-risk sellersindividuals from using our products and services or register such sellershigh-risk individuals with the payment card networks and conduct additional monitoring with respect to such sellers. Although the amount of thesehigh-risk individuals. Any such penalties has not been material to date, any additional penalties in the future could become material and could result in termination of our ability to accept payment cards or could require changes in our process for registering new sellers.sellers and customers. This could materially and adversely affect our business.

Our quarterly results of operations and operating metrics fluctuate significantly and are unpredictable and subject to seasonality, which could result in the trading price of our Class A common stock being unpredictable or declining.



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Our quarterly results of operations have historically fluctuated significantlyWe rely on third parties and are not necessarily an indication of future performance. These fluctuations may be due totheir systems for a variety of factors, someservices, including the processing of which are outsidetransaction data and settlement of funds to us and our controlcustomers, and may not fully reflect the underlying performance of our business. Our limited operating history combined with the rapidly evolving markets in which we operate also contributesthese third parties’ failure to perform these fluctuations. Fluctuations in quarterly results mayservices adequately could materially and adversely affect our business.

To provide our products and services, we rely on third parties that we do not control, such as the predictabilitypayment card networks, our acquiring and issuing processors, the payment card issuers, a carrying broker, bank partners, various financial institution partners, systems like the Federal Reserve Automated Clearing House, and other partners. We rely on these third parties for a variety of services, including the transmission of transaction data, processing of chargebacks and refunds, settlement of funds to our sellers, certain brokerage services, storing customer funds, authorizing payment transactions under our various card programs, originating loans to customers, provide liquidity for Cash App’s feature that permits our customers to buy and sell bitcoin, and the provision of information and other elements of our business andservices. For example, we rely on a limited number of acquiring processors in some of the pricejurisdictions in which we offer our services. We are in the process of transitioning one of our Class A common stock.

Factorsacquiring processors, and we frequently review and assess third-party partners that provide services. Adding or transitioning to new acquiring or issuing processors or other third-party providers may cause fluctuationssignificantly disrupt our business or increase our costs. We have also in our quarterly financial results includethe past experienced outages with third parties we have worked with, which have affected our ability to attractprovide services and retain new customers; seasonalityprocess payments, including for cards issued under our own brands. In the event these third parties fail to provide these services adequately, including as a result of financial difficulty or insolvency, errors in their systems, outages or events beyond their control, or refuse to provide these services or renew our agreements with them on terms acceptable to us or at all, and we are not able to find suitable alternatives, our business or our sellers' business, including seasonal fluctuations in the amount of transactions our sellers are processing; the timing, effectiveness,may be materially and costs of expansion and upgrades of our systems and infrastructure, as well as the success of those expansions and upgrades; the outcomes of legal proceedings and claims; our ability to maintain or increase revenue, gross margins, and operating margins; our ability to continue introducing new products and services and to continue convincing customers to adopt additional offerings; increases in and timing of expenses that we may incur to grow and expand our operations and to remain competitive; period-to-period volatility related to fraud and risk losses; system failures resulting in the inaccessibility of our products and services; changes in the regulatory environment, including with respect to security, privacy, data protection or enforcement of laws and regulations by regulators, including fines, orders, or consent decrees; changes in global business or macroeconomic conditions; unusual weather conditions or natural disasters; general retail buying patterns; and the other risks described in this Annual Report on Form 10-K.adversely affected.


We depend on key management, as well as our experienced and capable employees, and any failure to attract, motivate, and retain our employees could harm our ability to maintain and grow our business.


Our future success is significantly dependent upon the continued service of our executives and other key employees. If we lose the services of any member of management or any key personnel, we may not be able to locate a suitable or qualified replacement, and we may incur additional expenses to recruit and train a replacement, which could severely disrupt our business and growth. Jack Dorsey, our co-founder, President, and Chief Executive Officer, also serves as Chief Executive Officer of Twitter, Inc. This may at times adversely affect his ability to devote time, attention, and effort to Square.


To maintain and grow our business, we will need to identify, attract, hire, develop, motivate, and retain highly skilled employees. Identifying, recruiting, training, integrating, and retaining qualified individualsThis requires significant time, expense, and attention. In addition, from time to time, there may be changes in our management team that may be disruptive to our business. If our management team, including any new hires that we make, fails to work together effectively and to execute our plans and strategies on a timely basis, our business could be harmed. Competition for highly skilled personnel is intense, particularly in the San Francisco Bay Area where our headquarters are located.intense. We may need to invest significant amounts of cash and equity to attract and retain new employees, and we may never realize returns on these investments. Further, our plans to cap our employee base at approximately 12,000, and any other future plans to restructure our employee base to improve operational efficiencies and operating costs, may adversely affect our ability to retain or attract highly skilled employees.

Historically, equity awards have been a key component of our employee compensation, and as a result, any decline in the price of our Class A common stock (directly or relative to the stock price of other companies with which we compete for talent) may adversely impact our ability to retain employees or to attract new employees. Additionally, potential changes in U.S. immigration policy may make it difficult to renew or obtain visas for any highly skilled personnel that we have hired or are actively recruiting. Negative sentiments towardsmay hire in the United States as a result of these potential changes may also adversely affect our international recruiting efforts.future. Furthermore, our international expansion and our business in general may be materially adversely affected if legislative or administrative changes to immigration or visa laws and regulations impair our hiring processes or projects involving personnel who are not citizens of the country where the work is to be performed. If we are not able to add andor retain employees effectively, our ability to achieve our strategic objectives will be adversely affected, and our business and growth prospects will be harmed.


If we do not continue to improve our operational, financial, and other internal controls and systems to manage growth effectively, our business could be harmed.


Our current business and anticipated growth, as well as our entry into new lines of business and our acquisitions, will continue to place significant demands on our management and other resources. In order to manage our growth effectively, we must continue to strengthen our existing infrastructure and operational procedures, enhance our internal controls and reporting systems, and ensure we timely and accurately address issues as they arise. In particular, our continued growth will increase the challenges involved in:
improving and implementing existing and developing new internal administrative infrastructure, particularly our operational, financial, communications and other internal systems and procedures;

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installing enhanced management information and control system; and
preserving our core values, strategies, and goals and effectively communicating these to our employees worldwide.


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•improving existing and developing new internal administrative infrastructure, particularly our operational, financial, communications, and other internal systems and procedures;

•successfully expanding and implementing internal controls as they relate to our new lines of business and any acquired businesses;

•identifying and mitigating new and developing risks;

•installing enhanced management information and control systems; and

•preserving our core values, strategies, and goals and effectively communicating these to our employees worldwide.

These challenges have increased as we shift to a more distributed workforce. If we are not successful in developing and implementing the right processes and tools to manage our enterprise, our ability to compete successfully and achieve our business objectives could be impaired.

These efforts may require substantial financial expenditures, commitments of resources, developments of our processes, and other investments and innovations. As we grow and our business model evolves, we must balance the need for additional controls and systems with the ability to efficiently develop and launch new features for our products and services. However, it is likely that as we grow, we will not be able to launch new features, or respond to customer or market demands as quickly as a smaller, more efficient organization. If we do not successfully manage our growth, our business will suffer.


A deterioration of general macroeconomic conditions could materially and adversely affectThe metrics we use to measure our business and financial results.

Our performance is subject to economic conditions and their impactare calculated using internal company data based on levels of spending by businessesthe activity we measure on our platforms and their customers. Most of the sellers that use our services are small businesses, many of which are in the early stages of their development, and these businesses may be disproportionately adversely affected by economic downturnscompiled from multiple systems, including systems that are organically developed or acquired through business combinations. There are inherent challenges and limitations in measuring our business globally at scale, and the methodologies used to calculate our metrics inherently require certain assumptions and judgments. For example, we currently identify a Cash App transacting active as a Cash App account that has at least one financial transaction using any product or service within Cash App during a specified period although certain of these accounts may fail at a higher rate than largershare an alias identifier with one or more established businesses. If spending byother transacting active accounts (for example, families sharing one alias identifier or one customer with multiple accounts). Examples of transactions include sending or receiving a peer-to-peer payment, transferring money into or out of Cash App, making a purchase using Cash App Card, earning a dividend on a stock investment, paying back a loan, among others. We regularly review our processes for calculating these metrics, and from time to time we may make adjustments to improve their customers declines, these businesses would experience reduced sales and process fewer payments with usaccuracy or relevance. Further, as our business develops, we may revise or cease reporting metrics if they cease to operate, stop using our products and services altogether. Small businesses frequently have limited budgets and limited access to capital, and they may choose to allocate their spending to items other than our financial or marketing services, especially in times of economic uncertainty or in recessions. In addition, if morewe determine that such metrics are no longer appropriate measures of our sellers cease to operate, this may have an adverse impactperformance. If investors, customers or other stakeholders do not only on the growth ofbelieve our payments services but also onreporting metrics accurately reflect our transaction and advance loss rates, and the success ofbusiness or they disagree with our other services. For example, if sellers processing payments with us receive chargebacks after they cease to operate, we may incur additional losses. Additionally, the growth in the number of sellers qualifying for participation in the Square Capital program may slow, or business loansmethodologies, our reputation may be paid more slowly, or not at all. Further,harmed and our suppliers, distributors and other third party partners may suffer their own financial and economic challenges. Such suppliers and third parties may demand pricing accommodations, delay payment or become insolvent, which could harm our ability to meet end customer demands, collect revenue, or otherwise harm our business. Furthermore, our investment portfolio, which includes U.S. government and corporate securities, is subject to general credit, liquidity, market, and interest rate risks, which may be exacerbated by certain events that affect the global financial markets. If global credit and equity markets decline for extended periods, or if there is a downgrade of the securities within our portfolio, the investment portfoliobusiness may be adversely affected andimpacted.

Many of our key components are procured from a single or limited number of suppliers. Thus, we could determine that our investments have experienced an other-than-temporary decline in fair value, requiring impairment charges that could adversely affect our financial results. Thus, if general macroeconomic conditions deteriorate, our business and financial results could be materially and adversely affected.

We are also monitoring developments related to the decision by the U.K. government to leave the European Union (EU) following a referendum in June 2016 in which voters in the United Kingdom approved an exit from the EU (often referred to as "Brexit"),at risk of shortage, price increases, tariffs, changes, delay, or discontinuation of key components, which could have significant implications for our business. In March 2017, the United Kingdom began the official process to leave the EU by April 2019. Brexit could lead to economicdisrupt and legal uncertainty, including significant volatility in global stock markets and currency exchange rates, and increasingly divergent laws, regulations and licensing requirements for the Company as the United Kingdom determines which EU laws to replace or replicate. Any of these effects of Brexit, among others, could adversely affect our operations and financial results.

Expanding our business globally could subject us to new challenges and risks.

We currently offer our services and products in multiple countries and plan to continue expanding our business further globally. Expansion, whether in our existing or new global markets, will require additional resources and controls, and offering our services in new geographic regions often requires substantial expenditures and takes considerable time. We may not be successful enough in these new geographies to recoup our investments in a timely manner or at all. Such expansion could also subject our business to substantial risks, including:
difficulty in attracting a sufficient number of sellers;
failure to anticipate competitive conditions;
conformity with applicable business customs, including translation into foreign languages and associated expenses;
increased costs and difficulty in protecting intellectual property and sensitive data;

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changes to the way we do business as compared with our current operations or a lack of acceptance of our products and services;
the ability to support and integrate with local third-party service providers;
competition with service providers or other entrenched market-players that have greater experience in the local markets than we do;
difficulties in staffing and managing foreign operations in an environment of diverse culture, laws and customs, challenges caused by distance, language, and cultural differences, and the increased travel, infrastructure and legal and compliance costs associated with global operations;
difficulties in recruiting and retaining qualified employees and maintaining our company culture;
difficulty in gaining acceptance from industry self-regulatory bodies;
compliance with multiple, potentially conflicting and changing governmental laws and regulations, including with respect to data privacy, data protection and information security;
compliance with U.S. and foreign anti-corruption, anti-bribery and anti-money laundering laws;
potential tariffs, sanctions, fines or other trade barriers;
exchange rate risk;
compliance with potentially conflicting and changing laws of taxing jurisdictions where we conduct business and applicable U.S. tax laws, the complexity and adverse consequences of such tax laws and potentially adverse tax consequences due to changes in such tax laws; and
regional economic and political instability.
As a result of these risks, our efforts to expand our global operations may not be successful, which could limit our ability to grow our business.
We rely on third parties and their systems for a variety of services, including the processing of transaction data and settlement of funds to us and our sellers, and these third parties’ failure to perform these services adequately could materially and adversely affect our business.


To provideMany of the key components used to manufacture our managed payments solution and other products, and services, we rely on third parties that we do not control, such as the payment card networks,custom parts of our acquiring processors,magstripe reader, come from limited or single sources of supply. Due to our reliance on the payment card issuers, various financial institution partners (including those for Square Capitalcomponents or products produced by third-party suppliers, we are subject to the risk of shortages and Cash App), systems likelong lead times or other disruptions in the Federal Reserve Automated Clearing House,supply of certain components or products. We have in the past experienced, and may in the future experience, component shortages or delays or other partners. We rely onproblems in product assembly, and the availability of these third partiescomponents or products may be difficult to predict. For example, our manufacturers may experience temporary or permanent disruptions in their manufacturing operations due to equipment breakdowns, labor strikes or shortages, natural disasters, the occurrence of a contagious disease or illness, component or material shortages, cost increases, acquisitions, insolvency, bankruptcy, business shutdowns, trade restrictions, changes in legal or regulatory requirements, or other similar problems. In addition, if we underestimate or overestimate demand for a varietyparticular product, our contract manufacturers and suppliers may not be able to deliver sufficient quantities of services,that product to meet our requirements, or we may carry excess inventory, all of which could adversely affect our business.

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Additionally, various sources of supply-chain risk, including the transmissionstrikes or shutdowns at delivery ports or loss of transaction data, processing of chargebacks and refunds, settlement of fundsor damage to our products while they are in transit or storage, intellectual property theft, losses due to tampering, third-party vendor issues with quality or sourcing control, failure by our suppliers to comply with applicable laws and regulation, potential tariffs or other trade restrictions, or other similar problems could limit or delay the supply of our products or harm our reputation. In the event of a shortage or supply interruption from suppliers of these components, we may not be able to develop alternate sources quickly, cost-effectively, or at all. Any interruption or delay in manufacturing, component supply, any increases in component costs, or the inability to obtain these parts or components from alternate sources at acceptable prices and within a reasonable amount of time, would harm our ability to provide our products to sellers on a timely basis or impact our cost of goods sold. This could harm our relationships with our sellers, prevent us from acquiring new sellers, and the provision of informationmaterially and other elementsadversely affect our business.

Some of our services. For example, we currently rely on three acquiring processorshardware devices manufactured in China are subject to 25% tariffs when imported to the United States, Canadawhile some other hardware devices are subject to tariffs at 7.5%. These tariffs negatively affect our gross margin on the impacted products, and Japan and two for each of Australia and the United Kingdom. While we believe there are other acquiring processors that could meetincreases in our needs, adding or transitioning to new providers may significantly disrupt our business and increase our costs. In the event these third parties fail to provide these services adequately, includingpricing as a result of financial difficultytariffs would reduce the competitiveness of our products if our competitors do not make similar pricing adjustments. The impact of any increased or insolvency, errors in their systemsnew tariffs or events beyond their control, or refuse to provide these servicesother trade restrictions could have a material and adverse effect on terms acceptable to us or at all, and we are not able to find suitable alternatives, our business, may be materiallyfinancial condition, and adversely affected.results of future operations.

In addition, we use third-party technology and systems for a variety of our day-to-day business operations. Although we have developed systems and processes that are designed to prevent data loss and other security breaches, including systems and processes designed to reduce the impact of a security breach at a third-party vendor, such measures cannot provide absolute security.


Our services must integrate with a variety of operating systems, and the hardware that enables merchants to accept payment cards must interoperate with third-party mobile devices utilizing those operating systems. If we are unable to ensure that our

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services or hardware interoperate with such operating systems and devices, our business may be materially and adversely affected.


We are dependent on the ability of our products and services to integrate with a variety of operating systems, as well as web browsers, and wired and wireless interfaces to mobile devices that we do not control. Any changes in these systems that degrade the functionality of our products and services, impose additional costs or requirements on us, or give preferential treatment to competitive services, including their own services, could materially and adversely affect usage of our products and services. In addition, we rely on app marketplaces, such as the Apple App Store and Google Play, to drive downloads of our mobile app.apps. Apple, Google, or other operators of app marketplaces regularly make changes to their marketplaces, and those changes may make access to our products and services more difficult. In the event that it is difficult for our customers to access and use our products and services, our business may be materially and adversely affected. Furthermore, Apple, Google, or other operators of app marketplaces regularly provide software updates, and such software updates may not operate effectively with our products and services, which may reduce the demand for our products and services, result in dissatisfaction by our customers, and may materially and adversely affect our business.


Our TIDAL business depends upon maintaining complex licenses with copyright owners, and it is difficult to estimate the amount payable under our license agreements.

Under TIDAL’s license agreements and relevant statutes, we must pay all required royalties to record labels, music publishers, and other copyright owners in order to stream, distribute, and display content. The determination of the amount and timing of such royalty payments is complex and subject to a number of variables, including the type of content accessed, the country in which it is accessed, the service tier such content is streamed on, the identity of the license holder to whom royalties are owed, the current size of our subscriber base, the applicability of any most favored nations provisions, and any applicable fees, waivers, and discounts, among other variables. We may underpay/under-accrue or overpay/over-accrue the royalty amounts payable to record labels, music publishers, and other copyright owners. Failure to accurately pay our royalties may damage our business relationships, our reputation, and adversely affect our business, operating results, and financial condition.

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Economic, Financial, and Tax Risks

A deterioration of general macroeconomic conditions could materially and adversely affect our business and financial results.

Our performance is subject to economic conditions and the impact of such conditions on levels of spending by businesses and individuals. Most of the sellers that use our services are small businesses, many of which are in the early stages of their development, and these businesses are often disproportionately adversely affected by economic downturns and may fail at a higher rate than larger or more established businesses. In particular, inflation and economic uncertainty have impacted and may continue to impact consumer spending in general and at these businesses specifically. Small businesses frequently have limited budgets and limited access to capital, and they may choose to allocate their spending to items other than our financial or marketing services, especially in times of economic uncertainty or in recessions. In addition, if our hardware interoperates with mobile devices developed by third parties.sellers cease to operate, this may have an adverse impact not only on the growth of our payments services but also on our transaction and advance loss rates, and the success of our other services. For example, if sellers processing payments with Square receive chargebacks after they cease to operate, we may incur additional losses. We serve sellers across a variety of industry verticals and in an economic downtown, certain verticals, particularly those that may be viewed as discretionary by consumers, may be impacted to a greater degree than others, which may harm our business and financial results.

We may experience material and adverse impacts to our business as a result of the current versionuncertainty and volatility in the banking and financial services sectors, deteriorating macroeconomic conditions, including inflation and interest rate increases, availability of credit, bankruptcies or insolvencies of customers, and recession or economic downturn. As a result of economic conditions, the growth in the number of Square sellers qualifying for participation in the Square Loans program may slow, or business loans may be paid more slowly, or not at all. In addition, customers who utilize our BNPL products and consumer loan products, such as Cash App Borrow, may also be disproportionately adversely affected by economic downturns, which could negatively impact demand for these product offerings or cause loss rates on such products to increase.

Further, our suppliers, distributors, and other third-party partners may suffer their own financial and economic challenges. Such suppliers and third parties may demand pricing accommodations, delay payment, or become insolvent, which could harm our ability to meet end customer demands or collect revenue or otherwise could harm our business. Furthermore, our investment portfolio, which includes U.S. government and corporate securities, is subject to general credit, liquidity, market, and interest rate risks, which may be exacerbated by certain events that affect the global financial markets. If global credit and equity markets decline for extended periods, or if there is a downgrade of the securities within our portfolio, our investment portfolio may be adversely affected and we could determine that our investments have experienced an other-than-temporary decline in fair value, requiring impairment charges that could adversely affect our financial results. In addition, from time to time we have reduced expenses and needed to restructure or reorganize certain portions of our magstripe reader plugs into the audio jackoperations in order to align our business with market conditions and our strategies, any of most smartphoneswhich can result in near term expense and tablets. In September 2016, Apple introduced the iPhone 7, which does notharm to our growth prospects.

We are currently subletting some of our office space. An economic downturn and our work-from-home practices have an audio jack,caused and instead Apple provided an adapter that can be inserted into a connectivity port, and subsequent models have operated the same. This change and other potential changesmay in the design of future mobile devicescause us to need less office space than we are contractually committed to leasing. We have, and may limit the interoperabilitycontinue to, incur losses or recognize impairment charges in connection with any unused office space if we are unable to successfully sublease any unused office space, or if we are unable to successfully terminate any of our hardwareleasing commitments.

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We may not be able to secure financing on favorable terms, or at all, to meet our future capital needs, and software withour existing credit facility and our senior notes contain, and any future debt financing may contain, covenants that impact the operation of our business and pursuit of business opportunities.

We have funded our operations since inception primarily through debt and equity financings, bank credit facilities, finance lease arrangements, and cash from operations. While we believe that our existing cash and cash equivalents, marketable debt securities, and availability under our line of credit are sufficient to meet our working capital needs and planned capital expenditures, and service our debt, there is no guarantee that this will continue to be true in the future. In the future, we may require additional capital to respond to business opportunities, refinancing needs, business and financial challenges, regulatory surety bond requirements, acquisitions, or unforeseen circumstances and may decide to engage in equity, equity-linked, or debt financings or enter into additional credit facilities for other reasons. We may not be able to secure any such devices and require modifications to our hardwareadditional financing or software.refinancing on favorable terms, in a timely manner, or at all. If we are unable to ensure thatobtain adequate financing or financing on terms satisfactory to us when we require it, our hardware and softwareability to continue to interoperate effectively with such devices, if doing so is costly,grow or if existing merchants decide not to utilize additional parts necessary for interoperability,support our business and to respond to business challenges could be significantly limited.

Following our acquisition of Afterpay, we assumed Afterpay’s financing arrangements with financial institutions in Australia, New Zealand, the United States and the United Kingdom (collectively, the “Warehouse Facilities”). We use the Warehouse Facilities to partly fund our BNPL platform. The terms of the Warehouse Facilities contain covenants that may be materially and adversely affected.

Manytriggered in certain situations (such as non-repayments on consumer borrowings exceeding certain monetary thresholds or key management resigning), which may negatively impact our ability to obtain additional funding under the Warehouse Facilities. If certain events of our key components are procured from a single or limited number of suppliers. Thus, we are at risk of shortage, price increases, changes, delay, or discontinuation of key components, which could disrupt and materially and adversely affect our business.

Many ofdefault occur under the key components used to manufacture our products, such as the custom parts of our magstripe reader, including its magnetic stripe-reading element, its plastic cover, and its application-specific integrated circuits, come from limited or single sources of supply, as do the plastic cover, connector, and security cage of our contactless and chip reader. In addition, in some cases, we rely only on one manufacturer to fabricate, test, and assemble our products. For example, a single manufacturer assembles our magstripe reader and our contactless and chip reader, as well as manufactures those products’ plastic parts with custom tools that we own but that they maintain on their premises. The term of the agreement with that manufacturer automatically renews for consecutive one-year periods unless either party provides notice of non-renewal. In general, our contract manufacturers fabricate or procure components on our behalf, subject to certain approved procedures or supplier lists, and we do not have firm commitments from all of these manufacturers to provide all components, or to provide them in quantities and on timelines that we may require. For example, pursuant to a development and supply agreement, a component supplier provides design, development, customization, and related services for components of the magnetic stripe-reading element in some of our products. The term of the agreement renews for successive two-year terms unless either party provides notice of non-renewal. Similarly, a component provider develops certain application-specific integrated circuits for our products pursuant to our designs and specifications. The term of our agreement with this provider renews for consecutive one-year periods unless either party provides notice of non-renewal.

Due to our reliance on the components or products produced by suppliers such as these, we are subject to the risk of shortages and long lead times in the supply of certain components or products. We are still in the process of identifying alternative manufacturers for the assembly of our products and for most of the single-sourced components used in our products. In the case of off-the-shelf components, we are subject to the risk that our suppliers may discontinue or modify them, or that the components may cease to be available on commercially reasonable terms, or at all. We have in the past experienced, and may in the future experience, component shortages or delays or other problems in product assembly, and the availability of these components or products may be difficult to predict. For example, our manufacturers may experience temporary or permanent disruptions in their manufacturing operations due to equipment breakdowns, labor strikes or shortages, natural disasters, component or material shortages, cost increases, acquisitions, insolvency, changes in legal or regulatory requirements, or other similar problems.

Additionally, various sources of supply-chain risk, including strikes or shutdowns at delivery ports or loss of or damage to our products while they are in transit or storage, intellectual property theft, losses due to tampering, third-party vendor issues with quality or sourcing control, failure by our suppliers to comply with applicable laws and regulation or other similar problems could limit or delay the supply of our products or harm our reputation. In the event of a shortage or supply interruption from

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suppliers of these components,Warehouse Facilities, we may not be able to develop alternate sources quickly, cost-effectively, or at all. Any interruption or delay in manufacturing, component supply, any increases in component costs,draw future funding from those Warehouse Facilities or the inabilitydebt outstanding under the Warehouse Facilities may be accelerated and our business and financial results could be adversely impacted.

Our credit facility contains affirmative and negative covenants, including customary limitations on the incurrence of certain indebtedness and liens, restrictions on certain intercompany transactions, and limitations on dividends and stock repurchases. The indentures pursuant to which our 2026 Senior Notes and 2031 Senior Notes (collectively, the “Senior Notes”) were issued contain covenants that restrict or could restrict, among other things, our business and operations. Any debt financing obtained by us in the future could also involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to operate our business, obtain additional capital, and pursue business opportunities, including potential acquisitions. Our ability to comply with these partscovenants may be affected by events beyond our control, and breaches of these covenants could result in a default under our existing credit facility or components from alternate sources at acceptable pricesour senior notes and within a reasonable amountany future financing agreements into which we may enter. If not waived, these defaults could cause indebtedness outstanding under our credit facility, our Senior Notes, our other outstanding indebtedness, including our 2025 Convertible Notes, 2026 Convertible Notes, and 2027 Convertible Notes (collectively, the “Convertible Notes,” and together with the Senior Notes, the “Notes”), and any future financing agreements that we may enter into to become immediately due and payable.

If we raise additional funds through further issuances of time, would harmequity or other securities convertible into equity, including convertible debt securities, our existing stockholders could suffer dilution in their percentage ownership of our company, and any such securities we issue could have rights, preferences, and privileges senior to those of holders of our Class A common stock.

Changes by any rating agency to our outlook or credit rating could negatively affect the value of both our debt and equity securities and increase our borrowing costs. If our credit ratings are downgraded or other negative action is taken, our ability to provide our products to sellersobtain additional financing in the future on a timely basis. This could harm our relationships with our sellers, prevent us from acquiring new sellers, and materially and adversely affect our business.

Our businessfavorable terms or at all could be harmed ifadversely affected.

Servicing our Notes may require a significant amount of cash, and we may not have sufficient cash or the ability to raise the funds necessary to settle conversions of the Convertible Notes in cash, repay the Notes at maturity, or repurchase the Notes as required following a fundamental change.

As of December 31, 2023, we had $1.0 billion outstanding aggregate principal amount of 2025 Convertible Notes, $575.0 million outstanding aggregate principal amount of 2026 Convertible Notes, $575.0 million outstanding aggregate principal amount of 2027 Convertible Notes, $1.0 billion outstanding aggregate principal amount of 2026 Senior Notes, and $1.0 billion outstanding aggregate principal amount of 2031 Senior Notes.

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Prior to December 1, 2024, in the case of the 2025 Convertible Notes, February 1, 2026, in the case of the 2026 Convertible Notes, and August 1, 2027, in the case of the 2027 Convertible Notes, the applicable Convertible Notes are unableconvertible at the option of the holders only under certain conditions or upon occurrence of certain events. If holders of the Convertible Notes of a series elect to accurately forecast demand forconvert such Convertible Notes when eligible, we will be required to make cash payments in respect of the Convertible Notes being converted unless we elect to deliver solely shares of our productsClass A common stock to settle such conversion. We currently expect to settle future conversions of our Convertible Notes solely in shares of our Class A common stock, and our ability to adequately manage our product inventory.

We invest broadlyelect to settle such conversions solely in shares requires us to include the shares of Class A common stock issuable upon conversion of the Convertible Notes of such series in our business, anddiluted earnings per share to the extent such investmentsshares are driven by our expectationsnot anti-dilutive. We will reevaluate this policy from time to time as conversion notices are received from holders of the future successConvertible Notes.

In addition, holders of each series of Notes also have the right to require us to repurchase all or a portion of their Notes of such series upon the occurrence of a product. For example, our productsfundamental change (as defined in the applicable indenture governing the Notes) and, in the case of the Senior Notes, accompanied by a downgrade of the Senior Notes, at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest, or at a repurchase price equal to 101% of the principal amount of the Senior Notes to be repurchased, plus accrued and unpaid interest, as applicable. If the Notes of any series have not previously been converted or repurchased, we will be required to repay such as the Square Reader often require investments with long lead times. An inability to correctly forecast the success of a particular product could harm our business. We must forecast inventory needs and expenses and place orders sufficientlyNotes in advance with our third-party suppliers and contract manufacturers based on our estimates of future demand for particular products. cash at maturity.

Our ability to accurately forecast demand for our products could be affected by many factors, including an increasemake required cash payments in connection with conversions of the Convertible Notes, repurchase the Notes as required following a fundamental change, or decrease in demand for our productsto repay or for our competitors’ products, unanticipated changes in generalrefinance the Notes at maturity will depend on market conditions and the change inour future performance, which is subject to economic, conditions.

If we underestimate demand for a particular product,financial, competitive, and other factors beyond our contract manufacturers and supplierscontrol. We also may not use the cash proceeds we raised through the issuance of the Notes in an optimally productive and profitable manner. Since inception, our business has generated net losses in most quarters, and we may continue to incur significant losses. As a result, we may not have enough available cash or be able to obtain financing at the time we are required to repurchase or repay the Notes or pay cash with respect to the Convertible Notes being converted.

In addition, our ability to repurchase or to pay cash upon conversion or at maturity of the Notes may be limited by law or regulatory authority. Our failure to repurchase Notes as required following a fundamental change or to pay cash upon conversion of our Convertible Notes (unless we elect to deliver sufficient quantitiessolely shares of that productour Class A common stock to meetsettle such conversion) or at maturity of the Notes as required by the applicable indenture would constitute a default under such indenture. A default under the applicable indenture or the fundamental change itself could also lead to a default under our requirements,credit facility, our other outstanding indebtedness, or agreements governing our future indebtedness and we may experience a shortage of that product available for sale or distribution. The shortage of a popular product could materially and adversely affect our brand, our seller relationships, and the acquisition of additional sellers. If we overestimate demand for a particular product, we may experience excess inventory levels for that product and the excess inventory may become obsolete or out-of-date. Inventory levels in excess of demand may result in inventory write-downs or write-offs and the sale of excess inventory at further discounted prices, which could negatively impact our gross profit and our business.

Our products and services may not function as intended due to errors in our software, hardware, and systems, product defects, or due to security breaches or human error in administering these systems, which could materially and adversely affect our business.

Our software, hardware, and systems may contain undetected errors that could have a material adverse effect on our business, particularlyresults of operations, and financial condition. If the payment of our other outstanding indebtedness or future indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay such indebtedness and repurchase the Notes or to pay cash upon conversion of the Convertible Notes or at maturity of the Notes.

We are subject to counterparty risk with respect to the extentconvertible note hedge transactions.

In connection with the issuance of each series of our Convertible Notes, we entered into convertible note hedge transactions with certain financial institutions, which we refer to as the "option counterparties." The option counterparties are financial institutions or affiliates of financial institutions, and we will be subject to the risk that one or more of such errors areoption counterparties may default under the convertible note hedge transactions. Our exposure to the credit risk of the option counterparties will not detectedbe secured by any collateral. If any option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the convertible note hedge transaction. Our exposure will depend on many factors but, generally, the increase in our exposure will be correlated to the increase in our Class A common stock market price and remedied quickly. in the volatility of the market price of our Class A common stock. In addition, upon a default by any option counterparty, we may suffer adverse tax consequences and dilution with respect to our Class A common stock. We can provide no assurance as to the financial stability or viability of any option counterparty.

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Our bitcoin investment is subject to volatile market prices.

We have from timemade, and may make additional, investments in bitcoin. The price of bitcoin has been highly volatile and may continue to time found defectsbe volatile in the future, due to market factors, regulatory developments and other risks that are outside of our control. The prevalence of bitcoin is a relatively recent trend, and the long-term adoption of bitcoin by investors, consumers, and businesses remains uncertain. Bitcoin’s lack of a physical form, its reliance on technology for its creation, existence, and transactional validation, and its decentralization may subject its integrity to the threat of malicious attacks and technological obsolescence. To the extent the market value of our bitcoin investment continues to decrease relative to the purchase prices, our financial condition may be adversely impacted.

The manner in which we account for our bitcoin under applicable accounting rules has changed. For example, prior to our adoption of ASU 2023-08, Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”), our bitcoin was accounted for as an indefinite-lived intangible asset and for each reporting period, we were required to evaluate our bitcoin for impairment and record impairment losses if the fair value decreased below the carrying value during the assessed period. Since impairment losses for our bitcoin investment could not be recovered for any subsequent increases in fair value until the asset was sold, our operating results were adversely affected in any period in which such impairment occurred. Upon adoption of ASU 2023-08, we remeasured our bitcoin investment to its fair value as of January 1, 2023, resulting in an adjustment to our accumulated deficit. We will continue to remeasure our bitcoin investment at the end of each reporting period with changes recognized in our customer-facing software and hardware, internal systems, and technical integrations with third-party systems, and new errors may be introduced in the future. We rely on a limited numberconsolidated statements of component and product suppliers located outside of the U.S. to manufacture our products. As a result, our direct control over production and distribution is limited and it is uncertain what effect such diminished control will have on the quality of our products.operations. If there are defectsfuture changes in applicable accounting rules that require us to change the manufacture ofmanner in which we account for our hardware products, we may face negative publicity, government investigations, and litigation, and we may notbitcoin investment, there could be fully compensated by our suppliers for any financial or other liability that we suffer as a result.

In addition, we provide frequent incremental releases of product and service updates and functional enhancements, which increase the possibility of errors. The electronic payments products and services we provide are designed to process complex transactions and deliver reports and other information related to those transactions, all at high volumes and processing speeds. Since customers use our services for important aspects of their businesses, any errors, defects, security breaches such as cyber-attacks or identify theft, malfeasance, disruptions in services, or other performance problems with our services could hurt our reputation and damage our customers’ businesses. Software and system errors, or human error, could delay or inhibit settlement of payments, result in oversettlement, cause reporting errors, or prevent us from collecting transaction-based fees, all of which have occurred in the past. Similarly, third-party security breaches such as cyber-attacks or identity theft could disrupt the proper functioning of our software products or services, cause errors, allow unauthorized access to sensitive, proprietary or confidential information of ours or our customers, and other destructive outcomes. Moreover, security breaches or errors in our hardware design or manufacture could cause product safety issues typical of consumer electronics devices. Such issues could lead to product recalls and inventory shortages, result in costly and time-consuming efforts to redesign and redistribute our products, give rise to regulatory inquiries and investigations, and result in lawsuits and other liabilities and losses, which could have a material and adverse effect on our financial results and the market price of our Class A common stock.

We are exposed to fluctuations in foreign currency exchange rates.

Our exposure to fluctuations in foreign currency exchange rates through our international operations could have a negative impact on our reported results of operations. From time to time, we may enter into forward contracts, options, and/or foreign exchange swaps related to foreign currency exposures that arise in the normal course of our business. These and other such hedging activities may not eliminate our exposure to foreign exchange fluctuations. Moreover, the use of hedging instruments may introduce additional risks if we are unable to structure effective hedges with such instruments.

We may have exposure to greater-than-anticipated tax liabilities, which may materially and adversely affect our business.


Additionally, electronic payment productsWe are subject to income taxes and services, including ours, have beennon-income taxes in the United States and other countries in which we transact or conduct business, and such laws and rates vary by jurisdiction. We are subject to review and audit by U.S. federal, state, local, and foreign tax authorities. Such tax authorities may disagree with tax positions we take, and if any such tax authority were to successfully challenge any such position, our financial results and operations could be materially and adversely affected. In addition, we currently are, and expect to continue to be, subject to numerous federal, state, local and foreign tax audits relating to transfer pricing, income, sales and use, gross receipts, franchise, value-added (“VAT”), and other tax liabilities. While we have established reserves based on assumptions and estimates that we believe are reasonably sufficient to cover such eventualities, any adverse outcome of such a review or audit could have an adverse impact on our financial position and results of operations if the reserves prove to be insufficient.

Our tax liability could be adversely affected by changes in tax laws, rates, regulations, and administrative practices. For example, various levels of government and international organizations, such as in the United States, the Organisation for Economic Co-operation and Development (“OECD”), and the European Union (“EU”), have increasingly focused on tax reform and any result from this development may create changes to long-standing tax principles, which could adversely affect our effective tax rate. On October 8, 2021, the OECD announced an international agreement with more than 130 countries to implement a new global minimum effective corporate tax rate of 15% (known as "Pillar Two") for large multinational companies starting in 2023. Additionally, under the agreement, new rules have been introduced that will result in the reallocation of certain profits from large multinational companies to market jurisdictions where customers and users are located. On December 12, 2022, the EU Council unanimously agreed to implement Pillar Two, which EU member countries are required to adopt into their respective tax codes by the end of 2023. On July 17, 2023, the OECD published Administrative Guidance regarding certain safe harbor rules that effectively extend certain effective dates to January 1, 2027. Although certain implementation details have yet to be developed and the enactment of these changes has not yet taken effect, these changes may have adverse tax consequences for us.

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On August 16, 2022, the Inflation Reduction Act (“IRA”) was enacted in the United States, which introduced, among provisions, a new minimum corporate income tax on certain large corporations, an excise tax of 1% on certain share repurchases by corporations, and increased funding for the Internal Revenue Service. Although we do not anticipate the new corporate minimum income tax will currently apply to us, changes in our business and any future regulations or other guidance on the interpretation and application of the new corporate minimum tax may result in additional taxes payable by us, which could materially and adversely affect our financial results and operations.

Our income tax obligations are based on our corporate operating structure, including the manner in which we develop, value, and use our intellectual property and the scope of our international operations. The tax authorities of the jurisdictions in which we operate may challenge our methodologies for valuing developed technology or intercompany arrangements. Additionally, tax authorities at the international, federal, state, and local levels are currently reviewing the appropriate tax treatment of companies engaged in internet commerce and financial technology and attempting to broaden the classification and definitions of activities subject to taxation. For example, various states may attempt to broaden the definition of internet hosting, data processing, telecommunications, and other services to capture additional types of activities. These developing changes could affect our financial position and results of operations. In particular, it is possible that tax authorities at the international, federal, state, and local levels may attempt to regulate our transactions or levy new or revised sales and use taxes, gross receipts, franchise, VAT, digital services taxes, digital advertising taxes, income taxes, loan taxes, or other taxes relating to our activities, which would likely increase the cost of doing business. New taxes could also create significant increases in internal costs necessary to capture data and collect and remit taxes. Proposed or enacted laws regarding tax compliance obligations could require us to make changes to our infrastructure or increase our compliance obligation. Any of these events could have an adverse effect on our business and results of operations. Moreover, an increasing number of states, the U.S. federal government, and certain foreign jurisdictions have considered or adopted laws or administrative practices that impose obligations for on-demand and streaming services, online marketplaces, payment service providers and other intermediaries. These obligations may deem parties, such as us, to be the legal agent of merchants and therefore may require us to collect and remit taxes on the merchants' behalf and take on additional reporting and record-keeping obligations. For example, the American Rescue Plan Act of 2021 requires businesses that process payments to report payments for goods and services on Form 1099-K when those transactions total more than $600 in a year for a given seller, which reporting requirement applies to Square and Cash App for Business accounts. This new threshold is currently expected to apply to transactions occurring in 2024, subject to any changes implemented by the Internal Revenue Service. Any failure by us to prepare for and to comply with these and similar reporting and record-keeping obligations could result in substantial monetary penalties and other sanctions, adversely impact our ability to do business in certain jurisdictions, and harm our business.

The determination of our worldwide provision for income and other tax liabilities is highly complex and requires significant judgment by management, and there are many transactions during the ordinary course of business where the ultimate tax determination is uncertain. Although we believe our estimates are reasonable, the ultimate tax outcome may differ from amounts recorded in our financial statements and may materially affect our financial results in the period or periods for which such determination is made.

We have in the past recorded, and may in the future specifically targetedrecord, significant valuation allowances on our deferred tax assets, which may have a material impact on our results of operations and penetrated or disrupted by hackers,cause fluctuations in such results.

As of December 31, 2023, we had a valuation allowance for deferred tax assets in the United States and in certain other countries. Our net deferred tax assets relate predominantly to the United States federal and state tax jurisdictions. The need for a valuation allowance requires an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable; such assessment is required on a jurisdiction-by-jurisdiction basis. In making such an assessment, significant weight is given to evidence that can be objectively verified.

We continue to monitor the likelihood that we will be able to recover our data encryptiondeferred tax assets in the future. Future adjustments in our valuation allowance may be unable to prevent unauthorized use. Because the techniques used to obtain unauthorized access to data, products and services, and disable, alter, degrade, or sabotage them, change frequently and may be difficult to detect or remediate for long periodsrequired. The recording of time, we and our customers

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may be unable to anticipate these techniques or implement adequate preventative measures to stop them. If we or our sellers are unable to anticipate or prevent these attacks, our sellers' businesses may be harmed, our reputation could be damaged, and we could incur significant liability.

Systems failures, interruptions, delays in service, catastrophic events, and resulting interruptions in the availability of our products or services, or those of our sellers, could harm our business and our brand, and subject us to substantial liability.

Our systems and those of our third-party data center facilities may experience service interruptions, denial-of-service and other cyber-attacks and security incidents, human error, earthquakes, hurricanes, floods, fires, other natural disasters, power losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks and other geopolitical unrest, computer viruses, changes in social, political or regulatory conditions or in laws and policies, or other changes or events. Our systems are also subject to break-ins, sabotage, and acts of vandalism. Some of our systems are not fully redundant, and our disaster-recovery planning is not sufficient for all eventualities. In addition, as a provider of payments solutions, we are subject to increased scrutiny by regulators that may require specific business continuity and disaster recovery plans and more rigorous testing of such plans. This increased scrutiny may be costly and time-consuming and may divert our resources from other business priorities.

We have experienced and will likely continue to experience denial-of-service attacks, system failures, and other events or conditions that interrupt the availability or reduce the speed or functionality of our products and services. These events have resulted and likely will result in loss of revenue. In addition, they could result in significant expense to repair or replace damaged equipment and remedy resultant data loss or corruption. A prolonged interruption in the availability or reduction in the speed or other functionality of our products or services could materially harm our reputation and business. Frequent or persistent interruptionsany future increases in our products and services could cause customers to believe that our products and services are unreliable, leading them to switch to our competitors or to avoid our products and services, and could permanently harm our reputation and business. Moreover, to the extent that any system failure or similar event results in damages to customers or their businesses, these customers could seek compensation from us for their losses, and those claims, even if unsuccessful, would likely be time-consuming and costly for us to address.

A significant natural disastervaluation allowance could have a material and adverse impact on our business. Our headquartersreported results, and certainboth the recording and release of our data center facilities are located in the San Francisco Bay Area, a region known for seismic activity. Despite any precautions we may take, the occurrence of a natural disaster or other unanticipated problems at our headquarters or data centersvaluation allowance could result in lengthy interruptionscause fluctuations in our services or could result in related liabilities. We have implemented a disaster recovery program, which enables us to move production to a back-up data center in the event of a catastrophe. Although this program is functional, it may prove to be inadequate, increasing the risk of interruptions in our services, which could have a materialquarterly and adverse impact on our business. We do not maintain insurance sufficient to compensate us for the potentially significant losses that could result from disruptions to our services.

Significant natural or other disasters could also have a material and adverse impact on our sellers, which, in the aggregate, could in turn adversely affect ourannual results of operations.

The loss or destruction of a private key required to access a bitcoin may be irreversible. If we are unable to access our private keys or if we experience a hack or other data loss relating to the bitcoins we hold on behalf of customers, our customers may be unable to access their bitcoins and it could harm customer trust in us and our products.

Bitcoins are controllable only by the possessor of both the unique public key and private key relating to the local or online digital wallet in which the bitcoins are held. While the bitcoin and blockchain ledger require a public key relating to a digital wallet to be published when used in a transaction, private keys must be safeguarded and kept private in order to prevent a third party from accessing the bitcoins held in such wallet. To the extent our private key is lost, destroyed or otherwise compromised and no backup of the private key is accessible, we will be unable to access the bitcoins held in the related digital wallet. Further, we cannot provide assurance that our wallet will not be hacked or compromised. Any loss of private keys relating to, or hack or other compromise of, digital wallets used to store our customers’ bitcoins could adversely affect our customers’ ability to access or sell their bitcoins and could harm customer trust in us and our products.

Square Capital is subject to additional risks relating to the availability of capital, seller payments, availability and structure of its bank partnership, expansion of its products, and general macroeconomic conditions.



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Legal, Regulatory, and Compliance Risks
Square Capital, which includes our wholly owned subsidiary Square Capital, LLC, is subject to risks in addition to those described elsewhere in this Annual Report on Form 10-K. Maintaining and growing Square Capital is dependent on institutional third-party investors purchasing the eligible business loans originated by our bank partner. If such third parties fail to continue to purchase such business loans or reduce the amount of future loans they purchase, then our bank partner may need to reduce originations, or we would need to fund the purchase of additional business loans from our own resources. We then may have to reduce the scale of Square Capital, which could have a direct impact on our ability to grow. If third parties reduce the price they are willing to pay for these business loans or reduce the servicing fees they pay us in exchange for servicing the business loans on their behalf, then the financial performance of Square Capital would be harmed.

The business loans are generally unsecured obligations of our Square sellers who utilize Square Capital, and they are not guaranteed or insured in any way. Adverse changes in macroeconomic conditions or the credit quality of our Square sellers could cause some Square sellers who utilize Square Capital to cease operating or to experience a decline in their payment processing volume, thereby rendering them unable to make payment on the business loan and/or extend the repayment period beyond the contractual repayment terms on the business loan. To the extent a seller breaches a contractual obligation, such as the requirement to make minimum payments or other breach, the seller would be liable for an accelerated business loan repayment, where Square Capital's recourse is to the business and not to any individual or other asset. In addition, because the servicing fees we receive from third party investors depend on the collectability of the business loans, if there is an increase in Square sellers who utilize Square Capital who are unable to make repayment of business loans, we will be unable to collect our entire servicing fee for such loans.

In addition, adverse changes in macroeconomic conditions could lead to a decrease in the number of sellers eligible for Square Capital facilitated business loans and strain our ability to correctly identify such sellers on behalf of our bank partner or manage the risk of non-payment or fraud as servicer of the business loans. Similarly, if we fail to correctly predict the likelihood of timely repayment of the business loans or correctly price the business loans to sellers utilizing Square Capital, our business may be materially and adversely affected.

We have partnered with a Utah-chartered, member FDIC industrial bank to originate the business loans. Such bank is subject to oversight both by the FDIC and the State of Utah. Due to the fact that we are a service-provider to our bank partner, we are subject to audit standards for third-party vendors in accordance with FDIC guidance and examinations by the FDIC. There has been, and may continue to be, regulatory interest in and/or litigation challenging partnered lending arrangements where a bank makes loans and then sells and assigns such loans to a non-bank entity that is engaged in assisting with the origination and servicing of the loan. If our bank partner ceases to partner with us, ceases to abide by the terms of our agreement with them, or cannot partner with us on commercially reasonable terms, and we are not able to find suitable alternatives and/or make business loans ourselves pursuant to state licensing requirements, Square Capital may need to enter into a new partnership with another qualified financial institution, revert to the merchant cash advance (MCA) model, or pursue an alternative model for originating business loans, all of which may be time-consuming and costly and/or lead to a loss of institutional third-party investors willing to purchase such business loans or MCAs, and as a result Square Capital may be materially and adversely affected.

We intend to continue to explore other products, models and structures for Square Capital, including partnering with referral partners and forming a Utah industrial loan corporation and other forms of credit and loan origination. Some of those models or structures may require, or be deemed to require, additional procedures, partnerships, licenses, regulatory approvals or capabilities that we have not yet obtained or developed. For example, we launched a limited consumer lending pilot program. The licenses required in connection with such pilot and other activities related to the Square Capital program subject us to reporting requirements, bonding requirements, and inspection by applicable state regulatory agencies. Should we fail to expand and evolve Square Capital in this manner, or should these new products, models or structures, or new regulations or interpretations of existing regulations, impose requirements on us that are impractical or that we cannot satisfy, the future growth and success of Square Capital may be materially and adversely affected.


Our business is subject to extensive regulation and oversight in a variety of areas, all of which are subject to change and uncertain interpretation.


We are subject to a wide variety of local, state, federal, and international laws, regulations, licensing schemes, and industry standards in the United States and in other countries in which we operate. These laws, regulations, and regulationsstandards govern numerous areas that are important to our business, including, but not limitedand include, or may in the future include, those relating to banking, lending, deposit-taking, cross-border and domestic money transmission, foreign exchange, payments services (such as payment processing and settlement services), cryptocurrency, trading in shares and fractional shares, personal income tax filing, fraud detection, consumer protection, privacy, information security, fair lending, financial services, laboranti-money laundering, anti-bribery and employment, immigration, importanti-corruption, escheatment, sanctions regimes and export practices, product labeling, competition,controls, privacy, data protection and marketinginformation security, fiscalization and communications practices. Suchcompliance with the Payment Card Industry Data Security Standard, a set of requirements designed to ensure that all companies that process, store, or transmit payment card information maintain a secure environment to protect cardholder data.

These laws, rules, regulations, and standards are enforced by multiple authorities and governing bodies in the United States, including federal agencies, such as the FDIC, the SEC, the Consumer Financial Protection Bureau ("CFPB"), and Office of Foreign Assets Control, self-regulatory organizations, and numerous state and local agencies, such as the Utah Department of Financial Institutions. Outside of the United States, we are subject to additional regulators, authorities, and governing bodies. As we expand into new jurisdictions, expand our product offerings in existing jurisdictions, or as laws, regulations, and standards evolve, the number of foreign regulations and regulators, authorities, and governing bodies governing our business will expand as well. For example, in connection with our acquisition of Afterpay we established a secondary listing on the ASX, subjecting us to additional listing requirements. As our business and products continue to develop and expand, we may become subject to additional rules, regulations, and industry standards. We may not always be able to accurately predict the scope or applicability of certain regulations to our business, particularly as we expand into new areas of operations, which could have a significant negative effect on our existing business and our ability to pursue future plans.

Laws, regulations, and standards are subject to changes and evolving interpretations and application,

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including by means of legislative changes and/or executive orders, and itmay not be consistent across jurisdictions or regulatory bodies. It can be difficult to predict how theysuch laws, regulations, and standards may be applied to our business and the way we conduct our operations, particularly as we introduce new products and services and expand into new jurisdictions. Any

For example, Cash App includes a feature that permits our customers to buy and sell bitcoin. Bitcoin is not widely accepted as legal tender or backed by governments around the world, and it has experienced price volatility, technological glitches, security compromises, and various law enforcement and regulatory interventions. Certain existing laws also prohibit transactions with certain persons and entities, and we have a risk-based program in place to prevent such transactions. Despite this, due to the nature of bitcoin and blockchain technology, we may not be able to prevent all such transactions, and there can be no guarantee that our measures will be viewed as sufficient. The regulation of bitcoin, as well as cryptocurrency and crypto platforms is an evolving area, and we could become subject to additional legislation or regulation in the future. As an example, the FinCEN has issued a proposed rule that would require bitcoin providers like us to keep additional records of and file additional reports to FinCEN of certain bitcoin transaction information. There are substantial uncertainties on how these proposed requirements would apply in practice, and we may face substantial compliance costs to operationalize and comply with these requirements should FinCEN finalize this rule as proposed. If we fail to comply with regulations or prohibitions applicable to us, we could face regulatory or other enforcement actions, potential fines, reputational harm, and other consequences. Further, we might not be able to continue operating the feature in Cash App, at least in current form, or might need to make other changes to our business, our products or our services, which could cause the price of our Class A common stock to decrease.

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We are subject to audits, inspections, inquiries, and investigations from regulators, authorities, and governing bodies, as applicable, on an ongoing basis. Although we have a compliance program focused on the laws, rules, regulations, and standards applicable to our business, we have been and are still subject to audits, inspections, inquiries, investigations, fines, or other actions or penalties in one or more jurisdictions levied by regulators, including federal agencies, state Attorneys General and private plaintiffs who may be acting as private attorneys general pursuant to various applicable laws, as well as those levied by foreign regulators, authorities, and governing bodies. For example, we received inquiries from the SEC and Department of Justice shortly after the publication of a short seller report in March 2023. We believe the inquiries primarily relate to the allegations raised in the short seller report. In addition to fines, penalties for failing to comply with applicable rules and regulations could include significant criminal and civil lawsuits, forfeiture of significant assets, increased licensure requirements, revocation of licenses or other enforcement actions. We have been and may be required to make changes to our business practices or compliance programs as a result of regulatory scrutiny. In addition, any perceived or actual breach offailure by us to comply with applicable laws, rules, regulations, and regulationsstandards could result in investigations, regulatory inquiries, litigation, fines, or otherwise negativelyhave a significant impact on our business. It is possible that these lawsreputation as a trusted brand and regulations could be interpreted or applied in a manner that would prohibit, alter, or impair our existing or planned products and services; that could cause us to belose existing customers, prevent us from obtaining new customers, require us to expend significant funds to remedy problems caused by breaches and to avert further breaches, and expose us to legal risk and potential criminal and civil liability.

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Our business is subject to audits, inquiries, investigations, or lawsuits; that could result in fines, injunctive relief, or other liabilities; or that could require costly, time-consuming, or otherwise burdensome compliance measures from us.complex and evolving regulations and oversight related to privacy, data protection, and information security.


In particular, as we seek to build a trusted and secure platform for commerce, and as we expand our network of customers and facilitate their transactions and interactions with one another, we will increasingly beWe are subject to laws and regulations relating to the collection, use, retention, privacy, protection, security, and transfer of information, including the personally identifiablepersonal information of our employees and customers. As with the other laws and regulations noted above, these laws and regulations may change or be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible they will be interpreted and applied in ways that will materially and adversely affect our business. For example, the European Parliament and the Council of the European Union in 2016 adopted aUnion’s General Data Protection Regulation (GDPR), effective(“GDPR”) and similar legislation in May 2018, that will supersede current EU data protection legislation,the United Kingdom (“U.K.”) impose more stringent data privacy and data protection requirements and provide for greater penalties for noncompliance of up to the greater of 4% of worldwide annual revenue or €20 million.million or £17.5 million, as applicable. The GDPR restricts international data transfers from the EU to other jurisdictions unless the rights of the individual data subjects in respect of their personal data is protected by an approved transfer mechanism, or one of a limited number of exceptions applies. The U.K.’s data protection regime contains similar requirements. When transferring personal data from the EU to other jurisdictions, we utilize standard contractual clauses published by the EU Commission (the "SCCs"). On July 16, 2020, the Court of Justice of the European Union (“CJEU”) issued a decision that may impose additional obligations on companies when relying on those SCCs. On July 10, 2023, the European Commission issued its “adequacy decision” for the EU-US Data Privacy Framework, concluding that the DPF ensures U.S. protection of personal data transferred between the countries is comparable to that offered in the EU. These and other developments relating to cross-border data transfer could result in increased costs of compliance and limitations on our customers and us. Additionally, legal or regulatory challenges or other developments relating to cross-border data transfer may serve as a basis for our personal data handling practices, or those of our customers and vendors, to be challenged and may otherwise adversely impact our business, financial condition, and operating results. In the United Kingdom, a Data Protection Bill has been introduced to the House of Lords that proposes to substantially implement the GDPR. Nevertheless,U.K., the Data Protection Bill must completeAct and legislation referred to as the legislative process, so it remains unclear what modifications will be madeUK GDPR substantially enact the EU GDPR into U.K. law, with penalties for noncompliance of up to the finalgreater of £17.5 million or four percent of worldwide revenues. The European Commission has issued an adequacy decision under the GDPR and the Law Enforcement Directive, pursuant to which personal data generally may be transferred from the EU to the U.K. without restriction, subject to a four-year “sunset” period, after which the European Commission’s adequacy decision may be renewed. During that period, the European Commission will continue to monitor the legal situation in the U.K. and may intervene at any time with respect to its adequacy decision. The UK’s adequacy determination therefore is subject to future uncertainty and may be subject to modification or revocation in the future. We could be required to make additional changes to the way we conduct our business and transmit data between the U.S., the U.K., the EU, and the rest of the world. Further, in addition to the GDPR, the European Commission has a draft regulation in the approval process that focuses on a person’s right to conduct a private life. The proposed legislation, known as the Regulation of Privacy and Electronic Communications (“ePrivacy Regulation”), would replace the current ePrivacy Directive. If adopted, it would carry broad potential impacts on the use of internet-based services and tracking technologies, such as cookies. We expect to incur additional costs to comply with the requirements of the ePrivacy Regulation as it is finalized for implementation. Additionally, on January 13, 2022, the Austrian data protection regulator published a decision ruling that the collection of personal data and transfer to the U.S. through Google Analytics and other analytics and tracking tools used by website operators violates the GDPR. The Dutch, French and Italian data protection regulators have adopted similar decisions. Other data protection regulators in the EU increasingly are focused on the use of online tracking tools. Any of these changes or other developments with respect to EU data protection law could disrupt our business and otherwise adversely impact our business, financial condition, and operating results. In addition, some countries are considering or have enacted legislation addressing matters such as requirements for local storage and processing of data that could impact our compliance obligations, expose us to liability, and increase the cost and complexity of delivering our services.

Likewise, the California Consumer Privacy Act of 2018 (“CCPA”) became effective on January 1, 2020 and was modified by the California Privacy Rights Act (“CPRA”), which was passed in November 2020 and became effective on January 1, 2023. The CCPA and CPRA impose stringent data privacy and data protection requirements relating to personal information of California residents, and provide for penalties for noncompliance of up to $7,500 per violation. Aspects of the interpretation and enforcement of the CCPA and CPRA remain unclear. More generally, privacy, data protection, and information security continue to be rapidly evolving areas, and further legislative activity has arisen and will likely continue to arise in the U.S., the EU, and other jurisdictions. For example, several states in the U.S. have proposed or enacted laws that contain obligations similar to the CCPA and CPRA that have taken effect or will take effect in coming years. The U.S. federal government also is contemplating federal privacy legislation. The effects of recently proposed or enacted legislation potentially are far-reaching and may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply. Further, variances in these laws and regulations or their interpretations may increase our compliance costs.


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We have incurred, and may continue to incur, significant expenses to comply with mandatoryevolving privacy, data protection, and information security standards and protocols imposed by law, regulation, industry standards, shifting consumer expectations, or contractual obligations. We post onLaws and regulations directed at privacy, data protection, and information security, and those that have been applied in those areas, can be challenging to comply with and may be subject to evolving interpretations or applications. In particular, with laws and regulations such as the GDPR in the EU and the CCPA, CPRA, and other laws in the U.S. imposing new and relatively burdensome obligations, and with the interpretation and application of these and other laws and regulations subject to evolving and uncertain interpretation and application, we may face challenges in addressing their requirements and making necessary changes to our website our privacy policies and practices, concerning the collection, use, and disclosure of information.we may incur significant costs and expenses in an effort to do so. Any failure, real or perceived, by us to comply with our posted privacy, data protection, or information security policies, changing consumer expectations, or with any evolving legal or regulatory requirements, or orders, other local, state, federal, or international privacy, data protection, information security or consumer protection-related laws and regulations, industry standards, or contractual obligations could result in claims, demands, and litigation by private parties, investigations and other proceedings by regulatory authorities, and fines, penalties and other liabilities, may harm our reputation and competitive position, and may cause our customers to reduce their use of our products and services, disrupt our supply chain or third-party vendor or developer partnerships, and materially and adversely affect our business.

We are subject to risks related to litigation, including intellectual property claims, government investigations or inquiries, and regulatory matters or disputes.

We are currently, and may continue to be, subject to claims, lawsuits (including class actions and individual lawsuits), disputes, investigations, subpoenas, inquiries or audits, and other actions or proceedings, including from regulatory bodies and governmental agencies. The number and significance of our legal disputes and inquiries have increased as we have grown larger, as our business has expanded in scope and geographic reach, and as our products and services have increased in complexity, and we expect that we will continue to face additional legal disputes as we continue to grow and expand. We also receive significant media attention, which could result in increased litigation or other legal or regulatory reviews and proceedings. Moreover, legal disputes or government or regulatory inquiries or findings may cause follow-on litigation or regulatory scrutiny by additional parties. These claims, lawsuits, investigations, subpoenas, inquiries, audits and other actions may require significant time and expense even if we are successful in resolving the matter, and the outcomes can be uncertain and unpredictable and may involve material penalties, fines or restrictions on our business.

Some of the laws and regulations affecting the internet, mobile commerce, payment processing, BNPL, bitcoin and equity investing, streaming service, business financing, and employment were not written with businesses like ours in mind, and many of the laws and regulations, including those affecting us have been enacted relatively recently. As a result, there is substantial uncertainty regarding the scope and application of many of the laws and regulations to which we are or may be subject, which increases the risk that we will be subject to claims alleging violations of those laws and regulations. The scope, outcome, and impact of claims, lawsuits, government or regulatory investigations, subpoenas, inquiries or audits, and other proceedings to which we are subject cannot be predicted with certainty. Regardless of the outcome, such investigations and legal proceedings can have a material and adverse impact on us due to their costs, diversion of our resources, and other factors. Plaintiffs may seek, and we may become subject to, preliminary or provisional rulings in the course of litigation, including preliminary injunctions requiring us to cease some or all of our operations. We may decide to settle legal disputes on terms that are unfavorable to us. We have also been accused of having, or may be found to have, infringed or violated third-party copyrights, patents, trademarks, and other intellectual property rights. If any litigation to which we are a party is resolved adversely, we may be subject to an unfavorable judgment that we may not choose to appeal or that may not be reversed upon appeal. We have, from time to time, needed to obtain a license to continue existing practices as a result of changes in law or for which we are found to be in violation of a third-party’s rights. We may also need to change, restrict or cease certain practices altogether. If we are required, or choose to enter into, royalty or licensing arrangements, such arrangements may not be available on reasonable terms or at all and may significantly increase our operating costs and expenses. As a result, we may also be required to develop or procure alternative non-infringing technology or discontinue use of technology, and doing so could require significant effort and expense or may not be feasible. In addition, the terms of any settlement or judgment in connection with any legal claims, lawsuits, or proceedings may require us to cease some or all of our operations or to pay substantial amounts to the other party and could materially and adversely affect our business.


Further, from time to time, we may leverage third parties to help conduct our businesses abroad. We and our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and may be held liable for the corrupt or other illegal activities of these third-party business partners and intermediaries, our employees, representatives, contractors, channel partners, and agents, even if we do not explicitly authorize such activities. While we have policies and procedures to address compliance with such laws, we cannot assure you that all of our employees and agents will not take actions in violation of our policies and applicable law, for which we may be ultimately held responsible.
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We may not be able to respond quickly or effectively to regulatory, legislative and other developments, and these changes may in turn impair our ability to offer our existing or planned features, products and services and/or increase our cost of doing business. In addition, if our practices are not consistent or viewed as not consistent with the legal and regulatory requirements, including changes in laws and regulations or new interpretations of existing laws and regulations, we may become subject to audits, inquiries, whistleblower complaints, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions, or suspension or debarment from U.S. government contracts, all of which may have an adverse effect on our reputation, our business, results of operations and financial condition.

Our business is subject to complex and evolving regulations and oversight related to our provision of payments services and other financial services.

The state and federal laws, rules, regulations, and licensing schemes that govern our business include or may in the future include those relating to banking, lending, deposit-taking, cross-border and domesticAs a licensed money transmission, foreign exchange, payments services (such as payment processing and settlement services), consumer financial protection, anti-money laundering, escheatment, international sanctions regimes, and compliance with the Payment Card Industry Data Security Standard, a set of requirements designed to ensure that all companies that process, store, or transmit payment card information maintain a secure environment to protect cardholder data. These laws, rules, and regulations are enforced by multiple authorities and governing bodies in the United States, including the Department of the Treasury, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, and numerous state and local agencies. Outside of the United States,transmitter, we are subject to additional laws, rules,important obligations and regulations related to the provision of payments and financial services, including those enforcedrestrictions.

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by the Ministry of Economy, Trade, and Industry in Japan, those enforced by the Australian Transaction Reports and Analysis Centre, and those enforced by the Financial Conduct Authority in the United Kingdom. As we expand into new jurisdictions, the number of foreign regulations and regulators governing our business will expand as well. If we pursue additional or alternative means of growing Square Capital, additional state and federal regulations would apply. Similarly, if we choose to offer Square Payroll in more jurisdictions, additional regulations, including tax rules, will apply. In addition, as our business and products continue to develop and expand, we may become subject to additional rules and regulations.
We recently introduced a feature to the Cash App that permits our customers to buy and sell bitcoin. Bitcoin is not considered legal tender or backed by any government, and it has experienced price volatility, technological glitches and various law enforcement and regulatory interventions. We do not believe that the bitcoin platform involves offering participants securities that are subject to the registration or other provisions of the federal or state securities laws. We also do not believe the feature subjects us to regulation under the federal securities laws, including as a broker-dealer or an investment adviser, or registration under the federal commodities laws. However, the regulation of cryptocurrency and crypto platforms is still an evolving area and it is possible that a court or a federal or state regulator could disagree with one or more of these conclusions. If we fail to comply with regulations or prohibitions applicable to us, we could face regulatory or other enforcement actions and potential fines and other consequences. Further, we might not be able to continue operating the feature, at least in current form, and to the extent that the feature is viewed by the market as a valuable asset to Square, the price of our Class A common stock could decrease. Additionally, there is no specific accounting guidance in U.S. GAAP covering accounting for cryptocurrencies, which means the accounting can be complex and subject to challenge or scrutiny. The final conclusions on the accounting treatment for our cryptocurrency transactions could affect the presentation of our results of operations.

Although we have a compliance program focused on the laws, rules, and regulations applicable to our business and we are continually investing more in this program, we may still be subject to fines or other penalties in one or more jurisdictions levied by federal, state or local regulators, including state Attorneys General and private plaintiffs who may be acting as private attorneys general pursuant to various applicable federal, state and local laws, as well as those levied by foreign regulators. In addition to fines, penalties for failing to comply with applicable rules and regulations could include significant criminal and civil lawsuits, forfeiture of significant assets, increased licensure requirements, or other enforcement actions. We could also be required to make changes to our business practices or compliance programs as a result of regulatory scrutiny. In addition, any perceived or actual breach of compliance by us with respect to applicable laws, rules, and regulations could have a significant impact on our reputation as a trusted brand and could cause us to lose existing customers, prevent us from obtaining new customers, require us to expend significant funds to remedy problems caused by breaches and to avert further breaches, and expose us to legal risk and potential liability.


We have obtained licenses to operate as a money transmitter (or its equivalent)as other financial services institutions) in the United StatesU.S. and in the states where this is required.required, as well as in some non-U.S. jurisdictions, including but not limited to the EU, the U.K., and Australia. As a licensed money transmitter, we are subject to obligations and restrictions with respect to the investment of customer funds, reporting requirements, bonding requirements, and inspection by state and federal regulatory agencies concerning those aspects of our business considered money transmission. Evaluation of our compliance efforts, as well as the questions of whether and to what extent our products and services are considered money transmission, are matters of regulatory interpretation and could change over time. In the past, we have been subject to fines and other penalties by regulatory authorities due to their interpretations and applications to our business of their respective state money transmission laws. In the future, as a result of the regulations applicable to our business, we could be subject to investigations and resulting liability, including governmental fines, restrictions on our business, or other sanctions, and we could be forced to cease conducting certain aspects of our business with residents ofin certain jurisdictions, be forced to otherwise change our business practices in certain jurisdictions, or be required to obtain additional licenses or regulatory approvals. There can be no assurance that we will be able to obtain any such licenses, and, even if we were able to do so, there could be substantial costs and potential product changes involved in maintaining such licenses, which could have a material and adverse effect on our business.



We are subject to a number of regulatory risks relatedin the BNPL space.

The regulation of BNPL products is evolving, and it is possible that states or countries pass new or additional regulations or additional and changing legal, regulatory, tax, licensing, and compliance requirements and industry standards that could adversely impact our BNPL products or the way we operate our BNPL platform. In addition, the CFPB recently announced plans to litigation, including intellectual property claims,regulate companies offering BNPL products. Increased compliance obligations and regulatory mattersscrutiny may negatively impact our revenue and profitability. Any inability, or disputes.perceived inability, to comply with existing or new compliance obligations issued by the CFPB or any other regulatory authority, including with respect to BNPL products, could lead to regulatory investigations, or result in administrative or enforcement action, such as fines, penalties, and/or enforceable undertakings and adversely affect us and our results of operations. Regulatory scrutiny or changes in the BNPL space may impose significant compliance costs and make it uneconomical for us to continue to operate in our current markets or for us to expand into new markets.


We may be,Our subsidiary Cash App Investing is a broker-dealer registered with the SEC and have been,a member of FINRA, and therefore is subject to claims, lawsuits (including class actionsextensive regulation and individual lawsuits), government investigations,scrutiny.

Our subsidiary Cash App Investing facilitates transactions in shares and other proceedings involving intellectual property, consumer protection, privacy, laborfractionalized shares of publicly-traded stock and employment, immigration, import and export practices, product labeling, competition, accessibility, securities, tax, marketing and communications practices, commercial disputes, and other matters.


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The number and significanceexchange-traded funds by users of our legal disputesCash App through a third-party clearing and inquiries have increased as we have grown larger, as our business has expanded in scope and geographic reach, and as our products and services have increased in complexity, and we expect that we will continue to face additional legal disputes as we continue to grow and expand.

We receive significant media attention and,carrying broker, DriveWealth LLC (“DriveWealth”). Cash App Investing is registered with the SEC as a public company, havebroker-dealer under the Exchange Act and is a higher profile,member of FINRA. Therefore, Cash App Investing is subject to regulation, examination, and supervision by the SEC, FINRA, and state securities regulators. The regulations applicable to broker-dealers cover all aspects of the securities business, including sales practices, use and safekeeping of clients’ funds and securities, capital adequacy, record-keeping, and the conduct and qualification of officers, employees, and independent contractors. As part of the regulatory process, broker-dealers are subject to periodic examinations by their regulators, the purpose of which could result in increased litigation or other legal or regulatory proceedings. In addition, some of theis to determine compliance with securities laws and regulations, affecting the internet, mobile commerce, payment processing, business financing, and employment did not anticipate businesses like ours, and many of the laws and regulations affecting us have been enacted relatively recently. As a result, there is substantial uncertainty regarding the scope and application of many of the laws and regulationsfrom time to which we are subject, which increases the risk that we will be subject to claims alleging violations of those laws and regulations. We may also be accused of having, or be found to have, infringed or violated third-party intellectual property rights.

Regardless of the outcome, legal proceedings can have a material and adverse impact on us due to their costs, diversion of our resources, and other factors. Plaintiffs may seek, and we may become subject to, preliminary or provisional rulings in the course of litigation, including preliminary injunctions requiring us to cease some or all of our operations. We may decide to settle legal disputes on terms that are unfavorable to us. Furthermore, if any litigation to which we are a party is resolved adversely, wetime may be subject to additional routine and for-cause examinations. It is not uncommon for regulators to assert, upon completion of an unfavorable judgmentexamination, that wethe broker-dealer being examined has violated certain of these rules and regulations. Depending on the nature and extent of the violations, the broker-dealer may not choosebe required to appeal pay a fine and/or that may not be reversed upon appeal. We maysubject to other forms of disciplinary and corrective action. Additionally, the adverse publicity arising from the imposition of sanctions could harm our reputation and cause us to lose existing customers or fail to gain new customers.

The SEC, FINRA, and state regulators have the authority to seek a license to continue practices found to be in violationbring administrative or judicial proceedings against broker-dealers, whether arising out of a third party’s rights,examinations or we may have to change or cease certain practices. If we are required, or choose to enter into, royalty or licensing arrangements, such arrangements may not be available on reasonable terms or at allotherwise, for violations of state and federal securities laws. Administrative sanctions can include cease-and-desist orders, censure, fines, and disgorgement and may significantly increaseeven result in the suspension or expulsion of the firm from the securities industry. Similar sanctions may be imposed upon officers, directors, representatives, and employees.

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Cash App Investing has adopted, and regularly reviews and updates, various policies, controls, and procedures designed for compliance with Cash App Investing’s regulatory obligations. However, appropriately addressing Cash App Investing’s regulatory obligations is complex and difficult, and our operating costsreputation could be damaged if we fail, or appear to fail, to appropriately address them. Failure to adhere to these policies and expenses. As aprocedures may also result in regulatory sanctions or litigation against us. Cash App Investing also relies on various third parties, including DriveWealth, to provide services, including managing and executing customer orders, and failure of these third parties to adequately perform these services may negatively impact customer experience, product performance, and our reputation and may also result in regulatory sanctions or litigation against us or Cash App Investing.

In the event of any regulatory action or scrutiny, we mayor Cash App Investing could also be required to developmake changes to our business practices or procure alternative non-infringing technologycompliance programs. In addition, any perceived or discontinue useactual breach of technology,compliance by Cash App Investing with respect to applicable laws, rules, and doing soregulations could have a significant impact on our reputation, could cause us to lose existing customers, prevent us from obtaining new customers, require us to expend significant funds to remedy problems caused by breaches and to avert further breaches, and expose us to legal risk, including litigation against us, and potential liability.

Cash App Investing is subject to net capital and other regulatory capital requirements; failure to comply with these rules could harm our business.

Our subsidiary Cash App Investing is subject to the net capital requirements of the SEC and FINRA. These requirements typically specify the minimum level of net capital a broker-dealer must maintain and also mandate that a significant part of its assets be kept in relatively liquid form. Failure to maintain the required net capital may subject a firm to limitation of its activities, including suspension or revocation of its registration by the SEC and suspension or expulsion by FINRA, and ultimately may require its liquidation. Currently, Cash App Investing has relatively low net capital requirements, because it does not hold customer funds or securities, but instead facilitates the transmission and delivery of those funds on behalf of customers to DriveWealth or back to the applicable customer. However, a change in the net capital rules, a change in how Cash App Investing handles or holds customer assets, or the imposition of new rules affecting the scope, coverage, calculation, or amount of net capital requirements could have adverse effects. Finally, because Cash App Investing is subject to such net capital requirements, we may be required to inject additional capital into Cash App Investing from time to time and as such, we may have liability and/or our larger business may be affected by any of these outcomes.

It is possible that FINRA will require changes to our business practices based on our ownership of Cash App Investing, which could impose additional costs or disrupt our business.

In certain cases, FINRA has required unregistered affiliates of broker-dealers to comply with additional regulatory requirements, including, among others, handling all securities or other financial transactions through the affiliated broker-dealer or conforming all marketing and advertising materials to the requirements applicable to broker-dealers. We do not currently believe that these types of requirements apply to any aspect of our business other than the securities transactions facilitated through the Cash App. It is possible that, in the future, FINRA could require us to comply with additional regulations in the conduct of other activities (i.e., beyond the securities transactions made through the Cash App). If that were to occur, it could require significant effortchanges to our business practices. These and expenseother changes would impose significantly greater costs on us and disrupt existing practices in ways that could negatively affect our overarching business and profitability.

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Our subsidiary Square Financial Services is a Utah state-chartered industrial loan company, which requires that we serve as a source of financial strength to it and subjects us to potential regulatory sanctions.

On March 1, 2021, Square Financial Services received its deposit insurance from the FDIC and charter approval from the Utah Department of Financial Institutions and became operational. The FDIA requires that we serve as a source of financial strength to Square Financial Services. This means that we are required by law to provide financial assistance to Square Financial Services in the event that it experiences financial distress. In this regard, the FDIC’s approval requires that Square Financial Services have initial paid-in capital of not less than approximately $56 million, and at all times meet or exceed the regulatory capital levels required for Square Financial Services to be considered “well capitalized” under the FDIC’s prompt corrective action rules. The regulatory total capital and leverage ratios of Square Financial Services during the first three years of operation may not be feasible.less than the levels provided in Square Financial Services’ business plan approved by the FDIC. Thereafter, the regulatory capital ratios must be annually approved by the FDIC, and in no event may Square Financial Services’ leverage ratio be less than twenty percent, as calculated in accordance with FDIC regulations. If Square Financial Services' total capital or leverage ratios fall below the levels required by the FDIC, we will need to provide sufficient capital to Square Financial Services so as to enable it to maintain its required regulatory capital ratios. If the FDIC were to increase Square Financial Services’ capital requirements, it could negatively impact our business and operations and those of Square Financial Services.

The FDIC’s approval is also contingent on us maintaining a Capital and Liquidity Maintenance Agreement as well as a Parent Company Agreement. The Capital and Liquidity Maintenance Agreement requires, among other things, that we maintain the leverage ratio of Square Financial Services at a minimum of 20 percent following the first three years of Square Financial Services’ operations; maintain a third-party line of credit for the benefit of Square Financial Services acceptable to the FDIC; purchase any loan from Square Financial Services at the greater of the cost basis or fair market value, if deemed necessary by the FDIC or Square Financial Services; and establish and maintain a reserve deposit of $50 million at an unaffiliated third-party bank that Square Financial Services could draw upon in the event that we fail to provide sufficient funds to maintain Square Financial Services’ capital ratios at the required levels. The Parent Company Agreement requires, among other things, that we consent to the FDIC’s examination of us and our subsidiaries; limit our representation on Square Financial Services’ board of directors to no more than 25 percent; submit a contingency plan to the FDIC that describes likely scenarios of significant financial or operational stress and, if we were unable to serve as a source of financial strength, options for the orderly wind down or sale of Square Financial Services; and engage a third party to review and provide periodic reports concerning the effectiveness of our complaint response system. Jack Dorsey, who is considered our controlling shareholder in this context, also agreed to cause us to perform under these agreements. Should we fail to comply with these obligations, we could be subject to regulatory sanctions. In addition, the terms of any settlement or judgment in connectionfailure by Square Financial Services to comply with any legal claims, lawsuits, or proceedings mayapplicable laws, rules, and regulations could also subject us and Square Financial Services to regulatory sanctions. These sanctions could adversely impact our reputation and our business, require us to cease someexpend significant funds for remediation, and expose us to litigation and other potential liability.

Square Financial Services is subject to extensive supervision and regulation, including the Dodd-Frank Act and its related regulations, which are subject to change and could involve material costs or allaffect operations.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of our operations or pay substantial amounts2010 (the "Dodd-Frank Act") effected significant changes to U.S. financial regulations and required rule making by U.S. financial regulators including adding a new Section 13 to the Bank Holding Company Act known as the Volcker Rule. The Volcker Rule generally restricts certain banking entities (such as Square Financial Services) from engaging in proprietary trading activities and from having an ownership interest in or sponsoring any private equity funds or hedge funds (or certain other partyprivate issuing entities). The current activities of Square Financial Services have not been and are not expected to be materially affected by the Volcker Rule. Nevertheless, we cannot predict whether, or in what form, any other proposed regulations or statutes or changes to implementing regulations will be adopted or the extent to which the business operations of Square Financial Services may be affected by any new regulation or statute. Such changes could materiallysubject our business to additional compliance burden, costs, and adversely affect our business.possibly limit the types of financial services and products we may offer.


Square Financial Services is also subject to the requirements in Sections 23A and 23B of the Federal Reserve Act and the Federal Reserve Board’s implementing Regulation W, which regulate loans, extensions of credit, purchases of assets, and certain other transactions between an insured depository institution (such as Square Financial Services) and its affiliates. The statute and regulation require Square Financial Services to impose certain quantitative limits, collateral requirements, and other restrictions on “covered transactions” between Square Financial Services and its affiliates and requires all transactions be on “market terms” and conditions consistent with safe and sound banking practices.
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Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services, and brand.


Our trade secrets, trademarks, copyrights, patents, and other intellectual property rights are critical to our success. We rely on, and expect to continue to rely on, a combination of confidentiality, invention assignment, and license agreements with our employees, consultants, and third parties with whom we have relationships, as well as trademark, trade dress, domain name, copyright, trade secret, and patent rights, to protect our brand and other intellectual property rights. However, various events outside of our control may pose a threat to our intellectual property rights, as well as to our products and services. Effective protection of trademarks, copyrights, domain names, patent rights, and other intellectual property rights is expensive and difficult to maintain, both in terms of application and maintenance costs, as well as the costs of defending and enforcing those rights. The efforts we have taken to protect our intellectual property rights may not be sufficient or effective. Our intellectual property rights may be infringed, misappropriated, or challenged, which could result in them being narrowed in scope or declared invalid or unenforceable. Similarly, our reliance on unpatented proprietary information and technology, such as trade secrets and confidential information, depends in part on agreements we have in place with employees and third parties that place restrictions on the use and disclosure of this intellectual property. These agreements may be insufficient or may be breached, or we may not enter into sufficient agreements with such individuals in the first instance, in either case potentially resulting in the unauthorized use or disclosure of our trade secrets and other intellectual property, including to our competitors, which could cause us to lose any competitive advantage resulting from this intellectual property. Individuals not subject to invention assignment agreements may make adverse ownership claims to our current and future intellectual property. There can be no assurance that our intellectual property rights will be sufficient to protect against others offering products or services that are substantially similar to ours and that compete with our business.


As of December 31, 2017, we had 379 issuedWe routinely apply for patents in forcethe U.S. and internationally to protect innovative ideas in the United States and abroad and 605 filedour technology, but we may not always be successful in obtaining patent applications pending in the United States and abroad, though there can be no assurance that any or all ofgrants from these pending applications will ultimately be issued as patents.applications. We also pursue registration of copyrights, trademarks, and domain names in the United States and in certain jurisdictions outside of the United States, but doing so may not always be successful or cost-effective. In general, we may be unable or, in some instances, choose not to obtain legal protection for our intellectual property, and our existing and future intellectual property rights may not provide us with competitive advantages or distinguish our products and services from those of our competitors. The laws of some foreign countries do not protect our intellectual property rights to the same extent as the laws of the United States, and effective intellectual property protection and mechanisms may not be available in those jurisdictions. We may need to expend additional resources to defend our intellectual property in these countries, and the inability to do so could impair our business or adversely affect our international expansion. Our intellectual property rights

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may be contested, circumvented, or found unenforceable or invalid, and we may not be able to prevent third parties from infringing, diluting, or otherwise violating them.

Additionally, our intellectual property rights and other confidential business information are subject to risks of compromise or unauthorized disclosure if our security measures or those of our third-party service providers are unable to prevent cyber-attacks. Unauthorized disclosure or use of our intellectual property rights may also occur if third parties were to breach the licensing terms under which certain of our innovations are offered broadly, including under open source licenses. Furthermore, the growing use of generative AI presents an increased risk of unintentional and/or unauthorized disclosure or use of our intellectual property rights. Significant impairments of our intellectual property rights, and limitations on our ability to assert our intellectual property rights against others, could have a material and adverse effect on our business.


We may not be able to secure financing on favorable terms,
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Assertions by third parties of infringement or at all, to meetother violation by us of their intellectual property rights could harm our future capital needs.business.


WeThird parties have funded our operations since inception primarily through debt and equity financings, bank credit facilities, and capital lease arrangements. While we believe that our existing cash and cash equivalents, marketable securities, and availability under our line of credit are sufficient to meet our working capital needs and planned capital expenditures, and service our debt, there is no guarantee that this will continue to be true in the future. In the future, we may require additional capital to respond to business opportunities, refinancing needs, business and financial challenges, regulatory surety bond requirements, acquisitions, or unforeseen circumstancesasserted, and may decide to engage in equity or debt financings or enter into additional credit facilities for other reasons, and we may not be able to secure any such additional debt or equity financing or refinancing on favorable terms, in a timely manner, or at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited.

Any debt financing obtained by us in the future could also involve restrictive covenants relating to our capital-raising activitiesassert, that we have infringed, misappropriated, or otherwise violated their copyrights, patents, and other financial and operational matters, which may make it more difficult for usintellectual property rights. Although we expend significant resources to operate our business, obtain additional capital, and pursue business opportunities, including potential acquisitions. Our credit facility contains affirmative and negative covenants, including customary limitations on the incurrence of certain indebtedness and liens, restrictions on certain inter-company transactions, and limitations on the amount of dividends and stock repurchases. Our abilityseek to comply with these covenants may be affected by events beyond our control,the statutory, regulatory, and breachesjudicial frameworks and the terms and conditions of these covenants could resultstatutory licenses, we cannot assure you that we are not infringing or violating any third-party intellectual property rights, or that we will not do so in a default under the credit facility and any future, financial agreements intoparticularly as new technologies such as generative AI impact the industries in which we may enter. If not waived, defaults could cause our outstanding indebtedness under our credit facility andoperate. It is difficult to predict whether assertions of third-party intellectual property rights or any future financing agreements that we may enter into to become immediately due and payable, which event may also constitute a default under our other indebtedness, including our 0.375% convertible senior notes due 2022 (Notes).

If we raise additional funds through further issuances of equity, convertible debt securities,infringement or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new equity securities we issue could have rights, preferences, and privileges senior to those of holders of our Class A common stock.

Servicing our Notes may require a significant amount of cash, and we may not have sufficient cash or the ability to raise the funds necessary to settle conversions of the Notes in cash, repay the Notes at maturity or repurchase the Notes upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the Notes.

On March 6, 2017, we issued $440.0 million aggregate principal amount of Notes.

Prior to December 1, 2021, the Notes are convertible at the option of the holders only under certain conditions or upon occurrence of certain events. Because the last reported sale price of our Class A common stock exceeded the applicable threshold for the relevant period in the calendar quarter ending December 31, 2017, the Notes are convertible at the option of the holders thereof during the calendar quarter ending March 31, 2018. Whether the Notesmisappropriation claims arising from such assertions will be convertible following such calendar quarter will depend on the satisfaction of this condition, other conditions or such other certain events in the future. If holders of the Notes elect to convert their Notes, unless we elect to deliver solely shares of our Class A common stock to settle such conversion, we will be required to make cash payments in respect of the Notes being converted. In addition, holders of the Notes have the right to require us to repurchase all or a portion of their Notes upon the occurrence of a fundamental change (as defined in the indenture governing the Notes) at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest. If the Notes have not previously been converted or repurchased, we will be required to repay the Notes in cash at maturity.

Our ability to make required cash payments in connection with conversions of the Notes, repurchase the Notes in the event of a fundamental change or to repay or refinance the Notes at maturity will depend on market conditions and our future performance, which is subject to economic, financial, competitive and other factors beyond our control. We also may not use

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the cash proceeds we raised through the issuance of the Notes in an optimally productive and profitable manner. Since inception,substantially harm our business, has generated net losses and we may continue to incur significant losses. As a result, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of Notes surrendered therefor or pay cash with respect to Notes being converted or at their maturity.

In addition, our ability to repurchase or to pay cash upon conversion or at maturity of the Notes may be limited by law, regulatory authority or agreements governing our future indebtedness. Our failure to repurchase Notes at a time when the repurchase is required by the indenture or to pay cash upon conversion or at maturity of the Notes as required by the indenture would constitute a default under the indenture. A default under the indenture or the fundamental change itself could also lead to a default under our credit facility or agreements governing our future indebtedness and have a material adverse effect on our business,operating results, of operations and financial condition. If we are forced to defend against any infringement or misappropriation claims, whether they are with or without merit, are settled out of court, or are determined in our favor, we may be required to expend significant time and financial resources on the paymentdefense of such claims. Legal and regulatory changes in this area may also present uncertainty and risk. For instance, the Unified Patent Court in the European Union creates an opportunity to efficiently resolve such claims in a specialized forum, while also introducing limited operational uncertainty as the court’s procedures and processes scale. Regardless of the related indebtedness wereforum, an adverse outcome of a dispute may require us to pay significant damages, which may be accelerated aftereven greater if we are found to have willfully infringed upon a party’s intellectual property; cease exploiting copyrighted content that we have previously had the ability to exploit; cease using solutions that are alleged to infringe or misappropriate the intellectual property of others; expend additional development resources to redesign our solutions; enter into potentially unfavorable royalty or license agreements in order to obtain the right to use necessary technologies, content, or materials; indemnify our partners and other third parties; and/or take other actions that may have material and adverse effects on our business, operating results, and financial condition.

Increased scrutiny from investors, regulators, and other stakeholders relating to environmental, social, and governance issues could result in additional costs for us and may adversely impact our reputation.

Investors, regulators, customers, employees and other stakeholders are increasingly focused on environmental, social, and governance (“ESG”) matters. Our ESG strategy is focused on four key areas: driving financial inclusion throughout our ecosystem and in our communities, taking climate action for a more resilient and sustainable future, advancing inclusion and diversity across our distributed workplace, and designing corporate governance to promote trust and long-term value, and we publicly report on certain commitments, initiatives, and goals regarding ESG matters in our annual Corporate Social Responsibility Report, on our website, in our SEC filings, and elsewhere. For example, we are committed to increasing the diversity of our workforce and one of our climate change goals is to have net zero carbon for operations by 2030. The implementation of our ESG commitments, initiatives, and goals may require additional investments, and in certain cases, are reliant on third-party verification and/or performance, and we cannot guarantee that we will make progress on our commitments and initiatives or achieve our goals. If we fail, or are perceived to fail, to make such progress or achievements, or to maintain ESG practices that meet evolving stakeholder expectations, or if we revise any applicable noticeof our ESG commitments, initiatives, or grace periods,goals, our reputation and our ability to attract and retain employees could be harmed, and we may not have sufficient fundsbe negatively perceived by investors or our customers. To the extent that our required or voluntary disclosures about ESG matters increase, we could also be criticized or face claims regarding the accuracy, adequacy, or completeness of such disclosures and our reputation could be negatively impacted, or we could face claims regarding our policies and programs. In addition, regulatory requirements with respect to repay the indebtedness and repurchase the Notes or to pay cash upon conversion or at maturity of the Notes.

Any acquisitions, strategic investments, entries into new businesses, divestitures,carbon emissions disclosures and other transactions could fail to achieve strategic objectives, disrupt our ongoing operations, and harm our business.

In pursuingaspects of ESG may result in increased compliance requirements on our business strategy, we routinely conduct discussions and evaluate opportunities for possible acquisitions, strategic investments, entries into new businesses, divestitures,supply chain, and other transactions. We continue to seek to acquire or invest in businesses, apps, or technologies that we believe could complement or expandmay increase our products and services, enhance our technical capabilities, or otherwise offer growth opportunities. The identification, evaluation, and negotiation of potential acquisitions or divestitures may divert the attention of management and entail various expenses, whether or not such transactions are ultimately completed. We also have limited experience in acquiring other businesses. In addition to opportunity costs, these transactions involve large challenges and risks, whether or not such transactions are completed, including risks that:
the transaction may not advance our business strategy;
we may be unable to identify opportunities on terms acceptable to us;
we may not realize a satisfactory return or increase our revenue;
we may experience disruptions on our ongoing operations and divert management’s attention;
we may be unable to retain key personnel;
we may experience difficulty in integrating technologies, IT systems, accounting systems, culture, or personnel;
acquired businesses may not have adequate controls, processes and procedures to ensure compliance with laws and regulations, and our due diligence process may not identify compliance issues or other liabilities;
we may assume additional financial or legal exposure, including exposure that is known to us;
we may have difficulty entering new market segments;
we may be unable to retain the customers and partners of acquired businesses;
there may be unknown, underestimated, or undisclosed commitments or liabilities, including actual or threatened litigation;
there may be regulatory constraints, particularly competition regulations that may affect the extent to which we can maximize the value of our acquisitions or investments; and
acquisitions could result in dilutive issuances of equity securities or the incurrence of debt.
We may also choose to divest certain businesses or product lines that no longer fit with our strategic objectives. If we decide to sell assets or a business, we may have difficulty obtaining financing or selling on acceptable terms in a timely manner. Additionally, we may experience difficulty separating out portions of or entire businesses, incur potential loss of revenue or

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experience negative impact on margins. Such potential transactions may also delay achievement of our strategic objectives, cause us to incur additional expenses, potentially disrupt seller relationships, and expose us to unanticipated or ongoing obligations and liabilities.

Our reported financial results may be materially and adversely affected by changes in accounting principles generally accepted in the United States.

Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board (FASB), the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results and could materially and adversely affect the transactions completed before the announcement of a change. Additionally, the adoption of new or revised accounting principles may require that we make significant changes to our systems, processes and controls.

operating costs. For example, in February 2016,October 2023, the FASB issued a new accounting standardCalifornia Governor signed into law the Climate-Related Financial Risk Act and the Climate Corporate Data Accountability Act, which significantly expand climate-related disclosure requirements for leasing whichcompanies doing business in California, and the SEC has proposed extensive climate disclosures that will be effective for us in fiscal year 2019. While we know it will have an impact, we are still evaluating the extent that this new accounting standard will impact our consolidated financial statements and related disclosures. Changes resulting from this and other new standards may result in materially different financial results and may require that we change how we process, analyze and report financial information and that we change financial reporting controls.apply to all public companies.

If currency exchange rates fluctuate substantially in the future, our financial results, which are reported in U.S. dollars, could be adversely affected.

As we continue to expand our global operations, we become more exposed to the effects of fluctuations in currency exchange rates. Our contracts are denominated primarily in U.S. dollars, and therefore the majority of our revenue are not subject to foreign currency risk. However, fluctuations in exchange rates of the U.S. dollar against foreign currencies could adversely affect our business, results of operations and financial condition. We incur expenses for employee compensation and other operating expenses at our non-U.S. locations in the local currency. Fluctuations in the exchange rates between the U.S. dollar and other currencies could result in the dollar equivalent of such expenses being higher. This could have a negative impact on our reported results of operations. From time to time, we may enter into forward contracts, options and/or foreign exchange swaps related to specific transaction exposures that arise in the normal course of our business, though we are not currently a party to any such hedging transactions. These and other such hedging activities may not eliminate our exposure to foreign exchange fluctuations. Moreover, the use of hedging instruments may introduce additional risks if we are unable to structure effective hedges with such instruments.

We may have exposure to greater-than-anticipated tax liabilities, which may materially and adversely affect our business.

We are subject to income taxes and non-income taxes in the United States and other countries in which we conduct business, and such laws and rates vary by jurisdiction. We are subject to review and audit by U.S. federal, state, local and foreign tax authorities. Such tax authorities may disagree with tax positions we take and if any such tax authority were to successfully challenge any such position, our financial results and operations could be materially and adversely affected. For example, the Office of the Treasurer and Tax Collector of the City and County of San Francisco (the "Tax Collector") has issued us a formal notice relating to the Company's classification of its business activities. Although we disagree with the Tax Collector's position and are contesting this matter, the ultimate resolution is uncertain and, if the Tax Collector’s position were to prevail, we could have additional tax liabilities, which may adversely affect our financial condition and results of operations in the periods for which such determination is made. In addition, our future tax liability could be adversely affected by changes in tax laws, rates, and regulations. The determination of our worldwide provision for income and other taxes is highly complex and requires significant judgment, and there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe our estimates are reasonable, the amount ultimately payable may differ from amounts recorded in our financial statements and may materially affect our financial results in the period or periods for which such determination is made.

Federal income tax reform could have unforeseen effects on our financial condition and results of operations.

The 2017 Tax Cuts and Jobs Act ("2017 Tax Act") was enacted on December 22, 2017 and contains many significant changes to U.S. Federal tax laws. The 2017 Tax Act requires complex computations that were not previously provided for under U.S. tax law. The Company has provided for an estimated effect of the 2017 Tax Act in its financial statements. The 2017 Tax Act requires significant judgments to be made in interpretation of the law and significant estimates in the calculation of the provision for income taxes. However, additional guidance may be issued by the IRS, Department of the Treasury, or other


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governing bodies that may significantly differ from the Company's interpretation of the law, which could have unforeseen effects on our financial condition and results of operations.

Risks Related to Ownership of Our Common Stock


The dual class structure of our common stock has the effect of concentrating voting control within our stockholders who held our stock prior to our initial public offering, including many of our employees and directors and their affiliates; this will limit or preclude your ability to influence corporate matters.


Our Class B common stock has ten votes per share, and our Class A common stock has one vote per share. Stockholders who hold shares of Class B common stock, including manycertain of our executive officers, employees, and directors and their affiliates, held approximately 80.4%52.14% of the voting power of our combined outstanding capital stock as of December 31, 2017. Our executive officers and directors and their affiliates held approximately 75.2% of the voting power of our combined outstanding capital stock as of December 31, 2017.2023. Because of the ten-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively hold more than a majority of the combined voting power of our common stock, and therefore such holders are able to control all matters submitted to our stockholders for approval. When the shares of our Class B common stock represent less than 5% of the combined voting power of our Class A common stock and Class B common stock, the then-outstanding shares of Class B common stock will automatically convert into shares of Class A common stock.


Transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, subject to limited exceptions, such as certain transfers to entities, including certain charities and foundations, to the extent the transferor retains sole dispositive power and exclusive voting control with respect to the shares of Class B common stock.exceptions. Such conversions of Class B common stock to Class A common stock upon transfer will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term. If, for example, our Class B stockholders retain shares of Class B common stock constituting as little as 10% of all outstanding shares of our Class A and Class B common stock combined, they will continue to control a majority of the combined voting power of our outstanding capital stock.

We will continue to incur significantly increased costs and devote substantial management time as a result of operating as a public company.

As a public company, we incur significant legal, financial, and other expenses that we did not incur as a private company. We are subject to the reporting requirements of the Exchange Act and are required to comply with the applicable requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as the rules and regulations subsequently implemented by the SEC and the listing standards of the New York Stock Exchange (NYSE), including changes in corporate governance practices and the establishment and maintenance of effective disclosure and financial controls. Continuing to comply with these requirements may increase our legal and financial compliance costs and may make some activities more time consuming and costly. In addition, our management and other personnel must divert attention from operational and other business matters to devote substantial time to these requirements. If we are unable to continue to meet these requirements, we may not be able to remain listed on the NYSE, which could result in potential loss of confidence by our customers and employees, loss of institutional investor interest, fewer business development opportunities, class action or shareholder derivative lawsuits, depressed stock price, limited liquidity of our Class A common stock, and other material adverse consequences. Moreover, we could incur additional compensation costs in the event that we decide to pay cash compensation closer to that of other public technology companies, which would increase our general and administrative expenses and could materially and adversely affect our profitability.

If we are unable to maintain effective disclosure controls and internal controls over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, and the market price of our Class A common stock may be materially and adversely affected.

We are continuing to develop and refine our disclosure controls and improve our internal controls over financial reporting. We have expended, and anticipate that we will continue to expend, significant resources in order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting.

Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. If we identify material weaknesses in our disclosure controls or internal control over financial reporting in the

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future, we will be unable to assert that our internal controls are effective. If we are unable to do so, or if our auditors are unable to attest to management’s report on the effectiveness of our internal controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which could cause the price of our Class A common stock to decline. We have identified significant deficiencies in our internal control over financial reporting in the past and have taken steps to remediate such deficiencies. However, our efforts to remediate them may not be effective or prevent any future deficiency in our internal controls. We are required to disclose material changes made in our internal controls and procedures on a quarterly basis.

Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on our business and operating results, and cause a decline in the market price of our Class A common stock.


The market price of our Class A common stock has been and will likely continue to be volatile, and you could lose all or part of your investment.


The market price of our Class A common stock has been and may continue to be subject to wide fluctuations in response to various factors, some of which are beyond our control and may not be related to our operating performance. In addition to the factors discussed in this “Risk Factors”Risk Factors section and elsewhere in this Annual Report on Form 10-K, factors that could cause fluctuations in the market price of our Class A common stock include the following:

•general economic, regulatory, and market conditions, in particular conditions that adversely affect our sellers’ business and the amount of transactions they are processing;

•public health crises and related measures to protect the public health;

•sales of shares of our common stock by us or our stockholders;

•issuance of shares of our Class A common stock, whether in connection with an acquisition or upon conversion of some or all of our outstanding Convertible Notes;

•short selling of our Class A common stock or related derivative securities;

•from time to time we make investments in equity that is, or may become, publicly held, and we may experience volatility due to changes in the market prices of such equity investments;

•fluctuations in the price of bitcoin, and potentially any impairment charges in connection with our investments in bitcoin;

•reports by securities or industry analysts, media or other third parties, that are interpreted either negatively or positively by investors, failure of securities analysts to maintain coverage and/or to provide accurate consensus results of us, changes in financial estimates by securities analysts who follow us, or our failure to meet these estimates or the expectations of investors;

•the financial or other projections we may provide to the public, any changes in those projections, or our failure to meet those projections;

•announcements by us or our competitors of new products or services;
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price and volume fluctuations in the overall stock market from time to time;
volatility in the market prices and trading volumes of companies in our industry or companies that investors consider comparable;
changes in operating performance and stock market valuations of other companies generally or of those in our industry in particular;
sales of shares of our common stock by us or our stockholders;
issuance of shares of our Class A common stock, whether in connection with an acquisition or upon conversion of some or all of our outstanding Notes;
failure of securities analysts to maintain coverage and/or to provide accurate consensus results of us, changes in financial estimates by securities analysts who follow us, or our failure to meet these estimates or the expectations of investors;
the financial or other projections we may provide to the public, any changes in those projections, or our failure to meet those projections;
announcements by us or our competitors of new products or services;
public reaction to our press releases, other public announcements, and filings with the SEC;
rumors and market speculation involving us or other companies in our industry;
actual or anticipated changes in our results of operations;
changes in the regulatory environment;
actual or anticipated developments in our business, our competitors’ businesses, or the competitive landscape generally;
litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors;
announced or completed acquisitions of businesses or technologies by us or our competitors;
new laws or regulations or new interpretations of existing laws or regulations applicable to our business;

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changes in accounting standards, policies, guidelines, interpretations, or principles;
actual or perceived data security incidents that we or our service providers may suffer;
•rumors and market speculation involving us or other companies in our industry;
any significant change in our management; and

•actual or perceived security incidents that we or our service providers may suffer; and
general economic conditions and slow or negative growth of our markets.

•actual or anticipated developments in our business, our competitors’ businesses, or the competitive landscape generally.

In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. ThisSuch litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.


Our Class A common stock is listed to trade on more than one stock exchange, and this may result in price variations.

Our Class A common stock is listed for trade on the NYSE and as CDIs on the ASX. Dual-listing may result in price variations between the exchanges due to a number of factors. Our Class A common stock is traded in U.S. dollars on the NYSE and our CDIs are traded in Australian Dollars on the ASX. The two exchanges also have differing vacation schedules. Differences in the trading schedules, as well as volatility in the exchange rate of the two currencies, among other factors, may result in different trading prices for our Class A common stock on the two exchanges.

The convertible note hedge and warrant transactions may affect the value of our Class A common stock.


In connection with the issuance of theeach series of our Convertible Notes, we entered into convertible note hedge transactions with certain financial institutions, which we refer to as the “option counterparties”.option counterparties. We also entered into warrant transactions with the option counterparties pursuant to which we sold warrants for the purchase of our Class A common stock. The convertible note hedge transactions are expected generally to reduce the potential dilution to our Class A common stock upon any conversion of the Convertible Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Convertible Notes, as the case may be. The warrant transactions would separately have a dilutive effect to the extent that the market price per share of our Class A common stock exceeds the strike price of any warrants unless, subject to the terms of the warrant transactions, we elect to cash settle the warrants.

From time to time, the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivative transactions with respect to our Class A common stock and/or purchasing or selling our Class A common stock or other securities of ours in secondary market transactions prior to the maturity of the Convertible Notes. This activity could cause or avoid an increase or a decrease in the market price of our Class A common stock.


Anti-takeover provisions contained in our amended and restated certificate of incorporation, our amended and restated bylaws, and provisions of Delaware law could impair a takeover attempt.


Our amended and restated certificate of incorporation (“certificate of incorporation”), our amended and restated bylaws (“bylaws”), and Delaware law contain provisions whichthat could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by our board of directors and therefore depress the trading price of our Class A common stock.


Among other things, our amended and restateddual-class common stock structure provides our holders of Class B common stock with the ability to significantly influence the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding shares of common stock. Further, our certificate of incorporation and amended and restated bylaws include provisions (i) creating a classified board of directors whose members serve staggered three-year terms; (ii) authorizing “blank check” preferred stock, which could be issued by our board of directors without stockholder approval and may contain voting, liquidation, dividend, and other rights superior to our common stock; (iii) limiting the ability of our stockholders to call special meetings; (iv) eliminating the ability of our stockholders to act by written consent without a meeting or to remove directors without cause; and (v) requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors. These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.


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As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which prevents certain stockholders holding more than 15% of our outstanding capital stock from engaging in certain business combinations without the approval of our board of directors or the holders of at least two-thirds of our outstanding capital stock not held by such stockholder.


Any provision of our amended and restated certificate of incorporation, amended and restated bylaws, or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock and could also affect the price that some investors are willing to pay for our Class A common stock.


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Our amended and restated bylaws provide that (1) the Delaware Court of Chancery ofor another state court or federal court located within the State of Delaware will be the sole and exclusive forum for substantially all disputes between us and our stockholders and (2) the federal district courts of the U.S. will be the exclusive forum for all causes of action arising under the Securities Act, which could limit our stockholders’ ability to obtain a favorablechoose the judicial forum for disputes with us or our directors, officers, or employees.


Our amended and restated bylaws provide that, unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware does not have jurisdiction, another state court in Delaware or federal district court for the District of Delaware) is the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers, or other employees to us or to our stockholders; (iii) any action asserting a claim arising pursuant to the Delaware General Corporation Law;Law, our certificate of incorporation or our bylaws; or (iv) any action asserting a claim governed by the internal affairs doctrine.doctrine, in all cases subject to the court having jurisdiction over the claims at issue and the indispensable parties. The choice of forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act.

Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our bylaws also provide that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.

Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to the foregoing bylaw provisions. Although we believe these exclusive forum provisions benefit us by providing increased consistency in the application of Delaware law and federal securities laws in the types of lawsuits to which each applies, the exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorableof its choosing for disputes with us or any of our directors, officers, stockholders, or other employees, which may discourage lawsuits with respect to such lawsuitsclaims against us and our current and former directors, officers, andstockholders, or other employees. Alternatively, ifOur stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder as a result of our exclusive forum provisions. Further, in the event a court were to find the choice offinds either exclusive forum provision contained in our amended and restated bylaws to be inapplicableunenforceable or unenforceableinapplicable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could have a material and adverse impact onharm our business.results of operations.

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If securities or industry analysts publish reports that are interpreted negatively by the investment community, publish negative research reports about our business, or cease coverage of our company or fail to regularly publish reports on us, our share price and trading volume could decline.


The trading market for our Class A common stock depends, to some extent, on the research and reports that securities or industry analysts publish about us, our business, our market, or our competitors. We do not have any control over these analysts or the information contained in their reports. If one or more analysts publish research reports that are interpreted negatively by the investment community, or have a negative tone regarding our business, financial or operating performance, industry or end-markets, our share price could decline. In addition, if a majority of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

We do not intend to pay dividends for the foreseeable future.

We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. As a result, you may only receive a return on your investment in our common stock if the trading price of our common stock increases. Investors seeking cash dividends should not purchase shares of our common stock. Our ability to pay dividends is restricted by the terms of our revolving credit facility and is also subject to limitations imposed by certain financial regulations.

Additional stock issuances could result in significant dilution to our stockholders.

We may issue additional equity securities to raise capital, make acquisitions, or for a variety of other purposes. Additional issuances of our stock may be made pursuant to the exercise or conversion of new or existing convertible debt securities, warrants, stock options, or other equity incentive awards to new and existing service providers. Any such issuances will result in dilution to existing holders of our stock. We rely on equity-based compensation as an important tool in recruiting and retaining employees. The amount of dilution due to equity-based compensation of our employees and other additional issuances could be substantial.

ItemITEM 1B. UNRESOLVED STAFF COMMENTS

None.


ITEM 1C. CYBERSECURITY

Risk Management and Strategy

We have a cybersecurity risk management program consisting of policies and procedures for assessing, identifying, and managing material risk from cybersecurity threats, and we have integrated these policies and procedures into our overall risk management systems and processes. Our cybersecurity policies and procedures are based on recognized frameworks established by the National Institute of Standards and Technology, the International Organization for Standardization and other applicable industry standards. We routinely assess material risks from cybersecurity threats and regularly assess and update our cybersecurity risk management program in response to emerging trends and changes in our operations.

Our risk management program includes, among other elements:

Identification: We aim to proactively identify sources of risk, areas of impact, and relevant events that could give rise to cybersecurity risks, such as changes to our infrastructure, service providers, or personnel.

Assessment: We conduct periodic risk assessments to identify cybersecurity threats. We also conduct likelihood and impact assessments with the goal of identifying reasonably foreseeable internal and external risks, the likelihood and potential damage that could result from such risks, and the sufficiency of existing policies, procedures, systems, and safeguards in place to manage such risks.

Management: Following our risk assessments, we design and implement reasonable safeguards to address any identified gaps in our existing processes and procedures. Our employees participate in cybersecurity training and awareness upon hire and at least annually thereafter.

We engage third parties, including consultants and auditors, to evaluate the effectiveness of our risk management program, control environment, and cybersecurity practices through security audits, penetration testing, and other engagements.

We have processes in place to identify, review and evaluate cybersecurity risks associated with our use of third-party service providers. These reviews are conducted at onboarding and periodically throughout the tenure of the service provider based on risk tier rating of each service provider. We believe these processes enable us to evaluate a third-party service provider’s security posture, identify risks that may arise out of our use of the third party’s service, and make decisions regarding acceptable levels of risk and risk mitigation.

For additional information regarding whether any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect our company, including our business strategy, results of operations, or financial condition, please refer to Item 1A, “Risk Factors,” in this annual report on Form 10-K.

Board and Management’s Role in Data Privacy and Cybersecurity Oversight

Our board of directors recognizes the oversight of risk management as one of its primary responsibilities and central to maintaining an effective, risk-aware and accountable organization. While the board of directors maintains ultimate responsibility for the oversight of our data privacy and cybersecurity program and risks, it has delegated certain oversight responsibilities to our audit and risk committee. Our board of directors and audit and risk committee’s principal role is one of oversight, recognizing that management is responsible for the design, implementation, and maintenance of an effective program for protecting against and mitigating data privacy and cybersecurity risks. The audit and risk committee assists the board of directors in enhancing its understanding of data privacy and cybersecurity issues by overseeing our data privacy and information security programs, strategy, policies, standards, architecture, processes, and significant risks, as well as overseeing responses to security and data incidents, as appropriate.

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The full board of directors undergoes annual information security and privacy training by our Chief Information Security Officer (“CISO”) and our Chief Privacy Officer (“CPO”), which covers, among other matters, our privacy and cybersecurity programs and risks. Our audit and risk committee receives updates, at least quarterly, from our CISO and CPO on significant data privacy and security risks, including any significant incidents, relevant industry developments, threat vectors and significant risks identified in periodic penetration tests or vulnerability scans. The updates also include significant legal and legislative developments concerning data privacy and security, our approach to complying with applicable law, and significant engagement with regulators concerning data privacy and cybersecurity. Our audit committee provides regular updates to the board of directors on such reports.

Our CISO oversees our cybersecurity policies and processes, including those described in “Risk Management and Strategy” above. Our foundational engineering, data security governance, infrastructure security, product security and security operations teams report directly to our CISO and provide regular updates on significant or potentially significant threats and incidents. Additionally, we have an incident response team and an incident response plan that outlines the roles and responsibilities of key personnel, including representatives from information security, compliance, and counsel, that are involved in responding to, remediating and escalating such incidents to the CISO, as appropriate. Our CISO reports directly to our Chief Financial Officer and Chief Operating Officer and indirectly to our audit and risk committee. Our CISO provides updates on significant or potentially significant threats and incidents to our Block Head and leadership team, in addition to the audit and risk committee and our board of directors as appropriate and in accordance with the processes detailed in the prior paragraph.

Our CISO and Deputy CISO are primarily responsible for assessing and managing our material risks from cybersecurity threats. Our CISO has served in various roles building and securing enterprise platforms across retail, corporate and investment banking financial services as well as consumer experiences and data at multiple Fortune 500 companies for over 25 years. Our Deputy CISO has over 20 years of experience in information security, including serving as head of cybersecurity and privacy response at a global public company and information security leadership positions with the United States government. Our Deputy CISO holds undergraduate and graduate degrees in computer information systems and computer science with an information security focus and possesses various certifications, including the Information Systems Security Professional (NSTISSI No. 4011) and Information Systems Security Officer (CNSSI No. 4014) certifications.

ItemITEM 2. PROPERTIES


Our corporateWe do not designate a headquarters which includelocation as we have adopted a distributed work model. We lease space in San Francisco, California, for product development, sales, marketing, and business operations are located in San Francisco, California. It consistsand vacated most of 338,910 square feetthe space at the end of space under a lease that expires in 2023. We also lease 43,689 square feetspace in New York, New York for a product development, sales, and business operations office under a lease that expires in 2025. We2025 and office space in Oakland, California for general corporate purposes under a lease that expires in 2031. In July 2019, the Company entered into a lease arrangement for office space in St Louis, Missouri, for a term of 15.5 years with options to extend the lease term for two 5-year terms. In January 2023, we informed the landlord of this property of our intention to exercise an early termination option of the lease with respect to approximately 50% of the leased space effective December 31, 2023. In addition, we also have offices in several other locations and believe our facilities are sufficient for our current needs.



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ItemITEM 3. LEGAL PROCEEDINGS


We are currently a party to, and may in the future be involved in, various litigation matters (including intellectual property litigation), legal claims, and government investigations.

We were involved in a class action lawsuit concerning independent contractors in connection with our Caviar business. On March 19, 2015, Jeffry Levin, on behalf of a putative nationwide class, filed a lawsuit in the United States District Court for the Northern District of California against our wholly owned subsidiary, Caviar, Inc., which, as amended, alleged that Caviar misclassified Mr. Levin Refer to Note 20, Commitments and other similarly situated couriers as independent contractors and, in doing so, violated various provisions of the California Labor Code and California Business and Professions Code by requiring them to pay various business expenses that should have been borne by Caviar. The Court compelled arbitration of Mr. Levin’s individual claims on November 16, 2015 and dismissed the lawsuit in its entirety with prejudice on May 2, 2016. On June 1, 2016, Mr. Levin filed a Notice of Appeal of the Court’s order compelling arbitration with the United States Court of Appeals for the Ninth Circuit. Mr. Levin filed his opening appellate brief regarding the order compelling arbitration of his individual claims on October 7, 2016. We filed our answering brief on December 7, 2016, and Mr. Levin filed his reply on December 21, 2016. No hearing date was set. Mr. Levin also sought an award of penalties pursuantContingencies within Notes to the Labor Code Private Attorneys General Act of 2004 (PAGA). The parties stipulated that Mr. Levin would no longer pursue this PAGA claim but that it may instead be pursued by a different courier. Subsequently, couriers Nadezhda Rosen and La’Dell Brewster filed a new PAGA-only claim in the Superior Court of the State of CaliforniaConsolidated Financial Statements for the County of San Francisco (Superior Court) on November 7, 2016. Plaintiffs claimed that Caviar misclassified its couriers as independent contractors resulting in numerous violations of the California Labor Code, pursuant to which plaintiffs sought statutory penalties for those violations.In February 2017, we participated in a mediation with the parties in these Caviar misclassification suits to explore resolution of the matters at hand. After continued negotiation, the parties reached a global settlement of these suits, which has been confirmed. As a result, the Levin and Rosen lawsuits were dismissed with prejudice in their respective courts on January 24, 2018 and January 18, 2018, respectively.further information.

In addition, from time to time, we are involved in various other litigationlegal matters, investigations, claims, and disputes arising in the ordinary course of business. We cannot at this time fairly estimate a reasonable range of exposure, if any, of the potential liability with respect to these other matters. While we do not believe, at this time, that any ultimate liability resulting from any of these other matters will have a material adverse effect on our results of operations, financial position, or liquidity, we cannot give any assurance regarding the ultimate outcome of these other matters, and their resolution could be material to our operating results for any particular period.



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ItemITEM 4. MINE SAFETY DISCLOSURES


Not applicable.



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PART II



ItemITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES


Market Information for Common Stock


Our Class A common stock began tradingtrades on the New York Stock Exchange under the symbol “SQ”. Our CDIs are traded on November 19, 2015. Prior to that date, there was no public trading market for our Class A common stock.the ASX under the symbol “SQ2”. There is no public trading market for our Class B common stock. The following table sets forth the high and low sales price per share of our Class A common stock as reported on the New York Stock Exchange for the period indicated: 


Year Ended December 31, 2017 High Low
First Quarter $18.17
 $13.66
Second Quarter $24.97
 $16.66
Third Quarter $29.00
 $22.66
Fourth Quarter $49.56
 $28.78
Year Ended December 31, 2016    
First Quarter $15.91
 $8.06
Second Quarter $15.87
 $8.42
Third Quarter $12.54
 $8.78
Fourth Quarter $14.82
 $10.88

Holders of Record

As of February 22, 2018,16, 2024, there were 50637 holders of record of our Class A common stock and 10526 holders of record of our Class B common stock. Because many of our shares of Class A common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial owners of our Class A common stock represented by these record holders. As of February 16, 2024, we estimate that we have approximately 41,547 holders of record of our CDIs.


Dividend Policy


We have never declared nor paid any cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not expect to pay any dividends on our capital stock in the foreseeable future. Any future determination relating to our dividend policy will be at the discretion of our board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business conditions, and other factors that our board of directors considers relevant.
Unregistered Sales of Equity Securities
None.


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Issuer Purchases of Equity Securities
None.

In October 2023, the Company's Board of Directors authorized the repurchase of up to $1 billion of the Company’s Class A common stock. Repurchases may be made from time to time through open market purchases or through privately negotiated transactions subject to market conditions, applicable legal requirements and other relevant factors. The repurchase program does not obligate the Company to acquire any particular amount of its Class A common stock and may be suspended at any time at the Company’s discretion. The timing and number of shares repurchased will depend on a variety of factors, including the stock price, business and market conditions, corporate and regulatory requirements, alternative investment opportunities, acquisition opportunities, and other factors.

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The following table summarizes the share repurchase activity for the three months ended December 31, 2023 (in thousands, except per share amounts):

PeriodTotal Number of Shares Purchased
Average price paid per share(i)
Total number of shares purchased as part of publicly announced plans or programApproximate dollar value of shares that may yet be purchased under the plans or programs
October 1, 2023 - October 31, 2023— — — 1,000,000 
November 1, 2023 - November 30, 20231,345 56.21 1,345 924,423 
December 1, 2023 - December 31, 20231,121 72.44 1,121 843,238 
Total2,466 2,466 

(i) Average price paid per share for open market purchases includes broker commissions.

Unregistered Sales of Equity Securities

During the three months ended December 31, 2023, we issued a total of 171,691 shares of our Class A common stock in connection with the acquisition of an artist-centric financial technology company, pursuant to exemptions from registration provided by Section 4(a)(2).

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Performance Graph


This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act)(the "Exchange Act"), or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Square,Block, Inc. under the Exchange Act or the Securities Act of 1933, as amended, or the Exchange Act.amended.

The following graph compares the cumulative total return to stockholders onof our common stock relative to the cumulative total returns of the Standard & Poor’s 500 Index or ("S&P 500,500"), and the S&P North American Technology Index. An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our Class A common stock and in each index on November 19, 2015, the date our Class A common stock beganlast trading onday for the NYSE,fiscal year ended December 31, 2018 and its relative performance is tracked through December 31, 2017.2023. The returns shown are based on historical results and are not intended to suggest future performance.
SQ2023-600dpi.jpg
Company/Index12/31/201812/31/201912/31/202012/31/202112/31/202212/31/2023
Block, Inc.$100.00 $111.54 $388.02 $287.95 $112.03 $137.90 
S&P 500$100.00 $131.49 $155.68 $200.37 $164.08 $207.21 
S&P North American Technology$100.00 $142.68 $207.11 $261.79 $169.22 $272.66 

ITEM 6. [RESERVED]

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Company/Index 11/19/2015
 12/31/2015
 12/31/2016
 12/31/2017
Square, Inc. 100
 100.15
 104.28
 265.26
S&P 500 100
 98.72
 110.52
 134.65
S&P North American Technology 100
 99.20
 111.15
 151.43


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Item 6. SELECTED FINANCIAL DATA

The following selected consolidated statement of operations data for the years ended December 31, 2017, 2016, and 2015, and the consolidated balance sheet data as of December 31, 2017, and 2016, have been derived from our audited consolidated financial statements and should be read in conjunction with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. The following selected consolidated statement of operations data for the years ended December 31, 2014, and 2013, and the consolidated balance sheet data as of December 31, 2015, and 2014, are derived from our audited consolidated financial statements which are not included in this Annual Report on Form 10-K.

41






 Year Ended December 31,
 2017 2016 2015 2014 2013
 (in thousands, except per share data)
Consolidated Statement of Operations Data:    
Revenue:         
Transaction-based revenue$1,920,174
 $1,456,160
 $1,050,445
 $707,799
 $433,737
Starbucks transaction-based revenue—
 78,903
 142,283
 123,024
 114,456
Subscription and services-based revenue252,664
 129,351
 58,013
 12,046
 —
Hardware revenue41,415
 44,307
 16,377
 7,323
 4,240
Total net revenue2,214,253
 1,708,721
 1,267,118
 850,192
 552,433
Cost of revenue:         
Transaction-based costs1,230,290
 943,200
 672,667
 450,858
 277,833
Starbucks transaction-based costs—
 69,761
 165,438
 150,955
 139,803
Subscription and services-based costs75,720
 43,132
 22,470
 2,973
 —
Hardware costs62,393
 68,562
 30,874
 18,330
 6,012
Amortization of acquired technology6,544
 8,028
 5,639
 1,002
 —
Total cost of revenue1,374,947
 1,132,683
 897,088
 624,118
 423,648
Gross profit839,306
 576,038
 370,030
 226,074
 128,785
Operating expenses:         
Product development321,888
 268,537
 199,638
 144,637
 82,864
Sales and marketing253,170
 173,876
 145,618
 112,577
 64,162
General and administrative250,553
 251,993
 143,466
 94,220
 68,942
Transaction, loan and advance losses67,018
 51,235
 54,009
 24,081
 15,329
Amortization of acquired customer assets883
 850
 1,757
 1,050
 —
Impairment of intangible assets—
 —
 —
 —
 2,430
Total operating expenses893,512
 746,491
 544,488
 376,565
 233,727
Operating loss(54,206) (170,453) (174,458) (150,491) (104,942)
Interest and other (income) expense, net8,458
 (780) 1,613
 2,162
 (962)
Loss before income tax(62,664) (169,673) (176,071) (152,653) (103,980)
Provision for income taxes149
 1,917
 3,746
 1,440
 513
Net loss(62,813) (171,590) (179,817) (154,093) (104,493)
Deemed dividend on Series E preferred stock—
 —
 (32,200) —
 —
Net loss attributable to common stockholders$(62,813) $(171,590) $(212,017) $(154,093) $(104,493)
Net loss per share attributable to common stockholders:         
Basic$(0.17) $(0.50) $(1.24) $(1.08) $(0.82)
Diluted$(0.17) $(0.50) $(1.24) $(1.08) $(0.82)
Weighted-average shares used to compute net loss per share attributable to common stockholders:         
Basic379,344
 341,555
 170,498
 142,042
 127,845
Diluted379,344
 341,555
 170,498
 142,042
 127,845


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Costs and expenses include share-based compensation expense as follows:
 Year Ended December 31,
 2017 2016 2015 2014 2013
 (in thousands)
Cost of revenue$77
 $—
 $—
 $—
 $—
Product development98,310
 91,404
 54,738
 24,758
 8,820
Sales and marketing17,568
 14,122
 7,360
 3,738
 1,235
General and administrative39,881
 33,260
 20,194
 7,604
 4,603
Total share-based compensation$155,836
 $138,786
 $82,292
 $36,100
 $14,658

 December 31,  
 2017 2016 2015 2014 2013
 (in thousands)  
Consolidated Balance Sheet Data:         
Cash and cash equivalents$696,474
 $452,030
 $461,329
 $222,315
 $166,176
Settlements receivable620,523
 321,102
 142,727
 115,481
 64,968
Working capital805,467
 423,961
 371,361
 218,761
 124,061
Total assets2,187,270
 1,211,362
 894,772
 541,888
 318,341
Customers payable733,736
 431,632
 224,811
 148,648
 95,794
Long-term debt (Note 9)358,572
 —
 —
 30,000
 —
Total stockholders’ equity786,333
 576,153
 508,048
 273,672
 162,294

Key Operating Metrics and Non-GAAP Financial Measures
We collect and analyze operating and financial data to evaluate the health of our business, allocate our resources, and assess our performance. In addition to revenue, net income (loss), and other results under generally accepted accounting principles (GAAP), the following table sets forth key operating metrics and non-GAAP financial measures we use to evaluate our business. We believe these metrics and measures are useful to facilitate period-to-period comparisons of our business, and to facilitate comparisons of our performance to that of other payment processors. Each of these metrics and measures excludes the effect of our processing agreement with Starbucks which transitioned to another payments solutions provider in the fourth quarter of 2016. As we do not expect transactions with Starbucks to recur, we believe it is useful to exclude Starbucks activity to clearly show the impact Starbucks has had on our financial results historically. Our agreements with other sellers generally provide both those sellers and us the unilateral right to terminate such agreements at any time, without fine or penalty.
 Year Ended December 31,
 2017 2016 2015 2014 2013
 
(in thousands, except for GPV and per share data)
Gross Payment Volume (GPV) (in millions)$65,343
 $49,683
 $35,643
 $23,780
 $14,822
Adjusted Revenue$983,963
 $686,618
 $452,168
 $276,310
 $160,144
Adjusted EBITDA$139,009
 $44,887
 $(41,115) $(67,741) $(51,530)
Adjusted Net Income (Loss) Per Share:         
Basic$0.30
 $0.04
 $(0.39) $(0.62) $(0.46)
Diluted$0.27
 $0.04
 $(0.39) $(0.62) $(0.46)


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Gross Payment Volume (GPV)
We define GPV as the total dollar amount of all card payments processed by sellers using Square, net of refunds. Additionally, GPV includes Cash App activity related to peer-to-peer payments sent from a credit card and Cash for Business. As described above, GPV excludes card payments processed for Starbucks.

Adjusted Revenue
Adjusted Revenue is a non-GAAP financial measure that we define as our total net revenue less transaction-based costs, adjusted to eliminate the effect of activity with Starbucks. As described above, Starbucks completed its previously announced transition to another payments provider and has ceased using our payments solutions altogether, and we believe that providing Adjusted Revenue metrics that exclude the impact of our agreement with Starbucks is useful to investors.
We believe it is useful to subtract transaction-based costs from total net revenue to derive Adjusted Revenue as this is a primary metric used by management to measure our business performance, and it affords greater comparability to other payments solution providers. Substantially all of the transaction-based costs are interchange and assessment fees, processing fees and bank settlement fees paid to third-party payment processors and financial institutions. While some payments solution providers present their revenue in a similar fashion to us, others present their revenue net of transaction-based costs because, unlike us, they pass through these costs directly to their sellers and are not deemed the principal in these arrangements. Under our standard pricing model, we do not pass through these costs directly to our sellers.
Adjusted Revenue has limitations as a financial measure, should be considered as supplemental in nature, and is not meant as a substitute for the related financial information prepared in accordance with GAAP. These limitations include the following:
Adjusted Revenue is net of transaction-based costs, which is our largest cost of revenue item; and

other companies, including companies in our industry, may calculate Adjusted Revenue differently or not at all, which reduces its usefulness as a comparative measure.

Because of these limitations, you should consider Adjusted Revenue alongside other financial performance measures, including total net revenue and our financial results presented in accordance with GAAP. The following table presents a reconciliation of total net revenue to Adjusted Revenue for each of the periods indicated:
 Year Ended December 31,
 2017 2016 2015 2014 2013
 (in thousands)
Total net revenue$2,214,253
 $1,708,721
 $1,267,118
 $850,192
 $552,433
Less: Starbucks transaction-based revenue—
 78,903
 142,283
 123,024
 114,456
Less: transaction-based costs1,230,290
 943,200
 672,667
 450,858
 277,833
Adjusted Revenue$983,963
 $686,618
 $452,168
 $276,310
 $160,144

Adjusted EBITDA, Adjusted Net Income (Loss), and Adjusted Net Income (Loss) Per Share
Adjusted EBITDA, Adjusted Net Income (Loss), and Adjusted Net Income (Loss) Per Share are non-GAAP financial measures that represent our net income (loss) and net income (loss) per share, adjusted to eliminate the effect of Starbucks transactions and certain other items as described below. We have included these non-GAAP financial measures in this Annual Report on Form 10-K because they are key measures used by our management to evaluate our operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of internal resources. Accordingly, we believe these measures provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. In addition, they provide useful measures for period-to-period comparisons of our business, as they remove the effect of certain non-cash items and certain variable charges.

We exclude Starbucks transaction-based revenue and Starbucks transaction-based costs. As described above, Starbucks completed its previously announced transition to another payments solution provider and has ceased using our payments

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solutions altogether, and we believe that providing non-GAAP financial measures that exclude the impact of Starbucks is useful to investors.

We believe it is useful to exclude non-cash charges, such as amortization of intangible assets, and share-based compensation expenses, from our non-GAAP financial measures because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations.

In connection with the issuance of our convertible senior notes (as described in Note 9), we are required to recognize non-cash interest expense related to amortization of debt discount and issuance costs. We believe that excluding these expenses from our non-GAAP measures is useful to investors because such incremental non-cash interest expense does not represent a current or future cash outflow for the Company and is therefore not indicative of our continuing operations or meaningful when comparing current results to past results.

We exclude the litigation settlement with Robert E. Morley (as described in Note 1), gain or loss on the sale of property and equipment, and impairment of intangible assets from non-GAAP financial measures because we do not believe that these items are reflective of our ongoing business operations.

In addition to the items above, Adjusted EBITDA as a non-GAAP financial measure also excludes depreciation, other cash interest income and expense, other income and expense and provision or benefit from income taxes, as these items are not components of our core business operations.

Non-GAAP financial measures have limitations, should be considered as supplemental in nature and are not meant as a substitute for the related financial information prepared in accordance with GAAP. These limitations include the following:

share-based compensation expense has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of our compensation strategy;

the intangible assets being amortized may have to be replaced in the future, and the non-GAAP financial measures do not reflect cash capital expenditure requirements for such replacements or for new capital expenditures or other capital commitments; and

non-GAAP measures do not reflect changes in, or cash requirements for, our working capital needs.

In addition to the limitations above, Adjusted EBITDA as a non-GAAP financial measure does not reflect the effect of depreciation expense and related cash capital requirements, income taxes that may represent a reduction in cash available to us, and the effect of foreign currency exchange gains or losses which is included in other income and expense.

Other companies, including companies in our industry, may calculate the non-GAAP financial measures differently or not at all, which reduces their usefulness as comparative measures.

Because of these limitations, you should consider the non-GAAP financial measures alongside other financial performance measures, including net loss and our other financial results presented in accordance with GAAP.

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The following table presents a reconciliation of net loss to Adjusted EBITDA for each of the periods indicated (in thousands):
 Year Ended December 31,
 2017 2016 2015 2014 2013
Net loss$(62,813) $(171,590) $(179,817) $(154,093) $(104,493)
Starbucks transaction-based revenue—
 (78,903) (142,283) (123,024) (114,456)
Starbucks transaction-based costs—
 69,761
 165,438
 150,955
 139,803
Share-based compensation expense155,836
 138,786
 82,292
 36,100
 14,658
Depreciation and amortization37,279
 37,745
 27,626
 18,586
 8,272
Litigation settlement expense—
 48,000
 —
 —
 —
Interest and other (income) expense, net8,458
 (780) 1,613
 2,162
 (962)
Provision for income taxes149
 1,917
 3,746
 1,440
 513
Loss (gain) on sale of property and equipment
100
 (49) 270
 133
 2,705
Impairment of intangible assets—
 —
 —
 —
 2,430
Adjusted EBITDA$139,009
 $44,887
 $(41,115) $(67,741) $(51,530)

The following table presents a reconciliation of net loss to Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Share for each of the periods indicated (in thousands, except per share data):

 Year Ended December 31,
 2017 2016 2015 2014 2013
Net loss$(62,813) $(171,590) $(179,817) $(154,093) $(104,493)
Starbucks transaction-based revenue—
 (78,903) (142,283) (123,024) (114,456)
Starbucks transaction-based costs—
 69,761
 165,438
 150,955
 139,803
Share-based compensation expense155,836
 138,786
 82,292
 36,100
 14,658
Amortization of intangible assets7,615
 9,013
 7,503
 2,133
 54
Litigation settlement expense—
 48,000
 —
 —
 —
Amortization of debt discount and issuance costs14,223
 —
 —
 —
 —
Loss (gain) on sale of property and equipment100
 (49) 270
 133
 2,705
Impairment of intangible assets—
 —
 —
 —
 2,430
Adjusted Net Income (Loss)$114,961
 $15,018
 $(66,597) $(87,796) $(59,299)
Adjusted Net Income (Loss) Per Share:         
Basic$0.30
 $0.04
 $(0.39) $(0.62) $(0.46)
Diluted$0.27
 $0.04
 $(0.39) $(0.62) $(0.46)
Weighted-average shares used to compute Adjusted Net Income (Loss) Per Share:         
Basic379,344
 341,555
 170,498
 142,042
 127,845
Diluted426,519
 370,258
 170,498
 142,042
 127,845
Basic Adjusted Net Income (Loss) Per Share is computed by dividing the Adjusted Net Income (Loss) by the weighted-average number of shares of common stock outstanding during the period.

Diluted Adjusted Net Income Per Share is computed by dividing Adjusted Net Income by the weighted-average number of shares of common stock outstanding adjusted for the dilutive effect of all potential shares of common stock.


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In periods when we recorded an Adjusted Net Loss, the Diluted Adjusted Net Loss Per Share is the same as Basic Adjusted Net Loss Per Share because the effects of potentially dilutive items were anti-dilutive given the Adjusted Net Loss position.


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ItemITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


You should readThis management's discussion and analysis provides a review of the results of operations, key operating metrics and non-GAAP financial measures, and liquidity and capital resources of Block, Inc. on a historical basis and outlines the factors that have affected recent earnings, as well as those factors that may affect future earnings. The following discussion and analysis should be read in conjunction with the information set forth under “Selected Financial Data” and our consolidated financial statements and relatedthe notes thereto included elsewhere in this Annual Report on Form 10-K. 10-K ("Form 10-K").
This section of this Form 10-K generally discusses fiscal 2023 compared to fiscal 2022. The comparison of the fiscal 2022 results with the fiscal 2021 results that are not included in this Form 10-K can be found in the "Management's Discussion and Analysis Results of Operations" section in the Company's fiscal 2022 Annual Report within Part II, Item 7 of Form 10-K, filed on February 23, 2023.
The statements in this discussion regarding our expectations of our future performance;performance, liquidity, and capital resources; our plans, estimates, beliefs, and expectations that involve risks and uncertainties; and other non-historical statements in this discussion are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described under “Risk Factors”Item 1A. Risk Factors and elsewhere in this Annual Report on Form 10-K. Our actual results may differ materially from those contained in or implied by any forward-looking statements.


Overview


We startedlaunched the Square ecosystem in February 2009 to enable businesses (sellers)("sellers") to accept card payments, an important capability that was previously inaccessible to many businesses. However, sellers also need innovative solutions to thrive, and weWe have since expanded to provide sellers additional products and services and to give these businessesthem access to the same tools as large businesses. Square is a cohesive commerce ecosystem that helps our sellers start, run,of tools to help them manage and grow their businesses. We combine sophisticated softwareSimilarly, with affordable hardware to enable sellers to turn mobile and computing devices into powerful payment and point-of-sale solutions. We focus on technology and design to createCash App, we have built an ecosystem of financial products and services to help individuals manage their money. In January 2022, we completed the acquisition of Afterpay, a buy now, pay later ("BNPL") platform that are cohesive, fast, self-serve,facilitates commerce between retail merchants and dependable.

The foundation of our ecosystem is a full service, managed payments offering. Once a seller downloads the Square Point of Sale mobile app, they can quickly and easily takeconsumers by allowing retail merchant clients to offer their first payment, because we can typically bring them onto our system in minutes. With our offering, a seller can accept payments in person via magnetic stripe (a swipe), EMV (Europay, MasterCard, and Visa) (a dip), or NFC (Near Field Communication) (a tap); or online via Square Invoices, Square Virtual Terminal, or the seller’s website. Once on our system, sellers gain access to technology and features such as reporting and analytics, next-day settlements, digital receipts, payment dispute and chargeback management, security, and Payment Card Industry (PCI) compliance.

Our commerce ecosystem also includes powerful point-of-sale software and services that help sellers make informed business decisions through the use of analytics and reporting. As a result, sellers can manage orders, inventory, locations, employees, and payroll; engage and grow their sales with customers; and gain access to business loans through our Square Capital service. Some of these advanced point-of-sale features are broadly applicable to our seller base and include Employee Management and Customer Engagement. We have also extended our ecosystem to serve sellers with more specific needs. Our Build with Square developer platform (application programming interface or APIs) allows businesses with individualized needs to customize their business solutions while processing payments on Square and taking advantage of all the services in our ecosystem, including integration with third-party applications. In addition, certain verticals, such as service and retail sellers, benefit from specific features such as Invoices, Appointments, and Square for Retail. We monetize these features through either a per transaction fee, a subscription fee, or a service fee.

In the same way that we have empowered businesses with fast, simple, and cohesive tools, we see an opportunity with Cash App to build a similar ecosystem of services for individuals. Cash App offers individuals access to a fast, easy way to send and receive money electronically to and from individuals and businesses. We also offer our Cash App customers the ability to storebuy goods and services on a BNPL basis. In addition, we also operate TIDAL, a global platform for musicians and fans, and TBD, an open developer platform, to contribute to our purpose of economic empowerment.

We delivered strong growth across our primary ecosystems in 2023. Gross profit was $7.5 billion, up 25% year over year, driven primarily by our Cash App and Square ecosystems.

Cash App generated gross profit of $4.3 billion in 2023, up 33% year over year. Performance was driven by growth in transacting actives and adoption by transacting actives of our broader ecosystem, including financial services products.

Square generated gross profit of $3.1 billion in 2023, up 16% year over year as we continued to make progress growing upmarket with larger sellers and optimizing our go-to-market strategies.

In 2023, operating loss was $278.8 million and Adjusted Operating Income was $351.4 million, a decrease of 55% and an increase of 342% year over year, respectively. For the same period, net income was $9.8 million, an increase of 102%, year over year, and Adjusted EBITDA was $1.8 billion, an increase of 81% year over year.

Refer to the Key Operating Metrics and Non-GAAP Financial Measures section below for reconciliations of non-GAAP financial measures to their fundsnearest generally accepted accounting principles ("GAAP") equivalents.

65

In 2023, we sharpened our focus on our organizational structure and expenditures with a view to identifying areas where we can be more cost efficient as we focus on disciplined growth and pursuing cost efficiencies and we expect to continue these efforts in 2024. This involves implementing greater expense discipline and reassessing certain contractual vendor arrangements. In November 2023, we announced we would implement an absolute cap of 12,000 on the number of employees we have at our company. We plan to operate below this cap through a combination of performance management, centralizing teams and functions to reduce duplication, and prioritization of our scope. The Company recorded $104.0 million of severance and other related expenses for the year ended December 31, 2023, of which $70.2 million related to severance recognized in the fourth quarter of 2023. We may continue to incur expenses, including restructuring costs, in the short term to implement these initiatives, but we expect to benefit from these actions in future periods.

We ended 2023 with $7.7 billion in available liquidity, with $6.9 billion in cash, cash equivalents, restricted cash, and investments in marketable debt securities, as well as use their funds viaan undrawn amount of $775.0 million available under our revolving credit facility. This represents an increase of $205.8 million from the end of 2022, including a Visa debit card. $461.8 million cash payment for the settlement of the outstanding 2023 Convertible Notes that matured in May 2023.

On October 26, 2023, the board of directors of the Company authorized the repurchase of up to $1 billion of the Company’s Class A common stock, which commenced in the fourth quarter of 2023. The goal of the program is to offset a portion of the dilution associated with stock-based compensation issued to employees as part of the Company’s overall compensation program. The timing and amount of shares repurchased will depend on a variety of factors, including the stock price, business and market conditions, corporate and regulatory requirements, alternative investment opportunities, acquisition opportunities, and other factors. In the fourth quarter of 2023, we repurchased $156.8 million under this program.

We have also recently added functionalityhistorically allocated the financial results from our BNPL platform equally to the Cash App and Square segments. In the fourth quarter of 2023, we changed our management reporting structure and moved the business activities and management of our BNPL platform fully under the Cash App segment. We believe that this transition will allow us to enable customersbetter focus on consumer based commerce as well as the development of its financial tools within the Cash App segment. Accordingly, beginning with this Annual Report on Form 10-K, we have updated our segment reporting to buy and sell bitcoin.

We also serve sellers through Caviar, our food ordering platform that helps restaurants reach new customers and increase sales without additional overhead. Caviar revenue consists of seller fees charged to restaurants, delivery fees, and service fees from consumers. All fees are recognized upon deliveryincorporate the financial results of the food, netBNPL platform within the Cash App segment, rather than allocating 50% of refunds.

With Square Capital, we facilitate the offering of loansrevenue and gross profit from our BNPL platform to sellers based on their payment processing history, and the product is broadly available across our seller base. We currently fund a majority of these loans from arrangements with institutional third-party investors who purchase these loans. We recognize revenue upon the saleeach of the loans to third-party investors or over time as the sellers pay down the outstanding amountsSquare and Cash App segments. We have also reflected this change for the loans that we hold as available for sale. We also earn a servicing fee from third-party investors that we record as revenue as we provide the services.applicable historical periods presented.


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We also provide hardware to facilitate commerce for sellers. This hardware includes magstripe reader, contactless and chip readers, chip card readers, Square Stand, Square Register and third-party peripherals.

We have grown rapidly to serve millions of sellers that represent a diverse set of industries, including retail, services, and food-related businesses, and sizes, ranging from a single vendor at a farmers’ market to multi-location businesses. These sellers also span geographies including the United States, Canada, Japan, Australia, and the United Kingdom.

Operating Metric Overview (in thousands, except for GPV, percentages and per share data)

 Year Ended December 31, 2016 to 2017 2015 to 2016
 2017 2016 2015 % Change % Change
Gross Payment Volume (GPV) (in millions)$65,343
 $49,683
 $35,643
 32% 39%
Total net revenue$2,214,253
 $1,708,721
 $1,267,118
 30% 35%
Adjusted Revenue$983,963
 $686,618
 $452,168
 43% 52%
Net loss attributable to common stockholders$(62,813) $(171,590) $(212,017)    
Adjusted EBITDA$139,009
 $44,887
 $(41,115)    
Net loss per share attributable to common stockholders:         
Basic$(0.17) $(0.50) $(1.24)    
Diluted$(0.17) $(0.50) $(1.24)    
Adjusted Net Income (Loss) Per Share:         
Basic$0.30
 $0.04
 $(0.39)    
Diluted$0.27
 $0.04
 $(0.39)    

Components of Results of Operations
Revenue
Transaction-based revenue.Revenue
We charge our sellers a transaction fee for managed payments solutions that is generally calculated based on a percentage of the total transaction amount processed. We also selectively offer custom pricing for certain larger sellers. Transaction-based revenue also includes amounts we charge our Cash App customers for peer-to-peer transactions to business accounts and payments sent from a credit card.
Starbucks transaction-based revenue. During the fourth quarter of 2016, Starbucks completed its previously announced transition to another payments solution provider. Prior to this date we charged a percentage of the total transaction amount for payments solutions we offered to certain Starbucks-owned stores in the United States.Subscription and Services-based Revenue

Subscription and services-based revenue. In addition to managed paymentsrevenue is primarily comprised of revenue we generate from Cash App, Square Loans (formerly known as Square Capital), our BNPL platform, TIDAL, and point-of-sale services,various other software as a service (“SaaS”) products that we offer our sellers a range of products and services, with Instant Deposit, Caviar, and Square Capital, currently comprising the majority of ourthrough Square. Cash App subscription and services-based revenue.revenue is primarily comprised of transaction fees from Cash App Instant Deposit, Cash App Card, bitcoin withdrawal fees, and other Cash App financial services offerings. Our other subscription and services-basedSaaS products include Cash App, Gift Cards,subscription fees on our vertical software solutions (including Square for Restaurants, Square Appointments, and Square for Retail), Customer Engagement Employeeproducts (including Square Loyalty, Square Marketing, Square Gift Cards), staff management products (including Square Team Management Payroll,and Square Payroll), website hosting and domain name registration services, and other subscription and services-based products offered through our Square Marketplace.products.
    
Instant Deposit is a functionality within the Cash App and our managed payment solutions that enables customercustomers, including individuals and sellers, to instantly deposit funds into their bank accounts.

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Cash App Card offers Cash App customers the ability to use their stored funds via a Visa prepaid card that is linked to the balance the customer stores in Cash App. We charge the customer a per transaction fee which we recognize as revenue when customersthey instantly deposit funds to their bank account.account or withdraw funds from an ATM. We also earn interchange fees when a Cash App Card is used to make a purchase. These transaction and interchange fees are treated as revenue when charged.

Revenue for Caviar, our food ordering platform, is derived from seller fees, which are a percentage of total food order value, delivery fees, and service fees paid by the consumer based on total food order value.

Square Capital facilitatesLoans originates loans to sellers that are offered through a partnership bank and are generally repaid through withholding a percentage of the collections of the seller's receivables processed by us. Duringus or a specified monthly amount. In April 2021, we began originating loans in the first quarterU.S. through our wholly-owned subsidiary bank, Square Financial Services. Prior to the launch of 2016, we fully

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transitioned from offering merchant cash advances (MCAs) to loans. TheSquare Financial Services, the loans arewere generally originated by a bank partner, from whom we purchasepurchased the loans obtainingto obtain all rights, title, and interest. Ourinterests. We also originate loans to the customers of certain sellers which are generally repaid via ACH. For some of the loans, it is our intention is to sell the rights, title, and interest in these loans to third-party investors for an upfront fee when the loans are sold.fee. We are retained by the third-party investors to service the loans and earn a servicing fee for facilitating the repayment of these receivablesloans through our payments solutions. Certain loans, for which we have the intention and ability to hold through maturity, are not immediately sold to third-party investors, in which case, interest and fees earned are recognized as revenue using the effective interest method.

Cash App Borrow, the Company’s first credit product for consumers, allows customers to access short-term loans for a small fee. The loans are repaid at the end of the loan term and customers may elect to prepay all or a part of the outstanding balance. If the outstanding balance is not paid when due, late fees in the form of interest may be charged. The short-term loans are facilitated through a partnership with an industrial bank. The loans are originated by the bank partner, from whom the Company purchases the loans obtaining all rights, title, and interest. Net amounts paid to the bank are recorded as the cost of the loans purchased, and amounts collected in excess of the carrying value are recognized as revenue over the life of the loans.

Revenue from our BNPL platform includes fees generated from consumer receivables, late fees, and certain affiliate and advertising fees. Through the use of our BNPL platform, consumers can pay for their purchases over time by splitting their purchase price generally into three or four installments, typically due in two-week increments, without paying fees (if payments are made on time). For the majority of our BNPL products, we do not charge consumers interest or fees, other than late fees, which may be charged in certain regions as an incentive to encourage consumers to pay their outstanding balances as and when they fall due. We also offer the ability for consumers to pay for larger transaction sizes over a six- or twelve-month period using a monthly payment option, which includes no late fees and no compounding interest with a cap on total interest owed.

TIDAL primarily generates revenue from subscriptions to customers, and such subscriptions allow access to the song library, video library, and improved sound quality. Customers can subscribe to services directly from the TIDAL website or through the Apple store. With both offerings, we charge customers a monthly fee for those subscription services.
Hardware revenue.Revenue
Hardware revenue includes revenue from sales of magstripe readers, contactless and chip readers, chip card readers, Square Stand, Square Register, Square Terminal, and third-party peripherals. Third-party peripherals include cash drawers, receipt printers, scales, and barcode scanners, all of which can be integrated with Square Stand, Square Register, or Square Terminal to provide a comprehensive point-of-sale solution. In

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Bitcoin Revenue

Our Cash App customers have the fourth quarterability to purchase bitcoin, a cryptocurrency. We recognize revenue when customers purchase bitcoin and it is transferred to the customer's account. We purchase bitcoin from private broker dealers or from Cash App customers and apply a small margin before selling it to our customers. The sale amounts received from our customers are recorded as revenue on a gross basis and the associated bitcoin cost as cost of 2017,revenues, as we began selling Square Register, our first all-in-one offering that combines our hardware, point-of-sale software, and payments technology.are the principal in the bitcoin sale transaction. Bitcoin revenue may fluctuate as a result of changes in customer demand or the market price of bitcoin.

Cost of Revenue and Gross Margin
Transaction-based costs.Costs

Transaction-based costs consist primarily of interchange and assessment fees, processing fees, and bank settlement fees paid to third-party payment processors and financial institutions.
Starbucks transaction-based costs. Starbucks transaction-based costs consist of the same components as our overall transaction-based costs, as applicable to the previously described Starbucks transaction.
Subscription and services-based costs.Services-based Costs

Subscription and services-based costs consist primarily of Caviar-related costs, which include payments to third-party couriers for deliveriesprocessing and the cost of equipment provided to sellers. Cost of revenue for other subscription and services-based products consists primarily of the amortizationpartnership fees related to the development of software for certain subscriptionCash App including Instant Deposit and services-based products.Cash App Card, and our BNPL platform, as well as costs associated with TIDAL.

Hardware costs. Costs

Hardware costs consist primarily of product costs associated with magstripe readers, contactless and chip readers, chip card readers, Square Stand, Square Register, Square Terminal, and third-party peripherals. Product costs include manufacturing-related overhead and personnelpersonnel-related costs, certain royalties, packaging, and fulfillment costs. Hardware is sold primarily as a means to grow our transaction-based revenue and, as a result, generating positive gross margins from hardware sales is not the primary goal of the hardware business.

Bitcoin Costs

Bitcoin costs consist of the amounts we pay to purchase bitcoin that is sold to customers. These costs fluctuate in line with bitcoin revenue.

Amortization of Acquired Technology Assets

Amortization of acquired technology. These costs consist assets is primarily comprised of amortization related to technologiesthe acquired through acquisitions that havetechnology assets from the capabilityacquisition of producing revenue.Afterpay.

Operating Expenses

Operating expenses consist of product development,development; sales and marketing,marketing; general and administrative expenses,expenses; transaction, loan, and advance losses,consumer receivable losses; bitcoin impairment losses; and amortization of customer and other acquired customerintangible assets. For product development and general and administrative expenses, the largest single component is personnel-related expenses, including salaries, commissions and bonuses, employee benefit costs, and share-based compensation. In the case of sales and marketing expenses, a significant portion is related to paid advertising expensesthe Cash App peer-to-peer transactions and Cash App Card issuance costs, in addition to paid advertising and personnel-related expenses. Operating expenses also include allocated overhead costs for facilities, human resources, and IT.

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Product development. Development Expenses

Product development expenses currently represent the largest component of our operating expenses and consist primarily of expenses related to our engineering, data science, and design personnel; fees and supply costs related to maintenance and capacity expansion at third-party data center facilities; hardware related development and tooling costs; software and cloud computing infrastructure fees; and fees for software licenses, consulting, legal, and other services that are directly related to growing and maintaining our portfolio of products and services. Additionally, product development expenses include the depreciation of product-related infrastructure and tools, including data center equipment, internally developed software, and computer equipment. We continue to focus our product development efforts on adding new features and expanding our apps, and on enhancing the functionality and ease of use of our offerings. Our ability to realize returns on these investments is substantially dependent upon our ability to successfully address current and emerging requirements of sellers, buyers, and buyerscustomers through the development and introduction of these new products and services. While we expect total product development expenses to increase as we invest further in engineering and design personnel, over time we also expect our product development expenses to decline as a percentage of total net revenue.


Sales and marketing. Marketing Expenses

Sales and marketing expenses consist primarily of fourare aggregated into two main components. The first component is comprisedconsists of traditional advertising costs incurred to acquire new sellers through various paid advertising channels, including online search, online display,such as direct mail, direct response television, mobile advertising, affiliates, and referrals, all of which are expensed as incurred.

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The second component includes expenses related to our direct sales expense, account management, local and product marketing, retail and ecommerce,e-commerce, partnerships, and communications personnel. The thirdsecond component includes costs associated with free Cash App peer-to-peer transactions. The fourth component includes the costs associated with the manufacturing and distribution of our magstripe reader, which is offered for free on our website and provided through various marketing events and distribution channels. New sellers who purchase a magstripe reader from one of our retail distribution partners are offered a rebate equal to the price paid. The cost to us of manufacturing and distributing magstripe readers are partially offset by amounts received from retail distribution partners. As our sellers transition to using our contactless and chip reader, we expect to distribute relatively fewer magstripe readers, thus reducing that component of our sales and marketing expenses. While we expect sales and marketing expenses consists of costs incurred for services, incentives, and other costs that are not directly related to increaserevenue generating transactions that we consider to be marketing costs to encourage the usage of Cash App. These expenses include, but are not limited to, Cash App peer-to-peer processing costs and transaction losses, card issuance costs, customer referral bonuses, and promotional giveaways that are expensed as the scale of our business grows, over the long term we also expect sales and marketing expenses to decline as a percentage of total net revenue. Over the short term, however, sales and marketing expenses as a percentage of total net revenue may demonstrate variability based on the timing and magnitude of marketing and customer acquisition initiatives.incurred.


General and administrative. Administrative Expenses

General and administrative expenses consist primarily of expenses related to our customer support, finance, legal, customer success, Square Capital operations, Caviar operations, risk operations, human resources, and administrative personnel. General and administrative expenses also include costs related to fees paid for professional services, including legal, tax, and accounting services. While we expect general

Transaction, Loan, and administrative expenses to increase in dollar amount to support our growth and costs of compliance associated with being a public company, over time we expect general and administrative expenses to decline as a percentage of total net revenue.Consumer Receivable Losses


Transaction loan and advance losses. We are exposed to transaction losses due to chargebacks as a result of fraud or uncollectibility. Examples of transaction losses include chargebacks for unauthorized credit card use and the inability to collect on disputes between buyers and sellers over the delivery of goods or services.services, as well as losses on Cash App activity related to peer-to-peer payments sent from a credit card, Cash for Business, and Cash App Card. We base our reserve estimates on prior chargeback history and current period data points indicative of transaction loss. We reflect additions to the reserve in current operating results, while we make charges torealized losses are offset against the reserve when we incur losses.

reserve. The establishment of appropriate reserves for transaction losses is an inherently uncertain process, and ultimate losses may vary from the current estimates. We regularly update our reserve estimates as new facts become known and events occur that may affect the settlement or recovery of losses. For the period from January 1, 2015 through December 31, 2017, our transaction losses accounted for approximately 0.1% of GPV.


Loan losses relatedrelate to loans that have been retained by the CompanySquare Loans and Cash App Borrow and are recorded whenever the amortized cost of a loan exceeds its fair value, with suchvalue. Such charges beingare reversed for subsequent increases in fair value, but only to the extent that such reversals do not result in the amortized cost of a loan exceeding its fair value. To determine the fair value of loans, the Company utilizes industry standard modeling, such as discounted cash flow models,

Losses on consumer receivables relate to arrive at anmanagement's estimate of fair value.expected credit losses in the outstanding portfolio of consumer receivables. We reflect additions to the reserve in current operating results, while realized losses are offset against the reserve.


Amortization of acquired customer assets. Customer and Other Acquired Intangible Assets

Amortization of customer and other acquired customerintangible assets includes customer relationships, restaurant relationships, courier relationships, subscriber relationships, and partner relationships.is primarily as a result of the intangible assets from the Afterpay acquisition.


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Interest Expense, net, and Other Income, and Expense, net


Interest and other income and expense, net consists primarily of gains or losses arising from remeasurements of our investments in equity securities, bitcoin investment, interest expense related to our long-term debt, interest income on our investmentinvestments in marketable debt securities, and foreign currency-related gains and losses.


Provision (Benefit) for Income Taxes


The provision for income taxes consists primarily of federal, state, local, and foreign tax. Our effective tax rate fluctuates from period to period due to changes in the mix of income and losses in jurisdictions with a wide range of tax rates, the effect of acquisitions, changes resulting from the amount of recorded valuation allowance, permanent differences between U.S. generally accepted accounting principles and local tax laws, certain one-time items, and changes in tax contingencies.
As discussed in further detail in Note 11 to the Consolidated Financial Statements, the 2017 Tax Act contains many significant changes to U.S. Federal tax laws.  The 2017 Tax Act requires complex computations that were not previously provided for under U.S. tax law.  The Company has provided for an estimated effect of the 2017 Tax Act in its financial statements.  The 2017 Tax Act requires significant judgments to be made in interpretation of the law and significant estimates in the calculation of the provision for income taxes.  SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act ("SAB 118") was issued in December 2017. The Company will continue to monitor and assess potential impacts of the 2017 Tax Act in accordance with SAB 118.


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Deemed Dividend on Series E Preferred Stock

For the year ended December 31, 2015, we issued 10,299,696 shares of our common stock to certain holders of Series E preferred stock in the form of a deemed stock dividend of $32.2 million. There were no similar occurrences in any other period presented.



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Results of Operations

Revenue (in thousands, except for percentages)
Year Ended December 31,
20232022$ Change% Change
Transaction-based revenue$6,315,301 $5,701,540 $613,761 11 %
Subscription and services-based revenue5,944,842 4,552,773 1,392,069 31 %
Hardware revenue157,178 164,418 (7,240)
NM (i)
Bitcoin revenue9,498,302 7,112,856 2,385,446 34 %
       Total net revenue$21,915,623 $17,531,587 $4,384,036 25 %
 Year Ended December 31, 2016 to 2017 2015 to 2016
 2017 2016 2015 % Change % Change
Transaction-based revenue$1,920,174
 $1,456,160
 $1,050,445
 32 % 39 %
Starbucks transaction-based revenue—
 78,903
 142,283
 (100)% (45)%
Subscription and services-based revenue252,664
 129,351
 58,013
 95 % 123 %
Hardware revenue41,415
 44,307
 16,377
 (7)% 171 %
Total net revenue$2,214,253
 $1,708,721
 $1,267,118
 30 % 35 %
Comparison of Years Ended December 31, 2017 and 2016

(i) Not meaningful ("NM")
Total net revenue for the year ended December 31, 2017,2023, increased by $505.5 million,$4.4 billion, or 30%25%, compared to the year ended December 31, 2016.2022. Bitcoin revenue increased by $2.4 billion and represented the primary driver of the increase in total net revenue. Excluding bitcoin revenue, total net revenue increased by $2.0 billion, or 19%, in the year ended December 31, 2023, compared to the year ended December 31, 2022.


Transaction-based revenue for the year ended December 31, 2017,2023 increased by $464.0$613.8 million, or 32%11%, compared to the year ended December 31, 2016.2022. This increase in revenue was attributable to growthlargely in GPV processedline with the increase in Gross Payment Volume ("GPV") of $15.7 billion, or 32%, to $65.3 billion from $49.7 billion. We continue to benefit from growth in processed volumes from our existing sellers, in addition to meaningful contributions from new sellers. Additionally, GPV from larger sellers, which we define as all sellers that generate more than $125,000 in annualized GPV, represented 48% of our GPV in the fourth quarter of 2017, an increase from 43% in the fourth quarter of 2016. We continue to see ongoing success with attracting and enabling large seller growth, which will help drive strong GPV growth as we scale.

During the fourth quarter of 2016, Starbucks completed its previously announced transition to another payments solution provider. Accordingly, we did not record any Starbucks transaction-based revenue in12% for the year ended December 31, 2017,2023, compared to the year ended December 31, 2022. GPV increased due to overall Square GPV growth as well as growth in Cash App Business GPV, which is comprised of Cash App activity related to peer-to-peer transactions received by business accounts. Square GPV growth was driven by improvements in both card-present and we do not expect transaction-based revenuecard-not-present volumes as a result of growth from Starbucksin-person and online channels, as well as growth in the future.our international markets, and Cash App Business GPV growth was driven by increases in peer-to-peer transactions received by business accounts as well as peer-to-peer payments sent from a credit card. See below in Key Operating Metrics and Non-GAAP Financial Measures for further discussion of GPV.


Subscription and services-based revenue for the year ended December 31, 20172023 increased by $123.3 million,$1.4 billion, or 95%31%, compared to the year ended December 31, 2016.2022. The increases wereincrease was primarily driven by continueddue to growth ofin Cash App's financial service-related products, including Cash App Card usage, Cash App Instant Deposit Caviar,volumes, as well as revenue from the BNPL platform and Square Capital, which in aggregate grew by $103.0 million when compared tointerest earned on customer funds. Revenue generated from the prior year. Subscription and services-based revenue grew to 11% of total net revenue inBNPL platform was $1.0 billion for the year ended December 31, 2017, up from 8% in2023 compared to $811.4 million for the year ended December 31, 2016.2022.


HardwareBitcoin revenue for the year ended December 31, 2017, decreased2023 increased by $2.9 million,$2.4 billion, or 7%34%, compared to the year ended December 31, 2016. During2022. As bitcoin revenue is the year ended December 31, 2016, we had experienced elevated growth in shipmentstotal sale amount of our contactless and chip reader driven bybitcoin sold to customers, the fulfillmentamount of the majority of the backlog of pre-orders receivedbitcoin revenue recognized will fluctuate depending on customer demand as well as changes in the first halfmarket price of 2016, following its launch in the fourth quarter of 2015. There was no similar activity during the year ended December 31, 2017.bitcoin. This was offset in part by growth in our sales of our Square Stand and third-party peripherals driven primarily by new features and product offerings.

Comparison of Years Ended December 31, 2016 and 2015

Total net revenueincrease for the year ended December 31, 2016, increased2023 was driven primarily by $441.6 million, or 35%,the quantity of bitcoin sold to customers compared to the year ended December 31, 2015.

Transaction-based2022. The prevailing bitcoin prices fluctuated significantly within each year, but the average price for 2023 was only approximately 2% higher than 2022. While bitcoin contributed 43% and 41% of the total revenue forin 2023 and 2022, respectively, gross profit generated from bitcoin was only 3% of the year ended December 31, 2016, increased by $405.7 million, or 39%, compared to the year ended December 31, 2015. This increase was attributable to growthtotal gross profit in GPV processed of $14.0 billion, or 39%, to $49.7 billion from $35.6 billion. We benefited from positive dollar-based retention from our existing sellers, in addition to meaningful contributions from new sellers. Additionally, GPV from larger sellers, represented 43% of our GPV in the fourth quarter of 2016, an increase from 39% in the fourth quarter of 2015.

Starbucks transaction-based revenue for the year ended December 31, 2016, decreased by $63.4 million, or 45%, compared to the year ended December 31, 2015. Starbucks-related payment volume declined throughout 2016both 2023 and during the fourth quarter of 2016, as Starbucks completed its previously announced transition to another payments solution provider.

2022.
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Subscription and services-based revenue for the year ended December 31, 2016 increased by $71.3 million, or 123%, compared to the year ended December 31, 2015. The increase was primarily driven by continued growth and expansion of Square Capital and Caviar, and to a lesser extent, the launch and expansion of new products and services, including Instant Deposit. During the year ended December 31, 2016 and 2015, Square Capital and Caviar were the largest contributors to subscription and services-based revenue. Subscription and services-based revenue grew to 8% of total net revenue in the year ended December 31, 2016, up from 5% in the year ended December 31, 2015.

Hardware revenue for the year ended December 31, 2016, increased by $27.9 million, or 171%, compared to the year ended December 31, 2015. The increase primarily reflected growth in shipments of our contactless and chip reader following its launch in the fourth quarter of 2015. To a lesser extent, we generated increased sales across all of our other paid hardware products, including Square Stand, our chip card reader, and third-party peripherals.
Total Cost of Revenue (in thousands, except for percentages)
Year Ended December 31,
20232022$ Change% Change
Transaction-based costs$3,702,016 $3,364,028 $337,988 10 %
Subscription and services-based costs1,075,129 861,745 213,384 25 %
Hardware costs267,650 286,995 (19,345)
NM (i)
Bitcoin costs9,293,113 6,956,733 2,336,380 34 %
Amortization of acquired technology assets72,829 70,194 2,635 
NM (i)
Total cost of revenue$14,410,737 $11,539,695 $2,871,042 25 %
 Year Ended December 31, 2016 to 2017 2015 to 2016
 2017 2016 2015 % Change % Change
Transaction-based costs$1,230,290
 $943,200
 $672,667
 30 % 40 %
Starbucks transaction-based costs—
 69,761
 165,438
 (100)% (58)%
Subscription and services-based costs75,720
 43,132
 22,470
 76 % 92 %
Hardware costs62,393
 68,562
 30,874
 (9)% 122 %
Amortization of acquired technology6,544
 8,028
 5,639
 (18)% 42 %
Total cost of revenue$1,374,947
 $1,132,683
 $897,088
 21 % 26 %


(i) Not meaningful ("NM")
Comparison of Years Ended December 31, 2017 and 2016


Total cost of revenue for the year ended December 31, 2017,2023 increased by $242.3 million,$2.9 billion, or 21%25%, compared to the year ended December 31, 2016.2022. Bitcoin costs of revenue, which increased by $2.3 billion, was the primary driver of the increase in total cost of revenue, with the remaining increase related to an increase in GPV. Excluding bitcoin costs of revenue, total cost of revenue increased by approximately $534.7 million, or 12%, in the year ended December 31, 2023, compared to the year ended December 31, 2022.


Transaction-based costs for the year ended December 31, 2017,2023 increased by $287.1$338.0 million, or 30%10%, compared to the year ended December 31, 2016. This increase was attributable to2022, largely in line with the growth inof GPV processed of $15.7 billion, or 32%12%. Transaction-based costs increasedgrew at a slower pace compared to GPV due to more favorable interchange economics, which offset a lessor extent than transaction-based revenue primarily as a result of growth in Invoices, Virtual Terminal, and E-Commerce API payments, which have higher margins than our card-present transactions, as well as improvements in our transaction cost profile, partially offset by the impact of custom pricing for certain larger sellers. Transaction-based margin as a percentage of GPV was 1.06% for the year ended December 31, 2017, up from 1.03% for the year ended December 31, 2016.card-present and credit card transactions, which are less favorable to our economics on a per transaction basis.

As noted above, Starbucks completed its previously announced transition to another payments solution provider. Accordingly, we did not record any Starbucks transaction-based costs in the year ended December 31, 2017 and we do not expect Starbucks transaction-based costs in the future.


Subscription and services-based costs for the year ended December 31, 2017,2023 increased by $32.6 million compared to the year ended December 31, 2016, primarily reflecting increase in costs associated with the growth of Caviar and, to a lesser extent, an increase in costs associated with the growth of Instant Deposit.
Hardware costs for the year ended December 31, 2017, decreased by $6.2$213.4 million, or 9%25%, compared to the year ended December 31, 2016. Hardware2022. The increase was driven by:

•growth in Cash App's financial service-related products, including Cash App Card and related processing costs decreasedand fees, which is partially offset by favorable terms on such processing costs due to a greater extent than hardware revenue mainly as a result of the growth in sales of third-party peripherals which have relatively better terms than our other hardware products. Additionally,contract renewal executed during the third quarter of fiscal year ended December 31, 2017, we recorded $4.9 million in inventory reserves, revaluations,2023; and write-offs compared to $4.2

•the cost of revenues associated with the BNPL platform, which were $286.6 million for the year ended December 31, 2016. This includes a $2.32023 and $223.2 million charge recorded as a resultfrom the date of the bankruptcy of one of our distribution partners during the third quarter of 2017.acquisition through December 31, 2022.


Amortization of acquired technology assetsBitcoin costs for the year ended December 31, 2017, decreased by $1.5 million compared to the year ended December 31, 2016, as a result of certain technology assets reaching end of life.


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Comparison of Years Ended December 31, 2016 and 2015

Total cost of revenue for the year ended December 31, 2016,2023 increased by $235.6 million,$2.3 billion, or 26%34%, compared to the year ended December 31, 2015.

Transaction-based2022. Bitcoin costs forare comprised of the year ended December 31, 2016, increased by $270.5 million, or 40%, comparedtotal amount we pay to the year ended December 31, 2015. This increase was attributable to growthpurchase bitcoin, which fluctuates in GPV processed of $14.0 billion, or 39%, and is consistentline with the growth in transaction-basedbitcoin revenue.


Starbucks transaction-based costs for the year ended December 31, 2016, decreased by $95.7 million, or 58%, compared to the year ended December 31, 2015. As noted above, Starbucks-related payment volume declined throughout 2016, and during the fourth quarter of 2016, Starbucks completed its previously announced transition to another payments solution provider. Additionally, Starbucks transaction-based costs decreased by a greater percentage than Starbucks transaction-based revenue as a result of Starbucks' agreement to pay us increased processing rates effective October 1, 2015.
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Subscription and services-based costs for the year ended December 31, 2016, increased by $20.7 million compared to the year ended December 31, 2015, primarily reflecting increased costs associated with the growth of Caviar. To a lesser extent, we also incurred increased amortization costs related to the development of certain subscription and services-based products.
Hardware costs for the year ended December 31, 2016, increased by $37.7 million, or 122%, compared to the year ended December 31, 2015. Hardware costs grew more slowly than hardware revenue mainly as a result of the growth in sales of our contactless and chip reader, which have relatively better terms than Square Stand.

Amortization of acquired technology assets for the year ended December 31, 2016, increased by $2.4 million compared to the year ended December 31, 2015. The increase was primarily related to new technology assets obtained through acquisitions that occurred in 2015.

Product DevelopmentOperating Expenses (in thousands, except for percentages)
Year Ended December 31,
20232022$ Change% Change
Product development$2,720,819 $2,135,612 $585,207 27 %
% of total net revenue12 %12 %
% of total gross profit36 %36 %
Sales and marketing$2,019,009 $2,057,951 $(38,942)(2)%
% of total net revenue9 %12 %
% of total gross profit27 %34 %
General and administrative$2,209,190 $1,686,849 $522,341 31 %
% of total net revenue10 %10 %
% of total gross profit29 %28 %
Transaction, loan, and consumer receivable losses$660,663 $550,683 $109,980 20 %
% of total net revenue3 %3 %
% of total gross profit9 %9 %
Bitcoin impairment losses$— $46,571 $(46,571)(100)%
% of total net revenue— %— %
% of total gross profit— %1 %
Amortization of customer and other acquired intangible assets$174,044 $138,758 $35,286 25 %
% of total net revenue1 %1 %
% of total gross profit2 %2 %
Total operating expenses$7,783,725 $6,616,424 $1,167,301 18 %
 Year Ended December 31, 2016 to 2017 2015 to 2016
 2017 2016 2015 % Change % Change
Product development$321,888
 $268,537
 $199,638
 20% 35%
Percentage of total net revenue15% 16% 16% 
 


Product development expenses for the year ended December 31, 2017,2023, increased by $53.4$585.2 million, or 20%27%, compared to the year ended December 31, 2016,2022, due primarily to the following:

•an increase of $451.5 million in personnel costs primarily due to an increase of $39.2 million in personnel related costs mainly inheadcount among our engineering product, data scienceteams, as we continue to improve and design teams.diversify our products. The increase in product development personnel related costs includes an increase in share-based compensation expense of $6.9 million.

Product development expenses$200.4 million for the year ended December 31, 2016, increased by $68.92023; and

•an increase of $112.5 million or 35%, compared toin software and cloud computing infrastructure fees as well as consulting fees for the year ended December 31, 2015, primarily due to an increase2023, as a result of $62.9 million in personnel related costs mainly inincreased capacity needs and expansion of our engineering, product, data science and design teams. The increase in personnel related costs includes an increase in share-based compensation expense of $36.7 million.cloud-based services.

Sales and Marketing (in thousands, except for percentages)
 Year Ended December 31, 2016 to 2017 2015 to 2016
 2017 2016 2015 % Change % Change
Sales and marketing$253,170
 $173,876
 $145,618
 46% 19%
Percentage of total net revenue11% 10% 11% 
 


Sales and marketing expenses for the year ended December 31, 2017, increased2023, decreased by $79.3$38.9 million, or 46%2%, compared to the year ended December 31, 2016,2022, primarily due to the following:to:
an increase
•a decrease of $25.2 million in costs associated with our Cash App peer-to-peer transfer service as result of continued growth and expansion of this product;

55





an increase of $23.6$163.4 million in advertising costs, primarily from increaseddecreased online direct mail and mobile marketingtelevision campaigns during the year; andas we focused on expense discipline; partially offset by

•an increase of $22.4$87.7 million in sales and marketing personnel costs to enable growth initiatives.maintain initiatives and $52.7 million in Cash App marketing. The increase in sales and marketing personnel related costs also includes an increase in share-based compensation expense of $3.4$25.4 million.

Sales and marketing expenses for the year ended December 31, 2016, increased by $28.3 million, or 19%, compared to the year ended December 31, 2015, due to the following:

an increase of $17.8 million in sales and marketing personnel costs to support growth in the business. The increase in personnel related costs includes an increase in share-based compensation expense of $6.8 million.

an increase of $4.7 million in costs associated with our Cash App peer-to-peer transfer service; and

paid marketing expenditures were stable compared to the prior year.

General and Administrative (in thousands, except for percentages)
73
 Year Ended December 31, 2016 to 2017 2015 to 2016
 2017 2016 2015 % Change % Change
General and administrative$250,553
 $251,993
 $143,466
 (1)% 76%
Percentage of total net revenue11% 15% 11% 
 


General and administrative expenses for the year ended December 31, 2017, decreased2023, increased by $1.4$522.3 million, or 31%, compared to the year ended December 31, 2016. Excluding a $48.0 million non-recurring expense related to the settlement of legal proceedings with Robert E. Morley that was recorded in the year ended December 31, 2016, general and administrative expenses for the year ended December 31, 2017 increased by $46.6 million,2022, primarily due to the following:to:


•an increase of $24.8$288.1 million in general and administrative personnel costs, mainly as a result of additions to our finance, legal,customer support and compliance customer success, Square Capital operations, Caviar operations and internal business systems personnel as we continue to addmaintain resources and skills asto support our business scaleslong-term growth; and drive long-term growth. The increase

•a goodwill impairment charge of $132.3 million related to TIDAL recognized in personnel related costs includes an increase in share-based compensation expensethe fourth quarter of $6.6 million;2023. Refer to Note 10, Goodwill within Notes to the Consolidated Financial Statements for more details.
Transaction, loan, and

the remaining increase is primarily due to increased third-party legal, finance, consulting, and corporate level expenses such as facilities expansion as our business and personnel continue to scale and diversify.

General and administrative expenses consumer receivable losses for the year ended December 31, 2016,2023, increased by $108.5$110.0 million, or 76%20%, compared to the year ended December 31, 2015,2022, primarily due to the following:


a $48.0 million non-recurring expense related to the settlement of legal proceedings with Robert E. Morley, with no similar activity in the prior year;

an increase $37.5 million in general and administrative personnel costs, mainly customer success, legal, compliance, risk, finance, Square Capital operations, and Caviar operations personnel that together will drive long-term operating efficiencies as our business scales. The increase in personnel related costs includes •an increase in share-based compensation expenseloan losses of $13.1 million; and

$89.0 million compared to the remaining increaseyear ended December 31, 2022, primarily due to increased third-party legal, finance, consulting,loan volumes; and certain software license expenses

•an increase in transaction losses of $21.0 million for the year ended December 31, 2023, primarily relateddue to our firstan operational outage as well as growth in Cash App Card and Square GPV.

Amortization of customer and other acquired intangible assets increased $35.3 million for the year of operationsended December 31, 2023, compared to the year ended December 31, 2022, primarily as a public company.result of the revision of certain intangibles' useful lives as well as the timing of the acquisition of Afterpay in the first quarter of fiscal year 2022 and the related intangible assets and measurement period adjustments. Refer to Note 11, Acquired Intangible Assets within Notes to the Consolidated Financial Statements for more details.


Transaction, LoanInterest Expense (Income), Net, and Advance LossesOther Expense (Income), Net (in thousands, except for percentages)
Year Ended December 31,
20232022$ Change% Change
Interest expense (income), net$(47,221)$36,228 $(83,449)(230)%
Other income, net(202,475)(95,443)(107,032)112 %
 Year Ended December 31, 2016 to 2017 2015 to 2016
 2017 2016 2015 % Change % Change
Transaction, loan and advance losses$67,018
 $51,235
 $54,009
 31% (5)%



56





Transaction, loan and advance lossesInterest income, net, of $47.2 million for the year ended December 31, 2017,2023 was primarily due to an increase in interest income received as a result of both higher interest rates and investment balances, which more than offset interest expense in the period. Interest expense, net of $36.2 million, for the year ended December 31, 2022 was primarily due to interest expense related to our 2026 Senior Notes and 2031 Senior Notes, which were issued in May 2021. Refer to Note 15, Indebtedness within Notes to the Consolidated Financial Statements for further details.

Other income, net, of $202.5 million for the year ended December 31, 2023 was primarily driven by a gain of $207.1 million from the remeasurement of our bitcoin investment following the adoption of Accounting Standards Update 2023-08, Accounting for and Disclosure of Crypto Assets ("ASU 2023-08"). Refer to Note 14, Bitcoin within Notes to the Consolidated Financial Statements for further details. Other income, net, of $95.4 million for the year ended December 31, 2022 was primarily driven by revaluation of certain equity investments.

Segment Results

Square Results

The following tables provide a summary of the revenue and gross profit for our Square segment for the year ended December 31, 2023 and 2022(in thousands, except for percentages):
Year Ended December 31,
20232022$ Change% Change
Segment net revenue$7,033,384 $6,294,137 $739,247 12 %
Segment cost of revenue3,904,730 3,587,236 317,494 9 %
Segment gross profit$3,128,654 $2,706,901 $421,753 16 %

74

Revenue

Revenue for the Square segment for the year ended December 31, 2023 increased by $15.8$739.2 million compared to the year ended December 31, 2022. The increase was primarily due to growth in Square GPV from both card-present and card-not-present volumes.

Cost of Revenue

Cost of revenue for the Square segment for the year ended December 31, 2023 increased by $317.5 million compared to the year ended December 31, 2022. The increase was primarily due to a higher percentage of card-present and credit card transactions, which are less favorable to our economics on a per transaction basis, partially offset by more favorable interchange economics.

Cash App Results

The following tables provide a summary of the revenue and gross profit for our Cash App segment for the year ended December 31, 2023 and 2022 (in thousands, except for percentages):
Year Ended December 31,
20232022$ Change% Change
Segment net revenue$14,681,686 $11,031,804 $3,649,882 33 %
Segment cost of revenue10,358,223 7,786,760 2,571,463 33 %
Segment gross profit$4,323,463 $3,245,044 $1,078,419 33 %

Revenue

Revenue for the Cash App segment for the year ended December 31, 2023 increased by $3.6 billion compared to the year ended December 31, 2022, primarily due to growth in bitcoin revenue, Cash App's financial service-related products, including Cash App Card, Cash App Instant Deposit volumes, as well revenue from the BNPL platform and interest earned on customer funds. Bitcoin revenue has and will fluctuate depending on customer demand, as well as changes in the market price of bitcoin. The increase in bitcoin revenue was driven primarily by an increase in quantity of bitcoin sold to customers compared to prior year. The prevailing bitcoin prices fluctuated significantly within each year, but the average price for 2023 was approximately 2% higher than 2022. While bitcoin revenue contributed 65% and 64% of Cash App revenue in 2023 and 2022, respectively, gross profit generated from bitcoin was only 5% of Cash App gross profit in both 2023 and 2022.

Excluding bitcoin revenue, Cash App net revenue increased $1.3 billion, or 31%32%, compared to the year ended December 31, 2016, primarily due to growth in GPV. Transaction losses increased to a lesser extent than GPV growth due to ongoing investment in data science and improvements in our risk operations to mitigate exposure to transaction losses, offset by2022.

Cost of Revenue

Cost of revenue for the netting effect of the following:

an $8.0 million charge recorded to loan losses in year ended December 31, 2017, with no similar charges during the prior year, as a result of the growth and increasing maturity of our Square Capital loan portfolio, and continued refinement of inputs to our loan loss estimation methodology. We record loan losses when the amortized cost of a loan exceeds the estimated fair value of the loan, as determined at the individual loan level;

an out of period adjustment of $5.5 million recorded in the year ended December 31, 2016, as a result of a correction to the calculation of our reserve for transaction losses, with no similar charges during the current year.
Transaction, loan and advance lossesCash App segment for the year ended December 31, 2016, decreased2023 increased by $2.8 million, or 5%,$2.6 billion compared to the year ended December 31, 2015, due to better use of data science and improvements in our risk operations to mitigate exposure to transaction losses despite the growth in GPV during 2016, and2022. The increase was due to the net effectitems referenced within the revenue discussion. Excluding bitcoin cost of revenue, Cash App cost of revenue increased $235.1 million, or 28%.
75

Key Operating Metrics and Non-GAAP Financial Measures
We collect and analyze operating and financial data to evaluate the following:

an $8.5 million charge recorded in the year ended December 31, 2015, comprised of a $4.4 million charge related to fraud loss from a single seller and an increase of $4.1 million loss provision made to reflect updates to our risk model; and

an out of period adjustment of $5.5 million recorded in the year ended December 31, 2016, as a result of a correction to the calculationhealth of our reserve for transaction losses.

Amortization of Acquired Customer Assets (in thousands, except for percentages)
 Year Ended December 31, 2016 to 2017 2015 to 2016
 2017 2016 2015 % Change % Change
Amortization of acquired customer assets$883
 $850
 $1,757
 4% (52)%

Amortization of acquired customer assets for the year ended December 31, 2017, remained relatively flat comparedbusiness, allocate our resources, and assess our performance. In addition to the year ended December 31, 2016, as a result of certain customer assets reaching end of life offset by additional customer assets acquired.

Amortization of acquired customer assets for the year ended December 31, 2016, decreased by $0.9 million, or 52%total net revenue, operating income (loss), compared to the year ended December 31, 2015, as a result of certain customer assets reaching end of life.

Interest and Other Income and Expense, net (in thousands, except for percentages)
 Year Ended December 31, 2016 to 2017 2015 to 2016
 2017 2016 2015 % Change % Change
Interest and other (income) expense, net$8,458
 $(780) $1,613
 NM (148)%

Interestincome (loss), and other (income) expense, net, forresults under GAAP, the year ended December 31, 2017, changed by $9.2 million, compared to the year ended December 31, 2016, primarily due to interest expense related to our convertible notes offset in part by income earned on our investment in marketable securities and foreign exchange rate gains.

Interest and other (income) expense, net, for the year ended December 31, 2016, changed by $2.4 million, or 148%, compared to the year ended December 31, 2015, primarily driven by interest income earned on our investment in marketable securities offsetting interest expense and driven by fluctuations in foreign exchange rates.

Provision for Income Taxes (in thousands, except for percentages)
 Year Ended December 31, 2016 to 2017 2015 to 2016
 2017 2016 2015 % Change % Change
Provision for income taxes$149
 $1,917
 $3,746
 (92)% (49)%

57





Provision for income taxes for the year ended December 31, 2017, decreased by $1.8 million compared to the year ended December 31, 2016, primarily related to the federal income tax benefit resulting from the release of the valuation allowance on certain deferred tax assets due to the enactment of the 2017 Tax Act.

Provision for income taxes for the year ended December 31, 2016, decreased by $1.8 million compared to the year ended December 31, 2015, primarily related to the reduction in federal income tax expense.

Deemed Dividend on Series E Preferred Stock (in thousands, except for percentages)
 Year Ended December 31, 2016 to 2017 2015 to 2016
 2017 2016 2015 % Change % Change
Deemed dividend on Series E preferred stock$—
 $—
 $(32,200) NM NM

For the year ended December 31, 2015, we issued 10,299,696 shares of our common stock to certain holders of Series E preferred stock, in the form of a deemed stock dividend of $32.2 million. There were no similar occurrences in any other period presented.

58





Quarterly Results of Operations
The following tables set forth selected unaudited quarterly statements of operations data for the last eight quarters. The information for each of these quarters has been prepared on the same basis as the audited annual financial statements included elsewhere in this Annual Report on Form 10-K and, in the opinion of management, includes all adjustments, which consist only of normal recurring adjustments, necessary for the fair presentation of the results of operations for these periods. This data should be read in conjunction with our audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. These quarterly operating results are not necessarily indicative of the results we may achieve in future periods.

 Three Months Ended,
 Dec. 31,
2017		 Sep. 30,
2017		 Jun. 30,
2017		 Mar. 31,
2017		 Dec. 31,
2016		 Sep. 30,
2016		 Jun. 30,
2016		 Mar. 31,
2016
 (in thousands, except per share data)
 (unaudited)
Revenue:               
Transaction-based revenue$524,612
 $510,019
 $482,065
 $403,478
 $402,496
 $388,347
 $364,864
 $300,453
Starbucks transaction-based revenue—
 —
 —
 —
 34
 7,164
 32,867
 38,838
Subscription and services-based revenue79,402
 65,051
 59,151
 49,060
 40,518
 35,320
 29,717
 23,796
Hardware revenue12,021
 10,089
 10,289
 9,016
 8,869
 8,171
 11,085
 16,182
Total net revenue616,035
 585,159
 551,505
 461,554
 451,917
 439,002
 438,533
 379,269
Cost of revenue:               
Transaction-based costs333,377
 328,043
 311,092
 257,778
 260,006
 254,061
 234,857
 194,276
Starbucks transaction-based costs—
 —
 —
 —
 (49) 4,528
 28,672
 36,610
Subscription and services-based costs24,559
 18,169
 17,116
 15,876
 11,431
 12,524
 10,144
 9,033
Hardware costs16,783
 18,775
 14,173
 12,662
 12,118
 15,689
 14,015
 26,740
Amortization of acquired technology1,486
 1,556
 1,695
 1,807
 1,886
 1,886
 1,886
 2,370
Total cost of revenue376,205
 366,543
 344,076
 288,123
 285,392
 288,688
 289,574
 269,029
Gross profit239,830
 218,616
 207,429
 173,431
 166,525
 150,314
 148,959
 110,240
Operating expenses:               
Product development92,633
 82,547
 78,126
 68,582
 64,889
 70,418
 68,638
 64,592
Sales and marketing76,821
 66,533
 59,916
 49,900
 49,406
 46,754
 39,220
 38,496
General and administrative66,318
 64,312
 62,988
 56,935
 53,027
 52,075
 50,784
 96,107
Transaction, loan and advance losses16,833
 19,893
 18,401
 11,891
 13,034
 12,885
 17,455
 7,861
Amortization of acquired customer assets234
 222
 222
 205
 147
 164
 222
 317
Total operating expenses252,839
 233,507
 219,653
 187,513
 180,503
 182,296
 176,319
 207,373
Operating loss(13,009) (14,891) (12,224) (14,082) (13,978) (31,982) (27,360) (97,133)
Interest and other (income) expense, net2,839
 1,854
 3,266
 499
 153
 111
 (327) (717)
Loss before income tax(15,848) (16,745) (15,490) (14,581) (14,131) (32,093) (27,033) (96,416)
Provision (benefit) for income taxes(185) (647) 472
 509
 1,036
 230
 312
 339
Net loss(15,663) (16,098) (15,962) (15,090) (15,167) (32,323) (27,345) (96,755)
Deemed dividend on Series E preferred stock—
 —
 —
 —
 —
 —
 —
 —
Net loss attributable to common stockholders$(15,663) $(16,098) $(15,962) $(15,090) $(15,167) $(32,323) $(27,345) $(96,755)
Net loss per share attributable to common stockholders:               
Basic$(0.04) $(0.04) $(0.04) $(0.04) $(0.04) $(0.09) $(0.08) $(0.29)
Diluted$(0.04) $(0.04) $(0.04) $(0.04) $(0.04) $(0.09) $(0.08) $(0.29)
Weighted-average shares used to compute net loss per share attributable to common stockholders:               
Basic390,030
 383,951
 376,357
 366,737
 356,343
 343,893
 334,488
 331,324
Diluted390,030
 383,951
 376,357
 366,737
 356,343
 343,893
 334,488
 331,324


59





Costs and expenses include share-based compensation expense as follows:
 Three Months Ended,
 Dec. 31,
2017		 Sep. 30,
2017		 Jun. 30,
2017		 Mar. 31,
2017		 Dec. 31,
2016		 Sep. 30,
2016		 Jun. 30,
2016		 Mar. 31,
2016
 (in thousands)
Share-Based Compensation(unaudited)
Cost of revenue$30
 $29
 $18
 $—
 $—
 $—
 $—
 $—
Product development28,564
 25,254
 25,136
 19,356
 21,340
 23,949
 24,168
 21,947
Sales and marketing4,699
 4,579
 4,355
 3,935
 4,159
 3,697
 3,363
 2,903
General and administrative11,232
 10,186
 10,084
 8,379
 8,388
 9,133
 9,391
 6,348
Total share-based compensation$44,525
 $40,048
 $39,593
 $31,670
 $33,887
 $36,779
 $36,922
 $31,198

The following table sets forth the key operating metrics and non-GAAP financial measures we use to evaluate our business. We believe these metrics and measures are useful to facilitate period-to-period comparisons of our business, and to facilitate comparisons of our performance to that of other payment solution providers.
Year Ended December 31,
202320222021
Gross Payment Volume (GPV) (in millions)$227,699 $203,536 $167,720 
Adjusted Operating Income (Loss) (in thousands)$351,351 $(145,408)$306,104 
Adjusted EBITDA (in thousands)$1,792,420 $990,964 $1,013,657 
Adjusted Net Income Per Share:
Basic$1.85 $1.05 $1.46 
Diluted$1.80 $1.00 $1.28 

Gross Payment Volume ("GPV")

GPV includes Square GPV and Cash App Business GPV. Square GPV is defined as the total dollar amount of all card payments processed by sellers using Square, net of refunds, and ACH transfers. Cash App Business GPV is comprised of Cash App activity related to peer-to-peer transactions received by business accounts, and peer-to-peer payments sent from a credit card. GPV does not include transactions from our BNPL platform because GPV is related only to transaction-based revenue and not to subscription and services-based revenue.

Adjusted EBITDA, Adjusted Net Income Per Share ("Adjusted EPS") and Adjusted Operating Income

Adjusted EBITDA and Adjusted EPS are non-GAAP financial measures that represent our net income (loss) and net income (loss) per share, adjusted to eliminate the effect of items as described below. Adjusted Operating Income is a non-GAAP financial measure that represents our operating income (loss), adjusted to eliminate the effect of items as described below.

We have included these non-GAAP financial measures in this Form 10-K because they are key measures used by our management to evaluate our operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of internal resources. Accordingly, we believe these measures provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. In addition, they provide useful measures for period-to-period comparisons of our business, as they remove the effect of certain non-cash items and certain variable charges that do not vary with our operations.

•We believe it is useful to exclude certain non-cash charges, such as amortization of intangible assets, and share-based compensation expenses, from our non-GAAP financial measures because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations.

•We believe that excluding the expense related to amortization of debt discount and issuance costs from our non-GAAP measures is useful to investors because such incremental non-cash interest expense does not represent a current or future cash outflow for the Company and is therefore not indicative of our continuing operations or meaningful when comparing current results to past results. Additionally, for purposes of calculating diluted Adjusted EPS, we add back cash interest expense on convertible notes, as if converted at the beginning of the period, if the impact is dilutive.


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•We exclude the following from non-GAAP financial measures because we do not believe that these items are reflective of our ongoing business operations: gain or loss on the disposal of property and equipment; gain or loss on revaluation of equity investments; gain or loss from the remeasurement of our bitcoin investment, and bitcoin impairment losses on our bitcoin investment (prior to the adoption of ASU 2023-08), as applicable.

•To aid in comparability of our results across periods, we also exclude certain acquisition-related and integration costs associated with business combinations, various restructuring and other costs, and goodwill impairment charges, each of which are not normal operating expenses. Acquisition related costs include amounts paid to redeem acquirees’ unvested share-based compensation awards, and legal, accounting, valuation, and due diligence costs. Integration costs include advisory and other professional services or consulting fees necessary to integrate acquired businesses. Restructuring and other costs that are not reflective of our core business operating expenses may include severance costs, contingent losses, impairment charges, and certain litigation and regulatory charges. We also add back the periods indicated:impact of the acquired deferred revenue and deferred cost adjustment, which was written down to fair value in purchase accounting.

In addition to the items above, Adjusted EBITDA as a non-GAAP financial measure also excludes depreciation and amortization, other cash interest income and expense, and other income and expense.

Non-GAAP financial measures have limitations, should be considered as supplemental in nature, and are not meant as a substitute for the related financial information prepared in accordance with GAAP. These limitations include the following:

•share-based compensation expense has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of our compensation strategy;

•the intangible assets being amortized may have to be replaced in the future, and the non-GAAP financial measures do not reflect cash capital expenditure requirements for such replacements or for new capital expenditures or other capital commitments; and

•non-GAAP measures do not reflect changes in, or cash requirements for, our working capital needs.

In addition to the limitations above, Adjusted EBITDA as a non-GAAP financial measure does not reflect the effect of depreciation and amortization expense and related cash capital requirements, income taxes that may represent a reduction in cash available to us, and the effect of foreign currency exchange gains or losses, which is included in other income and expense.

In view of the limitations associated with Adjusted EBITDA, we also present Adjusted Operating Income (Loss), which is a non-GAAP financial measure that excludes certain expenses that we believe are not reflective of our core operating performance, including amortization of intangible assets, bitcoin investment impairment losses (prior to the adoption of ASU 2023-08), acquisition-related accelerated share-based compensation expenses, acquisition-related and integration costs, restructuring and other costs, and goodwill impairment charges. Adjusted Operating Income (Loss) does however include the effect of share-based compensation expense, which is a significant recurring expense in our business and an important part of our compensation strategy, as well as depreciation expense.

Other companies, including companies in our industry, may calculate the non-GAAP financial measures differently or not at all, which reduces their usefulness as comparative measures.

Because of these limitations, you should consider the non-GAAP financial measures alongside other financial performance measures, including net income (loss) and our other financial results presented in accordance with GAAP.
77

 Three Months Ended,
 Dec. 31,
2017		 Sep. 30,
2017		 Jun. 30,
2017		 Mar. 31,
2017		 Dec. 31,
2016		 Sep. 30,
2016		 Jun. 30,
2016		 Mar. 31,
2016
 (in thousands, except for GPV and per share data)
Key Operating Metrics and non-GAAP Financial Measures(unaudited)
GPV (in millions)$17,888
 $17,386
 $16,421
 $13,647
 $13,694
 $13,248
 $12,451
 $10,290
Adjusted Revenue$282,658
 $257,116
 $240,413
 $203,776
 $191,877
 $177,777
 $170,809
 $146,155
Adjusted EBITDA$41,184
 $34,304
 $36,496
 $27,025
 $29,793
 $11,623
 $12,554
 $(9,083)
Adjusted Net Income (Loss) Per Share:               
Basic$0.09
 $0.08
 $0.08
 $0.05
 $0.06
 $0.01
 $0.02
 $(0.05)
Diluted$0.08
 $0.07
 $0.07
 $0.05
 $0.05
 $0.01
 $0.02
 $(0.05)


The following table presents a reconciliation of total net revenueoperating income (loss) to Adjusted RevenueOperating Income (Loss) for each of the periods indicated:indicated (in thousands):
Year Ended December 31,
202320222021
Operating income (loss)$(278,839)$(624,532)$161,112 
Amortization of acquired technology assets72,829 70,194 22,645 
Acquisition-related and integration costs11,422 105,518 15,474 
Restructuring and other charges239,582 51,746 20,000 
Goodwill impairment132,313 — — 
Bitcoin impairment losses— 46,571 71,126 
Amortization of customer and other acquired intangible assets174,044 138,758 15,747 
Acquisition-related share based acceleration costs— 66,337 — 
Adjusted Operating Income (Loss)$351,351 $(145,408)$306,104 
 Three Months Ended,
 Dec. 31,
2017		 Sep. 30,
2017		 Jun. 30,
2017		 Mar. 31,
2017		 Dec. 31,
2016		 Sep. 30,
2016		 Jun. 30,
2016		 Mar. 31,
2016
 (in thousands)
Adjusted Revenue Reconciliation(unaudited)
Total net revenue$616,035
 $585,159
 $551,505
 $461,554
 $451,917
 $439,002
 $438,533
 $379,269
Less: Starbucks transaction-based revenue—
 —
 —
 —
 34
 7,164
 32,867
 38,838
Less: transaction-based costs333,377
 328,043
 311,092
 257,778
 260,006
 254,061
 234,857
 194,276
Adjusted Revenue$282,658
 $257,116
 $240,413
 $203,776
 $191,877
 $177,777
 $170,809
 $146,155


60






The following table presents a reconciliation of net lossincome (loss) to Adjusted EBITDA for each of the periods indicated:indicated (in thousands):
Year Ended December 31,
202320222021
Net income (loss) attributable to common stockholders$9,772 $(540,747)$166,284 
Net loss attributable to noncontrolling interests(30,896)(12,258)(7,458)
Net income (loss)(21,124)(553,005)158,826 
Share-based compensation expense1,276,097 1,069,289 608,042 
Depreciation and amortization408,560 340,523 134,756 
Acquisition-related and integration costs11,422 105,518 15,474 
Restructuring and other charges239,582 51,746 20,000 
Goodwill impairment132,313 — — 
Interest expense (income), net(47,221)36,228 33,124 
Other income, net(202,475)(95,443)(29,474)
Bitcoin impairment losses— 46,571 71,126 
Benefit for income taxes(8,019)(12,312)(1,364)
Loss on disposal of property and equipment3,186 1,619 2,633 
Acquired deferred revenue and cost adjustment99 230 514 
Adjusted EBITDA$1,792,420 $990,964 $1,013,657 


78
 Three Months Ended,
 Dec. 31,
2017		 Sep. 30,
2017		 Jun. 30,
2017		 Mar. 31,
2017		 Dec. 31,
2016		 Sep. 30,
2016		 Jun. 30,
2016		 Mar. 31,
2016
 (in thousands)
Adjusted EBITDA Reconciliation(unaudited)
Net loss$(15,663) $(16,098) $(15,962) $(15,090) $(15,167) $(32,323) $(27,345) $(96,755)
Starbucks transaction-based revenue—
 —
 —
 —
 (34) (7,164) (32,867) (38,838)
Starbucks transaction-based costs—
 —
 —
 —
 (49) 4,528
 28,672
 36,610
Share-based compensation expense44,525
 40,048
 39,593
 31,670
 33,887
 36,779
 36,922
 31,198
Depreciation and amortization9,632
 9,085
 9,125
 9,437
 9,928
 9,681
 9,018
 9,118
Litigation settlement (benefit) expense—
 —
 —
 —
 —
 —
 (2,000) 50,000
Interest and other (income) expense, net2,839
 1,854
 3,266
 499
 153
 111
 (327) (717)
Provision (benefit) for income taxes(185) (647) 472
 509
 1,036
 230
 312
 339
Loss (gain) on sale of property and equipment
36
 62
 2
 —
 39
 (219) 169
 (38)
Adjusted EBITDA$41,184
 $34,304
 $36,496
 $27,025
 $29,793
 $11,623
 $12,554
 $(9,083)


The following table presents a reconciliation of net lossincome (loss) to Adjusted Net Income (Loss) Per Share for each of the periods indicated:indicated (in thousands, except per share data):

Year Ended December 31,
202320222021
Net income (loss) attributable to common stockholders$9,772 $(540,747)$166,284 
Net loss attributable to noncontrolling interests(30,896)(12,258)(7,458)
Net income (loss)(21,124)(553,005)158,826 
Share-based compensation expense1,276,097 1,069,289 608,042 
Acquisition-related and integration costs11,422 105,518 15,474 
Restructuring and other charges239,582 51,746 20,000 
Goodwill impairment132,313 — — 
Amortization of intangible assets246,873 208,952 40,522 
Amortization of debt discount and issuance costs11,904 15,162 9,822 
Loss (gain) on revaluation of equity investments16,523 (73,457)(35,493)
Bitcoin remeasurement(207,084)— — 
Bitcoin impairment losses— 46,571 71,126 
Loss on disposal of property and equipment3,186 1,619 2,633 
Acquired deferred revenue and cost adjustment99 230 514 
Tax effect of non-GAAP net income adjustments(582,703)(264,523)(222,104)
Adjusted Net Income - basic$1,127,088 $608,102 $669,362 
Cash interest expense on convertible notes3,554 5,014 6,099 
Adjusted Net Income - diluted$1,130,642 $613,116 $675,461 
Weighted-average shares used to compute Adjusted Net Income Per Share:
Basic608,856 578,949 458,432 
Diluted628,320 615,034 525,725 
Adjusted Net Income Per Share:
Basic$1.85 $1.05 $1.46 
Diluted$1.80 $1.00 $1.28 

Diluted Adjusted Net Income Per Share is computed by dividing Adjusted Net Income by the weighted-average number of shares of common stock outstanding adjusted for the dilutive effect of all potential shares of common stock. In periods when we reported an Adjusted Net Loss, diluted Adjusted Net Income Per Share is the same as basic Adjusted Net Income Per Share because the effects of potentially dilutive items were anti-dilutive.

The following table presents a reconciliation of the tax effect of non-GAAP net income adjustments to our provision (benefit) for income taxes (in thousands, except effective tax rate):
Year Ended December 31,
202320222021
Benefit for income taxes, as reported$(8,019)$(12,312)$(1,364)
Tax effect of non-GAAP net income adjustments582,703 264,523 222,104 
Adjusted provision for income taxes, non-GAAP$574,684 $252,211 $220,740 
Non-GAAP effective tax rate34%29%25%

We determined the adjusted provision for income taxes by calculating the estimated annual effective tax rate based on adjusted pre-tax income and applying it to Adjusted Net Income before income taxes.
79
 Three Months Ended,
 Dec. 31,
2017		 Sep. 30,
2017		 Jun. 30,
2017		 Mar. 31,
2017		 Dec. 31,
2016		 Sep. 30,
2016		 Jun. 30,
2016		 Mar. 31,
2016
 (in thousands, except per share data)
Adjusted Net Income (Loss) Per Share:(unaudited)
Net loss$(15,663) $(16,098) $(15,962) $(15,090) $(15,167) $(32,323) $(27,345) $(96,755)
Starbucks transaction-based revenue—
 —
 —
 —
 (34) (7,164) (32,867) (38,838)
Starbucks transaction-based costs—
 —
 —
 —
 (49) 4,528
 28,672
 36,610
Share-based compensation expense44,525
 40,048
 39,593
 31,670
 33,887
 36,779
 36,922
 31,198
Amortization of intangible assets1,747
 1,804
 1,943
 2,121
 2,090
 2,076
 2,134
 2,713
Litigation settlement expense—
 —
 —
 —
 —
 —
 (2,000) 50,000
Amortization of debt discount and issuance costs4,335
 4,277
 4,221
 1,390
 —
 —
 —
 —
Loss (gain) on sale of property and equipment$36
 $62
 $2
 $—
 $39
 $(219) $169
 $(38)
Adjusted Net Income (Loss)$34,980
 $30,093
 $29,797
 $20,091
 $20,766
 $3,677
 $5,685
 $(15,110)
Adjusted Net Income (Loss) Per Share:               
Basic$0.09
 $0.08
 $0.08
 $0.05
 $0.06
 $0.01
 $0.02
 $(0.05)
Diluted$0.08
 $0.07
 $0.07
 $0.05
 $0.05
 $0.01
 $0.02
 $(0.05)
Weighted-average shares used to compute Adjusted Net Income (Loss) Per Share:               
Basic390,030
 383,951
 376,357
 366,737
 356,343
 343,893
 334,488
 331,324
Diluted450,703
 432,284
 418,468
 404,319
 382,531
 370,746
 365,731
 331,324

Quarterly Trends

Transaction-based revenue is highly correlated with the level of GPV generated by sellers using our managed payments services. Historically our transaction-based revenue has been strongest in our fourth quarter and weakest in our first quarter, as our sellers typically generate additional GPV during the holiday season. We believe that this seasonality has affected and will continue to affect our quarterly results; however, to date its effect has been masked by our rapid growth. There was no Starbucks transaction-based revenue in 2017, after Starbucks transaction-based revenue declined throughout 2016, leading up to the completion of Starbucks' transition to another payments solution provider during the fourth quarter of 2016. Accordingly, we do not expect revenue from Starbucks to recur in the future.


61






Subscription and services-based revenue generally demonstrates less seasonality than transaction-based revenue. The sequential increase is primarily driven by continued growth of Instant Deposit, Caviar, and Square Capital.
Hardware revenue generally demonstrates less seasonality than transaction-based revenue, with most fluctuations tied to periodic product launches, promotions, or other arrangements with our retail partners.
Changes in product development expenses primarily reflect the timing of additions of engineering, product, and design personnel. To a lesser extent, they also reflect the timing of fees and supply costs related to maintenance and capacity expansion at third-party data center facilities, development and tooling costs related to the design, testing, and shipping of our hardware products, and fees for software licenses, consulting, legal, and other services that are directly related to growing and maintaining our products and services.
Changes in sales and marketing expenses reflect the variable nature of the timing and magnitude of paid marketing and customer acquisition initiatives across our advertising channels. Changes in sales and marketing expenses are also affected by the timing of additions of direct sales, account management, local, product and paid marketing, retail and ecommerce, partnerships, and communications personnel. Additionally, sales and marketing expenses are affected by the timing and magnitude of costs related to our Cash App peer-to-peer service and the total shipments of our magstripe readers in a given period, as they include the cost of manufacturing and distributing those readers.
Changes in general and administrative expenses primarily reflect the timing of additions of finance, legal, risk operations, human resources, and administrative personnel, as well as the timing of non income tax payments and reserves. They also reflect the timing of costs related to customer success personnel and systems, as well as fees paid for professional services, including legal and financial services. During the first quarter of 2016, general and administrative expenses included $50.0 million of non-recurring expense related to legal proceedings with Robert E. Morley, which was settled the following quarter, with no similar activity in the other periods presented.


62





Liquidity and Capital Resources


The following table summarizes ourAs of December 31, 2023, we had approximately $7.7 billion in available liquidity, with $6.9 billion in cash, cash equivalents, restricted cash, and investments in marketable debt securities, (in thousands):as well as an undrawn amount of $775.0 million available under our revolving credit facility subject to compliance with our covenants. Additionally, we had $99.4 million available to be withdrawn under our warehouse funding facilities. Refer to Note 15, Indebtedness within Notes to the Consolidated Financial Statements for more details. We intend to continue focusing on our long-term business initiatives and believe that our available funds are sufficient to meet our liquidity needs for the foreseeable future, including the $1.0 billion share repurchase program. As of December 31, 2023, we were in compliance with all financial covenants associated with our revolving credit facility and senior notes. None of our warehouse funding facilities contain financial covenants.

 Year Ended December 31,
 2017 2016 2015
Cash and cash equivalents$696,474
 $452,030
 $461,329
Short-term restricted cash28,805
 22,131
 13,537
Long-term restricted cash9,802
 14,584
 14,686
Cash, cash equivalents, and restricted cash735,081
 488,745
 489,552
Short-term investments169,576
 59,901
 —
Long-term investments203,667
 27,366
 —
Cash, cash equivalents, restricted cash and investments in marketable securities1,108,324
 576,012
 489,552


The following table summarizes our cash flow activitiesavailable liquidity (in thousands):
December 31,
2023		December 31,
2022
Cash and cash equivalents$4,996,465 $4,544,202 
Short-term restricted cash (i)
770,380 639,780 
Long-term restricted cash71,812 71,600 
Investments in short-term debt securities851,901 1,081,851 
Investments in long-term debt securities251,127 573,429 
Revolving credit facility775,000 600,000 
Total liquidity$7,716,685 $7,510,862 
 Year Ended December 31,
 2017 2016 2015
Net cash provided by operating activities$127,711
 $23,131
 $21,123
Net cash used in investing activities:(340,611) (114,241) (43,218)
Net cash provided by financing activities454,933
 90,741
 264,763
Effect of foreign exchange rate on cash and cash equivalents4,303
 (438) (1,775)
Net increase (decrease) in cash, cash equivalents and restricted cash$246,336
 $(807) $240,893


(i) As of December 31, 2023, the Company has invested $291.4 million of restricted cash into a money market fund. See Note 5, Fair Value Measurements.

Our principal sources of liquidity are our cash and cash equivalents, and investments in marketable debt securities. As of December 31, 2017, we had $1.1 billion ofCustomer funds cash and cash equivalents are excluded from our liquidity as these are funds we hold on behalf of customers that are separate from our corporate funds and investmentsare not available for corporate purposes. Investments in marketable debt securities which were held primarily in cash deposits, money market funds, reverse repurchase agreements, U.S. government and agency securities, commercial paper, and corporate bonds. We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Our investments in marketable debt securities are classified as available-for-sale. In November 2015,

As of December 31, 2023, we completedheld approximately 8,038 bitcoins for investment purposes ("bitcoin investment") with a fair value of $339.9 million based on observable market prices, which is included within “Other non-current assets” on the consolidated balance sheets. We believe cryptocurrency is an instrument of economic empowerment that aligns with our initial public offering in which we received total net proceeds of $245.7 million after deducting underwriting discounts and commissions of $14.7 million and other offering expenses of $6.9 million. Priorcorporate purpose. We expect to hold these investments for the long term but will continue to reassess our bitcoin investment relative to our initial public offering,balance sheet. Bitcoin is considered an indefinite-lived intangible asset, and upon adoption of Accounting Standards Update No. 2023-08, Accounting for and Disclosure of Crypto Assets, effective January 1, 2023, our principal sourcebitcoin investment is remeasured at fair value at each reporting date with changes recognized in net income through “Other expense (income), net” in the consolidated statements of liquidity was private salesoperations. We did not purchase or sell any of convertible preferred stock with total cash proceedsour bitcoin investment during the year ended December 31, 2023. We recognized a gain of $207.1 from the remeasurement of our bitcoin investment during the fourth quarter of 2023.

In September 2020, we announced our intent to usinvest $100.0 million in supporting underserved communities, particularly, racial and ethnic minority groups who have been disproportionately affected by COVID-19. This initiative further deepens our commitment toward economic empowerment to help broaden such communities' access to financial services. As of $544.9 million.
On March 6, 2017,December 31, 2023, we issued $440.0have invested $44.3 million in aggregate towards this initiative, of which $12.3 million and $10.1 million were invested in the years ended December 31, 2023 and 2022, respectively.

Our principal amountcommitments consist of convertible notes, senior notes, (Notes) that mature on March 1, 2022, unless earlier converted or repurchased,revolving credit facility, warehouse funding facilities, operating leases, capital leases, and bear interest at a rate of 0.375% payable semi-annually on March 1purchase commitments. Refer to Note 15, Indebtedness andNote 20, Commitments and September 1 of each year. The Notes are convertible at an initial conversion rate of 43.5749 shares of Class A common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $22.95 per share of Class A common stock. In connection with the offering of the Notes, we entered into convertible note hedge transactions with certain financial institutions (Counterparties) whereby we have the option to purchase a total of approximately 19.2 million shares of our Class A common stock at a price of approximately $22.95 per share. The total cost of the convertible note hedge transactions was approximately $92.1 million. In addition, we sold warrants to the Counterparties whereby the Counterparties have the option to purchase a total of approximately 19.2 million shares of our Class A common stock at a price of approximately $31.18 per share. We received approximately $57.2 million in cash proceeds from the sale of these warrants. Taken together, the purchase of the convertible note hedges and sale of the warrants are intended to offset any actual dilution from the conversion of the Notes. The net proceeds from this transaction, after issuance costs was approximately $393.4 million. See Note 9, Indebtedness, of theContingencies within Notes to the Consolidated Financial Statements for more details on these transactions.


commitments.
63
80







In addition,Senior Notes and Convertible Notes

As of December 31, 2023, we have a revolving secured credit facilityheld $4.2 billion in aggregate principal amount of debt, comprised of, $1.0 billion in aggregate amount of convertible senior notes that maturesmature on March 1, 2025 ("2025 Convertible Notes"), $575.0 million in aggregate amount of convertible senior notes that mature on May 1, 2026 ("2026 Convertible Notes"), and $575.0 million in aggregate amount of convertible senior notes that mature on November 2020. To date, no funds have been drawn under1, 2027 ("2027 Convertible Notes," collectively referred to as the credit facility,“Convertible Notes”). Additionally, on May 20, 2021, we issued $1.0 billion in aggregate principal amount of outstanding senior unsecured notes that mature on June 1, 2026 ("2026 Senior Notes") and $1.0 billion in aggregate principal amount of outstanding senior unsecured notes that mature on June 1, 2031 ("2031 Senior Notes" and, together with $375.0 million remaining available. Loans under the credit facility2026 Senior Notes, the “Senior Notes” and, together with the Convertible Notes, the “Notes”). The 2025 Convertible Notes bear interest at our optiona rate of (i)0.125% payable semi-annually on March 1 and September 1 of each year, the 2026 Convertible Notes bear no interest, and the 2027 Convertible Notes bear interest at a base rate basedof 0.25% payable semi-annually on May 1 and November 1 of each year. These Convertible Notes can be converted or repurchased prior to maturity if certain conditions are met. The 2026 Senior Notes bear interest a rate of 2.75% payable semi-annually on June 1 and December 1, while the 2031 Senior Notes bear interest at a rate of 3.50% payable semi-annually on June 1 and December 1 of each year. These Senior Notes can be redeemed or repurchased prior to maturity if certain conditions are met.

On January 31, 2022, we closed the acquisition of Afterpay and assumed Afterpay's outstanding convertible notes of $1.1 billion, which we redeemed in cash on March 4, 2022 at face value. Refer to Note 9, Acquisitions within Notes to the Consolidated Financial Statements for further details.

On May 25, 2018, the Company issued an aggregate principal amount of $862.5 million of convertible senior notes ("2023 Convertible Notes"). On May 15, 2023, we paid $461.8 million in cash to settle the outstanding principal balance and interest on the highest2023 Convertible Notes upon maturity.

Revolving Credit Facility

We have entered into a revolving credit agreement with certain lenders, as subsequently amended, which provides a $500.0 million senior unsecured revolving credit facility (the "2020 Credit Facility") maturing in May 2024. On February 23, 2022, the Company entered into a sixth amendment to the Credit Agreement to, among other things, provide for a new tranche of unsecured revolving loan commitments in an aggregate principal amount of up to $100.0 million. On June 9, 2023, the Company entered into a seventh amendment to the Credit Agreement to, among other things, extend the maturity date of the prime rate,loans advanced to June 9, 2028 and provide for additional unsecured revolving loan commitments in an aggregate principal amount of up to $175 million. The Credit Agreement also contains a financial covenant that requires the federal funds rateCompany to maintain a quarterly minimum liquidity amount (consisting of the sum of Unrestricted Cash and Cash Equivalents plus 0.50%, and an adjusted LIBOR rate forMarketable Securities, each as defined in the Credit Agreement) of at least $250 million, tested on a one-month interest period, in each case plus a margin ranging from 0.00% to 1.00%, or (ii) an adjusted LIBOR rate plus a margin ranging from 1.00% to 2.00%. This marginquarterly basis. The Company is determined based on our total leverage ratio for the preceding four fiscal quarters. We are obligated to pay other customary fees for a credit facility of this size and type including an annual administrative agent fee of $0.1 million and an unuseda commitment fee of 0.15%.0.10% to 0.20% per annum on the undrawn portion available under the 2020 Credit Facility, depending on the Company's total net leverage ratio. To date, no funds have been drawn and no letters of credit have been issued under the 2020 Credit Facility.


Warehouse Funding Facilities

Following the acquisition of Afterpay, we assumed Afterpay's existing warehouse funding facilities ("Warehouse Facilities") with an aggregate commitment amount of $1.7 billion on a revolving basis, of which $1.6 billion was drawn as of December 31, 2023. The Warehouse Facilities have been arranged utilizing wholly-owned and consolidated entities (collectively, the "Warehouse Special Purpose Entities (SPEs)") formed for the sole purpose of financing the origination of consumer receivables to partly fund our BNPL platform. Borrowings under the Warehouse Facilities are secured against the respective consumer receivables. While the Warehouse SPEs are included in our consolidated financial statements, they are separate legal entities that maintain legal ownership of the receivables they hold. The assets of the Warehouse SPEs are not available to satisfy our claims or those of our creditors.


81

Cash, Restricted Cash, and Working Capital

We believe that our existing cash and cash equivalents, investment in marketable debt securities, and availability under our line of credit will be sufficient to meet our working capital needs, including any expenditures related to strategic transactions and investment commitments that we may from time to time enter into, and planned capital expenditures for at least the next 12 months. From time to time, we may seek to raise additionalhave raised capital throughby issuing equity, equity-linked, or debt securities such as our convertible notes and debt financing arrangements. We cannot be assured that any additional financing willsenior notes; and we may do so in the future, however, such funding may not be available on terms acceptable to us on acceptable terms or at all.


When we were last rated, in the second half of 2023, we received a non-investment grade rating by S&P Global Ratings (BB+), Fitch Ratings, Inc. (BB+), and Moody's Corporation (Ba2). We expect that these credit rating agencies will continue to monitor our performance, including our capital structure and results of operations. Our liquidity, access to capital, and borrowing costs could be adversely impacted by declines in our credit rating.

Short-term restricted cash of $28.8$770.4 million as of December 31, 2017 reflects2023 primarily includes cash held by the Warehouse SPEs used in the Warehouse Facilities funding arrangements that will be used to pay the borrowings under the Warehouse Facilities or will be distributed to us. It also includes pledged cash deposited into savingsdeposits in accounts at the financial institutions that process our sellers' paymentspayment transactions and as collateral pursuant to an agreementvarious agreements with the originating bank for the Company's loan product.banks relating to our products. We use the restricted cash to secure letters of credit with thesethe related financial institutions to provide collateral for liabilities arising from cash flow timing differences in the processing of these payments. We have recorded this amountthese amounts as a current assetassets on our consolidated balance sheetssheet given the short-term nature of these cash flow timing differences and that there is no minimum time frame during which the cash must remain restricted.
Long-term restricted cash of $9.8$71.8 million as of December 31, 2017 reflects2023 is primarily related to cash deposited into money market accounts that is usedheld as collateral pursuant to multi-year lease agreements entered into in 2012 and 2014as required by the FDIC for our office buildings. The Company hasSquare Financial Services. We have recorded this amountthese amounts as a non-current assetassets on theour consolidated balance sheetssheet as the lease terms extend beyond one year.

requirement by the FDIC specifies a time frame of 12 months or longer during which the cash must remain restricted.
We experience significant day-to-day fluctuations in our cash and cash equivalents due to fluctuations in settlements receivable, and customers payable, and hence working capital. These fluctuations are primarily due to:


•Timing of period end. For periods that end on a weekend or a bank holiday, our cash and cash equivalents, settlements receivable, and customers payable amountsbalances typically will be morehigher than for periods ending on a weekday, as we settle to our sellers for payment processing activity on business days; and

•Fluctuations in daily GPV. When daily GPV increases, our cash and cash equivalents, settlements receivable, and customers payable amounts increase. Typically our settlements receivable and customers payable balances at period end represent one to four days of receivables and disbursements to be made in the subsequent period. Customers payable, excluding amounts attributable to Cash App stored funds, and settlements receivable balances typically move in tandem, as pay-out and pay-in largely occur on the same business day. However, customers payable balances will be greater in amount than settlements receivable balances due to the fact that a subset of funds are held due to unlinked bank accounts, risk holds, and chargebacks. Customer funds obligations, which may be impacted by the timing of period end, number of processors used and processing times, are included in customers payable and may also cause customers payable to trend differently than settlements receivable. Holidays and day-of-week may also cause significant volatility in daily GPV amounts.

82


Safeguarding Obligation Liability and Safeguarding Asset Related to Bitcoin Held for Other Parties

As detailed in Note 14, Bitcoin within Notes to the Consolidated Financial Statements, we recorded a safeguarding obligation liability and a corresponding safeguarding asset related to the bitcoin held for other parties. As of December 31, 2023, the safeguarding obligation liability related to bitcoin held for other parties was $1.0 billion. We have taken steps to mitigate the potential risk of loss for the bitcoin held for other parties, including holding insurance coverage specifically for certain bitcoin incidents and using secure cold storage to store materially all of the bitcoin held for other parties. Staff Accounting Bulletin No. 121 ("SAB 121") also asks us to consider the legal ownership of the bitcoin held for other parties, including whether the bitcoin held for other parties would be available to satisfy general creditor claims in the event of Block’s bankruptcy. The legal rights of people with respect to crypto-assets held on their behalf by a custodian, such as us, upon the custodian’s bankruptcy have not yet been settled by courts and are highly fact dependent. Our contractual arrangements state that our customers and trading partners retain legal ownership of the bitcoin custodied by us on their behalf; they have the right to sell, pledge, or transfer the bitcoin; and they also benefit from the rewards and bear the risks associated with the ownership, including as a result of any bitcoin price fluctuations. We do not use any of the bitcoin held for other parties as collateral for our loans or any other financing arrangements, nor do we lend or pledge bitcoin held for others to any third parties. We have been monitoring and will continue to actively monitor legal and regulatory developments and may consider further steps, as appropriate, to support this contractual position so that in the event of Block’s bankruptcy, the bitcoin custodied by us should not be deemed to be part of Block's bankruptcy estate. We do not expect potential future cash flows associated with the bitcoin safeguarding obligation liability.
Cash Flow Activities

The following table summarizes our cash flow activities (in thousands):
Year Ended December 31,
20232022
Net cash provided by operating activities$100,961 $175,903 
Net cash provided by investing activities683,201 1,225,696 
Net cash provided by (used in) financing activities(240,137)97,580 
Effect of foreign exchange rate on cash and cash equivalents29,156 (38,363)
Net increase in cash, cash equivalents, restricted cash, and customer funds$573,181 $1,460,816 

Cash Flows from Operating Activities

Cash provided by (used in) operating activities consisted of net loss adjusted for certain non-cash items including depreciation and amortization, non-cash interest and other expense, share-based compensation expense, transaction, loan and advance losses, deferred income taxes, and gain (loss) on disposal of property and equipment, as well as the effect of changes in operating assets and liabilities, including working capital.


For the year ended December 31, 2017,2023, cash provided by operating activities was $127.7$101.0 million, primarily as a result of:

Netdue to net loss of $62.8$21.1 million, offset byadjusted for non-cash itemsexpenses of $2.6 billion consisting primarily of share-based compensation of $155.8 million,compensation; transaction, loan, and advance losses of $67.0 million, andconsumer receivable losses; depreciation and amortization; non-cash interest and lease expense; and goodwill impairment. This was partially offset by amortization of $37.3 million. These items are largely driven by growthdiscounts and expansionpremiums and other non-cash adjustments of our business activities.

64






Additional cash provided from$984.4 million; bitcoin remeasurement of $207.1 million; a change in deferred income taxes of $85.9 million; and a net outflow related to changes in operatingother assets and liabilities including increases in customers payable of $301.8 million, and increases in settlements payable of $63.6 million. Customers payable and settlements payable balances increased significantly as the year ended on a Sunday and transactions over a weekend will not settle until the following week. These balances are largely offset by settlements receivable, described below, which moves in tandem.

These were offset in part by cash used from changes in operating assets and liabilities, including increases in settlements receivable of $305.8 million for reasons aforementioned, increases in customer funds of $59.5 million as result of an increasing customer base with stored funds on the Cash App, charge-offs to accrued transaction losses of $46.1 million arising as a result of growth in GPV, and$1.2 billion due to the net activitytiming of period end, including a $350.0 million deposit held by a processor to meet requirements related to loans held for sale of $39.3 million arising from increased loan purchases.processing volumes.

For the year ended December 31, 2016,2022, cash provided by operating activities was $23.1$175.9 million, primarily as a result of:
Netdue to net loss of $171.6$553.0 million, offset byadjusted for non-cash itemsexpenses of $2.0 billion consisting primarily of share-based compensation of $138.8 million,compensation; transaction, loan, and advance losses of $51.2 million, andconsumer receivable losses; depreciation and amortization of $37.7 million.
Additional cash provided fromamortization; non-cash interest; and bitcoin impairment losses. This was offset by changes in operatingother assets and liabilities including increases in customers payable of $206.6$674.4 million increases in settlements payabledue to timing of $38.0 millionperiod end and decreases ina net outflow from amortization of discounts and premiums and other current assetsnon-cash adjustments of $16.1$592.5 million.
These were offset in part by cash used
Cash Flows from changes in operating assets and liabilities, including increases in settlements receivable of $177.7 million, charge-offs to accrued transaction losses of $47.9 million, the net activity related to loans held for sale of $41.3 million and increases in customer funds of $34.1 million.Investing Activities

For the year ended December 31, 2015,2023, cash provided by operatinginvesting activities was $21.1$683.2 million, primarily asdue to the net proceeds from investments of marketable securities of $600.3 million and a result of:
Net lossnet inflow related to consumer receivables of $179.8 million,$272.9 million. These were partially offset by non-cash items consisting primarilythe purchase of share-based compensationproperty and equipment of $82.3 million, transaction, loan and advance losses$151.2 million; purchases of $54.0 million, and depreciation and amortizationother investments of $27.6 million.
Additional cash provided from changes in operating assets and liabilities, including increases in customers payable of $76.0 million, increases in settlements payable of $13.1 million and increases in accrued expenses of $21.5 million.
These were offset in part by cash used from changes in operating assets and liabilities, including increases in settlements receivable of $31.8 million, charge-offs to accrued transaction losses of $34.7 million and increases in other current assets of $25.8 million.

Cash Flows from Investing Activities

Cash flows used in investing activities primarily relate to capital expenditures to support our growth, investments in marketable securities, investment in privately held entity$33.9 million; and business acquisitions.combinations, net of cash acquired, of $5.0 million.


83

For the year ended December 31, 2017,2022, cash used inprovided by investing activities was $340.6 million,$1.2 billion, primarily due to the net proceeds from investments of marketable securities, including investments from customer funds, of $1.1 billion. Additional inflows of cash were as a result of the purchase of marketable securities of $544.9 million, offset in part by proceeds from maturities and sales of marketable securities of $257.3 million. We increased our investment portfolio using proceeds from the financing activities described below. Additional usesbusiness acquisitions, net of cash acquired, of $539.5 million. These were a result of a strategic investment in a privately held entity of $25.0 million andpartially offset by the purchase of property and equipment of $26.1$170.8 million, to help us scale.

For the year ended December 31, 2016, cash used in investing activities was $114.2 million, primarily as a resultnet consumer receivable originations of the purchase of marketable securities of $164.8 million, offset in part by proceeds from maturities and sales of marketable securities of $77.4 million. Additional uses of cash were as a result of the purchase of property and equipment of $25.4 million.

For the year ended December 31, 2015, cash used in investing activities was $43.2 million, primarily as a result of capital expenditures of $37.4$169.4 million and business acquisitionspurchases of $4.5other investments of $56.7 million.


65






Cash Flows from Financing Activities
For the year ended December 31, 2017,2023, cash provided byused in financing activities was $454.9$240.1 million, primarily as a result of $393.4a cash payment of $461.8 million to settle the 2023 Convertible Notes in May 2023, stock repurchases of $156.8 million, a net outflow for other financing activities of $20.0 million, and the repayment and forgiveness of PPP loans of $16.8 million. These were partially offset by net proceeds from the Notes offeringwarehouse facilities borrowings of $269.6 million and as a result of proceeds from issuances of common stock from the exercise of options and purchases under theour employee stockshare purchase plan net of $162.5 million, offset in part by the settlement of a warrant with Starbucks of $54.8 million and payments for employee tax withholding related to vesting of restricted stock units of $44.7$130.4 million. We intend to use the proceeds from financing activities to support general corporate purposes and help us grow to scale.

For the year ended December 31, 20162022, cash provided by financing activities was $90.7$97.6 million, primarily as a result of net proceeds from warehouse facilities borrowings of $1.2 billion, a change in customer funds of $349.3 million, as well as proceeds from issuances of common stock from the exercise of options warrants, and purchases under our employee stockshare purchase plan of $96.4 million,$81.8 million. These were offset in part by payments in offering costs relatedthe payment to our initial public offeringredeem convertible notes assumed upon the acquisition of $5.5 million.

For the year ended December 31, 2015, cash provided by financing activities was $264.8 million, as a result of proceeds from our initial public offering of $251.3 million, proceeds from our issuance of convertible preferred stock of $30.0 million, proceeds from the exercise of stock options of $13.8 million, and an excess tax benefit from share-based award activityAfterpay of $1.1 million, offset in part by principal payments on debtbillion and the repayment and forgiveness of $30.0 million and paymentsPPP loans of debt issuance costs of $1.4$480.7 million.


Contractual Obligations and Commitments

Our principal commitments consist of convertible senior notes, operating leases, capital leases, and purchase commitments. The following table summarizes our commitments to settle contractual obligations in cash as of December 31, 2017.
 Payments due by period
 Total Less than 1 year 1 - 3 years 3 - 5 years More than 5 years
 (in thousands)
Convertible senior notes, including interest$446,738
 $1,650
 $3,300
 $441,788
 $—
Operating leases106,890
 18,740
 34,812
 33,955
 19,383
Capital leases6,496
 2,656
 3,805
 35
 —
Purchase commitments20,387
 20,387
 —
 —
 —
Total$580,511
 $43,433
 $41,917
 $475,778
 $19,383

Convertible Senior Notes
On March 6, 2017, we issued $440.0 million in aggregate principal amount of Notes that mature on March 1, 2022, unless earlier converted or repurchased, and bear interest at a rate of 0.375% payable semi-annually on March 1 and September 1 of each year. See Note 9, Indebtedness, of the Notes to the Consolidated Financial Statements for more details on this transaction.
Lease Commitments

We have entered into various non-cancelable operating leases for certain offices with contractual lease periods expiring between 2018 and 2025. We recognized total rental expenses under operating leases of $12.9 million, $11.3 million, and $12.8 million during the years ended December 31, 2017, 2016, and 2015, respectively.

Purchase commitments
We had non-cancelable purchase obligations to hardware suppliers for $20.4 million for the year ended December 31, 2017.


66





Off-balance Sheet Arrangements

We do not have any off-balance sheet arrangements during the periods presented.

Critical Accounting Policies and Estimates


Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. GAAP requires us to make certain estimates and judgments that affect the amounts reported in our financial statements. We base our estimates on historical experience, anticipated future trends, and other assumptions we believe to be reasonable under the circumstances. Because these accounting policiesestimates require significant judgment, our actual results may differ materially from our estimates.


We believe accounting policies and the assumptions and estimates associated with accrued transaction losses and revenue recognitionallowance for credit losses related to consumer receivables could potentially have the greatest potentiala material effect on our consolidated financial statements. Therefore, we consider these to be ourstatements, and therefore are critical accounting policies and estimates.


84

Accrued Transaction Losses


We are exposed to potential credit losses related to transactions processed by sellers that are subsequently subject to chargebacks when we are unable to collect from the sellers primarily due to insolvency, disputes between a seller and their customer, or due to fraudulent transactions. Accrued transaction losses duealso include estimated losses on Cash App activity related to chargebacks aspeer-to-peer payments sent from a result of fraud or uncollectibility of transaction payments. Wecredit card, Cash for Business, and Cash App Card. Generally, we estimate accrued transaction lossesthe potential loss rates based on availablehistorical experience that is continuously adjusted for new information and incorporates, where applicable, reasonable and supportable forecasts about future expectations. We also consider other relevant market data asin developing such estimates and assumptions. As of the reporting date, including expectations of future chargebacks, and historical trends related to loss rates. During the year ended December 31, 2017,2023, we recorded transaction losses of $53.0had accrued $54.0 million which as a percentage of GPV were less than 0.1%, and continues to show improvement relative to historical averages. We expect transaction losses to increase to a lesser extent than GPV growth due to ongoing investment in data science and improvements in our risk operations to mitigate exposurerelated to transaction losses. Additions to the reserve are reflected in current operating results, while realized losses are offset against the reserve. These amounts are classified within transaction, loan, and consumer receivable losses on the consolidated statements of operations, except for the amounts associated with the peer-to-peer service offered to Cash App customers for free that are classified within sales and marketing expenses. Refer to Note 1, Description of Business and Summary of Significant Accounting Policies and Note 12, Other Consolidated Balance Sheet Components (Current) within Notes to the Consolidated Financial Statements for further details.


Revenue RecognitionAllowance for Credit Losses Related to Consumer Receivables


ApplicationWe are exposed to credit losses on our consumer receivables portfolio. We estimate the expected credit losses in the outstanding portfolio of consumer receivables using both quantitative and qualitative methods that analyze portfolio performance, uses judgment regarding the quantitative components of the various accounting principles in U.S. GAAP requires thatreserve, and considers all available information relevant to assessing collectibility. As of December 31, 2023, we make judgments and estimateshad accrued $185.3 million related to the classification, measurementallowance for credit losses. Refer to Note 1, Description of Business and recognitionSummary of revenue. Complex arrangements may require significant contract interpretation to determine the appropriate accounting. Specifically, the determination of whether we are a principal in the delivery of managed payments solutions to sellersSignificant Accounting Policies and therefore recognize the transaction fees we earn as revenue on a gross basis, or we are an agent and hence recognize revenue on aNote 6, Consumer Receivables, net basis can require considerable judgment. We have concluded that we are the principal in these arrangements because we: (i) are the merchant of record and the primary obligorwithin Notes to the seller, (ii) are responsibleConsolidated Financial Statements for processing the payment, (iii) have latitude in establishing pricing with respect to the sellers and other terms of service, (iv) have sole discretion in selecting the third party to settlement the transaction, and (v) assume the credit risk for the transactions processed. Accordingly, we recognize the transaction fees we earn as revenue on gross basis. Changes in judgments with respect to these assumptions and estimates could impact the amount of revenue recognized.further details.


Recent Accounting Pronouncements


See “Recent Accounting Pronouncements” described in Note 1, Description of Business and Summary of Significant Accounting Policies within Notes to the accompanying notes to our consolidated financial statements.Consolidated Financial Statements.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


We have operations both within the United States and globally, and we are exposed to market risks in the ordinary course of our business, including the effects of interest rate changes and foreign currency fluctuations. Information relating to quantitative and qualitative disclosures about these market risks is described below.


Equity Price Risk

Marketable Equity Investments

Our marketable equity investments are investments held in publicly-traded companies and are measured using quoted prices in active markets which could result in volatility in our financial results in future periods. As of December 31, 2023, our marketable equity investments were immaterial. Adjustments are recorded in other (expense) income, net on the consolidated statements of operations and establish a new carrying value for the investment. A hypothetical 10% increase or decrease in the fair value of our marketable equity investments would not have a material effect on our financial results.

Non-Marketable Equity Investments

Our non-marketable equity investments are investments in privately-held companies that we hold for purposes other than trading. These investments are inherently risky because there is no established market for these securities and the markets for the technologies or products these companies are developing are typically in the early stages. As such, we could lose our entire investment in these companies. Adjustments are recorded in other expense (income), net on the consolidated statements of operations and establish a new carrying value for the investment. As of December 31, 2023, the aggregate carrying value of our non-marketable equity investments included in other non-current assets was $205.3 million. A hypothetical 10% increase or decrease in the carrying value of our non-marketable equity investments would not have a material effect on our financial results.

85

Bitcoin Market Price Risk

Our bitcoin investment is measured using observed prices from active exchanges which could result in volatility in our financial results in future periods. Adjustments are recorded in net income through “other expense (income), net” on the consolidated statements of operations. As of December 31, 2023, the fair value of our bitcoin investment included in other non-current assets was $339.9 million. A hypothetical 10% increase or decrease in the fair value of our bitcoin investment would not have a material effect on our financial results.

Interest Rate Sensitivity


Our cash and cash equivalents, and marketable debt securities as of December 31, 2017,2023 were held primarily in cash deposits, money market funds, U.S. government and agency securities, commercial paper, and corporate bonds. The fair value of our cash, cash equivalents, and marketable debt securities would not be significantly affected by either an increase or decrease in interest rates due mainly to the short-term nature of a majority of these instruments. Additionally, we have the ability to hold these instruments until maturity if necessary to reduce our risk. AnyOur Warehouse Facilities borrowings and any future borrowings incurred under our credit facility wouldthe 2020 Credit Facility both accrue

67





interest at a floating ratevariable rates based on a formulaformulas tied to certain market rates at the time of incurrence (as described above).incurrence. A hypothetical 100 basis point10% increase or decrease in interest rates would not have a material effect on our financial results.


Foreign Currency Risk


Our consolidated financial statements are presented in U.S. dollars. Most of our revenue is earned in U.S. dollars and, thereforesubsequent to the acquisition of Afterpay, a portion is earned in Australian Dollars. Our exposure to other foreign currencies would not have a material effect on our revenue is not currently subject to significant foreign currency risk.financial results. Our foreign operations are denominated in the currencies of the countries in which our operations are located, and may be subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Japanese Yen, Canadian Dollar, Australian Dollar, Eurorates. Our results of operations and British Pound. Fluctuationscash flows are, therefore, subject to fluctuations in foreign currency exchange rates and may cause us to recognize transaction gains and losses on our financial statements.

From time to time, we use foreign exchange derivative contracts to hedge a portion of our exposure to changes in currency exchange rates, which result from our statementglobal operating and financing activities. We do not use derivative financial instruments for trading or speculative purposes. Gains and losses from foreign currency transactions, as well as foreign exchange forward contracts, were not significant for any period presented in the consolidated financial statements included in this Annual Report on Form 10-K. We did not have any material gains and losses from foreign currency derivatives outstanding as of operations.December 31, 2023. A hypothetical 10% increase or decrease in current exchange rates on our financial instruments would not have a material impacteffect on our financial results.




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86






ItemITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


SQUARE,BLOCK, INC.
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

Page No
7088
Consolidated Balance Sheets
7291
Consolidated Statements of Operations
7392
Consolidated Statements of Comprehensive LossIncome (Loss)
7493
7594
Consolidated Statements of Cash Flows
7795
7997


The supplementary financial information required by this Item 8 is included in Part II, Item 7 under the caption "Quarterly Results of Operations," which is incorporated herein by reference.




87

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




TheTo the Stockholders and the Board of Directors and Stockholdersof Block, Inc.
Square, Inc.:

OpinionsOpinion on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Square,Block, Inc. and subsidiaries (the “Company”)Company) as of December 31, 20172023 and 2016,2022, and the related consolidated statements of operations, comprehensive loss,income (loss), stockholders’ equity and cash flows for each of the three years in the three-year period ended December 31, 2017,2023, and the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as ofat December 31, 20172023 and 2016,2022, and the results of its operations and its cash flows for each of the three years in the three-year period ended December 31, 2017,2023, in conformity with U.S. generally accepted accounting principles. Also

We also have audited, in our opinion,accordance with the standards of the Public Company maintained, in all material respects, effectiveAccounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2017,2023, based on criteria established in Internal Control - Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.Commission (2013 framework), and our report dated February 22, 2024 expressed an unqualified opinion thereon.

Basis for Opinion
The Company’s management is responsible for these consolidated
These financial statements for maintaining effective internal control over financial reporting, and for its assessmentare the responsibility of the effectiveness of internal control over financial reporting, included in the accompanying Form 10-K.Company's management. Our responsibility is to express an opinion on the Company’s consolidatedCompany's financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the auditsaudit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
fraud. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements.statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.





88

Allowance for Credit Losses related to Consumer Receivables
Description of the MatterThe Company’s consumer receivables and the associated allowance for credit losses were $2.6 billion and $185.3 million as of December 31, 2023, respectively. The provision for credit losses was $261.3 million for the year ended December 31, 2023. As discussed in Notes 1 and 6 to the consolidated financial statements, the Company has exposure to expected credit losses from consumer receivables, for which an allowance for credit losses is recorded under ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The Company estimates the allowance for credit losses related to consumer receivables using both quantitative methods, based on historical payment patterns including losses and recoveries, recent and historical trends in delinquencies, past-due receivables and charge-offs, and qualitative methods, which consider consumer behavior, current and historical macroeconomic trends, along with other factors.
Auditing management’s estimate of the allowance for credit losses related to consumer receivables was challenging because management’s estimate required a high degree of judgment in evaluating historical trends related to loss rates and an assessment of a need for a qualitative adjustment in the Company’s expected credit loss methodology.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s controls over the process for determining the allowance for credit losses related to consumer receivables. This includes testing controls over management’s review of the methodology to determine estimated losses, the completeness and accuracy of historical losses and recoveries, past-due receivables and charge-offs, and management’s qualitative assumptions on future losses.

To test the Company’s allowance for credit losses related to consumer receivables, we involved EY specialists in testing management’s methodology and key assumptions. Our audit procedures included, among others, evaluating the Company’s methodology as well as performing procedures over historical losses incurred by the Company by aging category and testing recoveries. In addition, we evaluated and tested management’s conclusion for the need for a qualitative adjustment in the Company’s expected credit loss methodology including the examination of current macroeconomic conditions such as changes in unemployment and GDP. We also reviewed subsequent events, which included actual collections on current and aged receivables as of December 31, 2023, to consider whether they corroborated the Company’s conclusion related to the overall allowance for credit losses related to consumer receivables.

/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2019.
San Francisco, California
February 22, 2024
89

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Block, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Block, Inc.’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Block, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years ended December 31, 2023, and the related notes and our report dated February 22, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also includedrisk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audits provideaudit provides a reasonable basis for our opinions.opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and


expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



/s/ KPMGErnst & Young LLP

We have served as the Company’s auditor since 2011.
San Francisco, California
February 27, 201822, 2024

90



SQUARE,BLOCK, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
December 31,
20232022
Assets
Current assets:
Cash and cash equivalents$4,996,465 $4,544,202 
Investments in short-term debt securities851,901 1,081,851 
Settlements receivable3,226,294 2,416,324 
Customer funds3,170,430 3,180,324 
Consumer receivables, net2,444,695 1,871,160 
Loans held for sale775,424 474,036 
Safeguarding asset related to bitcoin held for other parties1,038,585 428,243 
Other current assets2,353,488 1,627,265 
Total current assets18,857,282 15,623,405 
Property and equipment, net296,056 329,302 
Goodwill11,919,720 11,966,761 
Acquired intangible assets, net1,761,521 2,014,034 
Investments in long-term debt securities251,127 573,429 
Operating lease right-of-use assets244,701 373,172 
Other non-current assets739,486 484,237 
Total assets$34,069,893 $31,364,340 
Liabilities and Stockholders’ Equity
Current liabilities:
Customers payable$6,795,340 $5,548,656 
Settlements payable8,469 462,505 
Accrued expenses and other current liabilities1,326,200 1,073,516 
Current portion of long-term debt (Note 15)— 460,356 
Warehouse funding facilities, current753,035 461,240 
Safeguarding obligation liability related to bitcoin held for other parties1,038,585 428,243 
Total current liabilities9,921,629 8,434,516 
Deferred tax liabilities35,695 132,498 
Warehouse funding facilities, non-current854,882 877,066 
Long-term debt (Note 15)4,120,091 4,109,829 
Operating lease liabilities, non-current289,788 357,419 
Other non-current liabilities154,972 201,657 
Total liabilities15,377,057 14,112,985 
Commitments and contingencies (Note 20)
Stockholders’ equity:
Preferred stock, $0.0000001 par value: 100,000 shares authorized at December 31, 2023 and December 31, 2022. None issued and outstanding at December 31, 2023 and December 31, 2022.— — 
Class A common stock, $0.0000001 par value: 1,000,000 shares authorized at December 31, 2023 and December 31, 2022; 555,306 and 539,408 issued and outstanding at December 31, 2023 and December 31, 2022, respectively.— — 
Class B common stock, $0.0000001 par value: 500,000 shares authorized at December 31, 2023 and December 31, 2022; 60,515 and 60,652 issued and outstanding at December 31, 2023 and December 31, 2022, respectively.— — 
Additional paid-in capital19,601,992 18,314,681 
Accumulated other comprehensive loss(378,307)(523,090)
Accumulated deficit(528,429)(568,712)
Total stockholders’ equity attributable to common stockholders18,695,256 17,222,879 
Noncontrolling interests(2,420)28,476 
Total stockholders’ equity18,692,836 17,251,355 
Total liabilities and stockholders’ equity$34,069,893 $31,364,340 
The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.
91
 December 31,
 2017 2016
Assets   
Current assets:   
Cash and cash equivalents$696,474
 $452,030
Short-term investments169,576
 59,901
Restricted cash28,805
 22,131
Settlements receivable620,523
 321,102
Customer funds103,042
 43,574
Loans held for sale73,420
 42,144
Other current assets86,454
 60,543
Total current assets1,778,294
 1,001,425
Property and equipment, net91,496
 88,328
Goodwill58,327
 57,173
Acquired intangible assets, net14,334
 19,292
Long-term investments203,667
 27,366
Restricted cash9,802
 14,584
Other non-current assets31,350
 3,194
Total assets$2,187,270
 $1,211,362
Liabilities and Stockholders’ Equity   
Current liabilities:   
Accounts payable$16,763
 $12,602
Customers payable733,736
 431,632
Settlements payable114,788
 51,151
Accrued transaction losses26,893
 20,064
Accrued expenses52,280
 39,543
Other current liabilities28,367
 22,472
Total current liabilities972,827
 577,464
Long-term debt (Note 9)358,572
 —
Other non-current liabilities69,538
 57,745
Total liabilities1,400,937
 635,209
Commitments and contingencies (Note 14)
 
Stockholders’ equity:
  
Preferred stock, $0.0000001 par value: 100,000,000 shares authorized at December 31, 2017 and December 31, 2016. None issued and outstanding at December 31, 2017 and December 31, 2016.—
 —
Class A common stock, $0.0000001 par value: 1,000,000,000 shares authorized at December 31, 2017 and December 31, 2016; 280,400,813 and 198,746,620 issued and outstanding at December 31, 2017 and December 31, 2016, respectively.—
 —
Class B common stock, $0.0000001 par value: 500,000,000 shares authorized at December 31, 2017 and December 31, 2016; 114,793,262 and 165,800,756 issued and outstanding at December 31, 2017 and December 31, 2016, respectively.—
 —
Additional paid-in capital1,630,386
 1,357,381
Accumulated other comprehensive loss(1,318) (1,989)
Accumulated deficit(842,735) (779,239)
Total stockholders’ equity786,333
 576,153
Total liabilities and stockholders’ equity$2,187,270
 $1,211,362

See accompanying notes to consolidated financial statements.


SQUARE,BLOCK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year Ended December 31,
202320222021
Revenue:
Transaction-based revenue$6,315,301 $5,701,540 $4,793,146 
Subscription and services-based revenue5,944,842 4,552,773 2,709,731 
Hardware revenue157,178 164,418 145,679 
Bitcoin revenue9,498,302 7,112,856 10,012,647 
Total net revenue21,915,623 17,531,587 17,661,203 
Cost of revenue:
Transaction-based costs3,702,016 3,364,028 2,719,502 
Subscription and services-based costs1,075,129 861,745 483,056 
Hardware costs267,650 286,995 221,185 
Bitcoin costs9,293,113 6,956,733 9,794,992 
Amortization of acquired technology assets72,829 70,194 22,645 
Total cost of revenue14,410,737 11,539,695 13,241,380 
Gross profit7,504,886 5,991,892 4,419,823 
Operating expenses:
Product development2,720,819 2,135,612 1,383,841 
Sales and marketing2,019,009 2,057,951 1,617,189 
General and administrative2,209,190 1,686,849 982,817 
Transaction, loan, and consumer receivable losses660,663 550,683 187,991 
Bitcoin impairment losses— 46,571 71,126 
Amortization of customer and other acquired intangible assets174,044 138,758 15,747 
Total operating expenses7,783,725 6,616,424 4,258,711 
Operating income (loss)(278,839)(624,532)161,112 
Interest expense (income), net(47,221)36,228 33,124 
Other income, net(202,475)(95,443)(29,474)
Income (loss) before income tax(29,143)(565,317)157,462 
Benefit for income taxes(8,019)(12,312)(1,364)
Net income (loss)(21,124)(553,005)158,826 
Less: Net loss attributable to noncontrolling interests(30,896)(12,258)(7,458)
Net income (loss) attributable to common stockholders$9,772 $(540,747)$166,284 
Net income (loss) per share attributable to common stockholders:
Basic$0.02 $(0.93)$0.36 
Diluted$0.02 $(0.93)$0.33 
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders:
Basic608,856 578,949 458,432 
Diluted614,024 578,949 501,779 

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.
92
 Year Ended December 31,
 2017 2016 2015
Revenue:     
Transaction-based revenue$1,920,174
 $1,456,160
 $1,050,445
Starbucks transaction-based revenue—
 78,903
 142,283
Subscription and services-based revenue252,664
 129,351
 58,013
Hardware revenue41,415
 44,307
 16,377
Total net revenue2,214,253
 1,708,721
 1,267,118
Cost of revenue:     
Transaction-based costs1,230,290
 943,200
 672,667
Starbucks transaction-based costs—
 69,761
 165,438
Subscription and services-based costs75,720
 43,132
 22,470
Hardware costs62,393
 68,562
 30,874
Amortization of acquired technology6,544
 8,028
 5,639
Total cost of revenue1,374,947
 1,132,683
 897,088
Gross profit839,306
 576,038
 370,030
Operating expenses:     
Product development321,888
 268,537
 199,638
Sales and marketing253,170
 173,876
 145,618
General and administrative250,553
 251,993
 143,466
Transaction, loan and advance losses67,018
 51,235
 54,009
Amortization of acquired customer assets883
 850
 1,757
Total operating expenses893,512
 746,491
 544,488
Operating loss(54,206) (170,453) (174,458)
Interest and other (income) expense, net8,458
 (780) 1,613
Loss before income tax(62,664) (169,673) (176,071)
Provision for income taxes149
 1,917
 3,746
Net loss(62,813) (171,590) (179,817)
Deemed dividend on Series E preferred stock—
 —
 (32,200)
Net loss attributable to common stockholders$(62,813) $(171,590) $(212,017)
Net loss per share attributable to common stockholders:     
Basic$(0.17) $(0.50) $(1.24)
Diluted$(0.17) $(0.50) $(1.24)
Weighted-average shares used to compute net loss per share attributable to common stockholders:     
Basic379,344
 341,555
 170,498
Diluted379,344
 341,555
 170,498
See accompanying notes to consolidated financial statements.

73






SQUARE,BLOCK, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSINCOME (LOSS)
(In thousands)

Year Ended December 31,
202320222021
Net income (loss)$(21,124)$(553,005)$158,826 
Net foreign currency translation adjustments104,728 (471,166)(24,667)
Net unrealized gain (loss) on marketable debt securities40,055 (35,489)(15,096)
Total comprehensive income (loss)$123,659 $(1,059,660)$119,063 

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.
93
 Year Ended December 31,
 2017 2016 2015
Net loss$(62,813) $(171,590) $(179,817)
Net foreign currency translation adjustments1,900
 (716) (356)
Net unrealized gain (loss) on revaluation of intercompany loans385
 (11) (22)
Net unrealized loss on marketable securities(1,614) (77) —
Total comprehensive loss$(62,142) $(172,394) $(180,195)

See accompanying notes to consolidated financial statements.

74






SQUARE,BLOCK, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except for number of shares)
Class A and B common stockCommon stock and Additional paid-inAccumulated other comprehensiveAccumulatedNoncontrollingTotal stockholders’
Sharescapitalincome (loss)deficitinterestsequity
Balance at December 31, 2020456,185 $2,955,464 $23,328 $(297,223)$— $2,681,569 
Cumulative adjustment due to adoption of ASU 2020-06— (502,707)— 102,974 — (399,733)
Net income (loss)— — — 166,284 (7,458)158,826 
Shares issued in connection with employee stock plans11,976 126,829 — — — 126,829 
Issuance of common stock in connection with business combination118 28,735 — — — 28,735 
Change in other comprehensive loss— — (39,763)— — (39,763)
Share-based compensation— 623,067 — — — 623,067 
Tax withholding related to vesting of restricted stock units(1,403)(323,012)— — — (323,012)
Issuance of common stock in conjunction with the conversion of convertible notes5,515 408,879 — — — 408,879 
Exercise of bond hedges in conjunction with the conversion of convertible notes(7,447)— — — — — 
Noncontrolling interests in connection with business combination— — — — 48,192 48,192 
Balance at December 31, 2021464,944 $3,317,255 $(16,435)$(27,965)$40,734 $3,313,589 
Net loss— — — (540,747)(12,258)(553,005)
Shares issued in connection with employee stock plans11,824 81,768 — — — 81,768 
Issuance of common stock in connection with business combination113,617 13,827,929 — — — 13,827,929 
Change in other comprehensive loss— — (506,655)— — (506,655)
Share-based compensation— 1,092,010 — — — 1,092,010 
Tax withholding related to vesting of restricted stock units(37)(4,735)— — — (4,735)
Issuance of common stock in conjunction with the conversion of convertible notes20 454 — — — 454 
Exercise of bond hedges in conjunction with the conversion of convertible notes(1,189)— — — — — 
Issuance of common stock in connection with the exercise of common stock warrants10,881 — — — — — 
Balance at December 31, 2022600,060 $18,314,681 $(523,090)$(568,712)$28,476 $17,251,355 
Cumulative adjustment due to adoption of ASU 2023-08— — — 30,511 — 30,511 
Net income (loss)— — — 9,772 (30,896)(21,124)
Shares issued in connection with employee stock plans18,055 130,433 — — — 130,433 
Repurchases of common stock(2,466)(156,812)— — — (156,812)
Change in other comprehensive income— — 144,783 — — 144,783 
Share-based compensation— 1,307,032 — — — 1,307,032 
Issuance of common stock in connection with business combination172 6,658 — — — 6,658 
Balance at December 31, 2023615,821 $19,601,992 $(378,307)$(528,429)$(2,420)$18,692,836 

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.
94
  Convertible preferred stock Class A and B common stock Additional paid-in Accumulated other comprehensive Accumulated Total stockholders’
  Shares Amount Shares Amount capital loss deficit equity
Balance at December 31, 2014135,252,809
 $514,945
 154,603,683
 $—
 $155,166
 $(807) $(395,632) $273,672
 Net loss—
 —
 —
 —
 —
 —
 (179,817) (179,817)
Shares issued in connection with:               
 Issuance of common stock upon initial public offering, net of issuance costs—
 —
 29,700,000
 

 245,726
 —
 —
 245,726
 Series E preferred stock financing1,940,058
 29,952
 —
 —
 —
 —
 —
 29,952
 Conversion of Series A, B, C, D & E preferred stock upon initial public offering to common stock(137,192,867) (544,897) 137,192,867
   544,897
 —
 —
 —
 Deemed dividend on Series E preferred stock—
 —
 10,299,696
 —
 32,200
 —
 (32,200) —
 Exercise of stock options—
 —
 5,544,785
 —
 14,766
 —
 —
 14,766
 Issuance of common stock related to acquisitions—
 —
 3,591,014
 —
 35,776
 —
 —
 35,776
 Issuance of common stock—
 —
 3,777
 —
 —
 —
 —
 —
Vesting of early exercised stock options—
 —
 —
 —
 4,958
 —
 —
 4,958
Contribution of common stock—
 —
 (5,068,238) —
 —
 —
 —
 —
Repurchase of common stock—
 —
 (918,139) —
 —
 —
 —
 —
Change in other comprehensive loss—
 —
 —
 —
 —
 (378) —
 (378)
Share-based compensation—
 —
 —
 —
 82,292
 —
 —
 82,292
Tax benefit from share-based award activity—
 —
 —
 —
 1,101
 —
 —
 1,101
Balance at December 31, 2015—
 $—
 334,949,445
 $—
 $1,116,882
 $(1,185) $(607,649) $508,048
 Net loss—
 —
 —
 —
 —
 —
 (171,590) (171,590)
Shares issued in connection with:               
 Exercise of stock options and warrants—
 —
 24,413,821
 —
 82,438
 —
 —
 82,438
 Purchases under employee stock purchase plan—
 —
 1,852,900
 —
 14,201
 —
 —
 14,201
 Vesting of restricted stock units—
 —
 3,392,726
 —
 —
 —
 —
 —
Vesting of early exercised stock options—
 —
 —
 —
 2,313
 —
 —
 2,313
Cancellation of shares related to business combinations—
 —
 (228) —
 —
 —
 —
 —
Repurchase of common stock—
 —
 (61,288) —
 —
 —
 —
 —
Change in other comprehensive loss—
 —
 —
 —
 —
 (804) —
 (804)
Share-based compensation—
 —
 —
 —
 141,547
 —
 —
 141,547
Balance at December 31, 2016—
 $—
 364,547,376
 $—
 $1,357,381
 $(1,989) $(779,239) $576,153
 Net loss—
 —
 —
 —
 —
 —
 (62,813) (62,813)
Shares issued in connection with:              
 Exercise of stock options—
 —
 24,510,745
 —
 144,774
 —
 —
 144,774
 Purchases under employee stock purchase plan—
 —
 1,670,045
 —
 17,859
 —
 —
 17,859
 Vesting of restricted stock units—
 —
 5,964,153
 —
 —
 —
 —
 —

75






  Convertible preferred stock Class A and B common stock Additional paid-in Accumulated other comprehensive Accumulated Total stockholders’
  Shares Amount Shares Amount capital loss deficit equity
Vesting of early exercised stock options and other—
 —
   —
 661
 —
 —
 661
Repurchase of common stock—
 —
 (24,209) —
 —
 —
 —
 —
Change in other comprehensive loss—
 —
 —
 —
 —
 671
 —
 671
Share-based compensation—
 —
 —
 —
 159,509
 —
 —
 159,509
Tax withholding related to vesting of restricted stock units—
 —
 (1,474,035) —
 (44,682) —
 —
 (44,682)
Conversion feature of convertible senior notes, due 2022, net of allocated debt issuance costs—
 —
 —
 —
 83,901
 —
 —
 83,901
Purchase of bond hedges in conjunction with issuance of convertible senior notes, due 2022—
 —
 —
 —
 (92,136) —
 —
 (92,136)
Sale of warrants in conjunction with issuance of convertible senior notes, due 2022—
 —
 —
 —
 57,244
 —
 —
 57,244
Payment for termination of Starbucks warrant—
 —
 —
 —
 (54,808) —
 —
 (54,808)
Cumulative adjustment due to adoption of new standard (Note 12)—
 —
 —
 —
 683
 —
 (683) —
Balance at December 31, 2017—
 —
 395,194,075
 —
 1,630,386
 (1,318) (842,735) 786,333

See accompanying notes to consolidated financial statements.

76





SQUARE,BLOCK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Year Ended December 31,
 2017 2016 2015
Cash flows from operating activities:     
Net loss$(62,813) $(171,590) $(179,817)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:     
Depreciation and amortization37,279
 37,745
 27,626
Non-cash interest and other expense14,421
 (49) 270
Share-based compensation155,836
 138,786
 82,292
Excess tax benefit from share-based payment activity—
 —
 (1,101)
Transaction, loan and advance losses67,018
 51,235
 54,009
Deferred provision (benefit) for income taxes(1,385) 58
 26
Changes in operating assets and liabilities:     
Settlements receivable(305,831) (177,662) (31,810)
Customer funds(59,468) (34,128) (6,462)
Purchase of loans held for sale(1,184,630) (668,976) (816)
Sales and principal payments of loans held for sale1,145,314
 627,627
 21
Other current assets(26,119) 16,116
 (25,841)
Other non-current assets(3,274) 631
 1,220
Accounts payable4,515
 (2,147) 7,831
Customers payable301,778
 206,574
 76,009
Settlements payable63,637
 38,046
 13,105
Charge-offs to accrued transaction losses(46,148) (47,931) (34,655)
Accrued expenses12,207
 (409) 21,450
Other current liabilities3,683
 6,056
 6,655
Other non-current liabilities11,691
 3,149
 11,111
Net cash provided by operating activities127,711
 23,131
 21,123
Cash flows from investing activities:     
Purchase of marketable securities(544,910) (164,766) —
Proceeds from maturities of marketable securities168,224
 43,200
 —
Proceeds from sale of marketable securities89,087
 34,222
 —
Purchase of property and equipment(26,097) (25,433) (37,432)
Proceeds from sale of property and equipment—
 296
 —
Payments for investment in privately held entity(25,000) —
 —
Payment for acquisition of intangible assets—
 (400) (1,286)
Business acquisitions, net of cash acquired(1,915) (1,360) (4,500)
Net cash used in investing activities:(340,611) (114,241) (43,218)
Cash flows from financing activities:     
Proceeds from issuance of convertible senior notes, net428,250
 —
 —
Purchase of convertible senior note hedges(92,136) —
 —
Proceeds from issuance of warrants57,244
 —
 —
Payment for termination of Starbucks warrant(54,808) —
 —
Proceeds from issuance of preferred stock, net—
 —
 29,952
Proceeds from issuance of common stock upon initial public offering, net of offering costs
 —
 251,257
Payments of offering costs related to initial public offering—
 (5,530) —
Principal payments on debt—
 —
 (30,000)
Payments of debt issuance costs—
 —
 (1,387)
Principal payments on capital lease obligation(1,439) (168) —
Proceeds from the exercise of stock options and purchases under the employee stock purchase plan, net162,504
 96,439
 13,840
Payments for tax withholding related to vesting of restricted stock units(44,682) —
 —
Excess tax benefit from share-based payment award—
 —
 1,101


Year Ended December 31,
202320222021
Cash flows from operating activities:
Net income (loss)$(21,124)$(553,005)$158,826 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization408,560 340,523 134,757 
Amortization of discounts and premiums and other non-cash adjustments(984,442)(592,489)31,104 
Non-cash lease expense144,198 129,811 83,137 
Share-based compensation1,276,097 1,071,278 608,040 
Loss (gain) on revaluation of equity investments16,523 (73,457)(35,492)
Bitcoin remeasurement(207,084)— — 
Transaction, loan, and consumer receivable losses660,663 550,683 187,991 
Bitcoin impairment losses— 46,571 71,126 
Change in deferred income taxes(85,879)(69,593)(10,435)
Goodwill impairment132,313 — — 
Changes in operating assets and liabilities:
Settlements receivable(1,108,529)(1,499,057)(346,217)
Purchases and originations of loans(8,586,293)(6,114,847)(3,227,172)
Proceeds from payments and forgiveness of loans8,032,687 6,040,369 3,067,344 
Customers payable1,256,578 1,060,861 171,555 
Settlements payable(454,036)207,894 15,249 
Other assets and liabilities(379,271)(369,639)(61,983)
Net cash provided by operating activities100,961 175,903 847,830 
Cash flows from investing activities:
Purchases of marketable debt securities(1,126,615)(755,697)(2,714,560)
Proceeds from maturities of marketable debt securities1,387,830 999,569 831,019 
Proceeds from sale of marketable debt securities339,095 449,723 617,097 
Purchases of marketable debt securities from customer funds— — (488,851)
Proceeds from maturities of marketable debt securities from customer funds— 73,000 505,501 
Proceeds from sale of marketable debt securities from customer funds— 316,576 35,071 
Payments for originations of consumer receivables(23,968,787)(18,361,871)— 
Proceeds from principal repayments and sales of consumer receivables24,241,651 18,192,470 — 
Purchases of property and equipment(151,151)(170,815)(134,320)
Purchases of bitcoin investments— — (170,000)
Purchases of other investments(33,853)(56,712)(48,510)
Proceeds from sale of equity investments— — 420,644 
Business combinations, net of cash acquired(4,969)539,453 (163,970)
Net cash provided by (used in) investing activities683,201 1,225,696 (1,310,879)

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

77
95






BLOCK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(In thousands)

Year Ended December 31,
202320222021
Cash flows from financing activities:
Proceeds from issuance of senior notes, net— — 1,971,828 
Payments to redeem convertible notes(461,761)(1,071,788)— 
Proceeds from PPP Liquidity Facility advances— — 681,539 
Repayments of PPP Liquidity Facility advances(16,840)(480,694)(648,100)
Proceeds from warehouse facilities borrowings    1,387,662 1,620,805 — 
Repayments of warehouse facilities borrowings    (1,118,083)(391,463)— 
Proceeds from the exercise of stock options and purchases under the employee stock purchase plan130,433 81,768 126,719 
Payments for tax withholding related to vesting of restricted stock units— (4,735)(323,011)
Net increase in interest-bearing deposits25,135 82,049 59,844 
Repurchases of common stock(156,812)— — 
Other financing activities(19,977)(87,692)(9,948)
Change in customer funds, restricted from use in the Company's operations(9,894)349,330 793,163 
Net cash provided by (used in) financing activities(240,137)97,580 2,652,034 
Effect of foreign exchange rate on cash and cash equivalents29,156 (38,363)(7,066)
Net increase in cash, cash equivalents, restricted cash, and customer funds573,181 1,460,816 2,181,919 
Cash, cash equivalents, restricted cash, and customer funds, beginning of the period8,435,906 6,975,090 4,793,171 
Cash, cash equivalents, restricted cash, and customer funds, end of the period$9,009,087 $8,435,906 $6,975,090 
Reconciliation of cash, cash equivalents, restricted cash, and customer funds:
Cash and cash equivalents$4,996,465 $4,544,202 $4,443,669 
Short-term restricted cash770,380 639,780 18,778 
Long-term restricted cash71,812 71,600 71,702 
Customer funds cash and cash equivalents3,170,430 3,180,324 2,440,941 
Total$9,009,087 $8,435,906 $6,975,090 

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.
Net cash provided by financing activities454,933
 90,741
 264,763
Effect of foreign exchange rate on cash and cash equivalents4,303
 (438) (1,775)
Net increase (decrease) in cash, cash equivalents and restricted cash246,336
 (807) 240,893
Cash, cash equivalents and restricted cash, beginning of the year488,745
 489,552
 248,659
Cash, cash equivalents and restricted cash, end of the year$735,081
 $488,745
 $489,552
96
See accompanying notes to consolidated financial statements.

78






SQUARE,BLOCK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Business


Square,Block, Inc. (together with its subsidiaries, Square"Block" or the Company)"Company") creates tools that helpempower businesses, sellers, and individuals to participate in the economy. Block is comprised of two reportable segments, Square and Cash App. Square is a cohesive commerce ecosystem that helps sellers start, run, and grow their businesses. Square enablesbusinesses, including enabling sellers to accept card payments, and also providesprovide reporting and analytics, and facilitating next-day settlement, and chargeback protection.settlement. Square’s point-of-sale software and other business services help sellers manage inventory, locations, and employees; access financing;financial services; engage customers;buyers; build a website or online store; and grow sales. Cash App is an easy wayecosystem of financial products and services focused on helping consumers make their money go further by enabling customers to store, send, receive, spend, invest, borrow, or save their money. Cash App seeks to redefine the world’s relationship with money by making it more relatable, instantly available, and universally accessible.

On January 31, 2022, the Company completed the acquisition of Afterpay Limited (“Afterpay”), a global buy now, pay later ("BNPL") platform, to strengthen its position to better deliver compelling financial products and services that expand access to more consumers and drive incremental revenue for businesses and individualsmerchants of all sizes. Refer to send and receive money and Caviar is a food ordering service Note 9, Acquisitions for pickup and delivery that helps restaurants reach new customers. Squarefurther details.

Block was founded in 2009 and is headquartered in San Francisco, withhas offices in the United States, Canada, Japan, Australia, Ireland, and the United Kingdom.

Reclassifications and Other Adjustments

As a result of the Company’s adoption of Accounting Standards Update (ASU) No. 2016-18, Restricted Cash, on January 1, 2017, the Company reclassified changes in restricted cash balances from investing activities in the statement of cash flows to changes in cash, cash equivalents and restricted cash. For the years ended December 31, 2016 and 2015, $8.5 million and $1.9 million, respectively, was reclassified from cash outflows from investing activities to changes in cash, cash equivalents and restricted cash.

During the year ended December 31, 2017, the Company has reclassified certain prior period balances to conform to the current period presentation. In particular the Company has combined the Customer funds obligation and Customers payable into a single caption called Customers payable on the consolidated balance sheet. This classification change was made because both accounts reflect customer amounts that are held by Square that are obligations to the customer.

Litigation Settlement

On June 8, 2016, a final, definitive settlement agreement (Settlement Agreement) was entered into by Robert E. Morley, REM Holdings 3, LLC, Jack Dorsey, Jim McKelvey, and the Company. The Settlement Agreement required an aggregate total payment of $50.0 million to plaintiffs, including meaningful contributions by Mr. Dorsey and Mr. McKelvey.globally. The Company madedoes not designate a payment of $48.0 million to plaintiffs and met its obligations under the Settlement Agreement. This amount was classified within general and administrative expenses on the consolidated statements of operations for the year ended December 31, 2016. On June 17, 2016, the Court entered an Order dismissing the complaintsheadquarters location as it adopted a distributed work model in their entirety, with prejudice.2021.


Basis of Presentation


The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles generally accepted in the United States of America (U.S. GAAP)("U.S. GAAP") and the applicable rules and regulations of the Securities and Exchange Commission ("SEC"). The consolidated financial statements include the accountsfinancial statements of the CompanyBlock and its wholly-owned and majority-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Minority interests are recorded as a noncontrolling interest, which is reported as a component of stockholders' equity on the consolidated balance sheets.


Use of Estimates


The preparation of the Company’s consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, as well as related disclosure of contingent assets and liabilities. Actual results could differ from the Company’s estimates. To the extent that there are material differences between these estimates and actual results, the Company’s financial condition or operating results will be materially affected. The Company bases its estimates on current and past experience, to the extent that historical experience is predictive of future performance and other assumptions that the Company believes are reasonable under the circumstances, and thecircumstances. The Company evaluates these estimates on an ongoing basis.


Estimates, judgments, and assumptions in these consolidated financial statements include, but are not limited to, those related to revenue recognition, accrued transaction losses, valuation of the debt component of convertible senior notes,contingencies, including outcomes from claims and disputes, valuation of loans held for sale and investment, valuation of goodwill and acquired intangible assets, determination of goodwill impairment charges, determination of allowance for loan loss reserves for loans held for investment, determination of allowance for credit losses for consumer receivables, pre-acquisition contingencies associated with business combinations, allocation of acquired goodwill to reporting units, income and other taxes, operating and financing lease right-of-use assets and related liabilities, and share-based compensation.



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The Company's estimates of valuation of loans held for sale and investment, allowance for credit losses associated with consumer receivables and loans held for investment, and accrued transaction losses are based on historical experience, adjusted for market data relevant to the current economic environment. The Company will continue to update its estimates as developments occur and additional information is obtained. Refer to Note 5, Fair Value Measurements for further details on amortized cost and fair value of the loans; Note 6, Consumer Receivables, net for further details on consumer receivables; and Note 12, Other Consolidated Balance Sheet Components (Current) for further details on transaction losses.

Concentration of Credit Risk

For the years ended December 31, 2023, 2022, and 2021, the Company had no customer that accounted for greater than 10% of total net revenue.

As of December 31, 2023, the Company had two third-party payment processors that represented approximately 46% and 35% of settlements receivable. As of December 31, 2022, the company had two third-party payment processors that represented approximately 54% and 31% of settlements receivable. In both years, all other third-party processors were insignificant.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, marketable debt securities, settlements receivable, customer funds, consumer receivables, loans held for sale, and loans held for investment. To mitigate the risk of concentration associated with cash and cash equivalents, as well as restricted cash, funds are held with creditworthy institutions and, at certain times, temporarily swept into insured programs overnight to reduce single firm concentration risk. Amounts on deposit may exceed federal deposit insurance limits. The associated risk of concentration for marketable debt securities is mitigated by holding a diversified portfolio of highly rated investments. Settlements receivable are amounts due from well-established payment processing companies and normally take one or two business days to settle which mitigates the associated risk of concentration. The associated risk of concentration for loans and consumer receivables is partially mitigated by credit evaluations that are performed prior to facilitating the offering of loans and receivables and ongoing performance monitoring of the Company’s loan customers.

Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements reflect our accounts and operations and those of our subsidiaries in which we have a controlling financial interest. In accordance with the provisions of Accounting Standards Codification ("ASC") 810, Consolidation (“ASC 810”), there are two models for determining whether a subsidiary is to be consolidated. Under the voting interest model, we consolidate entities where we are deemed to have a controlling financial interest. We also consolidate any variable interest entity (“VIE”) where we are deemed to be the primary beneficiary. The primary beneficiary is the party that has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. As described in Note 15, Indebtedness, we have formed wholly owned "Warehouse Special Purpose Entities ("SPEs"), which qualify as VIEs under ASC 810. We have determined that we are the primary beneficiary of all Warehouse SPEs, which we therefore consolidate. We evaluate our relationships with all the VIEs on an ongoing basis to determine if we continue to be the primary beneficiary. As of December 31, 2023 and 2022, the Company had $314.7 million and $276.7 million, respectively, in restricted cash related to VIE's. All intercompany transactions and balances have been eliminated upon consolidation.

Revenue Recognition


The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery of obligations to its customers has occurred, the related fees are fixed or determinable, and collectibility is reasonably assured. Revenue is generated fromrecognized when control of the following:promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.


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Transaction-based revenue and Starbucks transaction-based revenueRevenue


The Company charges its sellers a transaction fee for managed payments solutions that is generally calculated as a percentage of the total transaction amount processed. The Company selectively offers custom pricing for certain large sellers. The Company had a processing agreement with Starbucks, for certain Starbucks-owned stores in the United States. During the fourth quarter of 2016, Starbucks completed its previously announced transition to another payments solution provider.

The Company recognizescollects the transaction fees a seller pays to the Company as revenue upon authorization of a transaction byamount from the seller's customer's bank. Revenue is recognizedbank, net of refunds, which arise from reversals of transactions initiated byacquiring interchange and assessment fees, processing fees, and bank settlement fees paid to third-party payment processors and financial institutions. The Company retains its fees and remits the net amount to the sellers.

The Company acts as the merchant of record for its sellers and works directly with payment card networks and banks so that its sellers do not need to manage the complex systems, rules, and requirements of the payments industry. AsThe Company satisfies its performance obligations and therefore recognizes the merchanttransaction fees as revenue upon authorization of record, Squarea transaction by the seller's customer's bank.

Revenue is liable for settlementrecognized net of therefunds, which arise from reversals of transactions the Company processes for itsinitiated by sellers.


The gross transaction fees collected from sellers are recognized as revenue on a gross basis as the Company is the primary obligorprincipal in the delivery of the managed payments solutions to the sellers. The Company has concluded it is the principal because as the merchant of record, it controls the services before delivery to the seller, andit is primarily responsible for the delivery of the services to its sellers, and it has discretion in setting prices charged to sellers. The Company also has the unilateral ability to accept or reject a transaction based on criteria established by the Company. As the merchant of record, Square is liable for the costs of processing the transactions for its sellers, and records such costs within cost of revenue.

The Company also charges certain Cash App customers making peer-to-peer transactions using business accounts, or funding transactions with a credit card, a transaction fee that is generally calculated as a percentage of the total transaction amount processed. The Company collects the transaction amount from the customer's Cash App account, net of incurring interchange and assessment fees, processing fees, and bank settlement fees paid to third-party payment has latitude in establishing pricing with respectprocessors and financial institutions. The Company retains its fees and remits the net amount to the sellers and other terms of service, has sole discretion in selecting the third party to perform the settlement, and assumes the credit risk for the transaction processed.customers.


Subscription and services-based revenueServices-based Revenue

Subscription and services-based revenue is primarily generated bycomprised of revenue the Company generates from Cash App Instant Deposit, Caviar,Cash App Card, interest earned on customer funds, bitcoin withdrawal fees, Square CapitalLoans, the Company's BNPL platform, TIDAL, and various other software as a service ("SaaS") products.


Instant Deposit is a functionality within the Cash App and the Company's managed payment solutionspayments solution that enables customercustomers, including individuals and sellers, to instantly deposit funds into their bank accounts.accounts for a percentage-based fee of the amounts deposited.

The Cash App Card offers customers the ability to store funds in the Cash App and subsequently use these funds via a Visa prepaid card that is linked to the balance the customer stores in Cash App. The Company charges the customer a per transaction fee which we recognize as revenue when customersthey instantly deposit funds to their bank account.account or withdraw funds from an ATM. The Company also earns interchange fees when a Cash App Card is used to make a purchase. These transaction and interchange fees are treated as revenue when charged. While the Company is restricted from using the stored funds in the Company's operations, the Company may invest a portion of these funds in short-term marketable debt securities to generate interest income which is reported as revenue. Interest earned on customer funds was $153.5 million for the year ended December 31, 2023 and was immaterial for the years ended December 31, 2022, and 2021, respectively.


CaviarBitcoin withdrawal is a food ordering platformfunctionality within the Cash App that facilitates food delivery servicesenables customers to withdraw bitcoin stored on Cash App to a third party wallet. The Company charges customers a fee for restaurants. Caviar revenue consiststhe option of fees charged to restaurants, as sellers, and delivery and service fees charged to customers. All fees are recognized upon delivery of the food, net of refunds.faster withdrawal speeds.
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Square CapitalLoans facilitates a loan thatloans to qualified Square sellers through the Company's subsidiary, Square Financial Services, Inc. ("Square Financial Services"), which is offered through a partnership with an industrial bank that is generallyloan company. The loans are either repaid through withholding a percentage of the collections of the seller's receivables processed by the Company. During the first quarter of 2016, the Company fully transitioned from offering merchant cash advances (MCAs) to loans.("flex loans") or a specified monthly amount ("term loans"). The Company facilitates loans to sellers pre-qualified throughgenerally utilizes a pre-qualification process that includes an analysis of the aggregated data of the seller’s business which includes, but is not limited to, the seller’s historical processing volumes, transaction count, chargebacks, growth, and length of time as a Square customer. The loans are originated by a bank partner, from whomGenerally, the Company purchases the loans obtaining all rights, title, and interest. The loans have no stated coupon rate but the seller is charged a one-time origination fee by the bank partner based upon their risk rating, which is derived primarily from processing activity. ItFor some of the loans, it is the Company’s intent to sell all of its rights, title, and interest of these loans to third-party investors for an upfront fee when the loans are sold. The Company records the amounts advanced to the customers or the net amounts paid to purchase the bankloans as the cost of the loans purchased and subsequentlyloans. Subsequently, the Company records a gain on sale of the loans to the third-party investors.investors as revenue upon transfer of title. The Company is retained by the third-party investors to service the loans and earns a servicing fee for facilitating the repayment of these receivables through its managed payments solutions. The Company recognizes the gain on sale of the loans to the investors as revenue upon transfer of title to investors. The Company records servicing revenue as servicing is delivered. For the loans which are not immediately sold to third-party investors or for which the Company recognizeshas the intent and ability to hold through maturity, interest and fees earned are recognized as revenue using the effective interest method.

Cash App Borrow, the Company’s first credit product for consumers, allows customers to access short-term loans for a portionsmall fee. The loans are repaid at the end of the expected seller repayments overloan term and customers may elect to prepay all or a part of the outstanding balance. If the outstanding balance is not paid when due, late fees in the form of interest may be charged. The short-term loans are facilitated through a partnership with an industrial bank. The loans are originated by the bank partner, from whom the Company purchases the loans obtaining all rights, title, and interest. Net amounts paid to the bank are recorded as the cost of the loans purchased, and amounts collected in excess of the carrying value are recognized as revenue over the life of the loans. The loan fee and late fees are recorded within subscription and services-based revenue on the consolidated statement of operations.

Through the BNPL platform, consumers can pay for their purchases over time by splitting their purchase price into generally three or four installments, typically due in proportiontwo-week increments, without paying fees (if payments are made on time). The Company generally pays the seller the full order value upfront, less taxes, if applicable, and a merchant fee, which consists of fixed and variable rates as contracted with the sellers. The Company also incurs other costs such as fees paid to third-party partners and processing fees to complete the consumer purchase transaction. The Company generally assumes non-repayment risk from the consumers. The Company initially recognizes a consumer receivable equal to net amounts paid to the loan principal reduction.seller plus any costs incurred to originate the consumer receivable. The Company recognizes the merchant fee less costs incurred to originate the consumer receivables as revenue using the effective interest method. This revenue is included within subscription and services-based revenue on the consolidated statement of operations. The effective interest rate is determined based on estimated future cash receipts over the expected life of the consumer receivable, having consideration for the historical repayment pattern of the consumer receivables on a portfolio basis. For the majority of the Company's BNPL products, consumers are not charged interest or fees, other than late fees which may be charged in certain regions by the Company as an incentive to encourage consumers to pay their outstanding balances as and when they fall due. The Company also offers the ability for consumers to pay for larger transaction sizes over a six- or twelve-month period using a monthly payment option, which includes no late fees and no compounding interest with a cap on total interest owed.



TIDAL primarily generates revenue from subscriptions to its customers, and such subscriptions allow access to the song library, video library, and improved sound quality. Customers can subscribe to services directly from the TIDAL website or through the Apple store. With both offerings, the Company charges customers a monthly fee for those subscription services, which is recognized ratably as revenue as the service is provided.



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Software as a service providesSaaS represents software products and solutions that provide customers with access to various technologies for a fee which is recognized as revenue ratably as the service is provided. The Company's contracts with customers are generally for a term of one month and renew automatically each month. The Company invoices its customers monthly. The Company considers that it satisfies its performance obligations over time each month as it provides the SaaS services to customers and hence recognizes revenue ratably over the month.

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Hardware revenue

Revenue
Hardware revenue is generatedincludes revenue from sales of magstripe readers, contactless and chip readers, chip card readers, Square Stand, Square Register, Square Terminal, and third-party peripherals. HardwareThird-party peripherals include cash drawers, receipt printers, scales, and barcode scanners, all of which can be integrated with Square Stand, Square Register, or Square Terminal to provide a comprehensive point-of-sale solution. The Company generates revenue is recorded netthrough the sale of returnshardware through e-commerce and is recognizedthrough its retail distribution channels. The Company satisfies its performance obligation upon delivery of hardware to theits customers which include end user customers, distributors, and retailers. The Company allows for customer returns which are accounted for as variable consideration. The Company estimates these amounts based on historical experience and satisfactionreduces revenue recognized. The Company invoices end user customers upon delivery of the other basic revenue recognition criteria. products to customers, and payments from such customers are due upon invoicing. Distributors and retailers have payment terms that range from 30 to 90 days after delivery.

Bitcoin Revenue

The Company considers deliveryoffers its Cash App customers the ability to have occurred once titlepurchase bitcoin, a cryptocurrency denominated asset, from the Company. The Company satisfies its performance obligation and risk of loss has beenrecords revenue when bitcoin is transferred to the end customer.customer's account. The Company records deferredpurchases bitcoin from private broker dealers or from Cash App customers and applies a marginal fee before selling it to its customers. The amounts received from customers and exchanges are recorded as revenue whenon a gross basis and the associated bitcoin cost as cost of revenues, as the Company is the principal in the bitcoin sale transaction. The Company has concluded it receives payments in advance ofis the principal because it controls the bitcoin before delivery to the customers, it is primarily responsible for the delivery of products.the bitcoin to the customers, it is exposed to risks arising from fluctuations of the market price of bitcoin before delivery to customers, and has discretion in setting prices charged to customers.


Cost of Revenue


Transaction-based costs and Starbucks transaction-based costsCosts


Transaction-based costs and Starbucks transaction-based costs consist primarily of interchange and assessment fees, processing fees and bank settlement fees paid to third-party payment processors and financial institutions. Contracts with third-party payment processors are typically for a term of two to four years.


Subscription and services-based costsServices-based Costs


SubscriptionSubscriptions and services-based costs consist primarily of Caviar-related costs, which include paymentsprocessing and partnership fees related to third-party couriers for deliveries and the cost of equipment provided to sellers. These costs also includeCash App including Instant Deposit, Cash App Card, as well as costs associated with Cash App transactions when customers instantly deposit funds to their bank accountthe Company's BNPL platform, and for transactions conducted with a Cash Card, credit card or Cash for Business. Cost of revenue for other subscription and services-based costs consists primarily of the amortization related to the development of certain subscription and services-based products.TIDAL.


Hardware costsCosts


Hardware costs consist of all product costs associated with magstripe readers, contactless and chip readers, chip card readers, Square Stand, Square Register, Square Terminal, and third-party peripherals. Product costs include third-party manufacturing-related overhead and personnelpersonnel-related costs, certain royalties, packaging, and fulfillment costs.


AdvertisingBitcoin Costs


Bitcoin costs consist of the total amount the Company pays to purchase bitcoin that is sold to customers. These costs fluctuate in line with bitcoin revenue.

Amortization of Acquired Technology Assets

Amortization of acquired technology assets is primarily comprised of amortization related to the acquired technology assets from the acquisition of Afterpay.

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Other Costs

Generally, other costs such as personnel-related costs, rent, and occupancy charges are not allocated to cost of revenues and are reflected in operating expenses and are not material.

Severance and Other Restructuring Expenses

The Company records severance-related expenses once they are both probable and estimable in accordance with the provisions of the applicable accounting guidance for severance provided under an ongoing benefit arrangement. One-time involuntary benefit arrangements and other costs are generally recognized in the period in which the liability is incurred. The Company recorded $104.0 million of severance and other related expenses for the year ended December 31, 2023 as part of product development, sales and marketing, and general and administrative within the Company's operating expenses, of which $70.2 million related to severance was recognized in the fourth quarter of 2023 when all the criteria for recognition were met. The Company also assesses its assets for impairment in connection with restructuring and other exit activities when the carrying amount of the related assets may not be fully recoverable, in accordance with the appropriate accounting guidance.

Sales and Marketing Expenses

Advertising costs are expensed as incurred and included in sales and marketing expenseexpenses on the consolidated statements of operations. Total advertising costs for the years ended December 31, 2017, 2016,2023, 2022, and 20152021 were $81.9$360.1 million, $58.3$544.2 million, and $435.8 million, respectively. The Company also records services, incentives, and other costs to customers that are not directly related to a revenue generating transaction as sales and marketing expenses, as the Company considers these to be marketing costs to encourage the usage of Cash App. These expenses include, but are not limited to, Cash App peer-to-peer processing costs and related transaction losses, card issuance costs, customer referral bonuses, and promotional giveaways. These costs are expensed as incurred. The Company recorded $898.3 million, $840.0 million, and $58.3$778.3 million, respectively.for the years ended December 31, 2023, 2022, and 2021, respectively, for such expenses.


Share-based Compensation


Share-based compensation expense relates to stock options, restricted stock awards ("RSAs"), restricted stock units (RSUs)("RSUs"), and purchases under the Company’s 2015 Employee Stock Purchase Plan (ESPP)("ESPP"), which is measured based on the grant-date fair value. The fair value of RSAs and RSUs is determined by the closing price of the Company’s common stock on each grant date.Thedate. The fair value of stock options and employee stock purchase planESPP shares granted to employees is estimated on the date of grant using the Black-Scholes-Merton option valuation model. This share-based compensation expense valuation model requires the Company to make assumptions and judgments regarding the variables used in the calculation. These variables include the expected term (weighted average(weighted-average period of time that the options granted are expected to be outstanding), the expected volatility of the Company’s stock, expected risk-free interest rate, and expected dividends. The Company uses the simplified calculation of expected term, defined as an average of the Company does not have sufficient historical datavesting term and the contractual term to use any other method to estimate expected term.maturity. Expected volatility is based on a weighted averageweighted-average of the historical volatilities of the Company's common stock along with several entities with characteristics similar to those of the Company. The Company will continue to weight its own volatility more heavily as more of its own historical stock price information becomes available. Once its own historical data is equal to that of the expected term of option grants a peer group is no longer considered necessary.stock. The expected risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. Share-basedGenerally, share-based compensation expense is recorded on a straight-line basis over the requisite service period. ForRSUs and RSAs typically vest over a term of four years. The Company accounts for forfeitures as they occur.

Interest Income and Expense

Interest income consists of interest income from the Company's investment in marketable debt securities and was $126.6 million for the year ended December 31, 20162023. Interest income was immaterial for the years ended December 31, 2022 and prior,2021. Interest expense consists primarily of the Company recorded share-based compensation expense netCompany's long-term debt and was immaterial for the years ended December 31, 2023, 2022, and 2021.

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Foreign Currency

The functional currency for most subsidiaries outside of estimated forfeitures. On January 1, 2017,the United States is the local currency. For purposes of the Company's consolidated financial statements, the assets and liabilities of these subsidiaries, including goodwill and acquired intangible assets, are translated into U.S. dollars using the exchange rates at the balance sheet dates. Gains and losses resulting from these translations are reported as a resultcomponent of accumulated other comprehensive income (loss) on the Company's

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adoptionconsolidated statements of ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, the Company elected to account for forfeitures as they occur.
The fair value of stock options granted to non-employees, including consultants, is initially measured upon the date of grantcomprehensive income (loss). Revenue, expenses, and remeasured over the vesting periodgains or losses are translated into U.S. dollars using the same methodology described above. These non-employees provide service to the Company on an ongoing basis, therefore, the performance commitmentaverage exchange rates for each non-employee grant is not considered probable untilperiod.

Gains and losses from the award is earned over time. The expected term for non-employee grants isremeasurement of foreign currency transactions into the contractual term and share-based compensation expense isfunctional currency are recognized as a component of other income, net on a straight-line basis over this term. Share-based compensation expense related to non-employees has not been material for anythe consolidated statements of the periods presented.operations.

Income and Other Taxes


The Company reports income taxes under the asset and liability approach. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as net operating loss and tax credit carryforwards. Deferred tax amounts are determined by using the enacted tax rates expected to be in effect when the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

A valuation allowance reduces the deferred tax assets to the amount that is more likely than not to be realized.

The Company usesconsiders historical information, tax planning strategies, the expected timing of the reversal of existing temporary differences, and may rely on financial projections to support its netposition on the recoverability of deferred tax assets, which containassets. The Company’s judgment regarding future profitability contains significant assumptions and estimates of future operations. If such assumptions were to differ significantly from actual future results of operations, it may have a material impact on the Company’s ability to realize its deferred tax assets. At the end of each period, the Company assesses the ability to realize the deferred tax assets. If it is more likely than not that the Company wouldwill not realize the deferred tax assets, then the Company would establishestablishes a valuation allowance for all or a portion of the deferred tax assets.


The Company recognizes the effect of uncertain income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that has a greater than 50% likelihood of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to uncertain tax positions in the provision (benefit) for income tax expense on the consolidated statements of operations.


Cash and Cash Equivalents, and Restricted Cash, and Customer Funds


Cash and Cash Equivalents

The Company considers all highly liquid investments, including money market funds, with an original maturity of three months or less when purchased to be cash equivalents.


AsRestricted Cash

The Company records restricted cash amounts as a current asset on the consolidated balance sheets if the restriction expires in less than 12 months, or as a non-current asset if the restriction is greater than 12 months. If there is no minimum time frame during which the cash must remain restricted, the nature of the transactions related to the restriction determine the classification.

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The Company's short-term restricted cash was $770.4 million and $639.8 million as of December 31, 20172023 and 2016,2022, respectively. The balance as of December 31, 2023 was primarily comprised of the wholly-owned consolidated entities used in the warehouse funding facility arrangements. This restricted cash of$28.8 million and $22.1 million, respectively, is relatedwill be used to pay the borrowings under the warehouse funding facilities or will be distributed to the Company. The Company's total restricted cash also includes pledged cash deposited into savingsdeposits in accounts at the financial institutions that process the Company's sellers' payment transactions and as collateral pursuant to an agreementvarious agreements with the originating bank forbanks relating to the Company's loan product.products. The Company uses the restricted cash to secure letters of credit with the related financial institutioninstitutions to provide collateral for cash flow timing differences in the processing of these payments.

The Company's long-term restricted cash of $71.8 million and $71.6 million as of December 31, 2023 and December 31, 2022, respectively, is primarily related to cash held as collateral as required by the FDIC for Square Financial Services. The Company has recorded this amountthese amounts as a current assetnon-current assets on the consolidated balance sheets due toas the short-term naturerequirement by the FDIC specifies a time frame of these cash flow timing differences and that there is no minimum time frame12 months or longer during which the cash must remain restricted. Additionally, this balance includes certain amounts held as collateral pursuant

Customer Funds

Customer funds represent customers' stored balances that customers would later use to multi-year lease agreements,send money or make payments, or customers cash in transit. As discussed under section titled Subscription and Services-based Revenue accounting policy above, under the terms of service associated with these funds, the Company is restricted from using the funds in the paragraph below, which we expectCompany's operations, but may invest these funds in short-term marketable debt securities to become unrestricted withinearn interest. Refer to Note 4, Customer Funds for more details.

Investments in Marketable Debt Securities

The Company's short-term and long-term investments include marketable debt securities such as government and agency securities, corporate bonds, commercial paper, and municipal securities. The Company determines the next year.

Asappropriate classification of December 31, 2017its investments in marketable debt securities at the time of purchase and 2016, the remaining restricted cash of $9.8 million and $14.6 million, respectively, is primarily related to cash deposited into money market funds that is used as collateral pursuant to multi-year lease agreements entered into in 2012 and 2014 (Note 14).reevaluates such designation at each balance sheet date. The Company has recorded this amountclassified and accounted for its marketable debt securities as available-for-sale and carries these investments at fair value, reporting the unrealized gains and losses, net of taxes, as a non-current assetcomponent of stockholders’ equity. The U.S. government and U.S. agency securities are either explicitly or implicitly guaranteed by the U.S. government and are highly rated by major rating agencies. The corporate bonds are issued by highly rated entities. The foreign government securities are issued by highly rated international entities. The Company has the ability and intent to hold these investments with unrealized losses for a reasonable period of time, sufficient for the recovery of their amortized cost bases, which may be at maturity. The Company determines any realized gains or losses on the sale of marketable debt securities on a specific identification method, and records such gains and losses as a component of other expense (income), net on the consolidated balance sheets as the termsstatements of the related leases extend beyond one year.operations.


Concentration of Credit RiskInvestments in Equity Securities

For the years ended December 31, 2017 and 2016, the Company had no customer who accounted for greater than 10% of total net revenue. For the year ended December 31, 2015, the Company had no customer other than Starbucks who accounted for greater than 10% of total net revenue. The Company terminated its relationship with Starbucks during the year ended December 31, 2016.

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The Company had three third-party payment processorsholds marketable and non-marketable equity investments. Marketable equity investments are measured using quoted prices in active markets with changes recorded in other expense (income), net on the consolidated statements of operations.

Non-marketable equity investments, which have no readily determinable fair values, are measured using the measurement alternative, which is defined as cost, less impairment, adjusted for observable price changes from orderly transactions for identical or similar investments of the same issuer. Adjustments are recorded in other income, net on the consolidated statements of operations. Non-marketable equity investments are valued using significant unobservable inputs or data in an inactive market and the valuation requires judgment due to the absence of market prices and inherent lack of liquidity. The carrying value for these investments is not adjusted if there are no observable transactions for identical or similar investments of the same issuer or if there are no identified events or changes in circumstances that represented approximately 46%, 42%,may indicate impairment. The Company will adjust for changes resulting from observable price changes in orderly transactions for an identical or similar investment in the same issue. Valuations of non-marketable equity investments are inherently complex due to the lack of readily available market data. In addition, the determination of whether an orderly transaction is for an identical or similar investment requires significant management judgment, including understanding the differences in the rights and 8%obligations of settlements receivable asthe investments and the extent to which those differences would affect the fair values of December 31, 2017. those investments.

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The same three parties represented approximately 52%, 35%,Company assesses the impairment of its non-marketable equity investments on a quarterly basis. The impairment analysis encompasses an assessment of the severity and 10%duration of settlements receivable asthe impairment and a qualitative and quantitative analysis of December 31, 2016. All other third-party processors were insignificant.

Financial instruments that potentially subjectkey factors including the investee’s financial metrics, market acceptance of the investee’s product or technology, other competitive products or technology in the market, general market conditions, and the rate at which the investee is using its cash. If the investment is considered to be impaired, the Company to concentrationswill record an impairment in other income, net on the consolidated statements of credit risk consist primarily of cashoperations and cash equivalents, restricted cash, marketable securities, settlements receivables, customer funds, and loans heldestablish a new carrying value for sale. The associated risk of concentration for cash and cash equivalents and restricted cash is mitigated by banking with creditworthy institutions. At certain times, amounts on deposit exceed federal deposit insurance limits. The associated risk of concentration for marketable securities is mitigated by holding a diversified portfolio of highly rated investments. Settlements receivable are amounts due from well-established payment processing companies and normally take one or two business days to settle which mitigates the associated risk of concentration. The associated risk of concentration for loans held for sale is partially mitigated by credit evaluations that are performed prior to facilitating the offering of loans and ongoing performance monitoring of the Company’s loan customers.investment.


Fair Value of Financial InstrumentsMeasurements


The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Fair value accounting establishes a three-level hierarchy priority for disclosure of assets and liabilities recorded at fair value. The ordering of priority reflects the degree to which objective prices in external active markets are available to measure fair value. The classification of assets and liabilities within the hierarchy is based on whether the inputs to the valuation methodology used for measurement are observable or unobservable.


The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:


•Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.


•Level 2 Inputs: Other than quoted prices included in Level 1 Inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.


•Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.


Customer Loans Held for Sale


The Company's loan products consist primarily of flex loans, term loans and Cash Borrow which are described in detail under the section titled Subscription and Services-based Revenue above.

The Company classifies customer loans as loans held for sale upon purchase from a bank partner, as there is an available market for such loans and it iswhen the Company’sCompany has the intent to sell all of its rights, title, and interest in these loans to third-party investors. investors, and there is an available market for such loans. The Company classifies customer loans as loans held for investment when the Company has both the intent and ability to hold for the foreseeable future, or until maturity or payoff. The Company designates all its loans as held for sale upon origination, of which the majority are sold. Loans held by Square Financial Services that are not sold within one to two business days from origination are reclassified as held for investment, while all the other loans continue to be classified as held for sale. For the year ended December 31, 2023, $201.9 million of total loan balances was reclassified from loans held for sale to loans held for investment. For the years ended December 31, 2023, 2022 and 2021, net gains on sales of loans were $196.1 million, $164.3 million, and $95.5 million respectively. Since the loans are classified as held for sale at origination, all the cash flows associated with these loans are disclosed as a component of cash flows from operating activities.

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Loans Held for Sale

Loans held for sale are recorded at the lower of amortized cost or fair value determined on an individual loan basis. To determine the fair value the Company utilizes industry-standard valuation modeling, such as discounted cash flow models,valuation modeling, taking into account the probability of default and estimated timing and amounts of periodic repayments. In estimating the expected timing and amounts of the future periodic repayments for the loans outstanding, the Company considered other relevant market data. The Company recognizes a charge within transaction, loan, and advanceconsumer receivable losses on the consolidated statement of operations whenever the amortized cost of a loan exceeds its fair value, with such charges being reversed for subsequent increases in fair value, but only to the extent that such reversals do not result in the amortized cost of a loan exceeding its fair value. A loan that is initially designated as held for sale may be reclassified to held for investment if and when the Company's intent for that loan changes. There have been

Loans Held for Investment

Loans held for investment are recorded at amortized cost, less an allowance for potential uncollectible amounts. Amortized cost basis represents principal amounts outstanding, net of unearned income, unamortized deferred fees and costs on originated loans, premiums or discounts on purchased loans and charge-offs. The Company’s intent and ability to designate loans as held for investment in the future may change based on changes in business strategies, the economic environment, and market conditions.

Allowance for loans losses

The Company calculates an allowance for losses on the loans held for investment portfolio in accordance with Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments - Credit Losses(Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). The Company assesses impairment of its financial instruments based on current estimates of expected credit losses over the contractual term of its loans held for investment portfolio as of each balance sheet date. The Company determines the allowance for loan losses using both quantitative and qualitative methods and considers all available information relevant to assessing collectability. This includes, but is not limited to, historical loss and recovery experience, recent and historical trends in delinquencies, past-due loans and charge-offs, borrower behavior and repayment speed, underwriting and collection management changes, changes in the legal and regulatory environment, changes in risk and underwriting standards, current and historical macroeconomic conditions such as changes in unemployment and GDP, and various other factors that may affect the sellers’ ability to make future payments.

Consumer Receivables

The Company evaluates its consumer receivables as a single homogeneous portfolio as it is comprised of a single product type, point-of-sale unsecured installment loans. The Company classifies consumer receivables as held for investment when the Company has the intent and ability to hold these investments for the foreseeable future or until maturity or payoff. The Company classifies consumer receivables as held for sale when the Company has the intent to sell all of its rights, title, and interest in these receivables to third-party investors, and there is an available market for such receivables. For the year ended December 31, 2023, $437.5 million of consumer receivables were reclassified from loans held for investment to loans held for sale and sold to third parties. Net losses on sales of consumer receivables were immaterial for the years ended December 31, 2023, 2022 and 2021. Consumer receivables are reported at amortized cost, which includes the cost to originate the consumer receivables, adjusted for unearned merchant fees, origination costs, charge-offs, and the allowance for credit losses. Refer to Note 6, Consumer Receivables, net for more information.

Allowance for Credit Losses Related to Consumer Receivables

The Company calculates an allowance for credit losses on the consumer receivables portfolio in accordance with ASU 2016-13. The guidance requires an entity to assess impairment of its financial instruments based on the entity's current estimates of expected credit losses over the contractual term of its loans held for investment portfolio as of each balance sheet date.

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Allowance for credit losses related to consumer receivables represents management’s estimate of the expected credit losses in the outstanding portfolio of consumer receivables, as of the balance sheet date. The Company determines the allowance for credit losses using both quantitative and qualitative methods that analyze portfolio performance, uses judgment regarding the quantitative components of the reserve, and considers all available information relevant to assessing collectibility. This includes, but is not limited to, historical loss and recovery experience, recent and historical trends in delinquencies, past-due receivables and charge-offs, consumer behavior and repayment speed, underwriting and collection management changes, changes in the legal and regulatory environment, changes in risk and underwriting standards, current and historical macroeconomic conditions such as changes in unemployment and GDP, and various other factors that may affect the consumers’ ability to make future payments. When available information confirms that specific consumer receivables or portions thereof are uncollectible, identified amounts are charged off against the allowance for credit losses. Consumer receivables are charged off when management considers amounts to be uncollectible, which is generally determined by the number of days past due and is typically no reclassifications made to date.later than 180 days past due.


Settlements Receivable and Settlements Payables
    
Settlements receivable and settlements payable represents amounts due from or due to third-party payment processors for customer transactions. Settlements receivable and settlements payable are typically received or paid within one or two business days of the transaction date. Under the terms of arrangements, some of the processors may process both transaction receivables and payables. Additionally, the terms may allow processors the right of offset for the amounts due to and due from the Company. No valuation allowances have been established for settlements receivable, as funds are due from large, well-established financial institutions with no historical collections issue.

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Customer Funds

Customer funds held represent Cash App customers' stored balances that customers would later use to send money or make payments, or customers cash in transit. As of December 31, 2017 and 2016, the Company held these stored balances as short term bank deposits.


Inventory


Inventory is comprisedconsists of contactless and chip readers, chip card readers, Square Stand, Square Register, Square Terminal, and third-party peripherals, as well as component parts that are used to manufacture these products. Inventory is stated at the lower of cost (generally on a first-in, first-out basis) or net realizable value. Inventory that is obsolete or in excess of forecasted usage is written down to its net realizable value based on the estimated selling prices in the ordinary course of business. The Company's inventory is held at the Company'sthird-party warehouses as well as at third partyand contract manufacturer premises.


Deferred Magstripe Reader CostsBitcoin


Company Owned Bitcoin

The Company capitalizesholds bitcoin for long term investment purposes ("bitcoin investment"') and also holds bitcoin for the costfacilitation of customer sales and purchases of bitcoin on Cash App ("bitcoin for operating purposes"). The Company accounts for its magstripe readers, which are includedbitcoin as an indefinite-lived intangible asset in accordance with ASC 350, Intangibles—Goodwill and Other and has ownership of and control over its bitcoin.

The Company early adopted ASU No. 2023-08, Accounting for and Disclosure of Crypto Assets ("ASU 2023-08") in the fourth quarter of 2023 using a modified retrospective approach. ASU 2023-08 provides guidance on accounting and disclosure of crypto assets and requires an entity to (i) subsequently remeasure crypto assets at fair value at each measurement date with changes recognized in net income, (ii) present the changes in fair value separately from changes in the carrying amount of other currentintangible assets in the income statement, and (iii) present crypto assets measured at fair value separately from other intangible assets on the consolidated balance sheets. sheet. Prior to the adoption of ASU 2023-08, the Company's bitcoin investment was subject to impairment losses if the fair value decreased below the carrying value during the assessed period. Impairment losses on the Company's bitcoin investment could not be recovered for any subsequent increases in fair value until the asset was sold. Upon adoption of ASU 2023-08, the Company recognized a cumulative-effect adjustment increasing bitcoin value and retained earnings by $30.5 million as of the beginning of fiscal year 2023.

The amount capitalized representsCompany’s bitcoin investment is initially recorded at cost, inclusive of transaction costs, and the Company uses the ‘first-in, first-out’ method to determine the cost of the readers, including packaging and shipping costs, held on-hand bybasis. Subsequently, the Company asremeasures its bitcoin investment at fair value at the end of each consolidated balance sheet date. Oncereporting period with changes recognized in net income through “Other income, net” in the readers are shipped to a third-party distributor or an end-customer, they are recorded as marketing expense on theCompany’s consolidated statements of operations. As of December 31, 2023, the Company has purchased an approximate cumulative $220.0 million in bitcoin for investment purposes. For the year ended December 31, 2023 the Company recognized a $207.1 million gain from the remeasurement of the Company's bitcoin investment.


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The Company’s bitcoin for operating purposes is initially recorded at cost, inclusive of transaction costs, and the Company uses ‘first-in, first-out’ as its method of determining the cost basis. Subsequent to purchase, any sales related to bitcoin occur at its current market price, plus a small margin. As such, any change in fair value of bitcoin purchased and sold for customer orders is captured within bitcoin revenue. Given the small amount of bitcoin for operating purposes held at any time, and that the bitcoin is held for a relatively short period of time, typically being purchased and sold within a day, the changes in fair value are not material to the Company.

Bitcoin trades in an active market which is not centrally managed or provided by one particular exchange. We determine the fair value of bitcoin at each period end in accordance with ASC 820, Fair Value Measurement, based on observed prices from active exchanges that the Company has determined are its principal market for bitcoin.

Refer to Note 13, Other Consolidated Balance Sheet Components (Non-Current) and Note 14, Bitcoin, for more information.

Bitcoin Held for Other Parties

The Company adopted the SEC's Staff Accounting Bulletin No. 121 ("SAB 121"), that was released in March 2022. SAB 121 expressed the views of the SEC staff regarding the accounting for obligations to safeguard crypto-assets an entity holds for users of its crypto platform and requires entities that hold crypto-assets on behalf of platform users to recognize a liability to reflect the entity’s obligation to safeguard the crypto-assets held for its platform users. The liability should be measured at initial recognition and each reporting date at the fair value of the crypto-assets that the entity is responsible for holding for its platform users. The entity should also recognize an asset at the same time that it recognizes the safeguarding liability, measured at initial recognition and each reporting date at the fair value of the crypto-assets held for its platform users, subject to adjustments to reflect any actual or potential safeguarding loss events. The entity should also describe the asset and the corresponding liability in the footnotes to the financial statements and consider including information regarding who (e.g., the company, its agent, or another third party) holds the cryptographic key information, maintains the internal recordkeeping of those assets, and is obligated to secure the assets and protect them from loss or theft. Refer to Note 14, Bitcoin, for more information.

Property and Equipment


Property and equipment are recorded at historical cost less accumulated depreciation, which is computed on a straight-line basis over the asset’s estimated useful life.
The estimated useful lives of property and equipment are described below:


Property and EquipmentUseful Life
Capitalized software18 months
Computer and data center equipmentThree years
Furniture and fixturesSeven years
Leasehold improvementsLesser of estimated useful lifeten years or remaining lease term

When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from their respective accounts, and any gain or loss on such sale or disposal is reflected in operating expenses.


Capitalized Software


The Company capitalizes certain costcosts incurred in developing internal-use software when capitalization requirements have been met. Costs prior to meeting the capitalization requirements are expensed as incurred. Capitalized costs are included in property and equipment, net, and amortized on a straight-lined basis over the estimated useful life of the software and included in product development costs or allocated to subscription and service-based costs on the consolidated statements of operations. The Company capitalized $9.8 million, $7.9 million and $4.5 million of internally developed software during the years ended December 31, 2017, 2016 and 2015, respectively, and recognized $6.6 million, $7.1 million and $3.2 million of amortization expense during the years ended December 31, 2017, 2016 and 2015, respectively.


Leases


The Company leases office space and equipment under non-cancellable capitalfinance and operating leases with various expiration dates.

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The Company determines whether an arrangement is a lease for accounting purposes at contract inception. Operating lease right-of-use (“ROU”) assets and operating lease liabilities are recognized at the present value of the future lease payments, generally for the base noncancellable lease term, at the lease commencement date for each lease. The interest rate used to determine the present value of the future lease payments is the Company's incremental borrowing rate because the interest rate implicit in most of the Company's leases is not readily determinable. The Company's incremental borrowing rate is estimated to approximate the interest rate that the Company would pay to borrow on a collateralized basis with similar terms and payments as the lease, and in economic environments where the leased asset is located. Operating lease ROU assets also include any prepaid lease payments and lease incentives. The Company's lease agreements generally contain lease and non-lease components. The Company applies the practical expedient to account for the lease and non-lease components as a single lease component for all leases, where applicable. Non-lease components primarily include payments for maintenance and utilities. The Company includes the fixed non-lease components in the determination of the ROU assets and operating lease liabilities. Variable lease payments that are not based on a rate or index are not included in the calculation of the ROU asset and lease liability, and they are recognized as lease expense in the period in which the obligation for those payments is incurred. Variable lease payments predominantly relate to variable operating expenses, taxes, parking, and electricity. The Company records the totalamortization of the ROU asset and the accretion of lease liability as a component of rent expense onin the consolidated statements of operations.

The Company evaluates ROU assets related to leases for indicators of impairment whenever events or changes in circumstances indicate that the carrying amount of a straight-line basisROU asset may not be recoverable. When a decision has been made to exit a lease prior to the contractual term or to sublease that space, the Company evaluates the asset for impairment and recognizes the associated impact to the ROU asset and related expense, if applicable. The evaluation is performed at the asset group level initially and when appropriate, at the lowest level of identifiable cash flows, which is at the individual lease level. Undiscounted cash flows expected to be generated by the related ROU assets are estimated over the lease term.ROU assets’ useful lives. If the evaluation indicates that the carrying amount of the ROU assets may not be recoverable, any potential impairment is measured based upon the fair value of the related ROU asset or asset group as determined by appropriate valuation techniques.


When lease agreements provide allowances for leasehold improvements, the Company assesses whether it is the owner of the leasehold improvements for accounting purposes. When the Company concludes that it is the owner, it capitalizes the leasehold improvement assets and recognizes the related depreciation expense on a straight-line basis over the lesser of the lease term or the estimated useful life of the asset, and reduces rent expense onasset. Additionally, the Company recognizes the amounts of allowances to be received from the lessor as a straight-line basis over the termreduction of the lease byliability and the amount

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ofassociated ROU asset. When the allowances provided. The Company classifiesconcludes that it is not the cashowner, the payments forthat the Company makes towards the leasehold improvements within investing activities while reimbursements from the landlords are classified within operating activities.

The Company recordsaccounted as a liability for the estimated fair value for any asset retirement obligation (ARO) associated with its leases, with an offsetting asset. In the determinationcomponent of the fair value of AROs, the Company uses various assumptions and judgments, including such factors as the existence of a legal obligation, estimated amounts and timing of settlements, and discount and inflation rates. The liability is subsequently accreted while the asset is depreciated. As of December 31, 2017, the Company had a liability for ARO, gross of accretion, of $3.6 million and an associated asset, net of depreciation, of $2.3 million.lease payments.


Business Combinations


The purchase price of an acquisition is allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition dates. The excess of total consideration over the fair values of the assets acquired and the liabilities assumed is recorded as goodwill. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments would be recorded on the consolidated statements of operations.


Long-Lived Assets, including Goodwill and Acquired IntangiblesIntangible Assets


The Company evaluates the recoverability of property and equipment and finite livedfinite-lived intangible assets for impairment whenever events or circumstances indicate that the carrying amounts of such assets may not be recoverable. Recoverability is measured by comparing the carrying amount of an asset or an asset group to estimateestimated undiscounted future net cash flows expected to be generated. If the carrying amount of the long–lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values, and third–partparty independent appraisals, as considered necessary. For the periods presented, the Company had recorded no impairment charges.


Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in a business combination.
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The Company performs a goodwill impairment test annually on December 31 and more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the reporting unit’s fair value. The Company has the option to first assessassesses qualitative factors to determine whether events or circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount and determine whether further action is needed. If, after assessing the totality of events or circumstances, the Company determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. For the periods presented, the Company had recorded no impairment charges.


Acquired intangiblesintangible assets consist of acquired technology and customer relationships associated with various acquisitions. Acquired technology is amortized over its estimated useful life on a straight-line basis withinand included as a component of cost of revenue. Customerrevenue on the consolidated statements of operations. Acquired customer relationships acquiredand other intangible assets are amortized on a straight-line basis over their estimated useful lives, withinand included as a component of operating expenses.expenses on the consolidated statements of operations. The Company evaluates the remaining estimated useful life of its intangible assets being amortized on an ongoing basis to determine whether events and circumstances warrant a revision to the remaining period of amortization.


Customers Payable


Customers payable represents the transaction amounts, less revenue earned by the Company, owed to sellers or Cash App customers. The payable amount comprisesconsists of amounts owed to customers due to timing differences as wethe Company typically settlesettles within one business day, amounts held by the Company in accordance with its risk management policies, and amounts held for customers who have not yet linked a bank account. This balance also includes the Company's liability for customer funds held on deposit in the Cash App.App and balances related to Square Card.


Accrued Transaction Losses


The Company establishes a reserve for estimated transactionis exposed to potential credit losses related to transactions processed by sellers that are subsequently subject to chargebacks when the Company is unable to collect from the sellers primarily due to chargebacks, which represent a potential loss due toinsolvency, disputes between a seller and their customer, or due to fraudulent transactions. Accrued transaction losses also include estimated losses on Cash App activity related to peer-to-peer payments sent from a fraudulent transaction. The reserve is estimatedcredit card, Cash for Business, and Cash App Card. Generally, the Company estimates the potential loss rates based on

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available historical experience that is continuously adjusted for new information and incorporates, where applicable, reasonable and supportable forecasts about future expectations. The Company also considers other relevant market data as of the reporting date, including expectations of future chargebacks,in developing such estimates and historical trends related to loss rates.assumptions. Additions to the reserve are reflected in current operating results, while charges to the reserve are made whenrealized losses are recognized.offset against the reserve. These amounts are classified within transaction, loan, and advanceconsumer receivable losses on the consolidated statements of operations.operations, except for the amounts associated with the peer-to-peer service offered to Cash App customers for free that are classified within sales and marketing expenses as the Company considers these to be marketing costs to encourage the usage of Cash App.


Share Repurchases

Share repurchases under the Company's share repurchase authorization may be made from time to time through open market purchases or through privately negotiated transactions subject to market conditions, applicable legal requirements and other relevant factors. The Company's policy is to deduct the par value from common stock and to reflect any excess of cost over par value as a deduction from additional paid-in capital.

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Segments

The Company reports its segments to reflect the manner in which the Company's chief operating decision maker ("CODM") reviews and assesses performance. The Company has two reportable segments, Square (formerly Seller) and Cash App. In the fourth quarter of 2023, the Company reorganized its business structure and moved the business activities, management, and the financial results of the Company's BNPL platform fully into Cash App. Accordingly, the segment results below include the financial results of the BNPL platform solely within the Cash App segment. Products and services that are not assigned to a specific reportable segment, including TIDAL and other emerging ecosystems, are aggregated and presented within a general corporate and other category. Square and Cash App are defined as follows:

•    Cash App includes the financial tools available to individuals within the mobile Cash App, including peer-to-peer payments, bitcoin and stock investments. Cash App also includes Cash App Card which is linked to customer stored balances that customers can use to pay for purchases or withdraw funds from an ATM. Cash App also includes the BNPL platform.

•    Square includes managed payment services, software solutions, hardware, and financial services offered to sellers, excluding those that involve Cash App.

The primary financial measures used by the CODM to evaluate performance and allocate resources are revenue and gross profit. The CODM does not evaluate performance or allocate resources based on segment asset data, and therefore such information is not included.

Recent Accounting Pronouncements


In May 2014,addition to the recently adopted accounting pronouncements below, the Company also adopted ASU No. 2023-08, Accounting for and Disclosure of Crypto Assets, and the SEC's Staff Accounting Bulletin No. 121, see above for more details.

In March 2022, the Financial Accounting Standards Board (FASB)("FASB") issued Accounting Standards Update (ASU)ASU No. 2014-09, Revenue from Contracts with Customers,2022-01, Derivatives and issued subsequent amendmentsHedging (Topic 815): Fair Value Hedging—Portfolio Layer Method ("ASU 2022-01") related to the initial guidance within ASU 2015-04, ASU 2016-08, ASU 2016-10, ASU 2016-12, and ASU 2016-20.portfolio layer method of hedge accounting. The new guidance will replace all current U.S. GAAP guidance about revenue recognition, including industry specific guidance. The core principal of this new guidance is that revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration for which the Company expectsamendments allow nonprepayable financial assets to be entitledincluded in exchangea closed portfolio hedge using the portfolio layer method. ASU 2022-01 also allows for those goodsmultiple hedged layers to be designated for a single closed portfolio of financial assets or services. The new guidance will also change how companies account for certain incremental costs to obtainone or more beneficial interests secured by a customer contract, such as sales commissions, by requiring that such costs be capitalized and charged to expense over the periodportfolio of expected benefit. This guidance is effective for the Company’s interim and annual financial statements beginning January 1, 2018. The guidance can be adopted either through the full retrospective approach, which requires restatement of all periods presented with a cumulative effect adjustment as of the beginning of the earliest period presented, or through a modified retrospective approach, which requires a cumulative effect adjustment as of the date of adoption. The modified retrospective approach also requires additional disclosures, for the year of adoption, of the impact of the new guidance to each of the financial statements line items and qualitative explanation of the significant changes between the reported results under the new revenue guidance and the previous revenue guidance.instruments. The Company adopted this new guidance oneffective January 1, 2018 using2023, and has applied the modified retrospective approach. Apart from the incremental disclosure requirements it is the Company’s conclusion that the new guidance willprospectively. The adoption of this guidance did not have a material impact on its consolidatedthe Company's financial statements financial reporting systems, processes or controls.and related disclosures.


In July 2015,March 2022, the FASB issued ASU No. 2015-11, Simplifying2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”) related to troubled debt restructuring and vintage disclosures for financing receivables. The amendments eliminate recognition and measurement guidance for troubled debt restructurings for creditors and requires entities to evaluate if the modification represents a new loan or a continuation of the existing loan. ASU 2022-02 also enhances disclosure requirements for certain loan refinancing and restructurings made to borrowers experiencing financial difficulty and requires disclosure of current period write-offs by year of origination for financing receivables. The Company adopted this guidance effective January 1, 2023, and has applied the guidance prospectively. The adoption of this guidance did not have a material impact on the Company's financial statements and related disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement of Inventory, asEquity Securities Subject to Contractual Sale Restrictions ("ASU 2022-03") related to equity securities. The amendments clarify that a contractual restriction on the sale of an equity security is not considered part of its simplification initiative.the unit of account of the equity security and, therefore, is not considered in measuring fair value. An entity is prohibited from recognizing a contractual sale restriction as a separate unit of account. ASU 2022-03 also requires specific disclosures related to equity securities that are subject to contractual restrictions, including the fair value of such equity securities, the nature and remaining duration of the corresponding restrictions, and any circumstances that could cause a lapse in the restrictions. The previous guidance required an entity to measure inventory at the lower of cost or market. Market could be replacement cost, net realizable value, or net realizable value less a normal profit margin. Under the new guidance, inventory is measured at the lower of cost and net realizable value, which would eliminate the other two options that currently exist for market replacement cost and net realizable value less a normal profit margin. The amendment isamendments are effective for financial statements issued for fiscal years beginning after December 15, 2016, and2023, including interim periods within those fiscal years, with earlyyears. Early adoption is permitted. The Company adopted this new guidance on January 1, 2017, and it diddoes not expect the adoption to have any effecta material impact on the consolidatedCompany's financial statements and related disclosures.statements.


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In January 2016,November 2023, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. This guidance is intended2023-07, Improvements to improve the recognition, measurement, presentation, andReportable Segment Disclosures (“ASU 2023-07”). The amendments expand segment disclosures by requiring disclosure of financial instruments. This guidance issignificant segment expenses that are regularly provided to the CODM, the amount and description of other segment items, permits companies to disclose more than one measure of segment profit or loss, and requires all annual segment disclosures to be included in the interim periods. The amendments do not change how an entity identifies its operating segments, aggregates those operating segments, or applies quantitative thresholds to determine its reportable segments. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2017,2023 and interim periods within those fiscal years with earlybeginning after December 15, 2024. Early adoption permitted with certain restrictions.is permitted. The adoption of ASU 2023-07 will impact the Company’s disclosures only and the Company is evaluating the effect of adopting the new guidance could result to volatility of other income (expense), net, in future periods as a result of the remeasurement of the equity securities through earnings upon the occurrence of future observable price changes. The Company adopted this new guidance on January 1, 2018, and it did not have any effect on the consolidated financial statements.disclosure requirements.


In February 2016,December 2023, the FASB issued ASU No. 2016-02, Leases, which will require, among other2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”). The amendments expand income tax disclosure requirements by requiring an entity to disclose (i) specific categories in the rate reconciliation, (ii) additional information for reconciling items lessees to recognizethat meet a right of use assetquantitative threshold, and a related lease liability for most leases on the balance sheet. Qualitative and quantitative disclosures will be enhanced to better understand(iii) the amount timing and uncertainty of cash flows arising from leases. This guidance istaxes paid disaggregated by jurisdiction. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2018,2024. Early adoption is permitted. The adoption of ASU 2023-09 will impact the Company’s disclosures only and interim periods withinthe Company is evaluating the effect of adopting the new disclosure requirements.

NOTE 2 - REVENUE

The following table presents the Company's net revenue disaggregated by revenue source (in thousands):
Year Ended December 31,
202320222021
Revenue from contracts with customers:
Transaction-based revenue$6,315,301 $5,701,540 $4,793,146 
Subscription and services-based revenue4,319,825 3,385,784 2,445,811 
Hardware revenue157,178 164,418 145,679 
Bitcoin revenue9,498,302 7,112,856 10,012,647 
Revenue from other sources:
Subscription and services-based revenue (i)
1,625,017 1,166,989 263,920 
       Total net revenue$21,915,623 $17,531,587 $17,661,203 

(i) Subscription and services-based revenue from other sources relates to revenue generated from the Company's Square Loans, interest income earned on customer funds, and interest income earned on funds held by Square Financial Services. For 2022 and 2023 amounts, this also includes revenue generated from consumer receivables originated through the BNPL platform, following the acquisition of Afterpay.
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NOTE 3 - INVESTMENTS IN DEBT SECURITIES

The Company's short-term and long-term investments as of December 31, 2023 were as follows (in thousands):
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Short-term debt securities:
U.S. agency securities$68,778 $— $(1,263)$67,515 
Corporate bonds216,864 96 (1,733)215,227 
Commercial paper15,159 — — 15,159 
Municipal securities9,396 — (231)9,165 
Certificates of deposit3,856 — — 3,856 
U.S. government securities544,145 210 (4,357)539,998 
Foreign government securities1,000 — (19)981 
Total$859,198 $306 $(7,603)$851,901 
Long-term debt securities:
Corporate bonds$94,564 $809 $(45)$95,328 
Municipal securities2,495 55 (138)2,412 
U.S. government securities152,549 875 (37)153,387 
Total$249,608 $1,739 $(220)$251,127 
The Company's short-term and long-term investments as of December 31, 2022 are as follows (in thousands):
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Short-term debt securities:
U.S. agency securities$96,545 $16 $(2,120)$94,441 
Corporate bonds368,110 2 (7,475)360,637 
Commercial paper31,503 — — 31,503 
Municipal securities9,884 — (191)9,693 
Certificates of deposit6,400 — — 6,400 
U.S. government securities580,568 6 (8,937)571,637 
Foreign government securities7,795 — (255)7,540 
Total$1,100,805 $24 $(18,978)$1,081,851 
Long-term debt securities:
U.S. agency securities$74,097 $— $(3,782)$70,315 
Corporate bonds245,891 6 (9,171)236,726 
Municipal securities10,415 3 (664)9,754 
U.S. government securities268,902 — (13,210)255,692 
Foreign government securities1,000 — (58)942 
Total$600,305 $9 $(26,885)$573,429 

The amortized cost of investments classified as cash equivalents approximated the fair value due to the short-term nature of the investments.


113

The Company's gross unrealized losses and fair values for those fiscal years, with early adoption permitted. investments that were in an unrealized loss position as of December 31, 2023 and 2022, aggregated by investment category and the length of time that individual securities have been in a continuous loss position were as follows (in thousands):
December 31, 2023
Less than 12 monthsGreater than 12 monthsTotal
Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Short-term debt securities:
U.S. agency securities$9,770 $(10)$57,745 $(1,253)$67,515 $(1,263)
Corporate bonds61,054 (60)110,706 (1,673)171,760 (1,733)
Municipal securities— — 9,165 (231)9,165 (231)
U.S. government securities80,724 (113)207,183 (4,243)287,907 (4,356)
Foreign government securities— — 981 (19)981 (19)
Total$151,548 $(183)$385,780 $(7,419)$537,328 $(7,602)
Long-term debt securities:
Corporate bonds11,819 (31)2,274 (14)14,093 (45)
Municipal securities976 (24)383 (112)1,359 (136)
U.S. government securities28,474 (37)— — 28,474 (37)
Total$41,269 $(92)$2,657 $(126)$43,926 $(218)

December 31, 2022
Less than 12 monthsGreater than 12 monthsTotal
Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Short-term debt securities:
U.S. agency securities$8,572 $(24)$84,628 $(2,096)$93,200 $(2,120)
Corporate bonds34,795 (423)320,748 (7,052)355,543 (7,475)
Municipal securities587 (13)5,811 (178)6,398 (191)
U.S. government securities146,974 (839)394,880 (8,098)541,854 (8,937)
Foreign government securities— — 7,540 (255)7,540 (255)
Total$190,928 $(1,299)$813,607 $(17,679)$1,004,535 $(18,978)
Long-term debt securities:
U.S. agency securities$11,501 $(20)$58,814 $(3,762)$70,315 $(3,782)
Corporate bonds33,862 (262)201,791 (8,909)235,653 (9,171)
Municipal securities467 (33)8,784 (631)9,251 (664)
U.S. government securities54,405 (590)201,288 (12,620)255,693 (13,210)
Foreign government securities— — 942 (58)942 (58)
Total$100,235 $(905)$471,619 $(25,980)$571,854 $(26,885)

The Company does not planintend to early adopt this guidance. The Company’s operating leases primarily comprisesell nor anticipate that it will be required to sell these securities before recovery of office spaces, with the most significant leases relatingamortized cost basis. Unrealized losses on available-for-sale debt securities were determined not to corporate headquarters in San Francisco andbe related to credit related losses, therefore, an office in New York. While the Company continues to evaluate the impact of adopting this guidance on its consolidated financial statements, it does expect to record right to use assets and related lease liabilities on its consolidated balance sheets upon adoption, which will increase total assets and liabilities.allowance for credit losses is not required.



86
114






In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting,
which is intended to simplify several aspectsThe contractual maturities of the accounting for share-based payment transactions, includingCompany's short-term and long-term investments as of December 31, 2023 were as follows (in thousands):
Amortized CostFair Value
Due in one year or less$859,198 $851,901 
Due in one to five years249,608 251,127 
Total$1,108,806 $1,103,028 

NOTE 4 - CUSTOMER FUNDS

The following table presents the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, with early adoption permitted.assets underlying customer funds (in thousands):
December 31,
2023		December 31,
2022
Cash$2,137,634 $1,748,983 
Cash equivalents:
Money market funds4,042 851,296 
Reverse repurchase agreement (i)
1,028,754 580,045 
Total customer funds$3,170,430 $3,180,324 

(i) The Company adopted this new guidance on January 1, 2017. As part ofhas accounted for the adoption,reverse repurchase agreement with a third party as an overnight lending arrangement, collateralized by the Company electedsecurities subject to account for forfeitures as they occur. As this guidance requires a modified retrospective approach when eliminating the forfeiture rate, the Company recorded an adjustment of $0.7 million to increase accumulated deficit and additional paid-in capital as of January 1, 2017. With respect to classification of excess tax benefits on the Statement of Cash Flows, the Company has elected to apply this guidance on a prospective basis. Thus, the prior periods have not been adjusted. The remaining areas of simplification in this guidance did not have an impact on the consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which requires measurement and recognition of expected credit losses for financial assets held. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted.repurchase agreement. The Company is currently evaluatingclassifies the impact this new guidance may have onamounts due from the consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments. This guidance addresses several cash flow issues with the objective of reducing the existing diversity in practice. Specific issues addressed in this guidance include, but are not limited to, debt prepayment or extinguishment costs, contingent consideration payments made after a business combination and application of the predominance principle. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The amendments should be applied retrospectively. The Company adopted this new guidance on January 1, 2018, and it did not have any effect on the consolidated financial statements and related disclosures.

In October 2016, the FASB issued ASU No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, which amends existing guidance on the recognition of current and deferred income tax impacts for intra-entity asset transfers other than inventory. The current guidance requires companies to defer the income tax effects of intercompany transfers of all assets, until the asset has been sold to an outside party whereas the new guidance will not allow the deferral of income tax effects of intercompany transfers of assets except for inventory. This standard is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The amendments in this guidance should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earningscounterparty as of the beginning of the period of adoption. The Company adopted this new guidance on January 1, 2018, and it did not have any effect on the consolidated financial statements and related disclosures.

In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash, which provides guidance on the classification of restricted cash to be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts on the statement of cash flows. This standard is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The Company early adopted this guidance on January 1, 2017, and adjusted its consolidated statements of cash flow for each of the periods presented.due to their short term nature.


In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business. The amendment seeks to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, intangible assets and consolidation. This standard is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The amendments should be applied prospectively on or after the effective dates. The Company adopted this new guidance on January 1, 2018, and it did not have any effect on the consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. The new guidance eliminates the requirement to calculate the implied fair value of goodwill assuming a hypothetical purchase price allocation (i.e., Step 2 of the goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value, not to exceed the carrying amount of goodwill. This standard should be adopted when the Company performs its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted. The amendments should be applied on a prospective basis. The Company does not expect the adoption of this guidance to have a material the impact on the consolidated financial statements and related disclosures.

87






In March 2017, the FASB issued ASU No. 2017-08, Premium Amortization on Purchased Callable Debt Securities, which amends the amortization period for certain purchased callableany available-for-sale debt securities held at a premium, shortening such periodfor which the Company has recorded credit related losses.

The amortized cost of investments classified as cash equivalents approximated the fair value due to the earliest call date. This standard is effective for annual periods beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The amendments in this guidance should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings asshort-term nature of the beginning of the period of adoption. The Company is currently evaluating the impact this new guidance may have on the consolidated financial statements and related disclosures.investments.


In May 2017, the FASB issued ASU No. 2017-09, Scope of Modification Accounting, which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. This standard is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The amendments should be applied on a prospective basis. The Company adopted this new guidance on January 1, 2018, and it did not have any effect on the consolidated financial statements and related disclosures.

NOTE 25 - FAIR VALUE OF FINANCIAL INSTRUMENTSMEASUREMENTS

The Company measures its cash equivalents, customer funds, short-term and long-term marketable debt securities, marketable equity investments, and bitcoin investment at fair value. The Company classifies these investments within Level 1 or Level 2 of the fair value hierarchy because the Company values these investments using quoted market prices or alternative pricing sources and models utilizing market observable inputs. The Company measures its safeguarding obligation liability related to bitcoin held for other parties at the fair value of the bitcoin that the Company holds for other parties and classifies the liability within Level 2 because the Company uses observable market prices of the underlying bitcoin as an input for the valuation. The Company also classifies its safeguarding asset related to bitcoin held for other parties within Level 2, unless the asset's carrying amount is adjusted to reflect any actual or potential safeguarding loss events, in which case it would be classified within Level 3. The Company was not aware of any actual or possible safeguarding loss events as of December 31, 2023 or December 31, 2022.

115

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis arewere classified as follows (in thousands):
December 31, 2023December 31, 2022
Level 1Level 2Level 3Level 1Level 2Level 3
Cash equivalents:
Money market funds$960,705 $— $— $1,230,924 $— $— 
U.S. agency securities— — — — 7,923 — 
U.S. government securities29,788 — — — — — 
Commercial paper— 4,993 — — 25,080 — 
Corporate bonds— 699 — — — — 
Restricted Cash:
Money market funds291,374 — — — — — 
Customer funds:
Money market funds4,042 — — 851,296 — — 
Reverse repurchase agreement1,028,754 — — 580,045 — — 
Short-term debt securities:
U.S. agency securities— 67,515 — — 94,441 — 
Corporate bonds— 215,227 — — 360,637 — 
Commercial paper— 15,159 — — 31,503 — 
Municipal securities— 9,165 — — 9,693 — 
Certificates of deposit— 3,856 — — 6,400 — 
U.S. government securities539,998 — — 571,637 — 
Foreign government securities— 981 — — 7,540 — 
Long-term debt securities:
U.S. agency securities— — — — 70,315 — 
Corporate bonds— 95,328 — — 236,726 — 
Municipal securities— 2,412 — — 9,754 — 
U.S. government securities153,387 — — 255,692 — — 
Foreign government securities— — — — 942 — 
Other:
Investment in marketable equity security8,267 — — 11,092 — — 
Bitcoin investment (i)
339,898 — — 102,303 — — 
Safeguarding asset related to bitcoin held for other parties— 1,038,585 — — 428,243 — 
Safeguarding obligation liability related to bitcoin held for other parties— (1,038,585)— — (428,243)— 
Total assets (liabilities) measured at fair value    $3,356,213 $415,335 $— $3,602,989 $860,954 $— 
(i) The Company holds an immaterial amount of bitcoin for operating purposes and, given the bitcoin is held for a relatively short period of time, typically being purchased and sold within a day, the fair value approximates carrying value. Refer to Note 1, Description of Business and Summary of Significant Accounting Policies and Note 14, Bitcoin for more details.
 December 31, 2017 December 31, 2016
 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Cash and cash equivalents:           
Money market funds$387,698
 $—
 $—
 $207,168
 $—
 $—
Commercial paper—
 24,695
 —
 —
 7,496
 —
Municipal securities—
 —
 —
 —
 1,000
 —
Short-term securities:           
U.S. agency securities—
 15,083
 —
 —
 9,055
 —
Corporate bonds—
 57,798
 —
 —
 6,980
 —
Commercial paper—
 17,428
 —
 —
 17,298
 —
Municipal securities—
 23,700
 —
 —
 8,028
 —
U.S. government securities55,567
 —
 —
 18,540
 —
 —
Long-term securities:           
U.S. agency securities—
 20,169
 —
 —
 3,502
 —
Corporate bonds—
 91,413
 —
 —
 12,914
 —
Municipal securities—
 26,224
 —
 —
 2,492
 —
U.S. government securities65,861
 —
 —
 8,458
 —
 —
Total$509,126
 $276,510
 $—
 $234,166
 $68,765
 $—


The carrying amounts of certain financial instruments, including cash equivalents, settlements receivable, customer funds,consumer receivables, loans held for investment, accounts payable, customers payable, accrued expenses, and settlements payable, approximate their fair values due to their short-term nature. The carrying amounts of the Company's warehouse funding facilities approximate their fair values.


116

The Company estimates the fair value of its convertible and senior notes based on their last actively traded prices (Level 1) or market observable inputs (Level 2). The estimated fair value and carrying value of the convertible and senior notes were as follows (in thousands):
December 31, 2023December 31, 2022
Carrying ValueFair Value (Level 2)Carrying ValueFair Value (Level 2)
2031 Senior Notes$989,567 $879,913 $988,171 $782,857 
2026 Senior Notes993,208 938,105 990,414 885,876 
2027 Convertible Notes569,865 468,475 568,535 433,082 
2026 Convertible Notes571,014 501,910 569,315 464,066 
2025 Convertible Notes996,437 979,776 993,394 943,188 
2023 Convertible Notes— — 460,356 480,925 
Total$4,120,091 $3,768,179 $4,570,185 $3,989,994 
 December 31, 2017
 Carrying Value Fair Value (Level 2)
Convertible senior notes$358,572
 $719,356
Total$358,572
 $719,356


88







A summaryThe estimated fair value and carrying value of loans disclosed at fair value on a recurring basis isheld for sale and loans held for investment were as follows (in thousands):

December 31, 2017 December 31, 2016
Carrying Value Fair Value (Level 3) Carrying Value Fair Value (Level 3)
December 31, 2023
December 31, 2023
December 31, 2023
Carrying Value
Carrying Value
Carrying Value
Loans held for sale$73,420
 $76,070
 $42,144
 $42,633
Loans held for sale
Loans held for sale
Loans held for investment
Loans held for investment
Loans held for investment
Total$73,420
 $76,070
 $42,144
 $42,633
Total
Total
    
For the yearyears ended December 31, 2017,2023, 2022, and 2021, the Company recorded a chargeincremental charges for the excess of amortized cost over the fair value of the loans of $8.0 million. No charges were recorded$35.1 million, $27.5 million, and $6.4 million, respectively. To determine the fair value of the loans held for sale, the Company utilizes discounted cash flow valuation modeling, taking into account the probability of default and estimated timing and amounts of periodic repayments. In estimating the expected timing and amounts of the future periodic repayments for the years endedloans outstanding, the Company considered other relevant market data in developing such estimates and assumptions. As of December 31, 20162023, there were no material changes to the Company's estimates of fair value, and 2015.the Company will continue to evaluate facts and circumstances that could impact its estimates and affect its results of operations in future periods.
    
If applicable, the Company will recognize transfers into and out of levels within the fair value hierarchy at the end of the reporting period in which the actual event or change in circumstance occurs. During the years ended December 31, 2017, 20162023, 2022, and 2015,2021, the Company did not have any transfers in or out of Level 1, Level 2, or Level 3 assets or liabilities.


NOTE 36 - INVESTMENTSCONSUMER RECEIVABLES, NET

Consumer receivables represent amounts due from consumers for outstanding installment payments on orders processed on the Company's BNPL platform. Further discussed in Note 1, Description of Business and Summary of Significant Accounting Policies, consumer receivables are classified as held for investment. These receivables are typically interest free and are generally due within 14 to 56 days.

The Company determinesclosely monitors credit quality for consumer receivables to manage and evaluate its related exposure to credit risk. The criteria the appropriate classificationCompany monitors when assessing the credit quality and risk of its investments in marketable securitiesconsumer receivables portfolio is primarily based on internal risk assessments, as they provide insight into customer risk profiles and are useful as indicators of potential future credit losses. Consumer receivables are internally rated as "Pass" or "Classified." Pass rated consumer receivables generally consist of consumer receivables that are current or up to 60 days past due. Classified consumer receivables are generally comprised of consumer receivables that are greater than 60 days past due and have a higher risk of default. Internal risk ratings are reviewed and, generally, updated at least once a year. As of December 31, 2023, the timeamortized cost of purchasePass rated consumer receivables was $2.5 billion and reevaluates such designation at each balance sheet date. The Company has classified and accounted for its marketable securities as available-for-sale.the amount of Classified consumer receivables was $0.1 billion.


117

The Company's short-termfollowing table presents an aging analysis of the amortized cost of consumer receivables by delinquency status (in thousands):
December 31, 2023December 31, 2022
Non-delinquent loans$2,074,532 $1,643,874 
1 - 60 days past due453,412 295,830 
61 - 90 days past due26,798 20,612 
90+ days past due75,227 62,134 
Total amortized cost$2,629,969 $2,022,450 

The amount listed as 1 - 60 days past due in the above table includes $365.4 million and long-term investments$224.9 million of cash in transit as of December 31, 2017 are2023 and December 31, 2022, respectively, which reflects ongoing repayments from consumers that have been sent from consumers’ bank accounts but have not yet been received at the Company’s bank account as follows (in thousands):

 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
Short-term securities:       
U.S. agency securities$15,122
 $—
 $(39) $15,083
Corporate bonds57,855
 22
 (79) 57,798
Commercial paper17,428
 —
 —
 17,428
Municipal securities23,743
 8
 (51) 23,700
U.S. government securities55,729
 1
 (163) 55,567
Total$169,877
 $31
 $(332) $169,576
        
Long-term securities:       
U.S. agency securities$20,288
 $2
 $(121) $20,169
Corporate bonds91,959
 25
 (571) 91,413
Municipal securities26,371
 13
 (160) 26,224
U.S. government securities66,362
 19
 (520) 65,861
Total$204,980
 $59
 $(1,372) $203,667

89





The Company's short-term and long-term investmentsof the date of the financial statements. This cash in transit as of December 31, 20162023 and December 31, 2022 represents 13.9% and 11.1%, respectively, of the total amortized cost of consumer receivables.

Consumer receivables are charged off when they are over 180 days past due as followsthe Company has no reasonable expectation of recovery. When consumer receivables are charged off, the Company recognizes the charge against the allowance for credit losses. While the Company expects collections at that point to be unlikely, the Company may recover amounts from the respective consumers. Any subsequent recoveries following charge-off are credited to transaction, loan, and consumer receivable losses on the consolidated statements of operations in the period they were recovered. The amount of recoveries for the year ended December 31, 2023 and December 31, 2022 were immaterial.

The following table summarizes activity in the allowance for credit losses subsequent to the acquisition of Afterpay (in thousands):

Year Ended December 31, 2023From Acquisition on
January 31, 2022 to
December 31, 2022
Allowance for credit losses, beginning of the period (i)
$151,290 $115,552 
Provision for credit losses261,296 203,670 
Charge-offs and other adjustments(228,845)(168,664)
Foreign exchange effect1,534 732 
Allowance for credit losses, end of the period$185,275 $151,290 

 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
Short-term securities:       
U.S. agency securities$9,048
 $7
 $—
 $9,055
Corporate bonds17,318
 —
 (20) 17,298
Commercial paper6,980
 —
 —
 6,980
Municipal securities8,037
 —
 (9) 8,028
U.S. government securities18,537
 3
 —
 18,540
Total$59,920
 $10
 $(29) $59,901
        
Long-term securities:       
U.S. agency securities$3,502
 $—
 $—
 $3,502
Corporate bonds12,939
 —
 (25) 12,914
Municipal securities2,505
 —
 (13) 2,492
U.S. government securities8,478
 —
 (20) 8,458
Total$27,424
 $—
 $(58) $27,366

(i) Consumer receivables acquired from Afterpay that reflect a more-than-insignificant deterioration of credit from origination are considered purchased credit deteriorated ("PCD") receivables. For PCD consumer receivables, the years ended December 31, 2017, 2016 and 2015, gains orinitial estimate of expected credit losses realizedis recognized in the allowance for credit losses on the saledate of investments were not material. Investmentsacquisition using the same methodology as other consumer receivables.

NOTE 7 - CUSTOMER LOANS

Loans Held for Investment

The Company originates loans in the U.S. through its wholly-owned subsidiary, Square Financial Services. The Company sells the majority of the loans to institutional investors with a portion retained on its balance sheet. Loans retained by the Company are reviewed periodically to identify possible other-than-temporary impairments. Asclassified as held for investment as the Company has both the abilityintent and intentability to hold these investments with unrealized losses until a recovery of fair value, or for a reasonable period of time sufficientthem for the recoveryforeseeable future, until maturity, or until payoff. The Company’s intent and ability in the future may change based on changes in business strategies, the economic environment, and market conditions. As of fair value, which may be maturity,December 31, 2023, the Company does not consider these investmentsheld $247.6 million as loans held for investment, net of allowance, included in other current assets on the consolidated balance sheets. Refer to be other-than-temporarily impairedNote 12, Other Consolidated Balance Sheet Components (Current) for anymore details.

118

Loans held for investment are recorded at amortized cost, less an allowance for potential uncollectible amounts. Amortized cost basis represents principal amounts outstanding, net of the periods presented.

unearned income, unamortized deferred fees and costs on originated loans, premiums or discounts on purchased loans and charge-offs. The contractual maturitiesallowance for loan losses, amount of the Company's short-termcharge offs recorded, and long-term investmentsamount of recoveries as of December 31, 20172023 were immaterial.

The Company considers loans that are greater than 60 days past due to be delinquent, and loans 90 days or more past due to be nonperforming. Loans that are 120 days or more past due are generally considered to be uncollectible and are written off. When a loan is identified as followsnonperforming, recognition of income is discontinued. Loans are restored to performing status after total overdue unpaid amounts are repaid and the Company has reasonable assurance that performance under the terms of the loan will continue. As of December 31, 2023, the amount of loans that were identified as nonperforming loans was immaterial.

The Company closely monitors economic conditions and loan performance trends to assess and manage its exposure to credit risk. The criteria the Company monitors when assessing the credit quality and risk of its loan portfolio is primarily based on internal risk ratings, as they provide insight into borrower risk profiles and are useful as indicators of potential future credit losses. Loans are internally rated as "Pass" or "Classified". Pass rated loans generally consist of loans that are current or up to 60 days past due. Classified loans generally comprise of loans that are 60 days or greater past due and have a higher risk of default. Internal risk ratings are reviewed and, generally, updated at least once a year. As of December 31, 2023, the amortized cost of Pass rated loans was $261.4 million and the amount of Classified loans was immaterial.

Loans Held For Sale

The Company classifies loans as held for sale when there is an available market for such loans and it is the Company’s intent to sell all of its rights, title, and interest in these loans to third-party investors. Loans held for sale primarily include Square Loans and Cash App Borrow products. Square Loans are loans facilitated by Square Financial Services to qualified Square sellers, while Cash App Borrow is a credit product for consumers that allows customers to access short-term loans for a small fee. Loans held for sale are recorded at the lower of amortized cost or fair value.

As of December 31, 2023 and December 31, 2022 the Company had $775.4 million and $474.0 million, respectively, of loans held for sale, as disclosed in the Company's consolidated balance sheets.

The Company aggregates loans held for sale by the intended customer of the loan product. Commercial loans held for sale include Square Loans, Consumer loans held for sale include loans initiated through Cash App Borrow, and Other loans held for sale include loans outside of consumer and commercial loans.

The following table presents the Company’s loans held for sale aggregated by category (in thousands):

December 31, 2023December 31, 2022
Commercial$478,128 $327,449 
Consumer274,630 120,870 
Other22,666 25,717 
Total$775,424 $474,036 

119
 Amortized Cost Fair Value
Due in one year or less$169,877
 $169,576
Due in one to five years204,980
 203,667
Total$374,857
 $373,243


NOTE 48 - PROPERTY AND EQUIPMENT, NET
The following is a summary oftable details property and equipment, less accumulated depreciation and amortization (in thousands):

December 31,
2023		December 31,
2022
Capitalized software$243,214 $197,420 
Computer equipment224,127 224,959 
Leasehold improvements123,218 228,634 
Office furniture and equipment28,798 45,836 
Total619,357 696,849 
Less: Accumulated depreciation and amortization(323,301)(367,547)
Property and equipment, net$296,056 $329,302 
 December 31,
2017		 December 31,
2016
Computer equipment$66,186
 $52,915
Office furniture and equipment14,490
 10,737
Leasehold improvements77,073
 73,366
Capitalized software35,063
 24,642
Total192,812
 161,660
Less: Accumulated depreciation and amortization(101,316) (73,332)
Property and equipment, net$91,496
 $88,328


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Depreciation and amortization expense on property and equipment was $29.7$172.8 million, $28.7$131.5 million, and $20.1$94.2 million for the years ended December 31, 2017, 2016,2023, 2022, and 2015,2021, respectively.


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NOTE 59 - ACQUISITIONS

Afterpay

On January 31, 2022 (February 1, 2022 Australian Eastern Daylight Time), the Company completed the acquisition of Afterpay, a global BNPL platform. In connection with the acquisition, the Company issued 113,617,352 shares of the Company’s Class A common stock. The shares issued included a deemed vested component of outstanding employee awards, based on the ratio of time served in relation to the vesting term of each award, with the unvested portion being replaced with Block’s unvested replacement awards, with the same terms. The aggregate fair value of the shares issued was $13.8 billion based on the closing price of the Company’s Class A common stock on the acquisition date, of which $66.3 million was attributed to acceleration of various share-based arrangements and was accounted for as an expense immediately post-acquisition, included as a component of general and administrative expenses in the consolidated statement of operations. As of the completion of the acquisition, certain convertible notes with an outstanding principal amount of AU $1.5 billion (U.S. $1.1 billion based on the closing exchange rate on the acquisition date) remained outstanding, and were redeemed on March 4, 2022. As of December 31, 2023, the Company's purchase price allocation was complete and the measurement period was closed.

The acquisition meets the criteria to be accounted for as a business combination in accordance with ASC 805, Business Combinations. This method requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date and that the difference between the fair value of the consideration paid for the acquired entity and the fair value of the net assets acquired be recorded as goodwill, which is not amortized but is tested at least annually for impairment.

The table below summarizes the consideration paid for Afterpay and the assessment of the fair value of the assets acquired and liabilities assumed at the closing date (in thousands, except share data):
Consideration:
Stock (113,617,352 shares of Class A common stock, excluding value accounted as post-combination expense of $66,337)$13,827,929 
Cash paid to settle tax withholding in connection with replacement awards8,693 
Total consideration$13,836,622 
Recognized amounts of identifiable assets acquired and liabilities assumed:
Current assets (inclusive of cash, cash equivalents, and restricted cash acquired)$653,709 
Consumer receivables1,245,508 
Intangible customer assets1,378,000 
Intangible technology assets239,000 
Intangible trade name386,000 
Other non-current assets74,232 
Long-term debt - current (i)
(1,058,065)
Current liabilities(439,358)
Warehouse funding facilities (ii)
(107,996)
Deferred tax liabilities(190,689)
Other non-current liabilities(63,213)
Total identifiable net assets acquired2,117,128 
Goodwill11,719,494 
Total$13,836,622 

(i) Long-term debt - current is comprised of the aforementioned Afterpay convertible notes, which were redeemed in cash at face value on March 4, 2022.

(ii) Refer to Note 15, Indebtedness for further details.

121

Goodwill from the acquisition was primarily attributable to the value of expected synergies created by incorporating Afterpay's BNPL platform, its business, and operations into the Company's Cash App ecosystem and the value of the assembled workforce. The goodwill has no amortizable basis for income tax purposes.

Other Acquisitions

During the years ended December 31, 2023, 2022, and 2021, the Company completed certain acquisitions for a total consideration of $14.2 million, $46.0 million, and $253.7 million, respectively, which resulted in the recognition of additional intangible assets and goodwill. These acquisitions did not have a material impact to the Company's consolidated financial statements, and therefore pro forma financial information has not been presented. None of the goodwill generated from the acquisitions or the acquired intangible assets are expected to be deductible for tax purposes.

NOTE 10 - GOODWILL


Goodwill is recorded when the consideration paid for an acquisition of a business exceeds the fair value of identifiable net tangible and intangible assets acquired. As

The change in the carrying value of December 31, 2017 and December 31, 2016, goodwill was $58.3as follows (in thousands):
Balance at December 31, 2021$519,276 
Acquisitions11,761,866 
Foreign currency translation adjustments(314,381)
Balance at December 31, 202211,966,761 
Acquisitions7,921 
Foreign currency translation adjustments77,351 
Impairment charge(132,313)
Balance at December 31, 2023$11,919,720 

As discussed further in Note 21, Segment and Geographical Information, the Company has two reportable segments, Square and Cash App. In the fourth quarter of 2023, the Company reorganized its business structure and moved the business activities and management of the Company's BNPL platform fully into Cash App. In connection with this reorganization, the Company reallocated the goodwill associated with the BNPL platform from Square to Cash App using the relative fair value approach. Additionally, the Company assessed goodwill for impairment for Square and Cash App immediately before and immediately after the reorganization and concluded that there was no goodwill impairment, as their estimated fair values exceeded their carrying values both immediately before and after the reorganization. The Company also performed a goodwill impairment testing of its other reporting units and recognized an impairment charge of 132.3 million related to TIDAL in the fourth quarter of 2023. The impairment charge was as a result of changes in TIDAL's strategic focus, including terminations of certain revenue arrangements and $57.2 million, respectively.investment into new product areas. This charge was included within general and administrative expenses in the Company's statements of operations. The fair value of the TIDAL reporting unit was estimated using the income approach, which was based upon the present value of estimated future cash flows.


122

The change in the carrying value of goodwill allocated to the reportable segments was as follows (in thousands):
Cash AppSquareCorporate and OtherTotal
Balance at December 31, 2021$128,334 $193,057 $197,885 $519,276 
Acquisitions5,882,133 5,879,733 — 11,761,866 
Foreign currency translation adjustments(157,537)(156,844)— (314,381)
Balance at December 31, 20225,852,930 5,915,946 197,885 11,966,761 
Acquisitions— — 7,921 7,921 
Foreign currency translation adjustments77,351 — — 77,351 
Reallocation between segments (i)
720,847 (720,847)— — 
Impairment charge— — (132,313)(132,313)
Balance at December 31, 2023$6,651,128 $5,195,099 $73,493 $11,919,720 

(i) Represents effects of the reallocation of goodwill due to the reorganization of the Company's business structure in the fourth quarter of 2023.

The Company performed its annual goodwill impairment testassessment as of December 31, 2017. The2023 and concluded no additional goodwill impairment should be recognized. For purposes of completing the impairment test, the Company determined that the consolidated business is represented byperforms either a singlequalitative or a quantitative analysis on a reporting unit and through qualitative analysis concluded that it was more likely than not that the fair value of the reporting unit was greater than its carrying amount. As a result, the two-step goodwill impairment test was not required, and no impairments of goodwill were recognized during the year ended December 31, 2017.basis.


NOTE 611 - ACQUIRED INTANGIBLE ASSETS

During the years ended December 31, 2017 and 2016, the Company did not make any material acquisitions.


The following table presents the detail ofdetails acquired intangible assets as of the periods presented (in thousands):

Balance at December 31, 2023
Weighted Average Estimated Useful LifeCostAccumulated AmortizationNet
Technology assets5 years$393,511 $(201,409)$192,102 
Customer assets14 years1,473,970 (237,316)1,236,654 
Trade names9 years428,944 (102,774)326,170 
Other9 years13,299 (6,704)6,595 
Total$2,309,724 $(548,203)$1,761,521 

 Balance at December 31, 2017
Cost Accumulated Amortization Net
Patents$1,285
 $(559) $726
Technology Assets29,158
 (21,329) 7,829
Customer Assets10,319
 (4,540) 5,779
Total$40,762
 $(26,428) $14,334
Balance at December 31, 2022
Weighted Average Estimated Useful LifeCostAccumulated AmortizationNet
Technology assets5 years$398,665 $(133,116)$265,549 
Customer assets15 years1,474,163 (110,316)1,363,847 
Trade names9 years434,766 (58,352)376,414 
Other9 years13,701 (5,477)8,224 
Total$2,321,295 $(307,261)$2,014,034 


 Balance at December 31, 2016
Cost Accumulated Amortization Net
Patents$1,285
 $(454) $831
Technology Assets29,075
 (14,702) 14,373
Customer Assets7,745
 (3,657) 4,088
Total$38,105
 $(18,813) $19,292

The weighted average amortization periods for acquired patents, technology, and customerAll intangible assets are approximately 13 years, 4 years, and 9 years, respectively.amortized over their estimated useful lives.
Amortization expense associated with acquired
123

The change in the carrying value of intangible assets was $7.6 million, $9.0 million, and $7.5 million for the years ended December 31, 2017, 2016, and 2015, respectively.as follows (in thousands):

Year Ended December 31,
202320222021
Acquired intangible assets, net, beginning of the period$2,014,034 $257,049 $137,612 
Acquisitions6,300 2,006,490 159,100 
Amortization expense(246,873)(208,952)(40,522)
Foreign currency translation and other adjustments(11,940)(40,553)859 
Acquired intangible assets, net, end of the period$1,761,521 $2,014,034 $257,049 
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The total estimated annual future amortization expense of these intangible assets as of December 31, 2017,2023 is as follows (in thousands):
2024$227,482 
2025208,252 
2026194,185 
2027147,028 
2028142,826 
Thereafter841,748 
Total$1,761,521 
2018 $6,226
2019 3,442
2020 1,479
2021 846
2022 611
Thereafter1,730
Total$14,334



NOTE 712 - OTHER CONSOLIDATED BALANCE SHEET COMPONENTS (CURRENT)


Other Current Assets


The following table presents the detail of other current assets (in thousands):
December 31,
2023		December 31,
2022
Restricted cash (i)
$770,380 $639,780 
Short term deposits (ii)
397,630 25,555 
Processing costs receivable365,153 298,568 
Loans held for investment, net of allowance for loan losses (iii)
247,631 123,959 
Accounts receivable, net134,824 140,508 
Inventory, net110,097 97,703 
Prepaid expenses100,770 141,262 
Other227,003 159,930 
Total$2,353,488 $1,627,265 
 December 31,
2017		 December 31,
2016
Inventory, net$16,777
 $13,724
Processing costs receivable21,083
 10,049
Prepaid expenses14,473
 7,365
Accounts receivable, net8,606
 6,191
Deferred hardware costs7,931
 4,546
Deferred magstripe reader costs2,469
 3,911
Merchant cash advance receivable, net125
 4,212
Other14,990
 10,545
Total$86,454
 $60,543


(i) Includes a portion invested in money market funds. Refer to Note 5, Fair Value Measurements for further details.

(ii) Includes a $350.0 million deposit held by a processor to meet requirements related to processing volumes under an arrangement that was executed in the fourth quarter of 2023. This activity is included within cash flows from operating activities within the Company's consolidated statements of cash flows.

(iii) Refer to Note 7, Customer Loans for further details.

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124






Accrued Expenses and Other Current Liabilities

The following table presents the detail of accrued expenses (in thousands):
 December 31,
2017		 December 31,
2016
Accrued payroll$9,103
 $5,799
Accrued professional fees5,638
 5,788
Accrued advertising and other marketing6,723
 5,008
Processing costs payable10,145
 10,871
Accrued non income tax liabilities6,155
 3,562
Accrued hardware costs2,496
 3,148
Other accrued liabilities$12,020
 $5,367
Total$52,280
 $39,543

Other Current Liabilities
The following table presents the detail ofand other current liabilities (in thousands):
December 31,
2023		December 31,
2022
Accrued expenses$538,812 $382,571 
Accounts payable142,554 95,846 
Customer deposits167,028 141,893 
Accrued transaction losses (i)
54,042 64,539 
Accrued royalties62,140 63,684 
Operating lease liabilities, current53,721 66,854 
Other307,903 258,129 
Total$1,326,200 $1,073,516 

 December 31,
2017		 December 31,
2016
Square Capital payable (i)
$7,671
 $4,907
Square Payroll payable (ii)
2,850
 4,769
Deferred revenue5,893
 5,407
Current portion of deferred rent3,311
 2,862
Accrued redemptions1,036
 1,628
Other7,606
 2,899
Total$28,367
 $22,472

(i)Square Capital payable represents unpaid amounts arising The Company is exposed to potential credit losses related to transactions processed by sellers that are subsequently subject to chargebacks when the Company is unable to collect from the purchasesellers primarily due to insolvency. Generally, the Company estimates the potential loss rates based on historical experience that is continuously adjusted for new information and incorporates, where applicable, reasonable and supportable forecasts about future expectations.

The following table summarizes the activities of loans or loan repayments collected on behalf of third parties.the Company’s reserve for transaction losses (in thousands):

Year Ended December 31,
20232022
Accrued transaction losses, beginning of the period$64,539 $55,167 
Provision for transaction losses95,885 100,735 
Charge-offs to accrued transaction losses(106,382)(91,363)
Accrued transaction losses, end of the period$54,042 $64,539 
(ii) Square Payroll payable represents
In addition to amounts received from Square Payroll product customersreflected in the table above, the Company recognized additional provision for transaction losses that will be utilizedwas realized and written-off within the same period. Such losses are primarily related to settleCash App transactions, such as peer-to-peer transactions and negative balances, that are uncertain in nature. The Company recorded $405.6 million and $411.7 million for the customers employee payrollyears ended December 31, 2023 and related obligations.2022, respectively, for such losses.



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NOTE 813 - OTHER CONSOLIDATED BALANCE SHEET COMPONENTS (NON-CURRENT)


Other Non-Current Assets


The following table presents the detail of other non-current assets (in thousands):

December 31,
2023		December 31,
2022
Investment in non-marketable equity securities (i)
$205,268 $208,880 
Bitcoin investment (ii)
339,898 102,303 
Restricted cash71,812 71,600 
Other122,508 101,454 
Total$739,486 $484,237 

(i) Investment in non-marketable equity securities represents the Company's investments in equity of non-public entities. These investments are measured using the measurement alternative and are therefore carried at cost, less impairment, adjusted for observable price changes from orderly transactions for identical or similar investments of the same issuer. Adjustments are recorded within other expense (income), net on the consolidated statements of operations. Unrealized gains and losses were immaterial in the year ended December 31, 2023.

(ii) Refer to Note 14, Bitcoin for further details.

NOTE 14 - BITCOIN
 December 31,
2017		 December 31,
2016
Investment in privately held entity (i)
$25,000
 $—
Deposits2,738
 1,775
Debt issuance costs788
 1,063
Deferred tax assets519
 306
Other2,305
 50
Total$31,350
 $3,194


A) Company Owned Bitcoin
(i)In August, 2017,
Bitcoin investment

As of December 31, 2023, the Company invested $25.0held approximately 8,038 bitcoins for investment purposes with a fair value of $339.9 million, which is included within the Company’s “Other non-current assets” on the consolidated balance sheets. The following table summarizes the changes in Eventbrite,the Company’s bitcoin investment (in thousands, except number of bitcoin):
Amount of bitcoinValue
Balance at December 31, 20228,038 $102,303 
Cumulative effect of adoption of ASU 2023-08— 30,511 
Remeasurement gain— 207,084 
Balance at December 31, 20238,038 $339,898 

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Bitcoin for operating purposes

The Company holds a leadersmall amount of bitcoin for operating purposes, at any time, to facilitate the purchases and sales of bitcoin on behalf of Cash App customers. The bitcoin for operating purposes is reflected on the consolidated balance sheets within “Other current assets”. The following table summarizes the changes in event technology providingthe Company's bitcoin for operating purposes (in thousands, except number of bitcoin):
Amount of bitcoinValue
Balance at December 31, 2022638 $10,941 
Additions335,213 9,369,762 
Dispositions(335,467)(9,364,010)
Balance at December 31, 2023384 $16,693 

Given the Company holds a platformsmall amount of bitcoin for operating purposes and such bitcoin is held for only a short period, typically less than a day, any remeasurement gains or losses on the Company's bitcoin for operating purposes were immaterial.

B) Bitcoin Held for Other Parties

The Company allows its Cash App customers to store their bitcoin in the Company’s digital wallets free of charge. The Company also holds an immaterial amount of bitcoin from select trading partners to facilitate bitcoin transactions for customers on Cash App. Other than bitcoin, the Company does not hold or store any other types of crypto-assets for customers or trading partners. The Company holds the cryptographic key information and maintains the internal recordkeeping of the bitcoin held for other parties. The Company's contractual arrangements state that facilitates ticket sales, as well as promotionits customers and managementtrading partners retain legal ownership of events. In conjunctionthe bitcoin; have the right to sell, pledge, or transfer the bitcoin; and also benefit from the rewards and bear the risks associated with the investment,ownership, including as a result of any bitcoin price fluctuations. The customer also bears the risk of loss as a result of fraud or theft, unless the loss was caused by the Company’s gross negligence or the Company’s willful misconduct. The Company does not use any of the bitcoin custodied for customers or trading partners as collateral for any of the Company’s loans or other financing arrangements; nor does it lend or pledge bitcoin held for others to any third parties. The Company occasionally engages third-party custodians to store and safeguard bitcoin on the Company's behalf. As of December 31, 2023, an immaterial amount of the bitcoin was held by third-party custodians on the Company's behalf.

As of the adoption of SAB 121, the Company entered into an agreement with Eventbrite specifying terms under which the Company would provide payment processing services to Eventbriterecords a bitcoin safeguarding obligation liability and its customers for a five year term in the countries in which the Company operates. This agreement is subject to automatic one year renewals thereafter unless terminated by either party. Eventbrite and the Company have a common membercorresponding bitcoin safeguarding asset based on their respective boards of directors. The Company has not estimated the fair value of the investmentbitcoin held for other parties at each reporting date. The Company was not aware of any actual or possible safeguarding loss events as it has determined that it is not practicable to determine such fair value,of December 31, 2023 or December 31, 2022, and there are no identified events or changes in circumstances that may have a significant adverse effect onaccordingly, the fairbitcoin safeguarding obligation liability and the associated bitcoin safeguarding asset were recorded at the same value.

Other Non-Current Liabilities
The following table presentssummarizes the detailCompany’s bitcoin held for other parties (in thousands, except number of other non-current liabilities (in thousands)bitcoin):
December 31,
2023		December 31,
2022
Approximate amount of bitcoin held for customers24,570 25,850 
Approximate amount of bitcoin held for trading partners—62 
Total approximate amount of bitcoin held for other parties24,57025,912 
Safeguarding obligation liability related to bitcoin held for customers$1,038,585 $427,221 
Safeguarding obligation liability related to bitcoin held for trading partners— 1,022 
Safeguarding obligation liability related to bitcoin held for other parties$1,038,585 $428,243 
Safeguarding asset related to bitcoin held for other parties$1,038,585 $428,243 

127
 December 31,
2017		 December 31,
2016
Statutory liabilities (ii)
$40,768
 $29,497
Deferred rent20,349
 23,119
Deferred tax liabilities644
 476
Other7,777
 4,653
Total$69,538
 $57,745


(ii) Statutory liabilities represent loss contingencies that may arise from the Company's interpretation and application of certain guidelines and rules issued by various federal, state, local, and foreign regulatory authorities.


NOTE 915 - INDEBTEDNESS


A) Revolving Credit Facility


In November 2015,May 2020, the Company entered into a revolving credit agreement with certain lenders, which extinguished the priorprovided a $500.0 million senior unsecured revolving credit facility (the "2020 Credit Facility") maturing in May 2024. On May 28, 2020, the Company amended the credit agreement for the 2020 Credit Facility (the "Credit Agreement") to permit the Company’s wholly-owned subsidiary, Square Capital, LLC (“Square Capital”), to incur indebtedness in an aggregate principal amount of up to $500.0 million pursuant to the Paycheck Protection Program Liquidity Facility (“PPPLF”) authorized under the Federal Reserve Act of 1913. In connection with its convertible debt offerings in November 2020, the Company entered into a second amendment to the Credit Agreement on November 9, 2020 to permit convertible debt in an aggregate principal amount not to exceed $3.6 billion. On January 28, 2021, the Company entered into a third amendment to the Credit Agreement to increase the amount of indebtedness that Square Capital is permitted to incur pursuant to the PPPLF from an aggregate principal amount of up to $500.0 million to an aggregate principal amount of up to $1.0 billion. On May 25, 2021, the Company entered into a fourth amendment to the Credit Agreement to, among other things, extend the maturity date of the loans advanced to May 1, 2024. On January 28, 2022, the Company entered into a fifth amendment to the Credit Agreement to permit certain existing obligations of Afterpay and providedits subsidiaries to remain outstanding as of and after the completion of the Afterpay acquisition. On February 23, 2022, the Company entered into a sixth amendment to the Credit Agreement to, among other things, provide for a $375.0new tranche of unsecured revolving loan commitments in an aggregate principal amount of up to $100.0 million. On June 9, 2023, the Company entered into a seventh amendment to the Credit Agreement to, among other things, extend the maturity date of the loans advanced to June 9, 2028 and provide for additional unsecured revolving loan commitments in an aggregate principal amount of up to $175 million. The Credit Agreement also contains a financial covenant that requires the Company to maintain a quarterly minimum liquidity amount (consisting of the sum of Unrestricted Cash and Cash Equivalents plus Marketable Securities, each as defined in the Credit Agreement) of at least $250.0 million, revolving securedtested on a quarterly basis. The Company is obligated to pay customary fees for a credit facility maturingof this size and type including a commitment fee of 0.10% to 0.20% per annum on the undrawn portion available under the 2020 Credit Facility. To date, no funds have been drawn and no letters of credit have been issued under the 2020 Credit Facility. As of December 31, 2023, $775.0 million remained available for draw subject to compliance with our covenants. The Company incurred immaterial unused commitment fees during the years ended December 31, 2023, 2022, and 2021. As of December 31, 2023, the Company was in November 2020. This revolving credit agreement is secured by certain tangible and intangible assets.compliance with all financial covenants associated with the 2020 Credit Agreement.


Loans under the credit facility2020 Credit Agreement bear interest at the Company’sCompany's option of (i) an annual rate based on the forward-looking term rate based on the Secured Overnight Financing Rate ("Term SOFR") or (ii) a base rate. Loans based on Term SOFR shall bear interest at a rate equal to Term SOFR plus a margin of between 1.25% and 1.75%, depending on the Company's total net leverage ratio. Loans based on the base rate shall bear interest at a rate based on the highest of the prime rate, the federal funds rate plus 0.50%, and an adjusted LIBOR rate forTerm SOFR with a tenor of one-month interest periodplus 1.00%, in each case, plus a margin ranging from 0.00%0.25% to 1.00%0.75%, depending on the Company's total net leverage ratio. The Credit Agreement also contains customary affirmative and negative covenants typical for a financing of this type that, among other things, restricts the Company and certain of its subsidiaries’ ability to incur additional indebtedness, create liens, merge or (ii) an adjusted LIBORconsolidate or make certain dispositions, pay dividends and make distributions, enter into restrictive agreements, enter into agreements with affiliates, and make certain investments and acquisitions.

B) Warehouse Funding Facilities

Following the acquisition of Afterpay, the Company assumed Afterpay's existing warehouse funding facilities. The Company has financing arrangements with financial institutions in Australia, New Zealand, the United States, and the United Kingdom (collectively, the “Warehouse Facilities”). The Warehouse Facilities have been arranged utilizing wholly-owned and consolidated entities (collectively, the "Warehouse Special Purpose Entities ("Warehouse SPEs") formed for the sole purpose of financing the origination of consumer receivables to partly fund the Company's BNPL platform. Borrowings under the Warehouse Facilities are secured against the respective consumer receivables. While the Warehouse SPEs are included in our consolidated financial statements, they are separate legal entities that maintain legal ownership of the receivables they hold. The assets of the Warehouse SPEs are not available to satisfy our claims or those of our creditors.

128

These Warehouse Facilities have maturity dates through June 2026. As of December 31, 2023, the aggregate amount of the Warehouse Facilities, using the respective exchange rates at period-end, was $1.7 billion on a revolving basis, of which $1.6 billion was drawn and $99.4 million remained available. All Warehouse Facilities contain portfolio parameters based on performance of the underlying consumer receivables, which each respective region has satisfied as of December 31, 2023. None of the Warehouse Facilities contain corporate financial covenants.

All Warehouse Facilities are on a variable rate plusbasis which aligns closely to the weighted-average life of the consumer receivables they finance. Borrowings under these facilities bear interest at (i) a base rate aligned to either the local risk free rate, such as Term SOFR and the Sterling Overnight Index Average ("SONIA") or similar, and (ii) a margin ranging from 1.00% to 2.00%. This marginwhich is

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determined based set for the term of the availability period. The interest expense incurred on the Company’s total leverage ratio forCompany's Warehouse Facilities is included within general and administrative as part of the preceding four fiscal quarters. The Company is obligated to pay other customary fees for a credit facility of this size and type including an annual administrative agent fee of $0.1Company's operating expenses. Interest expense on the Company's Warehouse Facilities was $65.9 million and an unused commitment fee of 0.15%. To date no funds have been drawn under the credit facility, with $375.0$16.2 million remaining available. The Company paid $0.6 million in unused commitment fees for both the years ended December 31, 20172023 and 2016. As2022, respectively. The Company did not have any interest expense on the Company's Warehouse Facilities in 2021. In addition, each Warehouse Facility requires payment of immaterial commitment fees.

129

The table below summarizes the future scheduled principal payments of amounts drawn on the Company's Warehouse Facilities (in thousands):
December 31,
2023
2024 (i) (ii)
$753,035 
2025154,882 
2026700,000 
Total$1,607,917 

(i) Includes $140.0 million of future scheduled principal payments related to a Warehouse Facility that matured in December 2023. The amount drawn at maturity remained outstanding as of December 31, 2017,2023 as the Company washad four months following the termination to repay the facility upon maturity. The amounts were repaid in compliance with all financial covenants associated with this credit facility.January 2024.


Convertible Senior(ii) Disclosed as warehouse funding facilities, current portion within total current liabilities on the consolidated balance sheet.

C) Notes


Senior Unsecured Notes due in 2026 and 2031

On March 6, 2017,May 20, 2021, the Company issued an aggregate principal amount of $400.0$2.0 billion senior unsecured notes comprised of $1.0 billion of senior unsecured notes due 2026 ("2026 Senior Notes") and $1.0 billion senior unsecured notes due 2031 ("2031 Senior Notes" and, together with the 2026 Senior Notes, the “Senior Notes”). The 2026 Senior Notes mature on June 1, 2026, unless earlier redeemed or repurchased, and bear interest at a rate of 2.75% payable semi-annually on June 1 and December 1 of each year. The 2031 Senior Notes mature on June 1, 2031, unless earlier redeemed or repurchased, and bear interest at a rate of 3.50% payable semi-annually on June 1 and December 1 of each year. The Senior Notes are subject to optional redemption provisions. At any time prior to May 1, 2026, in the case of the 2026 Senior Notes, and March 1, 2031, in the case of the 2031 Senior Notes, the Company may redeem the applicable series in whole or part at a price equal to 100% of the principal amount of the notes to be redeemed plus an applicable premium and accrued and unpaid interest, if any, to but excluding the redemption date. The applicable premium for any note is the greater of: (i) 1.0% of the principal amount of such note, and (ii) the excess, if any, of (a) the present value at the redemption date of all scheduled payments of interest plus principal on such note (excluding accrued but unpaid interest, if any, to, but excluding, the redemption date) computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points, over (b) the principal amount of such note. At any time on or after May 1, 2026, in the case of the 2026 Senior Notes, and March 1, 2031, in the case of the 2031 Senior Notes, the Company may redeem the notes of the applicable series in whole or part at a price of 100% of the principal amount of the notes to be redeemed plus accrued and unpaid interest, if any, to but excluding the redemption date. If the Company experiences a change of control triggering event (as defined in the applicable indenture governing the applicable Senior Notes), the Company must offer to repurchase each series of Senior Notes at a repurchase price equal to 101% of the principal amount of the applicable notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the applicable repurchase date. In the event of default, the trustee or holders of at least 25% in aggregate principal amount of the applicable series of outstanding Senior Notes under the applicable indenture may declare all of the notes of the applicable series to be due and immediately payable. If the event of default is the result of specified events of bankruptcy, insolvency or reorganization, all of the notes of the applicable series will become due without any declaration or action by the trustee or holders. If there is a default in the payment of interest, the Company shall pay the defaulted interest plus, to the extent lawful, interest payable on the defaulted interest at the rate provided in the Senior Notes.

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Debt issuance costs related     to the 2026 Senior Notes and 2031 Senior Notes were comprised of discounts and commissions payable to the initial purchasers of $22.5 million and third party offering costs of $5.7 million. Issuance costs are amortized to interest expense using the effective interest method at an effective interest rate of 3.06% and 3.69% for each of the respective terms of the 2026 Senior Notes and 2031 Senior Notes, respectively.

Convertible Notes due in 2026 and 2027

On November 13, 2020, the Company issued an aggregate principal amount of $1.15 billion of convertible senior notes comprised of $575.0 million of convertible senior notes (Notes)due 2026 ("2026 Convertible Notes") and an additional 10% or $40.0$575.0 million pursuant to the exercise in full of the option to the initial purchasers to cover over-allotments.convertible senior notes due 2027 ("2027 Convertible Notes"). The 2026 Convertible Notes mature on MarchMay 1, 2022,2026, unless earlier converted or repurchased, and bear a zero rate of interest. The 2027 Convertible Notes mature on November 1, 2027, unless earlier converted or repurchased, and bear interest at a rate of 0.375%0.25% payable semi-annually on MarchMay 1 and SeptemberNovember 1 of each year. TheBoth the 2026 Convertible Notes and 2027 Convertible Notes are convertible at an initial conversion rate of 43.57493.3430 shares of the Company's Class A common stock per $1,000 principal amount, of Notes, which is equivalent to an initial conversion price of approximately $22.95$299.13 per share of Class A common stock. Holders may convert their Notesrelevant series of notes at any time prior to the close of business on the business day immediately preceding DecemberFebruary 1, 20212026 and August 1, 2027 for the 2026 Convertible Notes and 2027 Convertible Notes, respectively, only under the following circumstances: (1)(i) during any calendar quarter, commencing after the calendar quarter ending on March 31, 2021 (and only during such calendar quarter), if the last reported sale price of the Company’s Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2)(ii) during the five business day period after any five consecutive trading day period (the measurement period)"measurement period") in which the trading price (as defined in the indenture governing the 2026 Convertible Notes and 2027 Convertible Notes) per $1,000 principal amount of 2026 Convertible Notes and 2027 Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s Class A common stock and the conversion rate on each such trading day; (iii) if the Company calls any or (3)all of the 2026 Convertible Notes and 2027 Convertible Notes for redemption, such relevant series of notes called for redemption may be converted at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or (iv) upon the occurrence of specified corporate events, including certain distributions, the occurrence of a fundamental change (as defined in the indenture governing the 2026 Convertible Notes and 2027 Convertible Notes) or a transaction resulting in the Company’s Class A common stock converting into other securities or property or assets. In addition, upon occurrence of the specified corporate events prior to the maturity date, the Company would increase the conversion rate for a holder who elects to convert their relevant series of notes in connection with such an event in certain circumstances. On or after DecemberFebruary 1, 2021,2026 in the case of the 2026 Convertible Notes, and on or after August 1, 2027 in the case of the 2027 Convertible Notes, up until the close of business on the second scheduled trading day immediately preceding the maturity date, a holder of the relevant series of notes may convert all or any portion of its 2026 Convertible Notes or 2027 Convertible Notes regardless of the foregoing circumstances. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of its Class A common stock, or a combination of cash and shares of its Class A common stock, at the Company’s election. It isOn or after November 5, 2023 for the Company’s current intent2026 Convertible Notes, and policyon or after November 5, 2024 for the 2027 Convertible Notes, the Company may redeem all or a portion of each series of convertible notes for cash at its option, if the last reported sale price of the Company's Class A common stock has been at least 130% of the conversion price for the relevant series of notes then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to settle conversions through combination settlement with a specified dollar amount100% of $1,000 per $1,000the principal amount of Notes. the 2026 Convertible Notes and 2027 Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

131

The circumstances required to allow the holders to convert their 2026 Convertible Notes and 2027 Convertible Notes were not met as of January 1, 2018.during the year ended December 31, 2023. As of February 27, 2018,December 31, 2023, no holders haveprincipal had converted theirand the if-converted value did not exceed the outstanding principal amount of either the 2026 Convertible Notes or 2027 Convertible Notes.


Convertible Notes due in 2025

On March 5, 2020, the Company issued an aggregate principal amount of $1.0 billion of convertible senior notes ("2025 Convertible Notes"). The 2025 Convertible Notes mature on March 1, 2025, unless earlier converted or repurchased, and bear interest at a rate of 0.1250% payable semi-annually on March 1 and September 1 of each year. The 2025 Convertible Notes are convertible at an initial conversion rate of 8.2641 shares of the Company's Class A common stock per $1,000 principal amount of 2025 Convertible Notes, which is equivalent to an initial conversion price of approximately $121.01 per share of Class A common stock. Holders may convert their 2025 Convertible Notes at any time prior to the close of business on the business day immediately preceding December 1, 2024 only under the following circumstances: (i) during any calendar quarter, commencing after the calendar quarter ending on June 30, 2020 (and only during such calendar quarter), if the last reported sale price of the Company’s Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (ii) during the five business day period after any five consecutive trading day period (the "measurement period") in which the trading price (as defined in the indenture governing the 2025 Convertible Notes) per $1,000 principal amount of 2025 Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s Class A common stock and the conversion rate on each such trading day; (iii) if the Company calls any or all of the 2025 Convertible Notes for redemption, such 2025 Convertible Notes called for redemption may be converted at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or (iv) upon the occurrence of specified corporate events, including certain distributions, the occurrence of a fundamental change (as defined in the indenture governing the 2025 Convertible Notes) or a transaction resulting in the Company’s Class A common stock converting into other securities or property or assets. In accountingaddition, upon occurrence of the specified corporate events prior to the maturity date, the Company would increase the conversion rate for a holder who elects to convert their 2025 Convertible Notes in connection with such an event in certain circumstances. On or after December 1, 2024, up until the close of business on the second scheduled trading day immediately preceding the maturity date, a holder may convert all or any portion of its 2025 Convertible Notes regardless of the foregoing circumstances. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of its Class A common stock, or a combination of cash and shares of its Class A common stock, at the Company’s election. The Company may redeem for cash all or any part of the 2025 Convertible Notes, at its option, on or after March 5, 2023, if the last reported sale price of the Company's Class A common stock has been at least 130% of the conversion price for the issuance2025 Convertible Notes then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the Notes,trading day immediately preceding the date on which the Company separated the Notes into liability and equity components. The carrying amountprovides notice of the liability component was calculated by measuring the fair value ofredemption at a similar debt instrument that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was $86.2 million and was determined by deducting the fair value of the liability component from the par value of the Notes. The equity component is not remeasured as long as it continuesredemption price equal to meet the conditions for equity classification. The excess100% of the principal amount of the liability component over its carrying amount ("debt discount") is amortized2025 Convertible Notes to be redeemed, plus accrued and unpaid interest expense overto, but excluding, the termredemption date. The circumstances to allow the holders to convert their 2025 Convertible Notes were met in the first quarter of 2021 through the first quarter of 2022. The circumstances were not met in the second through fourth quarters of 2022 and the year ended December 31, 2023. As of December 31, 2023, certain holders of the 2025 Convertible Notes atconverted an effective interest rateimmaterial aggregate principal amount of 5.34% overtheir 2025 Convertible Notes. The Company has settled the contractual termsconversions through the issuance of an immaterial amount of shares of the Company's Class A common stock. As of December 31, 2023, the if-converted value did not exceed the outstanding principal amount of the 2025 Convertible Notes.


Debt issuance costs related toConvertible Notes due in 2023

On May 25, 2018, the Company issued an aggregate principal amount of $862.5 million of convertible senior notes ("2023 Convertible Notes"). As of the maturity date on May 15, 2023, certain holders of the 2023 Convertible Notes comprisedhad converted an aggregate principal amount of discounts and commissions payable to$401.9 million of their 2023 Convertible Notes, none of which was converted during the initial purchasers of $11.0 million and third party offering costs of $0.8 million.year ended December 31, 2023. The Company allocatedsettled the total amount incurred toconversions through the liability and equity componentsissuance of 5.2 million shares of the Company's Class A common stock and paid a total of $461.8 million in cash to settle the remaining unconverted principal balance, and interest, as of May 15, 2023.

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The 2023 Convertible Notes, based on their relative values. Issuance costs attributable to2025 Convertible Notes, 2026 Convertible Notes, and 2027 Convertible Notes (collectively, the liability component were $9.4 million and will be amortized to interest expense using the effective interest method over the contractual term.  Issuance costs attributable to the equity component were netted“Convertible Notes”), together with the equity component in stockholders’ equity.Senior Notes, are collectively referred to as the “Notes.”


The following table summarizes the Company's Notes consistedas of the followingDecember 31, 2023 (in thousands):
Principal OutstandingUnamortized Debt Issuance CostsNet Carrying Value
2031 Senior Notes$1,000,000 $(10,433)$989,567 
2026 Senior Notes1,000,000 (6,792)993,208 
2027 Convertible Notes575,000 (5,135)569,865 
2026 Convertible Notes575,000 (3,986)571,014 
2025 Convertible Notes1,000,000 (3,563)996,437 
Total$4,150,000 $(29,909)$4,120,091 
 December 31, 2017
Principal$440,000
Less: unamortized debt discount(73,384)
Less: unamortized debt issuance costs(8,044)
Net carrying amount$358,572

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The net carrying amountfollowing table summarizes the Company's Notes as of the equity component of the Notes was as followsDecember 31, 2022 (in thousands):

Principal OutstandingUnamortized Debt Issuance CostsNet Carrying Value
2031 Senior Notes$1,000,000 $(11,829)$988,171 
2026 Senior Notes1,000,000 (9,586)990,414 
2027 Convertible Notes575,000 (6,465)568,535 
2026 Convertible Notes575,000 (5,685)569,315 
2025 Convertible Notes1,000,000 (6,606)993,394 
2023 Convertible Notes (i)
460,630 (274)460,356 
Total$4,610,630 $(40,445)$4,570,185 

 December 31, 2017
Debt discount related to value of conversion option$86,203
Less: allocated debt issuance costs(2,302)
Equity component, net$83,901
(i) Net carrying value disclosed as current portion of long-term debt within total current liabilities on the consolidated balance sheet.    



The Company recognized interest expense on the Notes as follows (in thousands, except for percentages)thousands):

Year Ended December 31,
202320222021
Contractual interest expense$65,566 $66,910 $44,141 
Amortization of debt issuance costs10,538 10,979 9,823 
Total$76,104 $77,889 $53,964 

133
Year Ended December 31,
2017
Contractual interest expense based on 0.375% per annum1,351
Amortization of debt discount and issuance costs14,223
Total15,574
Effective interest rate of the liability component5.34%


Convertible Note Hedge and Warrant Transactions


In connection with the offering of the 2027 Convertible Notes, the Company entered into convertible note hedge transactions ("2027 Convertible Note Hedges") with certain financial institutions (Counterparties)institution counterparties ("2027 Note Hedge Counterparties") whereby the Company has the option to purchase a total of approximately 19.21.9 million shares of its Class A common stock at a price of approximately $22.95$299.13 per share. The total cost of the 2027 convertible note hedge transactions was approximately $92.1$104.3 million. In addition, the Company sold warrants ("2027 Warrants") to the 2027 Note Hedge Counterparties whereby the 2027 Note Hedge Counterparties have the option to purchase a total of approximately 19.21.9 million shares of the Company’s Class A common stock at a price of approximately $31.18$414.18 per share.share for the 2027 Warrants. The Company received approximately $57.2$68.0 million in cash proceeds from the sale of these warrants.the 2027 Warrants. Taken together, the purchase of the convertible note hedges2027 Convertible Note Hedges and sale of the warrants2027 Warrants are intended to reduce dilution from the conversion of the 2027 Convertible Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the converted 2027 Convertible Notes, as the case may be, and to effectively increase the overall conversion price from approximately $22.95$299.13 per share to approximately $31.18$414.18 per share.share for the 2027 Warrants. As these instruments are considered indexed to the Company's own stock and are considered equity classified, the convertible note hedges2027 Convertible Note Hedges and warrants2027 Warrants are recorded in stockholders’ equity, are not accounted for as derivatives, and are not remeasured each reporting period. The net costs incurred in connection with the convertible note hedge2027 Convertible Note Hedges and 2027 warrant transactions were recorded as a reduction to additional paid-in capital on the consolidated balance sheets.


NOTE 10 - ACCRUED TRANSACTION LOSSES
In connection with the offering of the 2026 Convertible Notes, the Company entered into convertible note hedge transactions ("2026 Convertible Note Hedges") with certain financial institution counterparties ("2026 Note Hedge Counterparties") whereby the Company has the option to purchase a total of approximately 1.9 million shares of its Class A common stock at a price of approximately $299.13 per share. The total cost of the 2026 Convertible Note Hedges was $84.6 million. In addition, the Company is exposedsold warrants ("2026 Warrants") to transaction losses duethe 2026 Note Hedge Counterparties whereby the 2026 Note Hedge Counterparties have the option to chargebacks aspurchase a resulttotal of fraud or uncollectibility.
The following table summarizes the activities1.9 million shares of the Company’s reserveClass A common stock at a price of approximately $368.16 per share for transaction losses (in thousands):the 2026 Warrants. The Company received $64.6 million in cash proceeds from the sale of the 2026 Warrants. Taken together, the purchase of the 2026 Convertible Note Hedges and sale of the 2026 Warrants are intended to reduce dilution from the conversion of the 2026 Convertible Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the converted 2026 Convertible Notes, as the case may be, and to effectively increase the overall conversion price from approximately $299.13 per share to approximately $368.16 per share for the 2026 Warrants. As these instruments are considered indexed to the Company's own stock and are considered equity classified, the 2026 Convertible Note Hedges and 2026 Warrants are recorded in stockholders’ equity, are not accounted for as derivatives, and are not remeasured each reporting period. The net costs incurred in connection with the 2026 Convertible Note Hedges and 2026 Warrants were recorded as a reduction to additional paid-in capital on the consolidated balance sheets.

 Year Ended December 31,
 2017 2016 2015
Accrued transaction losses, beginning of the year$20,064
 $17,176
 $8,452
Provision for transaction losses52,977
 50,819
 43,379
Charge-offs to accrued transaction losses(46,148) (47,931) (34,655)
Accrued transaction losses, end of the year$26,893
 $20,064
 $17,176
In connection with the offering of the 2025 Convertible Notes, the Company entered into convertible note hedge transactions ("2025 Convertible Note Hedges") with certain financial institution counterparties ("2025 Note Hedge Counterparties") whereby the Company has the option to purchase a total of approximately 8.3 million shares of its Class A common stock at a price of approximately $121.01 per share. The total cost of the 2025 Convertible Note Hedges was $149.2 million. In addition, the Company sold warrants ("2025 Warrants") to the 2025 Note Hedge Counterparties whereby the 2025 Note Hedge Counterparties have the option to purchase a total of 8.26 million shares of the Company’s Class A common stock at a price of approximately $161.34 per share. The Company received $99.5 million in cash proceeds from the sale of the 2025 Warrants. Taken together, the purchase of the 2025 Convertible Note Hedges and sale of the 2025 Warrants are intended to reduce dilution from the conversion of the 2025 Convertible Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the converted 2025 Convertible Notes, as the case may be, and to effectively increase the overall conversion price from approximately $121.01 per share to approximately $161.34 per share. As these instruments are considered indexed to the Company's own stock and are considered equity classified, the 2025 Convertible Note Hedges and 2025 Warrants are recorded in stockholders’ equity, are not accounted for as derivatives, and are not remeasured each reporting period. The net costs incurred in connection with the 2025 Convertible Note Hedges and 2025 Warrants were recorded as a reduction to additional paid-in capital on the consolidated balance sheets.



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134




In connection with the offering of the 2023 Convertible Notes, the Company entered into convertible note hedge transactions ("2023 Convertible Note Hedges"), resulting in the receipt of 3.0 million shares of the Company's Class A common stock from certain financial institution counterparties and, as of December 31, 2023, the Convertible Note Hedges were completely settled and no longer outstanding. In addition, the warrants entered into in connection with the issuance of the 2023 Convertible Notes expired evenly over a 60 trading day period starting on August 15, 2023 and ending on November 7, 2023. None of the warrants were exercised over the trading day period.

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NOTE 1116 - INCOME TAXES

The domestic and foreign components of lossincome (loss) before income taxes arewere as follows (in thousands):
Year Ended December 31,
202320222021
Domestic$(30,304)$(347,968)$417,356 
Foreign1,161 (217,349)(259,894)
Income (loss) before income taxes$(29,143)$(565,317)$157,462 

 Year Ended December 31,
2017 2016 2015
Domestic$(10,900) $(145,499) $(157,229)
Foreign(51,764) (24,174) (18,842)
Loss before income taxes$(62,664) $(169,673) $(176,071)
The components of the provision for income taxes arewere as follows (in thousands):
Year Ended December 31,
202320222021
Current:
Federal$12,003 $14,352 $201 
State14,351 17,504 3,186 
Foreign51,506 25,425 5,684 
Total current provision for income taxes77,860 57,281 9,071 
Deferred:
Federal(58,532)(59,909)(1,463)
State(25,072)(7,677)(524)
Foreign(2,275)(2,007)(8,448)
Total deferred benefit for income taxes(85,879)(69,593)(10,435)
Total benefit for income taxes$(8,019)$(12,312)$(1,364)

 Year Ended December 31,
2017 2016 2015
Current:     
Federal$(1,192) $63
 $1,662
State739
 527
 836
Foreign1,987
 1,269
 1,222
Total current provision for income taxes1,534
 1,859
 3,720
Deferred:     
Federal(1,169) 173
 67
State57
 18
 11
Foreign(273) (133) (52)
Total deferred provision for income taxes(1,385) 58
 26
Total provision for income taxes$149
 $1,917
 $3,746
The following is a reconciliation of the statutory federal income tax rate to the Company's effective tax rate:
December 31,
202320222021
Tax at federal statutory rate21.0 %21.0 %21.0 %
State taxes, net of federal benefit45.9 (1.1)0.6 
Foreign rate differential(175.6)(2.0)10.4 
Other non-deductible expenses(21.7)(1.2)4.4 
Credits292.9 27.0 (83.9)
Other items(2.2)0.6 1.6 
Change in valuation allowance11.2 (46.7)290.4 
Share-based compensation(16.1)7.5 (275.0)
Change in uncertain tax positions(27.4)(1.5)5.0 
Income/loss inclusions of U.S. foreign subsidiaries(216.5)2.1 0.9 
Non-deductible executive compensation(9.2)(0.3)5.9 
Non-deductible acquisition related costs(15.0)(3.0)5.9 
Foreign exchange gain/loss174.1 (0.2)— 
Impairment loss(60.8)— 0.1 
Return to provision adjustments26.9 — — 
Intercompany transactions— — 3.8 
Cancellation of debt income— — 8.0 
Total27.5 %2.2 %(0.9)%
136
 Balance at December 31,
2017 2016 2015
Tax at federal statutory rate34.0 % 34.0 % 34.0 %
State taxes, net of federal benefit(0.4) (0.1) (0.2)
Foreign rate differential(14.9) (2.4) (1.8)
Nondeductible expenses(1.0) (0.9) (1.1)
Credits41.5
 8.5
 8.2
Other items(1.2) 0.2
 0.1
Change in valuation allowance(119.5) (37.4) (38.6)
Impact of U.S. tax reform(209.1) —
 —
Share-based compensation (i)
243.5
 (2.4) (2.2)
Change in uncertain tax positions(2.4) (0.6) (0.5)
Termination of warrant29.3
 —
 —
Total(0.2)% (1.1)% (2.1)%
(i) Starting in 2017, excess tax benefits from share-based award activity are reflected in the provision for income taxes.

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The tax effects of temporary differences and related deferred tax assets and liabilities arewere as follows (in thousands):
December 31,
20232022
Deferred tax assets:
Capitalized costs & research and development capitalization$552,731 $474,766 
Accrued expenses173,556 129,695 
Net operating loss carryforwards935,289 1,172,880 
Tax credit carryforwards529,314 501,185 
Share-based compensation45,153 72,128 
Other61,489 6,199 
Operating lease liability85,154 109,176 
Cryptocurrency investment— 30,273 
Deferred consideration6,943 11,665 
Convertible notes33,952 52,915 
Safeguarding liability related to bitcoin held for other parties257,503 110,150 
Total deferred tax assets2,681,084 2,671,032 
Valuation allowance(2,001,438)(2,100,383)
Total deferred tax assets, net of valuation allowance679,646 570,649 
Deferred tax liabilities:
Property, equipment and intangible assets(332,512)(452,658)
Unrealized gain on investments(25,618)(29,554)
Operating lease right-of-use asset(60,600)(96,894)
Safeguarding asset related to bitcoin held for other parties(257,503)(110,150)
Cryptocurrency investment(29,711)— 
Total deferred tax liabilities(705,944)(689,256)
Net deferred tax liabilities$(26,298)$(118,607)
 Balance at December 31,
2017 2016 2015
Deferred tax assets:     
Capitalized costs$35,608
 $61,897
 $67,051
Accrued expenses23,553
 29,421
 27,964
Net operating loss carryforwards244,197
 65,507
 36,633
Tax credit carryforwards60,567
 38,927
 25,349
Property, equipment and intangible assets7,390
 5,721
 —
Share-based compensation35,728
 52,091
 36,689
Other2,519
 1,640
 1,469
Total deferred tax assets409,562
 255,204
 195,155
Valuation allowance(409,043) (254,898) (195,103)
Total deferred tax assets, net of valuation allowance519
 306
 52
Deferred tax liabilities:     
Property, equipment and intangible assets(644) (476) (163)
Total deferred tax liabilities(644) (476) (163)
Net deferred tax liabilities$(125) $(170) $(111)

On December 22, 2017,October 31, 2023, the Company completed certain internal restructuring steps resulting in certain U.S. government enacted comprehensive tax legislation commonly referred to asdomiciled Afterpay entities (collectively "Afterpay U.S.") integrating into the Tax Cuts and Jobs Act ("2017 Tax Act"Block, Inc. U.S. federal consolidated filing group (the "Company's U.S. consolidated group"). The 2017 Tax Act makes broad and complex changesintention of the integration is to theimprove U.S. tax code, including, but not limited to, (1) reducing thecompliance efficiencies and optimize funding opportunities for Afterpay U.S. Federal corporate tax rate from 35% to 21%; (2) requiring companies to payThe Company recognized a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (3) in part eliminating U.S. Federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. Federal taxable income of certain unrepatriated earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax ("AMT") and changing how existing AMT credits can be realized; (6) creating the base erosion anti-abuse tax ("BEAT"), a new minimum tax; (7) creating a new limitation on deductible interest expense; and (8) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.
In connection with the Company's analysis of the impact of the 2017 Tax Act, it recorded a net tax benefit of $1.3$29.1 million in the period ended December 31, 2017.year related to the internal restructuring. The net benefit consistsintegration may result in a change to the taxes owed by the Company's U.S. consolidated group in future years. This will be dependent on the income or loss generated by Afterpay U.S. or if certain conditions are met that enables the utilization of the releasecarried over tax attributes of Afterpay U.S., which have utilization restrictions within the valuation allowance on the Company's AMT credit carryforward, which will be refunded in tax years 2018-2021. In addition, the 2017 Tax Act reduces the corporate tax rate to 21%, effective January 1, 2018. Consequently, the Company has recorded a decrease of $63.6 million, with an offset to the valuation allowance, to its U.S. Federal and state deferred tax assets. The Company has also completed its analysis of the deemed repatriation transition tax and has concluded that it will not owe any transition tax. Additionally, on December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118") to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Act. The Company has recognized the tax impacts related to refundable AMT credits and revaluation of deferred tax assets, offset by the valuation allowance, and included these amounts in its consolidated financial statements for the year ended December 31, 2017. The ultimate impact may differ from the amounts recorded due to, among other things, additional analysis, changes in interpretations and assumptions as applicable, and additional regulatory guidance that may be issued. Any difference is not expected to be material. The accounting is expected to be complete when the 2017 U.S. corporate income tax return is filed in 2018.group post-integration.

Realization of deferred tax assets is dependent upon the generation of future taxable income, the timing and amount of which are uncertain. The Company's deferred tax assets and liabilities are primarily related to U.S. operations. In 2023, the Company's U.S. consolidated group generated a current tax provision resulting from the requirement to capitalize research and development expenses under Internal Revenue Code ("IRC") Section 174 and a decline in stock-based compensation deductions. The Company's U.S. consolidated group has significant deferred tax assets in the form of net operating loss carryovers, tax credit carryovers, capitalized costs resulting from the IRC Section 174 capitalization requirement, and other tax deductible temporary differences. Due to the history of tax losses generated inby the Company's U.S. and certain foreign jurisdictions,consolidated group, the Company believes that it is not more likely than not that itsthe deferred tax assets as of December 31, 2023 will be realized. Accordingly, the Company retained a full valuation allowance on the deferred tax assets of the Company's U.S. consolidated group.
137

The Company also has a history of tax losses in thesecertain foreign jurisdictions, willwhich it believes are not more likely than not to be realized as of December 31, 2017.2023. Accordingly, the Company retained a full valuation allowance on its deferred tax assets in these jurisdictions. The amount of deferred tax assets considered realizable in future periods may change as management continues to reassess the underlying factors it uses in estimating future taxable income.

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The valuation allowance decreased by approximately $98.9 million and increased by approximately $154.1 million, $59.8 million, and $69.7$213.3 million during the years ended December 31, 2017, 2016,2023, and 2015,2022, respectively.


As of December 31, 2017,2023, the Company had $774.2 million$2.4 billion of Federal, $594.2 millionfederal, $4.6 billion of state, and $131.7 million$1.6 billion of foreign net operating loss carryforwards, whichcarryforwards. The remaining carryforward amounts have no expiration date. The state operating losses will begin to expire in 2035 for Federal2025 and 2021 for state tax purposes. Thethe foreign net operating loss carryforwards do not expire.
As of December 31, 2017, the Company had $42.6 million of Federal, $31.1 million of state, and $1.6 million of Canadian research credit carryforwards. The Federal credit carryforward will begin to expire in 2029,2024. As of December 31, 2023, the Company had $377.6 million of federal, $264.7 million of state, and $57.5 million of foreign research credit carryforward has no expiration date, and the Canadiancarryforwards. The remaining federal research credit carryforwardcarryforwards will begin to expire in 2035.
2038. The Company also has a Federal AMT credit carryforward of $1.3 million that will be refunded over the 2018-2021 tax years under the 2017 Tax Act. The Company has California Enterprise Zonestate and foreign credit carryforwards of $2.8 million, which will begin to expire in 2023.have no expiration date.
Utilization of the net operating loss carryforwards and credits may be subject to annual limitations due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitations may result in the expiration of net operating losses and credits before they are able to be utilized. The Company does not expect any previous ownership changes, as defined under Section 382 and 383 of the Internal Revenue Code, to result in aan ultimate limitation that will materially reduce the total amount of net operating loss carryforwards and credits that can be utilized.
As of December 31, 2017,2023, the Company had unrecognized tax benefit was $70.8benefits of $465.1 million, of which $4.5$80.2 million would impact the annual effective tax rate if recognized and the remainder of which would result in a corresponding adjustment to the valuation allowance.
A reconciliation ofThe change in the beginning and ending amountbalance of unrecognized tax benefit is presented belowwas as follows (in thousands):

Year Ended December 31,
202320222021
Unrecognized tax benefit, beginning of the period$506,512 $448,392 $295,182 
Gross increases and decreases related to prior period tax positions(7,348)5,431 6,552 
Gross increases and decreases related to current period tax positions(30,063)30,988 124,238 
Reductions related to lapse of statute of limitations(3,998)(2,950)— 
Gross increases related to acquisitions— 24,651 22,420 
Unrecognized tax benefit, end of the period$465,103 $506,512 $448,392 
 Year Ended December 31,
2017 2016 2015
Balance at the beginning of the year$92,134
 $90,372
 $78,031
Gross increases and decreases related to prior period tax positions—
 5,190
 —
Gross increases and decreases related to current period tax positions4,193
 (3,428) 12,341
Reductions related to lapse of statute of limitations(91) —
 —
Gross increases and decreases related to U.S. tax reform(25,437) —
 —
Balance at the end of the year$70,799
 $92,134
 $90,372


The Company recognizes interest and penalties related to income tax matters as a component of income tax expense. As of December 31, 2017, there were no significantThe Company had total accrued interest and penalties of $22.1 million, $9.1 million, and $7.8 million related to uncertain tax positions.positions for the years ended December 31, 2023, 2022, and 2021, respectively. It is reasonably possible that over the next 12-month period the Company may experience a decrease in its unrecognized tax benefits as a result of tax examinations or lapses of statute of limitations. The estimated decrease in unrecognized tax benefits may range up to $13$17.6 million.
The Company is subject to taxation in the United States and various state and foreign jurisdictions. The Company is currently under examination in California for tax years 2013, and 2014, and other jurisdictions2016 and in Texas for tax years 2013-2016.2015 to 2019. The Company’s various tax years starting with 2009 to 20162022 remain open in various taxing jurisdictions.
As of December 31, 2017,2023, the Company has not provided deferred U.S. income taxes or foreign withholding taxes on temporary differences resulting from earnings for certain non-U.S. subsidiaries, which are permanently reinvested outside the U.S. Cumulative undistributed earnings for these non-U.S. subsidiaries as of December 31, 20172023 are $4.1$113.2 million. Furthermore, the Company has accumulated deficits such that no U.S. tax is expected to be due as a result of U.S. tax reform related to IRC Section 965.
                


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NOTE 1217 - STOCKHOLDERS' EQUITY

Initial Public Offering

In November 2015, the Company completed its IPO in which it issued and sold 29,700,000 shares of Class A common stock at a public offering price of $9.00 per share. The total net proceeds received from the IPO were $245.7 million after deducting underwriting discounts and commissions of $14.7 million and other offering expenses of approximately $6.9 million.

Convertible Preferred Stock

As of December 31, 2017, the Company is authorized to issue 100,000,000 shares of preferred stock, with a $0.0000001 par value. No shares of preferred stock are outstanding as of December 31, 2017.

Deemed Dividend on Series E Preferred Stock

On November 24, 2015, upon the closing of the IPO, certain holders of Series E preferred stock were issued an incremental 10,299,696 shares of Class B common stock pursuant to the Company's Restated Certificate of Incorporation dated as of September 8, 2014, as amended (the "2014 Certificate"). The 2014 Certificate allowed for an adjustment to the Series E original conversion price based on a prescribed formula upon the Company's IPO. The conversion of the Series E preferred stock resulted in a beneficial conversion feature, analogous to a deemed dividend. The beneficial conversion feature was calculated as the difference between fair value of the Company's common stock ultimately issued, based on the commitment date fair value of the Company's common stock, and the initial proceeds received for the Series E preferred stock. As a result, the Company recorded a one-time $32.2 million deemed stock dividend that resulted in an increase to net loss to arrive at net loss attributable to common stockholders.


Common Stock


The Company has two classes of authorized the issuance ofcommon stock outstanding: Class A common stock and Class B common stock. Class A common stock and Class B common stock are referred to as "common stock" throughout these Notes to the Consolidated Financial Statements, unless otherwise noted. Holders of the Company's Class A common stock and Class B common stock are entitled to dividends when, as and if, declared by the Company's board of directors, subject to the rights of the holders of all classes of stock outstanding having priority rights to dividends. As of December 31, 2017,2023, the Company did not declare any dividends. Holders of shares of Class A common stock are entitled to one vote per share, while holders of shares of Class B common stock are entitled to ten votes per share. Shares of the Company's Class B common stock are convertible into an equivalent number of shares of its Class A common stock and generally convert into shares of its Class A common stock upon transfer. Class A common stock and Class B common stock are referred to as common stock throughout these Notes to the Consolidated Financial Statements, unless otherwise noted. The holders of Class A common stock and Class B common stock have no preemptive or other subscription rights and there are no redemption or sinking fund provisions with respect to such shares.

As of December 31, 2017, the Company was authorized to issue 1,000,000,000 shares of Class A common stock and 500,000,000 shares of Class B common stock, each with a par value of $0.0000001 per share. As of December 31, 2017, the Company had outstanding 280,400,813 shares of Class A common stock and 114,793,262 shares of Class B common stock.


Warrants

On August 7, 2012, the Company entered into a processing agreement with Starbucks and issued warrants to purchase 15,761,575 shares of common stock that would become exercisable if certain performance conditions, specified in the agreement as subsequently amended between 2012 and 2015, were achieved. In 2015, warrants to purchase 6,304,620 shares of common stock were canceled.

On February 24, 2017, the Company and Starbucks entered into a Warrant Cancellation and Payment Agreement pursuant to which the Company paid Starbucks cash consideration of approximately $54.8 million in return for the termination of the Warrant to Purchase Stock dated August 7, 2012, as amended, that provided Starbucks with the right to purchase an aggregate of approximately 9.5 million shares of the Company’s common stock.


In conjunction with the 2023 Convertible Notes offering, the Company sold warrantsthe 2023 Warrants whereby the Counterpartiescounterparties have the option to purchase a total of approximately 19.211.1 million shares of the Company’s Class A common stock at a price of $31.18$109.26 per share. The 2023 Warrants expired evenly over a 60 trading day period starting on August 15, 2023 and ending on November 7, 2023. None of the warrants were exercised as of December 31, 2023.


In conjunction with the 2025 Convertible Notes offering, the Company sold the 2025 Warrants whereby the counterparties have the option to purchase a total of approximately 8.3 million shares of the Company’s Class A common stock at a price of $161.34 per share. The 2025 Warrants expire evenly over a 60 trading day period starting on June 1, 2025. None of the warrants were exercised as of December 31, 2023.

In conjunction with the 2026 Convertible Notes offering, the Company sold the 2026 Warrants whereby the counterparties have the option to purchase a total of approximately 1.9 million shares of the Company’s Class A common stock at a price of $368.16 per share. The 2026 Warrants expire evenly over a 60 trading day period starting on August 1, 2026. None of the warrants were exercised as of December 31, 2023.

In conjunction with the 2027 Convertible Notes offering, the Company sold the 2027 Warrants whereby the counterparties have the option to purchase a total of approximately 1.9 million shares of the Company’s Class A common stock at a price of $414.18 per share. The 2027 Warrants expire evenly over a 60 trading day period starting on February 1, 2028. None of the warrants were exercised as of December 31, 2023.

Conversion of Convertible Notes and Exercise of Convertible Note Hedges

In connection with the conversion of the 2023 Convertible Notes, the Company has issued an aggregate 5.2 million shares of Class A common stock as of December 31, 2023, of which no shares were issued in in the year ended December 31, 2023. The Company also exercised a pro-rata portion of the 2023 Convertible Note Hedges and received 3.0 million shares of Class A common stock from the 2023 Note Hedge Counterparties to offset the shares issued as of December 31, 2023. No shares were received in the year ended December 31, 2023.

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Share Repurchase Program

In October 2023, the board of directors of the Company authorized the repurchase of up to $1 billion of the Company’s Class A common stock. Repurchases may be made from time to time through open market purchases or through privately negotiated transactions subject to market conditions, applicable legal requirements and other relevant factors. The repurchase program does not obligate the Company received $57.2to acquire any particular amount of its Class A common stock and may be suspended at any time at the Company’s discretion. The timing and number of shares repurchased will depend on a variety of factors, including the stock price, business and market conditions, corporate and regulatory requirements, alternative investment opportunities, acquisition opportunities, and other factors.

During the year ended December 31, 2023, we repurchased 2.5 million in cash proceeds from the saleshares of these warrants. See Note 9, Indebtedness,our Class A common stock for more details on this transaction.

an aggregate amount of $156.8 million. As of December 31, 2017, the Company had outstanding warrants to purchase an aggregate of 19,172,956 shares of its capital stock, with a weighted average exercise price of approximately $31.18 per share.2023, $843.2 million remained available and authorized for repurchases.


Stock Plans


The Company maintains two share-based employee compensation plans: the 2009 Stock Option Plan (2009 Plan)("2009 Plan") and the 2015 Equity Incentive Plan (2015 Plan)("2015 Plan"). The 2015 Plan serves as the successor to itsthe 2009 Plan. The 2015 Plan became effective as of November 17, 2015. Outstanding awards under the 2009 Plan continue to be subject to the terms and conditions of the 2009 Plan. Since November 17, 2015, no additional awards have been nor will be granted in the future under the 2009 Plan. As of December 31, 2023, the total number of shares subject to stock options, RSAs, and RSUs outstanding under the 2009 Plan was 2 million shares.


Under the 2015 Plan, shares of the Company's Class A common stock are reserved for the issuance of incentive and nonstatutory stock options (ISOs)("ISOs" and "NSOs", non-statutory stock options (NSOs)respectively), restricted stock awards RSUs,("RSAs"), restricted stock units ("RSUs"), performance shares, and stock bonuses to qualified employees, directors, and consultants. The shares mayawards must be granted at a price per share not less than the fair market value at the date of grant. Initially, 30,000,00030 million shares were reserved under the 2015 Plan and any shares subject to options or other similar awards granted under the 2009 Plan that expire, are forfeited, are repurchased by the Company or otherwise terminate unexercised will become available under the 2015 Plan. The number of shares available for issuance under the 2015 Plan has been and will be increased on the first day of each fiscal year, in an amount equal to the least of (i) 40,000,00040 million shares, (ii) 5% of the outstanding shares of the Company's common stock on the last day of the immediately preceding fiscal year, or (iii) such number of shares determined by the administrator.administrator of the Plan. The administrator consists of the Board of Directors who then delegates the responsibilities to the Compensation Committee. As of December 31, 2017,2023, the total number of shares subject to stock options, RSAs, and RSUs outstanding under the 2015 Plan was 25,971,95843 million shares, and 45,785,515121 million shares were available for future issuance.
Under the 2009 Plan, shares of common stock are reserved for the issuance of ISOs or NSOs to eligible participants. The options may be granted at a price per share not less than the fair market value at the date of grant. Options granted generally vest over a four-year term from the date of grant, at a rate of 25% after one year, then monthly on a straight-line basis thereafter. Generally, options granted are exercisable for up to 10 years from the date of grant. The Plan allows for early exercise of employee stock options whereby the option holder is allowed to exercise prior to vesting. Any unvested shares are subject to repurchase by the Company at their original exercise prices. As of December 31, 2017, the total number of options and RSUs outstanding under the 2009 Plan was 42,615,658 shares. No additional shares will be issued under 2009 Plan, effective November 17, 2015.     
In January 2015, the Company’s Chief Executive Officer contributed 5,068,238 shares of common stock back to the Company for no consideration. The purpose of the contribution was to retire such shares in order to offset stock ownership dilution to existing investors in connection with future issuances under the 2009 Plan.
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A summary of stock option activity for the year ended December 31, 20172023 is as follows (in thousands, except share and per share data):
Number of Stock Options OutstandingWeighted
Average
Exercise
Price		Weighted
Average
Remaining
Contractual
Term
(in years)		Aggregate
Intrinsic
Value
Outstanding, beginning of the period6,739 $40.37 4.02$224,484 
Granted682 65.16 
Exercised(2,065)21.38 
Forfeited(311)95.32 
Expired(54)91.69 
Outstanding, end of the period4,991 $47.64 3.80$195,760 
Exercisable, end of the period4,250 $40.26 2.94$189,357 
 Number of stock options outstanding Weighted
average
exercise
price		 Weighted
average
remaining
contractual
term
(in years)		 Aggregate
intrinsic
value
Balance at December 31, 201673,261,562
 $7.70
 7.28 $443,711
Granted1,216,959
 17.2
    
Exercised(24,510,745) 5.91
    
Forfeited and canceled(2,697,685) 11.36
    
Balance at December 31, 201747,270,091
 $8.67
 6.52 $1,229,103
Options vested and expected to vest at       
December 31, 201747,270,091
 $8.67
 6.52 $1,229,103
Options exercisable at       
December 31, 201744,252,865
 $8.37
 6.38 $1,163,690

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Aggregate intrinsic value represents the difference between the Company’s estimated fair value of its common stock and the exercise price of outstanding, “in-the-money”in-the-money options. Aggregate intrinsic value for stock options exercised throughfor the years ended December 31, 2017, 2016,2023, 2022, and 20152021 was $464.1$96.1 million, $202.6$211.0 million, and $49.8 million,$1.1 billion, respectively.

The total weighted averageweighted-average grant-date fair value of options granted was $5.97, $5.80$39.13, $73.31, and $5.87$131.57 per share for the years ended December 31, 2017, 20162023, 2022, and 2015,2021, respectively.


Restricted Stock Activity


The Company issues restricted stock units (RSUs) under the 2015 Plan, which typically vest over a term of four years.

Activity related to RSAs and RSUs during the year ended December 31, 20172023 is set forth below:
Number of
Shares		Weighted
Average Grant
Date Fair Value
Unvested, beginning of the period28,300 $97.89 
Granted30,233 61.03 
Vested(14,211)86.84 
Forfeited(4,223)90.82 
Unvested, end of the period40,099 $74.76 

As of December 31, 2023, all remaining RSAs were vested and there were no RSAs outstanding.

The total fair value of shares vested was $873.0 million, $724.2 million, and $1.6 billion in the years ended December 31, 2023, 2022, and 2021, respectively.

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 Number of
RSUs		 Weighted
average grant
date fair value
Unvested at December 31, 201615,443,391
 $12.09
Granted14,256,257
 21.21
Vested(5,964,153) 12.83
Forfeited(2,417,970) 13.29
Unvested at December 31, 201721,317,525
 $17.84


Employee Stock Purchase Plan


On November 17, 2015, the Company’s 2015 Employee Stock Purchase Plan (ESPP)("ESPP") became effective. The ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15% of their eligible compensation,25%, subject to any plan limitations. The ESPP provides for 12-month offering periods. The offering periods are scheduled to start on the first trading day on or after May 15 and November 15 of each year, except for the first offering period, which commenced on November 19, 2015 and ended on November 15, 2016.year. Each offering period includes two purchase periods, which begin on the first trading day on or after November 15 and May 15, and ending on the last trading day on or before May 15 and November 15, respectively. Employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or the last trading day of the purchase period. The number of shares available for sale under the ESPP will be increased annually on the first day of each fiscal year, equal to the least of (i) 8,400,0008.4 million shares, (ii) 1% of the outstanding shares of the Company’s common stock as of the last day of the immediately preceding fiscal year, or (iii) such other amount as determined by the administrator.

As of December 31, 2017, 3,522,9452023, 9 million shares had been purchased under the ESPP and 7,672,02230 million shares were available for future issuance under the ESPP. The Company recorded $6.0 million and $5.1 million of share-based compensation expense related to the ESPP during the year ended December 31, 2017 and 2016, respectively.


Share-Based Compensation


The fair valuevalues of stock options wasgranted were estimated using the following weighted-average assumptions:
Year Ended December 31,
202320222021
Dividend yield— %— %— %
Risk-free interest rate3.48 %3.08 %1.08 %
Expected volatility62.32 %59.2 %54.91 %
Expected term (years)6.026.026.02
 Year Ended December 31,
 2017 2016 2015
Dividend yield—% —% —%
Risk-free interest rate1.88% 1.54% 1.73%
Expected volatility32.22% 42.74% 47.68%
Expected term (years)6.02
 6.08
 6.02


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Effective August 31, 2015, the Company modified all of its nonstatutory stock option grants to extend the exercise term for terminated employees who have completed two years of service. During the year ended December 31, 2017, 2016, and 2015, share-based compensation expense includes $1.9 million, $2.6 million, and $3.3 million, respectively, related to the vested portion of the impacted options as a result of the modification. The Company will incur an additional $1.9 million of share-based compensation expense over the remaining vesting periods of the impacted options.
The following table summarizes the effects of share-based compensation on the Company's consolidated statements of operations (in thousands):
Year Ended December 31,
202320222021
Cost of revenue$601 $494 $410 
Product development902,130 701,715 446,596 
Sales and marketing130,665 105,231 57,070 
General and administrative242,701 261,849 103,966 
     Total$1,276,097 $1,069,289 $608,042 

 Year Ended December 31,
 2017 2016 2015
Cost of revenue$77
 $—
 $—
Product development98,310
 91,404
 54,738
Sales and marketing17,568
 14,122
 7,360
General and administrative39,881
 33,260
 20,194
Total$155,836
 $138,786
 $82,292
The Company recorded tax benefits related to stock-based compensation expense of $228.2 million, $218.9 million and $10.5 million, during the years ended December 31, 2023, 2022, and 2021, respectively.

The Company recorded $63.3 million, $61.4 million, and $34.9 million of share-based compensation expense related to the Company's 2015 Employee Stock Purchase Plan during the years ended December 31, 2023, 2022 and 2021, respectively. The total share-based compensation expense for the year ended December 31, 2022 includes a $66.3 million one-time charge related to the acceleration of various share-based arrangements associated with the acquisition of Afterpay.
    
The Company capitalized $3.7$30.9 million, $20.7 million, and $2.8$15.1 million of share-based compensation expense related to capitalized software during the yearyears ended December 31, 20172023, 2022, and 2016. There was no similar activity during the year ended December 31, 2015.2021, respectively.
    
As of December 31, 2017,2023, there was $423.8 million$2.9 billion of total unrecognized compensation cost related to outstanding stock options and restricted stock awards that isare expected to be recognized over a weighted averageweighted-average period of 2.80three years.



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NOTE 1318 - NET LOSSINCOME (LOSS) PER SHARE


Basic net lossincome (loss) per share is computed by dividing the net loss attributable to common stockholdersincome (loss) by the weighted-average number of shares of common stock outstanding during the period. ForDiluted net income per share is computed by dividing net income by the year ended December 31, 2015,weighted-average number of shares of common stock outstanding adjusted for the dilutive effect of all potential shares of common stock. In periods when the Company reported a net loss, attributable to common stockholders includes the impact of the issuance of 10,299,696 shares of the Company's common stock to certain holders of Series E preferred stock, in the form of a deemed stock dividend of $32.2 million. Diluteddiluted net loss per share is the same as basic net loss per share for all years presented because the effects of potentially dilutive items were anti-dilutive given the Company’s net loss attributable to common stockholders.anti-dilutive.

The following table presents the calculation of basic and diluted net lossincome per share (in thousands, except per share data):
Year Ended December 31,
202320222021
Numerator:
Net income (loss)$(21,124)$(553,005)$158,826 
Less: Net loss attributable to noncontrolling interests(30,896)(12,258)(7,458)
Net income (loss) attributable to common stockholders$9,772 $(540,747)$166,284 
Denominator:
Basic shares:
Weighted-average shares used to compute basic net income (loss) per share608,856 578,949 458,432 
Diluted shares:
Stock options, restricted stock, and employee stock purchase plan5,168 — 17,849 
Convertible notes— — 408 
Common stock warrants— — 25,090 
Weighted-average shares used to compute diluted net income (loss) per share614,024578,949501,779
Net income (loss) per share attributable to common stockholders:
Basic$0.02 $(0.93)$0.36 
Diluted$0.02 $(0.93)$0.33 
 Year Ended December 31,
 2017 2016 2015
Net loss$(62,813) $(171,590) $(179,817)
Deemed dividend on Series E preferred stock—
 —
 (32,200)
Net loss attributable to common stockholders$(62,813) $(171,590) $(212,017)
Basic shares:     
Weighted-average common shares outstanding380,921
 344,393
 175,139
Weighted-average unvested shares(1,577) (2,838) (4,641)
Weighted-average shares used to compute basic net loss per share379,344
 341,555
 170,498
Diluted shares:     
Weighted-average shares used to compute diluted net loss per share379,344
 341,555
 170,498
      
Loss per share attributable to common stockholders:     
Basic$(0.17) $(0.50) $(1.24)
Diluted$(0.17) $(0.50) $(1.24)

Additionally, since the Company expects to settle the principal amount of its outstanding Notes in cash, the Company uses the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted net income per share, if applicable. The conversion spread will have a dilutive impact on diluted net income per share of common stock when the average market price of the Company’s common stock for a given period exceeds the conversion price of $22.95 per share for the Notes. Because the Company has reported a net loss for all periods presented, diluted loss per share is the same as basic loss per share for those periods.


The following potential common shares were excluded from the calculation of diluted net lossincome per share attributable to common stockholders because their effect would have been anti-dilutive for the periods presented (in thousands):

Year Ended December 31,
202320222021
Stock options, restricted stock, and employee stock purchase plan40,431 32,185 7,680 
Convertible notes14,297 18,029 23,947 
Common stock warrants20,243 33,699 17,271 
     Total anti-dilutive securities74,971 83,913 48,898 

NOTE 19 - RELATED PARTY TRANSACTIONS

In July 2019, the Company entered into a lease agreement for office space in St. Louis, Missouri, from an affiliate of one of the Company’s co-founders and current member of its board of directors, Mr. Jim McKelvey, for a term of 15.5 years with options to extend the lease term for two five-year terms. The lease possession date varied by floor, beginning in May 2020. As of December 31, 2023, the Company had recorded right-of-use assets of $10.4 million and associated lease liabilities of $16.3 million related to this lease arrangement.

143
 Year Ended December 31,
 2017 2016 2015
Stock options and restricted stock units68,588
 88,705
 111,148
Common stock warrants19,173
 9,457
 9,544
Unvested shares1,300
 1,892
 3,420
Employee stock purchase plan157
 216
 172
Total anti-dilutive securities89,218
 100,270
 124,284





104






Under the lease agreement, the Company also has an option to terminate the lease for up to 50% of the leased space any time between January 1, 2024 and December 31, 2026, as well as an option to terminate the lease for the entire property on January 1, 2034. Termination penalties specified in the lease agreement will apply if the Company exercises any of the options to terminate the lease. On January 2, 2023, the Company notified the lessor of its intention to exercise the early termination option with respect to approximately 48% of the leased space, effective December 31, 2023. As a result, the Company paid a termination penalty of approximately $5.2 million to exercise the option.

NOTE 1420 - COMMITMENTS AND CONTINGENCIES

Operating and CapitalFinance Leases

The Company has entered into various non-cancelableCompany’s operating leases are primarily comprised of office facilities. The Company's leases have remaining lease terms of one year to 13 years, some of which include options to extend up to five year terms, or include options to terminate the leases with advanced notice. None of the options to extend the leases have been included in the measurement of the right-of-use asset or the associated lease liability. There were no finance lease obligations as of December 31, 2023.

The components of lease costs for certain offices with contractual lease periods expiring between 2018 and 2025. The Company recognized total rental expenses under operating leases of $12.9 million, $11.3 million, and $12.8 million during the yearsyear ended December 31, 2017, 2016, and 2015, respectively.2023 were as follows (in thousands):
Year Ended December 31,
20232022
Fixed operating lease costs$77,659 $93,365 
Variable operating lease costs22,555 27,065 
Short-term lease costs3,332 4,332 
Sublease income(11,933)(15,965)
Total lease costs$91,613 $108,797 

Other information related to operating leases was as follows:
Year Ended December 31,
20232022
Weighted-average remaining lease term7.0 years7.7 years
Weighted-average discount rate3.62 %3.55 %

144

Cash flows related to leases were as follows (in thousands):
Year Ended December 31,
20232022
Cash flows from operating activities:
Payments for operating lease liabilities$(93,890)$(92,730)
Supplemental cash flow data:
Right-of-use assets obtained in exchange for operating lease obligations$7,106 $39,324 

Future minimum lease payments under non-cancelable operating leases (with initial lease terms in excess of one year) and future minimum capital lease payments as of December 31, 20172023 are as follows (in thousands):
2024$65,279 
202559,151 
202649,352 
202745,389 
202845,631 
Thereafter128,729 
Total$393,531 
Less: Amount representing interest48,177 
Less: Lease incentives and transfer to held for sale1,996 
Total$343,358 

 Capital Operating
Year:   
2018$2,656
 $18,740
20192,540
 17,438
20201,265
 17,374
202135
 16,968
2022—
 16,987
Thereafter—
 19,383
Total$6,496
 $106,890
Less amount representing interest(14)  
Present value of capital lease obligations6,482
  
Less current portion of capital lease obligation(2,650)  
Non-current portion of capital lease obligation$3,832
  
The Company recognized total rental expenses for operating leases of $75.8 million, $93.6 million, and $80.3 million during the years ended December 31, 2023, 2022, and 2021, respectively.


LitigationPurchase Commitments


During the year ended December 31, 2022, we entered into non-cancelable purchase obligations related to cloud computing infrastructure. The commitment amounts in the table below are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, and the approximate timing of the actions under the contracts.

As of December 31, 2023, the future minimum payments under the purchase commitments were as follows (in thousands):
Payments Due By Period
2024$300,554 
2025316,425 
2026263,300 
2027315,100 
Total$1,195,379 

Litigation and Regulatory Matters

The Company is currently a partysubject to, and may in the future be involved in, various litigation matters, (including intellectual property litigation), legal claims, investigations, and government investigations.regulatory proceedings.


145

The Company was involvedreceived Civil Investigative Demands (“CIDs”) from the Consumer Financial Protection Bureau (“CFPB”), as well as subpoenas from Attorneys General from multiple states, seeking the production of information related to, among other things, Cash App’s handling of customer complaints and disputes. In December 2023, the CFPB notified the Company, pursuant to the CFPB’s discretionary Notice and Opportunity to Respond and Advise (“NORA”) process, that the CFPB’s Office of Enforcement is considering recommending that the CFPB take legal action against the Company related to the topics addressed in its CIDs. The purpose of a classNORA is to provide a party being investigated an opportunity to present its position to the CFPB before an enforcement action lawsuit concerning independent contractorsmay be recommended or commenced. The Company is unable to predict the likely outcome of this matter and cannot provide any assurance that the CFPB will not ultimately take legal action against the Company or that the outcome of any such action, if brought, will not have a material adverse effect on the Company. The Company is cooperating with the CFPB and the state Attorneys General in connection with the Company’s Caviar business. On March 19, 2015, Jeffry Levin, on behalf of a putative nationwide class, filed a lawsuit in the United States District Court for the Northern District of California against the Company’s wholly owned subsidiary, Caviar, Inc., which, as amended, alleged that Caviar misclassified Mr. Levin and other similarly situated couriers as independent contractors and, in doing so, violated various provisions of the California Labor Code and California Business and Professions Code by requiring them to pay various business expenses that should have been borne by Caviar. The Court compelled arbitration of Mr. Levin’s individual claims on November 16, 2015 and dismissed the lawsuit in its entirety with prejudice on May 2, 2016. On June 1, 2016, Mr. Levin filed a Notice of Appeal of the Court’s order compelling arbitration with the United States Court of Appeals for the Ninth Circuit. Mr. Levin filed his opening appellate brief regarding the order compelling arbitration of his individual claims on October 7, 2016. The Company filed its answering brief on December 7, 2016, and Mr. Levin filed his reply on December 21, 2016. No hearing date was set. Mr. Levin also sought an award of penalties pursuant to the Labor Code Private Attorneys General Act of 2004 (PAGA). The parties stipulated that Mr. Levin would no longer pursue this PAGA claim but that it may instead be pursued by a different courier. Subsequently, couriers Nadezhda Rosen and La’Dell Brewster filed a new PAGA-only claim in the Superior Court of the State of California for the County of San Francisco (Superior Court) on November 7, 2016. Plaintiffs claimed that Caviar misclassified its couriers as independent contractors resulting in numerous violations of the California Labor Code, pursuant to which plaintiffs sought statutory penalties for those violations.In February 2017, the Company participated in a mediation with the parties in these Caviar misclassification suits to explore resolution of the matters at hand. After continued negotiation, the parties reached a global settlement of these suits, which has been confirmed. As a result, the Levin and Rosen lawsuits were dismissed with prejudice in their respective courts on January 24, 2018 and January 18, 2018, respectively.inquiries.


105






The Company has receivedaccrued a Noticeliability for an estimated amount in connection with these CIDs in accordance with ASC 450-20, Contingencies: Loss Contingencies. The accrued amount was not material as of Tax Audit Deficiency (“Notice”)December 31, 2023. Given the status of these matters, it is not possible to reliably determine the range of potential liability in excess of the accrued amounts that could result from these investigations. The Company regularly assesses the likelihood of adverse outcomes resulting from litigation and regulatory proceedings and adjusts the financial statements based on such assessments. The eventual outcome of these matters may differ materially from the Office of the Treasurer & Tax Collector of the City and County of San Francisco (“Tax Collector”), for fiscal years 2014 and 2015, informingestimates the Company thathas currently accrued in the Tax Collector believes the Company’s primary business activity is financial services rather than information services, and accordingly the Company would be liable for the Gross Receipts Tax and Payroll Expense Tax under the rules for financial services business activities. The demand Notice is for an immaterial amount andstatements.

In addition, the Company is challenging the Noticesubject to various legal matters, investigations, subpoenas, inquiries or audits, claims, lawsuits and intends to vigorously defend its position, which it believes has merit. Should the Tax Collector prevail,disputes, including with regulatory bodies and governmental agencies. For example, the Company could be obligated to pay additional taxes together with any associated penaltiesreceived inquiries from the SEC and interest for subsequent years that together,Department of Justice shortly after the publication of a short seller report in aggregate, could be material.March 2023. The Company is currently unablebelieves the inquiries primarily relate to estimate the range of possible loss given the uncertainties associated with this matter, including uncertainties about the Tax Collector’s rationale for its position and about the amounts that may ultimately be subject to such taxes.

In addition, from time to time, the Company is involved in various other litigation matters and disputes arisingallegations raised in the ordinary course of business.short seller report. The Companycannot at this time fairly estimate a reasonable range of exposure, if any, of the potential liability, if any, with respect to any of these other matters. WhileAlthough the Company may be subject to an adverse decision or settlement, it does not believe at this time, that any ultimate liability resulting fromthe final disposition of any of these other matters will have a material adverse effect on the Company'sits results of operations, financial position, or liquidity,liquidity. However, the Company cannot give any assurance regarding the ultimate outcome of any of these other matters, and their resolution could be material to the Company's operating resultsresults.

Other Contingencies

The Company is under examination, or may be subject to examination, by several tax authorities. These examinations may lead to proposed adjustments to the Company's taxes or net operating losses with respect to years under examination, as well as subsequent periods. The Company regularly assesses the likelihood of adverse outcomes resulting from tax examinations to determine the adequacy of the Company's provision for direct and indirect taxes. The Company continues to monitor the progress of ongoing discussions with tax authorities and the effect, if any, on the Company's provision for direct and indirect taxes.

Management believes that an adequate provision has been made for any particular period.adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company's tax audits are resolved in a manner not consistent with the Company’s expectations, the Company could be required to adjust the Company's provision for direct and indirect taxes in the period such resolution occurs.



146

NOTE 1521 - SEGMENT AND GEOGRAPHICAL INFORMATION
Operating
The Company reports its segments are defined as components of an enterprise forto reflect the manner in which discrete financial information is available that is evaluated regularly by the Company's chief operating decision maker (CODM)("CODM") reviews and assesses performance. Accordingly, the Company has two reportable segments, Square and Cash App. In the fourth quarter of 2023, the Company reorganized its business structure and moved the business activities, management, and the financial results of the Company's BNPL platform fully into Cash App. Accordingly, the segment results below include the financial results of the BNPL platform solely within the Cash App segment. Products and services that are not assigned to a specific reportable segment, including but not limited to TIDAL and other emerging ecosystems, are aggregated and presented within a general corporate and other category. Square and Cash App are defined as follows:

•Cash App includes the financial tools available to individuals within the mobile Cash App, including peer-to-peer payments, bitcoin and stock investments. Cash App also includes Cash App Card which is linked to customer stored balances that customers can use to pay for purposespurchases or withdraw funds from an ATM. Cash App also includes the BNPL platform.

•Square includes managed payment services, software solutions, hardware, and financial services offered to sellers, excluding those that involve Cash App.

147

The primary financial measures used by the CODM to evaluate performance and allocate resources are revenue and gross profit. The CODM does not evaluate performance or allocate resources based on segment asset data, and therefore such information is not included. The following tables present information on the reportable segments revenue and segment gross profit (in thousands):
Year Ended December 31, 2023
Cash AppSquare
Corporate and Other (i)
Total
Revenue:
Transaction-based revenue$498,176 $5,817,125 $— $6,315,301 
Subscription and services-based revenue4,685,208 1,059,081 200,553 5,944,842 
Hardware revenue— 157,178 — 157,178 
Bitcoin revenue9,498,302 — — 9,498,302 
Segment revenue14,681,686 7,033,384 200,553 21,915,623 
Segment gross profit (ii)
$4,323,463 $3,128,654 $52,769 $7,504,886 

Year Ended December 31, 2022
Cash AppSquare
Corporate and Other (i)
Total
Revenue:
Transaction-based revenue$466,171 $5,235,369 $— $5,701,540 
Subscription and services-based revenue3,452,777 894,350 205,646 4,552,773 
Hardware revenue— 164,418 — 164,418 
Bitcoin revenue7,112,856 — — 7,112,856 
Segment revenue11,031,804 6,294,137 205,646 17,531,587 
Segment gross profit (ii)
$3,245,044 $2,706,901 $39,947 $5,991,892 

Year Ended December 31, 2021
Cash AppSquare
Corporate and Other (i)
Total
Revenue:
Transaction-based revenue$409,844 $4,383,302 $— $4,793,146 
Subscription and services-based revenue1,893,008 664,367 152,356 2,709,731 
Hardware revenue— 145,679 — 145,679 
Bitcoin revenue10,012,647 — — 10,012,647 
Segment revenue12,315,499 5,193,348 152,356 17,661,203 
Segment gross profit (ii)
$2,070,847 $2,316,671 $32,305 $4,419,823 

(i) Corporate and other represents results related to products and services that are not assigned to a specific reportable segment, and intersegment eliminations.

(ii) Segment gross profit for Cash App for the years ended December 31, 2023, 2022, and 2021 included $56.1 million, $53.9 million, and $10.5 million of allocating resourcesamortization of acquired technology assets expense, respectively. Segment gross profit for Square for the years ended December 31, 2023, 2022, and evaluating financial performance. 2021 included $10.6 million, $10.5 million, and $8.3 million of amortization of acquired technology assets expense, respectively. Amortization of acquired technology assets expense included in Corporate and Other was immaterial for the years ended December 31, 2023, 2022, and 2021.

148

The Company’s CODM is the chief executive officer who reviews financial information presented onfollowing table provides a consolidated basis for purposesreconciliation of allocating resources and evaluating financial performance. As such,total segment gross profit to the Company’s operations constitute a single operating segment and one reportable segment.income (loss) before applicable income taxes (in thousands):
Year Ended December 31,
202320222021
Total segment gross profit$7,504,886 $5,991,892 $4,419,823 
Less: Product development2,720,819 2,135,612 1,383,841 
Less: Sales and marketing2,019,009 2,057,951 1,617,189 
Less: General and administrative2,209,190 1,686,849 982,817 
Less: Transaction, loan, and consumer receivable losses660,663 550,683 187,991 
Less: Bitcoin impairment losses— 46,571 71,126 
Less: Amortization of customer and other intangible assets    174,044 138,758 15,747 
Less: Interest expense (income), net(47,221)36,228 33,124 
Less: Other income, net(202,475)(95,443)(29,474)
     Income (loss) before applicable income taxes$(29,143)$(565,317)$157,462 

Revenue

Revenue by geography is based on the billing addresses of the merchants.sellers or customers. The following table sets forthdetails revenue by geographic area (in thousands):

Year Ended December 31,
202320222021
United States$20,416,462 $16,314,769 $17,077,532 
International1,499,161 1,216,818 583,671 
Total$21,915,623 $17,531,587 $17,661,203 

 Year Ended December 31,
 2017 2016 2015
Revenue     
United States$2,120,088
 $1,643,852
 $1,224,566
International94,165
 64,869
 42,552
Total net revenue$2,214,253
 $1,708,721
 $1,267,118

No individual country from the international markets contributed in excess ofmore than 10% of total revenue for the years ended December 31, 2017, 2016,2023, 2022, and 2015.2021.


Long-Lived Assets

The following table sets forthdetails long-lived assets by geographic area (in thousands):
December 31,
20232022
United States$7,570,973 $8,023,535 
Australia4,761,535 4,801,434 
International1,889,490 1,858,300 
Total$14,221,998 $14,683,269 

Assets by reportable segment were not included, as this information is not reviewed by the CODM to make operating decisions or allocate resources, and is reviewed on a consolidated basis.

149
 December 31,
 2017 2016
Long-lived assets   
United States$158,820
 $162,118
International5,337
 2,675
Total long-lived assets$164,157
 $164,793


106







NOTE 1622 - SUPPLEMENTAL CASH FLOW INFORMATION


The supplemental disclosures of cash flow information consist of the following (in thousands):

Year Ended December 31,
202320222021
Supplemental Cash Flow Data:
Cash paid for interest$130,009 $84,876 $40,446 
Cash paid for income taxes81,376 39,045 10,041 
Supplemental disclosures of non-cash investing and financing activities:
Right-of-use assets obtained in exchange for operating lease obligations7,106 39,324 63,290 
Purchases of property and equipment in accounts payable and accrued expenses3,921 5,212 15,071 
Deferred purchase consideration related to business combinations2,550 14,377 50,079 
Fair value of common stock issued related to business combinations(6,658)(13,827,929)(28,735)
Fair value of common stock issued to settle the conversion of convertible notes— (2,523)(1,258,562)
Fair value of shares received to settle convertible note hedges— 133,144 1,800,933 
Fair value of common stock issued in connection with the exercise of common stock warrants— (806,446)— 
Bitcoin lent to third-party borrowers— 5,934 (6,084)

 Year Ended December 31,
 2017 2016 2015
Supplemental Cash Flow Data:     
Cash paid for interest$1,374
 $570
 $981
Cash paid for income taxes1,254
 395
 1,916
Supplemental disclosures of non-cash investing and financing activities:     
Change in purchases of property and equipment in accounts payable and accrued expenses143
 2,554
 5,593
Unpaid business acquisition purchase price2,115
 240
 —
Conversion of Series A, B, C, D & E preferred stock upon initial public offering to common stock—
 —
 544,897
Unpaid offering costs related to initial public offering—
 —
 5,530
Deemed dividend on Series E preferred stock—
 —
 32,200
Fair value of shares issued related to acquisitions—
 —
 35,776

ItemITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE


None.


ItemITEM 9A. CONTROLS AND PROCEDURES


Evaluation of Disclosure Controls and Procedures


Our management, with the participation of our ChiefPrincipal Executive Officer and our ChiefPrincipal Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on such evaluation, our ChiefPrincipal Executive Officer and ChiefPrincipal Financial Officer have concluded that, as of December 31, 2017,2023, our disclosure controls and procedures were effective at the reasonable assurance level.


Changes in Internal Control over Financial Reporting


There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended December 31, 20172023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


150

Management's Report on Internal Control over Financial Reporting


107






Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria established in “Internal Control - Integrated Framework” (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)("COSO"). Based on that assessment, our management has concluded that our internal control over financial reporting was effective as of December 31, 2017.2023. The effectiveness of the Company’sour internal control over financial reporting as of December 31, 20172023 has been audited by KPMGErnst & Young, LLP, an independent registered public accounting firm, as stated in their report which appears herein.


ItemITEM 9B. OTHER INFORMATION


During the quarterly period ended December 31, 2023, the following officer, as defined in Rule 16a-1(f), adopted or terminated a “Rule 10b5-1 trading arrangement” as defined in Regulation S-K Item 408, as follows:

On November 29, 2023, Brian Grassadonia, our Chief Executive Officer, Cash App, adopted a Rule 10b5-1 trading arrangement providing for the sale from time to time of an aggregate of up to 652,282 shares of our Class A common stock, which includes the exercise of up to 412,122 options and the corresponding sale of enough of the resulting 412,122 shares of Class A common stock required to cover the exercise price, withholding taxes, commissions and fees related to exercising the aforementioned options. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c). The duration of the trading arrangement is until March 30, 2025, or earlier if all transactions under the trading arrangement are completed.

No other officers or directors, as defined in Rule 16a-1(f), adopted and/or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as defined in Regulation S-K Item 408, during the last fiscal quarter.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

None.

151

108






PART III
ItemITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    
The information required by this item will be set forthincluded in our definitive proxy statementProxy Statement for the 2024 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission not later thanSEC within 120 days afterof the end of our fiscal year ended December 31, 2017 in connection with our 2018 annual meeting of stockholders (the 2023 ("Proxy Statement),Statement") and is incorporated herein by reference.



ItemITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be set forthincluded in the Proxy Statement and is incorporated herein by reference.



ItemITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item will be set forthincluded in the Proxy Statement and is incorporated herein by reference.



ItemITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item will be set forthincluded in the Proxy Statement and is incorporated herein by reference.



ItemITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item will be set forthincluded in the Proxy Statement and is incorporated herein by reference.





109
152






PART IV
ItemITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES


(a) The following documents are filed as a part of this Annual Report on Form 10-K:
(1)Consolidated Financial Statements:


Our Consolidated Financial Statements are listed in the “Index to Consolidated Financial Statements” under Part II, Item 8 of this Annual Report on Form 10-K.
(2)Financial Statement Schedules:


Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes herein.
(3)Exhibits


The documents listed in the following Exhibit Index of this Annual Report on Form 10-K are incorporated by reference or are filed with this Annual Report on Form 10-K, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K):


EXHIBIT INDEX
Incorporated by Reference
Exhibit NumberDescriptionFormFile No.ExhibitFiling Date
8-K001-376222.1August 2, 2021
8-K001-376222.1December 7, 2021
3.1
10-K001-376223.1February 24, 2022
8-K001-376223.1October 21, 2022
S-1/A333-2074114.1November 6, 2015
8-K001-376224.1March 5, 2020
8-K001-376224.2March 5, 2020
8-K001-376224.1November 13, 2020
8-K001-376224.2November 13, 2020
8-K001-376224.3November 13, 2020
8-K001-376224.4November 13, 2020
8-K001-376224.1May 20, 2021
8-K001-376224.2May 20, 2021
8-K001-376224.3May 20, 2021
8-K001-376224.4May 20, 2021
10-K001-376224.7February 26, 2020
153
   Incorporated by Reference
Exhibit Number DescriptionFormFile No.ExhibitFiling Date
3.1
 
Amended and Restated Certificate of Incorporation of the Registrant.
8-K001-376223.1November 24, 2015
3.2
 
Amended and Restated Bylaws of the Registrant.
8-K001-376223.1November 3, 2017
4.1
 
Form of Class A common stock certificate of the Registrant.
S-1/A333-2074114.1November 6, 2015
4.2
 
Fifth Amended and Restated Investors’ Rights Agreement among the Registrant and certain holders of its capital stock, dated as of September 9, 2014.
S-1333-2074114.2October 14, 2015
4.3
 
Indenture, dated March 6, 2017, between the Registrant and The Bank of New York Mellon Trust Company, N.A.
8-K001-376224.1March 6, 2017
4.4
 
Form of 0.375% Convertible Senior Notes due 2022 (included in Exhibit 4.3).
8-K001-376224.2March 6, 2017
10.1+
 
Form of Indemnification Agreement between the Registrant and each of its directors and executive officers.
S-1/A333-20741110.1November 6, 2015
10.2+
 
Square, Inc. 2015 Equity Incentive Plan, as amended and restated, and related form agreements.
10-Q001-3762210.1August 2, 2017
10.3+
 
Square, Inc. 2015 Employee Stock Purchase Plan, as amended and restated, and related form agreements.
10-K001-3762210.3March 10, 2016
10.4+
 
Square, Inc. 2009 Stock Plan and related form agreements.
S-1333-20741110.4October 14, 2015
10.5+
 
Square, Inc. Executive Incentive Compensation Plan.
S-1333-20741110.5October 14, 2015
10.6+
 
Square, Inc. Outside Director Compensation Policy, as amended and restated.
10-K001-3762210.6February 24, 2017
10.7+
 
Form of Change of Control and Severance Agreement between the Registrant and certain of its executive officers.
S-1333-20741110.7October 14, 2015
10.8+
 
Offer Letter between the Registrant and Jack Dorsey, dated as of March 7, 2016.
10-K001-3762210.8March 10, 2016
10.9+
 
Offer Letter between the Registrant and Sarah Friar, dated as of October 1, 2015.
S-1/A333-20741110.9November 6, 2015
10.10+
 
Offer Letter between the Registrant and Françoise Brougher, dated as of October 1, 2015.
S-1/A333-20741110.11November 6, 2015
10.11+
 
Offer Letter between the Registrant and Alyssa Henry, dated as of October 1, 2015.
S-1/A333-20741110.12November 6, 2015
10.12+
 
Offer Letter between the Registrant and Hillary Smith, dated as of October 27, 2016.
10-K001-3762210.13February 24, 2017

110





Incorporated by Reference
Exhibit NumberDescriptionFormFile No.ExhibitFiling Date
10.1+
S-1/A333-20741110.1November 6, 2015
10.2.1+
10-K001-3762210.2.1February 24, 2022
10.2.2+*
10.2.3+
10-K001-3762210.2.3February 24, 2022
10.2.4+*
10.3+
10-Q001-3762210.1November 3, 2022
10.4+
S-1333-20741110.4October 14, 2015
10.5+
S-1333-20741110.5October 14, 2015
10.6*




10.7+
S-1333-20741110.7October 14, 2015
10.9+
10-K001-3762210.8March 10, 2016
10.10+
S-1/A333-20741110.12November 6, 2015
10.11+
8-K001-3762210.1January 4, 2019
10.12+
10-Q001-3762210.1May 4, 2023
10.13
8-K001-3762210.1May 6, 2020
10.14
8-K001-3762210.1June 3, 2020
10.15
8-K001-3762210.6November 10, 2020
10.16
8-K001-3762210.1February 3, 2021
10.17
8-K001-3762210.1May 26, 2021
10.18
8-K001-3762210.1January 31, 2022
10.19
10-K001-3762210.21February 24, 2022
10.20
8-K001-3762210.1June 9, 2023
10.21#
10-Q001-3762210.2August 3, 2023
10.22#
10-Q001-3762210.3August 3, 2023
154

10.13+
 
Offer Letter between the Registrant and Jacqueline D. Reses, dated as of October 2, 2015
10-Q001-3762210.6May 4, 2017
10.14
 
Office Lease by and between the Registrant and Hudson 1455 Market, LLC, dated as of October 17, 2012, as amended on March 22, 2013, January 22, 2014, June 6, 2014, February 1, 2015, April 27, 2015, June 18, 2015, October 5, 2016, and October 6, 2016.
10-Q001-3762210.7May 4, 2017
10.15
 
Ninth Amendment to Office Lease by and between the Registrant and Hudson 1455 Market Street, LLC, dated as of December 19, 2017.
    
10.16
 
Revolving Credit Agreement dated as of November 2, 2015 among the Registrant, the Lenders Party Thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent.
S-1/A333-20741110.14November 6, 2015
10.17
 
Commitment Letter dated October 30, 2015 by Goldman Sachs Lending Partners LLC.
S-1/A333-20741110.14ANovember 16, 2015
10.18
 
First Amendment to Credit Agreement, dated as of February 27, 2017, among the Registrant, the Lenders Party Thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent
8-K001-3762210.1February 27, 2017
10.19#
 
Master Development and Supply Agreement by and between the Registrant and TDK Corporation, dated as of October 1, 2013.
S-1333-20741110.15October 14, 2015
10.20#
 
Master Manufacturing Agreement by and between the Registrant and Cheng Uei Precision Industry Co., Ltd., dated as of June 27, 2012.
S-1333-20741110.16October 14, 2015
10.21#
 
ASIC Development and Supply Agreement by and between the Registrant, Semiconductor Components Industries, LLC (d/b/a ON Semiconductor) and ON Semiconductor Trading, Ltd., dated as of March 25, 2013.
S-1333-20741110.17October 14, 2015
10.22
 
Warrant Cancellation and Payment Agreement, dated as of February 24, 2017, by and between the Registrant and Starbucks Corporation.
8-K001-3762210.1February 24, 2017
10.23
 
Purchase Agreement, dated February 28, 2017, by and among the Registrant and Goldman, Sachs & Co. and J.P. Morgan Securities LLC, as representatives of the initial purchasers named therein.
8-K001-3762210.1March 6, 2017
10.24
 
Form of Convertible Note Hedge Confirmation.
8-K001-3762210.2March 6, 2017
10.25
 
Form of Warrant Confirmation.
8-K001-3762210.3March 6, 2017
21.1
 
List of subsidiaries of the Registrant.
    
23.1
 
Consent of KPMG LLP, Independent Registered Public Accounting Firm.
    
31.1
 
Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
    
31.2
 
Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
    
32.1†
 
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
    
101.INS XBRL Instance Document.    
101.SCH XBRL Taxonomy Extension Schema Document.    
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.    
101.DEF XBRL Taxonomy Extension Definition Linkbase Document.    
101.LAB XBRL Taxonomy Extension Labels Linkbase Document.    
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.    
Incorporated by Reference
Exhibit NumberDescriptionFormFile No.ExhibitFiling Date
10.23#*
10.24
10-K001-3762210.23February 27, 2019
10.25
8-K001-3762210.2June 3, 2020
10.26
8-K001-3762210.2February 3, 2021
8-K001-3762210.2May 25, 2018
8-K001-3762210.3May 25, 2018
8-K001-3762210.2March 5, 2020
8-K001-3762210.3March 5, 2020
8-K001-3762210.2November 10, 2020
8-K001-3762210.4November 10, 2020
8-K001-3762210.3November 10, 2020
8-K001-3762210.5November 10, 2020
21.1*
31.1*
31.2*
32.1†*
97.1*
101.INSXBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document..
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
101.LABInline XBRL Taxonomy Extension Labels Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
____________________

+Indicates management contract or compensatory plan.
#The Registrant has omitted portions of the relevant exhibit and filed such exhibit separately with the Securities and Exchange Commission pursuant to a request for confidential treatment under Rule 406 of the Securities Act of 1933, as amended.
†The certifications attached as Exhibit 32.1 that accompany this Annual Report on Form 10-K are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing.




*     Filed herewith.

+Indicates management contract or compensatory plan.
#    Certain portions of this exhibit have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K. The Company agrees to furnish supplementally an unredacted copy of the exhibit to the Securities and Exchange Commission upon its request.
†    The certifications attached as Exhibit 32.1 that accompany this Annual Report on Form 10-K are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing.


155

ItemITEM 16. FORM 10-K SUMMARY
    
None.



112
156








SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 27, 201822, 2024
SQUARE,BLOCK, INC.
By:    /s/ Jack Dorsey
Jack Dorsey
President, ChiefBlock Head and Chairperson
(Principal Executive Officer, and ChairmanOfficer)




POWER OF ATTORNEY


Each person whose signature appears below hereby constitutes and appoints Jack Dorsey, Sarah FriarAmrita Ahuja, and Hillary Smith,Chrysty Esperanza, and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their, his or her substitutes, may lawfully do or cause to be done by virtue hereof.


113
157








Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

SignatureTitleDate
/s/ Jack DorseyBlock Head and Chairperson
(Principal Executive Officer)		February 22, 2024
SignatureJack Dorsey
/s/ Amrita AhujaTitle
Chief Financial Officer & Chief Operating Officer
(Principal Financial Officer)
DateFebruary 22, 2024
Amrita Ahuja
/s/ Ajmere Dale
Chief Accounting Officer
(Principal Accounting Officer)
February 22, 2024
Ajmere Dale
/s/ Roelof BothaDirectorFebruary 22, 2024
Roelof Botha
/s/ Amy BrooksDirectorFebruary 22, 2024
Amy Brooks
/s/ Shawn CarterDirectorFebruary 22, 2024
Shawn Carter
/s/ Paul Deighton DirectorFebruary 22, 2024
Paul Deighton
/s/ Randy GaruttiDirectorFebruary 22, 2024
Randy Garutti
/s/ Jim McKelveyDirectorFebruary 22, 2024
Jim McKelvey
/s/ Mary MeekerDirectorFebruary 22, 2024
Mary Meeker
/s/ Jack DorseyNeha NarulaPresident, Chief Executive Officer, and Chairman (Principal Executive Officer)DirectorFebruary 27, 201822, 2024
Jack DorseyNeha Narula
/s/ Sarah FriarSharon RothsteinChief Financial Officer (Principal Financial Officer)DirectorFebruary 27, 201822, 2024
Sarah Friar
/s/ Ajmere DaleChief Accounting Officer (Principal Accounting Officer)February 27, 2018
Ajmere Dale
/s/ Roelof BothaDirectorFebruary 27, 2018
Roelof Botha
/s/ Paul Deighton DirectorFebruary 27, 2018
Paul Deighton
/s/ Randy GaruttiDirectorFebruary 27, 2018
Randy Garutti
/s/ Jim McKelveyDirectorFebruary 27, 2018
Jim McKelvey
/s/ Mary MeekerDirectorFebruary 27, 2018
Mary Meeker
/s/ Anna PattersonDirectorFebruary 27, 2018
Anna Patterson
/s/ Naveen RaoDirectorFebruary 27, 2018
Naveen Rao
/s/ Ruth SimmonsDirectorFebruary 27, 2018
Ruth Simmons
/s/ Lawrence SummersDirectorFebruary 27, 2018
Lawrence Summers
/s/ David ViniarDirectorFebruary 27, 2018
David ViniarSharon Rothstein



114
158