UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-Q
______________________
(Mark One)
ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2024
OR
oTRANSITION 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
______________________
Square,Block, Inc.
(Exact name of registrant as specified in its charter)
______________________
Delaware
Delaware80-0429876
(State or other jurisdiction of
incorporation or organization)
(IRSI.R.S Employer
Identification No.)

1455 Market Street,1955 Broadway, Suite 600
San Francisco,Oakland, CA 94103946121
(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
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 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  ý   Accelerated filer  o   Non-accelerated filer  o (Do not check if smaller reporting company) 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 Exchange Act).    Yes  o    No  ý
As of November 3, 2017,April 29, 2024, the number of shares (in thousands) of the registrant’s Class A common stock outstanding was 268,850,952 and the number of shares of the registrant’s Class B common stock outstanding was 119,716,690.were 556,545 and 60,496, respectively.

1 We 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.




TABLE OF CONTENTS
 



Page No.
Page No.



SPECIAL



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS


This Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q. 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 Quarterly Report on Form 10-Q. 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 Quarterly Report on Form 10-Q and are not guarantees of future performance. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.





Part I—Financial Information
Item 1. Financial Statements
SQUARE,BLOCK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)
 September 30,
2017
 December 31,
2016
Assets   
Current assets:   
Cash and cash equivalents$658,412
 $452,030
Short-term investments209,959
 59,901
Restricted cash20,533
 22,131
Settlements receivable587,630
 321,102
Customer funds85,473
 43,574
Loans held for sale58,331
 42,144
Other current assets66,539
 60,543
Total current assets1,686,877
 1,001,425
Property and equipment, net88,666
 88,328
Goodwill57,961
 57,173
Acquired intangible assets, net14,648
 19,292
Long-term investments191,335
 27,366
Restricted cash14,565
 14,584
Other non-current assets29,800
 3,194
Total assets$2,083,852
 $1,211,362
Liabilities and Stockholders’ Equity   
Current liabilities:   
Accounts payable$13,529
 $12,602
Customers payable727,341
 431,632
Settlements payable81,414
 51,151
Accrued transaction losses26,720
 20,064
Accrued expenses60,626
 39,543
Other current liabilities21,049
 22,472
Total current liabilities930,679
 577,464
Long-term debt (Note 10)354,237
 
Other non-current liabilities66,027
 57,745
Total liabilities1,350,943
 635,209
Commitments and contingencies (Note 15)
 
Stockholders’ equity:   
Preferred stock, $0.0000001 par value: 100,000,000 shares authorized at September 30, 2017 and December 31, 2016. None issued and outstanding at September 30, 2017 and December 31, 2016.
 
Class A common stock, $0.0000001 par value: 1,000,000,000 shares authorized at September 30, 2017 and December 31, 2016; 263,379,421 and 198,746,620 issued and outstanding at September 30, 2017 and December 31, 2016, respectively.
 
Class B common stock, $0.0000001 par value: 500,000,000 shares authorized at September 30, 2017 and December 31, 2016; 124,422,721 and 165,800,756 issued and outstanding at September 30, 2017 and December 31, 2016, respectively.
 
Additional paid-in capital1,560,374
 1,357,381
Accumulated deficit(827,072) (779,239)
Accumulated other comprehensive loss(393) (1,989)
Total stockholders’ equity732,909
 576,153
Total liabilities and stockholders’ equity$2,083,852
 $1,211,362
  March 31, 2024December 31, 2023
Assets(Unaudited)
Current assets:
Cash and cash equivalents$5,753,436 $4,996,465 
Investments in short-term debt securities573,390 851,901 
Settlements receivable3,714,810 3,226,294 
Customer funds4,046,346 3,170,430 
Consumer receivables, net1,914,278 2,444,695 
Loans held for sale892,068 775,424 
Safeguarding asset related to bitcoin held for other parties1,681,111 1,038,585 
Other current assets1,962,865 2,353,488 
Total current assets20,538,304 18,857,282 
Goodwill11,721,329 11,919,720 
Acquired intangible assets, net1,673,618 1,761,521 
Other non-current assets1,679,579 1,531,370 
Total assets$35,612,830 $34,069,893 
Liabilities and Stockholders’ Equity
Current liabilities:
Customers payable$8,137,147 $6,795,340 
Accrued expenses and other current liabilities1,275,321 1,334,669 
Current portion of long-term debt (Note 12)997,197 — 
Warehouse funding facilities, current410,426 753,035 
Safeguarding obligation liability related to bitcoin held for other parties1,681,111 1,038,585 
Total current liabilities12,501,202 9,921,629 
Warehouse funding facilities, non-current543,751 854,882 
Long-term debt (Note 12)3,125,456 4,120,091 
Other non-current liabilities475,225 480,455 
Total liabilities16,645,634 15,377,057 
Commitments and contingencies (Note 17)
Stockholders’ equity:
Preferred stock, $0.0000001 par value: 100,000 shares authorized at March 31, 2024 and December 31, 2023. None issued and outstanding at March 31, 2024 and December 31, 2023.— — 
Class A common stock, $0.0000001 par value: 1,000,000 shares authorized at March 31, 2024 and December 31, 2023; 556,563 and 555,306 issued and outstanding at March 31, 2024 and December 31, 2023, respectively.— — 
Class B common stock, $0.0000001 par value: 500,000 shares authorized at March 31, 2024 and December 31, 2023; 60,501 and 60,515 issued and outstanding at March 31, 2024 and December 31, 2023, respectively.— — 
Additional paid-in capital19,687,428 19,601,992 
Accumulated other comprehensive loss(660,203)(378,307)
Accumulated deficit(56,424)(528,429)
Total stockholders’ equity attributable to common stockholders18,970,801 18,695,256 
Noncontrolling interests(3,605)(2,420)
Total stockholders’ equity18,967,196 18,692,836 
Total liabilities and stockholders’ equity$35,612,830 $34,069,893 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4
SQUARE,


BLOCK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)

Three Months Ended
March 31,
20242023
Revenue:
Transaction-based revenue$1,511,209 $1,422,705 
Subscription and services-based revenue1,682,294 1,366,224 
Hardware revenue32,501 37,451 
Bitcoin revenue2,731,124 2,163,751 
Total net revenue5,957,128 4,990,131 
Cost of revenue:
Transaction-based costs873,165 820,787 
Subscription and services-based costs269,668 264,092 
Hardware costs50,785 58,785 
Bitcoin costs2,651,010 2,113,375 
Amortization of acquired technology assets18,027 18,508 
Total cost of revenue3,862,655 3,275,547 
Gross profit2,094,473 1,714,584 
Operating expenses:
Product development720,574 626,937 
Sales and marketing443,885 496,011 
General and administrative471,260 432,825 
Transaction, loan, and consumer receivable losses165,729 127,896 
Amortization of customer and other acquired intangible assets43,282 37,087 
Total operating expenses1,844,730 1,720,756 
Operating income (loss)249,743 (6,172)
Interest income, net(18,745)(3,161)
Other income, net(237,824)(77,717)
Income before income tax506,312 74,706 
Provision (benefit) for income taxes35,492 (21,122)
Net income470,820 95,828 
Less: Net loss attributable to noncontrolling interests(1,185)(2,488)
Net income attributable to common stockholders$472,005 $98,316 
Net income per share attributable to common stockholders:
Basic$0.77 $0.16 
Diluted$0.74 $0.16 
Weighted-average shares used to compute net income per share attributable to common stockholders:
Basic616,401 602,234 
Diluted637,360 623,579 
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Revenue:       
Transaction-based revenue$510,019
 $388,347
 $1,395,562
 $1,053,664
Starbucks transaction-based revenue
 7,164
 
 78,869
Subscription and services-based revenue65,051
 35,320
 173,262
 88,833
Hardware revenue10,089
 8,171
 29,394
 35,438
Total net revenue585,159
 439,002
 1,598,218
 1,256,804
Cost of revenue:       
Transaction-based costs328,043
 254,061
 896,913
 683,194
Starbucks transaction-based costs
 4,528
 
 69,810
Subscription and services-based costs18,169
 12,524
 51,161
 31,701
Hardware costs18,775
 15,689
 45,610
 56,444
Amortization of acquired technology1,556
 1,886
 5,058
 6,142
Total cost of revenue366,543
 288,688
 998,742
 847,291
Gross profit218,616
 150,314
 599,476
 409,513
Operating expenses:       
Product development82,547
 70,418
 229,255
 203,648
Sales and marketing66,533
 46,754
 176,349
 124,470
General and administrative64,312
 52,075
 184,235
 198,966
Transaction, loan and advance losses19,893
 12,885
 50,185
 38,201
Amortization of acquired customer assets222
 164
 649
 703
Total operating expenses233,507
 182,296
 640,673
 565,988
Operating loss(14,891) (31,982) (41,197) (156,475)
Interest and other (income) expense, net1,854
 111
 5,619
 (933)
Loss before income tax(16,745) (32,093) (46,816) (155,542)
Provision (benefit) for income taxes(647) 230
 334
 881
Net loss$(16,098) $(32,323) $(47,150) $(156,423)
Net loss per share:       
Basic$(0.04) $(0.09) $(0.13) $(0.46)
Diluted$(0.04) $(0.09) $(0.13) $(0.46)
Weighted-average shares used to compute net loss per share       
Basic383,951
 343,893
 375,743
 336,593
Diluted383,951
 343,893
 375,743
 336,593

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5
SQUARE,


BLOCK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSINCOME
(Unaudited)
(In thousands)

Three Months Ended
March 31,
20242023
Net income$470,820 $95,828 
Net foreign currency translation adjustments (i)
(284,174)(63,881)
Net unrealized gain on marketable debt securities2,278 14,410 
Total comprehensive income$188,924 $46,357 

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Net loss$(16,098) $(32,323) $(47,150) $(156,423)
Net foreign currency translation adjustments367
 127
 1,554
 722
Net unrealized gain (loss) on revaluation of intercompany loans(41) 74
 $362
 $656
Net unrealized gain (loss) on marketable securities(200) (60) (320) 20
Total comprehensive loss$(15,972) $(32,182) $(45,554) $(155,025)
(i) Includes foreign currency translation adjustments related to goodwill of $198.2 million and $47.6 million for March 31, 2024 and March 31, 2023, respectively.


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6
SQUARE,


BLOCK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSSTOCKHOLDERS' EQUITY
(Unaudited)
(In thousands)
Class A and B common stockCommon stock and additional paid-inAccumulated other comprehensiveAccumulatedNoncontrollingTotal stockholders’
sharescapitallossdeficitinterestsequity
Balance at December 31, 2023615,821 $19,601,992 $(378,307)$(528,429)$(2,420)$18,692,836 
Net income— — — 472,005 (1,185)470,820 
Shares issued in connection with employee stock plans4,806 19,943 — — — 19,943 
Repurchases of common stock(3,563)(252,095)— — — (252,095)
Change in other comprehensive loss— — (281,896)— — (281,896)
Share-based compensation— 317,588 — — — 317,588 
Balance at March 31, 2024617,064 $19,687,428 $(660,203)$(56,424)$(3,605)$18,967,196 
 Nine Months Ended September 30,
 2017 2016
Cash flows from operating activities:   
Net loss$(47,150) $(156,423)
Adjustments to reconcile net loss to net cash provided by operating activities:   
Depreciation and amortization27,647
 27,817
Non-cash interest and other expense9,969
 (88)
Share-based compensation111,311
 104,899
Transaction, loan and advance losses50,185
 38,201
Deferred provision for income taxes133
 (104)
Changes in operating assets and liabilities:   
Settlements receivable(271,235) (92,207)
Customer funds(41,899) (19,000)
Purchase of loans held for sale(874,498) (421,243)
Sales and principal payments of loans held for sale852,187
 393,221
Other current assets(6,262) 24,685
Other non-current assets(1,699) 145
Accounts payable1,223
 (867)
Customers payable295,406
 139,105
Settlements payable30,263
 14,410
Charge-offs to accrued transaction losses(33,081) (32,623)
Accrued expenses20,328
 86
Other current liabilities(1,125) 845
Other non-current liabilities8,614
 2,376
Net cash provided by operating activities130,317
 23,235
Cash flows from investing activities:   
Purchase of marketable securities(485,484) (139,103)
Proceeds from maturities of marketable securities106,079
 26,268
Proceeds from sale of marketable securities65,121
 20,962
Purchase of property and equipment(19,625) (19,674)
Payment for investment in privately held entity(25,000) 
Payment for acquisition of intangible assets
 (400)
Business acquisitions, net of cash acquired(1,600) 
Net cash used in investing activities(360,509) (111,947)
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) 
Principal payments on capital lease obligation(1,020) 
Payments of offering costs related to initial public offering
 (5,530)
Proceeds from the exercise of stock options and purchases under the employee stock purchase plan, net111,889
 48,304
Payments for tax withholding related to vesting of restricted stock units(18,298) 
Net cash provided by financing activities431,121
 42,774
Effect of foreign exchange rate changes on cash and cash equivalents3,836
 2,536
Net increase (decrease) in cash, cash equivalents and restricted cash204,765
 (43,402)
Cash, cash equivalents and restricted cash, beginning of period488,745
 489,552
Cash, cash equivalents and restricted cash, end of period$693,510
 $446,150

Class A and B common stockCommon stock and additional paid-inAccumulated other comprehensiveAccumulatedNoncontrollingTotal stockholders’
sharescapitallossdeficitinterestsequity
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— — — 98,316 (2,488)95,828 
Shares issued in connection with employee stock plans3,333 6,825 — — — 6,825 
Change in other comprehensive loss— — (49,471)— — (49,471)
Share-based compensation— 285,502 — — — 285,502 
Balance at March 31, 2023603,393 $18,607,008 $(572,561)$(439,885)$25,988 $17,620,550 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
SQUARE,
7


BLOCK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
March 31,
20242023
Cash flows from operating activities:
Net income$470,820 $95,828 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization97,640 93,173 
Amortization of discounts and premiums and other non-cash adjustments(266,991)(85,314)
Non-cash lease expense14,512 24,333 
Share-based compensation311,168 279,592 
Loss on revaluation of equity investments1,111 14,885 
Bitcoin remeasurement(233,404)(96,088)
Transaction, loan, and consumer receivable losses165,729 127,896 
Change in deferred income taxes(7,984)1,353 
Changes in operating assets and liabilities:
Settlements receivable(542,070)452,868 
Purchases and originations of loans(3,010,609)(1,834,442)
Proceeds from payments and forgiveness of loans2,824,953 1,753,515 
Customers payable465,891 (418,948)
Settlements payable(7,341)(64,528)
Other assets and liabilities205,970 (49,722)
Net cash provided by operating activities489,395 294,401 
Cash flows from investing activities:
Purchases of marketable debt securities(184,048)(56,761)
Proceeds from maturities of marketable debt securities204,737 273,771 
Proceeds from sale of marketable debt securities327,128 15,697 
Payments for originations of consumer receivables(6,095,104)(4,911,509)
Proceeds from principal repayments and sales of consumer receivables6,824,596 5,339,800 
Purchases of property and equipment(31,998)(32,253)
Purchases of other investments(2,924)(4,821)
Net cash provided by investing activities1,042,387 623,924 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8


BLOCK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(Unaudited)
(In thousands)

Three Months Ended
March 31,
20242023
Cash flows from financing activities:
Repayments of Paycheck Protection Program Liquidity Facility advances— (5,077)
Proceeds from warehouse facilities borrowings160,587 47,975 
Repayments of warehouse facilities borrowings(790,592)(692,556)
Proceeds from the exercise of stock options and purchases under the employee stock purchase plan19,943 6,825 
Net increase in interest-bearing deposits18,650 13,601 
Repurchases of common stock(252,095)— 
Change in customer funds, restricted from use in the Company's operations875,916 620,149 
Net cash provided by (used in) financing activities32,409 (9,083)
Effect of foreign exchange rate on cash and cash equivalents(41,755)1,033 
Net increase in cash, cash equivalents, restricted cash, and customer funds1,522,436 910,275 
Cash, cash equivalents, restricted cash, and customer funds, beginning of the period9,009,087 8,435,906 
Cash, cash equivalents, restricted cash, and customer funds, end of the period$10,531,523 $9,346,181 
Reconciliation of cash, cash equivalents, restricted cash, and customer funds:
Cash and cash equivalents$5,753,436 $5,061,091 
Short-term restricted cash660,153 414,267 
Long-term restricted cash71,588 70,350 
Customer funds cash and cash equivalents4,046,346 3,800,473 
Total$10,531,523 $9,346,181 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
9

BLOCK, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



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 providesproviding 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. Square Cash App is an easy way for businessesecosystem of financial products and individualsservices 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 receive money, and Caviar is a food ordering service for restaurants. Squareuniversally accessible.

Block was founded in 2009 and is headquarteredhas offices globally. The Company does not designate a headquarters location as it adopted a distributed work model in San Francisco, with offices in the United States, Canada, Japan, Australia, Ireland, and the United Kingdom.2021.


Basis of Presentation
    
The accompanying interim condensed consolidated financial statements of the Company are unaudited. These interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles 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)("SEC") for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The December 31, 20162023 condensed consolidated balance sheet was derived from the audited financial statements as of that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.


The accompanying unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments of a normal recurring nature considered necessary to state fairly the Company's consolidated financial position, results of operations, comprehensive loss,income (loss), and cash flows for the interim periods. The condensed consolidated financial statements include the financial statements of Block and its wholly-owned and majority-owned subsidiaries, including variable interest entities for which the Company is deemed to be the primary beneficiary. 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 condensed consolidated balance sheets. The interim results for the three and nine months ended September 30, 2017March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017,2024, or for any other future annual or interim period.


The information included in this Quarterly Report on Form 10-Q should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures About Market Risk,” and the Consolidated Financial Statements and related notes thereto included in Items 7, 7A, and 8, respectively, in the Company's Annual Report on Form 10-K for the year ended December 31, 2016.2023.


ReclassificationsAdoption of ASU 2023-08 and Other AdjustmentsRecasting of Prior Period


As a resultThe Company early adopted ASU No. 2023-08, Accounting for and Disclosure of the Company’s adoption of Accounting Standards Update (ASU) No. 2016-18, Restricted Cash, on January 1, 2017, the Company reclassified changesCrypto Assets ("ASU 2023-08"), in restricted cash balances from investing activities in the statement of cash flows to changes in cash, cash equivalents and restricted cash. For the nine months ended September 30, 2016, $8.5 million was reclassified from cash outflows from investing activities to changes in cash, cash equivalents and restricted cash.

The presentation of changes in customer funds in the statement of cash flows for the nine months ended September 30, 2016 has also been revised for the correction of an immaterial error that was identified during the fourth quarter of 2016 whereby2023 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 intangible assets in the income statement, and (iii) present crypto assets measured at fair value separately from other intangible assets on the balance 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 had previously misclassifiedrecognized a cumulative-effect adjustment increasing bitcoin value and reported certain customer fundsretained earnings by $30.5 million as cash and cash equivalents rather than classifying these customer funds as a component of current assets impacting operating activities. The effect of the revision wasbeginning of fiscal year 2023.

10


The adoption of ASU 2023-08 using a modified retrospective approach requires the Company to decreaseadopt the amountstandard as of net cash provided by operating activitiesJanuary 1, 2023. As such, the previously reported condensed consolidated financial statements for the ninethree months ended September 30, 2016 by $19.0 million and decrease cash and cash equivalents asMarch 31, 2023 have been revised to reflect the adoption of September 30, 2016 by that same amount. Net cash provided by operating activities forASU 2023-08. The following table presents the year ended December 31, 2016 and cash and cash equivalents aseffects of December 31, 2016 were not misstated.

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 Customer payablethese changes on the Company’s condensed 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.statements of operations:


Three Months Ended March 31, 2023
As Previously Reported (i)
Adjustments (ii)
As Adjusted
Net income (loss) attributable to common stockholders (iii)
$(16,838)$115,154 $98,316 
Net income (loss) per share attributable to common stockholders:
Basic$(0.03)$0.19 $0.16 
Diluted$(0.03)$0.19 $0.16 
___________________
(i)As reported in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, filed with the SEC on May 4, 2023.
(ii)The adjustment had no impact on previously reported cash flows from operating, investing, or financing activities within the Company's condensed consolidated statements of cash flows.
(iii)Financial statement lines item impacted within the condensed consolidated statements of operations were "Other expense (income), net" and "Provision (benefit) for income taxes".

Use of Estimates

The preparation of the Company’s condensed 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.


Significant estimates,Estimates, judgments, and assumptions in these condensed 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, 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, 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.


The Company's estimates of valuation of loans held for sale, 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 over fair value of the loans, Note 6, Consumer Receivables, net for further details on consumer receivables, Note 7, Customer Loans for further details on customer loans, and Note 9, Other Consolidated Balance Sheet Components (Current) for further details on transaction losses.

Concentration of Credit Risk
    
For the three and nine months ended September 30, 2017March 31, 2024 and 2016,March 31, 2023, the Company had no customer that accounted for greater than 10% of total net revenue.


11


The Company had threetwo third-party payment processors that represented approximately 52%, 37%,42% and 8%35% of settlements receivable as of September 30, 2017. The same three parties represented approximately 52%, 35%, and 10% of settlements receivable asMarch 31, 2024. As of December 31, 2016. All2023, the Company had two parties that represented approximately 46% and 35% of settlements receivable. In both periods, all other third-party payment processors were insignificant. Certain of the Company's products are reliant on third-party service providers such as partner banks, card issuers, and payment service providers. The Company's relationships with third-party service providers may result in operational concentration risks for some of these products.


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 receivables,receivable, customer funds, consumer receivables, loans held for sale, and loans held for sale. The associatedinvestment. To mitigate the risk of concentration forassociated with cash and cash equivalents, andas well as restricted cash, is mitigated by bankingfunds are held with creditworthy institutions. Atinstitutions and, at certain times, amountstemporarily 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 held for saleand 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 PoliciesSales and Marketing Expenses
Except
Advertising costs are expensed as incurred and included in sales and marketing expenses on the condensed consolidated statements of operations. Total advertising costs were $61.6 million for the adoption of ASU 2016-18, Restricted Cash, described above, there have been no material changes to the Company’s significant accounting policies during the ninethree months ended September 30, 2017, asMarch 31, 2024 compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K$89.1 million for the yearthree months ended DecemberMarch 31, 2016.2023. The Company also records services, incentives, and other costs to acquire 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 $210.9 million for the three months ended March 31, 2024 compared to $243.7 million for the three months ended March 31, 2023 for such expenses.


Recent Accounting Pronouncements


Recently Issued Accounting Pronouncements Not Yet Adopted

In May 2014,November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, and issued subsequent amendments to the initial guidance within ASU 2015-04, ASU 2016-08, ASU 2016-10, ASU 2016-12, and ASU 2016-20. 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 expects to be entitled in exchange for those goods or services. The new guidance will also change how companies account for certain incremental costs to obtain a customer contract, such as sales commissions, by requiring that such costs be capitalized and charged to expense over the period of expected benefit. This guidance will be 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. The Company plans to adopt the new guidance using the modified retrospective approach. The Company is still evaluating the impact the new guidance will have on its financial statements and disclosures. The Company has reached preliminary conclusions about certain key accounting assessments. The Company is also assessing financial reporting system and process changes that may be necessary to implement

the new guidance. Although its evaluation is ongoing and its preliminary conclusions could change, apart from the incremental disclosure requirements and the potential impact the new standard may have on systems and processes, it is the Company’s preliminary conclusion that the new guidance will not have a material impact on its consolidated financial statements.

In July 2015, the FASB("FASB") issued ASU No. 2015-11, Simplifying2023-07, Improvements to Reportable Segment Disclosures (“ASU 2023-07”). The amendments expand segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the MeasurementCompany's chief operating decision maker ("CODM"), the amount and description of Inventory, as partother segment items, permits companies to disclose more than one measure of its simplification initiative.segment profit or loss, and requires all annual segment disclosures to be included in the interim periods. The current guidance requiresamendments do not change how an entity identifies its operating segments, aggregates those operating segments, or applies quantitative thresholds 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.determine its reportable segments. The amendment isamendments are effective for financial statements issued for fiscal years beginning after December 15, 2016,2023 and interim periods within those fiscal years with earlybeginning after December 15, 2024. Early adoption is permitted. The adoption of ASU 2023-07 will impact the Company’s disclosures only and the Company adopted thisis evaluating the effect of adopting the new guidance on January 1, 2017, and it did not have any effect on the consolidated financial statements and related disclosures.disclosure requirements.


In January 2016,December 2023, the FASB issued ASU No. 2016-01, Recognition2023-09, 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 that meet a quantitative threshold, and Measurement(iii) the amount of Financial Assets and Financial Liabilities. This guidance is intended to improve the recognition, measurement, presentation, and disclosure of financial instruments. This guidance istaxes paid disaggregated by jurisdiction. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early2024. Early adoption permitted with certain restrictions. We anticipate that theis permitted. The adoption of ASU 2016-01 may increase2023-09 will impact the volatility of our other income (expense), net, as a result of the remeasurement of our equity securities upon the possible occurrence of future observable price changes; however,Company’s disclosures only and the Company does not expectis evaluating the effect of adopting the new disclosure requirements.

12


In March 2024, the SEC adopted rules that require registrants to provide climate-related information in their registration statements and annual reports, such changesas disclosure of material climate-related risks, Board of Directors’ oversight and risk management activities, material greenhouse gas emissions, and material climate-related targets and goals. The rules will also require registrants to be material.

In February 2016,quantify certain effects of severe weather events and other natural conditions in their audited financial statements. As adopted, the FASB issued ASU No. 2016-02, Leases, which will require, among other items, lessees to recognize most leases as assets and liabilities on the balance sheet. Qualitative and quantitative disclosuresnew rules will be enhanced to better understand the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The Company does not plan to early adopt this guidance. The Company’s operating leases primarily comprise of office spaces, within 2025, except for the most significant leases relating to corporate headquarters in San Francisco and an office in New York. Based on the Company's initial assessment of its current leases and potential, the Company does not anticipate the adoption of this guidance to have a material impact on its operating results. The Companygreenhouse gas emissions disclosures, which will continue to evaluate the impact of recording right to use assets and related liabilities on its consolidated balance sheets.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting,
which is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This guidance isbe effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, with early adoption permitted. The Company adopted this new guidance on January 1, 2017. As partin 2026. On April 4, 2024, the SEC voluntarily stayed the implementation of the adoption,rules pending the Company electedjudicial review of challenges to account for forfeitures as they occur. As this guidance requires a modified retrospective approach when eliminating the forfeiture rate,rules in the Company recorded an adjustmentEighth Circuit Court 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.Appeals. The Company is currently evaluating the impact thiseffect of adopting these new guidance may have on the consolidated financial statements and related disclosures.rules.


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 does not expect the adoption of this new guidance to have a material impact 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 earnings as of the beginning of the period of adoption. The Company does not expect the adoption of this guidance to have a material impact 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 condensed consolidated statements of cash flow for each of the periods presented.

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 does not expect the adoption of this guidance to have a material the impact 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.

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 callable debt securities held at a premium, shortening such period 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 as 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.

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 currently anticipates that the adoption of this new guidance will not have a material impact on the consolidated financial statements and related disclosures.

NOTE 2 - RESTRICTED CASHREVENUE

AsThe following table presents the Company's net revenue disaggregated by revenue source (in thousands):
Three Months Ended
March 31,
20242023
Revenue from contracts with customers:
Transaction-based revenue$1,511,209 $1,422,705 
Subscription and services-based revenue1,212,118 1,038,613 
Hardware revenue32,501 37,451 
Bitcoin revenue2,731,124 2,163,751 
Revenue from other sources:
Subscription and services-based revenue (i)
470,176 327,611 
Total net revenue$5,957,128 $4,990,131 

(i) Subscription and services-based revenue from other sources relates to revenue generated from the Company's Square Loans, revenue generated from consumer receivables originated through our buy now, pay later ("BNPL") platform, interest income earned on customer funds, and interest income earned on funds held by Square Financial Services, Inc. ("Square Financial Services").

13


NOTE 3 - INVESTMENTS IN DEBT SECURITIES

The Company's short-term and long-term investments as of September 30, 2017March 31, 2024 were as follows (in thousands):
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Short-term debt securities:
U.S. agency securities$58,399 $— $(676)$57,723 
Corporate bonds135,097 60 (626)134,531 
Commercial paper724 — — 724 
Municipal securities9,391 — (138)9,253 
Certificates of deposit500 — — 500 
U.S. government securities372,337 43 (2,317)370,063 
Foreign government securities600 — (4)596 
Total$577,048 $103 $(3,761)$573,390 
Long-term debt securities:
Corporate bonds$96,206 $273 $(95)$96,384 
Municipal securities2,481 30 (119)2,392 
U.S. government securities89,073 151 (78)89,146 
Total$187,760 $454 $(292)$187,922 

The Company's short-term and long-term investments as of December 31, 2016, restricted2023 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 amortized cost of investments classified as cash of $20.5 million and $22.1 million, respectively, is related to pledged cash deposited into savings accounts atequivalents approximated the financial institutions that process the Company's sellers' payment transactions and as collateral pursuant to an agreement with the originating bank for the Company's loan product.The Company uses the restricted cash to secure letters of credit with the financial institution to provide collateral for cash flow timing differences in the processing of these payments and loans. The Company has recorded this amount as a current asset on the condensed consolidated balance sheetsfair value due to the short-term nature of these cash flow timing differencesthe investments.

14


The Company's gross unrealized losses and fair values for those investments that there is no minimum time frame during which the cash must remain restricted.

Aswere in an unrealized loss position as of both September 30, 2017March 31, 2024 and December 31, 2016,2023, aggregated by investment category and the remaining restricted cashlength of $14.6 million, is primarilytime that individual securities have been in a continuous loss position were as follows (in thousands):
March 31, 2024
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$400 $— $57,322 $(676)$57,722 $(676)
Corporate bonds44,988 (48)52,483 (578)97,471 (626)
Municipal securities— — 9,253 (138)9,253 (138)
U.S. government securities92,760 (78)162,389 (2,239)255,149 (2,317)
Foreign government securities— — 596 (4)596 (4)
Total$138,148 $(126)$282,043 $(3,635)$420,191 $(3,761)
Long-term debt securities:
Corporate bonds$45,907 $(87)$980 $(8)$46,887 $(95)
Municipal securities977 (13)385 (106)1,362 (119)
U.S. government securities25,758 (78)— — 25,758 (78)
Total$72,642 $(178)$1,365 $(114)$74,007 $(292)

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 bonds$11,819 $(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)

15


The Company does not intend to sell nor anticipate that it will be required to sell these securities before recovery of the amortized cost basis. Unrealized losses on available-for-sale debt securities were determined not to be related to cash deposited into money marketcredit related losses, therefore, an allowance for credit losses is not required.

The contractual maturities of the Company's short-term and long-term investments as of March 31, 2024 were as follows (in thousands):
Amortized CostFair Value
Due in one year or less$577,048 $573,390 
Due in one to five years187,760 187,922 
Total$764,808 $761,312 

NOTE 4 - CUSTOMER FUNDS

The following table presents the assets underlying customer funds that is used as collateral pursuant to multi-year lease agreements entered into in 2012 and 2014 (see Note 15).(in thousands):
  March 31, 2024December 31, 2023
Cash$3,109,317 $2,137,634 
Cash equivalents:
Money market funds4,645 4,042 
Reverse repurchase agreement (i)
932,384 1,028,754 
Total customer funds$4,046,346 $3,170,430 

(i) The Company has recorded this amountaccounted for the reverse repurchase agreement with a third party as a non-current asset onan overnight lending arrangement, collateralized by the condensed consolidated balance sheetssecurities subject to the repurchase agreement. The Company classifies the amounts due from the counterparty as cash equivalents due to their short-term nature.

The amortized cost of investments classified as cash equivalents approximated the termsfair value due to the short-term nature of the related leases extend beyond one year.investments.



NOTE 35 - FAIR VALUE OF FINANCIAL INSTRUMENTSMEASUREMENTS


The Company measures its cash equivalents, andcustomer funds, short-term and long-term marketable debt securities, marketable equity investments, and bitcoin investment at fair value. The Company classifies its cash equivalents and short-term and long-termthese 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 March 31, 2024 or December 31, 2023.

16


The Company’s financial assets and liabilities that are measured at fair value on a recurring basis arewere classified as follows (in thousands):
March 31, 2024December 31, 2023
Level 1Level 2Level 3Level 1Level 2Level 3
Cash equivalents:
Money market funds$1,403,811 $— $— $960,705 $— $— 
U.S. government securities44,577 — — 29,788 — — 
Commercial paper— 1,875 — — 4,993 — 
Corporate bonds— 555 — — 699 — 
Restricted cash:
Money market funds292,184 — — 291,374 — — 
Customer funds:
Money market funds4,645 — — 4,042 — — 
Reverse repurchase agreement932,384 — — 1,028,754 — — 
Short-term debt securities:
U.S. government securities370,063 — — 539,998 — — 
Corporate bonds— 134,532 — — 215,227 — 
U.S. agency securities— 57,722 — — 67,515 — 
Certificates of deposit— 500 — — 3,856 — 
Commercial paper— 724 — — 15,159 — 
Municipal securities— 9,253 — — 9,165 — 
Foreign government securities— 596 — — 981 — 
Long-term debt securities:
U.S. government securities89,146 — — 153,387 — — 
Corporate bonds— 96,384 — — 95,328 — 
Municipal securities— 2,392 — — 2,412 — 
Other:
Investment in marketable equity securities1,610 — — 8,267 — — 
Bitcoin investment (i)
573,302 — — 339,898 — — 
Safeguarding asset related to bitcoin held for other parties— 1,681,111 — — 1,038,585 — 
Safeguarding obligation liability related to bitcoin held for other parties— (1,681,111)— — (1,038,585)— 
Total assets (liabilities) measured at fair value$3,711,722 $304,533 $— $3,356,213 $415,335 $— 
 September 30, 2017 December 31, 2016
 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Cash and Cash Equivalents:           
Money market funds$384,546
 $
 $
 $207,168
 $
 $
U.S. agency securities
 
 
 
 
 
Commercial paper
 
 
 
 7,496
 
U.S. government securities
 
 
 
 
 
Corporate bonds
 
 
 
 
 
Municipal securities
 
 
 
 1,000
 
Short-term securities:           
U.S. agency securities
 13,091
 
 
 9,055
 
Corporate bonds
 52,420
 
 
 6,980
 
Commercial paper
 58,298
 
 
 17,298
 
Municipal securities
 22,493
 
 
 8,028
 
U.S. government securities63,657
 
 
 18,540
 
 
Long-term securities:           
U.S. agency securities
 25,269
 
 
 3,502
 
Corporate bonds
 88,673
 
 
 12,914
 
Municipal securities
 20,080
 
 
 2,492
 
U.S. government securities57,313
 
 
 8,458
 
 
Total$505,516
 $280,324
 $
 $234,166
 $68,765
 $
(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 11, Bitcoin for more details.


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.


17


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):
March 31, 2024December 31, 2023
Carrying ValueFair Value (Level 2)Carrying ValueFair Value (Level 2)
2031 Senior Notes$989,915 $862,038 $989,567 $879,913 
2026 Senior Notes993,905 935,652 993,208 938,105 
2027 Convertible Notes570,197 477,540 569,865 468,475 
2026 Convertible Notes571,439 510,998 571,014 501,910 
2025 Convertible Notes997,197 1,020,472 996,437 979,776 
Total$4,122,653 $3,806,700 $4,120,091 $3,768,179 
 September 30, 2017
 Carrying Value Fair Value (Level 2)
Convertible senior notes$354,237
 $616,000
Total$354,237
 $616,000



LoansThe estimated fair value and carrying value of loans held for sale are recorded at the lower of cost or fair value determined on an individual loan basis. To determine the fair value ofand loans the Company utilizes industry-standard valuation modeling, such as discounted cash flow models, taking into account the probability of loan default, and the estimated timing and amounts of periodic repayments.
A summary of loans disclosed at fair value on a recurring basis isheld for investment were as follows (in thousands):

March 31, 2024December 31, 2023
Carrying ValueFair Value (Level 3)Carrying ValueFair Value (Level 3)
Loans held for sale$892,068 $889,427 $775,424 $783,464 
Loans held for investment246,355 256,285 247,631 258,684 
Total$1,138,423 $1,145,712 $1,023,055 $1,042,148 
 September 30, 2017 December 31, 2016
 Carrying Value Fair Value (Level 3) Carrying Value Fair Value (Level 3)
Loans held for sale$58,331
 $60,375
 $42,144
 $42,633
Total$58,331
 $60,375
 $42,144
 $42,633

The Company recognizes a charge within transaction, loan and advance losses on the condensed consolidated statements of operations whenever the amortized cost of a loan exceeds its fair value, with such charges being reversed for subsequent increases in fair value to the extent of the amortized cost amount. For the three and nine months ended September 30, 2017, the Company recorded a charge for the excess of amortized cost over fair value of the loans of $3.4 million and $6.1 million, respectively. No charges were recorded for the respective periods in 2016.
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 three and nine months ended September 30, 2017March 31, 2024 and 2016,March 31, 2023, the Company did not have any transfers in or out of Level 1, Level 2, or Level 3 assets or liabilities.


NOTE 4 - INVESTMENTS

The Company determines the appropriate classification of its investments in marketable securities at the time of purchase and reevaluates such designation at each balance sheet date. The Company has classified and accounted for its marketable securities as available-for-sale.

The Company's short-term and long-term investments as of September 30, 2017 are as follows (in thousands):

 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
Short-term securities:       
U.S. agency securities$13,084
 $7
 $
 $13,091
Corporate bonds52,405
 25
 (10) 52,420
Commercial paper58,298
 
 
 58,298
Municipal securities22,513
 5
 (25) 22,493
U.S. government securities63,674
 15
 (32) 63,657
Total$209,974
 $52
 $(67) $209,959
        
Long-term securities:       
U.S. agency securities$25,306
 $
 $(37) $25,269
Corporate bonds88,722
 39
 (88) 88,673
Municipal securities20,104
 9
 (33) 20,080
U.S. government securities57,388
 22
 (97) 57,313
Total$191,520
 $70
 $(255) $191,335


The Company's short-term and long-term investments as of December 31, 2016 are as follows (in thousands):

 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

For the periods presented, gains or losses realized on the sale of investments were not material. Investments are reviewed periodically to identify possible other-than-temporary impairments. As the Company has the ability and intent to hold these investments with unrealized losses until a recovery of fair value, or for a reasonable period of time sufficient for the recovery of fair value, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired for any of the periods presented.

The contractual maturities of the Company's short-term and long-term investments as of September 30, 2017 are as follows (in thousands):

 Amortized Cost Fair Value
Due in one year or less$209,974
 $209,959
Due in one to five years191,520
 191,335
Total$401,494
 $401,294

NOTE 5 - PROPERTY AND EQUIPMENT, NET
The following is a summary of property and equipment, less accumulated depreciation and amortization (in thousands):    

September 30,
2017

December 31,
2016
Leasehold improvements$75,533
 $73,366
Computer equipment61,694

52,915
Capitalized software31,723
 24,642
Office furniture and equipment14,313

10,737
 183,263
 161,660
Less: Accumulated depreciation and amortization(94,597)
(73,332)
Property and equipment, net$88,666
 $88,328

Depreciation and amortization expense on property and equipment was $7.3 million and $21.8 million for the three and nine months ended September 30, 2017, respectively. Depreciation and amortization expense on property and equipment was $7.6 million and $20.9 million for the three and nine months ended September 30, 2016, respectively.

NOTE 6 - GOODWILLCONSUMER RECEIVABLES, NET


GoodwillConsumer receivables represent amounts due from consumers for outstanding installment payments on orders processed on the Company's BNPL platform. 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 closely monitors credit quality for consumer receivables to manage and evaluate its related exposure to credit risk. The criteria the Company monitors when assessing the credit quality and risk of its consumer receivables portfolio is recorded when the consideration paid for an acquisitionprimarily 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 business exceeds the fair valuehigher risk of identifiable net tangibledefault. Internal risk ratings are reviewed and, intangible assets acquired.generally, updated at least once a year. As of September 30, 2017March 31, 2024, the amortized cost of Pass rated consumer receivables was $2.0 billion and the amount of Classified consumer receivables was $132.3 million.

18


The following table presents an aging analysis of the amortized cost of consumer receivables by delinquency status (in thousands):
  March 31, 2024December 31, 2023
Non-delinquent loans$1,555,673 $2,074,532 
1 - 60 days past due408,257 453,412 
61 - 90 days past due50,133 26,798 
90+ days past due82,162 75,227 
Total amortized cost$2,096,225 $2,629,969 

The amount listed as 1 - 60 days past due in the above table includes $336.1 million and $365.4 million of cash in transit as of March 31, 2024 and December 31, 2016, goodwill was $58.02023, 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 of the date of the financial statements.

Consumer receivables are charged off when they are over 180 days past due as the 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 condensed consolidated statements of operations in the period they were recovered. The amount of recoveries for the three months ended March 31, 2024 and March 31, 2023 were immaterial.

The following table summarizes activity in the allowance for credit losses (in thousands):
Three Months Ended
March 31,
20242023
Allowance for credit losses, beginning of the period$185,275 $151,290 
Provision for credit losses60,979 43,131 
Charge-offs and other adjustments(62,133)(52,401)
Foreign exchange effect(2,174)(486)
Allowance for credit losses, end of the period$181,947 $141,534 

NOTE7 - 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 classified as held for investment as the Company has both the intent and ability to hold them for the foreseeable 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 March 31, 2024 and December 31, 2023, the Company held $246.4 million and $57.2$247.6 million, respectively.respectively, as loans held for investment, net of allowance, included in other current assets on the condensed consolidated balance sheets. Refer to Note 9, Other Consolidated Balance Sheet Components (Current) for more details.


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 allowance for loan losses, amount of charge offs recorded, and amount of recoveries as of March 31, 2024 and December 31, 2023 were immaterial.

19


The Company performsconsiders 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 goodwill impairment test annually onloan is identified as nonperforming, 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 March 31, 2024 and 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 March 31, 2024 and December 31, 2023, the amortized cost of Pass rated loans was $260.1 million and $261.4 million, respectively, and the amount of Classified loans was immaterial for both periods.

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. Square Loans that are 120 days or more frequently if eventspast due are generally considered to be uncollectible and circumstances indicate that the asset might be impaired. For the periods presented,are written off.

As of March 31, 2024 and December 31, 2023, the Company had recorded no impairment charges.$892.1 million and $775.4 million, respectively, of loans held for sale, as disclosed in the Company's condensed 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 primarily includes 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):
  March 31, 2024December 31, 2023
Commercial$475,001 $478,128 
Consumer385,566 274,630 
Other31,501 22,666 
Total$892,068 $775,424 

20


NOTE 78 - ACQUIRED INTANGIBLE ASSETS

The following table presents the detail ofdetails acquired intangible assets as of the periods presented (in thousands):
Balance at March 31, 2024
Weighted Average Estimated Useful LifeCostAccumulated AmortizationNet
Technology assets5 years$389,262 $(217,765)$171,497 
Customer assets14 years1,450,587 (265,816)1,184,771 
Trade names9 years424,203 (113,114)311,089 
Other9 years13,299 (7,038)6,261 
Total$2,277,351 $(603,733)$1,673,618 
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 September 30, 2017
Cost Accumulated Amortization Net
Patents$1,285
 $(533) $752
Technology Assets29,158
 (19,843) 9,315
Customer Assets8,886
 (4,305) 4,581
Total$39,329
 $(24,681) $14,648


 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, acquired technology, and customerAll intangible assets are approximately 13 years, four years, and nine years, respectively.amortized over their estimated useful lives.

Amortization expense associated with otherThe change in the carrying value of intangible assets was $1.8 million and $5.9 million for the three and nine months ended September 30, 2017, respectively. Amortization expense associated with other intangible assets was $2.1 million and $6.9 million for the three and nine months ended September 30, 2016, respectively.

The total estimated annual future amortization expense of these intangible assets as of September 30, 2017 is as follows (in thousands):
Three Months Ended
March 31,
20242023
Acquired intangible assets, net, beginning of the period$1,761,521 $2,014,034 
Amortization expense(61,309)(55,595)
Foreign currency translation and other adjustments(26,594)(9,353)
Acquired intangible assets, net, end of the period$1,673,618 $1,949,086 

The estimated future amortization expense of intangible assets as of March 31, 2024 was as follows (in thousands):
Remainder of 2024$163,387 
2025205,317 
2026191,250 
2027144,871 
2028140,740 
Thereafter828,053 
Total$1,673,618 


2017 (remaining 3 months)$1,734
20186,037
20193,253
20201,296
2021759
Thereafter1,569
Total$14,648
21



NOTE 89 - OTHER CONSOLIDATED BALANCE SHEET COMPONENTS (CURRENT)

Other Current Assets

The following table presents the detail of other current assets (in thousands):
  March 31, 2024December 31, 2023
Restricted cash (i)
$660,153 $770,380 
Processing costs receivable397,012 365,153 
Loans held for investment, net of allowance for loan losses (ii)
246,355 247,631 
Accounts receivable, net148,090 134,824 
Prepaid expenses125,767 100,770 
Inventory, net119,413 110,097 
Short term deposits (iii)
41,451 397,630 
Other224,624 227,003 
Total$1,962,865 $2,353,488 
 September 30,
2017
 December 31,
2016
Inventory, net$21,204
 $13,724
Processing costs receivable16,777
 10,049
Prepaid expenses7,901
 7,365
Accounts receivable, net4,209
 6,191
Deferred hardware costs2,648
 4,546
Deferred magstripe reader costs2,428
 3,911
Merchant cash advance receivable, net356
 4,212
Other11,016
 10,545
Total$66,539
 $60,543

(i) Includes a portion invested in money market funds. Refer to Note 5, Fair Value Measurements for further details.

(ii) Refer to Note 7, Customer Loans for further details.

(iii) As of December 31, 2023, 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. During the first quarter of 2024, this $350.0 million deposit was returned to the Company.

Accrued Expenses and Other Current Liabilities

The following table presents the detail of accrued expenses (in thousands):    
 September 30,
2017
 December 31,
2016
Accrued payroll$11,878
 $5,799
Accrued professional fees9,161
 5,788
Accrued advertising and other marketing10,482
 5,008
Processing costs payable5,766
 9,655
Accrued non income tax liabilities4,862
 3,562
Accrued hardware costs6,157
 3,148
Other accrued liabilities12,320
 6,583
Total$60,626
 $39,543

Other Current Liabilities
The following table presents the detail ofand other current liabilities (in thousands):    
  March 31, 2024December 31, 2023
Accrued expenses$480,672 $538,812 
Customer deposits185,677 167,028 
Accounts payable91,426 142,554 
Accrued royalties62,306 62,140 
Accrued transaction losses (i)
60,016 54,042 
Operating lease liabilities, current53,188 53,721 
Other342,036 316,372 
Total$1,275,321 $1,334,669 

(i) 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 sellers 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.

22


 September 30,
2017
 December 31,
2016
Square Capital payable$7,472
 $4,907
Square Payroll payable2,350
 4,769
Deferred revenue3,424
 5,407
Current portion of deferred rent3,207
 2,862
Accrued redemptions1,084
 1,628
Other3,512
 2,899
Total$21,049
 $22,472
The following table summarizes the activities of the Company’s reserve for transaction losses (in thousands):
Three Months Ended
March 31,
20242023
Accrued transaction losses, beginning of the period$54,042 $64,539 
Provision for transaction losses30,819 24,942 
Charge-offs to accrued transaction losses(24,845)(27,396)
Accrued transaction losses, end of the period$60,016 $62,085 


In addition to amounts reflected in the table above, the Company recognized additional provision for transaction losses that was realized and written-off within the same period. Such losses are primarily related to Cash App transactions, such as peer-to-peer transactions, disputes, and negative balances, that are uncertain in nature. The Company recorded $47.4 million and $105.9 million for the three months ended March 31, 2024 and March 31, 2023, respectively, for such losses.

NOTE 910 - OTHER CONSOLIDATED BALANCE SHEET COMPONENTS (NON-CURRENT)


Other Non-Current Assets


The following table presents the detail of other non-current assets (in thousands):

  March 31, 2024December 31, 2023
Bitcoin investment (i)
$573,302 $339,898 
Property and equipment, net290,715 296,056 
Operating lease right-of-use assets242,858 244,701 
Investment in non-marketable equity securities (ii)
209,504 205,268 
Investments in long-term debt securities187,922 251,127 
Restricted cash71,588 71,812 
Other103,690 122,508 
Total$1,679,579 $1,531,370 

 September 30,
2017
 December 31,
2016
Investment in privately held entity (i)
$25,000
 $
Deposits2,911
 1,775
Debt Issuance Costs858
 1,063
Deferred tax assets191
 306
Other840
 50
Total$29,800
 $3,194
(i) Refer to Note 11, Bitcoin for further details.


(i)In August, 2017,(ii) Investment in non-marketable equity securities represents the Company invested $25.0 million Company's investments in Eventbrite, a leader in event technology providing a platform that facilitates ticket sales, as well as promotionequity of non-public entities. These investments are measured using the measurement alternative and managementare therefore carried at cost, less impairment, adjusted for observable price changes from orderly transactions for identical or similar investments of events. In conjunction with the investment,same issuer. Adjustments are recorded within other expense (income), net on the Company entered into an agreement with Eventbrite specifying terms under whichcondensed consolidated statements of operations. Unrealized gains and losses were immaterial during the Company would provide payment processing services to Eventbrite 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 member on their respective boards of directors. three months ended March 31, 2024.


Other Non-Current Liabilities

The following table presents the detail of other non-current liabilities (in thousands):
  March 31, 2024December 31, 2023
Operating lease liabilities, non-current$281,836 $289,788 
Deferred tax liabilities27,376 35,695 
Other166,013 154,972 
Total$475,225 $480,455 

23
 September 30,
2017
 December 31,
2016
Statutory liabilities$38,049
 $29,497
Deferred rent21,029
 23,119
Deferred tax liabilities476
 476
Other6,473
 4,653
Total$66,027
 $57,745



NOTE 1011 - BITCOIN

A) Company Owned Bitcoin

The Company holds bitcoin for long term investment purposes ("bitcoin investment") and also holds bitcoin for the facilitation of customer sales and purchases of bitcoin on Cash App ("bitcoin for operating purposes"). The Company accounts for its bitcoin 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 in the fourth quarter of 2023 using a modified retrospective approach. Refer to Note 1, Description of Business and Summary of Significant Accounting Policies for further details.

The Company remeasures its bitcoin investment at fair value at the end of each reporting period with changes recognized in net income through “Other income, net” in the Company’s condensed consolidated statements of operations. As of March 31, 2024 and December 31, 2023, the Company held approximately 8,038 bitcoins for investment purposes with a cost basis of $220.0 million and a fair value of $573.3 million and $339.9 million, respectively, which is included within the Company’s “Other non-current assets” on the condensed consolidated balance sheets. For the three months ended March 31, 2024 and March 31, 2023, the Company recognized a $233.4 million and $96.1 million gain, respectively, from the remeasurement of the Company's bitcoin investment.

The Company’s bitcoin for operating purposes is initially recorded at cost, inclusive of transaction costs. 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. As of March 31, 2024 and December 31, 2023, the Company held approximately 263 and 384 bitcoins, respectively, for operating purposes with a fair value of $18.5 million and $16.7 million, respectively, to facilitate the purchases and sales of bitcoin on behalf of Cash App customers. The bitcoin for operating purposes is reflected on the condensed consolidated balance sheets within “Other current assets”.

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 its customers and trading partners retain legal ownership of the bitcoin; have the right to sell, pledge, or transfer the bitcoin; and also benefit from the rewards and bear the risks associated with the 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 March 31, 2024 and December 31, 2023, an immaterial amount of the bitcoin was held by third-party custodians on the Company's behalf.

The Company records a bitcoin safeguarding obligation liability and a corresponding bitcoin safeguarding asset based on the fair value of the bitcoin held for other parties at each reporting date in accordance with Staff Accounting Bulletin No. 121 ("SAB 121"). The Company was not aware of any actual or possible safeguarding loss events as of March 31, 2024 or December 31, 2023, and accordingly, the bitcoin safeguarding obligation liability and the associated bitcoin safeguarding asset were recorded at the same value.

24


The following table summarizes the Company’s bitcoin held for other parties (in thousands, except number of bitcoin):
  March 31, 2024December 31, 2023
Total approximate number of bitcoin held for other parties23,570 24,570 
Safeguarding obligation liability related to bitcoin held for other parties$1,681,111 $1,038,585 
Safeguarding asset related to bitcoin held for other parties$1,681,111 $1,038,585 

NOTE 12 - INDEBTEDNESS


A) Notes

The 2025 Convertible Notes, 2026 Convertible Notes, and 2027 Convertible Notes (each, as defined below, and collectively, the “Convertible Notes”), together with the Senior Notes (as defined below), are collectively referred to as the “Notes.”

The following table summarizes the Company's Notes as of March 31, 2024 (in thousands):
Principal OutstandingUnamortized Debt Issuance CostsNet Carrying Value
2031 Senior Notes$1,000,000 $(10,085)$989,915 
2026 Senior Notes1,000,000 (6,095)993,905 
2027 Convertible Notes575,000 (4,803)570,197 
2026 Convertible Notes575,000 (3,561)571,439 
2025 Convertible Notes (i)
1,000,000 (2,803)997,197 
Total$4,150,000 $(27,347)$4,122,653 

(i) Net carrying value disclosed as current portion of long-term debt within total current liabilities on the condensed consolidated balance sheet.

The following table summarizes the Company's Notes as of December 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 

The Company recognized interest expense on the Notes as follows (in thousands):
Three Months Ended
March 31,
20242023
Contractual interest expense$16,130 $16,495 
Amortization of debt issuance costs2,562 2,710 
Total$18,692 $19,205 
25



Convertible Notes due in 2026 and 2027

On November 13, 2020, the Company issued an aggregate principal amount of $1.2 billion of convertible senior notes comprised of $575.0 million of convertible senior notes due 2026 ("2026 Convertible Notes") and $575.0 million of convertible senior notes due 2027 ("2027 Convertible Notes"). The 2026 Convertible Notes mature on May 1, 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 0.25% payable semi-annually on May 1 and November 1 of each year.

The circumstances to allow the holders to convert their 2026 Convertible Notes and 2027 Convertible Notes were not met during the three months ended March 31, 2024. As of March 31, 2024, no principal had converted and the if-converted value did not exceed the outstanding principal amount on 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 0.125% payable semi-annually on March 1 and September 1 of each year.

The circumstances to allow the holders to convert their 2025 Convertible Notes were not met during the three months ended March 31, 2024. As of March 31, 2024, certain holders of the 2025 Convertible Notes converted an immaterial aggregate principal amount of their 2025 Convertible Notes. The Company has settled the conversions through the issuance of an immaterial amount of shares of the Company's Class A common stock. As of March 31, 2024, the if-converted value did not exceed the outstanding principal amount of the 2025 Convertible Notes.


26


B) Revolving Credit Facility & Other


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 2023. 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 $175.0 million. On March 29, 2024, the Company entered into an eighth amendment to the Credit Agreement to, among other things, provide the Company and its subsidiaries additional flexibility with respect to warehouse facilities, securitization facilities, or receivables financings involving accounts receivable or other rights to payment. 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 March 31, 2024, $775.0 million remained available for draw subject to compliance with our covenants. The Company incurred immaterial unused commitment fees during the three months ended March 31, 2024 and March 31, 2023. As of March 31, 2024, 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 Facility.


Loans under the credit facility2020 Credit Facility 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 period,plus 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 LIBOR rate plusconsolidate or make certain dispositions, pay dividends and make distributions, enter into restrictive agreements, enter into agreements with affiliates, and make certain investments and acquisitions.

The Company also has uncommitted and unsecured lines of credit with certain third-party banks for short-term liquidity needs, subject to availability of funds, through Square Financial Services. These lines of credit were immaterial in the aggregate and there were no outstanding balances as of March 31, 2024 and December 31, 2023.


27


C) 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 condensed 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.

These Warehouse Facilities have maturity dates through June 2026. As of March 31, 2024, the aggregate amount of the Warehouse Facilities, using the respective exchange rates at period-end, was $1.5 billion on a margin ranging from 1.00% to 2.00%. This margin is determinedrevolving basis, of which $0.9 billion was drawn and $0.6 billion remained available. All Warehouse Facilities contain portfolio parameters based on performance of the Company’s total leverage ratio forunderlying consumer receivables, which each respective region has satisfied as of March 31, 2024. None of the preceding four fiscal quarters. The Company is obligated to pay other customary fees forWarehouse Facilities contain corporate financial covenants.

All Warehouse Facilities are on a credit facility of this size and type including an annual administrative agent fee of $0.1 million and an unused commitment fee of 0.15%. To date no funds have been drawn under the credit facility, with $375.0 million remaining available. The Company paid $0.1 million and $0.4 million in unused commitment fees during the three and nine months ended September 30, 2017 and 2016, respectively. As of September 30, 2017, the Company was in compliance with all financial covenants associated with this credit facility.

Convertible Senior Notes

On March 6, 2017, the Company issued an aggregate principal amount of $400.0 million of convertible senior notes (Notes) and an additional 10% or $40.0 million pursuantvariable rate basis which aligns closely to the exercise in fullweighted-average life of the option to the initial purchasers to cover over-allotments. The Notes mature on March 1, 2022, unless earlier converted or repurchased, andconsumer receivables they finance. Borrowings under these facilities bear interest at (i) a base rate of 0.375% payable semi-annually on March 1aligned to either the local risk free rate, such as Term SOFR and September 1 of each year. The Notes are convertible at an initial conversion rate of 43.5749 shares of the Company's Class A common stock per $1,000 principal amount of Notes,Sterling Overnight Index Average or similar, and (ii) a margin which is equivalent to an initial conversion price of approximately $22.95 per share of Class A common stock. Holders may convert their Notes at any time prior to the close of business on the business day immediately preceding December 1, 2021 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2017 (and only during such calendar quarter), if the last reported sale price of the Company’s Class A common stockset 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) 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 Notes) per $1,000 principal amount of 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; or (3) upon the occurrence of specified corporate events, including certain distributions, the occurrence of a fundamental change (as defined in the Indenture governing the Notes) or a transaction resulting in the Company’s Class A common stock converting into other securities or property or assets.  On or after December 1, 2021, 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 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 is the Company’s current intent and policy to settle conversions through combination settlement with a specified dollar amount of $1,000 per $1,000 principal amount of notes.

In accounting for the issuance of the Notes, the Company separated the Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of 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 continues to meet the conditions for equity classification. The excess of the principal amount of the liability component over its carrying amount ("debt discount") is amortized to interest expense over the term of the Notes at an effectiveavailability period. The interest rate of 5.34% overexpense incurred on the contractual termsCompany's Warehouse Facilities is included within general and administrative as part of the Notes.

Debt issuance costs related toCompany's operating expenses. Interest expense on the Notes comprised of discounts and commissions payable to the initial purchasers of $11.0Company's Warehouse Facilities was $19.7 million and third party offering costs$14.7 million for the three months ended March 31, 2024 and March 31, 2023, respectively. In addition, each Warehouse Facility requires payment of $0.8 million. The Company allocated the total amount incurred to the liability and equity components of the Notes based on their relative values. Issuance costs attributable to 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 with the equity component in stockholders’ equity.immaterial commitment fees.


The Notes consistedtable below summarizes the future scheduled principal payments of amounts drawn on the followingCompany's Warehouse Facilities (in thousands):
March 31, 2024
2024 (i)
$353,577 
2025 (i)
100,600 
2026500,000 
Total$954,177 
 September 30, 2017
Principal$440,000
Less: unamortized debt discount(77,291)
Less: unamortized debt issuance costs(8,472)
Net carrying amount$354,237


The net carrying amount of the equity component of the Notes was(i) Future scheduled principal payments in 2024 as follows (in thousands):

 September 30, 2017
Debt discount related to value of conversion option$86,203
Less: allocated debt issuance costs(2,302)
Equity component, net$83,901


The Company recognized interest expense on the Notes as follows (in thousands, except for percentages):

 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2017
Contractual interest expense based on 0.375% per annum$413
 $938
Amortization of debt discount and issuance costs4,277
 9,889
Total$4,690
 $10,827
Effective interest rate of the liability component5.34% 5.34%

Convertible Note Hedge and Warrant Transactions

In connection with the offering of the Notes, the Company entered into convertible note hedge transactions with certain financial institutions (Counterparties) whereby the Company has the option to purchase a total of approximately 19.2 million shares of its Class A common stock at a price of approximately $22.95 per share. The total cost of the convertible note hedge transactions was $92.1 million. In addition, the Company sold warrants to the Counterparties whereby the Counterparties have the option to purchase a total of approximately 19.2 million shares of the Company’s Class A common stock at a price of approximately $31.18 per share. The Company received $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 and to effectively increase the overall conversion price from approximately $22.95 per share to approximately $31.18 per share. As these instruments are considered indexed to the Company's own stock and are considered equity classified, the convertible note hedges and 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 hedge and warrant transactions were recordedwell as a reduction to additional paid-in capitalportion of 2025 are disclosed as warehouse funding facilities, current within total current liabilities on the condensed consolidated balance sheets.sheet.


NOTE 11 - ACCRUED TRANSACTION LOSSES
The Company is exposed to transaction losses due to chargebacks as a result of fraud or uncollectibility.
The following table summarizes the activities of the Company’s reserve for transaction losses (in thousands):
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Accrued transaction losses, beginning of the period$22,455
 $16,093
 $20,064
 $17,176
Provision for transaction losses15,102
 13,483
 39,737
 36,875
Charge-offs to accrued transaction losses(10,837) (8,148) (33,081) (32,623)
Accrued transaction losses, end of the period$26,720
 $21,428
 $26,720
 $21,428

NOTE 1213 - INCOME TAXES

The Company recorded an income tax benefit of $0.6 million and an income tax expense of $0.3$35.5 million for the three and nine months ended September 30, 2017, respectively, compared to income tax expense of $0.2 million and $0.9 million for the three and nine months ended September 30, 2016, respectively. The income tax benefit recorded for the three months ended September 30, 2017March 31, 2024, compared to an income tax benefit of $21.1 million for the three months ended March 31, 2023. The difference between income before income tax at the U.S. federal statutory rate and the income tax expense recorded for the ninethree months ended September 30, 2017 wereMarch 31, 2024 is primarily due to statea change in the valuation allowance in the U.S. related to the utilization of tax loss carryovers and foreigntax credits.

The difference between the income tax expense offset byfor the three months ended March 31, 2024, and the income tax benefit of the monetization of the Company’s alternative minimum tax (AMT) credit carryforward on its 2016 Federal tax return.

The Company’s effective tax rate was 3.9% and (0.7)% for the three and nine months ended September 30, 2017, respectively, comparedMarch 31, 2023 primarily relates to an effective tax ratea change in the mix of (0.7)% and (0.6)%income by jurisdiction. In addition, for the three and nine months ended September 30, 2016, respectively. The difference betweenMarch 31, 2023, Afterpay U.S. was included in the annual effective tax rate and had a current year loss, which generated a partial tax benefit due to the deferred tax liabilities available to recognize those losses. On October 31, 2023, Afterpay U.S. was integrated into Block Inc.’s U.S. federal statutory tax rateconsolidated filing group. As the Afterpay U.S. integration was a one-time event, there is no corresponding benefit for the three and nine months ended September 30, 2017March 31, 2024.

28


The Company is subject to income taxes in the U.S. and September 30, 2016 primarily relatescertain foreign tax jurisdictions. The tax provision for the three months ended March 31, 2024 and March 31, 2023 is calculated on a jurisdictional basis. The Company estimated the worldwide income tax provision using the estimated annual effective income tax rate expected to be applicable for the valuation allowance on the Company’s deferred tax assets.
full year. The Company’s effective tax rate may be subject to fluctuationfluctuations during the year as new information is obtained, which may affect, among other things, the assumptions used to estimate the annual effective tax rate, including factors such as the mix of forecasted pre-tax earnings in the various jurisdictions in which the Company operates, changes in valuation allowances against deferred tax assets, the recognition and de-recognition of tax benefits related to uncertain tax positions, and changes in or the interpretation of tax laws in jurisdictions where the Company conducts business.


As of September 30, 2017,March 31, 2024, the Company retainsretained a full valuation allowance on its net deferred tax assets in the U.S. and certain foreign jurisdictions. The realization of the Company’s deferred tax assets depends primarily on its ability to generate taxable income in future periods. 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.
The tax provision for the three and nine months ended September 30, 2017 and September 30, 2016, was calculated on a jurisdiction basis. The Company estimated the foreign income tax provision using the effective income tax rate expected to be applicable for the full year.

NOTE 1314 - STOCKHOLDERS’STOCKHOLDERS' EQUITY
The changes in total stockholders’ equity were as follows (in thousands):

Share Repurchase Program

 Total stockholders’ equity
Balance at December 31, 2016$576,153
Net loss(47,150)
Exercise of stock options104,251
Purchases under the employee stock purchase plan7,767
Vesting of early exercised stock options and other563
Share-based compensation113,826
Tax withholding related to vesting of restricted stock units
(18,298)
Conversion feature of convertible senior notes, due 2022, net of allocated debt issuance costs83,901
Purchase of bond hedges in conjunction with issuance of convertible senior notes, due 2022(92,136)
Sale of warrants in conjunction with issuance of convertible senior notes, due 202257,244
Payment for termination of Starbucks warrant(54,808)
Change in other comprehensive loss1,596
Balance at September 30, 2017$732,909


Common Stock

TheIn October 2023, the board of directors of the Company has authorized the issuancerepurchase of Class A common stock and Class B common stock. Class A common stock and Class B common stock are referredup to as "common stock" throughout these Notes to the Condensed Consolidated Financial Statements, unless otherwise noted. As of September 30, 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 September 30, 2017, there were 263,379,421 shares of Class A common stock and 124,422,721 shares of Class B common stock outstanding. Options and awards granted following the Company's Initial Public Offering are related to underlying Class A common stock. Additionally, holders of Class B common stock are able to convert such shares into Class A common stock.

Warrants

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 Notes offering, the Company sold warrants whereby the Counterparties have the option to purchase a total of approximately 19.2 million shares$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.

During the three months ended March 31, 2024, we repurchased 3.6 million shares of $31.18 per share. The Company received $57.2our Class A common stock for an aggregate amount of $252.1 million. As of March 31, 2024, $591.1 million in cash proceeds from the sale of these warrants. See Note 10, Indebtedness,remained available and authorized for more details on this transaction.repurchases.


Stock Plans


The Company maintains two share-based employee compensation plans: the 2009 Stock Plan (2009 Plan) and the 2015 Equity Incentive Plan (2015 Plan). The ("2015 Plan serves asPlan") provides that the successor to the 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 securities have been nor will be in the future issued under the 2009 Plan.

Under the 2015 Plan, shares of the Company's Class A common stock are reserved for the issuance of incentive and nonstatutory stock options, restricted stock awards, restricted stock units (RSUs), performance shares, and stock bonuses to qualified employees, directors, and consultants. The shares may be granted at a price per share not less than the fair market value at the date of grant. Initially, 30,000,000 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 will be increased on the first day of each fiscal year, in an amount equal to the least of (i) 40,000,00040.0 million shares, (ii) 5% of the outstanding shares on the last day of the immediately preceding fiscal year, or (iii) such number of shares determined by the Company’sother amount as our board of directors or a committee thereof.may determine. As of September 30, 2017, the total number ofMarch 31, 2024, there were 153.2 million shares subject to stock options and RSUs outstanding under the 2015 Plan was 26,290,690, and 46,341,496 shares were available for future issuance. As of September 30, 2017, the total number of shares subject to stock options and RSUs outstandingissuance under the 2009 Plan was 48,262,824.our 2015 Plan.


A summary of stock option activity for the ninethree months ended September 30, 2017March 31, 2024 is as follows (in thousands, except share and per share data):
Number of Stock OptionsWeighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
Value
Outstanding, beginning of the year4,991 $47.64 3.80$195,760 
Granted— — 
Exercised(987)20.20 
Forfeited— — 
Expired(81)158.19 
Outstanding, end of the period3,923 $52.27 4.20$163,836 
Exercisable, end of the period3,294 $44.89 3.37$155,692 

29

 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
 17.20
    
Exercised(19,050,042) 5.47
    
Forfeited(2,423,888) 11.42
    
Balance at September 30, 201753,004,591
 $8.55
 6.76 $1,073,815
Options exercisable as of       
September 30, 201749,642,480
 $8.26
 6.63 $1,020,272


Restricted Stock Activity

Activity related to RSUs during the ninethree months ended September 30, 2017March 31, 2024 is set forth below:below (in thousands, except per share data):
Number of
Shares
Weighted
Average Grant
Date Fair Value
Unvested, beginning of the year40,099 $74.76 
Granted2,440 65.33 
Vested(3,820)81.50 
Forfeited(3,874)76.30 
Unvested, end of the period34,845 $73.19 
 Number of
RSUs
 Weighted
Average Grant
Date Fair Value
Unvested as of December 31, 201615,443,391
 $12.09
Granted12,241,086
 18.81
Vested(4,145,734) 12.37
Forfeited(1,989,820) 12.90
Unvested as of September 30, 201721,548,923
 $15.78


Share-Based Compensation
The fair value of stock options and employee stock purchase plan rights are estimated on the date of grant using the Black-Scholes-Merton option valuation model. Whereas, the fair value of RSUs is determined by the closing price of the Company’s common stock on each grant date. 
The fair value of stock options granted was estimated using the following weighted-average assumptions:
 Three Months Ended September 30, Nine Months Ended September 30,
 2016 2017 2016
Dividend yield% % %
Risk-free interest rate1.31% 1.88% 1.54%
Expected volatility43.51% 32.22% 42.74%
Expected term (years)6.08
 6.02
 6.08
There were no stock options granted during the three months ended September 30, 2017.
As a result of the Company’s adoption of ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, the Company elected 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.
The following table summarizes the effects of share-based compensation on the Company's condensed consolidated statements of operations (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Three Months Ended
March 31,
Three Months Ended
March 31,
Three Months Ended
March 31,
2024
2024
2024
Cost of revenue
Cost of revenue
Cost of revenue$29
 $
 $47
 $
Product development25,254
 23,949
 69,746
 70,064
Product development
Product development
Sales and marketing
Sales and marketing
Sales and marketing4,579
 3,697
 12,869
 9,963
General and administrative10,186
 9,133
 28,649
 24,872
General and administrative
General and administrative
Total$40,048
 $36,779
 $111,311
 $104,899
Total
Total
    
The Company recorded $1.3$7.0 million and $4.4$21.1 million of share-based compensation expense related to the Company's 2015 Employee Stock Purchase Plan during the three and nine months ended September 30, 2017, respectively, compared to $0.8 millionMarch 31, 2024 and $3.8 million for the three and nine months ended September 30, 2016,March 31, 2023, respectively, which are included in the table above.


The Company capitalized $1.3$6.5 million and $2.5$5.9 million of share-based compensation expense related to capitalized software costs during the three and nine months ended September 30, 2017, respectively, compared to $1.2 millionMarch 31, 2024 and $2.0 million for the three and nine months ended September 30, 2016,March 31, 2023, respectively.

As of September 30, 2017,March 31, 2024, there was $399.7 million$2.5 billion of total unrecognized compensation cost related to outstanding stock options and RSUs that isare expected to be recognized over a weighted-average period of 2.872.5 years.


30


NOTE 1415 - LOSSNET INCOME PER SHARE

Basic net lossincome (loss) per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) 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 the Company reported a net loss, diluted net loss per share is the same as basic net loss per share for all periods presented because the effects of potentially dilutive items were anti-dilutive given the Company’s net loss.anti-dilutive.

The following table presents the calculation of basic and diluted net lossincome (loss) per share (in thousands, except per share data):
Three Months Ended
March 31,
20242023
Numerator:
Net income$470,820 $95,828 
Less: Net loss attributable to noncontrolling interests(1,185)(2,488)
Net income attributable to common stockholders$472,005 $98,316 
Denominator:
Basic shares:
Weighted-average shares used to compute basic net income per share616,401 602,234 
Diluted shares:
Stock options, restricted stock, and employee stock purchase plan8,851 7,164 
Convertible notes12,108 14,181 
Common stock warrants— — 
Weighted-average shares used to compute diluted net income per share637,360 623,579 
Basic$0.77 $0.16 
Diluted$0.74 $0.16 
 Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net loss$(16,098) $(32,323) $(47,150) $(156,423)
Basic shares:       
Weighted-average common shares outstanding385,409
 346,299 377,374
 339,728
Weighted-average unvested shares(1,458) (2,406) (1,631) (3,135)
Weighted-average shares used to compute basic net loss per share383,951
 343,893
 375,743
 336,593
Diluted shares:       
Weighted-average shares used to compute diluted loss per share383,951
 343,893
 375,743
 336,593
Net loss per share:       
Basic$(0.04) $(0.09) $(0.13) $(0.46)
Diluted$(0.04) $(0.09) $(0.13) $(0.46)

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 (loss) per share because their effect would have been anti-dilutive for the periods presented (in thousands):

Three Months Ended
March 31,
20242023
Stock options, restricted stock, and employee stock purchase plan35,006 29,655 
Convertible notes— 3,844 
Common stock warrants12,108 23,188 
Total anti-dilutive securities47,114 56,687 

31
 Three and Nine Months Ended September 30,
 2017 2016
Stock options and restricted stock units74,554
 101,972
Common stock warrants19,173
 9,458
Unvested shares1,446
 1,997
Employee stock purchase plan642
 637
Total anti-dilutive securities95,815
 114,064



NOTE 16 - 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 March 31, 2024, the Company had recorded right-of-use assets of $10.8 million and associated lease liabilities of $16.6 million related to this lease arrangement.

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 in the first quarter of 2023.

NOTE 1517 - COMMITMENTS AND CONTINGENCIES
Operating
Litigation and Capital LeasesRegulatory Matters
The Company has entered into various non-cancelable operating leases for certain offices with contractual lease periods expiring between 2017 and 2025. The Company recognized total rental expenses under operating leases of $3.7 million and $9.6 million for the three and nine months ended September 30, 2017, respectively, compared to $2.9 million and $8.4 million for the three and nine months ended September 30, 2016, respectively.
Future minimum lease payments under non-cancelable operating leases (with initial or remaining lease terms in excess of one year) and future minimum capital lease payments as of September 30, 2017 are as follows (in thousands):
 Capital Operating
Year:   
2017 (remaining 3 months)$376
 $4,381
20181,495
 18,001
20191,380
 16,911
2020142
 16,905
2021
 16,626
Thereafter
 36,088
Total$3,393
 $108,912
Less amount representing interest(1)  
Present value of capital lease obligations3,392
  
Less current portion of capital lease obligation(1,500)  
Non-current portion of capital lease obligation$1,892
  

Litigation
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.


The Company received 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 involvedconsidering 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 these inquiries.

The Company has accrued a liability 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 March 31, 2024. Given the Company’s Caviar business. On March 19, 2015, Jeffry Levin,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 behalfsuch assessments. The eventual outcome of a putative nationwide class, filed a lawsuitthese matters may differ materially from the estimates the Company has currently accrued in the financial statements.


United States District Court for the Northern District of California against the Company’s wholly owned subsidiary, Caviar, Inc., which, as amended, alleges 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 has been 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 claim that Caviar misclassified its couriers as independent contractors resulting in numerous violations of the California Labor Code, pursuant to which plaintiffs seek statutory penalties for those violations.In February 2017,addition, 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 is subject to final confirmation byvarious legal matters, investigations, subpoenas, inquiries or audits, claims, lawsuits and disputes, including with regulatory bodies and governmental agencies. For example, the Superior Court.Company received inquiries from the SEC and Department of Justice shortly after the publication of a short seller report in March 2023. The Company has made appropriate accrualsbelieves the inquiries primarily relate to the allegations raised in the financial statements for the immaterial amounts expected to be paid as settlement.

In addition, from time to time, theshort seller report. The Company is involved in various other litigation matters and disputes arising in the ordinary course of business. 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.

32


Purchase Commitments

From time to time, we may enter 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 March 31, 2024, the future minimum payments under the purchase commitments were as follows (in thousands):
Payments Due By Period
Remainder of 2024$210,294 
2025316,425 
2026263,300 
2027315,100 
Total$1,105,119 

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.


NOTE 1618 - SEGMENT AND GEOGRAPHICAL INFORMATION
Operating
The Company reports its segments to reflect the manner in which the Company's 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 components offollows:

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 enterprise for which discreteATM. 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.


33


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 availablenot included. The following tables present information on the reportable segments revenue and segment gross profit (in thousands):
Three Months Ended
March 31, 2024
Cash AppSquare
Corporate and Other (i)
Total
Revenue:
Transaction-based revenue$109,220 $1,401,989 $— $1,511,209 
Subscription and services-based revenue1,332,560 296,218 53,516 1,682,294 
Hardware revenue— 31,830 671 32,501 
Bitcoin revenue2,731,124 — — 2,731,124 
Segment revenue$4,172,904 $1,730,037 $54,187 $5,957,128 
Segment gross profit (ii)
$1,258,527 $820,272 $15,674 $2,094,473 

Three Months Ended
March 31, 2023
Cash AppSquare
Corporate and Other (i)
Total
Revenue:
Transaction-based revenue$134,663 $1,288,042 $— $1,422,705 
Subscription and services-based revenue1,085,748 229,884 50,592 1,366,224 
Hardware revenue— 37,451 — 37,451 
Bitcoin revenue2,163,751 — — 2,163,751 
Segment revenue$3,384,162 $1,555,377 $50,592 $4,990,131 
Segment gross profit (ii)
$1,009,953 $691,562 $13,069 $1,714,584 

(i) Corporate and Other represents results related to products and services that is evaluated regularly byare not assigned to a specific reportable segment, and intersegment eliminations.

(ii) Segment gross profit for Cash App for the chief operating decision maker (CODM)three months ended March 31, 2024 and March 31, 2023 included $13.7 million and $14.4 million of amortization of acquired technology assets expense, respectively. Segment gross profit for purposesSquare for the three months ended March 31, 2024 and March 31, 2023 included $2.5 million and $2.7 million of allocating resourcesamortization of acquired technology assets expense, respectively. Amortization of acquired technology assets expense included in Corporate and evaluating financial performance. Other was immaterial for the three months ended March 31, 2024 and March 31, 2023.

34


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):
Three Months Ended
March 31,
20242023
Total segment gross profit$2,094,473 $1,714,584 
Less: Product development720,574 626,937 
Less: Sales and marketing443,885 496,011 
Less: General and administrative471,260 432,825 
Less: Transaction, loan, and consumer receivable losses165,729 127,896 
Less: Amortization of customer and other intangible assets43,282 37,087 
Less: Interest income, net(18,745)(3,161)
Less: Other income, net(237,824)(77,717)
Income before applicable income taxes$506,312 $74,706 

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):
Three Months Ended
March 31,
20242023
United States$5,566,297 $4,664,635 
International390,831 325,496 
Total$5,957,128 $4,990,131 


 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Revenue       
United States$559,053
 $421,317
 $1,533,960
 $1,210,704
International26,106
 17,685
 64,258
 46,100
Total net revenue$585,159
 $439,002
 $1,598,218
 $1,256,804

No individual country from the international markets contributed in excess ofmore than 10% of total revenue for the three and nine months ended September 30, 2017March 31, 2024 and 2016.March 31, 2023.



Long-Lived Assets

The following table sets forthdetails long-lived assets by geographic areageography (in thousands):
  March 31, 2024December 31, 2023
United States$7,512,224 $7,570,973 
Australia4,546,350 4,761,535 
Other international1,869,946 1,889,490 
Total$13,928,520 $14,221,998 

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.

35
 September 30,
2017
 December 31,
2016
Long-lived assets   
United States$156,850
 $162,118
International4,425
 2,675
Total long-lived assets$161,275
 $164,793



NOTE 1719 - SUPPLEMENTAL CASH FLOW INFORMATION


The supplemental disclosures of cash flow information consist of the following (in thousands):

Three Months Ended
March 31,
20242023
Supplemental cash flow data:
Cash paid for interest$23,031 $16,680 
Cash paid for income taxes$38,652 $18,652 
Supplemental disclosures of non-cash investing and financing activities:
Right-of-use assets obtained in exchange for operating lease obligations$9,416 $518 
Purchases of property and equipment in accounts payable and accrued expenses$3,577 $6,580 

36
 Nine Months Ended September 30,
 2017 2016
Supplemental Cash Flow Data:   
Cash paid for interest$1,230
 $428
Cash paid for income taxes1,117
 321
Supplemental disclosures of non-cash investing and financing activities:   
Change in purchases of property and equipment in accounts payable and accrued expenses(123) 1,310
Unpaid business acquisition purchase price644
 



Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations


You should read the following discussion and analysis in conjunction with the information set forth within the condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q.10-Q, as well as our Annual Report on Form 10-K. The statements in this discussion regarding our expectations of our future 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” and elsewhere in this Quarterly Report on Form 10-Q.10-Q. 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 provide these businesses withgive them access to the same tools as large businesses. Square is a cohesive commerce ecosystem that combines sophisticated software with affordable hardware that turns mobile and computing devices into powerful payments and point-of-sale solutions enabling sellersof tools to start, run,help them manage and grow their businesses. We focus on technology and design to createSimilarly, with Cash 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.consumers by allowing retail merchant clients to offer their customers the ability to buy 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.


The foundationWe delivered strong growth across our primary ecosystems in the first quarter of 2024, with gross profit of $2.1 billion, up 22% year over year.

Cash App generated gross profit of $1.3 billion in the first quarter of 2024, up 25% year over year. Performance was driven by strength across our financial services products.

Square generated gross profit of $820.3 million in the first quarter of 2024, up 19% year over year, driven by notable strength in our banking products and international markets.

In the first quarter of 2024, operating income was $249.7 million and Adjusted Operating Income was $364.3 million, compared to an operating loss of $6.2 million and Adjusted Operating Income of $51.0 million in the first quarter of 2023. For the same period, net income attributable to common stockholders was $472.0 million and Adjusted EBITDA was $705.1 million, compared to a net income attributable to common stockholders of $98.3 million and Adjusted EBITDA of $368.4 million in the first quarter of 2023. Net income for the first quarter of 2024 and 2023 included a gain of $233.4 million and $96.1 million, respectively, from the remeasurement of our ecosystem is a full service, managed payments offering. With our offering, a seller can accept payments in person via magnetic stripe (a swipe), EMV (Europay, MasterCard,bitcoin investment.

Refer to the Key Operating Metrics 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 in our ecosystem, sellers gain access to technology and features such as reporting and analytics, next-day settlements, digital receipts, payment dispute management and chargeback protection, and Payment Card Industry (PCI) compliance. On the consumer (buyer) side, Square Cash is our payments app that allows individuals to send and track both P2P (peer-to-peer) and Cash Card payments,

store money, and deposit moneyNon-GAAP Financial Measures section below for reconciliations of non-GAAP financial measures to their bank account.nearest generally accepted accounting principles ("GAAP") equivalents.

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. 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 monetize these featuresplan to operate below this cap through a per transaction fee whichcombination of performance management, the centralization of teams and functions to reduce duplication, and prioritization of our scope. In the first quarter of 2024, we record as revenue upon authorization of a transaction by the seller's customer's bank.

Our commerce ecosystem also includes powerful point-of-sale software and services that help sellerscontinued to make informed business decisionsprogress on these goals. We expect to continue these efforts through the useremainder of analytics2024, including implementing greater expense discipline and reporting. As a result, sellers can manage orders, inventory, locations, employees,reassessing certain contractual vendor arrangements. To date, we have recorded $121.6 million of severance and payroll; engage and grow their sales with customers; and gain accessother related expenses, of which $17.6 million was recorded in the quarter ended March 31, 2024. We may continue to business loans. Some ofincur expenses, including restructuring costs, in the short term to implement these advanced point-of-sale features are broadly applicableinitiatives, but we expect to our seller base and include Employee Management and Customer Engagement. We have also extended our ecosystem to serve sellers with more specific needs. For example, our Build with Square developer platform 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 our vertical specific Point of Sale system for retail sellers - Square for Retail. We monetize these features through either a per transaction fee, a subscription fee, or a service fee.actions in future periods.


With Square Capital, we facilitate the offering of loans to sellers based on their payment processing history, and the product is broadly applicable 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 sale of the loans to third-party investors or over time as the sellers pay down the outstanding amounts 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.
37



We also serve sellers through Caviar, a food ordering service that helps restaurants reach new customersended the first quarter of 2024 with $8.0 billion in available liquidity, with $7.2 billion in cash, cash equivalents, restricted cash, 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 delivery of the food, net of refunds.

We also provide hardware to facilitate commerce for sellers. This hardware includes contactless and chip readers, chip card readers, Square Stand and our just released Square Register, our first all-in-one hardware offering,investments in marketable debt securities, as well as third-party peripherals.an undrawn amount of $775.0 million available under our revolving credit facility. This represents an increase of $304.8 million from the end of 2023.


We have grown rapidlyOn October 26, 2023, the board of directors of the Company authorized the repurchase of up to serve millions$1 billion of sellers that representour Class A common stock. The goal of the program is to offset a diverse setportion of industries, including retail, services,the dilution associated with share-based compensation issued to employees as part of the Company’s overall compensation program. The timing and food-related businesses, and sizes, ranging fromamount of shares repurchased will depend on a single vendor at a farmers’ market to multi-location businesses. These sellers also span geographiesvariety of factors, including the United States, Canada, Japan, Australia,stock price, business and market conditions, corporate and regulatory requirements, alternative investment opportunities, acquisition opportunities, and other factors. To date, we have purchased $408.9 million of our Class A common stock under this program, of which $252.1 million was purchased in the United Kingdom.first quarter of 2024.


Results of Operations
Revenue (in thousands, except for percentages)
Three Months Ended
March 31,
20242023$ Change% Change
Transaction-based revenue$1,511,209 $1,422,705 $88,504 %
Subscription and services-based revenue1,682,294 1,366,224 316,070 23 %
Hardware revenue32,501 37,451 (4,950)
NM (i)
Bitcoin revenue2,731,124 2,163,751 567,373 26 %
Total net revenue$5,957,128 $4,990,131 $966,997 19 %
 Three Months Ended 
 September 30,
 Nine Months Ended 
 September 30,
 2017 2016 $ Change % Change 2017 2016 $ Change % Change
Transaction-based revenue$510,019
 $388,347
 $121,672
 31 % $1,395,562
 $1,053,664
 $341,898
 32 %
Starbucks transaction-based revenue
 7,164
 (7,164) (100)% $
 $78,869
 $(78,869) (100)%
Subscription and services-based revenue65,051
 35,320
 29,731
 84 % $173,262
 $88,833
 $84,429
 95 %
Hardware revenue10,089
 8,171
 1,918
 23 % $29,394
 $35,438
 $(6,044) (17)%
Total net revenue$585,159
 $439,002
 $146,157
 33 % $1,598,218
 $1,256,804
 $341,414
 27 %
(i) Not meaningful ("NM")
Total net revenue for the three and nine months ended September 30, 2017March 31, 2024 increased by $146.2$967.0 million, or 33% and $341.4 million or 27%19%, respectively, compared to the three and nine months ended September 30, 2016.March 31, 2023. Bitcoin revenue increased by $567.4 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. Excluding bitcoin revenue, total net revenue increased by $399.6 million, or 14%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Transaction-based revenue for the three and nine months ended September 30, 2017March 31, 2024 increased by $121.7$88.5 million, or 31% and $341.9 million or 32%6%, respectively, compared to the three and nine months ended September 30, 2016. This increase was attributable toMarch 31, 2023, driven primarily by growth in Gross Payment Volume (GPV) processed for("GPV"), which grew by 6% in the three and nine months ended September 30, 2017 of 31% and 32%, respectively, compared to the three and nine months ended September 30, 2016. We continue to benefit fromsame period. The growth in processedSquare GPV was driven by improvements in both card-present and card-not-present volumes as a result of growth from in-person and online channels, as well as growth in our existing sellers,international markets. See below in addition to meaningful contributions from new sellers. Additionally,Key Operating Metrics and Non-GAAP Financial Measures for further discussion of GPV.

GPV from larger sellers, which we define as all sellers that generate more than $125,000 in annualized GPV, increased 43% year over year and accounted for 48% of total GPV.
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 in the three and nine months ended September 30, 2017 and we do not expect transaction-based revenue from Starbucks in the future.
Subscription and services-based revenue for the three and nine months ended September 30, 2017March 31, 2024 increased by $29.7$316.1 million, or 84% and $84.4 million or 95%23%, respectively, compared to the three and nine months ended September 30, 2016. The increases wereMarch 31, 2023. This increase was primarily driven by continueddue to growth in Cash App's financial service-related products, including Cash App Card, BNPL platform, and expansion ofCash App Borrow, as well as revenue from Square banking products, which primarily include Square Loans, Instant Deposit, Caviar,Transfer, and Square Capital, which were alsoDebit Card. Revenue generated from the largest contributors to subscriptionBNPL platform was $283.5 million and services-based revenue. Subscription and services-based revenue contributed 11% of total net revenue in both$223.7 million for the three and nine months ended September 30, 2017, compared to 8%March 31, 2024 and 7% in the three and nine months ended September 30, 2016,March 31, 2023, respectively.
Hardware
Bitcoin revenue for the three and nine months ended September 30, 2017March 31, 2024 increased by $1.9$567.4 million, or 23% and decreased by $6.0 million or 17%26%, respectively, compared to the three and nine months ended September 30, 2016. DuringMarch 31, 2023. As bitcoin revenue is the nine months ended September 30, 2016, we experienced elevated growth in shipmentstotal sale amount of our contactless and chip reader driven bybitcoin to customers, the fulfillmentamount of the majority of the backlog of pre-ordersbitcoin revenue recognized will fluctuate depending on customer demand as well as changes in the first halfmarket price of 2016, following its launchbitcoin. The increase in the fourth quarter of 2015, with no similar activity during the nine months ended September 30, 2017. 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. During the three months ended September 30, 2017, the increased hardware revenue reflects growth in our sales of Square Stand and third-party peripherals as described above. Additionally, hardware revenue and growth rates have normalized as we move beyond the higher-than-normal sales of our contactless and chip card readerMarch 31, 2024 was driven by an increase in the first halfaverage market price of 2016 whenbitcoin, partially offset by a decrease in the product began shipping.quantity of bitcoin sold to customers, compared to the three months ended March 31, 2023. While bitcoin contributed 46% and 43% of the total revenue for the three months ended March 31, 2024 and March 31, 2023, respectively, gross profit generated from bitcoin was only 4% and 3%, respectively, of the total gross profit for both the three months ended March 31, 2024 and 2023.
Total
38


Cost of Revenue (in thousands, except for percentages)
Three Months Ended
March 31,
20242023$ Change% Change
Transaction-based costs$873,165 $820,787 $52,378 %
Subscription and services-based costs269,668 264,092 5,576 %
Hardware costs50,785 58,785 (8,000)
NM (i)
Bitcoin costs2,651,010 2,113,375 537,635 25 %
Amortization of acquired technology assets18,027 18,508 (481)
NM (i)
Total cost of revenue$3,862,655 $3,275,547 $587,108 18 %

 Three Months Ended 
 September 30,
 Nine Months Ended 
 September 30,
 2017 2016 $ Change % Change 2017 2016 $ Change % Change
Transaction-based costs$328,043
 $254,061
 $73,982
 29 % $896,913
 $683,194
 $213,719
 31 %
Starbucks transaction-based costs
 4,528
 (4,528) (100)% $
 $69,810
 $(69,810) (100)%
Subscription and services-based costs18,169
 12,524
 5,645
 45 % $51,161
 $31,701
 $19,460
 61 %
Hardware costs18,775
 15,689
 3,086
 20 % $45,610
 $56,444
 $(10,834) (19)%
Amortization of acquired technology1,556
 1,886
 (330) (17)% $5,058
 $6,142
 $(1,084) (18)%
Total cost of revenue$366,543
 $288,688
 $77,855
 27 % $998,742
 $847,291
 $151,451
 18 %
(i) Not meaningful ("NM")


Total cost of revenue for the three and nine months ended September 30, 2017March 31, 2024 increased by $77.9 million or 27% and $151.5$587.1 million, or 18%, respectively, compared to the three and nine months ended September 30, 2016.March 31, 2023. Bitcoin costs of revenue, which increased by $537.6 million in the three months ended March 31, 2024, compared to the three months ended March 31, 2023, was the primary driver of the increase in total cost of revenue, with the remaining increase related to an increase in Square GPV. Excluding bitcoin costs of revenue, total cost of revenue increased by approximately $49.5 million, or 4%, in the three months ended March 31, 2024, compared to the three months ended March 31, 2023.


Transaction-based costs for the three and nine months ended September 30, 2017March 31, 2024 increased by $74.0$52.4 million, or 29% and $213.7 million or 31%6%, respectively, compared to the three and nine months ended September 30, 2016. This increase was attributable toMarch 31, 2023, in line with GPV growth in GPV processed for the three and nine months ended September 30, 2017 of 31% and 32%, respectively, compared to the three and nine months ended September 30, 2016.

As noted above, Starbucks completed its previously announced transition to another payments solution provider. Accordingly, we did not record any Starbucks transaction-based costs6% in the three and nine months ended September 30, 2017 and we do not expect Starbucks transaction-based costs in the future.same periods.


Subscription and services-based costs for the three and nine months ended September 30, 2017March 31, 2024 increased by $5.6 million, or 45% and $19.5 million or 61%2%, respectively, compared to the three and nine months ended September 30, 2016, primarily reflecting increasedMarch 31, 2023. The increase in the three months ended March 31, 2024 was driven by growth in Cash App's financial service-related products, including Cash App Card and related processing costs associated with the growth of Caviar and fees, which was more than offset by favorable terms on such processing costs due to a lesser extent, increased costs associated withcontract renewal executed during the growththird quarter of Instant Deposit.2023.



HardwareBitcoin costs for the three and nine months ended September 30, 2017March 31, 2024 increased by $3.1$537.6 million, or 20% and decreased by $10.8 million or 19%25%, respectively, compared to the three and nine months ended September 30, 2016. During the nine months ended September 30, 2016, we experienced elevated growth in shipments of our contactless and chip reader driven by the fulfillmentMarch 31, 2023. Bitcoin costs are comprised of the majority of the backlog of pre-orders in the first half of 2016, following its launch in the fourth quarter of 2015, with no similar activity during the nine months ended September 30, 2017. This was offset in part by growth in our sales of Square Stand and third-party peripherals driven primarily by new features and product offerings. The decrease in hardware costs for the nine months ended September 30, 2017 istotal amount we pay to purchase bitcoin, which fluctuates in line with the decrease in hardware revenue during the same period. The increase in hardware costs during the three months ended September 30, 2017 reflects growth in our sales of Square Stand and third-party peripherals as described above. Additionally, during the three months ended September 30, 2017, we recorded $3.2 million in inventory reserves, revaluations, and write-offs compared to $1.7 million during the three months ended September 30, 2016. The increase during the three months ended September 30, 2017, is primarily driven by a $2.3 million charge as a result of the bankruptcy of one of our distribution partners.bitcoin revenue.



39



Amortization of acquired technology for the three and nine months ended September 30, 2017 decreased by $0.3 million or 17% and $1.1 million or 18%, respectively, compared to the three and nine months ended September 30, 2016, as a result of certain technology assets reaching end of life.

Operating Expenses (in thousands, except for percentages)
Three Months Ended
March 31,
20242023$ Change% Change
Product development$720,574 $626,937 $93,637 15 %
% of total net revenue12 %13 %
% of total gross profit34 %37 %
Sales and marketing$443,885 $496,011 $(52,126)(11)%
% of total net revenue%10 %
% of total gross profit21 %29 %
General and administrative$471,260 $432,825 $38,435 %
% of total net revenue%%
% of total gross profit23 %25 %
Transaction, loan, and consumer receivable losses$165,729 $127,896 $37,833 30 %
% of total net revenue%%
% of total gross profit%%
Amortization of customer and other acquired intangible assets$43,282 $37,087 $6,195 17 %
% of total net revenue%%
% of total gross profit%%
Total operating expenses$1,844,730 $1,720,756 $123,974 %
 Three Months Ended 
 September 30,
 Nine Months Ended 
 September 30,
 2017 2016 $ Change % Change 2017 2016 $ Change % Change
Product development$82,547
 $70,418
 $12,129
 17% $229,255
 $203,648
 $25,607
 13 %
% of total net revenue14% 16%     14% 16%    
Sales and marketing$66,533
 $46,754
 $19,779
 42% $176,349
 $124,470
 $51,879
 42 %
% of total net revenue11% 11%     11% 10%    
General and administrative$64,312
 $52,075
 $12,237
 23% $184,235
 $198,966
 $(14,731) (7)%
% of total net revenue11% 12%     12% 16%    
Transaction, loan and advance losses$19,893
 $12,885
 $7,008
 54% $50,185
 $38,201
 $11,984
 31 %
% of total net revenue3% 3%     3% 3%    
Amortization of acquired customer assets$222
 $164
 $58
 35% $649
 $703
 $(54) (8)%
% of total net revenue% %     % %    
Total operating expenses$233,507
 $182,296
 $51,211
 28% $640,673
 $565,988
 $74,685
 13 %

Product development expenses for the three and nine months ended September 30, 2017March 31, 2024 increased by $12.1$93.6 million, or 17% and $25.6 million or 13%15%, respectively, compared to the three and nine months ended September 30, 2016,March 31, 2023, due primarily dueto the following:

an increase of $43.9 million in personnel costs for the three months ended March 31, 2024 related to an increase in headcount of 20%among our engineering teams, as we continue to develop and diversify our products. This increase in product development personnel mainlycosts also includes an increase in our engineering, product, and design teams. Product development expenses were also impacted by share-based compensation expense which increased by $1.3of $24.1 million and decreased by $0.3 million compared tofor the three and nine months ended September 30, 2016, respectively.March 31, 2024; and

an increase of $43.5 million in software and cloud computing infrastructure fees for the three months ended March 31, 2024, as a result of increased capacity needs and expansion of our cloud-based services.

Sales and marketing expenses for the three and nine months ended September 30, 2017 increasedMarch 31, 2024 decreased by $19.8$52.1 million, or 42% and $51.9 million or 42%11%, respectively, compared to the three and nine months ended September 30, 2016,March 31, 2023, primarily due to the following:
an increasea release of $7.2chargeback losses of $27.3 million and $13.6 milliona decrease in both Cash App marketing and other advertising costs comparedefforts as we have continued to the three and nine months ended September 30, 2016, respectively, primarily from increased online, direct mail and mobile marketing campaigns during the period;focus on expense discipline.
during the three and nine months ended September 30, 2017, we incurred $11.6 million and $32.0 million in costs associated with our Square Cash peer-to-peer transfer service, an increase of $4.5 million and $15.9 million compared to the three and nine months ended September 30, 2016, respectively;

an increase in headcount of 41% in sales and marketing personnel to enable growth initiatives; and
an increase in share-based compensation expense of $0.9 million and $2.9 million compared to the three and nine months ended September 30, 2016, respectively.
General and administrative expenses for the three and nine months ended September 30, 2017March 31, 2024 increased by $12.2$38.4 million, or 23% and decreased by $14.7 million or 7%9%, respectively, compared to the three and nine months ended September 30, 2016. ExcludingMarch 31, 2023, primarily due to a $48.0charge of $32.2 million non-recurring expenserecognized during the first quarter of 2024 related to certain purchase considerations related to the settlement of legal proceedings with Robert E. MorleyTIDAL acquisition that was recorded in the nine months ended September 30, 2016, the generalhad been previously withheld for post-acquisition activities.

Transaction, loan, and administrative expensesconsumer receivable losses for the three and nine months ended September 30, 2017March 31, 2024 increased by $12.2$37.8 million, and $33.3 million, respectively, dueor 30%, compared to the following:three months ended March 31, 2023, primarily due to:

an increase in headcountloan losses of 19%$53.5 million for the three months ended March 31, 2024, primarily due to increased loan volumes; partially offset by

a decrease in generaltransaction losses of $15.7 million for the three months ended March 31, 2024, primarily due to a release of previously established risk loss provisions related to prior periods.

40


Interest Expense (Income), Net, and administrative personnel, mainly additions to our finance, legal, compliance, Square Capital operations and internal business systems personnel that together will drive long-term operating efficiencies as our business scales; andOther Expense (Income), Net (in thousands, except for percentages)
Three Months Ended
March 31,
20242023$ Change% Change
Interest income, net$(18,745)$(3,161)$(15,584)493 %
Other income, net$(237,824)$(77,717)$(160,107)206 %
an increase in share-based compensation expense of $1.1 million and $3.8
Interest income, net, for the three months ended March 31, 2024 increased by $15.6 million, compared to the three and nine months ended September 30, 2016, respectively.March 31, 2023, driven by an increase in interest income received as a result of both higher interest rates and investment balances.

Transaction, loan and advance lossesOther income, net, of $237.8 million for the three and nine months ended September 30, 2017March 31, 2024 was primarily driven by a gain of $233.4 million from the remeasurement of our bitcoin investment. Refer to Note 11, Bitcoin within Notes to the Condensed Consolidated Financial Statements for further details. Other income, net, of $77.7 million for the three months ended March 31, 2023 was primarily due to a gain of $96.1 million from the remeasurement of our bitcoin investment, partially offset by unrealized losses on certain marketable and non-marketable investments.

Segment Results

Square Results

The following table provides a summary of the revenue and gross profit for our Square segment for the three months ended March 31, 2024 and March 31, 2023 (in thousands, except for percentages):
Three Months Ended
March 31,
20242023$ Change% Change
Segment net revenue$1,730,037 $1,555,377 $174,660 11 %
Segment cost of revenue909,765 863,815 45,950 %
Segment gross profit$820,272 $691,562 $128,710 19 %

Revenue

Revenue for the Square segment for the three months ended March 31, 2024 increased by $7.0$174.7 million, or 54% and $12.0 million or 31%11%, respectively, compared to the three and nine months ended September 30, 2016,March 31, 2023. The increase was primarily due to growth in GPV. Transaction losses increased to a lesser extent thanSquare GPV as well as growth due to ongoing investment in data scienceSquare Banking products, which primarily include Square Loans, Instant Transfer, and improvements in our risk operations to mitigate exposure to transaction losses, offset by the netting effectSquare Debit Card.

Cost of the following:Revenue


$3.4 million and $6.1 million charge recorded to loan losses in the three and nine months ended September 30, 2017, respectively, with no similar charges during the three and nine months ended September 30, 2016, as a resultCost 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;
a $6.0 million increase in transaction losses recorded during the nine months ended September 30, 2016, as a result of a correction to the calculation of our reserve for transaction losses, with no similar charges during the three and nine months ended September 30, 2017; and
a $1.7 million reduction in transaction losses recorded during the nine months ended September 30, 2016, due to the reversal of prior overestimatesrevenue for the EMV liability shift, with no similar activity during the nine months ended September 30, 2017.
Amortization of acquired customer assetsSquare segment for the three and nine months ended September 30, 2017 remained relatively flat,March 31, 2024 increased by $46.0 million, or 5%, compared to the three and nine months ended September 30, 2016, as a result of certain customer assets reaching end of life offset by additional customer assets acquired.

Interest and Other Income and Expense, Net (in thousands, except for percentages)
 Three Months Ended 
 September 30,
 Nine Months Ended 
 September 30,
 2017 2016 $ Change % Change 2017 2016 $ Change % Change
Interest and other (income) expense, net$1,854
 $111
 $1,743
 1,570% $5,619
 $(933) $6,552
 702%

Interest and other (income) expense, net, for the three and nine months ended September 30, 2017 increased by $1.7 million and $6.6 million, respectively, compared to the three and nine months ended September 30, 2016,March 31, 2023. The increase was primarily due to interest expense incurred on long-term debt, including the Notes, offset in part by income earned on our investment in marketable securities and foreign exchange rate gains.


Provision (benefit) for Income Taxes (in thousands, except for percentages)
 Three Months Ended 
 September 30,
 Nine Months Ended 
 September 30,
 2017 2016 $ Change % Change 2017 2016 $ Change % Change
Provision (benefit) for income taxes$(647) $230
 $(877) (381)% $334
 $881
 $(547) (62)%
Effective tax rate3.9% (0.7)%     (0.7)% (0.6)%    

Provision (benefit) for income taxes for the three and nine months ended September 30, 2017 decreased by $0.9 million and $0.5 million, respectively, compared to the three and nine months ended September 30, 2016, due to an increase in stateSquare GPV and foreign tax expense, offset by the income tax benefitan increase in Square Banking services.

Cash App Results

The following table provides a summary of the monetizationrevenue and gross profit for our Cash App segment for the three months ended March 31, 2024 and March 31, 2023 (in thousands, except for percentages):
Three Months Ended
March 31,
20242023$ Change% Change
Segment net revenue$4,172,904 $3,384,162 $788,742 23 %
Segment cost of revenue2,914,377 2,374,209 540,168 23 %
Segment gross profit$1,258,527 $1,009,953 $248,574 25 %

41


Revenue

Revenue for the Cash App segment for the three months ended March 31, 2024 increased by $788.7 million, or 23%, compared to the three months ended March 31, 2023. The increase was due to the Cash App items referenced within the Company's overall revenue discussion. While bitcoin revenue contributed 65% and 64% of our alternative minimum tax (AMT) credit carryforward on our 2016 Federal tax return.Cash App revenue for three months ended March 31, 2024 and 2023, respectively, gross profit generated from bitcoin was only 6% and 5% of Cash App gross profit for the three months ended March 31, 2024 and 2023, respectively.


Excluding $2.7 billion in bitcoin revenue for the three months ended March 31, 2024, Cash App revenue increased by $221.4 million, or 18%, compared to the three months ended March 31, 2023.

Cost of Revenue

Cost of revenue for the Cash App segment for the three months ended March 31, 2024 increased by $540.2 million, or 23%, compared to the three months ended March 31, 2023. The increase was due to the items referenced within the Company's overall cost of revenue discussion. Excluding $2.7 billion in bitcoin cost of revenue for the three months ended March 31, 2024, Cash App cost of revenue increased by approximately $2.5 million, or 1%, compared to the three months ended March 31, 2023.

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 total net revenue, operating income (loss), net income (loss), and other results reported under generally accepted accounting principles (GAAP),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 and we do not expect transactions with Starbucks to recur. As a result, 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.solution providers.

Three Months Ended 
 September 30,
 Nine Months Ended 
 September 30,
2017 2016 2017 2016
Three Months Ended
March 31,
Three Months Ended
March 31,
Three Months Ended
March 31,
2024
2024
2024
(in thousands, except GPV) (in thousands, except GPV)
Gross Payment Volume (GPV) (in millions)$17,386
 $13,248
 $47,454
 $35,989
Adjusted Revenue$257,116
 $177,777
 $701,305
 $494,741
Adjusted EBITDA$34,304
 $11,623
 $97,825
 $15,094
Adjusted Net Income (Loss) Per Share:       
Gross Payment Volume (GPV) (in millions)
Gross Payment Volume (GPV) (in millions)
Adjusted Operating Income (in thousands)
Adjusted Operating Income (in thousands)
Adjusted Operating Income (in thousands)
Adjusted EBITDA (in thousands)
Adjusted EBITDA (in thousands)
Adjusted EBITDA (in thousands)
Adjusted Net Income Per Share:
Adjusted Net Income Per Share:
Adjusted Net Income Per Share:
Basic
Basic
Basic$0.08
 $0.01
 $0.21
 $(0.02)
Diluted$0.07
 $0.01
 $0.19
 $(0.02)
Diluted
Diluted


Gross Payment Volume (GPV)
We define
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. Additionally,refunds, and ACH transfers. Cash App Business GPV includes Squareis 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 and Square Cash for Business. As described above,card. GPV excludes card payments processed for Starbucks.

Adjusted Revenue
Adjusted Revenuedoes not include transactions from our BNPL platform because GPV is a non-GAAP financial measure that we define as our total net revenue lessrelated only to 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 fees set by payment card networks and are paid to card issuers, with the remainder consisting of assessment fees paid to payment card networks, fees paid to third-party payment processors, and bank settlement fees. While some payments solution providers present their revenue in a similar fashion to us, others present their revenue net of transaction-based costs because they pass through these costs directly to their sellers. 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 revenuenot to Adjusted Revenue for each of the periods indicated:subscription and services-based revenue.

42

 Three Months Ended 
 September 30,
 Nine Months Ended 
 September 30,
 2017 2016 2017 2016
 (in thousands) (in thousands)
Total net revenue$585,159
 $439,002
 $1,598,218
 $1,256,804
Less: Starbucks transaction-based revenue
 7,164
 
 78,869
Less: transaction-based costs328,043
 254,061
 896,913
 683,194
Adjusted Revenue$257,116
 $177,777
 $701,305
 $494,741


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

Adjusted EBITDA Adjusted Net Income (Loss), and Adjusted Net Income (Loss) Per ShareEPS 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. 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 Quarterly Report on Form 10-Q 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.charges that do not vary with our operations.


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 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 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.


In connection withWe believe that excluding the issuance of our convertible senior notes (as described in Note 10), we are required to recognize non-cash interest expense related to amortization of debt discount and issuance costs. We believe that excluding these expensescosts 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.


We exclude the litigation settlement with Robert E. Morley described in Note 1 of the "Notes to the Consolidated Financial Statements" in our Annual Report on Form 10-K for the year ended December 31, 2016, gain or loss on the sale of property and equipment, and impairment of intangible assetsfollowing from non-GAAP financial measures because we do not believe that these items are reflective of our ongoing business operations.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, charges associated with holdback liabilities, 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 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 and provision or benefit from income taxes, as these items are not components of our core business operations.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.


43


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, and acquisition-related, integration, 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 lossincome (loss) and our other financial results presented in accordance with GAAP.
44


The following table presents a reconciliation of operating income (loss) to Adjusted Operating Income (Loss) for each of the periods indicated (in thousands):
Three Months Ended
March 31,
20242023
Operating income (loss)$249,743 $(6,172)
Amortization of acquired technology assets18,027 18,508 
Acquisition-related and integration costs32,512 1,479 
Restructuring and other charges14,063 72 
Restructuring share-based compensation6,637 — 
Amortization of customer and other acquired intangible assets43,282 37,087 
Adjusted Operating Income$364,264 $50,974 

The following table presents a reconciliation of net lossincome (loss) to Adjusted EBITDA for each of the periods indicated (in thousands):

Three Months Ended
March 31,
20242023
Net income attributable to common stockholders$472,005 $98,316 
Net loss attributable to noncontrolling interests(1,185)(2,488)
Net income470,820 95,828 
Share-based compensation expense304,531 279,591 
Restructuring share-based compensation expense6,637 — 
Depreciation and amortization97,640 93,173 
Acquisition-related and integration costs32,512 1,479 
Restructuring and other charges14,063 72 
Interest income, net(18,745)(3,161)
Other income, net(237,824)(77,717)
Provision (benefit) for income taxes35,492 (21,122)
Loss (gain) on disposal of property and equipment(71)191 
Acquired deferred revenue and cost adjustment19 33 
Adjusted EBITDA$705,074 $368,367 

45

 Three Months Ended 
 September 30,
 Nine Months Ended 
 September 30,
 2017 2016 2017 2016
 (in thousands) (in thousands)
Net loss$(16,098) $(32,323) $(47,150) $(156,423)
Starbucks transaction-based revenue
 (7,164) 
 (78,869)
Starbucks transaction-based costs
 4,528
 
 69,810
Share-based compensation expense40,048
 36,779
 111,311
 104,899
Depreciation and amortization9,085
 9,681
 27,647
 27,817
Litigation settlement expense
 
 
 48,000
Interest and other (income) expense, net1,854
 111
 5,619
 (933)
Provision (benefit) for income taxes(647) 230
 334
 881
Gain (loss) on sale of property and equipment62
 (219) 64
 (88)
Adjusted EBITDA$34,304
 $11,623
 $97,825
 $15,094



The following table presents a reconciliation of net lossincome (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):

Three Months Ended
March 31,
20242023
Net income attributable to common stockholders$472,005 $98,316 
Net loss attributable to noncontrolling interests(1,185)(2,488)
Net income470,820 95,828 
Share-based compensation expense304,531 279,591 
Restructuring share-based compensation expense6,637 — 
Acquisition-related and integration costs32,512 1,479 
Restructuring and other charges14,063 72 
Amortization of intangible assets61,309 55,595 
Amortization of debt discount and issuance costs3,071 2,949 
Loss on revaluation of equity investments1,111 14,885 
Bitcoin remeasurement(233,404)(96,088)
Loss (gain) on disposal of property and equipment(71)191 
Acquired deferred revenue and cost adjustment19 33 
Tax effect of non-GAAP net income adjustments(118,336)(84,607)
Adjusted Net Income - basic$542,262 $269,928 
Cash interest expense on convertible notes673 1,236 
Adjusted Net Income - diluted$542,935 $271,164 
Weighted-average shares used to compute Adjusted Net Income Per Share:
Basic616,401 602,234 
Diluted637,360 627,423 
Adjusted Net Income Per Share:
Basic$0.88 $0.45 
Diluted$0.85 $0.43 
 Three Months Ended 
 September 30,
 Nine Months Ended 
 September 30,
 2017 2016 2017 2016
 (in thousands) (in thousands)
Net loss$(16,098) $(32,323) $(47,150) $(156,423)
Starbucks transaction-based revenue
 (7,164) 
 (78,869)
Starbucks transaction-based costs
 4,528
 
 69,810
Share-based compensation expense40,048
 36,779
 111,311
 104,899
Amortization of intangible assets1,804
 2,076
 5,868
 6,924
Litigation settlement expense
 
 
 48,000
Amortization of debt discount and issuance costs4,277
 
 9,889
 
Gain (loss) on sale of property and equipment62
 (219) 64
 (88)
Adjusted Net Income (Loss)$30,093
 $3,677
 $79,982
 $(5,747)
Adjusted Net Income (Loss) Per Share:       
Basic$0.08
 $0.01
 $0.21
 $(0.02)
Diluted$0.07
 $0.01
 $0.19
 $(0.02)
Weighted-average shares used to compute Adjusted Net Income (Loss) Per Share:       
Basic383,951
 343,893
 375,743
 336,593
Diluted432,284
 370,746
 418,419
 336,593

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.

In periods when we recordedreported an Adjusted Net Loss, the Diluteddiluted Adjusted Net LossIncome Per Share is the same as Basicbasic Adjusted Net LossIncome Per Share because the effects of potentially dilutive items were anti-dilutive givenanti-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):
Three Months Ended
March 31,
20242023
Provision (benefit) for income taxes, as reported$35,492$(21,122)
Tax effect of non-GAAP net income adjustments118,33684,607
Adjusted provision for income taxes, non-GAAP$153,828$63,485
Non-GAAP effective tax rate23 %18 %

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 Loss position.Income before income taxes.



46


Liquidity and Capital Resources


The following table summarizes ourLiquidity Sources

As of March 31, 2024, we had approximately $8.0 billion in available liquidity, with $7.2 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 $0.6 billion available to be withdrawn under our warehouse funding facilities. Refer to Note 12, Indebtedness within Notes to the Condensed 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 remaining $591.1 million related to our share repurchase program. As of March 31, 2024, 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.

 September 30,
2017
 December 31,
2016
Cash and cash equivalents$658,412
 $452,030
Short-term restricted cash20,533
 22,131
Long-term restricted cash14,565
 14,584
Cash, cash equivalents, and restricted cash$693,510
 $488,745
Short-term investments209,959
 59,901
Long-term investments191,335
 27,366
Cash, cash equivalents, restricted cash and investments in marketable securities$1,094,804
 $576,012



The following table summarizes our cash flow activitiesavailable liquidity (in thousands):

  March 31, 2024December 31, 2023
Cash and cash equivalents$5,753,436 $4,996,465 
Short-term restricted cash (i)
660,153 770,380 
Long-term restricted cash71,588 71,812 
Investments in short-term debt securities573,390 851,901 
Investments in long-term debt securities187,922 251,127 
Revolving credit facility775,000 775,000 
Total liquidity$8,021,489 $7,716,685 

 Nine Months Ended 
 September 30,
 2017 2016
Net cash provided by operating activities$130,317
 $23,235
Net cash used in investing activities(360,509) (111,947)
Net cash provided by financing activities431,121
 42,774
Effect of foreign exchange rate changes on cash and cash equivalents3,836
 2,536
Net increase (decrease) in cash, cash equivalents and restricted cash204,765
 (43,402)
(i) As of March 31, 2024, the Company has invested $292.2 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 September 30, 2017, we had $1,059.7 million 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.


OnAs of March 6, 2017,31, 2024, we issued $440.0held approximately 8,038 bitcoins for investment purposes ("bitcoin investment") with a fair value of $573.3 million aggregatebased on observable market prices, which is included within “Other non-current assets” on the condensed consolidated balance sheets. We believe cryptocurrency is an instrument of economic empowerment that aligns with our corporate purpose. We expect to hold these investments for the long term but will continue to reassess our bitcoin investment relative to our 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 bitcoin investment is remeasured at fair value at each reporting date with changes recognized in net income through “Other expense (income), net” in the condensed consolidated statements of operations. We did not purchase or sell any of our bitcoin investment during the three months ended March 31, 2024. We recognized a gain of $233.4 million from the remeasurement of our bitcoin investment during the first quarter of 2024.

47


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 12, Indebtedness andNote 17, Commitments and September 1 of each year, beginning on September 1, 2017. 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 $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 $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 $393.4 million. See Note 10, Indebtedness, of theContingencies within Notes to the Condensed Consolidated Financial Statements for more details on these transactions.commitments.

In addition,Senior Notes and Convertible Notes

As of March 31, 2024, we held over $4.2 billion in aggregate principal amount of debt, comprised of $1.0 billion in aggregate amount of convertible senior notes that mature 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 1, 2027 ("2027 Convertible Notes," collectively referred to as the “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 the 2026 Senior Notes, the “Senior Notes” and, together with the Convertible Notes, the “Notes”). Refer to Note 12, Indebtedness within Notes to the Condensed Consolidated Financial Statements for further details.

Revolving Credit Facility

We have entered into a revolving securedcredit agreement with certain lenders, as subsequently amended, which provides a $775.0 million senior unsecured revolving credit facility that matures(the "2020 Credit Facility") maturing in November 2020. To date, no fundsJune 2028. Refer to Note 12, Indebtedness within Notes to the Condensed Consolidated Financial Statements for further details.

Warehouse Funding Facilities

We have warehouse funding facilities ("Warehouse Facilities") with an aggregate amount of $1.5 billion on a revolving basis, of which $0.9 billion was drawn as of March 31, 2024. The Warehouse Facilities have been drawnarranged 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 credit facility, with $375.0 million remaining available. Loans underWarehouse Facilities are secured against the credit facility bear interest atrespective consumer receivables. While the Warehouse SPEs are included in our option of (i) a base rate based on the highestcondensed consolidated financial statements, they are separate legal entities that maintain legal ownership of the prime rate,receivables they hold. The assets of the federal funds rate plus 0.50%,Warehouse SPEs are not available to satisfy our claims or those of our creditors.

Cash, Restricted Cash, and an adjusted LIBOR rate for 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 margin 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 unused commitment fee of 0.15%.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, and planned capital expenditures, 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.

48


Short-term restricted cash of $20.5$660.2 million as of September 30, 2017 reflectsMarch 31, 2024 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 condensed 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 $14.6$71.6 million as of September 30, 2017 reflectsMarch 31, 2024 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 Square Financial Services. We have recorded these amounts as non-current assets on our office buildings. The

Company has recorded this amount as a non-current asset on thecondensed 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, amounts.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.

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

As detailed in Note 11, Bitcoin within Notes to the Condensed Consolidated Financial Statements, we recorded a safeguarding obligation liability and a corresponding safeguarding asset related to the bitcoin held for other parties. As of March 31, 2024, the safeguarding obligation liability related to bitcoin held for other parties was $1.7 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.

49



Cash Flow Activities

The following table summarizes our cash flow activities (in thousands):
Three Months Ended
March 31,
20242023
Net cash provided by operating activities$489,395 $294,401 
Net cash provided by investing activities1,042,387 623,924 
Net cash provided by (used in) financing activities32,409 (9,083)
Effect of foreign exchange rate on cash and cash equivalents(41,755)1,033 
Net increase in cash, cash equivalents, restricted cash, and customer funds$1,522,436 $910,275 

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, provision for transaction 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 ninethree months ended September 30, 2017,March 31, 2024, cash provided by operating activities was $130.3$489.4 million, primarily as a result of:

Net losscomprised of $47.2net income of $470.8 million, offset byadjusted for non-cash itemsexpenses of $590.2 million, consisting primarily of share-based compensation of $111.3 million, provision forcompensation; transaction, losses of $50.2 million,loan, and consumer receivable losses; depreciation and amortization; non-cash lease expense; and losses on revaluation of equity investments, all of which contributed positively to operating activities. These were partially offset by the amortization of $27.6discounts and other non-cash adjustments on consumer receivables of $267.0 million; bitcoin remeasurement of $233.4 million; net outflows from loan products of $185.7 million; and the change in deferred income taxes of $8.0 million.

Additional cash provided from changes Changes in operatingother assets and liabilities, including increases insettlements receivable and customers payable, of $295.4$122.5 million increases in settlements payable of $30.3 million,contributed positively and increases in accrued expenses of $20.3 million.

Offset in part by cash used from changes in operating assets and liabilities, including increases in settlements receivable of $271.2 million, increases in customer funds of $41.9 million, charge-offs to accrued transaction losses of $33.1 million, andwas primarily due to the net activity related to loans held for saletiming of $22.3 million.period end.

For the ninethree months ended September 30, 2016,March 31, 2023, cash provided by operating activities was $23.2$294.4 million, primarily as a result of:
Net losscomprised of $156.4net income of $95.8 million, offset byadjusted for non-cash itemsexpenses of $539.9 million, consisting primarily of share-based compensation of $104.9 million, provision forcompensation; transaction, losses of $38.2 million,loan, and consumer receivable losses; depreciation and amortization; non-cash lease expense; and losses on revaluation of equity investments, all of which contributed positively to operating activities. These were partially offset by bitcoin remeasurement of $96.1 million; amortization of $27.8 million.
Additional cash provideddiscounts and other non-cash adjustments on consumer receivables of $85.3 million; net outflows from loan products of $80.9 million; as well as changes in operatingother assets and liabilities, including increases insettlements receivable, customers payable, and settlements payable, of $139.1$80.3 million, and decreases in other current assetsprimarily due to the timing of $24.7 million.period end.
Offset in part by cash used from changes in operating assets and liabilities, including increases in settlements receivable of $92.2 million, the net activity related to loans held for sale of $28.0 million and charge-offs to accrued transaction losses of $32.6 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 and business acquisitions.


For the ninethree months ended September 30, 2017,March 31, 2024, cash used inprovided by investing activities was $360.5$1.0 billion, primarily due to a net inflow related to consumer receivables of $729.5 million as a result of the purchaseand net proceeds from investments of marketable securities of $485.5$347.8 million. These were partially offset by the purchases of property and equipment and other investments of $32.0 million offset in partand $2.9 million, respectively.

For the three months ended March 31, 2023, cash provided by investing activities was $623.9 million, primarily due to a net inflow related to consumer receivables of $428.3 million and net proceeds from maturities and salesinvestments of marketable securities of $171.2$232.7 million. Additional uses of cashThese were as a result of a payment for investment in a privately held entity of $25.0 million andpartially offset by the purchasepurchases of property and equipment and other investments of $19.6 million.$32.3 million and $4.8 million, respectively.
For the nine months ended September 30, 2016, cash used in investing activities was $111.9 million as a result of the purchase of marketable securities of $139.1 million, offset in part by proceeds from maturities and sales of marketable securities of $47.2 million. Additional uses of cash were as a result of the purchase of property and equipment of $19.7 million.


Cash Flows from Financing Activities

For the ninethree months ended September 30, 2017,March 31, 2024, cash provided by financing activities was $431.1$32.4 million primarily as a result of $393.4a change in customer funds of $875.9 million, in net proceeds from the Notes offering and as a result of proceeds from issuances of common stock fromupon the exercise of options and purchases under theour employee stockshare purchase plan net of $111.9 million, offset in part by the settlement of warrant with Starbucks of $54.8$19.9 million, and payments for employee tax withholding related to vestinga net increase in interest-bearing deposits of restricted$18.7 million. These were partially offset by net repayments under Warehouse Facilities borrowings of $630.0 million as well as repurchases of common stock units of $18.3$252.1 million.

For the ninethree months ended September 30, 2016,March 31, 2023, cash used byin financing activities was $42.8$9.1 million primarily as a result of proceeds from issuancesnet repayments under Warehouse Facilities borrowings of common stock from the exercise$644.6 million. The majority of options and purchases under the employee stock purchase plan, net of $48.3 million,this was offset by paymentsa change in offering costs related to our initial public offeringcustomer funds of $5.5$620.1 million and a net increase in interest-bearing deposits of $13.6 million.

50

Contractual Obligations and Commitments

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 10, Indebtedness, of the Notes to the Condensed Consolidated Financial Statements for more details on this transaction.
There were no other material changes in our commitments under contractual obligations, except for scheduled payments from the ongoing business, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements during the periods presented.


Critical Accounting Policies and Estimates
    
Our critical accounting policies are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016.

Our critical accounting policies have not materially changed during the nine months ended September 30, 2017. 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.



There were no significant changes in our critical accounting estimates during the quarter ended March 31, 2024 compared to those previously disclosed in “Critical Accounting Policies and Estimates” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Recent Accounting Pronouncements


See “Recent Accounting Pronouncements” described in Note 1, Description of theBusiness and Summary of Significant Accounting Policies within Notes to the Condensed Consolidated Financial Statements.


Item 3. Quantitative and Qualitative Disclosures About Market Risk


We have operations both withinBitcoin Market Price Risk

Our bitcoin investment is measured using observed prices from active exchanges and adjustments are recorded in net income through “other expense (income), net” on the United Statescondensed consolidated statements of operations. The bitcoin market price may fluctuate significantly and globally, and we are exposed to market risksa decline in the ordinary coursemarket price of bitcoin could result in a material adverse effect on our business, includingfinancial results in future periods. As of March 31, 2024, the effects of interest rate changes and foreign currency fluctuations. Information relating to quantitative and qualitative disclosures about these market risks is described below.

Interest Rate Sensitivity

Our cash and cash equivalents, and marketable securities as of September 30, 2017, 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,bitcoin investment included in other non-current assets was $573.3 million, and marketable securities would not be significantly affected by either an increase or decrease in interest rates due mainly tofor the short-term nature ofthree months ended March 31, 2024, we recognized a majority of these instruments. Additionally, we have$233.4 million gain from the ability to hold these instruments until maturity if necessary to reduce our risk. Any future borrowings incurred under our credit facility would accrue interest at a floating rate based on a formula tied to certain market rates at the time of incurrence (as described above). A hypothetical 100 basis point increase or decrease in interest rates would not have a material effect on our financial results.

Foreign Currency Risk

Mostremeasurement of our revenue is earned in U.S. dollars, and therefore our revenue is not currently subject to significant foreign currency risk. Our foreign operations are denominated in the currencies of the countries in which our operations are located, and may be subject to fluctuations due tobitcoin investment.

There have been no additional material changes in foreign currency exchange rates, particularly changesmarket risk from the information presented in the Japanese Yen, Canadian Dollar, Australian Dollar, EuroPart II, Item 7A. "Quantitative and British Pound. Fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and lossesQualitative Disclosures About Market Risk" in our statement of operations. A 10% increase or decrease in current exchange rates would not have a material impactAnnual Report on our financial results.Form 10-K for the year ended December 31, 2023.

51


Item 4. 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 Quarterly Report on Form 10-Q.10-Q (the "Evaluation Date"). 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 such date,the Evaluation Date, 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 Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



52


Part II—Other Information



Item 1. 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 For information regarding legal proceedings in which we are involved, see “Litigation and Regulatory Matters” 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, alleges that Caviar misclassified Mr. LevinNote 17, 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 has been 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 California for the County of San Francisco (Superior Court) on November 7, 2016. Plaintiffs claim that Caviar misclassified its couriers as independent contractors resulting in numerous violations of the California Labor Code, pursuant to which plaintiffs seek 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,Condensed Consolidated Financial Statements, which is subject to final confirmationincorporated herein by the Superior Court.reference.

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, depending on the level of income for the period.



53


Item 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 Quarterly Report on Form 10-Q, including the section titled “Management’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations”Operations and our condensed 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.


The following description of risk factors includes any material changes to, and supersedes the description of, risk factors associated with the Company’s business previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 20162023 under the heading “Risk Factors.”


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 buy now, pay later ("BNPL") platform;
risks related to the banking ecosystem, including through Square Financial Services, Inc. ("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.

54


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.

55


Risks Related to Our Business and Our Industry

Our business depends on a strong 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 sellers and buyers will trust us and find value in building and growing their businesses with our products and services. Maintaining, protecting, and enhancing our brand is critical to expanding our base of sellers, buyers, and

other third-party partners, as well as increasing engagement with our products and services. This will depend largely on our ability to maintain trust, be a technology leader, and continue to provide high-quality and secure products and services. Any negative publicity about our industry 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 seller and buyer complaints, our privacy and security practices, litigation, regulatory activity, and the experience of sellers and buyers with our products or services, could adversely affect our reputation and the confidence in and use of our products and services. Harm to our brand can arise from many sources, including failure by us or our partners 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. If we do not successfully maintain a strong and trusted brand, our business could be materially and adversely affected.


Our growth rate has slowed at times and may not be sustainableslow or decline in the future, and our growth rates in each of our reporting segments may vary. Future revenue and gross 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 $850.2 million in 2014 to $1,267.1 million in 2015 and to $1,708.7 million in 2016. During the nine months ended September 30, 2016 and 2017, our total net revenue grew from $1,256.8 million to $1,598.2 million, respectively. 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 Quarterly Report on Form 10-Q. 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 other users of our servicescustomers 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, changes in the regulatory environment or regulations applicable to us,
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 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.


WeDuring the three months ended March 31, 2024 and March 31, 2023, we generated a net lossesincome of $171.6 million, $212.0$470.8 million and $154.1net income of $95.8 million, for the years ended December 31, 2016, 2015, and 2014, respectively. During the nine months ended September 30, 2017 and 2016, we generated net losses of $47.2 million and $156.4 million, respectively.

As of September 30, 2017,March 31, 2024, we had an accumulated deficit of $827.1$56.4 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; expansion of office space and otheracquisitions; 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
56


From time to time, we have made and may make decisions that may reducewill have a negative effect on our short-term operating results if we believe those decisions will improve the experiences of our sellers, their customers, and other users of our products and services, which we believe will improve our operating results over the long term. For example, we have recently implemented, and may in the future implement, 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.

57


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.

58


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.

59


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;

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
60



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.

61


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 or restrictions on 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;

increased exposure to public health issues such as pandemics, and related industry and governmental actions to address these issues; and
62



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. Should we or our bank partners be unable to satisfy these standards, we may have to discontinue certain product offerings or discontinue certain third-party relationships, and our business and operations may be materially and adversely affected.

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.

63


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 Quarterly Report on Form 10-Q. 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.

64


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 Square Cash 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.expand to include new products and 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, 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.


65


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 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.

66


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 userscustomers 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.

67


A significant natural or man-made disaster could have similar effects.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.

68


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 types of illegitimate transactions can also expose us to governmental and regulatory sanctions as well as potentially prevent us from satisfying our contractual obligations to our third party partners, which may cause us to be in breach of our obligations. The highly automated nature of, and liquidity offered by, our payments services make us a target for illegal or improper uses, including 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 or bank account numbers, or other deceptive or malicious practices, potentially can steal significant amounts of money from businesses like ours. In configuring our payments services, we face an inherent trade-off between security and customer convenience. 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 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. Illegitimate transactions can also expose us to governmental and regulatory enforcement actions and potentially prevent us from satisfying our contractual obligations to our third-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 or from our 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. 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 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,criminal 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.
69



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 e-commerce, mobile commerce, and proximity payment devices (including contactless payments via NFC technology). Other potential changes are on the horizon as well, such as developments in crypto-currencies 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 sellers will achieve significant commercial acceptance. Our ability to develop new products and services may be inhibited by industry-wide standards, payment card networks, laws and regulations, resistance to change from buyers or sellers, 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. 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 sellers or their 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 seller and buyer 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 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 themthe rules and change them.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 assessments to the payment card networks, as well asbank settlement fees to our acquiringthird-party payment processors, to process transactions.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
70


We rely on third parties 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.

Our quarterly results of operations may fluctuate significantly 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 attract and retain new customers; the timing, effectiveness, 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 newprovide services and process payments, including for cards issued under our own brands. In the event these third parties fail to continue convincing customersprovide 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 adopt additional offerings; increases inprovide these services or renew our agreements with them on terms acceptable to us or at all, and timing of expenses that we are not able to find suitable alternatives, our business may incur to growbe materially 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, 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 Quarterly Report on Form 10-Q.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 plan to continue 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 existing and developing new internal administrative infrastructure, particularly our operational, financial, communications, and other internal systems and procedures;

71


improving and implementing 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;

installing enhanced management information and control system; and
identifying and mitigating new and developing risks;

preserving our core values, strategies, and goals and effectively communicating these to our employees worldwide.
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 may not be ablemust balance the need for additional controls and systems with the ability to efficiently develop and launch new features for our products and servicesservices. 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 by their customers declines,other 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 businesses would experience reduced salesmetrics, and process fewer payments with us or, 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 more of our 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 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 loans may be paid more slowly, or not at all. 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, 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 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. 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"), 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 economic 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.

If we are unable to maintain, promote, and grow our brand through effective marketing and communications strategies, our brand and business may be harmed.

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 to expanding our base of customers. Maintaining and promoting our brand will depend largely on our ability to continue to provide useful, reliable, and innovative products and services, which we may not do successfully. We may introduce, 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 sellers would be materially harmed.

We have received a significant amount of media coverage since our formation. We have also been from time to time in the past, andwe may in the future be, the target of incomplete, inaccurate, and misleadingmake adjustments to improve their accuracy or false statements about our company,relevance. Further, as our business and our products and servicesdevelops, we may revise or cease reporting metrics if we determine that could damage our brand and deter people and enterprises from adopting our services. Negative publicity about our company or our management, including about our product quality and reliability, changes to our products and services, privacy and security practices, litigation, regulatory enforcement, and other actions, as well as the actionssuch metrics are no longer appropriate measures of our performance. If investors, customers andor other users ofstakeholders do not believe our services, even if inaccurate, could cause a loss of confidence in us. Our ability to respond to negative statements about usreporting metrics accurately reflect our business or they disagree with our methodologies, our reputation may be limited by legal prohibitions on permissible public communications by us during future periods.

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

We currently offer our services and products in multiple countries and plan to continue expanding our business further globally. Additional 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, and 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;
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 and security;
compliance with U.S. and foreign anti-bribery laws;
potential tariffs, sanctions, or other trade barriers including fines;

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 provide 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, our acquiring processors, the payment card issuers, various financial institution partners (including those for Square Capital and Square Cash), 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, and the provision of information and other elements of our services. For example, we currently rely on three acquiring processors in the United States, Canada and Japan and two for each of Australia and the United Kingdom. While we believe there are other acquiring processors that could meet 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, including as a result of financial difficulty or insolvency, errors in their systems or events beyond their control, or refuse to provide these services on terms acceptable to us or at all, and we are not able to find suitable alternatives, our business may be materially and adversely affected.impacted.

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 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 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. 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 sellers 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 sellers or their customers, and may materially and adversely affect our business.

In addition, our hardware interoperates with mobile devices developed by third parties. For example, the current version of our magstripe reader plugs into the audio jack of most smartphones and tablets. In September 2016, Apple introduced the iPhone 7, which does not have an audio jack, and instead Apple provided an adapter that can be inserted into a connectivity port. This change and other potential changes in the design of future mobile devices may limit the interoperability of our hardware and software with such devices and require modifications to our hardware or software. If we are unable to ensure that our hardware and software continue to interoperate effectively with such devices, if doing so is costly, or if existing merchants decide not to utilize additional parts necessary for interoperability, our business may be materially and adversely affected.



Many of our key components are procured from a single or limited number of suppliers. Thus, we are at risk of shortage, price increases, tariffs, changes, delay, or discontinuation of key components, which could disrupt and materially and adversely affect our business.


Many of 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.

supply. Due to our reliance on the components or products produced by third-party suppliers, such as these, we are subject to the risk of shortages and long lead times or other disruptions 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, 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 particular product, our contract manufacturers and suppliers may not be able to deliver sufficient quantities of that product to meet our requirements, or we may carry excess inventory, all of which could adversely affect our business.


72


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, 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.basis or impact our cost of goods sold. This could harm our relationships with our sellers, prevent us from acquiring new sellers, and materially and adversely affect our business.


Some of our hardware devices manufactured in China are subject to 25% tariffs when imported to the United States, while some other hardware devices are subject to tariffs at 7.5%. These tariffs negatively affect our gross margin on the impacted products, and increases in our pricing as a result of tariffs would reduce the competitiveness of our products if our competitors do not make similar pricing adjustments. The impact of any increased or new tariffs or other trade restrictions could have a material and adverse effect on our business, financial condition, and results of future operations.

Our business could be harmed ifservices must integrate with a variety of operating systems. If we are unable to accurately forecastensure that our 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, 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 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 adequately manageestimate the amount payable under our product inventory.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 invest broadly inmay 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 such investments are driven byadversely affect our expectationsbusiness, operating results, and financial condition.

73


Economic, Financial, and Tax Risks

A deterioration of the future success of a product. For example, our products 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 sufficiently in advance with our third-party suppliers and contract manufacturers based on our estimates of future demand for particular products. Our ability to accurately forecast demand for our products could be affected by many factors, including an increase or decrease in demand for our products or for our competitors’ products, unanticipated changes in general marketmacroeconomic conditions and the change in economic conditions.

If we underestimate demand for a particular product, our contract manufacturers and suppliers may not be able to deliver sufficient quantities of that product to meet our requirements, 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,business and financial results.

Our performance is subject to economic conditions and the acquisitionimpact of additional sellers. If we overestimate demand forsuch 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, product,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 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 excess inventory levelsmaterial and adverse impacts to our business as a result of the uncertainty 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 that productparticipation 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 the excess inventoryconsumer loan products, such as Cash App Borrow, 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,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 gross profitsuppliers, 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.


Our products Furthermore, our investment portfolio, which includes U.S. government and servicescorporate securities, is subject to general credit, liquidity, market, and interest rate risks, which may not function as intended due to errorsbe 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 our software, hardware, and systems, product defects, or due to security breaches or human error in administering these systems, whichfair value, requiring impairment charges that could materially and adversely affect our business.financial results. In addition, from time to time we have reduced expenses and needed to restructure or reorganize certain portions of our operations in order to align our business with market conditions and our strategies, any of which can result in near term expense and harm to our growth prospects.


We are currently subletting some of our office space. An economic downturn and our work-from-home practices have caused and may in the future cause us to need less office space than we are contractually committed to leasing. We have, and may continue 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 leasing commitments.

We may not be able to secure financing on favorable terms, or at all, to meet our future capital needs, and our 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, 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 or seek 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 additional 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.

74


We have financing arrangements with financial institutions in Australia, New Zealand, the United States and the United Kingdom (collectively, the “Warehouse Facilities”) to partly fund our BNPL platform. The terms of the Warehouse Facilities contain covenants that may be triggered 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 default occur under the Warehouse Facilities, we may not be able to draw future funding from those Warehouse Facilities or the debt outstanding under the Warehouse Facilities may be accelerated and our business and financial results could be adversely impacted.

Our software, hardware,credit facility contains affirmative and systemsnegative 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 contain undetected errorsmake 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 covenants may be affected by events beyond our control, and breaches of these covenants could result in a default under our existing credit facility or our senior notes and any 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 or may prevent us from borrowing under our credit facility.

If we raise additional funds through further issuances of equity 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 obtain additional financing in the future on favorable terms or at all could be adversely 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 March 31, 2024, 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.

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 convertible 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 convert 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 Class 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 elect 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 diluted earnings per share to the extent such shares are not anti-dilutive. We will reevaluate this policy from time to time as conversion notices are received from holders of the Convertible 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 fundamental 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 Notes in cash at maturity.

75


Our ability to make required cash payments in connection with conversions of the Convertible Notes, repurchase the Notes as required following 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 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 solely shares of our Class A common stock to settle 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 credit facility, our other outstanding indebtedness, or agreements governing our future indebtedness and 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.

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, third-party 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 sellers, and other destructive outcomes. Moreover, third-party 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.

76


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,non-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 have beenin the past disagreed, and may in the future 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.

On August 16, 2022, the Inflation Reduction Act 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.

77


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 March 31, 2024, 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 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, 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 sellers 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.


Square Capital is subject to additional risks relating to the availability of capital, seller payments, availability
78


Legal, Regulatory, and structure of its bank partnership, expansion of its products, and general macroeconomic conditions.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 Quarterly Report on Form 10-Q. Maintaining and growing Square Capital is dependent on institutional third-party investors purchasing the 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 continued growth. 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. Sellers have multiple contractual obligations, including but not limited to, the obligation to use Square as their only card payment processing service until the agreed-upon fixed amount of repayment of business loans is made. To the extent a seller breaches an obligation, 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 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. We recently 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, includingand include, or may in the future include, those relating to or placing restrictions upon 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, 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,compliance with the Payment Card Industry Data Security Standard, a set of requirements designed to nameensure that all companies that process, store, or transmit payment card information maintain a few. Suchsecure 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. In addition, certain regulators have imposed and in the future may impose additional requirements on our business as a condition for obtaining or maintaining permits, licenses or rights to conduct our business that restrict our business or our ability to take certain actions. If we fail to comply with the terms of such permits, licenses or other requirements, we could face regulatory or other enforcement actions, penalties or we may not be able to continue operating our business in the same manner.

Laws, regulations, and standards are subject to changes and evolving interpretations and application, 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, or we might not be able to continue operating the feature in Cash App, at least in current form. 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 need to make other changes to our business operations, our products or our services as a result of changes in laws, regulations, standards, or decisions made by governing or regulatory authorities, which could cause the price of our Class A common stock to decrease.

79


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.

80


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 sellers and buyers 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 sellers and their 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 ParliamentUnion’s General Data Protection Regulation (“GDPR”) and similar legislation in the CouncilUnited Kingdom (“U.K.”) impose stringent 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 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 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 2016 adoptedthe 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 Generalbasis 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 U.K., the Data Protection Act and legislation referred to as the UK GDPR substantially enact the EU GDPR into U.K. law, with penalties for noncompliance of up to the greater 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 (GDPR)of Privacy and Electronic Communications (“ePrivacy Regulation”), effectivewould 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 May 2018, that will supersede currentthe 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 more stringent data privacy and data protection requirements relating to personal information of California residents, and provide greaterfor penalties for noncompliance. Innoncompliance of up to $7,500 per violation. Aspects of the United Kingdom, a Data Protection Billinterpretation 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 been introducedarisen 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 HouseCCPA 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 Lords that proposesrecently proposed or enacted legislation potentially are far-reaching and may require us to substantially implement the GDPR. Nevertheless, the Data Protection Bill must complete the legislative process, so it remains unclear what modifications will be mademodify our data processing practices and policies and to the final legislation.
We may not be ableincur substantial costs and expenses in an effort to respond quickly or effectively to regulatory, legislative and other developments, andcomply. Further, variances in 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 changes in laws and regulations or newtheir interpretations of existing laws and regulations, we may become subject to audits, inquiries, investigations, lawsuits, penalties, and other liabilities that did not previously apply.increase our compliance costs.


81


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, industry standards, or orders orcontractual obligations could result in claims, demands, and litigation by private parties, investigations and other local, state, federal, or international privacy, data security or consumer protection-related lawsproceedings by regulatory authorities, and regulations couldfines, penalties and other liabilities, may harm our reputation and competitive position, and may cause sellers or theirour 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.


Our business is subject to complex and evolving regulations and oversight related to our provision of payments services and other financial services.
82



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 enforced 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 foreignrestrictions.

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.

Although we have a compliance program focused on applicable laws, rules, and regulations and 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.

Failure to comply with anti-bribery, anti-corruption, and anti-money laundering laws could subject us to penalties and other adverse consequences.


We are subject to a number of regulatory risks in the Foreign Corrupt Practices Act (FCPA),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 U.K. Briberyway we operate our BNPL platform. In addition, the CFPB recently announced plans to regulate companies offering BNPL products. Increased compliance obligations and regulatory scrutiny may negatively impact our revenue and profitability. Any inability, or 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.

Our subsidiary Cash App Investing is a broker-dealer registered with the SEC and a member of FINRA, and therefore is subject to extensive regulation and scrutiny.

Our subsidiary Cash App Investing facilitates transactions in shares and fractionalized shares of publicly-traded stock and exchange-traded funds by users of our Cash App through a third-party clearing and carrying broker, DriveWealth LLC (“DriveWealth”). Cash App Investing is registered with the SEC as a broker-dealer under the Exchange Act and other anti-corruption, anti-briberyis a member of FINRA. Therefore, Cash App Investing is subject to regulation, examination, and anti-money laundering laws in various jurisdictions. From timesupervision by the SEC, FINRA, and state securities regulators. The regulations applicable to time, we may leverage third parties to helpbroker-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 our businesses abroad. We and our third-party intermediaries may have direct or indirect interactions with officials and employeesqualification 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 ourofficers, employees, and agents will not take actions in violation of our policies and applicable law, for which we may be ultimately held responsible. Any violationindependent contractors. As part of the FCPA or other applicable anti-bribery, anti-corruption laws, and anti-money laundering laws could result in 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.

Weregulatory process, broker-dealers are subject to risks relatedperiodic examinations by their regulators, the purpose of which is to litigation, including intellectual property claims, and regulatory matters or disputes.

We may be, and have been, subject to claims, lawsuits (including class actions and individual lawsuits), government investigations, and other proceedings involving intellectual property, consumer protection, privacy, labor and employment, immigration, import and export practices, product labeling, competition, accessibility,determine compliance with securities tax, marketing and communications practices, commercial disputes, and other matters. For example, we are involved in putative class action lawsuits concerning independent contractors in connection with our Caviar business.

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.


Becoming a public company has raised our public profile, which could result in increased litigation or other legal or regulatory proceedings. In addition, some of the 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.

83


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.

84


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 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.

85


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 September 30, 2017, we had 341We routinely apply for patents issued in the United StatesU.S. and abroad and 607internationally to protect innovative ideas in our technology, but we may not always be successful in obtaining patent applications on file in the United States and abroad, though there can be no assurance that any or all ofgrants from these 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 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.



86


WeAssertions by third parties of infringement or other violation by us of their intellectual property rights could harm our business.

Third parties have asserted, and may not be able to secure financing on favorable terms, or at all, to meet our future capital needs.

We 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, there is no guarantee that this will continue to be true in the future. Infuture assert, that we have infringed, misappropriated, or otherwise violated their copyrights, patents, and other intellectual property rights. Although we expend significant resources to seek to comply with the statutory, regulatory, and judicial frameworks and the terms and conditions of statutory 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 the future, particularly as new technologies such as generative AI impact the industries in which we operate. It is difficult to predict whether assertions of third-party intellectual property rights or any infringement or misappropriation claims arising from such assertions will substantially harm our business, operating results, 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 defense 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 forum, an adverse outcome of a dispute may require us to pay significant damages, which may be even 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: our customers and communities, global climate action, our people, and corporate governance. 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 building a diverse workforce and one of our climate goals is to achieve net zero carbon for operations by 2030. The implementation of our ESG commitments, initiatives, and goals may require additional capitalinvestments, 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 respondfail, to business opportunities, refinancing needs, businessmake such progress or achievements, or to maintain ESG practices that meet evolving stakeholder expectations, or if we revise any of our ESG commitments, initiatives, or goals, our reputation and financial challenges, regulatory surety bond requirements, acquisitions, or unforeseen circumstancesour ability to attract and may decide to engage in equity or debt financings or enter into additional credit facilities for other reasons,retain employees could be harmed, and we may not be ablenegatively 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 secure any such additional debt or equity financing or refinancingcarbon emissions disclosures and other aspects of ESG may result in increased compliance requirements 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 supply chain, and may increase our operating costs. For example, in October 2023, the California 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 companies doing business in California, and the SEC recently adopted rules that will require registrants to respondprovide climate-related information in their registration statements and annual reports, such as disclosure of material climate-related risks, Board of Directors’ oversight and risk management activities, material greenhouse gas emissions, and material climate-related targets and goals. The SEC rules will also require entities to business challenges could be significantly limited.

Any debt financing obtained by usquantify certain effects of severe weather events and other natural conditions in the future could also involve restrictive covenants relatingaudited financial statements. While the SEC's rules have been stayed pending judicial review, to our capital-raising activitiesthe extent they become effective, we expect to expend significant time 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 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 abilityresources to comply with these covenants may be affected by events beyond our control, and breaches of these covenants could result in a default under the credit facility and any future financial agreements into which we may enter. If not waived, defaults could cause our outstanding indebtedness under our credit facility and 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).requirements.

If we raise additional funds through further issuances of equity, convertible debt securities, 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.

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

In pursuing our business strategy, we routinely conduct discussions and evaluate opportunities for possible acquisitions, strategic investments, entries into new businesses, divestitures, and other transactions. We continue to seek to acquire or invest in businesses, apps, or technologies that we believe could complement or expand 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:
87
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 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.

For example, in May 2014 and February 2016, the FASB issued new accounting standards for revenue recognition and leasing, respectively, which will be effective for us in fiscal year 2018 and fiscal year 2019, respectively. While we know they will have an impact, we are still evaluating the extent that these new accounting standards will have on our consolidated financial statements and related disclosures. Changes resulting from these 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.
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. 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.


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 82.5%52% of the voting power of our combined outstanding capital stock as of September 30, 2017. Our executive officers and directors and their affiliates held approximately 69.7% of the voting power of our combined outstanding capital stock as of September 30, 2017.March 31, 2024. 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, 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 sellers 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 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 Quarterly Report on Form 10-Q, 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;

rumors and market speculation involving us or other companies in our industry;
88


price and volume fluctuations in the overall stock market from time to time;

actual or perceived security incidents that we or our service providers may suffer; and
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;
actual or anticipated developments in our business, our competitors’ businesses, or the competitive landscape generally.
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;
changes in accounting standards, policies, guidelines, interpretations, or principles;
any significant change in our management; and
general economic conditions and slow or negative growth of our markets.


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.
Servicing
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 Notes may require a significant amount of cash, and we may notCDIs are traded in Australian Dollars on the ASX. The two exchanges also have sufficient cash ordiffering vacation schedules. Differences in the ability to raisetrading schedules, as well as volatility in the funds necessary to settle conversionsexchange rate of the Notestwo currencies, among other factors, may result 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. Upon satisfaction of these conditions or occurrence of these events, if holders of the Notes elect to convert their Notes, unless we elect to deliver solely shares ofdifferent trading prices for our Class A common stock to settle such conversion, we will be required to make cash payments in respect ofon 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.two exchanges.

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 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 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 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, results of operations and financial condition. If the payment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes or to pay cash upon conversion or at maturity of the Notes.


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.
In connection with establishing their initial hedges of
From time to time, the convertible note hedge and warrant transactions, the option counterparties purchased shares of our Class A common stock and/or entered into various derivative transactions with respect to our Class A common stock. 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.


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.


89


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.


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.

90
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.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.

Issuer Purchases of Equity Securities

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.

The following table summarizes the share repurchase activity for the three months ended March 31, 2024 (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
January 1, 2024 - January 31, 20241,503 $66.83 1,503 $742,746 
February 1, 2024 - February 29, 20241,104 $67.52 1,104 $668,200 
March 1, 2024 - March 31, 2024956 $80.66 956 $591,093 
Total3,563 3,563 
(i) Average price paid per share for open market purchases includes broker commissions.

Item 3. Defaults Upon Senior Securities

Not applicable.


Item 4. Mine Safety Disclosures

Not applicable.


Item 5. Other Information
Not applicable.

Securities Trading Plans of Directors and Executive Officers

During the quarterly period ended March 31, 2024, 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 March 1, 2024, Chrysty Esperanza, our Chief Legal Officer, adopted a Rule 10b5-1 trading arrangement providing for the sale from time to time of an aggregate of up to 36,790 shares of our Class A common stock. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c). The duration of the trading arrangement is until May 31, 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 quarter ended March 31, 2024.


91


Item 6. Exhibits

The documents listed in the Exhibit Index of this Quarterly Report on Form 10-Q are incorporated by reference or are filed with this Quarterly Report on Form 10-Q (numbered in accordance with Item 601 of Regulation S-K).


SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SQUARE, INC.

Date:November 8, 2017By:/s/ Jack Dorsey
Jack Dorsey
President, Chief Executive Officer, and Chairman
(Principal Executive Officer)
By:/s/ Sarah Friar
Sarah Friar
Chief Financial Officer
(Principal Financial Officer)



EXHIBIT INDEX
Incorporated by Reference
Exhibit NumberDescriptionFormFile No.ExhibitFiling Date
10.18-K001-3762210.1April 1, 2024
10.2.1+10-K001-3762210.2.2February 22, 2024
10.2.2+10-K001-3762210.2.4February 22, 2024
10.3+10-K001-3762210.6February 22, 2024
10.4+10-K001-3762210.8February 22, 2024
31.1
31.2
32.1†
101The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income (Loss), (iv) Condensed Consolidated Statements of Cash Flows, (v) Condensed Consolidated Statements of Stockholders’ Equity, and (vi) Notes to Condensed Consolidated Financial Statements.
104Cover Page Interactive Data File, formatted in Inline XBRL (included in Exhibit 101)
Incorporated by Reference
Exhibit NumberDescriptionFormFile No.ExhibitFiling Date
32.1
101.INSXBRL Instance Document.
101.SCHXBRL Taxonomy Extension Schema Document.
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.
101.LABXBRL Taxonomy Extension Labels Linkbase Document.
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.


+     Indicates management contract or compensatory plan.
†    The certifications attached as Exhibit 32.1 that accompany this Quarterly Report on Form 10-Q are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Square,Block, Inc. 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 Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.




64
92


SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

BLOCK, INC.
Date:May 2, 2024By:/s/ Jack Dorsey
Jack Dorsey
Block Head and Chairperson
(Principal Executive Officer)
By:/s/ Amrita Ahuja
Amrita Ahuja
Chief Financial Officer & Chief Operating Officer
(Principal Financial Officer)
93