EX-99.1

Exhibit 99.1
Q1 2018 Shareholder Letter
SQUARE.COM/INVESTORS
FEATURED SELLER SisterHearts In Arabi, LA

Total net revenue in the first quarter of 2018 includes $34 million of bitcoin revenue (see page 7 for further detail).

A reconciliation of non-GAAP metrics used in this letter to their nearest GAAP equivalents is provided at the end of this letter.

Adjusted Revenue is defined as total net revenue less transaction-based costs and bitcoin costs.

Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by Adjusted Revenue.

All bitcoin revenue and costs are related to Cash App activity and are recorded based on the following:

•

Bitcoin revenue is the total sale amount of bitcoin to customers.

•

Bitcoin costs are the total amount of bitcoin that we purchase. We purchase bitcoin to facilitate the buying of bitcoin conducted by Cash App customers.

•

Adjusted Revenue from bitcoin is our bitcoin revenue less our bitcoin costs.

Adjusted Revenue was $307 million in the first quarter of 2018, up 51% year over year. Adjusted Revenue in the first quarter of 2018 includes $0.2 million related to bitcoin.

Transaction-based revenue was $523 million in the first quarter of 2018, up 30% year over year. Transaction-based revenue as a percentage of GPV was 2.93% in the first quarter of 2018, down from 2.96% in the first quarter of 2017. Transaction-based profit as a percentage of GPV was 1.09% in the first quarter of 2018, up from 1.07% in the first quarter of 2017. Excluding unused promotional processing credits associated with the contactless and chip reader in the first quarter of 2017, transaction-based revenue as a percentage of GPV was consistent year over year. Transaction-based profit continued to benefit from growth in higher-margin products and improvements in our transaction cost profile. GPV from higher-margin products—Invoices, Virtual Terminal, and eCommerce API payments—doubled year over year.

Subscription and services-based revenue was $97 million in the first quarter of 2018, up 98% year over year. Growth was driven primarily by Instant Deposit, Caviar, and Square Capital. Instant Deposit benefited from volume growth in both our seller base and the Cash App. Cash Card is also becoming a more meaningful contributor to subscription and services-based revenue growth. In the first quarter of 2018, Square Capital facilitated over 50,000 business loans totaling $339 million, up 35% year over year.

Hardware revenue in the first quarter of 2018 was $14 million, up 60% year over year, driven by the launch of Square Register, which began shipping

TOTAL NET REVENUE

LOGO

Under U.S. GAAP, the current determination is that bitcoin sales are accounted for as gross revenue under ASC 606, Revenue from Contracts with Customers, given Square currently controls the bitcoin prior to sale.


FINANCIAL IMPACT FROM BITCOIN
Bitcoin revenue			$34.1M
Bitcoin costs			– $33.9M
Adjusted Revenue from bitcoin			$0.2M

ADJUSTED REVENUE

LOGO

Adjusted Revenue is defined as total net revenue less transaction-based costs and bitcoin costs.

Based on our results in the first quarter, we are raising our full-year guidance for total net revenue and Adjusted Revenue to reflect the ongoing momentum of our business and the acquisition of Zesty, which closed on April 19. Given the significant market opportunity ahead of us, we will continue to reinvest in our business to drive future growth and are therefore maintaining our full-year Adjusted EBITDA guidance.

Full-year 2018 guidance does not include the impact from the Weebly acquisition. We will update guidance after the completion of the transaction, which is subject to customary closing conditions including regulatory approvals and is expected to close during the second quarter of 2018.

We have not reconciled Adjusted EBITDA and Adjusted EPS guidance to their GAAP equivalents as a result of the uncertainty regarding, and the potential variability of, reconciling items such as share-based compensation expense and weighted-average fully diluted shares outstanding. Accordingly, a reconciliation of these non-GAAP guidance metrics to their corresponding GAAP equivalents is not available without unreasonable effort. However, we have provided a reconciliation of GAAP to non-GAAP metrics in tables at the end of this letter. It is important to note that the actual amount of such reconciling items would have a significant impact if they were included in our Adjusted EBITDA and Adjusted EPS.

1 How to Survive in an Omnichannel World: Best Practices for Omnichannel Retailing, Euromonitor International

This letter contains forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact could be deemed forward-looking, including, but not limited to, statements regarding the strategies, areas of focus, and future performance of Square, Inc. and its consolidated subsidiaries (the Company); the Company’s expected financial results for future periods; future growth in the Company’s businesses and products; the expected closing and impact of the Company’s recent proposed acquisitions, including our expectations regarding our ability to integrate such acquisitions and their impact on our growth and financial results; the Company’s expectations regarding scale, profitability, and the demand for or benefits from its products, product features, and services in the U.S. and in international markets; and management’s statements related to business strategy, plans, and objectives for future operations. In some cases, forward-looking statements can be identified by terms 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. Such statements are subject to a number of known and unknown risks, uncertainties, assumptions, and other factors that may cause the Company’s actual results, performance, or achievements to differ materially from results expressed or implied in this letter. Investors are cautioned not to place undue reliance on these statements. Actual results could differ materially from those expressed or implied, and reported results should not be considered as an indication of future performance.

Risks that contribute to the uncertain nature of the forward-looking statements include, among others, the Company’s ability to deal with the substantial and increasingly intense competition in its industry; changes to the rules and practices of payment card networks and acquiring processors; the Company’s ability to consummate, and the impact of, any potential acquisitions or divestitures, strategic investments, or entries into new businesses; the effect of evolving regulations and oversight related to the Company’s provision of payments services and other financial services; the effect of management changes and business initiatives; and changes in political, business, and economic conditions; as well as other risks listed or described from time to time in the Company’s filings with the Securities and Exchange Commission (the SEC), including the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, which is on file with the SEC and available on the investor relations page of the Company’s website. Additional information will also be set forth in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2018. All forward-looking statements are based on information and estimates available to the Company at the time of this letter and are not guarantees of future performance. Except as required by law, the Company assumes no obligation to update any of the statements in this letter.

To supplement our financial information presented in accordance with generally accepted accounting principles in the United States (GAAP), we consider certain operating and financial measures that are not prepared in accordance with GAAP, including Gross Payment Volume, Adjusted Revenue, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income (Loss), Adjusted EPS, and non-GAAP operating expenses. 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 payments solution providers.

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

Adjusted Revenue is a non-GAAP financial measure that we define as our total net revenue less transaction-based costs and bitcoin costs. We believe it is useful to subtract transaction-based costs and bitcoin costs from total net revenue to derive Adjusted Revenue as this is a primary metric used by management to measure our business performance, and it affords greater comparability to other payments solution providers. Substantially all of the transaction-based costs are interchange and assessment fees, processing fees, and bank settlement fees paid to third-party payment processors and financial institutions. While some payments solution providers present their revenue in a similar fashion to us, others present their revenue net of transaction-based costs because, unlike us, they pass through these costs directly to their sellers and are not deemed the principal in these arrangements. Under our standard pricing model, we do not pass through these costs directly to our sellers. We also deduct bitcoin costs because we consider our role in the bitcoin transactions to be facilitating customer access to bitcoin. Since we only apply a small margin to the market cost of bitcoin when we sell bitcoin to customers, and we have no control over the cost of bitcoin in the market, which tends to be volatile, we believe deducting bitcoin costs is a better reflection of the economic benefits as well as the Company’s performance from the bitcoin transactions. 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.

Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted EPS, and non-GAAP operating expenses are non-GAAP financial measures that represent our net loss and net loss per share, adjusted to eliminate the effect of share-based compensation expenses, amortization of intangible assets, amortization of debt discount and issuance costs in connection with our offering of convertible senior notes in the first quarter of 2017, the gain or loss on the sale of property and equipment, and impairment of intangible assets, as applicable. In addition to the items above, Adjusted EBITDA and non-GAAP operating expenses are non-GAAP financial measures that also exclude depreciation, other cash interest income and expense, other income and expense, and provision or benefit from income taxes, as applicable. 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.

We have included Adjusted EBITDA and Adjusted EPS 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 that Adjusted EBITDA and Adjusted EPS 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. Adjusted EBITDA and Adjusted EPS have limitations as financial measures, should be considered as supplemental in nature, and are not meant as substitutes for the related financial information prepared in accordance with GAAP.

These non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly titled measures presented by other companies.


GROSS PAYMENT VOLUME (GPV)	TOTAL NET REVENUE	NET INCOME (LOSS)



GPV MIX BY SELLER SIZE	ADJUSTED REVENUE	ADJUSTED EBITDA


	Q2	Current 2018	Previous 2018

Total net revenue	$740M to $760M	$3.00B to $3.06B	$2.82B to $2.88B

Adjusted Revenue	$355M to $360M	$1.40B to $1.43B	$1.30B to $1.33B

Year-over-year growth (midpoint)	49%	44%	34%

Adjusted EBITDA	$60M to $64M	$240M to $250M	$240M to $250M

Net income (loss) per share	$(0.04) to $(0.02)	$(0.04) to $0.00	$(0.08) to $(0.04)

Adjusted EPS (diluted)	$0.09 to $0.11	$0.44 to $0.48	$0.43 to $0.47




Jack Dorsey		Sarah Friar
CEO		CFO


	THREE MONTHS ENDED
	Mar 31, 2018		Mar 31, 2017
Revenue:
Transaction-based revenue	$	523,037	$	403,478
Subscription and services-based revenue		97,054		49,060
Hardware revenue		14,417		9,016
Bitcoin revenue		34,095		—

Total net revenue		668,603		461,554

Cost of revenue:
Transaction-based costs		327,911		257,778
Subscription and services-based costs		30,368		15,876
Hardware costs		19,702		12,662
Bitcoin costs		33,872		—
Amortization of acquired technology		1,580		1,807

Total cost of revenue		413,433		288,123

Gross profit		255,170		173,431

Operating expenses:
Product development		105,095		68,582
Sales and marketing		77,266		49,900
General and administrative		75,501		56,935
Transaction, loan and advance losses		18,031		11,891
Amortization of acquired customer assets		269		205

Total operating expenses		276,162		187,513

Operating loss		(20,992)		(14,082)

Interest and other expense, net		2,819		499

Loss before income tax		(23,811)		(14,581)

Provision for income taxes		175		509

Net loss	$	(23,986)		(15,090)

Net loss per share:
Basic	$	(0.06)	$	(0.04)

Diluted	$	(0.06)	$	(0.04)

Weighted-average shares used to compute net loss per share
Basic		395,948		366,737

Diluted		395,948		366,737


Assets	Mar 31, 2018		Dec 31, 2017
Current assets:
Cash and cash equivalents	$	738,586	$	696,474
Short-term investments		200,048		169,576
Restricted cash		27,688		28,805
Settlements receivable		700,646		620,523
Customer funds		152,661		103,042
Loans held for sale		78,821		73,420
Other current assets		91,933		86,454

Total current assets		1,990,383		1,778,294

Property and equipment, net		98,170		91,496
Goodwill		58,327		58,327
Acquired intangible assets, net		14,138		14,334
Long-term investments		176,672		203,667
Restricted cash		9,802		9,802
Other non-current assets		32,120		31,350

Total assets	$	2,379,612	$	2,187,270


Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	19,556	$	16,763
Customers payable		881,754		733,736
Settlements payable		116,902		114,788
Accrued transaction losses		28,309		26,893
Accrued expenses		57,997		52,280
Other current liabilities		27,214		28,367

Total current liabilities		1,131,732		972,827

Long-term debt		362,965		358,572

Other non-current liabilities		74,935		69,538

Total liabilities		1,569,632		1,400,937

Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0000001 par value: 100,000,000 shares authorized at March 31, 2018 and December 31, 2017. None issued and outstanding at March 31, 2018 and December 31, 2017.		—		—
Class A common stock, $0.0000001 par value: 1,000,000,000 shares authorized at March 31, 2018 and December 31, 2017; 287,921,742 and 280,400,813 issued and outstanding at March 31, 2018 and December 31, 2017, respectively.		—		—
Class B common stock, $0.0000001 par value: 500,000,000 shares authorized at March 31, 2018 and December 31, 2017; 112,462,337 and 114,793,262 issued and outstanding at March 31, 2018 and December 31, 2017, respectively.		—		—
Additional paid-in capital		1,682,581		1,630,386
Accumulated deficit		(871,307)		(842,735)
Accumulated other comprehensive loss		(1,294)		(1,318)

Total stockholders’ equity		809,980		786,333

Total liabilities and stockholders’ equity	$	2,379,612	$	2,187,270


Consolidated Statements of Operations		UNAUDITED
		In thousands, except per share data


	THREE MONTHS ENDED
Cash Flows from Operating Activities	Mar 31, 2018		Mar 31, 2017
Net loss	$	(23,986)	$	(15,090)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		10,160		9,437
Non-cash interest and other expense		4,847		1,534
Share-based compensation		46,824		31,670
Transaction, loan and advance losses		18,031		11,891
Deferred provision (benefit) for income taxes		(654)		99
Changes in operating assets and liabilities:
Settlements receivable		(81,452)		54,586
Customer funds		(49,619)		(13,953)
Purchase of loans held for sale		(344,976)		(252,170)
Sales and principal payments of loans held for sale		337,092		242,431
Other current assets		(13,444)		6,105
Other non-current assets		(1,256)		141
Accounts payable		1,990		(1,459)
Customers payable		147,977		(11,132)
Settlements payable		2,114		(15,378)
Charge-offs to accrued transaction losses		(12,842)		(11,178)
Accrued expenses		2,703		3,930
Other current liabilities		3,165		(368)
Other non-current liabilities		5,379		2,902

Net cash provided by operating activities		52,053		43,998


Cash Flows from Investing Activities
Purchase of marketable securities		(50,221)		(181,851)
Proceeds from maturities of marketable securities		45,450		15,569
Proceeds from sale of marketable securities		—		3,996
Purchase of property and equipment		(8,083)		(6,508)
Payment for investment in privately held entity		—		—
Purchase of intangible assets		(1,584)		—
Business acquisitions		(1,055)		(1,600)

Net cash used in investing activities:		(15,493)		(170,394)


	THREE MONTHS ENDED
Cash Flows from Financing Activities	Mar 31, 2018		Mar 31, 2017
Proceeds from issuance of convertible senior notes, net		—		428,250
Purchase of convertible senior note hedges		—		(92,136)
Proceeds from issuance of warrants		—		57,244
Payment for termination of Starbucks warrant		—		(54,808)
Principal payments on capital lease obligation		(665)		(247)
Proceeds from the exercise of stock options, net		31,354		39,280
Payments for tax withholding related to vesting of restricted stock units		(27,651)		—
Net cash provided by financing activities		3,038		377,583
Effect of foreign exchange rate on cash and cash equivalents		1,397		1,058
Net increase in cash, cash equivalents and restricted cash		40,995		252,245
Cash, cash equivalents and restricted cash, beginning of period		735,081		488,745
Cash, cash equivalents and restricted cash, end of period		$ 776,076		$ 740,990


Key Operating Metrics and Non-GAAP Financial Measures		UNAUDITED
		In thousands, except GPV and per share data


Adjusted Net Income (Loss) Reconciliation		UNAUDITED
		In thousands, except per share data


Adjusted Revenue Guidance Reconciliation		UNAUDITED
		In thousands


	THREE MONTHS ENDED		YEAR ENDED
	Jun 30, 2018		Dec 31, 2018

Total net revenue	$	740,000 - 760,000	$ 3,000,000 - 3,060,000
Less: Transaction-based & bitcoin costs		385,000 - 400,000	1,605,000 - 1,635,000

Adjusted Revenue	$	355,000 - 360,000	$ 1,395,000 - 1,425,000


Depreciation and Amortization by Function			UNAUDITED In thousands