ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 80-0429876 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
Page No. | |
PART I—Financial Information | |
PART II—Other Information | |
September 30, 2018 | December 31, 2017 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 721,738 | $ | 696,474 | |||
Short-term investments | 448,986 | 169,576 | |||||
Restricted cash | 33,230 | 28,805 | |||||
Settlements receivable | 1,194,701 | 620,523 | |||||
Customer funds | 269,094 | 103,042 | |||||
Loans held for sale | 73,219 | 73,420 | |||||
Other current assets | 136,400 | 86,454 | |||||
Total current assets | 2,877,368 | 1,778,294 | |||||
Property and equipment, net | 130,145 | 91,496 | |||||
Goodwill | 259,964 | 58,327 | |||||
Acquired intangible assets, net | 81,130 | 14,334 | |||||
Long-term investments | 537,663 | 203,667 | |||||
Restricted cash | 10,102 | 9,802 | |||||
Other non-current assets | 76,996 | 31,350 | |||||
Total assets | $ | 3,973,368 | $ | 2,187,270 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 12,448 | $ | 16,763 | |||
Customers payable | 1,315,108 | 733,736 | |||||
Settlements payable | 203,274 | 114,788 | |||||
Accrued transaction losses | 35,332 | 26,893 | |||||
Accrued expenses | 101,066 | 52,280 | |||||
Current portion of long-term debt | 125,971 | — | |||||
Other current liabilities | 70,338 | 28,367 | |||||
Total current liabilities | 1,863,537 | 972,827 | |||||
Long-term debt, net of current portion (Note 13) | 897,976 | 358,572 | |||||
Other non-current liabilities | 89,711 | 69,538 | |||||
Total liabilities | 2,851,224 | 1,400,937 | |||||
Commitments and contingencies (Note 18) | |||||||
Stockholders’ equity: | |||||||
Preferred stock, $0.0000001 par value: 100,000,000 shares authorized at September 30, 2018 and December 31, 2017. None issued and outstanding at September 30, 2018 and December 31, 2017. | — | — | |||||
Class A common stock, $0.0000001 par value: 1,000,000,000 shares authorized at September 30, 2018 and December 31, 2017; 306,228,873 and 280,400,813 issued and outstanding at September 30, 2018 and December 31, 2017, respectively. | — | — | |||||
Class B common stock, $0.0000001 par value: 500,000,000 shares authorized at September 30, 2018 and December 31, 2017; 106,143,959 and 114,793,262 issued and outstanding at September 30, 2018 and December 31, 2017, respectively. | — | — | |||||
Additional paid-in capital | 1,986,059 | 1,630,386 | |||||
Accumulated other comprehensive loss | (6,345 | ) | (1,318 | ) | |||
Accumulated deficit | (857,570 | ) | (842,735 | ) | |||
Total stockholders’ equity | 1,122,144 | 786,333 | |||||
Total liabilities and stockholders’ equity | $ | 3,973,368 | $ | 2,187,270 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenue: | |||||||||||||||
Transaction-based revenue | $ | 655,384 | $ | 510,019 | $ | 1,803,649 | $ | 1,395,562 | |||||||
Subscription and services-based revenue | 166,203 | 65,051 | 397,589 | 173,262 | |||||||||||
Hardware revenue | 17,558 | 10,089 | 50,337 | 29,394 | |||||||||||
Bitcoin revenue | 42,963 | — | 114,074 | — | |||||||||||
Total net revenue | 882,108 | 585,159 | 2,365,649 | 1,598,218 | |||||||||||
Cost of revenue: | |||||||||||||||
Transaction-based costs | 414,456 | 328,043 | 1,137,716 | 896,913 | |||||||||||
Subscription and services-based costs | 47,078 | 18,169 | 117,230 | 51,161 | |||||||||||
Hardware costs | 23,229 | 18,775 | 68,467 | 45,610 | |||||||||||
Bitcoin costs | 42,408 | — | 112,876 | — | |||||||||||
Amortization of acquired technology | 2,277 | 1,556 | 5,714 | 5,058 | |||||||||||
Total cost of revenue | 529,448 | 366,543 | 1,442,003 | 998,742 | |||||||||||
Gross profit | 352,660 | 218,616 | 923,646 | 599,476 | |||||||||||
Operating expenses: | |||||||||||||||
Product development | 135,773 | 82,547 | 355,668 | 229,255 | |||||||||||
Sales and marketing | 116,337 | 66,533 | 291,846 | 176,349 | |||||||||||
General and administrative | 85,527 | 64,312 | 243,800 | 184,235 | |||||||||||
Transaction, loan and advance losses | 23,596 | 19,893 | 63,603 | 50,185 | |||||||||||
Amortization of acquired customer assets | 1,294 | 222 | 2,235 | 649 | |||||||||||
Total operating expenses | 362,527 | 233,507 | 957,152 | 640,673 | |||||||||||
Operating loss | (9,867 | ) | (14,891 | ) | (33,506 | ) | (41,197 | ) | |||||||
Interest expense, net | 7,224 | 3,080 | 12,806 | 7,570 | |||||||||||
Other income, net | (37,800 | ) | (1,226 | ) | (37,908 | ) | (1,951 | ) | |||||||
Income (loss) before income tax | 20,709 | (16,745 | ) | (8,404 | ) | (46,816 | ) | ||||||||
Provision (benefit) for income taxes | 1,066 | (647 | ) | 1,845 | 334 | ||||||||||
Net income (loss) | $ | 19,643 | $ | (16,098 | ) | $ | (10,249 | ) | $ | (47,150 | ) | ||||
Net income (loss) per share: | |||||||||||||||
Basic | $ | 0.05 | $ | (0.04 | ) | $ | (0.03 | ) | $ | (0.13 | ) | ||||
Diluted | $ | 0.04 | $ | (0.04 | ) | $ | (0.03 | ) | $ | (0.13 | ) | ||||
Weighted-average shares used to compute net income (loss) per share | |||||||||||||||
Basic | 409,690 | 383,951 | 402,980 | 375,743 | |||||||||||
Diluted | 474,915 | 383,951 | 402,980 | 375,743 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income (loss) | $ | 19,643 | $ | (16,098 | ) | $ | (10,249 | ) | $ | (47,150 | ) | ||||
Net foreign currency translation adjustments | (946 | ) | 367 | (3,341 | ) | 1,554 | |||||||||
Net unrealized gain (loss) on revaluation of intercompany loans | (296 | ) | (41 | ) | $ | (89 | ) | $ | 362 | ||||||
Net unrealized gain (loss) on marketable debt securities | (647 | ) | (200 | ) | (1,597 | ) | (320 | ) | |||||||
Total comprehensive income (loss) | $ | 17,754 | $ | (15,972 | ) | $ | (15,276 | ) | $ | (45,554 | ) |
Nine Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (10,249 | ) | $ | (47,150 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | 38,323 | 27,647 | |||||
Non-cash interest and other expense | 23,554 | 9,969 | |||||
Loss on extinguishment of long-term debt | 1,625 | — | |||||
Share-based compensation | 157,856 | 111,311 | |||||
Replacement stock awards issued in connection with acquisition | 899 | — | |||||
Gain on revaluation of equity investment | (36,908 | ) | — | ||||
Recovery of common stock in connection with indemnification settlement agreement | (2,745 | ) | — | ||||
Transaction, loan and advance losses | 63,603 | 50,185 | |||||
Change in deferred income taxes | (563 | ) | 133 | ||||
Changes in operating assets and liabilities: | |||||||
Settlements receivable | (579,769 | ) | (271,235 | ) | |||
Customer funds | (156,162 | ) | (41,899 | ) | |||
Purchase of loans held for sale | (1,139,142 | ) | (874,498 | ) | |||
Sales and principal payments of loans held for sale | 1,130,378 | 852,187 | |||||
Other current assets | (50,060 | ) | (6,262 | ) | |||
Other non-current assets | (8,875 | ) | (1,699 | ) | |||
Accounts payable | (6,470 | ) | 1,223 | ||||
Customers payable | 581,530 | 295,406 | |||||
Settlements payable | 88,486 | 30,263 | |||||
Charge-offs to accrued transaction losses | (40,354 | ) | (33,081 | ) | |||
Accrued expenses | 31,015 | 20,328 | |||||
Other current liabilities | 27,230 | (1,125 | ) | ||||
Other non-current liabilities | 5,458 | 8,614 | |||||
Net cash provided by operating activities | 118,660 | 130,317 | |||||
Cash flows from investing activities: | |||||||
Purchase of marketable debt securities | (859,060 | ) | (485,484 | ) | |||
Proceeds from maturities of marketable debt securities | 128,603 | 106,079 | |||||
Proceeds from sale of marketable debt securities | 106,358 | 65,121 | |||||
Purchase of property and equipment | (37,173 | ) | (19,625 | ) | |||
Purchase of equity investment | — | (25,000 | ) | ||||
Purchase of intangible assets | (1,584 | ) | — | ||||
Business combinations, net of cash acquired | (112,399 | ) | (1,600 | ) | |||
Net cash used in investing activities | (775,255 | ) | (360,509 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from issuance of convertible senior notes, net | 855,663 | 428,250 | |||||
Purchase of convertible senior note hedges | (172,586 | ) | (92,136 | ) | |||
Proceeds from issuance of warrants | 112,125 | 57,244 | |||||
Principal payment on conversion of senior notes | (70,047 | ) | — | ||||
Payment of deferred purchase consideration | (640 | ) | — | ||||
Payment for termination of Starbucks warrant | — | (54,808 | ) | ||||
Principal payments on capital lease obligation | (2,658 | ) | (1,020 | ) | |||
Proceeds from the exercise of stock options and purchases under the employee stock purchase plan, net | 94,780 | 111,889 | |||||
Payments for tax withholding related to vesting of restricted stock units | (125,899 | ) | (18,298 | ) | |||
Net cash provided by financing activities | 690,738 | 431,121 | |||||
Effect of foreign exchange rate on cash and cash equivalents | (4,154 | ) | 3,836 | ||||
Net increase in cash, cash equivalents and restricted cash | 29,989 | 204,765 | |||||
Cash, cash equivalents and restricted cash, beginning of period | 735,081 | 488,745 | |||||
Cash, cash equivalents and restricted cash, end of period | $ | 765,070 | $ | 693,510 |
Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2018 | ||||||||||||||||||||||
As reported | Balances without adoption of ASC 606 | Effect of change | As reported | Balances without adoption of ASC 606 | Effect of change | ||||||||||||||||||
Impact on the Condensed Consolidated Statement of Operations: | |||||||||||||||||||||||
Subscription and services-based revenue | $ | 166,203 | $ | 166,037 | $ | 166 | $ | 397,589 | $ | 397,272 | $ | 317 | |||||||||||
Hardware revenue | 17,558 | 16,145 | 1,413 | 50,337 | 45,378 | 4,959 | |||||||||||||||||
Subscription and services-based costs | 47,078 | 47,078 | — | 117,230 | 117,230 | — | |||||||||||||||||
Hardware costs | $ | 23,229 | $ | 21,969 | $ | 1,260 | $ | 68,467 | $ | 63,665 | $ | 4,802 |
September 30, 2018 | |||||||||||
As reported | Balances without adoption of ASC 606 | Effect of change | |||||||||
Impact on the Condensed Consolidated Balance Sheets: | |||||||||||
Other current assets | $ | 136,400 | $ | 148,491 | $ | (12,091 | ) | ||||
Other current liabilities | 70,338 | 78,260 | (7,922 | ) | |||||||
Other non-current assets | 76,996 | 78,584 | (1,588 | ) | |||||||
Other non-current liabilities | $ | 89,711 | $ | 91,311 | $ | (1,600 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenue from Contracts with Customers: | |||||||||||||||
Transaction-based revenue | $ | 655,384 | $ | 510,019 | $ | 1,803,649 | $ | 1,395,562 | |||||||
Subscription and services-based revenue | 141,752 | 65,051 | 330,637 | 173,262 | |||||||||||
Hardware revenue | 17,558 | 10,089 | 50,337 | 29,394 | |||||||||||
Bitcoin revenue | $ | 42,963 | $ | — | $ | 114,074 | $ | — |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Deferred revenue, beginning of the period | $ | 27,155 | $ | 4,523 | $ | 5,893 | $ | 5,407 | |||||||
Less: accumulative adjustment for adoption of ASC 606 | — | — | (4,303 | ) | — | ||||||||||
Deferred revenue, beginning of the period, as adjusted | 27,155 | 4,523 | 1,590 | 5,407 | |||||||||||
Deferred revenue, end of the period | 33,614 | 3,424 | 33,614 | 3,424 | |||||||||||
Deferred revenue arising from business combination | 22,800 | — | 22,800 | — | |||||||||||
Revenue recognized in the period from amounts included in deferred revenue at the beginning of the period | $ | 10,165 | $ | 2,060 | $ | 1,539 | $ | 5,312 |
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
Short-term debt securities: | |||||||||||||||
U.S. agency securities | $ | 48,206 | $ | 11 | $ | (27 | ) | $ | 48,190 | ||||||
Corporate bonds | 83,647 | 135 | (64 | ) | 83,718 | ||||||||||
Municipal securities | 28,904 | 37 | (49 | ) | 28,892 | ||||||||||
U.S. government securities | 270,094 | 70 | (372 | ) | 269,792 | ||||||||||
Non-U.S. government securities | 18,433 | — | (39 | ) | 18,394 | ||||||||||
Total | $ | 449,284 | $ | 253 | $ | (551 | ) | $ | 448,986 | ||||||
Long-term debt securities: | |||||||||||||||
U.S. agency securities | $ | 132,013 | $ | 1 | $ | (244 | ) | $ | 131,770 | ||||||
Corporate bonds | 160,777 | 178 | (75 | ) | 160,880 | ||||||||||
Municipal securities | 20,203 | 82 | (45 | ) | 20,240 | ||||||||||
U.S. government securities | 221,751 | 202 | (419 | ) | 221,534 | ||||||||||
Non-U.S. government securities | 3,251 | — | (12 | ) | 3,239 | ||||||||||
Total | $ | 537,995 | $ | 463 | $ | (795 | ) | $ | 537,663 |
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
Short-term debt securities: | |||||||||||||||
U.S. agency securities | $ | 15,122 | $ | — | $ | (39 | ) | $ | 15,083 | ||||||
Corporate bonds | 57,855 | 22 | (79 | ) | 57,798 | ||||||||||
Commercial paper | 17,428 | — | — | 17,428 | |||||||||||
Municipal securities | 23,743 | 8 | (51 | ) | 23,700 | ||||||||||
U.S. government securities | 55,729 | 1 | (163 | ) | 55,567 | ||||||||||
Total | $ | 169,877 | $ | 31 | $ | (332 | ) | $ | 169,576 | ||||||
Long-term debt securities: | |||||||||||||||
U.S. agency securities | $ | 20,288 | $ | 2 | $ | (121 | ) | $ | 20,169 | ||||||
Corporate bonds | 91,959 | 25 | (571 | ) | 91,413 | ||||||||||
Municipal securities | 26,371 | 13 | (160 | ) | 26,224 | ||||||||||
U.S. government securities | 66,362 | 19 | (520 | ) | 65,861 | ||||||||||
Total | $ | 204,980 | $ | 59 | $ | (1,372 | ) | $ | 203,667 |
Amortized Cost | Fair Value | ||||||
Due in one year or less | $ | 449,284 | $ | 448,986 | |||
Due in one to five years | 537,995 | 537,663 | |||||
Total | $ | 987,279 | $ | 986,649 |
September 30, 2018 | December 31, 2017 | ||||||
Cash | $ | 219,087 | $ | 103,042 | |||
Cash Equivalents: | |||||||
Money market funds | 1,884 | — | |||||
U.S. agency securities | 8,335 | — | |||||
U.S. government securities | 29,898 | — | |||||
Short-term debt securities: | |||||||
U.S. government securities | $ | 9,890 | $ | — | |||
Total | $ | 269,094 | $ | 103,042 |
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
Short-term debt securities: | |||||||||||||||
U.S. government securities | 9,891 | — | (1 | ) | 9,890 | ||||||||||
Total | $ | 9,891 | $ | — | $ | (1 | ) | $ | 9,890 |
Amortized Cost | Fair Value | ||||||
Due in one year or less | $ | 9,891 | $ | 9,890 | |||
Due in one to five years | — | — | |||||
Total | $ | 9,891 | $ | 9,890 |
September 30, 2018 | December 31, 2017 | ||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||
Cash Equivalents: | |||||||||||||||||||||||
Money market funds | $ | 311,158 | $ | — | $ | — | $ | 387,698 | $ | — | $ | — | |||||||||||
U.S. agency securities | — | 123,202 | — | — | — | — | |||||||||||||||||
Commercial paper | — | — | — | — | 24,695 | — | |||||||||||||||||
U.S. government securities | 20,065 | — | — | — | — | — | |||||||||||||||||
Customer funds: | |||||||||||||||||||||||
Money market funds | 1,884 | — | — | — | — | — | |||||||||||||||||
U.S. agency securities | — | 8,335 | — | — | — | — | |||||||||||||||||
U.S. government securities | 39,788 | — | — | — | — | — | |||||||||||||||||
Short-term debt securities: | |||||||||||||||||||||||
U.S. agency securities | — | 48,190 | — | — | 15,083 | — | |||||||||||||||||
Corporate bonds | — | 83,718 | — | — | 57,798 | — | |||||||||||||||||
Commercial paper | — | — | — | — | 17,428 | — | |||||||||||||||||
Municipal securities | — | 28,892 | — | — | 23,700 | — | |||||||||||||||||
U.S. government securities | 269,792 | — | — | 55,567 | — | — | |||||||||||||||||
Non-U.S. government securities | — | 18,394 | — | — | — | — | |||||||||||||||||
Long-term debt securities: | |||||||||||||||||||||||
U.S. agency securities | — | 131,770 | — | — | 20,169 | — | |||||||||||||||||
Corporate bonds | — | 160,880 | — | — | 91,413 | — | |||||||||||||||||
Municipal securities | — | 20,240 | — | — | 26,224 | — | |||||||||||||||||
U.S. government securities | 221,534 | — | — | 65,861 | — | — | |||||||||||||||||
Non-U.S. government securities | — | 3,239 | — | — | — | — | |||||||||||||||||
Other: | |||||||||||||||||||||||
Equity investment | 61,908 | — | — | — | — | — | |||||||||||||||||
Total | $ | 926,129 | $ | 626,860 | $ | — | $ | 509,126 | $ | 276,510 | $ | — |
September 30, 2018 | December 31, 2017 | ||||||||||||||
Carrying Value | Fair Value (Level 2) | Carrying Value | Fair Value (Level 2) | ||||||||||||
2023 Notes | $ | 711,229 | $ | 1,234,496 | $ | — | $ | — | |||||||
2022 Notes | 312,718 | 1,599,954 | 358,572 | 719,356 | |||||||||||
Total | $ | 1,023,947 | $ | 2,834,450 | $ | 358,572 | $ | 719,356 |
September 30, 2018 | December 31, 2017 | ||||||||||||||
Carrying Value | Fair Value (Level 3) | Carrying Value | Fair Value (Level 3) | ||||||||||||
Loans held for sale | $ | 73,219 | $ | 76,302 | $ | 73,420 | $ | 76,070 | |||||||
Total | $ | 73,219 | $ | 76,302 | $ | 73,420 | $ | 76,070 |
September 30, 2018 | December 31, 2017 | ||||||
Leasehold improvements | $ | 99,722 | $ | 77,073 | |||
Computer equipment | 90,218 | 66,186 | |||||
Capitalized software | 51,177 | 35,063 | |||||
Office furniture and equipment | 18,773 | 14,490 | |||||
259,890 | 192,812 | ||||||
Less: Accumulated depreciation and amortization | (129,745 | ) | (101,316 | ) | |||
Property and equipment, net | $ | 130,145 | $ | 91,496 |
Consideration: | |||
Cash | $ | 132,432 | |
Stock (2,418,271 shares of Class A common stock) | 140,107 | ||
$ | 272,539 | ||
Recognized amounts of identifiable assets acquired and liabilities assumed: | |||
Current assets (inclusive of cash acquired of $25,758) | $ | 44,685 | |
Intangible customer assets | 42,700 | ||
Intangible technology assets | 14,900 | ||
Intangible trade name | 11,300 | ||
Intangible other assets | 961 | ||
Total liabilities assumed (including deferred revenue of $22,800) | (35,849 | ) | |
Total identifiable net assets acquired | 78,697 | ||
Goodwill | 193,842 | ||
Total | $ | 272,539 |
Balance at December 31, 2017 | $ | 58,327 | |
Acquisitions completed during the nine months ended September 30, 2018 | 201,637 | ||
Balance at September 30, 2018 | $ | 259,964 |
Balance at September 30, 2018 | |||||||||||
Cost | Accumulated Amortization | Net | |||||||||
Patents | $ | 1,285 | $ | (638 | ) | $ | 647 | ||||
Technology assets | 45,978 | (27,043 | ) | 18,935 | |||||||
Customer assets | 57,109 | (6,775 | ) | 50,334 | |||||||
Trade name | 11,300 | (942 | ) | 10,358 | |||||||
Other | 961 | (105 | ) | 856 | |||||||
Total | $ | 116,633 | $ | (35,503 | ) | $ | 81,130 |
Balance at December 31, 2017 | |||||||||||
Cost | Accumulated Amortization | Net | |||||||||
Patents | $ | 1,285 | $ | (559 | ) | $ | 726 | ||||
Technology assets | 29,158 | (21,329 | ) | 7,829 | |||||||
Customer assets | 10,319 | (4,540 | ) | 5,779 | |||||||
Total | $ | 40,762 | $ | (26,428 | ) | $ | 14,334 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Acquired intangible assets, net, beginning of the period | $ | 85,514 | $ | 16,452 | $ | 14,334 | $ | 19,292 | |||||||
Acquisitions | — | — | 75,871 | 1,224 | |||||||||||
Amortization expense | 4,384 | 1,804 | 9,075 | 5,868 | |||||||||||
Acquired intangible assets, net, end of the period | $ | 81,130 | $ | 14,648 | $ | 81,130 | $ | 14,648 |
2018 (remaining 3 months) | $ | 4,069 | |
2019 | 13,702 | ||
2020 | 11,496 | ||
2021 | 10,299 | ||
2022 | 8,369 | ||
Thereafter | 33,195 | ||
Total | $ | 81,130 |
September 30, 2018 | December 31, 2017 | ||||||
Inventory, net | $ | 25,294 | $ | 16,777 | |||
Processing costs receivable | 36,747 | 21,083 | |||||
Prepaid expenses | 12,666 | 14,473 | |||||
Accounts receivable, net | 18,980 | 8,606 | |||||
Deferred hardware costs (i) | — | 7,931 | |||||
Deferred magstripe reader costs (ii) | 6,996 | 2,469 | |||||
Prepaid compensation, current (iii) | 5,487 | — | |||||
Other | 30,230 | 15,115 | |||||
Total | $ | 136,400 | $ | 86,454 |
September 30, 2018 | December 31, 2017 | ||||||
Accrued payroll | $ | 17,691 | $ | 9,103 | |||
Accrued professional fees | 6,903 | 5,638 | |||||
Accrued advertising and other marketing | 16,391 | 6,723 | |||||
Processing costs payable | 11,150 | 10,145 | |||||
Accrued non income tax liabilities | 6,390 | 6,155 | |||||
Accrued hardware costs | 10,232 | 2,496 | |||||
Other accrued liabilities | 32,309 | 12,020 | |||||
Total | $ | 101,066 | $ | 52,280 |
September 30, 2018 | December 31, 2017 | ||||||
Deferred revenue, current | $ | 29,285 | $ | 5,893 | |||
Square Capital payable (iv) | 12,762 | 7,671 | |||||
Square Payroll payable (v) | 6,707 | 2,850 | |||||
Deferred rent, current | 3,844 | 3,311 | |||||
Accrued redemptions | 1,052 | 1,036 | |||||
Other | 16,688 | 7,606 | |||||
Total | $ | 70,338 | $ | 28,367 |
September 30, 2018 | December 31, 2017 | ||||||
Equity investment (i) | $ | 61,908 | $ | 25,000 | |||
Prepaid compensation, non-current (ii) | 6,959 | — | |||||
Deposits | 2,544 | 2,738 | |||||
Debt issuance costs | 580 | 788 | |||||
Deferred tax assets | 540 | 519 | |||||
Other | 4,465 | 2,305 | |||||
Total | $ | 76,996 | $ | 31,350 |
September 30, 2018 | December 31, 2017 | ||||||
Statutory liabilities (iii) | $ | 51,134 | $ | 40,768 | |||
Deferred rent, non-current | 22,243 | 20,349 | |||||
Deferred purchase consideration | 3,900 | — | |||||
Deferred revenue, non-current | 4,329 | 432 | |||||
Deferred tax liabilities | 147 | 644 | |||||
Other | 7,958 | 7,345 | |||||
Total | $ | 89,711 | $ | 69,538 |
Principal outstanding | Unamortized debt discount | Unamortized debt issuance costs | Net carrying value | ||||||||||||
September 30, 2018 | |||||||||||||||
2023 Notes | $ | 862,500 | $ | (145,998 | ) | $ | (5,273 | ) | $ | 711,229 | |||||
2022 Notes | 369,953 | (51,581 | ) | (5,654 | ) | 312,718 | |||||||||
Total | 1,232,453 | (197,579 | ) | (10,927 | ) | 1,023,947 | |||||||||
December 31, 2017 | |||||||||||||||
2022 Notes | $ | 440,000 | $ | (73,384 | ) | $ | (8,044 | ) | $ | 358,572 |
Amount allocated to conversion option | Less: allocated issuance costs | Equity component, net | |||||||||
September 30, 2018 | |||||||||||
2023 Notes | $ | 155,250 | $ | (1,231 | ) | $ | 154,019 | ||||
2022 Notes | 72,480 | (1,936 | ) | 70,544 | |||||||
Total | 227,730 | (3,167 | ) | 224,563 | |||||||
December 31, 2017 | |||||||||||
2022 Notes | $ | 86,203 | $ | (2,302 | ) | $ | 83,901 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Contractual interest expense | $ | 1,469 | $ | 413 | $ | 2,732 | $ | 938 | |||||||
Amortization of debt discount and issuance costs | 11,627 | 4,277 | 22,850 | 9,889 | |||||||||||
Total | $ | 13,096 | $ | 4,690 | $ | 25,582 | $ | 10,827 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Accrued transaction losses, beginning of the period | $ | 29,207 | $ | 22,455 | $ | 26,893 | $ | 20,064 | |||||||
Provision for transaction losses | 20,449 | 15,102 | 48,794 | 39,737 | |||||||||||
Charge-offs to accrued transaction losses | (14,324 | ) | (10,837 | ) | (40,355 | ) | (33,081 | ) | |||||||
Accrued transaction losses, end of the period | $ | 35,332 | $ | 26,720 | $ | 35,332 | $ | 26,720 |
Total stockholders’ equity | |||
Balance at December 31, 2017 | $ | 786,333 | |
Net loss | (10,249 | ) | |
Exercise of stock options | 82,202 | ||
Purchases under the employee stock purchase plan | 12,578 | ||
Vesting of early exercised stock options and other | 136 | ||
Issuance of common stock in connection with business combination | 140,107 | ||
Replacement stock awards issued in connection with acquisition | 899 | ||
Conversion feature of convertible senior notes, due 2023, net of allocated costs | 154,019 | ||
Purchase of bond hedges in conjunction with issuance of convertible senior notes, due 2023 | (172,586 | ) | |
Sale of warrants in conjunction with issuance of convertible senior notes, due 2023 | 112,125 | ||
Issuance of common stock in conjunction with the conversion of senior notes, due 2022 | (9,305 | ) | |
Exercise of bond hedges in conjunction with the conversion of senior notes, due 2022 | — | ||
Share-based compensation | 164,142 | ||
Tax withholding related to vesting of restricted stock units | (125,899 | ) | |
Cumulative adjustment for adoption of ASC 606 | (4,586 | ) | |
Recovery of common stock in connection with indemnification settlement agreement | (2,745 | ) | |
Change in other comprehensive loss | (5,027 | ) | |
Balance at September 30, 2018 | $ | 1,122,144 |
Number of Stock Options Outstanding | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value | |||||||||
Balance at December 31, 2017 | 47,270,091 | $ | 8.67 | 6.52 | $ | 1,229,103 | ||||||
Granted | 783,625 | 44.75 | ||||||||||
Exercised | (10,661,450 | ) | 7.71 | |||||||||
Forfeited | (674,525 | ) | 12.97 | |||||||||
Balance at September 30, 2018 | 36,717,741 | $ | 9.64 | 5.94 | $ | 3,281,558 | ||||||
Options exercisable as of | ||||||||||||
September 30, 2018 | 33,952,212 | $ | 8.64 | 5.75 | $ | 3,068,274 |
Number of shares | Weighted Average Grant Date Fair Value | |||||
Unvested as of December 31, 2017 | 21,317,525 | $ | 17.84 | |||
Granted | 6,408,650 | 52.93 | ||||
Vested | (5,796,657 | ) | 18.30 | |||
Forfeited | (2,031,584 | ) | 18.56 | |||
Unvested as of September 30, 2018 | 19,897,934 | $ | 28.94 |
Nine Months Ended September 30, | |||||
2018 | 2017 | ||||
Dividend yield | — | % | — | % | |
Risk-free interest rate | 2.92 | % | 1.88 | % | |
Expected volatility | 30.87 | % | 32.22 | % | |
Expected term (years) | 6.19 | 6.02 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||
Cost of revenue | $ | 18 | $ | 29 | $ | 79 | $ | 47 | ||||||
Product development | 39,525 | 25,254 | 103,813 | 69,746 | ||||||||||
Sales and marketing | 6,108 | 4,579 | 16,703 | 12,869 | ||||||||||
General and administrative | 13,262 | 10,186 | 37,261 | 28,649 | ||||||||||
Total | $ | 58,913 | $ | 40,048 | $ | 157,856 | $ | 111,311 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Numerator: | |||||||||||||||
Net income (loss) | $ | 19,643 | $ | (16,098 | ) | $ | (10,249 | ) | $ | (47,150 | ) | ||||
Denominator: | |||||||||||||||
Basic shares: | |||||||||||||||
Weighted-average common shares outstanding | 410,095 | 385,409 | 403,577 | 377,374 | |||||||||||
Weighted-average unvested shares | (405 | ) | (1,458 | ) | (597 | ) | (1,631 | ) | |||||||
Weighted-average shares used to compute basic net income (loss) per share | 409,690 | 383,951 | 402,980 | 375,743 | |||||||||||
Diluted shares: | |||||||||||||||
Stock options and restricted stock units | 47,175 | — | — | — | |||||||||||
Convertible senior notes | 6,409 | — | — | — | |||||||||||
Common stock warrants | 11,422 | — | — | — | |||||||||||
Employee stock purchase plan | 219 | — | — | — | |||||||||||
Weighted-average shares used to compute diluted net income (loss) per share | 474,915 | 383,951 | 402,980 | 375,743 | |||||||||||
Net income (loss) per share: | |||||||||||||||
Basic | $ | 0.05 | $ | (0.04 | ) | $ | (0.03 | ) | $ | (0.13 | ) | ||||
Diluted | $ | 0.04 | $ | (0.04 | ) | $ | (0.03 | ) | $ | (0.13 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
Stock options and restricted stock units | 12,079 | 76,618 | 62,822 | 81,118 | |||||||
Common stock warrants | 18,830 | 19,173 | 24,387 | 16,539 | |||||||
Convertible senior notes | 23,415 | — | 24,276 | — | |||||||
Unvested shares | 405 | 1,458 | 597 | 1,631 | |||||||
Employee stock purchase plan | 26 | 517 | 207 | 412 | |||||||
Total anti-dilutive securities | 54,755 | 97,766 | 112,289 | 99,700 |
Capital | Operating | ||||||
Year: | |||||||
2018 (remaining 3 months) | $ | 1,284 | $ | 7,687 | |||
2019 | 5,029 | 29,454 | |||||
2020 | 2,446 | 30,657 | |||||
2021 | — | 30,598 | |||||
2022 | — | 31,051 | |||||
Thereafter | — | 32,747 | |||||
Total | $ | 8,759 | $ | 162,194 | |||
Less amount representing interest | — | ||||||
Present value of capital lease obligations | 8,759 | ||||||
Less current portion of capital lease obligation | (5,135 | ) | |||||
Non-current portion of capital lease obligation | $ | 3,624 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenue | |||||||||||||||
United States | $ | 838,149 | $ | 559,053 | $ | 2,255,657 | $ | 1,533,960 | |||||||
International | 43,959 | 26,106 | 109,992 | 64,258 | |||||||||||
Total net revenue | $ | 882,108 | $ | 585,159 | $ | 2,365,649 | $ | 1,598,218 |
September 30, 2018 | December 31, 2017 | ||||||
Long-lived assets | |||||||
United States | $ | 464,455 | $ | 158,820 | |||
International | 6,784 | 5,337 | |||||
Total long-lived assets | $ | 471,239 | $ | 164,157 |
Nine Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Supplemental Cash Flow Data: | |||||||
Cash paid for interest | $ | 1,945 | $ | 1,230 | |||
Cash paid for income taxes | 1,265 | 1,117 | |||||
Supplemental disclosures of non-cash investing and financing activities: | |||||||
Change in purchases of property and equipment in accounts payable and accrued expenses | 11,004 | (123 | ) | ||||
Unpaid business combination purchase price | 3,995 | 644 | |||||
Fair value of common stock issued related to business combination | (140,107 | ) | — | ||||
Recovery of common stock in connection with indemnification settlement agreement | 2,745 | — | |||||
Fair value of common stock issued to settle the conversion of senior notes, due 2022 | (189,916 | ) | — | ||||
Fair value of shares received to settle senior note hedges, due 2022 | 189,916 | — |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||
2018 | 2017 | $ Change | % Change | 2018 | 2017 | $ Change | % Change | ||||||||||||||||||||||
Transaction-based revenue | $ | 655,384 | $ | 510,019 | $ | 145,365 | 29 | % | $ | 1,803,649 | $ | 1,395,562 | $ | 408,087 | 29 | % | |||||||||||||
Subscription and services-based revenue | 166,203 | 65,051 | 101,152 | 155 | % | $ | 397,589 | $ | 173,262 | $ | 224,327 | 129 | % | ||||||||||||||||
Hardware revenue | 17,558 | 10,089 | 7,469 | 74 | % | 50,337 | 29,394 | $ | 20,943 | 71 | % | ||||||||||||||||||
Bitcoin revenue | $ | 42,963 | $ | — | $ | 42,963 | — | % | $ | 114,074 | $ | — | $ | 114,074 | — | % | |||||||||||||
Total net revenue | $ | 882,108 | $ | 585,159 | $ | 296,949 | 51 | % | $ | 2,365,649 | $ | 1,598,218 | $ | 767,431 | 48 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||
2018 | 2017 | $ Change | % Change | 2018 | 2017 | $ Change | % Change | ||||||||||||||||||||||
Transaction-based costs | $ | 414,456 | $ | 328,043 | $ | 86,413 | 26 | % | $ | 1,137,716 | $ | 896,913 | $ | 240,803 | 27 | % | |||||||||||||
Subscription and services-based costs | 47,078 | 18,169 | 28,909 | 159 | % | 117,230 | 51,161 | 66,069 | 129 | % | |||||||||||||||||||
Hardware costs | 23,229 | 18,775 | 4,454 | 24 | % | 68,467 | 45,610 | 22,857 | 50 | % | |||||||||||||||||||
Bitcoin costs | 42,408 | — | 42,408 | — | % | 112,876 | — | 112,876 | — | % | |||||||||||||||||||
Amortization of acquired technology | 2,277 | 1,556 | 721 | 46 | % | 5,714 | 5,058 | 656 | 13 | % | |||||||||||||||||||
Total cost of revenue | $ | 529,448 | $ | 366,543 | $ | 162,905 | 44 | % | $ | 1,442,003 | $ | 998,742 | $ | 443,261 | 44 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||
2018 | 2017 | $ Change | % Change | 2018 | 2017 | $ Change | % Change | ||||||||||||||||||||||
Product development | $ | 135,773 | $ | 82,547 | $ | 53,226 | 64 | % | $ | 355,668 | $ | 229,255 | $ | 126,413 | 55 | % | |||||||||||||
% of total net revenue | 15 | % | 14 | % | 15 | % | 14 | % | |||||||||||||||||||||
Sales and marketing | $ | 116,337 | $ | 66,533 | $ | 49,804 | 75 | % | $ | 291,846 | $ | 176,349 | $ | 115,497 | 65 | % | |||||||||||||
% of total net revenue | 13 | % | 11 | % | 12 | % | 11 | % | |||||||||||||||||||||
General and administrative | $ | 85,527 | $ | 64,312 | $ | 21,215 | 33 | % | $ | 243,800 | $ | 184,235 | $ | 59,565 | 32 | % | |||||||||||||
% of total net revenue | 10 | % | 11 | % | 10 | % | 12 | % | |||||||||||||||||||||
Transaction, loan and advance losses | $ | 23,596 | $ | 19,893 | $ | 3,703 | 19 | % | $ | 63,603 | $ | 50,185 | $ | 13,418 | 27 | % | |||||||||||||
% of total net revenue | 3 | % | 3 | % | 3 | % | 3 | % | |||||||||||||||||||||
Amortization of acquired customer assets | $ | 1,294 | $ | 222 | $ | 1,072 | 483 | % | $ | 2,235 | $ | 649 | $ | 1,586 | 244 | % | |||||||||||||
% of total net revenue | — | % | — | % | — | % | — | % | |||||||||||||||||||||
Total operating expenses | $ | 362,527 | $ | 233,507 | $ | 129,020 | 55 | % | $ | 957,152 | $ | 640,673 | $ | 316,479 | 49 | % |
• | an increase of $29.1 million and $62.3 million in costs associated with increased volume of activity with our Cash App peer-to-peer transfer service and Cash Card issuance costs, for the three and nine months ended September 30, 2018, respectively. The peer-to-peer service is a free service we offer to our Cash App customers that we consider to be a marketing tool to encourage the use of the Cash Card; |
• | an increase of $5.8 million and $18.3 million in advertising costs for the three and nine months ended September 30, 2018, respectively, primarily from increased online, mobile, and televised marketing campaigns during the period; and |
• | an increase of $8.3 million and $19.5 million in sales and marketing personnel costs for the three and nine months ended September 30, 2018, respectively, to enable growth initiatives. The increase in personnel-related costs includes an increase in share-based compensation expense of $1.5 million and $3.8 million for the three and nine months ended September 30, 2018, respectively. |
• | an increase of $17.8 million and $47.6 million in general and administrative personnel costs for the three and nine months ended September 30, 2018, respectively, mainly as a result of additions to our support, finance and legal personnel as we continue to add resources and skills as our business scales to support long-term growth. The increase in personnel-related costs includes an increase in share-based compensation expense of $3.1 million and $8.6 million for the three and nine months ended September 30, 2018, respectively; |
• | for the nine months ended September 30, 2018, we also incurred $4.7 million in acquisition related costs that are not normal recurring operating expenses, including amounts paid to redeem acquirees’ unvested share-based compensation awards, and legal, accounting, and due diligence costs. There was no similar activity in the comparative prior year periods; and |
• | an increase of $2.8 million in various tax and licensing expenses for the nine months ended September 30, 2018, as we continue to expand our business and product offerings. |
• | growth in GPV. Transaction losses increased to a lesser extent than GPV growth due to ongoing investment in data science and improvements in our risk operations to mitigate exposure to transaction losses. |
• | a $3.3 million and $9.0 million charge recorded to loan losses in the three and nine months ended September 30, 2018, respectively, compared to $3.4 million and $6.1 million for the three and nine months ended September 30, 2017, respectively, as a result of the growth 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; and |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||
2018 | 2017 | $ Change | % Change | 2018 | 2017 | $ Change | % Change | ||||||||||||||||||||||
Interest expense, net | $ | 7,224 | $ | 3,080 | $ | 4,144 | 135 | % | $ | 12,806 | $ | 7,570 | $ | 5,236 | 69 | % | |||||||||||||
Other income, net | $ | (37,800 | ) | $ | (1,226 | ) | $ | (36,574 | ) | NM | $ | (37,908 | ) | $ | (1,951 | ) | $ | (35,957 | ) | NM |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||
2018 | 2017 | $ Change | % Change | 2018 | 2017 | $ Change | % Change | |||||||||||||||||||||
Provision (benefit) for income taxes | $ | 1,066 | $ | (647 | ) | $ | 1,713 | NM | $ | 1,845 | $ | 334 | $ | 1,511 | 452 | % | ||||||||||||
Effective tax rate | 5.1 | % | 3.9 | % | (22.0 | )% | (0.7 | )% |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands, except GPV and per share data) | |||||||||||||||
Gross Payment Volume (GPV) (in millions) | $ | 22,498 | $ | 17,386 | $ | 61,696 | $ | 47,454 | |||||||
Adjusted Revenue | $ | 431,136 | $ | 257,116 | $ | 1,123,389 | $ | 701,305 | |||||||
Adjusted EBITDA | $ | 70,997 | $ | 34,304 | $ | 175,213 | $ | 97,825 | |||||||
Adjusted Net Income Per Share: | |||||||||||||||
Basic | $ | 0.16 | $ | 0.08 | $ | 0.39 | $ | 0.21 | |||||||
Diluted | $ | 0.13 | $ | 0.07 | $ | 0.33 | $ | 0.19 |
• | Adjusted Revenue is net of transaction-based costs, which is our largest cost of revenue item; |
• | Adjusted Revenue is net of bitcoin costs, which could be a significant cost; |
• | The deferred revenue adjustment that is added back to Adjusted Revenue will never be recognized as revenue by the Company; 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. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Total net revenue | $ | 882,108 | $ | 585,159 | $ | 2,365,649 | $ | 1,598,218 | |||||||
Less: transaction-based costs | 414,456 | 328,043 | 1,137,716 | 896,913 | |||||||||||
Less: bitcoin costs | 42,408 | — | 112,876 | — | |||||||||||
Add: deferred revenue adjustment related to purchase accounting | 5,892 | — | 8,332 | — | |||||||||||
Adjusted Revenue | $ | 431,136 | $ | 257,116 | $ | 1,123,389 | $ | 701,305 |
• | We believe it is useful to exclude non-cash charges, such as amortization of intangible assets, and share-based compensation expenses, from our non-GAAP financial measures because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations. |
• | In connection with the issuance of our convertible senior notes (as described in Note 13), we are required to recognize non-cash interest expense related to amortization of debt discount and issuance costs. We believe that excluding these expenses from our non-GAAP measures is useful to investors because such incremental non-cash interest expense does not represent a current or future cash outflow for the Company and is therefore not indicative of our continuing operations or meaningful when comparing current results to past results. |
• | We exclude the gain or loss on the disposal of property and equipment, gain or loss on revaluation of equity investment, gain or loss on debt extinguishment related to the conversion of senior notes and impairment of intangible assets, as applicable, from non-GAAP financial measures because we do not believe that these items are reflective of our ongoing business operations. |
• | We also exclude certain costs associated with acquisitions that are not normal recurring operating expenses, including amounts paid to redeem acquirees’ unvested share-based compensation awards, and legal, accounting and due diligence costs, and we add back the impact of the acquired deferred revenue and deferred cost adjustment, which was written down to fair value in purchase accounting. Such amounts were not included in prior periods as they were immaterial or zero. |
• | 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. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income (loss) | $ | 19,643 | $ | (16,098 | ) | $ | (10,249 | ) | $ | (47,150 | ) | ||||
Share-based compensation expense | 58,913 | 40,048 | 157,856 | 111,311 | |||||||||||
Depreciation and amortization | 15,835 | 9,085 | 38,323 | 27,647 | |||||||||||
Interest expense, net | 7,224 | 3,080 | 12,806 | 7,570 | |||||||||||
Other income, net | (37,800 | ) | (1,226 | ) | (37,908 | ) | (1,951 | ) | |||||||
Provision (benefit) for income taxes | 1,066 | (647 | ) | 1,845 | 334 | ||||||||||
Loss on disposal of property and equipment | 806 | 62 | 781 | 64 | |||||||||||
Acquisition related costs | 345 | — | 4,708 | — | |||||||||||
Acquired deferred revenue adjustment | 5,892 | — | 8,332 | — | |||||||||||
Acquired deferred costs adjustment | (927 | ) | — | (1,281 | ) | — | |||||||||
Adjusted EBITDA | $ | 70,997 | $ | 34,304 | $ | 175,213 | $ | 97,825 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income (loss) | $ | 19,643 | $ | (16,098 | ) | $ | (10,249 | ) | $ | (47,150 | ) | ||||
Share-based compensation expense | 58,913 | 40,048 | 157,856 | 111,311 | |||||||||||
Amortization of intangible assets | 4,384 | 1,804 | 9,075 | 5,868 | |||||||||||
Amortization of debt discount and issuance costs | 11,627 | 4,277 | 22,850 | 9,889 | |||||||||||
Gain on revaluation of equity investment | (36,908 | ) | — | (36,908 | ) | — | |||||||||
Loss on extinguishment of long-term debt | 1,625 | — | 1,625 | — | |||||||||||
Loss on disposal of property and equipment | 806 | 62 | 781 | 64 | |||||||||||
Acquisition related costs | 345 | — | 4,708 | — | |||||||||||
Acquired deferred revenue adjustment | 5,892 | — | 8,332 | — | |||||||||||
Acquired deferred costs adjustment | (927 | ) | — | (1,281 | ) | — | |||||||||
Adjusted Net Income | $ | 65,400 | $ | 30,093 | $ | 156,789 | $ | 79,982 | |||||||
Adjusted Net Income Per Share: | |||||||||||||||
Basic | $ | 0.16 | $ | 0.08 | $ | 0.39 | $ | 0.21 | |||||||
Diluted | $ | 0.13 | $ | 0.07 | $ | 0.33 | $ | 0.19 | |||||||
Weighted-average shares used to compute Adjusted Net Income Per Share: | |||||||||||||||
Basic | 409,690 | 383,951 | 402,980 | 375,743 | |||||||||||
Diluted | 495,621 | 432,284 | 475,801 | 418,419 |
September 30, 2018 | December 31, 2017 | ||||||
Cash and cash equivalents | $ | 721,738 | $ | 696,474 | |||
Short-term restricted cash | 33,230 | 28,805 | |||||
Long-term restricted cash | 10,102 | 9,802 | |||||
Cash, cash equivalents, and restricted cash | $ | 765,070 | $ | 735,081 | |||
Short-term investments | 448,986 | 169,576 | |||||
Long-term investments | 537,663 | 203,667 | |||||
Cash, cash equivalents, restricted cash and investments in marketable debt securities | $ | 1,751,719 | $ | 1,108,324 |
Nine Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Net cash provided by operating activities | $ | 118,660 | $ | 130,317 | |||
Net cash used in investing activities | (775,255 | ) | (360,509 | ) | |||
Net cash provided by financing activities | 690,738 | 431,121 | |||||
Effect of foreign exchange rate on cash and cash equivalents | (4,154 | ) | 3,836 | ||||
Net increase in cash, cash equivalents and restricted cash | $ | 29,989 | $ | 204,765 |
• | 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 amounts typically will be more 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 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 |
• | Net loss of $10.2 million less non-cash gain on revaluation of equity investment of $36.9 million, offset by add back of non-cash items consisting primarily of share-based compensation of $157.9 million, transaction, loan and advance losses of $63.6 million, depreciation and amortization of $38.3 million, and non-cash items of $23.6 million. While the gain on revaluation of the equity investment is as result of the initial public offering of Eventbrite and subsequent mark to market valuation of this investment. The other items are largely driven by growth and expansion of our business activities. |
• | Additional cash provided from changes in operating assets and liabilities, including increases in customers payable of $581.5 million, settlements payable of $88.5 million, accrued expenses of $31.0 million, and other current liabilities of $27.2 million. Both customers payable and settlements payable balances increased significantly compared to as of December 31, 2017 primarily due to the increase in GPV at the end of the period. These balances are largely offset by settlements receivable, described below, which moves in tandem. Accrued expenses increased primarily due to increase in advertising and other marketing expenses. Other current liabilities increased primarily due to increase in payables associated with Square Capital and Square Payroll. |
• | Offset in part by cash used from changes in operating assets and liabilities, including increases in settlements receivable of $579.8 million for reasons aforementioned, increases in customer funds of $156.2 million as result of an increasing customer base with stored funds on the Cash App, increases in other current assets of $50.1 million, charge-offs to accrued transaction losses of $40.4 million arising as a result of growth in GPV. |
• | Net loss of $47.2 million, offset by non-cash items consisting primarily of share-based compensation of $111.3 million, provision for transaction losses of $50.2 million, and depreciation and amortization of $27.6 million. |
• | Additional cash provided from changes in operating assets and liabilities, including increases in customer payable of $295.4 million, increases in settlements payable of $30.3 million 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, and due to the net activity related to loans held for sale of $22.3 million. |
improving and implementing existing and developing new internal administrative infrastructure, particularly our operational, financial, communications and other internal systems and procedures; |
installing enhanced management information and control systems; and |
preserving our core values, strategies, and goals and effectively communicating these to our employees worldwide. |
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 payments, data privacy, data protection and information security; |
compliance with U.S. and foreign anti-corruption, anti-bribery and anti-money laundering laws; |
potential tariffs, sanctions, fines or other trade restrictions; |
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. |
the transaction may not advance our business strategy; |
we may spend time and resources on opportunities that we are unable to consummate on terms acceptable to us; |
the transaction may not close or may be delayed; |
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; |
we may not realize a satisfactory return or increase our revenue; |
we may experience difficulty, and may not be successful in, integrating technologies, IT systems, data processing methods and policies, accounting systems, culture, or personnel of the acquired business and we may not realize the expected synergies of the transaction in a timely manner, or at all; |
we may incur significant acquisition costs and transition costs; |
we may experience disruptions in our ongoing operations that divert management’s attention; |
we may not realize the expected benefits from the transaction in the expected time period, or at all; |
we may be unable to retain key personnel; |
acquired businesses or businesses in which we invest 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 incur substantial liabilities associated with the activities or conduct of the acquired business before the acquisition, including legal and regulatory claims or disputes, violations of laws and regulations, and other liabilities, whether known or unknown; |
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, or regulatory exposure, which may subject us to additional controls, policies, procedures, liabilities, costs of compliance or remediation, or other adverse effects on our business, operating results, or financial condition; |
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, including competition regulations that may affect the extent to which we can maximize the value of our acquisitions or investments; |
there may be local and foreign regulations applicable to the international activities of our business and the businesses we acquire; |
acquisitions could result in dilutive issuances of equity securities or the incurrence of debt; and |
our business, the acquired business, or the integrated business may be adversely affected by other political, business, and general economic conditions. |
price and volume fluctuations in the overall stock market from time to time; |
volatility in the market prices and trading volumes of companies in our industry or companies that investors consider comparable; |
changes in operating performance and stock market valuations of other companies generally or of those in our industry in particular; |
sales of shares of our common stock by us or our stockholders; |
issuance of shares of our Class A common stock, whether in connection with an acquisition or upon conversion of some or all of our outstanding Notes; |
failure of securities analysts to maintain coverage and/or to provide accurate consensus results of us, changes in financial estimates by securities analysts who follow us, or our failure to meet these estimates or the expectations of investors; |
the financial or other projections we may provide to the public, any changes in those projections, or our failure to meet those projections; |
announcements by us or our competitors of new products or services; |
public reaction to our press releases, other public announcements, and filings with the SEC; |
rumors and market speculation involving us or other companies in our industry; |
actual or anticipated changes in our results of operations; |
changes in the regulatory environment; |
actual or anticipated developments in our business, our competitors’ businesses, or the competitive landscape generally; |
litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; |
announced or completed acquisitions of businesses or technologies by us or our competitors; |
new laws or regulations or new interpretations of existing laws or regulations applicable to our business; |
changes in accounting standards, policies, guidelines, interpretations, or principles; | |
actual or perceived data security incidents that we or our service providers may suffer; |
any significant change in our management; and |
general economic conditions and slow or negative growth of our markets. |
Period | Total number of Shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs | Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs | |||||
July 1 to July 31 | 3,415 (i) | $ | 61.64 | — | — | ||||
August 1 to August 31 | — | — | — | — | |||||
September 1 to September 30 | 2,161,629 (ii) | -- (ii) | — | — | |||||
Total | 2,165,044 | 61.64 (iii) | — | — |
Incorporated by Reference | ||||||
Exhibit Number | Description | Form | File No. | Exhibit | Filing Date | |
32.1† | ||||||
101.INS | XBRL Instance Document. | |||||
101.SCH | XBRL Taxonomy Extension Schema Document. | |||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | |||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | |||||
101.LAB | XBRL Taxonomy Extension Labels Linkbase Document. | |||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
Date: | November 7, 2018 | By: | /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) | ||||
1. | I have reviewed this Quarterly Report on Form 10-Q of Square, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
1. | I have reviewed this Quarterly Report on Form 10-Q of Square, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Nov. 02, 2018 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Square, Inc. | |
Entity Central Index Key | 0001512673 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Class A | ||
Class of Stock [Line Items] | ||
Entity Common Stock, Shares Outstanding | 308,397,662 | |
Class B | ||
Class of Stock [Line Items] | ||
Entity Common Stock, Shares Outstanding | 105,099,942 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Class of Stock [Line Items] | ||
Preferred stock, par value (in USD per share) | $ 0.0000001 | $ 0.0000001 |
Preferred stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Class A | ||
Class of Stock [Line Items] | ||
Common stock, par value (in USD per share) | $ 0.0000001 | $ 0.0000001 |
Common stock, shares authorized (in shares) | 1,000,000,000 | 1,000,000,000 |
Common stock, shares issued (in shares) | 306,228,873 | 280,400,813 |
Common stock, shares outstanding (in shares) | 306,228,873 | 280,400,813 |
Class B | ||
Class of Stock [Line Items] | ||
Common stock, par value (in USD per share) | $ 0.0000001 | $ 0.0000001 |
Common stock, shares authorized (in shares) | 500,000,000 | 500,000,000 |
Common stock, shares issued (in shares) | 106,143,959 | 114,793,262 |
Common stock, shares outstanding (in shares) | 106,143,959 | 114,793,262 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Revenue: | ||||
Revenue | $ 882,108 | $ 585,159 | $ 2,365,649 | $ 1,598,218 |
Revenue | 857,700 | 2,298,700 | ||
Cost of revenue: | ||||
Total cost of revenue | 529,448 | 366,543 | 1,442,003 | 998,742 |
Gross profit | 352,660 | 218,616 | 923,646 | 599,476 |
Operating expenses: | ||||
Product development | 135,773 | 82,547 | 355,668 | 229,255 |
Sales and marketing | 116,337 | 66,533 | 291,846 | 176,349 |
General and administrative | 85,527 | 64,312 | 243,800 | 184,235 |
Transaction, loan and advance losses | 23,596 | 19,893 | 63,603 | 50,185 |
Amortization of acquired customer assets | 4,384 | 1,804 | 9,075 | 5,868 |
Total operating expenses | 362,527 | 233,507 | 957,152 | 640,673 |
Operating loss | (9,867) | (14,891) | (33,506) | (41,197) |
Interest expense, net | 7,224 | 3,080 | 12,806 | 7,570 |
Other income, net | (37,800) | (1,226) | (37,908) | (1,951) |
Income (loss) before income tax | 20,709 | (16,745) | (8,404) | (46,816) |
Provision (benefit) for income taxes | 1,066 | (647) | 1,845 | 334 |
Net income (loss) | $ 19,643 | $ (16,098) | $ (10,249) | $ (47,150) |
Net income (loss) per share: | ||||
Basic (in USD per share) | $ 0.05 | $ (0.04) | $ (0.03) | $ (0.13) |
Diluted (in USD per share) | $ 0.04 | $ (0.04) | $ (0.03) | $ (0.13) |
Weighted-average shares used to compute net income (loss) per share | ||||
Basic (in shares) | 409,690 | 383,951 | 402,980 | 375,743 |
Diluted (in shares) | 474,915 | 383,951 | 402,980 | 375,743 |
Technology assets | ||||
Cost of revenue: | ||||
Amortization of acquired technology | $ 2,277 | $ 1,556 | $ 5,714 | $ 5,058 |
Customer assets | ||||
Operating expenses: | ||||
Amortization of acquired customer assets | 1,294 | 222 | 2,235 | 649 |
Transaction-based revenue | ||||
Revenue: | ||||
Revenue | 655,384 | 510,019 | 1,803,649 | 1,395,562 |
Cost of revenue: | ||||
Cost of revenue | 414,456 | 328,043 | 1,137,716 | 896,913 |
Subscription and services-based revenue | ||||
Revenue: | ||||
Revenue | 166,203 | 65,051 | 397,589 | 173,262 |
Revenue | 141,752 | 65,051 | 330,637 | 173,262 |
Cost of revenue: | ||||
Cost of revenue | 47,078 | 18,169 | 117,230 | 51,161 |
Hardware revenue | ||||
Revenue: | ||||
Revenue | 17,558 | 10,089 | 50,337 | 29,394 |
Cost of revenue: | ||||
Cost of revenue | 23,229 | 18,775 | 68,467 | 45,610 |
Bitcoin revenue | ||||
Revenue: | ||||
Revenue | 42,963 | 0 | 114,074 | 0 |
Cost of revenue: | ||||
Cost of revenue | $ 42,408 | $ 0 | $ 112,876 | $ 0 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ 19,643 | $ (16,098) | $ (10,249) | $ (47,150) |
Net foreign currency translation adjustments | (946) | 367 | (3,341) | 1,554 |
Net unrealized gain (loss) on revaluation of intercompany loans | (296) | (41) | (89) | 362 |
Net unrealized gain (loss) on marketable debt securities | (647) | (200) | (1,597) | (320) |
Total comprehensive income (loss) | $ 17,754 | $ (15,972) | $ (15,276) | $ (45,554) |
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
9 Months Ended |
---|---|
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Square, Inc. (together with its subsidiaries, Square or the Company) creates tools that help sellers start, run, and grow their businesses. Square enables sellers to accept card payments and also provides reporting and analytics, next-day settlement, and chargeback protection. Square’s point-of-sale software and other business services help sellers manage inventory, locations, and employees; access financing; engage buyers; build a website or online store; and grow sales. The Cash App is an easy way to send, spend, and receive money, and Caviar is a food-ordering platform. Square was founded in 2009 and is headquartered in San Francisco, with offices in the United States, Canada, Japan, Australia, Ireland, and the UK. Reclassifications and Other Adjustments During the third quarter of 2018, the Company has reclassified prior period balances within interest and other (income) expense, net, to disaggregate the amounts and separately present interest (income) expense, net and other (income) expense, net on its consolidated statements of operations to conform to the current period presentation. This classification change was made to provide clarity of the balances as the activity continues to grow, particularly as a result of the impact of revaluation of an equity investment in the current period. During both the three and nine months ended September 30, 2018, the Company recorded a gain of $36.9 million to other income on the consolidated statements of operations arising from revaluation of this investment (Note 12). There was no impact to the net income (loss) on its consolidated statements of operations to any of the periods presented as result of this change. 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) and the applicable rules and regulations of the Securities and Exchange Commission (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, 2017 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 income (loss), and cash flows for the interim periods. All intercompany transactions and balances have been eliminated in consolidation. The interim results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018, 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 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, 2017. Use of Estimates The preparation of the Company’s consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, as well as related disclosure of contingent assets and liabilities. Actual results could differ from the Company’s estimates. To the extent that there are material differences between these estimates and actual results, the Company’s financial condition or operating results will be materially affected. The Company bases its estimates on past experience and other assumptions that the Company believes are reasonable under the circumstances, and the Company evaluates these estimates on an ongoing basis. Estimates, judgments, and assumptions in these consolidated financial statements include, but are not limited to, those related to revenue recognition, accrued transaction losses, valuation of the debt component of convertible senior notes, valuation of loans held for sale, goodwill, acquired intangible assets and deferred revenue, income and other taxes, and share-based compensation. Concentration of Credit Risk For the three and nine months ended September 30, 2018 and 2017, the Company had no customer that accounted for greater than 10% of total net revenue. The Company had three third-party payment processors that represented approximately 50%, 37%, and 9% of settlements receivable as of September 30, 2018. The same three parties represented approximately 46%, 42%, and 8% of settlements receivable as of December 31, 2017. All other third-party processors were insignificant. Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, marketable debt securities, settlements receivables, customer funds, and loans held for sale. The associated risk of concentration for cash and cash equivalents and restricted cash is mitigated by banking with creditworthy institutions. At certain times, amounts on deposit exceed federal deposit insurance limits. The associated risk of concentration for marketable 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 sale is partially mitigated by credit evaluations that are performed prior to facilitating the offering of loans and ongoing performance monitoring of the Company’s loan customers. Accounting Policies Except for the adoption of ASC 606, Revenue from Contracts with Customers (ASC 606), described in Note 2, and the accounting policy on cryptocurrency transactions and customer funds, both described below, there have been no material changes to the Company’s accounting policies during the nine months ended September 30, 2018, as compared to the accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. Cryptocurrency transactions During the fourth quarter of 2017, the Company started offering its Cash App customers the ability to purchase bitcoin, a cryptocurrency denominated asset, from the Company. The Company purchases bitcoin from private broker dealers or from Cash App customers. Upon purchase, the Company records the cost of bitcoin within other current assets in its consolidated balance sheets. Upon sale, the Company records the total sale amount received from customers as bitcoin revenue and the associated cost as cost of revenue. The carrying value of bitcoin held by the Company was $0.2 million and $0.3 million as of September 30, 2018 and December 31, 2017, respectively. The Company assesses the carrying value of bitcoin held by the Company at each reporting date and records an impairment charge if the cost exceeds the fair value. Losses on bitcoin for the three and nine months ended September 30, 2018, were insignificant. Customer funds Customer funds represent Cash App customers' stored balances that customers can later use to send money or make payments, or customers with cash in transit. As of December 31, 2017, the Company held these stored balances as short term bank deposits. During the third quarter of 2018, the Company started investing a portion of these stored balances in short-term marketable debt securities (Note 5). Recent Accounting Pronouncements Recently issued accounting pronouncements not yet adopted In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, Leases, which will require, among other items, lessees to recognize a right of use asset and a related lease liability for most leases on the balance sheet. Qualitative and quantitative disclosures 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 new standard should be applied on a modified retrospective basis. The Company does not plan to early adopt this guidance. The Company’s operating leases primarily comprise of office facilities, with the most significant leases relating to corporate headquarters in San Francisco and an office in New York. While the Company continues to evaluate the impact of adopting this guidance on its consolidated financial statements, it does expect to record material right to use assets and related lease liabilities on its consolidated balance sheets upon adoption, which will increase total assets and liabilities. 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. Early adoption is permitted for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company is currently evaluating the impact this guidance may have 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 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 guidance may have on the consolidated financial statements and related disclosures. In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. When the Tax Cuts and Jobs Act of 2017 was enacted in December 2017, there was a valuation allowance on the deferred tax assets included within the Company's accumulated other comprehensive income; therefore no tax expense resulted from the change in the federal income tax rate. This guidance allows companies to reclassify such tax effects from accumulated other comprehensive income to retained earnings. 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 expect the adoption of this guidance to have a material impact on the consolidated financial statements and related disclosures. In July 2018, the FASB issued ASU 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement, which will remove, modify and add disclosure requirements for fair value measurements to improve the overall usefulness of such disclosures. 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 for any removed or modified disclosure requirements. Transition is on a prospective basis for the new and modified disclosures, and on a retrospective basis for disclosures that have been eliminated. The Company is currently evaluating the impact this guidance may have on the consolidated financial statements and related disclosures. In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which is intended to align the requirements for capitalization of implementation costs incurred in a cloud computing arrangement that is a service contract with the existing guidance for internal-use software. 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. The guidance provides flexibility in adoption, allowing for either retrospective adjustment or prospective adjustment for all implementation costs incurred after the date of adoption. The Company is currently evaluating the impact this guidance may have on the consolidated financial statements and related disclosures. |
REVENUE |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REVENUE | REVENUE Adoption of ASC 606, Revenue from Contracts with Customers On January 1, 2018, the Company adopted ASC 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with the Company's historic revenue recognition methodology under ASC 605, Revenue Recognition. The Company recorded a net reduction to retained earnings of $4.6 million as of January 1, 2018, due to the cumulative impact of adopting ASC 606, primarily related to the effect on revenue and associated cost of revenue from hardware sold through the retail distribution channels and hardware installment sales. The impact to revenue for the three and nine months ended September 30, 2018 was an increase of $1.6 million and $5.3 million, respectively, as a result of applying ASC 606. For the three months ended September 30, 2018, the revenue recognized from contracts with customers was $857.7 million and revenue from other sources was $24.5 million. For the nine months ended September 30, 2018, the revenue recognized from contracts with customers was $2,298.7 million and revenue from other sources was $67.0 million. Impairment losses arising from contracts with customers were $0.9 million and $2.7 million for the three and nine months ended September 30, 2018, respectively. The impact of adoption of ASC 606 on the Company's condensed consolidated statement of operations was as follows (in thousands):
The impact of adoption of ASC 606 on the Company's condensed consolidated balance sheets was as follows (in thousands):
Revenue Recognition Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company's contracts with customers generally do not include multiple performance obligations with differing patterns of revenue recognition, except for domain name registration offered with website hosting services sold after May 31, 2018 following the acquisition of Weebly (Note 8). The following table presents the Company's revenue from contracts with customers disaggregated by revenue source (in thousands):
Transaction-based revenue The Company charges its sellers a transaction fee for managed payments solutions that is generally calculated as a percentage of the total transaction amount processed. The Company selectively offers custom pricing for certain sellers. The Company collects the transaction amount from the seller's customer's bank, net of acquiring interchange and assessment fees, processing fees, and bank settlement fees paid to third-party payment processors and financial institutions. The Company retains its fees and remits the net amount to the sellers. The Company acts as the merchant of record for its sellers and works directly with payment card networks and banks so that its sellers do not need to manage the complex systems, rules, and requirements of the payments industry. The Company satisfies its performance obligations and therefore recognizes the transaction fees as revenue upon authorization of a transaction by the seller's customer's bank. Revenue is recognized net of refunds, which arise from reversals of transactions initiated by sellers. The transaction fees collected from sellers are recognized as revenue on a gross basis as the Company is the principal in the delivery of the managed payments solutions to the sellers. The Company has concluded it is the principal because as the merchant of record, it controls the services before delivery to the seller, it is primarily responsible for the delivery of the services to its sellers, and it has discretion in setting prices charged to sellers. The Company also has the unilateral ability to accept or reject a transaction based on criteria established by the Company. As the merchant of record, Square is liable for the costs of processing the transactions for its sellers, and records such costs within cost of revenue. Subscription and services-based revenue Subscription and services-based revenue is primarily comprised of revenue the Company generates from Instant Deposit and Cash Card, Caviar, website hosting and domain name registration services, and various other software as a service (SaaS) products. Instant Deposit is a functionality within the Cash App and the Company's managed payments solution that enables customers, including individuals and sellers, to instantly deposit funds into their bank accounts. The Company charges a per transaction fee which is recognized as revenue when customers instantly deposit funds to their bank account. The Company also offers Cash App customers the ability to use funds stored in the Cash App via a Visa debit card, for which the Company charges a per transaction fee that is recorded as revenue. Caviar is a food ordering platform that facilitates food delivery services. The Company's performance obligations are the delivery of food orders from restaurants to customers and the provision of catered meals to corporate customers. For delivery of food orders, the Company charges fees to restaurants, as sellers, and also charges delivery and service fees to individuals. For provision of catered meals the Company charges corporate customers a fee. All fees are billed upon delivery of food orders or catered meals, when the Company considers that it has satisfied its performance obligations. Revenue is recognized upon delivery of the food orders or catered meals, net of refunds. Refunds are estimated based on historical experience. Following the acquisition of Weebly, the Company offers customers website hosting services for a fee that is generally billed at inception. The Company also acts as a reseller of domain names registration services for a registrar for a fee, which is also generally billed at inception. The Company considers that it satisfies its performance obligations over time and as such recognizes revenue ratably over the term of the relevant arrangements, which vary from one month to twenty four months for website hosting, and one year to ten years for domain name registration. SaaS represents software products and solutions that provide customers with access to various technologies for a fee which is recognized as revenue ratably as the service is provided. The Company's contracts with customers are generally for a term of one month and renew automatically each month. The Company invoices its customers monthly. The Company considers that it satisfies its performance obligations over time each month as it provides the SaaS services to customers and hence recognizes revenue ratably over the month. Hardware revenue The Company generates revenue through the sale of hardware through e-commerce and through its retail distribution channels. The Company satisfies its performance obligation upon delivery of hardware to its customers who include end user customers, distributors, and retailers. The Company may at times offer concessions to customers and also allow for customer returns, which are accounted for as variable consideration. The Company estimates these amounts based on historical experience and reduces revenue recognized. The Company invoices end user customers upon delivery of the products to customers, and payments from such customers are due upon invoicing. Distributors and retailers have payment terms that range from 30 to 90 days after delivery. The Company offers hardware installment sales to customers with terms ranging from three to twenty four months. The Company allocates a portion of the consideration received from these arrangements to a financing component when it determines that a significant financing component exists. The financing component is subsequently recognized as financing revenue separate from hardware revenue, within subscription and services-based revenue, over the terms of the arrangement with the customer. Bitcoin revenue During the fourth quarter of 2017, the Company started offering its Cash App customers the ability to purchase bitcoin, a cryptocurrency denominated asset, from the Company. The Company satisfies its performance obligation and records revenue when bitcoin is transferred to the customer's account. Arrangements with Multiple Performance Obligations The Company also offers its customers the option to buy website hosting bundled with domain name registration, and infrequently the Company has offered its hardware customers free managed payments solutions with the purchase of its hardware as part of a marketing promotion. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the prices charged to customers since the Company's products and services are normally sold on a stand alone basis. Deferred Revenue Deferred revenue is primarily comprised of payments for website hosting and domain name registration received from customers at inception of the arrangements prior to the services being rendered. Deferred revenue also includes unearned revenue related to managed payments services offered in conjunction with hardware sales for which the cash payments from customers are received and due upon the sale of the hardware. The deferred revenue balances were as follows (in thousands):
Practical Expedients The Company does not recognize a financing component for hardware installment sales that have a term of one year or less. |
RESTRICTED CASH |
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Sep. 30, 2018 | |
Cash and Cash Equivalents [Abstract] | |
RESTRICTED CASH | RESTRICTED CASH As of September 30, 2018 and December 31, 2017, restricted cash of $33.2 million and $28.8 million, respectively, is related to pledged cash deposited into savings accounts at 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. The Company has recorded this amount as a current asset on the consolidated balance sheets due to 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. Additionally, this balance includes certain amounts held as collateral pursuant to multi-year lease agreements, discussed in the paragraph below, which we expect to become unrestricted within the next year. As of September 30, 2018 and December 31, 2017, the remaining restricted cash of $10.1 million and $9.8 million, respectively, is primarily related to cash deposited into money market funds that is used as collateral pursuant to multi-year lease agreements (Note 18). The Company has recorded this amount as a non-current asset on the consolidated balance sheets as the terms of the related leases extend beyond one year. |
INVESTMENTS |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVESTMENTS | INVESTMENTS The Company determines the appropriate classification of its investments in marketable debt securities at the time of purchase and reevaluates such designation at each balance sheet date. The Company has classified and accounted for its marketable debt securities as available-for-sale. The Company's short-term and long-term investments as of September 30, 2018 are as follows (in thousands):
The Company's short-term and long-term investments as of December 31, 2017 are as follows (in thousands):
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 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 amortized cost of investments classified as cash equivalents approximated the fair value due to the short term nature of the investments. The contractual maturities of the Company's short-term and long-term investments as of September 30, 2018 are as follows (in thousands):
CUSTOMER FUNDS The following table presents the assets underlying customer funds (in thousands):
The Company determines the appropriate classification of the investments in marketable debt securities within customer funds at the time of purchase and reevaluates such designation at each balance sheet date. The Company has classified and accounted for its marketable debt securities within customer funds as available-for-sale. The Company's investments within customer funds as of September 30, 2018 are as follows (in thousands):
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 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 amortized cost of investments classified as cash equivalents approximated the fair value due to the short term nature of the investments. The contractual maturities of the Company's investments within customer funds as of September 30, 2018 are as follows (in thousands):
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CUSTOMER FUNDS |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CUSTOMER FUNDS | INVESTMENTS The Company determines the appropriate classification of its investments in marketable debt securities at the time of purchase and reevaluates such designation at each balance sheet date. The Company has classified and accounted for its marketable debt securities as available-for-sale. The Company's short-term and long-term investments as of September 30, 2018 are as follows (in thousands):
The Company's short-term and long-term investments as of December 31, 2017 are as follows (in thousands):
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 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 amortized cost of investments classified as cash equivalents approximated the fair value due to the short term nature of the investments. The contractual maturities of the Company's short-term and long-term investments as of September 30, 2018 are as follows (in thousands):
CUSTOMER FUNDS The following table presents the assets underlying customer funds (in thousands):
The Company determines the appropriate classification of the investments in marketable debt securities within customer funds at the time of purchase and reevaluates such designation at each balance sheet date. The Company has classified and accounted for its marketable debt securities within customer funds as available-for-sale. The Company's investments within customer funds as of September 30, 2018 are as follows (in thousands):
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 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 amortized cost of investments classified as cash equivalents approximated the fair value due to the short term nature of the investments. The contractual maturities of the Company's investments within customer funds as of September 30, 2018 are as follows (in thousands):
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FAIR VALUE OF FINANCIAL INSTRUMENTS |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE OF FINANCIAL INSTRUMENTS | FAIR VALUE OF FINANCIAL INSTRUMENTS The Company measures its cash equivalents, customer funds, short-term and long-term marketable debt securities, and equity investments at fair value. The Company classifies these investments within Level 1 or Level 2 of the fair value hierarchy because the Company values these investments using quoted market prices or alternative pricing sources and models utilizing market observable inputs. The Company’s financial assets and liabilities that are measured at fair value on a recurring basis are classified as follows (in thousands):
The carrying amounts of certain financial instruments, including settlements receivable, accounts payable, customers payable, and settlements payable, approximate their fair values due to their short-term nature. The Company estimates the fair value of its convertible 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 senior notes were as follows (in thousands):
Loans held for sale are recorded at the lower of amortized cost or fair value determined on an individual loan basis. To determine the fair value the Company utilizes industry-standard valuation modeling, such as discounted cash flow models, taking into account the estimated timing and amounts of periodic repayments. The estimated fair value and carrying value of loans held for sale is as follows (in thousands):
The Company recognizes a charge within transaction, loan and advance losses on the consolidated statement of operations whenever the amortized cost of a loan exceeds its fair value, with such charges being reversed for subsequent increases in fair value, but only to the extent that such reversals do not result in the amortized cost of a loan exceeding its fair value. For the three and nine months ended September 30, 2018, the Company recorded a charge for the excess of amortized cost over fair value of the loans of $3.3 million and $9.0 million, respectively. 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. 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, 2018 and 2017, the Company did not have any transfers in or out of Level 1, Level 2, or Level 3 assets or liabilities. |
PROPERTY AND EQUIPMENT, NET |
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PROPERTY AND EQUIPMENT, NET | PROPERTY AND EQUIPMENT, NET The following is a summary of property and equipment, less accumulated depreciation and amortization (in thousands):
Depreciation and amortization expense on property and equipment was $11.7 million and $29.2 million for the three and nine months ended September 30, 2018, respectively. 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. |
ACQUISITIONS |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACQUISITIONS | ACQUISITIONS Weebly, Inc. On May 31, 2018, the Company acquired 100% of the outstanding shares of Weebly, a technology company that offers customers website hosting and domain name registration solutions. The acquisition of Weebly enables the Company to combine Weebly’s web presence tools with the Company's in-person and online offerings to create a cohesive solution for sellers to start or grow an omnichannel business. The acquisition will also expand the Company’s customer base globally and add a new recurring revenue stream. The purchase consideration was comprised of $132.4 million in cash and 2,418,271 shares of the Company’s Class A common stock with an aggregate fair value of $140.1 million based on the closing price of the Company’s Class A common stock on the acquisition date. As part of the acquisition, the Company paid an aggregate of $17.7 million in cash and shares to settle outstanding vested and unvested employee options, of which $2.6 million was accounted for as post-combination compensation expense and is excluded from the purchase consideration. Third-party acquisition-related costs were insignificant. The results of Weebly's operations have been included in the consolidated financial statements since the closing date. The acquisition was accounted for as a business combination. This method requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date and that the difference between the fair value of the consideration paid for the acquired entity and the fair value of the net assets acquired be recorded as goodwill, which is not amortized but is tested at least annually for impairment. The table below summarizes the consideration paid for Weebly and the preliminary assessment of the fair value of the assets acquired and liabilities assumed at the closing date (in thousands, except share data).
The Company prepared an initial determination of the fair value of the assets acquired and liabilities assumed as of the acquisition date using preliminary information. During the third quarter of 2018, the Company has recognized measurement period adjustments to the purchase consideration and the fair value of certain liabilities assumed as a result of further refinements in the Company’s estimates. These adjustments were prospectively applied. The effect of these adjustments on the preliminary purchase price allocation was an increase in goodwill and tax liabilities assumed of $4.3 million and $3.0 million, respectively. There was no impact to the consolidated statements of operations as result of these adjustments. The Company continues the process of completing the valuation of the acquired intangible assets and deferred revenue and evaluating contingencies and tax effects related to the acquisition. Accordingly, the preliminary values reflected in the table above are subject to change. As of September 30, 2018, $19.9 million of cash and 372,578 shares of the total consideration were withheld as security for indemnification obligations related to general representations and warranties, in addition to certain potential tax exposures. Goodwill from the Weebly acquisition is primarily attributable to the value of expected synergies created by incorporating Weebly solutions into the Company's technology platform and the value of the assembled workforce. None of the goodwill generated from the Weebly acquisition or the acquired intangible assets are expected to be deductible for tax purposes. Additionally the acquisition would have resulted in recognition of deferred tax assets arising mainly from the net of deferred tax assets from acquired net operating losses (NOLs) and research and development credits, and deferred tax liabilities associated with intangible assets and deferred revenue. However, the realization of such deferred tax assets depends primarily on the Company's post-acquisition ability to generate taxable income in future periods. Accordingly, a valuation allowance was recorded against the net acquired deferred tax asset in accounting for the acquisition. The acquisition of Weebly did not have a material impact on the Company's reported revenue or net loss amounts for any period presented. Accordingly, pro forma financial information has not been presented. Other acquisitions The Company also spent an aggregate of $9.9 million, net of cash acquired, in connection with other immaterial acquisitions during the nine months ended September 30, 2018, which resulted in the recognition of additional intangible assets and goodwill. Pro forma financial information has not been presented for any of our acquisitions as the impact to our consolidated financial statements was not material. |
GOODWILL |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||
GOODWILL | GOODWILL Goodwill is recorded when the consideration paid for an acquisition of a business exceeds the fair value of identifiable net tangible and intangible assets acquired. The change in carrying value of goodwill in the period was as follows (in thousands):
The Company performs a goodwill impairment test annually on December 31 and more frequently if events and circumstances indicate that the asset might be impaired. For the periods presented, the Company had recorded no impairment charges. |
ACQUIRED INTANGIBLE ASSETS |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACQUIRED INTANGIBLE ASSETS | ACQUIRED INTANGIBLE ASSETS The Company entered into two transactions accounted for as business combinations during the quarter ended June 30, 2018, that involved the acquisition of intangible assets. Refer to Note 8 for further details. The following table presents the detail of acquired intangible assets as of the periods presented (in thousands):
The weighted average amortization periods for acquired patents, acquired technology, customer intangible assets, and acquired trade name are approximately 13 years, 5 years, 11 years and 4 years, respectively. All intangible assets are amortized over their estimated useful lives. The changes to the carrying value of intangible assets were as follows (in thousands):
The total estimated future amortization expense of these intangible assets as of September 30, 2018 is as follows (in thousands):
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OTHER CONSOLIDATED BALANCE SHEET COMPONENTS (CURRENT) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OTHER CONSOLIDATED BALANCE SHEET COMPONENTS (CURRENT) | OTHER CONSOLIDATED BALANCE SHEET COMPONENTS (CURRENT) Other Current Assets The following table presents the detail of other current assets (in thousands):
(i) The deferred hardware costs represented costs associated with hardware sold through the retail distribution channels. The adoption of ASC 606 on January 1, 2018, has resulted in the recognition of such costs upon delivery of the hardware to the distribution channel. (ii) The Company capitalizes the cost of its magstripe readers, including packaging and shipping costs, held on-hand by the Company as of each consolidated balance sheet date. Once the readers are shipped to a third-party distributor or an end-customer, they are recorded as marketing expense on the consolidated statements of operations. (iii) Prepaid compensation relates to cash transferred by the Company to an escrow agent in connection with a business combination that will be paid to officers of the acquiree over time as they provide services to the Company. Accrued Expenses The following table presents the detail of accrued expenses (in thousands):
Other Current Liabilities The following table presents the detail of other current liabilities (in thousands):
(iv) Square Capital payable represents unpaid amounts arising from the purchase of loans or loan repayments collected on behalf of third parties. (v) Square Payroll payable represents amounts received from Square Payroll product customers that will be utilized to settle the customers employee payroll and related obligations. OTHER CONSOLIDATED BALANCE SHEET COMPONENTS (NON-CURRENT) Other Non-Current Assets The following table presents the detail of other non-current assets (in thousands):
(i) In August, 2017, the Company invested $25.0 million for preferred shares of Eventbrite, Inc. (Eventbrite) which was carried at cost. In September, 2018, upon Eventbrite's initial public offering, the preferred shares held by the Company converted into Class B common shares of Eventbrite. The Company revalued this investment and will subsequently carry it at fair value, with changes in fair value being recorded within other income or expense on the consolidated statement of operations. During the three and nine months ended September 30, 2018, the Company recorded a gain of $36.9 million to other income on the consolidated statements of operations arising from revaluation of this investment. (ii) Prepaid compensation relates to cash transferred by the Company to an escrow agent in connection with a business combination that will be paid to officers of the acquiree over time as they provide services to the Company. Other Non-Current Liabilities The following table presents the detail of other non-current liabilities (in thousands):
(iii) Statutory liabilities represent loss contingencies that may arise from the Company's interpretation and application of certain guidelines and rules issued by various federal, state, local, and foreign regulatory authorities. |
OTHER CONSOLIDATED BALANCE SHEET COMPONENTS (NON-CURRENT) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OTHER CONSOLIDATED BALANCE SHEET COMPONENTS (NON-CURRENT) | OTHER CONSOLIDATED BALANCE SHEET COMPONENTS (CURRENT) Other Current Assets The following table presents the detail of other current assets (in thousands):
(i) The deferred hardware costs represented costs associated with hardware sold through the retail distribution channels. The adoption of ASC 606 on January 1, 2018, has resulted in the recognition of such costs upon delivery of the hardware to the distribution channel. (ii) The Company capitalizes the cost of its magstripe readers, including packaging and shipping costs, held on-hand by the Company as of each consolidated balance sheet date. Once the readers are shipped to a third-party distributor or an end-customer, they are recorded as marketing expense on the consolidated statements of operations. (iii) Prepaid compensation relates to cash transferred by the Company to an escrow agent in connection with a business combination that will be paid to officers of the acquiree over time as they provide services to the Company. Accrued Expenses The following table presents the detail of accrued expenses (in thousands):
Other Current Liabilities The following table presents the detail of other current liabilities (in thousands):
(iv) Square Capital payable represents unpaid amounts arising from the purchase of loans or loan repayments collected on behalf of third parties. (v) Square Payroll payable represents amounts received from Square Payroll product customers that will be utilized to settle the customers employee payroll and related obligations. OTHER CONSOLIDATED BALANCE SHEET COMPONENTS (NON-CURRENT) Other Non-Current Assets The following table presents the detail of other non-current assets (in thousands):
(i) In August, 2017, the Company invested $25.0 million for preferred shares of Eventbrite, Inc. (Eventbrite) which was carried at cost. In September, 2018, upon Eventbrite's initial public offering, the preferred shares held by the Company converted into Class B common shares of Eventbrite. The Company revalued this investment and will subsequently carry it at fair value, with changes in fair value being recorded within other income or expense on the consolidated statement of operations. During the three and nine months ended September 30, 2018, the Company recorded a gain of $36.9 million to other income on the consolidated statements of operations arising from revaluation of this investment. (ii) Prepaid compensation relates to cash transferred by the Company to an escrow agent in connection with a business combination that will be paid to officers of the acquiree over time as they provide services to the Company. Other Non-Current Liabilities The following table presents the detail of other non-current liabilities (in thousands):
(iii) Statutory liabilities represent loss contingencies that may arise from the Company's interpretation and application of certain guidelines and rules issued by various federal, state, local, and foreign regulatory authorities. |
INDEBTEDNESS |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INDEBTEDNESS | INDEBTEDNESS Revolving Credit Facility In November 2015, the Company entered into a revolving credit agreement with certain lenders, which extinguished the prior revolving credit agreement and provided for a $375.0 million revolving secured credit facility maturing in November 2020. This revolving credit agreement is secured by certain tangible and intangible assets. Loans under the credit facility bear interest at the Company’s option of (i) a base rate based on the highest of the prime rate, the federal funds rate plus 0.50%, 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 the Company’s total leverage ratio for the preceding four fiscal quarters. The Company is obligated to pay other customary fees for a credit facility of this size and type including an annual administrative agent fee of $0.1 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 both the three and nine months ended September 30, 2018 and 2017, respectively. As of September 30, 2018, the Company was in compliance with all financial covenants associated with this credit facility. Convertible Senior Notes due in 2023 On May 25, 2018, the Company issued an aggregate principal amount of $750.0 million of convertible senior notes and an additional 15% or $112.5 million pursuant to the exercise in full of the option to the initial purchaser to cover over-allotments (2023 Notes). The 2023 Notes mature on May 15, 2023, unless earlier converted or repurchased, and bear interest at a rate of 0.50% payable semi-annually on May 15 and November 15 of each year. The 2023 Notes are convertible at an initial conversion rate of 12.8456 shares of the Company's Class A common stock per $1,000 principal amount of 2023 Notes, which is equivalent to an initial conversion price of approximately $77.85 per share of Class A common stock. Holders may convert their 2023 Notes at any time prior to the close of business on the business day immediately preceding February 15, 2023 only under the following circumstances: (1) during any calendar quarter commencing after September 30, 2018 (and only during such calendar quarter), if the last reported sale price of the Company’s Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) 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 2023 Notes) per $1,000 principal amount of 2023 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 2023 Notes) or a transaction resulting in the Company’s Class A common stock converting into other securities or property or assets. On or after February 15, 2023, 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 2023 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. Effective October 2018, the Company revised its prior stated policy of settling conversions through combination settlement with a specified dollar amount of $1,000 per $1,000 principal amount of 2023 Notes, and currently expects to settle future conversions entirely in shares of the Company's Class A common stock. The Company will reevaluate this policy from time to time as conversion notices are received from holders of the 2023 Notes. In accounting for the issuance of the 2023 Notes, the Company separated the 2023 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 $155.3 million and was determined by deducting the fair value of the liability component from the par value of the 2023 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 2023 Notes at an effective interest rate of 4.69% over the contractual terms of the Notes. Debt issuance costs related to the 2023 Notes comprised of discounts and commissions payable to the initial purchasers of $6.0 million and third party offering costs of $0.8 million. The Company allocated the total amount incurred to the liability and equity components of the 2023 Notes based on their relative values. Issuance costs attributable to the liability component were $5.6 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. Convertible Senior Notes due in 2022 On March 6, 2017, the Company issued an aggregate principal amount of $400.0 million of convertible senior notes and an additional 10% or $40.0 million pursuant to the exercise in full of the option to the initial purchasers to cover over-allotments (2022 Notes). The 2022 Notes 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. The 2022 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 2022 Notes, which is equivalent to an initial conversion price of approximately $22.95 per share of Class A common stock. Holders may convert their 2022 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 (and only during such calendar quarter), if the last reported sale price of the Company’s Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) 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 2022 Notes) per $1,000 principal amount of 2022 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 2022 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 2022 Notes regardless of the foregoing circumstances. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of its Class A common stock, or a combination of cash and shares of its Class A common stock, at the Company’s election. The circumstances required to allow the holders to convert their 2022 Notes were met starting January 1, 2018. During the third quarter of 2018, certain holders of the 2022 Notes converted an aggregate principal amount of $70.0 million of their Notes. The Company settled the principal amount in cash and the balance by issuing 2.2 million shares of the Company's Class A common stock. Additionally, as of September 30, 2018, the Company had received notification from certain holders of the 2022 Notes of their intention to convert an aggregate principal amount of $149.0 million of 2022 Notes, that are expected to be settled in the fourth quarter of 2018 through a combination of cash and shares of the Company's Class A common stock. Effective October 2018, the Company revised its prior stated policy of settling conversions through combination settlement with a specified dollar amount of $1,000 per $1,000 principal amount of 2022 Notes. The Company currently expects to settle future conversions in shares of the Company's Class A common stock. The Company will reevaluate this policy from time to time as conversion notices are received from holders of the 2022 Notes. In accounting for the issuance of the 2022 Notes, the Company separated the 2022 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 2022 Notes. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. The debt discount is amortized to interest expense over the term of the 2022 Notes at an effective interest rate of 5.34% over the contractual terms of the Notes. Debt issuance costs related to the 2022 Notes comprised of discounts and commissions payable to the initial purchasers of $11.0 million and third party offering costs of $0.8 million. The Company allocated the total amount incurred to the liability and equity components of the 2022 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. The debt component associated with the 2022 Notes that were converted was accounted for as an extinguishment of debt, with the Company recording loss on extinguishment of $1.6 million, as the difference between the estimated fair value and the carrying value of such 2022 Notes. The equity component associated with the 2022 Notes that were converted was accounted for as a reacquisition of equity upon the conversion of such 2022 Notes. Accordingly, the excess of the fair value of the consideration issued to settle the conversion over the fair value of the debt component of $9.3 million was accounted for as a reduction to the additional paid in capital. The net carrying amount of the Notes were as follows (in thousands):
The net carrying amount of the equity component of the Notes were as follows (in thousands):
The Company recognized interest expense on the Notes as follows (in thousands, except for percentages):
The effective interest rate of the liability component is 4.69% and 5.34% for the 2023 Notes and 2022 Notes, respectively. Convertible Note Hedge and Warrant Transactions In connection with the offering of the 2023 Notes, the Company entered into convertible note hedge transactions (2023 convertible note hedges) with certain financial institution counterparties whereby the Company has the option to purchase a total of approximately 11.1 million shares of its Class A common stock at a price of approximately $77.85 per share. The total cost of the 2023 convertible note hedge transactions was $172.6 million. In addition, the Company sold warrants (2023 warrants) to the counterparties whereby the counterparties have the option to purchase a total of 11.1 million shares of the Company’s Class A common stock at a price of approximately $109.26 per share. The Company received $112.1 million in cash proceeds from the sale of the 2023 warrants. Taken together, the purchase of the 2023 convertible note hedges and sale of the 2023 warrants are intended to reduce dilution from the conversion of the 2023 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the converted 2023 Notes, as the case may be, and to effectively increase the overall conversion price from approximately $77.85 per share to approximately $109.26 per share. As these instruments are considered indexed to the Company's own stock and are considered equity classified, the 2023 convertible note hedges and 2023 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 2023 convertible note hedge and 2023 warrant transactions were recorded as a reduction to additional paid-in capital on the condensed consolidated balance sheets. In connection with the offering of the 2022 Notes, the Company entered into convertible note hedge transactions (2022 convertible note hedges) with certain financial institution 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 2022 convertible note hedge transactions was $92.1 million. In addition, the Company sold warrants (2022 warrants) to the counterparties whereby the counterparties have the option to purchase a total of 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 the 2022 warrants. Taken together, the purchase of the 2022 convertible note hedges and sale of the 2022 warrants are intended to reduce dilution from the conversion of the 2022 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the converted 2022 Notes, as the case may be, 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 2022 convertible note hedges and 2022 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 2022 convertible note hedge and 2022 warrant transactions were recorded as a reduction to additional paid-in capital on the condensed consolidated balance sheets. During the third quarter of 2018, the Company exercised a pro-rata portion of the 2022 convertible note hedges to offset the shares of the Company's Class A common stock issued to settle the conversion of the 2022 Notes discussed above. The 2022 convertible note hedges were net share settled, and the Company received 2.2 million shares of the Company's Class A common stock from the counterparties. |
ACCRUED TRANSACTION LOSSES |
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Product Warranties Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCRUED TRANSACTION LOSSES | 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):
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INCOME TAXES |
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Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The Company recorded an income tax expense of $1.1 million and $1.8 million for the three and nine months ended September 30, 2018, respectively, compared to income tax (benefit) expense of $(0.6) million and $0.3 million for the three and nine months ended September 30, 2017, respectively. The income tax expense recorded for the three and nine months ended September 30, 2018 was primarily due to state and foreign income tax expense offset by a release in the U.S. valuation allowance. The Company’s effective tax rate was 5.1% and (22.0)% for the three and nine months ended September 30, 2018, respectively, compared to an effective tax rate of 3.9% and (0.7)% for the three and nine months ended September 30, 2017, respectively. The difference between the effective tax rate and the federal statutory tax rate for the three and nine months ended September 30, 2018 and September 30, 2017 primarily relates to the valuation allowance on the Company’s deferred tax assets and the income tax benefit of the monetization of its alternative minimum tax (AMT) credit in 2017. The Company’s effective tax rate may be subject to fluctuation during the year as new information is obtained, which may affect 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, 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, 2018, the Company retains a full valuation allowance on its 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, 2018 and September 30, 2017, was calculated on a jurisdictional basis. The Company estimated the foreign income tax provision using the effective income tax rate expected to be applicable for the full year. On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118 (SAB 118) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act of 2017 (Tax Act). During the third quarter of 2018, the Company finalized its federal and state income tax returns, making no material adjustments to provisional amounts previously recorded. If additional guidance clarifying aspects of the Tax Act is released, any subsequent adjustment to these amounts will be recorded to current tax expense as a change in tax law. |
STOCKHOLDERS' EQUITY |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCKHOLDERS' EQUITY | STOCKHOLDERS’ EQUITY The changes in total stockholders’ equity were as follows (in thousands):
Common Stock The Company has authorized the issuance of Class A common stock and Class B common stock. Class A common stock and Class B common stock are referred to as "common stock" throughout these Notes to the Condensed Consolidated Financial Statements, unless otherwise noted. As of September 30, 2018, 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, 2018, there were 306,228,873 shares of Class A common stock and 106,143,959 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 In conjunction with the 2023 Notes offering, the Company sold the 2023 warrants whereby the counterparties have the option to purchase a total of approximately 11.1 million shares of the Company’s Class A common stock at a price of $109.26 per share. The Company received $112.1 million in cash proceeds from the sale of the 2023 warrants. See Note 13, Indebtedness, for more details on this transaction. Release of Caviar Shares Held Back In 2014, in conjunction with the Company's acquisition of Caviar, Inc. (Caviar), 1,291,979 shares of the purchase consideration issuable were withheld for indemnification purposes. In April 2018, the Company reached an agreement with the former owners of Caviar whereby 822,085 of the shares held back were released to the former owners and 469,894 shares were forfeited back to the Company as indemnification against liabilities related to Caviar preacquisition matters. Upon reaching the agreement, the Company recorded an indemnification asset of $2.8 million and a corresponding credit to expense to compensate for the costs previously incurred in connection with Caviar preacquisition claims. The remaining value of the forfeited shares was treated as an equity repurchase. Conversion of 2022 Notes and Exercise of the 2022 Convertible Note Hedges In connection with the conversion of certain of the 2022 Notes, the Company issued 2.2 million shares of Class A common stock. The Company also exercised a pro-rata portion of the 2022 convertible note hedges and received 2.2 million shares of Class A common stock from the counterparties to offset the shares issued. 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 as 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 awards have been nor will be in the future granted 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 (RSAs), restricted stock units (RSUs), performance shares, and stock bonuses to qualified employees, directors, and consultants. The awards must 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) 40,000,000 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’s board of directors or a committee thereof. As of September 30, 2018, the total number of shares subject to stock options, RSAs and RSUs outstanding under the 2015 Plan was 25,272,110, and 63,264,588 shares were available for future issuance. As of September 30, 2018, the total number of shares subject to stock options, RSAs and RSUs outstanding under the 2009 Plan was 31,343,565. A summary of stock option activity for the nine months ended September 30, 2018 is as follows (in thousands, except share and per share data):
Restricted Stock Activity Activity related to RSAs and RSUs during the nine months ended September 30, 2018 is set forth below:
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. The fair value of RSAs and 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:
The following table summarizes the effects of share-based compensation on the Company's condensed consolidated statements of operations (in thousands):
The Company recorded $2.0 million and $6.3 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, 2018, respectively, compared to $1.3 million and $4.4 million for the three and nine months ended September 30, 2017, respectively, which are included in the table above. The Company capitalized $2.0 million and $6.3 million of share-based compensation expense related to capitalized software costs during the three and nine months ended September 30, 2018, respectively, compared to $1.3 million and $2.5 million for the three and nine months ended September 30, 2017, respectively. As of September 30, 2018, there was $588.5 million of total unrecognized compensation cost related to outstanding awards that are expected to be recognized over a weighted-average period of 2.90 years. |
INCOME (LOSS) PER SHARE |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME (LOSS) PER SHARE | INCOME (LOSS) PER SHARE Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share is computed by dividing 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. Diluted net loss per share is the same as basic net loss per share because the effects of potentially dilutive items were anti-dilutive given the Company’s net loss. The following table presents the calculation of basic and diluted net income (loss) per share (in thousands, except per share data):
Additionally, since the Company has revised its policy and now intends to settle future conversions of its outstanding 2022 Notes and 2023 Notes entirely in shares of its Class A common stock, the Company will consider the number of shares expected to be issued in calculating any potential dilutive effect of the conversions, if applicable. In the periods that the Company has reported a net loss the 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 income (loss) per share because their effect would have been anti-dilutive for the periods presented (in thousands):
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COMMITMENTS AND CONTINGENCIES |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Operating and Capital Leases The Company has entered into various non-cancelable operating leases for certain offices with contractual lease periods expiring between 2018 and 2025. The Company recognized total rental expenses under operating leases of $6.4 million and $16.2 million for the three and nine months ended September 30, 2018, respectively, compared to $3.7 million and $9.6 million for the three and nine months ended September 30, 2017, respectively. Future minimum lease payments under non-cancelable operating leases (with initial lease terms in excess of one year) and future minimum capital lease payments as of September 30, 2018 are as follows (in thousands):
Litigation The Company is currently a party to, and may in the future be involved in, various litigation matters (including intellectual property litigation), legal claims, and government investigations. The Treasurer & Tax Collector of the City and County of San Francisco (Tax Collector) has issued a decision for fiscal years 2014 and 2015, that the Tax Collector believes the Company’s primary business activity is financial services rather than information services, and accordingly, the Company would be liable for the Gross Receipts Tax and Payroll Expense Tax under the rules for financial services business activities. The Company paid the liability for fiscal years 2014 and 2015 in the first quarter of 2018, as assessed by the Tax Collector. The Company intends to vigorously defend its position, which it believes has merit. Should the Company not prevail, the Company could be obligated to pay additional taxes together with any associated penalties and interest for subsequent years that together, in aggregate, could be material. The Company is currently unable to estimate the range of possible loss given the uncertainties associated with this matter, including uncertainties about the Tax Collector’s rationale for its position and about the amounts that may ultimately be subject to such taxes. On May 14, 2018, Joshua Woodle, on behalf of a class of couriers who have delivered with Caviar in California, filed a lawsuit in San Francisco County Superior Court against the Company doing business as Caviar, which alleges that Caviar misclassified Mr. Woodle 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. Plaintiffs seek damages and injunctive relief. The Court compelled arbitration of Mr. Woodle’s arbitrable claims on November 5, 2018. On August 24, 2018, Mervyn Cole, on behalf of the State of California and similarly situated couriers who have delivered with Caviar in California filed a lawsuit in Los Angeles County Superior Court against the Company doing business as Caviar. The complaint alleges that Caviar misclassified Mr. Cole and other similarly situated couriers as independent contractors and, in doing so, violated certain provisions of the California Labor Code. The action is being brought as a representative action under the Private Attorneys General Act (“PAGA”). Plaintiffs seek civil penalties and injunctive relief. Given the early stage of these proceedings, it is not yet possible to reliably determine any potential liability that could result from these matters. In addition, from time to time, the Company is involved in various other litigation matters and disputes arising in the ordinary course of business. The Company cannot at this time fairly estimate a reasonable range of exposure, if any, of the potential liability with respect to these other matters. While the Company does not believe, at this time, that any ultimate liability resulting from any of these other matters will have a material adverse effect on the Company's results of operations, financial position, or liquidity, the Company cannot give any assurance regarding the ultimate outcome of these other matters, and their resolution could be material to the Company's operating results for any particular period. |
SEGMENT AND GEOGRAPHICAL INFORMATION |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT AND GEOGRAPHIC INFORMATION | SEGMENT AND GEOGRAPHICAL INFORMATION Operating segments are defined as components of an enterprise for which discrete financial information is available that is evaluated regularly by the chief operating decision maker (CODM) for purposes of allocating resources and evaluating financial performance. The Company’s CODM is the chief executive officer who reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. As such, the Company’s operations constitute a single operating segment and one reportable segment. Revenue Revenue by geography is based on the billing addresses of the sellers or customers. The following table sets forth revenue by geographic area (in thousands):
No individual country from the international markets contributed in excess of 10% of total revenue for the three and nine months ended September 30, 2018 and 2017. Long-Lived Assets The following table sets forth long-lived assets by geographic area (in thousands):
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SUPPLEMENTAL CASH FLOW INFORMATION |
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SUPPLEMENTAL CASH FLOW INFORMATION | SUPPLEMENTAL CASH FLOW INFORMATION The supplemental disclosures of cash flow information consist of the following (in thousands):
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DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Reclassifications and Other Adjustments | During the third quarter of 2018, the Company has reclassified prior period balances within interest and other (income) expense, net, to disaggregate the amounts and separately present interest (income) expense, net and other (income) expense, net on its consolidated statements of operations to conform to the current period presentation. This classification change was made to provide clarity of the balances as the activity continues to grow, particularly as a result of the impact of revaluation of an equity investment in the current period. |
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) and the applicable rules and regulations of the Securities and Exchange Commission (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, 2017 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 income (loss), and cash flows for the interim periods. All intercompany transactions and balances have been eliminated in consolidation. The interim results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018, 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 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, 2017. |
Use of Estimates | The preparation of the Company’s consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, as well as related disclosure of contingent assets and liabilities. Actual results could differ from the Company’s estimates. To the extent that there are material differences between these estimates and actual results, the Company’s financial condition or operating results will be materially affected. The Company bases its estimates on past experience and other assumptions that the Company believes are reasonable under the circumstances, and the Company evaluates these estimates on an ongoing basis. Estimates, judgments, and assumptions in these consolidated financial statements include, but are not limited to, those related to revenue recognition, accrued transaction losses, valuation of the debt component of convertible senior notes, valuation of loans held for sale, goodwill, acquired intangible assets and deferred revenue, income and other taxes, and share-based compensation. |
Concentration of Credit Risk | 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, customer funds, and loans held for sale. The associated risk of concentration for cash and cash equivalents and restricted cash is mitigated by banking with creditworthy institutions. At certain times, amounts on deposit exceed federal deposit insurance limits. The associated risk of concentration for marketable 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 sale is partially mitigated by credit evaluations that are performed prior to facilitating the offering of loans and ongoing performance monitoring of the Company’s loan customers. |
Cryptocurrency transactions | During the fourth quarter of 2017, the Company started offering its Cash App customers the ability to purchase bitcoin, a cryptocurrency denominated asset, from the Company. The Company purchases bitcoin from private broker dealers or from Cash App customers. Upon purchase, the Company records the cost of bitcoin within other current assets in its consolidated balance sheets. Upon sale, the Company records the total sale amount received from customers as bitcoin revenue and the associated cost as cost of revenue. The carrying value of bitcoin held by the Company was $0.2 million and $0.3 million as of September 30, 2018 and December 31, 2017, respectively. The Company assesses the carrying value of bitcoin held by the Company at each reporting date and records an impairment charge if the cost exceeds the fair value. Losses on bitcoin for the three and nine months ended September 30, 2018, were insignificant. |
Customer funds | Customer funds represent Cash App customers' stored balances that customers can later use to send money or make payments, or customers with cash in transit. As of December 31, 2017, the Company held these stored balances as short term bank deposits. During the third quarter of 2018, the Company started investing a portion of these stored balances in short-term marketable debt securities (Note 5). |
Recent Accounting Pronouncements | Recently issued accounting pronouncements not yet adopted In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, Leases, which will require, among other items, lessees to recognize a right of use asset and a related lease liability for most leases on the balance sheet. Qualitative and quantitative disclosures 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 new standard should be applied on a modified retrospective basis. The Company does not plan to early adopt this guidance. The Company’s operating leases primarily comprise of office facilities, with the most significant leases relating to corporate headquarters in San Francisco and an office in New York. While the Company continues to evaluate the impact of adopting this guidance on its consolidated financial statements, it does expect to record material right to use assets and related lease liabilities on its consolidated balance sheets upon adoption, which will increase total assets and liabilities. 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. Early adoption is permitted for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company is currently evaluating the impact this guidance may have 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 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 guidance may have on the consolidated financial statements and related disclosures. In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. When the Tax Cuts and Jobs Act of 2017 was enacted in December 2017, there was a valuation allowance on the deferred tax assets included within the Company's accumulated other comprehensive income; therefore no tax expense resulted from the change in the federal income tax rate. This guidance allows companies to reclassify such tax effects from accumulated other comprehensive income to retained earnings. 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 expect the adoption of this guidance to have a material impact on the consolidated financial statements and related disclosures. In July 2018, the FASB issued ASU 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement, which will remove, modify and add disclosure requirements for fair value measurements to improve the overall usefulness of such disclosures. 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 for any removed or modified disclosure requirements. Transition is on a prospective basis for the new and modified disclosures, and on a retrospective basis for disclosures that have been eliminated. The Company is currently evaluating the impact this guidance may have on the consolidated financial statements and related disclosures. In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which is intended to align the requirements for capitalization of implementation costs incurred in a cloud computing arrangement that is a service contract with the existing guidance for internal-use software. 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. The guidance provides flexibility in adoption, allowing for either retrospective adjustment or prospective adjustment for all implementation costs incurred after the date of adoption. The Company is currently evaluating the impact this guidance may have on the consolidated financial statements and related disclosures. |
REVENUE (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Impact of Adoption of ASC 606 | The impact of adoption of ASC 606 on the Company's condensed consolidated statement of operations was as follows (in thousands):
The impact of adoption of ASC 606 on the Company's condensed consolidated balance sheets was as follows (in thousands):
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Schedule of Disaggregation of Revenue | The following table presents the Company's revenue from contracts with customers disaggregated by revenue source (in thousands):
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Schedule of Deferred Revenue | The deferred revenue balances were as follows (in thousands):
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INVESTMENTS (Tables) |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Short-term and Long-term Investments | The Company's short-term and long-term investments as of September 30, 2018 are as follows (in thousands):
The Company's short-term and long-term investments as of December 31, 2017 are as follows (in thousands):
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Investments Classified by Contractual Maturity Date | The contractual maturities of the Company's short-term and long-term investments as of September 30, 2018 are as follows (in thousands):
The contractual maturities of the Company's investments within customer funds as of September 30, 2018 are as follows (in thousands):
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CUSTOMER FUNDS (Tables) |
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Assets Underlying Customer Funds | The following table presents the assets underlying customer funds (in thousands):
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Investments within Customer Funds | The Company's investments within customer funds as of September 30, 2018 are as follows (in thousands):
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Investments within Customer Funds Classified by Contractual Maturity Date | The contractual maturities of the Company's short-term and long-term investments as of September 30, 2018 are as follows (in thousands):
The contractual maturities of the Company's investments within customer funds as of September 30, 2018 are as follows (in thousands):
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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | The estimated fair value and carrying value of the convertible senior notes were as follows (in thousands):
The estimated fair value and carrying value of loans held for sale is as follows (in thousands):
The Company’s financial assets and liabilities that are measured at fair value on a recurring basis are classified as follows (in thousands):
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PROPERTY AND EQUIPMENT, NET (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Property and Equipment | The following is a summary of property and equipment, less accumulated depreciation and amortization (in thousands):
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ACQUISITIONS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Assets Acquired and Liabilities Assumed | The table below summarizes the consideration paid for Weebly and the preliminary assessment of the fair value of the assets acquired and liabilities assumed at the closing date (in thousands, except share data).
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GOODWILL (Tables) |
9 Months Ended | ||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||
Schedule of Goodwill | The change in carrying value of goodwill in the period was as follows (in thousands):
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ACQUIRED INTANGIBLE ASSETS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Finite Lived Intangible Assets | The changes to the carrying value of intangible assets were as follows (in thousands):
The following table presents the detail of acquired intangible assets as of the periods presented (in thousands):
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Schedule of Annual Future Amortization Expense of Intangible Assets | The total estimated future amortization expense of these intangible assets as of September 30, 2018 is as follows (in thousands):
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OTHER CONSOLIDATED BALANCE SHEET COMPONENTS (CURRENT) (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Current Assets | The following table presents the detail of other current assets (in thousands):
(i) The deferred hardware costs represented costs associated with hardware sold through the retail distribution channels. The adoption of ASC 606 on January 1, 2018, has resulted in the recognition of such costs upon delivery of the hardware to the distribution channel. (ii) The Company capitalizes the cost of its magstripe readers, including packaging and shipping costs, held on-hand by the Company as of each consolidated balance sheet date. Once the readers are shipped to a third-party distributor or an end-customer, they are recorded as marketing expense on the consolidated statements of operations. (iii) Prepaid compensation relates to cash transferred by the Company to an escrow agent in connection with a business combination that will be paid to officers of the acquiree over time as they provide services to the Company. |
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Schedule of Accrued Expenses | The following table presents the detail of accrued expenses (in thousands):
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Schedule of Other Current Liabilities | The following table presents the detail of other current liabilities (in thousands):
(iv) Square Capital payable represents unpaid amounts arising from the purchase of loans or loan repayments collected on behalf of third parties. (v) Square Payroll payable represents amounts received from Square Payroll product customers that will be utilized to settle the customers employee payroll and related obligations. |
OTHER CONSOLIDATED BALANCE SHEET COMPONENTS (NON-CURRENT) (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Non-Current Assets | The following table presents the detail of other non-current assets (in thousands):
(i) In August, 2017, the Company invested $25.0 million for preferred shares of Eventbrite, Inc. (Eventbrite) which was carried at cost. In September, 2018, upon Eventbrite's initial public offering, the preferred shares held by the Company converted into Class B common shares of Eventbrite. The Company revalued this investment and will subsequently carry it at fair value, with changes in fair value being recorded within other income or expense on the consolidated statement of operations. During the three and nine months ended September 30, 2018, the Company recorded a gain of $36.9 million to other income on the consolidated statements of operations arising from revaluation of this investment. (ii) Prepaid compensation relates to cash transferred by the Company to an escrow agent in connection with a business combination that will be paid to officers of the acquiree over time as they provide services to the Company. |
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Schedule of Other Non-Current Liabilities | The following table presents the detail of other non-current liabilities (in thousands):
(iii) Statutory liabilities represent loss contingencies that may arise from the Company's interpretation and application of certain guidelines and rules issued by various federal, state, local, and foreign regulatory authorities. |
INDEBTEDNESS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Notes | The net carrying amount of the Notes were as follows (in thousands):
The net carrying amount of the equity component of the Notes were as follows (in thousands):
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Interest Expense on Convertible Notes | The Company recognized interest expense on the Notes as follows (in thousands, except for percentages):
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ACCRUED TRANSACTION LOSSES (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Product Warranties Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Reserve for Transaction Losses | The following table summarizes the activities of the Company’s reserve for transaction losses (in thousands):
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STOCKHOLDERS' EQUITY (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Stockholder's Equity | The changes in total stockholders’ equity were as follows (in thousands):
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Summary of Stock Option Activity | A summary of stock option activity for the nine months ended September 30, 2018 is as follows (in thousands, except share and per share data):
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Schedule of RSU Activity | Activity related to RSAs and RSUs during the nine months ended September 30, 2018 is set forth below:
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Schedule of Fair Value Assumptions for Options | The fair value of stock options granted was estimated using the following weighted-average assumptions:
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Summary of the Effect of Share-Based Compensation on the Condensed Consolidated Statements of Operations | The following table summarizes the effects of share-based compensation on the Company's condensed consolidated statements of operations (in thousands):
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INCOME (LOSS) PER SHARE (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Basic and Diluted Net Loss Per Share | The following table presents the calculation of basic and diluted net income (loss) per share (in thousands, except per share data):
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Schedule of Antidilutive Securities Excluded from Calculation of Diluted Net Income (Loss) Per Share | The following potential common shares were excluded from the calculation of diluted net income (loss) per share because their effect would have been anti-dilutive for the periods presented (in thousands):
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COMMITMENTS AND CONTINGENCIES (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Future Payments Under Operating and Capital Leases | Future minimum lease payments under non-cancelable operating leases (with initial lease terms in excess of one year) and future minimum capital lease payments as of September 30, 2018 are as follows (in thousands):
|
SEGMENT AND GEOGRAPHICAL INFORMATION (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from External Customers by Geographic Areas | Revenue by geography is based on the billing addresses of the sellers or customers. The following table sets forth revenue by geographic area (in thousands):
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Long-lived Assets by Geographic Areas | The following table sets forth long-lived assets by geographic area (in thousands):
|
SUPPLEMENTAL CASH FLOW INFORMATION (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Elements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Cash Flow, Supplemental Disclosures | The supplemental disclosures of cash flow information consist of the following (in thousands):
|
REVENUE - Adoption of ASC 606 on the Condensed Consolidated Balance Sheets (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Other current assets | $ 136,400 | $ 86,454 |
Other current liabilities | 70,338 | 28,367 |
Other non-current assets | 76,996 | 31,350 |
Other non-current liabilities | 89,711 | $ 69,538 |
Balances without adoption of ASC 606 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Other current assets | 148,491 | |
Other current liabilities | 78,260 | |
Other non-current assets | 78,584 | |
Other non-current liabilities | 91,311 | |
ASU 2014-09 | Effect of change | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Other current assets | (12,091) | |
Other current liabilities | (7,922) | |
Other non-current assets | (1,588) | |
Other non-current liabilities | $ (1,600) |
REVENUE - Revenue from Contracts with Customers (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Disaggregation of Revenue [Line Items] | ||||
Revenue, contracts from customers | $ 857,700 | $ 2,298,700 | ||
Transaction-based revenue | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue, contracts from customers | 655,384 | $ 510,019 | 1,803,649 | $ 1,395,562 |
Subscription and services-based revenue | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue, contracts from customers | 141,752 | 65,051 | 330,637 | 173,262 |
Hardware revenue | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue, contracts from customers | 17,558 | 10,089 | 50,337 | 29,394 |
Bitcoin revenue | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue, contracts from customers | $ 42,963 | $ 0 | $ 114,074 | $ 0 |
REVENUE - Deferred Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Deferred revenue, beginning of the period | $ 27,155 | $ 4,523 | $ 1,590 | $ 5,407 |
Deferred revenue, end of the period | 33,614 | 3,424 | 33,614 | 3,424 |
Deferred revenue arising from business combination | 22,800 | 0 | 22,800 | 0 |
Revenue recognized in the period from amounts included in deferred revenue at the beginning of the period | 10,165 | 2,060 | 1,539 | 5,312 |
Balances without adoption of ASC 606 | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Deferred revenue, beginning of the period | 27,155 | 4,523 | 5,893 | 5,407 |
ASU 2014-09 | Effect of change | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Deferred revenue, beginning of the period | $ 0 | $ 0 | $ (4,303) | $ 0 |
RESTRICTED CASH (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Cash and Cash Equivalents [Abstract] | ||
Pledged cash | $ 33,230 | $ 28,805 |
Collateral | $ 10,102 | $ 9,802 |
INVESTMENTS - Maturity of Available for Sale Debt Securities (Details) $ in Thousands |
Sep. 30, 2018
USD ($)
|
---|---|
Amortized Cost | |
Due in one year or less | $ 449,284 |
Due in one to five years | 537,995 |
Amortized Cost | 987,279 |
Fair Value | |
Due in one year or less | 448,986 |
Due in one to five years | 537,663 |
Fair Value | $ 986,649 |
CUSTOMER FUNDS - Assets Underlying Customer Funds (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Debt Securities, Available-for-sale [Line Items] | ||
Customer funds | $ 269,094 | $ 103,042 |
U.S. government securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Customer funds | 9,890 | 0 |
Cash | ||
Debt Securities, Available-for-sale [Line Items] | ||
Customer funds | 219,087 | 103,042 |
Cash Equivalents | Money market funds | ||
Debt Securities, Available-for-sale [Line Items] | ||
Customer funds | 1,884 | 0 |
Cash Equivalents | U.S. agency securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Customer funds | 8,335 | 0 |
Cash Equivalents | U.S. government securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Customer funds | $ 29,898 | $ 0 |
CUSTOMER FUNDS - Investments within Customer Funds (Details) $ in Thousands |
Sep. 30, 2018
USD ($)
|
---|---|
Debt Securities, Available-for-sale [Line Items] | |
Amortized Cost | $ 987,279 |
Fair Value | 986,649 |
Customer funds | |
Debt Securities, Available-for-sale [Line Items] | |
Amortized Cost | 9,891 |
Gross Unrealized Gains | 0 |
Gross Unrealized Losses | (1) |
Fair Value | 9,890 |
Customer funds | U.S. government securities | |
Debt Securities, Available-for-sale [Line Items] | |
Amortized Cost | 9,891 |
Gross Unrealized Gains | 0 |
Gross Unrealized Losses | (1) |
Fair Value | $ 9,890 |
CUSTOMER FUNDS - Maturity of Available for Sale Securities within Customer Funds (Details) $ in Thousands |
Sep. 30, 2018
USD ($)
|
---|---|
Amortized Cost | |
Due in one year or less | $ 449,284 |
Due in one to five years | 537,995 |
Amortized Cost | 987,279 |
Fair Value | |
Due in one year or less | 448,986 |
Due in one to five years | 537,663 |
Fair Value | 986,649 |
Customer funds | |
Amortized Cost | |
Due in one year or less | 9,891 |
Due in one to five years | 0 |
Amortized Cost | 9,891 |
Fair Value | |
Due in one year or less | 9,890 |
Due in one to five years | 0 |
Fair Value | $ 9,890 |
FAIR VALUE OF FINANCIAL INSTRUMENTS - Loans Disclosed at Fair Value (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Dec. 31, 2017 |
|
Carrying Value | Level 3 | Fair Value, Measurements, Recurring | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Loans held for sale, fair value | $ 73,219 | $ 73,219 | $ 73,420 | ||
Fair Value (Level 3) | Level 3 | Fair Value, Measurements, Recurring | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Loans held for sale, fair value | 76,302 | 76,302 | $ 76,070 | ||
Loans Receivable Held-For-Sale | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Excess amortized cost over fair value of loans charge | $ 3,300 | $ 3,400 | $ 9,000 | $ 6,100 |
PROPERTY AND EQUIPMENT, NET (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Dec. 31, 2017 |
|
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | $ 259,890 | $ 259,890 | $ 192,812 | ||
Less: Accumulated depreciation and amortization | (129,745) | (129,745) | (101,316) | ||
Property and equipment, net | 130,145 | 130,145 | 91,496 | ||
Depreciation | 11,700 | $ 7,300 | 29,200 | $ 21,800 | |
Leasehold improvements | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 99,722 | 99,722 | 77,073 | ||
Computer equipment | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 90,218 | 90,218 | 66,186 | ||
Capitalized software | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 51,177 | 51,177 | 35,063 | ||
Office furniture and equipment | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | $ 18,773 | $ 18,773 | $ 14,490 |
ACQUISITIONS - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
May 31, 2018 |
Sep. 30, 2018 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Business Acquisition [Line Items] | ||||
Payment for acquisitions, net of cash acquired | $ 112,399 | $ 1,600 | ||
Weebly, Inc. | ||||
Business Acquisition [Line Items] | ||||
Percent of outstanding shares acquired | 100.00% | |||
Cash consideration | $ 132,432 | |||
Equity consideration (in shares) | 2,418,271 | |||
Equity consideration fair value | $ 140,107 | |||
Payment to settle outstanding vested and unvested employee options | 17,700 | |||
Post-combination compensation expense | $ 2,600 | |||
Goodwill adjustment to purchase price allocation | $ 4,300 | |||
Tax liabilities adjustment to purchase price allocation | 3,000 | |||
Cash withheld for indemnification | $ 19,900 | $ 19,900 | ||
Shares withheld for indemnification (in shares) | 372,578 | 372,578 | ||
Immaterial acquisitions | ||||
Business Acquisition [Line Items] | ||||
Payment for acquisitions, net of cash acquired | $ 9,900 |
GOODWILL (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Goodwill [Roll Forward] | ||||
Goodwill, beginning balance | $ 58,327,000 | |||
Acquisitions completed during the nine months ended September 30, 2018 | 201,637,000 | |||
Goodwill, ending balance | $ 259,964,000 | 259,964,000 | ||
Goodwill, impairment charges | $ 0 | $ 0 | $ 0 | $ 0 |
ACQUIRED INTANGIBLE ASSETS - Narrative (Details) - business |
3 Months Ended | 9 Months Ended |
---|---|---|
Jun. 30, 2018 |
Sep. 30, 2018 |
|
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Number of businesses acquired involving intangible assets | 2 | |
Patents | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Amortization period | 13 years | |
Technology assets | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Amortization period | 5 years | |
Customer assets | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Amortization period | 11 years | |
Trade name | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Amortization period | 4 years |
ACQUIRED INTANGIBLE ASSETS - Change in Carrying Value of Intangible Assets (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Finite-lived Intangible Assets [Roll Forward] | ||||
Acquired intangible assets, net, beginning of the period | $ 85,514 | $ 16,452 | $ 14,334 | $ 19,292 |
Acquisitions | 0 | 0 | 75,871 | 1,224 |
Amortization expense | 4,384 | 1,804 | 9,075 | 5,868 |
Acquired intangible assets, net, end of the period | $ 81,130 | $ 14,648 | $ 81,130 | $ 14,648 |
ACQUIRED INTANGIBLE ASSETS - Future Amortization of Intangible Assets (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Jun. 30, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|---|---|---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | ||||||
2018 (remaining 3 months) | $ 4,069 | |||||
2019 | 13,702 | |||||
2020 | 11,496 | |||||
2021 | 10,299 | |||||
2022 | 8,369 | |||||
Thereafter | 33,195 | |||||
Net | $ 81,130 | $ 85,514 | $ 14,334 | $ 14,648 | $ 16,452 | $ 19,292 |
OTHER CONSOLIDATED BALANCE SHEET COMPONENTS (CURRENT) - Other Current Assets (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Inventory, net | $ 25,294 | $ 16,777 |
Processing costs receivable | 36,747 | 21,083 |
Prepaid expenses | 12,666 | 14,473 |
Accounts receivable, net | 18,980 | 8,606 |
Deferred hardware costs | 0 | 7,931 |
Deferred magstripe reader costs | 6,996 | 2,469 |
Prepaid compensation, current | 5,487 | 0 |
Other | 30,230 | 15,115 |
Total | $ 136,400 | $ 86,454 |
OTHER CONSOLIDATED BALANCE SHEET COMPONENTS (CURRENT) - Accrued Expenses (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Accrued payroll | $ 17,691 | $ 9,103 |
Accrued professional fees | 6,903 | 5,638 |
Accrued advertising and other marketing | 16,391 | 6,723 |
Processing costs payable | 11,150 | 10,145 |
Accrued non income tax liabilities | 6,390 | 6,155 |
Accrued hardware costs | 10,232 | 2,496 |
Other accrued liabilities | 32,309 | 12,020 |
Total | $ 101,066 | $ 52,280 |
OTHER CONSOLIDATED BALANCE SHEET COMPONENTS (CURRENT) - Other Current Liabilities (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Deferred revenue, current | $ 29,285 | $ 5,893 |
Square Capital payable | 12,762 | 7,671 |
Square Payroll payable | 6,707 | 2,850 |
Deferred rent, current | 3,844 | 3,311 |
Accrued redemptions | 1,052 | 1,036 |
Other | 16,688 | 7,606 |
Total | $ 70,338 | $ 28,367 |
OTHER CONSOLIDATED BALANCE SHEET COMPONENTS (NON-CURRENT) - Other Non-Current Assets (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Dec. 31, 2017 |
Aug. 31, 2017 |
|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||
Equity investment | $ 61,908 | $ 61,908 | $ 25,000 | ||
Prepaid compensation, non-current | 6,959 | 6,959 | 0 | ||
Deposits | 2,544 | 2,544 | 2,738 | ||
Debt issuance costs | 580 | 580 | 788 | ||
Deferred tax assets | 540 | 540 | 519 | ||
Other | 4,465 | 4,465 | 2,305 | ||
Total | 76,996 | 76,996 | $ 31,350 | ||
Investment in privately held entity at cost | $ 25,000 | ||||
Gain on equity investment | $ 36,900 | $ 36,908 | $ 0 |
OTHER CONSOLIDATED BALANCE SHEET COMPONENTS (NON-CURRENT) - Other Non-Current Liabilities (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Statutory liabilities | $ 51,134 | $ 40,768 |
Deferred rent, non-current | 22,243 | 20,349 |
Deferred purchase consideration | 3,900 | 0 |
Deferred revenue, non-current | 4,329 | 432 |
Deferred tax liabilities | 147 | 644 |
Other | 7,958 | 7,345 |
Total | $ 89,711 | $ 69,538 |
INDEBTEDNESS - Revolving Credit Facility, Narrative (Details) - Revolving Credit Facility - Line of Credit - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|---|
Nov. 30, 2015 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Debt Instrument [Line Items] | |||||
Maximum borrowing capacity | $ 375,000,000 | ||||
Administrative agent fee | $ 100,000 | ||||
Unused commitment fee percentage | 0.15% | ||||
Remaining borrowing capacity | $ 375,000,000 | $ 375,000,000 | |||
Unused commitment fees | $ 100,000 | $ 100,000 | $ 400,000 | $ 400,000 | |
Federal Funds Rate | |||||
Debt Instrument [Line Items] | |||||
Basis spread on variable rate | 0.50% | ||||
One Month LIBOR | Minimum | |||||
Debt Instrument [Line Items] | |||||
Basis spread on variable rate | 0.00% | ||||
One Month LIBOR | Maximum | |||||
Debt Instrument [Line Items] | |||||
Basis spread on variable rate | 1.00% | ||||
LIBOR | Maximum | |||||
Debt Instrument [Line Items] | |||||
Basis spread on variable rate | 2.00% |
INDEBTEDNESS - Components of Convertible Notes (Details) - Convertible Debt - USD ($) $ in Thousands |
Sep. 30, 2018 |
May 25, 2018 |
Dec. 31, 2017 |
Mar. 06, 2017 |
---|---|---|---|---|
Debt Instrument [Line Items] | ||||
Principal outstanding | $ 1,232,453 | |||
Unamortized debt discount | (197,579) | |||
Unamortized debt issuance costs | (10,927) | |||
Net carrying value | 1,023,947 | |||
Convertible Senior Notes due in 2023 | ||||
Debt Instrument [Line Items] | ||||
Principal outstanding | 862,500 | |||
Unamortized debt discount | (145,998) | |||
Unamortized debt issuance costs | (5,273) | $ (5,600) | ||
Net carrying value | 711,229 | |||
Convertible Senior Notes due in 2022 | ||||
Debt Instrument [Line Items] | ||||
Principal outstanding | 369,953 | $ 440,000 | ||
Unamortized debt discount | (51,581) | (73,384) | ||
Unamortized debt issuance costs | (5,654) | (8,044) | $ (9,400) | |
Net carrying value | $ 312,718 | $ 358,572 |
INDEBTEDNESS - Carrying Amount of Equity Component of Convertible Notes (Details) - Convertible Debt - USD ($) $ in Thousands |
Sep. 30, 2018 |
May 25, 2018 |
Dec. 31, 2017 |
Mar. 06, 2017 |
---|---|---|---|---|
Debt Instrument [Line Items] | ||||
Amount allocated to conversion option | $ 227,730 | |||
Less: allocated issuance costs | (3,167) | |||
Equity component, net | 224,563 | |||
Convertible Senior Notes due in 2023 | ||||
Debt Instrument [Line Items] | ||||
Amount allocated to conversion option | 155,250 | |||
Less: allocated issuance costs | (1,231) | |||
Equity component, net | 154,019 | $ 155,300 | ||
Convertible Senior Notes due in 2022 | ||||
Debt Instrument [Line Items] | ||||
Amount allocated to conversion option | 72,480 | $ 86,203 | ||
Less: allocated issuance costs | (1,936) | (2,302) | ||
Equity component, net | $ 70,544 | $ 83,901 | $ 86,200 |
INDEBTEDNESS - Interest Expense (Details) - Convertible Debt - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Debt Instrument [Line Items] | ||||
Contractual interest expense | $ 1,469 | $ 413 | $ 2,732 | $ 938 |
Amortization of debt discount and issuance costs | 11,627 | 4,277 | 22,850 | 9,889 |
Total | $ 13,096 | $ 4,690 | $ 25,582 | $ 10,827 |
Convertible Senior Notes due in 2023 | ||||
Debt Instrument [Line Items] | ||||
Effective interest rate of the liability component | 4.69% | 4.69% | ||
Convertible Senior Notes due in 2022 | ||||
Debt Instrument [Line Items] | ||||
Effective interest rate of the liability component | 5.34% | 5.34% |
ACCRUED TRANSACTION LOSSES (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Loss Contingency Accrual | ||||
Accrued transaction losses, beginning of the period | $ 26,893 | |||
Provision for transaction losses | 63,603 | $ 50,185 | ||
Accrued transaction losses, end of the period | $ 35,332 | 35,332 | ||
Transaction Losses | ||||
Loss Contingency Accrual | ||||
Accrued transaction losses, beginning of the period | 29,207 | $ 22,455 | 26,893 | 20,064 |
Provision for transaction losses | 20,449 | 15,102 | 48,794 | 39,737 |
Charge-offs to accrued transaction losses | (14,324) | (10,837) | (40,355) | (33,081) |
Accrued transaction losses, end of the period | $ 35,332 | $ 26,720 | $ 35,332 | $ 26,720 |
INCOME TAXES (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Income Tax Disclosure [Abstract] | ||||
Income tax expense (benefit) | $ 1,066 | $ (647) | $ 1,845 | $ 334 |
Effective tax rate | 5.10% | 3.90% | (22.00%) | (0.70%) |
STOCKHOLDERS' EQUITY - RSU Activity (Details) - RSAs and RSUs |
9 Months Ended |
---|---|
Sep. 30, 2018
$ / shares
shares
| |
Number of shares | |
Beginning balance (in shares) | shares | 21,317,525 |
Granted (in shares) | shares | 6,408,650 |
Vested (in shares) | shares | (5,796,657) |
Forfeited (in shares) | shares | (2,031,584) |
Ending balance (in shares) | shares | 19,897,934 |
Weighted Average Grant Date Fair Value | |
Beginning balance (in USD per share) | $ / shares | $ 17.84 |
Granted (in USD per share) | $ / shares | 52.93 |
Vested (in USD per share) | $ / shares | 18.30 |
Forfeited (in USD per share) | $ / shares | 18.56 |
Ending balance (in USD per share) | $ / shares | $ 28.94 |
STOCKHOLDERS' EQUITY - Stock Option Fair Value Assumptions (Details) - Stock options |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Dividend yield | 0.00% | 0.00% |
Risk-free interest rate | 2.92% | 1.88% |
Expected volatility | 30.87% | 32.22% |
Expected term (years) | 6 years 2 months 9 days | 6 years 7 days |
COMMITMENTS AND CONTINGENCIES - Operating and Capital Leases- Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Commitments and Contingencies Disclosure [Abstract] | ||||
Operating leases, rent expense | $ 6.4 | $ 3.7 | $ 16.2 | $ 9.6 |
COMMITMENTS AND CONTINGENCIES - Schedule of Future Payments Under Operating and Capital Leases (Details) $ in Thousands |
Sep. 30, 2018
USD ($)
|
---|---|
Capital | |
2018 (remaining 3 months) | $ 1,284 |
2019 | 5,029 |
2020 | 2,446 |
2021 | 0 |
2022 | 0 |
Thereafter | 0 |
Total | 8,759 |
Less amount representing interest | 0 |
Present value of capital lease obligations | 8,759 |
Less current portion of capital lease obligation | (5,135) |
Non-current portion of capital lease obligation | 3,624 |
Operating | |
2018 (remaining 3 months) | 7,687 |
2019 | 29,454 |
2020 | 30,657 |
2021 | 30,598 |
2022 | 31,051 |
Thereafter | 32,747 |
Total | $ 162,194 |
SEGMENT AND GEOGRAPHICAL INFORMATION - Narrative (Details) |
9 Months Ended |
---|---|
Sep. 30, 2018
segment
| |
Segment Reporting [Abstract] | |
Number of operating segments | 1 |
Number of reportable segments | 1 |
SEGMENT AND GEOGRAPHICAL INFORMATION - Revenue by Geography (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Revenue | $ 882,108 | $ 585,159 | $ 2,365,649 | $ 1,598,218 |
United States | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Revenue | 838,149 | 559,053 | 2,255,657 | 1,533,960 |
International | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Revenue | $ 43,959 | $ 26,106 | $ 109,992 | $ 64,258 |
SEGMENT AND GEOGRAPHICAL INFORMATION - Long-lived Assets by Geography (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long-lived assets | $ 471,239 | $ 164,157 |
United States | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long-lived assets | 464,455 | 158,820 |
International | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long-lived assets | $ 6,784 | $ 5,337 |
SUPPLEMENTAL CASH FLOW INFORMATION (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Supplemental Cash Flow Data: | ||
Cash paid for interest | $ 1,945 | $ 1,230 |
Cash paid for income taxes | 1,265 | 1,117 |
Supplemental disclosures of non-cash investing and financing activities: | ||
Change in purchases of property and equipment in accounts payable and accrued expenses | 11,004 | (123) |
Unpaid business combination purchase price | 3,995 | 644 |
Fair value of common stock issued related to business combination | (140,107) | 0 |
Recovery of common stock in connection with indemnification settlement agreement | 2,745 | 0 |
Fair value of common stock issued to settle the conversion of senior notes, due 2022 | (189,916) | 0 |
Fair value of shares received to settle senior note hedges, due 2022 | $ 189,916 | $ 0 |
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