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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-Q
______________________
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  ________ to ________
Commission File Number: 001-37622
______________________
Square, Inc.
(Exact name of registrant as specified in its charter)
______________________
Delaware80-0429876
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)

1455 Market Street, Suite 600
San Francisco, CA 94103
(Address of principal executive offices, including zip code)
(415) 375-3176
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, $0.0000001 par value per shareSQNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  ☒   Accelerated filer  ☐   Non-accelerated filer  ☐ Smaller reporting company  ☐ Emerging growth company ☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒
As of October 29, 2021, the number of shares of the registrant’s Class A common stock outstanding was 399,174,867 and the number of shares of the registrant’s Class B common stock outstanding was 62,100,770.



TABLE OF CONTENTS
 

Page No.
PART I—Financial Information
PART II—Other Information



SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “appears,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about our future financial performance, the impact of the COVID-19 pandemic, government stimulus programs in responses thereto, the timing of economic recovery and shifts in consumer behaviors on our business, customers, and employees, our expectations regarding our proposed acquisition of Afterpay, including expected time to close, our expectations regarding transaction and loan losses, the adequacy of our allowance for loan losses on loans held for investment, or increased delinquencies, and the impact of inaccurate estimates or inadequate reserves, the potential exposure as a non-bank participant in the Paycheck Protection Program ("PPP") and its effect on our liquidity and financial results and the ability of our customers to comply with requirements and otherwise perform with respect to loans obtained under such program, our anticipated growth and growth strategies and our ability to effectively manage that growth, our ability to invest in and develop our products and services to operate with changing technology, the expected benefits of our products to our customers and the impact of our products on our business, and our expectations regarding Gross Payment Volume (GPV) and revenue, including our expectations regarding the Cash App and Seller ecosystems, our expectations regarding product launches and the launch of banking operations of Square Financial Services, the expected impact of our recent acquisitions, our plans with respect to patents and other intellectual property, our expectations regarding litigation, our expectations regarding share-based compensation, our expectations regarding the impacts of accounting guidance and the timing of our compliance therewith, our expectations regarding restricted cash, and the sufficiency of our cash and cash equivalents and cash generated from operations to meet our working capital and capital expenditure requirements.

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

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



Part I—Financial Information
Item 1. Financial Statements
SQUARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)
  September 30, 2021December 31, 2020
Assets
Current assets:
Cash and cash equivalents$4,514,609 $3,158,058 
Investments in short-term debt securities868,809 695,112 
Settlements receivable1,211,886 1,024,895 
Customer funds2,649,114 2,037,832 
Loans held for sale708,086 462,665 
Other current assets609,533 383,067 
Total current assets10,562,037 7,761,629 
Property and equipment, net275,286 233,520 
Goodwill519,548 316,701 
Acquired intangible assets, net268,692 137,612 
Investments in long-term debt securities1,451,107 463,950 
Operating lease right-of-use assets448,248 456,888 
Other non-current assets384,508 499,250 
Total assets$13,909,426 $9,869,550 
Liabilities and Stockholders’ Equity
Current liabilities:
Customers payable$3,858,708 $3,009,051 
Settlements payable249,802 239,362 
Accrued expenses and other current liabilities654,495 360,850 
Operating lease liabilities, current60,482 52,747 
PPP Liquidity Facility advances725,658 464,094 
Total current liabilities5,549,145 4,126,104 
Long-term debt4,737,829 2,586,924 
Operating lease liabilities, non-current390,690 389,662 
Other non-current liabilities227,048 85,291 
Total liabilities10,904,712 7,187,981 
Commitments and contingencies (Note 18)
Stockholders’ equity:
Preferred stock, $0.0000001 par value: 100,000,000 shares authorized at September 30, 2021 and December 31, 2020. None issued and outstanding at September 30, 2021 and December 31, 2020.
— — 
Class A common stock, $0.0000001 par value: 1,000,000,000 shares authorized at September 30, 2021 and December 31, 2020; 398,878,883 and 390,187,079 issued and outstanding at September 30, 2021 and December 31, 2020, respectively.
— — 
Class B common stock, $0.0000001 par value: 500,000,000 shares authorized at September 30, 2021 and December 31, 2020; 62,100,770 and 65,997,697 issued and outstanding at September 30, 2021 and December 31, 2020, respectively.
— — 
Additional paid-in capital2,918,372 2,955,464 
Accumulated other comprehensive income (loss)(7,411)23,328 
Retained earnings (accumulated deficit)48,864 (297,223)
Total stockholders’ equity attributable to common stockholders2,959,825 2,681,569 
Noncontrolling interests44,889 — 
Total stockholders’ equity3,004,714 2,681,569 
Total liabilities and stockholders’ equity$13,909,426 $9,869,550 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4

SQUARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended
September 30,		Nine Months Ended
September 30,
2021202020212020
Revenue:
Transaction-based revenue$1,297,040 $925,294 $3,484,245 $2,365,967 
Subscription and services-based revenue694,770 447,522 1,937,629 1,090,032 
Hardware revenue37,255 27,294 109,769 67,291 
Bitcoin revenue1,815,662 1,633,764 8,051,026 2,815,318 
Total net revenue3,844,727 3,033,874 13,582,669 6,338,608 
Cost of revenue:
Transaction-based costs754,276 524,056 1,965,894 1,379,658 
Subscription and services-based costs132,046 68,528 346,144 161,801 
Hardware costs51,150 45,220 153,035 108,348 
Bitcoin costs1,774,040 1,601,615 7,879,816 2,759,082 
Total cost of revenue2,711,512 2,239,419 10,344,889 4,408,889 
Gross profit1,133,215 794,455 3,237,780 1,929,719 
Operating expenses:
Product development366,587 227,550 1,003,238 631,156 
Sales and marketing407,850 348,463 1,132,411 781,094 
General and administrative267,476 153,902 684,405 419,783 
Transaction and loan losses62,306 15,198 130,874 161,684 
Bitcoin impairment losses6,000 — 71,126 — 
Total operating expenses1,110,219 745,113 3,022,054 1,993,717 
Operating income (loss)22,996 49,342 215,726 (63,998)
Interest expense, net13,409 14,980 20,126 38,955 
Other expense (income), net12,011 (784)(36,249)(20,513)
Income (loss) before income tax(2,424)35,146 231,849 (82,440)
Provision (benefit) for income taxes452 (1,369)(7,961)(1,586)
Net income (loss)(2,876)36,515 239,810 (80,854)
Net income (loss) attributable to noncontrolling interests(2,960)— (3,303)— 
Net income (loss) attributable to common stockholders$84 $36,515 $243,113 $(80,854)
Net income (loss) per share attributable to common stockholders:
Basic$0.00 $0.08 $0.53 $(0.18)
Diluted$0.00 $0.07 $0.48 $(0.18)
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders:
Basic460,654 444,458 457,039 439,855 
Diluted504,120 488,069 520,204 439,855 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5

SQUARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In thousands)
Three Months Ended
September 30,		Nine Months Ended
September 30,
2021202020212020
Net income (loss)$(2,876)$36,515 $239,810 $(80,854)
Net foreign currency translation adjustments(14,145)9,111 (25,656)7,090 
Net unrealized gain (loss) on marketable debt securities(1,104)(1,567)(5,083)3,191 
Total comprehensive income (loss)$(18,125)$44,059 $209,071 $(70,573)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6

SQUARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended
September 30,
20212020
Cash flows from operating activities:
Net income (loss)$239,810 $(80,854)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization95,707 61,741 
Non-cash interest and other20,368 52,384 
Loss on extinguishment of long-term debt— 2,393 
Share-based compensation429,999 284,129 
Gain on revaluation of equity investment(41,007)(20,999)
Bitcoin impairment losses71,126 — 
Non-cash lease expense61,978 50,782 
Transaction and loan losses130,874 161,684 
Change in deferred income taxes(5,224)(3,375)
Changes in operating assets and liabilities:
Settlements receivable(337,893)(340,010)
Customer funds(591,982)(885,259)
Purchases and originations of loans(2,285,306)(1,620,057)
Sales, principal payments, and forgiveness of loans1,952,142 1,226,994 
Customers payable846,906 1,445,608 
Settlements payable10,440 54,871 
Other assets and liabilities74,838 (129,155)
Net cash provided by operating activities672,776 260,877 
Cash flows from investing activities:
Purchase of marketable debt securities(2,343,446)(966,278)
Proceeds from maturities of marketable debt securities609,377 404,931 
Proceeds from sale of marketable debt securities558,724 432,162 
Purchase of marketable debt securities from customer funds(488,851)(552,411)
Proceeds from maturities of marketable debt securities from customer funds456,481 237,000 
Proceeds from sale of marketable debt securities from customer funds10,000 28,457 
Purchase of property and equipment(98,028)(86,353)
Purchase of bitcoin investments(170,000)— 
Purchase of other investments(47,550)— 
Proceeds from sale of equity investments420,644 — 
Business combinations, net of cash acquired(163,970)(29,221)
Net cash used in investing activities(1,256,619)(531,713)
Cash flows from financing activities:
Proceeds from issuance of convertible senior notes, net— 986,241 
Purchase of convertible senior note hedges— (149,200)
Proceeds from issuance of warrants— 99,500 
Proceeds from issuance of senior unsecured notes, net1,971,828 — 
Proceeds from PPP Liquidity Facility advances681,542 473,496 
Repayments of PPP Liquidity Facility advances(419,978)— 
Payments for tax withholding related to vesting of restricted stock units(312,406)(182,607)
Proceeds from the exercise of stock options and purchases under the employee stock purchase plan84,866 106,600 
Other financing activities(7,112)(2,606)
Net cash provided by financing activities1,998,740 1,331,424 
Effect of foreign exchange rate on cash and cash equivalents(14,311)772 
Net increase in cash, cash equivalents, and restricted cash1,400,586 1,061,360 
Cash, cash equivalents, and restricted cash, beginning of period3,201,863 1,098,706 
Cash, cash equivalents, and restricted cash, end of period$4,602,449 $2,160,066 

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

SQUARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(In thousands, except for number of shares)
Class A and B common stockAdditional paid-inAccumulated other comprehensiveRetained earnings (AccumulatedNoncontrollingTotal stockholders’
SharesAmountcapitalincomedeficit)interestsequity
Balance at December 31, 2020456,184,776 $— $2,955,464 $23,328 $(297,223)$— $2,681,569 
Cumulative adjustment due to adoption of ASU No. 2020-06— — (502,708)— 102,974 — (399,734)
Net income— — — — 39,008 — 39,008 
Shares issued in connection with employee stock plans4,311,094 — 32,891 — — — 32,891 
Change in other comprehensive loss— — — (13,129)— — (13,129)
Share-based compensation— — 121,965 — — — 121,965 
Tax withholding related to vesting of restricted stock units(669,076)— (152,013)— — — (152,013)
Issuance of common stock in conjunction with the conversion of convertible notes166,967 — 3,816 — — — 3,816 
Exercise of bond hedges in conjunction with the conversion of convertible notes(5,325,320)— — — — — — 
Balance at March 31, 2021454,668,441 $— $2,459,415 $10,199 $(155,241)$— $2,314,373 
Net income— — — — 204,021 (343)203,678 
Shares issued in connection with employee stock plans2,410,350 — 39,526 — — — 39,526 
Change in other comprehensive loss— — — (2,361)— — (2,361)
Share-based compensation— — 150,367 — — — 150,367 
Tax withholding related to vesting of restricted stock units(602,961)— (140,212)— — — (140,212)
Issuance of common stock in conjunction with the conversion of convertible notes1,456,748 — 113,067 — — — 113,067 
Exercise of bond hedges in conjunction with the conversion of convertible notes(150,299)— — — — — — 
Issuance of common stock in connection with business combination41,138 — 10,071 — — — 10,071 
Noncontrolling interests in connection with business combination— — — — — 48,192 48,192 
Balance at June 30, 2021457,823,417 — $2,632,234 $7,838 $48,780 $47,849 $2,736,701 
Net loss— — — — 84 (2,960)(2,876)
Shares issued in connection with employee stock plans3,065,151 12,711 — — — 12,711 
Issuance of common stock in connection with business combination77,305 18,664 — — — 18,664 
8

Change in other comprehensive loss— — (15,249)— — (15,249)
Share-based compensation— 168,585 — — — 168,585 
Tax withholding related to vesting of restricted stock units(82,374)(20,181)— — — (20,181)
Issuance of common stock in conjunction with the conversion of convertible notes1,371,519 106,359 — — — 106,359 
Exercise of bond hedges in conjunction with the conversion of convertible notes(1,275,365)— — — — — — 
Balance at September 30, 2021460,979,653 — $2,918,372 $(7,411)$48,864 $44,889 $3,004,714 

Class A and B common stockAdditional paid-inAccumulated other comprehensiveAccumulatedNoncontrollingTotal stockholders’
SharesAmountcapitalincome (loss)deficitinterestsequity
Balance at December 31, 2019432,796,720 $— $2,223,749 $1,629 $(510,328)$— $1,715,050 
Net loss— — — — (105,891)— (105,891)
Shares issued in connection with employee stock plans5,222,525 — 31,406 — — — 31,406 
Issuance of common stock in connection with business combination357,017 — 14,999 — — — 14,999 
Change in other comprehensive loss— — — (5,061)— — (5,061)
Share-based compensation— — 79,562 — — — 79,562 
Tax withholding related to vesting of restricted stock units(722,606)— (48,772)— — — (48,772)
Conversion feature of convertible senior notes, due 2025, net of allocated costs— — 152,258 — — — 152,258 
Purchase of bond hedges in conjunction with issuance of convertible senior notes, due 2025— — (149,200)— — — (149,200)
Sale of warrants in conjunction with issuance of convertible senior notes, due 2025— — 99,500 — — — 99,500 
Issuance of common stock in conjunction with the conversion of convertible notes1,109,980 — 24,094 — — — 24,094 
Balance at March 31, 2020438,763,636 $— $2,427,596 $(3,432)$(616,219)$— $1,807,945 
Net loss— — — — (11,478)— (11,478)
Shares issued in connection with employee stock plans4,802,969 — 46,679 — — — 46,679 
Issuance of common stock in connection with business combination250,957 — 20,320 — — — 20,320 
Change in other comprehensive loss— — — 7,798 — — 7,798 
Share-based compensation— — 99,925 — — — 99,925 
Tax withholding related to vesting of restricted stock units(703,895)— (44,882)— — — (44,882)
9

Exercise of bond hedges in conjunction with the conversion of convertible notes(724,316)— — — — — — 
Balance at June 30, 2020442,389,351 $— $2,549,638 $4,366 $(627,697)$— $1,926,307 
Net income— — — — 36,515 — 36,515 
Shares issued in connection with employee stock plans4,246,489 — 28,514 — — — 28,514 
Change in other comprehensive loss— — — 7,544 — — 7,544 
Share-based compensation— — 114,172 — — — 114,172 
Tax withholding related to vesting of restricted stock units(694,266)— (88,953)— — — (88,953)
Issuance of common stock in conjunction with the conversion of convertible notes1,753,623 — 38,736 — — — 38,736 
Balance at September 30, 2020447,695,197 $— $2,642,107 $11,910 $(591,182)