Square, Inc.

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

______________________

Delaware

(State or other jurisdiction of incorporation or organization)

Square, Inc.

(Exact name of registrant as specified in its charter)

______________________

80-0429876

(IRS Employer Identification No.)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Class A common stock, $0.0000001 par value per share

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)

Trading Symbol(s) SQ

Name of each exchange on which registered New 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

PART I--Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets (unaudited) Condensed Consolidated Statements of Operations (unaudited) Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) Condensed Consolidated Statements of Cash Flows (unaudited) Condensed Consolidated Statements of Stockholders' Equity (unaudited) Notes to the Condensed Consolidated Financial Statements (unaudited) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures PART II--Other Information Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Mine Safety Disclosures Item 5. Other Information Item 6. Exhibits Signatures

Page No.

4 5 6 7 8 11 48 64 65

67 68 101 101 101 101 101 102

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.

Item 1. Financial Statements

Part I--Financial Information

SQUARE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited) (In thousands, except share and per share data)

September 30, 2021

December 31, 2020

Assets

Current assets:

Cash and cash equivalents

$

4,514,609 $

3,158,058

Investments in short-term debt securities

868,809

695,112

Settlements receivable

1,211,886

1,024,895

Customer funds

2,649,114

2,037,832

Loans held for sale

708,086

462,665

Other current assets

609,533

383,067

Total current assets

10,562,037

7,761,629

Property and equipment, net

275,286

233,520

Goodwill

519,548

316,701

Acquired intangible assets, net

268,692

137,612

Investments in long-term debt securities

1,451,107

463,950

Operating lease right-of-use assets

448,248

456,888

Other non-current assets

384,508

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 payable

249,802

239,362

Accrued expenses and other current liabilities

654,495

360,850

Operating lease liabilities, current

60,482

52,747

PPP Liquidity Facility advances

725,658

464,094

Total current liabilities

5,549,145

4,126,104

Long-term debt

4,737,829

2,586,924

Operating lease liabilities, non-current

390,690

389,662

Other non-current liabilities

227,048

85,291

Total liabilities

10,904,712

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 capital

2,918,372

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 stockholders

2,959,825

2,681,569

Noncontrolling interests

44,889

--

Total stockholders' equity

3,004,714

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,

2021

2020

Revenue:

Transaction-based revenue

$

1,297,040 $

925,294 $

Subscription and services-based revenue

694,770

447,522

Hardware revenue

37,255

27,294

Bitcoin revenue

1,815,662

1,633,764

Total net revenue

3,844,727

3,033,874

Cost of revenue:

Transaction-based costs

754,276

524,056

Subscription and services-based costs

132,046

68,528

Hardware costs

51,150

45,220

Bitcoin costs

1,774,040

1,601,615

Total cost of revenue

2,711,512

2,239,419

Gross profit

1,133,215

794,455

Operating expenses:

Product development

366,587

227,550

Sales and marketing

407,850

348,463

General and administrative

267,476

153,902

Transaction and loan losses

62,306

15,198

Bitcoin impairment losses

6,000

--

Total operating expenses

1,110,219

745,113

Operating income (loss)

22,996

49,342

Interest expense, net

13,409

14,980

Other expense (income), net

12,011

(784)

Income (loss) before income tax

(2,424)

35,146

Provision (benefit) for income taxes

452

(1,369)

Net income (loss)

(2,876)

36,515

Net income (loss) attributable to noncontrolling interests

(2,960)

--

Net income (loss) attributable to common stockholders

$

84 $

36,515 $

Net income (loss) per share attributable to common stockholders:

Basic

$

Diluted

$

Weighted-average shares used to compute net income (loss) per share attributable to common stockholders:

Basic

Diluted

0.00 $ 0.00 $

460,654 504,120

0.08 $ 0.07 $

444,458 488,069

Nine Months Ended September 30,

2021

2020

3,484,245 $ 1,937,629

109,769 8,051,026 13,582,669

2,365,967 1,090,032

67,291 2,815,318 6,338,608

1,965,894 346,144 153,035

7,879,816 10,344,889 3,237,780

1,379,658 161,801 108,348

2,759,082 4,408,889 1,929,719

1,003,238 1,132,411

684,405 130,874 71,126 3,022,054 215,726 20,126 (36,249) 231,849

(7,961) 239,810

(3,303) 243,113 $

631,156 781,094 419,783 161,684

-- 1,993,717

(63,998) 38,955 (20,513) (82,440) (1,586) (80,854)

-- (80,854)

0.53 $ 0.48 $

457,039 520,204

(0.18) (0.18)

439,855 439,855

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

5

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