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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