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OFFON

SQUARE, INC.

(SQ)
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SQUARE : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

08/02/2021 | 06:16am EDT
You should read the following discussion and analysis in conjunction with the
information set forth within the condensed consolidated financial statements and
the notes thereto included elsewhere in this Quarterly Report on Form 10-Q, as
well as our Annual report on Form 10-K. The statements in this discussion
regarding our expectations of our future performance, liquidity and capital
resources, our plans, estimates, beliefs and expectations that involve risks and
uncertainties, and other non-historical statements in this discussion are
forward-looking statements. These forward-looking statements are subject to
numerous risks and uncertainties, including, but not limited to, the risks and
uncertainties described under "Risk Factors" and elsewhere in this Quarterly
Report on Form 10-Q. Our actual results may differ materially from those
contained in or implied by any forward-looking statements.

Overview

We started Square in February 2009 to enable businesses (sellers) to accept card
payments, an important capability that was previously inaccessible to many
businesses. However, sellers need many innovative solutions to thrive, and we
have expanded to provide them additional products and services and to give them
access to a cohesive ecosystem of tools to help them manage and grow their
businesses. Similarly, with Cash App, we have built a parallel ecosystem of
financial services to help individuals manage their money.

Our Seller ecosystem is a cohesive commerce ecosystem that helps sellers start,
run and grow their businesses, and consists of over 30 distinct software,
hardware, and financial services products. We monetize these products through a
combination of transaction, subscription, and service fees. Our suite of
cloud-based software solutions are integrated to create a seamless experience
and enable a holistic view of sales, customers, employees, and locations. With
our offering, a seller can accept payments in person via swipe, dip, or tap of a
card, or online via Square Invoices, Square Virtual Terminal, or the seller's
website. We also provide hardware to facilitate commerce for sellers, which
includes magstripe readers, contactless and chip readers, Square Stand, Square
Register, Square Terminal, and third-party peripherals. Square Card is a
business prepaid card that enables sellers to spend the balance they have stored
with Square. Sellers can also deposit funds into their Square stored balance so
they can manage all of their business expenses in one place. In addition,
sellers gain access to business loans through Square Loans (formerly Square
Capital) based on the seller's payment processing history. We recognize revenue
upon the sale of the loans to third-party investors or over time as the sellers
pay down the outstanding amounts for the loans that we hold as available for
sale or for investment. We have grown rapidly to serve millions of sellers that
represent a diverse set of industries (including services, food-related
business, and retail businesses) and sizes, ranging from a single vendor at a
farmers' market to multi-location businesses. Square sellers also span
geographies, including the United States, Canada, Japan, Australia, the United
Kingdom, and Ireland.

Our Cash App ecosystem provides financial tools for individuals to store, send,
receive, spend and invest money. With Cash App, customers can fund their account
with a bank account or debit card, send and receive peer-to-peer payments, and
receive direct deposit payments. Customers can make purchases with their Cash
Card, a Visa prepaid card that is linked to the balance stored in Cash App. With
Cash Boost, customers receive instant discounts when they make Cash Card
purchases at designated merchants. Customers can also use their stored funds to
buy and sell bitcoin and equity investments within Cash App. In the fourth
quarter of 2020, we acquired Credit Karma Tax, which added a tax filing product
for individuals to Cash App's ecosystem, providing a seamless, mobile-first
solution for individuals to file their taxes for free.
On April 30, 2021, we completed the acquisition of a majority ownership interest
in TIDAL as detailed in Note 8, Acquisitions, of Notes to the Condensed
Consolidated Financial Statements. TIDAL is a global music and entertainment
platform that brings fans and artists together through unique music, content,
and experiences. The acquisition extends our purpose of economic empowerment to
musicians.
On May 20, 2021, we issued an aggregate principal amount of $2.0 billion of
senior unsecured notes comprised of $1.0 billion of senior unsecured notes that
mature on June 1, 2026 ("2026 Senior Notes") with a 2.75% interest rate, and
$1.0 billion of senior unsecured notes that mature on June 1, 2031 ("2031 Senior
Notes") with a 3.50% interest rate. The 2026 Senior Notes and 2031 Senior Notes
will mature on each of its respective dates, unless earlier redeemed or
repurchased. Interest on the 2026 Senior Notes and 2031 Senior Notes will be
payable semi-annually on June 1 and December 1 of each year beginning on
December 1, 2021. We intend to use the net proceeds from our 2026 Senior Notes
and 2031 Senior Notes offerings for general corporate purposes, which may
include potential acquisitions and strategic transactions, capital expenditures,
investments and working capital.
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On March 1, 2021, the industrial loan company charter for Square Financial
Services was approved by the Federal Deposit Insurance Corporation ("FDIC") and
the State of Utah and Square Financial Services began banking operations. Square
Financial Services maintains capital and leverage ratios, as well as minimum
liquidity levels that meet or exceed regulatory levels as defined by the FDIC to
be considered "well capitalized". Square Financial Services offers banking
services including certain loan and deposit products. To date, the operations of
SFS have not been material but are expected to grow in the second half of 2021.

In April 2020, we were licensed to participate in the Paycheck Protection
Program ("First Round PPP") administered by the Small Business Administration
("SBA") that was enacted in March 2020 under the Coronavirus Aid, Relief, and
Economic Security Act ("CARES Act") in response to the COVID-19 pandemic. In
February 2021, we began participating in the second round of the PPP program
("Second Round PPP"). The PPP was intended to provide relief to eligible
businesses impacted by COVID-19, and to incentivize businesses to keep their
workers on the payroll. These loans are guaranteed by the U.S. government and
are eligible for forgiveness if the borrowers meet certain criteria. As of June
30, 2021, we had facilitated the issuance of $1.4 billion loans in the aggregate
under the program. Of the loans facilitated under the First Round PPP, we sold
$399.0 million to an investor. We have not, and do not intend to sell loans
originated under the Second Round PPP. As of June 30, 2021, approximately
$336.6 million in the aggregate of PPP loans we facilitated had been forgiven by
the SBA, of which, $290.3 million was forgiven in the second quarter of 2021. We
approved and funded the last remaining PPP applications under the Second Round
PPP on May 21, 2021 upon exhaustion of the funds in the program.

On June 2, 2020, we entered into the Paycheck Protection Program Liquidity
Facility agreement with the Federal Reserve Bank of San Francisco ("First PPPLF
Agreement") to secure additional credit in an aggregate principal amount of up
to $500.0 million. The program was established by the Federal Reserve to
supplement the SBA's PPP to support the economy in response to the COVID-19
crisis. The facility is intended to bolster the effectiveness of the PPP and
provide liquidity to credit markets, helping to stabilize financial institutions
supporting COVID-19 relief efforts. On January 29, 2021, we entered into a
second PPPLF agreement with the Federal Reserve Bank of San Francisco ("Second
PPPLF Agreement") to secure additional credit, collateralized by loans from the
second round of the PPP program in an aggregate principal amount of up to $1.0
billion under both PPPLF Agreements. As of June 30, 2021, $823.7 million of
PPPLF advances were outstanding and collateralized by the same value of the PPP
loans. Borrowings under these facilities accrue interest at a rate of 0.35% and
advances must be collateralized with loans originated under the PPP. The
maturity date of any PPPLF advance will be the maturity date of the PPP loan
pledged to secure the advance, and will be accelerated upon the occurrence of
certain events of default. The advances under these facilities are also
repayable if the associated PPP loans are forgiven, repaid by the customer, or
settled by the government guarantee.

Update on the Impact of COVID-19 on Current Trends and Outlook


In the second quarter of 2021, we continued to experience improvements in our
business as the majority of U.S. markets transitioned to varying states of
economic recovery and re-openings. We saw strong performance in Seller GPV as
in-person activity at sellers increased, and strong performance in our Cash App
business due to increased consumer spending and inflows, as we continued to
benefit from the strength of a broader macroeconomic recovery, regional
re-openings, and government stimulus and relief programs enacted in response to
COVID-19.

Although our business results and outlook remain positive, the emergence of new
and more transmissible variants of COVID-19 could lead to a possible resurgence
of the virus, particularly in populations with low vaccination rates requiring
us to move back under more restrictive guidelines. The extent to which the
pandemic will further impact our financial results in the future is unknown.
                                       49
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Results of Operations
Revenue (in thousands, except for percentages)
                                                            Three Months Ended                                                                     Six Months Ended
                                                                 June 30,                                                                              June 30,
                                   2021                 2020               $ Change              % Change                2021                 2020               $ Change              % Change
Transaction-based revenue     $ 1,227,472          $   682,572          $   544,900                     80  %       $ 2,187,205          $ 1,440,673          $   746,532                     52  %
Subscription and
services-based revenue            685,178              346,275              338,903                     98  %       $ 1,242,859          $   642,510          $   600,349                     93  %
Hardware revenue                   43,726               19,322               24,404                    126  %            72,514               39,997          $    32,517                     81  %
Bitcoin revenue                 2,724,296              875,456            1,848,840                    211  %       $ 6,235,364          $ 1,181,554          $ 5,053,810                    428  %
Total net revenue             $ 4,680,672          $ 1,923,625          $ 2,757,047                    143  %       $ 9,737,942          $ 3,304,734          $ 6,433,208                    195  %


Total net revenue for the three and six months ended June 30, 2021 increased by
$2.8 billion, or 143%, and $6.4 billion, or 195%, compared to the three and six
months ended June 30, 2020, respectively. Bitcoin revenue increased by $1.8
billion and $5.1 billion for the three and six months ended June 30, 2021
compared to the three and six months ended June 30, 2020, respectively, and
represented 67% and 79% of the increase in total net revenue for the three and
six months ended June 30, 2021, compared to the three and six months ended June
30, 2020, respectively. Excluding bitcoin revenue, total net revenue increased
by $908.2 million, or 87%, and $1.4 billion, or 65%, in the three and six months
ended June 30, 2021 compared to the three and six months ended June 30, 2020,
respectively.
Transaction-based revenue for the three and six months ended June 30, 2021
increased by $544.9 million or 80%, and $746.5 million or 52%, compared to the
three and six months ended June 30, 2020, respectively. These increases in
revenue were in-line with the increase in GPV of 88% and 56% for the three and
six months ended June 30, 2021 compared to the three and six months ended June
30, 2020, respectively. The increase in transaction-based revenue was driven by
the:
•improvements experienced in card-present volumes as a result of regional
re-openings and resumed in-person activity at sellers in addition to continued
growth in higher-priced card-not-present transactions;
•increase in consumer spending driven in part by a broader macro economic
recovery, regional re-openings, as well as government disbursements related to
stimulus programs enacted through the second quarter of 2021; and
•growth in Cash App Business GPV which includes Cash for Business and
peer-to-peer payments sent from a credit card. Cash for Business includes
peer-to-peer transactions received by business accounts using Cash App.
These factors had varying impacts on GPV growth and may continue to impact our
revenues in the future.

Subscription and services-based revenue for the three and six months ended June
30, 2021 increased by $338.9 million, or 98%, and $600.3 million, or 93%,
compared to the three and six months ended June 30, 2020, respectively. These
increases were primarily driven by Cash App and Seller. Cash App subscription
and services-based revenue is primarily comprised of transaction fees from both
Cash Card and Cash App Instant Deposit. Seller subscription and services-based
revenue increased primarily due to the recovery of Square Loans, other software
subscriptions, and Instant Transfer for sellers. Subscription and services-based
revenue also includes revenue generated from music streaming services following
the acquisition of TIDAL in the second quarter of 2021.

Hardware revenue for the three and six months ended June 30, 2021 increased by
$24.4 million, or 126%, and $32.5 million, or 81%, compared to the three and six
months ended June 30, 2020, respectively. These increases were primarily a
result of an overall increase in sales of hardware across many of our product
offerings primarily due to Square Register, Square Terminal, and third party
peripherals.
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Bitcoin revenue for the three and six months ended June 30, 2021 increased by
$1.8 billion, or 211%, and $5.1 billion, or 428%, compared to the three and six
months ended June 30, 2020, respectively. The increase was due to the market
price of bitcoin, growth in the number of active bitcoin customers, and growth
in customer demand. The amount of bitcoin revenue recognized will fluctuate
depending on customer demand as well as changes in the market price of bitcoin.
While bitcoin revenue contributed 58% and 64% of the total net revenue in the
three and six months ended June 30, 2021, respectively, and 67% and 79% of the
increase in total net revenues in the three and six months ended June 30, 2021,
respectively, gross profit generated from bitcoin transactions was only 5% and
6% of the total gross profit in the three and six months ended June 30, 2021,
compared to 3% and 2% of total gross profit in the three and six months ended
June 30, 2020, respectively.
Cost of Revenue (in thousands, except for percentages)
                                                            Three Months Ended                                                                     Six Months Ended
                                                                 June 30,                                                                              June 30,
                                   2021                 2020               $ Change              % Change                2021                 2020               $ Change              % Change

Transaction-based costs $ 684,839 $ 389,136 $ 295,703

                     76  %       $ 1,211,618          $   855,602          $   356,016                     42  %
Subscription and
services-based costs              123,725               51,365               72,360                    141  %           214,098               93,273              120,825                    130  %
Hardware costs                     61,403               28,320               33,083                    117  %           101,885               63,128               38,757                     61  %
Bitcoin costs                   2,669,641              858,041            1,811,600                    211  %         6,105,776            1,157,467            4,948,309                    428  %

Total cost of revenue         $ 3,539,608          $ 1,326,862          $ 2,212,746                    167  %       $ 7,633,377          $ 2,169,470          $ 5,463,907                    252  %



Total cost of revenue for the three and six months ended June 30, 2021 increased
by $2.2 billion, or 167%, and $5.5 billion, or 252%, compared to the three and
six months ended June 30, 2020, respectively. Bitcoin costs of revenue increased
by $1.8 billion and $4.9 billion in the three and six months ended June 30,
2021, compared to the three and six months ended June 30, 2020, respectively,
and represented 82% and 91% of the increase in the total cost of revenue in the
three and six months ended June 30, 2021 compared to the three and six months
ended June 30, 2020, respectively. Excluding bitcoin costs of revenue, total
cost of revenue increased by approximately $401.1 million, or 86%, and $515.6
million, or 51%, in the three and six months ended June 30, 2021, compared to
the three and six months ended June 30, 2020, respectively.

Despite an increase in GPV of 88% and 56% for the three and six months ended
June 30, 2021, compared to the three and six months ended June 30, 2020,
respectively, transaction-based costs for the three and six months ended June
30, 2021 increased by only $295.7 million, or 76%, and $356.0 million, or 42%,
compared to the three and six months ended June 30, 2020, respectively, driven
mainly by a higher percentage of debit card transactions and larger average
transaction sizes. However, in the three months ended June 30, 2021, we noted a
declining trend of the percentage of debit card transactions and average
transaction sizes, which led to transaction-based costs growing faster than GPV
during the period, and may impact the growth in future periods.

Subscription and services-based costs for the three and six months ended June
30, 2021 increased by $72.4 million, or 141%, and $120.8 million, or 130%,
compared to the three and six months ended June 30, 2020, respectively. The
increase in the three and six months ended June 30, 2021 was driven primarily by
growth in Cash Card, Instant Deposit activity and costs related to music
streaming services following the acquisition of TIDAL in the second quarter of
2021.

Hardware costs for the three and six months ended June 30, 2021 increased by
$33.1 million, or 117%, and $38.8 million, or 61%, compared to the three and six
months ended June 30, 2020, respectively. The increase was primarily due to the
increased sales of hardware, as further discussed in hardware revenue above.

Bitcoin costs for the three and six months ended June 30, 2021 increased by $1.8
billion, or 211%, and $4.9 billion, or 428%, compared to the three and six
months ended June 30, 2020, respectively. Bitcoin cost of revenue comprises of
the total amounts we pay to purchase bitcoin, which will fluctuate in line with
bitcoin revenue.


                                       51
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Operating Expenses (in thousands, except for percentages)

                                                        Three Months Ended                                                                  Six Months Ended
                                                             June 30,                                                                           June 30,
                                 2021                2020             $ Change             % Change                2021                 2020              $ Change             % Change
Product development         $   326,510          $ 207,730          $ 118,780                     57  %       $   636,651          $   403,606          $ 233,045                     58  %
% of total net revenue                7  %              11  %                                                           7  %                12  %
Sales and marketing         $   375,101          $ 238,096          $ 137,005                     58  %       $   724,561          $   432,631          $ 291,930                     67  %
% of total net revenue                8  %              12  %                                                           7  %                13  %

General and administrative $ 221,020 $ 136,386 $ 84,634

                     62  %       $   416,929          $   265,881          $ 151,048                     57  %
% of total net revenue                5  %               7  %                                                           4  %                 8  %
Transaction and loan losses $    48,173          $  37,603          $  10,570                     28  %       $    68,568          $   146,486          $ (77,918)                   (53) %
% of total net revenue                1  %               2  %                                                           1  %                 4  %
Bitcoin impairment losses   $    45,266          $       -          $  45,266                      -  %       $    65,126          $         -          $  65,126                      -  %
% of total net revenue                1  %               -  %                                                           1  %                 -  %

Total operating expenses    $ 1,016,070          $ 619,815          $ 396,255                     64  %       $ 1,846,709          $ 1,248,604          $ 598,105                     48  %



Product development expenses for the three and six months ended June 30, 2021
increased by $118.8 million and $233.0 million, or 57%, and 58%, respectively,
compared to the three and six months ended June 30, 2020, due primarily to the
following:

•an increase of $82.9 million and $157.9 million in personnel costs for the
three and six months ended June 30, 2021, respectively, related to an increase
in headcount among our engineering, data science, and design teams, as we
continue to improve and diversify our products. The increase in personnel
related costs includes an increase in share-based compensation expense of $36.6
million and $66.1 million for the three and six months ended June 30, 2021,
respectively; and

•an increase of $31.5 million and $66.1 million in software, data center, and
crypto networks operating costs for the three and six months ended June 30,
2021, respectively, as a result of increased capacity needs and expansion of our
cloud-based services.

Sales and marketing expenses for the three and six months ended June 30, 2021
increased by $137.0 million or 58%, and $291.9 million or 67%, compared to the
three and six months ended June 30, 2020, respectively, primarily due to the
following:

•an increase in Cash App marketing costs for the three and six months ended June
30, 2021 of $68.9 million and $176.0 million, respectively. The increase in Cash
App marketing costs includes a $34.2 million and $102.6 million increase in
processing costs and related transaction losses primarily associated with the
increased volume of activity with our Cash App peer-to-peer service and
increased card issuance costs for the three and six months ended June 30, 2021,
respectively. We offer services such as stock investing, and certain Cash Card
and peer-to-peer services to certain Cash App customers for free. Additionally,
Cash App customer acquisition costs increased by $28.7 million and $63.3 million
in the three and six months ended June 30, 2021, respectively which includes
advertising costs and costs associated with various incentives to customers. We
consider the free peer-to-peer services and the customer incentives to be
marketing initiatives aimed at attracting new customers and encouraging the
usage of Cash App;
•an increase of $29.6 million and $53.2 million in advertising costs for our
Seller services for the three and six months ended June 30, 2021, respectively,
primarily from increased online and television marketing campaigns; and
•an increase of $19.6 million and $36.4 million in Seller and Cash App sales and
marketing personnel costs for the three and six months ended June 30, 2021,
respectively to enable growth initiatives. The increase in personnel
                                       52
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related costs includes an increase in share-based compensation expense of $4.9
million and $9.4 million for the three and six months ended June 30, 2021,
respectively.
General and administrative expenses for the three and six months ended June 30,
2021 increased by $84.6 million or 62% and $151.0 million or 57%, compared to
the three and six months ended June 30, 2020, respectively, primarily due to the
following:

•an increase of $52.4 million and $90.7 million in general and administrative
personnel costs for the three and six months ended June 30, 2021, respectively,
mainly as a result of additions to our customer support, finance, and legal
personnel as we continued to add resources and skills to support our long-term
growth as our business continues to scale. The increase in personnel related
costs includes an increase in share-based compensation expense of $8.7 million
and $16.0 million for the three and six months ended June 30, 2021,
respectively; and

•the remaining increase was primarily due to increase in software and subscription costs, third-party legal and other professional fees, and other administrative expenses.


Transaction and loan losses for the three and six months ended June 30, 2021
increased by $10.6 million or 28% and decreased by $77.9 million or 53% compared
to the three and six months ended June 30, 2020, respectively, primarily due to
the following:

•transaction losses for the three months ended June 30, 2021 increased by $10.3
million, while transaction losses decreased by $53.7 million for the six months
ended June 30, 2021 compared to the six months ended June 30, 2020. The increase
in the three months ended June 30, 2021 was primarily due to increased
transaction volumes associated with Cash Card, which was partially offset by
releases in certain previously established Seller risk loss provisions related
to the first quarter of 2021 due to better than expected realized transaction
losses. The decrease in the six months ended June 30, 2021 was due to lower
Seller risk loss provisions recorded in the first half of 2021 as businesses
recovered as a result of regional re-openings and broader macro economic
recovery, reducing the risk of chargebacks related to uncollectibility.
Additionally, we had recorded higher risk loss provisions for our Seller
business in the first half of 2020 due to the expected impact of COVID-19, that
were subsequently released based on realized transaction losses.

•loan losses for the three months ended June 30, 2021 increased slightly by $0.2
million compared to the three months ended June 30, 2020. Loan losses for the
six months ended June 30, 2021 decreased by $24.2 million compared to the six
months ended June 30, 2020. The primary driver for the decrease in loan losses
in the six months ended June 30, 2021 was due to the higher incremental
provisions that were recorded during the first quarter of 2020 associated with
the COVID-19 pandemic.
Bitcoin impairment losses were $45.3 million and $65.1 million in the three and
six months ended June 30, 2021, respectively, due to the market price of bitcoin
decreasing below the carrying value of our bitcoin investment observed during
the period. As of June 30, 2021, the fair value of our investment in bitcoin was
$281.4 million based on observable market prices, which is $126.5 million in
excess of the carrying value of our investment of $154.9 million. Any unrealized
gains on our bitcoin investment will only be recognized upon the sale of such
bitcoin investment.

Interest Expense, Net, and Other Expense, Net (in thousands, except for
percentages)
                                                       Three Months Ended                                                              Six Months Ended
                                                            June 30,                                                                       June 30,
                                2021               2020             $ Change            % Change               2021               2020             $ Change            % Change
Interest expense, net       $   6,464          $  14,769          $  (8,305)                  (56) %       $   6,717          $  23,975          $ (17,258)                  (72) %
Other (income), net         $ (75,788)         $ (25,591)         $ (50,197)                      NM       $ (48,260)         $ (19,729)         $ (28,531)                      NM



Interest expense, net, for the three and six months ended June 30, 2021
decreased by $8.3 million and $17.3 million, compared to the three and six
months ended June 30, 2020, respectively. The decrease was primarily due to
lower non-cash interest expense related to our convertible notes as a result of
the adoption of ASU No. 2020-06 on January 1, 2021. Under ASU No. 2020-06,
convertible notes will no longer be separated into a debt and equity component,
thereby eliminating the discount associated with the equity component and the
interest expense associated with such discount. This was offset in part
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by increases in cash interest expense related to the issuance of the 2031 Senior
Notes and 2026 Senior Notes issued in May 2021. Refer to Note 13, Indebtedness,
of Notes to the Condensed Consolidated Financial Statements for further details.

Other income, net for the three and six months ended June 30, 2021 increased by
$50.2 million and $28.5 million compared to the three and six months ended June
30, 2020, respectively, primarily due to the mark to market net gain of our
equity investment in DoorDash of $73.3 million and $44.4 million in the three
and six months ended June 30, 2021, respectively, arising from the revaluation
of this investment. In June 2021, we completed the sale of this investment in
DoorDash and as a result this investment will not impact the results in future
periods. These activities are offset in part by the foreign exchange gains and
losses.

Segment Results

Seller Results

The following tables provide a summary of the revenue and gross profit for our
Seller segment for the three and six months ended June 30, 2021 and 2020 (in
thousands):

                                                     Three Months Ended                                                                 Six Months Ended
                                                          June 30,                                                                          June 30,
                              2021                2020             $ Change            % Change                2021                 2020              $ Change            % Change
Net revenue              $ 1,311,488          $ 723,356          $ 588,132                    81  %       $ 2,329,142          $ 1,576,823            752,319                    48  %
Cost of revenue              726,351            407,656            318,695                    78  %         1,275,989              905,354            370,635                    41  %
Gross profit             $   585,137          $ 315,700          $ 269,437                    85  %       $ 1,053,153          $   671,469          $ 381,684                    57  %



Revenue

Revenue for the Seller segment for the three and six months ended June 30, 2021
increased by $588.1 million, or 81%, and $752.3 million or 48% compared to the
three and six months ended June 30, 2020, respectively. The increase was
primarily due to growth in GPV attributable to improvements experienced in
card-present volumes as a result of regional re-openings and resuming of
in-person business at sellers in addition to continued growth in higher-priced
card-not-present transactions. We also saw an increase in Seller subscription
and services-based revenue in the three and six months ended June 30, 2021
compared to the three and six months ended June 30, 2020 primarily due to the
recovery of facilitating loan volumes in 2021, other software subscriptions,
Instant Transfer for sellers, and Square Card. Additionally, Seller subscription
and services-based revenue was lower in the first half of 2020 due to the
suspension of facilitating loans in the second quarter of 2020, and the refund
of software subscription fees to our customers in March and April of 2020.

Cost of revenue


Cost of revenue for the Seller segment for the three and six months ended June
30, 2021 increased by $318.7 million or 78%, and $370.6 million or 41% compared
to the three and six months ended June 30, 2020, despite an increase in Seller
revenue of $588.1 million or 81%, and $752.3 million or 48% for the three and
six months ended June 30, 2021, compared to the three and six months ended June
30, 2020. For the six months ended June 30, 2021, the smaller increase in Seller
cost of revenues, relative to Seller revenues was primarily driven by higher
percentage of debit card transactions and larger average transaction sizes.
However, in the three months ended June 30, 2021 compared to the three months
ended June 30, 2020, we noted a declining trend of the percentage of debit card
transactions and average transaction sizes, which may impact the growth of
transaction-based costs in future periods.


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Cash App


The following tables provide a summary of the revenue and gross profit for our
Cash App segment for the three and six months ended June 30, 2021 and 2020 (in
thousands):

                                                       Three Months Ended                                                                   Six Months Ended
                                                            June 30,                                                                            June 30,
                              2021                 2020               $ Change             % Change                2021                 2020              $ Change             % Change
Net revenue              $ 3,330,191          $ 1,200,269          $ 2,129,922                   177  %       $ 7,369,807          $ 1,727,911           5,641,896                   327  %
Cost of revenue            2,784,138              919,206            1,864,932                   203  %         6,328,269            1,264,116           5,064,153                   401  %
Gross profit             $   546,053          $   281,063          $   264,990                    94  %       $ 1,041,538          $   463,795          $  577,743                   125  %



Revenue

Revenue for the Cash App segment for the three and six months ended June 30,
2021 increased by $2.1 billion, or 177%, and $5.6 billion or 327%, compared to
the three and six months ended June 30, 2020. The primary drivers were growth in
bitcoin revenue, and, to a lesser extent, Cash App Instant Deposit, Cash Card,
and Cash for Business. Bitcoin revenue increased due to the market price of
bitcoin, growth in the number of active bitcoin customers, and growth in
customer demand. While bitcoin contributed 58% and 64% of the total net revenue
and 67% and 79% of the increase in net revenues in the three and six months
ended June 30, 2021, respectively, gross profit generated from bitcoin was only
5% and 6% of the total gross profit. Excluding bitcoin revenue, Cash App revenue
increased by $281.1 million or 87%, and $588.1 million or 108% in the three and
six months ended June 30, 2021, compared to the three and six months ended June
30, 2020 due to growth in numbers of active Cash App customers, broader
macroeconomic recovery, and from government stimulus and relief programs enacted
in response to COVID-19. These programs provided government aid and unemployment
benefits which resulted in an increase in consumer spending and inflows into our
Cash App ecosystem. Cash App revenue growth may not be sustained at the same
levels in future quarters and may be impacted by the enactment of further
stimulus relief and benefit programs, as well as the demand and market prices
for bitcoin, amongst other factors.

Cost of revenue


Cost of revenue for the Cash App segment for the three and six months ended June
30, 2021 increased by $1.9 billion, or 203%, and $5.1 billion or 401% compared
to the three and six months ended June 30, 2020. The primary driver for the
increase was growth in bitcoin revenue and the associated costs of such revenue,
as discussed further above. Excluding bitcoin cost of revenue, Cash App cost of
revenue increased by approximately $53.3 million, or 87%, and $115.8 million or
109% in the three and six months ended June 30, 2021, compared to the three and
six months ended June 30, 2020, due to growth in Cash Card, Cash App Instant
Deposit, and Cash for Business.

Key Operating Metrics and Non-GAAP Financial Measures
We collect and analyze operating and financial data to evaluate the health of
our business, allocate our resources, and assess our performance. In addition to
total net revenue, net income (loss), and other results under generally accepted
accounting principles (GAAP), the following table sets forth key operating
metrics and non-GAAP financial measures we use to evaluate our business. We
believe these metrics and measures are useful to facilitate period-to-period
comparisons of our business and to facilitate comparisons of our performance to
that of other payment solution providers.
                                                  Three Months Ended             Six Months Ended
                                                       June 30,                      June 30,
                                                  2021           2020          2021           2020

Gross Payment Volume (GPV) (in millions) $ 42,828 $ 22,801 $ 75,966 $ 48,544

 Adjusted EBITDA (in thousands)               $  359,820      $ 97,931      

$ 596,069 $ 107,262

Adjusted Net Income Per Share:

 Basic                                        $     0.76      $   0.20      $    1.23      $    0.18
 Diluted                                      $     0.66      $   0.18      $    1.08      $    0.17



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


Adjusted EBITDA and Adjusted Net Income (Loss) Per Share (Adjusted EPS)
Adjusted EBITDA and Adjusted EPS are non-GAAP financial measures that represent
our net income (loss) and net income (loss) per share, adjusted to eliminate the
effect of items as described below. We have included these non-GAAP financial
measures in this Quarterly Report on Form 10-Q because they are key measures
used by our management to evaluate our operating performance, generate future
operating plans, and make strategic decisions, including those relating to
operating expenses and the allocation of internal resources. Accordingly, we
believe these measures provide useful information to investors and others in
understanding and evaluating our operating results in the same manner as our
management and board of directors. In addition, they provide useful measures for
period-to-period comparisons of our business, as they remove the effect of
certain non-cash items and certain variable charges.

•We believe it is useful to exclude certain 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, Indebtedness, of the Notes to the Condensed Consolidated Financial
Statements), prior to the adoption of ASU No. 2020-06 on January 1, 2021, we
were required to recognize non-cash interest expense related to amortization of
debt discount and issuance costs. Subsequent to the adoption, we only recognize
non-cash interest expense related to amortization of debt issuance costs on
convertible notes and unsecured senior notes. 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.
Additionally, for purposes of calculating diluted Adjusted EPS, we add back cash
interest expense on convertible senior notes, as if-converted at the beginning
of the period, if the impact is dilutive.

•We exclude gain or loss on the disposal of property and equipment, gain or loss
on revaluation of equity investments, bitcoin impairment losses, and prior to
the adoption of ASU No. 2020-06 on January 1, 2021, gain or loss on debt
extinguishment related to the conversion of convertible notes, 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
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.

In addition to the items above, Adjusted EBITDA as a non-GAAP financial measure
also excludes depreciation, other cash interest income and expense, other income
and expense and provision or benefit from income taxes, as these items are not
components of our core business operations.

Non-GAAP financial measures have limitations, should be considered as supplemental in nature and are not meant as a substitute for the related financial information prepared in accordance with GAAP. These limitations include the following:

•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.

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In addition to the limitations above, Adjusted EBITDA as a non-GAAP financial
measure does not reflect the effect of depreciation expense and related cash
capital requirements, income taxes that may represent a reduction in cash
available to us, and the effect of foreign currency exchange gains or losses
which is included in other income and expense, net.

Other companies, including companies in our industry, may calculate the non-GAAP
financial measures differently or not at all, which reduces their usefulness as
comparative measures.

Because of these limitations, you should consider the non-GAAP financial measures alongside other financial performance measures, including net income (loss) and our other financial results presented in accordance with GAAP.

The following table presents a reconciliation of net income (loss) to Adjusted EBITDA for each of the periods indicated (in thousands):

                                                            Three Months Ended                      Six Months Ended
                                                                 June 30,                               June 30,
                                                          2021               2020               2021               2020
Net income (loss) attributable to common stockholders $ 204,021          $ (11,478)         $ 243,029          $ (117,369)
Net income (loss) attributable to noncontrolling
interests                                                  (343)                 -               (343)                  -
Net income (loss)                                       203,678            (11,478)           242,686            (117,369)
Share-based compensation expense                        146,365             96,180            264,988             173,483
Depreciation and amortization                            28,394             21,056             57,595              41,117
Interest expense, net                                     6,464             14,769              6,717              23,975
Other (income), net                                     (75,788)           (25,591)           (48,260)            (19,729)
Bitcoin impairment losses                                45,266                  -             65,126                   -
Loss on disposal of property and equipment                  374              1,481                989               1,699

Acquisition related and other costs                      14,292              2,056             14,318               3,580
Acquired deferred revenue adjustment                        195                302                447                 959
Acquired deferred costs adjustment                          (60)               (92)              (124)               (236)
Benefit for income taxes                                 (9,360)              (752)            (8,413)               (217)
Adjusted EBITDA                                       $ 359,820          $  97,931          $ 596,069          $  107,262



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The following table presents a reconciliation of net income (loss) to Adjusted net income (loss) and Adjusted EPS for each of the periods indicated (in thousands, except per share data):

                                                             Three Months Ended                      Six Months Ended
                                                                  June 30,                               June 30,
                                                           2021               2020               2021               2020
Net income (loss) attributable to common stockholders  $ 204,021          $ (11,478)         $ 243,029          $ (117,369)
Net income (loss) attributable to noncontrolling
interests                                                   (343)                 -               (343)                  -
Net income (loss)                                        203,678            (11,478)           242,686            (117,369)
Share-based compensation expense                         146,365             96,180            264,988             173,483
Amortization of intangible assets                          9,234              4,134             16,118               8,286
Amortization of debt issuance costs                        2,305             17,580              4,137              30,108
Gain on revaluation of equity investment                 (76,744)           (20,998)           (47,844)            (20,998)
Bitcoin impairment losses                                 45,266                  -             65,126                   -
Loss on extinguishment of long-term debt                       -                  -                  -                 990
Loss on disposal of property and equipment                   374              1,481                989               1,699

Acquisition related and other costs                       14,292              2,056             14,318               3,580
Acquired deferred revenue adjustment                         195                302                447                 959
Acquired deferred costs adjustment                           (60)               (92)              (124)               (236)
Adjusted Net Income - basic                            $ 344,905          $  89,165          $ 560,841          $   80,502
Cash interest expense on convertible senior notes      $   1,611          $   1,565          $   3,339          $    2,938
Adjusted Net Income - diluted                          $ 346,516          $ 

90,730 $ 564,180 $ 83,440


Weighted-average shares used to compute Adjusted Net
Income Per Share:
Basic                                                    455,431            440,117            455,203             437,529
Diluted                                                  522,577            500,201            523,557             495,181

Adjusted Net Income Per Share:
Basic                                                  $    0.76          $    0.20          $    1.23          $     0.18
Diluted                                                $    0.66          $    0.18          $    1.08          $     0.17


To calculate the diluted Adjusted EPS we adjust the weighted-average number of shares of common stock outstanding for the dilutive effect of all potential shares of common stock.


In periods when we recorded an Adjusted Net Loss, the diluted Adjusted EPS is
the same as basic Adjusted EPS because the effects of potentially dilutive items
were anti-dilutive given the Adjusted Net Loss position.


Liquidity and Capital Resources


We continued to experience improvements in our business as the majority of U.S.
markets transitioned to varying states of economic recovery and reopenings.
Although our outlook and business results continue to be positive, the extent to
which the COVID-19 pandemic will further impact our results of operations,
financial condition and cash flows in the future is unknown. We continue to
evaluate our investment plans and discretionary expenditures and will make
adjustments accordingly.

As of June 30, 2021, we had approximately $7.1 billion in available funds,
including an undrawn amount of $500.0 million available under our revolving
credit facility, as described in Note 13, Indebtedness, of Notes to the
Condensed Consolidated Financial Statements. We intend to continue focusing on
our long-term business initiatives and believe that our available funds are
sufficient to meet our liquidity needs for the foreseeable future. We are
carefully monitoring and managing our cash position in light of ongoing
conditions and levels of operations. As of June 30, 2021, the Company was in
compliance with all financial covenants associated with the 2020 Credit Facility
and Senior Notes.
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Liquidity Sources

The following table summarizes our cash, cash equivalents, restricted cash, and investments in marketable debt securities (in thousands):

                                                                                          December 31,
                                                                   June 30, 2021              2020
Cash and cash equivalents                                       $     4,581,234          $  3,158,058
Short-term restricted cash                                               15,088                30,279
Long-term restricted cash                                                74,569                13,526
Cash, cash equivalents, and restricted cash                     $     4,670,891          $  3,201,863
Investments in short-term debt securities                             1,014,903               695,112
Investments in long-term debt securities                                947,093               463,950

Cash, cash equivalents, restricted cash, and investments in marketable debt securities

                                      $     

6,632,887 $ 4,360,925




Our principal sources of liquidity are our cash and cash equivalents and
investments in marketable debt securities. As of June 30, 2021, we had $6.6
billion of cash and cash equivalents, restricted cash, and investments in
marketable debt securities, which were held primarily in cash deposits, money
market funds, reverse repurchase agreements, U.S. government and agency
securities, commercial paper, and corporate bonds. We consider all highly liquid
investments with an original maturity of three months or less when purchased to
be cash equivalents. Our investments in marketable debt securities are
classified as available for sale. From time to time, we have raised capital by
issuing equity, equity-linked, or debt securities such as our convertible senior
notes.

As of June 30, 2021, we held over $4.9 billion in aggregate principal amount of
long-term debt, comprised of $4.7 million in aggregate principal amount of
outstanding convertible senior notes that mature on March 1, 2022 ("2022
Convertible Notes"), $749.1 million in aggregate principal amount of convertible
senior notes that mature on May 15, 2023 ("2023 Convertible Notes"), $1.0
billion in aggregate amount of convertible senior notes that mature on March 1,
2025 ("2025 Convertible Notes"), and $575.0 million and $575.0 million in
aggregate amount of convertible senior notes that mature on May 1, 2026, and
November 1, 2027, respectively ("2026 Convertible Notes" and "2027 Convertible
Notes," respectively). Additionally, on May 20, 2021, we issued $1.0 billion and
$1.0 billion in aggregate principal amount of outstanding senior unsecured notes
that mature on June 1, 2026 and June 1, 2031, respectively ("2026 Senior Notes"
and "2031 Senior Notes"). The 2022 Convertible Notes bear interest at a rate
of 0.375% payable semi-annually on March 1 and September 1 of each year, while
the 2023 Convertible Notes bear interest at a rate of 0.50% payable
semi-annually on May 15 and November 15 of each year, and the 2025 Convertible
Notes bear interest at a rate of 0.125% payable semi-annually on March 1 and
September 1 of each year. The 2026 Convertible Notes bear no interest, whereas,
the 2027 Convertible Notes bear interest at a rate of 0.25% payable
semi-annually on May 1 and November 1 of each year. These convertible senior
notes can be converted or repurchased prior to maturity if certain conditions
are met. The 2026 Senior Notes bear interest a rate of 2.75% payable
semi-annually on June 1 and December 1, while the 2031 Senior Notes bear
interest at a rate of 3.50% payable semi-annually on June 1 and December 1 of
each year. These Senior Notes can be redeemed or repurchased prior to maturity
if certain conditions are met.

We purchased $50.0 million and $170.0 million in bitcoin in October 2020 and
February 2021, respectively, as we believe cryptocurrency is an instrument of
economic empowerment that aligns with our corporate purpose. We expect to hold
these investments for the long term but will continue to reassess our investment
in bitcoin relative to our balance sheet. As bitcoin is considered an indefinite
lived intangible asset, under the accounting policy for such assets we will be
required to recognize any decreases in market prices below carrying value as an
impairment charge, with any mark up in value prohibited if the market price of
bitcoin subsequently increases. We recorded impairment charges of $45.3 million
and $65.1 million in the three and six months ended June 30, 2021 due to the
observed market price of bitcoin decreasing below the carrying value during the
period. As of June 30, 2021, the fair value of our investment in bitcoin was
$281.4 million based on observable market prices which is $126.5 million in
excess of the Company's carrying value of $154.9 million. Impairment losses
cannot be recovered for any subsequent increase in fair value until the sale of
the asset.

In September 2020, we announced our intent to invest $100 million in supporting
underserved communities, particularly, racial and ethnic minority groups who
have been disproportionately affected by COVID-19. This initiative further
deepens our commitment toward economic empowerment to help broaden such
communities' access to financial
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services. As of June 30, 2021, we have invested $17.9 million in aggregate towards this initiative, of which $6.8 million and $17.5 million were invested in the three and six months ended June 30, 2021, respectively.


In June 2020, we entered into the Paycheck Protection Program Liquidity Facility
agreement with the Federal Reserve Bank of San Francisco ("First PPPLF
Agreement") to secure additional credit collateralized by PPP loans. The
advances under this facility are repayable if the associated PPP loans are
forgiven, repaid by a customer or settled by the government guarantee. On
January 29, 2021, we entered into a second PPPLF agreement with the Federal
Reserve Bank of San Francisco ("Second PPPLF Agreement") to secure additional
credit, collateralized by loans from the second round of the PPP program, in an
aggregate principal amount of up to $1.0 billion under both PPPLF Agreements. As
of June 30, 2021, $823.7 million of PPPLF advances were outstanding and are,
generally, collateralized by the same value of PPP loans. Any differences
between the amounts are generally due to the timing of PPP loan repayment or
forgiveness, and repayment of PPPLF advances.

In May 2020, we entered into a new revolving credit agreement with certain
lenders, as subsequently amended, which provides a $500 million senior unsecured
revolving credit facility (the "2020 Credit Facility") maturing in May 2023.
Loans under the 2020 Credit Facility bear interest at our option of (i) a base
rate based on the highest of the prime rate, the federal funds rate plus 0.50%,
and the adjusted LIBOR rate plus 1.00%, in each case, plus a margin ranging from
0.25% to 0.75% or (ii) an adjusted LIBOR rate plus a margin ranging from 1.25%
to 1.75%. The margin is determined based on our total net leverage ratio, as
defined in the agreement. We are obligated to pay other customary fees for a
credit facility of this size and type including an unused commitment fee of
0.15%. To date, no funds have been drawn and no letters of credit have been
issued under the 2020 Credit Facility.

See Note 13, Indebtedness, of the Notes to the Condensed Consolidated Financial Statements for more details on these transactions.


We believe that our existing cash and cash equivalents, investment in marketable
debt securities, and availability under our line of credit will be sufficient to
meet our working capital needs, including any expenditures related to strategic
transactions and investment commitments that we may from time to time enter
into, and planned capital expenditures for at least the next 12 months. From
time to time, we may seek to raise additional capital through equity,
equity-linked, and debt financing arrangements. We cannot provide assurance that
any additional financing will be available to us on acceptable terms or at all.

Short-term restricted cash of $15.1 million as of June 30, 2021 reflects pledged
cash deposited into savings accounts at the financial institutions that process
our sellers' payments transactions and as collateral pursuant to agreements with
third party originating banks for certain loan products. We use the restricted
cash to secure letters of credit with these financial institutions to provide
collateral for liabilities arising from cash flow timing differences in the
processing of these payments. We have recorded this amount as a current asset on
our condensed consolidated balance sheets given 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.
Long-term restricted cash of $74.6 million as of June 30, 2021 is primarily
related to a reserve deposit to satisfy the capital and liquidity requirements
associated with the banking operations of SFS mandated by the FDIC, as well as
cash deposited into money market funds that is used as collateral pursuant to
multi-year lease agreements. We have recorded these amounts as non-current
assets on the condensed consolidated balance sheets as we are required to
establish and maintain the reserve deposit at all times to support the ongoing
liquidity obligations of SFS, and due to certain lease terms extending beyond
one year.


We experience significant day-to-day fluctuations in our cash and cash equivalents due to fluctuations in settlements receivable and customers payable, and hence working capital. These fluctuations are primarily due to:


•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
balances typically will be higher than for periods ending on a weekday, as we
settle to our sellers for payment processing activity on business days; and

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•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, excluding amounts attributable to Cash
App stored funds, 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 fact that a subset of funds are held due to unlinked bank accounts,
risk holds, and chargebacks. Also customer funds obligations, which are included
in customers payable, may cause customers payable to trend differently than
settlements receivable. Holidays and day-of-week may also cause significant
volatility in daily GPV amounts.

Cash Flow Activities
The following table summarizes our cash flow activities (in thousands):
                                                                        Six Months Ended
                                                                            June 30,
                                                                    2021                 2020
Net cash provided by (used in) operating activities            $   297,812          $  (151,833)
Net cash used in investing activities                             (933,039)            (302,295)
Net cash provided by financing activities                        2,111,347  

1,366,812

Effect of foreign exchange rate on cash and cash equivalents (7,092)

              (5,182)

Net increase in cash, cash equivalents, and restricted cash $ 1,469,028

$ 907,502

Cash Flows from Operating Activities


Cash provided by (used in) operating activities consisted of our net income
(loss) adjusted for certain non-cash items, including gain or loss on
revaluation of equity investments, depreciation and amortization, non-cash
interest and other expense, share-based compensation expense, transaction and
loan losses, bitcoin impairment losses, deferred income taxes, non-cash lease
expense, as well as the effect of changes in operating assets and liabilities,
including working capital.

For the six months ended June 30, 2021, cash provided by operating activities
was $297.8 million. Net income was $242.7 million, adjusted for the add back of
non-cash expenses of $460.3 million, consisting primarily of share-based
compensation, transaction and loan losses, bitcoin impairment losses,
depreciation and amortization, and non-cash lease expenses, which contributed
positively to operating activities. This was offset by net PPP loans facilitated
of $269.9 million, as well as a net outflow from changes in other assets and
liabilities of $135.3 million due to timing.

For the six months ended June 30, 2020, cash used in operating activities was
$151.8 million. Net loss was $117.4 million, adjusted for the add back of
non-cash expenses of $405.4 million, consisting primarily of share-based
compensation, transaction and loan losses, depreciation and amortization, and
non-cash interest and other expenses. This was offset by net PPP loans
facilitated of $465.5 million. The increase in transaction and loan losses was
largely caused by estimated losses attributable to the COVID-19 pandemic and the
increase in other non-cash expenses was primarily due to the growth and
expansion of our business activities.

Cash Flows from Investing Activities


Cash flows used in investing activities primarily relate to capital expenditures
to support our growth, investments in marketable debt securities, bitcoin, and
business acquisitions.
For the six months ended June 30, 2021, cash used in investing activities was
$933.0 million, primarily due to the net investments of marketable securities
including investments from customer funds of $864.9 million, purchases of
bitcoin and other investments of $215.4 million, business acquisitions, net of
cash acquired of $164.3 million, as well as the purchase of property and
equipment of $66.6 million, partially offset by the proceeds from sale of equity
investments of $378.2 million.
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For the six months ended June 30, 2020, cash used in investing activities was
$302.3 million, primarily due to the net proceeds from investments of marketable
securities including investments from customer funds of $227.4 million.
Additional uses of cash were as a result of the purchase of property and
equipment of $56.6 million and business acquisitions, net of cash acquired of
$18.4 million.
Cash Flows from Financing Activities
For the six months ended June 30, 2021, cash provided by financing activities
was $2.1 billion primarily as a result of $2.0 billion in net proceeds from the
2031 Senior Notes and 2026 Notes offerings, the proceeds, net of repayments of
the PPPLF advances of $359.6 million, proceeds from issuances of common stock
from the exercise of options and purchases under our employee share purchase
plan of $72.2 million, offset by payments for employee tax withholding related
to vesting of restricted stock units of $292.2 million.
For the six months ended June 30, 2020, cash provided by financing activities
was $1.4 billion primarily as a result of $936.5 million in net proceeds from
the 2025 Convertible Notes offering, proceeds from the PPPLF advances of $447.8
million, and proceeds from issuances of common stock from the exercise of
options and purchases under our employee share purchase plan of $78.1 million,
offset by payments for employee tax withholding related to vesting of restricted
stock units of $93.7 million.
Contractual Obligations and Commitments
On May 20, 2021, the Company issued an aggregate principal amount of $2.0
billion senior unsecured notes comprised of $1.0 billion of senior unsecured
notes due 2026 ("2026 Senior Notes") and $1.0 billion senior unsecured notes due
2031 ("2031 Senior Notes"). The 2026 Senior Notes mature on June 1, 2026, unless
earlier redeemed or repurchased, and bear interest at a rate of 2.75% payable
semi-annually on June 1 and December 1. The 2031 Senior Notes mature on June 1,
2031, unless earlier redeemed or repurchased, and bear interest at a rate of
3.50% payable semi-annually on June 1 and December 1 of each year. See Note 13,
Indebtedness, of the Notes to the Condensed Consolidated Financial Statements
for more details on this transaction.

On January 29, 2021, we entered into a second Paycheck Protection Program
Liquidity Facility agreement with the Federal Reserve Bank of San Francisco
("Second PPPLF Agreement" and together with the First PPPLF Agreement, "PPPLF
Agreements") to secure additional credit in an aggregate principal amount of up
to $1.0 billion under both PPPLF Agreements. Borrowings under the facilities
accrue interest at a rate of 0.35% and must be collateralized with loans
originated under the PPP. The maturity date of any PPPLF advances will be the
maturity date of the PPP loan pledged to secure the advance, and will be
accelerated upon the occurrence of certain events of default. Although loans
originated under the PPP have a stated maturity of between two and five years
from origination, some of the loans may be forgiven 24 weeks after disbursement
if they meet certain specified criteria. The PPPLF advances are also repayable
if the underlying PPP loan is repaid by the customer. As of June 30, 2020,
$823.7 million of PPPLF advances were outstanding and are, generally,
collateralized by the same value of PPP loans. Any differences between the
amounts are generally due to the timing of PPP loan repayment or forgiveness,
and repayment of PPPLF advances. See Note 13, Indebtedness, of the Notes to the
Condensed Consolidated Financial Statements for more details on this
transaction.
With the exception of the Senior Notes and PPPLF advances, there were no
material changes in our commitments under contractual obligations, except for
scheduled payments from the ongoing business, as disclosed in our Annual Report
on Form 10-K for the year ended December 31, 2020.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements during the periods presented.

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Critical Accounting Policies and Estimates


Our discussion and analysis of our financial condition and results of operations
are based upon our financial statements, which have been prepared in accordance
with GAAP. GAAP requires us to make certain estimates and judgments that affect
the amounts reported in our financial statements. We base our estimates on
historical experience, anticipated future trends, and other assumptions we
believe to be reasonable under the circumstances. Because these accounting
policies require significant judgment, our actual results may differ materially
from our estimates.

We believe accounting policies and the assumptions and estimates associated with
transaction and loan losses have the greatest potential effect on our condensed
consolidated financial statements. Therefore, we consider this to be our
critical accounting policy and estimate.

Our critical accounting policies are disclosed in our Annual Report on Form 10-K
for the year ended December 31, 2020. Our critical accounting policies have not
materially changed during the six months ended June 30, 2021.

Recent Accounting Pronouncements

See "Recent Accounting Pronouncements" described in Note 1, Description of Business and Summary of Significant Accounting Policies, of the Notes to the Condensed Consolidated Financial Statements.

© Edgar Online, source Glimpses

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