Square : First Quarter 2021 Shareholder Letter

Q1 2021 Shareholder Letter

INVESTORS.SQUAREUP.COM

FEATURED SELLER • Craft + Carry in New York, NY

1

Highlights

In the first quarter of 2021, we achieved gross profit of $964 million, up 79% year over year. Our Seller ecosystem generated gross profit of $468 million, up 32% year over year. Cash App generated gross profit of $495 million, up 171% year over year.

Our upmarket sellers experienced strong growth: In the first quarter of 2021, mid-marketSeller GPV increased 43% year over year, more than 2x the growth of total Seller GPV.

Our customers have found increased value and convenience with Cash Card: In March, we had more than

10 million monthly Cash Card actives, with weekly actives nearly doubling year over year to 7 million on average.

first quarter financial metrics

GROSS PROFIT

ADJUSTED EBITDA

$964 Million +79% YoY

$236 Million

$964M

$236M

$794M

$804M

$181M

$185M

$597M

$539M

$9M

$98M

(85%)

36%

28%

59%

52%

79%

YoY

(7%)

38%

57%

NA

YoY Growth

Growth

Q1

Q2

Q3

Q4

Q1

Q1

Q2

Q3

Q4

Q1

2020

2021

2020

2021

SELLER GROSS PROFIT

CASH APP GROSS PROFIT

NET INCOME (LOSS)

$468 Million +32% YoY

$495 Million +171% YoY

$39 Million

$468M

$495M

$294M

$409M

$427M

$356M

$316M

$385M

$377M

$281M

$37M

$39M

$183M

($106M)

($11M)

18%

(9%)

12%

13%

32%

115%

167%

212%

162%

171%

YoY

YoY

Growth

Growth

Q1

Q2

Q3

Q4

Q1

Q1

Q2

Q3

Q4

Q1

Q1

Q2

Q3

Q4

Q1

2020

2021

2020

2021

2020

2021

In the first quarter of 2021, total net revenue was $5.06 billion, up 266% year over year, and, excluding bitcoin revenue, total net revenue was $1.55 billion, up 44% year over year.

In the first quarter of 2020, net income (loss) and Adjusted EBITDA were significantly affected by an increase in provisions for transaction and loan losses as a result of the anticipated impact of COVID-19.

The following items affected net income (loss) per share during the respective periods. In the second quarter of 2020, we recognized a gain of $21 million related to observable price changes for non-marketable equity investments. In the fourth quarter of 2020, we recognized a gain of $274 million related to equity investments, driven primarily by a gain of $255 million as a result of the mark-to-market valuation of our investment in DoorDash. In the first quarter of 2021, we recognized a loss of $29 million related to the mark-to-market valuation of our investment in DoorDash as well as a $20 million bitcoin impairment.

A reconciliation of non-GAAP financial measures used in this letter to their nearest GAAP equivalents is provided at the end of this letter.

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ON THE COVER

Craft + Carry, a taproom and beer store in New York City, uses Square Point of Sale, Square Loyalty, Square Team Management Plus, Square Marketing, Square Online, Square Terminal, Square Register, Square Gift Cards, and Pointy API through our App Marketplace.

CASH APP HIGHLIGHT

We offer customers the unique ability to send bitcoin to friends and family directly within Cash App instead of leaving the platform or locating a bitcoin wallet address.

May 6, 2021

The Paycheck Protection Program (PPP) is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.

To Our Shareholders

We delivered strong growth at scale during the first quarter of 2021. Gross profit grew 79% year over year to $964 million. In our Seller ecosystem, gross profit was up 32% year over year in the first quarter. Our Cash App ecosystem delivered gross profit growth of 171% year over year.

As a company, we continue to believe our purpose of economic empowerment is more important than ever. This quarter, we again participated in the Paycheck Protection Program (PPP), enabling us to uplift many of the businesses most

in need through forgivable loans. As the macroeconomic environment remains uncertain, we are focused on helping our sellers and individuals thrive for the long term. To help support individuals, we made government disbursements available to customers through Cash App and facilitated payments to customers up to two days early. For each of our Seller and Cash App ecosystems, we remain encouraged by the opportunity to reach new audiences by increasing our investments in customer acquisition and product innovation, especially

as regions in the U.S. and international markets begin to reopen.

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Square Messages is accessible from sellers' online Square Dashboard and is available with all Square apps on Android and iOS devices, including Square Appointments, Square for Retail, Square Point of Sale, and Square for Restaurants.

1.How Consumers Use Messaging, Twilio.

We consider upmarket to be our larger sellers, including SMB and mid- market sellers.

Seller GPV (Gross Payment Volume) represents payment volume from our Seller ecosystem. Seller GPV is composed of the total dollar amount of all card payments processed by sellers using Square, net of refunds, and does not include GPV from our Cash App ecosystem.

A larger seller generates more than $125,000 in annualized GPV. An SMB seller generates between $125,000 and $500,000 in annualized GPV. A mid- market seller generates more than $500,000 in annualized GPV.

seller ecosystem

Enhancing our ecosystem of products

We continued to build upon our omnichannel capabilities by launching Square Messages, a new feature that helps sellers interact with their buyers more effectively through text message or email. Instead of making a phone call, a hair stylist can simply check in with new clients within seconds through a message or hear from a customer who may be running late. Nine out of ten consumers expressed interest in messaging businesses directly, and we believe Square Messages will help sellers build more meaningful relationships with their buyers, which has become increasingly important in an omnichannel world.¹

We have played a crucial role in helping sellers access government funding during the pandemic. In February, we began participating in the current round of the PPP to support small businesses that have been affected by COVID-19. In the first quarter, Square Capital facilitated $531 million in

1. loans, providing access to a financial lifeline to more than 57,000 small businesses. In keeping with our purpose of economic empowerment, we helped reach sellers who are typically overlooked by traditional financial institutions: During the first quarter, the vast majority of our PPP loans were distributed to sellers with fewer than five employees. We see a meaningful opportunity
   to expand access to banking products for small businesses, and we opened our bank, Square Financial Services, in March to pursue this effort.

Growing upmarket

Our ecosystem of products continued to support growth of larger sellers. In the first quarter, mid- market Seller GPV grew 43% year over year, more than 2x the growth of total Seller GPV. With our increase in sales and marketing investments, we see an opportunity to continue driving awareness of our broader ecosystem among larger sellers.

BUYER

SELLER

SQUARE

MESSAGES

FEEDBACK RECEIPTS APPOINTMENTS

Square Messages provides a single channel for sellers to manage their relationships with customers, allowing them to view and reply to texts or emails regarding feedback, receipts, and appointment reminders in one place.

larger seller gpv growth

				$18.1B
$11.5B	$13.5B			Mid-market sellers
			>$500K GPV
					SMB sellers
					$125K-$500K GPV
Q1	Q1		Q1
2019		2020	2021

We have continued to move upmarket with larger sellers, and our mid-market category has achieved strong growth. In the first quarter, GPV from mid-market sellers increased 43% year over year, more than 2x the growth of total Seller GPV.

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1. Metric is the average number of Square products, excluding hardware devices, used by Square for Restaurants and Square for Retail sellers during the first quarter of 2021.
2. Represents total gross profit from sellers that use Square for Restaurants and Square for Retail. Gross profit for only the Square for Restaurants and Square for Retail products (inclusive of SaaS and payment processing revenue) was $66 million on an annualized basis in the first quarter.

Australia represented our largest international market as a percent of total Seller GPV.

Our vertical point-of-sale software has attracted new and larger sellers to Square. In the first quarter, more than half of Square for Restaurants and Square for Retail sellers onboarded were new to Square. Restaurants and retailers value the cohesion of Square's ecosystem to help them manage their businesses efficiently, and have adopted more than three products on average.¹ These sellers have used more of our broader ecosystem and generated gross profit of more than 5x greater compared to the average seller. We have seen encouraging momentum from Square for Restaurants and Square for Retail: Overall gross profit from sellers using these products was nearly $140 million on an annualized basis during the first quarter, doubling year over year.²

Expanding globally

Strengthening our international presence remains a key priority for our Seller ecosystem, and we are focused on achieving product parity globally. In the first quarter, we launched Square Terminal in Japan, as well as Square Register in both the U.K. and Australia, to enable more contactless commerce experiences and attract larger sellers. We also introduced Square Appointments in the U.K. to help sellers accept online bookings. As we grow upmarket, we believe these versatile products will attract larger businesses with more complex needs.

During the first quarter, despite strict lockdowns around the world, Seller gross profit in our international markets grew nearly 80% year over year and represented 8% of Seller gross profit. We see an opportunity to further scale globally as we continue expanding our software and financial services offerings. In Australia, our largest international market, gross profit doubled year over year in the first quarter due primarily to strong acquisition of new sellers and continued growth upmarket.

Square for Restaurants is an all-in-onerestaurant point-of-salesystem that includes more capabilities such as integrated table management, a kitchen display system, and online order management.

Square for Retail is an all-in-one retail point of sale system that includes integrated inventory, vendor, and customer relationship management, and online order management.

In March, we launched Square Terminal in Japan to provide sellers with an all-in-one solution that allows them to accept contactless payments quickly and securely. Makers' Basein Tokyo, Japan, uses Square Terminal, Square Reader, and Square Online.

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