What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-01 compared with 2024-05-02 · 133 added, 104 removed, 273 unchanged (46% of the section changed)

9 unchanged sentences

In addition, we also operate TIDAL, a global platform for musicians and fans, and TBD, an open developer platform, to contribute to our purpose of economic empowerment.

We delivered strong growth across our primary ecosystems in the first quarter of 2024, with gross profit of $2.1 billion, up 22% year over year.

Cash App generated gross profit of $1.3 billion in the first quarter of 2024, up 25% year over year.

We delivered strong growth across our primary ecosystems in the second quarter of 2024, with gross profit of $2.2 billion, up 20% year over year.

Cash App generated gross profit of $1.3 billion in the second quarter of 2024, up 23% year over year.

Performance was driven by strength across our financial services products.

Square generated gross profit of $820.3 million in the first quarter of 2024, up 19% year over year, driven by notable strength in our banking products and international markets.

In the first quarter of 2024, operating income was $249.7 million and Adjusted Operating Income was $364.3 million, compared to an operating loss of $6.2 million and Adjusted Operating Income of $51.0 million in the first quarter of 2023.

For the same period, net income attributable to common stockholders was $472.0 million and Adjusted EBITDA was $705.1 million, compared to a net income attributable to common stockholders of $98.3 million and Adjusted EBITDA of $368.4 million in the first quarter of 2023.

Net income for the first quarter of 2024 and 2023 included a gain of $233.4 million and $96.1 million, respectively, from the remeasurement of our bitcoin investment.

Square generated gross profit of $922.6 million in the second quarter of 2024, up 15% year over year, driven by notable strength in our banking products and software and integrated payments.

In the second quarter of 2024, operating income was $306.6 million and Adjusted Operating Income was $399.1 million, compared to an operating loss of $132.1 million and Adjusted Operating Income of $25.5 million in the second quarter of 2023.

For the same period, net income attributable to common stockholders was $195.3 million, compared to a net loss attributable to common stockholders of $102.0 million, and Adjusted EBITDA was $759.5 million, compared to $384.4 million.

Net income for the second quarter of 2024 and net loss for the second quarter of 2023 included a loss of $70.1 million and gain of $16.0 million, respectively, from the remeasurement of our bitcoin investment.

Refer to the Key Operating Metrics and Non-GAAP Financial Measures section below for reconciliations of non-GAAP financial measures to their nearest generally accepted accounting principles ("GAAP") equivalents.

In 2023, we sharpened our focus on our organizational structure and expenditures with a view to identifying areas where we can be more cost efficient as we focus on disciplined growth and pursuing cost efficiencies.

In November 2023, we announced we would implement an absolute cap of 12,000 on the number of employees we have at our company.

We plan to operate below this cap through a combination of performance management, the centralization of teams and functions to reduce duplication, and prioritization of our scope.

In the first quarter of 2024, we continued to make progress on these goals.

We expect to continue these efforts through the remainder of 2024, including implementing greater expense discipline and reassessing certain contractual vendor arrangements.

To date, we have recorded $121.6 million of severance and other related expenses, of which $17.6 million was recorded in the quarter ended March 31, 2024.

We may continue to incur expenses, including restructuring costs, in the short term to implement these initiatives, but we expect to benefit from these actions in future periods.

We ended the first quarter of 2024 with $8.0 billion in available liquidity, with $7.2 billion in cash, cash equivalents, restricted cash, and investments in marketable debt securities, as well as an undrawn amount of $775.0 million available under our revolving credit facility.

This represents an increase of $304.8 million from the end of 2023.

On October 26, 2023, the board of directors of the Company authorized the repurchase of up to $1 billion of our Class A common stock.

The goal of the program is to offset a portion of the dilution associated with share-based compensation issued to employees as part of the Company’s overall compensation program.

The timing and amount of shares repurchased will depend on a variety of factors, including the stock price, business and market conditions, corporate and regulatory requirements, alternative investment opportunities, acquisition opportunities, and other factors.

To date, we have purchased $408.9 million of our Class A common stock under this program, of which $252.1 million was purchased in the first quarter of 2024.

In the second quarter of 2024, we continued to make progress on these goals and we expect to continue these efforts through the remainder of 2024, including implementing greater expense discipline and reassessing certain contractual vendor arrangements.

In November 2023, we announced we would implement an absolute cap of 12,000 on the number of employees we have at our company, which we have achieved, and plan to continue to operate below this cap, through a combination of performance management, centralization of teams and functions to reduce duplication, and prioritization of our scope.

As of June 30, 2024, we have recorded $125.5 million of severance and other related expenses, of which $3.9 million was recorded in the quarter ended June 30, 2024.

We may continue to incur expenses, including restructuring costs, in the short term to implement these initiatives.

In the second quarter of 2024, we have begun to realize benefits related to our focus on disciplined growth and cost efficiencies and we expect to continue to benefit from these actions in future periods.

During the second quarter of 2024, we issued an aggregate principal amount of $2.0 billion of senior unsecured notes due 2032 ("2032 Senior Notes").

Including the net proceeds from this debt offering after issuance costs, we ended the second quarter of 2024 with $10.3 billion in available liquidity, with $9.5 billion in cash, cash equivalents, restricted cash, and investments in marketable debt securities, as well as an undrawn amount of $775.0 million available under our revolving credit facility.

This represents an increase of $2.5 billion from the end of 2023.

In October 2023, our board of directors authorized the repurchase of up to $1 billion of our Class A common stock.

As of June 30, 2024, we have purchased $798.4 million of our Class A common stock under this program, of which $389.5 million was purchased in the second quarter of 2024.

The program was completed as of July 31, 2024.

On July 25, 2024, our board of directors authorized an increase to this share repurchase program to repurchase up to an additional $3 billion of our Class A common stock.

The goal of the program is to return capital to shareholders.

The timing and number of shares repurchased will depend on a variety of factors, including the stock price, business and market conditions, corporate and regulatory requirements, alternative investment opportunities, acquisition opportunities, and other factors.

Results of Operations

1 unchanged sentence

Three Months Ended

2024 2023 $ Change % Change

June 30, Six Months Ended

2024 2023 $ Change % Change 2024 2023 $ Change % Change

Transaction-based revenue $ 1,712,967 $ 1,637,654 $ 75,313 5 % $ 3,224,176 $ 3,060,359 $ 163,817 5 %

1 unchanged sentence

Hardware revenue 42,960 44,922 (1,962) NM (i)

75,461 82,373 (6,912) NM (i)

Bitcoin revenue 2,611,743 2,390,884 220,859 9 % 5,342,867 4,554,635 788,232 17 %

1 unchanged sentence

(i) Not meaningful ("NM")

Total net revenue for the three months ended March 31, 2024 increased by $967.0 million, or 19%, compared to the three months ended March 31, 2023.

Bitcoin revenue increased by $567.4 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Excluding bitcoin revenue, total net revenue increased by $399.6 million, or 14%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Transaction-based revenue for the three months ended March 31, 2024 increased by $88.5 million, or 6%, compared to the three months ended March 31, 2023, driven primarily by growth in Gross Payment Volume ("GPV"), which grew by 6% in the same period.

The growth in Square GPV was driven by improvements in both card-present and card-not-present volumes as a result of growth from in-person and online channels, as well as growth in our international markets.

Total net revenue for the three and six months ended June 30, 2024 increased by $620.6 million, or 11%, and $1.6 billion, or 15%, compared to the three and six months ended June 30, 2023, respectively.

Bitcoin revenue increased by $220.9 million and $788.2 million for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023, respectively.

Excluding bitcoin revenue, total net revenue increased by $399.7 million, or 13%, and $799.4 million, or 13%, in the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023, respectively.

Transaction-based revenue for the three and six months ended June 30, 2024 increased by $75.3 million, or 5%, and $163.8 million, or 5%, compared to the three and six months ended June 30, 2023, respectively, driven primarily by growth in Gross Payment Volume ("GPV"), which grew by 5% and 6% in the same periods.

The growth in Square GPV was driven by improvements in both card-present and card-not-present volumes including strength in online channels.

See below in Key Operating Metrics and Non-GAAP Financial Measures for further discussion of GPV.

Subscription and services-based revenue for the three months ended March 31, 2024 increased by $316.1 million, or 23%, compared to the three months ended March 31, 2023.

This increase was primarily due to growth in Cash App's financial service-related products, including Cash App Card, BNPL platform, and Cash App Borrow, as well as revenue from Square banking products, which primarily include Square Loans, Instant Transfer, and Square Debit Card.

Revenue generated from the BNPL platform was $283.5 million and $223.7 million for the three months ended March 31, 2024 and March 31, 2023, respectively.

Bitcoin revenue for the three months ended March 31, 2024 increased by $567.4 million, or 26%, compared to the three months ended March 31, 2023.

Subscription and services-based revenue for the three and six months ended June 30, 2024 increased by $326.4 million, or 22%, and $642.5 million, or 23%, compared to the three and six months ended June 30, 2023, respectively.

This increase was primarily due to growth in Cash App's financial service-related products, including Cash App Card, BNPL platform, Cash App Borrow, Instant Deposit, and Cash App Pay, as well as revenue from Square banking products.

Revenue generated from the BNPL platform was $294.0 million and $577.5 million for the three and six months ended June 30, 2024, respectively.

Revenue generated from the BNPL platform was $235.4 million and $459.2 million for the three and six months ended June 30, 2023, respectively.

Bitcoin revenue for the three and six months ended June 30, 2024 increased by $220.9 million, or 9%, and $788.2 million, or 17%, compared to the three and six months ended June 30, 2023, respectively.

As bitcoin revenue is the total sale amount of bitcoin to customers, the amount of bitcoin revenue recognized will fluctuate depending on customer demand as well as changes in the market price of bitcoin.

The increase in the three months ended March 31, 2024 was driven by an increase in the average market price of bitcoin, partially offset by a decrease in the quantity of bitcoin sold to customers, compared to the three months ended March 31, 2023.

While bitcoin contributed 46% and 43% of the total revenue for the three months ended March 31, 2024 and March 31, 2023, respectively, gross profit generated from bitcoin was only 4% and 3%, respectively, of the total gross profit for both the three months ended March 31, 2024 and 2023.

The increase in the three and six months ended June 30, 2024 was driven by an increase in the average market price of bitcoin, partially offset by a decrease in the quantity of bitcoin sold to customers, compared to the three and six months ended June 30, 2023.

While bitcoin contributed 42% and 44% of the total revenue for the three and six months ended June 30, 2024, respectively, gross profit generated from bitcoin was only 3% of the total gross profit for both the three and six months ended June 30, 2024, compared to 2% and 3% of total gross profit in the three and six months ended June 30, 2023, respectively.

Cost of Revenue (in thousands, except for percentages)

Three Months Ended

2024 2023 $ Change % Change

June 30, Six Months Ended

2024 2023 $ Change % Change 2024 2023 $ Change % Change

Transaction-based costs $ 1,000,055 $ 950,523 $ 49,532 5 % $ 1,873,220 $ 1,771,310 $ 101,910 6 %

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Hardware costs 68,309 74,085 (5,776) NM (i)

119,094 132,870 (13,776) NM (i)

Bitcoin costs 2,544,329 2,346,633 197,696 8 % 5,195,339 4,460,008 735,331 16 %

Amortization of acquired technology assets 17,589 18,392 (803) NM (i)

35,616 36,900 (1,284) NM (i)

Total cost of revenue $ 3,922,083 $ 3,668,856 $ 253,227 7 % $ 7,784,738 $ 6,944,403 $ 840,335 12 %

(i) Not meaningful ("NM")

Total cost of revenue for the three months ended March 31, 2024 increased by $587.1 million, or 18%, compared to the three months ended March 31, 2023.

Bitcoin costs of revenue, which increased by $537.6 million in the three months ended March 31, 2024, compared to the three months ended March 31, 2023, was the primary driver of the increase in total cost of revenue, with the remaining increase related to an increase in Square GPV.

Excluding bitcoin costs of revenue, total cost of revenue increased by approximately $49.5 million, or 4%, in the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

Transaction-based costs for the three months ended March 31, 2024 increased by $52.4 million, or 6%, compared to the three months ended March 31, 2023, in line with GPV growth of 6% in the same periods.

Subscription and services-based costs for the three months ended March 31, 2024 increased by $5.6 million, or 2%, compared to the three months ended March 31, 2023.

The increase in the three months ended March 31, 2024 was driven by growth in Cash App's financial service-related products, including Cash App Card and related processing costs and fees, which was more than offset by favorable terms on such processing costs due to a contract renewal executed during the third quarter of 2023.

Bitcoin costs for the three months ended March 31, 2024 increased by $537.6 million, or 25%, compared to the three months ended March 31, 2023.

Total cost of revenue for the three and six months ended June 30, 2024 increased by $253.2 million, or 7%, and $840.3 million, or 12%, compared to the three and six months ended June 30, 2023, respectively.

Bitcoin costs of revenue, which increased by $197.7 million and $735.3 million in the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, respectively, was the primary driver of the increase in total cost of revenue, with the remaining increase related to an increase in Square GPV.

Excluding bitcoin costs of revenue, total cost of revenue increased by approximately $55.5 million, or 4%, and $105.0 million, or 4%, in the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, respectively.

Transaction-based costs for the three and six months ended June 30, 2024 increased by $49.5 million, or 5%, and $101.9 million, or 6%, compared to the three and six months ended June 30, 2023, respectively, in line with GPV growth of 5% and 6% in the same periods.

Subscription and services-based costs for the three and six months ended June 30, 2024 increased by $12.6 million, or 5%, and $18.2 million, or 3%, compared to the three and six months ended June 30, 2023, respectively.

The increase in the three and six months ended June 30, 2024 was driven by growth in Cash App's financial service-related products, including Cash App Card and related processing costs and fees, which was partially offset by favorable terms on such processing costs due to a contract renewal executed during the third quarter of 2023.

Bitcoin costs for the three and six months ended June 30, 2024 increased by $197.7 million, or 8%, and $735.3 million, or 16%, compared to the three and six months ended June 30, 2023, respectively.

Bitcoin costs are comprised of the total amount we pay to purchase bitcoin, which fluctuates in line with bitcoin revenue.

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Three Months Ended

2024 2023 $ Change % Change

June 30, Six Months Ended

2024 2023 $ Change % Change 2024 2023 $ Change % Change

Product development $ 713,163 $ 694,672 $ 18,491 3 % $ 1,433,737 $ 1,321,609 $ 112,128 8 %

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% of total gross profit 9 % 10 % 8 % 9 %

Amortization of customer and other acquired intangible assets $ 43,282 $ 37,087 $ 6,195 17 %

Amortization of customer and other acquired intangible assets $ 40,813 $ 36,865 $ 3,948 NM (i)

$ 84,095 $ 73,952 $ 10,143 NM (i)

% of total net revenue 1 % 1 % 1 % 1 %

1 unchanged sentence

Total operating expenses $ 1,926,918 $ 1,998,208 $ (71,290) (4) % $ 3,771,648 $ 3,718,964 $ 52,684 1 %

Product development expenses for the three months ended March 31, 2024 increased by $93.6 million, or 15%, compared to the three months ended March 31, 2023, due primarily to the following:

• an increase of $43.9 million in personnel costs for the three months ended March 31, 2024 related to an increase in headcount among our engineering teams, as we continue to develop and diversify our products.

This increase in product development personnel costs also includes an increase in share-based compensation expense of $24.1 million for the three months ended March 31, 2024;

• an increase of $43.5 million in software and cloud computing infrastructure fees for the three months ended March 31, 2024, as a result of increased capacity needs and expansion of our cloud-based services.

Sales and marketing expenses for the three months ended March 31, 2024 decreased by $52.1 million, or 11%, compared to the three months ended March 31, 2023, primarily due to a release of chargeback losses of $27.3 million and a decrease in both Cash App marketing and other advertising efforts as we have continued to focus on expense discipline.

General and administrative expenses for the three months ended March 31, 2024 increased by $38.4 million, or 9%, compared to the three months ended March 31, 2023, primarily due to a charge of $32.2 million recognized during the first quarter of 2024 related to certain purchase considerations related to the TIDAL acquisition that had been previously withheld for post-acquisition activities.

Transaction, loan, and consumer receivable losses for the three months ended March 31, 2024 increased by $37.8 million, or 30%, compared to the three months ended March 31, 2023, primarily due to:

• an increase in loan losses of $53.5 million for the three months ended March 31, 2024, primarily due to increased loan volumes;

(i) Not meaningful ("NM")

Product development expenses for the three and six months ended June 30, 2024 increased by $18.5 million, or 3%, and $112.1 million, or 8%, compared to the three and six months ended June 30, 2023, respectively, primarily due to an increase of $44.7 million and $88.2 million in software and cloud computing infrastructure fees for the three and six months ended June 30, 2024, respectively, as a result of increased capacity needs and expansion of our cloud-based services.

Expenses for the three months ended June 30, 2024 were partially offset by a decrease in personnel costs of $15.5 million arising from cost efficiencies realized from the ongoing efforts to reduce headcount and expenditures.

Sales and marketing expenses for the three and six months ended June 30, 2024 decreased by $30.0 million, or 6%, and $82.2 million, or 8%, compared to the three and six months ended June 30, 2023, respectively, primarily due to a decrease in marketing and other advertising costs.

The decrease for the six months ended June 30, 2024 was also impacted by a release of estimated chargeback losses of $27.3 million in the first quarter of 2024.

General and administrative expenses for the three and six months ended June 30, 2024 decreased by $75.7 million, or 14%, and $37.3 million, or 4%, compared to the three and six months ended June 30, 2023, respectively.

The decrease was primarily due to headcount related reductions in personnel costs of $69.7 million and $69.1 million for the three and six months ended June 30, 2024, respectively, as well as a reduction of facilities expenses of $5.7 million and $12.7 million, respectively, for the same periods.

The decrease in expenses for the six months ended June 30, 2024 was partially offset by a charge of $32.2 million recognized during the first quarter of 2024 related to adjustments of certain TIDAL acquisition deferred purchase consideration.

Additionally, in the second quarter of 2024, we derecognized $15.1 million of certain indemnification assets related to the TIDAL acquisition that was deemed no longer recoverable.

Transaction, loan, and consumer receivable losses for the three and six months ended June 30, 2024 increased by $12.0 million, or 7%, and $49.9 million, or 16%, compared to the three and six months ended June 30, 2023, respectively, primarily due to:

• an increase in loan losses of $47.7 million and $101.2 million for the three and six months ended June 30, 2024, respectively, primarily due to increased loan volumes;

partially offset by

• a decrease in transaction losses of $15.7 million for the three months ended March 31, 2024, primarily due to a release of previously established risk loss provisions related to prior periods.

• a decrease in transaction losses of $35.6 million and $51.3 million for the three and six months ended June 30, 2024, respectively, primarily due to a release of previously established risk loss provisions related to prior periods.

Interest Expense (Income), Net, and Other Expense (Income), Net (in thousands, except for percentages)

Three Months Ended

2024 2023 $ Change % Change

June 30, Six Months Ended

2024 2023 $ Change % Change 2024 2023 $ Change % Change

Interest income, net $ (1,871) $ (3,944) $ 2,073 (53) % $ (20,616) $ (7,105) $ (13,511) 190 %

Other income, net $ (237,824) $ (77,717) $ (160,107) 206 %

Interest income, net, for the three months ended March 31, 2024 increased by $15.6 million, compared to the three months ended March 31, 2023, driven by an increase in interest income received as a result of both higher interest rates and investment balances.

Other income, net, of $237.8 million for the three months ended March 31, 2024 was primarily driven by a gain of $233.4 million from the remeasurement of our bitcoin investment.

Other expense (income), net $ 59,532 $ (14,635) $ 74,167 NM (i)

$ (178,292) $ (92,352) $ (85,940) 93 %

(i) Not meaningful ("NM")

Interest income, net, for the three months ended June 30, 2024 decreased by $2.1 million compared to the three months ended June 30, 2023, primarily due to an increase in interest expense related to our 2032 Senior Notes issued in the second quarter of 2024, which more than offset an increase in interest income received as a result of higher interest rates and investment balances.

Interest income, net, for the six months ended June 30, 2024 increased by $13.5 million compared to the six months ended June 30, 2023, driven by an increase in interest income received as discussed above, partially offset by interest expense related to our 2032 Senior Notes.

Refer to Note 12, Indebtedness within Notes to the Condensed Consolidated Financial Statements for further details.

Other expense, net, of $59.5 million and other income, net, of $178.3 million for the three and six months ended June 30, 2024, respectively, was primarily driven by a loss of $70.1 million and a gain of $163.3 million from the remeasurement of our bitcoin investment in the respective periods.

Refer to Note 11, Bitcoin within Notes to the Condensed Consolidated Financial Statements for further details.

Other income, net, of $77.7 million for the three months ended March 31, 2023 was primarily due to a gain of $96.1 million from the remeasurement of our bitcoin investment, partially offset by unrealized losses on certain marketable and non-marketable investments.

Other income, net, of $14.6 million and $92.4 million for the three and six months ended June 30, 2023, respectively, was primarily due to a gain of $16.0 million and $112.1 million, respectively, from the remeasurement of our bitcoin investment in the respective periods, partially offset by unrealized losses on certain marketable and non-marketable investments.

Segment Results

Square Results

The following table provides a summary of the revenue and gross profit for our Square segment for the three months ended March 31, 2024 and March 31, 2023 (in thousands, except for percentages):

The following table provides a summary of the revenue and gross profit for our Square segment for the three and six months ended June 30, 2024 and June 30, 2023 (in thousands, except for percentages):

Three Months Ended

2024 2023 $ Change % Change

June 30, Six Months Ended

2024 2023 $ Change % Change 2024 2023 $ Change % Change

Segment net revenue $ 1,979,490 $ 1,811,713 $ 167,777 9 % $ 3,709,528 $ 3,367,090 $ 342,438 10 %

1 unchanged sentence

Segment gross profit $ 922,584 $ 804,033 $ 118,551 15 % $ 1,742,857 $ 1,495,601 $ 247,256 17 %

Revenue for the Square segment for the three months ended March 31, 2024 increased by $174.7 million, or 11%, compared to the three months ended March 31, 2023.

Revenue for the Square segment for the three and six months ended June 30, 2024 increased by $167.8 million, or 9%, and $342.4 million, or 10%, compared to the three and six months ended June 30, 2023, respectively.

The increase was primarily due to growth in Square GPV as well as growth in Square Banking products, which primarily include Square Loans, Instant Transfer, and Square Debit Card.

Cost of Revenue

Cost of revenue for the Square segment for the three months ended March 31, 2024 increased by $46.0 million, or 5%, compared to the three months ended March 31, 2023.

The increase was primarily due to an increase in Square GPV and an increase in Square Banking services.

Cost of revenue for the Square segment for the three and six months ended June 30, 2024 increased by $49.2 million, or 5%, and $95.2 million, or 5%, compared to the three and six months ended June 30, 2023, respectively.

The increase was primarily due to an increase in Square GPV.

Cash App Results

The following table provides a summary of the revenue and gross profit for our Cash App segment for the three months ended March 31, 2024 and March 31, 2023 (in thousands, except for percentages):

The following table provides a summary of the revenue and gross profit for our Cash App segment for the three and six months ended June 30, 2024 and June 30, 2023 (in thousands, except for percentages):

Three Months Ended

2024 2023 $ Change % Change

June 30, Six Months Ended

2024 2023 $ Change % Change 2024 2023 $ Change % Change

Segment net revenue $ 4,128,827 $ 3,673,165 $ 455,662 12 % $ 8,301,730 $ 7,057,327 $ 1,244,403 18 %

1 unchanged sentence

Segment gross profit $ 1,298,944 $ 1,052,285 $ 246,659 23 % $ 2,557,470 $ 2,062,238 $ 495,232 24 %

Revenue for the Cash App segment for the three months ended March 31, 2024 increased by $788.7 million, or 23%, compared to the three months ended March 31, 2023.

Revenue for the Cash App segment for the three and six months ended June 30, 2024 increased by $455.7 million, or 12%, and $1.2 billion, or 18%, compared to the three and six months ended June 30, 2023, respectively.

The increase was due to the Cash App items referenced within the Company's overall revenue discussion.

While bitcoin revenue contributed 65% and 64% of Cash App revenue for three months ended March 31, 2024 and 2023, respectively, gross profit generated from bitcoin was only 6% and 5% of Cash App gross profit for the three months ended March 31, 2024 and 2023, respectively.

Excluding $2.7 billion in bitcoin revenue for the three months ended March 31, 2024, Cash App revenue increased by $221.4 million, or 18%, compared to the three months ended March 31, 2023.

While bitcoin revenue contributed 63% and 64% of Cash App revenue for three and six months ended June 30, 2024, respectively, gross profit generated from bitcoin was only 5% and 6% of Cash App gross profit for the three and six months ended June 30, 2024, respectively.

Excluding $2.6 billion and $5.3 billion in bitcoin revenue for the three and six months ended June 30, 2024, respectively, Cash App revenue increased by $234.8 million, or 18%, and $456.2 million, or 18%, compared to the three and six months ended June 30, 2023, respectively.

Cost of Revenue

Cost of revenue for the Cash App segment for the three months ended March 31, 2024 increased by $540.2 million, or 23%, compared to the three months ended March 31, 2023.

Cost of revenue for the Cash App segment for the three and six months ended June 30, 2024 increased by $209.0 million, or 8%, and $749.2 million, or 15%, compared to the three and six months ended June 30, 2023, respectively.

The increase was due to the items referenced within the Company's overall cost of revenue discussion.

Excluding $2.7 billion in bitcoin cost of revenue for the three months ended March 31, 2024, Cash App cost of revenue increased by approximately $2.5 million, or 1%, compared to the three months ended March 31, 2023.

Excluding $2.5 billion and $5.2 billion in bitcoin cost of revenue for the three and six months ended June 30, 2024, respectively, Cash App cost of revenue increased by approximately $11.3 million, or 4%, and $13.8 million, or 3%, compared to the three and six months ended June 30, 2023, respectively.

Key Operating Metrics and Non-GAAP Financial Measures

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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Gross Payment Volume (GPV) (in millions)

23 unchanged sentences

gain or loss on revaluation of equity investments;

gain or loss from the remeasurement of our bitcoin investment, and bitcoin impairment losses on our bitcoin investment (prior to the adoption of ASU 2023-08), as applicable.

and gain or loss from the remeasurement of our bitcoin investment.

• To aid in comparability of our results across periods, we also exclude certain acquisition-related and integration costs associated with business combinations, various restructuring and other costs, and goodwill impairment charges, each of which are not normal operating expenses.

10 unchanged sentences

In addition to the limitations above, Adjusted EBITDA as a non-GAAP financial measure does not reflect the effect of depreciation and amortization 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.

In view of the limitations associated with Adjusted EBITDA, we also present Adjusted Operating Income (Loss), which is a non-GAAP financial measure that excludes certain expenses that we believe are not reflective of our core operating performance, including amortization of intangible assets, bitcoin investment impairment losses (prior to the adoption of ASU 2023-08), acquisition-related accelerated share-based compensation expenses, and acquisition-related, integration, and other costs, and goodwill impairment charges.

In view of the limitations associated with Adjusted EBITDA, we also present Adjusted Operating Income (Loss), which is a non-GAAP financial measure that excludes certain expenses that we believe are not reflective of our core operating performance, including amortization of intangible assets, acquisition-related accelerated share-based compensation expenses, and acquisition-related, integration, and other costs, and goodwill impairment charges.

Adjusted Operating Income (Loss) does however include the effect of share-based compensation expense, which is a significant recurring expense in our business and an important part of our compensation strategy, as well as depreciation expense.

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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Operating income (loss) $ 306,562 $ (132,107) $ 556,305 $ (138,279)

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Three Months Ended

Net income attributable to common stockholders $ 472,005 $ 98,316

June 30, Six Months Ended

2024 2023 2024 2023

Net income (loss) attributable to common stockholders $ 195,268 $ (102,042) $ 667,273 $ (3,726)

Net loss attributable to noncontrolling interests (5,396) (3,336) (6,581) (5,824)

Net income 470,820 95,828

Net income (loss) 189,872 (105,378) 660,692 (9,550)

Share-based compensation expense 320,368 319,248 624,899 598,839

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Interest income, net (1,871) (3,944) (20,616) (7,105)

Other income, net (237,824) (77,717)

Other expense (income), net 59,532 (14,635) (178,292) (92,352)

Provision (benefit) for income taxes 59,029 (8,150) 94,521 (29,272)

Loss (gain) on disposal of property and equipment (71) 191

Loss on disposal of property and equipment 1,471 343 1,400 534

Acquired deferred revenue and cost adjustment 18 24 37 57

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Three Months Ended

Net income attributable to common stockholders $ 472,005 $ 98,316

June 30, Six Months Ended

2024 2023 2024 2023

Net income (loss) attributable to common stockholders $ 195,268 $ (102,042) $ 667,273 $ (3,726)

Net loss attributable to noncontrolling interests (5,396) (3,336) (6,581) (5,824)

Net income 470,820 95,828

Net income (loss) 189,872 (105,378) 660,692 (9,550)

Share-based compensation expense 320,368 319,248 624,899 598,839

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Amortization of debt discount and issuance costs 3,432 2,885 6,503 5,834

Loss on revaluation of equity investments

Loss (gain) on revaluation of equity investments

(3,594) 1,370 (2,483) 16,255

Bitcoin remeasurement 70,116 (16,014) (163,288) (112,102)

Loss (gain) on disposal of property and equipment (71) 191

Loss on disposal of property and equipment 1,471 343 1,400 534

Acquired deferred revenue and cost adjustment 18 24 37 57

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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Provision (benefit) for income taxes, as reported $ 59,029 $ (8,150) $ 94,521 $ (29,272)

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Liquidity Sources

As of March 31, 2024, we had approximately $8.0 billion in av ailable liquidity, with $7.2 billion in cash, cash equivalents, restricted cash, and investments in marketable debt securities, as well as an undrawn amount of $775.0 million available under our revolving credit facility subject to compliance with our covenants.

Additionally, we had $0.6 billion available to be withdrawn under our warehouse funding facilities.

As of June 30, 2024, we had approximately $10.3 billion in available liquidity, with $9.5 billion in cash, cash equivalents, restricted cash, and investments in marketable debt securities, which includes net proceeds of approximately $2.0 billion related to the issuance of our 2032 Senior Notes in the second quarter of 2024, as well as an undrawn amount of $775.0 million available under our revolving credit facility subject to compliance with our covenants.

Additionally, we had $507.9 million available to be withdrawn under our warehouse funding facilities.

Refer to Note 12, Indebtedness within Notes to the Condensed Consolidated Financial Statements for more details.

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, including the remaining $591.1 million related to our share repurchase program.

As of March 31, 2024, we were in compliance with all financial covenants associated with our revolving credit facility and senior notes.

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, including the additional $3 billion related to the share repurchase program.

As of June 30, 2024, we were in compliance with all financial covenants associated with our revolving credit facility and senior notes.

None of our warehouse funding facilities contain financial covenants.

The following table summarizes our available liquidity (in thousands):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Cash and cash equivalents $ 7,799,093 $ 4,996,465

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Total liquidity $ 10,262,909 $ 7,716,685

(i) As of March 31, 2024, the Company has invested $292.2 million of restricted cash into a money market fund.

(i) As of June 30, 2024, the Company has invested $149.2 million of restricted cash into a money market fund.

See Note 5, Fair Value Measurements.

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Customer funds cash and cash equivalents are excluded from our liquidity as these are funds we hold on behalf of customers that are separate from our corporate funds and are not available for corporate purposes.

Investments in marketable debt securities were held primarily in cash deposits, money market funds, reverse repurchase agreements, U.S.

Investments in marketable debt securities were held primarily in certificates of deposits, money market funds, reverse repurchase agreements, U.S.

government and agency securities, commercial paper, and corporate bonds.

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Our investments in marketable debt securities are classified as available-for-sale.

As of March 31, 2024, we held approximately 8,038 bitcoins for investment purposes ("bitcoin investment") with a fair value of $573.3 million based on observable market prices, which is included within “Other non-current assets” on the condensed consolidated balance sheets.

As of June 30, 2024, we held approximately 8,211 bitcoins for investment purposes ("bitcoin investment") with a fair value of $514.6 million based on observable market prices, which is included within “Other non-current assets” on the condensed consolidated balance sheets.

We believe cryptocurrency is an instrument of economic empowerment that aligns with our corporate purpose.

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2023-08, Accounting for and Disclosure of Crypto Assets , effective January 1, 2023, our bitcoin investment is remeasured at fair value at each reporting date with changes recognized in net income through “Other expense (income), net” in the condensed consolidated statements of operations.

We did not purchase or sell any of our bitcoin investment during the three months ended March 31, 2024.

We recognized a gain of $233.4 million from the remeasurement of our bitcoin investment during the first quarter of 2024.

We purchased approximately 173 bitcoins with a cost basis of $11.4 million during the three and six months ended June 30, 2024 for investment purposes.

We did not sell any of our bitcoin investment during the three and six months ended June 30, 2024.

We recognized a loss of $70.1 million and a gain of $163.3 million from the remeasurement of our bitcoin investment during the three and six months ended June 30, 2024.

Our principal commitments consist of convertible notes, senior notes, revolving credit facility, warehouse funding facilities, operating leases, capital leases, and purchase commitments.

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Senior Notes and Convertible Notes

As of March 31, 2024, we held over $4.2 billion in aggregate principal amount of debt, comprised of $1.0 billion in aggregate amount of convertible senior notes that mature on March 1, 2025 ("2025 Convertible Notes"), $575.0 million in aggregate amount of convertible senior notes that mature on May 1, 2026 ("2026 Convertible Notes"), and $575.0 million in aggregate amount of convertible senior notes that mature on November 1, 2027 ("2027 Convertible Notes," collectively referred to as the “Convertible Notes”).

Additionally, on May 20, 2021, we issued $1.0 billion in aggregate principal amount of outstanding senior unsecured notes that mature on June 1, 2026 ("2026 Senior Notes") and $1.0 billion in aggregate principal amount of outstanding senior unsecured notes that mature on June 1, 2031 ("2031 Senior Notes" and, together with the 2026 Senior Notes, the “Senior Notes” and, together with the Convertible Notes, the “Notes”).

As of June 30, 2024, we held over $6.2 billion in aggregate principal amount of debt, comprised of $1.0 billion in aggregate amount of convertible senior notes that mature on March 1, 2025 ("2025 Convertible Notes"), $575.0 million in aggregate amount of convertible senior notes that mature on May 1, 2026 ("2026 Convertible Notes"), and $575.0 million in aggregate amount of convertible senior notes that mature on November 1, 2027 ("2027 Convertible Notes," collectively referred to as the “Convertible Notes”), as well as an outstanding $1.0 billion in aggregate principal amount of senior unsecured notes that mature on June 1, 2026 ("2026 Senior Notes"), $1.0 billion in aggregate principal amount of senior unsecured notes that mature on June 1, 2031 ("2031 Senior Notes"), and $2.0 billion in aggregate principal amount of senior unsecured notes that mature on May 15, 2032 ("2032 Senior Notes" and, together with the 2026 Senior Notes and 2031 Senior Notes, the “Senior Notes” and, together with the Convertible Notes, the “Notes”).

Refer to Note 12, Indebtedness within Notes to the Condensed Consolidated Financial Statements for further details.

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Warehouse Funding Facilities

We have warehouse funding facilities ("Warehouse Facilities") with an aggregate amount of $1.5 billion on a revolving basis, of which $0.9 billion was drawn as of March 31, 2024.

We have warehouse funding facilities ("Warehouse Facilities") with an aggregate amount of $1.5 billion on a revolving basis, of which $945.8 million was drawn as of June 30, 2024.

The Warehouse Facilities have been arranged utilizing wholly-owned and consolidated entities (collectively, the "Warehouse Special Purpose Entities (SPEs)") formed for the sole purpose of financing the origination of consumer receivables to partly fund our BNPL platform.

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When we were last rated, in the second half of 2023, we received a non-investment grade rating by S&P Global Ratings (BB+), Fitch Ratings, Inc.

(BB+), and Moody's Corporation (Ba2).

(BB+), and Moody's Corporation (Ba2), and the agencies re-affirmed our rating in the second quarter of 2024.

We expect that these credit rating agencies will continue to monitor our performance, including our capital structure and results of operations.

Our liquidity, access to capital, and borrowing costs could be adversely impacted by declines in our credit rating.

Short-term restricted cash of $660.2 million as of March 31, 2024 primarily includes cash held by the Warehouse SPEs used in the Warehouse Facilities funding arrangements that will be used to pay the borrowings under the Warehouse Facilities or will be distributed to us.

Short-term restricted cash of $597.9 million as of June 30, 2024 primarily includes cash held by the Warehouse SPEs used in the Warehouse Facilities funding arrangements that will be used to pay the borrowings under the Warehouse Facilities or will be distributed to us.

It also includes pledged cash deposits in accounts at the financial institutions that process our sellers' payment transactions and collateral pursuant to various agreements with banks relating to our products.

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We have recorded these amounts as current assets on our condensed consolidated balance sheet 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.

Long-term restricted cash of $71.6 million as of March 31, 2024 is primarily related to cash held as collateral as required by the FDIC for Square Financial Services.

Long-term restricted cash of $71.2 million as of June 30, 2024 is primarily related to cash held as collateral as required by the Federal Deposit Insurance Corporation ("FDIC") for Square Financial Services.

We have recorded these amounts as non-current assets on our condensed consolidated balance sheet as the requirement by the FDIC specifies a time frame of 12 months or longer during which the cash must remain restricted.

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As detailed in Note 11, Bitcoin within Notes to the Condensed Consolidated Financial Statements, we recorded a safeguarding obligation liability and a corresponding safeguarding asset related to the bitcoin held for other parties.

As of March 31, 2024, the safeguarding obligation liability related to bitcoin held for other parties was $1.7 billion.

As of June 30, 2024, the safeguarding obligation liability related to bitcoin held for other parties was $1.4 billion.

We have taken steps to mitigate the potential risk of loss for the bitcoin held for other parties, including holding insurance coverage specifically for certain bitcoin incidents and using secure cold storage to store materially all of the bitcoin held for other partie s.

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The following table summarizes our cash flow activities (in thousands):

Three Months Ended

Six Months Ended

Net cash provided by operating activities $ 1,008,787 $ 407,719

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Cash Flows from Operating Activities

For the three months ended March 31, 2024, cash provided by operating activities was $489.4 million, comprised of net income of $470.8 million, adjusted for non-cash expenses of $590.2 million, consisting primarily of share-based compensation;

For the six months ended June 30, 2024, cash provided by operating activities was $1.0 billion, comprised of net income of $660.7 million, adjusted for non-cash expenses of $1.2 billion, consisting primarily of share-based compensation;

transaction, loan, and consumer receivable losses;

depreciation and amortization;

non-cash lease expense;

and losses on revaluation of equity investments, all of which contributed positively to operating activities.

and non-cash lease expenses, all of which contributed positively to operating activities.

These were partially offset by the amortization of discounts and other non-cash adjustments on consumer receivables of $537.8 million;

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net outflows from loan products of $326.1 million.

and the change in deferred income taxes of $8.0 million.

Changes in other assets and liabilities, including settlements receivable and customers payable, of $158.9 million contributed positively and was primarily due to the timing of period end.

For the three months ended March 31, 2023, cash provided by operating activities was $294.4 million, comprised of net income of $95.8 million, adjusted for non-cash expenses of $539.9 million, consisting primarily of share-based compensation;

For the six months ended June 30, 2023, cash provided by operating activities was $407.7 million, comprised of net loss of $9.6 million, adjusted for non-cash expenses of $1.2 billion, consisting primarily of share-based compensation;

transaction, loan, and consumer receivable losses;

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Cash Flows from Investing Activities

For the three months ended March 31, 2024, cash provided by investing activities was $1.0 billion, primarily due to a net inflow related to consumer receivables of $729.5 million and net proceeds from investments of marketable securities of $347.8 million.

For the six months ended June 30, 2024, cash provided by investing activities was $867.4 million, primarily due to a net inflow related to consumer receivables of $860.7 million and net proceeds from investments of marketable securities of $96.1 million.

These were partially offset by the purchases of property and equipment and other investments of $70.4 million and $19.1 million, respectively.

For the three months ended March 31, 2023, cash provided by investing activities was $623.9 million, primarily due to a net inflow related to consumer receivables of $428.3 million and net proceeds from investments of marketable securities of $232.7 million.

For the six months ended June 30, 2023, cash provided by investing activities was $578.9 million, primarily due to a net inflow related to consumer receivables of $387.4 million and net proceeds from investments of marketable securities of $257.6 million.

These were partially offset by the purchases of property and equipment and other investments of $61.8 million and $4.4 million, respectively.

Cash Flows from Financing Activities

For the three months ended March 31, 2024, cash provided by financing activities was $32.4 million primarily as a result of a change in customer funds of $875.9 million, proceeds from issuances of common stock upon the exercise of options and purchases under our employee share purchase plan of $19.9 million, and a net increase in interest-bearing deposits of $18.7 million.

For the six months ended June 30, 2024, cash provided by financing activities was $1.2 billion primarily due to approximately $2.0 billion of net proceeds related to the issuance of the 2032 Senior Notes in the second quarter of 2024, a change in customer funds of $380.3 million, and proceeds from issuances of common stock upon the exercise of options and purchases under our employee share purchase plan of $86.2 million.

These were partially offset by net repayments under Warehouse Facilities borrowings of $648.4 million as well as repurchases of common stock of $641.6 million.

For the three months ended March 31, 2023, cash used in financing activities was $9.1 million primarily as a result of net repayments under Warehouse Facilities borrowings of $644.6 million.

For the six months ended June 30, 2023, cash used in financing activities was $721.0 million primarily as a result of net repayments under Warehouse Facilities borrowings of $505.0 million.

The majority of this was offset by a change in customer funds of $172.3 million and a net increase in interest-bearing deposits of $28.6 million.

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Because these accounting estimates require significant judgment, our actual results may differ materially from our estimates.

There were no significant changes in our critical accounting estimates during the quarter ended March 31, 2024 compared to those previously disclosed in “Critical Accounting Policies and Estimates” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2023.

There were no significant changes in our critical accounting estimates during the quarter ended June 30, 2024 compared to those previously disclosed in “Critical Accounting Policies and Estimates” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Recent Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis