ý
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
|
80-0429876
|
(State or other jurisdiction of
incorporation or organization)
|
|
(IRS Employer
Identification No.)
|
Page No.
|
|
PART I—Financial Information
|
|
Item 1. Financial Statements
|
|
Condensed Consolidated Balance Sheets (unaudited)
|
|
Condensed Consolidated Statements of Operations (unaudited)
|
|
Condensed Consolidated Statements of Comprehensive Loss (unaudited)
|
|
Condensed Consolidated Statements of Cash Flows (unaudited)
|
|
Notes to the Condensed Consolidated Financial Statements (unaudited)
|
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
Item 3. Quantitative and Qualitative Disclosures About Market Risk
|
|
Item 4. Controls and Procedures
|
|
PART II—Other Information
|
|
Item 1. Legal Proceedings
|
|
Item 1A. Risk Factors
|
|
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
|
Item 3. Defaults Upon Senior Securities
|
|
Item 4. Mine Safety Disclosures
|
|
Item 5. Other Information
|
|
Item 6. Exhibits
|
|
Signatures
|
|
June 30,
2017 |
|
December 31,
2016 |
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
716,989
|
|
|
$
|
452,030
|
|
Short-term investments
|
203,287
|
|
|
59,901
|
|
||
Restricted cash
|
22,147
|
|
|
22,131
|
|
||
Settlements receivable
|
309,021
|
|
|
321,102
|
|
||
Customer funds
|
73,596
|
|
|
43,574
|
|
||
Loans held for sale
|
50,079
|
|
|
42,144
|
|
||
Other current assets
|
62,798
|
|
|
60,543
|
|
||
Total current assets
|
1,437,917
|
|
|
1,001,425
|
|
||
Property and equipment, net
|
87,442
|
|
|
88,328
|
|
||
Goodwill
|
57,961
|
|
|
57,173
|
|
||
Acquired intangible assets, net
|
16,452
|
|
|
19,292
|
|
||
Long-term investments
|
124,099
|
|
|
27,366
|
|
||
Restricted cash
|
14,565
|
|
|
14,584
|
|
||
Other assets
|
3,278
|
|
|
3,194
|
|
||
Total assets
|
$
|
1,741,714
|
|
|
$
|
1,211,362
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
11,375
|
|
|
$
|
12,602
|
|
Customers payable
|
465,926
|
|
|
431,632
|
|
||
Settlements payable
|
41,834
|
|
|
51,151
|
|
||
Accrued transaction losses
|
22,455
|
|
|
20,064
|
|
||
Accrued expenses
|
56,699
|
|
|
39,543
|
|
||
Other current liabilities
|
26,639
|
|
|
22,472
|
|
||
Total current liabilities
|
624,928
|
|
|
577,464
|
|
||
Long-term debt (Note 10)
|
349,960
|
|
|
—
|
|
||
Other liabilities
|
63,082
|
|
|
57,745
|
|
||
Total liabilities
|
1,037,970
|
|
|
635,209
|
|
||
Commitments and contingencies (Note 15)
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock, $0.0000001 par value: 100,000,000 shares authorized at June 30, 2017 and December 31, 2016. None issued and outstanding at June 30, 2017 and December 31, 2016.
|
—
|
|
|
—
|
|
||
Class A common stock, $0.0000001 par value: 1,000,000,000 shares authorized at June 30, 2017 and December 31, 2016; 250,974,736 and 198,746,620 issued and outstanding at June 30, 2017 and December 31, 2016, respectively.
|
—
|
|
|
—
|
|
||
Class B common stock, $0.0000001 par value: 500,000,000 shares authorized at June 30, 2017 and December 31, 2016; 131,645,329 and 165,800,756 issued and outstanding at June 30, 2017 and December 31, 2016, respectively.
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
1,515,237
|
|
|
1,357,381
|
|
||
Accumulated deficit
|
(810,974
|
)
|
|
(779,239
|
)
|
||
Accumulated other comprehensive loss
|
(519
|
)
|
|
(1,989
|
)
|
||
Total stockholders’ equity
|
703,744
|
|
|
576,153
|
|
||
Total liabilities and stockholders’ equity
|
$
|
1,741,714
|
|
|
$
|
1,211,362
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Revenue:
|
|
|
|
|
|
|
|
||||||||
Transaction-based revenue
|
$
|
482,065
|
|
|
$
|
364,864
|
|
|
$
|
885,543
|
|
|
$
|
665,317
|
|
Starbucks transaction-based revenue
|
—
|
|
|
32,867
|
|
|
—
|
|
|
71,705
|
|
||||
Subscription and services-based revenue
|
59,151
|
|
|
29,717
|
|
|
108,211
|
|
|
53,513
|
|
||||
Hardware revenue
|
10,289
|
|
|
11,085
|
|
|
19,305
|
|
|
27,267
|
|
||||
Total net revenue
|
551,505
|
|
|
438,533
|
|
|
1,013,059
|
|
|
817,802
|
|
||||
Cost of revenue:
|
|
|
|
|
|
|
|
||||||||
Transaction-based costs
|
311,092
|
|
|
234,857
|
|
|
568,870
|
|
|
429,133
|
|
||||
Starbucks transaction-based costs
|
—
|
|
|
28,672
|
|
|
—
|
|
|
65,282
|
|
||||
Subscription and services-based costs
|
17,116
|
|
|
10,144
|
|
|
32,992
|
|
|
19,177
|
|
||||
Hardware costs
|
14,173
|
|
|
14,015
|
|
|
26,835
|
|
|
40,755
|
|
||||
Amortization of acquired technology
|
1,695
|
|
|
1,886
|
|
|
3,502
|
|
|
4,256
|
|
||||
Total cost of revenue
|
344,076
|
|
|
289,574
|
|
|
632,199
|
|
|
558,603
|
|
||||
Gross profit
|
207,429
|
|
|
148,959
|
|
|
380,860
|
|
|
259,199
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Product development
|
78,126
|
|
|
68,638
|
|
|
146,708
|
|
|
133,230
|
|
||||
Sales and marketing
|
59,916
|
|
|
39,220
|
|
|
109,816
|
|
|
77,716
|
|
||||
General and administrative
|
62,988
|
|
|
50,784
|
|
|
119,923
|
|
|
146,891
|
|
||||
Transaction, loan and advance losses
|
18,401
|
|
|
17,455
|
|
|
30,292
|
|
|
25,316
|
|
||||
Amortization of acquired customer assets
|
222
|
|
|
222
|
|
|
427
|
|
|
539
|
|
||||
Total operating expenses
|
219,653
|
|
|
176,319
|
|
|
407,166
|
|
|
383,692
|
|
||||
Operating loss
|
(12,224
|
)
|
|
(27,360
|
)
|
|
(26,306
|
)
|
|
(124,493
|
)
|
||||
Interest and other (income) expense, net
|
3,266
|
|
|
(327
|
)
|
|
3,765
|
|
|
(1,044
|
)
|
||||
Loss before income tax
|
(15,490
|
)
|
|
(27,033
|
)
|
|
(30,071
|
)
|
|
(123,449
|
)
|
||||
Provision for income taxes
|
472
|
|
|
312
|
|
|
981
|
|
|
651
|
|
||||
Net loss
|
$
|
(15,962
|
)
|
|
$
|
(27,345
|
)
|
|
$
|
(31,052
|
)
|
|
$
|
(124,100
|
)
|
Net loss per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.04
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.37
|
)
|
Diluted
|
$
|
(0.04
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.37
|
)
|
Weighted-average shares used to compute net loss per share
|
|
|
|
|
|
|
|
||||||||
Basic
|
376,357
|
|
|
334,488
|
|
|
371,573
|
|
|
332,906
|
|
||||
Diluted
|
376,357
|
|
|
334,488
|
|
|
371,573
|
|
|
332,906
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net loss
|
$
|
(15,962
|
)
|
|
$
|
(27,345
|
)
|
|
$
|
(31,052
|
)
|
|
$
|
(124,100
|
)
|
Net foreign currency translation adjustments
|
430
|
|
|
85
|
|
|
1,187
|
|
|
595
|
|
||||
Net unrealized gain (loss) on revaluation of intercompany loans
|
432
|
|
|
329
|
|
|
$
|
403
|
|
|
$
|
582
|
|
||
Net unrealized gain (loss) on marketable securities
|
(139
|
)
|
|
4
|
|
|
(120
|
)
|
|
80
|
|
||||
Total comprehensive loss
|
$
|
(15,239
|
)
|
|
$
|
(26,927
|
)
|
|
$
|
(29,582
|
)
|
|
$
|
(122,843
|
)
|
|
Six Months Ended June 30,
|
||||||
|
2017
|
|
2016
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(31,052
|
)
|
|
$
|
(124,100
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
||||
Depreciation and amortization
|
18,562
|
|
|
18,136
|
|
||
Non-cash interest and other expense
|
5,680
|
|
|
131
|
|
||
Share-based compensation
|
71,263
|
|
|
68,120
|
|
||
Transaction, loan and advance losses
|
30,292
|
|
|
25,316
|
|
||
Deferred provision for income taxes
|
99
|
|
|
63
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Settlements receivable
|
8,934
|
|
|
(64,186
|
)
|
||
Customer funds
|
(30,022
|
)
|
|
3,233
|
|
||
Purchase of loans held for sale
|
(570,819
|
)
|
|
(212,727
|
)
|
||
Sales and principal payments of loans held for sale
|
560,209
|
|
|
183,748
|
|
||
Other current assets
|
(2,201
|
)
|
|
7,985
|
|
||
Other assets
|
(110
|
)
|
|
(377
|
)
|
||
Accounts payable
|
143
|
|
|
2,538
|
|
||
Customers payable
|
34,149
|
|
|
84,826
|
|
||
Settlements payable
|
(9,317
|
)
|
|
(10,579
|
)
|
||
Charge-offs to accrued transaction losses
|
(22,243
|
)
|
|
(24,475
|
)
|
||
Accrued expenses
|
17,000
|
|
|
(13,784
|
)
|
||
Other current liabilities
|
4,327
|
|
|
24,025
|
|
||
Other noncurrent liabilities
|
5,696
|
|
|
(431
|
)
|
||
Net cash provided by (used in) operating activities
|
90,590
|
|
|
(32,538
|
)
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchase of marketable securities
|
(314,055
|
)
|
|
(102,245
|
)
|
||
Proceeds from maturities of marketable securities
|
52,064
|
|
|
16,768
|
|
||
Proceeds from sale of marketable securities
|
21,730
|
|
|
4,964
|
|
||
Purchase of property and equipment
|
(13,883
|
)
|
|
(15,840
|
)
|
||
Payment for acquisition of intangible assets
|
—
|
|
|
(400
|
)
|
||
Business acquisitions
|
(1,600
|
)
|
|
—
|
|
||
Net cash used in investing activities
|
(255,744
|
)
|
|
(96,753
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from issuance of convertible senior notes, net
|
428,250
|
|
|
—
|
|
||
Purchase of convertible senior note hedges
|
(92,136
|
)
|
|
—
|
|
||
Proceeds from issuance of warrants
|
57,244
|
|
|
—
|
|
||
Payment for termination of Starbucks warrant
|
(54,808
|
)
|
|
—
|
|
||
Principal payments on capital lease obligation
|
(634
|
)
|
|
—
|
|
||
Payments of offering costs related to initial public offering
|
—
|
|
|
(5,530
|
)
|
||
Proceeds from the exercise of stock options and purchases under the employee stock purchase plan, net
|
89,863
|
|
|
15,496
|
|
||
Net cash provided by financing activities
|
427,779
|
|
|
9,966
|
|
||
Effect of foreign exchange rate changes on cash and cash equivalents
|
2,331
|
|
|
2,672
|
|
||
Net increase (decrease) in cash, cash equivalents and restricted cash
|
264,956
|
|
|
(116,653
|
)
|
||
Cash, cash equivalents and restricted cash, beginning of period
|
488,745
|
|
|
489,552
|
|
||
Cash, cash equivalents and restricted cash, end of period
|
$
|
753,701
|
|
|
$
|
372,899
|
|
|
June 30, 2017
|
|
December 31, 2016
|
||||||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||
Cash and Cash Equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Money market funds
|
$
|
333,693
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
207,168
|
|
|
$
|
—
|
|
|
$
|
—
|
|
U.S. agency securities
|
—
|
|
|
7,498
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Commercial paper
|
—
|
|
|
15,740
|
|
|
—
|
|
|
—
|
|
|
7,496
|
|
|
—
|
|
||||||
U.S. government securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Corporate bonds
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Municipal securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,000
|
|
|
—
|
|
||||||
Short-term securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. agency securities
|
—
|
|
|
15,584
|
|
|
—
|
|
|
—
|
|
|
9,055
|
|
|
—
|
|
||||||
Corporate bonds
|
—
|
|
|
48,404
|
|
|
—
|
|
|
—
|
|
|
6,980
|
|
|
—
|
|
||||||
Commercial paper
|
—
|
|
|
54,285
|
|
|
—
|
|
|
—
|
|
|
17,298
|
|
|
—
|
|
||||||
Municipal securities
|
—
|
|
|
17,655
|
|
|
—
|
|
|
—
|
|
|
8,028
|
|
|
—
|
|
||||||
U.S. government securities
|
67,359
|
|
|
—
|
|
|
—
|
|
|
18,540
|
|
|
—
|
|
|
—
|
|
||||||
Long-term securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. agency securities
|
—
|
|
|
15,023
|
|
|
—
|
|
|
—
|
|
|
3,502
|
|
|
—
|
|
||||||
Corporate bonds
|
—
|
|
|
53,253
|
|
|
—
|
|
|
—
|
|
|
12,914
|
|
|
—
|
|
||||||
Municipal securities
|
—
|
|
|
18,961
|
|
|
—
|
|
|
—
|
|
|
2,492
|
|
|
—
|
|
||||||
U.S. government securities
|
36,862
|
|
|
—
|
|
|
—
|
|
|
8,458
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
$
|
437,914
|
|
|
$
|
246,403
|
|
|
$
|
—
|
|
|
$
|
234,166
|
|
|
$
|
68,765
|
|
|
$
|
—
|
|
|
June 30, 2017
|
||||||
|
Carrying Value
|
|
Fair Value (Level 2)
|
||||
Convertible senior notes
|
$
|
349,960
|
|
|
$
|
539,062
|
|
Total
|
$
|
349,960
|
|
|
$
|
539,062
|
|
|
June 30, 2017
|
|
December 31, 2016
|
||||||||||||
|
Carrying Value
|
|
Fair Value (Level 3)
|
|
Carrying Value
|
|
Fair Value (Level 3)
|
||||||||
Loans held for sale
|
$
|
50,079
|
|
|
$
|
52,266
|
|
|
$
|
42,144
|
|
|
$
|
42,633
|
|
Total
|
$
|
50,079
|
|
|
$
|
52,266
|
|
|
$
|
42,144
|
|
|
$
|
42,633
|
|
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
||||||||
Short-term securities:
|
|
|
|
|
|
|
|
||||||||
U.S. agency securities
|
$
|
15,593
|
|
|
$
|
1
|
|
|
$
|
(10
|
)
|
|
$
|
15,584
|
|
Corporate bonds
|
48,397
|
|
|
29
|
|
|
(22
|
)
|
|
48,404
|
|
||||
Commercial paper
|
54,285
|
|
|
—
|
|
|
—
|
|
|
54,285
|
|
||||
Municipal securities
|
17,668
|
|
|
8
|
|
|
(21
|
)
|
|
17,655
|
|
||||
U.S. government securities
|
67,388
|
|
|
2
|
|
|
(31
|
)
|
|
67,359
|
|
||||
Total
|
$
|
203,331
|
|
|
$
|
40
|
|
|
$
|
(84
|
)
|
|
$
|
203,287
|
|
|
|
|
|
|
|
|
|
||||||||
Long-term securities:
|
|
|
|
|
|
|
|
||||||||
U.S. agency securities
|
$
|
15,028
|
|
|
$
|
3
|
|
|
$
|
(8
|
)
|
|
$
|
15,023
|
|
Corporate bonds
|
53,282
|
|
|
20
|
|
|
(49
|
)
|
|
53,253
|
|
||||
Municipal securities
|
18,973
|
|
|
6
|
|
|
(18
|
)
|
|
18,961
|
|
||||
U.S. government securities
|
36,911
|
|
|
6
|
|
|
(55
|
)
|
|
36,862
|
|
||||
Total
|
$
|
124,194
|
|
|
$
|
35
|
|
|
$
|
(130
|
)
|
|
$
|
124,099
|
|
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
||||||||
Short-term securities:
|
|
|
|
|
|
|
|
||||||||
U.S. agency securities
|
$
|
9,048
|
|
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
9,055
|
|
Corporate bonds
|
17,318
|
|
|
—
|
|
|
(20
|
)
|
|
17,298
|
|
||||
Commercial paper
|
6,980
|
|
|
—
|
|
|
—
|
|
|
6,980
|
|
||||
Municipal securities
|
8,037
|
|
|
—
|
|
|
(9
|
)
|
|
8,028
|
|
||||
U.S. government securities
|
18,537
|
|
|
3
|
|
|
—
|
|
|
18,540
|
|
||||
Total
|
$
|
59,920
|
|
|
$
|
10
|
|
|
$
|
(29
|
)
|
|
$
|
59,901
|
|
|
|
|
|
|
|
|
|
||||||||
Long-term securities:
|
|
|
|
|
|
|
|
||||||||
U.S. agency securities
|
$
|
3,502
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,502
|
|
Corporate bonds
|
12,939
|
|
|
—
|
|
|
(25
|
)
|
|
12,914
|
|
||||
Municipal securities
|
2,505
|
|
|
—
|
|
|
(13
|
)
|
|
2,492
|
|
||||
U.S. government securities
|
8,478
|
|
|
—
|
|
|
(20
|
)
|
|
8,458
|
|
||||
Total
|
$
|
27,424
|
|
|
$
|
—
|
|
|
$
|
(58
|
)
|
|
$
|
27,366
|
|
|
Amortized Cost
|
|
Fair Value
|
||||
Due in one year or less
|
$
|
203,331
|
|
|
$
|
203,287
|
|
Due in one to five years
|
124,194
|
|
|
124,099
|
|
||
Total
|
$
|
327,525
|
|
|
$
|
327,386
|
|
|
June 30,
2017 |
|
December 31,
2016 |
||||
Leasehold improvements
|
$
|
74,138
|
|
|
$
|
73,366
|
|
Computer equipment
|
60,041
|
|
|
52,915
|
|
||
Capitalized software
|
28,475
|
|
|
24,642
|
|
||
Office furniture and equipment
|
12,509
|
|
|
10,737
|
|
||
Total
|
175,163
|
|
|
161,660
|
|
||
Less: Accumulated depreciation and amortization
|
(87,721
|
)
|
|
(73,332
|
)
|
||
Property and equipment, net
|
$
|
87,442
|
|
|
$
|
88,328
|
|
|
Balance at June 30, 2017
|
||||||||||
Cost
|
|
Accumulated Amortization
|
|
Net
|
|||||||
Patents
|
$
|
1,285
|
|
|
$
|
(506
|
)
|
|
$
|
779
|
|
Technology Assets
|
29,158
|
|
|
(18,287
|
)
|
|
10,871
|
|
|||
Customer Assets
|
8,886
|
|
|
(4,084
|
)
|
|
4,802
|
|
|||
Total
|
$
|
39,329
|
|
|
$
|
(22,877
|
)
|
|
$
|
16,452
|
|
|
Balance at December 31, 2016
|
||||||||||
Cost
|
|
Accumulated Amortization
|
|
Net
|
|||||||
Patents
|
$
|
1,285
|
|
|
$
|
(454
|
)
|
|
$
|
831
|
|
Technology Assets
|
29,075
|
|
|
(14,702
|
)
|
|
14,373
|
|
|||
Customer Assets
|
7,745
|
|
|
(3,657
|
)
|
|
4,088
|
|
|||
Total
|
$
|
38,105
|
|
|
$
|
(18,813
|
)
|
|
$
|
19,292
|
|
2017 (remaining 6 months)
|
$
|
3,538
|
|
2018
|
6,037
|
|
|
2019
|
3,253
|
|
|
2020
|
1,296
|
|
|
2021
|
759
|
|
|
Thereafter
|
1,569
|
|
|
Total
|
$
|
16,452
|
|
|
June 30,
2017 |
|
December 31,
2016 |
||||
Inventory, net
|
$
|
18,457
|
|
|
$
|
13,724
|
|
Prepaid expenses
|
10,216
|
|
|
7,365
|
|
||
Accounts receivable, net
|
8,104
|
|
|
6,191
|
|
||
Processing costs receivable
|
7,514
|
|
|
8,593
|
|
||
Deferred hardware costs
|
5,458
|
|
|
4,546
|
|
||
Deferred magstripe reader costs
|
2,681
|
|
|
3,911
|
|
||
Merchant cash advance receivable, net
|
885
|
|
|
4,212
|
|
||
Tenant improvement reimbursement receivable
|
213
|
|
|
1,189
|
|
||
Other
|
9,270
|
|
|
10,812
|
|
||
Total
|
$
|
62,798
|
|
|
$
|
60,543
|
|
|
June 30,
2017 |
|
December 31,
2016 |
||||
Accrued marketing
|
$
|
9,406
|
|
|
$
|
3,972
|
|
Accrued payroll
|
8,469
|
|
|
5,799
|
|
||
Processing costs payable
|
7,170
|
|
|
9,655
|
|
||
Accrued professional fees
|
7,151
|
|
|
5,788
|
|
||
Accrued hardware costs
|
5,873
|
|
|
3,148
|
|
||
Other accrued liabilities
|
18,630
|
|
|
11,181
|
|
||
Total
|
$
|
56,699
|
|
|
$
|
39,543
|
|
|
June 30,
2017 |
|
December 31,
2016 |
||||
Square Payroll payable
|
$
|
9,158
|
|
|
$
|
4,769
|
|
Deferred revenue
|
4,523
|
|
|
5,407
|
|
||
Current portion of deferred rent
|
2,944
|
|
|
2,862
|
|
||
Accrued redemptions
|
1,794
|
|
|
1,628
|
|
||
Other
|
8,220
|
|
|
7,806
|
|
||
Total
|
$
|
26,639
|
|
|
$
|
22,472
|
|
|
June 30,
2017 |
|
December 31,
2016 |
||||
Statutory liabilities
|
$
|
34,736
|
|
|
$
|
29,497
|
|
Deferred rent
|
21,770
|
|
|
23,119
|
|
||
Deferred tax liabilities
|
476
|
|
|
476
|
|
||
Other
|
6,100
|
|
|
4,653
|
|
||
Total
|
$
|
63,082
|
|
|
$
|
57,745
|
|
|
June 30, 2017
|
||
Principal
|
$
|
440,000
|
|
Less: unamortized debt discount
|
(81,146
|
)
|
|
Less: unamortized debt issuance costs
|
(8,894
|
)
|
|
Net carrying amount
|
$
|
349,960
|
|
|
June 30, 2017
|
||
Debt discount related to value of conversion option
|
$
|
86,203
|
|
Less: allocated debt issuance costs
|
(2,302
|
)
|
|
Equity component, net
|
$
|
83,901
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||
|
June 30,
|
|
June 30,
|
||||
|
2017
|
|
2017
|
||||
Contractual interest expense based on 0.375% per annum
|
$
|
413
|
|
|
$
|
526
|
|
Amortization of debt discount and issuance costs
|
4,221
|
|
|
5,611
|
|
||
Total
|
$
|
4,634
|
|
|
$
|
6,137
|
|
Effective interest rate of the liability component
|
5.34
|
%
|
|
5.34
|
%
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Accrued transaction losses, beginning of the period
|
$
|
20,444
|
|
|
$
|
15,419
|
|
|
$
|
20,064
|
|
|
$
|
17,176
|
|
Provision for transaction losses
|
13,076
|
|
|
16,210
|
|
|
24,634
|
|
|
23,392
|
|
||||
Charge-offs to accrued transaction losses
|
(11,065
|
)
|
|
(15,536
|
)
|
|
(22,243
|
)
|
|
(24,475
|
)
|
||||
Accrued transaction losses, end of the period
|
$
|
22,455
|
|
|
$
|
16,093
|
|
|
$
|
22,455
|
|
|
$
|
16,093
|
|
|
Total stockholders’ equity
|
||
Balance at December 31, 2016
|
$
|
576,153
|
|
Net loss
|
(31,052
|
)
|
|
Exercise of stock options
|
82,225
|
|
|
Purchases under the employee stock purchase plan
|
7,767
|
|
|
Vesting of early exercised stock options and other
|
488
|
|
|
Conversion feature of convertible senior notes, due 2022, net of allocated debt issuance costs
|
83,901
|
|
|
Purchase of bond hedges in conjunction with issuance of convertible senior notes, due 2022
|
(92,136
|
)
|
|
Sale of warrants in conjunction with issuance of convertible senior notes, due 2022
|
57,244
|
|
|
Payment for termination of Starbucks warrant
|
(54,808
|
)
|
|
Change in other comprehensive loss
|
1,470
|
|
|
Share-based compensation
|
72,492
|
|
|
Balance at June 30, 2017
|
$
|
703,744
|
|
|
Number of Stock Options Outstanding
|
|
Weighted
Average Exercise Price |
|
Weighted
Average Remaining Contractual Term (in years) |
|
Aggregate
Intrinsic Value |
|||||
Balance at December 31, 2016
|
73,261,562
|
|
|
$
|
7.70
|
|
|
7.28
|
|
$
|
443,711
|
|
Granted
|
1,216,959
|
|
|
17.20
|
|
|
|
|
|
|||
Exercised
|
(14,912,966
|
)
|
|
5.51
|
|
|
|
|
|
|||
Forfeited
|
(2,144,552
|
)
|
|
11.38
|
|
|
|
|
|
|||
Balance at June 30, 2017
|
57,421,003
|
|
|
$
|
8.33
|
|
|
6.80
|
|
$
|
868,556
|
|
Options exercisable as of
|
|
|
|
|
|
|
|
|||||
June 30, 2017
|
53,717,383
|
|
|
$
|
8.03
|
|
|
6.65
|
|
$
|
829,122
|
|
|
Number of
RSUs |
|
Weighted
Average Grant Date Fair Value |
|||
Unvested as of December 31, 2016
|
15,443,391
|
|
|
$
|
12.09
|
|
Granted
|
9,656,680
|
|
|
16.78
|
|
|
Vested
|
(2,383,941
|
)
|
|
11.91
|
|
|
Forfeited
|
(1,438,238
|
)
|
|
12.66
|
|
|
Unvested as of June 30, 2017
|
21,277,892
|
|
|
$
|
14.20
|
|
|
|
Three and Six Months Ended June 30,
|
||||
|
|
2017
|
|
2016
|
||
Dividend yield
|
|
—
|
%
|
|
—
|
%
|
Risk-free interest rate
|
|
1.88
|
%
|
|
1.55
|
%
|
Expected volatility
|
|
32.22
|
%
|
|
42.71
|
%
|
Expected term (years)
|
|
6.02
|
|
|
6.08
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Cost of revenue
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
18
|
|
|
$
|
—
|
|
Product development
|
25,136
|
|
|
24,168
|
|
|
44,492
|
|
|
46,115
|
|
||||
Sales and marketing
|
4,355
|
|
|
3,363
|
|
|
8,290
|
|
|
6,266
|
|
||||
General and administrative
|
10,084
|
|
|
9,391
|
|
|
18,463
|
|
|
15,739
|
|
||||
Total
|
$
|
39,593
|
|
|
$
|
36,922
|
|
|
$
|
71,263
|
|
|
$
|
68,120
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
2017
|
|
2016
|
|
2017
|
|
2016
|
|||||||||
Net loss
|
$
|
(15,962
|
)
|
|
$
|
(27,345
|
)
|
|
$
|
(31,052
|
)
|
|
$
|
(124,100
|
)
|
Basic shares:
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding
|
377,959
|
|
337,635
|
|
373,291
|
|
336,406
|
||||||||
Weighted-average unvested shares
|
(1,602
|
)
|
|
(3,147
|
)
|
|
(1,718
|
)
|
|
(3,500
|
)
|
||||
Weighted-average shares used to compute basic net loss per share
|
376,357
|
|
334,488
|
|
371,573
|
|
332,906
|
||||||||
Diluted shares:
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares used to compute diluted loss per share
|
376,357
|
|
334,488
|
|
371,573
|
|
332,906
|
||||||||
Net loss per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.04
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.37
|
)
|
Diluted
|
$
|
(0.04
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.37
|
)
|
|
Three and Six Months Ended June 30,
|
||||
|
2017
|
|
2016
|
||
Stock options and restricted stock units
|
78,699
|
|
|
113,981
|
|
Common stock warrants
|
19,173
|
|
|
9,458
|
|
Unvested shares
|
1,469
|
|
|
2,878
|
|
Employee stock purchase plan
|
262
|
|
|
127
|
|
Total anti-dilutive securities
|
99,603
|
|
|
126,444
|
|
|
Capital
|
|
Operating
|
||||
Year:
|
|
|
|
||||
2017 (remaining 6 months)
|
$
|
762
|
|
|
$
|
8,599
|
|
2018
|
1,495
|
|
|
17,065
|
|
||
2019
|
1,380
|
|
|
16,165
|
|
||
2020
|
142
|
|
|
16,223
|
|
||
2021
|
—
|
|
|
16,614
|
|
||
Thereafter
|
—
|
|
|
36,084
|
|
||
Total
|
$
|
3,779
|
|
|
$
|
110,750
|
|
Less amount representing interest
|
(2
|
)
|
|
|
|||
Present value of capital lease obligations
|
3,777
|
|
|
|
|||
Less current portion of capital lease obligation
|
(1,511
|
)
|
|
|
|||
Non-current portion of capital lease obligation
|
$
|
2,266
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Revenue
|
|
|
|
|
|
|
|
||||||||
United States
|
$
|
530,008
|
|
|
$
|
421,808
|
|
|
$
|
974,907
|
|
|
$
|
789,387
|
|
International
|
21,497
|
|
|
16,725
|
|
|
38,152
|
|
|
28,415
|
|
||||
Total net revenue
|
$
|
551,505
|
|
|
$
|
438,533
|
|
|
$
|
1,013,059
|
|
|
$
|
817,802
|
|
|
June 30,
2017 |
|
December 31,
2016 |
||||
Long-lived assets
|
|
|
|
||||
United States
|
$
|
158,721
|
|
|
$
|
162,118
|
|
International
|
3,134
|
|
|
2,675
|
|
||
Total long-lived assets
|
$
|
161,855
|
|
|
$
|
164,793
|
|
|
Six Months Ended June 30,
|
||||||
|
2017
|
|
2016
|
||||
Supplemental Cash Flow Data:
|
|
|
|
||||
Cash paid for interest
|
$
|
284
|
|
|
$
|
284
|
|
Cash paid for income taxes
|
850
|
|
|
168
|
|
||
Supplemental disclosures of non-cash investing and financing activities:
|
|
|
|
||||
Change in purchases of property and equipment in accounts payable and accrued expenses
|
1,454
|
|
|
4,192
|
|
||
Unpaid business acquisition purchase price
|
644
|
|
|
—
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||||||||
|
2017
|
|
2016
|
|
$ Change
|
|
% Change
|
|
2017
|
|
2016
|
|
$ Change
|
|
% Change
|
||||||||||||||
Transaction-based revenue
|
$
|
482,065
|
|
|
$
|
364,864
|
|
|
$
|
117,201
|
|
|
32
|
%
|
|
$
|
885,543
|
|
|
$
|
665,317
|
|
|
$
|
220,226
|
|
|
33
|
%
|
Starbucks transaction-based revenue
|
—
|
|
|
32,867
|
|
|
(32,867
|
)
|
|
(100
|
)%
|
|
$
|
—
|
|
|
$
|
71,705
|
|
|
$
|
(71,705
|
)
|
|
(100
|
)%
|
|||
Subscription and services-based revenue
|
59,151
|
|
|
29,717
|
|
|
29,434
|
|
|
99
|
%
|
|
$
|
108,211
|
|
|
$
|
53,513
|
|
|
$
|
54,698
|
|
|
102
|
%
|
|||
Hardware revenue
|
10,289
|
|
|
11,085
|
|
|
(796
|
)
|
|
(7
|
)%
|
|
$
|
19,305
|
|
|
$
|
27,267
|
|
|
$
|
(7,962
|
)
|
|
(29
|
)%
|
|||
Total net revenue
|
$
|
551,505
|
|
|
$
|
438,533
|
|
|
$
|
112,972
|
|
|
26
|
%
|
|
$
|
1,013,059
|
|
|
$
|
817,802
|
|
|
$
|
195,257
|
|
|
24
|
%
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||||||||
|
2017
|
|
2016
|
|
$ Change
|
|
% Change
|
|
2017
|
|
2016
|
|
$ Change
|
|
% Change
|
||||||||||||||
Transaction-based costs
|
$
|
311,092
|
|
|
$
|
234,857
|
|
|
$
|
76,235
|
|
|
32
|
%
|
|
$
|
568,870
|
|
|
$
|
429,133
|
|
|
$
|
139,737
|
|
|
33
|
%
|
Starbucks transaction-based costs
|
—
|
|
|
28,672
|
|
|
(28,672
|
)
|
|
(100
|
)%
|
|
$
|
—
|
|
|
$
|
65,282
|
|
|
$
|
(65,282
|
)
|
|
(100
|
)%
|
|||
Subscription and services-based costs
|
17,116
|
|
|
10,144
|
|
|
6,972
|
|
|
69
|
%
|
|
$
|
32,992
|
|
|
$
|
19,177
|
|
|
$
|
13,815
|
|
|
72
|
%
|
|||
Hardware costs
|
14,173
|
|
|
14,015
|
|
|
158
|
|
|
1
|
%
|
|
$
|
26,835
|
|
|
$
|
40,755
|
|
|
$
|
(13,920
|
)
|
|
(34
|
)%
|
|||
Amortization of acquired technology
|
1,695
|
|
|
1,886
|
|
|
(191
|
)
|
|
(10
|
)%
|
|
$
|
3,502
|
|
|
$
|
4,256
|
|
|
$
|
(754
|
)
|
|
(18
|
)%
|
|||
Total cost of revenue
|
$
|
344,076
|
|
|
$
|
289,574
|
|
|
$
|
54,502
|
|
|
19
|
%
|
|
$
|
632,199
|
|
|
$
|
558,603
|
|
|
$
|
73,596
|
|
|
13
|
%
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||||||||
|
2017
|
|
2016
|
|
$ Change
|
|
% Change
|
|
2017
|
|
2016
|
|
$ Change
|
|
% Change
|
||||||||||||||
Product development
|
$
|
78,126
|
|
|
$
|
68,638
|
|
|
$
|
9,488
|
|
|
14
|
%
|
|
$
|
146,708
|
|
|
$
|
133,230
|
|
|
$
|
13,478
|
|
|
10
|
%
|
% of total net revenue
|
14
|
%
|
|
16
|
%
|
|
|
|
|
|
14
|
%
|
|
16
|
%
|
|
|
|
|
||||||||||
Sales and marketing
|
$
|
59,916
|
|
|
$
|
39,220
|
|
|
$
|
20,696
|
|
|
53
|
%
|
|
$
|
109,816
|
|
|
$
|
77,716
|
|
|
$
|
32,100
|
|
|
41
|
%
|
% of total net revenue
|
11
|
%
|
|
9
|
%
|
|
|
|
|
|
11
|
%
|
|
10
|
%
|
|
|
|
|
||||||||||
General and administrative
|
$
|
62,988
|
|
|
$
|
50,784
|
|
|
$
|
12,204
|
|
|
24
|
%
|
|
$
|
119,923
|
|
|
$
|
146,891
|
|
|
$
|
(26,968
|
)
|
|
(18
|
)%
|
% of total net revenue
|
11
|
%
|
|
12
|
%
|
|
|
|
|
|
12
|
%
|
|
18
|
%
|
|
|
|
|
||||||||||
Transaction, loan and advance losses
|
$
|
18,401
|
|
|
$
|
17,455
|
|
|
$
|
946
|
|
|
5
|
%
|
|
$
|
30,292
|
|
|
$
|
25,316
|
|
|
$
|
4,976
|
|
|
20
|
%
|
% of total net revenue
|
3
|
%
|
|
4
|
%
|
|
|
|
|
|
3
|
%
|
|
3
|
%
|
|
|
|
|
||||||||||
Amortization of acquired customer assets
|
$
|
222
|
|
|
$
|
222
|
|
|
$
|
—
|
|
|
—
|
%
|
|
$
|
427
|
|
|
$
|
539
|
|
|
$
|
(112
|
)
|
|
(21
|
)%
|
% of total net revenue
|
—
|
%
|
|
—
|
%
|
|
|
|
|
|
—
|
%
|
|
—
|
%
|
|
|
|
|
||||||||||
Total operating expenses
|
$
|
219,653
|
|
|
$
|
176,319
|
|
|
$
|
43,334
|
|
|
25
|
%
|
|
$
|
407,166
|
|
|
$
|
383,692
|
|
|
$
|
23,474
|
|
|
6
|
%
|
•
|
an increase in headcount of 14% in product development personnel mainly in our engineering, product, and design teams; and
|
•
|
share-based compensation expense increased by
$1.0 million
and decreased by
$1.6 million
compared to the
three and six months ended
June 30, 2016
, respectively.
|
•
|
an increase of $6.1 million and $6.4 million in advertising costs compared to the
three and six months ended
June 30, 2016
, respectively, primarily from increased online and direct mail marketing campaigns during the period;
|
•
|
during the
three and six months ended
June 30, 2017
, we incurred $10.3 million and $20.4 million in costs associated with our Square Cash peer-to-peer transfer service, an increase of $6.5 million and $11.4 million compared to the
three and six months ended
June 30, 2016
, respectively;
|
•
|
an increase in headcount of 44% in sales and marketing personnel to enable growth initiatives; and
|
•
|
an increase in share-based compensation expense of
$1.0 million
and
$2.0 million
compared to the
three and six months ended
June 30, 2016
, respectively.
|
•
|
an increase in headcount of 12% in general and administrative personnel, mainly additions to our finance, legal, compliance, Square Capital operations and internal business systems personnel that together will drive long-term operating efficiencies as our business scales; and
|
•
|
an increase in share-based compensation expense of
$0.7 million
and
$2.7 million
compared to the
three and six months ended
June 30, 2016
, respectively.
|
•
|
a $2.7 million charge recorded to loan losses in the
three and six months ended
June 30, 2017
as a result of the growth and increasing maturity of our Square Capital loans portfolio;
|
•
|
a $6.0 million increase in transaction losses recorded during both the
three and six months ended
June 30, 2016
, as a result of a correction to the calculation of our reserve for transaction losses, with no similar charges during the
three and six months ended
June 30, 2017
; and
|
•
|
a $1.7 million reduction in transaction losses recorded during the
six months ended
June 30, 2016
, due to the reversal of prior overestimates for the EMV liability shift, with no similar activity during the
six months ended
June 30, 2017
.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
|||||||||||||||||||||||||
|
2017
|
|
2016
|
|
$ Change
|
|
% Change
|
|
2017
|
|
2016
|
|
$ Change
|
|
% Change
|
|||||||||||||
Interest and other (income) expense, net
|
$
|
3,266
|
|
|
$
|
(327
|
)
|
|
$
|
3,593
|
|
|
NM
|
|
$
|
3,765
|
|
|
$
|
(1,044
|
)
|
|
$
|
4,809
|
|
|
461
|
%
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||||||||
|
2017
|
|
2016
|
|
$ Change
|
|
% Change
|
|
2017
|
|
2016
|
|
$ Change
|
|
% Change
|
||||||||||||||
Provision for income taxes
|
$
|
472
|
|
|
$
|
312
|
|
|
$
|
160
|
|
|
51
|
%
|
|
$
|
981
|
|
|
$
|
651
|
|
|
$
|
330
|
|
|
51
|
%
|
Effective tax rate
|
(3.0
|
)%
|
|
(1.2
|
)%
|
|
|
|
|
|
(3.3
|
)%
|
|
(0.5
|
)%
|
|
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||||||||
|
2017
|
|
2016
|
|
$ Change
|
|
% Change
|
|
2017
|
|
2016
|
|
$ Change
|
|
% Change
|
||||||||||||||
|
(in thousands, except GPV)
|
|
|
|
(in thousands, except GPV)
|
|
|
||||||||||||||||||||||
Gross Payment Volume (GPV) (in millions)
|
$
|
16,421
|
|
|
$
|
12,451
|
|
|
$
|
3,970
|
|
|
32
|
%
|
|
$
|
30,068
|
|
|
$
|
22,741
|
|
|
$
|
7,327
|
|
|
32
|
%
|
Adjusted Revenue
|
$
|
240,413
|
|
|
$
|
170,809
|
|
|
$
|
69,604
|
|
|
41
|
%
|
|
$
|
444,189
|
|
|
$
|
316,964
|
|
|
$
|
127,225
|
|
|
40
|
%
|
Adjusted EBITDA
|
$
|
36,496
|
|
|
$
|
12,554
|
|
|
$
|
23,942
|
|
|
191
|
%
|
|
$
|
63,521
|
|
|
$
|
3,471
|
|
|
$
|
60,050
|
|
|
1,730
|
%
|
Adjusted Net Income (Loss) Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Basic
|
$
|
0.08
|
|
|
$
|
0.02
|
|
|
|
|
|
|
$
|
0.13
|
|
|
$
|
(0.03
|
)
|
|
|
|
|
||||||
Diluted
|
$
|
0.07
|
|
|
$
|
0.02
|
|
|
|
|
|
|
$
|
0.12
|
|
|
$
|
(0.03
|
)
|
|
|
|
|
•
|
Adjusted Revenue is net of transaction-based costs, which is our largest cost of revenue item; and
|
•
|
other companies, including companies in our industry, may calculate Adjusted Revenue differently or not at all, which reduces its usefulness as a comparative measure.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||||||||
|
2017
|
|
2016
|
|
$ Change
|
|
% Change
|
|
2017
|
|
2016
|
|
$ Change
|
|
% Change
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
Total net revenue
|
$
|
551,505
|
|
|
$
|
438,533
|
|
|
$
|
112,972
|
|
|
26
|
%
|
|
$
|
1,013,059
|
|
|
$
|
817,802
|
|
|
$
|
195,257
|
|
|
24
|
%
|
Less: Starbucks transaction-based revenue
|
—
|
|
|
32,867
|
|
|
(32,867
|
)
|
|
(100
|
)%
|
|
—
|
|
|
71,705
|
|
|
$
|
(71,705
|
)
|
|
(100
|
)%
|
|||||
Less: transaction-based costs
|
311,092
|
|
|
234,857
|
|
|
76,235
|
|
|
32
|
%
|
|
568,870
|
|
|
429,133
|
|
|
$
|
139,737
|
|
|
33
|
%
|
|||||
Adjusted Revenue
|
$
|
240,413
|
|
|
$
|
170,809
|
|
|
$
|
69,604
|
|
|
41
|
%
|
|
$
|
444,189
|
|
|
$
|
316,964
|
|
|
$
|
127,225
|
|
|
40
|
%
|
•
|
We exclude Starbucks transaction-based revenue and Starbucks transaction-based costs. As described above, Starbucks completed its previously announced transition to another payments solution provider and has ceased using our payments solutions altogether, and we believe that providing non-GAAP financial measures that exclude the impact of Starbucks is useful to investors.
|
•
|
We believe it is useful to exclude 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 10), we are required to recognize non-cash interest expense related to amortization of debt discount and issuance costs. 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.
|
•
|
We exclude the litigation settlement with Robert E. Morley described in Note 1 of the "Notes to the Consolidated Financial Statements" in our Annual Report on Form 10-K for the year ended
December 31, 2016
, gain or loss on the sale of property and equipment, and impairment of intangible assets from non-GAAP financial measures because we do not believe that these items are reflective of our ongoing business operations.
|
•
|
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.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||||||||
|
2017
|
|
2016
|
|
$ Change
|
|
% Change
|
|
2017
|
|
2016
|
|
$ Change
|
|
% Change
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
Net loss
|
$
|
(15,962
|
)
|
|
$
|
(27,345
|
)
|
|
$
|
11,383
|
|
|
NM
|
|
|
$
|
(31,052
|
)
|
|
$
|
(124,100
|
)
|
|
$
|
93,048
|
|
|
NM
|
|
Starbucks transaction-based revenue
|
—
|
|
|
(32,867
|
)
|
|
32,867
|
|
|
NM
|
|
|
—
|
|
|
(71,705
|
)
|
|
$
|
71,705
|
|
|
NM
|
|
|||||
Starbucks transaction-based costs
|
—
|
|
|
28,672
|
|
|
(28,672
|
)
|
|
(100
|
)%
|
|
—
|
|
|
65,282
|
|
|
$
|
(65,282
|
)
|
|
(100
|
)%
|
|||||
Share-based compensation expense
|
39,593
|
|
|
36,922
|
|
|
2,671
|
|
|
7
|
%
|
|
71,263
|
|
|
68,120
|
|
|
$
|
3,143
|
|
|
5
|
%
|
|||||
Depreciation and amortization
|
9,125
|
|
|
9,018
|
|
|
107
|
|
|
1
|
%
|
|
18,562
|
|
|
18,136
|
|
|
$
|
426
|
|
|
2
|
%
|
|||||
Litigation settlement expense
|
—
|
|
|
(2,000
|
)
|
|
2,000
|
|
|
NM
|
|
|
—
|
|
|
48,000
|
|
|
$
|
(48,000
|
)
|
|
(100
|
)%
|
|||||
Interest and other (income) expense, net
|
3,266
|
|
|
(327
|
)
|
|
3,593
|
|
|
NM
|
|
|
3,765
|
|
|
(1,044
|
)
|
|
$
|
4,809
|
|
|
NM
|
|
|||||
Provision for income taxes
|
472
|
|
|
312
|
|
|
160
|
|
|
51
|
%
|
|
981
|
|
|
651
|
|
|
$
|
330
|
|
|
51
|
%
|
|||||
Loss on sale of property and equipment
|
2
|
|
|
169
|
|
|
(167
|
)
|
|
(99
|
)%
|
|
2
|
|
|
131
|
|
|
$
|
(129
|
)
|
|
(98
|
)%
|
|||||
Adjusted EBITDA
|
$
|
36,496
|
|
|
$
|
12,554
|
|
|
$
|
23,942
|
|
|
191
|
%
|
|
$
|
63,521
|
|
|
$
|
3,471
|
|
|
$
|
60,050
|
|
|
1,730
|
%
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||||||||
|
2017
|
|
2016
|
|
$ Change
|
|
% Change
|
|
2017
|
|
2016
|
|
$ Change
|
|
% Change
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
Net loss
|
$
|
(15,962
|
)
|
|
$
|
(27,345
|
)
|
|
$
|
11,383
|
|
|
NM
|
|
|
$
|
(31,052
|
)
|
|
$
|
(124,100
|
)
|
|
$
|
93,048
|
|
|
NM
|
|
Starbucks transaction-based revenue
|
—
|
|
|
(32,867
|
)
|
|
32,867
|
|
|
NM
|
|
|
—
|
|
|
(71,705
|
)
|
|
71,705
|
|
|
NM
|
|
||||||
Starbucks transaction-based costs
|
—
|
|
|
28,672
|
|
|
(28,672
|
)
|
|
(100
|
)%
|
|
—
|
|
|
65,282
|
|
|
(65,282
|
)
|
|
(100
|
)%
|
||||||
Share-based compensation expense
|
39,593
|
|
|
36,922
|
|
|
2,671
|
|
|
7
|
%
|
|
71,263
|
|
|
68,120
|
|
|
3,143
|
|
|
5
|
%
|
||||||
Amortization of intangible assets
|
1,943
|
|
|
2,134
|
|
|
(191
|
)
|
|
(9
|
)%
|
|
4,064
|
|
|
4,847
|
|
|
(783
|
)
|
|
(16
|
)%
|
||||||
Litigation settlement expense
|
—
|
|
|
(2,000
|
)
|
|
2,000
|
|
|
NM
|
|
|
—
|
|
|
48,000
|
|
|
(48,000
|
)
|
|
(100
|
)%
|
||||||
Amortization of debt discount and issuance costs
|
4,221
|
|
|
—
|
|
|
4,221
|
|
|
NM
|
|
|
5,611
|
|
|
—
|
|
|
5,611
|
|
|
NM
|
|
||||||
Loss on sale of property and equipment
|
2
|
|
|
169
|
|
|
(167
|
)
|
|
(99
|
)%
|
|
2
|
|
|
131
|
|
|
(129
|
)
|
|
(98
|
)%
|
||||||
Adjusted Net Income (Loss)
|
$
|
29,797
|
|
|
$
|
5,685
|
|
|
$
|
24,112
|
|
|
424
|
%
|
|
$
|
49,888
|
|
|
$
|
(9,425
|
)
|
|
$
|
59,313
|
|
|
NM
|
|
Adjusted Net Income (Loss) Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Basic
|
$
|
0.08
|
|
|
$
|
0.02
|
|
|
|
|
|
|
$
|
0.13
|
|
|
$
|
(0.03
|
)
|
|
|
|
|
||||||
Diluted
|
$
|
0.07
|
|
|
$
|
0.02
|
|
|
|
|
|
|
$
|
0.12
|
|
|
$
|
(0.03
|
)
|
|
|
|
|
||||||
Weighted-average shares used to compute Adjusted Net Income (Loss) Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Basic
|
376,357
|
|
|
334,488
|
|
|
|
|
|
|
371,573
|
|
|
332,906
|
|
|
|
|
|
||||||||||
Diluted
|
418,468
|
|
|
365,731
|
|
|
|
|
|
|
411,420
|
|
|
332,906
|
|
|
|
|
|
|
June 30,
2017 |
|
December 31,
2016 |
||||
Cash and cash equivalents
|
$
|
716,989
|
|
|
$
|
452,030
|
|
Short-term restricted cash
|
22,147
|
|
|
22,131
|
|
||
Long-term restricted cash
|
14,565
|
|
|
14,584
|
|
||
Cash, cash equivalents, and restricted cash
|
$
|
753,701
|
|
|
$
|
488,745
|
|
Short-term investments
|
203,287
|
|
|
59,901
|
|
||
Long-term investments
|
124,099
|
|
|
27,366
|
|
||
Cash, cash equivalents, restricted cash and investments in marketable securities
|
$
|
1,081,087
|
|
|
$
|
576,012
|
|
|
Six Months Ended
June 30, |
||||||
|
2017
|
|
2016
|
||||
Net cash provided by (used in) operating activities
|
$
|
90,590
|
|
|
$
|
(32,538
|
)
|
Net cash used in investing activities
|
(255,744
|
)
|
|
(96,753
|
)
|
||
Net cash provided by financing activities
|
427,779
|
|
|
9,966
|
|
||
Effect of foreign exchange rate changes on cash and cash equivalents
|
2,331
|
|
|
2,672
|
|
||
Net increase (decrease) in cash, cash equivalents and restricted cash
|
264,956
|
|
|
(116,653
|
)
|
•
|
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 amounts typically will be more than for periods ending on a weekday, as we settle to our sellers for payment processing activity on business days; and
|
•
|
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 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. Holidays and day-of-week may also cause significant volatility in daily GPV amounts.
|
•
|
Net loss of
$31.1 million
, offset by non-cash items consisting primarily of share-based compensation of
$71.3 million
, provision for transaction losses of
$30.3 million
, and depreciation and amortization of
$18.6 million
.
|
•
|
Additional cash provided from changes in operating assets and liabilities, including increases in customer payable of
$34.1 million
, increases in accrued expenses of
$17.0 million
and decreases in settlements receivable of
$8.9 million
.
|
•
|
Offset in part by cash used from changes in operating assets and liabilities, including increases in customer funds of
$30.0 million
, charge-offs to accrued transaction losses of
$22.2 million
, and due to the net activity related to loans held for sale of
$10.6 million
.
|
•
|
Net loss of
$124.1 million
, offset by non-cash items consisting primarily of share-based compensation of
$68.1 million
, provision for transaction losses of
$25.3 million
, and depreciation and amortization of
$18.1 million
.
|
•
|
Additional uses of cash were from changes in operating assets and liabilities, including increases in settlements receivable of
$64.2 million
, the net activity related to loans held for sale of
$29.0 million
, charge-offs to accrued transaction losses of
$24.5 million
, decreases in accrued expenses of
$13.8 million
, and decreases in settlements payable of
$10.6 million
.
|
•
|
Offset in part by cash provided from changes in operating assets and liabilities, including increases in customers payable of
$84.8 million
and decreases in other current assets of
$24.0 million
.
|
|
improving and implementing existing and developing new internal administrative infrastructure, particularly our operational, financial, communications and other internal systems and procedures;
|
|
installing enhanced management information and control system; and
|
|
preserving our core values, strategies, and goals and effectively communicating these to our employees worldwide.
|
|
difficulty in attracting a sufficient number of sellers;
|
|
failure to anticipate competitive conditions;
|
|
conformity with applicable business customs, including translation into foreign languages and associated expenses;
|
|
increased costs and difficulty in protecting intellectual property and sensitive data;
|
|
changes to the way we do business as compared with our current operations or a lack of acceptance of our products and services;
|
|
the ability to support and integrate with local third-party service providers;
|
|
competition with service providers or other entrenched market-players that have greater experience in the local markets than we do;
|
|
difficulties in staffing and managing foreign operations in an environment of diverse culture, laws and customs, challenges caused by distance, language, and cultural differences, and the increased travel, infrastructure and legal and compliance costs associated with global operations;
|
|
difficulties in recruiting and retaining qualified employees;
|
|
difficulty in gaining acceptance from industry self-regulatory bodies;
|
|
compliance with multiple, potentially conflicting and changing governmental laws and regulations, including with respect to data privacy and security;
|
|
compliance with U.S. and foreign anti-bribery laws;
|
|
potential tariffs, sanctions, or other trade barriers including fines;
|
|
exchange rate risk;
|
|
compliance with potentially conflicting and changing laws of taxing jurisdictions where we conduct business and applicable U.S. tax laws, the complexity and adverse consequences of such tax laws and potentially adverse tax consequences due to changes in such tax laws; and
|
|
regional economic and political instability.
|
|
the transaction may not advance our business strategy;
|
|
we may be unable to identify opportunities on terms acceptable to us;
|
|
we may not realize a satisfactory return or increase our revenue;
|
|
we may experience disruptions on our ongoing operations and divert management’s attention;
|
|
we may be unable to retain key personnel;
|
|
we may experience difficulty in integrating technologies, IT systems, accounting systems, culture, or personnel;
|
|
acquired businesses may not have adequate controls, processes and procedures to ensure compliance with laws and regulations, and our due diligence process may not identify compliance issues or other liabilities;
|
|
we may assume additional financial or legal exposure, including exposure that is known to us;
|
|
we may have difficulty entering new market segments;
|
|
we may be unable to retain the customers and partners of acquired businesses;
|
|
there may be unknown, underestimated, or undisclosed commitments or liabilities, including actual or threatened litigation;
|
|
there may be regulatory constraints, particularly competition regulations that may affect the extent to which we can maximize the value of our acquisitions or investments; and
|
|
acquisitions could result in dilutive issuances of equity securities or the incurrence of debt.
|
|
price and volume fluctuations in the overall stock market from time to time;
|
|
volatility in the market prices and trading volumes of companies in our industry or companies that investors consider comparable;
|
|
changes in operating performance and stock market valuations of other companies generally or of those in our industry in particular;
|
|
sales of shares of our common stock by us or our stockholders;
|
|
issuance of shares of our Class A common stock, whether in connection with an acquisition or upon conversion of some or all of our outstanding Notes;
|
|
failure of securities analysts to maintain coverage and/or to provide accurate consensus results of us, changes in financial estimates by securities analysts who follow us, or our failure to meet these estimates or the expectations of investors;
|
|
the financial or other projections we may provide to the public, any changes in those projections, or our failure to meet those projections;
|
|
announcements by us or our competitors of new products or services;
|
|
public reaction to our press releases, other public announcements, and filings with the SEC;
|
|
rumors and market speculation involving us or other companies in our industry;
|
|
actual or anticipated changes in our results of operations;
|
|
changes in the regulatory environment;
|
|
actual or anticipated developments in our business, our competitors’ businesses, or the competitive landscape generally;
|
|
litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors;
|
|
announced or completed acquisitions of businesses or technologies by us or our competitors;
|
|
new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
|
|
changes in accounting standards, policies, guidelines, interpretations, or principles;
|
|
any significant change in our management; and
|
|
general economic conditions and slow or negative growth of our markets.
|
Date:
|
August 2, 2017
|
|
By:
|
/s/ Jack Dorsey
|
|
|
|
|
Jack Dorsey
|
|
|
|
|
President, Chief Executive Officer, and Chairman
|
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
|
By:
|
/s/ Sarah Friar
|
|
|
|
|
Sarah Friar
|
|
|
|
|
Chief Financial Officer
|
|
|
|
|
(Principal Financial Officer)
|
|
|
|
|
|
|
|
|
Incorporated by Reference
|
|||
Exhibit Number
|
|
Description
|
Form
|
File No.
|
Exhibit
|
Filing Date
|
10.1+
|
|
Square, Inc. 2015 Equity Incentive Plan, as amended and restated, and related form agreements.
|
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
32.1†
|
|
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
101.INS
|
|
XBRL Instance Document.
|
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Labels Linkbase Document.
|
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
|
|
1.
|
Purposes of the Plan.....................................................................................................................................................
|
2
|
|
2.
|
Shares Subject to the Plan............................................................................................................................................
|
2
|
|
3.
|
Administration of the Plan...........................................................................................................................................
|
3
|
|
4.
|
Stock Options...............................................................................................................................................................
|
5
|
|
5.
|
Restricted Stock............................................................................................................................................................
|
6
|
|
6.
|
Restricted Stock Units..................................................................................................................................................
|
7
|
|
7.
|
Stock Appreciation Rights............................................................................................................................................
|
7
|
|
8.
|
Performance Stock Units and Performance Shares......................................................................................................
|
8
|
|
9.
|
Performance Awards.....................................................................................................................................................
|
8
|
|
10.
|
Outside Director Limitations........................................................................................................................................
|
9
|
|
11.
|
Leaves of Absence/Transfer Between Locations/Change of Status.............................................................................
|
9
|
|
12.
|
Transferability of Awards.............................................................................................................................................
|
10
|
|
13.
|
Adjustments; Dissolution or Liquidation.....................................................................................................................
|
10
|
|
14.
|
Change in Control........................................................................................................................................................
|
10
|
|
15.
|
Tax Matters...................................................................................................................................................................
|
12
|
|
16.
|
Other Terms..................................................................................................................................................................
|
12
|
|
17.
|
Term of Plan.................................................................................................................................................................
|
13
|
|
18.
|
Amendment and Termination of the Plan.....................................................................................................................
|
13
|
|
19.
|
Conditions Upon Issuance of Shares............................................................................................................................
|
13
|
|
20.
|
Stockholder Approval...................................................................................................................................................
|
14
|
|
21.
|
Definitions....................................................................................................................................................................
|
14
|
|
1.
|
Purposes of the Plan.
|
2.
|
Shares Subject to the Plan.
|
(a)
|
If the Participant dies or his or her status as a Service Provider is terminated due to his or her
|
(b)
|
If there is a Change in Control or merger of the Company, Section 14 of the Plan may further limit this Option’s exercisability.
|
(c)
|
This Option will not be exercisable after the Expiration Date, unless Section 4(g) of the Plan (which tolls expiration in very limited cases when there are legal restrictions on exercise) permits later exercise.
|
(i)
|
He or she agrees that this Option is granted under and governed by the terms and conditions of the Plan and this Agreement, including their exhibits and appendices.
|
(ii)
|
He or she understands that the Company is not providing any tax, legal, or financial advice and is not making any recommendations regarding his or her participation in the Plan or his or her acquisition or sale of Shares.
|
(iii)
|
He or she has reviewed the Plan and this Agreement, has had an opportunity to obtain the advice of personal tax, legal, and financial advisors prior to signing this Agreement, and fully understands all provisions of the Plan and Agreement. He or she will consult with his or her own personal tax, legal, and financial advisors before taking any action related to the Plan.
|
(iv)
|
He or she has read and agrees to each provision of Section 11 of this Agreement.
|
(v)
|
He or she will notify the Company of any change to the contact address below.
|
PARTICIPANT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature
|
|
|
|
|
Address:
|
|
|
|
|
|
|
|
|
|
Purchaser Name:
|
|
Grant Date of Stock Option (the "
Option
"):
|
|
Exercise Date:
|
|
Number of Shares Exercised:
|
|
Per Share Exercise Price:
|
|
Total Exercise Price:
|
|
Exercise Price Payment Method:
|
|
Tax-Related Items Payment Method:
|
|
PARTICIPANT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature
|
|
|
|
|
Address:
|
|
|
|
|
|
|
|
|
|
|
Participant
|
|
|
|
Grant Number
|
|
|
|
Grant Date
|
|
|
|
Vesting Start Date
|
|
|
|
Number of Shares Granted
|
|
|
(i)
|
He or she agrees that this Restricted Stock award is granted under and governed by the terms and conditions of the Plan and this Agreement, including their exhibits and appendices.
|
(ii)
|
He or she understands that the Company is not providing any tax, legal, or financial advice and is not making any recommendations regarding his or her participation in the Plan or his or her acquisition or sale of Shares.
|
(iii)
|
He or she has reviewed the Plan and this Agreement, has had an opportunity to obtain the advice of
|
(iv)
|
He or she has read and agrees to each provision of Section 10 of this Agreement.
|
(v)
|
He or she will notify the Company of any change to the contact address below.
|
PARTICIPANT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature
|
|
|
|
|
Address:
|
|
|
|
|
|
|
|
|
|
|
Participant
|
|
|
|
Grant Number
|
|
|
|
Grant Date
|
|
|
|
Vesting Start Date
|
|
|
|
Number of RSUs Granted
|
|
|
(i)
|
He or she agrees that this Restricted Stock Unit award is granted under and governed by the terms and conditions of the Plan and this Agreement, including their exhibits and appendices.
|
(ii)
|
He or she understands that the Company is not providing any tax, legal, or financial advice and is not making any recommendations regarding his or her participation in the Plan or his or her acquisition or sale of Shares.
|
(iii)
|
He or she has reviewed the Plan and this Agreement, has had an opportunity to obtain the advice of personal tax, legal, and financial advisors prior to signing this Agreement, and fully understands all provisions of the Plan and Agreement. He or she will consult with his or her own personal tax, legal, and financial advisors before taking any action related to the Plan.
|
(iv)
|
He or she has read and agrees to each provision of Section 10 of this Agreement.
|
(v)
|
He or she will notify the Company of any change to the contact address below.
|
PARTICIPANT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature
|
|
|
|
|
Address:
|
|
|
|
|
|
|
|
|
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Square, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Square, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|