BLOCK, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

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

Insight

On December 1, 2021, we changed our name from Square to Block. Block is the name
for the company as a corporate entity. We started Block with the Square
ecosystem in February 2009 to enable businesses (sellers) to accept card
payments, an important capability that was previously inaccessible to many
businesses. However, sellers need many solutions to thrive, and we have expanded
to provide them additional products and services and to give them access to a
cohesive ecosystem of tools to help them manage and grow their businesses.
Similarly, with Cash App, we have built an ecosystem of financial services to
help individuals manage their money. We also added TIDAL and TBD as businesses
to contribute to our purpose of economic empowerment. TIDAL, a global music and
entertainment platform, focuses on putting both the artist experience and fan
experience at the center of decisions, providing artists direct access to their
audience, and allowing fans deeper connections to their favorite artists through
original, exclusive, and curated content and events. TBD, a bitcoin-focused
business, was established to build an open developer platform with the goal of
making it easy to create non-custodial, permissionless, and decentralized
financial services. In January 2022, we completed the acquisition of Afterpay
Limited, a buy now pay later ("BNPL") platform that facilitates commerce between
retail merchants and consumers by allowing its retail merchant clients to offer
their customers the ability to buy goods and services on a BNPL basis.

Square is a cohesive commerce ecosystem that helps sellers start, run, and grow
their businesses, and consists of over 30 distinct software, hardware, and
financial services products. We monetize the majority of these products through
a combination of transaction, subscription, and service fees. Our suite of
cloud-based software solutions are integrated to create a seamless experience
and enable a holistic view of sales, customers, employees, and locations. With
our offerings, a seller can accept payments in person via swipe, dip, or tap of
a card, or online via Square Invoices, Square Virtual Terminal, or the seller's
website. We also provide hardware to facilitate commerce for sellers, which
includes magstripe readers, contactless and chip readers, Square Stand, Square
Register, Square Terminal, and third-party peripherals. In July 2021, we
launched Square Banking for our U.S. sellers, which consists of a suite of
products including Square Savings, Square Checking, and Square Loans (formerly
known as Square Capital). Square Checking is offered through a partner bank, and
Square Savings and Square Loans are offered through our wholly-owned subsidiary
Square Financial Services, Inc. ("Square Financial Services"). Square Financial
Services offers banking services including certain loan and deposit products. In
addition to the United States, we also offer Square Loans in Australia and
Canada. Square Savings allows sellers to automatically set aside funds from
daily sales into savings accounts that earn interest. Square Checking provides
sellers with an FDIC-insured account allowing them instant access to their sales
and the ability to use those funds for business expenses using their Square
Debit Card, withdraw from an ATM, transfer via ACH, or pay employees via Square
Payroll. Square Loans offers sellers access to business loans based on the
seller's payment processing history. We recognize revenue upon the sale of the
loans to third-party investors or over time as the sellers pay down the
outstanding amounts for the loans that we hold as available for sale or for
investment. We have grown rapidly to serve millions of sellers that represent a
diverse set of industries including services, food-related business, and retail
businesses; and sizes, ranging from a single vendor at a farmers' market to
multi-location businesses. Square sellers also span geographies, including the
United States, Canada, Japan, Australia, the United Kingdom, Ireland, France,
and Spain.

Our Cash App ecosystem provides financial tools for individuals to store, send,
receive, spend, and invest money. With Cash App, customers can fund their
account with a bank account or debit card, send and receive peer-to-peer
payments, add physical cash at participating retailers, deposit mobile checks,
and receive direct deposit payments. Customers can make purchases with their
Cash Card, a Visa prepaid card that is linked to the balance stored in Cash App.
Additionally, customers can use Cash App Pay, a checkout option which allows
customers to pay using their Cash App account. With Cash Boost, customers
receive instant discounts when they make Cash Card purchases at designated
merchants. Customers can also use their stored funds to buy and sell bitcoin and
equity investments within Cash App. The Cash App ecosystem also includes a tax
filing product for individuals, providing a seamless, mobile-first solution for
individuals to file their taxes for free.
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As mentioned above, with the acquisition of Afterpay, we added a BNPL platform
to our offerings. Through the use of this BNPL platform, consumers can split
their purchases across four installments, generally due in two-week increments,
without paying fees (if payments are made on time). Afterpay provides consumers
with the ability to get desired items now but pay for them later and can
simultaneously help merchants increase sales and order values. The Company pays
BNPL sellers the full order value upfront, less a merchant fee, and assumes the
risk of non-payment from the end-customer. Apart from capped late payment fees,
consumers do not incur additional fees. Afterpay also provides an online shop
directory, which allows consumers to search by product category for stores that
offer Afterpay as a payment option, and offers an Afterpay in-store card for
in-person transactions at a merchant's point of sale. The BNPL platform is being
integrated into the Cash App and Square ecosystems, strengthening the connection
between these ecosystems, expanding access to more sellers and customers,
increasing Square's omnichannel platform, and helping drive more commerce
between our sellers and customers. Customers will be able to manage their
installments and repayments directly within Cash App, potentially driving
increased engagement, while the commerce discovery functionality will be
integrated with Cash App to help drive lead generation for merchants and
customer engagement.

Update on the impact of COVID-19 on current trends and outlook

In 2022, our Square business experienced improvements which have been mainly as
a result of continued economic recovery and re-openings in the majority of U.S.
markets. We experienced growth in our Square Gross Payment Volume ("GPV," as
defined below within Key Operating Metrics and Non-GAAP Financial Measures)
performance, as in-person activity at sellers continued to increase on a
year-over-year basis. Overall, we continued to experience improvements in our
business in our international markets, although regional lockdowns in select
markets periodically affected in-person activity. Our Cash App business
performed well due to increased consumer spending, as we continued to benefit
from the strength of a broader macroeconomic recovery and regional re-openings.

Although our business results remain positive, the continued effects of the
COVID-19 pandemic on our financial results and the broader economic recovery are
unknown. The emergence of new and more transmissible variants of COVID-19 has at
times led to a resurgence of the virus, particularly in populations with low
vaccination rates. Further, the impacts of inflation on our business and the
broader economy, which may be exacerbated by the economic recovery from the
COVID-19 pandemic, has impacted consumer spending, and may also impact our
financial condition and results of operations.
Results of Operations

Revenue (in thousands, except for percentages)

                                                                                     Three Months Ended
                                                                                         March 31,
                                                           2022                 2021               $ Change               % Change
Transaction-based revenue                             $ 1,232,969          $   959,733          $    273,236                     28  %
Subscription and services-based revenue                   959,557              557,681               401,876                     72  %
Hardware revenue                                           37,326               28,788                 8,538                     30  %
Bitcoin revenue                                         1,730,793            3,511,068            (1,780,275)                   (51) %
Total net revenue                                     $ 3,960,645          $ 5,057,270          $ (1,096,625)                   (22) %


Total net revenue for the three months ended March 31, 2022 decreased by $1.1
billion, or 22%, compared to the three months ended March 31, 2021. Bitcoin
revenue decreased by $1.8 billion for the three months ended March 31, 2022
compared to the three months ended March 31, 2021. Excluding bitcoin revenue,
total net revenue increased by $683.7 million, or 44%, in the three months ended
March 31, 2022 compared to the three months ended March 31, 2021.

Transaction-based revenue for the three months ended March 31, 2022 increased by
$273.2 million, or 28%, compared to the three months ended March 31, 2021. This
increase was in-line with the increase in GPV of 31% for the three months ended
March 31, 2022 compared to the three months ended March 31, 2021. The increase
in transaction-based revenue was driven by:
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• Continued improvement in card-present and card-not-present volumes due to growth in online channels, including Square Online, Invoices,
Virtual terminal, and the e-commerce API, as well as the growth of our international markets; and

•growth of the GPV Cash App Business which includes Cash for Business and peer-to-peer payments issued from a bank card. Cash for Business includes peer-to-peer transactions received by business accounts using Cash App.

These factors have had varying impacts on GPV’s growth and may continue to impact our revenues in the future.

Subscription and services-based revenue for the three months ended March 31,
2022 increased by $401.9 million, or 72%, compared to the three months ended
March 31, 2021. This increase was primarily driven by the revenue generated from
the BNPL platform following the acquisition of Afterpay in the first quarter of
2022, which contributed $129.8 million of subscription and services-based
revenue in February and March 2022. The increase was also driven by the results
of Cash App and Square. The increase in Cash App subscription and services-based
revenue is primarily due to increased Cash Card usage and Cash App Instant
Deposit volumes. Square subscription and services-based revenue increased
primarily due to the increased origination volumes of Square Loans, other
software subscriptions, and Instant Transfer for sellers. Subscription and
services-based revenue also includes revenue generated from music streaming
services following the acquisition of TIDAL in the second quarter of 2021.

Hardware revenue for the three months ended March 31, 2022 increased by $8.5
million, or 30%, compared to the three months ended March 31, 2021. This
increase was primarily a result of an overall increase in sales of hardware
across many of our product offerings including Square Register, Square Terminal,
and Square Reader.
Bitcoin revenue for the three months ended March 31, 2022 decreased by $1.8
billion, or 51%, compared to the three months ended March 31, 2021. The amount
of bitcoin revenue recognized will fluctuate depending on customer demand as
well as changes in the market price of bitcoin. This decrease in the three
months ended March 31, 2022 was driven primarily by relative stability in the
price of bitcoin during the quarter ended March 31, 2022, which reduced customer
demand and trading activity compared to the quarter ended March 31, 2021. While
bitcoin revenue contributed 44% of the total net revenue in the three months
ended March 31, 2022, gross profit generated from bitcoin transactions was only
3% of the total gross profit in the three months ended March 31, 2022, compared
to 8% of total gross profit in the three months ended March 31, 2021.

Revenue cost (in thousands, except percentages)

                                                                                     Three Months Ended
                                                                                         March 31,
                                                           2022                 2021               $ Change               % Change
Transaction-based costs                               $   718,700          $   526,779          $    191,921                     36  %
Subscription and services-based costs                     195,862               90,373               105,489                    117  %
Hardware costs                                             63,664               40,482                23,182                     57  %
Bitcoin costs                                           1,687,459            3,436,135            (1,748,676)                   (51) %

Total cost of revenue                                 $ 2,665,685          $ 4,093,769          $ (1,428,084)                   (35) %



Total cost of revenue for the three months ended March 31, 2022 decreased by
$1.4 billion, or 35%, compared to the three months ended March 31, 2021. Bitcoin
costs of revenue decreased by $1.7 billion in the three months ended March 31,
2022, compared to the three months ended March 31, 2021. Excluding bitcoin costs
of revenue, total cost of revenue increased by approximately $320.6 million, or
49%, in the three months ended March 31, 2022, compared to the three months
ended March 31, 2021. Cost of revenue also includes $15.5 million and $4.3
million for the three months ended March 31, 2022 and 2021, respectively,
related to the amortization of acquired developed technology assets, which
includes $8.9 million related to the acquisition of Afterpay in the first
quarter of 2022.

Transaction-based costs increased by $191.9 million, or 36%, compared to the
three months ended March 31, 2021, while GPV grew by 31% in the same periods.
Transaction-based costs during the three months ended March 31, 2022 were
affected by a decrease in the percentage of debit card transactions which have a
lower cost per transaction.

Subscription and services-based costs for the three months ended March 31, 2022
increased by $105.5 million, or 117%, compared to the three months ended March
31, 2021. The increase in the three months ended March 31, 2022 was
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driven primarily by Afterpay costs of revenue of $37.5 million for February and
March of 2022, as well as growth in Cash Card and Instant Deposit activity.
Additionally, these costs for the three months ended March 31, 2022 include
costs related to music streaming services following the acquisition of TIDAL in
the second quarter of 2021, as well as costs associated with Afterpay revenues
following the acquisition of Afterpay in the first quarter of 2022.

Hardware costs for the three months ended March 31, 2022 increased by $23.2
million, or 57%, compared to the three months ended March 31, 2021. The increase
was due to the increased sales of hardware, as further discussed in hardware
revenue above, as well as increased purchase price variances and inbound
shipping rates due to supply chain disruptions.

Bitcoin costs for the three months ended March 31, 2022 decreased by $1.7
billion, or 51%, compared to the three months ended March 31, 2021. Bitcoin cost
of revenue comprises of the total amounts we pay to purchase bitcoin, which will
fluctuate in line with bitcoin revenue.

Operating expenses (in thousands, except for percentages)

                                                                                  Three Months Ended
                                                                                      March 31,
                                                          2022                 2021              $ Change             % Change
Product development                                 $           484,761    $        310,141    $ 174,620                     56  %
% of total net revenue                                       12    %              6    %
Sales and marketing                                 $           501,562    $        349,460    $ 152,102                     44  %
% of total net revenue                                       13    %              7    %
General and administrative                          $           444,276    $        195,909    $ 248,367                    127  %
% of total net revenue                                       11    %              4    %
Transaction, loan, and consumer receivable losses   $            91,150    $         20,395    $  70,755                    347  %
% of total net revenue                                        2    %              -    %
Bitcoin impairment losses                           $                 -    $         19,860    $ (19,860)                  (100) %
% of total net revenue                                        -    %              -    %
Total operating expenses                            $         1,521,749    $        895,765    $ 625,984                     70  %



Product development expenses for the three months ended March 31, 2022 increased
by $174.6 million, or 56%, compared to the three months ended March 31, 2021,
due primarily to the following:

•an increase of $126.2 million in personnel costs for the three months ended
March 31, 2022, related to an increase in headcount among our engineering, data
science, and design teams, as we continue to improve and diversify our products.
The increase in personnel related costs includes an increase in share-based
compensation expense of $58.2 million for the three months ended March 31, 2022;
•an increase of $25.8 million in depreciation and amortization for the three
months ended March 31, 2022, primarily as a result of the acquired intangible
assets from Afterpay which increased the amortization of intangibles by $22.1
million. Refer to Note 11, Acquired Intangible Assets within Notes to the
Condensed Consolidated Financial Statements for more details; and

•an increase of $24.8 million in software and data center costs, consulting, and
certain Cash App crypto networks operating costs for the three months ended
March 31, 2022, as a result of increased capacity needs and expansion of our
cloud-based services. Beginning in the third quarter of 2021, certain operating
costs related to Cash App crypto network products that are offered for free were
reclassified to sales and marketing, while the portion of operating costs
attributable to revenue-generating products have been reclassified to cost of
revenues.

Sales and marketing expenses for the three months ended March 31, 2022 increased
by $152.1 million or 44%, compared to the three months ended March 31, 2021,
primarily due to the following:

•an increase of $36.9 million in sales and marketing personnel costs for the
three months ended March 31, 2022, to enable growth initiatives. The increase in
personnel related costs includes an increase in share-based compensation
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expense of $10.4 million for the three months ended March 31, 2022;
•an increase of $29.3 million in advertising costs for our Square services for
the three months ended March 31, 2022, primarily from increased online and
television marketing campaigns;
•an increase in Cash App marketing costs for the three months ended March 31,
2022 of $18.7 million. For the three months ended March 31, 2022 compared to the
three months ended March 31, 2021, Cash App customer acquisition costs increased
by $32.8 million and peer-to-peer risk loss increased by $16.1 million. Cash App
customer acquisition costs include advertising costs and costs associated with
various incentives to customers. We consider the free services such as stock
investing, Cash App Taxes, and certain Cash Card and peer-to-peer services to
Cash App customers to be marketing initiatives aimed at attracting new customers
and encouraging the usage of Cash App; and

•an increase in sales and marketing expenses due to the recent acquisitions of
Afterpay and TIDAL, completed in the first quarter of 2022 and second quarter of
2021, respectively.

General and administrative expenses for the three months ended March 31, 2022
increased by $248.4 million or 127%, compared to the three months ended March
31, 2021, primarily due to the following:

•an increase of $164.7 million in general and administrative personnel costs for
the three months ended March 31, 2022, mainly as a result of additions to our
customer support, finance, and legal personnel as we continued to add resources
and skills to support our long-term growth as our business continues to scale.
The increase in personnel related costs includes an increase in share-based
compensation expense of $21.9 million for the three months ended March 31, 2022;

•acquisition-related integration and other expenses for Afterpay of $42.4
million, as well as a $66.3 million one-time charge related to the acceleration
of various stock compensation arrangements in connection with the Afterpay
acquisition, which was additional to ongoing share-based compensation expense
for Afterpay employees; and

•an increase in third-party software and legal fees, subscription fees and other professional fees, and other administrative costs.

Transaction, loan, and consumer receivable losses for the three months ended
March 31, 2022 increased by $70.8 million, or 347%, compared to the three months
ended March 31, 2021, primarily due to the following:

• an increase in the provision for credit losses related to trade receivables since the acquisition of Afterpay until March 31, 2022 of $36.5 million;

•an increase in transaction losses for the three months ended March 31, 2022 of
$25.5 million compared to the three months ended March 31, 2021. The increase in
the three months ended March 31, 2022 was primarily due to lower transaction
losses in the three months ended March 31, 2021 following the release of
previously established Square risk loss provisions related to the fourth quarter
of 2020 as a result of better than expected realized transaction losses. This
increase was partially offset by a decrease in transaction losses related Cash
App's Cash Card in the three months ended March 31, 2022; and

•an increase in loan losses for the three months ended March 31, 2022 of $8.8
million compared to the three months ended March 31, 2021. The increase in loan
losses in the three months ended March 31, 2022 as compared to March 31, 2021
was due to increased loan volumes. Additionally, loan losses in the three months
ended March 31, 2022 also includes loan losses attributable to early stage
products for Cash App.

We did not record bitcoin impairment losses in the three months ended March 31,
2022, while bitcoin impairment losses were $19.9 million in the three months
ended March 31, 2021. As of March 31, 2022, the fair value of our investment in
bitcoin was $365.5 million based on observable market prices, which is
$216.5 million in excess of the carrying value of our investment of
$149.0 million. Any unrealized gains on our bitcoin investment will only be
recognized upon the sale of such bitcoin investment.

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Interest Expense, Net, and Other Expense (Income), Net (in thousands, except for
percentages)
                                                Three Months Ended
                                                    March 31,
                                 2022           2021        $ Change       % Change
Interest expense, net         $  15,748      $    253      $  15,495              NM
Other expense (income), net   $ (33,472)     $ 27,528      $ (61,000)        (222) %



Interest expense, net for the three months ended March 31, 2022 increased by
$15.5 million, compared to the three months ended March 31, 2021. The increase
was primarily due to interest expense related to our 2026 Senior Notes and 2031
Senior Notes. Refer to Note 14, Indebtedness within Notes to the Condensed
Consolidated Financial Statements for further details.

We recognized other income, net for the three months ended March 31, 2022 of
$33.5 million, compared to other expense, net of $27.5 million for the three
months ended March 31, 2021. The change of $61.0 million in the three months
ended March 31, 2022 was primarily due to recording an unrealized gain of
$59.8 million during the three months ended March 31, 2022, arising from the
revaluation of a non-marketable investment. Other expense (income), net also
includes foreign exchange losses and amortization of investments in marketable
debt securities.

Segment Results

The Company has two reportable segments, Square and Cash App. The results of
Afterpay have been equally allocated to the Square and Cash App segments as
management has concluded that Afterpay's BNPL platform will contribute equally
to both the Square and Cash App platforms. Refer to Note 20, Segment and
Geographical Information within Notes to the Condensed Consolidated Financial
Statements for more details.

Square results

The following tables provide a summary of the revenue and gross profit for our
Square segment for the three months ended March 31, 2022 and 2021 (in
thousands):
                                      Three Months Ended
                                           March 31,
                      2022             2021          $ Change       % Change
Net revenue       $ 1,443,704      $ 1,017,654      $ 426,050           42  %
Cost of revenue       782,483          549,638        232,845           42  %
Gross profit      $   661,221      $   468,016      $ 193,205           41  %



Revenue

Revenue for the Square segment for the three months ended March 31, 2022
increased by $426.1 million, or 42%, compared to the three months ended March
31, 2021. The increase was primarily due to growth in GPV attributable to
continued improvements experienced in both card-present volumes, growth in
higher-priced card-not-present transactions, as well as an increase in
subscription and services-based revenue, which was primarily due to the
increased origination volumes of Square Loans, other software subscriptions,
Instant Transfer for sellers, and Square Debit Card. The increase in revenue for
the Square segment was also due to the revenue generated from the BNPL platform
following the acquisition of Afterpay.

Revenue cost

Cost of revenue for the Square segment for the three months ended March 31, 2022
increased by $232.8 million, or 42%, compared to the three months ended March
31, 2021, which was in line with the increase in Square revenue of $426.1
million or 42%, for the three months ended March 31, 2022, compared to the three
months ended March 31, 2021. Transaction-based costs during the three months
ended March 31, 2022 were affected by a decrease in the percentage of debit card
transactions which have a lower cost per transaction.

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Cash App Results

The following tables provide a summary of the revenue and gross profit for our
Cash App segment for the three months ended March 31, 2022 and 2021 (in
thousands):
                                        Three Months Ended
                                            March 31,
                      2022             2021            $ Change        % Change
Net revenue       $ 2,462,343      $ 4,039,616      $ (1,577,273)         (39) %
Cost of revenue     1,838,684        3,544,131        (1,705,447)         (48) %
Gross profit      $   623,659      $   495,485      $    128,174           26  %



Revenue

Revenue for the Cash App segment for the three months ended March 31, 2022
decreased by $1.6 billion, or 39%, compared to the three months ended March 31,
2021. The primary driver was a decrease in bitcoin revenue, slightly offset by
growth in Cash App Instant Deposit, Cash Card, and Cash for Business. Bitcoin
revenue will fluctuate depending on customer demand as well as changes in the
market price of bitcoin. The decrease in bitcoin revenue in the three months
ended March 31, 2022 was driven primarily by relative stability in the price of
bitcoin during the quarter ended March 31, 2022, which reduced customer demand
and trading activity compared to the quarter ended March 31, 2021. While bitcoin
contributed 44% of the total net revenue, gross profit generated from bitcoin
was only 3% of the total gross profit.

Excluding $1.7 billion in bitcoin revenue, Cash App revenue increased by $203.0
million, or 38%, in the three months ended March 31, 2022, compared to the three
months ended March 31, 2021 due to growth in the number of active Cash App
accounts, an increase in the number of business accounts, and revenue generated
from the BNPL platform following the acquisition of Afterpay.

Revenue cost

Cost of revenue for the Cash App segment for the three months ended March 31,
2022 decreased by $1.7 billion, or 48%, compared to the three months ended March
31, 2021. The primary driver was a decrease in bitcoin revenue and the
associated costs of such revenue, as discussed further above. Excluding $1.7
billion in bitcoin cost of revenue, Cash App cost of revenue increased by
approximately $43.2 million, or 40%, in the three months ended March 31, 2022,
compared to the three months ended March 31, 2021, due to growth in Cash Card,
Cash App Instant Deposit, and Cash for Business.

Key Operating Parameters and Non-GAAP Financial Measures

We collect and analyze operating and financial data to evaluate the health of
our business, allocate our resources, and assess our performance. In addition to
total net revenue, net income (loss), and other results under generally accepted
accounting principles ("GAAP"), the following table sets forth key operating
metrics and non-GAAP financial measures we use to evaluate our business. We
believe these metrics and measures are useful to facilitate period-to-period
comparisons of our business, and to facilitate comparisons of our performance to
that of other payment solution providers.
                                                           Three Months Ended
                                                               March 31,
                                                          2022           2021

          Gross Payment Volume ("GPV") (in millions)   $  43,504      $  33,138

          Adjusted EBITDA (in thousands)               $ 195,361      $ 236,249
          Adjusted Net Income Per Share:
          Basic                                        $    0.19      $    0.47
          Diluted                                      $    0.18      $    0.41



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Gross Payment Volume (“GPV”)

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

Adjusted EBITDA and adjusted net earnings per share (“Adjusted EPS”)

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

•We believe it is useful to exclude certain non-cash charges, such as
amortization of intangible assets, and share-based compensation expenses, from
our non-GAAP financial measures because the amount of such expenses in any
specific period may not directly correlate to the underlying performance of our
business operations.

•In connection with the issuance of our convertible senior notes (as described
in Note 14, Indebtedness within Notes to the Condensed Consolidated Financial
Statements), prior to the adoption of ASU 2020-06 on January 1, 2021, we were
required to recognize non-cash interest expense related to amortization of debt
discount and issuance costs. Subsequent to adoption, we only recognize non-cash
interest expense related to amortization of debt issuance costs on convertible
notes and unsecured notes. We believe that excluding these expenses from our
non-GAAP measures is useful to investors because such incremental non-cash
interest expense does not represent a current or future cash outflow for the
Company and is therefore not indicative of our continuing operations or
meaningful when comparing current results to past results. Additionally, for
purposes of calculating diluted Adjusted EPS we add back cash interest expense
on convertible senior notes, as if converted at the beginning of the period, if
the impact is dilutive.

•We exclude gain or loss on the disposal of property and equipment, gain or loss
on revaluation of equity investments, bitcoin impairment losses, and prior to
the adoption of ASU 2020-06 on January 1, 2021, gain or loss on debt
extinguishment related to the conversion of convertible notes, as applicable,
from non-GAAP financial measures because we do not believe that these items are
reflective of our ongoing business operations.

•We also exclude certain transaction and integration costs associated with
business combinations, and various other costs that are not normal operating
expenses. Transaction costs include amounts paid to redeem acquirees' unvested
share-based compensation awards, and legal, accounting, valuation, and due
diligence costs. Integration costs include advisory and other professional
services or consulting fees necessary to integrate acquired businesses. Other
costs that are not reflective of our core business operating expenses may
include contingent losses, litigation and regulatory charges. We also add back
the impact of the acquired deferred revenue and deferred cost adjustment, which
was written down to fair value in purchase accounting.

In addition to the above items, Adjusted EBITDA as a non-GAAP financial measure also excludes amortization, other cash interest income and expense, and other income and expense.

Beginning in the first quarter of 2022, we have included the tax impact of the
non-GAAP adjustments in determining the Adjusted EPS. We determined the adjusted
provision (benefit) for income taxes by calculating the estimated annual
effective tax rate based on adjusted pre-tax income and applying it to Adjusted
Net Income before income taxes. The prior period Adjusted EPS presentation has
also been revised to conform with our new calculation and presentation.

Non-GAAP financial measures have limitations, should be considered supplemental in nature, and are not intended to replace related financial information prepared in accordance with GAAP. These limitations include the following:

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• stock-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;

•amortized intangible assets may need to be replaced in the future, and non-GAAP financial measures do not reflect 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 requirements.

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.

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

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

The following table provides a reconciliation of net income and adjusted EBITDA for each of the periods indicated (in thousands):

                                                                Three Months Ended
                                                                     March 31,
                                                                2022           2021

Net income (loss) attributable to common shareholders ($204,199) $39,008

   Net loss attributable to noncontrolling interests            (3,164)     

   Net income (loss)                                          (207,363)     

39,008

   Share-based compensation expense                            275,423      

118,623

   Depreciation and amortization                                70,056      

29 201

   Acquisition-related, integration and other costs             76,065      

26

   Interest expense, net                                        15,748      

253

   Other expense (income), net                                 (33,472)     

27,528

   Bitcoin impairment losses                                         -      

19,860

   Provision (benefit) for income taxes                         (1,702)     

947

   Loss on disposal of property and equipment                      534      

615

   Acquired deferred revenue adjustment                            118      

252

   Acquired deferred cost adjustment                               (46)           (64)
   Adjusted EBITDA                                          $  195,361      $ 236,249



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The following table presents a reconciliation of net income (loss) to Adjusted
Net Income and Adjusted EPS for each of the periods indicated, with revisions to
the prior period to include the tax effect of non-GAAP net income adjustments as
described above (in thousands, except per share data):
                                                                                  Three Months Ended
                                                                                      March 31,
                                                                               2022                2021
Net income (loss) attributable to common stockholders                      $ (204,199)         $  39,008
Net loss attributable to noncontrolling interests                              (3,164)                 -
Net income (loss)                                                            (207,363)            39,008
Share-based compensation expense                                              275,423            118,623
Acquisition-related, integration and other costs                               76,065                 26
Amortization of intangible assets                                              42,160              6,884
Amortization of debt discount and issuance costs                                3,630              1,832
Loss (gain) on revaluation of equity investments                              (49,741)            28,900
Bitcoin impairment losses                                                           -             19,860

Loss on disposal of property and equipment                                        534                615

Acquired deferred revenue adjustment                                              118                252
Acquired deferred cost adjustment                                                 (46)               (64)
Tax effect of non-GAAP net income adjustments                                 (38,326)           (47,537)
Adjusted Net Income - basic                                                $  102,454          $ 168,399
Cash interest expense on convertible senior notes                          $    1,241          $   1,728
Adjusted Net Income - diluted                                              

$103,695 $170,127

Weighted-average shares used to compute Adjusted Net Income Per Share:
Basic                                                                         541,435            454,973
Diluted                                                                       583,452            524,540

Adjusted Net Income Per Share:
Basic                                                                      $     0.19          $    0.47
Diluted                                                                    $     0.18          $    0.41



Diluted Adjusted Net Income Per Share is computed by dividing Adjusted Net
Income by the weighted-average number of shares of common stock outstanding
adjusted for the dilutive effect of all potential shares of common stock. In
periods when we reported an Adjusted Net Loss, diluted Adjusted Net Income Per
Share is the same as basic Adjusted Net Income Per Share because the effects of
potentially dilutive items were anti-dilutive.

The following table presents a reconciliation of the tax effect of non-GAAP net
income adjustments to our provision (benefit) for income taxes (in thousands,
except effective tax rate):
                                                             Three Months Ended
                                                                  March 31,
                                                             2022               2021

Provision (benefit) for income taxes, as published $(1,702)

  $    947
Tax effect of non-GAAP net income adjustments               38,326          

47,537

Adjusted provision for income taxes, non-GAAP               36,624             48,484
Non-GAAP Effective Tax Rate                           26%                    22%


We determined the adjusted provision for income taxes by calculating the estimated annual effective tax rate based on adjusted pre-tax income and applying it to adjusted net income before income taxes.

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Cash and capital resources

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

Sources of liquidity

As of March 31, 2022, we had approximately $6.9 billion in available funds,
including an undrawn amount of $600.0 million available under our revolving
credit facility. Additionally, we had $1.6 billion available under our warehouse
funding facilities. Refer to Note 14, 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. We
are carefully monitoring and managing our cash position in light of ongoing
conditions and levels of operations. As of March 31, 2022, we were in compliance
with all financial covenants associated with the 2020 Credit Facility and Senior
Notes. None of our warehouse funding facilities contain financial covenants.

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

                                                                                          December 31,
                                                                  March 31, 2022              2021
Cash and cash equivalents                                      $      3,993,565          $  4,443,669
Short-term restricted cash                                              109,450                18,778
Long-term restricted cash                                                71,702                71,702
Customer funds cash and cash equivalents                              3,190,905                2,440,941

Cash, cash equivalents, restricted cash and customer funds 7,365,622

             6,975,090
Investments in short-term debt securities                               796,749               869,283
Investments in long-term debt securities                              1,333,139             1,526,430

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

                      $      

9,495,510 $9,370,803



Our principal sources of liquidity are our cash and cash equivalents and
investments in marketable debt securities. As of March 31, 2022, we had $9.5
billion of cash and cash equivalents, restricted cash, customer funds cash and
cash equivalents, and investments in marketable debt securities. Customer funds
cash and cash equivalents are separate from our corporate funds and are not used
for any corporate purposes. These funds are not used for our liquidity, but
rather to meet the obligations set aside for customers. Investments in
marketable debt securities were held primarily in cash deposits, money market
funds, reverse repurchase agreements, U.S. government and agency securities,
commercial paper, and corporate bonds. We consider all highly liquid investments
with an original maturity of three months or less when purchased to be cash
equivalents. Our investments in marketable debt securities are classified as
available-for-sale. Excluding customer funds, the balance of cash and cash
equivalents, restricted cash, and investments in marketable debt securities as
of March 31, 2022 was $6.3 billion. From time to time, we have raised capital by
issuing equity, equity-linked, or debt securities such as our convertible senior
notes. We do not have any off-balance sheet arrangements during the periods
presented.

We purchased an aggregate $220.0 million in bitcoin in 2020 and 2021, with no
purchases in the three months ended March 31, 2022. We believe cryptocurrency is
an instrument of economic empowerment that aligns with our corporate purpose. We
expect to hold these investments for the long term but will continue to reassess
our investment in bitcoin relative to our balance sheet. As bitcoin is
considered an indefinite lived intangible asset, under the accounting policy for
such assets we will be required to recognize any decreases in market prices
below carrying value as an impairment charge, with any mark up in value
prohibited if the market price of bitcoin subsequently increases. We did not
record impairment losses in the three months ended March 31, 2022. As of March
31, 2022, the fair value of our investment in bitcoin was $365.5 million based
on observable market prices which is $216.5 million in excess of the Company's
carrying value of $149.0 million. Impairment losses cannot be recovered for any
subsequent increase in fair value until the sale of the asset.

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In September 2020, we announced our intent to invest $100.0 million in
supporting underserved communities, particularly, racial and ethnic minority
groups who have been disproportionately affected by COVID-19. This initiative
further deepens our commitment toward economic empowerment to help broaden such
communities' access to financial services. As of March 31, 2022, we have
invested $24.1 million in aggregate towards this initiative, of which $2.2
million was invested in the three months ended March 31, 2022.

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

Senior Bonds and Convertible Bonds

As of March 31, 2022, we held over $4.6 billion in aggregate principal amount of
long-term debt, comprised of $460.6 million in aggregate principal amount of
convertible senior notes that mature on May 15, 2023 ("2023 Convertible Notes"),
$1.0 billion in aggregate amount of convertible senior notes that mature on
March 1, 2025 ("2025 Convertible Notes"), $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," and together with the 2023
Convertible Notes, 2025 Convertible Notes, and 2026 Convertible Notes, 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"). The 2023 Convertible Notes
bear interest at a rate of 0.50% payable semi-annually on May 15 and November 15
of each year, the 2025 Convertible Notes bear interest at a rate of 0.125%
payable semi-annually on March 1 and September 1 of each year, the 2026
Convertible Notes bear no interest, and the 2027 Convertible Notes bear interest
at a rate of 0.25% payable semi-annually on May 1 and November 1 of each year.
These Convertible Notes can be converted or repurchased prior to maturity if
certain conditions are met. The 2026 Senior Notes bear interest a rate of 2.75%
payable semi-annually on June 1 and December 1, while the 2031 Senior Notes bear
interest at a rate of 3.50% payable semi-annually on June 1 and December 1 of
each year. These Senior Notes can be redeemed or repurchased prior to maturity
if certain conditions are met.

On January 31, 2022, we closed the acquisition of Afterpay and assumed
Afterpay's outstanding convertible notes of $1.1 billion, which we redeemed on
March 4, 2022 at face value. Refer to Note 9, Acquisitions within Notes to the
Condensed Consolidated Financial Statements for further details.

Paycheck Protection Program Liquidity Facility

In June 2020, we entered into the Paycheck Protection Program Liquidity Facility
("PPPLF") agreement with the Federal Reserve Bank of San Francisco ("First PPPLF
Agreement") to secure additional credit collateralized by PPP loans. The
advances under this facility are repayable if the associated PPP loans are
forgiven, repaid by a customer or settled by the government guarantee. On
January 29, 2021, we entered into a second PPPLF agreement with the Federal
Reserve Bank of San Francisco ("Second PPPLF Agreement") to secure additional
credit, collateralized by loans from the second round of the PPP program, in an
aggregate principal amount of up to $1.0 billion under both PPPLF Agreements.
The maturity date of any PPPLF advances is the maturity date of the PPP loan
pledged to secure the advance, and will be accelerated upon the occurrence of
certain events of default. Although loans originated under the PPP have a stated
maturity of between two and five years from origination, some of the loans may
be forgiven 24 weeks after disbursement if they meet certain specified criteria.
The PPPLF advances are repayable if the associated PPP loan is forgiven, repaid
by the customer, or settled by the government guarantee. As of March 31, 2022,
$124.6 million of PPPLF advances were outstanding and are, generally,
collateralized by the same value of PPP loans. Any differences between the
amounts are generally due to the timing of PPP loan repayment or forgiveness,
and repayment of PPPLF advances.

Revolving credit facility

We have entered into a revolving credit agreement with certain lenders, as
subsequently amended, which provides a $500.0 million senior unsecured revolving
credit facility (the "2020 Credit Facility") maturing in May 2024. On February
23, 2022, the Company entered into a sixth amendment to the Credit Agreement to,
among other things, provide for a new tranche of unsecured revolving loan
commitments in an aggregate principal amount of up to $100.0 million (the
"Tranche B Loans"). Loans under the 2020 Credit Facility, excluding the Tranche
B Loans, bear interest at our option of (i) a base rate based on the highest of
the prime rate, the federal funds rate plus 0.50%, and the adjusted LIBOR rate
plus 1.00%, in each
                                       62
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case, plus a margin ranging from 0.25% to 0.75% or (ii) an adjusted LIBOR rate
plus a margin ranging from 1.25% to 1.75%. The margin is determined based on our
total net leverage ratio, as defined in the agreement. The Tranche B Loans bear
interest at the Company's option of (i) an annual rate based on the
forward-looking term rate based on the Secured Overnight Financing Rate ("Term
SOFR") or (ii) a base rate. Tranche B Loans based on Term SOFR shall bear
interest at a rate equal to Term SOFR plus a margin of between 1.25% and 1.75%,
depending on the Company's total net leverage ratio. Tranche B Loans based on
the base rate shall bear interest at a rate based on the highest of the prime
rate, the federal funds rate plus 0.50%, and Term SOFR with a tenor of one-month
plus 1.00%, in each case, plus a margin ranging from 0.25% to 0.75%, depending
on the Company's total net leverage ratio. We are obligated to pay other
customary fees for a credit facility of this size and type including an unused
commitment fee of 0.15%. To date, no funds have been drawn and no letters of
credit have been issued under the 2020 Credit Facility.

Refer to Note 14, Indebtedness in the Notes to the Condensed Consolidated Financial Statements for more details on these transactions.

Warehouse financing facilities

Following the acquisition of Afterpay, we assumed Afterpay's existing warehouse
funding facilities ("Warehouse Facilities") with an aggregate commitment amount
of $1.8 billion on a revolving basis, of which $0.2 billion was drawn and $1.6
billion remained available as of March 31, 2022. The Warehouse Facilities have
been arranged utilizing wholly-owned and consolidated entities formed for the
sole purpose of financing the origination of consumer receivables to partly fund
our BNPL platform. Borrowings under the Warehouse Facilities are secured against
the respective consumer receivables.

Refer to Note 14, Indebtedness in the Notes to the Condensed Consolidated Financial Statements for further details.

Cash, restricted cash and working capital

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

When we were last rated in 2021, we received a non-investment grade rating by
S&P Global Ratings (BB), Fitch Ratings, Inc. (BB) and Moody's Corporation (Ba2).
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 $109.5 million as of March 31, 2022 reflects
pledged cash deposited into savings accounts at the financial institutions that
process our sellers' payments transactions and as collateral pursuant to
agreements with third-party originating banks for certain loan products. We use
the restricted cash to secure letters of credit with these financial
institutions to provide collateral for liabilities arising from cash flow timing
differences in the processing of these payments. We have recorded this amount as
a current asset on our consolidated balance sheets given the short-term nature
of these cash flow timing differences and that there is no minimum time frame
during which the cash must remain restricted. Additionally, this balance
includes certain amounts held as collateral pursuant to multi-year lease
agreements, which we expect to become unrestricted within the next year.

Long-term restricted cash of $71.7 million as of March 31, 2022 is primarily
related to a reserve deposit to satisfy the capital and liquidity requirements
associated with the banking operations of SFS mandated by the FDIC, as well as
cash deposited into money market funds that is used as collateral pursuant to
multi-year lease agreements. We have recorded these amounts as non-current
assets on the condensed consolidated balance sheets as we are required to
establish and maintain the reserve deposit at all times to support the ongoing
liquidity obligations of SFS, and due to certain lease terms extending beyond
one year.

We experience significant daily fluctuations in our cash and cash equivalents due to fluctuations in settlements receivable, customers payable and, therefore, working capital. These fluctuations are mainly due to:

                                       63
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•Timing of period end. For periods that end on a weekend or a bank holiday, our
cash and cash equivalents, settlements receivable, and customers payable
balances typically will be higher than for periods ending on a weekday, as we
settle to our sellers for payment processing activity on business days; and

•Fluctuations in daily GPV. When daily GPV increases, our cash and cash
equivalents, settlements receivable, and customers payable amounts increase.
Typically our settlements receivable and customers payable balances at period
end represent one to four days of receivables and disbursements to be made in
the subsequent period. Customers payable, excluding amounts attributable to Cash
App stored funds, and settlements receivable balances typically move in tandem,
as pay-out and pay-in largely occur on the same business day. However, customers
payable balances will be greater in amount than settlements receivable balances
due to the fact that a subset of funds are held due to unlinked bank accounts,
risk holds, and chargebacks. Also customer funds obligations, which are included
in customers payable, may cause customers payable to trend differently than
settlements receivable. Holidays and day-of-week may also cause significant
volatility in daily GPV amounts.

Treasury activities

The condensed consolidated statements of cash flows for the three months ended
March 31, 2022 has been revised to reflect changes in the cash flow presentation
adopted in 2021. Previously, the total changes in customer funds and customers
payable were presented within operating activities within the Company's
condensed consolidated statements of cash flows. The adjustment resulted in
reclassifying changes in customer funds, and cash and cash equivalents that were
associated with customers payable as financing activities. The adjustment also
resulted in the portion of customer funds that is held in cash and cash
equivalents, restricted cash, and customer funds to be included in the beginning
and ending period totals of cash, cash equivalents, restricted cash, and
customer funds. Prior period amounts have been adjusted to this presentation.
Refer to Note 1, Description of the Business and Summary of Significant
Accounting Policies within Notes to the Condensed Consolidated Financial
Statements for further details.


The following table summarizes our treasury activities (in thousands):

                                                                        Three Months Ended
                                                                             March 31,
                                                                    2022                  2021
Net cash provided by (used in) operating activities            $    229,423          $    (29,193)
Net cash provided by (used in) investing activities               1,130,613              (158,023)
Net cash provided by (used in) financing activities                (968,556)            1,119,588

Effect of exchange rate on cash and cash equivalents (948)

               (8,206)
Net increase in cash, cash equivalents, restricted cash, and
customer funds                                                 $    390,532          $    924,166



                                       64
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Cash flow from operating activities

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

For the three months ended March 31, 2022, cash provided by operating activities
was $229.4 million. Net loss was $207.4 million, adjusted for the add back of
non-cash expenses of $337.6 million, consisting primarily of share-based
compensation; transaction, loan, and consumer receivable losses; depreciation
and amortization; and gains on revaluation of equity investments, as well as
non-cash lease expenses, which all contributed positively to operating
activities. Additionally, there was a net inflow from the repayment and
forgiveness of PPP loans, and a net outflow related to changes in other assets
and liabilities of $61.4 million due to timing of period end.

For the three months ended March 31, 2021, cash used in operating activities was
$29.2 million. Net income was $39.0 million, adjusted for the add back of
non-cash expenses of $242.6 million, consisting primarily of share-based
compensation, transaction and loan losses, depreciation and amortization, loss
on revaluation of equity investment, and bitcoin impairment losses, which
contributed positively to operating activities. This was offset by net outflow
of PPP loans of $271.6 million, as well as a net outflow from changes in other
assets and liabilities of $39.2 million due to timing.

Cash flow from investing activities

Cash flows generated or used in investing activities primarily relate to capital expenditures to support our growth, investments in marketable debt securities, bitcoin and business acquisitions.

For the three months ended March 31, 2022, cash provided by investing activities
was $1.1 billion, primarily due to the net proceeds from the sales and
maturities of marketable securities including investments from customer funds of
$620.5 million, and the net cash acquired through the acquisition of Afterpay of
$570.7 million. These were partially offset by the purchase of marketable debt
securities, property and equipment and other investments of $210.0 million,
$41.2 million, and $16.5 million, respectively.

For the three months ended March 31, 2021, cash used in investing activities was
$158.0 million, primarily due to purchases of bitcoin and other investments of
$170.0 million, as well as the purchase of property and equipment of $34.1
million, partially offset by the net proceeds from investments of marketable
securities including investments from customer funds of $55.6 million and the
proceeds from sale of equity investments of $19.0 million.

Cash flow from financing activities

For the three months ended March 31, 2022, cash used in financing activities was
$1.0 billion primarily as a result of the payment to redeem convertible notes
assumed upon the acquisition of Afterpay of $1.1 billion, repayments of the
PPPLF advances of $372.9 million, partially offset by the change in customer
funds of $359.9 million and net proceeds from Warehouse Facilities borrowings of
$92.9 million.

For the three months ended March 31, 2021, cash provided by financing activities
was $1.1 billion primarily as a result of the change in customer funds of $938.6
million as well as proceeds, net of repayments of the PPPLF advances of $300.1
million, proceeds from issuances of common stock from the exercise of options,
and purchases under our employee share purchase plan of $32.9 million, partially
offset by payments for employee tax withholding related to vesting of restricted
stock units of $152.0 million.
                                       65
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Significant Accounting Policies and Estimates

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

As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021we believe that the accounting policies and assumptions and estimates associated with losses on transactions, loans and trade receivables could potentially have a material effect on our condensed consolidated financial statements and therefore constitute a critical accounting policy and estimate.

Additionally, we consider accounting for business combinations under ASC 805,
Business Combinations, to also be a critical accounting policy and estimate as
it requires management to make significant estimates and assumptions, including
the valuation of intangible assets acquired, determination of fair values of
liabilities assumed including pre-acquisition contingencies, and valuation of
contingent consideration, where applicable. Although we believe that the
assumptions and estimates we have made have been reasonable and appropriate,
they are based in part on historical experience and information obtained from
the management of the acquired companies and are inherently uncertain.
Unanticipated events and circumstances may occur that may affect the accuracy or
validity of such assumptions, estimates or actual results.


Recent accounting pronouncements

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

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