Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Overview

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

Our Seller ecosystem is a cohesive commerce ecosystem that helps sellers start, run and grow their businesses, and consists of over 30 distinct software, hardware, and financial services products. We monetize 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 offering, a seller can accept payments in person via swipe, dip, or tap of a card, or online via Square Invoices, Square Virtual Terminal, or the seller’s website. We also provide hardware to facilitate commerce for sellers, which includes magstripe readers, contactless and chip readers, Square Stand, Square Register, Square Terminal, and third-party peripherals. Our Seller ecosystem includes Square Banking for our U.S. sellers, offering a suite of products including Square Savings, Square Checking, and Square Loans (formerly known as Square Capital). In the second quarter of 2021, we began offering Square Loans in Australia. 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 access to funds for business expenses using their Square Debit Card or for paying 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, and France.

Our Cash App ecosystem provides financial tools for individuals to store, send, receive, spend and invest money. With Cash App, customers can fund their account with a bank account or debit card, send and receive peer-to-peer payments, and receive direct deposit payments. Customers can make purchases with their Cash Card, a Visa prepaid card that is linked to the balance stored in Cash App. 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.

We also recently launched TBD, a bitcoin-focused business established to build an open developer platform with the goal of making it easy to create non-custodial, permissionless, and decentralized financial services.

On August 1, 2021, we entered into a definitive agreement to acquire Afterpay by way of a court-approved Scheme of Arrangement for 0.375 share of our Class A common stock for each outstanding Afterpay ordinary share. The estimated aggregate purchase consideration based on our closing stock price of $239.84 as of September 30, 2021 and the outstanding shares of Afterpay as of the same date, excluding the value of replacement equity awards, is $26.6 billion, comprising approximately 111 million shares of our Class A common stock. The final determination of the purchase consideration will depend on our stock price and the outstanding shares of Afterpay at the closing date of the transaction. The transaction is expected to close in the first quarter of 2022. Afterpay, a pioneering global ‘buy now, pay later’ (BNPL) platform, is expected to accelerate our strategic priorities for our Seller and Cash App ecosystems. Refer to Note 8, Acquisitions, of Notes to the Condensed Consolidated Financial Statements for further details.

On July 20, 2021, we launched Square Banking to our U.S. sellers, expanding access to financial services, which includes Square Savings, Square Checking, and Square Loans (formerly known as Square Capital). Square Loans and Square Savings are offered through our wholly-owned subsidiary, Square Financial Services, Inc. ("Square Financial Services"), and Square Checking through a partner bank.

On April 30, 2021, we completed the acquisition of a majority ownership interest in TIDAL as detailed in Note 8, Acquisitions, of Notes to the Condensed Consolidated Financial Statements. TIDAL is a global music and entertainment platform that brings fans and artists together through unique music, content, and experiences. The acquisition extends our purpose of economic empowerment to musicians.

On May 20, 2021, we issued an aggregate principal amount of $2.0 billion of senior unsecured notes comprised of $1.0 billion of senior unsecured notes that mature on June 1, 2026 ("2026 Senior Notes") with a 2.75% interest rate, and $1.0 billion of senior unsecured notes that mature on June 1, 2031 ("2031 Senior Notes") with a 3.50% interest rate. The 2026 Senior Notes and 2031 Senior Notes will mature on each of its respective dates, unless earlier redeemed or repurchased. Interest on the 2026 Senior Notes and 2031 Senior Notes will be payable semi-annually on June 1 and December 1 of each year beginning on December 1, 2021. We intend to use the net proceeds from our 2026 Senior Notes and 2031 Senior Notes offerings for general corporate purposes, which may include potential acquisitions and strategic transactions, capital expenditures, investments and working capital.

On March 1, 2021, the industrial loan company charter for Square Financial Services was approved by the Federal Deposit Insurance Corporation ("FDIC"). Square Financial Services offers banking services including certain loan and deposit products.

We participated in two rounds of the Paycheck Protection Program (“PPP”) under the provisions of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). These PPP loans are guaranteed by the U.S. government and are eligible for forgiveness if the borrowers meet certain criteria. As of September 30, 2021, we had facilitated the issuance of $1.4 billion of loans in the aggregate under the program, of which we had sold $399.0 million to an investor. As of September 30, 2021, approximately $434.2 million in the aggregate of PPP loans had been forgiven by the SBA, of which, $387.9 million was forgiven in the third quarter of 2021. We approved and funded the last remaining PPP applications on May 21, 2021 upon exhaustion of the funds in the program.

To fund some of our PPP loans, we entered into Paycheck Protection Program Liquidity Facility agreements with the Federal Reserve Bank of San Francisco for an aggregate principal amount of up to $1.0 billion. Borrowings under the facility accrue interest at a rate of 0.35% and advances are collateralized by the same value of the loans originated under the PPP. The maturity date of any PPPLF advance 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. The advances under the facility are repayable if the associated PPP loans are forgiven, repaid by the customer, or settled by the government guarantee. As of September 30, 2021, $725.7 million of PPPLF advances were outstanding.

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

Continuing into the third quarter of 2021, we experienced improvements in our business, despite the rise of COVID-19 delta variant infection rates across the country. These improvements were mainly as a result of varying states of continued economic recovery and re-openings in the majority of U.S. markets that our customers operate in. We experienced growth in our Seller GPV 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, regional re-openings, and government stimulus and relief programs enacted in response to COVID-19.

Although our business results and outlook remain positive, the emergence of new and more transmissible variants of COVID-19 could lead to a possible resurgence of the virus, particularly in populations with low vaccination rates, requiring the reimplementation of restrictions. The extent to which the pandemic will further impact our financial results in the future is unknown.

Results of Operations

Revenue (in thousands, except for percentages)


	Three Months Ended September 30,								Nine Months Ended September 30,
	2021		2020		$ Change		% Change		2021		2020		$ Change		% Change
Transaction-based revenue	$	1,297,040	$	925,294	$	371,746	40	%	$	3,484,245	$	2,365,967	$	1,118,278	47	%
Subscription and services-based revenue	694,770		447,522		247,248		55	%	$	1,937,629	$	1,090,032	$	847,597	78	%
Hardware revenue	37,255		27,294		9,961		36	%	109,769		67,291		$	42,478	63	%
Bitcoin revenue	1,815,662		1,633,764		181,898		11	%	$	8,051,026	$	2,815,318	$	5,235,708	186	%
Total net revenue	$	3,844,727	$	3,033,874	$	810,853	27	%	$	13,582,669	$	6,338,608	$	7,244,061	114	%

Total net revenue for the three and nine months ended September 30, 2021 increased by $810.9 million, or 27%, and $7.2 billion, or 114%, compared to the three and nine months ended September 30, 2020, respectively. Bitcoin revenue increased by $181.9 million and $5.2 billion for the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020, respectively, and represented 22% and 72% of the increase in total net revenue for the three and nine months ended September 30, 2021, compared to the three and nine months ended September 30, 2020, respectively. Excluding bitcoin revenue, total net revenue increased by $629.0 million, or 45%, and $2.0 billion, or 57%, in the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020, respectively.

Transaction-based revenue for the three and nine months ended September 30, 2021 increased by $371.7 million or 40%, and $1.1 billion or 47%, compared to the three and nine months ended September 30, 2020, respectively. These increases in revenue were in-line with the increase in GPV of 43% and 51% for the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020, respectively. The increase in transaction-based revenue was driven by the:

continued improvements in both card-present volumes as a result of regional re-openings and resumed in-person activity at sellers, as well as growth in higher-priced card-not-present transactions;
increase in consumer spending driven in part by a broader macro economic recovery, regional re-openings and growth in our Seller GPV in international markets despite periodic lockdowns in certain markets, as well as U.S. government disbursements related to stimulus programs enacted through the third quarter of 2021; and
growth in Cash App Business GPV which includes Cash for Business and peer-to-peer payments sent from a credit card. Cash for Business includes peer-to-peer transactions received by business accounts using Cash App.

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

Subscription and services-based revenue for the three and nine months ended September 30, 2021 increased by $247.2 million, or 55%, and $847.6 million, or 78%, compared to the three and nine months ended September 30, 2020, respectively. These increases were primarily driven by Cash App and Seller. The increase in Cash App subscription and services-based revenue is primarily due to increased Cash Card usage and Cash App Instant Deposit volumes. Seller 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 and nine months ended September 30, 2021 increased by $10.0 million, or 36%, and $42.5 million, or 63%, compared to the three and nine months ended September 30, 2020, respectively. These increases were primarily a result of an overall increase in sales of hardware across many of our product offerings primarily due to Square Register, Square Terminal, and third party peripherals.

Bitcoin revenue for the three and nine months ended September 30, 2021 increased by $181.9 million, or 11%, and $5.2 billion, or 186%, compared to the three and nine months ended September 30, 2020, respectively. The increase was due to the market price of bitcoin and growth in the number of active bitcoin customers. The amount of bitcoin revenue recognized will fluctuate depending on customer demand as well as changes in the market price of bitcoin. This smaller increase in the three months ended September 30, 2021 was impacted by the stability in the price of bitcoin, which reduced buying and selling activity compared to prior quarters. While bitcoin revenue contributed 47% and 59% of the total net revenue in the three and nine months ended September 30, 2021, respectively, and 22% and 72% of the increase in total net revenues in the three and nine months ended September 30, 2021, respectively, gross profit generated from bitcoin transactions was only 4% and 5% of the total gross profit in the three and nine months ended September 30, 2021, compared to 4% and 3% of total gross profit in the three and nine months ended September 30, 2020, respectively.

Cost of Revenue (in thousands, except for percentages)


	Three Months Ended September 30,								Nine Months Ended September 30,
	2021		2020		$ Change		% Change		2021		2020		$ Change		% Change
Transaction-based costs	$	754,276	$	524,056	$	230,220	44	%	$	1,965,894	$	1,379,658	$	586,236	42	%
Subscription and services-based costs	132,046		68,528		63,518		93	%	346,144		161,801		184,343		114	%
Hardware costs	51,150		45,220		5,930		13	%	153,035		108,348		44,687		41	%
Bitcoin costs	1,774,040		1,601,615		172,425		11	%	7,879,816		2,759,082		5,120,734		186	%

Total cost of revenue	$	2,711,512	$	2,239,419	$	472,093	21	%	$	10,344,889	$	4,408,889	$	5,936,000	135	%

Total cost of revenue for the three and nine months ended September 30, 2021 increased by $472.1 million, or 21%, and $5.9 billion, or 135%, compared to the three and nine months ended September 30, 2020, respectively. Bitcoin costs of revenue increased by $172.4 million and $5.1 billion in the three and nine months ended September 30, 2021, compared to the three and nine months ended September 30, 2020, respectively, and represented 37% and 86% of the increase in the total cost of revenue in the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020, respectively. Excluding bitcoin costs of revenue, total cost of revenue increased by approximately $299.7 million, or 47%, and $815.3 million, or 49%, in the three and nine months ended September 30, 2021, compared to the three and nine months ended September 30, 2020, respectively.

Transaction-based costs increased by $230.2 million, or 44%, and $586.2 million, or 42%, compared to the three and nine months ended September 30, 2020, respectively, while GPV grew by 43% and 51% in the same periods. Transaction-based costs during the three months ended September 30, 2021 were affected by a decrease in the percentage of debit card transactions which have a lower cost per transaction, and a decrease in average transaction sizes resulting in higher cost per transaction. However, for the nine months ended September 30, 2021, the overall percentage of debit card transactions was higher compared to the nine months ended September 30, 2020, resulting in a smaller percentage increase in transaction costs compared to the percentage increase in GPV, a trend which we do not expect to continue in future periods as transaction costs customarily increase in proportion to GPV.

Subscription and services-based costs for the three and nine months ended September 30, 2021 increased by $63.5 million, or 93%, and $184.3 million, or 114%, compared to the three and nine months ended September 30, 2020, respectively. The increase in the three and nine months ended September 30, 2021 was driven primarily by growth in Cash Card, Instant Deposit activity and costs related to music streaming services following the acquisition of TIDAL in the second quarter of 2021.

Hardware costs for the three and nine months ended September 30, 2021 increased by $5.9 million, or 13%, and $44.7 million, or 41%, compared to the three and nine months ended September 30, 2020, respectively. The increase was primarily due to the increased sales of hardware, as further discussed in hardware revenue above.

Bitcoin costs for the three and nine months ended September 30, 2021 increased by $172.4 million, or 11%, and $5.1 billion, or 186%, compared to the three and nine months ended September 30, 2020, respectively. Bitcoin cost of revenue comprises of the total amounts we pay to purchase bitcoin, which will fluctuate in line with bitcoin revenue.

Operating Expenses (in thousands, except for percentages)


	Three Months Ended September 30,										Nine Months Ended September 30,
	2021			2020			$ Change		% Change		2021			2020			$ Change		% Change
Product development	$	366,587		$	227,550		$	139,037	61	%	$	1,003,238		$	631,156		$	372,082	59	%
% of total net revenue	10		%	8		%					7		%	10		%
Sales and marketing	$	407,850		$	348,463		$	59,387	17	%	$	1,132,411		$	781,094		$	351,317	45	%
% of total net revenue	11		%	11		%					8		%	12		%
General and administrative	$	267,476		$	153,902		$	113,574	74	%	$	684,405		$	419,783		$	264,622	63	%
% of total net revenue	7		%	5		%					5		%	7		%
Transaction and loan losses	$	62,306		$	15,198		$	47,108	310	%	$	130,874		$	161,684		$	(30,810)	(19)	%
% of total net revenue	2		%	1		%					1		%	3		%
Bitcoin impairment losses	$	6,000		$	—		$	6,000	—	%	$	71,126		$	—		$	71,126	—	%
% of total net revenue	—		%	—		%					1		%	—		%
Total operating expenses	$	1,110,219		$	745,113		$	365,106	49	%	$	3,022,054		$	1,993,717		$	1,028,337	52	%

Product development expenses for the three and nine months ended September 30, 2021 increased by $139.0 million and $372.1 million, or 61%, and 59%, respectively, compared to the three and nine months ended September 30, 2020, due primarily to the following:

an increase of $105.9 million and $268.9 million in personnel costs for the three and nine months ended September 30, 2021, respectively, related to an increase in headcount among our engineering, data science, and design teams, as we continue to improve and diversify our products. The increase in personnel related costs includes an increase in share-based compensation expense of $42.5 million and $108.6 million for the three and nine months ended September 30, 2021, respectively; and
an increase of $20.8 million and $83.0 million in software and data center costs, consulting, and certain Cash App crypto networks operating costs for the three and nine months ended September 30, 2021, respectively, 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 and nine months ended September 30, 2021 increased by $59.4 million or 17%, and $351.3 million or 45%, compared to the three and nine months ended September 30, 2020, respectively, primarily due to the following:

an increase in Cash App marketing costs for the three and nine months ended September 30, 2021 of $13.4 million and $189.4 million, respectively. For the three months ended September 30, 2021 compared to the three months ended September 30, 2020, Cash App customer acquisition costs increased by $43.5 million, partially offset by a $33.4 million reduction related to lower processing costs and transaction losses. For the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, Cash App customer acquisition costs increased by $106.8 million while the processing costs and related transaction losses increased by $69.3 million primarily as a result of increased volume of activity with our Cash App peer-to-peer service and increased card issuance costs. 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, 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;

an increase of $21.2 million and $57.6 million in sales and marketing personnel costs for the three and nine months ended September 30, 2021, respectively to enable growth initiatives. The increase in personnel related costs includes an increase in share-based compensation expense of $4.0 million and $13.3 million for the three and nine months ended September 30, 2021, respectively;
an increase of $5.5 million and $55.7 million in advertising costs for our Seller services for the three and nine months ended September 30, 2021, respectively, primarily from increased online and television marketing campaigns; and
an increase in sales and marketing expenses due to the recent acquisition of TIDAL completed in the second quarter of 2021.

General and administrative expenses for the three and nine months ended September 30, 2021 increased by $113.6 million or 74% and $264.6 million or 63%, compared to the three and nine months ended September 30, 2020, respectively, primarily due to the following:

an increase of $54.5 million and $145.4 million in general and administrative personnel costs for the three and nine months ended September 30, 2021, respectively, mainly as a result of additions to our customer support, finance, and legal personnel as we continued to add resources and skills to support our long-term growth as our business continues to scale. The increase in personnel related costs includes an increase in share-based compensation expense of $8.1 million and $24.1 million for the three and nine months ended September 30, 2021, respectively; and
the remaining increase was primarily due to an increase in software and subscription costs, third-party legal and other professional fees, including fees for acquisition-related expenses, and other administrative expenses.

Transaction and loan losses for the three and nine months ended September 30, 2021 increased by $47.1 million or 310%, and decreased by $30.8 million or 19%, compared to the three and nine months ended September 30, 2020, respectively, primarily due to the following:

transaction losses for the three months ended September 30, 2021 increased by $44.3 million compared to the three months ended September 30, 2020, while transaction losses decreased by $9.4 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase in the three months ended September 30, 2021 was due to increased transaction volumes associated with Cash Card in the three months ended September 30, 2021. Additionally, for the three months ended September 30, 2020, we released certain previously established Seller risk loss provisions related to the first half of 2020 due to better than expected realized transaction losses, which offset transaction losses for that quarter. The decrease in the nine months ended September 30, 2021 was due to lower Seller risk loss provisions recorded as businesses recovered as a result of regional re-openings and broader macro economic recovery, reducing the risk of chargebacks related to uncollectibility. Overall, we recorded higher risk loss provisions for our Seller business in the prior year due to the expected impact of COVID-19.
loan losses for the three months ended September 30, 2021 increased by $2.8 million compared to the three months ended September 30, 2020. Loan losses for the nine months ended September 30, 2021 decreased by $21.4 million compared to the nine months ended September 30, 2020. The slight increase in loan losses in the three months ended September 30, 2021 as compared to September 30, 2020 was due to increased loan volumes, whereas the primary driver for the decrease in loan losses in the nine months ended September 30, 2021 was due to the higher incremental provisions that were recorded during the first quarter of 2020 associated with the COVID-19 pandemic. Additionally, loan losses in the three and nine months ended September 30, 2021 also includes loan losses attributable to early stage products for Cash App.

Bitcoin impairment losses were $6.0 million and $71.1 million in the three and nine months ended September 30, 2021, respectively, due to the market price of bitcoin decreasing below the carrying value of our bitcoin investment observed during the period. As of September 30, 2021, the fair value of our investment in bitcoin was $351.7 million based on observable market prices, which is $202.8 million in excess of the carrying value of our investment of $148.9 million. Any unrealized gains on our bitcoin investment will only be recognized upon the sale of such bitcoin investment.

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


	Three Months Ended September 30,								Nine Months Ended September 30,
	2021		2020		$ Change		% Change		2021		2020		$ Change		% Change
Interest expense, net	$	13,409	$	14,980	$	(1,571)	(10)	%	$	20,126	$	38,955	$	(18,829)	(48)	%
Other expense (income), net	$	12,011	$	(784)	$	12,795	NM		$	(36,249)	$	(20,513)	$	(15,736)	77	%

Interest expense, net, for the three and nine months ended September 30, 2021 decreased by $1.6 million and $18.8 million, compared to the three and nine months ended September 30, 2020, respectively. The decrease was primarily due to lower non-cash interest expense related to our convertible notes as a result of the adoption of ASU No. 2020-06 on January 1, 2021. Under ASU No. 2020-06, convertible notes will no longer be separated into a debt and equity component, thereby eliminating the discount associated with the equity component and the interest expense associated with such discount. This was offset in part by increases in cash interest expense related to the issuance of the 2031 Senior Notes and 2026 Senior Notes issued in May 2021. Refer to Note 13, Indebtedness, of Notes to the Condensed Consolidated Financial Statements for further details.

Other income, net for the three and nine months ended September 30, 2021 decreased by $12.8 million and increased by $15.7 million compared to the three and nine months ended September 30, 2020, respectively. The decrease in the three months ended September 30, 2021 was due to the losses from the revaluation of investments in non-marketable equity securities, foreign exchange losses, and amortization of investments in marketable debt securities. The increase in the nine months ended September 30, 2021 was primarily due to the mark to market net gain of our equity investment in DoorDash of $44.4 million arising from the revaluation of this investment, offset in part by the losses from the revaluation of investments in non-marketable equity securities, foreign exchange losses, and amortization of investments in marketable debt securities. In June 2021, we completed the sale of our remaining investment in DoorDash and as a result of the sale, this investment will have no impact to our results in future periods.

Segment Results

Seller Results

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


	Three Months Ended September 30,								Nine Months Ended September 30,
	2021		2020		$ Change		% Change		2021		2020		$ Change		% Change
Net revenue	$	1,393,444	$	965,279	$	428,165	44	%	$	3,722,586	$	2,542,102	1,180,484		46	%
Cost of revenue	787,219		555,948		231,271		42	%	2,063,208		1,461,302		601,906		41	%
Gross profit	$	606,225	$	409,331	$	196,894	48	%	$	1,659,378	$	1,080,800	$	578,578	54	%

Revenue

Revenue for the Seller segment for the three and nine months ended September 30, 2021 increased by $428.2 million, or 44%, and $1.2 billion or 46% compared to the three and nine months ended September 30, 2020, respectively. The increase was primarily due to growth in GPV attributable to continued improvements experienced in both card-present volumes as a result of regional re-openings and resumed in-person business at sellers, as well as growth in higher-priced card-not-present transactions. The increase in Seller subscription and services-based revenue in the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020 was primarily due to the increased origination volumes of Square Loans, other software subscriptions, Instant Transfer for sellers, and Square Debit Card, in addition to lower Seller subscription and services-based revenue in the three and nine months ended September 30, 2020 impacted by the suspension of facilitating loans in the second quarter of 2020, and the refund of software subscription fees to our customers in March and April of 2020.

Cost of revenue

Cost of revenue for the Seller segment for the three and nine months ended September 30, 2021 increased by $231.3 million or 42%, and $601.9 million or 41% compared to the three and nine months ended September 30, 2020, which was in line with the increase in Seller revenue of $428.2 million or 44%, and $1.2 billion or 46% for the three and nine months ended September 30, 2021, compared to the three and nine months ended September 30, 2020. Transaction-based costs during the three months ended September 30, 2021 were affected by a decrease in the percentage of debit card transactions which have a lower cost per transaction, and a decrease in average transaction sizes resulting in higher cost per transaction. However, for the nine months ended September 30, 2021 the overall percentage of debit card transactions was higher compared to the nine months ended September 30, 2020, resulting in a smaller percentage increase in transaction costs compared to the percentage increase in GPV, a trend which we do not expect to continue in future periods as transactions costs customarily increase in proportion to GPV.

Cash App

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


	Three Months Ended September 30,								Nine Months Ended September 30,
	2021		2020		$ Change		% Change		2021		2020		$ Change		% Change
Net revenue	$	2,393,633	$	2,068,595	$	325,038	16	%	$	9,763,440	$	3,796,506	5,966,934		157	%
Cost of revenue	1,881,916		1,683,471		198,445		12	%	8,210,185		2,947,587		5,262,598		179	%
Gross profit	$	511,717	$	385,124	$	126,593	33	%	$	1,553,255	$	848,919	$	704,336	83	%

Revenue

Revenue for the Cash App segment for the three and nine months ended September 30, 2021 increased by $325.0 million, or 16%, and $6.0 billion or 157%, compared to the three and nine months ended September 30, 2020. The primary drivers were growth in bitcoin revenue, and, to a lesser extent, Cash App Instant Deposit, Cash Card, and Cash for Business. Bitcoin revenue increased due to the market price of bitcoin and growth in the number of active bitcoin customers. This smaller increase in the three months ended September 30, 2021 was impacted by the stability in the price of bitcoin, which affected trading activity compared to prior quarters. While bitcoin contributed 47% and 59% of the total net revenue and 22% and 72% of the increase in net revenues in the three and nine months ended September 30, 2021, respectively, gross profit generated from bitcoin was only 4% and 5% of the total gross profit. Excluding bitcoin revenue, Cash App revenue increased by $143.1 million or 33%, and $731.2 million or 75% in the three and nine months ended September 30, 2021, compared to the three and nine months ended September 30, 2020 due to growth in numbers of active Cash App customers, increase in number of business accounts, broader macroeconomic recovery, and from government stimulus and relief programs enacted through the third quarter of 2021 in response to COVID-19. These programs provided government aid and unemployment benefits which resulted in an increase in consumer spending and inflows into our Cash App ecosystem. Cash App revenue growth may not be sustained at the same levels in future quarters and may be impacted by the enactment of further stimulus relief and benefit programs, as well as the demand and market prices for bitcoin, amongst other factors.

Cost of revenue

Cost of revenue for the Cash App segment for the three and nine months ended September 30, 2021 increased by $198.4 million, or 12%, and $5.3 billion or 179% compared to the three and nine months ended September 30, 2020. The primary driver for the increase was growth in bitcoin revenue and the associated costs of such revenue, as discussed further above. Excluding bitcoin cost of revenue, Cash App cost of revenue increased by approximately $26.0 million, or 32%, and $141.9 million or 75% in the three and nine months ended September 30, 2021, compared to the three and nine months ended September 30, 2020, due to growth in Cash Card, Cash App Instant Deposit, and Cash for Business.

Key Operating Metrics and Non-GAAP Financial Measures

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020

Gross Payment Volume (GPV) (in millions)	$	45,426	$	31,729	$	121,392	$	80,272
Adjusted EBITDA (in thousands)	$	233,406	$	181,320	$	829,475	$	288,582
Adjusted Net Income Per Share:
Basic	$	0.41	$	0.39	$	1.64	$	0.57
Diluted	$	0.37	$	0.34	$	1.44	$	0.51

Gross Payment Volume (GPV)

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

Adjusted EBITDA and Adjusted Net Income (Loss) Per Share (Adjusted EPS)

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

We believe it is useful to exclude certain non-cash charges, such as amortization of intangible assets, and share-based compensation expenses, from our non-GAAP financial measures because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations.
In connection with the issuance of our convertible senior notes (as described in Note 13, Indebtedness, of the Notes to the Condensed Consolidated Financial Statements), prior to the adoption of ASU No. 2020-06 on January 1, 2021, we were required to recognize non-cash interest expense related to amortization of debt discount and issuance costs. Subsequent to the adoption, we only recognize non-cash interest expense related to amortization of debt issuance costs on convertible notes and unsecured senior notes. We believe that excluding these expenses from our non-GAAP measures is useful to investors because such incremental non-cash interest expense does not represent a current or future cash outflow for the Company and is therefore not indicative of our continuing operations or meaningful when comparing current results to past results. Additionally, for purposes of calculating diluted Adjusted EPS, we add back cash interest expense on convertible senior notes, as if-converted at the beginning of the period, if the impact is dilutive.
We exclude gain or loss on the disposal of property and equipment, gain or loss on revaluation of equity investments, bitcoin impairment losses, and prior to the adoption of ASU No. 2020-06 on January 1, 2021, gain or loss on debt extinguishment related to the conversion of convertible notes, as applicable, from non-GAAP financial measures because we do not believe that these items are reflective of our ongoing business operations.
We also exclude certain costs associated with acquisitions that are not normal operating expenses, including amounts paid to redeem acquirees’ unvested share-based compensation awards, and legal, accounting and due diligence costs, and we add back the impact of the acquired deferred revenue and deferred cost adjustment, which was written down to fair value in purchase accounting.

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

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

share-based compensation expense has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of our compensation strategy;
the intangible assets being amortized may have to be replaced in the future, and the non-GAAP financial measures do not reflect cash capital expenditure requirements for such replacements or for new capital expenditures or other capital commitments; and
non-GAAP measures do not reflect changes in, or cash requirements for, our working capital needs.

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

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

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

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income (loss) attributable to common stockholders	$	84	$	36,515	$	243,113	$	(80,854)
Net income (loss) attributable to noncontrolling interests	(2,960)		—		(3,303)		—
Net income (loss)	(2,876)		36,515		239,810		(80,854)
Share-based compensation expense	165,011		110,389		429,999		283,872
Depreciation and amortization	38,110		20,624		95,705		61,741
Interest expense, net	13,409		14,980		20,126		38,955
Other expense (income), net	12,011		(784)		(36,249)		(20,513)
Bitcoin impairment losses	6,000		—		71,126		—
Loss on disposal of property and equipment	877		396		1,866		2,095

Acquisition related and other costs	308		359		14,626		3,939
Acquired deferred revenue adjustment	159		281		606		1,240
Acquired deferred costs adjustment	(55)		(71)		(179)		(307)
Provision (benefit) for income taxes	452		(1,369)		(7,961)		(1,586)
Adjusted EBITDA	$	233,406	$	181,320	$	829,475	$	288,582

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income (loss) attributable to common stockholders	$	84	$	36,515	$	243,113	$	(80,854)
Net income (loss) attributable to noncontrolling interests	(2,960)		—		(3,303)		—
Net income (loss)	(2,876)		36,515		239,810		(80,854)
Share-based compensation expense	165,011		110,389		429,999		283,872
Amortization of intangible assets	11,140		5,236		27,258		13,522
Amortization of debt issuance costs	2,868		17,516		7,005		47,624
Loss (gain) on revaluation of equity investment	6,836		—		(41,008)		(20,998)
Bitcoin impairment losses	6,000		—		71,126		—
Loss on extinguishment of long-term debt	—		1,403		—		2,393
Loss on disposal of property and equipment	877		396		1,866		2,095

Acquisition related and other costs	308		359		14,626		3,939
Acquired deferred revenue adjustment	159		281		606		1,240
Acquired deferred costs adjustment	(55)		(71)		(179)		(307)
Adjusted Net Income - basic	$	190,268	$	172,024	$	751,109	$	252,526
Cash interest expense on convertible senior notes	$	1,494	$	1,544	$	4,833	$	4,482
Adjusted Net Income - diluted	$	191,762	$	173,568	$	755,942	$	257,008

Weighted-average shares used to compute Adjusted Net Income Per Share:
Basic	460,654		444,458		457,039		439,855
Diluted	525,003		514,806		524,048		501,757

Adjusted Net Income Per Share:
Basic	$	0.41	$	0.39	$	1.64	$	0.57
Diluted	$	0.37	$	0.34	$	1.44	$	0.51

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

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

Liquidity and Capital Resources

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

As of September 30, 2021, we had approximately $7.4 billion in available funds, including an undrawn amount of $500.0 million available under our revolving credit facility, as described in Note 13, Indebtedness, of Notes to the Condensed Consolidated Financial Statements. We intend to continue focusing on our long-term business initiatives and believe that our available funds are sufficient to meet our liquidity needs for the foreseeable future. We are carefully monitoring and managing our cash position in light of ongoing conditions and levels of operations. As of September 30, 2021, we were in compliance with all financial covenants associated with the 2020 Credit Facility and Senior Notes.

Liquidity Sources

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


	September 30, 2021		December 31, 2020
Cash and cash equivalents	$	4,514,609	$	3,158,058
Short-term restricted cash	14,420		30,279
Long-term restricted cash	73,420		13,526
Cash, cash equivalents, and restricted cash	$	4,602,449	$	3,201,863
Investments in short-term debt securities	868,809		695,112
Investments in long-term debt securities	1,451,107		463,950
Cash, cash equivalents, restricted cash, and investments in marketable debt securities	$	6,922,365	$	4,360,925

Our principal sources of liquidity are our cash and cash equivalents and investments in marketable debt securities. As of September 30, 2021, we had $6.9 billion of cash and cash equivalents, restricted cash, and investments in marketable debt securities, which were held primarily in cash deposits, money market funds, reverse repurchase agreements, U.S. government and agency securities, commercial paper, and corporate bonds. We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Our investments in marketable debt securities are classified as available for sale. From time to time, we have raised capital by issuing equity, equity-linked, or debt securities such as our convertible senior notes.

As of September 30, 2021, we held over $4.8 billion in aggregate principal amount of long-term debt, comprised of $4.7 million in aggregate principal amount of outstanding convertible senior notes that mature on March 1, 2022 ("2022 Convertible Notes"), $642.5 million in aggregate principal amount of convertible senior notes that mature on May 15, 2023 ("2023 Convertible Notes"), $1.0 billion in aggregate amount of convertible senior notes that mature on March 1, 2025 ("2025 Convertible Notes"), and $575.0 million and $575.0 million in aggregate amount of convertible senior notes that mature on May 1, 2026, and November 1, 2027, respectively ("2026 Convertible Notes" and "2027 Convertible Notes," respectively). Additionally, on May 20, 2021, we issued $1.0 billion and $1.0 billion in aggregate principal amount of outstanding senior unsecured notes that mature on June 1, 2026 and June 1, 2031, respectively ("2026 Senior Notes" and "2031 Senior Notes"). The 2022 Convertible Notes bear interest at a rate of 0.375% payable semi-annually on March 1 and September 1 of each year, while the 2023 Convertible Notes bear interest at a rate of 0.50% payable semi-annually on May 15 and November 15 of each year, and the 2025 Convertible Notes bear interest at a rate of 0.125% payable semi-annually on March 1 and September 1 of each year. The 2026 Convertible Notes bear no interest, whereas, the 2027 Convertible Notes bear interest at a rate of 0.25% payable semi-annually on May 1 and November 1 of each year. These convertible senior notes can be converted or repurchased prior to maturity if certain conditions are met. The 2026 Senior Notes bear interest a rate of 2.75% payable semi-annually on June 1 and December 1, while the 2031 Senior Notes bear interest at a rate of 3.50% payable semi-annually on June 1 and December 1 of each year. These Senior Notes can be redeemed or repurchased prior to maturity if certain conditions are met.

We purchased $50.0 million and $170.0 million in bitcoin in October 2020 and February 2021, respectively, as we believe cryptocurrency is an instrument of economic empowerment that aligns with our corporate purpose. We expect to hold these investments for the long term but will continue to reassess our investment in bitcoin relative to our balance sheet. As bitcoin is considered an indefinite lived intangible asset, under the accounting policy for such assets we will be required to recognize any decreases in market prices below carrying value as an impairment charge, with any mark up in value prohibited if the market price of bitcoin subsequently increases. We recorded impairment charges of $6.0 million and $71.1 million in the three and nine months ended September 30, 2021 due to the observed market price of bitcoin decreasing below the carrying value during the period. As of September 30, 2021, the fair value of our investment in bitcoin was $351.7 million based on observable market prices which is $202.8 million in excess of the Company's carrying value of $148.9 million. Impairment losses cannot be recovered for any subsequent increase in fair value until the sale of the asset.

In September 2020, we announced our intent to invest $100 million in supporting underserved communities, particularly, racial and ethnic minority groups who have been disproportionately affected by COVID-19. This initiative further deepens our commitment toward economic empowerment to help broaden such communities' access to financial

services. As of September 30, 2021, we have invested $18.0 million in aggregate towards this initiative, of which $0.1 million and $17.5 million were invested in the three and nine months ended September 30, 2021, respectively.

In June 2020, we entered into the Paycheck Protection Program Liquidity Facility agreement with the Federal Reserve Bank of San Francisco ("First PPPLF Agreement") to secure additional credit collateralized by PPP loans. The advances under this facility are repayable if the associated PPP loans are forgiven, repaid by a customer or settled by the government guarantee. On January 29, 2021, we entered into a second PPPLF agreement with the Federal Reserve Bank of San Francisco (“Second PPPLF Agreement”) to secure additional credit, collateralized by loans from the second round of the PPP program, in an aggregate principal amount of up to $1.0 billion under both PPPLF Agreements. As of September 30, 2021, $725.7 million of PPPLF advances were outstanding and are, generally, collateralized by the same value of PPP loans. Any differences between the amounts are generally due to the timing of PPP loan repayment or forgiveness, and repayment of PPPLF advances.

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

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

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

Short-term restricted cash of $14.4 million as of September 30, 2021 reflects pledged cash deposited into savings accounts at the financial institutions that process our sellers' payments transactions and as collateral pursuant to agreements with third party originating banks for certain loan products. We use the restricted cash to secure letters of credit with these financial institutions to provide collateral for liabilities arising from cash flow timing differences in the processing of these payments. We have recorded this amount as a current asset on our condensed consolidated balance sheets given the short-term nature of these cash flow timing differences and that there is no minimum time frame during which the cash must remain restricted. Additionally, this balance includes certain amounts held as collateral pursuant to multi-year lease agreements, discussed in the paragraph below, which we expect to become unrestricted within the next year.

Long-term restricted cash of $73.4 million as of September 30, 2021 is primarily related to a reserve deposit to satisfy the capital and liquidity requirements associated with the banking operations of SFS mandated by the FDIC, as well as cash deposited into money market funds that is used as collateral pursuant to multi-year lease agreements. We have recorded these amounts as non-current assets on the condensed consolidated balance sheets as we are required to establish and maintain the reserve deposit at all times to support the ongoing liquidity obligations of SFS, and due to certain lease terms extending beyond one year.

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

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

Cash Flow Activities

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


	Nine Months Ended September 30,
	2021		2020
Net cash provided by operating activities	$	672,776	$	260,877
Net cash used in investing activities	(1,256,619)		(531,713)
Net cash provided by financing activities	1,998,740		1,331,424
Effect of foreign exchange rate on cash and cash equivalents	(14,311)		772
Net increase in cash, cash equivalents, and restricted cash	$	1,400,586	$	1,061,360

Cash Flows from Operating Activities

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

For the nine months ended September 30, 2021, cash provided by operating activities was $672.8 million. Net income was $239.8 million, adjusted for the add back of non-cash expenses of $763.8 million, consisting primarily of share-based compensation, transaction and loan losses, bitcoin impairment losses, depreciation and amortization, and non-cash lease expenses, which contributed positively to operating activities. This was offset by net PPP loans facilitated of $184.6 million, as well as a net outflow from changes in other assets and liabilities of $146.3 million due to timing of period end.

For the nine months ended September 30, 2020, cash provided by operating activities was $260.9 million. Net loss was $80.9 million, PPP loans facilitated, less loans sold, of $462.1 million, adjusted for the add back of non-cash expenses of $588.7 million, consisting primarily of share-based compensation, transaction and loan losses, depreciation and amortization, and non-cash interest and other expenses. Whereas the increase in transaction and loan losses was largely caused by estimated losses attributable to the COVID-19 pandemic, the increase in other non-cash expenses was primarily due to the growth and expansion of our business activities. Additionally, the cash generated from operating activities increased due to a net inflow from changes in other assets and liabilities of $215.1 million due to timing of period end.

Cash Flows from Investing Activities

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

For the nine months ended September 30, 2021, cash used in investing activities was $1.3 billion, primarily due to the net investments of marketable securities including investments from customer funds of $1.2 billion, purchases of bitcoin and other investments of $217.6 million, business acquisitions, net of cash acquired of $164.0 million, as well as the purchase of property and equipment of $98.0 million, partially offset by the proceeds from sale of equity investments of $420.6 million.

For the nine months ended September 30, 2020, cash used in investing activities was $531.7 million, primarily due to the net proceeds from investments of marketable securities including investments from customer funds of $416.1 million. Additional uses of cash were as a result of the purchase of property and equipment of $86.4 million and business acquisitions, net of cash acquired of $29.2 million.

Cash Flows from Financing Activities

For the nine months ended September 30, 2021, cash provided by financing activities was $2.0 billion primarily as a result of $2.0 billion in net proceeds from the 2031 Senior Notes and 2026 Notes offerings, the proceeds, net of repayments of the PPPLF advances of $261.6 million, proceeds from issuances of common stock from the exercise of options and purchases under our employee share purchase plan of $84.9 million, offset by payments for employee tax withholding related to vesting of restricted stock units of $312.4 million.

For the nine months ended September 30, 2020, cash provided by financing activities was $1.3 billion primarily as a result of $936.5 million in net proceeds from the 2025 Convertible Notes offering, proceeds from the PPPLF advances of $473.5 million, proceeds from issuances of common stock from the exercise of options and purchases under our employee share purchase plan of $106.6 million, offset by payments for employee tax withholding related to vesting of restricted stock units of $182.6 million.

Contractual Obligations and Commitments

On May 20, 2021, the Company issued an aggregate principal amount of $2.0 billion senior unsecured notes comprised of $1.0 billion of senior unsecured notes due 2026 ("2026 Senior Notes") and $1.0 billion senior unsecured notes due 2031 ("2031 Senior Notes"). The 2026 Senior Notes mature on June 1, 2026, unless earlier redeemed or repurchased, and bear interest at a rate of 2.75% payable semi-annually on June 1 and December 1. The 2031 Senior Notes mature on June 1, 2031, unless earlier redeemed or repurchased, and bear interest at a rate of 3.50% payable semi-annually on June 1 and December 1 of each year. See Note 13, Indebtedness, of the Notes to the Condensed Consolidated Financial Statements for more details on this transaction.

On January 29, 2021, we entered into a second Paycheck Protection Program Liquidity Facility agreement with the Federal Reserve Bank of San Francisco (“Second PPPLF Agreement” and together with the First PPPLF Agreement, “PPPLF Agreements”) to secure additional credit in an aggregate principal amount of up to $1.0 billion under both PPPLF Agreements. Borrowings under the facility accrue interest at a rate of 0.35% and must be collateralized with loans originated under the PPP. The maturity date of any PPPLF advances will be the maturity date of the PPP loan pledged to secure the advance, and will be accelerated upon the occurrence of certain events of default. Although loans originated under the PPP have a stated maturity of between two and five years from origination, some of the loans may be forgiven 24 weeks after disbursement if they meet certain specified criteria. The PPPLF advances are also repayable if the underlying PPP loan is repaid by the customer. As of September 30, 2020, $725.7 million of PPPLF advances were outstanding and are, generally, collateralized by the same value of PPP loans. Any differences between the amounts are generally due to the timing of PPP loan repayment or forgiveness, and repayment of PPPLF advances. See Note 13, Indebtedness, of the Notes to the Condensed Consolidated Financial Statements for more details on this transaction.

With the exception of the Senior Notes and PPPLF advances, there were no material changes in our commitments under contractual obligations, except for scheduled payments from the ongoing business, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements during the periods presented.

Critical Accounting Policies and Estimates

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

As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020, we believe accounting policies and the assumptions and estimates associated with transaction and loan losses could potentially have a material effect on our condensed consolidated financial statements and is therefore a critical accounting policy and estimate.

Additionally, as a result of the acquisition of TIDAL and the contemplated acquisition of Afterpay, 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, of the Notes to the Condensed Consolidated Financial Statements.

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