Item 1. Financial Statements

BLOCK, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

			March 31, 2023						December 31, 2022
Assets			(Unaudited)
Current assets:
Cash and cash equivalents			$	5,061,091					$	4,544,202
Investments in short-term debt securities			1,024,110						1,081,851
Settlements receivable			1,897,835						2,416,324
Customer funds			3,800,473						3,180,324
Consumer receivables, net			1,486,511						1,871,160
Loans held for sale			476,754						474,036
Safeguarding asset related to bitcoin held for other parties			726,495						428,243
Other current assets			1,427,210						1,627,265
Total current assets			15,900,479						15,623,405
Goodwill			11,919,274						11,966,761
Acquired intangible assets, net			1,949,086						2,014,034
Investments in long-term debt securities			412,747						573,429
Operating lease right-of-use assets			344,229						373,172
Other non-current assets			811,512						813,539
Total assets			$	31,337,327					$	31,364,340
Liabilities and Stockholders’ Equity
Current liabilities:
Customers payable			$	5,749,857					$	5,548,656
Settlements payable			397,977						462,505
Accrued expenses and other current liabilities			1,066,203						1,073,516
Current portion of long-term debt (Note 13)			460,539						460,356
Warehouse funding facilities, current			305,195						461,240
Safeguarding obligation liability related to bitcoin held for other parties			726,495						428,243
Total current liabilities			8,706,266						8,434,516
Warehouse funding facilities, non-current			384,998						877,066
Long-term debt (Note 13)			4,112,356						4,109,829
Operating lease liabilities, non-current			329,196						357,419
Other non-current liabilities			329,626						334,155
Total liabilities			13,862,442						14,112,985
Commitments and contingencies (Note 18)
Stockholders’ equity:
Preferred stock, $0.0000001 par value: 100,000 shares authorized at March 31, 2023 and December 31, 2022. None issued and outstanding at March 31, 2023 and December 31, 2022.			—						—
Class A common stock, $0.0000001 par value: 1,000,000 shares authorized at March 31, 2023 and December 31, 2022; 542,757 and 539,408 issued and outstanding at March 31, 2023 and December 31, 2022, respectively.			—						—
Class B common stock, $0.0000001 par value: 500,000 shares authorized at March 31, 2023 and December 31, 2022; 60,636 and 60,652 issued and outstanding at March 31, 2023 and December 31, 2022, respectively.			—						—
Additional paid-in capital			18,607,008						18,314,681
Accumulated other comprehensive loss			(572,561)						(523,090)
Accumulated deficit			(585,550)						(568,712)
Total stockholders’ equity attributable to common stockholders			17,448,897						17,222,879
Noncontrolling interests			25,988						28,476
Total stockholders’ equity			17,474,885						17,251,355
Total liabilities and stockholders’ equity			$	31,337,327					$	31,364,340

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

BLOCK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

			Three Months Ended March 31,
			2023						2022
Revenue:
Transaction-based revenue			$	1,422,705					$	1,232,969
Subscription and services-based revenue			1,366,224						959,557
Hardware revenue			37,451						37,326
Bitcoin revenue			2,163,751						1,730,793
Total net revenue			4,990,131						3,960,645
Cost of revenue:
Transaction-based costs			820,787						716,236
Subscription and services-based costs			264,092						182,857
Hardware costs			58,785						63,664
Bitcoin costs			2,113,375						1,687,459
Amortization of acquired technology assets			18,508						15,469
Total cost of revenue			3,275,547						2,665,685
Gross profit			1,714,584						1,294,960
Operating expenses:
Product development			626,937						458,224
Sales and marketing			496,011						501,562
General and administrative			432,825						444,149
Transaction, loan, and consumer receivable losses			127,896						91,150
Amortization of customer and other acquired intangible assets			37,087						26,664
Total operating expenses			1,720,756						1,521,749
Operating loss			(6,172)						(226,789)
Interest expense (income), net			(3,161)						15,748
Other expense (income), net			18,371						(33,472)
Loss before income tax			(21,382)						(209,065)
Benefit for income taxes			(2,056)						(1,702)
Net loss			(19,326)						(207,363)
Less: Net loss attributable to noncontrolling interests			(2,488)						(3,164)
Net loss attributable to common stockholders			$	(16,838)					$	(204,199)
Net loss per share attributable to common stockholders:
Basic			$	(0.03)					$	(0.38)
Diluted			$	(0.03)					$	(0.38)
Weighted-average shares used to compute net loss per share attributable to common stockholders:
Basic			602,234						541,435
Diluted			602,234						541,435

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

BLOCK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands)

			Three Months Ended March 31,
			2023						2022
Net loss			$	(19,326)					$	(207,363)
Net foreign currency translation adjustments (i)			(63,881)						264,746
Net unrealized gain (loss) on marketable debt securities			14,410						(29,954)
Total comprehensive income (loss)			$	(68,797)					$	27,429

(i) Includes foreign currency translation adjustments related to goodwill of $47.6 million and $220.7 million for March 31, 2023 and March 31, 2022, respectively.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

BLOCK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

(In thousands)

						Class A and B common stock												Additional paid-in						Accumulated other comprehensive						Accumulated						Noncontrolling						Total stockholders’
						Shares						Par value						capital						loss						deficit						interests						equity
Balance at December 31, 2022						600,060						$	—					$	18,314,681					$	(523,090)					$	(568,712)					$	28,476					$	17,251,355
			Net loss			—						—						—						—						(16,838)						(2,488)						(19,326)
Shares issued in connection with employee stock plans						3,333						—						6,825						—						—						—						6,825
Change in other comprehensive loss						—						—						—						(49,471)						—						—						(49,471)
Share-based compensation						—						—						285,502						—						—						—						285,502
Balance at March 31, 2023						603,393						$	—					$	18,607,008					$	(572,561)					$	(585,550)					$	25,988					$	17,474,885

						Class A and B common stock												Additional paid-in						Accumulated other comprehensive						Accumulated						Noncontrolling						Total stockholders’
						Shares						Par value						capital						income (loss)						deficit						interests						equity
Balance at December 31, 2021						464,944						$	—					$	3,317,255					$	(16,435)					$	(27,965)					$	40,734					$	3,313,589
			Net loss			—						—						—						—						(204,199)						(3,164)						(207,363)
Shares issued in connection with employee stock plans						2,120						—						4,093						—						—						—						4,093
Change in other comprehensive income						—						—						—						234,792						—						—						234,792
Share-based compensation						—						—						279,354						—						—						—						279,354
Tax withholding related to vesting of restricted stock units						(16)						—						(2,456)						—						—						—						(2,456)
Issuance of common stock in connection with business combination						113,617						—						13,827,929						—						—						—						13,827,929
Issuance of common stock in conjunction with the conversion of convertible notes						20						—						454						—						—						—						454
Exercise of bond hedges in conjunction with the conversion of convertible notes						(1,189)						—						—						—						—						—						—
Balance at March 31, 2022						579,496						$	—					$	17,426,629					$	218,357					$	(232,164)					$	37,570					$	17,450,392

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

BLOCK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

			Three Months Ended March 31,
			2023						2022
Cash flows from operating activities:
Net loss			$	(19,326)					$	(207,363)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			93,173						70,056
Amortization of discounts and premiums and other non-cash adjustments			(85,314)						(64,351)
Non-cash lease expense			24,333						22,696
Share-based compensation			279,592						275,423
Loss (gain) on revaluation of equity investments			14,885						(49,741)
Transaction, loan, and consumer receivable losses			127,896						91,150
Change in deferred income taxes			1,353						(7,653)
Changes in operating assets and liabilities:
Settlements receivable			452,868						(220,361)
Purchases and originations of loans			(1,834,442)						(951,665)
Proceeds from payments and forgiveness of loans			1,753,515						1,112,266
Customers payable			(418,948)						136,474
Settlements payable			(64,528)						10,360
Other assets and liabilities			(30,656)						12,132
Net cash provided by operating activities			294,401						229,423
Cash flows from investing activities:
Purchases of marketable debt securities			(56,761)						(209,981)
Proceeds from maturities of marketable debt securities			273,771						262,559
Proceeds from sale of marketable debt securities			15,697						178,352
Proceeds from maturities of marketable debt securities from customer funds			—						73,000
Proceeds from sale of marketable debt securities from customer funds			—						316,576
Payments from originations of consumer receivables			(4,911,509)						(1,946,468)
Proceeds from principal repayments and sales of consumer receivables			5,339,800						1,943,554
Purchases of property and equipment			(32,253)						(41,187)
Purchases of other investments			(4,821)						(16,495)
Business combinations, net of cash acquired			—						570,703
Net cash provided by investing activities			623,924						1,130,613

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

BLOCK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued

(Unaudited)

(In thousands)

			Three Months Ended March 31,
			2023						2022
Cash flows from financing activities:
Repayments of PPP Liquidity Facility advances			(5,077)						(372,897)
Payments to redeem convertible notes			—						(1,071,788)
Proceeds from warehouse facilities borrowings			47,975						183,440
Repayments of warehouse facilities borrowings			(692,556)						(90,491)
Proceeds from the exercise of stock options and purchases under the employee stock purchase plan			6,825						4,093
Payments for tax withholding related to vesting of restricted stock units			—						(2,456)
Net increase in interest-bearing deposits			13,601						21,633
Change in customer funds, restricted from use in the Company's operations			620,149						359,910
Net cash used in financing activities			(9,083)						(968,556)
Effect of foreign exchange rate on cash and cash equivalents			1,033						(948)
Net increase in cash, cash equivalents, restricted cash, and customer funds			910,275						390,532
Cash, cash equivalents, restricted cash, and customer funds, beginning of the period			8,435,906						6,975,090
Cash, cash equivalents, restricted cash, and customer funds, end of the period			$	9,346,181					$	7,365,622
Reconciliation of cash, cash equivalents, restricted cash, and customer funds:
Cash and cash equivalents			$	5,061,091					$	3,993,565
Short-term restricted cash			414,267						109,450
Long-term restricted cash			70,350						71,702
Customer funds cash and cash equivalents			3,800,473						3,190,905
Total			$	9,346,181					$	7,365,622

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

BLOCK, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

Block, Inc. (together with its subsidiaries, "Block" or the "Company") creates tools that empower businesses, sellers, and individuals to participate in the economy. Block is comprised of two reportable segments, Square and Cash App. Square is a cohesive commerce ecosystem that helps sellers start, run, and grow their businesses, including enabling sellers to accept card payments, provide reporting and analytics, and facilitating next-day settlement. Square’s point-of-sale software and other business services help sellers manage inventory, locations, and employees; access financial services; engage buyers; build a website or online store; and grow sales. Cash App is an ecosystem of financial products and services to help individuals manage their money by providing financial tools that allow individuals to store, send, receive, spend, save and invest their money. Cash App seeks to redefine the world’s relationship with money by making it more relatable, instantly available, and universally accessible.

On January 31, 2022, the Company completed the acquisition of Afterpay Limited (“Afterpay”), a global buy now pay later ("BNPL") platform, to strengthen its position to better deliver compelling financial products and services that expand access to more consumers and drive incremental revenue for merchants of all sizes. See Note 8, Acquisitions for further details.

Block was founded in 2009 and has offices globally. The Company does not designate a headquarters location as it adopted a distributed work model in 2021.

Basis of Presentation

The accompanying interim condensed consolidated financial statements of the Company are unaudited. These interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") and the applicable rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The December 31, 2022 condensed consolidated balance sheet was derived from the audited financial statements as of that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

The accompanying unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments of a normal recurring nature considered necessary to state fairly the Company's consolidated financial position, results of operations, comprehensive income, and cash flows for the interim periods. The condensed consolidated financial statements include the financial statements of Block and its wholly-owned and majority-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Minority interests are recorded as a noncontrolling interest, which is reported as a component of stockholders' equity on the condensed consolidated balance sheets. The interim results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023, or for any other future annual or interim period.

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Consolidated Financial Statements and related notes in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, as well as related disclosure of contingent assets and liabilities. Actual results could differ from the Company’s estimates. To the extent that there are material differences between these estimates and actual results, the Company’s financial condition or operating results will be materially affected. The Company bases its estimates on current and past experience, to the extent that historical experience is predictive of future performance and other assumptions that the Company believes are reasonable under the circumstances. The Company evaluates these estimates on an ongoing basis.

Estimates, judgments, and assumptions in these condensed consolidated financial statements include, but are not limited to, those related to accrued transaction losses, contingencies, valuation of loans held for sale, valuation of goodwill and acquired intangible assets, determination of allowance for loan loss reserves for loans held for investment, determination of allowance for credit losses for consumer receivables, pre-acquisition contingencies associated with business combinations, allocation of acquired goodwill to segments, assessing the likelihood of adverse outcomes from claims and disputes, accrued royalties, income and other taxes, operating and financing lease right-of-use assets and related liabilities, and share-based compensation.

The Company's estimates of valuation of loans held for sale, allowance for credit losses associated with consumer receivables, and accrued transaction losses are based on historical experience, adjusted for market data relevant to the current economic environment. The Company will continue to update its estimates as developments occur and additional information is obtained. Refer to Note 5, Fair Value Measurements for further details on amortized cost over fair value of the loans, Note 6, Consumer Receivables, net for further details on consumer receivables, and Note 10, Other Consolidated Balance Sheet Components (Current) for further details on transaction losses.

Concentration of Credit Risk

For the three months ended March 31, 2023 and March 31, 2022, the Company had no customer that accounted for greater than 10% of total net revenue.

The Company had three third-party payment processors that represented approximately 41%, 29%, and 10% of settlements receivable as of March 31, 2023. As of December 31, 2022, there were two parties that represented approximately 54% and 31% of settlements receivable. In both periods, all other third-party payment processors were insignificant. Certain of the Company's products are reliant on third-party service providers such as partner banks, card issuers, and payment service providers. The Company's relationships with third-party service providers may result in operational concentration risks for some of these products.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, marketable debt securities, settlements receivable, customer funds, consumer receivables, loans held for sale, and loans held for investment. To mitigate the risk of concentration associated with cash and cash equivalents, as well as restricted cash, funds are held with creditworthy institutions and, at certain times, temporarily swept into insured programs overnight to reduce single firm concentration risk. Amounts on deposit may exceed federal deposit insurance limits. The associated risk of concentration for marketable debt securities is mitigated by holding a diversified portfolio of highly rated investments. Settlements receivable are amounts due from well-established payment processing companies and normally take one or two business days to settle which mitigates the associated risk of concentration. The associated risk of concentration for loans and consumer receivables is partially mitigated by credit evaluations that are performed prior to facilitating the offering of loans and receivables and ongoing performance monitoring of the Company’s loan customers.

Sales and Marketing Expenses

Advertising costs are expensed as incurred and included in sales and marketing expenses on the condensed consolidated statements of operations. Total advertising costs were $89.1 million for the three months ended March 31, 2023 compared to $156.3 million for the three months ended March 31, 2022. The Company also records services, incentives, and other costs to acquire customers that are not directly related to a revenue generating transaction as sales and marketing expenses, as the Company considers these to be marketing costs to encourage the usage of Cash App. These expenses include, but are not limited to, Cash App peer-to-peer processing costs and related transaction losses, card issuance costs, customer referral bonuses, and promotional giveaways. These costs are expensed as incurred. The Company recorded $243.7 million for the three months ended March 31, 2023 compared to $202.3 million for the three months ended March 31, 2022 for such expenses.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In March 2022, the Financial Accounting Standards Board ("FASB") issued ASU No. 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method ("ASU 2022-01") related to the portfolio layer method of hedge accounting. The amendments allow nonprepayable financial assets to be included in a closed portfolio hedge using the portfolio layer method. ASU 2022-01 also allows for multiple hedged layers to be designated for a single closed portfolio of financial assets or one or more beneficial interests secured by a portfolio of financial instruments. The Company adopted this guidance effective January 1, 2023, and has applied the guidance prospectively. The adoption of this guidance did not have a material impact on the Company's financial statements and related disclosures.

In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”) related to troubled debt restructuring and vintage disclosures for financing receivables. The amendments eliminate recognition and measurement guidance for troubled debt restructurings for creditors and requires entities to evaluate if the modification represents a new loan or a continuation of the existing loan. ASU 2022-02 also enhances disclosure requirements for certain loan refinancing and restructurings made to borrowers experiencing financial difficulty and requires disclosure of current period write-offs by year of origination for financing receivables. The Company adopted this guidance effective January 1, 2023, and has applied the guidance prospectively. The adoption of this guidance did not have a material impact on the Company's financial statements and related disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions ("ASU 2022-03") related to equity securities. The amendments clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. An entity is prohibited from recognizing a contractual sale restriction as a separate unit of account. ASU 2022-03 also requires specific disclosures related to equity securities that are subject to contractual restrictions, including the fair value of such equity securities, the nature and remaining duration of the corresponding restrictions, and any circumstances that could cause a lapse in the restrictions. The amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption to have a material impact on the Company's financial statements.

NOTE 2 - REVENUE

The following table presents the Company's net revenue disaggregated by revenue source (in thousands):

			Three Months Ended March 31,
			2023						2022
Revenue from contracts with customers:
Transaction-based revenue			$	1,422,705					$	1,232,969
Subscription and services-based revenue			1,038,613						724,745
Hardware revenue			37,451						37,326
Bitcoin revenue			2,163,751						1,730,793
Revenue from other sources:
Subscription and services-based revenue (i)			327,611						234,812
Total net revenue			$	4,990,131					$	3,960,645

(i) Subscription and services-based revenue generated from Square Loans and consumer receivables originated through the BNPL platform.

NOTE 3 - INVESTMENTS IN DEBT SECURITIES

The Company's short-term and long-term investments as of March 31, 2023 were as follows (in thousands):

			Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value
Short-term debt securities:
U.S. agency securities			$	121,972					$	31					$	(1,706)					$	120,297
Corporate bonds			364,948						—						(6,690)						358,258
Commercial paper			7,461						—						—						7,461
Municipal securities			6,587						—						(120)						6,467
Certificates of deposit			2,500						—						—						2,500
U.S. government securities			527,991						16						(6,439)						521,568
Foreign government securities			7,724						—						(165)						7,559
Total			$	1,039,183					$	47					$	(15,120)					$	1,024,110
Long-term debt securities:
U.S. agency securities			$	58,494					$	—					$	(2,626)					$	55,868
Corporate bonds			157,810						16						(4,324)						153,502
Municipal securities			10,410						12						(530)						9,892
U.S. government securities			201,379						20						(8,868)						192,531
Foreign government securities			1,000						—						(46)						954
Total			$	429,093					$	48					$	(16,394)					$	412,747

The Company's short-term and long-term investments as of December 31, 2022 were as follows (in thousands):

			Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value
Short-term debt securities:
U.S. agency securities			$	96,545					$	16					$	(2,120)					$	94,441
Corporate bonds			368,110						2						(7,475)						360,637
Commercial paper			31,503						—						—						31,503
Municipal securities			9,884						—						(191)						9,693
Certificates of deposit			6,400						—						—						6,400
U.S. government securities			580,568						6						(8,937)						571,637
Foreign government securities			7,795						—						(255)						7,540
Total			$	1,100,805					$	24					$	(18,978)					$	1,081,851
Long-term debt securities:
U.S. agency securities			$	74,097					$	—					$	(3,782)					$	70,315
Corporate bonds			245,891						6						(9,171)						236,726
Municipal securities			10,415						3						(664)						9,754
U.S. government securities			268,902						—						(13,210)						255,692
Foreign government securities			1,000						—						(58)						942
Total			$	600,305					$	9					$	(26,885)					$	573,429

The amortized cost of investments classified as cash equivalents approximated the fair value due to the short-term nature of the investments.

The Company's gross unrealized losses and fair values for those investments that were in an unrealized loss position as of March 31, 2023 and December 31, 2022, aggregated by investment category and the length of time that individual securities have been in a continuous loss position were as follows (in thousands):

			March 31, 2023
			Less than 12 Months												Greater than 12 Months												Total
			Fair Value						Gross Unrealized Losses						Fair Value						Gross Unrealized Losses						Fair Value						Gross Unrealized Losses
Short-term debt securities:
U.S. agency securities			$	26,381					$	(31)					$	92,659					$	(1,675)					$	119,040					$	(1,706)
Corporate bonds			30,590						(118)						327,472						(6,572)						358,062						(6,690)
Municipal securities			—						—						6,468						(120)						6,468						(120)
U.S. government securities			152,623						(482)						321,220						(5,957)						473,843						(6,439)
Foreign government securities			—						—						7,559						(165)						7,559						(165)
Total			$	209,594					$	(631)					$	755,378					$	(14,489)					$	964,972					$	(15,120)
Long-term debt securities:
U.S. agency securities			$	8,966					$	(35)					$	46,903					$	(2,591)					$	55,869					$	(2,626)
Corporate bonds			21,761						(158)						129,136						(4,166)						150,897						(4,324)
Municipal securities			471						(29)						8,909						(501)						9,380						(530)
U.S. government securities			4,879						(10)						170,033						(8,858)						174,912						(8,868)
Foreign government securities			—						—						954						(46)						954						(46)
Total			$	36,077					$	(232)					$	355,935					$	(16,162)					$	392,012					$	(16,394)

			December 31, 2022
			Less than 12 Months												Greater than 12 Months												Total
			Fair Value						Gross Unrealized Losses						Fair Value						Gross Unrealized Losses						Fair Value						Gross Unrealized Losses
Short-term debt securities:
U.S. agency securities			$	8,572					$	(24)					$	84,628					$	(2,096)					$	93,200					$	(2,120)
Corporate bonds			34,795						(423)						320,748						(7,052)						355,543						(7,475)
Municipal securities			587						(13)						5,811						(178)						6,398						(191)
U.S. government securities			146,974						(839)						394,880						(8,098)						541,854						(8,937)
Foreign government securities			—						—						7,540						(255)						7,540						(255)
Total			$	190,928					$	(1,299)					$	813,607					$	(17,679)					$	1,004,535					$	(18,978)
Long-term debt securities:
U.S. agency securities			$	11,501					$	(20)					$	58,814					$	(3,762)					$	70,315					$	(3,782)
Corporate bonds			33,862						(262)						201,791						(8,909)						235,653						(9,171)
Municipal securities			467						(33)						8,784						(631)						9,251						(664)
U.S. government securities			54,405						(590)						201,288						(12,620)						255,693						(13,210)
Foreign government securities			—						—						942						(58)						942						(58)
Total			$	100,235					$	(905)					$	471,619					$	(25,980)					$	571,854					$	(26,885)

The Company does not intend to sell nor anticipate that it will be required to sell these securities before recovery of the amortized cost basis. Unrealized losses on available-for-sale debt securities were determined not to be related to credit related losses, therefore, an allowance for credit losses is not required.

The contractual maturities of the Company's short-term and long-term investments as of March 31, 2023 were as follows (in thousands):

			Amortized Cost						Fair Value
Due in one year or less			$	1,039,183					$	1,024,110
Due in one to five years			429,093						412,747
Total			$	1,468,276					$	1,436,857

NOTE 4 - CUSTOMER FUNDS

The following table presents the assets underlying customer funds (in thousands):

			March 31, 2023						December 31, 2022
Cash			$	2,403,642					$	1,748,983
Cash equivalents:
Money market funds			737,522						851,296
Reverse repurchase agreement (i)			659,309						580,045
Total customer funds			$	3,800,473					$	3,180,324

(i) The Company has accounted for the reverse repurchase agreement with a third-party as an overnight lending arrangement, collateralized by the securities subject to the repurchase agreement. The Company classified the amounts due from the counterparty as cash equivalents due to the short-term nature.

NOTE 5 - FAIR VALUE MEASUREMENTS

The Company measures its cash equivalents, customer funds, short-term and long-term marketable debt securities, and marketable equity investment at fair value. The Company classifies these investments within Level 1 or Level 2 of the fair value hierarchy because the Company values these investments using quoted market prices or alternative pricing sources and models utilizing market observable inputs. The Company measures its safeguarding obligation liability related to bitcoin held for other parties at the fair value of the bitcoin that the Company holds for other parties and classifies the liability within Level 2 because the Company uses observable market prices of the underlying bitcoin as an input for the valuation. The Company also classifies its safeguarding asset related to bitcoin held for other parties within Level 2, unless the asset's carrying amount is adjusted to reflect any actual or potential safeguarding loss events, in which case it would be classified within Level 3. The Company was not aware of any actual or possible safeguarding loss events as of March 31, 2023 or December 31, 2022.

The Company’s assets and liabilities that are measured at fair value on a recurring basis were classified as follows (in thousands):

			March 31, 2023																		December 31, 2022
			Level 1						Level 2						Level 3						Level 1						Level 2						Level 3
Cash equivalents:
Money market funds			$	962,662					$	—					$	—					$	1,230,924					$	—					$	—
U.S. agency securities			—						—						—						—						7,923						—
Commercial paper			—						—						—						—						25,080						—
Restricted cash:
Money market funds			118,780						—						—						—						—						—
Customer funds:
Money market funds			737,522						—						—						851,296						—						—
Reverse repurchase agreement			659,309						—						—						580,045						—						—
Short-term debt securities:
U.S. government securities			521,568						—						—						571,637						—						—
Corporate bonds			—						358,258						—						—						360,637						—
U.S. agency securities			—						120,297						—						—						94,441						—
Certificates of deposit			—						2,500						—						—						6,400						—
Commercial paper			—						7,461						—						—						31,503						—
Municipal securities			—						6,467						—						—						9,693						—
Foreign government securities			—						7,559						—						—						7,540						—
Long-term debt securities:
U.S. government securities			192,531						—						—						255,692						—						—
Corporate bonds			—						153,502						—						—						236,726						—
U.S. agency securities			—						55,868						—						—						70,315						—
Municipal securities			—						9,892						—						—						9,754						—
Foreign government securities			—						954						—						—						942						—
Other:
Investment in marketable equity security			11,012						—						—						11,092						—						—
Safeguarding asset related to bitcoin held for other parties			—						726,495						—						—						428,243						—
Safeguarding obligation liability related to bitcoin held for other parties			—						(726,495)						—						—						(428,243)						—
Total assets (liabilities) measured at fair value			$	3,203,384					$	722,758					$	—					$	3,500,686					$	860,954					$	—

The carrying amounts of certain financial instruments, including settlements receivable, consumer receivables, loans held for investment, accounts payable, customers payable, accrued expenses, and settlements payable, approximate their fair values due to their short-term nature. The carrying amounts of the Company's warehouse funding facilities approximate their fair values.

The Company estimates the fair value of its convertible and senior notes based on their last actively traded prices (Level 1) or market observable inputs (Level 2). The estimated fair value and carrying value of the convertible and senior notes were as follows (in thousands):

			March 31, 2023												December 31, 2022
			Carrying Value						Fair Value (Level 2)						Carrying Value						Fair Value (Level 2)
2031 Senior Notes			$	988,513					$	814,189					$	988,171					$	782,857
2026 Senior Notes			991,101						902,239						990,414						885,876
2027 Convertible Notes			568,863						437,763						568,535						433,082
2026 Convertible Notes			569,734						469,689						569,315						464,066
2025 Convertible Notes			994,145						958,713						993,394						943,188
2023 Convertible Notes			460,539						472,522						460,356						480,925
Total			$	4,572,895					$	4,055,115					$	4,570,185					$	3,989,994

The estimated fair value and carrying value of loans held for sale and loans held for investment were as follows (in thousands):

			March 31, 2023												December 31, 2022
			Carrying Value						Fair Value (Level 3)						Carrying Value						Fair Value (Level 3)
Loans held for sale			$	476,754					$	492,735					$	474,036					$	491,807
Loans held for investment			178,300						182,344						123,959						126,122
Total			$	655,054					$	675,079					$	597,995					$	617,929

If applicable, the Company will recognize transfers into and out of levels within the fair value hierarchy at the end of the reporting period in which the actual event or change in circumstance occurs. During the three months ended March 31, 2023 and March 31, 2022, the Company did not have any transfers in or out of Level 1, Level 2, or Level 3 assets or liabilities.

NOTE 6 - CONSUMER RECEIVABLES, NET

Consumer receivables represent amounts due from consumers for outstanding installment payments on orders processed on the Company's BNPL platform. Consumer receivables are classified as held for investment. These receivables are typically interest free and are generally due within 14 to 56 days.

The Company closely monitors credit quality for consumer receivables to manage and evaluate its related exposure to credit risk. The criteria the Company monitors when assessing the credit quality and risk of its consumer receivables portfolio is primarily based on internal risk assessments, as they provide insight into customer risk profiles and are useful as indicators of potential future credit losses. Consumer receivables are internally rated as "Pass" rated or "Classified." Pass rated consumer receivables generally consist of consumer receivables that are current or up to 60 days past due. Classified consumer receivables generally comprise of consumer receivables that are 60 days or greater past due and have a higher risk of default. Internal risk ratings are reviewed and, generally, updated at least once a year. As of March 31, 2023, the amortized cost of Pass rated consumer receivables was $1.5 billion and the amount of Classified consumer receivables was less than $0.1 billion.

The following table presents an aging analysis of the amortized cost of consumer receivables by delinquency status (in thousands):

			March 31, 2023						December 31, 2022
Non-delinquent loans			$	1,330,642					$	1,643,874
1 - 60 days past due			191,609						295,830
61 - 90 days past due			40,249						20,612
90+ days past due			65,545						62,134
Total amortized cost			$	1,628,045					$	2,022,450

The amount listed as 1 - 60 days past due in the above table includes $137.3 million and $224.9 million of cash in transit as of March 31, 2023 and December 31, 2022, respectively, which reflects ongoing repayments from consumers that have been sent from consumers’ bank accounts but have not yet been received at the Company’s bank account as of the date of the financial statements. This cash in transit as of March 31, 2023 and December 31, 2022 represents 8.4% and 11.1%, respectively, of the total amortized cost of consumer receivables.

For consumer receivables, an allowance for credit losses is determined based on the probability of a default event occurring over the life of the receivables. When a consumer has not paid by the due date, it is an indication that credit risk has increased. As a result, the allowance for credit losses for that receivable is measured at an amount equal to the lifetime allowance for credit losses for increased credit risk. Lifetime allowance for credit losses is the expected credit losses that result from all possible default events over the expected life of the receivables. The allowance for credit losses on consumer receivables is a valuation account that is deducted from the carrying value of the consumer receivables.

Consumer receivables are charged off when they are over 180 days past due and the Company has no reasonable expectation of recovery. When consumer receivables are charged off, the Company recognizes the charge against the allowance for credit losses. While the Company expects collections at that point to be unlikely, the Company may recover amounts from the respective consumers. Any subsequent recoveries following charge-off are credited to transaction, loan, and consumer receivable losses on the condensed consolidated statements of operations in the period they were recovered. The amount of recoveries for the three months ended March 31, 2023 and March 31, 2022 were immaterial.

The following table summarizes activity in the allowance for credit losses subsequent to the acquisition of Afterpay (in thousands):

			Three Months Ended March 31, 2023						From Acquisition on January 31, 2022 to March 31, 2022
Allowance for credit losses, beginning of the period (i)			$	151,290					$	115,552
Provision for credit losses			43,131						36,505
Charge-offs and other adjustments			(52,401)						(53,780)
Foreign exchange effect			(486)						11,547
Allowance for credit losses, end of the period			$	141,534					$	109,824

(i) Consumer receivables acquired from Afterpay that reflected a more-than-insignificant deterioration of credit from origination were considered purchased credit deteriorated ("PCD") receivables. For PCD consumer receivables, the initial estimate of expected credit losses is recognized in the allowance for credit losses on the date of acquisition using the same methodology as other consumer receivables.

NOTE 7 - LOANS HELD FOR INVESTMENT

In April 2021, the Company began originating loans in the U.S. through its wholly-owned subsidiary bank, Square Financial Services. The Company sells the majority of the loans to institutional investors with a portion retained on its balance sheet. Loans retained by the Company are classified as held for investment as the Company has both the intent and ability to hold them for the foreseeable future, until maturity, or until payoff. The Company’s intent and ability in the future may change based on changes in business strategies, the economic environment, and market conditions. As of March 31, 2023 and December 31, 2022, the Company held $178.3 million and $124.0 million, respectively, as loans held for investment, net of allowance, included in other current assets on the condensed consolidated balance sheet. Refer to Note 10, Other Consolidated Balance Sheet Components (Current) for more details.

Loans held for investment are recorded at amortized cost, less an allowance for potential uncollectible amounts. Amortized cost basis represents principal amounts outstanding, net of unearned income, unamortized deferred fees and costs on originated loans, premiums or discounts on purchased loans and charge-offs. The allowance for loan losses and amount of charge offs recorded as of March 31, 2023 and December 31, 2022 were all immaterial.

The Company considers loans that are greater than 60 days past due to be delinquent, and loans 90 days or more past due to be nonperforming. Loans that are 120 days or more past due are generally considered to be uncollectible and are written off. When a loan is identified as nonperforming, recognition of income is discontinued. Loans are restored to performing status after total overdue unpaid amounts are repaid and the Company has reasonable assurance that performance under the terms of the loan will continue. As of March 31, 2023, the amount of loans that were identified as nonperforming loans was immaterial.

The Company closely monitors economic conditions and loan performance trends to assess and manage its exposure to credit risk. The criteria the Company monitors when assessing the credit quality and risk of its loan portfolio is primarily based on internal risk ratings, as they provide insight into borrower risk profiles and are useful as indicators of potential future credit losses. Loans are internally rated as "Pass" rated or "Classified". Pass rated loans generally consist of loans that are current or up to 60 days past due. Classified loans generally comprise of loans that are 60 days or greater past due and have a higher risk of default. Internal risk ratings are reviewed and, generally, updated at least once a year. As of March 31, 2023, the amortized cost of Pass rated loans was $183.1 million and the amount of Classified loans was immaterial.

NOTE 8 - ACQUISITIONS

Afterpay

On January 31, 2022 (February 1, 2022 Australian Eastern Daylight Time), the Company completed the acquisition of Afterpay, a global BNPL platform. In connection with the acquisition, the Company issued 113,617,352 shares of the Company’s Class A common stock. The shares issued included a deemed vested component of outstanding employee awards, based on the ratio of time served in relation to the vesting term of each award, with the unvested portion being replaced with Block’s unvested replacement awards, with the same terms. The aggregate fair value of the shares issued was $13.8 billion based on the closing price of the Company’s Class A common stock on the acquisition date, of which $66.3 million was attributed to acceleration of various share-based arrangements and was accounted for as an expense immediately post-acquisition, included as a component of general and administrative expenses in the condensed consolidated statement of operations. As of the completion of the acquisition, certain convertible notes with an outstanding principal amount of AU $1.5 billion (U.S. $1.1 billion based on the closing exchange rate on the acquisition date) remained outstanding, and were redeemed on March 4, 2022. As of December 31, 2022, the Company's purchase price allocation was complete and the measurement period was closed.

The table below summarizes the consideration paid for Afterpay and the assessment of the fair value of the assets acquired and liabilities assumed at the closing date (in thousands, except share data):

Consideration:
Stock (113,617,352 shares of Class A common stock, excluding value accounted as post-combination expense of $66,337)			$	13,827,929
Cash paid to settle tax withholding in connection with replacement awards			8,693
Total			$	13,836,622
Recognized amounts of identifiable assets acquired and liabilities assumed:
Current assets (inclusive of cash, cash equivalents, and restricted cash acquired)			$	653,709
Consumer receivables			1,245,508
Intangible customer assets			1,378,000
Intangible technology assets			239,000
Intangible trade name			386,000
Other non-current assets			74,232
Long-term debt - current (i)			(1,058,065)
Current liabilities			(439,358)
Warehouse funding facilities (ii)			(107,996)
Deferred tax liabilities			(190,689)
Other non-current liabilities			(63,213)
Total identifiable net assets acquired			2,117,128
Goodwill			11,719,494
Total			$	13,836,622

(i) Long-term debt - current is comprised of the aforementioned Afterpay convertible notes, which were redeemed in cash at face value on March 4, 2022.

(ii) Refer to Note 13, Indebtedness for further details.

NOTE 9 - ACQUIRED INTANGIBLE ASSETS

The following tables present the detail of acquired intangible assets as of the periods presented (in thousands):

			Balance at March 31, 2023
Weighted Average Estimated Useful Life						Cost						Accumulated Amortization						Net
Technology assets			5 years						$	396,916					$	(151,189)					$	245,727
Customer assets			15 years						1,467,212						(134,798)						1,332,414
Trade names			9 years						432,814						(69,725)						363,089
Other			9 years						13,701						(5,845)						7,856
Total									$	2,310,643					$	(361,557)					$	1,949,086

			Balance at December 31, 2022
Weighted Average Estimated Useful Life						Cost						Accumulated Amortization						Net
Technology assets			5 years						$	398,665					$	(133,116)					$	265,549
Customer assets			15 years						1,474,163						(110,316)						1,363,847
Trade names			9 years						434,766						(58,352)						376,414
Other			9 years						13,701						(5,477)						8,224
Total									$	2,321,295					$	(307,261)					$	2,014,034

All intangible assets are amortized over their estimated useful lives.

The changes to the carrying value of intangible assets were as follows (in thousands):

			Three Months Ended March 31,
			2023						2022
Acquired intangible assets, net, beginning of the period			$	2,014,034					$	257,049
Acquisitions			—						2,025,000
Amortization expense			(55,595)						(42,160)
Foreign currency translation adjustments			(9,353)						35,310
Acquired intangible assets, net, end of the period			$	1,949,086					$	2,275,199

The estimated future amortization expense of intangible assets in future periods as of March 31, 2023 was as follows (in thousands):

Remainder of 2023			$	165,612
2024			217,392
2025			210,565
2026			196,498
2027			148,734
Thereafter			1,010,285
Total			$	1,949,086

NOTE 10 - OTHER CONSOLIDATED BALANCE SHEET COMPONENTS (CURRENT)

Other Current Assets

The following table presents the detail of other current assets (in thousands):

			March 31, 2023						December 31, 2022
Inventory, net			$	101,655					$	97,703
Restricted cash (i)			414,267						639,780
Processing costs receivable			305,935						298,568
Prepaid expenses			135,706						141,262
Accounts receivable, net			133,502						140,508
Loans held for investment, net of allowance for loan losses (ii)			178,300						123,959
Other			157,845						185,485
Total			$	1,427,210					$	1,627,265

(i) Includes a portion invested in money market funds. Refer to Note 5, Fair Value Measurements for further details*.*

(ii) Refer to Note 7, Loans Held for Investment for further details*.*

Accrued Expenses and Other Current Liabilities

The following table presents the detail of accrued expenses and other current liabilities (in thousands):

			March 31, 2023						December 31, 2022
Accrued expenses			$	379,252					$	382,571
Accounts payable			100,093						95,846
Customer deposits			155,494						141,893
Accrued transaction losses (i)			62,085						64,539
Accrued royalties			58,538						63,684
Operating lease liabilities, current			62,673						66,854
Other			248,068						258,129
Total			$	1,066,203					$	1,073,516

(i) The Company is exposed to potential credit losses related to transactions processed by sellers that are subsequently subject to chargebacks when the Company is unable to collect from the sellers primarily due to insolvency. Generally, the Company estimates the potential loss rates based on historical experience that is continuously adjusted for new information and incorporates, where applicable, reasonable and supportable forecasts about future expectations.

The following table summarizes the activities of the Company’s reserve for transaction losses (in thousands):

			Three Months Ended March 31,
			2023						2022
Accrued transaction losses, beginning of the period			$	64,539					$	55,167
Provision for transaction losses			24,942						20,721
Charge-offs to accrued transaction losses			(27,396)						(22,229)
Accrued transaction losses, end of the period			$	62,085					$	53,659

In addition to amounts reflected in the table above, the Company recognized additional provision for transaction losses that was realized and written-off within the same period. The Company recorded $70.0 million and $87.3 million for the three months ended March 31, 2023 and March 31, 2022, respectively, for such losses.

NOTE 11 - OTHER CONSOLIDATED BALANCE SHEET COMPONENTS (NON-CURRENT)

Other Non-Current Assets

The following table presents the detail of other non-current assets (in thousands):

			March 31, 2023						December 31, 2022
Property and equipment, net			$	332,144					$	329,302
Investment in non-marketable equity securities (i)			205,225						208,880
Investment in bitcoin, net (ii)			102,479						102,303
Restricted cash			70,350						71,600
Other			101,314						101,454
Total			$	811,512					$	813,539

(i) Investment in non-marketable equity securities represents the Company's investments in equity of non-public entities. These investments are measured using the measurement alternative and are therefore carried at cost, less impairment, adjusted for observable price changes from orderly transactions for identical or similar investments of the same issuer. Adjustments are recorded within other expense (income), net on the condensed consolidated statements of operations. Unrealized gains and losses were immaterial as of March 31, 2023.

(ii) As of March 31, 2023, the Company has purchased a cumulative $220.0 million in bitcoin for investment purposes. Investment in bitcoin is accounted for as an indefinite-lived intangible asset, and does not include any bitcoin held for other parties, which is further described in Note 12, Bitcoin Held for Other Parties. Investment in bitcoin is subject to impairment losses if the fair value of bitcoin decreases below the carrying value during the assessed period. Impairment losses cannot be recovered for any subsequent increase in fair value until the sale of the asset. The Company recorded no impairment losses in the three months ended March 31, 2023. As of March 31, 2023, the cumulative impairment charges to date were $117.7 million and the fair value of the investment in bitcoin was $228.7 million based on observable market prices, which was $126.2 million in excess of the Company's carrying value of $102.5 million after impairment charges.

NOTE 12 - BITCOIN HELD FOR OTHER PARTIES

The Company allows its Cash App customers to store their bitcoin in the Company’s digital wallets free of charge. The Company also holds an immaterial amount of bitcoin from select trading partners to facilitate bitcoin transactions for customers on Cash App. Other than bitcoin, the Company does not hold or store any other types of crypto-assets for customers or trading partners. The Company holds the cryptographic key information and maintains the internal recordkeeping of the bitcoin held for other parties. The Company's contractual arrangements state that its customers and trading partners retain legal ownership of the bitcoin; have the right to sell, pledge, or transfer the bitcoin; and also benefit from the rewards and bear the risks associated with the ownership, including as a result of any bitcoin price fluctuations. The customer also bears the risk of loss as a result of fraud or theft, unless the loss was caused by the Company’s gross negligence or the Company’s willful misconduct. The Company does not use any of the bitcoin custodied for customers or trading partners as collateral for any of the Company’s loans or other financing arrangements; nor does it lend or pledge bitcoin held for others to any third parties. The Company occasionally engages third-party custodians to store and safeguard bitcoin on the Company's behalf. As of March 31, 2023, an immaterial amount of the bitcoin was held by third-party custodians on the Company's behalf.

The Company records a bitcoin safeguarding obligation liability and a corresponding bitcoin safeguarding asset based on the fair value of the bitcoin held for other parties at each reporting date. The Company was not aware of any actual or possible safeguarding loss events as of March 31, 2023 or December 31, 2022, and accordingly, the bitcoin safeguarding obligation liability and the associated bitcoin safeguarding asset were recorded at the same value. The balance sheet as of December 31, 2022 has been revised to reflect the adoption of Staff Accounting Bulletin No. 121 ( "SAB 121"). The adoption had no impact on previously reported consolidated statements of operations, statements of cash flows, or statements of stockholders' equity.

The following table summarizes the Company’s bitcoin held for other parties (in thousands, except number of bitcoin):

			March 31, 2023						December 31, 2022
Approximate number of bitcoin held for customers			25,507						25,850
Approximate number of bitcoin held for trading partners			3						62
Total approximate number of bitcoin held for other parties			25,510						25,912
Safeguarding obligation liability related to bitcoin held for customers			$	726,397					$	427,221
Safeguarding obligation liability related to bitcoin held for trading partners			98						1,022
Safeguarding obligation liability related to bitcoin held for other parties			$	726,495					$	428,243
Safeguarding asset related to bitcoin held for other parties			$	726,495					$	428,243

NOTE 13 - INDEBTEDNESS

A) Notes

The 2023 Convertible Notes, 2025 Convertible Notes, 2026 Convertible Notes, and 2027 Convertible Notes (each, as defined below, and collectively, the “Convertible Notes”), together with the Senior Notes (as defined below), are collectively referred to as the “Notes.”

The net carrying amount of the Notes as of March 31, 2023 were as follows (in thousands):

			Principal Outstanding						Unamortized Debt Issuance Costs						Net Carrying Value
2031 Senior Notes			$	1,000,000					$	(11,487)					$	988,513
2026 Senior Notes			1,000,000						(8,899)						991,101
2027 Convertible Notes			575,000						(6,137)						568,863
2026 Convertible Notes			575,000						(5,266)						569,734
2025 Convertible Notes			1,000,000						(5,856)						994,145
2023 Convertible Notes (i)			460,630						(91)						460,539
Total			$	4,610,630					$	(37,736)					$	4,572,895

(i) Net carrying value disclosed as current portion of long-term debt within total current liabilities on the condensed consolidated balance sheet.

The net carrying amount of the Notes as of December 31, 2022 were as follows (in thousands):

			Principal Outstanding												Unamortized Debt Issuance Costs						Net Carrying Value
2031 Senior Notes			$	1,000,000											$	(11,829)					$	988,171
2026 Senior Notes			1,000,000												(9,586)						990,414
2027 Convertible Notes			575,000												(6,465)						568,535
2026 Convertible Notes			575,000												(5,685)						569,315
2025 Convertible Notes			1,000,000												(6,606)						993,394
2023 Convertible Notes (i)			460,630												(274)						460,356
Total			$	4,610,630											$	(40,445)					$	4,570,185

(i) Net carrying value disclosed as current portion of long-term debt within total current liabilities on the condensed consolidated balance sheet.

The Company recognized interest expense on the Notes as follows (in thousands):

			Three Months Ended March 31,
			2023						2022
Contractual interest expense			$	16,495					$	16,466
Amortization of debt issuance costs (i)			2,710						2,703
Total			$	19,205					$	19,169

(i) Upon adoption of ASU 2020-06, the debt discount associated with the equity component on convertible debt outstanding was reversed which resulted in a decrease in the amount of non-cash interest expense to be recognized going forward.

Convertible Notes due in 2026 and 2027

On November 13, 2020, the Company issued an aggregate principal amount of $1.15 billion of convertible senior notes comprised of $575.0 million of convertible senior notes due 2026 ("2026 Convertible Notes") and $575.0 million of convertible senior notes due 2027 ("2027 Convertible Notes"). The 2026 Convertible Notes mature on May 1, 2026, unless earlier converted or repurchased, and bear a zero rate of interest. The 2027 Convertible Notes mature on November 1, 2027, unless earlier converted or repurchased, and bear interest at a rate of 0.25% payable semi-annually on May 1 and November 1 of each year.

As of March 31, 2023, no principal had converted and the if-converted value did not exceed the outstanding principal amount on either the 2026 Convertible Notes or 2027 Convertible Notes.

Convertible Notes due in 2025

On March 5, 2020, the Company issued an aggregate principal amount of $1.0 billion of convertible senior notes ("2025 Convertible Notes"). The 2025 Convertible Notes mature on March 1, 2025, unless earlier converted or repurchased, and bear interest at a rate of 0.125% payable semi-annually on March 1 and September 1 of each year. The circumstances were not met during the three months ended March 31, 2023. As of March 31, 2023, certain holders of the 2025 Convertible Notes had converted an immaterial aggregate principal amount of their 2025 Convertible Notes. The Company has settled the conversions through the issuance of an immaterial amount of shares of the Company's Class A common stock. As of March 31, 2023, the if-converted value of the 2025 Convertible Notes did not exceed the outstanding principal amount.

Convertible Notes due in 2023

On May 25, 2018, the Company issued an aggregate principal amount of $862.5 million of convertible senior notes ("2023 Convertible Notes"). The 2023 Convertible Notes mature on May 15, 2023, unless earlier converted or repurchased, and bear interest at a rate of 0.50% payable semi-annually on May 15 and November 15 of each year. The circumstances to allow the holders to convert their 2023 Convertible Notes were met in the fourth quarter of 2020 and continued to be met through the first half of 2022. The circumstances were met during the three months ended March 31, 2023 and on or after February 15, 2023, up until the close of business on the second scheduled trading day immediately preceding the maturity date, a holder may convert all or any portion of its 2023 Convertible Notes regardless of the circumstances. As of March 31, 2023, certain holders of the 2023 Convertible Notes had converted an aggregate principal amount of $401.9 million of their 2023 Convertible Notes, leaving approximately $460.6 million aggregate principal amount outstanding that could be converted prior to or repaid on the maturity date of May 15, 2023. The Company has settled the conversions through the issuance of 5.2 million shares of the Company's Class A common stock. As of March 31, 2023, the if-converted value of the 2023 Convertible Notes did not exceed the outstanding principal amount.

Convertible Note Hedge and Warrant Transactions

In connection with the offering of the 2023 Convertible Notes, the Company entered into convertible note hedge transactions ("2023 Convertible Note Hedges") with certain financial institution counterparties ("2023 Note Hedge Counterparties") whereby the Company has the option to purchase a total of approximately 11.1 million shares of its Class A common stock at a price of approximately $77.85 per share. The total cost of the 2023 Convertible Note Hedges was $172.6 million. In addition, the Company sold warrants ("2023 Warrants") to the 2023 Note Hedge Counterparties whereby the 2023 Note Hedge Counterparties have the option to purchase a total of 11.1 million shares of the Company’s Class A common stock at a price of approximately $109.26 per share. The Company received $112.1 million in cash proceeds from the sale of the 2023 Warrants. Taken together, the purchase of the 2023 Convertible Note Hedges and sale of the 2023 Warrants are intended to reduce dilution from the conversion of the 2023 Convertible Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the converted 2023 Convertible Notes, as the case may be, and to effectively increase the overall conversion price from approximately $77.85 per share to approximately $109.26 per share. As these instruments are considered indexed to the Company's own stock and are considered equity classified, the 2023 Convertible Note Hedges and 2023 Warrants are recorded in stockholders’ equity, are not accounted for as derivatives, and are not remeasured each reporting period. The net costs incurred in connection with the 2023 Convertible Note Hedges and 2023 Warrants were recorded as a reduction to additional paid-in capital on the condensed consolidated balance sheets. The Company also exercised a pro-rata portion of the 2023 Convertible Note Hedges to offset the shares of the Company's Class A common stock issued to settle the conversion of the 2023 Convertible Notes. The Company has received 3.0 million shares of the Company's Class A common stock from the 2023 Note Hedge Counterparties, of which none were received in the three months ended March 31, 2023.

B) Revolving Credit Facility

In May 2020, the Company entered into a revolving credit agreement with certain lenders, which provided a $500.0 million senior unsecured revolving credit facility (the "2020 Credit Facility") maturing in May 2023. On May 28, 2020, the Company amended the credit agreement for the 2020 Credit Facility (the "Credit Agreement") to permit the Company’s wholly-owned subsidiary, Square Capital, LLC (“Square Capital”), to incur indebtedness in an aggregate principal amount of up to $500.0 million pursuant to the Paycheck Protection Program Liquidity Facility (“PPPLF”) authorized under the Federal Reserve Act of 1913. In connection with its convertible debt offerings in November 2020, the Company entered into a second amendment to the Credit Agreement on November 9, 2020 to permit convertible debt in an aggregate principal amount not to exceed $3.6 billion. On January 28, 2021, the Company entered into a third amendment to the Credit Agreement to increase the amount of indebtedness that Square Capital is permitted to incur pursuant to the PPPLF from an aggregate principal amount of up to $500.0 million to an aggregate principal amount of up to $1.0 billion. On May 25, 2021, the Company entered into a fourth amendment to the Credit Agreement to, among other things, extend the maturity date of the loans advanced to May 1, 2024. On January 28, 2022, the Company entered into a fifth amendment to the Credit Agreement to permit certain existing obligations of Afterpay and its subsidiaries to remain outstanding as of and after the completion of the Afterpay acquisition. 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). The Credit Agreement also contains a financial covenant that requires the Company to maintain a quarterly minimum liquidity amount (consisting of the sum of Unrestricted Cash and Cash Equivalents plus Marketable Securities, each as defined in the Credit Agreement) of at least $250.0 million, tested on a quarterly basis. The Company is obligated to pay customary fees for a credit facility of this size and type including a commitment fee of 0.15% per annum on the undrawn portion available under the 2020 Credit Facility. To date, no funds have been drawn and no letters of credit have been issued under the 2020 Credit Facility. As of March 31, 2023, $600.0 million remained available for draw. The Company incurred immaterial unused commitment fees during the three months ended March 31, 2023 and March 31, 2022, respectively. As of March 31, 2023, the Company was in compliance with all financial covenants associated with the 2020 Credit Facility.

Loans under the 2020 Credit Facility, excluding the Tranche B Loans, bear interest at the Company's option of (i) a base rate based on the highest of the prime rate, the federal funds rate plus 0.50%, and the adjusted London Interbank Offered Rate ("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 Credit Agreement includes provisions allowing the Company to replace or update LIBOR with a replacement rate. The margin is determined based on the Company’s total leverage ratio, as defined in the Credit 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. The Credit Agreement also contains customary affirmative and negative covenants typical for a financing of this type that, among other things, restricts the Company and certain of its subsidiaries’ ability to incur additional indebtedness, create liens, merge or consolidate or make certain dispositions, pay dividends and make distributions, enter into restrictive agreements, enter into agreements with affiliates, and make certain investments and acquisitions.

C) Warehouse Funding Facilities

Following the acquisition of Afterpay, the Company assumed Afterpay's existing warehouse funding facilities. The Company has financing arrangements with financial institutions in Australia, New Zealand, the United States, and the United Kingdom (collectively, the “Warehouse Facilities”). 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 the Company's BNPL platform. Borrowings under the Warehouse Facilities are secured against the respective consumer receivables.

These Warehouse Facilities have maturity dates ranging from December 2023 to December 2024. As of March 31, 2023, the aggregate commitment amount of the Warehouse Facilities, using the respective exchange rates at period-end, was $1.7 billion on a revolving basis, of which $0.7 billion was drawn and $1.0 billion remained available. All facilities contain portfolio parameters based on performance of the underlying consumer receivables, which each respective region has satisfied as of March 31, 2023. None of the Warehouse Facilities contain corporate financial covenants.

All Warehouse Facilities are on a variable rate basis which aligns closely to the weighted average life of the consumer receivables they finance. Borrowings under these facilities bear interest at (i) a base rate aligned to either the local risk free rate, such as Term SOFR and the Sterling Overnight Index Average ("SONIA") or similar, and (ii) a margin which is set for the term of the availability period. In addition, each facility requires payment of immaterial commitment fees.

The table below summarizes the amounts drawn on these facilities by year of maturity (in thousands):

			March 31, 2023
2023			$	305,195
2024			384,998
Total funding debt, net of deferred debt issuance costs			$	690,193

NOTE 14 - INCOME TAXES

The Company recorded an income tax benefit of $2.1 million for the three months ended March 31, 2023, compared to an income tax benefit of $1.7 million for the three months ended March 31, 2022. The difference between income before income tax at the U.S. federal statutory rate and the income tax benefit recorded for the three months ended March 31, 2023 is primarily due to a change in the valuation allowance in the U.S. and certain foreign jurisdictions, offset by the current year loss of an entity with deferred tax liabilities available to recognize those losses in future periods.

The difference between the income tax benefit for the three months ended March 31, 2023 and the income tax benefit for the three months ended March 31, 2022 primarily relates to the inclusion of an entity in the annual effective income tax rate that has a current year loss with deferred tax liabilities available to recognize those losses in future periods and a change in the valuation allowance in certain jurisdictions.

The Company is subject to income taxes in the U.S. and certain foreign tax jurisdictions. The tax provision for the three months ended March 31, 2023 and March 31, 2022 is calculated on a jurisdictional basis. The Company estimated the worldwide income tax provision using the estimated annual effective income tax rate expected to be applicable for the full year. The Company’s effective tax rate may be subject to fluctuations during the year as new information is obtained, which may affect the assumptions used to estimate the annual effective tax rate, including factors such as the mix of forecasted pre-tax earnings in the various jurisdictions in which the Company operates, changes in valuation allowances against deferred tax assets, the recognition and de-recognition of tax benefits related to uncertain tax positions, and changes in or the interpretation of tax laws in jurisdictions where the Company conducts business.

As of March 31, 2023, the Company retained a full valuation allowance on its net deferred tax assets in certain jurisdictions. The realization of the Company’s deferred tax assets depends primarily on its ability to generate taxable income in future periods. The amount of deferred tax assets considered realizable in future periods may change as management continues to reassess the underlying factors it uses in estimating future taxable income.

NOTE 15 - STOCKHOLDERS’ EQUITY

Common Stock

The Company has two classes of authorized common stock outstanding: Class A common stock and Class B common stock. Class A common stock and Class B common stock are referred to as "common stock" throughout these Notes to the Condensed Consolidated Financial Statements, unless otherwise noted. Holders of shares of Class A common stock are entitled to one vote per share, while holders of shares of Class B common stock are entitled to ten votes per share. Shares of the Company's Class B common stock are convertible into an equivalent number of shares of its Class A common stock and generally convert into shares of its Class A common stock upon transfer. The holders of Class A common stock and Class B common stock have no preemptive or other subscription rights and there are no redemption or sinking fund provisions with respect to such shares. Following the Company's initial public offering in 2015, all new stock options and stock-based awards are granted in Class A common stock.

Warrants

In conjunction with the 2023 Convertible Notes offering, the Company sold the 2023 Warrants whereby the counterparties have the option to purchase a total of approximately 11.1 million shares of the Company’s Class A common stock at a price of $109.26 per share. The 2023 Warrants expire evenly over a 60 trading day period starting on August 15, 2023. None of the warrants were exercised as of March 31, 2023.

In conjunction with the 2025 Convertible Notes offering, the Company sold the 2025 Warrants whereby the counterparties have the option to purchase a total of approximately 8.3 million shares of the Company’s Class A common stock at a price of $161.34 per share. The 2025 Warrants expire evenly over a 60 trading day period starting on June 1, 2025. None of the warrants were exercised as of March 31, 2023.

In conjunction with the 2026 Convertible Notes offering, the Company sold the 2026 Warrants whereby the counterparties have the option to purchase a total of approximately 1.9 million shares of the Company’s Class A common stock at a price of $368.16 per share. The 2026 Warrants expire evenly over a 60 trading day period starting on August 1, 2026. None of the warrants were exercised as of March 31, 2023.

In conjunction with the 2027 Convertible Notes offering, the Company sold the 2027 Warrants whereby the counterparties have the option to purchase a total of approximately 1.9 million shares of the Company’s Class A common stock at a price of $414.18 per share. The 2027 Warrants expire evenly over a 60 trading day period starting on February 1, 2028. None of the warrants were exercised as of March 31, 2023.

Conversion of Convertible Notes and Exercise of Convertible Note Hedges

In connection with the conversion of the 2023 Convertible Notes, the Company has issued an aggregate 5.2 million shares of Class A common stock as of March 31, 2023, of which no shares were issued in the three months ended March 31, 2023. The Company also exercised a pro-rata portion of the 2023 Convertible Note Hedges and received 3.0 million shares of Class A common stock from the 2023 Note Hedge Counterparties to offset the shares issued as of March 31, 2023. No shares were received in the three months ended March 31, 2023.

Stock Plans

The Company maintains two share-based employee compensation plans: the 2009 Stock Plan ("2009 Plan") and the 2015 Equity Incentive Plan ("2015 Plan"). The 2015 Plan serves as the successor to the 2009 Plan. The 2015 Plan became effective as of November 17, 2015. Outstanding awards under the 2009 Plan continue to be subject to the terms and conditions of the 2009 Plan. Since November 17, 2015, no additional awards have been nor will be granted in the future under the 2009 Plan. As of March 31, 2023, the total number of shares subject to stock options, RSAs, and RSUs outstanding under the 2009 Plan was 3,065,728 shares.

Under the 2015 Plan, shares of the Company's Class A common stock are reserved for the issuance of incentive and nonstatutory stock options ("ISOs" and "NSOs", respectively), restricted stock awards ("RSAs"), restricted stock units ("RSUs"), performance shares, and stock bonuses to qualified employees, directors, and consultants. The awards must be granted at a price per share not less than the fair market value at the date of grant. Initially, 30,000,000 shares were reserved under the 2015 Plan and any shares subject to options or other similar awards granted under the 2009 Plan that expire, are forfeited, are repurchased by the Company, or otherwise terminate unexercised, will become available under the 2015 Plan. The number of shares available for issuance under the 2015 Plan has been and will be increased on the first day of each fiscal year, in an amount equal to the least of (i) 40,000,000 shares, (ii) 5% of the outstanding shares on the last day of the immediately preceding fiscal year, or (iii) such number of shares determined by the administrator of the Plan. The administrator consists of the board of directors who then delegates the responsibilities to the compensation committee. As of March 31, 2023, the total number of shares subject to stock options, RSAs, and RSUs outstanding under the 2015 Plan was 30,267,337, and 145,593,622 shares were available for future issuance.

A summary of stock option activity for the three months ended March 31, 2023 is as follows (in thousands, except per share data):

			Number of Stock Options						Weighted Average Exercise Price						Weighted Average Remaining Contractual Term (in years)						Aggregate Intrinsic Value
Outstanding, beginning of the year			6,739						$	40.37					4.02						$	224,484
Granted			225						74.50
Exercised			(712)						9.58
Forfeited			(7)						29.62
Expired			(4)						$	126.99
Outstanding, end of the period			6,241						$	45.07					3.91						$	213,706
Exercisable, end of the period			5,148						$	32.60					3.12						$	209,832

Restricted Stock Activity

Activity related to RSAs and RSUs during the three months ended March 31, 2023 is set forth below (in thousands, except per share data):

			Number of Shares						Weighted Average Grant Date Fair Value
Unvested, beginning of the year			28,300						$	97.89
Granted			2,035						80.71
Vested			(2,642)						97.68
Forfeited			(601)						110.75
Unvested, end of the period			27,092						$	96.33

Share-Based Compensation

The following table summarizes the effects of share-based compensation on the Company's condensed consolidated statements of operations (in thousands):

			Three Months Ended March 31,
			2023						2022
Cost of revenue			$	142					$	109
Product development			197,857						145,075
Sales and marketing			29,365						21,256
General and administrative			52,227						108,983
Total			$	279,591					$	275,423

The Company recorded $21.1 million and $13.0 million of share-based compensation expense related to the Company's 2015 Employee Stock Purchase Plan during the three months ended March 31, 2023 and March 31, 2022, respectively, which are included in the table above. The total share-based compensation expense for the three months ended March 31, 2022 also includes $66.3 million related to the acceleration of various share-based arrangements associated with the acquisition of Afterpay.

The Company capitalized $5.9 million and $3.9 million of share-based compensation expense related to capitalized software costs during the three months ended March 31, 2023 and March 31, 2022, respectively.

As of March 31, 2023, there was $2.5 billion of total unrecognized compensation cost related to outstanding stock options, RSUs, and RSAs that are expected to be recognized over a weighted-average period of 2.7 years.

NOTE 16 - NET LOSS PER SHARE

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share is computed by dividing 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 the Company reported a net loss, diluted net loss per share is the same as basic net loss per share because the effects of potentially dilutive items were anti-dilutive.

The following table presents the calculation of basic and diluted net loss per share (in thousands, except per share data):

			Three Months Ended March 31,
2023						2022
Numerator:
Net loss			$	(19,326)					$	(207,363)
Less: Net loss attributable to noncontrolling interests			(2,488)						(3,164)
Net loss attributable to common stockholders			$	(16,838)					$	(204,199)
Denominator:
Basic shares:
Weighted-average shares used to compute basic net loss per share			602,234						541,435
Diluted shares:
Weighted-average shares used to compute diluted net loss per share			602,234						541,435
Net loss per share attributable to common stockholders:
Basic			$	(0.03)					$	(0.38)
Diluted			$	(0.03)					$	(0.38)

The following potential common shares were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented (in thousands):

			Three Months Ended March 31,
			2023						2022
Stock options, restricted stock, and employee stock purchase plan			36,819						23,402
Convertible notes			18,025						18,038
Common stock warrants			23,188						42,361
Total anti-dilutive securities			78,032						83,801

NOTE 17 - RELATED PARTY TRANSACTIONS

In July 2019, the Company entered into a lease agreement for office space in St. Louis, Missouri, from an affiliate of one of the Company’s co-founders and current member of its board of directors, Mr. Jim McKelvey, for a term of 15.5 years, with options to extend the lease term for two five-year terms. The lease possession date varied by floor, beginning in May 2020. As of March 31, 2023, the Company had recorded right-of-use assets of $10.9 million and associated lease liabilities of $17.7 million related to this lease arrangement.

Under the lease agreement, the Company also has an option to terminate the lease for up to 50% of the leased space any time between January 1, 2024 and December 31, 2026, as well as an option to terminate the lease for the entire property on January 1, 2034. Termination penalties specified in the lease agreement will apply if the Company exercises any of the options to terminate the lease. On January 2, 2023, the Company notified the lessor of its intention to exercise the early termination option with respect to approximately 48% of the leased space, effective December 31, 2023. As a result, the Company paid a termination penalty of approximately $5.2 million to exercise the option.

NOTE 18 - COMMITMENTS AND CONTINGENCIES

Litigation and Regulatory Matters

The Company is currently subject to, and may in the future be involved in, various litigation matters, legal claims, investigations, and regulatory proceedings.

The Company received Civil Investigative Demands (“CIDs”) from the Consumer Financial Protection Bureau (“CFPB”), as well as from Attorneys General from multiple states, seeking the production of information related to, among other things, Cash App’s handling of customer complaints and disputes. The Company is cooperating with the CFPB and the state Attorneys General in connection with these CIDs. The Company has accrued a liability for an estimated amount in connection with these CIDs in accordance with ASC 450-20, Contingencies: Loss Contingencies. The accrued amount was not material as of March 31, 2023. Given the status of these matters, it is not possible to reliably determine the range of potential liability in excess of the accrued amounts that could result from these investigations. The Company regularly assesses the likelihood of adverse outcomes resulting from litigation and regulatory proceedings and adjusts the financial statements based on such assessments. The eventual outcome of these matters may differ materially from the estimates the Company has currently accrued in the financial statements.

On December 16, 2021, H&R Block, Inc. and HRB Innovations, Inc. (collectively, “HRB”) filed a complaint for trademark infringement against the Company in the United States District Court for the Western District of Missouri. HRB alleges that the Company’s rebranding to Block, Inc. and use of a green square logo in connection with the Company’s Cash App Taxes product infringe HRB’s trademarks and are likely to cause consumer confusion. HRB demands that the Company stop using the Block name and associated branding, and further demands that the Company stop using the green square Cash App logo. A preliminary injunction granted by the trial court on April 28, 2022 preventing the Company from using its Block, Inc. name in connection with Cash App Taxes was stayed by the appellate court on June 8, 2022 for the duration of the Company's appeal of the preliminary injunction. On January 24, 2023, the Eighth Circuit reversed and vacated the injunction granted by the trial court. On February 21, 2023, HRB filed a petition for rehearing en banc, which was denied on March 15, 2023. On March 31, 2023, HRB and the Company entered into a settlement agreement resolving all claims between them. The settlement is not material to the Company’s consolidated financial statements. The case was dismissed on April 24, 2023.

In addition, the Company is subject to various legal matters, investigations, inquiries, claims, and disputes, including with regulatory bodies and governmental agencies. The Company cannot at this time fairly estimate a reasonable range of exposure, if any, of the potential liability with respect to these matters. Although occasional adverse decisions or settlements may occur, the Company does not believe that the final disposition of any of these other matters will have a material adverse effect on its results of operations, financial position, or liquidity. The Company cannot give any assurance regarding the ultimate outcome of these matters, and their resolution could be material to the Company's operating results for any particular period.

Purchase Commitments

During the year ended December 31, 2022, we entered into non-cancelable purchase obligations related to cloud computing infrastructure. The commitment amounts in the table below are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, and the approximate timing of the actions under the contracts.

As of March 31, 2023, the future minimum payments under the purchase commitments were as follows (in thousands):

									Payments Due By Period
Remainder of 2023									$	229,148
2024									300,554
2025									316,425
2026									263,300
2027									315,100
Total									$	1,424,527

Other Contingencies

The Company is under examination, or may be subject to examination, by several tax authorities. These examinations may lead to proposed adjustments to the Company's taxes or net operating losses with respect to years under examination, as well as subsequent periods. The Company regularly assesses the likelihood of adverse outcomes resulting from tax examinations to determine the adequacy of the Company's provision for direct and indirect taxes. The Company continues to monitor the progress of ongoing discussions with tax authorities and the effect, if any, on the Company's provision for direct and indirect taxes.

Management believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company's tax audits are resolved in a manner not consistent with the Company’s expectations, the Company could be required to adjust the Company's provision for direct and indirect taxes in the period such resolution occurs.

NOTE 19 - SEGMENT AND GEOGRAPHICAL INFORMATION

The Company reports its segments to reflect the manner in which the Company's chief operating decision maker ("CODM") reviews and assesses performance. Accordingly, the Company has two reportable segments, Square and Cash App. The financial results of the Company's BNPL platform have been allocated equally to the Cash App and Square segments as management has concluded that the BNPL platform will contribute equally to both the Cash App and Square platforms. Further, Afterpay does not have a segment manager who reports to the CODM. Rather, the operations of Afterpay are managed by the segment managers of Cash App and Square, who are responsible for allocating resources and evaluating the performance of Afterpay. Products and services that are not assigned to a specific reportable segment, including but not limited to TIDAL, TBD, and Spiral, are aggregated and presented within a general corporate and other category. Square and Cash App are defined as follows:

• Cash App includes the financial tools available to individuals within the mobile Cash App, including peer-to-peer payments, bitcoin and stock investments. Cash App also includes Cash App Card which is linked to customer stored balances that customers can use to pay for purchases or withdraw funds from an ATM.

• Square includes managed payment services, software solutions, hardware, and financial services offered to sellers, excluding those that involve Cash App.

The primary financial measures used by the CODM to evaluate performance and allocate resources are revenue and gross profit. The CODM does not evaluate performance or allocate resources based on segment asset data, and therefore such information is not included. The following tables present information on the reportable segments revenue and segment gross profit (in thousands):

			Three Months Ended March 31, 2023
			Cash App						Square						Corporate and Other (i)						Total
Revenue:
Transaction-based revenue			$	134,663					$	1,288,042					$	—					$	1,422,705
Subscription and services-based revenue			973,891						341,741						50,592						1,366,224
Hardware revenue			—						37,451						—						37,451
Bitcoin revenue			2,163,751						—						—						2,163,751
Segment revenue			$	3,272,305					$	1,667,234					$	50,592					$	4,990,131
Segment gross profit (ii)			$	931,240					$	770,275					$	13,069					$	1,714,584

			Three Months Ended March 31, 2022
			Cash App						Square						Corporate and Other (i)						Total
Revenue:
Transaction-based revenue			$	109,241					$	1,123,728					$	—					$	1,232,969
Subscription and services-based revenue			622,309						282,650						54,598						959,557
Hardware revenue			—						37,326						—						37,326
Bitcoin revenue			1,730,793						—						—						1,730,793
Segment revenue			$	2,462,343					$	1,443,704					$	54,598					$	3,960,645
Segment gross profit (ii)			$	623,659					$	661,221					$	10,080					$	1,294,960

(i) Corporate and other represents results related to products and services that are not assigned to a specific reportable segment, and intersegment eliminations between Cash App and Square.

(ii) Segment gross profit for Cash App for the three months ended March 31, 2023 and March 31, 2022 included $8.5 million and $7.0 million of amortization of acquired technology assets expense, respectively. Segment gross profit for Square for the three months ended and March 31, 2023 and March 31, 2022 included $8.6 million and $7.0 million of amortization of acquired technology assets expense, respectively. Amortization of acquired technology assets expense included in Corporate and Other was immaterial for the three months ended March 31, 2023 and March 31, 2022.

The following table provides a reconciliation of total segment gross profit to the Company’s loss before applicable income taxes (in thousands):

			Three Months Ended March 31,
			2023						2022
Total segment gross profit			$	1,714,584					$	1,294,960
Less: Product development			626,937						458,224
Less: Sales and marketing			496,011						501,562
Less: General and administrative			432,825						444,149
Less: Transaction, loan, and consumer receivable losses			127,896						91,150
Less: Amortization of customer and other intangible assets			37,087						26,664
Less: Interest expense (income), net			(3,161)						15,748
Less: Other expense (income), net			18,371						(33,472)
Loss before applicable income taxes			$	(21,382)					$	(209,065)

Revenue

Revenue by geography is based on the addresses of the sellers or customers. The following table details revenue by geographic area (in thousands):

			Three Months Ended March 31,
			2023						2022
United States			$	4,664,635					$	3,721,597
International			325,496						239,048
Total			$	4,990,131					$	3,960,645

No individual country from the international markets contributed more than 10% of total revenue for the three months ended March 31, 2023 and March 31, 2022.

Long-Lived Assets

The following table details long-lived assets by geography (in thousands):

			March 31, 2023						December 31, 2022
United States			$	7,960,049					$	8,023,535
Australia			4,700,189						4,801,434
Other international			1,884,495						1,858,300
Total			$	14,544,733					$	14,683,269

Assets by reportable segment were not included, as this information is not reviewed by the CODM to make operating decisions or allocate resources, and is reviewed on a consolidated basis.

NOTE 20 - SUPPLEMENTAL CASH FLOW INFORMATION

The supplemental disclosures of cash flow information consist of the following (in thousands):

			Three Months Ended March 31,
			2023						2022
Supplemental cash flow data:
Cash paid for interest			$	16,680					$	2,725
Cash paid for income taxes			18,652						1,611
Supplemental disclosures of non-cash investing and financing activities:
Right-of-use assets obtained in exchange for operating lease obligations			518						26,090
Purchases of property and equipment in accounts payable and accrued expenses			6,580						16,338
Fair value of common stock issued related to business combinations			—						(13,827,929)
Fair value of common stock issued to settle the conversion of convertible notes			—						(2,496)
Fair value of common stock shares received to settle convertible note hedges			—						133,141