A transacting active is a Cash App account that has at least one financial transaction using any product or service within Cash App during a specified period. A transacting active for a specific Cash App product has at least one financial transaction using that product during the specified period and is referred to as an active. Examples of transactions include sending or receiving a peer-to-peer payment, transferring money into or out of Cash App, making a purchase using Cash App Card, earning a dividend on a stock investment, and paying back a loan, among others. Certain of these accounts may share an alias identifier with one or more other transacting active accounts. This could represent, among other things, one customer with multiple accounts or multiple customers sharing one alias identifier (for example, families).

Inflows per transacting active refers to total inflows in the quarter divided by monthly actives for the last month of the quarter. Inflows refers to funds entering the Cash App ecosystem. Inflows does not include the movement of funds when funds remain in the Cash App ecosystem or when funds leave the Cash App ecosystem, or inflows related to the Afterpay or Verse apps. Inflows from Verse actives were not material to overall inflows.

Cash App Ecosystem

We are building Cash App for customers to be able to use our ecosystem across their financial needs, starting with Cash App Card. We have seen customers adopt the card and then expand usage to other financial services products within Cash App like Savings, ATMs, Borrow, and Direct Deposit. Cash App Card reached 22 million monthly actives as of September, with approximately 30% of those transacting on any given day. To drive further engagement with Cash App Card, we are focused on new card and personalized design launches; marketing that uses a combination of emails, ads, and push notifications; and the convergence of software and hardware through app themes, card effects, and personalization. For instance, in September we launched Pink Card, a custom pink Cash App Card, and we saw the fastest pace of Cash App Card orders ever sold in one week. We have also seen our paid card holders spend more than those using our free cards.

Our customers have found value in gaining access to our short-term credit product, Cash App Borrow, as it provides flexible cash flow optionality. We have been able to reach scale while also maintaining historical loss rates of less than 3% on average: In the third quarter, we originated over $900 million in short-term loans and had more than 2 million Cash App Borrow monthly actives as of September.

We’re working to provide additional utility to banking products like direct deposit, and offer more choice to customers, which in turn drives engagement. In October, we started offering Auto-save paychecks and Paychecks applet, allowing customers to automatically save a percentage of each direct-deposited paycheck across savings, stocks, bitcoin, or their stored balance.

We launched a custom pink Cash App Card in the third quarter that pairs with an in-app pink theme. This is part of our strategy to elevate the card experience, and we have seen paid card holders spend more than those using our free cards.

Cash App Pay experienced strong growth and positive unit economics in the third quarter: As of September, we had more than 2 million Cash App Pay monthly actives, doubling since June. Growth has been driven by our recent partnerships, such as DoorDash, Adyen, and Stripe, as well as other large Afterpay merchants. Widening distribution of Cash App Pay allows us to reach customers beyond those whom Cash App Card serves today, and provides increased utility around stored funds.

Cash App Pay volumes are not included in our reported GPV numbers because GPV is related only to transaction-based revenue and not to subscription and services-based revenue. Cash App Pay revenue is included in subscription and services-based revenue.

¹ “2023 Franchise Economic Outlook,” International Franchise Association, March 28, 2023.

Square Ecosystem

In August, we launched Square Go, a consumer app that provides a marketplace of local beauty and personal care sellers that use the Square platform, with plans to bring the mobile booking functionality to more verticals in the future. Square Go directly integrates with Square Appointments to provide an end-to-end booking experience so consumers can search, discover, and schedule with highly rated independent service providers in their area. We have connected sellers and buyers to create nearly half a million bookings through Square Go in the third quarter since launch, and week-over-week bookings continued to increase through the same period.

We are focused on refining our go-to-market strategy to win more complex sellers, and in the third quarter we began introducing more formal contracts for large sellers. While smaller sellers enjoy the flexibility of no long-term contracts, we have learned that larger sellers prefer to have set terms for a year or more, allowing them to better manage their cash flow. Enabling multi-year contract terms empowers our sales team to bring sellers into our ecosystem, which allows us to provide competitive up-front discounts and rate guarantees to sellers.

The franchise market in the U.S. drives more than $860 billion of projected revenue across 9,000 brands and a range of verticals.¹ During the third quarter, we introduced Square for Franchises to serve these complex sellers and expand our serviceable market. Franchise and multi-entity sellers are key to our upmarket strategy as they generally use more products and generate greater gross profit than non-franchise sellers. With the Square for Franchises platform, sellers can efficiently manage multiple locations by having a comprehensive view of store performance, offer unique menu options, and coordinate gift card and loyalty programs.

In the third quarter we launched Square Go, a consumer app that provides a marketplace of local beauty and personal care sellers that use the Square platform.

SELLER HIGHLIGHT

Square for Franchises has revolutionized our restaurant group, BIRDCODE, by providing an all-in-one platform for comprehensive reporting across our entire system, seamless payments, and powerful marketing tools. Our mobile app’s Online Ordering feature has been a game-changer for the development of our franchise system and an engaging way to connect with our customers and drive success.”

- BIRDCODE Hot Chicken

We believe artificial intelligence (AI) can be a powerful assistant to help sellers further grow their businesses as it can enable greater creativity, efficiency, and productivity. In October, we launched several new AI features dedicated to helping sellers automate operations, speed up workflows, and regain time. For example, approximately 60% of new restaurant sellers have indicated that they don’t have or aren’t ready to upload their menu during onboarding. With Menu Generator, sellers can now create a full menu on Square in minutes, giving them valuable momentum when launching operations on Square.

We’re working to provide sellers in our global markets with innovative tools to account for all forms of payment their customers want to use. During the third quarter, we launched Tap to Pay on Android in Japan and Canada, joining six other countries across Australia, Europe, the UK, and the U.S. As demand for contactless payments continues to scale around the globe, we have seen strong adoption and the ability of Tap to Pay to drive acquisition in our current markets.

In October we launched several new AI features including Copy Generator, which helps sellers save time, level up their websites, and boost search engine optimization (SEO) with AI-assisted short- or long-form website copy.

Reconciliations of non-GAAP metrics used in this letter to their nearest GAAP equivalents are provided at the end of this letter.

GPV includes Square GPV and Cash App Business GPV. Square GPV is defined as the total dollar amount of all card payments processed by sellers using Square, net of refunds, and ACH transfers. Cash App Business GPV comprises Cash App activity related to peer-to-peer transactions received by business accounts and peer-to-peer payments sent from a credit card. GPV does not include transactions from our BNPL platform because GPV is related only to transaction-based revenue and not to subscription and services-based revenue.

We acquired our BNPL platform through the acquisition of Afterpay. We recognize revenue from our BNPL platform as subscription and services-based revenue, and have allocated 50% of revenue and gross profit from our BNPL platform to each of Square and Cash App. Revenue from our BNPL platform includes fees generated from consumer receivables, late fees, and certain affiliate and advertising fees from the platform.

Financial Discussion

REVENUE AND GROSS PROFIT

Total net revenue was $5.62 billion in the third quarter of 2023, up 24% year over year. Excluding bitcoin revenue, revenue in the third quarter was $3.19 billion, up 16% year over year. Gross profit was $1.90 billion, up 21% year over year.

Transaction-based revenue was $1.66 billion in the third quarter of 2023, up 9% year over year, and transaction-based gross profit was $674 million, up 9% year over year. We processed $60.08 billion in GPV in the third quarter of 2023, up 10% year over year. Transaction-based gross profit as a percentage of GPV was 1.12% in the third quarter, down 1 basis point year over year and 4 basis points quarter over quarter.

Subscription and services-based revenue was $1.49 billion in the third quarter of 2023, up 25% year over year, and subscription and services-based gross profit was $1.23 billion, up 28% year over year.

In the third quarter of 2023, gross profit included $18 million of amortization of acquired technology assets, the majority of which was from the acquisition of our BNPL platform.

Bitcoin gross profit was $45 million in the third quarter of 2023. The total sale amount of bitcoin sold to customers, which we recognize as bitcoin revenue, was $2.42 billion. Bitcoin gross profit was 2% of bitcoin revenue.

Software and integrated payments gross profit excludes contributions from our BNPL platform.

SQUARE ECOSYSTEM REVENUE

AND GROSS PROFIT

In the third quarter of 2023, Square generated $1.98 billion of revenue and $899 million of gross profit, up 12% and 15% year over year, respectively. Our BNPL platform contributed $129 million of revenue and $94 million of gross profit to Square in the third quarter of 2023.

We continued to drive growth in software and integrated payments, with gross profit from these products up 16% year over year. Gross profit from sidecar payments, or transactions where sellers enter an amount on the keypad and hit charge, grew 2% year over year. Gross profit from our banking products, which primarily include Square Loans, Instant Transfer, and Square Debit Card, was up 20% year over year and 24% year over year excluding gross profit attributable to Paycheck Protection Program (PPP) loan forgiveness.

Square generated $1.54 billion of transaction-based revenue in the third quarter of 2023, up 10% year over year. During the quarter, Square saw more favorable interchange economics, which offset a higher percentage of card-present and credit card transactions on a year-over-year basis, which are less favorable to our economics on a per transaction basis.

In the third quarter of 2023, Square GPV was $55.69 billion, up 11% year over year and 12% year over year on a constant currency basis. We observed the following trends in Square GPV during the third quarter of 2023:

Hardware gross profit losses and gross profit contributions from our BNPL platform are not presented for any period. Percentages are of Square gross profit excluding contributions from PPP loan forgiveness for each period.

Square GPV is defined as the total dollar amount of all card payments processed by sellers using Square, net of refunds, and ACH transfers. Square GPV does not include transactions from our BNPL platform because GPV is related only to transaction-based revenue and not to subscription and services-based revenue.

Services verticals include

professional services,

beauty and personal care,

health care and fitness,

and home and repair.

Square generated $402 million of subscription and services-based revenue during the third quarter of 2023, up 21% year over year. Square Loans facilitated approximately 120,000 loans totaling $1.17 billion in originations, up 4% year over year.

Hardware revenue in the third quarter of 2023 was $42 million, down 2% year over year, and gross loss was $36 million as we use hardware as an acquisition tool.

We determine seller size based on annualized GPV during the

applicable quarter. A mid-market seller generates more than

$500,000 in annualized GPV. GPV does not include transactions

from our BNPL platform because GPV is related only to

transaction-based revenue and not to subscription and services-

based revenue. Gross profit from mid-market sellers does not

include gross profit contributions from our BNPL platform.

Square gross profit in markets outside the U.S. includes

contributions from our BNPL platform beginning in the second

quarter of 2022. Excluding our BNPL platform, Square gross

profit in markets outside the U.S. was $95 million in the third

quarter of 2023, representing 12% of Square gross profit.

Bitcoin revenue is the total

sale amount of bitcoin sold

to customers. Bitcoin costs

are the total amount we pay

to purchase bitcoin in order

to facilitate customers’

access to bitcoin. In future

quarters, bitcoin revenue

and gross profit may

fluctuate as a result of

changes in customer

demand or the market price

of bitcoin.

CASH APP ECOSYSTEM REVENUE

AND GROSS PROFIT

In the third quarter of 2023, Cash App generated $3.58 billion of revenue and $984 million of gross profit, up 34% and 27% year over year, respectively. Excluding bitcoin revenue, Cash App revenue was $1.16 billion, up 26% year over year. Our BNPL platform contributed $129 million of revenue and $94 million of gross profit to Cash App in the third quarter of 2023.

In September, Cash App had 55 million monthly transacting actives, up 11% year over year. Inflows per transacting active in the third quarter were $1,132, up 8% year over year and relatively stable quarter over quarter. Overall inflows were $62 billion, up 21% year over year and 1% quarter over quarter. Monetization rate was 1.43%, up 8 basis points year over year and flat quarter over quarter.

In the third quarter of 2023, Cash App Business GPV was $4.38 billion, up 1% year over year. Cash App Business GPV comprises Cash App activity related to peer-to-peer transactions received by business accounts and peer-to-peer payments sent from a credit card. Cash App generated $121 million of transaction-based revenue during the third quarter of 2023, up 2% year over year.

Cash App generated $1.04 billion of subscription and services-based revenue during the third quarter of 2023, up 29% year over year. Growth was driven by transaction fees from both Cash App Card and Instant Deposit, as well as interest earned on customer funds and revenue from other financial services products.

Cash App generated $45 million of bitcoin gross profit in the third quarter of 2023, up 22% year over year. The total sale amount of bitcoin sold to customers, which we recognize as bitcoin revenue, was $2.42 billion, up 37% year over year. The year-over-year increase in bitcoin revenue and gross profit was driven by an increase in both the average market price of bitcoin and the quantity of bitcoin sold to customers.

We calculate monetization rate by dividing Cash App gross

profit, excluding contributions from our BNPL platform,

by Cash App inflows.

We discuss Cash App

marketing expenses because

a large portion is generated

by our peer-to-peer service,

which we offer free to our

Cash App customers, and we

consider it to be a marketing

tool to encourage the use of

Cash App.

CORPORATE AND OTHER REVENUE

AND GROSS PROFIT

Corporate and Other generated $50 million in revenue and $16 million in gross profit in the third quarter of 2023. Corporate and Other comprised areas outside Square and Cash App, which were primarily TIDAL and intersegment eliminations between Cash App and Square in the third quarter of 2023.

OPERATING EXPENSES

Operating expenses were $1.91 billion on a GAAP basis and $1.44 billion on a non-GAAP basis in the third quarter of 2023, up 18% and 14% year over year, respectively.

Product development expenses were $714 million on a GAAP basis and $430 million on a non-GAAP basis in the third quarter of 2023, each up 30% year over year. The increase was driven primarily by personnel costs related to our engineering team.

Sales and marketing expenses were $479 million on a GAAP basis and $442 million on a non-GAAP basis in the third quarter of 2023, down 1% and 3% year over year, respectively.

General and administrative expenses were $481 million on a GAAP basis and $379 million on a non-GAAP basis in the third quarter of 2023, up 22% and 21% year over year, respectively. The increase was driven primarily by personnel costs related to our customer support and compliance teams.

The accounting rules for bitcoin currently require us to recognize any decreases in market price below carrying value as an impairment charge, with no upward revisions recognized when the market price increases until the sale of that bitcoin. Bitcoin impairment loss is a GAAP expense. Non-GAAP operating expenses exclude bitcoin impairment losses. To determine the impairment charge, Block revalues its bitcoin holdings using the lowest price in the period.

Transaction, loan, and consumer receivables losses were $177 million in the third quarter of 2023, up 20% year over year. The increase was driven primarily by an operational outage as well as growth in Cash App Card transactions and Square GPV. In the third quarter, loss rates for Square GPV, Square Loans, and BNPL consumer receivables remained consistent with historical ranges, and we will continue to monitor trends closely given the dynamic macro environment.

In the third quarter of 2023, operating expenses included $57 million of amortization of customer and other acquired intangible assets, the majority of which was from the acquisition of our BNPL platform. The year-over-year increase in amortization of customer and other acquired intangible assets was driven primarily by the revision of certain intangibles’ useful lives as well as the timing of the acquisition of Afterpay in the first quarter of 2022 and the related intangible assets and measurement period adjustments.

In the fourth quarter of 2020 and first quarter of 2021, we invested $50 million and $170 million, respectively, in bitcoin. As an indefinite-lived intangible asset, bitcoin is subject to impairment losses if the fair value of bitcoin decreases below the carrying value during the assessed period. In the third quarter of 2023, we did not recognize a bitcoin impairment loss. As of September 30, 2023, the carrying value of our investment in bitcoin, after cumulative impairment charges, was $102 million, while the fair value, based on observable market prices, was $216 million, which was $114 million in excess of our carrying value.

EARNINGS

In the third quarter of 2023, operating loss was $10 million and Adjusted Operating Income was $90 million. Adjusted Operating Income (Loss) is a non-GAAP financial measure that excludes certain expenses that we believe are not reflective of our core operating performance, including amortization of intangible assets, bitcoin impairment losses, acquisition-related accelerated share-based compensation expenses, and acquisition-related, integration, and other costs. We present Adjusted Operating Income (Loss) because we use it to evaluate our operating performance, generate future operating plans, and make strategic decisions.

Please see the reconciliations at the end of this letter for a description of certain items that affected operating income (loss) in the second quarter of 2023.

EARNINGS

Net loss attributable to common stockholders was $29 million in the third quarter of 2023. Net loss per share attributable to common stockholders was $0.05 on a basic and diluted basis in the third quarter of 2023, based on 611 million weighted-average basic and diluted shares outstanding during the third quarter of 2023, representing a $0.03 decrease year over year.

Adjusted EBITDA was $477 million in the third quarter of 2023, compared to $327 million in the third quarter of 2022. The improvement in net income attributable to common stockholders and in Adjusted EBITDA compared to the prior-year period was driven by gross profit growth across our Cash App and Square ecosystems.

In the third quarter of 2023, Adjusted Net Income Per Share (Adjusted EPS) was $0.55 on a diluted basis based on 628 million weighted-average diluted shares outstanding during the third quarter of 2023, representing a $0.13 increase year over year.

Please see the reconciliations at the end of this letter for a description of certain items that affected net income (loss) in the third quarter of 2023.

BALANCE SHEET/CASH FLOW

We ended the third quarter of 2023 with $8.1 billion in available liquidity, with $7.3 billion in cash, cash equivalents, restricted cash, and investments in marketable debt securities, as well as $775 million available to be withdrawn from our revolving credit facility. Additionally, we had $1.7 billion available to be withdrawn under our warehouse funding facilities, to support funding of growth in our consumer receivables related to our BNPL platform.

In the third quarter of 2023, Adjusted EBITDA contributed positively to our overall liquidity.

Net cash provided by operating activities was $899 million for the nine months ended September 30, 2023, compared to $131 million for the nine months ended September 30, 2022. Adjusted Free Cash Flow was $1.3 billion for the nine months ended September 30, 2023, compared to negative $17 million for the nine months ended September 30, 2022. We present Adjusted Free Cash Flow because we use it to understand the cash generated by our business, after investments in property and equipment, that can possibly be used for investing in our business and make strategic decisions related to our balance sheet, and because we are focused on growing our Adjusted Free Cash Flow generation over time. This measure is not intended to represent residual cash flows available for discretionary expenditures and may be calculated differently by companies in our industry.

Guidance

In the fourth quarter of 2023, we expect our share-based compensation expense to remain relatively stable quarter over quarter on a dollar basis.

In 2024 we expect a significant improvement in Adjusted Operating Income margin on a year-over-year basis in 2024 compared to 2023. Our outlook does not assume any additional macroeconomic deterioration, which could impact our results.

We have historically allocated the financial results from our BNPL platform equally to the Cash App and Square segments. In the fourth quarter of 2023, we changed our management reporting structure and moved the business activities and management of our BNPL platform fully under Cash App. Accordingly, beginning in the fourth quarter of 2023, we will update our segment reporting to incorporate the financial results of the BNPL platform within the Cash App segment, rather than allocating 50% of revenue and gross profit from our BNPL platform to each of Square and Cash App. We will also reflect this change for the applicable historical periods we present in our future filings.

On a GAAP basis, we currently expect to recognize approximately $61 million in expenses related to amortization of intangible assets in the fourth quarter of 2023, based on the intangible assets as of September 30, 2023. This quarterly expense includes approximately $18 million recognized in cost of sales and approximately $43 million in operating expenses. On a GAAP basis, we currently expect to recognize approximately $222 million in expenses related to amortization of intangible assets in the full year 2024, based on the intangible assets as of September 30, 2023. This annual expense includes approximately $68 million recognized in cost of sales and approximately $154 million in operating expenses. These amounts may be affected by fluctuations in foreign exchange rates in future periods.

1. We have not provided the forward-looking GAAP equivalents for certain forward-looking non-GAAP metrics, including Adjusted EBITDA, and Adjusted Operating Income (Loss), or GAAP reconciliations of any of the aforementioned, as a result of the uncertainty regarding, and the potential variability of, reconciling items such as share-based compensation expense. Accordingly, the Company has relied upon the exception in item 10(e)(1)(i)(B) of Regulation S-K to exclude such reconciliations, as the reconciliations of these non-GAAP guidance metrics to their corresponding GAAP equivalents are not available without unreasonable effort. However, it is important to note that material changes to reconciling items could have a significant effect on future GAAP results. We have provided reconciliations of other historical GAAP to non-GAAP metrics in tables at the end of this letter.

The 2023 outlook table shows our current outlook for the full year 2023 compared to our prior outlook provided in the second quarter of 2023.

Adjusted Operating Income margin is defined by dividing Adjusted Operating Income over a given period by gross profit over the same period.

MEDIA CONTACT

press@block.xyz

INVESTOR RELATIONS CONTACT

ir@block.xyz

Earnings

Webcast

Block (NYSE:SQ) will host a conference call and earnings webcast at 2:00 p.m. Pacific time/5:00 p.m. Eastern time, November 2, to discuss these financial results. To register to participate in the conference call, or to listen to the live audio webcast, please visit the Events & Presentations section of Block’s Investor Relations website at investors.block.xyz. A replay will be available on the same website following the call.

We will release financial results for the fourth quarter and full year 2023 on February 22, 2024, after the market closes, and will also host a conference call and earnings webcast at 2:00 p.m. Pacific time/5:00 p.m. Eastern time on the same day to discuss those financial results.

Jack Dorsey		Amrita Ahuja

SAFE HARBOR STATEMENT

This letter contains “forward-looking statements” within the meaning of the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact could be deemed forward-looking, including, but not limited to, statements regarding the future performance of Block, Inc. and its consolidated subsidiaries (the Company); the Company’s strategies, including expected impact of such strategies on our customers, actives, and sellers as well as our business and financial performance, expected financial results, guidance, and general business outlook for current and future periods; the Company’s integration of Afterpay into its Square and Cash App businesses, and its impacts on the Company’s business and financial results; future profitability and growth in the Company’s businesses and products and the Company’s ability to drive such profitability and growth; the Company’s beliefs around artificial intelligence; the Company’s expectations regarding scale, economics, and the demand for or benefits from its products, product features, and services; the Company’s product development plans; the ability of the Company’s products to attract and retain customers, particularly in new or different markets or demographics; trends in the Company’s markets and the continuation of such trends; the Company’s expectations and intentions regarding future expenses, including future transaction and loan losses and the Company’s estimated reserves for such losses; the Company’s bitcoin investments and strategy as well as the potential financial impact and volatility; and management’s statements related to business strategy, plans, investments, opportunities, and objectives for future operations. In some cases, forward-looking statements can be identified by terms such as “may,” “will,” “appears,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions.

Such statements are subject to a number of known and unknown risks, uncertainties, assumptions, and other factors that may cause the Company’s actual results, performance, or achievements to differ materially from results expressed or implied in this letter. Investors are cautioned not to place undue reliance on these statements, and reported results should not be considered as an indication of future performance.

Risks that contribute to the uncertain nature of the forward-looking statements include, among others, a continued or prolonged economic downturn in the United States and in other countries around the world; the Company’s investments in its business and ability to maintain profitability; the Company’s efforts to expand its product portfolio and market reach; the Company’s ability to develop products and services to address the rapidly evolving market for payments and financial services; the Company’s ability to deal with the substantial and increasingly intense competition in its industry; acquisitions, strategic investments, entries into new businesses, joint ventures, divestitures, and other transactions that the Company may undertake; the integration of Afterpay; the Company’s ability to ensure the integration of its services with a variety of operating systems and the interoperability of its technology with that of third parties; the Company’s ability to retain existing customers, attract new customers, and increase sales to all customers; the Company’s dependence on payment card networks and acquiring processors; our participation in government relief programs set up in response to the COVID-19 pandemic; the effect of extensive regulation and oversight related to the Company’s business in a variety of areas; risks related to the banking ecosystem, including through our bank partnerships, and FDIC and other regulatory obligations; the effect of management changes and business initiatives; the liabilities and loss potential associated with new products, product features, and services; litigation, including intellectual property claims, government investigations or inquiries, and regulatory matters or disputes; adoption of the Company’s products and services in international markets; changes in political, business, and economic conditions; as well as other risks listed or described from time to time in the Company’s filings with the Securities and Exchange Commission (the SEC), including the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and subsequent Quarterly Reports on Form 10-Q, which are on file with the SEC and available on the Investor Relations page of the Company’s website. Additional information will also be set forth in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023. All forward-looking statements represent management’s current expectations and predictions regarding trends affecting the Company’s business and industry and are based on information and estimates available to the Company at the time of this letter and are not guarantees of future performance. Except as required by law, the Company assumes no obligation to update any of the statements in this letter.

KEY OPERATING METRICS AND

NON-GAAP FINANCIAL MEASURES

To supplement our financial information presented in accordance with generally accepted accounting principles in the United States (GAAP), from period to period, we consider and present certain operating and financial measures that we consider key metrics or are not prepared in accordance with GAAP, including Gross Payment Volume (GPV), Adjusted EBITDA, Adjusted Net Income (Loss), Diluted Adjusted Net Income (Loss) Per Share (Adjusted EPS), Adjusted Operating Income (Loss), Adjusted Operating Income (Loss) margin, constant currency, Adjusted Free Cash Flow, and non-GAAP operating expenses as well as other measures defined in this letter such as measures excluding bitcoin revenue, measures excluding gross profit contributions from our BNPL platform, and measures excluding PPP loan forgiveness gross profit.

We believe these metrics and measures are useful to facilitate period-to-period comparisons of our business and to facilitate comparisons of our performance to that of other payments solution providers. We define GPV as the total dollar amount of all card payments processed by sellers using Square, net of refunds, and ACH transfers. Additionally, GPV includes Cash App Business GPV, which comprises Cash App activity related to peer-to-peer transactions received by business accounts, and peer-to-peer payments sent from a credit card. GPV does not include transactions from our BNPL platform.

Adjusted EBITDA, Adjusted Net Income (Loss), and Diluted Adjusted Net Income (Loss) Per Share (Adjusted EPS) are non-GAAP financial measures that represent our net income (loss) and net income (loss) per share, adjusted to eliminate the effect of share-based compensation expenses; amortization of intangible assets; gain or loss on revaluation of equity investments; bitcoin impairment losses; amortization of debt discount and issuance costs; and the gain or loss on the disposal of property and equipment, as applicable. Adjusted Operating Income (Loss) is a non-GAAP financial measure that represents our operating income (loss), adjusted to eliminate the effect of amortization of acquired technology assets; acquisition-related, integration, and other costs; bitcoin impairment losses; amortization of customer and other acquired intangible assets; and acquisition-related share-based acceleration costs. We also exclude from these measures certain acquisition-related and integration costs associated with business combinations, and various other costs that are not reflective of our core operating performance. We exclude amortization of intangible assets arising from business combinations because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our ongoing business operations. Acquisition-related costs include amounts paid to redeem acquirees’ unvested stock-based compensation awards, and legal, accounting, and due diligence costs. Integration costs include advisory and other professional services or consulting fees necessary to integrate acquired businesses. Other costs that are not reflective of our core business operating expenses may include contingent losses, impairment charges, and certain litigation and regulatory charges. We also add back the impact of the acquired deferred revenue and deferred cost adjustment, which was written down to fair value in purchase accounting. Additionally, for purposes of calculating diluted Adjusted EPS, we add back cash interest expense on convertible senior notes, as if converted at the beginning of the period, if the impact is dilutive. In addition to the items above, Adjusted EBITDA is a non-GAAP financial measure that also excludes depreciation and amortization, interest income and expense, other income and expense, and provision or benefit from income taxes, as applicable. Adjusted Operating Income (Loss) margin is calculated as Adjusted Operating Income (Loss) divided by gross profit. To calculate diluted Adjusted EPS, we adjust the weighted-average number of shares of common stock outstanding for the dilutive effect of all potential shares of common stock. In periods when we recorded an Adjusted Net Loss, diluted Adjusted EPS is the same as basic Adjusted EPS because the effects of potentially dilutive items were anti-dilutive given the Adjusted Net Loss position.

KEY OPERATING METRICS AND

NON-GAAP FINANCIAL MEASURES

Constant currency growth is calculated by assuming international results in a given period and the comparative prior period are translated from local currencies to the U.S. dollar at rates consistent with the monthly average rates in the comparative prior period. We discuss growth on a constant currency basis because a portion of our business operates in markets outside the U.S. and is subject to changes in foreign exchange rates.

Adjusted Free Cash Flow is a non-GAAP financial measure that represents our net cash provided by operating activities adjusted to include cash flows associated with consumer receivables generated through our BNPL platform, and payments for the purchase of property and equipment as we consider such cash flows to be core part of our normal operations, but are presented as investing activities under GAAP. Adjusted Free Cash Flow however excludes the effects of changes in customers payable, settlements receivables and settlements payable as these amounts, which represent customer transactions, may result in significant fluctuations in Adjusted Free Cash Flow depending on the timing of the end of the reporting period and whether such date is a bank holiday or a weekend. We believe that Adjusted Free Cash Flow provides helpful information in understanding the cash generated by our business, after investments in property and equipment, that can possibly be used for investing in our business, making strategic investments, and strengthening our balance sheet.

Non-GAAP operating expenses is a non-GAAP financial measure that represents operating expenses adjusted to remove the impact of share-based compensation, depreciation and amortization, bitcoin impairment losses, loss on disposal of property and equipment, and acquisition-related integration and other costs.

We have included Adjusted EBITDA, Adjusted Operating Income (Loss), Adjusted Operating Income (Loss) margin, Adjusted Net Income, Adjusted EPS, Adjusted Free Cash Flow, and non-GAAP operating expenses because they are key measures used by our management to evaluate our operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of internal resources. Accordingly, we believe that Adjusted EBITDA, Adjusted Operating Income (Loss), Adjusted Operating Income (Loss) margin, Adjusted Net Income, Adjusted EPS, Adjusted Free Cash Flow, and non-GAAP operating expenses provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. In addition, they provide useful measures for period-to-period comparisons of our business, as certain of these measures remove the effect of certain non-cash items and certain variable charges that do not vary with our operations. We have included measures excluding our BNPL platform because we believe these measures are useful in understanding the ongoing results of our operations. We have included measures excluding bitcoin revenue because our role is to facilitate customers’ access to bitcoin. When customers buy bitcoin through Cash App, we only apply a small margin to the market cost of bitcoin, which tends to be volatile and outside our control. Therefore, we believe deducting bitcoin revenue or gross profit better reflects the economic benefits as well as our performance from these transactions. We have included measures excluding PPP loan forgiveness gross profit because we believe these measures are useful in order to facilitate comparisons of our business without PPP loan forgiveness.

Adjusted EBITDA, Adjusted Net Income, Adjusted Operating Income (Loss), Adjusted Operating Income (Loss) margin, Adjusted EPS, Adjusted Free Cash Flow, and non-GAAP operating expenses, as well as other measures defined in the shareholder letter, such as measures excluding our BNPL platform, bitcoin revenue, and PPP loan forgiveness gross profit, have limitations as financial measures, should be considered as supplemental in nature, and are not meant as substitutes for the related financial information prepared in accordance with GAAP.

We believe that the aforementioned metrics and measures provide useful information about our operating results, enhance the overall understanding of our past performance and future prospects, and provide useful measures for period-to-period comparisons of our business, as they remove the effect of certain variable amounts, or they remove amounts that were not repeated across periods and therefore make comparisons more difficult. Our management uses these measures to evaluate our operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of internal resources.

These non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP. Other companies, including companies in our industry, may calculate these non-GAAP financial measures differently or not at all, which reduces their usefulness as comparative measures.

Condensed Consolidated

Statements of Operations

UNAUDITED

In thousands, except per share data

Condensed Consolidated

Balance Sheets

In thousands, except per share data

Condensed Consolidated

Statements of Cash Flows

UNAUDITED

In thousands

Reportable Segment Disclosures

UNAUDITED

Information on the reportable segments revenue and segment operating profit are as

follows (in thousands):

Operating Segment Disclosures

UNAUDITED

A reconciliation of total segment gross profit to the Company’s income (loss) before

applicable income taxes is as follows (in thousands):

(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 and nine months ended September 30, 2023 included $8.0 million and $24.9 million of amortization of acquired technology assets expense, respectively. Segment gross profit for Cash App for the three and nine months ended September 30, 2022 included $8.5 million and $23.8 million of amortization of acquired technology assets expense, respectively. Segment gross profit for Square for the three and nine months ended September 30, 2023 included $8.5 million and $25.5 million of amortization of acquired technology assets expense, respectively. Segment gross profit for Square for the three and nine months ended September 30, 2022 included $8.6 million and $23.8 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 and nine months ended September 30, 2023 and September 30, 2022.

Key Operating Metrics and

Non-GAAP Financial Measures

UNAUDITED

Adjusted Free Cash Flow

UNAUDITED

In thousands

Select Financial Results Excluding

Bitcoin, BNPL and PPP

UNAUDITED

In thousands