SQUARE, INC., 10-Q filed on 8/5/2020
Quarterly Report
v3.20.2
Cover Page - shares
6 Months Ended
Jun. 30, 2020
Jul. 31, 2020
Class of Stock [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Jun. 30, 2020  
Document Transition Report false  
Entity File Number 001-37622  
Entity Registrant Name Square, Inc.  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 80-0429876  
Entity Address, Address Line One 1455 Market Street  
Entity Address, Address Line Two Suite 600  
Entity Address, City or Town San Francisco  
Entity Address, State or Province CA  
Entity Address, Postal Zip Code 94103  
City Area Code 415  
Local Phone Number 375-3176  
Title of 12(b) Security Class A common stock, $0.0000001 par value per share  
Trading Symbol SQ  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Central Index Key 0001512673  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q2  
Amendment Flag false  
Class A    
Class of Stock [Line Items]    
Entity Common Stock, Shares Outstanding   371,293,974
Class B    
Class of Stock [Line Items]    
Entity Common Stock, Shares Outstanding   72,237,774
v3.20.2
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Current assets:    
Cash and cash equivalents $ 1,972,762 $ 1,047,118
Investments in short-term debt securities 714,348 492,456
Settlements receivable 879,464 588,692
Customer funds 1,733,107 676,292
Loans held for sale 567,499 164,834
Other current assets 319,890 250,409
Total current assets 6,187,070 3,219,801
Property and equipment, net 167,062 149,194
Goodwill 295,759 266,345
Acquired intangible assets, net 99,802 69,079
Investments in long-term debt securities 446,685 537,303
Operating lease right-of-use assets 449,445 113,148
Other non-current assets 166,449 196,388
Total assets 7,812,272 4,551,258
Current liabilities:    
Customers payable 2,568,418 1,273,135
Settlements payable 179,131 95,834
Accrued expenses and other current liabilities 393,576 297,841
Operating lease liabilities, current 43,627 27,275
PPP Liquidity Facility advances 447,764 0
Total current liabilities 3,632,516 1,694,085
Long-term debt 1,778,428 938,832
Operating lease liabilities, non-current 384,801 108,830
Other non-current liabilities 90,220 94,461
Total liabilities 5,885,965 2,836,208
Commitments and contingencies (Note 17)
Stockholders’ equity:    
Preferred stock, $0.0000001 par value: 100,000,000 shares authorized at June 30, 2020 and December 31, 2019. None issued and outstanding at June 30, 2020 and December 31, 2019. 0 0
Additional paid-in capital 2,549,638 2,223,749
Accumulated other comprehensive income 4,366 1,629
Accumulated deficit (627,697) (510,328)
Total stockholders’ equity 1,926,307 1,715,050
Total liabilities and stockholders’ equity 7,812,272 4,551,258
Class A    
Stockholders’ equity:    
Common stock 0 0
Class B    
Stockholders’ equity:    
Common stock $ 0 $ 0
v3.20.2
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares
Jun. 30, 2020
Dec. 31, 2019
Class of Stock [Line Items]    
Preferred stock, par value (in USD per share) $ 0.0000001 $ 0.0000001
Preferred stock, shares authorized (in shares) 100,000,000 100,000,000
Preferred stock, shares issued (in shares) 0 0
Preferred stock, shares outstanding (in shares) 0 0
Class A    
Class of Stock [Line Items]    
Common stock, par value (in USD per share) $ 0.0000001 $ 0.0000001
Common stock, shares authorized (in shares) 1,000,000,000 1,000,000,000
Common stock, shares issued (in shares) 370,102,185 352,386,562
Common stock, shares outstanding (in shares) 370,102,185 352,386,562
Class B    
Class of Stock [Line Items]    
Common stock, par value (in USD per share) $ 0.0000001 $ 0.0000001
Common stock, shares authorized (in shares) 500,000,000 500,000,000
Common stock, shares issued (in shares) 72,287,165 80,410,158
Common stock, shares outstanding (in shares) 72,287,165 80,410,158
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Revenue:        
Revenue $ 1,923,625 $ 1,174,238 $ 3,304,734 $ 2,133,597
Cost of revenue:        
Total cost of revenue 1,326,862 708,393 2,169,470 1,270,998
Gross profit 596,763 465,845 1,135,264 862,599
Operating expenses:        
Product development 206,825 174,201 401,811 328,551
Sales and marketing 238,096 156,421 432,631 290,134
General and administrative 136,386 100,508 265,881 202,106
Transaction and loan losses 37,603 34,264 146,486 62,105
Amortization of acquired customer assets 4,134 3,958 8,286 7,445
Total operating expenses 619,815 466,688 1,248,604 885,484
Operating loss (23,052) (843) (113,340) (22,885)
Interest expense, net 14,769 5,143 23,975 9,824
Other expense (income), net (25,591) 1,230 (19,729) 12,529
Loss before income tax (12,230) (7,216) (117,586) (45,238)
Income tax benefit (752) (476) (217) (347)
Net loss $ (11,478) $ (6,740) $ (117,369) $ (44,891)
Net loss per share        
Basic (in USD per share) $ (0.03) $ (0.02) $ (0.27) $ (0.11)
Diluted (in USD per share) $ (0.03) $ (0.02) $ (0.27) $ (0.11)
Weighted-average shares used to compute net loss per share        
Basic (in shares) 440,117 423,305 437,529 421,297
Diluted (in shares) 440,117 423,305 437,529 421,297
Technology assets        
Cost of revenue:        
Amortization of acquired technology $ 2,231 $ 1,719 $ 4,551 $ 3,095
Customer assets        
Operating expenses:        
Amortization of acquired customer assets 905 1,294 1,795 2,588
Transaction-based revenue        
Revenue:        
Revenue 682,572 775,510 1,440,673 1,432,272
Cost of revenue:        
Cost of revenue 388,106 490,349 853,885 899,418
Subscription and services-based revenue        
Revenue:        
Revenue 328,763 216,491 584,646 405,693
Revenue 346,275 251,383 642,510 470,240
Cost of revenue:        
Cost of revenue 50,169 60,119 90,880 120,642
Hardware revenue        
Revenue:        
Revenue 19,322 22,260 39,997 40,472
Cost of revenue:        
Cost of revenue 28,315 33,268 62,687 60,209
Bitcoin revenue        
Revenue:        
Revenue 875,456 125,085 1,181,554 190,613
Cost of revenue:        
Cost of revenue $ 858,041 $ 122,938 $ 1,157,467 $ 187,634
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Statement of Comprehensive Income [Abstract]        
Net loss $ (11,478) $ (6,740) $ (117,369) $ (44,891)
Net foreign currency translation adjustments 6,367 261 (2,021) 527
Net unrealized gain on revaluation of intercompany loans 0 0 0 75
Net unrealized gain on marketable debt securities 1,431 2,237 4,758 4,525
Total comprehensive loss $ (3,680) $ (4,242) $ (114,632) $ (39,764)
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Cash flows from operating activities:    
Net loss $ (117,369) $ (44,891)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:    
Depreciation and amortization 41,117 37,754
Non-cash interest and other 32,769 16,013
Loss on extinguishment of long-term debt 990 0
Share-based compensation 173,713 140,554
Loss (gain) on revaluation of equity investment (20,999) 18,929
Non-cash lease expense 32,343 14,354
Transaction and loan losses 146,486 62,105
Change in deferred income taxes (1,024) (2,229)
Changes in operating assets and liabilities:    
Settlements receivable (302,103) (1,148,376)
Customer funds (953,387) (125,042)
Purchase of loans held for sale (1,466,391) (1,035,500)
Sales and principal payments of loans held for sale 1,041,208 975,823
Customers payable 1,291,968 1,052,867
Settlements payable 83,297 236,515
Charge-offs to accrued transaction losses (37,783) (36,050)
Other assets and liabilities (96,668) 3,010
Net cash provided by (used in) operating activities (151,833) 165,836
Cash flows from investing activities:    
Purchase of marketable debt securities (724,862) (354,908)
Proceeds from maturities of marketable debt securities 267,686 220,229
Proceeds from sale of marketable debt securities 330,626 116,522
Purchase of marketable debt securities from customer funds (265,287) (88,064)
Proceeds from maturities of marketable debt securities from customer funds 142,000 63,000
Proceeds from sale of marketable debt securities from customer funds 22,457 0
Purchase of property and equipment (56,561) (30,162)
Payments for other investments 0 (2,000)
Business combinations, net of cash acquired (18,354) (20,372)
Net cash used in investing activities (302,295) (95,755)
Cash flows from financing activities:    
Proceeds from issuance of convertible senior notes, net 986,241 0
Purchase of convertible senior note hedges (149,200) 0
Proceeds from issuance of warrants 99,500 0
Proceeds from PPP Liquidity Facility advances 447,764 0
Payments for tax withholding related to vesting of restricted stock units (93,654) (106,663)
Proceeds from the exercise of stock options and purchases under the employee stock purchase plan, net 78,085 66,921
Other financing activities (1,924) (2,663)
Net cash provided by (used in) financing activities 1,366,812 (42,405)
Effect of foreign exchange rate on cash and cash equivalents (5,182) 2,340
Net increase in cash, cash equivalents, and restricted cash 907,502 30,016
Cash, cash equivalents, and restricted cash, beginning of period 1,098,706 632,847
Cash, cash equivalents, and restricted cash, end of period $ 2,006,208 $ 662,863
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($)
$ in Thousands
Total
Class A and B common stock
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Beginning balance (in shares) at Dec. 31, 2018   417,048,006      
Beginning balance at Dec. 31, 2018 $ 1,120,501 $ 0 $ 2,012,328 $ (6,053) $ (885,774)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net loss (38,151)       (38,151)
Shares issued in connection with employee stock plans (in shares)   5,582,633      
Shares issued in connection with employee stock plans 25,364   25,364    
Change in other comprehensive loss 2,629     2,629  
Share-based compensation 62,835   62,835    
Tax withholding related to vesting of restricted stock units (in shares)   (741,324)      
Tax withholding related to vesting of restricted stock units (50,801)   (50,801)    
Issuance of common stock in conjunction with the conversion of senior notes, due 2022 (in shares)   43      
Issuance of common stock in conjunction with the conversion of senior notes, due 2022 1   1    
Exercise of bond hedges in conjunction with the conversion of senior notes, due 2022 (in shares)   (250,614)      
Recovery of common stock in connection with indemnification settlement agreement (in shares)   (14,798)      
Recovery of common stock in connection with indemnification settlement agreement (789)   (789)    
Ending balance (in shares) at Mar. 31, 2019   421,623,946      
Ending balance at Mar. 31, 2019 1,121,589 $ 0 2,048,938 (3,424) (923,925)
Beginning balance (in shares) at Dec. 31, 2018   417,048,006      
Beginning balance at Dec. 31, 2018 1,120,501 $ 0 2,012,328 (6,053) (885,774)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net loss (44,891)        
Ending balance (in shares) at Jun. 30, 2019   426,217,993      
Ending balance at Jun. 30, 2019 1,184,472 $ 0 2,116,063 (926) (930,665)
Beginning balance (in shares) at Mar. 31, 2019   421,623,946      
Beginning balance at Mar. 31, 2019 1,121,589 $ 0 2,048,938 (3,424) (923,925)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net loss (6,740)       (6,740)
Shares issued in connection with employee stock plans (in shares)   5,371,051      
Shares issued in connection with employee stock plans 41,593   41,593    
Change in other comprehensive loss 2,498     2,498  
Share-based compensation 81,392   81,392    
Tax withholding related to vesting of restricted stock units (in shares)   (777,006)      
Tax withholding related to vesting of restricted stock units (55,862)   (55,862)    
Issuance of common stock in conjunction with the conversion of senior notes, due 2022 (in shares)   86      
Issuance of common stock in conjunction with the conversion of senior notes, due 2022 2   2    
Exercise of bond hedges in conjunction with the conversion of senior notes, due 2022 (in shares)   (84)      
Ending balance (in shares) at Jun. 30, 2019   426,217,993      
Ending balance at Jun. 30, 2019 1,184,472 $ 0 2,116,063 (926) (930,665)
Beginning balance (in shares) at Dec. 31, 2019   432,796,720      
Beginning balance at Dec. 31, 2019 1,715,050 $ 0 2,223,749 1,629 (510,328)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net loss (105,891)       (105,891)
Shares issued in connection with employee stock plans (in shares)   5,222,525      
Shares issued in connection with employee stock plans 31,406   31,406    
Issuance of common stock in connection with business combination (in shares)   357,017      
Issuance of common stock in connection with business combination 14,999   14,999    
Change in other comprehensive loss (5,061)     (5,061)  
Share-based compensation 79,562   79,562    
Tax withholding related to vesting of restricted stock units (in shares)   (722,606)      
Tax withholding related to vesting of restricted stock units (48,772)   (48,772)    
Conversion feature of convertible senior notes, net of allocated costs 152,258   152,258    
Purchase of bond hedges in conjunction with issuance of convertible senior notes, due 2025 (149,200)   (149,200)    
Sale of warrants in conjunction with issuance of convertible senior notes 99,500   99,500    
Issuance of common stock in conjunction with the conversion of senior notes, due 2022 (in shares)   1,109,980      
Issuance of common stock in conjunction with the conversion of senior notes, due 2022 24,094   24,094    
Ending balance (in shares) at Mar. 31, 2020   438,763,636      
Ending balance at Mar. 31, 2020 1,807,945 $ 0 2,427,596 (3,432) (616,219)
Beginning balance (in shares) at Dec. 31, 2019   432,796,720      
Beginning balance at Dec. 31, 2019 1,715,050 $ 0 2,223,749 1,629 (510,328)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net loss (117,369)        
Ending balance (in shares) at Jun. 30, 2020   442,389,351      
Ending balance at Jun. 30, 2020 1,926,307 $ 0 2,549,638 4,366 (627,697)
Beginning balance (in shares) at Mar. 31, 2020   438,763,636      
Beginning balance at Mar. 31, 2020 1,807,945 $ 0 2,427,596 (3,432) (616,219)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net loss (11,478)       (11,478)
Shares issued in connection with employee stock plans (in shares)   4,802,969      
Shares issued in connection with employee stock plans 46,679   46,679    
Issuance of common stock in connection with business combination (in shares)   250,957      
Issuance of common stock in connection with business combination 20,320   20,320    
Change in other comprehensive loss 7,798     7,798  
Share-based compensation 99,925   99,925    
Tax withholding related to vesting of restricted stock units (in shares)   (703,895)      
Tax withholding related to vesting of restricted stock units (44,882)   (44,882)    
Exercise of bond hedges in conjunction with the conversion of senior notes, due 2022 (in shares)   (724,316)      
Ending balance (in shares) at Jun. 30, 2020   442,389,351      
Ending balance at Jun. 30, 2020 $ 1,926,307 $ 0 $ 2,549,638 $ 4,366 $ (627,697)
v3.20.2
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
6 Months Ended
Jun. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
        
Square, Inc. (together with its subsidiaries, Square or the Company) creates tools that empower businesses, sellers and individuals to participate in the economy. Square enables sellers to accept card payments and also provides reporting and analytics, and next-day settlement. Square’s point-of-sale software and other business services help sellers manage inventory, locations, and employees; access financing; engage buyers; build a website or online store; and grow sales. Cash App is an easy way to send, spend, and store money. Square was founded in 2009 and is headquartered in San Francisco, with offices in the United States, Canada, Japan, Australia, Ireland, and the United Kingdom.

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, 2019 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 loss, and cash flows for the interim periods. All intercompany transactions and balances have been eliminated in consolidation. The interim results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020, 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, 2019.

Use of Estimates

The preparation of the Company’s 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. Generally, the Company's estimates and assumptions consider current and past experience, to the extent that historical experience is predictive of future performance.

Estimates, judgments, and assumptions in these consolidated financial statements include, but are not limited to, those related to revenue recognition, accrued transaction losses, credit loss allowances from marketable debt securities, contingencies, valuation of the debt component of convertible senior notes, valuation of loans held for sale including loans under the Paycheck Protection Program ("PPP"), valuation of goodwill and acquired intangible assets, determination of income and other taxes, operating and financing lease right-of-use assets and related liabilities, assessing the likelihood of adverse outcomes from claims and disputes, and share-based compensation.

In March 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The Company operates in geographic locations that have been impacted by COVID-19 and that are subject to various mandated public health ordinances, which have negatively impacted the business operations of the Company and its customers. As a consequence of the pandemic and related public health orders, the Company’s customers are now exposed to a variety of uncertainties that could negatively impact their ability to repay outstanding amounts, or even continue in business. As of the date of issuance of the financial statements, the Company has revised or updated the carrying values of its assets or liabilities based on estimates, judgments and circumstances we are aware of, particularly, the expected impact of COVID-19.
Due to the impact of the COVID-19 outbreak, the Company’s estimates of accrued transaction losses and valuation of loans held for sale were subject to greater uncertainty. The Company's estimates were based on historical experience, adjusted for market data relevant to the current economic environment. Additionally, the Company incorporated market data for similar historical periods of recessionary economic conditions and uncertainty in developing such estimates and assumptions. See Note 10, Other Consolidated Balance Sheet Components (Current), for further details on transaction losses and Note 5, Fair Value of Financial Instruments, for further details on amortized cost over fair value of the loans. These estimates may change, as new events develop and additional information is obtained. Actual results could differ from these estimates, and such differences may be material to the Company's financial statements.

The extent of the impact of COVID-19 on the Company's operational and financial performance will depend on certain developments, including, but not limited to, the duration, extent of spread and severity of the outbreak, duration and changes to local, state and federal issued public health orders, impact on our customers and our sales cycles, impact on our employees, various government stimulus assistance programs, and impact on regional and worldwide economies and financial markets in general, all of which are uncertain and cannot be predicted.

Concentration of Credit Risk
        
For the three and six months ended June 30, 2020 and June 30, 2019, the Company had no customer that accounted for greater than 10% of total net revenue.

The Company had two third-party payment processors that represented approximately 50% and 35% of settlements receivable as of June 30, 2020. As of December 31, 2019, the Company had three parties that represented approximately 48%, 29%, and 9% of settlements receivable. All other third-party processors were insignificant.

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 receivables, customer funds, and loans held for sale. The associated risk of concentration for cash and cash equivalents and restricted cash is mitigated by banking with creditworthy institutions. At certain times, amounts on deposit 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 held for sale is partially mitigated by credit evaluations that are performed prior to facilitating the offering of loans and ongoing performance monitoring of the Company’s loan customers. The risk associated with the PPP loans is considered low due to government guarantees on those loans.

Recent Accounting Pronouncements
Recently adopted accounting pronouncements

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses, which requires the measurement and recognition of expected credit losses for financial assets held. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available for sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted this guidance effective January 1, 2020 and has applied the guidance prospectively. The Company has concluded that the adoption of the guidance did not have a material impact on the balances reported in its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. The new guidance eliminates the requirement to calculate the implied fair value of goodwill assuming a hypothetical purchase price allocation (i.e., Step 2 of the goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value, not to exceed the carrying amount of goodwill. This standard should be adopted when the Company performs its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The amendments should be applied on a prospective basis. The Company adopted this guidance effective January 1, 2020 and will apply the guidance during its
annual goodwill impairment test for the year ending December 31, 2020. The adoption of this guidance did not have a material impact on the consolidated financial statements and related disclosures.

In July 2018, the FASB issued ASU No. 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement, which will remove, modify, and add disclosure requirements for fair value measurements to improve the overall usefulness of such disclosures. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted for any removed or modified disclosure requirements. Transition is on a prospective basis for the new and modified disclosures, and on a retrospective basis for disclosures that have been eliminated. The Company adopted this guidance effective January 1, 2020 and has applied the guidance prospectively, and included additional disclosures required by the new guidance relating to significant unobservable inputs used to develop Level 3 fair value measurements.

In August 2018, the FASB issued ASU No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which is intended to align the requirements for capitalization of implementation costs incurred in a cloud computing arrangement that is a service contract with the existing guidance for internal-use software. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. The guidance provides flexibility in adoption, allowing for either retrospective adjustment or prospective adjustment for all implementation costs incurred after the date of adoption. The Company adopted this guidance effective January 1, 2020 and has applied the guidance prospectively. The adoption of this guidance did not have a material impact on the consolidated financial statements and related disclosures.

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments — Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The amendments clarify the scope of the credit losses standard and hedge accounting among other things. The Company adopted ASC 326 on January 1, 2020 for credit losses. With respect to hedge accounting, the amendments address partial-term fair value hedges and fair value hedge basis adjustments, among other things. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted as long an entity has also adopted the amendments in ASU No. 2016-13. The adoption of this guidance did not have a material impact on the consolidated financial statements and related disclosures. For entities which have already adopted ASU No. 2017-12, they are permitted to elect either retrospectively or prospectively adopt the amendments. The Company had previously adopted ASU No. 2017-12 on January 1, 2019 and therefore is eligible to and has prospectively adopted the amendments.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes, as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Among other things, the new guidance simplifies intraperiod tax allocation and reduces the complexity in accounting for income taxes with year-to-date losses in interim periods. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. The Company early adopted this guidance effective January 1, 2020 and has applied the guidance prospectively. The adoption did not have a material impact on the consolidated financial statements and related disclosures.
v3.20.2
REVENUE
6 Months Ended
Jun. 30, 2020
Revenue from Contract with Customer [Abstract]  
REVENUE REVENUE
The following table presents the Company's revenue disaggregated by revenue source (in thousands):

Three Months Ended
June 30,
Six Months Ended
June 30,
2020201920202019
Revenue from Contracts with Customers:
Transaction-based revenue$682,572  $775,510  $1,440,673  $1,432,272  
Subscription and services-based revenue328,763  216,491  584,646  405,693  
Hardware revenue19,322  22,260  39,997  40,472  
Bitcoin revenue875,456  125,085  1,181,554  190,613  
Revenue from other sources:
Subscription and services-based revenue$17,512  $34,892  $57,864  $64,547  

The deferred revenue balances were as follows (in thousands):

Three Months Ended
June 30,
Six Months Ended
June 30,
2020201920202019
Deferred revenue, beginning of the period$47,046  $42,160  $44,331  $36,451  
Deferred revenue, end of the period51,549  44,812  51,549  44,812  
Revenue recognized in the period from amounts included in deferred revenue at the beginning of the period$16,288  $14,889  $26,483  $21,786  
v3.20.2
INVESTMENTS IN DEBT SECURITIES
6 Months Ended
Jun. 30, 2020
Investments, Debt and Equity Securities [Abstract]  
INVESTMENTS IN DEBT SECURITIES INVESTMENTS IN DEBT SECURITIES
The Company's short-term and long-term investments as of June 30, 2020 are as follows (in thousands):

Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Short-term debt securities:
U.S. agency securities$206,566  $1,172  $(287) $207,451  
Corporate bonds80,593  199  (187) 80,605  
Commercial paper8,992  —  —  8,992  
Municipal securities8,933  57  (15) 8,975  
U.S. government securities380,662  1,743  (377) 382,028  
Foreign government securities26,279  42  (24) 26,297  
Total$712,025  $3,213  $(890) $714,348  
Long-term debt securities:
U.S. agency securities$131,430  $645  $(541) $131,534  
Corporate bonds143,213  1,232  (310) 144,135  
Municipal securities6,026  84  (66) 6,044  
U.S. government securities127,916  1,670  (791) 128,795  
Foreign government securities35,973  307  (103) 36,177  
Total$444,558  $3,938  $(1,811) $446,685  

The Company's short-term and long-term investments as of December 31, 2019 are as follows (in thousands):

Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Short-term debt securities:
U.S. agency securities$131,124  $409  $(11) $131,522  
Corporate bonds67,169  580  (28) 67,721  
Municipal securities6,667  109  —  6,776  
U.S. government securities264,069  1,083  (17) 265,135  
Foreign government securities21,270  48  (16) 21,302  
Total$490,299  $2,229  $(72) $492,456  
Long-term debt securities:
U.S. agency securities$63,645  $612  $(189) $64,068  
Corporate bonds141,307  1,832  (61) 143,078  
Municipal securities9,594  151  (39) 9,706  
U.S. government securities294,682  1,287  (190) 295,779  
Foreign government securities24,625  86  (39) 24,672  
Total$533,853  $3,968  $(518) $537,303  


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 June 30, 2020 and December 31, 2019, aggregated by investment category and the length of time that individual securities have been in a continuous loss position are as follows (in thousands):

June 30, 2020
Less than 12 monthsGreater than 12 monthsTotal
Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Short-term debt securities:
U.S. agency securities$47,472  $(287) $—  $—  $47,472  $(287) 
Corporate bonds42,235  (187) —  —  42,235  (187) 
Municipal securities3,697  (15) —  —  3,697  (15) 
U.S. government securities127,860  (377) —  —  127,860  (377) 
Foreign government securities18,467  (24) —  —  18,467  (24) 
Total$239,731  $(890) $—  $—  $239,731  $(890) 
Long-term debt securities:
U.S. agency securities$13,382  $(541) $—  $—  $13,382  $(541) 
Corporate bonds37,869  (310) —  —  37,869  (310) 
Municipal securities1,764  (66) —  —  1,764  (66) 
U.S. government securities—  (791) —  —  —  (791) 
Foreign government securities13,893  (103) —  —  13,893  (103) 
Total$66,908  $(1,811) $—  $—  $66,908  $(1,811) 


December 31, 2019
Less than 12 monthsGreater than 12 monthsTotal
Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Short-term debt securities:
U.S. agency securities$23,896  $(9) $4,996  $(2) $28,892  $(11) 
Corporate bonds5,507  (27) 2,502  (1) 8,009  (28) 
U.S. government securities21,481  (8) 14,984  (9) 36,465  (17) 
Foreign government securities13,499  (16) —  —  13,499  (16) 
Total$64,383  $(60) $22,482  $(12) $86,865  $(72) 
Long-term debt securities:
U.S. agency securities$16,740  $(189) $—  $—  $16,740  $(189) 
Corporate bonds16,708  (61) —  —  16,708  (61) 
Municipal securities1,005  (39) —  —  1,005  (39) 
U.S. government securities42,210  (162) —  (28) 42,210  (190) 
Foreign government securities16,383  (39) —  —  16,383  (39) 
Total$93,046  $(490) $—  $(28) $93,046  $(518) 
The U.S. government and U.S. agency securities are either explicitly or implicitly guaranteed by the U.S. government and are highly rated by major rating agencies. The corporate bonds are issued by highly rated entities. The foreign government securities are issued by highly rated international entities. The Company has the ability and intent to hold these investments with unrealized losses for a reasonable period of time sufficient for the recovery of their amortized cost bases, which may be at maturity. The Company determines any realized gains or losses on the sale of marketable debt securities on a specific identification method, and records such gains and losses as a component of other expense, net.

The Company does not have any available for sale debt securities for which the Company has recorded credit related losses.  

The contractual maturities of the Company's short-term and long-term investments as of June 30, 2020 are as follows (in thousands):

Amortized CostFair Value
Due in one year or less$712,025  $714,348  
Due in one to five years444,558  446,685  
Total$1,156,583  $1,161,033  
CUSTOMER FUNDS
The following table presents the assets underlying customer funds (in thousands):

  June 30, 2020December 31, 2019
Cash$117,658  $422,459  
Cash Equivalents:
Money market funds1,229,498  233  
Reverse repurchase agreement (i)30,006  —  
U.S. agency securities10,997  8,585  
U.S. government securities5,000  6,984  
Short-term debt securities:
U.S. agency securities127,796  —  
U.S. government securities212,152  238,031  
Total$1,733,107  $676,292  

(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 classifies the amounts due from the counterparty as cash equivalents due to the short term nature.

The Company's investments within customer funds as of June 30, 2020 are as follows (in thousands):

Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Short-term debt securities:
U.S. agency securities$127,727  $71  $(2) $127,796  
U.S. government securities211,907  354  (109) 212,152  
Total$339,634  $425  $(111) $339,948  
The Company's investments within customer funds as of December 31, 2019 are as follows (in thousands):

Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Short-term debt securities:
U.S. government securities$237,909  $144  $(22) $238,031  
Total$237,909  $144  $(22) $238,031  

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

The gross unrealized losses and fair values for those investments that were in an unrealized loss position as of June 30, 2020 and December 31, 2019, aggregated by investment category and the length of time that individual securities have been in a continuous loss position are as follows (in thousands):

June 30, 2020
Less than 12 monthsGreater than 12 monthsTotal
Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Short-term debt securities:
U.S. agency securities$19,987  $(2) $—  $—  $19,987  $(2) 
U.S. government securities63,978  (109) —  —  63,978  (109) 
Total$83,965  $(111) $—  $—  $83,965  $(111) 


December 31, 2019
Less than 12 monthsGreater than 12 monthsTotal
Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Short-term debt securities:
U.S. government securities$56,984  $(22) $—  $—  $56,984  $(22) 
Total$56,984  $(22) $—  $—  $56,984  $(22) 

The unrealized losses above were caused by interest rate changes. The U.S. government securities are either explicitly or implicitly guaranteed by the U.S. government and are highly rated by major rating agencies. The Company has the ability and intent to hold these investments with unrealized losses for a reasonable period of time sufficient for the recovery of their amortized cost bases, which may be at maturity. The Company determines any realized gains or losses on the sale of marketable debt securities on a specific identification method, and records such gains and losses as a component of other expense, net.

The Company does not have any available for sale debt securities for which the Company has recorded credit related losses.  
The contractual maturities of the Company's investments within customer funds as of June 30, 2020 are as follows (in thousands):

Amortized CostFair Value
Due in one year or less$339,634  $339,948  
Due in one to five years—  —  
Total$339,634  $339,948  
v3.20.2
CUSTOMER FUNDS
6 Months Ended
Jun. 30, 2020
Investments, Debt and Equity Securities [Abstract]  
CUSTOMER FUNDS INVESTMENTS IN DEBT SECURITIES
The Company's short-term and long-term investments as of June 30, 2020 are as follows (in thousands):

Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Short-term debt securities:
U.S. agency securities$206,566  $1,172  $(287) $207,451  
Corporate bonds80,593  199  (187) 80,605  
Commercial paper8,992  —  —  8,992  
Municipal securities8,933  57  (15) 8,975  
U.S. government securities380,662  1,743  (377) 382,028  
Foreign government securities26,279  42  (24) 26,297  
Total$712,025  $3,213  $(890) $714,348  
Long-term debt securities:
U.S. agency securities$131,430  $645  $(541) $131,534  
Corporate bonds143,213  1,232  (310) 144,135  
Municipal securities6,026  84  (66) 6,044  
U.S. government securities127,916  1,670  (791) 128,795  
Foreign government securities35,973  307  (103) 36,177  
Total$444,558  $3,938  $(1,811) $446,685  

The Company's short-term and long-term investments as of December 31, 2019 are as follows (in thousands):

Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Short-term debt securities:
U.S. agency securities$131,124  $409  $(11) $131,522  
Corporate bonds67,169  580  (28) 67,721  
Municipal securities6,667  109  —  6,776  
U.S. government securities264,069  1,083  (17) 265,135  
Foreign government securities21,270  48  (16) 21,302  
Total$490,299  $2,229  $(72)