SQUARE, INC., 10-Q filed on 5/6/2020
Quarterly Report
v3.20.1
Cover Page - shares
3 Months Ended
Mar. 31, 2020
May 01, 2020
Cover [Abstract]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Mar. 31, 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, $0.0000001 par value per share  
Trading Symbol SQ  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Class of Stock [Line Items]    
Entity Central Index Key 0001512673  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q1  
Amendment Flag false  
Class A    
Class of Stock [Line Items]    
Entity Common Stock, Shares Outstanding (in shares)   362,988,307
Class B    
Class of Stock [Line Items]    
Entity Common Stock, Shares Outstanding (in shares)   76,362,944
v3.20.1
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Current assets:    
Cash and cash equivalents $ 1,962,316 $ 1,047,118
Investments in short-term debt securities 521,840 492,456
Settlements receivable 521,629 588,692
Customer funds 944,811 676,292
Loans held for sale 160,709 164,834
Other current assets 278,670 250,409
Total current assets 4,389,975 3,219,801
Property and equipment, net 150,659 149,194
Goodwill 288,533 266,345
Acquired intangible assets, net 81,936 69,079
Investments in long-term debt securities 529,460 537,303
Operating lease right-of-use assets 413,458 113,148
Other non-current assets 149,852 196,388
Total assets 6,003,873 4,551,258
Current liabilities:    
Customers payable 1,485,439 1,273,135
Settlements payable 89,150 95,834
Accrued expenses and other current liabilities 392,734 297,841
Operating lease liabilities, current 37,335 27,275
Total current liabilities 2,004,658 1,694,085
Long-term debt 1,760,847 938,832
Operating lease liabilities, non-current 349,562 108,830
Other non-current liabilities 80,861 94,461
Total liabilities 4,195,928 2,836,208
Commitments and contingencies (Note 17)
Stockholders’ equity:    
Preferred stock, $0.0000001 par value: 100,000,000 shares authorized at March 31, 2020 and December 31, 2019. None issued and outstanding at March 31, 2020 and December 31, 2019. 0 0
Additional paid-in capital 2,427,596 2,223,749
Accumulated other comprehensive income (loss) (3,432) 1,629
Accumulated deficit (616,219) (510,328)
Total stockholders’ equity 1,807,945 1,715,050
Total liabilities and stockholders’ equity 6,003,873 4,551,258
Class A    
Stockholders’ equity:    
Common stock 0 0
Class B    
Stockholders’ equity:    
Common stock $ 0 $ 0
v3.20.1
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares
Mar. 31, 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) 359,142,301 352,386,562
Common stock, shares outstanding (in shares) 359,142,301 352,386,562
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) 79,621,335 80,410,158
Common stock, shares outstanding (in shares) 79,621,335 80,410,158
v3.20.1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Revenue:    
Revenue $ 1,381,109 $ 959,359
Cost of revenue:    
Total cost of revenue 842,608 562,605
Gross profit 538,501 396,754
Operating expenses:    
Product development 194,986 154,350
Sales and marketing 194,535 133,713
General and administrative 129,495 101,598
Transaction and loan losses 108,883 27,841
Amortization of acquired customer assets 4,152 3,487
Total operating expenses 628,789 418,796
Operating loss (90,288) (22,042)
Interest expense, net 9,206 4,681
Other expense, net 5,862 11,299
Loss before income tax (105,356) (38,022)
Provision for income taxes 535 129
Net loss $ (105,891) $ (38,151)
Net loss per share    
Basic (in USD per share) $ (0.24) $ (0.09)
Diluted (in USD per share) $ (0.24) $ (0.09)
Weighted-average shares used to compute net loss per share    
Basic (in shares) 434,940 419,289
Diluted (in shares) 434,940 419,289
Technology assets    
Cost of revenue:    
Amortization of acquired technology $ 2,320 $ 1,376
Customer assets    
Operating expenses:    
Amortization of acquired customer assets 890 1,294
Transaction-based revenue    
Revenue:    
Revenue 758,101 656,762
Cost of revenue:    
Cost of revenue 465,779 409,069
Subscription and services-based revenue    
Revenue:    
Revenue 255,883 190,307
Revenue 296,235 218,857
Cost of revenue:    
Cost of revenue 40,711 60,523
Hardware revenue    
Revenue:    
Revenue 20,675 18,212
Cost of revenue:    
Cost of revenue 34,372 26,941
Bitcoin revenue    
Revenue:    
Revenue 306,098 65,528
Cost of revenue:    
Cost of revenue $ 299,426 $ 64,696
v3.20.1
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Statement of Comprehensive Income [Abstract]    
Net loss $ (105,891) $ (38,151)
Net foreign currency translation adjustments (8,388) 266
Net unrealized gain on revaluation of intercompany loans 0 75
Net unrealized gain on marketable debt securities 3,327 2,288
Total comprehensive loss $ (110,952) $ (35,522)
v3.20.1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Cash flows from operating activities:    
Net loss $ (105,891) $ (38,151)
Adjustments to reconcile net loss to net cash provided by operating activities:    
Depreciation and amortization 20,061 18,971
Non-cash interest and other 12,411 8,224
Loss on extinguishment of long-term debt 990 0
Share-based compensation 77,303 61,088
Loss on revaluation of equity investment 0 14,087
Non-cash lease expense 15,125 6,690
Recovery of common stock in connection with indemnification settlement agreement 0 (789)
Transaction and loan losses 108,883 27,841
Change in deferred income taxes (984) (754)
Changes in operating assets and liabilities:    
Settlements receivable 60,248 (1,027,472)
Customer funds (210,201) (109,439)
Purchase of loans held for sale (573,502) (507,755)
Sales and principal payments of loans held for sale 555,584 467,518
Customers payable 212,929 912,749
Settlements payable (6,684) 211,984
Charge-offs to accrued transaction losses (17,413) (17,443)
Other assets and liabilities (27,563) 5,095
Net cash provided by operating activities 121,296 32,444
Cash flows from investing activities:    
Purchase of marketable debt securities (363,874) (193,673)
Proceeds from maturities of marketable debt securities 98,146 111,505
Proceeds from sale of marketable debt securities 247,027 44,810
Purchase of marketable debt securities from customer funds (144,494) (34,613)
Proceeds from maturities of marketable debt securities from customer funds 65,000 33,000
Proceeds from sale of marketable debt securities from customer funds 22,457 0
Purchase of property and equipment (26,137) (18,168)
Payments for other investments 0 (2,000)
Business combinations, net of cash acquired (12,742) (11,248)
Net cash used in investing activities (114,617) (70,387)
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
Payments for tax withholding related to vesting of restricted stock units (48,772) (50,801)
Proceeds from the exercise of stock options, net 31,406 25,328
Other financing activities (1,055) (1,379)
Net cash provided by (used in) financing activities 918,120 (26,852)
Effect of foreign exchange rate on cash and cash equivalents (13,588) 1,277
Net increase (decrease) in cash, cash equivalents, and restricted cash 911,211 (63,518)
Cash, cash equivalents, and restricted cash, beginning of period 1,098,706 632,847
Cash, cash equivalents, and restricted cash, end of period $ 2,009,917 $ 569,329
v3.20.1
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, 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, due 2025, 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, due 2025 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)
v3.20.1
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3 Months Ended
Mar. 31, 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 months ended March 31, 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, goodwill, acquired intangible assets, 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. The Company evaluates these estimates and assumptions on an ongoing basis and will make adjustments as appropriate. In the three months ended March 31, 2020, the provision for transaction losses increased to $79.3 million, compared to $19.8 million for the three months ended March 31, 2019 — See Note 10, Other Consolidated Balance Sheet Components (Current), for further details on transaction losses. In the three months ended March 31, 2020, the charge for the excess of amortized costs over the fair value of loans increased to $22.0 million, compared to $6.7 million for the three months ended March 31, 2019 — See 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 and spread of the outbreak, duration of local, state and federal issued public health orders, impact on our customers and our sales cycles, impact on our employees, 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 months ended March 31, 2020 and March 31, 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 45% and 28% of settlements receivable as of March 31, 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.

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 and has included disclosures under the guidance.

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 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 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 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 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 2017-12, they are permitted to elect either retrospectively or prospectively adopt the amendments. The Company had previously adopted ASU 2017-12 on January 1, 2019 and therefore is eligible to and has prospectively adopted the amendments.

In December 2019, the FASB issued ASU 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.
v3.20.1
REVENUE
3 Months Ended
Mar. 31, 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
March 31,
20202019
Revenue from Contracts with Customers:
Transaction-based revenue$758,101  $656,762  
Subscription and services-based revenue255,883  190,307  
Hardware revenue20,675  18,212  
Bitcoin revenue306,098  65,528  
Revenue from other sources:
Subscription and services-based revenue$40,352  $28,550  

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

Three Months Ended
March 31,
20202019
Deferred revenue, beginning of the period$44,331  $36,451  
Deferred revenue, end of the period47,046  42,160  
Revenue recognized in the period from amounts included in deferred revenue at the beginning of the period$15,570  $12,306  
v3.20.1
INVESTMENTS IN DEBT SECURITIES
3 Months Ended
Mar. 31, 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 March 31, 2020 are as follows (in thousands):

Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Short-term debt securities:
U.S. agency securities$173,424  $912  $(208) $174,128  
Corporate bonds75,440  50  (627) 74,863  
Commercial paper2,996  —  —  2,996  
Municipal securities8,837  44  (5) 8,876  
U.S. government securities238,012  1,722  (114) 239,620  
Foreign securities21,308  52  (3) 21,357  
Total$520,017  $2,780  $(957) $521,840  
Long-term debt securities:
U.S. agency securities$166,075  $704  $(466) $166,313  
Corporate bonds141,920  216  (2,161) 139,975  
Municipal securities8,464  32  (40) 8,456  
U.S. government securities177,308  2,648  (587) 179,369  
Foreign securities35,031  334  (18) 35,347  
Total$528,798  $3,934  $(3,272) $529,460  

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 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 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 March 31, 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):

March 31, 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$26,172  $(208) $—  $—  $26,172  $(208) 
Corporate bonds61,012  (627) —  —  61,012  (627) 
Municipal securities5,342  (5) —  —  5,342  (5) 
U.S. government securities24,028  (114) —  —  24,028  (114) 
Foreign securities4,209  (3) —  —  4,209  (3) 
Total$120,763  $(957) $—  $—  $120,763  $(957) 
Long-term debt securities:
U.S. agency securities$23,037  $(466) $—  $—  $23,037  $(466) 
Corporate bonds106,455  (2,161) —  —  106,455  (2,161) 
Municipal securities489  (40) —  —  489  (40) 
U.S. government securities9,061  (587) —  —  9,061  (587) 
Foreign securities2,003  (18) —  —  2,003  (18) 
Total$141,045  $(3,272) $—  $—  $141,045  $(3,272) 


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 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 securities16,383  (39) —  —  16,383  (39) 
Total$93,046  $(490) $—  $(28) $93,046  $(518) 
The unrealized losses above were as a consequence of interest rate changes. 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 non-US 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 March 31, 2020 are as follows (in thousands):

Amortized CostFair Value
Due in one year or less$520,017  $521,840  
Due in one to five years528,798  529,460  
Total$1,048,815  $1,051,300  
CUSTOMER FUNDS
The following table presents the assets underlying customer funds (in thousands):

March 31, 2020December 31, 2019
Cash$132,908  $422,459  
Cash Equivalents:
Money market funds505,553  233  
U.S. agency securities9,999  8,585  
U.S. government securities—  6,984  
Short-term debt securities:
U.S. agency securities118,835  —  
U.S. government securities177,516  238,031  
Total$944,811  $676,292  

The Company's investments within customer funds as of March 31, 2020 are as follows (in thousands):

Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Short-term debt securities:
U.S. agency securities$118,750  $100  $(15) $118,835  
U.S. government securities176,750  821  (55) 177,516  
Total$295,500  $921  $(70) $296,351  
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 March 31, 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):

March 31, 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$39,934  $(15) $—  $—  $39,934  $(15) 
U.S. government securities3,999  (55) —  —  3,999  (55) 
Total$43,933  $(70) $—  $—  $43,933  $(70) 


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 March 31, 2020 are as follows (in thousands):

Amortized CostFair Value
Due in one year or less$295,500  $296,351  
Due in one to five years—  —  
Total$295,500  $296,351  
v3.20.1
CUSTOMER FUNDS
3 Months Ended
Mar. 31, 2020
Investments, Debt and Equity Securities [Abstract]  
CUSTOMER FUNDS INVESTMENTS IN DEBT SECURITIES
The Company's short-term and long-term investments as of March 31, 2020 are as follows (in thousands):

Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Short-term debt securities:
U.S. agency securities$173,424  $912  $(208) $174,128  
Corporate bonds75,440  50  (627) 74,863  
Commercial paper2,996  —  —  2,996  
Municipal securities8,837  44  (5) 8,876  
U.S. government securities238,012  1,722  (114) 239,620  
Foreign securities21,308  52  (3) 21,357  
Total$520,017  $2,780  $(957) $521,840  
Long-term debt securities:
U.S. agency securities$166,075  $704  $(466) $166,313  
Corporate bonds141,920  216  (2,161) 139,975  
Municipal securities8,464  32  (40) 8,456  
U.S. government securities177,308  2,648  (587) 179,369  
Foreign securities35,031  334  (18) 35,347  
Total$528,798  $3,934  $(3,272) $529,460  

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 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 securities24,625  86  (39) 24,672  
Total$533,853