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What changed in Block, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Block, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+503 added−527 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-23)

Top changes in Block, Inc.'s 2023 10-K

503 paragraphs added · 527 removed · 401 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeIn our Square ecosystem, this technology platform enables us to capture and analyze billions of transactions per year and automate risk assessment for more than 99.95% of all transactions. Our hardware is designed and developed in-house, and we contract with third-party manufacturers for production. Our Competition Square Ecosystem The markets in which our Square ecosystem operates are competitive and evolving.
Biggest changeOur services are built on a scalable technology platform, and we place a strong emphasis on data analytics and machine learning to maximize the efficacy, efficiency, and scalability of our services. 16 In our Square ecosystem, this technology platform enables us to capture and analyze billions of transactions per year and automate risk assessment for more than 99.95% of all transactions.
Competitors that overlap with certain functions and features that we provide include: • Pen and paper, manual processes, and paper currency; • Business software providers such as those that provide point of sale, website building, inventory management, employee management, customer relationship management invoicing, and appointment booking solutions; • Payment terminal vendors; • Merchant acquirers; • Banks that provide payment processing, checking, savings, loans, and payroll; • Payroll processors; and • Established or new alternative lenders.
Competitors that overlap with certain functions and features that we provide include: • Business software providers such as those that provide point of sale, website building, inventory management, employee management, customer relationship management invoicing, and appointment booking solutions; • Payment terminal vendors; • Merchant acquirers; • Banks that provide payment processing, checking, savings, loans, and payroll; • Pen and paper, manual processes, and paper currency; • Payroll processors; and • Established or new alternative lenders.
We may also receive digital advertising revenue based on clicks to a merchant site from the Afterpay App as well as flat fees for premium ad placements. • Shop directory: We operate an online shop directory, which allows consumers to search by product category for stores that offer Afterpay as a payment option. 16 • Afterpay Card, Afterpay Plus Card: We offer two in-store cards that allow consumers to pay in 4 for in-person transactions at a merchant’s point of sale.
We may also receive digital advertising revenue based on clicks to a merchant site from the Afterpay App as well as flat fees for premium ad placements. • Shop directory: We operate an online shop directory, which allows consumers to search by product category for stores that offer Afterpay as a payment option. • Afterpay Card, Afterpay Plus Card: We offer two in-store cards that allow consumers to pay in 4 for in-person transactions at a merchant’s point of sale.
These funds can then be sent to another customer through the app, spent anywhere that accepts Visa cards, withdrawn from an ATM using the Cash App Card, invested in stocks or exchange-traded funds (“ETFs”), used to buy bitcoin, or transferred to a bank account (either instantly for a fee or for free in one to three days).
These funds can then be sent to another customer through the app, spent anywhere that accepts Visa cards or Cash App Pay, withdrawn from an ATM using the Cash App Card, invested in stocks or exchange-traded funds (“ETFs”), used to buy bitcoin, or transferred to a bank account (either instantly for a fee or for free in one to three days).
This could represent, among other things, one customer with multiple accounts or multiple customers sharing one alias identifier (for example, families). 7 Our Products and Services Square Ecosystem Our Square ecosystem consists of more than 30 distinct software, hardware, and financial services products that provide cohesive Commerce, Customer Relationship Management, Staff Management, and Banking capabilities.
This could represent, among other things, one customer with multiple accounts or multiple customers sharing one alias identifier (for example, families). 6 7 Our Products and Services Square Ecosystem Our Square ecosystem consists of more than 30 distinct software, hardware, and financial services products that provide cohesive Commerce, Customer Relationship Management, Staff Management, and Banking capabilities.
We charge a fee to the sender when transactions are funded using a credit card, and a fee to the recipient if it is a business account. Instant Deposit was the first feature we started monetizing on Cash App. Customers are able to instantly transfer funds from Cash App to a bank account for a small fee.
We charge a fee to the sender when transactions are funded using a credit card, and a fee to the recipient if it is a business account. 14 Instant Deposit was the first feature we started monetizing on Cash App. Customers are able to instantly transfer funds from Cash App to a bank account for a small fee.
Customers can select the Cash Boost they want to apply to their Cash App Card through Cash App, and the discount is instantly applied to their Cash App balance for eligible transactions. Some Cash Boosts are selected and funded by Cash App, while others are funded by our partners.
Customers can select the Cash Boost they want to apply to their Cash App Card, and the discount is instantly applied to their Cash App balance for eligible transactions. Some Cash Boosts are selected and funded by Cash App, while others are funded by our partners.
Further corporate governance information, including our board committee charters, code of business conduct and ethics, and corporate governance guidelines, is also available on our investor relations website under the heading “Governance Documents.” The contents of our websites are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only. 22
Further corporate governance information, including our board committee charters, code of business conduct and ethics, and corporate governance guidelines, is also available on our investor relations website under the heading “Governance Documents.” The contents of our websites are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only. 21
TIDAL has a global presence with listeners in more than 60 countries and relationships with more than 200 labels and distributors. 4 Bitcoin Ecosystem Our bitcoin ecosystem includes Spiral, an independent team focused on contributing to bitcoin open source work; TBD, an open developer platform focused on making the decentralized financial world accessible for everyone; and our bitcoin hardware projects, which include a self-custody bitcoin wallet and a bitcoin mining system.
TIDAL has a global presence with listeners in more than 60 countries and relationships with more than 200 labels and distributors. 4 Bitcoin Ecosystem Our bitcoin ecosystem includes TBD, which is an open developer platform focused on making the decentralized financial world accessible for everyone, our bitcoin hardware projects, which include Bitkey, a self-custody bitcoin wallet, a bitcoin mining system, Spiral, an independent team focused on contributing to bitcoin open source work.
We are also registered as a “Money Services Business” with the U.S. Department of Treasury’s Financial Crimes Enforcement Network ("FinCen"). These licenses and registrations subject us, among other things, to record-keeping requirements, reporting requirements, bonding requirements, limitations on the investment of customer funds, and inspection by state and federal regulatory agencies.
We are also registered as a “Money Services Business” with the U.S. Department of Treasury’s Financial Crimes Enforcement Network ("FinCEN"). These licenses and registrations subject us, among other things, to record-keeping requirements, reporting requirements, bonding requirements, limitations on the investment of customer funds, and examination by state and federal regulatory agencies.
A key focus of our human capital management approach is our commitment to promoting inclusion and diversity in our workplace. In 2022, we equipped managers with tools to build and lead inclusive teams, expanded professional development opportunities for employees from traditionally underrepresented backgrounds, and continued to elevate diversity as a central component of our recruiting strategy.
A key focus of our human capital management approach is our commitment to promoting inclusion and diversity in our workplace. In 2023, we equipped managers with tools to build and lead inclusive teams, expanded professional development opportunities for employees from traditionally underrepresented backgrounds, and continued to elevate diversity as a central component of our recruiting strategy.
Cash App also uses paid marketing, including referrals, advertising spend, partnerships, and social media campaigns, to expand its network, as these programs help reach new customers, enhance its brand, and improve retention among existing customers. 17 Additionally, we see the launch and advertising of new Cash App features as an important way to attract new customers.
Cash App also uses paid marketing, including referrals, advertising spend, partnerships, and social media campaigns, to expand its network, as these programs help reach new customers, enhance its brand, and improve retention among existing customers. Additionally, we see the launch and advertising of new Cash App features as an important way to attract new customers and engage existing customers.
Emerging Ecosystems We are also making modest investments in two more nascent and emerging ecosystems related to TIDAL and bitcoin, in order to serve new audiences. TIDAL Ecosystem In 2021, we completed the acquisition of a majority ownership interest in TIDAL, expanding our purpose of economic empowerment to artists.
Emerging Ecosystems We are also making modest investments in two relatively nascent and emerging ecosystems related to TIDAL and bitcoin, in order to serve new audiences. TIDAL Ecosystem In 2021, we completed the acquisition of a majority ownership interest in TIDAL, expanding our purpose of economic empowerment to artists.
The structure of the product includes no late fees and no compounding interest with a cap on total interest owed. • Advertising and affiliate: Our BNPL platform generates hundreds of millions of leads each year for merchants and has channeled this demand towards scaling an ads and affiliate program for its merchants: for affiliate relationships, we are paid a commission when a consumer begins their shopping journey in the Afterpay App and makes a purchase.
The structure of the product includes no late fees and no compounding interest with a cap on total interest owed. • Advertising and affiliate: Our BNPL platform generates hundreds of millions of leads each year for merchants and has channeled this demand towards scaling an ads and affiliate program for its merchants: for affiliate relationships, we receive a commission when a consumer begins their shopping journey in the Afterpay App and makes a purchase.
We currently fund a majority of these loans from arrangements with institutional third-party investors who purchase these loans on a forward-flow basis, which mitigates our balance sheet and liquidity risk. Since its public launch in May 2014, Square Loans has facilitated more than 2.1 million loans and advances, representing more than $15.1 billion in principal amount loaned or advanced.
We currently fund a majority of these loans from arrangements with institutional third-party investors who purchase these loans on a forward-flow basis, which mitigates our balance sheet and liquidity risk. Since its public launch in May 2014, Square Loans has facilitated more than 2.2 million loans and advances, representing more than $16.2 billion in principal amount loaned or advanced.
We determine a Cash App customer’s eligibility based on prudent risk management by using our unique data set that includes a customer’s inflows and engagement on Cash App. The average Cash App Borrow loan was repaid in less than four weeks in 2022.
We determine a Cash App customer’s eligibility based on prudent risk management by using our unique data set that includes a customer’s inflows and engagement on Cash App. The average Cash App Borrow loan was repaid in less than four weeks in 2023.
We typically monetize these products via service and software fees. • Afterpay drives net new demand to sellers via discovery in the Afterpay app and has historically increased average conversion rates and average transaction sizes for new and existing customers across online and in-store channels. • Square Loyalty helps sellers keep their buyers coming back.
We typically monetize these products via service and software fees. • BNPL helps drive net new demand to sellers via discovery in the Afterpay app and has historically increased average conversion rates and average transaction sizes for new and existing customers across online and in-store channels. • Square Loyalty helps sellers keep their buyers coming back.
Generally, for loans to Square sellers, loan repayment occurs automatically through a fixed percentage of every card transaction a seller takes. Loans are sized to be less than 20% of a seller's expected annual Square GPV and, by simply running their business, sellers historically have repaid their loan in less than nine months on average.
Generally, loan repayment occurs automatically through a fixed percentage of every card transaction a seller takes. Loans are sized to be less than 20% of a seller's expected annual Square GPV and, by simply running their business, sellers historically have repaid their loans within nine months on average.
We are also increasingly serving mid-market and larger sellers, which we define as sellers that generate more than $500,000 in annualized Square Gross Payment Volume (“Square GPV”). We are able to service mid-market sellers due to our ability to offer more flexible and complex solutions than traditional alternatives, as well as a growing product suite.
We are also increasingly serving mid-market sellers, which we define as sellers that generate more than $500,000 in annualized Square Gross Payment Volume (“Square GPV”), due to our ability to offer more flexible and complex solutions than traditional alternatives, as well as a growing product suite.
It is also integrated with Square Assistant, an artificial intelligence-enabled automated messaging tool that responds to buyers efficiently and professionally, saving sellers' time and helping prevent missed appointments. • Square for Retail is a vertical solution tailored for sellers in the retail industry.
It is also integrated with Square Assistant, an AI-enabled automated messaging tool that responds to buyers efficiently and professionally, saving sellers' time and helping prevent missed appointments. • Square for Retail is a vertical solution tailored for sellers in the retail industry.
We have used, and intend to continue to use, our investor relations website, as well as the Twitter accounts @Blocks and @BlockIR, as means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.
We have used, and intend to continue to use, our investor relations website, as well as the X (formerly known as Twitter) accounts @Blocks and @BlockIR, as means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.
Cash App Ecosystem Cash App competes with other companies in the peer-to-peer payments, debit and prepaid cards, credit card rewards, stock trading, tax filing, digital wallet, bitcoin exchanges, and shopping and consumer demand generation spaces. Our competitors include money transfer apps, prepaid debit card offerings, brokerage firms, tax firms, financial technology apps, banks, and crypto trading services.
Cash App Ecosystem Cash App competes with other companies in peer-to-peer payments, debit and prepaid cards, credit card rewards, stock trading, tax filing, digital wallet, bitcoin exchanges, BNPL providers, and shopping and consumer demand generation. Our competitors include money transfer apps, prepaid debit card offerings, brokerage firms, tax firms, financial technology apps, banks, and crypto trading services.
Each year, we publish our workforce demographics to show how far we have come, where there is room to grow, and how our workforce is evolving. The 2022 report is available at: https://block.xyz/inclusion/workforce-data-2022. The contents of the report and our websites are not incorporated by reference into this Annual Report on Form 10-K.
Each year, we publish our workforce demographics to show how far we have come, where there is room to grow, and how our workforce is evolving. The 2023 report is available at: https://block.xyz/inside/report-workforce-data-2023. The contents of the report and our websites are not incorporated by reference into this Annual Report on Form 10-K.
This model has unlocked opportunities to hire and retain talent in more locations, as we can hire employees in locations where we do not have office space, and employees can continue to work for us if they need or want to relocate.
Our distributed work model has unlocked opportunities to hire and retain talent in more locations, as we can hire employees in locations where we do not have office space, and employees can continue to work for us if they need or want to relocate.
In 2022, across the iOS App Store and Google Play, Cash App was the number one finance app and the number ten app overall, based on downloads in the United States.
In 2023, across the iOS App Store and Google Play, Cash App was the number one finance app and the number ten app overall in the United States, based on downloads.
TIDAL is a global platform for musicians and their fans that uses unique content, experiences, and features to bring fans closer to artists and to provide artists with tools to succeed as entrepreneurs. TIDAL offers an extensive catalog of more than 90 million songs and 450,000 high-quality videos.
TIDAL is a global platform for musicians and their fans that uses unique content, experiences, and features to bring fans closer to artists and to provide artists with tools to succeed as entrepreneurs. TIDAL offers an extensive catalog of more than 132 million songs and 774,000 high-quality videos.
In 2022, each Cash App monthly transacting active brought in an average of $358 of inflows in a given month during the year. A transacting active is a Cash App account that has at least one financial transaction using any product or service within Cash App during the specified period.
In 2023, each Cash App monthly transacting active brought in an average of $384 of inflows in a given month during the year. A transacting active is a Cash App account that has at least one financial transaction using any product or service within Cash App during the specified period.
We pay retail merchants the full order value up front (less a percentage fee) and assume the risk of non-payment from the consumer. • Monthly Payment Solution: In October 2022, we also launched the ability for consumers to pay for larger transaction sizes over a six- or twelve-month period using a monthly payment option.
We pay retail merchants the full order value up front (less a percentage fee) and assume the risk of non-payment from the consumer. • Monthly Payment Solution: We also offer the ability for consumers to pay for larger transaction sizes over a six- or twelve-month period using a monthly payment option.
Cash App has a diverse mix of customers, and in the United States, Cash App had monthly transacting actives in each of the 50 states and nearly every county as of December 2022. In 2022, Cash App transacting actives brought more than $203 billion in inflows into Cash App.
Cash App has a diverse mix of customers, and in the United States, Cash App had monthly transacting actives in each of the 50 states and nearly every county as of December 2023. In 2023, Cash App transacting actives brought more than $248 billion in inflows into Cash App.
In early 2018, we started with a simple bitcoin exchange and custody solution that provides customers with an onramp and offramp to buy and sell bitcoin with Cash App for as little as $1 and a custodial account to store it securely without needing to keep track of any private keys.
Bitcoin We have a simple bitcoin exchange and custody solution that provides customers with an onramp and offramp to buy and sell bitcoin with Cash App for as little as $1 and a custodial account to store it securely without needing to keep track of any private keys.
Human Capital Our employees are a driving force behind our purpose of economic empowerment. Attracting, developing, and retaining top talent remain a focus in the development of our human capital programs. As of December 31, 2022, we had 12,428 full-time employees worldwide with 3,074 full-time employees outside the US.
Human Capital Our employees are a driving force behind our purpose of economic empowerment. Attracting, developing, and retaining top talent remain a focus in the development of our human capital programs. As of December 31, 2023, we had 12,985 full-time employees worldwide with 3,154 full-time employees outside the US.
Most software products have a free tier (without a subscription fee), which we monetize only through transaction fees on card payments. Most software products also have premium tiers with additional functionality, which we monetize through subscription fees in addition to transaction fees on payments. • Square for Restaurants is a vertical solution tailored for both quick-service and full-service restaurants.
Most software products also have premium tiers with additional functionality, which we monetize through subscription fees in addition to transaction fees on payments. • Square for Restaurants is a vertical solution tailored for both quick-service and full-service restaurants.
Direct marketing, online and offline, has also been an effective customer acquisition channel. These tactics include online search engine optimization and marketing, online display advertising, direct mail campaigns, direct response television advertising, mobile advertising, and affiliate and seller referral programs. Our direct sales and account management teams also contribute to the acquisition and support of larger sellers.
These tactics include online search engine optimization and marketing, online display advertising, direct mail campaigns, direct response television advertising, mobile advertising, and affiliate and seller referral programs. Our direct sales and account management teams also contribute to the acquisition and support of larger sellers.
Tax Preparation In the first quarter of 2021, we launched Cash App Taxes, which provides a seamless, mobile-first solution for consumers to file their taxes for free. Stock Brokerage Customers can also use Cash App to invest their funds for free in U.S. listed stocks and ETFs.
Tax Preparation Cash App Taxes provides a seamless, mobile-first solution for consumers to file their taxes for free. Stock Brokerage Customers can also use Cash App to invest their funds for free in U.S. listed stocks and ETFs.
Lending Regulation Various laws and regulations govern lending in the United States and internationally. In the United States, Square Capital, LLC holds and maintains lending and collections licenses with state regulators to support lending products offered across the United States. Afterpay US Services, LLC holds and maintains lending licenses to support its product offerings.
In the United States, Square Capital, LLC holds and maintains lending and collections licenses with state regulators to support lending products offered across the United States. Afterpay US Services, LLC holds and maintains lending licenses to support its product offerings.
ITEM 1. BUSINESS Our Business At Block, we are building an ecosystem of ecosystems, and are focused on creating ecosystems for distinct customer audiences. We define an ecosystem as a set of tools and services that work together cohesively, often positively reinforcing one another.
ITEM 1. BUSINESS Our Business At Block, Inc. (together with its subsidiaries, "Block" or "we"), we are building an ecosystem of ecosystems, each focused on distinct customer audiences. We define an ecosystem as a set of tools and services that work together cohesively, often positively reinforcing one another.
This includes approximately 150,000 loans to small businesses representing more than $1.5 billion of Paycheck Protection Program (“PPP”) loans facilitated in 2020 and 2021, excluding canceled loans. • Instant Transfer enables sellers to receive funds from their payments instantly or later that same day.
This includes approximately 150,000 loans to small businesses representing more than $1.5 billion of Paycheck Protection Program (“PPP”) loans facilitated in 2020 and 2021, excluding canceled loans. We launched Square Credit Card in 2023 to provide another lending option. • Instant Transfer enables sellers to receive funds from their payments instantly or later that same day.
We also engage temporary employees and consultants as needed to support our operations. 21 We have a purpose-driven culture, with a focus on employee input and well-being, which we believe enables us to attract and retain exceptional talent. We offer learning and development programs for all employees, as well as a robust manager training program.
We have a purpose-driven culture, with a focus on employee input and well-being, which we believe enables us to attract and retain exceptional talent. We offer learning and development programs for all employees, as well as a robust manager training program.
We currently hold a New York State BitLicense. The laws and regulations applicable to virtual currency are evolving and subject to interpretation and change. Therefore, our current and future virtual currency services may be or become subject to additional licensing and regulatory requirements by other state and federal authorities.
The laws and regulations applicable to virtual currency are evolving and subject to interpretation and change. Therefore, our current and future virtual currency services may be or become subject to additional licensing, regulatory requirements and oversight by other state and federal authorities.
Through the Square App Marketplace, Square partners are able to expand their own addressable market by reaching the millions of sellers using Square. As of December 31, 2022, Square had more than 900 managed partners connected to its platform.
Through the Square App Marketplace, Square partners are able to expand their own addressable market by reaching the millions of sellers using Square. As of December 31, 2023, Square had nearly 1,000 managed partners connected to its platform.
Launched in the third quarter of 2021, Cash App Pay is a simple, mobile-friendly way for Cash App customers to pay at merchants across online and in-person channels.
Cash App Pay Cash App Pay is a simple, mobile-friendly way for Cash App customers to pay at merchants across online and in-person channels.
From a total rewards perspective, Block offers a competitive compensation and benefits package, which is reviewed and updated each year. Our annual compensation planning coincides with our feedback cycle during which employees and managers have performance conversations to facilitate learning and career development. As part of our compensation review program, pay equity analyses are conducted annually.
From a total rewards perspective, Block offers a competitive compensation and benefits package, which is reviewed and updated each year. Our annual compensation planning coincides with our feedback cycle during which employees and managers have performance conversations to facilitate learning and career development.
Our Net Promoter Score (“NPS”) has averaged nearly 61 over the past four quarters, which is approximately double the average score for banking providers. Our high NPS means Square sellers recommend our services to others, which we believe strengthens the Square brand and helps drive efficient customer acquisition.
Our Net Promoter Score (“NPS”) has averaged 54 over the past four quarters, which is nearly double the average score for banking providers. Our high NPS means Square sellers recommend our services to others, which we believe strengthens the Square brand and helps drive efficient customer acquisition. Direct marketing, online and offline, has also been an effective customer acquisition channel.
Our competitors range from large, well-established vendors to smaller, earlier-stage companies. We seek to differentiate ourselves from competitors primarily on the basis of our extensive commerce ecosystem and our focus on building remarkable products and services that are cohesive, fast, self-serve, and elegant.
We seek to differentiate ourselves from competitors primarily on the basis of our extensive commerce ecosystem and our focus on building remarkable products and services that are cohesive, fast, self-serve, and elegant.
Seasonality Historically, for our Square ecosystem transaction-based revenue has been strongest in our fourth quarter and weakest in our first quarter, as our sellers typically generate additional GPV during the holiday season. Subscription and services-based revenue generally demonstrates less seasonality than transaction-based revenue.
As our business continues to develop and expand, additional laws, rules and regulations may become relevant. Seasonality Historically, transaction-based revenue for our Square ecosystem has been strongest in our fourth quarter and weakest in our first quarter, as our sellers typically generate additional GPV during the holiday season. Subscription and services-based revenue generally demonstrates less seasonality than transaction-based revenue.
Banking We offer a growing number of banking services that make it easier for sellers to manage cash flow and get faster access to funds. 11 • Square Loans (formerly Square Capital) facilitates loans to qualified Square sellers through our subsidiary Square Financial Services (“SFS”), which is an industrial loan corporation (“ILC").
Banking We offer a growing number of banking services that make it easier for sellers to manage cash flow and get faster access to funds. 11 • Square Lending provides a platform of lending products to qualified Square sellers . Square Loans (formerly Square Capital) facilitates loans to qualified Square sellers through our subsidiary Square Financial Services, Inc.
As a broker-dealer, Cash App Investing is subject to SEC and FINRA laws and regulations including, without limitation, how it markets its services, handles customer assets, keeps records, and reports to the SEC and FINRA.
As a broker-dealer, Cash App Investing is subject to SEC and FINRA laws and regulations including, without limitation, how it markets its services, handles customer assets, keeps records, and reports to the SEC and FINRA. Cash App Investing is also registered in each state where we conduct business, and subject to those states’ securities laws and regulations.
By creating more connections between our ecosystems, we have an opportunity to increase the resilience of our overall company. BNPL Platform Our BNPL platform serves as a connection point between our Square and Cash App ecosystems as we build out a marketplace that acts as a shopping destination for consumers to search for merchants and find offers.
Our BNPL platform serves as a connection point between our Square and Cash App ecosystems as we build out a marketplace that acts as a shopping destination for consumers to search for merchants and find offers.
While Cash App started with the single ability to send and receive money, it now provides an ecosystem of financial services focused on helping consumers make their money go further — whether that's by storing, sending, receiving, spending, or investing their money with Cash App.
While Cash App started with the single ability to send and receive money, it now provides an ecosystem of financial services focused on helping consumers make their money go further by enabling customers to store, send, receive, spend, invest, borrow or save their money with Cash App.
We invest in brand, design, and technology to keep our products fast and simple, while also improving and expanding our features. 18 Intellectual Property We seek to protect our intellectual property rights by relying on a combination of federal, state, and common law rights in the United States and other countries, as well as on contractual measures.
Intellectual Property We seek to protect our intellectual property rights by relying on a combination of federal, state, and common law rights in the United States and other countries, as well as on contractual measures.
As of December 31, 2022, there were more than 2 million employees working for Square sellers. 5 The charts below show the percentage mix of our Square GPV by seller industry and seller size for the year ended December 31, 2022: 6 Our Cash App Customers As of December 2022, Cash App had more than 51 million monthly transacting actives across the United States and Europe.
The charts below show the percentage mix of our Square GPV by seller industry and seller size for the year ended December 31, 2023: 5 Our Cash App Customers As of December 2023, Cash App had 56 million monthly transacting actives across the United States and the U.K.
During the year ended December 31, 2022, typical seasonality trends for the Cash App ecosystem were impacted by a decline in bitcoin revenue. The primary drivers of bitcoin revenue are customer demand and the current market price of bitcoin, and as such, may not be indicative of future performance and skew typical seasonality trends in the Cash App ecosystem.
Typical seasonality trends for the Cash App ecosystem are also impacted by bitcoin revenue, which is driven by customer demand and the current market price of bitcoin, and as such, may not be indicative of future performance and skew typical seasonality trends in the Cash App ecosystem.
Cash App Investing is also registered in each state where we conduct business, and subject to those states’ securities laws and regulations. 20 Virtual Currency Regulation We are subject to certain licensing and supervisory frameworks as a result of our Cash App offering, through which customers can use their stored funds to buy, hold and sell bitcoin, and transfer bitcoin to and from Cash App.
Virtual Currency Regulation We are subject to certain licensing and supervisory frameworks as a result of our Cash App offering, through which customers can use their stored funds to buy, hold and sell bitcoin, and transfer bitcoin to and from Cash App. We currently hold a New York State BitLicense and a Virtual Currency Business License in Louisiana.
Our two reportable segments are Square, formerly referred to as Seller, and Cash App, which reflects our two primary ecosystems and the manner in which the Company's chief operating decision maker ("CODM") reviews and assesses performance. Square and Cash App have demonstrated the benefits and scale of our ecosystem model.
Since our start in 2009 with the Square business, we have added Cash App, TIDAL, and TBD as businesses. Our two reportable segments are Square, formerly referred to as Seller, and Cash App, which reflects our two primary ecosystems and the manner in which the Company's chief operating decision maker ("CODM") reviews and assesses performance.
In addition to our existing patents, we intend to file additional patent applications as we continue to innovate through our research and development efforts and to pursue additional patent protection to the extent we deem it beneficial and cost-effective.
We intend to file additional patent applications as we continue to innovate through our research and development efforts and to pursue additional patent protection to the extent we deem it beneficial and cost-effective, including acquiring patent assets or licensing patent rights from third parties.
Over the past few years, we have added investing features including auto buys and custom limit orders. We also allow customers to use direct deposit to auto-convert their paycheck into bitcoin and earn instant bitcoin rewards on Cash App Card purchases. 14 We have also focused on payments through bitcoin.
Our solution offers features that allow customers to complete auto buys and custom limit orders, as well as direct deposit to auto-convert their paycheck into bitcoin and earn instant bitcoin rewards on Cash App Card purchases. We have also focused on payments through bitcoin.
Payroll allows sellers to pay wages and associated employee taxes, and offer employee benefits (e.g. 401(k) accounts). The Square ecosystem drives competitive differentiation for our Payroll product with the ability to use Payroll in conjunction with our point-of-sale products, Team Management, and Cash App.
The Square ecosystem drives competitive differentiation for our Payroll product with the ability to use Payroll in conjunction with our point-of-sale products, Team Management, and Cash App.
Cash App Ecosystem Cash App provides an ecosystem of financial products and services to help consumers manage their money. Cash App’s goal is to redefine the world’s relationship with money by making it more relatable, instantly available, and universally accessible.
Cash App’s goal is to redefine the world’s relationship with money by making it more relatable, instantly available, and universally accessible.
Square Loans eliminates the lengthy (and often unsuccessful) loan application process. We are able to approve sellers for these loans by using our unique data set of the seller’s Square transactions to help facilitate loan underwriting and collections, which mitigates risks. The terms are straightforward for sellers, and once approved, they get their funds quickly, often the next business day.
(“SFS Financial Services”), which is an industrial loan company (“ILC"). Square Loans eliminates the lengthy (and often unsuccessful) loan application process. We are able to approve sellers for these loans by using our unique data set of the seller’s Square transactions to help facilitate loan underwriting and collections, which mitigates risks.
We compete primarily on our differentiated lifestyle brand, the breadth of our network, the range of products in our ecosystem, and the simplicity and quality of our customer experience.
We compete primarily on our differentiated lifestyle brand, the breadth of our network, the range of products in our ecosystem, and the simplicity and quality of our customer experience. We invest in brand, design, and technology to keep our products fast and simple, while also improving and expanding our features.
We use our inflows framework to assess the performance of Cash App across actives, inflows per active, and the monetization rate on inflows. 12 Customers can use Cash App to inflow funds in a variety of ways, including by receiving money from another Cash App customer through the app’s core peer-to-peer transfer service, transferring money from a bank account, depositing mobile checks, adding physical cash at participating retailers, and through other inflow channels.
Our primary focus with Cash App, in alliance with our bank partners, is on earning the primary banking relationship of our existing customer base in the U.S. 12 Customers can use Cash App to inflow funds in a variety of ways, including by receiving money from another Cash App customer through the app’s core peer-to-peer transfer service, transferring money from a bank account, depositing mobile checks, adding physical cash at participating retailers, receiving a recurring paycheck by direct deposit, and through other inflow channels.
For Block, the distributed work model means that we no longer have a designated headquarters location and, for the vast majority of roles, employees have the flexibility to work within or outside a Block office space.
Employees have the opportunity to actively voice their questions and thoughts through many internal channels, including our company townhall meetings and bi-annual employee engagement surveys. Our distributed work model means that we no longer have a designated headquarters location and, for the vast majority of roles, employees have the flexibility to work within or outside a Block office space.
On January 31, 2022, we completed the acquisition of Afterpay Limited ("Afterpay”), which is a global buy now, pay later ("BNPL") platform that facilitates commerce between retail merchants and consumers by allowing its retail merchant clients to offer their customers the ability to buy goods and services on a BNPL basis.
Our BNPL platform facilitates commerce between retail merchants and consumers by allowing its retail merchant clients to offer their customers the ability to buy goods and services on a BNPL basis.
Our payments services may be or become subject to regulation by other authorities, and the laws and regulations applicable to the payments industry in any given jurisdiction are always subject to interpretation and change. 19 Consumer Protection The Consumer Financial Protection Bureau and other federal, local, state, and foreign regulatory and law enforcement agencies regulate financial products and enforce consumer protection laws, including those applicable to credit, deposit, and payments services, and other similar services.
Our payments services may be or become subject to regulation by other authorities, and the laws and regulations applicable to the payments industry in any given jurisdiction are always subject to interpretation and change.
We have developed a patent program and strategy to identify, apply for, and secure patents for innovative aspects of our products, services, and technologies where appropriate.
We have developed a patent program and strategy to identify, apply for, and secure patents for innovative aspects of our products, services, and technologies where appropriate. We also actively pursue registration of our trademarks, logos, service marks, trade dress, and domain names in the United States and in other jurisdictions.
As of December 2022, Cash App Pay is enabled for a subset of Square sellers that are using certain Square hardware and software products, as well as a subset of Afterpay merchants, and we intend on expanding it to other merchants over time.
As of December 2023, Cash App Pay is enabled for a subset of Square sellers that are using certain Square hardware and software products, as well as a subset of Afterpay merchants, and most recently launched with large payment service providers who can offer it to their merchants.
Additional Developments Various regulatory agencies in the United States and elsewhere in our international markets continue to examine a wide variety of issues that could impact our business, including products liability, import and export compliance, accessibility for the disabled, insurance, marketing, privacy, data protection, information security, and labor and employment matters.
Communications laws and regulations, including those promulgated by the Federal Communications Commission, apply to certain aspects of this activity in the United States and elsewhere. 19 Additional Developments Various legislative bodies and regulatory agencies in the United States and elsewhere in our international markets continue to examine a wide variety of issues that could impact our business, including privacy, data protection, information security, virtual currencies, identity theft, tax, marketing, and labor and employment matters.
We also adapt the amount of funds a customer can bring in through specific channels based on risk profile, and as we improve our understanding of a customer’s identity. We believe building and maintaining deep trust with our customers will drive greater product adoption and increased inflows into our ecosystem.
We develop trust with customers by offering reliable, easy, and secure access to their accounts and convenient support. We also adapt the amount of funds a customer can bring in through specific channels based on risk profile, and as we improve our understanding of a customer’s identity.
We believe our customer base values fast access to funds, and this speed is one example of how we differentiate our ecosystem. 13 Financial Services Banking • Cash App Card is a debit card linked directly to a customer’s Cash App balance.
We believe our customer base values fast access to funds, and this speed is one example of how we differentiate our ecosystem. Commerce Cash App is focused on driving greater commerce between consumers and merchants.
We define Square GPV as the total dollar amount of all card payments processed by sellers using Square, net of refunds, and ACH transfers. In the year ended December 31, 2022, more than 4 million sellers used the Square ecosystem to make 4.0 billion individual sales transactions totaling $186.5 billion of Square GPV.
For the years ended December 31, 2023, 2022, and 2021, none of our customers accounted for greater than 5% of Square GPV. We define Square GPV as the total dollar amount of all card payments processed by sellers using Square, net of refunds, and ACH transfers.
Bank Regulation We obtained approval from the Federal Deposit Insurance Corporation ("FDIC") and the Utah Department of Financial Institutions to open an industrial loan corporation ("ILC") in 2021. The opening of Square Financial Services, our ILC, in March 2021 subjects us to direct state and federal regulatory supervision and requires compliance with applicable banking regulations and requirements.
The opening of Square Financial Services, Inc., our ILC, in March 2021 subjects us to direct state and federal regulatory supervision and requires compliance with applicable banking regulations and requirements. 18 Lending Regulation Various laws and regulations govern lending in the United States and internationally.
Communications Regulation We send texts, emails, and other communications in a variety of contexts, such as when providing digital receipts and marketing. Communications laws and regulations, including those promulgated by the Federal Communications Commission, apply to certain aspects of this activity in the United States and elsewhere.
Communications Regulation We send texts, emails, and other communications in a variety of contexts, such as when providing digital receipts and marketing.
In the fourth quarter of 2022, we launched gift cards, which allow customers to send gift cards at specific merchants to other customers and for recipients to spend them with their Cash App Card. • Cash Boost is a free and instant rewards program that offers customers discounts at specific businesses (e.g., 10% off a purchase on DoorDash) or at certain business types (e.g., grocery stores).
Customers can add money to Savings using their Cash App balance, a linked debit card, or through Round Ups on purchases with Cash App Card. • Cash Boost is a free and instant rewards program that offers customers discounts at specific businesses (e.g., 10% off a purchase on DoorDash) or at certain business types (e.g., grocery stores).
Hardware revenue generally demonstrates less seasonality than transaction-based revenue, with most fluctuations tied to periodic product launches, promotions, or other arrangements with our retail partners. In 2020 and 2021, typical seasonality trends for the Square ecosystem were impacted as a result of the COVID-19 pandemic and related shelter-in-place restrictions.
Hardware revenue generally demonstrates less seasonality than transaction-based revenue, with most fluctuations tied to periodic product launches, promotions, or other arrangements with our retail partners.
It also enables limiting access to Square software features per employee or role. The Square Team App enables team members to clock in and out, view and adjust their schedules, and see timecards, hours worked, and estimated pay from their mobile phone. • Square Payroll makes it easy to pay employees in minutes.
The Square Team App enables team members to clock in and out, view and adjust their schedules, and see timecards, hours worked, and estimated pay from their mobile phone. • Square Payroll allows sellers to pay wages and associated employee taxes, and offer employee benefits (e.g. 401(k) accounts).
We have since expanded Square into a cohesive commerce ecosystem that provides more than 30 distinct products and services to help our sellers start, run, and grow their businesses. We combine software, hardware, and financial services to create products and services that are cohesive, fast, self-serve, and elegant.
As our company grew, we recognized that sellers need a variety of solutions to thrive and saw how we could apply our strength in technology and innovation to help sellers. We have since expanded Square into a cohesive commerce ecosystem that provides more than 30 distinct products and services to help our sellers start, run, and grow their businesses.
Costs related to the Cash Boost rewards program that are funded by Cash App are recognized as reductions to revenue. • Direct deposit capabilities allow customers to receive their recurring paycheck, tax refund, or government disbursement into their Cash App account, which they can then use to send, spend, store, or invest the funds. • Savings was launched in January 2023, allowing customers to hold a separate savings balance, and easily set and track towards financial goals.
Customers can also purchase and send gift cards at specific merchants to other customers, and recipients can spend them with their Cash App Card. • Direct deposit capabilities, in alliance with our partner bank and system processor, allow customers to receive their recurring paycheck, tax refund, or government disbursement into their Cash App account, which they can then use to send, spend, store, or invest. 13 • Savings allows customers to hold a separate savings balance at our bank partner, and easily set and track towards financial goals.
We monetize these products through a combination of transaction, subscription, and service fees. 8 Commerce Square's commerce products help sellers make sales and track orders, inventory, and fulfillment across in-person and online channels, as well as first-party and third-party channels.
We will continue to drive trust with our sellers, and build products and features that help with sellers accessing funds securely and timely. 8 Commerce Square's commerce products help sellers make sales and track orders, inventory, and fulfillment across in-person and online channels, as well as first-party and third-party channels.
With Cash App Pay, Cash App customers can pay by simply scanning a QR code or tapping a button on their mobile device at checkout. Cash App allows business accounts to collect payments for their business by accepting peer-to-peer transactions for a fee, while allowing higher weekly limits and providing relevant tax reporting forms.
With Cash App Pay, Cash App customers can pay by simply scanning a QR code or tapping a button on their mobile device at checkout.
These attributes differentiate Square in a fragmented industry that traditionally forces sellers to stitch together products and services from multiple vendors, and often rely on inefficient non-digital processes and tools. Our ability to add new sellers efficiently, help them grow their business, and cross-sell our products and services has historically led to continued and sustained long-term growth.
We combine software, hardware, and financial services to create products and services that are cohesive, fast, self-serve, and elegant. These attributes differentiate Square in a fragmented industry that traditionally forces sellers to stitch together products and services from multiple vendors, and often rely on inefficient non-digital processes and tools.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur services must integrate with a variety of operating systems, and the hardware that enables merchants to accept payment cards must interoperate with third-party mobile devices utilizing those operating systems. If we are unable to ensure that our services or hardware interoperate with such operating systems and devices, our business may be materially and adversely affected.
Biggest changeIf we are unable to ensure that our services or hardware interoperate with such operating systems and devices, our business may be materially and adversely affected. We are dependent on the ability of our products and services to integrate with a variety of operating systems, web browsers, and wired and wireless interfaces to mobile devices that we do not control.
Furthermore, we expect to continue to expand our markets in the future, and we may have limited or no experience in such newer markets. We cannot assure you that any of our products or services will be widely accepted in any market or that they will continue to grow in revenue or contribute to our profitability.
Furthermore, we expect to continue to expand our markets in the future, and we may have limited or no experience in such newer markets. We cannot assure you that any of our products or services will be widely accepted in any market or that they will grow in revenue or contribute to our profitability.
If a divestiture is not completed for any reason, we may not be able to find another buyer on the same terms, and we may have incurred significant costs without the corresponding benefit.
If a divestiture is not completed for any reason, we may not be able to find another buyer on the same terms, and we may have incurred significant costs without any corresponding benefit.
If a merchant closes some or all of its locations, ceases its operations, or fails to deliver goods or services to our consumers, the merchant may not be able to reimburse us for chargebacks or refunds or may not be able to repay the funds we have advanced to them, all of which could result in higher charge-off rates than anticipated.
If a merchant ceases its operations, closes some or all of its locations, or fails to deliver goods or services to our consumers, the merchant may not be able to reimburse us for chargebacks or refunds or may not be able to repay the funds we have advanced to them, all of which could result in higher charge-off rates than anticipated.
Our failure to repurchase Notes following a fundamental change or to pay cash upon conversion of our Convertible Notes (unless we elect to deliver solely shares of our Class A common stock to settle such conversion) or at maturity of the Notes as required by the applicable indenture would constitute a default under such indenture.
Our failure to repurchase Notes as required following a fundamental change or to pay cash upon conversion of our Convertible Notes (unless we elect to deliver solely shares of our Class A common stock to settle such conversion) or at maturity of the Notes as required by the applicable indenture would constitute a default under such indenture.
Moreover, acquired businesses’ technology stacks may add complexity, resource constraints, and legacy technological challenges that make it difficult and time consuming to achieve such adequate controls, processes, and procedures. • we may fail to identify or assess the magnitude of certain liabilities, shortcomings, or other circumstances prior to acquiring or investing in a business, which could result in additional financial, legal, regulatory, or tax exposure and may subject us to additional controls, policies, procedures, liabilities, litigation, costs of compliance or remediation, or other adverse effects on our business, operating results, or financial condition; • we may have difficulty entering into new market segments or new geographic territories; • we may be unable to retain the customers, vendors, and partners of acquired businesses; • there may be lawsuits or regulatory actions resulting from the transaction; • there may be risks associated with undetected security weaknesses, cyberattacks, or security breaches or incidents at companies that we acquire or with which we may combine or partner; 29 • there may be local and foreign regulations applicable to the international activities of our business and the businesses we acquire; and • acquisitions could result in dilutive issuances of equity securities or the incurrence of debt.
Moreover, acquired businesses’ technology stacks may add complexity, resource constraints, and legacy technological challenges that make it difficult and time consuming to achieve such adequate controls, processes, and procedures. • we may fail to identify or assess the magnitude of certain liabilities, shortcomings, or other circumstances prior to acquiring or investing in a business, which could result in additional financial, legal, regulatory, or tax exposure and may subject us to additional controls, policies, procedures, liabilities, litigation, costs of compliance or remediation, or other adverse effects on our business, operating results, or financial condition; • we may have difficulty entering into new market segments or new geographic territories; • we may be unable to retain the customers, vendors, and partners of acquired businesses; • there may be lawsuits or regulatory actions resulting from the transaction; 28 • there may be risks associated with undetected security weaknesses, cyberattacks, or security breaches or incidents at companies that we acquire or with which we may combine or partner; • there may be local and foreign regulations applicable to the international activities of our business and the businesses we acquire; and • acquisitions could result in dilutive issuances of equity securities or the incurrence of debt.
Any negative publicity about the industries we operate in or our company, the quality and reliability of our products and services, our risk management processes, changes to our products and services, our ability to effectively manage and resolve customer complaints, our privacy, data protection, and information security practices, litigation, regulatory activity, policy positions, and the experience of our customers with us, our products or services could adversely affect our reputation and the confidence in and use of our products and services.
Any negative publicity about the industries we operate in or our company, the quality and reliability of our products and services, our risk management processes, changes to our products and services, our ability to effectively manage and resolve customer complaints, our privacy, data protection, and information security practices, litigation, regulatory activity, policy positions, and the experience of our sellers and customers with us, our products or services could adversely affect our reputation and the confidence in and use of our products and services.
Such expansion, and the ongoing operation of our global business, subject our business to substantial risks, including: • difficulty in attracting sellers and customers, or a lack of acceptance of our products and services in foreign markets; • failure to anticipate competitive conditions and competition with service providers or other market-players that have greater experience in the foreign markets than we do; • failure to conform with applicable business customs, including translation into foreign languages, cultural context, and associated expenses; • increased costs and difficulty in protecting intellectual property and sensitive data; • changes to the way we do business as compared with our current operations; • inability to support and integrate with local third-party service providers; • difficulties in staffing and managing foreign operations in an environment of diverse cultures, laws, and customs, challenges caused by distance, language, and cultural differences, and the increased travel, infrastructure, and legal and compliance costs associated with global operations; • difficulties in recruiting and retaining qualified employees and maintaining our company culture; • difficulty in gaining acceptance from industry self-regulatory bodies; • compliance with multiple complex, potentially conflicting and changing governmental laws and regulations, including with respect to payments, privacy, data protection, information security, and tax; • compliance with U.S. and foreign anti-corruption, anti-bribery, and anti-money laundering laws; • enactment of tariffs, sanctions, fines, or other trade restrictions; 31 • exchange rate risk; • increased exposure to public health issues such as pandemics, and related industry and governmental actions to address these issues; and • regional economic and political instability and other geopolitical risks.
Such expansion, and the ongoing operation of our global business, subject our business to substantial risks, including: • difficulty in attracting sellers and customers, or a lack of acceptance of our products and services in foreign markets; • failure to anticipate competitive conditions and competition with service providers or other market-players that have greater experience in the foreign markets than we do; • failure to conform with applicable business customs, including translation into foreign languages, cultural context, and associated expenses; • increased costs and difficulty in protecting intellectual property and sensitive data; • changes to the way we do business as compared with our current operations; • inability to support and integrate with local third-party service providers; • difficulties in staffing and managing foreign operations in an environment of diverse cultures, laws, and customs, challenges caused by distance, language, and cultural differences, and the increased travel, infrastructure, and legal and compliance costs associated with global operations; • difficulties in recruiting and retaining qualified employees and maintaining our company culture; • difficulty in gaining acceptance and maintaining compliance with industry self-regulatory bodies; • compliance with multiple complex, potentially conflicting and changing governmental laws and regulations, including with respect to payments, privacy, data protection, information security, and tax; • compliance with U.S. and foreign anti-corruption, anti-bribery, and anti-money laundering laws; • enactment of tariffs, sanctions, fines, or other trade restrictions; • exchange rate risk; 30 • increased exposure to public health issues such as pandemics, and related industry and governmental actions to address these issues; and • regional economic and political instability and other geopolitical risks.
In addition, the terms of any settlement or judgment in connection with any legal claims, lawsuits, or proceedings may require us to cease some or all of our operations or to pay substantial amounts to the other party and could materially and adversely affect our business. As a licensed money transmitter, we are subject to important obligations and restrictions.
In addition, the terms of any settlement or judgment in connection with any legal claims, lawsuits, or proceedings may require us to cease some or all of our operations or to pay substantial amounts to the other party and could materially and adversely affect our business. 50 As a licensed money transmitter, we are subject to important obligations and restrictions.
Harm to our brands can arise from many sources, including failure by us or our partners and service providers to satisfy expectations of service and quality; inadequate protection or misuse of sensitive information; fraud committed by third parties using our products or applications; compliance failures and claims; litigation and other claims; errors caused by us or our partners; and misconduct by our partners, service providers, or other counterparties.
Harm to our brands can arise from many sources, including failure by us or our partners and service providers to satisfy expectations of service and quality; inadequate protection or misuse of sensitive information; fraud committed by third parties using our products or applications; compliance failures and claims; litigation, regulatory and other claims; errors caused by us or our partners; and misconduct by our partners, service providers, or other counterparties.
Existing competitors and new entrants in the BNPL space have engaged in, and may continue to engage in, aggressive consumer acquisition campaigns, may develop superior technology offerings, or consolidate with other entities and achieve benefits of scale. Such competitive pressures may materially erode our existing market share in the BNPL space and may hinder our expansion into new markets.
Competitors in the BNPL space have engaged in, and may continue to engage in, aggressive consumer acquisition campaigns, may develop superior technology offerings, or consolidate with other entities and achieve benefits of scale. Such competitive pressures may materially erode our existing market share in the BNPL space and may hinder our expansion into new markets.
If not waived, these defaults could cause indebtedness outstanding under our credit facility, our Senior Notes, our other outstanding indebtedness, including our 2023 Convertible Notes, 2025 Convertible Notes, 2026 Convertible Notes, and 2027 Convertible Notes (collectively, the “Convertible Notes,” and together with the Senior Notes, the “Notes”), and any future financing agreements that we may enter into to become immediately due and payable.
If not waived, these defaults could cause indebtedness outstanding under our credit facility, our Senior Notes, our other outstanding indebtedness, including our 2025 Convertible Notes, 2026 Convertible Notes, and 2027 Convertible Notes (collectively, the “Convertible Notes,” and together with the Senior Notes, the “Notes”), and any future financing agreements that we may enter into to become immediately due and payable.
These laws, rules, regulations, and standards are enforced by multiple authorities and governing bodies in the United States, including federal agencies, such as the FDIC, the SEC, the Consumer Financial Protection Bureau, and Office of Foreign Assets Control, self-regulatory organizations, and numerous state and local agencies, such as the Utah Department of Financial Institutions.
These laws, rules, regulations, and standards are enforced by multiple authorities and governing bodies in the United States, including federal agencies, such as the FDIC, the SEC, the Consumer Financial Protection Bureau ("CFPB"), and Office of Foreign Assets Control, self-regulatory organizations, and numerous state and local agencies, such as the Utah Department of Financial Institutions.
Additionally, on January 13, 2022, the Austrian data protection regulator published a decision ruling that the collection of personal data and transfer to the U.S. through Google Analytics and other analytics and tracking tools used by website operators violates the GDPR. The French and Italian data protection regulators have adopted similar decisions.
Additionally, on January 13, 2022, the Austrian data protection regulator published a decision ruling that the collection of personal data and transfer to the U.S. through Google Analytics and other analytics and tracking tools used by website operators violates the GDPR. The Dutch, French and Italian data protection regulators have adopted similar decisions.
Additionally, certain of our products and services are subject to the Health Insurance Portability and Accountability Act of 1996 (and the rules and regulations thereunder, as amended, including with respect to the HITECH Act) (HIPAA), and therefore we are required to take measures to safeguard protected health information of our health care entity-sellers' customers when using those products.
Additionally, certain of our products and services are subject to the Health Insurance Portability and Accountability Act of 1996 (and the rules and regulations thereunder, as amended, including with respect to the HITECH Act), and therefore we are required to take measures to safeguard protected health information of our health care entity-sellers' customers when using those products and services.
If we fail, or are perceived to fail, to make such progress or achievements, or to maintain ESG practices that meet evolving stakeholder expectations, or if we have to revise any of our ESG commitments, initiatives, or goals, our reputation and our ability to attract and retain employees could be harmed, and we may be negatively perceived by investors or our customers.
If we fail, or are perceived to fail, to make such progress or achievements, or to maintain ESG practices that meet evolving stakeholder expectations, or if we revise any of our ESG commitments, initiatives, or goals, our reputation and our ability to attract and retain employees could be harmed, and we may be negatively perceived by investors or our customers.
If the cryptocurrency environment further deteriorates, our customers may wish to sell their bitcoin at a price or volume that exceeds the market demand for bitcoin, which could cause disruptions in our operations and have a material and adverse effect on our business and financial condition.
If the cryptocurrency environment deteriorates, our customers may wish to sell their bitcoin at a price or volume that exceeds the market demand for bitcoin, which could cause disruptions in our operations and have a material and adverse effect on our business and financial condition.
If we were unable to accept payment cards or were limited in our ability to do so, our business would be materially and adversely affected. 39 We are required to pay interchange and assessment fees, processing fees, and bank settlement fees to third-party payment processors, payment networks, and financial institutions.
If we were unable to accept payment cards or were limited in our ability to do so, our business would be materially and adversely affected. We are required to pay interchange and assessment fees, processing fees, and bank settlement fees to third-party payment processors, payment networks, and financial institutions.
Legal, regulatory, and compliance risks: • extensive regulation and oversight in a variety of areas of our business; • complex and evolving regulations and oversight related to privacy, data protection, and information security; • litigation, including intellectual property claims, government investigations or inquiries, and regulatory matters or disputes; • obligations and restrictions as a licensed money transmitter; • regulatory scrutiny or changes in the BNPL space; • regulation and scrutiny of our subsidiary Cash App Investing, which is a broker-dealer registered with the SEC and a member of FINRA, including net capital and other regulatory capital requirements; • changes to our business practices imposed by FINRA based on our ownership of Cash App Investing; • regulation and scrutiny of our subsidiary Square Financial Services, which is a Utah state-chartered industrial bank, including the requirement that we serve as a source of financial strength to it; • supervision and regulation of Square Financial Services, including the Dodd-Frank Act and its related regulations; • any inability to protect our intellectual property rights; • assertions by third parties of infringement of intellectual property rights by us; and • increased scrutiny from investors, regulators, and other stakeholders relating to environmental, social, and governance issues.
Legal, regulatory, and compliance risks: • extensive regulation and oversight in a variety of areas of our business; • complex and evolving regulations and oversight related to privacy, data protection, and information security; • litigation, including intellectual property claims, government investigations or inquiries, and regulatory matters or disputes; • obligations and restrictions as a licensed money transmitter; • regulatory scrutiny or changes in the BNPL space; • regulation and scrutiny of our subsidiary Cash App Investing, which is a broker-dealer registered with the SEC and a member of FINRA, including net capital and other regulatory capital requirements; • changes to our business practices imposed by FINRA based on our ownership of Cash App Investing; • regulation and scrutiny of our subsidiary Square Financial Services, which is a Utah state-chartered industrial loan company, including the requirement that we serve as a source of financial strength to it; • supervision and regulation of Square Financial Services, including the Dodd-Frank Act and its related regulations; • any inability to protect our intellectual property rights; • assertions by third parties of infringement of intellectual property rights by us; and • increased scrutiny from investors, regulators, and other stakeholders relating to environmental, social, and governance issues.
However, we may not be successful in maintaining or growing our current revenue, or deriving any significant new revenue streams from these products and services. Failure to successfully broaden the scope of products and services that are attractive may inhibit our growth and harm our business.
However, we may not be successful in maintaining or growing our revenue, or deriving any significant new revenue streams from these products and services. Failure to successfully broaden the scope of products and services that are attractive may inhibit our growth and harm our business.
We have also been from time to time in the past, and may in the future be, the target of incomplete, inaccurate, and misleading or false statements about our company and our business that could damage our brands and deter customers from adopting our services or our products.
We have also been from time to time in the past, and may in the future be, the target of incomplete, inaccurate, and misleading or false statements about our company and our business that could damage our reputation and brands and deter customers from adopting our services or our products.
If we are not able to add and retain employees effectively, our ability to achieve our strategic objectives will be adversely affected, and our business and growth prospects will be harmed. If we do not continue to improve our operational, financial, and other internal controls and systems to manage growth effectively, our business could be harmed.
If we are not able to add or retain employees effectively, our ability to achieve our strategic objectives will be adversely affected, and our business and growth prospects will be harmed. If we do not continue to improve our operational, financial, and other internal controls and systems to manage growth effectively, our business could be harmed.
In addition, adverse changes in macroeconomic conditions may lead to a decrease in the number of sellers eligible for Square Loans and may strain our ability to correctly identify such sellers or manage the risk of non-payment or fraud as servicer of the business loans.
Adverse changes in macroeconomic conditions may lead to a decrease in the number of sellers eligible for Square Loans and may strain our ability to correctly identify such sellers or manage the risk of non-payment or fraud as servicer of the business loans.
As a licensed money transmitter, we are subject to obligations and restrictions with respect to the investment of customer funds, reporting requirements, bonding requirements, and inspection by state regulatory agencies concerning those aspects of our business considered money transmission.
As a licensed money transmitter, we are subject to obligations and restrictions with respect to the investment of customer funds, reporting requirements, bonding requirements, and inspection by state and federal regulatory agencies concerning those aspects of our business considered money transmission.
Significant impairments of our intellectual property rights, and limitations on our ability to assert our intellectual property rights against others, could have a material and adverse effect on our business. Assertions by third parties of infringement or other violation by us of their intellectual property rights could harm our business.
Significant impairments of our intellectual property rights, and limitations on our ability to assert our intellectual property rights against others, could have a material and adverse effect on our business. 54 Assertions by third parties of infringement or other violation by us of their intellectual property rights could harm our business.
Risks related to ownership of our common stock: • the dual class structure of our common stock; • volatility of the market price of our Class A common stock; • the dual-listing of our Class A common stock on the NYSE and our CHESS Depositary Interests ("CDIs") on the Australian Securities Exchange ("ASX"); • our convertible note hedge and warrant transactions; • anti-takeover provisions contained in our amended and restated certificate of incorporation, our amended and restated bylaws, and provisions of Delaware law; and • exclusive forum provisions in our bylaws. 24 Risks Related to Our Business and Our Industry Our growth rate has slowed at times and may slow or decline in the future, and our growth rates in each of our reporting segments may vary.
Risks related to ownership of our common stock: • the dual class structure of our common stock; • volatility of the market price of our Class A common stock; • the dual-listing of our Class A common stock on the NYSE and our CHESS Depositary Interests ("CDIs") on the Australian Securities Exchange ("ASX"); • our convertible note hedge and warrant transactions; • anti-takeover provisions contained in our amended and restated certificate of incorporation, our amended and restated bylaws, and provisions of Delaware law; and • exclusive forum provisions in our bylaws. 23 Risks Related to Our Business and Our Industry Our growth rate has slowed at times and may slow or decline in the future, and our growth rates in each of our reporting segments may vary.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management. 59 As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which prevents certain stockholders holding more than 15% of our outstanding capital stock from engaging in certain business combinations without the approval of our board of directors or the holders of at least two-thirds of our outstanding capital stock not held by such stockholder.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management. 57 As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which prevents certain stockholders holding more than 15% of our outstanding capital stock from engaging in certain business combinations without the approval of our board of directors or the holders of at least two-thirds of our outstanding capital stock not held by such stockholder.
In addition to the factors discussed in this Risk Factors section and elsewhere in this Annual Report on Form 10-K, factors that could cause fluctuations in the market price of our Class A common stock include the following: • general economic, regulatory, and market conditions, in particular conditions that adversely affect our sellers’ business and the amount of transactions they are processing; • public health crises and related measures to protect the public health; • sales of shares of our common stock by us or our stockholders; • issuance of shares of our Class A common stock, whether in connection with an acquisition or upon conversion of some or all of our outstanding Convertible Notes; • short selling of our Class A common stock or related derivative securities; • from time to time we make investments in equity that is, or may become, publicly held, and we may experience volatility due to changes in the market prices of such equity investments; • fluctuations in the price of bitcoin, and potentially any impairment charges in connection with our investments in bitcoin; • reports by securities or industry analysts that are interpreted either negatively or positively by investors, failure of securities analysts to maintain coverage and/or to provide accurate consensus results of us, changes in financial estimates by securities analysts who follow us, or our failure to meet these estimates or the expectations of investors; • the financial or other projections we may provide to the public, any changes in those projections, or our failure to meet those projections; 58 • announcements by us or our competitors of new products or services; • rumors and market speculation involving us or other companies in our industry; • actual or perceived security incidents that we or our service providers may suffer; and • actual or anticipated developments in our business, our competitors’ businesses, or the competitive landscape generally.
In addition to the factors discussed in this Risk Factors section and elsewhere in this Annual Report on Form 10-K, factors that could cause fluctuations in the market price of our Class A common stock include the following: • general economic, regulatory, and market conditions, in particular conditions that adversely affect our sellers’ business and the amount of transactions they are processing; • public health crises and related measures to protect the public health; • sales of shares of our common stock by us or our stockholders; • issuance of shares of our Class A common stock, whether in connection with an acquisition or upon conversion of some or all of our outstanding Convertible Notes; • short selling of our Class A common stock or related derivative securities; • from time to time we make investments in equity that is, or may become, publicly held, and we may experience volatility due to changes in the market prices of such equity investments; • fluctuations in the price of bitcoin, and potentially any impairment charges in connection with our investments in bitcoin; • reports by securities or industry analysts, media or other third parties, that are interpreted either negatively or positively by investors, failure of securities analysts to maintain coverage and/or to provide accurate consensus results of us, changes in financial estimates by securities analysts who follow us, or our failure to meet these estimates or the expectations of investors; • the financial or other projections we may provide to the public, any changes in those projections, or our failure to meet those projections; • announcements by us or our competitors of new products or services; 56 • rumors and market speculation involving us or other companies in our industry; • actual or perceived security incidents that we or our service providers may suffer; and • actual or anticipated developments in our business, our competitors’ businesses, or the competitive landscape generally.
Furthermore, an adverse outcome of a dispute may require us to pay significant damages, which may be even greater if we are found to have willfully infringed upon a party’s intellectual property; cease exploiting copyrighted content that we have previously had the ability to exploit; cease using solutions that are alleged to infringe or misappropriate the intellectual property of others; expend additional development resources to redesign our solutions; enter into potentially unfavorable royalty or license agreements in order to obtain the right to use necessary technologies, content, or materials; indemnify our partners and other third parties; and/or take other actions that may have material and adverse effects on our business, operating results, and financial condition.
Regardless of the forum, an adverse outcome of a dispute may require us to pay significant damages, which may be even greater if we are found to have willfully infringed upon a party’s intellectual property; cease exploiting copyrighted content that we have previously had the ability to exploit; cease using solutions that are alleged to infringe or misappropriate the intellectual property of others; expend additional development resources to redesign our solutions; enter into potentially unfavorable royalty or license agreements in order to obtain the right to use necessary technologies, content, or materials; indemnify our partners and other third parties; and/or take other actions that may have material and adverse effects on our business, operating results, and financial condition.
Frequent or persistent interruptions in our products and services could cause customers to believe that our products and services are unreliable, leading them to switch to our competitors or to avoid our products and services, and could permanently harm our reputation and business.
Frequent, persistent or significant interruptions in our products and services could cause customers to believe that our products and services are unreliable, leading them to switch to our competitors or to avoid our products and services, and could permanently harm our reputation and business.
Moreover, to the extent that any system failure or similar event results in damages to customers or contractual counterparties, these customers and contractual counterparties could seek compensation from us for their losses, and those claims, even if unsuccessful, would likely be time-consuming and costly for us to address. 36 A significant natural or man-made disaster could have a material and adverse impact on our business.
Moreover, to the extent that any system failure or similar event results in damages to customers or contractual counterparties, these customers and contractual counterparties could seek compensation from us for their losses, and those claims, even if unsuccessful, would likely be time-consuming and costly for us to address. 35 A significant natural or man-made disaster could have a material and adverse impact on our business.
The recording of any future increases in our valuation allowance could have a material impact on our reported results, and both the recording and release of the valuation allowance could cause fluctuations in our quarterly and annual results of operations. 48 Legal, Regulatory, and Compliance Risks Our business is subject to extensive regulation and oversight in a variety of areas, all of which are subject to change and uncertain interpretation.
The recording of any future increases in our valuation allowance could have a material impact on our reported results, and both the recording and release of the valuation allowance could cause fluctuations in our quarterly and annual results of operations. 46 Legal, Regulatory, and Compliance Risks Our business is subject to extensive regulation and oversight in a variety of areas, all of which are subject to change and uncertain interpretation.
If we are unable to generate adequate revenue growth and manage our expenses, we may incur significant losses and may not maintain profitability on a consistent basis. 25 From time to time, we have made and may make decisions that will have a negative effect on our short-term operating results if we believe those decisions will improve our operating results over the long term.
If we are unable to generate adequate revenue growth and manage our expenses, we may incur significant losses and may not maintain profitability on a consistent basis. 24 From time to time, we have made and may make decisions that will have a negative effect on our short-term operating results if we believe those decisions will improve our operating results over the long term.
If we fail to successfully operate and grow our TIDAL business, we will not realize the benefits anticipated when we acquired a majority interest in the business, and any such failure could result in adverse effects on our business and financial results, including substantial impairment charges. Expanding our business globally subjects us to new challenges and risks.
If we fail to successfully operate and grow our TIDAL business, we will not realize the benefits anticipated when we acquired a majority interest in the business, and any such failure could result in adverse effects on our business and financial results, including substantial impairment charges. Operating or expanding our business globally subjects us to new challenges and risks.
Further, in the event a court finds either exclusive forum provision contained in our bylaws to be unenforceable or inapplicable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our results of operations. 60 ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Further, in the event a court finds either exclusive forum provision contained in our bylaws to be unenforceable or inapplicable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our results of operations. 58 ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Our rate of revenue growth has slowed at times and may decline in the future, and it may slow or decline more quickly than we expect for a variety of reasons, including the risks described in this Annual Report on Form 10-K. Additionally, our rate of revenue growth may vary between our reporting segments.
Our rate of revenue and gross profit growth has slowed at times and may decline in the future, and it may slow or decline more quickly than we expect for a variety of reasons, including the risks described in this Annual Report on Form 10-K. Additionally, our rate of revenue and gross profit growth may vary between our reporting segments.
As our hardware and software services continue to increase in size and complexity, and as we integrate new, acquired subsidiaries with different technology stacks and practices, these risks may correspondingly increase as well. 35 In addition, we provide frequent incremental releases of product and service updates and functional enhancements, which increase the possibility of errors.
As our hardware and software services continue to increase in size and complexity, and as we integrate new, acquired subsidiaries with different technology stacks and practices, these risks may correspondingly increase as well. 34 In addition, we provide frequent incremental releases of product and service updates and functional enhancements, which increase the possibility of errors.
These companies may devote greater resources to the development, promotion, and sale of products and services, may achieve economies of scale due to the size of their customer bases, and may more effectively introduce their own innovative products and services that adversely impact our growth. For example, a number of competitors offer BNPL products similar to Afterpay’s.
These companies may devote greater resources to the development, promotion, and sale of products and services, may achieve economies of scale due to the size of their customer bases, and may more effectively introduce their own innovative products and services that adversely impact our growth. For example, a number of competitors offer BNPL products.
Any of the foregoing issues could lead to product recalls and inventory shortages, result in costly and time-consuming efforts to redesign and redistribute our products, give rise to regulatory inquiries and investigations, and result in lawsuits and other liabilities and losses, any of which could have a material and adverse effect on our business.
Any of the foregoing issues could lead to product recalls and inventory shortages, result in costly and time-consuming efforts to redesign and redistribute our products, give rise to regulatory inquiries and investigations, and result in reimbursement obligations, lawsuits and other liabilities and losses, any of which could have a material and adverse effect on our business.
Although certain implementation details have yet to be developed and the enactment of these changes has not yet taken effect, these changes may have adverse tax consequences for us. 47 On August 16, 2022, the Inflation Reduction Act (“IRA”) was enacted in the United States, which introduced, among provisions, a new minimum corporate income tax on certain large corporations, an excise tax of 1% on certain share repurchases by corporations, and increased funding for the Internal Revenue Service (“IRS”).
Although certain implementation details have yet to be developed and the enactment of these changes has not yet taken effect, these changes may have adverse tax consequences for us. 45 On August 16, 2022, the Inflation Reduction Act (“IRA”) was enacted in the United States, which introduced, among provisions, a new minimum corporate income tax on certain large corporations, an excise tax of 1% on certain share repurchases by corporations, and increased funding for the Internal Revenue Service.
We have in the past recorded, and may in the future record, significant valuation allowances on our deferred tax assets, which may have a material impact on our results of operations and cause fluctuations in such results. As of December 31, 2022, we had a valuation allowance for deferred tax assets in the United States and in certain other countries.
We have in the past recorded, and may in the future record, significant valuation allowances on our deferred tax assets, which may have a material impact on our results of operations and cause fluctuations in such results. As of December 31, 2023, we had a valuation allowance for deferred tax assets in the United States and in certain other countries.
Any failure of our products and services to continue to operate effectively with third-party infrastructures and technologies could reduce the demand for our products and services, result in dissatisfaction of our customers, and materially and adversely affect our business. 27 Substantial and increasingly intense competition in our markets and industry may harm our business.
Any failure of our products and services to continue to operate effectively with third-party infrastructures and technologies could reduce the demand for our products and services, result in dissatisfaction of our customers, and materially and adversely affect our business. 26 Substantial and increasingly intense competition in our markets and industry may harm our business.
If we continue this practice and if an increasing proportion of our sellers are large sellers, we may have to increase the discounts or incentives we provide, which could also reduce our gross profit. Disruptions in the cryptocurrency market subject us to additional risks.
If we continue this practice and if an increasing proportion of our sellers are large sellers, we may have to increase the discounts or incentives we provide, which could also reduce our gross profit. Developments in the cryptocurrency market subject us to additional risks.
We have in the past acquired or invested in, and we continue to seek to acquire or invest in, businesses, technologies, or other assets that we believe could complement or expand our business, including acquisitions of new lines of business that are adjacent to or outside of our existing ecosystems.
We have in the past acquired or invested in, and we continue to seek to acquire or invest in, businesses, technologies, or other assets that we believe could complement or expand our business, including acquisitions of new lines of business that are adjacent to or outside of our existing ecosystems or geographic territories.
We rely on third parties and their systems for a variety of services, including the processing of transaction data and settlement of funds to us and our customers, and these third parties’ failure to perform these services adequately could materially and adversely affect our business.
This could materially and adversely affect our business. 38 We rely on third parties and their systems for a variety of services, including the processing of transaction data and settlement of funds to us and our customers, and these third parties’ failure to perform these services adequately could materially and adversely affect our business.
We believe that maintaining, promoting, and enhancing the Square brand, the Cash App brand, the TIDAL brand, and our other brands, in a cost-effective manner is critical to achieving widespread acceptance of our products and services and expanding our base of customers.
We believe that maintaining, promoting, and enhancing the Square, Cash App, TIDAL, Afterpay, and our other brands, in a cost-effective manner is critical to achieving widespread acceptance of our products and services and expanding our base of customers.
In addition to transaction and opportunity costs, these transactions involve large challenges and risks, whether or not such transactions are completed, any of which could harm our business and negatively impact our results of operations, including risks that: • the transaction may not advance our business strategy or may harm our growth or profitability; • we may not be able to secure required regulatory approvals or otherwise satisfy closing conditions for a proposed transaction in a timely manner, or at all; • the transaction may subject us to additional regulatory burdens that affect our business in potentially unanticipated and significantly negative ways; • we may not realize a satisfactory return on our investment or increase our revenue; • we may experience difficulty, and may not be successful in, integrating technologies, IT or business enterprise systems, culture, or management or other personnel of the acquired business; • we may incur significant acquisition costs and transition costs, including in connection with the assumption of ongoing expenses of the acquired business; • we may not realize the expected benefits or synergies from the transaction in the expected time period, or at all, which may result in impairment charges or other negative impacts to our business; • we may be unable to retain key personnel; • acquired businesses or businesses that we invest in may not have adequate controls, processes, and procedures to ensure compliance with laws and regulations, including with respect to data privacy, data protection, and information security, and our due diligence process may not identify compliance issues or other liabilities.
In addition to transaction and opportunity costs, these transactions involve large challenges and risks, whether or not such transactions are completed, including risks that: • the transaction may not advance our business strategy or may harm our growth, profitability, or reputation; • we may not be able to secure required regulatory approvals or otherwise satisfy closing conditions for a proposed transaction in a timely manner, or at all; • the transaction may subject us to additional regulatory burdens that affect our business in potentially unanticipated and significantly negative ways; • we may not realize a satisfactory return on our investment or increase our revenue; • we may experience difficulty, and may not be successful in, integrating technologies, IT or business enterprise systems, culture, or management or other personnel of the acquired business; • we may incur significant acquisition costs and transition costs, including in connection with the assumption of ongoing expenses of the acquired business; • we may not realize the expected benefits or synergies from the transaction in the expected time period, or at all, which may result in impairment charges, costs of winding down acquired operations or other negative impacts to our business; • we may be unable to retain key personnel; • acquired businesses or businesses that we invest in may not have adequate controls, processes, and procedures to ensure compliance with laws and regulations, including with respect to data privacy, data protection, and information security, and our due diligence process may not identify compliance issues or other liabilities.
We could be, and in the past have been, subject to penalties from payment card networks if we fail to detect that sellers are engaging in activities that are illegal, contrary to the payment card network operating rules, or considered “high risk.” We must either prevent high-risk sellers from using our products and services or register such high-risk sellers with the payment card networks and conduct additional monitoring with respect to such high-risk sellers.
We could be, and in the past have been, subject to penalties from payment card networks if we fail to detect activities that are illegal, contrary to the payment card network operating rules, or considered “high risk.” We must either prevent high-risk individuals from using our products and services or register such high-risk individuals with the payment card networks and conduct additional monitoring with respect to such high-risk individuals.
As a result of these risks, our efforts to expand our global operations may not be successful, which could limit our ability to grow our business. Our BNPL platform increases our exposure to consumer defaults, bad transactions, and merchant insolvency.
As a result of these risks, our efforts to expand our global operations may not be successful, which could limit our ability to grow our business. Our BNPL platform increases our exposure to consumer defaults and merchant insolvency.
You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including the section titled Management’s Discussion and Analysis of Financial Condition and Results of Operation s and our consolidated financial statements and related notes, before making any investment decision with respect to our securities.
You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including the section titled Management’s Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and related notes, before making any investment decision with respect to our securities.
In particular, it is possible that tax authorities at the international, federal, state, and local levels may attempt to regulate our transactions or levy new or revised sales & use taxes, VAT, digital services taxes, digital advertising taxes, income taxes, loan taxes, or other taxes relating to our activities, which would likely increase the cost of doing business.
In particular, it is possible that tax authorities at the international, federal, state, and local levels may attempt to regulate our transactions or levy new or revised sales and use taxes, gross receipts, franchise, VAT, digital services taxes, digital advertising taxes, income taxes, loan taxes, or other taxes relating to our activities, which would likely increase the cost of doing business.
Our investments in bitcoin, our bitcoin ecosystem, and our Cash App feature that permits customers to transact in bitcoin, subject us to additional risks related to any further disruption in the cryptocurrency markets and the resulting impact on customer and investor behavior.
Our investments in bitcoin, our bitcoin ecosystem, and our Cash App feature that permits customers to transact in bitcoin, subject us to additional risks related to any further developments in the cryptocurrency markets and the resulting impact on customer and investor behavior.
We may also suffer a decline in the market price of our Class A common stock due to any negative perception by our customers, investors, or the general public, of cryptocurrencies or the cryptocurrency markets. 28 Acquisitions, strategic investments, new businesses, joint ventures, divestitures, and other transactions we enter into could fail to achieve strategic objectives, disrupt our ongoing operations or result in operating difficulties, liabilities and expenses, harm our business, and negatively impact our results of operations.
We may also suffer a decline in the market price of our Class A common stock due to any negative perception by our customers, investors, or the general public, of bitcoin or the cryptocurrency markets. 27 Acquisitions, strategic investments, new businesses, joint ventures, divestitures, and other transactions we enter into could fail to achieve strategic objectives, disrupt our ongoing operations or result in operating difficulties, liabilities and expenses, harm our business, and negatively impact our results of operations.
Failure to accurately pay our royalties may damage our business relationships, our reputation, and adversely affect our business, operating results, and financial condition. 43 Economic, Financial, and Tax Risks A deterioration of general macroeconomic conditions could materially and adversely affect our business and financial results.
Failure to accurately pay our royalties may damage our business relationships, our reputation, and adversely affect our business, operating results, and financial condition. 41 Economic, Financial, and Tax Risks A deterioration of general macroeconomic conditions could materially and adversely affect our business and financial results.
Our ability to make required cash payments in connection with conversions of the Convertible Notes, repurchase the Notes in the event of a fundamental change, or to repay or refinance the Notes at maturity will depend on market conditions and our future performance, which is subject to economic, financial, competitive, and other factors beyond our control.
Our ability to make required cash payments in connection with conversions of the Convertible Notes, repurchase the Notes as required following a fundamental change, or to repay or refinance the Notes at maturity will depend on market conditions and our future performance, which is subject to economic, financial, competitive, and other factors beyond our control.
Moreover, our customers could attempt to seek compensation from us for their financial investment losses, and those claims, even if unsuccessful, would likely be time-consuming and costly for us to address.
Further, our customers could attempt to seek compensation from us for their financial investment losses, and those claims, even if unsuccessful, would likely be time-consuming and costly for us to address.
In particular, our continued growth will increase the challenges involved in: • improving existing and developing new internal administrative infrastructure, particularly our operational, financial, communications, and other internal systems and procedures; • successfully expanding and implementing internal controls as they relate to our new lines of business and any acquired businesses; • installing enhanced management information and control systems; and • preserving our core values, strategies, and goals and effectively communicating these to our employees worldwide.
In particular, our continued growth will increase the challenges involved in: 39 • improving existing and developing new internal administrative infrastructure, particularly our operational, financial, communications, and other internal systems and procedures; • successfully expanding and implementing internal controls as they relate to our new lines of business and any acquired businesses; • identifying and mitigating new and developing risks; • installing enhanced management information and control systems; and • preserving our core values, strategies, and goals and effectively communicating these to our employees worldwide.
These laws, regulations, and standards govern numerous areas that are important to our business, and include, or may in the future include, those relating to banking, lending, deposit-taking, cross-border and domestic money transmission, foreign exchange, payments services (such as payment processing and settlement services), cryptocurrency, trading in shares and fractional shares, fraud detection, consumer protection, anti-money laundering, escheatment, sanctions regimes and export controls, privacy, data protection and information security, fiscalization and compliance with the Payment Card Industry Data Security Standard, a set of requirements designed to ensure that all companies that process, store, or transmit payment card information maintain a secure environment to protect cardholder data.
These laws, regulations, and standards govern numerous areas that are important to our business, and include, or may in the future include, those relating to banking, lending, deposit-taking, cross-border and domestic money transmission, foreign exchange, payments services (such as payment processing and settlement services), cryptocurrency, trading in shares and fractional shares, personal income tax filing, fraud detection, consumer protection, anti-money laundering, anti-bribery and anti-corruption, escheatment, sanctions regimes and export controls, privacy, data protection and information security, fiscalization and compliance with the Payment Card Industry Data Security Standard, a set of requirements designed to ensure that all companies that process, store, or transmit payment card information maintain a secure environment to protect cardholder data.
The introduction and promotion of new products and services, as well as the promotion of existing products and services, may be partly dependent on our visibility on third-party advertising platforms, such as Google, Facebook, or Twitter.
The introduction and promotion of new products and services, as well as the promotion of existing products and services, may be partly dependent on our visibility on third-party advertising platforms, such as Google, Facebook, or X.
Additionally, we recently made certain Cash App functions available to customers between the ages of 13 through 17 with the authorization of a parent or guardian. The risks and the potential harm to our reputation are magnified in instances of fraud or unauthorized or inappropriate transactions involving minors.
Additionally, certain Cash App functions are available to customers between the ages of 13 through 17 with the authorization of a parent or guardian. The risks and the potential harm to our reputation are magnified in instances of fraud or unauthorized or inappropriate transactions involving minors.
In the event these third parties fail to provide these services adequately, including as a result of financial difficulty or insolvency, errors in their systems, outages or events beyond their control, or refuse to provide these services on terms acceptable to us or at all, and we are not able to find suitable alternatives, our business may be materially and adversely affected.
In the event these third parties fail to provide these services adequately, including as a result of financial difficulty or insolvency, errors in their systems, outages or events beyond their control, or refuse to provide these services or renew our agreements with them on terms acceptable to us or at all, and we are not able to find suitable alternatives, our business may be materially and adversely affected.
In addition, holders of each series of Notes also have the right to require us to repurchase all or a portion of their Notes of such series upon the occurrence of a fundamental change (as defined in the applicable indenture governing the Notes) at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest, or at a repurchase price equal to 101% of the principal amount of the Senior Notes to be repurchased, plus accrued and unpaid interest, as applicable.
In addition, holders of each series of Notes also have the right to require us to repurchase all or a portion of their Notes of such series upon the occurrence of a fundamental change (as defined in the applicable indenture governing the Notes) and, in the case of the Senior Notes, accompanied by a downgrade of the Senior Notes, at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest, or at a repurchase price equal to 101% of the principal amount of the Senior Notes to be repurchased, plus accrued and unpaid interest, as applicable.
Additionally, our metrics are calculated using internal company data based on the activity we measure on our platforms and may be compiled from multiple systems, including systems that are organically developed or acquired through business combinations.
The metrics we use to measure our business are calculated using internal company data based on the activity we measure on our platforms and may be compiled from multiple systems, including systems that are organically developed or acquired through business combinations.
Our Class B common stock has ten votes per share, and our Class A common stock has one vote per share. Stockholders who hold shares of Class B common stock, including certain of our executive officers, employees, and directors and their affiliates, held approximately 52.93% of the voting power of our combined outstanding capital stock as of December 31, 2022.
Our Class B common stock has ten votes per share, and our Class A common stock has one vote per share. Stockholders who hold shares of Class B common stock, including certain of our executive officers, employees, and directors and their affiliates, held approximately 52.14% of the voting power of our combined outstanding capital stock as of December 31, 2023.
Further, negative publicity or commentary regarding the partners and influencers who are, or are perceived to be, affiliated with us may also damage our reputation, even if the negative publicity or commentary is not directly related to us.
Further, negative publicity or commentary regarding the partners and influencers or other third parties who are, or are perceived to be, affiliated with us may also damage our reputation, even if the negative publicity or commentary is not directly related to us.
Moreover, since October 2015, businesses that cannot process EMV chip cards are held financially responsible for certain fraudulent transactions conducted using chip-enabled cards. Not all of the readers we offer to merchants are EMV-compliant.
Moreover, businesses that cannot process EMV chip cards are held financially responsible for certain fraudulent transactions conducted using chip-enabled cards. Not all of the readers we offer to merchants are EMV-compliant.
In addition, we currently are, and expect to continue to be, subject to numerous federal, state, local and foreign tax audits relating to transfer pricing, income, sales & use, value-added (“VAT”), and other tax liabilities.
In addition, we currently are, and expect to continue to be, subject to numerous federal, state, local and foreign tax audits relating to transfer pricing, income, sales and use, gross receipts, franchise, value-added (“VAT”), and other tax liabilities.
In addition, because the servicing fees we receive from third-party investors depend on the collectability of the business loans, if there is an increase in sellers who utilize Square Loans who are unable to make repayment of business loans, we will be unable to collect our entire servicing fee for such loans.
In addition, because the servicing fees we receive from third-party investors depend on the collectability of the business loans, if there is an increase in sellers who utilize Square Loans who are unable to repay their business loans, we will be unable to collect our entire servicing fee for such loans.
Future revenue growth depends on our ability to retain existing sellers and customers, attract new sellers and customers, and increase sales to both new and existing sellers and customers.
Future revenue and gross profit growth depends on our ability to retain existing sellers and customers, attract new sellers and customers, and increase sales to both new and existing sellers and customers.
Furthermore, our international expansion and our business in general may be materially adversely affected if legislative or administrative changes to immigration or visa laws and regulations impair our hiring processes or projects involving personnel who are not citizens of the country where the work is to be performed.
Furthermore, our business may be materially adversely affected if legislative or administrative changes to immigration or visa laws and regulations impair our hiring processes or projects involving personnel who are not citizens of the country where the work is to be performed.
On October 8, 2021, the OECD announced an international agreement with more than 130 countries to implement a new global minimum effective corporate tax rate of 15% for large multinational companies starting in 2023.
On October 8, 2021, the OECD announced an international agreement with more than 130 countries to implement a new global minimum effective corporate tax rate of 15% (known as "Pillar Two") for large multinational companies starting in 2023.
These risks will increase as our business continues to expand to include new products, subsidiaries, and technologies, and as we and our third-party vendors rely on an increasingly distributed workforce.
These risks will increase as our business continues to expand to include new products and technologies, such as AI, and as we and our third-party vendors rely on an increasingly distributed workforce.
We are subject to risks related to litigation, including intellectual property claims, government investigations or inquiries, and regulatory matters or disputes. We are currently, and may continue to be, subject to claims, lawsuits (including class actions and individual lawsuits), government or regulatory investigations, subpoenas, inquiries or audits, and other proceedings.
We are subject to risks related to litigation, including intellectual property claims, government investigations or inquiries, and regulatory matters or disputes. We are currently, and may continue to be, subject to claims, lawsuits (including class actions and individual lawsuits), disputes, investigations, subpoenas, inquiries or audits, and other actions or proceedings, including from regulatory bodies and governmental agencies.
For example, any further deterioration in the cryptocurrency markets may have an adverse effect on our reputation, and any negative perception by our customers of one or more cryptocurrencies may lead to a loss of customer demand for our products and services, any of which could have an adverse impact on our business and financial condition.
Deteriorations in the cryptocurrency markets may also have an adverse effect on our reputation, and any negative perception by our customers of one or more cryptocurrencies may lead to a loss of customer demand for our products and services, any of which could have an adverse impact on our business and financial condition.
As of December 31, 2022, we had $460.6 million outstanding aggregate principal amount of 2023 Convertible Notes, $1.0 billion outstanding aggregate principal amount of 2025 Convertible Notes, $575.0 million outstanding aggregate principal amount of 2026 Convertible Notes, and $575.0 million outstanding aggregate principal amount of 2027 Convertible Notes, $1.0 billion outstanding aggregate principal amount of 2026 Senior Notes, and $1.0 billion outstanding aggregate principal amount of 2031 Senior Notes. 45 Prior to February 15, 2023, in the case of the 2023 Convertible Notes; December 1, 2024, in the case of the 2025 Convertible Notes; February 1, 2026, in the case of the 2026 Convertible Notes; and August 1, 2027, in the case of the 2027 Convertible Notes; the applicable Convertible Notes are convertible at the option of the holders only under certain conditions or upon occurrence of certain events.
As of December 31, 2023, we had $1.0 billion outstanding aggregate principal amount of 2025 Convertible Notes, $575.0 million outstanding aggregate principal amount of 2026 Convertible Notes, $575.0 million outstanding aggregate principal amount of 2027 Convertible Notes, $1.0 billion outstanding aggregate principal amount of 2026 Senior Notes, and $1.0 billion outstanding aggregate principal amount of 2031 Senior Notes. 43 Prior to December 1, 2024, in the case of the 2025 Convertible Notes, February 1, 2026, in the case of the 2026 Convertible Notes, and August 1, 2027, in the case of the 2027 Convertible Notes, the applicable Convertible Notes are convertible at the option of the holders only under certain conditions or upon occurrence of certain events.
Although we do not anticipate the new corporate minimum income tax will currently apply to us, changes in our business and any future regulations or other guidance on the interpretation and application of the new corporate minimum tax, as well as the potential application of the share repurchase excise tax, may result in additional taxes payable by us, which could materially and adversely affect our financial results and operations.
Although we do not anticipate the new corporate minimum income tax will currently apply to us, changes in our business and any future regulations or other guidance on the interpretation and application of the new corporate minimum tax may result in additional taxes payable by us, which could materially and adversely affect our financial results and operations.
Further, we might not be able to continue operating the feature in Cash App, at least in current form, or might need to make other changes to our business, our products or our services, which could cause the price of our Class A common stock to decrease. 49 We are subject to audits, inspections, inquiries, and investigations from regulators on an ongoing basis.
Further, we might not be able to continue operating the feature in Cash App, at least in current form, or might need to make other changes to our business, our products or our services, which could cause the price of our Class A common stock to decrease. 47 We are subject to audits, inspections, inquiries, and investigations from regulators, authorities, and governing bodies, as applicable, on an ongoing basis.
In addition, they could result in significant expense to repair or replace damaged equipment and remedy resultant data loss or corruption. The risk of security incidents is increasing as we experience an increase in electronic payments, e-commerce, and other online activity.
In addition, we may incur significant expense to repair or replace damaged equipment and remedy resultant data loss or corruption. The risk of security incidents is increasing as we experience an increase in electronic payments, e-commerce, and other online activity.
Partners and influencers with whom we maintain relationships could engage in behavior or use their platforms to communicate directly with our sellers and customers in a manner that reflect poorly on our brands and such behavior or communications may adversely affect us.
Partners and influencers or other third parties with whom we maintain relationships could engage in behavior or use their platforms to communicate directly with our sellers and customers in a manner that reflects poorly on our brands and such behavior or communications may adversely affect us.
Our success will depend on our ability to develop new technologies and to adapt to technological changes and evolving industry standards, and our ability to provide products and services that are tailored to specific needs and requirements of our customers.
Our success will depend on our ability to develop new technologies, to adapt to technology changes and evolving industry standards, to incorporate new technologies into our products and services, and to provide products and services that are tailored to specific needs and requirements of our customers.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES As of 2021, we do not designate a headquarters location as we have adopted a distributed work model. We lease space in San Francisco, California, for product development, sales, marketing, and business operations under a lease that expires in 2023.
Biggest changeITEM 2. PROPERTIES We do not designate a headquarters location as we have adopted a distributed work model. We lease space in San Francisco, California, for product development, sales, marketing, and business operations and vacated most of the space at the end of 2023.
We also lease space in New York, New York for a product development, sales, and business operations office under a lease that expires in 2025 and office space in Oakland, California under a lease that expires in 2031.
We also lease space in New York, New York for a product development, sales, and business operations office under a lease that expires in 2025 and office space in Oakland, California for general corporate purposes under a lease that expires in 2031.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWhile we do not believe, at this time, that any ultimate liability resulting from any of these other matters will have a material adverse effect on our results of operations, financial position, or liquidity, we cannot give any assurance regarding the ultimate outcome of these other matters, and their resolution could be material to our operating results for any particular period.
Biggest changeWhile we do not believe, at this time, that any ultimate liability resulting from any of these other matters will have a material adverse effect on our results of operations, financial position, or liquidity, we cannot give any assurance regarding the ultimate outcome of these other matters, and their resolution could be material to our operating results for any particular period. 60 ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 61 PART II
MINE SAFETY DISCLOSURES Not applicable. 61 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePerformance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Block, Inc. under the Exchange Act or the Securities Act of 1933, as amended.
Biggest changeUnregistered Sales of Equity Securities During the three months ended December 31, 2023, we issued a total of 171,691 shares of our Class A common stock in connection with the acquisition of an artist-centric financial technology company, pursuant to exemptions from registration provided by Section 4(a)(2). 63 Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Block, Inc. under the Exchange Act or the Securities Act of 1933, as amended.
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our Class A common stock and in each index on December 31, 2017 and its relative performance is tracked through December 31, 2022.
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our Class A common stock and in each index on the last trading day for the fiscal year ended December 31, 2018 and its relative performance is tracked through December 31, 2023.
Holders of Record As of February 17, 2023, there were 612 holders of record of our Class A common stock and 29 holders of record of our Class B common stock.
Holders of Record As of February 16, 2024, there were 637 holders of record of our Class A common stock and 26 holders of record of our Class B common stock.
As of February 17, 2023, we estimate that we have approximately 47,802 holders of record of our CDIs. Dividend Policy We have never declared nor paid any cash dividends on our capital stock.
As of February 16, 2024, we estimate that we have approximately 41,547 holders of record of our CDIs. Dividend Policy We have never declared nor paid any cash dividends on our capital stock. We do not expect to pay any dividends on our capital stock in the foreseeable future.
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We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not expect to pay any dividends on our capital stock in the foreseeable future.
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Issuer Purchases of Equity Securities In October 2023, the Company's Board of Directors authorized the repurchase of up to $1 billion of the Company’s Class A common stock. Repurchases may be made from time to time through open market purchases or through privately negotiated transactions subject to market conditions, applicable legal requirements and other relevant factors.
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The returns shown are based on historical results and are not intended to suggest future performance. 62 Company/Index 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 Block, Inc. $ 100.00 $ 161.78 $ 180.44 $ 627.75 $ 465.85 $ 181.25 S&P 500 $ 100.00 $ 95.62 $ 125.72 $ 148.85 $ 191.58 $ 156.89 S&P North American Technology $ 100.00 $ 102.88 $ 146.79 $ 213.07 $ 269.33 $ 174.09 ITEM 6. [RESERVED] 63
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The repurchase program does not obligate the Company to acquire any particular amount of its Class A common stock and may be suspended at any time at the Company’s discretion.
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The timing and number of shares repurchased will depend on a variety of factors, including the stock price, business and market conditions, corporate and regulatory requirements, alternative investment opportunities, acquisition opportunities, and other factors. 62 The following table summarizes the share repurchase activity for the three months ended December 31, 2023 (in thousands, except per share amounts): Period Total Number of Shares Purchased Average price paid per share (i) Total number of shares purchased as part of publicly announced plans or program Approximate dollar value of shares that may yet be purchased under the plans or programs October 1, 2023 - October 31, 2023 — — — 1,000,000 November 1, 2023 - November 30, 2023 1,345 56.21 1,345 924,423 December 1, 2023 - December 31, 2023 1,121 72.44 1,121 843,238 Total 2,466 2,466 (i) Average price paid per share for open market purchases includes broker commissions.
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The returns shown are based on historical results and are not intended to suggest future performance.
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Company/Index 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Block, Inc. $ 100.00 $ 111.54 $ 388.02 $ 287.95 $ 112.03 $ 137.90 S&P 500 $ 100.00 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21 S&P North American Technology $ 100.00 $ 142.68 $ 207.11 $ 261.79 $ 169.22 $ 272.66 ITEM 6. [RESERVED] 64

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeBecause of these limitations, you should consider the non-GAAP financial measures alongside other financial performance measures, including net income (loss) and our other financial results presented in accordance with GAAP. 76 The following table presents a reconciliation of net income (loss) to Adjusted EBITDA for each of the periods indicated (in thousands): Year Ended December 31, 2022 2021 2020 2019 2018 Net income (loss) attributable to common stockholders $ (540,747) $ 166,284 $ 213,105 $ 375,446 $ (38,453) Net loss attributable to noncontrolling interests (12,258) (7,458) — — — Net income (loss) (553,005) 158,826 213,105 375,446 (38,453) Share-based compensation expense 1,069,289 608,042 397,500 297,863 216,881 Depreciation and amortization 340,523 134,756 84,212 75,598 60,961 Acquisition related, integration, and other costs 157,264 35,474 7,482 9,739 4,708 Interest expense, net 36,228 33,124 56,943 21,516 17,982 Other expense (income), net (95,443) (29,474) (291,725) 273 (18,469) Bitcoin impairment losses 46,571 71,126 — — — Provision (benefit) for income taxes (12,312) (1,364) 2,862 2,767 2,326 Loss (gain) on disposal of property and equipment 1,619 2,633 2,570 1,008 (224) Gain on sale of asset group — — — (373,445) — Acquired deferred revenue adjustment 382 744 1,497 7,457 12,853 Acquired deferred costs adjustment (152) (230) (375) (1,369) (2,042) Adjusted EBITDA $ 990,964 $ 1,013,657 $ 474,071 $ 416,853 $ 256,523 77 The following table presents a reconciliation of net income (loss) to Adjusted Net Income (Loss) Per Share for each of the periods indicated (in thousands, except per share data): Year Ended December 31, 2022 2021 2020 2019 2018 Net income (loss) attributable to common stockholders $ (540,747) $ 166,284 $ 213,105 $ 375,446 $ (38,453) Net loss attributable to noncontrolling interests (12,258) (7,458) — — — Net income (loss) $ (553,005) $ 158,826 $ 213,105 $ 375,446 $ (38,453) Share-based compensation expense 1,069,289 608,042 397,500 297,863 216,881 Acquisition related, integration, and other costs 157,264 35,474 7,482 9,739 4,708 Amortization of intangible assets 208,952 40,522 19,239 15,000 13,103 Amortization of debt discount and issuance costs 15,162 9,822 67,979 39,139 32,855 Loss (gain) on revaluation of equity investments (73,457) (35,493) (295,297) 12,326 (20,342) Bitcoin impairment losses 46,571 71,126 — — — Loss on extinguishment of long-term debt — — 6,651 — 5,028 Loss (gain) on disposal of property and equipment 1,619 2,633 2,570 1,008 (224) Gain on sale of asset group — — — (373,445) — Acquired deferred revenue adjustment 382 744 1,497 7,457 12,853 Acquired deferred cost adjustment (152) (230) (375) (1,369) (2,042) Tax effect of non-GAAP net income adjustments (264,523) (222,104) (102,383) (85,372) (34,371) Adjusted Net Income - basic $ 608,102 $ 669,362 $ 317,968 $ 297,792 $ 189,996 Cash interest expense on convertible notes 5,014 6,099 6,078 5,108 1,292 Adjusted Net Income - diluted $ 613,116 $ 675,461 $ 324,046 $ 302,900 $ 191,288 Weighted-average shares used to compute Adjusted Net Income Per Share: Basic 578,949 458,432 443,126 424,999 405,731 Diluted 615,034 525,725 507,229 486,381 478,895 Adjusted Net Income Per Share: Basic $ 1.05 $ 1.46 $ 0.72 $ 0.70 $ 0.47 Diluted $ 1.00 $ 1.28 $ 0.64 $ 0.62 $ 0.40 Diluted Adjusted Net Income Per Share is computed by dividing Adjusted Net Income by the weighted-average number of shares of common stock outstanding adjusted for the dilutive effect of all potential shares of common stock.
Biggest changeBecause of these limitations, you should consider the non-GAAP financial measures alongside other financial performance measures, including net income (loss) and our other financial results presented in accordance with GAAP. 77 The following table presents a reconciliation of operating income (loss) to Adjusted Operating Income (Loss) for each of the periods indicated (in thousands): Year Ended December 31, 2023 2022 2021 Operating income (loss) $ (278,839) $ (624,532) $ 161,112 Amortization of acquired technology assets 72,829 70,194 22,645 Acquisition-related and integration costs 11,422 105,518 15,474 Restructuring and other charges 239,582 51,746 20,000 Goodwill impairment 132,313 — — Bitcoin impairment losses — 46,571 71,126 Amortization of customer and other acquired intangible assets 174,044 138,758 15,747 Acquisition-related share based acceleration costs — 66,337 — Adjusted Operating Income (Loss) $ 351,351 $ (145,408) $ 306,104 The following table presents a reconciliation of net income (loss) to Adjusted EBITDA for each of the periods indicated (in thousands): Year Ended December 31, 2023 2022 2021 Net income (loss) attributable to common stockholders $ 9,772 $ (540,747) $ 166,284 Net loss attributable to noncontrolling interests (30,896) (12,258) (7,458) Net income (loss) (21,124) (553,005) 158,826 Share-based compensation expense 1,276,097 1,069,289 608,042 Depreciation and amortization 408,560 340,523 134,756 Acquisition-related and integration costs 11,422 105,518 15,474 Restructuring and other charges 239,582 51,746 20,000 Goodwill impairment 132,313 — — Interest expense (income), net (47,221) 36,228 33,124 Other income, net (202,475) (95,443) (29,474) Bitcoin impairment losses — 46,571 71,126 Benefit for income taxes (8,019) (12,312) (1,364) Loss on disposal of property and equipment 3,186 1,619 2,633 Acquired deferred revenue and cost adjustment 99 230 514 Adjusted EBITDA $ 1,792,420 $ 990,964 $ 1,013,657 78 The following table presents a reconciliation of net income (loss) to Adjusted Net Income (Loss) Per Share for each of the periods indicated (in thousands, except per share data): Year Ended December 31, 2023 2022 2021 Net income (loss) attributable to common stockholders $ 9,772 $ (540,747) $ 166,284 Net loss attributable to noncontrolling interests (30,896) (12,258) (7,458) Net income (loss) (21,124) (553,005) 158,826 Share-based compensation expense 1,276,097 1,069,289 608,042 Acquisition-related and integration costs 11,422 105,518 15,474 Restructuring and other charges 239,582 51,746 20,000 Goodwill impairment 132,313 — — Amortization of intangible assets 246,873 208,952 40,522 Amortization of debt discount and issuance costs 11,904 15,162 9,822 Loss (gain) on revaluation of equity investments 16,523 (73,457) (35,493) Bitcoin remeasurement (207,084) — — Bitcoin impairment losses — 46,571 71,126 Loss on disposal of property and equipment 3,186 1,619 2,633 Acquired deferred revenue and cost adjustment 99 230 514 Tax effect of non-GAAP net income adjustments (582,703) (264,523) (222,104) Adjusted Net Income - basic $ 1,127,088 $ 608,102 $ 669,362 Cash interest expense on convertible notes 3,554 5,014 6,099 Adjusted Net Income - diluted $ 1,130,642 $ 613,116 $ 675,461 Weighted-average shares used to compute Adjusted Net Income Per Share: Basic 608,856 578,949 458,432 Diluted 628,320 615,034 525,725 Adjusted Net Income Per Share: Basic $ 1.85 $ 1.05 $ 1.46 Diluted $ 1.80 $ 1.00 $ 1.28 Diluted Adjusted Net Income Per Share is computed by dividing Adjusted Net Income by the weighted-average number of shares of common stock outstanding adjusted for the dilutive effect of all potential shares of common stock.
This was offset by a net outflow from amortization of discounts and premiums and other non-cash adjustments of $592.5 million and changes in other assets and liabilities of $674.4 million due to timing of period end.
This was offset by changes in other assets and liabilities of $674.4 million due to timing of period end and a net outflow from amortization of discounts and premiums and other non-cash adjustments of $592.5 million.
Cash Flows from Financing Activities For the year ended December 31, 2022, cash provided by financing activities was $97.6 million, primarily as a result of net proceeds from warehouse facilities borrowings of $1.2 billion, a change in customer funds of $349.3 million, as well as proceeds from issuances of common stock from the exercise of options and purchases under our employee share purchase plan of $81.8 million.
For the year ended December 31, 2022, cash provided by financing activities was $97.6 million, primarily as a result of net proceeds from warehouse facilities borrowings of $1.2 billion, a change in customer funds of $349.3 million, as well as proceeds from issuances of common stock from the exercise of options and purchases under our employee share purchase plan of $81.8 million.
Instant Deposit is a functionality within the Cash App and our managed payment solutions that enables customers, including individuals and sellers, to instantly deposit funds into their bank accounts. Cash App Card offers Cash App customers the ability to use their stored funds via a Visa prepaid card that is linked to the balance the customer stores in Cash App.
Instant Deposit is a functionality within the Cash App and our managed payment solutions that enables customers, including individuals and sellers, to instantly deposit funds into their bank accounts. 66 Cash App Card offers Cash App customers the ability to use their stored funds via a Visa prepaid card that is linked to the balance the customer stores in Cash App.
Such charges are reversed for subsequent increases in fair value, but only to the extent that such reversals do not result in the amortized cost of a loan exceeding its fair value. 67 Losses on consumer receivables relate to management's estimate of expected credit losses in the outstanding portfolio of consumer receivables.
Such charges are reversed for subsequent increases in fair value, but only to the extent that such reversals do not result in the amortized cost of a loan exceeding its fair value. Losses on consumer receivables relate to management's estimate of expected credit losses in the outstanding portfolio of consumer receivables.
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 is comprised of Cash App activity related to peer-to-peer transactions received by business accounts, Cash App Pay transactions, and peer-to-peer payments sent from a credit card.
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 is comprised of Cash App activity related to peer-to-peer transactions received by business accounts, and peer-to-peer payments sent from a credit card.
Adjusted EBITDA and Adjusted Net Income (Loss) Per Share ("Adjusted EPS") Adjusted EBITDA and Adjusted EPS are non-GAAP financial measures that represent our net income (loss) and net income (loss) per share, adjusted to eliminate the effect of items as described below.
Adjusted EBITDA, Adjusted Net Income Per Share ("Adjusted EPS") and Adjusted Operating Income Adjusted EBITDA and Adjusted EPS are non-GAAP financial measures that represent our net income (loss) and net income (loss) per share, adjusted to eliminate the effect of items as described below.
When we were last rated, in the second half of 2022, we received a non-investment grade rating by S&P Global Ratings (BB), Fitch Ratings, Inc. (BB), and Moody's Corporation (Ba2). We expect that these credit rating agencies will continue to monitor our performance, including our capital structure and results of operations.
When we were last rated, in the second half of 2023, we received a non-investment grade rating by S&P Global Ratings (BB+), Fitch Ratings, Inc. (BB+), and Moody's Corporation (Ba2). We expect that these credit rating agencies will continue to monitor our performance, including our capital structure and results of operations.
In January 2022, we completed the acquisition of Afterpay Limited ("Afterpay"), a buy now, pay later ("BNPL") platform that facilitates commerce between retail merchants and consumers by allowing its retail merchant clients to offer their customers the ability to buy goods and services on a BNPL basis.
In January 2022, we completed the acquisition of Afterpay, a buy now, pay later ("BNPL") platform that facilitates commerce between retail merchants and consumers by allowing retail merchant clients to offer their customers the ability to buy goods and services on a BNPL basis.
On February 23, 2022, the Company entered into a sixth amendment to the Credit Agreement to, among other things, provide for a new tranche of unsecured revolving loan commitments in an aggregate principal amount of up to $100.0 million (the "Tranche B Loans").
On February 23, 2022, the Company entered into a sixth amendment to the Credit Agreement to, among other things, provide for a new tranche of unsecured revolving loan commitments in an aggregate principal amount of up to $100.0 million.
The following discussion and analysis should be read in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K ("Form 10-K"). This section of this Form 10-K generally discusses fiscal 2022 compared to fiscal 2021.
The following discussion and analysis should be read in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K ("Form 10-K"). This section of this Form 10-K generally discusses fiscal 2023 compared to fiscal 2022.
We estimate the expected credit losses in the outstanding portfolio of consumer receivables using both quantitative and qualitative methods that analyze portfolio performance, uses judgment regarding the quantitative components of the reserve, and considers all available information relevant to assessing collectibility. As of December 31, 2022, we had accrued $151.3 million related to allowance for credit losses.
We estimate the expected credit losses in the outstanding portfolio of consumer receivables using both quantitative and qualitative methods that analyze portfolio performance, uses judgment regarding the quantitative components of the reserve, and considers all available information relevant to assessing collectibility. As of December 31, 2023, we had accrued $185.3 million related to allowance for credit losses.
Cash App subscription and services-based revenue is primarily comprised of transaction fees from Cash App Instant Deposit, Cash App Card, and other Cash App financial services offerings.
Cash App subscription and services-based revenue is primarily comprised of transaction fees from Cash App Instant Deposit, Cash App Card, bitcoin withdrawal fees, and other Cash App financial services offerings.
Bitcoin Revenue Our Cash App customers have the ability to purchase bitcoin, a cryptocurrency. We recognize revenue when customers purchase bitcoin and it is transferred to the customer's account. We purchase bitcoin from private broker dealers or from Cash App customers and apply a small margin before selling it to our customers.
We recognize revenue when customers purchase bitcoin and it is transferred to the customer's account. We purchase bitcoin from private broker dealers or from Cash App customers and apply a small margin before selling it to our customers.
The 2023 Convertible Notes bear interest at a rate of 0.50% payable semi-annually on May 15 and November 15 of each year, the 2025 Convertible Notes bear interest at a rate of 0.125% payable semi-annually on March 1 and September 1 of each year, the 2026 Convertible Notes bear no interest, and the 2027 Convertible Notes bear interest at a rate of 0.25% payable semi-annually on May 1 and November 1 of each year.
The 2025 Convertible Notes bear interest at a rate of 0.125% payable semi-annually on March 1 and September 1 of each year, the 2026 Convertible Notes bear no interest, and the 2027 Convertible Notes bear interest at a rate of 0.25% payable semi-annually on May 1 and November 1 of each year.
The comparison of the fiscal 2021 results with the fiscal 2020 results that are not included in this Form 10-K can be found in the "Management's Discussion and Analysis Results of Operations" section in the Company's fiscal 2021 Annual Report within Part II, Item 7 of Form 10-K, filed on February 24, 2022.
The comparison of the fiscal 2022 results with the fiscal 2021 results that are not included in this Form 10-K can be found in the "Management's Discussion and Analysis Results of Operations" section in the Company's fiscal 2022 Annual Report within Part II, Item 7 of Form 10-K, filed on February 23, 2023.
As of October 2022, we also offer the ability for consumers to pay for larger transaction sizes over a six- or twelve-month period using a monthly payment option, which includes no late fees and no compounding interest with a cap on total interest owed.
We also offer the ability for consumers to pay for larger transaction sizes over a six- or twelve-month period using a monthly payment option, which includes no late fees and no compounding interest with a cap on total interest owed.
In addition to total net revenue, net income (loss), and other results under generally accepted accounting principles ("GAAP"), the following table sets forth key operating metrics and non-GAAP financial measures we use to evaluate our business.
In addition to total net revenue, operating income (loss), net income (loss), and other results under GAAP, the following table sets forth key operating metrics and non-GAAP financial measures we use to evaluate our business.
SAB 121 also asks us to consider the legal ownership of the bitcoin held for other parties, including whether the bitcoin held for other parties would be available to satisfy general creditor claims in the event of Block’s bankruptcy.
Staff Accounting Bulletin No. 121 ("SAB 121") also asks us to consider the legal ownership of the bitcoin held for other parties, including whether the bitcoin held for other parties would be available to satisfy general creditor claims in the event of Block’s bankruptcy.
Hardware is sold primarily as a means to grow our transaction-based revenue and, as a result, generating positive gross margins from hardware sales is not the primary goal of the hardware business. Bitcoin Costs Bitcoin costs consist of the amounts we pay to purchase bitcoin that is sold to customers.
Hardware is sold primarily as a means to grow our transaction-based revenue and, as a result, generating positive gross margins from hardware sales is not the primary goal of the hardware business. Bitcoin Costs Bitcoin costs consist of the amounts we pay to purchase bitcoin that is sold to customers. These costs fluctuate in line with bitcoin revenue.
See below in Key Operating Metrics and Non-GAAP Financial Measures for further discussion of GPV. Subscription and services-based revenue for the year ended December 31, 2022 increased by $1.8 billion, or 68%, compared to the year ended December 31, 2021.
See below in Key Operating Metrics and Non-GAAP Financial Measures for further discussion of GPV. Subscription and services-based revenue for the year ended December 31, 2023 increased by $1.4 billion, or 31%, compared to the year ended December 31, 2022.
Holidays and day-of-week may also cause significant volatility in daily GPV amounts. 81 Safeguarding Obligation Liability and Safeguarding Asset Related to Bitcoin Held for Other Parties As detailed in Note 14, Bitcoin Held for Other Parties within Notes to the Consolidated Financial Statements, upon the adoption of SAB 121, we recorded a safeguarding obligation liability and a corresponding safeguarding asset related to the bitcoin held for other parties.
Holidays and day-of-week may also cause significant volatility in daily GPV amounts. 82 Safeguarding Obligation Liability and Safeguarding Asset Related to Bitcoin Held for Other Parties As detailed in Note 14, Bitcoin within Notes to the Consolidated Financial Statements, we recorded a safeguarding obligation liability and a corresponding safeguarding asset related to the bitcoin held for other parties.
However, sellers need a variety of solutions to thrive, and we have expanded to provide them additional products and services and to give them access to a cohesive ecosystem of tools to help them manage and grow their businesses. Similarly, with Cash App, we have built an ecosystem of financial products and services to help individuals manage their money.
We have expanded to provide sellers additional products and services and to give them access to a cohesive ecosystem of tools to help them manage and grow their businesses. Similarly, with Cash App, we have built an ecosystem of financial products and services to help individuals manage their money.
Long-term restricted cash of $71.6 million as of December 31, 2022 is primarily related to cash held as collateral as required by the FDIC for Square Financial Services.
Long-term restricted cash of $71.8 million as of December 31, 2023 is primarily related to cash held as collateral as required by the FDIC for Square Financial Services.
Refer to Note 15, Indebtedness and Note 20, Commitments and Contingencies within Notes to the Consolidated Financial Statements for more details on these commitments. 79 Senior Notes and Convertible Notes As of December 31, 2022, we held $4.6 billion in aggregate principal amount of debt, comprised of $460.6 million in aggregate principal amount of convertible senior notes that mature on May 15, 2023 ("2023 Convertible Notes"), $1.0 billion in aggregate amount of convertible senior notes that mature on March 1, 2025 ("2025 Convertible Notes"), $575.0 million in aggregate amount of convertible senior notes that mature on May 1, 2026 ("2026 Convertible Notes"), and $575.0 million in aggregate amount of convertible senior notes that mature on November 1, 2027 ("2027 Convertible Notes," and together with the 2023 Convertible Notes, 2025 Convertible Notes, and 2026 Convertible Notes, the “Convertible Notes”).
Refer to Note 15, Indebtedness and Note 20, Commitments and Contingencies within Notes to the Consolidated Financial Statements for more details on these commitments. 80 Senior Notes and Convertible Notes As of December 31, 2023, we held $4.2 billion in aggregate principal amount of debt, comprised of, $1.0 billion in aggregate amount of convertible senior notes that mature on March 1, 2025 ("2025 Convertible Notes"), $575.0 million in aggregate amount of convertible senior notes that mature on May 1, 2026 ("2026 Convertible Notes"), and $575.0 million in aggregate amount of convertible senior notes that mature on November 1, 2027 ("2027 Convertible Notes," collectively referred to as the “Convertible Notes”).
Our other SaaS products include subscription fees on our vertical software solutions (including Square for Restaurants, Square Appointments, and Square for Retail), Customer Engagement products (including Square Loyalty, Square Marketing, Square Gift Cards), staff management products (including Square Team Management and Square Payroll), and other products.
Our other SaaS products include subscription fees on our vertical software solutions (including Square for Restaurants, Square Appointments, and Square for Retail), Customer Engagement products (including Square Loyalty, Square Marketing, Square Gift Cards), staff management products (including Square Team Management and Square Payroll), website hosting and domain name registration services, and other products.
Product Development Expenses Product development expenses currently represent the largest component of our operating expenses and consist primarily of expenses related to our engineering, data science, and design personnel; fees and supply costs related to maintenance at third-party data center facilities; hardware related development and tooling costs; and fees for software licenses, consulting, legal, and other services that are directly related to growing and maintaining our portfolio of products and services.
Operating expenses also include allocated overhead costs for facilities, human resources, and IT. 68 Product Development Expenses Product development expenses currently represent the largest component of our operating expenses and consist primarily of expenses related to our engineering, data science, and design personnel; fees and supply costs related to maintenance at third-party data center facilities; hardware related development and tooling costs; software and cloud computing infrastructure fees; and fees for software licenses, consulting, legal, and other services that are directly related to growing and maintaining our portfolio of products and services.
As of December 31, 2022, we have invested $32.0 million in aggregate towards this initiative, of which $10.1 million and $21.5 million were invested in the years ended December 31, 2022 and 2021, respectively. Our principal commitments consist of convertible notes, senior notes, revolving credit facility, warehouse funding facilities, operating leases, and purchase commitments.
As of December 31, 2023, we have invested $44.3 million in aggregate towards this initiative, of which $12.3 million and $10.1 million were invested in the years ended December 31, 2023 and 2022, respectively. Our principal commitments consist of convertible notes, senior notes, revolving credit facility, warehouse funding facilities, operating leases, capital leases, and purchase commitments.
Components of Results of Operations Revenue Transaction-based Revenue We charge our sellers a transaction fee that is generally calculated based on a percentage of the total transaction amount processed. We also selectively offer custom pricing for certain larger sellers.
We have also reflected this change for the applicable historical periods presented. Components of Results of Operations Revenue Transaction-based Revenue We charge our sellers a transaction fee that is generally calculated based on a percentage of the total transaction amount processed. We also selectively offer custom pricing for certain larger sellers.
Additionally, for purposes of calculating diluted Adjusted EPS we add back cash interest expense on convertible notes, as if converted at the beginning of the period, if the impact is dilutive. 75 • We exclude the following from non-GAAP financial measures because we do not believe that these items are reflective of our ongoing business operations: gain or loss on the disposal of property and equipment; gain or loss on revaluation of equity investments; bitcoin impairment losses on our investment in bitcoin, as applicable; and prior to the adoption of ASU 2020-06 on January 1, 2021, gain or loss on debt extinguishment related to the conversion of convertible notes, as applicable. • To aid in comparability of our results across periods and with peer companies that may not have similar expenses, we also exclude certain acquisition related and integration costs associated with business combinations, and various other costs that are not normal operating expenses.
Additionally, for purposes of calculating diluted Adjusted EPS, we add back cash interest expense on convertible notes, as if converted at the beginning of the period, if the impact is dilutive. 76 • We exclude the following from non-GAAP financial measures because we do not believe that these items are reflective of our ongoing business operations: gain or loss on the disposal of property and equipment; gain or loss on revaluation of equity investments; gain or loss from the remeasurement of our bitcoin investment, and bitcoin impairment losses on our bitcoin investment (prior to the adoption of ASU 2023-08), as applicable. • To aid in comparability of our results across periods, we also exclude certain acquisition-related and integration costs associated with business combinations, various restructuring and other costs, and goodwill impairment charges, each of which are not normal operating expenses.
Through the use of our BNPL platform, consumers can pay for their purchases over time by splitting their purchase price generally into three or four installments, typically due in two-week increments, without paying fees (if payments are made on time).
Revenue from our BNPL platform includes fees generated from consumer receivables, late fees, and certain affiliate and advertising fees. Through the use of our BNPL platform, consumers can pay for their purchases over time by splitting their purchase price generally into three or four installments, typically due in two-week increments, without paying fees (if payments are made on time).
However, customers payable balances will be greater in amount than settlements receivable balances due to the fact that a subset of funds are held due to unlinked bank accounts, risk holds, and chargebacks. Also customer funds obligations, which are included in customers payable, may cause customers payable to trend differently than settlements receivable.
However, customers payable balances will be greater in amount than settlements receivable balances due to the fact that a subset of funds are held due to unlinked bank accounts, risk holds, and chargebacks.
The Warehouse Facilities have been arranged utilizing wholly-owned and consolidated entities formed for the sole purpose of financing the origination of consumer receivables to partly fund our BNPL platform.
The Warehouse Facilities have been arranged utilizing wholly-owned and consolidated entities (collectively, the "Warehouse Special Purpose Entities (SPEs)") formed for the sole purpose of financing the origination of consumer receivables to partly fund our BNPL platform. Borrowings under the Warehouse Facilities are secured against the respective consumer receivables.
Short-term restricted cash of $639.8 million as of December 31, 2022 primarily includes cash held by the wholly-owned consolidated entities used in the Warehouse Facilities funding arrangements, that will be used to pay the borrowings under the Warehouse Facilities or will be distributed to us.
Short-term restricted cash of $770.4 million as of December 31, 2023 primarily includes cash held by the Warehouse SPEs used in the Warehouse Facilities funding arrangements that will be used to pay the borrowings under the Warehouse Facilities or will be distributed to us.
Borrowings under the Warehouse Facilities are secured against the respective consumer receivables. 80 Cash, Restricted Cash, and Working Capital We believe that our existing cash and cash equivalents, investment in marketable debt securities, and availability under our line of credit will be sufficient to meet our working capital needs, including any expenditures related to strategic transactions and investment commitments that we may from time to time enter into, and planned capital expenditures for at least the next 12 months.
The assets of the Warehouse SPEs are not available to satisfy our claims or those of our creditors. 81 Cash, Restricted Cash, and Working Capital We believe that our existing cash and cash equivalents, investment in marketable debt securities, and availability under our line of credit will be sufficient to meet our working capital needs, including any expenditures related to strategic transactions and investment commitments that we may from time to time enter into, and planned capital expenditures for at least the next 12 months.
We base our estimates on historical experience, anticipated future trends, and other assumptions we believe to be reasonable under the circumstances. Because these accounting policies require significant judgment, our actual results may differ materially from our estimates.
GAAP requires us to make certain estimates and judgments that affect the amounts reported in our financial statements. We base our estimates on historical experience, anticipated future trends, and other assumptions we believe to be reasonable under the circumstances. Because these accounting estimates require significant judgment, our actual results may differ materially from our estimates.
Subscription and services-based costs for the year ended December 31, 2022 increased by $378.7 million, or 78%, compared to the year ended December 31, 2021.
Subscription and services-based costs for the year ended December 31, 2023 increased by $213.4 million, or 25%, compared to the year ended December 31, 2022.
Excluding bitcoin costs of revenue, total cost of revenue increased by approximately $1.1 billion, or 32%, in the year ended December 31, 2022, compared to the year ended December 31, 2021.
Excluding bitcoin costs of revenue, total cost of revenue increased by approximately $534.7 million, or 12%, in the year ended December 31, 2023, compared to the year ended December 31, 2022.
Bitcoin revenue decreased by $2.9 billion and represented the primary driver of the decrease in the total net revenue. Excluding bitcoin revenue, total net revenue increased by $2.8 billion, or 36%, in the year ended December 31, 2022, compared to the year ended December 31, 2021.
Bitcoin revenue increased by $2.4 billion and represented the primary driver of the increase in total net revenue. Excluding bitcoin revenue, total net revenue increased by $2.0 billion, or 19%, in the year ended December 31, 2023, compared to the year ended December 31, 2022.
Additionally, we had $389.4 million available under our warehouse funding facilities. We intend to continue focusing on our long-term business initiatives and believe that our available funds are sufficient to meet our liquidity needs for the foreseeable future. As of December 31, 2022, we were in compliance with all covenants associated with our revolving credit facility and senior notes.
We intend to continue focusing on our long-term business initiatives and believe that our available funds are sufficient to meet our liquidity needs for the foreseeable future, including the $1.0 billion share repurchase program. As of December 31, 2023, we were in compliance with all financial covenants associated with our revolving credit facility and senior notes.
Cash Flow Activities The following table summarizes our cash flow activities (in thousands): Year Ended December 31, 2022 2021 Net cash provided by operating activities $ 175,903 $ 847,830 Net cash provided by (used in) investing activities 1,225,696 (1,310,879) Net cash provided by financing activities 97,580 2,652,034 Effect of foreign exchange rate on cash and cash equivalents (38,363) (7,066) Net increase in cash, cash equivalents, restricted cash, and customer funds $ 1,460,816 $ 2,181,919 Cash Flows from Operating Activities For the year ended December 31, 2022, cash provided by operating activities was $175.9 million, primarily due to net income of $553.0 million, adjusted for the add back of non-cash expenses of $1.4 billion consisting primarily of share-based compensation; transaction, loan, and consumer receivable losses; depreciation and amortization; non-cash interest; and bitcoin impairment losses.
Cash Flow Activities The following table summarizes our cash flow activities (in thousands): Year Ended December 31, 2023 2022 Net cash provided by operating activities $ 100,961 $ 175,903 Net cash provided by investing activities 683,201 1,225,696 Net cash provided by (used in) financing activities (240,137) 97,580 Effect of foreign exchange rate on cash and cash equivalents 29,156 (38,363) Net increase in cash, cash equivalents, restricted cash, and customer funds $ 573,181 $ 1,460,816 Cash Flows from Operating Activities For the year ended December 31, 2023, cash provided by operating activities was $101.0 million, primarily due to net loss of $21.1 million, adjusted for non-cash expenses of $2.6 billion consisting primarily of share-based compensation; transaction, loan, and consumer receivable losses; depreciation and amortization; non-cash interest and lease expense; and goodwill impairment.
As of December 31, 2022, the safeguarding obligation liability related to bitcoin held for other parties was $428.2 million.
As of December 31, 2023, the safeguarding obligation liability related to bitcoin held for other parties was $1.0 billion.
For the year ended December 31, 2021, cash provided by operating activities was $847.8 million, primarily due to net income of $158.8 million, adjusted for the add back of non-cash expenses of $1.1 billion consisting primarily of share-based compensation, transaction and loan losses, depreciation and amortization, non-cash interest, bitcoin impairment losses and other expenses.
For the year ended December 31, 2022, cash provided by operating activities was $175.9 million, primarily due to net loss of $553.0 million, adjusted for non-cash expenses of $2.0 billion consisting primarily of share-based compensation; transaction, loan, and consumer receivable losses; depreciation and amortization; non-cash interest; and bitcoin impairment losses.
Interest Expense, net, and Other Income, net Interest and other income and expense, net consists primarily of gains or losses arising from remeasurements of our investments in equity securities, interest expense related to our long-term debt, interest income on our investments in marketable debt securities, and foreign currency-related gains and losses.
Amortization of Customer and Other Acquired Intangible Assets Amortization of customer and other acquired intangible assets is primarily as a result of the intangible assets from the Afterpay acquisition. 69 Interest Expense, net, and Other Income, net Interest and other income and expense, net consists primarily of gains or losses arising from remeasurements of our investments in equity securities, bitcoin investment, interest expense related to our long-term debt, interest income on our investments in marketable debt securities, and foreign currency-related gains and losses.
Acquisition related costs include amounts paid to redeem acquirees’ unvested share-based compensation awards, and legal, accounting, valuation, 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, certain litigation and regulatory charges.
Acquisition related costs include amounts paid to redeem acquirees’ unvested share-based compensation awards, and legal, accounting, valuation, and due diligence costs. Integration costs include advisory and other professional services or consulting fees necessary to integrate acquired businesses.
Hardware Revenue Hardware revenue includes revenue from sales of magstripe readers, contactless and chip readers, Square Stand, Square Register, Square Terminal, and third-party peripherals. Third-party peripherals include cash drawers, receipt printers, scales, and barcode scanners, all of which can be integrated with Square Stand, Square Register, or Square Terminal to provide a comprehensive point-of-sale solution.
Third-party peripherals include cash drawers, receipt printers, scales, and barcode scanners, all of which can be integrated with Square Stand, Square Register, or Square Terminal to provide a comprehensive point-of-sale solution. 67 Bitcoin Revenue Our Cash App customers have the ability to purchase bitcoin, a cryptocurrency.
Refer to Note 15, Indebtedness within Notes to the Consolidated Financial Statements for further details. 72 Other income, net for the year ended December 31, 2022 was primarily comprised of unrealized gains of $96.1 million arising from the revaluation of certain equity investments.
Refer to Note 14, Bitcoin within Notes to the Consolidated Financial Statements for further details. Other income, net, of $95.4 million for the year ended December 31, 2022 was primarily driven by revaluation of certain equity investments.
This increase in revenue was largely in line with the increase in Gross Payment Volume ("GPV") of 21% for the year ended December 31, 2022, compared to the year ended December 31, 2021.
Transaction-based revenue for the year ended December 31, 2023 increased by $613.8 million, or 11%, compared to the year ended December 31, 2022. This increase in revenue was largely in line with the increase in Gross Payment Volume ("GPV") of 12% for the year ended December 31, 2023, compared to the year ended December 31, 2022.
Excluding bitcoin cost of revenue, Cash App cost of revenue increased $268.8 million, or 60%, due to the growth in Cash App Card, Cash App Instant Deposit, and Cash for Business. 74 Key Operating Metrics and Non-GAAP Financial Measures We collect and analyze operating and financial data to evaluate the health of our business, allocate our resources, and assess our performance.
The increase was due to the items referenced within the revenue discussion. Excluding bitcoin cost of revenue, Cash App cost of revenue increased $235.1 million, or 28%. 75 Key Operating Metrics and Non-GAAP Financial Measures We collect and analyze operating and financial data to evaluate the health of our business, allocate our resources, and assess our performance.
The following table presents a reconciliation of the tax effect of non-GAAP net income adjustments to our provision (benefit) for income taxes (in thousands, except effective tax rate): Year Ended December 31, 2022 2021 2020 2019 2018 Provision (benefit) for income taxes, as reported $ (12,312) $ (1,364) $ 2,862 $ 2,767 $ 2,326 Tax effect of non-GAAP net income adjustments 264,523 222,104 102,383 85,372 34,371 Adjusted provision for income taxes, non-GAAP $ 252,211 $ 220,740 $ 105,245 $ 88,139 $ 36,697 Non-GAAP effective tax rate 29% 25% 25% 23% 16% We determined the adjusted provision for income taxes by calculating the estimated annual effective tax rate based on adjusted pre-tax income and applying it to Adjusted Net Income before income taxes. 78 Liquidity and Capital Resources As of December 31, 2022, we had approximately $7.5 billion in available funds, including an undrawn amount of $600.0 million available under our revolving credit facility.
The following table presents a reconciliation of the tax effect of non-GAAP net income adjustments to our provision (benefit) for income taxes (in thousands, except effective tax rate): Year Ended December 31, 2023 2022 2021 Benefit for income taxes, as reported $ (8,019) $ (12,312) $ (1,364) Tax effect of non-GAAP net income adjustments 582,703 264,523 222,104 Adjusted provision for income taxes, non-GAAP $ 574,684 $ 252,211 $ 220,740 Non-GAAP effective tax rate 34% 29% 25% We determined the adjusted provision for income taxes by calculating the estimated annual effective tax rate based on adjusted pre-tax income and applying it to Adjusted Net Income before income taxes. 79 Liquidity and Capital Resources As of December 31, 2023, we had approximately $7.7 billion in available liquidity, with $6.9 billion in cash, cash equivalents, restricted cash, and investments in marketable debt securities, as well as an undrawn amount of $775.0 million available under our revolving credit facility subject to compliance with our covenants.
The increase in product development personnel-related costs includes an increase in share-based compensation expense of $255.1 million for the year ended December 31, 2022; and • an increase of $179.4 million in software and data center costs, consulting, and certain Cash App crypto networks operating costs for the year ended December 31, 2022 as a result of increased capacity needs and expansion of our cloud-based services.
The increase in product development personnel costs includes an increase in share-based compensation expense of $200.4 million for the year ended December 31, 2023; and • an increase of $112.5 million in software and cloud computing infrastructure fees as well as consulting fees for the year ended December 31, 2023, as a result of increased capacity needs and expansion of our cloud-based services.
Bitcoin revenue for the year ended December 31, 2022 decreased by $2.9 billion, or 29%, compared to the year ended December 31, 2021. As bitcoin revenue is the total sale amount of bitcoin sold to customers, the amount of bitcoin revenue recognized will fluctuate depending on customer demand, as well as changes in the market price of bitcoin.
As bitcoin revenue is the total sale amount of bitcoin sold to customers, the amount of bitcoin revenue recognized will fluctuate depending on customer demand as well as changes in the market price of bitcoin.
Warehouse Funding Facilities Following the acquisition of Afterpay, we assumed Afterpay's existing warehouse funding facilities ("Warehouse Facilities") with an aggregate commitment amount of $1.7 billion on a revolving basis, of which $1.3 billion was drawn and $0.4 billion remained available as of December 31, 2022.
To date, no funds have been drawn and no letters of credit have been issued under the 2020 Credit Facility. Warehouse Funding Facilities Following the acquisition of Afterpay, we assumed Afterpay's existing warehouse funding facilities ("Warehouse Facilities") with an aggregate commitment amount of $1.7 billion on a revolving basis, of which $1.6 billion was drawn as of December 31, 2023.
For the year ended December 31, 2022, cash provided by investing activities was $1.2 billion, primarily due to the net proceeds from investments of marketable securities, including investments from customer funds, of $1.1 billion. Additional inflows of cash were as a result of business acquisitions, net of cash acquired, of $539.5 million.
These were partially offset by the purchase of property and equipment of $151.2 million; purchases of other investments of $33.9 million; and business combinations, net of cash acquired, of $5.0 million. 83 For the year ended December 31, 2022, cash provided by investing activities was $1.2 billion, primarily due to the net proceeds from investments of marketable securities, including investments from customer funds, of $1.1 billion.
Our effective tax rate fluctuates from period to period due to changes in the mix of income and losses in jurisdictions with a wide range of tax rates, the effect of acquisitions, changes resulting from the amount of recorded valuation allowance, permanent differences between U.S. generally accepted accounting principles and local tax laws, certain one-time items, and changes in tax contingencies. 68 Results of Operations Revenue (in thousands, except for percentages) Year Ended December 31, 2022 2021 $ Change % Change Transaction-based revenue $ 5,701,540 $ 4,793,146 $ 908,394 19 % Subscription and services-based revenue 4,552,773 2,709,731 1,843,042 68 % Hardware revenue 164,418 145,679 18,739 13 % Bitcoin revenue 7,112,856 10,012,647 (2,899,791) (29) % Total net revenue $ 17,531,587 $ 17,661,203 $ (129,616) (1) % Total net revenue for the year ended December 31, 2022, decreased by $129.6 million, or 1%, compared to the year ended December 31, 2021.
Our effective tax rate fluctuates from period to period due to changes in the mix of income and losses in jurisdictions with a wide range of tax rates, the effect of acquisitions, changes resulting from the amount of recorded valuation allowance, permanent differences between U.S. generally accepted accounting principles and local tax laws, certain one-time items, and changes in tax contingencies. 70 Results of Operations Revenue (in thousands, except for percentages) Year Ended December 31, 2023 2022 $ Change % Change Transaction-based revenue $ 6,315,301 $ 5,701,540 $ 613,761 11 % Subscription and services-based revenue 5,944,842 4,552,773 1,392,069 31 % Hardware revenue 157,178 164,418 (7,240) NM (i) Bitcoin revenue 9,498,302 7,112,856 2,385,446 34 % Total net revenue $ 21,915,623 $ 17,531,587 $ 4,384,036 25 % (i) Not meaningful ("NM") Total net revenue for the year ended December 31, 2023, increased by $4.4 billion, or 25%, compared to the year ended December 31, 2022.
Accrued Transaction Losses We are exposed to credit losses related to transactions processed by sellers that are subsequently subject to chargebacks when we are unable to collect from the sellers primarily due to insolvency, disputes between a seller and their customer, or due to fraudulent transactions.
We believe accounting policies and the assumptions and estimates associated with transaction losses and allowance for credit losses related to consumer receivables could potentially have a material effect on our consolidated financial statements, and therefore are critical accounting policies and estimates. 84 Accrued Transaction Losses We are exposed to potential credit losses related to transactions processed by sellers that are subsequently subject to chargebacks when we are unable to collect from the sellers primarily due to insolvency, disputes between a seller and their customer, or due to fraudulent transactions.
Operating Expenses Operating expenses consist of product development; sales and marketing; general and administrative expenses; transaction, loan, and consumer receivable losses; bitcoin impairment losses; and amortization of customer and other acquired intangible assets. For product development and general and administrative expenses, the largest single component is personnel-related expenses, including salaries, commissions and bonuses, employee benefit costs, and share-based compensation.
Amortization of Acquired Technology Assets Amortization of acquired technology assets is primarily comprised of amortization related to the acquired technology assets from the acquisition of Afterpay. Operating Expenses Operating expenses consist of product development; sales and marketing; general and administrative expenses; transaction, loan, and consumer receivable losses; bitcoin impairment losses; and amortization of customer and other acquired intangible assets.
The prior period Adjusted EPS presentation has also been revised to conform with our new calculation and presentation. Non-GAAP financial measures have limitations, should be considered as supplemental in nature, and are not meant as a substitute for the related financial information prepared in accordance with GAAP.
In addition to the items above, Adjusted EBITDA as a non-GAAP financial measure also excludes depreciation and amortization, other cash interest income and expense, and other income and expense. Non-GAAP financial measures have limitations, should be considered as supplemental in nature, and are not meant as a substitute for the related financial information prepared in accordance with GAAP.
We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Our investments in marketable debt securities are classified as available-for-sale. Excluding customer funds, our total liquidity as of December 31, 2022 was $6.9 billion .
Investments in marketable debt securities were held primarily in cash deposits, money market funds, reverse repurchase agreements, U.S. government and agency securities, commercial paper, and corporate bonds. We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Our investments in marketable debt securities are classified as available-for-sale.
Additional uses of cash were as a result of business acquisitions, net of cash acquired of $164.0 million, the purchase of bitcoin investments of $170.0 million, the purchase of property and equipment of $134.3 million, and purchases of other investments of $48.5 million. These were partially offset by proceeds from sales of equity investments of $420.6 million.
Additional inflows of cash were as a result of business acquisitions, net of cash acquired, of $539.5 million. These were partially offset by the purchase of property and equipment of $170.8 million, net consumer receivable originations of $169.4 million and purchases of other investments of $56.7 million.
Year Ended December 31, 2022 2021 2020 2019 2018 Gross Payment Volume (GPV) (in millions) $ 203,536 $ 167,720 $ 112,295 $ 106,239 $ 84,654 Adjusted EBITDA (in thousands) $ 990,964 $ 1,013,657 $ 474,071 $ 416,853 $ 256,523 Adjusted Net Income Per Share: Basic $ 1.05 $ 1.46 $ 0.72 $ 0.70 $ 0.47 Diluted $ 1.00 $ 1.28 $ 0.64 $ 0.62 $ 0.40 Gross Payment Volume ("GPV") GPV includes Square GPV and Cash App Business GPV.
Year Ended December 31, 2023 2022 2021 Gross Payment Volume (GPV) (in millions) $ 227,699 $ 203,536 $ 167,720 Adjusted Operating Income (Loss) (in thousands) $ 351,351 $ (145,408) $ 306,104 Adjusted EBITDA (in thousands) $ 1,792,420 $ 990,964 $ 1,013,657 Adjusted Net Income Per Share: Basic $ 1.85 $ 1.05 $ 1.46 Diluted $ 1.80 $ 1.00 $ 1.28 Gross Payment Volume ("GPV") GPV includes Square GPV and Cash App Business GPV.
Refer to Note 9, Acquisitions within Notes to the Consolidated Financial Statements for further details. Revolving Credit Facility We have entered into a revolving credit agreement with certain lenders, as subsequently amended, which provides a $500.0 million senior unsecured revolving credit facility (the "2020 Credit Facility") maturing in May 2024.
On May 15, 2023, we paid $461.8 million in cash to settle the outstanding principal balance and interest on the 2023 Convertible Notes upon maturity. Revolving Credit Facility We have entered into a revolving credit agreement with certain lenders, as subsequently amended, which provides a $500.0 million senior unsecured revolving credit facility (the "2020 Credit Facility") maturing in May 2024.
In the case of sales and marketing expenses, a significant portion is related to the Cash App peer-to-peer transactions and Cash App Card issuance costs, in addition to paid advertising and personnel-related expenses. Operating expenses also include allocated overhead costs for facilities, human resources, and IT.
For product development and general and administrative expenses, the largest single component is personnel-related expenses, including salaries, commissions and bonuses, employee benefit costs, and share-based compensation. In the case of sales and marketing expenses, a significant portion is related to the Cash App peer-to-peer transactions and Cash App Card issuance costs, in addition to paid advertising and personnel-related expenses.
Generally, we estimate the potential loss rates based on historical experience that is continuously adjusted for new information and incorporates, where applicable, reasonable and supportable forecasts about future expectations. We also consider other relevant market data in developing such estimates and assumptions.
Accrued transaction losses also include estimated losses on Cash App activity related to peer-to-peer payments sent from a credit card, Cash for Business, and Cash App Card. Generally, we estimate the potential loss rates based on historical experience that is continuously adjusted for new information and incorporates, where applicable, reasonable and supportable forecasts about future expectations.
Transaction, loan, and consumer receivable losses for the year ended December 31, 2022, increased by $362.7 million, or 193%, compared to the year ended December 31, 2021, primarily due to the following: • an increase in the allowance for credit losses related to consumer receivables of $197.6 million from the date of the acquisition of Afterpay through December 31, 2022; • an increase in transaction losses compared to the year ended December 31, 2021 of $87.0 million, primarily due to growth in Square GPV; and • an increase in loan losses compared to the year ended December 31, 2021 of $78.1 million, primarily due to increased loan volumes.
Transaction, loan, and consumer receivable losses for the year ended December 31, 2023, increased by $110.0 million, or 20%, compared to the year ended December 31, 2022, primarily due to the following: • an increase in loan losses of $89.0 million compared to the year ended December 31, 2022, primarily due to increased loan volumes; and • an increase in transaction losses of $21.0 million for the year ended December 31, 2023, primarily due to an operational outage as well as growth in Cash App Card and Square GPV.
In addition, they provide useful measures for period-to-period comparisons of our business, as they remove the effect of certain non-cash items and certain variable charges that do not vary with our operations. • We believe it is useful to exclude certain non-cash charges, such as amortization of intangible assets, and share-based compensation expenses, from our non-GAAP financial measures because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations. • In connection with the issuance of our convertible senior notes (as described in Note 15, Indebtedness within Notes to the Consolidated Financial Statements), prior to the adoption of ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity ("ASU 2020-06") on January 1, 2021, we were required to recognize non-cash interest expense related to amortization of debt discount and issuance costs.
In addition, they provide useful measures for period-to-period comparisons of our business, as they remove the effect of certain non-cash items and certain variable charges that do not vary with our operations. • We believe it is useful to exclude certain non-cash charges, such as amortization of intangible assets, and share-based compensation expenses, from our non-GAAP financial measures because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations. • We believe that excluding the expense related to amortization of debt discount and issuance costs from our non-GAAP measures is useful to investors because such incremental non-cash interest expense does not represent a current or future cash outflow for the Company and is therefore not indicative of our continuing operations or meaningful when comparing current results to past results.
The increase was primarily driven by amortization related to the acquired technology assets from the acquisition of Afterpay of $43.5 million. 70 Operating Expenses (in thousands, except for percentages) Year Ended December 31, 2022 2021 $ Change % Change Product development $2,135,612 $1,383,841 $ 751,771 54 % % of total net revenue 12 % 8 % % of total gross profit 36 % 31 % Sales and marketing $2,057,951 $1,617,189 $ 440,762 27 % % of total net revenue 12 % 9 % % of total gross profit 34 % 37 % General and administrative $1,686,849 $982,817 $ 704,032 72 % % of total net revenue 10 % 6 % % of total gross profit 28 % 22 % Transaction, loan, and consumer receivable losses $550,683 $187,991 $ 362,692 193 % % of total net revenue 3 % 1 % % of total gross profit 9 % 4 % Bitcoin impairment losses $46,571 $71,126 $ (24,555) (35) % % of total net revenue — % — % % of total gross profit 1 % 2 % Amortization of customer and other acquired intangible assets $138,758 $15,747 $ 123,011 781 % % of total net revenue 1 % — % % of total gross profit 2 % — % Total operating expenses $6,616,424 $4,258,711 $ 2,357,713 55 % Product development expenses for the year ended December 31, 2022, increased by $751.8 million, or 54%, compared to the year ended December 31, 2021, due primarily to the following: • an increase of $560.3 million in personnel-related costs primarily due to an increase in headcount among our engineering, data science, and design teams, as we continue to improve and diversify our products.
Bitcoin costs are comprised of the total amount we pay to purchase bitcoin, which fluctuates in line with bitcoin revenue. 72 Operating Expenses (in thousands, except for percentages) Year Ended December 31, 2023 2022 $ Change % Change Product development $ 2,720,819 $ 2,135,612 $ 585,207 27 % % of total net revenue 12 % 12 % % of total gross profit 36 % 36 % Sales and marketing $ 2,019,009 $ 2,057,951 $ (38,942) (2) % % of total net revenue 9 % 12 % % of total gross profit 27 % 34 % General and administrative $ 2,209,190 $ 1,686,849 $ 522,341 31 % % of total net revenue 10 % 10 % % of total gross profit 29 % 28 % Transaction, loan, and consumer receivable losses $ 660,663 $ 550,683 $ 109,980 20 % % of total net revenue 3 % 3 % % of total gross profit 9 % 9 % Bitcoin impairment losses $ — $ 46,571 $ (46,571) (100) % % of total net revenue — % — % % of total gross profit — % 1 % Amortization of customer and other acquired intangible assets $ 174,044 $ 138,758 $ 35,286 25 % % of total net revenue 1 % 1 % % of total gross profit 2 % 2 % Total operating expenses $ 7,783,725 $ 6,616,424 $ 1,167,301 18 % Product development expenses for the year ended December 31, 2023, increased by $585.2 million, or 27%, compared to the year ended December 31, 2022, due primarily to the following: • an increase of $451.5 million in personnel costs primarily due to an increase in headcount among our engineering teams, as we continue to improve and diversify our products.
Net amounts paid to the bank are recorded as the cost of the loans purchased, and amounts collected in excess of the carrying value are recognized as revenue over the life of the loans. 65 Revenue from our BNPL platform includes fees generated from consumer receivables, late fees, and certain affiliate and advertising fees.
The loans are originated by the bank partner, from whom the Company purchases the loans obtaining all rights, title, and interest. Net amounts paid to the bank are recorded as the cost of the loans purchased, and amounts collected in excess of the carrying value are recognized as revenue over the life of the loans.
Bitcoin costs of revenue, which decreased by $2.8 billion, was the primary driver of the decrease in total cost of revenue. The decrease in total cost of revenue was offset by increased transaction-based costs related to an increase in GPV and increased costs as a result of our BNPL platform, which we acquired in the first quarter of 2022.
Bitcoin costs of revenue, which increased by $2.3 billion, was the primary driver of the increase in total cost of revenue, with the remaining increase related to an increase in GPV.
Segment Cost of Revenue Cost of revenue for the Square segment for the year ended December 31, 2022 increased by $822.2 million compared to the year ended December 31, 2021.
Excluding bitcoin revenue, Cash App net revenue increased $1.3 billion, or 32%, compared to the year ended December 31, 2022. Cost of Revenue Cost of revenue for the Cash App segment for the year ended December 31, 2023 increased by $2.6 billion compared to the year ended December 31, 2022.
Amortization of customer and other acquired intangible assets increased $123.0 million for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to increased amortization expense of $121.8 million as a result of the intangible assets from the Afterpay acquisition.
Amortization of customer and other acquired intangible assets increased $35.3 million for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily as a result of the revision of certain intangibles' useful lives as well as the timing of the acquisition of Afterpay in the first quarter of fiscal year 2022 and the related intangible assets and measurement period adjustments.
Other companies, including companies in our industry, may calculate the non-GAAP financial measures differently or not at all, which reduces their usefulness as comparative measures.
Adjusted Operating Income (Loss) does however include the effect of share-based compensation expense, which is a significant recurring expense in our business and an important part of our compensation strategy, as well as depreciation expense. Other companies, including companies in our industry, may calculate the non-GAAP financial measures differently or not at all, which reduces their usefulness as comparative measures.
Revenue from our BNPL platform was $811.4 million from the date of acquisition through December 31, 2022, representing 5% of our total net revenue for the year ended December 31, 2022. Transaction-based revenue for the year ended December 31, 2022 increased by $908.4 million, or 19%, compared to the year ended December 31, 2021.
Revenue generated from the BNPL platform was $1.0 billion for the year ended December 31, 2023 compared to $811.4 million for the year ended December 31, 2022. Bitcoin revenue for the year ended December 31, 2023 increased by $2.4 billion, or 34%, compared to the year ended December 31, 2022.
Accrued transaction losses also include estimated losses on Cash App activity related to peer-to-peer payments sent from a credit card, Cash for Business, and Cash App Card. As of December 31, 2022, we had accrued $64.5 million related to transaction losses. Additions to the reserve are reflected in current operating results, while realized losses are offset against the reserve.
We also consider other relevant market data in developing such estimates and assumptions. As of December 31, 2023, we had accrued $54.0 million related to transaction losses. Additions to the reserve are reflected in current operating results, while realized losses are offset against the reserve.
Sales and marketing expenses for the year ended December 31, 2022, increased by $440.8 million, or 27%, compared to the year ended December 31, 2021, primarily due to the following: • an increase of $168.4 million in sales and marketing personnel-related costs to enable growth initiatives, including an increase in share-based compensation expense of $48.2 million; • an increase of $101.0 million in Cash App peer-to-peer processing costs, related peer-to-peer transaction losses, and card issuance costs as a result of increased volumes of activity with our Cash App peer-to-peer service and card issuance; and • an increase in sales and marketing expenses due to the acquisition of Afterpay in the first quarter of 2022. 71 General and administrative expenses for the year ended December 31, 2022, increased by $704.0 million, or 72%, compared to the year ended December 31, 2021, primarily due to the following: • an increase of $482.6 million in general and administrative personnel-related costs, mainly as a result of additions to our customer support, human resources, finance, and legal personnel as we continue to add resources and skills to support our long-term growth.
The increase in sales and marketing personnel costs also includes an increase in share-based compensation expense of $25.4 million. 73 General and administrative expenses for the year ended December 31, 2023, increased by $522.3 million, or 31%, compared to the year ended December 31, 2022, primarily due to: • an increase of $288.1 million in general and administrative personnel costs, mainly as a result of additions to our customer support and compliance personnel as we continue to maintain resources and skills to support our long-term growth; and • a goodwill impairment charge of $132.3 million related to TIDAL recognized in the fourth quarter of 2023.
While bitcoin contributed 41% and 57% of the total revenue in 2022 and 2021, respectively, gross profit generated from bitcoin was only 3% and 5% of the total gross profit in 2022 and 2021, respectively. 69 Cost of Revenue (in thousands, except for percentages) Year Ended December 31, 2022 2021 $ Change % Change Transaction-based costs $ 3,364,028 $ 2,719,502 $ 644,526 24 % Subscription and services-based costs 861,745 483,056 378,689 78 % Hardware costs 286,995 221,185 65,810 30 % Bitcoin costs 6,956,733 9,794,992 (2,838,259) (29) % Amortization of acquired technology assets 70,194 22,645 47,549 210 % Total cost of revenue $ 11,539,695 $ 13,241,380 $ (1,701,685) (13) % Total cost of revenue for the year ended December 31, 2022 decreased by $1.7 billion, or 13%, compared to the year ended December 31, 2021.
While bitcoin contributed 43% and 41% of the total revenue in 2023 and 2022, respectively, gross profit generated from bitcoin was only 3% of the total gross profit in both 2023 and 2022. 71 Cost of Revenue (in thousands, except for percentages) Year Ended December 31, 2023 2022 $ Change % Change Transaction-based costs $ 3,702,016 $ 3,364,028 $ 337,988 10 % Subscription and services-based costs 1,075,129 861,745 213,384 25 % Hardware costs 267,650 286,995 (19,345) NM (i) Bitcoin costs 9,293,113 6,956,733 2,336,380 34 % Amortization of acquired technology assets 72,829 70,194 2,635 NM (i) Total cost of revenue $ 14,410,737 $ 11,539,695 $ 2,871,042 25 % (i) Not meaningful ("NM") Total cost of revenue for the year ended December 31, 2023 increased by $2.9 billion, or 25%, compared to the year ended December 31, 2022.
Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. GAAP requires us to make certain estimates and judgments that affect the amounts reported in our financial statements.
These were offset by the payment to redeem convertible notes assumed upon the acquisition of Afterpay of $1.1 billion and the repayment and forgiveness of PPP loans of $480.7 million. Critical Accounting Estimates Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP.
Our liquidity, access to capital, and borrowing costs could be adversely impacted by declines in our credit rating. We have entered into various non-cancelable operating leases for certain offices with contractual lease periods expiring between 2022 and 2034.
Our liquidity, access to capital, and borrowing costs could be adversely impacted by declines in our credit rating.
The increase was driven by: • Costs of revenues associated with our BNPL platform of $223.2 million from the date of acquisition through December 31, 2022; and • growth in Cash App Card usage, paper money deposit activity, and related processing costs and fees.
The increase was driven by: • growth in Cash App's financial service-related products, including Cash App Card and related processing costs and fees, which is partially offset by favorable terms on such processing costs due to a contract renewal executed during the third quarter of fiscal year 2023; and • the cost of revenues associated with the BNPL platform, which were $286.6 million for the year ended December 31, 2023 and $223.2 million from the date of acquisition through December 31, 2022.
Risk Factors and elsewhere in this Form 10-K. Our actual results may differ materially from those contained in or implied by any forward-looking statements. Overview On December 1, 2021, we changed our name as a corporate entity from Square, Inc. to Block, Inc. (together with its subsidiaries, "Block").
Risk Factors and elsewhere in this Form 10-K. Our actual results may differ materially from those contained in or implied by any forward-looking statements. Overview We launched the Square ecosystem in February 2009 to enable businesses ("sellers") to accept card payments, an important capability that was previously inaccessible to many businesses.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+2 added−4 removed5 unchanged
Biggest changeOur results of operations and cash flows are, therefore, subject to fluctuations in foreign currency exchange rates and may cause us to recognize transaction gains and losses on our financial statements. 85 From time to time, we use foreign exchange derivative contracts to hedge a portion of our exposure to changes in currency exchange rates, which result from our global operating and financing activities.
Biggest changeOur results of operations and cash flows are, therefore, subject to fluctuations in foreign currency exchange rates and may cause us to recognize transaction gains and losses on our financial statements.
As such, we could lose our entire investment in these companies. Adjustments are recorded in other expense (income), net on the consolidated statements of operations and establish a new carrying value for the investment. As of December 31, 2022, the aggregate carrying value of our non-marketable equity investments included in other non-current assets was $208.9 million.
As such, we could lose our entire investment in these companies. Adjustments are recorded in other expense (income), net on the consolidated statements of operations and establish a new carrying value for the investment. As of December 31, 2023, the aggregate carrying value of our non-marketable equity investments included in other non-current assets was $205.3 million.
As of December 31, 2022, our marketable equity investments were immaterial. Adjustments are recorded in other (expense) income, net on the consolidated statements of operations and establish a new carrying value for the investment. A hypothetical 10% increase or decrease in the fair value of our marketable equity investments would not have a material effect on our financial results.
Adjustments are recorded in other (expense) income, net on the consolidated statements of operations and establish a new carrying value for the investment. A hypothetical 10% increase or decrease in the fair value of our marketable equity investments would not have a material effect on our financial results.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We have operations both within the United States and globally, and we are exposed to market risks in the ordinary course of our business, including the effects of interest rate changes and foreign currency fluctuations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We have operations both within the United States and globally, and we are exposed to market risks in the ordinary course of our business, including the effects of interest rate changes and foreign currency fluctuations. Information relating to quantitative and qualitative disclosures about these market risks is described below.
We do not use derivative financial instruments for trading or speculative purposes. Gains and losses from foreign currency transactions, as well as foreign exchange forward contracts, were not significant for the any period presented in the consolidated financial statements included in this Form 10-K. We did not have any material foreign currency derivatives outstanding as of December 31, 2022.
Gains and losses from foreign currency transactions, as well as foreign exchange forward contracts, were not significant for any period presented in the consolidated financial statements included in this Annual Report on Form 10-K. We did not have any material gains and losses from foreign currency derivatives outstanding as of December 31, 2023.
Foreign Currency Risk Our consolidated financial statements are presented in U.S. dollars. Most of our revenue is earned in U.S. dollars and, subsequent to the acquisition of Afterpay, a portion is earned in Australian Dollars.
Foreign Currency Risk Our consolidated financial statements are presented in U.S. dollars. Most of our revenue is earned in U.S. dollars and, subsequent to the acquisition of Afterpay, a portion is earned in Australian Dollars. Our exposure to other foreign currencies would not have a material effect on our financial results.
Interest Rate Sensitivity Our cash and cash equivalents, and marketable debt securities as of December 31, 2022 were held primarily in cash deposits, money market funds, U.S. government and agency securities, commercial paper, and corporate bonds.
A hypothetical 10% increase or decrease in the fair value of our bitcoin investment would not have a material effect on our financial results. Interest Rate Sensitivity Our cash and cash equivalents, and marketable debt securities as of December 31, 2023 were held primarily in cash deposits, money market funds, U.S. government and agency securities, commercial paper, and corporate bonds.
Information relating to quantitative and qualitative disclosures about these market risks is described below. 84 Equity Price Risk Marketable Equity Investments Our marketable equity investments are investments held in publicly-traded companies and are measured using quoted prices in active markets which could result in volatility in our financial results in future periods.
Equity Price Risk Marketable Equity Investments Our marketable equity investments are investments held in publicly-traded companies and are measured using quoted prices in active markets which could result in volatility in our financial results in future periods. As of December 31, 2023, our marketable equity investments were immaterial.
A hypothetical 10% increase or decrease in the carrying value of our non-marketable equity investments would not have a material effect on our financial results. Bitcoin Market Price Risk As of December 31, 2022, we had made cumulative investments in bitcoin of $220.0 million.
A hypothetical 10% increase or decrease in the carrying value of our non-marketable equity investments would not have a material effect on our financial results. 85 Bitcoin Market Price Risk Our bitcoin investment is measured using observed prices from active exchanges which could result in volatility in our financial results in future periods.
Removed
Our investment in bitcoin is accounted for as an indefinite-lived intangible asset, and thus, is subject to impairment losses if the fair value of bitcoin decreases below the carrying value during the assessed reporting period. Impairment losses cannot be recovered for any subsequent increase in fair value until the sale of the asset.
Added
Adjustments are recorded in net income through “other expense (income), net” on the consolidated statements of operations. As of December 31, 2023, the fair value of our bitcoin investment included in other non-current assets was $339.9 million.
Removed
We recorded an impairment charge on our investment in bitcoin of $46.6 million in the year ended December 31, 2022 due to the observed market price of bitcoin decreasing below the carrying value during the period.
Added
From time to time, we use foreign exchange derivative contracts to hedge a portion of our exposure to changes in currency exchange rates, which result from our global operating and financing activities. We do not use derivative financial instruments for trading or speculative purposes.
Removed
As of December 31, 2022, the cumulative impairment charges to date were $117.7 million and the fair value of the investment in bitcoin was $132.7 million based on observable market prices, which is $30.4 million in excess of our carrying value of $102.3 million after impairment charges.
Removed
Any decreases to the carrying value of bitcoin investments are recorded in operating expenses on the consolidated statements of operations. A hypothetical 10% increase or decrease in the market price of bitcoin would not have a material effect on our financial results.

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