square q3 20182 Net income includes a gain of $37 million as a result of the initial public offering (IPO) of Eventbrite and subsequent mark-to-market valuation of ourEventbrite investment. In August 2017, we invested $25 million for preferred shares of Eventbrite, which converted into common stock in connectionwith the IPO. In September 2018, upon Eventbrite's IPO, we revalued this investment and will subsequently carry it at fair market value, with changesin fair market value being recorded in other income or expense. A reconciliation of non-GAAP financial measures used in this letter to their nearestGAAP equivalents is provided at the end of this letter. Adjusted Revenue is total net revenue less transaction-based costs and bitcoin costs, andexcludes the effect of deferred revenue adjustment related to purchase accounting. Adjusted EBITDA margin is calculated as Adjusted EBITDAdivided by Adjusted Revenue. Highlights Square Installments, our newpurchase financing product,gives sellers a growth tool thathelps them never miss a sale. We continue to drive strong revenue growth at scale: In the third quarter of 2018,total net revenue grew 51% year over year and Adjusted Revenue grew 68% year overyear, compared to 48% and 60%, respectively, in the second quarter of 2018.We are expanding our developerplatform and launched Square ReaderSDK so that sellers can use Squarehardware with the point of sale thatworks best for their business. We launched Square Terminal, aportable, all-in-one payments device toreplace traditional keypad terminals. third quarter key results Q3 2017 Q4Q3Q1 2018 Q2 2017Q3 ($16M) Q4 ($16M) 2018 Q1 ($24M) Q2 ($6M)Q3 $20M $68M$71M 107% $34M$41M$36M195%YoYGrowth38%87% 33%Q3 2017 Q3 2017 Q4 Q4 Q3 Q3 Q1 2018 Q1 2018 Q2 Q2 $616M 36%$669M 45%$882M 51%$815M 48%$585M 33%YoYGrowth $283M 47%$307M 51%$385M 60%$431M 68%$257M 45%YoYGrowth TOTAL NET REVENUE $882 Million +51% YoYADJUSTED REVENUE $431 Million +68% YoYQ3 2017 $17.4B 31%YoYGrowth Q4 $17.9B 31% Q3 $22.5B 29%Q1 2018 Q2 $17.8B $21.4B 31% 30%<$125KAnnualized GPV $125K–$500KAnnualized GPV $500KAnnualized GPV 2018 Q3 24%20%16% 2016 Q3 2017 Q3 48% 28% 52% 27% 57% 27% GROSS PAYMENT VOLUME (GPV) $22.5 Billion +29% YoYGPV MIX BY SELLER SIZE 52% from larger sellers ADJUSTED EBITDA $71 Million +107% YoYNET INCOME (LOSS) $20 Million square q3 20183 Eye Carumba Optometryhas been using Squarefor six years and is basedin San Francisco. Thebusiness often uses Cardon File to accept paymentsfrom regular customersand recently upgraded toSquare Terminal.ON THE COVER Verve Wine has been withSquare for two years. Thebusiness was founded byveteran wine merchantsDerrick Mize and DustinWilson, wine director ofthe three-Michelin-starrestaurant Eleven MadisonPark. Verve often uses Cardon File to serve its regularcustomers and recentlyadopted Square for Retailat its two brick-and-mortarlocations in New York Cityand San Francisco.In the third quarter of 2018, we continued to drive strong revenue growth at scale.Total net revenue was $882 million, up 51% year over year, and Adjusted Revenuewas $431 million, up 68% year over year. Excluding the acquisitions of Weebly andZesty, total net revenue and Adjusted Revenue grew 46% and 56% year over year,respectively, which represents an acceleration compared to the prior quarter.Gross Payment Volume (GPV) was $22.5 billion, up 29% year over year income was $20 million, compared to a net loss of $16 million in the third quarter of 2017. Net income includes a gain of $37 million as a result of the initial public offering and subsequent mark-to-market valuation of our Eventbrite investment. Excluding the impact of this gain, net loss was $17 million. Adjusted EBITDA was $71 million in the third quarter of 2018, compared to $34 million in the third quarter of 2017. To Our ShareholdersNovember 7, 2018square q3 20184We launched Square Terminal, a portable,all-in-one payments device to replacetraditional keypad terminals. Our sellers expect fast, differentiated hardwareand our latest device delivers. We designedSquare Terminal in-house with a bright, 5.5touchscreen, making it a modern, elegantreplacement for traditional keypad terminals.Square Terminal accepts all payment types,including tap, dip, and swipe, and also printsreceipts. The cloud-based interface is self-serve,so sellers, employees, and customers can use itright away, and software updates are automatic.Unlike payment devices from other providers,Square Terminal has one transparent processingrate and a one-time hardware cost—there are nolong-term contracts or early-termination fees.Square Terminal expands our addressable marketto serve new sellers and new use cases. It is idealfor sellers with crowded countertops, such asdoctors’ offices, dry cleaners, and the much-belovedbodegas (i.e., corner stores). The compact size andportability of Square Terminal enable the sellerto also meet the buyer beyond the countertop— customers on the sales floor in a distributed retailenvironment, patients in a physician’s treatmentroom, or diners at their table in a restaurant. Wesee a significant market opportunity for SquareTerminal, as there are nearly two million stand- alone payment terminal devices in the U.S. alone.Lighthouse is a full-service Mediterraneanrestaurant in Brooklyn, New York, that usesSquare for Restaurants to manage in-persondining and Caviar for delivery. Lighthouse’s corevalues include operating a sustainable business,treating employees fairly, and connecting withdiners. The Lighthouse team is able to provide abetter, more efficient experience for both serversand diners by using Square Terminal for tablesidepayments: Diners no longer have to wait for serversto complete the multistep checkout process.Digital receipts allow diners to provide immediatefeedback, enable servers to expedite end-of-shift tipreconciliation, and reduce paper waste. Lighthouseis adding seating and continues to grow rapidly. We also updated existing hardware. Our iconicSquare Reader for magstripe is now directlycompatible with Apple’s Lightning port to helpour sellers manage technology shifts so they canfocus on their customers. Hardware like SquareReader for magstripe is a powerful acquisitionchannel because it makes it easy for sellersto begin accepting in-person card payments.Once sellers are part of the Square ecosystem,we also help them grow: In the third quarter of2018, over 40% of larger-seller GPV came fromsellers that started on Square as micro sellers.A micro seller generatesless than $125,000 inannualized GPV.A larger seller generatesmore than $125,000 inannualized GPV.IHL Group, North AmericaSMB Sizing, as of 2016.With Square Terminal, sellers receive access to the fullSquare ecosystem, which includes dispute management, PCIcompliance, Instant Deposit, Square Capital, and more. Square Reader formagstripe with Lightningport compatibility. Payment types Tap: NFC-enabled phones and cards Dip: EMV chip–enabled cards Swipe: Magstripe cardsseller highlight There are three times a diner is looking attheir watch: when they come in and arewaiting for the host, when they’re waitingfor a table, and when they’re ready toleave. The faster we can make the paymentprocess, the better, and Terminal makesthings much faster.” Naama TamirLighthouseBrooklyn, New York 。。。。。。