10-Q 1 sqsp-20220331.htm 10-Q sqsp-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________
FORM 10-Q
_________________________________
[Mark One]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number: 001-40393
SQUARESPACE, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
20-0375811
(I.R.S. Employer
Identification No.)
225 Varick Street, 12th Floor
New York, New York
(Address of Principal Executive Offices)
10014
(Zip Code)
Registrant’s Telephone Number, Including Area Code: (646) 580-3456
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.0001 par value per share
SQSPNew York Stock Exchange
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of March 31, 2022, the registrant had 91,562,991 shares of Class A Common Stock, 48,344,755 shares of Class B Common Stock, and no shares of Class C Common Stock, each with a par value of $0.0001 per share, outstanding.



TABLE OF CONTENTS
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1

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements that reflect our current views with respect to, among other things, future events and our future business, financial condition and results of operations. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” or the negative version of those words or phrases or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not statements of historical fact, and are based on current expectations, estimates and projections about our industry as well as certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, which you should consider and read carefully, including but not limited to:
•     our ability to attract and retain customers and expand our customers’ use of our platform;
our ability to anticipate market needs and develop new or enhanced solutions to meet those needs;
our ability to compete successfully in our industry against current and future competitors;
the impact of the COVID-19 pandemic on how we, our providers, and consumers operate and its impact on the global economy, and the duration and extent to which the pandemic will affect our business, future results of operations, and financial condition;
our ability to manage growth and maintain demand for our solutions;
our ability to protect and promote our brand;
our ability to successfully identify, manage and integrate any existing and potential acquisitions;
our ability to hire, integrate and retain highly skilled personnel;
our ability to adapt to and comply with existing and emerging regulatory developments, technological changes and cybersecurity needs;
our ability to establish and maintain intellectual property rights;
our ability to manage expansion into international markets; and
•     the other risks and uncertainties described under “Risk Factors.”
This list of factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this Quarterly Report on Form 10-Q. We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q, and our future levels of activity and performance, may not occur and actual results could differ materially and adversely from those described or implied in the forward-looking statements. As a result, you should not regard any of these forward-looking statements as a representation or warranty by us or any other person or place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
In addition, statements that contain “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that this information provides a reasonable basis for these statements, this information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.
You should read this Quarterly Report on Form 10-Q and the documents that we reference herein and have filed as exhibits to the Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by the cautionary statements contained in this section and elsewhere in this Quarterly Report on Form 10-Q.
2

PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
SQUARESPACE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited)
March 31, 2022December 31, 2021
Assets
Current assets:
Cash and cash equivalents$230,492 $203,247 
Restricted cash40,384 30,433 
Investment in marketable securities27,891 31,456 
Accounts receivable, net8,353 7,969 
Due from vendors2,805 1,828 
Prepaid expenses and other current assets27,376 67,099 
Total current assets337,301 342,032 
Property and equipment, net53,190 52,839 
Operating lease right-of-use assets99,262 — 
Goodwill435,601 435,601 
Intangible assets, net55,494 60,138 
Other assets9,566 8,939 
Total assets$990,414 $899,549 
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Deficit
Current liabilities:
Accounts payable$19,641 $26,533 
Accrued liabilities107,351 60,861 
Deferred revenue254,140 233,999 
Funds payable to customers40,985 30,137 
Debt, current portion19,933 13,586 
Deferred rent and lease incentives, current portion 2,095 
Operating lease liabilities, current portion10,103 — 
Total current liabilities452,153 367,211 
Debt, non-current portion503,525 513,047 
Deferred rent and lease incentives, non-current portion 32,348 
Operating lease liabilities, non-current portion121,258 — 
Other liabilities3,167 422 
Total liabilities1,080,103 913,028 
Commitments and contingencies (see Note 11)
Redeemable convertible preferred stock, par value of $0.0001; zero shares authorized as of March 31, 2022 and December 31, 2021, respectively; zero shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
  
Preferred stock, par value of $0.0001; 100,000,000 authorized as of March 31, 2022 and December 31, 2021, respectively; zero shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
  
Stockholders’ deficit:
Class A common stock, par value of $0.0001; 1,000,000,000 shares authorized as of March 31, 2022 and December 31, 2021, respectively; 91,562,991 and 90,826,625 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
9 9 
Class B common stock, par value of $0.0001; 100,000,000 shares authorized as of March 31, 2022 and December 31, 2021, respectively; 48,344,755 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
5 5 
Class C common stock (authorized March 15, 2021), par value of $0.0001; zero shares authorized as of March 31, 2022 and December 31, 2021, respectively; zero shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
  
Class C common stock (authorized May 10, 2021), par value of $0.0001; 1,000,000,000 shares authorized as of March 31, 2022 and December 31, 2021, respectively; zero shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
  
Additional paid in capital929,199 911,570 
Accumulated other comprehensive loss(1,187)(208)
Accumulated deficit(1,017,715)(924,855)
Total stockholders’ deficit(89,689)(13,479)
Total liabilities, redeemable convertible preferred stock and stockholders’ deficit$990,414 $899,549 
The accompanying notes are an integral part of these financial statements.
3

SQUARESPACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
Three Months Ended March 31,
20222021
Revenue$207,762 $179,646 
Cost of revenue36,649 27,408 
Gross profit171,113 152,238 
Operating expenses:
Research and product development57,328 42,011 
Marketing and sales112,906 97,972 
General and administrative35,981 19,516 
Total operating expenses206,215 159,499 
Operating loss(35,102)(7,261)
Interest expense(2,449)(3,260)
Other income, net1,511 3,593 
Loss before (provision for)/benefit from income taxes(36,040)(6,928)
(Provision for)/benefit from income taxes(56,820)5,782 
Net loss$(92,860)$(1,146)
Less: accretion of redeemable convertible preferred stock to redemption value (969)
Net loss attributable to Class A, Class B and Class C common stockholders, basic and dilutive$(92,860)$(2,115)
Net loss per share attributable to Class A, Class B, and Class C common stockholders, basic and dilutive$(0.67)$(0.11)
Weighted-average shares used in computing net loss per share attributable to Class A, Class B, and Class C stockholders, basic and dilutive139,423,228 19,012,323 
The accompanying notes are an integral part of these financial statements.
4

SQUARESPACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)
Three Months Ended March 31,
20222021
Net loss$(92,860)$(1,146)
Other comprehensive loss:
Foreign currency translation adjustment(801)(1,282)
Unrealized loss on marketable securities, net of income taxes(178)(45)
Total other comprehensive loss(979)(1,327)
Total comprehensive loss$(93,839)$(2,473)
The accompanying notes are an integral part of these financial statements.
5

SQUARESPACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
(in thousands, except share and per share data)
(unaudited)
Three Months Ended March 31, 2022 and 2021
Redeemable
Convertible
Preferred Stock
Class A
Common Stock
Class B
Common Stock
Class C
Common Stock
Additional
Paid in
Capital
Accumulated Other Comprehensive LossAccumulated
Deficit
Total
Stockholders’
Deficit
SharesAmountSharesAmountSharesAmountSharesAmount
Balance at December 31, 2021 $ 90,826,625 $9 48,344,755 $5  $ $911,570 $(208)$(924,855)$(13,479)
Stock-based compensation— — — — — — — — 24,160 — — 24,160 
Stock option exercises— — 343,687 — — — — — 1,141 — — 1,141 
Vested RSUs converted to common shares
— — 680,134 — — — — — — — — — 
Repurchase of Class A common stock and retirement— — (287,455)— — — — — (7,672)— — (7,672)
Net loss
— — — — — — — — — — (92,860)(92,860)
Total other comprehensive loss, net of taxes
— — — — — — — — — (979)— (979)
Balance at March 31, 2022 $ 91,562,991 $9 48,344,755 $5  $ $929,199 $(1,187)$(1,017,715)$(89,689)

Redeemable
Convertible
Preferred Stock
Class A
Common Stock
Class B
Common Stock
Class C
Common Stock
Additional
Paid in
Capital
Accumulated Other Comprehensive IncomeAccumulated
Deficit
Total
Stockholders’
Deficit
SharesAmountSharesAmountSharesAmountSharesAmount
Balance at December 31, 2020104,446,332 $131,390 8,903,770 $1 14,368,532 $1  $ $9,043 $2,455 $(675,706)$(664,206)
Stock-based compensation— — — — — — — — 9,873 — — 9,873 
Stock option exercises— — — — 900,476 — — — 707 — — 707 
Vested RSUs converted to common shares— — 525,920 — — — — — — — — — 
Repurchase of Class A common stock and retirement— — (270,089)— — — — — (13,416)— — (13,416)
Issuance of Class C common stock, net of issuance costs— — — — — — 4,452,023 — 304,409 — — 304,409 
Issuance of Class C common stock for acquisition— — — — — — 2,750,330 1 188,178 — — 188,179 
Accretion of redeemable convertible preferred stock— 969 — — — — — — (969)— — (969)
Net loss— — — — — — — — — — (1,146)(1,146)
Total other comprehensive loss, net of taxes— — — — — — — — — (1,327)— (1,327)
Balance at March 31, 2021104,446,332 $132,359 9,159,601 $1 15,269,008 $1 7,202,353 $1 $497,825 $1,128 $(676,852)$(177,896)
The accompanying notes are an integral part of these financial statements.
6

SQUARESPACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended March 31,
20222021
OPERATING ACTIVITIES:
Net loss$(92,860)$(1,146)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization8,058 8,506 
Stock-based compensation24,097 9,852 
Non-cash lease expense328  
Other261 282 
Changes in operating assets and liabilities:
Accounts receivable and due from vendors(1,361)(706)
Prepaid expenses and other current assets31,896 (8,190)
Accounts payable and accrued liabilities42,220 20,971 
Deferred revenue21,538 20,441 
Funds payable to customers10,847  
Other operating assets and liabilities2,246 121 
Net cash provided by operating activities47,270 50,131 
INVESTING ACTIVITIES:
Proceeds from the sale and maturities of marketable securities7,340 7,105 
Purchases of marketable securities(4,027)(1,197)
Purchase of property and equipment(3,359)(657)
Cash paid for acquisitions, net of acquired cash (200,903)
Net cash used in investing activities(46)(195,652)
FINANCING ACTIVITIES:
Principal payments on debt(3,396)(3,396)
Taxes paid related to net share settlement of equity awards(7,556)(13,416)
Proceeds from exercise of stock options1,141 707 
Proceeds from issuance of Class C (authorized on March 15, 2021) common stock, net of issuance costs 304,409 
Net cash (used in)/provided by financing activities(9,811)288,304 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(217)(324)
Net increase in cash, cash equivalents, and restricted cash37,196 142,459 
Cash, cash equivalents, and restricted cash at the beginning of the period233,680 57,891 
Cash, cash equivalents, and restricted cash at the end of the period$270,876 $200,350 
Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents$230,492 $183,339 
Restricted cash40,384 17,011 
Cash, cash equivalents, and restricted cash at the end of the period$270,876 $200,350 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
Cash paid during the year for interest$2,149 $3,064 
Cash paid/(refunded) during the year for income taxes$1 $(22)
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCE ACTIVITIES
Purchases of property and equipment included in accounts payable and accrued liabilities$1,332 $671 
Capitalized stock-based compensation$63 $21 
Accrued taxes related to net share settlement of equity awards included in accrued liabilities$116 $ 
Issuance of Class C (authorized on March 15, 2021) common stock for acquisition$ $188,179 
The accompanying notes are an integral part of these financial statements.
7


SQUARESPACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)

1.Description of Business
Squarespace, Inc. and its subsidiaries (the “Company”) is a leading all-in-one platform for businesses and independent creators to build an online presence, grow their brands and manage their businesses across the internet. The Company offers websites, domains, e-commerce, tools for managing a social media presence, marketing tools, scheduling and hospitality services. The Company is headquartered in New York, NY, with additional offices in Portland, OR, Chicago, IL, and Dublin, Ireland.
Emerging Growth Company Status
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies.
The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that the Company (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, the Company’s condensed consolidated financial statements may not be comparable to financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards based on public company effective dates.
The Company will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the Company’s total annual gross revenue is at least $1,070,000, (ii) the last day of the fiscal year following the fifth anniversary of the completion of the Direct Listing, as discussed below, (iii) the date on which the Company issued more than $1,000,000 in non-convertible debt securities during the prior three-year period, or (iv) the date on which the Company becomes a large accelerated filer.
Acquisition of Tock, Inc.
On March 31, 2021, the Company acquired all of the equity interests in Tock, Inc. (“Tock”), a reservation platform for prepaid reservations, access to restaurant management data, and other customization features, for a total consideration of $425,710. See “Note 4. Acquisitions” for further information on the acquisition of Tock.
Direct Listing
On May 19, 2021, the Company completed a direct listing of its Class A common stock (the “Direct Listing”) on the New York Stock Exchange (“NYSE”).
2.Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The Company’s condensed consolidated financial statements and related notes have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and include the Company’s wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the applicable rules and regulations of the Securities and Exchange Commission. The condensed balance sheet data as of December 31, 2021 was derived from the Company's audited financial statements but does not include all disclosures required by U.S. GAAP. Therefore, these unaudited, condensed, consolidated financial statements and accompanying notes should be read in conjunction with the Company's annual consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K filed with the SEC on March 7, 2022. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of the Company’s financial information.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Management’s estimates are based on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates.
8


SQUARESPACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
Significant estimates include but are not limited to (i) the recognition and measurement of loss contingencies, and indirect tax liabilities; (ii) the inputs used in the valuation of acquired intangible assets; (iii) the grant date fair value of stock-based awards; and (iv) the recognition, measurement and valuation of current and deferred income taxes. The Company evaluates its assumptions and estimates on an ongoing basis and adjusts prospectively, if necessary.
COVID-19
In March 2020, the World Health Organization declared the outbreak of the novel coronavirus ("COVID-19") a pandemic. The COVID-19 pandemic has created, and may continue to create, significant uncertainty in macroeconomic conditions. The countries in which the Company operates have begun easing initial measures to control the spread of COVID-19. However, the Company is not able to estimate the impact that COVID-19 will continue to have on worldwide economic activity or the Company’s results of operations, financial condition, or liquidity. As of March 31, 2022, the Company has not experienced a materially adverse impact from COVID-19. The Company continues to assess the potential impacts of COVID-19 and the measures taken by governments, businesses and other organizations in response to COVID-19 as information becomes available.
Concentration of Risks Related to Credit, Interest Rates and Foreign Currencies
The Company is subject to credit risk, interest rate risk on any indebtedness the Company would potentially incur, market risk on investments and foreign currency risk in connection with the Company’s operations internationally.
The Company maintains the components of its cash and cash equivalents balance in various accounts, which from time to time exceed the federal depository insurance coverage limit. In addition, substantially all cash and cash equivalents, as well as marketable securities, are held by three financial institutions. The Company has not experienced any concentration losses related to its cash, cash equivalents and marketable securities to date.
As of March 31, 2022 and December 31, 2021, no single customer accounted for more than 10% of the Company’s accounts receivable. Additionally, no single customer accounted for more than 10% of the Company’s revenue during the three months ended March 31, 2022 and 2021.
The Company is also subject to foreign currency risks that arise from normal business operations. Foreign currency risks include the translation of local currency and intercompany balances established in local customer currencies sold through the Company's international subsidiaries.
Cash and Cash Equivalents
Cash and cash equivalents are stated at fair value. The Company considers all highly liquid investments purchased with an original maturity date of 90 days or less from the date of original purchase to be cash equivalents.
Restricted Cash and Payment Processing Transactions
As a result of the acquisition of Tock, the Company processes certain payments and holds funds on behalf of its restaurant customers consisting of diner prepayments for restaurant reservations as well as to-go orders. While the Company does not have any contractual obligations to hold such cash as restricted, the diner prepayments and associated sales tax are included in restricted cash in the condensed consolidated balance sheet as of March 31, 2022 and December 31, 2021.
In addition, the Company recognizes the liability due to restaurant customers in funds payable to customers and the associated sales tax payable in accrued liabilities in the condensed consolidated balance sheet as of March 31, 2022 and December 31, 2021. Funds are remitted to the restaurant customers based on the stipulated contract terms. In addition to restricted cash held on behalf of restaurant customers, the Company recognizes in-transit receivables from certain third-party vendors which assist in processing and settling payment transactions due to a clearing period before the related cash is received or settled. In-transit receivables are included in due from vendors in the condensed consolidated balance sheet as of March 31, 2022 and December 31, 2021.
9


SQUARESPACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
The following table represents the assets and liabilities related to payment processing transactions:
March 31, 2022December 31, 2021
Restricted cash$40,384 $30,433 
Due from vendors2,805 1,828 
Total payment processing assets43,189 32,261 
Funds payable to customers(40,985)(30,137)
Sales tax payable(2,204)(2,124)
Total payment processing liabilities(43,189)(32,261)
Total payment processing transactions, net$ $ 
See “Note 4. Acquisitions” for further information on the acquisition of Tock.
Fair Value of Financial Instruments
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement, describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value.
The three-level hierarchy for fair value measurements is defined as follows:
Level 1 Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets;
Level 2 Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability other than quoted prices, either directly or indirectly, including inputs in markets that are not considered to be active; and
Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
See “Note 6. Fair Value of Financial Instruments” for further information.
Business Combinations
The Company evaluates acquisitions to determine whether it is a business combination or an asset acquisition. The Company accounts for business combinations under the acquisition method of accounting. The Company includes the results of operations of acquired businesses in its condensed consolidated financial statements as of the respective dates of acquisition. The purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with the excess recorded to goodwill. Critical estimates used in valuing certain acquired intangible assets include, but are not limited to, future expected cash flows (e.g., from customer relationships or technology) and discount rates.
The determination of fair value requires considerable judgment and is sensitive to changes in the underlying assumptions. The Company’s estimates are preliminary and subject to adjustment, which may result in material changes to the final valuation. During the measurement period, which will not exceed one year from closing, the Company will continue to obtain information to assist in finalizing the acquisition date fair values. Any qualifying changes to the preliminary estimates will be recorded as adjustments to the respective assets and liabilities, with any residual amounts allocated to goodwill. Any transaction costs are expensed as incurred.
Goodwill
Goodwill represents the excess of the purchase price over the estimated fair value of net tangible and identifiable intangible assets acquired in business combinations. The recognition of goodwill represents the strategic and synergistic benefits the Company expects to realize from acquisitions.
Goodwill is not amortized to earnings, rather, assessed for impairment annually during the fourth quarter for its single reporting unit. The Company also performs an assessment at other times if events or changes in circumstances indicate the carrying value of the assets may not be recoverable.

10


SQUARESPACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
Intangible Assets
The Company’s intangible assets are finite-lived and are amortized on a straight-line basis over their estimated remaining life, which is aligned to the economic benefit of the asset.
Leases
ASC Topic 842, Leases
The Company adopted ASC Topic 842, Leases, as of January 1, 2022. The Company determines if an arrangement is or contains a lease at inception by assessing whether the arrangement conveys the right to control the use of an identified asset. The Company classifies, measures and recognizes a lease liability on the lease commencement date based on the present value of lease payments over the remaining lease term. As of March 31, 2022, the Company's leases are classified as operating leases. The Company uses an estimated incremental borrowing rate based on information available at the lease commencement date in determining the present value of future payments as the rate implicit in the lease is not generally known. The incremental borrowing rate is based on the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Operating right-of-use assets related to operating lease liabilities equal the amount of the initial measurement of the lease liability adjusted for any initial direct costs, prepaid rent and lease incentives received. Lease terms that are used in determining operating lease liabilities at lease inception may include options to extend or terminate the leases and when it is reasonably certain that the Company will exercise such options. Operating lease expense is recorded on a straight-line basis over the lease term. The straight-line expense is allocated within the condensed consolidated statement of operations based on departmental employee headcount. Variable lease costs are recognized as incurred and allocated within the condensed consolidated statement of operations based on departmental employee headcount. The Company has applied practical expedients for lease agreements with lease and non-lease components, and in such cases, accounts for the components as a single lease component. The Company has also elected not to recognize operating right-of-use assets and operating lease liabilities for any lease with an original lease term of less than one year.
Operating lease right-of-use assets are included in non-current assets on the condensed consolidated balance sheets for the entire lease term. The Company includes the portion of the total lease payments, net of implicit interest, that are due in the next 12 months in current liabilities and the remaining portion in non-current liabilities on the condensed consolidated balance sheets. The difference between straight-line lease expense and the cash paid for leases is included as non-cash lease expense in the adjustments to reconcile net loss to net cash provided by operating activities on the condensed consolidated statements of cash flows.
ASC Topic 840, Leases
The Company categorized leases at their inception as either operating or capital leases. In the ordinary course of business, the Company enters into long term operating leases for office space. The Company’s headquarters is located in New York, NY. As of December 31, 2021, the Company also had office leases in Portland, OR, Los Angeles, CA, Chicago, IL, and Dublin, Ireland, all of which included varying commencement and expiration dates.The Company recognized rent expense on a straight-line basis over the lease period and accrued for rent expense as incurred, but not paid. Any related lease incentives were recorded as a reduction in rent expense on a straight-line basis over the lease term. The Company classified deferred rent and lease incentives as current based on the rent expense that would have been recognized during the succeeding twelve-month period from the balance sheet date. All other deferred rent and lease incentives were recorded as non-current in the condensed consolidated balance sheets. The Company recognized any sublease rental income on a straight-line basis as an offset to rent expense.
Net Loss Per Share Attributable to Class A, Class B and Class C Common Stockholders
The Company calculates net loss per share attributable to Class A, Class B and Class C common stockholders using the two-class method required for companies with participating securities. The Company considers redeemable convertible preferred stock to be participating securities as holders of such securities have non-forfeitable dividend rights in the event of the Company’s declaration of a dividend for shares of Class A, Class B and Class C common stock. During periods when the Company is in a net loss position, the net loss attributable to Class A, Class B and Class C common stockholders is not allocated to the redeemable convertible preferred stock and unvested Class A, Class B and Class C common stock under the two-class method as these securities do not have a contractual obligation to share in the Company’s losses. Payment in excess of the carrying value on the redemption of redeemable convertible preferred stock represents a deemed dividend to the redeemable convertible preferred stockholder. Accordingly, the difference between the amount paid upon redemption and the carrying value of the redeemable convertible preferred stock is deducted from (if a premium) or added to (if a discount) net income to arrive at net loss available to Class A, Class B and Class C common stockholders.
Distributed and undistributed earnings allocated to participating securities are subtracted from net loss in determining net loss attributable to Class A, Class B and Class C common stockholders. Basic net loss per share is
11


SQUARESPACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
computed by dividing net loss attributable to Class A, Class B and Class C common stockholders by the weighted-average number of shares of the Company’s Class A, Class B and Class C common stock outstanding.
The diluted net loss per share attributable to Class A, Class B and Class C common stockholders is computed by giving effect to all dilutive securities. Diluted net loss per share attributable to Class A, Class B and Class C common stockholders is computed by dividing the resulting net loss attributable to Class A, Class B and Class C common stockholders by the weighted-average number of fully diluted Class A, Class B and Class C common shares outstanding. The Company used the if-converted method as though the conversion, exchange or vesting, respectively, had occurred as of the beginning of the period or the original date of issuance, if later. During periods when there is a net loss attributable to Class A, Class B and Class C common stockholders, potentially dilutive Class A, Class B and Class C common stock equivalents are excluded from the calculation of diluted net loss per share attributable to Class A, Class B and Class C common stockholders as their effect is anti-dilutive. If the effect of a conversion of an instrument is neutral to earnings per share, the Company considers the security to be dilutive.
Recently Issued Accounting Pronouncements
Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies. See “Note 1. Description of Business” for further information on the Company's status as an emerging growth company.
Accounting Pronouncements Recently Adopted
In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). This standard requires lessees to recognize a right-of-use asset and a lease liability for operating leases initially measured at the present value of the lease payments in its condensed consolidated balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. In July 2018, the FASB issued ASU 2018-10, Leases (Topic 842): Codification Improvements (“ASU 2018-10”) and ASU 2018-11, Leases (Topic 842): Targeted Improvements (“ASU 2018-11”), to provide additional guidance for the adoption of ASU 2016-02. ASU 2018-10 clarifies certain provisions and corrects unintended applications of the guidance. ASU 2018-11 provides an alternative transition method which allows entities the option to present all prior periods under previous lease accounting guidance while recognizing the cumulative effect of applying the new standard as an adjustment to the opening balance of retained earnings in the year of adoption. In June 2020, the FASB issued ASU No. 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Deferral of the Effective Date, which requires nonpublic companies to adopt the provisions of ASU 2016-02 for fiscal years beginning after December 15, 2021, and for interim periods in fiscal years beginning after December 15, 2022. The Company adopted this standard as of January 1, 2022 using the modified retrospective approach. Pursuant to the practical expedients, the Company has elected not to reassess: (i) whether expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases, or, (iii) initial direct costs for any existing leases. The Company recognized $100,998 of operating lease right-of-use assets and $127,009 of operating lease liabilities on its condensed consolidated balance sheet as of January 1, 2022 with the difference being primarily adjustments for deferred rent and remaining lease incentive balances. The adoption of this standard did not have a material impact on the Company’s condensed consolidated statement of operations. See "Note 12. Leases" for further information.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This standard requires entities to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. It also modifies the impairment model for available-for-sale debt securities and provides a simplified accounting model for purchased financial assets with credit deterioration since their origination. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) —  Effective Dates, which requires nonpublic companies to adopt the provisions of ASU 2016-13 for fiscal years and interim periods in fiscal years beginning after December 15, 2022. The Company adopted this standard as of January 1, 2022. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"), which eliminates Step 2 from the prior guidance’s goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. ASU No. 2017-04 is effective for fiscal years and interim periods in those years beginning after December 15, 2021 for nonpublic entities with early adoption permitted. The Company
12


SQUARESPACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
adopted this standard as of January 1, 2022. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This standard simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740, Income Taxes ("ASC 740"). The amendments also improve consistent application of and simplify GAAP for other areas of ASC 740 by clarifying and amending existing guidance. This standard is effective for nonpublic entities for annual reporting periods beginning after December 15, 2021 and interim periods in annual reporting periods beginning after December 15, 2022 with early adoption permitted. The Company adopted this standard as of January 1, 2022. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements.
Accounting Pronouncements Pending Adoption
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASC 2021-08"). This standard requires that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers, as if the acquirer had originated the contracts. ASU 2021-08 is effective for fiscal years and interim periods in those years beginning after December 15, 2023 for nonpublic entities with early adoption permitted. The Company is currently evaluating the timing of its adoption of this standard and the impact in its condensed consolidated financial statements.
3.Revenue
The Company primarily derives revenue from annual and monthly subscriptions. Revenue is also derived from non-subscription services, including fixed percentages or fixed-fees earned on revenue share arrangements with third-parties and on sales made through our customers’ sites.
The Company has disaggregated revenue from contracts with customers by product type, subscription type, revenue recognition pattern, and geography as these categories depict the nature, amount, timing and uncertainty of revenue and how cash flows are affected by economic factors. The Company disaggregates revenue by product type as follows:
Presence
Presence revenue primarily consists of fixed-fee subscriptions to the Company’s plans that offer core platform functionalities, currently branded “Personal” and “Business” plans. Presence revenue also consists of fixed-fee subscriptions related to additional entry points for starting online such as domain managed services and social media stories. Additionally, presence revenue is derived from third-party solutions related to email services and access to third-party content to enhance online presence. For customers in need of a larger scale solution, the Company has an enterprise offering, and revenue is recognized over the life of the contract.
Commerce
Commerce revenue primarily consists of fixed-fee subscriptions to the Company’s plans that offer all the features of presence plans as well as additional features that support end to end commerce transactions, currently branded “Basic” and “Advanced” plans. Commerce revenue also includes fixed-fee subscriptions to a number of other tools that support running an online business such as marketing, member areas, scheduling and hospitality tools. Non-subscription revenue is derived from fixed-fees earned on revenue share arrangements with commerce partners as well as fixed transaction fees earned on gross merchandise value ("GMV") processed through Business plan sites and certain hospitality offerings. Commerce revenue also includes payment processing fees received in exchange for use of the Company’s hospitality services.
13


SQUARESPACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
Revenue by Product Type, Subscription Type and Revenue Recognition Pattern
The following tables summarize revenue by product type, subscription type, and revenue recognition pattern for the periods presented:
Three Months Ended March 31, 2022
PresenceCommerceTotal
Subscription revenue
Transferred over time$139,776 $47,055 $186,831 
Transferred at a point in time3,658  3,658 
Non-subscription revenue
Transferred over time398 846 1,244 
Transferred at a point in time113 15,916 16,029 
Total revenue$143,945 $63,817 $207,762 
Three Months Ended March 31, 2021
PresenceCommerceTotal
Subscription revenue
Transferred over time$129,131 $37,254 $166,385 
Transferred at a point in time2,851  2,851 
Non-subscription revenue
Transferred over time575 72 647 
Transferred at a point in time314 9,449 9,763 
Total revenue$132,871 $46,775 $179,646 
Revenue by Geography
Revenue by geography is based on the customer’s self-reported country identifier or, if not available, the billing address or IP address, and was as follows:
Three Months Ended March 31,
20222021
United States$146,819 $127,043 
International60,943 52,603 
Total revenue$207,762 $179,646 
During the three months ended September 30, 2021, the Company identified certain revenues which should have been classified as international revenues during the first and second quarter. Accordingly, in the third quarter of 2021, the Company reclassified approximately $4,101 related to the first quarter out of United States and into international revenue. Using the updated classification, the international revenue for the three months ended March 31, 2021 would have been $56,704. Further, the United States revenue for the three months ended March 31, 2021 would have been $122,942. No amounts were reclassified related to 2022.
Currently no individual country contributes greater than 10% of total International revenue.
Deferred Revenue
The deferred revenue balance as of March 31, 2022 and December 31, 2021 represents the Company’s aggregate remaining performance obligations that are expected to be recognized as revenue in subsequent periods. Generally, the Company’s contracts are for one year or less and the value for contracts with terms greater than one year is not material. The change in deferred revenue primarily reflects cash payments received during the period for which the performance obligation was not satisfied prior to the end of the period partially offset by $108,622 and $96,655 of revenues recognized during the three months ended March 31, 2022 and 2021, respectively.
14


SQUARESPACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
Capitalized Contract Costs
Assets capitalized related to contract costs consisted of the following:
March 31, 2022December 31, 2021
Capitalized referral fees, current$5,147 $4,813 
Capitalized referral fees, non-current7,749 7,713 
Capitalized app fees, current1,080 1,202 
Sales commissions, current308 221 
Sales commissions, non-current155 131 
Total capitalized contract costs$14,439 $14,080 
Amortization of capitalized contract costs were $2,629 and $1,902 for the three months ended March 31, 2022 and 2021, respectively, and were included in marketing and sales in the condensed consolidated statements of operations.
There were no impairment charges recognized related to capitalized contract costs for the three months ended March 31, 2022 and 2021.
Obligations for Returns, Refunds and Other Similar Obligations
The Company did not have any material change in revenue recognition from a previous period due to refunds, change in transaction price or other consideration variables. As of March 31, 2022 and December 31, 2021, obligations for refunds were $375 and $506, respectively, and are included in accrued liabilities in the condensed consolidated balance sheet.
4.Acquisitions
The Company did not acquire any businesses during the three months ended March 31, 2022.
Tock, Inc.
On March 31, 2021 (the "Tock Acquisition Date"), the Company acquired all of the equity interests in Tock, a reservation platform for prepaid reservations, access to restaurant management data, and other customization features. The purpose of the acquisition was to expand the Company’s complementary suite of services available with a platform for reservations, take-out, delivery and events for the hospitality industry. The total consideration for the transaction was $425,710, consisting of $226,821 of cash, $188,179 of the Company’s Class C common stock, and $10,710 of net working capital adjustments. The Company recognized this transaction as a business combination.
The Company has finalized the purchase accounting, including the identification and allocation of consideration to assets acquired, and the purchase price allocation as of March 31, 2022. Goodwill associated with the acquisition of Tock is not amortizable for tax purposes.
The following table sets forth the allocation of the purchase price to the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed, with the excess recorded to goodwill:
Tock
Net tangible assets acquired$13,004 
Deferred income tax liability(724)
Customer relationships – restaurants37,000 
Customer relationships – enterprise16,000 
Tradename5,000 
Developed technology3,000 
Net assets acquired73,280 
Consideration425,710 
Goodwill$352,430 
Amount
Consideration transferred$425,710 
Less: Issuances of Class C common stock(188,179)
Less: Cash acquired(18,350)
Less: Restricted cash(17,011)
Less: Consideration remaining to be paid as of March 31, 2021(1,267)
Cash paid for acquisitions, net of acquired cash$200,903 
15


SQUARESPACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
5.Investment in Marketable Securities
The following tables represent the amortized cost, gross unrealized gains and losses and fair market value of the Company’s available-for-sale (“AFS”) marketable securities:
March 31, 2022
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Aggregate
Fair Value
Corporate bonds and commercial paper$16,949 $ $(85)$16,864 
Asset backed securities2,138  (14)2,124 
U.S. treasuries9,020  (117)8,903 
Total investment in marketable securities$28,107 $ $(216)$27,891 
December 31, 2021
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Aggregate
Fair Value
Corporate bonds and commercial paper$19,301 $ $(14)$19,287 
Asset backed securities6,190 2  6,192 
U.S. treasuries6,003  (26)5,977 
Total investment in marketable securities$31,494 $2 $(40)$31,456 
The Company did not have any AFS marketable securities that were in an unrealized loss position for more than 12 months as of March 31, 2022 and December 31, 2021.
The Company recognized unrealized losses of $178 and $45 with respect to its AFS securities during the three months ended March 31, 2022 and 2021, respectively. The unrealized losses were due to changes in market rates and the Company has determined the losses are temporary in nature. These unrealized losses were classified in accumulated other comprehensive loss in the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021.
The Company reviews AFS marketable securities on a recurring basis to evaluate whether or not any securities have experienced an other-than-temporary decline in fair value. Some factors considered in establishing an expected credit loss on AFS marketable securities are the length of time and extent to which the market value has been less than the cost, the financial condition and near-term prospects of the issuer, the Company's intent to sell, and whether it is more likely than not the Company will be required to sell the investment before recovery of the investments amortized cost basis. The Company does not have any AFS securities for which an expected credit loss has been recorded as the Company's AFS securities with an amortized cost basis lower than fair value are not considered other-than-temporary declines in fair value. In the instance that the Company has AFS securities at an amortized cost basis lower than fair value, the Company does not intend to sell, nor is it more-likely-than not the Company would be required to sell, the AFS security prior to recovery.
The contractual maturities of the investments classified as marketable securities were as follows:
March 31, 2022December 31, 2021
Due within 1 year$20,902 $19,248 
Due in 1 year through 5 years6,989 12,208 
Total investment in marketable securities$27,891 $31,456 
16


SQUARESPACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
6.Fair Value of Financial Instruments
A summary of the Company’s investments in marketable securities (including, if applicable, those marketable securities classified as cash and cash equivalents) were as follows:
March 31, 2022
Level 1Level 2Level 3Total
Cash equivalents
Money market funds$84,920 $ $ $84,920 
Available-for-sale debt securities
Corporate bonds and commercial paper 16,864  16,864 
Asset backed securities 2,124  2,124 
U.S. treasuries8,903   8,903 
Total$93,823 $18,988 $ $112,811 
December 31, 2021
Level 1Level 2Level 3Total
Cash equivalents
Money market funds$81,501 $ $ $81,501 
Available-for-sale debt securities
Corporate bonds and commercial paper 19,287  19,287 
Asset backed securities 6,192  6,192 
U.S. treasuries5,977   5,977 
Total$87,478 $25,479 $ $112,957 
The Company’s valuation techniques used to measure the fair value of money market funds and certain AFS marketable securities were derived from quoted prices in active markets for identical assets. The valuation techniques used to measure the fair value of the Company’s other debt securities, all of which have counterparties with high credit ratings, were valued based on quoted market prices or model driven valuations using significant inputs derived from or corroborated by observable market data. There were no transfers of financial instruments between Level 1, Level 2, and Level 3 during the periods presented.
For certain other financial instruments, including accounts receivable, accounts payable and accrued liabilities, the carrying amounts approximate the fair value of such instruments due to the relatively short maturity of these balances. The recorded amounts of the Company’s debt obligations approximate their fair values as they are based upon rates available to the Company for obligations of similar terms and maturities.
7.Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
March 31, 2022December 31, 2021
Prepaid advertising expenses$3,849 $16,236 
Prepaid income taxes393 22,032 
Prepaid operational expenses12,247 12,301 
Receivables for leasehold improvements 5,186 
Prepaid referrals, current5,147 4,813 
Other current assets5,740 6,531 
Total prepaid expenses and other current assets$27,376 $67,099 
17


SQUARESPACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
8.Accrued Liabilities
Accrued liabilities consisted of the following:
March 31, 2022December 31, 2021
Accrued marketing expenses$31,328 $23,042 
Accrued indirect taxes21,934 19,565 
Accrued income taxes32,415  
Accrued leasehold improvement expenditures439 1,228 
Accrued product expenses4,685 1,359 
Accrued payroll expense4,504 2,900 
Other accrued expenses12,046 12,767 
Total accrued liabilities$107,351 $60,861 
9.Debt
Debt outstanding as of March 31, 2022 and December 31, 2021 was as follows:
March 31, 2022December 31, 2021
Term Loan$526,455 $529,852 
Less: unamortized original issue discount(2,454)(2,635)
Less: unamortized deferred financing costs(543)(584)
Less: debt, current(19,933)(13,586)
Total debt, non-current$503,525 $513,047 
Credit Facility
On December 12, 2019 (the “Closing Date”), the Company entered into a credit agreement (the “2019 Credit Agreement”) with certain lending institutions (the “2019 Credit Facility”) which included Initial Term A Loans for $350,000 (“2019 Term Loan”) and Revolving Credit Loans of up to $25,000 (“2019 Revolving Credit Facility”), which included a Letters of Credit sub-facility available up to a total of $15,000 (“2019 Letter of Credit”).
On December 11, 2020 (the “Modification Date”), the Company amended the 2019 Credit Agreement (“2020 Credit Agreement”) to increase the total size of the 2019 Term Loan to $550,000 (collectively, the “2020 Term Loan”) with the same lending institutions as the 2019 Credit Facility (collectively, the “Credit Facility”) and extend the maturity date for the 2020 Term Loan and the 2019 Revolving Credit Facility (as extended, the "Revolving Credit Facility") to December 11, 2025 (collectively, the “Modification”).
Borrowings under the Credit Facility are subject to an interest rate equal to LIBOR or the bank’s alternative base rate. The bank’s alternative base rate (the “ABR”) is the greater of the prime rate, the federal funds effective rate plus 0.5% or the LIBOR quoted rate plus 1.50% as of March 31, 2022. The effective interest rate as of March 31, 2022 was 2.00%.
As of March 31, 2022, $9,643 was outstanding under the Revolving Credit Facility in the form of outstanding letters of credit and $15,357 remained available for borrowing by the Company. The letters of credit issued as of March 31, 2022 were related to certain of the Company's operating lease agreements for offices that require security deposits in the form of an irrevocable letter of credit. The letters of credit issued are subject to a fee equal to the interest rate on the Credit Facility. In addition, the Revolving Credit Facility is subject to an unused commitment fee of 0.20% to 0.25%, depending on the consolidated total debt to consolidated EBITDA ratio as defined by the 2020 Credit Agreement, quarterly to the lenders in respect of the unutilized commitments.
The 2020 Credit Agreement contains certain customary affirmative covenants and events of default. The negative covenants in the Credit Facility include, among other items, limitations on the ability, subject to negotiated exceptions, to incur additional indebtedness or issue additional preferred stock of the Company, to create or issue certain liens on certain assets, to enter into agreements related to mergers and acquisitions, including the sale of certain assets or disposition of assets, or declare, make or pay dividends and distributions. The 2020 Credit Agreement contains certain negative covenants for an indebtedness to consolidated EBITDA ratio, as defined by the 2020 Credit Agreement, and commencing with December 31, 2020 and all fiscal quarters thereafter through maturity. As a result of the Modification, commencing with the fiscal quarter ended December 31, 2020, the Company is required to maintain an indebtedness to consolidated EBITDA ratio of not more than 4.50, tested as of the last day of each fiscal quarter, with a step-down to 4.25 for the fiscal quarters ending March 31, 2022 and June 30, 2022, a further step-down to 4.00 for the fiscal quarters ending September 30, 2022 and December 31, 2022 and a final step-down to 3.75 for the fiscal quarter ending March 31, 2023 and each fiscal quarter thereafter (the “Financial Covenant”), subject to customary equity cure rights. The Financial Covenant is subject to a 0.50
18


SQUARESPACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
step-up in the event of a material permitted acquisition, which the Company can elect to implement up to two times during the life of the facility. The Company did not elect to implement this step-up as a result of the acquisition of Tock. If the Company is not in compliance with the covenants under the 2020 Credit Agreement or the Company otherwise experiences an event of default, the lenders would be entitled to take various actions, including acceleration of amounts due under the 2020 Credit Agreement. As of March 31, 2022, the Company was in compliance with all applicable covenants, including the Financial Covenant.
Consolidated EBITDA is defined in the Credit Agreement as net loss adjusted to exclude interest expense, other income, net, (provision for)/benefit from income taxes, depreciation and amortization, and stock-based compensation expense. In addition, consolidated EBITDA also allows for other adjustments such as the exclusion of transaction costs, changes in deferred revenue, and other costs that may be