10-Q 1 sqsp-20240331.htm 10-Q sqsp-20240331
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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, 2024
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 class
Class A Common Stock, 0.0001 par value per share
Trading Symbol(s)
SQSP
Name of each exchange on which registered
New 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, 2024, the registrant had 89,684,219 shares of Class A Common Stock, 47,844,755 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
PAGE

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 solutions to meet those needs;
our ability to improve and enhance the functionality, performance, reliability, design, security and scalability of our existing solutions;
our ability to compete successfully against current and future competitors;
our ability to manage growth and maintain demand for our solutions;
our ability to protect and promote our brand;
our ability to generate new customers through our marketing and selling activities;
our ability to successfully identify, manage and integrate any existing and potential acquisitions or achieve the expected benefits of such 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 compliance with privacy and data protection laws and regulations as well as contractual privacy and data protection obligations;
our ability to establish and maintain intellectual property rights;
our ability to manage expansion into international markets;
the expected timing, amount and effect of our share repurchases; 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, 2024December 31, 2023
Assets
Current assets:
Cash and cash equivalents$241,905 $257,702 
Restricted cash38,778 36,583 
Investment in marketable securities46,981  
Accounts receivable
30,297 24,894 
Due from vendors5,298 6,089 
Prepaid expenses and other current assets70,419 48,947 
Total current assets433,678 374,215 
Property and equipment, net58,759 58,211 
Operating lease right-of-use assets75,325 77,764 
Goodwill210,438 210,438 
Intangible assets, net175,225 190,103 
Other assets12,044 11,028 
Total assets$965,469 $921,759 
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable$21,386 $12,863 
Accrued liabilities109,789 99,435 
Deferred revenue376,134 333,191 
Funds payable to customers44,076 42,672 
Debt, current portion53,058 48,977 
Operating lease liabilities, current portion12,819 12,640 
Total current liabilities617,262 549,778 
Deferred income taxes, non-current portion1,100 1,039 
Debt, non-current portion503,833 519,816 
Operating lease liabilities, non-current portion94,317 97,714 
Other liabilities15,230 13,764 
Total liabilities1,231,742 1,182,111 
Commitments and contingencies (see Note 10)
Stockholders’ deficit:
Class A common stock, par value of $0.0001; 1,000,000,000 shares authorized as of March 31, 2024 and December 31, 2023, respectively; 89,684,219 and 88,545,012 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively
9 9 
Class B common stock, par value of $0.0001; 100,000,000 shares authorized as of March 31, 2024 and December 31, 2023, respectively; 47,844,755 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively
5 5 
Class C common stock (authorized May 10, 2021), par value of $0.0001; 1,000,000,000 shares authorized as of March 31, 2024 and December 31, 2023, respectively; zero shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively
  
Additional paid in capital918,552 924,634 
Accumulated other comprehensive loss(826)(843)
Accumulated deficit(1,184,013)(1,184,157)
Total stockholders’ deficit(266,273)(260,352)
Total liabilities and stockholders’ deficit$965,469 $921,759 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

SQUARESPACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
Three Months Ended March 31,
20242023
Revenue$281,148 $237,028 
Cost of revenue80,774 42,950 
Gross profit200,374 194,078 
Operating expenses:
Research and product development66,846 58,570 
Marketing and sales117,533 101,672 
General and administrative30,823 32,340 
Total operating expenses215,202 192,582 
Operating (loss)/income(14,828)1,496 
Interest expense(10,381)(8,094)
Other income/(loss)4,577 (840)
Loss before benefit from income taxes(20,632)(7,438)
Benefit from income taxes20,776 7,940 
Net income$144 $502 
Net income per share, basic and diluted$0.00 $0.00 
Weighted-average shares used in computing net income per share, basic136,936,860 134,917,610 
Weighted-average shares used in computing net income per share, diluted140,447,379 137,182,268 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

SQUARESPACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
Three Months Ended March 31,
20242023
Net income$144 $502 
Other comprehensive income
Foreign currency translation adjustment44 258 
Unrealized (loss)/gain on marketable securities, net of income taxes(27)216 
Total other comprehensive income17 474 
Total comprehensive income$161 $976 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

SQUARESPACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
(in thousands, except share data)
(unaudited)
Three Months Ended March 31, 2024 and 2023
Class A
Common Stock
Class B
Common Stock
Class C
Common Stock
Additional
Paid in
Capital
Accumulated Other Comprehensive LossAccumulated
Deficit
Total
Stockholders’
Deficit
SharesAmountSharesAmountSharesAmount
Balance at December 31, 202388,545,012 $9 47,844,755 $5  $ $924,634 $(843)$(1,184,157)$(260,352)
Stock-based compensation— — — — — — 28,979 — — 28,979 
Stock option exercises420,214 — — — — — 841 — — 841 
Vested RSUs converted to common shares1,808,975 — — — — — — — — — 
Taxes paid related to net share settlement of equity awards(769,189)— — — — — (24,022)— — (24,022)
Repurchase and retirement of Class A common stock(320,793) — — — — (12,164)— — (12,164)
Excise tax on repurchase of Class A common stock— — — — — — 284 — — 284 
Net income— — — — — — — — 144 144 
Total other comprehensive income, net of taxes— — — — — — — 17 — 17 
Balance at March 31, 202489,684,219 $9 47,844,755 $5  $ $918,552 $(826)$(1,184,013)$(266,273)
Class A
Common Stock
Class B
Common Stock
Class C
Common Stock
Additional
Paid in
Capital
Accumulated Other Comprehensive LossAccumulated
Deficit
Total
Stockholders’
Deficit
SharesAmountSharesAmountSharesAmount
Balance at December 31, 202287,754,534 $8 47,844,755 $5  $ $875,737 $(1,665)$(1,177,076)$(302,991)
Stock-based compensation— — — — — — 22,595 — — 22,595 
Stock option exercises13,050 — — — — — 52 — — 52 
Vested RSUs converted to common shares1,357,462 — — — — — — — — — 
Taxes paid related to net share settlement of equity awards(573,862)— — — — — (13,369)— — (13,369)
Repurchase and retirement of Class A common stock(1,256,170)— — — — — (25,321)— — (25,321)
Excise tax on repurchase of Class A common stock— — — — — — (277)— — (277)
Net income— — — — — — — — 502 502 
Total other comprehensive income, net of taxes— — — — — — — 474 — 474 
Balance at March 31, 202387,295,014 $8 47,844,755 $5  $ $859,417 $(1,191)$(1,176,574)$(318,335)
The accompanying notes are an integral part of these condensed consolidated financial statements.
6

SQUARESPACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended March 31,
20242023
OPERATING ACTIVITIES:
Net income$144 $502 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization18,672 7,241 
Stock-based compensation28,167 22,126 
Deferred income taxes62 62 
Non-cash lease income(767)(466)
Other350 93 
Changes in operating assets and liabilities:
Accounts receivable and due from vendors(4,592)411 
Prepaid expenses and other current assets(21,554)(13,697)
Accounts payable and accrued liabilities19,627 16,960 
Deferred revenue45,669 29,279 
Funds payable to customers1,404 1,580 
Other operating assets and liabilities(1,963)64 
Net cash provided by operating activities85,219 64,155 
INVESTING ACTIVITIES:
Proceeds from the sale and maturities of marketable securities 39,664 
Purchases of marketable securities(47,031)(7,824)
Purchase of property and equipment(3,385)(3,075)
Net cash (used in)/provided by investing activities(50,416)28,765 
FINANCING ACTIVITIES:
Principal payments on debt(12,244)(10,189)
Payments for repurchase and retirement of Class A common stock(12,164)(25,321)
Taxes paid related to net share settlement of equity awards(24,372)(12,760)
Proceeds from exercise of stock options841 92 
Net cash used in financing activities(47,939)(48,178)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(466)135 
Net (decrease)/increase in cash, cash equivalents and restricted cash(13,602)44,877 
Cash, cash equivalents, and restricted cash at the beginning of the period294,285 232,620 
Cash, cash equivalents, and restricted cash at the end of the period$280,683 $277,497 
Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents$241,905 $239,327 
Restricted cash38,778 38,170 
Cash, cash equivalents, and restricted cash at the end of the period$280,683 $277,497 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
Cash paid during the year for interest$9,951 $7,985 
Cash paid during the year for income taxes, net of refunds
$1,426 $10,163 
Cash paid for amounts included in the measurement of operating lease liabilities
$4,103 $3,922 
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCE ACTIVITIES
Purchases of property and equipment included in accounts payable and accrued liabilities$649 $22 
Capitalized stock-based compensation$812 $469 
Accrued taxes related to net share settlement of equity awards
$12 $645 
The accompanying notes are an integral part of these condensed consolidated 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 operating in Chicago, IL, Dublin, Ireland and Aveiro, Portugal.
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, 2023 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 February 28, 2024. 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.
Significant estimates include but are not limited to (i) the inputs used in the valuation of acquired intangible assets; (ii) the inputs used in the quantitative assessment over goodwill impairment; (iii) the recognition, measurement and valuation of current and deferred income taxes; (iv) amount of applicable indirect tax nexus in different jurisdictions and associated indirect tax liabilities; and (v) the incremental borrowing rate for operating lease liabilities. The Company evaluates its assumptions and estimates on an ongoing basis and adjusts prospectively, if necessary.
Concentration of Risks Related to Credit, Interest Rates and Foreign Currencies
The Company is subject to credit risk, interest rate risk on its outstanding indebtedness, 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 four financial institutions. The Company has not experienced any concentration losses related to its cash, cash equivalents and marketable securities to date.
During the three months ended March 31, 2024 and 2023, no single customer accounted for more than 10% of the Company’s revenue. As of March 31, 2024 and December 31, 2023, one customer accounted for 42% and 37%, respectively, of the Company's accounts receivable.
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.
Interest income on cash and cash equivalents was $2,983 and $1,062 for the three months ended March 31, 2024 and 2023, respectively, and was included in other income/(loss), net in the condensed consolidated statements of operations.
8


SQUARESPACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
Restricted Cash and Payment Processing Transactions
The Company holds funds and processes certain payments on behalf of its customers consisting of prepayments for restaurant reservations, to-go orders and events. While the Company does not have any contractual obligations to hold such cash as restricted, the prepayments were included in restricted cash in the condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023.
In addition, the Company recognized the liability due to its customers in funds payable to customers in the condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023. The Company remits funds to customers based on the stipulated contract terms. In addition to restricted cash held on behalf of its 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 sheets as of March 31, 2024 and December 31, 2023.
The following table represents the assets and liabilities related to payment processing transactions for restaurant reservations, to-go orders and events:
March 31, 2024December 31, 2023
Restricted cash$38,778 $36,583 
Due from vendors5,298 6,089 
Total payment processing assets44,076 42,672 
Funds payable to customers(44,076)(42,672)
Total payment processing liabilities(44,076)(42,672)
Total payment processing transactions, net$ $ 
Investment in Marketable Securities
The Company classifies its investment in marketable securities as available for sale securities which are stated at fair value, as determined by quoted market prices. Unrealized gains and losses are included in accumulated other comprehensive loss in the condensed consolidated balance sheets. Unrealized losses are evaluated for impairment and those considered other than temporarily impaired are included in other income/(loss), net in the condensed consolidated statements of operations. Subsequent gains or losses realized upon redemption or sale of these securities in excess or below their adjusted cost basis are also included in other income/(loss), net in the condensed consolidated statements of operations. The cost of securities sold is based upon the specific identification method.
The Company considers all of its investment in marketable securities, irrespective of the maturity date, as available for use in current operations, and therefore classifies these securities within current assets in the condensed consolidated balance sheet.
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.
Net Income/(Loss) Per Share
The Company computes net income/(loss) per share under the two-class method required for multiple classes of common stock. The rights, including the liquidation and dividend rights, of the Class A, Class B and Class C common stock are substantially identical, other than voting rights. Accordingly, the Class A, Class B and Class C common stock share in the Company’s earnings.
9


SQUARESPACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
Basic net income/(loss) per share is computed by dividing net income/(loss) by the weighted-average number of shares of the Company’s Class A, Class B and Class C common stock outstanding.
Diluted net income per share is computed by giving effect to all dilutive securities. During periods of net loss, potentially dilutive Class A, Class B and Class C common stock equivalents are excluded from the calculation as their effect is anti-dilutive. During periods of net income, diluted net income per share is computed by dividing net income by the resulting weighted-average number of fully diluted Class A, Class B and Class C common stock outstanding.
Recently Issued Accounting Pronouncements
Accounting Pronouncements Pending Adoption
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). This standard improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis, 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.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosure (“ASU 2023-09”). This standard provides transparency to income tax disclosures related to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 for public entities on a prospective or retrospective basis, 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 the Company’s 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, whereby 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, memberships, courses, 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 payment volume processed through Business plan sites, certain hospitality offerings and the Company's native payment processing solution. Commerce revenue also includes payment processing fees received for use of the Company’s hospitality services.
10


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, 2024
PresenceCommerceTotal
Subscription revenue
Transferred over time$194,046 $61,199 $255,245 
Transferred at a point in time5,989  5,989 
Non-subscription revenue
Transferred over time730 928 1,658 
Transferred at a point in time119 18,137 18,256 
Total revenue$200,884 $80,264 $281,148 
Three Months Ended March 31, 2023
PresenceCommerceTotal
Subscription revenue
Transferred over time$159,580 $54,056 $213,636 
Transferred at a point in time4,144  4,144 
Non-subscription revenue
Transferred over time599 895 1,494 
Transferred at a point in time68 17,686 17,754 
Total revenue$164,391 $72,637 $237,028 
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,
20242023
United States$201,035 $169,754 
International80,113 67,274 
Total revenue$281,148 $237,028 
Currently no individual country contributes greater than 10% of total international revenue.
Deferred Revenue
The deferred revenue balance as of March 31, 2024 and December 31, 2023 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 $151,266 and $124,130 of revenues recognized during the three months ended March 31, 2024 and 2023, respectively.
11


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, 2024December 31, 2023
Capitalized referral fees, current$7,674 $7,626 
Capitalized referral fees, non-current10,591 9,715 
Capitalized app fees, current651 750 
Sales commissions, current667 496 
Sales commissions, non-current347 144 
Total capitalized contract costs$19,930 $18,731 
Amortization of capitalized contract costs was included in the following line items in the condensed consolidated statements of operations:
Three Months Ended March 31,
20242023
Cost of revenue$749 $861 
Marketing and sales2,593 2,067 
Total amortization of capitalized contract costs
$3,342 $2,928 
There were no impairment charges recognized related to capitalized contract costs for the three months ended March 31, 2024 and 2023.
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, 2024 and December 31, 2023, the Company's obligation for refunds was not material.
4.Investment in Marketable Securities
The following table represents the amortized cost, gross unrealized gains and losses and fair market value of the Company’s available-for-sale (“AFS”) marketable securities as of March 31, 2024:
March 31, 2024
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Aggregate
Fair Value
Corporate bonds and commercial paper$35,356 $2 $(19)$35,339 
U.S. treasuries11,650  (8)11,642 
Total investment in marketable securities$47,006 $2 $(27)$46,981 
The Company's gross unrealized losses and fair values for those investments that were in an unrealized loss position as of March 31, 2024, aggregated by investment category and the length of time that individual securities have been in a continuous loss position were as follows:
March 31, 2024
Less than 12 months12 months or GreaterTotal
Aggregate
Fair Value
Gross
Unrealized
Losses
Aggregate
Fair Value
Gross
Unrealized
Losses
Aggregate
Fair Value
Gross
Unrealized
Losses
Corporate bonds and commercial paper$32,096 $(19)$ $ $32,096 $(19)
U.S. treasuries10,580 (8)  10,580 (8)
Total investment in marketable securities$42,676 $(27)$ $ $42,676 $(27)
The Company recognized unrealized losses of $27 with respect to its AFS marketable securities during the three months ended March 31, 2024. The unrealized losses were due to changes in market rates and were determined to be temporary in nature. The unrealized losses were included in accumulated other comprehensive loss in the condensed consolidated balance sheet as of March 31, 2024.
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
12


SQUARESPACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
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 did not have any AFS marketable securities for which an expected credit loss has been recorded as the Company's AFS marketable securities with an amortized cost basis lower than fair value were not considered other-than-temporary declines in fair value. In the instance that the Company has AFS marketable 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 marketable security prior to recovery.
The contractual maturities of the investments classified as marketable securities were as follows:
March 31, 2024
Due within 1 year$20,480 
Due in 1 year through 5 years26,501 
Total investment in marketable securities$46,981 
The Company did not own any AFS marketable securities as of December 31, 2023.
5.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, 2024
Level 1Level 2Level 3Total
Cash equivalents
Money market funds$180,035 $ $ $180,035 
Corporate bonds and commercial paper4,043   4,043 
Available-for-sale debt securities
Corporate bonds and commercial paper 35,339  35,339 
U.S. treasuries11,642   11,642 
Total$195,720 $35,339 $ $231,059 
December 31, 2023
Level 1Level 2Level 3Total
Cash equivalents
Money market funds$194,210 $ $ $194,210 
Total$194,210 $ $ $194,210 
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 Company records debt obligations at their approximate fair values as they are based upon rates available to the Company for obligations of similar terms and maturities.
13


SQUARESPACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
6.Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
March 31, 2024December 31, 2023
Prepaid income taxes
$27,498 $3,402 
Prepaid domain name registration fees
15,809 12,073 
Prepaid operational expenses11,497 12,183 
Capitalized contract costs
8,992 8,872 
Prepaid advertising expenses
944 5,804 
Other current assets5,679 6,613 
Total prepaid expenses and other current assets$70,419 $48,947 
As of March 31, 2024 and December 31, 2023, the Company had $2,295 and $3,895, respectively, in deposits for domain name registration fees at certain third-party registries included as other current assets above.
7.Accrued Liabilities
Accrued liabilities consisted of the following:
March 31, 2024December 31, 2023
Accrued indirect taxes$39,676 $38,174 
Accrued marketing expenses29,527 24,998 
Accrued product expenses22,214 22,569 
Accrued payroll expenses
6,863 4,247 
Other accrued expenses11,509 9,447 
Total accrued liabilities$109,789 $99,435 
8.Debt
Debt outstanding as of March 31, 2024 and December 31, 2023 was as follows:
March 31, 2024December 31, 2023
Term Loan$559,154 $571,398 
Less: unamortized original issue discount(1,530)(1,761)
Less: unamortized deferred financing costs(733)(844)
Less: debt, current(53,058)(48,977)
Total debt, non-current$503,833 $519,816 
Credit Facility
On December 12, 2019, the Company entered into a credit agreement (the “2019 Credit Agreement”) with certain lending institutions (the “Credit Facility”) which included Initial Term A Loans for $350,000 (the "2019 Term Loan”), and Revolving Credit Loans of up to $25,000 (the “2019 Revolving Credit Facility”), which included a Letters of Credit sub-facility available up to a total of $15,000.
On December 11, 2020, the Company amended the 2019 Credit Agreement (the “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 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.
On June 15, 2023, the Company amended the 2020 Credit Agreement (as amended, the "Credit Agreement") to increase the total size of the 2020 Term Loan to $650,000 (collectively, the "Term Loan") and, effective June 30, 2023, replace LIBOR as the benchmark rate with SOFR.
Borrowings under the Credit Facility were subject to an interest rate equal to LIBOR plus the applicable margin based on our Consolidated Total Debt to Consolidated EBITDA ratio prior to June 30, 2023. Effective June 30, 2023, under the Credit Agreement, LIBOR as the benchmark rate was replaced with SOFR. The applicable margin was 1.60%, which includes a credit spread adjustment of 0.10%, and 1.50% as of March 31, 2024 and 2023, respectively. The effective interest rate was 6.93% and 6.38% as of March 31, 2024 and 2023, respectively.
As of March 31, 2024, $7,255 was outstanding under the Revolving Credit Facility in the form of outstanding letters of credit and $17,745 remained available for borrowing by the Company. The letters of credit issued as of March 31, 2024
14


SQUARESPACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
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 Credit Agreement, payable quarterly to the lenders in respect of the unutilized commitments.
The 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 Credit Agreement contains certain negative covenants for an indebtedness to consolidated EBITDA ratio, as defined by the Credit Agreement, and commencing with December 31, 2020 and all fiscal quarters thereafter through maturity. For the fiscal quarter ended March 31, 2024, and each fiscal quarter thereafter, the Company is required to maintain an indebtedness to consolidated EBITDA ratio of not more than 3.75 (the “Financial Covenant”), subject to customary equity cure rights. The Financial Covenant is subject to a 0.50 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. If the Company is not in compliance with the covenants under the 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 Credit Agreement. As of March 31, 2024, the Company was in compliance with all applicable covenants, including the Financial Covenant.
Consolidated EBITDA is defined in the Credit Agreement as net income/(loss) adjusted to exclude interest expense, other income/(loss), 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 considered non-recurring.
Scheduled Principal Payments
The scheduled principal payments required under the terms of the Credit Facility are as follows:
Year Ending December 31,
Amount
Remainder of 2024$36,733 
2025522,421 
Total$559,154 
9.Income Taxes
For interim periods, the Company uses the estimated annual effective tax rate method under which the Company determines its (provision for)/benefit from income taxes based on the current estimate of its annual effective tax rate plus the tax effect of discrete items occurring during the period. The estimated annual effective tax rate is based on forecasted annual results which may fluctuate due to significant changes in the forecasted or actual results and any other transaction that results in differing tax treatment.
For the three months ended March 31, 2024 and 2023, the Company recorded an income tax benefit of $20,776 and $7,940, respectively, which resulted in an effective tax rate of (100.7)% and (106.7)%, respectively.
The Company’s estimated annual effective income tax rate for the three months ended March 31, 2024 differed from the statutory rate of 21% primarily due to the change in the valuation allowance for deferred tax assets related primarily to the capitalization of research and development expenditures as required by the 2017 Tax Cuts and Jobs Act, nondeductible stock-based compensation, state and local income taxes, unrecognized tax benefits, and global intangible low-taxed income, partially offset by research and development tax credits, deduction from foreign-derived intangible income, and the effect of foreign operations.
The Company’s estimated annual effective income tax rate for the three months ended March 31, 2023 differed from the statutory rate of 21% primarily due to the change in the valuation allowance for deferred tax assets related primarily to the capitalization of research and development expenditures as required by the 2017 Tax Cuts and Jobs Act, nondeductible executive compensation, unrecognized tax benefits, state and local income taxes, global intangible low-taxes income, and nondeductible expenses, partially offset by research and development tax credits, deduction from foreign derived intangible income, and effect of foreign operations.
As of March 31, 2024, the Company considered a significant portion of the earnings of foreign subsidiaries to be not permanently reinvested outside the U.S. The incremental deferred federal and state income taxes or foreign withholding
15


SQUARESPACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
taxes are not material to the financial statements as those respective earnings have previously been subject to U.S. taxation or will receive a dividend received deduction.
All unrecognized tax benefits have been recorded to other liabilities in the condensed consolidated balance sheets. As of March 31, 2024, unrecognized tax benefits approximated $12,452, all of which would affect the effective tax rate if recognized. As of March 31, 2023, unrecognized tax benefits approximated $11,943, all of which have been recorded to other liabilities and of which $1,100 would affect the effective tax rate if recognized. The Company does not believe that its unrecognized tax benefits as of March 31, 2024 will significantly increase or decrease within the next twelve months. The Company’s policy is to include interest and penalties related to unrecognized tax benefits within the Company's (provision for)/benefit from income taxes. Accrued interest and penalties were $1,196 and $249 for the three months ended March 31, 2024 and 2023, respectively.
The Company’s corporate federal income tax returns for the years ended December 31, 2020 through December 31, 2023 remain subject to examination by the Internal Revenue Service. The Company’s corporate income tax returns for the years ended December 31, 2020 through December 31, 2023 remain subject to examination by taxing authorities in various U.S. states and foreign jurisdictions. In addition, in the U.S., any net operating losses or credits that were generated in prior years but utilized in open years may also be subject to examination.
In December 2021, the OECD proposed the Pillar Two framework as part of the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project which makes changes to existing tax laws, including a 15% global minimum tax (“BEPS Pillar Two”). Several countries have enacted tax legislation with proposals from the BEPS Pillar Two framework, with an effective date starting in 2024. While we continue to monitor further legislation and guidance in the non-US jurisdictions in which we operate, we have evaluated the impact of the published legislation and although not material to the condensed consolidated financial statements, we have included the impacts in the estimated annual effective tax rate for the three months ended March 31, 2024.
On December 15, 2022, the Ireland Finance Act 2022 was signed into Irish law. With the enactment of the Ireland Finance Act 2022, qualifying Ireland-related research and development tax credits do not depend on the generation of future taxable income. As a result, the Company determined these credits to be a credit to research and development expenses in the form of a government grant as analogized under International Accounting Standards 20, Accounting for Government Grants and Disclosure of Government Assistance. During the three months ended March 31, 2024 and 2023, the Company recognized Ireland-related research and development tax credits of $176 and $276 as a reduction to research and product development in the condensed consolidated statements of operations.
10.Commitments and Contingencies
Indirect Taxes
The Company is subject to indirect taxation in some, but not all, of the various U.S. states and foreign jurisdictions in which it conducts business. Therefore, the Company has an obligation to charge, collect and remit Value Added Tax (“VAT”) or Goods and Services Tax (“GST”) in connection with certain foreign sales transactions and sales and use tax in connection with eligible sales to subscribers in certain U.S. states. On June 21, 2018, the U.S. Supreme Court overturned the physical presence nexus standard and held that states can require remote sellers to collect sales and use tax. In addition, U.S. states and foreign jurisdictions have and continue to enact laws which expand tax collection and remittance obligations that could apply to a platform like the Company's. This also includes the requirement for e-commerce platforms to collect and remit taxes on certain sales through a marketplace. As a result of these rulings, recently enacted laws, and the scope of the Company’s operations, taxing authorities continue to provide regulations that increase the complexity and risks to comply with such laws and could result in substantial liabilities, prospectively as well as retrospectively. In accordance with ASC 450, the Company establishes accruals for contingencies, including uncertainties related to taxes not based on income, when the Company believes it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Based on the information available, the Company continues to evaluate and assess the jurisdictions in which indirect tax nexus exists and believes that the indirect tax liabilities are adequate and reasonable. However, due to the complexity and uncertainty around the application of these rules by taxing authorities, results may vary materially from the Company’s expectations. The Company had an indirect tax liability of $39,676 and $38,174, including indirect tax contingencies of $30,493 and $29,836, as of March 31, 2024 and December 31, 2023, respectively, which is included in accrued liabilities in the condensed consolidated balance sheets.
16


SQUARESPACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
Service Agreements
As of March 31, 2024, the Company had outstanding non-cancelable minimum commitments with terms in excess of one year related to service agreements, including services for third-party cloud-computing and payment processing services, as follows:
Year Ending December 31,
Amount
Remainder of 2024$15,454 
202524,658 
202628,567 
202729,467 
20284,508 
Total$102,654 
Certain Risks and Concentrations
The Company’s revenues were principally generated from software as a service customers establishing their online presence. The market is highly competitive and rapidly changing. Significant changes in this industry, technological advances or changes in customer buying behavior could adversely affect the Company’s future results of operations.
Other
The Company is subject to litigation and other claims that arise in the ordinary course of business. While the ultimate result of outstanding legal matters cannot presently be determined, the Company does not expect that the ultimate disposition will have a material adverse effect on its results of operations or financial condition. However, legal matters are inherently unpredictable and subject to significant uncertainties, some of which are beyond the Company’s control. Based on the Company’s current knowledge, the final outcome of any particular legal matter will not have a material adverse effect on the Company’s financial condition.
11.Leases
The Company has operating leases for its office space with lease terms through 2034. Certain lease agreements include options to extend and/or terminate the lease. The Company's lease agreements do not contain terms and conditions of material restrictions, covenants or residual value guarantees. Variable lease costs are comprised primarily of the Company's proportionate share of operating expenses and property taxes.
The components of operating lease expense, net recognized in the condensed consolidated statements of operations were as follows:
Three Months Ended March 31,
20242023
Operating lease costs
Operating lease costs$3,338 $3,455 
Variable lease costs872 764 
Short-term lease costs53 75 
Operating lease income
Sublease income$67 $182 
Total operating lease expense, net$4,196 $4,112 
As of March 31, 2024, maturities of operating lease liabilities were as follows:
Year Ending December 31,
Amount
Remainder of 2024$12,387 
202516,877 
202617,600 
202717,062 
202817,277 
Thereafter41,178 
Total operating lease payments122,381 
Less: imputed interest(15,245)
Total operating lease liabilities$107,136 
17


SQUARESPACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
12.Stockholders’ Deficit
Class A Common Stock
Each holder of shares of Class A common stock shall be entitled to one vote for each share held. As of March 31, 2024, the number of authorized shares of Class A common stock, par value $0.0001 per share, by the Company was 1,000,000,000.
On May 10, 2022, the board of directors authorized a general share repurchase program of the Company’s Class A common stock of up to $200,000. On February 26, 2024, the board of directors authorized a new general share repurchase program of the Company’s Class A common stock of up to $500,000 with no fixed expiration (the "Stock Repurchase Plan") to replace the previous repurchase plan. These Class A common stock repurchases may occur in the open market, through privately negotiated transactions, through block purchases, other purchase techniques including the establishment of one or more plans under Rule 10b5-1 of the Securities Exchange Act of 1934 or by any combination of such methods. The timing and actual amount of shares repurchased will depend on a variety of different factors and may be modified, suspended or terminated at any time at the discretion of the board of directors.
During the three months ended March 31, 2024 and 2023, the Company repurchased 320,793 and 1,256,170 shares and paid cash of $12,164 and $25,321, including commissions of $7 and $25, respectively, under the Stock Repurchase Plan through open market purchases. The weighted-average prices per share for the share repurchases were $33.33 and $22.04 during the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, approximately $487,836 remained available for stock repurchase pursuant to the Stock Repurchase Plan.
Class B Common Stock
Each holder of shares of Class B common stock shall be entitled to ten votes for each share held.
Each outstanding share of the Company's Class B common stock is convertible into one share of Class A common stock at any time. As of March 31, 2024, the number of authorized shares of Class B common stock, par value $0.0001 per share, by the Company was 100,000,000.
Class C Common Stock
The Company's Class C common stock has no voting rights and is not convertible into shares of Class A common stock or Class B common stock.
As of March 31, 2024, the number of authorized shares of Class C common stock, par value $0.0001 per share, by the Company was 1,000,000,000. The board of directors has the authority, without stockholder approval except as required by the NYSE, to issue shares of the Company's Class C common stock.
Dividends
The Company shall not declare or pay dividends on Class A common stock, Class B common stock or Class C common stock unless the same dividend or distribution with the same record date and payment dated shall be declared or paid on all shares of Class A, Class B and Class C common stock.
During the three months ended March 31, 2024 and 2023, the Company did not declare or pay any dividends.
13.Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss activity for the three months ended March 31, 2024 and 2023 was as follows:
Foreign Currency Translation Adjustments
Net Unrealized Losses on Marketable Securities
Total Accumulated Other Comprehensive Loss
Balance at December 31, 2023$(843)$ $(843)
Other comprehensive income/(loss) before reclassifications
44 (27)17 
Other comprehensive income/(loss)
$44 $(27)$17 
Balance at March 31, 2024$(799)$(27)$(826)
18


SQUARESPACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
Foreign Currency Translation Adjustments
Net Unrealized (Losses)/Gains on Marketable Securities
Total Accumulated Other Comprehensive Loss
Balance at December 31, 2022$(1,449)$(216)$(1,665)
Other comprehensive income before reclassifications
258 216 474 
Other comprehensive income
258 216 474 
Balance at March 31, 2023$(1,191)$ $(1,191)
Amounts reclassified out of accumulated other comprehensive loss, net of taxes, during the three months ended March 31, 2024 and 2023 were not material.
14.Stock-based Compensation
Stock Options
Squarespace, Inc. Amended and Restated 2008 Equity Incentive Plan
In January 2008, the Company established and approved the Squarespace, Inc. 2008 Equity Incentive Plan which was ratified in 2010 and was subsequently amended and restated in March 2016 (the “2008 Plan”). Under the 2008 Plan, which covers certain employees and consultants, the Company granted shares of its Class B common stock in the form of stock options. After November 17, 2017, there were no additional grants from the 2008 Plan.
A summary of the Company’s stock option activity for the 2008 Plan during the three months ended March 31, 2024 is as follows:
Number of
Options
Weighted-
Average
Exercise
Price
As of December 31, 2023
1,117,616 $2.56 
Exercised
(420,214)2.00 
As of March 31, 2024
697,402 $2.89 
Vested at March 31, 2024
697,402 $2.89 
Exercisable at March 31, 2024
697,402 $2.89 
Restricted Stock Units ("RSUs") and Performance Stock Units ("PSUs")
Squarespace, Inc. 2017 Equity Incentive Plan
On November 17, 2017, the Company’s board of directors approved the Squarespace, Inc. 2017 Equity Incentive Plan (the “2017 Plan”). Under the 2017 Plan, the Company may grant shares of its Class A common stock in the form of RSUs, PSUs, stock options, stock appreciation rights and other stock awards. RSUs are subject to continuous service, generally vest over four years and are measured based on the fair market value of the underlying Class A common stock on the date of grant. After April 15, 2021, no additional grants were issued from the 2017 Plan.
Squarespace, Inc. 2021 Equity Incentive Plan
On March 25, 2021, the Company’s board of directors adopted the Squarespace, Inc. 2021 Equity Incentive Plan (the “2021 Plan”) which was approved by the stockholders on May 3, 2021 and went into effect on May 9, 2021. Under the 2021 Plan, the Company may grant shares of its Class A common stock in the form of RSUs, PSUs, stock options, stock appreciation rights and other stock awards. RSUs and PSUs are measured based on the closing price of the Company's Class A common stock as reported on the date of grant. RSUs are subject to continuous service and generally vest over four years. PSUs are subject to continuous service and generally vest over three years based on the achievement of certain performance targets over a one-year performance cycle. The percentage of PSUs that will vest can range from 0% to 200% of the target number of shares granted based on the performance targets that are achieved. The Company begins recognizing stock-based compensation costs when the achievement of a performance target becomes probable. Quarterly, the Company reassesses the probability of each possible outcome and, if applicable, recognizes a cumulative adjustment for any changes to the previously determined expectation using the grant date fair value of the PSU award. The Company recognizes stock-based compensation expense for PSUs ratably, net of forfeitures, over the requisite service period, which is the vesting period.
19


SQUARESPACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
During the three months ended March 31, 2024, the Company granted 349,417 shares of Class A common stock in the form of PSUs under the 2021 Plan. Additionally, the granted activity below includes 111,738 PSUs awarded for the achievement of performance targets as of December 31, 2023 which were approved by the Company’s board of directors during the three months ended March 31, 2024.
A summary of the Company’s RSU and PSU activity during the three months ended March 31, 2024, is as follows:
Number of Share Units
Weighted Average
Grant Date Fair
Value Per Share Unit
Outstanding – December 31, 2023
10,025,607 $28.31
Granted
4,562,457 32.10
Vested
(1,808,975)28.77
Forfeited
(398,583)29.86
Outstanding – March 31, 2024
12,380,506 $29.59
In connection with the vesting of shares, the Company reacquired 769,189 shares for $24,022 during the three months ended March 31, 2024 in order to satisfy employee tax withholding obligations. The employees received the net number of shares after consideration to those reacquired. The reacquired shares subsequently became available again for issuance under the Plan.
Casalena Performance Award
On April 15, 2021 (“Grant Date”), the board of directors of the Company approved an RSU grant to Anthony Casalena, CEO, of 2,750,000 Class A common shares (the “Casalena Performance Award”). The Casalena Performance Award vesting is contingent on both service- and market-based vesting conditions. The Company estimated the fair value of the Casalena Performance Award using a Monte Carlo simulation with a weighted-average grant date fair value of $30.38 per Class A common share. The Company will recognize the fair value of the award as stock-based compensation expense using the accelerated attribution method over the longer of (i) the period of time the market condition for each tranche is expected to be met (i.e., the derived service period) or (ii) the service vesting condition of four years. During the three months ended March 31, 2024 and 2023, the Company recorded compensation expense of $1,776 and $4,816, respectively, related to the Casalena Performance Award in general and administrative expenses in the condensed consolidated statements of operations.
Stock-based Compensation
The classification of stock-based compensation by line item in the condensed consolidated statements of operations was as follows:
Three Months Ended March 31,
20242023
Cost of revenue$1,769 $1,052 
Research and product development15,650 10,687 
Marketing and sales3,211 1,871 
General and administrative7,537 8,516 
Total stock-based compensation$28,167 $22,126 
The amount above excludes $812 and $469 of stock-based compensation capitalized as property and equipment, net, for the three months ended March 31, 2024 and 2023, respectively.
15.Related Party Transactions
On September 1, 2014, the Company entered into an agreement with Getty Images to resell certain content to the Company’s customers. A member of the Company’s board of directors is a Co-Founder and board member of Getty Images. Amounts recorded in connection with this agreement were not material for the three months ended March 31, 2024 and 2023.
20


SQUARESPACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
16.Net Income per Share
The following table sets forth the computation of basic and diluted net income per share:
Three Months Ended March 31,
20242023
Numerator:
Net income$144 $502 
Denominator:
Weighted-average shares used in computing net income per share, basic136,936,860 134,917,610 
Effect of dilutive securities3,510,519 2,264,658 
Weighted-average shares used in computing net income per share, diluted140,447,379 137,182,268 
Net income per share, basic and diluted$0.00 $0.00 
The following weighted-average outstanding shares of potentially dilutive securities were excluded from the computation of diluted net income per share for the periods presented because including them would have been antidilutive:
Three Months Ended March 31,
20242023
Stock options
  
RSUs and PSUs
321,926 2,134,308 
Total
321,926 2,134,308 
21

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and the related notes and the other financial information included elsewhere in this Quarterly Report and our audited consolidated financial statements and the related notes and the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the fiscal year ended December 31, 2023 included in the Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on February 28, 2024. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual business, financial condition and results of operations could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly under “Part II. Other Information, Item 1A. Risk Factors.” Our historical results are not necessarily indicative of the results that may be expected for any period in the future.
Overview
Squarespace enables anyone to stand out and succeed online, providing customers in over 200 countries and territories with the tools they need for an online presence with best-in-class design and a consistent brand across domains, websites, marketing and social media. Our commerce solutions include tools for selling digital content, classes, appointments, reservations, physical goods and more.
We primarily derive revenue from annual and monthly subscriptions to our presence and commerce solutions. Subscription revenue accounted for 92.9% and 91.9% of our total revenue for the three months ended March 31, 2024 and 2023, respectively. Payments for our subscription plans are generally collected at the beginning of the subscription period and we generally recognize the associated revenue ratably over the term of the customer contract. Non-subscription revenue primarily consists of commerce transaction fees received through revenue sharing arrangements with payment processors that handle our customers’ commerce transactions, payment processing fees received in exchange for use of our hospitality services as well as revenue we generate from third-party services we offer that provide additional functionality to our customers.
We generated revenue of $281.1 million and $237.0 million for the three months ended March 31, 2024 and 2023, respectively, and net income of $0.1 million and $0.5 million for the three months ended March 31, 2024 and 2023, respectively. We believe our business model is driven by stable retention of our existing customers as well as the acquisition of new customers, including additional offerings and add-on subscriptions which allow our customers to grow and scale with our platform as their needs evolve. No individual unique subscription accounted for more than 1% of our total bookings for the three months ended March 31, 2024 and 2023.
On September 7, 2023, we closed an asset purchase agreement with Google LLC ("Google") to acquire, among other things, Google's domain assets, including all domain names for which Google is the registrar or reseller, for a total amount paid of $180.7 million (the "Google Domains Asset Acquisition"). Unique subscriptions and average revenue per unique subscription ("ARPUS") do not account for single domain subscriptions originally sold by Google as a part of the Google Domains Asset Acquisition (collectively, the "Acquired Domain Assets").
Key Factors Affecting Our Performance
Retention of existing and acquisition of new unique subscriptions
Retaining and acquiring unique subscriptions to our platform is the primary driver of our revenue growth. The number of unique subscriptions on our platform, excluding the Acquired Domain Assets, was 4.9 million as of March 31, 2024, representing an increase of 15.2% from the same period in 2023. In order to support the acquisition of new unique subscriptions, we intend to continue to invest in our marketing efforts and expand internationally. We view this spending as a long-term investment in our business to attract new unique subscriptions.
We believe that our easy-to-customize and design-first solutions drive consistent cash retention in our subscription base. Our historical cash retention rate is the percentage of revenue share and subscription bookings received in the current period from website and domain subscriptions in existence during the same period in the prior year. In calculating cash retention, revenue share from contractual arrangements is allocated to the relevant subscription base based on the gross payment volume ("GPV") processed on the platform. Our historical cash retention rate for the years ended December 31, 2023, 2022 and 2021 was 88.2%, 84.1%, and 84.4%, respectively. We also look at cash retention of only our website and domain subscriptions, excluding revenue share, in order to better isolate and understand the underlying retention trends of our subscription customers. Our cash retention rate excluding revenue share is calculated as the percentage of subscription bookings received in the current period from website and domain subscriptions in existence during the same period in the prior year. Our cash retention rate, excluding revenue share, for the years ended December 31, 2023, 2022 and 2021 was 88.1%, 84.3%, and 84.1%, respectively.
22

6047313962323
The above chart represents cumulative cash from each website and domain subscription cohort for website subscription bookings and allocated revenue share from contractual arrangements. These website and domain subscription cohorts are defined by the first payment date associated with the website subscription or stand-alone domain purchase. Revenue share from contractual arrangements is allocated based on GPV for that period. For example, if the Q1 2021 cohort accounted for 3% of total GPV in Q1 2022, then 3% of the Q1 2022 revenue share from contractual arrangements is allocated to the Q1 2021 cohort in that period.
Expansion of our commerce offerings
We believe that our commerce offerings significantly expand our addressable market. Our comprehensive commerce offerings enable our customers to sell anything online, attracting a differentiated set of commerce-oriented brands to our platform.
We continue to invest in our commerce offerings to deepen and expand functionality. Our commerce revenue was $80.3 million for the three months ended March 31, 2024, representing an increase of 10.5% from the same period in 2023.
GPV represents the total dollar value of orders processed through our platform in the period, net of refunds and fraudulent orders. Our platform processed approximately $1,649.5 million of GPV during the three months ended March 31, 2024, representing an increase of 7.5% from the same period in 2023.
Investments in product innovation
We rely on hiring and retaining a talented product development workforce. The success of our customers relies on the innovation tied to this workforce and our ability to remain agile to address customer needs. Our research and product development expenses were $66.8 million for the three months ended March 31, 2024, representing an increase of 14.1% from the same period in 2023.
Foreign currency fluctuations
As of March 31, 2024, we had customers in over 200 countries and territories and our international customers represented approximately 30% of our total bookings. As foreign currency exchange rates change, translation of the statements of operations of our international businesses into U.S. dollars may affect year-over-year comparability of our results of operations.
Key Components of Results of Operations
Revenue
We primarily derive revenue from annual and monthly subscriptions. Typically, annual and monthly subscriptions represent 75% and 25% of total subscriptions, respectively. 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
23

through our customers’ sites. In addition, we earn fixed-fees on sales through certain hospitality offerings and payment processing fees in exchange for use of our hospitality services. Payments received for subscriptions in advance of fulfillment of our performance obligations are recorded as deferred revenue. Subscription plans automatically renew unless advance notice is provided to us. We primarily recognize subscription revenue ratably on a straight-line basis, net of a reserve for refunds. Transaction fee revenue, payment processing revenue and revenue generated from third-parties is recognized at a point in time, when the sale has been completed.
We disaggregate our revenue by product type in accordance with the following definitions:
Presence revenue
Presence revenue primarily consists of fixed-fee subscriptions to our plans that offer core platform functionalities, currently branded “Personal” and “Business” plans in our offerings. Presence revenue also consists of fixed-fee subscriptions related to additional entry points for starting online such as domain managed services. 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, we have an enterprise offering where revenue is recognized over the life of the contract.
Commerce revenue
Commerce revenue primarily consists of fixed-fee subscriptions to our 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” in our plan offerings. Commerce revenue also includes fixed-fee subscriptions to a number of other tools that support running an online business such as marketing, memberships, courses, 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 GPV processed through our native payment processing solution, Business plan sites and certain hospitality offerings. Commerce revenue also includes payment processing fees received in exchange for use of our hospitality services.
Cost of revenue
Cost of revenue primarily consists of domain name registration fees, customer support employee related expenses, credit card and payment processing fees, web hosting costs, amortization of acquisition-related intangible assets associated with acquired technology and capitalized software development costs, as well as allocated shared costs. Employee-related expenses consist of salaries, taxes, benefits and stock-based compensation.
Operating expenses:
Research and product development
Research and product development expenses are primarily employee-related expenses, costs associated with continuously developing new solutions and enhancing and maintaining our technology platform as well as allocated shared costs. These costs are expensed as incurred. Employee-related expenses consist of salaries, taxes, benefits and stock-based compensation. We capitalize employee-related expenses relating to software development costs incurred in connection with adding functionality to our platform, as well as internal-use projects during the application development stage.
Marketing and sales
Marketing and sales expenses include costs related to advertisements used to drive customer acquisition, employee-related expenses, amortization of acquisition-related intangible assets associated with acquired customer relationships, customer acquisition and creative assets, affiliate fees on customer referrals and allocated shared costs. Employee-related expenses consist of salaries, sales commissions, taxes, benefits and stock-based compensation. Allocated shared costs include customer support costs related to assistance provided by our customer service team to customers during their trial periods on our platform. Depending on the nature of the advertising, costs are expensed at the time a commercial initially airs, when a promotion first appears in the media or as incurred. Affiliate fees on customer referrals are deferred and recognized ratably over the expected period of our relationship with the new customer. Sales commissions paid to internal sales personnel relating to obtaining customer contracts are capitalized and amortized ratably over the expected life of the new customer.
General and administrative
General and administrative expenses are primarily employee-related expenses, which consist of salaries, taxes, benefits and stock-based compensation associated with supporting business operations. General and administrative expenses also include software and subscription services, external accounting and legal professional service fees, indirect taxes, as well as insurance. The functional elements included in general and administrative are finance, people, legal, information technology and overall corporate support.
24

Interest expense
Interest expense primarily consists of the interest expense related to our debt facilities. For further discussion on our interest expense related to our debt facilities, see "Liquidity and Capital Resources, Indebtedness.”
Other income/(loss)
Other income/(loss) is primarily comprised of net investment income and realized and unrealized foreign currency gains and losses. See “Item 3. Quantitative and Qualitative Disclosures About Market Risk, Foreign Currency Exchange Risk.”
Benefit from income taxes
The Company accounts for income taxes under the asset and liability method, and deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying values of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The Company recognizes deferred tax assets to the extent it believes these assets are more likely than not to be realized. In making such a determination, the Company considers all positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations. A valuation allowance is provided if it is determined that it is more likely than not that the deferred tax asset will not be realized.
The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax positions will be sustained on examination by the tax authority. The tax benefits recognized in the financial statements from such positions are measured based on the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company recognizes interest and penalties, where appropriate, related to unrecognized tax benefits in income tax expense.
Effective December 1, 2018, the Company became subject to a U.S. tax requirement that certain income earned by foreign subsidiaries, referred to as Global Intangible Low-Taxed Income (“GILTI”), must be included in the gross income of the subsidiary’s U.S. shareholder. Accounting principles generally accepted in the U.S. provide for an accounting policy election of either recognizing deferred taxes for temporary differences expected to reverse as GILTI in future years or recognizing such taxes as a current period expense when incurred. The Company elected to treat GILTI as a current period expense when incurred.
25

Results of operations
The following table sets forth our condensed consolidated statements of operations information for the three months ended March 31, 2024 and 2023.
Three Months Ended March 31,
($ in thousands)20242023
(Unaudited)(Unaudited)
Revenue$281,148 $237,028 
Cost of revenue(1)
80,774 42,950 
Gross profit200,374 194,078 
Operating expenses:
Research and product development(1)
66,846 58,570 
Marketing and sales(1)
117,533 101,672 
General and administrative(1)
30,823 32,340 
Total operating expenses215,202 192,582 
Operating (loss)/income(14,828)1,496 
Interest expense(10,381)(8,094)
Other income/(loss)4,577 (840)
Loss before benefit from income taxes(20,632)(7,438)
Benefit from income taxes20,776 7,940 
Net income$144 $502 
__________________

(1)Includes stock-based compensation as follows:
Three Months Ended March 31,
($ in thousands)20242023
(Unaudited)(Unaudited)
Cost of revenue$1,769 $1,052 
Research and product development15,650 10,687 
Marketing and sales3,211 1,871 
General and administrative7,537 8,516 
Total stock-based compensation$28,167 $22,126 
The following table sets forth our condensed consolidated statements of operations information as a percentage of total revenue for the three months ended March 31, 2024 and 2023.
Three Months Ended March 31,
20242023
(Unaudited)(Unaudited)
Revenue100.0 %100.0 %
Cost of revenue28.7 %18.1 %
Gross profit71.3 %81.9 %
Operating expenses:
Research and product development23.8 %24.7 %
Marketing and sales41.8 %42.9 %
General and administrative11.0 %13.6 %
Total operating expenses76.6 %81.2 %
Operating (loss)/income(5.3)%0.7 %
Interest expense(3.7)%(3.4)%
Other income/(loss)1.6 %(0.4)%
Loss before benefit from income taxes(7.4)%(3.1)%
Benefit from income taxes7.4 %3.3 %
Net income— %0.2 %
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The following table sets forth our condensed consolidated revenue by geographic location and our condensed consolidated revenue by geographic location as a percentage of total revenue for the three months ended March 31, 2024 and 2023.
Three Months Ended March 31,Change
($ in thousands, except percentages)
20242023
Amount
%
(Unaudited)(Unaudited)
United States$201,035 $169,754 $31,281 18.4 %
International80,113 67,274 12,839 19.1 %
Total revenue$281,148 $237,028 $44,120 18.6 %
Percentage of total revenue:
United States71.5 %71.6 %
International28.5 %28.4 %
Total revenue100 %100 %
Comparison of the Three Months Ended March 31, 2024 and 2023
Revenue
Three Months Ended March 31,Change
($ in thousands, except percentages)20242023Amount%
(Unaudited)(Unaudited)
Presence$200,884 $164,391 $36,493 22.2 %
Commerce80,264 72,637 7,627 10.5 %
Total revenue$281,148 $237,028 $44,120 18.6 %
Percentage of total revenue:
Presence71.5 %69.4 %
Commerce28.5 %30.6 %
Total revenue100 %100 %
Presence revenue
Presence revenue increased $36.5 million, or 22.2%, for the three months ended March 31, 2024 compared to the same period in 2023. This increase was primarily the result of the growth of our unique subscriptions, which contributed $20.3 million, or 55.7%, driven by retention of existing subscriptions and continued acquisition of new subscriptions across our presence offerings. As described above, unique subscriptions do not account for the Acquired Domain Assets, which contributed additional growth of $11.5 million, or 31.5%. Additionally, price increases across our website subscription plans contributed $4.2 million, or 11.4%.
Commerce revenue
Commerce revenue increased $7.6 million, or 10.5%, for the three months ended March 31, 2024 compared to the same period in 2023. This increase was primarily the result of the growth of our unique subscriptions, which contributed approximately $5.8 million, or 76.7%, driven by retention of existing subscriptions and continued acquisition of new subscriptions across our commerce offerings, including subscriptions for our scheduling and marketing tools. Additionally, price increases across our commerce subscription plans contributed approximately $1.2 million, or 16.0%.
Cost of revenue and gross profit
Three Months Ended March 31,Change
($ in thousands, except percentages)20242023Amount%
(Unaudited)(Unaudited)
Cost of revenue$80,774 $42,950 $37,824 88.1 %
Gross profit$200,374 $194,078 $6,296 3.2 %
Percentage of total revenue:
Cost of revenue28.7 %18.1 %
Gross profit71.3 %81.9 %
Cost of revenue
Cost of revenue increased $37.8 million, or 88.1%, for the three months ended March 31, 2024 compared to the same period in 2023. The increase was primarily due to increases in domain name registration fees of $31.3 million,
27

primarily attributed to domain subscriptions associated with the Google Domains Asset Acquisition. Additionally, this increase was partially due to increases in web hosting costs of $2.4 million, payroll and associated benefit expenses for customer support of $2.2 million and payment processing fees of $1.1 million, as a result of our growing subscription base.
Gross profit
Gross profit increased $6.3 million, or 3.2%, for the three months ended March 31, 2024 compared to the same period in 2023, primarily due to the growth of our unique subscriptions, partially offset by increases in domain name registration fees primarily attributed to domain subscriptions associated with the Google Domains Asset Acquisition.
Gross profit as a percentage of revenue was 71.3% for the three months ended March 31, 2024 compared to 81.9% for the same period in 2023, primarily due to the Acquired Domain Assets, all of which have not completed an annual renewal period on our platform as of March 31, 2024. Generally, we recognize revenue for our domain subscription ratably over a period of twelve months and we recognize the cost of registering domains upon purchase or renewal. This has resulted in a decline in gross profit as a percentage of revenue during the three months ended March 31, 2024 compared to the same period in 2023, which was prior to the Google Domains Asset Acquisition.
Operating expenses:
Research and product development
Three Months Ended March 31,Change
($ in thousands, except percentages)20242023Amount%
(Unaudited)(Unaudited)
Research and product development$66,846 $58,570 $8,276 14.1 %
Percentage of total revenue23.8 %24.7 %
Research and product development expenses increased $8.3 million, or 14.1%, for the three months ended March 31, 2024 compared to the same period in 2023. The increase was primarily due to increases in payroll and associated benefit expenses of $7.5 million, partially offset by increases in capitalized internally developed software costs of $0.7 million, in support of our product development. Additionally, during the three months ended March 31, 2024, the Company recognized $1.1 million of expenses related to a transactions service agreement between the Company and Google as part of the Google Domains Asset Acquisition.
Marketing and sales
Three Months Ended March 31,Change
($ in thousands, except percentages)20242023Amount%
(Unaudited)(Unaudited)
Marketing and sales$117,533 $101,672 $15,861 15.6 %
Percentage of total revenue41.8 %42.9 %
Marketing and sales expenses increased $15.9 million, or 15.6%, for the three months ended March 31, 2024 compared to the same period in 2023, primarily due to increased amortization expense of $11.0 million related to finite-lived intangible assets acquired as part of the Google Domains Asset Acquisition and advertising expenses of $5.2 million, mainly related to increased direct response channels.
General and administrative
Three Months Ended March 31,Change
($ in thousands, except percentages)20242023Amount%
(Unaudited)(Unaudited)
General and administrative$30,823 $32,340 $(1,517)(4.7)%
Percentage of total revenue11.0 %13.6 %
General and administrative expenses decreased $1.5 million, or 4.7%, for the three months ended March 31, 2024 compared to the same period in 2023, primarily due to decreased indirect tax expenses of $1.6 million.
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Interest expense
Three Months Ended March 31,Change
($ in thousands, except percentages)20242023Amount%
(Unaudited)(Unaudited)
Interest expense$(10,381)$(8,094)$2,287 28.3 %
Percentage of total revenue(3.7)%(3.4)%
Interest expense increased $2.3 million, or 28.3%, for the three months ended March 31, 2024 compared to the same period in 2023, primarily due to an increase in our total debt outstanding as a result of additional term loan commitments received during the third quarter of the year ended December 31, 2023.
Other income/(loss)
Three Months Ended March 31,Change
($ in thousands, except percentages)20242023Amount%
(Unaudited)(Unaudited)
Other income/(loss)$4,577 $(840)$5,417 (644.9)%
Percentage of total revenue1.6 %(0.4)%
Other income/(loss) increased $5.4 million for the three months ended March 31, 2024 compared to the same period in 2023. The increase is primarily due to increased net transaction gains of $3.3 million due to favorable foreign exchange rates, as well as increased interest income of $2.0 million due to increased cash equivalents and investment in marketable securities balances compared to the same period in 2023.
Benefit from income taxes
Three Months Ended March 31,Change
($ in thousands, except percentages)20242023Amount%
(Unaudited)(Unaudited)
Loss before benefit from income taxes$(20,632)$(7,438)$(13,194)177.4 %
Benefit from income taxes$20,776 $7,940 $12,836 
Effective tax rate(100.7)%(106.7)%6.0 %
The benefit from income taxes increased for the three months ended March 31, 2024 compared to the same period in 2023, primarily driven by the increase in loss before benefit from income taxes.
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Quarterly Results of Operations
The following tables set forth selected unaudited quarterly statements of operations data for each of the eight fiscal quarters ended March 31, 2024, as well as the percentage of revenues that each line item represents for each quarter. The information for each of these quarters has been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") on the same basis as our audited historical consolidated financial information and includes, in the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for the fair statement of the results of operations for these periods. This data should be read in conjunction with our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. These quarterly results are not necessarily indicative of our results of operations to be expected for any future period.
Three Months Ended (Unaudited)
($ in thousands)March 31,
2024
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
December 31,
2022
September 30,
2022
June 30,
2022
Revenue$281,148 $270,718 $257,061 $247,529 $237,028 $228,812 $217,696 $212,702 
Cost of revenue(1)
80,774 69,650 51,753 43,167 42,950 40,106 38,907 36,993 
Gross profit200,374 201,068 205,308 204,362 194,078 188,706 178,789 175,709 
Operating expenses:
Research and product development(1)66,846 61,715 60,491 61,412 58,570 56,828 54,312 58,829 
Marketing and sales(1) 117,533 91,513 81,016 75,373 101,672 66,154 74,248 68,743 
General and administrative(1)
30,823 29,922 36,155 30,909 32,340 37,942 38,507 39,190 
Impairment charge— — — — — 225,163 — — 
Total operating expenses215,202