(EDGAR Online via COMTEX) -- 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 in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Amendment No 1. on Quarterly Report on Form 10-Q/A 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, 2020 included in the Final Prospectus for our Direct Listing filed with the SEC, pursuant to Rule 424(b)(4) on May 19, 2021. 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 set forth under "Risk Factors" in Item 1A of Part II of this Amendment No.1 on Quarterly Report on Form 10-Q/A and in our Final Prospectus for our Direct Listing. See also "Cautionary Note Regarding Forward-Looking Statements." Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Overview Squarespace is a leading all-in-one platform for businesses and independent creators to build a beautiful online presence, grow their brands and manage their businesses across the internet. We offer websites, domains, e-commerce, tools for managing a social media presence, marketing tools, scheduling and hospitality services. Our easy-to-customize and design-first platform empowers millions of customers across over 200 different countries and territories. From individual entrepreneurs just starting out to the world's most iconic businesses, Squarespace helps transform our customers' visions into reality by creating an impactful, stylish and professional online presence. We were founded in 2003 by our Chief Executive Officer, Anthony Casalena, and have achieved a number of significant milestones since then: In 2004, we launched publicly as a blogging service to enable our customers to publish their content online. In 2006, we hired our first employees. In 2010, we raised a combined $38.5 million from Accel and Index Ventures. In 2012, we surpassed 100 employees and transitioned the platform to service the next phase of the internet with sophisticated and design-forward presentations, enabling businesses and independent creators to tell their brand stories in a professional manner, including on mobile devices. In 2013, we launched our commerce offerings, giving customers the ability to sell physical and digital goods directly from our platform. In 2014, we raised $40 million from General Atlantic. In 2015, we surpassed 500 employees and crossed $100 million in bookings. In 2016, we began generating net income. In 2019, we completed our first three acquisitions, continued to expand our commerce functionality and introduced Scheduling, Social, Marketing and Email Campaigns, which broadened our suite of solutions and points of entry to our platform. In 2020, we reached $664.7 million in bookings and 1,200 employees. On March 31, 2021, we acquired Tock, Inc., a reservation management system tool for time slotted businesses primarily serving restaurants and hospitality businesses. In May 2021, we became a public company through a direct listing on the NYSE. We primarily derive revenue from monthly and annual subscriptions to our presence and commerce solutions. Subscription revenue accounted for 92.1% and 92.5% of our total revenue for the three and nine months ended September 30, 2021, respectively, and 94.4% and 94.6% of our total revenue in the three and nine months ended September 30, 2020, 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 as well as revenue we generate from third-party services we offer that provide additional functionality to our customers. We generated revenue of $201.0 million and $576.6 million for the three and nine months ended September 30, 2021, respectively, and $162.3 million and $448.8 million in the three and nine months ended September 30, 2020, respectively. We believe we have a stable and predictable business model driven by efficient customer acquisition and the adoption by our customers over time of higher value offerings and add-on subscriptions. Our platform serves all types of customers, from SMBs and independent creators, such as restaurants, photographers, wedding planners, artists, musicians
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Three Months Ended September 30, Nine Months Ended September 30,
($ in thousands) 2021 2020 2021 2020
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenue $ 200,962 $ 162,335 $ 576,618 $ 448,849
Cost of revenue(1) 32,868 24,550 92,777 72,166
Gross profit 168,094 137,785 483,841 376,683
Operating expenses:
Research and product development(1) 48,769 38,379 139,692 110,497
Marketing and sales(1) 80,249 59,656 249,005 186,490
General and administrative(1) 32,091 11,961 336,337 37,570
Total operating expenses 161,109 109,996 725,034 334,557
Operating income/(loss) 6,985 27,789 (241,193) 42,126
Interest expense (2,491) (2,460) (8,578) (8,046)
Other income/(loss), net 2,101 (3,488) 4,493 (3,602)
Income/(loss) before (provision
for)/benefit from income taxes 6,595 21,841 (245,278) 30,478
(Provision for)/benefit from income taxes (3,756) (3,917) 12,439 (4,147)
Net income/(loss) $ 2,839 $ 17,924 $ (232,839) $ 26,331
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(1)Includes stock-based compensation as follows:
Three Months Ended September 30, Nine Months Ended September 30,
($ in thousands) 2021 2020 2021 2020
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cost of revenue $ 440 $ 202 $ 1,095 $ 568
Research and product development 8,782 5,522 23,820 15,468
Marketing and sales 1,716 882 4,457 2,305
General and administrative (a) 12,796 1,047 254,727 4,482
Total stock-based compensation $ 23,734 $ 7,653 $ 284,099 $ 22,823
(a) During the nine months ended September 30, 2021, we incurred $229.3 million of additional stock-based compensation expense associated with the lapse of vesting conditions upon consummation of the Direct Listing.
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Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenue 100.0 % 100.0 % 100.0 % 100.0 %
Cost of revenue 16.4 % 15.1 % 16.1 % 16.1 %
Gross profit 83.6 % 84.9 % 83.9 % 83.9 %
Operating expenses:
Research and product development 24.3 % 23.6 % 24.2 % 24.6 %
Marketing and sales 39.9 % 36.7 % 43.2 % 41.5 %
General and administrative 16.0 % 7.4 % 58.3 % 8.4 %
Total operating expenses 80.2 % 67.8 % 125.7 % 74.5 %
Operating income/(loss) 3.5 % 17.1 % (41.8) % 9.4 %
Interest expense (1.2) % (1.5) % (1.5) % (1.8) %
Other income/(loss), net 1.0 % (2.1) % 0.8 % (0.8) %
Income/(loss) before (provision
for)/benefit from income taxes 3.3 % 13.5 % (42.5) % 6.8 %
(Provision for)/benefit from income
taxes (1.9) % (2.4) % 2.2 % (0.9) %
Net income/(loss) 1.4 % 11.0 % (40.4) % 5.9 %
The following table sets forth our consolidated revenue by geographic location and our consolidated revenue by geographic location as a percentage of total revenue for the three and nine months ended September 30, 2021 and 2020.
Three Months Ended September 30, Change Nine Months Ended September 30, Change
($ in thousands, except percentages) 2021 2020 Amount % 2021 2020 Amount %
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
United States $ 130,133 $ 112,265 $ 17,868 15.9 % $ 398,693 $ 312,735 $ 85,958 27.5 %
International 70,829 50,070 20,759 41.5 % 177,925 136,114 41,811 30.7 %
Total revenue $ 200,962 $ 162,335 $ 38,627 23.8 % $ 576,618 $ 448,849 $ 127,769 28.5 %
Percentage of total revenue:
United States 64.8 % 69.2 % 69.1 % 69.7 %
International 35.2 % 30.8 % 30.9 % 30.3 %
Total revenue 100 % 100 % 100 % 100 %
During the three months ended September 30, 2021, we identified certain revenues which should have been classified as international revenues during the first and second quarter. Accordingly, in the third quarter, we reclassified approximately $4.1 million and $5.1 million related to the first and second quarter, respectively, out of United States and into international revenue. Using the updated classification, the first, second and third quarter international year-over-year growth would have been 37%, 34% and 23%, respectively. Further, the first, second and third quarter United States year-over-year growth would have been 29%, 30% and 24%, respectively. No amounts were reclassified related to fiscal 2020.
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Revenue
Three Months Ended September 30, Change
($ in thousands, except percentages) 2021 2020 Amount %
(Unaudited) (Unaudited)
Presence $ 141,152 $ 123,821 $ 17,331 14.0 %
Commerce 59,810 38,514 21,296 55.3 %
Total revenue $ 200,962 $ 162,335 $ 38,627 23.8 %
Percentage of total revenue:
Presence 70.2 % 76.3 %
Commerce 29.8 % 23.7 %
Total revenue 100 % 100 %
Presence Revenue
Cost of Revenue and Gross Profit
Three Months Ended September 30, Change
($ in thousands, except percentages) 2021 2020 Amount %
(Unaudited) (Unaudited)
Cost of revenue $ 32,868 $ 24,550 $ 8,318 33.9 %
Gross profit $ 168,094 $ 137,785 $ 30,309 22.0 %
Percentage of total revenue:
Cost of revenue 16.4 % 15.1 %
Gross profit 83.6 % 84.9 %
Cost of revenue
Nov 15, 2021
COMTEX_396989565/2041/2021-11-15T16:51:19
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