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
PART I.		FINANCIAL INFORMATION	3
	Item 1.	Financial Statements (Unaudited)	3
		Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023	3
		Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023	4
		Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2024 and 2023	5
		Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the Three Months Ended March 31, 2024 and 2023	6
		Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023	7
		Notes to Unaudited Condensed Consolidated Financial Statements	8
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	36
	Item 4.	Controls and Procedures	36
PART II.		OTHER INFORMATION	38
	Item 1.	Legal Proceedings	38
	Item 1A.	Risk Factors	38
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61
	Item 3.	Defaults upon Senior Securities	61
	Item 4.	Mine Safety Disclosures	62
	Item 5.	Other Information	62
	Item 6.	Exhibits	62
SIGNATURES			63

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, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	241,905	$	257,702
Restricted cash	38,778		36,583
Investment in marketable securities	46,981		—
Accounts receivable	30,297		24,894
Due from vendors	5,298		6,089
Prepaid expenses and other current assets	70,419		48,947
Total current assets	433,678		374,215
Property and equipment, net	58,759		58,211
Operating lease right-of-use assets	75,325		77,764
Goodwill	210,438		210,438
Intangible assets, net	175,225		190,103
Other assets	12,044		11,028
Total assets	$	965,469	$	921,759
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	21,386	$	12,863
Accrued liabilities	109,789		99,435
Deferred revenue	376,134		333,191
Funds payable to customers	44,076		42,672
Debt, current portion	53,058		48,977
Operating lease liabilities, current portion	12,819		12,640
Total current liabilities	617,262		549,778
Deferred income taxes, non-current portion	1,100		1,039
Debt, non-current portion	503,833		519,816
Operating lease liabilities, non-current portion	94,317		97,714
Other liabilities	15,230		13,764
Total liabilities	1,231,742		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 capital	918,552		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,
	2024		2023
Revenue	$	281,148	$	237,028
Cost of revenue	80,774		42,950
Gross profit	200,374		194,078
Operating expenses:
Research and product development	66,846		58,570
Marketing and sales	117,533		101,672
General and administrative	30,823		32,340
Total operating expenses	215,202		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 taxes	20,776		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, basic	136,936,860		134,917,610
Weighted-average shares used in computing net income per share, diluted	140,447,379		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,
	2024		2023
Net income	$	144	$	502
Other comprehensive income
Foreign currency translation adjustment	44		258
Unrealized (loss)/gain on marketable securities, net of income taxes	(27)		216
Total other comprehensive income	17		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 Loss		Accumulated Deficit		Total Stockholders’ Deficit
	Shares	Amount		Shares	Amount		Shares	Amount
Balance at December 31, 2023	88,545,012	$	9	47,844,755	$	5	—	$	—	$	924,634	$	(843)	$	(1,184,157)	$	(260,352)
Stock-based compensation	—	—		—	—		—	—		28,979		—		—		28,979
Stock option exercises	420,214	—		—	—		—	—		841		—		—		841
Vested RSUs converted to common shares	1,808,975	—		—	—		—	—		—		—		—		—
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, 2024	89,684,219	$	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 Loss		Accumulated Deficit		Total Stockholders’ Deficit
	Shares	Amount		Shares	Amount		Shares	Amount
Balance at December 31, 2022	87,754,534	$	8	47,844,755	$	5	—	$	—	$	875,737	$	(1,665)	$	(1,177,076)	$	(302,991)
Stock-based compensation	—	—		—	—		—	—		22,595		—		—		22,595
Stock option exercises	13,050	—		—	—		—	—		52		—		—		52
Vested RSUs converted to common shares	1,357,462	—		—	—		—	—		—		—		—		—
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, 2023	87,295,014	$	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,
	2024		2023
OPERATING ACTIVITIES:
Net income	$	144	$	502
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	18,672		7,241
Stock-based compensation	28,167		22,126
Deferred income taxes	62		62
Non-cash lease income	(767)		(466)
Other	350		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 liabilities	19,627		16,960
Deferred revenue	45,669		29,279
Funds payable to customers	1,404		1,580
Other operating assets and liabilities	(1,963)		64
Net cash provided by operating activities	85,219		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 options	841		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 period	294,285		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 cash	38,778		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, 2024		December 31, 2023
Restricted cash	$	38,778	$	36,583
Due from vendors	5,298		6,089
Total payment processing assets	44,076		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
	Presence		Commerce		Total
Subscription revenue
Transferred over time	$	194,046	$	61,199	$	255,245
Transferred at a point in time	5,989		—		5,989
Non-subscription revenue
Transferred over time	730		928		1,658
Transferred at a point in time	119		18,137		18,256
Total revenue	$	200,884	$	80,264	$	281,148

	Three Months Ended March 31, 2023
	Presence		Commerce		Total
Subscription revenue
Transferred over time	$	159,580	$	54,056	$	213,636
Transferred at a point in time	4,144		—		4,144
Non-subscription revenue
Transferred over time	599		895		1,494
Transferred at a point in time	68		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,
	2024		2023
United States	$	201,035	$	169,754
International	80,113		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, 2024		December 31, 2023
Capitalized referral fees, current	$	7,674	$	7,626
Capitalized referral fees, non-current	10,591		9,715
Capitalized app fees, current	651		750
Sales commissions, current	667		496
Sales commissions, non-current	347		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,
	2024		2023
Cost of revenue	$	749	$	861
Marketing and sales	2,593		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. treasuries	11,650		—		(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 months				12 months or Greater				Total
	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. treasuries	10,580		(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 years	26,501
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 1		Level 2		Level 3		Total
Cash equivalents
Money market funds	$	180,035	$	—	$	—	$	180,035
Corporate bonds and commercial paper	4,043		—		—		4,043
Available-for-sale debt securities
Corporate bonds and commercial paper	—		35,339		—		35,339
U.S. treasuries	11,642		—		—		11,642
Total	$	195,720	$	35,339	$	—	$	231,059

	December 31, 2023
	Level 1		Level 2		Level 3		Total
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, 2024		December 31, 2023
Prepaid income taxes	$	27,498	$	3,402
Prepaid domain name registration fees	15,809		12,073
Prepaid operational expenses	11,497		12,183
Capitalized contract costs	8,992		8,872
Prepaid advertising expenses	944		5,804
Other current assets	5,679		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, 2024		December 31, 2023
Accrued indirect taxes	$	39,676	$	38,174
Accrued marketing expenses	29,527		24,998
Accrued product expenses	22,214		22,569
Accrued payroll expenses	6,863		4,247
Other accrued expenses	11,509		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, 2024		December 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
2025	522,421
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
2025	24,658
2026	28,567
2027	29,467
2028	4,508
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,
	2024		2023
Operating lease costs
Operating lease costs	$	3,338	$	3,455
Variable lease costs	872		764
Short-term lease costs	53		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
2025	16,877
2026	17,600
2027	17,062
2028	17,277
Thereafter	41,178
Total operating lease payments	122,381
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.

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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,
	2024		2023
Cost of revenue	$	1,769	$	1,052
Research and product development	15,650		10,687
Marketing and sales	3,211		1,871
General and administrative	7,537		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.

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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,
	2024		2023
Numerator:
Net income	$	144	$	502
Denominator:
Weighted-average shares used in computing net income per share, basic	136,936,860		134,917,610
Effect of dilutive securities	3,510,519		2,264,658
Weighted-average shares used in computing net income per share, diluted	140,447,379		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,
	2024	2023
Stock options	—	—
RSUs and PSUs	321,926	2,134,308
Total	321,926	2,134,308

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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.

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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

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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.

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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.

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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)	2024		2023
	(Unaudited)		(Unaudited)
Revenue	$	281,148	$	237,028
Cost of revenue(1)	80,774		42,950
Gross profit	200,374		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 expenses	215,202		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 taxes	20,776		7,940
Net income	$	144	$	502

__________________

(1)Includes stock-based compensation as follows:

	Three Months Ended March 31,
($ in thousands)	2024		2023
	(Unaudited)		(Unaudited)
Cost of revenue	$	1,769	$	1,052
Research and product development	15,650		10,687
Marketing and sales	3,211		1,871
General and administrative	7,537		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,
	2024		2023
	(Unaudited)		(Unaudited)
Revenue	100.0	%	100.0	%
Cost of revenue	28.7	%	18.1	%
Gross profit	71.3	%	81.9	%
Operating expenses:
Research and product development	23.8	%	24.7	%
Marketing and sales	41.8	%	42.9	%
General and administrative	11.0	%	13.6	%
Total operating expenses	76.6	%	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 taxes	7.4	%	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)	2024			2023			Amount		%
	(Unaudited)			(Unaudited)
United States	$	201,035		$	169,754		$	31,281	18.4	%
International	80,113			67,274			12,839		19.1	%
Total revenue	$	281,148		$	237,028		$	44,120	18.6	%
Percentage of total revenue:
United States	71.5		%	71.6		%
International	28.5		%	28.4		%
Total revenue	100		%	100		%

Comparison of the Three Months Ended March 31, 2024 and 2023

Revenue

	Three Months Ended March 31,						Change
($ in thousands, except percentages)	2024			2023			Amount		%
	(Unaudited)			(Unaudited)
Presence	$	200,884		$	164,391		$	36,493	22.2	%
Commerce	80,264			72,637			7,627		10.5	%
Total revenue	$	281,148		$	237,028		$	44,120	18.6	%
Percentage of total revenue:
Presence	71.5		%	69.4		%
Commerce	28.5		%	30.6		%
Total revenue	100		%	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)	2024			2023			Amount		%
	(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 revenue	28.7		%	18.1		%
Gross profit	71.3		%	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,

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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)	2024			2023			Amount		%
	(Unaudited)			(Unaudited)
Research and product development	$	66,846		$	58,570		$	8,276	14.1	%
Percentage of total revenue	23.8		%	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)	2024			2023			Amount		%
	(Unaudited)			(Unaudited)
Marketing and sales	$	117,533		$	101,672		$	15,861	15.6	%
Percentage of total revenue	41.8		%	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)	2024			2023			Amount		%
	(Unaudited)			(Unaudited)
General and administrative	$	30,823		$	32,340		$	(1,517)	(4.7)	%
Percentage of total revenue	11.0		%	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)	2024			2023			Amount		%
	(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)	2024			2023			Amount		%
	(Unaudited)			(Unaudited)
Other income/(loss)	$	4,577		$	(840)		$	5,417	(644.9)	%
Percentage of total revenue	1.6		%	(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)	2024			2023			Amount			%
	(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 profit	200,374		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 expenses	215,202		183,150		177,662		167,694		192,582		386,087		167,067		166,762
Operating (loss)/income	(14,828)		17,918		27,646		36,668		1,496		(197,381)		11,722		8,947
Interest expense	(10,381)		(10,718)		(9,321)		(8,635)		(8,094)		(7,230)		(5,209)		(3,319)
Other income/(loss), net	4,577		(4,163)		6,327		2,038		(840)		(9,567)