S-1/A 1 tm213918-9_s1a.htm S-1/A tm213918-9_s1a - block - 45.3439673s
As filed with the Securities and Exchange Commission on April 26, 2021.
Registration No. 333-255284       
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SQUARESPACE, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
7372
(Primary Standard Industrial
Classification Code Number)
20-0375811
(I.R.S. Employer
Identification Number)
225 Varick Street, 12th Floor
New York, New York 10014
(646) 580-3456
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Anthony Casalena
Chief Executive Officer
Squarespace, Inc.
225 Varick Street, 12th Floor
New York, New York 10014
(646) 580-3456
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Ryan J. Dzierniejko
David J. Goldschmidt
Skadden, Arps, Slate, Meagher & Flom LLP
One Manhattan West
New York, NY 10001
(212) 735-3000
Courtenay O’Connor
Jessica Krasner
Squarespace, Inc.
225 Varick Street, 12th Floor
New York, New York 10014
(646) 580-3456
Marc D. Jaffe
Gregory P. Rodgers
Benjamin J. Cohen
Latham & Watkins LLP
885 Third Avenue
New York, NY 10022
(212) 906-1200
Approximate date of commencement of proposed sale to public: As soon as practicable after this registration statement is declared effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
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 to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
Title of Each Class of
Securities to be Registered
Amount to be
Registered
Proposed
Maximum
Offering Price
Per Share
Proposed
Maximum
Aggregate
Offering Price(1)
Amount of
Registration Fee(2)
Class A common stock, $0.0001 par value per share
        
Not Applicable
$ 100,000,000 $ 10,910
(1)
Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(a) under the Securities Act of 1933, as amended. Given that there is no proposed maximum offering price per share of Class A common stock, the Registrant calculates the proposed maximum aggregate offering price, by analogy to Rule 457(f)(2), based on one-third of the par value per share of the Registrant’s Class A common stock because the Registrant has an accumulated capital deficit based on the Registrant’s unaudited pro forma balance sheet as of March 31, 2021. Given that the Registrant’s shares of Class A common stock are not traded on an exchange or over-the-counter, the Registrant did not use the market prices of its Class A common stock in accordance with Rule 457(c).
(2)
The Registrant previously paid $10,910 of the registration fee with the initial filing of this registration statement.
The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 
TABLE OF CONTENTS
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F-1
Neither we nor any of the Registered Stockholders have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectus we have prepared or that have been prepared on our behalf or to which we have referred you. Neither we nor any of the Registered Stockholders take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. The Registered Stockholders are offering to sell and seeking offers to buy shares of their Class A common stock but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date, regardless of the time of delivery of this prospectus or of any sale of our Class A common stock. Our business, financial condition and results of operations may have changed since such date.
For investors outside the United States: Neither we nor any of the Registered Stockholders have done anything that would permit the use or possession or distribution of this prospectus or any related free writing prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of our Class A common stock by the Registered Stockholders and the distribution of this prospectus outside the United States.
 
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement on Form S-1 that we filed with the SEC using a “shelf” registration or continuous offering process. Under this process, the Registered Stockholders may, from time to time, sell the Class A common stock covered by this prospectus in the manner described in the section titled “Plan of Distribution.” Additionally, we may provide a prospectus supplement to add information to, or update or change information contained in, this prospectus, including the section titled “Plan of Distribution.” You may obtain this information without charge by following the instructions under the section titled “Where You Can Find Additional Information” appearing elsewhere in this prospectus. You should read this prospectus and any prospectus supplement before deciding to invest in our Class A common stock.
Except as otherwise indicated, all information in this prospectus assumes:

the conversion of (i) all our outstanding Class C common stock, (ii) certain of our Series A-1 redeemable convertible preferred stock, (iii) all our outstanding Series A-2 redeemable convertible preferred stock and (iv) all our outstanding Series B redeemable convertible preferred stock into an aggregate of 62,064,788 shares of Class A common stock and the remainder of our outstanding Series A-1 redeemable convertible preferred stock into an aggregate of 49,583,897 shares of Class B common stock (the “Capital Stock Conversions”);

the exclusion of (i) 4,324,501 shares of Class B common stock issuable upon exercise of stock options outstanding as of March 31, 2021 at a weighted average exercise price of $2.17 per share, 4,288,345 of which were exercisable as of such date; (ii) 5,996,773 shares of Class A common stock issuable upon settlement of restricted stock units outstanding as of March 31, 2021 for which the time-based vesting condition had not been satisfied as of such date; (iii) 19,250,000 shares of Class A common stock reserved for issuance under the 2021 Plan (as defined below); and (iv) 2,700,000 shares of Class A common stock reserved for issuance under the ESPP (as defined below);

the exclusion of up to 2,750,000 shares of Class A common stock issuable upon settlement of restricted stock units pursuant to the Casalena Performance Award (as defined below);

no forfeiture of the 4,460,858 restricted shares of Class B common stock held by Mr. Casalena pursuant to the equity award described in “Executive Compensation — Outstanding Equity Awards at Fiscal Year End for 2020”; and

the filing and effectiveness of our amended and restated certificate of incorporation and the adoption and effectiveness of our amended and restated bylaws, each of which will occur in connection with the effectiveness of the registration statement of which this prospectus forms a part.
After giving effect to the Capital Stock Conversions, as of March 31, 2021, we had a total of 71,224,389 shares of Class A common stock, 64,852,905 shares of Class B common stock and no shares of Class C common stock outstanding. Between March 31, 2021 and the effective date of the registration statement of which this prospectus forms a part, we have not issued any additional shares of common stock or awards convertible or exercisable for shares of common stock.
Following the listing of our Class A common stock on the NYSE, approximately          shares of our Class A common stock may be immediately sold either (i) by the Registered Stockholders pursuant to this prospectus, (ii) in connection with the Form S-8 that we intend to file to register, among other things, shares of Class B common stock issuable upon currently exercisable outstanding stock options or (iii) by our other existing stockholders under Rule 144 under the Securities Act since such shares held by such other stockholders will have been beneficially owned by non-affiliates for at least one year. See also “Shares Eligible For Future Sale.”
Certain amounts, percentages and other figures presented in this prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals, dollars or percentage amounts of changes may not represent the arithmetic summation or calculation of the figures that precede them.
 
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PROSPECTUS SUMMARY
This summary highlights select information contained elsewhere in this prospectus and does not contain all the information you should consider before making an investment decision. You should read the entire prospectus carefully, including the sections entitled “Risk Factors,” “Cautionary Note Regarding Forward-Looking Statements,” “Selected Consolidated Financial and Operating Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the accompanying notes included elsewhere in this prospectus before making an investment decision. Unless otherwise indicated or the context otherwise requires, all references in this prospectus to “we,” “us,” “our,” the “Company,” “Squarespace” and similar terms refer to Squarespace, Inc. and its consolidated subsidiaries.
Our Mission
Squarespace exists to help people with creative ideas stand out and succeed. We enable millions to build a brand and transact with their customers in an impactful and beautiful online presence.
Overview
Squarespace is a leading all-in-one platform for businesses and independent creators to build a beautiful online presence, grow their brands and manage their businesses across the internet. We offer websites, domains, e-commerce, tools for managing a social media presence, marketing tools and scheduling capabilities. Our easy-to-customize and design-first platform empowers millions of customers in approximately 180 countries. From individual entrepreneurs just starting out to the world’s most iconic businesses, Squarespace helps transform our customers’ visions into reality by creating an impactful, stylish and professional online presence.
Consumer behavior continues to rapidly evolve in conjunction with changes in the internet and technology, and the amount of time and money consumers spend online is accelerating. As consumers increasingly engage with companies online to learn about and transact with new brands, the marketplace for consumer attention is intensely competitive. It is mission-critical for brands to differentiate themselves with a beautiful and effective online presence. Businesses and independent creators need a way to develop an impactful, professional-quality presence quickly and cost-effectively that also enables them to transact directly with their customer base.
The Squarespace platform empowers our customers to build, manage and grow compelling brands online. We bring together three primary pillars of functionality to create a unified, all-in-one platform to help our customers grow:

Presence:   Our intuitive design tools make it possible to quickly and easily create a professional-quality, mobile and desktop friendly website, acquire a domain and have a differentiated social media presence. Since our founding, we have aggressively invested in our design and creative teams in an effort to create innovative, forward-thinking website designs that ensure our customers’ websites are seen as among the most sophisticated on the web.

Commerce:   Through our comprehensive commerce solutions, we provide our customers everything they need to sell physical products, subscriptions, content or services online. Our commerce functionality is fully integrated with our presence products, eliminating the need for third-party tools.

Marketing:   We provide brands with powerful, integrated marketing solutions, such as Email Campaigns, customer relationship management functionality, search engine optimization (“SEO”) and analytics tools to help them better understand and target their audiences while driving traffic, sales and conversion.
Squarespace is an engineering and design-led company and our platform features a modern architecture, scalable delivery platform and secure solutions that provide support for our global customer base. The Squarespace platform works for customers that are just getting started, as well as large brands that need scale, flexibility and reliability.
 
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In addition to servicing customers from inception to at-scale, our customers span a wide variety of industries and use cases, from small businesses and independent creators, such as restaurants, photographers, wedding planners, artists, musicians and bloggers, to iconic brands. As of March 31, 2021, we had 3.8 million unique subscriptions to our platform.
We believe we have a significant existing and growing market opportunity with over 800 million small businesses and self-employed ventures globally. In addition, according to the Kauffman Index, nearly 540,000 new businesses are created each month in the United States. According to Clutch, approximately 46% of small and medium-sized businesses (“SMBs”) are not online today and we believe there is significant headroom for growth with increasing online penetration alone. We believe we have created a highly-efficient and multi-pronged go-to-market model that enables us to capitalize on our market opportunity and acquire customers in a cost effective manner. We believe we have a stable and predictable business model driven by efficient customer acquisition and the adoption by our customers over time of higher value offerings and add-on subscriptions. We generated in fiscal 2019 and 2020, respectively:

revenue of $484.8 million and $621.1 million;

net income of $58.2 million and $30.6 million;

adjusted EBITDA of $97.6 million and $116.7 million;

cash flow from operating activities of $102.3 million and $150.0 million; and

unlevered free cash flow of $94.6 million and $152.4 million.
We generated in the three months ended March 31, 2020 and 2021, respectively:

revenue of $136.9 million and $179.6 million;

net loss of $10.1 million and $1.1 million;

adjusted EBITDA of $1.2 million and $11.1 million;

cash flow from operating activities of $52.5 million and $50.1 million; and

unlevered free cash flow of $53.4 million and $51.8 million.
For additional information about our non-GAAP financial measures, including reconciliations of the non-GAAP financial measures to the most directly comparable financial measures stated in accordance with GAAP, see “Selected Consolidated Financial and Operating Information — Key Performance Indicators and Non-GAAP Financial Measures.”
Our Industry
Some of the key trends impacting our industry include:

The Criticality of Online Presence:   The rise in global internet usage has resulted in a dynamic and competitive online environment where consumers are provided with more options and more ways to engage than ever before. Many customers’ first interaction with a new brand will be digital. In response, businesses and independent creators have rapidly transitioned online (a shift further accelerated by the recent pandemic).

The Rise in Online Commerce:   In addition to engaging with brands online from a discovery standpoint, consumers expect to transact with them across digital channels, purchasing both goods and services.

The Rise of Direct to Consumer Relationships:   As brands move online and gain more control over their technology stack, there is a trend towards brands being able to directly own the relationship with their customers. This allows businesses and independent creators to directly access their customer data, which is not possible when relying on social networks and other distribution channels that otherwise might control access to it.

The Preference for DIY and DIFM Solutions:   “Do-it-yourself” ​(“DIY”) website creation tools have democratized the web, rapidly displacing expensive agencies and making equivalent design quality
 
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out-of-the-box, accessible and easy-to-use for all. Affordable “do-it-for-me” ​(“DIFM”) services leverage powerful DIY development tools due to the speed, scalability and maintenance advantages of these platforms.
The Challenges of Creating and Growing an Online Brand
Businesses and independent creators face several key challenges as they build and market their brands online, including:

Growing Competition for Consumer Attention:   As consumers increasingly engage online, the marketplace for consumer attention is intensely competitive, making it mission-critical for brands to differentiate themselves with an online presence that stands out. Based on a study by the Association for Computing Study and a study in Taylor & Francis’ Behavior and Information Technology Journal, 94% of first impressions are design-related, and it takes less than 0.05 seconds for someone to form an opinion about whether they like a website or not.

Limited Ability to Transact with Consumers:   Consumers are increasingly purchasing goods and services online. Many traditional commerce offerings are primarily designed to sell physical products. We believe in order for businesses and independent creators to succeed, they require comprehensive solutions that enable them to transact with their consumers across the full range of commerce models, including sale of physical goods, subscriptions and content, as well as capabilities such as scheduling appointments.

Accessibility of Solutions:   SMBs often lack the tools to develop a comprehensive and effective online presence quickly and affordably. Developing and maintaining a beautiful, fully functional website that addresses various use cases often requires extensive coding skills or the engagement of professional designers, agencies or developers. Meanwhile, traditional DIY solutions often lack the complex functionality required to create and maintain high-quality, expressive content.

Lack of Integrated Solutions:   Historically, brands have leveraged multiple separate solutions due to the lack of a comprehensive, integrated platform. As businesses continue to evolve and add new offerings, the integration of their solutions becomes crucial to maintain a cohesive brand expression across all touchpoints, to analyze data to grow their businesses and to provide an efficient and seamless customer experience across channels and devices.

Inability to Adapt Quickly to Rapidly Changing Consumer Behavior:   Traditional solutions often lack the flexibility customers require to keep up with constantly changing consumer behavior. From new products and services to new digital channels, businesses and independent creators need flexible and dynamic solutions with broad functionality.
The Key Benefits of our Platform
Our comprehensive, integrated platform provides a unified experience for our customers.

Beautiful Design, Consistent Everywhere:   We believe design is not a luxury. Our beautifully-designed, award-winning templates enable our customers to look professional from the start, while also providing deep levels of customization so that no two websites look alike. This empowers our customers to stand out and express their story and brand in a beautiful, engaging and consistent way across digital channels, including websites, social media and Email Campaigns, among others.

Sell Anything:   Our commerce solution supports a diverse set of business models, allowing our customers to sell physical products, subscriptions, content and services within the same platform. For example, a fitness instructor can market their brand professionally online and their clients can book personal training sessions through their website, attend virtual classes and buy custom apparel, all powered on the Squarespace platform.

Power with Simplicity:   Our platform balances ease-of-use with a deep level of functionality required to run more complex businesses. Our platform is also accessible from anywhere — customers can update their website or manage their business on-the-go using our web application or our iPhone and Android applications.
 
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All-in-One Platform:   Our all-in-one platform offers businesses and independent creators everything they need to build and manage their online presence and commerce across devices and social media. Our fully-integrated SaaS-based content management solution combines a website builder, a commerce solution, social presence and blogging infrastructure, a hosting service, a domain name registrar, marketing tools and differentiated analytics across digital channels. This comprehensive approach enables customers to aggregate and analyze data across solutions to help our customers better understand their audience and drive higher traffic, sales and conversion through a single interface.

Built for Modern Use Cases:   Our platform is both accessible and editable from all types of devices. Built on modern technology, we can adapt quickly to emerging channels and technology. For example, our Unfold product provides easy-to-use tools that empower storytellers to differentiate their content and brand on social media. With elevated design collections and intuitive photo and video editing, Unfold helps our customers look great beyond their websites. We aim to establish a foothold with the next generation of independent creators, because we understand that not all journeys may begin with a website.
Our Market Opportunity
Based on data from Intuit, as of 2019, there are an estimated 800 million SMBs and self-employed ventures worldwide. We believe that our near and medium-term addressable market is in excess of $150 billion, based on the number of global SMBs and self-employed ventures and our average revenue per unique subscription (“ARPUS”) as of December 31, 2020.
Global spending on e-commerce is set to accelerate. In response to this accelerating growth, we continue to innovate and add new services and features that create incremental opportunities to further penetrate as well as expand our core addressable market through new use cases and entry points. In addition, the growth of SMBs and proliferation of commerce, both domestically and internationally, will continue to drive our market opportunity and unlock new monetization opportunities for our platform.
Our Growth Strategies

Expand Our New Customer Base, Especially Internationally:   We aim to continue to deploy offerings across the globe, both in English and non-English speaking regions, in order to continue to diversify and accelerate our growth.

Expand and Deepen our Commerce Offerings:   We will continue to expand and invest in our commerce capabilities through the development of solutions that enable new ways for our customers to transact online.

Continued Investment in our Design Platform:   We will continue to invest in our core design platform and technology to ensure that we maintain our position at the forefront of leading design on the web.

Deepen Relationships with Existing Customers:   We plan to further invest in offerings that will enable our existing customers to grow their businesses by using more of our products and features, including online scheduling, exclusive Member Areas and Email Campaigns.

Promote and Develop our Enterprise Capabilities:   We will continue to develop our Enterprise offering, which includes both larger businesses and volume customers, to ensure they are able to fully leverage our all-in-one platform.

Expand our Experts Community:   We will continue to support our Experts community with the knowledge and tools they need to find clients and grow their businesses, as we believe it provides us with a unique marketing channel to address the steadily growing DIFM website development industry.

Opportunistically Pursue Strategic Acquisitions:   We believe that future strategic acquisitions will enable us to accelerate key platform, product and marketing initiatives and augment our organic growth strategy.
 
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Recent Developments
In March 2021, we issued on a private placement basis an aggregate of 4,452,023 shares of our Class C common stock to certain accredited investors at a purchase price of approximately $68.42 per share for aggregate proceeds of approximately $300 million (the “Private Placement”). The shares acquired by such investors will be registered for resale in connection with the registration statement of which this prospectus forms a part. See the section titled “Principal and Registered Stockholders.”
In March 2021, we acquired all of the outstanding equity of Tock, Inc. (“Tock”) for aggregate consideration of $415 million, consisting of $226.8 million of cash and 2,750,330 shares of our Class C common stock, subject to customary post-closing adjustments, based on, among other things, working capital, indebtedness and cash (the “Acquisition”). Tock was founded to solve booking problems of restaurants and to enable a direct connection between the hospitality industry’s business owners and its consumers. Tock provides a hospitality platform and application system for restaurants and other businesses that facilitates reservation, guest and table management, takeout, pickup and delivery and event management ticketing systems and related services. The Acquisition closed on March 31, 2021. The shares issued to Tock stockholders in the Acquisition will be registered for resale in connection with the registration statement of which this prospectus forms a part. See the section titled “Principal and Registered Stockholders.”
Summary Risk Factors
Our business is subject to a number of risks and uncertainties, as more fully described under “Risk Factors” in this prospectus. These risks could materially and adversely impact our business, financial condition and results of operations, which could cause the trading price of our Class A common stock to decline and could result in a loss of all or part of your investment. Some of these risks include:

Our business, financial condition and results of operations will be harmed if we are unable to attract and retain customers and expand their use of our platform.

If we fail to improve and enhance the functionality, performance, reliability, design, security and scalability of our solutions in a manner that responds to our customers’ evolving needs, our business, financial condition and results of operations may be adversely affected.

Our industry is highly competitive and we may not be able to compete successfully against current and future competitors.

The COVID-19 pandemic, the measures attempting to contain and mitigate the effects of the COVID-19 pandemic (including stay-at-home, business closure and other restrictive orders) and the resulting changes in consumer behaviors have disrupted and may continue to disrupt our normal operations.

The Squarespace brand is integral to our success. If we fail to protect or promote our brand, our business, financial condition and results of operations may be harmed.

Our business, financial condition and results of operations would be adversely affected if our marketing and selling activities fail to generate new customers at the levels that we anticipate or fail to generate new customers on a cost-effective basis.

We depend on highly skilled personnel, and if we are unable to hire, integrate and retain our personnel, we may not be able to address competitive challenges.

We rely heavily on the reliability, security and performance of our software. If our software contains serious errors or defects, or we have difficulty maintaining the software, we may lose revenue and market acceptance and may incur costs to defend or settle claims with our customers.

Our business, financial condition and results of operations would be harmed if changes to technologies used in our platform or new versions or upgrades of operating systems and internet browsers adversely impact the process by which customers interface with our platform and users interface with our customers’ sites.

We are subject to privacy and data protection laws and regulations as well as contractual privacy and data protection obligations. Our failure to comply with these or any future laws, regulations or
 
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obligations could subject us to sanctions and damages and could harm our reputation, business, financial condition and results of operations.

Our business is susceptible to risks associated with international sales and the use of our platform in various countries as well as our ability to localize our platform in such countries.

Our listing differs significantly from a traditional underwritten public offering.

The public trading price of our Class A common stock may be volatile, and could, upon listing on the NYSE, decline significantly and rapidly.

The multi-class structure of our common stock will have the effect of concentrating voting control with those stockholders who hold our Class B common stock, including our Founder and Chief Executive Officer. This will limit or preclude your ability to influence corporate matters, including the election of directors, amendments to our organizational documents and any merger, consolidation, sale of all or substantially all of our assets or other major corporate transactions requiring stockholder approval. Further, the issuance of shares of Class C common stock, whether to our Founder and Chief Executive Officer or to other stockholders, could prolong the duration of control of holders of Class B common stock.
Channels for Disclosure of Information
Following the effectiveness of the registration statement of which this prospectus forms a part, we intend to announce material information to the public through filings with the SEC, the investor relations page on our website (www.squarespace.com), press releases, public conference calls and public webcasts.
Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website.
Implications of Being an Emerging Growth Company
As a company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include that:

we are only required to include two years of audited consolidated financial statements in this prospectus in addition to any required interim financial statements, and correspondingly only required to provide reduced disclosure in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;

we are not required to engage an auditor to report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”);

we are not required to submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay,” “say-on-frequency” and “say-on-golden parachutes”; and

we are not required to disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to our median employee compensation.
We may take advantage of these provisions until the last day of the fiscal year during which the fifth anniversary of this listing occurs or such earlier time that we are no longer an emerging growth company. We will remain an emerging growth company until the earliest of: (i) the last day of the first fiscal year in which our annual gross revenue is $1.07 billion or more; (ii) the last day of the fiscal year during which the fifth anniversary of this listing occurs; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
Under the JOBS Act, emerging growth companies also can delay adopting new or revised accounting standards until such time as those standards would otherwise apply to private companies. We currently intend to take advantage of this exemption.
 
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For risks related to our status as an emerging growth company, see “Risk Factors — Risks Related to Being a Public Company — We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Class A common stock less attractive to investors.”
Our Principal Stockholder and our Status as a Controlled Company
As a result of his share ownership, Mr. Casalena, our Founder and Chief Executive Officer, will be able to exercise voting control with respect to an aggregate of 49,086,410 shares of our Class B common stock, representing approximately 68.2% of the total voting power of our outstanding capital stock as of March 31, 2021 (after giving effect to the Capital Stock Conversions). Accordingly, Mr. Casalena will have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of our directors. As a founder-led company, we believe that this voting structure aligns our interests in creating stockholder value.
Because Mr. Casalena will control a majority of our outstanding voting power, we will be a “controlled company” under the corporate governance rules for NYSE-listed companies. We have currently elected not to avail ourselves of any “controlled company” exemptions.
Corporate Information
We were incorporated in the State of Delaware in October 2007. Our principal executive offices are located at 225 Varick Street, 12th Floor, New York, New York 10014. Our telephone number is (646) 580-3456 and our website address is www.squarespace.com. The information contained on, or that can be accessed through, our website is deemed not to be incorporated in this prospectus or to be part of this prospectus. You should not consider information contained on, or hyperlinked through, our website to be part of this prospectus in deciding whether to purchase shares of our Class A common stock.
 
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SUMMARY HISTORICAL AND UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL AND OPERATING INFORMATION
The following tables summarize our consolidated financial and operating information. We have derived our summary consolidated statements of operations information and consolidated statements of cash flows information for the years ended December 31, 2019 and 2020 from our audited consolidated financial statements included elsewhere in this prospectus. The consolidated statements of operations information and consolidated statements of cash flows information for the three months ended March 31, 2020 and 2021 and the summary consolidated balance sheet information as of March 31, 2021 are derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. Our unaudited condensed consolidated financial statements were prepared on a basis consistent with our audited consolidated financial statements and include, in our opinion, all adjustments, consisting only of normal recurring adjustments, that we consider necessary for the fair statement of the financial information set forth in those statements. Our historical results are not necessarily indicative of the results that may be expected in the future. Except as otherwise indicated, the following unaudited pro forma condensed combined financial and operating information presents Squarespace’s summary consolidated statements of operations information after giving effect to the Acquisition and the Listing (as defined under “Unaudited Pro Forma Condensed Combined Financial Information”) and presents Squarespace’s summary consolidated balance sheet information after giving effect to the Listing. The unaudited pro forma condensed combined statements of operations information for the year ended December 31, 2020 and the three months ended March 31, 2021 gives pro forma effect to such transactions as if they had occurred on January 1, 2020 and the unaudited pro forma condensed combined balance sheet information as of March 31, 2021 gives pro forma effect to the Listing as if such transaction occurred on March 31, 2021. Our pro forma information is not necessarily indicative of the results that may be expected in the future. You should read the following financial information together with the information under the sections titled “Capitalization,” “Selected Consolidated Financial and Operating Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Unaudited Pro Forma Condensed Combined Financial Information” and our consolidated financial statements and related notes included elsewhere in this prospectus.
($ in thousands, except share and per share data)
Year Ended
December 31,
Three
Months
Ended
March 31,
Pro Forma
Year Ended
December 31,
Pro Forma
Three
Months
Ended
March 31,
2019
2020
2020
2021
2020
2021
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Consolidated Statements of Operations Information:
Revenue
$ 484,751 $ 621,149 $ 136,874 $ 179,646 $ 644,177 $ 188,747
Cost of revenue(1)
81,910 98,337 23,771 27,408 113,662 33,338
Gross profit
402,841 522,812 113,103 152,238 530,515 155,409
Operating expenses:
Research and product development(1)
107,645 167,906 36,086 42,011 180,084 45,789
Marketing and sales(1)
184,278 260,039 75,580 97,972 272,652 101,595
General and administrative(1)
49,578 54,647 13,786 19,516 324,136 22,710
Total operating expenses
341,501 482,592 125,452 159,499 776,872 170,094
Operating income /(loss)
61,340 40,220 (12,349) (7,261) (246,357) (14,685)
Interest expense
(1,080) (10,043) (3,130) (3,260) (10,043) (3,260)
Other income/(loss), net
3,815 (7,678) 1,205 3,593 (7,667) 3,592
Income before (provision for)/benefit from
income taxes
64,075 22,499 (14,274) (6,928) (264,067) (14,353)
(Provision for)/benefit from income
taxes
(5,923) 8,089 4,142 5,782 (3,586) 3,964
Net income/loss
$ 58,152 $ 30,588 $ (10,132) $ (1,146) $ (267,653) $ (10,389)
Net loss per share attributable to Class A
and Class B common stockholders, basic
and diluted(2)
$ (14.91) $ (14.10) $ (0.65) $ (0.11)
 
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($ in thousands, except share and per share data)
Year Ended
December 31,
Three
Months
Ended
March 31,
Pro Forma
Year Ended
December 31,
Pro Forma
Three
Months
Ended
March 31,
2019
2020
2020
2021
2020
2021
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Weighted-average shares used in computing
net income/(loss) per share attributable
to Class A and Class B common
stockholders, basic and diluted(2)
17,354,458 17,917,236 17,417,384 19,012,323
Pro forma net income/(loss) per share
attributable to Class A and Class B
common stockholders, basic and diluted
(unaudited)
$ (4.07) $ (0.06)
Pro forma weighted-average shares used in
computing net income/(loss) per share
attributable to Class A and Class B
common stockholders, basic and diluted
(unaudited)
129,720,912 130,815,999
Consolidated Statements of Cash Flows Information:
($ in thousands)
Net cash provided by operating
activities
$ 102,333 $ 150,030 $ 52,469 $ 50,131
Net cash (used in) provided by investing activities
(75,323) 34,262 12,026 (195,652)
Net cash used in financing activities
(45,827) (170,709) (7,345) 288,304
As of March 31, 2021
($ in thousands)
Actual
Pro Forma
(Unaudited)
(Unaudited)
Consolidated Balance Sheet Information:
Cash and cash equivalents
$ 183,339 $ 183,339
Restricted cash
17,011 17,011
Investment in marketable securities
31,500 31,500
Total assets
872,464 872,464
Total liabilities
918,001 945,871
Redeemable convertible preferred stock
132,359
Total stockholders’ equity/(deficit)
(177,896) (73,407)
(1)
Includes stock-based compensation as follows:
Year Ended December 31,
Three Months Ended
March 31,
($ in thousands)
2019
2020
2020
2021
(Unaudited)
(Unaudited)
Cost of revenue
$ 532 $ 780 $ 161 $ 275
Research and product development
12,087 21,619 4,677 6,793
Marketing and sales
1,737 3,144 641 1,172
General and administrative
3,619 5,711 2,423 1,612
Total stock-based compensation
$ 17,975 $ 31,254 $ 7,902 $ 9,852
(2)
See Note 2 of the notes to our audited consolidated financial statements included elsewhere in this prospectus for an explanation of the calculations of our net income/(loss) per share, basic and diluted, for the years ended December 31, 2019 and 2020. See Note 2 of the notes to our unaudited condensed consolidated financial statements included elsewhere in this prospectus for an explanation of the calculations of our net income/(loss) per share, basic and diluted, for the three months ended March 31, 2020 and 2021.
 
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Key Performance Indicators and Non-GAAP Financial Measures
We review the following key performance indicators and non-GAAP financial measures to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. Increases or decreases in our key performance indicators and non-GAAP financial measures may not correspond with increases or decreases in our revenue and our key performance indicators and non-GAAP financial measures may be calculated in a manner different than similar key performance indicators and non-GAAP financial measures, respectively, used by other companies.
Year Ended
December 31,
Three Months
Ended March 31,
2019
2020
2020
2021
Unique subscriptions (in thousands)(1)
2,984 3,656 3,178 3,794
Total bookings (in thousands)(2)
$ 514,428 $ 664,739 $ 155,868 $ 198,947
Annual run rate revenue (ARRR) (in thousands)(3)
$ 549,156 $ 709,062 $ 556,266 $ 754,206
Average revenue per unique subscription (ARPUS)(4)
$ 181 $ 186 $ 183 $ 190
Adjusted EBITDA (in thousands)(5)
$ 97,624 $ 116,666 $ 1,190 $ 11,097
Unlevered free cash flow (in thousands)(6)
$ 94,571 $ 152,439 $ 53,364 $ 51,782
(1)
Unique subscriptions represent the number of unique sites, standalone scheduling subscriptions and Unfold (social) subscriptions, as of the end of a period. A unique site represents a single subscription and/or group of related subscriptions, including a website subscription and/or a domain subscription, and other subscriptions related to a single website or domain. Every unique site contains at least one domain subscription or one website subscription.
(2)
Total bookings represents cash receipts for all subscriptions purchased, as well as payments due under the terms of contractual agreements for obligations to be fulfilled.
(3)
ARRR is calculated as the monthly revenue from subscription fees and revenue generated in conjunction with associated fees (fees taken or assessed in conjunction with commerce transactions) in the last month of the period multiplied by 12.
(4)
ARPUS is calculated as the total revenue during the preceding 12-month period divided by the average of the number of total unique subscriptions at the beginning and end of the period.
(5)
Adjusted EBITDA is calculated as net income/(loss) excluding interest expense, other income/(loss), net, provision for/(benefit from) income taxes, depreciation and amortization, stock-based compensation expense and other items that we do not consider indicative of our ongoing operating performance, which include expenses associated with a special bonus in 2020.
(6)
Unlevered free cash flow is defined as cash flow from operating activities less cash paid for capital expenditures increased by cash paid for interest expense net of the associated tax benefit.
For additional information about our key performance indicators and non-GAAP financial measures, including reconciliations of the non-GAAP financial measures to the most directly comparable financial measures stated in accordance with GAAP, see “Selected Consolidated Financial and Operating Information — Key Performance Indicators and Non-GAAP Financial Measures” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Key Performance Indicators and Non-GAAP Financial Measures.”
 
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RISK FACTORS
An investment in our Class A common stock involves a high degree of risk. You should consider carefully the following risks, together with the financial and other information contained in this prospectus, before you decide to purchase shares of our Class A common stock. If any of the following risks or uncertainties actually occurs, our business, financial condition and results of operations could be materially and adversely affected. In that case, the market price of our Class A common stock could decline and you may lose all or a part of your investment. The risks discussed below are not the only risks we face. Additional risks or uncertainties not currently known to us, or that we currently deem immaterial, may also have a material adverse effect on our business, financial condition and results of operations. We cannot assure you that any of the events discussed in the risk factors below will not occur.
Risks Related to our Business and Industry
Our business, financial condition and results of operations will be harmed if we are unable to attract and retain customers and expand their use of our platform.
We have experienced growth in recent years, due in large part to sustained subscription growth and retention, including customers who expand their use of our platform over time. We offer two payment options for each of our subscription plans: monthly and annual. Customers’ subscriptions currently renew automatically at the end of each monthly or annual period, as applicable, but the customer is free to disable automatic renewal or cancel the subscription at any time. As a result, even though the number of unique subscriptions to our platform has grown in recent years, there can be no assurance that we will be able to retain unique subscriptions beyond the existing monthly or annual subscription periods. In addition, any limitation or restriction imposed on our ability to bill our customers on a recurring basis, whether due to new regulations or otherwise, may significantly lower our unique subscription retention rate.
A number of factors could impact our ability to attract and retain customers and expand our customers’ use of our platform, including:

the quality and design of our solutions compared to other similar solutions;

our ability to develop new technologies or offer new or enhanced solutions;

the pricing of our solutions compared to our competitors;

the reliability and availability of our customer support;

our ability to provide value-added third-party applications, solutions and services that integrate into our platform;

any perceived or actual security, reliability, quality or compatibility problems with our solutions, including those related to system outages, unscheduled downtime and the impact of cyber-attacks on customers’ data;

our ability to expand into new geographic regions; and

the cost and effectiveness of our marketing campaigns.
We have historically experienced customer turnover as a result of general economic conditions and other risks affecting our customers’ businesses or needs. Many of these customers are in the entrepreneurial stage of their development and there is no guarantee that their businesses will succeed. Other customers may be looking for a shorter-term solution for a specific event. Our costs associated with renewals are substantially lower than costs associated with generating new unique subscriptions. Therefore, a reduction in retention of our unique subscriptions, even if offset by an increase in new unique subscriptions, could adversely impact our business, financial condition and results of operations. Moreover, any volatile or uncertain economic conditions due to the COVID-19 pandemic or otherwise and any resulting decrease in business formation or failures of SMBs could affect our ability to generate new unique subscriptions or retain existing unique subscriptions.
Additionally, our growth rate may decline over time even though the number of unique subscriptions on our platform increases. As our growth rate declines, investors’ perception of our business, financial
 
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condition and results of operations may be adversely affected. To the extent our growth rate slows, our business performance will become increasingly dependent on our ability to retain revenue from existing unique subscriptions and increase sales to existing customers.
If we fail to improve and enhance the functionality, performance, reliability, design, security and scalability of our solutions in a manner that responds to our customers’ evolving needs, our business, financial condition and results of operations may be adversely affected.
The markets in which we compete are characterized by constant change and innovation, and we expect them to continue to evolve rapidly. The success of our business will depend, in part, on our ability to adapt and respond effectively to changing market dynamics on a timely basis while continuing to improve and enhance the functionality, performance, reliability, design, security and scalability of our solutions. For example, as commerce transacted over mobile devices continues to grow more rapidly than desktop transactions, continued effective mobile functionality becomes increasingly integral to our long-term development and growth strategy. If we are unable to develop new and upgraded solutions that satisfy our customers and that keep pace with rapid technological and industry change, our business, financial condition and results of operations could be adversely affected.
The process of developing new technology is complex and uncertain. If we fail to accurately predict customers’ changing needs or emerging technological trends, or we otherwise fail to achieve the benefits expected from our investments in technology, our business, financial condition and results of operations could be harmed. The development of new and upgraded solutions involves a significant amount of time and effort from our research and development team, as it can take months to update, code and test new and upgraded solutions and integrate them into our existing solutions. Further, our design team spends a significant amount of time and resources in order to incorporate various design elements and other features into any new and upgraded solutions. The introduction of these new and upgraded design and functional features often involves a significant amount of marketing spend. We must also manage our existing solutions as we continue to introduce new solutions. Given this complexity, we occasionally have experienced, and could experience in the future, delays in completing the development and introduction of new and upgraded solutions.
Our industry is highly competitive and we may not be able to compete successfully against current and future competitors.
The market for providing SaaS-based website design and management software is evolving and highly fragmented and we face competition in various aspects of our business, which we expect to intensify in the future as existing and new competitors introduce new solutions or enhance existing solutions. We also compete with specific providers offering services or products that overlap with parts of our solutions, including online presence solutions, e-commerce solutions, domain registration and website hosting services, email marking solutions and scheduling solutions. Some of our competitors have longer operating histories, larger customer bases, greater brand recognition, more extensive commercial relationships and greater financial and other resources than we do.
New or existing competitors may be able to develop solutions better received by customers or may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, regulations or requirements of our customers and their users. In addition, some larger competitors may be able to leverage a larger installed customer base and distribution network to adopt more aggressive pricing policies and offer more attractive sales terms, which could cause us to lose potential sales or reduce prices to remain competitive.
Competition may also intensify as our competitors enter into business combinations or alliances or raise additional capital, or as established companies in other market segments or geographic regions expand into our market segments or geographic regions. For instance, certain competitors could use strong or dominant positions in one or more markets to gain a competitive advantage by integrating competing platforms or features into solutions they control such as search engines, web browsers, mobile device operating systems or social networks or by making access to our platform more difficult. We also expect new entrants to offer competitive solutions. If we cannot compete successfully against current and future competitors, our business, financial condition and results of operations could be negatively impacted.
 
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The COVID-19 pandemic, the measures attempting to contain and mitigate the effects of the COVID-19 pandemic (including stay-at-home, business closure and other restrictive orders), and the resulting changes in consumer behaviors have disrupted and may continue to disrupt our normal operations.
In response to the COVID-19 pandemic, we have taken a number of actions that have impacted and continue to impact our business, financial condition and results of operations, including transitioning employees across all our offices (including our corporate headquarters) to remote work-from-home arrangements and recommending travel and related restrictions. While we believe these actions were reasonable and necessary as a result of the COVID-19 pandemic, they were disruptive to our business. Given the continued spread of COVID-19, we may have to take additional actions in the future that could further disrupt our business. If we are required to maintain work-from-home arrangements for a significant period of time as a result of the ongoing COVID-19 pandemic or other future adverse public health developments, it may impact our ability to preserve our corporate culture. Any failure to preserve our culture could negatively affect our future success, including our ability to retain and recruit personnel and to effectively focus on and pursue our corporate objectives. In addition, the COVID-19 pandemic could disrupt or delay the ability of our employees to work because they become sick or are required to care for those who become sick or for dependents for whom external care is not available. The COVID-19 pandemic could also cause delays or disruptions in services provided by key service providers, increase our and service providers’ vulnerability to security breaches, distributed denial of service (“DDoS”) attacks or other hacking or phishing attacks or cause other unpredictable effects. Our management team has spent, and will likely continue to spend, significant time, attention and resources monitoring the COVID-19 pandemic and associated global economic uncertainty and seeking to manage its effects on our business and workforce.
If economic conditions further deteriorate, uncertainty from the pandemic may cause prospective or existing customers to cancel their subscriptions for our solutions and users may not have the financial means to make purchases from our customers or may delay or reduce discretionary purchases, negatively impacting our e-commerce customers and our associated results of operations. Our entrepreneurial and small business customers may be more susceptible to general economic conditions than larger businesses with greater liquidity and access to capital.
The degree to which COVID-19 and any associated volatile or uncertain economic conditions will affect our business, financial condition and results of operations will depend on future developments that are highly uncertain and cannot currently be predicted. The risks described herein and throughout this “Risk Factors” section could be further exacerbated by a prolonged existence of the COVID-19 pandemic or other future adverse public health developments.
Our business, financial condition and results of operations could be harmed if we fail to manage our growth effectively.
The growth that we have experienced places significant demands on our operational infrastructure. The scalability and flexibility of our platform depends on the functionality of our technology and network infrastructure and our ability to handle increased traffic and demand for bandwidth. The growth in the number of unique subscriptions on our platform and the number of orders processed through our platform has increased the amount of data and requests processed. Any problems with the transmission of increased data and requests could result in harm to our brand or reputation. Moreover, as our business grows, we will need to devote additional resources to improving our operational infrastructure and continuing to enhance our scalability in order to maintain the performance of our platform.
Our growth has also placed, and will likely continue to place, a significant strain on our managerial, administrative, operational, financial and other resources. We intend to further expand the business, including into new geographic regions, with no assurance that our revenue will continue to grow. We are likely to recognize the costs associated with these investments earlier than some of the anticipated benefits, and the return on these investments may be lower or may develop more slowly than we expect. Unless our growth results in an increase in our revenues that is proportionate to, or greater than, the increase in our costs associated with this growth, our profitability may be adversely affected. As we grow, we will be required to continue to improve our operational and financial controls, management information systems and reporting procedures and we may not be able to do so effectively.
 
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The Squarespace brand is integral to our success. If we fail to protect or promote our brand, our business, financial condition and results of operations may be harmed.
We believe that protecting, maintaining and enhancing the Squarespace brand is integral to our success, particularly as we seek to attract new customers. Protecting, maintaining and enhancing our brand will depend largely on our ability to continue to provide design-focused and differentiated solutions, which we may not do successfully. The value of our brand may decline if we are unable to maintain the image of the Squarespace brand as design-focused. Successfully maintaining our brand will depend largely on the effectiveness of our marketing efforts, our ability to provide a reliable and useful platform to meet the needs of our customers, our ability to maintain our customers’ trust and our ability to continue to develop and successfully differentiate our solutions. Errors, defects, disruptions or other performance problems with our solutions, including with third-party services accessed through our platform, may harm our reputation and brand. Unfavorable media coverage, negative publicity or negative public perception about us or our marketing efforts, our industry, the quality and reliability of our platform or our privacy and security practices may also harm our reputation and our brand. If events occur that damage our reputation and brand, our ability to expand our subscription base may be impaired, and our business, financial condition and results of operations may be harmed.
We also believe that the importance of brand recognition will increase as competition in our market increases and the promotion of our brand may require substantial expenditures. We have invested, and expect to continue to invest, substantial resources to increase our brand awareness, both generally and in specific geographies and to specific customer groups. There can be no assurance that our brand development strategies and investment of resources will enhance recognition of the Squarespace brand or lead to an increased customer base. Furthermore, our international branding efforts may prove unsuccessful due to language barriers and cultural differences. If our efforts to protect and promote our brand are not successful, our business, financial condition and results of operations may be adversely affected. In addition, even if brand recognition and loyalty increases, revenue may not increase at a level commensurate with our marketing spend.
Our business, financial condition and results of operations would be adversely affected if our marketing and selling activities fail to generate new customers at the levels that we anticipate or fail to generate new customers on a cost-effective basis.
We use a variety of marketing channels to promote our brand, including online keyword search, sponsorships and celebrity endorsements, television, podcasts, print and online advertising, email and social media marketing. If we lose access to one or more of these channels because the costs of advertising become prohibitively expensive or for other reasons, we may not be able to promote our brand effectively, which could limit our ability to grow our business. In addition, in order to maintain our current revenues and grow our business, we need to continuously optimize our marketing campaigns aimed at acquiring new customers. However, we may fail to accurately predict customer interest and, as a result, fail to generate the expected return on marketing spend. An unexpected increase in the marginal acquisition cost of new customers may have an adverse effect on our ability to grow our subscription base. We have and may in the future invest a significant portion of our marketing expenses in more traditional advertising and promotion of our brand, including through print and television commercials, the effectiveness of which is more difficult to track than online marketing. If these marketing activities fail to generate traffic to our website, attract potential customers and lead to new and renewed subscriptions at the levels we anticipate, our business, financial condition and results of operations would be adversely affected.
If demand for our solutions does not meet expectations, our ability to generate revenue could be adversely affected.
Although we expect continued demand from individuals and businesses for our solutions, it is possible the rate of growth may not meet our expectations, or the market may not grow, including as a result of the global economic slowdown resulting from the COVID-19 pandemic or future adverse public health developments. Our expectations for future revenue growth are based in part on assumptions reflecting our industry knowledge and experience serving individuals and businesses, as well as our assumptions regarding demographic shifts, growth in the availability and capacity of internet infrastructure internationally and the general economic climate. If any of these assumptions proves to be inaccurate, including as a result of the extent of current global economic uncertainty, our growth could be significantly lower than expected.
 
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Our ability to compete successfully depends on our ability to offer an integrated and comprehensive platform enabling a diverse base of customers to start, grow and run their businesses or promote their brand. The success of our solutions is predicated on the assumption that an online presence is, and will continue to be, an important factor in our customers’ abilities to establish, expand and manage their online presence quickly, easily and affordably. If we are incorrect in this assumption, for example due to the introduction of a new technology or industry standard superseding the importance of an online presence or rendering our existing or future solutions obsolete, then our ability to retain existing customers and attract new customers could be adversely affected, which could harm our business, financial condition and results of operations.
If we fail to maintain a consistently high level of customer support, our brand, business, financial condition and results of operations may be harmed.
We believe our focus on customer support is critical to acquiring new customers, retaining existing customers and growing our business. As a result, we have invested heavily in the quality and training of our Customer Operations team along with the tools they use to provide this service. If we are unable to maintain a consistently high level of customer support, we may lose existing customers. In addition, our ability to attract new customers and increase unique subscriptions depends, in part, on the support we provide to customers as well as positive recommendations from our existing customers. Any failure to maintain a consistently high level of customer support, or a market perception that we do not maintain high-quality customer support, could adversely affect our brand, business, financial condition and results of operations.
Our pricing decisions may adversely affect our ability to attract and retain customers.
We have from time to time changed our overall pricing model or the various price points of our subscription plans and add-on services and expect to do so in the future. However, no assurance can be given that any new pricing model or price points will be optimal and not result in loss of customers or profits. In addition, as competitors introduce new solutions, we may be unable to attract new customers at the price or based on the pricing models we currently use and we may be required to reduce prices. Individuals and small businesses, which comprise the majority of customers on our platform, could be sensitive to price increases or swayed by more attractive prices offered by competitors. We also must determine the appropriate price to enable us to compete effectively internationally. Any of these developments could negatively impact our business, financial condition and results of operations.
We may acquire or invest in companies, which may divert our management’s attention and result in additional dilution to our stockholders. We may be unable to integrate acquired businesses and technologies successfully or achieve the expected benefits of such acquisitions.
From time to time, we evaluate potential strategic acquisition or investment opportunities and we have completed various strategic acquisitions in recent periods, including the Acquisition. Any future transactions that we enter into could be material to our business, financial condition and results of operations. The process of acquiring and integrating another company or technology could create unforeseen operating difficulties and expenditures. Acquisitions and investments involve a number of risks, such as:

diversion of management time and focus from operating our business;

use of resources that are needed in other areas of our business;

retention and integration of employees from an acquired company, including potential risks or challenges to our corporate culture;

implementation or remediation of controls, procedures and policies of an acquired company;

difficulty integrating the accounting systems and operations of an acquired company;

coordination of product, engineering and selling and marketing functions, including difficulties and additional expenses associated with incorporating the acquired company’s solutions and infrastructure with our existing solutions and infrastructure and difficulties converting the customers of the acquired company onto our platform;

unforeseen costs or liabilities;
 
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adverse effects to our existing business relationships as a result of the acquisition or investment;

the possibility of adverse tax consequences;

litigation or other claims arising in connection with the acquired company or investment; and

in the case of foreign acquisitions, the need to integrate operations and workforces across different cultures and languages and to address the particular economic, currency, political and regulatory risks associated with specific countries.
In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. If our acquisitions, including the Acquisition, do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could adversely affect our business, financial condition and results of operations.
Future acquisitions and investments may also result in dilutive issuances of equity securities, which could adversely affect the trading price of our Class A common stock, result in issuances of securities with superior rights and preferences to our Class A common stock or result in the incurrence of debt with restrictive covenants that limit our operating flexibility.
We may not be able to identify future acquisition or investment opportunities that meet our strategic objectives, or to the extent such opportunities are identified, we may not be able to negotiate terms with respect to the acquisition or investment that are acceptable to us. If we do complete acquisitions, we may not ultimately strengthen our competitive position or achieve our strategic objectives, and any acquisitions we complete could be viewed negatively by investors. To pay for any such acquisition, we may have to use cash or incur debt, both of which may affect our financial condition or the trading price of our Class A common stock. At this time we have made no commitments or agreements with respect to any such material transactions.
We depend on highly skilled personnel, and if we are unable to hire, integrate and retain our personnel, we may not be able to address competitive challenges.
Our future success will depend upon our continued ability to hire, integrate and retain highly skilled personnel, including senior management, engineers, designers, product managers, finance and legal personnel and customer support. Competition for highly skilled personnel is intense. We compete with many other companies for engineers, designers and product managers with meaningful experience in designing, developing and managing software, as well as for skilled marketing, operations and customer support professionals, and we may not be successful in attracting and retaining the professionals we need. We may need to invest significant amounts of cash and equity to attract and retain new and highly skilled employees, and may never realize returns on these investments. Extended stay-at-home, business closure and other restrictive orders may impact our ability to identify, hire and train new personnel. In addition, we are limited in our ability to recruit global talent for our U.S. offices by U.S. immigration laws, including those related to H1-B visas. If we are not able to effectively hire, train and retain employees, our ability to achieve our strategic objectives will be adversely impacted and our business, financial condition and results of operations will be harmed.
In addition to hiring and integrating new employees, we must continue to focus on retaining our key employees who foster and promote our innovative corporate culture. Our future performance depends on the continued services and contributions of our Founder and Chief Executive Officer, Mr. Casalena, who is critical to the development of our business and growth strategy, in addition to other key employees to execute on our business plan and to identify and pursue new opportunities and solutions. The failure to properly develop or manage succession plans or develop leadership talent or the loss of services of key employees could significantly delay or prevent the achievement of our strategic objectives. From time to time, there may be changes in our senior management team resulting from the hiring or departure of executives, which could disrupt our business. We do not have employment agreements with our executive officers or other key personnel that require them to continue to work for us for any specified period; therefore, they could terminate their employment with us at any time. The loss of one or more of our key employees (including any limitation on the performance of their duties or short term or long term absences as a result of illness, such as COVID-19) could adversely affect our business, financial condition and results of operations.
 
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We primarily rely on a single supplier to process payments from our customers and we integrate with a limited number of suppliers to process transactions from users.
The success of our platform depends, in part, on our ability to integrate and offer third-party services to our customers. In particular, we use Stripe Inc. (“Stripe”) to process our transactions with our customers and we offer payment processing integrations for our customers to charge their users through Stripe, PayPal Holdings, Inc. (“PayPal”) and Square, Inc. (“Square”). While we offer our customers access to three payment processing integrations through which to charge their users, disruptions or problems with the relevant services provided by any of these companies could have an adverse effect on our reputation, business, financial condition and results of operations. If Stripe, PayPal or Square were to terminate its relationship with us or become unable to continue processing payments on our behalf, we could incur substantial delays and expense in finding and integrating an alternative payment service provider to process payments from our customers and their users, and the quality and reliability of any such alternative payment service provider may not be comparable.
If we cannot maintain the compatibility of our platform and solutions with third-party applications or content or if the third-party applications that we offer fail to keep pace with competitors’ offerings, demand for our platform and solutions could decline.
In addition to offering our customers access to Stripe and other payment solutions, we offer our customers access to third-party applications for order fulfillment, accounting and other business services as well as third-party content. Third-party application providers may change the features of their applications and third-party content providers and application providers may change how others can access the application or content or alter the terms governing use of their applications or content in an adverse manner. Such changes could limit, restrict or terminate our access to their applications and content, which could negatively impact our solutions and harm our business, financial condition and results of operations. In addition, competitors may offer better functionality than the third-party applications integrated into our platform. If we fail to integrate new third-party applications and content that our customers need for their online presence or develop them directly, we may not be able to offer the functionality that our customers expect, which would negatively impact our solutions and, as a result, harm our business, financial condition and results of operations.
We rely heavily on the reliability, security and performance of our software. If our software contains serious errors or defects, or we have difficulty maintaining the software, we may lose revenue and market acceptance and may incur costs to defend or settle claims with our customers.
The reliability and continuous availability of our platform is critical to our success. However, software such as ours often contains errors, defects, security vulnerabilities or software bugs that are difficult to detect and correct, particularly when first introduced or when new versions or enhancements are released. Any third-party software we incorporate into our platform may have similar deficiencies. Despite internal testing, our platform may contain serious errors or defects, security vulnerabilities or software bugs that we may be unable to successfully correct in a timely manner or at all, and any ensuing disruptions could result in lost revenue, significant expenditures of capital, a delay or loss in market acceptance and damage to our reputation and brand, any of which could have an adverse effect on our business, financial condition and results of operations. Furthermore, our platform is cloud-based, which allows us to deploy new versions and enhancements to all of our customers simultaneously. To the extent we deploy new versions or enhancements that contain errors, defects, security vulnerabilities or software bugs to all of our customers simultaneously, the consequences would be more severe than if such versions or enhancements were only deployed to a smaller number of customers. In addition, to the extent that we do not effectively address capacity constraints, upgrade our systems as needed and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business, financial condition and results of operations, as well as our reputation, may be adversely affected.
Since customers may use our solutions for processes that are critical to their businesses, errors, defects, security vulnerabilities, service interruptions or software bugs in our platform could result in losses to our customers. Customers may seek significant compensation from us for any losses they suffer or they may cease conducting business with us altogether. Further, a customer could share information about bad
 
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experiences on social media, which could result in damage to our reputation. There can be no assurance that provisions typically included in agreements with our customers that attempt to limit exposure to claims would be enforceable or adequate or would otherwise protect us from liabilities or damages with respect to any particular claim. Even if not successful, a claim brought against us by any of our customers would likely be time-consuming, divert management’s attention and be costly to defend and could seriously damage our reputation and brand, making it harder to sell our solutions.
We rely on search engines, social networking sites and online streaming services to attract a meaningful portion of our customers, and if those search engines, social networking sites and online streaming services change their listings or policies regarding advertising, or increase their pricing or suffer problems, it may limit our ability to attract new customers.
Many customers locate our platform through internet search engines, such as Google, and advertisements on social networking sites and online streaming services, such as Facebook and YouTube. If we are listed less prominently or fail to appear in search results for any reason, visits to our website could decline significantly, and we may not be able to replace this traffic. Search engines revise their algorithms from time to time in an attempt to optimize their search results. If the search engines on which we rely for algorithmic listings modify their algorithms, we may appear less prominently or not at all in search results, which could result in reduced traffic to our website that we may not be able to replace. Additionally, if the costs of search engine marketing services, such as Google AdWords, increase, we may incur additional marketing expenses, we may be required to allocate a larger portion of our marketing spend to this channel or we may be forced to attempt to replace it with another channel (which may not be available at reasonable prices, if at all), and our business, financial condition and results of operations could be adversely affected.
Furthermore, competitors may in the future bid on our brand names and other search terms that we use to drive traffic to our website. Such actions could increase our marketing costs and result in decreased traffic to our website. In addition, search engines, social networking sites and video streaming services may change their advertising policies from time to time. If any change to these policies delays or prevents us from advertising through these channels, it could result in reduced traffic to our website and sales of our solutions. Additionally, new search engines, social networking sites, video streaming services and other popular digital engagement platforms may develop in specific jurisdictions or more broadly that reduce traffic on existing search engines, social networking sites and video streaming services. Moreover, the use of voice recognition technology such as Alexa, Google Assistant, Cortana or Siri may drive traffic away from search engines, potentially resulting in reduced traffic to our website. If we are not able to achieve awareness through advertising or otherwise, we may not achieve significant traffic to our website.
Our business, financial condition and results of operations would be harmed if changes to technologies used in our platform or new versions or upgrades of operating systems and internet browsers adversely impact the process by which customers interface with our platform and users interface with our customers’ sites.
We believe that our integrated web and mobile platform has helped us to grow our customer base. In addition to offering customers mobile-optimized websites created on our platform, we offer mobile apps that enable customers to monitor analytics, fulfill orders and create, edit and manage content from their mobile devices. In the future, mobile and desktop operating system providers, such as Microsoft, Google, Apple or any other provider of internet browsers, could introduce new features that would make it difficult for customers to use our platform, change existing browser specifications such that they would be incompatible with our platform, prevent users from accessing customers’ sites or limit or preclude our marketing efforts. In addition, we are subject to the standard policies and terms of service of these providers, which may change in the future. We may incur additional costs in order to adapt our platform to other operating systems and may face technical challenges adapting our solutions to different versions of already-supported operating systems, such as Android variants offered by different mobile phone manufacturers, and we may face technical challenges adapting to new hardware and software on the Android and iOS platforms. Any changes to technologies used in our platform, to existing features that we rely on or to operating systems or internet browsers that make it difficult for customers to access our platform or visitors to access our customers’ sites, may make it more difficult for us to maintain or increase our revenue and could adversely impact our business, financial condition and results of operations. Moreover, as customers increasingly expect to be able to purchase and use our solutions on their mobile device or via our mobile apps, our future
 
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prospects could be harmed or we could face increased costs to build out and maintain this functionality. The use of our apps is also subject to applicable terms of use of third-party app stores. If we are unable to maintain availability on these third-party app stores or update our applications on these stores, our business, financial condition and results of operations may be harmed.
We use a limited number of cloud service providers, infrastructure providers and data centers to deliver our solutions. Any disruption of service by these providers or at these facilities could harm our business, financial condition and results of operations.
We currently rely on a limited number of cloud service providers and third-party data center facilities. While we engineer and architect the systems upon which our platform runs, and own the hardware installed at the data centers on which we rely, we do not control the operation of these facilities. We also obtain cloud storage and computing from Amazon and Google. We have experienced, and may in the future experience, failures at the third-party data centers where our hardware is deployed. Data centers are vulnerable to damage or interruption from human error, cyber-crimes, computer viruses and other intentional bad acts, earthquakes, hurricanes, floods, fires, war, terrorist attacks, power losses, hardware failures, systems failures, telecommunications failures and similar events. Changes in law or regulations applicable to data centers in various jurisdictions could also cause a disruption in service. Similarly, if we are unable to utilize cloud services from Amazon and Google, we could experience delays or disruptions. The occurrence of any of these events or other unanticipated problems with these providers or at these facilities could result in loss of data (including personal information), lengthy interruptions in the availability of our solutions and harm to our reputation and brand.
While our third-party data center and cloud provider agreements include automatic renewal provisions, these service providers have no obligation to renew the agreements on commercially reasonable terms or at all. In addition, a timely notice of intent not to renew under one or more of these agreements may not provide us with adequate time to transfer operations and may cause disruptions to our platform. Similarly, service providers of other aspects of our critical infrastructure, such as private network connectivity, content delivery, DDoS mitigation, domain registration and domain name servers, among others, are under no obligation to continue to provide these services after the expiration of the respective service agreements, nor are they obligated to renew the terms of those agreements. If we were required to move our equipment to a new facility, move cloud platforms or migrate to a new critical infrastructure vendor without adequate time to plan and prepare for such a migration, we would face significant challenges due to the technical complexity, risk and high costs of the relocation or migration. If we are unable to renew these agreements on commercially reasonable terms, or if the service providers close such facilities or cease providing such services, we may be required to transfer to new service providers and may incur costs and possible service interruption in connection with doing so.
Our business depends on our customers’ continued and unimpeded access to the internet and the development and maintenance of the internet infrastructure. Internet service providers may be able to block, degrade or charge for access to certain of our solutions, which could lead to additional expenses and the loss of customers.
Our success depends upon the general public’s ability to access the internet and continued willingness to use the internet as a means to pay for purchases, communicate, access social media and research and conduct commercial transactions, including through mobile devices. If consumers or sellers become unable, unwilling or less willing to use the internet for commerce for any reason, including lack of access to high-speed communications equipment, internet outages or delays, disruptions or other damage to sellers’ and consumers’ computers, increases in the cost of accessing the internet and security and privacy risks or the perception of such risks, our business, financial condition and results of operations could be adversely affected.
Currently, internet access is provided by companies that have significant market power in the broadband and internet access marketplace, including incumbent telephone companies, cable companies, mobile communications companies and government-owned service providers. Laws or regulations that adversely affect the growth, popularity or use of the internet, including changes to laws or regulations impacting internet neutrality, could decrease the demand for our solutions, increase our operating costs, require us to alter the manner in which we conduct our business or otherwise adversely affect our business, financial condition and results of operations. We could experience discriminatory or anti-competitive practices
 
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that could impede our growth, cause us to incur additional expense or otherwise negatively affect our business, financial condition and results of operations. For example, paid prioritization could enable internet service providers to impose higher fees. Public opinion towards internet infrastructure, mobile connected devices and other similar technological advancements is rapidly evolving and such industries have faced criticism in the past. We cannot be certain that the public will continue to support existing or new technologies on which we, our service providers, our customers and their users rely or may come to rely. If our industry loses public interest and support, it could have a material adverse effect on our business, financial condition and results of operations.
We may be unable to obtain, maintain and protect our intellectual property rights and proprietary information or prevent third parties from making unauthorized use of our technology.
Intellectual property rights are important to our business. We rely on a combination of trade secret, copyright, patent and trademark laws as well as contractual provisions, such as confidentiality clauses, to protect our proprietary technology, know-how, brand and other intellectual property, all of which offer only limited protection. While it is our policy to protect and defend our intellectual property, the steps we take may be inadequate to prevent infringement, misappropriation, dilution or other potential violations of our intellectual property rights or to provide us with any competitive advantage. Further, the laws of foreign countries may not provide as much protection to intellectual property as exists in the United States. For example, some license provisions protecting against unauthorized use, copying, transfer and disclosure of our solutions may be unenforceable under the laws of certain jurisdictions and foreign countries. Moreover, policing unauthorized use of our intellectual property is difficult, expensive and time-consuming, particularly in foreign countries where the laws may not be as protective of intellectual property rights as those in the United States and where mechanisms for enforcement of intellectual property rights may be weak. To the extent we expand our international activities, our exposure to unauthorized copying and use of our intellectual property and proprietary information may increase. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. Despite the precautions taken by us, it may be possible for unauthorized third parties to copy or reverse engineer our solutions and use information that we regard as proprietary to create solutions that compete with those offered by us.
We enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with the parties with whom we have strategic relationships and business alliances. No assurance can be given that these agreements will be effective in controlling access to, or ownership of, our proprietary information and technology or providing adequate remedies for unauthorized use or disclosure of such information or technology. Further, these agreements do not prevent competitors from independently developing technologies that are substantially equivalent or superior to our solutions. Additionally, from time to time we may be subject to opposition or similar proceedings with respect to applications for registrations of our intellectual property, including but not limited to trademark applications. While we aim to acquire adequate protection of our brand through trademark registrations in key markets, occasionally third parties may have already registered or otherwise acquired rights to identical or similar marks for solutions that also address the software market. Any of the pending or future trademark applications and any future patent applications, whether or not challenged, may not be issued with the scope of the claims we seek, if at all. There can be no guarantee that additional trademarks will issue from pending or future applications, that patents will issue from future applications, if any, or that any issued patents or trademarks will not be challenged, invalidated, circumvented or declared invalid or unenforceable, or that the rights granted under the patents will provide us with meaningful protection or any commercial advantage. We rely on our brand and trademarks to identify our solutions to our customers and to differentiate our solutions from those of our competitors. If we are unable to adequately protect our trademarks, third parties may use brand names or trademarks similar to ours in a manner that may cause confusion or dilute our brand names or trademarks, which could decrease the value of our brand.
From time to time, we may discover that third parties are infringing, misappropriating or otherwise violating our intellectual property rights. However, policing unauthorized use of our intellectual property and misappropriation of our technology is difficult and we may therefore not always be aware of such unauthorized use or misappropriation. In addition, litigation brought to protect and enforce our intellectual property rights can be costly, time-consuming and distracting to management and could result in the
 
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impairment or loss of portions of our intellectual property. As a result, we may be aware of infringement by competitors but may choose not to bring litigation to enforce our intellectual property rights due to the cost, time and distraction of bringing such litigation. Furthermore, even if we decide to bring litigation, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits challenging or opposing our right to use and otherwise exploit particular intellectual property, services and technology or the enforceability of our intellectual property rights. As a result, despite efforts by us to protect our intellectual property rights, unauthorized third parties may attempt to use, copy or otherwise obtain and market or distribute our intellectual property or technology or otherwise develop solutions with the same or similar functionality as our solutions. If competitors infringe, misappropriate or otherwise violate our intellectual property rights and we are not adequately protected or elect not to litigate, or if competitors are able to develop solutions with the same or similar functionality without infringing our intellectual property, our competitive position, business, financial condition and results of operations could be harmed.
Claims by third parties of intellectual property infringement, regardless of merit, could result in litigation and materially adversely affect our business, financial condition and results of operations.
The software industry is characterized by the existence of a large number of patents and frequent claims and related litigation regarding patents and other intellectual property rights. Third parties have asserted, and may in the future assert, that our platform, solutions, technology, methods or practices infringe, misappropriate or otherwise violate their intellectual property or other proprietary rights. Such claims may be made by competitors seeking to obtain a competitive advantage or by other parties. Our competitors and others may now and in the future have significantly larger and more mature patent portfolios than we have.
Additionally, in recent years, non-practicing entities have begun purchasing intellectual property assets for the purpose of making claims of infringement and attempting to extract settlements from companies like us, and such entities may not be deterred by a patent portfolio of any size because their sole or primary business is the assertion of patent claims. The risk of claims may increase as the number of solutions we offer and the number of competitors increases and overlaps occur. In addition, to the extent we gain greater visibility and market exposure, we face a higher risk of being the subject of intellectual property infringement claims. If it appears necessary or desirable, we may seek to license intellectual property that our solutions are alleged to infringe. If required licenses cannot be obtained, litigation could result.
Regardless of merit, litigation is inherently uncertain and defending intellectual property claims is costly, can impose a significant burden on management and employees, disrupt the conduct of our business and have an adverse effect on our brand, business, financial condition and results of operations. The terms of any settlement or any adverse judgment may require us to pay substantial damages, develop non-infringing technology, enter into royalty-bearing licensing agreements, stop selling or marketing some or all of our solutions, indemnify our customers or partners, refund fees or re-brand our solutions, any of which could be costly and could materially and adversely affect our business, financial condition and results of operations.
Our platform contains open-source software, which could negatively affect our ability to sell our solutions, pose particular risks to our proprietary software and subject us to possible litigation.
We use open-source software that is subject to one or more open-source licenses in connection with our software development and we may incorporate additional open-source software into our software, or otherwise link our software to open-source software. Open-source software is typically freely accessible, usable and modifiable, subject to compliance with the applicable licenses. Certain open-source software licenses require an entity who distributes or otherwise makes available the open-source software in connection with the entity’s software to disclose publicly part or all of the source code to the entity’s software or to make any derivative works of the open-source code or even the entity’s software available to others on potentially unfavorable terms or at no cost.
However, the terms of many open-source licenses have not been interpreted by United States or foreign courts and there is little or no legal precedent governing the interpretation of many of the terms of certain of these licenses. As a result, the potential impact of these terms on our business is uncertain and may result in unanticipated obligations or restrictions relating to the use of our platform. In that event, we could be required to seek licenses from third parties in order to continue offering our solutions, to re-develop our
 
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solutions, to discontinue sales of our solutions or to release our proprietary source code under the terms of an open-source license, any of which could harm our business, financial condition and results of operations. From time to time, companies that use open-source software have faced claims challenging the use of open-source software and/or compliance with open-source license terms, and we may be subject to such claims in the future.
While we monitor our use of open-source software and try to ensure that none is used in a manner that would require disclosure of proprietary source code that would preclude us from charging fees for the use of our software or that would otherwise breach the terms of an open-source agreement, we cannot guarantee that our monitoring efforts will be fully successful. While it is our view that the majority of our solutions are not considered distributed software since no installation of the applicable software is necessary, this position could be challenged. In addition, parts of our platform, such as our mobile applications, for example, may be considered to be distributed. Finally, certain open-source licenses require disclosure of proprietary code under certain circumstances, even in the absence of distribution. In those instances, if a specific open-source license requires it, we might be obligated to disclose part of our proprietary code or otherwise be subject to undesirable open-source license terms. Any termination of an open-source license, requirement to disclose proprietary source code or distribute proprietary software on open-source license terms or pay damages for breach of contract could be harmful to our business, financial condition and results of operations, and could help our competitors develop solutions that are similar to or better than ours.
In addition to risks related to license requirements, usage of open-source software can lead to greater risks than the use of third-party commercial software, as open-source licensors generally do not provide warranties, controls on the origin or development of the software or remedies against the licensors. Further, given the nature of open-source software, it may be more likely that third parties might assert copyright and other intellectual property infringement claims against us based on our use of open-source software. Finally, use of open-source software may introduce vulnerabilities into our solutions. Many of the risks associated with usage of open-source software cannot be eliminated and could adversely affect our business, financial condition and results of operations.
We are exposed to risks, including security and regulatory risks, associated with credit card and debit card payment processing.
We accept payments through credit and debit cards and are therefore subject to a number of risks related to credit and debit card payments, including:

payment of fees, which may increase over time and may require us to either increase the prices we charge for our solutions or experience an increase in operating expenses;

if our billing systems fail to work properly and, as a result, we do not automatically charge customers’ credit cards on a timely basis or at all, we could lose revenue;

if we are unable to maintain our chargeback rate at acceptable levels, our credit card fees for chargeback transactions, or for other credit and debit card transactions, may increase or issuers may terminate their relationship with us;

if we are unable to maintain payment card industry data security standards (“PCI-DSS”) compliance, we may breach our contractual obligations, be subject to fines, penalties, damages, higher transaction fees and civil liability, be prevented from processing or accepting payment cards or lose payment processing partners;

we rely on third-party payment service providers to securely store customer payment card information and maintain PCI-DSS compliance; and

we rely on third-party payment service providers to process payments from our customers and their users and the providers may face downtime and thus affect our cash flow and our customers’ cash flow.
There can also be no assurance that the billing system data security standards of our third-party payment service provider will adequately comply with the billing standards of any future jurisdiction in which we seek to market our solutions.
 
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In addition, certain of our subsidiaries perform services that relate to the processing of payments or similar activities. The U.S. Department of Treasury’s Financial Crimes Enforcement Network and various state banking departments regulate entities engaged in money transmission and require registration, at the federal level, and licensure, at the state level, of entities engaged in regulated activity. We have relied on various exemptions from such registration and licensing requirements to date and believe, based on our business model, that such exemptions are valid. Any determination that we are not exempt may require expenditures of time and money to remediate and could adversely affect our business, financial condition and results of operations.
If the security of personal information, payment card information or other confidential information of customers and their users stored in our systems is breached or otherwise subjected to unauthorized access, our reputation may be harmed and we may be exposed to liability.
Our business involves the storage and transmission of personal information, payment card information and other confidential information. In addition, the amount of potentially sensitive or confidential data we store for customers on our servers has been increasing. If third parties succeed in penetrating our security measures or those of our service providers, or in otherwise accessing or obtaining without authorization the sensitive or confidential information we or our service providers maintain, we could be subject to liability, loss of business, litigation, government investigations or other losses. Hackers or individuals who attempt to breach the security measures put in place by us or our service providers could, if successful, cause the unauthorized disclosure, misuse or loss of personal information, payment card information or other confidential information, suspend web-hosting operations or cause malfunctions or interruptions in our platform.
If we or our customers experience any breaches of security measures or sabotage or otherwise suffer unauthorized use or disclosure of, or access to, personal information, payment card information or other confidential information, we might be required to expend significant capital and resources to address these problems. We may not be able to remedy any problems caused by hackers or other similar actors in a timely manner, or at all. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until after they are launched against a target, we and our service providers may be unable to anticipate these techniques or to implement adequate preventative measures. Advances in computer capabilities, discoveries of new weaknesses and other developments with software generally used by the internet community also increase the risk we, or customers using our servers, will suffer a security breach. We, our service providers or our customers may also suffer security breaches or unauthorized access to personal information, payment card information and other confidential information due to employee error, rogue employee activity, unauthorized access by third parties acting with malicious intent or who commit an inadvertent mistake or social engineering. If a breach of security or other data security incident occurs or is perceived to have occurred, the perception of the effectiveness of our security measures and reputation could be harmed and we could lose current and potential customers, even if the security breach were to also affect one or more of our competitors. Further, concerns about practices with regard to the collection, use, disclosure or security of personal information, payment card information or other confidential information, even if unfounded, could damage our reputation and adversely affect our business, financial condition and results of operations.
Any actual or alleged security breaches or other unauthorized access to personal information, payment card information and other confidential information or alleged violation of federal, state or foreign laws or regulations relating to privacy and data security could result in:

mandated customer notifications, litigation, government investigations, significant fines and expenditures;

claims against us for misuse of personal information, payment card information and other confidential information;

diversion of management’s attention;

damage to our brand and reputation;

our operations being suspended for some length of time; and
 
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an adverse effect on our business, financial condition and results of operations.
In addition, we could be required to devote significant resources to investigate and address a security breach. Defending against claims or litigation based on any security breach or incident, regardless of its merit, will be costly and may cause reputation harm. Further, under certain regulatory schemes, such as the California Consumer Privacy Act (the “CCPA”), we may be liable for statutory damages on a per breached record basis, irrespective of any actual damages or harm to the individual. The successful assertion of one or more large claims against us that exceed available insurance coverage, denial of coverage as to any specific claim or any change or cessation in our insurance policies and coverages, including premium increases or the imposition of large deductible requirements, could adversely affect our business, financial condition and results of operations. We expect to continue to expend significant resources to protect against security breaches and other data security incidents. The risk that these types of events could seriously harm our business is likely to increase as we expand our solutions and operate in more geographic regions.
We are subject to privacy and data protection laws and regulations as well as contractual privacy and data protection obligations. Our failure to comply with these or any future laws, regulations or obligations could subject us to sanctions and damages and could harm our reputation, business, financial condition and results of operations.
We are subject to a variety of laws and regulations, including regulation by various federal government agencies, including the Federal Trade Commission (“FTC”), the Federal Communications Commission and state and local agencies, as well as data privacy and security laws in jurisdictions outside of the United States. We collect personal information, payment card information and other confidential information from our employees, our current and prospective customers and their users. The U.S. federal and various state and foreign governments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personal information, payment card information or other confidential information of individuals and the FTC and many state attorneys general are applying federal and state consumer protection laws to impose standards on the online collection, use and dissemination of data. Self-regulatory obligations, other industry standards, policies and other legal obligations may apply to our collection, distribution, use, security or storage of personal information, payment card information or other confidential information relating to individuals. These obligations may be interpreted and applied inconsistently from one jurisdiction to another and may conflict with one another, other regulatory requirements or our internal practices. Any failure or perceived failure by us to comply with United States, European Union or other foreign privacy or security laws, policies, industry standards or legal obligations or any security incident resulting in the unauthorized access to, or acquisition, release or transfer of, personal information, payment card information or other confidential information relating to our customers, employees and others may result in governmental enforcement actions, litigation, fines and penalties or adverse publicity and could cause our customers to lose trust in us, which could have an adverse effect on our reputation, business, financial condition and results of operations.
We expect there will continue to be newly enacted and proposed laws and regulations as well as emerging industry standards concerning privacy, data protection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and standards may have on our business. Such laws, regulations, standards and other obligations could impair our ability to, or the manner in which we, collect or use information to target advertising to our customers, thereby having a negative impact on our ability to maintain and grow our customer base and increase revenue. For example, California recently enacted the CCPA that, among other things, requires covered companies such as ours to provide new disclosures to California consumers and affords such consumers new rights, including the right to access and delete their information and to opt-out of certain sharing and sales of personal information or opt into certain financial incentive programs. The law also prohibits covered businesses from discriminating against consumers (e.g., charging more for services) for exercising any of their CCPA rights. The CCPA took effect on January 1, 2020 and enforcement of the CCPA by the California Attorney General began on July 1, 2020. The CCPA imposes a severe statutory damages framework as well as a private right of action for certain data breaches that result in the loss of personal information. This private right of action is expected to increase the likelihood of, and risks associated with, data breach litigation. It remains unclear how various provisions of the CCPA will be interpreted
 
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and enforced. The CCPA has been amended on multiple occasions and is the subject of regulations of the California Attorney General finalized on August 14, 2020. Additionally, the California Secretary of State recently certified a new privacy law, the California Privacy Rights Act (the “CPRA”), which California voters approved on November 4, 2020. This initiative significantly modifies the CCPA, potentially resulting in further uncertainty and requiring us to incur additional costs and expenses in an effort to comply. The CCPA and CPRA may lead other states to pass comparable legislation, with potentially greater penalties and more rigorous compliance requirements relevant to our business. The effects of the CCPA, and other similar state or federal laws, are potentially significant and may require us to modify our data processing practices and policies and to incur substantial costs and potential liability in an effort to comply with such legislation. Future restrictions on the collection, use, sharing or disclosure of our customers’ data or additional requirements for express or implied consent of customers for the collection, use, disclosure, sharing or other processing of such information could increase our operating expenses, require us to modify our solutions, possibly in a material manner, or stop offering certain solutions, and could limit our ability to develop and implement new solutions.
In addition, several foreign countries and governmental bodies, including the European Union and Canada, have laws and regulations concerning the collection and use of their residents’ personal information and payment card information, which are often more restrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security of personal information and payment card information identifying, or which may be used to identify, an individual, such as names, email addresses and, in some jurisdictions, Internet Protocol (IP) addresses, device identifiers and other data. Although we are working to comply with those laws and regulations applicable to us, these and other obligations may be modified and interpreted in different ways by courts, and new laws and regulations may be enacted in the future. We are subject to the E.U. General Data Protection Regulation 2016/679 (the “GDPR”), and following the United Kingdom’s exit from the European Union, from January 1, 2021, we are also subject to the United Kingdom GDPR (the “U.K. GDPR”), which, together with the amended U.K. Data Protection Act of 2018 (the “U.K. Data Protection Act”), retains the GDPR in U.K. national law. The U.K. GDPR mirrors the fines under the GDPR. It remains unclear how the U.K. GDPR, the U.K. Data Protection Act and other U.K. data protection laws or regulations will develop in the medium to longer term and how data transfers to and from the United Kingdom will be regulated after the expiration of the grace period to seek an adequacy ruling later this year. In addition, some countries are considering or have enacted legislation requiring local storage and processing of data that could increase the cost and complexity of delivering our solutions. Any new laws, regulations, other legal obligations or industry standards or any changed interpretation of existing laws, regulations or other standards may require us to incur additional costs and restrict our business operations.
The regulatory environment applicable to the handling of European Economic Area (“EEA”) and United Kingdom individuals’ personal data, and our actions taken in response, may cause us to face a risk of enforcement actions by data protection authorities in the EEA and the United Kingdom, assume additional liabilities or incur additional costs and could result in our business, financial condition and results of operations being harmed. In particular, with regard to transfers to the United States of personal data (as such term is used in the GDPR) of our European employees and our European and United Kingdom customers and their users, we historically relied upon the U.S.-E.U. Privacy Shield, as well as E.U. Model Clauses in certain circumstances. The U.S.-E.U. Privacy Shield was invalidated by the Court of Justice of the European Union in July 2020, and the E.U. Model Clauses have been subject to legal challenge and may be modified or invalidated. Draft guidance that has been issued by the European Data Protection Board casts doubt on the ability to transfer unencrypted data to the United States, however industry is lobbying for a risk-based approach. We are monitoring these developments, but depending on the outcome, we may be unsuccessful in maintaining a legitimate means for our transfer and receipt of personal data from the EEA and United Kingdom in the United States and any other countries that are not considered adequate by the European Union or the United Kingdom. We may, in addition to other impacts, experience additional costs associated with increased compliance burdens and be required to engage in new contract negotiations with third parties that aid in processing data on our behalf or localize certain data. We may experience reluctance or refusal by current or prospective European customers to use our solutions, and we may find it necessary or desirable to make further changes to our handling of personal data of EEA and United Kingdom residents.
 
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We are also subject to evolving privacy laws on tracking technologies, including cookies and e-marketing. For example, in the European Union and the United Kingdom, regulators are increasingly focusing on compliance with requirements in the online behavioral advertising ecosystem, and current national laws that implement the ePrivacy Directive are highly likely to be replaced by an E.U. regulation known as the ePrivacy Regulation which will significantly increase fines for non-compliance. Recent guidance and case law in the European Union and the United Kingdom require opt-in consent for the placement of a cookie or similar tracking technologies on a customer’s device and for direct electronic marketing. Evolving privacy laws on cookies and e-marketing could lead to substantial costs, require significant systems changes, limit the effectiveness of our marketing activities, divert the attention of our technology personnel, adversely affect our margins, increase costs and subject us to additional liabilities. Regulation of cookies and similar technologies, and any decline of cookies or similar online tracking technologies as a means to identify and potentially target users, may lead to broader restrictions and impairments on our marketing and personalization activities and may negatively impact our efforts to understand our customers.
If our privacy or data security measures fail to comply with current or future laws, regulations, policies, legal obligations or industry standards, or are perceived to have failed to so comply, we may be subject to litigation, regulatory investigations and related actions, significant fines (which, for certain breaches of the GDPR or U.K. GDPR, may be up to the greater of €20 million or 4% of total global annual turnover), civil claims including representative actions and other class action type litigation (potentially amounting to significant compensation or damages liabilities) or other liabilities, negative publicity and a potential loss of business. Moreover, if future laws, regulations, other legal obligations or industry standards, or any changed interpretations of the foregoing, limit our customers’ ability to use and share personal information, including payment card information, or our ability to store, process and share such personal information or other data, demand for our solutions could decrease, our costs could increase and our business, financial condition and results of operations could be harmed.
Activities of our customers or the content of their websites could damage our brand, subject us to liability and harm our business, financial condition and results of operations.
Our terms of service and acceptable use policy prohibit our customers from using our platform to engage in illegal or otherwise prohibited activities and our terms of service and acceptable use policy permit us to terminate a customer’s account if we become aware of such use. Customers may nonetheless use our platform to engage in prohibited or illegal activities, such as uploading content in violation of applicable laws, which could subject us to liability. Furthermore, our brand may be negatively impacted by the actions of customers that are deemed to be hostile, offensive, inappropriate or illegal. We do not proactively monitor or review the appropriateness of our customers’ websites and we do not have control over customer activities or the activities in which their users engage. The safeguards we have in place may not be sufficient for us to avoid liability or avoid harm to our brand, especially if such hostile, offensive, inappropriate or illegal use is high profile, which could adversely affect our business, financial condition and results of operations. Customers using the platform may also operate businesses in regulated industries, which are subject to additional scrutiny, increasing the potential liability we could incur.
We are subject to export controls and economic sanctions laws that could impair our ability to compete in international markets and subject us to liability if we are not in full compliance with applicable laws.
Our business activities are subject to various restrictions under U.S. export controls and trade and economic sanctions laws, including the U.S. Commerce Department’s Export Administration Regulations and economic and trade sanctions regulations maintained by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”). If we fail to comply with these laws and regulations, we could be subject to civil or criminal penalties and reputational harm. U.S. export control laws and economic sanctions laws also prohibit certain transactions with U.S. embargoed or sanctioned countries, governments, persons and entities.
Even though we take precautions to prevent transactions with U.S. sanctions targets, there is risk that in the future we could provide our solutions to such targets despite such precautions. This could result in negative consequences to us, including government investigations, penalties and reputational harm. Changes in the list of embargoed countries and regions or prohibited persons may require us to modify these procedures in order to comply with governmental regulations.
 
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Changes in our solutions, changes in export and import regulations or changes in the global environment may create delays in the introduction and sale of our solutions in international markets or, in some cases, prevent the sale of our solutions to certain countries, governments or persons altogether. Any change in export or import regulations, shift in the enforcement or scope of existing regulations or change in the countries, governments, persons or technologies targeted by such regulations, could result in decreased use of our platform or decreased ability to sell our solutions to existing or potential customers. Any decreased use of our solutions or limitation on our ability to sell our solutions internationally could adversely affect our growth prospects.
If we are found to be in violation of the export controls laws and regulations or economic sanctions laws and regulations, penalties may be imposed against us and our employees, including loss of export privileges and monetary penalties, which could have an adverse effect on our business, financial condition and results of operations.
Due to the global nature of our business, we could be adversely affected by violations of anti-bribery and anti-corruption laws.
The global nature of our business creates various domestic and local regulatory challenges. The U.S. Foreign Corrupt Practices Act of 1977, as amended (“FCPA”), the U.K. Bribery Act 2010 ( “U.K. Bribery Act”), the U.S. Travel Act of 1961 and similar anti-bribery and anti-corruption laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to foreign government officials and other persons for the corrupt purpose of obtaining or retaining business, directing business to any person or securing any advantage. In addition, companies are required to maintain records accurately and fairly representing their transactions and having an adequate system of internal accounting controls. We face significant risks if we fail to comply with the FCPA and other anti-corruption and anti-bribery laws prohibiting companies and their employees and third-party intermediaries from authorizing, offering or providing, directly or indirectly, improper payments or benefits to foreign government officials, political parties and private-sector recipients for an illegal purpose.
We sell our solutions to customers around the world, including some in areas of the world that experience corruption by government officials to some degree and, in certain circumstances, compliance with anti-bribery laws may conflict with local customs and practices. In addition, changes in laws could result in increased regulatory requirements and compliance costs which could adversely affect our business, financial condition and results of operations. While we are committed to complying, and training our employees to comply, with all applicable anti-bribery and anti-corruption laws, we cannot assure our employees or other agents will not engage in prohibited conduct and render us responsible under the FCPA, the U.K. Bribery Act or other anti-bribery and anti-corruption laws.
If we are found to be in violation of the FCPA, the U.K. Bribery Act or other anti-bribery and anti-corruption laws (either due to acts or inadvertence of our employees, or due to the acts or inadvertence of others), we could suffer criminal or civil penalties or other sanctions, which could have an adverse effect on our business, financial condition and results of operations. Any violation of the FCPA or other applicable anti-corruption or anti-bribery laws could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions and, in the case of the FCPA, suspension or debarment from U.S. government contracts, which could have an adverse effect on our reputation, business, financial condition and results of operations. In addition, responding to any enforcement action may result in a significant diversion of management’s attention and resources and significant defense costs and other professional fees.
Our business could be affected by new and evolving governmental regulations regarding the internet.
To date, laws, regulations and enforcement actions by governments have not materially restricted use of the internet in most parts of the world. However, the legal and regulatory environment relating to the internet is uncertain, and governments may impose regulation in the future. New laws may be passed, courts may issue decisions affecting the internet, existing but previously inapplicable or unenforced laws may be deemed to apply to the internet or regulatory agencies may begin to more rigorously enforce such formerly unenforced laws, or existing legal safe harbors may be narrowed, both by U.S. federal or state governments and by governments of foreign jurisdictions. The adoption of any new laws or regulations, or the narrowing
 
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of any safe harbors, could hinder growth in the use of the internet and online services generally, and decrease acceptance of the internet and online services as a means of communications, e-commerce and advertising. In addition, such changes in laws could increase our costs of doing business or prevent us from delivering our solutions over the internet or in specific jurisdictions, which could harm our business, financial condition and results of operations. For example, we rely on a variety of statutory and common-law frameworks and defenses relevant to the content available on our platform, including the Digital Millennium Copyright Act (the “DMCA”), the Communications Decency Act (the “CDA”), the fair-use doctrine in the United States and the Electronic Commerce Directive in the European Union. The DMCA limits, but does not necessarily eliminate, our potential liability for caching, hosting, listing or linking to third-party content that may include materials that infringe copyrights or other rights. The CDA further limits our potential liability for content uploaded onto our platform by third parties. Defenses such as the fair-use doctrine (and related doctrines in other countries) may be available to limit our potential liability for featuring third-party intellectual property content for purposes such as reporting, commentary and parody. In the European Union, the Electronic Commerce Directive offers certain limitations on our potential liability for featuring third-party content. However, each of these statutes and doctrines is subject to uncertain or evolving judicial interpretation and regulatory and legislative amendments, and we cannot guarantee that such frameworks and defenses will be available for our protection. Regulators in the United States and in other countries may introduce new regulatory regimes that increase potential liability for content available on our platform, including liability for misleading or manipulative information, hate speech, privacy violations, copyrighted content and other types of online harm. For example, there have been various Congressional efforts to restrict the scope of the protections available to online platforms under Section 230 of the CDA, and current protections from liability for third-party content in the United States could decrease or change. There are also a number of legislative proposals in the United States, at both the federal and state level, and in the European Union and the United Kingdom, that could impose new obligations in areas affecting our business, such as liability for copyright infringement and other online harm. Any new legislation may be difficult to comply with in a timely and comprehensive manner and may expose our business or customers to increased costs. If the rules, doctrines or currently available defenses change, if international jurisdictions refuse to apply protections similar to those that are currently available in the United States or the European Union or if a court were to disagree with our application of those rules to our solutions, our potential liability for information or content created by third parties and posted to our platform could require us to expend significant resources to try to comply with the new rules and implement additional measures to reduce our exposure to such liability or we could incur liability and our business, financial condition and results of operations could be harmed.
Governmental and regulatory policies or claims concerning the domain registration system and the internet in general, and industry reactions to those policies or claims, may cause instability in the industry and disrupt our business.
The Internet Corporation for Assigned Names and Numbers (“ICANN”) is a multi-stakeholder, private sector, not-for-profit corporation formed in 1998 for the express purposes of overseeing a number of internet related tasks, including managing the Domain Name System’s (“DNS”) allocation of IP addresses, accreditation of domain name registrars and registries and the definition and coordination of policy development for all of these functions. ICANN has been subject to strict scrutiny by the public and governments around the world, as well as multi-governmental organizations such as the United Nations, with many of those bodies becoming increasingly interested in internet governance. Any instability in the domain name registration system may make it difficult for us to maintain our relationships with accredited domain name registrars and continue to offer our existing solutions and introduce new ones.
Natural catastrophic events and man-made problems such as power disruptions, computer viruses, global pandemics, data security breaches and terrorism may disrupt our business.
We rely heavily on our network infrastructure and IT systems for our business operations. An online attack (including illegal hacking, ransomware, phishing or criminal fraud or impersonation), earthquake, fire, flood, terrorist attack, power loss, global pandemic (such as the COVID-19 pandemic) or other future adverse public health developments, telecommunications failure or other similar catastrophic events could cause interruptions in the availability of our platform, delays in accessing our solutions, reputational harm and loss of critical data. Such events could prevent us from providing our solutions to our customers
 
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and their users. A catastrophic event that results in the destruction or disruption of our data centers, network infrastructure or IT systems, including any errors, defects or failures in third-party services, could result in costly litigation or other claims and adversely affect our business, financial condition and results of operations.
Our level of indebtedness could have a material adverse effect on our ability to generate sufficient cash to fulfil our obligations under such indebtedness, to react to changes in our business and to incur additional indebtedness to fund future needs.
As of March 31, 2021, we have outstanding $540.0 million aggregate principal amount of borrowings under the Term Loan and $7.1 million aggregate principal amount of borrowings under the Revolving Credit Facility. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures or to sell assets, seek additional capital or restructure or refinance our indebtedness. Our ability to restructure or refinance our current or future debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The terms of existing or future debt instruments may restrict us from adopting some of these alternatives. We cannot assure you that our business will be able to generate sufficient levels of cash or that future borrowings or other financings will be available to us in an amount sufficient to enable us to service our indebtedness and fund our other liquidity needs. In addition, our indebtedness under the Credit Agreement (as defined below) bears interest at variable rates. Because we have variable rate debt, fluctuations in interest rates may affect our business, financial condition and results of operations.
Our Credit Agreement contains financial covenants and other restrictions on our actions that may limit our operational flexibility or otherwise adversely affect our business, financial condition and results of operations.
The terms of our Credit Agreement include a number of covenants that limit our ability to (subject to negotiated exceptions), among other things, incur additional indebtedness or issue preferred stock, incur liens on assets, enter into agreements related to mergers and acquisitions, dispose of assets or pay dividends and make distributions. The terms of our Credit Agreement may restrict our current and future operations and could adversely affect our ability to finance our future operations or capital needs. In addition, complying with these covenants may make it more difficult for us to successfully execute our business strategy and compete against companies which are not subject to such restrictions.
A failure by us to comply with the covenants specified in the Credit Agreement could result in an event of default under the agreement, which would give the lenders the right to terminate their commitments to provide additional loans under our Revolving Credit Facility and to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable. If the debt under the Credit Agreement were to be accelerated, we may not have sufficient cash or be able to borrow sufficient funds to refinance the debt or sell sufficient assets to repay the debt, which could adversely affect our business, financial condition and results of operations.
Because we generally recognize revenue from monthly and annual subscriptions over the term of an agreement, downturns or upturns in sales are not immediately reflected in our full results of operations.
We offer annual and monthly subscriptions and generally recognize revenue over the term of our customers’ contracts in accordance with GAAP. Accordingly, increases in annual subscriptions during a particular period do not translate into immediate, proportional increases in revenue during such period, and a substantial portion of the revenue we recognize during a quarter is derived from deferred revenue from annual subscriptions purchased during previous quarters. Conversely, a decline in new or renewed annual subscriptions in any one quarter may not significantly reduce revenue for that quarter but could negatively affect revenue in future quarters. Accordingly, the effect of significant downturns in new or renewed sales of our solutions may not be fully reflected in our results of operations until future periods.
 
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Our business is susceptible to risks associated with international sales and the use of our platform in various countries as well as our ability to localize our platform in such countries.
As of December 31, 2020 we had customers in approximately 180 countries and expect to continue to expand our international operations in the future. However, international sales and the use of our platform in various countries subject us to risks that we do not generally face with respect to domestic sales. These risks include, but are not limited to:

greater difficulty in enforcing contracts, including our terms of service and other agreements;

lack of familiarity and burdens and complexity involved with complying with multiple, conflicting and changing foreign laws, standards, regulatory requirements, tariffs, export controls and other barriers;

data privacy laws, which may require that customer and user data be stored and processed in a designated territory;

differing technology standards and different strategic priorities for customers in various jurisdictions;

weaker protection for intellectual property in certain jurisdictions;

potentially adverse tax consequences, including the complexities of foreign value-added tax (or other tax) systems and restrictions on the repatriation of earnings;

uncertain political and economic climates and increased exposure to global political, economic and social risks that may impact our operations or our customers’ operations and/or decrease consumer spending, including the impact of global health emergencies;

difficulties in ensuring compliance with government regulations of e-commerce and other services, which could lead to lower adoption rates;

potentially restrictive actions by foreign governments or regulators, including actions that prevent or limit access to our platform, solutions, apps or website;

uncertainties and instability in European and global markets and increased regulatory costs and challenges and other adverse effects caused by the United Kingdom’s withdrawal from the European Union;

lower levels of credit card usage and increased payment risks;

currency exchange rates;

reduced or uncertain protection for intellectual property rights and free speech in some countries;

new and different sources of competition; and

restricted access to and/or lower levels of use of the internet.
These factors may cause international costs of doing business to exceed comparable domestic costs and may also require significant management attention and financial resources. Any negative impact from our international business efforts could adversely affect our business, financial condition and results of operations.
Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our business, financial condition and results of operations.
With sales in various countries, we are subject to taxation in several jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain. The amount of taxes paid in these jurisdictions could increase substantially as a result of changes in the applicable tax principles, including increased tax rates, new tax laws or revised interpretations of existing tax laws and precedents, which could have an adverse impact on our liquidity and results of operations.
Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:

changes in the valuation of deferred tax assets and liabilities;
 
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expected timing and amount of the release of any tax valuation allowances;

tax effects of stock-based compensation;

expiration of, or unfavorable changes to, research and development tax credit laws;

costs related to intercompany restructurings;

changes in tax laws, regulations or interpretations thereof; or

future earnings being lower than anticipated in countries that have lower statutory tax rates and higher than anticipated earnings in countries that have higher statutory tax rates.
Our corporate structure and associated transfer pricing policies consider the functions, risks and assets of the various entities involved in the intercompany transactions. If two or more affiliated companies are located in different countries, the tax laws or regulations of each country generally will require that transfer prices be the same as those between unrelated companies dealing at arm’s length. If tax authorities in any of these countries were to successfully challenge our transfer prices as not reflecting arm’s length transactions, they could require us to adjust our transfer prices and thereby reallocate income to reflect these revised transfer prices, which could result in a higher tax liability. Our financial statements could fail to reflect adequate reserves to cover such a contingency.
In addition, the authorities in several jurisdictions could review our tax returns and impose additional tax, interest and penalties, which could have an impact on us and our business, financial condition and results of operations.
We may be subject to additional obligations to collect and remit sales tax and other taxes. We may be subject to tax liability for past sales, which could harm our business, financial condition and results of operations.
State, local and foreign jurisdictions have differing rules and regulations governing sales, use, value added and other taxes, and these rules and regulations are subject to varying interpretations that may change over time. In particular, the applicability of such taxes to our platform in various jurisdictions is unclear. These jurisdictions’ rules regarding tax nexus are complex and vary significantly. Significant judgment is required on an ongoing basis to evaluate applicable tax obligations, and as a result, amounts recorded are estimates and are subject to adjustments. In many cases, the ultimate tax determination is uncertain because it is not clear how new and existing statutes might apply to our business.
One or more states, localities, the federal government or other countries may seek to impose additional reporting, record-keeping or indirect tax collection and remittance obligations on businesses like ours. An increasing number of jurisdictions have enacted laws or are considering enacting laws requiring e-commerce platforms to report user activity or collect and remit taxes on certain sales through a marketplace. Imposition of an information reporting, record-keeping or tax collection requirement could require us to incur substantial costs in order to comply, including costs associated with tax calculation, collection and remittance, which could adversely affect our business and results of operations. In some cases we also may not have sufficient notice to enable us to build systems and adopt processes to properly comply with new reporting, record-keeping or collection obligations by the effective date.
As a result, we could face tax assessments and audits. Our liability for these taxes and associated penalties could exceed our historical tax accruals. Jurisdictions in which we have not historically collected or accrued sales, use, value added or other taxes could assert our liability for such taxes. A successful assertion that we should be collecting additional taxes in jurisdictions where we have not historically done so could result in substantial tax liabilities for past sales. Further, even where we are collecting and remitting taxes to the appropriate authorities, we may fail to accurately calculate, collect, report and remit such taxes. Any of these events could result in substantial tax liabilities and related penalties for past sales. It could also discourage customers from using our platform or otherwise harm our business, financial condition and results of operations.
Exchange rate fluctuations may negatively affect our business, financial condition and results of operations.
Our business, financial condition and results of operations are affected by fluctuations due to changes in foreign currency exchange rates. While we generate the majority of our revenue in U.S. dollars, a portion
 
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of our revenue is denominated in Euros. For the year ended December 31, 2020, 69.2% of our revenue was denominated in U.S. dollars and 30.8% of our revenue was denominated in Euros and for the three months ended March 31, 2021, 70.7% of our revenue was denominated in U.S. dollars and 29.3% of our revenue was denominated in Euros. As we expand globally, we will be further exposed to fluctuations in currency exchange rates to the extent that the revenue that we generate in currencies other than the U.S. dollar increases. Furthermore, currency exchange rates have been especially volatile in the recent past, and these currency fluctuations may make it difficult for us to predict our results of operations.
Risks Related to Being a Public Company
As a public company, we will be obligated to maintain an effective system of disclosure controls and internal controls over financial reporting that is compliant with Section 404 of the Sarbanes-Oxley Act. Our current internal control systems and procedures may not prove to be adequate to support our rapid growth. Any failure of our internal systems, controls and procedures could have an adverse effect on our business, financial condition and results of operations.
Pursuant to Section 404 of the Sarbanes-Oxley Act (“Section 404”) and the related rules adopted by the SEC and the Public Company Accounting Oversight Board, our management will be required to report on the effectiveness of our disclosure controls and internal control over financial reporting starting with our second Annual Report on Form 10-K. Because we are not currently required to comply with Section 404, we are not currently required to make an assessment of the effectiveness of our internal controls, or to deliver a report that assesses the effectiveness of our internal control over financial reporting. We have not yet determined whether our existing internal controls over financial reporting are compliant with Section 404. This process will require the investment of substantial time and resources, including by our Chief Financial Officer and other members of our senior management. In addition, we cannot predict the outcome of this determination and whether we will need to implement remedial actions. Management’s assessment of our internal control systems and procedures may identify weaknesses and conditions that need to be addressed or other matters that may raise concerns for investors, including confidence in the accuracy and completeness of our financial reports. The determination and any remedial actions required could result in us incurring additional costs that we did not anticipate. In addition, we could become subject to investigations by the SEC or other regulatory authorities. Additionally, any actual or perceived weakness or condition that needs to be addressed in our internal control systems may have an adverse impact on our business, financial condition and results of operations.
Irrespective of compliance with Section 404, as we mature, we will need to further develop our internal control systems and procedures to keep pace with our rapid growth and we are currently working to improve our controls. Our current controls and any new controls that we develop may become inadequate because, among other reasons, they may not keep pace with our growth or the conditions in our business may change.
We have made, and will continue to make, changes to our financial management control systems and other areas to manage our obligations as a public company, including corporate governance, corporate controls, disclosure controls and procedures and financial reporting and accounting systems. During the year ended December 31, 2020, Tock identified material weaknesses in its internal control over financial reporting. We are implementing measures to integrate Tock and improve its control systems and procedures. However, these and other measures that we might take may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis. If we fail to maintain effective systems, controls and procedures, including disclosure controls and internal controls over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations and prevent fraud could be adversely impacted. Moreover, we may have to disclose in periodic reports we file with the SEC material weaknesses in our system of internal controls. The existence of a material weakness would preclude management from concluding that our internal controls over financial reporting are effective, and would preclude our independent auditors from issuing an unqualified opinion that our internal controls over financial reporting are effective. We may also experience higher than anticipated operating expenses during and after the implementation of these changes.
If we are unable to implement any of the changes to our internal control over financial reporting effectively or efficiently or are required to do so earlier than anticipated, it could adversely affect our
 
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business, financial condition and results of operations. Additionally, we do not expect that our internal control systems, even if timely and well established, will prevent all errors and all fraud. Internal control systems, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.
We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Class A common stock less attractive to investors.
We are an “emerging growth company” as defined in the JOBS Act. Under the JOBS Act, emerging growth companies also can delay adopting new or revised accounting standards until such time as those standards would otherwise apply to private companies. We currently intend to take advantage of this exemption. As a result, our financial statements may not be comparable to the financial statements of companies that comply with public company effective dates.
For as long as we continue to be an emerging growth company, we may also take advantage of other exemptions from certain reporting requirements that are applicable to other public companies, including not being required to comply with the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding a non-binding advisory vote on executive compensation and any golden parachute arrangements, such as “say-on-pay,” “say-on-frequency” and “say-on-golden-parachutes,” and reduced financial reporting requirements. Although we cannot predict with any certainty, investors may find our Class A common stock less attractive because we will rely on these exemptions, which could result in a less active trading market for our Class A common stock, increased price fluctuation and a decrease in the trading price of our Class A common stock. Moreover, the information that we provide to our stockholder may be different than the information you might receive from other public reporting companies in which you hold equity interests.
We will remain an emerging growth company until the earliest of: (i) the last day of the first fiscal year in which our annual gross revenue is $1.07 billion or more; (ii) the last day of the fiscal year during which the fifth anniversary of this listing occurs; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
Our management team has limited experience managing a public company.
Most members of our management team have limited experience managing a publicly traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage our transition to being a public company that is subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could harm our business, financial condition and results of operations.
The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.
As a public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the NYSE on which our Class A common stock will be traded and other applicable securities rules and regulations. The SEC and other regulators have continued to adopt new rules and regulations and make additional changes to existing regulations that require our compliance. Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact, in ways we cannot currently anticipate, the manner in which we operate our business. We will need to institute a comprehensive compliance function and establish internal policies to ensure we have the ability to prepare on a timely basis financial statements that are fully compliant with all SEC reporting requirements and establish an investor relations function. Compliance with these rules and regulations
 
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may cause us to incur additional accounting, legal and other expenses that we did not incur as a private company. Any failure by us to file our periodic reports with the SEC in a timely manner could harm our reputation and reduce the trading price of our Class A common stock. We also anticipate that we will incur costs associated with corporate governance requirements, including requirements under securities laws, as well as rules and regulations implemented by the SEC and the NYSE, particularly after we are no longer an “emerging growth company.” We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly, while also diverting some of management’s time and attention from revenue-generating activities. Furthermore, these rules and regulations could make it more difficult or more costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. In addition, if we fail to comply with these rules and regulations, we could be subject to a number of penalties, including the delisting of our Class A common stock, fines, sanctions or other regulatory action or civil litigation.
Risks Related to Ownership of our Class A Common Stock
Our listing differs significantly from a traditional underwritten initial public offering.
This is not a traditional underwritten initial public offering of our Class A common stock. This listing of our Class A common stock on the NYSE differs from a traditional underwritten initial public offering in several significant ways, which include, but are not limited to, the following:

There is no firm commitment underwriting. Consequently, prior to the opening of trading on the NYSE, there will be no book building process and no price at which underwriters initially sell shares to the public to help inform efficient and sufficient price discovery with respect to the opening trades on the NYSE. Therefore, buy and sell orders submitted prior to and at the opening of trading of our Class A common stock on the NYSE will not have the benefit of being informed by a published price range or a price at which the underwriters initially sell shares to the public, as would be the case in a traditional underwritten initial public offering. Moreover, there will be no underwriters assuming risk in connection with the initial resale of shares of our Class A common stock. Unlike the case in a traditional underwritten offering, this registration statement does not provide for an over-allotment option of the underwriters to purchase additional shares from us. Moreover, we will not engage in, and have not and will not, directly or indirectly, request the financial advisors to engage in, any special selling efforts or stabilization or price support activities in connection with any sales made pursuant to this registration statement. In a traditional underwritten initial public offering, the underwriters may engage in “covered” short sales in an amount of shares representing the underwriters’ option to purchase additional shares. To close a covered short position, the underwriters purchase shares in the open market or exercise the underwriters’ option to purchase additional shares. In determining the source of shares to close the covered short position, the underwriters typically consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the underwriters’ option to purchase additional shares. Purchases in the open market to cover short positions, as well as other purchases underwriters may undertake for their own accounts, may have the effect of preventing a decline in the trading price of shares of our Class A common stock. Given that there will be no underwriters’ option to purchase additional shares and no underwriters engaging in stabilizing transactions with respect to the trading of our Class A common stock on the NYSE, there could be greater volatility in the public price of our Class A common stock during the period immediately following the listing. See “— The public trading price of our Class A common stock may be volatile, and could, upon listing on the NYSE, decline significantly and rapidly” below.

There is not a fixed or determined number of shares of our Class A common stock available for sale in connection with the registration and the listing. Therefore, there can be no assurance that any
 
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Registered Stockholders or other existing stockholders will sell any of their shares of our Class A common stock and there may initially be a lack of supply of, or demand for, shares of our Class A common stock on the NYSE. Alternatively, we may have a large number of Registered Stockholders or other existing stockholders who choose to sell their shares of our Class A common stock in the near term, resulting in potential excess supply of our Class A common stock, which could adversely impact the public price of our Class A common stock once listed on the NYSE and thereafter.

None of our Registered Stockholders or other existing stockholders have entered into contractual lock-up agreements or other restrictions on transfer. In a traditional underwritten initial public offering, it is customary for an issuer’s officers, directors and most or all of its other stockholders to enter into a contractual lock-up arrangement with the underwriters to help promote orderly trading immediately after such initial public offering. Consequently, any of our stockholders who own our Class A common stock or Class B common stock, including our directors and officers and other significant stockholders, may sell any or all of their shares of Class A common stock or Class B common stock at any time (subject to any restrictions under applicable law, and in the case of shares of Class B common stock, upon conversion of any shares of Class B common stock into Class A common stock at the time of sale), including immediately upon listing on the NYSE. If such sales were to occur in a significant volume in a short period of time following the listing, it may result in an oversupply of our Class A common stock in the market, which could adversely impact the trading price of our Class A common stock. See “— None of our stockholders are party to any contractual lock-up agreement or other contractual restrictions on transfer. Following our listing, sales of substantial amounts of our Class A common stock in the public markets, or the perception that sales might occur, could cause the trading price of our Class A common stock to decline.”

We will not conduct a traditional “roadshow” with underwriters prior to the opening of trading of our Class A common stock on the NYSE. Instead, we intend to host one investor day and engage in additional investor education meetings. In advance of the investor day, we will announce the date for such day over financial news outlets in a manner consistent with typical corporate outreach to investors. We intend to prepare an electronic presentation for this investor day, which will have content similar to a traditional roadshow presentation, and to make a version of the presentation publicly available, without restrictions, on our website. There can be no guarantee that the investor day and other investor education meetings will have the same impact on investor education as a traditional “roadshow” conducted in connection with a traditional underwritten initial public offering. As a result, there may not be efficient or sufficient price discovery with respect to our Class A common stock or sufficient demand among potential investors immediately after our listing, which could result in a more volatile public trading price of our Class A common stock.
Such differences from a traditional underwritten initial public offering could result in a volatile trading price for our Class A common stock and uncertain trading volume, which may adversely affect your ability to sell any shares of our Class A common stock that you may purchase.
The public trading price of our Class A common stock may be volatile, and could, upon listing on the NYSE, decline significantly and rapidly.
The listing of our Class A common stock and the registration of the Registered Stockholders’ shares of Class A common stock is a process that is not a traditional underwritten initial public offering. We engaged Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Barclays Capital Inc., RBC Capital Markets, LLC, Citigroup Global Markets Inc., BofA Securities, Inc., William Blair & Company, L.L.C., Raymond James & Associates, Inc., JMP Securities LLC, KeyBanc Capital Markets Inc., Piper Sandler & Co., Mizuho Securities USA LLC, Fifth Third Securities, Inc. and Citizens Capital Markets, Inc. as our financial advisors. There will be no book building process and no price at which underwriters initially sell shares to the public to help inform efficient and sufficient price discovery with respect to the opening trades on the NYSE.
As there has not been a recent sustained history of trading in our Class A common stock in a private placement market prior to listing, NYSE listing rules require that a designated market maker (“DMM”) consult with a financial advisor in order to effect a fair and orderly opening of trading of our Class A common stock without coordination with us, consistent with the applicable securities laws in connection with our direct listing on the NYSE. Accordingly, Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC
 
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will be available to consult with the DMM who will be setting the opening public trading price of our Class A common stock on the NYSE. In addition, the DMM may also consult with our other financial advisors, also without coordination with us, in connection with our direct listing. Pursuant to Rule 7.35A(g) of the NYSE Listed Company Manual, and based upon information known to them at the time, Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and our other financial advisors are expected to provide input to the DMM regarding their understanding of the ownership of our outstanding Class A common stock and pre-listing selling and buying interest in our Class A common stock that they become aware of from potential investors and holders of our Class A common stock, including after consultation with certain investors (which may include certain of the Registered Stockholders). Such investor consultation by the financial advisors would not involve any coordination with or outreach on behalf of the Company. The financial advisors will not engage in a book building process as would typically be undertaken by underwriters in a registered initial public offering. Instead, the input that the financial advisors provide to the DMM will be based on information that they become aware of from potential investors and holders of our Class A common stock (which may include certain of the Registered Stockholders) in connection with investor education regarding the process and mechanics of the direct listing, the receipt of buy and sell orders and other customary brokerage activities undertaken without coordination with us. The DMM, in consultation with Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and our other financial advisors, is also expected to consider the information in “Sale Price History of our Class A Common Stock.” Based on information provided to the NYSE, the opening public trading price of our Class A common stock on the NYSE will be determined by buy and sell orders collected by the NYSE from broker-dealers, and the NYSE is where buy orders can be matched with sell orders at a single price. Based on such orders, the DMM will determine an opening price for our Class A common stock pursuant to the NYSE rules. However, because our financial advisors will not have engaged in a book building process, they will not be able to provide input to the DMM that is based on or informed by that process. See the section titled “Plan of Distribution.”
Moreover, prior to the opening trade, there will not be a price at which underwriters initially sell shares of our Class A common stock to the public as there would be in a traditional underwritten initial public offering. The absence of a predetermined initial public offering price could impact the range of buy and sell orders collected by the NYSE from various broker-dealers. Consequently, upon listing on the NYSE, the public trading price of our Class A common stock may be more volatile than in a traditional underwritten initial public offering and could decline significantly and rapidly.
Further, because of our listing process, individual investors may have greater influence in setting the opening public trading price and subsequent public trading prices of our Class A common stock on the NYSE and may participate more in our initial and subsequent trading, leading to an increased amount of smaller orders at numerous prices, for example, than is typical for a traditional underwritten initial public offering with more institutional investor influence. These factors could result in more volatility in the public trading price of our Class A common stock and an unsustainable trading price if the price of our Class A common stock significantly rises upon listing and institutional investors believe our Class A common stock is worth less than retail investors, in which case the price of our Class A common stock may decline over time. Further, if the public trading price of our Class A common stock is above the level that investors determine is reasonable for our Class A common stock, some investors may attempt to short our Class A common stock after trading begins, which would create additional downward pressure on the public trading price of our Class A common stock. There will likely be more ability for such investors to short our Class A common stock in early trading than is typical for a traditional underwritten public offering given increased availability of our Class A common stock on the trading markets in part due to the lack of contractual lock-up agreements or other restrictions on transfer. To the extent that there is a lack of awareness among retail investors, such lack of awareness could reduce the value of our Class A common stock and cause volatility in the public trading price of our Class A common stock.
The public trading price of our Class A common stock following our direct listing is likely to be volatile and could be subject to wide fluctuations in response to many risk factors listed in this section, and others beyond our control, including:

the number of shares of our Class A common stock made available for trading;

sales or expectations with respect to sales of shares of our Class A common stock by holders of our Class A common stock;
 
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actual or anticipated fluctuations in our business, financial condition and results of operations;

variance in our financial performance from expectations of securities analysts;

changes in our revenue;

announcements by us or our competitors of significant business developments, acquisitions or new offerings;

our involvement in any litigation;

our sale of our Class A common stock or other securities in the future;

changes in senior management or key personnel;

the trading volume of our Class A common stock;

changes in the anticipated future size and growth rate of our market; and

general economic, regulatory and market conditions.
Recently, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry fluctuations, as well as general economic, political, regulatory and market conditions (including the impact of the ongoing COVID-19 pandemic and other future adverse public health developments), may negatively impact the market price of our Class A common stock. These fluctuations may be even more pronounced in the trading market for our Class A common stock shortly following the listing of our Class A common stock on the NYSE as a result of the supply and demand forces described above and could cause you to lose all or part of your investment in our Class A common stock since you might be unable to sell your shares at or above the price you paid. In the past, companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation. We may be the target of this type of litigation in the future, which could result in substantial costs and divert our management’s attention.
The trading price of our Class A common stock, upon listing on the NYSE, may have little or no relationship to the historical sales prices of our Class A common stock in private transactions.
Prior to the listing of our Class A common stock on the NYSE, our shares have not been listed on any stock exchange or other public trading market and have an extremely limited history of private purchases. In the section titled “Sale Price History of our Class A Common Stock,” we have provided the historical sales prices of our capital stock in private transactions. However, this information may have little or no relation to broader market demand for our Class A common stock and thus the initial public trading price of our Class A common stock on the NYSE once trading begins. As a result, you should not place undue reliance on these historical sales prices as they may differ materially from the opening public trading prices and subsequent public trading prices of our Class A common stock on the NYSE. For more information about how the initial listing price on the NYSE will be determined, see “Plan of Distribution.”
An active, liquid and orderly market for our Class A common stock may not develop or be sustained. You may be unable to sell your shares of Class A common stock at or above the price you bought them for.
We currently expect our Class A common stock to be listed and traded on the NYSE. Prior to listing on the NYSE, there has been no public market for our Class A common stock. Moreover, consistent with Regulation M and other federal securities laws applicable to our listing, we have not consulted with Registered Stockholders or other existing stockholders regarding their desire or plans to sell shares in the public market following the listing or discussed with potential investors their intentions to buy our Class A common stock in the open market following the listing. While our Class A common stock may be sold after our listing on the NYSE by the Registered Stockholders pursuant to this prospectus or by our other existing stockholders in accordance with Rule 144 of the Securities Act, unlike a traditional underwritten initial public offering, there can be no assurance that any Registered Stockholders or other existing stockholders will sell any of their shares of Class A common stock and there may initially be a lack of supply of, or demand for,
 
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our Class A common stock on the NYSE. Conversely, there can be no assurance that the Registered Stockholders and other existing stockholders will not sell all of their shares of Class A common stock, resulting in excess supply of our Class A common stock on the NYSE. In the case of a lack of supply of our Class A common stock, the trading price of our Class A common stock may rise to an unsustainable level. Further, institutional investors may be discouraged from purchasing our Class A common stock if they are unable to purchase a block of our Class A common stock in the open market in a sufficient size for their investment objectives due to a potential unwillingness of our existing stockholders to sell a sufficient amount of Class A common stock at the price offered by such institutional investors and the greater influence individual investors have in setting the trading price. If institutional investors are unable to purchase our Class A common stock in a sufficient amount for their investment objectives, the market for our Class A common stock may be more volatile without the influence of long-term institutional investors holding significant amounts of our Class A common stock. In the case of a lack of demand for our Class A common stock, the trading price of our Class A common stock could decline significantly and rapidly after our listing. Therefore, an active, liquid and orderly trading market for our Class A common stock may not initially develop or be sustained, which could significantly depress the trading price of our Class A common stock and/or result in significant volatility, which could affect your ability to sell your shares of Class A common stock.
None of our stockholders are party to any contractual lock-up agreement or other contractual restrictions on transfer. Following our listing, sales of substantial amounts of our Class A common stock in the public markets, or the perception that sales might occur, could cause the trading price of our Class A common stock to decline.
In addition to the supply and demand and volatility factors discussed above, sales of a substantial number of shares of our Class A common stock into the public market, particularly sales by our Founder, directors, executive officers and principal stockholders, or the perception that these sales might occur in large quantities, could cause the trading price of our Class A common stock to decline. None of our securityholders are subject to any contractual lock-up or other contractual restriction on the transfer or sale of their shares.
As of March 31, 2021, after giving effect to (i) the Capital Stock Conversions and (ii) the filing and effectiveness of our amended and restated certificate of incorporation and the adoption and effectiveness of our amended and restated bylaws, we had 71,224,389 shares of Class A common stock outstanding and 64,852,905 shares of Class B common stock outstanding, all of which are “restricted securities” ​(as defined in Rule 144 under the Securities Act). In addition to the shares of Class A common stock that may be immediately sold by the Registered Stockholders pursuant to this prospectus, approximately          of these shares may be immediately sold by our other existing stockholders under Rule 144 since such shares held by such other stockholders will have been beneficially owned by non-affiliates for at least one year. Moreover, once we have been a reporting company subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act for 90 days and assuming the availability of certain public information about us, (i) non-affiliates who have beneficially owned our common stock for at least six months may rely on Rule 144 to sell their shares of common stock, and (ii) our directors, executive officers and other affiliates who have beneficially owned our common stock for at least six months, including certain of the shares of Class A common stock covered by this prospectus to the extent not sold hereunder, will be entitled to sell their shares of our Class A common stock subject to volume limitations under Rule 144.
In addition, following the effectiveness of the registration statement of which this prospectus forms a part, we intend to file a registration statement on Form S-8 under the Securities Act to register all shares subject to outstanding stock options or reserved for future issuance under our equity compensation plans. As of March 31, 2021, we had 4,324,501 options outstanding that, if fully exercised, would result in the issuance of 4,324,501 shares of Class B common stock. 4,288,345 of these options were exercisable as of March 31, 2021. As of March 31, 2021, we also had 5,996,773 shares of Class A common stock subject to RSU awards granted prior to March 31, 2021 for which the time-based vesting condition had not been satisfied as of such date. These shares will be able to be freely sold in the public market upon issuance, subject to applicable vesting requirements and compliance by affiliates with Rule 144.
Following the effectiveness of the registration statement of which this prospectus forms a part, the holders of up to 110,211,401 shares of our Class A common stock (including shares of our Class B common
 
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stock that are convertible into shares of our Class A common stock) will have rights, subject to some conditions, to require us to file registration statements for the public resale of the Class A common stock issuable upon conversion of such shares or to include such shares in registration statements that we may file for us or other stockholders. Any registration statement we file to register additional shares, whether as a result of registration rights or otherwise, could cause the trading price of our Class A common stock to decline or be volatile.
The multi-class structure of our common stock will have the effect of concentrating voting control with those stockholders who hold our Class B common stock, including our Founder and Chief Executive Officer. This will limit or preclude your ability to influence corporate matters, including the election of directors, amendments to our organizational documents and any merger, consolidation, sale of all or substantially all of our assets or other major corporate transactions requiring stockholder approval.
Our Class A common stock registered in this listing has one vote per share, our Class B common stock has ten votes per share and our Class C common stock has no voting rights. The multi-class structure of our common stock has the effect of concentrating voting control with our Class B common stockholders. As of March 31, 2021, Mr. Casalena holds 68.2% of the voting power of our outstanding capital stock. For more information, see “Principal and Registered Stockholders.” As a result, Mr. Casalena will have control over most matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions. He may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. Corporate action might be taken even if other stockholders, including those who purchase shares from any of the Registered Stockholders, oppose them. This concentration of ownership may have the effect of delaying, preventing or deterring a change of control or other liquidity event of our company, could deprive our stockholders of an opportunity to receive a premium for their shares of Class A common stock as part of a sale or other liquidity event and might ultimately affect the trading price of our Class A common stock. Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, which will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term.
Pursuant to our amended and restated certificate of incorporation, we will be authorized to issue 1,000,000,000 shares of Class C common stock, none of which will be outstanding following the effectiveness of the registration statement of which this prospectus forms a part. Although we have no current plans to issue any shares of Class C common stock in the future, we may issue shares of Class C common stock for a variety of corporate purposes, including financings, acquisitions, investments, dividends and equity incentives to our employees, consultants and directors. Under our amended and restated certificate of incorporation, our board of directors will have the authority, without stockholder approval except as required by the listing standards of the NYSE, to issue additional shares of our capital stock. Because the Class C common stock carries no voting rights, is not convertible into any other capital stock and is not listed for trading on an exchange or registered for sale with the SEC, shares of Class C common stock may be less liquid and less attractive to any future recipients of these shares than shares of Class A common stock, although we may seek to list the Class C common stock for trading and register shares of Class C common stock for sale in the future. In addition, because our Class C common stock carries no voting rights and is not counted when determining whether the seven percent ownership threshold related to automatic conversion of the Class B common stock is met, if we issue shares of Class C common stock in the future, the holders of our Class B common stock, including our Founder and Chief Executive Officer, may be able to elect all of our directors and to determine the outcome of most matters submitted to a vote of our stockholders for a longer period of time than would be the case if we issued Class A common stock rather than Class C common stock in such transactions. In addition, if we issue shares of Class C common stock in the future, such issuances would have a dilutive effect on the economic interests of our Class A common stock and Class B common stock.
We cannot predict the impact our capital structure may have on our stock price.
We cannot predict whether our multi-class structure will result in a lower or more volatile market price of our Class A common stock, in adverse publicity or other adverse consequences. For example, certain index providers have announced restrictions on including companies with multiple-class share structures in
 
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certain of their indexes. S&P, Dow Jones and FTSE Russell have each announced changes to their eligibility criteria for inclusion of shares of public companies on certain indices, including the S&P 500. These changes exclude companies with multiple classes of shares of common stock from being added to these indices. In addition, several stockholder advisory firms have announced their opposition to the use of multiple class structures. As a result, the multi-class structure of our capital stock may prevent the inclusion of our Class A common stock in these indices and may cause stockholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure. Any such exclusion from indices could result in a less active trading market for our Class A common stock. Any actions or publications by stockholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect the trading price of our Class A common stock.
The multi-class structure of our common stock additionally has the effect of concentrating voting control with our Class B common stockholders, including our Founder and Chief Executive Officer. This concentrated control could delay, defer, or prevent a change of control, merger, consolidation, takeover, or other business combination involving us that you, as a stockholder, may otherwise support, and could allow us to take actions that some of our stockholders do not view as beneficial, which could reduce the trading price of our Class A common stock. Furthermore, this concentrated control could also discourage a potential investor from acquiring our Class A common stock due to the limited voting power of such stock relative to the Class B common stock and might harm the trading price of our Class A common stock. Any issuance of Class C common stock could also cause the trading price of our Class A common stock to decline.
Our business, financial condition and results of operations may differ from any projections that we disclose or any information that may be attributed to us by third parties.
From time to time, we may provide guidance via public disclosures regarding our projected business, financial condition or results of operations. However, any such projections involve risks, assumptions and uncertainties, and our actual results could differ materially from such projections. Factors that could cause or contribute to such differences include, but are not limited to, those identified in these Risk Factors, some or all of which are not predictable or within our control. Other unknown or unpredictable factors also could adversely impact our performance, and we undertake no obligation to update or revise any projections, whether as a result of new information, future events or otherwise. In addition, various news sources, bloggers and other publishers often make statements regarding our historical or projected business or financial performance, and you should not rely on any such information even if it is attributed directly or indirectly to us.
We do not intend to pay dividends on our Class A common stock for the foreseeable future and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our Class A common stock.
We do not currently anticipate paying dividends on our Class A common stock, Class B common stock or Class C common stock. Any declaration and payment of future dividends to holders of our Class A common stock, Class B common stock or Class C common stock will be at the discretion of our board of directors and will depend on many factors, including our financial condition, earnings, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends, the provisions of Delaware law affecting the payment of dividends and distributions to stockholders and other considerations that our board of directors deems relevant. In addition, the terms of the Credit Agreement currently limit our ability to pay dividends and future agreements governing our indebtedness may similarly limit our ability to pay dividends. Consequently, your only opportunity to achieve a return on your investment in our company will be if the trading price of our Class A common stock appreciates and you sell your shares at a profit. There is no guarantee that the price of our Class A common stock that will prevail in the market will ever exceed the price that you paid.
If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our Class A common stock adversely, the trading price of our Class A common stock and trading volume could decline.
The trading market for our Class A common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not control these analysts. If any of
 
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the analysts who cover us downgrade our Class A common stock or our industry, or the stock of any of our competitors, or publish inaccurate or unfavorable research about our business, the price of our Class A common stock may decline. If analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the price or trading volume of our Class A common stock to decline and our Class A common stock to be less liquid.
Additional issuances of our stock could result in significant dilution to our stockholders.
Additional issuances of our stock, exercise of options or vesting of RSUs will result in dilution to existing holders of our capital stock. The amount of dilution could be substantial depending upon the size of the issuance, exercise or vesting. As part of our business strategy, we may acquire or make investments in companies, products or technologies and issue equity securities to pay for any such acquisition or investment. Any such issuances of additional capital stock may cause stockholders to experience significant dilution of their ownership interests and the trading price of our Class A common stock to decline.
Anti-takeover provisions contained in our charter documents and Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the trading price of our Class A common stock.
Our amended and restated certificate of incorporation and our amended and restated bylaws will contain provisions that could delay or prevent a change in control of our company. These provisions could also make it more difficult for stockholders to elect directors and take other corporate actions. These provisions include:

our multi-class common stock structure, which provides holders of our Class B common stock with the ability to significantly influence the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding common stock;

our stockholders will only be able to take action at a meeting of stockholders and not by written consent;

special meetings of our stockholders may be called only by a majority of our board of directors, the chairperson of our board of directors or our chief executive officer;

advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders.

certain amendments to our amended and restated certificate of incorporation or our amended and restated bylaws will require the approval of at least 6613% of the then-outstanding voting power of our capital stock;

our amended and restated bylaws will provide that certain litigation against us can only be brought in Delaware; and

authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock.
These and other provisions in our amended and restated certificate of incorporation and our amended and restated bylaws and under Delaware law could discourage potential takeover attempts, reduce the price investors might be willing to pay in the future for shares of our Class A common stock and result in the trading price of our Class A common stock being lower than it would be without these provisions. For more information, see “Description of Capital Stock — Anti-Takeover Provisions.”
Our amended and restated certificate of incorporation will contain exclusive forum provisions for certain claims, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated certificate of incorporation, to the fullest extent permitted by law, will provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of us; (ii) any action asserting a claim of breach of a duty (including any fiduciary duty) owed by any of our current or former directors, officers, stockholders, employees or agents to us or our stockholders; (iii) any action asserting a claim against us or any of our current or former directors, officers,
 
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stockholders, employees or agents arising out of or relating to any provision of the General Corporation Law of the State of Delaware (the “DGCL”) or our amended and restated certificate of incorporation or our amended and restated bylaws; or (iv) any action asserting a claim against us or any of our current or former directors, officers, stockholders, employees or agents governed by the internal affairs doctrine of the State of Delaware. As described below, this provision will not apply to suits brought to enforce any duty or liability created by the Securities Act or Exchange Act, or rules and regulations thereunder.
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder and our amended and restated certificate of incorporation will provide that the federal district courts of the United States of America will, to the fullest extent permitted by law, be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. Our decision to adopt such a federal forum provision followed a decision by the Supreme Court of the State of Delaware holding that such provisions are facially valid under Delaware law. While there can be no assurance that federal or state courts will follow the holding of the Delaware Supreme Court or determine that our federal forum provision should be enforced in a particular case, application of our federal forum provision means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court.
Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder and our amended and restated certificate of incorporation will provide that the exclusive forum provision does not apply to suits brought to enforce any duty or liability created by the Exchange Act. Accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder must be brought in federal court. Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder.
Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of and consented to our exclusive forum provisions, including the federal forum provision, provided, however, that stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. Additionally, our stockholders cannot waive compliance with the federal securities laws and the rules and regulations thereunder. These provisions may limit our stockholders’ ability to bring a claim in a judicial forum they find favorable for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees and agents. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.
 
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus 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. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” or the negative version of those words or phrases or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not statements of historical fact, and are based on current expectations, estimates and projections about our industry as well as certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, which you should consider and read carefully, including but not limited to:

our ability to attract and retain customers and expand our customers’ use of our platform;

our ability to anticipate market needs and develop new or enhanced solutions to meet those needs;

our ability to compete successfully in our industry against current and future competitors;

the impact of the COVID-19 pandemic and the associated economic uncertainty on us, our customers and their users;

our ability to manage growth and maintain demand for our solutions;

our ability to protect and promote our brand;

our ability to successfully identify, manage and integrate any existing and potential acquisitions;

our ability to hire, integrate and retain highly skilled personnel;

our ability to adapt to and comply with existing and emerging regulatory developments, technological changes and cybersecurity needs;

our ability to establish and maintain intellectual property rights;

our ability to manage expansion into international markets; and

the other risks and uncertainties described under “Risk Factors.”
This list of factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this prospectus. 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 prospectus, 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 prospectus. 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.
 
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You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement of which this prospectus forms a part 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 prospectus.
 
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MARKET AND INDUSTRY DATA
This prospectus includes estimates regarding market and industry data. Unless otherwise indicated, information concerning our industry and the markets in which we operate, including our general expectations, market position, market opportunity and market size, are based on our management’s knowledge and experience in the markets in which we operate, together with currently available information obtained from various sources, including publicly available information, industry reports and publications, surveys, our customers, trade and business organizations and other contacts in the markets in which we operate. Certain information is based on management estimates, which have been derived from third-party sources, as well as data from our internal research.
In presenting this information, we have made certain assumptions that we believe to be reasonable based on such data and other similar sources and on our knowledge of, and our experience to date in, the markets in which we operate. While we believe the estimated market and industry data included in this prospectus is generally reliable, such information is inherently uncertain and imprecise. Market and industry data is subject to change and may be limited by the availability of raw data, the voluntary nature of the data gathering process and other limitations inherent in any statistical survey of such data. In addition, projections, assumptions and estimates of the future performance of the markets in which we operate are necessarily subject to uncertainty and risk due to a variety of factors, including those described in “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” These and other factors could cause results to differ materially from those expressed in the estimates made by third parties and by us. Accordingly, you are cautioned not to place undue reliance on such market and industry data or any other such estimates.
TRADEMARKS, SERVICE MARKS, COPYRIGHTS AND TRADENAMES
We own or otherwise have rights to the trademarks, service marks and copyrights, including those mentioned in this prospectus, used in conjunction with the operation of our business. This prospectus includes our own trademarks, which are protected under applicable intellectual property laws, as well as trademarks, service marks, copyrights and tradenames of other companies, which are the property of their respective owners. We do not intend our use or display of other companies’ trademarks, service marks, copyrights or tradenames to imply a relationship with, or endorsement or sponsorship of us by, any other companies. Solely for convenience, trademarks and tradenames referred to in this prospectus may appear without the ®, ™ or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights to these trademarks and tradenames.
 
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USE OF PROCEEDS
Registered Stockholders may, or may not, elect to sell shares of our Class A common stock covered by this prospectus. To the extent any Registered Stockholder chooses to sell shares of our Class A common stock covered by this prospectus, we will not receive any proceeds from any such sales of our Class A common stock. See “Principal and Registered Stockholders.”
 
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DIVIDEND POLICY
We do not currently anticipate paying dividends on our Class A common stock, Class B common stock or Class C common stock. Any declaration and payment of future dividends to holders of our Class A common stock, Class B common stock or Class C common stock will be at the discretion of our board of directors and will depend on many factors, including our financial condition, earnings, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends, the provisions of Delaware law affecting the payment of dividends and distributions to stockholders and other considerations that our board of directors deems relevant. In addition, the terms of the Credit Agreement currently limit our ability to pay dividends and future agreements governing our indebtedness may similarly limit our ability to pay dividends. See “Risk Factors — Risks Relating to Ownership of our Class A Common Stock — We do not intend to pay dividends on our Class A common stock for the foreseeable future and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our Class A common stock.”
 
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CAPITALIZATION
The following table sets forth our cash and cash equivalents, investment in marketable securities and capitalization as of March 31, 2021 as follows:

on an actual basis; and

on a pro forma basis to give effect to the Listing (as defined under “Unaudited Pro Forma Condensed Consolidated and Combined Financial Information”).
You should read this information in conjunction with our consolidated financial statements and the related notes included elsewhere in this prospectus and the “Selected Consolidated Financial and Operating Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this prospectus.
As of March 31, 2021
($ in thousands, except share numbers)
Actual
Pro Forma
(Unaudited)
(Unaudited)
Cash and cash equivalents
$ 183,339 $ 183,339
Investment in marketable securities
$ 31,500 $ 31,500
Debt:
Debt, current portion
$ 13,586 $ 13,586
Debt, non-current portion
522,576 522,576
Total debt
536,162 536,162
Series A-1 redeemable convertible preferred stock, par value $0.0001 per share; 54,431,446 shares authorized, actual; no shares authorized, pro forma; 54,431,446 shares issued and outstanding, actual; and no shares issued and outstanding, pro forma
5
Series A-2 redeemable convertible preferred stock, par value $0.0001 per share; 39,134,868 shares authorized, actual; no shares authorized, pro forma; 39,134,868 shares issued and outstanding, actual; and no shares issued and outstanding, pro forma
63,462
Series B redeemable convertible preferred stock, par value $0.0001 per share; 10,880,018 shares authorized, actual; no shares authorized, pro forma; 10,880,018 shares issued and outstanding, actual; and no shares issued and outstanding, pro forma
68,892
Stockholders’ equity/(deficit):
Preferred stock, par value $0.0001 per share; no shares authorized, actual; 100,000,000 shares authorized, pro forma; no shares issued and outstanding, actual; and no shares issued and outstanding, pro forma
Class A common stock, par value $0.0001 per share; 157,839,411 shares
authorized, actual; 1,000,000,000 shares authorized, pro forma; 9,159,601 shares
issued and outstanding, actual; and 71,224,389 shares issued and outstanding,
pro forma
1 7
Class B common stock, par value $0.0001 per share; 69,987,398 shares authorized,
actual; 100,000,000 shares authorized, pro forma; 15,269,008 shares issued and
outstanding, actual; and 64,852,905 shares issued and outstanding, pro forma
2 7
Class C common stock, par value $0.0001 per share; 7,673,154 shares authorized, actual; 1,000,000,000 shares authorized, pro forma; 7,202,353 shares issued and outstanding, actual; and no shares issued and outstanding, pro forma
1
Additional paid-in capital
497,825 859,462
Accumulated other comprehensive income/(loss)
1,128 1,128
Accumulated deficit
(676,853) (934,011)
Total stockholders’ equity/(deficit)
(177,896) (73,407)
Total capitalization
$ 490,625 $ 462,755
 
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SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING INFORMATION
The following table sets forth our selected historical consolidated financial information for the periods and dates indicated. We have derived the consolidated statements of operations information and consolidated statements of cash flows information for the years ended December 31, 2019 and 2020 and the consolidated balance sheet information as of December 31, 2019 and 2020 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the consolidated statements of operations information and consolidated statements of cash flows information for the three months ended March 31, 2020 and 2021 and the consolidated balance sheet information as of March 31, 2021 from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. Our unaudited condensed consolidated financial statements were prepared on a basis consistent with our audited consolidated financial statements and include, in our opinion, all adjustments, consisting only of normal recurring adjustments, that we consider necessary for the fair statement of the financial information set forth in those statements. We have derived the unaudited consolidated statement of operations information and consolidated statement of cash flows information for the year ended December 31, 2018 from our accounting records. Our historical results are not necessarily indicative of the results that may be expected in the future. You should read the following selected consolidated financial and other data together with the information under the sections titled “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and related notes included elsewhere in this prospectus.
($ in thousands, except share and per share data)
Year Ended December 31,
Three Months Ended
March 31,
2018
2019
2020
2020
2021
(Unaudited)
(Unaudited)
(Unaudited)
Consolidated Statements of Operations Information:
Revenue
$ 389,863 $ 484,751 $ 621,149 $ 136,874 $ 179,646
Cost of revenue
70,176 81,910 98,337 23,771 27,408
Gross profit
319,687 402,841 522,812 113,103 152,238
Operating expenses:
Research and product development(1)
75,916 107,645 167,906 36,086 42,011
Marketing and sales(1)
149,022 184,278 260,039 75,580 97,972
General and administrative(1)
39,993 49,578 54,647 13,786 19,516
Total operating expenses
264,931 341,501 482,592 125,452 159,499
Operating income/(loss)
54,756 61,340 40,220 (12,349) (7,261)
Interest expense
(173) (1,080) (10,043) (3,130) (3,260)
Other income/(loss), net
2,632 3,815 (7,678) 1,205 3,593
Income/(loss) before (provision for)/benefit
from income taxes
57,215 64,075 22,499 (14,274) (6,928)
(Provision for)/benefit from income taxes
(14,092) (5,923) 8,089 4,142 5,782
Net income/(loss)
$ 43,123 $ 58,152 $ 30,588 $ (10,132) $ (1,146)
Net income/(loss) per share attributable to Class A and Class B common stockholders, basic and diluted(2)
$ 0.27 $ (14.91) $ (14.10) $ (0.65) $ (0.11)
Weighted-average shares used in computing
net income/(loss) per share attributable
to Class A and Class B common
stockholders, basic and diluted(2)
20,943,219 17,354,458 17,917,236 17,417,384 19,012,323
 
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($ in thousands, except share and per share data)
Year Ended December 31,
Three Months Ended
March 31,
2018
2019
2020
2020
2021
(Unaudited)
(Unaudited)
(Unaudited)
($ in thousands)
Consolidated Statements of Cash Flows Information:
Net cash provided by operating activities
$ 111,918 $ 102,333 $ 150,030 $ 52,469 $ 50,131
Net cash (used in)/provided by investing activities
(56,262) (75,323) 34,262 12,026 (195,652)
Net cash (used in)/provided by financing activities
(13,680) (45,827) (170,709) (7,345) 288,304
As of December 31,
As of
March 31,
($ in thousands)
2019
2020
2021
(Unaudited)
Consolidated Balance Sheet Information:
Cash and cash equivalents
$ 43,649 $ 57,891 $ 183,339
Restricted cash
17,011
Investment in marketable securities
76,784 37,462 31,500
Total assets
336,729 306,766 872,464
Total liabilities
587,275 839,582 918,001
Redeemable convertible preferred stock
126,546 131,390 132,359
Total stockholders’ equity/(deficit)
(377,092) (664,206) (177,896)
(1)
Includes stock-based compensation as follows:
Year Ended December 31,
Three Months Ended
March 31,
($ in thousands)
2018
2019
2020
2020
2021
(Unaudited)
(Unaudited)
(Unaudited)
Cost of revenue
$ 281 $ 532 $ 780 $ 161 $ 275
Research and product development
4,090 12,087 21,619 4,677 6,793
Marketing and sales
708 1,737 3,144 641 1,172
General and administrative
1,939 3,619 5,711 2,423 1,612
Total stock-based compensation
$ 7,018 $ 17,975 $ 31,254 $ 7,902 $ 9,852
(2)
For the years ended December 31, 2019 and 2020, see Note 2 of the notes to our audited consolidated financial statements included elsewhere in this prospectus for an explanation of the calculations of our net income/(loss) per share, basic and diluted. For the three months ended March 31, 2020 and 2021, see Note 2 of the notes to our unaudited condensed consolidated financial statements included elsewhere in this prospectus for an explanation of the calculations of our net income/(loss) per share, basic and diluted.
Key Performance Indicators and Non-GAAP Financial Measures
We review the following key performance indicators and non-GAAP financial measures to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. Increases or decreases in our key performance indicators and non-GAAP financial measures may not correspond with increases or decreases in our revenue and our key performance indicators and non-GAAP financial measures may be calculated in a manner different than similar key performance indicators and non-GAAP financial measures, respectively, used by other companies. To the extent that our key performance indicators and non-GAAP financial measures relate to the year ended December 31, 2018, they are based on unaudited financials from our accounting records.
We believe that our financial statements and the other financial data included in this prospectus have been prepared in a manner that complies, in all material respects, with GAAP and the regulations published
 
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by the SEC. However, management believes evaluating our ongoing operating results may be enhanced if investors have additional key performance indicators and non-GAAP financial measures. Specifically, we present adjusted EBITDA and unlevered free cash flow in various places in this prospectus, each of which is a non-GAAP financial measure. Non-GAAP financial measures are presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP financial measures used by other companies. A reconciliation of each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP is provided below. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.
The following table summarizes our key performance indicators and non-GAAP financial measures for each period presented below (unaudited).
Year Ended
December 31,
Three Months Ended
March 31,
2018
2019
2020
2020
2021
Unique subscriptions (in thousands)(1)
2,336 2,984 3,656 3,178 3,794
Total bookings (in thousands)(2)
$ 426,926 $ 514,418 $ 664,739 $ 155,868 $ 198,947
ARRR (in thousands)(3)
$ 425,849 $ 549,156 $ 709,062 $ 556,266 $ 754,206
ARPUS(4) $ 178 $ 181 $ 186 $ 183 $ 190
Adjusted EBITDA (in thousands)(5)
$ 74,505 $ 97,624 $ 116,666 $ 1,190 $ 11,097
Unlevered free cash flow (in thousands)(6)
$ 82,905 $ 94,571 $ 152,439 $ 53,364 $ 51,782
(1)
Unique subscriptions represent the number of unique sites, standalone scheduling subscriptions and Unfold (social) subscriptions, as of the end of a period. A unique site represents a single subscription and/or group of related subscriptions, including a website subscription and/or a domain subscription, and other subscriptions related to a single website or domain. Every unique site contains at least one domain subscription or one website subscription.
(2)
Total bookings represents cash receipts for all subscriptions purchased, as well as payments due under the terms of contractual agreements for obligations to be fulfilled.
(3)
ARRR is calculated as the monthly revenue from subscription fees and revenue generated in conjunction with associated fees (fees taken or assessed in conjunction with commerce transactions) in the last month of the period multiplied by 12.
(4)
ARPUS is calculated as the total revenue during the preceding 12-month period divided by the average of the number of total unique subscriptions at the beginning and end of the period.
(5)
Adjusted EBITDA is a supplemental performance measure that our management uses to assess our operating performance. We calculate adjusted EBITDA as net income/(loss) excluding interest expense, other income/(loss), net, provision for/(benefit from) income taxes, depreciation and amortization, stock-based compensation expense and other items that we do not consider indicative of our ongoing operating performance, which include expenses associated with a special bonus in 2020. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation from, or as a substitute for, the analysis of other GAAP financial measures, such as net income. Some of these limitations include:

this measure does not reflect interest expense, or the cash requirements necessary to service interest or principal payments on our indebtedness;

this measure does not reflect our corporate taxes or the cash requirements to pay our corporate taxes;

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and this measure does not reflect any cash requirements for such replacements; and

this measure does not reflect stock-based compensation expense.
The following is a reconciliation of adjusted EBITDA to the most comparable GAAP measure, net income:
 
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Year Ended
December 31,
Three Months Ended
March 31,
($ in thousands)
2018
2019
2020
2020
2021
Net income/(loss)
$ 43,123 $ 58,152 $ 30,588 $ (10,132) $ (1,146)
Interest expense
173 1,080 10,043 3,130 3,260
Other (income)/loss, net
(2,632) (3,815) 7,678 (1,205) (3,593)
Provision for /(benefit from) income taxes
14,092 5,923 (8,089) (4,142) (5,782)
Depreciation and amortization
12,731 18,309 21,703 5,637 8,506
Stock-based compensation expense
7,018 17,975 31,254 7,902 9,852
Special bonus*
23,489
Adjusted EBITDA
$ 74,505 $ 97,624 $ 116,666 $ 1,190 $ 11,097
*
On December 7, 2020 we declared an extraordinary dividend payable to all stockholders of record as of December 14, 2020. In light of the extraordinary dividend, we concurrently approved a special bonus of approximately $23.5 million to be paid to current employees on record as of the date of the extraordinary dividend. The special bonus was designed to allow employees to participate in our overall successes in a manner commensurate with the stockholders receiving the extraordinary dividend. The special bonus was not tied to the employees’ individual performance, but rather, was calculated as the greater of five hundred USD, EUR or PLN or $2.666 per vested stock option held by the employee, the same amount paid per share to our stockholders. Payment of these special bonuses was completed by January 2021.
We believe that it is meaningful to investors to adjust for this bonus in adjusted EBITDA because we do not routinely pay bonuses to employees and because this bonus was only paid in connection with our declaring an extraordinary dividend to stockholders. We do not expect to pay an extraordinary dividend and therefore special bonuses in the future.
Year Ended December 31,
Three
Months Ended
March 31,
2018
2019
2020
2020
2021
Cost of revenue
$ $ $ 1,303 $ $
Research and product development
18,290
Marketing and sales
3,122
General and administrative
774
Total
$  — $  — $ 23,489
(6)
Unlevered free cash flow is a supplemental liquidity measure that our management uses to evaluate our core operating business and our ability to meet our current and future financing and investing needs. We define unlevered free cash flow as cash flow from operating activities less cash paid for capital expenditures increased by cash paid for interest expense net of the associated tax benefit. The tax benefit is calculated using a blended rate of federal and state income tax rates of 24.76%, 24.52% and 24.48% in fiscal 2018, 2019 and 2020, respectively, and 24.74% and 24.70% for the three months ended March 31, 2020 and 2021. Unlevered free cash flow has limitations as an analytical tool and should not be considered in isolation from, or as a substitute for, the analysis of other GAAP financial measures, such as cash flows from operating activities. Unlevered free cash flow does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments, limiting its usefulness as a comparative measure.
The following is a reconciliation of unlevered free cash flow to the most comparable GAAP measure, cash flows from operating activities:
Year Ended
December 31,
Three Months Ended
March 31,
($ in thousands)
2018
2019
2020
2020
2021
Cash flow from operating activities
$ 111,918 $ 102,333 $ 150,030 $ 52,469 $ 50,131
Cash paid for capital expenditures
(29,163) (8,217) (4,712) (1,274) (657)
Free cash flow
82,755 94,116 145,318 51,195 49,474
Cash paid for interest expense net of the associated tax benefit
150 455 7,121 2,169 2,308
Unlevered free cash flow
$ 82,905 $ 94,571 $ 152,439 $ 53,364 $ 51,782
 
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED AND COMBINED FINANCIAL INFORMATION
The unaudited pro forma condensed consolidated balance sheet as of March 31, 2021 and the unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2021 and for the year ended December 31, 2020 present our combined financial position and results of operations after giving effect to the following transactions (collectively, the “Transactions”):

the acquisition of Tock, Inc. (“Tock”) for cash consideration of $226.8 million, the issuance of our Class C common stock with the fair value of $188.2 million and estimated working capital adjustments of $10.6 million; and

the conversion of our redeemable convertible preferred stock and our Class C common stock from the above transactions into Class A common stock or Class B common stock, as applicable, and the subsequent registration of our Class A common stock pursuant to this registration statement.
The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2021 and for the year ended December 31, 2020, gives pro forma effect to the Transactions as if they had occurred on January 1, 2020. The unaudited pro forma condensed consolidated balance sheet as of March 31, 2021 gives effect to the Listing (as defined below) as if such transaction occurred on March 31, 2021.
The unaudited pro forma condensed consolidated and combined financial information was prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses,” using the assumptions set forth in the notes to the unaudited pro forma condensed consolidated and combined financial information. The unaudited pro forma condensed consolidated and combined financial information has been adjusted to include Transactions adjustments, which reflect the application of the accounting required by generally accepted accounting principles in the United States (“GAAP”), and rules of the SEC, and linking the effects of the Transactions listed above to our historical combined financial statements (“Transaction Accounting Adjustments”).
Acquisition of Tock (the “Acquisition”)
On March 31, 2021, we acquired 100% of the outstanding stock of Tock. The purpose of the Acquisition was to expand our complementary suite of services available with a platform for reservations, take-out, delivery and events for the hospitality industry. The unaudited pro forma combined financial information was prepared using the acquisition method of accounting under GAAP. The consideration for the Acquisition consists of cash consideration of $226.8 million, the issuance of 2,750,330 shares of our Class C common stock valued at $188.2 million and estimated working capital adjustments of $10.6 million. In addition, $30.0 million of restricted stock units in our Class C common stock were issued to the Tock shareholders, which are subject to clawback and forfeiture based on providing continued service to the combined company. Accordingly, the restricted stock units will be accounted for as compensation expense over the service period of three years on a straight-line basis in the consolidated statement of operations assuming all restricted stock units will vest. For purposes of the unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2021 and for the year ended December 31, 2020, we have assumed the Acquisition was consummated on January 1, 2020.
Registration Statement (the “Listing”)
For purposes of the unaudited pro forma condensed consolidated balance sheet, we have assumed that all shares of our redeemable convertible preferred stock had automatically converted into an aggregate of 54,862,435 shares of our Class A common stock and 49,583,897 shares of our Class B common stock and that all Class C common stock issued and outstanding had automatically converted into an aggregate of 7,202,353 shares of our Class A common stock, as if such conversions had occurred on March 31, 2021. For purposes of the unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2021 and for the year ended December 31, 2020, we have assumed that the Listing and the conversions of our redeemable convertible preferred stock and Class C common stock occurred on January 1, 2020.
 
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The unaudited pro forma condensed consolidated and combined financial information is for illustrative and informational purposes only and is not necessarily indicative of the operating results that would have occurred if the Transactions had been completed as of the dates set forth above, nor is it indicative of the future combined results of operations or financial position of the Company. Further, Transaction Accounting Adjustments represent management’s best estimates based on information available as of the date of this prospectus and are subject to change as additional information becomes available.
The unaudited pro forma condensed consolidated and combined financial information is based on the assumptions and adjustments that are described in the accompanying notes. The application of the acquisition method of accounting is dependent upon certain valuations and other studies that have yet to be completed. Accordingly, the pro forma adjustments are preliminary, subject to further revision as additional information becomes available and additional analyses are performed and have been made solely for the purpose of providing unaudited pro forma combined financial information. There can be no assurances that the final valuations will not result in material changes to the preliminary estimated purchase price allocation. The unaudited pro forma condensed consolidated and combined financial information does not give effect to the potential impact of current financial conditions, any anticipated synergies, operating efficiencies or cost savings that may result from the Acquisition or any integration costs. The actual results reported in periods following the Transactions may differ significantly from those reflected in this pro forma financial information presented herein for a number of reasons, including, but not limited to, differences between the assumptions used to prepare this pro forma financial information.
The assumptions and estimates underlying the unaudited adjustments to the pro forma combined consolidated and financial statements are described in the accompanying notes, which should be read together with the unaudited pro forma condensed combined financial statements.
The unaudited pro forma condensed consolidated and combined financial information should be read together with “Capitalization,” “Selected Historical Consolidated Financial and Operating Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Certain Relationships and Related Party Transactions” and the historical financial statements and related notes thereto included elsewhere in this prospectus.
 
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2021
(in thousands)
Squarespace
(Historical)
Listing
Adjustments
Pro Forma
Consolidated
Assets
Current assets:
Cash and cash equivalents
$ 183,339 $ $ 183,339
Restricted cash
17,011 17,011
Investment in marketable securities
31,500 31,500
Accounts receivable
9,254 9,254
Due from vendors
2,400 2,400
Prepaid expenses and other current assets
44,296 44,296
Total current assets
$ 287,800 $ $ 287,800
Property and equipment, net
46,855 46,855
Deferred income taxes
838 838
Goodwill
422,198 422,198
Intangible assets, net
106,849 106,849
Other assets
7,924 7,924
Total assets
$ 872,464 $ $ 872,464
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity / (Deficit)
Current liabilities:
Accounts payable
$ 35,620 $ $ 35,620
Accrued liabilities
61,292 34,587
a
95,879
Deferred revenue