Squarespace Files for NYSE Direct Listing - IPO Details

Squarespace Files for Direct Listing

Squarespace, a prominent provider of software and hosting solutions for small and medium-sized businesses (SMBs), has officially submitted its S-1 filing. The company intends to pursue a direct listing on the New York Stock Exchange (NYSE).

Financial Performance Overview

The company’s financial records demonstrate consistent growth and a history of profitability. Squarespace’s reported financials incorporate adjustments for share conversions and other factors.

Pro forma results are presented assuming full conversion of all convertible preferred stock into common stock. These results also reflect a recent private placement and the acquisition of Tock.

A detailed analysis of these adjustments will be necessary. For the present, we will concentrate on Squarespace’s historical performance through 2020, excluding these complexities. Investors considering shares should understand the intricacies of these calculations.

Revenue and Profitability Trends

In 2019, Squarespace achieved revenues of $484.8 million, resulting in a gross profit of $402.8 million. Operating income reached $61.3 million, and net income totaled $58.2 million.

During 2020, revenues increased to $621.1 million, with a gross profit of $522.8 million. Operating income was $40.2 million, and net income amounted to $30.6 million.

Squarespace experienced revenue growth exceeding 28% in 2020 when compared to the previous year.

The pro forma results for 2020 show a slight revenue increase to $644.2 million, a gross profit of $530.5 million, but also an operating loss of $246.4 million and a net loss of $267.7 million.

Cash Flow and Funding

Squarespace has consistently generated positive cash flow, with operating cash flow of $102.3 million in 2019 and $150.0 million in 2020. This strong cash flow position is a key reason why the company is opting for a direct listing rather than a traditional Initial Public Offering (IPO).

The company’s ability to self-fund eliminates the need to issue shares to raise capital during its public debut.

Key Metrics and Growth

The number of unique subscriptions increased from 2.984 million in 2019 to 3.656 million in 2020.

Annual Recurring Revenue (ARR) rose from $549.2 million to $705.5 million in 2020.

Squarespace’s ARR grew by approximately 28.5% in 2020, representing a faster growth rate than its generally accepted accounting principles (GAAP) revenues.

According to the SEC filing, the company has estimated the fair value of its Class A common stock at $63.70 per share, as of March 11, 2021. This provides a preliminary benchmark for pricing.

Shareholder Information

Major shareholders include founder and CEO Anthony Casalena, who holds approximately 76% of the company’s Class B shares, totaling 49,086,410 units.

Accel owns 15,514,196 Class A shares. General Atlantic holds 22,361,073 Class A shares and 4,958,345 Class B shares. Index Ventures possesses 19,460,619 Class A shares.

The CEO maintains the majority of voting control, with 68.2% of the power. Potential public market investors should consider the implications of limited influence over the company’s future direction.

This direct listing promises to be a noteworthy event. Further analysis will follow.