Squarespace files for a direct listing on the NYSE

Today Squarespace, a well-known software-and-hosting provider for SMB websites, released its S-1 filing. The company is pursuing a direct listing on the New York Stock Exchange, or NYSE. It will trade under the ticker symbol “SQSP.”

The company’s financial results paint the picture of a rapidly growing company that has a history of profitability. Squarespace also has listed financial results that are inclusive of some share conversions, among other matters. Its pro forma results presume that “all shares of our convertible preferred stock had automatically converted” into different types of common stock. The pro forma results are also inclusive of a private placement, and its recent acquisition of Tock.

It will take some time to unspool that particular knot. For now we’ll stick to Squarespace’s historical results through 2020 without those accoutrements; if you intend to buy shares in the company, you’ll want to understand the more complicated math. For now let’s focus on Squarespace’s own metrics.

In 2019, Squarespace generated revenues of $484.8 million, leading to gross profit of $402.8 million, operating income of $61.3 million and net income of $58.2 million. In 2020 those numbers changed to revenues of $621.1 million, gross profit of $522.8 million, operating income of $40.2 million and net income of $30.6 million.

Squarespace’s revenue grew just over 28% in 2020, compared to 2019.

For reference, its pro forma results for 2020 include a modest revenue gain to $644.2 million, gross profit of $530.5 million, an operating loss of $246.4 million and a net loss of $267.7 million.

Squarespace has a history of cash generation, including operating cash flow of $102.3 million in 2019 and $150.0 million in 2020. The company’s cash flow data explains why Squarespace is not pursuing a traditional IPO. As Squarespace can self-fund, it does not need to sell shares in its public debut.

Turning to Squarespace-specific metrics, the company’s “unique subscriptions” rose from 2.984 million in 2019 to 3.656 million in 2020. Its annual recurring revenue (ARR) rose from $549.2 million to $705.5 million in 2020.

Squarespace’s ARR grew around 28.5% in 2020, a faster pace of expansion than its GAAP revenues.

Per the company’s SEC filing, the company “completed its estimate of the fair value of its Class A common stock for financial reporting purposes as a weighted-average $63.70 per share for shares granted prior to March 11, 2021.” That should help form a reference price measuring stick for now.

Finally, who owns the company? Major shareholders include the company’s founder and CEO Anthony Casalena, who owns just around 76% of the company’s Class B shares, or 49,086,410 total units. Accel has 15,514,196 Class A shares. General Atlantic has 22,361,073 Class A shares and 4,958,345 Class B shares, while Index Ventures has 19,460,619 of the Class A equity.

The majority of voting power rests with the company’s CEO, with 68.2% control. Public market investors will have to vet how much they like having zero say in the company’s future direction.

Regardless, this is going to be a fascinating debut. More shortly.