SQUARESPACE, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

The following discussion and analysis of our financial condition and results of
operations should be read together with our unaudited condensed consolidated
financial statements and the related notes and the other financial information
included elsewhere in this Quarterly Report and our audited consolidated
financial statements and the related notes and the discussion under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for the fiscal year ended December 31, 2021 included in the Annual
Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on
March 7, 2022. This discussion contains forward-looking statements that involve
risks and uncertainties. Our actual business, financial condition and results of
operations could differ materially from those anticipated in these
forward-looking statements as a result of various factors, including those
discussed below and elsewhere in this Quarterly Report on Form 10-Q,
particularly under "Part 2. Item 1A. Risk Factors." Our historical results are
not necessarily indicative of the results that may be expected for any period in
the future.

Overview

Squarespace is an all-in-one platform with everything to sell anything,
providing customers in over 200 countries and territories with all the tools
they need to sell physical products, digital content, classes, appointments,
reservations and more. Powered by best-in-class design for a consistent brand
experience across all touchpoints, our suite of fully integrated products
enables anyone to manage their projects and businesses through websites,
domains, e-commerce, marketing tools, and scheduling, along with tools for
managing a social media presence with Unfold and hospitality services via Tock.

We primarily derive revenue from monthly and annual subscriptions to our
presence and commerce solutions. Subscription revenue accounted for 91.7% of our
total revenue for both the three and nine months ended September 30, 2022 and
92.1% and 92.5% of our total revenue for the three and nine months ended
September 30, 2021, respectively. Payments for our subscription plans are
generally collected at the beginning of the subscription period and we generally
recognize the associated revenue ratably over the term of the customer contract.
Non-subscription revenue primarily consists of commerce transaction fees
received through revenue sharing arrangements with payment processors that
handle our customers' commerce transactions, payment processing fees received in
exchange for use of our hospitality services as well as revenue we generate from
third-party services we offer that provide additional functionality to our
customers.

We generated revenue of $217.7 million and $638.2 million for the three and nine
months ended September 30, 2022, respectively, and net income of $10.1 million
and net loss of $18.3 million for the three and nine months ended September 30,
2022, respectively. We generated revenue of $201.0 million and $576.6 million
for the three and nine months ended September 30, 2021, respectively, and net
income of $2.8 million and net loss of $232.8 million for the three and nine
months ended September 30, 2021, respectively. We believe we have a stable and
predictable business model driven by customer acquisition and the adoption by
our customers over time of higher value offerings and add-on subscriptions. Our
platform serves all types of customers, from small and medium-sized businesses
("SMBs") and independent creators, such as restaurants, photographers, wedding
planners, artists, musicians and bloggers, to iconic brands. No individual
unique subscription accounted for more than 1% of our total bookings for the
three and nine months ended September 30, 2022 and 2021.

Key factors affecting our performance

Get new and keep existing unique subscriptions

Acquiring and retaining unique subscriptions to our platform is the primary
driver of our revenue growth. The number of unique subscriptions to our platform
was in line with the previous quarter, remaining at 4.2 million unique
subscriptions as of September 30, 2022 representing an increase of 4.1% relative
to September 30, 2021. In order to support the acquisition of new unique
subscriptions, we intend to continue to invest in our direct response marketing
efforts, develop new points of entry to our platform and expand internationally.
We view this spending as a long-term investment in our business to attract new
unique subscriptions.

Expand our commerce offering

We believe that our commerce offerings significantly expand our addressable
market. Our comprehensive commerce offerings enable our customers to sell
anything online, attracting a differentiated set of commerce-oriented brands to
our platform. On March 31, 2021, we acquired Tock, which expanded our commerce
offerings by adding a platform for reservations, take-out, delivery and events
for the hospitality industry.

For the three and nine months ended September 30, 2022, our platform processed
approximately $1,411.0 million and $4,502.8 million of gross merchandise value
("GMV"), respectively, representing an increase of 2.5% and 11.4% from the same
period in 2021, respectively. GMV represents the total dollar value of orders
processed through our platform in the period, net of refunds and fraudulent
orders.

We continue to invest and innovate our commerce offerings to enable customers to
build the most impactful online stores, deepen our functionality in physical
commerce and establish leadership in commerce services and hospitality
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services. Our commerce revenue was $67.7 million and $197.7 million for the
three and nine months ended September 30, 2022, representing 13.2% and 19.6%
growth from the same period in 2021, respectively. We believe the adoption of
our commerce offerings by new and existing customers will help drive our
long-term revenue growth.

product innovation investment

We rely on hiring and retaining a talented product development workforce. The
success of our customers relies on the innovation tied to this workforce and our
ability to remain agile to address customer needs. Our research and product
development expenses were $54.3 million and $170.5 million for the three and
nine months ended September 30, 2022, respectively, representing 11.4% and 22.0%
growth over the same periods in 2021.

foreign currency fluctuations

As of September 30, 2022, we had customers in over 200 countries and territories
and our international customers represented approximately 30% of our total
bookings. As foreign currency exchange rates change, translation of the
statements of operations of our international businesses into U.S. dollars may
affect year-over-year comparability of our operating results.

Key Components of Operating Results

income

We primarily derive revenue from annual and monthly subscriptions. Typically,
annual and monthly subscriptions represent 70% and 30% of total subscriptions,
respectively. Revenue is also derived from non-subscription services, including
fixed percentages or fixed-fees earned on revenue share arrangements with
third-parties and on sales made through our customers' sites. In addition, we
earn fixed-fees on sales through certain hospitality offerings and payment
processing fees received in exchange for use of our hospitality services.
Payments received for subscriptions in advance of fulfillment of our performance
obligations are recorded as deferred revenue. Subscription plans automatically
renew unless advanced notice is provided to us. We primarily recognize
subscription revenue ratably on a straight-line basis, net of a reserve for
refunds. Transaction fee revenue, payment processing revenue and revenue
generated from third-parties is recognized at a point in time, when the sale has
been completed.

We break down revenue by product type according to the following definitions:

Presence revenue

Presence revenue primarily consists of fixed-fee subscriptions to our plans that
offer core platform functionalities, currently branded "Personal" and "Business"
plans in our offerings. Presence revenue also consists of fixed-fee
subscriptions related to additional entry points for starting online such as
domain managed services and social media stories. Additionally, presence revenue
is derived from third-party solutions related to email services and access to
third-party content to enhance online presence. For customers in need of a
larger scale solution, we have an enterprise offering where revenue is
recognized over the life of the contract.

business income

Commerce revenue primarily consists of fixed-fee subscriptions to our plans that
offer all the features of presence plans as well as additional features that
support end to end commerce transactions, currently branded "Basic" and
"Advanced" in our plan offerings. Commerce revenue also includes fixed-fee
subscriptions to a number of other tools that support running an online business
such as marketing, member areas, scheduling and hospitality tools.
Non-subscription revenue is derived from fixed-fees earned on revenue share
arrangements with commerce partners as well as fixed transaction fees earned on
GMV processed through Business plan sites and certain hospitality offerings.
Commerce revenue also includes payment processing fees received in exchange for
use of our hospitality services.

cost of revenue

Cost of revenue consists primarily of credit card and payment processing fees,
domain registration fees, and web hosting costs. Cost of revenue also includes
customer support employee-related expenses, amortization and depreciation, and
allocated shared costs. Employee-related expenses consist of salaries, taxes,
benefits and stock-based compensation. We expect that cost of revenue may
fluctuate as a percentage of total revenue from period to period based on the
subscriptions purchased and non-subscription transactions during that particular
period.
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Operating expenses:

Research and Product Development

Research and product development expenses are primarily employee-related
expenses, costs associated with continuously developing new solutions and
enhancing and maintaining our technology platform as well as allocated shared
costs. These costs are expensed as incurred. Employee-related expenses consist
of salaries, taxes, benefits and stock-based compensation. In addition, we
capitalize employee-related expenses relating to software development costs
incurred in connection with adding functionality to our platform, as well as
internal-use projects during the application development stage. These
capitalized software development costs are deferred and amortized ratably over
three years.

Marketing and sales

Marketing and sales expenses include costs related to advertisements used to
drive customer acquisition, employee-related expenses related to our brand and
sales of hospitality services, customer acquisition and creative assets,
affiliate fees on customer referrals, sales commissions, and allocated shared
costs. Depending on the nature of the advertising, costs are expensed at the
time a commercial initially airs, when a promotion first appears in the media or
as incurred. Affiliate fees on customer referrals are deferred and recognized
ratably over the expected period of our relationship with the new customer. In
addition, we capitalize sales commissions paid to internal sales personnel
relating to obtaining customer contracts for hospitality services. These
capitalized sales commissions are deferred and amortized ratably over the
expected life of the new customer.

General and Administrative

General and administrative expenses are primarily employee-related expenses
associated with supporting business operations as well as expenses required to
comply with government regulations in the markets in which we operate. The
functional elements included in general and administrative are finance, people,
legal, information technology and overall corporate support. Employee-related
expenses consist of salaries, taxes, benefits and stock-based compensation.

interest expense

Interest expense primarily consists of the interest expense related to our debt
facilities. For further discussion on our interest expense related to our debt
facilities, see "Liquidity and Capital Resources, Indebtedness."

Other income, net

Other income, net is primarily comprised of net investment income and realized
and unrealized foreign currency gains and losses. See "Item 3. Quantitative and
Qualitative Disclosures About Market Risk, Foreign Currency Exchange Risk."

(Provision) / Benefit from Income Tax

We are subject to income taxation and file U.S. federal income tax returns as
well as income tax returns in the various U.S. states and foreign jurisdictions
in which we conduct business. For interim periods, we historically utilized the
estimated annual effective tax rate method under which we determined our
(provision for)/benefit from income taxes based on the current estimate of our
annual effective tax rate. For the three and nine months ended September 30,
2022, we utilized the discrete effective tax rate method, as allowed under ASC
740, Income Taxes - Interim Reporting, when the application of the estimated
annual tax rate method is impractical and does not provide a reasonable estimate
of the annual effective tax rate. The discrete method treats the year-to-date
period as if it were the annual period and determines the interim income taxes
on that basis. We determined that since small changes in estimated annual
pre-tax income/(loss) would result in significant changes in the estimated
annual effective tax rate and significant variations in the customary
relationship between the (provision for)/benefit from income taxes and pre-tax
accounting income/(loss), the historical method would not provide a reliable
estimate of our effective tax rate for the three and nine months ended
September 30, 2022. We will reevaluate the use of this method each interim
period until we believe a return to the estimated annual effective rate method
is deemed appropriate.
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Business results

The following table sets forth our condensed consolidated operating information tables for the three and nine months ended September 30, 2022
and 2021.

                                        Three Months Ended September 30,                  Nine Months Ended September 30,
($ in thousands)                           2022                     2021                    2022                     2021
                                       (Unaudited)              (Unaudited)              (Unaudited)             (Unaudited)
Revenue                            $         217,696          $     200,962          $        638,160          $     576,618
Cost of revenue(1)                            38,907                 32,868                   112,549                 92,777
Gross profit                                 178,789                168,094                   525,611                483,841
Operating expenses:
Research and product
development(1)                                54,312                 48,769                   170,469                139,692
Marketing and sales(1)                        74,248                 80,249                   255,897                249,005
General and administrative(1)                 38,507                 32,091                   113,678                336,337
Total operating expenses                     167,067                161,109                   540,044                725,034
Operating income/(loss)                       11,722                  6,985                   (14,433)              (241,193)
Interest expense                              (5,209)                (2,491)                  (10,977)                (8,578)
Other income, net                              6,869                  2,101                    14,597                  4,493
Income/(loss) before (provision
for)/benefit from income taxes                13,382                  6,595                   (10,813)              (245,278)
(Provision for)/benefit from
income taxes                                  (3,277)                (3,756)                   (7,446)                12,439
Net income/(loss)                  $          10,105          $       2,839          $        (18,259)         $    (232,839)


__________________

(1) Includes the following stock-based compensation:

                                   Three Months Ended September 30,                 Nine Months Ended September 30,
($ in thousands)                     2022                     2021                    2022                    2021
                                  (Unaudited)             (Unaudited)             (Unaudited)             (Unaudited)
Cost of revenue               $          1,000          $         440          $         2,470          $       1,095
Research and product
development                              9,462                  8,782                   31,138                 23,820
Marketing and sales                      2,252                  1,716                    6,246                  4,457
General and administrative              11,380                 12,796                   35,197                254,727
Total stock-based
compensation                  $         24,094          $      23,734          $        75,051          $     284,099

The following table sets forth our condensed consolidated statement of operations information as a percentage of total revenue for the three and nine months ended September 30, 2022 and 2021.

                                              Three Months Ended September 30,                             Nine Months Ended September 30,
                                             2022                          2021                           2022                          2021
                                         (Unaudited)                    (Unaudited)                   (Unaudited)                    (Unaudited)
Revenue                                            100.0  %                      100.0  %                       100.0  %                      100.0  %
Cost of revenue                                     17.9  %                       16.4  %                        17.6  %                       16.1  %
Gross profit                                        82.1  %                       83.6  %                        82.4  %                       83.9  %
Operating expenses:
Research and product development                    24.9  %                       24.3  %                        26.7  %                       24.2  %
Marketing and sales                                 34.1  %                       39.9  %                        40.1  %                       43.2  %
General and administrative                          17.7  %                       16.0  %                        17.8  %                       58.3  %
Total operating expenses                            76.7  %                       80.2  %                        84.6  %                      125.7  %
Operating income/(loss)                              5.4  %                        3.4  %                        (2.2) %                      (41.8) %
Interest expense                                    (2.4) %                       (1.2) %                        (1.7) %                       (1.5) %
Other income, net                                    3.2  %                        1.0  %                         2.3  %                        0.8  %
Income/(loss) before (provision
for)/benefit from income taxes                       6.2  %                        3.2  %                        (1.6) %                      (42.5) %
(Provision for)/benefit from
income taxes                                        (1.5) %                       (1.9) %                        (1.2) %                        2.2  %
Net income/(loss)                                    4.7  %                        1.3  %                        (2.8) %                      (40.3) %


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The following table sets forth our condensed consolidated revenue by geographic
location and our condensed consolidated revenue by geographic location as
a percentage of total revenue for the three and nine months ended September 30,
2022 and 2021.

                                          Three Months Ended September 30,                       Change                        Nine Months Ended September 30,                       Change
($ in thousands, except percentages)          2022                   2021              Amount                %                    2022                   2021              Amount                %
                                           (Unaudited)            (Unaudited)                                                  (Unaudited)            (Unaudited)
United States                          $       157,409           $  130,133          $ 27,276                21.0  %       $       456,583           $  398,693          $ 57,890                14.5  %
International                                   60,287               70,829           (10,542)              (14.9) %               181,577              177,925             3,652                 2.1  %
Total revenue                          $       217,696           $  200,962          $ 16,734                 8.3  %       $       638,160           $  576,618          $ 61,542                10.7  %
Percentage of total revenue:
United States                                     72.3   %             64.8  %                                                        71.5   %             69.1  %
International                                     27.7   %             35.2  %                                                        28.5   %             30.9  %
Total revenue                                      100   %              100  %                                                         100   %              100  %


During the three months ended September 30, 2021, we identified certain revenues
which should have been classified as international revenues during the first and
second quarter of 2021. Accordingly, in the third quarter of 2021, we
reclassified approximately $4.1 million and $5.1 million related to the first
and second quarter, respectively, out of United States and into international
revenue. Using the updated classification, the year-over-year change for the
three months ended September 30, 2021 would have been a decrease of 2.2% for
international and an increase of 13.0% for the United States, respectively. In
addition, for the three months ended September 30, 2021 the international
percentage of total revenue would have been 30.7% and the United States
percentage of total revenue would have been 69.3%. No amounts were reclassified
related to fiscal 2022.

End of three months comparison September 30, 2022 and 2021

Revenue

                                             Three Months Ended
                                             September 30, 2022                  Change
($ in thousands, except percentages)       2022             2021           Amount         %
                                        (Unaudited)      (Unaudited)
Presence                               $  149,995       $  141,152       $  8,843        6.3  %
Commerce                                   67,701           59,810          7,891       13.2  %
Total revenue                          $  217,696       $  200,962       $ 16,734        8.3  %
Percentage of total revenue:
Presence                                     68.9  %          70.2  %
Commerce                                     31.1  %          29.8  %
Total revenue                                 100  %           100  %


Presence revenue

Presence revenue increased $8.8 million, or 6.3%, for the three months ended
September 30, 2022 compared to the same period in 2021. This increase was
primarily the result of the growth of our unique subscriptions, driven by strong
retention of existing subscriptions and continued acquisition of new
subscriptions.

business income

business income increase $7.9 millionor 13.2%, as of three months
September 30, 2022 compared to the same period in 2021. This increase was primarily due to growth in our unique subscriptions in commercial products, as well as growth in our hospitality services.

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Cost of Revenue and Gross Profit

                                             Three Months Ended
                                             September 30, 2022             

Change

($ in thousands, except percentages)       2022             2021           Amount          %
                                        (Unaudited)      (Unaudited)
Cost of revenue                        $   38,907       $   32,868       $  6,039        18.4  %
Gross profit                           $  178,789       $  168,094       $ 10,695         6.4  %
Percentage of total revenue:
Cost of revenue                              17.9  %          16.4  %
Gross profit                                 82.1  %          83.6  %


Cost of revenue

Cost of revenue increased $6.0 million, or 18.4%, for the three months ended
September 30, 2022 compared to the same period in 2021. The increase was
primarily driven by increased payment processing fees and hosting costs
associated with our growing subscription base as well as payroll and associated
benefit expenses for customer support.

gross profit

Gross profit increased $10.7 million, or 6.4%, for the three months ended
September 30, 2022 compared to the same period in 2021. As a percentage of total
revenue, gross profit was 82.1% and 83.6% for the three months ended September
30, 2022 and 2021, respectively.

Operating expenses:

Research and Product Development

                                              Three Months Ended
                                              September 30, 2022            

Change

($ in thousands, except percentages)        2022              2021          

quantity%

                                        (Unaudited)       (Unaudited)

Research and Product Development $54,312 $48,769 $5,543 11.4 % as a percentage of total revenue

                   24.9  %           24.3  %


Research and product development expenses increased $5.5 million, or 11.4%, for
the three months ended September 30, 2022 compared to the same period in 2021.
The increase is primarily due to payroll and associated benefit expenses related
to increased headcount, partially offset by capitalized internally developed
software costs, in support of our product development roadmap.

Marketing and sales

                                              Three Months Ended
                                              September 30, 2022                   Change
($ in thousands, except percentages)        2022              2021           Amount          %
                                        (Unaudited)       (Unaudited)
Marketing and sales                    $    74,248       $    80,249       $ (6,001)       (7.5) %
Percentage of total revenue                   34.1  %           39.9  %

Reduced marketing and sales expenses $6 millionor 7.5%, as of three months September 30, 2022 Compared to the same period in 2021, it was primarily due to a decrease in our brand spending channels, partially offset by higher expenses related to our direct response channel and an increase in the number of employees supporting our expanded marketing operations.

General and administrative

                                              Three Months Ended
                                              September 30, 2022                   Change
($ in thousands, except percentages)        2022              2021          Amount          %
                                        (Unaudited)       (Unaudited)
General and administrative             $    38,507       $    32,091       $ 6,416        20.0  %
Percentage of total revenue                   17.7  %           16.0  %

General and administrative expenses increased $6.4 millionor 20.0%, as of three months September 30, 2022 Compared to the same period in 2021, mainly due to higher payroll expenses related to the increase in the number of employees,

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Indirect tax expense as well as rental expense increased due to impairment of certain operating lease right-of-use assets.

Interest expense

                                              Three Months Ended
                                              September 30, 2022                   Change
($ in thousands, except percentages)        2022              2021          Amount          %
                                        (Unaudited)       (Unaudited)
Interest expense                       $    (5,209)      $    (2,491)      $ 2,718       109.1  %
Percentage of total revenue                   (2.4) %           (1.2) %


Interest expense increased $2.7 million, or 109.1%, for the three months ended
September 30, 2022 compared to the same period in 2021 due to higher interest
rates, driven by increased LIBOR rates, on our total debt outstanding related to
our amended credit agreement.

Other income, net

                                             Three Months Ended
                                             September 30, 2022                   Change
($ in thousands, except percentages)       2022              2021          Amount          %
                                        (Unaudited)      (Unaudited)
Other income, net                      $    6,869       $     2,101       $ 4,768       226.9  %
Percentage of total revenue                   3.2  %            1.0  %


Other income, net was in a net income position of $6.9 million for the three
months ended September 30, 2022 compared to a net income position of $2.1
million during the same period in 2021. The increase is primarily due to
favorable foreign exchange rates for the three months ended September 30, 2022
compared to the same period in 2021.

(Provision) / Benefit from Income Tax

For the three months ended September 30, 2022 and 2021, we recorded an income
tax expense of $3.3 million and $3.8 million, respectively, which resulted in an
effective tax rate of (24.5)% and (57.0)%, respectively.

Our effective income tax rate for the three months ended September 30, 2022
differed from the statutory rate of 21% primarily due to the change in the
valuation allowance for deferred tax assets related primarily to the
capitalization of research and development expenditures, nondeductible executive
compensation, unrecognized tax benefits, and nondeductible expenses, partially
offset by research and development tax credits, windfall on stock-based
compensation, and deduction from foreign-derived intangible income. The
provision for income taxes for the three months ended September 30, 2022 also
reflects a provision of the Tax Cuts and Jobs Act of 2017 becoming effective as
of January 1, 2022 that requires companies to capitalize and amortize research
and development expenditures rather than deduct the costs as incurred. Unless
the law is changed or repealed, we expect our effective tax rate and cash
payments to change significantly as compared to fiscal 2021.

Our estimated annual effective income tax rate for the three months ended
September 30, 2021 Unlike the statutory rate of 21%, it is primarily due to non-deductible executive compensation, non-deductible transaction expenses, minimum taxes, partially offset by windfall earnings from stock-based compensation and the R&D tax credit.

Comparison at the end of nine months September 30, 2022 and 2021

Revenue

                                             Nine Months Ended
                                             September 30, 2022                  Change
($ in thousands, except percentages)       2022             2021           Amount         %
                                        (Unaudited)      (Unaudited)
Presence                               $  440,471       $  411,300       $ 29,171        7.1  %
Commerce                                  197,689          165,318         32,371       19.6  %
Total revenue                          $  638,160       $  576,618       $ 61,542       10.7  %
Percentage of total revenue:
Presence                                     69.0  %          71.3  %
Commerce                                     31.0  %          28.7  %
Total revenue                                 100  %           100  %


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income exists

Presence revenue increased $29.2 million, or 7.1%, for the nine months ended
September 30, 2022 compared to the same period in 2021. This increase was
primarily the result of the growth of our unique subscriptions, driven by strong
retention of existing subscriptions and continued acquisition of new
subscriptions.

business income

Commerce revenue increased $32.4 million, or 19.6%, for the nine months ended
September 30, 2022 compared to the same period in 2021. This increase was
primarily a result of the growth of our unique subscriptions across our commerce
offerings, as well as the addition and subsequent growth of our hospitality
services.

Cost of Revenue and Gross Profit

                                             Nine Months Ended
                                             September 30, 2022             

Change

($ in thousands, except percentages)       2022             2021           Amount          %
                                        (Unaudited)      (Unaudited)
Cost of revenue                        $  112,549       $   92,777       $ 19,772        21.3  %
Gross profit                           $  525,611       $  483,841       $ 41,770         8.6  %
Percentage of total revenue:
Cost of revenue                              17.6  %          16.1  %
Gross profit                                 82.4  %          83.9  %


Cost of revenue

Cost of revenue increased $19.8 million, or 21.3%, for the nine months ended
September 30, 2022 compared to the same period in 2021. The increase was
primarily driven by increased payment processing fees and hosting costs
associated with our growing subscription base as well as payroll and associated
benefit expenses for customer support associated with hospitality services.

gross profit

Gross profit increased $41.8 million, or 8.6%, for the nine months ended
September 30, 2022 compared to the same period in 2021. As a percentage of total
revenue, gross profit was 82.4% and 83.9% for the nine months ended September
30, 2022 and 2021, respectively.

Operating expenses:

Research and Product Development

                                             Nine Months Ended
                                             September 30, 2022             

Change

($ in thousands, except percentages)       2022             2021           

quantity%

                                        (Unaudited)      (Unaudited)

Research and Product Development $170,469 $139,692 $30,777 22.0 % as a percentage of total revenue

                  26.7  %          24.2  %


Research and product development expenses increased $30.8 million, or 22.0%, for
the nine months ended September 30, 2022 compared to the same period in 2021.
The increase is primarily due to payroll and associated benefit expenses related
to increased headcount, partially offset by capitalized internally developed
software costs, in support of our product development roadmap and the addition
of hospitality services.

Marketing and sales

                                             Nine Months Ended
                                             September 30, 2022                 Change
($ in thousands, except percentages)       2022             2021          Amount         %
                                        (Unaudited)      (Unaudited)
Marketing and sales                    $  255,897       $  249,005       $ 6,892       2.8  %
Percentage of total revenue                  40.1  %          43.2  %

Increased marketing and sales expenses $6.9 millionor 2.8%, as of 9 months September 30, 2022 Compared to the same period in 2021, mainly due to payroll and related benefits related to the increase in headcount

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Supports our expanded marketing operations, including hospitality services, and the addition of multiple direct response channels.

General and administrative

                                             Nine Months Ended
                                             September 30, 2022                   Change
($ in thousands, except percentages)       2022             2021            Amount           %
                                        (Unaudited)      (Unaudited)
General and administrative             $  113,678       $  336,337       $ (222,659)      (66.2) %
Percentage of total revenue                  17.8  %          58.3  %


General and administrative expenses decreased $222.7 million, or 66.2%, for the
nine months ended September 30, 2022 compared to the same period in 2021,
primarily due to one-time expenses related to our Direct Listing in May 2021,
which included a $229.3 million expense for stock-based compensation associated
with the vesting conditions of a grant to our CEO of shares of Class B common
stock upon consummation of the listing and professional fees of $25.3 million,
partially offset by increased indirect tax expense, as well as increased payroll
and benefits expense associated with increased headcount.

Interest expense

                                              Nine Months Ended
                                             September 30, 2022                   Change
($ in thousands, except percentages)       2022              2021          Amount          %
                                        (Unaudited)      (Unaudited)
Interest expense                       $  (10,977)      $    (8,578)      $ 2,399        28.0  %
Percentage of total revenue                  (1.7) %           (1.5) %


Interest expense increased $2.4 million, or 28.0%, for the nine months ended
September 30, 2022 compared to the same period in 2021 due to higher interest
rates, driven by increased LIBOR rates, on our total debt outstanding related to
our amended credit agreement.

Other income/(loss), net

                                              Nine Months Ended
                                             September 30, 2022                   Change
($ in thousands, except percentages)       2022              2021           Amount          %
                                        (Unaudited)      (Unaudited)
Other income, net                      $   14,597       $     4,493       $ 10,104       224.9  %
Percentage of total revenue                   2.3  %            0.8  %


Other income, net was in a net income position of $14.6 million for the nine
months ended September 30, 2022 compared to a net income position of $4.5
million during the same period in 2021. The increase is primarily due to
favorable foreign exchange rates for the nine months ended September 30, 2022
compared to the same period in 2021.

(Provision) / Benefit from Income Tax

nine months ended September 30, 2022 and 2021, we recorded income tax expense $7.4 million and income tax benefits $12.4 millionresulting in effective tax rates of 68.9% and (5.1)%, respectively.

Our effective income tax rate for the nine months ended September 30, 2022
differed from the statutory rate of 21% primarily due to the change in the
valuation allowance for deferred tax assets related primarily to the
capitalization of research and development expenditures, nondeductible executive
compensation, global intangible low-taxed income, unrecognized tax benefits, and
the nondeductible expenses, partially offset by research and development tax
credits, windfall on stock-based compensation, and deduction from
foreign-derived intangible income. The provision for income taxes for the nine
months ended September 30, 2022 also reflects a provision of the Tax Cuts and
Jobs Act of 2017 becoming effective as of January 1, 2022 that requires
companies to capitalize and amortize research and development expenditures
rather than deduct the costs as incurred. Unless the law is changed or repealed,
we expect our effective tax rate and cash payments to change significantly as
compared to fiscal 2021.

Our estimated annual effective income tax rate for the nine months ended
September 30, 2021 Unlike the statutory rate of 21%, it is primarily due to non-deductible executive compensation, non-deductible transaction expenses, minimum taxes, partially offset by windfall earnings from stock-based compensation and the R&D tax credit.

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Quarterly Operating Results

The following tables set forth selected unaudited quarterly statements of
operations data for each of the eight fiscal quarters ended September 30, 2022,
as well as the percentage of revenues that each line item represents for each
quarter. The information for each of these quarters has been prepared in
accordance with generally accepted accounting principles in the United States
("GAAP") on the same basis as our audited historical condensed consolidated
financial information and includes, in the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary for the
fair statement of the results of operations for these periods. This data should
be read in conjunction with our condensed consolidated financial statements
included elsewhere in this Quarterly Report on Form 10-Q. These quarterly
results are not necessarily indicative of our results of operations to be
expected for any future period.

                                                                                            Three Months Ended (Unaudited)
                                          September 30,       June 30,        March 31,       December 31,     September 30,      June 30,       March 31,      December 31,
($ in thousands)                              2022              2022             2022             2021             2021             2021           2021             2020
Revenue                                 $      217,696    $     212,702   

$207,762 $207,420 $200,962 $196,010 $179,646 $172,300
cost of revenue (1)

                              38,907           36,993           36,649           33,854            32,868         32,501          27,408           26,171
Gross profit                                   178,789          175,709          171,113          173,566           168,094        163,509         152,238          146,129
Operating expenses:
Research and product development(1)             54,312           58,829           57,328           50,679            48,769         48,912          42,011           57,409
Marketing and sales(1)                          74,248           68,743          112,906           90,960            80,249         70,784          97,972           73,549
General and administrative(1)                   38,507           39,190           35,981           31,608            32,091        284,730          19,516           17,077
Total operating expenses                       167,067          166,762          206,215          173,247           161,109        404,426         159,499          148,035
Operating income/(loss)                         11,722            8,947          (35,102)             319             6,985       (240,917)         (7,261)          (1,906)
Interest expense                                (5,209)          (3,319)          (2,449)          (2,503)           (2,491)        (2,827)         (3,260)          (1,997)
Other income, net                                6,869            6,217            1,511            2,138             2,101         (1,201)          3,593           (4,076)
Income/(loss) before (provision
for)/benefit from income taxes                  13,382           11,845          (36,040)             (46)            6,595       (244,945)         (6,928)          (7,979)
(Provision for)/benefit from income
taxes                                           (3,277)          52,651          (56,820)         (16,264)           (3,756)        10,413           5,782           12,236
Net income/(loss)                       $       10,105    $      64,496    

$ (92,860) $ (16,310) $2,839 $ (234,532) $ (1,146) $4,257

Net income/(loss) attributable to Class
A, Class B and Class C common
stockholders, basic(2)                  $       10,105    $      64,496    $     (92,860)   $     (16,310)   $        2,839    $  (234,532)   $     (2,115)   $    (275,439)
Net income/(loss) attributable to Class
A, Class B and Class C common
stockholders, dilutive(2)               $       10,105    $      64,496    $     (92,860)   $     (16,310)   $        2,839    $  (234,532)   $     (2,115)   $    (275,439)
Net income/(loss) per share
attributable to Class A, Class B, and
Class C common stockholders, basic      $         0.07    $        0.46    $       (0.67)   $       (0.12)   $         0.02    $     (3.22)   $      (0.11)   $      (14.98)
Net income/(loss) per share
attributable to Class A, Class B, and
Class C common stockholders, dilutive   $         0.07    $        0.45    $       (0.67)   $       (0.12)   $         0.02    $     (3.22)   $      (0.11)   $      (14.98)
Weighted-average shares used in
computing net income/(loss) per share
attributable to Class A, Class B, and
Class C stockholders, basic                137,832,634      140,082,038      139,423,228      138,970,923       138,625,579     72,900,951      19,012,323       18,383,523
Weighted-average shares used in
computing net income/(loss) per share
attributable to Class A, Class B, and
Class C stockholders, dilutive             139,667,719      142,133,303     

139,423,228 138,970,923 143,251,717 72,900,951 19,012,323 18,383,523


__________________

(1) Includes the following stock-based compensation:

                                                                                       Three Months Ended (Unaudited)
                                            September 30,    June 30,    March 31,     December 31,     September 30,     June 30,     March 31,     December 31,
($ in thousands)                                2022           2022         2022           2021             2021            2021         2021            2020
Cost of revenue                           $        1,000    $    846    $     624    $         450    $          440    $     380    $      275    $         212
Research and product development                   9,462      11,508       10,168            9,210             8,782        8,245         6,793            6,151
Marketing and sales                                2,252       2,395        1,599            1,472             1,716        1,569         1,172              839
General and administrative(a)                     11,380      12,111       11,706           12,693            12,796      240,319         1,612        

1,229

Total stock-based compensation            $       24,094    $ 26,860    $  

24,097 $23,825 $23,734 $250,513 $9,852 $

8,431


a.In conjunction with our Direct Listing in May 2021, we incurred certain
stock-based compensation expense associated with the vesting conditions of a
grant to our CEO of shares of Class B common stock upon completion of the
listing which resulted in a one time expense of $229.3 million. In addition, we
incurred professional fees of $25.3 million associated with the Direct Listing.
We expect to continue to incur additional expenses as a result of operating as a
public company, including costs to comply with the rules and regulations
applicable to companies listed on a U.S. securities exchange and costs related
to compliance and reporting obligations pursuant to the rules and regulations of
the SEC. In addition, as a public company, we expect to incur additional costs
associated with accounting, compliance, insurance and investor relations.

(2)   Preferred shares of the Company do not participate in periods of net loss.
Therefore, in periods of net loss, or when undistributed earnings of the Company
are negative, there is no additional allocation of undistributed earnings to
preferred shareholders included within the calculation of net (loss)/income
attributable to Class A, Class B and Class C common stockholders.
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The following table sets forth our condensed consolidated statement of operations information as a percentage of total revenue for the following three-month periods.

                                                                                               Three Months Ended (Unaudited)
                                    September 30,       June 30,         March 31,         December 31,         September 30,         June 30,         March 31,         December 31,
($ in thousands)                         2022             2022             2022                2021                 2021                2021             2021                2020
Revenue                                    100.0  %         100.0  %          100.0  %             100.0  %              100.0  %         100.0  %          100.0  %             100.0  %
Cost of revenue(1)                          17.9  %          17.4  %           17.6  %              16.3  %               16.4  %          16.6  %           15.3  %              15.2  %
Gross profit                                82.1  %          82.6  %           82.4  %              83.7  %               83.6  %          83.4  %           84.7  %              84.8  %
Operating expenses:
Research and product
development(1)                              24.9  %          27.7  %           27.6  %              24.4  %               24.3  %          25.0  %           23.4  %              33.3  %
Marketing and sales(1)                      34.1  %          32.3  %           54.3  %              43.9  %               39.9  %          36.1  %           54.5  %              42.7  %
General and administrative(1)               17.7  %          18.4  %           17.3  %              15.2  %               16.0  %         145.3  %           10.9  %               9.9  %
Total operating expenses                    76.7  %          78.4  %           99.2  %              83.5  %               80.2  %         206.4  %           88.8  %              85.9  %
Operating income/(loss)                      5.4  %           4.2  %          (16.8) %               0.2  %                3.4  %        (123.0) %           (4.1) %              (1.1) %
Interest expense                            (2.4) %          (1.6) %           (1.2) %              (1.2) %               (1.2) %          (1.4) %           (1.8) %              (1.2) %
Other income, net                            3.2  %           2.9  %            0.7  %               1.0  %                1.0  %          (0.6) %            2.0  %              (2.4) %
Income/(loss) before (provision
for)/benefit from income taxes               6.2  %           5.5  %          (17.3) %                 -  %                3.2  %        (125.0) %           (3.9) %              (4.7) %
(Provision for)/benefit from
income taxes                                (1.5) %          24.8  %          (27.3) %              (7.8) %               (1.9) %           5.3  %            3.2  %               7.1  %
Net income/(loss)                            4.7  %          30.3  %          (44.6) %              (7.8) %                1.3  %        (119.7) %           (0.7) %               2.4  %


Quarterly Trends

Our business is impacted by seasonal fluctuations. We typically register a
greater number of new unique subscriptions during the first quarter of a year.
We believe this is related to, among other things, our customers' buying habits
and our increased marketing and sales spend in the first quarter of most years.
Our hospitality services have experienced a greater number of prepayments on
reservations around the time of major holidays and special occasions during the
first and fourth quarter of the year. In the future, seasonal trends may cause
fluctuations in our quarterly results, which may impact the predictability of
our business and operating results.

Liquidity and Capital Resources

To date, we have primarily funded our operations through operating cash flow.

As of September 30, 2022, we had cash and cash equivalents and investment in
marketable securities of $228.2 million and $17.7 million of available borrowing
capacity under our Revolving Credit Facility, as defined below. During July
2021, we were issued an additional letter of credit for $2.5 million relating to
a security deposit for a new operating lease in Chicago, IL. Additionally,
during September 2022, the letter of credit for our security deposit related to
the New York, NY headquarters was reduced by $2.4 million due to a scheduled
step-down per the lease agreement. See "Item 1. Financial Information, Item 1.
Financial Statements, Note 9. Debt." We believe our existing cash and cash
equivalents and investment in marketable securities will be sufficient to meet
our operating working capital and capital expenditure requirements over the next
12 months. We have also filed federal tax refund claims totaling approximately
$8.7 million of which $4.0 million relates to a research and development tax
credit carryback to 2018 and $4.7 million relates to a 2020 tax overpayment. We
do not expect to receive these refunds until later in 2022 or 2023. Our
principal commitments consist of payments for our Credit Facility, operating
leases and purchase commitments related to cloud-computing services. In
addition, as of September 30, 2022, we had accrued $10.3 million of unrecognized
tax benefits related to uncertain tax positions. On May 10, 2022, the board of
directors authorized a general share repurchase program of the Company's Class A
common stock of up to $200 million, with no fixed expiration. During the  three
and nine months ended September 30, 2022, the Company repurchased 2.4 million
and 4.0 million shares for a total cash consideration of $50.4 million and $85.6
million, including commissions of $0.05 million and $0.08 million, through open
market purchases at an average price per share of $21.84 and $21.40,
respectively. As of September 30, 2022, approximately $114.4 million remained
available for stock repurchase. At this time, we are unable to reasonably
estimate the timing of the long-term payments or the amount by which the
liability will increase or decrease over time. Our future financing requirements
will depend on many factors, including our growth rate, subscription renewal
activity, the timing and extent of spending to support development of our
platform and products, the expansion of marketing and sales activities and any
future investments or acquisitions we may make. Although we currently are not a
party to any agreement and do not have any understanding with any third-parties
with respect to future investments in, or acquisitions of, businesses or
technologies, we may enter into these types of arrangements following the filing
of this Quarterly Report on Form 10-Q, which could also require us to seek
additional equity or debt financing. Additional funds may not be available on
terms favorable to us or at all, including as a result of disruptions in the
credit markets. See "Part 2. Item 1A. Risk Factors."
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The table below summarizes our operating, investing and financing activities for the nine months ended September 30, 2022 and 2021.

                                           Nine Months Ended September 30,
($ in thousands)                                2022                     

2021

Net cash provided by/(used in):
Operating activities                $        125,117                 $  108,167
Investing activities                $         (5,556)                $ (203,694)
Financing activities                $       (110,945)                $  268,172

Net cash provided by operating activities

Net cash provided by operating activities in the nine months ended September 30,
2022 was $125.1 million, which reflected our net loss of $18.3 million,
increased by non-cash items such as $75.1 million of stock-based compensation,
$23.8 million of depreciation and amortization, and $2.3 million of non-cash
lease expense. Cash provided by operating activities included $38.0 million in
deferred revenue, $12.9 million in funds payable to customers, $6.0 million of
accounts payable and accrued liabilities, which was offset by $11.5 million in
prepaid expenses and other current assets and $3.1 million in accounts
receivables and due from vendors.

Net cash provided by operating activities in the nine months ended September 30,
2021 was $108.2 million, which reflected our net loss of $232.8 million, which
was increased by certain non-cash items primarily consisting of $284.1 million
of stock-based compensation and $23.9 million of depreciation and amortization,
partially offset by $13.8 million of deferred income taxes. Cash provided by
operating activities included $35.0 million in deferred revenue, $13.3 million
in funds payable to customers, $8.5 million of deferred rent and lease
incentives and $7.9 million in accounts payable and accrued liabilities, which
was primarily offset by $18.9 million in prepaid expenses and other current
assets.

Net cash used in investing activities

Net cash used in investing activities in the nine months ended September 30,
2022 was $5.6 million, which reflected $8.9 million spent in connection with the
purchase of property and equipment, and $19.4 million used to purchase
marketable securities offset by $22.7 million in proceeds from the sale and
maturities of marketable securities.

Net cash used in investing activities in the nine months ended September 30,
2021 was $203.7 million, which reflected $202.2 million, net of acquired cash,
used to pay for the acquisition of Tock and $20.4 million used to purchase
marketable securities, which was partially offset by $25.6 million in proceeds
from the sale and maturities of marketable securities. We additionally spent
$6.7 million in connection with the purchase of property and equipment.

Net cash provided by financing activities (used in)/provided

Net cash used in financing activities in the nine months ended September 30,
2022 was $110.9 million, which reflects $85.6 million cash spent on proceeds
from repurchase and retirement of Class A common stock, $17.3 million on stock
purchases related to equity incentive plans, and $10.2 million in principal
payments on our Term Loan, partially offset by $2.2 million in proceeds from the
exercise of stock options.

Net cash provided by financing activities in the nine months ended September 30,
2021 was $268.2 million, which primarily reflected $304.4 million in proceeds
from the issuance of 4,452,023 shares of Class C common stock, net of issuance
costs, coupled with $4.2 million of proceeds from the exercise of stock options.
These proceeds were partially offset by $29.9 million in stock purchases related
to equity incentive plans and $10.2 million in principal payments on our Term
Loan.

Indebtedness

On December 12, 2019, we entered into a credit agreement with various financial
institutions that provided for a $350.0 million term loan (the "Term Loan") and
a $25.0 million revolving credit facility ("Revolving Credit Facility"), which
included a $15.0 million letter of credit sub-facility. On December 11, 2020, we
amended the credit agreement (as amended, the "Credit Agreement") to increase
the size of the Term Loan to $550.0 million and extend the maturity date for the
Term Loan and the Revolving Credit Facility to December 11, 2025.

The original borrowings under the Term Loan were used to provide for the
repurchase, and subsequent retirement, of outstanding capital stock in 2019. The
additional borrowings were used to provide for a dividend on all outstanding
capital stock.

Borrowings under the Credit Agreement are subject to an interest rate equal to,
at our option, LIBOR or the bank's alternative base rate (the "ABR"), in either
case, plus an applicable margin. The ABR is the greater of the prime rate, the
federal funds effective rate plus the applicable margin or the LIBOR quoted rate
plus the applicable margin. The applicable margin is based on an indebtedness to
consolidated EBITDA ratio as prescribed under the Credit Agreement and ranges
from 1.25% to 2.25% on applicable LIBOR loans and 0.25% to 1.25% on ABR loans.
In addition, the Revolving Credit
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Facility is subject to an unused commitment fee, payable quarterly, of 0.20% to
0.25% of the unutilized commitments (subject to reduction in certain
circumstances). Consolidated EBITDA is defined in the Credit Agreement and is
not comparable to our definition of adjusted EBITDA used elsewhere in the
Quarterly Report on Form 10-Q since the Credit Agreement allows for additional
adjustments to net income/(loss) including the exclusion of transaction costs,
changes in deferred revenue, and other costs that may be considered
non-recurring. Further, consolidated EBITDA, as defined in the Credit Agreement,
may be different from similarly titled EBITDA financial measures used by other
companies. The definition of consolidated EBITDA is contained in Section 1.1 of
the Credit Agreement.

As of September 30, 2022, $519.7 million was outstanding under the Term Loan.
The Term Loan requires scheduled quarterly principal payments beginning
March 31, 2021 in aggregate annual amounts equal to 2.50% for 2021 and 2022,
7.50% for 2023 and 2024 and 10.00% for 2025, in each case, on the amended Term
Loan principal amount, with the balance due at maturity. In addition, the Credit
Agreement includes certain customary prepayment requirements for the Term Loan,
which are triggered by events such as asset sales, incurrences of indebtedness
and sale leasebacks.

As of September 30, 2022, $7.3 million was outstanding under the Revolving
Credit Facility in the form of outstanding letters of credit and $17.7 million
remained available for borrowing by us. The outstanding letters of credit relate
to security deposits for certain of our leased locations.

The Credit Agreement contains certain customary affirmative covenants and events
of default. The negative covenants in the Credit Agreement include, among
others, limitations on our ability (subject to negotiated exceptions) to incur
additional indebtedness or issue additional preferred stock, incur liens on
assets, enter into agreements related to mergers and acquisitions, dispose of
assets or pay dividends and distributions. In addition, commencing with the
fiscal quarter ended December 31, 2020, we are required to maintain an
indebtedness to consolidated EBITDA ratio of not more than 4.50, tested as of
the last day of each fiscal quarter, with a step-down to 4.25 for the fiscal
quarters ending March 31, 2022 and June 30, 2022, a further step-down to 4.00
for the fiscal quarters ending September 30, 2022 and December 31, 2022 and a
final step-down to 3.75 for the fiscal quarter ending March 31, 2023 and each
fiscal quarter thereafter (the "Financial Covenant"), subject to customary
equity cure rights. The Financial Covenant is subject to a 0.50 step-up in the
event of a material permitted acquisition, which we can elect to implement up to
two times during the life of the facility. We did not elect to implement this
step-up as a result of the acquisition of Tock. If we are not in compliance with
the covenants under the Credit Agreement or we otherwise experience an event of
default, the lenders would be entitled to take various actions, including
acceleration of amounts due under the Credit Agreement. As of September 30,
2022, we were in compliance with all applicable covenants, including the
Financial Covenant.

The obligations under the Credit Agreement are guaranteed by our wholly-owned
domestic subsidiaries and are secured by substantially all of the assets of the
guarantors, subject to certain exceptions.

Total interest expense related to our indebtedness was $5.2 million and $11.0
million for the three and nine months ended September 30, 2022, respectively,
and $2.5 million and $8.6 million for the three and nine months ended
September 30, 2021, respectively.

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 from similar key performance indicators and
non-GAAP financial measures, respectively, used by other companies.

                                      Three Months Ended September 30,                 Nine Months Ended September 30,
                                         2022                    2021                     2022                    2021
Unique subscriptions (in
thousands)                                   4,179                 4,016                      4,179                 4,016

Total bookings (in thousands) $225,460 $205,885

      $         673,911          $    611,477
ARRR (in thousands)              $         861,399          $    788,622          $         861,399          $    788,622
ARPUS                            $          206.38          $     198.27          $          206.38          $     198.27
Adjusted EBITDA (in thousands)   $          43,720          $     38,393          $          84,391          $     92,130
Unlevered free cash flow (in
thousands)                       $          42,122          $     47,251          $         124,034          $    109,287
GMV (in thousands)               $       1,411,002          $  1,376,159          $       4,502,828          $  4,042,589

Unique subscription. Unique Subscriptions represent the number of Unique Sites, Independent Scheduling Subscriptions, Spread (Social), and Hospitality Subscriptions as of the end of a period. A Unique Site represents a single subscription and/or group of related subscriptions, including website subscriptions and/or domain subscriptions, and other subscriptions associated with a single website or domain. Each unique site contains at least one domain subscription or one website subscription. For example, active website subscriptions, custom domain subscriptions, and Google Workspace

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subscription that represent services for a single website would count as one
unique site, as all of these subscriptions work together and are in service of a
single entity's online presence. Unique subscriptions do not account for
one-time purchases in Unfold or for hospitality services. The total number of
unique subscriptions is a key indicator of the scale of our business and is a
critical factor in our ability to increase our revenue base.

Unique subscriptions increased 0.2 million, or 4.1%, as of September 30, 2022
compared to the same period in 2021. These increases were primarily a result of
the continued acquisition of new subscriptions and the retention of existing
subscriptions.

Total bookings.  Total bookings includes cash receipts for all subscriptions
purchased, as well as payments due under the terms of contractual agreements for
obligations to be fulfilled. In the case of multi-year contracts, total bookings
only includes one year of committed revenue. Total bookings provides insight
into the sales of our solutions and the performance of our business because, for
a large portion of our business, we collect payment at the time of sale and
recognize revenue ratably over the term of our subscription agreements.

Total bookings increased $19.6 million, or 9.5%, for the three months ended
September 30, 2022 compared to the same period in 2021 and increased $62.4
million, or 10.2%, for the nine months ended September 30, 2022. These increases
were primarily a result of an increase in our unique subscriptions, price
increases across several of our subscription plans, as well as the growth of our
hospitality services.

Annual run rate revenue ("ARRR").  We calculate ARRR 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. We believe that ARRR is a key indicator of
our future revenue potential. However, ARRR should be viewed independently of
revenue, and does not represent our GAAP revenue on an annualized basis, as it
is an operating metric that can be impacted by subscription start and end dates
and renewal rates. ARRR is not intended to be a replacement or forecast of
revenue.

ARRR increased $72.8 millionor 9.2%, as of September 30, 2022 compared to the same period in 2021. This increase was primarily due to an increase in unique subscriptions and an increase in our hotel services.

Average revenue per unique subscription.  We calculate ARPUS 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. We
believe ARPUS is a useful metric in evaluating our ability to sell higher-value
plans and add-on subscriptions.

ARPUS increased $8.11, or 4.1%, as of September 30, 2022 compared to the same
period in 2021. The increase was primarily due to a shift in revenue mix toward
commerce as well as the addition and the growth of our hospitality services.

Adjusted EBITDA. Adjusted EBITDA is a supplemental performance measure used by our management to evaluate our operating performance. We calculate Adjusted EBITDA as excluding interest expense, other income, net, income tax provisions/(benefits), depreciation and amortization, stock-based compensation expense and other net income/ (loss) results from continuing operations. Below is a reconciliation of Adjusted EBITDA to the most comparable GAAP measure of net income/(loss):

                                   Three Months Ended September 30,                  Nine Months Ended September 30,
($ in thousands)                      2022                     2021                    2022                    2021
Net income/(loss)             $           10,105          $      2,839          $        (18,259)         $   (232,839)
Interest expense                           5,209                 2,491                    10,977                 8,578
Provision for/(benefit from)
income taxes                               3,277                 3,756                     7,446               (12,439)
Depreciation and amortization              7,904                 7,674                    23,773                23,906
Stock-based compensation
expense                                   24,094                23,734                    75,051               284,099
Other income, net                         (6,869)               (2,101)                  (14,597)               (4,493)
Direct listing costs                           -                     -                         -                25,318
Adjusted EBITDA                           43,720                38,393                    84,391                92,130


Adjusted EBITDA increased $5.3 million, or 13.9% for the three months ended
September 30, 2022 compared to the same period in 2021. The increase is
primarily due to increases in revenue and a reduction in marketing and sales
spend, partially offset by an increase in cash-based payroll and associated
benefits related to increases in headcount in research and development and
general and administrative expenses, as well as increases in indirect tax
expenses and rent expense due to the impairment of certain operating lease
right-of-use assets. Adjusted EBITDA decreased $7.7 million, or 8.4% for the
nine months ended September 30, 2022 compared to the same period in 2021. The
decrease is primarily due to an increase in cash-based payroll and benefit
related expenses driven by an increase in headcount in research and development
and the addition of hospitality services.
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Unlevered free cash flow.  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 following is a reconciliation of unlevered free cash
flow to the most comparable GAAP measure, cash flows from operating activities:

                                  Three Months Ended September 30,                 Nine Months Ended September 30,
($ in thousands)                     2022                    2021                    2022                    2021
Cash flows from operating
activities                    $         41,434          $     49,344          $        125,117          $    108,167
Cash paid of capital
expenditures                            (3,117)               (4,329)                   (8,852)               (6,744)
Free cash flow                          38,317                45,015                   116,265               101,423
Cash paid for interest, net
of the associated tax benefit            3,805                 2,236                     7,769                 7,864
Unlevered free cash flow      $         42,122          $     47,251          $        124,034          $    109,287


Unlevered free cash flow decreased $5.1 million, or 10.9%, for the three months
ended September 30, 2022 compared to the same period in 2021. This decrease was
primarily driven by a reduction in accounts payable and accrued liabilities due
to timing of payments. Unlevered free cash flow increased $14.7 million, or
13.5%, for the nine months ended September 30, 2022 compared to the same period
in 2021. The increase was primarily driven by a reduction in spend related to
costs associated with the Direct Listing, partially offset by increased spend in
research and development in support of our product development roadmap.

Gross Merchandise Value.  GMV represents the value of merchandise, physical
goods, content and time sold, including hospitality services, net of refunds, on
our platform over a given period of time. GMV processed on our platform
increased $34.8 million, or 2.5%, for the three months ended September 30, 2022
compared to the same period in 2021 and increased $460.2 million, or 11.4%, for
the nine months ended September 30, 2022 compared to the same period in 2021.

Critical Accounting Policies and Estimates

The preparation of the condensed consolidated financial statements in conformity
with U.S. GAAP requires management to make estimates, judgments and assumptions
that affect the amounts reported in the condensed consolidated financial
statements. Management's estimates are based on historical experience and on
various other market-specific and relevant assumptions that management believes
to be reasonable under the circumstances. Actual results could differ from those
estimates.

Our critical accounting policies are disclosed in our Annual Report on Form 10-K
for the year ended December 31, 2021. Our critical accounting policies have not
significantly changed during the nine months ended September 30, 2022. See "Part
1. Financial Information, Item 1. Financial Statements, Note 2. Summary of
Significant Accounting Policies" elsewhere in this Quarterly Report on Form 10-Q
for more information.

recently issued accounting standards

A discussion of recent accounting pronouncements is included in Note 2 to our
unaudited condensed consolidated financial statements included elsewhere in this
Quarterly Report on Form 10-Q.

what it means to be a person Emerging Growth Companies

As a company with less than $1.235 billion in revenue during our last fiscal
year, we qualify as an "emerging growth company" as defined in 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 required to include only reduced disclosures in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;

• Pursuant to Section 404(b), we are not required to engage auditors to report on our internal control over financial reporting;

• We are not required to submit certain executive compensation matters to shareholder advisors for voting, such as “salary say”, “frequency say” and “golden parachute say”; 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
following the fifth anniversary of the effectiveness of the registration
statement on Form S-1 filed with the SEC on May 19, 2021 or such earlier time
that we are no longer an emerging growth company.
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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 take advantage of this exemption.

For risks related to our status as an emerging growth company, see "Part II.
Item 1A.Risk Factors, Risks Related to our Business and Industry". 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.

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