Stock-based Compensation

6 Months Ended

Jun. 30, 2021

Share-based Payment Arrangement [Abstract]

Stock-based Compensation

Stock-based Compensation

Stock Options

Squarespace, Inc. Amended and Restated 2008 Equity Incentive Plan

In January 2008, the Company established and approved the Squarespace, Inc. 2008 Equity Incentive Plan which was ratified in 2010 and was subsequently amended and restated in March 2016 (“the 2008 Plan”). Under the 2008 Plan, which covers certain employees and consultants, the Company granted shares of its Class B common stock in the form of stock options. After November 17, 2017, there were no additional grants from the 2008 Plan.

Stock options in common stock exercised were 2,075,761 and 2,976,237 during the three and six months ended June 30, 2021, respectively, and 76,885 and 318,688 during the three and six months ended June 30, 2020, respectively. Cash consideration for stock options exercised were $2,858 and $3,566 during the three and six months ended June 30, 2021, respectively, and $240 and $627 for the three and six months ended June 30, 2020, respectively.

Restricted Stock Units (RSUs)

Squarespace, Inc. 2017 Equity Incentive Plan

On November 17, 2017, the Company’s board of directors approved the Squarespace, Inc. 2017 Equity Incentive Plan (“the 2017 Plan”). Under the 2017 Plan, the Company may grant shares of its Class A common stock in the form of RSUs, stock options, stock appreciation rights, performance stock awards and other stock awards. RSUs generally vest over four years and are measured based on the fair market value of the underlying Class A common stock on the date of grant, as determined by the Company’s board of directors. After April 15, 2021, there were no additional grants from the 2017 Plan.

Squarespace, Inc. 2021 Equity Incentive Plan

On March 25, 2021, the Company’s board of directors adopted the Squarespace, Inc. 2021 Equity Incentive Plan (“the 2021 Plan”) which was approved by the stockholders on May 3, 2021 and went into effect on May 9, 2021. Under the 2021 Plan, the Company may grant shares of its Class A common stock in the form of RSUs, stock options, stock appreciation rights, performance stock awards and other stock awards. RSUs generally vest over four years and subsequent to the Direct Listing, are measured based on the closing price of our Class A common stock as reported on the date of grant.

A summary of the Company’s RSU activity for the 2017 Plan and 2021 Plan during the three and six months ended June 30, 2021 is as follows:

	Number of RSUs	Weighted Average Grant Date Fair Value Per RSU
RSUs outstanding – December 31, 2020	5,441,475	$	21.27
RSUs granted	726,673	63.73
RSUs vested	(525,920)	17.47
RSUs forfeited and cancelled	(83,923)	24.72
RSUs outstanding – March 31, 2021	5,558,305	27.53
RSUs granted	473,541	$	56.03
RSUs vested	(607,038)	$	17.13
RSUs forfeited and cancelled	(126,033)	$	26.32
RSUs outstanding – June 30, 2021	5,298,775	$	31.28

During the three and six months ended June 30, 2021, the weighted-average fair value of share units vested was $30,447 and $56,575, respectively. As of June 30, 2021, there was $168,630 of total unrecognized compensation costs related to RSU grants that are expected to be recognized, respectively, over a weighted-average period of 3 years.

In connection with the vesting of the RSUs, the Company reacquired 247,120 and 517,209 shares for $12,319 and $25,735 during the three and six months ended June 30, 2021, respectively, in order to satisfy employee tax withholding obligations. The employees received the net number of shares after consideration to those reacquired.

Executive Restricted Stock Grant

On August 22, 2017, the Company granted its Chief Executive Officer ("CEO") 4,460,858 shares of Class B common stock with a grant date fair value of $27,434 (the “CEO Stock Grant”). Under the terms of the initial agreement, these shares were to be forfeited as of a date that is three years and six months following the date of grant unless one of the following occurs prior to that date: (1) a Liquidation Event (other than a liquidation, dissolution or winding up of the Company) as defined by the Stock Grant Agreement or (2) an IPO, as defined by the Stock Grant Agreement.

On August 24, 2020 the board of directors modified the forfeiture provision of the CEO Stock Grant by extending the forfeiture date from February 22, 2021 to August 22, 2021. The modification of the forfeiture date was accounted for as the grant of the new award, accordingly, the Company updated the fair value of the CEO Stock Grant on the modification date. The Company estimated the fair value of the Class B common stock to be $51.40 per share on the modification date.

On May 19, 2021, upon completion of the Direct Listing, 4,460,858 shares of Class B common stock vested in accordance with the CEO Stock Grant Agreement. As a result, the Company recorded compensation expense of $229,288 within general and administrative expenses on the condensed consolidated statements of operations during the three months ended June 30, 2021.

Tock Selling Shareholder RSUs

On March 31, 2021, the Company issued 438,468 shares of Class C common stock in the form of RSUs to certain selling shareholders of Tock, which will vest over three years contingent upon continued service. Immediately prior to the

registration statement in connection with the Direct Listing being declared effective, the shares of Class C common stock automatically converted to Class A common stock, Note 14 — Stockholders' Equity/(Deficit) for further information. These RSUs were issued outside of the 2017 Plan and 2021 Plan. The weighted-average grant price of these RSUs was $68.42 per share. Accordingly, the Company will recognize $30,000 as compensation expense over the requisite 3 year service period on a straight-line basis.

During the three months ended June 30, 2021, the Company recorded compensation expense of $2,408 related to the RSUs issued to certain selling shareholders of Tock within general and administrative expenses on the condensed consolidated statements of operations.

Casalena Performance Award

On April 15, 2021 (“Grant Date”), the board of directors of the Company approved an RSU grant to Anthony Casalena, CEO, of 2,750,000 Class A common shares (“Casalena Performance Award”). The Casalena Performance Award vesting is contingent on both service- and market-based vesting conditions. The market-based vesting condition is based on the achievement of specified Class A common stock price targets during the period beginning upon the effectiveness of the registration statement and ending on the fifth anniversary of the Grant Date (“Performance Period”). The Casalena Performance Award is divided into ten equal tranches. The market-based vesting condition is eligible to vest based on the achievement of ten different and progressively increasing stock price targets. The targets will be deemed to have been achieved when the average closing price of a share of the Company’s Class A common stock on the trading days over any consecutive 30 calendar day period during the Performance Period equals or exceeds the applicable Class A common stock price target. The service-based vesting condition is deemed met in four equal installments over four years starting on the first anniversary of the Grant Date. Although the service-based vesting condition period is four years, Mr. Casalena must be employed by the Company at the time the market condition is met in order to vest in any tranche of the award.

The Company estimated the fair value of the Casalena Performance Award on the grant date to be approximately $84,450 using a Monte Carlo simulation with a weighted-average grant date fair value of $30.71 per Class A common share. The Company will recognize the fair value of the award as stock-based compensation expense using the accelerated attribution method over the longer of (i) the period of time the market condition for each tranche is expected to be met (i.e., the derived service period) or (ii) the service vesting condition of four years.

The applicable stock price targets are as follows:

Company Stock Price Target	Cumulative Number of Shares of Vest
$105.00	275,000
$140.00	550,000
$175.00	825,000
$210.00	1,100,000
$245.00	1,375,000
$280.00	1,650,000
$315.00	1,925,000
$350.00	2,200,000
$385.00	2,475,000
$420.00	2,750,000

During the three months ended June 30, 2021, the Company recorded compensation expense of $7,247 related to the Casalena Performance Award within general and administrative expenses on the condensed consolidated statements of operations.

Stock-Based Compensation

The classification of stock-based compensation by line item within the condensed consolidated statement of operations is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Cost of revenue	$	380	$	205	$	655	$	366
Research and product development	8,245		5,269		15,038		9,946
Marketing and sales	1,569		782		2,741		1,423
General and administrative	240,319		1,012		241,931		3,435
Total stock-based compensation	$	250,513	$	7,268	$	260,365	$	15,170

The amount above excludes $21 and $42 of stock compensation capitalized as property and equipment, net, for the three and six months ended June 30, 2021, respectively, and $34 and $70 for the three and six months ended June 30, 2020, respectively.

Shares Available for Future Issuance

As of May 9, 2021, all shares available under the 2008 and 2017 Plans will continue to remain available but will no longer be available for future issuance. The shares available will continue to include all shares forfeited and expired and reacquired to satisfy employee tax withholding obligations that were issued under the 2008 and 2017 Plans.

The following table summarizes the shares available under the 2008 and 2017 Plans:

	Shares Available Under the 2008 and 2017 Plans
Balance as of December 31, 2020	8,728,327
Granted	(726,673)
Forfeited and expired	87,361
Reacquired to satisfy employee tax withholding obligations	270,089
Balance as of March 31, 2021	8,359,104
Casalena Performance Award granted	(2,750,000)
Forfeited and expired	126,640
Reacquired to satisfy employee tax withholding obligations	247,120
Balance as of June 30, 2021	5,982,864

On May 9, 2021, upon effectiveness of the 2021 Plan, the Company included an additional 19,250,000 Class A common shares available for issuance. The following table summarizes the shares available for future issuance under the 2021 Plan:

	Shares Available for Future Grant Under the 2021 Plan
Balance as of December 31, 2020	—
Class A common shares available for issuance	19,250,000
RSUs granted	(473,541)
Balance as of June 30, 2021	18,776,459