Core business outperforms, delivering 14% topline growth;
Customer acquisition strength in March drives full-year guidance higher;
Unlevered free cash flow margin of 28% resulting from pricing success and marketing efficiency
NEW YORK, May 9, 2023 /PRNewswire/ — Squarespace, Inc. (NYSE: SQSP), the design-driven platform helping entrepreneurs build brands and businesses online, today announced results for the first quarter ended March 31, 2023.
“Squarespace had an outstanding first quarter, delivering double-digit revenue and bookings growth,” said Anthony Casalena, Founder & CEO of Squarespace. “Our strong results exemplify the value we provide entrepreneurs looking to grow their businesses online.”
“The first quarter was an excellent start to the year, highlighted by strong demand for our offerings, improved marketing efficiency, and solid free cash flow,” said Nathan Gooden, CFO of Squarespace. “The momentum we are seeing supports our increased full-year guidance and positions us well to continue to deliver growth and profitability in 2023.”
First Quarter 2023 Financial Highlights
- Total revenue grew 14% year over year to $237.0 million in the first quarter, compared with $207.8 million in first quarter 2022, and 15% in constant currency.
- Presence revenue grew 14% year over year to $164.4 million and 16% in constant currency.
- Commerce revenue grew 14% year over year to $72.6 million and 15% in constant currency.
- Net income increased to $0.5 million, compared with a net loss of $92.9 million in the first quarter 2022, due to operating efficiency and recorded tax benefit.
- Earnings per share of $0.00 based on 134,917,610 basic and 137,182,268 dilutive weighted average shares in the first quarter, compared with loss per share of $0.67 based on 139,423,228 basic and dilutive weighted average shares in the first quarter 2022.
- Total bookings grew 16% year over year to $265.8 million in the first quarter, compared to $228.5 million in the first quarter 2022.
- Cash flow from operating activities increased 36% to $64.2 million for the trailing three months, compared with $47.3 million for the trailing three months ended March 31, 2022, due to continued momentum in bookings and a reduction in marketing and sales spend.
- Unlevered free cash flow increased 47% to $67.1 million representing 28% of total revenue for the trailing three months, compared with $45.5 million for the trailing three months ended March 31, 2022.
- Adjusted EBITDA increased to $30.9 million in the first quarter, compared with $(2.9) million in the first quarter 2022.
- Cash and cash equivalents of $239.3 million; total debt of $504.0 million, of which $40.8 million is current, debt net of cash and investments totaled $264.6 million.
- Total unique subscriptions increased 2% year over year to over 4.3 million in 2023, compared to 4.2 million in 2022.
- Average revenue per unique subscription (“ARPUS”) increased 4% year over year to $212.76 in 2023, compared to $204.18 in 2022.
- Annual run rate revenue (“ARRR”) increased 14% year over year to $990.5 million in 2023, compared to $869.0 million in 2022.
A reconciliation of GAAP to non-GAAP financial measures has been provided in the tables included in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”
Outlook & Guidance
For the second quarter of fiscal year 2023, Squarespace currently expects:
- Revenue of $241 million to $245 million, or year-over-year growth of 13% to 15%
- Non-GAAP unlevered free cash flow of $49 million to $53 million. This is the result of:
- Cash flow from operating activities of $47 million to $50 million, minus
- Capital expenditures, expected to be approximately $3 million; plus
- Cash paid for interest expense net of associated tax benefit, expected to be approximately $6 million
For the full fiscal year 2023, Squarespace currently expects:
- Revenue of $969 million to $981 million, or year-over-year growth of 12% to 13%
- Non-GAAP unlevered free cash flow of $192 million to $207 million. This is the result of:
- Cash flow from operating activities of $179 million to $191 million, minus
- Capital expenditures, expected in the range of $8 million to $10 million; plus
- Cash paid for interest expense net of associated tax benefit, expected in the range of $23 million to $24 million
Webcast Conference Call & Shareholder Letter Information
Squarespace will host a conference call on May 9, 2023 at 8:30 a.m. ET to discuss its financial results. A live webcast of the event will be available in the Events & Presentations section of the Squarespace Investor Relations website. An archived replay of the webcast will be available following the conclusion of the call. Additionally, we invite you to read our shareholder letter available on our Investor Relations website.
Non-GAAP Financial Measures
Revenue growth in constant currency is being provided to increase transparency and align our disclosures with companies in our industry that receive material revenues from international sources. Revenue constant currency has been adjusted to exclude the effect of year-over-year changes in foreign currency exchange rate fluctuations. We believe providing this information better enables investors to understand our operating performance irrespective of currency fluctuations.
We calculate constant currency information by translating current period results from entities with foreign functional currencies using the comparable foreign currency exchange rates from the prior fiscal year. To calculate the effect of foreign currency translation, we apply the same weighted monthly average exchange rate as the comparative period. Our definition of constant currency may differ from other companies reporting similarly named measures, and these constant currency performance measures should be viewed in addition to, and not as a substitute for, our operating performance measures calculated in accordance with GAAP.
Adjusted EBITDA is a supplemental performance measure that our management uses to assess our operating performance. We calculate adjusted EBITDA as net income/(loss) excluding interest expense, other income/(loss), net (provision for)/benefit from income taxes, depreciation and amortization, stock-based compensation expense and other items that we do not consider indicative of our ongoing operating performance.
Unlevered free cash flow is a supplemental liquidity measure that Squarespace’s management uses to evaluate its core operating business and its ability to meet its current and future financing and investing needs. Unlevered free cash flow is defined as cash flow from operating activities, including one-time expenses related to Squarespace’s direct listing, less cash paid for capital expenditures increased by cash paid for interest expense net of the associated tax benefit.
Adjusted EBITDA, unlevered free cash flow and revenue constant currency are not prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and have important limitations as an analytical tool. Non-GAAP financial measures are supplemental, should only be used in conjunction with results presented in accordance with GAAP and should not be considered in isolation or as a substitute for such GAAP results.
Further information on these non-GAAP items and reconciliation to their closest GAAP measure is provided below under, “Reconciliation of Non-GAAP Financial Measures.”
Definitions of Key Operating Metrics
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.
Unique subscriptions represent the number of unique sites, standalone scheduling subscriptions, Unfold (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 a website subscription and/or a domain subscription, and other subscriptions related to a single website or domain. Every unique site contains at least one domain subscription or one website subscription. For instance, an active website subscription, a custom domain subscription and a Google Workspace 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.
Average revenue per unique subscription (“ARPUS”). 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.
Total bookings represents cash receipts for all subscriptions purchased, as well as payments due under the terms of contractual agreements for obligations to be fulfilled.
Gross merchandise value (“GMV”) represents the value of physical goods, content and time sold, including hospitality services, net of refunds, on our platform over a given period of time.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements. These statements include, but are not limited to, statements regarding Squarespace’s future operating results and financial position, including for its second fiscal quarter ending June 30, 2023 and its fiscal year ending December 31, 2023. The words “believe,” “may,” “will,” “estimate,” “potential,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “target,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on management’s expectations, assumptions, and projections based on information available at the time the statements were made. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including risks and uncertainties related to: Squarespace’s ability to attract and retain customers and expand their use of its platform; Squarespace’s ability to anticipate market needs and develop new solutions to meet those needs; Squarespace’s ability to improve and enhance the functionality, performance, reliability, design, security and scalability of its existing solutions; Squarespace’s ability to compete successfully in its industry against current and future competitors; the impact of the COVID-19 pandemic on Squarespace, its customers and their users; Squarespace’s ability to manage growth and maintain demand for its solutions; Squarespace’s ability to protect and promote its brand; Squarespace’s ability to generate new customers through its marketing and selling activities; Squarespace’s ability to successfully identify, manage and integrate any existing and potential acquisitions; Squarespace’s ability to hire, integrate and retain highly skilled personnel; Squarespace’s ability to adapt to and comply with existing and emerging regulatory developments, technological changes and cybersecurity needs; Squarespace’s compliance with privacy and data protection laws and regulations as well as contractual privacy and data protection obligations; Squarespace’s ability to establish and maintain intellectual property rights; Squarespace’s ability to manage expansion into international markets; and the expected timing, amount, and effect of Squarespace’s share repurchases. It is not possible for Squarespace’s management to predict all risks, nor can it assess the impact of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements Squarespace may make. In light of these risks, uncertainties, and assumptions, Squarespace’s actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Further information on risks that could cause actual results to differ materially from forecasted results are included in Squarespace’s filings with the Securities and Exchange Commission. Except as required by law, Squarespace assumes no obligation to update these forward-looking statements, or to update the reasons if actual results differ materially from those anticipated in the forward-looking statements.
About Squarespace
Squarespace (NYSE: SQSP) is a design-driven platform helping entrepreneurs build brands and businesses online. We empower millions of customers in more than 200 countries and territories with all the tools they need to create an online presence, build an audience, monetize, and scale their business. Our suite of products range from websites, domains, ecommerce, and marketing tools, as well as tools for scheduling with Acuity, creating and managing social media presence with Bio Sites and Unfold, and hospitality business management via Tock. For more information, visit www.squarespace.com.
Contacts
Investors
Clare Perry
investors@squarespace.com
Media
Kaitlyn Rawlett
press@squarespace.com
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
|||
|
Three Months Ended March 31, |
|||
|
2023 |
2022 |
||
|
Revenue |
$ 237,028 |
$ 207,762 |
|
|
Cost of revenue(1) |
42,950 |
36,649 |
|
|
Gross profit |
194,078 |
171,113 |
|
|
Operating expenses: |
|||
|
Research and product development(1) |
58,570 |
57,328 |
|
|
Marketing and sales(1) |
101,672 |
112,906 |
|
|
General and administrative(1) |
32,340 |
35,981 |
|
|
Total operating expenses |
192,582 |
206,215 |
|
|
Operating income/(loss) |
1,496 |
(35,102) |
|
|
Interest expense |
(8,094) |
(2,449) |
|
|
Other (loss)/income, net |
(840) |
1,511 |
|
|
Loss before benefit from/(provision for) income taxes |
(7,438) |
(36,040) |
|
|
Benefit from/(provision for) income taxes |
7,940 |
(56,820) |
|
|
Net income/(loss) |
$ 502 |
$ (92,860) |
|
|
Net income/(loss) per share attributable to Class A, Class B and Class C common stockholders, basic |
$ 0.00 |
$ (0.67) |
|
|
Net income/(loss) per share attributable to Class A, Class B and Class C common stockholders, dilutive |
$ 0.00 |
$ (0.67) |
|
|
Weighted-average shares used in computing net income/(loss) per share attributable to Class A, Class B |
134,917,610 |
139,423,228 |
|
|
Weighted-average shares used in computing net income/(loss) per share attributable to Class A, Class B |
137,182,268 |
139,423,228 |
|
|
(1) Includes stock-based compensation as follows: |
|||
|
Three Months Ended March 31, |
|||
|
2023 |
2022 |
||
|
Cost of revenue |
$ 1,052 |
$ 624 |
|
|
Research and product development |
10,687 |
10,168 |
|
|
Marketing and sales |
1,871 |
1,599 |
|
|
General and administrative |
8,516 |
11,706 |
|
|
Total stock-based compensation |
$ 22,126 |
$ 24,097 |
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS |
|||
|
March 31, 2023 |
December 31, 2022 |
||
|
Assets |
|||
|
Current assets: |
|||
|
Cash and cash equivalents |
$ 239,327 |
$ 197,037 |
|
|
Restricted cash |
38,170 |
35,583 |
|
|
Investment in marketable securities |
— |
31,757 |
|
|
Accounts receivable, net |
11,345 |
10,748 |
|
|
Due from vendors |
3,383 |
4,442 |
|
|
Prepaid expenses and other current assets |
64,240 |
48,326 |
|
|
Total current assets |
356,465 |
327,893 |
|
|
Property and equipment, net |
51,772 |
51,633 |
|
|
Operating lease right-of-use assets |
84,590 |
86,824 |
|
|
Goodwill |
210,438 |
210,438 |
|
|
Intangible assets, net |
38,985 |
42,808 |
|
|
Other assets |
12,151 |
10,921 |
|
|
Total assets |
$ 754,401 |
$ 730,517 |
|
|
Liabilities and Stockholders’ Deficit |
|||
|
Current liabilities: |
|||
|
Accounts payable |
$ 5,738 |
$ 12,987 |
|
|
Accrued liabilities |
89,886 |
64,360 |
|
|
Deferred revenue |
300,245 |
269,689 |
|
|
Funds payable to customers |
40,424 |
38,845 |
|
|
Debt, current portion |
40,758 |
40,758 |
|
|
Operating lease liabilities, current portion |
11,821 |
11,514 |
|
|
Total current liabilities |
488,872 |
438,153 |
|
|
Deferred income taxes, non-current portion |
850 |
788 |
|
|
Debt, non-current portion |
463,204 |
473,167 |
|
|
Operating lease liabilities, non-current portion |
107,172 |
110,169 |
|
|
Other liabilities |
12,638 |
11,231 |
|
|
Total liabilities |
1,072,736 |
1,033,508 |
|
|
Commitments and contingencies |
|||
|
Stockholders’ deficit: |
|||
|
Class A common stock, par value of $0.0001; 1,000,000,000 shares authorized as of March 31, 2023 and |
8 |
8 |
|
|
Class B common stock, par value of $0.0001; 100,000,000 shares authorized as of March 31, 2023 and |
5 |
5 |
|
|
Class C common stock (authorized May 10, 2021), par value of $0.0001; 1,000,000,000 shares authorized |
— |
— |
|
|
Additional paid in capital |
859,417 |
875,737 |
|
|
Accumulated other comprehensive loss |
(1,191) |
(1,665) |
|
|
Accumulated deficit |
(1,176,574) |
(1,177,076) |
|
|
Total stockholders’ deficit |
(318,335) |
(302,991) |
|
|
Total liabilities and stockholders’ deficit |
$ 754,401 |
$ 730,517 |
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||
|
Three Months Ended March 31, |
|||
|
2023 |
2022 |
||
|
OPERATING ACTIVITIES: |
|||
|
Net income/(loss) |
$ 502 |
$ (92,860) |
|
|
Adjustments to reconcile net income/(loss) to net cash provided by operating activities: |
|||
|
Depreciation and amortization |
7,241 |
8,058 |
|
|
Stock-based compensation |
22,126 |
24,097 |
|
|
Deferred income taxes |
62 |
— |
|
|
Non-cash lease (income)/expense |
(466) |
328 |
|
|
Other |
93 |
261 |
|
|
Changes in operating assets and liabilities: |
|||
|
Accounts receivable and due from vendors |
411 |
(1,361) |
|
|
Prepaid expenses and other current assets |
(13,697) |
31,896 |
|
|
Accounts payable and accrued liabilities |
16,960 |
42,220 |
|
|
Deferred revenue |
29,279 |
21,538 |
|
|
Funds payable to customers |
1,580 |
10,847 |
|
|
Other operating assets and liabilities |
64 |
2,246 |
|
|
Net cash provided by operating activities |
64,155 |
47,270 |
|
|
INVESTING ACTIVITIES: |
|||
|
Proceeds from the sale and maturities of marketable securities |
39,664 |
7,340 |
|
|
Purchases of marketable securities |
(7,824) |
(4,027) |
|
|
Purchase of property and equipment |
(3,075) |
(3,359) |
|
|
Net cash provided by/(used in) investing activities |
28,765 |
(46) |
|
|
FINANCING ACTIVITIES: |
|||
|
Principal payments on debt |
(10,189) |
(3,396) |
|
|
Payments for repurchase and retirement of Class A common stock |
(25,321) |
— |
|
|
Taxes paid related to net share settlement of equity awards |
(12,760) |
(7,556) |
|
|
Proceeds from exercise of stock options |
92 |
1,141 |
|
|
Net cash used in financing activities |
(48,178) |
(9,811) |
|
|
Effect of exchange rate changes on cash, cash equivalents, and restricted cash |
135 |
(217) |
|
|
Net increase in cash, cash equivalents and restricted cash |
44,877 |
37,196 |
|
|
Cash, cash equivalents, and restricted cash at the beginning of the period |
232,620 |
233,680 |
|
|
Cash, cash equivalents, and restricted cash at the end of the period |
$ 277,497 |
$ 270,876 |
|
|
Reconciliation of cash, cash equivalents, and restricted cash: |
|||
|
Cash and cash equivalents |
$ 239,327 |
$ 230,492 |
|
|
Restricted cash |
38,170 |
40,384 |
|
|
Cash, cash equivalents, and restricted cash at the end of the period |
$ 277,497 |
$ 270,876 |
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW |
|||
|
Cash paid during the year for interest |
$ 7,985 |
$ 2,149 |
|
|
Cash paid during the year for income taxes |
$ 10,163 |
$ 1 |
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCE ACTIVITIES |
|||
|
Purchases of property and equipment included in accounts payable and accrued liabilities |
$ 22 |
$ 1,332 |
|
|
Capitalized stock-based compensation |
$ 469 |
$ 63 |
|
|
Accrued taxes related to net share settlement of equity awards |
$ 645 |
$ 116 |
|
|
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES |
|||
|
The following tables reconcile each non-GAAP financial measure to its most directly comparable GAAP financial |
|||
|
Three Months Ended March 31, |
|||
|
2023 |
2022 |
||
|
Net income/(loss) |
$ 502 |
$ (92,860) |
|
|
Interest expense |
8,094 |
2,449 |
|
|
(Benefit from)/provision for income taxes |
(7,940) |
56,820 |
|
|
Depreciation and amortization |
7,241 |
8,058 |
|
|
Stock-based compensation expense |
22,126 |
24,097 |
|
|
Other loss/(income), net |
840 |
(1,511) |
|
|
Adjusted EBITDA |
$ 30,863 |
$ (2,947) |
|
|
Three Months Ended March 31, |
|||
|
2023 |
2022 |
||
|
Cash flows from operating activities |
$ 64,155 |
$ 47,270 |
|
|
Cash paid of capital expenditures |
(3,075) |
(3,359) |
|
|
Free cash flow |
$ 61,080 |
$ 43,911 |
|
|
Cash paid for interest, net of the associated tax benefit |
6,016 |
1,624 |
|
|
Unlevered free cash flow |
$ 67,096 |
$ 45,535 |
|
|
March 31, 2023 |
December 31, 2022 |
||
|
Total debt outstanding |
$ 503,962 |
$ 513,925 |
|
|
Less: total cash and cash equivalents and marketable securities |
239,327 |
228,794 |
|
|
Total net debt |
$ 264,635 |
$ 285,131 |
|
|
Three Months Ended March 31, |
|||
|
2023 |
2022 |
||
|
Revenue, as reported |
$ 237,028 |
$ 207,762 |
|
|
Revenue year-over-year growth rate, as reported |
14.1 % |
15.7 % |
|
|
Effect of foreign currency translation ($)(1) |
$ (2,803) |
$ (4,187) |
|
|
Effect of foreign currency translation (%)(1) |
1.3 % |
2.3 % |
|
|
Revenue constant currency growth rate |
15.4 % |
18.0 % |
|
|
Three Months Ended March 31, |
|||
|
2023 |
2022 |
||
|
Commerce revenue, as reported |
$ 72,637 |
$ 63,817 |
|
|
Revenue year-over-year growth rate, as reported |
13.8 % |
36.4 % |
|
|
Effect of foreign currency translation ($)(1) |
$ (489) |
$ (722) |
|
|
Effect of foreign currency translation (%)(1) |
0.8 % |
1.5 % |
|
|
Commerce constant currency growth rate |
14.6 % |
37.9 % |
|
|
Three Months Ended March 31, |
|||
|
2023 |
2022 |
||
|
Presence revenue, as reported |
$ 164,391 |
$ 143,945 |
|
|
Revenue year-over-year growth rate, as reported |
14.2 % |
8.3 % |
|
|
Effect of foreign currency translation ($)(1) |
$ (2,314) |
$ (3,465) |
|
|
Effect of foreign currency translation (%)(1) |
1.6 % |
2.6 % |
|
|
Presence constant currency growth rate |
15.8 % |
10.9 % |
|
|
(1) To calculate the effect of foreign currency translation, we apply the same weighted monthly average exchange rate as the |
|||
|
Three Months Ended March 31, |
|||
|
2023 |
2022 |
||
|
Shares Outstanding: |
|||
|
Class A common stock |
87,295,014 |
91,562,991 |
|
|
Class B common stock |
47,844,755 |
48,344,755 |
|
|
Class C common stock |
0 |
0 |
|
|
Total common stock outstanding |
135,139,769 |
139,907,746 |
|
|
Amounts may not sum due to rounding. |
|
KEY PERFORMANCE INDICATORS AND NON-GAAP FINANCIAL MEASURES |
|||
|
Three Months Ended March 31, |
|||
|
2023 |
2022 |
||
|
Unique subscriptions (in thousands) |
4,264 |
4,161 |
|
|
Total bookings (in thousands) |
$ 265,789 |
$ 228,539 |
|
|
ARRR (in thousands) |
$ 990,525 |
$ 869,000 |
|
|
ARPUS |
$ 212.76 |
$ 204.18 |
|
|
Adjusted EBITDA (in thousands) |
$ 30,863 |
$ (2,947) |
|
|
Unlevered free cash flow (in thousands) |
$ 67,096 |
$ 45,535 |
|
|
GMV (in thousands) |
$ 1,534,058 |
$ 1,574,540 |
|
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SOURCE Squarespace, Inc.
