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August 8, 2023

Squarespace Announces Second Quarter 2023 Financial Results

NEW YORK, Aug. 8, 2023 /PRNewswire/ -- Squarespace, Inc. (NYSE: SQSP), the design-driven platform helping entrepreneurs build brands and businesses online, today announced results for the second quarter ended June 30, 2023.

"We are thrilled to report another strong quarter with revenue growth accelerating to 16% year over year as entrepreneurs continue to trust Squarespace to power their businesses," said Anthony Casalena, Founder & CEO of Squarespace. "We brought new technology to our customers, continued to prioritize key product improvements, and leveraged our brand momentum internationally, attracting new customers and deepening our connection with millions."

"Strong customer retention and new customer demand drove the outperformance in Q2 with both revenue and free cash flow exceeding our expectations," said Nathan Gooden, CFO of Squarespace. "Our underlying business drivers generated robust growth and we continue to deliver operational excellence and efficiency. We are increasing our topline and unlevered free cash flow outlook for the second half of 2023 as a testament to the strength of our core business."

Second  Quarter 2023 Financial Highlights

  • Total revenue grew 16% year over year to $247.5 million in the second quarter (as reported and in constant currency), compared with $212.7 million in second quarter 2022.
    • Presence revenue grew 17% year over year to $172.1 million.
    • Commerce revenue grew 14% year over year to $75.5 million.
  • Net income decreased to $3.7 million, compared with a net income of $64.5 million in the second quarter 2022, due to a reversion to the effective annual tax rate method during Q2 2023.
  • Earnings per share of $0.03 based on 135,302,409 basic and 138,771,613 dilutive weighted average shares in the second quarter, compared with earnings per share of $0.46 based on 140,082,038 basic weighted average shares and $0.45 based on 142,133,303 dilutive weighted average shares in the second quarter 2022.
  • Total bookings grew 16% year over year to $256.1 million in the second quarter, compared to $219.9 million in the second quarter 2022.
  • Cash flow from operating activities increased 44% to $52.5 million for the trailing three months, compared with $36.4 million for the trailing three months ended June 30, 2022, primarily due to continued strength in bookings.
  • Unlevered free cash flow increased 51% to $54.8 million representing 22% of total revenue for the trailing three months, compared with $36.4 million for the trailing three months ended June 30, 2022.
  • Adjusted EBITDA increased to $73.4 million in the second quarter, compared with $43.6 million in the second quarter 2022.
  • Cash and cash equivalents of $274.0 million; total debt of $494.0 million, of which $40.8 million is current, debt net of cash and investments totaled $220.0 million.
  • Total unique subscriptions increased 3% year over year to over 4.3 million in 2023, compared to 4.2 million in 2022.
  • Average revenue per unique subscription ("ARPUS") increased 7% year over year to $219.42 in 2023, compared to $204.17 in 2022.
  • Annual run rate revenue ("ARRR") increased 17% year over year to $980.8 million in 2023, compared to $837.8 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 third quarter of fiscal year 2023, Squarespace currently expects:

  • Revenue of $250 million to $253 million, or year-over-year growth of 15% to 16%.
  • Non-GAAP unlevered free cash flow of $47 million to $51 million. This is the result of:
    • Cash flow from operating activities of $43 million to $47 million, minus
    • Capital expenditures, expected to be approximately $2 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 $987 million to $995 million, or year-over-year growth of 14% to 15%.
  • Non-GAAP unlevered free cash flow of $217 million to $225 million. This is the result of:
    • Cash flow from operating activities of $205 million to $211 million, minus
    • Capital expenditures, expected in the range of $10 million to $12 million; plus
    • Cash paid for interest expense net of associated tax benefit, expected in the range of $24 million to $25 million.

Our guidance does not assume any impact from our proposed acquisition of Google Domains assets.

Webcast Conference Call & Shareholder Letter Information

Squarespace will host a conference call on August 8, 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 third fiscal quarter ending September 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 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
(In thousands, except shares and per share amounts)
(unaudited)




Three Months Ended June 30,


Six Months Ended June 30,


2023


2022


2023


2022

Revenue

$               247,529


$               212,702


$               484,557


$               420,464

Cost of revenue(1)

43,167


36,993


86,117


73,642

Gross profit

204,362


175,709


398,440


346,822

Operating expenses:








Research and product development(1)

61,412


58,829


119,982


116,157

Marketing and sales(1)

75,373


68,743


177,045


181,649

General and administrative(1)

30,909


39,190


63,249


75,171

Total operating expenses

167,694


166,762


360,276


372,977

Operating income/(loss)

36,668


8,947


38,164


(26,155)

Interest expense

(8,635)


(3,319)


(16,729)


(5,768)

Other income, net

2,038


6,217


1,198


7,728

Income/(loss) before (provision for)/benefit from income
taxes

30,071


11,845


22,633


(24,195)

(Provision for)/benefit from income taxes

(26,411)


52,651


(18,471)


(4,169)

Net income/(loss)

$                   3,660


$                 64,496


$                   4,162


$                (28,364)









Net income/(loss) per share attributable to Class A, Class B
and Class C common stockholders, basic

$                     0.03


$                     0.46


$                     0.03


$                   (0.20)

Net income/(loss) per share attributable to Class A, Class B
and Class C common stockholders, dilutive

$                     0.03


$                     0.45


$                     0.03


$                   (0.20)

Weighted-average shares used in computing net
income/(loss) per share attributable to Class A, Class B and
Class C stockholders, basic

135,302,409


140,082,038


135,111,072


139,754,453

Weighted-average shares used in computing net
      income/(loss) per share attributable to Class A, Class B
     and Class C stockholders, dilutive

138,771,613


142,133,303


138,013,454


139,754,453


(1) Includes stock-based compensation as follows:



Three Months Ended June 30,


Six Months Ended June 30,


2023


2022


2023


2022

Cost of revenue

$                   1,549


$                      846


$                   2,601


$                   1,470

Research and product development

15,650


11,508


26,337


21,676

Marketing and sales

3,045


2,395


4,916


3,994

General and administrative

9,235


12,111


17,751


23,817

Total stock-based compensation

$                 29,479


$                 26,860


$                 51,605


$                 50,957

 

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except shares and per share amounts)
(unaudited)



June 30, 2023


December 31, 2022

Assets




Current assets:




Cash and cash equivalents

$                274,004


$                197,037

Restricted cash

34,272


35,583

Investment in marketable securities


31,757

Accounts receivable, net

9,748


10,748

Due from vendors

3,030


4,442

Prepaid expenses and other current assets

51,305


48,326

Total current assets

372,359


327,893

Property and equipment, net

53,874


51,633

Operating lease right-of-use assets

82,247


86,824

Goodwill

210,438


210,438

Intangible assets, net

35,118


42,808

Other assets

12,376


10,921

Total assets

$                766,412


$                730,517

Liabilities and Stockholders' Deficit




Current liabilities:




Accounts payable

$                    4,782


$                  12,987

Accrued liabilities

83,222


64,360

Deferred revenue

308,662


269,689

Funds payable to customers

36,713


38,845

Debt, current portion

40,758


40,758

Operating lease liabilities, current portion

12,104


11,514

Total current liabilities

486,241


438,153

Deferred income taxes, non-current portion

912


788

Debt, non-current portion

453,230


473,167

Operating lease liabilities, non-current portion

104,020


110,169

Other liabilities

13,205


11,231

Total liabilities

1,057,608


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 June 30, 2023 and
December 31, 2022, respectively; 87,723,667 and 87,754,534 shares issued and outstanding as of June 30,
2023 and December 31, 2022, respectively

8


8

Class B common stock, par value of $0.0001; 100,000,000 shares authorized as of June 30, 2023 and
December 31, 2022, respectively; 47,844,755 shares issued and outstanding as of June 30, 2023 and
December 31, 2022, respectively

5


5

Class C common stock (authorized May 10, 2021), par value of $0.0001; 1,000,000,000 shares authorized
as of June 30, 2023 and December 31, 2022, respectively; zero shares issued and outstanding as of June 30,
2023 and December 31, 2022, respectively


Additional paid in capital

883,192


875,737

Accumulated other comprehensive loss

(1,487)


(1,665)

Accumulated deficit

(1,172,914)


(1,177,076)

Total stockholders' deficit

(291,196)


(302,991)

Total liabilities and stockholders' deficit

$                766,412


$                730,517

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)



Six Months Ended June 30,


2023


2022

OPERATING ACTIVITIES:




Net income/(loss)

$                4,162


$             (28,364)

Adjustments to reconcile net income/(loss) to net cash provided by operating activities:




Depreciation and amortization

14,477


15,869

Stock-based compensation

51,605


50,957

Deferred income taxes

124


Non-cash lease (income)/expense

(989)


638

Other

310


502

Changes in operating assets and liabilities:




Accounts receivable and due from vendors

2,364


(1,701)

Prepaid expenses and other current assets

(1,480)


(3,021)

Accounts payable and accrued liabilities

9,822


9,260

Deferred revenue

38,030


30,294

Funds payable to customers

(2,131)


9,456

Other operating assets and liabilities

408


(207)

Net cash provided by operating activities

116,702


83,683

INVESTING ACTIVITIES:




Proceeds from the sale and maturities of marketable securities

39,664


15,940

Purchases of marketable securities

(7,824)


(17,016)

Purchase of property and equipment

(7,167)


(5,735)

Net cash provided by/(used in) investing activities

24,673


(6,811)

FINANCING ACTIVITIES:




Principal payments on debt

(20,379)


(6,793)

Payments for repurchase and retirement of Class A common stock

(25,321)


(35,202)

Taxes paid related to net share settlement of equity awards

(20,318)


(15,269)

Proceeds from exercise of stock options

134


2,110

Net cash used in financing activities

(65,884)


(55,154)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

165


(600)

Net increase in cash, cash equivalents and restricted cash

75,656


21,118

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

$             308,276


$             254,798





Reconciliation of cash, cash equivalents, and restricted cash:




Cash and cash equivalents

$             274,004


$             215,092

Restricted cash

34,272


39,706

Cash, cash equivalents, and restricted cash at the end of the period

$             308,276


$             254,798





SUPPLEMENTAL DISCLOSURE OF CASH FLOW




Cash paid during the year for interest

$               16,360


$                5,247

Cash paid during the year for income taxes

$               22,902


$                5,968





SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCE ACTIVITIES




Purchases of property and equipment included in accounts payable and accrued liabilities

$                   196


$                1,582

Non-cash leasehold improvements

$                     —


$                5,679

Capitalized stock-based compensation

$                1,638


$                   259

 

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(In thousands)
(unaudited)


The following tables reconcile each non-GAAP financial measure to its most directly comparable GAAP financial
measure:



Three Months Ended June 30,


Six Months Ended June 30,


2023


2022


2023


2022

Net income/(loss)

$                   3,660


$                  64,496


$                   4,162


$                (28,364)

Interest expense

8,635


3,319


16,729


5,768

Provision for/(benefit from) income taxes

26,411


(52,651)


18,471


4,169

Depreciation and amortization

7,236


7,811


14,477


15,869

Stock-based compensation expense

29,479


26,860


51,605


50,957

Other income, net

(2,038)


(6,217)


(1,198)


(7,728)

Adjusted EBITDA

$                  73,383


$                  43,618


$                104,246


$                  40,671

 


Three Months Ended June 30,


Six Months Ended June 30,


2023


2022


2023


2022

Cash flows from operating activities

$                  52,547


$                  36,413


$                116,702


$                  83,683

Cash paid of capital expenditures

(4,092)


(2,376)


(7,167)


(5,735)

Free cash flow

$                  48,455


$                  34,037


$                109,535


$                  77,948

Cash paid for interest, net of the associated tax
benefit

6,310


2,340


12,326


3,964

Unlevered free cash flow

$                  54,765


$                  36,377


$                121,861


$                  81,912

 


June 30, 2023


December 31, 2022

Total debt outstanding

$               493,988


$               513,925

Less: total cash and cash equivalents and marketable securities

274,004


228,794

Total net debt

$               219,984


$               285,131

 


Three Months Ended June 30,


Six Months Ended June 30,


2023


2022


2023


2022

Revenue, as reported

$             247,529


$             212,702


$             484,557


$             420,464

Revenue year-over-year growth rate, as reported

16.4 %


8.5 %


15.2 %


11.9 %

Effect of foreign currency translation ($)(1)

$                   685


$               (6,605)


$               (2,118)


$             (10,792)

Effect of foreign currency translation (%)(1)

0.3 %


(3.4) %


(0.5) %


(2.9) %

Revenue constant currency growth rate

16.1 %


11.9 %


15.7 %


14.8 %

 


Three Months Ended June 30,


Six Months Ended June 30,


2023


2022


2023


2022

Commerce revenue, as reported

$               75,455


$               66,171


$             148,092


$             129,988

Revenue year-over-year growth rate, as reported

14.0 %


12.7 %


13.9 %


23.2 %

Effect of foreign currency translation ($)(1)

$                   119


$               (1,157)


$                 (369)


$               (1,880)

Effect of foreign currency translation (%)(1)

0.2 %


(2.0) %


(0.3) %


(1.8) %

Commerce constant currency growth rate

13.8 %


14.7 %


14.2 %


25.0 %

 


Three Months Ended June 30,


Six Months Ended June 30,


2023


2022


2023


2022

Presence revenue, as reported

$             172,074


$             146,531


$             336,465


$             290,476

Revenue year-over-year growth rate, as reported

17.4 %


6.7 %


15.8 %


7.5 %

Effect of foreign currency translation ($)(1)

$                   565


$               (5,448)


$               (1,749)


$               (8,913)

Effect of foreign currency translation (%)(1)

0.4 %


(4.0) %


(0.6) %


(3.3) %

Presence constant currency growth rate

17.0 %


10.7 %


16.4 %


10.8 %


(1) To calculate the effect of foreign currency translation, we apply the same weighted monthly average exchange rate as the comparative period.

 


Six Months Ended June 30,


2023


2022

Shares Outstanding:




Class A common stock

87,723,667


91,246,588

Class B common stock

47,844,755


47,844,755

Class C common stock

0


0

Total common stock outstanding

135,568,422


139,091,343


Amounts may not sum due to rounding.

 

KEY PERFORMANCE INDICATORS AND NON-GAAP FINANCIAL MEASURES
(In thousands)
(unaudited)



Three Months Ended June 30,


Six Months Ended June 30,


2023


2022


2023


2022

Unique subscriptions (in thousands)

4,305


4,182


4,305


4,182

Total bookings (in thousands)

$                256,137


$                219,912


$                521,926


$                448,451

ARRR (in thousands)

$                980,837


$                837,759


$                980,837


$                837,759

ARPUS

$                  219.42


$                  204.17


$                  219.42


$                  204.17

Adjusted EBITDA (in thousands)

$                  73,383


$                  43,618


$                104,246


$                  40,671

Unlevered free cash flow (in thousands)

$                  54,765


$                  36,377


$                121,861


$                  81,912

GMV (in thousands)

$             1,525,476


$             1,517,286


$             3,059,534


$             3,091,826

 

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