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November 7, 2023

Squarespace Announces Third Quarter 2023 Financial Results

NEW YORK, Nov. 7, 2023 /PRNewswire/ -- Squarespace, Inc. (NYSE: SQSP), the design-driven platform helping entrepreneurs build brands and businesses online, today announced results for the third quarter ended September 30, 2023.

"We are on track to exceed $1 billion in total revenue by the end of 2023, a significant milestone for Squarespace as we continue to expand our offerings and footprint globally," said Anthony Casalena, Founder & CEO of Squarespace. "During the third quarter, we continued to introduce powerful new products and features, further deepening our platform's value proposition and creating new entry points to serve our diverse customer base and use cases. Squarespace Refresh 2023, announced in October, marks one of the strongest years of product releases in our history."

"We delivered another record quarter with 18% topline growth, exceeding our revenue and unlevered free cash flow expectations, achievements fueled by strong customer demand and retention," said Nathan Gooden, CFO of Squarespace. "Strong growth and solid execution across Squarespace propelled our financial performance forward in Q3. We are excited to approach year-end with powerful growth drivers still in play, including international expansion, go-to-market synergies stemming from our acquisition of Google Domains, and the continued relevance of our platform for entrepreneurs."

Third  Quarter 2023 Financial Highlights

  • Total revenue grew 18% year over year to $257.1 million in the third quarter, compared with $217.7 million in third quarter 2022, and 16% in constant currency.
    • Presence revenue grew 20% year over year to $179.5 million and 17% in constant currency.
    • Commerce revenue grew 15% year over year to $77.6 million and 14% in constant currency.
  • Net loss is $16.5 million, compared with net income of $10.1 million in the third quarter 2022, due to a larger income tax provision.
  • Loss per share of $(0.12) based on 135,736,599 basic and dilutive weighted average shares in the third quarter, compared with earnings per share of $0.07 based on 137,832,634 basic 139,667,719 dilutive weighted average shares in the third quarter 2022.
  • Cash flow from operating activities increased 29% to $53.3 million for the trailing three months, compared with $41.4 million for the trailing three months ended September 30, 2022, primarily due to sustained strength in bookings.
  • Total bookings grew 18% year over year to $267.0 million in the third quarter, compared to $225.5 million in the third quarter 2022.
  • Unlevered free cash flow increased 29% to $54.1 million representing 21% of total revenue for the trailing three months, compared with $42.1 million for the trailing three months ended September 30, 2022.
  • Adjusted EBITDA increased to $66.5 million in the third quarter, compared with $43.7 million in the third quarter 2022.
  • Cash and cash equivalents of $216.5 million; total debt of $580.7 million, of which $49.0 million is current, debt net of cash and investments totaled $364.2 million.
  • Total unique subscriptions increased 5% year over year to over 4.4 million in 2023, compared to 4.2 million in 2022.
  • Average revenue per unique subscription ("ARPUS") increased 10% year over year to $226.05 in 2023, compared to $206.38 in 2022.
  • Annual run rate revenue ("ARRR") increased 18% year over year to $1,013.5 million in 2023, compared to $861.4 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 fourth quarter of fiscal year 2023, Squarespace currently expects:

  • Revenue of $261 million to $264 million, or year-over-year growth of 14% to 16%.
  • Non-GAAP unlevered free cash flow of $56 million to $60 million. This is the result of:
    • Cash flow from operating activities of $53 million to $57 million, minus
    • Capital expenditures, expected to be approximately $5 million; plus
    • Cash paid for interest expense net of associated tax benefit, expected to be approximately $7.5 million.

For the full fiscal year 2023, Squarespace currently expects:

  • Revenue of $1,002 million to $1,006 million, or year-over-year growth of 15% to 16%.
  • Non-GAAP unlevered free cash flow of $232 million to $236 million. This is the result of:
    • Cash flow from operating activities of $224 million to $227 million, minus
    • Capital expenditures, expected in the range of $18 million to $19 million; plus
    • Cash paid for interest expense net of associated tax benefit, expected in the range of $26 million to $27 million.

Webcast Conference Call & Shareholder Letter Information

Squarespace will host a conference call on November 7, 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."

Definiti ons of Key Operating Metrics

On September 7, 2023, we closed an asset purchase agreement between us and Google LLC ("Google") to acquire, among other things, Google's domain assets (the "Google Domains Asset Acquisition "). Unique subscriptions and average revenue per unique subscription do not account for single domain subscriptions originally sold by Google as a part of the Google Domains Asset Acquisition (the "Acquired Domain Assets").

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 nor do they account for our Acquired Domain Assets. 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. ARPUS does not account for Acquired Domain Assets or the revenue from Acquired Domain Assets. 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 fourth fiscal quarter and its fiscal year, both 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
investors@squarespace.com

Media
press@squarespace.com

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except shares and per share amounts)
(unaudited)



Three Months Ended September 30,


Nine Months Ended September 30,


2023


2022


2023


2022

Revenue

$               257,061


$               217,696


$               741,618


$               638,160

Cost of revenue(1)

51,753


38,907


137,870


112,549

Gross profit

205,308


178,789


603,748


525,611

Operating expenses:








Research and product development(1)

60,491


54,312


180,473


170,469

Marketing and sales(1)

81,016


74,248


258,061


255,897

General and administrative(1)

36,155


38,507


99,404


113,678

Total operating expenses

177,662


167,067


537,938


540,044

Operating income/(loss)

27,646


11,722


65,810


(14,433)

Interest expense

(9,321)


(5,209)


(26,050)


(10,977)

Other income, net

6,327


6,869


7,525


14,597

Income/(loss) before provision for income taxes

24,652


13,382


47,285


(10,813)

Provision for income taxes

(41,151)


(3,277)


(59,622)


(7,446)

Net (loss)/income

$                (16,499)


$                 10,105


$                (12,337)


$                (18,259)









Net (loss)/income per share, basic and dilutive

$                   (0.12)


$                     0.07


$                   (0.09)


$                   (0.13)

Weighted-average shares used in computing net
(loss)/income per share, basic

135,736,599


137,832,634


135,321,873


139,106,807

Weighted-average shares used in computing net
      (loss)/income per share, dilutive

135,736,599


139,667,719


135,321,873


139,106,807


(1) Includes stock-based compensation as follows:



Three Months Ended September 30,


Nine Months Ended September 30,


2023


2022


2023


2022

Cost of revenue

$                   1,484


$                   1,000


$                   4,085


$                   2,470

Research and product development

14,601


9,462


40,938


31,138

Marketing and sales

3,019


2,252


7,935


6,246

General and administrative

9,213


11,380


26,964


35,197

Total stock-based compensation

$                 28,317


$                 24,094


$                 79,922


$                 75,051

 

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



September 30, 2023


December 31, 2022

Assets




Current assets:




Cash and cash equivalents

$                216,464


$                197,037

Restricted cash

40,671


35,583

Investment in marketable securities


31,757

Accounts receivable, net

21,999


10,748

Due from vendors

4,292


4,442

Prepaid expenses and other current assets

57,398


48,326

Total current assets

340,824


327,893

Property and equipment, net

57,245


51,633

Operating lease right-of-use assets

79,810


86,824

Goodwill

210,438


210,438

Intangible assets, net

205,147


42,808

Other assets

11,432


10,921

Total assets

$                904,896


$                730,517

Liabilities and Stockholders' Deficit




Current liabilities:




Accounts payable

$                  10,561


$                  12,987

Accrued liabilities

113,733


64,360

Deferred revenue

315,603


269,689

Funds payable to customers

44,208


38,845

Debt, current portion

48,977


40,758

Operating lease liabilities, current portion

12,352


11,514

Total current liabilities

545,434


438,153

Deferred income taxes, non-current portion

978


788

Debt, non-current portion

531,714


473,167

Operating lease liabilities, non-current portion

100,710


110,169

Other liabilities

14,022


11,231

Total liabilities

1,192,858


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 September 30, 2023
and December 31, 2022, respectively; 88,124,267 and 87,754,534 shares issued and outstanding as of
September 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 September 30, 2023 and
December 31, 2022, respectively; 47,844,755 shares issued and outstanding as of September 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 September 30, 2023 and December 31, 2022, respectively; zero shares issued and outstanding as of
September 30, 2023 and December 31, 2022, respectively


Additional paid in capital

905,069


875,737

Accumulated other comprehensive loss

(3,631)


(1,665)

Accumulated deficit

(1,189,413)


(1,177,076)

Total stockholders' deficit

(287,962)


(302,991)

Total liabilities and stockholders' deficit

$                904,896


$                730,517

 

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



Nine Months Ended September 30,


2023


2022

OPERATING ACTIVITIES:




Net loss

$             (12,337)


$             (18,259)

Adjustments to reconcile net loss to net cash provided by operating activities:




Depreciation and amortization

24,975


23,773

Stock-based compensation

79,922


75,051

Deferred income taxes

190


Non-cash lease (income)/expense

(1,601)


2,258

Other

485


700

Changes in operating assets and liabilities:




Accounts receivable and due from vendors

(11,151)


(3,099)

Prepaid expenses and other current assets

(9,486)


(11,514)

Accounts payable and accrued liabilities

44,080


6,034

Deferred revenue

47,786


38,035

Funds payable to customers

5,364


12,936

Other operating assets and liabilities

1,800


(798)

Net cash provided by operating activities

170,027


125,117

INVESTING ACTIVITIES:




Proceeds from the sale and maturities of marketable securities

39,664


22,740

Cash paid for asset acquisition

(176,721)


Purchases of marketable securities

(7,824)


(19,444)

Purchase of property and equipment

(13,141)


(8,852)

Net cash used in investing activities

(158,022)


(5,556)

FINANCING ACTIVITIES:




Borrowings on Term Loan

99,444


Payments of debt issuance costs

(637)


Principal payments on debt

(32,623)


(10,189)

Payments for repurchase and retirement of Class A common stock

(25,321)


(85,580)

Taxes paid related to net share settlement of equity awards

(28,306)


(17,334)

Proceeds from exercise of stock options

191


2,158

Net cash provided by/(used in) financing activities

12,748


(110,945)

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

(238)


(985)

Net increase in cash, cash equivalents and restricted cash

24,515


7,631

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

$             257,135


$             241,311





Reconciliation of cash, cash equivalents, and restricted cash:




Cash and cash equivalents

$             216,464


$             200,480

Restricted cash

40,671


40,831

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

$             257,135


$             241,311





SUPPLEMENTAL DISCLOSURE OF CASH FLOW




Cash paid during the year for interest

$               25,407


$               10,283

Cash paid during the year for income taxes

$               31,240


$                9,450





SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCE ACTIVITIES




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

$                     23


$                1,814

Non-cash leasehold improvements

$                     —


$                5,863

Capitalized stock-based compensation

$                3,127


$                   737

 

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 September 30,


Nine Months Ended September 30,


2023


2022


2023


2022

Net (loss)/income

$                (16,499)


$                  10,105


$                (12,337)


$                (18,259)

Interest expense

9,321


5,209


26,050


10,977

Provision for income taxes

41,151


3,277


59,622


7,446

Depreciation and amortization

10,498


7,904


24,975


23,773

Stock-based compensation expense

28,317


24,094


79,922


75,051

Other income, net

(6,327)


(6,869)


(7,525)


(14,597)

Adjusted EBITDA

$                  66,461


$                  43,720


$                170,707


$                  84,391



Three Months Ended September 30,


Nine Months Ended September 30,


2023


2022


2023


2022

Cash flows from operating activities

$                  53,325


$                  41,434


$                170,027


$                125,117

Cash paid of capital expenditures

(5,974)


(3,117)


(13,141)


(8,852)

Free cash flow

$                  47,351


$                  38,317


$                156,886


$                116,265

Cash paid for interest, net of the associated tax benefit

6,780


3,805


19,106


7,769

Unlevered free cash flow

$                  54,131


$                  42,122


$                175,992


$                124,034



September 30, 2023


December 31, 2022

Total debt outstanding

$                580,691


$                513,925

Less: total cash and cash equivalents and marketable securities

216,464


228,794

Total net debt

$                364,227


$                285,131



Three Months Ended September 30,


Nine Months Ended September 30,


2023


2022


2023


2022

Revenue, as reported

$             257,061


$             217,696


$             741,618


$             638,160

Revenue year-over-year growth rate, as reported

18.1 %


8.3 %


16.2 %


10.7 %

Effect of foreign currency translation ($)(1)

$                4,464


$               (9,274)


$                2,346


$             (20,066)

Effect of foreign currency translation (%)(1)

2.1 %


(4.6) %


0.4 %


(3.5) %

Revenue constant currency growth rate

16.0 %


12.9 %


15.8 %


14.2 %



Three Months Ended September 30,


Nine Months Ended September 30,


2023


2022


2023


2022

Commerce revenue, as reported

$               77,610


$               67,701


$             225,702


$             197,689

Revenue year-over-year growth rate, as reported

14.6 %


13.2 %


14.2 %


19.6 %

Effect of foreign currency translation ($)(1)

$                   777


$               (1,630)


$                   408


$               (3,510)

Effect of foreign currency translation (%)(1)

1.1 %


(2.7) %


0.2 %


(2.1) %

Commerce constant currency growth rate

13.5 %


15.9 %


14.0 %


21.7 %



Three Months Ended September 30,


Nine Months Ended September 30,


2023


2022


2023


2022

Presence revenue, as reported

$             179,451


$             149,995


$             515,916


$             440,471

Revenue year-over-year growth rate, as reported

19.6 %


6.3 %


17.1 %


7.1 %

Effect of foreign currency translation ($)(1)

$                3,687


$               (7,644)


$                1,938


$             (16,557)

Effect of foreign currency translation (%)(1)

2.5 %


(5.4) %


0.4 %


(4.0) %

Presence constant currency growth rate

17.1 %


11.7 %


16.7 %


11.1 %


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



Nine Months Ended September 30,


2023


2022

Shares Outstanding:




Class A common stock

88,124,267


88,984,890

Class B common stock

47,844,755


47,844,755

Class C common stock

0


0

Total common stock outstanding

135,969,022


136,829,645


Amounts may not sum due to rounding.

 

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



Three Months Ended September 30,


Nine Months Ended September 30,


2023


2022


2023


2022

Unique subscriptions (in thousands)

4,404


4,179


4,404


4,179

Total bookings (in thousands)

$                267,047


$                225,460


$                788,973


$                673,911

ARRR (in thousands)

$             1,013,481


$                861,399


$             1,013,481


$                861,399

ARPUS

$                  226.05


$                  206.38


$                  226.05


$                  206.38

Adjusted EBITDA (in thousands)

$                  66,461


$                  43,720


$                170,707


$                  84,391

Unlevered free cash flow (in thousands)

$                  54,131


$                  42,122


$                175,992


$                124,034

GMV (in thousands)

$             1,498,163


$             1,411,002


$             4,557,697


$             4,502,828


Unique subscriptions and average revenue per unique subscription ("ARPUS") do not account for single domain subscriptions originally sold by Google as a part of the Google Domains Asset Acquisition.

 

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