Squarespace, Inc. (NYSE: SQSP), the all-in-one website building and ecommerce platform, today announced results for the second quarter ended June 30, 2022.
“Squarespace achieved $213 million in revenue, growing 12% year over year in constant currency,” said Anthony Casalena, Founder & CEO of Squarespace. “We continue to track well against our product roadmap as we seek to bring more value to our millions of customers worldwide. Our recent launch of Fluid Engine, a core enhancement to our page building experience, represents a major step forward in no-code web design for professionals and beginners and we are excited it is now available to customers globally.”
“Our revenue and unlevered free cash flow results delivered against our plans; without the impact of FX headwinds, we would have exceeded our revenue guidance,” said Marcela Martin, CFO of Squarespace.
Second Quarter 2022 Financial Highlights
- Total revenue of $212.7 million grew 9% year-over-year as reported on a GAAP basis and 12% in constant currency
- Commerce revenue grew 13% year-over-year to $66.2 million
- Annual run rate revenue (“ARRR”) increased 8% year-over-year to $837.8 million
- Unique subscriptions increased 6% year-over-year to 4.2 million
- Average revenue per unique subscription (“ARPUS”) increased 6% year-over-year to $204
- Net income of $64.5 million vs. net loss of $234.5 million a year ago
- Earnings per share of $0.46 based on 140,082,038 basic weighted average shares and earnings per share of $0.45 based on 142,133,303 dilutive weighted average shares
- Adjusted EBITDA was $43.6 million vs. $42.6 million a year ago
- Cash flow from operating activities was $36.4 million vs. $8.7 million a year ago
- Non-GAAP unlevered free cash flow was $36.4 million vs. $10.3 million a year ago driven primarily by a reduction in cash payments related to the direct listing in Q2 2021
- Cash and cash equivalents of $215.1 million, investments in marketable securities of $32.2 million; total debt of $520.3 million, of which $26.3 million is current
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 2022, Squarespace currently expects:
- Revenue of $213 million to $218 million, or year-over-year growth of 6% to 8%
- Non-GAAP unlevered free cash flow of $33.7 million to $38.7 million. This is the result of:
- Cash flow from operating activities of $33.3 million to $38.2 million, minus
- Capital expenditures, expected in the range of $1.9 million to $2.2 million; plus
- Cash paid for interest expense net of associated tax benefit, expected in the range of $2.3 million to $2.6 million
For the full fiscal year 2022, Squarespace currently expects:
- Revenue of $857 million to $867 million, or year-over-year growth of 9% to 11%
- Non-GAAP unlevered free cash flow of $156.5 million to $166.5 million. This is the result of:
- Cash flow from operating activities of $155.9 million to $165.9 million, minus
- Capital expenditures, expected in the range of $8.6 million to $9.6 million; plus
- Cash paid for interest expense net of associated tax benefit, expected in the range of $9.2 million to $10.2 million
Webcast Conference Call & Shareholder Letter Information
Squarespace will host a conference call on July 25, 2022 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 here.
Non-GAAP Financial Measures
Revenue 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, benefit from/(provision for) 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.
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, 2022 and its fiscal year ending December 31, 2022. 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.
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