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SI

Squarespace, Inc. (SQSP)·Q1 2024 Earnings Summary

Executive Summary

  • Squarespace delivered strong Q1 performance: revenue grew 19% YoY to $281.1M, bookings +23%, ARRR +19%, and unlevered free cash flow rose 33% to $89.3M (32% of revenue) .
  • FY24 guidance was raised: revenue to $1.193–$1.208B (18–19% YoY) and unlevered free cash flow to $298–$318M; Q2 guidance calls for revenue of $291–$294M and UFCF of $61–$64M .
  • Mix favored Presence: Presence revenue +22% YoY to $200.9M; Commerce +11% YoY to $80.3M, reflecting continued strength in subscriptions and domains (including Google Domains migration tailwinds) .
  • Management attributed the beat to organic growth and operating leverage; CFO flagged Q2 UFCF cadence impacts from tax timing, with Q1 non-GAAP gross margin commentary at ~73% and international expansion (25 currencies, 11 languages) emphasized on the call .

What Went Well and What Went Wrong

What Went Well

  • Strong topline and cash generation: revenue +19% YoY to $281.1M; bookings +23% to $325.9M; UFCF +33% to $89.3M (32% margin) .
  • Presence strength and funnel expansion: Presence revenue +22% YoY to $200.9M; CEO: “broaden our customer funnel through the migration of our new Google Domains customers” .
  • Guidance raised: FY24 revenue to 18–19% growth and UFCF higher; CFO: “we raise our FY24 guidance today based on the strength we see in the business” .

What Went Wrong

  • Profitability compression vs prior quarters: Q1 adjusted EBITDA fell to $32.0M from $64.7M in Q4; operating loss of $(14.8)M vs Q4 operating income of $17.9M .
  • Net income margin near breakeven: $0.1M net income; EPS $0.00, reflecting higher cost of revenue and interest expense .
  • Q2 UFCF guide lower sequentially (tax timing): $61–$64M vs Q1 actual $89.3M; management highlighted Q1 corporate tax payment timing impacting quarterly margin cadence .

Financial Results

MetricQ3 2023Q4 2023Q1 2024
Revenue ($USD Millions)$257.061 $270.718 $281.148
Net Income ($USD Millions)$(16.499) $5.256 $0.144
EPS (Basic/Diluted, $USD)$(0.12) $0.04 $0.00
Gross Profit ($USD Millions)$205.308 $201.068 $200.374
Operating Income ($USD Millions)$27.646 $17.918 $(14.828)
Adjusted EBITDA ($USD Millions)$66.461 $64.697 $32.011
Gross Profit Margin %79.9% 74.3% 71.3%
EBIT Margin %10.8% 6.6% -5.3%
EBITDA Margin %25.9% 23.9% 11.4%
Net Income Margin %-6.4% 1.9% 0.05%

Segment revenue breakdown:

Segment Revenue ($USD Millions)Q3 2023Q4 2023Q1 2024
Presence$179.451 $188.433 $200.884
Commerce$77.610 $82.285 $80.264

Key KPIs:

KPIQ3 2023Q4 2023Q1 2024
Unique Subscriptions (000s)4,404 4,631 4,912
Total Bookings ($USD 000s)$267,047 $286,123 $325,946
ARRR ($USD 000s)$1,013,481 $1,105,743 $1,117,659
ARPUS ($USD)$226.05 $228.02 $226.63
Adjusted EBITDA ($USD 000s)$66,461 $64,697 $32,011
Unlevered Free Cash Flow ($USD 000s)$54,131 $65,021 $89,322
GPV/GMV ($USD 000s)$1,498,163 $1,654,126 $1,649,457

Balance sheet snapshot (Q1 2024):

  • Cash & cash equivalents: $241.9M; Total debt: $556.9M; Net debt: $268.0M .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)FY 2024$1,170–$1,190 $1,193–$1,208 Raised
Unlevered Free Cash Flow ($USD Millions)FY 2024$290–$310 $298–$318 Raised
Cash from Operations ($USD Millions)FY 2024$266–$288 $275–$297 Raised
Capital Expenditures ($USD Millions)FY 2024$4–$6 $5–$7 Raised
Cash Interest (net, $USD Millions)FY 2024~$28 ~$28 Maintained
Revenue ($USD Millions)Q2 2024N/A$291–$294 New
Unlevered Free Cash Flow ($USD Millions)Q2 2024N/A$61–$64 New
Cash from Operations ($USD Millions)Q2 2024N/A$55–$59 New
Capital Expenditures ($USD Millions)Q2 2024N/A~ $2 New
Cash Interest (net, $USD Millions)Q2 2024N/A~ $7 New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2023)Previous Mentions (Q4 2023)Current Period (Q1 2024)Trend
AI/technology initiativesProduct refresh; deepening platform value “Invested in Squarespace AI… Generative AI integrations” Continued ecosystem leverage; focus on organic growth Improving capability, steady focus
International expansion“Expand our offerings and footprint globally” “Increasing our currency options by 5x” 25 currencies (21 added in last 12 months); 11 languages; more to come Accelerating
Google Domains migrationAcquisition closed Sep 2023; funnel synergies Relaunched Squarespace Domains; exclusive reseller agreement CEO: broaden funnel via migration of new Google Domains customers Execution underway; tailwind
PaymentsN/A in Q3Launched Squarespace Payments Enable entrepreneurs to transact on platform Building attach; ecosystem
Mix: Presence vs CommercePresence +20% YoY; Commerce +15% Presence +20% YoY; Commerce +14% Presence +22% YoY; Commerce +11% YoY Presence outperformance sustained
Margin cadenceN/ARecord Q4 adj. EBITDA; UFCF 24% margin Q2 UFCF lower sequentially on tax timing; Q1 non-GAAP gross margin ~73% Cadence clarity; manage full-year

Management Commentary

  • CEO: “We had a strong start to 2024, with Q1 revenue growing 19% and bookings growing 23%… tremendous opportunity to drive long-term growth and profitability… broaden our customer funnel through the migration of our new Google Domains customers” .
  • CFO: “In Q1, we delivered revenue and unlevered free cash flow at the high end or above our guidance range, generating strong operating leverage… We raise our FY24 guidance today based on the strength we see in the business” .
  • International and margin cadence on the call: support for 25 currencies and 11 languages; non-GAAP gross margin ~73%; Q2 margin cadence impacted by Q1 corporate tax payment timing .

Q&A Highlights

  • Guidance cadence: Management clarified Q2 UFCF guidance reflects timing of corporate tax payments; focus remains on full-year margin management .
  • International expansion: Discussion of currency and language support broadening TAM (25 currencies, 11 languages) .
  • Funnel and product ecosystem: Emphasis on Google Domains migration expanding the top-of-funnel and enabling more transactions across the ecosystem .

Estimates Context

  • Wall Street consensus from S&P Global was unavailable for SQSP due to a mapping issue; therefore, beat/miss vs S&P consensus cannot be provided.
  • As secondary context, public sources indicate Q1 revenue of $281.15M was ahead of some published estimates and EPS comparisons varied by methodology; Seeking Alpha shows revenue beat of ~$4.81M and EPS beat of $0.07 (methodology differs) .
  • Where analysts adjust models: Presence strength, bookings/ARRR momentum, and raised FY24 guidance likely drive upward revisions to FY revenue and cash flow; Q2 UFCF cadence commentary may temper near-term cash flow expectations .

Key Takeaways for Investors

  • Revenue growth accelerating with durable Presence tailwinds; bookings/ARRR momentum supports sustained topline trajectory .
  • Raised FY24 revenue and UFCF guidance signal confidence; watch Q2 cash flow cadence given tax timing but full-year outlook improved .
  • Ecosystem strategy (Domains, Payments, Scheduling, Hospitality) is expanding TAM and attach; Google Domains migration is a tangible funnel catalyst .
  • Mix shift toward Presence and strong subscriptions underpin ARPUS and ARRR; Commerce remains solid though slower vs Presence .
  • Profitability compressed vs Q4; monitor adjusted EBITDA and operating margin progression through 2024 as scale and leverage build .
  • Balance sheet: Net debt $268.0M with robust cash generation; capital allocation includes capex discipline and UFCF growth .
  • Near-term trading: Positive sentiment from guidance raise; subsequent go-private announcement (May 13) is a major catalyst for valuation/strategy discussions beyond Q1 [List shows press release; retrieval failed; reference: press release listing Document ID 10].