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Squarespace, Inc. (SQSP)·Q4 2023 Earnings Summary

Executive Summary

  • Revenue rose 18.3% year over year to $270.7M, capping a record quarter; Presence revenue grew 20.2% and Commerce 14.3%, with adjusted EBITDA of $64.7M and operating cash flow of $61.1M .
  • Diluted EPS was $0.04; Q4 bookings grew 23% to $286.1M and unlevered free cash flow reached $65.0M (24% of revenue) .
  • FY24 guidance introduced: revenue $1.17–$1.19B (+16–18% y/y), UFCF $290–$310M; management highlighted $85–$88M revenue contribution from Google Domains assets .
  • Board authorized a $500M share repurchase, signaling confidence and adding a capital-return catalyst alongside an Investor Day announced for May 15, 2024 .

What Went Well and What Went Wrong

What Went Well

  • “Squarespace surpassed $1 billion in revenue… driven by new customer growth across markets and strong retention” – Anthony Casalena, Founder & CEO .
  • “Delivered a record fourth quarter that exceeded our expectations across the board… [and] $500 million authorization underscores the strong financial momentum” – Nathan Gooden, CFO .
  • Strong operational KPIs: bookings +23% y/y to $286.1M; ARRR +19% y/y to $1,105.7M; ARPUS +9% y/y to $228.02; unique subscriptions +10% y/y to 4.631M .

What Went Wrong

  • Commerce growth trailed Presence (14.3% y/y vs 20.2%), implying mix headwinds within transactional businesses .
  • Interest expense rose to $10.7M in Q4, pressuring net income despite solid operating performance .
  • FY2023 still posted a GAAP net loss of $7.1M; prior-year comparison was distorted by a goodwill impairment, but profitability remains sensitive to tax and interest dynamics .

Financial Results

MetricQ2 2023Q3 2023Q4 2023
Revenue ($USD Millions)$247.529 $257.061 $270.718
Net Income ($USD Millions)$3.660 $(16.499) $5.256
Diluted EPS ($USD)$0.03 $(0.12) $0.04
Operating Income ($USD Millions)$36.668 $27.646 $17.918
Adjusted EBITDA ($USD Millions)$73.383 $66.461 $64.697
Cash from Operations ($USD Millions)$52.547 $53.325 $61.090
Revenue YoY Growth (%)16.4% 18.1% 18.3%

Segment breakdown:

Segment Revenue ($USD Millions)Q2 2023Q3 2023Q4 2023
Presence$172.074 $179.451 $188.433
Commerce$75.455 $77.610 $82.285

KPIs:

KPIQ2 2023Q3 2023Q4 2023
Unique Subscriptions (000s)4,305 4,404 4,631
Total Bookings ($USD Millions)$256.137 $267.047 $286.123
ARRR ($USD Millions)$980.837 $1,013.481 $1,105.743
ARPUS ($USD)$219.42 $226.05 $228.02
GMV ($USD Millions)$1,525.476 $1,498.163 $1,654.126

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ4 2023$261–$264M Actual: $270.718M Raised vs guidance (beat)
Unlevered Free Cash FlowQ4 2023$56–$60M Actual: $65.021M Raised vs guidance (beat)
RevenueQ1 2024N/A$274–$277M (+16–17% y/y) New
Unlevered Free Cash FlowQ1 2024N/A$83–$86M (CFO $77–$81M; capex $2–$3M; interest net of tax ~$8M) New
RevenueFY 2024N/A$1,170–$1,190M (+16–18% y/y), includes $85–$88M from Google Domains assets New
Unlevered Free Cash FlowFY 2024N/A$290–$310M (CFO $266–$288M; capex $4–$6M; interest net of tax ~$28M) New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2023)Trend
AI/technology initiativesEmphasized new technology and international brand momentum (Q2) ; strong year of product releases via Squarespace Refresh (Q3) Introduced “new AI capabilities” to populate websites, campaigns, commerce descriptions Increasing AI integration across products
Google Domains acquisitionQ2 guidance did not assume impact from proposed acquisition ; Q3 referenced go-to-market synergies from Google Domains Closed acquisition; FY24 revenue guidance includes $85–$88M contribution; domains product relaunch Integration and monetization ramp
PaymentsNot highlighted in Q2/Q3 press releasesLaunched Squarespace Payments fully integrated with online stores Expanding commerce stack, potential take-rate uplift
International expansionLeveraged brand momentum internationally (Q2) Expanded currency options by 5x; partnerships (e.g., SoundCloud) Accelerating global capabilities
Capital allocationRepurchases were ongoing historically; no new authorizations in Q2/Q3 press releases Authorized $500M repurchase, signals confidence and discipline Shareholder returns increasing
Hospitality/TockGMV stable with hospitality offerings noted in definitions; no specific prior highlight Enhanced Tock apps/features and Reserve with Google integration Product enhancement supporting GMV

Management Commentary

  • Anthony Casalena (CEO): “Squarespace surpassed $1 billion in revenue… driven by new customer growth across markets and strong retention… [we] enhanced… long-term growth through our acquisition of Google Domains, the launch of Squarespace Payments, and… new AI capabilities” .
  • Nathan Gooden (CFO): “Delivered a record fourth quarter that exceeded our expectations across the board… [and] the $500 million authorization announced today underscores the strong financial momentum” .
  • Product highlights: Domains relaunch post Google Domains; Payments launch; Blueprint guided design; investments in Squarespace AI; Tock app upgrades; Reserve with Google integration .
  • Branding/marketing: Currency options expanded; award-winning campaigns and Big Game ad; partner programs (Circle Day) .

Q&A Highlights

  • Management hosted the Q4 2023 call and referenced both GAAP and non-GAAP metrics, directing investors to the press release and shareholder letter for reconciliations .
  • Discussion and clarifications focused on FY24 and Q1 guidance components (CFO ranges, capex, and cash interest net of tax), Google Domains contribution, and capital allocation including the $500M buyback, consistent with guidance detail and authorization disclosed in the press release .

Estimates Context

  • S&P Global consensus data for Q4 2023 (Primary EPS Consensus Mean, Revenue Consensus Mean, and estimate counts) was unavailable due to a CIQ mapping issue; therefore, we cannot formally assess beats/misses versus SPGI consensus for this quarter. Values retrieved from S&P Global were unavailable (CIQ mapping error).
  • As a proxy, company guidance for Q4 provided in Q3 was exceeded on both revenue and unlevered free cash flow (actual revenue $270.7M vs $261–$264M; UFCF $65.0M vs $56–$60M) .

Key Takeaways for Investors

  • Q4 execution strong: revenue +18.3% y/y to $270.7M; bookings +23% y/y; UFCF $65.0M (24% of revenue), underscoring demand and cash generation .
  • Mix shift favorable to Presence (20.2% y/y) vs Commerce (14.3% y/y), highlighting core subscriptions strength and pricing/ARPUS momentum .
  • FY24 guide implies sustained mid- to high-teens growth with explicit Google Domains contribution ($85–$88M), de-risking topline ramp as integration progresses .
  • Capital return accelerates with a $500M buyback authorization, a potential support for per-share metrics and downside protection in volatile markets .
  • Operating leverage story intact: adjusted EBITDA of $64.7M in Q4 alongside improved operating cash flow to $61.1M; however, interest expense remains a watchpoint ($10.7M in Q4) .
  • Product velocity and AI: new AI capabilities, Payments launch, and global product enhancements should support ARPUS and retention over 2024 .
  • Near-term trading: positive reaction likely on guidance and repurchase; monitor Commerce growth pacing and any updates at the May 15 Investor Day .
Notes:
- Non-GAAP measures and definitions (Adjusted EBITDA, Unlevered FCF, Constant Currency) and KPI definitions are detailed in the press release **[1496963_0001496963-24-000007_sqsp-02282024x8kexhibit991.htm:3]** **[1496963_0001496963-24-000007_sqsp-02282024x8kexhibit991.htm:4]**.
- Shareholder letter and webcast details available in the press release **[1496963_0001496963-24-000007_sqsp-02282024x8kexhibit991.htm:3]**.