Squarespace Announces First Quarter 2022 Financial Results and $200 Million Share Repurchase Program

NEW YORK, May 12, 2022 /PRNewswire/ -- Squarespace, Inc. SQSP, the all-in-one website building and ecommerce platform, today announced results for the first quarter ended March 31, 2022.

"Our Q1 results mark another strong quarter of growth," said Anthony Casalena, Founder & CEO of Squarespace. "We achieved record revenue of $207.8 million as our global customer base continued to grow and new use cases evolved within our all-in-one platform. We remain committed to maintaining our unique combination of growth alongside profitability as we continue through 2022. Further building on the confidence we have in our business, our board of directors has authorized a $200 million share repurchase program. We strongly believe in the opportunity Squarespace has open to us over the coming years."

"Revenue and unlevered free cash flow exceeded our guidance in the first quarter as we attracted new subscriptions and delivered additional capabilities to our customer base," said Marcela Martin, CFO of Squarespace. "We are pleased to be raising our full-year guidance for both revenue and unlevered free cash flow."

First Quarter 2022 Financial Highlights

  • Total revenue of $207.8 million grew 16% year-over-year as reported on a GAAP basis and 18% in constant currency
  • Commerce revenue of $63.8 million grew 36% year-over-year
  • Annual run rate revenue ("ARRR") increased 15% year-over-year to $869.0 million
  • Unique subscriptions reached 4.2 million in the quarter, up 10% year-over-year
  • Average revenue per unique subscription ("ARPUS") grew to $204, up 7% year-over-year
  • Net loss of $92.9 million vs. net loss of $1.1 million a year ago
  • Net loss per share of $0.67 based on 139,423,228 basic and dilutive weighted average shares
  • Adjusted EBITDA was a loss of $2.9 million vs. a gain of $11.1 million a year ago, primarily driven by marketing expenses, headcount in research & product development, and investments in Tock
  • Cash flow from operating activities was $47.3 million vs. $50.1 million a year ago
  • Non-GAAP unlevered free cash flow was $45.5 million vs. $51.8 million a year ago driven primarily by increased marketing and research & product development spend
  • Cash and cash equivalents of $230.5 million, investments in marketable securities of $27.9 million; total debt of $523.5 million

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."

Share Repurchase Authorization

Squarespace's board of directors authorized a general share repurchase program of the Company's Class A common stock of up to $200 million with no fixed expiration. These repurchases may occur in the open market, through privately negotiated transactions, through block purchases, other purchase techniques or by any combination of such methods. The timing and actual amount of shares repurchased will depend on a variety of different factors and may be modified, suspended or terminated at any time at the discretion of the board of directors.

Outlook & Guidance

For the second quarter of fiscal year 2022, Squarespace currently expects:

  • Revenue of $208 million to $213 million, or year-over-year growth of 6% to 9%
  • Non-GAAP unlevered free cash flow of $33.0 million to $37.0 million. This is the result of:
    • Cash flow from operating activities of $32.6 million to $36.5 million, minus
    • Capital expenditures, expected in the range of $1.4 million to $1.6 million; plus
    • Cash paid for interest expense net of associated tax benefit, expected in the range of $1.8 million to $2.0 million

For the full fiscal year 2022, Squarespace currently expects:

  • Revenue of $867 million to $879 million, or year-over-year growth of 11% to 12%
  • Non-GAAP unlevered free cash flow of $156.0 million to $169.0 million. This is the result of:
    • Cash flow from operating activities of $154.4 million to $167.4 million, minus
    • Capital expenditures, expected in the range of $6.7 million to $7.3 million; plus
    • Cash paid for interest expense net of associated tax benefit, expected in the range of $8.3 million to $8.9 million

Webcast Conference Call & Shareholder Letter Information

Squarespace will host a conference call on May 12, 2022 at 8:30 a.m. ET (UTC-5:00) 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.

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.

Constant currency, 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, 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.

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 second fiscal quarter ending June 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 improve and enhance the functionality, performance, reliability, design, security and scalability of its solutions; Squarespace's ability to compete successfully against current and future competitors; the impact of the COVID-19 pandemic on Squarespace; Squarespace's ability to protect or promote its brand; Squarespace's ability to generate new customers through its marketing and selling activities; Squarespace's ability to hire, integrate and retain its personnel; the reliability, security and performance of Squarespace's software; Squarespace's ability to adapt to changes to technologies used in its platform or new versions or upgrades of operating systems and internet browsers; Squarespace's compliance with privacy and data protection laws and regulations as well as contractual privacy and data protection obligations; and risks associated with international sales and the use of Squarespace's platform in various countries. 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 is the all-in-one platform with everything to sell anything, providing customers in over 200 countries and territories with all the tools they need to sell physical products, digital content, classes, appointments, reservations and more. Powered by best-in-class design for a consistent brand experience across all touchpoints, our suite of fully integrated products enables anyone to manage their projects and businesses through websites, domains, ecommerce, marketing tools, and scheduling, along with tools for managing a social media presence with Unfold and hospitality business management via Tock. Squarespace is headquartered in downtown New York City, with offices in Dublin, Ireland, Portland, Oregon, and Chicago, Illinois. For more information, visit www.squarespace.com. 

Contacts

Investors
Robert Sanders
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 March 31,


2022


2021

Revenue

$               207,762


$               179,646

Cost of revenue(1)

36,649


27,408

Gross profit

171,113


152,238

Operating expenses:




     Research and product development(1)

57,328


42,011

     Marketing and sales(1)

112,906


97,972

     General and administrative(1)

35,981


19,516

          Total operating expenses

206,215


159,499

Operating loss

(35,102)


(7,261)

Interest expense

(2,449)


(3,260)

Other income, net

1,511


3,593

Loss before (provision for)/benefit from income taxes

(36,040)


(6,928)

(Provision for)/benefit from income taxes

(56,820)


5,782

Net loss

$                (92,860)


$                  (1,146)

Less: accretion of redeemable convertible preferred stock to redemption value


(969)

Net loss attributable to Class A, Class B and Class C common stockholders, basic and dilutive

(92,860)


(2,115)





Net loss per share attributable to Class A, Class B, and Class C common stockholders, basic and dilutive

$                    (0.67)


$                    (0.11)

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

139,423,228


19,012,323


(1) Includes stock-based compensation as follows:



Three Months Ended March 31,


2022


2021

Cost of revenue

$                      624


$                      275

Research and product development

10,168


6,793

Marketing and sales

1,599


1,172

General and administrative

11,706


1,612

     Total stock-based compensation

$                 24,097


$                   9,852

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except shares and per share amounts)

(unaudited)




March 31, 2022


December 31, 2021

Assets




Current assets:




     Cash and cash equivalents

$               230,492


$               203,247

     Restricted cash

40,384


30,433

     Investment in marketable securities

27,891


31,456

     Accounts receivable, net

8,353


7,969

     Due from vendors

2,805


1,828

     Prepaid expenses and other current assets

27,376


67,099

               Total current assets

337,301


342,032

Property and equipment, net

53,190


52,839

Operating lease right-of-use assets

99,262


Goodwill

435,601


435,601

Intangible assets, net

55,494


60,138

Other assets

9,566


8,939

               Total assets

$               990,414


$               899,549

Liabilities, Redeemable Convertible Preferred Stock and Stockholders' Deficit




Current liabilities:




     Accounts payable

$                 19,641


$                 26,533

     Accrued liabilities

107,351


60,861

     Deferred revenue

254,140


233,999

     Funds payable to customers

40,985


30,137

     Debt, current portion

19,933


13,586

     Deferred rent and lease incentives, current portion


2,095

     Operating lease liabilities, current portion

10,103


               Total current liabilities

452,153


367,211

Debt, non-current portion

503,525


513,047

Deferred rent and lease incentives, non-current portion


32,348

Operating lease liabilities, non-current portion

121,258


Other liabilities

3,167


422

               Total liabilities

1,080,103


913,028

Commitments and contingencies




     Redeemable convertible preferred stock, par value of $0.0001; zero shares authorized as of March 31, 2022
     and December 31, 2021, respectively; zero shares issued and outstanding as of March 31, 2022 and
     December 31, 2021, respectively


       Preferred stock, par value of $0.0001; 100,000,000 authorized as of March 31, 2022 and December 31, 2021,
       respectively; zero shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively


Stockholders' deficit:




          Class A common stock, par value of $0.0001; 1,000,000,000 shares authorized as of March 31, 2022 and
          December 31, 2021, respectively; 91,562,991 and 90,826,625 shares issued and outstanding as of March 31,
          2022 and December 31, 2021, respectively

9


9

          Class B common stock, par value of $0.0001; 100,000,000 shares authorized as of March 31, 2022 and
          December 31, 2021, respectively; 48,344,755 shares issued and outstanding as of March 31, 2022 and
          December 31, 2021, respectively

5


5

          Class C common stock (authorized March 15, 2021), par value of $0.0001; zero shares authorized as of
          March 31, 2022 and December 31, 2021, respectively; zero shares issued and outstanding as of March 31,
          2022 and December 31, 2021, respectively


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


     Additional paid in capital

929,199


911,570

     Accumulated other comprehensive loss

(1,187)


(208)

     Accumulated deficit

(1,017,715)


(924,855)

Total stockholders' deficit

(89,689)


(13,479)

     Total liabilities, redeemable convertible preferred stock and stockholders' deficit

$               990,414


$               899,549

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)



Three Months Ended March 31,


2022


2021

OPERATING ACTIVITIES:




Net loss

$             (92,860)


$               (1,146)

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




     Depreciation and amortization

8,058


8,506

     Stock-based compensation

24,097


9,852

     Non-cash lease expense

328


     Other

261


282

     Changes in operating assets and liabilities:




          Accounts receivable and due from vendors

(1,361)


(706)

          Prepaid expenses and other current assets

31,896


(8,190)

          Accounts payable and accrued liabilities

42,220


20,971

          Deferred revenue

21,538


20,441

          Funds payable to customers

10,847


          Other operating assets and liabilities

2,246


121

               Net cash provided by operating activities

47,270


50,131

INVESTING ACTIVITIES:




Proceeds from the sale and maturities of marketable securities

7,340


7,105

Purchases of marketable securities

(4,027)


(1,197)

Purchase of property and equipment

(3,359)


(657)

Cash paid for acquisitions, net of acquired cash


(200,903)

               Net cash used in investing activities

(46)


(195,652)

FINANCING ACTIVITIES:




Principal payments on debt

(3,396)


(3,396)

Taxes paid related to net share settlement of equity awards

(7,556)


(13,416)

Proceeds from exercise of stock options

1,141


707

Proceeds from issuance of Class C (authorized on March 15, 2021) common stock, net of issuance costs


304,409

               Net cash (used in)/provided by financing activities

(9,811)


288,304

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

(217)


(324)

Net increase in cash, cash equivalents, and restricted cash

37,196


142,459

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

233,680


57,891

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

$             270,876


$             200,350





Reconciliation of cash, cash equivalents, and restricted cash:




Cash and cash equivalents

$             230,492


$             183,339

Restricted cash

40,384


17,011

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

$             270,876


$             200,350





SUPPLEMENTAL DISCLOSURE OF CASH FLOW




Cash paid during the year for interest

$                2,149


$                 3,064

Cash paid/(refunded) during the year for income taxes

$                       1


$                    (22)





SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCE ACTIVITIES




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

$                1,332


$                    671

Capitalized stock-based compensation

$                     63


$                      21

Accrued taxes related to net share settlement of equity awards included in accrued liabilities

$                   116


$                      —

Issuance of Class C (authorized on March 15, 2021) common stock for acquisition

$                     —


$             188,179

 

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 March 31,


2022


2021

Net loss

$                (92,860)


$                  (1,146)

     Interest expense

2,449


3,260

     Provision for/(benefit from) income taxes

56,820


(5,782)

     Depreciation and amortization

8,058


8,506

     Stock-based compensation expense

24,097


9,852

     Other income, net

(1,511)


(3,593)

Adjusted EBITDA

$                  (2,947)


$                  11,097





Three Months Ended March 31,


2022


2021

Cash flows from operating activities

$                  47,270


$                  50,131

     Cash paid of capital expenditures

(3,359)


(657)

Free cash flow

$                  43,911


$                  49,474

     Cash paid for interest, net of the associated tax benefit

1,624


2,308

Unlevered free cash flow

$                  45,535


$                  51,782





March 31, 2022


December 31, 2021

Total debt outstanding

$                523,458


$                526,633

     Less: total cash and cash equivalents and marketable securities

258,383


234,703

Total net debt

$                265,075


$                291,930





Three Months Ended March 31,


2022


2021

Revenue, as reported

$             207,762


$             179,646

Revenue year-over-year growth rate, as reported

15.7 %


31.2 %

Effect of foreign currency translation ($)(1)

$                (4,187)


$                 4,432

Effect of foreign currency translation (%)(1)

(2.3) %


3.2 %

Revenue constant currency growth rate

18.0 %


28.0 %


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


Amounts may not sum due to rounding

 

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SOURCE Squarespace, Inc.

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