Squarespace : First Quarter 2024 Earnings Call Shareholder Letter

Q1 2024

SHAREHOLDER LETTER

Q1 2024 OVERVIEW

Total Revenue	Commerce Revenue	Total Bookings
$281M	$80M	$326M
+19% YoY GROWTH	+11% YoY GROWTH	+23% YoY GROWTH
Adjusted EBITDA	Unlevered FCF	GPV
$32M	$89M	$1.6B
11% MARGIN	32% MARGIN	+8% YoY GROWTH
Unique Subscriptions	ARPUS	ARRR
4.9M	$227	$1.1B
+15% YoY GROWTH	+7% YoY GROWTH	+19% YoY GROWTH

Unique subscriptions and average revenue per unique subscription ("ARPUS") do not account for single domain subscriptions originally sold by Google as part of the Google Domains Asset Acquisition (the "Acquired Domain Assets"). A reconciliation of non-GAAP metrics used in this letter to their nearest GAAP equivalents is provided at the end. "Gross payment volume" or "GPV" was previously presented as "Gross merchandise volume" or "GMV" in prior period disclosures. There were no revisions to the calculation of the amounts previously disclosed as a result of this nomenclature change. Annual run rate revenue ("ARRR") for the three months ended March 31, 2023 has been recast to conform to the current period definition. Previously, ARRR was calculated using monthly revenue from subscription fees and revenue generated in conjunction with associated fees in the last month of the period multiplied by 12. We have since revised our calculation to use the current quarter results multiplied by 4 to normalize results for the run rate each quarter.

Q1 2024

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SHAREHOLDER LETTER

TO OUR SHAREHOLDERS

Anthony Casalena

Founder & Chief Executive Officer

Our Q1 2024 results reflect strong momentum across our business, with total revenue growing 19% year over year. The results were led by the outperformance of our website business with strong retention and new customer growth across markets globally. This outstanding performance to start the year gives us confidence to raise our guidance today, with our updated ranges indicating full-year 2024 revenue at 19% year-over-year growth and an unlevered free cash flow margin of 26% at the midpoint.

We believe that we are the best positioned company to provide the primary elements every entrepreneur needs to get started online: a domain, a website, and email. No other company is at the same time one of the world's largest website providers, domain providers, and one of the largest resellers of Google Workspace. We seek to be number one across all of these critical categories. We have achieved this status alongside our globally recognized creative brand, which gives us mindshare distinct from our peers when people set out to launch an idea online.

Q1 2024

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SHAREHOLDER LETTER

We also benefit from a broad funnel, our ecosystem now includes multiple brands alongside our primary Squarespace brand, including Squarespace Domains, Acuity Scheduling, Tock, Unfold, and Bio Sites. Our goal is to let customers enter our ecosystem via any of our brands, and we have the opportunity to cross sell our other services no matter how they want to get started. We ended the quarter with 4.9 million unique subscriptions, growing 15% year over year, and in Q1 2024, new website subscriptions grew over 12% year-over-year.

We have built Squarespace Domains into a best-in-class customer experience for customers, including those who might only manage domains with us. Squarespace Domains differentiates by offering customers a modern, easy-to- use UI, and a focus on helping customers solve for domain-first use cases. Our philosophy in this space is to provide a robust offering in an easy to understand pricing model. Customers using our Domains products do not have to worry about hard to understand and trivial "add-ons" that should be the default in their subscription offering.

During the quarter we saw strong demand from new domain customers entering our ecosystem, as well as continued robust referral traffic from Google Domainsfollowing our strategic acquisition of Google Domains assets last year.

Q1 2024

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SHAREHOLDER LETTER

The acquisition of Google Domains assets extends our platform to millions of legacy Google Domains customers. Through Q1 we have been encouraged to see strong renewal rates, and the migration of these customers to Squarespace Domains is beginning to accelerate. Once we complete migration, we will unlock the opportunity to cross-sell our broader ecosystem of products to this large customer base.

Websites continued to be the primary driver of revenue growth during the quarter. All of our selling-plans - Business, Commerce, and Commerce Advanced - benefit from the roll-out of Squarespace Payments, our native payment solution, now available to 100% of new US customers and launching in international markets throughout 2024. Squarespace Payments unlocks our ability to drive GPV growth through our ecosystem, and we are planning to revise our plan architecture to include Squarespace Payments with every plan to enable more of our customers to transact. We are also continuing to innovate and develop enhanced features as we harness the potential of being able to run our own payments product. This quarter we launched Klarna in the US, allowing our customers to provide alternative payment options for their customers. We intend to introduce more payment methods and features later this year.

Q1 2024

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SHAREHOLDER LETTER

We saw momentum in GPV during the quarter, growing 8% year over year. Our ability to grow our GPV reflects our increasing focus on moving more transactions onto our platform. This quarter we made Invoicing available to all plans to encourage sellers to transact more with their customers on Squarespace, an early example of how Payments unlocks new opportunities for us. We see invoicing as an essential tool for entrepreneurs to collect payments, and making it more accessible to customers brings more transactions to Squarespace. GPV coming from Online Stores and service sellers accelerated this quarter with notable strength also from Acuity Scheduling. We saw positive signals from Memberships and Courses, products which help our entrepreneurs turn their content and expertise into income by offering memberships, online courses and classes, videos, and paid newsletters to their customers.

This quarter we continued our multi-year journey to expand our brand and grow our customer base in new markets globally. Our momentum growing internationally continues, with 50% of new website trials coming from this important customer base. In line with growing trials, we saw double-digit growth in new international website subscriptions. We believe our progress over the past couple years in available site languages (11) and currency offerings (25) make our ecosystem more competitive as we expand in international markets. We continue to make progress on product market fit with our commerce offering to ensure features are localized and work seamlessly with more geos. Extending our reach also means designing localized brand campaigns with a global audience in mind.

Q1 2024

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SHAREHOLDER LETTER

Continuous innovation to our product offering maintains our competitive positioning in the market, and our focus on design further differentiates us from peers. We continue to make progress with thoughtful AI integrations into our core web builder where we see additive value for customers. We continue to see AI developments being a tailwind for our business.

Today we unveil Design Intelligence by Squarespace, rooted in the principle that AI should augment human creativity rather than replace it. We coupled 20 years of industry-leading design proficiency with AI-driven content generation and guidance. While AI will feature in all our products, Design Intelligence offers customers clear insights into its application on their websites.

The power of our brand, scale of our business, and our ecosystem of products position us for growth in the future. We offer entrepreneurs a robust set of products and services to help them build a business and brand to stand out online. We have significantly broadened our customer funnel and enhanced customers' ability to sell with Squarespace, positioning us to grow with our customers as they take advantage of our ecosystem. I look forward to discussing our growth opportunities, strategy and long-term financial potential in more detail at our upcoming Investor Day next week.

We enter Q2 with immense gratitude to our customers for continuing to trust Squarespace with their online presence, and to our team for remaining focused on delivering exceptional products that help entrepreneurs to stand out and succeed.

I am thrilled to be able to continue to develop such incredible value for our customers, alongside such strong financial results for our investors.

Q1 2024

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SHAREHOLDER LETTER

FINANCIAL DISCUSSION

Q1 2024

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SHAREHOLDER LETTER

FINANCIAL DISCUSSION

Nathan Gooden

Chief Financial Officer

We sustained our 2023 momentum into the first quarter of this year, with revenue and unlevered free cash flow beating our guidance. We saw solid retention of existing subscriptions and strong demand from new customers. Core business growth was the primary driver of our revenue outperformance. Revenue grew 19% year over year to $281 million, exceeding our revenue guidance by $4 million. This growth demonstrates the value we are delivering across our stable base of 4.9 million unique subscriptions.

Q1 2024

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SHAREHOLDER LETTER

TOTAL REVENUE

			+20% 4-YR CAGR
				+19% YoY
			$271M	$281M
		$257M
$237M	$248M
Q1 2023	Q2 2023	Q3 2023	Q4 2023	Q1 2024

In Q1 2024, total revenue reached $281 million, growing 19% year over year (18% in constant currency), with subscriptions accounting for 93% of our total revenue. This growth contributed to a 20% four-year revenue CAGR as millions have chosen our tools to create a web presence and transact with their customers online. Unique subscriptions contributed $26.1 million of growth during the quarter, which helped grow our bookings to 23% year over year. We continued to see resilience in our overall core business and contributions from our Acquired Domain Assets, which contributed $11.5 million in the quarter. We also saw benefits from legacy price increases issued in 2022.

During the quarter, our organic growth was approximately 13% year over year. This growth excludes contributions from our acquisition of Google Domains and deepened Google partnerships, including revenue associated with our Acquired Domain Assets, domains referred from Google, and resold domains through our exclusive Workspace agreement, as well as the net impacts of increased pricing and FX.

In Q1 2024, international revenue was $80.1 million, growing 19% year over year (18% in constant currency) and contributing 28% to our total revenue and growing as a percentage of our total revenue by approximately 10 basis points. Strong growth in websites across many of our target markets contributed to our revenue growth. We continue to see tremendous opportunity as we already serve customers in over 200 countries and territories.

Quarterly results are based on Unaudited Financial Statements.

Q1 2024

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SHAREHOLDER LETTER