Squarespace's (NYSE:SQSP) Posts Q3 Sales In Line With Estimates But Quarterly Guidance Underwhelms

Adam Hejl /
2022/11/08 6:10 am EST

Website and ecommerce tools provider Squarespace (NYSE:SQSP) reported results in line with analyst expectations in Q3 FY2022 quarter, with revenue up 8.32% year on year to $217.6 million. However, guidance for the next quarter was less impressive, coming in at $221.5 million at the midpoint, being 1.62% below analyst estimates. Squarespace made a GAAP profit of $10.1 million, improving on its profit of $2.83 million, in the same quarter last year.

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Squarespace (SQSP) Q3 FY2022 Highlights:

  • Revenue: $217.7 million vs analyst estimates of $215.7 million (0.88% beat)
  • EPS: $0.07 vs analyst expectations of $0.07 (4.38% miss)
  • Revenue guidance for Q4 2022 is $221.5 million at the midpoint, below analyst estimates of $225.1 million
  • Free cash flow of $38.3 million, up 12.5% from previous quarter
  • Gross Margin (GAAP): 82.1%, down from 83.6% same quarter last year

"We delivered another solid quarter of strong total revenue, margin, and cash flow," said Anthony Casalena, Founder & CEO of Squarespace.

Founded in New York City in 2003, Squarespace (NYSE:SQSP) is a platform for small businesses and creators to build their digital presences online.

While e-commerce has been around for over two decades and enjoyed meaningful growth, its overall penetration of retail still remains low. Only around $1 in every $5 spent on retail purchases comes from digital orders, leaving over 80% of the retail market still ripe for online disruption. It is these large swathes of the retail where e-commerce has not yet taken hold that drives the demand for various e-commerce software solutions.

Sales Growth

As you can see below, Squarespace's revenue growth has been solid over the last two years, growing from quarterly revenue of $162.3 million in Q3 FY2020, to $217.7 million.

Squarespace Total Revenue

Squarespace's quarterly revenue was only up 8.32% year on year, which might disappoint some shareholders. We can see that revenue increased by $4.99 million in Q3, which was roughly the same as in Q2 2022.

Guidance for the next quarter indicates Squarespace is expecting revenue to grow 6.78% year on year to $221.5 million, slowing down from the 20.3% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 11% over the next twelve months.

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Key Takeaways from Squarespace's Q3 Results

With a market capitalization of $2.73 billion Squarespace is among smaller companies, but its more than $228.2 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

It was good to see Squarespace produce free cash flow this quarter. On the other hand, it was unfortunate that revenue guidance for the next quarter missed analysts' expectations. Overall, this quarter's results could have been better. The company is flat on the results and currently trades at $19.67 per share.

Squarespace may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.