Squarespace's (NYSE:SQSP) Q3 Sales Top Estimates But Quarterly Guidance Underwhelms

Adam Hejl /
2021/11/08 4:18 pm EST
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Website and ecommerce tools provider Squarespace (NYSE:SQSP) reported Q3 FY2021 results that beat analyst expectations, with revenue up 23.7% year on year to $200.9 million. On the other hand, guidance for the next quarter missed analyst expectations with revenues guided to $204.5 million at midpoint, slightly below analyst estimates. Squarespace made a GAAP profit of $2.83 million, down on its profit of $17.9 million, in the same quarter last year.

Is now the time to buy Squarespace? Access our full analysis of the earnings results here, it's free.

Squarespace (SQSP) Q3 FY2021 Highlights:

  • Revenue: $200.9 million vs analyst estimates of $197.9 million (1.53% beat)
  • EPS (GAAP): $0.04
  • Revenue guidance for Q4 2021 is $204.5 million at the midpoint, slightly below analyst estimates of $205.2 million
  • Free cash flow of $45 million, up from $6.93 million in previous quarter
  • Gross Margin (GAAP): 83.6%, down from 84.8% same quarter last year

"Squarespace had another outstanding quarter as we continued to achieve strong revenue growth and introduce new solutions that give our millions of customers around the world the competitive advantages they need to succeed," 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.

Although the share of digital commerce is rising every year, the majority of the small and medium sized businesses have still not fully embraced it. Having a good looking, interactive website is becoming a must but most small and medium sized businesses don’t have expertise or resources to develop one from scratch. That in effect drives demand for no-code website building platforms.

Sales Growth

As you can see below, Squarespace's revenue growth has been strong over the last year, growing from quarterly revenue of $162.3 million, to $200.9 million.

Squarespace Total Revenue

This quarter, Squarespace's quarterly revenue was once again up a very solid 23.7% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $4.95 million in Q3, compared to $16.3 million in Q2 2021. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Analysts covering the company are expecting the revenues to grow 18.6% over the next twelve months, although estimates are likely to change post earnings.

There are others doing even better than Squarespace. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 400% since the IPO in December. You can find it on our platform for free.

Key Takeaways from Squarespace's Q3 Results

With a market capitalization of $6.03 billion Squarespace is among smaller companies, but its more than $232 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

Squarespace topped analysts’ revenue expectations this quarter, even if just narrowly. And we were also glad to see good revenue growth. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. The company is up 2.59% on the results and currently trades at $47.50 per share.

Should you invest in Squarespace 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.