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Squarespace's (NYSE:SQSP) Q4 Sales Top Estimates, Outlook For Next Year Is Optimistic


Petr Huřťák /
2023/03/07 6:11 am EST

Website and ecommerce tools provider Squarespace (NYSE:SQSP) reported Q4 FY2022 results that beat analyst expectations, with revenue up 10.3% year on year to $228.8 million. Guidance for next quarter's revenue was $233 million at the midpoint, 2.36% above the average of analyst estimates. Squarespace made a GAAP loss of $234 million, down on its loss of $16.3 million, in the same quarter last year.

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Squarespace (SQSP) Q4 FY2022 Highlights:

  • Revenue: $228.8 million vs analyst estimates of $222.2 million (2.99% beat)
  • EPS: -$1.72 vs analyst estimates of $0.07 (-$1.79 miss)
  • Revenue guidance for Q1 2023 is $233 million at the midpoint, above analyst estimates of $227.6 million
  • Management's revenue guidance for upcoming financial year 2023 is $962.5 million at the midpoint, beating analyst estimates by 1.56% and predicting 11% growth (vs 10.7% in FY2022)
  • Free cash flow of $36.4 million, roughly flat from previous quarter
  • Gross Margin (GAAP): 82.5%, down from 83.7% same quarter last year

"We had another strong quarter and full year of financial results," 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 $172.3 million in Q4 FY2020, to $228.8 million.

Squarespace Total Revenue

This quarter, Squarespace's quarterly revenue was once again up 10.3% year on year. We can see that the company increased revenue by $11.1 million quarter on quarter. That's a solid improvement on the $4.99 million increase in Q3 2022, so shareholders should appreciate the re-acceleration of growth.

Guidance for the next quarter indicates Squarespace is expecting revenue to grow 12.1% year on year to $233 million, slowing down from the 15.7% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $962.5 million at the midpoint, growing 11% compared to 10.6% increase in FY2022.

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Key Takeaways from Squarespace's Q4 Results

With a market capitalization of $3.29 billion Squarespace is among smaller companies, but its more than $228.8 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

We liked to see that Squarespace guided for revenue growth next year to continue. And we were also glad that the revenue guidance for the next quarter exceeded analysts' expectations. On the other hand, revenue growth is overall a bit slower these days. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is flat on the results and currently trades at $25 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.