Squarespace, Inc. (SQSP) reported a robust financial performance for the first quarter of 2024, with a 19% increase in revenue and a 23% rise in bookings, surpassing the company's guidance. Squarespace also raised its full-year 2024 outlook for revenue and free cash flow, reflecting confidence in continued growth.
The company's strategic focus on domain services has positioned it as a top registrar, following the successful migration of millions of domains from Google (NASDAQ:GOOGL).
Moreover, the launch of Squarespace payments and the integration of Klarna as a payment option have strengthened its commerce offerings. Squarespace's commitment to innovation is evident in its "design intelligence" approach, which merges AI with human creativity for web design.
The company's international expansion and pricing optimization efforts, along with the Google Domains acquisition, have significantly contributed to revenue growth.
Key Takeaways
- Squarespace's Q1 2024 revenue increased by 19%, and bookings grew by 23%.
- Fiscal year 2024 outlook for revenue and free cash flow has been raised.
- The company has become a leading domain registrar after acquiring Google Domains.
- Squarespace payments rolled out, with Klarna introduced as an alternative payment method.
- The "design intelligence" philosophy combines AI with human creativity for web design.
- Strong growth and retention in core business areas, including websites, domains, and email.
- International expansion and pricing optimization are key revenue growth drivers.
- Non-GAAP gross profit margin stood at approximately 73% in Q1 2024.
- Adjusted EBITDA increased to $32 million, or 11% of total revenue.
- Cash and cash equivalents totaled $242 million, with total debt around $557 million.
- A $500 million share repurchase program has been authorized.
Company Outlook
- Raised guidance for total revenue to the range of $1.193 billion to $1.208 billion.
- Unlevered free cash flow expected to be between $298 million to $318 million.
- Investments in offerings aimed at driving profitability and shareholder return.
Bearish Highlights
- Adjusted EBITDA of $32 million represents a decline from the previous year.
Bullish Highlights
- Subscription plans remain the primary drivers of growth.
- International revenue reached $80 million, accounting for 28% of total revenue.
- Support for 25 currencies and 11 languages, with more languages planned for 2024.
Misses
- No significant impact expected from minor plans in development for the current year.
Q&A Highlights
- Marketing expenses improved by 500 basis points due to efficient spending.
- AI to become a default experience in Squarespace's design intelligence.
- Growth in Gross Payment Volume attributed to new launches and Squarespace payments.
- Easy migration process for customers switching from Stripe to Squarespace payments.
- Integration of payments into SaaS tiers will be a key transition point.
Squarespace's CEO, Anthony Casalena, and CFO, Nathan Gooden, discussed the company's resilience in a normal macro environment, noting its counter-cyclical nature during economic downturns. The closure of Google Domains has led to strong organic growth and lower customer churn for Squarespace.
The company's CapEx for 2024 is expected to be lower due to the impact of the Google transaction in 2023. Casalena expressed gratitude for a strong quarter and emphasized Squarespace's leadership in the website building, domain registration, and Google Workspace reselling markets.
InvestingPro Insights
Squarespace, Inc. (SQSP) has demonstrated a strong start to the year with its Q1 2024 earnings release, and the data from InvestingPro further underscores the company's financial narrative. With a market capitalization of $5.07 billion, Squarespace is positioning itself as a formidable player in the domain and web services market. The company's gross profit margin impressively stands at 79.5% for the last twelve months as of Q1 2023, which is a testament to its efficient operations and strong pricing power.
InvestingPro Tips highlight that Squarespace is expected to see net income growth this year, an optimistic sign for investors looking for profitability. Moreover, the company's impressive gross profit margins are indicative of its ability to maintain profitability in a competitive landscape. These insights suggest that Squarespace's strategic initiatives, such as the integration of Klarna and the expansion of its domain services, are likely to support its upward trajectory.
While Squarespace does not pay dividends, indicating a reinvestment strategy for growth, it is also important to note that the company operates with a moderate level of debt. This financial prudence could provide the flexibility needed to navigate through dynamic market conditions.
For readers looking to delve deeper into Squarespace's financial health and future prospects, InvestingPro offers additional tips on its platform. By using the coupon code PRONEWS24, readers can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking access to a total of 9 additional InvestingPro Tips for Squarespace. These tips will provide a more comprehensive understanding of the company's valuation multiples, debt levels, and profitability forecasts.
The InvestingPro Fair Value metric suggests that Squarespace is valued at $42.71, which is higher than the current price, indicating potential undervaluation. With the next earnings date on May 7, 2024, investors will be keen to see if the company can maintain its growth momentum and continue to surpass expectations.
Full transcript - Squarespace Inc (SQSP) Q1 2024:
Operator: Good morning. My name is Alyssa and I will be your operator today. At this time I would like to welcome everyone to Squarespace's First Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the prepared remarks there will be a question-and-answer session. [Operator Instructions] Thank you. I will now hand the call over to your host at Squarespace, Clare Perry. Clare, please go ahead.
Clare Perry: Good morning and thank you for joining Squarespace's first quarter 2024 earnings conference call. This is Clare Perry, Head of Investor Relations. I'm joined by Anthony Casalena, Squarespace's founder and CEO and Nathan Gooden, CFO. After their prepared remarks we will open the call to your questions. Earlier today we posted a press release and shareholder letter to the Investor Relations section of our website. On today's call we will be referencing both GAAP and non-GAAP financial results and operating metrics. You can find additional information on how we calculate these metrics, including a reconciliation of GAAP to non-GAAP measures in today's press release and shareholder letter. These measures should not be considered in isolation from nor substitute for our GAAP reporting. We will make forward-looking statements pursuant to the safe harbor provisions of the Private Security Litigation Reform Act of 1995, which include but are not limited to statements related to our future financial performance, our strategies, and our ability to integrate new technology into our core platform. These forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially. These risks are further defined in our most recent filings with the Securities and Exchange Commission. Any forward-looking statements that we make on this call are based on assumptions as of this day, May 7, 2024. We undertake no obligation to update these statements as a result of new information or future events, except we're required by law. Please note that all comparisons are on a year-over-year basis unless we state otherwise. I will now turn the call over to Anthony.
Anthony Casalena: Thanks, Clare, and good morning everyone. I'm pleased to share that Squarespace's Q1 was a strong one, with our revenue up 19% and bookings up 23%, beating the high end of our guidance on both metrics. Unlevered free cash flow margin within the quarter was 32%, further setting us up for a fantastic year. On the back of the strong performance, we're pleased to raise our fiscal year 2024 outlook today from both the revenue and free cash flow perspective. The quarter was driven by continued organic growth momentum in the core business, specifically websites, where we saw strong retention and new customer growth domestically and globally. Squarespace is now positioned as a leader in three primary categories that are critical to all small businesses, websites, domains, and email. Squarespace's domains has been a big focus for us in 2024, as we complete the migration of domains from Google, as well as launch constant improvements to our domains platform. Already millions of domains from Google have been migrated, and we are on track to complete this migration over the summer. The acquisition of Google Domains positions us as one of the top registrars in the world. And we are especially encouraged by the new domains business we are seeing, a funnel which is showing a strong attach rates into our core web building tools, as well as a strong uptake of Google Workspace. We have nearly reached 100% rollout of our partnership from the Google Workspace side, where Squarespace acts as the exclusive domain provider for any customer purchasing a domain along with their workspace subscription from Google. Squarespace payments is also off to a great start, now available to 100% of customers in the United States and feedback so far has been very positive. We launched our migration tool, which lets our existing Stripe customers move their accounts to Squarespace payments in just a few clicks while retaining their transaction history and without having to re-verify their business data. We also introduced Klarna to Squarespace payments, the first of many other ways to pay we will be adding. Klarna is the first alternative payment mechanism we introduced in three years, and our ability to rapidly innovate on our payments product will unlock multiple new features through the end of the year. A primary focus of ours is enabling selling across all of our plan types at Squarespace, and Squarespace payments is a critical unlock for us, as we'll be bundling it within our various SaaS tiers and adjusting our take rate for higher value plans, which is the first in our history. We believe this will attract both larger sellers that are not accommodated by our current plan structure, and smaller sellers who are just getting started and now have access to even more of our tools. I'm also excited to announce that we've recently introduced our AI philosophy as it pertains to web design called design intelligence by Squarespace. It is rooted in the principle that AI should augment human creativity rather than replace it. It combines two decades of industry-leading design proficiency with AI-driven content generation and guidance. This integration will empower entrepreneurs to leave their mark with confidence. While AI will feature in all of our products, design intelligence offers customers clear insights into how its application should be applied to their websites. Explore more about how AI is shaping our current and future endeavors at squarespace.com/designintelligence. All said, it is a very exciting time for our company. I'd like to extend a huge thank you to our customers, team, and supporters as we continue our pace of innovation throughout 2024. And with that, I'll turn it over to Nathan.
Nathan Gooden: Thank you, Anthony. Good morning, everyone. And thank you for joining us today. The investments we have made into building a powerful ecosystem for entrepreneurs everywhere have delivered strength across all elements of our business. We entered the year with strong Q1, 2024 results building on our momentum in 2023 and benefiting from a combination of catalysts, including strength in our core business, pricing and packaging optimization, international expansion in our domain business, both the organic and Google migration. All of these catalysts will continue to drive revenue growth and unlevered free cash flow expansion in 2024 and over the long term at Squarespace. We exceeded our top line and unlevered free cash flow guidance with revenue growth of 19% and an unlevered free cash flow margin of 32% over 340 basis points of improvement. We continue to drive meaningful revenue growth, improve profitability and deliver strong incremental cash flow. Q1 total bookings of $326 million grew 23%. We are seeing strong growth come from our core website business and our acquired domain assets. Our platform has never been stronger and we are encouraged by the retention and acquisition of new subscriptions. Our acquired domain assets help drive our growth as well. As a reminder, our acquired domain assets consist of single domain subscriptions originally sold by Google as part of our acquisition of Google Domains. Renewal rates from this customer base continues to surpass our expectations. Revenue of $281 million exceeded the high end of our guidance, up $274 million to $277 million in the first quarter, which represents 19% growth as reported and 18% in constant currency. Outperformance of our revenue guidance range was primarily due to the strength in our core business where we saw strong new subscription acquisitions from websites. Retention and acquisition of unique subscriptions contributed approximately $26 million or over 59% of the growth during the quarter. Organic growth excluding revenue associated with our acquired domain assets was 13% in the quarter. The second largest contributor to revenue growth this quarter was from our acquisition of Google Domains, which contributed approximately $13 million, representing 29% of growth during the quarter. This amount includes revenue associated with our acquired domain assets, domains referred from Google, and resold domains through our exclusive workspace reseller agreement. We continue to see a positive halo effect following our acquisition of Google Domains where we see robust referral traffic to Squarespace. As of March 31st, 2024, our customer base represented over 4.9 million unique subscriptions, up 15% and representing a net increase of 648,000 unique subscriptions over the 12-month period. This strength includes websites as well as new domain subscriptions as we see strong demand for Squarespace domains. ARPUs was $227 in Q1, 2024, growing 7%. Residual revenue impact from 2022 pricing increases and increased attachment rates for certain commerce offerings drove ARPUs growth in the quarter. The quarter-over-quarter ARPUs comparison reflects the fact that a larger number of our Q1, 2024 new unique subscriptions in the quarter were domain subscriptions, which carry a lower price point. Note that unique subscriptions and ARPUs do not account for our acquired domain assets. In Q1, presence revenue grew 22% as reported and in constant currency to $201 million. As a reminder, associated revenue from our domains is recognized as presence revenue. Strength in our unique subscriptions were the primary driver of growth, contributing over 56% of the growth. We saw solid retention of existing subscriptions and continued acquisition of new subscriptions in both our personal and business plans. Another important driver of revenue growth was our acquired domain assets, which represent renewals from legacy Google domain customers. Additionally, we continue to see some benefit from our legacy price increases, which we began rolling out to customers in Q3 2022. Squarespace benefits from a diversified commerce portfolio, serving our customers varied e-commerce needs, including selling physical goods, services, content, time, hospitality and events. Commerce revenue grew to approximately $80 million or 11% as reported and 10% in constant currency. The increase in commerce revenue was primarily the result of unique subscription growth, which represented approximately $6 million. Many of our customers who are sellers choose our business plan and therefore fall under presence revenue. So that dynamic can mass some of the underlying growth we are seeing in commerce. Growth payment volume or GPV was $1.6 billion in the quarter of 8% over 100 basis points of momentum versus Q4, 2023, breaking historical seasonal trends. Affected with Q1 2024, we have changed our nomenclature for this metric to GPV from GMV, growth merchandise value. We have not changed the calculation or definition. GPV represents the total dollar value of orders processed through our platform in the period, net of refunds and fraudulent orders. This new nomenclature better captures Squarespace payments, which we launched at the end of 2023. We saw GPV momentum continue from Q4 2023 with notable strength driven by acuity scheduling and increased commerce transactions occurring on our customer's website plans. We exited Q1, 2024 with annual run rate revenue of $1.1 billion, up 19% or $176 million. Increases in our unique subscriptions, the impact of the acquired domain assets and price increases across several of our subscription plans were the primary drivers of growth for the period. We have updated our calculation of annual run rate revenue to represent quarterly revenue from subscription fees and revenue generated in conjunction with associated fees in the last quarter of the period multiplied by four, rather than calculating based off the most recent monthly revenue figure multiplied by 12 to normalize results for the run rate each quarter. International revenue was $80 million, growing 19% and 18% in constant currency and representing 28% of our total revenue. International is a key area of focus for the business as we bring our ecosystem into new markets where we see clear synergies with design and strong product market fit. Our growing domains footprint further expands our reach internationally. We now support 25 currencies adding 21 in the last 12 months and 11 languages looking to launch more new languages in 2024. Turning to our margin profile, our non-GAAP gross profit margin was approximately 73% in Q1 2024. As we have called out previously, comparisons of gross profit margin to prior year reflect higher cost of revenue primarily due to the domain registration fees associated with our acquired domain assets. As legacy Google Domain customers renew their domain subscriptions, we pay registry fees up front while recognizing the associated revenue rateably over the course of the subscription. Q1 2024 is the trough for our gross profit margin and we expect improvement building each quarter as we progress through the year. Non-GAAP operating expenses grew by only 4% in Q1 2024 to $173 million or 62% of revenue. This ratio represents over 800 basis points of improvement. Non-GAAP R&D was $50 million in the quarter or approximately 18% of revenue. Historically, Q1 is our strongest quarter of demand from new customers and we therefore spend more marketing and sales dollars into this demand pattern. Non-GAAP marketing and sales expenses grew 4% to $100 million which represents approximately 36% of revenue, a decline of more than 500 basis points. Our marketing attribution model continues to efficiently direct the mix of our marketing spin across our marketing channels. Finally, non-GAAP G&A expenses were $23 million or 8% of revenue. G&A expenses improved on an absolute dollar basis and as a percentage of revenue as we continue to optimize investments and benefit from the scale of our business. In the first quarter, our adjusted EBITDA increased to $32 million or 11% of total revenue, more than 160 basis points of decline from the same period last year. The impact to adjusted EBITDA from our strong growth in revenue was softened by higher domain registration fees. On a dollar basis, advertising expenses were higher, though as a percentage of total revenue, we saw over 300 basis points of improvement. Adjusted EBITDA can fluctuate quarter-to-quarter due to operating expense seasonality. We anticipate favorable leverage on adjusted EBITDA through the full year 2024 as we continue our disciplined approach to invest across our operations as we scale our revenue. Overall, our solid execution and core business strength demonstrates Squarespace's ability to deliver profitable growth at scale. We are driving stronger cashflow and profitability despite the temporary gross profit margin headwind related to our acquired domain assets. We intend to continue driving higher levels of profitability and longer-term shareholder return by prioritizing investments in our offerings. We maintained a healthy balance sheet with cash and cash equivalents of $242 million and approximately $18 million of available borrowing. Total debt was approximately $557 million, of which $53 million is current. I remain comfortable with our net debt to trailing 12-month adjusted EBITDA at 1.0 times as of quarter end. Turning now to our cash flow. We delivered strong cash flow in the quarter, surpassing our guidance. Our cash flow from operating activities grew 33% to $85 million for the three months ended March 31st, 2024, primarily due to the strength in bookings. In Q1, our unlevered free cash flow was $89 million, growing 33% and representing a margin of 32% surpassing the high end of our guidance. The outperformance was primarily due to strong bookings driven by renewals and acquisition of website subscriptions. The year-to-year increase of over 340 basis points in unlevered free cash flow margin also reflects the timing of our Q1 tax pavement, which fell in Q1 a year ago and will fall in Q2 in 2024. Timing of payments may fluctuate in any one quarter. Our consistent levels of positive unlevered free cash flow afford us opportunities to innovate and develop new products, where we see opportunity to provide more value to our customers and to plant the seeds for long-term growth and return value to shareholders through our stock repurchase program. In February 2024, our board of directors authorized a $500 million share repurchase program. We view share repurchases as an integral part of our capital allocation strategy. As of March 31, 2024, we returned over $12 million to shareholders under the current authorization, representing approximately 321,000 shares at an average weighted price per share of $33.33 on the open market. Now turning to our guidance for Q2 and the full year 2024. In the second quarter of 2024, we are targeting total revenue in the range of $291 million to $294 million, which represents approximately 18% growth at the midpoint of the range. We expect unlevered free cash flow during the second quarter to be the range of $61 to $64 million, which represents a margin of approximately 21% at the midpoint of the range. The implied Q2 margin relative to Q1, 2024 primarily reflects the timing of our Q1 corporate tax payment, as I noted a moment ago. Because timing of such payments may cause fluctuations in any one quarter, we manage to the full year metric and margin. The strength that we saw on Q1, combined with our healthy expectations for Q2, gives us confidence to raise our full year guidance today. In 2024, we expect total revenue to be in the range of $1.193 billion to $1.208 billion, up from our previous range of $1.170 billion to $1.190 billion. The midpoint of our updated range represents 19% growth. Unlevered free cash flow is expected to reach between $298 million to $318 million and implies a margin of 26% at the midpoint of the range. This represents an increase from our previous estimate of $290 million to $310 million. To summarize, we had a great Q1. We saw strong momentum in the core business fueling our top-line growth, profitability and cash flow, supported by solid early traction from the migration of our Google Domain assets. Our business continues to grow with existing and new customers as we make progress against our strategic priority to drive long-term growth while continuing to gain leverage, achieving profitable growth at scale. Thank you to our employees for their continued commitment to our customer success. I look forward to engaging with many of you at our investor day next week. With that, operator, please open the line for the Q&A portion of the call.
Operator: Thank you. We will now begin the question and answer session. [Operator Instructions] The first question comes from the line of Vikram Kesavabhotla with Baird. Your line is now open.
Vikram Kesavabhotla: Great. Thanks for taking the question. My first one is on the unique subscription number. It looks like that was up 15% year-over-year. I think that compares to 10% and 5% in the prior two quarters. So, just wondering if you can help us understand the drivers behind the acceleration in that metric? How much of that is a reflection of easier comparisons versus some of the tailwinds that you're seeing from the work on the platform? And maybe you can offer some thoughts on how we should think about the growth of that metric this year. And then my second question is on the guidance. Just wondering if you could clarify your expectations for Google Domain's contribution to the revenue ranges for the second quarter and fiscal '24? And I'll leave it there. Thanks.
Anthony Casalena: Great. I can get started on the unique subscribers. A lot of that is driven by new domain subscribers. Just to remind everyone, we've had even before the Google Domain's acquisition, there were of course they sold domains for better part of a decade now. We had millions of domains on the platform. So it's not exactly a new type of subscription for us. That being said, post the Google Domain's closure, we've seen really greatly increased traffic in new domains coming onto the platform that are domain first instead of website first. So that's a huge difference between now and this time last year. Again, to remind everyone, Google Domain's transaction officially closed in September. So, we're really encouraged by that. We're really encouraged by the attach rate to our core products on those new domains. And there's a lot of factors contributing to that in the ecosystem, which we can touch on later. But it's an entirely different world than it was last year and we're the beneficiary of a lot of that inbound traffic. But that's the primary driver of the unique subscriptions being higher. And I can turn it over to Nathan on the guidance.
Nathan Gooden: Yes. On the guidance Vikram, one, I would say we're not going to continue to break out the contribution from Google Domain as we did for the full year in Q1. But what I will say, we were able to raise our guidance, and they called us a trifecta small business for a website, domain and email. And we are seeing continued strength from all three of those channels, and that causes us to raise the guide for the full year. So the organic business is continuing to maintain the same strength that we saw throughout 2023. And as a reminder, Google Domain, the revenue will, you do recognize that over 12 months, you'll see that continue to gain momentum as part of revenue throughout the year. I will say Google Domain was the number one driver for bookings this quarter. So we are very happy to see that -- yes, the overall domain business come through.
Vikram Kesavabhotla: Okay, great. Thank you.
Operator: Thank you. The next question comes from the line of Andrew Boone with JMP Securities. Your line is now open.
Andrew Boone: Good morning and thanks so much for taking my questions. Nathan, you talked about a 500 basis point improvement in marketing efficiency. Can you help us understand the drivers of that as well as the sustainability of that marketing efficiency going forward? And then going back to the last question, can you break down international? We've seen strong acceleration from 14% 4Q to 18% in 1Q, '24 ex FX growth. Can you help us understand that, is that the subscriber number or is there anything else to highlight as we think about the international opportunity?
Nathan Gooden: Yes, I'll take the marketing or marketing expense improvement. We did see 500 basis points on a non-GAAP basis. I'll say this has continued impact from our marketing attribution model as we direct spend to the right channel. And that is driving a healthy top line. I would say we're very efficient when it comes to marketing spend and investing in the right channels and shifting as we see inefficient spend there. And that's just that coming through the model. I would say, we do expect to continue to maintain healthy margins on that. The other thing I'd point out, especially on a GAAP basis, you do see the amortization of the PPA from Google Transaction rolling through that, so on a GAAP basis, that's why it's not as impactful improvement.
Anthony Casalena: Okay. So on international revenue, we're continuing to see lots of investments there that are continuing to pay off. We increased currency year-over-year by 21 currencies to 25 currencies. The momentum that we're seeing in the United States, revenue is really a trailing indicator and the ones that we're seeing that the momentum in Q1, we saw very healthy trials international. And so, we expect the investments that we're making there to pay off throughout the year. But I will say we're very excited to talk about international next week at our Investor Day is one of the key growth drivers we're seeing going forward.
Andrew Boone: Thank you.
Operator: Thank you. The next question comes from the line of Ken Wong with Oppenheimer. Your line is now open.
Ken Wong: Great. Thanks for taking my question. It's just one for you, Anthony. You guys brought up design intelligence. How do you envision customers will engage with that interface? Is this an opt-in? Will this be default upon interacting with Squarespace? How does that potentially roll out over time?
Anthony Casalena: Sure. So, as mentioned in the letter, people can go and take a look on our front site. It's actually linked from the header, squarespace.com/design-intelligence. It's just a real roundup of how we see our AI efforts applying to our design tools. As to your question this will be opt-in part of default experience. It'll be part of the default experience. AI, this page focuses a lot on how we are maintaining design integrity while utilizing a lot of these solutions in various parts in our platform. But AI is going to appear everywhere within Squarespace. It's mentioned on previous calls in the form of machine learning. It's already appeared in our customer operations. We've had a, you know, AI chatbot trained on our knowledge base for the better part of a decade. We've monitored deflection rates there, et cetera, et cetera. There's great opportunities for it to do, boring things like filling metadata, simple chores. But the design intelligence stuff is great because if you take a look at it, you'll see a woven into the blueprint onboarding and showing how we can, in a very particular way, generate image libraries that are both stylistic and appropriate contextually on the website for what content may go over a background image or something else like that. We're really focused on the quality and the results here. I think a lot of people are sort of in a mad scramble to just put AI on something on their front side. And I think the results are, in many ways, very, very unimpressive, frankly. And so we're trying to make sure we use the technology mixed with our taste level and doing it a curated way to maintain really great results. So the design intelligence page is a roundup of some stuff that's either launched or is in flight. And yes, it'll appear everywhere. You won't need to opt into it as some special thing. It's just part of the experience. The other thing I would call out on that is onboarding experiences like Blueprint are really important because, we have yet to see somebody come to our site and say, hey, I want to write an essay and I want you to turn that into a visual website for me. And then I want to write paragraphs back in order to edit it. That's just never occurred. We don't really anticipate it occurring. So it's very important for us to provide visual interfaces into AI tools so that people can see what they're getting and then have control over those experiences and manipulate them in place. And so we're going to continue to pursue that sort of visual first, but AI-enabled path through integrating these technologies into our product.
Ken Wong: Got it. Fantastic. And Nathan, just a quick follow-up. You mentioned GPV coming in above seasonal trend. How much of that is new versus perhaps same-store sales? And then, should we think that there's additional tailwinds that come now that you guys have launched Squarespace payments or is that already starting to work its way into that above seasonal number?
Nathan Gooden: Yes, great question here. So we are seeing great acceleration in our GPV. As I said, there's multiple streams here that are flowing in for GPV. And like acuity, we sell double-digit growth from a SaaS perspective and GPV. Some of the newer sets that we launched in '23 with invoicing, memberships, and courses all sold double-digit growth. And so you're starting to see that flow through the numbers. So I was excited to break the historical trend where Q1 is usually lower from a pure dollar standpoint than Q4. I mean, that's just the momentum. Again, all the investments you made in service sellers, you're starting to see that flow through. And I mentioned Squarespace payments. We're just at the start of Squarespace payments. And Anthony will probably talk a little bit about the re-architecture of plans that's really going to start to accelerate this in the latter half of the year. But as we roll out Squarespace payments to all of our customers, you'll start to see more GPV going to our platform.
Anthony Casalena: Yes, I'll just add on there that it was encouraging to see the GPV break seasonal trend and move in a positive direction. Just two more comments there. One is that the GPV on the platform is composed of many, many, many different types of GPV. There's physical products, there's service sellers, there's tickets, there's donations, there's classes and courses, there's invoicing, all these different things. And what Squarespace payments unlocks for us in addition to a better customer experience and take rate is -- take rate for us, is once we've integrated this more tightly with our SaaS plans, we can enable selling across the entire platform and have a variable take rate as people move up in SaaS tier. That does two things. One, on the low end, more people have access to our commerce tools that don't have access to them today because of how we've architected the plan. And two, on the high end, sellers who are looking for a discounted take rate out of the gate without any kind of negotiation required will see that option in our offering. So both of those things are a huge unlock for us. I'm of the belief that we've launched many, many products that are extremely good, but we have not commercialized well. And so, you'll see some of that next week at Investor Day too, just that connective tissue between who we're speaking to on the front side, what the product looks like and offers you, what words it uses when you go in, and what plan applies to you when you check out, and what tools you have available to you at every step of the way. So until -- so obviously Squarespace payments being available to 100% of the U.S. is amazing, but the real amazing part is when we do the other things I was talking about, complete commercialization process and integrate take rates into the SaaS tiers and unlock these ways to transact for everyone across the platform.
Ken Wong: Extremely helpful. Thank you.
Operator: Thank you. The next question comes from the line of Josh Beck with Raymond James. Your line is now open.
Josh Beck: Yes. Thank you so much for taking the question. Yes, I was kind of curious about the comment around the unique subscription ads, certainly having a larger domain first component. What are you tracking in terms of adoption of either workspace or website in terms of maybe where it is today, and maybe where you think that could head in the years forward?
Anthony Casalena: Sure. So, the paths through our ecosystem are many, right? If you start with a website, then add a domain, then add email, that's one path. You could also start with a domain, then add email, then add a website, add a just email, add just a website, just keep the domain. Yes, there's all these sort of flows through the system. The flow that's really been unlocked post Google, and this is due to a lot of engineering effort on our side is the flow where you really start with a domain, then manage domains. And after that flow, we track your -- on a cohort basis, your attachment of website products and email products. And that's kind of the primary thing. We're very encouraged by the attach rates that we're seeing from that domain's first flow. We have not yet completed the migration, which we expect to complete over the summer of the existing domains. And we've made at this point, zero efforts to try and market to those customers or anything else. In fact, we're in kind of a, I call it like a do no harm mode, make sure that this migration completes successfully for everybody, that the price is what they, everyone's expecting, we're not increasing the price on the first renewal for a lot of people. And it's just making sure that that's just super, super, super smooth. But that all being said, that new domains funnel is greatly elevated because one of the most trusted brands in the industry left. And we are the partner that they selected to register domains from there. So that's a massive ecosystem change. As people move over to Squarespace, they want another domain. If the domain's already with us, they'll get it with us. The domain's experience is greatly improved. The upsells and cross-sells are easy, but not invasive. And it's just kind of like a whole different world. And so -- and we have yet to even lean into marketing there after all the things that we can do in that world. So we'll continue to lean into the domain's world over the next couple of years. But even today in an unauthorized form, it is really encouraging.
Nathan Gooden: Which I will say as a reminder, we talked about this last quarter, we have not included any material contribution from cross-sell upsell of these domains in our guide. We do view that as a future year benefit. And we will talk more about that next week at our Investor Day.
Josh Beck: Okay, that's super helpful. And then, just on Squarespace payments, obviously it's available to the customer base. When we think about the adoption curve with existing customers, it certainly seems like a renewal is always a natural insertion point, right? For new customers, it seems like the door is kind of always open. So what are you doing? Or, strategically, how are you thinking about promoting the existing base to kind of move on to the Squarespace payments platform? And over what timeframe? Is that a multi-year journey? Is it something that could start to happen fairly quickly as some of these tier-based pricing, plans are rolled out? Just how should we frame that up?
Anthony Casalena: Sure. So it's going to be a multi-year journey, of course. But that being said, right now, you can go into Squarespace and in three clicks, without re-entering your customer information, port from Stripe into Squarespace payments, retaining your entire order and transaction history. And we actually have people doing that with absolutely no pushing and no incentive to do that, other than the fact that it's a better product experience. Everything's in one place. You're dealing with one vendor. And that's what people were telling us before we launched this. So it's nice to see that with, again, absolutely no financial incentive to do that. People are organically doing that. And then we've made that process so easy, is frankly incredible. To something else you said, the real driver of moving people over to payments will be when we have this integrated into our SaaS tiers, because you will have a financial benefit from moving over to Squarespace payments in addition to the integration. So that's going to be the real transition point. And then we can, of course, market that and say, hey, you're above X amount of sales, click here once and move over to Squarespace payments. And here's your new SaaS fee. And that's it. It's a win for all of us. So we're really, really looking forward to being able to do that.
Josh Beck: Very helpful. Thanks, Anthony and Nathan.
Operator: Thank you. The next question comes from the line of Trevor Young with Barclays. Your line is now open.
Trevor Young: Great. Thanks. First one, just back to international. Could you just expand on what countries are driving that strength and what in particular is enabling you to win? I understand localizing the platform site languages and even the currency offerings certainly help, but that also feels a little bit like table stakes needs to be competitor. So it would seem to me that something else is helping you in?
Anthony Casalena: Well, the combination is those table stakes things and just different payment methods. I think we are just to test out with PayPal (NASDAQ:PYPL) internationally right now. Yes. So we just launched PayPal as a way to check out on Squarespace in certain markets. We had stuff introduced last year. We're continuing to refine the localization. Frankly, Google was a great kickstart for us with respect to our language and currency coverage because we support 98% or so, maybe even more of the languages and currencies supported in Google Domains, which is as worldwide as you could imagine. I think there's -- we're just stepping through the markets. English speaking non-U.S. were very strong. The conversion rates there approached that of the U.S. And then mostly it's the European markets that are kind of next to our, let's we call it like EN12. And then later this year, we're going to be dabbling in certain select Asian markets as well. Look, I know it's sort of like maybe a generic sounding answer, but it really is a process. We can't just arrive in a market and then ban everything's just the way we want. So you start with using our circle community, local meetups, just really like guerrilla tactical, more local type marketing initially. And then you can move to bigger and bigger things, direct response, we can always do worldwide at any time. But it's just a combination of hundreds of things and hundreds of languages and you know, not hundreds of languages, but like a lot of languages and like many, many currencies to really be successful in these markets. So it's a time and effort thing along with a feature and functionality thing. But again, it's like, we say, oh, it's a table thing. Well, it's a little long time to even get PayPal to check on, but we're testing that now in certain markets. So it's not like we have complete coverage even today, so, yes, but decade-long effort for us and we'll continue to be.
Trevor Young: That's helpful Anthony. And Nathan, just a quick follow-up on the Google Domains, appreciate you're not disclosing what it's going to be in 2Q, but is that $85 million to $88 million from last quarter for the full year still kind of a good number to model in here?
Nathan Gooden: I mean, I will say, Trevor, we do maintain the strong renewal rates that we forecasted at the beginning of the year. So that's continuing to flow to the model. But again, like the full year guide was raised for all three of those. So we are seeing goodness from websites, domains, and the email side of the business.
Trevor Young: Okay, great. Thank you.
Operator: Thank you. The next question comes from the line of Siti Panigrahi with Mizuho. Your line is now open.
Unidentified Analyst: Hey, guys, this is Phil on for Siti. Can you help us better understand what drove the $5 million contribution from the pricing increase this quarter? And how should we think about the pricing uplift included in your FY '24 guidance? Thanks.
Nathan Gooden: Yes. The $5 million that flew through that came through in Q1 is the increase of the legacy customers that we did in Q3 of '22. So you're still seeing the annual impact of those that received it in Q2 and Q3 of '23 that's flowing through in Q1 here. We haven't included a very immaterial impact for price increases for those legacy customers in Q3 of this year going forward, where you'll see just like you saw previously, the material impact from a price increase in the latter half of the year is in the following. So we would expect a more material impact for '25 than we would in '24 for price increases for our legacy customers.
Unidentified Analyst: Got it.
Anthony Casalena: I will just add one thing. In quarter we did, we were able to successfully move up slightly the list price in the business and plans and above. And so, I think that's rolled out to 100% now. And it just gives us opportunity later in the year as we kind of contemplate what to do with legacy prices, now that more people are “legacy”. And yes, again, we've guided to roughly every two years, roughly 5% to 10%, is what to expect there.
Operator: Thank you. The next question comes from the line of Ygal Arounian with Citi Group. Your line is now open.
Ygal Arounian: Hey, good morning, guys. I want to dive into the subscriptions a little bit more, understanding that we're seeing some strength coming from the domains out of the funnel. But the website, Subscriber Growth was up 12%. And if we look back to that, what that number was pre-Google Domains, they were kind of -- if I'm just looking back over the beginning of '22, let's say, on average, it was mid-single digits and we're up 12%, 13% here. Is all that incremental being driven from the domain part of the funnel? But are you still -- are you seeing incremental strength from people coming directly to build a website? How should we think about the split of the list here from the pre-Google run rate?
Anthony Casalena: So the answer is no, it's not a result of just domains attaching websites. I mean, that's a factor. But the trial first website starts at an all-time high, too. So that's not the domain's funnel. You're dealing with a lot of things here. The halo effect around Google is very, very big. And it's not so easy to just draw a straight line between, you know, oh, they were referral, then they did a domain, then they did a website. You got to imagine that as people move over from Google, seven million new people will be Squarespace customers, whether or not they decide to transact and buy a website in month one, month five, month 12, month 24. It's just a totally different macro landscape, in addition to the product being better than ever, in addition to international strength remaining strong. And, it's just -- there's a lot of factors at play here that are leading to really strengthen the core. But I wouldn't just point to like, oh, the domain's business is driving because it's not the case.
Nathan Gooden: Yes. Let me layer on that, Ygal. You know, we reported in '23 record trials every quarter and Q1 again this year was a record trial highest in the history of the company. So that momentum of our core business started before the Google transaction. So it's just continuing to flow through and we're maintaining those strong rates.
Ygal Arounian: Okay. Great. That's helpful. We're getting a lot of questions from investors on that already. So I think that clarification is important. And then second on just on the pricing and packaging optimization, I know we're talking about kind of integrating the payments fee into higher stats here. Is there more you're doing there as well? We'll hear more about that on Investor Day, I'm guessing. And how should we think about the timeline for when the stuff's going to start to roll out? Thanks.
Anthony Casalena: There's a lot we're contemplating there. I think that is the biggest one, just the transaction fee showing up. I think it's also important to note that alongside that transaction fee showing up, we'll be enabling the actual commerce functionality in almost all of the plans just differentiated by a fee. That's a giant change. The adjustment of the fee in the business plan, which I don't think is particularly market right now, it's another giant change, frankly, the removal of it. So there's that, I think there's feature interplay with those plans would be more minor in terms of timeframe. Yes, later this year, definitely something in year, I mean, for us testing it or putting it out, I don't think impact this year necessarily. But yes, I mean, it's all under development right now. The other thing we have under development from a -- it's not really a pricing perspective, but from a packaging perspective, right now, although we're really, really encouraged by that new domains funnel, our product is immature. When you check out with a domain, it doesn't ask you if you want to buy the website right there at the same time. We have a lot of no brainer things to do in the checkout flow that could have pretty dramatic results if some of these catch on. So we're working on things like that too. Again, that's more bundling than it is pricing. But yes, that's kind of what we're looking at.
Ygal Arounian: Great, really helpful. Thank you.
Operator: Thank you. The next question comes from the line of Naved Khan with B. Riley. Your line is now open.
Naved Khan: Yes, thanks. Are you planning to launch more markets this year? I think I heard Nathan say I think he mentioned adding support for more languages. These new markets are just kind of more strength support and marketability and just talk about that a little bit. And then maybe just on the mix of monthly subscribers versus annuals, any color there in terms of if the mix has changed anything a bit?
Anthony Casalena: Yes, so I mentioned with the closing of Google Domains, not anticipating this global customer base moving over. We're now in -- I'm going to misquote it in the letter, it's like 27 currencies and like 25 currencies and countless languages that are needed in the interface to support those customers. In terms of new markets for the primary products, we have under development the language and support needed to enter a couple select Asian markets hopefully by the end of this year. So that will be the new change there. And I'll let Nathan.
Nathan Gooden: On total active subscriptions, we are still mixing at 75% annual, 25% monthly. We've talked about previously that there's been some mix on new, but it's not mix on new to monthly, but it's not moving the total active sub number from the 75-25 that we previously reported.
Naved Khan: Got it. Thank you, guys.
Operator: Thank you. The next question comes from the line of Chris Zhang with UBS. Your line is now open.
Chris Zhang: Hi, thanks for taking our question. So I think a lot of great questions have been answered, but I guess just on the potential tiered pricing for different website plans, there seems to be one increased capability to target some of the larger customers and also, I guess, just maybe from the incrementality of investment perspective, what are you thinking about potentially going up market and getting bigger customers or would you say the focus still remains the same just across all your existing customer base?
Anthony Casalena: I would say, as a blunt statement, that our current commercialization of our commerce products is wrong. And what we need to do is get payments, well, payments is out, and what we need to now do is get it integrated with the plan tiers and enable commerce across all selling, but differentiate via fees, not via SaaS to unlock commerce functionality. The current personal plan does not have commerce functionality. The business plan doesn't have a particularly compelling take rate if you're a consumer. And then up from there, we don't get you into a sub 2.9% take rate automatically. Now, we can do that for customers, but it's not automatic based on your SaaS tier. So by adding the payments take rates into the SaaS tier, it actually does two things, one on the low end and one on the high end. On the low end, you can now use all the commerce functionality and pay a slightly higher fee for doing it. On the high end, if you upgrade your SaaS tier, you'll get a lower fee without having to negotiate anything with anyone. It's currently my feeling that large customers are probably looking at our SaaS tiers and going, not for me. And I think that we have finally an opportunity to correct that. So that's exciting. And then it's exciting on the low end too to say, look, you don't have to pay more to get started with commerce. Try it out. Try it out. Try everything out. And if something works for you, great, we're here with you when you grow.
Chris Zhang: All right. Thank you, Anthony. That's very helpful. I guess just a quick follow up on the macro. Do you feel like -- does it feel to you like this is kind of the new normal post pandemic? Or do you think there are different pockets or different segments or industries, verticals, where you can still see some improvement or some recovery?
Anthony Casalena: So I wouldn't have any commentary on a vertical by vertical basis. I would say that the macro right now, again, as somebody who doesn't know anything about macro and can't possibly predict it for you, seems to be not detrimental. I think it feels normal and positive. I guess from our end, we don't see anything that is a huge headwind. But it's hard for me to call out what that, like if there was a specific tailwind to point to, it just feels normal. I don't know, which is great, because we're seeing great results in what I would call a normal environment. Certainly, the Squarespace has proven to be counter cyclical, if you will, to a lot of the things like financial recessions and pandemics where people go home, they start businesses and they adapt. So that has always been sort of a boon to us. But right now it's sort of like strong performance in what I would call normal macro environment.
Chris Zhang: All right. Appreciate it. Thank you so much.
Operator: Thank you. The next question comes from the line of Alexei Gogolev with JP Morgan. Your line is now open.
Ella Smith: Hi, this is Ella Smith on for Alexei Gogolev. Thank you so much for taking our question. So first, so you posted the second quarter of reacceleration and unique subs growth. And Anthony, I was hoping, oh, sorry, and you said that Google Domains is a big driver there. Are these customers typically coming to Squarespace organically or via a referral link from Google?
Anthony Casalena: Yes, it's a great question. So to model Google is very hard because you have a giant ecosystem change, right? People who are previously doing the Google Domains, if they go there, it will be a referral link to Squarespace. If the domain is transferred to Squarespace, they will be within Squarespace. If they're on SEO looking for things, they might find Squarespace instead of Google. If their account is transferred, they will have an email from Squarespace saying you're now at Squarespace customer, you can log into this account, sign up to things, blah, blah, blah. So yes, some part of it is a direct link, but it's a seismic ecosystem change that we'll be absorbing for a period of time. But it's just really a good position for us to have such strong sustained organic growth in the funnel and to also see lower than expected churn in the customers coming over and just -- we haven't even begun like mark it. So it's early days for the Google thing, but highly encouraging.
Ella Smith: Got it. Very clear, Anthony. Thank you. And Nathan, I think this next one would be for you. So the guidance for CapEx in 2024 is much lower than what you printed in 2023. Can you remind us why that is?
Nathan Gooden: Because of the Google transaction, we had internally developed software in 2023 that had an outside impact. So you see that come down in 2024 to a more normal state.
Ella Smith: Understood. Thanks so much.
Operator: Thank you. This concludes the question and answer portion of today's call. I would now like to hand the call back to Anthony for any final remarks.
Anthony Casalena: Yes, I just, obviously, hopefully what we feel is a really great quarter. Thank you all for joining in for the questions. We'll see a lot of you next week at our Investor Day. And, it's just a real pleasure to be in this position. I mean, I think Squarespace's position is one of the top website builders in the world, one of the top domain registrars in the world, and one of the bit largest resellers Google workspace in the world. And to have all of those in one really strong modern platform is just some of the best positioning we've ever had. So thank you all. Speak to everyone soon. And thanks for the thoughtful questions.
Operator: This concludes today's call. Thank you for joining. You may now disconnect your lines.
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