Website and ecommerce tools provider Squarespace (NYSE:SQSP) announced better-than-expected results in Q4 FY2023, with revenue up 18.3% year on year to $270.7 million. Guidance for next quarter's revenue was also better than expected at $275.5 million at the midpoint, 1.2% above analysts' estimates. It made a GAAP profit of $0.04 per share, down from its profit of $0.14 per share in the same quarter last year.
Is now the time to buy Squarespace? Find out by reading the original article on StockStory.
Squarespace (SQSP) Q4 FY2023 Highlights:
- Revenue: $270.7 million vs analyst estimates of $263.2 million (2.9% beat)
- EPS: $0.04 vs analyst estimates of $0.13 (-$0.09 miss)
- Revenue Guidance for Q1 2024 is $275.5 million at the midpoint, above analyst estimates of $272.3 million
- Management's revenue guidance for the upcoming financial year 2024 is $1.18 billion at the midpoint, beating analyst estimates by 1.3% and implying 16.6% growth (vs 16.7% in FY2023)
- Free Cash Flow of $57.23 million, up 20.9% from the previous quarter
- Gross Margin (GAAP): 74.3%, down from 82.5% in the same quarter last year
- Market Capitalization: $4.59 billion
Founded in New York City in 2003, Squarespace (NYSE:SQSP) is a platform for small businesses and creators to build their digital presences online.
E-commerce SoftwareWhile 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 GrowthAs you can see below, Squarespace's revenue growth has been mediocre over the last two years, growing from $207.4 million in Q4 FY2021 to $270.7 million this quarter.
This quarter, Squarespace's quarterly revenue was once again up 18.3% year on year. We can see that Squarespace's revenue increased by $13.66 million quarter on quarter, which is a solid improvement from the $9.53 million increase in Q3 2023. Shareholders should applaud the acceleration of growth.
Next quarter's guidance suggests that Squarespace is expecting revenue to grow 16.2% year on year to $275.5 million, improving on the 14.1% year-on-year increase it recorded in the same quarter last year. For the upcoming financial year, management expects revenue to be $1.18 billion at the midpoint, growing 16.6% year on year compared to the 16.8% increase in FY2023.
Cash Is KingIf you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Squarespace's free cash flow came in at $57.23 million in Q4, up 57.2% year on year.
Squarespace has generated $214.1 million in free cash flow over the last 12 months, an impressive 21.2% of revenue. This high FCF margin stems from its asset-lite business model and strong competitive positioning, giving it the option to return capital to shareholders or reinvest in its business while maintaining a cash cushion.
Key Takeaways from Squarespace's Q4 Results Revenue beat, which is always encouraging. However, profitability missed, leading to EPS below expectations. We were glad that next quarter and the full year's revenue guidance was strong and above Wall Street estimates. Overall, this quarter's results seemed fairly positive, with good guidance as a key bright spot. The stock is flat after reporting and currently trades at $33.6 per share.
