Squarespace produces superb web sites for SMBs — we’re an enormous buyer at SaaStr. And that’s powered all of it the best way to a $1B run-rate with 28% EBITDA. Self-serve merchandise can and ought to be fairly worthwhile at scale.
However it’s additionally a narrative of hitting some limits on TAM, and development has slowed to 10% at $1B ARR. And subscriber development of solely 3%.
5 Attention-grabbing Learnings:
#1. Solely 32% of Income From Web sites. 68% From Ecommerce. Chances are you’ll consider Squarespace as an internet site builder, and it’s. However actually it’s turn into a low-end Shopify and Woocommerce competitor. Nearly all of its income comes from ecommerce. Their pure web site income, which they name “Presence”, is simply 32% of their income.
#2. Many of the web site / presence development got here from value will increase, which noticed restricted churn in consequence. Churn was modest from their value improve, resulting in materials development. A normal playbook when development slows. I’ve seen related issues play out in my very own portfolio. Comparatively cheap merchandise promoting to SMBs which might be really useful don’t see a lot elevated churn from reasonable value will increase.
#3. 28% of their income from outdoors the U.S. A reminder to go world!
#4. Subscribers solely grew 3% in 2022. A troublesome metric. Virtually all of the income development got here from value will increase and transaction price will increase on commerce. New prospects solely grew 3%. That’s very mature. Having mentioned that, many SMB gamers had been hit onerous in 2022. Zoom’s SMB prospects shrunk for the primary time ever, for instance. And to some extent, the worth improve impression could also be muted going ahead as a result of their newer merchandise have a decrease ARPU, for now not less than.
#5. Constant EBITDA, going up. EBITDA hit a excessive of 28% final quarter and 17% final 12 months. Squarespace isn’t hitting huge GAAP profitability numbers but, nevertheless it’s producing important money and trending previous a sustained 20% EBITDA. Put in another way, it has a reasonably environment friendly self-serve mannequin that’s getting much more environment friendly.
And some different fascinating learnings:
#6. Massive mark-down for its $400m acquisition of Tock in 2021. Squarespace purchased a web-based restaurant reservations participant in 2021 for $400m, and that enterprise continued. However it overpayed by the requirements of 2023, and took a $200m markdown to replicate that. Diversifying into the restaurant house is sensible — it’s one of many largest segments for SMB commerce. However it’s a brutally aggressive and sophisticated house.
#7. 1,800 staff, so over $500,000 income per worker. That’s fairly darn environment friendly. That’s doing self-serve proper.
Squarespace is such an fascinating story. At nearly a $4B market cap, it trades at solely 4x ARR as a result of its mature development at scale (10%), regardless of being pretty environment friendly. But the Founder CEO owns ~35% of the company. 35% of $4B is … so much. 😉
Revealed on April 26, 2023