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spk00: Good morning, my name is Katie and I'll be your conference operator today. At this time I would like to welcome everyone to Squarespace's fourth quarter 2021 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. If you'd like to ask a question during this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star followed by the number two. Thank you. Robert Sanders, you may begin your conference.
spk05: Good morning, and thank you for joining us. My name is Robert Sanders, Head of Investor Relations. With me on the call today are Anthony Casalena, Squarespace founder and CEO, and Marcella Martin, our CFO. They will share some opening remarks and then open the call to your questions. Earlier today, we posted a shareholder letter in 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, which can be found in the investor relations section of our website. These measures should not be considered in isolation from or a substitute for our GAAP results. We will make forward-looking statements pursuant to the safe harbor provisions of the Private Securities and Litigation Reform Act of 1995, which include but are not limited to statements related to our future financial performance. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. These risks are further defined in our most recent Form 10-K filed with the Securities and Exchange Commission. Any forward-looking statements that we make on this call are based on assumptions as of this day, March 7, 2022. We undertake no obligation to update these statements as a result of new information or future events, except where required by law. Now, I'll turn the call over to Anthony.
spk07: Good morning, everyone. Thank you for joining us on the call today. Robert, welcome to Squarespace. Like many of you, we have friends, family, colleagues that are either directly or indirectly touched by the conflict in Ukraine. Our heart goes out to them, and we hope this conflict ends soon. Squarespace has provided and will continue to provide assistance to our employees and customers in that region. I am proud of what our customers have achieved during recent months, and I'd like to thank our employees whose work enables their success every day. We've included some highlights from our most recent quarter in our shareholder letter. Our integrated platform is used by millions to establish a world-class online presence, and our advanced commerce functionality is enabling our customers to transact online in a myriad of ways. Our Everything to Sell Anything campaign is an embodiment of this mission, and we are looking forward to pursuing it even further in 2022. I'll hand the call to Marcella to take us through guidance.
spk01: Thank you, Anthony. We are delighted to share results with you this morning that exceeded our guidance for Q4 2021, driven by a strong adoption of our commerce plan. Our durable business model is balanced to generate both growth and profitability as witnessed by our outperformance in the fourth quarter. While it's important to recognize the success We believe we are still in the early stages of addressing a large and growing global addressable market for our services, and our platform has the ability to continue to scale and serve millions of customers. As we look forward to the coming year, I would like to provide you with details on how we build guidance for 2022. For the first quarter, of 2022, we expect revenue to be in the range of $203 million to $205 million, representing 13% to 14% growth year over year. We project our unlevered free cash flow to be in the range of $39.4 million to $41 million, which implies an unlevered free cash flow margin of 19.7% at the midpoint of the range. For the full year 2022, we expect revenue to be in the range of $862 million to $878 million, representing 11% year-over-year growth at the midpoint of the range. We expect unlevered free cash flow will be between $149.3 million and $165.5 million, representing, again, an 18.1% margin at the midpoint. When thinking about our guidance, it's important to remember that we recognize revenue associated with the TOC acquisition beginning in the second quarter of 2021. As a result, our year-over-year growth assumptions in Q1 2022 do not overlap with the TOC acquisition, whereas the remaining quarters of 2022 do anniversary the closing. In 2022, our revenue growth will be driven by a combination of the following. Strong adoption of our newer products, such as scheduling member areas and email campaigns, which will continue to grow at higher growth rates compared to website and domain subscriptions. Strong retention of our existing loyal customer base of 4.1 million unique subscriptions. We expect unique subscriptions to grow moderately in 2022, mainly due to tough comp versus 2021 and the waning of the positive effects of COVID. And we expect expansion of new revenue lines, such as stock, which continues to grow at higher double digits. We expect Q2 to be the trust from a revenue growth perspective and revenue to re-accelerate throughout this year and into 2023. Let me walk you now through our operating expenses on a non-GAAP basis and the areas where we plan to deploy our investments. Our growth margin will continue to be strong. though recall that our mix is shifting towards commerce revenue, where the transactional portion of that revenue has lower margins than subscription revenue. We believe we can continue to scale our efforts in marketing this fiscal year. Last year, for the first time in the history of Squarespace, we successfully delivered bespoke marketing campaigns in several countries outside the U.S., As we think about our internal expansions and efforts abroad, we will be mindful of the demand landscape when deploying marketing resources. As a result, we anticipate that marketing and sales expenses will be in the range of 30 to 35% of total revenue on an on-gap basis, as long as demand remains as expected. This is our plan as we see the market today, and we will adjust according to the environment as we move through the year. Turning now to R&D, we expect a continued investment in our platform as we deliver additional services and new features to our customers with an exciting product roadmap. In 2022, we expect R&D expenditures to increase as a percentage of revenue versus 2021, as we continue to invest in initiatives that will drive higher growth in 2023 and on, such as investments in payments, bundling, new products, and innovation. Specifically, we are heavily investing to the tune of double-digit millions on the top platform and the products we announced during investor day, as we believe there is an enormous opportunity to continue to grow in the hospitality sector. Therefore, we expect that R&D will be in the range of 25% to 30% of 2022 revenue. With regards to G&A, please know that in 2021, we experienced certain one-time costs associated with our direct listing for around $25 million. In 2022, we anticipate that G&A will represent approximately 11% of revenue. The sum of these operating efficiencies are allowing us to give initial unlevered free cash flow margin guidance that is above our 2021 results. In spite of the fact that we are experiencing difficult comparisons in 2022 due to the COVID-related demand environment in 2021, We are very excited and confident about our ability to capitalize on the large market opportunities that we see in front of us. We are confident that we can retain and grow our subscription revenue as evidenced by the 18% increase in annual run rate revenue and the 9% increase in average revenue per unique subscription, or ARPUs, in 2021. Both of these metrics point to our ability to sell higher value plans and add-on services and the power of our recurring subscription model. In summary, the fundamentals of our business remain strong. We have a long operating history of profitable growth combined with a large and growing customer base. We believe the introduction of new products combined with the optimization of existing offerings to packaging and pricing will accelerate our growth as we exit this year and we look to the future. During the last two years, we have had a tailwind related to the pandemic. And over those two years, we have grown 27% on a compound annual growth basis. Those tailwinds made us even stronger as our customer base has expanded significantly and we continue to serve our customers with tools that help them stay in business through the pandemic. In 2023 and 2024, we expect revenue growth to reaccelerate into the mid to high teens. crossing the $1 billion mark in revenues in 2023 while still expanding cash flow margins. We are very excited about the growth opportunities over the years ahead. Given our very strong brand presence, diverse portfolio of products, and multiple ways to reach customers who are just getting started, Squarespace has a wide array of opportunities to win. Thank you, everyone. And with that, I will hand it back to Anthony.
spk07: Thank you, Marcella. To recap, the building blocks of our platform that give us confidence in our outlook for 2022 and beyond include our commerce tools, which are designed not only to help our customers sell physical goods, but also to help them sell time, content, services, and more. On mobile, we're providing tools for creators who are inventing new business models and starting out on a diverse array of platforms. Via our Unfold platform, we are providing ways for customers to look good on social, but we are also creating tools like bio sites for them to capture and monetize traffic effortlessly. Our international expansion is ongoing through the support of new languages, the addition of new geographies, and the adoption of localized payment methods. We believe there's tremendous opportunity for us to increase our international customer base. We also see significant opportunities in bundling, payments, and pricing leverage that can further help us monetize the products that we already have in market across our 4 million plus unique subscriptions. We remain invested in sustainable and profitable growth, which we've been doing since our inception almost two decades ago. We have never had more opportunities to expand our business and serve our customers, and I'm excited for what 2022 will bring us. Thank you all. Operator, please open the line for questions.
spk00: Thank you. If you'd like to ask a question, please press star followed by 1 on your telephone keypad now. If you'd like to remove your question, please press star followed by 2. And please ensure when asking your question, your line is unmuted locally. We take our first question from Sterling Auty from JP Morgan. Please go ahead, Sterling.
spk02: Yeah, thanks. Hi, guys. So in regards to the modest growth in subscription additions for 2022, which would be down or deceleration versus 21, how much of that do you think is just coming from the push from COVID driving existing companies online? So you just have to digest that versus any fall off in new company creations?
spk01: Hi, Sterling, thank you for the question. We believe that there must be some, you know, pulled forward demands and that, as you mentioned, that we will have to digest. But we are, you know, we have seen also some softness in January, and I believe it is a little bit related to new business formations. New business formations is just one factor, and we have to be cognizant of that factor. But we have plenty of opportunities to continue to grow through the existing customer base that we have, which is pretty large. And we are still at very nascent stages of doing upselling, cross-selling, bundling. If you look at the growth that we have had in ARPUs on a total basis in 2021, it has been 9%. if you take out the impact of organic excuse me, of inorganic growth through talk, it's about 6%. And that growth was done with bare bones of initiatives related to bundles or further, you know, selling other products that have worked so nicely for us, like scheduling and member areas. And that has put us actually in a very good and in a leading position on servicing time-slotted businesses.
spk02: That makes sense. And then one follow-up, Anthony.
spk07: The only one thing I would add to Marcella's point is that when you're looking at the raw number of unique subscriptions on the platform, these are really diverse subscriptions. I mean, a domain subscription, a website subscription, an unfold subscription are all, you know, have really different properties and different kinds of seasonality to them. And I'd just like to underscore that, you know, while the small business formation is a factor, it really isn't the only factor that we see there, especially when you think of, you know, when we talk about creators and them coming online, they're not going to be really represented properly in that small business formation number because it's just going to be a real lagging indicator. What was the second? Sorry, I interrupted you. What were you going to ask?
spk02: No, that's okay. Last quarter, Anthony, you had talked about that you were going to revisit the the payments business, and I think with probably the eye towards deciding whether to change the structure, maybe become more of a payment facilitator instead of an ISO, was there a conclusion to that process?
spk07: Yeah, so we are going to be pursuing payments, and we're expecting to see that kind of enter the market in 2023. When we pull our customers, because obviously what you're referencing is we've had a deal with Stripe for a long time where we're able to capture a portion of our – we're able to – capture profit off the GMV that's flowing through the platform. And that deal was appropriate for us for a long time when we were smaller, when GMV was smaller, et cetera, et cetera. When we talk to our customers now, we think they would get a lot of value from seeing everything in one place, and they don't have a particular affinity towards you know, any payment infrastructure provider in this space. And so when we ask them about, hey, would you want to use Squarespace Payments, they're pretty enthusiastic about saying, yes, we would, and we really appreciate everything being in one place. So we think that'll be a better customer experience for us, as evidenced by the fact that they're asking for it. And also, it'll give us a little bit better economics as we move forward through that deal. So it's absolutely being worked on. It's something we expect to see around 2023 in that early part. And, yeah, it'll be another great driver for our business.
spk01: Yeah, it's something we are very excited. We have been working on that for a while because it also gives us an opportunity to launch a whole array of different products on financial services, which could serve really well for the type of customers, you know, that we have in our customer base.
spk02: Understood. Thank you.
spk00: The next question comes from Trevor Young from Barclays. Please go ahead.
spk10: Great. Thanks, too, if I may. Just first on the 1Q revenue guide of $205 million at the high end, that implies a modest sequential downtick, whereas historically, at least the last few years, I think you've seen, call it like 3% to 4% sequential growth. Can you help us understand what's driving that softer sequential trend? I think, Marcella, you maybe mentioned some softness in January. Any color on that and, you know, the cadence now in February as well? And then on the full-year revenue guide, you get some good color on how you expect, you know, the trough in 2Q and then a re-acceleration. What informs that confidence in seeing the revenue growth re-accelerate? Is it just a matter of lapping easier compares or is it an expectation that your efforts to lean in on marketing begin to bear fruit? Just any color there would be appreciated.
spk01: Thank you, Trevor, for the question. So we have reflected in Q1 where, you know, what we have seen so far in the market. We are, you know, very excited about the fact that once, you know, we are passing on this quarter and the next quarter, I believe that the comparisons are going to get a little bit better. There is some pull forward that I mentioned earlier. And so, you know, we have taken a moderate approach on how we think that Q1 is going to play. With regards to the rest of the year, you know, we have been working on some initiatives related to bundles. that we are going to be able to serve our customers in a much more simplistic way when they have to make choices on the products that they want to use from Square State. So we are pretty confident about the fact that after we pass Q2, that revenue will get back to Accelerate and even, you know, Further on, we believe in 2023 and 2024 with the initiatives that we have in place that we have mentioned earlier on payment. And as a reminder, you know, the vast majority of the revenues that flow through our platforms at Squarespace and TOG is booked on a net basis, not on a gross basis. And so as we launch payments, you know, we continue to deliver on bundles and new products and innovation. We feel pretty strongly and pretty confident about the growth that we will continue to see later in the year.
spk07: Yeah, just to underscore two points there, one just building on what Marcel is mentioning regarding bundling. You know, we have a lot of different products that we've launched over the past couple of years, and I think that we may be under-optimized in how we're delivering those to customers. So we talk about members, talk about email campaigns. These are all separate options on the platform, and I think we just have a real opportunity to simplify this in the minds of consumers and to create a really powerful single subscription that I think would really set us apart. The other thing to mention regarding the later half of the year is just the leverage we have in pricing. We mentioned on prior calls that we've never increased pricing for our existing cohorts. I think we have an opportunity there with a modest price increase to really see a pretty profound result, actually. And also I think as we move into the later half of the year, you know, while you do see We have so many different revenue lines where, you know, maybe we're seeing less growth on a year-over-year basis on, you know, websites and domains. But the COVID situation, the Omnicom situation also really negatively impacted our businesses like TOC. So as we move throughout the rest of the year, we expect those to really improve. One interesting fact about TOC is that diners increased 250% year-over-year in 2021. which is a huge opportunity for us as we think about monetizing that traffic and also thinking about, you know, what those diners and that traffic to explore talk might mean when we launch consumer marketplaces and things like that. So I think it's important to think that, you know, we're not relying on, like, magic marketing or something to cause that reacceleration that we expect to see.
spk10: Great. Thank you both.
spk00: The next question comes from Clark Jeffries from Piper Sandler. Please go ahead, Clark.
spk09: Hello. Thank you for taking the question. First one, I was curious maybe if you could share what the cash retention rate was during 2021 or any kind of sense on what you're seeing in terms of retention of the cohorts that signed up with the business during the first four quarters post-pandemic. I think trying to right-size how much of it tough comparison is on a, you know, overall new business funnel or on sort of a net basis of retention.
spk01: Thank you. for the question, Clark. So what we have seen is that subscription cash retention has been very strong in 2021 and better than 2020. And this was mainly driven by a strong cash retention that we have in present and also favorable FX rates. But even if you look at constant FX rate cash retention, so if you exclude that impact, we have seen in 2021 overall cash retention better than what it was in 2020. We also have observed the cash retention for one year cohort, like the 2020 cohort, and we compare that to the one year cash retention that we have seen in 2019 and they are both in line. We are very excited because as I keep mentioning, I think COVID made us even stronger because we have been able to grow our customer base The stickiness is there. We don't see churn. Cash retention is better than what we saw in prior years. And we have a lot of opportunities to continue to grow the ARPUs within the customer base that we currently have.
spk09: Thank you for the caller. Maybe another follow up and more of a strategic question. You know, you outlined some of these growth levers in the business for 2022 and beyond. You know, one of them that stands out to me is really an entry into the enterprise space. It being over only 5% of bookings today, just curious on what are the strategies you want to pursue specifically next year to maybe get more involved with larger companies, and what are the points of differentiation that you really want to emphasize when entering that segment of the business?
spk07: The enterprise segment is interesting to us because, again, it encompasses – a couple of sort of very different things. On the Squarespace side, well, so if you look at the product lines, you've got enterprise in presence, and that is mostly one of two things. One, larger contracts with particular large companies like, you know, the Nike marketing team might want to use Squarespace and we need single sign-on. Volume customers, so that's us identifying people who build hundreds of sites on Squarespace and making sure that they're well-serviced and that they've got the right controls and a good contract in place. And the scheduling side of things, once you cross a certain volume size of appointments, we kind of congratulate you into an enterprise space. And then within TOC, a lot of their businesses kind of can be classified as enterprise in the sense that, you know, they've got a sales team that reaches out and, you know, converts customers onto that platform. It's a little less – so it's interesting because, you know, with a TOC, you can identify the targets, right? It's like, okay, that's a restaurant they should be using. You know, that's a hospitality business. That's a winery. They should be using TOC. In the former, in the presence category, it's a little harder. So we can go into our customer database and say, hey, look, we see all these email addresses using Squarespace from I'm just picking Nike as an arbitrary example. Maybe we should be targeted. Maybe they need something more for us. And so we're going to be more proactive about really digging into who's using the platform to find those end customers. And then similarly with volume, we can really go on and find people who are doing this on the platform and really handhold them onto what we're doing. So we're targeting all of that. Again, the enterprise business is very, very small for Squarespace overall, but we think it has big potential, so that's why we keep investing in it. And it's just a natural extension for us to be servicing these larger customers who are, frankly, in a lot of cases, already using Squarespace.
spk09: Appreciate the call. Thank you.
spk00: Our next question comes from Siti Panagrafi from Missouri. Please go ahead.
spk04: Thanks for taking my question. Two questions, if I may be. First one, Marcella, what are the organic growth in 2021? Mainly talk, you know, any color on the organic growth?
spk01: Yeah, sure. I mean, for in 2021, we have grown overall 26%. And out of that, 22% is organic. And if you look at Q4, for the quarter, we grew 20%, and approximately 15%, 16% is organic city, just for Q4.
spk04: Okay, thanks for that color. And then, I mean, you guys launched a big campaign last year, September, and then also revamped your products, you know, features and added a lot of new features there. And then, you know, the everything to sell anything that campaign as well. But despite that, you know, this is quite a deceleration, like 10 to 12% guidance 2022. I'm wondering how effective was that campaign and What makes you more confident about 2023 and beyond, besides that payment, how you're going to recognize revenue?
spk07: So I'm really happy with that campaign because I think it embodies everything that we've been talking about on these calls regarding, you know, just the ways we help people run their businesses online. I mean, I think we're, of course, well known for presence, but what we've launched really helps people go beyond that. And to your question around what gives us confidence in, you know, about the year, Look, I mean, we're lapping a really serious COVID quarter. The effects of that are, you know, you know, most participating on certain parts of the business. And other parts of our business, like TAC, have not fully come out of COVID. And so we're sort of, you know, have a positive view towards that later in the year. But like I was mentioning in the other question, the reacceleration I am looking to is not based on, like, I call it, like, magic marketing moments. It's pricing, leverage, it's bundling, it's, you know, which is basically just us getting more value out of the product we, frankly, already launched. It's a payment system that's happening later on, and just the continued demand for what we do. You know, below the surface, the businesses have very different dynamics. Again, we've mentioned talk being unfavorably treated by Omicron, but the scheduling business remains very, very strong. And so, you know, all of that leads us to be frankly, quite confident in how things look in the future. Look, it's an unprecedented time. I mean, you know, the lack of these code reporters, I mean, it's pretty wild.
spk04: Thank you.
spk00: We have a question from Ken Wong from Guggenheim Securities. Please go ahead.
spk06: Great. Thank you for taking my question. I wanted to build on CT's question just now. When thinking about that re-acceleration in fiscal 23-24, you also mentioned that you are making that change in payments. That usually comes with a gross rep rec instead of a net rep rec. Should we be thinking about that re-acceleration happening on an apples-to-apples basis as well when we look at your business, or purely as a byproduct of that accounting change?
spk01: No, the growth that we are expecting in 2023 and 2024, that's not purely related to a change in accounting recognition.
spk07: Because even when you move into 2023, the adoption of that payments platform will remain small initially, right? And so it won't immediately have a huge top-line impact, even though that's changed. I'm talking about an apples-to-apples, you know, us-to-us. Using our pricing leverage, introducing bundling, and introducing new products is what I'm counting on to drive that change.
spk01: Yes, we are investing, as we mentioned earlier, in some products, not only on the team that is currently working on its Workspace products, but the teams that are doing amazing work at And we see a great deal of opportunities there for us with the investments that we are doing on those products to continue to grow on the hospitality sector.
spk06: Really appreciate the clarity. I think that does make a big difference for folks. And then second, I think earlier you mentioned you guys expect talk to grow double digits in 2022. Also, is that kind of a compared versus the three-quarters of talk that were in results or relative to the roughly 33 million kind of if it was an all-in talkier type of a dynamic? Yeah.
spk01: the latter can we expect to continue to grow in double digits going forward in 2022 2023 and on
spk07: Yeah, and I think within there, I'll just quickly highlight a couple things. Again, top was adversely impacted by Omicron, and, you know, we're seeing that dynamic change. But we're introducing changes to booking fees to help monetize those diners, which, again, increased 250% year over year. We're thinking about event self-service onboarding, further kind of you know, strengthened by the integration with Squarespace, and then consumer marketplaces to take another angle at revenue that just doesn't even exist right now. So we have a lot of things happening over there as well as a lot of things happening in, you know, the presence business, the scheduling business, you know. Yeah. So we remain really positive on that. kind of being in a, quote, unquote, more normal year and seeing how, you know, that business operates.
spk01: Yeah, I mean, we serve millions and millions of diners in talk, and, you know, we are very excited with the products that are coming the way so that we can continue to grow that business, which is growing really nicely.
spk06: Got it. Great. Thank you very much.
spk00: Our next question comes from Matthew from William Blair. Please go ahead.
spk08: Hey, Greg. Thanks, guys, for taking my questions. I wanted to first ask on the scheduling solution. I think you called out in the shareholder letter that that was the biggest contributor of organic growth. Maybe just sort of unpack what you're seeing with that product and what's driving the strength there.
spk01: I can talk – you can talk about the product. Just to clarify, I think that what we meant to say is that scheduling is the biggest driver of the organic growth that we saw in average revenue per unique subscription. And, yeah.
spk07: Yeah, I mean, as we move forward with the scheduling product, I think one of the things that we're – excited about is actually that a lot of the A lot of the volume, a lot of the payments volume, a lot of the transacting that occurs around the appointment is currently happening off platform for Squarespace. So as we introduce things like invoicing and other features into that platform to kind of make it a more holistic experience for the user, we're going to actually be able to generate even more payment volume through that platform as well as reduce the need to look at external tools. So a lot of that's going to happen this year. We're really excited by it, and it's actually a really big opportunity out there.
spk08: Great. And then as you think about investing outside of North America in the new geographies for 2022, any specific areas that you would call out? And besides marketing campaigns, any other additional changes that need to be made from a platform perspective?
spk07: Well, the targets are similar to what they were last quarter in the sense that it's English-speaking non-U.S. and then, you know, France, Germany, like those sorts of regions. The only product changes, well, I mean, what we've done differently is, one, localized campaigns and then, two, payment methods. And so things like SEPA being introduced to the platform should hopefully improve our ability to convert in those markets.
spk08: Great. Thanks, guys.
spk00: Our next question is from Josh Beck from KeyBank. Please go ahead.
spk03: Hi there. Thank you for taking the question. I wanted to ask just a little bit about the return on marketing efficiency that you've seen. Could you maybe characterize what channels are productive for you and how you're approaching that as we go into 22?
spk07: So we've kept marketing spend on a year-over-year basis basically flat, and what we're doing What we're looking at there is just trying to make sure that we're teasing out what was happening during COVID and what boost are we getting from that and what boost are we really getting from driving our internal internal results. As you know from previous calls, we have a mix between direct response and brand advertising. The brand advertising component is, of course, important to us because we need to be top of mind when people want to come and create a website or differentiate themselves on social. So we always balance those two things. But we have taken a modest approach to the increase this year as we really just want to always keep an eye on the balance within the business. Squarespace has always been about sustainable growth with positive cash flow margins. And so we just want to make sure we're doing a good job there. And so we're reducing brand a little bit while keeping DR high and thinking about how we're deploying this dollars internationally. So that's kind of what you might want to think about regarding that.
spk03: Very helpful. And maybe a follow-up on just how to think about subscription for the year. It sounds like with a bit of a slow start, and obviously we have Q1 guidance, that really a lot of the growth perhaps more so from the commerce side. So as we start to model out the back year, should we think about trying to incorporate more of an ARPU lift on the subscription side, you know, related to some of the bundling changes, or should we hold off on that? Any other guidance just on how to think about subscription and how to model that throughout the year would be appreciated.
spk01: Yeah, thank you, Josh. Yeah, I think you are on the right path on your thinking on how to model or how to think about where the revenue growth is going to come later on and, you know, our excitement around how it is going to reaccelerate later in 2022 on getting into 2023 and 2024 and on. Excellent. Thank you both.
spk00: The next question comes from Aaron Kessler from Raymond James. Please go ahead.
spk11: Great. I have a couple of questions. Can you talk a little bit about maybe just the growth, sub-growth you were seeing in 21, maybe that station for 22, kind of versus net, sounds like some of the companies with the, and then we also talk about the mid-20 cohort and kind of in the early 21 cohort and the retention you were seeing there. And just any thoughts on kind of international trends you're seeing as well. Thank you.
spk01: Yeah, sure. I mean, I was talking a little bit earlier about how we see cash retention, which has overall on a year-to-date basis and based on subscriptions, it has performed better. than previous year. And what I also mentioned earlier is that we have not seen any change in churn. Churn actually in 2020 was a little bit higher at the very beginning, and then it went away. But in 2021, our cash retention is pretty similar to what we have seen previously in 2020. And we looked at the 2020 cohorts, and we see that those are performing in line with 2019. So, you know, overall, we are very happy with what we see, the stickiness that we see. in our platform and how the whole array of products that we launch in between 2019 and 2019, how they are paying off. We see really amazing and great growth in products like email campaigns, member areas, scheduling, which I believe it has put us in a position as a leader in services in the market.
spk11: Got it. And anything you see as international trends, maybe opportunities you see internationally in 2022 as well?
spk07: I think that we're building on our existing base and our existing investment. As you know, it's like when you go into one of these markets initially, you know, Some have been easier for us because some of our ad spend in podcasting is kind of global by nature. People are listening to the same podcast in the UK as they are in the US in many instances. And then that becomes harder to go into non-English speaking where you don't get that kind of organic halo from the US-based activities. So continuing to pursue localized efforts across the markets you already kind of know us in is what we're doing.
spk01: Yes, and of course, you know, with the recent events, you know, we have taken a conservative approach with regards to the growth. But we are, we have a platform, the Squarespace platform is a very modern platform where we can continue to expand in languages above and beyond the ones that we have. And so we have, you know, a great deal of opportunities to continue to expand in other areas besides Europe, like Asia or Latin America as well. But obviously, with a recent event in Europe, I mean, we remain cautious about the growth with coming from that particular area.
spk11: Great. Thank you.
spk00: Our next question is from Brad Erickson from RBC Capital Markets. Please go ahead.
spk10: Thanks. First, I guess just on the free cash flow guidance here for 22, I guess it looks like it's bumping up fairly close to the long-term targets you gave at the end of last year. And so I guess, Marcella, you know, you mentioned the further expansion, I believe, to free cash flow in 23 and 24. So curious if you just want to maybe update anything relative to that long-term target model today, and then I have a follow-up.
spk01: Yeah, I mean, look, we feel... The way that we look at our business, you know, it's a great space. I always say it's a cash machine. We have an amazing profile, and historically we have always tried to be very educated about the investments that we do. And we aim to continue to, you know, make investments that are going to drive returns. If we wanted to – if we suddenly see that perhaps growth is not there, we can easily pull levers to continue to increase margins. But what we see at the moment in 2023 and 2024 and on, we see an opportunity to continue to expand the revenue base. We see we can continue we can continue to grow and that's why we are investing and investing heavily in some areas more perhaps than others as we see opportunities there. So I don't see a reason why unlevered free cash flow margins could not expand even further than what we see this current year.
spk07: Yeah, I mean, just to reiterate what Marc saw as saying, I mean, Square Face is almost two decades old now, and it's always been about sustainable growth. So we were operating cash flow to break even for 14, 15 years and then flipped over to profitability a few years ago. And, you know, when we talk about a free cash flow margin in the low 20s, mid 20s, Again, if we, for some reason, thought, which we don't, that we're more limited in how we can grow, I mean, the cash generation of Squarespace is unbelievable. I mean, we could flip to our long-term target within a quarter or two if we wanted to be very aggressive about hiring, marketing, and all that stuff. But that would just... that would just cut off our long-term potential. I think what we're seeing, you know, within the campaigns, you know, within the Everything to Sell Anything campaign, I just think that's a really strong message and a really strong position. And I think we would be silly to not invest in it. We're really well positioned to capture a lot of these ways people are transacting, and we have. And that's why we're showing what we're showing with regards to some of our businesses related to commerce revenue.
spk10: Yeah, got it. That's great. And then second.
spk07: And I'll just keep in mind one tiny thing. I'll just keep in mind just regarding cash generation in the future. We have so much coming from existing cohorts that have very, very stable churn properties, right? So stable, but they're kind of changing in and out of the pandemic. And as Marcel was also mentioning, positive cash retention properties. So, you know, like that stuff just kind of It's there. You know, it continues. And so it's not dependent upon, you know, whatever we're doing in any given quarter to, you know, add, you know, add whatever or add some certain set of net new subscribers or, you know, push GMB through the platform right now. So it is a very stable core.
spk01: Yeah, and I think that the beauty of Squared Space is that there are so many different levers to pull that this is still in so many ways a business that is in very nascent stages of growth in many areas, international, enterprise, commerce offering. So we are quite excited about the future.
spk10: Got it. And then second, and no, this is a little bit of a difficult question asked just around Russia, Ukraine, but we are seeing companies in adjacent markets here halting operation, changing guidance in some cases here this morning. Maybe if you could just give a quick attribution on those markets and then obviously, Anthony, your general philosophy around the continuity of operations in that part of the world. Thanks.
spk07: Yeah, sure. Obviously a terrible, terrible situation. For us, we do not have major customer bases in either Ukraine or Russia. We do have... We do have, and from an employee-based perspective, we have a couple of, we had a couple contractors in Ukraine, not very many at all, but we're immediately helping them relocate to actually our ILO's office and doing what we can there. And to any Ukrainian customers, we're providing credits for hardship and things like that. So, yeah, that's, I don't, I hope we don't see much more of a disruption from that, but we have pretty limited exposure there.
spk10: Yes, that's clear. Thank you.
spk04: That's it.
spk05: Okay. Operator, are there any more questions in the queue?
spk00: That concludes our Q&A session for today.
spk07: Okay. Hey, thank you all for the thoughtful questions and for joining us today. Looking forward to 2022 and everything that we're going to be able to do. So thank you.
spk00: Thanks. Thank you all for joining. This now concludes today's call. Please disconnect your lines.
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