Q3 2021 Squarespace Inc Earnings Call
As well as our revamped circle professional referral program.
But for myself the financial details I would like to highlight a few notable achievements. This quarter first we surpassed a significant milestone by crossing 4 million unique subscriptions a testament to our all in one platform and of course, there is the ability to continue to attract new customers.
Our revenue grew 24% year over year and achievement against the strong Q3 in 2020.
Also on a trailing 12 month basis, we achieved $749 million in revenue of which $210 million with commerce related revenue, we have done so while maintaining strong gross margins of 84%.
Finally, our adjusted EBITDA and Unlevered free cash flow this quarter exceeded the high end of our guidance, which gives us the flexibility to invest further in our business.
We believe our combination of scale growth and profitability places us in an elite class of technology companies with compelling financial profile.
There are over 800 million small businesses and self employed ventures globally that need our support we remain confident in our long term trajectory of the creator economy and our many opportunities for future growth as we continue to scale our business profitability and.
In September to support our new platform vision of everything to sell anything.
Or what you are all known as our multimodal Commerce approach, we have announced a series of new product features and improvements to existing products focused on helping our customers sell online in multiple ways across physical products digital content classes appointments and reservation.
With more and more people thinking of creative ways to sell the things. They are passionate about we're focused on providing today's entrepreneurs with everything they need to thrive all in one seamless integrated platform.
To highlight two specific new launches as part of our Roundup first we launched square space video studio, which is an app that helps anyone create professional level videos to promote their businesses tell their story after let's say the app pulls in content and brand elements from our website and we wanted to create marketing materials the site design.
Within our menu updates to unfold our award winning App to help anyone standout on social media and we'd like to highlight biotechs bias. It's a quick simple website users can create directly on their phone and tended to go into social media bias. These simple sites can route visitors deeper content and functionality depending on what the creative we'd like to optimize this enables Lincoln.
Sites monetizing content or collecting tips. These updates were inspired by the trends of the evolving small business landscape and a flourishing creator economy with services based business is poised for increasing levels of success as many businesses broaden our way to transact every.
Everything to sell anything as a broad vision to help our customers convert their dreams into ventures.
The introduction of these products and updates is done in conjunction with the launch of our everything to sell anything campaign, which we continue to run internationally to reinforce our positioning this campaign with syndicated by many news outlets and we received an incredibly positive response.
As part of our ongoing investments in international markets, we have begun launching local campaigns as well starting with Australia and the United Kingdom for instance, in Australia or make a name for yourself campaign aimed to inspire encourage and celebrate local entrepreneurship.
<unk> answer Bolton individuals to turn their personal experiences and the idea is to a beautiful online presence reflected as who they are.
I'm incredibly excited to pair our evolving platform and product innovations with such a beautiful and telegraph the campaign, which I think resonates very well with the next generation of entrepreneurs of creators Im looking forward to seeing everything they do is square space with that I pass it to Marcella Martin our CFO, who will walk you through the financials.
Thank you Anthony and thank you everyone for joining today, we're excited to share our third quarter results and we continue to be even more excited about our fundamentals on the state of our business. We delivered strong revenue growth each quarter ahead of expectation.
<unk> was $201 million in the quarter, an increase of 24% over the same quarter last year, driven by strong performance across both Chris Lytham partners.
Our comments revenue reached $60 million, representing 55% year over year growth, which includes stocks revenue.
Bookings grew 22% during the same period, we achieved annualized run rate revenue of $789 million as of the end of Q3, 21% higher than prior year.
Continued strong revenue bookings and annual run rate revenue were driven by growth in unique subscription offering.
13, 5% year over year.
<unk> deal almost 6% to $198 due to growth in commerce, including our scheduling product and the addition of hospitality services offer can you talk with.
We delivered adjusted EBITDA of $38 million, and 19% margin and Unlevered free cash flow of $47 million or 24% matching.
We achieved year over year revenue growth of 24% over a strong Q3 last year.
Breaking it out presence revenue grew 14% year over year, and our commerce revenue experienced 65% year over year growth.
<unk> revenue was driven by a strength in personal and business plan subscription as well as healthy growth in global workspace, which we account for on a net revenue basis and social products.
We delivered a total of $60 million in commerce revenue this quarter, which grew 55% versus Q3 2022 Colby.
Organically and without the inclusion of Toc revenue commerce would have grown approximately 34% year over year.
Commerce revenue was driven by strength in our basic and advanced Commerce subscription plan as well as continued strong growth in our multimodal offering offer scheduling and campaign.
Driven by the strong growth in our commerce business commerce represent an increasing percentage of our overall business.
As of the end of Q3 2021 commerce represented 30% of our total revenue.
The total transactional or non subscription revenue represents 25% of the total commerce revenue.
Non subscription revenue continues to grow as a percentage of revenue on a year over year basis at the <unk> that flows through our platform continues to increase.
<unk> has grown 38% this quarter versus last year, we saw particular strength from services base GMB, notably from our scheduling product the inclusion of stock related GMB contributed to the year over year growth rate the labor shortages in the hospitality industry impacted our.
Issuance of the potential growth.
Physical goods represent a meaningful portion of our DMD mix.
Some of which was impacted by issues related to the global supply chain trend.
Trend wise during the quarter Dnb deep during the summer months picking up in September.
Finally, our take rate has stabilized quarter over quarter as we will now include the payment processing services through <unk> going forward.
Our results this quarter was strong and we believe issues facing the global supply chain and labor shortages in the hospitality industry adversely impacted our commerce business and growth would have been even higher but for these issues.
We are very excited about our growing revenue base.
Our total annual run rate revenue has grown to $788 6 million or 21% higher than the annual run rate revenue at the same time last year and represents 42% increase compared to the end of Q1 2020.
Markets outside the U S continue to be a driver per square space on our international expansion is one of the more important areas of growth in poker.
After reclassifications that shifted some revenue from the U S to international our international revenue was almost $62 million in the quarter, representing a 23% year over year growth rate and 31% of total revenue.
Reclassification pertain to certain revenues, which should have been classified as international revenues during Q1, and Q2 of 2021, Accordingly, and QC, we reclassified approximately $4 1 million and $5 1 million related to Q1 on Q2 litigation in 2021.
International year over year growth.
Would have been 37%, 34% and 23% respectively.
Okay.
Further Q1, Q2, Q3 U S year over year growth would have been.
A 9%, 30% and 24% respectively.
These changes are outlined in our 10-Q.
Much of the growth was driven by our performance in the English speaking countries, including Australia UK and.
Spansion strategy with you.
Key geographies such as Germany.
How many U K and Australia.
We have recently launched two new languages for web sites.
We'll expand our supported languages.
And Danish in the first half of 2022.
This quarter, we observed some macroeconomic headwinds, particularly on new business formation.
According to the U S Bureau of Labor statistics the growth rate is.
Quarter fell approximately 18% year over year with a steeper month over month declines in July and August.
We believe these had an impact on customer acquisition this quarter as compared to the previous year as a unique subscription growth rates. In Q3 2020 was one of our trends we saw in July and August recovered significantly in September.
Our business formation and growth remains flat year over year.
Pouring massive growing.
Market opportunity that will allow us to continue to expand our customer base and revenue over time.
During the third quarter 13, 5% year over year.
Thanks to over $4 million.
As a reminder, a unique subscription may account for both presence in commerce revenue of what could potentially be multi before offering.
David.
In average revenue per unit.
Fred $98.
Over 3% of which was.
Organic growth versus $188 in the previous year.
As we have accelerated the pace of adding new products to the all in one platform over the last two years, we continue to see immense opportunity in cross selling various subscription throughout the customer base.
<unk> has a strong fundamentals, including attractive margin profile.
Our gross profit margin was 83, 6% in Q3.
Slightly below Q3, 2020, the slightly higher sequentially due to the consolidation with talk where payment processing fees represent the largest component of tax revenue.
Our strong gross profit margins allow us to continue to invest in R&D, which grew 27% year over year to $49 million.
Prior year to $80 million.
G&A expenses have now returned to a more normalized level without the impact of the direct leasing costs, but it's still growing 168% year over year growing to $32 million part of this increase was driven by the market performance of the stock based compensation grant.
Our strong fundamentals are also reflected in non-GAAP margins and profitability measures.
Adjusted EBITDA was $38 million in the third quarter versus 41 million a year ago.
Our unlevered free cash flow grew to approximately $47 million this quarter from approximately $45 million in the prior year driven by higher revenue, partially offset by a decline in net working capital.
Q3 on a number of free cash flow exceeded the midpoint of the guidance range.
By approximately $24 million. The main reasons for this positive buyer relate primarily to the timing of prepayments timing of certain tax the healthy balance sheet.
Cash on investments reached over $206 million at the end of the quarter, our net leverage improved this quarter to approximately two three times.
The last 12 months adjusted EBITDA.
Let's move on to fourth quarter guidance on when we are expecting the full year of 2021.
For the next quarter or full year 2021, we are cautiously optimistic that.
That could continue or worsen in Q4.
Our guidance.
And that growth in our commerce business will continue to outpace Preston driven by a strong adoption of our diversified multimodal offering such as our E Commerce store scheduling campaign number.
Gray area some talk.
Near term uncertainty driven by three macroeconomic factors may create some had related to business formations in the U S global supply chain issues, which affect physical product GMB and continued labor shortages that impacted hospitality.
The industry in multiple ways.
Our guidance assumes this headwind.
Since remain through the end of the year improvement or further deterioration in Q4 could either positively or negatively impact our results.
Therefore in Q4 2021, we expect to achieve total revenue between $203 million on 206 million and Unlevered free cash flow between $7 7 million and $12 7 million.
This implies a year over year revenue growth.
Close rate between 18% to 20%.
And Unlevered free cash flow margin between three 8% and six 2%.
We expect our margin to be seasonally lower in Q4 due to an increase in prepayments associated with Q1 advertising spend.
Unlevered free cash flow is comprised of cash flow from operating activities between 11 million and $17 3 million.
$30 million in cash paid for interest expenses net of associated tax benefit between $2 5 million and $2 7 million Symantec.
Symantec.
In Q4 2021.
Based on the timing of <unk>.
For our full year 2021 guidance, we have increased our total revenue expectation to be.
Between $780 million on $783 million from $700. This.
This implies a year.
<unk> revenue growth rate of approximately 26% at the top end of guidance, which would have been an acceleration of the 2019 annual revenue growth rate of 24% and slightly below our 2020 annual revenue growth rate of 28%.
We also expect Unlevered free cash flow between $117 million on $122 million from $102 million to 116 million previously.
15% and 16%.
The guidance has increased.
Based on the increasing the full year revenue guidance from timing of prepayments.
Cash flow from operating activities is now between $119 2 million on $125 5 million.
Little expenditures of $12 $5 million and $14 million and cash paid for interest expenses net of associated tax benefits between $10 3 million and $10 tightening.
Gross opportunities abound that squares pace.
We continue to deliver our financial goals and we remain focused on execution.
Our opportunities are significant continued growth of multimodal commerce geographical expansion enterprise and expert community are the key focus area.
We remain very optimistic on the long term secular trends in our industry.
Total addressable market as well as our ability to execute against our plan.
We would like to remind the audience that our virtual investor day will be held on Thursday November 18, 2021, we are very excited for this upcoming event next week and the opportunity to share more on the gross basis story on our future. It will be a webcast beginning at one PM Eastern standard time on <unk>.
<unk> signed a registration details in the events and presentations section of our Investor Relations website.
I will pass it on to Anthony for final remarks.
I'm incredibly proud of our achievements this quarter, we are making excellent progress towards our vision of not only helping our customers represent themselves in mind, but also helping them transact with their customers no matter how that transaction may occur.
This wave of existing businesses transacting online in many ways, along with a new generation of creators and entrepreneurs will drive durable growth for square space in the years to come in closing I'd like to thank all of our employees partners and customers and shareholders for their ongoing support. Thank you again.
We look forward to seeing many of you at our Investor Day next week.
Thank you Anthony and Marcella will now turn the call over to Q&A operator, Please open the line for questions.
Ladies and gentlemen, as a reminder, please press star followed by one to register for a question.
The first question we have comes from Trevor Young from Barclays. Please go ahead Trevor Your line is now open.
Great. Thanks, so much just on the Gmg comment or I think you noted that it dipped in the summer and then pick back up in September and just wanted to clarify that you're saying that growth slowed in those summer months, but didn't actually decline year on year is that correct and then how has that trended. So far into October have you seen kind of stable trends of improvement.
Any detail there would be helpful. Thank you.
Hi, Trevor Thanks for your question, Yes, you hear that correctly.
It was a little bit soft on the good side very strong on scheduling and we attribute that to.
The macro trends that you see with supply chain challenges, so far and that October.
We have seen so far the Asa According to what we had what we had expected.
Okay.
Alright, thank you.
The next question, we have comes from Sterling Auty from JP Morgan.
Sterling Your line is open.
Yes. Thanks.
I wanted to follow on that line of questioning but kind of expand upon it. So you mentioned a number of factors the business starts in the U S supply chain constraints I Wonder if you could just kind of characterize the magnitude what's having the bigger impact on the business and how are you managing your marketing spend.
In particular in light of those elements.
Hi, Sterling.
Look I mean, we had a very good strong Q3 financials and what we can tell you is that scheduling perform really well and above of what we had anticipated.
We have a very powerful set of tools for creators and that they are.
In a professional they want to sell their assignment we are very happy with the performance that we have had so far I think that all of our scheduling tools for event appointments and so on are putting us up and leader in this space.
Online Commerce also perform.
Better a little bit better than what we had expected and.
And we believe that commerce will continue to grow and will become a more meaningful contributor to the overall mix of our topline growth.
Unique subscriptions performed a little bit.
Our lower than what we had expected and we attributed that to the slow U S business formations that we saw in July and August.
<unk> with a little bit of seasonality in international summer months, typically drive lower <unk>.
Conversion rates.
What we've seen in talk is that we sit at a record number of diners in the quarter. So we're quite pleased with the performance of the business from a volume perspective. However, the product mix was the driver of the lower than expected revenue for payment.
We see subscriptions continue to increase.
But we have what we have a third theme in Tulsa in particular was that the business has been impacted by it.
Industry and how that is impacting the whole industry in general.
And again.
That said, we believe that it has impacted.
The growth of <unk>.
<unk> on online.
Our <unk> stores and again.
The strength that we have seen in GMB has come for the most part from our.
Scheduling tools.
And maybe one quick follow up.
I think a lot of discussion around what might happen to the E Commerce World as we go through the holiday season.
Okay right of the supply chain constraints I think you mentioned that in your guidance, you're assuming that the constraints continue but in particular, how have you kind of factored in the e-commerce environment for the holiday season in light of those constraints.
Okay.
What we have assumed and of course, we don't know we are optimistic about some may also impact our scheduling.
In business with.
Perfect.
For him really well, so far but consumers may shift.
<unk> towards goods.
Our site towards travel and.
Is that that could impact the growth.
He had in considering four unique subscriptions our websites on.
Domain.
We are again I mean, we are variable.
But we remain cautious because of the supply chain to center.
So.
Sure.
The food inflation the foot price inflation is real.
And that can impact.
In our comments.
The stores.
Yes, I think just to add to what Marcellus thing.
Within square spaces revenues.
Youre seeing a pretty dire.
<unk> picture emerge really where our business a decade ago or five years ago domains and to a lesser extent back then.
People transacting through the platform and now Youre seeing a business that has revenues from scheduling revenues from hospitality restaurant revenues to go ordering.
The revenues from events revenues from.
Remember areas in all these different ways that we're enabling people to transact and so in any given quarter I think youre going to see.
Far as these macro.
Thanks Keith.
Kind of washing over us those revenue streams impacted in different ways at different times for instance, no.
And when Covid started our scheduling business was really hit hard for a couple of months and now has picked up and I just wanted to.
The strongest performers within that commerce portfolio.
Yes, I don't think any one individual trend that we see there is going to have such an outsized impact, but they are all real and.
And depending on the sector Youre looking at the sub sector within square space.
They're going to play out in different ways.
Excellent. Thank you guys I appreciate it.
Thank you next we have Cte paani grodsky from Mizuho. Please go ahead.
Hey, thanks.
Congratulations good quarter.
I'm Tony M. Michel I want to ask you about in the beginning and for Q2, you were a little concerned about Delta Varian.
Heading into Q4.
That exceeded your expectations.
As Youre looking forward to Q4, what are you seeing.
<unk> going to be key driver Q4 or in the next few quarters.
Yes, yes.
One.
We have been investing over the long the long run.
And this is what Anthony was trying to portray earlier when he was talking about the different revenues.
And what I was trying to convey.
Covid environment or an adult environment with Lockdowns, we could have expected that for business and domain. Those we're going to thrive, while our scheduling business and unfold business would have been negatively impacted right and the opposite would occur without without lockdowns. So what we have seen.
In Q3 that perform really well is commerce to stores continue to perform well, though <unk> has been impacted particularly for hardwood.
When I say it has grown but it hasn't grown as strongly as the scheduling the GMB for rescheduling businesses scheduling has performed really really well and unique subscriptions were a little bit lower than what we had expected part of that because of seasonality impact of that we believe it is because of the.
U S information business with our our overall business continue to be skewed towards domestic right and again I mean, we stop we are quite excited about the <unk>.
Business.
Record number of diners in the quarter. So that's a major milestone for the business. So transaction wise that business is performing really well is getting the traction that we were expecting and we're even more excited with the tools that we can continue to create to support these diamond slotted businesses for the hospitality industry.
And.
Anthony.
At September you introduced so many features and how does that expand your competencies would you Sidney and also the new campaign everything to sell anything.
Do you see that.
Camden going to drive any kind of.
Growth.
Yes, well I'm really proud of the team and I'm proud of what we released and I love the new positioning its inherent in that campaign because.
Multimodal Commerce, maybe is not the best way of describing.
What we do from a from a consumer perspective, but I think.
Yes, I haven't even thought of anything is.
Yes.
Along with a couple releases we highlighted.
<unk> highlighted biocide can unfold, we highlighted Chris its video studio coming out there are a slew of other improvements across our product lines and really we use it as an opportunity to sort of recap and say hey <unk>.
Square space is not just websites and physical commerce, so much more its tools for the hospitality industry, it's tools for appointment booking and scheduling theres new emerging business models. So we want to highlight things like member areas, a trigger to expand into more tools for online courses in video and yes.
It's just there is a huge opportunity and commerce out there that is just beyond simple physical commerce, I mean, thats of course, big too and again I've said it on previous calls we have almost a decade of investment in our commerce engine and it's one of the most powerful ones on the internet, but when you combine that with all these other ways to transact in one platform.
One company I think is where square space, it's really going to start to shine certainly shining now, but we're going to lean more into that.
For us to come and you see that reflected in our numbers as well with $60 million.
And revenue that's about 30% of our revenue just around there.
Yes, this quarter coming from those commerce related activities and we think that's just going to we think thats just going to continue to grow.
Yes.
That's great. Thank you thanks for the color.
Thank you Sydney.
Next question comes from Josh Beck from Keybanc. Please go ahead.
Thank you team for taking the question.
I wanted to go back to the international growth, obviously, that's been one of the future opportunities for you as a business.
This quarter it was similar or maybe a touch below U S.
Was that may be related to some of the measures that we've seen in Australia and some other countries. Just curious maybe what some of the impacts were this quarter and how we should be forget about those trends over a longer time horizon.
So ensure thank you for the question.
So in short, yes, I think as we see the climate vary.
Just very different scenarios very in various regions.
But from an international standpoint, we continue to introduce new languages, Marseille I mentioned two coming in the first half of next year, we have been pushing with.
Localized campaigns actually in the slide materials on our Youtube channel you can see some of what we did in the UK and Australia.
And we're going to be launching new payment mechanisms. So yes, we have to suffer on the horizon, which will further enhance our ability to convert in those international markets, but just to circle back around to the beginning of the question, Yes, I mean, depending on where people are the travel what's locked down whats opening up and part of what we're seeing is just kind of interesting.
Okay.
We touch on as part of the prior answer just because of lockdown exists or doesn't exist at all kinds of dynamics created now post lockdown all the supply chain issues labor shortages all of that.
It's not.
I don't think a lot of people could have maybe known exactly that that was going to play out quite like that and they're affecting different industries in different regions in a desperate way.
Very helpful. And then maybe just a follow up on.
Subscriptions, obviously, the last two years, where we have large quarterly detail.
Unusual time for a lot of reasons just so as we think about next year anything to call out with respect to seasonality is there a bit of a new year's Halo, where you start to see stronger formation in a typical year.
The thing that we should be calibrated on and just in terms of seasonality for next year.
Hi, Josh.
Look I mean with Tucson, Let me walk you through typical seasonality of unique subscriptions.
On a non COVID-19 year.
Q1 is the strongest in Q3 are strong and the lowest are typically Q2 and.
Q4, actually Q4 is stronger than Q2.
Right.
That's on a regular basis, but I just wanted to call out that because of the nature of the unique subscription.
Unfolded has is not a product that is fully attached to.
Yet two websites or two domains and so unique typically unfold.
The account is unique and then we have the other set of prescription domains.
<unk> got remember areas campaigns et cetera that they get attached to each other.
They account for one the reason why Im clarify and this is because unfolds that has a slightly different seasonality than the rest of the what I would say the whole.
Unique subscriptions, which is that typically Q3 is a.
Strong is a strongest actually with Q1 is our strongest quarter.
Four unfolded.
Sorry, excuse me I am think Q1, and Q2 of the strongest for <unk> in Q3, and Q4 are the weakest for four unfolds. So overall, what we can expect is that as we moved into 2022. This seasonality will remain as as I have explained to you before.
Q1 is going to be the strongest the strongest quarter.
And Q2 the weakest.
Very helpful context. Thank you Marcella Thank you Anthony.
Okay.
Next question comes from Navin <unk> Khan from <unk> Securities. Please go ahead.
Thanks, a lot maybe just a quick clarification on the trends you described in terms of.
Growth over the summer you said July August September.
So some improvement and you said that Dr.
Essentially near expectations.
Let me just compare and contrast October versus September.
The recovery in September.
Continued into October.
Is it even higher and how should we think about that.
And then I have a follow up.
Sure Hi, Annabel.
October has been a little bit of a stronger month compared to.
Two September though we still remain cautious on how the business formations will remain for the rest of the year just because of the typical trends that we see in the industry.
One more thing that I alluded earlier I don't know how how clear it was that if we yet need to see.
<unk> started to open up and consumers may shift.
In particular more compared to other yet to say have been stuck in their homes or almost two years. They may shift expense towards more traveling and entertainment rather than typical services, our websites or domain.
So far what we feel at the moment, we are confident with the guidance that we have provided based on what we have seen so far and so far what I am saying so far is same as of today.
Understood.
And maybe just.
A bigger picture question.
In terms of hospitality and leisure plus you would think about that as a guide.
How meaningful could it be if it recovers.
Growth in payments and your ability to kind of capture that or other things maybe speak to that.
Thank you for the question.
And we think it can be huge.
Why we were so excited to partner up and join forces with talk.
We have so many businesses on the platform.
At our Costco debased businesses to service based businesses event based businesses take time for the businesses.
I mean it.
<unk> I don't have the figure off top my head, but what percent of it our whole GDP is it's a <unk>.
But something like.
So I need to reference check me on that number but.
It can be absolutely it can be absolutely massive in fact, I think when you look across.
All of the revenue streams that we enable within our commerce offering all of them can individually.
You could have a company just doing one of them and it can be a very very large company and that applied to scheduling an appointment satisfies two times by the businesses and Thats to go ordering.
Reservations events that applies to e-commerce of course, which you've all seen and we've got some bets on some newer things like member areas, where we think that there is a lot of businesses out there that are going to want to sell time and expertise and provide access to video classes and courses.
Paid newsletters all of those I think can be very big.
On their own and the powerful part of what we do is that we've got all of that in one single platform and I think it just sets us up really well for the future because again as we're referencing earlier on this call. This business is not we just need another website another website and on the web site, we put all our eggs in one basket on e-commerce or scheduling the scheduling industry.
The types of businesses that are being powered by our scheduling products are affected everything else is lost so.
We're trying to set up a really robust and durable.
Revenue stream.
One that can grow with these customers I think when you look at square space five years ago versus today. The big difference is the more we're part of that commerce transaction, we get to scale with our customers sell them more services, but also as we're part of more as they transact more.
We're able to grow with them 510 years ago, let's pick 10 years ago, that's definitely not the case for square footage of your website gets a bunch more traffic.
Bandwidth and storage.
Modest a commoditized in our industry and.
For small sites years ago. So this is.
An exciting time for us and I think when you think about any one of those revenue streams that I am referencing there and if you take a.
A 10 year view and think okay, or even a five year view and say are people going to be booking more orders online more appointments online selling more online.
Or less than five years I think the answer is clearly more and all of the basic categories that we service we've intentionally gone from really really.
Broad revenue streams right, there's a lot of niches within them, but these categories I'm describing are just they are really big.
John just to add to that I think we.
So all of this emphasis tools that we have in the platform are positioning us as the leader we believe as the leader in the marketing services in particular, when you think about the talk obligation right. It is a tool that was born to health.
Served restaurants, but it's actually a tool that has expanded to much more than that.
And we have distilleries wineries museums that use that that towards so it's quite exciting.
And combined with our scheduling where we tackled a lot of the health and wellness industry I think that it's.
Anthony said, we are very very well position for the future. Yes, we've got really we've got really diverse wide coverage there, but I'd also like to emphasize that we actually go very very deep in these different categories.
If it was just surface space. If we just kind of went out there. We've got scheduling share we have to go ordering I just don't think that that would translate to meaningful actual meaningful revenue because we wouldn't be really powering.
The kind of businesses that we have always attracted to our platform square space has always attracted.
Customer sat there was more serious more design conscious may wanted to pay.
And really wanted to succeed and stand out and so we have to pair that with deep functionality not just surface level functionality and I think when you look across our product offering we are really.
We're in an incredibly unique spot with regards to that.
Considering what we've built in what we bought.
Makes sense.
Thank you guys.
Thank you.
The next question comes from Ken Wong from Guggenheim Securities. Please go ahead, Ken maybe to circle up on something you touched on earlier in your call you mentioned.
Revamping our referral program Youre partner on a full program something we've kind of heard might've been might be in the works just would love to get your sense for what what's changed there and how that might potentially.
So drive subs down the line potentially change your change your change your commerce mix to the extent that you are moving a little more.
And any color there would be fantastic.
Thanks, Ken.
Yes, so we introduced a new referral program, we've been we've been testing it in non U S geos for a little bit and seeing how it performed we we started to roll.
Build more on the platform into sharing.
Sharon our success I'd say two things one the circle program, which is of course.
Our professional community has always been incredibly important to us. It's a great space has always been a favorite choice of designers and web professionals because of our design orientation and the fact that they are using us.
Yes, they are able to get out of the box so much further than that.
Fixed design on something Thats kind of inherently out of the box a little bit more broken.
So yes, we've always been we've always resonated very well with that community and is just another step in us partnering with them and servicing them. The other thing that I would like to help equip them with is we've got tens of thousands of people out there putting sites.
<unk> space and that means that they are in front of.
Businesses as Theyre getting started and I think that that gives us an opportunity for things with for instance talk to say hey.
Youre setting up a new restaurant youre setting that you produce.
<unk> web site for an event consider plugging in.
This system versus something else that integrates better et cetera, et cetera, as youre getting your client set up so that puts us in a really great spot and it's one that if you were for instance talk Standalone you really wouldnt be in front of us because you don't have tens of thousands of people in front of small businesses that are.
Right, there when theyre getting set up so.
Circle remains really important to us excited about the referral program rolling out more broadly now as opposed to.
Just testing it locally and Im excited about equipping the circle members to help really introduce our clients to our broader range of services. They can just show much more they can sell them on square states right now than they could 345 years ago, It's just a completely different product portfolio.
Got it got it really appreciate the color on the on the cross sell opportunity.
So I just wanted to just.
Ill take a take a quick cut it.
Leverage it looks like a lot more profitable this quarter I guess, how much of that might be short term in nature, perhaps you guys dialed back on marketing with the funnel looking a little softer labor shortages as you mentioned, maybe maybe put a dampener on hiring ramp.
Is that is the number we saw in Q3, and how Youre guiding Q4 kind of the right number to build off of or should we expect that there may be.
Yes, a little bit of pent up demand and kind of the costs might flow back in a more meaningful way once once some of this macro stuff clears.
Hey, Ken we had a little bit of a shift of spend from Q3 to Q4 and mostly related to hiring right on the hiring piece.
But other than that I mean, we have being <unk> line on the rest of the expenses with what we had expected or regionally.
Great. Thanks, a lot guys.
Thank you.
Next we have Brad Erickson, Brad from RBC capital markets. Please go ahead.
Hi, Thanks I.
I want to come back to the net sub add it sounds like.
Things improved in September and then again a bit in October.
I guess the question is we kind of trend dimensionalize. The net AD levels going forward are we would you say, it's fair to say, we're approaching say COVID-19 levels. Once again after that sort of summer time seasonal slowdown I mean, if you look at it you just did more in Q3 than Q1, but less than Q2. So just trying to get a sense of any sort of baseline run rate youre seeing in <unk>.
Expecting in terms of how bad as we look forward hopefully beyond Covid and obviously, what's baked into the guide and then I have a follow up thanks.
Yeah.
Thanks, Thanks for the question actually what what we have seen is that we have accelerated the pace of new unique subscriptions compared to 2019.
For the last for the last couple of quarters.
So I mean in terms of seasonality. We are we are considering that we are going to go back to a little bit of what it was.
2019 in terms of seasonality, but definitely not the pace of the growth compared to 2019, because we believe that we're going to grow unique subscriptions faster than what we viewing 2019.
That's very helpful. Thanks, and then just a follow up.
We may have missed it in the filing or the presentation, but can you give us talk contribution to revenue in the quarter. Please. Thanks.
Okay.
Well I mean, we have reported the growth. So I think you can.
Determined that from the previous.
The previous figures that we have reported on and the current organic versus inorganic growth organically, we grew 34% year over year and in <unk>.
Total growth has been 55%.
Okay.
That's great. Thank you.
Next question comes from Aaron Kessler from Raymond James. This is the last question. Please go ahead Erin.
Great. Thank you.
One of the questions have been asked by many of marketing tools can you talk about maybe what's the roadmap maybe or is this from marketing solutions for Smbs.
Maybe just the timing of kind of some of your local language rollouts as well. Thank you.
I am sorry, you sounded very choppy. So you were asking about marketing tools.
Yes, maybe I'll just turn on marketing solutions Youre. Thank you, Matt you could be rolling out for your clients and kind of the traction with some of your key marketing tools today.
Yes, so right now the marketing tools portfolio consists of.
Video studio, what we're helping within SCO email campaigns.
Sorts of things.
We haven't talked about exactly what's coming up on the roadmap next but it's sort of things that are going to be.
In that vein for small businesses.
Got it great and if any of the kind of the <unk>.
Some of the local language rollouts as well.
So correct me, if I'm wrong, but Norwegian and Danish and the first half next year. Yes. Those are the next one is on the <unk>.
And then also no specific timing on it but server will happen at some point soon.
And that.
That will help us in our regions that expect that.
Got it that's helpful. Thank you.
And it seems that we have time for one more question.
Next will be Matt Pfau from William Blair. Please go ahead Mac.
Hey, great. Thanks, guys for fitting me in just wanted to ask a couple of clarifications on the comments around <unk> and specifically what drove the mix of loss payments with the diners being up and then the labor impact how do we think.
That is it just lower capacity at the restaurants because of the labor issues is that the main impact or is there something else there to think about.
Sure. Thanks for the question I'll give a couple a couple of remarks on each so first off during the pandemic.
It is a business that was basically centered around <unk>.
Diners buying experiences in restaurants and that reservation system, obviously that went to almost nothing.
Pandemic rolled around and Lockdowns occurred in a launch it to go ordering business those businesses could thrive during that time and actually that was really really really well received and a lot of businesses use that the to go business has a different margin profile then.
The booking space business and over the past.
Two quarters as people have really started to return to restaurants, and Marcel noted earlier that it was a record record quarter for <unk> and people <unk>.
And those restaurants that revenue shift is mixed.
<unk> has shifted back more to being in person versus to go and so we have a number of things we're looking at there to address that.
Activity on the platform is very very high tons of attention on it.
And we will just keep adapting as we see those trends kind of move back and forth, but the good thing is we have both of those revenue streams on the platform. So we will be able to capture demand off of both when we were talking about labor shortages and supply chain issues and how that affects hospitality.
Well first off.
With the supply chain issues restaurants may not be able to open for one or two reasons, one the cost of goods or their ability to access just the raw materials they need to serve customers impacted by all of this and if you are in that world shifting your your payment. Your reservation system is probably not at the top of the list of things do you want to pursue right now.
Also with labor shortages, that's also affecting their ability to open and if they can open they might not be able to open at full capacity and so all of that is kind of happening in swirling behind the scenes is.
As we move forward.
We're still very optimistic about the future with talk because again, just the amount of activity on the platform the amount of diners using the system. The versatility of the system the ability to apply it to other time slot of businesses like events.
Stuff that we're really excited to do.
And again as we move into next year <unk> has its own roadmap.
Yes, really exciting from a product standpoint, and it's going to be it's going to be great.
Great 2022 with them.
Great. Thanks, I appreciate it guys.
With that I will hand back to the management team for closing remarks.
Thank you everybody for joining the call and for the for the Super insightful questions.
But we.
When I look at the business and I think about how we're situated.
Never.
I have never been more confident in.
How we are positioned because again and we've touched upon it on this call. It is not just that square space is dependent on one single revenue stream. It is not just E. Commerce. It is not just websites not just demand not just scheduling it sounded hospitality.
To address all of those in one platform and it leads to these interesting scenario. That's right. We're certainly these macro events are going to impact one in a different way that impacts the other but.
Commerce as a percentage of revenue is higher than higher than ever within the company and we're going to see that continue so.
Looking forward to an exciting 2022 and <unk>.
We will see many of you later and all of you soon and also just a reminder, that we have an investor day coming up next week.
November November 18th and looking forward to seeing many of you there and when they will give us the opportunity to really dive into our models, a little bit more and to help.
To help.
Further the story.
Thank you.
Ladies and gentlemen, this concludes today's call. Thank you all for joining you may now disconnect your lines.
Okay.
Okay.
Okay.
Yes.