Q2 2022 Squarespace Inc Earnings Call
We delivered a fundamental upgrade to the core part of square spaces content management system. This new design system called fluid engine lets us push forward a platform that is both more usable and expressive than our previous system.
This benefits both our users who are just getting started and not familiar with web development as well as our professional circle members, who will find that the platform, but some do even more without resorting to cost encoder complex tools.
Fluid engine is currently alive to our customers using our seven one platform and anyone's signing up for square space. Today, we have some great demo videos and more up on our homepage for anyone interested.
To enable the billions of transactions.
Of all types, we envision our platform. We also are investing in an integrated payment solution scores based payments, we look forward to sharing more in future calls about the opportunities, we see enabling our customers to transact in more ways.
And in more places on our platform.
Momentum around talk our unique solution for hospitality and time slotted businesses continues to build and we're making significant investments to support <unk> future growth.
We launched a new global brand campaign delicious starts here to showcase the range of businesses using Tox platform. The campaign include strategic advertising across digital print and partnership channels.
<unk> is also beginning to draw large enterprise hotel groups as clients and is expanding to hospitality groups with hundreds of locations because of the ROI. It presents and the ability for those groups to own the relationship to the end customer.
It's been a bit of a year since our direct listing one reason, we chose a direct listing versus traditional IPO, but because we are cash generative and did not need to raise primary capital, but rather wanted to diverse.
Rather one at our diverse stakeholders to have the ability to transact in the public markets are public listing also enables us to return the cash we generate to shareholders in the form of share buybacks I'm delighted to report that under our $200 million repurchase program. We've bought over one 5 million shares at an average price of 2073 per share through the end of the SEC.
Quarter.
Our CFO search is underway and we've met with a number of quality candidates in the interim period I am confident in our finance leadership, our finance leadership team ability to execute Marcelo was gracious enough to join us for one more call before our departure. Please join me again in thanking her for our work at square space.
Recently economists reports in the press of for one of an economic slowdown while no. Two recessions are necessarily equivalent square space has historically fared well during times when individuals are seeking lower cost alternatives to custom web development scores. This will continue to operate by balancing revenue growth with strong cash flow as we move throughout this period.
Finally, I'd like to thank all of our employees, who worked tirelessly to provide our customers and deliver innovations that underpin our future success.
Now I'd like to turn the call over to Marcel out to take you through the financials.
Okay.
Thank you Anthony good morning, everyone and thank you for being here today.
I will talk about some of the highlight of this second quarter performance.
Further details on guidance for the rest of the year.
We executed well as we did in EBIT revenue ahead of our estimated high end of guidance when adjusted for the impact of the stronger dollar versus when we had originally anticipated.
Revenue of $217 million and 9% year over year as reported and two.
12% on a constant currency basis.
Breaking revenue further down fences.
11% and Congress SKU, 16% year over year.
In constant currency.
Okay.
These results were driven by new unique subscriptions and our strong customer retention across our bank.
Our business model and relentless focus on cash flow and profitability.
Steven Unlevered free cash flow to 36 million in the quarter, representing a 17% unlevered free cash flow margin and adjusted EBITDA to $44 million.
And 21% margin.
Overall, we are pleased with our performance in the second quarter as we continue to execute towards our plan.
There are a few specific items that I would like to unpack this quarter.
The first item is our net new subscriptions.
New subscriptions or website and domains were ahead of our own internal forecast as we had a stronger than expected months of May and June .
Further expanding our loyal customer base of $4 2 million unique subscription.
This quarter is impacted by a 2021 call each quarter of the strong growth on prices.
New business formation overall, as we had anticipated in our Q1 guidance.
And most impacted product was unfolds, which has the lowest average revenue per unique subscription.
The light net new unfolds subscriptions are the result of the shift of social media trend, resulting in a general decline in this photo continually in the main platforms, where and for these distributed.
We are incredibly encouraged by the unfolding teen pace of innovation.
We continue to deliver new products and features to position <unk> as an essential tool for creators on social media.
We are especially encouraged by developments in and for spinal site functionality, which lets our customers create symbol website for their social profile.
The second item relates to the increase in customer acquisition costs very unique subscription.
Our overall marketing spend includes investments in our core business and investments in new revenue streams, such as stock international expansion on enterprise.
This business is.
Different maturity and development level versus our core business.
At the beginning of the year, we talked about the increased marketing research and development investments that we are deploying that talk.
Marketing expenses had an impact on the calculation of compensation costs.
Though these have not mention who the number of subscriptions that we acquire as they mostly relate to marketing direct to consumer.
We are quite pleased with how the business performed so far and the speed of launching new features and products, which has proven so far than return on investment than we had expected.
We are continually updating our distribution model to evaluate our marketing spend and ensure that we are investing wisely.
We expect to leverage marketing expenses further in the future, though not at the cost of nurturing new revenue streams for our business.
Our history of strong cash retention pricing average revenue per unique subscription on growing customer NPV provided us with some confidence.
The third item relates to spending in a recessionary environment.
At the beginning of the year, we took a conservative approach related to our overall spend and this allowed us to deliver strong cash flow margins in the last two quarters, while also repurchasing shares.
We continue to pay close attention to macroeconomic headwinds and we will adjust expenses accordingly.
We believe that our company is well positioned to continue to deliver revenue growth and profitability even in a recession impacts because we believe that our the wheel for our customer and low cost solution to maintain a digital presence both for their business and online presence.
We provide essential web tools on site for people looking to launch the business transact with their customers or promote themselves online.
More than 90% of our revenue is subscription based and about 70% of the new additions typically pay for online.
The fourth item relates to FX headwinds, which had an impact on our actual results.
And on our full year guidance I think we would explain a little bit later.
Besides the impact that we have shown in revenue bookings of $220 million resulted in a 6% year over year growth of 10% in constant currency.
Also we reached $838 million on an annual run rate revenue growing 8% year over year as reported but because we calculate already on one run rate revenue using.
Received in the final month of the period in this case June times 12.
FX movements, we weakness in June had announced side impact on these calculation.
Our balance sheet is strong and ensures that we have the resources to execute our strategy.
As of June <unk> cash and marketable securities totaled $247 3 million bolstered by strong cash generation in the period, allowing us to return over $35 million in share buybacks to our shareholders as Anthony noted in his remarks.
Turning now to some further detail from guidance.
Today, we update our guidance only to reflect changes in foreign exchange rates. Since we last offered guidance in may as our business remains on track to deliver on our prior guidance excluding FX impact.
We reduced the high end of our full year guidance range for revenue by $12 million or one 4% due to our exposure to savings in foreign currencies.
Our outlook for profitability remains unchanged as we continue to drive towards the full year free cash flow margin Unlevered free cash flow margin of 18, 7% of the midpoint of our guidance.
For the third quarter of 2022, we expect revenue to be in the range of $213 million to $219 million, representing a year over year growth range of 6% to 8% versus Q3 2021.
We anticipate unlevered free cash flow in the range of <unk>.
$33 7 million to $38 7 million.
Implies an unlevered free cash flow margin of 16, 8% at the midpoint of our guidance range.
For the full year 2022, we expect revenue to be in the range of $857 million to $867 million, representing a year over year growth rate range of 9% to 11%.
We anticipate unlevered free cash flow in the range of $156 five to $166 5 million.
In Q1, we outlined our expectations for non-GAAP operating expenses in 2022.
We are executing well against our peer prior comments and expect our non-GAAP expenses ratios.
We remain within the following ranges.
Gross margin on our.
Current level.
So no changes to report.
Previously, we noted expectations of marketing and sales expenses at a range between 32% to 35%.
We now believe we hit the high end of that range because of the exposure that we have to foreign currencies.
While we are expanding our international presence with entities in Australia, UK, Netherlands expenses denominated in foreign currencies are still lower than the revenue that we generate outside the U S.
Research and development to be at a range between 20% to 25% on G&A and approximately 11% of revenue.
Our second quarter performance brings us closer to these full year projections as we deliver industry best operating performance.
I've had the pleasure of leading the squares based finance team since I joined in 2020.
In the interim period before a new CFO begins I feel confident that the highly qualified leaders from the finance team will continue to support the business relative to their areas of expertise.
And now we would like to open the line to your questions.
Thank you if you'd like to ask a question. Please press star followed by one on the telephone keypad, if you'd like to withdraw. Your question. Please press star followed by two when preparing to ask a question. Please ensure you're on mute locally.
As a reminder, that star followed by one on your telephone keypad now.
Our first question comes from Trevor Young with Barclays. Your line is now live.
Great. Thanks first one based on the <unk> guide and what that implies for <unk>. It looks like you are assuming a modest uptick call. It like 8% to 10% year on year revenue growth versus 8% at the high end for <unk> can.
Can you just help us understand what's informing that uptick is there something that you see today.
Excuse me, giving you more confidence later in the year is it just some of the pricing initiatives you started with new subs earlier in the year and pricing for existing subs in the back half of the year.
That's the first question.
Right.
Thanks for the question, Yes, we have we are at.
Assuming that our GMB trends are going to perform.
Higher than Q2, and that is mainly related to seasonality.
Okay.
And of course Q3 is suffering of Q4 from the impact of the FX FX headwinds.
Overall, we also talked in the past about our pricing initiatives that are underway with regard to legacy customers and later in the year bundling Wechat. We are excited about the work that we have been doing there and we expect to.
Two.
We released some further news probably in Q3 Q4.
Great. Thanks, and then just a separate one on that bookings growth of nearly nine <unk>, so maybe a little bit less FX, while customers, where maybe flattish or down the 10-Q on Q and <unk> was also down was all that kind of consistent with your expectations. We're just trying to reconcile those trends in the commentary in the letter.
But the lower full year revenue guide was really FX based rather than a change in business fundamentals and growth trajectory.
Okay.
Yes. Thank you again for the question.
The business continues to grow.
Bookings, we become less relevant metric because the transactional portion of the business is growing.
Faster than that.
Rest of the business when we are expecting and this is something that we have already.
In the full year guidance on Q1 much earlier, one is also the growth of our stock.
As the business continues to grow because of the vast majority deal for business related payment. We you can expect that it's going to.
Converged and it will be a little bit more not fully of ours, because our business is still heavily relying on on time, but.
Portfolio guidance, we have only taken into account the impact of exchange rate, which is about $12 million.
For the remaining of the year.
Great. Thanks Marcelo.
Thank you for your question as Trevor Our next question comes from Matthew Pfau of William Blair.
Your line is now open.
Hey, guys. Thanks for taking my question I wanted to ask on the net additions in the quarter. You commented that they came in ahead of your expectations.
You saw some strength in May and June maybe just some more details on why those are coming in ahead of your expectations and why May and June were stronger with would be helpful.
Yes.
In any given month, it's sometimes a little bit hard to to kind of tease out.
What what's going on especially considering the macroeconomic environment that surrounds us, but it was pleasing to see that those were a little bit ahead while.
Unfold was kind of behind where we wanted it to be on.
Unfolds more global I think the Russia situation effects at more things like that but at the core business remains strong and so we were encouraged to see the positive reversion seasonality.
Great and just a follow up.
How about any updated commentary around retention and churn how did those trend in the quarter.
Yes, sure we have not seen any changes in term.
Again, the impact that we have on the net new is mostly related to new and with that it's mostly related to unfold and with regards to.
Recession cash redemption, it's better than prior year, and we actually as you know we pay a lot of attention to the 2020 on the 2021 cohort to see how they behave.
Back to the previous cohort.
When you look at the 2020 cohort towards the end of the at the end of the quarter. It performed better than the 20, sorry is performing in line with 2019, but what is exciting is that the 2021 cohort is actually performing better than the 2020 under <unk>.
2019 cohort at the same maturity level right for the whole year. So overall, we are pleased with the with our customer base and how well they retain as we continue to innovate with products and features.
Antelope.
Great. Thanks, a lot guys I appreciate it.
Okay.
Thank you Mathieu next questions come from Rick Hill potential of J P. Morgan. Your line is now open.
Hey, guys. Thanks for taking my question I know you guys spoke a little bit about the deceleration unfolded this quarter, but present revenue accelerated quarter over quarter. So I'm curious what you guys are performing well.
With that.
Can you repeat the second part of that.
Little soft on luxury.
Yes, sorry about that I'm curious what you saw are performing well on the packaging side of your business.
Alright.
Thanks.
Similar to the other.
So because of the lower ARPA. So when you look at our a combination of revenue streams you have very very high our post businesses like talk where is subscription may cause to 600 $700 a year with very low.
Our <unk> or average revenue per unit subscription for four unfold and so while we have seen the net Neil for.
<unk> coming down did not have.
It did not have an impact overall on the revenue and there was the other reason of course is our breast health business continues to.
Performed very strong growing at a 7% on a ear to ear renovated by 11% on a constant currency basis.
So the diversified portfolio of revenue streams that we have.
Allow.
Allow for that flexibility that one one business may not be performing assets that affected it may be compensated by by the other businesses, but again I mean unfolded is small.
It's a smaller revenue size overall.
It's a small very low ARPA.
But in terms of.
Unique subscription.
It has a significant impact when you look at that because.
First of all the base of customers that has unfolded is pretty large.
And for the most part.
Hi, Neel there is not much attached yet between unfolds and websites. So theres a lot of potential for growth there as well, particularly with with Biocidal.
I just want to highlight one of the things you were I think asking about what was going well and the presence business.
I mean, obviously one of the highlights in the quarter that we point out is the launch of fluid engine, which is a core improvement to our content management system, but those kinds of updates are happening really all the time behind the scenes and scores fees across both presence in commerce, and so I'd like to think that.
We are not even close to finished innovating on the core platform.
And I think that we really have an edge right now in terms of what we've got out there from a product perspective in the market.
Just one thing I wanted to clarify because I said talk.
Subscription $600 to areas actually $600 a month.
Thank you guys.
Okay.
Perfect next question comes from Ron Josey of Citi. Your line is now open.
Great. Thanks for taking my question I had two please and maybe Anthony just a follow up from a prior question around.
Sub growth and what May and June were better than expected and I think the answer was ebbs and flows but maybe can you just talk a little bit more I think you mentioned macro in your prepared remarks, how you're prepared for it but is there anything that maybe stood out in may and June that was better was it maybe around fluid I know it just launched but maybe that are market.
Campaigns that might've drone driven better May and June and then lastly on fluid ends and you just mentioned it Anthony but talk to us a little bit more about how web pros benefit from this in the process. We're just raising awareness among web pros for fluid end Jim. Thank you.
Thanks.
I don't I'm not sure I have much more color around the May June .
Stuff that was more positive there I mean, where you've got we advertise across every channel imaginable and summer depending on a lot of factors outperforming and some are underperforming and we're updating our attribution model and rebalancing our spend so there was a lot of that.
What's interesting that from a macro perspective is this is one of the first summer as we are starting with really kind of lower COVID-19 rates in a lot of the areas that we were lower.
Lower Covid impact I should say and a lot of the areas that.
<unk> had it in the past. So these are just interesting years, sometimes we're the beneficiary, sometimes sometimes as the headwinds in this case.
We're seeing that we're a beneficiary.
Second to your question around fluid engine and specifically why professionals. This launch it's something I'm really proud of because I think what youre seeing is us invest in one unified system that really works for both and so if you're new to the platform Youre not a pro this system is easier to use and what we currently have on the platform for almost the past.
<unk>.
But at the same time.
Web professional and Youre comfortable using the tool the expressed ability aspect of the tool matters.
A lot more to you than maybe the usability does.
And what's really great about this is now within one system you have got one our exception based design system, but fluid ends you can appear as a section and web pros can get a lot more flexibility out of this tool and that means that.
They just don't need to resort to either way more complex tools or custom code as much so I'm really.
I'm really happy about this launch I think it underscores is really what makes square space special and a lot of ways.
We're able to kind of pull this off and one system at a glance. It may seem like these things are easy to do or create but they just really arent, which is why they are so few companies at our scale that have the results we're doing web sites.
Usable by so many millions of people.
So it's really an upgrade across both the DIY and professional audience.
And any plans on specific marketing around fluid engine with the launch thanks guys.
Yes, actually it is going to show up in a lot of our campaigns right. Now if you go to square space Dot Com. This demo videos that can show you kind of how it operates in.
A lot of like fancy stuff in those videos, but it's like kind of.
Not fake like Thats kind of how it works, it's really really really good.
So yes, you'll see it appear visually and a lot of marketing campaigns and yes. It's live on the front side right now I think when you think about marketing, it's not that it's not.
Got.
Core message of square spaces not different this just helps more people get better results and more varied results on the platform really bridging the gap between some of the higher end tools and frankly, the usability of.
Some of the simpler tools right I think that at times.
I'd always thought about square spaces, having.
Really really good express ability that maybe for the peso I was like Oh. This is not easy to use and I think this really lets us turn a corner with that.
So really happy about it again, it's an in place upgrade so.
It's rolled out to everyone.
You can convert your old pages or if you are signing up for square feet today Youre automatically have.
This platform.
Sure.
Got it thank you.
Sure.
Thank you next question comes from Christopher <unk> of Credit Suisse. Christopher Your line is now open.
Hi, good morning, Thanks for taking my question.
Your international mix was pretty strong in the second quarter, especially adjusted for FX and on the basis of.
Your incremental international mix and that's perhaps the first time, you've called out the Pacific region. So can you talk a little bit about your.
Any initiatives there that's driving this trend and what's the relative impact of the Pacifica Pacific region today versus the Euro and then how about follow up on G&P.
So.
Nothing we're doing right now in terms of international is significantly different than what we were doing and.
Yes.
From prior quarters.
I think youre seeing just the result of many initiatives play out right currency language or support cues in multiple languages multiple ways to checkout and pay for square space.
Localized campaigns that are running internationally.
And I think that.
And we continue to be pleased with the growth outside of the U S.
Obviously it was mentioned in the prepared remarks, and I think it will probably come up in these questions.
We're investing in.
Marketing not all of our business lines in all of our regions are as developed as we are in the U S. So when we're investing in.
Talk in international markets, It's a drag if you look at it on a holistic basis.
What's happened in the U S, but as you're pointing out.
Eventually pays off and yes, we are.
We continue to expand globally.
And just to add to that Christopher.
Christopher last year, we did.
Marketing campaigns for the first time that we're localized Florida southern markets, while we continue to disease at the beginning of the year Budd.
Much lower scale and Australia is a very good market for us and we can see now the impact of those marketing campaigns, where we had raising brand awareness.
And how they are paying off on them on the.
Net.
The additions that we are seeing coming from come from international.
And then if that is the combination of all the efforts that we're doing and also what we have guided.
Last year in a much at a much deeper level.
Okay. Thanks.
So we had much lower and then I have a follow up on the GMB, which is somewhat weaker than typical seasonality.
And arguably some of the macro trends look back sort of holding up in the second quarter. So can you unpack the sequential move into GMB, maybe by the underlying categories, such as goods versus services and particularly how pork was performing thank you.
Sure. So I'm glad you're calling this out because when you look at our G&A I think we saw this last quarter that people expected us to be much more correlated with <unk>.
Essentially physical good sales, but in that <unk> number we have.
There's many categories. So you've got the scheduling business, which operates differently than hospitality in time slot based businesses. The talk has and operates differently than our e-commerce business and operates differently than our member areas businesses, which are just starting to grow.
So within there I think talk saw a much more normal quarter than they've really seen in the past I think.
Two items to highlight there one.
Beginning of adoption by larger chains, and then what have significantly impact <unk> and then also.
The hospitality industry.
Those lightning a bit in terms of.
Workforce ability to open all those sorts of things. So those things moved in a positive direction for top scheduling business remains strong and the physical.
And the memory business is growing and it looks good.
And then the.
Yes, I think.
We're all seeing kind of a little bit of movement in a different direction for physical goods.
So, but this is why I like how we're positioned I mean square space has always been about many many ways to sell and as we keep strengthening that and grow real business revenue lines there.
We'll not see it's impacted by any one hopefully any one single trend in particular.
Within there.
Yes.
Alright, Thanks, I really appreciate the color.
Sure.
Thank you. Our next question comes from Josh Beck of Keybank, Joe Your line is now open.
Okay.
Thank you for taking the question I think on the prior call. You had cited the idea that business formations were pretty observable headwind. Obviously, we're further along in the year at this point.
But I think you all can see the U S data.
Quite well probably have less of a.
The handle globally. So maybe if you could just.
Talk about what type of expectations you are embedding there as we think about the second half.
So it's interesting we've begun to do a little bit of research on our side as well around the correlation with small business formations and what we're seeing in the main products.
I would just caution and say.
In the past, we did see an extreme correlation but a correlation in different periods of time, we actually observed that it wasn't as correlated as it used to be.
We may be returning to a time of correlation but.
I would just again issue that word of caution that you don't always see it play out.
The way you might think and then in addition.
As our revenue streams diversify and you've got it.
Scheduling of member areas in all these ways for creators to interact online and things unfold. The correlation there I think will lessen.
So that's just.
Kind of how we kind of how we view it.
Okay.
Very helpful.
And then just with respect to the pricing initiatives. It always seems like there is a great opportunity to reach some of the extra value that you've you've created.
So on the other side that can.
Cause churn.
Small cases, obviously generally viewed as a net positive. So just kind of help us think about how youre kind of framing these different factors as we approach the pricing initiatives here.
Yes, so I would highlight two areas highlighted in the past one is our bundling and positioning of the packages, which as you know.
I'm a believer that scores space has a lot of products in market that just due to how we've rolled them out over time, there's just a lot of different subscriptions in there you have to use to access those products and I think that as we rethink our bundling strategy and how we how we presented it to an end consumer.
I think theres going to be a lot of leverage we've got just giving people more access to the things we already made frankly and that's something we are looking to have happen later this year early next.
Other point you make in that we've made on the call is just around refreshing pricing for existing users now we have never done that before and right. Now we are rolling out and we have started rolling out.
Pretty modest price increase we don't anticipate this.
We're monitoring it of course, we don't anticipate this causing a massive amount of churn.
The danger is there somebody realize that they didn't.
On the website and the like.
It just wasn't using this but on the flip side with a very modest price increase.
Move your website, because it cost you 10 or $20 more a year is sort of.
Assuming you want the website, probably not a great use of your time to react to that especially considering two things. One is that competitors are also raise their prices and so youre, not really going to something cheaper and to even within square space.
Many of our customers that are getting renewal or legacy prices updated are still coming in under list price. If you just re signed up with square space and so we're monitoring that situation, but I think I think it's not a crazy thing for us to have a modest price increase after.
Literally never doing it.
Yes, just to add to that.
With the strength of our platform, particularly on Cologuard from creators since the launch a little bit also about the.
The new business formation.
Earlier, because most of these businesses or some of the weakness may start.
Website before even registering themselves.
But with regards to the pricing increases in particular, we are doing this in a very thoughtful manner looking at cohort by cohort. So we in the cohorts that prices for each of the cell cohort.
So at any point in time, we can stop any increase and really for that without any major changes because not everybody is getting the same price increase we discussed earlier, the fact that youre going to take a significant amount of time to get.
Everybody in the base to it.
The listing price according to the website because all of the cohorts have different prices and within the cohort cohort.
There have been some prices as well so our ability to really monitor and check on term and Taiwan.
It's very very very high just because we are doing this on a very thoughtful space base too.
To make sure that we protect our revenue base.
And again just to emphasize it not all of our customers that are receiving the increase would actually be even move to our current list price.
So yes.
Yes.
Okay.
Yeah.
Thank you. Our next question comes from <unk> <unk> of Mizuho your.
Your line is now open.
Thank you thanks for taking my question so Anthony.
Like many other companies square space has gone through some even survive.
So help us understand a little bit like what how does the different segments react during recession and how prepared you are.
I mean post Covid it was more of a tailwind for online presence and e-commerce, but in a private citizen.
Prepare to you or that.
That would be helpful.
Yes, so thanks for thanks for asking that.
Look and I said it in the prepared remarks, it's tough for me to.
So one last time, we were through a recession, we didn't have as many diversified revenue stream. So I can't comment on what those might look like.
Will say, though that the core business during prior recessions performed well because.
One.
It's a low cost DIY tool so instead of.
Having.
To go out there and pay somebody for setup, you might try and set it up a.
Set the site up yourself and so we saw a lot of positive usage.
Further during a recession, yes. Some business is closed but also some people just lose their job.
And so they set out and try more entrepreneurial things than they might have I mean square space actually itself was started in 2003, which is not exactly like a fun time.
After the tech collapse, so I think a lot of entrepreneurial.
Initiative happens during these times of constraint and so.
I think we're well positioned there.
So in terms of like.
Cutting cost in your business like turning your website off is not exactly like the place most people start if they needed a website I mean square. So it is not a huge line item expense for people. So.
Pretty confident there.
<unk>.
So does that things should be things should be okay.
Further in the core business, we love highlighting how profitable we are from a cash flow basis, and so we have used the period.
We said this in January that we were starting to look at.
Just making sure we were right sized cost wise in the business from the very beginning so I think we.
We're very good at controlling our costs. Obviously, we are investing for growth. So we don't want to turn that off which is why were always talking about the balanced.
Revenue growth with profitability, but theres, just a lot of flexibility in the core business. There. So we're really confident I mean as I look into next year.
<unk> taken the free cash flow margin up is kind of what I'm expecting to do.
So I think I think we're in a good spot there.
Also worth noting that.
There was a reason we went and related cash flow comment, but we did a direct listing because of course, they didn't need to raise money.
It was profitable so.
We're not like out there in the public markets, having a raise money in fact as you saw from the buyback. We're just using the time, where it's been a few are going around right now to say Hey, we think.
We think the buyback can make sense for us and so that's what we executed on so you see all those factors in play.
That's.
Great color.
Yes.
One more point on the profitability on the strength of the core business at the beginning of the year, we talk about the investments that we are doing in young guard revenue streams like international and enterprise.
So.
We are delivering we are expecting to deliver.
Unlevered free cash flow margins that are in in the range of.
17% for <unk> for the quarter and even higher for the year in spite of the fact that we are making those investments in those businesses.
Our actual drive to the Unlevered free cash flow margins and the EBITDA margins that we have shown.
Thanks for that color and quick clarification in.
By the way how much was the talk revenue this quarter and.
Anthony I think you talked about <unk> payments that you are going to launch this year what is it this year or.
Was it planned for next year.
It's planned for next year and for the.
Talk we don't we don't split out the.
The revenue specifically.
Yes, but really I know you have I'd like to note that revenues for.
I've been talking about organic versus inorganic growth throughout the whole entire year last year, when we acquired <unk>.
<unk> continues to grow nicely and.
In the overall growth rate.
Approximately 100 basis points on the on the on the growth.
Just to give you a little bit more color about about Tom.
Great. Thank you.
Mhm.
Our next question comes from <unk> Khan of <unk> Securities. Your line is now open.
Okay.
Yeah, Hi, Thanks, a lot.
No.
We are hearing about the consumer wanted kind of.
Shifting more towards experiential spend.
Thanks, and just wondering how it affects you or GMB number because <unk> as you pointed out it's pretty diversified.
Extremes.
And bookings and everything.
So just talk to us about that and how we should think about in the museum.
In the back half and maybe next year, how should we be thinking.
The other question I have is around.
Opportunities for M&A as valuations continued to adjust.
Can we just talk about what are you seeing out there with respect to.
Potential.
Bite size acquisitions.
Sure. So first off with respect to consumer spending I think what's interesting is we sort of recapture a bit of that.
Yeah.
When we kind of go through our GMB commentary and if you think about hey, okay, I'm not going to buy this physical.
This wallet I'm going to go and invest in the experience.
Perfectly situated to capture that demand with things like talk which is about time slotted businesses and will eventually be about events and so.
I think that's just going to highlight the power of the diversified revenue streams that we have.
And what was your second.
Quick question.
It was around M&A opportunities.
Yes, so our M&A strategy remains unchanged I think we're in integration mode right now with the product.
The platforms that we currently are bringing together.
The share buyback does not prevent us from.
Executing on M&A within a target range that we have and so we will remain opportunistic but look I mean square space is also really good at building things too. So a lot of times when you see a company might have to resort to M&A to buy something.
Ucs.
<unk> are build muscle scores, but didn't execute on any M&A for.
15 years or so of its existence.
Again, we like having a muscle but.
It's just an opportunistic thing for us.
Got it thank you.
Mhm.
Yes.
Yes.
Our next question comes from Clarke Jeffries of Piper Sandler Clark. Your line is now open.
Yeah.
Hello. Thank you for taking the question Anthony you briefly mentioned some of the upmarket momentum and talk could impact Jim <unk> significantly.
Are you feeling about the pipeline there for other marquee brands.
And.
Feeling comfortable investing that platform in Europe anything driving that upmarket traction beyond some of those macro factors you called out in the in the hospitality vertical.
Well the interesting thing about talk versus the the square space.
<unk> got a square space brands talk really started very upmarket and is moving down with the events product that we're working on and other things to be.
<unk>.
To move to a broader base. So I mean upmarket spot is their sweet spot.
So.
Yes, I mean, that's kind of that's kind of how it's oriented.
Alright, great and then.
Clarifying a little bit of how we should think about fluid engine.
Could you maybe give some color on the portion of users that will be getting access to fluid engine here over the next quarter what portion of subscribers are on an eligible version to get that that innovation.
So, it's 100% of new subscribers today and.
On the seven I don't have an exact number for you off like on the seven one platform.
How many are enabled today I would just say this in terms of business impact it's going to have.
A much bigger impact for new sites in existing sites, because if you have an existing site you've kind of like created those pages already and so this might be better and you might use it to get more expressive layouts at times, but it's really around that new new build experience that I think youre going to see.
Its shine, especially people putting sites on a platform that otherwise would have had to go to a different tools because they express ability isn't there right and Youre always limited by that so hopefully it.
Cam expanding for US, which is which is which is really important I mean at the end of the day. If you can't make the site you wanted using the platforms tools, you're going to be on another platform youre going to get accustomed code or youre, just going to settle for what's on the platform. So.
I really I think the team has done just a fantastic job with this release and it was again, we've been testing it for a while and so now it's out to everybody.
Yeah.
First thank you very much.
Yeah.
Thank you for your questions. Unfortunately. This is all we have time for so therefore this concludes today's call. Thank you. So much for joining you may now disconnect your lines.
Yeah.
Okay.
Yeah.
Sure.