Q1 2024 Squarespace Inc Earnings Call

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Operator: Good morning, my name is Alyssa, and I will be your operator today. At this time, I would like to welcome everyone to Squarespace's first quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

Elisa: Good morning, My name is Elisa and I will be your operator today.

Operator: After the prepared remarks, there will be a question and answer session. If you would 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 the pound key. Thank you. I will now hand the call over to your host at Squarespace, Clare Perry. Clare, please go ahead.

Elisa: At this time I would like to welcome everyone to square spaces first quarter 'twenty 'twenty four earnings conference call.

Elisa: All lines have been placed on mute to prevent any background noise.

Elisa: After the prepared remarks, there will be a question and answer session.

Elisa: If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

Elisa: If you would like to withdraw your question press the pound key thank you.

Elisa: I'll now hand, the call over to your host its square space Clare Parry Claire. Please go ahead.

Clare Perry: Good morning, and thank you for joining Squarespace's first quarter 2024 earnings conference call. This is Clare Perry, head of investor relations. I'm joined by Anthony Casalena, Squarespace's founder and CEO, and Nathan Gooden, CFO.

Clare Perry: Good morning, and thank you for joining squares pieces first quarter 'twenty 'twenty four earnings conference call.

Clare Perry: This is Clare Parry head of Investor Relations I'm joined by Anthony constantly not square spaces, founder and CEO and Nathan good CFO. After their prepared remarks, we will open the call to your questions earlier today, we posted a press release and shareholder letter to the Investor Relations section of our website on <unk>.

Clare Perry: After their prepared remarks, we will open the call to your questions. Earlier today, we posted a press release and shareholder letter to 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 and shareholder letter. These measures should not be considered in isolation from nor as a substitute for our GAAP reporting.

Clare Perry: 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 and shareholder letter.

Clare Perry: These measures should not be considered in isolation from nor as substitute for our GAAP reporting we will make forward looking statements pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995, which include but are not limited to statements related to our future financial performance our.

Clare Perry: We will make forward-looking statements pursuant to the safe harbor provisions of the Private Security Litigation Reform Act of 1995, which include but are not limited to statements related to our future financial performance, our strategies, and our ability to integrate new technology into our core platform. These forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially. These risks are further defined in our most recent filings with the Securities and Exchange Commission.

Clare Perry: <unk> and our ability to integrate new technology into our core platform. These forward looking statements are subject to risks and uncertainties that could cause our actual results to differ materially. These risks are further defined in our most recent filings with the Securities and Exchange Commission any forward looking statements.

Clare Perry: Any forward-looking statements that we make on this call are based on assumptions as of this day, May 7, 2024. We undertake no obligation to update these statements as a result of new information or future events except where required by law. Please note that all comparisons are on a year-over-year basis unless we state otherwise. I will now turn the call over to Anthony.

Clare Perry: That we make on this call are based on assumptions as of this day may 7th of 'twenty 'twenty four.

Clare Perry: We undertake no obligation to update these statements as a result of new information or future events, except where required by law.

Clare Perry: Please note that all comparisons are on a year over year basis, unless we state otherwise.

Clare Perry: I will now turn the call over to Anthony.

Anthony Casalena: Thanks, Clare, and good morning, everyone. I'm pleased to share that Squarespace's Q1 was a strong one, with our revenue up 19% and bookings up 23%, beating the high end of our guidance on both metrics. Unlevered free cash flow margin within the quarter was 32%, further setting us up for a fantastic year. On the back of the strong performance, we're pleased to raise our fiscal year 2024 outlook today from both the revenue and free cash flow perspectives.

Anthony: Thanks, Claire and good morning, everyone.

Anthony: I am pleased to share that scores basis Q1 was a strong one with our revenue up 19% and bookings up 23%, beating the high end of our guidance on both metrics.

Anthony: Unlevered free cash flow margin within the quarter was 32% further setting us up for a fantastic year on the back of the strong performance. We're pleased to raise our fiscal year 2024 outlook today from both a revenue and free cash flow perspective, the quarter was driven by continued organic growth momentum in the core business, specifically web site, where we are.

Anthony Casalena: The quarter was driven by continued organic growth momentum in the core business, specifically websites, where we saw strong retention and new customer growth domestically and globally. Squarespace is now positioned as a leader in three primary categories that are critical to all small businesses: websites, domains, and email. Squarespace domains has been a big focus for us in 2024, as we complete the migration of domains from Google, as well as launch constant improvements to our domains platform. Already, millions of domains from Google have been migrated, and we are on track to complete this migration over the summer.

Anthony: Saw strong retention and new customer growth domestically and globally.

Anthony: Square space is now positioned as a leader in three primary categories that are critical to all small businesses websites domains and email.

Anthony: Of course these demands has been a big focus for us in 2024, as we complete the migration of the mains from Google as well as launch constant improvements where domain platform already millions of domains from Google had been migrated and we are on track to complete this migration over the summer.

Anthony Casalena: The acquisition of Google Domains positions us as one of the top registrars in the world, and we are especially encouraged by the new domain business we are seeing. A funnel that is showing a strong attach rate to our core web building tools, as well as a strong uptake of Google Workspace. We have nearly reached 100% rollout of our partnership on the Google Workspace side, where Squarespace acts as the exclusive domain provider for any customer purchasing a domain along with a Workspace subscription from Google. Squarespace payments is also off to a great start. It is now available to 100% of customers in the United States, and feedback so far has been very positive.

Anthony: The acquisition of Google domains positions us as one of the top registrars in the world and we are especially encouraged by the new domain business. We are seeing a funnel, which is showing a strong attach rates into our core web building tools as well as the strong uptake of Google workspace.

Anthony: We have nearly reached 100% rollout of our partnership from the Google Workspace side, where square space acts as the exclusive domain provider for any customer purchasing a domain along with their workspace subscription from Google.

Anthony: Square space payments is also off to a great start now available to 100% of customers in the United States and feedback. So far has been very positive we launched our migration tool, which lets our existing stripe customers move their accounts to scores based payments and just a few clicks, while retaining their transaction history and without having to re verify their business day.

Anthony Casalena: We launched our migration tool, which lets our existing Stripe customers move their accounts to Squarespace payments in just a few clicks while retaining their transaction history and without having to re-verify their business data. We also introduced Klarna to Squarespace payments, the first of many other ways to pay we will be adding. Klarna is the first alternative payment mechanism we have introduced in three years, and our ability to rapidly innovate on our payments product will unlock multiple new features through the end of the year.

Anthony: <unk>.

Anthony: We also introduced carnival scores based payments the first of many other ways to pay we will be adding.

Anthony: <unk> is the first alternative payment mechanism, we introduced in three years and our ability to rapidly innovate on our payments product will unlock multiple new features through the end of the year.

Anthony Casalena: A primary focus of ours is enabling selling across all of our plan types at Squarespace, and Squarespace payments is a critical unlock for us, as we will be bundling it within our various SaaS tiers and adjusting our take rate for higher-value plans, which is a first in our history. We believe this will attract both larger sellers that are not accommodated by our current plan structure and smaller sellers who are just getting started and now have access to even more of our tools.

Anthony: A primary focus of ours is enabling selling across all of our planned types of square space and scores based payments as a critical unlock for us as we will be bundling it within our various SaaS tears and adjusting our take rate for higher value plans, which is a first in our history.

Anthony: We believe this will attract both larger sellers theyre not accommodated by our current plan structure and smaller sellers, who are just getting started and now have access to even more of our tools.

Anthony Casalena: I'm also excited to announce that we recently introduced our AI philosophy as it pertains to web design, called Design Intelligence by Squarespace. It is rooted in the principle that AI should augment human creativity rather than replace it. It combines two decades of industry-leading design proficiency with AI-driven content generation and guidance. This integration will empower entrepreneurs to leave their mark with confidence. While AI will feature in all of our products, design intelligence offers customers clear insights into how its application should be applied to their website.

Anthony: I'm also excited to announce that we've recently introduced our AI philosophy as it pertains to web design called design intelligence by square space.

Anthony: It is rooted in the principle that AI should augment human creativity, rather than replace it. It combines two decades of industry, leading design proficiency with AI driven content generation and guidance.

Anthony: This integration will empower entrepreneurs to leave their mark with confidence.

Anthony: While I will feature in all of our products design intelligence offers customers clear insights into how its application should be applied to their websites.

Anthony Casalena: Explore more about how AI is shaping our current and future endeavors at squarespace.com design intelligence. All said, it is a very exciting time for our company. I'd like to extend a huge thank you to our customers, team, and supporters as we continue our pace of innovation throughout 2024. And with that, I'll turn it over to Nathan.

Anthony: Explore and more about how AI is shaping our current and future endeavors at <unk> Dot Com Slash design intelligence.

Anthony: All said it is a very exciting time for our company I would like to extend a huge thank you to our customers team and support us as we continue our pace of innovation throughout 2024, and with that I'll turn it over to Nathan.

Nathan Gooden: Thank you, Anthony. Good morning, everyone, and thank you for joining us today. The investments we have made in building a powerful ecosystem for entrepreneurs everywhere have delivered strength across all elements of our business. We entered the year with strong Q1 2024 results, building on our momentum in 2023, and benefiting from a combination of catalysts, including strength in our core business, pricing and packaging optimization, international expansion, and our domains business, both the organic and Google migration.

Nathan: Thank you Anthony good morning, everyone and thank you for joining us today the.

Nathan: The investments we have made into building a powerful ecosystem for entrepreneurs everywhere have delivered strength across all elements of our business. We entered the year with strong Q1 2024 results building on our momentum in 2023 and benefiting from a combination of catalysts, including strengthen our core business pricing.

Nathan: Packaging optimization international expansion and our domains business, both the organic and Google migration.

Nathan Gooden: All of these catalysts will continue to drive revenue growth and unlevered free cash flow expansion in 2024 and over the long term at Squarespace. We exceeded our top line and unlevered free cash flow guidance with revenue growth of 19% and an unlevered free cash flow margin of 32%, more than 340 basis points of improvement. We continue to drive meaningful revenue growth, improve profitability, and deliver strong incremental cash flow. For example, Q1 total bookings of $326 million grew 23 percent.

Nathan: All of these catalysts will continue to drive revenue growth and Unlevered free cash flow expansion in 2024 and over the long term at square space.

Nathan: We exceeded our topline and Unlevered free cash flow guidance with revenue growth of 19% and an unlevered free cash flow margin of 32% over 340 basis points of improvement.

Nathan: We continue to drive meaningful revenue growth improve profitability and deliver strong incremental cash flow.

Nathan: Q1, total bookings of $326 million grew 23%, we are seeing strong growth come from our core website business and our acquired domain assets. Our platform has never been stronger and we are encouraged by the retention and acquisition of new subscriptions are acquired domain assets helped draw.

Nathan Gooden: We are seeing strong growth come from our core website business and our acquired domain assets. Our platform has never been stronger, and we are encouraged by the retention and acquisition of new subscriptions. Our acquired domain assets help drive our growth as well. As a reminder, our acquired domain assets consist of single domain subscriptions originally sold by Google as part of our acquisition of Google domains. Renewal rates from this customer base continue to exceed our expectations.

Nathan: Our growth as well as a reminder.

Nathan: Our acquired domain assets consist of single domain subscriptions originally sold by Google as part of our acquisition of Google domains.

Nathan: <unk> rates from this customer base continues to surpass our expectations revs.

Nathan Gooden: Revenue of $281 million exceeded the high end of our guidance of $274 to $277 million in the first quarter, which represents 19% growth as reported and 18% in constant currency. The outperformance of our revenue guidance range was primarily due to the strength in our core business, where we saw strong new subscription acquisitions from websites. Retention and acquisition of unique subscriptions contributed approximately $26 million, or over 59% of the growth during the quarter. Organic growth excluding revenue associated with our acquired domain assets was 13% in the quarter.

Nathan: Revenue of $281 million exceeded the high end of our guidance of $274 million to $277 million in the first quarter, which represents 19% growth as reported and 18% in constant currency.

Nathan: Outperformance of our revenue guidance range was primarily due to the strength in our core business, where we saw strong new subscription acquisitions from websites retention and acquisition of unique subscriptions contributed approximately $26 million or over 59% of the growth during the quarter.

Nathan: Organic growth excluding revenue associated with our acquired domain assets was 13% in the quarter.

Nathan Gooden: The second largest contributor to revenue growth this quarter was from our acquisition of Google Domains, which contributed approximately $13 million, representing 29% of growth during the quarter. This amount includes revenue associated with our acquired domain assets, domains referred from Google, and resold domains through our exclusive workspace reseller agreement. We continue to see a positive halo effect following our acquisition of Google Domains, where we see robust referral traffic to Squarespace.

Nathan: The second largest contributor to revenue growth. This quarter was from our acquisition of Google domains, which contributed approximately $13 million, representing 29% of growth during the quarter.

Nathan: This amount includes revenue associated with our acquired domain assets domains referred from Google and we sold domains through our exclusive workspace reseller agreement.

Nathan: We continue to see a positive halo effect following our acquisition of Google domains, where we see robust referral traffic to square space as of March 31, 2020 for our customer base represented over $4 9 million unique subscriptions up 15% and representing a net increase of 648000 units.

Nathan Gooden: As of March 31st, 2024, our customer base represented over 4.9 million unique subscriptions, up 15% and representing a net increase of 648,000 unique subscriptions over the 12-month period. This growth includes websites as well as new domain subscriptions as we see strong demand for Squarespace domains. ARPUs were $227 in Q1 2024, growing 7%. Residual revenue impact from 2022 pricing increases and increased attachment rates for certain commerce offerings drove ARPU growth in the quarter.

Nathan: <unk> subscriptions over the 12 month period.

Nathan: This strength includes websites as well as new domains subscriptions as we see strong demand for square space domains.

Nathan: <unk> was $227 in Q1, 2024 growing 7% residual revenue impact from 2022 pricing increases and increased attachment rates for certain commerce offerings drove <unk> growth in the quarter the quarter over quarter ARPA, whose comparison reflects the fact that a larger number of our.

Nathan Gooden: The quarter-over-quarter ARPU comparison reflects the fact that a larger number of our Q1 2024 new unique subscriptions in the quarter were domain subscriptions, which carry a lower price point. Note that Unique Subscriptions and ARPUs do not account for our acquired domain assets. In Q1, Presence Revenue grew 22% as reported and in constant currency to $201 million. As a reminder, associated revenue from our domains is recognized as Presence Revenue. Strength in our unique subscriptions was the primary driver of growth, contributing over 56% of the growth. We saw solid retention of existing subscriptions and continued acquisition of new subscriptions in both our personal and business plans.

Nathan: Q1, 2024, new unique subscriptions in the quarter were domain subscriptions, which carry a lower price point note that unique subscriptions and <unk> do not account for our acquired domain assets.

Nathan: In Q1 presence revenue grew 22% as reported and in constant currency to $201 million as a reminder.

Nathan: <unk> associated revenue from our domain is recognized as presence revenue.

Nathan: Strengthen our unique subscriptions were the primary driver of growth contributing over 56% of the growth. We saw solid retention of existing subscriptions and continued acquisition of new subscriptions in both our personal and business plans. Another important driver of revenue growth was our acquired domain assets.

Nathan Gooden: Another important driver of revenue growth was our acquired domain assets, which represent renewals from legacy Google domain customers. Additionally, we continue to see some benefit from our legacy price increases, which we began rolling out to customers in Q3 2022. Squarespace benefits from a diversified commerce portfolio, serving our customers' varied e-commerce needs, including selling physical goods, services, content, time, hospitality, and events.

Nathan: Which represent renewals from legacy Google domain customers. Additionally, we continue to see some benefit from our legacy price increases, which we began rolling out to customers in Q3 2022.

Nathan: <unk> benefits from a diversified commerce portfolio, serving our customers' varied e-commerce needs, including selling physical goods services content time, hospitality and events Commerce revenue grew to approximately $80 million or 11% as reported and 10% in <unk>.

Nathan Gooden: Commerce revenue grew to approximately $80 million, or 11% as reported, and 10% in constant currency. The increase in commerce revenue was primarily the result of unique subscription growth, which represented approximately $6 million. Many of our customers who are sellers choose our business plan and therefore fall under presence revenue. So that dynamic can mask some of the underlying growth we are seeing in commerce.

Nathan: Scent currency.

Nathan: The increase in Commerce revenue was primarily the result of unique subscription growth, which represented approximately $6 million.

Nathan: Many of our customers who are sellers choose our business plan and therefore fall under presence revenue so that dynamic can mask some of the underlying growth we are seeing in commerce.

Nathan Gooden: Gross payment volume, or GPV, was $1.6 billion in the quarter, up 8% over 100 basis points of momentum versus Q4 2023, breaking historical seasonal trends. However, effective with Q1 2024, we have changed our nomenclature for this metric to GPV from GMV, gross merchandise value. We have not changed the calculation or definition.

Nathan: Gross payment volume or <unk> was $1 6 billion in the quarter up 8% over 100 basis points of momentum versus Q4, 2023, breaking historical seasonal trends.

Nathan: <unk> with Q1 2024, we have changed our nomenclature for this metric to GPP from G. M. B gross merchandize value, we have not changed the calculation or definition <unk> represents the total dollar value of orders processed through our platform in the period net of refunds and project.

Nathan Gooden: GPB represents the total dollar value of orders processed through our platform in the period, net of refunds and fraudulent orders. This new nomenclature better reflects Squarespace payments, which we launched at the end of 2023. We saw GPV momentum continue from Q4 2023, with notable strength driven by acuity scheduling and increased commerce transactions occurring on our customers' websites. We exited Q1 2024 with annual run rate revenue of $1.1 billion, up 19%, or $176 million. Increases in our unique subscriptions, the impact of the acquired domain assets, and price increases across several of our subscription plans were the primary drivers of growth for the period.

Nathan: A lot of orders.

Nathan: This new nomenclature better captures square space payments, which we launched at the end of 2023, we saw <unk> momentum continue from Q4 2023 with notable strength driven by acuity scheduling and increased commerce transactions occurring on our customers' website plans.

Nathan: We exited Q1 2024 with annual run rate revenue of $1 $1 billion.

Nathan: Up 19% or $176 million.

Nathan: Increases in our unique subscriptions.

Nathan: Impact of the acquired domain assets and price increases across several of our subscription plans were the primary drivers of growth for the period.

Nathan Gooden: We have updated our calculation of annual run rate revenue to represent quarterly revenue from subscription fees and revenue generated in conjunction with associated fees in the last quarter of the period, multiplied by four, rather than calculating based off the most recent monthly revenue figure multiplied by 12 to normalize results for the run rate each quarter. International revenue was $80 million, growing 19% and 18% in constant currency and representing 28% of our total revenue.

Nathan: We have updated our calculation of annual run rate revenue to represent quarterly revenue from subscription fees and revenue generated in conjunction with associated fees in the last quarter over the period multiplied by four <unk>.

Nathan: Rather than calculating based off the most recent monthly revenue figure.

Nathan: Multiplied by 12 to normalized results for the run rate each quarter.

Nathan: International revenue was $80 million growing, 19% and 18% in constant currency and representing 28% of our total revenue.

Nathan Gooden: International is a key area of focus for the business as we bring our ecosystem into new markets where we see clear synergies with design and strong product market fit. Our growing domain footprint further expands our reach internationally. We now support 25 currencies, adding 21 in the last 12 months, and 11 languages, looking to launch more new languages in 2024.

Nathan: International is a key area of focus for the business as we bring our ecosystem into new markets, where we see clear synergies with design and strong product market fit.

Nathan: Our growing domains footprint further expand our reach internationally, we now support 25 currencies, adding 21 in the last 12 months and 11 languages.

Nathan: Looking to launch more new languages in 2024.

Nathan Gooden: Returning to our margin profile, our non-GAAP gross profit margin was approximately 73% in Q1 2024. As we have called out previously, comparisons of gross profit margin to prior years reflect higher cost of revenue primarily due to the domain registration fees associated with our acquired domain assets. As legacy Google Domain customers renew their domain subscriptions, we pay registry fees up front while recognizing the associated revenue gradually over the course of the subscription.

Nathan: Turning to our margin profile.

Nathan: Our non-GAAP gross profit margin was approximately 73% in Q1 2024.

Nathan: As we've called out previously comparisons of gross profit margin to prior year reflect higher cost of revenue primarily due to the domain registration fees associated with our acquired domain assets.

Nathan: As legacy Google domain customers renew their domain subscriptions, we pay registry fees upfront, while recognizing the associated revenue ratably over the course of the subscription.

Nathan Gooden: Q1 2024 is the trough for our gross profit margin, and we expect improvement building each quarter as we progress through the year. Non-GAAP operating expenses grew by only 4% in Q1 2024 to $173 million, or 62% of revenue. This ratio represents over 800 basis points of improvement. Non-GAAP R&D was $50 million in the quarter, or approximately 18% of revenue. Historically, Q1 is our strongest quarter of demand from new customers, and we therefore spend more marketing and sales dollars to meet this demand pattern. As a result of this demand pattern, non-gap marketing and sales expenses grew 4% to $100 million, which represents approximately 36% of revenue, a decline of more than 500 basis points. Our marketing attribution model continues to efficiently direct the mix of our marketing spend across our marketing channels.

Nathan: Q1, 2024 is the trough for our gross profit margin and we expect improvement building each quarter as we progress through the year.

Nathan: non-GAAP operating expenses grew by only 4% in Q1, 2000 $24 million to $173 million or 62% of revenue this ratio.

Nathan: <unk> represents over 800 basis points of improvement.

Nathan: non-GAAP R&D was $50 million in the quarter or approximately 18% of revenue. Historically Q1 is our strongest quarter of demand from new customers and we therefore spend more marketing and sales dollars into this demand pattern.

Nathan: non-GAAP marketing and sales expenses grew 4% to $100 million, which represents approximately 36% of revenue a decline of more than 500 basis points or.

Nathan: Our marketing attribution model continues to efficiently direct the mix of our marketing spend across our marketing channels.

Nathan Gooden: Finally, non-GAAP G&A expenses were $23 million, or 8% of revenue. G&A expenses improved on an absolute dollar basis and as a percentage of revenue as we continue to optimize investments and benefit from the scale of our business. In the first quarter, our Adjusted EBITDA increased to $32 million, or 11% of total revenue, more than 160 basis points of decline from the same period last year. The impact on Adjusted EBITDA from our strong growth in revenue was softened by higher domain registration fees. On a dollar basis, advertising expenses were higher, though as a percentage of total revenue, we saw over 300 basis points of improvement.

Nathan: Finally, non-GAAP G&A expenses were $23 million or 8% of revenue G&A.

Nathan: G&A expenses improved on an absolute dollar basis and as a percentage of revenue as we continue to optimize investments and benefit from the scale of our business.

Nathan: In the first quarter, our adjusted EBITDA increased to $32 million or 11% of total revenue more than 160 basis points of decline from the same period last year the impact to adjusted EBITDA from our strong growth in revenue was softened by higher domain registration fees on a dollar basis advertising expenses were.

Nathan: Higher though as a percentage of total revenue, we saw over 300 basis points of improvement.

Nathan Gooden: Adjusted EBITDA can fluctuate quarter to quarter due to operating expense seasonality. However, we anticipate favorable leverage on adjusted EBITDA through the full year 2024 as we continue our disciplined approach to invest across our operations as we scale our revenue. Overall, our solid execution and core business strength demonstrates Squarespace's ability to deliver profitable growth at scale.

Nathan: Adjusted EBITDA can fluctuate quarter to quarter due to operating expense seasonality, we anticipate favorable leverage on adjusted EBITDA through the full year 2024, as we continue our disciplined approach to invest across our operations as we scale our revenue.

Nathan: Overall, our solid execution and core business strength demonstrates square spaces ability to deliver profitable growth at scale, we are driving stronger cash flow and profitability. Despite the temporary gross profit margin headwind related to our acquired domain assets.

Nathan Gooden: We are driving stronger cash flow and profitability despite the temporary gross profit margin headwind related to our acquired domain assets. We intend to continue driving higher levels of profitability and longer-term shareholder return by prioritizing investments in our offerings. We maintained a healthy balance sheet with cash and cash equivalents of $242 million and approximately $18 million of available borrowing. Total debt was approximately $557 million, of which $53 million is current.

Nathan: We intend to continue driving higher levels of profitability and longer term shareholder return by prioritizing investments in our offerings.

Nathan: We maintained a healthy balance sheet with cash and cash equivalents of $242 million and approximately $18 million of available borrowing total debt was approximately $557 million of which $53 million as current I remain comfortable with our net debt to trailing 12 month adjusted EBITDA at one <unk>.

Nathan Gooden: I remain comfortable with our net debt to trailing 12-month adjusted EBITDA at 1.0 times as of quarter end. Turning now to our cash flow. We delivered strong cash flow in the quarter, surpassing our guidance. Our cash flow from operating activities grew 33% to $85 million for the three months ended March 31st, 2024, primarily due to the strength in bookings. In Q1, our unlevered free cash flow was $89 million, growing 33% and representing a margin of 32%, surpassing the high end of our guidance.

Nathan: <unk> zero times as of quarter end.

Nathan Gooden: The outperformance was primarily due to strong bookings, driven by renewals and acquisition of website subscriptions. The year-over-year increase of over 340 basis points in unlevered free cash flow margin also reflects the timing of our Q1 tax payment, which fell in Q1 a year ago and will fall in Q2 in 2024. However, timing of payments may fluctuate in any one quarter.

Nathan: Turning now to our cash flow.

Nathan: We delivered strong cash flow in the quarter, surpassing our guidance our cash flow from operating activities grew 33% to $85 million for the three months ended March 31, 2024, primarily due to the strength in bookings in Q1, our unlevered free cash flow was $89 million growing 33.

Nathan: 3% and representing a margin of 32%, surpassing the high end of our guidance.

Nathan: The outperformance was primarily due to strong bookings driven by renewals in acquisition of website subscriptions.

Nathan: The year over year increase of over 340 basis points and Unlevered free cash flow margin also reflects the timing of our Q1 tax payment, which fell in Q1, a year ago and will fall in Q2, and 2020 for timing of payments may fluctuate in any one quarter are consistent levels of positive unlevered.

Nathan Gooden: Our consistent levels of positive unlevered free cash flow afford us opportunities to innovate and develop new products, where we see opportunities to provide more value to our customers and to plant the seeds for long-term growth and return value to shareholders through our stock repurchase program. In February 2024, our board of directors authorized a $500 million share repurchase program. We view share repurchases as an integral part of our capital allocation strategy.

Nathan: Free cash flow afford us opportunities to innovate and develop new products, where we see opportunity to provide more value to our customers and to plant the seeds for long term growth and return value to shareholders through our stock repurchase program.

Nathan: In February 2024, our board of directors authorized a $500 million share repurchase program.

Nathan: We view share repurchases as an integral part of our capital allocation strategy as of March 31.

Nathan Gooden: As of March 31st, 2024, we returned over $12 million to shareholders under the current authorization, representing approximately 321,000 shares at an average weighted price per share of $33.33 on the open market. Now turning to our guidance for Q2 and the full year 2024. For the second quarter of 2024, we are targeting total revenue in the range of $291 to $294 million, which represents approximately 18% growth at the midpoint of the range.

Nathan: 2024, we returned over $12 million to shareholders under the current authorization, representing approximately 321000 shares at an average weighted price per share of $33 33.

Nathan: On the open market now.

Speaker Change: Now turning to our guidance for Q2 and the full year 2024.

Speaker Change: In the second quarter of 2024, we are targeting total revenue in the range of $291 million to $294 million, which represents approximately 18% growth at the midpoint of the range. We expect unlevered free cash flow during the second quarter to be in the range of $61 million to $64 million, which represents a margin.

Nathan Gooden: We expect unlevered free cash flow during the second quarter to be in the range of $61 to $64 million, which represents a margin of approximately 21% at the midpoint of the range. The implied Q2 margin relative to Q1 2024 primarily reflects the timing of our Q1 corporate tax payment, as I noted a moment ago. Because the timing of such payments may cause fluctuations in any one quarter, we manage to the full year metric and margin.

Speaker Change: Approximately 21% at the midpoint of the range.

Speaker Change: The implied Q2 margin relative to Q1 2024, primarily reflects the timing of our Q1 corporate tax payment as I noted a moment ago, because the timing of such payments may cause fluctuations in any one quarter, we manage to the full year metric and margin.

Nathan Gooden: The strength that we saw in Q1, combined with our healthy expectations for Q2, gives us confidence to raise our full-year guidance today. For 2024, we expect total revenue to be in the range of $1.193 to $1.208 billion, up from our previous range of $1.170 to $1.190 billion. The midpoint of our updated range represents 19% growth. Unleveraged free cash flow is expected to reach between $298 and $318 million and implies a margin of 26% at the midpoint of the range. This represents an increase from our previous estimate of $290 million to $310 million. To summarize,

Speaker Change: The strength that we saw in Q1 combined with our healthy expectations for Q2 gives us confidence to raise our full year guidance today.

Speaker Change: In 2024, we expect total revenue to be in the range of $1 193 to $1 $208 billion up from our previous range of $1 170 to 1190 or $1 billion.

Speaker Change: The midpoint of our updated range represents 19% growth.

Speaker Change: Unlevered free cash flow is expected to reach between $298 million to $318 million and implies a margin of 26% at the midpoint of the range.

Speaker Change: This represents an increase from our previous estimate of $290 million to $310 million.

Speaker Change: To summarize.

Operator: We had a great Q1. We saw strong momentum in the core business, fueling our top line growth, profitability, and cash flow, supported by solid early traction from the migration of our Google domain assets. Our business continues to grow with existing and new customers as we make progress against our strategic priority to drive long-term growth while continuing to gain leverage and achieve profitable growth at scale. Thank you to our employees for their continued commitment to our customer success. I look forward to engaging with many of you at our Investor Day next week. With that, Operator, please open the line for the Q&A portion of the call.

Speaker Change: We had a great Q1, we saw strong momentum in our core business fueling our top line growth profitability and cash flow supported by solid early traction from the migration of our Google domain assets.

Speaker Change: Our business continues to grow with existing and new customers as we make progress against our strategic priority to drive long term growth, while continuing to gain leverage achieving profitable growth at scale.

Speaker Change: To our employees for their continued commitment to our customers' success I look forward to engaging with many of you at our Investor Day next week with that operator. Please open the line for the Q&A portion of the call.

Operator: Thank you. We will now begin the question and answer session. As a reminder, if you would like to ask a question, simply press star followed by one on your telephone keypad. And if you would like to withdraw your question, press the pound key. The first question comes from the line of Vikram Kesavotla with Baird. Your line is now open.

Speaker Change: We will now begin the question and answer session.

Speaker Change: As a reminder, if you would like to ask a question simply press star followed by one on your telephone keypad.

Speaker Change: And if you would like to withdraw your question press the pound key.

Speaker Change: The first question comes from the line of Vikram cast their vote cast that bolt loves sorry with Baird. Your line is now open.

Vikram Kesavabhotla: Great, thanks for taking the questions. My first one is on the unique subscription number. It looks like that was up 15% year-over-year. I think that compares to 10% and 5% in the prior two quarters. So just wondering if you can help us understand the drivers behind the acceleration in that metric. How much of that is a reflection of easier comparisons versus some of the tailwinds that you're seeing from the work on the platform?

Vikram: Great. Thanks for taking my question. My first one is on the unique subscriptions number it looks like that was up 15% year over year, I think that compares to 10% and 5% in the prior two quarters. So just wondering if you can help us understand the drivers behind the acceleration in that metric.

Vikram: That is a reflection of easier comparisons versus some of the tailwind that you are seeing from our work on the platform and maybe you could offer some thoughts on how we should think about the growth of that metric for the balance of this year.

Vikram Kesavabhotla: And maybe you can offer some thoughts on how we should think about the growth of that metric through the balance of this year. And then my second question is on the guidance. Just wondering if you could clarify your expectations for Google Domains' contribution to the revenue ranges for the second quarter and fiscal 24. And I'll leave it there.

Speaker Change: And then my second question is on the guidance just wondering if you could clarify your expectations for Google domains contribution to the revenue ranges for the second quarter and fiscal 'twenty, four and I'll leave it there. Thanks.

Anthony Casalena: Great. I can get started on the unique subscribers. A lot of that is driven by new domain subscribers. Just to remind everyone, we've had, you know, even before the Google domains acquisition, Squarespace sold domains for the better part of a decade now. We had millions of domains on the platform, so it's not exactly a new type of subscription for us. That being said, post the Google domains closure, we've seen really greatly increased traffic from new domains coming onto the platform that are domain first instead of website first. So that's a huge difference between now and this time last year. Again, to remind everyone that the Google Debates transaction officially closed.

Speaker Change: Great I can get started on the unique.

Speaker Change: A unique subscribers a lot of that is driven by new domain subscribers.

Speaker Change: To remind everyone. We've had even before the Google domains acquisition. There were of course, there's still demand for better part of a decade now we had millions of demands on the platform. So it's not a.

Speaker Change: Exactly a.

Speaker Change: New type of subscription for us that being said post the Google domains closure, we've seen really greatly increased.

Speaker Change: Traffic and new demands coming onto the platform that are domain first instead of website fares. So that's a huge difference between now.

Speaker Change: Now and this time last year again to remind everyone that Google debate transaction officially closed.

Anthony Casalena: So, you know, we're really encouraged by that. We're really encouraged by the attach rate to our core products on those new domains. And you know, there are a lot of factors contributing to that in the ecosystem, which we can touch on later.

Speaker Change: September.

Speaker Change: Yes, we're really encouraged by that we're really encouraged by the attach rate to our core products on this new demands.

Speaker Change: And there's a lot of factors contributing to that in the ecosystem, which we can we can touch on later, but it's an entirely different world than it was last year and we're the beneficiary of a lot of that inbound traffic, but that's the primary driver of the unique descriptions being higher.

Nathan Gooden: But it's an entirely different world than it was last year, and you know, we're the beneficiary of a lot of that inbound traffic. But that's the primary driver of the unique subscriptions being higher. And I can turn it over to Nathan on the guidance.

Speaker Change: And I can turn it over to Nathan on the guidance on the guidance that Greg what I would say, we're not going to continue to break out the contribution from Google domains as we did for the full year and Q1.

Nathan Gooden: Yeah, on the guidance, Vikram, one, I would say we're not going to continue to break out the contribution from Google domains as we did for the full year in Q1. But what I will say is we were able to raise our guidance, you know, Anthony calls it the trifecta of small business for our website, domain, and email. And we are seeing continued strength from all three of those channels that caused us to raise the guide for the full year.

Nathan: But what I will say, we were able to raise our guidance Jeremy I think I'll just turn it back to a small business for our website domain and email and we are seeing continued strength from all three of those channels and that causes to raise the guidance for the full year.

Nathan Gooden: So the organic business is continuing to maintain the same strength that we saw throughout 2023. And as a reminder, Google domains revenue will, you do recognize that over 12 months, you'll see that continue to gain momentum as part of revenue throughout the year. I will say Google domains was the number one driver for bookings this quarter. So we are very happy to see that, and, oh yeah, the overall domain business.

Nathan: Getting business are continuing to maintain the same strength that we saw throughout 2023 and as a reminder, Google domains that revenue will you recognize that over 12 months Youll see that continue to gain momentum as part of revenue throughout the year.

Nathan: I will say Google domains was the number one driver for bookings this quarter. So we are very happy to see.

Nathan: That.

Nathan: Yes, the overall domain business come through.

Speaker Change: Okay, great. Thank you.

Operator: Thank you. The next question comes from the line of Andrew Boone with JMP Securities. Your line is now open.

Speaker Change: Thank you. The next question comes from the line of Andrew Boone with JMP Securities. Your line is now open.

Andrew M. Boone: Good morning, and thanks so much for taking my questions. Nathan, you talked about a 500 basis point improvement in marketing efficiency. Can you help us understand the drivers of that, as well as the sustainability of that marketing efficiency going forward? And then, going back to the last question, can you break down international? We've seen a strong acceleration from 14% 4Q to 18% in 1Q24XFX growth. Can you help us understand that? Is that the subscriber number? Or is there anything else to highlight as we think about the international opportunity? Yeah, I'll take the marketing contribution or marketing expense.

Andrew M. Boone: Good morning, and thanks, so much for taking my questions.

Andrew M. Boone: Nathan you talked about a 500 basis point improvement in marketing efficiency can you help us understand the drivers of that as well as the sustainability of that marketing efficiency going forward.

Andrew M. Boone: And then going back to the last question can you breakout international we've seen strong acceleration from 14% <unk> to 18% and 124 ex FX growth can you help us understand that is that the subscriber number or is there anything else to highlight as we think about the international opportunity.

Nathan Gooden: Yeah, I'll take the marketing attribution or marketing expense improvement. We did see 500 basis points on a non-GAAP basis. I'll say this is the continued impact from our marketing attribution model as we direct spend to the right channel. And that is driving a healthy top line.

Speaker Change: Yes, I'll take the Mark attribution, alright, marketing expense, but we did see 500 basis.

Speaker Change: non-GAAP.

Speaker Change: Basis, I will say this is continued.

Speaker Change: The impact from our marketing attribution model as we direct spend is the right channel.

Speaker Change: That is driving a healthy top I'd say, we're very efficient point of kind of our marketing spend and investing in the right channels and.

Nathan Gooden: I would say we're very efficient when it comes to marketing spend and investing in the right channels and shifting as we see inefficient spend there. And that's just the stuff coming through the model. I would say, you know, we do expect to continue to maintain healthy margins on that. The other thing I'd point out, especially on a gap basis, and you do see the amortization of the PPA from Google transaction rolling through that.

Speaker Change: And shifting as we see inefficient spend there.

Speaker Change: The.

Speaker Change: That coming through the model I would say, we do expect to continue to maintain a healthy margins on that the other thing I'd point out, especially on a GAAP basis.

Speaker Change: Do see the amortization of the PPA from Google transaction rolling through that so.

Speaker Change: On a GAAP basis, that's why it's not as impactful improvements.

Speaker Change: Okay.

Speaker Change: Okay Gotcha.

Nathan Gooden: So on a gap basis, that's why it's not as impactful an improvement. So, on international revenue, we're continuing to see, you know... Lots of investments there that are continuing to pay off. We increase currency year over year by 21 currencies to 25 currencies. The momentum that we're seeing in, I'd say, revenue is really a trailing indicator. The ones that we're seeing the momentum in, Q1, we saw very healthy trials internationally. And so we expect the investments that we're making there to pay off throughout the year. But I will say, we're very excited to talk about international business next week at our Investor Day as one of the key growth drivers we're seeing going forward.

Speaker Change: Okay. So on international revenue.

Speaker Change: We're continuing to see.

Speaker Change: Lots of investments there that are continuing to pay off we increased currency year over year by 21 currency to 25 currencies.

Speaker Change: Momentum that we're seeing and I would say.

Speaker Change: Revenue is really a trailing indicator on the ones that we're seeing that.

Speaker Change: Momentum in Q1, we saw very healthy trials international.

Speaker Change: So we expect the investments that we're making there to pay off throughout the year, but I will say, we're very excited to talk about international next week at our Investor Day is one of the key growth drivers, we're seeing going forward.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Yeah.

Operator: Thank you. The next question comes from the line of Ken Wong with Oppenheimer. Your line is now open.

Speaker Change: Thank you. The next question comes from the line of Ken Wong with Oppenheimer. Your line is now open.

Ken Wong: Great, thanks for taking my question. First one for you, Anthony, you know, when you guys brought up design intelligence, how do you anticipate customers will engage with that interface? Is this an opt-in? Will this be the default way of interacting with Squarespace? How does that potentially roll out over time?

Speaker Change: Okay.

Ken Wong: Great. Thanks for taking my question so.

Ken Wong: First one for you Anthony.

Ken Wong: You guys brought up design intelligent.

Ken Wong: How do you envision customers will engage with that interface is this an.

Ken Wong: And will this be default upon.

Ken Wong: Interacting with square space.

Ken Wong: How does that potentially rollout over time.

Speaker Change: Sure. So yeah as I mentioned in the latter people can go and take a look on our franchise, it's actually linked from the head our square space Dot Com slash designed as intelligence.

Anthony Casalena: Sure. So as mentioned in the letter, people can go and take a look at it on our front site. It's actually linked in the header, squarespace.com slash design dash intelligence. It's just a real roundup of how we see our AI efforts applying to our design tools. As to your question of if it'll be an opt-in part of the default experience, it'll be part of the default experience.

Ken Wong: It's just a real round up of how we see.

Ken Wong: Our AI efforts applying to our design tools ask your question or if it'll be opt in part of default experience it'll be part of the default experience AI. This page focuses a lot on how we are maintaining design integrity, while utilizing a lot of these solutions in various parts of our platform.

Anthony Casalena: This page focuses a lot on how we are maintaining design integrity while utilizing a lot of these solutions at various parts of our platform. But AI is going to appear everywhere within Squarespace. As mentioned on previous calls, in the form of machine learning, it's already appeared in our customer operations. We've had an AI chatbot trained on our knowledge base for the better part of a decade. We monitor deflection rates there, et cetera, et cetera.

Ken Wong: But AI is going to appear everywhere within square space as mentioned on previous calls in the form of machine learning. It's already appeared in our customer operations. We had a AI chatbot trained on our knowledge base for the better part of a decade, we monitor the deflection rates, there et cetera et cetera.

Anthony Casalena: There are great opportunities for it to do boring things like fill in metadata, simple chores. But the design intelligence stuff is great because, if you take a look at it, you'll see it woven into the blueprint onboarding and showing how we can, in a very particular way, generate image libraries that are both stylistic and appropriate contextually on the website for what content may go over a background image or something else like that.

Ken Wong: <unk> opportunity is straight to do barring things like filling metadata simple chart, but the design intelligence that is great. Because if you take a look at it youll see it woven into the blueprint onboarding and showing how.

Ken Wong: We can we can in a very particular way generate MSR library that are both stylistic at appropriate contextually on the website for what content may go over a background image or something else like that we're really focused on the quality and the results here I think a lot of.

Anthony Casalena: We're really focused on the quality and the results here. I think a lot of people are sort of in a mad scramble to just put AI on something on their front page, and I think the results are, in many ways, very, very unimpressive, frankly.

Ken Wong: People are sort of in a mad scramble to just put AI on something on their site and I think the results are.

Ken Wong: Anyway, it's very very unimpressive, frankly, and so we're trying to make sure we used the technology mix with our taste level and doing it in a curated way to get to maintain really great results.

Anthony Casalena: And so we're trying to make sure we use the technology mixed with our taste level and do it in a curated way to maintain really great results. So the design intelligence page is a roundup of some stuff that's either launched or is in flight. And yeah, it'll appear everywhere. You won't need to opt into it as some special thing.

Ken Wong: The design intelligence pages, a roundup of some stuff that's either launched or is in flight and yes. It will appear everywhere you wont need like opt into it is some special thing. It's just part of the experience and the other thing I would call out on that is onboarding experiences like blueprint are really important because.

Anthony Casalena: It's just part of the experience. The other thing I would call out is onboarding experiences like Blueprint are really important because we have yet to see somebody come to our site and say, hey, I want to write an essay. And I want you to turn that into a visual website for me. And then I want to write paragraphs back in order to edit it. That's just never occurred to us. We don't really anticipate it occurring.

Ken Wong: We have yet to see somebody come to our site to hey, I want to write an essay and.

Ken Wong: I want you to turn that into a visual website for me and then I want to write paragraphs back in order to edit that's just never occurred we don't really anticipated occurring so it's very important.

Anthony Casalena: So it's very important for us to provide visual interfaces into AI tools so that people can see what they're getting and then have control over those experiences and manipulate them in place. And so we're going to continue to pursue that sort of visual first, but AI-enabled path through integrating these technologies into our product.

Ken Wong: And for us to provide visual interfaces into AI tools. So that people can see what they are getting and then have control over those experiences and manipulate them in place and so we're going to continue to pursue that sort of visual first but AI enabled passed through integrating these technologies into our product.

Nathan Gooden: Got it, fantastic. And then Nathan, just a quick follow up.

Speaker Change: We've got a fantastic and then Nathan just a quick follow up you mentioned GTD come in above seasonal trend.

Speaker Change: Much of that is new versus perhaps same store sales and then should we think that there is additional tailwind to come now that you guys have lost square space payments or is that already starting to work its way into that above seasonal number.

Nathan Gooden: You mentioned GPB coming in above seasonal trends. How much of that is new versus perhaps same-source sales? And then, should we think that there's additional tailwinds to come now that you guys have launched Squarespace payments? Or is that already starting to work its way into that above seasonal number?

Nathan: Yes, great question here. So we are seeing great acceleration in our <unk> as I said, there's multiple streams here.

Nathan: Flowing in for <unk>.

Nathan: Acuity and we saw double digit growth from a SaaS perspective and <unk> some.

Nathan: Some of the newer set to be launched in 2003 with invoicing memberships of course is all saw double digit growth in sub youre, starting to see that flow through the numbers.

Nathan: Excited to break the historical trend, where Q1 is usually lower from a pure dollar standpoint than Q4.

Nathan Gooden: Yeah, great question here. So we are seeing great acceleration in our GDP. You know, as I said, there are multiple streams here, and they are flowing in for GPB. And you know, like Acuity, we saw double-digit growth from a SaaS perspective, and GPB, some of the newer stuff that we launched in 23, with invoicing, memberships, and courses, also double-digit growth. And so you're starting to see that flow through the numbers. I'm so excited to break the historical trend where Q1 is usually lower from a pure dollar standpoint than Q4. I mean, that's just the momentum.

Nathan: Just the momentum again like all of the investments we made in service sellers Youre, starting to see that flow through and as you mentioned of course payments like we are.

Nathan: At the start is first of all.

Nathan: And you'll probably talk a little bit about the re architecture. Our plans, that's really going to start to accelerate in the latter half of the year, but as we rollout square six payments to all of our customers Youll start to see more GBP. According to our platform, yes, I'll just add on there that it was encouraging to see the GPT breaks seasonal trend and move in a positive direction.

Anthony Casalena: Yeah, I'll just add on there that it was encouraging to see the GPV break its seasonal trend and move in a positive direction. Just two more comments there.

Nathan Gooden: Again, like all the investments we made in service sellers, you're starting to see that flow through. And as you mentioned, Squarespace payments, like, we're just at the start of Squarespace payments. And Anthony will probably talk a little bit about the re-architecture of plans that's really going to start to accelerate this in the latter half of the year. But as we roll out Squarespace payments to all of our customers, you'll start to see more GPB going through our platform. Yeah, I'll just...

Nathan: Just two more comments there one is that the GPT on the platform is composed of many many many different types of GPP their physical product to service sellers tickets.

Anthony Casalena: One is that the GPV on the platform is composed of many, many, many different types of GPV. There are physical products, there are service sellers, there are tickets, there are donations, there are, you know, classes and courses, there's invoicing, all these different things. And what Squarespace payment unlocks for us, in addition to a better customer experience and higher take rate, is that once we've integrated this more tightly with our SaaS plans, we can enable selling across the entire platform and have a variable take rate as people move up in the SaaS tiers. That does two things.

Nathan: <unk>.

Nathan: Classes and of course is there an invoicing all these different things and what scores based payment unlocks for US in addition to a better customer experience and take rate is take rate.

Nathan: Is once we've integrated this more tightly with our SaaS platform.

Nathan: Can enable selling across the entire platform may have a variable take rate as people move up in SaaS here that does two things one on the low end more people have access to our commerce tool that don't have access to them today because of how we've architected the plaid and two on the high end sellers, who are looking for a discounted take rates out of the gate without any kind of near.

Anthony Casalena: One, on the low end, more people will have access to our commerce tools that don't have access to them today because of how we've architected the plans. And two, on the high end, sellers who are looking for a discounted take rate out of the gate without any kind of negotiation required will see that option in our offering. So both of those things are a huge unlock for us. I'm of the belief that we've launched many, many products that are extremely good but that we have not commercialized well.

Nathan: <unk> required well see that option in our offering so both of those things are a huge unlock for us.

Nathan: All of the belief that we've launched many many.

Nathan: They're extremely good.

Nathan: We have not commercialize as well and so youll see some of that next week at Investor day, too just that connective tissue between who we're speaking to on the front side, what the product looks like and offers you know what words. The easiest one you go in and what plan applies to you when you check out and what tools you have available to you at every step of the way so.

Anthony Casalena: And so you'll see some of that next week at Investor Day too, just that connective tissue between who we're speaking to on the front side, what the product looks like and offers you, what words it uses when you go in, and what plan applies to you when you check out, and what tools you have available to you at every step of the way. So until, you know, obviously, Squarespace payments being available to 100% of the US is amazing, but the real amazing parts will be when we do the other things I was talking about, complete the commercialization process and integrate take rates into the SaaS tiers and unlock these ways to transact for everyone across the platform.

Operator: Extremely helpful. Thank you.

Nathan: Until so obvious.

Nathan: Obviously, these payments being available to 100% of the U S is amazing, but the real amazing price when we do the other things I was talking about complete the commercialization process and integrate take rates into the SaaS tears and unlock these ways to transact for everyone across the platform.

Speaker Change: Extremely helpful. Thank you.

Speaker Change: Yeah.

Josh J. Beck: Thank you. The next question comes from the line of Josh Beck with Raymond James. Your line is now open.

Speaker Change: Thank you.

Speaker Change: The next question comes from the line of Josh Beck with Raymond James Your line is now open.

Anthony Casalena: Yeah, thank you so much for taking the question. You know, I was kind of curious about the comment about the unique subscription ads, certainly having a larger, you know, domain-first component. What are you tracking in terms of adoption of either workspace or website in terms of maybe where it is today and maybe where you think that could head in the years ahead.

Josh J. Beck: Yes. Thank you so much for taking the question I was kind of curious about the comment around the <unk>.

Josh J. Beck: Unique subscription adds certainly having a larger.

Josh J. Beck: Domain first component.

Josh J. Beck: What are you tracking in terms of.

Josh J. Beck: Adoption of either work space or website in terms of maybe where it is today and maybe where you think that could head.

Speaker Change: In the years.

Speaker Change: Forward.

Anthony Casalena: Sure, so the paths through our ecosystem are many, right? If you start with a website, then add a domain, then add email, that's one path. You could also start with a domain, then add email, then add a website, add just email, add just a website, just keep the domain.

Speaker Change: Sure so.

Josh J. Beck: The past through our ecosystem are many right. If you start with a website that added that remain that email. That's one path you get out to start with the demand then add email then add a website added just email address the website just keep the demand. Yes. There is all these sort of flows through the system.

Anthony Casalena: Yeah, there's all these sort of flows through the system. The flow that's really been unlocked post-Google, and this is due to a lot of engineering effort on our side, is the flow where you really start with a domain and then manage domains. And after that flow, we track, on a cohort basis, your attachment to website products and email products, and that's kind of the primary thing. We're very encouraged by the attach rates that we're seeing from that domains-first flow.

Josh J. Beck: The flow that's really been unlocked post Google and this is due to.

Josh J. Beck: A lot of engineering effort on our side is the flow when you really start with a domain then manage domains and after that flow we track you're on a cohort basis your attachment of website products and E mail products.

Josh J. Beck: And that's kind of the primary thing we're very encouraged by the attach rates that we're seeing from that domains first flow, we have not yet completed the migration, which we expect to complete over the summer of the existing domains and we have made.

Anthony Casalena: We have not yet completed the migration, which we expect to complete over the summer of the existing domains, and we've made, at this point, [inaudible] That new domain funnel is greatly elevated because one of the most trusted brands in the industry left, and we are the partner that they selected to register domains from there. So that's a massive ecosystem change. As people move over to Squarespace and they want another domain, if the domain's already with us, they'll get it with us.

Josh J. Beck: At this point.

Josh J. Beck: Zero efforts to try and market to those customers or anything else in fact, we're in kind of a.

Josh J. Beck: I call it like a do no harm and make sure that this migration complete successfully for everybody.

Josh J. Beck: Prices, what they everyone's expecting or we're not increasing the price on the personnel.

Josh J. Beck: For a lot of people.

Josh J. Beck: Just making sure that that's just super Super Super Smit, but that all being said that.

Josh J. Beck: <unk> remains on all is greatly elevated because one of the most trusted brands in the industry left and we are the we are the partner that they selected to do.

Josh J. Beck: The registrar domains from there so that's a massive ecosystem change as people move over to square space. They want another domain at the domain is already with us they'll get it with US a domain experience is greatly improved.

Anthony Casalena: The domain's experience is greatly improved. The upsells and cross-sells are easy, but not intrusive. And it's just kind of like a whole different world. And we have yet to even lean into marketing there, all the things that we could do in that world. So we'll continue to lean into the domain world over the next couple of years. But even today, in an unoptimized form, it is really encouraging. Which I will say is a reminder.

Josh J. Beck: The Upsells and cross sells the easy, but noninvasive and it's just kind of like a whole different world and so and we have yet to even lean into marketing there. After all the things that we can do in that in that world. So we will continue to lean into the domain.

Josh J. Beck: The world over the next couple of years, but even today in an unauthorized form it is really encouraging which I will say as a reminder, we talked about this last quarter. We have not included any material contribution from cross sell upsell of these domains in our guide we do view that as a future year benefit.

Anthony Casalena: Which I will say as a reminder, as we talked about last quarter, we have not included any material contribution from cross-sell and upsell of these domains in our guide. We do view that as a future year benefit, and we will talk more about that next week at our investor day.

Josh J. Beck: And we will talk more about that next week at our Investor day.

Nathan Gooden: Okay, that's, that's super helpful. And then, you know, just on Squarespace payments, obviously, it's available to the customer base. When we think about the adoption curve, you know, with existing customers, it certainly seems like a renewal is always a natural insertion point, right? For new customers, it seems like the door is, is kind of always open. So what are you doing?

Josh J. Beck: Okay.

Speaker Change: Super helpful.

Josh J. Beck: Then just.

Josh J. Beck: Square space payments obviously.

Josh J. Beck: Available to the customer base, when we think about the adoption curve.

Josh J. Beck: With existing customers. It certainly seems like a renewal is always a natural insertion point for new customers. It seems like the doors.

Josh J. Beck: There are always open so what are you Julian are strategically how are you thinking about.

Josh J. Beck: Or, you know, strategically, how are you thinking about promoting the existing base to kind of move on to the Squarespace payments platform? And you know, over what timeframe? Is that a multi-year journey? Is it something that could start to happen fairly quickly as some of these tier-based pricing plans are rolled out? Just how should we frame that up?

Josh J. Beck: Promoting.

Josh J. Beck: Existing base to kind of move on to the square space payments platform and over what timeframe is that a multi year journey is it something that could start to happen fairly quickly as some of these tier based pricing.

Josh J. Beck: Plans are rolled out so just how should we how should we frame that up.

Anthony Casalena: Sure. So it's going to be a multi-year journey, of course. But that being said, right now, you can go into Squarespace and, in three clicks, without re-entering your customer information, switch from Stripe to Squarespace Payments, retaining your entire order and transaction history. And we actually have people doing that with absolutely no pushing and no incentive to do that, other than the fact that it's a better product experience. Everything's in one place; you're dealing with one vendor. And, yeah, that's what people were telling us before we launched this. So, it's nice to see that with absolutely, again, absolutely no financial incentive to do that. You know, people are organically doing that.

Speaker Change: Sure. So it's going to be a multiyear journey of course, but that being said.

Speaker Change: Right now you can go into square space in three clicks without re entering your customer information port from stripe into scores based payments retaining your entire order and transaction history, and we actually have people doing that with absolutely no pushing and no incentive to do that other than the fact that it's a better product experience everything is in one.

Speaker Change: Youre dealing with one vendor.

Speaker Change: And that's what people are telling us before we launched it so it's nice to see that with absolutely no financial incentive to do that.

Speaker Change: People are people organically doing that and we've made that process. So easy.

Anthony Casalena: And that we've made that process so easy is frankly incredible. To something else you said, the real driver of moving people over to payments will be when we have this integrated into our SaaS tiers, because you will have a financial benefit from moving over to Squarespace Payments in addition to the integration. So, that's going to be the real transition point. And then we can, of course, market that and say, hey, you're above X amount of sales, click here once and move over to Squarespace Payments. And, you know, here's your new SaaS fee. And, you know, that's it. It's a win for all of us. So, we're really... We're really looking forward to being able to do that.

Speaker Change: <unk>.

Speaker Change: Frankly incredible.

Speaker Change: Something else you said the real driver of moving people over to payments will be when we have this integrated into our SaaS tiers, because you will have a financial benefit from moving over to scores based payments. In addition to the integration so that's going to be the real.

Speaker Change: Transition point and then we can of course market that is they hey, youre above X amount of sales click here at once and movement of scores based payments and here's your SaaS fee and that said, it's a win for all of us.

Speaker Change: So we're really.

Speaker Change: So really looking forward to being able to do that.

Anthony Casalena: Very helpful. Thanks, Anthony. And thank you.

Speaker Change: Yeah.

Speaker Change: Very helpful. Thanks, Anthony.

Speaker Change: Uh-huh.

Operator: Thank you. The next question comes from the line of Trevor Young with Barclays. Your line is now open.

Speaker Change: The next question comes from the line of truck cover young with Barclays. Your line is now open.

Trevor Vincent Young: Great, thanks. First one, just back to international.

Speaker Change: Great. Thanks first one just back to international could you just expand on what countries are driving that strength and what in particular is enabling you to win I understand localizing the platform site languages, and even the currency offerings.

Young: Help but that also feels a little bit like table Stakes vis a vis competitors. So it would seem to me that something else is helping you win.

Anthony Casalena: Could you just expand on what countries are driving that strength? And what in particular is enabling you to win? I understand localizing the platform, site languages, and even the currency offerings certainly help, but that also feels a little bit like table stakes vis-a-vis competitors. So it would seem to me that something else is helping you win.

Speaker Change: Well, it's a combination it is table stakes things and just different payment methods I think we are.

Anthony Casalena: Well, it's a combination. It is those table stakes things and just different payment methods. You know, I think we are just doing a test out with PayPal internationally right now. Yeah.

Speaker Change: The test out with Paypal internationally right now, yes, so we just launched Paypal.

Anthony Casalena: So we just launched PayPal as a way to check out on Squarespace in certain markets. You know, we had SEPA introduced last year. We're continuing to refine the localization. Frankly, Google was a great kickstart for us with respect to our language and currency coverage because we support 98% or so, maybe even more of the languages and currencies supported in Google domains, which is as worldwide as you can imagine. You know, I think there's, you know, we're just stepping through the markets. English-speaking non-U.S. are very strong. The conversion rates there approach that of the U.S. And then mostly it's the European markets that are kind of next on our list. We call it EM12.

Speaker Change: Way to check out of a square space in certain markets. We had SAP entering this last year, we're continuing to refine the localization and frankly, Google was a great kickstart.

Speaker Change: Kickstart for us with respect to our language and currency coverage, because we support 98% or so maybe even more of the languages and currencies supported and Google domains, which is worldwide as you could imagine.

Speaker Change: I think there is just stepping through the markets English speaking non you asked for very strong conversion rates their approach side of the U S. And then mostly its the European markets that are kind of next at our let's say call. It <unk>.

Anthony Casalena: And then later this year, we're going to be dabbling in certain select Asian markets as well. Look, I know it's sort of like a, you know, maybe a generic sounding answer, but it really is a process. We can't just arrive in a market and then, bam, everything's just the way we want it. So we start with using our circle community, local meetups, just really like guerrilla, tactical, more local type marketing initially, and then you can move to bigger and bigger things.

Speaker Change: And then later this year, we're going to be dabbling in Asia.

Speaker Change: Asian markets as well.

Speaker Change: Look I know, it's sort of like a.

Speaker Change: Maybe a generic sounding answer but it really is a process. We can't just arrive in a market and then Bam everything is just the way we want so when you start with using our circle community local meat, just really like gorilla tactical a more local type marketing initially and then you can move to bigger and bigger.

Anthony Casalena: Direct response, we can always do worldwide at any time, but it's just a combination of hundreds of things and hundreds of languages and, you know, not hundreds of languages, but a lot of languages and like many, many currencies to really be successful in these markets. So it's a time and effort thing, along with a feature and functionality thing. But again, it's like we say, oh, it's a table thing. Well, it took us a long time to even get PayPal to check in on it, but we're testing that now in certain markets. So it's not like we have complete coverage even today. So yeah, but yeah, a decade-long effort for us will continue to be.

Speaker Change: Direct response, we can always do worldwide at any time, but it's just a combination of hundreds of things and hundreds of languages.

Speaker Change: Hundreds language, but like a lot of languages like many many currencies.

Speaker Change: Really be successful in these markets. So it's a time and effort thing along with a feature and functionality thing, but again.

Speaker Change: We say, it's a table and say well it took us a long time, even get Paypal checkout or testing that now in certain markets.

Speaker Change: So it's not like we have complete coverage even today so.

Speaker Change: Yes, but decade long effort for us and we will continue to be.

Nathan Gooden: But that's helpful, Anthony. And then Nathan, just a quick follow-up on the Google domains. Appreciate you're not, you know, disclosing what it's going to be in 2Q, but is that $85 to $88 million from last quarter for the full year still kind of a good number to model in here? I mean, I will say, Trevor, we do maintain...

Speaker Change: That's helpful. Anthony Nathan just a quick follow up on the Google domains I appreciate youre not.

Anthony Casalena: Disclosing what it's going to be in <unk>, but is that 85% to $88 million from last quarter for the full year still kind of a good number to model in here.

Nathan Gooden: I mean, I will say, Trevor, we do maintain the strong renewal rates that we forecasted at the beginning of the year, so that's continuing to flow into the model. But again, like the full-year guide was raised for all three of those, so we are seeing goodness from websites, domains, and the email side of the business.

Anthony Casalena: I will say I'm Trevor we do maintain the strong renewal rates that we forecasted at the beginning of the year, So thats continuing to flow through the model.

Anthony Casalena: But again like the full.

Anthony Casalena: Full year guidance.

Anthony Casalena: Does raise for all three of those so we are seeing goodness from websites domains and.

Anthony Casalena: The email side of the business.

Operator: Okay, great. Thank you. Thank you.

Speaker Change: Okay, great. Thank you.

Anthony Casalena: Okay.

Operator: Thank you. The next question comes from the line of Siti Panigrahi with Mizuho. Your line is now open.

Speaker Change: Thank you.

Speaker Change: The next question comes from the line of <unk> <unk> with Mizuho. Your line is now open.

Speaker Change: Hey, guys. This is Phil on for city can you help us better understand what drove the $5 million of contribution from the pricing increase this quarter and how should we think about the pricing uplift included in your FY 'twenty guidance.

Sitikantha Panigrahi: Yeah, the $5 million that flowed, or that flowed through, that came through in Q1 is the increase in the legacy customers that we did in Q3 of 22. So you're still seeing the annual impact of those that received it in, you know, Q2 and Q3 of 23, that's flowing through in Q1 here. We have included a very immaterial impact for price increases for those legacy customers in Q3 of this year and going forward, where you'll see, just like you saw previously, the material impact from a price increase in the latter half of the year is as follows. So we would expect a more material impact for 25 than we would in 24 for price increases for our legacy customers. I'd just add one thing. In the quarter we did it, we were able to...

Speaker Change: Yes.

Speaker Change: <unk> 5 million that flu.

Speaker Change: That came through in Q1.

Speaker Change: The increase of the legacy customers that we did in Q3 of 'twenty two so youre still seeing the annual impact of those that received it in.

Anthony Casalena: Q2, and Q3 of 'twenty three that's flowing through in Q1 here.

Anthony Casalena: We have included a very immaterial impact for price increases for those legacy customers.

Anthony Casalena: In Q3 of this year going forward and where Youll see just like you saw previously the material impact from a price increase in the latter half of the year and the following so we would expect a more material impact of our 25 and we would in 'twenty four for price increases for our legacy customers.

Nathan Gooden: I'd just add one thing. In the quarter, we were able to successfully move up slightly the list price from the business plans and above. And so I think that's rolled out to 100% now, and it just gives us an opportunity later in the year as we kind of contemplate what to do with legacy prices now that more people are, quote, unquote, legacy. And yeah, again, we've guided to roughly every two years, roughly 5% to 10%. You know, it's what to expect there.

Speaker Change: Got it I'll just add one thing in quarter. We did we were able to successfully move up slightly the list price in the business plans and above.

Speaker Change: And so I think thats rolled out to 100% now and it just gives us opportunity later in the year as we kind of contemplate what to do with legacy prices now that more people are quote unquote legacy.

Speaker Change: And yes, again, we've guided to.

Speaker Change: Roughly every two years roughly 5% to 10%.

Speaker Change: Yes, thats what to expect there.

Anthony Casalena: Thank you. The next question comes from the line of Ygal Arounian with Citigroup. Your line is now open.

Speaker Change: Thank you.

Equal Iranian: The next question comes from the line of equal Iranian with Citigroup. Your line is now open.

Operator: Hey, good morning, guys. I want to dive into the subscriptions a little bit more, you know, understanding that we're seeing some strength coming from the domain side of the funnel. But the website subscriber growth was up 12%. And if we look back at that, what that number was pre Google domains, or kind of just looking back over the beginning of 22, let's say, on average, it was. So, like, is all that incremental being driven from the domain part of the funnel? But are you still, are you seeing incremental strength from people coming directly to build a website? How should we think about the split of the lift here from, you know, the pre-Google run rate?

Equal Iranian: Hey, good morning, guys.

Equal Iranian: I want to dive.

Iranian: Got it.

Equal Iranian: Subscriptions, a little bit more understanding that we're seeing some strength coming from the domain side of the funnel.

Iranian: But the.

Iranian: The web site with subscriber growth was up 12%.

Iranian: Look backs.

Iranian: That what that number was pre.

Iranian: Google domains or kind of just looking back over the beginning of 'twenty two let's say on average was.

Iranian: Single digits.

Iranian: We're up.

Iranian: 12, 13% here.

Iranian: What is all of that incremental being driven from from the domain part of the funnel.

Iranian: But are you still are you seeing incremental strength from people coming directly to build the website. This how should we think about the split of the lift here from.

Iranian: The <unk> run rate.

Ygal Arounian: So the answer is no, it's not a result of just domains attaching websites. I mean, that's a factor, but the trial first website starts are at an all-time high, too. So that's not the domains funnel. You're dealing with a lot of things here.

Speaker Change: So the answer is no. It's not a result of just domains attaching website I mean, thats a factor, but the trial first website starts are at an all time high tiers, so thats not the demand funnel.

Iranian: Youre dealing with a lot of things here.

Anthony Casalena: The halo effect around Google is very, very big, and it's not so easy to just draw a straight line between, you know, oh, they were a referral, then they did a domain, then they did a website. You have to imagine that as people move over from Google, 7 million new people will be Squarespace customers. Whether or not they decide to transact and buy a website in month one, month five, month 12, month 24, it's just a totally different macro landscape, in addition to the product being better than ever.

Iranian: Like the Halo effect around Google is very very big and it's not so easy to just draw a straight line between.

Iranian: Sure.

Iranian: They were referrals than they did a domain and then get a website you got to imagine that as people move over from Google 7 million, new people will be square space customers, whether or not they decide to transact and buy a website in month one month five month 12 month 24, it's just a totally different macro.

Iranian: Our landscape in addition to the product being better than ever in addition to international strength remaining strong.

Anthony Casalena: In addition to international strength remaining strong, and, you know, it's just, there's a lot of factors at play here that are leading to real strength in the core, but I wouldn't just point to, like, other domains businesses driving, because that's not the case. Yeah. Let me layer on that, Egal.

Iranian: And it's just there's a lot of factors at play here that are leading to really strengthen the core but I wouldn't just point to like other domains business is driving us is not the case.

Nathan Gooden: You know, we reported 23 record trials every quarter, and Q1, again, this year was a record trial, the highest in the history of the company. So that momentum of our core business started before the Google transaction. So it's just continuing to flow through, and we're maintaining those strong rates.

Iranian: Let me layer on that angle.

Iranian: We reported 23 record trials every quarter and Q1 again this year was a record trial highest in the history of the company.

Iranian: So that momentum of our core business started before the Google transaction. So it's just continuing to flow through and we're maintaining those strong rates.

Ygal Arounian: Okay, great. That's helpful.

Speaker Change: Okay, Great. That's helpful. We're getting a lot of questions from investors on that already.

Ygal Arounian: We're getting a lot of questions from investors on that already, so I think that clarification is important. And then, second, on pricing and packaging optimization, I know we're talking about kind of integrating the payments fee into the higher SaaS tier. Is there more you're doing there as well? We'll hear more about that as an investor today, I'm guessing, and how should we think about the timeline for when, you know, this stuff's going to start to roll out?

Speaker Change: That clarification is important and then second one just on the pricing and packaging optimization.

Speaker Change: I know, we're talking about what kind of integrating the payments fee into higher sized here is there more.

Iranian: There as well.

Iranian: We'll hear more about that at the Investor day, I'm guessing and how should we think about the timeline for one.

Iranian: This stuff's going to start to rollout. Thanks.

Anthony Casalena: Um, there's a lot we're contemplating there. I think that is the biggest one, just the transaction fee showing up. I think it's also important to note that alongside that transaction fee showing up, we'll be enabling the actual commerce functionality in almost all of the plans, just differentiated by a fee. That's a giant change. The adjustment of the fee in the business plan, which I don't think is particularly market right now, it's another giant change, frankly, the removal of it. So, there's that.

Speaker Change: There's a lot we're contemplating there I think that is the biggest one is the transaction fee showing up I think it's also important to note that.

Speaker Change: Alongside that transactions <unk>, Shanghai will be enabling the actual commerce functionality in almost all of the plans just differentiated by a fee that's a giant change.

Iranian: The adjustment of the fee and the business plan, which I don't think its particularly market right now it's another giant change frankly that removal of it.

Anthony Casalena: I think there's feature interplay with those plans, which would be more minor, in terms of time frame, you know, later this year. Definitely something in the year, I mean, for us testing it or putting it out, I don't think it will impact this year necessarily. But yeah, I mean, it's all under development right now. The other thing we have under development from a, it's not really a pricing perspective, but from a packaging perspective, you know, right now. Although we're really, really encouraged by that new domain funnel, our product is immature.

Iranian: Sure.

Iranian: So there is that I think theres feature interplay with but those plans are there'll be more minor.

Iranian: In terms of timeframe.

Iranian: Yes later this year definitely something in year two.

Iranian: Testing it or putting it I don't think the impact this year necessarily but.

Iranian: Yes, I mean, it's all under development right now.

Iranian: The other thing we have under development from a it's not really a pricing perspective, but from a package packaging perspective right now, although we're really really encouraged by that new domain funnel.

Anthony Casalena: You know, when you check out with a domain, it doesn't ask you if you want to buy the website right there at the same time. We have a lot of no-brainer things to do in the checkout flow that could have pretty dramatic results if some of these catch on. So we're working on things like that too. Again, that's more bundling than it is pricing, but yeah, that's kind of what we're looking at.

Iranian: Our product is immature when you check out with a domain. It doesn't ask you. If you want to buy the website right. There at the same time, we have a lot of no brainer things to do in the checkout flow that could have pretty dramatic results. If some of these catch on so we're working on things like that too again, thats more bundling than it is pricing, but yes, that's kind of what we.

Iranian: We're looking at.

Ygal Arounian: Okay, great. Really helpful. Thank you. Thank you. The next question comes from the line of Naved Khan with B. Reilly. Your line is now open. Yeah, thanks. Are you planning to launch more?

Speaker Change: Okay, Great really helpful. Thank you.

Iranian: Mhm.

Speaker Change: Thank you.

Operator: The next question comes from the line of Naved Khan with B. Reilly. Your line is now open.

Speaker Change: The next question comes from the line of Narvik Kahn with B Riley. Your line is now open.

Naved Ahmad Khan: Yes, hi, thanks.

Naved Ahmad Khan: Ill.

Naved Ahmad Khan: Are you planning to launch more.

Naved Ahmad Khan: Market this year I think.

Naved Ahmad Khan: Hi, Nathan.

Naved Ahmad Khan: I think you mentioned, adding to vote for more languages.

Naved Ahmad Khan: New markets or are you just kind of.

Naved Ahmad Khan: We are bolstering support in markets you already and just talk about that and then what.

Nathan: And then.

Nathan: Maybe just on the mix of monthly subscribers and was any any color there in terms of.

Nathan: If the mix has changed a.

Nathan: A bit.

Naved Ahmad Khan: Yeah, so I mentioned prior, you know, with the closing of Google Domains and us anticipating this global customer base moving over, we're now in, I'm going to misquote it, it's in the letter, it's like 27... currencies and like 25 currencies and countless languages that are needed in the interface to support those customers. In terms of new markets for the primary products, we have under development the language and support needed to enter a couple of select Asian markets, hopefully by the end of this year. So that will be the new change there. And I'll let Nathan- Yeah, on total active subscriptions.

Speaker Change: Yes, So I've mentioned Brian.

Speaker Change: <unk>.

Speaker Change: Closing of Google domains, not anticipating this global customer base moving over.

Speaker Change: Now and.

Speaker Change: I admit I misquoted in Atlanta, or it's like 27.

Speaker Change: Currency is in like 25 currencies and countless languages that are needed in the interface to support those customers in terms of new markets for the primary products.

Speaker Change: We have under development.

Speaker Change: The language and support needed to answer a couple of select Asian markets hopefully by the end of this year, so that will be the new <unk>.

Anthony Casalena: Total active subscriptions, we are still mixing at 75% annual, 25% monthly. We've talked about previously that there's been some mix on new, but it's not mixing on new to monthly, but it's not moving the total active sub number from the 75-25 that we previously reported.

Speaker Change: Change, there and I'll, let Nathan.

Speaker Change: Total active subscriptions, we are still mixing at 75% annual 25% monthly we've talked about previously that theres been some mix on new but it's not.

Speaker Change: Mix on new monthly, but it's not moving the total active sub number from the 70 525 that we previously reported.

Speaker Change: Got it.

Speaker Change: Thank you guys.

Nathan Gooden: Thank you. The next question comes from the line of Chris Zhang with UBS. Your line is now open.

Speaker Change: Thank you. The next question comes from the line of Chris Young with UBS. Your line is now open.

Operator: Hi, thanks for taking our question. I think a lot of great questions have been answered. But I guess just on the potential tiered pricing for different website plans, there seems to be, you know, an increased capability to target some of the larger customers. And also, I guess just maybe from the incrementality of investment perspective, what are you thinking about potentially going after in terms of going up market and getting bigger customers? Or would you say the kind of focus still remains the same just across all your existing customer base?

Chris Young: Hi, Thanks for taking my question. So I think a lot with great questions have been answered, but I guess.

Chris Young: Just stop.

Chris Young: <unk>.

Chris Young: On the peso tiered pricing for sprint website plans.

Chris Young: To be one increased capabilities to target some of the larger.

Chris Young: Customers and also.

Chris Young:

Chris Young: And also I guess to start.

Speaker Change: Just maybe from the increments tells me of the vessel perspective, what are you thinking about potentially going after kind of going upmarket and getting bigger customers or would you say the kind of the focus still remains the same across all your existing customer base.

Chris Zhang: I would say as a blunt statement that our current commercialization of our commerce products is wrong. And what we need to do is get payments, well, payments are out.

Chris Young: I would say as a blunt statement that our current commercialization of our commerce products is wrong and what we need to do is get payments, while payments is out and what we need to now do is get it integrated with the plan tiers and enable commerce across all Sally but differentia.

Anthony Casalena: And what we need to now do is get it integrated with the plan tiers and enable commerce across all selling, but differentiate via fees, not via SAP, to unlock commerce functionality. The current personal plan does not have commerce functionality. The business plan doesn't have a particularly compelling take rate if you're a consumer. And then, from there, we don't get you into a sub-2.9% take rate automatically. Now, we can do that for Slack customers, but it's not automatic based on your SaaS tier.

Chris Young: <unk> not via SaaS to unlock commerce functionality. The current market. The current personal plan does not have commerce functionality. The business plan doesn't have a particularly compelling take rate if you're a consumer and then up from there. We don't get you into a sub two 9% take rate automatically now.

Chris Young: Do that for customers, but its not automatic based on your SaaS here, so by adding the payments take rate into the SaaS <unk>. It actually does two things one on the low end and one on the high end on the low end you can now use all the commerce functionality and pay us a slightly higher fee for doing it on the high end. If you upgrade your SaaS tier yoga at a lower fee.

Anthony Casalena: So by adding the payment take rate to the SaaS tier, it actually does two things, one on the low end and one on the high end. On the low end, you can now use all the commerce functionality and pay a slightly higher fee for doing it. On the high end, if you upgrade your SaaS tier, you will get a lower fee without having to negotiate anything with anyone, feel that, you know, large customers are probably looking at our SaaS tiers and going, not for me.

Chris Young: Without having to negotiate anything with anyone is currently my.

Chris Young: Feeling fit.

Chris Young: Our large customers are probably looking at our SaaS chairs and going not for me and I think that we have finally, an opportunity to correct that so that's exciting and then it's exciting on the low end two to say look you don't have to pay more to get started with commerce try it out tried out try everything out and if something works feel great. We're here with you in your graph.

Anthony Casalena: And I think that we finally have an opportunity to correct that. So that's exciting. And then it's exciting on the low end, too, to say, look, you don't have to pay more to get started with commerce.

Anthony Casalena: Try it out. Try everything out. And if something works for you, great. We're here with you when you grow up.

Chris Zhang: Thank you, Anthony. That's very helpful. I guess just a quick follow-up on the macro. Do you feel like this is kind of the new normal post-pandemic, or do you think there are different pockets or different segments or industries, or verticals, where you can still see some improvement or some recovery?

Speaker Change: Alright, Thank you Anthony and that's very helpful. I guess, just a quick follow up on the.

Speaker Change: On the macro.

Speaker Change: Do you feel like does it feel to you like this is kind of the new normal post spin that make or do you think there are different pockets are different.

Speaker Change: <unk>, our industry vertical where you can still see some improvement or some.

Speaker Change: Recovery.

Anthony Casalena: I wouldn't have any commentary on a vertical by vertical basis. I would say that the macro right now, again, as somebody who doesn't know anything about macro and can't possibly predict it for you, seems not to be detrimental.

Anthony: So I wouldn't have any commentary on a vertical by vertical basis.

Chris Young: I would say that the macro right now again, it's somebody who doesn't know anything about macro and can't possibly predict it for you.

Anthony Casalena: I think it feels normal and positive, I guess, from our end. We don't see anything that is a huge headwind, but it's hard for me to call out what that... If there was a specific tailwind to point to, it just feels normal. I don't know, which is great because we're seeing great results in what I would call a normal environment. Certainly, Squarespace has proven to be counter-cyclical, if you will, to a lot of things like financial recessions and pandemics, where people go home, they start businesses, and they adapt. That has always been a boon to us, but right now, it's strong performance in what I would call a normal macro environment. All right, I will appreciate it.

Chris Young: It seems to be not detrimental.

Speaker Change: Thank you.

Speaker Change: It feels normal and positive I guess from a from our end we don't see anything that is.

Chris Young: A huge headwind.

Chris Young: But it's hard for me to call out what that like like if there was a specific tailwind to point to it just feels normal.

Chris Young: Now, which is great because we're seeing great results and what I would call a normal environment.

Chris Young: Certainly that's squares base has proven to be.

Chris Young: Counter cyclical if you will to a lot of the things like financial recession, Pandemics, where people go home.

Chris Young: Let me start businesses. They adapt so that has always been sort of a boon to us.

Chris Young: But right now it's sort of like strong performance in our what I would call normal macro environment.

Chris Zhang: All right, I will appreciate it. Thank you so much.

Speaker Change: Alright I appreciate it thank you so much.

Speaker Change: Yeah.

Operator: The next question comes from the line of Alexei Gogolev with J.P. Morgan. Your line is now open.

Speaker Change: Thank you.

Speaker Change: The next question comes from the line of Alexia <unk> with Jpmorgan. Your line is now open.

Alexei Mihaylovich Gogolev: Hi, this is Ella Smith. I'm on behalf of Alexei Gogolev.

Speaker Change: Hi, This is Alex Smith on for Alexia <unk>. Thank you so much for taking our question. So first so you posted the second quarter free acceleration and unique subscriber and Anthony I was hoping Oh, sorry, and you said that Google domains as the Big driver. There are these customers typically come in a square space organically or via a referral link from.

Anthony Casalena: Thank you so much for taking our question. First, you posted the second quarter of reacceleration and unique subs growth. And Anthony, I was hoping, oh, sorry, and you said that Google Domains is a big driver there. Are these customers typically coming to Squarespace organically or via a referral link from Google?

Speaker Change: Google.

Anthony Casalena: Yeah, it's a great question. So modeling Google is very hard because you have a giant ecosystem change, right? People who were previously going to Google domains, if they go there, it will be a referral link to Squarespace. If the domain is transferred to Squarespace, they will be within Squarespace. If they're on SEO looking for things, they might find Squarespace instead of Google. If their account is transferred, they will receive an email from Squarespace saying that they're now a Squarespace customer, they can log into this account, sign up for things, blah, blah, blah.

Speaker Change: Yes, it's a great question so.

Speaker Change: Two model Google is very hard because you have a giant ecosystem changed people who were previously going to Google domains. If they go there it will be a referral link to square space. If the domain is transferred to square today, they will be within square space. If theyre on SCO looking for things they might find squared space instead of Google.

Speaker Change: If there are accounted transfer they will have an email from square, saying <unk> customer you can login into account sign ups things blah blah blah. So.

Anthony Casalena: So yeah, some part of it is a direct link, but it's a seismic ecosystem change that we'll be absorbing for a period of time. But it's just really a good position for us to have such strong, sustained organic growth in the funnel and to also see lower than expected churn in the customers coming over. And just, you know, we haven't even begun to like the market. So like, you know, it's, it's early days for the Google thing, but I highly encourage you to try it very, very

Speaker Change: Yes, some part of it is direct link, but it's a seismic ecosystem change that will be absorbing four.

Speaker Change: Yes.

Speaker Change: <unk> of time, but it's just really a good position for us to be to have such strong sustained sustained organic growth in the funnel and to also see.

Speaker Change: Lower than expected churn and the customers coming over.

Speaker Change: We haven't even begun to like market.

Speaker Change: Like it.

Speaker Change: It's early days for that for the.

Speaker Change: Google thing, but highly encouraging.

Alexei Mihaylovich Gogolev: Got it very clear, Anthony. Thank you. And Nathan, I think this next one would be for you. So the guidance for CapEx in 2024 is much lower than what you printed in 2023. Can you remind us why that is?

Speaker Change: Got it very clear Anthony Thank you.

Speaker Change: Nathan I think this next one would be for you. So the guidance for Capex in 2024 is much slower than what you printed in 2023 can you remind us why that is.

Nathan Gooden: Because of the Google transaction, we had internally developed software in 2023 that had an outsized impact. So you see that come down in 2024 to a more normal state. Understand. Thanks.

Speaker Change: Oh.

Nathan: Because of the Google transaction, we had internally developed software in 2023 that had an outside them back so youll see that come down in 2024 to a more normal state.

Alexei Mihaylovich Gogolev: I understand. Thanks so much.

Nathan: Understood. Thanks, so much.

Anthony Casalena: Thank you. This concludes the question and answer portion of today's call. I would now like to hand the call back to Anthony for any final remarks.

Speaker Change: Thank you.

Speaker Change: This concludes the question and answer portion of today's call I would now like to hand, the call back to Anthony for any final remarks.

Anthony Casalena: Yeah, I just, you know, obviously, hopefully, what we feel is a really great quarter. Thank you all for joining us for the question. We'll see a lot of you next week at our Investor Day. And, you know, it's just a real pleasure to be in this position. I mean, I think Squarespace's position is one of the top website builders in the world, one of the top domain registrars in the world, and one of the bit largest resellers of Google Workspace in the world. And to have all of those in one really strong modern platform is just some of the best positioning we've ever had. So, thank you all. I will speak to everyone soon. And thanks for the thoughtful questions.

Speaker Change: Yes.

Speaker Change: Obviously.

Anthony: Hopefully what we feel is a really great quarter. Thank you all for joining us for the question, we'll see a lot of you next week at our Investor day, and so it's a real pleasure to be in this position I mean, I think square faced positioned as one of the top website builders in the world one of the top domain registrar in the world and one of the largest resellers Google workspace.

Nathan: And to have all of those and one really strong modern platform is.

Nathan: Just some of the best positioning we've ever had so thank you all speak to everyone soon and thanks for the thoughtful questions.

Operator: This concludes today's call. Thank you for joining us. You may now disconnect your lines.

Speaker Change: This concludes today's call. Thank you for joining you may now disconnect your lines.