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Good morning. My name is Nadia, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Squarespace's Third Quarter 2022 Earnings Conference Call. [Operator Instructions] After the prepared remarks there will be a question-and-answer session. [Operator Instructions] Thank you.
I will now hand the call over to your host, Robert Sanders, Head of Investor Relations at Square Space to begin. Robert, please go ahead.
Good morning. Thank you for joining us. My name is Robert Sanders, Head of Investor Relations. With me on the call today are Anthony Casalena, Squarespace Founder and CEO, and we welcome Nathan Gooden, our CFO who joined the company in October. They will share some opening remarks, and then we will open the call to your questions.
Earlier today, we issued a press release and posted a shareholder letter in the Investor Relations section of our website with additional information related to our Q3 results. On today's call, we will be referring to both GAAP and non-GAAP financial results and operating metrics. You can find additional information on how we calculate these metrics, including a reconciliation of GAAP to non-GAAP measures in today's press release, which can be found in the Investor Relations section of our website. These measures should not be considered in isolation from or superior to our GAAP results.
We will make forward-looking statements pursuant to the safe harbor provisions of the Private Securities and Litigation Reform Act of 1995, which include, but are not limited to, statements related to our future financial performance. These forward-looking statements are subject to risks and uncertainties that could cause 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 that we make on this call are based on assumptions as of this day, November 8, 2022. We undertake no obligation to update these statements as a result of new information or future events, except where required by law.
Now I'll turn the call over to Anthony.
Good morning, everyone. Please join me in welcoming Nathan Gooden to our team as our new CFO. I'm Tilles with us and pleased to have him on this call. Nathan brings over 2 decades of financial leadership in the technology sector, most recently as CFO of Amazon's Alexa business. In our first weeks of working together, I'm finding his enthusiasm for our business invigorating and believe his positive influence will spread across the organization as he settles into his new role. Welcome, Nathan.
Thank you, Anthony. I will say I'm thrilled to be working with you and excited about the tremendous opportunity ahead for Squarespace. I believe, together with the amazing Squarespace team, we can further optimize our portfolio of brands for entrepreneurs and accelerate growth. I'm inspired by the vision that drives our business forward to help entrepreneurs with creative ideas stand out and succeed. I believe our mission, enabling millions to build a brand and transact with their customers with an impactful and beautiful online presence creates an amazing opportunity for our business.
Now I'll hand the call back to Anthony for some opening remarks, then I'll take us through our third quarter financial results.
Thank you, Nathan. Our third quarter results highlight the strength and durability of our business. Revenue came in at the high end of our guidance range, growing 8% annually as reported and 13% in constant currency, driven by strong customer retention, growth in higher-value commerce subscriptions and talk.
Our revenue is extremely durable with 92% coming from SaaS fees across our 4.2 million unique subscriptions. Unlevered free cash flow in the quarter of $42.1 million exceeded the high end of our guidance range by $3.4 million, mainly due to the timing of payments. We're especially pleased to see bookings accelerate to 10% year-over-year as reported and 14% in constant currency, up from 6% year-over-year growth we achieved in Q2. Bookings strength was fueled by new website subscriptions legacy price increases and talk. This strength gives us -- this growth gives us further confidence in our continued success.
This fall, we were pleased to announce Squarespace refresh, our annual campaign that showcases over 100 new product innovations and features that we introduced throughout the year. Our constantly evolving platform has grown exceptionally in a myriad of ways, from improvements in our selling tools to enhancements in the kinds of sites our customers can create on our platform.
We also hosted our first Circle day for our community of professionals to build on Squarespace. This live event in New York was exclusively from members of our community. No matter how simple we make our platform to use, there are many out there who would prefer professional help from setting up their site to consulting on copy photography and our marketing. Since Squarespace is uniquely positioned in the world due to our emphasis on incredible design, we are a fantastic starting point for these professionals when they build sites for clients.
Further, as we continue to enhance our platform with innovations like Fluid Engine, our new page design system we launched it a few months ago, we eliminate the need for these professionals to learn custom code or move to more complex platforms that are harder to maintain. This quarter, we also began introducing modest increases to our pricing for existing base of subscribers and saw minimal impact to customer retention and response, far below what we originally had modeled.
We continue to benefit from the new pricing introduced in the third quarter over the coming quarters as annual subscriptions come up for renewal with approximately 70% of our entire customer base on annual subscriptions. As we've noted previously, we've never raised prices on existing customers. Accordingly, many of our existing customers, who received the new pricing this quarter remain well below our current market rates for new customers.
To unpack some of the drivers of growth in this quarter. Unique subscriptions for websites grew in line with our expectations throughout the quarter as we acquired new customers and retained existing ones. However, our unfold business saw softness impacting overall subscription growth, leading to the number being roughly flat from a macro perspective. Unfold subscriptions are substantially lower in dollar value than other subscriptions we offer. We continue to innovate and unfold by rapidly launching new features, including biosites, which are easy to create websites for social profiles that are being adopted rapidly.
Commerce subscription continues to outpace presence as entries and creators and greater numbers turn to our simple use but powerful integrated platform and services for sellers. Talk is also helping drive growth in our Commerce segment. In Q3 2020, presence revenue grew at 6% year-over-year as reported and 12% in constant currency. Commerce revenue grew 13% year-over-year as reported and 16% in constant currency.
Our mix of Commerce subscriptions as well as the addition and subsequent growth of talk contributed to ARPU climbing to $206 growing 4% annually. International expansion remains a core growth driver as we localize our offerings. I'm excited about some of our new international brand ambassadors and geo-specific campaigns tailored to appeal to international audiences. Within talk, which helps hospitality and time slotted businesses thrive, we launched the top wine shop. This makes it possible for our winery partners to sell directly to consumers while continuing to manage the tasting reservations on its all-in-one platform.
Further, we're making progress with Squarespace payments and have recently hired a new Vice President who brings over a decade of experience and payments to our team. We believe payments will be an important driver of our business moving forward.
I'll hand it over to Nathan to speak to the financials before taking your questions.
Thank you, Anthony. Let me begin by highlighting some of the bright spots in the third quarter. Revenue $218 million was at the top end of our guidance range. As Anthony said, our growth was underpinned by strong customer retention as we introduce new pricing with existing customers. Increases in higher-value commerce subscriptions, which continue to outpace growth in presence subscriptions and growth in our talk business.
As Anthony pointed out, these signs give us further confidence in our business and its future success. In addition to our top line performance, our efficient and scalable model delivered $42 million in unlevered free cash flow, giving us a 19.3% unlevered free cash flow margin and demonstrating our ability to generate growth and drive profits. Total GMV of $1.4 billion grew 3% year-over-year as discretionary spending dwindled due to macroeconomic environment we are in.
Recall, our Board of Directors authorized a $200 million share repurchase program in the second quarter of this year. As of September 30th, we have repurchased and retired 3.99 million shares, including 2.43 million shares during the third quarter, offsetting dilution related to stock-based compensation. Approximately $114.4 million remained available under this program at the end of the third quarter.
I do want to clarify our mix of international revenue as reported, which represented 28% of our total revenue and declined 15% year-over-year, whereas U.S. revenue as reported was 72% of revenue and grew 21% year-over-year. This is a reflection of prior year revenue reclassifications and current year FX headwinds. As we noted previously, in the third quarter of 2021, we reclassified $9.2 million of first and second quarter 2021 revenue out of the U.S. and into international.
When taking into account this reclassification and the $9.3 million of currency headwinds versus rates and effect in the third quarter of 2021, our mix of U.S. and international revenue would have been 69% and 31%, respectively, which is consistent with levels in the first two quarters of this year. When considering the impact of these two adjustments, both U.S. and international grew 13% year-over-year.
We are executing against our expectations for non-GAAP expenses. Full-year 2022, our non-GAAP operating margin is expected to increase approximately 300 basis points from 2021 levels as we reduced G&A and marketing and sales expenses as a percent of revenue, while at the same time, increasing our investment in R&D relative to 2021. This balanced approach fuels our future growth, while also delivering strong unlevered free cash flow.
Let me turn to guidance before opening up for Q&A. For the fourth quarter of 2022, we expect revenue to be in the range of $219 million to $224 million, representing a year-over-year growth rate range of 6% to 8% versus Q4 2021. We anticipate unlevered free cash flow in the range of $24.6 million to $29.6 million.
Our unlevered free cash flow guidance comprises ranges of cash flow from operating activities of $24.0 million to $28.9 million, capital expenditures of $4.6 million to $5.5 million and cash paid for interest expenses net of associated tax benefits between $5.1 million and $6.2 million.
For the full-year 2022, we expect revenue to be in the range of $857 million to $862 million, representing a year-over-year growth rate range of 9% to 10%. We anticipate unlevered free cash flow in the range of $148.6 million to $153.6 million. Our 2022 unlevered free cash flow guidance assumes cash flow from operating activities in the range of $149.2 million to $154.2 million.
Capital expenditures of $12.9 million to $13.9 million and cash paid for interest expenses, net of associated tax benefits between $12.4 million and $13.4 million. We are reducing our revenue outlook for full-year 2022 by $2.5 million or 0.3% at the midpoint as we take a more conservative outlook related to the GMV transacting on our platform in the fourth quarter.
Historically, during the fourth quarter, we processed higher levels of GMV relative to other periods during the year, -- this year, with increased uncertainty around consumer spending, we're taking our expectations for GMV in the fourth quarter down slightly. We are also factoring an additional $1.1 million in currency headwinds since we offered full-year guidance in July.
Turning to unlevered free cash flow, reducing full-year 2022 guidance by $10 million at the midpoint to a range of $149 million to $156 million, representing a 17.5% margin at the midpoint to account for our lowered revenue expectations and primarily the uncertainty and timing of tax receivables.
In summary, I believe the fundamentals of our business remains strong. We have a long operating history of profitable growth, a strong gross profit margin and a loyal customer base. Our refresh platform delivers an exceptional experience for entrepreneurs that will continue to fuel future growth.
I look forward to meeting our investors and analysts in the coming weeks and cannot be more excited to be a part of the Squarespace team and for the opportunity we have in front of us. Given my short tenure, Anthony will be fielding your questions today, and I look forward to speaking with you on our fourth quarter call.
Now we would like to open the line to your questions.
Thank you. [Operator Instructions] And our first question today goes to Trevor Young of Barclays. Trevor, please go ahead. Your line is open.
Great, thanks. Two, if I may. First one, Nathan, on the unlevered free cash flow. You came in just over $3 million ahead in the quarter, but as you mentioned, lowering full-year by about $10 million at the midpoint. I think you mentioned something about tax receivables, but I think also in prior years stronger cash flow on some timing events that reversed in 4Q? Maybe that's the tax item you're referring to, but also 4Q, I think you had some ad spend prepay ahead of 1Q. So is that the dynamic that's going on here that basically a little bit of a reversal of the 3Q trend? Just any color on that would be appreciated.
Thank you, Trevor, for your question. The tax receivables are relating to two things: one, from 2018, as you can see in the Q on a research and development tax credit that we received or haven't received, but filed for a tax overpayment from tax year 2020 that was paid in 2021. That represents the far majority of that $10 million that we have pushed to 2023. As you look at the operating margin in the cash flow margin that is improving the 300 basis points, as I said in my remarks year-over-year.
That’s really helpful.
I'll just add to that -- yes it's the payments -- I mean the timing is moving some things around. It's not reflective of like a fundamental difference in how the company is generating free cash flow.
Got it. Yes, that's what I'm trying to get at. And Anthony, I run your comments a bit on taking price, which I think started earlier in the year. You mentioned rolling out the price increases to existing subs and not having an impact on churn initially. Can you just remind us how much of a discount versus list price existing subs are? Because I think you mentioned still a significant discount. So this maybe is like a multiyear initiative to kind of get closer to parity.
Yes. Good. Thanks for highlighting that. It is -- it will be a multiyear initiative. So basically, we went in on a plan by plan level and tried to find -- we didn't want anyone's price increase, because they could have been on like Square station like 10-years ago to be like 25% or something like that. So a lot of the -- like, I guess the biggest -- like we wanted to take people up by, let's call it, around 10% to 15%, around 10% on average. And so there's not just one kind of difference that people saw. But you're correct in assuming that we have more room to move in subsequent years as we kind of slowly bring us -- bring everyone up to what we would call like list price.
In addition, in international markets, depending on how our new price tests go, we'll have even more kind of room to move as we establish a new intro price point, right, which is a prerequisite for doing all this. The other part of what you were talking about, and this is just -- I mean, again, it's like the first time you're doing something like this. So it's like -- yes, there's no precedent. The churn ended up coming in far below what we modeled, which was great. And again, we don't know how much of that is just a pull forward, which would be ideal, right, because we're going to leave anyway.
So I'm really pleased with the rollout of this and with the reaction we're seeing. And it just kind of underscores to me how important the product is to the people, who are using it and the fact that they get a lot of value out of this. Otherwise, we wouldn't be able to do this. And I think, look, the intra prices still remains very, very competitive in my view. So I don't think we've done anything at all outrageous here. And I think the platform is just so much better than it was years ago. So I think this has been a highlight for us over the quarter.
That's really helpful. And just to dovetail on that. Can you update us on where we stand with the bundling efforts? And as part of that to bring maybe some older subs that were kind of a la carte into new bundles at potentially higher price point?
So we're still doing a lot of the engineering work for that, part of the idea behind the bundling efforts are to give more like basically supercharge the power and the features and functionality that are in the base level plans. And so I think that just will speak to us maybe being able to get to a higher intro price point and also mid-bundle price point later on. So I think we'll start to see some of that stuff enter into a test phase more in Q1. But yes, still remain excited about that.
Great. Thanks, Anthony.
Thank you. And the next question goes to Josh Beck from KeyBanc --
I just want to add one thing there because we saw a bookings reacceleration this quarter, which we're all very pleased to see. Some of that is the price increase, but a lot of that is also just new website subscribers, which, again, is getting masked by the offset in the negative -- the negative story related to the unfold subscribers. So I just want to point that out.
And the next question goes to Josh Beck of KeyBanc. Josh, please go ahead. Your line is open.
Thank you so much for taking the question. I wanted to go back to, Anthony, your comments there around churn. Certainly, you had embedded something into the model, you obviously have so many months of experience at this point. Do you feel like you have a pretty good handle on how that churn at least related to pricing is going to play out in the future quarters? Or is that one where you're may be awaiting a little bit more data through the end of the year to really be able to make the call, like, okay, we have a very good kind of handle on the sensitivity around pricing there?
I think we have enough data to say we have a good handle around it. I think -- and we're talking about hundreds of thousands of data points. The 1 area where we won't know until it happens is the full impact of what it will mean for annual renewals. But I would think that if you didn't like the new price, you were planning on leaving you would have just set your site to cancel and not renew as soon as you saw this. But no, I think, again, it's a positive story for us, and it's -- we rolled it out in a controlled way. And I think I don't anticipate more surprises related to this.
Okay. That's great to hear. Obviously, it's kind of breaking new ground in some ways with your model. I also wanted to ask just a follow-up on GMV. Obviously, the growth slow, we've heard this theme from many commerce-oriented companies this quarter. I'm kind of curious, you mentioned discretionary that's obviously been a topic that's come up many times, but if you kind of double click on GMV and what the drivers are? Any verticals that really stood out or maybe some that were resilient, just kind of curious on what some of those drivers were and how we should kind of bleed that forward into future periods?
Yes. So again, no surprises there. We've seen softness in U.S. e-commerce over the past couple of months and last quarter and all that. So it shouldn't be too much of a surprise. I think the interesting thing about our GMV is that it's really multidimensional. So it's not just physical commerce, it's services-based commerce, it's appointments. It's bookings and reservations would talk. So I think talk showed a bit of resilience where physical and services-based commerce was a little bit weakened. But again, that's kind of going to be the difference between what you're going to see in Squarespace's GMV as we move forward, which will maybe cause it to look a little bit different than if you just compare it to like with Amazon or Shopify sees.
Super helpful. Thank you, Anthony.
Thanks.
Thank you. And the next question goes to Ken Wong of Oppenheimer. Ken, please go ahead. Your line is open.
Great. Fantastic. Anthony, you mentioned weakness in unfold. That was something we saw last quarter as well. Any color on whether or not that stabilized, worsened? Would love an update on how that piece of the business did.
Yes. So I remain really enthusiastic about unfold, and I'll kind of break down what I'm -- what we're looking at in there a little bit. So unfold is a very low-priced subscription, one of our lowest side from domains, but there's a high volume of them. And what is -- and it's also, by the way, a very global business, much more than the rest of Squarespace. So I think a couple of quarters ago when we were talking about the situation in Europe, things like that actually impact Unfold in a disproportionate way, as well as events in Asia and South America.
So what's happening in unfold is it's a place where there's two factors that really kind of batter it, if you will. One is competition in the App Store and two is just the evolution of trends on social media. So what people are doing on social media and how it looks and how they use Instagram, how do you use stories three years ago, aren't the same as two years ago or five years ago or even last year, and especially with the usage trends changing alongside the pandemic.
That being said, we still have a huge belief that people are starting out on social media and then their presence managed them there. And the real bright spot actually within Unfold is the introduction of biosites, which we're not fully monetizing yet. So there's -- like if you're looking at what's called like the Lincoln Bio space, there's a couple of different competitors there. It's a notion that -- you've all seen it, I'm sure on Instagram, you click on somebody's bio and you could see that little site that's kind of a train station routing links out. We have hundreds of thousands of biosite created and the pace of them being deployed is accelerating.
So I think we're going to have a lot of opportunities within that product, as well as the stories products to create a really positive story here. Again, like it's just so great to see something accelerate and organically spread that we deployed from within unfold. In addition to it being a new homegrown brand that we're launching we developed and launched in-house. So more to come there, but I'm really happy with that foothold we've got and how that story has played out.
Got it, fantastic. And then maybe following up on Trevor's question on bundling, I noticed you guys put out this refresh campaign. Should we think of that as the first, kind of, education process to get the customers aware? Where are we in terms of the direct sales efforts, your partner efforts to kind of get the bundling initiative up and rolling? And then it sounds like the product piece is still TBD. But on the go-to-market side, are we kind of getting to the point where you guys are ready to activate that once the product side is squared away?
There's more than enough we can put into the bundles. I mean, they -- part of the situation, Squarespace has found itself in over the years is that we actually do so many things with classes and courses or e-mail campaigns. And these things are launched and on the platform, but they're behind separate subscription. So we have plenty of -- the bundling work is not dependent upon like us needing to create new features for the bundles. It's the re-architecture of how those things are accessed is really -- it's just a heavy lift, I mean, it's just a lot in the platform.
So refresh, that's kind of the rebrand -- that's a new brand for us again, branding date, what's essentially going to be our annual product event, which is a combination of future launches and a roundup of what's been going on. We actually launched a ton of stuff during the year, and I think some of it gets lost, because it's not at the level of a press release. And so refresh gives us an opportunity to say, hey, wait, let's take a look. This product improved in like 100 different ways over the past year. Let's relook at Fluid Engine. Let's look at the work we're doing with various personalities and brands that are on the platform.
Another thing was fun and part of refresh is after putting Fluid Engine out, which I have talked to a previous call, would love to talk to you about more, it's really unlocked the ability for us in a no-code fashion to do really, kind of, forward-thinking sites that our customers can then not just admire, but manipulate and it's something that would work for them. And so as part of refresh, we launched Icons, which lets us showcase sort of like we've always had this dream for like a fall in a spring season of templates, if you will, just to further the fashion analogy.
And we can finally do that and then do it in a way where those templates that we put out there, we collaborated with [Biorco] (ph) and one of the first ones here are usable by customers, and they -- it's not just as completely avant garde thing. They can take it with fluid engine and our section-based design system actually make it work for a portfolio or for a consulting site or something like that. So that has been a long time coming for me, and I'm happy we've got it there. But yes, I hope that gives some color on refreshing the intersection with bundling.
Great. Thanks for the details.
Thanks, Wong.
Thank you. And the next question goes to Chris Zhang of Credit Suisse. Chris, please go ahead. Your line is open.
Hi, good morning. Thanks for taking my question. I had a question on the unique subscriptions. I know a lot of details and very helpful color has been provided, especially around the continued impact from Unfold and at the same time, the growth in website subscribers. So given the moving parts here, can you maybe unpack the growth of unique subscriptions in the presence versus commerce sense and how they compare to the overall growth? I think any directional comments on the question or a year-on-year growth of these two segments would be appreciated. And I had a follow-up, if I may.
Sure. I think why you see a positive bookings and revenue story here is that we continue to grow a higher -- higher-value subscriptions at a pace above lower-value subscriptions, and we continue to get more revenue out of the subscriptions that we have. Again, underscoring in that number that it's masking the fact that the new website revenue number was strong.
To be more specific about it, commerce sub is growing at 7% versus presence subs growing at 4%, just to, kind of, help you think about that. Look, I think that -- as we continue to evolve the system and provide more and more sophisticated tools and become more and more a part of the infrastructure that entrepreneurs use to grow their businesses, it's just naturally going to trend towards those higher-value subscriptions, because we're getting just more -- it's just more business oriented in nature.
And the more kinds of businesses that we serve, time slotted businesses, hospitality, services-based businesses, classes and courses. It's just going to keep trending there. And then once we overlay that with improvements to payments, we'll be unlocking that stream too. Again, 92% of our revenue right now is coming from SaaS and recurring fees in the business, which is, again, great from a resiliency standpoint, especially considering our cash retention and churn properties, but just a lot more to do there.
Thanks, Anthony for the great details. I really appreciate it. The second question is on the payments. Can you maybe give us some update on the progress and the timing of your in-house payment offering?
Yes. I wish I had more of an update. The big update I do have is that we welcomed a new Vice President, [Dan Schaundra] (ph), who's joining us acts First day today, who will be really focusing on this and also our Acuity business, which I can talk about later. But yes, we've just been making updates to the team and going back and forth to try and make this a reality. We're far down the road with it. It's just -- it's a heavy undertaking, and it's a new muscle for the company. So it takes a minute.
Alright. Yes, that’s great to hear the update on the leadrship. I’ll jump back to the queue. Thank you.
Yes.
Thank you. And the next question goes to Matt Pfau of William Blair. Matt, please go ahead. Your line is open.
Hey, great. Thanks for taking my questions. I wanted to first ask on the macro and dig into the sub commentary a little bit more. Are you seeing any impact from the macro in terms of the top of funnel activity or conversion or even on the churn side of things?
No. All of that remains strong, especially if you're looking at the website business in particular, which is going to be one of the main drivers of bookings and revenue.
Okay. Got it. And then if we are heading into a weaker macro next year, how do you all think about managing your expenses? And are there certain areas where you might pull back on if we were to see demand weaken a bit.
Yes. I mean that's kind of been the whole story of the year, right? So Squarespace, one of the things I'm very proud of with our company is that we've always been I think very cautious with cash, and this company operated to cash flow breakeven for 15-years before flipping over to profitability a number of years before going public. And to put it in perspective, like earlier in this year, when we saw things changing internally, we massively changed our plans regarding headcount and hiring and continue to keep our eye on that as we move forward into the year.
We're looking further into our marketing spend, making sure that ratio remains under control and managed as we continue to grow. And you see those actions and those results for us kind of almost every quarter. So it's not like a Squarespace is going to be making like some, sort of, left turn. We have a diversity of businesses, right? So it's not just Squarespace websites or Unfold or biosites, or talk or scheduling. We've got all these different business lines and all these different ways that we're helping entrepreneurs.
And so it will be interesting to see as we move forward into what is an uncertain macroeconomic time which of these have headwinds and which have tailwinds. It's something we saw during the pandemic, right? Our websites business had massive tailwinds and other businesses like appointments suffered a certain headwinds on any given quarter, same with talk.
Two things: one, just to underscore that 92% of the business is SaaS revenue. So even if there are further fluctuations that are affecting GMV in those -- that aspect of the business. That is not like Squarespace's current main driver for growth. It remains a big opportunity for us. But I don't think you should worry too much about that. The second thing and this will be interesting, because no two recessions are created equal. And the last time Squarespace existed in a time like this was 2008. And what ended up happening back then?
And again, it was such sort of different numbers, different recession, et cetera, we were actually countercyclical to that recession because people get laid off or have to switch jobs or have to evolve, they evolve. They adapt. They don't just sit there and give up and go home and say, oh, yes, I won't put my portfolio online. I won't try and start a business, I'd just give up. It's not what we tend to see.
So I hope that we're well positioned to help people adapt in this time frame. And frankly, for some of them to come out with new businesses of their own and not that we want to be in a situation, but it could push certain people to have a positive change. So we'll see, but we remain a critical infrastructure component in people's lives. And yes, I think we're -- hopefully, we're well positioned.
I would just layer on this, Matt. This is Nathan that in my few weeks here, I do think the company has a very strong discipline here that we manage the expenses to our top line and make the adjustments necessary. And you can see that in our operating profit improvement year-over-year and our healthy cash flow margin.
Perfect, very helpful. Thank you.
Thank you. And the next question goes to Gabriela Borges of Goldman Sachs. Gabriela, please go ahead. Your line is open.
Good morning. Thank you, Anthony, as you noted think about your medium-term planning assumptions, I would love if you could share a little bit of color on what do you think the normalized growth rate of this business is? And more specifically on 2023, do you think 2023 can accelerate based on the visibility that you have today?
Well, one of the highlights -- thank you. Well, one of the highlights of this call today is talking about the bookings acceleration to 10% year-over-year and 14% on a constant currency basis. So I think that, that's really encouraging while still preserving margins that we like. We're not burning cash to just falsely inflate that number. We would never do that. We've always operated with a balance. I think there -- that, along with pricing, along with bundling, along with payments, there are many, many, many levers this business has to accelerate our growth rate. I can highlight kind of two additional ones.
One of the ways we're thinking about the business right now is not just Squarespace the brand and everything falling under that one brand. We're really thinking about having -- building on the portfolio of brands. You see that with Talks, biosites, -- but one of the areas where I don't think that we've pushed enough and we've changed our structure internally to be able to do this. It's things like the Acuity brand. Yes, appointments will appear as part of the Squarespace platform, because there's a large number of people that want to do schedule appointments as part of that subscription. But there's a huge number of people that want to do that that aren't using us for their website.
And so I think one of the ways that we can really continue to grow a lot bigger is invest in those brands. I mean, that's what Scores pace is so good at doing. I mean we've added the internal agency of the year last year. We can apply that skill set to all of these other brands that we've either acquired or launched so that we can win in more categories than just websites. And that is, frankly, a really big difference from us and a lot of our competitive set and what we're kind of the path pursuing right now.
Anthony, do you think -- if you think about the next three to five years, the consistency that -- and the strategy that you have with pricing, order of magnitude, how much do you think pricing can contribute to the growth algorithm?
Well, a lot. I mean, again, another positive highlight from this quarter that we were able to -- and by the way, a positive highlight throughout the entire year is that we were able to really successfully increased the price for new customers, which gives us the leverage to increase for existing customers, and we started to push that up a little bit. I think there's huge potential there. And -- but it's not all I want to rely on.
What I really am interested to see what happens with bundling, see what happens with pricing within Acuity, pricing within Talk. I mean we've just scratched the surface of what we're able to do across the product portfolio there. And then in addition, bundling is one side of it because we're introducing new features on to like a kind of a base level subscription. But in areas like talk and acuity, we have a real opportunity to grow with customers and have much, much, much higher LTV as we pursue those lines of business. So I see -- there's just a lot of directions we can move in, and we're moving in them, right? I mean, you saw the past quarter.
Thanks for the color.
Thank you. And the next question goes to Logan Reach of RBC Capital Markets. Logan, please go ahead. Your line is open.
Hey, goo morning. Thanks for taking the question. Just on the sequential sub growth, you guys were flat or approximately flat this quarter. Obviously, A lot of that was related to the unfold being soft. But what needs to happen for you guys to return back to your sub growth?
I personally find that number challenging to look at from a number of reasons. I mean we're reporting it. And I think what we're trying to show is that versus the ARPUs and that positive dynamic within that subscriber set. But if you're just looking at the raw number, it's hard because Talk has thousands of subs that generate tens of millions of dollars and Unfold has hundreds of thousands of subs that generates like single digit to low -- like somewhere in that range, millions of revenue.
So my focus is not necessarily, I need to see 4.2 go to 4.3, go to 4.4%, although that would be great. It should go to $1 billion. But it's what's happening in that number that's so important. And so focusing on the Acuity sub, the high-value subs. And again, one highlight of the quarter, and I want to make sure we're emphasizing this. The website subscription growth was strong within that number, which is a core driver of the business and why we have a positive bookings story.
And so yes, I mean, I guess to answer the question in a nuanced way, I'd almost have to take it like subtype by subtype, right? Like you have to talk about talk and what that means for our sales force and how that's related to those growing and unfold that driver of that is organic growth. In the app store, it's virally spreading like there's so much underlying that number. So I hope it's not too misleading.
Got it. Yes, totally makes sense. But I really appreciate the color.
Yes. No problem.
Thank you. And the next question goes to Siti Panagrihi of Misuho City. Please go ahead. Your line is open.
Thanks for taking my questions. Anthony, I think last year, you talked about enterprise team, which you started a couple of years back. Just wondering if you could give an update on that? And what kind of traction are you seeing on the enterprise customer, a larger customer?
Yes. Thanks for the question. it's actually seen some improvements over the past couple of quarters, but it's such a small part of the business right now that we kind of don't share too many updates on it. It is definitely still a focus. And if you think about Squarespace as again, being a bit of a portfolio of brands, the unlock that, that gives you inside the enterprise space is really big because if we've got scheduling as a separate product, as a separate brand with Acuity, a lot of the enterprise interest that we had that was really natural came in through that angle. It wasn't because somebody made a website on Squarespace and added scheduling and suddenly they're giant customer opportunity for us.
So I think as we clarify that point, we're going to be able to give kind of a -- I look at it like a segment-by-segment breakdown of how we're doing in enterprise. Again, talk, for instance, is enterprise right word, but maybe more mid-market sales force-driven already has that muscle and grows that way. It's just we're trying to grow that in acuity and square space more broadly, but still getting footing there, but not a significant driver of revenue in the business yet.
Great. And Nathan, As you joined, you talked about why you joined and about like profitability part of this business. And -- what are the things -- it did mention some of the things that you like. Maybe help us understand the strength and where do you think you can improve further -- and how do you think about the opportunity in terms of investing given that such a large TAM and this business is pretty much ties to your growth pretty much ties to Campen and how you're investing. How you're thinking about that?
Yes. Thanks for the question. So as I evaluated the Squarespace opportunity, I'll say one of the key factors was Anthony. And partnering with a CEO that could grow the business. He is a very forward-looking product driven, what we can do to the entrepreneurial world type of tinker,nd that was personally, very attractive me, like I want to partner with the right CEO that we can grow and drive a business to be 10 times.
Secondly, I would say, like the foundation that we have at Squarespace with the premium brand and the portfolio of brands that Anthony referred to, I think that's just the start of what we can deliver to the entrepreneurial world. And thinking about the adjacent spaces that we can go in three years and five years of how that looks to deliver an even more holistic approach to our entrepreneurs that will drive monetization for both the entrepreneur and for Squarespace.
Lastly, and I did refer to this, the -- I think the financial profile of Squarespace is very healthy. We have a very strong cash flow margin. We also have a very good operating margin that allows us to think about where we're going to drive growth and investment growth but also give strong returns to our shareholders. And I think that, that is laying the land of how we are going to grow this business to be 10 times.
Thank you. Nath and then welcome. Looking forward to working with you.
Thank you. [indiscernible]
Thank you. And our final question today goes to Clarke Jeffries of Piper Sandler. Clark, please go ahead. Your line is open.
Hello? Thank you for taking questions
One thing that stood out to me in the shareholder letter was that scheduling and talk account for half of the mix of GMV. I was wondering if you could talk about -- what does the payment attach look like in the scheduling product today or broadly within time sorted businesses? And what would be your ambition to have more off-line commerce functionality potentially at the point of sale, but even scheduling or software functionality offline.
So this is a huge focus for us, especially within the Acuity business. A huge, huge amount of the transactions are happening not at the point of booking, but at the point of service rendering. So it is a big focus of the team right now to think about that, think about invoicing, think about workflows. Invoicing was announced as part of refresh. And it's just a big focus for us.
And further, with innovations that are happening on the phones with Tap to Pay and all of that, it means that if we want to enable solutions within the mobile app to kind of complete that end-to-end payment that we're not reliant on hardware and things like that to help people facilitate that. So very excited there. And again, excited pursuing is portfolio-based approach, right? It's not just physical commerce, it's services-based commerce, it's reservations, events, it's all of these things that we can push on.
And I think when you think about, hey, look, it's going to be a portfolio of brands, not just one. You can see that it affords you to kind of have a path to like, okay, well, we'll talk is winning as a reservations platform in a number of ways. How can we make sure that Acuity doesn't fade into the darkness, but becomes a prominent thing in people's minds when they think of scheduling platforms. So there's just so much opportunity there.
Our analysis of what's happening around those platforms like just especially with like with acuity, it's just billions and billions in that ecosystem. And because we have permission, I think, because we're like the front door and we have that like branded touch point, I think people want us to participate there and they want us to be providing those solutions so that the customer, everything from booking an appointment to the invoice they see looks consistent. So that's kind of how we're oriented.
Absolutely. It certainly seems like there's a level of functionality specific to time flatted businesses related to loyalty and services rather than products follow-up question is really a lot of the commentary had been around during this call, I've been around the new customer funnel, the subscription growth I think the last few quarters, we've got the characterization that you may have been pulling back on sales and marketing spend, because of the ROI in this environment, do you think that's changing? Does the new customer funnel look today? Is it in a place where you might consider increasing the sales and marketing investments?
I think we've been focusing on sort of rightsizing it. And I think when you think about these different businesses and how they need to grow, we're trying to take a pretty nuanced approach to where we're adding and where we're holding it flat. You've seen us through that throughout the year, we try to keep that EDR ratio kind of in a certain range. So we're not thinking about really taking it up from that ratio right now. I mean we certainly would if there was something to lean into more heavily. But I think we keep focusing on really sustainable growth. And so that's kind of been our model.
Al right. Thank you very much.
All right. Thank you for joining today. We will be presenting at the RBC Conference in New York later this month and at the Barclays Conference in December. Thank you all, and enjoy your Tuesday.
Thank you. This now concludes today's call. Thank you so much for joining. You may now disconnect your lines.