Wix reports strong results, weak guidance

Wix  photo: Reuters

The Israeli DIY website builder had a market cap of over $6 billion yesterday.

The share price of Israeli DIY website builder Wix.com hit an all-time high of $126 yesterday, reflecting a $6.1 billion market cap. The company today published its financial statements for 2018, which outstripped the forecasts, with growth of 42% in revenue and 44% in free cash flow. Wix moved into the black in non-GAAP net profit. The company's share was down by over 10% in pre-trading, however, after the company provided mediocre guidance for the first quarter of 2019.

The company projects $172-173 million in revenue in the first quarter, compared with the analysts' forecast of $176 million. Wix's guidance for 2019 as a whole, however, is similar to the analysts' forecasts: $755-761 million in revenue, 25-26% more than in 2018.

Wix, managed by CEO Avishai Abrahami, provides a platform for setting up and managing websites. In the fourth quarter of 2018, the company's revenue totaled $164 million, 39% more than in the fourth quarter of 2017. Collection, which includes deferred revenue, grew 33% to $176 million. The company's GAAP operating loss was $2.2 million, 71% less than in the corresponding quarter in 2017, while the company's net loss in the quarter was $5.8 million, compared with a $6.6 million net loss in the fourth quarter of 2017.

Wix made a $20.8 million non-GAAP net profit, 187% more than in the corresponding quarter in the preceding year. Net profit per share was $0.42, $0.10 more than the analysts' forecasts.

Wix's revenue grew 42% to $604 million in 2018, its GAAP net loss fell 34% to $37.1 million, and its non-GAAP net profit totaled $51.3 million, compared with a $549,000 loss in 2017. Wix generated $116 million in cash flow in 2018, and its free cash flow totaled $102 million, compared with $70.7 million in 2017. The difference between Wix's GAAP loss and its non-GAAP profit is attributable to share remuneration for employees and other adjustments totaling $88.4 million.

"Another year with over 40% growth"

Wix had four million premium subscribers at the end of 2018, 24% more than at the end of 2017, and the number of its registered users grew 19% to 142 million.

"2018 was an excellent year. The figures are clear - it was another year with over 40% growth. There aren't many companies growing at such a rate and to such an extent five years after their IPO," Wix president and COO Nir Zohar said today. "The other side of this story is the growing cash flow, a sign of a healthy business. The most interesting part is the strategy. We produce something that has potential for a good many years. 2018 was a very fruitful year, with a record number of new products. We produced the Wix Code product, which will be very significant for our business in the coming years. We continued improving our ability to help users build businesses on the platform with Ascend and the payment solution."

"Globes": If we look 3-5 years ahead, can the company continue growing by over 10% a year?

Wix CFO Lior Shemesh: "We launched a record number of products, some of which have very significant growth potential in the future. What's most exciting about this is that despite the size, we succeeded in innovating at the product level. We have reached a very significant size, but we're still innovative in technology, and that creates very important possibilities for us, with possibly even faster growth in the future. How many years can we keep up these growth rates? It's hard to predict, but we haven't exhausted the growth possibilities for the coming years."

Zohar: "In the long term, our goal is exposure of a billion users, compared with 147 million today. The potential is enormous, and the world is headed in this direction."

In 2019, the company plans to invest $15-20 million in supporting new growth engines. Shemesh says, "We could finish 2019 with $155 million in free cash flow, but we'll invest part of the expected growth in cash flow in products we spotted as important. This investment will help us realize the growth potential in the best and fastest ways."

Referring to the record set by the company's share price, Zohar says, "It's great for our shareholders, for whom we're working, among others, but a momentary peak reached by the share, however exciting, is less important. In the long term, the real measure is how much value we create for our users. That way, spending by each customer will increase, because he or she is buying more products and services. That's how we're creating value for our shareholders."

Published by Globes, Israel business news - en.globes.co.il - on February 20, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Wix  photo: Reuters
Wix photo: Reuters
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