Wix Reports Second Quarter 2022 Results

Total revenue of $345.2 million, up 9% y/y, and $349.0 million on a constant currency basis, up 11% y/y
Total bookings of $354.6 million, up 3% y/y, and $365.2 million on a constant currency basis, up 7% y/y

Partners continue to turn to the Wix platform, resulting in partners revenue of $84.9 million or 25% of total revenue, up 31% y/y and representing a two year CAGR of 56%
Cost reduction plan expected to generate approximately $150 million of annualized cost savings and accelerate margin expansion
Launched a new Wix Editor experience, combining AI capabilities with new advanced features to create an even more powerful and intuitive web creation experience

NEW YORK, Aug. 10, 2022 /PRNewswire/ — Wix.com Ltd. (Nasdaq: WIX) today reported financial results for the second quarter ended June 30, 2022. In addition, the Company provided its initial outlook for the third quarter. Please visit the Wix Investor Relations website at https://investors.wix.com/ to view the Q2’22 Shareholder Update and other materials.

“We are pleased with our fundamental business improvement this quarter as Wix continues to be the go-to platform for any type of user and any type of business globally,” said Avishai Abrahami, Wix Co-founder and CEO. “The strong results of our growth initiatives continue. Despite the current macroeconomic environment, we are focused on what is under our control — driving operational efficiencies to accelerate our path to profitability while continuing to execute on growth initiatives, such as launching the new Wix Editor this quarter. We remain committed to executing on our three-year financial plan, enhancing our differentiated business model and delivering innovative capabilities for our users to drive shareholder value.”

Lior Shemesh, CFO at Wix, added, “Our results this quarter reflect continued market-wide volatility. We are executing on the three-year plan we shared in May and are undertaking a cost reduction plan that we expect will save approximately $150 million in annualized expenses. These cost reduction measures are expected to accelerate expansion of our gross margin and operating margin as well as help us achieve our free cash flow target as presented in our three-year plan even if market conditions continue to be challenged in 2023.”

Cost reduction plan

As part of our commitment to execute on the three-year plan and achieve the free cash flow targets introduced at our Analyst Day in May, today we are announcing a set of comprehensive cost reduction measures that will result in approximately $150 million of annualized cost savings. These savings are not one-time in nature and will continue to be realized on a run-rate basis. Approximately 20% of the annualized savings are expected to be realized already in 2022. Further, these cost savings do not include any reduction to our user acquisition marketing investments that we adjust to match our TROI thresholds, which we have not changed.

We expect that these reductions in our cost structure will result in free cash flow as a percentage of revenue (excluding headquarters capital expenditures) to be in line with our three-year plan and accelerate margin expansion ahead of the three-year plan in 2023 and beyond.

Key aspects of the plan include right-sizing our workforce and future hiring targets across multiple functions to realign with the operating environment today and optimizing additional operating costs that are not revenue generating.

We continue to take a deeper look to identify additional areas of productivity improvements across our care, sales and marketing, and engineering functions as well as opportunities to rationalize our real estate footprint, among other potential levers.

These measures will allow us to increase our focus on and investment in our highest conviction growth opportunities.

Many of these actions are already underway. Of these $150 million of annualized savings, roughly 25% will come from cost of revenue, mainly our care organization, which will lead to approximately 200 basis points of gross margin improvement in 2023 compared to our three-year plan presented in May. The other 75% of savings will come primarily from operating expenses with a small amount being capital expenditures.

Q2 2022 Financial Results

Total revenue in the second quarter of 2022 was $345.2 million, up 9% y/y and representing a two year CAGR of 21%

Total revenue on a y/y constant currency basis was $349.0 million, up 11% y/y
Creative Subscriptions revenue in the second quarter of 2022 was $258.2 million, up 9% y/y
Creative Subscriptions ARR increased to $1.05 billion, up 9% y/y

Business Solutions revenue in the second quarter of 2022 was $87.0 million, up 9% y/y

Transaction revenue was $36.8 million, up 13% y/y

Partners revenue in the second quarter of 2022 was $84.9 million, up 31% y/y

Total bookings in the second quarter of 2022 were $354.6 million, up 3% y/y and representing a two year CAGR of 15%

Total bookings on a y/y constant currency basis were $365.2 million, up 7% y/y
Creative Subscriptions bookings in the second quarter of 2022 were $269.9 million, up 3% y/y

Business Solutions bookings in the second quarter of 2022 were $84.7 million, up 6% y/y

Total gross margin on a GAAP basis in the second quarter of 2022 was 61%

Creative Subscriptions gross margin on a GAAP basis was 74%

Business Solutions gross margin on a GAAP basis was 21%

Total non-GAAP gross margin in the second quarter of 2022 was 62%

Creative Subscriptions gross margin on a non-GAAP basis was 76%

Business Solutions gross margin on a non-GAAP basis was 23%

GAAP net loss in the second quarter of 2022 was $111.2 million, or $1.92 per share
Non-GAAP net loss in the second quarter of 2022 was $7.8 million, or $0.14 per share

Net cash used by operating activities for the second quarter of 2022 was $(2.7) million, while capital expenditures totaled $13.2 million, leading to free cash flow of $(15.9) million

Excluding the capex investment associated with our new headquarters office build out, free cash flow would have been $(6.0) million

Financial Outlook

Our guidance for the second half reflects demand that has reset to pre-COVID-19 levels and FX rate headwinds experienced since May.

For Q3, we expect total revenue to be $341 to $345 million, representing 7 – 8% y/y growth. For the full year, we now expect revenue to grow 8 – 10% y/y. These ranges include the impact of y/y FX rates through July, discontinued commercial activities in Russia and the assumption that market conditions remain challenged for the remainder of the year.

We expect free cash flow to be roughly 2 – 3% of revenue in 2022, inclusive of the cost reduction plan and y/y FX rate headwinds through July. On a y/y constant currency basis, this would translate into free cash flow margin of 4 – 5% of revenue for full year 2022.

Despite these lower revenue growth expectations, we expect that the cost reduction plan we have implemented will allow free cash flow as a percentage of revenue (excluding headquarters capital expenditures) in 2023 to be in line with the three-year plan outlined in May and drive accelerated gross and operating margins compared to the plan even if market conditions continue to be challenged in 2023. We are committed to this plan and are taking the necessary actions to achieve it.

Conference Call and Webcast Information
Wix will host a conference call to discuss the results at 8:30 a.m. ET on Wednesday, August 10, 2022. To participate on the live call, analysts and investors should register and join at https://register.vevent.com/register/I75e57676e62f46a4bdce023f055300a6. A replay of the call will be available through August 9, 2023 via the registration link.

Wix will also offer a live and archived webcast of the conference call, accessible from the “Investor Relations” section of the Company’s website at https://investors.wix.com/.

About Wix.com Ltd.
Wix is a leading platform to create, manage and grow a digital presence. What began as a website builder in 2006 is now a complete platform providing users with enterprise-grade performance, security and a reliable infrastructure. Offering a wide range of commerce and business solutions, advanced SEO and marketing tools, Wix enables users to take full ownership of their brand, their data and their relationships with their customers. With a focus on continuous innovation and delivery of new features and products, anyone can build a powerful digital presence to fulfill their dreams on Wix.

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Non-GAAP Financial Measures and Key Operating Metrics

To supplement its consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, Wix uses the following non-GAAP financial measures: bookings, cumulative cohort bookings, bookings on a constant currency basis, revenue on a constant currency basis, non-GAAP gross margin, non-GAAP operating income (loss), non-GAAP net income (loss), non-GAAP net income (loss) per share, free cash flow, free cash flow, as adjusted, free cash flow margins, non-GAAP R&D expenses, non-GAAP S&M expenses, non-GAAP G&A expenses, non-GAAP operating expenses, non-GAAP cost of revenue expense, non-GAAP financial expense, non-GAAP tax expense (collectively the “Non-GAAP financial measures”). Measures presented on a constant currency or FX neutral basis have been adjusted to exclude the effect of y/y changes in foreign currency exchange rate fluctuations. Bookings is a non-GAAP financial measure calculated by adding the change in deferred revenues and the change in unbilled contractual obligations for a particular period to revenues for the same period. Bookings include cash receipts for premium subscriptions purchased by users as well as cash we collect from business solutions, as well as payments due to us under the terms of contractual agreements for which we may have not yet received payment. Cash receipts for premium subscriptions are deferred and recognized as revenues over the terms of the subscriptions. Cash receipts for payments and the majority of the additional products and services (other than Google Workspace) are recognized as revenues upon receipt. Committed payments are recognised as revenue as we fulfill our obligation under the terms of the contractual agreement. Non-GAAP gross margin represents gross profit calculated in accordance with GAAP as adjusted for the impact of share-based compensation expense, acquisition-related expenses and amortization, divided by revenue. Non-GAAP operating income (loss) represents operating income (loss) calculated in accordance with GAAP as adjusted for the impact of share-based compensation expense, amortization, acquisition-related expenses and sales tax expense accrual and other G&A expenses (income). Non-GAAP net income (loss) represents net loss…