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A month has gone by since the last earnings report for Wix.com (WIX). Shares have lost about 13.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Wix.com due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Wix.com Reports Loss in Q4, Revenues Improve Y/Y
Wix.com Ltd reported fourth-quarter 2020 non-GAAP loss of 3 cents per share. Notably, the company had reported earnings of 39 cents in the year-ago quarter. The Zacks Consensus Estimate for fourth-quarter bottom line was pegged at a loss of 7 cents.
However, total revenues increased 38% year over year to $282.5 million. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $270.2 million.
Quarter in Detail
For increased transparency, beginning fourth-quarter 2019, Wix reports revenues, collections and cost of revenues under two segments — Creative Subscriptions and Business Solutions.
Creative Subscriptions revenues (76% of revenues) increased 25% year over year to $213.7 million, driven by increase in Creative Subscriptions Annualized Recurring Revenues (ARR).
Business Solutions revenues (24% of revenues) surged 107% to $68.8 million, driven by robust adoption of G-Suite and Ascend applications and Wix Payments.
For the fourth quarter Creative Subscriptions ARR was $878 million, up 24% year over year while Business Solutions’ ARR was $138.3 million, up 46% year over year.
Region wise, North America, Europe, Asia and others and Latin America contributed 57%, 26%, 12% and 5% to fourth-quarter revenues, respectively. Revenues from North America, Europe, Asia and others and Latin America increased 42%, 38%, 28% and 9% year over year, respectively.
Key Metrics in Q4
Collections were $306.4 million, up 35% year over year. Creative Subscriptions (77.2% of collections) increased 24% year over year to $236.4 million. Business Solutions (22.8% of collections) surged 95% to $70 million.
The company witnessed better-than-expected conversion and retention in user cohorts. Wix added a total of 185K net premium subscriptions in the reported quarter, up 107% year over year to reach 5.5 million as of Dec 31, 2020.
Wix added 7.4 million registered users during the reported quarter. Registered users as of Dec 31, 2020 were 196.7 million, up 19% year over year.
Non-GAAP gross margin contracted 900 basis points (bps) to 65%, due to higher investments in Customer Care domain and faster increase in Business Solutions’ revenue growth
Creative Subscriptions non-GAAP gross margin contracted 300 bps on a year-over-year basis to 78%, due to investment in expansion of Customer Care organization. Business Solutions non-GAAP gross margin shrunk 900 bps to 25% in the reported quarter, primarily due to uptick in Wix Payments adoption — a product that carries a lower overall gross margin and increasing hosting costs.
Non-GAAP research and development expenses as a percentage of collections contracted 100 bps year over year to 22%. Non-GAAP selling and marketing expenses as a percentage of collections expanded 300 bps year over year to 33%.
Wix reported non-GAAP operating loss of $7.6 million, against non-GAAP operating income of $17.2 million in the year-ago quarter.
Balance Sheet & Cash Flow
As of Dec 31, 2020, Wix had $1.6 billion in cash compared with $1.5 billion as of Sep 30, 2020. As of Dec 31, 2020, long-term debt was reported at $834 million compared with $824 million as of Sep 30, 2020.
Cash flow from operations amounted to $28.6 million during the fourth quarter compared with $24.5 million in the previous quarter.
Free cash flow was $23.2 million compared with $19.4 million in the prior quarter.
2020 Numbers in Details
Wix reported revenues of $988.8 million in 2020, up 30% over 2019 tally.
Creative Subscriptions revenues rallied 22% to $783.5 million, while Business Solutions revenues surged 76% to $205.3 million.
In 2020, total collections were $1.102 billion, up 32% year over year.
Non-GAAP loss per share was 44 cents against earnings per share of $1.17 reported for 2019.
For 2020, Wix’s non-GAAP operating loss was $37.3 million compared with non-GAAP operating income of $41.5 million in 2019.
In 2020, Wix generated cash flow from operations of $148 million compared with $149.6 million in the previous year. Free cash flow for full year was $129.2 million compared with $127.5 million reported in 2019
For first-quarter 2021, Collections are projected to be $340-$350 million, indicating an improvement of 37-41% from the year-ago quarter’s reported figure.
Moreover, revenues are expected between $291 million and $296 million, suggesting growth of 35-37% from the prior-year quarter’s reported figure.
Management also provided full year 2021 outlook. Collections are projected to be $1.435-$1.455 billion, indicating an improvement of 30-32% from the prior-year quarter’s levels.
Moreover, revenues are expected between $1.272 billion and $1.286 billion, indicating growth of 29-30% from the prior-year quarter’s reported figure.
Notably, the company anticipates free cash flow in the range of $60-$70 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -68.49% due to these changes.
At this time, Wix.com has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Wix.com has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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