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Wix.com (WIX) Q1 Loss Narrower Than Estimates, Revenues Up Y/Y

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Wix.com Ltd. WIX reported first-quarter 2021 non-GAAP loss of 54 cents per share. Notably, the company had reported loss of 1 cent in the year-ago quarter. The Zacks Consensus Estimate for first-quarter bottom line was pegged at a loss of 73 cents.

Total revenues increased 41% year over year to $304.1 million. The Zacks Consensus Estimate for first-quarter revenues is pegged at $295.4 million.

In the past year, the company’s stock has returned 74.4% compared with the industry’s surge of 68.9%.

Wix.com Ltd. Price, Consensus and EPS Surprise

Wix.com Ltd. Price, Consensus and EPS Surprise
Wix.com Ltd. Price, Consensus and EPS Surprise

Wix.com Ltd. price-consensus-eps-surprise-chart | Wix.com Ltd. Quote

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 (74.5% of revenues) increased 28% year over year to $226.4 million, driven by increase in Creative Subscriptions Annualized Recurring Revenues (ARR).

Business Solutions revenues (25.5% of revenues) surged 97% to $77.7 million, driven by robust adoption of applications like Ascend by Wix along with paid ads and other third-party applications (TPAs).

In the first quarter, Creative Subscriptions ARR was $926.1 million, up 25% year over year.

Region wise, North America, Europe, Asia and others and Latin America contributed 57%, 27%, 12% and 4% to first-quarter revenues, respectively. Revenues from North America, Europe, Asia and others and Latin America increased 43%, 43%, 30% and 14% year over year, respectively

Key Metrics in Q1

Collections were $351.1 million, up 41% year over year. Creative Subscriptions (76.3% of collections) increased 28% year over year to $268.1 million. Business Solutions (23.7% of collections) surged 107% to $83.1 million.

The company witnessed better-than-expected conversion and retention in user cohorts. Wix noted that net premium subscriptions in the reported quarter, increased 50% year over year.

Wix added more than 7.5 million new registered users during the reported quarter. Registered users as of Mar 31, 2021 were 204 million up 18.6% year over year.

Operating Results

Non-GAAP gross margin contracted 900 basis points (bps) to 63%, due to Business Solutions’ revenues constituting increasing portion of total revenues.

Creative Subscriptions non-GAAP gross margin contracted 400 bps on a year-over-year basis to 77%, due to investment in expansion of Customer Care organization. Business Solutions non-GAAP gross margin shrunk 900 bps to 24% in the reported quarter, primarily due to uptick in the company’s payments and shipping solutions, which carry lower overall gross margin.

Non-GAAP research and development expenses, as a percentage of collections, contracted 200 bps year over year to 20%. Non-GAAP selling and marketing expenses, as a percentage of collections, expanded 200 bps year over year to 39%.

Wix reported non-GAAP operating loss of $36.3 million compared with non-GAAP operating loss of $4.2 million in the year-ago quarter.

Balance Sheet & Cash Flow

As of Mar 31, 2021, Wix had $1.6 billion in cash compared with $1.6 billion as of Dec 31, 2020. As of Mar 31, 2021, long-term debt was reported at $919 million compared with $834 million as of Dec 31, 2020.

Cash flow from operations amounted to $18.5 million during the first quarter compared with $28.6 million in the previous quarter.

Free cash flow was $14.6 million compared with $23.2 million in the prior quarter.

Guidance

For second-quarter 2021, Collections are projected to be $342-$352 million, indicating an improvement of 29-32% from the year-ago quarter’s reported figure.

Moreover, revenues are expected between $308 million and $312 million, suggesting growth of 30-32% from the prior-year quarter’s reported figure. The Zacks Consensus Estimate for second-quarter revenues is currently pegged at $312.3 million, which suggests an increase of 32.3% from the year-ago quarter’s reported figure.

Management also raised full-year 2021 outlook. Collections are now projected in the range of $1.44-$1.46 billion, indicating an improvement of 31-32% from the prior-year quarter’s levels. Earlier, the company guided Collections in the range of $1.435-$1.455 billion.

Moreover, revenues are now expected between $1.28 billion and $1.29 billion, indicating growth of 29-30% from the prior-year quarter’s reported figure. Earlier, the company guided revenues in the range of $1.272-$1.286 billion.

The Zacks Consensus Estimate for 2021 revenues is currently pegged at $1.29 billion, suggesting growth of 30% from the year-ago quarter’s levels.

Notably, the company now anticipates free cash flow in the range of $62-$72 million.

Zacks Rank & Stocks to Consider

Currently, Wix carries a Zacks Rank #3 (Hold).

Some top-ranked stocks in the broader technology sector are Agilent Technologies A, Pure Storage PSTG and NVIDIA NVDA. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Agilent scheduled to report quarterly results on May 25, while NVIDIA and Pure Storage are slated to announce results on May 26.

Long-term earnings growth rate of Agilent, Pure Storage and NVIDIA is pegged at 9%, 52.2% and 15.2%, respectively.

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