U.S. Markets closed

Wix.com (WIX) Q2 Earnings and Revenues Surpass Estimates

Zacks Equity Research

Wix.com Ltd. WIX delivered second-quarter 2019 non-GAAP earnings of 34 cents per share beating the Zacks Consensus Estimate of 17 cents. Notably, the bottom line also improved 17.2% on a year-over-year basis.

Total revenues surged 27% year over year to $185.4 million, surpassing the Zacks Consensus Estimate of $184 million. The figure also came ahead of management’s guided range of $182 million to $184 million.

The year-over-year increase in the top line can primarily be attributed to robust product offering and higher sales of complementary products.  Further, growing user and subscription base were other positives.

Notably, shares of Wix have returned 61.7% year to date, substantially outperforming the industry’s rally of 30.8%.

Quarter in Detail

Collections during the reported quarter came in at $199.6 million, up 25% year over year, attributable to expansion of new products and enhancement of existing products. Management had projected collections in the range of $197-$199 million.

The company witnessed better-than-expected conversion and retention in its user cohorts. The company added a total of 132,000 net premium subscriptions in the reported quarter, which came in at 4.3 million as of Jun 30, 2019 (up 17% year over year).

Wix added 5.7 million registered users during the reported quarter. Registered users as of Jun 30, 2019 came in at 154 million, up 18% year over year.

During the reported quarter, average revenue per subscription (ARPS) increased 9% year over year. The surge can primarily be attributed to favorable mix of higher priced subscription packages.

In the quarter under review, collections from first-half 2019 user cohorts increased 9% year over year. The company anticipates collections from all existing cohorts to be roughly $5.9 billion in the future, up 28% year over year.

Notably, Average Collections per Subscription (ACPS) of the latest annual subscriptions in the US improved 29% on a year-over-year basis and came in at $228 in the second quarter.

Latest Developments Hold Promise

In the reported quarter, the company enhanced Wix Code with new functionalities and rebranded it as Corvid by Wix. The renewed product is designed to aid developers manage their workflow in a streamlined manner.

During the quarter, the company expanded customer support organization by launching 24/7 global customer support and implementing facilities to provide support to users.

Additionally, in the quarter under review, Wix announced opening of a Customer Support Centre in Tokyo. The centre is aimed at improving the company’s international market reach, which favors growth prospects. The partnership is aimed at strengthening the company’s foothold in sports marketing.

We believe that these product innovations and partnership deals bode well for Wix.

Moreover, incremental adoption of innovative digital services including Wix Editor, Wix ADI, Wix Logo Maker, Wix Answers, Ascend by Wix, Wix Turbo, Wix Payments, among others. are other positives.

Operating Results

Non-GAAP gross profit advanced 20% from the year-ago quarter to $140.3 million. Nonetheless, non-GAAP gross margin contracted 400 bps to 76%, primarily owing to lower TPAs gross margin and higher cost of revenues.

Non-GAAP operating expenses surged 21.4% to $126.1 million in the second quarter.

The company reported non-GAAP operating income of $14.2 million as compared with $12.9 million reported in the year-ago quarter. As percentage of revenues non-GAAP operating margin contracted 110 bps to 7.7%,

Balance Sheet & Cash Flow

As on Jun 30, 2019, Wix had cash and cash equivalents of $351.5 million, up from $348.1 million in the previous quarter.

Cash flow from operations came in at $37.2 million during the second quarter compared with $35.1 million reported in the previous quarter. Free cash flow was $30.8 million, compared with $307 million reported in the prior quarter.

Guidance

For the third quarter, the company expects revenues in the range of $196-$198 million, suggesting growth of 26-27% from the year-ago quarter. The Zacks Consensus Estimate for revenues is currently pegged at $196.3 million. Collections are projected to be in the range of $204-$206 million, indicating an improvement of 25-27% from the year-ago reported figure

The company updated fiscal 2019 guidance. Management now anticipates revenues in the range of $761-$765 million, up from prior guided range of $758-$763 million. This indicates an improvement of 26% to 27% from the year-ago reported figure. The Zacks Consensus Estimate for revenues is currently pegged at $761.9 million.

Collections are projected to be in the range of $825-$831 million, suggesting growth of 25-26% from the prior-year quarter, compared with previous predicted range of $822-$830 million.

Moreover, the company expects free cash in the range of $123-$126 million, indicating an improvement of 21-24% from the year-ago quarter. Notably, the previously guided range was $122-$126 million.

Zacks Rank and Key Picks

Wix carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Mitek Systems, Inc. MITK, Alteryx, Inc. AYX and Alibaba Group Holding Limited BABA, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Mitek Systems, Alteryx and Alibaba have a long-term earnings growth rate of 15%, 13.7% and 26.8%, respectively.

The Hottest Tech Mega-Trend of All                

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Alibaba Group Holding Limited (BABA) : Free Stock Analysis Report
 
Wix.com Ltd. (WIX) : Free Stock Analysis Report
 
Mitek Systems, Inc. (MITK) : Free Stock Analysis Report
 
Alteryx, Inc. (AYX) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research