Release Date: November 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Wix.com Ltd (WIX, Financial) reported a 16% year-over-year growth in bookings for Q3 2024, marking the third consecutive quarter of accelerating growth.
- The company's AI-powered solutions, including the AI website builder, have significantly improved user onboarding, with over 50% of new users opting for this method.
- Wix Studio has shown exceptional results, with 75% of bookings from new partners driven by Studio accounts, contributing to a 30% year-over-year growth in partners' revenue.
- The company has successfully implemented a price increase earlier this year, which has contributed to higher average revenue per user (ARPU) and better-than-expected renewal activity.
- Wix.com Ltd (WIX) achieved a free cash flow margin of 29% of revenue in Q3, surpassing the 'Rule of 40' for the first time since early 2021, indicating strong financial health and operational efficiency.
Negative Points
- Despite the positive growth, the company faces challenges in maintaining the momentum of its self-creators segment, which has seen slower growth compared to partners.
- The macroeconomic environment remains uncertain, which could impact future demand and growth prospects.
- While AI products are expected to drive future growth, they are still in the early stages, and their direct monetization impact remains to be seen.
- The company has increased its marketing expenses, which could pressure margins if not matched by proportional revenue growth.
- Wix.com Ltd (WIX) faces competition from other platforms, such as WordPress, which could impact its market share and growth trajectory.
Q & A Highlights
Q: Can you remind us where we are in terms of free cash flow margin between self creator and partner? Is self creator holding steady in the mid-30s percent implying partner is in high 10s territory? Also, can you expand on investing more in self creator for better growth in the coming years?
A: We do not provide a breakdown between partners and self creators, but self creators are very profitable in terms of free cash flow, and partners are improving. Long-term, partners' profitability might surpass self creators. Regarding investments, we expect better demand and new products next year, driving higher growth for self creators. Margin expansion is also anticipated.
Q: How much contribution are you getting from Studio in terms of overall bookings and revenue? Have you seen any impacts from the news around WordPress?
A: Studio accounts for 75% of new partner bookings, becoming a significant portion of our revenue and bookings. We see more agencies joining and existing ones building more websites on Wix. Regarding WordPress, their conflicts have reduced trust and innovation, leading agencies to move to different platforms, benefiting us.
Q: Can you discuss the marketing efficiencies you expect to sustain in Q4 and into 2025? Also, can you unpack the success you're seeing with commerce products over the last quarter?
A: The marketing step-up is linked to increased demand and strong top-of-funnel behavior, allowing us to expand acquisition marketing while maintaining guardrails. We see similar trends in Q4 as in Q3. Regarding commerce, our horizontal offering, including events, invoicing, and scheduling, allows deeper penetration. The partner segment contributes significantly to commerce growth.
Q: What changed between Q2 and Q3 that gave you the confidence to raise the exit rate to 18%? Would you characterize it as more of a partner dynamic or self creator?
A: The acceleration is due to several factors, including increased studio subscription bookings, strong retention of studio partners, and the impact of AI on self creators. We see improved top-of-funnel behavior and commerce growth, making us comfortable raising the guidance.
Q: Can you provide early views on the types of AI innovations we can expect for self creators? Where do you think self creators' growth could ultimately go?
A: Innovation will influence both acquiring new self creators and helping them complete websites. We have AI products that will be monetized, providing new functionality and better revenues. The growth rate is hard to predict due to economic factors, but we are optimistic about the innovations' impact.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
