Q2 2024 Earnings Summary
- Strong adoption and growth of Wix Studio among agencies, leading to compounding growth. Agencies are not only joining Wix Studio but are also purchasing multiple subscriptions over time, indicating sustained growth. Agencies are building second, third, fourth, fifth, and even tenth websites on Wix, which is much more than what was anticipated. This has contributed to the acceleration of bookings growth from 10% to 15% in Q2. Furthermore, significant revenue growth from Studio is expected in 2025. ,
- Increased adoption of AI tools is attracting new types of customers and driving growth. AI tools are enabling users who do not have design or text-writing skills to create websites, thereby opening Wix to more new types of customers. This is creating an opportunity to expand the user base beyond those who traditionally used Wix.
- Growth in the commerce business by attracting larger merchants and expanding verticals, leading to increased GPV and take rate. With the increased maturity of commerce offerings and deeper penetration into the professional market, Wix is attracting higher bigger merchants across various platforms. Additionally, the introduction of new capabilities and products, such as donations, proposals, and POS solutions, is expected to expand GPV and improve monetization. Wix aspires to increase its take rate to about 2% - 2.25%, similar to the best-in-class in the industry. There is still a lot of room to grow in the next few years. ,
- Uncertainty in the macroeconomic environment and FX volatility may negatively impact Wix's future results. The company expressed general conservatism in its guidance due to these factors and acknowledged difficulty in predicting potential volatility in the upcoming quarters.
- Slow adoption of AI tools among existing users could limit upselling opportunities. Wix observed that existing users, confident in their design and writing skills, may use AI tools less than new users, potentially impacting the ability to drive additional spending from the existing customer base.
- Monetization from Wix Studio may take longer to significantly impact revenue. While positive trends are emerging, leadership indicated that substantial revenue growth from Studio is expected to be more meaningful in 2025, suggesting a delay in anticipated growth contributions.
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Exceeding Rule of 40 in 2025
Q: How will you surpass Rule of 40 next year?
A: Lior expects to significantly surpass the Rule of 40 in 2025 through a combination of both growth and margin expansion. Despite increasing payroll and marketing expenses in dollars, revenue growth is anticipated to outpace expense growth, leading to increased leverage. Strong execution of bookings growth will accelerate revenue next year, contributing to higher free cash flow margins. -
AI Adoption and Impact
Q: How is AI adoption affecting growth and customer behavior?
A: Avishai reports that AI tools like ADI have dramatically improved conversion rates among self-creators. The new version released earlier this year continued this trend. They see higher adoption of AI among new users who rely on AI for design and content creation, opening Wix to more new customer types. All 17 AI assistants are customer-facing, enhancing user experience by providing quick answers and automating tasks, which leads to measurable effects and optimism about ongoing improvements. -
Wix Studio's Growth
Q: Can you discuss Wix Studio's sustainability and revenue impact?
A: Avishai notes significant growth since Wix Studio's release a year ago, with agencies adopting it and purchasing more subscriptions over time. This compounding growth indicates agencies are embracing the product long-term. Lior believes that in 2025, revenue growth from Studio will be much more significant, as existing partners build more projects and newcomers contribute, resulting in accelerated bookings. -
Guidance Conservatism
Q: Is your guidance conservative due to macro factors?
A: Lior explains that the conservatism in guidance is general and not specific to any quarter. They always consider macro and FX when providing guidance. Execution of bookings in Q2 was in line with expectations at 15% growth, supporting their forecast of 16% growth. There is nothing specific causing concern, but they acknowledge the unpredictability of macroeconomic impacts. -
Wix Payments Take Rate
Q: How can you improve Wix Payments' take rate and margins?
A: Nir mentions that increasing adoption by driving more customers to use Wix Payments over other providers can improve the take rate, potentially reaching around 2.25%, similar to industry best-in-class. Introducing new capabilities, products, and verticals—such as POS systems and donations—helps expand GPV and offers significant room for growth in the coming years. -
Attracting Larger Merchants
Q: How are you gaining larger merchant customers?
A: Nir explains that gaining traction with Wix Studio and partners is attracting larger merchants across bookings, scheduling, stores, commerce, and events. This success is due to the increased maturity of their commerce offerings and greater penetration into the professional market, resulting in higher market share. -
SMB Health and Geography
Q: What are you seeing regarding SMB health and geographic trends?
A: Nir states there are no significant shifts in SMB health or geographic trends. Since mid-last year, they've observed stabilization with slight, moderate increases. Some verticals like scheduling, bookings, and events are growing slightly faster, but these do not indicate major macroeconomic changes. -
AI Impact on Agencies vs Self-Creators
Q: Does AI affect the balance between agencies and self-creators?
A: Avishai explains that agencies and self-creators have different needs from AI. Self-creators benefit from AI in design assistance and content creation, while agencies use AI to enhance efficiency in tasks like image editing and responsive design. He believes both segments will continue to grow, as many businesses prefer professional agencies for their expertise, and AI is not yet capable of replacing them.