Q3 2024 Earnings Summary
- Wix's Studio platform is driving significant growth, with 75% of new partner bookings coming from Studio, making it a significant portion of revenue and bookings. The accelerating adoption by agencies, including large agencies building more websites on Wix, is leading to quarter-over-quarter growth acceleration and strong retention of Studio partners.
- Operating leverage is expected to improve margins next year, as the company's fixed cost structure remains stable while revenue increases. This means the increase in costs will be less than the increase in top line, resulting in further leverage for margins. The partner segment is expected to provide higher leverage, but leverage will be seen in both partners and self-creators.
- AI initiatives are positively impacting conversion rates and monetization, particularly through the AI website builder, which makes it easier for customers to build websites, leading to higher conversion and monetization. There is also opportunity to monetize AI beyond website building, during the later part of the website lifecycle, which could drive future growth.
- Price increases may be masking underlying growth issues: The company admits that price increases have had a positive impact on revenue but refuses to break down how much growth is due to these increases versus organic growth ( ). This raises concerns about the sustainability of revenue growth if it is heavily reliant on price hikes rather than increased demand or user growth.
- Uncertainty around monetization of AI initiatives: While Wix is investing heavily in AI and acknowledges positive impacts on conversion rates, executives admit that the monetization of AI products within the core website design funnel is still under development and it's "really hard to tell what will be the impact" ( , ). This uncertainty suggests that the anticipated revenue boost from AI may not materialize as expected.
- Heavy reliance on Wix Studio and the partners segment for growth: A significant portion of new bookings (75% of new partners' bookings) is attributed to Wix Studio ( , ). This indicates that growth is heavily dependent on the success of a single product line and market segment. If the adoption of Studio slows down or competition increases, it could negatively impact the company's overall growth prospects.
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Bookings Acceleration
Q: What's driving the boost in bookings growth to 18%?
A: The acceleration in bookings between Q2 and Q3 is due to a combination of increased demand, product innovation, and improved conversion rates, particularly from AI enhancements. The adoption of Studio by partners has led to 75% of new partner bookings coming from Studio , and this trend is accelerating into Q4. Additionally, agencies are building more websites on Wix, contributing to continuous growth. -
Monetization of AI
Q: How will you directly monetize AI offerings?
A: We are launching new AI products next year that will generate revenue by adding value to both self-creators and agency partners. These products will help users manage their businesses and communicate with customers more effectively, leading to better revenues from providing new functionalities. -
Margin Expansion and Free Cash Flow Margins
Q: Do you expect further margin expansion next year?
A: Yes, we anticipate continued margin expansion next year. The current cost structure is sufficient to support growth over the next couple of years, with fixed costs remaining relatively stable. We expect costs to increase less than the top-line growth, resulting in improved leverage. Notably, the partner segment is expected to see higher leverage compared to self-creators. Additionally, our overall free cash flow margin is nearing 30% for the entire business, with self-creators already exceeding this level. -
Self-Creator Growth and AI Innovations
Q: How will AI innovations enhance self-creator growth?
A: We are introducing significant AI-driven innovations aimed at self-creators that will improve both user acquisition and website completion rates. These technologies will enable users to do things they couldn't before, increasing the number of self-creators on our platform. Additionally, we are launching AI products that will be monetized, providing new functionalities and better revenues from self-creators. -
Impact of Studio and Partner Segment Growth
Q: What's the contribution of Studio to bookings and revenue?
A: Studio now accounts for 75% of new partner bookings, becoming a significant portion of our revenue and bookings. The acceleration is due to more agencies joining Studio and existing agencies building more websites on Wix. We see strong retention among Studio partners, contributing positively to growth. -
Top-of-Funnel Improvements and Organic Growth
Q: What's driving the improvement in top-of-funnel and organic growth?
A: We are seeing some macroeconomic improvements that, along with enhancements in conversion rates—such as a 13% improvement in conversion from free to paying users on the new cohort—are boosting our top-of-funnel metrics. Our AI initiatives are contributing to better conversion, and we expect this trend to continue with new product releases and further improvements next year. -
Commerce Products and Transaction Revenue
Q: How are commerce products contributing to growth?
A: Our commerce offerings, which include a wide array of services like event ticketing, invoicing, and scheduling, are contributing to balanced and deeper market penetration. The partner segment is a significant contributor here, growing faster in terms of commerce adoption than self-creators. Transaction revenue has accelerated quarter over quarter. -
Marketing Efficiency
Q: Can you sustain current marketing efficiencies into Q4 and 2025?
A: The increase in marketing spend is directly linked to stronger demand and top-of-funnel activity. This allows us to expand acquisition marketing while maintaining our ROI guardrails. We are currently seeing similar trends in Q4 as in Q3, but it's too early to predict for 2025. -
Engagement with Large Agencies
Q: Any change in engagement with large agency partners?
A: While we don't disclose specific numbers, we have several large agencies using Wix and are actively pursuing more through marketing, brand building, education, and product development. We expect to continue expanding in this market segment next year and believe our innovations will help us gain more ground in 2025 and beyond. -
Business Solutions Bookings Seasonality
Q: Any factors affecting business solutions bookings this quarter?
A: The apparent seasonality in Q3 is primarily due to the timing of incentives from Google Workspace, which don't occur every quarter. Transaction revenue, however, has accelerated quarter over quarter, indicating strong underlying growth.