Q4 2024 Earnings Summary
- Wix anticipates achieving double-digit growth in the self-creators segment by 2026, driven by new product launches and technological advancements, indicating strong future growth potential.
- The company is strategically leveraging AI to expand into new product categories, such as AI site chat and marketing agents, which could enhance functionality for users and open new revenue streams, positioning Wix at the forefront of technological innovation in web creation.
- Wix expects acceleration in growth over 2025 driven by strong contributions from its Studio platform and partners segment, with Studio accounting for about 50% of new partner cohorts, along with increasing impact from AI initiatives on conversion rates, indicating robust momentum in key growth areas.
- Slower Growth in Self-Creators Segment: Wix does not expect to achieve double-digit growth in its self-creators business in 2025. Lior Shemesh, the CFO, stated, "We are not modeling right low double-digit growth for self-creater in 2025, but we definitely believe that we can achieve it in 2026 based on the new product that we are going to launch." This indicates potential challenges in accelerating growth for this segment in the near term.
- Decline in Paid Subscribers and De-emphasis of Metric: There has been a slight year-over-year decline in the number of premium subscribers. Nir Zohar, the President and COO, acknowledged this and mentioned that net subscriptions have become a secondary KPI. He stated, "We made so much more focus on the cohort value, both on the signal level... So when we come to determine our business goals and actions the net subs is really a secondary factor in a secondary KPI, not the main one." This shift in focus may suggest challenges in subscriber growth.
- Uncertainty in AI Product Adoption and Monetization: Although Wix has introduced new AI-based products like the AI site chat and AI marketing agent, there is uncertainty regarding user adoption and monetization. Avishai Abrahami, the CEO, mentioned, "It looks very promising... It is subscription monetization... but it doesn't necessarily mean that we're going to get a huge amount of users that want to install it... we have to see." This uncertainty could impact the expected growth from these AI initiatives.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q1 2025 | no prior guidance | $469 million to $473 million, representing 12% to 13% YOY growth on an as‐reported basis and 13% to 14% on a constant currency basis | no prior guidance |
Bookings | FY 2025 | no prior guidance | $2,060 million; 11% to 13% YOY growth; FX headwind of approximately $45 million; constant currency bookings growth of 13% to 15% | no prior guidance |
Revenue | FY 2025 | no prior guidance | $1,970 million to $2,000 million; representing 12% to 14% YOY growth; FX headwind of approximately $34 million; constant currency revenue growth of 14% to 16% | no prior guidance |
Gross Margin | FY 2025 | no prior guidance | Non‑GAAP total gross margin expected to improve to 70% for the full year | no prior guidance |
Operating Expenses | FY 2025 | no prior guidance | Non‑GAAP operating expenses anticipated to be 47% to 48% of revenue for the full year | no prior guidance |
Free Cash Flow | FY 2025 | no prior guidance | Free cash flow expected to be $590 million to $610 million (30% to 31% of revenue) with a constant currency free cash flow margin of 31% to 32% | no prior guidance |
CapEx | FY 2025 | no prior guidance | Expected CapEx of approximately $13 million to $15 million, or 1% of revenue | no prior guidance |
Cash Taxes | FY 2025 | no prior guidance | Expected cash taxes of approximately $40 million | no prior guidance |
Convertible Note | FY 2025 | no prior guidance | Plan to pay down the $575 million convertible note due in August 2025 with cash | no prior guidance |
Rule of 45 | FY 2025 | no prior guidance | Targeting to achieve the Rule of 45 in 2025 | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Wix Studio | Discussed across Q1–Q3 with strong adoption, market share gains, high partner retention, and minimal concern over dependency risk | Q4 emphasizes robust adoption, significant partner revenue growth (+30% YoY) and 50% of new partner cohorts use Studio | Consistent focus on adoption. Dependency risk remains low and emphasis is on growth and market share. |
AI Initiatives | Q1–Q3 calls highlighted high adoption (e.g., AI website builder, image enhancement), improved conversion rates, and emerging monetization, albeit with some uncertainty | Q4 shows broad rollout of AI tools (site chat, marketing agent) with strong adoption and conversion improvements, though monetization remains cautious | Continued positive adoption and conversion gains with cautious near‐term monetization expectations. |
Operating Leverage, Free Cash Flow, and Profitability | Across Q1–Q3, discussions emphasized significant improvements, record free cash flow margins, expanding non‐GAAP margins, and overall profitability enhancements | Q4 reports further improvements with operating expense leverage, 29% free cash flow in Q4, and GAAP operating income turning positive | Consistently positive. Financial efficiency and profitability metrics have steadily improved. |
Macroeconomic and FX Environment Risks | Q1 noted macro stability; Q2 acknowledged FX volatility building in; Q3 had minimal mention; whereas Q1–Q2 discussions incorporated cautious guidance | Q4 explicitly cites adverse FX impacts with an expected ~$45M headwind for 2025 | Increased caution. FX risks have gained prominence in Q4 compared to prior periods. |
Self-Creators Segment Growth Potential | Q1–Q3 largely optimistic with AI and Creative Subscriptions driving double-digit bookings growth; Q1 showed no significant near-term challenges | Q4 remains optimistic on long-term (double-digit by 2026) while noting near-term challenges like price sensitivity and subscription losses | Optimism persists long term, but Q4 introduces additional near-term challenges not previously highlighted. |
Decline in Premium Subscribers & KPI Shift | No discussion in Q1–Q3 | Q4 addresses a decline in premium subscribers (driven by price sensitivity) and a strategic shift away from net subscriptions towards cohort value and long-term bookings | New topic. A fresh focus in Q4 on qualitative KPIs reflects a strategic repositioning. |
Commerce Business Expansion | Consistently discussed across Q1–Q3 with expansion into new verticals, enhanced solutions (including AI-powered onboarding), and improved take rates | Q4 reiterates strategic expansion into new verticals and highlights enhanced monetization channels via commerce capabilities | Steady momentum. Continued expansion with consistently positive sentiment across periods. |
Price Increases vs Organic Demand | Q1 emphasized organic demand and innovation (AI and Studio) as primary drivers; Q2 and Q3 noted contributions from both factors | Q4 shows a balanced narrative: while price increases contributed to revenue, organic demand and product improvements are key drivers | Evolving dynamics. Earlier reliance on price increases is being balanced by growing organic demand. |
Execution Risks in New Product Rollouts | Q1 and Q2 mentioned strong initial adoption of new AI tools and Studio enhancements with no explicit risks; Q3 continued promotion of the initiatives without highlighting risks | Q4 does not explicitly mention execution risks, with focus on favorable adoption and early performance of new products | Consistent optimism. No significant execution risks are flagged in any period. |
Future Tax Liabilities | Q1 noted that future tax liabilities would begin affecting profitability from 2026, factored into projections | Not mentioned in Q2–Q4 | De-emphasized. Earlier concerns about tax liabilities have not re-emerged in later periods. |
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Free Cash Flow Margin Expansion
Q: What are the main sources of free cash flow margin expansion?
A: The main drivers are a 1-point improvement in gross margin and 1–2 points of operating expense leverage, even with increased costs for new product launches. These benefits will contribute to higher free cash flow in 2025. -
2025 Guidance and Acceleration
Q: What drives the strength and acceleration in 2025 guidance?
A: Growth will be fueled by faster-growing products like Studio, which now represents 50% of new partner cohorts, and the increasing impact of AI on conversion rates, particularly in the second half of the year. -
AI's Impact on Cost Structure
Q: How will AI integration affect costs and profitability?
A: AI integration, especially in customer care, will expand gross margins, with benefits flowing directly to free cash flow. Most impacts will be seen in the second half of 2025, contributing to overall margin expansion. -
Net Premium Subscriber Trends
Q: How should we view growth in premium subscribers?
A: While net subscribers are a secondary KPI, there was a slight improvement over expectations post price increase. Focus remains on cohort value, with the Q1 '24 cohort reaching $61 million in cumulative bookings, and aggregate bookings increasing from $16.2 billion to $18.4 billion year-over-year. A positive net subscriber trend is expected in 2025. -
Partners' Contribution to GPV
Q: Will partners continue to drive GPV growth?
A: Yes, partners' proportion of GPV has surpassed 60% and is expected to keep growing. Partners build larger websites that drive higher GPV, helping to increase overall GPV over time. -
Achieving Double-Digit Self-Creator Growth
Q: What is needed to reach double-digit self-creator growth?
A: By introducing new technologies and products, better conversion rates and increased LTV are expected. While not modeled for 2025, they believe they can achieve low double-digit growth in self-creators by 2026 with upcoming product launches. -
AI Enabling New Products and TAM Expansion
Q: How does AI allow expansion into new product categories?
A: AI enables the creation of new products like AI-powered site chat and marketing assistants, expanding offerings for SMBs. Future websites will look different, and Wix aims to help small businesses be ready for these changes, significantly expanding its addressable market. -
Monetization of AI Agent Products
Q: How are AI agents being used and monetized?
A: Two monetized AI agents—a customer support chat and a marketing mastermind—are showing promising early results. They help users by handling inquiries and managing marketing efforts, potentially providing higher monetization opportunities in 2025. -
Advancements in Studio Editor
Q: Is the Studio editor where you want it to be?
A: No, there are many more features planned. The team is executing well, and the roadmap is exciting. Studio has over 2 million accounts, with 75% being new partners, indicating strong adoption since its public release 15 months ago. -
Top of Funnel Trends
Q: How is the top of funnel activity trending?
A: Positive trends are observed, though future predictions are uncertain. Strategic marketing is focused on high-intent users, leading to an increase in 10-year cohort value from $16.2 billion to $18.4 billion, net revenue retention up from 105% to 106%, and 13% year-over-year growth in ABP (equivalent to ARPU).