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Wix.com (WIX) Up 4.5% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Wix.com (WIX - Free Report) . Shares have added about 4.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Wix.com due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Wix.com Reports Loss in Q3, Revenues Increase Y/Y
Wix.com Ltd. reported third-quarter 2020 non-GAAP loss of 14 cents per share. Notably, the company had reported earnings of 41 cents in the year-ago quarter. The Zacks Consensus Estimate for third-quarter bottom line was pegged at a loss of 11 cents.
However, total revenues improved 29% year over year to $254.2 million. The Zacks Consensus Estimate for third-quarter revenues was pegged at $249.9 million.
Quarter in Detail
For increased transparency, beginning fourth-quarter 2019, Wix reports revenues, collections and cost of revenues under two segments: Creative Subscriptions and Business Solutions.
Creative Subscriptions revenues (80% of revenues) improved 23% year over year to $203 million, driven by increase in Creative Subscriptions Annualized Recurring Revenue (ARR), which is the primary KPI for growth of its segment. As of Sep 30, 2020, Creative Subscriptions ARR was $840.5 million, up 24% year over year.
Business Solutions (20% of revenues) surged 60% to $51.2 million, driven by robust adoption of G-Suite and Ascend applications and Wix Payments, and momentum in GMV processed through Wix Payments. Notably, new Ascend subscriptions soared more than 100% on a year-over-year basis.
Region wise, North America, Europe, Asia and others and Latin America accounted for 57%, 25%, 12% and 6% of third-quarter revenues, respectively. Moreover, revenues from North America, Europe, Asia and others and Latin America increased 35%, 25%, 23% and 7% year over year, respectively.
Key Metrics in Q3
Collections were $280.9 million, up 36% year over year. Creative Subscriptions (81.3% of collections) increased 32% year over year to $228.3 million. Business Solutions (18.7% of collections) climbed 63% to $52.6 million.
The company witnessed better-than-expected conversion and retention in user cohorts. Wix added a total of 302K net premium subscriptions in the reported quarter, up 164% year over year, to reach 5.3 million as of Sep 30, 2020.
Wix added 7.8 million registered users during the reported quarter. Registered users as of Sep 30, 2020 were 189 million, up 19% year over year.
Operating Results
Non-GAAP gross margin contracted 400 basis points (bps) to 70%, due to increasing investments in Customer Care domain and increase in hosting costs, both aimed at addressing higher demand.
Creative Subscriptions gross margin contracted 200 bps on a year-over-year basis to 80%, due to the investment in expansion of Customer Care organization. Business Solutions gross margin shrunk 200 bps to 31% in the reported quarter, on account of uptick in Wix Payments adoption — a product that carries a lower overall gross margin.
Research and development expenses as a percentage of collections contracted 200 bps year over year to 22%. Selling and marketing expenses as a percentage of revenues expanded 400 bps year over year to 38%. Wix reported non-GAAP operating loss of $8.5 million, against operating income of $12.3 million in the year-ago quarter.
Balance Sheet & Cash Flow
As of Sep 30, 2020, Wix had $1.5 billion in cash, compared with $1 billion as of Jun 30, 2020. As of Sep 30, 2020, long-term debt was reported at $824 million, compared with $371 million as of Jun 30, 2020.
Cash flow from operations amounted to $24.5 million during the third quarter compared with $50 million in the previous quarter.
Free cash flow was $19.4 million compared with $46.7 million in the prior quarter.
Guidance
For fourth-quarter 2020, Collections are projected to be $295-$305 million, indicating an improvement of 30-35% from the year-ago reported figure.
Moreover, revenues are expected between $266 million and $271 million, suggesting growth of 30-32% from the prior-year reported figure.
Notably, the company anticipates free cash flow in the range of $16 million to $21 million.
Based on fourth-quarter 2020 guidance, management provided full year 2020 outlook. Collections are projected to be $1.09-$1.10 billion, indicating an improvement of 31-32% from the prior-year quarter.
Moreover, revenues are expected between $972 million and $977 million, indicating growth of 28% from the prior year reported figure.
Notably, the company anticipates free cash flow in the range of $122 million to $127 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Wix.com has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Wix.com has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Wix.com (WIX) Up 4.5% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Wix.com (WIX - Free Report) . Shares have added about 4.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Wix.com due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Wix.com Reports Loss in Q3, Revenues Increase Y/Y
Wix.com Ltd. reported third-quarter 2020 non-GAAP loss of 14 cents per share. Notably, the company had reported earnings of 41 cents in the year-ago quarter. The Zacks Consensus Estimate for third-quarter bottom line was pegged at a loss of 11 cents.
However, total revenues improved 29% year over year to $254.2 million. The Zacks Consensus Estimate for third-quarter revenues was pegged at $249.9 million.
Quarter in Detail
For increased transparency, beginning fourth-quarter 2019, Wix reports revenues, collections and cost of revenues under two segments: Creative Subscriptions and Business Solutions.
Creative Subscriptions revenues (80% of revenues) improved 23% year over year to $203 million, driven by increase in Creative Subscriptions Annualized Recurring Revenue (ARR), which is the primary KPI for growth of its segment. As of Sep 30, 2020, Creative Subscriptions ARR was $840.5 million, up 24% year over year.
Business Solutions (20% of revenues) surged 60% to $51.2 million, driven by robust adoption of G-Suite and Ascend applications and Wix Payments, and momentum in GMV processed through Wix Payments. Notably, new Ascend subscriptions soared more than 100% on a year-over-year basis.
Region wise, North America, Europe, Asia and others and Latin America accounted for 57%, 25%, 12% and 6% of third-quarter revenues, respectively. Moreover, revenues from North America, Europe, Asia and others and Latin America increased 35%, 25%, 23% and 7% year over year, respectively.
Key Metrics in Q3
Collections were $280.9 million, up 36% year over year. Creative Subscriptions (81.3% of collections) increased 32% year over year to $228.3 million. Business Solutions (18.7% of collections) climbed 63% to $52.6 million.
The company witnessed better-than-expected conversion and retention in user cohorts. Wix added a total of 302K net premium subscriptions in the reported quarter, up 164% year over year, to reach 5.3 million as of Sep 30, 2020.
Wix added 7.8 million registered users during the reported quarter. Registered users as of Sep 30, 2020 were 189 million, up 19% year over year.
Operating Results
Non-GAAP gross margin contracted 400 basis points (bps) to 70%, due to increasing investments in Customer Care domain and increase in hosting costs, both aimed at addressing higher demand.
Creative Subscriptions gross margin contracted 200 bps on a year-over-year basis to 80%, due to the investment in expansion of Customer Care organization. Business Solutions gross margin shrunk 200 bps to 31% in the reported quarter, on account of uptick in Wix Payments adoption — a product that carries a lower overall gross margin.
Research and development expenses as a percentage of collections contracted 200 bps year over year to 22%. Selling and marketing expenses as a percentage of revenues expanded 400 bps year over year to 38%. Wix reported non-GAAP operating loss of $8.5 million, against operating income of $12.3 million in the year-ago quarter.
Balance Sheet & Cash Flow
As of Sep 30, 2020, Wix had $1.5 billion in cash, compared with $1 billion as of Jun 30, 2020. As of Sep 30, 2020, long-term debt was reported at $824 million, compared with $371 million as of Jun 30, 2020.
Cash flow from operations amounted to $24.5 million during the third quarter compared with $50 million in the previous quarter.
Free cash flow was $19.4 million compared with $46.7 million in the prior quarter.
Guidance
For fourth-quarter 2020, Collections are projected to be $295-$305 million, indicating an improvement of 30-35% from the year-ago reported figure.
Moreover, revenues are expected between $266 million and $271 million, suggesting growth of 30-32% from the prior-year reported figure.
Notably, the company anticipates free cash flow in the range of $16 million to $21 million.
Based on fourth-quarter 2020 guidance, management provided full year 2020 outlook. Collections are projected to be $1.09-$1.10 billion, indicating an improvement of 31-32% from the prior-year quarter.
Moreover, revenues are expected between $972 million and $977 million, indicating growth of 28% from the prior year reported figure.
Notably, the company anticipates free cash flow in the range of $122 million to $127 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Wix.com has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Wix.com has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.