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Wix.com (WIX) Beats on Q4 Earnings & Revenues, Guides Weak

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Wix.com Ltd. (WIX - Free Report) delivered non-GAAP earnings of 42 cents per share in the fourth quarter of 2018, beating the Zacks Consensus Estimate of 30 cents. The bottom line was also higher than the year-ago quarter’s figure of 16 cent per share.

Wix.com has returned 50.1% year over year, substantially outperforming the industry’s growth of 4.3%.

However, shares of the company went down more than 11%, yesterday, primarily owing to tepid first quarter and fiscal 2019 guidance. Further, gross margin contraction impacted the share price movement.

Quarter Details

Total revenues surged 39% year over year to $164.2 million, surpassing the Zacks Consensus Estimate of $162 million. Collections during the reported quarter came in at $176 million, up 33% year over year, attributable to expansion of new products and enhancement of existing products.

The company witnessed better-than-expected conversion and retention in its user cohorts. The company added a total of 147,000 net premium subscriptions in the reported quarter, which came in at 4 million as of Dec 31, 2018 (up 24% year over year).

Wix.com added 5.9 million registered users during the quarter under review. Registered users as of Dec 31, 2018 came in at 142 million, up 19% year over year.

During the reported quarter, average revenue per subscription (ARPS) increased 22.6% year over year. The surge can primarily be attributed to favorable mix of higher priced subscription packages.

Recently, the company unveiled a suite of 20 products named Ascend by Wix, which enable businesses to connect with and manage their customer base. This in turn aids them in competing with larger businesses online.

The company also intends to launch Wix Turbo, a platform that enhances speeds across all Wix websites. The company also unveiled Wix Payments. The latest product is a complete payments platform designed to aid small businesses manage their financial flow addressing significant business challenges and helping them to grow.

The company also inked a deal with MyHeritage, which will be utilizing the Wix Answers Knowledge Base, ticketing system, and call center tools. Wix.com is also partnering withschools and universities all over the United States to make Wix part of the curriculum.

We believe that these product innovations and partnership deals bode well for Wix.com.

Operating Results

Non-GAAP gross profit advanced 30.3% from the year-ago quarter to $131 million. Nonetheless, non-GAAP gross margin contracted 500 basis points (bps) to 80%.

The company’s non-GAAP operating income for the reported quarter came in at $18.8 million compared with $9.7 million reported in the year-ago quarter. As a percentage of revenues non-GAAP operating income came in at 11.5% compared with 8.2% recorded in the year-ago period.

Balance Sheet

As on Dec 31, 2018, Wix.com had cash and cash equivalents of $331.1 million, up from $319.9 million in the previous quarter.

Cash flow from operations came in at $36.1 million during the fourth quarter compared with $27.6 million reported in the previous quarter. Free cash flow was $32.7 million during the reported quarter.

Fiscal 2018 Highlights

WIX reported non-GAAP earnings of $1.07 per share in fiscal 2018. The figure reversed the year-ago quarter’s loss of 1 cent per share.

Total revenues increased 42% year over year to $603.7 million. Collections during the reported quarter came in at $658.4 million, up 36% year over year.

In fiscal 2018, ARPS increased 12% year over year. The surge can primarily be attributed to higher monetization.

Guidance

For the first quarter, the company expects revenues in the range of $172-$173 million, representing year-over-year growth of 25-26%. The Zacks Consensus Estimate for revenues is pegged at $177.1 million. Collections are projected to be in the range of $196-$197 million, representing year-over-year growth of 23%.

The company provided fiscal 2019 guidance. Management anticipates revenues in the range of $755-$761million. This reflects year-over-year growth of 25-26%. The Zacks Consensus Estimate for revenues is pegged at $763 million.

Collections are projected to be in the range of $817-$827 million, displaying year-over-year growth of 24-26%.

The company expects free cash in the range of $135-$140 million, representing year-over-year growth of 33-38%.

Zacks Rank and Other Stocks to Consider

Wix carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader technology sector are Symantec Corporation (SYMC - Free Report) , salesforce.com, inc. (CRM - Free Report) and Fortinet, Inc. (FTNT - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Symantec, salesforce and Fortinet have a long-term earnings growth rate of 7.9%, 24.2% and 16.8%, respectively.

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