A month has gone by since the last earnings report for Wix.com (WIX - Free Report) . Shares have added about 14% 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 catalysts.
Wix.com Q1 Earnings & Revenues Beat Estimates
Wix.com Ltd. reported first-quarter 2020 non-GAAP loss of 1 cent per share, narrower than the Zacks Consensus Estimate of a loss of 2 cents. Notably, the company had reported earnings of 3 cents in the year-ago quarter.
Total revenues rose 24% year over year to $216 million and surpassed the Zacks Consensus Estimate by 0.1%.
Quarter in Detail
Creative Subscriptions revenues (81.7% of revenues) improved 17% year over year to $176.5 million, driven by increase in Creative Subscriptions Annualized Recurring Revenue (ARR), which is the primary KPI for growth of its segment. As of Mar 31, 2020, Creative Subscriptions ARR was $739.5 million, up 19% year over year.
Business Solutions (18.3% of revenues) soared 72% to $39.4 million, driven by robust adoption of G-Suite and Ascend applications and Wix Payments, and momentum in GMV processed through Wix Payments.
Region wise, North America, Europe, Asia and others and Latin America accounted for 56%, 25%, 13% and 6% of first-quarter revenues, respectively. Moreover, revenues from North America, Europe, Asia and others and Latin America increased 30%, 22%, 19% and 6% year over year, respectively.
Key Metrics in Q4
Collections came in at $248.9 million, up 24% year over year. Creative Subscriptions (83.9% of collections) increased 18% year over year to $208.8 million. Business Solutions (16.1% of collections) soared 71% to $40.1 million.
The company witnessed better-than-expected conversion and retention in user cohorts. Wix added a total of 162K net premium subscriptions in the reported quarter, up 12% year over year, to reach 4.7 million as of Mar 31, 2020. Wix added 6.9 million registered users during the reported quarter. Registered users as of Mar 31, 2020 were 172 million, up 16% year over year.
Non-GAAP gross profit increased 14.3% from the year-ago quarter to $155.5 million. Nonetheless, non-GAAP gross margin contracted 600 basis points (bps) to 72%.
Creative Subscriptions gross margin contracted 200 bps on a year-over-year basis to 81%, due to the investment in expansion of Customer Care organization. Business Solutions gross margin declined from the year-ago figure of 44% to 33% in the reported quarter, due to uptick in Wix Payments adoption, a product which carries a lower overall gross margin.
Research and development expenses as a percentage of revenues contracted 100 bps year over year to 25%. Selling and marketing expenses as a percentage of revenues contracted 400 bps year over year to 42%. General and administrative expenses as a percentage of revenues, remained flat on a year-over-year basis at 7%.
Wix reported non-GAAP operating loss of $4.2 million, compared with operating loss of $2.2 million in the year-ago quarter.
Balance Sheet & Cash Flow
As of Mar 31, 2020, Wix had cash and cash equivalents of $937 million compared with $950 million as of Dec 31, 2019. As of Mar 31, 2020, long-term debt was reported at $365 million, compared with $360 million as of Dec 31, 2019.
Cash flow from operations came in at $35.1 million during the first quarter compared with $41.2 million reported in the previous quarter. Free cash flow was $40 million compared with $37.5 million reported in the prior quarter.
For second-quarter 2020, Collections are projected in the range of $255-$260 million, indicating an improvement of 28-30% from the year-ago reported figure. Moreover, revenues are expected between $231 million and $233 million, indicating growth of 25-26% from the prior year reported figure. The company anticipates free cash flow within $41-$43 million, indicating an improvement of 33-40% from the prior-year quarter.
However, the company withdrew guidance for 2020, citing coronavirus crisis-induced uncertainty and drastic changes in consumer preferences.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted -50.71% due to these changes.
Currently, Wix.com has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile 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.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Wix.com has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.