A month has gone by since the last earnings report for Wix.com (WIX). Shares have added about 22.5% 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 the most recent earnings report in order to get a better handle on the important drivers.
Wix.com Q1 Loss Narrower Than Estimates, Revenues Up Y/Y
Wix.com Ltd reported first-quarter 2021 non-GAAP loss of 54 cents per share. Notably, the company had reported loss of 1 cent in the year-ago quarter. The Zacks Consensus Estimate for first-quarter bottom line was pegged at a loss of 73 cents.
Total revenues increased 41% year over year to $304.1 million. The Zacks Consensus Estimate for first-quarter revenues is pegged at $295.4 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 (74.5% of revenues) increased 28% year over year to $226.4 million, driven by increase in Creative Subscriptions Annualized Recurring Revenues (ARR).
Business Solutions revenues (25.5% of revenues) surged 97% to $77.7 million, driven by robust adoption of applications like Ascend by Wix along with paid ads and other third-party applications (TPAs).
In the first quarter, Creative Subscriptions ARR was $926.1 million, up 25% year over year.
Region wise, North America, Europe, Asia and others and Latin America contributed 57%, 27%, 12% and 4% to first-quarter revenues, respectively. Revenues from North America, Europe, Asia and others and Latin America increased 43%, 43%, 30% and 14% year over year, respectively
Key Metrics in Q1
Collections were $351.1 million, up 41% year over year. Creative Subscriptions (76.3% of collections) increased 28% year over year to $268.1 million. Business Solutions (23.7% of collections) surged 107% to $83.1 million.
The company witnessed better-than-expected conversion and retention in user cohorts. Wix noted that net premium subscriptions in the reported quarter, increased 50% year over year.
Wix added more than 7.5 million new registered users during the reported quarter. Registered users as of Mar 31, 2021 were 204 million up 18.6% year over year.
Non-GAAP gross margin contracted 900 basis points (bps) to 63%, due to Business Solutions’ revenues constituting increasing portion of total revenues.
Creative Subscriptions non-GAAP gross margin contracted 400 bps on a year-over-year basis to 77%, due to investment in expansion of Customer Care organization. Business Solutions non-GAAP gross margin shrunk 900 bps to 24% in the reported quarter, primarily due to uptick in the company’s payments and shipping solutions, which carry lower overall gross margin.
Non-GAAP research and development expenses, as a percentage of collections, contracted 200 bps year over year to 20%. Non-GAAP selling and marketing expenses, as a percentage of collections, expanded 200 bps year over year to 39%.
Wix reported non-GAAP operating loss of $36.3 million compared with non-GAAP operating loss of $4.2 million in the year-ago quarter.
Balance Sheet & Cash Flow
As of Mar 31, 2021, Wix had $1.6 billion in cash compared with $1.6 billion as of Dec 31, 2020. As of Mar 31, 2021, long-term debt was reported at $919 million compared with $834 million as of Dec 31, 2020.
Cash flow from operations amounted to $18.5 million during the first quarter compared with $28.6 million in the previous quarter.
Free cash flow was $14.6 million compared with $23.2 million in the prior quarter.
For second-quarter 2021, Collections are projected to be $342-$352 million, indicating an improvement of 29-32% from the year-ago quarter’s reported figure.
Moreover, revenues are expected between $308 million and $312 million, suggesting growth of 30-32% from the prior-year quarter’s reported figure.
Management also raised full-year 2021 outlook. Collections are now projected in the range of $1.44-$1.46 billion, indicating an improvement of 31-32% from the prior-year quarter’s levels. Earlier, the company guided Collections in the range of $1.435-$1.455 billion.
Moreover, revenues are now expected between $1.28 billion and $1.29 billion, indicating growth of 29-30% from the prior-year quarter’s reported figure. Earlier, the company guided revenues in the range of $1.272-$1.286 billion
Notably, the company now anticipates free cash flow in the range of $62-$72 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month. The consensus estimate has shifted 7.95% due to these changes.
At this time, Wix.com has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
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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