Hi,
I wrote this post for the Fool’s WIX premium boards and thought I would post for the readers here on Saul’s board as well…
Tomorrow morning before the market opens, WIX is scheduled to announce their Q4 and full year 2018 earnings results. In anticipation of this event, I thought I would provide a deeper look at the company and some key metrics, so that we can put tomorrow’s results in the context of what has transpired previously.
Background:
Much like its bigger competitor, Shopify ($20B market cap vs. $6B for Wix), WIX was founded by happenstance when its founders were attempting to build a website for another business they were launching and found the process so cumbersome they decided to solve for it. Here is how the company’s website describes those early days:
Wix was established in 2006 by Avishai Abrahami, Nadav Abrahami, and Giora (Gig) Kaplan. While constructing a website to be the basis of another start-up idea, the Abrahami brothers and close friend Kaplan quickly discovered that creating their own website was difficult, frustrating and very costly. It was this experience that led them to build a platform that empowered anyone to create their own website with no coding or design skills needed - for free.
In 2006, Wix was born, forever changing the way people create their web presence. Today, with over 120 million users across 190 countries, anyone can create their own stunning website - no creative limits, no coding – just complete freedom to express themselves and manage their entire business online.
After almost a decade of growth, Wix now offers a drag and drop website builder with HTML5 capabilities, 100s of designer-made templates, top grade hosting, innovative apps and tons of features for free. Additionally, we offer valuable premium services, though our business model still allows us to provide complete websites to everyone for free!
Wix continuously pursues ways to provide its current and future users with the finest technology, support, and unique solutions to create and manage an incredible online presence.
https://support.wix.com/en/article/the-history-of-wix
Purpose:
While Shopify boasts of the celebrities (like Kylie & Kendall Jenner, Drake, Adele & Lady Gaga https://www.smartrmail.com/blog/12-celebrities-with-great-sh…) that build websites on their platform, WIX holds down the corner of the web for “the people.” Here is their purpose statement:
Wix.com is a leading cloud-based development platform with millions of users worldwide. We make it easy for everyone to create a beautiful, professional web presence.
Promote your business, showcase your art, set up an online shop or just test out new ideas. The Wix website builder has everything you need to create a fully personalized, high-quality free website.
Listen to Cramer talking to Abrahami about how WIX delivers for small business owners and “empowers the little guy:”
https://www.cnbc.com/video/2018/12/12/wix-com-ceo-new-ascend…
So if Shopify is the premium web platform service, think of WIX as the low cost alternative.
Metrics
Ok let’s take look at some key business indicators related to WIX’s customer base:
*# of Users (thousands):*
**2017: 2018:**
**Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4**
103 109 114 119 125 131 136 -
%Y/Y: 25% 24% 23% 22% 21% 20% 20% -
%Q/Q: 6% 5% 5% 5% 5% 5% 4% -
*Premium Subscriptions:*
2,6 2,9 3,1 3,2 3,5 3,6 3,8 -
%Y/Y: 38% 35% 33% 31% 29% 28% 26% -
%Q/Q: 8% 7% 7% 6% 7% 6% 5% -
*Revenue:*
93 104 111 118 138 146 156 -
%Y/Y: 50% 51% 47% 41% 49% 41% 40% -
%Q/Q: 10% 12% 7% 7% 16% 6% 6% -
*Collections:*
115 117 120 132 160 160 162 -
%Y/Y: 51% 44% 38% 35% 39% 37% 36% -
%Q/Q: 17% 2% 3% 10% 21% 0% 2% -
A few other notable data points from Wix's 3Q 2018 earnings report:
```
* Non-GAAP operating income of $16.3 million, an all-time high and up 376% y/y;
* Record operating cash flow of $27.6 million;
* Free cash flow of $23.7 million, up 25% y/y
* Accelerating monetization drove results as average revenue per subscription increased 11% y/y and conversion increased year over year;
* Board of Directors authorizes $100 million in share repurchases;
* Gross margin on a GAAP basis in the third quarter of 2018 was 79%, compared to 83% for the third quarter of 2017;
* Non-GAAP gross margin in the third quarter of 2018,calculated as non-GAAP gross profit as a percent of revenue, was 80%, compared to 84% for the third quarter of 2017:
* Under ASC 605, third quarter 2018 GAAP gross margin as a percent of revenue would have also been 79%.
Source: [https://investors.wix.com/press-releases](https://investors.wix.com/press-releases)
Finally, here is WIX's forecast for Q4 and end of FY18:
Q4 2018 Outlook Y/Y growth
* Revenue $161- $162 million 36% – 37%
* Collections $176 - $178 million 33% – 35%
*Analyst estimates:*
* The consensus EPS Estimate is $0.31 (+93.8% Y/Y) and the consensus Revenue Estimate is $162.01M (+36.7% Y/Y).
* Over the last 2 years, WIX has beaten EPS estimates 50% of the time and has beaten revenue estimates 100% of the time.
```
I hope this is helpful in assessing WIX's performance when they report tomorrow morning.
I'll report back after reading results and listening to conference call.
Best, Swift...
Long SHOP
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