My Take on WIX

Here is a summary of my notes on WIX I’ll start with Bear’s introduction of Wix to the board earlier this month (as modified by me in my notes):

Bear - I’d like to introduce the newest company in my portfolio, Wix. They first piqued my interest when they grew revenue 48% for the Dec quarter…they simply hadn’t been on my radar before, even though I was a user. I actually used Wix to create a website for my fantasy football league a couple years ago. Wish I’d been paying attention to the company then!..Wix offers hosted websites for free and also sells premium sites They have 100 million users and 2.5 million are paying (premium). Subscriptions can run for 1 year or multiple years.

Saul – Up until about three years ago, Wix used to be a simple website set-up and hosting company, but in the last three years they’ve become a (low-end) online website and business development site (a low-end Shopify). They also released ADI, or Artificial Design Intelligence, which can create and set up a website in minutes. Here’s what Wix said about it:

We Launched Wix ADI: Wix unveiled the first-ever AI solution for design and creation for desktop and mobile websites worldwide. It was designed to eliminate the most significant challenges of building websites – time, design and content creation. It instantly produces tailored websites by learning about the user through a few simple questions, then selects content to create a unique design. From billions of high-quality combinations and possibilities, Wix ADI selects the perfect combination for each users’ need.

Bear again - The History Wix is based in Israel. Its IPO in Nov 2013 was at $16.50. After a typical post-IPO spike to $30 or so, it retracted, and then languished until early 2016. Since then it has shot up and is now at $75/share. Their market cap is currently about $3.3 billion, so their $290 million of revenue in 2016 puts the P/S ratio at about 11.5…I never said they were cheap… They also made a tiny acquisition in March – they bought Deviant Art for $36 million in cash. This altered their expectations for this year slightly, but I will mostly ignore it since it’s so little. I’ll give the numbers they provided a few weeks earlier when they reported their 2016 results.

Saul - Bear called this a tiny acquisition but Deviant Art has 40 million registered members world-wide. That could potentially make a very significant addition to Wix)

Bear again - How do they make money? Like Shopify, they have a lot of different ways they can make money.

  1. They put ads on web sites of free-site users (to attract more users) – they have over 100 million users most of whom use the site for free.
  2. Get users to sign up for premium – they’ve been getting 50 or 60 thousand to sign up each month. But overall they’ve got over 100 million users and growing! 50 or 60 thousand users is just 5 or 6 hundredths of 1 percent of 100 million. That’s all they need to sign up for premium each month to keep pace. And the average revenue per new subscriber is rising - up from $132/yr to $153/yr in 2016!
  3. Get new premium users to upgrade, by adding more features.(#1 and especially #2 and #3 act combine to create the massive revenue increase they’re expecting in 2017: 41%! However, I also believe #4 is quite possible and would result in WAY more revenue in the long run…)
  4. Find new ways to monetize, like Shopify’s merchant solutions, payments, etc. As far as I can tell they haven’t even started to do this, but I would imagine it is coming. In fact, on the CC, there were several questions about this. To one of these, the CEO answered: “…I think that the question isn’t just what else can we do? It’s what can’t we do – because there are so many opportunities.”

They have an ecommerce solution already, so there should be other ways to monetize that than just subscription revenue. They’re also clearly excited about the AI thing.

Performance

Revenue:


2015:  45  49  54  57 = 205
2016:  62  69  76  84 = 291 

Saul - Note that they were up 42% for the year, but it’s accelerating. Here’s the percent increase in revenue by quarter:


**2016:  37.7  40.8   40.7  47.4  =  42.0** 

Bear again - 2016 totals

Collections: 342M (up 42%)
Revenue: 290M (up 43%)
FCF: 36M (up 149%)

Levels at end of 2016:

Av Collection per New Sub: $153/yr (up 16%)
Registered Users: - 97M (up 26%)
Premium Subs: - 2.5M (up 39%)

A few other things…

Cash on hand was 171M, so I guess now it is 135M after the aquisition
New deferred revenue during 2016: 52M (2015: 38M) – this is awesome
Stock Based Comp in 2016: 28M (2015: 19M) – about avg for a growth tech company, much lower than some

Guidance

(midpoints…again before the acquisition)
2017 Collections: 455M (up 33%)
2017 Revenue: 410M (up 41%)
2017 FCF: 71.5M (up 98%)

… I have to imagine they plan to beat, so 45-50% revenue growth is more likely. With all the opportunity, I wouldn’t be surprised to see the rate increase in the next several quarters. But the point is, this kind of growth can make their lofty valuation look not so crazy, rather quickly.

Summing Up

100M users is an incredible network. 40%+ revenue growth for 2017 is an impressive guide, but I think it’s easily beatable. That FCF growth is astounding. Also, though it is speculation at this point: I think they have a huge open road ahead when it comes to other ways to monetize. With 100M users, 2.5M who are already paying for subscriptions, they don’t need to sell very much to very many for it to have a tremendous impact.

Comparisons to Shopify can’t help but come to mind. Wix doesn’t have nearly the force multiplier (yet) as they don’t yet do much (any?) monetization other than selling ads and subscriptions. However, they have 2.5M subscribers compared to Shopify’s 400k merchants. So…that’s nice.
I bought some shares yesterday.
Bear

Press release - Dec quarter results

***Yearly
Collections growth accelerated to up 42%,
Revenue up 43%

***Quarterly
Collections growth accelerated to up 46%
Revenue growth accelerated to up 48%
Free Cash Flow was a record $18.7 million, up 122%
Adj earnings – 6 cents (first time profitable).
Premium Subs up 39% Y/Y to 2.5 million

… In the last twelve months, we delivered innovative products such as Wix ADI, and the mobile Wix App, as well as growth in our brand and successful marketing execution, highlighted by our Super Bowl LI campaign….The re-acceleration in top line growth this quarter was exceptional – a direct result of the improvement in conversion of registered users to premium subscriptions and higher collections per new subscriptions due to record adoption of our vertical solutions. The stronger than expected non-GAAP profitability highlights the scalability of our low-cost, fixed-cost model. We expect to deliver continued top line growth and higher free cash flow in 2017 by further leveraging our investments in technology and marketing.

Quarter Results
Revenue up 48% to $84.2 million from $56.8 million
Collections up 46% to $97.7 million from $66.9 million
Adj gross profit was 87% of collections up from 85% a year ago
Adj oper income was $3.9 million up from a loss of $4.4 million
Adj net income was $2.7 million, up from a loss of $5.4 million
Adj earnings per share was 6 cents, up from (-13) cents
Adjusted EBITDA was $17.9 million up from $7.0 million
Free cash flow was $18.7 million up from $8.4 million
Added 171,000 net premium subscriptions to reach 2.5 million, up 39% from a year ago.
Added 5.0 million registered users to reach 97.0 million, up 27% from a year ago.

2016 Year Results
Revenue up 43% to $290.1 million from $203.5 million
Collections up 42% to $342.1 million from $241.7 million
Adj operating income was ($12.5) million up from a loss of ($29.3) million
Adj earnings per share was (-37) cents improved from (-71) cents)
Adjusted EBITDA was $42.6 million up from $14.7 million
Free cash flow was $36.2 million up 150% from $14.5 million
Cash was $93 million up from $39 million

Recent Business Highlights
Acquired flok, a customer loyalty and engagement platform to enhance CRM technology.
Announced Integration with Square: Wix announced a partnership with Square to give Wix merchants and entrepreneurs in North America a new way to transact. The Square integration improves payment processing and allows both online and in-person payments via a mobile device based POS. In addition, a user can create a stunning Wix Store and, with a few clicks, manage its store and its catalog on the Wix App with the ability to accept payments online or in-person with Square.
Wix launched its Super Bowl campaign in mid-January on YouTube and Facebook Live, the first company to launch a Super Bowl campaign using these live video platforms.
Wix Mobile Growth: Wix users have created over 22 million mobile sites to date, making Wix one of the largest mobile site development platforms globally.
Global E-commerce Platform: E-commerce subscriptions reached 332,000 during the quarter. Growth of e-commerce and transaction-enabled websites continues to exceed overall subscriptions growth, highlighting Wix’s broad reach with small businesses.
Strong Platform Engagement: Continued engagement with the Wix ecosystem is illustrated by 480 million user contacts saved onto the Wix platform by users. Leveraging Wix’s MyAccount CRM system, business owners track customer activity data, manage relationships and communicate using Wix ShoutOut, Wix’s email marketing solution.

Guidance
For the Mar quarter
Revenue of $89 to $90 million (up 45% to 46%)
Collections of $107 to $109 million (up 41% to 44%)

For the full year 2017:
Revenue of $409 to $411 million (up 41% to 42%)
Collections of $452 to $458 million (up 32% to 34%)
Free Cash Flow of $71 to $72 million (up 96% to 100%)

Definitions:
Collections is the total cash collected by us from our customers in a given period and is calculated by adding the change in deferred revenues to revenues for the same period.

We adjust collections and revenue to measure them on a constant currency basis by assuming the same exchange rates as the prior period applied to the reported figures in the current period.

Adj earnings represents net GAAP earnings as adjusted for share-based compensation expense, amortization, and acquisition-related costs.

From Conference Call
Why Cash is more important than earnings: For example if in a certain quarter we were able to increase our collection by $10 million, it drives more marketing expense in the amount of $4 to $5 million. Now we recognize the entire cost as expense in the quarter, but out of the $10 million that we collected, we recognize only $2.5 million as revenue; you actually see increased cash but actually lower operating profit because of the model. This is why we don’t provide guidance for operating income: because it’s not the best measurement for our model.

How they are getting leverage out of decreased percentages of marketing and R&D expenses: We do anticipate that in 2017 we’re going to see more leverage coming from marketing, meaning it will go down to approximately 40% to 41% of collections from the 44% we saw in 2016. Year after year we see more and more leverage coming in marketing, simply because of the fact that all those historical cohorts keep on generating more and more revenue for us. The marketing is just to acquire the new cohorts, so obviously we see a very nice leverage in terms of lowered percentage of expense. I think that it will continue in 2018 and 2019, at least.

The same goes for the R&D. We’ve seen that the R&D has gone down again by two points from 2016 to the guidance that we are providing in 2017. Also from 2015 to 2016 it was down by two points. I think that it will continue in the next two to three years.

A new product they are anticipating in the summer: We believe that the new product we are about to release will be spring to summer this year. And we are super proud of what it is. I think it’s a big surprise and as it’s being tested here at Wix I think most of the people were shocked that this actually can work and it does what it does. But we’re not going to give more details at this stage. It’s a new product and is going to be slowly rolled out during the year.

Shareholder Update Letter (excellent!)
Our quarterly performance was highlighted by accelerating collections growth to 46% and revenue growth to 48%, record conversion of registered users to premium subs, record collections per new annual subs in the US, and greater adoption of our vertical solutions.
Net premium subs up by 700,000 for the year to 2.5 million, up 39% from a year ago
Registered users up 20 million to 97.4 million
Free cash flow up 149% to $36.2 million
Conversion of new registered users to paid subs during the quarter improved once again and reached a new all-time high. The continued improvement in conversion is a result of ongoing enhancements to Wix ADI, our editor platform, and the improved functionality of our Wix OS

Collections per new annual sub in the US increased to $153 from $131 a year ago. This was mainly due to a higher mix of subs for higher-tiered packages and those with a vertical application, as well as increasing App Market purchases.

We added more new vertical application subs than in any prior quarter: New subs with a vertical app attached, in particular Wix Bookings and Wix Stores, continues to increase, highlighted by 15% of our new subs being e-commerce subs. Growth of e-commerce and other transaction-enabled subs continues to exceed our overall sub growth, underscoring our broad reach with all many types of small businesses. We ended the year with 332,000 e-commerce sub.

We also continue to see increased activity in our App Market with app purchases in the quarter up 51% year over year. This demonstrates the tremendous value the new products and services we introduced earlier in 2016 present to small businesses and our ability to build and offer businesses increasing functionality.

The $10 million sequential increase in collections during Q4 was our highest such increase ever, and we increased at nearly twice the rate as last quarter ($5.8 million) and this quarter last year ($5.3 million). Collections for the full year 2016 were $342 million, up 42%. This growth was well above our original expectations for the year.

Adj S&M expense during the quarter was 40% of collections, down from 44% of collections last year. By optimizing our channel and geographic mix, we are able to continue growing our marketing investment year over year and remain within our TROI (Time to Return on Investment) range of 7-9 months.

Our cohorts continue to demonstrate negative churn. We added 171,000 premium subs in the quarter, compared to 125,000 last year, and total subs were up 39% to 2.5 million. Conversion of new and existing registered users into premium subs reached an all-time high in the quarter due to Wix ADI, to our vertical solutions, and to enhancements made to our core editor.

63% of our new subs came from existing users. They were users who had already registered with Wix, were using our product, and required no significant additional marketing dollars to convert. Our opportunity to convert a large cohort of existing users is unique to our freemium business model amongst our peers.

Wix Video: Wix Video enables users to showcase, promote, and sell videos online without a commission. The product was developed with filmmakers, educators, fitness instructors, and musicians in mind…

Outlook
In 2017, initiatives in the following areas will enable us to deliver our growth objectives:

Deeper product capabilities: We will invest in product development to offer deeper functionality across our existing and new vertical solutions. We will also invest in horizontal services that enable our products to integrate more seamlessly. These efforts further position us as a platform on which users can manage and grow their business and not just a build a website.

Mobile capabilities: We can drive even stronger user engagement on mobile. We will invest in providing a more feature rich mobile website experience and further enhance the Wix App with more features and functionality.

Community outreach: We will empower and grow our incredible community of passionate Wix users to growing our brand globally in local markets.

For 2017, we expect the following:
Revenue of $410 million, up 41.5%
Collections of $455 million, up 33%
Free Cash Flow of $71.5 million.
Free Cash Flow as a percent of collections of 16% in 2017 up from 11% in 2016.
Adj gross margin of 87% of collections
Adj S&M expense of 40.5% of collections
Total adj operating expenses of 70.5% of collections
Fully diluted share count will be roughly 57.5 million shares outstanding

For the first quarter of 2017
Revenue of $89.5 million, up 45.5%
Collections of $108 million, up 42.5%
S&M as a percent of collections at 46%, down from 52% in the quarter. It will be highest in this quarter, as it has been historically, due to branding initiatives, including our Super Bowl campaign.

Saul– There was a nice article on Seeking Alpha in March by Harlem and Stone. https://seekingalpha.com/article/4053734-night-found-wealth-…

Saul - Note to myself
It’s important to remember that the vast majority of their 100 million free users are just free “vanity” websites, and that most of these users have no need for, and will never convert to, paid premium status. They might be the website for a small-time actor or musician for instance, so that someone can look him up on the web and see a list of his past performances, etc. Or an author, where he or she can list her books. These websites are not a business. They don’t sell anything. (The websites are an asset to Wix nonetheless as they each have a couple of Wix ads on them: This website was created using Wix, etc.)
Also you have to think in cohorts. Cohorts of free users that signed up 10 years ago are undoubtedly content with what they have and are unlikely to upgrade to premium in any significant numbers.
That is not to say that WIX won’t grow at a good pace. It’s just to say don’t get too excited about those 100 million free accounts.

Conclusion: It seems to me that this is no longer your grandpa’s web hosting company, but is super-modernizing and breaking out. This is balanced on the negative side by the fact that their acquisition of free accounts has leveled off at 5 million per quarter for three or four quarters now, so growth has to come from better conversion to paid premium accounts and at higher prices with more features attached. They seem to be doing that as revenue growth has not only been maintained but is accelerating. I took a small position a couple of weeks ago.

Saul

For Knowledgebase for this board,
please go to Post #17774, 17775 and 17776.
We had to post it in three parts this time.

A link to the Knowledgebase is also at the top of the Announcements column
that is on the right side of every page on this board

29 Likes

And they had a new press release today:

Launch of Wix Video gives users unparalleled video capabilities. Industry’s first solution to curate, control and monetize video, designed to provide an industry-leading solution for showcasing, sharing and selling videos online.

The all-in-one tool is the first to provide users with the ability to centralize their video library and combine their videos into a single playlist regardless of the host. Wix Video pairs an advanced video streaming and hosting service with third party services so users no longer have to choose between YouTube, Vimeo or Facebook to publish their video content. Instead, users can seamlessly integrate their videos into a single, complete online portfolio.

Wix Video is specifically designed to meet the needs of creators, artists, businesses and brands looking to incorporate video into their websites to promote their services, grow their audience, engage with their customers or sell online:

For video creators, it provides complete, customizable, control over their content and how it looks on their website, along with a wide variety of ways to monetize content while preserving its integrity.
For businesses using video to showcase their products and share the story behind their brands, Wix Video ensures that demos, instructions and customer testimonials look amazing from any size screen.
For instructors, educators and small businesses that offer lessons, tutorials or online classes, Wix Video provides the ability to create multiple channels and easily update them on their Wix website, sell videos and rentals and offer monthly subscriptions - all commission free.

Wix Video follows Wix’s successful freemium model where some advanced features are offered as part of a premium offering.

Video is a powerful medium, and we believe video creators should be the ones with the power, having complete control over how their content is displayed and how it is monetized. Wix Video was developed to help our users get the most out of video by opening up exciting new options for display and distribution. Importantly, we decided that while other platforms may take portions of video revenues from users, Wix Video will take no commission and was launched, as with all of our products, to further increase Wix users’ successes.

Wix Video’s state-of-the-art features and functionality include:
Industry-Leading Curation. Wix hosted and third party videos can be combined into a single playlist.
Complete Control. Wix Video is based on streaming that ensures both high quality streaming and smooth playback, and users have full control of their layout and design.
Revenue Generation. Wix allows users to keep all the revenue they generate and the ability to deliver videos to their customers via subscriptions, individual purchases or a temporary pass for 24, 48 or 72 hours.

3 Likes

I can’t help but smile. If anyone wants to undertake a compare/contrast of two different investing philosophies, a head-to-head comparison of ICLR to WIX fits the bill. ICLR has been in business much longer, and sports a larger market cap than WIX (4.34B vs 3.3B), but they’re both midcap enterprises. What is most striking is that ICLR is profitable and WIX is most definitely not.

Here are their respective financial metrics:

http://www.nasdaq.com/symbol/iclr/financials?query=income-st…

http://www.nasdaq.com/symbol/wix/financials?query=income-sta…

It was a bit of a mental workout for me to switch from evaluating a conventional business such as ICLR to grapple with WIX’s financials. Standard financial terms remain the same, but with far different implications. I had to read WIX’s 2016 Annual Report in its entirety to understand WIX’s business plan. It was an interesting read.

http://tinyurl.com/jwo8lsr

Where to begin? Let’s examine how WIX makes/loses money. From the AR:

“A substantial source of our cash provided by operating activities is our cash collections from our premium subscriptions, a portion of which is reflected in our deferred revenues, which is included on our consolidated balance sheet as a liability. Deferred revenues consist of the unrecognized portion of upfront payments from our premium subscriptions as well as domain name registration sales. We assess our liquidity, in part, through an analysis of the anticipated recognition of deferred revenues into revenues together with our other sources of liquidity. As of December 31, 2016, we had a working capital of ($8.9) million [emphasis added]…To the extent that existing cash, cash from operations and net proceeds from the IPO are insufficient to fund our future activities, we may need to raise additional funding through debt and equity financing. Additional funds may not be available on favorable terms or at all.”

How does WIX make/lose money? It sells subscriptions to use its services. Monthly, annual or longer subscriptions constitute the company’s “collections.” The subscription fees are paid up front, and are recognized as revenue on the top line for the duration period. A monthly subscription expires at the end of the month and must be renewed if there is to be future growth. The annual subscriptions are the bread and butter of the business. Revenues are recognized month-by-month and the balance constitutes deferred revenues. Again, at the end of a subscription period there are no more revenues (deferred or otherwise) unless the subscription is renewed. At present, total liabilities exceed total assets by $8.9M. It didn’t begin that way. In 2013 assets were twice as great as liabilities (even though the company did not make a profit). Each subsequent year, the assets grew, but the liabilities grew faster. By the end of 2016, the liabilities exceeded the assets. Net income fell from -$28.7M to -$46.9M as subscriptions grew. (Note, it’s hard to summarize complex financial statements in a few short words. Best to refer to the financial statement links posted above.

What’s happening here is that while servicing the subscribers isn’t all that expensive, WIX has to spend ever greater sums to keep their existing subscribers and enroll ever more new subscribers. WIX is literally paying for its revenues, and the bigger the subscription base, the more WIX pays.

Will WIX ever be profitable? How lucky do you feel? Will the company ever be able to retain its subscribers and grow its base without spending ever greater sums? I direct the reader to pages 54 through 56 where WIX examines the challenge. If you’re an optimist you might like what you read/see. If you’re skeptical? Not so much. Me? I’m skeptical/cynical/jaded after 40+ years of investing. I’ve no faith that this scheme of growing your business by incurring ever greater acquisition costs is a solid plan.

I’ll stick with companies like ICLR. ICLR makes money by providing necessary services. Its total assets keep outgrowing its liabilities, such that the company actually retains earnings! At this point, ICLR retains more than $500K in earnings/quarter. That’s real, unencumbered hard cash. Money available to buy back shares and increase shareholder value, and that’s exactly what ICLR does…

Meanwhile WIX shareholders eat WIX’s losses.

WIX holds no interest for me as a value investor. If one is a momo investor, then there may be money to be made. Heck, the share price really rose in recent days (Note, short interest isn’t all that great. I believe traders were acting on takeover rumors). A wise TRADER (note: NOT investor) will have an exit strategy in mind before buying shares.

23 Likes

ICLR has been in business much longer, and sports a larger market cap than WIX (4.34B vs 3.3B), but they’re both midcap enterprises.

fwiw, it looks the computation above of 3.3b didn’t include the anti-dilutive shares - if you use current price of $81.50 and company supplied 2017 share count of 57.5m listed below from the write-up, WIX’s cap is actually at ~$4.7b, not 3.3b. Course, some of that was due to the recent price range, but what’s a billion+ in market value among friends? Plus, that 57.5m share count is likely an average - the actual count is more than likely a good bit higher.

For 2017, we expect the following:
Revenue of $410 million, up 41.5%
Collections of $455 million, up 33%
Free Cash Flow of $71.5 million.
Free Cash Flow as a percent of collections of 16% in 2017 up from 11% in 2016.
Adj gross margin of 87% of collections
Adj S&M expense of 40.5% of collections
Total adj operating expenses of 70.5% of collections
Fully diluted share count will be roughly 57.5 million shares outstanding

P.S. Just an old-fashioned opinion, if you want to take them at their word that FCF is this and that number, maybe you ought to include dilution since share comp makes up a huge part of that cash flow (though as noted getting paid up front is very nice!). Course, given this top line and this market’s emphasis exclusively on top line growth understandable), maybe it doesn’t matter - I’d take up 80% ytd anyday myself. Course, if you buy now, you are assuming it goes even higher. Another 20% rise takes it up nearly another $1b in market value.

P.P.S If WIX is smart, they will do a secondary offering and cash in…

3 Likes

P.P.P.S

WIX holds no interest for me as a value investor. If one is a momo investor, then there may be money to be made. Heck, the share price really rose in recent days (Note, short interest isn’t all that great. I believe traders were acting on takeover rumors). A wise TRADER (note: NOT investor) will have an exit strategy in mind before buying shares.

Saul emphasizes top line growth - he makes no secret of it - I find it scary and refreshing at the same time, and I thoroughly enjoy the show. Just make money!

1 Like

Meanwhile WIX shareholders eat WIX’s losses.

What an odd thing to say:
ICLR’s stockholders are up 14% from a year ago, WIX shareholders are up 230% from a year ago!

That’s not a misprint, by the way. Wix’s stock price is 330% of the price it was a year ago.

1 Like

Saul,

Fundamentally, would you prefer SHOP or WIX?

I have noticed the WIX commercials and they are stuck in my head.

If WIX’s business momentum is starting to steamroll, this is the hockey stick curve just starting.

Does WIX enable businesses to grow as well like SHOP does?

What WIX offers sounds more applicable to my multiple informational websites that would then link to my primary website, as additional places to place very specific, micro-focus blogs.

Is it a platform that one could competitively market and run a real business?

Thanks.

Tinker

2 Likes

Seeking Alpha Short Side Article:

https://seekingalpha.com/article/4063366-forensic-analysis-w…

Just noise or not?

2 Likes

Meanwhile WIX shareholders eat WIX’s losses…What an odd thing to say - Saul

Not an odd thing to say at all. Again, it’s the difference between value investing and momo trading. Yeppers, WIX shares have risen greatly in recent months/days. Underneath that share price? Increasing losses and liabilities. Let’s not pretend that WIX represents a good long-term, profitable enterprise. It isn’t. Never has been. Remember PFIE?

Listen, if folks want to trade based on share price fluctuations, bless 'em. But let’s not confuse long-term value investing with short-term trading. Naive folks may think they’re buying into a solid growth company when, in fact, they’re buying a flash in the pan. Frankly, if folks choose to “play the market” I have no problem with that. I, personally, don’t roll that way. But savvy traders can make good money that way. Innocents, newbies and the gullible are the ones most vulnerable if they don’t understand the game (traders make money on the basis of “Greater Fools” principles).

And, by the way, this value investor enjoyed a 48+% increase in his portfolio in 2016…by focusing on fundamentals. Like you, I’ve been living off the proceeds of my portfolio for almost 20 years. Different strokes and all that, but I truly wish the newbies understood the true benefits/risks.

8 Likes

Hi Tinker,

You have several questions there:

Fundamentally I guess I prefer Shopify…because I know it better, because it’s growing very fast, etc. My position in Shopify is much larger than my position in Wix.

Yes, this could be the start of a hockey stick rise for Wix as they just had their first profit of 6 cents for a quarter, margins are all improving, free cash flow is rising rapidly, etc.

As far as whether they will help you run a business what they said in their shareholder letter is

“These efforts further position us as a platform on which users can manage and grow their business and not just a build a website.”

"Wix Bookings and Wix Stores, continues to increase, highlighted by 15% of our new subs being e-commerce subs. Growth of e-commerce and other transaction-enabled subs continues to exceed our overall sub growth, underscoring our broad reach with many types of small businesses. We ended the year with 332,000 e-commerce subscriptions.".

However, whether it will work for YOUR business, I don’t know. You’d have to look at their website and evaluate. But I know that you know that.

I hope this helps.

3 Likes

Seeking Alpha Short Side Article…Just noise or not?

Considering that the price rose 12% two days after the article came out, what do you think?

There’s a very professional rebuttal here: http://www.sleeperthoughts.com/single-post/2017/04/20/Spruce…

Saul

1 Like

if you use current price of $81.50 and company supplied 2017 share count of 57.5m listed below from the write-up, WIX’s cap is actually at ~$4.7b, not 3.3b. Course, some of that was due to the recent price range, but what’s a billion+ in market value among friends? Plus, that 57.5m share count is likely an average - the actual count is more than likely a good bit higher. - OneEyeBirdRtns

An astute observation! I only referred to 2016 data from the annual report. Clearly, lotsa WIX employees are exercising their options! The “net flows from financing” line item represents shares bought at option exercise prices. Those who actually read the AR understand that employees are routinely granted stock options. The option exercise price is generally the stock price on the day of the options grant. For a number of years the stock prices fluctuated between $20-$30 dollars. Lots of options were issued with exercise prices at $20-$30/share. Fast forward: The share price is now $80+. You’d have to be a friggin’ idiot not to exercise those options. Net result? Lots of new shares now register on the balance sheet. If the option grantees are sane, they’ll exercise their options at $20-$30 and then sell those shares. WIX enjoyed a $21M cash inflow from optioned stock purchases. What will the naive investor experience when those same employees sell their shares to harvest profits?

2 Likes

Meanwhile WIX shareholders eat WIX’s losses

Up 298 % since inception

Up 236 % over the last 12 months

hmm

What losses ?

What losses? - gettinsumcoffeee

Let’s compare notes a year from today. I marked this post for “reply later”.

1 Like

Wow. It’s really that important ?

Wow. It’s really that important? - gettinsumcoffeee

Not for me. I’m not “investing” in WIX. You, on the other hand, may wish to take a moment or two to contemplate your “investment”.

1 Like

Clearly, lotsa WIX employees are exercising their options!

if it matters, i could be wrong, but think the explanation is actually a lot more prosaic than that - WIX reports negative earnings on a GAAP basis and thus dilution from RSUs and options are automatically excluded (cause they would make the loss look smaller on a per share basis).

In the 20F:

Basic and diluted net loss per share:
Basic and diluted net loss per share is computed based on the weighted-average number of shares of ordinary shares outstanding during each year.
Diluted loss per share is computed based on the weighted average number of ordinary shares outstanding during the period, plus dilutive potential
shares considered outstanding during the period, in accordance with ASC 260-10. Basic and diluted net loss per share of ordinary shares was the same
for each period presented as the inclusion of all potential ordinary shares outstanding was anti-dilutive.
For the years ended December 31, 2014, 2015 and 2016, all outstanding options and RSU’s have been excluded from the calculation of the diluted net
loss per share since their effect was anti-dilutive and the total options and RSU’s that have been excluded from the calculations was 11,267,917,
11,470,910 and 9,773,837, respectively.

So 9.773m were excluded.

If it matters, I don’t know where the company supplied 57.5m forecasted share count is coming from, and I don’t know if it too excludes non-dilutive options and rsu’s - this is not a trivial issue but of course in this market nobody cares but if I owned this I would find out. But I don’t own it.

Have a nice day.

Frank

Not for me. I’m not “investing” in WIX. You, on the other hand, may wish to take a moment or two to contemplate your “investment”.

if it matters, a very, very small opinion, esp. since I participate on other boards - not just Fool, but elsewhere - where people tell other people their ideas are written up poorly or they stink or they don’t work or that bad ill will come to them and sometimes it is meant to help but other times it comes across and judgmental and mean-spirited.

First, understand nobody is paying for Saul’s board
Second, understand that this is Saul’s board
Third, as Saul points out, there is no free lunch - people do what they do, and anybody who follows Saul’s footsteps takes responsibility for that
Lastly, a good lesson for everybody is not to wish ill for other people (I’m assuming most people don’t short on these boards).

Now, stating facts about an investment is one thing, but passing judgement on what other people do - that’s not productive as an investor or as a person, and you never know - though this doesn’t mean we all have to agree on ideas. One thing I never do is just pass by - if you don’t agree, you can take that extra step and say why, but if you can’t do it politely then it will just get you irrigated. So I’m trying harder and harder now to just not say anything. It might be good advice - up to you - go putnid’s portfolio!!

I wouldn’t invest in WIX at this point but don’t begrudge somebody’s else success if they do, having made a gazillion different mistakes myself.

just 2c

5 Likes

Putnid, calling Wix investors simple, “naive” traders isn’t particularly helpful. We get that you don’t like the stock. Please stick to reasons and facts instead of implying that your opinion is the moral high ground and the rest of us are irresponsible, cavalier, and stupid. Speaking of, I think some of your conclusions are incorrect.

It didn’t begin that way. In 2013 assets were twice as great as liabilities (even though the company did not make a profit). Each subsequent year, the assets grew, but the liabilities grew faster. By the end of 2016, the liabilities exceeded the assets.

Why does that even matter to you? They could issue 4 times as much SBC and jack up their cash (asset) while increasing Equity instead of Liabilities. Would that make you feel better?

WIX is literally paying for its revenues, and the bigger the subscription base, the more WIX pays.

Percentage-wise, the opposite is happening. They’re literally spending less as a percentage of revenue each quarter.

What you are either missing or disregarding is the entire SaaS business model. Businesses spend a lot to get subscribers that will pay them each month in perpetuity. If we were to see growing attrition, it would be a problem. You seem to be assuming this will happen, but so far it hasn’t. In fact they have negative churn.

Bear

5 Likes