Wix – 2021 Q3 Earnings Results
On 11 November 2021, Wix released its earnings results for 2021 Q3. Collections growth (33%) and revenue growth (26%) exceeded the high end of the company’s expectations, as key growth drivers outperformed amidst an improving business environment. As a result, Wix has revised up its full year outlook for revenue and collections to reflect its confidence in the recent improvements.
During the quarter, Wix also spent $200 million to repurchase ~1.6% of its shares, at an average price of $223, due to “its extreme confidence in its business and its belief that its stock price was trading below what it believed to be its intrinsic valuation”.
Here are our key points from the earnings results and call!
Revenue grew 26% y/y to $321 million in 2021 Q3. This was above the high end of its guidance range of $311-$317 million, driven by outperformance in both Creative Subscriptions and Business Solutions.Creative Subscriptions revenue grew 19% y/y to $241 million. This revenue growth was ahead of expectations due to higher conversion of new users as well as improved average revenue per subscription, as Wix continued to drive value for users through product improvements and innovations.
Business Solutions revenue grew faster, at 55% y/y to $80 million. This growth outperformed expectations due to better than expected performance from business applications, primarily Google Workspace, and from Wix Payments.
Collections grew faster than revenue, at 33% y/y to $373 million in 2021 Q3, which were also well above the high end of its guidance range of $355-$365 million. This is due to both Creative Subscriptions and Business Solutions performing better than initially anticipated in early August as trends improved throughout the quarter, and also due to a new partnership that closed in Q3 that Wix originally predicted would close in Q4.Creative Subscriptions collections grew 28% y/y to $293 million. This collections growth was ahead of expectations due to the same reason as revenue growth, and it also benefited from slightly higher than expected B2B partnership collections.
Business Solutions collections grew faster, at 53% y/y to $81 million. This growth outperformed expectations due to the same reason for the outperformance on the revenue side.
On number of users, the total registered users as of end September 2021 was >215 million, a 2.5% increase q/q, with an increasing number of businesses relying on Wix as their full operating system.Wix is increasing monetization in its user cohorts as users purchase higher-priced packages, increasingly favoring commerce packages, and attach Business Solutions products and services at a higher rate, particularly Wix Payments. The combination of these factors are resulting in higher ACPS.
As of the end 2021 Q3, these user cohorts are estimated to generate ~$15.4 billion in collections over the next 10 years, an increase of 30% compared to a year ago, or an increase of ~3% compared to a quarter ago.
On the upmarket segment, Wix continues to expand to agencies and designers, with nearly 480 thousand users building for others on Wix today, a 92% increase y/y. These agencies or designers tend to build more than 1 website, so, by adding them at this quick rate, Wix is likely to see strong growth within the next couple of years.
Gross profit grew slower than revenue, at 14% y/y to $198 million in 2021 Q3, due to lower gross profit margins.
Non-GAAP gross margin was 63% in 2021 Q3, in line with 2021 Q1 and Q2, while down y/y from 70%. The overall gross margin continues to be impacted by Wix Payments and other Business Solutions products becoming a larger portion of its revenue, as those revenues have lower gross margins.Creative Subscriptions non-GAAP gross margin was 77%, a decline y/y from 80%, but in-line with 2021 Q1 and Q2, as Wix continues to realize gains from its investments in Customer Care and infrastructure. Gross margin declined compared to a year ago due to these investments made mainly in the first half of 2021. As a reminder, Wix expects non-GAAP Creative Subscriptions gross margin to be ~76-77% for the full year 2021.
Business Solutions non-GAAP gross margin was 21%, a decline y/y from 31%, and sequentially from 23%. This decline was anticipated as Wix Payments continues to perform well, resulting in a greater mix of the revenue coming from Wix Payments, which is a lower gross margin product. Other Business Solutions products, such as shipping and paid ad campaigns that carry lower gross margins, are also growing. Wix continues to expect non-GAAP Business Solutions gross margin to be ~22% for the full year 2021.
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