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3 Key Takeaways From Wix's Earnings Call


Wix.com (NASDAQ: WIX) has been on a roll recently. This is evident both by its strong revenue and EPS growth and its soaring stock price -- shares are up 74% year to date.

While metrics like Wix's 42% year-over-year increase in revenue and 37% growth in free cash flow in its second-quarter earnings release do a great job of helping investors understand the company's momentum, there's plenty more to uncover in Wix's most recent earnings call .

Here are three important topics management discussed during the call.

Employees outside of Wix offices

Image source: Wix.com.

1. Trends in premium subscriptions

During Q2, Wix added an impressive 205,000 net premium subscriptions, bringing total premium subscriptions to 3.7 million. While this represents strong year-over-year growth of 28%, it notably marked a deceleration from the 29% growth Wix saw in premium subscriptions in Q1.

When asked about this trend, CFO Lior Shemesh suggested decelerating growth in the metric is unlikely to stick around:

[R]emember that in terms of seasonality, Q2 is weaker than the first quarter. Usually the first quarter is very strong, especially about premiums added.

Shemesh added another reason not to be concerned: "[O]verall the conversion is up even when we look at the new cohorts in the second quarter compared to the first quarter."

2. Artificial Design Intelligence: A key driver for conversion

Speaking of conversion, or the rate registered users purchase a premium subscription, the company's Artificial Design Intelligence (ADI) continues to help drive improvements in the metric -- even as ADI expands to new languages.

"Wix ADI continues to be a positive contributor to the overall conversion improvements," said CEO Avishai Abrahami. "We are experiencing early success in additional languages other than English and plan to release more before the end of the year."

Management did a good job of articulating why ADI helps conversion in the company's first-quarter earnings release:

The ability for users to produce websites with AI-driven aesthetics and functionality, fully customized to their business within minutes, is increasing the number of sites completed, leading to improving conversion.

3. About Wix's guidance

Considering that Wix's second-quarter revenue came in above management's guidance and management boosted its outlook for full-year revenue, some investors may be looking for more insight into how management comes up with its guidance figures in the first place. After all, management's outlook for 40% to 41% year-over-year revenue growth in 2018 paints a rosy picture.

But Abrahami implied Wix's guidance is conservative:

[A]s always, we include in the guidance the products that exist today with the current performance. New products are not in the guidance or improvement in performance of existing products also are not part of the guidance. We would like to guide it when it happens.

With this approach to guidance in mind, investors shouldn't be surprised if Wix exceeds its updated full-year outlook for revenue between $597 to $599 million.

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Wix.com. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Personal Finance , Stocks
Referenced Symbols: ADI , WIX



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