After seeing its share price drop recently on concerns that the company could be hurt from the development of artificial intelligence (AI), website building platform Wix (Nasdaq: WIX) posted better-than-expected results for the first quarter of this year, and its share price rose 1.33%. yesterday to $82.53, giving it a market capitalization of $4.85 billion.
“The financials speak for themselves, both in terms of growth, which was better than expected, and in terms of profitability, which has made good progress. We are pleased with the trend and hope it continues,” said Nir Zohar, President of Wix. Virtual press conference. At the end of the quarter, Wix had 5,006 employees, after laying off 370 in February, most of them in support roles. The Zohar said there are no plans for another round of layoffs.
The company’s first-quarter revenue grew 9.5% to $374 million, higher than estimates. On a GAAP basis, Wix trimmed its operating loss by 71% to $33.3 million, and its net loss by 95% to $10.4 million. On a non-GAAP basis, excluding stock-based compensation and other accounting items, Wix’s gross margin improved from 62% to 67%, and the company turned a loss into a net profit of $51.1 million, or $0.91 per share, above estimates. . Free cash flow in the quarter was $25 million, and at its end Wix had more than $1.3 billion in cash, and $567 million in long-term debt to holders of its convertible notes.
For the second quarter, Wix expects 10-12% growth sequentially to $380-385M, and has slightly raised its annual revenue guidance to $1.522-1.543B, which represents growth of 10-11% through 2022. The company sees improved profitability, and has also raised its guidance for annual free cash flow (excluding the cost of building its headquarters) to $172-180 million. The environment remains volatile and uncertain, says the Zohar, and so Wix is being careful in its guidance.
After a positive trend in the early part of the year, Wix’s share price fell 6% in the first half of May on market concerns that artificial intelligence, which is developing rapidly, will change the world of website creation and harm Wix’s business. Wix CEO Avichai Abrahami tried to reassure investors when he recently wrote on the social network LinkedIn that artificial intelligence has been very valuable in building websites but is no substitute for software to manage a company’s entire web activity.
“It started with a report to the stock exchange by Chegg, an American company that deals in digital content for students, that generative AI could jeopardize part of its business. Market players tried to make a list of companies at risk, and they put Wix on it,” says Zohar. “I definitely think that because Wix isn’t a content creation company but rather provides software services for very complex things, with a depth of business functionality within a website, we don’t belong on this list. But that’s part of the fact that we’re a public company, and our job is to convince people why we don’t have What they fear .. Our shareholders understand, but there is noise in the market.
“We have had an AI division for nearly a decade and launched ADI (Artificial Intelligence Based Website Building Platform, S.HW.) in 2016. There is a huge opportunity in AI models, such as services that simplify many processes for our customers, And there are things that AI cannot do, because the company wants, for example, the images and content that it produces itself. There are still many opportunities especially for us, who have been involved in this field for many years now, to develop our platform even further.”
Overall, says the Zohar, “In terms of growth potential and the market size of Wix, we still see ourselves as young. In the post-Covid period and the economic slowdown, the Internet is growing slower, but it’s not going backwards, and we’re growing together.”
When Wix published its previous financial statements in February, at a time when the battle for judicial reform in Israel was at its height and headlines were about companies moving their money out of Israel, the Zohar spoke of a rise in Israel’s risk profile. In response to a question about what he sees in this context today, he replied: “In the nature of matters, we have not had any conversations with investors since the end of the quarter, and the substantial conversations were in March, which is in the context of events in Israel for ages.
“At that time, there were serious questions about the risks. Undoubtedly, questions have been raised in the past two months that have not been raised before. We have been a public company for nearly a decade, and in that time there have been many confrontations military, and there have been times when we have launched our money from an air raid shelter in Tel Aviv, but this is the first time we have had such questions about Israel.There is no doubt inappropriate and unhealthy talk about levels of certainty in investing in Israeli companies, and I will be Glad if that goes away, but unfortunately not in our hands.
Published by Globes, Israel business news – en.globes.co.il – on May 18, 2023.
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