Wix: 2021 Q1 Earnings – 19 Points Not to Miss!
- Rupam Deb
- Jun 15, 2021
- 5 min read
On 13 May 2021, Wix released its earnings results for Q1 2021. Wix had a strong start to the year with revenue and collections growing at 41%, exceeding management expectations. It also saw continued strong demand across all types of users, with online commerce businesses driving accelerating growth and cohort monetization.
Here are our 19 key points from the earnings results and call, including its strategies on products, targeting the professional market, M&A, etc!
Total collections in Q1 2021 were up 41% year-on-year, from $249 million to $351 million, which was slightly above the high end of its guidance range of $340 million to $350 million. Creative subscriptions collections were up less, by 28% year-on-year, from $209 million to $268 million. Business solutions collections were up significantly, by 107% year-on-year, from $40 million to $83 million.
Total revenue in Q1 2021 was also up 41% year-on-year, from $216 million to $304 million. The results were well above the high end of its prior guidance range of $291 million to $296 million. The 41% year-on-year growth rate was also an acceleration over the year-on-year growth experienced in both Q4 2020 and Q1 2020.
Creative subscriptions revenue was up less, by 28% year-on-year, from $177 million to $226 million. This growth was slightly below its expectations for the quarter due to an agreement with a channel partnership that was not finalized in the quarter as it had expected. However, the delay on this agreement does not change its expectations for the year.The strong results during the quarter were driven by the continued addition of premium subscriptions, which on a net basis were nearly 50% more than the year ago quarter, due to increased conversion of registered users purchasing premium subscriptions, and higher revenue and collections per subscription, as more users purchased higher priced business packages for online commerce capabilities.
Business solutions revenue was up significantly, by 97% year-on-year, from $39 million to $78 million, exceeding its expectations.The intent of businesses coming online is rapidly changing from merely creating a digital presence to managing and growing a fully functioning online business with commerce capabilities. As Wix builds out its horizontal platform to become an operating system for businesses of any kind, it is experiencing greater adoption of business applications and growth in transaction volume.Businesses using its online commerce platform continue to grow in numbers and sales. Growth in payments was driven by a substantial increase in GPV in Q1 2021. In addition, take rate (defined as payments revenue as a percent of GPV) expanded in Q1 as a higher mix of total GPV was facilitated through Wix Payments. Wix remains on track to generate more than $10 billion in GPV, and exceed its goal stated in the last quarter of a take rate of 1.25% to 1.30% in 2021. That would translate to a revenue from payments of around $130 million, which was around 13% of its total revenue of $1 billion in 2020. Wix expects that payments revenue will continue to grow as GPV increases and take rate expands, as more users choose Wix Payments as their payment gateway.
In Q1 2021, over 7.5 million new users came to Wix to build an online presence, bringing its total registered users to over 204 million. As the demand for an online presence increases, Wix continues to experience an increase in new users coming to it during the quarter.This newest 7.5 million user cohort created in Q1 2021 generated $37 million in collections in the quarter, which is 32% higher than that generated by the Q1 2020 user cohort in its first quarter. This strong performance was the result of a substantial increase in conversion of users to premium subscriptions and higher collections per subscription, as more users purchased online commerce business packages, attached business applications and utilized Wix Payments.As of the end of Q1 2021, Wix estimates that its existing user cohorts will generate approximately $14.2 billion in collections over the next 10 years, which is a 10% increase from the $12.9 billion expected in the previous quarter in Q4 2020.Wix has also started disclosing its net revenue retention rate, which stood at 113% for year 2020, which was bolstered by compounding growth from online commerce users. However, given that the high revenue retention rate is likely to be driven more by business solutions revenue with lower gross profit margins than the subscription revenues (as existing cohorts spend more on e-commerce related solutions), the net “gross profit” retention rate is likely to be lower.For the calculations of the Annual Net Revenue Retention Rate, Wix calculates it at the end of a base year (e.g. December 2020), by identifying all of the registered users on its platform as of the end of the prior year (e.g. December 2019), and then dividing the total revenue generated by that cohort of registered users at the end of the base year, by the total revenue generated by the same cohorts of registered users at the end of the prior year.
During the quarter, Wix continued to evolve and enhance its existing web creation product suite. It added a number of new features and products that help businesses succeed online, including integration with Google My Business, launching spaces by Wix (a native mobile application for customers to engage and transact with businesses built on Wix), and launching Promoter (an easy way for users to promote their services through email marketing, social posts, or videos, right from the Wix dashboard.It also rolled out several new features to the Editors, with a strong focus to deliver the best value to the users, often time based on the users’ feedback and requests.First, it launched the Wix Accessibility Wizard, which provides users with a step-by-step interactive solution that instructs them on how to improve and maintain their sites’ accessibility. This tool allows users to design and build sites that include features with which their customers with disabilities can perceive, understand, navigate and interact.Second, it rolled out Live Preview, a highly requested feature that lets users who are utilizing the data binding feature to see their real data while still in editing mode in any of the Editors.Third, it tested Wix2X, a tool that allows users to migrate Wix sites to Editor X. Wix2X enables its Partners who have built sites on the Wix Editor, or are in the process of doing so, to transition to the Editor X environment, giving them a higher level of design control.
Overall gross profit margin in Q1 2021 was 62%, down slightly from 63% in Q4 2020. The decline was primarily attributed to business solutions revenue (which has a lower gross margin) becoming a larger portion of its overall revenue.Gross margin for creative subscriptions in Q1 2021 was 75%, down slightly from 76% in Q4 2020. This decline was due to the increase in customer care experts hired, and increased investments in hosting infrastructure. Wix believes the scale benefits of these investments will generate positive returns through growth in collections and revenue in the coming years, and that its creative subscriptions non-GAAP gross margin, which was 77% in 2021 Q1, will reach 80% by the second half of 2022.Gross margin for business solutions in Q1 2021 was 23%, which was slightly lower than that in Q4 2020, due to growth in revenue from payments and shipping solutions which have lower margins. As these products scale, Wix expects the margin to increase.Compared to a year ago, overall gross margin was down significantly, from 71% in 2020 Q1 to 62% in 2021 Q1. Therefore, gross profit in Q1 2021 grew slower than revenue, at 22% year-on-year, from $154 million to $188 million.
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