Website design and e-commerce platform provider Wix.com (NASDAQ:WIX) reported Q1 FY2023 results beating Wall St's expectations, with revenue up 9.51% year on year to $374.1 million. Guidance for next quarter's revenue was $382.5 million at the midpoint, which is 1.3% above the analyst consensus. Wix made a GAAP loss of $10.4 million, improving on its loss of $227.3 million, in the same quarter last year.
Is now the time to buy Wix? Access our full analysis of the earnings results here, it's free.
Wix (WIX) Q1 FY2023 Highlights:
- Revenue: $374.1 million vs analyst estimates of $369.3 million (1.28% beat)
- EPS (non-GAAP): $0.91 vs analyst estimates of $0.16 (474% beat)
- Revenue guidance for Q2 2023 is $382.5 million at the midpoint, above analyst estimates of $377.6 million
- The company reconfirmed revenue guidance for the full year, at $1.53 billion at the midpoint
- Free cash flow of $25 million, down 35.1% from previous quarter
- Gross Margin (GAAP): 65.4%, up from 60.6% same quarter last year
"Wix was founded over 15 years ago to bring simplicity to people who wanted to use the internet and were held back by complex software and technology," said Avishai Abrahami, Wix Co-founder and CEO.
Founded in 2006 in Tel Aviv, Wix.com (NASDAQ:WIX) offers a free and easy to operate website building platform.
While e-commerce has been around for over two decades and enjoyed meaningful growth, its overall penetration of retail still remains low. Only around $1 in every $5 spent on retail purchases comes from digital orders, leaving over 80% of the retail market still ripe for online disruption. It is these large swathes of the retail where e-commerce has not yet taken hold that drives the demand for various e-commerce software solutions.
As you can see below, Wix's revenue growth has been mediocre over the last two years, growing from quarterly revenue of $304.1 million in Q1 FY2021, to $374.1 million.
Wix's quarterly revenue was only up 9.51% year on year, which might disappoint some shareholders. We can see that the company increased revenue by $19 million quarter on quarter re-accelerating up on $9.24 million in Q4 2022.
Guidance for the next quarter indicates Wix is expecting revenue to grow 10.8% year on year to $382.5 million, improving on the 9.11% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 9.92% over the next twelve months.
In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.
What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Wix's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 65.4% in Q1.
That means that for every $1 in revenue the company had $0.65 left to spend on developing new products, marketing & sales and the general administrative overhead. While it improved significantly from the previous quarter this would still be considered a low gross margin for a SaaS company and we would like to see the improvements continue.
Key Takeaways from Wix's Q1 Results
With a market capitalization of $4.31 billion Wix is among smaller companies, but its more than $624.6 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.
It was good to see Wix improve their gross margin this quarter. And we were also glad that the revenue guidance for the next quarter exceeded analysts' expectations. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is flat on the results and currently trades at $83.9 per share.
Should you invest in Wix right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.
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The author has no position in any of the stocks mentioned.