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Wix (NASDAQ:WIX) Reports Sales Below Analyst Estimates In Q4 Earnings, Stock Drops


Radek Strnad /
2022/02/16 4:07 am EST
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Website design and e-commerce platform provider Wix.com (NASDAQ:WIX) fell short of analyst expectations in Q4 FY2021 quarter, with revenue up 16.2% year on year to $328.3 million. Guidance for the next quarter also missed analyst expectations with revenues guided to $340.5 million at the midpoint, or 3.67% below analyst estimates. Wix made a GAAP loss of $111 million, down on its loss of $62.7 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) Q4 FY2021 Highlights:

  • Revenue: $328.3 million vs analyst estimates of $332.8 million (1.34% miss)
  • EPS (non-GAAP): -$0.37 vs analyst estimates of -$0.42
  • Revenue guidance for Q1 2022 is $340.5 million at the midpoint, below analyst estimates of $353.4 million
  • Free cash flow of $7.33 million, up from negative free cash flow of $8.7 million in previous quarter
  • Gross Margin (GAAP): 60.7%, down from 63.4% same quarter last year

"2020 and 2021 brought unprecedented changes, challenges and opportunities for almost every business worldwide due to uncertainty and volatility brought on by the pandemic. Now, as we enter our third year of COVID-19, the world has begun to transition once again," said Avishai Abrahami, Co-founder and CEO of Wix.

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.

Sales Growth

As you can see below, Wix's revenue growth has been strong over the last year, growing from quarterly revenue of $282.5 million, to $328.3 million.

Wix Total Revenue

This quarter, Wix's quarterly revenue was once again up 16.2% year on year. We can see that the company increased revenue by $7.54 million quarter on quarter. That's a solid improvement on the $4.39 million increase in Q3 2021, so shareholders should appreciate the acceleration of growth.

Guidance for the next quarter indicates Wix is expecting revenue to grow 11.9% year on year to $340.5 million, slowing down from the 40.8% year-over-year increase in revenue the company had recorded in the same quarter last year.

There are others doing even better than Wix. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 150% since the IPO last December. You can find it on our platform for free.

Profitability

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 60.7% in Q4.

Wix Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.60 left to spend on developing new products, marketing & sales and the general administrative overhead. This would be considered a low gross margin for a SaaS company and it has been going down over the last year, which is probably the opposite direction shareholders would like to see it go.

Key Takeaways from Wix's Q4 Results

With a market capitalization of $6.59 billion Wix is among smaller companies, but its more than $863 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

We struggled to find many strong positives in these results. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations. Overall, this quarter's results were not the best we've seen from Wix. The company is down 5.83% on the results and currently trades at $109 per share.

Wix may have had a tough quarter, but does that actually create an opportunity to invest 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.