Website design and e-commerce platform provider Wix.com (NASDAQ:WIX) reported results in line with analyst expectations in Q1 FY2022 quarter, with revenue up 13.6% year on year to $341.5 million. However, guidance for the next quarter was less impressive, coming in at $344 million at the midpoint, being 3.45% below analyst estimates. Wix made a GAAP loss of $227.2 million, down on its loss of $121.7 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) Q1 FY2022 Highlights:
- Revenue: $341.5 million vs analyst estimates of $340.4 million (small beat)
- EPS (non-GAAP): -$0.72 vs analyst estimates of -$0.61
- Revenue guidance for Q2 2022 is $344 million at the midpoint, below analyst estimates of $356.3 million
- Free cash flow was negative $33.5 million, down from positive free cash flow of $7.33 million in previous quarter
- Gross Margin (GAAP): 60.5%, down from 61.9% same quarter last year
"Wix has remained focused on executing on our long-term opportunities, our product and marketing roadmaps, and concentrating on what we can control despite the recent months of instability and volatility," 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 strong over the last year, growing from quarterly revenue of $304.1 million, to $341.5 million.
This quarter, Wix's quarterly revenue was once again up 13.6% year on year. We can see that the company increased revenue by $13.2 million quarter on quarter. That's a solid improvement on the $7.54 million increase in Q4 2021, so shareholders should appreciate the re-acceleration of growth.
Guidance for the next quarter indicates Wix is expecting revenue to grow 8.72% year on year to $344 million, slowing down from the 34% 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 15% 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 60.5% in Q1.
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 we would like to see it start improving.
Key Takeaways from Wix's Q1 Results
With a market capitalization of $4.05 billion Wix is among smaller companies, but its more than $386.6 million in cash and the fact it is operating close to free cash flow break-even put it in a robust financial 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 and the revenue growth was quite weak. Overall, it seems to us that this was a complicated quarter for Wix. The company is down 9.09% on the results and currently trades at $64.75 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.
One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.
The author has no position in any of the stocks mentioned.