Website design and e-commerce platform provider Wix.com (NASDAQ:WIX) reported results in line with analyst expectations in Q4 FY2022 quarter, with revenue up 8.13% year on year to $355 million. Wix made a GAAP loss of $39 million, improving on its loss of $111 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 FY2022 Highlights:
- Revenue: $355 million vs analyst estimates of $351.9 million (0.9% beat)
- EPS (non-GAAP): $0.61 vs analyst estimates of $0.10 ($0.5 beat)
- Management's revenue guidance for upcoming financial year 2023 is $1.52 billion at the midpoint, in line with analyst expectations and predicting 9.72% growth (vs 9.34% in FY2022)
- Free cash flow of $38.6 million, up from negative free cash flow of $22.6 million in previous quarter
- Gross Margin (GAAP): 63.7%, up from 60.7% same quarter last year
"In the face of a dynamic macroeconomic environment this year, we shifted our focus toward tightening spending and becoming more efficient in the execution of our priorities. Through all of this, we continued to lead through innovation. We released hundreds of new products and features throughout 2022 to improve our platform for self creators and partners. Among the most notable releases this year were Wix Blocks for developers, our new Wix Editor, Wix Portfolio and our new AI Text Creator," 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 solid over the last two years, growing from quarterly revenue of $278.1 million in Q4 FY2020, to $355 million.
Wix's quarterly revenue was only up 8.13% year on year, which might disappoint some shareholders. We can see that the company increased revenue by $9.24 million quarter on quarter accelerating up on $581 thousand in Q3 2022.
For the upcoming financial year management expects revenue to be $1.52 billion at the midpoint, growing 9.72% compared to 9.29% increase in FY2022.
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 63.7% in Q4.
That means that for every $1 in revenue the company had $0.64 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 Q4 Results
With a market capitalization of $4.75 billion Wix is among smaller companies, but its more than $244.7 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 liked to see that Wix guided for revenue growth next year to continue. And we were also glad that the revenue guidance for the rest of the year exceeded expectations. On the other hand, revenue growth was quite weak. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. The company currently trades at $83.55 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.
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.