Stock Story -
Website design and e-commerce platform provider Wix.com (NASDAQ:WIX) reported results in line with analysts' expectations in Q2 CY2024, with revenue up 11.7% year on year to $435.7 million. The company expects next quarter's revenue to be around $442.5 million, in line with analysts' estimates. It made a non-GAAP profit of $1.67 per share, improving from its profit of $0.54 per share in the same quarter last year.
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Wix (WIX) Q2 CY2024 Highlights:
- Revenue: $435.7 million vs analyst estimates of $433.8 million (small beat)
- Adjusted Operating Income: $90.19 million vs analyst estimates of $77.7 million (16.1% beat)
- EPS (non-GAAP): $1.67 vs analyst estimates of $1.36 (22.4% beat)
- Revenue Guidance for Q3 CY2024 is $442.5 million at the midpoint, roughly in line with what analysts were expecting
- The company slightly lifted its revenue guidance for the full year from $1.75 billion to $1.75 billion at the midpoint
- Gross Margin (GAAP): 67.5%, in line with the same quarter last year
- Free Cash Flow of $112.8 million, similar to the previous quarter
- Market Capitalization: $8.79 billion
Founded in 2006 in Tel Aviv, Wix.com (NASDAQ:WIX) offers a free and easy to operate website building platform.
E-commerce SoftwareWhile 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 GrowthAs you can see below, Wix's 12.8% annualized revenue growth over the last three years has been sluggish, and its sales came in at $435.7 million this quarter.
This quarter, Wix's quarterly revenue was once again up 11.7% year on year. We can see that Wix's revenue increased by $15.97 million in Q2, which was roughly the same growth rate observed in Q1 CY2024. This steady quarter-on-quarter growth shows that the company can maintain its paced growth trajectory.
Next quarter's guidance suggests that Wix is expecting revenue to grow 12.4% year on year to $442.5 million, slowing down from the 13.9% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 13.1% over the next 12 months before the earnings results announcement.
Cash Is KingAlthough earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Wix has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company's free cash flow margin averaged 22.8% over the last year, quite impressive for a software business.
Wix's free cash flow clocked in at $112.8 million in Q2, equivalent to a 25.9% margin. This quarter's result was good as its margin was 13.3 percentage points higher than in the same quarter last year, but we wouldn't put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends trump fluctuations.
Over the next year, analysts predict Wix's cash conversion will improve. Their consensus estimates imply its free cash flow margin of 22.8% for the last 12 months will increase to 26.1%, giving it more money to invest.
Key Takeaways from Wix's Q2 Results Revenue and operating profit both exceeded expectations, and the company lifted full year revenue guidance. Overall, this quarter was solid. The stock traded up 2.1% to $160.51 immediately after reporting.
