Wix.com Ltd. Q1 FY2025 earnings call

• Launched Wixel, a new visual design platform with AI, integrating with Microsoft Copilot. - Introduced Astro, an AI assistant in the Wix dashboard to improve user engagement. - Launched new AI-powered tools for website automations and real-time site customization. - Rolled out the Wix MCP server. - Strong new user cohort growth with 5.3 million new users in Q1, up 7% year-over-year. - Healthy behavior in existing user cohorts with steady growth in bookings, stable conversion, strong retention, and increasing ARPS.

In Q1 2025, total bookings were $511 million, up 12% year-over-year. Partners revenue grew 24% year-over-year to $172 million. Transaction revenue was $59 million, up 19% year-over-year. GPV had a 2-point headwind from a subsidiary, but core GPV (excluding the subsidiary) grew 12% year-over-year in constant currency. Non-GAAP gross margin was 69%, in line with expectations. Non-GAAP operating income increased 44% year-over-year to 21% of revenue. Q1 free cash flow was over $142 million, which is 30% of revenue.

• Expect Q2 total revenue to be $485 million to $489 million, representing approximately 11% to 12% year-over-year growth. - Maintain full-year bookings expectations at $2,025 million to $2,060 million (11% to 13% growth year-over-year) and revenue expectations at $1,970 million to $2,000 million (12% to 14% growth year-over-year) with increased conservatism due to macro uncertainty. - Expect free cash flow in 2025 to be $590 million to $610 million, or 30% to 31% of revenue. - Upsized share repurchase program to $400 million.

• Macro-economic uncertainty which could impact the business. - Potential impact on the Business Solutions segment due to consumer behavior changes. - FX headwinds. - Early stage of new products like Wixel with ongoing development needed for full realization.

Q: Maybe just to start with Wixel, given the focus on your comments. Can you maybe just give us a little bit more color on the expectations on the rollout kind of the product road map monetization expectations?

A: Of course, I think that we just offline Wixel, right? So this is the very early version of the product that we just released. And we believe that this allows us to expand on a market in a few ways...

Q: This one is for you, Lior. As we think about free cash flow margins, usually, Q1 is the low watermark. How should we think about the progression of free cash flow margins through the year, given the current guidance?

A: So yes, I mean I think that what we are going to see are very similar to last year, meaning that we will see a modest increase in free cash flow margin because we are continuing with the leverage that we are getting in terms of operating expenses out of revenue...

Q: The Partners revenue obviously continued to outperform the rest of the segment, but it is a bit of a decel in Q1 to 24% from 29% last quarter. Wondering how should we think about that, what some of the factors might be? And then second, on the new Wixel product, obviously, as you mentioned, new user base really opening up a new design front, but wondering how you're thinking about distribution, marketing since it is a different type of cohort, as you mentioned, besides the Partnership you mentioned.

A: So I will start with the Partners revenue. So we feel very good about the overall Partners and the growth. I believe that Partners will continue to be a hyper-growth revenue driver for us in the future... As for Wixel, I think that it's a new funnel, right, the distribution, it's a new funnel, which opened a lot of interesting opportunities...

Q: I wanted to ask again on Wixel, think the design and visual adding space has certainly seen some increasing competition. We've also seen some of the traditional design software companies move into websites, which creates just a really interesting intersection. So it'd be great to get a better understanding for really the core differentiator for Wix in the designing software, what enables the right to win against some of the larger brands in the market. And then maybe just at a higher level, some thoughts on pricing, how you landed at $79 a year, and how you're trying to strike the balance between monetization and adoption?

A: Well, I think that -- this is a great question. I think the first question is about the fact that we do see some of the traditional design tools moving into more of a website building area. I think less into our universe, but more into the web flow kind of a universe, but we do see some...

Q: First, can you just kind of talk about -- you've sort of been around the edges of this, but can you talk about product development considerations as we kind of think about agents and this ability to sort of can those lots of different sites and more complex tasks and everything. Maybe just, I guess, like help us expand our minds, so to speak, on whether websites somehow kind of need to be like structurally different in the AI era, particularly from like a utility and discoverability perspective, kind of how do you position for that?

A: And then just to clarify, you're asking about for ChatGPT to be able to read the website well, or do you talk about how we build a website? Brad Erickson: Yes, I'm talking about like how agents will sort of maybe change how people access the internet broadly and website specifically.

A: Well, I do believe that there is a big change coming. I know that for myself, I'm using ChatGPT more than Google when I check for things now. So I would love to have a content and traffic digest a lot of content from the Internet and try to give you this limited vision and its advantages and disadvantages...

Q: Super helpful. And maybe a follow-up for Lior. I know there was a comment in there that you expect transaction growth to be similar to GPV growth moving forward. So it seems like somewhat stable take rates is the way to think about that? Is that really a comment for this year as you maybe lap the addition of some payment Partners, but as we take a multiyear view there's still opportunity for the take rate to go higher? Any comments on that front?

A: So on a multiyear basis, definitely, yes. I think that there are many things that we can do for example, moving people from offline to online. We have our POS solution, full omni-channel solution, that's actually helping that, and we actually do that partnering with channels and customers to use our POS. And this is one of the ways to move people from offline to online in terms of the transaction. Except of that, many new features, many new products that do the same thing. So I believe that definitely, yes, I think that there are more countries that we need to implement Wix payments, and we're definitely going to do that. Yes, we are going to see increase in take rate. I'm not sure if it's going to be significant as last year, for example, when we partner with Square or People. But definitely, they’ve had much more big customer -- big channels like that or a big partnerships like that. But definitely, yes, I believe that it will continue to grow and increase even this year, but not as significant as last year.