Q4 2021 Wix.Com Ltd Earnings Call
Good day, and thank you for standing by and welcome to the fourth quarter and full year 2021 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone. Please be advised today's conference is being.
<unk> recorded if you require any further assistance. Please press Star then zero I would now like to hand, the conference over to your host today, Maggie O'donnell director of Investor Relations Ma'am. Please go ahead.
Thank you Michelle and good morning, everyone.
Welcome to the fourth quarter and full year 2021 earnings call joining me today to discuss our results are.
<unk> CEO and co founder Nir Zohar, President and CFO .
Dennis our CFO and Joe Ferraro, our GM of the us.
During this call we may make forward looking statements and these statements are based on current expectations and assumptions. Please consider the risk factors included in our press release and most recent form 20-F that could cause our actual results to differ materially from these forward looking statements.
We do not undertake any obligation to update these forward looking statements.
In addition, we will comment on non-GAAP financial results and key operating metrics and you can find all reconciliations between our GAAP and non-GAAP results in the earnings materials and our interactive Analyst Center on the Investor Relations section of our web site investors Bartlett Satcom I apologize for the background noise around me, but with that I'm going to turn it over to <unk>.
Call to Joe who will be moderating the Q&A with the team.
Yeah.
Great. Thanks Maggie.
Welcome everyone. So.
Let's start off with.
With you were coming up on two years now through this pandemic and so much has changed in this period of time. So just give us your view on the current state of the market and also the level of demand we're seeing here with <unk>.
Corona started right, we enjoyed really high level of demand.
He says drilling very quickly and the peak of it was Q1 last year.
After that we saw slowdown.
It has slowed down for Q2 and Q3 and then if that will stabilize in Q4.
No.
And I think that this is an effect that pretty much everybody around us has experienced we saw it in many other companies so kind of like the internet drove the slowdown of consumption of the Internet is slow down.
However, we do see that it's stabilizing and starting to reverse the trend a bit so we're starting to see growth on that again.
For us it's.
In two weeks a few things that we noticed is that the fundamentals have stayed pretty much the same old fruit.
Which means that the cohorts.
Behaving in the same way the beer before Covid and there continues to be at the semi Jacobi and there's still continued to be the same with no changes the same everything is the same.
We did notice that.
Average revenue per subscribers did go up so 10% last year and again, so overall, 20% initiatives like partners impairments are growing.
So we do see that.
But I think the overall I'd say it was a really great beginning in Corona and then slowdown in the second year of Corona.
Right. So so.
Some of these dynamics, though 22021 was actually had a great year for wix in a lot of regards, especially when you compare to 2019, which was before the pandemic. So just read out some of the numbers. So we ended 2021 and with revenue and bookings up 29% year over year compared to 2012.
And when you compare to 2019 revenue actually grew 67% and bookings grew 70% over that two year period.
And this growth as you kind of said was really has been driven by really stronger user cohorts of ours. So talk about specifically this growth we've seen in these user cohorts.
So we've dramatically grown off from where we were at the end of 2019, and if you try to look at it and say to isolate growing as an event.
We look at it so I don't know if we have post corona, but the peace phase, where we are and we compare to 2019 of course, we see margin growth. It really good ways to look at it is that.
If you look at the Q1 this year in Q1.
Last year, obviously the growth rate.
<unk>.
The best quarter, which was last year. So obviously this is it looks at this moment, we don't see that we're still continuing to expand our reach to new markets and which is done by.
A lot of work for pod managed a lot of work for commerce.
Hey.
And we can see that we actually have higher quality subs now I think a lot of it is because we removed a lot of the things that blocked users from using wix. So by removing thing by adding E. Commerce capabilities. For example, those four partners, we actually an ambulatory pump that would have normally high volumes yourself to come two weeks ago, Here's a week.
As a services led being added so we do see that.
And the.
I'm very optimistic about what it is for the future hopefully, we're starting to see the pace of the trend.
Great. So we shared that our focus on growth.
Really it's going to come from three areas now moving ahead.
One is bringing more self creators to wix.
The other is bringing more partners to work through our building sites for others.
These are both really kind of go to market initiatives of ours and then the third very product focused which applies to both types of audiences are commerce and payments. So I wont go through each of these four investors and how kind of you view them.
And how we're going to drive growth. So it starts with self creators well this is Doug.
This is where we started but this is still is our biggest customer base right.
I think we are the market leader in that category I don't think anybody else is similar to us in terms of size.
And we still see growth there.
Julian tend to do a few more things to enable faster growth there and the first thing is with our co product editors and so we gave some innovation that is coming soon.
No from Easter at the tissues will drive massive increase in subscribers.
The other thing is that we again, we removed barriers that people had so allow.
Shipyard has to do more with commerce.
It's very important because we allow.
Small businesses right.
In many different places I wanted to remind everybody that when we say we don't just talk about <unk> lots to talk about things like.
Scheduling and booking in restaurants, and hotels and many different kind of businesses like that actually want to drive to.
If they try to do it yourself creators like they need the functionality to be successful.
Edit functionality, we enable them to use wix and this is a strategy that's worked for us really well in Nebraska and the other thing that we did is really large investment in customer care and we know that.
Well the cost per bit on customer care.
I, usually have less knowledge the proficient on without use wix.
And and they need help right. So we have somebody that can help them. That's the concept behind it I think we're doing very well there the last part of that.
Well, we are growing internationally, we always been there's a lot of small things we need to do it in every country in order to enable <unk> to be really.
Doing well in that country and it can be simple things like changing text or it can be I think payment providers. It could be how you do some kind of business functionality pointed out the booking of Germany, the United States.
Very differently.
All because you could actually penetrated opportunity something which is uncommon in other places so all of those things when we keep removing the things that the barrier to success.
We see growth and so creators and traditionally we've been really good at doing that and I think we have a lot of really exciting things coming this year.
Great. So let's move on to partners and when we talk about partners, there's different kinds of partners that we have at Wix. We have agencies that we know build sites. We have freelancers that are building sites for others.
Also have large businesses like Vistaprint, and NTT, which are using wix to build.
To help their customers be successful online as well so with partners generally across the board how do you see as driving growth here.
Well.
We are starting to believe agencies designers.
Partners.
First day, we pretty much open wings, while we did in the last couple of years are starting to invest a lot into making their lives easier. So.
Did it by many different ways first of all we give them tools, but they can manage many different websites right. So let's say you're an agency free designers in your agency and you had 300.
Customers like websites. So obviously you need tools to manage 300 website to manage commission for team members unique tools to enable it.
Billing so how you charge your customers, how we track what faithful all of those things are things that we've added and so really great success, because we would do that.
Okay.
And the other thing that day.
We did have lines to make <unk> more of a professional tool. So I'll give you. An example of search engine optimization the ability to affect it.
Ranking of your web site from Google what place you'll website.
For assisted us most.
Most of the time you wanted it to be automatic right because you're just wanting to have really good results without doing anything.
Professionals, they wanted to be able to go under the Hood and tweak everything and be able to control every small thing.
And so this is something that we've added to the product enabling them to have daily. This amazing search engine optimization capabilities that it could go under.
Deep in two weeks and doing a lot of different things, whether it's product that is specifically for designers and agencies editor X and of course, we've added the team that give them a special support again, if you are supporting 300 websites.
Unique different support than somebody that's one website in the men's.
Business is doing yoga.
And even if the question itself. The same the answer would be very different by because one is how do we know anything about weeks and he knows how to use it to build the website into auto guys Super proficient so even if it's a similar question that which they did.
And of course, the response time is to be very different. So we created that team and we saw massive growth this year and the partners and agencies and we think that this is a really good strategy I think the more we continue with this strategy the more growth we're seeing from that.
Great and we'll come back to the partners data in a minute, but before that I want to go onto commerce very quickly Commerce, obviously, you mentioned that both with sell creators and partners.
We share transaction revenue.
Which is essentially payments revenue a big indicator of how our commerce business is performing in 2021, it was $130 million or 134% year over year.
<unk> on Wix was $9 6 billion up 78% year over year.
And a little bit more about what is driving our success in cars.
Yes.
Want to emphasize again E. Commerce is very diversified not just shipping a lot of additional things out, but we also have the ability to schedule services the ability to sell time the ability to four restaurants. So there's a lot of different things that we do.
I think what drove the successes that we actually give the right product before that if you came to which is a separate OSA part and then you wanted to do a lot of the things you Couldnt, we didn't have the functionality so by enabling better by offering building dysfunctionality in two weeks now separators and agency partners can do it and the results from Douglas.
Growth.
It is all driven by <unk>.
Hedging derived products and creating really good products.
We've seen because of that strong GP growth and because we know theres a lot of more things we need to do there whether.
We're optimistic on accelerating that into the future because we know what our customers are saying well I want to do that they cannot do it and we're getting a police edge up in different enabling them to do it.
The upside of regions of course.
Here.
Revenue per subs and of course additional revenues when we experience.
Great.
Nir.
Let's move on and talk a little bit more about going back to the partners revenue. So this is the first time, we're sharing that number generally revenue generated through partners. It was 257 million in 2021.
That was up 75% year over year and up three times over what it was in 2019.
Talk a little bit more about why this has been successful for us and why partners are so important and meaningful us and why this extra data is something we're going to be provided.
Absolutely. Thank you of course, everyone for joining us today.
We wanted to give this breakout.
And the structure.
Two tools you guys because.
This is how we think about their own business. So we wanted to try and kind of matched internal thinking how we explain it.
Outwards and essentially when we think about our business. There is really two parts of it right Dave.
The risks.
Acquisition, which would be.
Traffic and users.
For the <unk>.
<unk> creators right.
To our platform by the way we capture a lot of those partners also by direct acquisition, but those people are coming to us directly okay.
And.
The partners and it doesn't matter if they are.
It is more a freelancer, a one man show or an agency or a big partnership.
<unk> partnership.
All of those cases this is basically kind of an indirect go to market because in this case, we are reaching customers that we can't reach otherwise because those are those customers are people, who don't want to do their own website for whatever reason it didnt want someone else to help them out with decent decent wave and scales with help and.
This is why we think differently about about the partnership.
Section of our business is obviously I mentioned before it has always been.
We've always been an attraction for professional but obviously much structured much more of what do we do towards to help them and make them more successful in the last in the last few years.
And.
When you look.
When you look at what we deliver for them at the end of the day, it's basically even with the platform, we give them the technology and it doesn't matter if their debt freelancer the agency or the big the Big company gives us the technology to be successful to deliver value to their own customer and thats, obviously, a massive growth opportunity for us.
So you mentioned you mentioned these big company partner, So Vistaprint obviously.
But a significant one last year can you just give us an update on where we are with the Vistaprint partnership.
I think it is.
Obviously, it's been a very significant and interesting.
Partnership for Us.
That is also wanted to higher scale, which obviously this time around required that we need to do some adjustments in order to facilitate it.
Which is also great because it.
This infrastructure, which we don't need to repeat next time around.
To be honest it got me a little bit worried that we may not meet timelines, but I think.
The great news.
We are actually exactly where we wanted to be meaning that we already started testing that.
Mutual funnel in some territories.
It looks good.
And we are on schedule to deliver and launch it.
This quarter Q1.
It makes me assume that we will start to see the contribution in revenues sometime.
Sometime in Q2 and throughout the rest of the year.
I think one other maybe interesting points about this.
Vistaprint to deal with that also.
Very.
Large volume of legacy websites that are also we intend to migrate to our platform throughout the year and this is a project that we are pursuing already and we believe it will be finished by the end of the year.
Great. So.
Now, let's move on and zero in on our user cohorts.
So first of all we ended the year with nearly 222 million users and almost 6 million subscriptions.
We shared that we added 478000 net subscriptions in 2021.
Not surprising that that was down compared to 2000 22020 was obviously a very unusual year that created a huge demand that had a big impact not only in 'twenty, but also on 'twenty one.
At the same time, our revenue per subscription as I'm sure. You mentioned it was up 12% year over year in 2021 and revenue and that came off of a year. When Rps was up 10% in 2020. So just put all this together and talk more about how they looked at our user absolutely.
Joe you kind of mentioned this I would say.
Different behavior, which is something that is a dynamic that is significant to us two years okay.
When we look at 'twenty, one compared to 19.
We have a much higher demand okay gross subs were up 16%, so 60% higher than 2000, and then 2019, but.
Cause us been massive amount of subscriptions and the huge size and demand of the of the cohorts of 2020 going into the Q1 of 2021, we basically can this kind of dynamic where even though the churn rates.
Tim or even slightly better.
We actually still on absolute numbers.
They believe they should into the 2021 numbers of the MX, App, which kind of makes sense right. But this is all based on that we actually see that as a onetime effect is something that we don't expect to repeat in 2022.
That being fit when you look at those cohorts and you look at the value generated do you see that.
Much stronger because it has better monetization first of all we've seen the users coming into much higher intent towards building a business web site. So we see an adoption of the higher priced packages almost.
All of that.
And also they are starting to generate GPP did GPP is compounding also into the value of those web sites and then to the value of the of the court itself. So it's much better monetization.
And when you look at kind of that.
The overall potential of all of the cohorts under our Hood that number has grown to well above 15 billion, it's roughly $15 seven I think at this point.
Huge increase.
This is all by the way all of this as it comes.
Both of that evolution that obviously I spoke about that investment.
Our product into our users that expanded their business into <unk>.
<unk> of our business significantly within these two years.
Great and finally.
Net revenue retention for 2021 actually grew to 116%.
From where it was in 2020% to 113% just touch on what drove that.
As I just mentioned.
See monetization increase across the board.
Within within the within the courts when should we see <unk> going up when you see the GPP going up obviously, you also get higher quality of users that will generate more retention of revenues over time, but in fact, you actually see them staying longer because their businesses are more successful.
So our expectation is that this will this is a phenomenon that not only is here.
To state, but actually can improve overtime overtime, even even more.
And again, it's two investment into product more than anything else.
Great. So now let's turn to the financials we are.
First I wanted to talk about our results in Q4, we came in toward the lower end of our range for bookings.
And a little bit above the midpoint for revenue.
Range, So talk just a little bit more about what happened in Q4 with our topline results.
Sure drew and thank you everyone for joining us today, so just to remind you when we provided the guidance.
For the year and obviously for the quarter.
That was really the range that we saw at that time.
When we look at revenue we came in exactly how we expected.
The high end of the range.
Yeah.
For booking.
About $14 million.
We could be partnership if we expect to have.
Actually performed poorly.
Later, this year and as a result of that.
Came in toward the low end of the range.
For bookings.
It's very important to mentioned that with regard to the mutual be partnership.
Still looks very strong with more than $70 million in thermal bookings and we said before this is a lumpy business at the very beginning and as long as we continue to increase the family of diesel business it will be less lumpy in the future.
And we feel very excited about it because at the end of the day is bulk of the strategy part of our strategy and we're already starting to see the contribution in terms of number of websites premiums and revenue.
Yeah.
Let's move on to.
2022 now so.
We're not providing annual guidance right now.
Talk about why and top off what are we going to provide.
So obviously I spoke about it before about the.
In clarity about you know about the business about the macroeconomics and specifically about COVID-19 .
So we will continue to provide annual guidance when we have enough clarity to do so.
The amount of confidence that we like.
We are not in a place where we want to provide guidance suggest will seek for the for providing guidance. We obviously want to feel comfortable about the numbers, we want to feel that we can actually predict the numbers and we will continue to doing so when we have more clarity.
We see that there is a lot of volatility in the market today.
And again I wish I had mentioned that a lot.
At the beginning of this call.
And.
Giving you a little visibility into our model on an annual basis.
So for now we are going to provide the guidance on a quarterly basis.
Because of the fact that we see much more clarity in the short term rather than the long term.
And again as usual our guidance for the quarter reflect the range based on what we know today.
Okay. So just really quick.
Just walk through specifically the guidance that we're providing for Q1 revenue.
Yes, so the guidance for the first quarter with <unk>.
<unk> revenue was 238% to 343, which represents a growth of about 11% to 13% on a year over year basis.
Again, we need to remember that.
Very difficult on a year over to you.
Comparable we face this year.
The first quarter of 2021 was unusually strong quarter.
So I do expect that for the rest of the year the usual growth of revenue in the same obviously for bookings will be much higher than the first quarter.
As for the for the new initiatives like <unk> payments, we do expect to generate a much higher growth.
For this year.
As a result of the investments that we've made and we've already started to see the fruits and the fact that it started to become more profitable than last year.
Great and then gross margins and gross profit. So what are you expecting on the gross margin trends for 'twenty two.
So with regards to the creative subscription gross margin we expected.
Speak to have a modest improvement in the second half of the year as we mentioned last year we.
We started to see we will start to feed the leverage of it and by the way. This is one of the reasons why we expect the free cash flow to be better this quarter in terms of margin.
But this year the last year and obviously.
Massive improvements in 2023, just because of that I saw the business solution.
We expect improvement throughout the year. It means gross profit on the year over year growth will accelerate.
Great and just to just to wrap up in free cash flow. So we ended 2021 at about $52 million in free cash flow that excludes the capex that we're using for our new headquarters build out.
So that was a 4% margin on revenue.
Obviously invested a lot into the business in the last couple of years as you mentioned so just talk about your outlook on the free cash flow going forward.
So I think that this is really exciting because in the end of the day the way that I look at it is is the same as when you invest.
Startup costs, when you have a new company and start to build the infrastructure.
Team.
<unk> the team to support the products.
So at the very beginning.
More expensive than income and this is exactly what we had before and this is a value.
Focus is up it makes a lot of things to improve the infrastructure in order to support this new initiative.
Both Schein you mentioned the fastest growing <unk> in the last two years, we still how payments is growing and I think that this is something that will continue and even accelerate.
We already started to see.
Early result, we know that it's walking.
Number of people and increasing we started to see the leverage of those investments and we will see more this year and certainly next year.
So this year we.
Said that free cash flow is going to be about 5% of revenue.
And next few probably.
We were going to double it and this is all come from from a point that most the massive amount of the investment has already been done meaning that we will continue to invest but not to the same level. So we're going to get much much more of leverage and think about it. This way the costs are not going to grow the firm.
Our plans are built on the top line is going to grow simply much faster and higher which will enable us to start to generate profitable growth in the second half of this year and certainly next year.
Great.
I'll hand, it back to you to open it up for questions.
Great. Thanks, Joe Michelle I think we are ready to open up the lines for some questions.
Thank you and if you have a question at this time. Please press Star then one on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
And our first question comes from the line of.
Iranian with.
Your line is open. Please go ahead.
Hey, good morning, good afternoon guys.
I went down to the into the growth initiatives I guess, particularly on the first in South Korea and the agencies.
It's great to see that growth partners.
Right now it's been largely coming from Asia.
Talk a little bit more firsthand.
Good.
Maybe dive a little bit more.
The kind of agencies.
At this point in time, there is an ability to kind of keep going up market to larger agencies.
And what that can look like in the coming year or two.
The top creative side, obviously still a key focus there.
I believe I'm doing this right the right way.
Back out the partners' revenue total revenue the South Korean revenue still strong in 2020.
Decelerated.
Really over the course of the year the guidance would imply that that's not to get into <unk> I know, there's a lot of expense.
We could pull that out and talk about the overall health of the environment as well. Thank you.
So let me if I understand correctly firstly. It is the first question. The question was to give you more color on the type of agencies that we see it right.
And the opportunity.
Great strength.
Okay.
Of course, so I think that if you look at the type of allegiance fees, we're seeing it's very diversified right.
We have a lot of the smaller guys than what it was.
A freelancer.
Big portion and then we have.
A big portion of agencies got the ones that are building towards a website and of course noticed that because it would be a lot of web site.
And they do it very quickly.
And recently, we are seeing more and more of agency that building.
And a very high end web.
Websites, so things that they would like.
Painful as a big commercial those are very big companies and we see a lot of those joining weeks now.
In terms of the potential we believe that the potential there is huge because we think that the.
This one is probably 10 times bigger than <unk>.
Overall of course there is.
Side to drive because the more we add functionality and simplified the <unk> theaters, we're going to get more of a bigger market. So that's one side of it the other side of it is that well.
A lot of people want to want to build a wealth of dose of it and pay them to do it and obviously that goes to the second category. So we think that there is a very big.
The potential for growth here, maybe you want to take the second part yes, absolutely. So in terms of the self care obviously still.
It's still a very big focus of ours in terms of the product is obviously I just mentioned.
And when you look at the growth there okay.
If you kind of like the growth of the to the year over two years growth that specific segment. It grew 50%.
50% 2021 on 2020 or 2019, which is.
It's a very very healthy growth naturally when when you try to compare 'twenty, one to 'twenty, where we have the tougher comp of 20.
It looks like it slowed down but it still remains a very healthy very strong part of our business and when you think about going forward in terms of will it.
Keep on growing fast.
Let's think about what needs to happen for it to decelerate, Okay. It's one basically to either.
People were steer away from needing to take their business online and move away from our websites and transact less on the internet or Alternatively, there will be some very massive change in terms of competition and somebody is going to capture market share. Obviously, we don't think that first is going to happen we believe.
That when you see people keep them onboarding their businesses online and we haven't seen any significant change in terms of market share and in fact, we believe that we're gaining we are gaining market share so our.
We're very confident that going forward, we will keep on expanding that business and growing fast.
Okay.
Maybe a quick follow up for the.
On the free cash flow.
Right now in the current market environment.
We're focused on.
Our cash generation.
Understand the dynamics of investments kind of coming through the margins improving over the next couple of years.
You look out to 'twenty three guidance on that.
It's still.
Nicely below where you guys were in 2007 to 2019, whereas the margin ones.
Between 16 and 17% on revenue.
Got back to those kind of levels what would it take together. Thank you.
Thanks.
So.
First of all for show, we're willing to go back to this level.
Sure.
I think that the.
Two different ways to look.
The first one is about.
In the past we didn't really have.
The business solutions like the payments for example, which is.
With a low mountain.
Alright.
So I don't think that I don't expect to have the same free cash flow margin.
From this type of activity that's it.
If we exclude the investments that we've made.
For the last two or three years will certainly higher than 20% of free cash flow for the core business and this is something that it's really important to mentioned.
Hoping to understand I believe what we've managed to do is to generate funding.
Finding an opportunity to continue with a very healthy growth.
And this is why we are going to feed the leverage of those expenses and for sure. We're going to go back to the same level of free cash flow that we've been before and I believe that we are actually going to exceed that.
Thank you guys.
Thank you and our next question comes from the line of Deepak <unk>.
With Wolfe Research. Your line is open. Please go ahead.
Thanks. This is back on for Deepak.
First just on the Q1 guide can you just help us think about the implied kind of bookings growth in <unk> and I know you called out the $14 million be partnerships that was deferred out of <unk> that drop into <unk> or is that more.
Laid out over the course of the year.
And then second just transaction revenues.
Do you think about the drivers of growth. This year do you think.
The primary driver of growth will be better penetration of the existing merchant base or kind of new merchants kind of coming on to the platform and I guess anything you can share just in terms of your expectations for GPT and transaction revenue growth for this year would be helpful. Thank you.
I think the first one is for you, yes, so forth.
First quarter guidance.
We are going to see that.
You mentioned, the B to B partnership.
I don't know yet.
This is something that it will be recognized book conditions during the quarter or during the second quarter and by the way. This is one of the reasons.
Especially around <unk>.
Uncertainty.
Macro economics to provide those type of guidance even for the next quarter.
So to answer your question I don't know for sure it is going to be postponed right, but it will be recognized somewhere during 2022.
I'm talking specifically about those.
From the fourth quarter.
With regard to the transaction revenue growth.
I'll leave that.
<unk> is going to have a significant increase.
During this year.
But we prefer at this point to start because of the uncertainty not to provide the exact guidance, but as we mentioned before we're going to report on it.
Got it should we expect <unk> disclosure on a quarterly basis going forward.
Yes, we are going to disclose on a quarterly basis.
Alright, thank you.
Thank you and our next question comes from the line of Clarke Jeffries with Piper Sandler. Your line is open. Please go ahead.
Thank you for taking the question first a housekeeping item just to understand.
Or what's embedded in the guidance between business solutions and creative subscriptions for the Q1 guide do you believe creative IRR.
Net basis can kind of improve from here in Q1.
Yes, I do believe that it can improve.
I'm not sure.
I mean for sure it will improve.
Again remember that.
When we talk about the creative subscription and you compare it to the first quarter of 2021, its kind of difficult, but as I mentioned before.
Think that throughout 2022, we're going to accelerate the growth both on creative subscription, but also in business solutions.
Alright.
Good and then.
And then I think just.
If you could help us contextualize sort of the dynamics of the funnel on the creative side.
And what was blending to the volatility should we think of this.
The conversions of users to premium subscriptions. The journey is completely net new premium subscriptions or even just a broader traffic or interest level given engagement overall at the highest level of the funnel.
Help understand what was happening on the customer addition side in Q4.
So hi, so I think it's mostly on kind of fluctuation around demand uneven demand in the top of the funnel model more than anything.
A little bit of a slowdown.
On.
On <unk> in terms of commerce happening, mostly in December where some economies are starting to go into these kind of.
Omicron induced lockdowns.
If you look kind of for the conversion and DAA Rps those actually stayed very strong as well as the <unk>.
Mixed towards the business.
The higher price packages, so, it's mostly about that kind of volatility.
The fundamentals remain the same our deepwater before.
I appreciate it very much.
Thank you and our next question comes from the line of Andrew Boone with JMP Securities. Your line is open. Please go ahead.
Yeah.
Hi, guys. Thanks for taking my questions I wanted to talk about the macro environment and just how the macro environment today is different than kind of pre COVID-19 .
So really my question is is business formation slowing or is it really the conversion of long tail legacy business.
Have come online that is changing the macro environment growth rate.
So the reason that I want to think about this as just as we think about the macro environment backdrop over the next three years, how do we think about that impacting results right business to be driven by business formation or is it still kind of that long tail conversion going on.
So.
I think that what we're seeing is pretty much going back to normal maybe a bit slower than normal but.
And what's happening and covered is that you had a lot of traditional businesses that normally would not moving I think we spoke about the Italian grocery store right like you would not imagine them, having a website and suddenly the head end.
Let me start and many different kind of businesses right not just going in Italy.
So while we had is that in 2020 in the first quarter in 2021.
We have a lot of traditional businesses that nobody would not need the website suddenly meeting a website and moving and thats going to relax those decent demand for those guys.
Peer to slow down.
What we do see is that if you look at the core kind of customers that we had in 2019 pre COVID-19 .
We're seeing now.
Those guys again, the vast majority of our customers.
And we actually in higher numbers than we were in 2019, So we think that it would.
Almost.
Back to the 2019, right and then started to.
Go out from there so I think that the.
And the best way to look at what happened at least in my mind right now, it's very hard to predict the future but.
Is that.
We added this single event, which is called Covid right.
Mainly that everything went up and as this event started to fit out that the effect of that event is fitted out and we're back to where we want it before but with higher numbers right.
And so I think this is kind of like how I look at it.
<unk>.
Of course, we.
No.
And my ability to look at it is only for the.
While we do see a tweaks we can say.
The amount of businesses, yet, but it is limited to that and of course, what I read from other companies I think pretty much from this plague slightly shopify to Spotify, everybody experiencing a very similar phenomenon, where people who have looked at all they need to solve that and then well we have backup side now things are getting back to normal.
And we're going back to the same kind of growth we had in <unk>.
<unk>.
Okay, that's super helpful.
And then just as a follow up as you guys move team.
Commerce users that have more needs do you think the competitive environment changes.
Is it harder to attract those customers is it more competitive versus kind of a lower on self serve customers. Thanks. So much.
We don't see well, we came to commerce, because it took them two weeks and said I want to be a shopping cart.
Jumping out on my website, that's going to give me a shopping cart right to remind everybody is beginning a solution for shopping cart with shopify and that's what's kind of like to think we added.
We offer them the temple and realized that we.
We need to build one of all and this is becoming part of our business and.
So we don't see any change in how people behave so it's not like.
We get lift I think we actually get more of it as a percentage so not so I would say positive change.
Of course, when it comes to shopping card specifically right. There is a giant in their own right as an elephant which is shopify.
However, it's really good business for us growing very quickly when it comes to the rest of what we do in Columbus, which is that we do feel like scheduling booking.
Event hotels restaurants, we don't see any any real giant and going really really well so.
And again accelerating.
Thank you guys.
Thank you and our next question comes from the line of Ken Wong with Guggenheim Securities. Your line is open. Please go ahead.
Great I wanted to just circle back on the volatility that you're seeing obviously a lot of moving pieces in your business now, but would you say that volatility leans more towards the.
Kind of the self service is it just purely because <unk> is so lumpy or is it the payments now that it's much more transactional.
Where where is this the kind of the visibility largely being clouded.
Well, we've taken everything subject to comment because that was the easiest thing I think everybody saw that.
In December of course at the lesser of ecommerce transaction that anybody expected in any thinking any company in every market.
So that was an example of our ability to predict according to what happened in October and November .
Was reduced.
We see it in the fact that we went back to if you look at the last year Q1 was the best ever at the 40, 70% growth and then Q2 was not right.
And then Q3 was even worse than Q2, and then Q4 stabilized item.
But even that was above what was in 19. So overall one of the things that we're trying to say that if you look at.
Yeah.
The volatility we described as the volatility that makes it hard to predict because if were looking at.
Being the CEO of weeks and doing petition with the easiest job ever.
Scott.
Does the trend look, let's let's extend that and we know what we are selling the external events that to make that product.
That much on it because.
Over the next few right Q2 would be as strong as Q1 last year of course.
What changed right and if we're going to see another deceleration at all but we're changing all of that is happening without changing anything in the product all competitive competitors doing anything right. So it's kind of like trying to predict global economy and government trends and we think that we are much better at predicting premium subscribers and <unk> and less coverage trends. So that's why we felt.
That.
There is a volatility created by <unk>.
Events outside and we have less of an idea how to predict that.
Very much.
Yes.
Thank you and our next question comes from the line of Elisabeth Elliot with Morgan Stanley . Your line is open. Please go ahead.
Hi, Thanks, so much for taking the question.
The sustainability, if you can do the sustainability of the revenue per subscription.
The 12% in fiscal 'twenty, one and 10% in fiscal 'twenty, we certainly impressive.
Is your view on the sustainability of double digit growth and revenue per subscription.
Right.
I believe that it will be a double digit growth.
Subscription also during this year.
During next year.
Got it and then.
Yes.
Yes.
Obviously, the most some of the reasons.
And we did mentioned before the growth of parcels.
Partners.
Growing amazingly well I mean, we provided some of the numbers right <unk> over two years and this is something that we believe that is going to continue.
And even to accelerate.
We need also to remember that the commerce will continue to breed hydro price up GP re growth.
Some new other products that we're going to do so all of it together.
Cause us to believe that it's going to be a double digit growth.
And we feel very excited about it.
Got it and then just a clarification.
You referenced it take rate.
<unk> I just wanted to get a sense for how that compared kind of person to your target.
12513, and kind of what are the <unk>.
Levers for incremental improvement going forward. Thank you.
Yes. It is.
Slightly improved compared to what we thought.
We added much more functionality and integration with payments providers.
We were able also to penetrate.
Graphics more countries. So all overall its bill.
Prove the take rate.
And this is something that we believe that it's going to continue also this year.
Thank you.
Thank you and this concludes today's question and answer session and I would like to turn the conference back over to Maggie O'donnell for any further remarks.
Thank you Michelle Thank you everybody for joining us today have a great day.
This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
Thank you.
Yes.
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