Q1 2024 Wix.com Ltd Earnings Call
Okay.
Operator: Good day, and thank you for standing by. Welcome to Wix's First Quarter 2024 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 1 1 on your telephone. You will then hear an automatic message device in your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Emily Liu of Investor Relations. Please go ahead.
Speaker Change: Good day and thank you for standing by welcome to <unk> first quarter 'twenty 'twenty four earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session. That's a question. During the session you will need to press star one one on your telephone you will then be an automatic messages.
Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.
Speaker Change: Oh, Hey, let's raise please note that today's conference is being recorded.
Speaker Change: Now hand, the conference over to your Speaker House, Emily Lee of Investor Relations. Please go ahead.
Emily Liu: Thanks and good morning everyone. Welcome to Wix's first quarter 2024 earnings call. Joining me today to discuss our results are Avishai Abrahami, CEO and Co-Founder, Nir Zohar, our President and COO, and Lior Shemesh, our CFO. 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.
Emily Liu: Thanks, and good morning, everyone. Welcome to Wix is first quarter 2024 earnings call. Joining me today to discuss our results are at least try other hanmi CEO and co founder Nir Zohar, President and COO and you're finished our CFO during.
Speaker Change: 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.
Emily Liu: Yeah.
Speaker Change: In addition, we will comment on non-GAAP financial results and key operating metrics you can find all reconciliations between our GAAP and non-GAAP results in the earnings materials and in our interactive Analyst Center on the Investor Relations section of our web site investors <unk> Dot com with that I'll turn the call over to Avi.
Emily Liu: 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. You can find all reconciliations between our GAAP and non-GAAP results in the earnings materials and in our Interactive Analyst Center in the Investor Relations section of our website, investors.wix.com. With that, I'll turn the call over to Avishai.
Avishai Abrahami: Thanks Emily, and good morning everyone. We had a fantastic start to 2021. As we build upon the strong momentum and milestones of the last, we exceeded our expectations across many areas of our business in the first quarter by executing on a product strategy, the Growth Initiative, and commitment to balanced, profitable growth. As a result, we continue to differentiate ourselves and grow markets, as users increasingly choose Wix as the go-to platform to achieve their goals.
Emily Liu: Right.
Avi: Thanks, Emily and good morning, everyone. We had a fantastic start to 2020.
Avi: As we build upon the strong momentum milestones over the last year we.
Avi: We exceeded our expectations across many areas of our business.
Avi: In the first quarter by executing on our product strategy growth initiatives, our commitment to balanced profitable growth.
Avi: As a result, we continue to differentiate ourselves and grow market share.
Users are increasingly choose weeks as the go to platform to achieve their goals.
Avishai Abrahami: We kicked off the year with strong growth. Bookings in Q1 grew to more than $457 million, exceeding expectations. Revenue grew to $420 million, above our guidance. This outperformance drove free cash flow, which grew to more than $111 million.
Avi: We kicked off the year with a strong group booking in Q1 go to more than $457 million.
Avi: Exceeding expectations revenue grew to $420 million above our guidance. This outperformance drove free cash flow, which grew to more than.
Avishai Abrahami: This new high, a watermark in our profitability journey, is a milestone that Leo will go into more details shortly. The strong growth we saw this quarter was driven by improving business fundamentals, which I'll let you discuss in a few minutes, and incredible product innovation. In particular, we are seeing remarkable results from the product milestone achieved last year, a leading portfolio of AI technology and Wix Studio. A.I.
Avi: 111 million.
Avi: This new high watermark in our profitability journey ease.
Avi: Milestones that can always go into more details shortly.
We showed this quarter were driven by improving business for dementia, which I'll, let neel discussed in a few minutes and incredible product innovation. In particular, we are seeing remarkable results from the product milestone achieved last year and leading portfolio of AI technology and we.
Avi: Studio.
Avi: First.
Avi:
First.
Avishai Abrahami: First, our suite of AI-powered products is performing extremely well. Notably, this quarter, we released the highly-anticipated AI Website Builder. 10 plus years of web creation expertise and unparalleled knowledge base, [inaudible] Importantly, the AI-generated site includes all relevant pages, with personalized layout, themes, text, images, and business solutions, such as scheduling, e-commerce, and more. Best of all, This website is fully optimized with Wix's reliable infrastructure, including security and performance as well as built-in marketing, SEO, CRM, and analytics. There is truly nothing like this on the planet.
Avi: Our suite of AD part product is performing extremely well, notably this quarter, we released the highly anticipated AI website builder. This.
Avi: He's a corner store AI product at leverage.
Avi: 10, plus years of web creation expertise and unparalleled knowledge base.
Avi: Users behavior through a conversion of a conversation.
Avi: AI chat experience users describe their intent.
Avi: Ingalls.
Large again creates a professional unique and fully built out website that meets the user needs and dreams importantly.
Avi: We are generating site include all relevant pages.
Avi: Personalize layout seems text images and business solutions, such as scheduling ecommerce anymore vegetable.
Avi: This website fully optimize with weeks of that bug infrastructure, including security and performance sweaters built in marketing.
Speaker Change: S. Your CRM and analytics tools.
Speaker Change: There is truly nothing like this on the market.
Avishai Abrahami: Excitingly, feedback on the AI Website Builder has been incredible. In just a few short months since its launch, hundreds of thousands of sites have already been created using this tool by both investors and partners. This strong response and utilization... is a testament to the depth of our AI expertise and strength of our product. We did not step off the gas after this milestone release and recently added more products to our AI portfolio in order to make the site building experience easier and more enjoyable.
Speaker Change: Excitingly feedback on the <unk> website builder has been incredible and Joseph you short months since its launch hundreds of thousands of sites have been already been created using this tool by book.
Speaker Change: In part this strongly supports and utilization.
Speaker Change: As a testament to the depth of our expertise and strengths of our product.
Speaker Change: Yeah.
Speaker Change: We did not step up the guys. After this milestone release and recently added more products to add to our.
Speaker Change: AI portfolio in order to make the site building spirits easier and more enjoyable integrated suite of AI powered image enhancement tools that provide users with a capability to create professional images on their own high quality images in a central part of a professional website, but often hard to achieve without that.
Avishai Abrahami: In April, we released a suite of AI-powered image enhancement tools that provide users with the capability to create professional images on their own. High-quality images are an essential part of a professional website but often hard to achieve without the help of a professional photographer.
Avishai Abrahami: New users will be able to easily erase objects, generate images, and edit them to add or replace objects with a simple prompt, all without ever leaving the Wix photo studio. A few weeks ago, we also released the AI Portfolio Creator, which uses in-house AI image clustering technology and the latest AI model to enable users to easily and professionally showcase an online portfolio. Create a smooth, intuitive portfolio building experience that generates unique and professional options in moments.
Speaker Change: Help her professional photography users will be able to easily erase objects generated images and edit them to add or replace object with a simple prompt or without ever leaving the weeks.
Speaker Change: Photo studio a few weeks ago. We also released a portfolio of data, which users in house AI image cluster technology and the latest air module to enable users to easily and proficient showcase in them.
Speaker Change: Underlying portfolio this.
Speaker Change: Create a smooth annuity portfolio building experiences that generates unique professional options in moments. These new capabilities are just the start of a robust pipeline of AI enabled products.
Avishai Abrahami: These new capabilities are just the start of a robust pipeline of AI-enabled products. Still to come this year, including a variety of vertical AI business assistants that will be released throughout the year. A couple of these assistants are currently in beta testing and seeing great results. I can't wait to share this and more.
Speaker Change: Still to come this year, including a variety of vertical AI business assistant that will be at least for the year.
Speaker Change: A couple of these assistance are currently in beta testing and seeing great results and feedback again wait to share data and more.
Avishai Abrahami: We're seeing a tangible benefit from our entire AI offering, particularly a better convergence between. I strongly believe that our AI capability will be a significant driver of self-created growth in 2024. I'd like to finish with an update on Wix Studio, which continues to perform ahead of schedule. Since its launch in August, over 1 million studio accounts have been created by agencies and designers. The majority of these studio accounts are created by larger agencies completely new to Wix.
Speaker Change: We're seeing tangible benefits from our <unk>.
Speaker Change: Oh free, particularly better conversions.
Speaker Change: <unk> users.
Speaker Change: Users into premium subscriptions.
Speaker Change: I strongly believe that our AI capability it would be significant a significant driver of <unk> growth in 2024 and beyond I'd.
Speaker Change: I'd like to finish with an update on weak studio, which continues to perform ahead of plan since its launch in August over 1 million studio accounts being created by agencies and designers. The majority of the studio concept created by larger agency completely new two weeks. This is an encouraging sign that we continue to win market share.
Avishai Abrahami: This is an encouraging sign that we continue to win market share. Existing professionals are also increasingly using Studio to complement their classic editor projects, with most of our top partners having built at least one project on Studio. Moreover, fast conversion of these accounts resulted in more Studio Premium subscriptions than anticipated. This high conversion demonstrated powerful design, creation, and workflow management capabilities that professionals cannot get anywhere. As a result, we expect the lifetime value of our partners' user base to continue to improve as partners build more projects on Studio over time.
Speaker Change: Existing professionals are also increasingly using studio to complement their classic editor project with most of our top partners, having built at least one project on studio. Moreover, fast conversion of these accounts and resulted in more studio premium subscriptions than.
This high conversion demonstrated powerful design creation and workflow management capabilities, the proficient cannot get anywhere else.
Speaker Change: We expect the life time value of our partners' user base to continue to improve as partners more project.
Avishai Abrahami: As a reminder, the lifetime value of our partners is already multiple times higher than that of our sub-creators. We continue to add new innovative capabilities and improve the Studio platform, and we will introduce the ability for partners to sell Studio templates in the marketplace. Market End.
Speaker Change: Judy overtime.
Speaker Change: <unk> the lifetime value of our partner.
Speaker Change: He is already multiple times higher than that of <unk>.
Speaker Change: <unk>, we continue to add.
Innovative capabilities group the studio platform integrator introduced the ability for partners to share stood a tablet in the marketplace. This feature enables partners.
Speaker Change: Market and sell.
Avishai Abrahami: Please see the complete disclaimer at https://sites.google.com, with the momentum we started this year, I'm confident that we will succeed. We are successfully executing on a strategic initiative and growth pilot. There are many exciting things still to come in 2024 and an incredible but incredible team here. So thank you to the entire team for your hard work and dedication to our users. Without me, it would be impossible.
Speaker Change: Studio templates.
Speaker Change: Created dose increasing any potential what organically fostering the studio ecosystem with more new features on the horizon. We remain confident that studio will be a significant driver of partner group in the years to come with the momentum we started receiving I am confident that we will successfully.
Speaker Change: And we are successfully executing on our strategic initiatives and growth.
Speaker Change: <unk>.
Speaker Change: These are many exciting things are still to come in 2024, and then possible, but incredible team here at weeks. So thank you to the entire team for their hard work and dedication to our users without any over to you.
Nir Zohar: Thank you, Avishai, and thank you everyone for joining us this morning. I'd like to expand on what we saw in the first quarter in terms of our user cohorts and business fundamentals and explain how they drove our strong results, starting with our user course. We are extremely encouraged by the quality of our funnel this quarter, as demonstrated by the exceptional strength of our newest user code. The Q1-24 user courts, which had approximately 4.9 million new users, collectively generated more than $32 million in bookings in the first quarter.
Speaker Change: Thank you Avi shy and thank you everyone for joining us this morning, I'd like to expand on what you've seen in the first quarter in terms of our user cohorts and business fundamentals.
Speaker Change: And explain how the drove our strong results.
Avishai Abrahami: Starting with our user cohorts.
Speaker Change: We're extremely encouraged by the quality of our funnel this quarter demonstrated by the exceptional strength of our newest user cohorts.
Speaker Change: The Q1, 'twenty four user cohorts of approximately $4 $4 9 million, new users collectively generated more than $32 million in bookings in the first quarter.
Nir Zohar: This is 6% higher than the bookings generated by our Q1 2023 user cohort in its first quarter, despite a slightly smaller base of users. This further underscores the improving fundamentals of our business. The Q1'24 cohort now replaces the Q1'23 cohort as the strongest non-COVID cohort in our history.
Speaker Change: This is 6% higher than the bookings generated by our Q1 'twenty three user cohort in its first quarter. Despite a slightly smaller base of users.
Speaker Change: This further underscores the improving fundamentals of our business.
Speaker Change: The Q1 'twenty four cohorts now replaces the Q1 'twenty three cohort is the strongest non COVID-19 cohort in our history.
Nir Zohar: As a result, returns on our acquisition marketing investments remain elevated, and we remain on pace to sustain a time-to-return on investment, or TROI, of four to five months. At the same time, we continue to see strong performance from existing courts, as evidenced by the ongoing growth of our Q1-23 courts, which have generated over $83 million over the past five quarters. This is 5% higher than the cumulative bookings generated by the Q1-22 cohort over the same period. The incredible performance of our newest cohort and continued strength of prior cohorts are driven by robust conversion and improving monetization. I'd like to spend a few minutes talking about these business drivers.
Speaker Change: As a result.
Speaker Change: Turns on our acquisition marketing investments remained elevated.
Speaker Change: We remain on pace to sustain a time to return on investment or ROI for four to five months.
Speaker Change: At the same time, we continue to see strong performance from existing court as evidenced by the ongoing growth of our Q1, 'twenty three court, which has generated over $83 million over the past five quarters.
Speaker Change: This is 5% higher than the cumulative bookings generated by the Q1 'twenty two cohort in the same timeframe.
Speaker Change: The incredible performance of our newest cohort and continued strength of prior cohorts are driven by robust conversion and improving monetization.
Speaker Change: I'd like to spend a few minutes talking about these business drivers.
Nir Zohar: First... We've seen conversion tailwinds from the several initiatives we began last year and continue to build upon. These include, one, focusing on our marketing investment in attracting higher intent users, particularly partners and commerce users. 2.
Speaker Change: First we've seen conversion tailwind from the several initiatives, we began last year and continue to build upon these include one focusing on our marketing investment on attracting a higher intent users, particularly partners and corporate users.
Nir Zohar: The success of our expanding portfolio of AI initiatives, which we continue to expand. And finally, the early outperformance and momentum for Wix Studio, which is driving high conversion and lifetime value of parts. As a result, the most recent court experienced record conversion.
Speaker Change: The success of our expanding portfolio of AI initiatives, which we continue to expand.
Speaker Change: And finally, the early outperformance in momentum weak studio, which is driving higher conversion and lifetime value of partners.
Speaker Change: As a result, the most recent cohort experienced record conversion.
Nir Zohar: This is a tangible indication that our strategic growth plan is working. This strong conversion is coupled with improved monetization of both partners and self-care. ARPS is increasing as we expand our offering and progressively bring on users with more complex needs. These users are purchasing higher-priced packages, adopting more business applications, and generating more GPV. As we mentioned in February, we began updating package pricing this quarter for new and existing users. This is part of our ongoing strategy to align pricing with the continuously growing value our platform delivers to users.
Speaker Change: This is a tangible indication that our strategic growth plan is working.
Speaker Change: Second.
Speaker Change: This strong conversion is coupled with improved monetization of both partners and soft theaters.
Speaker Change: Rps is increasing as we expand our offering and progressively bring up on users with more complex needs.
Speaker Change: These users are purchasing higher priced packages adopting more business applications and generating more GPP.
Speaker Change: As we mentioned in February we began updating packaged pricing this quarter.
Speaker Change: New and existing users.
Speaker Change: This is part of our ongoing strategy to align pricing with a continuously growing value approximately platform delivers to users.
Nir Zohar: Our users have historically responded well to previous pricing updates, so we knew what to expect going into this. Nevertheless, I'm pleased to share we've seen better than expected user retention from this most recent price. This is a driver of our increased guidance, which Liu will discuss shortly. The combination of steadily increasing ARPS along with strong retention is evidence of our growing value proposition. Additionally, ARPS benefited from robust commerce goals. GPV in the first quarter grew 14% year over year, as larger merchants joined Wix and existing merchants on our platform grew their business.
Speaker Change: Our users have historically responded well to previous pricing updates. So we knew what to expect going into this one.
Speaker Change: Nevertheless, I'm pleased to share we've seen better than expected user retention from this most recent price change.
Speaker Change: This is a driver of our increased guidance, which Leo will discuss shortly.
Speaker Change: The combination of steadily increasing rps, along with strong retention is evidence of our growing value proposition.
Speaker Change: Additionally, AARP Benny.
<unk> benefited from robust commerce growth.
Speaker Change: <unk> in the first quarter grew 14% year over year as larger mentioned joined Wix and existing merchants on our platform grew their businesses.
Nir Zohar: Growth in GPV was coupled with increased take rate. Our take rate improved to 1.58% in Q1, an all-time high as more merchants chose Wix Payments. CommerceGov continues to be led by our partners who are responsible for roughly half of our GPV distribution. We expect GPZ from our commerce users to continue to compound and take weight to remain elevated, driving ARPS improvement going forward. Finally, we also continue to keep a close eye on the macro environment impacting users and merchants on our platform.
Speaker Change: Growth in <unk> was coupled with increased take rate.
Speaker Change: Our take rate improved to 158% in Q1, an all time high as more merchants chose wix payments.
Speaker Change: Commerce growth continues to be led by our partners, who are responsible for roughly half of our GPU this quarter.
Speaker Change: We expect GPC from our commerce users to continue to compound and take rate to remain elevated driving rps improvement going forward.
Speaker Change: Finally, we also continue to keep close eye on the macro environment impacting the users and merchants on our platform.
Nir Zohar: I'm pleased to say that the solid top-of-unnel and GPV growth trends we've seen... What we're seeing points to a normal operating environment. The macro has actually been stable and positive from where we stand for the past few quarters. We didn't see any change in Q1.
Speaker Change: I'm pleased to say that the solid top of funnel and GPU growth trends we've seen.
Speaker Change: We've seen we're seeing points to a normal operating environment.
Speaker Change: The macro has actually been stable and positive from where we stand for the past few quarters. We didn't see any change in Q1. This stability has allowed us to execute on our growth initiatives, which drove the momentum of last year and the strong start to 2024.
Nir Zohar: This stability has allowed us to execute on our growth initiative, which drove the momentum of last year and a strong start to 2024. The strong fundamentals of the quarter are proof that our marketing strategy continues to work well, and the global Wix brand remains strong. We are increasingly attracting higher intent users with greater monetization throughout their lifetime, particularly commerce users and larger partners. We expect conversion and ARPS to continue to improve as we innovate and grow our product suite to better meet the dynamic needs of our growing base of sales creators and partners. With that, I will now hand it over to Lior to walk through our financials and outlook.
Speaker Change: The strong fundamentals of the quarter are proof that our marketing strategy continues to work well and the global weeks brand remains strong.
Speaker Change: Our increasingly attracting higher intent users with greater monetization throughout their lifetime, particularly commerce users and larger partners, we expect conversion and <unk> to continue to improve as we innovate and grow our product suite to better meet the dynamic means of our growing base of creators and partners.
Leo: With that I will now hand, it over to Leo to walk through our financials and outlook.
Menashe Lior Shemesh: Thanks Nir. We kicked off 2024 with a very strong start to the year, with top line growth exceeding expectations in Q1, driven by incredible product traction, particularly for our AI offering and Wix Studio, as well as the improved business fundamentals you just heard about from Nir. Outpinned by a stable and positively trending macro environment, Jerome Grot allowed us to achieve record profitability with free cash flow margin reaching 26% this quarter.
Speaker Change: Thanks Neil.
Leo: Kicked off 2024 with a very strong start to the year with topline growth exceeded expectations in Q1, driven by incredible product traction, particularly with our AI offerings in weeks to review as well as the improved fundamentals you just heard about from Neil.
Leo: This was.
Leo: Outgained by stable and positively trending macro environment strong growth allowed us to achieve record profitability with free cash flow margin, reaching 26% this quarter as a result, better than expected growth in free cash flow generation.
Menashe Lior Shemesh: As a result, better than expected growth and free cash flow generation would have come very close to achieving the Rule of 40 in Q1 and for the full year. The growth outperformance in Q1 firms up our expectations for accelerating bookings growth in the back half of 2024, as well as anticipated strong revenue growth across both self-creators and partners in 2025. As a result, we are increasingly confident that we will significantly surpass the Rule of 40 in 2025. I will discuss this in more detail along with our updated outlook.
Leo: Very close to achieving the rule of 40 in Q1 and for the full year.
Leo: The growth outperformance in Q1 trends up our expectations for accelerating bookings growth in the back half of 2020 full as well as anticipated strong revenue growth across both sales creators and partners in 2025.
Leo: As a result, we are increasingly confident that we will significantly surpass the rule of 40 in 2025 I will discuss this in more detail along with our updated outlook shortly.
Menashe Lior Shemesh: Moving on to the details of the first quarter, total bookings were $457 million, with growth accelerating to 10% year-over-year and exceeding our expectations. Total revenue was $420 million, up 12% year-over-year and above our guidance. Bookings and revenue growth were driven by strong business fundamentals as well as robust uptakes of Wix Studio, new AI products, and our growing suite of commerce capabilities. Growth is driven by continued innovation to provide the best online creation experience for all users.
Leo: Moving on to the details of the first quarter total bookings were $457 million with growth accelerating to 10% year over year.
Leo: And exceeding our expectations.
Leo: Total revenue was $420 million up 12% year over year and above our guidance.
Leo: Bookings and revenue growth were driven by strong business fundamentals as well as robust uptake of weak studio, new AI products and growing fleet of commerce capabilities.
Leo: Growth is driven by continued innovation to provide the best online creation experience for all users.
Menashe Lior Shemesh: Our partners' business continued to build momentum and contributed meaningfully to overall growth this quarter. Partners' revenue grew 33% year-over-year as we experienced market share gains, larger agencies joining the platform, and better monetization of our existing professional users. This was due in part to Wix Studio, which is beginning to demonstrate early top-line contribution as the product continues to ramp and perform ahead of plan. With over 1 million accounts today and the number of subscriptions exceeding expectations, we expect Studio will continue to improve the lifetime value of our partner user base. Total non-GAAP gross margin in Q1 was 68%, which was in line with our expectations of 68% to 69% gross margin for the full year.
Leo: Our bottoms business continued to build momentum and contributed meaningfully to overall growth this quarter.
Leo: <unk> revenue grew 33% year over year.
Leo: We experienced market share gains with larger agencies, joining the platform and better monetization of our existing professional users.
Leo: This was due in two weeks ago deal, which is beginning to demonstrate early topline contribution as the product continues to ramp and performed ahead of plan.
Leo: With over 1 million accounts per day, and the number of subscriptions exceeding expectation, we expect <unk> will continue to improve the lifetime value of our <unk>.
Leo: Total user base.
Leo: Total non-GAAP gross margin in Q1 was 68% which was in line with our expectations of 68% to 69% gross margin for the full year non-GAAP operating income increased 43% year over year and totaled 17% of revenue our operating cost base remains stable.
Menashe Lior Shemesh: Non-GAAP operating income increased 43% year-over-year and total 17% of revenue as our operating cost base remained stable as growth outperformed. We also achieved a second consecutive quarter of positive GAAP operating income and remain on track to achieve GAAP operating profits for the full year. In Q1, Nangab Sales and Marketing expenses grew quarter over quarter to $96 million as we ramped up investment in Wix Studio as planned. We continue to execute against the streamlined marketing strategy introduced last year, resulting in stable TRY of our most recent user code compared to the prior year code.
Leo: Growth outperformed.
Leo: We also achieved our second consecutive quarter of positive GAAP operating income and we remain on track to achieve GAAP operating profit for the full year.
Leo: And Q1, non-GAAP sales and marketing expenses grew quarter over quarter to $96 million.
Leo: Ramped up investment in weeks with your plan.
Leo: We continue to execute against the streamlined marketing strategy introduced last year, resulting in stable <unk> of.
Leo: Our most recent user compared to the prior year.
Menashe Lior Shemesh: Q1 free cash flow, excluding headquarter cost, was over $111 million, our record of 26% of revenue due to strong top line growth coupled with steady operating spending. I now want to finish by providing some guidance around our expectations for the rest of 2024.
Leo: Q1 free cash flow, excluding headquarter growth was over $111 million or a record of 26% of revenue due to strong top line growth coupled with steady operating expenses.
Leo: I now want to finish by providing some color around our expectations for the rest of 2024, we expect total revenue in Q2 of 431% to $435 million, representing approximately 11%, 12% year over year growth.
Menashe Lior Shemesh: We expect total revenue in Q2 of $431 to $435 million, representing approximately 11 to 12% year-over-year growth. For the full year 2024, we are increasing our outlook. We now expect total booking of $1,796 to $1,826 million, or 12% growth year-over-year. This is up from our previous outlook of $1,784 to $1,813 million. Additionally, we are raising total revenue to $1,738 to $1,761 million, or 11% to 13% growth year-over-year. This is up from our previous outlook of $1,726 to $1,757 million.
Leo: For the full year 2024, we are increasing our outlook. We now expect total booking of 1796 to 1820 $6 million.
Leo: <unk> growth.
Leo: Growth year over year.
Leo: This is up from our previous outlook of 1784 to 1800 $13 million. Additionally, we are raising total revenue to 1738 to 1760 $1 million or 11%, 12% deleverage, so 11% to 13% growth year over year.
Leo: This is up from our previous outlook of 1726 to 1007.
Leo: $757 million.
Menashe Lior Shemesh: Importantly, we expect total bookings growth to accelerate in the second half of 2024 to 16% as the high end of our guidance range, up from 15% as previously anticipated. This acceleration is expected to come from both self-creators and partners. Self-Creators Growth Acceleration is expected to be powered by higher conversion and monetization as a result of our AI products. Meanwhile, Partners' growth acceleration is expected to be driven by Wix Studio Ramping and contributing more meaningful than initially planned.
Leo: Importantly, we expect bookings growth to accelerate in the second half of 2024% to 16% as the high end of our guidance range up from 15% as previously anticipated.
Leo: This acceleration is expected to count for both self pills and powders.
Leo: <unk> growth acceleration is expected to be powered by higher conversion and monetization as a result of our AI products.
Leo: Meanwhile, all of this growth acceleration is expected to be driven by weak studio ramping and contributing more meaningfully than initially planned.
Menashe Lior Shemesh: Creative Subscriptions booking is still expected to accelerate to double-digit growth in the second half of 2024. The success of our AI initiatives in studio will also benefit revenue on a smaller scale due to our SaaS model.
Leo: Booking is still expected to accelerate to double digit growth in the second half of 2024.
Leo: The success of our AI initiatives in studio will also benefit revenue.
Leo: On a smaller scale due to our SaaS model, we will see more significant benefit from these dynamics on our 2025 revenue.
Menashe Lior Shemesh: We will see more significant benefits from these dynamics in our 2025 revenue. We continue to expect non-GAAP total gross margin of 68% to 69%, with non-GAAP business solution gross margin to exceed 30% for the full year. Non-GAAP operating expenses are now expected to be 50% to 51% of revenue for the full year, down slightly from our previous expectation of 51% to 52% of revenue. This decrease is due to expected organic improvement in sales productivity and slower hiring as a result of the efficiency initiatives implemented over the past couple of years. We will continue to gradually invest in our studio brand as previously planned. This has not changed in our model.
We continue to expect non-GAAP total gross margin of 68% to 69% with non-GAAP user solution gross margin to exceed 30% for the full year.
non-GAAP operating expenses are now expected to be 50% to 51% of revenue for the full year down slightly from our previous expectation of 51% to 52% of revenue.
Leo: This decrease is due to expected organic improvement in sales productivity.
Leo: Slower hiring as a result of the efficiency initiatives implemented over the past couple of years, we will continue to gradually invest in our studio brand previously planned this has not changed in our model.
Menashe Lior Shemesh: We now expect to generate free cash flow excluding headquarter costs of $445 million to $465 million, or approximately This is a meaningful increase from $370 to $400 million, or 21% to 23% of revenue, as previously expected. This significant increase in free cash flow is expected to be driven by a few factors. First, and primarily our higher booking expectations. Second, a more favorable gross margin mix as creative subscriptions, Growth Accelerates, and third, the operating efficiencies I just mentioned, as well as general working capital efficiency.
Leo: We now expect to generate free cash flow, excluding headquarter cost of $445 million to $455 million.
Leo: Approximately.
Leo: 26% of revenue in 2024, this is a meaningful increase from $370 million to $400 million.
Speaker Change: Can you walk between the treatment center revenue as previously expected.
Speaker Change: This significant increase in free cash flow is expected to be driven by a few factors first and primarily our higher bookings expectations second multi available gross margin mix as creative subscriptions.
Speaker Change: Growth accelerates and said.
Speaker Change: <unk> operating efficiencies I, just mentioned as well as general working capital efficiency.
Menashe Lior Shemesh: As a result, we are now positioned an entire year ahead of our three-year plan, as we did not expect to achieve 25% plus free cash flow margin until 2025. Finally, we continue to follow through on our commitment to allocate 50% of free cash flow generation through 2025 to share repurchase. Following the completion of our $300 million plan in February, we recently implemented an additional $225 million repurchase authorization, and execution against this plan is currently underway.
Speaker Change: As a result, we are now positioned and entire year ahead of our three year plan.
Speaker Change: We did not expect to achieve 25% plus free cash flow margin until 2025.
Speaker Change: Finally, we continue to follow through our commitment to allocate 50% of free cash flow generation through 2025 through share repurchases.
Speaker Change: Following the completion of our $300 million plan in February recently implemented an additional 225 billion repurchase authorization execution against this plan is currently underway.
Menashe Lior Shemesh: As a result of this increased repurchase activity and continued share count management, we anticipate ending 2024 with a fully diluted share count of 62 to 63 million. This anticipated share count, along with stronger free cash flow expectations, translates to a higher free cash flow per share trajectory for 2024 than previously anticipated. The great progress we made in Q1 and the improved booking trend we are now expecting for the rest of the year set us up for anticipated revenue growth acceleration in 2025.
Speaker Change: As a result of this increased repurchase activity and continued share count management, we anticipate to end 2024, with a fully diluted share count of $62 million to $63 million.
Speaker Change: The anticipated share count along with stronger free cash flow expectation.
Speaker Change: This leads to a higher free cash flow per share trajectory for 2020 fold than previously anticipated.
Speaker Change: The great progress we've made in Q1 and the improved bookings trends. We are now expecting for the rest of the year set us up for anticipated revenue growth acceleration in 2025 as a result of these broad based strength in the maintenance of our stable cost structure, we are.
Menashe Lior Shemesh: As a result of this broad-based trend and the maintenance of our stable cost structure, we are increasingly confident that we will significantly surpass the rule of law in 2025. With that, we will now take your questions.
Speaker Change: <unk> really confident that we will significantly surpass the waterfalls in 2025.
Speaker Change: We will now take your questions.
Operator: Thank you. Ladies and gentlemen, to ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced; to withdraw your questions, simply press star 11 again. Please stand by while we call the county roster. Now, the first question comes from the line of Ygal Arounian with Citigroup. Your line is open.
Speaker Change: Thank you, ladies and gentlemen to ask a question you will need to press star one on your telephone and wait for your name to be announced.
Speaker Change: Your question simply press Star one again, please standby, while we compile the Q&A roster.
Speaker Change: Yes.
Speaker Change: Yes first question coming from the line of Al Ronny.
Speaker Change: <unk> with Citigroup Your line is open.
Ygal Arounian: Hey, good morning, guys. Great quarter. Maybe first, just to dig into 2025 a little bit. On the revenue growth acceleration expectations, I know we're talking about AI and studio and everything, but is there any more color on how to think about the contributions from each or which one's the biggest contributor? How much of the self-creator side is needed?
Speaker Change: Hey, good morning, guys.
Speaker Change: Maybe first just to.
Speaker Change: Dig into 2025, a little bit.
Speaker Change: On the.
Speaker Change: Revenue growth acceleration expectations, I know were talking about AI and studio and everything but.
Speaker Change: Is there any more color to.
Speaker Change: How to think about that.
Speaker Change: Contributions from major which which one is the biggest contributor how much of.
Speaker Change: The south creator side as needed.
Nir Zohar: to improve to get to that acceleration point and then follow up on studio. Really strong early success here. You're talking about, you know, seeing better signups so far. You also talked about in the letter features and improvements that are coming. How should we think about, or how do you think about the studio and the partner opportunity today versus maybe six months ago before it really rolled out? How much bigger do you see it? How much more of the professional and partner market do you think you can capture? And just a little more details on that. Thank you.
Speaker Change: To improve to get to that acceleration point and then a follow up on <unk>.
Speaker Change: Studio.
Speaker Change: Really strong early success here you're talking about.
Speaker Change: Seeing better sign up so far.
You also talked about in the letter features and improvements that are coming.
Speaker Change: How should we think about how do you think about.
Speaker Change: The studio and the partner opportunity today versus maybe six months ago before studio really really rolled out how much bigger do you see it how much more of the professional part of market do.
Speaker Change: Do you think you can capture in just a little more details on that thank you.
Menashe Lior Shemesh: Hey Ygal, I will start with the first question. I think that, you know, the way to understand the 2025 Growth is actually looking at the growth of the second half of this year. As you know revenue lag after bookings Most of the acceleration is booking is actually coming from creative subscription, which will be doubled in the second half of the year Part of it is obviously due to studio. We see much better and this is also related to the second question we see much better result in term of the adoption of studio as We anticipated initially as a result of that we believe that creative subscription is going to be Accelerated due to that meaning that we are seeing more accounts and more premiums coming out of studio, The second thing is about the different AI tools that we launched, and definitely we see the monetization, we see the contribution, we see much healthy cohorts as a result of that, better retention in some way, and as a result of that we believe that we are going to see acceleration of the creative subscription also as a result of the different AI tools.
Speaker Change: Hey, guys I will start with the first question I think that.
Speaker Change: The way to understand the 2025.
Speaker Change: Growth is actually looking at the growth of the second half of this year as you know revenue leg absolute bookings.
Speaker Change: Most of the acceleration is booking is actually coming from creative subscription which will be doubled.
Speaker Change: In the second half of the year.
Speaker Change: Part of it is obviously due to studio we see much better and this is also related to the second question, we see much better results in terms of the adoption of <unk>.
Speaker Change: We anticipated initially as a result of that we believe that creative subscription is going to be.
Speaker Change: Accelerated due to that meaning that we are seeing more accounts and more premium is coming out of school deal.
Speaker Change: The second thing is about the different AI tools that we launched and definitely we see the monetization we see the contribution.
Speaker Change: We see much healthy cohorts as a result of that better retention in some way.
Speaker Change: And as a result of that we believe that we're going to see acceleration of the creative subscription also as a result of the different AI tools.
Menashe Lior Shemesh: The third thing is obviously the price optimization that we've made. We are going to see the benefit of it mostly in booking in the second half of the year, and also revenue will follow through 2025. All that is going to result in better revenue growth than we've seen this year.
Speaker Change: <unk> is obviously.
Speaker Change: The price optimization that we've made we're going to see the benefit of it mostly in booking in the second half of the year and also revenue will follow.
Speaker Change: Through 2025, all of that is going to be resulted with a better revenue.
Growth than.
Speaker Change: And then we've seen this year.
Nir Zohar: Well, I asked for studios. I think that the question was about how we see it now and what we think that it means in the long term for our potential. Obviously, as I mentioned in my notes... Today, the studio is doing better than we predicted. We think that this is a great sign for product adoption. Obviously, for us, partners, and agencies are the bigger market that we still have not yet addressed in the past, so it's a great opportunity.
Speaker Change: Well as for studio.
Speaker Change: I think the question was about how do we see it now and what do we think that it means in the long term on a potential obviously as I mentioned in my notes today.
Speaker Change: It is doing better than.
Speaker Change: We predicted we think that this is a great sign for the product.
Speaker Change: Adoption.
Obviously for US partners agencies at the bigger market that we're still not able to get addressed in the past so it's a great opportunity.
Nir Zohar: With reaching 1 million registered accounts already, we're seeing growth into that market happening very quickly. The business fundamentals of websites built with Studio are better than, of course, self-creators. It's usually companies that are going to agencies that have a bigger budget and more experience in their business. And as a result, we're seeing better GPV, better retention, and that drives, of course, LTV to be higher. And the other thing that I believe is very obvious.
Speaker Change: We do.
Speaker Change: Reaching eight 1 million.
Speaker Change: Registered account already we're seeing.
Speaker Change: Growth into that market is happening very quickly.
Speaker Change: The business fundamentals of websites built which studio are better then of course <unk>.
Speaker Change: Usually companies that are going to agencies that have a bigger budget and more experienced in their business and as a result, we're seeing a better <unk> better retention and that drives.
Speaker Change: Of course LTV to be higher.
Speaker Change: The other thing that I believe is very albeit.
Nir Zohar: And when you look at the result of studio so far, we're gaining market share in a market that we have not addressed before. So looking at everything that has come out of studio until now and knowing what we're planning to do in the future in terms of product innovation and marketing innovation, I believe that it's going to continue to help us to gain significant market shares with the agency.
When you look at the result of studios that we're gaining market share in a market that we have not addressed before so looking at everything that came from studio until now.
Speaker Change: Knowing what we're planning to do in the future in terms of product innovation and marketing innovation I believe that it is going to continue to <unk>.
Speaker Change: Help us to gain significant market shares with agencies.
Ygal Arounian: Thanks. Just a super quick follow-up on 2025. I forgot to ask the initial question. On the margin front, you pulled that number forward by more than a year, right? You know, 20-25% for 2025, or 26% now. How should we think about the margin trajectory, you know, beyond 24 at this point? Thanks guys.
Mike: Thanks, Mike just Super quick follow up on 2025.
Speaker Change: The initial question.
Speaker Change: On the margin front, you called that number forward.
Speaker Change: By more than a year right.
Speaker Change: 25% for 2025, 26% now.
Speaker Change: Should we think about.
Speaker Change: The margin trajectory beyond 24 at this point, thank you guys.
Menashe Lior Shemesh: So look, obviously, I mean, we see a great result of free cash flow, you know, for this year. And this is why we mentioned that we do believe that we will significantly surpass the rule of 40. This will be as a result of both growth and free cash flow margin. I think that, you know, it's coming together because, you know, think about it this way when we see a significant increase. In Creative Subscription, most of it goes to the bottom line as the gross margin on it is really, really high. So I believe that it means that we are going to see acceleration of both.
Speaker Change: So look obviously I mean, we see great result of free cash flow.
Speaker Change: And Noah for for this year.
Speaker Change: And this is why we mentioned that we do believe that will significantly surpass the rule of 40.
Speaker Change: This is will be as a result of both growth, but also free cash flow margin.
Speaker Change: That can always come together, because you know think about it this way when we see.
Speaker Change: A significant increase.
Speaker Change: In creative subscription most of it go to the bottom line.
Speaker Change: Gross margin of it is really really high.
Speaker Change: So I believe that.
Speaker Change: It means that we're going to see acceleration of both.
Speaker Change: Thank you.
Ken Wong: Thank you. And our next question comes from the line of Ken Wong with Oppenheimer. Your line is open.
Speaker Change: Thank you.
Speaker Change: Our next question coming from the line of Ken Wong with Oppenheimer. Your line is now open.
Nir Zohar: You guys changed compensation for your partners; I was just wondering what you saw in the early days there. Are you getting the effect on the incremental attach and upmarket selling that you guys are anticipating?
Ken Wong: Great. Thank you for taking my question, maybe just for RV side, maybe near you guys change compensation for your partners. Just wondering what you saw in the early days there are you getting the.
Speaker Change: The effect on the incremental attach an upmarket selling that you guys are anticipating any any color would be great.
Ken Wong: And any color would be great.
Nir Zohar: Hey Ken, it's Nir. So it's still relatively early, as you mentioned. Okay, this is something we fully implemented early in Q1. The early results are, I would say, very encouraging. We're seeing that people definitely want to take advantage of it, which means that they are more motivated to onboard Wix Studio for their projects as agencies, and they're also motivated to use more business functionality, add more GP, you know, drive GPV, and it's definitely something that we see as driving higher adoption of all of those kinds of ARPS drivers altogether on the partner side. Our expectations, again, because it's still early, are for this to keep on expanding and be a great tool for us to increase the connection and the loyalty of the agencies and the partners.
Speaker Change: Hey, Ken.
So.
Speaker Change: It's still relatively early as you mentioned, okay to do something.
Speaker Change: We fully implemented in early in Q1. The early results are I would say very encouraging we're seeing.
Speaker Change: We're seeing that people definitely want to take advantage of it which means that they are they are.
Speaker Change: More motivated.
Speaker Change: To onboard.
Speaker Change: Weak studio for the projects as the agencies and they are also motivated to use more business functionality add more GP Jive <unk>.
Speaker Change: And it's definitely something that we see as driving higher adoption of all of all of those kind of aarp's drivers altogether on the on the partner side our expectation.
Speaker Change: <unk> again, because it's still early for this to keep on expanding and create a great.
Speaker Change: <unk> for us to increase the.
The connection and the loyalty.
Speaker Change: Of the agencies and partners.
Ken Wong: Got it. Fantastic. And then maybe just a follow-up. We are on the 25 pre-cash flow margins. I think one other dynamic you guys mentioned was maybe the tax rate going up. I guess, how should we think about kind of that impact next year relative to what was baked into the targets earlier?
Speaker Change: Got it fantastic and then.
Maybe just a follow up there on the on the 25% free cash flow margin.
Speaker Change: I think one other dynamic you guys mentioned was just maybe the tax rate going up I guess, how should we think about kind of that impact next year relative to what was baked into the targets earlier.
Menashe Lior Shemesh: Look, I think that in terms of the overall tax rate, next year we are mostly going to use the losses carry forward that we have. So I don't think that it will have any impact. Obviously, it's going to have an impact mostly from 2026 onward. But it's already baked into the numbers, meaning that, yes, we are going to pay more taxes. But on the other hand, I think that the benefit that we are going to get from the accelerated revenue and the efficiency that we have with our operating expenses is going to drive free cash flow even higher. Okay, perfect.
Speaker Change: Look I think that in term of the <unk>.
Speaker Change: Our tax rate next year, we are mostly going to up.
Speaker Change: You know the use.
Speaker Change: Losses carryforward that we have.
Speaker Change: So I don't think that it will have an impact obviously its going to have impacts from.
Speaker Change: Mostly from 2026 onward.
Speaker Change: But it's already baked into the numbers, meaning that yes, we are going to pay more taxes.
But on the other and I think that the benefit that we are going to get from the accelerated revenue.
Speaker Change: With the efficiency that we have with our operating expenses are going to drive free cash flow.
Speaker Change: Even even higher.
Ken Wong: Okay, perfect. Thanks a lot. Great quarter, guys.
Speaker Change: Okay perfect. Thanks, a lot great quarter guys.
Speaker Change: Thank you.
Operator: And our next question, coming from the line-up... Chien-Li with Evercore Sialan Sulfan.
Speaker Change: Thank you.
Speaker Change: Our next question coming from the line of.
Speaker Change: Ken <unk> with Evercore ISI. Your line is now open.
Chien-Li: Great, thanks a lot. First question on the full year bookings guide. It's a pretty strong second half acceleration.
Ken <unk>: Great. Thanks, a lot first question on <unk>.
Speaker Change: The full year bookings guide.
Speaker Change: It's a pretty strong second half acceleration I think you touched on a little bit on the drivers, but can you just parse out a little more how much of this outlook is driven by.
Speaker Change: The current pricing increased contribution of our new product rollout and I think you mentioned a couple of other products like AI business assistance are these baked into the guide R&D as kind of a.
Speaker Change: Upside and specifically if ourself create or should we kind of expect to see that.
Chien-Li: I think you touched on a little bit about the drivers, but can you just parse out a little more how much of this outlook is driven by, you know, the current pricing increased contribution versus new product rollout? And I think you mentioned a couple of other products like AI business assistance. Are these baked into the guide, or are these kind of upside? And specifically for self-creators, should we kind of expect to see the end of the year at double digit growth? If you can kind of share your growth trajectory for both? Thanks.
Speaker Change: Exiting the year at double digit growth.
Speaker Change: You can kind of share.
Speaker Change: Alright.
Speaker Change: Trajectory profile.
Menashe Lior Shemesh: Okay, so I will try to mention again the main reasons, but I think that by far the number one reason is the increase that we see in our business. And it's coming from both self-creators, mostly driven by, you know, the different AI tools that we've launched, but obviously also from partners, because we see the adoption of studio, and we already see the early numbers. We understand exactly what the contribution will be in the second half of the year.
Speaker Change: Okay. So I will try to.
Speaker Change: <unk>.
Speaker Change: To try to.
Speaker Change: Mentioned again.
Speaker Change: The main reasons.
Speaker Change: I think that by far the number one reason is the increase that we've seen in our business.
Speaker Change: And it's coming from both.
Speaker Change: Self creators.
Mostly driven by the different the AI tools that we've launched.
Speaker Change: But obviously also from partners.
Speaker Change: Because we see the adoption of two deal and we already see the early numbers, we understand exactly what is the contribution.
Speaker Change: In the second half of the year.
Menashe Lior Shemesh: And that was, you know, this was like, the number one reason. We see a much better business, a much more creative subscription, more premiums, more agencies coming to Wix, using Wix, a new agency, and also existing agencies using Wix for more of their projects. I think that, you know, the overall contribution of that is the most significant one. And this is, like, most of the reason why we increased guidance. Remember that we did a price increase earlier this year.
Speaker Change: And that was this is like number one reason, we see a much better business much more creative subscription more premium small agencies coming two weeks using weeks.
Speaker Change: Our new agencies.
Speaker Change: And also existing agencies using wix for malls or project I think that you know the overall contribution of that is the most significant one and this is like most of the reason why we increased guidance remember that we did.
The price increase earlier this year. So we have no surprises overdue. So most of the increase that we've made this quarter is a result of those are both AI and studio.
Menashe Lior Shemesh: So we have no surprises over there. So most of the increase that we've made this quarter is a result of both the AI and studio rollout and the growing impact that we see. And this is really exciting.
All out and the growing impact that we see and this is really exciting.
Menashe Lior Shemesh: And again, most of the impact is on creative subscriptions, to make sure that it's clear. By the way, we also see a change in mix of our customers, meaning that we have already passed 50% of GPV coming from partners, so it means that the different mix using more business solutions, and as a result of that, we see an increase in output, with regard to the second question about self-creators. So we are going to see that Self-Creators exit 2024 with double-digit growth. Obviously in bookings, right, but not really. The question was about bookings.
Speaker Change: And again most of the impact these on creative subscriptions to.
Speaker Change: To make sure that it's clear.
Speaker Change: By the way, we will also feed the changing mix of our customers, meaning that we already passed the 50% of GP re coming for partners. So it means that the different mix using more business solution as a result of that we see increasing output.
Speaker Change: With regard to the second question about <unk>.
Speaker Change: So we are going to feed the <unk> exit 'twenty 'twenty four with the double digit growth.
Speaker Change: Yeah.
Speaker Change: Obviously in bookings right.
Speaker Change: That's revenue.
Speaker Change: The question was about the bookings.
Chien-Li: If I can follow up on your comment on Partners Growth taking market share, where do you think this market share is coming from? Is it mostly WordPress? Is it from your peers? We've seen a lot of product innovation coming out of the space in general. Anything in particular that you think could drive a more favorable competitive position for Wix specifically?
Speaker Change: Yes, correct.
Speaker Change: But if I can double like follow up on your comment on partners cross taking market share.
Speaker Change: Do you think this market share is coming from is it mostly we're past I just from your peers.
Speaker Change: <unk> seen a lot of kind of product innovation coming out of the space in general anything that in particular that you think could drive a more favorable competitive position for wet specifically thank you.
Speaker Change: I think that the.
Speaker Change: Most of your market share is coming from agencies that are using legacy system.
Speaker Change: Some of them will be open source like drupal.
Speaker Change: What price solar.
Speaker Change: A big mix of Odyssey stem cell.
Speaker Change: And so this is what most of the market share is coming from.
Speaker Change: In terms of is there anything that.
Speaker Change: Can contribute to better growth I believe that each brand awareness, we're getting our brand.
Speaker Change: Studio to be more recognizable and more associated with their function incredible functionality that it contains and then of course product innovation.
Speaker Change: There's just so much more we can do.
Nir Zohar: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question coming from the line of Jeffrey Young with Barclays. Your line is now open.
Speaker Change: Great. Thank you for the questions first on free cash flow margin any color on margin across self greater versus partner itself create or approaching that 35% long term goal from the analyst day, and then second question Nir just to clarify your remarks on user retention following the most recent price increases.
Kris: Kris is that retention following the increase better similar or worse than what you saw when you took price back in 'twenty two.
Chien-Li: I think that most of the market share is coming from agencies that are using legacy systems. Some of them will be open source, like Drupal, WordPress, or... a big mix of other systems. And so this is where most of the market share is coming from. In terms of, is there anything that can contribute to better growth?, I believe that. Brand awareness, getting our brand of studio to be more recognizable and more associated with the incredible functionality that it contains, and then, of course, product innovation. And there's still so much more we can do.
Speaker Change: So let me start from the second question because it's.
Speaker Change: Kind of a quick clarification I would guess and then Liam can follow up on the cash flow margin. So from in terms of the user retention on the price increase.
Speaker Change: As.
Speaker Change: The remark the written remark was essentially that.
Speaker Change: It is better retention that what we've seen in previous price changes that we've done.
Speaker Change: We always look at all the data we have in the past change has been made in order to model and understand what makes sense and what to expect and we are happy to say that in this case it was actually slightly better than we anticipated.
Speaker Change: Yes, so with regards to the two.
Speaker Change: To the first part of the question. So yes, I mean this year.
Speaker Change: We guided for 26% of free cash flow. So obviously it means to seeing Scott in term of a positive.
Speaker Change: We are already really profitable on this.
Speaker Change: As a business, we're happy to say that.
Speaker Change: But it also means that the same schedule business as you mentioned is getting closer to 35%.
Speaker Change: I believe that it's an amazing milestone for us, which actually demonstrate the strength of our model.
And I believe that it will continue I think that it's also called for a very interesting fact that.
Speaker Change: Partners in the long term I believe that is going to be more or less.
Speaker Change: The same place and even higher.
Speaker Change: Great. Thank you both.
Speaker Change: Thank you.
Operator: Thank you, and our next question, coming from the line of Trevor Young with Barclays New Zealand, is open.
Speaker Change: And our next question coming from the line of <unk>.
Andrew Boone with JMP Securities. Your line is open.
Trevor Vincent Young: Great, thank you for the questions. First, on free cash flow margin, any color on margin across self-creator versus partner? Is self-creator approaching that 35% long-term goal from the analyst day? And then second question, Nir, just to clarify your remarks on user retention following the most recent price increase: is retention following the increase better, similar, or worse than what you saw when you took price back in 22?
Andrew M. Boone: Good morning, and thanks, so much for taking my questions I wanted to ask about the sustainability of your marketing efficiency.
Andrew M. Boone: What's driving the recent efficiency and then why not invest more like why are you guys, making the choice to take margin here.
And then secondly can you talk about ai's impact on driving higher catch what products exactly we're seeing higher attach and how do we expect this to evolve going forward. Thanks, so much.
Andrew M. Boone: Great.
Speaker Change: You can talk about the first one.
Nir Zohar: So let me start with the second question, because it's just a kind of a quick clarification, I would guess, and then Liu can follow up on the cash flow margin. So in terms of user retention on the price increase, as the remark, the written remark was essentially that it was better retention than what we've seen in previous price changes that we've done. You know, we always look at all the data we have and the past changes we've made in order to model and understand what makes sense and what to expect. And we are happy to say that, in this case, it was actually slightly better than we expected. Yes, so with regard to
Speaker Change: So in terms of the sustainability of the marketing efficiency.
Menashe Lior Shemesh: Yes, so with regard to the first part of the question, so yes, I mean, this year we got it for 26% of free cash flow. So obviously, it means two things: that, in terms of parcels, we are already really profitable in this business, and we are happy to say that. But it also means that the self-care business, as you mentioned, is getting closer to 35%. You know, I believe that it's an amazing milestone for us, which actually demonstrates the strength of our model, and I believe that it will continue. I think that it's also called for a very interesting fact that partners, in the long term, I believe that they're going to be more or less at the same place and even higher.
Speaker Change: Doing this for almost I would say almost two years now or clothing up on two years now.
Operator: And our next question comes from the line of Andrew Boone with GMP Securities. Your line is open.
Speaker Change: We definitely feel that it is.
Speaker Change: Very sustainable.
Speaker Change: I don't think anything is you can add.
Speaker Change: Massive change lately.
Andrew M. Boone: Good morning. Thanks so much for taking my questions.
Speaker Change: Sure.
Speaker Change: It's a machine that we keep on optimizing and improving.
And it mainly aimed at the end of the day to to attract.
Speaker Change: The higher intent users.
Speaker Change: And to US is that we believe we will end up also adopting.
Speaker Change: More functionality.
Speaker Change: More and more business applications and the potential of generating more GPC.
Speaker Change: Is there a potential route.
Speaker Change: Room to grow and spend more but we always explore that and if you have that at the same at the same category of confuses then obviously, we'll be doing so.
Speaker Change: The reason we were able to do this as a reminder, at the end of the day.
Speaker Change: Due to the strength of our global brands I think.
Speaker Change: Kate.
Speaker Change: Investing in building, a very sustainable and strong brand globally allowed us to go down this path of a much more efficient marketing than we did before and we're very happy with these results.
Andrew M. Boone: I wanted to ask about the sustainability of your marketing efficiency. What's driving the recent efficiency, and then why not invest more? Like, why are you guys making the choice to take margin here? And then, secondly, can you talk about AI's impact on driving higher attach? What products exactly are we seeing higher attach on, and how do we expect this to evolve going forward?
Speaker Change: The second thing on AI and attach.
Speaker Change: Of course.
Speaker Change: Question is about which products are driving more product attachment why does it matter.
Speaker Change: Yes.
Speaker Change: Alright.
Speaker Change: Sure.
Speaker Change: Thank you.
Speaker Change: All right.
Speaker Change: Recommends the dashboard.
Speaker Change: Okay.
Speaker Change: I think that this is kind of a very.
Speaker Change: We are seeing now that given the you know when we look at the site builders.
Speaker Change: The guidance I feel to it.
Speaker Change: Interviews you about your business and then it was a combined which products.
Speaker Change: Our best for your.
Speaker Change: For your business of course, you can override.
Speaker Change: It's doing a pretty good job. So that's the first one the second one is.
Speaker Change: It's going to be a lot in what we call the business assistance of the vertical business assistance, where we think they're going to be a massive contribution to the exposure of products because it essentially have a conversation with you about what you can do what is happening in your business and what tools can help you advance more with your goals. So if I understand the question correctly.
Speaker Change: It is.
Speaker Change: I believe that the right right.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: And our last question coming from the line of Josh Beck with Raymond James Your line is now open.
Josh Beck: Yes. Thank you for taking the question I wanted to kind of.
Josh Beck: Follow on to that and just kind of understand.
Josh Beck: With respect to the AI tools.
Speaker Change #100: Do you see this primarily impacting the new the new customers.
Speaker Change #100: Any sense of how high adoption you could see maybe.
Speaker Change #100: Amongst the self creators in the years ahead, and then from a product point of view.
Speaker Change #100: How much different do you expect.
This suite of products to look maybe one year ahead or further.
Speaker Change #100: Just.
Speaker Change #101: With respect to Onboarding and that kind of thing.
Speaker Change #101: So.
Speaker Change #101: Obviously.
Speaker Change #101: When users are building the website the website creation tools available to them.
Speaker Change #101: Helping them most of our users will stay a few years or more than that with the same website and sometimes when they are updated but they're not going to recreate it. So in that time of course, the exposure is limited by the integration of the vertical assistance is having that means that every time, we go to the website youre going to have recommendation.
Speaker Change #102: <unk> you can do with AI.
Speaker Change #102: Exposure will be pretty much.
Every time you go into the website.
And that see significantly higher.
Speaker Change #102: If you think about the fact that we have.
Speaker Change #102: And a lot of people to run the business in total weeks. It means that all of those guys will be daily almost daily exposed to new products.
Speaker Change #102: AI.
Speaker Change #102: As for how much different.
Speaker Change #102: The product will be in a year.
Speaker Change #102: We always strive to.
Speaker Change #102: Make big changes, but we also worked very hard to make sure that we test it very carefully and part of that.
Speaker Change #102: None in already learned user behavior that the users have which is why if you go to weeks today, new and used it youre going to find AI tools, but im not going to replace what you already know how to do.
Speaker Change #102: Some time, if you want to change an image for example, it's easier to click click on change image instead of right into the prompt a police changed.
Speaker Change #103: Amy deferred the image from the top.
Speaker Change #103: So it's always about the combination of how you do things in a balanced way, while allowing users to feel comfortable with the changes and not.
Speaker Change #103: Moving beyond that saying all of that we do have a lot of really interesting things coming with AI.
Speaker Change #103: <unk>.
Speaker Change #103: I think actually changing.
Speaker Change #103: The potential to be able to use it in a significant ways.
Speaker Change #103: Okay.
Speaker Change #104: Helpful. And then maybe just a follow up.
Speaker Change #105: On the macro certainly.
Speaker Change #106: The commentary I think from <unk> was certainly signs of stability. How do you feel like I know this is tough to judge but.
Obviously, there was a big pull forward that there was a little bit of a give back but with respect to.
Speaker Change #106: The pace of new business formation.
Speaker Change #106: Demand to build websites do you feel like.
Speaker Change #106: We're at a pretty stable point from here are there any.
Speaker Change #106: Particular macro factors that you are watching very closely that could swing that more positively or negatively just would love to hear.
Speaker Change #107: More on that topic, well I do believe that.
Speaker Change #108: I want to first of all give a disclaimer here.
Speaker Change #108: And.
Speaker Change #109: I don't think anyone here is able to predict the economy and I think that's going to always have the bigger effect on anything happening with formation of new businesses.
But.
Speaker Change #109: If we.
Speaker Change #109: Ignore that for a minute the effects of the economy and we look at the effect of what's happening now in the world I believe that theres, so much potential for new things coming with AI. So much potential in roofing coming with market trends and new technology is introduced into the market that I believe that we're going to continue to see significant innovation growing innovation.
Speaker Change #109: Coming from small businesses and bigger businesses in the world, which will probably result in the submission of additional.
Speaker Change #109: Growth for us.
Speaker Change #109: However of course, the economy is going to be always the stronger first to influence everything.
Speaker Change #110: Thank you.
Speaker Change #111: That's all the time, we have our Q&A session I will now turn the call back over to the company for any closing remarks.
Nir Zohar: Thanks so much.
Andrew M. Boone: All right. Yeah, you can talk about it.
Nir Zohar: So in terms of the sustainability of market efficiency, as we've been doing this for almost, I would say, almost two years now, or closing up on two years now, we definitely feel that it is very sustainable. I don't think anything has driven a massive change lately. It's a machine that we keep on optimizing and improving, and it's mainly aimed, at the end of the day, to attract higher-intent users, and the users that we believe will end up also adopting more functionality, more business applications, and the potential to generate more GTV.
Nir Zohar: Is there potential room to grow and spend more? We always explore that, and if you have that in the same category of scant users, then obviously, we'll be doing so. The reason we were able to do this, as a reminder at the end of the day, is due to the strength of our global brand. I think a decade of investing in and building a very sustainable and strong brand globally allowed us to go down this path of much more efficient marketing than we did before, and we are very happy with this result.
Andrew M. Boone: Anything on AI and attachments? Of course, and the question is about which products are arriving with more product attachment. What does it mean, product attachment?
Nir Zohar: Our AR technology is including how, you know, like...
Nir Zohar: Right, it recommends that. Okay, so I think that this is kind of a very... We're seeing now that even when we look at the site builder, the AI site builder, it actually interviews you about your business, and then it will recommend which product. [inaudible] There's going to be a lot in what we call business assistance or vertical business assistance, where we think they're going to be a massive contribution to the exposure of products because they essentially have a conversation with you about what you can do, what is happening in your business, and what tools can help you advance more with your goals. So, if I understand the question correctly, that is the... I believe they'd do right by him.
Speaker Change #112: Thanks, everyone for joining us today, and we'll talk to you next time. Thanks Bye.
Josh Beck: And our last questioner, coming from the line of Josh Beck with Raymond James, he'll be on his cell phone.
Josh Beck: Yes, thank you for taking the question. I wanted to kind of, you know, follow on to that and just kind of understand, you know, with respect to the AI tools, do you see this, you know, primarily impacting, you know, new customers? Any sense of how high adoption you could see maybe amongst self-creators in the years ahead? And then from a product point of view, how much different do you expect this suite of products to look maybe, you know, one year ahead or further? Just, you know, with respect to, you know, onboarding and that kind of thing.
Avishai Abrahami: Obviously, when users are building websites, all the website creation tools are visible to them, and I'm helping them. Most of our users will stay for a few years or more than that with the same website, and they'll update it, but they're not going to recreate it. So in that term, of course, the exposure is limited by the integration of the vertical assistant. Shaving that means that every time you go to the website, you're going to have a recommendation and ideas on things you can do with AI.
Avishai Abrahami: So there the exposure will be pretty much every time you go into the website, and that is significantly higher. If you think about the fact that we have a lot of people that run their business on top of Wix, it means that all those guys will be daily or almost daily exposed to new products, with AI. How much different is that? The product will be in a year. I think we always strive to make big changes.
Avishai Abrahami: But we also worked very hard to make sure that we test it very carefully and that part of the.., known and already learned user behavior that the users have, which is why if you go to Wix today and you use it, you're going to find AI tools, but they are not going to replace what you already know how to do. Sometimes, if you want to change an image, for example, it's easier to click on Change Image instead of writing to the prompt, hey, please change the image, the deferred image from the top.
Avishai Abrahami: All right? So it's always about the combination of how you do things in a balanced way while allowing users to feel comfortable with the changes and not... Moving on from that, saying all of that, we do have a lot of really interesting things coming with AI that I think are actually changing the potential behavior of a user in a significant way.
Josh Beck: Okay, very helpful. And then maybe just to follow up on the macro, certainly, you know, the commentary, I think, from Lior was certainly signs of stability. You know, do you feel like, I know this is tough to judge, but obviously, there was a big pull forward, that there was a little bit of a give back. But, you know, with respect to, you know, the pace of new business formation, just, you know, demand to build websites, you know, do you feel like we're at a pretty stable point from here?
Josh Beck: Are there any, you know, particular macro factors that you're watching very closely that could swing that, you know, more positively or negatively? We just would love to hear a little bit more on that.
Operator: And that's all the time we have for our Q&A session. I will now turn the call back over to the company for any closing remarks.
Avishai Abrahami: Well, I do believe that, but I want to first of all give a disclaimer here. I don't think anyone here is able to predict the economy, and I think that's going to always have the bigger effect on anything happening with the formation of new businesses. Ignore that for a minute and look at the effect of what's happening now in the world. I believe that there's so much potential for new things coming with AI, so many potential new things coming with market trends and new technologies. [inaudible] However, of course, the economy is going to be always the stronger force to implant.
Unknown Executive: Thank you everyone for joining us today, and we'll talk to you next time. Bye.
Speaker Change #113: This concludes today's conference. Thank you for your participation you may now disconnect.
Speaker Change #113: Okay.
Speaker Change #113: [music].