Q4 2024 Wix.com Ltd Earnings Call
Good day and thank you for standing by. Welcome to the WIC's 4th Quarter and Full Year Earnings Conference.
for you.
Good day and thank you for standing by. Welcome to the WIC's fourth quarter and full year earnings conference call. At this time all participants are in a listen-only mode.
Speaker Change: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message device when your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised, today's conference is being recorded. I would now like to hand the conference over to your speaker today, Emily Liu. Please go ahead.
Emily Liu: Thanks and good morning everyone. Welcome to Wix's fourth quarter and full year 2024 earnings call.
Emily Liu: 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.
Emily Liu: During this call we may make forward-looking statements and these statements are based on current expectations and assumptions.
Emily Liu: 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: We do not undertake any obligation to update these forward-looking statements.
Emily Liu: In addition, we will comment on non-GAAP financial results and key operating metrics.
With that, I'll turn the call over to Avishai.
Avishai Abrahami: Thanks Emily and good morning everyone. 2024 was a fantastic year for Wix, marked by substantial growth and continued innovation that reaffirms our leadership position in the web creation space.
Avishai Abrahami: We exceeded our plan quarter after quarter, showcasing our strong execution and deep commitment to users.
Avishai Abrahami: In 2022, we set out an ambitious plan to achieve Rule of 40 by 2025.
Avishai Abrahami: I am excited to announce that not only have we now achieved the Rule of Forty milestone, but the tremendous commitment and execution of our team allowed us to reach this target a full year ahead of our goal.
Avishai Abrahami: Now naturally, we're not going to just stop there. We're continuing to aim even higher in 2025 with new goals and targets
Avishai Abrahami: Impressively, we are now setting up to achieve the Rule of 45 in 2025, which Lior will discuss in a few minutes. As we reflect on the past year, it's clear that our key product initiatives are yielding great results.
Avishai Abrahami: We exited 2024 with bookings growth of 18% year over year, fueled by acceleration in our self-creators business and strong sustained partners momentum. Partners revenue grew a lofty 30% year over year.
Avishai Abrahami: This growth reflects our continued success in winning share of the professional market, particularly among agencies.
Avishai Abrahami: as well as the ramping adoption and strong enthusiasm for our studio platform.
Avishai Abrahami: We now have over 2 million studio accounts that represent a vibrant community of creative professionals with over 75% of these accounts created by partners new to Wix.
Avishai Abrahami: Feedback has been positive, and engagement remains high, which are testaments to the value we are providing with our differentiated platform. Additionally, our self-creators business saw steady revenue growth accelerations through 2024, driven by growing tailwinds from our AI product suite.
Avishai Abrahami: We introduced a number of new creation marketing and design AI tools last year. Notably, we also rolled out our AI website builder, our new generation AI site builder.
Avishai Abrahami: This is the evolution of Wix Artificial Design Intelligence, or ADI, which was our first AI-powered website creation tool introduced in 2016. The new AI website builder is the linchpin in our suite of AI products and is revolutionizing
Web creation.
Avishai Abrahami: Available to all users today, over 1 million sites have been created and published with the Website Builder.
As I discussed...
Avishai Abrahami: last quarter, the AI website builder continues to drive demonstrably stronger conversion and purchase behavior as well.
Avishai Abrahami: Looking ahead, I'm excited about the product roadmap for 2025. Our 2023 launch of Studio was a major landmark in our product strategy.
Avishai Abrahami: With incredible reception and strong adoption, Studio has revolutionized web creation for professionals and has proven to be a key growth driver for our partners' business. This year, we're channeling that same enthusiasm and focus
Avishai Abrahami: to reimagine the self-creator experience. We have two major products that I believe will change how self-creators build and grow online. The first will be a new solution that expands powerful design capabilities beyond just websites.
Avishai Abrahami: We expect this to launch around spring. The second will be a transformative new way for self-creators to build their presence on the Internet.
Avishai Abrahami: This is planned for launch in the early fall. I strongly believe that these two products will drive tremendous value for self-creators and accelerate growth in this business to double digits.
Avishai Abrahami: On the other hand, we also have a number of exciting new products and features planned for partners this year.
Avishai Abrahami: We remain dedicated to evolving the studio platform into the go-to canvas for professionals where creativity meets functionality.
Avishai Abrahami: We will introduce new advanced design tools that will enable professionals to push limits and achieve spectacular and powerful results efficiently, ultimately driving further market share gains.
Avishai Abrahami: This means that by the end of 2025, we will have an unmatched offering with two clearly differentiated and best-in-class products for self-creators and partners. Finally, A, I remains a major part of our product roadmap.
Avishai Abrahami: In December, we introduced our first monetized AI product, the AI Site Chat. This tool provides a 24-7 AI-powered chat between businesses and their customers, answering questions and directing customers to relevant products and services.
Avishai Abrahami: In 2025, our focus is on AI assistants and agents. We've recently started to test our AI assistant in the Wix Business Manager, which adds a seamless chat interface to the dashboard.
Avishai Abrahami: This chat guides users and helps to execute tasks such as creating bookings, purchasing domain names, and much more all from a single entry point. We are also currently in the early rollout phase of our specialized AI marketing agent.
Avishai Abrahami: The marketing agent analyzes user website data to generate tailored marketing plans complete with actionable recommendations, content schedules, and SEO insights, helping users enhance online visibility and reach target audiences.
Avishai Abrahami: We continue to test monetization opportunities as adoption and usage ramps.
Avishai Abrahami: As we close out the year, I want to reiterate our commitment to continually enhance our platform and make online creation, management, and growth effortless and impactful for all our users. Thank you for your ongoing trust and support. With that, Nir, over to you.
Thanks, Avishai.
Nir Zohar: We achieved impressive bookings growth of 15% in 2024 with growth accelerating through the year, which Lior will discuss in more detail shortly.
Nir Zohar: Our incredible performance was underpinned by robust business fundamentals and fueled by successful execution of our strategic priorities.
Speaker Change: Over the past couple of years and through 2024, our strategic focus has been on onboarding higher intent users with greater lifetime value, as well as maximizing the lifetime value of our existing user base.
Speaker Change: We executed on these mandates by shifting towards a more targeted marketing strategy beginning in late 2022.
Speaker Change: addressing the more sophisticated needs of professionals with the introduction of Wix Studio last year, our cornerstone partner product.
Speaker Change: building out our comprehensive and best-in-class suite of AI capabilities to make the website creation experience more frictionless for everyone.
Speaker Change: expanding our commerce capabilities through new verticals, a growing base of Wix Payments partners and enhanced payment solutions and offerings.
Speaker Change: These engines drove take rate in 2024 to increase over 10 basis points compared to the previous year and finally regularly aligning the growing value of our platform with the price users pay.
Speaker Change: Successful implementation of these initiatives are reflected in the strong business fundamentals achieved this year.
First, the 2024 cohort performed exceptionally well.
Speaker Change: Our Q124 user cohort generated approximately 61 million dollars in cumulative bookings through its first four quarters.
Speaker Change: This is only second to the Q121 cohort, which benefited significantly from COVID tailwinds.
Speaker Change: Recent performance was particularly impressive given the smaller user base of the Q1 2024 cohort compared to previous cohorts as a result of continued execution of our streamlined marketing strategy.
Speaker Change: Additionally, average bookings per subscription or ABPS increased 13% year over year.
to more than $294.
Speaker Change: This step-up in monetization was driven by the continued shift to higher-tiered packages, increased adoption of business solutions, and compounding GPV as we onboarded and retained high-intent users such as commerce-oriented users and more upmarket partners.
Speaker Change: ABPS also benefited from the price increase implemented earlier this year, which was absorbed better than historical increases, another testament to the improving quality of our user base over recent years.
Speaker Change: At the same time, continued product innovation boosted conversion across both self-creators and partners. Throughout 2024, we introduced and expanded the integration of AI across our onboarding process.
Speaker Change: Most new users today are creating their websites through our AI-powered onboarding process and website builder, which is leading to a meaningful increase in conversion of free users to paid subscriptions, particularly among self-creators.
Speaker Change: As we innovate best-in-class products to provide users a seamless and intuitive creation experience, we believe conversion will continue to improve.
Speaker Change: Given these solid fundamentals, we now expect existing user cohorts to generate 18.4 billion dollars in bookings over the next 10 years, assuming consistent cohort behavior.
Speaker Change: This is a significant increase compared to the $16.2 billion estimated in last year's model. The improvement underscores the high quality of users brought onto the platform in 2024, as well as the tremendous increase in value of our overall user base over the past year.
Speaker Change: Finally, existing cohort behavior improved compared to the prior year, demonstrated by net revenue retention increasing to 106% in 2024.
Speaker Change: We expect our growing product offering and continued ability to attract partners and larger commerce users will increase revenue retention going forward.
Speaker Change: Our initiatives in recent years have undoubtedly shifted our base in favor of higher intent users such as partners and commerce users.
Speaker Change: This dynamic has been meaningfully accretive to our business, as demonstrated by the strong top-line growth achieved in 2024.
Speaker Change: We expect this positive momentum to continue into 2025 as we drive our strategic initiatives forward and innovate to add new layers of long-term growth.
Speaker Change: With that, I will now hand it over to Lior to walk through our financials and outlook. Lior.
Lior Shemesh: Thanks Nir. We wrapped up a fantastic 2024 with strong growth and profitability driven by successful execution of our product roadmap and pricing strategy as well as strong business fundamentals. Outperformance on all fronts put us squarely above the rule of 40 for full year 2024.
Speaker Change: a significant milestone for weeks as we outperformed the zenith targets of our three-year plan.
Speaker Change: Still, we are maintaining full speed ahead and are targeting Rule of 45 on an as-reported basis in 2025.
Speaker Change: Before walking through 2025 Outlook, I want to quickly summarize our Q4 and full year 2024 results.
Speaker Change: Bookings and revenue growth both accelerated for a fourth consecutive quarter driven by strong execution of our key growth initiatives.
Speaker Change: Studio AI and Commerce, as well as continued benefits from the price increase implemented earlier this year and a positive demand environment in Q4.
Speaker Change: Total bookings in Q4 was $465 million, up an incredible 18% year-over-year, driven by strong creative subscriptions performance and an acceleration in the business solutions segment due to robust adoption of business applications, particularly Google Workspace.
Speaker Change: We began to experience elevated FX volatility late in the fourth quarter.
continuing through the new year.
which resulted in a modest negative effects impact in Q4.
Speaker Change: Excluding FX, total bookings was over $466 million in the most recent quarter, which was at the top of expectations.
Speaker Change: Total revenue in Q4 grew to $460 million, up 14% year-over-year, driven by continued acceleration in our self-creators' business and sustained partner strength.
Speaker Change: Partners revenue grew 29% year-over-year to $168 million in Q4 as we onboarded new partners.
Studio adoption remains strong.
GPV transaction revenue in Q4 was $57 million.
Up 23% year-over-year.
Speaker Change: driven by a 12% year-over-year increase in GPV and a very meaningful year-over-year step-up in take rate.
Speaker Change: as we expanded the Wix Payments platform. In the fourth quarter, we saw slightly lower GPV growth across some of our services' verticals compared to our initial expectations.
Speaker Change: We believe this was due to Christmas falling in the middle of the week in 2024, which drove many service-focused merchants to stay home and celebrate with their families the entire week, resulting in fewer selling days for those merchants.
Speaker Change: GPV was also impacted by the FX headwinds that arose late in the fourth quarter. Adjusting for FX, GPV was up 13% year over year on a constant currency basis.
Speaker Change: These situational GPV headwinds drove transaction revenue to finish lower than expected in the quarter which had immediate impact on bookings and revenue in Q4.
Speaker Change: Turning to margins, we were able to drive continued margin expansion and increased profitability as we kept our costs stable, resulting in better growth and operating margins.
Speaker Change: We exited the year with free cash flow of $132 million in Q4, or 29% of revenue, moving on to 2024 full-year results.
Speaker Change: Total bookings in 2024 grew to $1.830 billion, up 15% year-over-year.
Speaker Change: Total revenue in 2024 was $1.761 billion, an increase of 13% year-over-year, with Creative Subscriptions' ARR of $1.343 billion as of the end of the year, up over 13% year-over-year.
Speaker Change: Non-Gap Operating Income Margin Expanded to 20% of Revenue in 2024
Speaker Change: An increase of nearly 450 basis points compared to 2023 as we maintain the stable operating cost base amidst strong top-line growth momentum.
We generated free cash flow of $488 million.
Speaker Change: or 28% of revenue and above the high end of our expectations.
Speaker Change: This is nearly double the free cash flow generated in 2023 and a testament to our focused cost management as we drive sustained growth momentum. Turning now to my thoughts about 2025.
Speaker Change: Following a standout 2024, we expect another year of robust growth powered by the existing key product initiatives you're familiar with, as well as other ongoing product enhancements against a positive demand environment.
Speaker Change: First, Studio continues to capture market share of the professional community, and AI usage and conversion benefits continue to ramp as our offering suite grows. We are encouraged by the trends we see today, and so we anticipate these products will be even bigger growth engines in 2025.
Second, we have a number of product enhancements.
and new strategic initiatives slotted for 2025.
Speaker Change: Many of which we have already rolled out or tested. We are seeing these enhancements and initiatives already delivering value to users today, which we expect to translate into direct ARPS and conversion tailwinds this year.
Speaker Change: We expect top line contribution from those enhancements and initiatives currently underway to increasingly layer in as we progress through the year, as it typically does in a subscription business model like ours.
Speaker Change: As a result, we expect bookings and revenue growth to accelerate in the second half of the year. This anticipated acceleration in bookings is particularly impressive as we fully lap the price increase benefit midway through Q1 2025, while we'll continue to see revenue tailwind through the entire year.
Speaker Change: I want to know that we are factoring almost no contribution from the new products you just heard about from Avishai into expectations.
Speaker Change: While I am confident these new offerings will drive medium-term growth, we do not plan to include them in Outlook until they are fully launched and we can build better expectations around early usage data.
Finally, before I turn to the numbers...
I want to remind everyone that as a global company
Speaker Change: With approximately 40% of revenue derived outside of the U.S., we began to experience adverse impact from outsized volatility in FX rates beginning mid-Q4, which has continued through the new year. Assuming late January spot rates, we anticipate strong FX headwinds to our 2025 outlook.
Speaker Change: For the full year, we expect total bookings of 2025 to 2060 million dollars on an as-reported basis up 11 to 13 percent year over year.
Speaker Change: We expect an FX headwind of approximately $45 million for the full year following changes in primarily US Dollar to Euro and British Pound exchange rates. We expect total bookings growth of 13-15% year-over-year on a constant currency basis.
Speaker Change: We expect total revenue to be $1,970-$2,000 million on a reported basis, up 12-14% year-over-year for the full year.
Speaker Change: excluding an estimated approximately 34 million dollars of negative impact from FX, we expect total revenue growth of 14 to 16 percent year-over-year on a constant currency basis.
Speaker Change: We expect total revenue in Q1 2025 of $469-$473 million on an as-reported basis, up 12-13% year-over-year.
Speaker Change: We expect total revenue growth of 13 to 14 percent year over year on a constant currency basis.
Speaker Change: Following the meaningful operating leverage generated over the past two years, we remain focused on managing a stable operating cost structure in the year ahead.
Speaker Change: As such, we anticipate top-line strength to flow through to improve profitability in 2025. We expect non-gap total gross margin to improve to 70% for the full year.
Speaker Change: Most of the anticipated margin improvement is expected to occur in the back half of 2025 as newly implemented AI cost initiatives drive incremental efficiencies across our care organization.
Speaker Change: We also expect additional operating leverage, with non-GAAP operating expenses anticipated to be 47% to 48% of revenue for the full year. This year we expect to pay cash taxes of approximately $40 million following the full utilization of our NOLs in 2024.
Speaker Change: We also anticipate CAPEX of approximately 13 to 15 million dollars.
Speaker Change: or approximately 1% of revenue in 2025. This translates to free cash flow expectations of 590 to 610 million dollars.
or 30-31% of revenue in 2025.
While FX is anticipated to be a headwind
Speaker Change: to our top line as I discussed earlier. We are modeling a benefit from the strengthening of the U.S. dollar on the expense line.
Speaker Change: With a significant portion of our operating expenses, particularly payroll, denominated in non-U.S. currencies, we expect a $25 million net headwind from FX, translating to 31-32% free cash flow margin on a constant currency basis in 2025.
Rule of Forty-Five in 2025.
a new milestone target that underscores our relentless focus
Speaker Change: on driving both growth and profitability improvements on top of the incredible progress made in recent years.
Speaker Change: Finally, I want to touch quickly on capital allocation plans for the year ahead. Our $575 million convertible note comes due in August, which at this point in time we plan to pay down with cash.
Speaker Change: Nevertheless, we remain committed to returning value to shareholders and responsibly managing dilution as demonstrated by the completion of our $200 million share repurchase program earlier this year.
Speaker Change: We were able to repurchase approximately 868,000 shares, or 1.5% of outstanding shares.
Speaker Change: We expect strong free cash flow generation, in combination with our careful focus on share count management to translate to higher free cash flow per diluted share in 2025.
Speaker Change: We have many exciting things planned for this year and I look forward to the new milestones on the horizon. Operator, we're now ready for questions.
Speaker Change: Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 11 on your telephone. If your question has been answered and you were seen with yourself from the queue, please press star 11 again. We'll pause for a moment while we compile our Q&A roster.
Speaker Change: Our first question comes from Yigal Aronian with Citigroup. Your line is open.
Hey, good morning, good afternoon guys.
It's great to see the results continue here. Maybe just...
acceleration over the course of the year.
Thank you.
I know, Lior, you mentioned...
Speaker Change: Some of that, but if we could dive into it a little bit more on the various components that drive that strength over the course of the year, particularly given the comps in the second half get much more difficult and then have a follow-up.
Lior Shemesh: Hi guys, this is Lior. Yes, you're absolutely right with regard to the conference. I think that this is what even makes it much more exciting.
Lior Shemesh: I think that, you know, take for example studio, right, or take partners as a whole, you know, they are growing faster.
Lior Shemesh: And we know, you know, based on every other SAS model, that as long as you go and progress into the year, you're getting more and more impact from those new cohorts, definitely when they're growing faster.
Lior Shemesh: So this is one, we see that Studio is going to be a major contribution. Actually today we see that Studio is, for the new court, is about 50% of the overall partner's court, which makes it even more exciting.
Lior Shemesh: The other stuff is obviously about AI. We see the impact of AI increasing conversion as long as it's progressing throughout the year. We see more and more impact of this conversion on the numbers.
Lior Shemesh: So this is mostly the effect of the new product that we've launched in 2024, and we'll see more impact on the second half of the year as a result of that.
Thank you. Thank you.
Okay, thanks and there's definitely a lot to...
ask about product-wise, but
Lior Shemesh: I've been getting this question a lot more lately on the payer side, on the premium subscriber side, and growth in that number. I know in the letter you kind of highlighted some of the year-over-year comps and factors that got that number to decline.
year-over-year slightly but
Thank you.
You know, given the commentary around better conversion.
from
all the products that are coming through.
Lior Shemesh: subscriber number, how investors should think about the growth opportunity there.
Lior Shemesh: If users are growing, total users are growing 7%, you're getting better conversion, theoretically the paid number should be, you know, this year, next year, should be growing faster than that. How should we think about that?
Lior Shemesh: Hey guys, it's Lior. So I think you know that, you know, in the last few years we de-emphasized NetSubs as a specific
a specific KPI in terms of importance.
because we made so much more...
Lior Shemesh: focus on the cohort value both on the signal level, so if you look at
Lior Shemesh: you know take for example the Q124 cohort that we publish you can see it's our strongest non-COVID cohort with 61 million dollars of cumulative bookings but also if you look on the longer terms if you look at the the table we publish for the 10-year projection
Lior Shemesh: The value of the aggregate bookings of those existing courts is significantly higher. It moved from $16.2 billion last year to $18.4 billion this year. It's a very significant increase.
Lior Shemesh: So when we come to determine our, you know, business goals and actions, the net subs is really a secondary factor and a secondary KPI, not the main one.
Lior Shemesh: That being said, I do believe that we elaborated on the headwinds that we had in 2024 from that perspective.
Lior Shemesh: I would point out that the actual result is slightly better than we expected, simply because one of the things we factored in is...
Lior Shemesh: is what will happen in a price increase. And when you do a price increase, you do see a heightened loss of subscriptions that are more sensitive to price, usually the lower-priced one.
Lior Shemesh: And we ended up having a result that was better than the initial model we put in place. So that's why it's actually better than we thought it was.
Lior Shemesh: All that being said, when I look at 2025, again, we're not going to project and we're not guiding for that number, but we do believe we're going to see a positive trend on the NetSubs.
Okay, very helpful. Thank you guys.
One moment for our next question
Speaker Change: Our next question comes from Elizabeth Porter with Morgan Stanley. Your line is open.
Elizabeth Porter: Great, thank you so much. It sounds like there's a really exciting slate of new products for 2025. I wanted to follow up on the first comment about a self-creator solution that expands design beyond websites.
Elizabeth Porter: Is it possible to help us just unpack what that could look like? You know, what interfaces are you able to address outside of websites? You know, and if so, kind of what gives the confidence and the right to win on potentially new interfaces? Thank you.
Speaker Change: Wow I think it's a lot of questions there and a lot of them require details that we're not yet revealing because I think let me just say a couple of things
Thank you. Bye.
Speaker Change: When you build a website, a lot of the time you want to take the content that you have and push it to other places.
Speaker Change: things for your customers, right? And so this requires you to expand your design capabilities, take the content you have into new formats.
Speaker Change: And the new product, we're trying to address that. It also, of course, allows us to capture audiences that are normally not starting at WAITS, but would want to have those kind of intents.
That does, you're number one.
Speaker Change: The motivation behind this product is the fact that we already have a lot of people that need those kinds of capabilities.
Saying that, historically, I think we've shown many times
Thank you.
Speaker Change: We can do a really good job when it comes to tackling very hard user interface and creation processes and simplify them to a way that they become reasonable for the vast majority of people. And I think this is the bigger challenge.
Speaker Change: when it comes to how to do those things today. So a lot of it is very similar to what...
We believe he's a core
Speaker Change: So, this is the code capabilities as a company which is making something that already exists like HTML, which always exists for website creation, but making it accessible to a lot of people.
because we can make a much better creation experience.
Speaker Change: Now, if you combine that with everything else that's happening today in the world when it comes to user interface combined with AI, I think that we have something that I'm very excited about.
Speaker Change: and professional technology guys are also very excited about it, so we will have to see. It's not that far, so hopefully we're going to see very soon.
Speaker Change: Great, thank you so much for that extra color. And then just as a follow-up, I wanted to ask on the cost side, one of the factors you highlighted was gross margin expansion with a benefit from AI integration across customer care.
Speaker Change: We'd love to just understand more at a high level what you're seeing Internally with the use of AI and how that can expand the cost structure and it's at a high level You know, would you look to reinvest those savings for faster product development or is that something that's more likely to flow through to profitability?
So, are you better?
Speaker Change: I will start with the second part of the question. So definitely we are going to see this benefit going down to the free cash flow. By the way, this is why we see the expansion.
Speaker Change: of the overall margin in 2025 as a result of that. Very important to mention, this is something that we are going to see mostly the second half of the year, and it's actually accelerating, meaning that those plans are already being taken.
Speaker Change: But we are going to see the full effects of it in the second half of the year.
Got it. Thank you.
One moment for our next question.
Speaker Change: Our next question comes from Deepak Mathavenian with Cantor Fitzgerald, your line is open.
Deepak Mathavenian: Great. Thanks for taking the questions. I'll ask two product questions. Avishai, I know the agent products, assistant and marketing tools are kind of still in the early test phase.
Deepak Mathavenian: Can you give us some color on how people are sort of using it in the early days? And beyond these two products, what do you think is the right roadmap for 2025 when it comes to agents, clearly considering these are, you know, products with potentially higher monetization?
Deepak Mathavenian: And then on Studio, can you expand on what you're seeing with designers and developers who kind of used Studio in the early days?
Deepak Mathavenian: Are they seeing sustained increase in sort of efficiency gains in their processes as they have used it maybe for 6 to 12 months now? Any color you can provide on sort of like their comparable KPIs would be great. Thank you so much.
Deepak Mathavenian: Of course, so the first part was about AI agents. So we released two AI agents that we monetized. We actually have more, but two that we monetized. The first one is the...
Deepak Mathavenian: a support request. And again, it's very early in days and preliminary results, but
Deepak Mathavenian: It looks very promising. I mean, if I had a website like that today, I would actually be very excited about installing it. It seems to be doing a really good job in helping you get better results for your business.
Deepak Mathavenian: Of course, you have to see the fact that it's very effective doesn't necessarily mean that we're going to get a huge amount of users that want to install it, right?
should make sense but it doesn't always work like that.
Deepak Mathavenian: It's a subscription monetization that we have on that, and I think the product...
Deepak Mathavenian: It's very cool and it's really worth taking a look at it if you didn't.
Deepak Mathavenian: Again, for a lot of our customers, it provides tremendous value because it does.
It does work better than most.
most of what
Deepak Mathavenian: Agencies or definitely users would be able to do it by themselves.
Deepak Mathavenian: It analyzes your SEO plan, it analyzes your ads, how to run the right ads, what are the right ads, and then it helps you manage them.
Deepak Mathavenian: The result, of course, is the ability to attract more traffic to your website, and because of that, sell more and be more successful.
Speaker Change: In terms of long-term strategy, I believe that the concept which we have now is a good concept where we allow users to have
to kind of like hire an expert to the website,
and Edgar to the team of their business.
Speaker Change: And I think that is a very good way to present it to our users.
Speaker Change: It also, when we think about a product, helps us focus a lot about what which one of those agents is doing, and I think that is a tremendous value.
Speaker Change: I think that was the question, right? Oh, about studio. You had another question about studio. So, what we're seeing on studio is the fact that...
Thank you. Thank you.
For agencies, it streamlines their work.
Today,
Speaker Change: If you want to create a, for example, WordPress website, usually you go to some design tool, design it there, then start copying things. Have another guy that does all the CSS and all the HTML coding. Have another guy that does the actual coding.
Speaker Change: All of those things you don't need them, you just go to the studio and design a website and you have tremendous power and capabilities in how to do that. You don't feel like you're programming, you don't feel like you're confound by a lot of technical tools. It's really...
Speaker Change: It feels more like a design tool than a website building environment. But the result, of course, is a website. Because of that, we see two things that we get two kinds of feedbacks. One is that our agencies are able to create better-looking websites.
Speaker Change: And this is a big part of the value they want to provide to their customers.
The second part.
Speaker Change: of course, is that they don't need this long cycle for every change that they want to do. And that, of course, increases their efficiency. So they get better efficiency.
and better results.
Speaker Change: So, we think that's a great deal and I think that is a big part that, of course, this product is growing so fast.
Thanks, Avishai.
One moment for our next question.
Speaker Change: Our next question comes from Josh Beck with Raymond James. Your line is open.
Josh Beck: Yes, thanks so much for for taking the question. I'll just make it a two-parter
Speaker Change: So on Studio, you know, how would you delineate the momentum with the core editor versus the workspace, as in...
Speaker Change: is the studio editor, pretty much, you know, where you'd like it to be from a product point of view. And then, secondarily, on the GPV, I think you mentioned that
Speaker Change: partner's contribution has risen from 45% to over 50%. So is this something that could continue and potentially lift up GPV over time? That would be great.
Speaker Change: So, I'll take the first part of the question and then Emil will take the second one.
Speaker Change: Is the Studio Editor where I want it to be? The answer is no. I have so many more things I want to do there, and I think the roadmap there is super exciting, and I think even at the end of this year it will not be where I want it to be. There is much more we can do.
Is it where, realistically, it should be?
Shemesh. Shemesh.
Speaker Change: It should be. Then the answer is yes. I think the team is doing a really good job of executing and building and innovating and adding new things to the product. So I'm very happy with the R&D speed. I'm really very excited about what we can do in the future.
Speaker Change: Rehashing the time frame, we're talking about, you know, it was released in open to the public.
in October 23.
Speaker Change: So, essentially, we're talking about 15 months of it being out there and live.
Speaker Change: with more than 2 million accounts now on the studio and essentially...
Speaker Change: 75% of those are new partners on studio so it's definitely becoming the prominent solution for our for our partners demographic and we are very very happy about it.
Speaker Change: To the second part of your second question about the GPV or the partner's GPV.
Speaker Change: which obviously they're quite well connected as we see ongoing growth of usage by partners.
Speaker Change: And actually, they build the bigger websites, the websites that also drive more and higher GPV.
Speaker Change: So the uplift in terms of their proportion of the general GPV of the company continues to grow.
Speaker Change: but their piece of that pie also increases all the time.
Speaker Change: As we noted, it has surpassed the 50%, and our expectations, looking at the growth trend for that, for their piece of the pie to continue to increase, and essentially also help drive the overall GPV upwards in total.
Thank you all. Bye. Bye.
Very helpful, thank you. One moment for our next question.
Speaker Change: Our next question comes from Andrew Boone with Citizens. Your line is open.
Speaker Change: Thanks so much for taking my questions. I wanted to ask about the visibility into achieving double digit self-creator growth. What do you guys need to do to be able to achieve that level? And then talk about just kind of timing there.
Speaker Change: And then secondly, more of a strategic question. AI is allowing Wix to expand into new product categories like customer service with AI site chat.
Can you talk about just AI more strategically?
Speaker Change: and how it is allowing you to expand to new product categories. And how do we think about that over time, right? Are you guys limited in terms of what you guys may offer for SMBs? How do we think about the expansion of the category and the TAM as we think about AI unlocking new products? Thanks so much.
Lior Shemesh: I think that maybe, Lior, you want to take the first part and then I will take the second part. I will take the first part about the self-creators. Let's take, for example, what happened in 2024. We saw the acceleration of bookings.
Lior Shemesh: And it was part, also not just because it was part of the studio, but also because of the different initiatives which are created. We definitely understand.
Lior Shemesh: We know that while we are introducing more technology and more capabilities, we see that we have better conversion, but also increasing the output.
Lior Shemesh: We are not modeling right now double-digit growth for self-creator in 2025, but we definitely believe that we can achieve it in 2026 based on the new product that we are going to launch.
Thank you. Thank you.
Just for a second.
Speaker Change: The second question about AI. I think that the, you know, we released our first AI product, right, in 2016. ADI was the first time.
Lior Shemesh: I think anywhere there was a generative AI that actually allowed consumers or users or small businesses to do anything, probably also for enterprises.
Speaker Change: And you could create a website just using very, very simple.
Prompts
and that's it and we'll see you in a minute.
Speaker Change: Of course, already then, AI allows us to increase our market share. Obviously, in the last couple of years, where things became more...
Speaker Change: More powerful, we can do more with that. And things like the website chat, the support for our users' websites.
Speaker Change: and the marketing agents are, of course, examples of that. And I think there's a lot more that we can do there.
Speaker Change: And I believe that that is one line of expansion of functionality we will see.
Speaker Change: I do also believe that this is the most trivial, the more trivial kind of line of thinking about it. And in 2016, I think we surprised everybody by doing what we did. I think there is a line of new things we can surprise the world with and additional initiatives that we can create.
Speaker Change: I don't believe that if you look forward, right, into the future, if you look five years into the future, websites will look and feel the same. I think there's a lot more we can do now.
Speaker Change: And I also believe that Wix is probably the best company in the world in terms of positioning and technical capabilities and product capabilities to enable small businesses.
Speaker Change: to achieve everything they need to be ready for how websites and how the internet will look in five years from today. And there's a lot of discussions about it, a lot of theories about it, but I really believe that the opportunity there is bigger than anything else because...
Speaker Change: What we have today is going to continue to dramatically evolve into something that is probably more powerful and more enabling for small businesses to be successful.
Speaker Change: Overall, the internet has a tendency to do it every 10 years or so, right? In the 90s, the internet started.
and became HTML, then it became images.
Speaker Change: images and then later on videos, and then it became mobile, right? And I think, and then it became interactive, everything becoming application-like, kind of an application, and I think how a website will look in the AI universe is the next step, and I think there's a lot of exciting things we can offer our users there.
Thank you.
Thank you.
One moment for our next question.
Speaker Change: Our last question comes from Brenton Thill with Jefferies. Your line is open.
Speaker Change: Hi, thank you. This is John Bian for Brentel. Two questions. On the free cash for margin expansion, pretty impressive.
Speaker Change: increase in this year, but what will be the biggest sources in leverage beyond the gross margin that you mentioned earlier? And then once you see about the top of funnel, how that's looking, whether you're also seeing the usual start of the year with a bump in activity. Thank you.
Speaker Change: So, I will start with the first part of your question and you will answer the second one about the top of the funnel.
Speaker Change: So we have a few, actually mostly two reasons. The first one, as we mentioned before, is about the gross margin that is actually improving by one point.
We also see more leverage in operating expenses.
Speaker Change: And we can see that also in our guidance for the overall savings that we have over there. But we are guiding to approximately one to two points of operating expenses leverage as a percentage of revenue. Let's remember...
Speaker Change: that in dollar we are actually increasing the cost. For example, those new products that we are going to launch in 2025, I definitely took into consideration that I will need more marketing budget in order to support it.
Speaker Change: Despite of this fact, I do believe that we are going to see one to two points of leverage also as part of the operating expenses. This is most of the reason why we are going to see the improvement in free cash flow.
Speaker Change: Everett, in terms of your question about the top of the funnel and what we're seeing and I think we made some commentaries about it as well in Q4
Speaker Change: So, I think we are, I would say we are happy to comment on what we are seeing.
Speaker Change: positive trends. Naturally, we have no ability to predict the rest of the year.
Speaker Change: But we're very, at least for now, we're seeing a positive trend. And we continue on our strategic marketing effort, which is monetizing and prioritizing towards high-intent users.
which I think you've seen us perform very successfully.
Speaker Change: As you know, can be a clear testament in what you see in terms of the court value, the 10-year court value, as well, by the way, is an increase in net revenue retention over time, it's increased.
and also the increase of the ABPS.
Speaker Change: which is kind of our equivalent to ARPU, that rose 13% year-over-year. So I think, you know, from that standpoint, it's a good indication and one that we have the right tools to capitalize on.
Speaker Change: for 2025. It will be interesting to see how all of the new the new releases of these new products that Avishai is hinting towards will will impact that going forward but that's going to be kind of much further down the year.
Thank you. Thank you.
Thank you.
Speaker Change: Thank you, ladies and gentlemen. This concludes today's conference. We thank you for your participation. You may now disconnect and have a wonderful day.