Q1 2025 Wix.com Ltd Earnings Call
Good day, Thank you for standing by welcome until the first quarter 2025 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. Just a question. During the session you will need to press star one on your telephone.
You will then hear an automated message advising yohanan sways. Please note that today's conference maybe recorded.
Speaker Change: I'll now hand, the conference I'll, let you speak of House, Emily Liu Investor Relations. Please go ahead.
Emily Liu: Thanks, and good morning, everyone. Welcome to Wix is first quarter 2025 earnings call joining.
Emily Liu: Joining me today to discuss our results are all beside Abra Hanmi CEO and co founder Nir Zohar, President and co founder.
Emily Liu: New York's Hamish our CFO.
Emily Liu: 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.
Emily Liu: Any obligation to update these forward looking statements.
Emily Liu: 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 start Wix dotcom.
Avi Shy: With that I'll turn the call over to Avi shy.
Avi Shy: Thank you Emily and good morning, everyone 2025 is off to a strong and exciting start even if the macroeconomic landscape continues to evolve we've seen robust demand for our platform reaffirming the essential role weeks place for small businesses.
Avi Shy: And everyone, who wants or needs an online presence around the world. Our team continues to execute with excellence delivering significant product innovation and strategic momentum.
Avi Shy: With our long term vision.
Avi Shy: Excitingly, we have launched the first of two milestone products slotted for the year earlier. This month, we introduced Wicksell, our new Standalone visual design platform that extends wix advanced design expertise.
Avi Shy: Owned websites for the first time with.
Avi Shy: So mark the beginning of our next generation approach to visual design, combining which is intuitive creation tools and user friendly interface with the power of generative AI. This platform combines the best AI models on the market today tailored for specific image needs, including object background editing and much more with the <unk>.
Avi Shy: <unk> pipeline of new AI enhancements. This makes wix a unique from everything else available on the market. It handles the complexity of today's high end AI technology behind the scenes choosing and continuously optimizing the best models for each task.
Avi Shy: It allows our users to always have access to the most advanced and up to date tools for image generation and everything.
Speaker Change: So how did we get here. We initially started building wicksell for Wix users. We saw the incredible demand for powerful video and image editing capabilities amongst our own users, who edited and saved more than 40 million images to use on their wix website in 2024.
Speaker Change: There was also a need from the more than 100 million members on deviantart, the largest online social network and platform for artists to promote their works. These artists seek high performance professional grade image editing tools that enable them to create exhibition worthy work. However, visual editing is difficult today with professional grade image.
Speaker Change: <unk> and manipulation only possible with graphic design platform for professionals not accessible to the average person.
Speaker Change: My vision is for wix or to democratize visual design the same way Wix has democratized website building.
Speaker Change: In the past if you wanted a great looking website.
Speaker Change: Either needed to be a web designer or higher one we exchange that now with Wicksell. We're doing the same for visual design assets, allowing anyone to create something stunning and professional grade in minutes.
Speaker Change: Goal is to give total control over photo and video editing to everyone. The same way we did for website creation Weeksville is for wix users for entrepreneurs freelancers and business owners, who already rely on wix to build and grow in line.
Speaker Change: For the millions of Deviantart artists, who want to add an easy to use yet powerful editing tool to their toolkit without sacrificing the quality of their art, but wickes's reach goes far beyond that its for anyone trying to create any type of digital design asset without a technical background.
Speaker Change: If you've ever felt limited by your tools or by your own skills, which still is for you Excitingly, we've partnered with Microsoft to integrate with those capabilities into Microsoft co pilot.
Speaker Change: This collaboration allows Microsoft 365 users small business owners students in everyday creators to design in a smarter more intuitive way with Wicksell.
Speaker Change: Though this launch is a cornerstone of our product roadmap. We are still very early in the journey with plenty of work ahead in order to achieve our vision for Wheatstone and the coming year, you can expect the platform to evolve meaningfully with breakthrough capabilities as we continue to innovate I'm excited to see how witzel reshaped.
Speaker Change: The digital creation space, which is always the headline but it wasn't the only launched this quarter. We also introduced Astro.
Speaker Change: AI assistant embedded within the Wix dashboard Astra simplifies the user journey by guiding users surfacing relevant tools and insights in helping them complete key tasks, we expect astral to improve user engagement boost package upgrades and reduce churn over the long term and it's only the first in a series of AI agents.
Speaker Change: We plan to rollout. Additionally, we launched new AI powered tools for web site automation and real time site customization, including adaptive content application wix functions and Wix automation. These features are designed to make our platform smarter and more efficient while delivering highly personalized.
Speaker Change: Experienced as the site visitors finally, we rolled out the Wix module context protocol or MCT server, a key infrastructure advancement that allows users to leverage natural language prompts to seamlessly connect wix is comprehensive business functionality with their preferred compatible AI powered tools the weeks MCP.
Speaker Change: Server enables AI driven app development for users to build custom experiences on top of wix or manage their wix based business using natural language and AI coding assistance as a use case presented at stripes recent conference our team demonstrated how to use it L aims to generate reliable code for fully.
Speaker Change: Functional payment solutions. They built a complete website that accept online payments via credit cards, Apple pay and Google pay through wix payments and stripe.
Speaker Change: As we continue innovating our focus remains the same creating powerful tools that make it easier faster and more inspiring for anyone to build online.
Speaker Change: It meant to AI innovation user empowerment, and long term growth has never been stronger with that year over to you.
Avi Shy: Thanks, Savi shy, we've kicked off 2025 with our strongest new user cohort of recent years as demand for building online exceeded expectations in the first quarter. This strength underscores the value of our platform against any macro backdrop, and our unmatched innovation that enables wix users to achieve their goals on line more in.
Speaker Change: Secondly than ever before our.
Speaker Change: Our Q1, 2025 user cohort generated $36 million in bookings, reflecting a 12% increase over the bookings generated by the Q1 2024 cohort.
Speaker Change: Which was also very strong in its first quarter.
Speaker Change: This marks a meaningful improvement in demand.
Speaker Change: Year over year, New cohort bookings had previously grown mid single digits in the post Covid period.
Speaker Change: Impressively this significant growth acceleration was driven almost entirely by better fundamentals.
Speaker Change: Particularly a bigger user cohort and product innovation.
Speaker Change: From a top of funnel perspective, we saw strong traction, particularly in several key high spend geographic region.
Speaker Change: Including the U S and parts of Europe. This drove the addition of nearly $5 3 million new users in Q1 up 7% year over year.
Speaker Change: Importantly, we maintained a high proportion of high intent in commerce oriented users as our product innovation continues to attract users with more sophisticated needs. We saw healthy conversion of this higher number of new users into paid subscriptions driven by our AI onboarding funnel, which continues to widen with the large.
Speaker Change: The majority of new users opting to use our AI website builder to create their first weeks website partners also continued to convert well driven by studio momentum as we roll out platform enhancements and deepen our reach within the professional community. In addition to our robust top of funnel monetization.
Speaker Change: The most recent cohort improved.
Speaker Change: Compared to previous user cohorts.
Speaker Change: Higher a rps was fueled by new users buying more higher tier packages and strong attachment rates for business solution, particularly Google workspace.
Speaker Change: We captured strong top of funnel demand through the first quarter, while continuing to prudently manage acquisition marketing investments against our guardrails strong execution of our acquisition strategy has us on track to achieve or time to return on our investment or T. R O I.
Speaker Change: A 45 months on our Q1 2025 user cohort, which is at the lower end of our targeted return Guardrails. These returns are similar to the returns on the first quarter cohorts of prior years. Despite the much larger recent new user bookings base. This is particularly impressive and demonstrates the improved quality of our top of funnel.
Speaker Change: Today.
Speaker Change: Turning to our existing user cohorts.
Speaker Change: Behavior remained healthy bookings from prior cohorts continued to grow steadily in the first quarter.
Speaker Change: Ported by stable conversion strong retention and increasing arpus.
Speaker Change: And our partners business. These effects are magnified as professionals built more sites.
Speaker Change: Patched more business solutions and drove <unk> growth through more complex projects.
Speaker Change: I'd like to finish with some thoughts on what we're seeing on the macro front year to date, we've seen really positive demand trends with new cohorts strength actually continuing through April and early May. This is a clear reflection of the critical and growing role <unk> plays in helping small businesses in any one building their brand on line six.
Speaker Change: Feet and thrive in fact, our business historically has tended to outperform during times when shifting online increasingly became non negotiable. We expect Q2, Q3 and Q4, new cohorts to remained strong driving topline growth acceleration in two H as these additional cohorts.
Speaker Change: Layer on and contribution.
Speaker Change: <unk> throughout the year, though we are encouraged by the strong demand and our results. So far it is difficult to predict how the macro environment could trend through the rest of the year. So while we like what we're seeing today, we are building conservatism into our expectations.
Speaker Change: Particularly around our business solutions segment business solutions, particularly commerce in GTA V is naturally a bit more responsive to changes in consumer behavior and macro volatility overall engagement and adoption of our suite of business applications currently remain healthy and we continue to onboard.
Speaker Change: Larger merchants to the platform.
Speaker Change: Our solid Q1 results illustrate the durability of our business across varying macroeconomic environments as weeks remains the leading platform to create manage and grow our digital presence.
Speaker Change: I remain confident in our ability to drive long term growth by delivering essential tools that help users adapt operate and succeed in any environment.
Speaker Change: With that I'll hand, it over to <unk>, who will provide more details on our financial results and our outlook.
Speaker Change: Thanks, Neil we began 2025 on strong footing with very healthy topline growth driven by continued benefits from our key strategic and product initiatives, particularly studio and our growing suite of AI offerings as well as robust year to date top of funnel activity you just heard about.
Speaker Change: From now.
Speaker Change: This underscores the critical importance of weeks of small businesses and anyone maintaining an online presence globally.
Speaker Change: Starting with our first quarter results before we move on to expectations for the rest of the year total bookings were $511 million in Q1 up 12% year over year total revenue was $474 million up 13% year over year and above the high end of our guidance.
Speaker Change: <unk> revenue grew 24% year over year to $172 million in the first quarter, driven by more subscription purchases, particularly higher priced ones as well as improved adoption of business applications and increasingly <unk> <unk>.
Speaker Change: Fortunately studio adoption remains strong as bookings from new studio subscriptions accelerated compared to previous quarters. This was a factor of new partners building. The first studio website more quickly than previous cohorts and existing studio partners are building additional projects on the platform.
Speaker Change: Transaction revenue in Q1 was $59 million up 19% year over year, driven by increasing the <unk> and continued improvement in our take rate as more merchants adopted wix payments.
Speaker Change: Transaction revenue growth also continued to benefit from the previous year's addition of a new wix payments partner.
Speaker Change: As we lap this benefit in Q2, we expect transaction revenue to grow at a similar pace as the G. P really going forward.
Speaker Change: Digging into <unk>, we continued to face headwinds from the same small subsidiary discussed last quarter accelerated G. P. Real drawdown in this subsidiary resulted in a two point headwind to total J P V in Q1.
Speaker Change: We expect this headwind to GP rate to persist through the rest of the year, though with minimal top line impact as J P. V from subsidiaries experienced significantly lower monetization rates as a result core GP rate excluding the impact of this subsidiary grew 12% year over year in constant currency.
Speaker Change: Total non-GAAP gross margin in Q1 was 69% in line with our expectation.
Speaker Change: non-GAAP operating income increased 44% year over year and totaled 21% of revenue as we continued to benefit from a stable operating cost base as our business scales. This quarter non-GAAP R&D expenses increased quarter over quarter to $96 million.
Speaker Change: We added developer head count in line with our hiring plans for 2025.
Speaker Change: non-GAAP sales and marketing expenses grew quarter over quarter to $102 million as we increased acquisition marketing spend to capture the strong demand we saw through the first quarter. Despite the large base of cohort bookings on boarded T. R. O I remained stable underscoring the.
Speaker Change: Strength of the weeks brand improving quality of our funnel and continued execution of our marketing strategy.
Speaker Change: Q1 free cash flow was over $142 million or.
Speaker Change: Or a milestone 30% of revenue.
Speaker Change: Let's turn now to outlook for Q2, and the rest of 2025, we expect total revenue in Q2 to be $485 million to $489 million, representing approximately 11% to 12% year over year growth, even with new cohort trends remaining strong we are maintaining our bookings.
Speaker Change: <unk> for the full year.
Speaker Change: We continue to expect bookings of 2025 to 2000 $60 million or 11% to 13% growth year over year.
Speaker Change: For revenue we are also maintaining our previous guidance of 1970 2000 million dollars or 12% to 14% growth year over year.
Our expectations now incorporate a higher degree of conservatism given the macro uncertainty and you spoke about this potential volatility is offset by the easing FX headwinds we're seeing today.
Speaker Change: So while our fundamentals remain very healthy today. We are also aware that the macro pendulum can swing quite meaningfully very quickly as a result, we are also leaving our free cash flow expectations are unchanged. We continue to expect to generate $590 million to $610 million of free cash flow or 32.
Speaker Change: 231% of revenue in 2025.
Speaker Change: We remain on track to achieve rule of 45 this year, assuming the high end of our outlook.
Speaker Change: Finally, I am pleased to announce the upsizing of our share repurchase program.
Speaker Change: The board has authorized an additional $200 million of repurchases, which now puts the total authorization under the current program at $400 million.
Speaker Change: This increase reflects continued confidence in our ability to drive strong cash flow generation as well as our ongoing commitment to increasing shareholder value.
Speaker Change: Operator, we are now ready for questions.
Speaker Change: Thank you, ladies and gentlemen to ask a question at this time, you will need to press star one on your telephone and wait for your name to be announced.
Speaker Change: Draw your question simply press Star one again.
Speaker Change: And by while we compile the Q&A roster.
Speaker Change: Our first question coming from the line of.
Iranian: Iranian from Citigroup. Your line is now open.
Iranian: Hey, good morning, guys or good afternoon for you.
Speaker Change: Maybe just to start with what you saw obviously I've given.
Iranian: The focus on your in your comments.
Speaker Change: Yeah.
Speaker Change: Give us a little bit more color on that.
Speaker Change: Expectations are on on the rollout kind of the product road map monetization expectations is it something that overtime. You think can have can be as big as wix is today, maybe kind of end market users a little bit more just to understand how this might flow through.
Speaker Change: The financials.
Speaker Change: Company metrics over the next couple of years. Thanks.
Speaker Change: Of course, I think perhaps.
We just so far in Switzerland.
Speaker Change: So this is a very early version of the product that we just released.
Speaker Change: We believe that this allow us to.
Speaker Change: Expand.
Speaker Change: On a market.
Speaker Change: In a few ways first of all can you find out it allow us to bring users that don't need a website.
Speaker Change: In two weeks because they need.
Speaker Change: To do a really sophisticated image editing.
Speaker Change: Which is today only possible without.
Speaker Change: The.
Speaker Change: So that's the first thing the second thing is that it's also something that we intend to at least two weeks users, allowing them to edit their content.
Speaker Change: The images.
Speaker Change: Video is better.
Speaker Change: Which also we hope to.
Speaker Change: And.
Speaker Change: The capabilities of our users, which is a separate subscription.
Bryce: Bryce so on pricing.
Bryce: What you are just now starting to take so it's going to take a while to stabilize body.
Bryce: It's all subscription.
Bryce: Its own user base.
Bryce: We did.
Bryce: That already when we started this.
Bryce: Product immediately started with it.
Bryce: A few interesting partnership Microsoft opening so.
Bryce: We do believe there is a big need in the market for it.
Bryce: AI image.
Bryce: And video editing.
Bryce: Okay. Thank you and thank you.
Bryce: To stay with you, obviously I and.
Bryce: AIC.
Bryce: And if we can just kind of your updated thoughts on the AI landscape within the.
Bryce: The web builder world or kind of I guess, what web design more broadly now.
Bryce: You guys continue to roll out a lot of products. It feels like the cadence around AI has picked up.
Bryce: Our AI releases.
Bryce: And in the letter you talked about.
Bryce: <unk> five coding and I guess Theres just been a lot of change over the past few years since popped up in your world when you're starting to implement that into your product.
Bryce: How do you see the world evolving from here.
Clearly.
Bryce: Vibe coding.
Bryce: It becomes easier to code with just kind of natural language processing and how that changes your product evolution how might change.
Speaker Change: And the way web sites or Bill just a bigger picture question.
Bryce: I think by putting is super exciting.
Speaker Change: Concept.
Speaker Change: It's still very early.
Speaker Change: So things tend to break after a while they are not stable.
Speaker Change: Not good SCO search engine optimization, there's a lot of things that need to get there to be mature in order for it to be.
Speaker Change: Viable product for our customers.
Speaker Change: Just the simplest one is if you like.
Ed: Ed It's something right. It takes four minutes for any small changes.
Speaker Change: The base case scenario four minutes so.
Speaker Change: Moving about it will take a few minutes.
Speaker Change: So theres a lot of.
Speaker Change: Yes.
Speaker Change: Super exciting potential.
Speaker Change: <unk> coding.
Speaker Change: But I think.
Speaker Change: It's a bit too early for it to be really in mass.
Speaker Change: And Max product, so reaching for the mass market.
Speaker Change: <unk>.
Speaker Change: Biologics, it's really exciting I think that for us as a company we always when it came to AI. We always been ahead of the curve frankly at least the first product in 2016, and then of course with all the image editing in 17, and 18 and I think that right.
Speaker Change: I am quoting pretty much the same we need to be ahead of the curve. There we need to know what what is happening and we feel very strong.
Speaker Change: About how to try and combine that into in two weeks, we're going to start.
Speaker Change: Of course, if you.
Speaker Change: Things, including diabetic CT components into the weeks heading towards which is.
Speaker Change: One of the obvious things that we're going to be doing.
I do think that this will allow.
Speaker Change: And companies like us to expand our market reach because things that you could not have done traditionally.
Speaker Change: On website building platforms right now you'll be able to do because you're able to add discussed include without coding.
Speaker Change: I I do I'm very optimistic I think it's going to present to ask a lot of really.
Speaker Change: Interesting opportunities, but I want to emphasize again, it's really a young technology its still not stable.
Speaker Change: He is still very slow, but we definitely have to be to understand it and to position ourselves correctly to capitalize on that.
Speaker Change: Great. Thanks, so much.
Speaker Change: Thank you.
Ken Wong: Our next question coming from the line of Ken Wong with Oppenheimer. Your line is now open.
Speaker Change: Great. Thank you for taking my question. This one's for you Lee are you.
Speaker Change: Think about free cash flow margins, usually Q1 is the low watermark.
Speaker Change: How should we think about the progression of free cash flow margin through the year given the current guidance.
Speaker Change: Yes.
Speaker Change: So, yes, I mean I think that.
Speaker Change: What we're going to see a very similar to last year.
Speaker Change: Meaning that we will see.
Speaker Change: Modest increase in free cash flow margin.
Speaker Change: Because we all continue with the leverage that we're getting in.
Speaker Change: In terms of operating expenses out of revenue.
Speaker Change: No.
Speaker Change: As long as we continue with our plan and you know we mentioned before that we're going to see a slight acceleration in the second half of the year.
Speaker Change: Of revenue.
Speaker Change: And bookings.
Speaker Change: This is going to have also a positive impact on free cash flow. Therefore, I believe that there will be a modest increase in free cash flow throughout the year.
Speaker Change: Okay perfect.
Speaker Change: And then I mean, this would be for you or maybe near but you guys have talked about really strong momentum in April may at the.
Speaker Change: Same time, you guys are talking about heightened conservatism in the guidance how should we think about kind of what was built in in terms of that conservatism is it.
Speaker Change: Peak April panic or like what level of down ticking are you guys. You guys have you guys factored in now.
Speaker Change: So, yes, I think thats.
Speaker Change: Always.
Speaker Change: What we mentioned asked many many times in the past.
Speaker Change: The stuff that we can control and things that we cannot control obviously.
Speaker Change: Obviously, we see a very good result in terms of the Q1 cohort.
Speaker Change:
Speaker Change: By the way it is also improving into April and May.
Speaker Change: So we feel very comfortable about it we released a new product <unk>.
Speaker Change: With everything everything was already.
Speaker Change: During Q1 when people ask about the acceleration into the second.
Speaker Change: Half of the year, and we did mention about new products and innovation that we already tested so we actually can see that in Q1, our quarter results, meaning that is happening.
Speaker Change: On the other end.
Speaker Change: That we cannot control I mean look what's happened to the.
Speaker Change: Apple to the FX in the last few months.
Speaker Change: And to the overall macro in terms of trade and so on so we wanted to make sure that we are conservative around it.
Speaker Change: Because I really don't know what you know what kind of development on new development, we are going to happen in the future. So I prefer to be conservative about the guidance and actually maintaining them.
Speaker Change: Okay perfect. Thank you very much.
Speaker Change: Thank you and our next.
Speaker Change: Question coming from the line of.
Speaker Change: Brent Thill with Jefferies. Your line is now open.
John Byun: Alright. Thank you this is John Byun for Brent Thill.
Speaker Change: Two questions one the partners I mean, obviously you continue to outperform the rest of the segment, but it is a bit of a T cell in Q1 to 24% and 29% last quarter.
Speaker Change: How we should think about what some of the factors might be and then second on the new XL project, obviously as you mentioned new user base really opening up the.
Speaker Change: New design front, but I'm wondering how you're thinking about.
Speaker Change: Distribution marketing since.
Speaker Change: It is a different type of cohort as you mentioned besides the partnership you mentioned thank you.
Speaker Change: So I'll start with where they are.
Speaker Change: Partners revenue. So you know we feel very good about.
Speaker Change: Overall partners and the growth.
Speaker Change: I believe that.
Speaker Change: We'll continue to be a hyper growth.
Speaker Change: Revenue driver for us in the future. We see also the success of school deal. So it's obviously continue.
Speaker Change: I wanted to mention about the.
Speaker Change: The specific question of the two as compared to the to the previous quarter. So obviously, we had two points of effect in terms of the FX.
Speaker Change: It has a direct impact on our partners. The other one is about the growth in <unk> was a bit less than anticipated.
Speaker Change: Remember that problems to make up for about 35% of revenue, but contribute over 50% of GPP.
Speaker Change: Because also of the nature.
Speaker Change: Over the customers and the difference between the mix of sales.
Partners.
Speaker Change: We still feel very strongly about partners and the fact that it will continue to be a growth driver a meaningful growth driver for us in the future.
Speaker Change: Four weeks ago.
Speaker Change: I think that.
Speaker Change: Yeah.
Speaker Change: It's a new finance distribution in your funnel, which open a lot of interesting opportunities. So the first one of course is actually using our existing user base and to allow them to access the product. The second one if you've just demonstrated is going to be I think.
Speaker Change: We think there's a lot of appetite or opportunity for partnership with these products.
Speaker Change: We do intend to continue doing that as well.
Speaker Change: I think more interesting is that it allows us to do a lot of really cool things with marketing and we have a lot of really cool ideas on what to do there. So it's going to be very interesting I think.
Speaker Change: We demonstrated many times in the past that.
Speaker Change: Know how to do online marketing very well and have the discipline to do it on a metric.
Speaker Change: Profitable basis, and I think we're going to take the same strategy and try and do it with excellence.
Speaker Change: I just want to emphasize again that this is a young product.
Speaker Change: Given that we're seeing great results already.
Speaker Change: You're going to take a diamond tail for that to be substantial.
Speaker Change: With our revenues.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Next question coming from the line of.
Speaker Change: <unk> <unk> with Morgan Stanley. Your line is now open.
Speaker Change: Great. Thank you so much I wanted to ask again on <unk> I think the design and visual adding space has certainly seen increasing competition. We've also seen some of the traditional design software companies move into websites, which create so just a really interesting intersection.
Speaker Change: So it'd be great to get a better understanding for really the core differentiator for weeks in that design software.
Speaker Change: Tables.
Speaker Change: Great to win against some of the larger brands in the market and then maybe just at a higher level thoughts on pricing, how you landed at $9 a year and how youre trying to strike the balance between monetization and adoption. Thank you.
Speaker Change: Well I think that does a great question I think the first question is about the fact that we do see some of the traditional design tools moving into a.
Speaker Change: More of a website building area.
Speaker Change: I think listening to our universe, but more into the.
Speaker Change: More into the.
Speaker Change: Workflow kind of a universe, but but.
Speaker Change: But we do see some I think that.
Speaker Change: Okay.
Speaker Change: Building really great website, it's a lot harder than it seems and then that actually is tremendous.
Speaker Change: Value for users.
Speaker Change: But beyond that when it come to wix.
Speaker Change: <unk>.
Speaker Change: We don't try to build another dragon drove editing environment, which I think all the tools that you're referring to are a drag and drop editing environment. What we're trying to do is really how would a few of them.
Speaker Change: You would think.
Speaker Change: Five years from today, how you could edit images.
Speaker Change: Content with AI, how would that look like and we tried to build that.
Speaker Change: In two weeks.
Speaker Change: I think the way that the.
Speaker Change: Jewel itself behavior is very different than the traditional editing.
Speaker Change: No I'm, not saying that it cannot do that I'm sure. They can do a lot of smart people there I'm, just saying that.
Speaker Change: If you try to rebuild.
Speaker Change: Tools into this thinking about how with the universe look in five years, Our award with AI looking five years, you'll find that you have to change a lot of the user interface a lot of the experiences.
Speaker Change: <unk> technologies in those existing tools, which I believe is a bit of a challenge when you are the biggest.
We have a lot of users.
Speaker Change: So we hope that by being able to be more agile and focusing in that long term vision, we can create a better experience for the people that are interested in editing content with AI.
Speaker Change: Yeah.
Speaker Change: Great. Thank you so much and just as a follow up I wanted to ask on that top of funnel strength.
Speaker Change: Net new user cohort kind of flipping to ground after declines in Q1 for the last two years has certainly been.
Speaker Change: Impressive so I wanted to better understand are you, saying new drivers emerge further improving that top of funnel demand is it more partners versus self creators.
Speaker Change: Any notable changes in the free to paid conversion in terms of actions you talked specifically in the quarter.
Speaker Change: How just overall this impacts your view on.
Speaker Change: Ah the premium subscription growth in 2012.
Speaker Change: Thank you.
Speaker Change: Elizabeth.
Speaker Change: So I think.
Speaker Change: You mentioned that before these are.
Speaker Change: The key things that impact that top of funnel.
Speaker Change: Eventually the product innovation we've done.
Speaker Change: Throughout 2024 towards the end of it throughout Q1, and this is an ongoing effort because.
Speaker Change: <unk> seen it for a long time.
Speaker Change: Keep on innovating, we keep on introducing new capabilities.
Speaker Change: New function, we are improving or the.
Speaker Change: The final itself throughout.
Speaker Change: Throughout our users come.
Speaker Change: Due to the software to the editors, we improve the ability.
Speaker Change: The user interface the ability to get to the end result, we unblock a lot of business functionality people need for specific business needs and to be honest, we do it on both and so it goes to self care doesn't mean it goes to partners.
Speaker Change: I would say that what we've.
Speaker Change: We've been experiencing throughout the year.
Speaker Change: First few months of the year Q1, as well as going into the beginning of Q2.
Speaker Change: The benefits from those kind of improvement.
Speaker Change: And naturally that's also what you are seeing plays out into the increased value of our cohorts in Q1.
Speaker Change: And it gives us confidence that we can go down this path.
Speaker Change: For the rest of the year.
I also think it keeps us still positive on our ability to regrow.
Speaker Change: Re grow mid this year.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Speaker Change: And our next question coming from the line of Brad Erickson with RBC capital markets. Your line is now open.
Speaker Change: Alright, thank you.
Speaker Change: First can we just kind of talk about <unk>.
Speaker Change: You've sort of been around the edges of this but can you talk about product development consideration, we kind of think about agents.
Speaker Change: Its ability to sort of canvas lots of different sites on more complex tasks and everything maybe just I guess help us expand our mind so to speak on weather website somehow kind of need to be like structurally different in the AI era from particularly from like a utility and discover ability perspective kind of how do you position for that.
Speaker Change: Uh huh.
Speaker Change: And then just to clarify youre asking about four <unk> to be able to read the website well or do you talk about how we build a website.
Speaker Change: Yes, I am talking about like how agents will sort of maybe change how people access the internet broadly and website specifically.
Speaker Change: Well I do believe that there is a big change coming I know that for myself I'm using chat equity more than gogo when a search for things, though so I would love to have the content and tragically Digest a lot of content from the Internet and try to give you. This limited vision.
Speaker Change: And its advantages and disadvantages right because you've got this as rich.
Speaker Change: Content from everything and then a lot of your time, you know what you're looking for and you know what is the right place to look at.
Speaker Change: If you look at that information weight and that can be a product that you wanted by the service that you want to get on kidney general information right, but.
Speaker Change: Pretty much anything.
Speaker Change: And and.
Speaker Change: And the way that <unk> works today by just calling the Internet of course is not good enough. It's not going to provide you any knowledge about with my hedge ratios I have an appointment in two days right and so.
Speaker Change: So.
Speaker Change: And we're starting to see the first layer of protocols, Microsoft just announced one.
Speaker Change: Entropic announced MCP, which is the way forward.
Speaker Change: Query complicated services.
Speaker Change: Sure.
Speaker Change: In a way that the agent know how to learn how to ask an API, we just announced that.
Speaker Change: That we supported and release everything that <unk> now is available for MCP.
I think we're going to have to be very agile there.
Speaker Change: The.
Speaker Change: Valued far user I believe we will grow.
Speaker Change: Wanted to say goodbye to yield a positive month over month right. So we need to be there in the front.
Speaker Change: And make sure that you provided I think.
Speaker Change: And I do also believe that.
Speaker Change: Many ways that will.
Speaker Change: Play.
Speaker Change: Help platforms like weeks, because the complexity of building a website that know how to offer services for API and MCP to L M and how to do the equivalent of ACL for it and I'm.
Speaker Change: Just gotta make building a website.
Speaker Change: 10 times harder right. So if you today you can take somebody would not drive that she came out as it says in theory build a different website then in a year that will be possible I think the complexity that will be created by those tools and the speed of innovation right MCP was announced a month and a half ago, we already relative to elicit.
Speaker Change: I think about a month and half ago and the.
Speaker Change: So the complexity and the need to support it to say I think that is something that actually.
Speaker Change: The all the website and content building platform because.
Speaker Change: It is going to be much harder to do it.
Speaker Change: With your own internal team.
Speaker Change: Got it and then I guess, just as we think about the utility of Wix changing told US all the good development that you've talked about do we kind of see any changes to the mix shift we're seeing from.
Speaker Change: Partners versus creators or does it kind of augment both at the same rate and so that mix shift we're seeing kind of continues which of those would you say thank you.
Speaker Change: In theory right.
Speaker Change: In theory.
Speaker Change: We'll look at the far future then why would you need an agency because in theory, you can just build.
Speaker Change: Builders websites, where many chamber things now make it successful.
Speaker Change: And but practically we're not there yet I think there's a big distance that we have to have for those.
Speaker Change: Urgent to evolve in order to be able to help you actually achieve all of those goals. Even when we are at weeks trying to build this exact.
Speaker Change: James to do each one of those there's still a lot of human interactions and I think in a lot of expertise that the human can bring to help it. So I think there is a lot of room for agencies, even into next year and into next.
Speaker Change: <unk> com.
Speaker Change: Currently.
Speaker Change: When we look at that data I would say that this is part of the pickup technologies faster than consumers small businesses.
Speaker Change: So we've actually kind of give them a bit of a shift in terms of.
Speaker Change: What they can do a studio is a great example of what it can do there to play with it by the <unk>.
Speaker Change: But having the shopping habits of people that decided they wanted to do it myself on the peoples yeah.
Speaker Change: I'm going to go for an agency I pretty much constant I mean, we didn't change the humans right. We only change the technology. So I think when it comes to that.
Speaker Change: That's why we're seeing that buying behavior in display it's pretty much constant.
Speaker Change: Very helpful. Thank you.
Speaker Change: Sure.
Speaker Change: Thank you.
Speaker Change: Next question coming from the line of Josh Beck with Raymond James Your line is now open.
Speaker Change: Yes, thanks, so much for taking the question.
Speaker Change: Maybe just focusing on the self creator obviously, there has been quite nice momentum accelerated above.
Speaker Change: 7% this quarter.
Speaker Change: Bridging the gap between where the business stands today and at a double digit.
Speaker Change: Type of clip what would be some of the primary drivers some conversions important I'm not sure if.
Speaker Change: <unk> is a contributor but just how should we think about that that bridge.
Speaker Change: Hey, Josh.
Speaker Change: First of all.
Speaker Change: You are assuming right. Obviously, we saw it was obviously I mentioned.
Speaker Change: Early stages. It is not a contributor at least not at this stage.
Speaker Change: In the future.
Speaker Change: Definitely definitely an offset.
Speaker Change: That's not the 2025 thing.
Generally speaking I think that.
Speaker Change: Over the course of the years, what you've seen.
Driving.
Speaker Change: The growth of self graders.
Speaker Change: There's a big obviously theres always.
Speaker Change: Some some play here in terms of what does the macro and how does that affect.
Speaker Change: That can play a role.
Speaker Change: But this is obviously not something we are counting on it because it's completely out of our control.
Speaker Change: The key thing is improving our editing environment simplifying.
Speaker Change: Lots of this functionality.
Speaker Change: People need in order to incorporate them into their website.
Speaker Change: So essentially making the.
Speaker Change: The journey from the point, where you come to us in these states youll need to the point, where you actually have something that you're happy about that.
Speaker Change: We're proud of the creation, making that journey with us.
Speaker Change: Possible, but also as accurate as possible people are very very.
Speaker Change: Accurate in their needs and their wants meaning that they really want to get to something that really encompasses an.
Speaker Change: Delivery is the exact division they have to do their creation.
Speaker Change: Yes.
Speaker Change: So pointed out and we've seen this over the years is that website.
Speaker Change: Over the past more than a decade, it became something much much much more sophisticated in terms of the value to give people the nature of them being transactional not only for commerce, but also for communicating with your old customers with giving service.
Speaker Change: With giving information.
Speaker Change: And from that standpoint, whenever we remove a blocker in something that stops.
Speaker Change: The user from achieving their goal obviously that's also.
Speaker Change: Ends up with a with a heightened conversion and better results. So I think all of those together I think that we believe can continue driving south greater growth in the future.
Speaker Change: Super helpful.
Speaker Change: A follow up.
Speaker Change: Or Lee or had no. There was a comment in there that you expect transaction growth to be similar to <unk> growth moving forward. So it seems like somewhat stable.
Speaker Change: Rates is the way to think about that is that really a comment for this year as you maybe lap. The addition of some payment partners, but as we.
Speaker Change: Take a multiyear view there is still opportunity for the take rate to go higher any comments on that front.
Speaker Change: So on a multiyear basis definitely is I think that you know.
Speaker Change: There are many things.
Speaker Change: We can do for example, moving people from offline to online.
Speaker Change: We have.
Speaker Change: Our <unk> solution, a full omnichannel solution, that's actually helping that and we we actually do that.
Speaker Change: Hum.
Speaker Change: With channels and customers to help you with and this is the one over the way you know to move people from offline to online in time of the transaction.
Speaker Change: Except for the Doctor know many.
Speaker Change: Many new features or any new products that do the same thing.
Speaker Change:
Speaker Change: So I believe that definitely is I think that there are more countries.
Speaker Change: We need to implement we experiments and we definitely going to do that.
Speaker Change: Yes, we are going to see increase in take rate.
Speaker Change: I'm not sure if it's going to be significant.
Speaker Change: Last year for example, when we partner with a square or Paypal.
Speaker Change: But definitely you know them that much.
Much more big customers.
Speaker Change: Channels like that.
Speaker Change: Partnerships like that but definitely as I believe that it will continue to grow and increase.
Speaker Change: Even even this year, but not as significant as last year.
Thank you.
Speaker Change: There are no further questions. This concludes today's conference call. Thank you all for your participation and you may all disconnect.
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