Q2 2025 Wix.com Ltd Earnings Call
Thank you for standing by.
Hello and welcome to which second quarter 2025 earnings conference call.
Please note that this call is being recorded.
I'll now hand the call over to the Wix team. Please go ahead.
Thanks and good morning everyone. Welcome to wix's second quarter 2025 earnings call.
Joining me today to discuss our results are avishai abrahami, CEO, and co-founder near Zohar president, and co-founder and lior Shemesh or 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.
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 on the investor relations section of our website investors. Cam.
With that, I'll turn the call over to abishai.
Thank you, Emily and good morning, everyone.
The first half of 2025, has been extremely exciting as creation online, and the internet continues to broadly evolve at a rapid pace.
The fundamental shift in how people create discover and interact online. AI driven advancements, are lowering the barriers to digital creation. This is allowing more people to turn their ideas into more sophisticated and higher quality projects, with greater speed and ease demand for AI powered. Online creation is growing faster than ever. As AI is undoubtedly, bringing more people online in new ways and rapidly expanding the world of what is possible. AI. Momentum combined. With our early innovation, has set us on a strong trajectory, clearly reflected in the strength of our new cohorts.
I'll let near talk about cohort behavior in a few minutes, but I'm excited to report that we are seeing an improving level of new cohort growth. This new cohort momentum is the main driver of the Top Line growth acceleration expected in the second half of the year, which Leo will dive into later. We've seen strength in our AI on boarding funnel and increase adoption of AI across the platform encouraging signals, that new users are increasingly leveraging AI to create online.
While the full picture of this new era is still unfolding, I'm confident that weeks is well positioned to thrive and help shape. What comes next?
We are heading down this path fast with major AI players building the rails to bring in this new era of web.
And Wix is ready. Recently, we developed proprietary algorithms that help our users content surface prominently in AI generated responses with our generative engine optimization offering.
This empowers users to understand Monitor and actively improve how their brand appears in llm based search engines, which is the first CMS to offer this kind of AI. Visibility natively setting a new Benchmark for AI search optimization tools within website platforms and demonstrating our first mover Advantage as we, transform our core website building offering to align with the next area of Internet. We are also unlocking completely new markets, such as Vibe coding growing. Our town is a core pillar of our long-term growth strategy. And we are making big leaps with our June acquisition of Base 44,
Bass 44, gives us immediate access to a completely new audience.
This includes developers design and product teams Enterprises building, internal tools, and DIY, users building applications. Not just websites. This isn't just about entering an attractive Market, it's about recognizing early enough. That Vibe. Coding represents the future of how applications will be built. Vibe coding, whether through bass 44, or native capabilities Yet to Come is going to be a major growth.
Both driver in 2026 and Beyond. We're already seeing the fruits of this investment today with just a few million of ARR at the time of our acquisition base. 44 is now on track to generate 40 to 50 million of ARR. By the end of this year, this is a supersonic level of growth in just a matter of weeks.
And we don't expect this momentum to slow as we accelerate towards the 100 million ARR milestone.
More importantly, there is opportunity to generate long-term Synergy between Wix and base 44.
Which can provide the robust infrastructure that Vibe. Coding platforms need to scale.
This includes hosting capabilities, security framework gdpr compliance payments, processing, marketing, Automation and more.
Bass, 44 brings the application layer to empower rapid development of ideas. While Wix can supply the business and online platform.
These are all capabilities that Wix has invested into and built over nearly 20 years, resulting in a full sum ecosystem.
In fact, these are the same problems faced by custom coded websites today, which continues to push users to migrate to South CMS platforms like wix
While we've seen this trend for years, migration has a specially accelerated in the last few quarters. Long-term, I strongly believe Vibe. Coding is a natural complement to our existing core offering. My belief is that the future of building online is in the combination of intuitive visual editing. With flexible Vibe, coding weeks is well ahead on the path to offering the full spectrum. Visual first creation for Simplicity and speed and AI, powered coding capabilities, for flexibility and depth. This is how we'll continue to lead in this next era giving every user from beginner to Pro the tools to build smarter faster and at a scale previously, not possible with that. I'll turn it over to near.
So we recently, onboarded and continue to onboard to drive, Topline growth acceleration later this year.
These cohorts improved. The foundation for growth in 2026 and Beyond as the increasingly layer on, this is the power of our business model. This strength. Underscores growing demand for our platform as users online needs change and the internet evolves at Breakneck speed.
Bookings from our Q2 2025 user cohort grew 14% over the bookings generated by the Q2 2024 cohort in its first quarter. Impressively, the new cohort's bookings growth accelerated to a higher clip in late Q2 and through early Q3. I'll speak more about this shortly.
Q2 cohort strengths was driven by our main geographic markets, such as the US, UK and Europe notably growth. In the US, our biggest market experience particular strength with year-over-year Improvement across all key metrics including cohort size conversion rate to paying subscriptions and monetization new cohort. Strength was also driven by a strong top of funnel notably. We saw improvement in our organic traffic as more users actively searched for Wix online, which is an indication of our increased brand awareness being the top platform for web creation. We've also seen growth coming from Paid channels which also drove higher traffic to the platform. While we maintained our TR oi guardrails as a result more than 5 million new users on boarded in Q2 up 6% year-over-year.
We continue to see an improving mix of high intent and commerce oriented users in our new cohorts. As we expand our product suite and innovate up Market.
Constant Innovation, particularly across our AI offering is enabling improved user success. As a result, we have seen healthy conversion of new users into paid subscriptions Partners in particular, continue to convert. Well driven by Studio. Momentum discontinued makeshift to higher intent. Users also fueled higher. Monetization in the recent cohort, as they purchase more, advanced subscriptions and adopt more business solutions turning. Now to our existing cohort users, which continue to perform well in the second quarter, this was driven by stable ongoing conversion, strong retention and users committing to Wix for longer subscription periods, both existing and new users are now opting for more of our longest terms subscriptions than ever before, demonstrating improved confidence in their businesses and our platform.
Growing bookings are from existing users was also driven by better monetization across both self creators and partners as adoption of our AI products improved.
This quarter, uh, we saw strong results from a couple of the AI offerings launched earlier this year. Our AI marketing agent brought a notable increase in adoption of our paid marketing tools while Astro engagement accelerated improved engagement and resulted in more users continuing through more than 300, uh, suggested flows and taking direct action afterwards.
It's incredibly rewarding to see our AI Innovation tangibly enable more success for users.
Better monetization was also uh, uh, result of solid Commerce activity in the second quarter transaction, Revenue increased by 18% year-over-year, driven by 11% year-over-year growth in gpv and continued Improvement in take rate.
More Merchants are opting for Wix payments. As we improve our capabilities, demonstrated by the recent expanded partnership with PayPal new offerings like Wix capital and Wix checking are opening up new avenues for monetization. We remain focused on capturing and addressing the full spectrum of merchant needs. As part of our long-term Commerce strategy.
Finally, I would like to briefly talk about what we've seen in early Q3.
The incredibly positive demand Trends we've seen in the first half of 2025 have actually continued to accelerate.
Impressively new user cohort, bookings. Grew more than 20% exiting July over what the previous year, cohort, grew in the same time frame.
We have not seen organic cohort growth at this elevated level since Peak Co this 20% plus growth, excludes impact from base 44, including base, 44, cohorts, new cohort, growth would have have accelerated much more significantly in early, Q3
Bookings from the q1 and Q2 2025, new user cohorts. Also continue to perform very well. These Trends give me confidence that Topline growth will accelerate in the back half of the year, which Leo will speak about shortly to wrap it up our solid Q2 results illustrate the durability of our business across the dynamic macro as weeks, Remains the leading platform to create manage and grow uh digital presence.
Operate and succeed in any environment with that. I'll hand it over to lior.
Thanks, senior. We delivered another great quarter that exceeded expectations across multiple metrics, driven by the robust business fundamentals you just heard about, and continued successful execution of key initiatives. The momentum built up year to date is expected to drive growth acceleration in the second half, which I'll talk through in a few minutes. More importantly, the cohort strengths we are generating today, as well as the products we are innovating and the new terms we are entering, are laying the foundation for robust growth in 2026 and beyond. First, let's dive into the details of the second quarter. Total bookings grew to $510 million in Q2, up 11% year-over-year.
Performance was driven primarily by increasingly stronger, new user cohorts. Joining the platform as well as deeper adoption of our Ai and Studio offerings, total revenue grew to 490 million up, 12% year-over-year and above the high end of our guidance range.
Partners Revenue grew 24% year-over-year to 183 million driven by continued adoption in the professional audience segments of our platform and Studio.
We continue to see Studio, bookings grow with an increasing number of Partners building, multiple projects on the platform.
Transaction. Revenue was 64 million up 18% year-over-year driven by continued, gpv growth coupled with improvement in our take rate as weeks payments. Adoption among new, Merchants continues to grow gpv, grew 11% year-over-year, to 3.6 billion Partners remained the primary driver of gpv growth contributing nearly 55% of total gpv, as larger agencies and Merchants continue to choose weeks for their Commerce needs.
Total non-gaap growth margin in Q2 was 70% up from 69% in q1. This reflects productivity benefits from AI Solutions implemented across. Our Customer Care Organization, as well as optimization of a key vendor partnership.
Non-gaap R&D and sales and marketing expenses increased in the second quarter as we increase headcount, according to our annual plan and integrated the team from our recent base 44 and our 1 acquoni.
Tier 1, this excludes 6.1 million of non-operating acquisition related expenses. Primarily acred bonus and earnout payments per the respective. Acquisition agreements Q2 free cash flow was 148 million or 30% of Revenue. This quarter, we also began executing on our 400 million repurchase authorization. We repurchase approximately 646,000 weeks, ordinary shares for nearly 100 million dollars, proving our continued commitment to returning value to shareholders. Let's now turn to the rest of 2025, healthy first half performance provides confidence in our expectations, for growth acceleration through the rest of the year. Particularly as we see increasingly stronger, new cohorts layering onto the platform. We are raising our full year. Bookings Outlook to 2.04 to 2.075 billion or 11 to 13% year-over-year growth. This increased
Outlook assumes a continued upwards Trend in new cohort, Behavior contribution from base 44 and current FX rates.
For revenue, we are updating our previous full-year outlook to $1.975 to $2 billion, up 12 to 14% year-over-year. We expect total revenue in Q3 2025 to be $498 to $504 million, up 12 to 13% year-over-year.
Remember that robust new cohorts and Acquisitions made in the middle of the year. Have minimal impact on second half Revenue. I want to also provide more color on the growth acceleration in the second half specifically, we anticipate 1 in new cohorts layering onto the platform, new user cohort, bookings, exited July growing. More than 20% compared to what the previous year. Cohort grew in the same time frame as demand. Continues to increase conversion continues to improve in key markets and more sophisticated users on board. We expect new cohort, bookings growth to Trend upwards through the rest of the year.
Layering in are expected to drive the majority of the second. Half Topline acceleration 2 contribution from base, 44, 3 modene from targeted pricing optimizations. This was planned at the beginning of the year to remediate pricing disparity across certain subscription types in select geographies.
4 continued ramping contribution from Studio as new partners. Join and earlier users mature and build multiple projects with us. And 5 growing impact from our AI products such as our AI onboarding funnel and AI marketing agent on the cost side. We now expect non-gaap total gross margin of approximately 69% and non-gaap operating expenses to be approximately 49% of revenue for the full year.
This slightly higher cost, expectations, reflect incremental ongoing, AI marketing and headcount Investments. We plan to make to operate integrate and grow base 44,
with higher bookings, expectations of setting. These increased costs we are able to keep our free cash flow, expectations and changed. We continue to expect to generate free cash flow of 595 to 610 million in 2025, or 30% to 31% of Revenue. Accelerating new cohort, momentum combined, with AI Tailwind as the internet, continues to evolve and bass 44, tremendous growth trajectory gives me confidence that we can achieve even more and maintain
Robust growth in 2026 and Beyond.
Operator.
We are now ready for questions.
Thank you.
If you'd like to ask a question please press star and the number 1 on your telephone keypad. Additionally, if you'd like to withdraw your question, please, press star number 1 again on your keypad and our first question comes from the line of Eagle Arun from City.
London.
Hey, good morning guys. Um, okay, so I want to dig into uh Genai Vibe coding and uh base 44 a little bit more.
So uh, obviously the the way you talk about it, um the vibe coding is complimentary to your core, you know Wix kind of drag and drop editor. Um so I want to expand on that as you know, Vibe coding grows the the the way it's growing. Um, you know, do you think this model of building? Uh, you know, replaces the drag and drop editor, does it? Remain complimentary oh over time, you know? And I guess if you look at the the share performance,
Um, the investors would would seem to to view that A vibe coding. Replaces, Wix not, not creates a, a new market, and complimentary in, you know, for example, our our, our, um, agencies using this comp with Wick Studios, is a replace Wick studio. Just want to understand how you envision the ecosystem, uh, evolving and then have uh, quick follow-up.
Well, I think it's complimentary, right. I think that if you look at the history we've done, the first version of something that is very similar to a Vibe coding where you type what you want and we actually build the website around it and we started in 2016. Of course we continue to improve it and we will continue to improve it and I think for websites and it's very hard just with a text interface to move things around and design them the way you want them.
But uh, and we can actually see already the tools that they do. Uh, just wipe coding already started to add a very weak but existing, uh, visual editing elements.
So obviously the the the the solution in the future will be a combination. I think the vibe coding is tremendous potential when it comes to building applications.
So that way, I think it's very interesting because there are a lot of the business logic is extremely is extremely hard, and that's where Vibe coding shines. I, I want to point out again that
If you build a website with a, the standard Vibe coding tools today.
You actually end up with a website that is a very poor in terms of a lot of the quality that is needed or required by law. For example, you don't have support for gdpr. You don't have support for accessibility. You don't have support.
Of a full-blown e-commerce package.
The prompt.
Okay, I understood it, um, and, um, I guess the follow-up then, um, as you see based 44 gain adoption, uh, you know, among your partners is it, um, you know, are they using Studio and bass 44, or is it a complete kind of different set of of users that you're seeing right now? And I guess, you know, part of the um, the view from investors is you you're seeing a number of smaller new entrance, you know, like base 44 um, that are growing really quickly and, you know, uh, at least seemingly taking share of the overall market and just what your your thoughts on on that. Thank you.
Well I think it's it's a very different intent sometime. It's the same user but it's a different intent and you can know already see some of the sign of that on Wix itself, right? We accelerate it not the accelerated. So in theory, if there was a huge amount of the competition out there, we would have a decelerated and not accelerated. However, I do think that if you look at the 3, different needs that you have mostly for website, builder and application Builders right, there will be a website, building application building a prototype building, okay? So think for
Prototype building and application building. You see tremendous use of vipe coding now. And I expect that to continue to go and I'm sure that we can enjoy it weighs. A lot of the new capabilities of AI in order to enhance our offering, which is something that we always been doing.
Excellent.
Thank you. Was it. Our next question comes from the line of Ken Wong from Oppenheimer.
The lines open.
Fantastic. Uh Leo uh was wondering just in terms of the the bookings acceleration in the back half and the increase in the bookings. Uh, any any rough sense? What the the base 44 contribution is? I know you guys mentioned 44 million of ARR. Just wanted to to understand how much of that 15 million raised was was driven by base 44.
Sure. So so
From the fact that it's, uh, driven by the overachievement, uh, of our new court. Um, I think that we mentioned that it's a level of strength that, you know, since uh, big Co we haven't seen something even similar to that. Um, and this is why it's allowing us to accelerate the second half growth even more than what we initially expected. Um, Base 44 has had some contribution, but it's not the majority, uh, of the race. Uh, but in any case, we are not going to break it down to the different elements.
Okay. Understood super, super helpful. And then obviously I you know also on on base 44 just wondering as you as you guys work it into the the Wix platform is this a business that you guys intend to kind of run separately? Is it just going to be part of the core Wix ADI Studio platform. Just love some thoughts on on, on how you plan to, to integrate the businesses.
well, we're going to keep it separately, at least for the
For, for the current future that we can foresee. And I believe again that those are very different needs, people don't do the same thing on base 444 to do on wix
And I think that the vibe coding is a great way to build prototypes and applications.
and,
Not necessarily the best solution for website. And I think the intent is what drives the success of products. So I believe that we're going to maintain them separately.
Got it. Thank you very much.
Thank you.
Our next question comes from the line of Brent still from Jeffries.
The lines open.
Thank you. This is a great to see the acceleration in new use a cohort and you talked about that's going to help the the guidance, but if you can do it to, you know, why you're confident that strength can continue and I don't know if there's anything specific drivers or things underneath that. You see that makes you confident that all of this is sustainable. Um, you know, for the next uh, 6 Plus months or so.
Hey, hey Brent, it's near. Uh, so, first of all, um, I think our confidence comes from the sense that uh, We've uh, you know, we've already covered 1 month out of the 6 that you just refer to, uh, and we are seeing very favorable Trends from that from, uh, from that standpoint. And also, because we understand that the a large part of why we're seeing. This is, is comes from the strength of our brand, uh, and and, and increase demand. So, um, we feel very calm
Comfortable, uh, since this is not something that started just a few weeks ago, but actually, you know, started in Q2 and Spilled already into a significant part of Q3. Uh, it gives us, uh, a good confidence that uh, that this should should continue.
Thank you. So I do a quick follow-up on you, mentioned the targeted price increases. I'm wondering, you know how broad those are. And we did see 1 in 1 of the skus in the US. But, you know, is that a material impact for 25? And or maybe even 26, that's it. Thank thank you.
Hey, so actually it's uh, it's uh, it's it's not a material 1. It's a more of a kind of a tail, the tail end of the previous move that we've done. And some some, uh, wrap-ups that we did in specific for specific, uh, subscriptions and specific, uh, um, geographies. Uh, so the impact is not, uh, very significant and was actually part of the, our regional plan and was already, uh, uh, baked into our original guidance.
Thank you.
Thank you.
All right, next question comes from the line of Andrew. Boom, from citizens.
The lines open.
Thanks so much for taking the question.
Um I'd love to talk a big picture question for abashi. As I think about the expansion of the Wix product portfolio including wexel previously and now kind of financial services is AI unlocking just a wider product set for Wix what's kind of in the strike zone or out of the strike zone that you guys want to be able to approach.
Can you can you just speak to kind of the, the expansion of the product road map, and kind of how you guys are thinking about offering a broader set of services for customers?
and and the reason for that is that we believe that AI provided and will continue to provide tremendous opportunities for us to explain our Market, reach to expand, uh, the value that we bring to our customers and and, uh,
And of course to offer new and exciting things.
And Vibe coding is a point in that, but there's so much more that I believe, will happen and should happen. And we do intend to, to continue to develop that and continue to offer, new ideas and new technologies to our customers. So, yes, I do believe that we are tremendously being off, been benefiting, uh, from Ai and we will continue, uh,
To do that. And and, and to enjoy the benefits of of the global, AI innovation.
And then I, I wanted to ask a question that it may be too early to answer, but but I want to try to address it to to the the barriers to change websites.
Change. As we think about more text website capabilities, how do we think about the, the kind of the component of churn within websites as new capabilities, kind of lower the barrier to Creation?
Well, it's always been easy to change a website, right? I think that the content is always been owned by the user and and, and you can always move between different platforms. I think that the reason that we see so many people staying with Wix is because we offer them a better platform for many of the things that they need. I do believe that the more AI capabilities, Advanced Air capabilities exist. It actually going to be harder to change a website. Not easier. I think that going to be less platform that offer all those capabilities.
And so on the amount of platform, you can change be between will actually grow down and we can already see that.
If you look at how much time it took to people, to catch up to other companies to catch up after ADI, who was quite a few years. And I think that if you look at the thing we've been doing in the last couple of years, you see that most of them don't exist yet and other platforms and I think so. Going forward, I think that the speed of innovation and the fact that we have so much expertise in how to add integrate and and offer to our customers and our products will actually continue to give us a benefit in terms of competitive landscape.
So, I believe that actually AI is currently mostly provided. It's a great barrier or a great way for us to enjoy innovation.
Thank you.
Thank you. Our next question comes from the line of Brad Erickson from RBC Capital markets.
Vaillons open.
Yeah. Hey guys, I have 2. Um the first I guess just you know 2 Trend with AI that seemed kind of salient to your business. 1 is organic search traffic, is declining to individual websites and then 2 maybe some more signs of AI driving some layoffs. How do these 2 Trends kind of potentially interplay and impact your business. If at all and then I have a follow-up
Well, I think that when it comes to organic search traffic, we do see a decline. It's still very small, but we do see a decline. However, there is a new universe now that people have to, to, to think about and work very hard to do that. And this is how to appear and be visible on the LMS themselves, right? And that is actually, at least as complicated as being found on Google as a result. Again, I think we need to supply our customers with the best tool and the best Technologies to be visible. And to be found on LMS,
And the I I don't see any time in the near future where the back end of the transactions will be done on the llms themselves.
And let me explain. For example, let's say that you have a yoga studio and you want, and, and somebody want to go to an llm and actually order a class with you or to join a seminar, right?
For that, LM has to know the seminar exist. How many seats are there? What is the price of a ticket? What are the tax rules? What is the reimbursement rules? What are the refund rules? What kind of coupons go together? How does it all combined to the membership card that you have? Do you need a membership card? You don't need a membership card. All of the things required. Very complicated back end, which is a very complicated database and a lot of rules on top of that.
That nlms providers will not develop those but actually interface with the existing website, as a result from that, you still have the all of the logic of the website and and a lot of the visual elements as part of it. Right? And now it's even more complicated because it has to know how to talk not just with users, but also with different agents that know to do different things with their knowledge that you have and you need to be able to expose that knowledge to the LMS. In addition, you need to be found on the LMS. So I think that if you look at the next couple of years, at least, we're going to see that actually be building a successful website. It just become way more complicated. Which also means that you probably need a a, a stronger platform to support all of that. Just being fun and LM is extremely hard. Not to mention Building Technology for Urgent to talk to other agents and, and take part of the visual and present stuff, uh, on on a different, uh, uh, Target, right? I mean nobody want to buy a shirt.
Shirt or a car, or join a go to restaurant without or hotel without seeing them and being able to actually interact with them.
Yeah, that's that's great, that's helpful. Um, and then second just on studio. Uh, I think you shipped a number of enhancements kind of in the March, or maybe April time frame, which I think have been pretty well received and kind of perceived as adding more value. How do you guys think about your ability and maybe timing of potentially capturing
Some of that value on the improvements you've made on Studio this year. Thanks.
Well, I think that we have a very exciting roadmap for Studio.
And and that I'm personally very excited about it.
I think that in studio, we have 2 different direction that we currently are working on 1 is enhancing the capabilities of studio, and the traditional way we did and the other 1 is preparing Studio to provide tremendous tools for partners to be able to support the future of of the internet for their customers. And I think both of them combined together. Uh, this year and more even more. Next year, will provide a, a, a, a big Competitive Edge as opposed to all different other platforms that exist today.
Got it, thanks.
Thank you.
Our next question comes from the line of Elizabeth Porter from Morgan Stanley.
The lines open.
Great, thank you so much. I wanted to ask again about a base 44, it's a really exciting New Market to go after with the new audience of users. And when we think about the historical expansion that you've had into markets like Partners, there were certainly incremental investment to build the brand with the new audience. So how should we think about base 44? You know, what are some of the factors that could make the impact on Troi? Look either.
Similar to or different from the prior periods, we were investing for partners.
Well, I think that best 44 is a great example for a fantastic product that makes it easier right to push and to do marketing and to create a brand new technician because it is in my, in my, at least, in my opinion, the best of its class and you guys are more than welcome to try and compare it to other tools and you see immediately the difference. So, I believe that, you know, it's always the same, right? You keep building a great product, keep doing great marketing, you keep building. Great Community working, very hard with your users to to solve their needs. And I think that we really are starting at a great point to be it.
Great. And then, um,
Go ahead.
No, no. I and of course, you know, I think that the same thing that happen in weeks is part of you. You can already see a lot of it happening. Now in base, which is a very strong organic growth.
I got it. Great Elizabeth. Just I I just want to add that it's different than Studio because then we uh uh we build a product. Um, so I think that uh we kind of over here, we both we bought a company uh of course there is a lot of investment to do with the product but the hour is much faster. Uh so I don't think that it will have a big burden on our p.
Or any future plans, uh, which regard to the kpis that we mentioned in the past. Um,
Great. And then just as a follow-up.
Creator product potentially be additive to further accelerating conversion improvements.
Uh hey this is me so um obviously not going to State the date but we're looking still looking at kind of a launch uh at a full launch. Sorry. Uh and in terms of uh the potential to to an uplifting conversion, um obviously that's always attached to any kind of improvement that that we do and we definitely, uh, hope so but it will take time to for, you know, to roll out. Something new, uh, and test it over time to see what, uh, what kind of impact it has?
Thank you. All right, next question comes from the line of Trevor Young from Berkeley.
The line's open.
Great. Thank you. First, 1 Avy bigger picture. Are we now at the point where you've harvested a lot of the margin opportunity and from here, we should assume much less margin, less than more incremental Investments to further accelerate growth. Such that as you go from your current rule of 42 to something. North of that, the incremental lift comes from accelerating Revenue growth
I'm not sure, I understand the question.
Uh, are you are you going to invite more to try to accelerate growth?
So, whichever, uh, generally, and then I'm going to hand it over to Lior, of course. But generally, um, um, the answer is yes. I think we can invest further into, uh, the growth of our, uh, uh, business while maintaining similar margins.
um,
Correct. I think that, uh, we need to, uh, look at, uh, right now or the expansion of the margin. So we we've expanded the dramatically significantly over the last, over the, the last couple of years, we actually even with that, uh, investment, uh, that we have this year. Um, we haven't changed really the 3x low margin. Uh, I believe that, uh, base is a super profitable business. Um, from 1 end, it's going to, uh, increase the growth on the other end is going to generate more free cash flows in the future. So I don't see a major deviation, uh, from the kpi that we provided in the past, actually. I think that there is some, um, an options, uh, in the future, actually, to even to improve further the margins, because I believe that the AI cost, uh, will drop significantly over the last over the next couple of years.
Great. Thanks for that. And as a follow-up lior on Capital, allocation is the plan, still to repay the convert from cash on hand. I think that comes to be fairly soon. And if so, why not opt to refi or use another form of debt. The high recurring nature of the dismiss would suggest, more leverage would still be palatable and that would give you, you know, a lot more cash on hand to accelerate by current prices.
Um, yeah, we definitely, uh, plan to repay the converts with cash with regard to, uh, dips and plan for the future. We leave it to the future. But right now, we are going to pay, um, the converts with cash. Uh, definitely. Um, if we feel that we need, uh, um, you know, requirement or, uh, needs for cash in the future. So, I agree with you. There's a lot of means in order to do that in the capital markets,
Great. Thank you.
Thank you. All right, next question comes from the line of Josh Beck from Raymond James.
Yeah, thank you for uh for thank you for taking the question. Um I was really trying to put um base 44 in in the right swim Lane, so maybe more for for abashi. But it seems like there's kind of 2 ends of the spectrum. You have very prototype building types.
Of platforms. Obviously there's been some some Buzzy IPOs right there. Um, the other side you have, you know, vary in depth, um, at building platforms. Obviously, a lot of headlines with Vibe coding kind of getting integrated into into Ides.
Where is the, the base 44 in this kind of Market map? And are you really going after kind of the entrepreneurial developer? Is it, the Enterprise developer just would love to hear how it fits into the market?
well, basically for I mean, first of all, maybe it's important to say
Right? And there are many different ways of using that to generate code.
Uh, each 1 of them is is mostly the experience and and, and what they do is different according to the user.
I meaning that.
If you look at something like Windsor for cursor,
they are aimed at developers, right? So they all experience is very different than the experience that you have in base 44.
bass, 44 is aimed for
Mostly people that are not developers or that are are developers and do not want to develop and this and to do something very quick and and then continue to innovate on top of it again without coding.
So, I, I think this is where they start to deviate from things like cursor and wind surf,
I believe that, long term, there is a huge opportunity.
And and a huge market for building applications and prototypes for different applications. And I think this is the core of the market of Base 44.
Okay, that's that's super helpful. Um and then maybe a a question more. So for for lior near on, um, what you're seeing with respect to
You know, maybe customer retention versus your, you know, expectations this year and maybe how that's informing. Obviously, you kind of mentioned you have this, um, strategic pricing action. Sounds like a, it's a little bit of a, of a cleanup of some, some Legacy plans. But you know, how does that inform kind of your your go forward, thoughts around, uh maybe pricing strategy and into next year and and Beyond
Well, generally, I can say, uh, that, you know, this year. We're seeing kind of a stroke a little bit of a stronger than expected. Uh, um, uh, Dynamics around retention again, as I said before, what you've seen in terms of kind of, uh, the, the current changes in pricing was very, uh, a very limited. So, it had no, no significant impact. Uh, and generally we're seeing, uh, we're seeing a stronger than expected Dynamics.
Um,
you know, I I I've I've nothing to comment on on any future uh uh price changes because obviously we're not going to announce them uh a bit ahead of time. Uh but I will say that actually I think you know, from our standpoint we obviously see this uh improved retention uh as just a very strong and positive signal uh overall both in terms of um the value that we give our customers as well as some more strength in the in the in the micro environment.
Thank you.
Thank you.
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