Wix.com Earnings: Free Cash Flow Is Surging

MarketsMotley Fool

Wix.com (NASDAQ: WIX), a leading cloud-based platform for building websites, saw more strong top-line growth in its first quarter of 2019. In addition, free cash flow jumped sharply.

Here's a close look at these trends, as well as the quarter's overall performance, which was driven primarily by a big increase in premium subscriptions and improved monetization.

Continue Reading Below

Wix's third-quarter results: The raw numbers

What happened with Wix this quarter?

Wix's revenue increased 27% year over year to $174.3 million. Though this figure was higher than management's guidance for between $172 million and $173 million, it represented a much lower growth rate than the 39% Wix posted in Q4. Free cash flow went up 40% year over year to $35.1 million.

Results were bolstered by a 9% year-over-year increase in average revenue per subscription and 180,000 net new premium subscriptions.

What management had to say

The quarter was "a strong start to the year," said Wix CEO Avishai Abrahami in the company's first-quarter earnings release.

He continued:

Wix CFO Lior Shemesh noted that the company's top-line growth was aided by "the early success of our strategy to increase collections per subscription, as the trend that we began to see last quarter is continuing as expected."

Improved monetization per user was the result of new products and pricing, management said.

Looking forward

Wix lifted its outlook for full-year revenue, guiding for $758 million to $763 million, or 26% year over year growth. Previously, management was expecting 2019 revenue between $755 million and $761 million.

But management lowered its outlook for free cash flow, forecasting full-year free cash flow between $122 million and $126 million. This is down from a previous forecast for $135 million to $140 million. The lowered outlook for free cash flow reflects a planned $15 million investment in customer solutions, which management decided to double down on. "Excluding this investment, our free cash flow guidance for 2019 would be $137-$141 million," management said.

"We are also excited to create another growth opportunity by investing in the next phase of Customer Solutions," explained Abrahami. "We believe this evolution will drive top line growth through conversion improvements and the sale of new products while increasing our overall level of support."

Even with this investment, management's free cash flow guidance implies 20% to 24% growth in the important metric.

Find out why Wix.com is one of the 10 best stocks to buy now

Motley Fool co-founders Tom and David Gardner have spent more than a decade beating the market. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

Tom and David just revealed their ten top stock picks for investors to buy right now. Wix.com is on the list -- but there are nine others you may be overlooking.

Click here to get access to the full list!

*Stock Advisor returns as of March 1, 2019

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Wix.com. The Motley Fool has a disclosure policy.