Wix.com Ltd. — Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2013, with comparisons to fiscal 2012. This is an annual report, not a 2012 Q4 filing; the supplied filing does not provide standalone fourth-quarter financial results. Figures are in U.S. dollars unless noted. Financial statements follow U.S. GAAP and were audited.
Business context and key metrics
Wix operates a cloud-based website creation platform using a freemium model. Most revenue comes from monthly and annual premium subscriptions. At year-end, it reported 42.1 million registered users and 789,753 premium subscriptions, across 190 countries.
| Metric | 2013 | 2012 | Change or context |
|---|---|---|---|
| Revenue | $80.5 million | $43.7 million | Up 84.2% |
| Collections (non-GAAP) | $98.7 million | $52.5 million | Up $46.2 million; includes changes in deferred revenue |
| Gross profit / margin | $65.2 million / 81.0% | $34.4 million / 78.9% | Margin improved 2.1 percentage points |
| Operating loss | $(26.5) million | $(15.0) million | Loss widened as operating expenses grew |
| Net loss | $(28.7) million | $(15.0) million | Net loss margin was 35.7%, versus 34.3% |
| Adjusted EBITDA (non-GAAP) | $(18.2) million | $(13.1) million | Loss widened |
| Operating cash flow | $4.2 million | $(3.6) million | Turned positive |
| Free cash flow (non-GAAP) | $1.2 million | $(4.6) million | Turned positive; operating cash flow less capital expenditures |
| Cash and cash equivalents | $101.3 million | $7.5 million | Increase principally reflects IPO proceeds |
| Total assets / shareholders’ equity | $115.4 million / $62.3 million | $16.1 million / $(10.6) million | Equity turned positive after IPO and preferred-share conversion |
| Deferred revenue | $37.2 million | $19.0 million | Liability reflecting customer payments not yet recognized as revenue |
Material changes and capital position
- Premium subscriptions grew 68.2%, from 469,589 to 789,753. Registered users increased from 28.2 million to 42.1 million. Management attributed revenue growth to subscriber growth, product and language expansion, and increased marketing.
- Operating expenses rose 85%, to $91.7 million. Selling and marketing increased 84.9% to $53.8 million; research and development increased 76.8% to $29.7 million; general and administrative expense rose to $8.3 million. Share-based compensation was $7.1 million, compared with $1.0 million in 2012.
- The November 2013 IPO generated approximately $93.6 million in net proceeds to Wix. The company reported $3.3 million of restricted deposits and working capital of $58.4 million at year-end.
- Wix drew $5.0 million on its $10.0 million Silicon Valley Bank credit line in July 2013 and repaid it in November. No borrowing was reported outstanding at year-end. The filing reports no long-term borrowings.
- Operating cash flow benefited substantially from an $18.8 million increase in deferred revenue. Collections are a company-defined non-GAAP measure and should not be treated as GAAP revenue or cash flow.
Outlook, risks, contingencies, and unusual items
- Management expected to invest in growth during 2014, including continued substantial research and development, expanded marketing, additional hiring, and infrastructure improvements. It estimated 2014 capital expenditures of approximately $4.3 million, expected to be funded from IPO proceeds and cash generated by operations. No specific revenue or profitability guidance is provided.
- Management stated that cash and cash from operations should fund operations for at least the next 12 months. It also warned that additional financing may be needed if existing resources and operating cash flow are insufficient.
- Wix has incurred losses every year since inception and expected near-term operating expenses to absorb all or substantially all revenue growth. Continued losses, marketing returns, subscription renewals, and the ability to grow premium subscriptions are key uncertainties.
- Foreign exchange is material: about 35% of 2013 cost of revenue and operating expenses were denominated in Israeli shekels. Wix estimated a 10% shekel appreciation would have increased its 2013 net loss by approximately $3.8 million; it uses derivatives to hedge portions of exposure.
- Wix voluntarily disclosed potential U.S. sanctions/export-control issues to OFAC and BIS after identifying subscriptions and users associated with sanctioned countries. Reviews were unresolved; potential penalties and reputational harm were disclosed. Wix also sought guidance from Israel’s Ministry of Finance on the application of the Trading with the Enemy Ordinance to its online services.
- A February 2014 denial-of-service attack caused significant but intermittent service downtime for Wix and some user websites; the company reported user personal and billing data remained secure. This occurred after the reporting year.
- A patent-infringement suit was settled in October 2013 for an amount described as immaterial. The company reported no other litigation expected to have a material adverse effect. It acquired Appixia in February 2014 for approximately $1.3 million in cash; the acquisition will be recorded in 2014.
- Other principal risks include reliance on online advertising and third-party hosting/cloud services, privacy and cybersecurity exposure, competition, small-business spending, international payment and regulatory hurdles, and the potential effect of NIS movements. The filing also cautions that registered-user counts may include inactive or duplicate users.
Most important facts for investors to verify
- Whether premium-subscription growth, renewal rates, and customer collections continue to support recognized revenue growth; collections are non-GAAP and include deferred-revenue movements.
- Whether marketing and research spending produce durable subscriber growth and whether the widening operating and adjusted EBITDA losses improve.
- How much of positive 2013 operating cash flow and free cash flow depended on the increase in deferred revenue, and how cash use develops after the IPO.
- The status and potential financial or operational consequences of the OFAC/BIS review and the Israeli sanctions-law inquiry.
- Exposure from share-based compensation, outstanding options and future dilution, alongside management’s 2014 spending plans and $4.3 million capital-expenditure estimate.