Wix.com Ltd. — Form 20-F Summary
Period clarification: The supplied filing is Wix’s annual report for the fiscal year ended December 31, 2014, not a standalone 2013 Q4 filing. It provides annual comparisons, but no clear standalone Q4 2013 financial results. Figures below are in U.S. dollars unless stated otherwise.
Business context and reporting period
Wix operates a cloud-based website creation and management platform, offered through a freemium model. Most revenue comes from monthly and annual premium subscriptions; other sources include domain registrations and a small amount of app-market revenue. At year-end 2014, the company reported about 58 million registered users and approximately 1.23 million premium subscriptions. Its financial statements were prepared under U.S. GAAP and audited by Ernst & Young’s Israeli member firm, which issued an unqualified opinion.
Key financial results
| Metric | FY 2013 | FY 2014 | Change / context |
|---|---|---|---|
| Revenue | $80.5 million | $141.8 million | Up 76.1% |
| Gross profit / margin | $65.2 million / 81.0% | $115.7 million / 81.6% | Margin improved 0.6 percentage points |
| Operating expenses | $91.7 million | $171.4 million | Up 86.9%; 120.8% of revenue in 2014 |
| Operating loss | $(26.5) million | $(55.6) million | Loss widened; operating margin was (39.2%) in 2014 |
| Net loss | $(28.7) million | $(56.6) million | Loss widened; net margin was (39.9%) in 2014 |
| Basic and diluted loss per share | $(3.33) | $(1.49) | Per-share loss narrowed amid a much larger weighted-average share count following the IPO |
| Collections (non-GAAP) | $98.7 million | $171.3 million | Up 73.5%; includes the change in deferred revenue |
| Net cash from operating activities | $4.2 million | $(0.8) million | Declined by about $5.0 million |
| Capital expenditures / free cash flow | $3.1 million / $1.2 million | $5.6 million / $(6.4) million | Free cash flow is a non-GAAP measure |
| Adjusted EBITDA (non-GAAP) | $(1.9) million | $(11.3) million | Company revised its calculation; comparisons require caution |
Revenue growth was primarily driven by a 56.1% increase in premium subscriptions, from 789,753 to 1,232,827. The filing also reports the 2014 ending count as 1,232,832 in another section; investors should verify the precise figure. Advertising expense rose to $74.0 million from $41.0 million and represented 43% of collections, versus 42% in 2013. Research and development expense increased to $57.8 million from $29.7 million. Share-based compensation increased to $13.9 million from $7.1 million.
Liquidity, debt and capital resources
- At December 31, 2014, cash and cash equivalents were $40.2 million and short-term deposits were $45.8 million; together they totaled $86.0 million. Restricted deposits were $5.9 million.
- Total assets were $118.4 million, total liabilities were $99.8 million and shareholders’ equity was $18.7 million. Current liabilities included $64.1 million of deferred revenue; long-term deferred revenue was $2.5 million.
- Management reported working capital of $6.6 million and stated that existing cash and expected operating cash would fund operations for at least the next 12 months.
- The filing reports no long-term borrowings at year-end. A $10 million revolving credit line had been available through December 31, 2014; Wix drew $5 million in 2013 and repaid it after the IPO. No balance remained from that draw at year-end 2013.
- Investing activities used $60.7 million in 2014, mainly reflecting investments in deposits, $5.6 million of capital expenditures, $4.3 million paid for acquisitions and $1.2 million for intangible assets. Financing activities provided $0.8 million, primarily from option exercises.
- Operating lease obligations totaled $18.5 million, including $5.6 million due in 2015. Uncertain tax obligations of $1.1 million were disclosed, with settlement timing unclear.
Material changes, outlook and risks
- Management said it planned to continue investing in research and development, marketing, technology and network infrastructure, and workforce growth in 2015. Expected 2015 capital expenditures were approximately $6–$7 million.
- Wix acquired Appixia and OpenRest in 2014 for aggregate cash consideration of about $4.3 million. The company expected to develop mCommerce and restaurant online-ordering offerings from these acquisitions during 2015; OpenRest founders’ additional consideration was contingent on specified conditions, including continued employment.
- Annual subscriptions accounted for about 74% of year-end premium subscriptions. Upfront collections support cash generation but are recorded as deferred revenue and recognized over service periods. In 2014, revenue growth outpaced operating cash flow, which turned negative.
- Management identified continued user and subscription growth, renewal rates, customer acquisition returns, product development and international expansion as important to future performance. It also warned that marketing costs and operating expenses could continue rising and that profitability may not be achieved.
- Key risks include intense competition; reliance on search engines, social networks and paid marketing; cyberattacks and service interruptions; dependence on third-party hosting providers; privacy and data-protection regulation; foreign-exchange exposure; and the ability to retain users and renew subscriptions.
- Wix disclosed ongoing U.S. sanctions/export-control reviews following voluntary disclosures to OFAC and BIS, and voluntary discussions with Israel’s Ministry of Finance regarding the application of Israeli restrictions. Outcomes and potential penalties were uncertain. The filing also describes DDoS attacks that caused significant but intermittent downtime and blocked hacking attempts during 2014 and early 2015.
- A 10% appreciation of the Israeli shekel against the U.S. dollar was estimated to increase 2014 net loss by about $7 million. Management used hedging instruments, but noted that hedging might not fully protect results.
- Management reported effective disclosure controls and internal control over financial reporting as of year-end. The auditor did not provide an internal-control attestation, citing Wix’s emerging-growth-company exemption.
Most important facts for investors to verify
- Confirm the reporting period: this is FY 2014, and the filing does not provide a clear standalone Q4 2013 income statement or cash-flow statement.
- Reconcile the reported year-end premium-subscription totals of 1,232,827 and 1,232,832.
- Review the adjusted EBITDA definition change and its reconciliation before comparing the 2014 figure with prior periods; collections and free cash flow are also non-GAAP measures.
- Assess whether subscription growth and annual renewals can support cash generation as marketing, research and development, and other expenses rise.
- Track the OFAC/BIS and Israeli sanctions matters, privacy-law developments, cyber resilience, hosting-provider dependence, and foreign-exchange exposure.
- Review acquisition performance, lease commitments and the company’s stated liquidity coverage, particularly given negative 2014 operating cash flow and free cash flow.