Wix.com Ltd. — Form 20-F Summary
Period clarification: The supplied filing is Wix’s annual report for the fiscal year ended December 31, 2015, filed April 12, 2016. It is not a 2014 Q4 filing; the text does not provide a standalone fourth-quarter 2014 income statement.
Business context and reporting period
Wix operates a freemium, cloud-based website development and business-management platform. Most revenue comes from monthly and annual premium subscriptions; other sources include domain registrations and app-market sales. The financial statements are audited and prepared under U.S. GAAP. Unless noted otherwise, amounts below are U.S. dollars.
Financial and operating metrics
| Metric | 2014 | 2015 |
|---|---|---|
| Revenue | $141.8 million | $203.5 million |
| Gross profit / gross margin | $115.7 million / 81.6% | $168.5 million / 82.8% |
| Operating loss | $55.6 million | $48.6 million |
| Net loss | $56.6 million | $51.3 million |
| Basic and diluted loss per share | $1.49 | $1.30 |
| Net cash from (used in) operating activities | $(0.8) million | $20.9 million |
| Capital expenditures | $5.6 million | $6.3 million |
| Free cash flow, non-GAAP | $(6.4) million | $14.5 million |
| Collections, non-GAAP | $171.3 million | $241.7 million |
| Adjusted EBITDA, non-GAAP | $(11.3) million | $14.7 million |
| Registered users at year-end | 57.9 million | 77.0 million |
| Premium subscriptions at year-end | 1.23 million | 1.77 million |
At December 31, 2015, cash and cash equivalents were $39.2 million and short-term deposits were $70.8 million. Restricted deposits were $3.9 million. Working capital was negative $16.0 million, including $100.6 million of current deferred revenue. Total liabilities were $153.2 million and shareholders’ equity was negative $3.8 million. The filing says Wix had no long-term borrowings and no material interest-rate exposure.
Changes versus the prior comparable year
- Revenue rose 43%; collections increased 41%. Management attributed growth mainly to 43% growth in premium subscriptions, more annual packages, expanded products and increased marketing.
- Gross margin improved from 81.6% to 82.8%. Operating expenses grew 27% to $217.2 million, but fell as a share of revenue; operating loss narrowed by about $8.0 million.
- Net loss narrowed by $5.2 million. Operating cash flow improved by $21.7 million, supported substantially by a $38.2 million increase in deferred revenue and other working-capital movements.
- Cash and short-term deposits together increased from $86.0 million to $110.0 million. Deferred revenue rose from $66.6 million to $104.8 million.
- Research and development expense rose 34% to $77.6 million; selling and marketing rose 23% to $120.0 million. Advertising expense increased to $87.6 million.
Outlook, management commentary, risks and unusual items
- For 2016, management expected continued significant investment in research and development, marketing, infrastructure and headcount. Planned capital expenditures were approximately $6–$7 million.
- Management believed cash and cash from operations would fund operations for at least the next 12 months. It noted future funding needs could change and additional financing might not be available on acceptable terms.
- Key business risks include retaining users and premium subscribers, the effectiveness and cost of marketing, competition, service reliability and cyberattacks, privacy regulation, international expansion and payment collection, and currency exposure. Wix reported intermittent downtime from DDoS attacks since 2014, but said these had not materially affected operations or financial condition to date.
- Wix had made voluntary disclosures to U.S. authorities regarding possible sanctions/export-law issues; reviews by OFAC and BIS remained unresolved. It had also asked Israeli authorities for guidance on the application of Israeli restrictions to online services. Potential penalties and reputational effects were uncertain.
- Foreign exchange remained material: approximately 37% of 2015 operating costs were denominated in Israeli shekels. The company used derivatives to hedge some exposures. Net financial income was $0.1 million in 2015, including $2.1 million of income related to hedging activity, partly offset by exchange-rate losses.
- Share-based compensation was $18.8 million in 2015. The filing presents adjusted EBITDA as $14.721 million in one selected-data table and $14.738 million in its reconciliation; the reported value is therefore inconsistent within the filing.
- The company reported no current claims or legal proceedings in the financial-statement notes, while separately disclosing the unresolved regulatory matters above. Management stated disclosure controls and internal control over financial reporting were effective; the auditor did not attest to internal-control effectiveness because Wix qualified for the emerging-growth-company exemption.
Important facts for investors to verify
- Confirm the period: this is the FY2015 annual filing, not a Q4 2014 quarterly report.
- Review the quality and sustainability of cash generation, particularly the contribution of deferred-revenue growth to operating cash flow and non-GAAP measures.
- Reconcile the two adjusted EBITDA figures and assess the company’s non-GAAP definitions alongside GAAP losses.
- Track premium-subscription growth, annual-subscription mix and renewal rates; the filing notes that user registrations do not necessarily indicate active engagement.
- Monitor the outcomes of the U.S. and Israeli sanctions inquiries, foreign-exchange exposure, privacy-law changes and cybersecurity incidents.
- Assess dilution from equity awards: share-based compensation was substantial, and the filing disclosed significant outstanding options and restricted stock units.