Business context and reporting period
Wix.com Ltd. filed this Form 20-F for the fiscal year ended December 31, 2016, prepared under U.S. GAAP. This does not match the requested “2015 Q4” period; the filing provides annual 2016 results and comparative annual figures, not standalone fourth-quarter results.
Wix operates a freemium, cloud-based website creation and business-management platform. Revenue comes primarily from premium subscriptions. At year-end 2016, Wix reported 97.4 million registered users and 2.47 million premium subscriptions.
Key financial metrics
Amounts are in U.S. dollars; financial statement figures are rounded to millions.
| Metric | 2016 | 2015 | Change |
|---|---|---|---|
| Revenue | $290.1 million | $203.5 million | +42.5% |
| Gross profit / margin | $244.8 million / 84.4% | $168.5 million / 82.8% | Margin +1.6 percentage points |
| Operating loss / margin | ($44.0 million) / (15.2%) | ($48.6 million) / (23.9%) | Loss narrowed |
| Net loss / margin | ($46.9 million) / (16.2%) | ($51.3 million) / (25.3%) | Loss narrowed |
| Collections (non-GAAP) | $342.1 million | $241.7 million | +41.5% |
| Operating cash flow | $40.6 million | $20.9 million | Increased |
| Free cash flow (non-GAAP) | $36.2 million | $14.5 million | Increased |
Gross margin improved as cost of revenue grew more slowly than revenue. Operating expenses rose 33.0% to $288.8 million; selling and marketing remained the largest expense at $156.5 million. Share-based compensation increased to $28.0 million from $18.8 million.
Balance sheet, debt and liquidity
At December 31, 2016, cash and cash equivalents were $93.1 million and short-term deposits were $78.2 million, for $171.3 million combined; restricted deposits were $0.9 million. Total assets were $214.7 million and total liabilities were $217.2 million. Shareholders’ deficiency was $2.5 million, and accumulated deficit was $243.3 million.
Working capital was negative $8.9 million, largely because $147.0 million of current deferred revenue was recorded as a liability. Deferred revenue represents customer payments collected before the related services are recognized as revenue. The filing reports no long-term borrowings and says Wix had no material interest-rate exposure because it had no long-term debt. Management expected existing cash and operating cash flows to fund operations for at least 12 months.
Material changes versus the prior comparable period
- Revenue increased 42.5%, principally alongside 39% growth in premium subscriptions, from 1.77 million to 2.47 million.
- Collections grew 41.5%; deferred revenue increased by $52.0 million during 2016.
- Net loss narrowed by $4.4 million, while operating loss narrowed by $4.6 million.
- Research and development expense rose 36% to $105.4 million, and selling and marketing expense rose 30% to $156.5 million. Advertising expense increased to $113.2 million from $87.6 million.
- Operating cash flow rose to $40.6 million; cash and short-term deposits combined increased to $171.3 million from $110.0 million.
Outlook, risks, contingencies and unusual items
Wix gave no specific 2017 revenue or earnings guidance in this filing. Management expected continued significant investment in research and development, marketing, technology infrastructure and headcount. It estimated 2017 capital expenditures of $6–$7 million, mainly for office improvements.
Key risks include the ability to acquire and retain users and subscriptions, rising marketing acquisition costs, competition, service interruptions and cyberattacks, privacy and data-protection compliance, foreign-exchange movements, and the ongoing history of operating losses. The company cited the EU General Data Protection Regulation, due to apply from May 2018, as a source of compliance costs and potential penalties.
Wix disclosed voluntary U.S. sanctions-related submissions to OFAC and BIS concerning historical users potentially located in sanctioned countries; agency reviews remained unresolved, and penalties or reputational harm were possible. It also had asked Israeli authorities for guidance on the application of the Trading with the Enemy Ordinance to online services. Separately, $1.1 million of uncertain tax positions remained recorded. The filing says there were no other current material legal proceedings.
After year-end, Wix acquired Flok in January 2017, assuming certain liabilities, and acquired DeviantArt in February 2017 for approximately $36 million in cash, including assumption of approximately $3 million of liabilities. These are subsequent events, not 2016 operating results. The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting.
Important facts for investors to verify
- Confirm the intended period: this filing covers the full year ended December 31, 2016, not 2015 Q4.
- Review subscription growth, renewal behavior and the relationship between collections and GAAP revenue; collections is a non-GAAP measure.
- Assess whether higher marketing and R&D spending can support growth while reducing losses, and account for rising share-based compensation.
- Evaluate liquidity with deferred revenue and negative working capital in context, and verify the cash impact and integration progress of the 2017 acquisitions.
- Track outcomes of the sanctions reviews, privacy-law readiness, foreign-exchange exposure and any changes in the company’s profitability outlook.