Wix fired 230 employees in Q2 and saved $150 million - 100 more in the 3rd quarter

A day after it was revealed that it would lay off about 100 of its employees (about 2% of the workforce), Wix Company reports slightly higher revenues than expected in its reports for the second quarter of the year. The company, which developed a system for building websites, shows revenues of $345.2 million - a growth of About 9% compared to the corresponding quarter last year. Market analysts expected revenues of $344.39 million and the company itself predicted revenues of $342-346 million.
Excluding exchange rate differences, revenues in the last quarter grew by 11% to the level of 349 million dollars. However, the growth continues in the slowing trend, since in the first quarter this year it amounted to 14% compared to the fourth last year - then it was 16%.
The adjusted loss (Non-GAAP) was cut in half, to $0.14 per share from $0.28 per share a year earlier, or to $7.8 million in total from $16.1 million. On the other hand, the company went from an accounting profit (GAAP) of about 38 million dollars to an accounting loss of 111 million dollars. About 59 million dollars of this amount are attributed to expenses for share compensation, and another 54 million dollars are attributed to a decrease in the value of the investment portfolio. Most of the portfolio is focused on investing in Munday's stock, which, like many technology companies, saw its stock plunge in the past year - even though this week it posted good results that boosted the stock.
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The adjusted gross profit margin was almost unchanged, at 62% of revenues. However, the adjusted operating loss was reduced from $17.8 million a year ago to $12.9 million this time.
"We are implementing the three-year plan that we presented last May, in which we formulated an economic efficiency plan that is expected to save us about 150 million dollars in annual expenses (upon completion of the plan in 2025, AP)," said Chief Financial Officer Lior Shemesh "Reducing these expenses is expected to improve our profit margin as well and help us achieve the target we set for our free cash flow, in any reasonable scenario for 2023.
"This saving is not one-time but will continue to be realized on an annual basis. About 20% of the savings will be realized already in 2022," writes Weeks in a statement she published. "The reduction of costs will not include the investment in marketing efforts, which correspond to the objectives of the period of return on investment (TROI) that have not changed."
Weeks' headcount decreased by 220 people (3.6%) during the second quarter, ending with 5,863 employees compared to 6,084 at the end of the first quarter this year. The company's announcement did not mention the layoffs of about 100 employees that were revealed yesterday, so it was not specified whether they were made in the second quarter and are included in the numbers above or were made afterward. If they are not included in the report, this means that after them the number of employees will already be 5.2% smaller than at the end of the first quarter.
In the breakdown of revenues in the quarter, the two areas of activity - the Creative (independent website creators) and the business solutions - have grown since the corresponding quarter in 2021 at a similar rate of about 9%. The rate of annual recurring revenue (ARR - Annual Recurring Revenue) from the creative sector increased by 9% to 1.05 billion dollars. Revenues from the company's clearing system increased by 13% to $36.8 million.
In Vix, they update that the revenues from professional website builders, which they call "Partners", amounted to 84.9 million dollars, that is, 25% of all revenues. This is a 31% increase compared to the corresponding quarter last year. If we include the results of the second quarter, the average growth of income from Partners in the last two years is 56%.
As for the cash flow, as in the first quarter this year, also in the second one, Wix recorded a negative figure - this time of about 5.9 million dollars, compared to a positive cash flow of about 17 million dollars in the corresponding quarter last year. The figures do not include Weeks' investment in establishing the company's new headquarters.
Weeks' forecast for the second half of the year reflects, according to them, the return of demand to pre-Corona levels: the periods of lockdown and social distancing accelerated the digitization of businesses and increased demand. The forecast also includes the volatility of exchange rates.
The company's forecast for the current quarter, the third quarter of the year, is to grow by 7%-8% to a revenue level of 345-341 million dollars. For the entire year, Wix expects growth of 8%-10%. This is based on the effects of the foreign exchange until July and the cessation of activity in Russia, as well as "the assumption that the market situation will remain challenging until the end of the year". This forecast is lower than the one three months ago, which expected growth of 10-13%.
Wix trades at a value of $3.9 billion, after a 56% drop since the beginning of the year.