Wix Reports First Quarter 2018 Results

Strong start to the year with all key metrics once again exceeding high end of expectations

Q1 revenue of $137.8 million, up 49% y/y; under ASC 605, Q1 revenue would have been $134.6 million, an increase of 45% y/y

Q1 collections of $159.7 million, up 39% y/y

Record free cash flow of $21.4 million, an increase of 45% y/y, demonstrates increasing leverage in our business model

Newest Q1 user cohort largest ever – expected to generate over $370 million in collections over the next eight years based on current cohort behavior

Results driven by continued outperformance of conversion and retention of subscriptions and outstanding marketing execution

Increasing 2018 outlook to reflect continued confidence in revenue and collections growth and incremental free cash flow generation

NEW YORK, May 9, 2018 -- Wix.com Ltd. (Nasdaq: WIX), a leading cloud-based web development platform, today reported financial results for the first quarter ended March 31, 2018. In addition, the Company provided its initial outlook for the second quarter of 2018 and increased its outlook for the full year 2018.

“Our continued focus on product development and efficient marketing investment once again drove strong financial results,” said Avishai Abrahami, Co-founder and CEO of Wix. “We are encouraged by the continued adoption of Wix Code, which allows our experts and professional users to build sophisticated web applications quickly and easily. Every day we see the potential of this product demonstrated with impressive results, and we are delighted by the creative ways that developers around the world have put Wix Code to use. This is a strong start to the year, and we are building momentum to propel continued growth through the remainder of 2018.”

Lior Shemesh, CFO of Wix, added, “The first quarter results exceeded our expectations as conversion and retention outperformed expectations, contributing to the creation of our largest user cohort ever. Equally impressive, we generated over $21 million in free cash flow, a record for a single quarter, demonstrating positive returns from our investment in marketing and R&D. We are increasing our outlook for 2018 to reflect this momentum and our continued confidence in the growth of the business.”

Q1 2018 Financial Summary

	Three months ended March 31,
$ in thousands	2017			2018			Y/Y growth			Prior Q1 2018 Outlook
Revenue	$	92,538		$	137,775			49	%	$	135,000 - 136,000
Collections	$	114,546		$	159,655			39	%	$	157,000 - 158,000
Operating Income (Loss)	$	(20,471	)	$	(18,452	)	NM
Non-GAAP Operating Income (Loss)	$	(7,538	)	$	(762	)	NM
Net Cash Provided by Operating Activities	$	16,397		$	24,779			51	%
Free Cash Flow	$	14,781		$	21,421			45	%

Additional Q1 2018 Results and Highlights

On January 1, 2018, Wix adopted Accounting Standards Codification (“ASC”) 606 “Revenue from Contracts with Customers”, using the modified retrospective method. This new rule replaced the previous accounting standard ASC 605, “Revenue Recognition”. As required, throughout the year we will provide the relevant 2018 financial results under ASC 606 as well as ASC 605 for comparability purposes. First quarter of 2017 financial results are presented under ASC 605. A reconciliation of the first quarter 2018 results under ASC 606 and ASC 605, as well as a reconciliation of other non-GAAP measures discussed in this release, are presented in the tables at the end of this press release.

·	Revenue in the first quarter of 2018 was $137.8 million, a 49% increase over the year ago period. Under ASC 605, first quarter revenue would have been $134.6 million, a 45% increase over last year

·	Collections in the first quarter of 2018 were $159.7 million, a 39% increase over the prior year period

Revenue and collections in the first quarter of 2018 each include a $7.3 million benefit due to the change from net (agent) to gross (principal) accounting related to the amended terms of our partnership agreement with Google announced last quarter

·	Gross margin on a GAAP basis in the first quarter of 2018 was 79%, compared to 84% for the first quarter of 2017; non-GAAP gross margin in the first quarter of 2018, calculated as non-GAAP gross profit as a percent of revenue, was 80%, compared to 85% for the first quarter of 2017

The decrease in gross margin is a result of the change from net (agent) to gross (principal) accounting of revenue due to the updated terms of our agreement with Google that was previously announced

Under ASC 605, first quarter 2018 GAAP gross margin as a percent of revenue would have also been 79% and non-GAAP gross margin as a percent of revenue would have also been 80%

·	GAAP net loss in the first quarter of 2018 was $(19.8) million, or $(0.42) per share, compared to a net loss of $(20.9) million, or $(0.47) per share, for the first quarter of 2017. Under ASC 605, first quarter 2018 GAAP net loss would have been $(21.7) million

·	Non-GAAP net loss in the first quarter of 2018 was $(2.1) million, or $(0.05) per share, compared to a non-GAAP net loss of $(8.0) million, or $(0.18) per share for the first quarter of 2017. Under ASC 605, first quarter 2018 non-GAAP net loss would have been $(4.0) million

·	Net cash provided by operating activities in the first quarter of 2018 was $24.8 million, while capital expenditures totaled $3.4 million, leading to free cash flow of $21.4 million, compared to $14.8 million of free cash flow in the first quarter of 2017, a 45% year over year increase

·	Added 231,000 net premium subscriptions in the first quarter of 2018 to reach 3.4 million as of March 31, 2018, a 29% increase over the total number of subscriptions at the end of the first quarter of 2017

·	Added 5.9 million registered users in the first quarter of 2018. Registered users as of March 31, 2018 were 125 million, representing a 21% increase compared to the end of the first quarter of 2017

Recent Business Highlights

Every 100,000 subscriptions generates over $165 million in collections: We generated a record number of subscriptions in a user cohort in Q1 2018, which is evidence of our ability to continue to drive growth in our business. We currently estimate that the Q1 2018 user cohort will generate over $370 million in future collections over the next eight years at an 80% gross margin with minimal additional marketing investment based on current cohort behavior. This is the result of our improving product offering, driving higher conversion and monetization of our user cohorts.

Wix Code: We continue to improve the capabilities of Wix Code by releasing new features that increase functionality, giving users more power to create advanced websites and applications. Current Wix users who are more technically savvy are increasingly putting Wix Code capabilities to use, and the product is attracting new professional web designers and developers to our platform.

Wix ADI: Wix Artificial Design Intelligence, or Wix ADI, continues to contribute to overall improvements in conversion. The ability for users to produce websites with AI-driven aesthetics and functionality, fully customized to their business within minutes, is increasing the number of sites completed, leading to improving conversion.

Wix Answers: We have continued to roll out Wix Answers, a powerful online customer support platform that lets businesses help their customers across multiple channels. Wix Answers is the platform that currently serves as the support infrastructure for our over 127 million registered users worldwide. Wix Answers can be customized to businesses of all sizes with an intuitive set-up and offers a fully-fledged knowledge base, ticketing system and call center. It also offers integration with other platforms, actionable insights and an embeddable help widget that can be used with any website. Wix Answers is a great example of the strength of Wix R&D, as a product developed in-house for our own use that is now shared and monetized. This product is available to current Wix users as a customer support solution and is also available to be purchased on a subscription basis by non-Wix users.

Financial Outlook

Guidance is provided using ASC 606. Over the course of 2018, the impact of ASC 606 is expected to have a minimal impact on revenue as compared to ASC 605. The following outlook can be compared to 2017 figures that were presented under ASC 606 with our fourth quarter 2017 earnings release, which is available on our Investor Relations website at https://investors.wix.com.

Wix is introducing its outlook for the second quarter of 2018 as follows:

	Q2 2018 Outlook	Y/Y growth
Revenue¹	$144 - $145 million	39% – 40%
Collections¹	$158 - $159 million	35% – 36%

Wix is increasing its outlook for the full year 2018 following the first quarter results:

	2018 Outlook
	Prior	Updated	Y/Y growth
Revenue²	$591 - $595 million	$594 - $597 million	40%
Collections²	$645 - $653 million	$651 - $657 million	35% – 36%
Free Cash Flow	$98 - $100 million	$100 - $102 million	41% – 44%

Conference Call and Webcast Information

Wix will host a conference call at 8:30 a.m. ET on Wednesday, May 9, 2018 to answer questions about the financial and operational performance of the business during the first quarter of 2018. The conference call will include a brief statement by management and will focus on answering questions about our results during the quarter. To enhance the Q&A portion of this call, the Company has posted a shareholder update and supporting slides to its Investor Relations website at https://investors.wix.com/. These materials provide shareholders and analysts with additional detail for analyzing results in advance of the quarterly conference call.

To participate on the live call, analysts and investors should dial 866-393-4306 (US/Canada), 734-385-2616 (International) or 1-809-315-362 (Israel) at least ten minutes prior to the start time of the call and reference Conference ID 8696559. A telephonic replay of the call will be available through May 13, 2018 at 11:59 p.m. ET by dialing 855-859-2056 (US/Canada) or 404-537-3406 (International) and providing Conference ID 8696559.

Wix will also offer a live and archived webcast of the conference call, accessible from the “Investor Relations” section of the Company’s website at https://investors.wix.com/.

¹ Revenue and collections guidance for Q2 2018 includes an additional $8 million benefit to both due to a change in accounting effective Jan. 1, 2018 related to the amended terms of our partnership agreement with Google. Excluding the accounting change, Q2 2018 revenue guidance would be $136-$137 million, or 31%-32% y/y growth, and Q2 2018 collections would be $150-$151 million, or 28%-29% y/y growth

² Revenue and collections guidance for FY 2018 includes an additional $30 million benefit to both due to a change in accounting effective Jan. 1, 2018 related to the amended terms of our partnership agreement with Google. Excluding the accounting change, FY 2018 updated revenue guidance would be $564-$567 million, or 33% y/y growth, and FY 2018 collections would be $621-$627 million, or 28%-30% y/y growth

About Wix.com Ltd.

Wix is leading the way with a cloud-based development platform for over 127 million registered users worldwide. Wix was founded on the belief that the Internet should be accessible to everyone to develop, create and contribute. Through free and premium subscriptions, Wix empowers millions of businesses, organizations, artists, and individuals to take their businesses, brands and workflow online. The Wix Editor, Wix ADI, a highly curated App Market, and Wix Code enable users to build and manage a fully integrated and dynamic digital presence. Wix's headquarters are in Tel Aviv with offices in Be'er Sheva, Berlin, Dnipro, Kiev, Los Angeles, Miami, New York, San Francisco, São Paulo and Vilnius.

Visit us: on our blog, Facebook, Twitter, Instagram, LinkedIn, Pinterest and Google+

Download: Wix App is available for free on Google Play and in the App Store

Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, Wix uses the following non-GAAP financial measures: collections, non-GAAP gross margin, non-GAAP operating income (loss), free cash flow, non-GAAP net income (loss) and non-GAAP net income (loss) per share (collectively the "Non-GAAP financial measures"). Collections represents the total cash collected by us from our customers in a given period and is calculated by adding the change in deferred revenues for a particular period to revenues for the same period. Non-GAAP gross margin represents gross profit calculated in accordance with GAAP as adjusted for the impact of share-based compensation expense, acquisition-related costs and amortization, divided by revenue. Non-GAAP operating income (loss) represents operating income (loss) calculated in accordance with GAAP as adjusted for the impact of share-based compensation expense, amortization, and acquisition-related costs. Non-GAAP net income (loss) represents net loss calculated in accordance with GAAP as adjusted for the impact of share-based compensation expense, amortization, and acquisition-related costs. Non-GAAP net income (loss) per share represents non-GAAP net income (loss) divided by the weighted average number of shares used in computing GAAP loss per share. Free cash flow represents net cash provided by (used in) operating activities less capital expenditures.

The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that these measures provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making.

For more information on the non-GAAP financial measures, please see the "Reconciliation of GAAP to Non-GAAP Financial Measures" table in this press release. This accompanying table has more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures. The Company has not reconciled its guidance as to free cash flow to cash flow from operations because it does not provide guidance for cash flow from operations. As items that impact cash flow from operations are out of the Company's control and/or cannot be reasonably predicted, the Company is unable to provide such guidance. Accordingly, a reconciliation to cash flow from operations is not available without unreasonable effort.

Forward-Looking Statements

This press release contains forward-looking statements, within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Such forward-looking statements may include projections regarding our future performance, including, but not limited to revenue, collections and free cash flow, the availability, merchantability or functionality of certain new products or features and their anticipated product demand and customer satisfaction, and may be identified by words like “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “outlook,” “future,” “will,” “seek” and similar terms or phrases. The forward-looking statements contained in this press release, including the full year guidance, are based on management’s current expectations, which are subject to uncertainty, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Important factors that could cause our actual results to differ materially from those indicated in the forward-looking statements include, among others, our ability to grow our user base and premium subscriptions; our ability to maintain and enhance our brand and reputation; our prediction of the future collections generated by our user cohorts; our ability to manage the growth of our infrastructure effectively; our ability to effectively execute our initiatives to scale and improve our user support function; customer acceptance of new products and other challenges inherent in new product development, changes to technologies used in our solutions or in global, national, regional or local economic, business, competitive, market, regulatory and other factors discussed under the heading “Risk Factors” in the Company’s 2017 annual report on Form 20-F filed with the Securities and Exchange Commission on March 29, 2018. Any forward-looking statement made by us in this press release speaks only as of the date hereof. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise.

Investor Relations:

Maggie O’Donnell

ir@wix.com

415-223-2624

Media Relations:

Vivian Hernandez

pr@wix.com

415-517-6539

Wix.com Ltd.

CONSOLIDATED STATEMENTS OF OPERATIONS - GAAP

(In thousands, except loss per share data)

	Three Months Ended
	March 31,
	2017			2018
	(unaudited)

Revenue	$	92,538		$	137,775
Cost of revenue		14,863			29,044
Gross Profit		77,675			108,731

Operating expenses:
Research and development		32,669			46,502
Selling and marketing		54,329			67,011
General and administrative		11,148			13,670
Total operating expenses		98,146			127,183
Operating loss		(20,471	)		(18,452	)
Financial income , net		148			(129	)
Other income		-			21
Loss before taxes on income		(20,323	)		(18,560	)
Taxes on income		562			1,251
Net loss	$	(20,885	)	$	(19,811	)

Basic and diluted net loss per share	$	(0.47	)	$	(0.42	)
Basic and diluted weighted-average shares used to compute net loss per share		44,695,951			46,827,425

Wix.com Ltd.

CONDENSED CONSOLIDATED BALANCE SHEET

(In thousands)

	Period ended
	December 31,			March 31,
	2017			2018
	(audited)			(unaudited)
Assets
Current Assets:
Cash and cash equivalents	$	85,230		$	103,487
Short term deposits		115,382			128,739
Restricted cash and deposit		949			949
Marketable securities		32,730			32,985
Trade receivables		11,400			11,212
Prepaid expenses and other current assets		19,246			17,595
Total current assets		264,937			294,967
Property, equipment and software, net
Long-Term Assets:
Property and equipment, net		16,201			18,163
Prepaid expenses and other long-term assets		3,823			1,127
Intangible assets and goodwill, net		45,052			44,425
Total long-term assets		65,076			63,715

Total assets	$	330,013		$	358,682

Liabilities and Shareholder's Deficiency
Current Liabilities:
Trade payables	$	34,240		$	34,297
Employees and payroll accruals		28,067			33,188
Deferred revenues		202,482			201,498
Accrued expenses and other current liabilities		37,592			43,668
Total current liabilities		302,381			312,651

Long term deferred revenues		14,329			9,040
Long term deferred tax liability		764			723
Long-term loan		1,219			1,219
Total long-term liabilities		16,312			10,982

Total liabilities		318,693			323,633

Shareholders' Equity (Deficiency)
Ordinary shares		80			80
Additional paid-in capital		311,107			340,417
Other comprehensive loss		(286	)		(767	)
Accumulated deficit		(299,581	)		(304,681	)
Total shareholders' equity (deficiency)		11,320			35,049

Total liabilities and shareholders' equity (deficiency)	$	330,013		$	358,682

	Three Months Ended
	March 31,
	2017			2018
	(unaudited)
OPERATING ACTIVITIES:
Net loss	$	(20,885	)	$	(19,811	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		1,297			1,897
Amortization		320			588
Share based compensation expenses		8,982			15,674
Increase in accrued interest and exchange rate on short term and long term deposits		(114	)		(352	)
Amortization of premium and discount and accrued interest on marketable securities, net		-			(33	)
Deferred income taxes, net		(213	)		(98	)
Decrease (increase) in trade receivables		(364	)		188
Increase in prepaid expenses and other current and long-term assets		(3,913	)		(9,272	)
Increase (decrease) in trade payables		4,508			(444	)
Increase in employees and payroll accruals		4,955			8,453
Increase in short term and long term deferred revenues		22,008			21,880
Increase (decrease) in accrued expenses and other current liabilities		(184	)		6,109
Net cash provided by operating activities		16,397			24,779
INVESTING ACTIVITIES:
Proceeds from short-term deposits and restricted deposits		16,386			13,774
Investment in short-term deposits and restricted deposits		(10,650	)		(26,779	)
Investment in marketable securities		-			(3,403	)
Proceeds from marketable securities		-			2,940
Purchase of property and equipment		(1,616	)		(3,211	)
Capitalization of software development costs		-			(147	)
Payment for Businesses acquired		(29,834	)		-
Net cash used in investing activities		(25,714	)		(16,826	)
FINANCING ACTIVITIES:
Proceeds from exercise of options and ESPP shares		7,320			10,304
Credit line repayment		(170	)		-
Net cash provided by financing activities		7,150			10,304
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(2,167	)		18,257
CASH AND CASH EQUIVALENTS—Beginning of period		93,064			85,230
CASH AND CASH EQUIVALENTS—End of period	$	90,897		$	103,487

	Three Months Ended
	March 31,
	2017		2018
(1) Share based compensation expenses:	(unaudited)
Cost of revenues	$	506	$	1,079
Research and development		4,726		8,485
Selling and marketing		1,419		2,042
General and administrative		2,331		4,068
Total share based compensation expenses		8,982		15,674
(2) Amortization		186		588
(3) Acquisition related expenses		3,765		1,428
Total adjustments of GAAP to Non GAAP	$	12,933	$	17,690

	Three Months Ended
	March 31,
	2017			2018
	(unaudited)
Operating loss	$	(20,471	)	$	(18,452	)
Adjustments:
Share based compensation expenses		8,982			15,674
Amortization		186			588
Acquisition related expenses		3,765			1,428
Total adjustments	$	12,933		$	17,690

Non GAAP operating income (loss)	$	(7,538	)	$	(762	)

	Three Months Ended
	March 31,
	2017		2018
	(unaudited)

Basic and diluted weighted average number of shares outstanding		44,695,951		46,827,425
The following items have been excluded from the diluted weighted average number of shares outstanding because they are anti-dilutive:
Stock options		8,881,497		8,588,308
Restricted share units		1,921,955		2,192,784
		55,499,403		57,608,517

	Three Months Ended				Year Ending
	June 30, 2018				December 31, 2018
	Low		High		Low		High

Projected revenues (*)	$	144,000	$	145,000	$	594,000	$	597,000
Projected change in deferred revenues	$	14,000	$	14,000		57,000		60,000
Projected collections	$	158,000	$	159,000	$	651,000	$	657,000

	Three Months ended March 31,
	2018			2018			2018

	ASC 606			ASC 605			Impact

Revenues	$	137,775		$	134,603		$	(3,172	)
y/y%		49	%		45	%
Cost of revenues		29,044			27,740			(1,304	)
Gross Profit (loss)		108,731			106,863			(1,868	)
		79	%		79	%
Operating expenses:					80	%
Research and development		46,502			46,502			-
Marketing		67,011			67,011			-
General and administrative		13,670			13,670			-
Total operating expenses		127,183			127,183			-

Operating loss		(18,452	)		(20,320	)		(1,868	)
Financial income (expenses), net		(129	)		(129	)		-
Other expenses		21			21			-

Loss before taxes on income		(18,560	)		(20,428	)		(1,868	)
Taxes on income		1,251			1,251			-
Net loss		(19,811	)		(21,679	)		(1,868	)

Basic and diluted net loss per share	$	(0.42	)	$	(0.46	)	$	(0.04	)
Basic and diluted weighted-average shares used to compute net loss per share		46,827,425			46,827,425			-

Adjustments to Non GAAP

Total Adjustments	$	17,690		$	17,690		$	-
Non GAAP operating income (loss)	$	(762	)	$	(2,630	)	$	(1,868	)
Non-GAAP net income/(loss)	$	(2,121	)	$	(3,989	)	$	(1,868	)
Basic Non GAAP net income/(loss) per share	$	(0.05	)	$	(0.09	)	$	(0.04	)