Wix.com misses 3Q profit estimates, raises its forecast

Wix.com, which helps small businesses build and operate websites, raised its revenue outlook for 2017 due to a jump in conversions to paid products, after posting sharply lower-than-expected third-quarter profits.

Boosted by more users paying for web-design products such as Wix ADI, the company on Wednesday projected full-year revenue of $423 million-$424m. for 47% growth over 2016, up from a prior forecast of $421m.-$423m.

It reported third-quarter profit of 1 cent a share excluding one-time items, compared with a 4 cent loss a year earlier. Revenue grew 47% to $111m. Operating expenses rose to $103.7m. from $73.6m.

Wix was forecast to earn 13 cents a share on revenue of $110m., according to Thomson Reuters I/B/E/S.

Chief financial officer Lior Shemesh attributed the profit miss to the company opting to use its revenue for marketing of a new product called Wix Code and for research and development.

“We prefer to invest in growth, which also increases our free cash flow,” he told Reuters. “We invested more in marketing because we beat our top line [revenue] and also invested more in R&D to be ready for [Wix Code].”

Israel-based Wix offers free basic features for setting up websites, but users must pay for extra services such as shopping carts, individual web addresses and site traffic analysis.

It has 114 million users. During the quarter it converted 188,000 free users to paying, up 33% over the prior year, for a total of 3.1 million premium customers.

In the next few weeks, Wix Code will be launched and targeted toward professional web designers.

Wix Code is not expected to start generating cash until 2019, Shemesh said.

Shares of Nasdaq-listed Wix, which has a market value of $3.2 billion, are up 56% so far this year.

Wix will not air a commercial during the Super Bowl in 2018, as it did this year, due to shifting its marketing budget to other advertising, Shemesh said.