Earnings quarterly revenue up, sees 40 percent growth in 2018

TEL AVIV (Reuters) - WIX.O, which helps small businesses build and operate websites, posted a rise in fourth-quarter adjusted profit and forecast higher-than-expected revenue growth of 40 percent in 2018 as more users convert to paid subscriptions.

FILE PHOTO: The offices website-designer firm are shown in Tel Aviv, Israel July 4, 2016. REUTERS/Baz Ratner/File Photo

It reported on Wednesday quarterly profit of 16 cents a share excluding one-time items, compared with 7 cents a year earlier as revenue grew 41 percent to $118.5 million. Analysts had forecast adjusted EPS of 16 cents on revenue of $117 million, according to Thomson Reuters I/B/E/S.

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 119 million registered users. During the quarter it added 170,000 paid users to reach 3.2 million premium customers, up 31 percent from the end of 2016.

The company attributed this to improvement in its product offering, most notably Wix ADI, a web design product released in late 2016 aimed at less tech savvy or first-time users.

“This has been a significant driver in the huge growth of conversions” to paid subscriptions, President Nir Zohar told Reuters.

Wix projects 2018 revenue of $591-$595 million, up 39-40 percent from 2017 and free cash flow of $98-$100 million, up 39-41 percent. Analysts were forecasting 2018 revenue of $557 million.

The company also expanded its strategic partnership with Google Cloud, choosing G Suite as the exclusive provider of business productivity applications on its platform.

Wix said its outlook includes growth it expects to realize from the revised terms in its agreement with Google GOOGL.O.

“It will increase revenue as business terms are better,” Zohar said, though he declined to disclose details.

For the first quarter Wix estimates revenue of $135-$136 million, up 46-47 percent from a year earlier.

Wix’s Nasdaq-listed shares were up 3.7 percent so far in 2018 after a 29.2 percent gain last year.

Although Wix continues to lose money on its bottom line when including all items, Chief Financial Officer Lior Shemesh said the company was focused on generating cash rather than profitability.

As a young company, Wix recruits and retains developers by offering stock-based compensation, a big expense that weighs on profitability, Zohar said.

“Investors understand that and expect us to invest in the future and keep growing,” he said.

Editing by Steven Scheer and Adrian Croft