Is the Covid website boom over? Wix lowers guidance on uncertainty

Wix says business slowed, especially in the second half of Q2.

Chart showing Wix collections over the past two years, with 29% year-over-year growth in Q2 2021

Wix’s collections were up 29% year over year but down sequentially.

Web presence companies, including domain name registrars and webhosting/site builder companies, have benefited from the pandemic. Offline businesses have quickly adopted online business models. They have registered domains, created websites, and added online payments and e-commerce capabilities.

Is this coming to an end? It’s hard to say.

In its earnings announcement today, WIX (NASDAQ: WIX) CEO Avishai Abrahami said:

As the story of the pandemic continues to evolve, there is an uncertainty whether we are at the end of it, or if there is a massive new wave coming again. For our users, this uncertainty means that they don’t know if they should create new online or offline stores, services and events. The result of this uncertainty, for us, is a mild slowdown in the creation of new web presences, which is reflected in our financials, where we came in at the low end of our expectations.

Wix CFO Lior Shemesh noted that Wix’s second quarter was stronger than pre-pandemic quarters, but business slowed, especially in the second half of the quarter. The company lowered guidance for the remainder of the year, and shares are down 15% this morning.

It’s important to consider that the second half of the quarter included May and June when businesses started reopening in the United States and people started traveling again. To the extent the Delta variant continues to put a wrench in reopening and travel plans, this trend may reverse. But it seems that when the world eventually reopens, the web presence boom will slow. Domain registrar Tucows reported a similar trend in its Q2 earnings.

Wix reported Q2 revenue of $316.4 million, up 24% year over year. Guidance was 30%-32%. Q2 collections (sales) were $342.9 million, up 29%. Guidance was 29%-32%.

The company breaks its revenue into two categories: creative subscriptions, which is basically its website builder product, and business solutions, which include add-ons such as communications tools, payment services, and marketing products.

Creative Subscriptions collections in the second quarter of 2021 were $263.0 million, up 21% year over year. Business Solutions collections were $79.8 million, up 66% year over year.

The company expects revenue of $311-317 million in Q3, up 22-25% year over year. It expects collections of $355-365 million, up 26-30%.

It lowered its full-year guidance for all measures. It now expects revenue of $1.255-1.270 billion, down from $1.280-1.290 billion. It lowered its collections guidance from $1.44-1.46 billion to 1.40-1.435 billion. And it expects free cash flow after its new headquarters buildout to be $35-$40 million, down from guidance of $62-72 million.

Wix turned in a GAAP profit of $38 million, aided by $110 million in unrealized gains from equity holdings, mostly due to its Monday.com holdings. Its non-GAAP measure was a loss of ($15.8) million.

This year, the company stopped reporting total paid subscribers in its quarterly press releases.

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