Wix.com Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 7, 2024

There are 12 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Wix Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

Operator

I would now like to hand the conference over to your speaker today, Emily Lu of Investor Relations. Please go ahead.

Speaker 1

Thanks, Amy, and good morning, everyone. Welcome to Wix's Q2 2024 Earnings Call. Joining me today to discuss our results are Abhishek Abrahami, CEO and Co Founder Nir Zohar, our President and COO and Nir Shemesh, our CFO. During this call, we may make forward looking statements and these statements are based on current expectations and assumptions. Please consider the risk factors included in our press release and most recent Form 20 F that could cause our actual results to differ materially from these forward looking statements.

Speaker 1

We do not undertake any obligation to update these forward looking statements. In addition, we will comment on non GAAP financial results and key operating metrics. You can find all reconciliations between our GAAP and non GAAP results in the earnings materials and in our interactive analyst center on the Investor Relations section of our website, investors. Wix dotcom. With that, I'll turn the call over to Abhisheh.

Speaker 2

Emily, and good morning, everyone. I'm very pleased to share that we finished the first half of twenty twenty four with excellent Q2 results. And by successfully executing our strategy and delivering innovative solutions to our users, we were able to drive impressive year over year bookings growth of 15%. This is a significant acceleration from the 10% bookings growth we saw in Q1 and underscores our leading position as the go to platform for any user or business to create, grow and succeed online. We also generated 12% revenue growth, which again exceeded the top end of our guidance.

Speaker 2

The strong top line results reflect the encouraging reception and performance of our key product initiatives that are continuing to propel our momentum. I'll share some updates on Wix Studio and our AI strategy before letting Nir dive into the incredible progress we've made in expanding our commerce platform. 1st, we continue to see outstanding results from Studio as we steadily add new features and enhancements. This quarter, we rolled out new dynamic, no code design expressions, business enablement capabilities and tools to help partners work better with their clients and grow their business. Most notably, we announced a highly anticipated Figma plug in, a top partner request.

Speaker 2

Partners can now leverage Studio's no code animations, built in business and AI solutions, CMS and workflow management tools to transform their Figma designs into powerful and dynamic websites seamlessly. Feedback has been very positive following this launch. The number of studio accounts and rate of new partners joining the Wix platform through studio continued to outperform expectations. We also saw an acceleration in the pace of studio subscription purchases. This, along with strong retention of existing subscriptions and the ramping of partners purchasing their second, third and fourth studio packages, drove quarter over quarter studio bookings growth of 20%.

Speaker 2

Our platform is increasingly resonating with the professional community as we continue to deliver best in class innovations and grow our partner ecosystem. 2nd, we continue to build up our suite of AI capabilities as a result of the numerous AI initiatives and work streams across Wix. Last quarter, we introduced our plan to embed AI assistance across our platform and products. I'm excited to share that we have released 17 AI Business Assistants so far to date. These assistants span a wide range of use cases to support users with minimal hands on support, thus streamlining their experience.

Speaker 2

These conversational AI assistants act as a right hand aid for users to guide them through the entire lifecycle of ideating, creating and managing their online presence. Our offering includes an analytics assistant that can help Wix users find the data they need without having to search through dozens of reports and an assistant that helps users create events through a conversational chat. We have already received positive feedback on this first set of AI assistance with dozens more set to launch later this year. Additionally, on the AI front, we launched AI creation capabilities for our mobile app builder in June. This new solution enables users to create and edit iOS or Android apps through an AI chat experience.

Speaker 2

Once AI understands the user's goals, intent and desired aesthetic, our technology generates a branded app that can be customized and managed from the app editor. We also recently released a suite of new AI features designed to help users identify relevant topics for blogs as well as generate outlines, content and images for their target audience. With this new experience, users can swiftly turn ideas into new ready articles, significantly reducing the time and effort required to create engaging content and ultimately changing the blog creation experience. Both self creators and partners continue to show excellent engagement with our AI tools. As we expand the breadth of our AI technology, we expect it to continue to be a competitive advantage for us as well as a significant driver of growth going forward.

Speaker 2

We have built up a lot of momentum in the first half of twenty twenty four with many exciting and impactful innovations powering meaningful growth acceleration. We expect to continue this momentum into the back half of the year with many exciting things still to come. Thank you to the entire Wix team for your hard work to make Wix the web creation platform of choice. And thank you to our users for trusting us to help you achieve your goals. With that, I'll turn it over to Nir.

Speaker 3

Thank you, Avishai, and thank you, everyone, for joining us today. I'd like to start with a quick update on our user cohorts before diving into the 3rd leg of our growth strategy, our commerce platform. 1st, Q2 was another great quarter marked by strong business fundamentals and robust user behavior. Our Q1 'twenty four user cohort remains our strongest non COVID cohort, generating more cumulative bookings in its 1st two quarters than our Q1 'twenty three cohort, while having 9% fewer users. This is a result of our continued marketing strategy high intent users.

Speaker 3

We have continued to expand our user base with partners and self creators, adding 4,700,000 new high intent users in the 2nd quarter. These new users continue to demonstrate strong conversion and increased ARPS and TROI compared to past cohorts. We continue to benefit from the success of strategic initiatives completed over the past year. Our AI tools continue to drive user conversion, Wix Studio uptake and contribution continues to ramp and consumption of the price increase implemented earlier this year by new and existing users remains strong. All of these factors are driving bookings growth, which we believe is reflecting our unmatched value proposition and durable business model.

Speaker 3

Our commerce business was a particular highlight this quarter with transaction revenue growing an impressive 21% year over year and take rate increasing to a record 1.68%. Take rate expanded 10 basis points sequentially, the largest quarter over quarter improvement in recent years. Over the past few years, we have built Wix into a full end to end commerce platform, enabling business owners of every size across every industry and in any geography to build, manage and grow on Wix. By introducing new features and capabilities, we have steadily expanded our platform with more merchants globally choosing and trusting Wix for their business and livelihood. Our platform has expanded in 2 ways, growing GPV paired with increased monetization of our GPV.

Speaker 3

First, we are maximizing the GPV flowing through our platform in

Speaker 4

a few

Speaker 3

ways. 1, we're continually expanding into new verticals in order to facilitate any business need and diversifying our platform, which helps to insulate us from macro volatility. This quarter, we introduced Wix Donations, which provides a tailored solution for NGOs and Wix Proposals, which helps professionals across various industries create, manage and finalize proposals easily. By expanding our supported verticals, we are appealing to wider pool of merchants and attracting additional GPV as a result. 2, we are increasingly onboarding larger merchants with higher average transaction size onto our platform.

Speaker 3

We expect this to continue as we increasingly win share of the professional market. 3, we are enabling existing merchants to grow their businesses through a growing suite of commerce tools from online advertising and email marketing to AI based product management. The success of our existing users drives compounding growth and is key to the success of our commerce strategy. In addition to growing GPV, we are also increasing monetization of our GPV by: 1, adding new payment partners to our Wix Payment platform, which is what we did this quarter. By expanding our base of partners, we are increasing our ownership and thus monetization of the GPV that flows through Wix.

Speaker 3

2, driving higher Wix Payments adoption as new and existing merchants increasingly choose Wix Payments over other providers. The Wix Payments experience is seamless for merchants with an integrated payments dashboard and built in disputes tool. Meanwhile, merchants customers have an easy and smooth native checkout experience. New merchant adoption of Wix Payments has steadily ticked up over the last few years and we expect this to continue. 3, providing additional platform solutions such as POS, credit card on file and mail and email ordering capabilities.

Speaker 3

These solutions are moving more of our offline GPV online, thus allowing us to capture and monetize better. 4, enhancing payment offerings to capture more wallet share, particularly in international markets. Earlier this year, we introduced new payment providers in India and entered into partnership with Global E to power cross border selling on Wix. We started making commerce a focus back in 2020 and our platform has grown tremendously since as a result of our initiatives. GPV in the most recent quarter was more than 2 times that of Q2 2020 GPV.

Speaker 3

Our monetization has improved even more significantly with Q2 'twenty four transaction revenue more than 5 times that of Q2 'twenty transaction revenue. As a result, our quarterly take rate has more than doubled over this period. Today, our full stack commerce solution provides Wix merchants with all of the tools they need to succeed online and drive strong user retention and higher ARPS. We believe that our commerce platform will remain a key growth driver for both self creators and partners in years to come. With that, I will now hand it over to Lior to walk through our financials and outlook.

Speaker 3

Lior?

Speaker 5

Thanks, Nir. Strong execution of the key growth initiatives you just heard about as well as solid business fundamentals resulted in incredible growth momentum and additional margin expansion in the Q2. As we continue to focus on accelerating top line growth and improving profitability margins in the back half of the year, we now expect to achieve the rule of 40 in 2024 at the high end of our guidance ranges. I will share more about this exciting milestone as well as our updated outlook shortly. 1st, let's dive into the details of the Q2.

Speaker 5

We experienced standout bookings performance with total bookings of $458,000,000 or 15% growth year over year. This was significant acceleration from the 10% growth in Q1 as a result of strong user absorption of the price increase implemented earlier this year as well as contribution from the strategic initiatives you just heard about, contribution from Studio and our growing suite of AI capabilities continue to ramp and are expected to be the main drivers of growth in the coming years. Notably, growth accelerated across both sales creators and partners, demonstrating the underlying strength of our entire Wix platform. Q2 revenue was also very strong and finished above the high end of our guidance. Total revenue grew to $436,000,000 up 12% year over year with growth driven by the same factors that benefited bookings.

Speaker 5

This quarter, our commerce business performed extremely well with transaction revenue growing 21% to $54,000,000 as a result of healthy GPV growth along with improving monetization. GPV growth was a product of larger merchants joining Wix and compounding GPV from existing businesses. Our bookings and events products were the best performing vertical this quarter with GPV growth of approximately 20% 25%, respectively. This GPV growth was paired with increased monetization driven by the addition of a new payment partners to Wix Payments platform. As a result, Techrate in the 2nd quarter reached a record high of 1.68%.

Speaker 5

This is an increase of 10 basis points sequentially. We expect GPV and Tech rate to continue to steadily improve over the long term as we grow our commerce platform. Our partners business was another major driver of overall top line growth this quarter. Partners revenue grew 29% year over year as we onboarded new agencies, empowered existing partners to build more projects on Wix and improve monetization of our professional user base. Notably, studio contribution continued to ramp as usage and adoption increased.

Speaker 5

The accelerating phase of studio package purchases, strong retention of partners and significant increase in the number of partners building the second, 3rd and 4th website on platform give us confidence that Studio will be meaningful driver of partners' growth in the coming years. Moving on to the cost side of things. Total non GAAP gross margin in Q2 was 68%, which was in line with our expectation of 68% to 69% gross margin for the full year. Impressively this quarter, we saw a significant improvement in operating margin. Both GAAP and non GAAP operating margin increased more than 400 basis points sequentially as a result of lower operating expenses.

Speaker 5

Q2 operating expenses decreased quarter over quarter as a result of payroll efficiencies, lower overhead costs from lower property taxes on our headquarters and additional subleasing of our office footprint as well as seasonally lower advertising expenses. We expect to sustain this lower base of payroll and overall costs through the rest of the year, while studio related sales and marketing costs increased through second half as planned. As a result, non GAAP operating margin totaled 21 percent of revenue, while GAAP operating margin was 7% of revenue. Q2 free cash flow, excluding headquarter build out costs, totaled almost $118,000,000 or 27 percent of revenue due to continued strong top line growth and more efficient operating cost base. This quarter marked the completion of our headquarter construction with no additional build out related CapEx anticipated going forward.

Speaker 5

This now leads me to our expectations for the back half of twenty twenty four. We expect total revenue in Q3 of $440,000,000 to $445,000,000 representing approximately 12% to 13% year over year growth. For the full year 2024, we are updating our outlook as we expect to sustain the momentum build up in the first half of the year. We now expect total booking of $1802,000,000 to $1822,000,000 or 13% to 14% year over year growth. We began to see FX volatility materialize in late Q2, which has continued into early Q3 due to this and a bit more macro unpredictability broadly mostly related to payments we are building more conservative into our outlook.

Speaker 5

I want to highlight that this updated guidance still reflect an acceleration in total bookings growth to 16% at the high end of our expectations. This has not changed from what we shared in May as we continue to see broad based trends across our platform. We continue to expect to see self creators and partners growth continue to accelerate in the second half at the high end of our expectations as our AI products and studio platform perform ahead of plan. Additionally, we now expect total revenue of $1747,000,000 to $1761,000,000 or 12% to 13% year over year growth. On the cost side, we continue to expect non GAAP total gross margin of 68% to 69% for the full year.

Speaker 5

As we sustain the lower operating expense base achieved in the most recent quarter, non GAAP operating expenses are now expected to be approximately 50% of revenue for the full year. This is slightly lower than our previous expectation of 50% to 51% of revenue. As a result, we expect to generate free cash flow, excluding headquarter cost of $460,000,000 to $470,000,000 or approximately 26% to 27% of revenue in 2024. This is an increase from the $445,000,000 to $455,000,000 or 26% of revenue previously expected. We now expect to achieve the Rule of 40 milestone this year assuming the high end of our revenue and free cash flow guidance ranges.

Speaker 5

This will be a major milestone that we have steadfastly worked towards for the past 3 years. Even more impressively, we will be achieving this goal 1 year ahead of plan. This is a testament to the successful execution of our strategic initiatives and focused commitment to profitable growth. But this is certainly not the finish line for us. The bookings acceleration expected this year set us up for revenue growth acceleration in 2025.

Speaker 5

We also expect continued incremental free cash flow margin improvement as we maintain our stable cost structure, while our business scales. As a result, we are positioned to surpass the rule of 40 in 2025 more meaningfully than previously expected. Finally, I would like to finish with highlighting another aspect of our 3 year plan that we are tracking ahead of, our share repurchase commitment. In the Q2, we repurchased 225,000,000 of shares, making the completion of the Board authorized plan approved last August. This marks more than $1,000,000,000 of share repurchases executed since 2021.

Speaker 5

We remain committed to returning value to shareholders and consider share repurchases a key tool in our capital allocation strategy. As such, our Board authorized a new $200,000,000 program to repurchase our securities. The progress made over the past couple of years demonstrates our track record of not just executing but outperforming our sales growth. I look forward to building on our momentum in the second half of the year and the milestones still to come. Operator, we're now ready for questions.

Speaker 5

Thank

Operator

And our first question comes from the line of Ygal Arounian of Citigroup. Your line is open.

Speaker 6

Hey, good morning. Good afternoon, guys. Great quarter and maybe I want to focus first on the commerce packages

Speaker 4

and just went into a little

Speaker 6

bit more detail there. It seems to be more of a driver now with the partner side. Can you share a little

Speaker 4

bit more about the new types of customers that are coming on board, what type of merchants they are, this kind of move to larger merchants,

Speaker 6

what that opportunity is for you guys to feel a little bit more newer, I guess?

Speaker 3

Hey, Gal, it's Nir. So I think naturally as we gain more and more traction Wixstudio and with partners and the professional crowd, we're also attracting bigger merchants of all kinds. So it can be on the bookings and scheduling platform, it can be on the stores and commerce platform, it can be bigger events. It really is across the board. And I think it's a testament to 2 things.

Speaker 3

First of all, it's the ongoing increased maturity of our commerce offering in all of these different verticals as well as the increased penetration and market share we're taking into the professional market.

Speaker 6

Got it. Okay. And then just a follow-up on the self creator side, particularly on the AI products. And I know sub creators are supposed to be part of what drives the acceleration in the 2H bookings. What are you seeing there so far on the AI uptake?

Speaker 6

I know you've got a lot of products and more in the pipeline. And are there any KPIs that are giving you confidence that we're going to continue to see that improvement, better conversions, higher ARPU, those types of things?

Speaker 7

Well, I think that, yes, we do have KPIs and more than that, we have a long trend that we see that can be continuously improved. And I'll explain. We released ADI, the first AI product, Gen AI product actually created website right in the end of 2016. And since then, we've seen that by exposing users to AI functionality as part of their natural progression in the product life cycle, we get very high adoption of using those kind of tools and results that can improve. And in FUADI, we showed that we improved the conversion dramatically.

Speaker 7

The new version that came earlier this year did it And we are seeing that a lot of the agents that we have now, AI agents, when they start to pick up more user interactions and more user conversations, again create a measurable effect. So I'm very optimistic. I think that our experience in releasing AI technology, right, which is almost, what, 8 years now, 7 years now, is helping us understand how to integrate them into the product in a way that actually makes user interact with them and that they feel natural and don't feel like you're stepping out of what you're doing to do something else and then coming back. I mean that creates a big difference. So yes, I'm very optimistic on the potential that we're going to see a continuation of the improvement.

Speaker 6

Thank you.

Operator

Thank you. And our next question comes from the line of Andrew Boone of JMP Securities. Your line is open.

Speaker 8

Thanks so much for taking my questions. I wanted to ask on Studios momentum. You guys are starting to lap tougher comps here. Can you just speak to the sustainability of Studios? And then a bigger picture question on Studios and again relating this back to AI.

Speaker 8

How does AI change the studio and partners opportunity? Is there any worry there that as you improve the self creator product there may be a shift back in the self creators? Do you guys care? How do we think about that balance? Thanks so much.

Speaker 7

All right. So that's like a pretty different question. I'll start with the first one. We're very happy, of course, with Chidogrof. It's a young product.

Speaker 7

It was released less than a year ago, about a year ago, and we can see already significant results from it. And the one of the biggest signals that we have is that we're seeing new kind of agencies that join Wix that would not normally join. And in addition, we're seeing that many of those agencies will buy add website, right, to buy more subscription as time progresses. So they buy 2, 3, 4, 5, 6, 7 and more subscription when they create new websites. And for us, it's a signal not just that they use Studio once or twice that they actually adopting the product and going to continue to use it in a longer term.

Speaker 7

Of course, for us as a company, it means that we are compounding, right, growth because every one agency that does it is a compounding as a compounding effect. So this is, again, a very good signal. That was the first right question. The second question was about how does the Studio use utilized AI. Well, there are massive there's a big difference between what an agency and a self creators need from AI.

Speaker 7

So for me, if I want to design a website and I'm not a designer, I want AI to help me design and because English is not my first language and I'm not writing so well in Hebrew as well, right? So I would love AI to also rate and help me write great text and generate images. When you're an agency, you probably know how to design and you have your system of design and how things should look like. So you don't need that. You probably need a little bit to help with the text.

Speaker 7

But other things like the image editing, right, and the content recomposition create tremendous value. And then there are other things that in addition to that, for example, a great designer not necessarily know how to configure things to work in a responsive way on different screen resolutions, and we have an AI to do that. So we are utilizing those kind of technologies to streamline the agency's experience and work and efficiency in a way that is significant to them. I think we have some ideas on how to make it even more significant question, as part of the question, which is, do we have concern between how agencies and self curators will end up in the future? Meaning, well, in theory, if you can just one day talk to a computer and get the full website functioning that knows exactly what should be there and that is easy to update that maybe some of the agencies business will disappear.

Speaker 7

But there is a long way until we get to something similar to that. And I think the majority of businesses, in the case that they need a website, they want somebody to be responsible for it, somebody that know how to activate the tools and use them and utilize them. And that's why they go to agencies because they have a professional that understand how to take care of all of their business needs. And there's a lot of the right from SEO to how do you write things correctly in order to get the right shipping rules and there's a ton of things. So I think that where there's a long way for AI to go before it can successfully replace good agencies.

Speaker 7

And unless, of course, you are a self creator by nature, which is a lot of most of our customers, and you want to create your website, you can control it and you can do those things and you can change it. So I think that the difference is in the user type and user intent and not necessarily in technology, which I believe means that both will continue to grow agencies and self creators.

Speaker 8

Thank you.

Operator

Thank you. And our next question comes from the line of Elizabeth Porter of Morgan Stanley. Your line is open.

Speaker 9

Great. Thank you very much. I wanted to follow-up on the strong adoption of AI solutions thus far. Are you seeing different initial opportunity evolving? What is that kind of opportunity around going back to the existing customer base in driving more spend with that existing cohort?

Speaker 9

Thank you.

Speaker 7

Well, Elizabeth, thank you for the question. And yes, we do see a different adoption rate between new users and, of course, older users. And one of the qualifications that you needed to have in order to be able to use Wix in the past was to know how to design to some level, to know how to write text to some level and to trust yourself that you're good enough to do it, right? And so most of our users feel that they know how to do those things. And naturally, they will use less AI because they think they can just do it.

Speaker 7

And I think we are now opening to users that don't feel that, right? They don't expect themselves to know how to do those things and expect us to have the tools to AI tools to automate it for them. So we're already seeing some of this gap and I believe that this will continue to grow. And essentially, we are opening Wix to be more useful to more new types of customers.

Speaker 9

Great. And then just as a follow-up, really impressive to see that hitting the rule of 4 d early. As we're looking out, I'm just hoping you could provide any context around the view for exceeding rule of 40 in 2025. If we look at just the free cash flow margin, you've seen some really good expansion this year. So how should we think about kind of magnitude for next year and any factors or actions that you're driving that would support free cash flow margin materially ahead of operating margin expansion?

Speaker 5

Elizabeth, this is Lior. So I assume that next year is a combination of both growth but also margin expansion. Take for example, like for example, overall payroll expenses. So yes, I mean, we are going to increase payroll expenses in dollars. But in terms of growth as a percentage of revenue on a year over year basis, it will not be the same as revenue, meaning that the revenue growth will be much faster than that.

Speaker 5

So it means that we are going to see more leverage coming from all kinds of different expenses, although we are going to increase investment, for example, in marketing. But still as a percentage of revenue, we are going to see some leverage over there as well. So I believe that the combination of what we have seen right now, a very strong execution of bookings growth on a year over year basis, which obviously will be reflected into our higher acceleration of revenue next year, the combination of that with the expansion of margins will lead me to believe that we are going to significantly surpass the rule of 40 next year.

Speaker 9

Great. Thank you for the context.

Operator

Thank you. And our next question comes from the line of Ji An Lee of Evercore ISI. Your line is open.

Speaker 10

Great. Thanks for taking the question. So first, Lior, I want to kind of circle back to your comment about back half conservatism in the guide due to macro. Just to clarify, is it general conservatism or are you seeing any potential volatility into Q3 to date? If you can kind of talk about the macro impact in top of funnel for both your partners, which assuming are more resilient and creators?

Speaker 10

That would be great. Thank you.

Speaker 5

So no, definitely it's something that is general. It's not something that is specific for the 3rd or the 4th quarter. It's really hard for me to know. But being conservative around macro and FX, it's something that we always take into consideration when we provide the guidance. I think that it's really important.

Speaker 5

I mean, we've seen that the execution of bookings for the 2nd quarter was really in line with our expectations, was 15%. But it puts us in a place that it will be it's very easy to understand how we get to the 16% now as we mentioned last quarter that we will be at. So no, there's nothing really specific about the sales, not about the 4th quarter. But that said, I really don't know.

Speaker 10

Got it. That's helpful. And also, another one on payment. Appreciate the color around vertical expansion and taking on new partners and expanding the adoption. Is there any lever that you can think of in terms of improving the Wix payment take rate by itself?

Speaker 10

Like what I mean is any value added service around the payment service that you can kind of help to improve the gross margin profile of Wix payment, if that makes sense?

Speaker 3

So I don't know about necessarily the gross I mean, the general gross margin is by the adoption and increasing the take rate, right. So in essence, if I managed to get everyone to the maximum, I'll get to take rate of almost 3%. Naturally, that's not the case. It's not the case with anyone in our industry. And I think if you look at the best in class in our industry, they get to about 2.25 percent and that's definitely something to aspire to.

Speaker 3

But I think the drivers are the things we spoke about, which is kind of more partners, making driving more of our customers to adopt Wix Payments rather than other providers. But it's also the introduction of new capabilities and new products, new verticals, adding the POS that allows us to attach and touch some of the offline transactions and move them online, things like the donations verticals, the proposals, all of these innovation is another great way to tap and expand our GPV. And I do think that we still have we have lots of room to grow there in the next few years.

Speaker 10

Thank you.

Operator

Thank you. And our next question comes from the line of Brent Thill of Jefferies. Your line is open.

Speaker 4

Hi, thank you. This is John Beane on behalf of Brent Thill. I don't know if you answered this a little bit earlier, but in terms of when you mentioned a bit more macro and predictability, wondering if you could give a little bit more color what you're seeing, especially around ESMB Health among your cohorts. And anything on the geographic side? And it looks like the trends were fairly consistent, but I want to see if you've seen anything notable there geography wise.

Speaker 4

Thank you.

Speaker 3

Hey, so I think again, I don't think we can point out anything specific with a major shift in either here nor there in terms of the SMB Health or in any geography and in general. We spoke about this in the past, I think few quarters that ever since kind of mid last year, we've seen a stabilization in the behavior with a slight increase, but very moderate. So the euro grew slightly more this quarter, but it's not significant enough in order to call anything specific. Vertical in terms of the verticals as Lior mentioned, we've seen our scheduling and bookings and events of verticals grow a little faster than other verticals. But these I would say again, I don't think any of those can be any concrete signals that you can read into macro economy.

Speaker 3

I think we're still seeing pretty much stability.

Speaker 5

By the way, this is why we are providing range. I think that some of it has got to do with that. I mean, we don't always know exactly the behavior in every country. And this is why we provide range in order to reflect that.

Speaker 6

Thank you.

Operator

Thank you. And our next question comes from the line of Josh Beck of Raymond James. Your line is open.

Speaker 11

Yes. Thanks so much for taking the question. I was pretty impressed with this metric that you all gave about 17 AI assistants and I believe you said there's dozens more to come. That's a big number, probably certainly larger than what we've seen elsewhere. So maybe if you can just kind of help unpack within that maybe how many are external customer facing, how many are internal efficiency driven and maybe what are kind of rising to the top as some of the most promising use cases there?

Speaker 7

Of course. So maybe I'll start with the easiest part of the question. How many of the 17 are customers facing? And the answer is all of them. The concept is that we are currently we build a platform in which it is easier for us to build an AI assistant.

Speaker 7

And that enabled us to develop 2 kinds of different assistants. The first one would be a question and answer AI assistant. So if you have a product booking, how do I add a staff member to my yoga studio, right? And so you can actually talk to the AI and ask question, get answers, ask question, get answers as you would do with a normal human being. And we see great result in that in terms of how customers quickly find the answers.

Speaker 7

Hallucinations are very small, the percentage, probably similar to what a human would do, not even better. And of course, in terms of customer experience, it's incredible because they get answers now. They don't have to contact support. They don't have to start searching Google. And so this is very exciting.

Speaker 7

The other thing that we are doing is that you can ask questions and you can have the AI do things for you. So this is the second kind. And for example, if you go to our analytics, you see that you can actually start asking questions and get the reports done for you automatically by the AI. So this is an AI that activates other agents in order to give you answers or do actions for you. How do I make an event that is a wedding event?

Speaker 7

What kind and then we do RSVP. But if you want to create an event, which is selling tickets for a creative concert, it will define that for you and work with you on that. So those kind of things streamline and reduce a lot of friction from the customer. We intend to integrate them, of course, to one coherent experience. And we're going to add those kind of assistance in pretty much everywhere that we can on Wix.

Speaker 7

And I think the overall change in a from a customer perspective is tremendous. You get quick answers, high quality answers to your questions and you get an AI that will help you set up things or change things or ask questions like get analytics. So it's really a big difference from a customer perspective.

Speaker 11

Understood. Very helpful. And then maybe just a follow-up on Studio and really trying to think about the monetization curve. It's been in the market for a year. So from the point at which somebody is creating an account to their ramp and learning curve with the new editor to really starting to produce a meaningful number of websites.

Speaker 11

I don't not looking for anything specific, but maybe if you look at some of the early cohorts, kind of what you've learned And in terms of model impact, I mean, is this something that we should be thinking about 25% as more impactful to revenue or maybe it's a bit beyond that? Just would love any color there.

Speaker 7

Well, of course, I think that modeling Lior will answer. I'm just going to say about the behavior. What we're saying is that people will come to studio and usually play with it, right? So agencies will come and play with the product. And at certain point in time, they'll take a project that they just got, so it's mostly a new project.

Speaker 7

So we have to wait until they have a new project. And then they'll implement that first project on Wick Studio. And this is the most critical time, of course. If they are happy with it and the customer is happy with it, there is a very high chance to come again when again to get the next project to do it again on Studio. The rate of projects is not depending so much on studio, right, because it's on the quality of the which studio, it's mostly dependent on how many customers they have, right?

Speaker 7

And this can be a big agency that only do a few websites every year or it can be a freelancer who do a few websites every year or it could be the agency that is doing a dozen websites every week. So we have a variety of them. And I think the exciting thing about Studio is that we're seeing all of them using Studio. And if you look at the statistics, it seems that all of them will more likely come back to Studio to build a second project than only 1. So we are very excited about that.

Speaker 7

It's a very strong signal that the customers that the agencies like this product. And if you had a chance to see the community chat about it, I think it's also obvious there.

Speaker 5

In terms of modeling, Keith, I think that there's like a very 2 interesting phenomenon that we see. So the first thing is obviously around existing partners, keep on building and using Wix for more and more of their projects. Now the question is how much it's going to grow and how many projects each and every one of them are using. And this is something that we'll keep learning, but it's quite big. Vishay mentioned before that they are building the second, the third, the 4th, the 5th, the 10th website on Wix.

Speaker 5

And this is really amazing. I can tell you that it is much more than what I anticipated in my model at the very, very beginning when we started. 2nd, obviously, is about the newcomers and what kind of agencies, what kind of business solution they are using. So we have like the first results that we see right now, for example, in the Q2. One of the reasons why you see the acceleration of 10% to 15% of bookings in the Q2 is because of that.

Speaker 5

It's still moderate. It's not huge, but we are not talking about 100,000 dollars. Obviously, it's 1,000,000 of dollars. Yes, I do believe that in 2025, the growth of revenue with regard to studio will be much more significant.

Speaker 6

Very helpful. Thanks, Steve.

Operator

And this concludes today's question and answer session. I would like to turn the call back to the company for closing comments.

Speaker 1

Thanks everyone for joining us today. We'll see you on the next one. Bye.

Speaker 3

Thank you.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

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Earnings Conference Call
Wix.com Q2 2024
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