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Operator
Ladies and gentlemen, thank you for standing by, and welcome to WIC's fourth quarter and four-year 2020 earnings call. At this time, all participant lines are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star then 1 on your telephone. We ask that you please limit yourself to one question and one follow-up. Please be advised that today's conference is being recorded. If you require any further assistance, please press stars and zero. I would now like to turn the conference over to your host, Maggie O'Donnell, Director of Investor Relations. Please go ahead.
Maggie O'Donnell
Thanks, Sarah. Good morning, everyone, and welcome to WIX's fourth quarter and full year 2020 earnings call. Joining me today to discuss our results are Abishai Abrahami, our CEO and co-founder, Nir Zohar, our President and COO, and Lior 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 20F that could cause our actual results to differ materially from these forward-looking statements. 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 our interactive analyst center on the investor relations section of our website, investors.wix.com. With that, I will now turn the call over to Avishai for some opening remarks.
Sarah
Avishai? Good morning, everybody, and thank you for joining us today. I think that if you look at the numbers, it's kind of obvious to see that this was our best year ever. So it's really exciting for us. But even more than that, I want to point out Two things that might be less obvious that I get excited about even more. And this is that we have incredible, more than doubling growth on e-commerce. And, of course, more than doubling growth on partners, people that are building websites for others. Both those things represent new kind of businesses to which we serve, new revenue streams that we have now on Wix. And both by nature... are compounding, right? E-commerce, because you have more people adding, and also they have more payments, and then on the other hand, all of the partners, because they build multiple websites, that's their business, to be more and more websites. So for us, as Wix, this is a big turning point where we are actually expanding our offering to be much wider. In fact, if you look at that, and you think about the growth rate of Wix, and the size and renewal of things on the Internet, of online presence on the Internet, I believe that it's kind of, well, maybe a bit ambitious, but achievable, right? Assume that in five years, half of all the new things on the Internet will be built on Wix. In fact, I'm so confident about it that I have to say that if we continue to have great execution, then this is something that we should achieve and For me, as the CEO of Wage, this is super exciting. It's really amazing to be in a place that you see such growth in all of the new things we released and, of course, that he positioned us as such a core part of the Internet going forward. So thank you, everybody. Thank you for joining us. And with that, I'm going to go back to Maggie.
Maggie O'Donnell
Thank you, Avishai. All right, I think we are ready for Q&A. Operator? Operator?
Operator
Thank you. As a reminder to ask a question, you would need to press star then one on your telephone. To withdraw your question, please press the pound key. We also ask that you please limit yourself to one question and one follow-up. Our first question comes from the line of Brent Field with Jefferies. Your line is now open.
spk14
Thank you. Avshai, just your vision of moving upstream to service not only small businesses but mid-enterprise and enterprise, can you just update us in terms of the vision and traction you're starting to see, you know, beyond the smaller startups? Of course, of course.
Sarah
So actually, this goes in a few different directions, right? So the first thing is that the product today is a product that fits, right? It can build huge websites with Wix. But beyond that, it's also... Editor X, which allows you to create this very sophisticated design going all the way to what you would see in the most complex websites existing today. The business stack below that, the ability to actually use Velo and connect everything to your backend, to your enterprise offering. And of course, the channels, because most of the larger customers do not build the website themselves. They work with partners. They have somebody that does it for them. So our ability to serve those customers with a great offering as well. And all of this is pretty much happening this year. So for me, it's really exciting, and we're already starting to see. We shared some examples on Delito X launch two weeks ago, and we're really starting to see more and more larger companies using Wix. Thank you. Of course.
Operator
Thank you. Our next question comes from the line of Sterling Audie with JP Morgan. Your line is now open.
Sterling Audie
Yeah, thanks. Hi, guys. Just one question from my side. Looking in the presentation materials, the discussion around the take rate on payments, it's a really impressive rate for a company, you know, being in the payments business as long as you have. I'm curious what's allowed you to get to those level of take rates, and are those take rates When you first start with a customer, do you ramp to those levels? Are you at those levels from the beginning, and they hold steady when a customer comes on to Wix Payments?
spk09
Hey, Sterling. It's Nir. Thank you. I think it's a great question. You phrased it relatively early. Actually, I'm 100% sure that the take rate is actually going to improve over time, as you've seen it improving so far. When you look at a specific customer, then you don't ramp up. We start at a higher take rate. But obviously, our ability to increase the overall take rate on the platform comes from the ongoing improvements that we apply to the platform and the expansion we are doing to the platform also internationally.
Sterling Audie
Got it. Thank you.
Operator
Thank you. Our next question comes from the line of Ron Josie with JMP Securities. Your line is now open.
Ron Josie
Great. Thanks for taking the question. Maybe a similar question in terms of the graduation rate for users. I was pretty impressed to see 37% of 2020 cohort revenue from newer online customers or subscribers or commerce subscribers. And I think you talked about maybe a 2X increase in terms of the rate of those subscribers adopting G Suite and Ascend and Facebook Ads. Can you just talk about the journey of how a new commerce subscriber goes about adopting these products? Is this something immediate? Is this something that happens over the next couple months once they start using the product? That would be helpful. And then maybe, Lior, on subs, I have to ask, with 185,000 new subscribers this quarter, can you just talk about the strategy here? I think they declined sequentially, and just maybe a little bit more about just the new subscriber growth. Thank you.
Sarah
Of course, so most of the time what we're seeing is that people will start with a very basic e-commerce business, and as time passes they will extend and add new things to it. So it's not like you come in one day and build everything. For example, if you look at the automatic advertising product, that can happen after a few years or after a few months, but it almost never happened in the first month, right? And we're seeing that the consumption of additional tools from us is something that is, the more people know the system, they understand the system and actually appreciate it and have trust with it, right? That's where they start looking around and seeing, okay, how we can accelerate our business. And so normally people will come two weeks and then the first couple of, I would say a week or so, they'll build their online presence for like the basic offering. So if it's a shopping cart business, they'll add the products, They set up the billing, the payments, the policies, and they'll try and start selling. If it's a... If it's something that has to do with booking, they'll build the basic offering of booking at some of the teachers, some of the classes, and start working from that. After that, they usually start using the applications, right? So the native application, and after that, they start going deeper and deeper into business tools. So usually a process that takes a bit, and... So it usually takes something that it takes time and then that's what we're seeing. By the way, a lot of things that we're seeing is that a lot of them will start adding different tools. So somebody that has a booking business will start selling products, right, to his customers. So we're starting to see there and then somebody that's doing selling product will start offering classes and teaching and things. So we're seeing a lot of this cross between the verticals, hotels, obviously, They have a store, they have a spa. So there's a lot of a cross between the vertical. So it's more of a vertical offering, not necessarily vertical customers in many cases. Leo, you want to take the second one?
Wix
Yeah. Hey, Ron. So with regard to the question about the net subs, so Q4 2019, actually the growth was about 107% more than before. Q4 2019, meaning that 2020 actually growth was double, more than double than Q4 last year. That said, Q4 was in a way also impacted by a typical seasonality with a bit of a higher volatility due to the epidemic. And probably also because we came out of a very strong Q3. So obviously we see that the impact is kind of temporary for the fourth quarter. And it's also reflected in the Q1 guidance that we provided that the growth, for example, of creative subscription is more than 30%. I think that it's also important to mention that the value of each subscription is so different. So it's really hard to measure and compare And this is why, by the way, in a way we are evaluating or looking at ourselves as the value of the quote. Just as an example, and I think that we also provided to you in the shareholder update, the 2020 quote generated nearly 7.5x the amount of revenue compared to 2016 quote. I think that it's a great indication to understand that each subscription today, the value of it is much higher than a subscription a year, two or three years ago. So I hope that it answers your question.
Ron Josie
It does. Thank you very much.
Operator
Thank you. Our next question comes from the line of Navij Khan with Truist Securities. Your line is now open.
Khan
Thanks a lot. So I wish I, on your vision of maybe accounting for 50% of new sites in five to seven years. Where do you think you are on that metric today in terms of share? And maybe if I heard you correctly, just a clarification, did you say that the contribution or the growth in partner channel doubled last year and how should we think about growth in the channel for this year?
Sarah
Yes, so I did mention that and I think that hopefully it will more than double this year as well. And this is something that two and three years ago, we spoke to everybody here and we mentioned that we're going to invest into that. And I think we're seeing really massive success. I think that, you know, 50%, right, of the new sites being on the internet, built in weeks, obviously it's an ambitious goal, right? And I think that it's a company you want to be ambitious. But I think that you can just play a little bit with the mathematics, right? And you'll see that it's not... hard to imagine that we'll be there. It's actually very likely that unless something changes, right, we'll be able to achieve that. Of course, we'll need to do an excellent execution and we have to continue to innovate and drive products. But I think this year's growth rate, and we look at the history of the growth rate, is such that it's showing that it's very likely to happen. Well, it could be not five years, but six years, right? but it can also probably be four years. So I think when I say five to seven years, I believe that it's something that is very achievable. And I think there's a message internally for the company. It's a very important thing because this is really something we believe we can achieve, and this is something that we work very hard to achieve.
Khan
Thank you.
Operator
Thank you. Our next question comes from the line of Ken Wong with Guggenheim Securities. Your line is now open.
Ken Wong
Great. Thank you for taking my question, guys. You know, I wanted to maybe touch on payments again. Previously, you guys updated us that about 30% of the install base had attached payments and 80% of the new. Any refresh of those numbers? And then on the take rate, as you think about where you guys could go, Any rough sense of what that ceiling is? You have some of your competitors out there have roughly 250 basis points. Is that what we should be thinking for Wix payments longer term?
spk09
Hey, Ken, it's Nir. So in terms of, I think, the 30%, 80%, it's growing. It hasn't changed dramatically. I don't think there's something different to report at this stage, but the adoption continues at a high pace. I think that in terms of the take rate, yes, I think that definitely over a longer period of time we will get to industry standards as we keep on evolving the product and expanding it. That's definitely the goal.
Operator
Great. Thank you. Thank you. Our next question comes from the line of Nat Schindler with Bank of America. Your line is now open.
spk05
Yeah. Hi, guys. So you mentioned in the gross margin discussion that the decline was partially due to the customer care expansion. How much of that is leverageable? And longer term, where do you think the gross margins will settle out? Secondly, if I look at your TROI slide, I think this is one of the first times I've seen just on the Q1 slide, which should be, I think, on average 10.5 months of time on that Q1 result, and it still hasn't gone into positive return, so a little off your 7 to 9. Was that a function of just Q1 this year and some seasonality, or is that an actual trend that you're looking to expand your TROI?
Wix
Okay, so I will start with the first question about the growth margin. I think that I want to divide the question, the answer into two. First, let me talk about the creative subscription. So you're absolutely right. The creative subscription is actually the growth margin went down as a result mainly of the expansion of our customer care to address the huge demand that we see right now, but also in the future. we see that demand is, you know, continue to grow. So we have to make sure that we prepare ourselves, prepare our ability to support users that come to Wix and looking to build an online presence. So we hired about 700 agents in 2020, which obviously has a full impact on 2021, but we will continue to hire more about 600 more in 2021. So it has an effect. To your question, you're absolutely right. I think that, and we mentioned that by second half of 2022, we are gonna be back to about 80% of growth margin as we stop hiring in accelerated mode. And also, there is a lot of infrastructure improvements that we've done in order to support this growth. that we won't do, obviously, in the near future. So definitely it's kind of a temporary effect in order to answer the growth, and we feel very good about it. With regard to the business solution, nothing dramatically changed, except for two things. The first one is the change of mix, where payments become more dominant. in terms of the business solution. Actually, in 2021, it will be the number one revenue stream on the business solution, kind of amazing, taking into consideration that we just started this business. And the gross margin of payments is increasing as we scale up. We talk about the tech rate, for example. So we also are investing a lot in order to build the infrastructure to support payments. Everything about the onboarding process, about the support. So next year, for example, we are not going to invest as much as we are investing this year. So growth margin is expected to go up as well there. But it's also important to mention that the focus of business solution is about the product. for users, not necessarily the gross margin. Because in the end of the day, it generates incremental free cash flow to our balance sheet. And this is very important. It also has an indirect effect over the retention of the creative subscription. So this is obviously something that is very important for us.
Sarah
This is Avish. I just want to ask a question about TOI in the first quarter. So it was influenced by a couple of things. And first of all was that, if you remember, in the first month of the pandemic, everything actually slowed down a bit, and then it accelerated, obviously, in that quarter. The second thing is that we launched, we spent marketing dollars on launching new products. And that always, you know, you overspend there to start creating this pool. So that was mostly, that was the effect of that. The last part of it was that we started investing into e-commerce product And the behavior of returning cash is influenced also by, of course, our take of payment. And that's something that we have to learn how to include better into the mathematics. However, I want to say that as the CEO, you know, we came up with the number seven to nine months because we felt that this means that we're efficient in a certain way. But for me, if we're in ten months, it's actually better than if we're in six months, right? Because that actually is what I would be worried about more. And by the end of the year, by the way, last year we came back again to the same range of seven to nine months. But thank you for noticing that, and I think it was influenced again by the pandemic, releasing of new products, and trying to think about what is the model with which we should measure all the commerce things, which of course have a different way to behave in terms of return on investment. Because they tend to go more in the future, right? So if in the first year you get X, usually in the second year you get 1.5 or 2X from them. So maybe we should be a bit more open to spending a bit more on those guys.
spk05
Makes sense. Thank you. Of course.
Operator
Thank you. Our next question comes from the line of Jason Huffston with Oppenheimer. Your line is now open.
Jason Huffston
Hey, everybody. Thanks. So maybe start with a question about your comment about you're targeting half of all new sites or things in five to seven years. Where are you today? So kind of what's the starting point that you're using to get to that glide path? And then a question about the gap between collections and revenue. Maybe take us through just the puts and takes because we get a lot of questions from investors on kind of, You know, we go through periods where, obviously, it's the gap, right, that the program is expanding, and then it narrows. It just kind of takes us through that. Thanks.
Sarah
All right. So, I think that if I answer one of your questions, as far as I know, if you look at the Internet, right, you have to divide it, right, between a few different sectors. So, the first thing would be people that are building small business websites, mostly building themselves, and I think there's self-creators, which is, by the way, a trend that is super growing on the Internet, right? So, That trend in itself is growing, and in that trend today, I think Wix is already about 50%, or very close to 50% of new sites being created on the Internet today. So from self-creators on the Internet. And then if you look at partners and designers, so it's very hard to estimate exactly what are their numbers on the planet, but I assume always that their number on the planet is probably equivalent to the amount of people using Photoshop. It's not exactly, but very similar, so about 3%. three or four million, and we are getting to be about, well, I don't know if we disclosed that number or not, but we're already double digits from that, right? And this is a new offering that we have. So even without doing it, just continue to grow in the same rate that we grow, we'll be at 50% of those. Now, those guys are responsible for two kinds of websites. They're responsible for people that buy websites, right? So if somebody else is designing their website, and of course, for enterprises, for most of the enterprise, the large companies' website. So, I mean, just by looking at those two key factors, right, you can see that it's very cheerful for us to be 50% of all new internet websites. And the one thing that we don't address as much today, but we're seeing growth already with Editor X happening today, are companies building their own websites, or enterprises, or medium-sized companies, or large-sized companies. And again, we're seeing growth with Editor X, which is surprisingly fast, 10% month over month, So more than 10% month over month. So I think that if you factor all of that, it's very easy to extrapolate that we'll probably be at 50% of all new websites being built in the world within five years.
Wix
Hey Jason, with regard to the second question about collection and revenue, a general comment about it, I think that we need to relate to two different behaviors. The first one is the creative subscription, which mostly is recognized over time, as you know. Business solution is mostly recognized immediately, for example, payments. So collection is equal to revenue with regard to payments, for example. In Q4, we had more collections coming from payments than what we anticipated initially, Therefore, the revenue was all recognized immediately, and it was kind of increased more than what we anticipated, as I mentioned before. So obviously, you know, the gap between revenue to collection really depends on the nature of the growth. If the growth is more coming from creative subscription, you will see that the gap is increasing. If you see that the growth of business solution is increasing, so the opposite. So it really depends. But again, this quarter, it was very nice to see how business solution is scaling up, especially payment, which obviously was all recognized.
Operator
Thank you. Thank you. Our next question comes from the line of Yigal Aranian with Web Bush. Your line is now open.
Yigal Aranian
Hey, good morning, guys. Thanks for the questions. I wanted to ask around the $60 million in incremental investments this year and how you think about that being the right level of investment, how that flows through to the revenue collections guidance this year and next year as well. And then, you know, within that – You have two real big initiatives, I guess, right, at Editor X and the partners and for commerce. Is Editor X with 200,000 subs kind of tracking where you thought you'd be at this moment? And how does Editor X contribute to commerce? Are you seeing more commerce sites being built on Editor X? Is it a boost to the commerce initiative? And then I have a few kind of technical follow-ups I'll ask after.
Wix
I will start with the 60 million incremental investments that we've made. We mentioned that we are going to use it for several things. The first one is about the clear headcount, expanding it. It's a good question because internally we try to understand how many people, how many agents we need to support the continuous growth. We also assume that the growth will continue. I mean, we talked also last quarter about the new state of mind, and it's actually happening. The growth continues, and the demand is actually increasing. So in order to support that, we have to recruit more people, more agents, and it takes time to train them. So I believe that 2021 we are going to increase the investment as we mentioned before. We are going to see the benefit of it already in 2021 but mostly in 2022 as the growth margin actually increasing again to 80% for creative subscription. We are going to use it in order to support payments. We talk about the payments, the product and the growth and how we increase the take rate. And there is a huge opportunity for us on payments. Payments have already started to deliver free cash flow on the bottom line. I think that next year it will be much more significant for us. And the same goes for account management. So we believe that this is like the appropriate amount that we need to invest. Obviously, we are not doing it in day one. It will be based on the actual growth that we are going to see and witness throughout the year.
spk09
I just want to add that I think that many companies that have a balance sheet as strong as ours will use that in order to grow the business through M&As. I think that our approach is that most of our growth will always come from innovation. I think we've proven that investing into innovation is what works best for us to generate that future growth.
Yigal Aranian
Okay, helpful. And I wanted to just a couple of mechanical things. So people have asked about payments and the take rate. Can you just explain the gap between the 1% and what's there on your website, which is kind of amounts to 2.5% to 3% already? What's the difference between what's listed on your site and what you're recognizing are chargebacks being accounted for in the take rate or as a cost? And then Again, going back to the creative subscriptions collections which decelerated this quarter and you're expecting to accelerate again next quarter, is that all coming from the kind of pull forward you talked about in subs and 3Q and normalizing again in 1Q, or are there other seasonal elements that are causing that?
Wix
So I'll start with the second question. It's exactly what we said before about the seasonality. effect that we've seen and the volatility that we had in the fourth quarter, again, especially after a very strong Q3. But we already see on January number that it's going up again to more than 30% on a year-over-year basis. So I think that it's a great indication for the fact that it's only a temporary effect, and we are back to the growth that we've seen before.
Sarah
As for Editor X, you asked about the growth for Editor X. So I got to say that your first question was about growth of HRX. And for me, I think this is by far the fastest growing product we ever released in terms of growth. And taking into account that this is not something that you just can broadcast and use regular marketing channel because you're going after professional people, I think this is amazing. And it's a testimony to the quality of the product and to the quality of the marketing team working on this product. In regards to does it do, it's growing over 10% month over month, 200,000 users already. So really, it's fantastic. In terms of contribution to e-commerce, we do see more e-commerce there and we do see more complex projects there. And I think a big part of the reason for that is that this is not, you know, Editor X is really a tool for professionals. I struggle to finish a website with it. It takes me time. Having that, if you use ADI, obviously, it's never an issue. But even if you use the classic editor, it's very simple to do. Editor X is much harder. So, of course, people using that are more professional, have bigger projects, deeper projects. And that's part of it. Again, for me, the most amazing thing is that I did not expect it to be anywhere near where it is now in terms of numbers or growth rate. It's amazing. Was there any more questions or we answered everything?
Yigal Aranian
Yeah. What's the difference between the 1% pay grade in payments and what's listed on your site? What are the factors there?
spk09
Well, you have to remember that, first of all, this is a young product and you're evolving it. A lot of our existing users who are transacting on our system are not necessarily on our own gateway, in which case we have different kinds of commercial terms with the other gateways. So naturally, it's not as favorable as two hours. We're not forcing them to move. We're enticing them to move by offering a better product and higher value. This is also why you see the take rate taking off from the half a percent it was in 19 to the 1.3 percent it should be in 2021. And we are very confident that it will continue to go up.
Yigal Aranian
Great. Helpful. Thank you, guys.
Operator
Thank you. Our next question comes from the line of Nick Jones with Citi. Your line is now open.
Nick Jones
Great. Thanks for the question. I guess a follow-up on some of the incremental investment, specifically on the growing the account management team for the high-volume commerce users. How do you feel the Wix platform is positioned against some of the, I guess, competitors for kind of agencies or higher-volume e-commerce companies? Is Wix's suite of solutions today adequate for someone to scale to a sizable e-commerce company, or is that, you know, a risk as they get bigger that they turn to maybe custom applications to, you know, improve speed or things like that?
Sarah
Thanks. Well, I think that we arrive to a place where we're actually very competitive in those categories, and I think that if you use Wix e-commerce, which is really a fantastic product, and then Editor X, which is nothing compared to its inability to design, edit, control your site, work as a team, right? We have the only company on the planet to give you a way to actually work as a team when you build projects like that, right? So you can use concurrent editing, right, for that. You have the history, the versioning, and then you have Velo, right, the Wix code solution. So you can actually custom build whatever you need and you don't have to rebuild new servers and infrastructure. So I'd say that if you... If you look at our ability to compete this year on bigger projects, it's fantastic. I think we have the best offering on the planet.
Nick Jones
Great.
Sarah
Thank you.
Operator
Thank you. Our last question comes from the line of Chris Contarge with Deutsche Bank. Your line is now open.
Wix
Thanks for taking my question. Maybe two if I can. you talk about having these commercial relationships with some of the other gateways. Can you just help us think about the opportunity for WICs to charge a transaction fee similar to what some of your peers are doing on transactions that are taking place on other payment rails and not through WICs payments? And then just kind of thinking through your 2021 payment disclosures that you've, or guidance that you've given here, how do you think about Yeah, as we look at gross payment value from existing users versus new users, how should we think about the drivers there? And just curious, yeah, why is the revenue guidance so tight at this point in time for a product that's growing so quickly? Thanks.
spk09
I'll take the first part, and I think, Lior, you'll cover the second one. So in terms of the opportunity to charge transaction fees for other payment gateways, First of all, of course, we have that opportunity. At this stage, we haven't implemented it or don't intend to do it in the near future. We believe that our ability to move the merchants and the customers is through the depth of our product and offering and make it so excellent that it's just much superior. We may do that in the future. Currently, we don't think that that's the best way to go about it.
Wix
With regard to the 2021 payment guidance, so obviously we see a strong growth coming from both existing and new users. But for example, a lot of new users in 2020 are driving the growth. It's in a way, think about it as a compounding effect where you see the growth of our users. In addition, we are getting more because also the mix is changing. and we are getting more kind of business users. So we see more than that, and it's actually growing. And at the same time, we also increased the tech rate. So all those indicators actually lead us to believe that the guidance for 2021 is actually something that is quite realistic. We are very excited about it. And actually, I can tell you that it can be even more than that. It really depends on how the year will be and how much people are going to embrace the new product. For example, point of sale. Point of sale is going to move many people from offline to online, so it's also going to contribute a global expansion of Wix payments. So there's a lot of opportunities over there, but certainly also long-term opportunities that we intend to pursue.
Wix
Got it. Thanks for the call.
Operator
Thank you. I will now turn the call back over to Maggie O'Donnell for closing remarks.
Maggie O'Donnell
Thank you, everybody, for joining us today. I hope you have a good day. Bye.
Operator
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
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