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spk00: Good day and thank you for standing by and welcome to the WIC's fourth quarter and full year 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then zero. I would now like to hand the conference over to your host today, Maggie O'Donnell, Director of Investor Relations. Ma'am, please go ahead.
spk05: Thank you, Michelle, and good morning, everyone. Welcome to Wix's fourth quarter and full year 2021 earnings call. Joining me today to discuss our results are Abhay Abrahami, CEO and co-founder, Anir Zohar, President and COO, Lior Shemesh, our CFO, and Joe Pilaro, our GM of the U.S. During the 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. And you can find all reconciliations between our GAF and non-GAF results in the earnings materials and our interactive analyst center on the investor relations section of our website, investors.wix.com. I apologize about the background noise around me. But with that, I'm going to turn over the call to Joe, who will be moderating the Q&A with the team.
spk02: Great. Thanks, Maggie. And welcome, everyone. So, Avishai, let's start off with you. With you, we're coming up on two years now through this pandemic, and so much has changed in this period of time. So just give us your view on the current state of the market and also the level of demand we're seeing here at Wix.
spk01: Well, as corona started, right, we enjoyed really high level of demand. And this has grown very quickly, and the peak of it was Q1 last year. After that, we still slowed down. And it slowed down through Q2 and Q3. And then it's kind of stabilized in Q4. So... And I think that this is an effect that pretty much everybody around us has experienced. So we saw it in many other companies. So kind of like the Internet growth has slowed down or consumption of the Internet has slowed down. However, we do see that it's stabilized and it's starting to reverse the trend a bit. So we're starting to see growth on that again. For us... A few things that we noticed is that the fundamentals have stayed pretty much the same or improved, which means that the courts are behaving in the same way they behaved before COVID, and they continue to behave the same way during COVID, and they still continue to behave the same way now. Churn is the same. Everything is the same. We did notice that the average revenue per subscribers did go up, so 10% last year and again, so overall 20%. Initiatives like partners and payments are growing. So we do see that. But I think overall, it was a really great beginning in corona and then slowed down in the second year of corona.
spk02: Great. So despite some of these dynamics, though, 2021 was actually a great year for Wix in a lot of regards, especially even when you compare to 2019, which was before the pandemic. So just to read off some of the numbers, so we ended 2020 with revenue and bookings of 29% year over year compared to 2020. And when you compare to 2019, revenue actually grew 67% and bookings grew 70% over that two-year period. And this growth, as you kind of said, really has been driven by really stronger user cohorts of ours. So talk about specifically this growth we've seen in these user cohorts.
spk01: So We've dramatically grown from where we were at the end of 2019. And if you try to look at it and say, to isolate corona as an event, right, and then if you look at it, so I don't know if we are post-corona, but at this phase where we are and we compare to 2019, of course, we see massive growth. A really good way to look at it is that if you look at the Q1 this year and Q1 last year, obviously the growth rate, right, is based on the best quote we ever had, which is last year. So obviously this year it looks a bit smaller. We do see that we are still continuing to expand our reach to new markets, which is done by a lot of work from partners, a lot of work from commerce. And we can see that we actually have higher quality subs now. I think a lot of it is because we removed a lot of the things that blocked users from using Wix. So by removing things, by adding e-commerce capabilities, for example, tools for partners, we actually enable people that would have normally higher values to come to Wix and now use Wix as a service for what they need. So we do see that, and I'm very optimistic about what it says for the future. Hopefully, we're starting to see a version of the trend.
spk02: Great. So we shared that our focus on growth really is going to come from three areas now moving ahead. One is bringing more self-creators to Wix. The other is bringing more partners to Wix who are building sites for others. And these are both really kind of go-to-market initiatives of ours. And then the third, very product-focused, which applies to both types of audiences, are commerce and payments. So I want to go through each of these. for investors and how kind of you view them and how we're going to drive growth. So start with self-creators.
spk01: Well, this is self-creators is where we started, right? This still is our biggest customer base, right? And I think we're the market leader in that category. I don't think anybody else is similar to us in terms of size. And we still see growth there, right? We do intend to do a few more things to enable faster growth there. And the first thing is with the core product, the editors, right? So we gave some innovation that are coming soon out, and we know from history that this usually drives massive increase in subscribers. The other thing is that we, again, we removed barriers that people had. So allow self-creators to do more with commerce, right, is very important, right, because we allow, we help small businesses, right, in many different ways. I want to remind everybody that when we say commerce, we don't just talk about shopping cart. We also talk about things like, scheduling and booking and restaurants and hotels and many different kind of businesses, right, that actually want to drive their – if they try to do it as self-creators, right, they need the functionality to be successful. So when we add the functionality, we enable them to use Wix. And this is a strategy that worked for us really well in the past. Another thing that we did is a really large investment in customer care, and we know that – Well, the concept behind customer care, the self-care is usually of less knowledge than professional and how to use Wix. And they need help, right? So we have somebody that can help them. That's the concept behind it. I think we're doing very well there. The last part is that, well, we are growing internationally. We've always been. There's a lot of small things we need to do in every country in order for Wix to be really doing well in that country. And it can be simple things like changing text, or it can be adding payment providers, It can be how you do some kind of a business functionality. For example, booking in Germany and the United States act very differently. So all because you can actually pay later after you did something which is uncommon in other places. So all those things, when we keep removing those things that are the barrier to success, we see growth in self-creators. And traditionally, we've been really good at doing that, and I think we have a lot of really exciting things coming this year.
spk02: Great. Let's move on to partners. When we talk about partners, there's different kinds of partners that we have at Wix. We have agencies that we know build sites. We have freelancers that are building sites for others. We also have large businesses like Vistaprint and NTT, which are using Wix to help their customers be successful online as well. With partners generally across the board, how do you see us driving growth here?
spk01: We started to have agencies, designers, what we call partners. On the first day, we pretty much opened wings. What we did in the last couple of years, we started to invest a lot into making their life easier. We did it by many different ways. First of all, we gave them tools where they can manage many different websites. Let's say you're an agency, you have three designers in your agency, and you have 300 customers, websites. So, obviously, you need tools to manage 300 websites, to manage permission for your team members. You need tools to enable billing, so how you charge your customers, how you track what's paid for whom. All of these things are things that we've added, and we saw really great success because we did that. Another thing that we did a lot is to make Wix more of a professional tool. So I'll give an example. Search engine optimization, the ability to, how you affect the, ranking of your website on Google or what place your website is in. So for self-creators, most of the time you want it to be all automatic because you just want them to have really good results without doing anything. For professionals, they want to be able to go under the hood and tweak everything and be able to control every small thing. And so this is something that we've added to the product, enabling them to have really this amazing search engine optimization capabilities that they can go under deep into Wix and do a lot of different things. We release product that is specifically for designers and agencies, Editor X. And, of course, we've added a team that gives them special support. Again, if you are supporting 300 websites, you need different support than somebody who has one website. And the main business is doing yoga. And even if the question sounds the same, the answer would be very different. Because one guy hardly knows anything about Wix, and he knows how to use it to build a website. And the other guy is super professional. So even if it's a similar question, the answer is very different. And, of course, the response time has to be very different. So we created that team, and we saw massive growth this year, right, in partners and agencies. And we think that this is a really good strategy. I think the more we continue with this strategy, the more growth we'll see from that.
spk02: Great. And we'll come back to the partners' data in a minute. But before that, I want to go on to commerce very quickly. Commerce, obviously, you mentioned it both with self-creators and through partners. We share transaction revenue. which is essentially payments revenue, a big indicator of how our commerce business is performing. In 2021, it was $130 million or 134% year-over-year. GPB on Wix was $9.6 billion, up 78% year-over-year. Just expand a little bit more about what is driving our success in commerce.
spk01: Well, I want to emphasize again that e-commerce is very diversified. It's not just shopping carts. A lot of it is shopping carts, but we also have The ability to schedule services, the ability to sell time, the ability for restaurants. So there's a lot of different things that we do. And I think what drove the success is that we actually gave the right product. Before that, if you came to Wix as a self-creator or as a partner and you wanted to do a lot of those things, you couldn't. We didn't have the functionality. So by enabling, by offering, building this functionality into Wix, now self-creators and agencies, partners can do it. And the result from that was growth. So it is all driven by adding the right products and creating really good products. We see, because of that, strong GPV growth. And because we know there's a lot of more things we need to do there, we're very optimistic on accelerating that into the future. Because we know what the customers are saying, well, I want to do that. I cannot do it in weeks. Can you please add something that will enable me to do it? The upside of it is, of course, higher revenue per subs. And, of course, additional revenues from which payment.
spk02: Great. So, Nir, let's move on and talk a little bit more about going back to the partners' revenue. So this is the first time we're sharing this number, revenue generated through partners. It was $257 million in 2021. That was up 75% year over year and up three times over what it was in 2019. Talk a little bit more about why this has been successful for us and why partners are so important and meaningful to us and why this extra data is something we're going to be providing.
spk04: Absolutely. First, thank you, of course, everyone for joining us today. You know, we wanted to give this breakout and structure it to all of you guys because we This is how we think about our own business. So we wanted to try and kind of match that internal thinking to how we explain it outwards. And essentially, when we think about our business, there's really two parts to it, right? There's the direct acquisition, which we bring traffic and users for those self-creators. right, to our platform. By the way, we capture a lot of those partners also by that direct acquisition, but those people are coming to us directly, okay? And the partners, and it doesn't matter if they're a small freelancer or a one-man show or an agency or a big partnership, B2B partnership, in all of those cases, this is basically kind of an indirect go-to-market because in this case, We are reaching customers that we can't reach otherwise because those customers are people who don't want to do their own website. For whatever reason it is, they want someone else to help them out with it, different ways and scales of help. And this is why we think differently about the partnership section of our business. As Avishai mentioned before, it has always been an attraction for professionals. But we obviously structured much more of what we do towards to help them and make them more successful in the last few years. And when you look at what we deliver for them at the end of the day, it's basically we give them the platform. We give them the technology. And it doesn't matter if they're the freelancer, the agency, or the big company. We give them the technology to be successful, to deliver value to their own customers. And that's obviously a massive growth opportunity for us.
spk02: So you mentioned these big company partners, so Vistaprint obviously was a significant one last year. Can you just give us an update on where we are with the Vistaprint partnership?
spk04: Yeah, absolutely. I think it's obviously been a very significant and interesting partnership for us. I think that it's also one at a higher scale, which obviously this time around required that we need to do some adjustments in order to facilitate it, which is also great because it's infrastructure, which we don't need to repeat next time around. To be honest, it got me a little bit worried that we may not meet timelines, but I think the great news is that we're actually exactly where we wanted to be, meaning that we already started testing the full mutual funnel in some territories, and it looks good. and we are on schedule to deliver and launch it this quarter, Q1, which makes me assume that we'll start to see the contribution in revenues sometime in Q2 and throughout the rest of the year. I think one other maybe interesting point about this VistaPrint deal is that also they have very – large volume of legacy websites that are also, we intend to migrate to our platform throughout the year, and this is a project that we are pursuing already, and we believe will be finished by the end of the year.
spk02: Great. So now let's move on and zero in on our user cohorts. So first of all, we ended the year with nearly 222 million users and almost 6 million subscriptions. We shared that we added 478,000 net subscriptions in 2021. Not surprising that that was down compared to 2020. 2020 was obviously a very unusual year that created huge demand and had a big impact, not only on 20, but also on 21. At the same time, our revenue per subscription, as Avishai earlier mentioned, it was up 12% year-over-year in 2021. And that came off of a year when ARPS was up 10% in 2020. So just put all this together and talk more about how this looks in our user call.
spk04: Absolutely. So, you know, Joe, you kind of mentioned this, I would say, different behavior, which is something that is a dynamic that is significant to these two years, okay? When we look at 21 compared to 19, we had a much higher demand. Gross subs were up 16%, so 16% higher than 2019. But because of the massive amount of subscriptions and the huge size and demand of the cohorts of 2020, going into that Q1 of 2021, we basically had this kind of dynamic where even though the churn rates were the same or even slightly better, we actually saw on absolute numbers a little bit of cannibalization into the 2021 numbers of the MEDS apps, which kind of makes sense, right? But since it's all based on that, we actually see that as a one-time effect and something that we don't expect to repeat in 2022. That being said, when you look at those cohorts and you look at this value generated, you see that it's much stronger because it has better multi-monetization, First of all, we've seen the users come with a much higher intent towards building a business website. So we see an adoption of the higher price packages, almost on all of them. And also they're starting to generate GPV. The GPV is compounding also into the value of those websites and then to the value of the court itself. So it's much better monetization. And when we look at kind of that overall potential of all of the cohorts under our hood, that number has grown to well above $15 billion. It's roughly 15.7, I think, at this point, which is a huge increase. This is all, by the way, all of this is kind of the result of that evolution that Avishai spoke about, that investment into our products, into our users that has expanded our business and the fundamentals of our business significantly within these two years.
spk02: Great. And finally, net revenue retention for 2021 actually grew to 116% from where it was in 2020 at 113%. Just touch on what drove this. Well, you know, as I just mentioned, as you see monetization increase,
spk04: across the board within the courts. When we see ARPS going up, when you see the GPV going up, obviously you will also get higher quality of users that will generate more retention of revenues over time. But in fact, you actually see them staying longer because their businesses are more successful. So our expectation is that this is a phenomenon that not only is here to stay, but actually can improve over time even more. And again, it's through investment into product more than anything else.
spk02: Great. So now let's turn to financials, Lior. First, I want to talk about our results in Q4. We came in toward the lower end of our range for bookings and a little bit above the midpoint for revenue range. So talk just a little bit more about what happened in Q4 with our top line results.
spk03: Thank you everyone for joining us today. Just to remind you, when we provided the guidance for the year and obviously for the quarter, that was really the range that we saw at that time. When we look at revenue, we came in exactly how we expected, near the high end of the range. As for booking, About $14 million of B2B partnership that we expect to have were actually postponed for later this year. And as a result of that, we came in toward the low end of the range for bookings. It's very important to mention that with regard to the B2B partnership, still the year was very strong, more than $70 million in terms of bookings. And we said before, this is a lumpy business at the very beginning, and as long as we continue to increase the funnel of this business, it will be less lumpy in the future. And we feel very excited about it, because in the end of the day, it's part of the strategy, part of our partner strategy, and we already started to see the contribution in terms of number of websites, premiums, and revenue.
spk02: Let's move on to... 2022 now, so we're not providing annual guidance right now. Talk about why and talk also about what are we going to provide.
spk03: So I wish I spoke about it before, about the in-clarity, about the business, about the macroeconomics, and specifically about COVID. So we will continue to provide annual guidance when we have enough clarity to do so with the amount of confidence that we like. We are not in a place where we want to provide guidance just for providing guidance. We obviously want to feel comfortable about the numbers. We want to feel that we can actually predict the numbers. And we will continue to do so when we have more clarity. We see that there is a lot of volatility in the market today. And again, Abishai mentioned that a lot in the very beginning of this call. and giving us less visibility into our model on an annual basis. So for now, we are going to provide the guidance on a quarterly basis, simply because of the fact that we see much more clarity in the short term rather than the long term. And again, as usual, our guidance for the quarter reflects the range based on what we know today. Yeah.
spk02: Okay, so just really quick, just walk through specifically the guidance that we're providing for Q1 revenue.
spk03: Yeah, so the guidance for the first quarter in terms of revenue is $338 to $343, which represents a growth of about 11% to 13% on a year-over-year basis. Again, we need to remember that it's most difficult on a year-over-year basis comparable we face this year because the first quarter of 2021 was unusual strong quarter. So I do expect that for the rest of the year, the year-over-year growth of our revenue and the same obviously for bookings will be much higher than the first quarter. As for the new initiatives like partners and payments, We do expect to generate a much higher growth also this year as a result of the investments that we've made, and we've already started to see the fruits and the fact that it's started to become more profitable than last year.
spk02: Great. And gross margins and gross profits. So what are you expecting on the gross margin trends for 2022?
spk03: So with regard to the creative subscription, the growth margin, we expect to have a modest improvement in the second half of the year, as we mentioned last year. We will start to see the leverage of it. And by the way, this is one of the reasons why we expect the free cash flow to be better this quarter in terms of its margin, better this year than last year, and obviously, massive improvements in 2023 just because of that. As for the business solution, we expect improvement throughout the year. It means growth profit on the year-over-year growth will accelerate.
spk02: Great. And just to wrap up then, free cash flow. So we ended 2021 at about $52 million in free cash flow. That excludes the CapEx So that was 4% margin on revenue. We've obviously invested a lot into the business in the last couple of years, as you mentioned. So just talk about your outlook on the free cash flow going forward.
spk03: So, Joe, I think that this is really exciting because, at the end of the day, the way that I look at it is the same as when you invest – start-up cost. When you have a new company, you start to build the infrastructure, you're adding sales team, you are building the team to support the product. So at the very beginning, you have more expenses than income. And this is exactly what we had before, and this is why we thought that it makes a lot of sense to improve the infrastructure in order to support those new initiatives. You know, both Avishai and Nir mentioned the partners growing 3X in the last two years. We saw how payments is growing and I think that this is something that will continue and even accelerate. We already started to see the early results. We know that it's working. The numbers are keep on increasing. We started to see the leverage of those investments and we will see more this year and certainly next year. So this year we said that free cash flow is going to be about 5% of revenue And next year, probably, we are going to double it. And this all comes from a point that the massive amount of the investment has already been done, meaning that we will continue to invest, but not at the same level. So we are going to get much more of leverage. And think about it this way. The costs are not going to grow the same as the top line. The top line is going to grow simply much faster and higher, which will enable us to start to generate profitable growth in the second half of this year and certainly next year.
spk02: Great. Maggie, I'll hand it back to you to open it up for questions.
spk05: Great. Thanks, Joe. Michelle, I think we're ready to open up the line for some questions.
spk00: Thank you. If you have a question at this time, please press star then 1 on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. And our first question comes from the line of Yigal Arunian with Woodbush. Your line is open. Please go ahead.
spk10: Good morning. Good afternoon, guys. I want to dial into the growth initiatives, I guess particularly on the first self-creators and the agencies and It's great to see that growth in the partners and that right now it's still largely coming from agencies. Can we talk a little bit more first on the agency side, maybe dive a little bit more into the trends, the kind of agencies, if at this point in time there's an ability to kind of keep going about market to larger agencies and what that can look like in the coming year or two. And then on the self-creator side, obviously still a huge focus there. I believe I'm doing this the right way. If you back out the partners' revenue from total revenue, the self-created revenue, still strong in 2020, but, you know, decelerated materially over the course of the year. I think the guidance would imply that steps down again to one Q. I know there's a lot of trends from COVID, but maybe we could pull that out and talk about the overall health of the self-created environment as well. Thank you.
spk01: So let me, if I understand correctly, the first question was, to give more color on the type of agencies that we see at Wix, right?
spk10: And the opportunity, yeah, the continued great strength and just the continued opportunity.
spk01: Of course. I think that if you look at the type of agencies, we see it's very diversifying, right? We have a lot of the smaller guys, you know, what you would call a freelancer. There's a big portion. And then we have a big portion of agencies that are the ones that are building tons of websites, and of course notice them because they build a lot of websites and they do it very quickly and recently we're seeing more and more of agencies that are building very high end websites so things that are like campaigns for very big commercials or very big companies and we see a lot of those joining Wix now in terms of the potential we believe that the potential there is huge because we think that the This market is probably 10 times bigger than the self-creators, okay, overall. Of course, there's two sides to it, right? Because the more we add functionality and simplify the self-creators, we're going to get more of a bigger market in the self-creators. So that's one side of it. The other side of it is that, well, you know, a lot of people want to build a website, throw somebody in pain to do it, and obviously that goes to the second category. So we think that there is a very big, potential for growth here. Nick, you want to take the second part?
spk04: Yeah, absolutely. So in terms of the self-care, obviously it's still a very big focus of ours in terms of the product, which I just mentioned. And, you know, when you look at the growth there, okay, if you cover the growth of the year over two years growth of that specific segment, it grew 50%. 50% 2021 or 2019, which is a very, very healthy growth. Naturally, when you try to compare 21 to 20, where we have the tougher comp of 20, it looks like a slowdown. But it still remains a very healthy, very strong part of our business. And when we think about it going forward in terms of will it keep on growing faster, Let's think about what needs to happen for it to decelerate. It's one of basically two. Either people will steer away from needing to take their business online and move away from websites and transact less on the Internet, or alternatively, there will be some very massive change in terms of competition and somebody is going to capture our market share. Obviously, you know, we don't think the first is going to happen. We believe that, you know, when we see people keep onboarding their businesses online. And we haven't seen any significant change in terms of market share. In fact, we believe that we're gaining market share. So we are very confident that going forward we'll keep on expanding that business and growing fast.
spk10: Thanks. And maybe a quick follow-up for Lior on the free cash flow, just because right now in the current market environment, there's such a heightened focus on cash generation. And I understand the dynamics of investments kind of coming through, the margins improving over the next couple of years. If you look out to your 23 guidance on the margins, it's still nicely below where you guys were in 27 to 2019, right? whereas the margin was between 16 and 17% on revenue. Do you expect to be able to get back to those kind of levels, and what would it take to get there? Thank you.
spk03: So first of all, for sure, we are going to go back to this level. I think that there are two different ways to look at it. The first one is about in the past, We didn't really have the business solution, like payments, for example, which is with a low margin, right? So I don't think that I don't expect to have the same free cash flow margin from this type of activity. That said, if we exclude the investments that we've made for the last two or three years, we are certainly higher than 20% of free cash flow for the core business. and this is something that is really important to mention and very important to understand. I believe that what we have managed to do is to generate a funnel and opportunity to continue with a very healthy growth, and this is why we are going to see the leverage of those expenses, and for sure we are going to go back to the same level of free cash flow that we've been before, and I believe that we are actually going to exceed that.
spk10: Thank you, guys.
spk00: Thank you. And our next question comes from the line of Deepak Mativanan with Wolf Research. Your line is open. Please go ahead.
spk09: Thanks. This is Zach on for Deepak. First, just on the Q1 guide, can you just help us think about the implied kind of bookings growth in 1Q? And I know you called out the $14 million of B2B partnerships that was deferred out of 4Q. Does that drop into 1Q, or is that more spread out over the course of the year? And then second, on just transaction revenues, When you think about the drivers of growth this year, do you think the primary driver of growth will be better penetration of the existing merchant base or kind of new merchants kind of coming on to the platform? And I guess anything you can share just in terms of your expectations for GPV and transaction revenue growth for this year would be helpful. Thank you.
spk03: I think the first one is for you, Leo. Yes, so for the first quote and guidance, We are going to see that, you know, as you mentioned, the B2B partnership. I don't know yet if this is something that will be recognized or booked during the quarter or during the second quarter. And by the way, this is one of the reasons, especially around an uncertainty macroeconomics, to provide those type of guidance even for the next quarter. So to answer your question, I don't know. For sure, it is going to be postponed, right? But it will be recognized somewhere during 2022. I'm talking specifically about those missed deals from the fourth quarter. With regard to the transaction revenue growth, I do believe that GPV is going to have a significant increase during this year. But we prefer at this point of time, because of the uncertainty, not to provide the exact guidance. But as we mentioned before, we are going to report on it.
spk09: Got it. Should we expect GPB disclosure on a quarterly basis going forward? Yes, we are going to disclose it on a quarterly basis.
spk03: Perfect. Thank you.
spk00: Thank you. And our next question comes from the line of Clark Jeffries with Piper Schindler. Your line is open. Please go ahead.
spk08: Thank you for taking the question. First, a housekeeping item just to understand, Lior, what's embedded in the guidance between business solutions and creative subscriptions for the Q1 guide? Do you believe creative ARR on a net basis can kind of improve from here in Q1?
spk03: Yes, I do believe that it can improve. I mean, for sure, it will improve. Again, remember that when we talk about the creative subscription and you compare it to the first quarter of 2021, it's kind of difficult. But as I mentioned before, I think that throughout 2022, we are going to accelerate the growth both on creative subscription but also on business solution.
spk08: All right, understood. And then... You know, I think just if you could help us contextualize sort of the dynamics of the funnel and the creative side and, you know, what was lending to the volatility. Should we think of this as the conversions of users, the premium subscriptions, the journey of completely net new premium subscriptions or even just a broader traffic or interest level kind of an engagement overall at the highest level of the funnel just to help understand what was happening on the customer edition side in Q4.
spk04: So, hi, it's Nir. So I think it's mostly on kind of fluctuation around demand, uneven demand in the top of the funnel more than anything. A little bit of a slowdown on GPV in terms of commerce happening mostly in December, where some economies were starting to go into these kind of Omicron-induced lockdowns. If you look kind of at the conversion and the ARPS, those actually stayed very strong, as well as the mix towards the business and high-priced packages. So it's mostly about that kind of volatility. Again, I think the fundamentals remain the same where they were before.
spk08: Appreciate it. Thank you very much.
spk00: Thank you. And our next question comes from the line of Andrew Boone with JMP Securities. Your line is open. Please go ahead.
spk07: Hi, guys. Thanks for taking my questions. I want to talk about the macro environment and just how the macro environment today is different than kind of pre-COVID. So really my question is, is business formation slowing or is it really the conversion of long tail legacy businesses that have come online that's changing the macro environment growth rate? So the reason that I want to think about this is just as we think about the macro environment backdrop over the next three years, how do we think about that impacting results, right? Can business be driven by business formation or is it, is there still kind of that long tail conversion going on?
spk01: So, um, I think that what we're seeing is pretty much going back to normal, maybe a bit slower than normal, but what's happening in COVID is that you had a lot of traditional businesses that normally would not move. I think we spoke about Italian grocery stores, right? Like you would not ever imagine them having a website, and suddenly they had. And we saw it in many different kinds of businesses, right, not just in Italy. So what we had is that in 2020 and the first quarter in 2021, We have a lot of traditional businesses that normally would not need a website, suddenly needing a website and moving. And as COVID relaxed, this demand for those guys kind of disappeared or slowed down. What we do see is that if you look at the core kind of customers that we had in 2019, pre-COVID, we're seeing now those guys are, again, the vast majority of our customers. And we're actually in higher numbers than we were in 2019. So we think that it went almost, you know, back to the 2019 rate and then started to go up from there. So I think that the best way to look at what happened, at least in my mind, right, it's very hard to predict the future, but is that we had this single event, which is called COVID, right, which made it that everything went up, and as this event started to fade out, that the effect of that event has faded out, and we're back to where we were before, but with higher numbers, right? So I think this is kind of like how I look at it. Of course, you know, we know my ability to look at it is only from what we see at Wix, which is a huge amount of businesses, yes, but it's limited to that, and of course, what I read from other companies. I think pretty much From Netflix, right, to Shopify, to Spotify, everybody experiencing a very similar phenomenon where people were locked at home and had to solve that, and then, well, we're back outside now. Things are getting back to normal, and we're going back to the same kind of growth we had in 19.
spk07: Okay, that's very helpful. And then just to the follow-up is, as you guys move to commerce users that have more needs, Do you think the competitive environment changes? Like, is it harder to attract those customers? Is it more competitive versus kind of the lower end self-serve customers? Thanks so much.
spk01: So we don't see, well, you know, we came to commerce because people came to Wix and said, yeah, I want to build a shopping cart, right? I need a shopping cart on my website. Guys can give me a shopping cart, right? To remind everybody, in the beginning, our solution for shopping carts was Shopify, right? That was kind of like the thing we added. We offered them Wix. At some point, we realized that We need to build one of our own. This is becoming a real part of our business. We don't see any change in how people behave. It's not like we get less. I think we actually get more in terms of percentage. I would say a positive change. Of course, when it comes to shopping carts specifically, there is a giant in the room. There is an elephant in the room, which is Shopify. However, it's really good business for us going very quickly. When it comes to the rest of what we do in commerce, which is scheduling, booking, events, hotels, restaurants, we don't see any real giants, and they're going really, really well. And again, accelerating. Thank you, guys.
spk00: Thank you. And our next question comes from the line of Ken Wong with Guggenheim Securities. Your line is open. Please go ahead.
spk11: Great. I wanted to just circle back on the volatility that you're seeing. Obviously, a lot of moving pieces in your business now, but would you say that volatility leans more towards kind of the self-service? Is it just purely because B2B is so lumpy, or is it the payments now that is much more transactional now? Where is this kind of the visibility largely being clouded?
spk01: Well, we're changing everything, right? I'll start with commerce because that was the easiest thing. I think everybody saw that. December, of course, had less of e-commerce transactions than anybody expected in anything, in any company, in every market, right? So that was an example where our ability to predict according to what happened in October and November was reduced. We see it in the fact that we went back to, you know, if you look at last year, Q1 was the best ever, right, at 40-something percent growth, and then Q2 was not, right? And then Q3 was even worse than Q2, and then Q4 stabilized, right? But even there, it was above what was in 19. So overall, one of the things that we're trying to say is that if you look at the The volatility we describe is the volatility that makes it hard to predict. Because if we look, usually, you know, being the CEO of Wix and doing prediction was the easiest job ever. How many subscribers we had? How does the trend line look? Let's extend that. And we know where we are. It's not only there's external events that make that much harder. Because if the next Q, right, Q2, would be as strong as Q1 last year, of course, all the results would change, right? And if we're going to see another deceleration or if we're changing, all of that is happening without us changing anything in the product or our competitors doing anything, right? So it's kind of like trying to predict global economy and COVID trends, and we think that we are much better at predicting premium subscribers and GPV and less COVID trends. So that's why we felt that there is a volatility created by those events outside, and we have less of an idea how to predict that.
spk11: Thank you very much.
spk00: Thank you. And our next question comes from the line of Elizabeth Elliott with Morgan Stanley. Your line is open. Please go ahead. Hi.
spk06: Thanks so much for taking the question. I wanted to dig into the sustainability of the revenue per subscription. The 12% in fiscal 21 and 10% in fiscal 20 was certainly impressive. So just what's your view on the sustainability of double-digit growth in revenue per subscription?
spk03: I believe that it will be a double-digit growth in subscription also during this year, certainly during next year.
spk06: Got it.
spk03: And then... Yeah. And obviously, you know, some of the reasons, and we did mention before, the growth of partners. Partners are growing amazingly well. I mean, we provided some of the numbers, right, 3X over two years. And this is something that we believe that it's going to continue and even to accelerate. We need also to remember that commerce will continue to bring higher price up, GPV growth, some new other products that we are going to do. So all of it together causes us to believe that it's going to be a double-digit growth, and we feel very excited about it.
spk06: Got it. And then just a clarification. I noticed that you referenced that the take rate improved. I just wanted to get a sense for how that compared kind of versus your target for the 1.25, 1.3, and kind of what are the levers for incremental improvement going forward? Thank you.
spk03: Yes, it slightly improved compared to what we thought as we added much more functionality and integrations with payment providers. We were able also to penetrate to more geographic, more countries. So overall, it's improved the take rate. Again, and this is something that we believe that it's going to continue also this year.
spk06: Thank you.
spk00: Thank you. And this concludes today's question and answer session, and I would like to turn the conference back over to Maggie O'Donnell for any further remarks.
spk05: Thanks, Michelle. Thanks, everybody, for joining us today. Have a great day.
spk00: This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.
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