Wix.com Ltd.

Good day and thank you for standing by. Welcome to the WIC's fourth quarter and full year earnings conference. Full year, good day and thank you for standing by. Welcome to the WIC's fourth quarter and full year earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that this conference is being recorded. I would not like to hand the conference over to your speaker today. So this conference is being recorded. I would not like to hand the conference over to your speaker today. Emily Luke, please go ahead.

Thanks and good morning, everyone. Welcome to WIC's fourth quarter and full year 2024 earnings call. Joining me today to discuss our results are Abhishek Abrahami, CEO and co-founder, Nira Zohar, our president and COO, and Lior Shamash, 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 in our interactive analyst center on the investor relations section of our website, .wix.com. With that, I'll turn the call over to Abhishek.

Thanks, Emily, and good morning, everyone. 2024 was a fantastic year for Wix, marked by substantial growth and continued innovation that reaffirms our leadership position in the web creation space. We exceeded our plan quarter after quarter, showcasing our strong execution and deep commitment to users. In 2022, we set out an ambitious plan to achieve rule of 40 by 2025. I am excited to announce that not only have we now achieved the rule of 40 milestone, but the tremendous commitment and execution of our team allowed us to reach this target a full year ahead of our goal. Now, naturally, we're not going to just stop there. We're continuing to aim even higher in 2025 with new goals and targets. Impressively, we are now setting up to achieve the rule of 45 in 2025, which Leo will discuss in a few minutes. As we reflect on the past year, it's clear that our key product initiatives are yielding great results. We exited 2024 with bookings growth of 18% year over year, fueled by acceleration in our self-creators business and strong sustained partners momentum. Partners revenue grew a lofty 30% year over year. This growth reflects our continued success in winning share of the professional market, particularly among agencies, as well as the ramping adoption and strong enthusiasm for our studio platform. We now have over 2 million studio accounts that represent a vibrant community of creative professionals with over 75% of these accounts created by partners new to Wix. Feedback has been positive and engagement remains high, which are testaments to the value we are providing with our differentiated platform. Additionally, our self-creators business saw steady revenue growth acceleration through 2024, driven by growing tailwinds from our AI product suite. We introduced a number of new creation, marketing, and design AI tools last year. Notably, we also rolled out our AI website builder, our new generation AI site builder. This is the evolution of Wix Artificial Design Intelligence, or ADI, which was our first AI powered website creation tool introduced in 2016. The new AI website builder is the linchpin in our suite of AI products, and is revolutionizing web creation. Available to all users today, over 1 million sites have been created and published with the website builder. As I discussed last quarter, the AI website builder continues to drive demonstrably stronger conversion and purchase behavior as well. Looking ahead, I'm excited about the product roadmap for 2025. Our 2023 launch of Studio was a major landmark in our product strategy. With incredible reception and strong adoption, Studio has revolutionized web creation for professionals and has proven to be a key growth driver for our partner's business. This year, we're channeling that same enthusiasm and focus to reimagine the self-creator experience. We have two major products that I believe will change how self-creators build and grow online. The first will be a new solution that expands powerful design capabilities beyond just websites. We expect this to launch around spring. The second will be a transformative new way for self-creators to build their presence on the internet. This is planned for launch in the early fall. I strongly believe that these two products will drive tremendous value for self-creators and accelerate growth in this business to double digits. On the other hand, we also have a number of exciting new products and features planned for partners this year. We remain dedicated to evolving the Studio platform into the go-to canvas for professionals where creativity meets functionality. We will introduce new advanced design tools that will enable professionals to push limits and achieve spectacular and powerful results efficiently, ultimately driving further market share gains. This means that by the end of 2025, we will have an unmatched offering with two clearly differentiated and -in-class products for self-creators and partners. Finally, A, I remain the major part of our product roadmap. In December, we introduced our first monetized AI product, the AI Site Chat. This tool provides a 24-7 AI-powered chat between businesses and their customers, answering questions and directing customers to relevant products and services. In 2025, our focus is on AI assistance and agents. We've recently started to test our AI assistant in the Wix Business Manager, which adds a seamless chat interface to the dashboard. This chat guides users and helps to execute tasks such as creating bookings, purchasing domain names, and much more all from a single entry point. We are also currently in the early rollout phase of our specialized AI marketing agent. The marketing agent analyzes user website data to generate tailored marketing plans complete with actionable recommendations, content schedules, and SEO insights, helping users enhance online visibility and reach target audiences. We continue to test monetization opportunities as adoption and usage ramps. As we close out the year, I wanna reiterate our commitment to continually enhance our platform and make online creation management and growth effortless and impactful for all our users. Thank you for your ongoing trust and support. With that, Nir, over to you.

Thanks, Avishai. We achieved impressive bookings growth of 15% in 2024, with growth accelerating through the year, which Lior will discuss in more detail shortly. Our incredible performance was underpinned by robust business fundamentals and fueled by successful execution of our strategic priorities. Over the past couple of years and through 2024, our strategic focus has been on onboarding higher intent users with greater lifetime value, as well as maximizing the lifetime value of our existing user base. We executed on these mandates by shifting towards a more targeted marketing strategy beginning in late 2022, addressing the more sophisticated needs of professionals with the introduction of Wix Studio last year, our cornerstone partner product, building out our comprehensive and best in class suite of AI capabilities to make the website creation experience more frictionless for everyone, expanding our commerce capabilities through new verticals, a growing base of Wix payments partners and enhanced payment solutions and offerings. These engines drove take rate in 2024 to increase over 10 basis points compared to the previous year. And finally, regularly aligning the growing value of our platform with the price users pay. Successful implementation of these initiatives are reflected in the strong business fundamentals achieved this year. First, the 2024 cohort performed exceptionally well. Our Q124 user cohort generated approximately $61 million in cumulative bookings through its first four quarters. This is only second to the Q121 cohort, which benefited significantly from COVID tailwinds. Recent performance was particularly impressive given the smaller user base of the Q12024 cohort compared to previous cohorts as a result of continued execution of our streamlined marketing strategy. Additionally, average bookings per subscription or ABPS increased 13% year over year to more than $294. This step up in monetization was driven by the continued shift to higher tiered packages, increased adoption of business solutions and compounding GPV as we onboarded and retained high intent users such as commerce oriented users and more upmarket partners. ABPS also benefited from the price increase implemented earlier this year, which was absorbed better than historical increases. Another testament to the improving quality of our user base over recent years. At the same time, continued product innovation boosted conversion across both self creators and partners. Throughout 2024, we introduced and expanded the integration of AI across our onboarding process. Most new users today are creating their websites through our AI powered onboarding process and website builder, which is leading to a meaningful increase in conversion of free users to paid subscriptions, particularly among self creators. As we innovate best in class products to provide users a seamless and intuitive creation experience, we believe conversion will continue to improve. Given these solid fundamentals, we now expect existing user cohorts to generate $18.4 billion in bookings over the next 10 years, assuming consistent cohort behavior. This is a significant increase compared to the $16.2 billion estimated in last year's model. The improvement underscores the high quality of users brought onto the platform in 2024, as well as the tremendous increase in value of our overall user base over the past year. Finally, existing cohort behavior improved compared to the prior year, demonstrated by net revenue retention increasing to 106% in 2024. We expect our growing product offering and continued ability to attract partners and larger commerce users will increase revenue retention going forward. Our initiatives in recent years have undoubtedly shifted our base in favor of higher intent users, such as partners and commerce users. This dynamic has been meaningfully accretive to our business as demonstrated by the strong top line growth achieved in 2024. We expect this positive momentum to continue into 2025 as we drive our strategic initiatives forward and innovate to add new layers of long-term growth. With that, I will now hand it over to Lior to walk through our financials and outlook. Lior.

Thanks, Nir. We wrapped up a fantastic 2024 with strong growth and profitability, driven by successful execution of our product roadmap and pricing strategy, as well as strong business fundamentals. Outperformance on all fronts put us squarely above the rule of 40 for full year 2024, a significant milestone for weeks as we outperform the Zenith targets of our three-year plan. Still, we are maintaining full speed ahead and are targeting rule of 45 on an as reported basis in 2025. Before walking through 2025 outlook, I want to quickly summarize our Q4 and full year 2024 results. Bookings and revenue growth both accelerated for a fourth consecutive quarter, driven by strong execution of our key growth initiatives, studio AI and commerce, as well as continued benefit from the price increase implemented earlier this year and the positive demand environment in Q4. Total bookings in Q4 was $465 million, up an incredible 18% year over year, driven by strong creative subscriptions performance and an acceleration in the business solution segment due to robust adoption of business applications, particularly Google Workspace. We began to experience elevated FX volatility late in the fourth quarter, continuing through the new year, which resulted in a modest negative FX impact in Q4. Excluding FX, total bookings was over $466 million in the most recent quarter, which was at the top of expectations. Total revenue in Q4 grew to $460 million, up 14% year over year, driven by continued acceleration in our self-creators business and sustained partner strength. Partners revenue grew 29% year over year to $168 million in Q4 as we onboarded new partners. Studio adoption remained strong and partners increasingly attached business applications and compounded GPV transaction revenue in Q4 was $57 million, up 23% year over year, driven by a 12% year over year increase in GPV and a very meaningful year over year step-up in take rate as we expanded the Wix payments platform. In the fourth quarter, we saw slightly lower GPV growth across some of our services' verticals compared to our initial expectations. We believe this was due to Christmas falling in the middle of the week in 2024, which drove many service-focused merchants to stay home and celebrate with their families the entire week, resulting in fewer selling days for those merchants. GPV was also impacted by the FX headwinds that arose late in the fourth quarter. Adjusting for FX, GPV was up 13% year over year on a constant currency basis. These situational GPV headwinds drove transaction revenue to finish lower than expected in the quarter, which had immediate impact on bookings and revenue in Q4. Turning to margins, we were able to drive continued margin expansion and increased profitability as we kept our costs stable, resulting in better growth and operating margins. We exited the year with free cashflow of $132 million in Q4, or 29% of revenue, moving on to 2024 full-year results. Total bookings in 2024 grew to $1.830 billion, up 15% year over year. Total revenue in 2024 was $1.761 billion, an increase of 13% year over year, with creative subscriptions ARR of $1.343 billion, as of the end of the year, up over 13% year over year, non-GAAP operating income margin expanded to 20% of revenue in 2024, an increase of nearly 450 basis points compared to 2023, as we maintained a stable operating cost base amid strong top-line growth momentum. Notably, GAAP operating income was $100 million, or 6% of revenue. This marks the first year of positive GAAP operating income in Wix's history. We generated free cashflow of $488 million, or 28% of revenue, and above the high end of our expectations. This is nearly double the free cashflow generated in 2023, and a testament to our focused cost management, as we drive sustained growth momentum, turning now to my thoughts about 2025. Following a standout 2024, we expect another year of robust growth, powered by the existing key product initiatives you're familiar with, as well as other ongoing product enhancements against a positive demand environment. First, Studio continues to capture market share of the professional community, and AI usage and conversion benefits continue to ramp as our offering suite grows. We're encouraged by the trends we see today, and so we anticipate these products will be even bigger growth engines in 2025. Second, we have a number of product enhancements and new strategic initiatives slotted for 2025, many of which we have already rolled out or tested. We are seeing these enhancements and initiatives already delivering value to users today, which we expect to translate into direct ARPS and conversion tailwinds this year. We expect top line contribution from those enhancements and initiatives currently underway to increasingly layer in as we progress through the year, as it typically does in a subscription business model like ours. As a result, we expect bookings and revenue growth to accelerate in the second half of the year. This anticipated acceleration in bookings is particularly impressive as we fully lap the price increase benefit midway through Q1 2025, while we'll continue to see revenue tailwind through the entire year. I want to know that we are factoring almost no contribution from the new products you just heard about from Avishai into expectations. While I am confident these new offerings will drive medium term growth, we do not plan to include them in Outlook until they are fully launched and we can build better expectations around the early usage data. Finally, before I turn to the numbers, I want to remind everyone that as a global company with approximately 40% of revenue derived outside of the US, we began to experience adverse impact from outsize volatility in FX rates in the beginning to mid Q4, which has continued through the new year. Assuming late January spot rates, we anticipate strong FX headwinds to our 2025 Outlook. So we will be providing guidance for the full year and first quarter on both as reported and constant currency basis. For the full year, we expect total bookings of 2025 to 2016 million dollars on an as reported basis, up 11 to 13% year over year. We expect an FX headwind of approximately 45 million dollars for the full year following changes in primarily US dollar to euro and British pound exchange rates. We expect total bookings growth of 13 to 15% year over year on a constant currency basis. We expect total revenue to be 1,970 to 2,000 million dollars on an as reported basis, up 12 to 14% year over year for the full year, excluding an estimated approximately 34 million dollars of negative impact from FX. We expect total revenue growth of 14 to 16% year over year on a constant currency basis. We expect total revenue in Q1 2025 of 469 to 473 million dollars on an as reported basis, up 12 to 13% year over year. We expect total revenue growth of 13 to 14% year over year on a constant currency basis. Following the meaningful operating leverage generated over the past two years, we remain focused on managing a stable operating cost structure in the year ahead. As such, we anticipate top line strength to flow through to improve profitability in 2025. We expect non-gap total gross margin to improve to 70% for the full year. Most of the anticipated margin improvement is expected to occur in the back half of 2025 as a newly implemented AI cost initiatives drive incremental efficiencies across our care organization. We also expect additional operating leverage with non-gap operating expenses anticipated to be 47 to 48% of revenue for the full year. This year, we expect to pay cash taxes of approximately 40 million dollars following the full utilization of our NOLs in 2024. We also anticipate CAPEX of approximately 13 to 15 million dollars or approximately 1% of revenue in 2025. This translates to free cashflow expectations of 590 to 610 million dollars or 30 to 31% of revenue in 2025. While FX is anticipated to be a headwind to our top line as I discussed earlier, we are modeling a benefit from the strengthening of the US dollar on the expense line. With a significant portion of our operating expenses, particularly payroll denominated in non-US currencies, we expect a 25 million dollar net headwind from FX translating to 31 to 32% free cashflow margin on a constant currency basis in 2025. The high end of our revenue and free cashflow expectations positions weeks to achieve rule of 45 in 2025, a new milestone target that underscores our relentless focus on driving both growth and profitability improvements on top of the incredible progress made in recent years. Finally, I want to touch quickly on capital allocation plans for the year ahead. Our 575 million dollar convertible note comes due in August, which at this point in time, we plan to pay down with cash. Nevertheless, we remain committed to returning value to shareholders and responsibly managing dilution as demonstrated by the completion of our 200 million dollar share repurchase program earlier this year. We were able to repurchase approximately 868,000 shares or .5% of outstanding shares. We expect strong free cashflow generation in combination with our careful focus on share count management to translate to higher free cashflow per diluted share in 2025. We have many exciting things planned for this year and I look forward to the new milestones on the horizon. Operator, we're now ready for questions.

Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star one one on your telephone. If your question has been answered, you were seen with yourself from the queue, please press star one one again. We'll pause for a moment while we compile our Q&A roster.

Our first

question comes from Yigal Aronian with Citigroup. Your line is open.

Hey, good morning, good afternoon, guys. Great to see the results continue here. Maybe just starting off on the 2025 guidance and acceleration over the course of the year. I know, Lior, you mentioned some of that, but if we could dive into it a little bit more on the various components that drive that series and the strength over the course of the year, particularly given the comps in the second half get much more difficult and then have a follow-up.

Hi, guys, this is Lior. Yes, you're absolutely right with regard to the comp and I think that this is what even make it much more exciting. I think that, you know, take for example, studio, right? Or take partners as a whole, you know, they're growing faster. And we know, you know, based on every other SAS model that as long as you go and progress into the year, you're getting more and more impact from those new codes, definitely when they're growing faster. So this is one, we see that studio is going to be a major contribution. Actually, today we see that studio is, for the new code, is about 50% of the overall partners code, which make it even more exciting. The other stuff is obviously about AI. We see the impact of AI increasing conversion as long as it's progressing throughout the year, we see more and more impact of this conversion on the numbers. So this is mostly the effect of the new product that we've launched in 2024 and we are seeing more impact on the second half of the year as a result of that.

Okay, thanks. And there's definitely a lot to ask about product-wise, but maybe just, because I've been getting this question a lot more lately on the payers side, on the premium subscriber side and growth in that number. I know in the letter you kind of highlighted some of the year-rear comps and factors that got that number to decline -over-year slightly, but just, given the commentary around better conversion from all the products that are coming through, can you talk about how you think about the premium subscriber number, how investors should think about the growth opportunity there? If users are growing, total users are growing 7%, you're getting better conversion. Theoretically, the paid number should be, this year, next year, should be growing faster than that. How should we think about that? Thanks.

Hey, guys, it's Mir. So I think you know that in the last few years, we de-emphasized NetSubs as a specific API in terms of importance because we made so much more focus on the cohort value, both on the signal level. So if you look at, for example, the Q124 cohort that we published, you can see it's our strongest non-COVID cohort with $61 million of cumulative bookings. But also, if you look on the longer terms, if you look at the table we published for the 10-year projection, the value of the aggregate bookings of those existing cohorts is significantly higher. It moved from 16.2 billion last year to 18.4 billion this year. It's a very significant increase. So when we come to determine our business goals and actions, the NetSubs is really a secondary factor and a secondary KPI, not the main one. That being said, I do believe that we had a very, we kind of elaborated on the headwinds that we had in 2024 from that perspective. In fact, I would point out that the actual result is slightly better than we expected, simply because one of the things we factored in is what will happen in a price increase. And when you do a price increase, you do see a heightened loss of subscriptions that are more sensitive to price, usually the lower priced one. And we ended up having a result that was better than the initial model we put in place. So that's why it's actually better than we thought it was. All that being said, when I look at 2025, again, we're not gonna project and we're not guiding for that number, but we do believe we're gonna see a positive trend on the NetSubs.

Okay, very helpful, thank you guys. One moment for our next question. Our next question comes from Elizabeth Porter with Morgan Stanley, your line is open.

Great, thank you so much. It sounds like there's a really exciting slate of new products for 2025. And I wanted to follow up on the first comment about a self-creator solution that expands design beyond websites. Is it possible to help us just unpack what that could look like? What interfaces are you able to address outside of websites? And if so, what are the best ways to do that? And also, what gives the confidence and the right to win on potentially new interfaces? Thank you.

Wow, I think it's a lot of questions and a lot of them require details that we're not yet revealing. Because I think, let me say a couple of things. When you build a website, a lot of the time you wanna take the content that you have and push it to other places. For example, you wanna create an Instagram ad or Instagram story. Or you wanna create things for your customers, right? And so this requires you to expand your design capabilities, take the content that you have into new formats. And the new product, we're trying to address that. It also, of course, allows us to capture audiences that are normally not starting at Wix, but would wanna save those kind of intents. Why? So I think that that is the number one motivation behind this product is the fact that we already have a lot of people that need those kind of capabilities. Saying that, historically we've seen, I think we've shown many times that we, we can do a really good job when it comes to tackling very hard user interface and creation processes and simplify them to a way that they become reasonable for the vast majority of people. And I mean, this is the bigger challenge when it comes to how to do those things today. So a lot of it is very similar to what we believe is our core capabilities as a company, which is making something that already exists, like HTML, right, always exists for website creation, but making it accessible to a lot of people because we can make a much better creation experience. Now, if you combine that with everything else that's happening today in the world when it comes to user interface combined with AI, I think that we have something that I'm very excited about. Of course, you know, we're gonna have the first version and then we're gonna have an additional, again and again, versions, but I'm very excited about. There are few people that have seen it already that are more on the level of a user than professional technology guys. I'm also very excited about it. So we'll have to see. It's not that far. So hopefully we're gonna see very soon.

Great, thank you so much for that extra color. And then just as a follow-up, I wanted to ask on the cost side, one of the factors you highlighted was gross margin expansion with a benefit from AI integration across customer care. We'd love to just understand more at a high level what you're seeing internally with the use of AI and how that can expand the cost structure. And at a high level, would you look to reinvest those savings for faster product development or is that something that's more likely to flow through profitability?

So, I would start with the second part of the question. So definitely we are going to see this benefit going down to the free cash flow. By the way, this is why we see the expansion of the overall margin in 2025 as a result of that. Very important to mention, this is something that we are going to see mostly the second half of the year. And it's actually accelerating, meaning that those plans are already been taken. But we are going to see the full effect of it in the second half of the year.

Got it, thank you.

One moment for our next question. Our next question comes from Deepak Vathavanian with Canterford-Sherald, your line is open.

Great, thanks for taking the questions. I'll ask two product questions. Obviously I know the agent products, assistant and marketing tools are kind of still in the early test phase. Can you give us some color on how people are sort of using it in the early days? And beyond these two products, what do you think is the right roadmap for 2025 when it comes to agents? Clearly considering these are products with potentially higher monetization. And then on Studio, can you expand on what you're seeing with designers and developers who kind of used Studio in the early days? Are they seeing sustained increase in sort of efficiency gains in their processes as they have used it maybe for six to 12 months now? Any color you can provide on sort of like the comparable KPI should be great. Thank you so much.

Of course, so the first part was about AI agents. So we released two AI agents that we monetized. We actually have more, but two that we monetized. The first one is the bot or the chat for our customers' websites, right? So if you're a weak customer, you can now install a chat, AI power chat on your website, and this will handle customer requests, product inquiries, and support requests. And again, it's very early in days and preliminary results, but it looks very promising. I mean, if I had a website like that today, I would actually be very excited about installing it. It seems to be doing a really good job in helping you get better results for your business. And of course, you have to see the fact that it's very effective doesn't necessarily mean that we're gonna get a huge amount of users that wanna install it, right? That

should make sense,

but it doesn't always work like that. It's a subscription monetization that we have on that, and I think the product is very cool. It's really worth taking a look at it if you didn't. The other one is a marketing mastermind that you hire to your website, right? And I think this is, again, for a lot of our customers, provide tremendous value because it does work better than most of what agencies or definitely users would be able to do by themselves. It analyzes your SEO plan, it analyzes your ads, how to run the right ads, what are the right ads, and then it helps you manage them. The result, of course, is the ability to attract more traffic to your website, and because of that, sell more and be more successful. In terms of long-term strategy, I believe that the concept which we have now is a good concept where we allow users to

have,

to kind of like hire an expert to the website, right? So the marketing expert or the support, customer support expert and HR to the team of their business, right? And I think that is a very good way to present it to our users. It also, when we think about a product, help us focus a lot about which one of those agents is doing, right? And I think that is a tremendous value. I think that was the question, right? Oh, about studio, we had another question about studio. So what we're seeing on studio is the fact that for agencies, it's streamlined, they work. Today, if you want to create, for example, a WordPress website, usually you go to some design tool, design it there, then start copying things. They have another guy that does all the CSS and all the HTML coding, they have another guy that does actual coding and installation, all those things, you don't need them. You just go to studio and design a website, and you have tremendous power and capabilities in how to do that. You don't feel like you're programming. You don't feel like you're confined by a lot of technical tools. It really feels more like a design tool than a website building environment. But the result, of course, is a website. But because of that, we see two things that, we get two kind of feedbacks. One is that our agencies are able to create better looking websites, right? And this is a big part of the value they want to provide to their customers. The second part, of course, is that they don't need this long cycle for every change that they want to do. And that, of course, increases their efficiency. So they get better efficiency and better results. So we think that's a great deal, and I think that is a big part that, of course, this product is growing so fast.

Thanks, O'Shaugh. One moment for our next question. Our next question comes from Josh Beck with Raymond James. Your line is open.

Yes, thanks so much for taking the question. I'll just make it a two-parter. So on Studio, how would you delineate the momentum with the core editor versus the product and the workspace as in, is the Studio editor pretty much where you'd like it to be from a product point of view? And then, secondarily, on the GPV, I think you mentioned that partners' contribution has risen from 45 to over 50%. So is this something that could continue and potentially lift up GPV over time? That would be great.

So I'll take the first part of the question, and then we'll take the second one. Is the Studio editor where I want it to be? The answer is no. I have so many more things I want to do there, and I think the roadmap there is super exciting, and I think even at the end of this year, it will not be where I want it to be. There's much more we can do. Is it where realistically it should be? Then the answer is yes. I think the team is doing a really good job of executing and building and innovating and adding new things to the product. So I'm very happy with the R&D speed. I'm really very excited about what we can do in the future.

And it's worth to point out, also kind of just rehashing the time frame. We're talking about, you know, it was released in open to the public in October 23. So essentially we're talking about 15 months of it being out there and live with more than two million accounts now on Studio, and essentially 75% of those are new partners on Studio. So it's definitely becoming the prominent solution for our partners' demographic, and we are very, very happy about it. To the second part of your second question about the GPV or the partners' GPV, which obviously they're quite well connected, as we see ongoing growth of usage by partners, naturally they build the bigger websites, the websites that also drive more and higher GPV. So the uplift in terms of their proportion of the general GPV of the company continues to grow, but their piece of that pie also increases all the time. As we noted, it is surpassed the 50%, and our expectations looking at the growth trend for their piece of the pie to continue to increase, and essentially also help drive the overall GPV upwards in total.

Very

helpful, thank you. One moment for our next question. Our next question comes from Andrew Boone with Citizens, your line is open.

Thanks so much for taking my questions. I wanted to ask about the visibility into achieving double-digit self-creator growth. What do you guys need to do to be able to achieve that level, and then talk about just kind of timing there. And then secondly, more of a strategic question. AI is allowing Wix to expand into new product categories, like customer service with AI site chat. Can you talk about just AI more strategically, and how it is allowing you to expand into new product categories, and how do we think about that over time? Are you guys limited in terms of what you guys may offer for SMBs? How do we think about the expansion of the category in the TAM as we think about AI unlocking new products? Thanks so much.

Well, I think that, maybe Leo, you wanna take the first part, and then I'll- Yeah, I will

take the first part about the self-creators. Let's take, for example, what happened in 2024. We saw the acceleration of bookings. And it was part, also not just because of part of the studio, but also because of the different initiatives with self-creator. We definitely understand, we know, that while we are introducing more technology and more capabilities, we see that we have better conversion, but also increasing the output. We are not modeling right now double-digit growth for self-creator in 2025, but we definitely believe that we can achieve it in 2026 based on the new product that we are going to launch.

As for the second, sorry. As for the second question about AI, I think that, we released our first AI product in 2016. ADI was the first time, I think, anywhere there was a generative AI that actually allows consumers or users or small businesses to do anything, probably also for enterprises. And you could create a website just using very, very simple prompts. And so, of course, already then, AI allows us to increase our market share. Obviously, in the last couple of years, where things became more powerful, we can do more with that. And things like the website chat, the support for our users' websites, agent and the marketing agents, are, of course, examples of that. And I think there's a lot more that we can do there. And I believe that that is one line of expansion of functionality we will see. I do also believe that this is the most trivial, the more trivial kind of line of thinking about it. And in 2016, I think we surprised everybody by doing what we did. I think there's a lot of new things we can surprise the world with and additional initiatives that we can create. I don't believe that if you look forward, right, into the future, if you look five years into the future, websites will look and feel the same. I think there's a lot more we can do now. And I also believe that Wix is probably the best company in the world in terms of positioning and technical capabilities and product capabilities to enable small businesses to achieve everything they need to be ready for how websites and how the internet will look in five years from today. And there's a lot of discussions about it, a lot of theories about it, but I really believe that the opportunity there is bigger than anything else because why we have today gonna continue to dramatically evolve into something that is probably more powerful and more enabling for small businesses to be successful. Overall, the internet has a tendency to do it every so, every 10 years or so, right? In the 90s, the internet started and became HTML, then it became images and then later on videos, and then it became mobile, right? And I think then it became interactive, everything become an application, kind of an application. And I think how website will look in the AI universe is the next step and I think there's a lot of exciting things we can offer our users there.

Thank you. One moment for our next question. Our last question comes from Brent Thill with Jeffrey Jelani-Zilpin.

Hi, thank you, this is John again for Brent Thill. Two question on the free cash for margin expansion, pretty impressive increase in this year, but what will be the biggest sources in leverage beyond the gross margin expansion? So, the first question is about the gross margin that you mentioned earlier. And then, what's the about the top of funnel, how that's looking, whether you're also seeing the usual start of the year with a bump in activity? Thank you.

So, I will start with the first part of your question and you will answer the second one about the top of the funnel. So, we have a few, actually, mostly two reasons. The first one, as we mentioned before, is about the gross margin that is actually improving by one point. We also see more leverage in operating expenses and we can see that also in our guidance for the overall savings that we have over there. But we are guiding to approximately one to two points of operating expenses leverage as a percentage of revenue. Let's remember that in dollar, we actually increasing the cost. For example, those new products that we are going to launch in 2025, I definitely took into consideration that I will need more marketing budget in order to support it. Despite of this fact, I do believe that we are going to see one to two points of leverage also as part of the operating expenses. This is most of the reason why we are going to see the improvement in free cash flow.

Brent, in terms of your question about the top of the funnel and what we're seeing, and I think we made some commentary about it as well in Q4. So, I think we're, I would say we are happy to comment that we are seeing positive trends. Naturally, we have no ability to predict the rest of the year, but you're very, very, very, very, very, very, very, very, but at least for now, we're seeing a positive trend. And we continue on our strategic marketing effort, which is monetizing and prioritizing towards high intent users, which I think you've seen us perform very successfully can be clear testamenting what you see in terms of the core value, the 10 year core value, as well, by the way, is an increase in net revenue retention over time. It's increased a bit more modestly, but from 105% to 106%. And also the increase of the ABPS, which is kind of our equivalent to ARPU that rose 13% year over year. So I think from that standpoint, it's a good indication and one that we have the right tools to capitalize on for 2025. It will be interesting to see how all of the new releases of these new products that Alvishai is hinting towards will impact that going forward, but that's gonna be kind of much further down the year.

Thank you. Thank you, ladies and gentlemen. This concludes today's conference. We thank you for your participation. You may now disconnect and have a wonderful day.