Conference Transcript - WIX 2026-05-27

Operator

Welcome back. Lira is with us from Wix. Really appreciate you making the trip and sharing your thoughts and what's happening in the industry. We were just talking about what was going on and kind of the overall sentiment in the markets and what's been happening. Maybe we'll talk about that. But the whole industry is kind of being punished right now with this terminal fear of what AI is going to do. And when you think about what you're doing as a management team to kind of get in front of this, and it seems like you're doing the right things, you know, with Base44 and what you're doing inside the core platform, maybe just talk to us about your thoughts.

Avishai Abrahami, CEO

So, yeah, first of all, you know, thank you for having us here. I think that it's a fair question because I can understand the fear because people might assume that in the future, we don't know that, that all the SaaS companies will be replaced with AI Salesforce Wix, Monday, ServiceNow and so on and it's a true concern I mean we see right now with base what people are capable to build. Okay, I'm using base to build all kind of workflow management, you know, like with my SOX compliance and so on that replace other SaaS companies. We can elaborate about it a bit, but it's a true concern. I think that in the end of the day, what is important, and your question is super important, what we as a company do in order to manage it. I think that there's no point to say there's no impact on our business because it's not true there is impact on our business there is impact of AI of every other SaaS company business but I think that the most important thing is to embrace this change and actually to deliver more growth so let's think about I don't know, there is like three scenarios I can think about one, everyone is going to use all kind of AI or Vibe coding tools LLM models in order to build any kind of application. It includes all the integration and everything that we can think about. If this is going to happen, so this is why we bought a base. Base already have about 40% of the U.S. market for non-professionals looking to build applications. Much more than LavaBold and Replit and so on. And we talk about it and it's exploding. Second option, LLM cost will continue to be so high that this model is not going to fly.

Operator

So we are back to where we were before.

Avishai Abrahami, CEO

Option three, which I assume that it's more realistic, that it will be a combination. Some of the people would like to use Base44 to build websites. Some of the people will still want to use Wix. Because it has much more rich platform, much more capabilities, and also the drag-and-drop experience. Think about it. If you use today LLM or any kind of AI model to build your website, how much money are you going to save compared to Wix? Second, every time that you want to change something, you need to prompt again. You don't have the drag-and-drop experience, which is really easy to do. So I think that in the end of the day for us for weeks, we are preparing for every given scenario. And I think that we need to make sure that the combined company is growing. You can create a website using base. You can create a website with a drag and drop with Harmony. This is why we call it Harmony. It's a combination between vibe coding and drag and drop. And it's okay. But what is interesting, by embracing the technology, we actually increase our time significantly for people that are coming with an intent not just to build a website, but to build all kinds of applications.

Operator

And I think, thanks for the refreshing view that there is an impact. And it seems like, I mean, to your point, base is, there's an impact, but you're backfilling, and you had $150 million of base 44 ARR, and you had a 46% jump in new cohort bookings. You had mid-teens top line, yet we kind of have a stock reaction that signals like, hey, it feels like, you know, you're going out of business is what the market's implying. I mean, it seems overly harsh from my perspective. But what is...

Avishai Abrahami, CEO

Well, again, I think that people need to look at the opportunity. And every time that I'm talking about the cost, yes, we increase the cost significantly. It's the first year. I mean, think about a SaaS model. Okay, let's think about a software model, not just a SaaS model. The first year, let's assume that you have a company with $100 million of collections, of bookings. You have 50% of gross margin. And you have 12 months of TRY. So it means that by definition, in the first year, you're marketing equal to top line. So you're losing about $50 million.

Lior Shemesh, CFO

What's happening in the second year?

Avishai Abrahami, CEO

The second year, you're going to have all the renewal. from the first year. And then you spend the marketing to bring the new traffic, meaning that the second year already margin improves significantly. What we need to make sure that we are talking about a healthy business. From my point of view, what is a healthy business? If I'm investing money in marketing, in advertisement, remember that we are doing it for the last 20 years, with an ROI of up to 12 months, taking everything into consideration, including the churn and so on. So it means that I'm already profitable in the second year. So this is one. I think that every time that we are looking at this TRY model that we are implementing also for Wix, it's working for us great. We know how to do that. So the only KPIs that we need to make sure that we comply with is this up to 12 months of ROI. By the way, in the future, it will be like weeks, five to seven months while you increase conversion and you improve the brand. The second thing is about the growth margin, and we can talk about it. But I do believe that we see the improvement growth margin. We did mention last quarter that we're already at around 30% when you compare it on bookings, and it keeps on improving. I do believe that it's something that is going to improve significantly, and I can explain the reason why, but let's see what we did with Harmony. We developed our own propriety LLM model. We took down the cost to about 5% of the cost that would have been paid with a third-party LLM model. So we are super innovative. We understand how to do that, and we already started to optimize the profit with the margin, with base, I definitely believe, I don't know what is going to happen in a year from now or two years from now, but I do understand and do believe that we are doing the right things, and I do believe that this business is going to be profitable. Yes, this year is not profitable, and we said that we are going to invest money mostly in sales and marketing in order to make sure that we can answer the demand. And we need, we want to make sure that in a few years from now, we can provide the full experience to our customers, including AI capabilities, including product. But more importantly, we have increased the time significantly. And I do believe that it's going to generate much more growth for us in the future. the um the big question we get is um you know base 44 is really exciting but there's so many of these tools that are merging and how do you know the investments you're putting in are going to be the right ones uh and help really differentiate base well we see the growth we see the usage i think that uh you know we see what people are building today and you know the And we already mentioned that BASE is about 40% of the U.S. market based on the similar web reports. And why is that? I think that BASE provides you with an amazing experience with a lot of capabilities, mostly about back-end. So it means that even when you compare it to other platforms like Lavable, you're able to be the really sophisticated, complex applications. Everything around CRM, management tool, productivity tool, dashboard that you can do, you use it for your own use or use it for your corporate. You see also big corporates that already started to use Base. What is interesting is that you really can do many, many things that you couldn't do before. And I can tell you from my own experience, you know, for example, for Wix, I use Base right now, and we develop a full SOX compliance workflow management, okay? And we did it within a couple of weeks. It means that I'm going to save about $60,000 or $70,000 from what I'm paying right now to the other SaaS software that we are using for SOX compliance. But what is interesting, Base is truly an amazing platform that enables many, many people to use for so many use cases. We just launched the super agent. So I created a virtual PA that's helping me managing my calendar, answering email, sending me a task to do, and I'm communicating with her through WhatsApp or Telegram. um so there's a lot of productivity tool that you can do with base and base truly provide with so many options for you as a corporate but also as an individual and this is why we see this kind of growth coming from all places not just for individuals but also for big enterprises that using right now um base uh you know for their needs the um on the capital uh allocation you repurchase 30% of your shares for 1.6 bill and it put you into a net debt position on can you just talk through you know going forward how you're thinking about the capital allocation yeah so let's start why we did it it is unusual to buy one third of the company I think that you know we I was in the in In other conferences, already in December, talking about the fact that we need to invest in our business, in our growth. And we said that we are going to invest more in sales and marketing. And obviously, there's also the cost of the AI. And yes, this year, we are not going to make $650 million in free cash flow. We are going to make just around $400 million. but not all of the shareholders feel really good about it many shareholders actually invested in weeks as a free cash flow story this year we are going to make less cash why? because we need to invest in our growth in our future in order to deliver more cash in the future, this is exactly what we are planning to do and we said okay that if we are willing to provide those shareholders the ability to sell the stock if they are not happy with the direction that we are going. And it was a strategic decision to do it, and I think that it's the right decision. Having known that the stock will go down after the first earnings, the way it was down, yes, perhaps I will do it gradually. but the decision to buy one third of the company coming from a place that we need that we know that we need to invest we are thinking about the long term and it's fine, not all of the shareholders feel very good about it so this is the decision that we took I believe that we will continue to generate a lot of cash this year we are going to generate $400 million next year we are going to generate much more than that and the plan is to generate the same amount of cash that we use for the buyback within the next two and a half years. Most of the debt is going to be returned in four years from now. It's for the converts. So I don't feel that we are under any pressure. We don't plan right now like a big M&A. When you think about it, most of the companies that would like to buy today they are very small like base. We are not talking about big companies. So in terms of capital allocation, I think that we are in a good place. I think that the decision to do the buyback was the right one. And we will continue to generate a lot of free cash flow.

Operator

And the durability keeps coming up, but your signals of the durability, maybe just explain why you're so confident that cash flow rebounds. what?

Avishai Abrahami, CEO

Because I see the core business. The core business is super healthy. We built it for many, many years. We always drove growth through innovation. We did it right now with Harmony. We are going to do it with new capabilities for our partners. I think that more than anything, when you think about agencies today, most of them most of them using Stilu, using WordPress. What kind of AI capabilities do they get? What's happened to WordPress? And what are the opportunities that it's open for us using all of our AI tools? Because Wix today is truly a full AI company. So I believe that we have a lot of opportunity, especially with base. This is one. Second, AI represents us a lot of efficiency that we can generate. it's coming from a place that we need less employees you know today for example at finance I have AI agents that are doing bank reconciliation for me I think that today when you think about engineers it's totally different we call it ex-engineer but you have one person that can do both front end, back end you know UI, UX How many people you had to have before? By the way, it's not just about taking down the course. It's about being much more efficient and launching product much faster. I think that if you do the right thing about how you size the company, how you structure the company, you have to do some kind of reorganization in order to meet the new capabilities and the new needs of AI. By the way, we did it also with care organizations. So I think that the combination between the opportunities that we see ahead of us plus being much more efficient in terms of the core structure, I truly believe that we can generate this amount in cash, and this is why I feel very, very comfortable about it.

Operator

And the synergies with Base44 and the core, can you speak to what you're seeing?

Avishai Abrahami, CEO

Wow, the synergy, this is like, you know, I've been in this business so many years. I think that the synergy just makes me so excited there's so many synergies it's not just about the product I will get to that but think about base 44 what it does it's simplify the way for people which are not sophisticated or not professional people they are sophisticated but they are not professional to build application Exactly the same thing that we did with Wix, with website. So there is a lot of synergy about, you know, the vision. Second, think about the know-how. After two months, after buying them, we already got to a point where we see about $100 million of run rate for marketing, and it's keep on increasing because we know how to do that. For 20 years, this is what we're doing. We know how to build a brand. we know how to use the marketing with the TRY methodology and we have the headcount to support it I don't right now need to recruit people, I have them everything that we did with Harmony developing the own propriety LLA model we are implementing it right now with base it's going to take more time it's much more complicated, yes but we have the talented people in order to execute on what we need to do. They use our infrastructure, security, GDPR, payments. They're using some of the technology that we use. And think about the synergy between both companies, you know, like BASE working with Headless and other products of Wix. Think about the entire vertical that we have. The amount of synergy between two companies, I think that this is the place of, every time that I'm saying, look at the combined company, it is really amazing. there's there's been comments about a pretty big reduction in force of employees can you comment about the supposed 20% reduction look I'm not gonna comment unfortunately it's linked to the newspaper in in Israel before we actually completed I can say one thing that it's something that we've been working and still we didn't execute we are going to do it really really soon so I'm not going to you know talk about the numbers but I mentioned before I think that this reorg is something that it's really important not just in terms of cost reduction but also about the efficiency and yes it's going to be significant and I think that it will make weeks you know it's funny we're a big company we assume to know everything but we've learned a lot from base how to operate with small teams how to how to develop things faster because today we have the technology that enable us to do that so yes I mean we're obviously going to do this reorg and we are working on it i definitely going to update once it is done about the result of it about the contribution there probably there will be some impact also for cost but also for top line because this reorganization will require from us to make a lot of changes but i believe that that overall is going to be healthy and more profitable for the company and again we mentioned about the things about the AI I think that what is important for management to do the right thing in order to make sure that we make the company even better and stronger How are things in Tel Aviv now? Well more relaxed it was really tough it's funny because most of weeks is Tel Aviv and Kiev in Ukraine we have about 1,000 employees over there and they're also having a very tough period right now, especially the last week it is tough it's not easy but I think that it's sad to say but we learn how to work in this kind of environment yes, we had some delays because of the war hopefully we are soon going to be done, to be after this kind of a weird period that actually started from COVID. But we are strong. We are a strong company. We know how to handle it. We are supporting our people. And even within the world, we launch Harmony. So I think just tell you about the company DNA and how people are strong and how we do things different.

Operator

Jeffries is a huge supporter of Israel, and we have a huge business there. Everyone's been asking us. We're bringing our tech trek back in May of 27, so we've already planned it. We've taken out the Kaminsky Hotel. This is amazing. Yeah, we're fully committed, so hopefully we can make this, because I've been bummed personally. I haven't been able to come over in a couple years. So that invites out. so if you guys want to sign up I can get you the link and I know it's a ways out but we're we already made the commitment to take the hotel out so we're financially in so any any open questions from the audience for Lior what do you think a separate class often, segmented users, use cases that will get more to the other, or

Lior Shemesh, CFO

it will be hybrid where an agency is using both these two together, bomb and pop shops are using both these two together, because I think that the question that everybody is trying to answer is, how can this take a zero, is it based what it will often be?

Avishai Abrahami, CEO

Again, this is why I'm looking at, specifically at Wix, I'm not talking about other companies, okay we are fully hedged for any given scenario and this is like you know from my point of view this is the most important thing because as a management you need to try to understand not what is going right now how the world is going to be in a five years from now and then it's difficult to say but you need to hedge yourself to any given scenario probably it will be a kind of a hybrid model. There's some people that feel very comfortable using just AI vibe coding within two prompt to create the website. Some people will have to have some kind of a drag and drop capabilities because they need constantly to change the content, need to change images, need to change how the websites looks like. They don't want to go back and prompt again and then discover that they're wasting a lot of time and money because they need to pay for the tokens. So yes, it will be a combination and remember that Harmony it's the reason why we call it Harmony because it exactly represents this hybrid kind of capabilities of both drag and drop and AI capabilities.

Operator

We appreciate you making the trip, and thanks for sharing the story, Lior.

Avishai Abrahami, CEO

Thank you for having us here. Thank you.