The Wix fix: “We began implementing further cost efficiency measures; reduced headcount by 15%"
Wix laid off around 370 employees last week, most of them in support centers in the US. On top of the $150 million cost reduction plan announced in August 2022, the company is implementing an incremental $50 million of cost savings in 2023
Wix slightly exceeded the forecasts in the last quarter of 2022, which was far from an easy year for the company. Quarterly revenues amounted to $355 million, a modest increase of 6% compared to the corresponding quarter and significantly lower than the high double-digit rates to which its shareholders have become accustomed.
Against the background of the significant slowdown in the rate of growth, the company is implementing ever-increasing efficiency measures. After carrying out a round of layoffs in August in order to save $150 million in costs, Wix has announced an expansion of the cost-cutting measures.
Last week, Wix laid off about 370 employees, most of them in its customer support centers in the U.S. Its total workforce following the cuts stands at 5,200 employees, compared to 6,100 employees during the peak period in the first quarter of 2022. In total, the company has laid off 15% of the employees.
On top of the $150 million cost reduction plan announced in August 2022, Wix announced that it is implementing an incremental $50 million of cost savings in 2023. These savings consist of a further reduction in headcount that took place last week, increased hosting efficiencies and a reduction in capex. After the completion of the move, Wix estimates that it will be able to achieve an operating profit and net profit in 2025 rather than 2026.
Meanwhile, Wix continues to lose money, ending 2022 with an operating loss of $285 million on revenues of $1.39 billion. This is somewhat of an improvement compared to 2021, which is the result of a slight increase in gross profitability and the beginning of the effect of a decrease in the number of employees, which stood at 5,516 at the end of 2022.
Net cash provided by operating activities for the full year 2022 was $37.2 million, but following the investment in the building of Wix’s new headquarters in Israel, which amounted to $70 million last year, the free flow was negative. The company states that in the last quarter of 2022 it reached the highest flow in its history which was $52 million.
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“Combined with our original cost reduction plan, we now expect total cost savings of $200 million in 2023 and $215 million of annualized savings compared to the plan we shared at our May 2022 Analyst Day,” said Wix CFO Lior Shemesh. “By continuing to control what we can, we expect to accelerate profitability with positive GAAP and non-GAAP net income now expected sooner than originally anticipated, exit 2023 with a FCF1 margin of ~12-13%, and achieve the 'Rule of 40' in FY2025 under varying revenue growth scenarios."
According to Wix’s forecast, if there is no deterioration in the macroeconomic environment, it will end the current quarter with revenues of $367-371 million, a figure that will reflect an annual increase of 8% (against the corresponding quarter) and also an improvement against the last quarter.
The forecast for 2023 is for revenues of $1.50-1.53 billion and a cash flow of $152-162 million before the investment in the building of the new headquarters in Israel. The investment in the new offices is estimated at $150 million.
