All right. Good afternoon, everybody. Let's get this started. We're very, very excited to have the Wix team. We have Lior Shemesh, Wix CFO, and Emily Liu, Wix Head of IR with us today. We also have my partner in covering the web builders, Chris Kuntarich, here with us. So let's get it started. Maybe just starting from the self-creators topic, a key takeaway to us from the third quarter earnings was that the self-creators was, in your words, firmly in the front seat of your growth strategy. It's still nearly two-thirds of your revenue, and growth accelerated in the third quarter, and now you're seeing your AI products bear fruit.
So I guess going from here, what areas are you focusing on to accelerate the growth in the self-creators business, and what are some of the investment needs in R&D and marketing spend there?
Mm-hmm. So first of all, hello everyone, and thank you for coming, and thank you for having us. I said many times in the past that I believe that the self-creator segment will probably at some point of time will get again to a double-digit growth. Looking at the history of Wix, we always drove growth through innovation, through product. So basically, there are two or a few ways in order to accelerate the growth, and this is exactly what we intend to do. The first thing is about, as I mentioned before, about increasing conversion through more product innovation. Let me go back a few years when we started to invest in the partner business. We’ve launched Studio a year ago, and it has a tremendous effect on our numbers, but also a tremendous effect in terms of the market opportunity.
But for the first time, we actually have two sets of products: the one for pros and another one for self-creators. So what we intend to do is to allocate some of the resources that we had with Studio, and to invest in self-creators and to launch, I believe, a significant product next year. You know, based on our experience, you know, for many, many years, usually when we do that, it means that, in, you know, conversion will continue to increase. So that with the combination of more AI tools and the combination of also increasing the output by introducing more services as part of the business solution. So I think that the combination between increasing conversion, increasing output, increasing top-of-the-funnel for Wix, will end up with accelerate the growth for self-creators in the, in the future.
All right. That's great. That's very helpful. And maybe I guess we dive a little deeper into the growth algorithm. If you think about how you grow from here, and definitely the growth is picking up. And for the potential for it to potentially grow to, let's say, high single digit, low double digit, and then eventually to probably like the mid-teens target. If you think about the components to get there, there can be subscriptions growth and pricing increases, maybe some mix shift and product attach. Maybe can you just break it out to us by those areas? And maybe is there something more?
For the overall business or just for the self-creator?
Just for Self-Creators.
Sure. First of all, every, you know, all the plans that we have for the self-creator will not require additional investment in R&D. I think that it's important to mention. You know, I mentioned many times in the past, we don't intend to increase the headcount, at least in the next 12-24 months. In order to achieve that, again, as I mentioned before, I think that the first opportunity that we have is to increase conversion by introducing a new product. Second, with the different AI tools. I think that, you know, this quarter we've experienced an increase in conversion of 13%. When we increase conversion, it has a double effect because, on one hand, we increase conversion from free to paid. Wix is a freemium model. We bring approximately 1.5 million users every month.
So the fact that we have managed to increase conversion, it ends up with, obviously, better numbers. But it actually takes down the TTR, meaning that the TTR for self-creator is about three to five months in terms of the returns. When we increase conversion, it goes down. So it allows us to increase marketing investment again. So it has this double effect, and, you know, as I mentioned before, continue with increasing the output, by introducing more products. And on a regular basis, I believe that every couple of years, we also will be able to increase prices. So those are kind of, you know, I believe the growth drivers for self-creators, in the near future.
All right. Thanks a lot for the color. And I guess maybe just putting those components all back together, what are you trying to solve for, for the Self-Creators? So what's a kind of your North Star? Is it Rule of 40? Is it maybe just investing as much as you can within your TTR guardrails? And as you mentioned, the Free Cash Flow Margin should be already above 30% right now.
Yeah.
What's your thinking on the spending going from here?
Definitely, passing the Rule of 40. I think that, we've already, you know, experienced an increase in the free cash flow margin. I believe that, for Self-Creators, it should be around 35%, perhaps a bit more than that, and a double-digit growth in terms of the top line. So I think that, you know, people can make their own calculation. But, you know, this is where I see the North Star of Self-Creators, and we are pretty much close to that, at least, you know, from the profitability perspective. In terms of the growth, we are working really hard on it.
All right. That sounds great. And, I'll probably squeeze in one last question about the self-creators before passing it to Chris on the partner side. So, and I guess it's a natural transition. So maybe what can you, can you share with us what you can maybe leverage from your effort over the past several years on the partners' business in this push on the self-creator side?
We've learned a lot, you know, when we've made the decision a few years ago to penetrate into the Partners' business. We invested a lot. We improved the infrastructure. We invested a lot in terms of the technology. I think that the fact that we have a much better performance also allows us to attract a different mix of customers for Self-Creators. It can be large stores. It can be enterprises. And it can be generally businesses that are more mature in their nature. But it also means that the output increases because, you know, they are using more business solutions, more business applications. And they also have much better KPIs, different retention, for example. The fact that we really right now understand the two segments also makes us use some of the technology, for example, that we develop in Studio to implement it on Self-Creators.
So for example, the fact that we are able to do responsive designs automatically using all kinds of AI tools that we develop for Studio, doing it again for self-creator. So the fact that we understand both sides of the business, both sides of those pros, but also for the fact that we understand the self-creators because this is how we started, makes it very interesting for us to deliver an accelerated growth for both segments in the future.
All right. Sounds great. Cool. Well, let's jump into the partner business and Wix Studio here for a second. I think you said 75% of bookings from new partners came from Studio accounts in 3Q, and that was a step up. I guess just are you able to share what that percentage of new premium accounts in your partner business are on Studio? And how should we be thinking about that ramping further?
So first of all, I think that when you're talking about Studio, there is Studio editor, but also the Studio workspace, meaning that many people that are not necessarily using Wix Studio, they can use Wix Editor, but they are using the Wix Studio dashboard. So it means that they can actually control and manage their customers, doing, you know, collection, looking at payments, and so on and so forth. It's increasing. Studio, it's a new product, only launched a year ago, but we see a tremendous increase in effect. We didn't show the numbers in terms of number of premiums, but what I can tell you that is like, growing tremendously well on a quarter-over-quarter basis. It mostly has a huge potential the way that I see it for the future.
Got it. And considering this strong growth here, is there any possibility that you would consider discontinuing the core editor and really just going forward with Wix Studio for the partner channel?
No. I think that, you know, we let partners decide what they want to use. You know, for some of the projects, you know, the Wix Editor can be a perfect fit. For some of the other projects, Studio is a better fit. So we don't want to limit them in terms of what they can use. They have, you know, the entire portfolio of products. They can use whatever they want. We do see them, you know, right now, some of them, you know, really like to use, you know, the Wix and Wix templates or the traditional editor for some of the project, and they feel very good about it. And for some more complex projects, they use Studio.
Got it. I guess as you think about drivers here that could be pushing further partners, and when could this become the overwhelming majority of partner businesses is going towards Studio? How do you think about drivers here and some of the caps that you're facing here for adoption? Where's that? Where are those friction points?
We already started to see that in terms of the new quotes.
Yep.
So it's become more and more significant, you know, the fact that we said that 75% of the bookings of new bookings coming from Studio users. It tells a lot about the engagement, about the fact that people really like Studio. In the past, you know, partners used to use Wix, but not entirely. Today, with Studio, they can use Wix for more than 90% of the projects, and we can see the adoption of it. Actually, we can see like the early comers, the ones that already started to use Studio a few quarters ago, they are building the second, the third, and the fourth website on Studio. We're hearing the feedback. We see the type of sites that they managed to build. It's really encouraging.
I do believe, again, and I said that many times, you know, in the last few quarters, Studio is the booking for Wix in the future. I believe that Studio it's a product with the best launch ever in terms of the product that we ever had. We already have more than 1 million users on Studio since we launched this product. So from my point of view, by far, it's an amazing opportunity for us, which will hopefully drive hundreds of millions of dollars of revenue.
I'll add too, you asked about caps and hurdles. Something that I think is really something we're really proud of is one of the biggest hurdles that we've had entering, you know, this new professional market, being known as an easy-to-use DIY platform, has been perception with, you know, smaller agencies, but especially like the larger professionals. Over the past 18 months, perception has improved a lot, like very, very meaningfully, in a way where agencies of all sizes today are very open to meeting with us and learning about Studio, even if they may not deploy it right away. The work that we've done to educate, to meet them at, you know, where they are at conferences, in their community, that's been, you know, we're seeing very meaningful fruits of that.
And now we're very focused on new, you know, transitioning over to initiatives that are helping them actually change the ways that they work. You know, if they're on WordPress and they have huge developer teams and big design teams 'cause you need all of that to build a WordPress site, or a more sophisticated site on another kind of CMS platform, on Wix and on Wix Studio, it really simplifies a lot of that. So getting them to change the way they work, we're doing that slowly but surely, but that's something that we're focused on, and it's gonna happen with time.
Got it. And maybe just one last one on Studio. Just you're gonna be getting to the anniversary of some of those earlier subscribers here. Just how have those renewal rates, you talked about the velocity of new projects getting spun up there, how have those kind of renewal rates for those early subscribers looked versus as you kind of think about Wix Editor trends and what other kind of trends you're seeing within the business?
Yeah. You know what I'm saying? The Studio, you know, the first cohort of Studios in the back half of last year, they're renewing at better rates than our classic Editor cohorts have in that same cohort. And especially like the business Studio packages are renewing at an even higher rate. So these kind of really strong, robust renewal rates that we do expect to continue, in addition to what Lior mentioned before, you know, more and more agencies building two, second, third, fourth, multiple sites, all of these things kind of drive the wheel of compounding growth, that will really power partners' growth, in the next few years.
By the way, when you think about it, it also makes a lot of sense because usually people that go to partners to build the website for them, they are more mature in terms of their business. And talking about, you know, small businesses, you know, the first couple of years are the most critical. You know, if they survive the first two years, so it's much easier for them, you know, for the future. We see much more mature businesses, onboarding to Wix through partners, with more GPV, much more healthy business. And, you know, as a fact, also the retention is totally different.
Helpful. All right. Thanks a lot for the color. A big focus of Wix, I guess, or from the investors this year, is the bookings numbers, and you kind of resumed the guidance on the bookings, and for the third quarter, bookings and revenue both accelerated by one point, and the revenue for self-creators and the partners each accelerated by about one point. I guess maybe directionally, are you seeing even stronger bookings acceleration for self-creators than the revenue acceleration, if you're able to share?
We definitely see acceleration in bookings for self-creators, you know, since the beginning of the year. I think that, you know, it's definitely a result, mostly from, you know, from innovation, but also from the AI. I mean, we mentioned that the AI site builder improved the conversion. We started to see the fruits of it. We see a better demand to our product. Modest improvement also in terms of the macro. Better GPV, increasing GPV and business solutions. So yeah, definitely we see acceleration of bookings more than revenue, you know, since the beginning of the year.
All right. That's great. And then for the fourth quarter, at the high end of your guidance ranges, total bookings and the total revenue are both expected to accelerate by about two points, I believe. I guess how should we think about the trends for self-creators versus partners' revenue growth in this fourth quarter?
I think that, again, I mean, we guided for acceleration in bookings. It's going to come both from Self-Creators and Partners. We're going to see a continued improvement of conversion. Usually when you see improvement in conversion, it's not a one-time effect. It continues. And as more that you progress into the year, the effect of those new quotas are, you know, higher like any other SaaS model. We see the improvement of that. We definitely see also the improvement and the increase of Studio, which contribute. You asked about the effect of Studio. Definitely the acceleration of Partners between the third to the fourth quarter is all coming from Studio.
Yeah. May we jump over, back to the product side of things? Wix has really been there for AI and has been an AI story since 2016. You've had Wix ADI. In March, you launched the AI Website Builder. Can you just maybe, for folks less familiar here, just talk to us about your capabilities here? Just how does, how are you stacking up against competitors? And as we think about the product roadmap here, where are areas and opportunities to kind of fill in?
Mm-hmm. Yeah. Yeah. You know, kind of like you mentioned, in 2016, we launched Artificial Design Intelligence, which is kind of version 1.0 of, you know, an AI-powered website generator. And even, you know, over the past decade, we've continued to invest really, really heavily, focusing a lot of our innovation efforts on AI. And now, you know, we have a really broad suite of AI products. You know, the cornerstone being the new AI website builder that we launched earlier this year that, you know, through a quick prompt, conversational AI chat, it will create. Our platform will create a fulsome, ready-to-publish website with inner pages, layout, content, whether it be text or images, included, verticals included if you're a business and you've marked yourself as such, payments attached. So something that's totally, you know, ready to be published with as little tinkering as you kind of need.
And that's, you know, like I said, our cornerstone product, and it's supported by a really broad suite of additional AI products. And that spans, you know, typical text and image generation that, you know, we see from other companies on the market as well, but a lot more proprietary AI products that I think really differentiate us. A lot of design capabilities, layouting, theme assistance, a lot of commerce capabilities as well, helping you write product descriptions, helping recommend product recommendations for your business, to help you boost, to help our merchants boost sales. And also, you know, AI tools to help you grow and market your business, helping write Google Ads, launch email marketing campaigns, connecting with social and running campaigns there. So it really is everything. We also have analytics tools.
So, you know, I think we definitely have a much more comprehensive suite than what we see out there. And it's really in our DNA of being product-first, innovation-first, and being a leader in AI for so long. And recently this year, we, earlier this year, we launched almost 30 AI business assistants. So these are more targeted use case assistants that will help, you know, kind of move merchants or users through the web creation journey, help them kind of troubleshoot any issues, and actually perform simple functions for them with very, very little, you know, customer or user support from our end. And, you know, we have already dozens of them, and we still have many, many more to come. So that's been something that we're really proud of this year.
And then looking forward, you know, this past quarter, we did mention that we will be rolling out our first set of AI, monetized AI products in the coming months, in early next year. These are going to be kind of, you know, much more valuable, value-adding, assistants, you know, targeting merchants, helping them streamline their businesses, making them kind of go to market easier for them, and other, you know, creation products that are coming as well. So yeah, a lot to be excited about.
Yeah. And that'll be the first real kind of direct AI monetized product. Can you just maybe talk about what you saw that allowed you to kind of, to go that route here? And how should we kind of think about the pricing of these? I think a lot of people think about Office 365 and Copilot, where the Copilot was earning more than the pilot. So, like how, how should we be thinking about the, the value-add of these products and kind of, yeah, what that monetization kind of structure could look like?
Yeah. So we haven't announced anything about pricing, but definitely, you know, before we put anything out, we do our own, you know, pricing tests. And for a couple of the products that are coming out, sooner, we're already doing those tests and seeing, you know, the results that we want to see. But with these products, you know, a lot of these are going to be more true, like assistant Copilot-like, experiences that can either supplement or almost replace, a lot of functions and, you know, backend responsibilities of very typical SMBs. So that's where like the real value is. And again, you know, it could be a subscription model. It could be usage-based, but we're testing all those things. And, you know, as they come out, we'll be coming out with the pricing for those.
All right. That's awesome. Very, very exciting to see the progress there. Maybe switching to the product segment on the business solutions, just wanted to dive a little deeper into the underlying products and the trends there. We've seen your transaction revenue continue to accelerate in the third quarter. And then for the rest of the business solutions, let's call it the non-transaction portion, which is mainly the applications. Your revenue also accelerated in the third quarter. Maybe can you talk about the drivers for the acceleration on the non-transaction portion and by product? Maybe where did you see the particular, particular strength there?
So let's start with the transactional revenue. I think that we've seen increasing GPV and continuous trends of the take rate, which obviously resulting in acceleration of the revenue. But I believe that it's worth mentioning that the business solution acceleration, it's also kind of attached with partners. I mentioned before the fact that we are talking about more mature businesses using more consumption of more business application. You know, they're using more Google Ads and Google Workspace and email marketing capabilities and so on, but also much higher GPV. We mentioned before that partners is about one-third of the revenue, but they are more than 50% of GPV. And I think that as long as we are going to see acceleration of partners, it will follow with acceleration of business solution as well.
With regard to the non-transactional revenue, it's exactly the same story. I think that we see a much better usage, different mix of customers that consume more applications, for example, email marketing.
Mm-hmm.
Because that's more mature business and they need to use it in order to boost their business.
Understood. So basically very similar drivers for transaction and non-transaction.
Correct.
Business solutions revenue. All right. That's very helpful. And maybe let's look at the gross margin there. And the margin continues to expand to 31%, up one point in the third quarter. And you continue to expect it to exceed 30% for the full year of 2024. Maybe can you give us an update by unpacking the transaction margin, the gross margin on the transaction revenue versus the gross margin on the non-transaction revenue?
Yeah.
Where, where are you right now?
So for the transactional revenue, I mentioned before that it's very clear. You cannot get more than 30%-35% in gross margin because of the nature of the business when two-thirds of it go to the credit card companies. So there is no change. I think that the fact that we see acceleration in gross margin over there is because you are getting better margins when you get higher GPV. In some of, you know, the geographies, we're already at 35%. So I think that, you know, the scale is actually improving the gross margin as well for payments. With regard to the non-payments, it really depends on the nature of the products. Some of the pro product, it's product that we developed, like for example, email marketing.
Some of the products we are using, like Google Workspace, when we recognize on a gross basis because we're adding a lot of value. I think that from my point of view, what is important about the business solution application is to add much more value to our customers, so let me give you an example. If we are providing them with the ability to do much better campaign on Google, and let's assume that I have an X profit on it, I also have an indirect effect of the fact that I have a much better happy customer. Increasing GPV, again, I'm getting a true payment back and because it's managed to boost his business, much better retention.
Yeah.
So there is this direct and indirect effect. So I'm not trying necessarily to optimize the gross margin for the non-transactional revenue. Actually, we are going to see in the near future, we are going to see more product that we are going to offer. Obviously, I intend to make money on it, but what is important, it's also much better experience to the customer, which also contributing to the indirect, the indirect effect.
All right. That's helpful.
But you shouldn't expect any change in terms of the gross profit also in 2025, according to my estimation.
All right. Sounds good. That's very helpful. So, maybe pass it on to Chris. Excuse me.
Yeah. Maybe just looking at some of the other areas here, just overall headcount has been down last year, reduction in support roles, I guess, while the headcount has increased in sales and marketing, G&A-related type of functions. I guess as you strive to maintain the discipline on overall headcount, is it fair to kind of think about that same direction as same direction as what you started in 2023, as you get more help from AI and support?
We shouldn't expect any change in terms of the headcount for 2025. I think that perhaps, you know, as you see some changes between the quarters, like, you know, plus 3%, minus 3%, but it's basically a, you know, depends on the fact that how fast we're able to recruit people, and, you know, instead of people that are leaving. But the overall headcount, we do believe that we have the right structure of headcount to support our growth initiatives. So I don't, we don't intend to change the overall headcount for, for, for next year. No major changes.
Just as far as going after some of these larger agency partners here, can you just talk to us about, like, what have you learned over the last year as far as winning these relationships here and going deeper with certain partners? And how should we be thinking about that as we look forward to 2025?
Yeah. I think that, you know, Emily spoke about it before, but I believe that the first challenge that we have after obviously competing with Studio, which we believe is the best product out there, is how to change perception of partners about Wix, to increase the brand awareness for Studio. Well, I think that we see how it's progressing. I think that, you know, people are talking about Studio, mentioning Studio. Agencies started to use Studio. It started to happen. We are engaging with agencies. We go to conferences. We are talking with them. We are teaching them. We are training them. And once they are using Studio, they are so happy. Remember that it's also a different model with them because up until now, they use WordPress. We're definitely taking a big market share from WordPress. It started to happen.
I mean, you can see that in the numbers. But for their point of view, using WordPress, it's a one-time fee. You build a website, you charge your customer a one-time fee, and that's it. With Wix, I'm sharing revenue with them. So for the first time, those agencies become a SaaS model, agencies. And it's great because they have a great product, but also a great business model.
Very helpful. All right. We're at the mark, and thank you so much. It's been very helpful, informative. Thank you, Lior and Emily, for joining us.
Thank you.
Thanks for having us.