By Steven Scheer
JERUSALEM -Wix.com, which helps small businesses build and operate websites, said on Wednesday it aims to cut costs by $150 million a year to compensate for a global economic slowdown and a stronger dollar, which has weighed on revenue.
Under a three-year plan, Wix said it would take comprehensive cost-cutting measures, including some job cuts, aimed at raising free cash flow and accelerating margin expansion. About 20% of the annualised savings are expected to
be realized already in 2022, it said.
A quarter of the cost savings with come from revenue and lead to a 200 basis points rise in its gross margin in 2023, while the other 75% of savings will come largely from
“We see what’s happening in the U.S. in terms of the GDP, it is shrinking, and it has shrunk in the last three quarters… So people are buying less, both offline and online, and it has an impact on us,” chief financial officer Lior Shemesh told Reuters after issuing quarterly earnings.
“This is why we initiated this efficiency plan to make sure that no matter what will be the top line next year we are still going to meet our target in terms of profitability.”
The Israeli company said it had lost 14 cents per share excluding one-time items, compared with a loss of 28 cents per share a year earlier. Revenue grew 9% to $345.2 million.
Wix was forecast to lose 34 cents excluding one-time items, on revenue of $344 million, according to Refinitiv I/B/E/S data.
The company, whose shares have slid 56% so far in 2022, projected free cash flow to be roughly 2%-3% of revenue in 2022. It seeks to achieve a free cash flow margin of 20% by 2025.
For the third quarter, Wix estimated revenue of $341 million to $345 million, representing annual growth of 7% to 8%. That is below analysts’ forecasts of $354 million.
It expects revenue growth of 8% to 10% in 2022, below a prior estimate in May of 10% to 13%.
Wix noted the estimates included the impact of closing operations in Russia, an assumption that market conditions would remain challenging for the remainder of the year, and foreign exchange effects due to a stronger dollar.
(Reporting by Steven Scheer; Editng by Bradley Perrett and Mike Harrison)