JERUSALEM: Wix.com, which helps small businesses build and operate websites, said on Wednesday (Aug 10) it aims to cut costs by US$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 per cent 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 per cent of savings will come largely from operating expenses.
"We see what's happening in the US 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 per cent to US$345.2 million.
Wix was forecast to lose 34 cents excluding one-time items, on revenue of US$344 million, according to Refinitiv I/B/E/S data.
The company, whose shares have slid 56 per cent so far in 2022, projected free cash flow to be roughly 2 per cent-3 per cent of revenue in 2022. It seeks to achieve a free cash flow margin of 20 per cent by 2025.
For the third quarter, Wix estimated revenue of US$341 million to US$345 million, representing annual growth of 7 per cent to 8 per cent. That is below analysts' forecasts of US$354 million.
It expects revenue growth of 8 per cent to 10 per cent in 2022, below a prior estimate in May of 10 per cent to 13 per cent.
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.