The company’s cash flow is blowing past expectations.
Shares of website-building company Wix.com (WIX 21.17%) soared on Monday after management reported financial results for the first quarter. As of 10 a.m. ET today, Wix stock was up 19%, hitting its highest price in well over a year.
Free cash flow is soaring for Wix
In the first quarter, much could be said about the top and bottom lines for Wix. But I think the real story here that’s exciting investors is the company’s free cash flow.
This profit metric looks at how much cash the business brings in and subtracts out cash operating expenses and cash used for buying things such as buildings or equipment. So it can be a good indicator of a business’ health.
Wix kicked off 2024 with first-quarter free cash flow over $100 million. In short, expenses are in check, and spending from its customers is stronger than expected. Consequently, management believes it will generate full-year cash flow of roughly $450 million. For perspective, just three months ago, it thought that it would have full-year free cash flow of $400 million, at best.
That’s a big increase to guidance, and investors are rightly upbeat about what’s going on at Wix. For perspective, it had free cash flow of just $182 million in 2023.
Wix is following the same playbook as always
Take Wix’s cash flow numbers with a small grain of salt. Management excludes expenses for its new headquarters, even though free cash flow should always include this. So it naturally looks a little better than it is.
That said, the business is growing nicely with first-quarter revenue up 12% year over year and with expectations of full-year growth of 11% to 13% for 2024. Management attributes its growth to its suite of artificial-intelligence (AI) products that help its users build out a presence online. And that’s in line with what’s made the company successful in the past: It has a knack for launching products that increase adoption and spending.
Given the positive developments in the first quarter and the expectations for 2024, I’m not surprised to see Wix stock up this much today.
Jon Quast has positions in Wix.com. The Motley Fool has positions in and recommends Wix.com. The Motley Fool has a disclosure policy.
