Wix.com Ltd. (WIX) Q4 2023 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the Wix Q4 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Emily Liu, Investor Relations. Please go ahead.

Thanks, and good morning, everyone. Welcome to Wix's fourth quarter and full year 2023 earnings call. Joining me today to discuss the results are Avishai Abrahami, CEO and Co-Founder; Nir Zohar, our President and COO; and Lior Shemesh, our CFO. During this call, we may make forward-looking statements, and these statements are based on current expectations and assumptions. Please consider the risk factors included in our press release and most recent Form 20-F that could cause our actual results to differ materially from these forward-looking statements. We do not undertake any obligation, to update these forward-looking statements. In addition, we will comment on non-GAAP financial results and key operating metrics. You can find all reconciliations between our GAAP and non-GAAP results in the earnings materials, and in our Interactive Analyst Center on the Investor Relations section of our website, investors.wix.com. With that, I'll turn the call over to Avishai.

Thanks Emily and good morning, everyone. 2023 was a milestone year for Wix. We maintained a leadership position as the go-to web creation platform, for any user and any business, grew market share for the best-in-class innovation, executed successfully on key initiatives, and achieved strong growth with record profitability. The incredible progress we made this year, positioned us to accelerate growth in 2024. And we now expect to exceed the targets applying in the three years plan we provided at the August Analyst Day. Lior will work through the details, around our updated expectation in a few minutes. For me, 2023 will be remembered as the year of a pivotal advance in our product suite. We started off the year labeled by others as a company facing potential AI disruption. Since then, we believe we've proven ourselves, not only to be a beneficiary of broader advancement, but also an AI leader among peers. We have spent the past eight years developing and embedding AI technology in our product, as well as across our operation. This year, we meaningfully extended an already impressive toolkit of AI capabilities to include new AI-powered features that will help Wix users create visual. And written web content more easily, optimize design and content layout, write code and manage their website and businesses more efficiently. The key AI products introduced in the last year, include an AI chat experience for businesses, responsive AI design, AI code assistant, AI Meta Tag Creators and AI text and image creators, among several other AI design tools. We also recently released our AI site generator and have heard fantastic feedback so far. I believe this will be the first AI tool on the market that creates a full-blown, tailored and ready to publish website integrated with relevant business, application based on user prompt. Our technology has benefited all our users, with both site creators and partners having shown excellent engagement over the past year. In fact, the majority of new users today, are using at least one AI tool on their web creation journey. This has resulted in reduced friction and enhanced the creation experience for our users, as well as increased conversion and improved monetization. We expect our AI technology to be a significant driver of growth in 2024 and beyond. We also leverage AI to improve many of our internal processes at Wix, especially research and development velocity. This includes an open internal AI deployment platform that allows for everyone at Wix to contribute to building AI-driven user features in tandem. We also have a Gen AI best platform dedicated to conversational assistant, which allow any product team at Wix to develop their own assistant tailored, to specific user needs without having to start from scratch. With these platforms, we are able to develop and release high quality AI-based features and tools efficiently and at scale. We expect AI to continue to be a major competitive advantage for us, as we build our product suite and more AI tools, to make web creation experience more frictionless for our users, as well as helping to improve operations. In addition to AI, we made a huge step in our offering for partners this year with the introduction of Studio, our cornerstone partners' web development platform. Since August, more than 500,000 agencies and freelancers have created Studio accounts, and we currently have more Studio premium subscriptions, than we expected to have at this point. Most notably, nearly half of our Studio accounts, were created by new partners who had not created on Wix before. This strong start is a testament to the trailblazing innovation of Studio, and our success in winning market share, amongst our professionals and larger agencies. With all the feedback and our performance so far, I am confident that Studio is our most successful product to-date. Since our initial investment in the professional market in 2019, we continue to see considerable momentum with partners' revenue growing nearly 40% year-over-year in the most recent two quarters. This growth has been driven by the incredible strides, we've made in building a best-in-class product tailored for the agency and freelancers market. And we have no plans of slowing. There are a number of improvement and new exciting tools on the way for partners. We expect Studio and our broader professional product offering, to be meaningful catalyst of growth in the coming years. Looking ahead for 2024, I am excited to build upon the success of the past year. Thank you for the entire Wix team. It is because of you and your hard work that I am confident that 2024, will be another year of incredible milestones, and unbounded potential. With that, Nir, over to you.

Thank you, Avishai. I'd like to share a bit more about the business fundamentals, underpinning the strong top-line performance, achieved in 2023, and the primary growth drivers that we expect, to accelerate growth in 2024. The 2023 cohort performed extremely well and was among the strongest non-COVID cohorts in our history. Our Q1, '23 cohort generated $60.4 million in cumulative bookings, through its first four quarters. This is the second highest level of cumulative bookings in this time frame, behind only Q1, '21 cohort, which benefited greatly from COVID tailwinds. This performance is particularly impressive given the significantly smaller user base of the Q1, '23 cohort compared to previous cohorts. Due to our streamlined marketing strategy targeting higher-intent users with lower amounts of acquisition marketing investment. Our success here, is a testament to the scale of the Wix brand, and the value our platform provides to users. This strong cohort behavior, also demonstrates the solid fundamentals of our business, including steadily improved conversion and monetization. ARPS improved to more than $253 in 2023, up 10% year-over-year, driven by a continued mixed shift to higher-tier packages, higher pricing, and increased adoption and usage of business solution products as we continue to onboard higher-intent and commerce-oriented users, particularly partners. Existing cohort behavior also improved, compared to the prior year, demonstrated by net revenue retention increasing to 105% in 2023, from 102% in 2022. We now expect existing user cohorts, to generate over $16.2 billion in bookings over the next 10 years, illustrating the power of our business model, and differentiated product offering. Turning to 2024, Lior will share the details of our outlook in a moment, but before he does, I want to highlight the drivers that we believe will accelerate bookings growth in the coming year. First, the launch of Wix Studio has been a great success. We have seen existing partners build more projects on Wix, and many new partners join our platform. We believe Studio will continue to bring an increase to the activity of partners on Wix, which will drive growth in overall monetization of our partner cohorts. Second, we expect conversion and ARPS of Self Creators, to trend positively as our leading product suite continues to resonate and enables users to meet their goals online. Third, as Avishai mentioned, uptake of the milestone AI initiatives of 2023, has been incredible, and we expect to see ramping conversion and monetization benefits, from our entire AI toolkit, for both Self Creators and partners this year. Fourth, we expect continued success in bringing on new businesses, and commerce users that generate GPV and adopt business applications. We will also benefit from the compounding growth of GPV from existing commerce users. Finally, we have recently implemented higher pricing for new and existing subscriptions. This recent price action is part of our goal, of aligning the continuously growing value, we deliver to users to the price they pay. Our users have responded extremely well historically, with strong retention, within our cohorts during past increases, which provides us with the confidence that our approach, to pricing is working. Following our price increases in 2019 and 2022, as well as this one, we believe there is still considerable room, to continue to increase price, as we innovate and deliver incremental value to users. We expect to continue to explore potential price action, at a similar cadence going forward. Because of these drivers and the continued momentum we've seen this year so far, we are confident that our business will experience an acceleration in growth in 2024. With that, I will now hand it over to Lior to walk through more details on our financials, 2024 outlook and improved 2025 expectations. Lior?

Thanks Nir. We finished 2023 on a very strong note, which we believe puts us on a great path going into 2024 and 2025. As our business fundamentals continue to improve, we have seen early success with Wix Studio and our AI products, as well as in improving the macro environment, giving us confidence in our ability to accelerate year-over-year bookings growth in 2024, which we believe puts us on a track to accelerate year-over-year revenue growth in 2025. We now expect to outperform the 2024 targets we shared at our analyst day in August, and believe that we will significantly surpass the Rule of 40 in 2025. Before I go through the details of our 2024 outlook, I want to quickly summarize our Q4 and full year of 2023 results. Know that all financial data are non-GAAP unless otherwise noted. Q4 total revenue was $404 million, up 14% year-over-year. Revenue growth was driven primarily by partners' revenue, which grew 38% year-over-year. As Avishai mentioned, Studio is off to a great start, exceeding our expectations. Creative Subscriptions revenue in Q4 grew nearly 12% year-over-year, and Business Solutions revenue in Q4 grew 20% year-over-year. We expanded total gross margin in Q4, to 70%, and operating income grew to nearly $65 million, or 16% of revenue. In Q4, sales and marketing expenses grew quarter-over-quarter to $92 million, as we increased our investment in the Wix Studio brand. While we expect to continue gaining leverage on marketing due to our streamlined marketing strategy, especially with Self Creators, we plan to continue investing in the Studio brand in 2024. Q4 free cash flow, excluding headquarters and restructuring cost, was over $19 million, or 22% of revenue, as we continue to benefit from high operating efficiencies. Moving on to 2023 full year results, total revenue grew to $1.56 billion or 13% year-over-year, and Creative Subscriptions ARR was $1.19 billion, up over 10% year-over-year. We ended 2023 with a total gross margin of 68%, an improvement of nearly 500 basis points, compared to 2022. Throughout the year, we benefited from improved efficiencies in hosting and infrastructure costs, and optimization of support costs, partially aided by integrating AI into our workflows. Creative Subscriptions gross margin expanded to 82% in 2023, and Business Solutions gross margin, grew to 29% for the full year, as we continue to benefit, from improving margin in new experiments. In 2023, we generated a total of $246 million in free cash flow, excluding headquarters and restructuring costs, a margin of 16% of revenue ahead of our prior expectations and guidance. This include breakeven free cash flow in our partners' business, a significant milestone and one-year ahead of our three-year plan. This was a result of strong sustained growth, as well as improved gross margin and meaningful operating leverage driven by the broader efficiencies implemented over the past two years. We expect to continue, to generate incremental margin improvements from the continued scaling of our commerce business, and the stable operating expenses base as our partners' business continue to grow. As a result, we now expect to significantly exceed the partners' free cash flow margin target for 2024 and 2025, as outlined in our three-year plan. I'm also happy to report that we finished 2023 with GAAP net income of $33 million, our first year of GAAP profitability. This profitability, was due to the careful management of costs throughout the last couple of years, including stock-based compensation costs, which declined as a percent of revenue for the third straight year. These results demonstrate the fantastic growth and incremental profitability of our business. We re-accelerated year-over-year revenue growth, due to a strong fundamentals of our cohorts and a strong cadence of product innovation. The continued returns from the cost efficiency culture, we have implemented at Wix over the last couple of years and the half drove - and drove strong incremental profit. We believe that these results, put us in a very strong position, to accelerate growth into 2024, as our successful efforts in implementing operating efficiency, gives me confidence we can continue to generate incremental profitability. And I want to spend the rest of my time on our expectations for 2024. We are reintroducing annual bookings guidance, due to the improved visibility and confidence in our business as stable and positively trending macro environment and strong cohort behavior, particularly in our partners business. For the full year 2024, we expect total bookings of $1.78 billion to $1.81 billion, or 12% to 14% year-over-year, an acceleration from 2023. We expect year-over-year growth of total bookings, to accelerate in the second half of 2024 to 15%, at the high end of the guidance range. In particular, the acceleration is expected to be primarily in creative subscription bookings, bringing it to double-digit year-over-year growth in the second half of 2024. This anticipated growth positions the business, to achieve accelerating year-over-year revenue growth in 2025. Nir will walk you through the drivers of our bookings growth in 2024, and you can find additional information in the shareholder update. For the full year 2024, we expect total revenue to be $1.73 billion to $1.76 billion, or 11% to 13% year-over-year. We expect revenue in Q1, 2024 of $415 million to $419 million, or 11% to 12% year-over-year. We continue to operate the business in an efficient manner as evidenced by the meaningful operating leverage we generated in 2023 on both a GAAP and non-GAAP basis. We plan to operate with the same efficiency in 2024, and expect strong growth in gross profit, due to anticipated gross margin improvement on a year-over-year basis. For the full year 2024, we expect non-GAAP total gross margin, of 68% to 69% with non-GAAP Business Solution gross margin, to be approximately 30% for the full year, ahead of the plan we shared in August. We also expect to generate additional leverage due to minimal growth in operating expenses year-over-year. We expect non-GAAP operating expenses, to be 51% to 52% of revenue for the full year, also better than our August plan. And non-GAAP sales and marketing, to remain similar to 2023, at roughly 23% to 24% of revenue. We will continue with marketing activities related to Wix Studio throughout 2024, as we capitalize on the growth we have seen since its launch. We anticipate that our strong growth in operating efficiency will generate positive GAAP operating profit, and net income in 2024. We expect, to generate free cash flow excluding headquarters cost of $370 million to $400 million, or 21% to 23% of revenue in 2024. We expect this free cash flow guidance in combination, with our share repurchase activity, will translate to more than $6 in free cash flow per diluted share in 2024, ahead of our three-year plan. As we continue to responsibly manage dilution, we expect stock-based compensation expenses, to decline for the third consecutive year, as a percent of revenue to approximately 13% of revenue in 2024, in line with our three-year plan. We expect capital expenditures, including costs associated with our new headquarters build-out, of approximately $7 million to $10 million in 2024. We will incur the final cost of our new headquarters in the first half of the year, and anticipate this cost, to be roughly $8 million to $10 million. We are very excited about the upcoming year. We believe we have positioned ourselves, to reaccelerate growth and generate incremental profitability. With that, we will now take your questions.

Certainly. [Operator Instructions] Our first question will be coming from Elizabeth Porter of Morgan Stanley. Your line is open, Elizabeth.

Great. Thank you so much. Congrats on a strong quarter. I wanted to follow-up on some of the comments about better conversion rates, both at the Wix Studio capturing pros that did continue through the funnel and also Self Creators with AI reducing friction to build a website. When we look at the premium subs as a percent of registered users, that metric has been pressured for the last kind of few years. So should we see this ratio start to improve in 2024? And if not, where would you point us, to detract the success on better conversion rates? Thank you.

Well, I think hi Elizabeth, it's Nir. I think that generally premium subs whether as a percentage, or as an absolute number is probably not the best KPI to look at since it may be significantly impacted by different things like our general goal to drive to get more - higher intent, better users that are willing to spend more on the platform. It goes towards pricing, it goes towards generally the changes we've done in marketing and more. So we definitely, in some cases, have reaccelerated some of the self-activity over time. But when we look at the conversion rates, we look at it per geography separately, per a different source of traffic, and definitely in a different manner when we look at the Self Creators and as well as the partners. We believe that the best thing to look at, is actually the cohort value which I think, and very easily, we've demonstrated that, not it only stabilizes is actually on an increasing trend. And in fact, we're gaining - getting to the point where it's close to surpassing, even the height of the COVID cohort, which obviously are the strongest ones in our history. And I think that's the best way to understand the real impact that all of these improvements on the product and the business are having - under the hood.

Great. Thank you. And just as a follow-up, I wanted to ask on just the algorithm between top line revenue growth and investment, given your initial three-year plan suggested roughly unchanged revenue growth. And now, we're seeing an improvement with growth excepted to accelerate in 2025. How do you think about the levers of investment? Understanding you guys are still exceeding the Rule of 40 in 2025, just helpful to understand the framework, around the opportunity to invest versus maybe less of a need, given the prior investment before? Thank you

So, Elizabeth, as we mentioned before, I think that the only way obviously to significantly overpass the Rule of 40 is, has to be a combination of both profitability and growth. The reason why we see right now that growth is accelerating in the second half of 2024, for us, it's a great indication that we will see acceleration of revenue in 2025. Remember that every - most of the incremental revenue that we get goes to the bottom line in terms of profitability, as we keep our operating expenses more or less at the same level. Therefore, I expect that this acceleration of growth will drive further free cash flow, which will be demonstrated in a much better, or significant surpassing the Rule of 40.

Great, thank you.

And one moment for our next question. Our next question will be coming from Brent Thill of Jefferies. Your line is open, Brent.

This is [indiscernible] for Brent Thill. The question is on bookings growth. You mentioned it's going to accelerate in half of the incremental, will come from several factors you mentioned like Studio creators, commerce and so on. But is there a way - when you think about them in terms of ranking them in terms of meaningful contribution in terms of the level of confidence you have behind each of those? Thank you.

Yes. So definitely looking at the next couple of years, I think that it will be much better to look at 2024 and 2025, because obviously, it's continuation of that. Remember that we are a SaaS model. So every time that we launch a new product, the time is passes, we see more and much more contribution, obviously. This is why - by the way, we believe that the second half of 2024, the growth is going to be accelerated. But then again, also 2025 will be much better than 2024. I think that the first reason is definitely the launching new products. In the end of the day, we are technology, a product company, and this is how we drive our growth, mostly from new features, from new products. And this is what we did in the past, and we will continue also to do in the future. So definitely, it's coming from the partners business with launching Studio. It was a great launch for us. We see the traction in the market. We see the demand. We see how our agencies use it. I think, that you know, we mentioned a few times about the number of new accounts with more than 50% are new. I think that it's - for us, it's a great proxy to the fact that, we are going to see much more that it would be significantly, the major growth driver for us in the next few years. The second one is, everything that we've done with AI, we see a tremendous results out of it, which we believe that we will continue into the next year. And as you know, as always, the third one, is about trying to optimize our pricing strategy. And this is what we've done in the past, we'll continue to do in the future.

Thank you. And then maybe a follow-up.

I think that we also mentioned like a fourth reason, which is the overall demand that we see on a macro basis.

Great. Actually, that's kind of leading to the other question I had, was when you mentioned positively trending macro in your prepared remarks, wondering if you could share more details what actually you're seeing specifically? Thank you. And that's it.

Well, I think generally, it's still not massive. But definitely, I think we are seeing a positive trending behavior in terms of the business is being formed, on the platform in terms of the GPV tool that is going through the website of - our users, both on the Self Creator side and the partner side. You have to also remember that we have a very wide activity of commerce. So not only shops, but also people are selling scheduling time, selling digital goods, booking, selling tickets to events, booking hotels, et cetera. And I think, that in most of these cases, we're seeing a positive upward trend. So, I think that's what, makes us feel a bit more comfortable about the macro economy.

Thank you very much.

And one moment for our next question. And our next question will come from Ygal Arounian of Citi. Your line is open.

Hi. Good morning, everyone. Good to see all the product - the strength in the product pipeline, all the innovation here and the kind of the expectations for more coming through. I don't know if there's anything that you can comment on the new things that are coming up in the pipeline that you're talking about here? And maybe specifically on AI site generator, if there's more you could share on what early users are seeing, what you're seeing from them and when we could expect a more general launch of that?

Of course. I think that - I'll start with the site generator. So we released what I would call version 1. It's a great way for people to start with the website, meaning that you come in and you say, I'm a SPA in New York City and I specialize in some specific things. And the AI will interview you on the - what makes your business unique, where are you located? How many people? Tell us about those people and the staff members. And as a result, we generate a website for you that is - has all the great content, right? And the content will be text and images. The other thing that then will actually get you to this experience where you can choose how you want to have the design look like. And the AI will generate different designs for you. So you can tell you why I like this thing, I want a variation on that, I don't like the colors, please change the colors or I want colors that are more professionals or I want color that are blue and yellow. And there I will do it for you. On the other hand, you can also say, well, I don't really like the design, can you generate something very different or generate a small variation of that, in many ways, a bit similar to [Me Journey], what the Me Journey is doing with the images, we are doing with a full-blown website. The result of that is something that is probably 70% of the website that you need to have on average, right, sometime it's 95%, but sometimes it's less than that. So it gives you an amazing way to start your website and shortened the amount of work that you need to do by about 70% to 80%. I think it's fantastic and very exciting. And it's even more exciting considering that we have some really cool ideals on how to take it even further and make it a better product that not just create more beautiful websites but also is more tightly coupled with your vision about your own business. And so we're going to see a lot of that is coming. There's a lot of other things that we are working on, mostly for Self Creators, mostly in how you manage your business. So at Wix, we have the opportunity to see our millions and millions of businesses are being run what works and what's not. And we can recommend our customers how to do things better, how to make the business more successful or what they should be saying and they don't say, and we are adding assistance that help you figure out how to take your business to the next level. I think that this is really unique. I don't believe anybody else is working on something similar to that, and I found it to be an amazing opportunity to more businesses to learn how to do things better. And a lot of it can also be automated so the AI can tell you, well, I think we should have more post on your website about things that regarding to - if you're a yoga studio or about what is the right way to it, what kind of food you should consume and what is better? And I think that can be also done by the AI. So the AI will not just recommend a lot of things it can be doing for you. So that is another exciting project that we're working on. And of course, in Wix Studio, there's a long roadmap of really exciting things you're that going to see coming this year.

Very helpful. Just a follow-up on that. I think a lot of what you've talked about in the previous answer will address this, but - on the - obviously, a lot of great things to focus on here in this quarter. But for Self Creators, the growth decelerated a bit sequentially on an easier year-over-year comp last quarter, I think it was Nir commented on seeing that business get back to double-digit growth. Do you still think that, that's the right framework for that? And is it just AI and these components that get you there or is there something else to think about? Thanks.

Well, the deceleration of - I think that it's also super important to mention that is a result of a few things, not necessarily from the business perspective. But obviously, we were lapping with the price increase that from spring of 2022. So obviously, we see the results in the second half of 2023. We spoke about it also last quarter, but I think that you know, as Nir mentioned, we obviously believe that this price increases and optimization is something that we will be doing on a regular basis as long as we need to, obviously, we have to optimize the pricing. The second thing about the Self Creators, I believe that we had a slightly higher percent of monthly plans in the second half of the year. So obviously, all the above will not be a headwind in 2024. I believe that everything that we are doing right now with the product and AI and so on. And we mentioned that for Self Creators in the long run, we believe that it will be a double-digit growth just because of that because it has the most effect of the macro environment which already started to see that it's improving. But then again, also the new product and AI is one of the examples how we can bring increased conversion and also increase the growth of Self Creators.

Thank you.

And one moment for our next question. And our next question will be coming from Mark Mahaney of Evercore ISI. Your line is open, Mark.

I just want to ask about the sales and marketing leverage. It's not too often you see company grow revenue by 25% over two years and get cut sales and marketing expenses by 25%, roughly those numbers are right. So just talk about the sustainability of that. Is it due to the increasing contribution from partners revenue? Is it due to the fact that you've reached enough brand awareness and scale where sales and marketing can become more of a fixed cost going forwards? I know you gave guidance for this upcoming year about where sales and marketing is, but just talk through again the pretty significant leverage you have and the potential for keeping that just as a fixed expense going forwards? Thank you.

Hi Mark, it's Nir. So I think you touched on both drivers. And I would say that, yes, definitely, partners plays a part in it. But I think that more than anything, it is about the scaled brand. And you have to remember that we've seen a surge in our brand recognition in the years kind of leading up towards 2023, mostly throughout the COVID era, which combined a very high increase in our marketing spend because there was a high - extremely high demand, but also because so many people were now actually forced to go online in businesses and in areas where naturally before they weren't. And they got to - we generated a crazy exposure throughout that period of time. That led us kind of late 2022 to the point where we started testing whether we can go and decrease the investment in marketing and what will that do to our sales and revenues on an ongoing basis. What we've seen, which we thought was very remarkable, that not only does it - that it really helps us quickly stabilize and continue growing even at a lower base of marketing. Simply because a lot of the traffic we kind of lost by not buying it was replaced by organic traffic, which came through the strength of the brand. And even that traffic, again, you see that the code basis are smaller in essence, but it was a much higher intent traffic. So it generated actually better financial results. So from our standpoint, yes, we do believe that on the Self Creators side, the marketing investment can pretty much be a fixed cost, obviously, with some fluctuation over time based on opportunities. Whereas when we look on the positive side of the business, I think 2024, especially with the fantastic results we're seeing on the studio side in terms of the product is where we're going to see more investment into marketing.

Thank you, Nir.

And one moment for our next question. Our next question will come from [Chris Zink] of UBS. Chris, your line is open.

Hi, thanks for taking our question. As you discussed a little bit in the release in the shareholder update about the pricing increase that's currently underway. I just wonder if you could share a little more detail about the extent of the pricing increase, which products, for example, and the level compared to 2022, you're thinking about? And also the timing and how that factors into your guidance here? Thank you.

Chris, it's Nir. I think I'll kick this off and then hand it over to Lior to talk about how the modeling and the guidance part of it. But generally, there's a variation, obviously, between different geographies and different kind of subscription in terms of what is the increase in percentage. I would say roughly 5% to 15% really depends on those different parameters. And the cadence, again, because for new prices, in the U.S. and in Europe are already in place and they're going to be expanded globally. And in terms of the cadence for the subscriptions, obviously, they only increase when they renew, so that's something that's going to be in effect throughout this year and actually will overflow also into 2025. Lior can share more about thoughts on the guidance there.

So with regard to the price increase, we obviously took it into consideration when we provided the guidance for those places that we actually tested and implemented the price increase. Very important to mention that it's not cover all of our customers, not all of our geos. And this is something that will probably test and if implemented, we will be an upside to the guidance.

Understood. That's super helpful. And if I may, I think just a quick follow-up. Just for your revenue by region. Asia is a smaller part and usually that fluctuates a little bit. And if our calculation is correct, the Asia and other regions actually saw a slight Q-on-Q decline, can you maybe talk about the drivers behind that? Thank you.

Are you talking about the North America revenue?

Sorry, it's Asia and other.

Asia and other. Well, I believe that Asia and other is like - has an impact of kind of a small amount of a specific customer channel. So it's kind of fluctuated. I think that, obviously, when you look at, for example, like Europe and North America, it has been impacted by a specific product that we've launched only in the second half of last year. So we do see the effects of it. Right now, I'm talking about specifically about Google Ad, I think that it's a great way to see that. Since we launched a new product, it was a huge impact on a significant impact on our numbers to show the ability to introduce new products. But specifically with regard to Asia and other, it is kind of fluctuating, really depends on a specific customer, especially with coming from the channel activity.

I understand. That's super helpful. Thank you so much.

And one moment for our next question. Our next question will be coming from Trevor Young of Barclays. Trevor, your line is open.

Great. First, on the expanded partner revenue share. Can you just kind of walk us through how the accounting works there and the timing of the impact? As I understand it, it's a contra revenue and may be recognized in arrears. I'm just trying to understand how that potentially impacts revs later this year for partners.

Sure. So the revenue recognition will be on a net basis. So for example, if we got $1,000 from partner and his share is about 20%, so we are going to recognize only the 800 over the period of the service, as you know, any other subscription that we do, very similar to that, but it will be just on a net basis. So there will be no impact on the profitability or the gross margin, for example, of the operating profit. I believe that this kind of program together with the amazing Studio, the product that we just launched, it's I think it's a combination that it's a win-win from one hand it's a great solution to our partners; on the other hand, is a great business for them, actually providing them the ability to be a SaaS model, get them a subscription base for a very long period of time as we are. So I believe that it's not going to have an effect or any impact on the margins, but definitely, we believe that it will be one of our significant growth drivers for the future.

That's really helpful. And as a follow-up, so a 33% margin in Business Solutions in 4Q, what drove that outsized step-up. Was that pricing actions in Google Workspace? And then on the implied step down to 30% for fiscal '24, is that just kind of a mix of more payments versus Google workspaces?

So there are like many reasons. I think that the number one reason is obviously our payments. And usually, Q4, with all the holidays and so on, you have increase in GPV. Increase in GPV means that the increase in the volume of payments. When payment is going up, so we get a better profit. We always say that. And by the way, one of the reasons why we believe that the gross margin of Business Solution will be increased in 2024 is this is the reason. We see that payments scaling up. And with that, we see better margins.

Great. Thank you.

And this concludes our Q&A session. I would now like to turn the conference back to the company for closing remarks.

Thanks, everyone, for joining us today, and we'll talk to you next quarter. Thanks. Bye.

This concludes today's conference call. Thank you for participating. You may now disconnect.