Yeah. Looks like we're- I'll sit here in the middle? Sit over there, yeah. So I can control. All right, looks like we are live. Let's get started here. I'm Jamesmichael Sherman-Lewis. I'm on the internet team here at Citi. Joining us is Lior Shemesh, Chief Financial Officer, and Nir Zohar, President and COO. Thank you both for joining us here. Before we get into, obviously, Base44 and Wix's product roadmap, wanted to zoom out for a second. There's a broader kind of debate here around the evolving role of a website in the agentic web. As AI agents increasingly browse and transact online, agentic traffic beginning to exceed human traffic, how does Wix think about the long-term value of a website, and how does it inform your product roadmap? Yeah. I think it's about a year ago, that same argument or the same question was about, does the rise of AI means that websites are completely going away? I don't think that is the-- Is it me? Yeah. Turning off the thing. Yeah, sure. It's not the first time that it's happened to him. Right. Quick technical piece. There we are. Okay. Perfect. Yeah. Last year, the question was more about will websites even exist because AI will come and basically make them redundant. I don't think that's a concern anymore. If anything, I think that with Vibe coding, either on the high-end professional level or the more less sophisticated, simple level of Base44, there are more and more things being created. With more and more things being created, some of them are websites, some of them are applications, but I think that we're going to see more rather than less. I do believe, and we're seeing it, and we're playing a part in it, is that how AI interacts with websites will keep on evolving and changing. I would say one aspect of it is we integrated Harmony into Gemini, so it's going to be super easy for you to go through Gemini and immediately go into the creation path, which makes a lot of sense. We understand your intent, we understand what you're looking for, and the AI immediately puts you into the right flow that will make you happier by getting the experience you were looking for. A different part of it, which is more the transactional level with websites is what's going to happen with a catalog when you want to buy something and you want to get an offer. Now, I think that the idea that everything is going to turn textual is, I actually think it's ridiculous, okay? I'll give you a beautiful text about the hotel room I want you to book or a few good images of the room and the beach next to it. I'm pretty sure which one will resonate better with you, right? Text is not enough for us as humans. I think, and you can say the same thing about the shoes you want to buy, and if it's not exactly what you wanted, I'll show you the alternatives. I'll give you different selections. I think there's definitely a change there in the sense that the AI would like to pull in the right thing that matches your search, matches your inquiry, matches the thing you're looking for. I think that's a better experience. Whether the full transaction happens within the agent or ends up pulling you back to a full-blown website, you need that place where everything exists in a seamless manner, has the right text for the catalog, the right images, videos, measurements, colors, prices, different prices for different places if it's cross-border, different taxes in different places. There's a lot of complexity, and even if you transact on the agent, at the end of the day, something needs to synchronize and make sure that transaction happened, fulfillment will happen next, something was removed, reducted from the inventory. If there are a few agents that are working with my websites, it needs to synchronize between them, and I think that this is definitely a change that's happening. It's actually happening slower than anyone anticipated. The fact that it's happening slower, in my mind, doesn't mean that it's not happening, just that it takes a lot more time to adapt. I think that definitely we're going to see a change in how people interact with websites and what websites do for them. It's going to increase the level of complexity, not decrease it, which I think is where we intend to be very much kind of ahead of the game to try and solve that complexity for the small businesses, our clients, the ones who cannot afford to pay huge tickets in development cost in order to solve those kind of issues. Increasing complexity, AI accelerating content creation. Wix's strategy here, as I see it, seems to be enabling user choice in how they do that creation. Wix Harmony maybe having some more of the conventional like drag and drop. You've got Base44, natural language, but also headless integrations with major LLMs. Based on kind of what you're seeing this year, what channels and solutions are customers really gravitating towards? Well, it really depends about who they are. We are seeing the regular behavior of most of the self-creators who are still going to Harmony because this still embodies the most simple and fully curated solution that has all the guardrails, and I think for people who are not tech-savvy, this is very important. We are also seeing some self-creators are starting to gravitate towards trying to do it fully blown on Vibe coding. We are seeing more of those on Base44. There are sites being created on Base44. Even though the majority is still applications, there are now quite a few websites being created on Base44. That is one side of it. If you look at partners, their business has been much more under the gun than the self-creators, and they are seeing a lot of pressure, but they are also trying many different things. Some of them are trying to build websites on Base44. Some of them are trying to build applications and offer applications to their customers through Base44, whether with the Base44 website or a Wix website or someone else's websites. Headless is also picking up, still relatively small. Again, it is mostly more of a professional play. It can be partners or actual engineers or people who want to build front end in one place, and then they want to take advantage of the very elaborate and deep business stack that we built on Wix over the years. With headless, it becomes super easy for them to adopt and enjoy that. I would just say, I do not think my job at this time is to try to foresee the future. First of all, I am happy that is not my job because I am going to miserably fail. I think it is impossible. Things are changing extremely fast right now. I think my job and our job as a management is to try to understand what are the most relevant outcomes that we can consider in our space, and then try to gear up and have a good solution out there. Whichever way the pendulum swings, we can capture opportunity. This is exactly one of the reasons that we bought Base44. When we thought about it earlier this day, we were thinking, okay, what is going to be just Vibe coding combination and so on. That was one of the reasons why we decided to buy Base44. Providing optionality. Exactly. Let's stay on Base44 for a minute. ARR went from $100 million early March to $150 million by mid-May. I think that growth trajectory continued through 2Q as I think we've discussed. What key parts of the product roadmap going forward from here are you really excited about? Oh, Base44. There's so much. Try to track the release notes on X coming from either the Base team or from all. It is something new that's coming every couple of days. So it's really hard for me to get attached to one specific thing and say, oh, that's the thing. But I think the fact of the matter is that the glass ceiling, so to speak, and it's not really a glass ceiling, but I think what's above our heads still on Base44 more than anything else is the fact that most people that are not in tech and are in this room have never heard about Vibe coding, have no idea what it means. So go out to 6th Avenue and ask around a little bit. You'll see that the vast majority never heard the term. A few heard the term but don't know what it means, and maybe one or two or zero understand that Vibe coding is something that can benefit their own lives by going in and using natural language to create a piece of software that could do something for them. And I think that's, to me, the most interesting thing. I think that's going to be the biggest thing that is going to affect the growth trajectory is that as this becomes more widely distributed and populated, and everyone knows about it- Right then that's where things expand dramatically. It's not that I'm not excited about the product. It's really evolving tremendously well, but it's already a healthy product, right? I think that it will continue expanding. There are more opportunities. There are business opportunities. We told the street that we said that we hired a VP of Sales. We're going to start building an enterprise muscle for Base44. I still think that just the expansion of the category, which is just being born, is the most exciting part there because that's where the breadth of the term comes to play. Widening the customer funnel, the aperture. That makes a lot of sense. For the customers that are using Base44 already, I think you've said cohort trends are improving almost every month, but it's not maybe yet at Wix's level of retention, correct me if I'm wrong. With the first kind of cohort of annual subscribers coming up for renewal, what leading indicators are you seeing on that front? First of all, you have to remember, we started selling annual subscriptions in August last year. Numbers were very small. I think statistically, we'll have more validity throughout Q4. That being said, I would say we're seeing good indications, meaning that it's as we expected and definitely we have no concern looking at the numbers we're looking at right now. First of all, the retention is different and probably will remain different because some of the nature of what is being done is very different. There is much more call for personal use of applications on Base44 than there are for personal websites on Wix, okay? Even there, if somebody builds a personal website, they usually will hold on to it for a long time. With applications, you might actually build something which is a one-time thing for you. But it doesn't mean that the next time you want to build or create something or a piece of software, you're not going to come back again to Base44. I think the longer-term understanding of how the cohorts behave, we still don't have enough to fully understand it, and it's also expanding very fast. We're seeing new things all of the time. But I'm actually encouraged by it because I think if we can get to a point or we can get to a place where people really expand their use into Base44 personally all the time. I start by building an app for my business, and then I understand that it's super simple, that I might actually build two or three more apps for my business for different functions. Because a business will usually have one website, but they may have an application for running the staff, an application to do loyalty, and a different application to deal with inventory, and something that can replace my CFO and do the finance for me. Then a person that is covering that as the business owner at some point may say, "Oh, can I actually use it to do something for my kids' soccer team or something for the PTA," or et cetera. As this expands, we can actually get Base44 be even more popular than Wix is, and that's obviously very exciting. Yep. Lior, let's- By the way, replacing CFO is really, really hard, can I tell you that? Lior, let's bring you back in the conversation so you can keep your job. But I think that just going back to this for a minute, I think that the first indication that we get it is within our expectations, which is really, really good. I mean, the feel that something, wow, it's going to be a complete failure, it's not the case. I think that within our expectation, even a bit better, let me say that. But it's really good. Great. And I think that it can only improve. Nir Zohar, for example, mentioned the fact that we're trying to build the enterprise business. So we do see indication that actually on a dollar value even it's better because it means that we see more and more businesses when they build application on Base44. Obviously, the retention there is super high. Great. Can we talk briefly about the economics of Base44 and some of these the newer models that you've implemented? So two new in-house models, the Wix Harmony LLM and Base 1 for Base44, each cutting inference costs to about 5% of the frontier model alternatives. Can you talk broadly about the decision to open source, the advantages in specializing on your own data? And then potentially a third one squeezed in, how you expect to adapt your proprietary models as frontier models continue to evolve? Yeah. I think the easy value that everyone sees immediately is the inference cost savings. I would actually argue that it's the least interesting one because I think it would've happened anyway. It probably would've happened, took a longer time. But eventually, just on the nature of the kind of competition there is around it should have come down. The other thing, I think that's driving costs on AI compute obviously is energy and data centers, the lack of both. But we all know that there's so much investment into expanding that. So over time, I would expect the cost to come down anyway. Naturally, because we don't want to wait, the fact that we can save a ton and improve the gross margin profile quickly by doing it now is a huge benefit. That being said, I think that there are two other things that are actually even more important. They're not immediate, but they're more important. One is if the core or one of the core things that Base44 does is understanding what's the best flow in order to create and code web applications for a certain kind of customers, then obviously sharing that knowhow with a third party that might at some point either deliver the train their own models and then let competitors use it or become a competitor themselves is a huge, huge disadvantage. So I think for us, using this is an important way to protect our IP. And I would say that once you encapsulate the problem you have and the issue you're trying to solve with your own model, you also have a better chance to improve on that specific undertaking. Whereas when you are only reliant on the improvements of a third party that does something much wider, you may get some benefit, but not necessarily the exact benefit that fits the problem you're trying to solve. So if Fable is much better at deep research, I'm not sure that helps me with building applications, right? It doesn't mean that it's not amazing for deep research. So I think that's another thing that over time we'll be able to create and curate a better solution by focusing on our own efforts on our own trained model. Now to your question, what happens when the new big innovation comes out? It's a great question. I think that, first of all, we are tracking it all the time. This is why we keep on using frontier models all the time. We're never going to be completely disconnected, and we're actually using a bunch of the top-notch new ones all the time and testing them. And I think, at least so far, we've seen a lot of those kind of outsource solutions manage to catch up rather quickly. You're asking what if comes a new one that nobody catches up with, and it is so good, it does something so different that you have to go and replace and go back to it. I don't know. It's a great question. If ever I have to deal with it, then maybe we'll come back and say, "Guys, we're going to increase cost right now because we're going to use it, but here's the benefit, and here's why it makes sense." It can happen, but it needs to be a smart business decision that I can articulate and explain to you why it makes sense, right? If it comes to it, we'll have to engage with it. Understood. On the cost side, Lior, maybe you have some input here as well, but Base44's profitability is continuing to improve. We have a few metrics that we're anchoring on now. TROI, modestly longer than 12 months, 60% gross margins in the second half. The question really is, how do you think about the structural profitability today, inclusive of free users, versus potential leverage ahead? Parallel to that, how do you think about TROI as you lean into marketing again in the second half? I think that when you talk about TROI and gross margin, in the end of the day, we manage risks. Okay? It means that if I see that I have a higher gross margin, I can take more risk in term of the TROI. I think that let's start with the gross margin. What we see right now, and we did mention what we expect from the second half of the year. So definitely within what we provided, and let me say even a bit better. Which is a really good indication because it means that when we go to our next year, we're definitely going to improve the overall gross margin for next year. Again, assuming there is no new model that we would implement. I can tell you even more than that. I think that technically, we can even increase the gross margin, but we want to use more of the frontier model in order to compare. I think that we are in a very good place, and we are going to see that next year, definitely the gross margin is going to improve, okay, based on what we know right now. With regard to the overall profitability, I think that then the only question that remain is how much we are going to invest in marketing. This is something that we'll have to decide as we progress because there is a lot of opportunities. There can be new products coming from Base44, that would like to invest. I don't want to be in a position where we had the growth because of the free cash flow, okay? We need to deliver, and we need to make sure that we will continue with the growth. I think that definitely when we provide the guidance, we are going to provide much more explanation about what we see, why, and what we decided to do. But in term of the margins itself, it's getting better. By the way, the same also for Wix. I'm going to see for the core Wix, I'm going for improvement in the gross margin next year. The consolidated, it's a question about the mix between Base44 and Wix. Makes a lot of sense. If we could switch gears quickly. Partners, just wanted to hit on that quickly. Some volatility this year. 50 million bookings headwind. Could you elaborate a little bit on the pipeline pressure? But really the question is more on, have the headwinds changed? Have you seen any change in the magnitude of the headwinds or? The simple answer is no. We haven't. We haven't seen improvement. We haven't seen deterioration. Obviously, we also already absorbed the surprise factor the last time and when we announced it in June. Again, I think the role of partners in this ecosystem is changing. Are they going to be completely gone in two or three years from now? I don't know. I don't think so, but I don't know. I think that if they do because they lose all of their business to essentially AI machines that can do everything instead of them, then we intend to own at least one of those AI machines and be part of that change. In the meantime, I actually think that as much of the simpler stuff become very easy to do with AI, a lot of the complex stuff as a business owner are still very complex for you, and business owners still have that tendency to try to steer away from technology, one, because it scares them, and two, because it de-focuses them from their business, which is what they know how to do best, unless it's digital business. Then I think the role of the agency can just evolve to be someone who's much of a partner to the business owner in helping them run it more effectively in a world where there are lots of other new technological opportunities that suddenly they can unlock with better website building on Harmony or on Base44, with adding applications around the business, maybe with running the business with that AI cluster of experts that is being built on Symphony. I think what we want to understand while we're improving the product and trying to slow the bleeding, hopefully stop the bleeding, but at least slow the bleeding, and this is something we're going to do very soon. We also were talking to many tens of our top agencies to try to understand what is the experience, what is changing, how their jobs are changing, and then from that, to curate solutions of how can we help them evolve into the next phase of what is a partner, what is an agency in the age of AI? I don't think anyone has all of the answers yet, but we're working closely with them in order to get there. Perfect. Wanted to open it up to the audience for any questions before we keep going. Yeah. Just out of curiosity, could you maybe just let us know the split between the queries based on frontier models versus Base 1, your own internal LLM? Just if you could quantify, that would be very helpful. Thank you. We do not want to provide, because for a few reasons, I think that it is mostly about the fact that it is keep on changing. Okay? It is not something that I want to commit to. It is not something that I can commit to. I think that the fact is that you want to test, you want to understand. In some of the cases, customer actually will prefer to use the frontier models. So it is something that we are. But I would definitely say that if you look at the first half of the year or early in the year towards what it is right now, the portion of the frontier model usage has changed dramatically. It is a big change. It is not small. Again, we are not going to quantify it exactly, but it is very big. On your prior subject of evolution, I think we are potentially in this transition period as well, where bookings have kind of lagged revenue growth for a few quarters now. Lior, I think you mentioned specifically that you hope that dynamic changes next year. What would need to be true for that to occur? For the? For the inflection to potentially happen. Look, I think that in the end of the day, what we do right now, I think that most of the time trying to figure out about what would be the growth drivers. Because there is a lot of changes right now. Even within Base, we spoke about Base, about new product. There is so much opportunities with Base. But definitely, this is one of the growth drivers that we are investing a lot. Second, with Wix. There are mostly, there are like three things and Nir mentioned that. But definitely, Symphony. I believe that also within partners we have more opportunities. Also we talk about the headless. So we are also evolving into a place where no matter where you do the front end, you will still be using Wix. I think that this is super important to understand because even if you use Anthropic or you use ChatGPT or whatever, I think at the end of the day, you want to be in a position where you can present our solution and everything that we have worked so many years and establish a lot of understanding about what small business needs, what kind of vertical, what kind of connections and so on. I think that we are working very hard in order to make sure that we can generate more growth from those growth drivers. But let us see, I think that it is too soon, but we are really, really optimistic about it. You said it's a transition. I think it's an underestimation of what's going on. First of all, 10 years ago when we were sitting here, we were a few years after the IPO, we had one editor, and we're talking about how we're adding all of those business solutions and verticals in order to help people unlock more value as they want to build websites. It wasn't that we were not invested in other things so much as the world was just a much simpler world back then. I think the shift that we're seeing right now is really dramatic. I think it's less dramatic sometimes because people are trying to describe it as if the sky are falling and everything is going to go away tomorrow. I don't think that's the case, but I do definitely think that we are going through a massive shift of a new internet, which is the internet in the age of AI. It definitely presents huge amount of risks, but also massive opportunities. I think everything we're talking about, think about all the things, the sheer number of different products and different things that we are talking about just now in 20 minutes. Again, I couldn't cover so many things last time because we didn't have or 10 years ago because I didn't have so many things going for me. I think all of that is geared up toward making sure that we can not only survive this shift, we actually want to come as winners in this shift. I think we have a good chance, but we'll have to work very hard. In that shift in the platform evolution, I think the new products are interesting, right? Just obviously headless, kind of changing the access and entry point. Symphony by Wix though, usable by businesses that are not even on Wix at all. Yep. How does Symphony by Wix maybe change your TAM and how you think about creating new products that are maybe very different from the products you used to have? I think obviously there's about if you look at kind of the go-to market or the kind of the profile of the user, you can say, oh, there's a lot of similarities, but I think the TAM is actually a new TAM or an independent TAM because it tries to answer a completely different need and something else. At the end of the day, so much AI innovation, so many great things you can do with AI. You can really leverage AI to make your business much, much, much better. The vast majority of the people have no idea how to approach it. If Symphony is successful, and I don't know to say it is, it's a three-weeks-old product, way too soon to determine anything. But I think that on paper, in terms of the opportunity, it's a super interesting opportunity. It's interesting because if it works, then yes, then it's independent of Wix, can cross with Wix definitely, but it's not determined on me bringing a customer to Wix and then selling them Symphony. But a whole new and independent opportunity. I think the great thing about this age of AI is that this is a product we developed in a matter of months with a very, very small team. I personally really believe in it and hope that it's going to be a big hit, but I also have the appetite to do more of these and try to go after new big opportunities. I think, again, to go back to what I said before, it's an era with a lot of opportunities. I think this is very exciting for us. Era of opportunities, I think, is a perfect place to end. Thank you both so much for coming. I really appreciate having you here.