Wix.Com Ltd (WIX) 2014 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Wix.com 2014 Third Quarter financial results conference call.

(Operator Instructions)

If anyone should require assistance while the meeting is in progress, please press star then zero on your touchtone telephone to reach an operator. Please note today's conference is being recorded. I will now hand the conference over to Joe Pollaro, Vice President of Strategic Partnerships and Investor Relations. Please go ahead.

Good morning. Welcome to Wix's third quarter 2014 earnings call. Joining me from management are Avashi Abrahami, co-founder and CEO; Nir Zohar, President and COO; and Lior Shemesh, CFO.

Before we begin, a quick reminder that during this conference call, management may make forward-looking statements which are subject to various risks and uncertainties that could cause actual results to differ materially from our current expectations. A detailed discussion of such risks and uncertainties is contained in our annual report on Form 20F for the year ended December 31, 2013. Forward-looking statements made during this conference call seek only as of today's date, and the company undertakes no obligation to update them to reflect subsequent events or circumstances.

Also during this call we will discuss non-GAAP measures. Reconciliations to the most comparable GAAP measures are provided in the tables in our press release. This conference call is also being webcast, and is available through the IR section of our Web site. Additionally, we posted to our IR site a supplemental data sheet containing additional financial information along with a slide presentation reviewing the results. I also want to remind everyone we are going to be participating in a Fireside Chat at the RBC conference in New York on Monday, November 10 at 2:00 Eastern.

So I will now turn the call over to our cofounder and CEO, Avashi Abrahami.

Thanks Joe, and thanks everyone for joining us. We delivered another strong quarter of results extending our prior outlook again. We also reached a milestone yesterday. It is our one-year anniversary of IPO.

On this morning's call I would like to spend a few minutes talking about the progress we've made on our strategic plan and how we are building on our progress to grow Wix further. Nir is going to share with you an update on our core data as well as an overview of the OpenRest acquisition which we announced last week. Lior will be providing more details on our financial performanceand Our improved outlook for 2014 and some thoughts on 2015. So let's get started.

We experienced strong performance across all of our team metrics. Collections in Q3 grew 70% over the prior year to $44.6 million. Revenues in Q3 grew 75% of the prior year to $37.5 million. We ended the third quarter with over 1.1 million premium subscriptions and over 54 million registered users. As I mentioned, today we mark exactly one year of being a public company, so I thought I would spend a few minutes reviewing the last 12 months and now we believe we have set it up for another strong year.

Over the last year we reinforced our position as the largest Web site and mobile development platform in the world. Our vision remains to enable everyone to create and contribute online. But we are evolving this vision to be a software platform that enables small businesses not to only create but also to manage and grow online. Since our IPO we have invested significantly in which to execute on this vision.

We have made hundreds of enhancements to our HTML5 editor and mobile editors, further increasing their capabilities and ease of use. Our HTML5 mobile site builder is likely the largest in the world with over 4.7 million mobile sites published to date. That's an increase from only 800,000 a year ago. We introduced highly impactful products and technology such as Wix ShoutOut, an easy way to create and send newsletterand WixHive, which enables our users to manage a CRM database in the cloud.

Since the launch of our database capabilities in July over 31 million contacts have been stored and are being managed by our users. We also launched our first vertical product WixHotels, and we announced the acquisition OpenRest which will become which will become our restaurant vertical. Business owners in certain industries are in need of an online solution that they control. So we plan to release future vertical products addressing these needs. All of these new products and technologies improve our ability to grow and retain new subscriptions.

We hired over 175 engineers in January, increasing our R&D team to over 400, representing half of our total employees, which has been a priority for us. A robust engineering team is critical to delivering our users best-in-class products. We invested in expanding our global presence for payments, distribution partnerships and new advertising campaigns. Our business in Europe and Asia have more than doubled year to date. Wix.com and all of our support forums are now available in 10 languages, with more on their way in the coming months.

And we continue to expand our app market, which has gone from 140 apps and 20,000 installations a day a year ago to over 230 apps and over 35,000 installations per day. We have already become one of the largest web development platforms for small businesses in the world. With businesses, organizations and individuals can create a beautiful, professional looking Web site easily and without the need to code.

We now focus on taking that vision a step further and becoming the cloud software platform where entrepreneurs can manage all their business online as well. Businesses of all types around the world need to be online beyond just a Web site. Marketing, customer relationship management, transaction capabilities, and back office management are all workflow processes that need to be online. Small businesses need easy to use, flexible and affordable solution to bring their complete business online. Today there are very few options for SMBs to take their complete business into the cloud.

The investments we have made have positioned us to establish and lead this market globally. To further execute on this vision, I am excited today to announce that we will be launching a new e-commerce product, WixStores at the end of the fourth quarter this year. Online retailers represent one of the largest verticals on Wix, and while we are already offering e-commerce solutions today, our newest version will be a significant improvement. The new product will upgrade the user interface, improve the buyers and store management experience. Our new architecture will also provide more mobile and social commerce opportunities.

We are also updating the store management capabilities for our merchants, including the ability to manage their store from a cell phone and mobile device. WixStores, both with it's back-end and front-end capabilities provides users a great experience of creating and managing their business online. WixStores is also a continuation of the vertical product strategy which includes WixHotels and soon a restaurant solution. We need to address the specific online needs of specific businesses in specific industries. Combined with WixShoutout and our CRM database capabilities, this vertical products create a complete platform to manage every aspect of the business.

I'm also excited to announce today WixJet. WixJet is a restructuring of our platform codebase enabling Wix user Web sites to launch faster than it takes 95% of the Web sites on the internet. As with all of our products and technologies, WixJet would bring enterprise capabilities to small businesses. The leaner codebase, better modularization and improved testability will also enable us to develop and employ new products, features and capabilities into our platform at an even faster pace. We have begun to roll out this technology to our users and expect it to be fully developed by year end. I will now hand it over to Nir who will provide some additional details on our performance this quarter and discuss our recently announced acquisition of OpenRest .

Thank you Avashi. Let me start by pointing out that the growth continued as we added over 106,000 premium subscriptions in the quarter. As we planned for in Q3, our user and net subscription ads were slightly impacted by lower traffic during the World Cap back in July. That being said, this is our third consecutive quarter of adding over 100,000 subscriptions, which we consider as an amazing accomplishment.

On page 8 in the slide we have posted on our IR Web site, we have updated our user cohort data from our first 5 Q1s I would like to highlight a few items on this slide. First, the rate at which we convert users into premium subscriptions continues to increase. In particular, the Q1 2014 user cohort, the green line on the chart, continues to convert at a higher rate than any of our past converts. We attribute this performance to enhancement to our overall platform, our new product offerings and an indication of increased value our users are getting from Wix.

Second, our retention of subscriptions is also better, as can be seen in the cohort behaviors. In the Q1 2013 user cohort, the yellow line on the chart, we actually saw a slight increase in net subscriptions in the most recent quarter. This behavior is consistent with what we have seen with the past quarter as they begin to mature. Improvements in our retention of subscriptions is also given by product as well as the ongoing shift of more annual packages versus monthly packages. The behavior of these cohorts reinforces the benefits of our free model in which we build a strong base of free users with the expectation that many of them will purchase one or multiple premium subscriptions over time.

As we continue to enhance our products, provide more functionality and remove the barriers of creating, managing and growing a business online, we believe these trends will continue.

Next, I would like to discuss some trends we are seeing in our marketing activity and our plans moving forward. As we have explained in the past, we measure the efficiency from marketing span by observing the time of return on investment, or TROI. Simply put, TROI is the ratio of dollars collected from new subscriptions acquired in a period, to dollars spend on direct marketing costs in the same period.

Our TROI has actually decreased over the last quarter, back to roughly six to seven months. This decrease has been probably driven by the shift in annual subscriptions versus monthly subscriptions. In Q3, 65% of the new subscriptions were annual, which is the highest% that we have ever seen, and an increase from 51% and 56% in Q1 and Q2 respectively. Because we collect the full amount of the package price up front, a greater% of annual subscriptions in a period increases collection and lowers our TROI. Lowering our TROI allows us to invest those dollars in the business faster, further driving top line growth.

Looking ahead, we plan to continue to be aggressive in marketing, including increasing our branding activities. We anticipate this increase in branding will extend our TROI back to a seven to eight months range, which we are very comfortable with. Lior will discuss in more detail our expectation for market expand in a moment.

I would now like to highlight some key points from our acquisition of OpenRest, which we announced last week. OpenRest provides a complete online ordering solution to independent restaurants, giving them full control over the customer experience. Similar to WixHotels, we intend to launch a product focused on the food service vertical using online technology in 2015.

Like independent hotels, we believe independent restaurants are in need of a complete online solution that they can customize and control without having to pay a large percentage of the transaction to a third party. Our solution will enable restaurant owners to create a professional Web site, build and manage their online menu, and take orders via the web and mobile.

Our vertical product strategy addresses the online need of businesses in specific industries, deepening the extent of workflow that these businesses can bring online. These products provide a solution that is fully customizable to the business's brand and needs, give the owner control over the customer experience, and are much more affordable than third-party marketplaces. I now hand it over to Lior to walk you through our financial results for the quarter.

Thanks Nir, and thanks everyone for joining today. What another great quarter, and we will once again be increasing our full year guidance of collection and revenues as well as of adjusted EBITDA. First, I will walk you through our KPIs for the quarter. Registered users as of the end of the third quarter totaled 54.1 million, for an increase of 3.9 million.

We ended the first quarter with approximately 1,125,000 premium subscriptions, adding over 106,000 on a net basis during the period. Q3 collections, which represent cash we have collected for both annual and monthly subscription packages and other products were $44.6 million, a 70% increase over the prior year period.

Growth in collections was driven by increase in premium subscriptions during the quarter. We also continue to see an increase in annual packages compared to monthly, which further drives collections growth. During Q3, 65% of new packages were annual, compared to 56% last quarter. We attribute this continued shift to product improvement, the increased value we are providing users, and pricing page optimization. Our aggregate subscription base is now comprised of 70% annual packages. We anticipate this percentage will continue to rise to our 2015 further contributing to our visibility.

I will now turn to our third quarter financial results. Please note that all of these figures are non-GAAP and exclude stock based competition expenses and one-time items unless I note otherwise. Revenue in the first quarter was $37.5 million, an increase of 75% over the prior period. The growth in revenue was driven by the increase in premium subscriptions as well as slight increase in revenue per subscription.

Growth margin in the third quarter was 82%, consistent with recent quarters. R&D expenses in the third quarter were 1$3.8 million, or 37% of revenue, versus 6.7 million, or 31% of revenue in the previous period. The increase was driven by headcount additions we have made this year. Marketing expenses were $24.1 million in the third quarter compared to $14.2 million in the prior period. As a% of collection, marketing fell to 54% versus 58% last quarter.

This is the first quarter that marketing expense has a% of collection decreased. It is now below the 58% we anticipated for the year. We are realizing greater leverage over our marketing expenses due to the strength of our historical cohorts, and we believe this trend will continue in Q4 and into 2015. GMA expenses in the third quarter were 3 million, or 8% of revenue, compared to 1.5 million or 7% of revenue in the prior period.

New adjusted EBITDA, which includes changes in the deferred revenue and changes in prepaid domain registration costs as outlined in our last call, was negative $2.8 million. We exceeded our previous guidance on adjusted EBITDA due to our performance on top line as well as marketing leverage we have realized this quarter. Our adjusted EBITDA was negative 9.4 million for the quarter. During the third quarter we also recognized 1.5 million in gains from financial hedging on our collections.

A quick word about our foreign currency exposure. We hedge both our collections and our expenses to forward in option contracts. We are currently nearly fully hedged on the Euro and British Pound for collections through 2015 at favorable rates. We also took advantage of the strength of the dollar and hedged Israeli Shekel for expenses through next year as well. Our top line will be impacted by currency fluctuations, however, because of our hedging, we will not be impacted on a cash basis. Our outlook, which I will review shortly, takes into account our estimate of currency fluctuation in Q4.

Third quarter net loss was $9 million, translating to a non-GAAP loss per share of 24 cents based on a share count of 38 million. CapEx in the quarter was $1.7 million. Free cash flow was roughly negative $2.9 million, an improvement from last quarter. We continue to maintain plenty of liquidity, ending the quarter with nearly $94 million in cash on our balance sheet and no debt. Our employee count at the end of the quarter was 824.

I would now like to outline our guidance for Q4 in 2014 as well as provide some early thoughts on 2015. For Q4 we expect collections of $48 million to $49 million, revenue in the range of $39 million to $40 million, and new adjusted EBITDA of negative $2 million to $3 million. We are increasing our guidance for the year due to the strong performance we have experienced this year to date. For the full year 2014, we now expect collections of $170 million to $171 million, an increase from our prior guidance of $163 million to $166 million.

Revenue in the range of $139 million to $140 million, an increase from our previous guidance of $136 to $138 million. And adjusted EBITDA of negative $12 million to $13 million, an improvement from our prior guidance of negative 14 to 16 million. While we are still finalizing our plans for 2015, I would like to share some preliminary thought on the coming year. As Avashi discussed, we invested heavily in the business in 2014, building a strong engineering team, expanding our marketing efforts globally and establishing ourselves as a family company.

These investments have paid off, as we are ahead of our place for product launches and positioned ourselves as leading technology platform for small businesses globally. We have also realized tremendous growth in subscriptions, collections, revenue, and adjusted EBITDA, exceeding our guidance each quarter we have been public. We continue to see significant growth opportunities ahead, so we plan to continue to invest in R&D in 2015 in order to build additional products and technology for our platform. We believe we will begin to see operating leverage on our R&D expenses in 2015.

Our large base of subscriptions that we have built along with improving conversion and retention will continue to drive leverage in our marketing expenses throughout 2015. With expected growth in collections and revenue, and the leverage we are beginning to see in the model, we anticipate we will reach profitability on an adjusted EBITDA basis during the second half of 2015. I will provide a more detailed look at 2015, including formal guidance on our Q4 call in February.

Back to the quarter in summary, we were very pleased with our third quarter execution and excited about what is on the horizon. I will now hand it back to Avashi.

Thank you. Our first year as a public company was a great success. We released seven new products and great expand of platform positioning which to be the leading cloud software provider for SMBs globally. We also seeing proof that our business model is working as our subscription base grows and we realize operating leverage.

With that, we will now take your questions.

(Operator Instructions)

Our first question comes from the line of Sterling Auty from JP Morgan.

Yes thanks. Hi guys.

Hi Sterling.

So let's start with the marketing leverage. Can you give us some added color, specifically around the increased conversions in the cohorts, you kind of gave some high level, but I'm curious if there are any other trends that you're seeing either by geography, where maybe you're seeing an increased amount of conversion, or types of sites that are being built, whether it's mobile first or something else.

Hey Sterling, this is Nir. I have to say that the increased conversion that we are seeing in the cohorts is pretty much across the board. It is not something which is a change of trend to a specific geography or a specific kind of a channel. We don't see mobiles first.

It is clearly the kind of bread and butter people first looking to build a Web site that will most likely represent their business or something of that kind. We think we are achieving this one improvement to the fact that there is also an ongoing improvement in the product itself.

More capabilities that are being added, you know, it's improving the more veteran products such as the editor itself, and then the mobile, et cetera, and also the new thing such as ShoutOut, more applications in the product, better support for payments globally, et cetera

All right, great. And then on the WixStores, what immediately pops to mind is the relationship you've had with Shopify. Any sense of what kind of revenue contribution or revenue contribution to the app revenue, or maybe how many users the Shopify application has, and you know, how do you manage the co-optation that you're now kind of entering into?

Well maybe I'll start by saying how do we handle the competition? We don't view it as competition. I mean there are some customers that might find Shopify to be what they are looking for, but if you're looking at Shopify traditionally a big portion of their customers are the bigger retailers, and they mostly will be concentrated in North America, and I think most of their payment methods are in the dark. If you look at our customers, they give you much variety of a smaller businesses and products being sold, and then more distributed around the world.

So I don't see competition, and do believe that we always should provide our customers with the ability to choose and select the product that best fits to them. I think that today both products are at least now giving you the base features, but there is so much more to which e-commerce can expand, and I think because the long-term focus of both companies is different, you are going to see much bigger differentiation in the product lines going forward. And so I think that, I believe that, if you look at the contributions, and there are of course our ecommerce contribution, as big as Shopify to e-commerce that exists and works very well, and we hope to increase that with continuing differentiating the offering.

Last question would be you know, as we look at the broader economic, by region, specifically talking about Europe doubling and Asia business doubling year to date, you know we are seeing still some question marks over what's happening in Europe from the economy, I just thought it might be a good point to, you know, can you give us some commentary in terms of how you feel some of the cyclical or economic environment impacts or does not impact your business in a region like Europe?

Well I just spent a couple weeks in Europe, so you can see that the economy is hurting in many ways in Europe. But when you look at which part of the economy, it's mostly the larger businesses that are suffering, and you can see a lot of innovation has tried to come below that. If you go to cities like Berlin, if you come, I just came from the Ukraine and from Italy, there are a lot of initiatives of people to create their own way of moving around and building their future with their own business, and especially as the common European big corporation.

So in many ways I believe that the economy in Europe, the way it's evolving, it's something that we are actually contributing to, again if you look globally, you can't really compete with the economy that you have in the United States or Australia. A lot of innovation creates fantastic economy and all the European countries, even the governments are focusing on that. So I think that that is going to create for us fantastic opportunities going forward. Hopefully at a faster than usual rate of things in Europe. Actually still happening now our time.

I hear you. Thanks guys.

Thank you. Our next question comes from the line of Nat Schindler from Bank of America-Merrill Lynch.

Yes, hi guys. Congratulations on another great quarter. I wanted to just touch a little bit on some of your vertical apps and your new WixStores product. Can you explain to us a little bit of how these are priced? What is a user paying for it, and is it going to be part of the apps store, or is it a more directed sale product that you focus on a certain group?

Well, you are asking a lot of questions, so I am going to start on the simplest one, which is how is it priced. First of all, let me say it is part of the app store, ok? And you find it within the templates or within the app store. Some users install it with the template that they select, and some install it afterwards. In terms of pricing, we are still in the process of testing pricing, so we don't have a fully committed price to that yet, and we will probably in the next quarter going to know lots more about it.

So that was the next part of the question. We are not going to charge a% on transaction. This again is our philosophy, and we believe that it is really a great, it's their business. We are a technology provider. We don't need to manage their business and take a percentage of their transactions. I just want to comment on one thing, and this is really one of the things I find fascinating about it.

So we launched the WixHotels product, and now there is a way for small retails to market themselves on Trip Advisor. Meaning the link that you click when you book the hotel is going to lead you to Expedia or Booking or it's going to be to the hotel's Web site. And of course the fact that they are small businesses that is using the Wix booking engine, we need to get that into Trip Advisor so that all of our retails will have the ability to do that if they choose.

As a result, it means we give them a huge, a bigger ownership of their business. Of course we don't have to take a commission to Booking or Expedia or other places. And again, this is beyond the philosophy of that we are going to enable you to make a great business, but we are not going to be the guys that take a commission on the fact that you got a great business.

Great, thank you.

Thank you. Our next question comes from the line of Mark Mahaney from RBC.

Two questions please. You talked about your belief that the annual package penetration would rise in 2015. Are you just extrapolating from current trends? Is there something else that makes you think that you'll continue to see that? I realize that it's a positive trend, but what makes you think you'll continue to see that? And could you comment a little more on the cohort behavior. You know slide 8, this is great data. It's extremely valuable, but there are different trends going on here. Q1 14 and Q1 13 are seeing really nice improvements in conversions. But Q1 '11 and Q1 '12, if I'm reading this right, you know, those levels are now below where you started.

So what's - is there something in the - with the latter cohorts that need to be fixed? Or is that just natural and we should expect that with the other cohorts over time? Thank you.

Hey, [Mark] it's Nir.

For the first question in terms of the annual rate, we do believe that the current 65% rate for the people buying new subscriptions is sustainable and it is a great testament to the fact that users are happy and are satisfied with the offering. They're happy, satisfied with the additional value that we put towards give the people who buy those annual - those annual packages.

If you look at on the cumulative base and look at all of the subscription base, the - naturally, that number has always been higher and it has increased now to 70%. Our belief is since the - for the new subscription, the rates have increased then over time, and it will also follow up with an increase over the cumulative base.

As for the second question, in terms of the behavior of the cohorts and the conversion and retention, I think there's definitely a significant difference between the cohorts of 13 and 14 versus the older one.

And I think it's a good demonstration of what a major or successful overall of the product can do. If you look at those at cohorts, we released our new HTML5 product in the end of 2012. So basically, 2012 was not really impacted by it so much -- as much as the newer cohorts of '13 and definitely '14.

And therefore, you also see right at kind of the get-go, you see a much better performance of those cohorts. I think that over time, you always see, kind of, you know, an opening point, which increases - then decreases for a bit and then kind of flattens over time, which is what we see with the more mature and older cohorts; definitely for the Q1 of '10 and '11.

We do believe, that over time, 13 and 14 will get that kind of flattening and supplying us with steady number of active subscriptions. And therefore, a steady amount of revenue to collection, but we obviously - the great part of it is that even with the steady lines of Q1, the older cohorts, we are still converting premium subscriptions there and honestly, getting more and more collections and revenues from them.

Thank you Nir.

Thanks.

Thank you. Our next question comes from the line of Kerry Rice from Needham and Company.

Thanks a lot. A couple questions. Maybe going back to Marketing, first. You know, you mentioned you're worried about getting some more leverage in Q4. How do we think about that? Is that just as a percentage of overall revenue we'll see somewhat decline or are we seeing any decline in an absolute dollar? And then, within marketing, you know, can you talk a little bit about if there's any shifts? I know you guys have been very successful on the social strategies. Maybe, any changes between that and expenditures on television?

And then the second question, back to the shift toward annual packages, it shifted pretty high up from 56% to 65% in Q3 and you mentioned, obviously, product enhancement. But you also mentioned pricing. I wonder if you could provide a little more detail if one of those was a bigger driver than the other? Thank you.

Okay. So, Kerry, this is Lior. In terms of the marketing expenses, we are already started to see the leverage of the marketing expenses this quarter. If you guys remember the beginning of the year, we called for 58% of a percentage of collection. And actually, that was the case in the first and the second quarter. And in this quarter, we are actually down to 54%.

And this is all about you know, the leverage and Nir explained before about the cohort and how, exactly, to drive the leverage of our model. And this is exactly the point. We do see the marketing expenses continue to decrease as a percentage of collection. And this is one of the reasons why we think that we will be able to reach into our profitability in the second half of next year because we are able to leverage our operating expenses.

But do you expect them to decrease on an absolute dollar sequentially? Is it that much of leverage? Or just on a percentage of collections?

No. Just as a percentage. Actual in the absolute numbers, we are going to increase the investment in marketing.

Okay. And then, and any color on kind of shifts between the strategy? TV? Social? Or display?

This is Nir, Kerry. This has been - there hasn't been any significant change in our strategy there through the year and you know, and we mentioned that in the past. You know, there is kind of naturally, we keep on testing all of - all of the channels to see whether there's more or less version one versus the other and keep on investing there. So, I don't think there was anything that has been - there's no significant changes. It is basically pretty balanced.

I think that your last question was about the drivers for the change, the switch from monthly to annuals, right?

Yes, the big, you know, big shift from 56 to 65.

Yes, well, you know, we always do what - like an ongoing testing of what's the right way to price? What's the right way to display the pricing? But it also is very much combined with what kind of extra values in terms of product we can add to the higher priced packages as well as the annual ones.

And it's not, you know, one specific thing that did one jump, but it's a combination of testing that, over time, is - has generated that increase. I think we found some really interesting formulas in the last six months that allowed us to do that - drive more change there than we had in the previous - in 2013. And definitely consider that a great success and again, a testament to the fact that our people are really happy with the product and the packages and are willing to move to the annual subscription.

Okay. Thank you.

Thank you. And our next question comes from the line of Jason Helfstein from Oppenheimer and Company.

Thanks. Three questions. First, can you talk about what you're seeing on the competitive front? Just by being a consumer, we see more television ads by some of your competitors, so maybe talk about is that having an impact? Is it different in different regions just because you are much more global than a lot of them?

And then, would you - do you think the industry needs to go through a phase of consolidation and if so, would you consider buying any of these companies?

Second question, do you have any examples where you've seen customers consolidate their activities with you as you bring them in with one set of services, right? And then over time, you're able to kind of upsell them more.

And then lastly, I don't think I heard in the prepared remarks anything just about the Google domain project, any update on that? Is that still coming to market?

Thanks.

Hey, Jason, it's Avashai. So, let me just start with the competitive. If you take a look at the actual product, I think it's pretty much the same. We didn't see any major of development in an actual product over our competitors. I think that if you look at the marketing, so, you know, a year ago before we did the IPO, we had pretty much a similar amount of money to spend on marketing like our competitors.

Right we always been better because our conversionwas more effective so we could actually turn investment faster and we feel like we're spending more. But right after we did the IPO our competitors raised more money and so again, seem to be in the same place that we been to a year ago. And so there was no dramatic change in the industry.

And this, of course, more stimulated the North America market. If we look at the other countries, we don't really have the same kind of competition. So, that is the also, it was never any competition and still there's not. So, we're pretty much in the same place.

We do see, again, that having a unique offering makes a big difference in our having a work flow and the ability to manage more and more of a business contributes to our - to our ability to differentiate farther from our customers.

So I would say overall, the answer is no, we don't see - feel any major change. And we do actually see some signs of improvement. So that's better but internationally it's pretty much the same.

In terms of are we going to - are we - do we have an intention of buying any one of the other players? I don't know if that's the right place to discuss that information. I could say that when we look out there, I'm not sure that's the right strategy for us. But of course, we will always be open to think about what is the right thing for us to do at this point of time.

I think our company has many ways of working together it doesn't necessarily to buy one or the other. So, hopefully, we'll find, very clearly ways to work in this industry.

In terms of - in terms of Google domains let me refer that to Nir, which is following this project.

Yes, so it's me again. In terms of Google domains still currently in various stages of testing on Google site. And therefore, they are still not drafting any significant amounts of traffic there. Which, leads us to not be able to really assess that because we don't understand yet what are the right metrics to understand how much traffic, what's the conversion? How does that behave?

On our end, you know, the work is done and they're going to move at their own pace. We are not modeling it at this date in any way and obviously, it will have - it will have an impact that will be an upside.

And then, any examples of kind of, you know, kind of the successful up sale of product over time? Kind of consolidation of activity by clients?

Any up - I couldn't hear the last part of the - what you said.

Yes, the idea ...

...example of...

...that you...

...Go ahead, sorry.

That you bring customers in, let's say that you know, with the single product or lower price point, and then over time, you're able to sell them you know, more services? Any type of examples that you can highlight?

In other words, do we see businesses consolidate their services onto one platform as opposed to using multiple platforms?

Yes, absolutely. We do see that all the - every day it works with - hundreds of examples. They're coming in, they start in the lowest package and then they upgrade that, starting to add more applications. We can see massive adoption of functionality signed by the hotels customers meaning that you know started with challenges, page in the web now moving to always booking, reservation management of current inventory which is their customers.

And now, in doing the campaigns or the shout-outs we can actually see that we also have a - some of the accounting, the applications which we hope to integrate of that we introduced in the last earning call so I think that we're going to see that pretty soon we will be able to manage to completely move the operation of hotels and right after, restaurants to an online cloud-based facility.

The other side of that is, of course, that we see them buying applications for marketing. Okay. So, they starting to also use that more and more.

And I think that that's, for us it's a fascinating process and we're very proud to be able to enable businesses to do that.

Thanks.

(Operator Instructions)

Our next question comes from the line of Tim Klasell from Northland Securities.

Yes, this is two quick questions here. First, on your vertical market strategy, you know, obviously, that's going to add to the lifetime value of customer. When you do your, you know, analysis of this, is it mostly through increased ARPU or through increased retention?

Well, I think that the answer to that - this is Avashi, I think that the answer to that is the combination. But retention rate is pretty high already. And I think that the majority of the short-term benefit's will be for increased ARPU. Currently we're testing the price of hotels for about twice - just the hotel application for about approximately twice the price of a premium offering. So that is the substantial differentiator.

Then, of course, we are testing the prices so it might change. But, I do believe that the ARPU is going to be the more significant change on this short-term. And when we say ARPU I just want to make one disclaimer. A lot of the times we only package it with a premium offering the app is a special premium offering for hotels that would be included in the - part of the package.

But retention rate was always really good and I think it's going to be even better. So by - because it was always good, I don't think there's going to be a huge difference.

Okay. Great. And then, just a quick detail question. What percentage of your revenue news are euro denominated?

Euro denominated.

Again, what was the question? What is the revenue from Euro. So, Yes, so we don't disclose the percentage of our revenue in euro but what I can say there is that 50% of our revenue coming from places outside of North America, which obviously are Europe is a significant part of it. But we don't disclose it on a regular basis.

Okay. Great. I appreciate that. Thank you.

Thank you. Our final question for today comes from the line of Jessie Katz from Makor Capital.

Hi, guys.

Hi, Jessie.

Thank you for taking my question. I want to ask you could you give us some color where the next geographic expansion should be in or if you can give us some direction where to go and what kind of distribution we are looking at?

Hey, Jessie, it's Nir. Well, I have to say that this is already you know, very popular globally and we're active in almost every country in the world. I think that definitely, we expecting to keep on proving our ability to cater to the needs according to the local needs of people in south and central America and in more countries in Europe.

You cannot - I cannot share a very, you know, a very specific time for each and every country but I can say that generally, what the things that we focus on, is making sure that the product fits the current geography, based on you know, language and sometimes other more minor cultural differences.

Definitely enabling us to - then enabling of local payment, which is usually something that requires a little bit of time and effort to understand how to do best; luckily, we had our own internal propriety billing system so we have - we control our own destiny in that matter, and our own pipeline and roadmap. And we can achieve it pretty fast.

And then definitely go into you know, marketing and other small cultivation effort. Again, the great news for us, I think, for weeks being a software company is all of this can happen from our current offices and our headquarters. We don't need to go and start establishing our local presences and hire a lot of people all over the world.

Okay. Thank you so much for everything. Okay. That's it for my side.

Thank you.

Thank you. And that concludes our question and answer session today. We thank you for your participation in today's conference and you may now disconnect.