Wix.Com Ltd (WIX) 2015 Q4 法說會逐字稿

Good morning. My name is [Sean]. I'll be your conference operator today. At this time, I'd like to welcome everyone to the Wix.com 2015 fourth quarter and full year financial results conference call. (Operator instructions.) Thank you. Vice President of US Operations and Investor Relations, Mr. Joe Pollaro, you may begin your conference call.

Good morning. Welcome to Wix's fourth quarter and full year 2015 earnings call.

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 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 you can find all reconciliations between GAAP and these non-GAAP results in our press release and presentation slides on the Investor Relations page of our website.

Earlier this morning, we posted on our IR site supporting materials regarding this quarter's results. The team will go ahead and run through some brief comments on the quarter now, and then we will take questions.

With that, I'll turn it over to our co-founder and CEO, Avishai Abrahami.

Thank you, and thanks, everyone, for joining our call today. We finished 2015 on a strong note, beating our guidance yet again. Once again, we exceeded collection guidance, growing 43% year-over-year, excluding currency impact. Profitability increased as we generated $7 million in adjusted EBITDA in Q4, which is 50% more than last quarter.

On our call today, I want to spend a few minutes summarizing the year, and then share some thoughts in 2016.

We had amazing results in 2015. Very few companies can grow 50% year-over-year while becoming profitable, but that's what we did. Our results again prove our subscription-based model is working and provides a high level of consistency.

Over 19 million registered users joined Wix in 2015, more than we have added in a year. We grew our subscription by 535,000, also the largest annual increase in our history. Collections 2015 grew to $258 million, excluding the impact of currency, a 50% increase over 2014. Our gross margin for the year was 84%, improving from 81% when we went public. And we became cash flow-positive in Q2, ending the year with nearly $50 million in adjusted EBITDA.

What made this result possible was our leading with product innovation and software development. Even more impressive is that we achieved this result without the need for a sales force. Our products sell themselves.

If you look back two years since our IPO, we've made significant investments in our business. We have nearly doubled our R&D headcount, and now have over 600 engineers, developers, and designers working at Wix, continuing to develop future innovation. We greatly expanded our marketing activities around the globe and across all channels, including two very well-received Super Bowl campaigns. As always, our focus is on measuring the return on every dollar we spend on marketing, and our returns have been positive.

In 2015, we said we would invest in product innovation and improvement to our current offerings. Because of this investment, the Wix platform now includes a much better -- a much broader range of functionality. In the last year, we released eight new products and over 100 features and application.

Most significantly, we launched a completely new editor. We greatly improved our proprietary vertical software applications, Wix Stores and Wix Hotels, and we have introduced Wix Music and Wix Bookings. We have two more vertical applications in beta now that we plan to formally launch soon.

We expanded the capabilities of Wix ShoutOut with a mobile app, Smart Actions, and an integration with Facebook. We added four new languages, making Wix fully available in 15 languages as we improve our payment capabilities in South America and in Europe. With all these product innovations, we are evolving Wix to be so much more than a website builder, and business owners can now manage and control workflow and communication with customer online and, for the first time ever, do it from a single platform, Wix.

In 2016, we will continue what we did in 2015, drive growth through product and technology innovation. As a leader in [apps] industry, we see an opportunity to build our momentum, moving forward. And to do so, we will continue to increase our investments in R&D in 2016. Our growth in the last two years has been driven in a large part by our ability to develop and launch product at a fast pace, and I believe it is critical we continue to do so.

In 2016, in addition to evolving the current Wix platform, we plan to release two major completely new products that we have been working on for more than two years. And I'm excited about what they can do. Wix has changed how we build website, and I believe these two product can significantly alter how content and workflow is created and used online.

Our execution was beyond expectations in 2015. Looking ahead, I am excited how we are positioned for 2016. No other competitor offer the scale, accessibility, product breadth, or the global reach for small businesses moving online as Wix. We're excited for another year of growth focused on technology and product innovation, and we look forward to updating you on our products.

I'll now turn it over to Nir.

Thank you, Avishai. As Avishai said, Q4 was another strong quarter for us, capping a fantastic year. I'll first focus on the quarter, and then provide some additional thoughts as we look ahead to 2016.

In Q4, we added over 4.7 million registered users and 125,000 net premium subscriptions, in line with our expectations. We continued to see improvement in conversion and retention rates, driven by the new editors and other products.

We continued to add to the lifetime value of our cohorts with high percentage of annual packages. During Q4, 79% of new packages were annual, up slightly from Q3 when it was 77%. At the end of Q4, our total subscription base was comprised of 83% annual packages, with the balance being monthly. This compares to 74% of our subscription base comprised of annual packages at the end of 2014. And we're really happy with this transition to more annual packages that has taken place over the last six quarters.

As we have stated, annual packages are of particular value for us as they deliver upfront payment that can be redeployed into R&D, marketing, and other purposes. Annual packages also create more stability in our cohorts, increase overall retention, and improve our financial visibility.

The shift of annual impact impacts ARPS, but it is a trade-off we'll happily take. The fourth quarter is historically our slowest quarter, so we typically run several seasonal promotions, which we did this year as well. As usual, these promotions are focused on annual and higher-priced packages. At the same time, we slowed some of the newer, personal-based promotional activity we had been running in recent quarters.

With all of our promotional activity, our goal is to increase the long-term value of our cohorts. We analyze years of data to support our decisions on when and how we run promotions, and we will continue to optimize all of our promotional campaigns around the world with this objective in mind.

Subscriptions that came from registered users in prior quarter cohorts accounted for 63% of new subscriptions in Q4. This is consistent with Q4 last year, when 64% of new subs came from prior user cohorts. Historically, conversions from prior quarter cohorts are higher in Q4 due to a lower amount of new user traffic during the quarter.

Regarding marketing, we launched our second Super Bowl campaign, this time in partnership with DreamWorks Animation. In contrast to last year, this year's campaign focuses on a global audience. DreamWorks approached us with the idea of promoting Wix and Kung Fu Panda 3 since we are both global technology brands that value visually stunning content and innovative marketing campaign.

We launched our campaign about a month ago before the Super Bowl with a dedicated website, videos, and social media activations, and we have generated over 150 million online engagements worldwide to date. According to a third-party study, our video content has been viewed online more than any other brand that ran a commercial during the game. This comparison includes some of the biggest and most well-known brands in the world, which is proof of our marketing team's ability to successfully execute a global campaign of this size.

And our campaign continues even after the Super Bowl. With our engagement to date, and a very strong TV audience of over 110 million households, we expect that, through this campaign, we will be seen by nearly half a billion people worldwide.

In 2016, we will continue to invest in marketing activities and maintain a time to return on investment, or TROI, of seven to nine months in acquisition spend. Our investments in branding to date have been positive, as the number of subscriptions coming through free traffic sources have been increasing. Building a strong brand globally is critical to continuing this trend, so expect us to do more in the coming year.

With that, I will hand it over to Lior.

Thanks, Nir, and good morning everyone. Collections in Q4 were up 43% year-over-year on a constant currency basis to $70.7 million, which has exceeded our prior guidance of $69 million to $70 million. On a reported basis, collections were up 36% year-over-year to $66.9 million.

FX impacted us in the quarter once again as several currencies continued to decline relative to the dollar, mainly the euro and British pound. In total, foreign currencies impacted our collections by about $3.8 million in Q4.

For the full year, on a constant currency basis, collections were $257.8 million, which is an increase of 51% over the prior year and above our guidance range. Currency impacted the full year by about $16 million, as reported collections were $241.7 million, or 41% increase year-over-year. While currency continues to impact our reported results, sustained growth of our business internationally is strong and is a key differentiator for Wix.

Revenue on the quarter was $56.8 million on a reported basis, which also exceeded our guidance, and $59.8 million on a constant currency basis. For the full year, revenue was $203.5 million on a reported basis, up 43% year-over-year and $212.3 million on a constant currency basis, a 50% increase over last year.

We continued to see year-over-year growth in average revenue per subscription when adjusted for currency and the mix shift to annual plans. In the last several months, we have launched several new vertical products, and early indications are that they will contribute to [ARPU] growth.

As Avishai mentioned, we have exceeded our top line guidance every quarter we have been public. The consistent performance of our cohorts provides us with a great deal of visibility into our future top line and is a testament to the predictability of our business. This, along with our high margin profile, are key attributes through [our] strong SAAS business [models].

Our business grew by more than 50% on top line this year, excluding the impact of foreign currency changes, and at the same time we actually increased our cash flow and profitability throughout the year. In the fourth quarter, our adjusted EBITDA was $7 million, which is 51% higher than the previous quarter and double what it was two quarters ago.

For the full year, our adjusted EBITDA was $14.7 million. Our original projection for the year was $5 million in adjusted EBITDA. For the full year, cash flow from operation was $21 million. This outperformance is further evidence of our strong user cohort, which generate ongoing conversions and allow us to leverage our investments in marketing and R&D.

Marketing expense in the quarter was $29.4 million, or 44% of collections, an improvement from last quarter when marketing was 46% of collections, and from Q4 2014, when it was 54%. For the full year, marketing expense was 48% of collections, which is at the low end of the guidance we provided a year ago. It is also down from 56% of collections in 2014. Both R&D and G&A also fell as a percentage of collections over the last year. Our cash balance at year-end was $110 million, and our total employees at the year-end totaled 1,119.

I'll now move onto our outlook for 2016. With several product updates and new product launches in the past year, along with upcoming releases, we expect strong growth to remain through 2016, along with the growth in profitability. We generated incremental margins on our growth throughout 2015, and we expect this trend to continue in 2016.

In Q1, we expect collections of $73 million to $74 million. Assuming constant exchange rates from Q1 2015, our guidance would be higher by approximately $2 million, or $75 million to $76 million. We expect revenue in the range of $60 million to $61 million, and adjusted EBITDA of $1 million to $2 million. Keep in mind that our profitability in Q1 is lower than any other quarter of the year. We increase marketing activities significantly during the first quarter, as traffic is high industry-wide.

Q1 will also include all of our Super Bowl campaign expense this year. We expect marketing expenses to be approximately 52% of collections in Q1. We anticipate marketing to fall to a range of 43% to 45% of collections for the full year of 2016, down from 48% in 2015.

For our outlook for the full year of 2016, we expect collections in the range of $314 million to $320 million. Assuming FX rates remain the same from 2015 to 2016, our collections guidance would be approximately $6 million higher, or $320 million to $326 million. We expect revenue in the range of $270 million to $274 million, and adjusted EBITDA for the full year is expected to be in the range of $27 million to $30 million.

Regarding R&D, as Avishai mentioned, we recognize that there are significant opportunities to expand on our leadership position and accelerate growth with new product innovation. Our business performed well this year as we grew our top line and generated cash ahead of expectations. As a result, we began adding to our R&D headcount in Q4 beyond our original plans to increase our focus on two key products that we plan to launch later this year.

We anticipate total R&D expense will be approximately 30% to 32% higher than it was in 2015, which includes roughly $5 million more than our original plans. These additional investments in R&D is included in the guidance we are providing today. Upside from these two new products are not part of our current top line forecast in 2016, but we believe they will create incremental growth beginning next year.

A few other modeling notes. We expect CapEx will be in the range of $6 million to $7 million for the year. We expect stock-based compensation expense of between $24 million to $25 million for the full year, and our basic shares outstanding will be approximately 42.5 million at the end of the year. In summary, we are very happy with our execution in Q4 and in 2015, and are excited about the upcoming year.

With that, we'll now take your questions.

(Operator instructions.) Sterling Auty, JPMorgan.

Yes, thanks. Hi, guys. So, I apologize--.

--Hey, Sterling, how are you?

I'm good. I apologize. I was jumping back and forth between calls, so I jumped on just a little bit late. What I'm curious about is a couple of things. I think we look at the collections and the revenue outlook above expectations. The one area that was a bit below our expectations was the EBITDA.

I just wanted to make sure that I'm connecting the dots. It sounds like R&D is an incremental expense maybe above where us in the Street were looking at, but also wondering specifically around the Super Bowl campaign and the spending on marketing in the first quarter, how does that compare relative to kind of where the Street consensus was, just so we can understand the difference in the EBITDA outlook?

Okay, so this is Lior, Sterling. So, in term of the EBITDA for the full year, the only difference I think to the Street consensus is about the R&D cost, because the Super Bowl cost, if you look at the entire sales and marketing, I think that everything is in line. There is no surprises over there.

In term of the R&D, what we've decided to do is to allocate incremental $5 million through two specific projects that we are working on, and I think that this is very important to say, and Avishai can elaborate more. But, the guidance do not include any upside from those projects. We obviously think that we're going to see very -- we're going to see a positive growth, or a positive impacts on next year from those two projects.

So, this is what we've decided to do. We've started to increase our headcount in the fourth quarter in order to accommodate the need for in term of the R&D for those two projects. Avishai?

No, Sterling, please continue.

For those two projects, should we think about those as kind of segment expanding, kind of like how you've done for music, for hotels, et cetera, or just enhancements on the core platform?

Well, we're actually looking at those two products as (inaudible) offerings, meaning addressing all the verticals that we do have today, and a lot more. And so, in many ways, it's broadening of the current platform to do things that it's not doing today.

Jason Helfstein, Oppenheimer.

Thanks. (Inaudible) I'll ask two questions. First, we did see a bit of a slowdown in the net adds in the quarter. I think that's seasonal, but maybe talk a little bit about that.

And then, is there a way to tell if you're being adopted by larger customers? I mean, you know basically people's credit card numbers and their addresses, but is there any way to be able to tell that you're kind of moving up the funnel as the product is getting more robust? Thanks.

So, hey, Jason, it's Nir. I'll take the first part of the question, then Avishai will pick up the next. In terms of the net adds, so first of all you have to remember that Q4 is indeed traditionally slower, or the slowest quarter of the year for us in terms of traffic, and also in terms of the time that it takes people to convert.

That being said, first of all, it's all in line with our target TROI of seven to nine months, and we have the historical data for Q4s to see that it does, as well as, at the end of the day, this is what we modeled for, and the evidence to that is that the financial results are supported.

Yes, and this is Avishai. And regarding your questions about are we moving up to larger companies, so we don't know the statistics about it, but I think generally saying, it's safe to say that we are. And we considered, I think, the more functionality that we have, and deeper [the breadth of the product], [and now] companies that have [bigger needs and more sophisticated operations use Wix. So, we do see that trend happening.

Thank you.

Mitch Bartlett, Craig-Hallum.

Yes, I wonder if you guys could talk about the conversion rate off of the existing base of registered users, what you've seen here over the last couple of quarters, over the last couple of years, kind of the impact, if any, from the Wix Editor improvement, what's going on in the verticals as far as conversion rates and things like that, just overall looking back at that registered user base and what's happening there?

This is Avishai. And I think that it's kind of a (inaudible) over the last two quarters that there's a gradual improvement in the conversion [funnel] over what we're doing. And this is a result of exactly those product enhancement that you've mentioned. Of course, the one with the larger, broader effect is the Editor, which affects all of our customers, and then you can see that we can see on the specific verticals there is much improvement when we release the offering that is exactly [in fit] to those verticals. In fact, we consider that to be the biggest benefit we get from verticals.

I think that this goes -- for us a Company, this proves, at least internally, when we think about a business, that a strategy of continuously to enhance and deliver functionality while simplifying the user experience is the best way to become a better company, by improving conversion and allowing us to be more efficient [our] marketing dollars. And I think that's the big part of how we created the strategy for the next couple of years.

Mitch, this is Nir. Just jump on and say that this is also -- everything that Avishai just said is also supported in data. If you look at kind of the regular slide 10 on our slideshow, that shows the behavior of the cohorts that show exactly that.

I see that, yes, absolutely. So, a lot of leverage off of the base. I just wanted to clarify, maybe I'm just missing this, but you are going to expand the number of verticals by a couple more products here I thought over the first half of this year, but that's separate from the two new products that you're really focused with your R&D efforts for the lighter half of the year. Is that correct?

Absolutely. Verticals usually represent a much more focused products led by smaller engineering team. Those are two more [of the massive] innovation that we didn't [release similar things built] today.

Aaron Kessler, Raymond James.

Yes, hi, guys, just maybe a couple questions [off]. First, can you just elaborate on the promotional pricing? You said you pulled back a little bit from what you were doing in Q4. And also, just any geographic -- just any commentary on kind of macro that you're seeing from a geographic basis in different regions? Thank you.

Yes, hi, it's Nir. So, generally Q4 is a period of time where, partly due to seasonal -- to the season holiday, we naturally also run more seasonal campaigns. We don't run those in parallel to the more promotional campaigns that we spoke about in the last quarter, so we basically go back and forth between them.

We also have been on an ongoing basis optimizing the personal promotions, also turning them on and off in order to test different geographies and different sources of traffic. And that we will -- we'll keep on doing those as we measure and get a huge amount of data in order to understand how to best perform them. It's important, I think, to mention that, at the end of the day, all of this effort is always under the one goal of increasing the long-term value of our cohorts.

And regard to your geographical question, I think that the -- well, the only real difference that we see is in the currencies, [right, value], meaning that we see ForEx going up or ForEx going down. But, in terms of growth, we do see that, in term way we actually see that -- places that seems to have a weaker economy now than a few years ago are actually growing faster, and we believe that that's just showing that in many ways, when the economy goes weaker, people are trying to work harder to develop new businesses, and which is a good alternative to build a great website by being on budget.

For example, Russian ruble grow 210% in the last year, so that's kind of incredible if you consider that, in last year, Russia was supposed to have been in a terrible crisis. And we can see the same thing in real, in Europe. And so, we believe that, except the (inaudible), which was changes in currency value, in fact we see tremendous growth from those areas.

Nat Schindler, Bank of America.

Yes, thank you. We are just looking at your guidance for Q1 in particular, and then across the year. You're calling for a pretty substantial slowdown in collections and revenue growth in Q1, about 800 basis points from Q4. And then you see almost no slowdown then for the full year, from Q1 to the full year guidance. Is there something we should look at on historically to see that there was maybe a step up in Q1? Is there an interesting comp I should compare on the mix shift, perhaps, that I'm missing here that was causing this kind of stairstep down in Q1, and then a nice, smooth de-cel for the rest of the year?

Also, can you go a little bit more over the adjusted EBITDA? It's a really substantial decline sequentially into Q1 when you've had very high sequential increases, as you would expect from a subscription company. Besides the Super Bowl and besides a overall interest in starting new businesses in Q1, is there anything else that occurs in this time?

Finally, how are the economics different in the DreamWorks Super Bowl ad campaign versus the last year's Super Bowl campaign? Was there any difference in cost and production?

Okay, so I will start with the first question. You are right about the differences between this year to last year about the first quarter and the full year. It's interesting to see that in 2015 we actually had a record of quarter in Q3, and also Q2 are very strong in term of premiums. If you look at 2014, actually, the record quarter for us in term of premiums was the first quarter, and last year it was the third quarter.

So, obviously what we're going to see in 2016, that the renewals coming in during the second quarter and the third quarter are going to be very strong because of that. So, basically it shift kind of the weight from the first quarter and make it, like, more offsetting with the rest of the year, so it going to be more like a smooth increase quarter-over-quarter, and it will not be the same behavior as last year.

So, this is with regard to the first question. With regard to the second one, and in term of the EBITDA of the first quarter, so first of all you can see that the overall EBITDA that we've been guiding to, actually talking about doubling the EBITDA year-over-year. The first quarter is going to include the entire campaign of the Super Bowl cost, and I think that this is something that also connected to the first question.

This year, DreamWorks is actually will be -? they were responsible for the production and creative, and we are responsible for the airtime and also running the campaign. And as a result of that, the overall cost of the Super Bowl (inaudible), but the weight in the first quarter, and because of the change in the business itself, on the deal itself between us to DreamWorks, enable us to take advantage of the first quarter, which is a very strong quarter in term of traffic, and to invest more in growth. And this is exactly what was done in the first quarter, and therefore the EBITDA in the first quarter is less than the other quarters, which obviously should compensate for that.

The third point about it, Nat, if you can look at the entire sales and marketing in 2016, or what we've guided, (inaudible) a percentage of collection. So, basically it's going to be 43% to 45%, with still quite a significant drop compared to 2015, the same as it was between 2015 to 2014. So, I hope that it answer those three questions.

Samad Samana, FBR.

Hi. Good morning. Thanks for taking my questions. The Company has talked a lot about the new vertical applications that it's launched in recent quarters and upcoming in the app store. I was wondering if you could give us an idea of how much that's contributing to revenue or collections now that we're at year-end, or if you could give us any kind of color on what your expectations for 2016 collections are from those applications and from the app store?

Certainly. So, it's very important first to note that what is more important for us is the conversion, and Avishai spoke about it. So, in cases where we can see that we can increase the conversion of the account of ARPU, we will certainly do so, because conversion is much more important for us than ARPU, at least when we start to launch those verticals.

But, from early indication that we started to see, we see that the ARPU, which based on collection, again, not revenue, because you won't see the full impact next quarter when you try to calculate it. But, in term of collection, we actually see a nice increase in ARPU coming from those verticals, and specifically also from the Wix [stores]. And this is something that we're very excited about.

So, to summarize it, we do see the increase in ARPU, but, more importantly, those verticals actually increase the retention and distinctness of our customers.

And then, a follow-up question. Based on the collections guidance, the back-of-the-envelope math suggests that the change in deferred revenues is going to be a smaller magnitude change in 2016 than in the last three years what the average has been, closer to $10 million. This year it looks like it's closer to $5 million.

I'm curious if that's a function of your expectations that the mix shift from month-to-month to annual will start to slow down now that you're in the 80s, just may be some color on what's driving that deferred revenue outlook?

Well, there's two things. The first one you just mentioned, the shifting between monthly to yearly. So, obviously we won't see the same shift in 2016 because it's already happened in 2015, most of the shift from monthly to yearly.

The other reason is obviously got to do with the growth rate of collection versus revenue. Revenue is more based on -- well, [catching up] is based on growth that we've seen last year rather than this year. So, this all contribute to what you just mentioned about the deferred revenue.

Tim Klasell, Northland.

Yeah, hi, guys. Most of my questions have been asked, but I wanted to hit a little bit on the competitive situation. Obviously Adobe has made a big push into this space, and we've gotten some calls from investors about that. How was the competitive situation changed maybe over the last quarter or two?

Well, let me first of all address the Adobe product. So, the Adobe product is not a website builder for businesses. It's a portfolio builder for a artist. That's what it aim for, okay? It's true, we have a huge amount of artists using Wix, but a lot of them are using the free offering. Adobe is pretty much aiming to go with a very similar offering.

We view that as a welcome competition. [I'm thinking] the product probably needs to mature a little bit before it can be really be competition, but I'm sure that, some point, they will go and do that. But, overall, I think that the larger amount of customers we have will have zero effect from that. You can't build e-commerce site with it. You cannot build an Hotel website with it. It's actually not even aimed for musicians. You don't have the functionality needed for that. It's good if you're a painter and you want to present your art.

So, just putting that into a correct frame. Beyond that, I think we have not seen any major change in the market. As far as I am aware, none of our competitors have released anything new or changed their marketing strategy in any significant way. So, I think it's pretty safe to say that what is today is exactly what was six months ago.

Okay, great. And then, I'm sure I can go back and look at my notes, but can you give us an idea of the magnitude of the shift from the content creation for the Super Bowl Ad last year, which impacted Q4? Now it seems like it's impacting Q1. Can you give us an idea of sort of a magnitude of how much of that shift was from Q4 to Q1 this year compared to last year?

Okay, so last year we had the entire production and creative in the fourth quarter, and just the airtime we had in the first quarter. This year, since DreamWorks actually took the entire production and creative upon themselves, we've just paid for the airtime in the first quarter. This is true that the airtime, including the entire running the campaign, because we took advantage of the fact that we are actually investing less and seeing the same, or even better results than last year.

So, we took advantage of it, and increasing the marketing budget and everything was according to the plan, obviously, in order to make sure that we [want] the campaign in a more effective way and taking advantage of it. So, there are about, you can say, a few millions of dollars moving from the fourth quarter to the first quarter.

Mark Mahaney, RBC.

(Inaudible) about three quick questions. Are there any more details you would give us about these two new products, the timing of them during the year, and anything to help us figure out how much they could impact -- how material they could be to your top line or to your market opportunity?

Second, is there any way you could talk about the ROI you've seen on your Super Bowl Ad spend this year versus last year? Do you think you'll have the same sort of -- based on what you've been able to see so far, do you think you'll have the same sort of ROI, higher or lower?

And then, finally, any change in your thinking about your long-term EBITDA margins, given your investment outlook for this year? Thank you.

Yes, Mark, I'll try and answer the first two. This is Avishai.

Well, we are not going to give a lot of more details about these two products. I think that it's a bit too early, [especially for the] -- [as] always has the tendency to get delayed, so timing is always tricky. We feel very confident about where we are today, but I think that, as we get closer to the launch date, we'll be happy to share more information.

In regard to the efficiency of the Super Bowl, of course the Super Bowl -? I think that just a couple of thoughts about it. So, it's a bit too early, right? To be fair, [you] just had the ad running. But, this one in comparison to the last year obviously is a lot more global. Everybody knows there's a Kung Fu Panda, and not so many people know who is Brett Favre, right, and especially if you move outside of the States.

And so, we are very confident about what we're seeing now. We're see really good first signs of the results from that, and I said that I'll be really surprised if it's not at least as efficient as last year, and probably even more.

And the last part, Lior will.

With regard to the long-term model, so first of all, the overall long-term model does not change. I mean, we want to be in a place where our adjusted EBITDA is higher than 30%, and obviously this is something that we think that it's going to happen in the future. But, let's talk about the timing, because what we're doing over here in term of the R&D and the impact of EBITDA in 2016, it's obvious.

But, I think that what is more exciting is the fact that company like Wix is able to recognize and perhaps generate more source of revenue for the future, because the most important thing for us right now is to maintain and even to increase the growth next year and continue with that, with more innovation and so on. So, I think that, over all, if this is something that it's going to be positive, it's for sure going to generate more growth in the future, and perhaps accelerate the timing for the EBITDA.

Kerry Rice, Needham.

Thank you. Earlier in the Q&A, I think you alluded to, Avishai, that ARPU, or (inaudible) ARPU is increasing as you're seeing that positive impact in collections. Could you talk a little bit more about maybe the uptake or the penetration you're seeing in the verticals? Maybe you can highlight the Wix Hotels verticals since it's been out there, one of the longer verticals and the uptake there.

And then, I know that ARPU has generally been trending down, given the growth in annual subscriptions. Do you think we'll see -? well, you already kind of answered that question, sorry. So, on the mobile side, can you talk a little bit more about the websites there, the launch of the native app creator, and how many adds you saw from mobile this quarter? Thanks.

Absolutely. And maybe, well, so you asked a couple of questions. So, let's see, the last one was about mobile. So, let me start by saying that we currently have almost 14 million mobile site built with Wix, making us I think by far the largest mobile site creation classroom in the world. And we're really happy with it, [and everybody] think that this is a really good plan, and we'll have to see how our customers are adopting mobile technologies.

In regards to the native mobile app, I think that it is getting more mature and better. We have closer to 2,000 customers now using that, actually having a native online stores running on dedicated application on (inaudible).

So, we're really proud of it. I think that, for me at least personally, ability to access e-commerce from a native interface is just better. It works faster, its nicer to use, it's easier, you can actually get more functionality. And of course, when you move outside of the States and outside of the EU and go to places where Internet is slower, it creates major benefits. And we love that offering, and I would love to see how it advance [and evolve].

Your last question was about highlighting the verticals. And I think that a big part of what we see is that we -? well, we measure two elements when it comes to vertical. The first one is being a conversion, the second one is ARPU. So, we do see, as always, a small increase in ARPU on Wix, but beyond that, what we do see all the time is the increase in conversion.

For example, if you look at the Hotel, since Hotel started until today, we've crossed more than double in [total] conversion, and which results in two things, right, twice our customer from the same [source] of traffic, or the same amount of traffic, we get twice the amount of customers. And that converts to premium, and of course we get twice the amount of happy customers.

Also, they get to be more happy, and because they can do so much more, and we are also seeing signs of organic growth that is accelerating within those verticals. Many people tell their friends, or [turn on this] (inaudible) musician, tell other musicians about Wix.

Deepak Mathivanan, Deutsche Bank.

Thanks, two questions. So, first, related to the competition question, we saw Super Bowl ads [for] some of your competitors, as well. Can you discuss about whether the competitive environment, with respect to marketing, are you seeing competition become less intense in any other channels?

And then, for 2016, you've decided to maintain your TROI levels. Wondering what was the biggest driver of the four to five percentage points of marketing leverage. Should we think of it more in terms of the lower churn from the annual packages mix shift, or is it related to the customer acquisition cost, as well? Thanks.

I'll just quickly take the first question. This is Nir. So, in terms of the competition and the marketing aspect of it, the same competition that you've seen last year was on the Super Bowl, and throughout the year we haven't seen any significant change or something that move the dial in terms of other sources of traffic and kind of competing in any significant way on the user acquisition, so no material change.

So, for the first question about the leverage that we see [in] marketing, so actually we are not going to change the strategy about the marketing, [neither] for the TROI. It's going to remain the same. But, actually we'll continue to invest in marketing, and even increase the dollar investments in marketing year-over-year, and also try to even do more in term of our branding.

The leverage that you see is mainly coming from the fact that our older cohorts keep on generating the same amount of collection month-over-month, quarter-over-quarter, and the fact is that, on our cohort basis, we actually do not see any churn. And this has allow us to invest the marketing in order to bring those new cohorts.

But, as a percentage of the total collection, which again a lot of it coming from those old cohorts that continue to generate more and more revenue which (inaudible) in the sales and marketing. And I think that it's also interesting to look at a new slide that we've added to our IR desk, where you can see that (inaudible) [will exist] in 2014 moving to 2015 -- by the way, it's on slide 13 -- actually generates more revenue, which this is something which is very, very exciting because it means that, even if we stop all the marketing effort, you're still going to see increase in revenue year-over-year, and therefore we are realize the leverage out of it.

Sterling Auty, JPMorgan.

Yes, thanks, one question and one follow-up. So, given the level of sales and marketing as a percent of collections in the first quarter, and then looking at the full-year guidance, what I'm wondering is how should we think about the pattern of that spend for quarters two, three, and four? So, do we go from that 52% down to something that's in the high 30s to balance it off, and it stays there consistently through the quarters, or is there going to be some variability in terms of how much as the percent of collections we will see each quarter?

So, to answer your questions, Sterling, so we've guided to the percentage out of collection in the first quarter, and I think that you should assume that the rest of the quarter is going to be less in term of percentage out of collection by a (inaudible), but in average in about 10%. So, basically it will bring you to an overall marketing out of collection of 43% to 45%.

Okay. And then, looking at within the quarter, obviously the collections were better than expected, revenue was better than expected, but the number of premium subscriptions was actually a little bit shy of what we are looking for. What I'm curious about is did you see better linearity where more of those premium subscriptions came on earlier in the quarter, and that's what helped drive the collections and the revenue, or did you just see a higher level of ARPU per subscription throughout the quarter to deliver the results?

So, actually neither, meaning that the collection and the revenue that we've seen was just in line. It acted as it was in any other quarter, and there was no differences. And the same goes for the ARPU, meaning that we haven't seen any significant increase in ARPU in the fourth quarter. And I think that it's interesting to look at the fourth quarter compared to the third quarter also in 2015 and also [2015], you're going to see the exact same ratio.

And as Nir mentioned before, Q4 in term of seasonality is obviously slower, and we also need to remember that Q3 was super-strong for us. But, if you look at it Q1 compared to Q4, it's exactly the same ratio between 2015 and 2014. And again, everything was in line with our expectations, and therefore the impact in term of financials actually was not there. We actually met our guidance, and even exceeded that.

That concludes the Q&A portion of the call. Thank you for participating today. You may now disconnect.