Ryan Gee - Investor Relations Avishai Abrahami - Co-Founder and Chief Executive Officer Nir Zohar - President and Chief Operating Officer Lior Shemesh - Chief Financial Officer.

Samad Samana - Stephens Inc. Nate Schindler - Bank of America/Merrill Lynch Jason Helfstein - Oppenheimer Sterling Auty - JPMorgan Ron Josey - JMP Securities Kerry Rice - Needham Tim Klasell - Northland Securities.

Good morning. My name is Denise and I will be your conference operator today. At this time, I would like to welcome everyone to the Wix 2016 Third Quarter Financial Results Conference Call. [Operator Instructions] Thank you. Ryan Gee from Wix Investor Relations, you may begin your conference..

Good morning. Welcome to Wix’s third quarter 2016 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 press release and most recent Form 20-F that could cause our actual results to differ materially from those 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 reconciliation between GAAP and non-GAAP results in our press release and presentation slides on the IR page of our website.

As we did last quarter, I will shortly hand it over to our CEO, Avishai Abrahami who is going to say a couple of quick words about the quarter and then we will go straight into Q&A. Earlier this morning, we posted on our IR site a shareholder update, in addition to the materials we normally post to provide some color on our results.

So with that, I will turn it over to our Co-Founder and CEO, Avishai Abrahami..

Good morning, everyone. So just very quickly we had an outstanding quarter by many measures it was our best quarter ever. Collection grew 42% again to a record of $87.3 million. We added 174,000 net premium subscriptions and we generated over $11 million in adjusted EBITDA also a record.

This result added to the momentum we had last quarter and we are raising our annual guidance by significant amount and expect to grow 40% for the full year. We come into this year thinking it would grow at 30%, so the fact that we are now expecting to grow 40% showed that – showed what year is successful [indiscernible].

Finally the results on the ADI has been fantastic overall since we launched ADI conversion is up, these are creating sites faster and more users have purchased our vertical application than ever before. We are off to a great start with ADI and with improvements we are already making it will only get better. So with that, let’s move to your questions.

Ryan, please take it..

Operator, can we take our first question please?.

Certainly. Your first question comes from the line of Samad Samana with Stephens Inc. Your line is open..

Congrats on a great quarter guys and thanks for taking my questions. So, we found it interesting that the company chose to do less promotional activity for annual packages in the quarter, especially when we consider that prices ticked up slightly on the website, it looks like.

Is the company finding that the value of the new features added over the last year is attracting enough customers without needing to be aggressively promotional? And do you think we are at a point where you can do another across-the-board price increase for this use?.

Hi, Samad, this is Nir. I will try and take the first part of your question. I think basically it was less volatile activity, but is similar to what we have done in the previous years.

So, at the end of the day, our promotional activity is just optimizing on the marketing and the traffic according to the changes in the seasons and it’s always ahead at the end of the day to reach the same TROI targets. So – and that’s basically kind of the whole rationale behind it and nothing else.

Now, you had another piece of question there, what was the other one?.

I was asking if we are at a point where the company can do price increases for SKUs across the board, because of all the features you have added over the last year?.

Well, I think generally again in terms of how we think about pricing, obviously, we test but we are not trying to – our aim is to gain the best growth possible. So, we want to keep our offering affordable and something that anyone can use.

And naturally when you grow into specific verticals and specific added functionality that is more heavy duty, that’s where you see the higher prices that’s kind of makes sense, because we give them extra value..

And then one follow-up if I may.

We have seen Wix is really crushing it when it comes to adding new subscriptions and you are more, call it, traditional competitors continue to struggle in terms of net adds, do you see something just a more fundamental market shift that’s driving your success while others are struggling in your space?.

So I think that more than anything else what’s driving the success is our products and I think that innovation of our products that’s what’s pushing our ability to grow faster and faster. And I think that you see that, the ongoing improvement in our product, ongoing improvement in our conversion globally in the United States and outside of it.

And I think that these are also the places where we focused our efforts in terms of continued innovation, you have seen that with ADI, you have seen that with our release of our vertical.

There is one other thing that I think is worth mentioning that you definitely in the past 2 years we have put a lot of more emphasis around the brand building and our brand exposure and we were definitely also seeing the value that and the benefit of that..

Last question for me and then I will hop out. Lior, when we think about growth for 2017, how should we think about collections for subscription, it’s been growing in the double-digits in 2016. Should we expect that to plateau or continue to increase? And thanks for taking my questions..

Yes. So obviously what we have seen from since the beginning of the year that the outflow actually increased quite significantly coming up from $132 on an annual basis to $150. Obviously, we hope that it will continue also for 2017, but again how to predict that.

So basically you know whenever I need to predict it in my model, I take into consideration that it stays stable, but this year was incredible in terms of the vertical adoption of our customers, we see the increase and we are very happy with it..

Your next question comes from Nate Schindler with Bank of America/Merrill Lynch. Your line is open..

Hey, guys. Great quarter. Want to ask you a little bit and see if you could help characterize that $90 million, the gap between the paid and the users and who are in those $90 million. I imagine there are large number of kind of discouraged people who found the process too difficult and never progressed past starting their page.

Is there a way that you know who these people are and where they sit on the page and what kind of whether or not there are potential paying subscribers, i.e., commercial businesses or and also how are you marketing to them?.

Okay. So, there was a bunch of questions. But I think the primary one was who are the rest of the $90 million, right? And the answer to that is of course, it’s a big mix, but let’s examine a couple of things we know. We know for example that there is a huge amount of students, okay.

And we cannot be talking in high schools and university across the world, a lot of it in the states and we can see that those guys are using Wix [indiscernible], but they don’t really need the website for looking commercial.

So, they have no reason to upgrade and a lot of them will come back after a while and do something more with Wix, but the primary use is learning. And so this is one group. Another group is just a lot of people that want to learn the product and with the standard potential and then this is another group that we are very familiar with.

And some of the – well, probably I would be a good example, because I was going to internet many times and look at new products and just remember that they exist. And then when I need them, I know where to go back and to actually use them.

So, we see a lot of that, people that being fear in add [indiscernible] about Wix and then we go in actually and play with the Editor and so we can see that they actually examining and scouting what we can do and what we can’t. And then a year or two later, they might back and build their website and go to premium.

And the last group, of course, the people just [indiscernible] use they want to do something smaller or something very personal and again those guys will not upgrade. So this is the majority of what we have. And I think that this – the combination of this group is quite bigger than the guys that try to build the website and couldn’t, right.

So I think that those are probably the four primary groups that we have..

If you have to speculate it, obviously how many of those 90 million without even going into new marketing, how many of those 90 million do you think could become paying subscribers over time?.

I would assume that about 9 million if we have continued to increase our offering I think between 9 million to 11 million. That would be my assumption. And just because I think there is another issue, I think we have to solve and might increase this number and that’s really where it’s really hard to do billing for Wix today.

So there are countries in world where it’s very easy done with international credit card, it’s really hard to buy and that’s another thing, we have to solve. But without doing more of those kind of things, that seems the number is ranging between 9 million 11 million that’s again [indiscernible]..

Great. Thank you..

Your next question comes from Jason Helfstein with Oppenheimer. Your line is open..

Thanks. Two questions, the first, if I take a look at the cohort slide, your usual slide, you actually see kind of a little bit of a pickup in the 2015 cohort even a little bit in 2014, I am just wondering what the expectation is with ADI is actually it could help all cohorts.

And the second question is, we saw less marketing leverage in this quarter than the first half and that was clearly you are making a decision to reinvest the collections as opposed to letting it fall to EBITDA, what are you seeing that’s giving you the confidence to do that or is it just about spending to get your full year marketing leverage target? Thanks..

Hey Jason. I will take this first – it was first part of your question about the cohorts. And we will pick up to see that. And Lior will take the second part. First of all, that pickup is it comes from the global improvement of our product. So ADI is part of it, but it’s definitely not all of it.

There is a lot of improvements that are happening through the verticals with the editor itself and basically across the board. Can ADI keep contributing to that over time, absolutely, yes. I think that’s kind of the game we are playing in which keep on improving the product and it helps us generate stronger cohorts to begin with.

But also have positive impact on the existing cohorts of users who already are using our system. Lior, do you want to take the second part..

Yes. So Jason, with regards to second part about the marketing expenses, if you guys remember during – when we started the year, we target marketing as 43% to 45% out of collection and we are on track to get it.

Obviously, during each quarter, we have been sometimes defending for example, for branding activities and this is what, also we have done during the third quarter. But overall, we are on track to get our target of 43% to 45% out of collection. And again, this is quite a big leverage from where we have been during our previous years.

And obviously, I expect that it will continue into 2017..

Thank you..

Your next question comes from Sterling Auty from JPMorgan. Your line is open..

Yes. Thanks. Hi guys.

Looking at the number of premium subscriptions that you added in the quarter, held up very well, relative to what we would consider I guess normal seasonality in the naming business, based on that, what should we be thinking about the fourth quarter and what should we be thinking about the seasonality in your business in terms of premium subscriptions moving forward?.

So the fourth quarter usually, we know that we have a lot of holidays for basically the fourth quarter, the week one, among all the other quarters, because of vacations and holidays. And this is also what we expect to happen in the fourth quarter, so at least with regard to the number of premiums.

And this is something that which is already embedded in our model and the numbers that we provide. So we don’t think that going forward, there will be much of a change when we see the fourth quarter compared to the other quarters.

Usually, the second and the third quarter obviously it’s kind of the trend in first quarter is really strong, is very strong for us and we don’t think this behavior will dramatically change during the next year..

Okay.

And then one follow-up question on Wix ADI, do you have any sense if you build a site prior to Wix ADI, how easy is it to convert over and start using ADI to, it’s a kind of maintain the website and is there any sense of what kind of up-tick you have seen from existing users on Wix ADI?.

So it’s not easy to take a regular – visiting on second what we think to ADI. It’s not super hard, but it’s not that easy. We are working on making it simpler. It is very fairly simple to move an ADI site into the Wix Editor. So we want to go deeper. Then what ADI allow you to do, economically we can actually fix a click.

And we do see a lot of users doing that. They use ADI to set up the beginning of their site and actually build the first version and then maintaining deeper functionality there..

Got it. Thank you..

Your next question comes from Ron Josey with JMP Securities. Your line is open..

[Indiscernible] and with all these new products launching, can you help us understand, what the traditional time it takes for a new product to release our producing results in terms of its adoption of registered subscribers and collections and I ask only because you have seen the early success with ADI, you have seen other newer products like bookings launched this year, be a strong driver and wondering if this lag is shrinking relative to what you have seen historically?.

So I think that the answer is that, it’s very different between different products, right.

So as we have a schedule in booking for example, product, to enable it to become widely used, we need to include in the templates, we need to include it in the billing and there is a wider set of things you need to do ADI reported gets in the front, so people will of course adopt it faster, right.

But again ADI is a lot more sensitive to geographical things, like language and the kind of businesses you have in different geographies. I would say, it’s different tremendously between different products and what we do see that if a company become benefited, so we understand better what we need to do release their new products..

Great.

And if I could follow-up with ADI specifically, I mean that a lot of sense, but with ADI specifically I think you said the average time it takes to build a site has been reduced, anyway to quantify that, are you talking weeks to days or days to hours and if you could talk about completion rates, when people when registered users would start a website to complete a website that would be helpful too? Thank you.

Great quarter..

First of all, yes, we can quantify that, that’s over 10x, we can get to over 10x faster, okay. On specific cases on ADI and so definitely super fast. In fact, I demoed on the Analyst Day, how you build a complete website we mentioned two minutes, right, which is in our mind incredible.

So we do see that, but we don’t necessarily view that as the success. What we loved is, an user get a chance to go deeper and then modify the site even more. And then they may actually go and personalize it and get their own design and appeals into what they build. So it’s not necessarily something that we look at as a good or a bad thing.

We think it should be fast when you want it, but it should also allow to go very, very deep and actually customize any detail that you want..

Great. Thank you..

Your next question comes from Kerry Rice with Needham. Your line is open..

Thanks a lot. A couple of questions and apologize if you answered this earlier. But with any early learnings from ADI related to maybe what type of site consumers are building, any additional color, just kind of early trends there.

And then as you think about, in the marketing strategy heading into 2017, the company has often focused a lot on television and social as marketing channels. Any changes to the channels and may be the allocation of marketing dollars going forward? Thanks..

So, I will start with ADI, things that I believe that why do we think that by increasing the resolution by which computer diagram works with you and your lifecycle will get tremendous results from that.

And we see that there are so many I am not surprised to see how many different kind of psychologists are, why they are? I really knew that there are so many different – and so many differences. And one thing we do see today is that with ADI we consider that more and more of the, I would say, traditional businesses are moving online, right.

So 5 years ago, a psychologist, a doctor would have made a website. We see that today they are all very committed to having those. So, we do see this trend at that moment into the online.

And they – Nir, you want to take the one in marketing?.

Yes, sir. So, in terms of marketing strategy, it’s always been our belief that marketing is not one single campaign or one single venue of investment, but rather a big mix that is critical to maintain together.

And our intention is to keep on doing that in various places online, offline actually combining the branding activities with direct acquisition. And it’s all maintaining the same TROI that we have and generating our hyper growth going forward..

Okay, thank you..

Your next question comes from [indiscernible] with Deutsche Bank. Your line is open..

Thanks for taking the questions. Two if I can.

First, if you can give us a sense of what percent of new users you are fully integrating the capabilities of ADI and the conversion rate uptick you are seeing from those early cohorts or if you can give specifics maybe you can compare to other product launches like the new site editor? And then secondly, how should we expect you guys to balance the marketing spend and top line growth ahead.

So now that conversion rates are improving, does it make sense to really step up marketing and drive acceleration in the growth? Thanks..

So, that was like one question with many different sub-questions. So I am going to try and remember all of them. Let’s see if I get them. What is the take of ADI, right, in terms of compared to other product. So relevant markets where we launched meaning that there is language support and the type of business support.

We see it’s a very large takeaway users and bigger than probably most of the credit cards. And what is the average conversion and that’s a number that I am sure most of our competitors would love to know. So, I am not going to actually refer to it.

Like I said, again, that we are very happy with the results we have and especially those are new result of the quarter.

And the other thing that I can say is that – you know what was another question?.

Yes. So, hey, Lloyd, with regard to the marketing, so obviously, we see that we increased the investments in marketing in dollars year-over-year, quarter-over-quarter, and essentially by keeping the defense TROI, which is 7 months to 9 months and we are able to do that, because obviously mainly because of our products.

Our product technology, we are maintaining the same TROI, but we are able to invest more and simply because of the fact that we see better conversion and the adoption of our new products and so on. So going forward, I think that we will continue to do that and hopefully conversion will continue to improve and maintain the same TROI.

This is the only KPI while we invest money in marketing, this is what we consider. The leverage that we see as a percentage of collection cyclically because it’s already embedded in the model, we see other historical causes continue to generate revenue for us and we talk about the negative churn and everything that’s embedded in our model.

And so the more cohorts, historical cohorts that we have we see a higher leverage in our marketing investments and I guess that this is something that will continue in the next following years, again, until we get to our target model..

Thanks, guys..

Your next question comes from Tim Klasell with Northland Securities. Your line is open..

Hey, good morning everybody. Congrats on the quarter. First just a question for you, it looks like deferred revenues grew at 51%, so much faster than revenues and collections. And then next quarter guidance, it looks like maybe revenues might grow little faster than collections.

Did you have a big surge at the end of the quarter where it grew up deferred revenues and we are going to start seeing that next quarter or maybe you can talk to me about what the linearity of the quarter look like?.

So obviously, deferred revenue has a lot of impact essentially, the deferred revenue is impact by the nature of the yearly subscription versus the monthly subscription. Obviously, yearly increased the collection and the revenue fixed time until it catch up. So, we see increase in deferred revenue.

And this is – and obviously, the growth of collection versus revenue. So, if we accelerate growth in collection, it takes time revenue to catch up and then see increase in deferred revenue.

And no essentially this is something that also happened in the last two quarters, where we see that we had really nice growth in terms of our collection and the business overall.

So again, the fourth quarter is something totally kind of different, because usually, the growth in the fourth quarter is not similar in term of premiums and everything to the rest of the quarter, as I mentioned before, because of the holidays and so on, while the revenue with collection from previous quarters and years.

So, this is why you see the change in the fourth quarter compared to the other quarters. So, the bottom line to that is mainly because of seasonality..

Okay, very good.

And then there is one quick follow-up, your various products, e-commerce, the mobile, obviously, ADI now, are you seeing some synergies were maybe the mobile and the e-commerce sell very well together or anything you are seeing sort of complementary sales across your product lines?.

So I think that we do and one of the things that we actually started to do at the beginning of the year, approximately beginning of the year, which is adding those combined marketing packages, which you can buy. So, you can buy this combo, which is built on offerings that will together and we said it take that and use that.

So yes, and things like it’s mentioned mobile and e-commerce go together and lot of CRM high, and overall we see that the combination is the stronger things of the week. So, as when several products aligning and that’s why we believe the vision of the Wix OS, were several products aligning on one website enabling one business is so strong.

For examples, ShoutOut is booking grew a lot, booking and e-commerce grew a lot to get our booking in hotels or restaurants and hotels, all those go together, that’s just a couple of combinations that are very common..

Okay, great..

Your next question comes from [indiscernible]..

Thank you very much. Just a quick one on saw in North America, is there anything in particular that contributed to this pickup.

And are there ideas that you can basically take from this market and use them to drive faster growth in other markets as well?.

Well, I think that’s definitely this product, okay, more than anything else, that’s driving that, coupled with the fact that our brand exposure is growing, and I think a lot of those activities actually happen in North America, not exclusively, but they have definitely great things that are being done, whether it’s our partnering with the new activities and other activities.

So, we are extremely happy. And I think that one of the things that we actually see is that also there is a huge amount of potential there in the sense of further growth in the U.S. That being said, I think that our growth outside of the U.S. and globally is still extremely strong.

And we are obviously the products – the products we duplicate as we duplicate and added languages and localize them they have – they carry that same impact that we had in the U.S. outside of the U.S. And as many of our branding activities and campaigns, which are global also have that same effect.

So definitely we see that, as you know, keep on carrying outside of the U.S. and spending growth there as well..

Okay, that’s helpful.

And then you called out the increased efficiency on performance advertising, outside of – besides the fact that you have a superior product, better product are there other factors that are contributing to this?.

I think that you are asking whether there is other, for decisions, you have market other things rather than products that are taking effect, that get us one..

Yes.

I guess sort of ADI timing in terms of when it was kind of rolled out, it was kind of end of August and it called out sort of improvement in efficiency and advertising spend sort of separately, so I just I was wondering, if there anything besides the product improvement that’s helping to drive efficiency?.

So first of all, it’s the branding as I mentioned – just mentioned, but also we have to take into account ADI for example, we still did – we [indiscernible] only for English speaking countries. Obviously, U.S. being a big English-speaking country, so it has more of an impact there and it has in the countries, in which we haven’t deployed it yet..

We are progressing there. Is that the market is changing, I think before a lot of people could have believed that this [indiscernible] some directory or online or something like that, that’s enough for the business.

I think a lot more did they understand, that they have to have control of their own brand and identity and their online progression into [indiscernible] we see that people really care about that and the huge market [indiscernible] would probably be a trend..

Okay.

And then just a quick follow-up if I may, ADI is available in the English-speaking countries, when do you plan to roll it out to other non-English NGOs?.

Well, one good thing about ADI, that it’s completely new products, that means there are so many things we want to do it. Especially, once completing the new products, you never actually manage to complete anything you wanted to do Version 1 or Version 1. When you release it yes, thousand things you want to do.

So we are working very hard to understand and to achieve one after another. So we don’t have are the only other countries. We could not assume right, it’s also subjected to what you do in this geography, because it’s actually – understanding this type of business that you have and it relates to your area.

So we also have to train it to understand, how to do things in different countries, different languages. So it’s a bit more of a set up than normal we have, but the results justify. So we don’t know yet, when we are going to start listening that in other languages, but we continue to introduce that..

Okay. There are no further questions. This concludes our call..

Thank you..