Wix Results Presentation Deck
relationships with third parties to provide hosting services and focus on driving
efficiency in scaling our capacity against the bandwidth and storage demands of
our growing user base.
The decline in gross margin year over year was partly attributed to changes in
hosting arrangements that will benefit us longer term but that created some one-
time costs. The decline was also due to higher support costs as we scale our
customer support infrastructure to meet the growth in registered users and
premium subscriptions, as we stated in our Q1 2017 earnings report. Since the
beginning of the year, we have developed and introduced several new
technologies and have added over 170 agents to provide support to our users.
Finally, increased hosting costs associated with DeviantArt impacted our gross
margin on a year over year basis. Over time, we anticipate hosting costs
associated with DeviantArt will decline as its infrastructure is consolidated with
ours and it gains the benefit of our scale.
Non-GAAP R&D expense in the quarter increased to $32.0 million compared to
$22.2 million in Q3 last year. Non-GAAP R&D expense rose to 27% of collections
in Q3 compared to 25% of collections in Q3 2016 and 25% in Q2 2017. The
increase this quarter was due to continued investments in headcount as we were
successful in hiring R&D talent faster than expected.
We view R&D headcount as being dependent on our ability to grow our top line
from product and technology development. We have demonstrated over
recent years of 40% annual collections growth that our investment in R&D
talent generates positive returns and is key to driving sustainable growth
in our business. In Q3, we increased headcount to over 1,000 people to execute
our vision and strategy. Despite this increase in headcount in Q3, we still expect
to gain leverage in R&D expense relative to collections for the full year 2017
compared to 2016. Our large and talented R&D team and our track record of
delivering positive returns on our investment is a powerful and unique combination
that we believe will continue to drive organic growth.
- 4-
82%
2014
30%
2014
Non-GAAP Gross Margin
83%
2015
28%
85%
2015
Non-GAAP R&D as a
% Collections
86%
2016 Q3'16 Q3'17
26%
25%
84%
2016 Q3'16
27%
Q3'17
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