Wix Results Presentation Deck slide image

Wix Results Presentation Deck

is consolidated to ours and it gains the benefit of our scale. Excluding hosting costs from DeviantArt, non-GAAP gross margin would have been 85% in Q2 2017. In Q2 2017, we began amortizing intangibles related to the acquisitions of DeviantArt and flok, which are excluded from our non-GAAP gross margin. We maintain strong gross margins as we leverage our 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. Non-GAAP R&D expense in the quarter increased to $29.2 million compared to $21.4 million in Q2 last year. The increase was primarily due to continued investments in new product development and improvements to existing products. Non-GAAP R&D expense was 25% of collections in Q2 compared to 26% of collections in the year ago period and 23% in Q1 2017. As conversion continues to improve, we generate incremental leverage in our investment in R&D on a year over year basis. Non-GAAP S&M expense during the quarter was $46.2 million, or 39% of collections compared to $34.9 million, or 43% of collections, in the year ago quarter. We continued to invest in branding and direct acquisition campaigns while staying within our Time to Return on Investment (TROI) range of 7-9 months and optimizing our investment across various channels and geographies. This continued investment in marketing while remaining within our return thresholds demonstrates our strong execution of our marketing strategy, increased efficiency in our direct advertising spend and improved brand. We reaffirm that S&M expense will be 40% - 41% of collections for the full year 2017, as previously provided in our outlook. Non-GAAP G&A expense was $8.4 million or 7% of collections in Q2, compared to $4.9 million or 6% of collections last year. The year over year increase was due to increased headcount, higher overhead expenses and additional costs associated with DeviantArt. - 4- 30% 2014 56% 2014 Non-GAAP R&D as a % Collections ($12.3) 28% 2015 48% 2015 26% Non-GAAP S&M as a % Collections ($3.0) 2016 Q2'16 44% 2016 26% ($1.2) $3.9 43% Non-GAAP Operating Income (Loss) (in $ Mn) 25% Q2'17 ($7.5) 39% Q2'16 Q2¹17 $3.5 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 WIX.com
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