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Wix.Com Ltd
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Ladies and gentlemen, thank you for standing by, and welcome to the Wix.com 2019 Third Quarter Financial Results Conference Call. At this time, all participant lines are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]
I would now like to turn the conference over to your speaker today, Maggie O'Donnell, Director of Investor Relations. Please go ahead.
Thanks, Sarah. Good morning, everyone, and welcome to Wix's third quarter 2019 earnings call. Joining me today to discuss our results are Avishai Abrahami, CEO and Co-Founder; Nir Zohar, President and COO; and Lior Shemesh, CFO.
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 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. You can find all reconciliation between our GAAP and non-GAAP results in our press release, presentation slides, shareholder update, and our Interactive Analyst Center on the Investor Relations section of our Web site, investors.wix.com.
Now, I will hand it over to Avishai Abrahami, who is going to say a couple of quick words about the quarter. Avishai?
Thanks, Maggie, and good morning everyone. Q3 was another solid quarter. We've added 114,000 net subscription in the quarter. Collection were higher than our guidance, and we are raising our outlook for the full-year when you adjust for changes in exchange rates. Collection from our new user cohort are higher than last year's cohort, which shows the success we've had in increasing the value of our product and optimizing pricing. The future collection of our existing cohort is now expected to be over $6 billion over the next eight years. This result prove that we have a very strong and consistent core business that continues to grow.
We are also seeing great early success in many of our new products and initiatives. The investment in marketing to professional is show very positive trend. The perception in the market Wix is a professional tool is increasing, and we have seen strong growth in users that build multiple Web site. In fact, collection from users that have 10 or more subscription grew approximately 50% in the last year. We are excited about this progress and will continue to develop our offering for this market. We recently launched Wix Fitness, our newest vertical offering that focus on one of the fastest growing categories on Wix. Use of Corvid is increasing, and this product has been an important part of our ability to attract high quality and professional users. We also continue to see positive growth in payments, and we are making positive advancement in expanding our customer solutions. We are ending 2019 on a strong note.
We are very excited about the upcoming year, thank you for your support for this year, and for joining us today.
Maggie?
Thank you.
Operator, can we have the first question, please?
Thank you. Our first question comes from the line of Ygal Arounian with Wedbush. Your line is now open.
Hey, guys, good morning, and thanks for taking the questions. So I have two, I'll start with the subs. And you had a really strong sub net add quarter. Your guidance is to now be at the high end of the previous range which really implies a big deceleration in the fourth quarter. I think the kind of deceleration we haven't seen typically. So I wanted to dig into that a little bit, see if there's something specifically going on there, kind of what the outlook is for subs in 4Q as we kind of bridge towards your expectations for acceleration in 2020? And then wanted to dig into the subscription packages that you're selling to the agencies a little bit more, maybe if you could kind of give a little bit more color around how that works, the kind of difference in duration, the average amount of subscriptions you see per package, and if you could talk about any kind of like volume discount that you're giving to agencies on that as well, and how that could be flowing through to ARPU. So I guess a lot of questions within those two, but thank you.
Hi, Ygal, this is Lior. So with regard to the net sub adds, I mean yes, we had a really strong quarter which I think that also are a good demonstration of the overall changes that we've made in the last few quarters, especially about the price optimization. It was more than what was in our guidance, and that was the main reason for the fact that on an FX neutral basis we actually are beat the [ph] quarter. And we saw a very strong demand specifically coming from international, but also from our partners. So obviously this is also very exciting news for us. And I believe that based on what we see right now I think that we are in the right place to say that next year actually will be accelerated in terms of net premiums additions. This is what we expect to happen. With regard to Q4, obviously Q4 usually impacts by seasonality. So therefore I expect that Q4 is going to be less than Q3 in terms of net subscription, but it always hasn't been the case. With regard to the agencies, I will move it to Nir.
Sure, gladly. So generally in terms of how we work with partners, naturally a partner that builds many Web sites buys many subscriptions throughout the year, it's much better KPIs, delivers more value to us, had much higher retention in the subscriptions that he creates because we give active and handholding to these customers. And naturally over time we see lots of potential there. As Avishai mentioned before and we actually included in our package, we're actually seeing when we look at those accounts that have 10-plus subscriptions in them we're actually seeing a rise of 50% in collections year-over-year, which we see as a great success and a big part of the new program that we're running. Specifically we're currently not giving volume discounts. We're definitely trying different approaches working with the agencies and with partners and want to find the best solutions that will deliver the most value for them and by that also deliver the best value for our users that are using the platform through them. And obviously you will see we deem that be -- to generate great impact for the company in years to come.
Okay, thank you.
Thank you, Ygal. Can we have the next question, please?
Thank you. Our next question comes from the line of Deepak Mathivanan with Barclays. Your line is now open.
Thanks for taking the question, guys. Two quick ones from us, so the first one, the gross margin deleverage in the quarter was a little bit higher than the second quarter levels. Can you help quantify the impact from customer support versus payments, and should we expect this kind of deleverage to be the normal for kind of few quarters until payments mix reaches a more normalized level? And then the second question, you noted that the average collections for sub growth is likely to moderate over the next few quarters. Should we kind of expect to see the benefit from price increases that you did in May this year continue for a few more quarters or is the benefit likely to be less significant from that? Thank you.
Hi, Deepak, this is Lior. So, with regard to the growth margin, obviously it was well expected. I actually view it as something that it's quite positive because it means that everything that we've done with regard to payments is actually being successful. Obviously, this quarter we see a higher top line coming from payments, therefore we provided at the very beginning of the year some kind of a range with regard to the gross margin, because it was very early to say if everything we've done about payments, all the initiatives, how is it going to work out and what will be the exact volume, because basically you know it's new.
So, I'm happy to say that it was all positive according to the expectations, and even a bit better. And therefore, as that as long as the payments activity is going up it will have an impact on gross margin but it's only incremental. Very important to mention that the basic gross margin for the core business, meaning the subscription is still very high, at about 84%, as it used to be two and three years ago.
The more that we are adding services to our customers like G Suite, like Payments, and so on, and obviously every investment that we have in support has an impact on gross margin, but it's all incremental to the core business, so I do expect gross margin to have more impact in the future as payments will go more and more higher. We will try to provide, next year, more color about it, and try to make some more orders as again as those kinds of services will continue to increase.
With regard to the ACPS, so obviously if I'm looking at the next, let's say, a few quarters, so there is a few things that going to impact the overall ACPS, but also the ARPU. And it's, first of all, about how we continue to provide more services to our customers, and this is, as I mentioned, I think that Payments is a good example to the fact that we are providing more services, and therefore I expect it to increase. Q4 obviously has some seasonality into it, so I don't see that increasing, but certainly next year I can say safely that at least for the ARPU it's going to increase and demonstrate all the different services that we are providing to our customers. And also you will see some benefit coming from the price optimization that we've made early this year.
Okay, thank you.
Thanks, Deepak. Can we have the next question, please?
Thank you. Our next question comes from the line of Ken Wong with Guggenheim Securities. Your line is now open.
Great, thanks for taking my question. And so in the prepared remarks you guys mentioned potentially launching a significant new product in 1Q of '20. Just wondering if you could maybe shed a little light on what that might be, and how we should think about potential contributions to top line there? And then also, you guys mentioned that revenue mix has a bit of a headwind on top line. Could you maybe walk us through what that might have been, and if possible help us quantify what that impact was? Thank you.
Hey, this is Avishai. So, we're not in the habit of disclosing product details. But I want to say this is a product that we've been working on for a very long time, and we're proud of it. It's a very clear continuation of one of the strategies we're discussing on this call. So I think that that's going to be a surprise, but the direction is probably going to be something that makes a lot of sense. And as a company, we are very, very excited about it.
Yes, with regard to the mix, I think that it was -- Ken, it was really, really small. I think that when you look at the revenue, about half was actually coming from FX, the other one is change of mix. Nothing significant that should change your model. Basically we had more subscriptions. And as we mentioned before, we had a strong quarter in terms of net subscription additions. As you know, subscriptions tend to be deferred in term of revenue recognition, so it has an impact compared to other services that have been recognized immediately, but again, it's nothing significant; it was very small, hundred thousands of dollars that shouldn't make any change to the model.
Thank you.
Thanks, Ken. Can we have the next question, please?
Our next question comes from the line of Brent Thill with Jefferies. Your line is now open.
Thanks. Just to follow on the revenue side, there was I think a little disappointment relative to where the Street was at in where the revenue came in, and I think you highlighted part of this is FX and the mix change, but was the bookings more backend-loaded this quarter or did the subscriptions come in linear through the quarter? I think everyone's just trying to reconcile why you weren't seeing a little bit better flow through on the top line based on the success of the customer adds. And we understand the move to subscription, but was it more backend-loaded than you've historically seen?
So the answer is, no. Nothing was unusual about it, but we need to remember that most of the incremental subscription that we got, it was mostly on a non-monthly basis so it's - most of it has been deferred. But again, it was really, really small. When you look at the revenue, we're talking about $1.5 million compared to the guidance that we provided before, about half of it was the FX, so again the change was such was not that significant. I think that when you look at the booking, so obviously you know it was demonstrated very well that we're actually FX neutral, that we're actually beat. Unfortunately not every dollar of it was part of the revenue. But again it was not that dramatic.
Okay. And just a quick follow-up, can you just give us a quick update on the progress of Corvid? Thank you.
Oh course. So we continue to see strong growth, and I think we're currently at about 250,000 -- sorry 300,000 highly engaged users. The percentage of highly engaged users that has grown from 20% to 25%, again, this product is what has enabled us I think to go so much stronger into the partners and designers markets. So we are happy with where it is. And we believe that this is just a beginning. There a lot of things we need to do there in order to be able to get it to the next level. So, we think that this was a year where we have seen a lot of success on this product. A 250,000 –- 300,000 developers that really developed into that is a tremendous number. And they decided that you can actually measure the perception change and the kind of the users that it brought to Wix. So this is a fantastic –- fantastic success from our perspective.
Thank you.
Thanks, Brent. Can we have the next question, please?
Our next question comes from the line of Zachary Schwartzman with RBC Capital Markets. Your line is now open.
Great. Thanks for taking my questions. Nice to see the uplift in ACPS for new fully-priced U.S. subs, but on price optimization globally, you mentioned in the shareholder's update that you continue to see these efforts benefit the lifetime cohort. Can you talk more on international specifically on targeting highly valued users? And what you are seeing that gives you confidence that this is the right strategy in those markets given the lower penetration rates and also as growth lagged North America and Europe and Asia and Lat Am this last quarter? And then a quick follow-up on Corvid, when Wix starts charging to use Corvid, could it turn off these developers who may generally prefer to work with Open-source alternatives? And if Corvid is kept Open-source will outbound agency sales or perhaps a platform marketplace be the best way Wix decides to monetize Corvid? Just wondering how Wix will walk that line as it comes up with pricing. Thanks.
Let me start with Corvid. So, you are asking when we start to monetize, so currently we are monetizing that in a way that you actually pay for the subscription, and if we look at it even if you use Open-source, so at some point of time you need to host it somewhere. So if there is project, you still need to host it. You need to buy a database or you need to use an Open-source database to then host that. Use probably Amazon or Google or Microsoft in order to get that as a managed service. So that kind of customers are already used to paying, and the thing that if we are going to have a more expensive offering for Corvid at some point in time, they are used to that. And in addition, Corvid also offer the advantage that you can develop it and develop in test mode for free, which they don't have today because they still need to build all the environment in order to start developing something. So, I believe that by -– if at some point we will have additional pricing for Corvid, it will be welled aligned with what people are used to do it today and probably will be easily accepted.
Yes. With regard to the global price optimization, the reason why we recorded the price optimization because in some cases we actually reduced prices in some of the countries, meaning that we actually run and did those test in literally in every country to try to see what is the best optimization that we can do in term of the pricing to get a better value for our Code. So obviously where we have made the changes, we see a better value for our code also outside of the U.S. I think that in the last few quarters we got a better and growing faster in the U.S. than in other places in the world. One of the reasons is obviously the strength of the dollar compared to other currencies. We need to remember that when we do the TOI is based on dollar. So, if we are getting for example in the U.K. we are getting the same amount of British pound in dollar, it's smaller. So the model is actually adjusting that automatically to be based on the TOI. So we are growing faster in the U.S., but I believe that still the international has a huge opportunity for us. And especially with all the price optimization that we have made, I think that the value from the Code is actually going up.
Great. Thank you.
Thanks, Zach. Can we have the next question, please?
Our next question comes from the line of Ron Josey with JMP Securities.
Great. Thanks for taking the question. Lior, you talked about earlier in the letter, we had three reasons, reasons for confidence and growth next year on the subscriber base products, partners, customer solutions. Just talk more about the partner side and with the partner program live, how built out as the program? Are you expecting more partners like the town page partner? Or is it smaller agencies any insight on maybe that second leg of the three stool, three legs that are that are driving growth next year? And yeah, I'll just stop there. And I guess maybe a quick one, Avishai, you talked about excitement into 2020, obviously, we have new products, payments, gaining traction to subscribers, anything else there that you want to highlight there? Thank you.
Yes, so sure. So I think that in terms of -- I think that in terms of subscription growth. There is kind of -- first of all, we keep on building, improving the kind products that we have, and also building new products and we always expect and the other great track record, I think, of showing how those new products improve conversion and by improving conversion, obviously driving growth. The second part is in terms of partners and then absolutely, yes, I think the initiatives will cover any kind in any size, and many forms of different partners and agencies. The entity deal is definitely, that kind is one kind of one kind of an example of a partner. And we'll keep on you know, going down that path of supporting any kind and then any size of those partners. As this is exactly what you set up to do. We wanted to revolve and expand our business to the people who are building the Web site for other people. Regarding the second question, can you repeat the second question quickly?
Well, I guess just on, it's more bringing everything together into 2020. And back to partners, just can you just talk about how built out is the program, but then on 2020 more than I've seen in the past these comments around, why 2020 is sort of exciting in your minds, new products, subscription, acceleration, payments, getting stronger, et cetera. So just obviously, you mentioned excitement in 2020, just more thoughts around that? Thanks.
Yes, absolutely. I think that companies that were for the live go from stages and I think that one of the interesting thing that companies can experience is the ability to attract new kinds of customers, like new type of customers, and as the nature a business via the subscription, things take time to accumulate to be significant. Well, I wish you know, with our ability to attract professionals two weeks to me is really exciting, it will take time to formulate, as you can see, you've seen with ADI, things take time but we're seeing already that the number the perception, the growth and we're going to do some interesting stuff coming into Q1. As a result that I'm very positive that we'll be able to not just do what is our traditional market but actually expand to new markets. And I think that is something that does not happen a lot of companies where the point where we're seeing something like this happen, so for me, it is super exciting.
In addition to that, I think that if you look at the total view of our market is a company then look at our other Web site, I think that our dominance today is higher than it ever been. And we can see that a lot of -- and we can see that in many different aspects. So I think that is the other side, which is something that we're very happy about. I think that we spent a lot of effort involving our technology and product to a level that it enables such a thing to happen.
Thank you.
Thanks for your question, Ron. Can we have the next question, please?
Our next question comes from the line of Naved Khan with SunTrust. Your line is open
Yes. Thanks a lot. A couple of questions, on the subscriber editions for next year, again, you guys called out the three components, improved conversions from product improvement partner program and the customer support. So if I have to in my mind, if I have to rank order them, how should I be thinking about the impact on the subscriber edition for next year? And then, I had a question on the state tax. It looks like it's going to be getting layered in over the coming months, is there a potential impact on conversion rate, meaning as people see a higher amount, they have to pay you might see an impact on conversions, how should we be thinking?
Yes, so I should -- I will start with the first question about the subs reacceleration. There is by the way, a fourth reason, which is the lapping price optimization impact which we had it on 2019, it was kind of a one-time when we did a price optimization, I don't expect it to happen at least not at that magnitude in 2020. So, we had this impact. In 2020, you basically start with from a different place, and therefore, the effect of the price optimization actually is going to end at 2020, when you look at it on a year-over-year basis. Again, that said, as you mentioned, you have new products and obviously, in fact conversion the partners and support investments, I believe that obviously partners is a big chunk out of it. But I cannot shrink it to you one, two, three, four but obviously partner is a big one of the, one of the most important items for reaccelerating.
With regard to the sales tax, the answer is, I don't know, I think that everything about the sales tax is something that's happening, it's a new thing in the U.S., at least for most of the countries, and we need to see the impact of it. I think that it's not just about weeks I think that people used to pay sales tax and think that it will be has any big impact. We saw that by the way in the past in Europe, when that started, which is essentially it's really, really the same. We haven't seen really impact on the conversion because of that when people started to pay back in Europe. So I believe that it's really, really the same. But again, it's how to tell, we will have to test, we will have to understand. And then obviously, we will inform.
Thanks. It's super helpful. And then so just on the, clarification on the tax issue, is this something that is layered into, so you irritated guide $450,000 to $500,000 for the year, but you think you're going to come in towards the high-end, are you making in some appropriate amount of conservatism because of the tax issue?
No, no, because remember that we are talking about this number for this year. In 2019, we haven't really started to collect taxes, the sales tax from the customers because we need to get ready for that every country has a different rules. And therefore it is file provisions, meaning that next year we won't see that as a provision because we are going to charge customers and paid back to the different authorities. Therefore, there is no change in terms of the pricing of sales tax in 2019.
Thank you.
Thanks for your questions, Naved. Could we have the next question, please?
Our next question comes from the line of Jason Helfstein with Oppenheimer. Your line is now open.
Thanks. Two questions, so with respect to next year, you're basically telling us you're confident in subs acceleration, better ARPU, you're obviously not giving us revenue at this point. But if I do the math, and just correct me if I'm wrong, the guidance basically assumes 27% collections growth. There's a currency headwind, I think if you back out the headwind, it's about 36. And so, are you basically telling us kind of in aggregate, adjusting for currency collections basically should accelerate next year and then just can you clarify, again on the pricing increases? Again, that when you expect to be complete as far as announced, but then they roll through at the annual increase, when that ends? Thank you.
So with regards to the first question, Jason, obviously, we are not in a position to provide numbers right now for 2020. So unfortunately, I cannot comment to that. I think that the only comment was about the reacceleration of next year. Net adds, again not to a specific number, but we cannot comment on the exact collection and revenue for next year. With regard to the pricing increase impact we obviously we started it mid of 2019. So I guess that the impact lapping in mid of 2020 in most of the cases. So I hope that was the question?
And it just clarify the currency impact, imply it's about -- what is it about nine points in the fourth quarter, is that right, headwind?
The question is compared to what if you compare…
Collections, growth headwind in the fourth quarter with the implied guidance?
When you compare it to the last guidance we provided a few months ago?
No, no, no, year-over-year growth rate of collections in the fourth quarter.
For the overall year the impact was about $12 million. So I believe that for Q3 it's a few millions. I don't think that we provided the number. I can check it and get back to you. But it was a few millions of dollars.
Okay, I was talking about the fourth quarter now.
The fourth quarter?
Right, what's implied in the guidance that is it about a nine point headwind on collections?
It was more like $2 million to $3 million.
In the fourth quarter?
Yes, for the fourth quarter on a year-over-year basis. Correct.
Okay. Thank you.
Thanks, Jason. Can we have the next question, please?
Our next question comes from the line of Lloyd Walmsley with Deutsche Bank. Your line is now open.
Thanks. So can you remind us, do some of the lower margin products at Q3 and payments flow through the disclosure on cohort collections and kind of when you look at cohorts on a gross margin basis it is adjusting for some of the lower margin products? Can you talk about how that recent cohorts look compared to earlier cohorts? And then a second one if I can just on the collections from partners with more subscriptions, being up 50%, how big is that in your case from last year just prior to the agency push the sales force push. I would think it would be growing even quicker than that unless it's just a bigger portion of the base. And then we realized that if you can give us a sense of the magnitude of that in the in the mix, that would be really helpful.
So with regard to the first question about the call, so basically, the quotes include collection in terms of dollars, not margins to a question it's included just with - included everything that we are selling because we need to compare it to the overall TROI model that we have and we measure collection. And obviously, the other associated cost is part of the overall budget and profitability that we keep on optimizing, but you're right, the quality includes all the different aspects of the collections. With regard to the increase, I mentioned of partner, so we didn't actually provide the number, but it was a very quiet and significant increase compared to where we were last year. And it's starting from the wide base.
It's a wide base, correct.
It's a wide base. Remember that we already had our partners when we started and overall it's make us to be very, very excited about next year.
Okay, so on the cohort stuff given that it does include some of the lower margin products, I mean, if you look at it on a gross margin basis by cohort is that is that showing healthy growth as well?
Correct, because still for example, when you take the payments, although we had millions of dollars for example, this quarter from our payments is still not that significant when you look at the quote basis. Remember that usually when you start a cohort, usually you don't use the payments immediately. It takes time until you open the store and start to have business on top of it and so on. So usually it's incremental, but it might have an impact in the later stage. I believe that it will be all incremental because the basic more fundamental businesses that we have not changed in terms of the growth margin. So I believe that it will certainly going to have an impact in the future right now. It's not so significant, but it will be interesting to see.
Great, thanks. Can we have the next question please?
Thank you. Our next question comes from the line of Sterling Auty with JPMorgan. Your line is not open.
Yes, thanks. Hi, guys one question. One follow-up first, on Corvid, you mentioned in the prepared remarks, the 6.5 FX I think traffic improvement for sites that are actually using it. Can you give us a sense of what is the revenue per subscription for those that are using Corvid and how in terms of how that compares to the average kind of revenue per subscription?
Yes, well, I can say that the overall people that are using Corvid tend to take the more expensive package and currently all pricing for Corvid is within the normal business a model that we have. And the one thing that we do notice that is very significant is that the retention of those users is dramatically higher. So they tend to stay much longer, build a much more complex Web site. So does this answer your question?
It does. Thanks, Avishai, I really appreciate that. And then one follow-up on payments, can you give us a sense of what is the type of customer that's taking Wix payments and maybe Lior, given the number of questions kind of earlier in the queue around payments? Can you just remind people what the accounting is for payments?
Sure…
Hey, Sterling, it's Nir. So, I'll take the first part into the type and hand it over for the accounting to Lior, but in terms of the kind of user, it's pretty much, it's very varied and diverse profile, you have to remember we have so many different kinds of businesses running on our platform, and many of them would like to close transactions online. So it will be an online store naturally, but it will also be someone who is using our bookings engine and then trying to close a class or an appointment. It can be a restaurant. It can be someone who's selling tickets to an event. When we look you look at kind of e-commerce kind of transactions and weeks, it's a very, very high variety. And all of them need that ability to do payments easily.
With regard to the overall margin of payments Sterling to your question, when you look at the payments by itself as a business has much lower margins than the overall margins that we have. I think that it's usually it's around 30%. But we need to remember that the way that I look at it is in a much different way, because what I think that the more interesting way to look at it is about all the services that you provide to merchants, and it's not necessarily just payments, I think the payments is one of them. In some of the cases, you can provide a bundled solution that includes all kinds of stuff like for example, drop ship and so on. It's nothing new in this market. And then I think that it's much more interesting to look at the overall margin of those mentioned solutions to our customers, because in the end of the day, each and every one of them has its own value, but together they provide much more value to the customer. So if you ask me about the target for I can see that in the future, I certainly hope that it will be somewhere between 30% to 40% when I am talking about the overall services that we provide our merchants and our customers in general, so, you know, I hope the next year will be able to provide much more color around it. I do believe that as long as it's growing, we need to provide some more information about it.
Understood, thank you so much.
Thanks, Sterling. Can we have the next question, please?
Our next question comes on the line of Josh Beck with KeyBanc. Your line is now open.
Thanks for taking the question. I'm not sure if you'll be able to address this, but I'm really just trying to think a little bit more granular about the shape of net add acceleration for next year, when I look at the implied Q4 guidance, it just it seems like the way that the 2020 is going to start off as it could still be down. And then maybe the back half could feature a lot of acceleration. And that's what gets you to a better number for the year. Is there any, I know that's pretty detailed, but is there any commentary you can share just on the shape of net adds for 2020?
Sure, I think that I think to answer your question, I will start with some general comments about it. You can see that in previous years, when you look historically at Wix, it was all based on product meaning that the way that that that we increase net subs was all due to when we actually launched new product. In some cases, you sell a better a stronger H2 than H1 in some of the cases a stronger H1 than H2. So, except for seasonality where usually the first quarter is really, really strong, there is another impact of when your product became mature and people actually more engaged with your product and using that. Specifically to your question, I do believe that the second half of next year is going to be stronger than the first half of the year simply because of the fact that the effect of partners, I do believe will be stronger in the second half than the first half as the product is more mature and we have the opportunity to increase the usage of that.
Second, there's also the obviously the effect of the price optimization that we've made. So if you look at it on a year-over-year basis, the price increase lapping is at around, I think that it's around May of 2020. So obviously, when you look at it on a year-over-year basis again, there is also in its mathematics, there is also an impact to that.
Okay, thanks Josh. Can we have the next question, please?
Our next question comes from the line of Aaron Kessler with Raymond James. Your line is now open.
Great, thanks, guys. Couple of questions may be first on the customer solutions initiatives, you reaffirmed kinds of five point growth reacceleration in 2020, can you just maybe update us on maybe traction or what you're seeing so far in terms of conversion rates, et cetera from customer solutions investments. And second, just quickly back to the gross margin drivers on a sequential basis it looks maybe the rough 200 basis points decline was three and for most out with payments are kind of can you help us, how much the sequential change the payment first customer service and G Suite? Thank you.
Yes, it's Nir. I will take the first question about customer service. So I have to say, we've kind of dived into this whole initiative based on years of data and work we've been doing in our customer service and understanding in many ways that this is, we know it's a big opportunity that was just there for us for to go, to go after. Throughout this year, we've hired and increased the size of our call centers mostly based on a third-party. But we're talking about hundreds of agents. We already just by doing that and training them on the basic level, we already managed to definitely improve significantly our SLA and just give better customer service in general.
Now what we're doing in the last few months is basically going into much deeper training level and basically working into a much more personalized level of customer service and experience in a way that will actually help us consult our users to just become better and more successful online whether it's taking them through the building of the Web site process and helping them convert and getting to the end point and actually have a live effective site online. And even if they already has converted in there and they can help them out, get more value by using more products, whether they are free products or paid products, send for example, then we would love to do that as long as we help to become more successful. So that has been the big focus in the last few months and also kind of revamping a lot of the training programs understanding the quality control for them, bringing more new talent of people with experience that can manage and run such an operation. And I would say that I'm very excited about this not only because of the potential growth we see towards 2020. I think that for us to be able to be in a position where we work with our customers more closely. we consult them, we help them be more successful. Just puts us in a much better position of for growth in years to come not only in as I look forward into next year.
With regard to the gross margin decline this quarter compared to Q2, since the investments in customer support was already done in Q2, and obviously in Q3, it was a bit higher, but most of the impact is coming from payments.
Okay. I think we have time for just one more question. Can we have the last question, please?
Our last question comes from the line of Jonathan Kees with Summit Insight Group. Your line is now open.
Great. Thanks for squeezing me in and taking my question here. I wanted to ask recording on what are your opportunities specifically international. I've heard you in terms of your [indiscernible] a huge opportunity, but if I look at the growth rate for the regions for the quarter, it was only Asia Pacific that was at corporate average, the other regions were below corporate average for the year-over-year growth. So, I guess -- and also saw the announcement with NTT page there, is there going to be like just trying to tie that in, are you looking to change your strategy by chance? Are you looking to lead international more with them Corvid? And are you also looking now at just focus countries versus more the regions? Or are you going to still stay with them the DIY market services? Thanks.
I think that you asked a broader question. Maybe I'll start with that. So obviously, right we've continued to go with our Do It Yourself strategy, but as we said, we're also working on attracting partners; partners being companies or individuals who are building Web sites for others, entity is an extreme example of that. Of course, it's not that a common case and which is a huge company that is now using weeks as the technology and product to build Web sites for their customers. And that is in line with our partner strategy. We hope to have a lot of those in the future, and some of them as big as NTT and the majority of them, of course will be smaller. So we will continue our data share [ph] business as it is very, very effective. We do intend to continue and invest in the partners as we mentioned today, we see a lot of growth in that. The amount of users with a 10 or more subscription is growing rapidly 50% and on revenues there. And so, we're very excited about both opportunities, we don't see them as conflicting with each other. Most of the people that will take a partner to build a Web site will not do the show on them self either because they're too busy or because they don't have the computer skills or they want the professional to do the Web site for them. So we believe that those two do not conflict with each other and actually contribute to the creation of ways is the dominion -- is the stronger brand in that, in this category.
With regards to the first part of your question about Europe for example, I think that the best way to explain it in a simple way is about the TOI. Think about it this way, what happened in Europe where and via strength some of the dollar compelled to do Euro and the British pound, obviously has an impact because when you do the calculation of the TRY essentially, it's dollar-in and dollar-out. Obviously, dollar-in is less when you convert what we are getting in Euro and British pound and therefore, we are looking at some of the investment to the U.S. where we -- there are much, much better growth, but most of the impact was bigger because of what's happened to the FX. Mainly we have FX remained the same as last year you would have seen more investment in Europe because of that.
Okay, great. Thanks for your opinion, Avishai.
Thanks to your question, Jonathan. Thanks, everybody for [technical difficulty].
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.