Groupon, Inc.
Q2 2012 Earnings Call Transcript

Published: 14 Aug 2012

[Operator:]

Good day, everyone, and welcome to Groupon's Second Quarter 2012 Financial Results Conference Call. [Operator Instructions] Today's conference is being recorded. For opening remarks, I would like to turn the conference over to Vice President of Investor Relations and Corporate Finance, Kartik Ramachandran. Please go ahead, sir.

[Kartik Ramachandran:]

Hello, and welcome to our Second Quarter 2012 Financial Results Conference Call. Joining us today are Andrew Mason, our CEO; and Jason Child, our CFO. The following discussion and responses to your questions reflect management's views as of today, August 13, 2012, only and will include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and in our filings with the SEC including our Form 10-Q. During this call, we will discuss certain non-GAAP financial measures. In our press release and our filings with the SEC, each of which is posted on our IR website, you'll find additional disclosures regarding these non-GAAP measures, including reconciliations of those measures with GAAP measures. Finally, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2011. Now, I will turn the call over to Andrew.

[Andrew D. Mason:]

Thank you, Kartik. Q2 was a solid quarter for Groupon. Total revenues grew to $568 million, that represents 53% growth excluding a $32 million unfavorable impact from foreign exchange. Operating income was $46 million compared with a loss of $101 million in the second quarter of last year. Before I get into the details, I'll call out a few more highlights. Gross billings were up 47% year-over-year, excluding FX, to $1.29 billion. North American revenue growth was 66% year-over-year, driven in part by demand in our burgeoning goods business. Weakness in our European markets, which comprised the majority of our international business today, created a significant drag on performance with over $70 million of impact on gross billings quarter-over-quarter. While macroeconomic factors did not help our performance in Europe, we believe there are a number of opportunities within our control that can improve our performance, which I'll discuss momentarily. We reported second quarter GAAP EPS of $0.04 and non-GAAP EPS of $0.08, both of which include some nonrecurring items that Jason will cover. Excluding nonrecurring items, non-GAAP EPS was $0.04. Finally, for the eighth time in a row, we ended this quarter with more cash than when we started, generating $49 million of free cash flow in Q2. This further strengthens our balance sheet, which had $1.2 billion of cash and no long-term debt as of June 30. Now I'd like to go into detail on 4 different topics

[Jason E. Child:]

Thanks, Andrew. With our detailed results available in this afternoon's press release, I'm going to give a quick summary of our performance and then provide our outlook for the third quarter. Some of my comments here will be on a non-GAAP basis. Note that reconciliations of GAAP to non-GAAP metrics can be found in this afternoon's press release, as well as in our 10-Q, both of which could be found on our website. Because the impact of FX was so significant, I'll provide a little more color on the key financial highlights. All comparisons refer to year-over-year growth, unless specifically stated otherwise. Gross billings, or the total amount spent by customers on Groupon products, were $1.29 billion, up 38% or 47% excluding a $75.1 million unfavorable impact from year-over-year changes in FX rates throughout the quarter. Revenues grew 45% or 53% excluding a $32.4 million unfavorable impact of FX. North American revenues grew 66%, and international grew 31% or 44% excluding FX impact of $31.6 million. Our Q2 GAAP operating income on a consolidated basis was $46.5 million, which included $25.4 million in noncash stock-based compensation and acquisition-related expenses. Excluding these noncash items, operating income would have been $71.9 million compared to a loss of $62.3 million in the second quarter of 2011 and income of $67.6 million last quarter. Changes in FX had less than $1 million unfavorable impact on profitability in the quarter. North American segment operating margin was 16.7%. International segment operating margin was positive for the second quarter in a row, coming in at 9.3%. GAAP earnings for the quarter were $28.4 million or $0.04 per share compared with a loss of $107.4 million or a loss of $0.35 per share in the second quarter of 2011. Non-GAAP earnings for the quarter were $53.8 million or $0.08 per share compared with a loss of $68.7 million or a loss of $0.23 per share in the second quarter of 2011. Second quarter earnings include a net $33 million gain related to a transaction in China, which led to a positive $0.05 impact on EPS. We also added $3.9 million reduction related to the buyout of noncontrolling interest positions related to prior acquisitions, which impacted EPS by negative $0.01. Together, these items had a positive $0.04 impact on both GAAP and non-GAAP EPS. And finally, operating cash flow increased 93% to $75.3 million. Free cash flow in Q2 was $48.6 million, including a nearly $25 million unfavorable impact from FX quarter-over-quarter. Our trailing 12-month free cash flow grew to $330.1 million as of June 30, 2012, including a $45 million unfavorable impact related to changes in FX throughout the period. Operating income, less stock-based compensation, was a major driver of cash flow in the quarter, as natural working capital benefits were offset in part by cash tax payments. This quarter, our blended accounts payable days were slightly up both quarter-over-quarter and year-over-year. While rolling out changes to payment terms of merchants in our international business is something that we believe can further enhance the merchant value proposition, the transition will occur on a deal-by-deal basis and with appropriate level of consideration to customer experience and credit risk management. Over time, we do expect working capital to continue to be a meaningful driver of our cash flow. As of June 30, we had $1.2 billion in cash and no long-term debt. We're pleased with our cash position, and we continue to see our flexibility and balance sheet improve. I want to comment further on 2 of the main drivers of our results in the quarter

[Andrew D. Mason:]

Thanks, Jason. Based on this quarter, we're on a run-rate to do well over $5 billion in gross billings and well over $2 billion in revenue. We have $1.2 billion of cash on the balance sheet and our cash balance has increased every quarter. Today, we have over 38 million customers, and we continue to see that number grow. And with nearly 1/3 of North American transactions in July originating from mobile devices, we are quickly becoming one of the largest mobile e-commerce companies out there. It's hard to imagine that we've accomplished all that, and Groupon hasn't even celebrated its fourth birthday. Finally, I want to thank our employees for doing their part every day to continue to drive Groupon's performance, and of course, thank our stockholders for supporting us as we continue on our journey. Thanks for your time today. Operator, let's take some questions.

[Operator:]

[Operator Instructions] We have a question from Ralph Schackart of William Blair.

[Ralph Schackart:]

Jason, can you provide us what the growth in the quarter was x rev rec on goods? And there also seems to be some confusion with the general article today in Q1 as well. Can you clarify that, please?

[Jason E. Child:]

Sure, Ralph. So in terms of the growth excluding the impact of direct revenue -- first let me point out that direct revenue includes, as we've said just a few moments ago, it includes the combination of goods as well as some of the stuff in our daily deal channels like travel vouchers and movie tickets. Specifically, the goods portion was -- it was less than half of the $19 million of direct revenue in Q1 and it was over half in Q2. If you exclude the direct revenue impacts, in other words, assume that all of the direct revenue was actually booked as net, we would have grown over 30% year-on-year versus the $45 million that we reported. That's on a global basis. That's not disclosure that we'll likely provide going forward just because it's competitively sensitive, specifically the deal margins that we have in our channels, and we don't provide channel outlooks, as you guys know. Second, with relate -- it relates -- as it relates to the Wall Street Journal, I got the breakout on the revenue recognition in Q1, so the estimates were incorrect. And effectively, the goods revenue, as I said, it was less than $10 million. And in fact, "from Q4 to Q1, it was actually about a little less than $6 million of the total $67 million revenue increase we saw globally from Q4 to Q1." So it was less than 10% of the total growth. And if you look at the total global quarter-on-quarter growth of 14%, it was actually less than 100 basis points, so immaterial. So overall, the reality, as you can see in the press release that we filed, direct revenue is material for the first time this quarter. We've been booking direct revenue now for actually 4 quarters. It's just this is the first time it's become large enough to disclose separately.

[Operator:]

Our next question is from Mark Mahaney of Citigroup.

[Mark S. Mahaney:]

Two questions. One on your guidance and one on the active customers. On the guidance, it seems like you've had a pretty clear trend of improving profitability measured in [indiscernible], more over the couple last of quarters, and it seems like your guidance implies a typical reversal of that. Could you talk through that? Are there specific new investment areas that you want to put money into? Or would you just describe that as seasonality? And then secondly, if you look at the active customers that you have in your slides, it really does look like they are starting to flatten out? Is that something you're trying to reverse maybe with new investments in the third quarter? Or is that level of active customers a level that you think is relatively manageable, is that where you want to maintain it going forward?

[Jason E. Child:]

Okay. So on the outlook, Mark, I'll take that, and I'll let Andrew take the customer question. On the outlook, I mean, I mean, I think as Andrew talked about and I mentioned also in, I think, in some detail that the uncertainty around Europe, whether it be macroeconomic as well as -- it's some of the operational stuff that we're working on and technology rollout, et cetera, all of those things, they're with uncertainty, we want to give ourselves room to make the appropriate investments to really continue to make what is a significant portion of our business to feed. And so we want to give ourselves room with that kind of uncertainty, and we feel like that the forecast that we've put forth kind of accurately reflects that uncertainty and the ability to make those investments. Andrew, do you want to take customers?

[Andrew D. Mason:]

Yes. So thanks for the question, Mark. We've seen our active customers grow over 60% year-over-year, so it continues to be healthy growth and in line with the type of revenue growth that we're seeing, while at the same time, we've reduced our marketing spend by over 50% in that same period. Absolutely, we continue to make investments in driving that active customer number. We talked about some of them last quarter, that continue to be a work in progress, such as our hyperlocal initiative to increase the quality of our deal selection, and so we're happy with the growth that we continue to see.

[Operator:]

Our next question is from Mark May of Barclays.

[Mark May:]

We had noticed that the size of the sales force declined both in the U.S. and in Europe in the quarter. Can you explain what drove that and what we should expect going forward? And then secondly, can you walk us through your thinking on how best to allocate deal real estate, and if the substitution of real estate from, say, local deals to goods deals should be viewed as a reduction in the opportunity in the local deal space? And how do these trade-offs compare, metrics like conversion rate, contribution margin, how do they compare between the various product offers that you have available to you?

[Andrew D. Mason:]

Thanks, Mark. So first on the sales force decline, there's a lot of people in that sales force number that they're sales support and not front line sales representatives. We've spoken in the past about the investments that we've started making to improve our internal operations instead of just applying our technology to improve the consumer and merchant experience, and we're starting to see a lot of this bear fruit. They allow us to increase the productivity of our sales force and scale the company without making corollary investments in headcount. So we expect to see the benefits, the productivity benefits of technology improve in the quarters to come. To talk about how we allocate deal real estate, the real estate of our e-mails, it's a combination of the contribution margin generated by deals and strategic investments that we're looking to make. So when we launch a new channel like goods that we're trying to get on the radar of our customers, then we might make a disproportionate investment that has short-term revenue impact to get it on the radar and start doing cross-channel sales. So all these things end up going into the calculus, something will obviously get more and more sophisticated on over time. It absolutely does not reflect a lack of opportunity in the local channel, local commerce is the biggest market out there. We have the strongest competitive position in local, and we're continuing to make the majority of our investments in improving our local e-commerce experience.

[Operator:]

Our next question is from Clay Moran of Benchmark.

[Clayton F. Moran:]

Two questions. Just wanted to follow up on the cash flow outlook for the third quarter. Are you basically saying that due to macro uncertainty, you might need to ramp up marketing? Or where would these investments come that would enable you to reach your revenue target? And then secondly, how about buying back some stock at these levels? How do you feel about the value of the company and potentially putting your capital to work?

[Jason E. Child:]

Okay. So just -- I guess, I'll take the second part first, if it's quite okay. We don't have anything to announce on a share buyback at this time. And if that changes, we'll certainly let you guys know. In terms of the question related to the outlook, I'm sorry, you said that it was about marketing or cash flow?

[Clayton F. Moran:]

Well, I'm just looking at your cash flow outlook, and it's down sequentially. You talked about uncertainty in making investments. What investments would you be making to reach your revenue goals then in that macro environment?

[Jason E. Child:]

Okay. So cash flow, just cash flow is down sequentially primarily due to FX. So we actually had about $20 million, I think it was $72 million in Q1, down to $49 million in Q2, about a $25 million impact on FX. So FX neutral would have been about flat to up slightly. In terms of whatever investments we would make in Q3, I guess there's -- the marketing outlook, I would say, at this point -- we've talked in the past about having a long-term target of roughly 20%. We continue to believe in that target, but we're also very focused on kind of evaluating the ROIs and making sure that we're getting efficient spend. And so at this point, marketing came in lower than that, but as we continue to look at each of our different markets, that number certainly could go up in the future. In terms of -- in the guidance for Q3, we did kind of include our current market assumption as part of the operating income forecast.

[Clayton F. Moran:]

And can I just follow up? I mean, can you give us any more sense of anything more on a stock buyback? Are you going to be more open-minded than some of your peers? And how do you approach potentially looking at buying back stock and using your capital? Can you give us any sense on your philosophy or anything?

[Andrew D. Mason:]

We could tell you that we're always looking to optimize our capital structure, and we have nothing to announce at this time.

[Operator:]

Our next question is from Ross Sandler of Deutsche Bank.

[Ross Sandler:]

Just 2 quick questions, first on marketing and then on cash flow. Can you talk generally about the relative increase in return that you're seeing on your marketing when you shift the model from e-mail acquisition to transaction marketing? And has that shift happened in your international markets? Or is that mostly a domestic initiative at this point in terms of the transaction-based marketing? And then, Jason, I think you mentioned that you're adjusting payable terms for some of your international merchants. Does this include changes to how breakage is being handled in any markets? And how could these changes broadly affect your free cash flow run rate going forward?

[Andrew D. Mason:]

Thanks, Ross. I'll take the first one. So like I said earlier, we've increased our revenues year-over-year, while at the same time reducing our marketing spend by over 50%. And this is a company that historically has been optimized for hyper-growth just as it was with the sales force. We haven't been shy about using people to solve problems and keep holding on to the tail of the rocket ship. As we scale and some of our technology resources catch up with the -- catch up with our sales hiring, we're able to invest in what remains low-hanging fruit to optimize our internal operations and sales and the marketing spend, and get a lot of efficiency gains as a result. So we're really still in the stage where we're rolling out basic nuts and bolts, marketing bid automation tools, replacing dozens of human beings that are crunching through Excel spreadsheets every day in order to measure the ROI of different channels. And with some basic technologies, as we roll more and more of those out, then we expect to see continued improvements in efficiency and reduction in the cost of acquiring new customers. Really, we're still in the early innings of a shift towards transactional advertising, which just as much has depended on technology has depended on increasing our deal selection. We shared that number, that our number of active deals has increased from 600 to over 8,000, largely due to the efforts in the North America, due to the efforts of deal bank in the last year. So most of the efficiency gains that you've seen have come through other sources than the shift to transactional advertising. And once that starts to kick in, in the quarters to come, we expect that to be yet another driver of an increase in marketing efficiency.

[Jason E. Child:]

And then on the question on merchant payables. So the overall terms, I mean, as I said in the prepared remarks, I mean, we do evaluate it on a kind of a deal-by-deal and by-country basis, with the idea that we need to ensure that we're getting the best merchants and have the right balance between -- and vendors are getting the right balance between customer and merchant kind of value. So at this point, I wouldn't -- I think I can't talk about kind of what's going to happen down the next quarter. Our expectation, and I think the working capital contributions in Q3, should be relatively consistent with what we've seen over the past couple quarters. But with things like breakage and things like moving to deal terms that are more like the U.S., and with shorter AP days cycles, that certainly is not -- is something that may occur over time. But as you could see in the current quarters in AP days, it's not happening, really, kind of thus far, but we'll certainly update you as we see those trends change.

[Operator:]

Our next question is from Jason Maynard of Wells Fargo.

[Jason Maynard:]

I just wanted to drill a little bit more into the European commentary, and was just hoping to get some additional color, if you will, around maybe mobile adoption and usage in the U.S. versus EMEA, if that is part of that mix that you're talking about. And then also your sense in terms of your caution on Q3. Just try to help me understand, is it more macro related? Is it more making the readjustments? And frankly, when you then bring in the FX piece of it, how much of the FX impact are you banking on either dollar percentage amount again in Q3?

[Andrew D. Mason:]

Thanks, Jason. So I'll talk about everything except for guidance, which I'll hand over to Jason. So like I said, the root cause of the issues that we're having in Europe, some of it appears to be macro. The evidence we have for that is that the higher price point deals, deals that go for over $100 or so, we've seen a disproportionate drop in popularity. And that's the main mix shift that we're talking about more than a mix differential between web or desktop and mobile purchasing behavior. There certainly is a mix. We're underpenetrated in Europe and most of the rest of the world as compared to the United States on mobile devices, and we see that as a large opportunity. As I've said, we -- our average customer on mobile device spend is about 50% more than on the desktop. So that's one of the areas where we are investing in Europe, and the international is increasing our mobile penetration and bringing it to parity with what we're seeing in the U.S. Jason, you want to discuss the guidance?

[Jason E. Child:]

Yes. On the FX aspects, we -- basically, we forecast that the spot rate through the current point in the quarter, obviously, there's 48 different countries, and I think it's 35 different currencies that we trade in so -- or that we operate in, so there's going to be a lot of movement just like we saw last quarter. When we gave guidance, we expected slightly between [ph] $590 million in revenue, we came in at $568 million. But since that point, we actually saw FX headwind of about over $8 million. And so what happens going forward is -- not sure what will happen, but whatever it is, it probably won't be flat. But we'll obviously try to update next quarter as what the impact was.

[Operator:]

Our next question is from Spencer Wang of Credit Suisse.

[Spencer Wang:]

Two questions, if I could. First, for Jason or maybe Andrew. In terms of direct revenue, can you give us a sense of what the gross margins look like on the direct revenue piece? And are you guys economically indifferent between third party versus direct revenue? Or do things like the customer experience and shipping times factor into the thought process in terms of how you optimize the economics? And secondly, in terms of Europe and some of the technology investments, Andrew, can you just give us a sense of the scope? Is this a one quarter type of investment issue? Or can we see CSOI margin start growing sequentially again in the fourth quarter?

[Jason E. Child:]

On the gross margin on direct revenue, we don't provide that. It does differ by channel. And as I mentioned, there's travel deals, there's movie tickets, there's physical goods and Groupon Goods. And so because we don't break out all those channels and because those are very, very competitive industries, we don't provide kind of the margins. I will say after having at least spent a fair amount of time in e-commerce, we are very happy with the margins that we have in those categories, along, of course, with the growth that we've seen. In terms of the -- I think you asked is, do we have a preference? And I think in general, we did not have the infrastructure to be able to actually take title to inventory and then be able to control the customer experience from being able to really control price, as well as to control the quantity that we can purchase and therefore the amount that we can sell. And then of course, ensuring that it's a shipping kind of cycle time that we think provides the right customer experience. And so we certainly like to control those aspects as much as possible. There's -- it's not quite as simple as what treatment do you want. It really comes down to there's a number of suppliers that we work with. As we've gotten larger, that don't even have the capability to sell stuff on their own, so typical OEM manufacturers or direct relationships. We need to sell on a direct basis because that's the only way they sell. There's also a number of distributors and other merchants that do so on their own, and so if there's not going to be economic benefit and ability to improve the customer experience, then we're not going to take title to it. So we try to manage it on what -- first, what's right for the customer, and then second is there actually even a-- is there an ability for the merchant to be able to sell on their own or not. So those are the considerations we take. Ultimately, I think as I said before, we really optimize for overall margin and profit dollars and cash flow dollars. And so we're not just worried about what the margin percentages are, but instead we're trying to optimize kind of total dollar per kind of transaction and per site visit actually.

[Andrew D. Mason:]

Spencer, on the European tech investments that we're making, so first, we've provided guidance for Q3, and that's all that we're prepared to comment on at this time. What I can tell you is we have 6 different technology platforms around the globe, all at various states of sophistication. We have a goal to integrate these platforms so that we can leverage innovations and deploy innovations globally as fast as we're doing in the U.S. But anyone with any history of projects like that know that they are -- they aren't one quarter changes, and it would be foolish for me to speculate on exactly how long they're going to take. However, all those changes -- the completion of that integration process is not a blocker to continue to make progress in Europe and around the rest of the world. Even this quarter, we're making a lot of progress. We're expecting to launch -- SmartDeals actually launches in our top 10 markets in the U.K. this week. We're planning to launch an additional 5 countries by the end of the quarter. That also includes deal bank, the technology that allows us to increase our active -- has allowed us to increase our active deal counts by an order of magnitude in the last 6 months. We'll also be deploying Merchant Center, Groupon Scheduler, our Subscription Center and a number of internal sales productivity tools internationally this quarter that we've built for the U.S. So we've really done a shifting in our R&D resources to make sure that they better reflect the balance or even an over-index towards Europe of where revenue is being generated.

[Operator:]

Our next question is from Shawn Milne of Janney Capital Markets.

[Shawn C. Milne:]

Just to -- I wanted to go back to the commentary on the physical side of the direct business, and maybe just look at what are the some of the other things that you need to add to continue to grow that business from a -- setting up that network of OEM companies? And would you actually entertain potentially building out some fulfillment infrastructure? Just walk through why you see a bigger sustainable opportunity in a market, there's so many bigger players in that market. And then more -- maybe a little bit more on the housekeeping side, just, Jason, the last time we were out there, you were looking for a Chief Accounting Officer and building up some of your back-end folks to make sure we're getting the right metrics and whatnot. Can you just give us an update on that?

[Andrew D. Mason:]

I'll take the first one, Shawn. So what else do we need to build in order to get Groupon Goods going? I'll tell you, the success that we've had in Groupon Goods, I think, is a reflection of the power of the consumer brand that we've built through our local business. Our customers think of us as a way to find unbeatable deals on great stuff, and we are able to transfer that same value proposition from spa packages to home ice cream -- or home yogurt kits, I think we're selling one of those today. For $15, you can make your own artisan yogurt. So we've been able to do that largely off of the brand that we've built and the internal infrastructure for procuring great deals. It reminds me of the very early days of our local business where consumer demand outpaced the technology offering that we had. We still don't have a lot of basics that we think will drastically improve the customer experience. We don't have a very shoppable marketplace where customers can come in and pull deals. We only really allow customers to engage with the good deals on our terms via e-mails that we're sending every week. So there's an awful lot to do. And the value proposition, the brand that we've built of offering unbeatable deals on high-quality stuff and having the trust of our customers, we think, is what's at the source of the success that we've had thus far, and we think that we can continue to leverage that for success in the future.

[Jason E. Child:]

And then relating to the kind of back-office progress, in terms of the Chief Accounting Officer progress, we just don't comment on personal matters until we make the formal announcement. Definitely, we like to let the team know before we do anything. And we'll certainly be updating on that when we have something to say. And then in terms of the other hires and actions, we're very happy with the additions we've made. We've added some very experienced folks across a number of our largest countries in South America and Europe and have made a lot of progress. So we're in -- we feel like we're in great shape and have come a long way.

[Operator:]

Our final question is from Justin Post of Bank of America Merrill Lynch.

[A. Justin Post:]

Thank you for breaking out the first-party sales and direct sales. And I guess my question is now that those are becoming an increasingly large portion of revenues, do you think a better way to measure the business might be gross profit versus revenues and maybe you think about guiding that versus revenues? And then secondly, given that it is helping revenues, maybe you could talk a little bit about the health of the U.S. or local business, just how are merchant repeat rates and how are take rates trending?

[Jason E. Child:]

So on the revenue recognition, so we -- yes, so it was material this quarter, so it is -- we're -- change our disclosures to reflect that. In terms of the gross margin, as being the way to look at it, I think that would makes sense, however, it would require us to break out the costs of goods sold, which is right now are booked in the cost of revenue. We're not breaking that out right now because of just there's a lot of competition in these channels. And so to break that out would give one, would give some information there that could be competitively useful. And then also we do combine a variety of channels, so it might also be a little bit confusing because it will be combining travel and some of the daily deal stuff, like the movie tickets that I mentioned, as well as physical goods. So I think theoretically, I understand what you're suggesting, but I don't know that it's necessarily going to provide the best answer. What I did -- give in the first call was, with the first question, was to provide the -- what the growth would have been excluding the direct revenue impact. And so I think that should be helpful in being able to try to estimate, I think, the numbers you're looking for. Regarding revenue or the take rates, we -- on a mix adjusted basis, the take rates were very consistent. In terms of the G1 business, they were very, very consistent globally. And I think what you see is movement that's now the combination of some of the revenue recognition differences between the gross -- the direct and third party, and of course, also some of the mix by categories as each of our channels does have an inherently different mix.

[Andrew D. Mason:]

So the North American business is strong. Like I mentioned, we're seeing 66% year-over-year growth. All of the -- the repeat rates, the take rates are -- haven't changed materially from the last numbers that we've disclosed. Mobile penetration continues to be strong. As far as we know, we're the -- we have the largest percentage of transactions occurring on mobile devices of any major e-commerce company, which makes us extraordinarily well positioned as we make this transition towards becoming the local commerce operating system. So we feel great about the business. We feel great about our competitive position and the foundation that we have now that we can use to further introduce the infrastructure for a local e-commerce ecosystem, not just in the United States but throughout the world.

[Operator:]

This ends the Q&A portion of today's conference. Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect, and have a wonderful day.