Welcome, ladies and gentlemen, to the MercadoLibre Second Quarter Earnings Conference Call. At this time, all participants are in a listen only mode. Later, we will hold a question and answer session and instructions will follow at that time. And as a reminder, this call is being recorded. I would now like to turn the conference over to the company management.
Please go ahead.
Hello, everyone, and welcome to the MercadoLibre earnings conference call for the quarter ended June 30, 2012. My name is Alex De Aboetis, and I am the Head of Investor Relations for MercadoLibre. Our Senior Manager presenting today is Pedro Arndt, Chief Financial Officer. Additionally, Marco Valperin, Chief Executive Officer and Osvaldo Jimenez, Senior Vice President of Mercado Pago will be available during today's Q and A session. This conference call is also being broadcast over the Internet and is available through the Investor Relations section of our website.
I remind you that management may make forward looking statements relating to such matters as continued growth prospects for the company, industry trends and product and technology initiatives. These statements are based on currently available information and our current assumptions,
expectations and projections
about future events.
While we believe that projections about future events. While we believe that our assumptions, expectations and projections are reasonable in view of the currently available information, you are cautioned not to place undue reliance on these forward looking statements. Our actual results may differ materially from those discussed in this call for a variety of reasons, including those described in the forward looking statements and risk factor sections of our 10 ks and other filings with the Securities and Exchange Commission, which are available on our Investor Relations website. Now let me turn the call over to Pedro.
Thank you. Welcome and thanks for joining us on our recap of MercadoLibre's Q2 of 2012. Having closed a strong first half of the year, I'd like to start by reviewing some of the drivers behind the solid performance across all our business units, both at the top and bottom lines, as revenue grew 47% in local currencies, 28% in U. S. Dollars and net income grew 91% in local currencies, 71% in U.
S. Dollars during the quarter. To start out, let me note that having posted the solid financial results despite significant currency headwinds and signs of slowing economies throughout the region confirms our understanding that sustained positive e commerce trends and solid internal execution continue to be determinant drivers of our company's growth. Accordingly, capturing market growth through innovation on our platforms is where we remain focused, conscious of the great mid to long term prospects of technology enterprises in rapidly developing regions such as Latin America. Internet penetration continues on the rise and better connections are allowing Internet users to become increasingly engaged online.
A growing middle class is therefore adapting its shopping habits in the countries where we operate and the search for convenience, competitive prices and unmatched variety leads them to MercadoLibre. As e commerce gains share of retail, we continue to benefit from the strong top of mind presence that we've built and from our commitment to deploying the best user facing products and technologies, offering the right solution for each user's needs and thus increasing the relevance and ubiquity of the services we offer. To quantify the success we believe we are having, here is a quick overview of key operational metrics that illustrate the underlying foreign exchange neutral growth of our business. During the Q2, 3,700,000 new users 2011, bringing our total confirmed registered users to 73,200,000. Successful items were 15,800,000, a 36% year over year growth.
Total number of payments were $5,500,000 78 percent year on year growth. GMV was $1,299,000,000 a 37% year on year growth in local currencies. TPV was $411,600,000 a 64% year on year growth in local currencies. These strong operational metrics translated well into financial performance. Specifically, during the Q2 of 2012, net revenues grew 28% in U.
S. Dollars to 88,800,000 a 47% growth in local currencies. Gross profit margin was 73.1% versus 75.6% in the Q2 of 2011 and 74.8% in the Q1 of 2012, driven principally by the growth of our lower margin payments business. Income from operations grew 48% to $31,900,000 with an operating income margin of 35.9% versus 31.1% in the Q1 of 2011. In local currencies, operating income grew 66 percent year on year.
Net income before income asset tax expenses grew 56% year on year to 35,100,000. In local currencies, pretax income grew 77%. Net income was 25,400,000 growing 71% year on year. This represents a 28.6 percent net income margin versus 21.4% a year earlier. When measured in local currencies, net income grew 91% year on year during the 2nd quarter.
Now I would like to dive into further detail on how we achieved these results. Let me start with our core marketplace, which today represents approximately 70% of our revenues. Our rate of GMV growth for the quarter, excluding the impact of foreign exchange, continued to be, we believe, above market rates. This 37% local currency growth drove a more than proportional increase in marketplace commission revenues as a result of increased pricing versus last year that we are charging to reflect higher MercadoPago penetration, which reached 32% of GMV versus 28% in the Q2 of 2011. In fact, it is an all time high, resulting from a streamlined integration with our marketplace checkout for Pago and the gradual implementation of a strategy that makes it obligatory for certain user segments to settle marketplace transactions through MercadoPago.
Marketplace revenues from placement fees were up mainly on growth in total live listings as we have been able to widen our base of sellers considerably versus 1 year ago. Live listings on our site grew 31% year on year, while new tools for inventory management released in the quarter keep generating incentives to list and manage larger volumes on our platform. Expansion in listings was also driven by continued work on our new vertical formats for products in apparel categories. After our initial tests with shoes in Brazil, we have now extended vertical features to more apparel categories in Brazil, thus spreading these new formats to a much wider base of listings. The initiative is now underway in Argentina as well.
In short, during the quarter, our expanding marketplace supply was matched with growing marketplace demand as our focus on improving selling tools, greater payments adoption and streamlined checkout generated improved conversions on our listings. Our payments business performed very well throughout the quarter, not just marketplace processing, which I have just outlined. MercadoPago's standalone revenue sources, financing and off platform payments grew at an even faster pace than the marketplace, classifieds and advertising revenues during the quarter. Off platform processing fees were an important driver of that growth as our payment service keeps spreading beyond MercadoLibre and into the wider e commerce arena, growing in the triple digits and still only a fraction of this expanding addressable market. With Mexico and Venezuela contributing a stream of new payments businesses, which was practically non existent at this time last year, we feel positive about the shape of our payments business going forward.
In this context, financing revenues also had a very good quarter, growing on the basis of both penetration we've already discussed as well as a lower underlying interest rate that improved our spread on these consumer financing transactions. To complete our picture of revenue growth, classifieds and ad sales revenues grew at a combined rate above 50 percent in local currencies, contributing strongly to total top line growth. So in summary, each component of our platform is helping to drive growth despite some deceleration in the back end of the quarter as we begin to cycle out the improvements to registration and buying flow, which took place in the 2nd and third quarters of last year. The following growth rates on a country basis help to round out the review of our top line performance during the quarter. In local currencies, year on year growth of consolidated net revenues for the Q2 was 36% for Brazil, 81% for Argentina, 30% for Mexico and 72% for Venezuela.
While the top line results I have just called out confirm the sound performance of our existing business, we also feel good about some of the longer term and still less visible progress being made on a few other key fronts, such as the case of our mobile efforts that already contribute more than 5% of our total traffic, though still a smaller share of our total GMV. We expect this new channel to keep expanding at a fast clip as smartphone penetration continues to rise in the region. Traffic through our native applications that have already been downloaded 3,400,000 times is increasingly complemented by traffic to our newly released HTML5 website version. Add to this another new initiative, our software as a service storefront offering, Mercado Shops, which reached 46,000 active shops during the quarter, an impressive 23% growth Q on Q. And finally, as mentioned last quarter, one of our key objectives for the year is a renewed focus on improving customer experience and service on our platforms.
Our investment in this area led by the formal opening of a new customer support center in Uruguay during the quarter and continued implementation of world class customer management tools are showing strong results as we continued improving most service level metrics and consequently have seen our net promoter scores increase consistently throughout the first half of the year. Last but not least, we are also pleased to have launched during this quarter the initial stages of our shipping deployment. We are live with our integration with Correios in Brazil, whereby MercadoLibre now determines pricing, collects fees and issues shipping orders and tracking numbers on behalf of sellers so that all sellers have to do is drop ship their products. Although the number of sellers who have onboarded this platform is still small, it is growing rapidly. We are convinced that this new service will be an important competitive factor for us going forward.
Let me now go over the rest of our P and L with a more detailed look at our cost structure during the Q2. Starting with gross profit, it grew 24% to $65,000,000 Gross profit margin decreased to 73.1% of revenues versus 75.6% in the Q2 of 201174.8% in the Q1 of 2012. Year on year gross margin contraction is primarily attributable to an increase in fees directly associated with additional payment volume, representing 2 78 basis points in margin contraction, as well as incremental expenses primarily related to our investments in hosting and customer service, representing 90 basis points of margin contraction, offset by efficiencies in sales related taxes, generating 122 basis points of margin improvement during the 2nd quarter. Operating expenses for the period were 37.2 percent of revenues versus 44.5% in the same period last year as we saw impressive operating leverage in each of our line item expenses amounting to 7.30 basis points of margin improvement. These positive margin expansions are a consequence of a scalable business model, close management of expenses as well as benefiting from no significant incremental investments during the current business cycle.
In absolute terms, operating expenses totaled $33,100,000 a 7% increase versus the Q2 of 2011. Here is a breakout by line item. Sales and marketing, our largest line item expense increased 7% for the quarter to $16,800,000 dropping as a percentage of revenues to 18.9 percent from 22.5 percent for the same period last year. We benefited primarily from the improved marketing ROIs we were able to drive, a 170 basis points improvement in margins, better bad debt ratios that contributed 120 basis points of margin improvement and natural leverage in our business model and an easy year on year comparative that included certain one off losses in the same quarter of last year. Had we incurred these losses this year again, they would have had a negative impact of 180 basis points on margin this quarter.
This leverage was more than enough to offset credit card chargebacks, which continue to grow at a faster rate than revenues as a result of growing in line with increased payments volume. It is important to note that on a sequential basis, we have taken steps to control chargeback growth, producing an important quarter on quarter drop in the ratio of chargebacks to TPV. Product development expenses grew 11% to $6,100,000 compared with $5,500,000 for the Q2 of 2011, dropping to 6.9% of revenues versus 8% last year. The improvement in product development as a percentage of revenues is principally attributable to capitalization of software projects contributing 104 basis points to margin improvement. G and A grew by 4% year over year to $10,100,000 in the 2nd quarter, dropping to 11.4% of revenues versus 14% last year as we continued to deliver economies of scale.
G and A expenses also benefited from a lower accrual pertaining to our long term retention plan that contributed 105 basis points of margin. As a result of all this, operating income for the Q2 of 2012 was $31,900,000 Operating income margin for the quarter was 35.9 percent versus 31.1% in the Q2 of 2011. The low operating income, we benefited from $3,000,000 of interest income, arriving at a pretax income of $35,100,000 56% higher than in the same quarter of last year in U. S. Dollars and 77% higher in local currencies.
Income tax expense was $9,700,000 in the Q2 of 2012, resulting in a blended tax rate of 27.7% versus 34% in the Q2 of 201127% in the first quarter of 2012. Year over year tax improvements were mainly driven by greater mix coming from Argentina, where we have our lowest tax rate. Also, our tax rate for the same prior year period was impacted by the non deductible nature of last year's one time expense that I mentioned earlier. Net income for the 3 months ended June 30, 2012 was $25,400,000 reflecting an increase of 71% when compared with $14,800,000 during the same period of 2011. Net income in local currencies grew 91% versus last year.
This represents a 28.6 percent net income margin, up from 21.4% for the same quarter of 2011, resulting in a basic net income per common share of $0.57 Property and equipment and intangible asset purchases for the quarter totaled $6,000,000 And consequently, for the period ended June 30, 2012, net cash provided by operating activities less property and equipment and intangible asset purchases totaled $33,500,000 versus $8,200,000 last year. Cash, short term investments and long term investments at the end of the quarter totaled $220,200,000 Wrapping up, our 2nd quarter was another strong quarter for us with sustained above market rates of growth in our operational metrics and improved profit margins as we benefit from investments made during previous cycles. We look forward to continue executing on our vision of what the e commerce landscape in Latin America can look like over the next 5 to 10 years and the growing role we imagine for MercadoLibre in this emerging context, while trying to manage as efficiently as possible the balance between immediate and long term profitability. With that, we would now like to take your questions. Operator?
Thank And our first question is from the line of Mark Miller of William Blair. Your line is open. Please go ahead.
Hi, good afternoon, everyone. Pedro, can you highlight the primary reasons why revenue growth in Brazil, you think, reaccelerated this quarter on a constant currency basis? And to what extent do you think the rollout of the functionality for the apparel vertical may have contributed to that? To
that? Sure. So I think I really focus exclusively on the new verticals as drivers of growth. I think the Brazilian operations saw strength in the marketplace across many categories. The Payments business, as we said, continued to perform well as did classifieds.
And so it's more across the board rather than driven by the new verticals. Although the new verticals, I think, signal going forward that there's still a significant opportunity for us as we expand and look at it, but it's where we haven't historically been that strong. But it's not like we've seen significant mix shift towards the apparel category over the last quarter.
Okay. And then with regard to the initial learnings from shipping, are there any metrics you're able to share with us, things that you're providing to sellers as incentives that could give us some idea of where the adoption rate could go? In other words, what are the potential cost savings and other incentives that you think will draw more of the sellers into that program?
Sure. So first of all, in terms of where we are, I think it was was a landmark for us in that the program is up and running and operational. The adoption rates are still extremely low and we've only began to onboard sellers in a more open fashion over the last 4 or 5 weeks. I think going forward, the value proposition is pretty strong for most of our middle market sellers in that it allows them to use our rates, which are obviously significantly scaled once we begin to combine different sellers. And it also makes for a much better buying experience because you're able to integrate shipping data, shipping costs within the checkout flow rather than the old marketplace concept where you needed to settle parts of the shipping and fulfillment off line with the seller.
So we believe the strongest value proposition going forward for sellers is that it should improve their conversion rates because it delivers a much improved value experience. As the program grows and scales, we'll try to keep you posted with specific metrics. At this point, it's still the very early days.
Thanks. And just a final one for me. I'll turn it over then. Why did the accrual go down for long term retention?
Yes. So a significant portion of the long term compensation is tied to Equity Capital Market performance. And so as the stock moves, that changes the amount that we provision for the year end payment. So since the stock trend was negative during the previous quarter, that generates a cost saving in the provision.
Our next question in queue is from Gene Messer of Piper Jaffray. Your line is open. Please go ahead.
Good afternoon and congratulations. Peter, you probably can guess what my question is here just in terms of the comp on September. And I realize that you don't give guidance, but we're a month into the quarter. And is there any way that you can any sort of feedback you can give us just this one quarter just to help us try to baseline what the local currency GMV growth is going to be in September? We can take it from there, but any feedback would be helpful.
Yes. So I'm going to be consistent with what I said last time when I said I was being consistent with what we had been saying all along. Essentially, I think, as you know, we don't guide and we don't address the ongoing quarter. What is important to make sure that everyone is aware of and I'm sure there are now is that we had significant technology deployments last year combined with a previous year comp. So when we go back to 2010, which was fairly weak on the back half, which generated extremely high growth rates last year.
And so that generates tough comps going forward. I think when we address the Q3 numbers in October, we'll be able to go into the specifics of what's happening. At this point, I think we're going to continue to say what we have been saying, which is it's a tough comp. It doesn't change the momentum our business has. And again, we're looking at this long term, not the next two quarters.
Okay. And then a follow-up. You talked about some of the shipping components that have just ramped up. And I know with New World, there's the also the API side of things to get other merchants the ability to more easily add inventory to the platform. Do you have any idea when that could go on board?
And second is, I guess, the combination of both the shipping and the API, when that could have some sort of a positive impact again on GMV growth?
Hi, how are you? This is Marcos. With respect to the API, we've seen during Q2 some very strong momentum with real estate sellers onboarding several thousands of real estate listings. So we are already seeing some of the benefits of the APIs. Although they are not publicly open, they are already we already interact with developers from various e building sites and companies and we are seeing some ramp up there.
And with respect to the shipping APIs, I think as Peter was saying, we're giving our first steps. We're very happy to have deployed the integration with Correos with several sellers already live, but it's a first step and we still have many more steps to go.
When is the merchant API going to be publicly available?
Well, we are hoping to launch a developers conference in October in Brazil when we will make all of our marketplace platform publicly available to all the APA or to all the developers. So we are aiming at October in Brazil to launch this conference.
Great. Thank you.
Thank you. Our next question is from the line of Matt Brekadir of Stifel Nicolaus. Your line is open.
Hey, guys. Thanks for taking the question. 2 quick ones. One is, take rate as a percent of GMV was materially up both quarter over quarter and year on year. Just wondering what drove that and if that's sustainable going forward?
And then secondly, GMV per item, the AOV is continuing to go down. How much of that is currency? And how much of that is a mix shift in the items sold?
Sure. So take rates essentially were, 1st and foremost, driven by the strong momentum of the Payments business. And then I would say, to an equal measure, core marketplace growth and growth in the Classified business. Take rates were up across all of the BUs, which I think reflects what we were saying earlier that it was a quarter of strength across the business. But certainly, Pavel was the most accretive of those and then core marketplace and classifieds in line with each other.
In terms of average selling prices, so obviously currency does impact that. But if you go to look at local currency average tickets, those are also coming down. And so there is a mix shift trend towards lower ASP categories and subcategories that continues to occur. So it's a bit of both.
Thanks for that. And then just quickly, on the competitive front, can you talk about what you guys are seeing out there? Obviously, some big U. S. Competitor coming into the market everyone's talking about.
I mean, could you just address that quickly? What's the specific question? How Amazon or how the competitive market place is shaping out in Brazil? Are you seeing any impact on that?
Well, we've been operating in
a very competitive environment for the last 13 years and we expect to continue operating in a very competitive environment for the next decade. So what has worked for us in the past is to watch what everyone is doing and then focus on what we need to do and that is what we intend to continue doing.
All right. Thanks for the time.
Thank you.
Thank you. Our next question in queue is from Marcelo Santos of JPMorgan. Your line is open. Please go ahead.
Hi, guys. Thanks for taking the question. I have actually two questions. The first one is I would like to know if you were seeing any impact in your sales in Brazil regarding to the federal police operation called Maraz Vermelia that is according to the newspapers make it difficult to bring items from abroad to Brazil? And the second question, I would like to understand a little bit better the dynamics of financing spreads.
I understood that in the previous quarters, you saw the spreads in Pago decline a little bit. And now I understand they increased again. I just wanted to understand a little bit better the dynamics and how that relates to competitors, if it relates to competitors.
Okay. So I'll take the first one. If we look at unit sold growth and perhaps even the overall EBIT live listings and unique sellers, we haven't seen any impact from Marevernilia in terms of our listing trends or our selection trends. So nothing to report there. With regards to this is Eduardo, Marcelo.
With regards to financing spread, what has happened over the most of this year is that the people's rates have been coming down in Brazil. We were under no pressure to cut our prices since we are already very competitive versus our competitors. And therefore, we have not done so. And therefore, our spread has increased in the last two quarters.
In December, you in the end of Q4, the financing revenue component was lower, right? So or
Yes. We did cut prices in December in Brazil, but we have not done again this year, while the Central Bank has cut away.
Okay. Got it. Thank you.
Thank you. Our next question is from the line of Stephen Ju of Credit Suisse. Your line is open. Please go ahead.
Hi, Marcos, Kedor and Alex. Just wondering which e commerce or retail sectors are the biggest users of our off platform Okada Pavo right now? Is it the daily deal side sort of the OTAs or is there no one particular sector you can call out? And you said mobile traffic is 5% of total, but a smaller percent of GMV, which to me seems a little bit counterintuitive. But what do you think is different about your mobile shopper and that they're either converting at a lower rate or perhaps converting at a lower ASP?
I would say, Juan, this
is Juan. Let me address the first part of the question regarding our platform growth. 2 industries we are seeing growing very strongly are coupons in more countries and then small core retailers. I'd say those are 2 of the segments that are growing the most. I think mobile has two explanations for that.
One is, I think, Jeff, the use case issue and users in the region are beginning to feel increasingly comfortable buying and paying online through their mobile phones. So there might be just a development curve issue. And the second one, as we've said in the past, is somewhat self inflicted. The full search through Pay complete checkout experience has been rolled out on our apps more recently. So you could only complete the entire search through payment mobile on the HTML5 version of the website, not on the native apps.
I think as we roll out complete native apps with cargo checkout integrated, we should see volume and traffic hopefully beginning to converge. So I think part of it is adoption of mobile commerce in the region and a big part of it is self inflicted in the state of evolution of our own mobile apps.
Got you. And one more on product development expense, if I may. Product development expense came down and you said you capitalized some of the software development into the balance sheet. How much are you capitalizing right now? And I'm not quite sure where this is appearing on the balance sheet.
Is this appearing in the other assets line or the current assets?
So I think what we disclosed in the call, there's about a little bit less than $1,000,000 of incremental capitalization of development given the nature of the projects and our increased comfort in capitalizing the CapEx. In terms of the balance sheet disclosures, I'll have to get back to you on that offline. I don't know off the top of my head how much of that is disclosed in that, but I'll get back to you. The incremental versus previous year is about $900,000
Okay. Thank you.
Thank you. And our next question in queue is from Rudy Martin of Latin Capital Markets. Please go ahead. Your line is open.
Good afternoon. I had a quick cash flow question. It showed in your press release that you have 33,500,000 dollars for the 3 months. And I was wondering if you could just give us some general comments on trends in cash flow, your financial flexibility? And can you address any issues with Argentine dollar restrictions?
Sure. So I think one of the virtues of our financial model, as we've always said, is that we've set it up in a way that it's a generator of free cash flow. Even parts of our business that could be consumables of cash flow, such as our payments business, the way we structured it by factoring receivables makes it a business that does not consume working capital. And so our conversions from net income to free cash tend to be fairly positive. And I think that should be the case going forward.
Last year, we engaged in purchase and preparation of a series of office buildings throughout the different countries. And so that generated perhaps a lower cash flow generation than what would be an expected run rate for our business. The Argentine situation, as many of you are aware, is one where there are very strict capital controls at the moment, not too different to the way we have had to manage the Venezuelan situation for many years. So it's something that I think we've grown accustomed to managing and that we feel very comfortable that we can manage through a series of issues. The first one and it's alluded to, to a certain extent in the call is we have now opened operational centers in Uruguay that will be servicing many of the shared services that used to be rendered out of Argentina, thus generating less cash that flows to Argentina.
And I think the other advantage versus Venezuela is Argentina is a country where there are technology assets that we can invest in that can drive our business, which is a slightly different case to Venezuela where there really isn't that much to invest in. And so we've invested in real estate to preserve the value of that cash. So the current situation in Argentina is one of very strict capital controls. That's leading us to move certain operational units away from Argentina. And we feel pretty comfortable that the cash that does get generated here can be reinvested in the business locally.
Thank you.
Our next question is from Scott Davitt of Morgan Stanley. Your line is open. Please go ahead.
Hi, it's Zach calling in for Scott. Just a quick question about the customer service improvements. I'm wondering if there's any metrics or benefits you can provide or give us color on besides the improving Net Promoter Score, Maybe something on repeat users or active users as a percentage of registered users?
Great. So we typically disclosed active usage on a yearly basis and so that should come out when we go through the year. I think the reason we highlighted the net promoter score issue is that we constantly strive obviously for improving the overall user experience. This is a much more specific call out of our customer service efforts, which we feel is an area where we have room to improve and where we've been in an investment cycle over the past 3, 4 quarters and are beginning to see very good results as witnessed by the improvements in that promoter score. I think the overall health of the business, including customer experience more broadly, can be seen in the sustained growth levels of successful items and the fact that we continue to grow above market in all the markets where we operate and by a significant margin in some of those countries.
Thank you. Our next question is from Robert Lardy of Rose Advisors. Your line is open. Please go ahead.
Yes. Hi. I'm sorry if
I missed this in the opening comments, but could you tell us what the local currency GMV growth was in Brazil?
Yes. So we actually haven't disclosed local currency GMV growth this turnaround. I think as we see significant competition in the retailing space in these markets, we felt that a bit of a disadvantage and that we are the only company that actually discloses country per country growth rates. So you have country per country revenue growth. We haven't disclosed local currency G and B as successful items at this point.
I think if everybody else were disclosing it, it would make it easier to do so.
Thank you. Our next question is from Chad Bartley of Pacific Crest. Your line is open. Please go ahead.
Hi. Thank you for taking a question. It's actually been asked. So I will maybe ask just one follow-up question. As you think about all the initiatives that you have going on, you've talked about verticalization in different categories, you've talked about payments and shipping, and other areas.
What's probably the biggest driver as you think about near term results, maybe not in Q3, but what's potentially the biggest impact to your revenue in Q4, for example, or maybe Q1 next year out of all the new initiatives that you have? Thanks.
Well, I think looking at the current quarter, and I feel fairly comfortable that you can extrapolate this quarter to the next few quarters. Probably the most significant driver of growth will continue to be payments, but both on and off platform. I think shipping and mobile are items that I would place under the extremely significant mid- to long term initiatives that could be tremendous growth opportunities for us that I don't think have significant impact over the next 3, 4 quarters. Verticalization, I think, falls somewhere in between. We are seeing a mix shift towards newer categories, and our dependence on consumer electronics continues to fall quarter on quarter.
That shift is happening slowly but in a sustained fashion. And because our businesses in those newer categories are typically small, a lot of that new business is probably accretive. So that would probably be the third one. But adding something that I think is sort of at the core of what we do is the continuous focus on the overall user experience and how that can simply sustain or perhaps even accelerate at some point the rate of growth of the overall marketplace beyond any specific vertical category. That's probably where we focus on the most.
And I'm showing no further questions. Thank you. This concludes today's conference. Thank you for your participation. You may now disconnect.
Have a great day.