美卡多 (MELI) 2012 Q2 法說會逐字稿

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. (Operator Instructions) 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 Aboitiz, and I am the head of Investor Relations for MercadoLibre. Our senior manager presenting today is Pedro Arnt, Chief Financial Officer. Additionally, Marcos Galperin, Chief Executive Officer, and Osvaldo Gimenez, Senior Vice President of MercadoPago, will be available during today's Q&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 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-K 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 second quarter 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 US dollars, and net income grew 91% in local currencies, 71% in US dollars, during the quarter.

To start out, let me note that having posted these 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 second quarter, 3.7 million new users were registered and confirmed on our site, 31% more than in the second quarter of 2011, bringing our total confirmed registered users to 73.2 million.

Successful items were 15.8 million, a 36% year-over-year growth.

Total number of payments were 5.5 million, 78% year-on-year growth.

GMV was $1.299 billion, a 37% year-on-year growth in local currencies.

TPV was $411.6 million, a 64% year-on-year growth in local currencies.

These strong operational metrics translated well into financial performance. Specifically, during the second quarter of 2012, net revenues grew 28% in US dollars, to $88.8 million, a 47% growth in local currencies.

Gross profit margin was 73.1%, versus 75.6% in the second quarter of 2011 and 74.8% in the first quarter of 2012, driven principally by the growth of our lower-margin payments business.

Income from operations grew 48% to $31.9 million, with an operating income margin of 35.9%, versus 31.1% in the first (sic - see press release) quarter of 2011. In local currencies, operating income grew 66% year on year.

Net income before income/asset tax expenses grew 56%, year on year, to $35.1 million. In local currencies, pretax income grew 77%.

Net income was $25.4 million, growing 71% year on year. This represents a 28.6% net income margin, versus 21.4% a year earlier. When measured in local currencies, net income grew 91% year on year during the second 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 second quarter 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 gross in total live listings, as we have been able to widen our base of sellers considerably versus one 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 stand-alone 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 payments 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 nonexistent 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 the increase in payments 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 over 50% 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 second 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 second quarter 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 is 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 3.4 million 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, MercadoShops, 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 out 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&L with a more detailed look at our cost structure during the second quarter. Starting with gross profit, it grew 24% to $65 million. Gross profit margin decreased to 73.1% of revenues, versus 75.6% in the second quarter of 2011, and 74.8% in the first quarter of 2012.

Year-on-year gross margin contraction is primarily attributable to an increase in fees directly associated with additional payment volume, representing 278 bps in margin contraction, as well as incremental expenses primarily related to our investments in hosting and customer service, representing 90 bps of margin contraction, offset by efficiencies in sales-related taxes, generating 122 bps of margin improvement during the second quarter.

Operating expenses for the period were 37.2% 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 730 bps of margin improvement. These positive margin expansions are a consequence of a scalable business model, close management of expenses, as well as benefitting from no significant incremental investments during the current business cycle.

In absolute terms, operating expenses totaled $33.1 million, a 7% increase versus the second quarter of 2011. Here is a breakout by line item. Sales and marketing, our largest line item expense, increased 7% for the quarter, to $16.8 million, dropping as a percentage of revenues to 18.9%, from 22.5% for the same period last year.

We benefitted primarily from the improved marketing ROIs we were able to drive, a 170 bps improvement in margins, better bad debt ratios that contributed 120 bps 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 bps 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 $6.1 million, compared with $5.5 million for the second quarter 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 bps to margin improvement.

G&A grew by 4% year over year, to $10.1 million in the second quarter, dropping to 11.4% of revenues, versus 14% last year, as we continued to deliver economies of scale. G&A expenses also benefitted from a lower accrual pertaining to our long-term retention plan that contributed 105 bps of margin.

As a result of all this, operating income for the second quarter of 2012 was $31.9 million. Operating income margin for the quarter was 35.9%, versus 31.1% in the second quarter of 2011.

Below operating income, we benefitted from $3 million of interest income, arriving at a pretax income of $35.1 million, 56% higher than in the same quarter of last year, in US dollars, and 77% higher in local currencies.

Income tax expense was $9.7 million in the second quarter of 2012, resulting in a blended tax rate of 27.7%, versus 34% in the second quarter of 2011, and 27% 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 nondeductible nature of last year's one-time expense that I mentioned earlier.

Net income for the three months ended June 30, 2012, was $25.4 million, reflecting an increase of 71% when compared with $14.8 million during the same period of 2011. Net income in local currencies grew 91% versus last year. This represents a 28.6% 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 million and, consequently, for the period ended June 30, 2012, net cash provided by operating activities less property and equipment and intangible asset purchases totaled $33.5 million, versus $8.2 million last year.

Cash, short-term investments, and long-term investments at the end of the quarter totaled $220.2 million.

Wrapping up, our second 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?

(Operator Instructions) Mark Miller, William Blair.

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?

Sure. So, I think I wouldn't focus exclusively on the new verticals as drivers of growth. I think the Brazilian operation saw strength in the Marketplace across many categories. The payments business, as we said, continued to perform well, as did classifieds. So, it was 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 bit of] significant opportunity for us as we expand into new categories 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.

OK. 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 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 offline with the seller.

So, we believe the strongest value position going forward for sellers is that it should improve their conversion rates, because it delivers a much improved buyer 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, let's say, when] stock trend is negative during the previous quarter, that generates a cost saving in the provision.

OK. Thanks, Pedro.

Gene Munster, Piper Jaffray.

Good afternoon, and congratulations. Peter, you probably can guess what my question is, here. Just concerns 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 have 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 they are now, is that we had significant technology deployments last year, combined with a previous-year comp, so when you 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 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.

OK. 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 also the API side of things to get their merchants the ability to more easily add inventory to the platform. Do you have any idea when that could go onboard? 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 Pedro was saying, we're giving our first steps. We're very happy to have deployed the integration with Correios, with several sellers already live. But, it's a first step, and we still have many more steps to go.

When was the merchant API going to be publicly available?

Well, we're hoping to launch a developers' conference in October in Brazil, when we will make all of our Marketplace platform publicly available to all the developers. So, we're aiming at October in Brazil to launch this conference.

Great. Thank you.

Nat Brogadir, Stifel Nicolaus.

Hey, guys. Thanks for taking the question. Two 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? Thanks.

Sure. So, take rates essentially were first and foremost driven by the strong momentum of the payments business. And, then, I would say through equal measure core Marketplace growth and growth in the classified business. Take rates were up across all of the BUs, which I think reflect what we were saying earlier that it was a quarter of strength across the business. But, certainly, Pago 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 sub-categories that continues to occur. So, it's a bit of both.

Thanks for that. And, then, just quickly, on the competitor front, can you talk about what you guys are seeing out there? Obviously, some -- a big US 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 marketplace 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 your time.

Thank you.

Marcelo Santos, J.P. Morgan.

Hi, guys. Thanks for taking the question. I have actually two questions. The first one is, I would like to know if you are seeing any impact in your sales in Brazil regarding to the federal police operation called (inaudible), 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.

[So,] I'll take the first one. If we look at units sold growth and perhaps even more importantly live listings (inaudible) sellers, we haven't seen any impact from (inaudible) in terms of a [listing] trend or a selection trend. So, nothing to report there.

With regards to -- this is Osvaldo, Marcelo. With regards to financing spreads, what has happened over the most of this year is that interest rates have been coming down in Brazil. We were under no pressure to cut our prices, since we're already very competitive with our competitors. And, therefore, we have not done so. And, that's why our spread has increased in the last two quarters.

In December, you -- in the end of the fourth quarter, the financing revenue complement was lower. Right? So, --.

We did cut prices in December in Brazil, but we have not done so again this year, while the central bank has cut rates.

OK. Got it. Thank you.

Stephen Ju, Credit Suisse.

Hi, Marcos. How are you doing? Just wondering which e-commerce or retail sectors are the biggest users of our off-platform MercadoPago right now? Is it the daily deal sights or 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 in that they're either converting at a lower rate or perhaps converting at a lower ASP? Thanks.

This is Osvaldo. Let me address the first part of the question regarding off-platform growth. Two [things] we are seeing growing very strongly are [coupons] in more countries and then small [clothes] retailers. I'd say those are two of the segments that are growing the most.

I think mobile has two explanations for that. One is I think just a 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, it's 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 mobilely on the HTML side version of the website, not on the native app. I think as we roll out complete native apps with Pago 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 native apps.

Got you. And, one more on product development expense, if I may. You know, 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 of the current assets?

So, I think what we disclosed in the call was about a little bit less than $1 million 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.

OK. Thank you.

Rudy Martin, Latin Capital Market.

Hi. Good afternoon. I had a quick cash flow question. It showed in your press release that you have $33.5 million for the three 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 about with Argentine dollar restrictions?

Sure. So, I think one of the (inaudible) 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 [flight-free] cash flow. Even parts of our business that could be consumers of cash flow, such as our payments business, the way we've 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 fairly 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 than 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 with the cash that does get generated here can be reinvested in the business locally.

Thank you.

Scott Devitt, Morgan Stanley.

Hi. It's Zack 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've typically disclosed active users 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 was 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 three, four quarters and are beginning to see very good results, as witnessed by the improvements in net promoter score.

I think the overall health of the business, [thinking of] 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.

Thanks.

Robert [Larity], Rose Advisors.

Yes. Hi. 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 time around. I think as we see significant competition in the retailing space [in these] markets, we felt at a bit of a disadvantage in that we're 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 GMV or successful items at this point.

I think if everybody else would disclose it that it would make it easier to do so.

Chad Bartley, Pacific Crest.

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 in shipping and other areas. What's probably the biggest driver as you think about near-term results? Maybe not in Q3, but 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, 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, but I don't think have significant impact over the next three, four 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 were 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 we continue to 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.

OK. Thank you, Pedro. That's helpful.

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.