Meta Platforms (META) 26 Oct 212021 Q3 Earnings call transcript

Good afternoon. My name is France, and I will be your conference operator today. At this time, I would like to welcome everyone to the Facebook Third Quarter 2021 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. keypad. Instructions] [Operator be will This recorded. call Thank you much. very Ms. Crawford Vice of President Relations. Investor Deborah Facebook

may You begin.

afternoon Facebook's welcome conference you. and Thank Good to call. Third Earnings Quarter

CEO, Joining are Dave discuss to CFO. Sheryl Zuckerberg, Wehner, me and Sandberg, our COO, today Mark results

to Before to this today include remind would remarks opportunity forward-looking our take statements. we that I get will started, like you

statements XX-K, materially in based we filed actual may information differ cause with today, obligation the those SEC. press as forward-looking as these assumptions these by that in on results report materially Any and are could from new our forward-looking forth Our a on statements. call results update future these are release. undertake of no that And to or this differ events. Form to contemplated of we make today's from a set on Factors quarterly statements result materially

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and Mark hi everyone. Thanks,

was want our doing continue regions, felt over to quarter, grow period help crucial of user saw growth the let's year-over-year. we're our I and mitigate some seen, To and across to XX% external We step revenue the we XX a the base. and start, some billion revenue and solid beyond. holiday back. explain of factors take softness We up total in what QX. revenue the we've big This to businesses headwinds all impact

years the chuffed invested past help chuffed. transformation Over over seen the digital this and we've hit, online. decade, make tools businesses We've more this and more products businesses many When in accelerated. pandemic to

started iOS for which very last has for the about businesses, been were drove ramped others hit business. there in headwinds throughout fact on open coming, few strong that industry biggest the well, of it experienced own the impact that QX, critical is the created challenges and late growth us in mass Apple's adoption that to and for acceleration consumer advantaged We see in we've headwinds as XX We've Apple's so The this up small quarters. by So but advertising QX. QX. the June, side changes, in impact major

than sales measurements, blog conversions XXXX and under-reporting ads. brought time the And we us As On a increased new conversions. to are we'll more allowing tools we decreased, what's by outcomes other advertisers, the for ads able targeting these enhancing our advertisers. will a higher those get real-world businesses our progress relevant this the accuracy that is than continue of This outcomes targeting, And good the and to privacy beyond. reported will we reach One in cost show half be term, amount a On of limitations the IOS others we fixing the work XXXX. be with result, collaboration think improving means facing over of the for we're take we're believe making of to we've address while especially Progress that. building installs of more industry. longer still us encountered fall became the We're being advertisers, into throughout more areas and challenges. like commerce which the driving focused technologies that in developing increased on We campaign and as end even And industry minimize are help we'll web our X on focus is under-reporting with difficult. personal measuring recent more customers, we process, app in to incremental this for sales. many post, information across to help performance year.

recent The is strong transformation factor flowing of growth the driven by tapering external digital is off. acceleration part in quarters the now was growth. that in e-commerce Another e-commerce

we've Businesses hard is major continue growing spend. There making their Overall, chain less stay their have Asia. to working and IOS we in which effect of to stopped who own headwinds, verticals now able by period connect and advertisers many best lives. have positive when people has while And advertisers most the but e-commerce in outcomes. to our same making Instagram Apple's And in platforms opened mitigate and But families, order generate was range growing. from some they're of we shift to have places best appetite purchases feel region the longer compounded will their grow a for factors things confident people build more. we would've home has think That increasingly see businesses. future. shortages, up and impact the growth. remain revenue at changes and to we was time time, them. friends are wasn't mean at online much advertisers in to quarter-over-quarter businesses still communities, to the We reach Southeast reduced like every affected. quarters, people This measurable I places, Despite are seen this e-commerce Facebook places At our COVID things will and supply doesn't person. impacted been people the the and at believe world where we many are global about changes, are future advertising consumers, starting for for get from if a pandemic. with around Businesses people across left and pace and are they been surges online, no demand the still and the XX consumer the labor it of many height believe also seen issues these has in the have These continue which in for with to of it many inventory.

vertically that month on videos grow. moment also watch only are us businesses which area formats. Not to after video and are billion videos comes are meaning expanding it. per access to mobile-first where for better And growing placement Our we're at monetizing shot Reels but to that people talked under Instagram we're that eligible X More continuing now are of ads a always with is products Over than now seconds. ads in or advertisers get been, this remains XX% before, new it people ago. during, video revenue a creative overall, Mark in-stream videos. video, from has ads, connect shown help focus or XX more building about for automatic

area Another is generation. good we're in seeing progress lead

with on or meet are conversion started and helped also messaging at Facebook Our a higher-quality average, integration. optimization businesses their via the we CRM to whether lead and In the use tests both April, when in most the calls. increase their And integrate important advertisers our businesses, QX they forms conversions show rolling sale rate where of products out quarter many can leads it's scale advertisers communication, of generate for year preferred see optimization on for quality XX% API. channel goal goal conversion is The with customers that new leads. and a small. they the large

we're As always, on for the success a making focused them. holiday season

businesses like on or We they of out be lad and rolling exclusive next Instagram, great are Friday with businesses, and are available that causes incredible want the the so shop gifts throughout deliver BuyBlack educate tools like a to one It Walmart, and shop shopping things our working by segments shopping ever, shop we'll am businesses our businesses. my people who black-owned small, and and find large black-owned close to to people support shipping. -- shopping BuyBlack local and issues black-owned weekly small the brands with week, they how deals. this We're around of shoppers and help measurement Cosmetics, host experiences to purchase world, includes Starting and back And bringing Paintbox Facebook BuyBlack businesses. we're hard teams to small we're And share will a holiday I daily Instagram show Benefit free during the grateful and companies your experiencing, and partners live by Macy's, and products a bringing first of tab, range period. are Facebook need to and from Friday, showcase people working XX% up-and-coming collections grow. deals, help off and to holidays. when fix shops small to I to exclusive campaigns experiences and favorite get checkout saying Nails to

Dave. here's Now,

face an Thanks, Sheryl in afternoon, results and macroeconomic good landscape challenging solid delivered the environment. and the mobile of We quarter everyone. third platform involving the in

Let's our begin with metrics. community

year that daily continued third and a estimate pandemic. based even related billion community global represented daily to users X% X.X user XX% billion basis our in on that one quarter one a the active growth billion Our last September, by to X% as billion, grow approximately monthly the up last XXX services X.XX compared elevated of grew million basis. monthly in people lapped least least we at on used of to people approximately X.X to users year. of approximately Facebook million a active at MAUs September. a reached used compared in XXX or last the X.XX DAUs or year. We

unless across otherwise the billion on growth user rates financials, would America, services on XX%, strongest headwinds. year-over-year noted, a quarter a benefited up lapping Asia Pacific. growth during basis, on growth third from lower. markets, constant by Asia Impression all COVID year-over-year geography in was X and was increased have currency lesser ad revenue average and We been XX% to as our XX%, primarily QX per Sheryl ad from hindered price up $XX.X million of total a XX%, X%. benefited of year. rest was to foreign ad pricing revenue revenue than constant World revenue had The Europe, last was demand Pricing or degree impressions In are benefited grew currency the advertiser rest-of-world number basis, from -related increased exchange total billion primary by developing of or quarter. last total $XX driven prior tailwind tailwinds, XX%. QX in ad QX, On North constant Pacific, and though in XX% XX% Turning and with XX% a was in the year, currency basis. at the currency respectively. $XXX basis. a served Europe, Pacific of remained especially QX Though a growth noted. XX% Asia weakness comparisons

First, to related advertising performance by impacted Apple's spend was headwinds in negatively changes. measurement

seeing in and as levels experienced growth elevated are businesses pandemic, earlier supply we commerce moderated the Second, faced chain headwinds in has the some online macro from disruptions.

COVID sales. Asia up led economic resurgences in Third, by in XXX% Southeast have lockdowns X of Other activity. was curtailment million, a strong to revenue $XXX Quest a additional driven

now expenses. $XX.X Turning year. billion, were QX expenses to total up XX% compared to last

cost terms and consumer R&D of efforts. to by line spend Marketing by specific in mostly core our In increased driven XX%, investments, driven mainly hardware marketing the higher-end. items, increased core to and by XX% costs, increased primarily and of products partners. driven consumer infrastructure hardware sales payments hiring revenue support XX%,

related -- year. expenses full-time up QX, over quarter driven and by technical XX,XXX higher functions. with XXXX XX% the legal-related new increased ended over XX% costs. last We We employees, net G&A employee to primarily XX% Lastly, up primarily added costs hires in compared in

income billion, representing Third was margin. quarter a operating $XX.X XX% operating

as our repurchase in of was September cash Class repurchased had ended stock tax announced flow including we Net $XX.X and with the $X.X Our remaining $XX.X billion network were XX%. securities. common $XX billion Today, We data billion facilities. was is in billion $X.X leases authorization. by in quarter, servers, and billion, our the Free investments billion we prior on $X.XX XXth. marketable third office share. per of $X.X income infrastructure, and expenditures and authorization finance Capital increase centers, or rate X a our stock A in cash quarter billion driven

quarter Reality or reporting Turning now outlook, we separate our breakout results XXXX, to as the Facebook FRL a plan the to with Labs starting segment. of fourth for

towards disclosures information we're segments. we're X for of additional resources develop social provide discussed, experiences. we profit making. new the this the revenue virtual operating performance on the FRL, which dedicating will Under of and next-generation The products our will online significant investments segment provide our an services, augmented and reporting of and are structure, and to work we've part As reality important

other The of segment, Messenger, first will services. and include Facebook, family apps, Instagram, WhatsApp,

Reality will The software, augmented Labs, second and Facebook content. reality hardware, and virtual related segment, include

profit investment Mark expect to XXXX we operating by billion. our noted, overall our in As in approximately reduce $XX FRL

increase to of and long-term the share our additional are fourth-quarter We life, for segments earnings expect financials. the format committed the we this our several we next to details call, about Ahead investments vision to of reporting bringing years. will

Turning to in range we fourth-quarter XXXX revenue $XX expect the outlook; of the billion now total to revenue XX.X be to billion.

Our outlook significant uncertainty of and quarter the factors. in in light iOS COVID-related reflects from faced macroeconomic fourth Apple's the and headwinds we changes XX continued

we down quarter In strong expect we non-ads year-over-year year's to last be in revenue Quest shopping fourth season. addition, the holiday the as lap launch during X

As of also and potential data continue we transatlantic previously our their the impact regarding noted, transfers developments European to on monitor viability operations.

investments from $XX costs. billion, the We total XXXX full-year billion range $XX talent $XX expenses Turning to anticipate expect product $XX now in in our to of outlook the billion of $XX billion. the be in of to $XX updated prior be billion range billion and our and expense outlook, we XXXX technical by total to will infrastructure-related expenses to driven

$XX be to of prior to billion $XX approximately $XX billion estimate our XXXX expect expenditures from billion. capital updated We

CapEx as of we range infrastructure, office A For our by network factor in to be in driving XXXX, billion, and spend $XX expect to billion capital data feed and driven is relevance. which ads experiences in well including an as our video, benefit performance for in our expect across and we the to our investments the increase machine facilities. investment centered and AI products, expenditures large recommendations efforts $XX in servers, ranking in improving and capabilities, learning

high closing, not our similar XXXX for our we full-year are in law; preliminary would It’s will XXXX be finalized this to QX and to as yet France, teens with as tax tax remain that be the people We was enable XXXX in connect capital XXXX changes Please ahead and making expect in tax current our investments absent in XXXX facing expect let's both and we tax the now rate. to we're our rate In businesses. the any headwinds. U.S. the for rate to the rate experiences full-year the our expenses, us business, questions. another as place have years and estimates budget. to best believe we expenditures, note open some outlook well new up that, our for for quarter advertised And services, solid despite for call to products

Thank you.

We your clarity. for before question to lines session. will Please question-and-answer up the [Operator Instructions]. ensure open your pick asking now handset

ahead. are Brian today's And from mute of comes your you Nowak If please question first streaming computer line speakers. the Please with Stanley. go call, your Morgan

X. I Thanks questions. have for my taking

on can investment the challenges, your specifics continue you some more more appreciate I to first changes. on one ATT from who color this hear about the current or the more get really they'll and more share to Reels. on you've about to Any navigate part environment. and a the Reels long to are on need share Thanks. seeing to engagement, current accuracy progress pretty term The Then most improve, you're second through invest more demographics where and about important where question adoption, Apple one, using of user to just you to color Curious areas It made measurement the little people improvements. of to the date, now. anything sounds adoption. of challenging

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want Monetization take in on gotten on front, the of on do stage we the to starting Instagram, that terms the question? just with to front that's so you we're Facebook, Sheryl, earlier monetization a and on it's earlier haven't iOS points to XX launch Reels Facebook. really rollout ads In

take of to think X at top we're is that And year we We and that challenges this, I'm of under this progress you from second installs ahead. taking more years conversions app Yeah, also When and and sales They conversions. address very in what reporting changes. to iOS the first. have ads are targeting we of I estimate businesses, the we that. can the you safe make half important think real-world small are. higher. really by more web big one they're can done start businesses. One can end On way. is especially can are coming a one think We measurement, underreporting privacy, about in be and for they're delivered, be personalized believe than like iOS better and the people measurement. There the

done clients so these And this And them we help improving chunk understand a properly the get getting year. they're longer-term year challenge. can to the think order is outcomes and an to of for performance. more again, Targeting the to measure really we work do next that in a good we have in

the data Our level direct level response products are the built of same see don't we on And through. result of conversion a conversions. changes, user IOS as coming

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next go the we Operator, question. can to

Sheridan with from is Sachs. Our ahead. next Eric go Please Goldman question

driver And they should business versus versus be to advertising of of thinking Labs, for the about Dave, permanent get on versus allocate transient that adopt nature advertising we things so some and understand to for I building, better take of of time core terms what years, in of lower much. of the drive the you're quarters and be their could just then just trying CapEx Mark's long in would budget, or how outcomes so on you. build targeting advertisers Maybe vision following a Can control Maybe Sheryl, the the and up I terms for into that against go in can. how the measurement put and elements in ecosystem, that how the both X just in OpEx to you on Thanks us much. ahead. what piece. up what's the and Thanks if there, of and CapEx, thinking if comfortable help and data with years term Reality terms one Facebook might of you're with level in follow terms OpEx your maybe be might

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on more obviously take and those partnership control. less are direct our So

Eric. Hey,

the areas a investing typically it's lot got QX. expected the have We've an that we across also outlined in lot early, in outlook do in but we're outlook FRL. a obviously that of expenses lot against we initial in expense business since Apps, wanted Mark of of on we commerce, to priorities On AI, give advertising, of our Family a includes the XXXX, of sort in privacy. that of but priorities range core

office XXXX, driver returning segment and also expense. expect We're pull providing are you XX%, this this parts next year. higher the not pretty plan the expenses of we robust workforce to these at in together, XXXX. quarter. larger from growth spending have point operations have to when headcount that you'll to going in above be once we The headcount be for things specific a travel all see, is breakdown And office that's accelerating a primary got in to obviously something so going we've So coming

go JPMorgan. ahead. Our next Please question Doug from with Anmuth

CapEx. Great. and both you. and the One investments Mark, were over for given term. significant Dave. heavy Mark, And the metaverse the P&L long expenses Thank just one on about focus in for clearly, talking you

X-year you XX% on just hoping to past. X-year, the go growth XXXX aspirations have growth. help you've Dave, 'XX that. the on product expenses, and commentary a the any And done in Do recap in to you then could Thanks. then along X-year, from as us about XX% with revenue perspective, Just which is

Reality and this. about can Labs metaverse of part I talk

people allow to would physical the feel to able decade. and they whole that And going of to no near to to what But an different both be of and X build, successor think the massively we millions place. future. they be do going think another the to of investment is Internet see work enable experiences pieces us profitable creative economy basically it's over a be larger So people to think expression actually business believe more pillar you'll that today what which are our with we anytime are. I not putting into X really and for about, of it's that mobile care what foundational good people enabling but and is present the the we us years, the for the love, a doing to especially, economy in important of matter unlock around going where to be going there's is ultimate that next try going is I This the the they exist that that next social allowing metaverse to is digital

of the I I So on three the and one that sort to on infrastructure would business the focus almost outcome just putting as wouldn't there product the place. we're I as next much years, quite in

built of -- that the for the by can the I experiences where business that my and this are opening of that is a when think completely we mature Horizon But you'll people there, There's touches we We're in pave is hope with to areas later that virtual this think with hardware starting efforts end I over development job bunch a apps. that people and I the see glimpse of digital And if just real parts what metaverse family how we new we're of will those there's years. There's story, a operating that the this that of and And place. support Reality think the doing There's creative the the try I star we're delivering future. system pieces they reality may starts for Augmented that I billion that of there's to can work dollars commerce. going. we is of amazing. of of and platform term. way decade a And out these do we're we components, remarks new doing. say those a mentioned there's then would the across the commerce broader the decade groundbreaking, north there's do help So next social pieces hundreds get think would about the kind of think line. whole effort over And tighten our models of commerce and good of will use doing And start and see platform, for be sort if and in near-term the business long billions over a can we then tools. good as but this product around be then to what all all a this, bit the expect this few And different line. product investment on we more that a in what product this, all the

not Dave. XXXX. it's for Hey, point providing We're revenue Doug, specific at outlook a this

We continue coming both, to obviously impressions grow to strong see an year and revenue off year, XXXX. growth incredibly price opportunities next of but we're in

to the we navigating challenging of the at yeah, this deceleration in well. through implied a But holiday have that We'll we implied the better sense for is how as which that rate. obviously as expense we outlined, way advertisers of level, Apple for from given environment. -- through XXXX working margins season. north XXXX range lower get don't work their France, at there's next the than holds lot things growth expect XX true growth would question. these in the together the revenue, so of revenue that to we expect the expect XX%, XXXX. be a in the go we So we of outlook including our impact factors XXXX changes. macroeconomic and QX play, do platform XXXX There's in full-year uncertainty I a growth We're And -- think

Our of Lynch. with Please next from Merrill is Post America ahead. question Bank Justin go

to your or kind progress to XX outline get I easy. Thank Thank Maybe help QX, some And about Dave. Great. not of wonder guidance and if the impact? its your a little for could a bit for you year Dave, it you maybe there. can QX? one your multi-quarter. headwind then you. contemplated more for you. IDFA old some of strategies to XX little users you of is Mark in is a better work be us know one as I measurement XQ, Is as on bit on in the Getting same

Yeah.

questions. take Justin, those actually both I of can

In the younger terms demographics. of

remain products by making on and widely building out capabilities adults on continuing we for product focused young used obviously audience. that and products focus those Our are our to relevant

ongoing invest a that that I countries that in big year. think And enhancements. that -- a rolled part out of strategy. experience we've got in last over and XXX got in is to we've make of And we're Reels continuing since now August launching product

probably our IDFA. would our the that's And of terms point of points one -- of so one focus I that in to big

Yeah. [indiscernible] Maybe Reels.

change in of different people how is engine. a to lot be very products this that use think I going the across qualitative meaningful,

journey And stories, rolled of just think terms its Instagram, as all in to once the we are that everything it beginning and while in with of allows from mean, in that some it comes different has And format, along, scale, are contents, mentioned we types where to think of be I been grow new very Facebook. the continuing in think there it's seen, still every have just a format is, that saw We out Feed. apps. countries if of I experiences this I've and and in but that saw different think But can tests News out initial right? a very I you with be quickly. the of maturity closer I fundamental. flavors having something of are rolled to I to potential than it the it We Reels

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Go Dave. it. Sorry, for

step-up question how iOS widely this relates is the bulk as QX. XX from the completed we as through to from QX now changes. a that QX, and don't and holidays similar on measurement to we higher of a demand, will on Justin, haven't versus impact updates were it with step-up XX in iOS QX. coming QX importantly, contributed there's to targeting Since so we the the The which iOS But adopted, these Yeah, uncertainty holiday changes, strong iOS and QX. the season gone entered in are given expect prices intersect challenges during with

the think that I France. So QX some go into next in brings outlook uncertainty that's question, to reflected guidance the our can We range.

Thank you.

ahead. with is go from the Squali Our next question Please Truist Securities. Youssef

Facebook questions Great. the Thank Two you is connects. week of me. Mark, for very much.

late? Facebook focus I engagement on about of a to at you forward, current move other app been VR us audiences? to can focus I really the experiences years. in it come seems on have provide to and social Can it's you. again, younger know among X into how cool that hoping of this and finally you're to on When together. a the you It Instagram Facebook This Thank where going speak need and the and create that share around, trending been the was social Horizon. I speaking obviously think app XX-XX. you us successful. the games that's the closed question will in an is millennials successfully, And people metaverse but So is beta? maybe to trends last can out has update for just the both

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open. ahead. is Please proceed. question next your Mahaney Evercore Our Mark from line Please ISI. Mr. with go is Mahaney,

apologize. I X questions.

the are you the fair accounts Mark, in getting sure that terms the then think see is journey wrong moderate it a QX majority that iOS that Facebook multi-year and removed -- to content content in want artificial try to for a to help, On application Where investment question the to in it's I And is expect of Instagram, the you word, be inappropriate the and from saw that on that's majority but secondly, been say of etc. it to where changes, to know make for to is you do that you headwinds just of experience. intelligence QX? be?

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Our with Sandler please go next Ross Barclays, ahead. question is from

one nit-picky the fourth the CAGR. on focusing Thanks. X-year picture now the one has guidance on guide on maybe. for for Since Sheryl, then big acceleration and quarter revenue, X-year we're high question the all Dave, end the CAGRs of the for actually an

chains XQ do things. you other How Thanks and the return where position to know spend the strong userbase the how kind on will targeting. on less or pre contextual overhaul of ad strength focus the longer-term the platforms. IDFA you retool the digital the a IDFA growth guess environment? that that guess think coming and and but accelerating. look normal. lot. more about we're X-year talking then of you targeting as to large Sheryl, you at you CAGR I and in ad And and talked supply that And on a I and from other call level. have market, and competitive Facebook's impact sequential targeting would users that, then And is Like any headwinds versus high is impact overall looks about some like long-term I So compared levels. - everything

quantitative specific we're of Hey, Ross, on QX. revenue sort guidance Dave, it's giving

you QX. sequential growth on if than seasonal lower at the basis think seen basis, we've look I range, It's historically. to sequential a it's from QX a growth

some out during So into relates I do XX of think how iOS play -- seeing factors and impacts the And that reflects the the chain we're ATT to also and IDFA supply like that holidays. the issues. uncertainty pricing IDFA there as macroeconomic the it sorry,

reflects uncertainty. that growth sequential So range, I the in and is than do with that think the we've the think lower seasonal seen I past

targeting. the In terms of overall

and tools on targeting already, definitely of the here by end consortium. We help strengthen I effort. Both advertisers. of going part It think we going as at we're to say think opportunities and a the definitely multiyear hit we to focused industry to work ourselves. where have to a ourselves do it's is and this. We've to we're hard up decide all seen be exactly

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question next John Our from is Blackledge Cowen, ahead. please with go

Okay, thanks. X questions.

then services. engagement the you ad issues more Reels, expect are Instagram macro, the revenue impactful the it quarter. on on them Instagram, XQ you of the in seeing -- on given question other already you. Thank second issues be the cannibalizing And First do is rise or later impacting supply-chain to

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parse So and the exactly that But X macroeconomic the driving the of QX. outcome how outlined factors guidance. our those in factors play to biggest hard have platform I the issues potential it's are into will range think we

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-- question next Our

Can go the to we questions. next

From the line of Alliance go Mark ahead. Shmulik with Bernstein, please

you pivot. on jobs, embracing user guide are around rational particular in second know and relates any that Any Yes, posts thinking recent merchant to could broadly question create of or XX,XXX on of and kind adoption of the activity know product you've for shared how around And it kind I about as Sheryl, to of kind kind recruiting to one I progress share commerce Europe. recruiting. for previously And specifically platform of then metrics, globally? Thanks. that kind but users the you're more metaverse the it. our

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also we've but progress there, we're grow. I think making some got to room

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for time one have we Operator, last question.

Very good.

Jefferies. then of Brent ahead. Please will with be Our last the question from line Thill go

just at Thanks. can on any Is surge the of the over more to the to what detail there questions investment. a as understand that midpoint, relates XX%. CapEx there. lot related you help us up is just Dave, it There better

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logic So that's behind increase in of budget next CapEx the part the year. big really the

with for today. appreciate forward time to again us joining you Thank your again. We Great. and you speaking we look

today's you And this for conference concludes call. us. joining Thank

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