GOOG | Q2 2016

Operator: Good day, ladies and gentlemen, and welcome to the Alphabet Q2 2016 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, today's conference call is being recorded. I would now like to turn the conference over to Ellen West, head of Investor Relations. Please go ahead.

Ellen West: Thank you. Good afternoon, everyone, and welcome to Alphabet's second quarter 2016 earnings conference call. With us today are Ruth Porat and Sundar Pichai. While you've been waiting for the call to start, you've been listening to Aurora an incredible new artist from Norway who is finding a rapidly growing audience on YouTube all over the world. Now I'll quickly cover the Safe Harbor. Some of the statements that we make today may be considered forward-looking, including statements regarding our future investments, our long-term growth and innovation, the expected performance of our businesses, and our expected level of capital expenditures. These statements involve a number of risks and uncertainties that could cause actual results to differ materially. For more information, please refer to the risk factors discussed in our Form 10-K for 2015 filed with the SEC. Any forward-looking statements that we make are based on assumptions as of today, and we undertake no obligation to update them. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release. As you know, we distribute our earnings release through our Investor Relations website, located at abc.xyz/investor. This call is also being webcast from our IR website, where a replay of the call will be available later today. And now, I'll turn the call over to Ruth.

Ruth Porat: Thanks, Ellen. Our revenue of $21.5 billion in the second quarter underscores the great performance of our businesses globally. For the quarter, our consolidated revenue grew 25% in constant currency versus last year. Once again, the primary driver was the increased use of Mobile Search by consumers, benefiting from our ongoing efforts to enhance the Mobile Search experience. We also benefited from solid growth in Desktop and Tablet Search as well as continued strength in YouTube and programmatic advertising. I'm going to present to you in the following order

Sundar Pichai: Thanks, Ruth. As you heard, we had a very strong second quarter. There's an amazing energy right now at Google. The strength of the quarter is about Mobile. It's transformed the way that people consume information, and Google's products have become a central and much-loved part of their experience. Our investment in Mobile now underlines everything that we do today, from Search and YouTube to Android and advertising. Mobile is the engine that drives our present. And now to our deep investments in machine learning and AI, we are building the engine that will drive our future. Since the last earnings call, we had Google I/O, our biggest event of the year, and I also wrote our annual Founders' Letter. Both of these allowed me to reflect on our past and look to our future. We are at a pivotal and transformational moment. Thanks to advancements in machine learning, we have the unique opportunity to take a big step forward for the next 10 years. In the letter, I wrote about how we think of our investments and our mission. Today, I'll walk through the six sections of the Founders' Letter and discuss our progress in each area. And then I'll call out three key highlights from the quarter that are driving our advertising business today and into the future. The first thing I highlighted in the Founders' Letter was information. At Google's core, we remain focused on making information and knowledge available for everyone. This of course starts with Search, where we now have trillions of searches every year. We continue to invest in making Search smarter and more useful. In the U.S., we recently introduced a voter tool, so when you search to register to vote, you will get a detailed state-by-state guide with information on how to register, requirements, and deadlines. Our new keyboard for iOS, called Gboard, is off to a great start. People love the ability to easily search right from the keyboard, swipe to type, and quickly send emojis. And after just one year, Google Photos is now helping over 200 million people every month organize and search their photos and memories. At I/O, I was excited to share our vision around the Google Assistant. We want to help people get things done in a conversational way across devices and context. This is possible thanks to advances in machine learning, voice and image recognition, and natural language processing, which we have invested in for years. You will be able to experience the Google Assistant in products like our new messaging app, Allo, and our voice-activated device, Google Home, and we can't wait to show you what else we are working on in this area. Second, machine learning; as I said, machine learning is the engine that will drive our future, and it's already making our products better and helping users every day. In fact, more than 100 teams are currently using machine learning at Google, from Street View to Gmail to Voice Search and more. For example, in Search, we use a ranking signal called RankBrain, which relies on deep learning to improve results. It's already enhancing the search experience in 40 languages. And based on user testing, RankBrain can accurately guess which results users will favor with about 80% accuracy. Advances like this help us make our search results even more relevant. Machine learning is also creating an impact in other ways. Just last week, we announced a test that applied DeepMind's machine learning to our own Google data centers, resulting in up to a 40% reduction in the energy we use for cooling. This will greatly improve efficiency. And when we publish our research, we hope it will enable others to reduce emissions, too. Third, content; a big part of making information available is making great content accessible, such as on Google Play, YouTube, and the web. Our efforts to make the mobile web better for everyone with Accelerated Mobile Pages, or AMP, has seen phenomenal global momentum. We now have over 150 million AMP pages in our index and with over 4 million new ones published every week from nearly 200 countries. Last week, we announced AMP for Ads, which helps advertisers build fast, simple, and beautiful ads and landing pages. This will help make the mobile web experience much faster for everyone and help fund it more sustainably. Video is a huge component of digital content, and YouTube continues to shine. It's a thriving home for creators, with more than 1,000 creators crossing the 1,000 subscribers mark every single day. Our content diary (20

Ruth Porat: Thank you, Sundar. We will now take your questions.

Operator: And our first question comes from Carlos Kirjner of Bernstein. Your line is now open.

Carlos Kirjner-Neto: Thank you. I have two questions. First is about Search revenues. Search is probably a $50 billion business, and from today's results it's clearly still growing strongly. Of course, as the business gets larger, it becomes harder and harder to sustain growth. As you look at this increasing growth challenge on your product innovations in Search, including the recent changes and also those that you have in your roadmap for the next few years, how do you think about your ability to sustain such revenues growth and the trajectory over which they will ultimately decelerate? The second question is on Google Fiber. I think Ruth has been quite clear that we should expect an increase in Other Bets CapEx and that Fiber is the main driver, suggesting more investment. Yet, when we see the rate at which you will have deployed in markets like Austin and some of the newer markets, they are quite slow. You also have started to talk about wireless technology, suggesting that you haven't fully figured this out yet, which in turn suggests that it's going to be slow deployment. So the question is, which one is it? Is it faster, more aggressive deployment given the CapEx commentary, or is it going to be continuous slow multiyear deployment as your track record and the talk of new technologies suggest? Thank you.

Ruth Porat: Thank you, Carlos, a lot in those questions. So starting with Sites revenue and where we see the opportunities there, obviously Sites revenue up 24% year on year includes the currency impact. And as Sundar and I both commented on, the biggest driver again this quarter was Mobile Search. We do continue to have solid growth in Desktop, Tablet. And we have strength in YouTube, particularly video advertising, both in our TrueView product and increasingly from Google Preferred. As we've talked about every quarter since the third quarter of last year, we have benefited from the change to ad formats on Mobile that we made in third quarter of last year, and that is evident yet again this quarter. Then, as per your question, going back to that third quarter of 2015 when we made the change in ad formats on Mobile, our growth rate meaningfully accelerated. And as we've noted in each subsequent quarter, that change has been the primary driver of the higher year-on-year revenue growth rate. But importantly, as you've seen over the last several quarters, we're benefiting not just from the higher growth rate but also from the durability of the impact of the change. So that's really underscoring the efficacy of these ads for users, as per Sundar's comments, and it's reflected in revenues running at a higher level. And you can see where the revenue growth rate was prior to the third quarter introduction. I'll let you do your own forecasting, but when comparing growth rates, we're obviously at a higher revenue base versus last year. And then Sundar talked about some of the recent events that we've had. Innovation is core to everything we're doing. We've launched several changes to ad formats and tools just a few days ago. As the team discussed at the Google Performance Summit, we believe the changes should result in a better, more useful experience for users and better performance for advertisers. And so that just continues to be core to the way we're looking at the business with a lot of incremental opportunity. And then on your Fiber and CapEx question, look, we continue to see Fiber as a huge market opportunity. We're focused on creating abundant connectivity on networks that are always fast and always open, as we've talked about, and we're continuing to work closely with cities given their excitement. We're also continuing to push the frontier with tech innovation, as you noted in your question, and different execution paths. So as you said in the question, we're exploring both Fiber and wireless, and you may have seen our recent acquisition of Webpass. So we want to make sure we're executing against a very large and attractive market in the most effective and efficient manner. We did start adding customers in Charlotte in July. And so again, we view it as a big opportunity. We're being thoughtful and deliberate in our execution path.

Operator: Thank you. And our next question comes from Eric Sheridan of UBS. Your line is now open.

Eric J. Sheridan: Thank you so much for taking the questions. Maybe following up on Carlos, his question on Search, and Ruth, your answer, I wanted to go a little bit deeper on the retail and the travel verticals. It's two areas where we see a lot of innovation from the company right now, both on the product side that consumers are seeing as well as on the advertising side. How should we think about the roadmap ahead for both increased user engagement with your product in those key verticals as well as the ability for advertiser conversion to lead to more advertising budgets for the company over the medium to long term? And then maybe one second question would be, with the buyback authorization having been completed this quarter, Ruth, I would love to get your thoughts on how you're thinking about the balance sheet as an asset and how shareholders should think about the ability for shareholder returns over the medium and long term. Thank you so much.

Ruth Porat: Okay, so why don't I start on your second question? Then I'll pass it to Sundar on the first question. So as you know, we announced the share repurchase program relatively recently. It was just in the third quarter of last year, and we just completed it as per my opening comments. As we discussed back in the third quarter, we do always review our balance sheet and capital requirements and opportunities with our board, and I'm not going to speculate about a potential for a future board decision, so really nothing more to add at this point. And then, Sundar?

Sundar Pichai: Look, we obviously think generally across all types of verticals, and you highlighted a couple of important verticals. To give an example on travel, many users start their travel inquiry on Google. And so we focus on doing a better job of getting them deeper information, new destinations, and compare costs through new features in Hotel Search [Hotel Finder], Google Flights, and the recently launched Destinations on Google. In all of this, we work closely with many different partners, including online travel agencies, and so we focus on product enhancements in partnership with them. And the better job we do at answering user queries, the more qualified leads we can provide to our partners, and we think it's win-win arrangement. And the same concept applies for these other verticals as well. So we approach it very holistically.

Operator: Thank you. And our next question comes from Heather Bellini of Goldman Sachs. Your line is now open.

Heather Bellini: Thank you very much. Sundar, I was wondering. I know you gave us some color on the Cloud business just a few moments ago in your prepared remarks. But I was wondering if you could share with us some of the changes, if you could highlight some of them that Diane [Greene] has made since she's come onboard. And I'm wondering how some of those changes might be starting to impact conversations with potential customers that you're having. In particular, I'm just trying to get a sense of, are you seeing Google now with GCP getting invited to more RFPs and starting to see your win rates go up as a result of some of her initiatives? Thank you.

Sundar Pichai: Thanks, Heather. Absolutely, I think Diane has initiated a set of changes, and essentially she has integrated our go-to-market strategy with our engineering and product efforts. She has integrated our engineering efforts on the cloud. So for example, Google Apps, Drive, Docs, Gmail, Slides, Sheets, Hangouts, et cetera, is on top the cloud stack. Our enterprise customers and partners for them, now they have one enterprise face and internally from frictionless contracts to touch points across Google, to one person to work with them on our considerable enterprise technologies and products, so the big unifying one being Cloud. We now have new leadership in place across sales, professional services, marketing, and partnering plus new customer facing support in the form of professional services. We have an office of the CTO and customer reliability. So it's a big set of changes, and it's obviously having an impact. Many of our customers are also partners since it's increasingly clear how much we can do together. So for me, I see a shift to a world-class enterprise approach, and it's definitely having an impact on the type of conversations we are having and the outcome of the RFPs we are engaged in.

Heather Bellini: Thank you very much.

Operator: Thank you. And our next question comes from Ross Sandler of Deutsche Bank. Your line is now open.

Ross Sandler: Great. Sundar, I just had a question about machine learning. So you spent a lot of time talking about how this is positively impacting Google as a whole and how you're building for the future, both tonight and at I/O a few months ago. And you guys have mentioned things like reducing the error rates in Search and improving relevancy. But are there tangible examples of either engagement or volume also increasing as you roll out machine learning in Search and in YouTube that you could share? And then, I think Google recently introduced Smart Bidding in AdWords using machine learning. So do you see something like this as a potential revenue driver? Any color there would be great. Thank you.

Sundar Pichai: So we definitely – a core part of improving the user experience for the next many years will be driven by machine learning. To give a specific example, you asked about YouTube. YouTube watch time is something we focus on. We use machine learning increasingly to give recommendations to users. So when they're watching a video in terms of what they could watch next, and that recommendation system is increasingly using machine learning, and that directly drives engagement. So there are several such examples I can give across the company. You mentioned AdWords, too. If you look at AdWords and the thoughtful changes we do, over time, we are dealing with paid commentarial space in terms of the kinds of changes and interactions that can happen. So deploying machine learning there over time, over many years, I think is a more powerful and deeper way to explore the various possibilities that exist and I think will lead to long-term impacts. And so I'm very optimistic on it.

Operator: Thank you. And our next question comes from Douglas Anmuth of JPMorgan. Your line is now open.

Douglas T. Anmuth: Thanks for taking the questions. I wanted to ask two. First, Sundar, you talked about Expanded Text Ads. And my question is just as the number of characters here increases somewhat, say, up to 50% through Expanded Text Ads, you're taking up more space on the page. How do you balance the higher percentage of clicks from these paid ads with the natural search experience? And then secondly, on YouTube, do you think you're taking share of TV dollars currently? And if not, what's needed to do that going forward? Thanks.

Sundar Pichai: On the first one, we obviously, over many, many years, we always put users first. And as we present our search results, we have long-term metrics for user happiness around which we make, that's the framework for all the changes we make. Obviously, with the shift to mobile, the user experience, users are evolving in terms of how they use our product. And with that as a guidance, we have made changes. We make many, many changes and I would look at it holistically. And even some of the changes you're talking about affect certain highly commercial queries, where users are actually looking for that commercial information. So the metrics is what drives how we change these things, and I'm being very, very thoughtful about it. But we always step back and make sure the overall load, et cetera, is really working for users. And I'm pretty comfortable with how we are approaching it. On YouTube, I think about it as we are seeing strong growth. I mentioned the momentum behind Google Preferred and how we are double the rate we were last year. So to me, that implies strong growth. It's tough for us to assess whether it's from TV or just advertisers investing more because there's traction in YouTube, but we just see strong momentum. And as far as today, when I just look at how users are using mobile, video is the killer app, killer format on mobile, and I think that's what gives us the secular trend moving forward.

Douglas T. Anmuth: Thank you.

Operator: Thank you. And our next question comes from Mark Mahaney of RBC Capital Markets. Your line is now open.

Mark Mahaney: Thanks. I just want to ask one question and it has to do with Mobile Search. And I want to throw an idea by you, which is we've been going through this mobile transition for four or five years. Consumers have I think dramatically led businesses and advertisers to mobile devices. I'm wondering if what you're now seeing is finally, as e-commerce and travel and other commerce activities have really become critical and material on mobile devices, you're finally starting to see ad budgets really shift over and you're starting to get auction dynamics start to pick up in Mobile Search. So could you just comment on whether you're finally seeing this kind of backswing for advertisers to engage with Mobile Search in a way that you really hadn't seen before; it just took that many years for this to happen? Thanks.

Sundar Pichai: Mark, thanks for the question. I would say at a higher level, this is a scale business. And you're right, as we have had this shift to mobile, there are second-order effects which kick in too, which is why when you look at our ad improvements and our revenue improvements, I would focus more holistically. We do deeper changes across the board, not just visible changes on the page, and all of that contributes to it. So I do definitely think as the shift to mobile accelerates, we are getting some scale benefits, and that's part of it.

Operator: Thank you. And our next question comes from Dan Salmon of BMO. Your line is now open.

Daniel Salmon: Hey, good afternoon, everyone. Sundar, I was wondering if you could spend a little time talking about the launch of the My Activity site, which I think is an update to the controls that your users have over the use of their data. And, in particular, I'd be interested to hear about the option to opt into greater personalization of ads from across the usership on Google Sites, as I believe that's the first time you've allowed, on an opt-in basis certainly, to have search data be used to target ads elsewhere. And then maybe as a follow-up to that, what you're seeing in terms of early traction of users turning that on and where your expectations for that may be.

Sundar Pichai: Look, we are very focused on giving users better controls, and so we wanted to give users a single place to see and control ad settings. And that will be honored as the user moves across devices. It's completely opt-in. Users are absolutely in control. Consumers and advertisers have come to expect ads to work better across devices, and this new option could help us better deliver on that. So for people who choose to opt in, over time we could make sure they see more relevant ads and fewer annoying ones, so effectively put them in better control of the experience they get, and so I think that helps the whole ecosystem work better. We are in very, very early days, but we're being thoughtful about how we do this for users.

Daniel Salmon: Thank you.

Operator: Thank you. And our next question comes from Colin Sebastian of Robert Baird. Your line is now open.

Colin A. Sebastian: Great, thanks. I guess two quick questions. First off, we understand that Google Shopping in particular continues to see strong growth, and I was hoping you could add some color on the relative mix or growth rates of TLA [Text Link Ads] contrasting to other ad types along with the adoption of transactional capabilities. And then, Sundar, I wanted to follow up on some of the conversational voice applications and devices that you have in the pipeline, and more generally how you envision voice really fitting in across the board, across the Google platform. Will this be a centerpiece as you also utilize machine learning and artificial intelligence? I'd like to hear more about your vision for that. Thank you.

Sundar Pichai: Let me quickly – on the first one, we don't comment on the relative mix, et cetera, so I'll probably give more color on your second question. Voice is obviously very, very exciting for us. I mentioned this at I/O. if you look at Android, the Google app on Android in the U.S., 20% of the queries are voice queries. So today in terms of evolving to a conversational assistant, we have a big head start. People do this. We get millions of queries every single day. And it's incredibly exciting to see how people interact with voice differently from text. It's more intuitive. It's more personal, and it's a bit more emotional and an engaging experience for users. And so I think to do this well requires deep computer science, just understanding what they are saying, the natural language processing involved. These are areas in which we have now been working for over 15 years, and we believe we are the best in class. And so bringing all of that together I think is what will help us do this at scale globally, but it's still very early days in terms of getting the conversational assistant right. You will see us launch this through our products as we go through the second half of this year, and I'm excited to see how users respond to it.

Colin A. Sebastian: Thank you.

Operator: Thank you. And our next question comes from Anthony DiClemente of Nomura. Your line is now open.

Anthony DiClemente: Great, thanks for taking my questions. I have one for Sundar and one for Ruth. Sundar, in terms of messaging, you mentioned Allo, your mobile messaging product, and Duo, which is your video messaging product. Why is it important that Google is competitive in mobile messaging? And what gives you the confidence that you could take market share from the other players in the messaging space? And then, Ruth, in terms of the drivers of YouTube growth, you mentioned in your prepared remarks that one of the drivers was buying on DoubleClick Bid Manager. I just want to maybe hear a little bit more about that. Why has that been so successful recently, and do you look at that as an incremental forward driver of YouTube revenue growth? Thank you.

Sundar Pichai: On your first question, I think messaging is obviously an important area. We approach these areas if you believe we have insights by which we can create something very differentiated for users, that we are actually approaching it in a new and unique way. The core underlying insight we have is, in the context of mobile and using state-of-the-art machine learning, can we rethink some of the areas for our users? So that's the underlying framework with which we have approached this space of being really enjoying using these products, and we'll get it out to users soon. For example, I think if you take something like Duo today, I think especially on Android, high-quality messaging is an experience that's still lacking for users, so we clearly see an opportunity there. And it's at the core of our mission, bringing information experiences to users. And so that's why we are investing and we are optimistic about this space.

Ruth Porat: And I think on the other part of your question, I think the key point is we've talking about programmatic for quite some time. We're just seeing strong momentum across the board, and we continue to benefit from that.

Anthony DiClemente: Thank you.

Operator: Thank you. And our next question comes from Ben Schachter of Macquarie. Your line is now open. Benjamin Schachter - Macquarie Capital (USA), Inc. Sundar, can you broadly discuss the Google hardware strategy and perhaps some of the lessons learned from previous Google hardware launches? And then relatedly, can you just discuss a little bit about how you're thinking the auto strategy? Do you build your own vehicles, license technology? How do you determine which direction to take there and how long until we might see any auto-related revenue? Thanks.

Sundar Pichai: On our overall hardware strategy, we've always, we have done devices like Nexus or Google Pixel, et cetera. We realize a lot of computing innovations happen at the intersection of hardware and software. And as we are building ecosystems and broad platforms, we need a way to drive them forward. And so that's the context in which we do. There are areas where we have done it very seriously. Chromecast is a great example. We now have over 30 million Chromecast devices sold, and that's an example of where we invest deeply. And especially as newer areas emerge like Google Home, we want our ability to put the best experience possible in front of our users and guide the ecosystem. So that's how we think about it. We are being much more thoughtful in how we approach it, and we're building a world-class team so that we can do this for our users. But we are very thoughtful about how we approach it, and we make sure to work with the ecosystem to accomplish what we are trying to do.

Ruth Porat: And then on cars, self-driving cars is in our Other Bets area, so just a brief update there. We're now testing in four cities, Mountain View, Austin. Most recently we expanded to Kirkland, Washington and to Phoenix. We've self-driven over 1.6 million miles. And the focus here for us is we're solving a really big need, safety, access, and city efficiency. The other thing that's really motivating for us is when you look at over 30,000 car deaths in the U.S. alone, that's what really inspired the founders to start working on this issue. And our approach is quite different from most others. We're focused on fully-autonomous cars because in early testing we saw the risk of depending on drivers to remain engaged once you give them the option to switch off. So we've invested a lot there. We're testing extensively based on this approach. And more specifically to your question, we're pleased to be working with FCA to advance the development of the self-driving cars. With them, we're more than doubling the number of cars that we have, but we do have huge respect for the expertise required, so we do expect we'll work with many partners in this area.

Operator: Thank you. And our next question comes from Justin Post of Merrill Lynch. Your line is now open.

Justin Post: Thank you, a couple questions. First on YouTube, just thinking about premium content, a lot of activity with streaming deals out there. Obviously, YouTube would be a natural place for streaming content, but even professionally developed content. Do you think you're letting an opportunity get by? How do you think about that? And then, Ruth, I know you had a lot of experience dealing with regulatory agencies in your last CFO role. There have been some new filings. Can you talk at all about how Google is thinking about that right now? Thank you.

Ruth Porat: So I'll start on the second question. Look, we continue to work constructively with regulators. We don't have an update on timing on any of those specific issues. But the main points in our view are that regulators have found that our businesses do help consumers. And the key mantra here is if we do the right thing for the user, all else will follow. With respect to consumers, we continue to invest in innovative opportunities that create great experiences and improve their lives. And we're empowering small businesses globally by providing greater reach to customers, not just in their towns, but across countries and around the world. And in our discussions, one of the very important points is we operate in a very vibrant, competitive environment, and we're also proud of the fact that we're investing meaningfully in the ecosystem. For example, Android has helped foster a remarkable and sustainable ecosystem of manufacturers and app developers and entrepreneurs based on open source software and open innovation. That's really the thrust of it, and the emphasis is we're continuing to work constructively with regulators, no additional update.

Sundar Pichai: And, Justin, on the livestreaming question, I already mentioned that livestream is a big focus for us. We've been at it for a while, and we've built a great, robust, and mature platform for big events. We just announced at VidCon our plans to make mobile livestreaming features available within our core YouTube app on all mobile devices. Our stream time, livestream time has increased 3x since the beginning of the year alone. And YouTube is the first major platform to support live content in 360 degrees. And recent examples, even the RNC in the DNC conventions, they have been livestreamed on YouTube in 360. So there's a lot of momentum there and we are absolutely committed to this space.

Operator: Thank you. And our final question comes from the line of Brian Nowak of Morgan Stanley. Your line is now open.

Brian Nowak: Thanks for taking my questions. I have two. The first one is on the U.S. It accelerated pretty nicely. Any specific buckets of advertisers or any of the innovative products that you'd call out as driving that acceleration in the quarter? And the second one, Sundar, you talked about using machine learning for better suggestions on YouTube. Can you help us all think about what the level of engagement is on YouTube right now, whether it's minutes or maybe growth in images? How do we think about engagement on YouTube now? Thanks.

Ruth Porat: So in terms of the U.S., the 25% year-on-year growth reflects strength across products. There's really nothing to call out. It's modest acceleration consistent with what we saw overall, but it's really about Mobile Search.

Sundar Pichai: On YouTube, at a high level I would say we don't have any new metrics. But on mobile alone, as I've said before, we reach more 18-to-34 and 18-to-49s than any other TV network, broadcast or cable. And every indication we see is that the growth is very, very strong, being driven by mobile, and it's growing globally as well. So overall, I think engagement is very, very healthy. I'm pretty excited about it.

Brian Nowak: Great, thanks.

Operator: Thank you. And this concludes our question-and-answer session for today. I'd like to turn the call back over to Ellen West for closing remarks.

Ellen West: Thanks, everyone, for joining us today. We look forward to speaking with you again on our third quarter 2016 call.

Operator: Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Have a great day, everyone.