Amazon (AMZN) Q1 2020 Earnings Call Transcript

Speaker 1: (00:00) Thank you for standing by. Good day everyone and welcome to the amazon.com Q1 2020 Financial Results Teleconference. At this time, all participants are in a listen only mode. After the presentation, we will conduct a question and answer session. Today's call is being recorded. For opening remarks, I will be turning the call over to the Director of Investor Relations, Shelly K. Piper. Please go ahead. Shelly K. Piper: (00:30) Hello, and welcome to our Q1 2020 Financial Results conference call. Joining us today to answer your questions are Brian Olsavsky, our CFO, and Dave Fildes, Director of Investor Relations. As you listen to today's conference call, we encourage you to have our press release in front of you, which includes our financial results as well as metrics and commentary on the quarter. Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2019. Our comments and responses to your questions reflect management's views as of today, April 30th, 2020 only and will include forward looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings. Shelly K. Piper: (01:32) During this call we may discuss certain non-GAAP financial measures. In our press release, slides accompanying in this webcast, and our filings with the SEC, each of which is posted on our IR website, you will find additional disclosures regarding these non-GAAP measures including reconciliations of these measures with comparable GAAP measures. Our guidance incorporates the order trends that we've seen to date and what we believe today to be appropriate assumptions. Our results are inherently unpredictable and may be materially affected by many factors, including fluctuations in foreign exchange rates, changes of global economic conditions and customer spending, world events, the rate of growth of the internet, online commerce, and Cloud services, and the various factors detailed in our filings with the SEC. Shelly K. Piper: (02:23) This guidance also reflects our estimates to date regarding the impact of the COVID-19 pandemic on our operations, including those discussed in our filings with the SEC and is highly dependent on numerous factors that we may not be able to predict or control including: the duration and spread of the pandemic, actions taken by governments, businesses, and individuals in response to the pandemic, the impact of the pandemic on global and regional economies and economic activity, workforce staffing and productivity, and our significant and continuing spending on employee safety measures, our ability to continue operations in affected areas, and consumer demand and consumer spending patterns, as well as the effects on suppliers, creditors, and third party sellers, all of which are uncertain. Our guidance also assumes, among other things, that we don't conclude any additional business acquisitions, investments, restructurings, or legal settlements. It's not possible to accurately predict demand for our business services and therefore our actual results could differ materially from our guidance. Now I'll turn the call over to Brian. Brian Olsavsky: (03:37) Before we move on to the Q and A, I'd like to lead off with a few comments. What we've all seen transpire in the past two months has been gut wrenching and unprecedented, but it has also been a time of heroic action by healthcare workers, government officials, police and emergency personnel, and all essential workers in our communities. This includes frontline Amazonians, including our Whole Foods team and our partners around the world. They've provided a lifeline of groceries and other critical supplies to the doorsteps of all of us at this critical time. I'd like to give you some insight into what we have seen at Amazon and how we are responding to this crisis. Beginning in early March we experienced a major surge in customer demand, particularly for household staples and other essential products, across categories such as health and personal care, groceries, and even home office supplies. At the same time, we saw a lower demand for discretionary items such as apparel, shoes, and wireless products. This large demand spike created major challenges in our operations network and with our seller community and our suppliers. Brian Olsavsky: (04:42) While we generally have experience in getting ready for spikes in demand for known events, like the holiday season and Prime Day, we also generally spend months ramping up for these periods. The COVID crisis allowed for no such preparation. We took quick action to react to the higher order levels while continuing to provide for the safety of our workforce, established rigorous safety and cleaning protocols including maintaining six foot social distancing, procuring a hundred million masks, tens of millions of gloves and wipes and other cleaning supplies. We began requiring temperature checks across our operations network. In our Whole Foods stores, we added plexiglass barriers between cashiers and customers and reserved special hours for senior customers to shop. Brian Olsavsky: (05:26) We temporarily raised wages and overtime premiums. We funded a new Amazon Relief Fund and we allowed employees to take unpaid time off at their discretion. To deal with the unprecedented demand, we hired an additional 175,000 new employees, many of whom were displaced from other jobs in the economy. We took steps to dampen demand for non-essential products including reducing our marketing spend. Our network pivoted to shipping priority products within one to four days and extending promises on non-priority items. Our independent, third party sellers, most of whom are small and medium sized businesses, work tremendously hard to serve our customers and we are grateful for their efforts. Third party sellers continue to see strong growth in our stores as more than half our units sold are from third party sellers. We increased grocery delivery capacity by more than 60% and expanded in store pickup at Whole Foods stores from 80 stores to more than 150 stores. Other Amazon teams shifted their focus to directly helping customers in the overall effort to fight the COVID virus. Brian Olsavsky: (06:33) AWS has created a data lake to assist healthcare workers, researchers, scientists, and public health officials who are working to understand and fight the Coronavirus. Many of our AWS products are helping in the government response to the crisis and are there for customers who are seeing their own demand spikes: companies enabling video conferencing, remote learning, and online health services, for example. Amazon Flex is supporting food banks by donating delivery services of groceries to serve six million meals in Los Angeles, Miami, Nashville, Orlando, San Francisco, Seattle, and Washington, D.C. The plan is to ramp this up to 25 cities across the U.S. Alexa is helping customers access important CDC guidance and help them evaluate their own COVID-19 risk levels. How is all this impacting our business? While customer demand remains high, the incremental revenue we are seeing on many of the lower ASP essential products is basically coming at cost. Brian Olsavsky: (07:34) We've invested more than $600 million in COVID related costs in Q1 and expect these costs could grow to $4 billion or more in Q2. These include productivity headwinds in our facilities as we provide for social distancing and allow for the ramp up of new employees, investments in personal protective equipment for employees, enhanced cleaning of our facilities, higher wages for our hourly teams, and hundreds of millions of dollars to develop COVID-19 testing capabilities. In Q1 we also had another $400 million of costs related to increased reserves for doubtful accounts. On the flip side, we did see a drop in travel, entertainment, and meeting costs as well as lower marketing as a way to dampen our demand for non-essential items. While we can't have great certainty about what the next few quarters will look like, I'm humbled by the efforts of my fellow Amazonians in delivering essential goods and services to so many people. We take this responsibility seriously and we're proud of the work our teams are doing to help customers through this difficult time. With that, let's open up for questions. Speaker 1: (08:42) At that time, we will open the call up for questions. We ask each caller, please limit yourself to one question. If you would like to ask a question, please press star one on your keypad. We ask that, when you pose your question, you pick up your handset to provide optimum sound quality. Once again, to initiate a question, please press star then one on your touch tone telephone at this time. Please hold while we poll for questions. Your first question comes from the line of Doug Anmuth with JP Morgan. Please proceed with your question. Doug Anmuth: (09:27) Great. Thanks for taking the question. First, I just wanted to ask, within the $4 billion of COVID related incremental costs in 2Q, you talked about spending hundreds of millions on your own testing capabilities. Can you just talk about the strategic thinking there, underlying trying to build this in house versus sourcing from elsewhere? Does this potentially take you into a new business path over time? Then how do you think about the spending here in 2Q and weather, over time, does that change your margin structure for an extended period of time beyond just the next quarter? Thanks. Doug Anmuth: (10:02) ... beyond just the next quarter. Thanks. Brian Olsavsky: (10:05) Yeah. Sure, Doug. First on testing. We estimate that testing will be about $300 million in Q2 if we're successful. We put some of our best people on it. I think everyone is trying to get testing. It's not readily available on the scale that we need it to test our scale of employees. We are working to do that ourselves and to build protocols and again, we'll see how we do that differently. And I don't know, again, about future business opportunities. Brian Olsavsky: (10:38) Our main concern is getting testing in the hands of our employees and then potentially as we have excess capacity, perhaps we can help in other areas. On the spending, a lot of the costs that we're seeing are tied to this COVID response. Most of it is hitting in people costs, both in productivity and also in wages and relief funds and all. We can't really tell how long that will last. It's probably good that we're only giving guidance for Q2 at this point. Brian Olsavsky: (11:14) We're going to probably learn a lot more in the next few weeks, the next few months and we'll continue to update this. But for now most of what we see are temporary costs in the scheme of things, but certainly very expensive temporary costs and also ones that we're not sure how long they'll last. Doug Anmuth: (11:35) Great. Thanks, Brian. Speaker 2: (11:45) Your next question comes from the line of Brian Nowak with Morgan Stanley. Please proceed with your question. Brian Nowak: (11:52) Thanks for taking my question too, Brian. The first one is the current situation I think in many ways sort of showcase the ability of your network to provide goods for people and the value of Prime and Amazon to customers. I guess in light of that, can you talk to us at all about the impact you've seen on the Prime customer account from the current situation in any color, on how you've been able to expand Prime's reach into new customers or demographics from this? Brian Nowak: (12:19) Then the second one I know there's a lot of changes going on in logistics and things, but Amazon is always a learning company. So any learnings you've had so far in the logistics side about how you actually may be able to learn some new best practices to run more efficient post-COVID from the current fire that we've been going through? Brian Olsavsky: (12:38) Well, I think we've learned that it's easier to get ready for a holiday or for a Prime day than it is to get ready for something like this when everything hits at once. High demand and then also a need to restock automatically and not prepare for it. That's not something that we want to keep learning, but we're doing our best to maintain and provide key services and essential items for our Prime customers and all our Amazon customers. On the Prime program what we're seeing is, again, a lot of pickup in Prime shopping benefits. Brian Olsavsky: (13:21) We see our Prime customers are shopping more often, they have larger bag basket sizes. We're also seeing a lot more use of our video benefits and our digital benefits. In March, the first-time viewers nearly doubled, which is I think is a good time for people to binge, when a lot of them are staying at home to stay entertained and see our video collection. It's also beyond Prime video. It's also our channels and video rentals also went up as I'm sure others in the entertainment business saw that as well. I think people are finding more benefit from Alexa when they're at home. They're listening to more music, asking questions, particularly questions related to COVID and issues around it. They're using it in education with their children. I think we're seeing a lot more on the communication side, people using "Alexa, call ... " and then drop in. I think the Prime story is that shopping is really important for people now, especially when those people can't leave their houses. I think the digital benefits are scaling well, I think they're handling the additional demand. And it gives people a good time and reason to use all of their Prime benefits that maybe they hadn't used as much in the past. Brian Nowak: (14:51) Great. Thanks Brian. Speaker 2: (14:56) Your next question comes from the line of Mark Mahaney with RBC. Please proceed with your question. Mark Mahaney: (15:02) Thanks too, please. First could you just talk about where you are in terms of fulfillment efficiencies, the way you track it? Pre-COVID, Amazon had some sort of level of standard of meeting demand within a certain period of time. How low that got given the surge in demand, and where you are in terms of the recovery? In other words, how long will it take for Amazon to get back to a point where you'd have the same sort of service efficiency levels on the retail side that you had pre-COVID? How far are you away from that? Mark Mahaney: (15:34) And then the second one is can you talk about the AWS business? I guess I would have expected maybe the growth rates really robust, but maybe even a kick up in the growth rate is ... What are you seeing there in terms of, I assume there's much greater usage of AWS now, is that something that would show up in a P&L maybe on a delayed basis? Just talk about what's happening to that side of the business in this crisis. Thank you. Brian Olsavsky: (15:58) Sure. Well we're happy with the growth in Q1 on such a large space. Again, now it's a $41 billion run rate and that's on 33% year over year. But what we're seeing kind of post-COVID is it varies by industry. We think where we're a bit well-positioned is that we have such a breadth of customers. There's millions of active customers from startups to enterprises to public sector so there's a lot of variants, again, in what individual industries are seeing right now. Brian Olsavsky: (16:36) Things like video conferencing, gaming, remote learning, entertainment, all are seeing a much higher growth and usage. Things like hospitality and travel certainly have contracted very severely, very quickly. I think there's going to be a mixed bag on industries and of course this would be tied to the general economic conditions for the country and the world quite frankly. Right now, we want to be there for our customers. We want to be able to scale up when they need us. We want to be there for them regionally around the world. We've been doing a good job of that, I believe. Brian Olsavsky: (17:13) On the fulfillment efficiency I think you're talking about one-day, probably the heart of your question, when will we get back to what we have seen in levels of one-day. A little bit on that. Again, as I mentioned in my introductory comments, we had to absorb this shock of top line demand and also the ability to stabilize our operations. We had to take the step to focus on essential items, extend the shipping period from one to four days and then further on non-essential items. Had to restrict things that were coming into the warehouses and focus on essential products. Brian Olsavsky: (17:56) We think that was the right course of action and as we add capacity, we're trying to resume more normal operations as far as the shipping of non-essential items and the speeding up of one-day shipments. But we'll explain a bit on the one-day shipping costs because it's aligned with this. We originally thought we would spend a billion dollars roughly on one-day shipping in Q1. What we're seeing is we pretty much spent about that same amount because in the old days we would have perhaps had the option to ship things two-day, three-day, four-day and seen a break on rates for the actual shipment. Brian Olsavsky: (18:42) But most of our one-day costs are really what we've done to our logistics networks to allow for one-day shipping. Things like putting inventory closer to the customer, things like building up AMZL network and delivery network and also having multiple pull times and shipping windows during the day. All those things are coming in very handy to us to help get more capacity out of what we currently have and we're glad we've made that investment. But we don't actually see a savings because we're still shipping things once they're available very quickly to customers. Brian Olsavsky: (19:20) It's really a combination of how long it takes to get things in stock, pick, pack, and shipped. The shipping is still pretty fast and it's still coming quickly. It's just taking longer to get things into our warehouse and out of our warehouse, so that's really the challenge right now is to speed that up and when we do that we'll see a resumption of more one-day service. But right now, things are still so up in the air that I can't really project when that day will be, what point in Q2 or Q3, or beyond. Mark Mahaney: (19:55) Okay. Thank you, Brian. Speaker 2: (19:58) Your next question comes from the line of Heath Terry with Goldman Sachs. Please proceed with your question. Speaker 3: (20:03) Heath Terry with Goldman Sachs. Please proceed with your question. Heath Terry: (20:05) Great, thanks. I did want to dig just a little bit deeper into your comments on AWS. Yesterday during Microsoft's call, they mentioned that they had seen two years worth of digital transformation in the cloud in two months. Curious how you would characterize sort of what you have seen as we've gone into August or into April in terms of cloud adoption and what this has meant for AWS and the rate of adoption or acceleration in that business, maybe more broadly. And then, as we look at the guidance, the $4 billion for the expenses in the second quarter, if we adjust for that, that implies a pretty material increase in profitability quarter over quarter. Any sense that you can sort of share with us of just what the drivers behind that profitability is, how much of that is annualizing the one day investments and the efficiency that you're seeing there versus anything else in particular that you would call out? Brian Olsavsky: (21:19) Yeah, so first on AWS, I mean, I don't have comments. You may have heard us or about digital transformation. I think what I would say is we've continued to see a healthy adoption of our business and healthy usage, not only in the United States, but globally. Our backlog of future contracts continues to build. And I still think the basic value proposition of AWS that we've always pointed to, things like having the largest, most functionality and largest and most vibrant community of customers and partners, having really proven operational in security experience and building, what customers need in the areas of machine learning, artificial intelligence, and other really key areas has not been impeded by this COVID crisis yet. And yes, we're seeing different performance in different industries, but our sales force is still there to help, help not only with current capacity but also the transition to new and as people make that journey onto the cloud and then expand their use of the cloud. Brian Olsavsky: (22:38) On the 4 billion, or sorry, on the two two guidance, I think the question is perhaps how do we have a range if it's above zero if we have $4 billion of costs? Is that pretty much the essence of your question? I think there are some efficiencies that we leverage that we get on fixed costs on higher volumes even if they are somewhat breakeven on a contribution profit basis. There's some improvement in our cost structure when we have high volumes. There's also been a resumption of seller volumes, especially from third parties using direct shipments to customers as companies are ... You get more capability both in this country and other countries. We will continue to moderate our marketing in the time period when we have, again, pretty much the demand we are trying to fulfill is there and there's some products that are still out of stock. So it doesn't make sense to always do marketing, especially variable marketing, in those situations. Brian Olsavsky: (23:52) We continue believe we'll be saving travel and entertainment costs through the quarter. I would say in a couple hundred million dollar size range is on the cost. So there's a lot of moving parts here, but certainly the investment we're making in the COVID response is pretty significant. On the one day, I would remind you that the one day started in earnest Q2 of last year. So we're starting to lap at that investment. It's not as large on a year over year basis as it's been in the past four quarters. Brian Olsavsky: (24:33) And then the other thing that I would just point out is remember the impact of changing the useful life of our servers, mostly getting in the AWS business. That was a $800 million benefit year over year in Q1. And that will continue into the rest of the year. And that again is the benefit we're seeing from being able to use our server infrastructure assets for a longer time period. We've been working on the ability to run them longer and it's been a hardware and a software challenge. And as we have had success there operating at scale for over 13 years now, we've been able to extend our useful life or assets or recognize that we have been extending the life. So that's a benefit that we've seen in Q1 and we'll see the remain from here on out. Brian Olsavsky: (25:29) Yeah, excuse me, just to add to that too. It takes about $800 million and nearly $100 million benefit in the first quarter. We do expect the change to decrease as the year progresses. So keep that in mind. Brian Olsavsky: (25:43) Right. Thank you, Brian. Speaker 3: (25:47) Our next question comes from the line of Eric Sheridan with UBS. Please proceed with your question. Eric Sheridan: (25:54) Thanks so much for taking the questions. And two, if I can. One I wanted to know on the revenue side, any difference in behavior you saw in various shelter in place geographies across the world, whether it be Europe versus the US or Asia and the US or India in terms of consumer behavior or certain elements of adoption of certain product categories as we went through the month of March? Be curious what differences you saw on a global scale including all Prime adoption in response to COVID-19. And one quick one on the cost side of the equation, the cost of energy and oil have come down dramatically. Wanted to know if there was any way you would be able to call that out or an element of that in your overall cost structure as you do more of your own logistics over time? Thanks so much. Brian Olsavsky: (26:43) Sure. Sorry, Eric, I don't have much for you on the second point. Certainly we would look to see lower shipping costs, although I would ... I mean, there's certainly things that we do long haul. There's things that we repositioned with the airplanes. There's things that we do on long haul trucking and that's where probably the fuel component would be larger. But we haven't quantified that or not for ... It's in our guidance, but I can't break it out for you right now. Brian Olsavsky: (27:16) On the how this may have played out differently, different geographies, we're actually seeing a lot of consistency, I would say, in the types of products that people are buying in the stay at home restrictions and the ... So it's been pretty consistent. There's obviously timing differences between countries and one sitting certain countries and when it's where they are in their curve and flattening the curve and all that. I think the biggest impact internationally has been in India where of course we, similar to all companies in India, we're now only fulfilling our essential goods such as grocery. So that's cut back a lot on our offering. And we will further expand when the Indian government announces that we're allowed to resume operations. So we're in a bit of a holding pattern except for grocery in India. And in France, there's been restrictions placed on us by the French courts. They did not impact Q1 business because essentially led to the closure of our French fulfillment centers in the middle of April. French customers are still able to order many millions of products from the selling partners we have who can ship directly to customers and through our global fulfillment. And we're continuing to appeal this court decision. But that's also different experience than the other countries internationally. Eric Sheridan: (28:48) Thanks so much. Speaker 3: (28:55) Our next question comes from the line of Justin Post with Bank of America. Please proceed with your question. Justin Post: (29:00) Great. A couple. Just wondering if you're seeing any sustainable changes in consumer habits you could call out such as people converting to Prime at a more rapid rate, adding more products in the consumable categories to their subscribe and save, anything you see that could really signal a longer term change in consumer habits, a faster adoption of certain categories. And the second thing, for the revenue guidance for two Q, does that assume a slowdown in growth in May and June related to the crisis? Thank you. Dave: (29:38) Hey Justin, it's Dave. I think on some of the consumer behavior, I'd certainly point to grocery. You look at the, as a reminder, the online grocery is up in our online sales, so it's not isolated like you can see for physical stores. But we have seen an increased demand in online grocery shopping and we have a number of ways for customers to do that. Buy now, fresh, and then of course, Whole Foods online for delivery or pickup. Dave: (30:03) ... Fresh, and then of course Whole Foods online, defer delivery or pickup. And really beginning in March and continuing now through April, seeing that increased demand, so that's continued. And a lot of our focus is on working around the clock and offering as much delivery as possible. We've increased delivery order capacity more than 60%, and our stores have gone up. Holding stores that offer pickup capability has gone from roughly 80 stores before the events to more than 150. So a lot of work being done there. On the physical stores, which you can see the growth there, it increased year over year at about 8%. That is predominantly Whole Foods, but it's the Whole Foods in-store shopping experience rather than the online order. So that's up quite a bit from the run rate you've seen in some recent quarters. It's again, similar that, saw a lot of folks that were stay at home measures were not yet in place were shopping in large volumes and stocking up at our stores. Dave: (31:01) Since that time, more recently we have seen some of those growth rates for the in-store shopping moderate some. So a lot of work being done there, both for the workers that are doing the delivery and the workers that are in the stores. A lot of focus on our part to make sure that they're safe and healthy and able to accommodate customers and make sure customers are comfortable however they choose to shop. Brian Olsavsky: (31:24) And I'd add to that Justin, I think the changes we've seen in the digital offerings will make people accustomed to those benefits and maybe advance their knowledge of what's available through music, video, Alexa, certainly communication features on our devices. We launched Prime Video Cinema in U.S., U.K., and Germany where movies are going direct to pay-per-view because of lack of theaters and that was a good move by the team and that's been very well received. We've also made a lot of kids and family content available free to watch on Prime Video. So I think people are getting a better look at what's available with their Prime memberships. Speaker 6: (32:16) Great and then second half of the quarter, are you assuming we go back to normal as the quarter progresses and some deceleration? Brian Olsavsky: (32:27) Well we are a heavily constrained, again it's an odd quarter because generally the biggest uncertainty we have is customer demand and what they'll order and how much of it they'll order. Demand has been strong. And the biggest questions we have in Q2 are more about ability to service that demand and that the products that people are ordering in a full way, not blocking or making hard to find non-essential items, increasing marketing, and everything else. So I think the challenge is really on everything besides the top line. The top line is certainly not to be taken for granted. There's always the importance of having attractive offerings in stock for customers. But usually things you can count on, the cost structure, the ability to get products, your capacity for shipping and delivering. Those are usually things that you can take for granted and in this quarter you can't. That's really where the uncertainty is driven. Speaker 7: (33:40) Your next question comes from [Steven Chu 00:00:33:42] with Credit Suisse. Please proceed with your question. Steven Chu: (33:46) Okay, thanks guys. So Brian, I think the third-party unit mix de-indexed a little bit as a percentage of the total this quarter. I know that number jumps around a little bit, but is this primarily a matter of the constrained delivery resources and I guess the heightened demand? And any ongoing supply chain concerns that remain worrisome for you from either a first-party perspective, or from what the third-party sellers maybe calling out? Thanks. Brian Olsavsky: (34:19) Sure. I think there's still supply chain concerns on a lot of PPE, not only that we use, but also that we sell to customers. Things like masks. There is general availability but still outages of things like cleaning wipes, masks, talk about testing, but that's not something that we resell, so there are a lot of supply chain concerns there mostly in those areas right now. I'm sorry, I forgot the other part of your question. Can you remind me of the first question- Steven Chu: (34:53) The third-party unit mix de-indexing a little bit as a percentage of the total this quarter. I'm just wondering if that's just normal fluctuations or are you just prioritizing the first-party delivery? I guess what's probably limited delivery resources on a heightened demand. Brian Olsavsky: (35:10) Yeah, thanks Steven. I would say that yes, it's a little off during this period because it's not so much we're restricting and favoring 1P or anything. We're prioritizing essential items and a lot of those tend to be, especially in the consumable area, tend to be retail supplied items from vendors. So I would say that is the reason that FBA would have not been as high as it normally would be. MFN is picking up a lot of the opportunity to go and sellers are taking that opportunity to ship direct because then it doesn't have to come into our warehouse obviously. So it's a bit of a different type of 3P mix right now. We're trying to minimize the impact on FBA sellers as we open up our warehouses as well. Many of them are also MFN or direct shippers to our customers. So the ability to satisfy demand of our customers from our seller community has never been more important, and we're very grateful to our third party sellers because they've been through a lot as well. Steven Chu: (36:28) Thank you. Speaker 7: (36:32) Our final question comes from the line of John Blackledge with Cowen. Please proceed with your question. John Blackledge: (36:39) Great, thanks. On advertising, the other revenue growth line accelerated. Could you just discuss how the advertising business performed in the first quarter, and any color on how it's trending in the second quarter if possible? And then, in the release you indicated potentially more hiring above the 175,000 headcount additions. Any way to quantify, and does this hiring replace the seasonal hiring that you typically do at the end of the third quarter? Thanks. Brian Olsavsky: (37:15) Yeah, sure. Let me start that second one. I don't have more for you on that. I think we'll announce as we change any thresholds on hiring more than that said at the time. Right now we've fully hired 175,000 people that we had discussed prior. 80,000 of them were in place at the end of the quarter, so the other 95,000 have been hired in April. On advertising, what we've seen is it's been a very strong quarter in ad revenue and your comment about other revenue accelerating, there's some other things going on in that other revenue account. The majority is revenue, but there's some other things. I can tell you underneath it is that advertising growth rate has stayed consistent with last quarter, and we're very happy with the progression of that offering for not only sellers, authors, vendors, and the positive impact it's had on customer selection. Brian Olsavsky: (38:22) But we did start to see some impact in March. Some pullback from advertisers and some downward pressure on price. But advertisers continue to advertise at a high clip. It wasn't as noticeable as maybe what some others are seeing and it's probably offset a bit by the continued strong traffic we have to the site. So it's a bit of a mixed bag. Again, as I said, downward pressure a bit on pricing, but I think we have a large portion of our advertising relates to Amazon sales, not things like travel and auto offsite, which may have been disproportional impact at least early on here in the COVID crisis. Brian Olsavsky: (39:11) I think our advertising will prove to be very efficient as well and can be directly measured. So even as people are cutting back perhaps on advertising or their costs, I think this will be one area that will prove its value. It has in the past. John Blackledge: (39:28) Great, thank you. Speaker 8: (39:29) Thanks for joining us today on the call and for your questions. A replay will be available on our investor relations website at least through the end of the quarter. We appreciate your interest in Amazon and look forward to talking with you again next quarter.