UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~June 30, 2023

-OR-


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission file number 001-33647

MercadoLibre, Inc.

(Exact name of Registrant as specified in its Charter)


Delaware			98-0212790
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)

WTC Free Zone

Dr. Luis Bonavita 1294, Of. 1733, Tower II

Montevideo, Uruguay, 11300

(Address of registrant’s principal executive offices) (Zip Code)

(+598) 2-927-2770

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value per share

MELI

Nasdaq Global Select Market

2.375% Sustainability Notes due 2026

MELI26

The Nasdaq Stock Market LLC

3.125% Notes due 2031

MELI31

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

~~50,207,607~~50,092,669 shares of the issuer’s common stock, $0.001 par value, outstanding as of ~~May 2,~~August 1, 2023.

Table of Contents

MERCADOLIBRE, INC.

INDEX TO FORM 10-Q


PART I. FINANCIAL INFORMATION
Item 1 — Unaudited Interim Condensed Consolidated Financial Statements
Interim Condensed Consolidated Balance Sheets as of ~~March 31,~~June 30, 2023 and December 31, 2022			1
Interim Condensed Consolidated Statements of Income for the six and three-month periods ended ~~March 31,~~June 30, 2023 and 2022			2
Interim Condensed Consolidated Statements of Comprehensive Income for the six and three-month periods ended ~~March 31,~~June 30, 2023 and 2022			3
Interim Condensed Consolidated Statements of Equity for the six and three-month periods ended ~~March 31,~~June 30, 2023 and 2022			4
Interim Condensed Consolidated Statements of Cash Flows for the ~~three-month~~six-month periods ended ~~March 31,~~June 30, 2023 and 2022			5
Notes to Interim Condensed Consolidated Financial Statements (unaudited)			6
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations			3639
Item 3 — Qualitative and Quantitative Disclosures About Market Risk			5965
Item 4 — Controls and Procedures			6368
PART II. OTHER INFORMATION			6369
Item 1 — Legal Proceedings			6369
Item 1A — Risk Factors			6469
Item 2 — ~~Issuer Purchases~~Unregistered Sales of Equity Securities and Use of Proceeds			6469
Item 5 — Other information			69
Item 6 — Exhibits			6469
INDEX TO EXHIBITS			6570

Table of Contents

MercadoLibre, Inc. - Interim Condensed Consolidated Balance Sheets as of ~~March 31,~~June 30, 2023 and December 31, 2022

(In millions of U.S. dollars, except par value) (Unaudited)


		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	2,143	$	1,910	Cash and cash equivalents	$	1,860	$	1,910
Restricted cash and cash equivalents	Restricted cash and cash equivalents	1,381		1,453		Restricted cash and cash equivalents	1,964		1,453
Short-term investments ($1,409 and $1,219 held in guarantee - Note 5)		2,479		2,339
Short-term investments						Short-term investments	2,839		2,339
Accounts receivable, net	Accounts receivable, net	132		130		Accounts receivable, net	160		130
Credit card receivables and other means of payments, net	Credit card receivables and other means of payments, net	2,799		2,946		Credit card receivables and other means of payments, net	2,835		2,946
Loans receivable, net of allowances of $1,116 and $1,074 (Note 6)		1,877		1,704
Loans receivable, net of allowances of $1,095 and $1,074 (Note 6)						Loans receivable, net of allowances of $1,095 and $1,074 (Note 6)	2,051		1,704
Prepaid expenses	Prepaid expenses	45		38		Prepaid expenses	55		38
Inventories	Inventories	199		152		Inventories	236		152
Customer crypto-assets safeguarding assets	Customer crypto-assets safeguarding assets	19		15		Customer crypto-assets safeguarding assets	21		15
Other assets	Other assets	262		266		Other assets	269		266
Total current assets	Total current assets	11,336		10,953		Total current assets	12,290		10,953
Non-current assets:	Non-current assets:					Non-current assets:
Long-term investments	Long-term investments	278		322		Long-term investments	149		322
Loans receivable, net of allowances of $25 and $30 (Note 6)		31		32
Loans receivable, net of allowances of $28 and $30 (Note 6)						Loans receivable, net of allowances of $28 and $30 (Note 6)	76		32
Property and equipment, net	Property and equipment, net	1,036		993		Property and equipment, net	1,090		993
Operating lease right-of-use assets	Operating lease right-of-use assets	697		656		Operating lease right-of-use assets	779		656
Goodwill	Goodwill	160		153		Goodwill	166		153
Intangible assets, net	Intangible assets, net	24		25		Intangible assets, net	22		25
Deferred tax assets	Deferred tax assets	357		346		Deferred tax assets	348		346
Other assets	Other assets	282		256		Other assets	323		256
Total non-current assets	Total non-current assets	2,865		2,783		Total non-current assets	2,953		2,783
Total assets	Total assets	$	14,201	$	13,736	Total assets	$	15,243	$	13,736
Liabilities	Liabilities					Liabilities
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable and accrued expenses	Accounts payable and accrued expenses	$	1,597	$	1,393	Accounts payable and accrued expenses	$	1,831	$	1,393
Funds payable to customers	Funds payable to customers	3,253		3,454		Funds payable to customers	3,734		3,454
Amounts payable due to credit and debit card transactions	Amounts payable due to credit and debit card transactions	547		483		Amounts payable due to credit and debit card transactions	585		483
Salaries and social security payable	Salaries and social security payable	425		401		Salaries and social security payable	394		401
Taxes payable	Taxes payable	363		414		Taxes payable	447		414
Loans payable and other financial liabilities	Loans payable and other financial liabilities	2,332		2,131		Loans payable and other financial liabilities	2,286		2,131
Operating lease liabilities	Operating lease liabilities	159		142		Operating lease liabilities	166		142
Customer crypto-assets safeguarding liabilities	Customer crypto-assets safeguarding liabilities	19		15		Customer crypto-assets safeguarding liabilities	21		15
Other liabilities	Other liabilities	132		129		Other liabilities	152		129
Total current liabilities	Total current liabilities	8,827		8,562		Total current liabilities	9,616		8,562
Non-current liabilities:	Non-current liabilities:					Non-current liabilities:
Amounts payable due to credit and debit card transactions	Amounts payable due to credit and debit card transactions	7		5		Amounts payable due to credit and debit card transactions	56		5
Loans payable and other financial liabilities	Loans payable and other financial liabilities	2,500		2,627		Loans payable and other financial liabilities	2,481		2,627
Operating lease liabilities	Operating lease liabilities	529		514		Operating lease liabilities	595		514
Deferred tax liabilities	Deferred tax liabilities	117		106		Deferred tax liabilities	112		106
Other liabilities	Other liabilities	181		95		Other liabilities	131		95
Total non-current liabilities	Total non-current liabilities	3,334		3,347		Total non-current liabilities	3,375		3,347
Total liabilities	Total liabilities	$	12,161	$	11,909	Total liabilities	$	12,991	$	11,909
Commitments and contingencies (Note 10)	Commitments and contingencies (Note 10)					Commitments and contingencies (Note 10)
Equity	Equity					Equity
Common stock, $0.001 par value, 110,000,000 shares authorized, 50,207,607 and 50,257,751 shares issued and outstanding		$	—	$	—
Common stock, $0.001 par value, 110,000,000 shares authorized, 50,092,669 and 50,257,751 shares issued and outstanding						Common stock, $0.001 par value, 110,000,000 shares authorized, 50,092,669 and 50,257,751 shares issued and outstanding	$	—	$	—
Additional paid-in capital	Additional paid-in capital	2,309		2,309		Additional paid-in capital	2,309		2,309
Treasury stock	Treasury stock	(992)		(931)		Treasury stock	(1,138)		(931)
Retained earnings	Retained earnings	1,114		913		Retained earnings	1,376		913
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(391)		(464)		Accumulated other comprehensive loss	(295)		(464)
Total Equity	Total Equity	2,040		1,827		Total Equity	2,252		1,827
Total Liabilities and Equity	Total Liabilities and Equity	$	14,201	$	13,736	Total Liabilities and Equity	$	15,243	$	13,736

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

Table of Contents

MercadoLibre, Inc.

Interim Condensed Consolidated Statements of Income

For the six and three-month periods ended ~~March 31,~~June 30, 2023 and 2022

(In millions of U.S. dollars, except for share data)

(Unaudited)


		Three Months Ended March 31,					Six Months Ended June 30,				Three Months Ended June 30,
		2023		2022			2023		2022		2023		2022
Net service revenues	Net service revenues	$	2,763	$	1,997	Net service revenues	$	5,814	$	4,329	$	3,051	$	2,332
Net product revenues	Net product revenues	274		251		Net product revenues	638		516		364		265
Net revenues	Net revenues	3,037		2,248		Net revenues	6,452		4,845		3,415		2,597
Cost of net revenues	Cost of net revenues	(1,501)		(1,175)		Cost of net revenues	(3,196)		(2,488)		(1,695)		(1,313)
Gross profit	Gross profit	1,536		1,073		Gross profit	3,256		2,357		1,720		1,284
Operating expenses:	Operating expenses:					Operating expenses:
Product and technology development	Product and technology development	(381)		(234)		Product and technology development	(749)		(496)		(368)		(262)
Sales and marketing	Sales and marketing	(383)		(286)		Sales and marketing	(766)		(583)		(383)		(296)
Provision for doubtful accounts	Provision for doubtful accounts	(252)		(255)		Provision for doubtful accounts	(474)		(557)		(222)		(303)
General and administrative	General and administrative	(180)		(159)		General and administrative	(369)		(332)		(189)		(173)
Total operating expenses	Total operating expenses	(1,196)		(934)		Total operating expenses	(2,358)		(1,968)		(1,162)		(1,034)
Income from operations	Income from operations	340		139		Income from operations	898		389		558		250

Other income (expenses):	Other income (expenses):					Other income (expenses):
Interest income and other financial gains	Interest income and other financial gains	161		31		Interest income and other financial gains	349		77		188		46
Interest expense and other financial losses	Interest expense and other financial losses	(94)		(56)		Interest expense and other financial losses	(186)		(129)		(92)		(73)
Foreign currency losses, net	Foreign currency losses, net	(87)		(3)		Foreign currency losses, net	(269)		(63)		(182)		(60)
Net income before income tax expense and equity in earnings of unconsolidated entity	Net income before income tax expense and equity in earnings of unconsolidated entity	320		111		Net income before income tax expense and equity in earnings of unconsolidated entity	792		274		472		163

Income tax expense	Income tax expense	(122)		(46)		Income tax expense	(332)		(85)		(210)		(39)
Equity in earnings of unconsolidated entity	Equity in earnings of unconsolidated entity	3		—		Equity in earnings of unconsolidated entity	3		(1)		—		(1)
Net income	Net income	$	201	$	65	Net income	$	463	$	188	$	262	$	123


		Three Months Ended March 31,					Six Months Ended June 30,				Three Months Ended June 30,
		2023		2022			2023		2022		2023		2022
Basic earning per share	Basic earning per share					Basic earning per share
Basic net income available to shareholders per common share	Basic net income available to shareholders per common share	$	4.01	$	1.30	Basic net income available to shareholders per common share	$	9.23	$	3.73	$	5.22	$	2.43
Weighted average of outstanding common shares	Weighted average of outstanding common shares	50,245,073		50,408,754		Weighted average of outstanding common shares	50,203,652		50,386,519		50,162,687		50,364,529
Diluted earning per share	Diluted earning per share					Diluted earning per share
Diluted net income available to shareholders per common share	Diluted net income available to shareholders per common share	$	3.97	$	1.30	Diluted net income available to shareholders per common share	$	9.12	$	3.73	$	5.16	$	2.43
Weighted average of outstanding common shares	Weighted average of outstanding common shares	51,235,341		50,408,754		Weighted average of outstanding common shares	51,193,920		50,386,519		51,152,955		50,364,529

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

Table of Contents

MercadoLibre, Inc.

Interim Condensed Consolidated Statements of Comprehensive Income

For the six and three-month periods ended ~~March 31,~~June 30, 2023 and 2022

(In millions of U.S. dollars)

(Unaudited)


		Three Months Ended March 31,					Six Months Ended June 30,				Three Months Ended June 30,
		2023		2022			2023		2022		2023		2022
Net income	Net income	$	201	$	65	Net income	$	463	$	188	$	262	$	123
Other comprehensive income, net of income tax:	Other comprehensive income, net of income tax:					Other comprehensive income, net of income tax:
Currency translation adjustment	Currency translation adjustment	77		151		Currency translation adjustment	175		38		98		(113)
Unrealized losses on hedging activities	Unrealized losses on hedging activities	(5)		(24)		Unrealized losses on hedging activities	(7)		(19)		(2)		5
Less: Reclassification adjustment for losses from accumulated other comprehensive income	Less: Reclassification adjustment for losses from accumulated other comprehensive income	(1)		(2)		Less: Reclassification adjustment for losses from accumulated other comprehensive income	(1)		(7)		—		(5)
Net change in accumulated other comprehensive income, net of income tax	Net change in accumulated other comprehensive income, net of income tax	73		129		Net change in accumulated other comprehensive income, net of income tax	169		26		96		(103)
Total Comprehensive income	Total Comprehensive income	$	274	$	194	Total Comprehensive income	$	632	$	214	$	358	$	20

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

Table of Contents

MercadoLibre, Inc.

Interim Condensed Consolidated Statements of Equity

For the six and three-month periods ended ~~March 31,~~June 30, 2023 and 2022

(In millions of U.S. dollars)

(Unaudited)


		Common stock			Additional paid-in capital				Treasury Stock (*)		Retained Earnings			Accumulated other comprehensive loss				Total Equity				Common stock						Additional paid-in capital					Treasury Stock (*)					Retained Earnings					Accumulated other comprehensive loss					Total Equity
		Shares	Amount										Shares								Amount
Balance as of December 31, 2022	Balance as of December 31, 2022	50	$	—			$	2,309			$	(931)				$	913			$	(464)		$	1,827	Balance as of December 31, 2022		50				$	—				$	2,309				$	(931)				$	913				$	(464)	$	1,827
Common Stock repurchased	Common Stock repurchased	—	—		—				(61)		—			—				(61)			Common Stock repurchased	—			—					—					(61)					—					—					(61)
Net Income		—	—		—				—		201			—				201
Other comprehensive Income		—	—		—				—		—			73				73
Net income																					Net income	—			—			—					—					201					—					201
Other comprehensive income																					Other comprehensive income	—			—			—					—					—					73					73
Balance as of March 31, 2023	Balance as of March 31, 2023	50	$	—	$	2,309			$	(992)	$	1,114		$	(391)			$	2,040		Balance as of March 31, 2023	50			$	—		$	2,309				$	(992)				$	1,114				$	(391)				$	2,040
Common Stock repurchased																					Common Stock repurchased	—			—			—					(146)					—					—					(146)
Net income																					Net income	—			—			—					—					262					—					262
Other comprehensive income																					Other comprehensive income	—			—			—					—					—					96					96
Balance as of June 30, 2023																					Balance as of June 30, 2023	50			$	—		$	2,309				$	(1,138)				$	1,376				$	(295)				$	2,252


(*)			As of ~~March 31,~~June 30, 2023 the Company held ~~714,094~~829,718 shares as treasury stock.


		Common stock			Additional paid-in capital		Treasury Stock		Retained Earnings		Accumulated other comprehensive loss		Total Equity			Common stock			Additional paid-in capital				Treasury Stock		Retained Earnings		Accumulated other comprehensive loss		Total Equity
		Shares	Amount													Shares	Amount
Balance as of December 31, 2021	Balance as of December 31, 2021	50	$	—	$	2,439	$	(790)	$	397	$	(515)	$	1,531	Balance as of December 31, 2021	50	$	—			$	2,439			$	(790)	$	397	$	(515)	$	1,531
Changes in accounting standards	Changes in accounting standards	—	—		(131)		—		34		—		(97)		Changes in accounting standards	—	—		(131)				—		34		—		(97)
Balance as of December 31, 2021 Restated	Balance as of December 31, 2021 Restated	50	$	—	$	2,308	$	(790)	$	431	$	(515)	$	1,434	Balance as of December 31, 2021 Restated	50	$	—	$	2,308			$	(790)	$	431	$	(515)	$	1,434
Common Stock repurchased	Common Stock repurchased	—	—		—		(39)		—		—		(39)		Common Stock repurchased	—	—		—				(39)		—		—		(39)
Net Income		—	—		—		—		65		—		65
Other comprehensive Income		—	—		—		—		—		129		129
Net income															Net income	—	—		—				—		65		—		65
Other comprehensive income															Other comprehensive income	—	—		—				—		—		129		129
Balance as of March 31, 2022	Balance as of March 31, 2022	50	$	—	$	2,308	$	(829)	$	496	$	(386)	$	1,589	Balance as of March 31, 2022	50	$	—	$	2,308			$	(829)	$	496	$	(386)	$	1,589
Shares granted															Shares granted	—	—		—				6		—		—		6
Common Stock repurchased															Common Stock repurchased	—	—		—				(35)		—		—		(35)
Net income															Net income	—			—				—		123		—		123
Other comprehensive income															Other comprehensive income	—	—		—				—		—		(103)		(103)
Balance as of June 30, 2022															Balance as of June 30, 2022	50	$	—	$	2,308			$	(858)	$	619	$	(489)	$	1,580

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

Table of Contents

MercadoLibre, Inc. - Interim Condensed Consolidated Statements of Cash Flows

For the ~~three-month~~six-month periods ended ~~March 31,~~June 30, 2023 and 2022

(In millions of U.S. dollars) (Unaudited)


		March 31,					Six Months Ended June 30,
		2023		2022			2023		2022
Cash flows from operations:	Cash flows from operations:					Cash flows from operations:
Net income	Net income	$	201	$	65	Net income	$	463	$	188
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:						Adjustments to reconcile net income to net cash provided by operating activities:
Equity in earnings of unconsolidated entity	Equity in earnings of unconsolidated entity	(3)		—		Equity in earnings of unconsolidated entity	(3)		1
Unrealized foreign currency losses, net	Unrealized foreign currency losses, net	117		30		Unrealized foreign currency losses, net	305		134
Impairment of digital assets	Impairment of digital assets	—		2		Impairment of digital assets	—		11
Depreciation and amortization	Depreciation and amortization	126		84		Depreciation and amortization	254		184
Accrued interest income	Accrued interest income	(72)		(24)		Accrued interest income	(147)		(65)
Non cash interest expense, convertible notes amortization of debt discount and amortization of debt issuance costs and other charges	Non cash interest expense, convertible notes amortization of debt discount and amortization of debt issuance costs and other charges	52		40		Non cash interest expense, convertible notes amortization of debt discount and amortization of debt issuance costs and other charges	117		154
Provision for doubtful accounts	Provision for doubtful accounts	252		255		Provision for doubtful accounts	474		557
Results on derivative instruments	Results on derivative instruments	11		37		Results on derivative instruments	21		22
Long term retention program (“LTRP”) accrued compensation	Long term retention program (“LTRP”) accrued compensation	47		30		Long term retention program (“LTRP”) accrued compensation	83		35
Deferred income taxes	Deferred income taxes	8		(24)		Deferred income taxes	24		(67)
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Accounts receivable	Accounts receivable	(12)		(71)		Accounts receivable	(38)		(32)
Credit card receivables and other means of payments	Credit card receivables and other means of payments	165		(447)		Credit card receivables and other means of payments	200		(642)
Prepaid expenses	Prepaid expenses	(6)		(35)		Prepaid expenses	(14)		(36)
Inventories	Inventories	(39)		38		Inventories	(66)		81
Other assets	Other assets	(10)		(30)		Other assets	(33)		(81)
Payables and accrued expenses	Payables and accrued expenses	107		(148)		Payables and accrued expenses	308		32
Funds payable to customers	Funds payable to customers	(242)		(89)		Funds payable to customers	119		119
Amounts payable due to credit and debit card transactions	Amounts payable due to credit and debit card transactions	63		28		Amounts payable due to credit and debit card transactions	127		80
Other liabilities	Other liabilities	39		—		Other liabilities	(47)		(55)
Interest received from investments	Interest received from investments	55		26		Interest received from investments	124		54
Net cash provided by (used in) operating activities		859		(233)
Net cash provided by operating activities						Net cash provided by operating activities	2,271		674
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of investments	Purchases of investments	(5,124)		(2,903)		Purchases of investments	(10,046)		(6,190)
Proceeds from sale and maturity of investments	Proceeds from sale and maturity of investments	5,104		2,425		Proceeds from sale and maturity of investments	9,923		5,043
Payments from settlements of derivative instruments	Payments from settlements of derivative instruments	(8)		(2)		Payments from settlements of derivative instruments	(14)		(7)
Purchases of intangibles assets						Purchases of intangibles assets	—		(1)
Changes in principal loans receivable, net	Changes in principal loans receivable, net	(421)		(607)		Changes in principal loans receivable, net	(866)		(1,170)
Investments of property and equipment	Investments of property and equipment	(89)		(137)		Investments of property and equipment	(203)		(236)
Net cash used in investing activities	Net cash used in investing activities	(538)		(1,224)		Net cash used in investing activities	(1,206)		(2,561)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from loans payable and other financial liabilities	Proceeds from loans payable and other financial liabilities	5,977		3,324		Proceeds from loans payable and other financial liabilities	12,317		7,315
Payments on loans payable and other financing liabilities	Payments on loans payable and other financing liabilities	(6,022)		(3,129)		Payments on loans payable and other financing liabilities	(12,569)		(6,646)
Payments of finance lease obligations	Payments of finance lease obligations	(6)		(4)		Payments of finance lease obligations	(13)		(9)
Common Stock repurchased	Common Stock repurchased	(61)		(39)		Common Stock repurchased	(207)		(74)
Net cash (used in) provided by financing activities	Net cash (used in) provided by financing activities	(112)		152		Net cash (used in) provided by financing activities	(472)		586
Effect of exchange rate changes on cash, cash equivalents, restricted cash and cash equivalents	Effect of exchange rate changes on cash, cash equivalents, restricted cash and cash equivalents	(48)		71		Effect of exchange rate changes on cash, cash equivalents, restricted cash and cash equivalents	(132)		(94)
Net increase (decrease) in cash, cash equivalents, restricted cash and cash equivalents	Net increase (decrease) in cash, cash equivalents, restricted cash and cash equivalents	161		(1,234)		Net increase (decrease) in cash, cash equivalents, restricted cash and cash equivalents	461		(1,395)
Cash, cash equivalents, restricted cash and cash equivalents, beginning of the period	Cash, cash equivalents, restricted cash and cash equivalents, beginning of the period	$	3,363	$	3,648	Cash, cash equivalents, restricted cash and cash equivalents, beginning of the period	$	3,363	$	3,648
Cash, cash equivalents, restricted cash and cash equivalents, end of the period	Cash, cash equivalents, restricted cash and cash equivalents, end of the period	$	3,524	$	2,414	Cash, cash equivalents, restricted cash and cash equivalents, end of the period	$	3,824	$	2,253

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

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1. Nature of Business

MercadoLibre, Inc. (“MercadoLibre” or the “Company”) was incorporated in the state of Delaware, in the United States of America, in October 1999. MercadoLibre is the largest online commerce ecosystem in Latin America, serving as an integrated regional platform and as a provider of necessary digital and technology tools that allow businesses and individuals to trade products and services in the region.

The Company enables commerce through its marketplace platform, which allows users to buy and sell in most of Latin America. Through Mercado Pago, the fintech solution, MercadoLibre enables individuals and businesses to send and receive digital payments; through Mercado Envios, MercadoLibre facilitates the shipping of goods from the Company and sellers to buyers; through the advertising products, MercadoLibre facilitates advertising services for large retailers and brands to promote their products and services on the web; through Mercado Shops, MercadoLibre allows users to set-up, manage, and promote their own on-line web-stores under a subscription-based business model; through Mercado Credito, MercadoLibre extends loans to certain merchants and consumers; and through Mercado Fondo, MercadoLibre allows users to invest funds deposited in their Mercado Pago accounts.

As of ~~March 31,~~June 30, 2023, MercadoLibre, through its wholly-owned subsidiaries, operated online e-commerce platforms directed towards Argentina, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Peru, Mexico, Panama, Honduras, Nicaragua, El Salvador, Uruguay, Bolivia, Guatemala, Paraguay and Venezuela. Additionally, MercadoLibre operates its fintech solution in Argentina, Brazil, Mexico, Colombia, Chile, Peru, Uruguay and Ecuador, and extends loans through Mercado Credito in Argentina, Brazil, Mexico and Chile. It also offers a shipping solution directed towards Argentina, Brazil, Mexico, Colombia, Chile, Uruguay, Peru and Ecuador.

2. Summary of significant accounting policies ~~and supplemental information~~

Basis of presentation

The accompanying unaudited interim condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) and include the accounts of the Company, its wholly-owned subsidiaries and consolidated Variable Interest Entities (“VIE”). Investments in entities where the Company holds joint control, but not control, over the investee are accounted for using the equity method of accounting. These unaudited interim condensed consolidated financial statements are stated in U.S. dollars, except where otherwise indicated. Intercompany transactions and balances with subsidiaries have been eliminated for consolidation purposes.

Substantially all net revenues, cost of net revenues and operating expenses are generated in the Company’s foreign operations. Long-lived assets, intangible assets and goodwill and operating lease right-of-use assets located in the foreign jurisdictions totaled ~~$1,905~~ $2,045 million and $1,817 million as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively.

These unaudited interim condensed consolidated financial statements reflect the Company’s consolidated financial position as of ~~March 31,~~June 30, 2023 and December 31, 2022. These unaudited interim condensed consolidated financial statements include the Company’s consolidated statements of income, comprehensive income and equity for the six and three-month periods ended June 30, 2023 and 2022 and statements of cash flows for the ~~three-month~~six-month periods ended ~~March 31,~~June 30, 2023 and 2022. These unaudited interim condensed consolidated financial statements include all normal recurring adjustments that Management believes are necessary to fairly state the Company’s financial position, operating results and cash flows. Certain comparative figures of these unaudited interim condensed consolidated financial statements were modified to provide more detailed disclosures. This change has not impacted the total amount of net income and total equity. The Company discloses the provision for doubtful accounts as a separate line item of its operating expenses in the unaudited interim condensed consolidated statements of income. The provision for doubtful accounts amounts to $252 million and $255 million for the three-month periods ended March 31, 2023 and 2022, respectively.

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Because all of the disclosures required by U.S. GAAP for annual consolidated financial statements are not included herein, these unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2022, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (“SEC”) (the “Company’s 2022 10-K”). The Company has evaluated all subsequent events through the date these unaudited condensed consolidated financial statements were issued. The unaudited interim condensed consolidated statements of income, comprehensive income, equity and cash flows for the periods presented herein are not necessarily indicative of results expected for any future period. For a more detailed discussion of the Company’s significant accounting policies, see Note 2 to the financial statements in the Company’s 2022 10-K. During the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023, there were no material updates made to the Company’s significant accounting policies.

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Use of estimates

The preparation of these unaudited interim condensed consolidated financial statements in conformity with U.S. GAAP requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used for, but not limited to, accounting for allowance for doubtful accounts and chargeback provisions, inventories valuation reserves, recoverability of goodwill, intangible assets with indefinite useful lives and deferred tax assets, impairment of short-term and long-term investments, impairment of long-lived assets, separation of lease and non lease components for aircraft leases, compensation costs relating to the Company’s long term retention program, fair value of convertible debt, fair value of investments, fair value of loans receivable, fair value of derivative instruments, income taxes and contingencies and determination of the incremental borrowing rate at commencement date of lease operating agreements. Actual results could differ from those estimates.

Revenue recognition

Revenue recognition criteria for the services provided and goods sold by the Company are described in Note 2 to the consolidated financial statements in the Company’s 2022 10-K.

The aggregate gain included in “Fintech services” revenues arising from financing transactions and sales of financial assets, net of the costs recognized on sale of credit card receivables, is ~~$336~~$676 million and ~~$227~~$340 million for the six and three-month periods ended ~~March 31,~~June 30, 2023 and $490 million and $263 million for the six and three-month periods ended June 30, 2022, respectively.

Contract Balances

Timing of revenue recognition may differ from the timing of invoicing to customers. Receivables represent amounts invoiced and revenue recognized prior to invoicing when the Company has satisfied the performance obligation and has the unconditional right to payment. Accounts receivable and credit ~~card receivables~~cards receivable and other means of payments are presented net of allowance for doubtful accounts and chargebacks of ~~$16~~$34 million and $25 million as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively. The allowance for doubtful accounts with respect to the Company’s loans receivable amounts to ~~$1,154~~$1,136 million and $1,112 million as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively, which includes $13 million and $8 million, respectively, related to unused agreed loan commitment on credit cards portfolio presented in Other liabilities of the unaudited interim condensed consolidated balance sheets.

Deferred revenue consists of fees received related to unsatisfied performance obligations at the end of the period in accordance with Accounting Standards Codification (“ASC”) 606. Due to the generally short-term duration of contracts, the majority of the performance obligations are satisfied in the following months. Deferred revenue as of December 31, 2022 was $44 million, of which ~~$17~~$24 million was recognized as revenue during the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023.

As of ~~March 31,~~June 30, 2023, total deferred revenue was ~~$39~~$56 million, mainly due to fees related to classifieds advertising services billed and loyalty programs that are expected to be recognized as revenue in the coming months.

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Foreign currency translation

All of the Company’s foreign operations have determined the local currency to be their functional currency, except for Argentina, which has used the U.S. dollar as its functional currency since July 1, 2018. Accordingly, the foreign subsidiaries with local currency as functional currency translate assets and liabilities from their local currencies into U.S. dollars by using period-end exchange rates while income and expense accounts are translated at the average monthly rates in effect during the period, unless exchange rates fluctuate significantly during the period, in which case the exchange rates at the date of the transaction are used. The resulting translation adjustment is recorded as a component of other comprehensive income (loss). Net foreign currency transaction results are included in the unaudited interim condensed consolidated statements of income under the caption “Foreign currency losses, net”.

Argentine currency status

As of July 1, 2018, the Company transitioned its Argentine operations to highly inflationary status in accordance with U.S. GAAP, and changed the functional currency for Argentine subsidiaries from Argentine Pesos to U.S. dollars, which is the functional currency of their immediate parent company. Argentina’s ~~quarterly~~ inflation rate for the ~~three-month~~six-month periods ended ~~March 31,~~June 30, 2023 and 2022 was ~~21.7%~~50.7% and ~~16.1%~~36.2%, respectively.

The Company uses Argentina’s official exchange rate to account for transactions in the Argentine segment, which as of ~~March 31,~~June 30, 2023 and December 31, 2022 was ~~209.01~~256.70 and 177.16 Argentine Pesos, respectively, against the U.S. dollar. For the ~~three-month~~six-month periods ended ~~March 31,~~June 30, 2023 and 2022, Argentina’s ~~quarterly~~ depreciation of its local currency against the U.S. dollar was ~~18.0%~~44.9% and ~~8.1%~~21.9%, respectively.

The following table sets forth the assets, liabilities and net assets of the Company’s Argentine subsidiaries and consolidated VIEs, before intercompany eliminations, as of ~~March 31,~~June 30, 2023 and December 31, 2022:


		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022
		(In millions)					(In millions)
Assets	Assets	$	3,295	$	3,238	Assets	$	3,696	$	3,238
Liabilities	Liabilities	2,259		2,419		Liabilities	2,486		2,419
Net Assets	Net Assets	$	1,036	$	819	Net Assets	$	1,210	$	819

The following table provides information relating to net revenues and direct contribution (see Note 8 of these unaudited interim condensed consolidated financial statements for definition of direct contribution) for the six and three-month periods ended ~~March 31,~~June 30, 2023 and 2022 of the Company’s Argentine subsidiaries and consolidated VIEs:


		Three Months Ended March 31,					Six Months Ended June 30,				Three Months Ended June 30,
		2023		2022			2023		2022		2023		2022
		(In millions)					(In millions)				(In millions)
Net revenues	Net revenues	$	721	$	518	Net revenues	$	1,492	$	1,112	$	771	$	594
Direct contribution	Direct contribution	310		198		Direct contribution	644		420		335		222

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Argentine Exchange regulations

Since the second half of 2019, the Argentine government instituted exchange controls restricting the ability of companies and individuals to exchange Argentine Pesos for foreign currencies and their ability to remit foreign currency out of Argentina. An entity’s authorization request to the Central Bank of Argentina (“CBA”) to access the official exchange market to make foreign currency payments may be denied depending on the circumstances. As a result of these exchange controls, markets in Argentina developed trading mechanisms, in which an entity or individual buys U.S. dollar denominated securities in Argentina (i.e. shares, sovereign debt) using Argentine pesos, and subsequently sells the securities for U.S. dollars, in Argentina, to access U.S. dollars locally, or outside Argentina, by transferring the securities abroad, prior to being sold (the latter commonly known as “Blue Chip Swap Rate”). The Blue Chip Swap Rate has diverged significantly from Argentina’s official exchange rate (commonly known as exchange spread). In recent years, the Blue Chip Swap Rate has been higher than Argentina’s official exchange rate. As of ~~March 31,~~June 30, 2023 and December 31, 2022, the spread of the Blue Chip Swap was ~~94.5%~~93.1% and 94.2%, respectively (see Note 16 of these unaudited interim condensed consolidated financial statements).

~~Table~~As part of ~~Contents~~

the exchange controls, since 2019, the Argentine government imposes a tax on the acquisition of foreign currency through the official exchange market in certain circumstances. On July 24, 2023, through the Executive Power Decree No. 377/2023, the Argentine government extended the application of this tax to the following cases: (i) certain services acquired from abroad or services rendered by foreign residents in Argentina (i.e. technical, legal, accounting, management, advertising, engineering, audiovisual services, among others), which will be subject to a 25% tax rate, (ii) freight and other transportation services for import and export of goods, which will be subject to a 7.5% tax rate; and (iii) imported goods, which will be subject to a 7.5% tax rate, with certain exemptions (such as fuels and products of the basic food basket).

Income taxes

Income taxes’ accounting policy is described in Note 2 to the consolidated financial statements in the Company’s 2022 10-K.

The Company’s consolidated estimated effective tax rate for the six and three-month ~~period~~periods ended ~~March 31,~~June 30, 2023 increased as compared to the same periods in 2022. This was a result of (i) taxable foreign exchange gains accounted for local tax purposes, which are not recorded for accounting purposes since Argentina’s operations functional currency is the U.S. dollar due to the country’s highly inflationary status, (ii) a higher proportion of pre-tax results arising from entities under general income tax treatment regime over the Brazilian segment as compared to the same period in 2022, ~~decreased from 40.7% to 38.1%, as a result of lower proportion of pre-tax losses in the Company’s Mexican segment which were included in the valuation allowance. This effect was offset by~~and (iii) higher non-deductible foreign exchange losses related to the acquisition of ~~the Company’s~~our own common stock in the Argentine market at a price that reflects the additional cost of accessing U.S. dollars through an indirect mechanism due to restrictions imposed by the Argentine government for buying U.S. dollars at the official exchange rate, which was considered as non-deductible expense.market.

Based on Management’s assessment,, the Company maintained a valuation allowance on deferred tax assets of ~~$407~~$415 million and $360 million as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively. This valuation allowance includes ~~$183~~$176 million and $156 million to fully reserve the outstanding U.S. foreign tax credits as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively.

During the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023, the Company increased its valuation allowance mainly on U.S foreign tax credits by ~~$27~~$20 million and in certain subsidiaries in its Mexican operations by ~~$17~~$32 million.

Knowledge-based economy promotional regime in Argentina

In August 2021, the Under Secretariat of Knowledge Economy issued the Disposition 316/2021 approving MercadoLibre S.R.L.’s application for eligibility under the knowledge-based economy promotional regime, established by the Law No. 27,506 and complemented by Argentina’s Executive Power Decree No. 1034/2020, Argentina’s Ministry of Productive Development’s Resolution No. 4/2021 and the Under Secretariat of Knowledge Economy’s Disposition No. 11/2021. ~~Tax benefits granted pursuant to the promotional regime to MercadoLibre S.R.L. were retroactive to January 1, 2020.~~

As a result, the Company ~~accounted for~~recorded an income tax benefit of ~~$10~~$21 million and $1$11 million, and $4 million and $3 million during the six and three-month periods ended ~~March 31,~~June 30, 2023 and 2022, respectively. The aggregate per share effect of the income tax benefit amounted to ~~$0.19~~ $0.42 and ~~$0.03~~$0.23, and $0.08 and $0.06 for the six and three-month periods ended ~~March 31,~~June 30, 2023 and 2022, respectively. Furthermore, the Company recorded a social security benefit of ~~$18~~$33 million and $15 million, and $26 million and $11 million during the six and three-month ~~periods~~periods ended ~~March 31,~~June 30, 2023 and 2022, respectively.

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Fair value option applied to certain financial instruments

Under ASC 825, U.S. GAAP provides an option to elect fair value with impact on the statement of income as an alternative measurement for certain financial instruments and other items on the balance sheet.

The Company has elected to measure certain financial assets at fair value with impact on the statement of income for several reasons including to avoid the mismatch generated by the recognition of certain linked instruments / transactions, separately, in the unaudited interim condensed consolidated statement of income and unaudited interim condensed consolidated statement of comprehensive income and to better reflect the financial model applied for selected instruments. The Company’s election of the fair value option applies to the: i) Brazilian federal government bonds and ii) U.S. treasury notes.

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Accumulated other comprehensive loss

The following tables summarize the changes in accumulated balances of other comprehensive income (loss) for the ~~three-month~~six-month periods ended ~~March 31,~~June 30, 2023 and ~~2022~~:2022:


		Unrealized (Loss) Gains on hedging activities, net		Foreign Currency Translation		Estimated tax benefit (expense)		Total			Unrealized (Loss) Gains on hedging activities, net		Foreign Currency Translation		Estimated tax benefit (expense)		Total
		(In millions)									(In millions)
Balances as of December 31, 2022	Balances as of December 31, 2022	$	(5)	$	(462)	$	3	$	(464)	Balances as of December 31, 2022	$	(5)	$	(462)	$	3	$	(464)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	(7)		77		2		72		Other comprehensive income (loss) before reclassifications	(10)		175		3		168
Amount of (gain) loss reclassified from accumulated other comprehensive income (loss)	Amount of (gain) loss reclassified from accumulated other comprehensive income (loss)	2		—		(1)		1		Amount of (gain) loss reclassified from accumulated other comprehensive income (loss)	2		—		(1)		1
Net current period other comprehensive income (loss)	Net current period other comprehensive income (loss)	(5)		77		1		73		Net current period other comprehensive income (loss)	(8)		175		2		169
Ending balance		$	(10)	$	(385)	$	4	$	(391)
Balances as of June 30, 2023										Balances as of June 30, 2023	$	(13)	$	(287)	$	5	$	(295)


		Unrealized Gains (Loss) on hedging activities, net		Foreign Currency Translation		Estimated tax benefit (expense)		Total			Unrealized Gains (Loss) on hedging activities, net		Foreign Currency Translation		Estimated tax benefit (expense)		Total
		(In millions)									(In millions)
Balances as of December 31, 2021	Balances as of December 31, 2021	$	8	$	(523)	$	—	$	(515)	Balances as of December 31, 2021	$	8	$	(523)	$	—	$	(515)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	(29)		151		5		127		Other comprehensive income (loss) before reclassifications	(24)		38		5		19
Amount of (gain) loss reclassified from accumulated other comprehensive income (loss)	Amount of (gain) loss reclassified from accumulated other comprehensive income (loss)	3		—		(1)		2		Amount of (gain) loss reclassified from accumulated other comprehensive income (loss)	9		—		(2)		7
Net current period other comprehensive income (loss)	Net current period other comprehensive income (loss)	(26)		151		4		129		Net current period other comprehensive income (loss)	(15)		38		3		26
Ending balance		$	(18)	$	(372)	$	4	$	(386)
Balances as of June 30, 2022										Balances as of June 30, 2022	$	(7)	$	(485)	$	3	$	(489)

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The following table provides details about reclassifications out of accumulated other comprehensive loss for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022:


Details about Accumulated Other Comprehensive loss Components	Details about Accumulated Other Comprehensive loss Components	Amount of (Loss) Gain Reclassified from Accumulated Other Comprehensive loss				Affected Line Item in the Statement of Income	Details about Accumulated Other Comprehensive loss Components	Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive loss				Affected Line Item in the Statement of Income
		Three Months Ended March 31,						Six Months Ended June 30,
		2023		2022				2023		2022
		(In millions)						(In millions)
Unrealized losses on hedging activities	Unrealized losses on hedging activities	$	(2)	$	(3)	Cost of net revenues, interest expense and foreign currency losses	Unrealized losses on hedging activities	$	(2)	$	(9)	Cost of net revenues, interest expense and foreign currency losses
Estimated tax benefit on unrealized losses	Estimated tax benefit on unrealized losses	1		1		Income tax expense	Estimated tax benefit on unrealized losses	1		2		Income tax expense
Total reclassifications for the period	Total reclassifications for the period	$	(1)	$	(2)	Total, net of income taxes	Total reclassifications for the period	$	(1)	$	(7)	Total, net of income taxes

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Recently Adopted Accounting Standards

On October 28, 2021, the FASB issued the Accounting Standards Update (“ASU”) 2021-08 “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” The amendments in this update improve comparability for the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination by specifying for all acquired revenue contracts regardless of their timing of payment (1) the circumstances in which the acquirer should recognize contract assets and contract liabilities that are acquired in a business combination and (2) how to measure those contract assets and contract liabilities. The amendments provide consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination. The ~~adoption~~Company adopted this standard effective as of ~~this standard~~January 1, 2023 and it did not have a material impact on the Company’s financial statements.

On March 31, 2022, the FASB issued the ASU 2022-02 “Troubled Debt Restructurings (“TDRs”) and Vintage Disclosures (Topic 326): Financial Instruments – Credit Losses,” which eliminates the accounting guidance on TDRs, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. In addition, the guidance requires disclosure of current-period gross write-offs by year of origination for financing receivables and net investment in leases. The amendments ~~in this update are effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The amendments~~ should be applied prospectively, except for the transition method related to the recognition and measurement of TDRs, where an entity has the option to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption. The ~~adoption~~Company adopted this standard effective as of ~~this standard~~January 1, 2023 and it did not have a material impact on the Company’s financial statements.

On September 29, 2022, the FASB issued the ASU 2022-04 “Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations.” The amendments in this update require entities that use supplier finance programs in connection with the purchase of goods and services to disclose the key terms of the programs and information about their obligations outstanding at the end of the reporting period, including a rollforward of those obligations. The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations. The ~~amendments in~~Company adopted this ~~update are~~standard effective ~~for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years,~~as of January 1, 2023, except for the rollforward requirement, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. The guidance should be applied retrospectively to all periods in which a balance sheet is presented, except for the rollforward requirement, which should be applied prospectively. The Company and certain financial institutions participate in a supplier finance program (“SFP”) that enables certain of the Company’s suppliers, at their own election, to request the payment of their invoices to the financial institutions earlier than the terms stated in the Company’s payment policy. Suppliers’ voluntary inclusion of invoices in the SFP does not change the Company’s payment terms, the amounts paid or liquidity. The Company has no economic interest in a supplier’s decision to participate in the SFP and has no financial impact in connection with the SFP. As of ~~March 31,~~June 30, 2023 and December 31, 2022, the obligations outstanding that the Company has confirmed as valid to the financial institutions amounted to ~~$254~~$273 million and $227 million, respectively, and are included in the unaudited interim condensed consolidated balance sheets within accounts payable and accrued expenses line.

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Recently issued accounting pronouncements not yet adopted

As of the date of issuance of these unaudited interim condensed consolidated financial statements there were no accounting pronouncements issued not yet adopted expected to have a material impact on the Company’s financial statements.

3. Fintech Regulations

Regulations issued by the Central Banks and other regulators of the countries where the Company operates applicable to its Fintech business are described in Note 3 to the consolidated financial statements in the Company’s 2022 10-K.

~~Recently issued regulations issued by CBA~~Argentina

On September 1, 2022, the CBA issued Communication “A” 7593, which extended the application of regulations for the protection of financial services users to the payment service providers who offer payment accounts (“PSPOCP” according to its Spanish acronym)., such as MercadoLibre S.R.L. The regulations were already applicable to non-financial credit providers. This communication came into effect on March 1, 2023. On February 15, 2023, the CBA issued Communication “A” 7699, which establishes that ~~PSPOCPs~~PSPOCP must submit the Information Regime on Claims, with the first submission deadline being April 24, 2023, and the Information Regime on Transparency, - Chapter II, ~~-, whose~~with first submission deadline for monthly information ~~corresponded to~~being March 14, 2023.

Brazil

The new prudential rules announced by the Central Bank during March 2022, were effective starting in July 2023 with full implementation by January 2025. The new rules require a gradual increase in the percentage of prudential capital applicable to the risk-weighted assets for the Company’s regulated Brazilian subsidiaries until 2025: 6.75% from July 2023, 8.75% from January 2024 and 10.50% from January 2025.

Colombia

On June 28, 2023, MercadoPago S.A. Compañía de Financiamiento obtained a license to operate as a financial institution in Colombia which enables it to offer financial deposits (digital accounts). The minimum capital requirement has been paid-in. This subsidiary is expected to be operational by the end of 2023.

Uruguay

On July 11, 2023, the Central Bank of Uruguay approved MercadoPago Uruguay S.R.L. to start operations as an Electronic Money Issuing Institution (“IEDE” according to its Spanish acronym). This subsidiary is expected to be operational by the last quarter of 2023.

Chile

On April 27, 2023, the Commission for the Financial Market (“CMF” according to its Spanish acronym) authorized the merger of Mercado Pago S.A. and Red Procesadora de Pagos Limitada (“Redelcom”), effective on May 1, 2023. This merger allows Mercado Pago S.A. to extend the processing of transactions and enable businesses and entrepreneurs in Chile the opportunity to access the Company’s ecosystem of fintech services.

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4. Net income per share

Basic earnings per share for the Company’s common stock is computed by dividing, net income ~~available to common shareholders attributable to common stock~~ for the period by the weighted average number of common shares outstanding during the period.

OnIn August, ~~24, 2018 and August 31,~~ 2018, the Company issued an aggregate principal amount of $880 million of 2.00% Convertible Senior Notes due 2028 (see Note 12 to these unaudited interim condensed consolidated financial statements and Note 17 to the financial statements for the year ended December 31, 2022, contained in the Company’s 2022 10-K). The conversion of these notes is included in the calculation for diluted earnings per share utilizing the “if converted” method. Accordingly, conversion of these Notes is not assumed for purposes of computing diluted earnings per share if the effect is antidilutive.

The denominator for diluted net income per share for the six and three-month periods ended ~~March 31,~~June 30, 2023 and 2022 does not include any effect from the capped call transactions entered into by the Company with certain financial institutions with respect to shares of the Company’s common stock (“2028 Notes Capped Call Transactions”) because it would be antidilutive. In the event of conversion of any or all of the 2028 Notes, the shares that would be delivered to the Company under the 2028 Notes Capped Call Transactions are designed to partially neutralize the dilutive effect of the shares that the Company would issue under the Notes. See Note 17 to the financial statements for the year ended December 31, 2022, contained in the Company’s 2022 10-K for more details.

For the six and three-month ~~period~~periods ended ~~March 31,~~June 30, 2022, the effect of the conversion of the Notes would have been antidilutive and, as a consequence, it was not factored into the calculation of diluted earnings per share.

Net income per share of common stock is as follows for the six and three-month periods ended ~~March 31,~~June 30, 2023 and 2022:


		Three Months Ended March 31,									Six Months Ended June 30,								Three Months Ended June 30,
		2023				2022					2023				2022				2023				2022
		Basic		Diluted		Basic		Diluted			Basic		Diluted		Basic		Diluted		Basic		Diluted		Basic		Diluted
Net income per common share (*)	Net income per common share (*)	$	4.01	$	3.97	$	1.30	$	1.30	Net income per common share (*)	$	9.23	$	9.12	$	3.73	$	3.73	$	5.22	$	5.16	$	2.43	$	2.43

Numerator (in millions):	Numerator (in millions):									Numerator (in millions):
Net income	Net income	$	201	$	201	$	65	$	65	Net income	$	463	$	463	$	188	$	188	$	262	$	262	$	123	$	123
Effect of dilutive Convertible Senior Notes	Effect of dilutive Convertible Senior Notes	—		2		—		—		Effect of dilutive Convertible Senior Notes	—		4		—		—		—		2		—		—
Net income corresponding to common stock		$	201	$	203	$	65	$	65
Net income available to common stock										Net income available to common stock	$	463	$	467	$	188	$	188	$	262	$	264	$	123	$	123

Denominator:	Denominator:									Denominator:
Weighted average of common stock outstanding for earnings per share	Weighted average of common stock outstanding for earnings per share	50,245,073		50,245,073		50,408,754		50,408,754		Weighted average of common stock outstanding for earnings per share	50,203,652		50,203,652		50,386,519		50,386,519		50,162,687		50,162,687		50,364,529		50,364,529
Adjustment for assumed conversions	Adjustment for assumed conversions	—		990,268		—		—		Adjustment for assumed conversions	—		990,268		—		—		—		990,268		—		—
Adjusted weighted average of common stock outstanding for earnings per share	Adjusted weighted average of common stock outstanding for earnings per share	50,245,073		51,235,341		50,408,754		50,408,754		Adjusted weighted average of common stock outstanding for earnings per share	50,203,652		51,193,920		50,386,519		50,386,519		50,162,687		51,152,955		50,364,529		50,364,529

(*) Figures have been calculated using non-rounded amounts.

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5. Cash, cash equivalents, restricted cash and cash equivalents and investments

The composition of cash, cash equivalents, restricted cash and cash equivalents, short-term and long-term investments is as follows:


		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022
		(In millions)					(In millions)
Cash and cash equivalents	Cash and cash equivalents					Cash and cash equivalents
Cash in bank accounts	Cash in bank accounts	$	1,084	$	1,160	Cash in bank accounts	$	860	$	1,160
Money market	Money market	629		599		Money market	683		599
Time deposits	Time deposits	191		130		Time deposits	211		130
U.S. government debt securities	U.S. government debt securities	239		21		U.S. government debt securities	65		21
Foreign government debt securities						Foreign government debt securities	41		—
Total cash and cash equivalents	Total cash and cash equivalents	$	2,143	$	1,910	Total cash and cash equivalents	$	1,860	$	1,910
Restricted cash and cash equivalents	Restricted cash and cash equivalents					Restricted cash and cash equivalents
Securitization transactions	Securitization transactions	$	610	$	459	Securitization transactions	$	792	$	459
Foreign government debt securities (Central Bank of Brazil mandatory guarantee) (*)	Foreign government debt securities (Central Bank of Brazil mandatory guarantee) (*)	—		158		Foreign government debt securities (Central Bank of Brazil mandatory guarantee) (*)	302		158
Bank account (Argentine Central Bank regulation) (*)	Bank account (Argentine Central Bank regulation) (*)	403		496		Bank account (Argentine Central Bank regulation) (*)	472		496
Bank account (Mexican National Banking and Securities Commission regulation) (*)	Bank account (Mexican National Banking and Securities Commission regulation) (*)	62		9		Bank account (Mexican National Banking and Securities Commission regulation) (*)	59		9
Time deposits (Mexican National Banking and Securities Commission regulation) (*)	Time deposits (Mexican National Banking and Securities Commission regulation) (*)	209		239		Time deposits (Mexican National Banking and Securities Commission regulation) (*)	248		239
Bank account (Chilean Commission for the Financial Market regulation) (*)	Bank account (Chilean Commission for the Financial Market regulation) (*)	10		4		Bank account (Chilean Commission for the Financial Market regulation) (*)	15		4
Time deposits (Chilean Commission for the Financial Market regulation) (*)	Time deposits (Chilean Commission for the Financial Market regulation) (*)	48		49		Time deposits (Chilean Commission for the Financial Market regulation) (*)	41		49
Money market (Secured lines of credit guarantee)	Money market (Secured lines of credit guarantee)	32		33		Money market (Secured lines of credit guarantee)	35		33
Bank account (Financial Superintendence of Colombia regulation) (*)	Bank account (Financial Superintendence of Colombia regulation) (*)	—		1		Bank account (Financial Superintendence of Colombia regulation) (*)	—		1
Money market (Financial Superintendence of Colombia regulation) (*)	Money market (Financial Superintendence of Colombia regulation) (*)	7		5		Money market (Financial Superintendence of Colombia regulation) (*)	—		5
Total restricted cash and cash equivalents	Total restricted cash and cash equivalents	$	1,381	$	1,453	Total restricted cash and cash equivalents	$	1,964	$	1,453
Total cash, cash equivalents, restricted cash and cash equivalents		$	3,524	$	3,363
Total cash, cash equivalents, restricted cash and cash equivalents (***)						Total cash, cash equivalents, restricted cash and cash equivalents (***)	$	3,824	$	3,363

Short-term investments	Short-term investments					Short-term investments
U.S. government debt securities	U.S. government debt securities	$	409	$	558	U.S. government debt securities	$	992	$	558
Foreign government debt securities (Central Bank of Brazil mandatory guarantee) (*)	Foreign government debt securities (Central Bank of Brazil mandatory guarantee) (*)	1,408		1,219		Foreign government debt securities (Central Bank of Brazil mandatory guarantee) (*)	1,398		1,219
Foreign government debt securities	Foreign government debt securities	73		123		Foreign government debt securities	37		123
Time deposits	Time deposits	588		439		Time deposits	411		439
Securitization transactions (**)	Securitization transactions (**)	1		—		Securitization transactions (**)	1		—
Total short-term investments	Total short-term investments	$	2,479	$	2,339	Total short-term investments	$	2,839	$	2,339

Long-term investments	Long-term investments					Long-term investments
U.S. government debt securities	U.S. government debt securities	$	138	$	175	U.S. government debt securities	$	—	$	175
Foreign government debt securities	Foreign government debt securities	62		70		Foreign government debt securities	68		70
Securitization transactions (**)	Securitization transactions (**)	21		21		Securitization transactions (**)	23		21
Equity securities held at cost	Equity securities held at cost	57		56		Equity securities held at cost	58		56
Total long-term investments	Total long-term investments	$	278	$	322	Total long-term investments	$	149	$	322


(*)			Regulations issued by the Central Banks and other regulators of the countries where the Company operates applicable to its Fintech business are described in Note 3 to the consolidated financial statements in the Company’s 2022 10-K. Recently issued regulations are described in Note 3 of these ~~unaudited~~unaudited interim condensed consolidated financial statements.
(**)			Investments from securitization transactions are restricted to the payment of amounts due to third-party investors.
(***)			Cash, cash equivalents, restricted cash and cash equivalents as reported in the consolidated statement of cash flows.

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6. Loans receivable, net

The Company classifies loans receivable as “On-line merchant”, “Consumer”, “In-store merchant” and “Credit Cards.” As of ~~March 31,~~June 30, 2023 and December 31, 2022, the components of Loans receivable, net were as follows:


		March 31, 2023							June 30, 2023
		Loans receivable		Allowance for doubtful accounts		Loans receivable, net			Loans receivable		Allowance for doubtful accounts		Loans receivable, net
		(In millions)							(In millions)
On-line merchant	On-line merchant	$	413	$	(124)	$	289	On-line merchant	$	429	$	(130)	$	299
Consumer	Consumer	1,713		(639)		1,074		Consumer	1,795		(625)		1,170
In-store merchant	In-store merchant	260		(141)		119		In-store merchant	278		(138)		140
Credit Cards	Credit Cards	663		(237)		426		Credit Cards	748		(230)		518
Total	Total	$	3,049	$	(1,141)	$	1,908	Total	$	3,250	$	(1,123)	$	2,127


	December 31, 2022
	Loans receivable		Allowance for doubtful accounts		Loans receivable, net
	(In millions)
On-line merchant	$	394	$	(120)	$	274
Consumer	1,568		(614)		954
In-store merchant	267		(145)		122
Credit Cards	611		(225)		386
Total	$	2,840	$	(1,104)	$	1,736

The allowance for doubtful accounts with respect to the Company’s loans receivable amounts to ~~$1,154~~$1,136 million and $1,112 million as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively, which includes $13 million and $8 million ~~related~~ related to unused agreed loan commitment on credit cards portfolio presented in Other liabilities of the unaudited interim condensed consolidated balance sheets as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively.

As of ~~March 31,~~June 30, 2023, the Company is exposed to off-balance sheet unused agreed loan commitments on its credit cards portfolio, which exposes the Company to credit risks. For the ~~period~~six and three-month periods ended ~~March 31,~~June 30, 2023, the Company recognized in Provision for doubtful accounts $4$3 million and $(1) million as expected credit ~~losses.~~losses, respectively.

The Company closely monitors credit quality for all loans receivable on a recurring basis to assess and manage its exposure to credit risk. To assess merchants and consumers seeking a loan under the Mercado Credito solution, the Company uses, among other indicators, risk models internally developed, as a credit quality indicator to help predict the merchant’s and consumer’s ability to repay the principal balance and interest related to the credit. The risk model uses multiple variables as predictors of the merchant’s and consumer’s ability to repay the credit, including external and internal indicators. Internal indicators consider user behavior related to credit/payment history, and with lower weight in the risk models, the Company uses the number of transactions in the Company’s ecosystem and the merchant’s annual sales volume, among other indicators. In addition, the Company considers external bureau information to enhance the model and the decision making process.

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The amortized cost of the loans receivable classified by the Company’s credit quality internal indicator was as follows:


		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022
		(In millions)					(In millions)
1-30 days past due	1-30 days past due	$	119	$	118	1-30 days past due	$	146	$	118
31-60 days past due	31-60 days past due	83		88		31-60 days past due	85		88
61 -90 days past due	61 -90 days past due	88		86		61 -90 days past due	90		86
91 -120 days past due	91 -120 days past due	82		103		91 -120 days past due	71		103
121 -150 days past due	121 -150 days past due	90		110		121 -150 days past due	89		110
151 -180 days past due	151 -180 days past due	84		112		151 -180 days past due	79		112
181 -210 days past due	181 -210 days past due	100		100		181 -210 days past due	72		100
211 -240 days past due	211 -240 days past due	109		93		211 -240 days past due	90		93
241 -270 days past due	241 -270 days past due	112		89		241 -270 days past due	91		89
271 -300 days past due	271 -300 days past due	101		73		271 -300 days past due	100		73
301 -330 days past due	301 -330 days past due	94		85		301 -330 days past due	111		85
331 -360 days past due	331 -360 days past due	89		75		331 -360 days past due	114		75
Total past due	Total past due	1,151		1,132		Total past due	1,138		1,132
To become due	To become due	1,898		1,708		To become due	2,112		1,708
Total	Total	$	3,049	$	2,840	Total	$	3,250	$	2,840

The following tables summarize the allowance for doubtful accounts activity during the ~~three-month~~six-month periods ended ~~March 31,~~June 30, 2023 and 2022:


		March 31, 2023											June 30, 2023
		On-line merchant		Consumer		In-store merchant		Credit Cards		Total			On-line merchant		Consumer		In-store merchant		Credit Cards		Total
		(In millions)											(In millions)
Balance at beginning of year	Balance at beginning of year	$	120	$	614	$	145	$	225	$	1,104	Balance at beginning of year	$	120	$	614	$	145	$	225	$	1,104
Net charged to Net Income	Net charged to Net Income	28		126		29		57		240		Net charged to Net Income	59		251		61		90		461
Currency translation adjustments	Currency translation adjustments	4		18		2		6		30		Currency translation adjustments	9		38		7		18		72
Write-offs (*)	Write-offs (*)	(28)		(119)		(35)		(51)		(233)		Write-offs (*)	(58)		(278)		(75)		(103)		(514)
Balance at end of period	Balance at end of period	$	124	$	639	$	141	$	237	$	1,141	Balance at end of period	$	130	$	625	$	138	$	230	$	1,123


		March 31, 2022											June 30, 2022
		On-line merchant		Consumer		In-store merchant		Credit Cards		Total			On-line merchant		Consumer		In-store merchant		Credit Cards		Total
		(In millions)											(In millions)
Balance at beginning of year	Balance at beginning of year	$	79	$	232	$	76	$	48	$	435	Balance at beginning of year	$	79	$	232	$	76	$	48	$	435
Net charged to Net Income	Net charged to Net Income	30		130		33		60		253		Net charged to Net Income	58		299		76		124		557
Currency translation adjustments	Currency translation adjustments	11		28		12		15		66		Currency translation adjustments	2		(2)		2		(1)		1
Write-offs (*)	Write-offs (*)	(18)		(45)		(13)		—		(76)		Write-offs (*)	(34)		(86)		(31)		—		(151)
Balance at end of period	Balance at end of period	$	102	$	345	$	108	$	123	$	678	Balance at end of period	$	105	$	443	$	123	$	171	$	842

(*) The Company writes off loans when customer balance becomes 360 days past due.

The increase in write-offs for the six-month period ended ~~March 31,~~June 30, 2023, compared to the same period in 2022, is mainly generated by higher originations of loans receivable for the six-month period ended ~~March 31,~~June 30, 2022, compared to the same period in 2021, generating a higher write-offs effect in the period ended ~~March 31,~~June 30, 2023.

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7. Goodwill and intangible assets

Intangible assets

The composition of goodwill and intangible assets is as follows:


		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022
		(In millions)					(In millions)
Goodwill	Goodwill	$	160	$	153	Goodwill	$	166	$	153
Intangible assets with indefinite lives	Intangible assets with indefinite lives					Intangible assets with indefinite lives
- Trademarks	- Trademarks	4		4		- Trademarks	4		4
- Digital assets (1)	- Digital assets (1)	9		9		- Digital assets (1)	9		9
Amortizable intangible assets	Amortizable intangible assets					Amortizable intangible assets
- Licenses and others	- Licenses and others	13		13		- Licenses and others	14		13
- Non-compete agreements	- Non-compete agreements	4		4		- Non-compete agreements	4		4
- Customer lists	- Customer lists	13		12		- Customer lists	13		12
- Trademarks	- Trademarks	12		12		- Trademarks	12		12
- Hubs network	- Hubs network	4		4		- Hubs network	4		4
- Others	- Others	3		3		- Others	3		3
Total intangible assets	Total intangible assets	$	62	$	61	Total intangible assets	$	63	$	61
Accumulated amortization	Accumulated amortization	(38)		(36)		Accumulated amortization	(41)		(36)
Total intangible assets, net	Total intangible assets, net	$	24	$	25	Total intangible assets, net	$	22	$	25

(1)Digital assets are net of $21 million of impairment ~~losses~~allowance as of both ~~March 31,~~June 30, 2023 and December 31, 2022.

Goodwill

The changes in the carrying amount of goodwill for the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023 and the year ended December 31, 2022 are as follows:


		Three Months Ended March 31, 2023															Six Months Ended June 30, 2023
		Brazil		Argentina		Mexico		Chile		Colombia		Other Countries		Total			Brazil		Argentina		Mexico		Chile		Colombia		Other Countries		Total
		(In millions)															(In millions)
Balance, beginning of the period	Balance, beginning of the period	$	60	$	10	$	39	$	37	$	5	$	2	$	153	Balance, beginning of the period	$	60	$	10	$	39	$	37	$	5	$	2	$	153
Effect of exchange rates changes	Effect of exchange rates changes	1		—		3		3		—		—		7		Effect of exchange rates changes	5		—		5		2		1		—		13
Balance, end of the period	Balance, end of the period	$	61	$	10	$	42	$	40	$	5	$	2	$	160	Balance, end of the period	$	65	$	10	$	44	$	39	$	6	$	2	$	166

		Year Ended December 31, 2022															Year Ended December 31, 2022
		Brazil		Argentina		Mexico		Chile		Colombia		Other Countries		Total			Brazil		Argentina		Mexico		Chile		Colombia		Other Countries		Total
		(In millions)															(In millions)
Balance, beginning of the period	Balance, beginning of the period	$	56	$	10	$	37	$	37	$	6	$	2	$	148	Balance, beginning of the period	$	56	$	10	$	37	$	37	$	6	$	2	$	148
Effect of exchange rates changes	Effect of exchange rates changes	4		—		2		—		(1)		—		5		Effect of exchange rates changes	4		—		2		—		(1)		—		5
Balance, end of the period	Balance, end of the period	$	60	$	10	$	39	$	37	$	5	$	2	$	153	Balance, end of the period	$	60	$	10	$	39	$	37	$	5	$	2	$	153

Amortizable intangible assets

Intangible assets with definite useful life are comprised of customer lists, non-compete and non-solicitation agreements, hubs network, acquired software licenses and other acquired intangible assets including developed technologies and trademarks. Aggregate amortization expense for intangible assets for the six-month periods ended June 30, 2023 and 2022 amounted to $3 million in both periods, while aggregate amortization expense for intangible assets totaled $2$1 million and $5$2 million for the three-month periods ended ~~March 31,~~June 30, 2023 and 2022, respectively.

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The following table summarizes the remaining amortization of intangible assets (in millions of U.S. dollars) with definite useful life as of ~~March 31,~~June 30, 2023:


For year to be ended December 31, 2023	$	32
For year to be ended December 31, 2024	32
For year to be ended December 31, 2025	1
For year to be ended December 31, 2026	1
Thereafter	3
	$	119

8. Segment reporting

Reporting segments are based upon the Company’s internal organizational structure, the manner in which the Company’s operations are managed and resources are assigned, the criteria used by Management to evaluate the Company’s performance, the availability of separate financial information and overall materiality considerations.

Segment reporting is based on geography as the main basis of segment breakdown in accordance with the criteria, as determined by Management, used to evaluate the Company’s performance. The Company’s segments include Brazil, Argentina, Mexico and other countries (which includes Chile, Colombia, Costa Rica, Ecuador, Peru and Uruguay).

Direct contribution consists of net revenues from external customers less direct costs, which include costs of net revenues, product and technology development expenses, sales and marketing expenses, provision for doubtful accounts and general and administrative expenses over which segment managers have direct discretionary control, such as advertising and marketing programs, customer support expenses, payroll and third-party fees. All corporate related costs have been excluded from the segment’s direct contribution.

Expenses over which segment managers do not currently have discretionary control, such as certain technology and general and administrative costs, are monitored by Management through shared cost centers and are not evaluated in the measurement of segment performance.

The following tables summarize the financial performance of the Company’s reporting segments:


		Three Months Ended March 31, 2023											Six Months Ended June 30, 2023
		Brazil		Argentina		Mexico		Other Countries		Total			Brazil		Argentina		Mexico		Other Countries		Total
		(In millions)											(In millions)
Net revenues	Net revenues	$	1,579	$	721	$	591	$	146	$	3,037	Net revenues	$	3,359	$	1,492	$	1,294	$	307	$	6,452
Direct costs	Direct costs	(1,261)		(411)		(464)		(131)		(2,267)		Direct costs	(2,592)		(848)		(987)		(279)		(4,706)
Direct contribution	Direct contribution	318		310		127		15		770		Direct contribution	767		644		307		28		1,746

Operating expenses and indirect costs of net revenues	Operating expenses and indirect costs of net revenues									(430)		Operating expenses and indirect costs of net revenues									(848)
Income from operations	Income from operations									340		Income from operations									898

Other income (expenses):	Other income (expenses):											Other income (expenses):
Interest income and other financial gains	Interest income and other financial gains									161		Interest income and other financial gains									349
Interest expense and other financial losses	Interest expense and other financial losses									(94)		Interest expense and other financial losses									(186)
Foreign currency losses, net	Foreign currency losses, net									(87)		Foreign currency losses, net									(269)
Net income before income tax expense										$	320
Net income before income tax expense and equity in earnings of unconsolidated entity												Net income before income tax expense and equity in earnings of unconsolidated entity									$	792

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		Three Months Ended March 31, 2022											Six Months Ended June 30, 2022
		Brazil		Argentina		Mexico		Other Countries		Total			Brazil		Argentina		Mexico		Other Countries		Total
		(In millions)											(In millions)
Net revenues	Net revenues	$	1,252	$	518	$	364	$	114	$	2,248	Net revenues	$	2,703	$	1,112	$	792	$	238	$	4,845
Direct costs	Direct costs	(1,065)		(320)		(328)		(110)		(1,823)		Direct costs	(2,263)		(692)		(691)		(227)		(3,873)
Direct contribution	Direct contribution	187		198		36		4		425		Direct contribution	440		420		101		11		972

Operating expenses and indirect costs of net revenues	Operating expenses and indirect costs of net revenues									(286)		Operating expenses and indirect costs of net revenues									(583)
Income from operations	Income from operations									139		Income from operations									389

Other income (expenses):	Other income (expenses):											Other income (expenses):
Interest income and other financial gains	Interest income and other financial gains									31		Interest income and other financial gains									77
Interest expense and other financial losses	Interest expense and other financial losses									(56)		Interest expense and other financial losses									(129)
Foreign currency losses, net	Foreign currency losses, net									(3)		Foreign currency losses, net									(63)
Net income before income tax expense										$	111
Net income before income tax expense and equity in earnings of unconsolidated entity												Net income before income tax expense and equity in earnings of unconsolidated entity									$	274


	Three Months Ended June 30, 2023
	Brazil		Argentina		Mexico		Other Countries		Total
	(In millions)
Net revenues	$	1,780	$	771	$	703	$	161	$	3,415
Direct costs	(1,331)		(436)		(524)		(148)		(2,439)
Direct contribution	449		335		179		13		976

Operating expenses and indirect costs of net revenues									(418)
Income from operations									558

Other income (expenses):
Interest income and other financial gains									188
Interest expense and other financial losses									(92)
Foreign currency losses, net									(182)
Net income before income tax expense and equity in earnings of unconsolidated entity									$	472

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	Three Months Ended June 30, 2022
	Brazil		Argentina		Mexico		Other Countries		Total
	(In millions)
Net revenues	$	1,451	$	594	$	428	$	124	$	2,597
Direct costs	(1,198)		(372)		(363)		(117)		(2,050)
Direct contribution	253		222		65		7		547

Operating expenses and indirect costs of net revenues									(297)
Income from operations									250

Other income (expenses):
Interest income and other financial gains									46
Interest expense and other financial losses									(73)
Foreign currency losses, net									(60)
Net income before income tax expense and equity in earnings of unconsolidated entity									$	163

The following table summarizes net revenues per reporting segment, which have been disaggregated by similar products and services for the six and three-month periods ended ~~March 31,~~June 30, 2023 and 2022:


		Three Months Ended March 31,																					Six Months Ended June 30,
		Brazil				Argentina				Mexico				Other Countries				Total					Brazil				Argentina				Mexico				Other Countries				Total
		2023		2022		2023		2022		2023		2022		2023		2022		2023		2022			2023		2022		2023		2022		2023		2022		2023		2022		2023		2022
		(In millions)																					(In millions)
Commerce services (a)	Commerce services (a)	$	762	$	567	$	224	$	181	$	338	$	213	$	91	$	76	$	1,415	$	1,037	Commerce services (a)	$	1,608	$	1,208	$	467	$	381	$	731	$	445	$	193	$	158	$	2,999	$	2,192
Commerce products sales (b)	Commerce products sales (b)	145		122		49		59		60		49		7		10		261		240		Commerce products sales (b)	348		233		108		129		142		107		15		21		613		490
Total commerce revenues	Total commerce revenues	$	907	$	689	$	273	$	240	$	398	$	262	$	98	$	86	$	1,676	$	1,277	Total commerce revenues	$	1,956	$	1,441	$	575	$	510	$	873	$	552	$	208	$	179	$	3,612	$	2,682
Fintech services (c)	Fintech services (c)	$	426	$	318	$	287	$	189	$	56	$	25	$	43	$	26	$	812	$	558	Fintech services (c)	888		702		583		391		123		59		89		54		1,683		1,206
Credit revenues (d)	Credit revenues (d)	241		239		159		88		135		75		1		—		536		402		Credit revenues (d)	504		546		331		208		294		176		3		1		1,132		931
Fintech products sales (e)	Fintech products sales (e)	5		6		2		1		2		2		4		2		13		11		Fintech products sales (e)	11		14		3		3		4		5		7		4		25		26
Total fintech revenues	Total fintech revenues	$	672	$	563	$	448	$	278	$	193	$	102	$	48	$	28	$	1,361	$	971	Total fintech revenues	$	1,403	$	1,262	$	917	$	602	$	421	$	240	$	99	$	59	$	2,840	$	2,163
Total net revenues	Total net revenues	$	1,579	$	1,252	$	721	$	518	$	591	$	364	$	146	$	114	$	3,037	$	2,248	Total net revenues	$	3,359	$	2,703	$	1,492	$	1,112	$	1,294	$	792	$	307	$	238	$	6,452	$	4,845

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	Three Months Ended June 30,
	Brazil				Argentina				Mexico				Other Countries				Total
	2023		2022		2023		2022		2023		2022		2023		2022		2023		2022
	(In millions)
Commerce services (a)	$	846	$	641	$	243	$	200	$	393	$	232	$	102	$	82	$	1,584	$	1,155
Commerce products sales (b)	203		111		59		70		82		58		8		10		352		249
Total commerce revenues	$	1,049	$	752	$	302	$	270	$	475	$	290	$	110	$	92	$	1,936	$	1,404
Fintech services (c)	462		384		296		202		67		34		46		28		871		648
Credit revenues (d)	263		307		172		120		159		101		2		1		596		529
Fintech products sales (e)	6		8		1		2		2		3		3		3		12		16
Total fintech revenues	$	731	$	699	$	469	$	324	$	228	$	138	$	51	$	32	$	1,479	$	1,193
Total net revenues	$	1,780	$	1,451	$	771	$	594	$	703	$	428	$	161	$	124	$	3,415	$	2,597

(a)Includes final value fees paid by sellers derived from intermediation services and related shipping fees, classified fees derived from classified advertising services and ad sales.

(b)Includes revenues from inventory sales and related shipping fees.

(c)Includes revenues from commissions the Company charges for transactions off-platform derived from use of the Company’s payment solution, revenues as a result of offering installments for the payment to its Mercado Pago users, either when the Company finances the transactions directly or when the Company sells the corresponding financial assets, Mercado Pago credit and debit card fees and insurtech fees.

(d)Includes interest earned on loans and advances granted to merchants and consumers, and interest earned on Mercado Pago credit card transactions.

(e)Includes sales of mobile point of sales devices.

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The following table summarizes the allocation of property and equipment, net based on geography:


		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022
		(In millions)					(In millions)
US property and equipment, net	US property and equipment, net	$	3	$	1	US property and equipment, net	$	3	$	1
Property and equipment, net	Property and equipment, net					Property and equipment, net
Argentina	Argentina	190		188		Argentina	191		188
Brazil	Brazil	521		514		Brazil	542		514
Mexico	Mexico	230		206		Mexico	262		206
Other countries	Other countries	92		84		Other countries	92		84
		$	1,033	$	992		$	1,087	$	992
Total property and equipment, net	Total property and equipment, net	$	1,036	$	993	Total property and equipment, net	$	1,090	$	993

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The following table summarizes the allocation of the operating lease right-of-use assets based on geography:


		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022
		(In millions)					(In millions)
Argentina	Argentina	$	51	$	53	Argentina	$	51	$	53
Brazil	Brazil	308		286		Brazil	357		286
Mexico	Mexico	262		245		Mexico	295		245
Other countries	Other countries	76		72		Other countries	76		72
Total operating lease right-of-use assets	Total operating lease right-of-use assets	$	697	$	656	Total operating lease right-of-use assets	$	779	$	656

The following table summarizes the allocation of the goodwill and intangible assets based on geography:


		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022
		(In millions)					(In millions)
US intangible assets, net	US intangible assets, net	$	9	$	9	US intangible assets, net	$	9	$	9
Goodwill and intangible assets, net	Goodwill and intangible assets, net					Goodwill and intangible assets, net
Argentina	Argentina	13		14		Argentina	13		14
Brazil	Brazil	65		63		Brazil	68		63
Mexico	Mexico	43		40		Mexico	44		40
Other countries	Other countries	54		52		Other countries	54		52
		$	175	$	169		$	179	$	169
Total goodwill and intangible assets, net	Total goodwill and intangible assets, net	$	184	$	178	Total goodwill and intangible assets, net	$	188	$	178

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9. Fair value measurement of assets and liabilities

Assets and liabilities measured and recorded at fair value on a recurring basis

The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis as of ~~March 31,~~June 30, 2023 and December 31, 2022:


Description	Description	Balances as of March 31, 2023		Quoted Prices in active markets for identical Assets (Level 1)		Significant other observable inputs (Level 2)		Unobservable inputs (Level 3)		Balances as of December 31, 2022		Quoted Prices in active markets for identical Assets (Level 1)		Significant other observable inputs (Level 2)		Unobservable inputs (Level 3)		Description	Balances as of June 30, 2023		Quoted Prices in active markets for identical Assets (Level 1)		Significant other observable inputs (Level 2)		Unobservable inputs (Level 3)		Balances as of December 31, 2022		Quoted Prices in active markets for identical Assets (Level 1)		Significant other observable inputs (Level 2)		Unobservable inputs (Level 3)
		(In millions)																	(In millions)
Assets	Assets																	Assets
Cash and Cash Equivalents:	Cash and Cash Equivalents:																	Cash and Cash Equivalents:
Money Market	Money Market	$	629	$	629	$	—	$	—	$	599	$	599	$	—	$	—	Money Market	$	683	$	683	$	—	$	—	$	599	$	599	$	—	$	—
U.S. government debt securities (1)	U.S. government debt securities (1)	239		239		—		—		21		21		—		—		U.S. government debt securities (1)	65		65		—		—		21		21		—		—
Foreign government debt securities (1)																		Foreign government debt securities (1)	41		41		—		—		—		—		—		—
Restricted Cash and Cash Equivalents:	Restricted Cash and Cash Equivalents:																	Restricted Cash and Cash Equivalents:
Money Market		521		521		—		—		352		352		—		—
Money Market (3)																		Money Market (3)	584		584		—		—		352		352		—		—
Foreign government debt securities (Central Bank of Brazil Mandatory Guarantee) (1)	Foreign government debt securities (Central Bank of Brazil Mandatory Guarantee) (1)	—		—		—		—		158		158		—		—		Foreign government debt securities (Central Bank of Brazil Mandatory Guarantee) (1)	302		302		—		—		158		158		—		—
Investments:	Investments:																	Investments:
U.S. government debt securities (1)	U.S. government debt securities (1)	547		547		—		—		733		733		—		—		U.S. government debt securities (1)	992		992		—		—		733		733		—		—
Foreign government debt securities (Central Bank of Brazil Mandatory Guarantee) (1)	Foreign government debt securities (Central Bank of Brazil Mandatory Guarantee) (1)	1,408		1,408		—		—		1,219		1,219		—		—		Foreign government debt securities (Central Bank of Brazil Mandatory Guarantee) (1)	1,398		1,398		—		—		1,219		1,219		—		—
Foreign government debt securities (1) (2)	Foreign government debt securities (1) (2)	157		157		—		—		214		214		—		—		Foreign government debt securities (1) (2)	129		129		—		—		214		214		—		—

Other Assets:	Other Assets:																	Other Assets:
Derivative Instruments	Derivative Instruments	—		—		—		—		1		—		1		—		Derivative Instruments	—		—		—		—		1		—		1		—
USDC	USDC	—		—		—		—		3		3		—		—		USDC	—		—		—		—		3		3		—		—
Customer crypto-assets safeguarding assets	Customer crypto-assets safeguarding assets	19		—		19		—		15		—		15		—		Customer crypto-assets safeguarding assets	21		—		21		—		15		—		15		—
Total Assets	Total Assets	$	3,520	$	3,501	$	19	$	—	$	3,315	$	3,299	$	16	$	—	Total Assets	$	4,215	$	4,194	$	21	$	—	$	3,315	$	3,299	$	16	$	—
Liabilities:	Liabilities:																	Liabilities:
Long-term retention program	Long-term retention program	$	31	$	—	$	31	$	—	$	58	$	—	$	58	$	—	Long-term retention program	$	50	$	—	$	50	$	—	$	58	$	—	$	58	$	—
Other Liabilities:	Other Liabilities:																	Other Liabilities:
Contingent considerations	Contingent considerations	8		—		—		8		8		—		—		8		Contingent considerations	—		—		—		—		8		—		—		8
Derivative Instruments	Derivative Instruments	31		—		31		—		24		—		24		—		Derivative Instruments	41		—		41		—		24		—		24		—
Customer crypto-assets safeguarding liabilities	Customer crypto-assets safeguarding liabilities	19		—		19		—		15		—		15		—		Customer crypto-assets safeguarding liabilities	21		—		21		—		15		—		15		—
Total Liabilities	Total Liabilities	$	89	$	—	$	81	$	8	$	105	$	—	$	97	$	8	Total Liabilities	$	112	$	—	$	112	$	—	$	105	$	—	$	97	$	8

(1)Measured at fair value with impact on the ~~unaudited interim condensed consolidated~~ statement of income for the application of the fair value option. (See Note 2 – Fair value option applied to certain financial instruments.)

(2)As of ~~March 31,~~June 30, 2023 and December 31, 2022 includes ~~$22~~$24 million and $21 million, respectively, of investments from securitization transactions that are restricted to the payment of amounts due to third-party investors. (See Note 5 - Cash, cash equivalents, restricted cash and cash equivalents and investments.)

(3)As of June 30, 2023 and December 31, 2022 includes $549 million and $314 million, respectively, of money markets from securitization transactions. (See Note 5 - Cash, cash equivalents, restricted cash and cash equivalents and investments.)

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As of ~~March 31,~~June 30, 2023 and December 31, 2022, the Company’s assets and liabilities measured and recorded at fair value on a recurring basis were valued using i) Level 1 inputs: unadjusted quoted prices in active markets (Level 1 instrument valuations are obtained from observable inputs that reflect quoted prices (unadjusted) for identical assets in active markets); ii) Level 2 inputs: obtained from readily-available pricing sources for comparable instruments as well as instruments with inactive markets at the measurement date; and iii) Level 3 inputs: valuations based on unobservable inputs reflecting Company’s assumptions. The unobservable inputs of the fair value of contingent considerations classified as Level 3 refer to the amounts to be paid according to the respective agreements of each acquisition, the likelihood of achievement of the performance targets arising from each one (expected to be 100%), and the Company’s historical experience with similar arrangements. Reasonable variation on those unobservable inputs would not significantly change the fair value of those instruments.

As of ~~March~~June 30, 2023 and December 31, ~~2023,~~2022, the ~~changes in~~Company had not changed the methodology nor the assumptions used to estimate the fair value of the financial ~~liabilities~~instruments.

There were no transfers to and from Levels 1, 2 and 3 during the six-month period ended June 30, 2023. There were no transfers to and from Levels 1, 2 and 3 during the year ended December 31, 2022, other than as detailed in the table below.

As of June 30, 2023, the contingent considerations measured at fair value using Level 3 inputs were ~~less than $1 million.~~settled. The following table summarizes the reconciliation of the financial liabilities measured at fair value using Level 3 inputs as of December 31, 2022:


		Year Ended December 31, 2022					Year Ended December 31, 2022
		Derivative Instruments, net		Contingent Considerations			Derivative Instruments, net		Contingent Considerations
		(In millions)					(In millions)
Balance, beginning of the year	Balance, beginning of the year	$	11	$	(9)	Balance, beginning of the year	$	11	$	(9)
Net Additions	Net Additions	3		—		Net Additions	3		—
Settlements	Settlements	7		1		Settlements	7		1
Foreign Currency Translation	Foreign Currency Translation	(5)		—		Foreign Currency Translation	(5)		—
Gain (Losses) in Other Comprehensive Income	Gain (Losses) in Other Comprehensive Income	(15)		—		Gain (Losses) in Other Comprehensive Income	(15)		—
Gain (Losses) on Income Statement	Gain (Losses) on Income Statement	(28)		—		Gain (Losses) on Income Statement	(28)		—
Transfers out of level 3		27		—
Transfers out of level 3 to level 2						Transfers out of level 3 to level 2	27		—
Balance, end of the year	Balance, end of the year	$	—	$	(8)	Balance, end of the year	$	—	$	(8)

The Company’s election of the fair value option applies to the: i) Brazilian federal government bonds and ii) U.S. treasury notes. ~~As a result of the election of the fair value option for the investments held as of March 31, 2023 and December 31, 2022, the~~The Company recognized fair value ~~gains~~changes in interest income and other financial gains ~~for $41~~which includes the related interest income of those instruments. Such fair value changes and interest income amount to $121 million and ~~$29~~$64 million, and $62 million and $39 million for the six and three-month periods ended June 30, 2023 and 2022, respectively.

As of ~~March 31,~~June 30, 2023 and December 31, 2022, the Company held no ~~investment in corporate debt securities that are~~financial assets classified as available for sale. However, during the year ended December 31, 2022, the Company purchased and sold ~~these kinds~~all the corporate debt securities classified as available for sale, resulting in $156 million of ~~instruments, being the~~ proceeds from the sales ~~$156 million~~ and ~~the~~in gross realized gains less than $1 million. The cost of these securities was determined under a specific identification basis.

Financial assets and liabilities not measured and recorded at fair value

As of ~~March 31,~~June 30, 2023 and December 31, 2022, the carrying value of the Company’s financial assets (except for loans ~~receivable)~~receivable and equity securities held at cost) and liabilities (except for loans payable and other financial liabilities) not measured at fair value approximated their fair value mainly because of their short-term maturity. These assets and liabilities included cash and cash equivalents, restricted cash and cash equivalents, short and long-term investments (excluding money markets, ~~and~~ U.S. and foreign government debt ~~securities)~~securities and equity securities held at cost), accounts receivable, credit card receivables and other means of payments, other assets (excluding derivative instruments and USD Coin - “USDC”), accounts payable and accrued expenses, funds payable to customers, amounts payable due to credit and debit card transactions, salaries and social security payable (excluding variable LTRP), and other liabilities (excluding variable LTRP, contingent considerations and derivative instruments). If these financial instruments were measured at fair value in the financial statements, cash and restricted cash would be classified as Level 1 (where cost and fair value are aligned) and the remaining financial ~~instruments~~assets and liabilities would be classified as Level 2.

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As of ~~March 31,~~June 30, 2023 and December 31, 2022, the estimated fair value of the loans receivable, which is based on Level 3 inputs, is ~~$1,954~~$2,176 million and $1,761 million, respectively, and was determined based on Company’s assumptions. As of ~~March 31,~~June 30, 2023 and December 31, 2022, the estimated fair value of the 2026 and 2031 Notes, which is based on Level 2 inputs, is ~~$361~~$365 million and $359 million, and ~~$550~~$559 million and $541 million, respectively. As of ~~March 31,~~June 30, 2023 and December 31, 2022, the estimated fair value of the 2028 Notes, which is based on Level 2 inputs, is ~~$1,329~~$1,202 million and $884 million, respectively, and was determined based on the closing trading price per $100 principal amount of the 2028 Notes as of the last day of trading for the period (see Note 12 - Loans payable and other financial liabilities of these unaudited interim condensed consolidated financial statements for further details). The rest of the loans payable and other financial liabilities approximate their fair value because the effective interest rates are not materially different from market interest rates.

The following table summarizes the estimated fair value level for the remaining financial assets and liabilities of the Company not measured at fair value as of ~~March 31,~~June 30, 2023 and December 31, 2022:


		Balances as of March 31, 2023		Estimated fair value as of March 31, 2023		Balances as of December 31, 2022		Estimated fair value as of December 31, 2022			Balances as of June 30, 2023		Estimated fair value as of June 30, 2023		Balances as of December 31, 2022		Estimated fair value as of December 31, 2022
		(In millions)									(In millions)
Assets	Assets									Assets
Cash and cash equivalents	Cash and cash equivalents	$	1,275	$	1,275	$	1,290	$	1,290	Cash and cash equivalents	$	1,071	$	1,071	$	1,290	$	1,290
Restricted cash and cash equivalents	Restricted cash and cash equivalents	860		860		943		943		Restricted cash and cash equivalents	1,078		1,078		943		943
Investments	Investments	588		588		439		439		Investments	411		411		439		439
Accounts receivables, net	Accounts receivables, net	132		132		130		130		Accounts receivables, net	160		160		130		130
Credit card receivables and other means of payment, net	Credit card receivables and other means of payment, net	2,799		2,799		2,946		2,946		Credit card receivables and other means of payment, net	2,835		2,835		2,946		2,946
Loans receivable, net	Loans receivable, net	1,908		1,954		1,736		1,761		Loans receivable, net	2,127		2,176		1,736		1,761
Other assets	Other assets	311		311		273		273		Other assets	360		360		273		273
Total Assets	Total Assets	$	7,873	$	7,919	$	7,757	$	7,782	Total Assets	$	8,042	$	8,091	$	7,757	$	7,782
Liabilities	Liabilities									Liabilities
Accounts payable and accrued expenses	Accounts payable and accrued expenses	$	1,597	$	1,597	$	1,393	$	1,393	Accounts payable and accrued expenses	$	1,831	$	1,831	$	1,393	$	1,393
Funds payable to customers	Funds payable to customers	3,253		3,253		3,454		3,454		Funds payable to customers	3,734		3,734		3,454		3,454
Amounts payable due to credit and debit card transactions	Amounts payable due to credit and debit card transactions	554		554		488		488		Amounts payable due to credit and debit card transactions	641		641		488		488
Salaries and social security payable	Salaries and social security payable	396		396		349		349		Salaries and social security payable	346		346		349		349
Loans payable and other financial liabilities	Loans payable and other financial liabilities	4,832		5,535		4,758		4,997		Loans payable and other financial liabilities	4,767		5,394		4,758		4,997
Other liabilities	Other liabilities	195		195		186		186		Other liabilities	219		219		186		186
Total Liabilities	Total Liabilities	$	10,827	$	11,530	$	10,628	$	10,867	Total Liabilities	$	11,538	$	12,165	$	10,628	$	10,867

10. Commitments and Contingencies

Litigation and Other Legal Matters

The Company is subject to certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings. The Company accrues liabilities when it considers it probable that future costs will be incurred and such costs can be reasonably estimated. Proceeding-related liabilities are based on developments to date and historical information related to actions filed against the Company. As of ~~March 31,~~June 30, 2023, the Company had accounted for estimated liabilities involving proceeding-related contingencies and other estimated contingencies of ~~$62~~$72 million to cover legal actions against the Company in which Management has assessed the likelihood of a final adverse outcome as probable. Expected legal costs related to litigations are accrued when the legal service is actually provided.

In addition, as of ~~March 31,~~June 30, 2023, the Company and its subsidiaries are subject to certain legal actions considered by the Company’s Management and its legal counsels to be reasonably possible of resulting in a loss for an estimated aggregate amount up to ~~$402~~$458 million. No ~~loss~~loss amounts have been accrued for such reasonably possible legal actions.

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For further information related to contingent liabilities please refer to Note 15 to the consolidated financial statements in the Company’s 2022 10-K.

Tax Claims

Interstate rate of ICMS-DIFAL on interstate sales

The tax claim related to the interstate rate of ICMS-DIFAL on interstate sales is described in Note 15 to the consolidated financial statements in the Company’s 2022 10-K. In April 2023, and based on court authorization, the Company withdrew the deposits corresponding to the case related to the branch of Santa Catarina, which had become final and unappealable in September 2022 in favor of eBazar.com.br Ltda. The remaining cases, which were pending as of December 31, 2022, had no updates during the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023. The Company ~~maintains~~maintains a $5 million provision as of ~~March 31,~~June 30, 2023 for the disputed amounts related to the 6 ongoing cases whose risk of losing is considered by Management to be probable, based on the opinion of external legal counsel.

Exclusion of ICMS tax benefits from PIS and COFINS tax base

The Company receives ICMS tax benefits from the State of Minas Gerais, Brazil, granted through a special regime signed with the State by means of a term of agreement, which are aimed at implementing and expanding business in the State. The Company accounted for the tax benefit netting cost of net revenues for the six and three-month periods ended June 30, 2023, for $28 million and $16 million, respectively, and for the six and three-month periods ended June 30, 2022, for $17 million and $8 million, respectively.

On April 25, 2023, the Company filed a writ of mandamus seeking an injunction and claiming the exclusion of the amounts relating to the ICMS tax benefits granted by the State of Minas Gerais in the tax base of the Social Contributions (PIS and COFINS).

On May 26, 2023, a decision was rendered granting the injunction requested. The Company is currently waiting for the final judicial decision. Management’s opinion, based on the opinion of external legal counsel, is that the risk of losing the case is reasonably possible but not probable based on the technical merits of the Company’s tax position. For that reason, the Company has not recorded any expense or liability for the disputed amounts. The Company accounted for $8 million for PIS and COFINS tax benefits arising from the ICMS tax incentives during the six-month period ended June 30, 2023, considering the exchange rate as of June 30, 2023, of which $2 million corresponded to the period ended December 31, 2021, and $3 million corresponded to the period ended December 31, 2022.

Buyer protection program

The buyer protection program (“BPP”) ~~program~~ is designed to protect buyers in the Marketplace from losses due primarily to fraud or counterparty non-performance. The Company’s BPP provides protection to consumers by reimbursing them for the total value of a purchased item and the value of any shipping service paid if it does not arrive, arrives incomplete or damaged, does not match the seller’s description or if the buyer regrets the purchase. The Company is entitled to recover from the third-party carrier companies performing the shipping service certain amounts paid under the BPP. Furthermore, in some specific circumstances, the Company enters into insurance contracts with third-party insurance companies in order to cover contingencies that may arise from the BPP.

The maximum potential exposure under this program is estimated to be the volume of payments on the Marketplace, for which claims may be made under the terms and conditions of the Company’s BPP. Based on historical losses to date, the Company does not believe that the maximum potential exposure is representative of the actual potential exposure. The Company records a liability with respect to losses under this program when they are probable and the amount can be reasonably estimated.

As of ~~March 31,~~June 30, 2023 and December 31, 2022, Management’s estimate of the maximum potential exposure related to the Company’s buyer protection program is ~~$4,010~~$4,533 million and $4,002 million, respectively, for which the Company recorded a provision of $8$7 million and $6 million, respectively.

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Commitments

The Company committed to purchase cloud platform services from two U.S. suppliers based on the following terms:

a) for a total amount of $824 million, to be ~~fully~~ paid ~~off~~ between October 1, 2021 and September 30, 2026. As of ~~March 31,~~June 30, 2023, the Company had paid ~~$212 million in relation thereto;~~$270 million; and

b) for a total amount of $200 million, to be ~~fully~~ paid ~~off~~ between September 23, 2022 and September 23, 2025. As of ~~March 31,~~June 30, 2023, the Company had paid ~~$14~~$27 million.

On April 8, 2022, the Company signed a 10-year agreement with Gol Linhas Aereas S.A. under which the Company is committed to contract a minimum amount of air logistics services for a total annual cost of $43 million (total amount once all the dedicated aircraft are in ~~relation thereto.~~operation). Pursuant to the agreement, Gol Linhas Aereas S.A. provides logistics services in Brazil to Mercado Envios through six dedicated aircraft, four of which have already started operations as of June 30, 2023.

In connection with the closing of MELI Kaszek Pioneer Corp’s (“MEKA”) initial public offering on October 1, 2021, MEKA (a special purpose acquisition company sponsored by MELI Kaszek Pioneer Sponsor LLC (the “Sponsor”), which is a joint venture between Company’s subsidiary MELI Capital Ventures LLC and Kaszek Ventures Opportunity II, L.P.) entered into a forward purchase agreement with the Sponsor, pursuant to which the Sponsor committed to purchase from MEKA 5 million Class A ordinary shares at a price of $10 per share in a private placement to close substantially concurrently with the consummation of MEKA’s initial business combination.

On ~~April 8, 2022, the Company signed a~~ 10-year agreement with Gol Linhas Aereas S.A. under which the Company is committed to contract a minimum amount of air logistics services for a total annual cost of $43 million (total amount once all the dedicated aircraft are in operation). Pursuant to the agreement, Gol Linhas Aereas S.A. provides logistics services in Brazil to Mercado Envios through six dedicated aircraft, three of which have already started operations as of March 31, 2023.

~~Table of Contents~~

11. Long term retention program (“LTRP”)

The following table summarizes the long term retention program accrued compensation expense for the six and three-month periods ended ~~March 31,~~June 30, 2023 and 2022, which are payable in cash according to the decisions made by the Board of Directors (the “Board”):


		Three Months Ended March 31,					Six Months Ended June 30,				Three Months Ended June 30,
		2023		2022			2023		2022		2023		2022
		(In millions)					(In millions)				(In millions)
LTRP 2017	LTRP 2017	$	—	$	(1)	LTRP 2017	$	—	$	(4)	$	—	$	(3)
LTRP 2018	LTRP 2018	2		—		LTRP 2018	2		(3)		—		(3)
LTRP 2019	LTRP 2019	5		6		LTRP 2019	9		7		4		1
LTRP 2020	LTRP 2020	6		7		LTRP 2020	10		9		4		2
LTRP 2021	LTRP 2021	7		8		LTRP 2021	12		11		5		3
LTRP 2022	LTRP 2022	13		10		LTRP 2022	22		15		9		5
LTRP 2023	LTRP 2023	14		—		LTRP 2023	28		—		14		—
Total LTRP	Total LTRP	$	47	$	30	Total LTRP	$	83	$	35	$	36	$	5

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12. Loans payable and other financial liabilities

The following tables summarize the Company’s Loans payable and other financial liabilities as of ~~March 31,~~June 30, 2023 and December 31, 2022:


		Balances as of
		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022
		(In millions)					(In millions)
Current loans payable and other financial liabilities:	Current loans payable and other financial liabilities:					Current loans payable and other financial liabilities:
Loans from banks	Loans from banks	$	361	$	319	Loans from banks	$	373	$	319
Bank overdrafts	Bank overdrafts	22		9		Bank overdrafts	32		9
Secured lines of credit	Secured lines of credit	113		115		Secured lines of credit	115		115
Financial Bills	Financial Bills	120		113		Financial Bills	131		113
Deposit Certificates	Deposit Certificates	949		993		Deposit Certificates	827		993
Commercial Notes	Commercial Notes	6		6		Commercial Notes	12		6
Finance lease obligations	Finance lease obligations	18		14		Finance lease obligations	22		14
Collateralized debt	Collateralized debt	723		535		Collateralized debt	749		535
2028 Notes	2028 Notes	1		3		2028 Notes	3		3
2026 Sustainability Notes	2026 Sustainability Notes	2		4		2026 Sustainability Notes	4		4
2031 Notes	2031 Notes	5		10		2031 Notes	9		10
Other lines of credit	Other lines of credit	12		10		Other lines of credit	9		10
		$	2,332	$	2,131		$	2,286	$	2,131
Non-Current loans payable and other financial liabilities:	Non-Current loans payable and other financial liabilities:					Non-Current loans payable and other financial liabilities:
Loans from banks	Loans from banks	$	138	$	145	Loans from banks	$	126	$	145
Secured lines of credit	Secured lines of credit	24		24		Secured lines of credit	23		24
Financial Bills						Financial Bills	1		—
Deposit Certificates	Deposit Certificates	2		3		Deposit Certificates	—		3
Commercial Notes	Commercial Notes	191		187		Commercial Notes	202		187
Finance lease obligations	Finance lease obligations	43		37		Finance lease obligations	40		37
Collateralized debt	Collateralized debt	573		703		Collateralized debt	604		703
2028 Notes	2028 Notes	436		436		2028 Notes	436		436
2026 Sustainability Notes	2026 Sustainability Notes	398		398		2026 Sustainability Notes	396		398
2031 Notes	2031 Notes	695		694		2031 Notes	651		694
Other lines of credit						Other lines of credit	2		—
		$	2,500	$	2,627		$	2,481	$	2,627

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							Balances as of
Type of instrument	Type of instrument	Currency	Interest	Weighted Average Interest Rate		Maturity	March 31, 2023		December 31, 2022		Type of instrument	Currency	Interest	Weighted Average Interest Rate		Maturity	June 30, 2023		December 31, 2022
							(In millions)										(In millions)
Loans from banks	Loans from banks										Loans from banks
Chilean Subsidiaries	Chilean Subsidiaries	Chilean Pesos	Fixed	11.72	%	April 2023 - April 2025	$	131	$	150	Chilean Subsidiaries	Chilean Pesos	Fixed	11.60	%	August 2023 - April 2025	$	112	$	150
Brazilian Subsidiary (*)	Brazilian Subsidiary (*)	US Dollar	Fixed	5.75	%	November 2023	50		—		Brazilian Subsidiary (*)	US Dollar	Fixed	5.75	%	November 2023	51		—
Brazilian Subsidiary (*)	Brazilian Subsidiary (*)	US Dollar	Fixed	4.32	%	August 2023	59		59		Brazilian Subsidiary (*)	US Dollar	Fixed	4.32	%	August 2023	59		59
Brazilian Subsidiary	Brazilian Subsidiary	Brazilian Reais	Variable	TJLP +0.8	%	April 2023 - May 2031	9		9		Brazilian Subsidiary	Brazilian Reais	Variable	TJLP + 0.8	%	July 2023 - May 2031	9		9
Mexican Subsidiary	Mexican Subsidiary	Mexican Pesos	Variable	TIIE + 2.20 - 3.50	%	April 2023 - June 2027	190		177		Mexican Subsidiary	Mexican Pesos	Variable	TIIE + 2.20 - 3.50	%	July 2023 - June 2027	198		177
Uruguayan Subsidiary	Uruguayan Subsidiary	Uruguayan Pesos	Fixed	11.60	%	April - June 2023	44		47		Uruguayan Subsidiary	Uruguayan Pesos	Fixed	11.00	%	July 2023	47		47
Colombian Subsidiary	Colombian Subsidiary	Colombian Pesos	Fixed	15.13	%	May 2023 - June 2023	16		22		Colombian Subsidiary	Colombian Pesos	Fixed	14.45	%	July 2023 - September 2023	23		22

Bank overdrafts	Bank overdrafts										Bank overdrafts
Uruguayan Subsidiary	Uruguayan Subsidiary	Uruguayan Pesos	—	—	%	—	—		9		Uruguayan Subsidiary	Uruguayan Pesos	Fixed	11.62	%	July 2023	7		9
Argentine Subsidiaries		Argentine Pesos	Fixed	—	%	April 2023	22		—
Chilean Subsidiaries											Chilean Subsidiaries	Chilean Pesos	Variable	TIB + 2.00	%	July 2023	25		—

Secured lines of credit	Secured lines of credit										Secured lines of credit
Argentine Subsidiaries	Argentine Subsidiaries	Argentine Pesos	Fixed	71.52	%	April 2024	104		107		Argentine Subsidiaries	Argentine Pesos	Fixed	88.50	%	July 2023	106		107
Mexican Subsidiary	Mexican Subsidiary	Mexican Pesos	Fixed	10.07	%	April 2023 - July 2027	33		32		Mexican Subsidiary	Mexican Pesos	Fixed	10.12	%	July 2023 - July 2027	32		32

Financial Bills	Financial Bills										Financial Bills
Brazilian Subsidiary	Brazilian Subsidiary	Brazilian Reais	Variable	CDI + 0.95% - 1.10%	%	July 2023 - February 2024	120		113		Brazilian Subsidiary	Brazilian Reais	Variable	CDI + 0.95 - 1.40	%	July 2023 - June 2025	132		113

Deposit Certificates	Deposit Certificates										Deposit Certificates
Brazilian Subsidiary	Brazilian Subsidiary	Brazilian Reais	Variable	IPCA + 5.35 - 6.85	%	April - May 2023	210		272		Brazilian Subsidiary	Brazilian Reais	—	—	%	—	—		272
Brazilian Subsidiary	Brazilian Subsidiary	Brazilian Reais	Variable	99% to 140% of CDI		April 2023 - September 2024	668		565		Brazilian Subsidiary	Brazilian Reais	Variable	100% to 150% of CDI		July 2023 - June 2024	715		565
Brazilian Subsidiary	Brazilian Subsidiary	Brazilian Reais	Fixed	12.55 - 14.70	%	April - September 2023	73		114		Brazilian Subsidiary	Brazilian Reais	Fixed	13.35 - 14.70	%	July 2023 - April 2024	91		114
Brazilian Subsidiary	Brazilian Subsidiary	Brazilian Reais	—	—	%	—	—		45		Brazilian Subsidiary	Brazilian Reais	Variable	107.02% to 107.05% of CDI		August 2023	21		45

Commercial Notes	Commercial Notes										Commercial Notes
Brazilian Subsidiary	Brazilian Subsidiary	Brazilian Reais	Variable	DI +0.88	%	April 2023 - August 2027	71		71		Brazilian Subsidiary	Brazilian Reais	Variable	DI + 0.88	%	July 2023 - August 2027	77		71
Brazilian Subsidiary	Brazilian Subsidiary	Brazilian Reais	Variable	IPCA + 6.41	%	April 2023 - August 2029	126		122		Brazilian Subsidiary	Brazilian Reais	Variable	IPCA + 6.41	%	July 2023 - August 2029	137		122

Finance lease obligations	Finance lease obligations						61		51		Finance lease obligations						62		51
Collateralized debt	Collateralized debt						1,296		1,238		Collateralized debt						1,353		1,238
2028 Notes	2028 Notes	US Dollar	Fixed	2.00	%	August 2023 - August 2028	437		439		2028 Notes	US Dollar	Fixed	2.00	%	August 2023 - August 2028	439		439
2026 Sustainability Notes	2026 Sustainability Notes	US Dollar	Fixed	2.375	%	July 2023 - January 2026	400		402		2026 Sustainability Notes	US Dollar	Fixed	2.375	%	July 2023 - January 2026	400		402
2031 Notes	2031 Notes	US Dollar	Fixed	3.125	%	July 2023 - January 2031	700		704		2031 Notes	US Dollar	Fixed	3.125	%	July 2023 - January 2031	660		704
Other lines of credit	Other lines of credit						12		10		Other lines of credit						11		10
							$	4,832	$	4,758							$	4,767	$	4,758

(*)The carrying amount includes the effect of the derivative instrument that qualified for fair value ~~hedge.~~hedge accounting. See ~~note~~Note 15 "Derivative ~~Instruments"~~instruments" for further detail.

See Notes 13 and 14 to these unaudited interim condensed consolidated financial statements for details regarding the Company’s collateralized debt securitization transactions and finance lease obligations, respectively.

2.375% Sustainability Senior Notes Due 2026 and 3.125% Senior Notes Due 2031

On January 14, 2021, the Company closed a public offering of $400 million aggregate principal amount of 2.375% Sustainability Notes due 2026 (the “2026 Sustainability Notes”) and $700 million aggregate principal amount of 3.125% Notes due 2031 (the “2031 Notes”, and together with the 2026 Sustainability Notes, the “Notes”).

In May 2023, the Company repurchased a $2 million and $44 million principal amount of the outstanding 2026 Sustainability Notes and 2031 Notes, respectively. The total amount paid amounted to $38 million, as a result, $398 million and $656 million of the principal amount of the 2026 Sustainability Notes and 2031 Notes remains outstanding as of June

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30, 2023, respectively. For the six and three-month periods ended June 30, 2023, the Company recognized $8 million as a gain in Interest income and other financial gains in the unaudited interim condensed consolidated statements of income.

For additional information regarding the 2026 Sustainability Notes and the 2031 Notes please refer to Note 17 to the audited consolidated financial statements for the year ended December 31, 2022, contained in the Company’s 2022 10-K.

~~Table of Contents~~

2.00% Convertible Senior Notes Due 2028 (“2028 Notes”)

As of ~~March 31,~~June 30, 2023, the principal and issuance costs of the 2028 Notes amounted to $439 million and $3 million, respectively. As of December 31, 2022, the principal and issuance costs of the 2028 Notes amounted to $439 million and $3 million, respectively. For the six and three-month ~~period~~periods ended ~~March 31,~~June 30, 2023 and 2022, the Company recognized interest expense, including the amortization of issuance costs of $2$5 million and $2 million, ~~respectively .~~in both periods, respectively.

During the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023, a total principal amount of $2$10 thousand was requested for conversion. The determination of whether or not the Notes are convertible must be performed on a quarterly basis. The Company reconfirmed during the ~~first~~second quarter of 2023 that the conversion threshold was met and the Notes remain eligible for conversion. ~~From April 1, 2023 to~~As of the date of issuance of these unaudited interim condensed consolidated financial statements, the Company did not receive additional ~~conversion request~~requests for ~~$1 thousand of principal amount was made.~~conversion.

The Company has entered into capped call transactions with respect to shares of its common stock with certain financial institutions (the “2028 Notes Capped Call Transactions”). The 2028 Notes Capped Call Transactions are expected generally to reduce the potential dilution upon conversion of the 2028 Notes in the event that the market price of the Company’s common stock is greater than the strike price and lower than the cap price of the 2028 Notes Capped Call Transactions. The amounts the Company has paid, including transaction expenses, are as follows:


Capped call trading date	Amount
	(In millions)
June 2019 (*)	$	88
June 2020 (*)	104
August 2020	83
November 2020	120
January 2021	101

(*) Partially unwound in 2021.

Based on the ~~$1,318.06~~$1,184.60 closing price of the Company’s common stock on ~~March 31,~~June 30, 2023, and if the stock price remains constant, the Company could obtain ~~369,489~~256,442 shares of common stock on the 2028 Notes Capped ~~Calls~~Call Transactions settlement date. The settlement averaging period with respect to the 2028 Notes Capped Call Transactions began on June 28, 2023 and will end on August 30, 2023, and the 2028 Notes Capped Call Transactions settlement date will be September 1, 2023.

The total estimated fair value of the 2028 Notes was ~~$1,329~~$1,202 million and $884 million as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively. The fair value was determined based on the closing trading price per $100 principal amount of the 2028 Notes as of the last day of trading for the period. The fair value of the 2028 Notes is primarily affected by the trading price of the Company’s common stock and market interest rates. Based on the ~~$1,318.06~~$1,184.60 closing price of the Company’s common stock on ~~March 31,~~June 30, 2023, the if-converted value of the 2028 Notes exceeded their principal amount by ~~$866~~$734 million.

For additional information regarding the 2028 Notes and the 2028 Notes Capped Call Transactions please refer to Note 17 to the audited consolidated financial statements for the year ended December 31, 2022, contained in the Company’s 2022 10-K.

Revolving Credit Agreement

On March 31, 2022, the Company, as borrower, and certain of its Subsidiaries, as guarantors, entered into a $400 million revolving credit agreement.

For additional information regarding the Credit Agreement please refer to Note 17 to the audited consolidated financial statements for the year ended December 31, 2022, contained in the Company’s 2022 10-K.

As of ~~March 31,~~June 30, 2023, no amounts have been borrowed under the facility.

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13. Securitization Transactions

The process of securitization consists of the issuance of securities collateralized by a pool of assets through a special purpose entity (“SPEs”), often under a VIE.

The Company securitizes financial assets associated with its credit cards and loans receivable portfolio. The Company’s securitization transactions typically involve the legal transfer of financial assets to bankruptcy remote SPEs. The Company generally retains economic interests in the collateralized securitization transactions, which are retained in the form of subordinated interests. For accounting purposes, the Company is generally precluded from recording the transfers of assets in securitization transactions as sales or is required to consolidate the SPE.

The Company securitizes certain credit card receivables related to users’ purchases through Chilean SPEs. Under the SPE contracts, the Company has determined that it has no obligation to absorb losses or the right to receive benefits of the SPEs that could be significant because it does not retain any equity certificate of participation or subordinated interest in the SPEs. As the Company does not control the vehicles, its assets, liabilities and related results are not consolidated in the Company’s financial statements.

Additionally, the Company securitizes certain credit card receivables related to users’ purchases through Brazilian SPEs. Under the SPE contracts, the Company has determined that it has the obligation to absorb losses or the right to receive benefits of the SPEs that could be significant because it retains subordinated interest in the SPEs. As the Company controls the vehicles, the assets, liabilities and related results are consolidated in its financial statements.

The Company securitizes certain loans receivable through Brazilian, Argentine and Mexican SPEs, formed to securitize loans receivable provided by the Company to its users or purchased from financial institutions that grant loans to the Company’s users through Mercado Pago. According to the SPE contracts, the Company has determined that it has both the power to direct the activities of the entity that most significantly impact the entity’s performance and the obligation to absorb losses or the right to receive benefits of the entity that could be significant because it retains the equity certificates of participation and would therefore also be consolidated. When the Company controls the vehicle, it accounts for the securitization transactions as if they were secured financing and therefore the assets, liabilities and related results are consolidated in its financial statements.

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The following table summarizes the Company’s collateralized debt under securitization transactions, as of ~~March 31,~~June 30, 2023:

SPEs

Collateralized debt as of March 31, 2023

Interest rate

Currency

Maturity

SPEs

Collateralized debt as of June 30, 2023

Interest rate

Currency

Maturity

Mercado Crédito I Brasil Fundo de Investimento Em Direitos Creditórios Não Padronizados

198

CDI + 2.50%

Brazilian Reais

June 2025

Mercado Crédito I Brasil Fundo de Investimento Em Direitos Creditórios Não Padronizados

209

CDI + 2.50%

Brazilian Reais

June 2025

Fundo de Investimento Em DireitosCreditórios Arandu

198

CDI + 1.75%

Brazilian Reais

June 2023

Mercado Crédito Fundo de Investimento Em Direitos Creditórios Não Padronizado

CDI + 3.50%

Brazilian Reais

August 2023

Mercado Crédito Fundo de Investimento Em Direitos Creditórios Não Padronizado

CDI + 3.50%

Brazilian Reais

August 2023

Olimpia Fundo de Investimento Em Direitos Creditórios

103

CDI + 1.25%

Brazilian Reais

November 2024

Olimpia Fundo de Investimento Em Direitos Creditórios

105

CDI + 1.25%

Brazilian Reais

November 2024

Mercado Crédito II Brasil Fundo De Investimento Em Direitos Creditórios Nao Padronizados

222

CDI + 1.90%

Brazilian Reais

April 2028

Mercado Crédito II Brasil Fundo De Investimento Em Direitos Creditórios Nao Padronizados

130

CDI + 1.90%

Brazilian Reais

April 2028

Mercado Crédito Consumo IX

Badlar rates plus 200 basis points with a min 30% and a max 52%

Argentine Pesos

May 2023

Mercado Crédito Consumo X

Badlar rates plus 200 basis points with a min 35% and a max 62%

Argentine Pesos

June 2023

Seller Fundo De Investimento Em Direitos Creditórios

205

CDI + 1.60%

Brazilian Reais

March 2026

Seller Fundo De Investimento Em Direitos Creditórios

102

CDI + 1.80%

Brazilian Reais

May 2026

Mercado Crédito Consumo XI

Badlar rates plus 200 basis points with a min 35% and a max 63%

Argentine Pesos

August 2023

Mercado Crédito Consumo XI

Badlar rates plus 200 basis points with a min 35% and a max 63%

Argentine Pesos

August 2023

Mercado Crédito Consumo XII

Badlar rates plus 200 basis points with a min 35% and a max 70%

Argentine Pesos

September 2023

Mercado Crédito Consumo XII

Badlar rates plus 200 basis points with a min 35% and a max 70%

Argentine Pesos

September 2023

Mercado Crédito Consumo XIII

Badlar rates plus 200 basis points with a min 35% and a max 74%

Argentine Pesos

November 2023

Mercado Crédito Consumo XIII

Badlar rates plus 200 basis points with a min 35% and a max 74%

Argentine Pesos

November 2023

Mercado Crédito Consumo XIV

Badlar rates plus 200 basis points with a min 35% and a max 80%

Argentine Pesos

October 2023

Mercado Crédito Consumo XIV

Badlar rates plus 200 basis points with a min 35% and a max 80%

Argentine Pesos

October 2023

Mercado Crédito Consumo XV

Badlar rates plus 200 basis points with a min 35% and a max 92%

Argentine Pesos

October 2023

Mercado Crédito Consumo XV

Badlar rates plus 200 basis points with a min 35% and a max 92%

Argentine Pesos

October 2023

Mercado Crédito Consumo XVI

Badlar rates plus 200 basis points with a min 60% and a max 92%

Argentine Pesos

December 2023

Mercado Crédito Consumo XVI

Badlar rates plus 200 basis points with a min 60% and a max 92%

Argentine Pesos

December 2023

Mercado Crédito Consumo XVII

Badlar rates plus 200 basis points with a min 60% and a max 92%

Argentine Pesos

January 2024

Mercado Crédito Consumo XVII

Badlar rates plus 200 basis points with a min 60% and a max 92%

Argentine Pesos

January 2024

Mercado Crédito Consumo XVIII

Badlar rates plus 200 basis points with a min 60% and a max 92%

Argentine Pesos

January 2024

Mercado Crédito Consumo XVIII

Badlar rates plus 200 basis points with a min 60% and a max 92%

Argentine Pesos

January 2024

Mercado Crédito Consumo XIX (*)

Badlar rates plus 200 basis points with a min 60% and a max 92%

Argentine Pesos

February 2024

Mercado Crédito XIV

Badlar rates plus 200 basis points with a min 30% and a max 48%

Argentine Pesos

April 2023

Mercado Crédito Consumo XIX

Badlar rates plus 200 basis points with a min 60% and a max 92%

Argentine Pesos

February 2024

Mercado Crédito Consumo XX

Badlar rates plus 200 basis points with a min 60% and a max 92%

Argentine Pesos

March 2024

Mercado Crédito Consumo XXI

Badlar rates plus 200 basis points with a min 80% and a max 120%

Argentine Pesos

June 2024

Mercado Crédito Consumo XXII (*)

Badlar rates plus 200 basis points with a min 80% and a max 120%

Argentine Pesos

June 2024

Mercado Crédito XV

Badlar rates plus 200 basis points with a min 30% and a max 56%

Argentine Pesos

August 2023

Mercado Crédito XV

Badlar rates plus 200 basis points with a min 30% and a max 56%

Argentine Pesos

August 2023

Mercado Crédito XVI

Badlar rates plus 200 basis points with a min 35% and a max 80%

Argentine Pesos

September 2023

Mercado Crédito XVI

Badlar rates plus 200 basis points with a min 35% and a max 80%

Argentine Pesos

September 2023

Mercado Crédito XVII

Badlar rates plus 200 basis points with a min 35% and a max 88%

Argentine Pesos

March 2024

Mercado Crédito XVII

Badlar rates plus 200 basis points with a min 35% and a max 88%

Argentine Pesos

March 2024

Mercado Crédito XVIII

Badlar rates plus 200 basis points with a min 35% and a max 92%

Argentine Pesos

January 2024

Mercado Crédito XVIII

Badlar rates plus 200 basis points with a min 35% and a max 92%

Argentine Pesos

January 2024

Fideicomiso de administración y fuente de pago CIB/3756

166

The equilibrium interbank interest rate published by Banco de Mexico in the Diario Oficial plus 1.90%

Mexican Pesos

September 2024

Fideicomiso de administración y fuente de pago CIB/3756

175

The equilibrium interbank interest rate published by Banco de Mexico in the Diario Oficial plus 1.90%

Mexican Pesos

September 2024

Fideicomiso de administración y fuente de pago CIB/3369

226

The equilibrium interbank interest rate published by Banco de Mexico in the Diario Oficial plus 3.0%

Mexican Pesos

April 2025

Fideicomiso de administración y fuente de pago CIB/3369

261

The equilibrium interbank interest rate published by Banco de Mexico in the Diario Oficial plus 3.0%

Mexican Pesos

April 2025

1,296

1,353

(*)As of ~~March 31,~~June 30, 2023, Loans payable owned by ~~these trusts~~this trust were obtained through private placements. Mercado Crédito Consumo ~~XIX~~XXII trust made a public bond offering in the Argentine stock market on ~~April 13,~~July 7, 2023.

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This secured debt is issued by the SPEs and includes collateralized securities used to fund the Company’s Fintech business. The third-party investors in the securitization transactions have legal recourse only to the assets securing the debt and do not have recourse to the Company. Additionally, the cash flows generated by the SPEs are restricted to the payment of amounts due to third-party investors, but the Company retains the right to residual cash flows.

The assets and liabilities of the SPEs are included in the Company’s unaudited interim condensed consolidated financial statements as of ~~March 31,~~June 30, 2023 and December 31, 2022 as follows:


		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022
Assets	Assets	(In millions)				Assets	(In millions)
Current assets:	Current assets:					Current assets:
Restricted cash and cash equivalents	Restricted cash and cash equivalents	$	610	$	459	Restricted cash and cash equivalents	$	792	$	459
Short-term investments	Short-term investments	1		—		Short-term investments	1		—
Credit card receivables and other means of payments, net	Credit card receivables and other means of payments, net	231		317		Credit card receivables and other means of payments, net	106		317
Loans receivable, net	Loans receivable, net	890		799		Loans receivable, net	989		799
Total current assets	Total current assets	1,732		1,575		Total current assets	1,888		1,575
Non-current assets:	Non-current assets:					Non-current assets:
Long-term investments	Long-term investments	21		21		Long-term investments	23		21
Loans receivable, net	Loans receivable, net	19		24		Loans receivable, net	17		24
Total non-current assets	Total non-current assets	40		45		Total non-current assets	40		45
Total assets	Total assets	$	1,772	$	1,620	Total assets	$	1,928	$	1,620
Liabilities	Liabilities					Liabilities
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable and accrued expenses	Accounts payable and accrued expenses	$	1	$	4	Accounts payable and accrued expenses	$	—	$	4
Loans payable and other financial liabilities	Loans payable and other financial liabilities	723		535		Loans payable and other financial liabilities	749		535
Other liabilities	Other liabilities	5		1		Other liabilities	4		1
Total current liabilities	Total current liabilities	729		540		Total current liabilities	753		540
Non-current liabilities:	Non-current liabilities:					Non-current liabilities:
Loans payable and other financial liabilities	Loans payable and other financial liabilities	573		703		Loans payable and other financial liabilities	604		703
Total non-current liabilities	Total non-current liabilities	573		703		Total non-current liabilities	604		703
Total liabilities	Total liabilities	$	1,302	$	1,243	Total liabilities	$	1,357	$	1,243

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14. Leases

The Company leases certain fulfillment, cross-docking and services centers, office space, aircraft, aircraft hangars, machines, and vehicles in the various countries in which it operates. The lease agreements do not contain any residual value guarantees or material restrictive covenants.

Supplemental balance sheet information related to leases was as follows:


		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022
		(In millions)					(In millions)
Operating Leases	Operating Leases					Operating Leases
Operating lease right-of-use assets	Operating lease right-of-use assets	$	697	$	656	Operating lease right-of-use assets	$	779	$	656

Operating lease liabilities	Operating lease liabilities	$	688	$	656	Operating lease liabilities	$	761	$	656

Finance Leases	Finance Leases					Finance Leases
Property and equipment, at cost	Property and equipment, at cost	102		87		Property and equipment, at cost	104		87
Accumulated depreciation	Accumulated depreciation	(36)		(31)		Accumulated depreciation	(40)		(31)
Property and equipment, net	Property and equipment, net	$	66	$	56	Property and equipment, net	$	64	$	56

Loans payable and other financial liabilities	Loans payable and other financial liabilities	$	61	$	51	Loans payable and other financial liabilities	$	62	$	51

The following table summarizes the weighted average remaining lease term and the weighted average incremental borrowing rate for operating leases and the weighted average discount rate for finance leases as of ~~March 31,~~June 30, 2023 and December 31, 2022:

March 31,
2023

December 31,
2022

June 30, 2023

December 31, 2022

Weighted average remaining lease term

Operating leases

8 Years

Operating leases

7 Years

8 Years

Finance leases

3 Years

Finance leases

3 Years

Weighted average discount rate (*)

Operating leases

Finance leases

(*)Includes discount rates of leases in local currency and U.S. dollar.

The components of lease expense were as follows:


		Three Months Ended March 31,					Six Months Ended June 30,
		2023		2022			2023		2022
		(In millions)					(In millions)
Operating lease cost	Operating lease cost	$	42	$	27	Operating lease cost	$	88	$	59

Finance lease cost:	Finance lease cost:					Finance lease cost:
Depreciation of property and equipment	Depreciation of property and equipment	5		4		Depreciation of property and equipment	10		8
Interest on lease liabilities	Interest on lease liabilities	2		2		Interest on lease liabilities	5		4
Total finance lease cost	Total finance lease cost	$	7	$	6	Total finance lease cost	$	15	$	12

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Supplemental cash flow information related to leases was as follows:


		Three Months Ended March 31,					Six Months Ended June 30,
		2023		2022			2023		2022
		(In millions)					(In millions)
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Operating cash flows from operating leases	$	41	$	27	Operating cash flows from operating leases	$	80	$	54
Financing cash flows from finance leases	Financing cash flows from finance leases	6		4		Financing cash flows from finance leases	13		9

Assets obtained in exchange for lease obligations:	Assets obtained in exchange for lease obligations:					Assets obtained in exchange for lease obligations:
Operating leases	Operating leases	$	42	$	61	Operating leases	$	122	$	115
Finance leases	Finance leases	11		3		Finance leases	15		7

The following table summarizes the fixed, future minimum rental payments, excluding variable costs, which are discounted by the Company’s incremental borrowing rates to calculate the lease liabilities for the operating and finance leases:


Period Ending March 31, 2023		Operating Leases		Finance Leases
Period Ending June 30, 2023						Period Ending June 30, 2023	Operating Leases		Finance Leases
		(In millions)					(In millions)
One year or less	One year or less	$	159	$	23	One year or less	$	173	$	28
One year to two years	One year to two years	148		20		One year to two years	167		24
Two years to three years	Two years to three years	133		14		Two years to three years	146		17
Three years to four years	Three years to four years	103		5		Three years to four years	116		8
Four years to five years	Four years to five years	91		2		Four years to five years	105		1
Thereafter	Thereafter	339		—		Thereafter	367		—
Total lease payments	Total lease payments	$	973	$	64	Total lease payments	$	1,074	$	78
Less imputed interest	Less imputed interest	(285)		(3)		Less imputed interest	(313)		(16)
Total	Total	$	688	$	61	Total	$	761	$	62

15. Derivative instruments

Cash Flow Hedges

As of ~~March 31,~~June 30, 2023, the Company used foreign currency exchange contracts to hedge the foreign currency effects related to the forecasted purchase of MPOS devices in U.S. dollars owed by a Brazilian subsidiary whose functional currency is the Brazilian ~~Reais.~~Real. The Company designated the foreign currency exchange contracts as cash flow hedges, the derivative’s gain or loss is initially reported as a component of accumulated other comprehensive income and subsequently reclassified into earnings in the same period the forecasted transaction affects earnings. As of ~~March 31,~~June 30, 2023, the Company estimated that the whole amount of net derivative gains or losses related to its cash flow hedges included in accumulated other comprehensive income will be reclassified into earnings within the next 12 months.

In addition, the Company has entered into swap contracts to hedge the interest rate fluctuation of its variable financial debt issued by one of its Brazilian subsidiaries. The Company designated the swap contracts as cash flow hedges. The derivative’s gain or loss is initially reported as a component of accumulated other comprehensive income and subsequently reclassified into earnings within the next 12 months.

Fair Value Hedges

The Company has entered into cross currency swap contracts to hedge the interest rate and the foreign currency exposure of its fixed-rate, foreign currency financial debt issued by one of its Brazilian subsidiaries. The Company designated the swap contracts as fair value hedges. The derivative’s gain or loss is reported in earnings in the same line items as the change in the value of the financial debt due to the hedged risks. Since the terms of the interest rate swaps match the terms of the hedged debts, changes in the fair value of the interest rate swaps are offset by changes in the fair value of the hedged debts attributable to changes in interest rates. Accordingly, the net impact in current earnings is that the interest expense associated with the hedged debts is recorded at the floating rates.

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Net Investment Hedge

The Company used cross currency swap contracts, to reduce the foreign currency exchange risk related to its investment in its Brazilian foreign subsidiaries and the interest rate risk. This derivative was designated as a net investment hedge and, accordingly, gains and losses are reported as a component of accumulated other comprehensive income. The derivative’s gain or loss is initially reported as a component of accumulated other comprehensive income and is expected to be reclassified into earnings in the same period that the interest expense affects earnings.

Derivative instruments not designated as hedging instruments

As of ~~March 31,~~June 30, 2023, the Company entered into certain foreign currency exchange contracts to hedge the foreign currency fluctuations related to certain transactions denominated in U.S. dollars of certain of its Brazilian subsidiaries, whose functional currencies are the Brazilian ~~Reais.~~Real. These transactions were not designated as hedges for accounting purposes.

Finally, as of ~~March 31,~~June 30, 2023, the Company entered into swap contracts to hedge the interest rate fluctuation of a certain portion of its financial debt in its Brazilian subsidiaries and VIEs. These transactions were not designated as hedges for accounting purposes.

The following table presents the notional amounts of the Company’s outstanding derivative instruments:


		Notional Amount as of					Notional Amount as of
		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022
		(In millions)					(In millions)
Designated as hedging instrument	Designated as hedging instrument					Designated as hedging instrument
Foreign exchange contracts	Foreign exchange contracts	$	85	$	109	Foreign exchange contracts	$	68	$	109
Interest rate swap contracts	Interest rate swap contracts	191		229		Interest rate swap contracts	—		229
Cross currency swap contracts	Cross currency swap contracts	174		133		Cross currency swap contracts	161		133

Not designated as hedging instrument	Not designated as hedging instrument					Not designated as hedging instrument
Foreign exchange contracts	Foreign exchange contracts	$	59	$	110	Foreign exchange contracts	$	72	$	110
Interest rate swap contracts	Interest rate swap contracts	387		480		Interest rate swap contracts	311		480

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Derivative Instrument Contracts

The fair values of the Company’s outstanding derivative instruments as of ~~March 31,~~June 30, 2023 and December 31, 2022 were as follows:


			March 31,		December 31,
		Balance sheet location	2023		2022			Balance sheet location	June 30, 2023		December 31, 2022
			(In millions)						(In millions)
Derivative Instruments	Derivative Instruments						Derivative Instruments
Foreign exchange contracts designated as cash flow hedges	Foreign exchange contracts designated as cash flow hedges	Other current assets	$	—	$	1	Foreign exchange contracts designated as cash flow hedges	Other current assets	$	—	$	1
Cross currency swap contracts designated as net investment hedge	Cross currency swap contracts designated as net investment hedge	Other current liabilities	1		2		Cross currency swap contracts designated as net investment hedge	Other current liabilities	4		2
Interest rate swap contracts designated as cash flow hedges	Interest rate swap contracts designated as cash flow hedges	Other current liabilities	6		8		Interest rate swap contracts designated as cash flow hedges	Other current liabilities	—		8
Cross currency swap contracts designated as fair value hedge	Cross currency swap contracts designated as fair value hedge	Other current liabilities	7		2		Cross currency swap contracts designated as fair value hedge	Other current liabilities	17		2
Interest rate swap contracts not designated as hedging instruments	Interest rate swap contracts not designated as hedging instruments	Other current liabilities	1		1		Interest rate swap contracts not designated as hedging instruments	Other current liabilities	—		1
Foreign exchange contracts not designated as hedging instruments	Foreign exchange contracts not designated as hedging instruments	Other current liabilities	5		2		Foreign exchange contracts not designated as hedging instruments	Other current liabilities	7		2
Foreign exchange contracts designated as cash flow hedges	Foreign exchange contracts designated as cash flow hedges	Other current liabilities	4		2		Foreign exchange contracts designated as cash flow hedges	Other current liabilities	7		2
Interest rate swap contracts not designated as hedging instruments	Interest rate swap contracts not designated as hedging instruments	Other non-current liabilities	4		6		Interest rate swap contracts not designated as hedging instruments	Other non-current liabilities	1		6
Cross currency swap contracts designated as net investment hedge	Cross currency swap contracts designated as net investment hedge	Other non-current liabilities	3		1		Cross currency swap contracts designated as net investment hedge	Other non-current liabilities	5		1

The effects of derivative contracts on the unaudited interim condensed consolidated statement of comprehensive income as of ~~March 31,~~June 30, 2023 were as follows:


		December 31, 2022		Amount of gain (loss) recognized in other comprehensive income		Amount of gain (loss) reclassified from accumulated other comprehensive income		March 31, 2023			December 31, 2022		Amount of gain (loss) recognized in other comprehensive income		Amount of (gain) loss reclassified from accumulated other comprehensive income		June 30, 2023
		(In millions)									(In millions)
Foreign exchange contracts designated as cash flow hedges	Foreign exchange contracts designated as cash flow hedges	$	(2)	$	(4)	$	1	$	(5)	Foreign exchange contracts designated as cash flow hedges	$	(2)	$	(10)	$	4	$	(8)
Interest swap contracts designated as cash flow hedges	Interest swap contracts designated as cash flow hedges	(2)		2		(1)		(1)		Interest swap contracts designated as cash flow hedges	(2)		8		(6)		—
Cross currency swap contracts designated as net investment hedge	Cross currency swap contracts designated as net investment hedge	(1)		(5)		2		(4)		Cross currency swap contracts designated as net investment hedge	(1)		(8)		4		(5)
		$	(5)	$	(7)	$	2	$	(10)		$	(5)	$	(10)	$	2	$	(13)

The effect of the Company’s fair value hedge relationships on the unaudited interim condensed consolidated statements of income for the six and three-month ~~period~~periods ended ~~March 31,~~June 30, 2023 is a loss of $5$13 million and $8 million respectively, and affected interest expense and other financial losses (there were no fair value hedge relationships during the six and three-month ~~period~~periods ended ~~March 31,~~June 30, 2022).

The carrying amount of the hedged item for fair value hedges as of ~~March 31,~~June 30, 2023 is ~~$109~~$110 million (there were no fair value hedge relationships as of ~~March 31,~~June 30, 2022).

~~Table of Contents~~

The effect of the Company’s fair value hedge relationships on the unaudited interim condensed consolidated balance sheets related to cumulative basis adjustments for fair value hedges for the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023 is ~~less than~~ $1 million (there were no fair value hedge relationships during the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2022).

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The effects of derivative contracts not designated as hedging instruments on the unaudited interim condensed consolidated statements of income for the six and three-month periods ended ~~March 31,~~June 30, 2023 and 2022 were as follows:


		Three Months Ended March 31,					Six Months Ended June 30,				Three Months Ended June 30,
		2023		2022			2023		2022		2023		2022
		(In millions)					(In millions)				(In millions)
Foreign exchange contracts not designated as hedging instruments recognized in Foreign currency losses, net	Foreign exchange contracts not designated as hedging instruments recognized in Foreign currency losses, net	$	(6)	$	(5)	Foreign exchange contracts not designated as hedging instruments recognized in Foreign currency losses, net	$	(11)	$	—	$	(5)	$	5
Currency swap contracts not designated as hedging instruments recognized in Foreign currency losses, net	Currency swap contracts not designated as hedging instruments recognized in Foreign currency losses, net	—		(32)		Currency swap contracts not designated as hedging instruments recognized in Foreign currency losses, net	—		(22)		—		10
Interest rate contracts not designated as hedging instruments recognized in Interest expense and other financial losses	Interest rate contracts not designated as hedging instruments recognized in Interest expense and other financial losses	2		—		Interest rate contracts not designated as hedging instruments recognized in Interest expense and other financial losses	5		—		3		—

16. Share repurchase program

On August 4, 2021, the Board authorized the Company to repurchase shares of the Company’s common stock, for aggregate consideration of up to $150 million. This authorization was scheduled to expire on August 31, 2022. On March 1, 2022, the Board authorized an increase in that authorization of $300 million, from an aggregate consideration of up to $150 million to an aggregate consideration of up to $450 million (the “~~Existing~~Prior Program”). On March 1, 2022, the Board also authorized a new extension of the term of the ~~Existing~~Prior Program, from August 31, 2022 to August 31, 2023. On February 21, 2023, the Board terminated the ~~Existing~~Prior Program and authorized a new program to repurchase shares of the Company’s common stock, for an aggregate consideration of up to $900 million to expire on March 31, 2024. As of ~~March 31,~~June 30, 2023, the estimated remaining balance available for share repurchases under this Program was ~~$783~~$479 million.

The Company expects to purchase shares at any time and from time to time, in compliance with applicable federal securities laws, through open-market purchases, block trades, derivatives, trading plans established in accordance with SEC rules, or privately negotiated transactions. The timing of repurchases will depend on factors including market conditions and prices, the Company’s liquidity requirements and alternative uses of capital. The share repurchase program may be suspended from time to time or discontinued, and there is no assurance as to the number of shares that will be repurchased under the program or that there will be any additional repurchases.

As of ~~March 31,~~June 30, 2023, the Company had acquired ~~341,276~~456,900 shares under the aforementioned share repurchase programs.

From time to time, the Company acquires shares of its own common stock in the Argentine market and pays for them in Argentine pesos at a price that reflects the additional cost of accessing U.S. dollars through securities denominated in U.S. dollars, because of restrictions imposed by the Argentine government for buying U.S. dollars at the official exchange rate in Argentina (See Note 2 - “Summary of significant accounting policies ~~and supplemental information~~ - Argentine currency status” of these unaudited interim condensed consolidated financial statements). As a result, the Company recognized foreign currency losses of ~~$56~~ $213 million and ~~$35~~$63 million for the six-month periods ended June 30, 2023 and 2022 respectively, while foreign currency losses for the three-month periods ended ~~March 31,~~June 30, 2023 and 2022 amounted to $157 million and $28 million, respectively.

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Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Regarding Forward-Looking Statements

Any statements made or implied in this report that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements within the meaning of Section 27 A of the Securities Act of 1933, as amended, (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and should be evaluated as such. The words “anticipate,” “believe,” “expect,” “intend,” “plan,” “estimate,” “target,” “project,” “should,” “may,” “could,” “will” and similar words and expressions are intended to identify forward-looking statements. These forward-looking statements are contained throughout this report. Forward-looking statements generally relate to information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, future economic, political and social conditions in the countries in which we operate and their possible impact on our business, and the effects of future regulation and the effects of competition. Such forward-looking statements reflect, among other things, our current expectations, plans, projections and strategies, anticipated financial results, future events and financial trends affecting our business, all of which are subject to known and unknown risks, uncertainties and other important factors (in addition to those discussed elsewhere in this report) that may cause our actual results to differ materially from those expressed or implied by these forward-looking statements. These risks and uncertainties include, among other things:

•our expectations regarding the continued growth of e-commerce and Internet usage in Latin America;

•competition;

•our ability to expand our operations and adapt to rapidly changing technologies;

•our ability to attract new customers, retain existing customers and increase revenues;

•the impact of government, central bank and other regulations on our business;

•credit risk and other risks of lending, such as increases in defaults by customers and other delinquencies;

•litigation and legal liability;

•security breaches and illegal uses of our services;

•systems interruptions or failures;

•our ability to attract and retain qualified personnel;

•consumer trends;

•reliance on third-party service providers;

•enforcement of intellectual property rights;

•our expectations regarding benefits and synergies from recent or future strategic investments, acquisitions of businesses, technologies, services or products;

•seasonal fluctuations;

•our indebtedness;

•volatility of market prices, impairment and unique risks related to loss of the digital assets that we acquire;

•political, social and economic conditions in Latin America; and

•our long-term sustainability goals.

Many of these risks are beyond our ability to control or predict. New risk factors emerge from time to time and it is not possible for Management to predict all such risk factors, nor can it assess the impact of all such risk factors on our company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

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These statements are based on currently available information and our current assumptions, expectations and projections about future events. While we believe that our assumptions, expectations and projections are reasonable in view of the currently available information, you are cautioned not to place undue reliance on our forward-looking statements. These statements are not guarantees of future performance. They are subject to future events, risks and uncertainties –many of which are beyond our control– as well as potentially inaccurate assumptions that could cause actual results to differ materially from our expectations and projections. Some of the material risks and uncertainties that could cause actual results to differ materially from our expectations and projections are described in “Item 1A — Risk Factors” in Part I of the Company’s 2022 10-K filed with the SEC on February 24, 2023 and in other reports we file from time to time with the SEC.

You should read that information in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I of this report, our unaudited interim condensed consolidated financial statements and related notes in Item 1 of Part I of this report and our audited consolidated financial statements and related notes in Item 8 of Part II of the Company’s 2022 10-K. We note such information for investors as permitted by the Private Securities Litigation Reform Act of 1995. There also may be other factors that we cannot anticipate or that are not described in this report, generally because they are unknown to us or we do not perceive them to be material that could cause results to differ materially from our expectations. Certain monetary amounts included elsewhere in this document have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be the arithmetic aggregation of the figures that precede them.

Forward-looking statements speak only as of the date they are made, and we do not undertake to update these forward-looking statements except as may be required by law. You are advised, however, to review any further disclosures we make on related subjects in our periodic filings with the SEC.

The discussion and analysis of our financial condition and results of operations has been organized to present the following:

•a brief overview of our company;

•a review of our financial presentation and accounting policies, including our critical accounting policies;

•a discussion of our principal trends and results of operations for the six and three-month periods ended ~~March 31,~~June 30, 2023 and 2022;

•a discussion of the principal factors that influence our results of operations, financial condition and liquidity;

•a discussion of our liquidity and capital resources and a discussion of our capital expenditures; and

•a description of our non-GAAP financial measures.

Other Information

We routinely post important information for investors on our Investor Relations website, http://investor.mercadolibre.com. We use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under SEC Regulation FD (Fair Disclosure). Accordingly, investors should monitor our Investor Relations website, in addition to following our press releases, SEC filings, public conference calls and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this report.

Business Overview

We are the largest online commerce ecosystem in Latin America based on unique visitors and orders processed, and we are present in 18 countries: Argentina, Brazil, Mexico, Chile, Colombia, Peru, Uruguay, Venezuela, Bolivia, Costa Rica, Dominican Republic, Ecuador, Guatemala, Honduras, Nicaragua, Panama, Paraguay and El Salvador. Our platform is designed to provide users with a complete portfolio of services to facilitate commercial transactions both digitally and offline.

Through our e-commerce platform, we provide buyers and sellers with a robust and safe environment that fosters the development of a large e-commerce community in Latin America, a region with a population of over 650 million people and with one of the fastest-growing Internet penetration and e-commerce growth rates in the world. We believe that we offer world-class technological and commercial solutions that address the distinctive cultural and geographic challenges of operating a digital commerce platform in Latin America.

We offer our users an ecosystem of six integrated e-commerce services and digital financial services: the Mercado Libre Marketplace, the Mercado Pago Fintech platform, the Mercado Envios logistics service, the Mercado Ads solution, the Mercado Libre Classifieds service and the Mercado Shops online storefronts solution.

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The Mercado Libre Marketplace, is a fully-automated, topically-arranged and user-friendly online commerce platform, which can be accessed through our website and mobile app. This platform enables us (when we act as sellers in our first party sales), merchants and individuals to list merchandise and conduct sales and purchases digitally. The Marketplace has an ample assortment of products, with a wide range of categories such as consumer electronics, apparel and beauty, home goods, automotive accessories, toys, books and entertainment and consumer packaged goods.

To complement the Mercado Libre Marketplace and enhance the user experience for our buyers and sellers, we developed Mercado Pago, an integrated digital payments solution. Mercado Pago was initially designed to facilitate transactions on Mercado Libre’s Marketplaces by providing a mechanism that allowed our users to securely, easily and promptly send and receive payments. Now Mercado Pago is a full ecosystem of financial technology solutions both in the digital and physical world. Our digital payments solution enables any MercadoLibre registered user to securely and easily send and receive digital payments and to pay for purchases made on any of Mercado ~~Libre’s~~Libre Marketplaces. Currently, Mercado Pago processes and settles all transactions on our Marketplaces in Argentina, Brazil, Mexico, Chile, Colombia, Uruguay and Peru and is available to process and settle certain transactions on our Marketplace in Ecuador.

Beyond facilitating Marketplace transactions, over the years we have expanded our array of Mercado Pago services to third parties outside Mercado Libre’s Marketplace. We began first by satisfying the growing demand for online-based payment solutions by providing merchants the necessary digital payment infrastructure for e-commerce to flourish in Latin America. Today, Mercado Pago’s digital payments business not only allows merchants to facilitate checkout and payment processes on their websites through a branded or white label solution or software development kits, but it also enables users to transfer money in a simple manner to each other through the Mercado Pago website or on Mercado Pago app. Through Mercado Pago, we brought trust to the merchant customer relationship, allowing online consumers to shop easily and safely, while giving them the confidence to share sensitive personal and financial data with us. Finally, we have also deepened our fintech offerings by growing our online-to-offline (“O2O”) products and services.

The Mercado Envios logistics solution enables sellers on our platform to utilize third-party carriers and other logistics service providers, while also providing them with fulfillment and warehousing services. The logistics services we offer are an integral part of our value proposition, as they reduce friction between buyers and sellers, and allow us to have greater control over the full experience. Sellers that opt into our logistics solutions are not only able to offer a uniform and seamlessly integrated shipping experience to their buyers at competitive prices, but are also eligible to access shipping subsidies to offer free or discounted shipping for many of their sales on our Marketplaces. In 2020, we launched Meli Air with a fleet of dedicated aircraft covering routes across Brazil and Mexico, with the aim of improving our delivery times. We have also developed a network of independent neighborhood stores and commercial points (known as “Meli Places”) to receive and store packages that are in transit using our integrated technology. Meli Places network allows buyers and sellers to pick-up, drop-off, or return packages with a better experience, reducing the travel distance for all parties. As of ~~March 31,~~June 30, 2023, we offer our shipping solution directed towards deliveries in Argentina, Brazil, Mexico, Chile, Colombia, Uruguay, Peru and Ecuador and we also offer free shipping to buyers in Argentina, Brazil, Mexico, Chile, Colombia, Uruguay and Peru.

Mercado Credito, our credit solution available in Argentina, Brazil, Mexico and Chile, leverages our user base, which is loyal and engaged, and in part has also been historically underserved or overlooked by financial institutions and suffers from a lack of access to needed credit. Facilitating credit is a key service overlay that enables us to further strengthen the engagement and lock-in rate of our users, while also generating additional touchpoints and incentives to use Mercado Pago as an end-to-end financial solution.

Our asset management product, which is available in Argentina, Brazil and Mexico, is a critical pillar to build our alternative two-sided network vision. It incentivizes our users to begin to fund their digital wallets with cash as opposed to credit or debit cards given that the return our product offers is greater than traditional checking accounts.

As an extension of our asset management and savings solutions for users, we launched a digital assets feature as part of the Mercado Pago wallet in Brazil in 2021, in Mexico in 2022 and in Chile in 2023. This service allows our millions of users to purchase, hold and sell selected digital assets through our interface without leaving the Mercado Pago application, while a partner acts as the custodian and offers the blockchain infrastructure platform. This feature is available for all users through their Mercado Pago wallet.

Our advertising platform, Mercado Ads, enables businesses to promote their products and services on the Internet. Through our advertising platform, MercadoLibre’s brands and sellers are able to display ads on our webpages through product searches, banner ads, or suggested products. Our advertising platform enables merchants and brands to access the millions of consumers that are on our Marketplaces at any given time with the intent to purchase, which increases the likelihood of conversion.

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Through Mercado Libre Classifieds, our online classified listing service, our users can also list and purchase motor vehicles, real estate and services in the countries where we operate. Classifieds listings differ from Marketplace listings as they only charge optional placement fees and not final value fees. Our classifieds pages are also a major source of traffic to our platform, benefiting both the commerce and fintech businesses.

Complementing the services that we offer, our digital storefront solution, Mercado Shops, allows users to set-up, manage and promote their own digital stores. These stores are hosted by Mercado Libre and offer integration with the rest of our ecosystem, namely our Marketplaces, payment services and logistics services. Users can create a store at no cost, and can access additional functionalities and value added services on commission.

Reporting Segments and Geographic Information

Our segment reporting is based on geography, which is the criterion our Management currently uses to evaluate our segment performance. Our geographic segments are Brazil, Argentina, Mexico and Other Countries (including Chile, Colombia, Costa Rica, Ecuador, Peru and Uruguay). Although we discuss long-term trends in our business, it is our policy not to provide earnings guidance in the traditional sense. We believe that uncertain conditions make the forecasting of near-term results difficult. Further, we seek to make decisions focused primarily on the long-term welfare of our Company and believe focusing on short-term earnings does not best serve the interests of our stockholders. We believe that execution of key strategic initiatives as well as our expectations for long-term growth in our markets will best create stockholder value. A long-term focus may make it more difficult for industry analysts and the market to evaluate the value of our Company, which could reduce the value of our common stock or permit competitors with short-term tactics to grow more rapidly than us. We, therefore, encourage potential investors to consider this strategy before making an investment in our common stock.

The following table sets forth the percentage of our consolidated net revenues by segment for the six and three-month periods ended ~~March 31,~~June 30, 2023 and 2022:


		Three Months Ended March 31,				Six Months Ended June 30,				Three Months Ended June 30,
(% of total consolidated net revenues)	(% of total consolidated net revenues)		2023		2022		(% of total consolidated net revenues)	2023		2022		2023		2022
Brazil	Brazil		52.0	%	55.7	%	Brazil	52.1	%	55.8	%	52.1	%	55.9	%
Argentina	Argentina		23.7		23.0		Argentina	23.1		23.0		22.6		22.9
Mexico	Mexico		19.5		16.2		Mexico	20.1		16.3		20.6		16.5
Other Countries	Other Countries		4.8		5.1		Other Countries	4.7		4.9		4.7		4.7

The following table summarizes the changes in our net revenues by segment for the six and three-month periods ended ~~March 31,~~June 30, 2023 and 2022:


			Three Months Ended March 31,	Change from 2022 to 2023					Six Months Ended June 30,						Change from 2022 to 2023				Three Months Ended June 30,				Change from 2022 to 2023
				2023			2022			in Dollars		in %			2023		2022		in Dollars		in %		2023		2022		in Dollars		in %
		(in millions, except percentages)				(in millions, except percentages)											(in millions, except percentages)
Net Revenues:	Net Revenues:													Net Revenues:
Brazil	Brazil			$	1,579		$	1,252		$	327	26.1	%	Brazil	$	3,359	$	2,703	$	656	24.3	%	$	1,780	$	1,451	$	329	22.7	%
Argentina	Argentina			721			518			203		39.2		Argentina	1,492		1,112		380		34.2		771		594		177		29.8
Mexico	Mexico			591			364			227		62.4		Mexico	1,294		792		502		63.4		703		428		275		64.3
Other Countries	Other Countries			146			114			32		28.1		Other Countries	307		238		69		29.0		161		124		37		29.8
Total Net Revenues	Total Net Revenues			$	3,037		$	2,248		$	789	35.1	%	Total Net Revenues	$	6,452	$	4,845	$	1,607	33.2	%	$	3,415	$	2,597	$	818	31.5	%

Description of Line Items

Net revenues

We disaggregate revenues into four geographical reporting segments. Within each of our segments, the services we provide and the products we sell generally fall into two distinct revenue streams: “Commerce” and “Fintech”.

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The following table summarizes our consolidated net revenues by revenue stream for the six and three-month periods ended ~~March 31,~~June 30, 2023 and 2022:


		Three Months Ended March 31,					Six Months Ended June 30,				Three Months Ended June 30,
Consolidated net revenues by revenue stream	Consolidated net revenues by revenue stream	2023		2022		Consolidated net revenues by revenue stream	2023		2022		2023		2022
		(in millions)					(in millions)
Commerce	Commerce	$	1,676	$	1,277	Commerce	$	3,612	$	2,682	$	1,936	$	1,404
Fintech	Fintech	1,361		971		Fintech	2,840		2,163		1,479		1,193
Total	Total	$	3,037	$	2,248	Total	$	6,452	$	4,845	$	3,415	$	2,597

Revenues from commerce transactions are mainly generated from:

•marketplace fees that include final value fees and flat fees for transactions below a certain merchandise value;

•first party sales;

•shipping fees, net of the third-party carrier costs (when we act as an agent);

•ad sales ~~up-front~~ fees;

•classifieds fees; and

•fees from other ancillary businesses.

Final value fees represent a percentage of the sale value that is charged to the seller once an item is successfully sold and flat fees represent a fixed charge for transactions below a certain merchandise value.

Revenues from ~~first-party~~first party sales are generated when control of the good is transferred, upon delivery to our customers.

Shipping revenues are generated when a buyer elects to receive an item through our shipping service, net of the third-party carrier costs (when we act as an agent).

Through our classifieds offerings in vehicles, real estate and services, we generate revenues from up-front fees. These fees are charged to sellers who opt to give their listings greater exposure throughout our websites.

Revenues from advertising services provided to sellers, vendors, brands and others, through performance product ads and display advertising, are recognized based on the number of clicks or impressions.

Fintech revenues correspond to our Mercado Pago service, which are attributable to:

•commissions representing a percentage of the payment volume processed that are charged to sellers in connection with off Marketplace-platform transactions;

•commissions from additional fees we charge when a buyer elects to pay in installments through our Mercado Pago platform, for transactions that occur either on or off our Marketplace platform;

•commissions from additional fees we charge when our sellers elect to withdraw cash;

•interest, cash advances and fees from merchant and consumer loans granted under our Mercado Credito solution;

•commissions that we charge from transactions carried out with Mercado Pago credit and debit cards; and

•revenues from the sale of mobile points of sale products and insurtech fees.

Although we also process payments on the Marketplace, we do not charge sellers an added commission for this service, as it is already included in the Marketplace final value fee that we charge.

When more than one service is included in one single arrangement with the same customer, we recognize revenue according to multiple element arrangements accounting, distinguishing between each of the services provided and allocating revenues based on their respective estimated selling prices. When the Company finances the transactions directly, the financing component is separated from the revenue amount and is recognized over the financing period using the interest method.

~~Table of Contents~~

We have a highly fragmented customer revenue base given the large numbers of sellers and buyers who use our platforms. For the six and three-month periods ended ~~March 31,~~June 30, 2023 and 2022, no single customer accounted for more than 5.0% of our net revenues.

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Our Mercado Libre Marketplace is available in 18 countries (Argentina, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Peru, Mexico, Panama, ~~Peru,~~Honduras, Nicaragua, El Salvador, Uruguay, Bolivia, Guatemala, Venezuela (deconsolidated since December 1, 2017)~~, Bolivia, Honduras, Nicaragua, El Salvador, Guatemala~~ and Paraguay), and Mercado Pago is available in 8 countries (Argentina, Brazil, Mexico, Colombia, Chile, Peru, ~~Colombia, Mexico,~~ Uruguay and Ecuador). Additionally, Mercado Envios is available in 8 countries (Argentina, Brazil, Mexico, Colombia, Chile, Peru, Uruguay and Ecuador). The functional currency for each country’s operations is the country’s local currency, except for Argentina, where the functional currency is the U.S. dollar due to Argentina’s status as a highly inflationary economy. Our net revenues are generated in multiple foreign currencies and then translated into U.S. dollars at the average monthly exchange rate. Please refer to “Summary of significant accounting ~~policies and supplemental information”~~policies” in Note 2 to our unaudited interim condensed consolidated financial statements for further detail on foreign currency translation.

Cost of net revenues

Cost of net revenues primarily includes cost of goods sold, shipping operation costs (including warehousing costs), carrier and other operating costs, collection fees, sales taxes, funding costs related to our credits business, fraud prevention fees, certain taxes on bank transactions, hosting and site operation fees, compensation for customer support personnel ~~ISP connectivity charges~~ and depreciation and amortization.

Our subsidiaries in Brazil, Argentina and Colombia are subject to certain taxes on revenues, which are classified as a cost of net revenues. These taxes represented ~~7.8%~~7.7% and 7.5% of net revenues for the six and three-month ~~period~~periods ended ~~March 31,~~June 30, 2023, respectively, as compared to ~~7.3%~~7.5% and 7.7% for the same ~~period~~periods in 2022.

Product and technology development expenses

Our product and technology development related expenses consist primarily of compensation for our engineering and web-development staff, depreciation and amortization expenses related to product and technology development, certain tax withholding related to export duties, telecommunications costs and payments to third-party suppliers who provide technology maintenance services to us.

Sales and marketing expenses

Our sales and marketing expenses consist primarily of costs related to marketing our platforms through online and offline advertising and agreements with portals, search engines and other sales expenses related to strategic marketing initiatives, charges related to our buyer protection program, the salaries of employees involved in these activities, chargebacks related to our Mercado Pago operations, branding initiatives, marketing activities for our users and depreciation and amortization expenses.

We carry out the majority of our marketing efforts on the Internet. We enter into agreements with portals, search engines, social networks, ad networks and other sites in order to attract Internet users to the Mercado Libre Marketplace and convert them into registered users and active traders on our platform.

We also work intensively on attracting, developing and growing our seller community through our customer support efforts. We have dedicated professionals in most of our operations that work with sellers through trade show participation, seminars and meetings to provide them with important tools and skills to become effective sellers on our platform.

Provision for doubtful accounts

Provision for doubtful accounts consists of the current expected credit losses on our financial assets, mainly loans receivable.

General and administrative expenses

Our general and administrative expenses consist primarily of salaries for management and administrative staff, compensation of non-employee directors, long term retention program compensation, expenses for legal, audit and other professional services, insurance expenses, office space rental expenses, impairment losses from digital assets, travel and business expenses, as well as depreciation and amortization expenses. Our general and administrative expenses include the costs of the following areas: general management, finance, treasury, internal audit, administration, accounting, tax, legal and human resources.

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Other income (expenses), net

Other income (expenses) consists primarily of interest income derived from our investments and cash equivalents, interest expense and other financial charges related to financial liabilities and foreign currency gains or losses.

Income tax

We are subject to federal and state income tax in the United States, as well as foreign taxes in the multiple jurisdictions where we operate. Our tax obligations consist of current and deferred income taxes incurred in these jurisdictions. We account for income taxes following the liability method of accounting. A valuation allowance is recorded when, based on the available evidence, it is more likely than not that all or a portion of our deferred tax assets will not be realized. Therefore, our income tax expense consists of taxes currently payable, if any (given that in certain jurisdictions we still have net operating loss carry-forwards), plus the change in our deferred tax assets and liabilities during each period.

Equity in earnings of unconsolidated entity

Equity in earnings of unconsolidated entity consists primarily of earnings and losses related to our share in our equity investment.

Critical Accounting Policies and Estimates

There have been no significant changes in our critical accounting policies, Management estimates or accounting policies since the year ended December 31, 2022 and disclosed in the Company’s 2022 10-K, see “Critical Accounting Policies and Estimates”. See also the section Recently Adopted Accounting Standards of Note 2 to our unaudited interim condensed consolidated financial statements included in Item 1 of Part I of this report.

Results of operations for the six and three-month ~~period~~periods ended ~~March 31,~~June 30, 2023 compared to the six and three-month ~~period~~periods ended ~~March 31,~~June 30, 2022

The selected financial data for the six and three-month periods ended ~~March 31,~~June 30, 2023 and 2022 discussed herein is derived from our unaudited interim condensed consolidated financial statements included in Item 1 of Part I of this report. ~~These statements include all normal recurring adjustments that Management believes are necessary to fairly state our financial position, results of operations and cash flows.~~ The results of operations for the six and three-month ~~period~~periods ended ~~March 31,~~June 30, 2023, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2023 or for any other period.

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Statement of income data


		Three Months Ended March 31,					Six Months Ended June 30,				Three Months Ended June 30,
(In millions)	(In millions)	2023		2022		(In millions)	2023		2022		2023		2022
		(Unaudited)					(Unaudited)				(Unaudited)
Net service revenues	Net service revenues	$	2,763	$	1,997	Net service revenues	$	5,814	$	4,329	$	3,051	$	2,332
Net product revenues	Net product revenues	274		251		Net product revenues	638		516		364		265
Net revenues	Net revenues	3,037		2,248		Net revenues	6,452		4,845		3,415		2,597

Cost of net revenues	Cost of net revenues	(1,501)		(1,175)		Cost of net revenues	(3,196)		(2,488)		(1,695)		(1,313)
Gross profit	Gross profit	1,536		1,073		Gross profit	3,256		2,357		1,720		1,284

Operating expenses:	Operating expenses:					Operating expenses:
Product and technology development	Product and technology development	(381)		(234)		Product and technology development	(749)		(496)		(368)		(262)
Sales and marketing	Sales and marketing	(383)		(286)		Sales and marketing	(766)		(583)		(383)		(296)
Provision for doubtful accounts	Provision for doubtful accounts	(252)		(255)		Provision for doubtful accounts	(474)		(557)		(222)		(303)
General and administrative	General and administrative	(180)		(159)		General and administrative	(369)		(332)		(189)		(173)
Total operating expenses	Total operating expenses	(1,196)		(934)		Total operating expenses	(2,358)		(1,968)		(1,162)		(1,034)
Income from operations	Income from operations	340		139		Income from operations	898		389		558		250

Other income (expenses):	Other income (expenses):					Other income (expenses):
Interest income and other financial gains	Interest income and other financial gains	161		31		Interest income and other financial gains	349		77		188		46
Interest expense and other financial losses	Interest expense and other financial losses	(94)		(56)		Interest expense and other financial losses	(186)		(129)		(92)		(73)
Foreign currency losses, net	Foreign currency losses, net	(87)		(3)		Foreign currency losses, net	(269)		(63)		(182)		(60)
Net income before income tax expense and equity in earnings of unconsolidated entity	Net income before income tax expense and equity in earnings of unconsolidated entity	320		111		Net income before income tax expense and equity in earnings of unconsolidated entity	792		274		472		163

Income tax expense	Income tax expense	(122)		(46)		Income tax expense	(332)		(85)		(210)		(39)
Equity in earnings of unconsolidated entity	Equity in earnings of unconsolidated entity	3		—		Equity in earnings of unconsolidated entity	3		(1)		—		(1)
Net income	Net income	$	201	$	65	Net income	$	463	$	188	$	262	$	123

Principal trends in results of operations

Net revenues

Our net revenues maintained ~~its~~consistent growth ~~trajectory~~ during the six and three-month ~~period~~periods ended ~~March 31,~~June 30, 2023 as compared to the same ~~period~~periods in 2022, specifically related to the growth of our ~~fintech solution services (mainly credits business and off-platform transactions through Mercado Pago)~~total payment volume and the ~~increase in our~~ gross merchandise ~~volume regarding our commerce services.~~volume. The quarter’s financial results reflect our ongoing commitment to deliver sustainable and profitable growth. In this sense, we maintained a cautious posture regarding originations of loans receivables and, as a consequence, our credit business portfolio’s size was similar to the prior quarter and focused on lower risk customers. Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Principal trends in results of operations— Net revenues” section below for further detail on net revenues trends for the six and three-month periods ended ~~March 31,~~June 30, 2023 and 2022.

The continued execution of our long-term strategies in Commerce and Fintech businesses has enabled us to deliver ~~rapid~~ growth in gross merchandise volume, total payment volume and net revenues, alongside record quarterly operating results and strong cash generation.

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Gross profit margins

Our gross profit margin is defined as total net revenues minus total cost of net revenues, as a percentage of net revenues.

Our ~~gross profit trends are directly affected by our net revenues, as stated above, and our cost of net revenues. In this sense, our~~ main cost of net revenues is composed of ~~cost of goods sold,~~ shipping operation costs (including warehousing costs), carrier and other operating costs, collection fees, sales taxes, funding costs related to our credits business, cost of goods sold, fraud prevention fees, certain taxes on bank transactions, hosting and site operation fees, compensation for customer support personnel ~~ISP connectivity charges~~ and depreciation and amortization. This cost structure is directly affected by the level of operations of our services, and our strategic plan on gross profit is built on factors such as an ample liquidity to fund expenses and investments and a cost-effective capital structure.

In the future, our gross profit margin could decline if we continue growing our sales of goods business, which has a lower pure product margin, building up our logistics network and if we fail to maintain an appropriate relationship between our cost of revenue structure and our net revenues trend.

For the six and three-month periods ended ~~March 31,~~June 30, 2023 and 2022, our gross profit margins were ~~50.6%~~50.5% and 50.4%, and ~~47.7%~~48.6% and 49.4%, respectively. The increase in our gross profit marginins resulted primarily from the decrease in our ~~shipping operating cost,~~ cost of goods sold, ~~and~~ collection fees and customer support expenses, as a percentage of net revenues, partially offset by an increase of our ~~fintech~~funding costs related to our credits business, as a percentage of net ~~revenues, mainly related to higher funding costs in connection with our credits business.~~revenues.

Operating income margins

Our operating income margin is defined as income from operations as a percentage of net revenues.

Our operating income margin is affected by our operating expenses structure, which mainly consists of our employees’ salaries, our sales and marketing expenses related to those activities we incurred to promote our services, provision for doubtful accounts mainly related to our loans receivable portfolio and product and technology development expenses, among other operating expenses. As we continue to grow and focus on expanding our leadership in the region, we will continue to invest in product and technology development, sales and marketing and human resources in order to promote our services and capture long-term business opportunities. As a result, we may experience decreases in our operating income margins.

For the six and three-month ~~period~~periods ended ~~March 31,~~June 30, 2023, as compared to the same ~~period~~periods in 2022, our operating income ~~margin~~margins increased from ~~6.2%~~8.0% and 9.6% to ~~11.2%.~~13.9% and 16.3%, respectively. This increase was mainly explained by our improvement in cost of net revenues margins and a decrease in provision for doubtful accounts, as a percentage of net revenues. This increase was partially offset by an increase in our product and technology development expenses, as a percentage of net revenues, mainly as a consequence of higher salaries and ~~wages.~~wages due to headcount increases and increases in amounts accrued under the LTRPs as result of the increase in our common stock price.

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Other Data

The following table ~~includes seven~~includes eight key performance indicators, which are calculated as defined in the footnotes to the table. Each of these indicators provide a different measure of the level of activity on our platform, and we use them to monitor the performance of the business.

Three Months Ended
March 31,
(in millions)(*)
2023 2022
Unique active users (1)
101 81
Gross merchandise volume(2)
$ 9,434 $ 7,665
Number of successful items sold (3)
309 267
Number of successful items shipped(4)
302 254
Total payment volume(5)
$ 36,986 $ 25,319
Total volume of payments on marketplace(6)
$ 9,950 $ 8,071
Total payment transactions(7)
1,875 1,091
Capital expenditures $ 89 $ 137
Depreciation and amortization $ 126 $ 84


	Six Months Ended June 30,						Three Months Ended June 30,
(in millions, except percentages) (*)	2023			2022				2023			2022

Unique active users (1)	135			107				109			84
Gross merchandise volume (2)	$	19,939		$	16,216			$	10,506		$	8,551
Number of items sold (3)	634			542				325			275
Number of items shipped (4)	620			518				319			264
Total payment volume (5)	$	79,051		$	55,513			$	42,064		$	30,194
Total volume of payments on marketplace (6)	$	21,024		$	17,090			$	11,074		$	9,019
Total payment transactions (7)	4,007			2,353				2,132			1,262
NIMAL (8)	33.8		%	28.0		%		36.8		%	29.8		%
Capital expenditures	$	203		$	237			$	114		$	100
Depreciation and amortization	$	254		$	184			$	128		$	100

(*)Figures have been calculated using rounded amounts. Growth calculations based on this table may not total due to rounding.

(1)New or existing user who performed at least one of the following actions during the reported period: (1) made one purchase, or reservation, or asked one question on Mercado Libre Marketplace or Classified Marketplace (2) maintained an active listing on Mercado Libre Marketplace or Classified Marketplace (3) maintained an active account in Mercado Shops (4) made a payment, money transfer, collection and/or advance using Mercado Pago (5) maintained an outstanding credit line through Mercado Credito or (6) maintained a balance of more than $5 invested in a Mercado Fondo asset management account. Management uses this metric to evaluate the size of our community of users who interact with the ecosystem and of which we have the opportunity to generate further engagement. With the changes in our businesses we believe it provides a better indication of our active user base rather than our discontinued registration metric that did not reflect any sort of interaction.

(2)Total U.S. dollar sum of all transactions completed through the Mercado Libre Marketplace, excluding Classifieds transactions.

(3)Number of items that were sold/purchased through the Mercado Libre Marketplace, excluding Classifieds items.

(4)Number of items that were shipped through our shipping service.

(5)Total U.S. dollar sum of all transactions paid for using Mercado Pago, including marketplace and non-marketplace transactions.

(6)Total U.S. dollar sum of all marketplace transactions paid for using Mercado Pago. Management uses this metric to evaluate the performance of our payments services and development of our integrated ecosystem. As from January 1, 2022, we no longer disclose our total volume of payments on marketplace net of shipping and financing fees. Given the growth of our shipping and fintech businesses, management believes that including shipping and financing fees in the calculation of total volume of payments on marketplace results in a more accurate indicator of that performance on a go-forward basis. Consequently, total volume of payment on marketplace for the six and three-month ~~period~~periods ended ~~March 31,~~June 30, 2022 has been recast to include shipping and financing fees.

(7)Number of all transactions paid for using Mercado Pago.

(8)Net interest margins after losses (“NIMAL”) represents the annualized ratio between the total credits revenues less funding costs and provision for doubtful accounts for the period and total average gross loans receivable for the period. Management uses NIMAL to monitor how effectively the Company is pricing and managing the credit products relative to their risk and setting targets. Accordingly, management is of the opinion that NIMAL provides useful information to investors and others related to the Company’s risk appetite through the different periods and shows how the Company effectively prices risk.

Net revenues

Three Months Ended
March 31, Change from 2022
to 2023
2023 2022 in Dollars in %
(in millions, except percentages)
Total Net Revenues $ 3,037 $ 2,248 $ 789 35.1 %


	Six Months Ended June 30,				Change from 2022 to 2023				Three Months Ended June 30,				Change from 2022 to 2023
	2023		2022		in Dollars		in %		2023		2022		in Dollars		in %
	(in millions, except percentages)								(in millions, except percentages)
Total Net Revenues	$	6,452	$	4,845	$	1,607	33.2	%	$	3,415	$	2,597	$	818	31.5	%

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The increase in net revenues was primarily attributable to:

a)an increase of ~~$399~~$930 million and $532 million, or ~~31.2%~~34.7% and 37.9%, in Commerce revenues, for the six and three-month ~~period~~periods ended ~~March 31,~~June 30, 2023, as compared to the same ~~period~~periods in ~~2022.~~2022, respectively. This increase was mainly generated by an increase of ~~$378~~$807 million and $429 million in our commerce services revenues and an increase of ~~$21~~$123 million and $103 million in our revenues from commerce products sales, for the six and three-month ~~period~~periods ended ~~March 31,~~June 30, 2023, respectively, as compared to the same ~~period~~periods in 2022. Shipping carrier costs which are netted ~~from~~against revenues increased ~~$134~~$264 million and $127 million, from ~~$401~~$836 million and $436 million for the six and three-month ~~period~~periods ended ~~March 31,~~June 30, 2022 to ~~$535~~$1,100 million and $563 million for the six and three-month ~~period~~periods ended ~~March 31, 2023;~~June 30, 2023, respectively; and

b)an increase of ~~40.2%,~~31.3% and 24.0% in fintech revenues, from ~~$971~~$2,163 million and $1,193 million for the six and three-month ~~period~~periods ended ~~March 31,~~June 30, 2022, respectively, to ~~$1,361~~$2,840 million and $1,479 million for the six and three-month ~~period~~periods ended ~~March 31, 2023.~~June 30, 2023, respectively. This increase was mainly generated by an increase of ~~$134~~$477 million and $223 million in our revenues from fintech services and an increase of $201 million and $67 million in our credits revenues, ~~and an increase of $254 million in our revenues from Fintech services,~~ for the six and three-month ~~period~~periods ended ~~March 31,~~June 30, 2023, respectively, as compared to the same ~~period~~periods in 2022.


		Three Months Ended March 31,				Change from 2022 to 2023					Six Months Ended June 30,				Change from 2022 to 2023				Three Months Ended June 30,				Change from 2022 to 2023
Consolidated Net Revenues by revenue stream	Consolidated Net Revenues by revenue stream	2023		2022		in Dollars		in %		Consolidated Net Revenues by revenue stream	2023		2022		in Dollars		in %		2023		2022		in Dollars		in %
		(in millions, except percentages)									(in millions, except percentages)								(in millions, except percentages)
Brazil	Brazil									Brazil
Commerce	Commerce	$	907	$	689	$	218	31.6	%	Commerce	$	1,956	$	1,441	$	515	35.7	%	$	1,049	$	752	$	297	39.5	%
Fintech	Fintech	672		563		109		19.4	%	Fintech	1,403		1,262		141		11.2	%	731		699		32		4.6	%
		$	1,579	$	1,252	$	327	26.1	%		$	3,359	$	2,703	$	656	24.3	%	$	1,780	$	1,451	$	329	22.7	%
Argentina	Argentina									Argentina
Commerce	Commerce	$	273	$	240	$	33	13.8	%	Commerce	$	575	$	510	$	65	12.7	%	$	302	$	270	$	32	11.9	%
Fintech	Fintech	448		278		170		61.2	%	Fintech	917		602		315		52.3	%	469		324		145		44.8	%
		$	721	$	518	$	203	39.2	%		$	1,492	$	1,112	$	380	34.2	%	$	771	$	594	$	177	29.8	%
Mexico	Mexico									Mexico
Commerce	Commerce	$	398	$	262	$	136	51.9	%	Commerce	$	873	$	552	$	321	58.2	%	$	475	$	290	$	185	63.8	%
Fintech	Fintech	193		102		91		89.2	%	Fintech	421		240		181		75.4	%	228		138		90		65.2	%
		$	591	$	364	$	227	62.4	%		$	1,294	$	792	$	502	63.4	%	$	703	$	428	$	275	64.3	%
Other countries	Other countries									Other countries
Commerce	Commerce	$	98	$	86	$	12	14.0	%	Commerce	$	208	$	179	$	29	16.2	%	$	110	$	92	$	18	19.6	%
Fintech	Fintech	48		28		20		71.4	%	Fintech	99		59		40		67.8	%	51		32		19		59.4	%
		$	146	$	114	$	32	28.1	%		$	307	$	238	$	69	29.0	%	$	161	$	124	$	37	29.8	%
Consolidated	Consolidated									Consolidated
Commerce	Commerce	$	1,676	$	1,277	$	399	31.2	%	Commerce	$	3,612	$	2,682	$	930	34.7	%	$	1,936	$	1,404	$	532	37.9	%
Fintech	Fintech	1,361		971		390		40.2	%	Fintech	2,840		2,163		677		31.3	%	1,479		1,193		286		24.0	%
Total	Total	$	3,037	$	2,248	$	789	35.1	%	Total	$	6,452	$	4,845	$	1,607	33.2	%	$	3,415	$	2,597	$	818	31.5	%

See Note 8 “Segment reporting” of our unaudited interim condensed consolidated financial statements for further information regarding our net revenues disaggregated by similar products and services for the six and three-month periods ended ~~March 31,~~June 30, 2023 and 2022.

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Brazil

Commerce revenues in Brazil increased ~~31.6%~~35.7% in the ~~three~~six-month period ended ~~March 31,~~June 30, 2023 as compared to the same period in 2022. This increase was generated by an increase of ~~$195~~$400 million in our commerce services revenues and an increase of ~~$23~~$115 million in our revenues from commerce products sales. Fintech revenues grew by ~~19.4%~~11.2%, a ~~$109~~$141 million increase, during the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023 as compared to the same period in 2022, mainly driven by an increase of ~~$108~~$186 million in our revenues from ~~Fintech~~fintech services, ~~and an increase~~partially offset by a decrease of $2$42 million in our credits revenues.

~~Table~~Commerce revenues in Brazil increased 39.5% in the three-month period ended June 30, 2023 as compared to the same period in 2022. This increase was generated by an increase of ~~Contents~~$205 million in our commerce services revenues and an increase of $92 million in our revenues from commerce products sales. Fintech revenues grew by 4.6%, a $32 million increase, during the three-month period ended June 30, 2023 as compared to the same period in 2022, mainly driven by an increase of $78 million in our revenues from fintech services, partially offset by a decrease of $44 million in our credits revenues.

Argentina

Commerce revenues in Argentina increased ~~13.8%~~12.7% in the six-month period ended June 30, 2023 as compared to the same period in 2022. This increase was generated by an increase of $86 million in our commerce services revenues, partially offset by a decrease of $21 million in our revenues from commerce products sales. Fintech revenues grew 52.3%, a $315 million increase, during the six-month period ended June 30, 2023 as compared to the same period in 2022, mainly driven by an increase of $192 million in our revenues from fintech services and an increase of $123 million in our credits revenues.

Commerce revenues in Argentina increased 11.9% in the three-month period ended ~~March 31,~~June 30, 2023 as compared to the same period in 2022. This increase was generated by an increase of $43 million in our commerce services revenues, partially offset by a decrease of ~~$10~~$11 million in our revenues from commerce products sales. Fintech revenues grew ~~61.2%~~44.8%, a ~~$170~~$145 million increase, during the three-month period ended ~~March 31,~~June 30, 2023 as compared to the same period in 2022, mainly driven by an increase of ~~$98~~$94 million in our revenues from ~~Fintech~~fintech services and an increase of ~~$71~~$52 million in our credits revenues.

Mexico

Commerce revenues in Mexico increased ~~51.9%~~58.2% in the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023 as compared to the same period in 2022. This increase was generated by an increase of ~~$125~~$286 million in our commerce services revenues and an increase of ~~$11~~$35 million in our revenues from commerce products sales. Fintech revenues grew ~~89.2%~~75.4%, a ~~$91~~$181 million increase, during the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023 as compared to the same period in 2022, mainly driven by an increase of ~~$60~~$118 million in our credits revenues and an increase of ~~$31~~$64 million in our revenues from fintech services.

Commerce revenues in Mexico increased 63.8% in the three-month period ended June 30, 2023 as compared to the same period in 2022. This increase was generated by an increase of $161 million in our commerce services revenues and an increase of $24 million in our revenues from commerce products sales. Fintech revenues grew 65.2%, a $90 million increase, during the three-month period ended June 30, 2023 as compared to the same period in 2022, mainly driven by an increase of $58 million in our credits revenues and an increase of $33 million in our revenues from fintech services.

The following table sets forth our total net revenues and the sequential quarterly growth of these net revenues for the periods described below:


		Quarter Ended													Quarter Ended
		March 31,			June 30,			September 30,			December 31,				March 31,			June 30,			September 30,			December 31,
		(in millions, except percentages)													(in millions, except percentages)
2023	2023													2023
Net revenues	Net revenues	$	3,037		n/a			n/a			n/a			Net revenues	$	3,037		$	3,415		n/a			n/a
Percent change from prior quarter	Percent change from prior quarter	1		%										Percent change from prior quarter	1		%	12		%
2022	2022													2022
Net revenues	Net revenues	$	2,248		$	2,597		$	2,690		$	3,002		Net revenues	$	2,248		$	2,597		$	2,690		$	3,002
Percent change from prior quarter	Percent change from prior quarter	5		%	16		%	4		%	12		%	Percent change from prior quarter	5		%	16		%	4		%	12		%

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The following table sets forth the growth in net revenues in local currencies, for the six and three-month ~~period~~periods ended ~~March 31,~~June 30, 2023 as compared to the same period in 2022:


~~(% of revenue growth in Local Currency) (*)~~	~~Three-month period~~
~~Brazil~~	~~25.9~~	%
~~Argentina~~ ~~(**)~~	~~150.9~~	%
~~Mexico~~	~~47.7~~	%
~~Other Countries~~	~~29.8~~	%
~~Total Consolidated~~	~~58.4~~	%


	Change from 2022 to 2023
(% of revenue growth in Local Currency) (*)	Six-month period		Three-month period
Brazil	24.5	%	23.3	%
Argentina (**)	153.5	%	155.7	%
Mexico	46.1	%	44.8	%
Other Countries	28.1	%	26.5	%
Total Consolidated	57.8	%	57.2	%

(*)The local currency revenue growth was calculated by using the average monthly exchange rates for each month during 2022 and applying them to the corresponding months in 2023, so as to calculate what our financial results would have been if exchange rates had remained stable from one year to the next. See also “Non-GAAP Financial Measures” section below for details on FX neutral measures.

(**)Average inter-annual inflation rate in our Argentine segment for the six and three-month ~~period~~periods ended ~~March 31,~~June 30, 2023 was ~~101.9%.~~107.4% and 112.9%, respectively. This effect was partially offset by an average inter-annual depreciation of the Argentine peso of ~~83.3%~~91.2% and 99.1% for the six and three-month ~~period~~periods ended ~~March 31, 2023.~~June 30, 2023, respectively.

Cost of net revenues

Three Months Ended
March 31, Change from 2022
to 2023
2023 2022 in Dollars in %
(in millions, except percentages)
Total cost of net revenues $ 1,501 $ 1,175 $ 326 27.7%
As a percentage of net revenues 49.4% 52.3%

~~Table of Contents~~


	Six Months Ended June 30,					Change from 2022 to 2023			Three Months Ended June 30,				Change from 2022 to 2023
	2023			2022		in Dollars		in %	2023		2022		in Dollars		in %
	(in millions, except percentages)								(in millions, except percentages)
Total cost of net revenues	$	3,196		$	2,488	$	708	28.5%	$	1,695	$	1,313	$	382	29.1%
As a percentage of net revenues	49.5		%	51.4%					49.6%		50.6%

For the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023 as compared to the same period in 2022, the increase in cost of net revenues was primarily attributable to: i) a ~~$102~~$239 million increase in shipping operating and carrier costs; ii) a ~~$74~~$129 million increase in sales taxes; iii) a ~~$60~~$111 million increase in collection fees, which was mainly attributable to our Brazilian and Mexican operations as a result of the higher transactions volume of Mercado Pago in those countries; iv) a ~~$52~~$106 million increase in other fintech costs mainly related to higher funding costs ~~related to~~in connection with our credits business; and v) an $82 million increase in cost of sales of goods mainly in Brazil and Mexico.

For the three-month period ended June 30, 2023 as compared to the same period in 2022, the increase in cost of net revenues was primarily attributable to: i) a ~~$19~~$137 million increase in shipping operating and carrier costs; ii) a $64 million increase in cost of sales of goods mainly in Brazil and Mexico; ~~and vi)~~iii) a ~~$17~~$55 million increase in sales taxes; iv) a $53 million increase in other fintech costs mainly related to ~~hosting.~~higher funding costs in connection with our credits business; and v) a $52 million increase in collection fees, which was mainly attributable to our Brazilian and Mexican operations as a result of the higher transactions volume of Mercado Pago in those countries.

Product and technology development expenses


		Three Months Ended March 31,				Change from 2022 to 2023				Six Months Ended June 30,						Change from 2022 to 2023			Three Months Ended June 30,				Change from 2022 to 2023
		2023		2022		in Dollars		in %		2023			2022			in Dollars		in %	2023		2022		in Dollars		in %
		(in millions, except percentages)								(in millions, except percentages)									(in millions, except percentages)
Product and technology development	Product and technology development	$	381	$	234	$	147	62.8%	Product and technology development	$	749		$	496		$	253	51.0%	$	368	$	262	$	106	40.5%
As a percentage of net revenues	As a percentage of net revenues	12.5%		10.4%					As a percentage of net revenues	11.6		%	10.2		%				10.8%		10.1%

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For the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023, the increase in product and technology development expenses as compared to the same period in 2022 was primarily attributable to: i) a ~~$109~~$182 million increase in salaries and wages mainly related to the increase of ~~42%~~34% in our product and technology development ~~headcount;~~headcount and increases in amounts accrued under the LTRPs as a consequence of the increase in our common stock price; ii) a ~~$23~~$39 million increase in other product and technology development expenses mainly related to certain tax withholding in connection with intercompany export services billing duties; and iii) a ~~$15~~$27 million increase in depreciation and amortization expenses mainly related to capitalized information and technology assets.

For the three-month period ended June 30, 2023, the increase in product and technology development expenses as compared to the same period in 2022 was primarily attributable to: i) a $73 million increase in salaries and wages mainly related to the increase of 37% in our product and technology development headcount and increases in amounts accrued under the LTRPs as a consequence of the increase in our common stock price; ii) a $16 million increase in other product and technology development expenses mainly related to certain tax withholding in connection with intercompany export services billing duties; and iii) a $12 million increase in depreciation and amortization expenses mainly related to capitalized information and technology assets.

We believe that product and technology development is one of our key competitive advantages and we intend to continue to invest in hiring engineers to meet the increasingly sophisticated product expectations of our customer base.

Sales and marketing expenses


		Three Months Ended March 31,						Change from 2022 to 2023				Six Months Ended June 30,						Change from 2022 to 2023			Three Months Ended June 30,						Change from 2022 to 2023
		2023			2022			in Dollars		in %		2023			2022			in Dollars		in %	2023			2022			in Dollars		in %
		(in millions, except percentages)										(in millions, except percentages)									(in millions, except percentages)
Sales and marketing	Sales and marketing	$	383		$	286		$	97	33.9%	Sales and marketing	$	766		$	583		$	183	31.4%	$	383		$	296		$	87	29.4%
As a percentage of net revenues	As a percentage of net revenues	12.6		%	12.7		%				As a percentage of net revenues	11.9		%	12.0		%				11.2		%	11.4		%

For the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023, the increase in sales and marketing expenses as compared to the same period in 2022 was primarily attributable to: i) a ~~$38~~$64 million increase in online and offline marketing expenses mainly in ~~Brazil and Mexico;~~Brazil; ii) a ~~$21~~$49 million increase in our buyer protection program expenses; iii) a $33 million increase in salaries and wages mainly related to the increase of 27% in our sales and marketing headcount and increases in amounts accrued under the LTRPs as a consequence of the increase in our common stock price; iv) an $18 million increase in ~~salaries~~chargebacks; and ~~wages; and iv)~~v) a $6$16 million increase in ~~chargebacks.~~

~~Provision for doubtful accounts~~

Three Months Ended
March 31, Change from 2022
to 2023
2023 2022 in Dollars in %
(in millions, except percentages)
Provision for doubtful accounts $ 252 $ 255 $ (3) (1.2)%
As a percentage of net revenues 8.3% 11.3%
sales expenses.

For the three-month period ended ~~March 31,~~June 30, 2023, the increase in sales and marketing expenses as compared to the same period in 2022 was primarily attributable to: i) a $26 million increase in online and offline marketing expenses mainly in Brazil; ii) a $23 million increase in our buyer protection program expenses; iii) a $15 million increase in salaries and wages mainly related to the increase of 31% in our sales and marketing headcount and increases in amounts accrued under the LTRPs as a consequence of the increase in our common stock price; iv) a $14 million increase in chargebacks; and v) an $8 million increase in sales expenses.

Provision for doubtful accounts


	Six Months Ended June 30,						Change from 2022 to 2023			Three Months Ended June 30,				Change from 2022 to 2023
	2023			2022			in Dollars		in %	2023		2022		in Dollars		in %
	(in millions, except percentages)									(in millions, except percentages)
Provision for doubtful accounts	$	474		$	557		$	(83)	(14.9)%	$	222	$	303	$	(81)	(26.7)%
As a percentage of net revenues	7.3		%	11.5		%				6.5%		11.7%

For the six and three-month periods ended June 30, 2023, as compared to the same periods in 2022, the provision for doubtful accounts ~~remained stable despite the credit portfolio increasing 26%, from $2,415~~decreased $83 million ~~as of March 31, 2022 to $3,049~~and $81 million, ~~as of March 31, 2023.~~respectively. Initiatives to rebalance portfolio exposure towards lower risk customers allowed us to improve our ~~1-90~~1-180 days non-performing loans ratio from ~~13.4%~~22.5% as of ~~March 31,~~June 30, 2022 to ~~9.5%~~17.2% as of ~~March 31,~~June 30, 2023.

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General and administrative expenses


		Three Months Ended March 31,				Change from 2022 to 2023				Six Months Ended June 30,						Change from 2022 to 2023			Three Months Ended June 30,				Change from 2022 to 2023
		2023		2022		in Dollars		in %		2023			2022			in Dollars		in %	2023		2022		in Dollars		in %
		(in millions, except percentages)								(in millions, except percentages)									(in millions, except percentages)
General and administrative	General and administrative	$	180	$	159	$	21	13.2%	General and administrative	$	369		$	332		$	37	11.1%	$	189	$	173	$	16	9.2%
As a percentage of net revenues	As a percentage of net revenues	5.9%		7.1%					As a percentage of net revenues	5.7		%	6.9		%				5.5%		6.7%

For the six-month period ended June 30, 2023, the increase in general and administrative expenses as compared to the same period in 2022 was primarily attributable to a $53 million increase in salaries and wages, mainly related to the increase of 18% in general and administrative headcount and increases in amounts accrued under the LTRPs as a consequence of the increase in our common stock price. This increase was partially offset by an $8 million decrease in other general and administrative expenses mainly related to lower impairment of digital assets and a $7 million decrease in temporary services primarily related to administrative workers.

For the three-month period ended ~~March 31,~~June 30, 2023, the increase in general and administrative expenses as compared to the same period in 2022 was primarily attributable to a $26 million increase in salaries and wages, mainly related to the increase of ~~27%~~20% in general and administrative headcount and increases in amounts accrued under the LTRPs as ~~it relates to~~a consequence of the increase in our ~~Argentine segment, related to an average inter-annual inflation rate for the three-month period ended March 31, 2023 that has been higher than the local currency depreciation.~~common stock price. This increase was partially offset by a $7 million decrease in other general and administrative expenses mainly related to lower impairment of digital assets and a $3 million decrease in temporary services primarily related to administrative workers.

Other expense, net


		Three Months Ended March 31,						Change from 2022 to 2023				Six Months Ended June 30,						Change from 2022 to 2023			Three Months Ended June 30,						Change from 2022 to 2023
		2023			2022			in Dollars		in %		2023			2022			in Dollars		in %	2023			2022			in Dollars		in %
		(in millions, except percentages)										(in millions, except percentages)									(in millions, except percentages)
Other expense, net	Other expense, net	$	(20)		$	(28)		$	8	(28.6)%	Other expense, net	$	(106)		$	(115)		$	9	(7.8)%	$	(86)		$	(87)		$	1	(1.1)%
As a percentage of net revenues	As a percentage of net revenues	-0.7		%	-1.2		%				As a percentage of net revenues	(1.6)		%	(2.4)		%				(2.5)		%	(3.4)		%

For the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023, the decrease in other expense, net as compared to the same period in 2022 was primarily attributable to (i) the ~~$130~~$272 million increase in interest income and other financial gains from our financial investments as a result of an increase in interest income from our Argentine segment related to the resolution issued by the CBA, which, starting in September 2022, allowed for a percentage of the customer funds deposited in financial institutions by payment service providers to be invested in Argentine treasury bonds, and (ii) higher interest income due to higher float and rates in ~~Argentina,~~ Brazil ~~Mexico~~ and higher rates in the U.S. This decrease was partially offset by: i) foreign exchange losses that were ~~$84~~$206 million higher than foreign exchange losses for the same period in 2022, mainly due to higher acquisition of our own common stock in the Argentine market at a price that reflects the additional cost of accessing U.S. dollars through an indirect mechanism due to restrictions imposed by the Argentine government for buying U.S. dollars at the official exchange rate (refer to Note 16 of our unaudited interim condensed consolidated financial statements for further detail), and higher foreign exchange losses from our Argentine subsidiaries, ~~and lower~~partially offset by foreign exchange gains from our Brazilian and Mexican subsidiaries; and ii) a ~~$38~~$57 million increase in interest expense and other financial losses mainly attributable to higher levels of indebtedness in 2023 and higher rates (mainly in ~~Brazil)~~Brazil, Mexico and Chile).

~~Income tax~~

Three Months Ended
March 31, Change from 2022
to 2023
2023 2022 in Dollars in %
(in millions, except percentages)
Income tax expense $ 122 $ 46 $ 76 165.2 %
As a percentage of net revenues 4.0 % 2.0 %

~~During~~For the three-month period ended ~~March 31,~~June 30, 2023, the decrease in other expense, net as compared to the same period in 2022 was primarily attributable to (i) the $142 million increase in interest income ~~tax expense increased mainly~~and other financial gains from our financial investments as a result of an increase in interest income from our Argentine segment related to the resolution issued by the CBA, which, starting in September 2022, allowed for a percentage of the customer funds deposited in financial institutions by payment service providers to be invested in Argentine treasury bonds, and (ii) higher interest income ~~tax expense~~due to higher float and rates in ~~Argentina~~Brazil and ~~Mexico as a consequence of~~ higher ~~pre-tax gains in those segments in 2023.~~

~~Table of Contents~~

~~The following table summarizes our effective tax~~ rates ~~for the three-month periods ended March 31, 2023 and 2022:~~

Three Months Ended
March 31,
2023 2022
Effective tax rate (*) 38.1% 40.7%

~~(*)Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear~~ in the ~~table.~~

~~Our effective tax rate~~U.S. This decrease was partially offset by: i) foreign exchange losses that were $122 million higher than foreign exchange losses for ~~the three-month period ended March 31, 2023 decreased as compared to~~ the same period in 2022, ~~as a result of lower proportion of pre-tax losses in our Mexican segment which were included in the valuation allowance. This effect was offset by~~mainly due to higher ~~foreign exchange losses related to the~~ acquisition of our own common stock in

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the Argentine market at a price that reflects the additional cost of accessing U.S. dollars through an indirect mechanism due to restrictions imposed by the Argentine government for buying U.S. dollars at the official exchange rate ~~which was considered~~(refer to Note 16 of our unaudited interim condensed consolidated financial statements for further detail) and higher foreign exchange losses from our Argentine subsidiaries, partially offset by foreign exchange gains from our Brazilian and Mexican subsidiaries; and ii) a $19 million increase in interest expense and other financial losses mainly attributable to higher levels of indebtedness in 2023 and higher rates (mainly in Brazil, Mexico and Chile).

Income tax


	Six Months Ended June 30,						Change from 2022 to 2023				Three Months Ended June 30,						Change from 2022 to 2023
	2023			2022			in Dollars		in %		2023			2022			in Dollars		in %
	(in millions, except percentages)										(in millions, except percentages)
Income tax expense	$	332		$	85		$	247	290.6	%	$	210		$	39		$	171	438.5	%
As a percentage of net revenues	5.1		%	1.8		%					6.1		%	1.5		%

During the six and three-month periods ended June 30, 2023 as ~~non-deductible expense.~~compared to the same periods in 2022, income tax expense increased mainly as a result of higher income tax expense in Argentina, Brazil and Mexico as a consequence of higher pre-tax gains in those segments in 2023.

The following table summarizes our estimated effective tax rates for the six and three-month periods ended ~~March 31,~~June 30, 2023 and 2022:

Three Months Ended
March 31,
2023 2022
Effective tax rate by country
Argentina 31.2% 26.2%
Brazil 6.8% -0.7%
Mexico 40.6% -27.8%


	Six Months Ended June 30,		Three Months Ended June 30,
	2023	2022	2023	2022

Effective tax rate (*)	41.9%	31.0%	44.4%	24.5%

~~The increase~~(*)Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in ~~our~~the table.

Our estimated effective tax rate for the six and three-month periods ended June 30, 2023 increased as compared to the same periods in 2022, as a result of (i) taxable foreign exchange gains accounted for local tax purposes that are not recorded for accounting purposes since, under U.S. GAAP, Argentine ~~effective~~operations’ functional currency is the U.S. dollar due to the highly inflationary status of the country, (ii) a higher proportion of pre-tax results arising from entities under general income tax ~~rate during~~treatment regime over the ~~three-month period ended March 31, 2023,~~Brazilian segment as compared to the same period in 2022 and (iii) higher non-deductible foreign exchange losses related to the acquisition of our own common stock in the Argentine market.

The following table summarizes our estimated effective tax rates for the six and three-month periods ended June 30, 2023 and 2022:


	Six Months Ended June 30,		Three Months Ended June 30,
	2023	2022	2023	2022
Effective tax rate by country
Argentina	34.3%	25.4%	37.0%	24.5%
Brazil	15.6%	(7.5)%	18.3%	(12.0)%
Mexico	36.2%	153.7%	33.8%	32.1%

The increase in our Argentine estimated effective income tax rate during the six and three-month periods ended June 30, 2023, as compared to the same periods in 2022, was mainly related to higher taxable foreign exchange gains accounted for local tax purposes which are not recorded for accounting purposes since, under U.S. GAAP, Argentine operations’ functional currency is the U.S. dollar due to the highly inflationary status of the ~~country and higher non-deductible expenses.~~country.

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The increase in our Brazilian estimated effective income tax rate for the six and three-month periods ended June 30, 2023, was mainly related to a higher proportion of pre-tax results arising from entities under general income tax treatment regime over the Brazilian segment as compared to the same periods in 2022.

The decrease in our Mexican estimated effective income tax rate for the six-month period ended June 30, 2023, was mainly driven by the decrease in pre-tax losses over the segment results that are included in the valuation allowance during 2023 compared to the same period in 2022.

Our Mexican estimated effective income tax rate for the three-month period ended ~~March 31,~~June 30, 2023, ~~was mainly related to a higher proportion of taxable pre-tax gains over the segment income as compared to the same period in 2022.~~

The increase in our Mexican effective income tax rate for the three-month period ended March 31, 2023, was mainly driven by lower proportion of pre-tax losses over the segment income which were included in the valuation allowance and higher true up charges recognized in the periodremains stable compared to the same period in 2022.

Segment information


		Three Months Ended March 31, 2023											Six Months Ended June 30, 2023
		Brazil		Argentina		Mexico		Other Countries		Total			Brazil		Argentina		Mexico		Other Countries		Total
		(In millions, except percentages)											(In millions, except percentages)
Net revenues	Net revenues	$	1,579	$	721	$	591	$	146	$	3,037	Net revenues	$	3,359	$	1,492	$	1,294	$	307	$	6,452
Direct costs	Direct costs	(1,261)		(411)		(464)		(131)		(2,267)		Direct costs	(2,592)		(848)		(987)		(279)		(4,706)
Direct contribution	Direct contribution	$	318	$	310	$	127	$	15	$	770	Direct contribution	$	767	$	644	$	307	$	28	$	1,746
Margin	Margin	20.1%		43.0%		21.5%		10.3%		25.4%		Margin	22.8%		43.2%		23.7%		9.1%		27.1%


	Six Months Ended June 30, 2022
	Brazil		Argentina		Mexico		Other Countries		Total
	(In millions, except percentages)
Net revenues	$	2,703	$	1,112	$	792	$	238	$	4,845
Direct costs	(2,263)		(692)		(691)		(227)		(3,873)
Direct contribution	$	440	$	420	$	101	$	11	$	972
Margin	16.3%		37.8%		12.8%		4.6%		20.1%


	Change from the Six Months Ended June 30, 2022 to June 30, 2023
	Brazil		Argentina		Mexico		Other Countries		Total
	(In millions, except percentages)
Net revenues
in Dollars	656		380		502		69		1,607
in %	24.3	%	34.2	%	63.4	%	29.0	%	33.2	%
Direct costs
in Dollars	(329)		(156)		(296)		(52)		(833)
in %	14.5	%	22.5	%	42.8	%	22.9	%	21.5	%
Direct contribution
in Dollars	327		224		206		17		774
in %	74.3	%	53.3	%	204.0	%	154.5	%	79.6	%


	Three Months Ended June 30, 2023
	Brazil		Argentina		Mexico		Other Countries		Total
	(In millions, except percentages)
Net revenues	$	1,780	$	771	$	703	$	161	$	3,415
Direct costs	(1,331)		(436)		(524)		(148)		(2,439)
Direct contribution	$	449	$	335	$	179	$	13	$	976
Margin	25.2%		43.5%		25.5%		8.1%		28.6%

5055

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		Three Months Ended March 31, 2022											Three Months Ended June 30, 2022
		Brazil		Argentina		Mexico		Other Countries		Total			Brazil		Argentina		Mexico		Other Countries		Total
		(In millions, except percentages)											(In millions, except percentages)
Net revenues	Net revenues	$	1,252	$	518	$	364	$	114	$	2,248	Net revenues	$	1,451	$	594	$	428	$	124	$	2,597
Direct costs	Direct costs	(1,065)		(320)		(328)		(110)		(1,823)		Direct costs	(1,198)		(372)		(363)		(117)		(2,050)
Direct contribution	Direct contribution	$	187	$	198	$	36	$	4	$	425	Direct contribution	$	253	$	222	$	65	$	7	$	547
Margin	Margin	14.9%		38.2%		9.9%		3.5%		18.9%		Margin	17.4%		37.4%		15.2%		5.6%		21.1%


		Change from the Three Months Ended March 31, 2022 to March 31, 2023													Change from the Three Months Ended June 30, 2022 to June 30, 2023
		Brazil		Argentina		Mexico			Other Countries			Total			Brazil		Argentina		Mexico			Other Countries			Total
		(In millions, except percentages)													(In millions, except percentages)
Net revenues	Net revenues													Net revenues
in Dollars	in Dollars	$	327	$	203	$	227		$	32		$	789	in Dollars	$	329	$	177	$	275		$	37		$	818
in %	in %	26.1%		39.2%		62.4%			28.1		%	35.1%		in %	22.7%		29.8%		64.3%			29.8		%	31.5%
Direct costs	Direct costs													Direct costs
in Dollars	in Dollars	$	(196)	$	(91)	$	(136)		$	(21)		$	(444)	in Dollars	$	(133)	$	(64)	$	(161)		$	(31)		$	(389)
in %	in %	18.4%		28.4%		41.5%			19.1%			24.4%		in %	11.1%		17.2%		44.4%			26.5%			19.0%
Direct contribution	Direct contribution													Direct contribution
in Dollars	in Dollars	$	131	$	112	$	91		$	11		$	345	in Dollars	$	196	$	113	$	114		$	6		$	429
in %	in %	70.1%		56.6%		252.8		%	275.0		%	81.2%		in %	77.5%		50.9%		175.4		%	85.7		%	78.4%

Net revenues

Net revenues for the six and three-month ~~period~~periods ended ~~March 31,~~June 30, 2023 as compared to the same ~~period~~periods in 2022 are described above in “Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations—Principal trends in results of operations— Net revenues.”

Direct costs

Brazil

For the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023, as compared to the same period in 2022, direct costs increased mainly driven by: i) a ~~$180~~$382 million increase in cost of net revenues, mainly attributable to an increase in ~~sales taxes,~~ shipping operating and carrier costs, sales taxes, cost of goods sold, collection fees as a consequence of the higher transactions volume of our Mercado Pago business, ~~cost of goods sold,~~ hosting expenses and other payments costs mainly consisting of higher funding cost related to our ~~credits;~~credits business; and ii) a ~~$42~~$76 million increase in sales and marketing expenses, mainly due to an increase in online and offline marketing expenses, buyer protection program expenses, salaries and wages (related to headcount increase and ~~sales expenses; and iii)~~increases in amounts accrued under the LTRPs as a ~~$9 million~~consequence of the increase in ~~product~~our common stock price), chargebacks and ~~technology development expenses, mostly attributable to an increase in depreciation and amortization~~sales expenses. This was partially offset by a decrease of ~~$35~~$135 million in provision for doubtful accounts mainly related to our initiatives to rebalance portfolio exposure towards lower risk customers, which allowed us to improve our ~~1-90~~1-180 days non-performing loans ratio.

~~Argentina~~

For the three-month period ended ~~March 31,~~June 30, 2023, as compared to the same period in 2022, direct costs increased mainly driven by: i) a ~~$63~~$201 million increase in cost of net revenues, mainly attributable to an increase in shipping operating and carrier costs, cost of goods sold, sales taxes, collection fees as a consequence of the higher transactions volume of our Mercado Pago business and hosting expenses; and ii) a $34 million increase in sales and marketing expenses, mainly due to an increase in online and offline marketing expenses, buyer protection program expenses, chargebacks and salaries and wages (related to headcount increase and increases in amounts accrued under the LTRPs as a consequence of the increase in our common stock price). This was partially offset by a decrease of $100 million in provision for doubtful accounts mainly related to our initiatives to rebalance portfolio exposure towards lower risk customers, which allowed us to improve our 1-180 days non-performing loans ratio.

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Argentina

For the six-month period ended June 30, 2023, as compared to the same period in 2022, direct costs increased mainly driven by: i) a $123 million increase in cost of net revenues, mainly attributable to an increase in other payments costs in connection with higher funding cost related to our credits business, sales taxes, shipping operating and carrier costs and hosting ~~expense;~~expenses; ii) a ~~$10~~$23 million increase in sales and marketing expenses, mainly due to buyer protection program expenses, chargebacks, salaries and wages (related to headcount increase and ~~chargebacks; iii)~~increases in amounts accrued under the LTRPs as a ~~$9 million~~consequence of the increase in ~~provision for doubtful accounts mainly related to~~ our ~~consumer credits business growth; iv) a $6~~common stock price) and online and offline marketing expenses and; iii) an $8 million increase in product and technology development expenses mostly attributable to an increase in depreciation and amortization expenses; and v) a $3 million increase in general and administrative expenses, mostly attributable to an increase in other general and administrative expenses principally related to certain tax withholdings.

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~~Mexico~~expenses.

For the three-month period ended ~~March 31,~~June 30, 2023, as compared to the same period in 2022, direct costs increased mainly driven by: i) a ~~$82~~$59 million increase in cost of net revenues, mainly attributable to an increase in other payments costs in connection with higher funding cost related to our credits business, sales taxes and shipping operating and carrier costs and; ii) a $13 million increase in sales and marketing expenses, mainly due to chargebacks, buyer protection program expenses, salaries and wages (related to headcount increase and increases in amounts accrued under the LTRPs as a consequence of the increase in our common stock price), online and offline marketing expenses and temporary expenses.

Mexico

For the six-month period ended June 30, 2023, as compared to the same period in 2022, direct costs increased mainly driven by: i) a $191 million increase in cost of net revenues, mainly attributable to increases in shipping operating and carrier costs, collection fees due to higher Mercado Pago penetration, cost of goods sold as a consequence of an increase in first-party sales, other payments costs mainly related to higher funding cost related to our credits business ~~cost of goods sold as a consequence of an increase in first-party sales~~ and hosting expenses; ii) a ~~$27~~$47 million increase in sales and marketing expenses, mainly due to buyer protection program expenses, salaries and wages (related to headcount increase and increases in amounts accrued under the LTRPs as a consequence of the increase in our common stock price), sales expenses, online and offline marketing expenses ~~salaries~~ and ~~wages, chargebacks~~chargebacks; and ~~sales expenses;~~ iii) a ~~$21~~$47 million increase in provision for doubtful accounts mainly related to our consumer credits business ~~growth, partially offset by initiatives~~growth.

For the three-month period ended June 30, 2023, as compared to ~~rebalance portfolio exposure towards lower risk customers, allowed us to improve our 1-90 days non-performing loans ratio; and; iv)~~the same period in 2022, direct costs increased mainly driven by: i) a $4$111 million increase in ~~product and technology development expenses,~~cost of net revenues, mainly attributable to ~~depreciation~~increases in shipping operating and ~~amortization expenses.~~carrier costs, cost of goods sold as a consequence of an increase in first-party sales, collection fees due to higher Mercado Pago penetration, other payments costs mainly related to higher funding cost related to our credits business and hosting expenses; ii) a $25 million increase in provision for doubtful accounts mainly related to our consumer credits business growth; and iii) a $20 million increase in sales and marketing expenses, mainly due to buyer protection program expenses, salaries and wages (related to headcount increase and increases in amounts accrued under the LTRPs as a consequence of the increase in our common stock price), sales expenses and chargebacks.

Liquidity and Capital Resources

Our main cash requirement has been working capital to fund Mercado Pago financing operations. We also require cash to fund our credits business, for capital expenditures relating to technology infrastructure, software applications, office space, business acquisitions, to build out our logistics capacity and to make interest payments on our loans payable and other financial liabilities.

We have funded Mercado Pago mainly by selling credit card receivables and through credit lines. Additionally, we have financed our Mercado Pago and Mercado Credito businesses through the securitization of credit card receivables and certain loans through SPEs created in Brazil, Mexico and Argentina. Finally, we obtained funding through our financial institution in Brazil through deposit certificates and financial bills. Refer to Notes 12 and 13 of our unaudited interim condensed consolidated financial statements for further detail.

We committed to purchase cloud services for: i) a total amount of $824 million to be paid within a 5-year period starting on October 1, 2021 and ii) a total amount of $200 million to be paid within a 3-year period starting on September 23, 2022. Please refer to Note 10 of our unaudited interim condensed consolidated financial statements for further detail on purchase commitments.

Further, in connection with the closing of MELI Kaszek Pioneer Corp (“MEKA”)’s initial public offering on October 1, 2021, MEKA (a special purpose acquisition company sponsored by MELI Kaszek Pioneer Sponsor LLC (the “Sponsor”), which is a joint venture between our subsidiary, MELI Capital Ventures LLC, and Kaszek Ventures Opportunity II, L.P.) entered into a forward purchase agreement with the Sponsor, pursuant to which the Sponsor committed to purchase from MEKA 5 million Class A ordinary shares at a price of $10 per share in a private placement to close substantially concurrently with the consummation of MEKA’s initial business combination.

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On April 8, 2022, we signed a 10-year agreement with Gol Linhas Aereas S.A. under which we committed to contract a minimum amount of air logistics services for a total annual cost of $43 million (total amount once all the dedicated aircraft are in operation). Pursuant to the agreement, Gol Linhas Aereas S.A. will provide logistics services in Brazil to Mercado Envios through six dedicated aircraft, ~~three~~four of which have already started operations as of ~~March 31,~~June 30, 2023.

Additionally, we have several committed leases, mainly related to our fulfillment and service centers, which are one of the most important investments for our Mercado Envios business. As of ~~March 31,~~June 30, 2023, we have committed rental expenditures with our lessors for ~~$973~~$1,074 million and ~~$64~~$78 million for operating leases and finance leases, respectively. See Note 14 of our unaudited interim condensed consolidated financial statements for further detail on leases.

We and certain financial institutions participate in a supplier finance program (“SFP”) that enables certain of our suppliers, at their own election, to request the payment of their invoices to the financial institutions earlier than the terms stated in our payment policy. Suppliers’ voluntary inclusion of invoices in the SFP does not change our payment terms, the amounts paid or liquidity. We have no economic interest in a supplier’s decision to participate in the SFP and have no financial impact in connection with the SFP. As of ~~March 31,~~June 30, 2023, the obligations outstanding that the Company has confirmed as valid to the financial institutions amounted to ~~$254~~$273 million, and are included in the balance sheet within accounts payable and accrued expenses line.

During August 2022, we issued commercial ~~paper~~notes in Brazil (denominated in Brazilian Real) for $198 million (considering the exchange rate as of the date of issuance), the main purpose of which is to continue investing in capital expenditures for our shipping business, in order to continue developing our shipping strategy. See Note 12 of our unaudited interim condensed consolidated financial statements for further detail.

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Finally, on March 31, 2022, we entered into a $400 million revolving credit arrangement (“the Credit Arrangement”). The interest rates under the Credit Arrangement are based on Adjusted Term SOFR plus an interest margin of 1.25% per annum. Any loans drawn under the Credit Arrangement must be repaid on or prior to March 31, 2025. We are also obligated to pay a commitment fee on the unused amounts of the facility at an annual rate of 0.3125%. As of ~~March 31,~~June 30, 2023, no amounts had been borrowed under the facility. See Note 12 of our unaudited interim condensed consolidated financial statements for further detail.

As of ~~March 31,~~June 30, 2023, our main source of liquidity was ~~$3,213~~$3,300 million of cash and cash equivalents and short-term investments, which excludes a ~~$1,409~~$1,399 million investment mainly related to the Central Bank of Brazil Mandatory Guarantee, and consists mainly of cash generated from operations and proceeds from loans.

The significant components of our working capital are cash and cash equivalents, restricted cash and cash equivalents, short-term investments, credit card receivables and other means of payments, accounts receivable, loans receivable, inventory, accounts payable and accrued expenses, funds payable to customers, amounts payable due to credit and debit card transactions and short-term debt.

As of ~~March 31,~~June 30, 2023, cash and cash equivalents, restricted cash and cash equivalents and investments of our non-U.S. subsidiaries amounted to ~~$5,173~~$5,649 million or ~~82.4%~~82.9% of our consolidated cash and cash equivalents, restricted cash and cash equivalents and investments, and our non-US denominated cash and cash equivalent, restricted cash and cash equivalent and investments held outside U.S. amounted to ~~79.8%~~78.8% of our consolidated cash and cash equivalents, restricted cash and cash equivalents and investments. Our non-U.S. dollar-denominated cash and investments are located primarily in Brazil, Mexico and Argentina.

The following table presents our cash flows from operating activities, investing activities and financing activities for the ~~three-month~~six-month periods ended ~~March 31,~~June 30, 2023 and 2022:


		Three Months Ended March 31,					Six Months Ended June 30,
(In millions)	(In millions)	2023		2022		(In millions)	2023		2022
Net cash provided by (used in):	Net cash provided by (used in):					Net cash provided by (used in):
Operating activities	Operating activities	$	859	$	(233)	Operating activities	$	2,271	$	674
Investing activities	Investing activities	(538)		(1,224)		Investing activities	(1,206)		(2,561)
Financing activities	Financing activities	(112)		152		Financing activities	(472)		586
Effect of exchange rates on cash and cash equivalents, restricted cash and cash equivalents	Effect of exchange rates on cash and cash equivalents, restricted cash and cash equivalents	(48)		71		Effect of exchange rates on cash and cash equivalents, restricted cash and cash equivalents	(132)		(94)
Net increase (decrease) in cash and cash equivalents, restricted cash and cash equivalents	Net increase (decrease) in cash and cash equivalents, restricted cash and cash equivalents	$	161	$	(1,234)	Net increase (decrease) in cash and cash equivalents, restricted cash and cash equivalents	$	461	$	(1,395)

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Net cash provided by ~~(used in)~~ operating activities


		Three Months Ended March 31,				Change from 2022 to 2023					Six Months Ended June 30,				Change from 2022 to 2023
		2023		2022		in Dollars		in %			2023		2022		in Dollars		in %
		(in millions, except percentages)									(in millions, except percentages)
Net Cash provided by (used in):
Net Cash provided by:										Net Cash provided by:
Operating activities	Operating activities	$	859	$	(233)	$	1,092	(468.7)	%	Operating activities	$	2,271	$	674	$	1,597	236.9	%

Net cash provided by operating activities in the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023 resulted mainly from our net income of ~~$201~~$463 million, adjustments to net income related to non-cash items of ~~$538~~$1,128 million, ~~a decrease~~an increase in credit card receivables and other means of payments ~~by $165~~of $200 million, and an increase in payables and accrued expenses of ~~$107~~$308 million. The $1,597 million ~~which were partially offset~~increase in the net cash provided by ~~a $242~~operating activities in the six-month period ended June 30, 2023, as compared to the same period in 2022, is mainly explained by the $275 million ~~decrease~~increase in net income and the $171 million increase in unrealized foreign currency losses, together with an increase of $842 million in funds ~~payable~~related to ~~customers.~~

~~Table~~credit cards receivable and other means of ~~Contents~~

payments, due to higher credit cards receivable sales.

Net cash used in investing activities


		Three Months Ended March 31,				Change from 2022 to 2023					Six Months Ended June 30,				Change from 2022 to 2023
		2023		2022		in Dollars		in %			2023		2022		in Dollars		in %
		(in millions, except percentages)									(in millions, except percentages)
Net Cash used in:	Net Cash used in:									Net Cash used in:
Investing activities	Investing activities	$	(538)	$	(1,224)	$	686	(56.0)	%	Investing activities	$	(1,206)	$	(2,561)	$	1,355	(52.9)	%

Net cash used in investing activities in the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023 resulted mainly from purchases of investments of ~~$5,124~~$10,046 million, which was offset by proceeds from the sale and maturity of investments of ~~$5,104~~$9,923 million, consistent with our treasury strategy of investing part of our available liquidity. We also used ~~$421~~$866 million in principal of loans receivable granted to merchants and consumers under our Mercado Credito solution and ~~$89~~$203 million in the investment of property and equipment (mainly related to our shipping network and information technology assets in Argentina, Brazil and Mexico).

Net cash (used in) provided by financing activities


		Three Months Ended March 31,				Change from 2022 to 2023					Six Months Ended June 30,				Change from 2022 to 2023
		2023		2022		in Dollars		in %			2023		2022		in Dollars		in %
		(in millions, except percentages)									(in millions, except percentages)
Net Cash (used in) provided by:	Net Cash (used in) provided by:									Net Cash (used in) provided by:
Financing activities	Financing activities	$	(112)	$	152	$	(264)	(173.7)	%	Financing activities	$	(472)	$	586	$	(1,058)	(180.5)	%

For the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023, our net cash used in financing activities resulted primarily from ~~$6,022~~$12,569 million used in payments on loans payable and other financial liabilities, ~~$61~~$207 million related to repurchases of our common stock, and $6$13 million for the payments of finance lease obligations, partially offset by ~~$5,977~~$12,317 million in net proceeds from loans payable and other financial liabilities.

In the event that we decide to pursue strategic acquisitions in the future, we may fund them with available cash, third-party debt financing, or by raising equity capital, as market conditions allow.

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Debt

Convertible Senior Notes

On August 24, 2018, we issued $800 million of 2.00% Convertible Senior Notes due 2028 and on August 31, 2018 we issued an additional $80 million of notes pursuant to the partial exercise of the initial purchasers’ option to purchase such additional notes, resulting in an aggregate principal amount of $880 million of 2.00% Convertible Senior Notes due 2028. The 2028 Notes are unsecured, unsubordinated obligations, which pay interest in cash semi-annually, on February 15 and August 15, at a rate of 2.00% per annum. The 2028 Notes will mature on August 15, 2028 unless earlier redeemed, repurchased or converted in accordance with their terms prior to such date. The 2028 Notes may be converted, under specific conditions, based on an initial conversion rate of 2.2553 shares of common stock per $1,000 principal amount of the 2028 Notes (equivalent to an initial conversion price of $443.40 per share of common stock), subject to adjustment as described in the indenture governing the 2028 Notes.

In January 2021, we signed agreements with 2028 Notes holders to repurchase $440 million principal amount of our outstanding 2028 Notes. The total amount paid amounted to $1,865 million, which includes principal, interest accrued and premium. As of the date of the issuance of this report, $439 million of our principal amount of the 2028 Notes remains outstanding.

Please refer to Note 12 to our unaudited interim condensed consolidated financial statements for additional information regarding the 2028 Notes and the related capped call transactions.

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Debt Securities Guaranteed by Subsidiaries

On January 14, 2021, we issued $400 million aggregate principal amount of the 2026 Sustainability Notes and $700 million aggregate principal amount of the 2031 Notes. The payment of principal, premium, if any, interest, and all other amounts in respect of each of the Notes, is fully and unconditionally guaranteed (the “Subsidiary Guarantees”), jointly and severally, on an unsecured basis, by certain of our subsidiaries (the “Subsidiary Guarantors”). The initial Subsidiary Guarantors were MercadoLibre S.R.L., Ibazar.com Atividades de Internet Ltda., eBazar.com.br Ltda., Mercado Envios Servicos de Logistica Ltda., Mercado Pago Instituição de Pagamento Ltda. (formerly known as “MercadoPago.com Representações Ltda.”), MercadoLibre Chile Ltda., MercadoLibre, S.A. de C.V., Institución de Fondos de Pago Electrónico (formerly known as “MercadoLibre, S. de R.L. de C.V.”), DeRemate.com de México, S. de R.L. de C.V. and MercadoLibre Colombia Ltda. On October 27, 2021, MercadoLibre, S.A. de C.V., Institución de Fondos de Pago Electrónico became an excluded subsidiary pursuant to the terms of the Notes and it was released from its Subsidiary Guaranty. On October 27, 2021, MP Agregador, S. de R.L. de C.V. became a Subsidiary Guarantor under the Notes. On July 1 and October 1, 2022, Ibazar.com Atividades de Internet Ltda. and Mercado Envios Servicos de Logistica Ltda. were merged into eBazar.com.br Ltda., respectively.

We pay interest on the Notes on January 14 and July 14 of each year, beginning on July 14, 2021. The 2026 Sustainability Notes will mature on January 14, 2026, and the 2031 Notes will mature on January 14, 2031.

The Notes rank equally in right of payment with all of the Company’s other existing and future senior unsecured debt obligations. Each Subsidiary Guarantee will rank equally in right of payment with all of the Subsidiary Guarantor’s other existing and future senior unsecured debt obligations, except for statutory priorities under applicable local law.

Each Subsidiary Guarantee will be limited to the maximum amount that would not render the Subsidiary Guarantor’s obligations subject to avoidance under applicable fraudulent conveyance provisions of applicable law. By virtue of this limitation, a Subsidiary Guarantor’s obligation under its Subsidiary Guarantee could be significantly less than amounts payable with respect to the Notes, or a Subsidiary Guarantor may have effectively no obligation under its Subsidiary Guarantee.

Under the indenture governing the Notes, the Subsidiary Guarantee of a Subsidiary Guarantor will terminate upon: (i) the sale, exchange, disposition or other transfer (including by way of consolidation or merger) of the Subsidiary Guarantor or the sale or disposition of all or substantially all the assets of the Subsidiary Guarantor (other than to the Company or a Subsidiary) otherwise permitted by the indenture, (ii) satisfaction of the requirements for legal or covenant defeasance or discharge of the Notes, (iii) the release or discharge of the guarantee by such Subsidiary Guarantor of the Triggering Indebtedness (as defined in the applicable indenture) or the repayment of the Triggering Indebtedness, in each case, that resulted in the obligation of such Subsidiary to become a Subsidiary Guarantor, provided that in no event shall the Subsidiary Guarantee of an Initial Subsidiary Guarantor terminate pursuant to this provision, or (iv) such Subsidiary Guarantor becoming an Excluded Subsidiary (as defined in the applicable indenture) or ceasing to be a Subsidiary.

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We may, at our option, redeem the 2026 Sustainability Notes, in whole or in part, at any time prior to December 14, 2025 (the date that is one month prior to the maturity of the 2026 Sustainability Notes) and the 2031 Notes, in whole or in part, at any time prior to October 14, 2030 (the date that is three months prior to the maturity of the 2031 Notes), in each case by paying 100% of the principal amount of such Notes so redeemed plus the applicable “make-whole” amount and accrued and unpaid interest and additional amounts, if any. We may, at our option, redeem the 2026 Sustainability Notes, in whole or in part, on December 14, 2025 or at any time thereafter and the 2031 Notes on October 14, 2030 or at any time thereafter, in each case at the redemption price of 100% of the principal amount of such Notes so redeemed plus accrued and unpaid interest and additional amounts, if any. If we experience certain change of control triggering events, we may be required to offer to purchase the notes at 101% of their principal amount plus any accrued and unpaid interest thereon through the purchase date.

In May 2023, we repurchased a $2 million and $44 million principal amount of the outstanding 2026 Sustainability Notes and 2031 Notes, respectively. The total amount paid amounted to $38 million, as a result, $398 million and $656 million of the principal amount of the 2026 Sustainability Notes and 2031 Notes remains outstanding as of June 30, 2023, respectively. For the six and three-month periods ended June 30, 2023, we recognized $8 million as a gain in Interest income and other financial gains in our unaudited interim condensed consolidated statements of income.

See Note 12 of our unaudited condensed consolidated financial statements for additional detail.

We are presenting the following summarized financial information for the issuer and the Subsidiary Guarantors (together, the “Obligor Group”) pursuant to Rule 13-01 of Regulation S-X, Guarantors and Issuers of Guaranteed Securities Registered or Being Registered. For purposes of the following summarized financial information, transactions between the Company and the Subsidiary Guarantors, presented on a combined basis, have been eliminated. Financial information for the non-guarantor subsidiaries, and any investment in a non-guarantor subsidiary by the Company or by any Subsidiary Guarantor, have been excluded. Amounts due from, due to and transactions with the non-guarantor subsidiaries and other related parties, as applicable, have been separately presented in footnotes.

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Summarized balance sheet information for the Obligor Group as of ~~March 31,~~June 30, 2023 and ~~as of~~ December 31, 2022 is provided in the table below:

(In millions) March 31, 2023 December 31, 2022
Current assets (1) (2)
$ 8,688 $ 7,966
Non-current assets (3)
2,811 2,693
Current Liabilities (4)
7,706 7,214
Non-current Liabilities 2,655 2,547


(In millions)	June 30, 2023		December 31, 2022

Current assets (1) (2)	$	9,419	$	7,966
Non-current assets (3)	2,861		2,693
Current liabilities (4)	7,999		7,214
Non-current liabilities	2,652		2,547

(1)Includes restricted cash and cash equivalents of ~~$435~~$809 million and $687 million and guarantees in short-term investments of ~~$1,408~~$1,398 million and $1,219 million as of ~~March 31,~~June 30, 2023, and December 31, 2022, respectively.

(2)Includes Current assets from non-guarantor subsidiaries of ~~$1,507~~$1,549 million and $863 million as of ~~March 31,~~June 30, 2023, and December 31, 2022, respectively.

(3)Includes Non-current assets from non-guarantor subsidiaries of $451 million and $410 million as of ~~March 31,~~June 30, 2023, and December 31, 2022, respectively.

(4)Includes Current liabilities to non-guarantor subsidiaries of ~~$1,758~~$1,380 million and $1,334 million as of ~~March 31,~~June 30, 2023, and December 31, 2022, respectively.

Summarized statement of income information for the Obligor Group for the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023, is provided in the table below:

(In millions)

March 31, 2023

(In millions)

June 30, 2023

Net revenues (1)

2,544

Net revenues (1)

5,338

Gross Profit (2)

1,181

Gross Profit (2)

2,568

Income from operations (3)

252

Income from operations (3)

688

Net Income (4)

155

Net income (4)

298

(1)Includes Net revenues from transactions with non-guarantor subsidiaries of ~~$28~~$35 million for the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023.

(2)Includes charges from transactions with non-guarantor subsidiaries of ~~$162~~$267 million for the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023.

(3)In addition to the charges included in Gross profit, Income from operations includes charges from transactions with non-guarantor subsidiaries of ~~$168~~$210 million for the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023.

(4)Includes other income/ (expense), net from transactions with non-guarantor subsidiaries of ~~$(21)~~$(42) million for the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023.

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Capital expenditures

Our capital expenditures (comprised of our investments for property and equipment (such as certain assets used in our fulfillment centers), intangible assets (excluding digital assets)) for the ~~three-month~~six-month periods ended ~~March 31,~~June 30, 2023 and 2022 amounted to ~~$89~~$203 million and ~~$137~~$237 million, respectively.

During the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023, we invested ~~$49~~$111 million in information and technology assets in Brazil, Argentina and Mexico, and ~~$36~~$92 million in our Argentine, Brazilian and Mexican shipping premises and offices.

We are continually increasing our level of investment in hardware and software licenses necessary to improve and update our platform’s technology and computer software developed internally. We anticipate continued investments in capital expenditures related to information technology and logistics network capacity in the future as we strive to maintain our position in the Latin American e-commerce and fintech market.

We believe that our existing cash and cash equivalents, including the sale of credit card receivables, short-term investments and cash generated from operations, will be sufficient to fund our operating activities, property and equipment expenditures and to pay or repay obligations in the foreseeable future.

~~Recently issued accounting pronouncements~~

See Item 1 of Part I, “Unaudited Interim Condensed Consolidated Financial Statements - Note 2 - Summary of significant accounting policies and supplemental information— Recently Adopted Accounting Standards and Recently issued accounting pronouncements not yet adopted.”

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Non-GAAP Measures of Financial Performance

To supplement our unaudited interim condensed consolidated financial statements presented in accordance with U.S. GAAP, we present earnings before interest income and other financial gains, interest expense and other financial losses, foreign currency losses, income tax expense, depreciation and amortization and equity in earnings of unconsolidated entity (“Adjusted EBITDA”), net debt ~~interest margins after losses (“IMAL”)~~ and foreign exchange (“FX”) neutral measures as non-GAAP measures. Reconciliation of these non-GAAP financial measures to the most comparable U.S. GAAP financial measures can be found in the tables below.

These non-GAAP measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with U.S. GAAP and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with U.S. GAAP. These non-GAAP financial measures should only be used to evaluate our results of operations in conjunction with the most comparable U.S. GAAP financial measures.

We believe that reconciliation of these non-GAAP measures to the most directly comparable GAAP measure provides investors an overall understanding of our current financial performance and its prospects for the future.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that represents our net income, adjusted to eliminate the effect of depreciation and amortization charges, interest income and other financial gains, interest expense and other financial losses, foreign currency losses, income tax expense and equity in earnings of an unconsolidated entity. We have included this non-GAAP financial measure because it is used by our Management to evaluate our operating performance and trends, make strategic decisions and the calculation of leverage ratios. Accordingly, we believe this measure provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our Management. In addition, it provides a useful measure for period-to-period comparisons of our business, as it removes the effect of certain items.

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The following table presents a reconciliation of net income to Adjusted EBITDA for ~~each of~~ the ~~periods~~period indicated (in ~~millions)~~millions of U.S. dollars):


		Three Months Ended March 31,					Six Months Ended June 30,				Three Months Ended June 30,
		2023		2022			2023		2022		2023		2022
Net income	Net income	$	201	$	65	Net income	$	463	$	188	$	262	$	123
Adjustments:	Adjustments:					Adjustments:
Depreciation and amortization	Depreciation and amortization	126		84		Depreciation and amortization	254		184		128		100
Interest income and other financial gains	Interest income and other financial gains	(161)		(31)		Interest income and other financial gains	(349)		(77)		(188)		(46)
Interest expense and other financial losses	Interest expense and other financial losses	94		56		Interest expense and other financial losses	186		129		92		73
Foreign currency losses, net	Foreign currency losses, net	87		3		Foreign currency losses, net	269		63		182		60
Income tax expense	Income tax expense	122		46		Income tax expense	332		85		210		39
Equity in earnings of unconsolidated entity	Equity in earnings of unconsolidated entity	(3)		—		Equity in earnings of unconsolidated entity	(3)		1		—		1
Adjusted EBITDA	Adjusted EBITDA	$	466	$	223	Adjusted EBITDA	$	1,152	$	573	$	686	$	350

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Net debt

We define net debt as total debt which includes current and non-current loans payable and other financial liabilities and current and non-current operating lease liabilities, less cash and cash equivalents, short-term investments and long-term investments, excluding foreign government debt securities held in guarantee, securitization transactions and equity securities held at cost. We have included this non-GAAP financial measure because it is used by our Management to analyze our current leverage ratios and set targets to be met, which will also impact other components of the Company’s balance sheet, cash flows and income statement. Accordingly, we believe this measure provides useful information to investors and other market participants in showing the evolution of the Company’s indebtedness and its capability of repayment as a means to, alongside other measures, monitor our leverage based on widely-used measures.

The following table presents a reconciliation of net debt for each of the periods indicated (in ~~millions)~~millions of U.S. dollars):


		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022
Current Loans payable and other financial liabilities	Current Loans payable and other financial liabilities	$	2,332	$	2,131	Current Loans payable and other financial liabilities	$	2,286	$	2,131
Non-current Loans payable and other financial liabilities	Non-current Loans payable and other financial liabilities	2,500		2,627		Non-current Loans payable and other financial liabilities	2,481		2,627
Current Operating lease liabilities	Current Operating lease liabilities	159		142		Current Operating lease liabilities	166		142
Non-current Operating lease liabilities	Non-current Operating lease liabilities	529		514		Non-current Operating lease liabilities	595		514
Total debt	Total debt	$	5,520	$	5,414	Total debt	$	5,528	$	5,414
Less:	Less:					Less:
Cash and cash equivalents	Cash and cash equivalents	$	2,143	$	1,910	Cash and cash equivalents	$	1,860	$	1,910
Short-term investments (1)	Short-term investments (1)	1,070		1,120		Short-term investments (1)	1,440		1,120
Long-term investments (2)	Long-term investments (2)	200		245		Long-term investments (2)	68		245
Net debt	Net debt	$	2,107	$	2,139	Net debt	$	2,160	$	2,139

(1) Excludes foreign government debt securities held in guarantee and investments held in VIEs as a consequence of securitization transactions.

(2) Excludes investments held in VIEs as a consequence of securitization transactions and equity securities held at cost.

~~IMAL~~

IMAL is a non-GAAP financial measure that represents the annualized ratio between total credits revenues of the last quarter less provision for doubtful accounts for the last quarter and total loans receivable as of the end of the quarter. We have included this non-GAAP financial measure because it is used by our Management to monitor how effectively we are pricing the credit product relative to its risk. As such, it is used internally as a measure to monitor performance, manage risk and set targets. Accordingly, we believe this measure provides useful information to investors and others portraying how revenues and provision for doubtful accounts interact with the portfolio size through the different quarters and showing how effectively we are pricing risk, and as a simple measure of profitability.

~~The following table presents a reconciliation of IMAL for each of the periods indicated (in millions, except percentages):~~

Three Months Ended March 31,
2023 2022
Total credits revenues $ 536 $ 402
Less: Provision for doubtful accounts 240 253
Subtotal (a) $ 296 $ 149
Loans receivable (b) $ 3,049 $ 2,415
Annualized ratio (a/b)*4 38.8 % 24.7 %

5863

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FX neutral

We believe that FX neutral measures provide useful information to both Management and investors by excluding the foreign currency exchange rate impact that may not be indicative of our core operating results and business outlook.

The FX neutral measures were calculated by using the average monthly exchange rates for each month during 2022 and applying them to the corresponding months in 2023, so as to calculate what our results would have been had exchange rates remained stable from one year to the next. The ~~comparative FX neutral measures were calculated by using the average monthly exchange rates for each month during 2021 and applying them to the corresponding months in 2022. The~~ table below excludes intercompany allocation FX effects. Finally, these measures do not include any other macroeconomic effect such as local currency inflation effects, the impact on impairment calculations or any price adjustment to compensate local currency inflation or devaluations.

The following table sets forth the FX neutral measures related to our reported results of the operations for the six and three-month ~~period~~periods ended ~~March 31,~~June 30, 2023:


		Three Months Ended March 31,													Six Months Ended June 30,
		As reported						FX Neutral Measures		As reported					As reported						FX Neutral Measures		As reported
(In millions, except percentages)	(In millions, except percentages)	2023		2022		Percentage Change		2023		2022		Percentage Change		(In millions, except percentages)	2023		2022		Percentage Change		2023		2022		Percentage Change
		(Unaudited)						(Unaudited)							(Unaudited)						(Unaudited)
Net revenues	Net revenues	$	3,037	$	2,248	35.1	%	$	3,562	$	2,248	58.4	%	Net revenues	$	6,452	$	4,845	33.2	%	$	7,645	$	4,845	57.8	%
Cost of net revenues	Cost of net revenues	(1,501)		(1,175)		27.7	%	(1,709)		(1,175)		45.4	%	Cost of net revenues	(3,196)		(2,488)		28.5	%	(3,682)		(2,488)		48.0	%
Gross profit	Gross profit	1,536		1,073		43.2	%	1,853		1,073		72.6	%	Gross profit	3,256		2,357		38.1	%	3,963		2,357		68.1	%

Operating expenses	Operating expenses	(1,196)		(934)		28.1	%	(1,450)		(934)		55.4	%	Operating expenses	(2,358)		(1,968)		19.8	%	(2,873)		(1,968)		46.0	%
Income from operations	Income from operations	$	340	$	139	144.6	%	$	403	$	139	188.3	%	Income from operations	$	898	$	389	130.8	%	$	1,090	$	389	180.2	%

															Three Months Ended June 30,
															As reported						FX Neutral Measures		As reported
(In millions, except percentages)														(In millions, except percentages)	2023		2022		Percentage Change		2023		2022		Percentage Change
															(Unaudited)						(Unaudited)
Net revenues														Net revenues	$	3,415	$	2,597	31.5	%	$	4,083	$	2,597	57.2	%
Cost of net revenues														Cost of net revenues	(1,695)		(1,313)		29.1	%	(1,973)		(1,313)		50.3	%
Gross profit														Gross profit	1,720		1,284		34.0	%	2,110		1,284		64.3	%

Operating expenses														Operating expenses	(1,162)		(1,034)		12.4	%	(1,422)		(1,034)		37.5	%
Income from operations														Income from operations	$	558	$	250	123.2	%	$	688	$	250	175.2	%

See “Summary of significant accounting policies - Foreign currency translation - Argentine currency status and Argentine Exchange regulations” in Note 2 of our unaudited interim condensed consolidated financial statements for further detail on the currency status and the exchange regulations of our Argentine segment.

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Item 3 — Qualitative and Quantitative Disclosure About Market Risk

We are exposed to market risks arising from our business operations. These market risks arise mainly from macroeconomic instability and the possibility that changes in interest rates and the U.S. dollar exchange rate with local currencies, particularly the Brazilian Real, Argentine Peso and Mexican Peso due to Brazil’s, Argentina’s and Mexico’s respective share of our revenues, may affect the value of our financial assets and liabilities.

We are also exposed to market risks arising from our long-term retention programs (“LTRPs”). These market risks arise from our obligations to pay employees cash payments in amounts that vary based on the market price of our stock.

Foreign currencies

We have significant operations internationally that are denominated in foreign currencies, primarily the Brazilian Real, Argentine Peso, Mexican Peso, Colombian Peso and Chilean Peso, subjecting us to foreign currency risk, which may adversely impact our financial results. We transact business in various foreign currencies and have significant international revenues and costs. In addition, we charge our international subsidiaries for their use of intellectual property and technology and for certain corporate services. Our cash flows, results of operations and certain of our intercompany balances that are exposed to foreign exchange rate fluctuations may differ materially from expectations and we may record significant gains or losses due to foreign currency fluctuations and related hedging activities.

We use foreign currency exchange forward contracts and currency swaps to protect our foreign currency exposure and our investment in a foreign subsidiary from adverse changes in foreign currency exchange rates. These hedging contracts reduce, but do not entirely eliminate, the impact of adverse foreign currency exchange rate movements. We designate these contracts as cash flow and net investment hedges for accounting purposes. The derivative’s gain or loss is initially reported as a component of accumulated other comprehensive income (“AOCI”). Cash flow hedges and net investment hedges are subsequently reclassified into the financial statement line item in which the hedged item is recorded in the same period the forecasted transaction affects earnings.

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As of ~~March 31,~~June 30, 2023, we hold cash and cash equivalents in local currencies in our subsidiaries, and have receivables denominated in local currencies in all of our operations. Our subsidiaries generate revenues and incur most of their expenses in the respective local currencies of the countries in which they operate. As a result, our subsidiaries use their local currency as their functional currency except for our Argentine subsidiaries, whose functional currency is the U.S. dollar due to the inflationary environment. As of ~~March 31,~~June 30, 2023, the total cash and cash equivalents, restricted cash and cash equivalent denominated in foreign currencies totaled ~~$2,988~~$3,314 million, short-term investments denominated in foreign currencies totaled ~~$1,916~~$1,847 million and accounts receivable, credit card receivables and other means of payment and loans receivable in foreign currencies totaled ~~$4,839~~$5,122 million. As of ~~March 31,~~June 30, 2023, we had ~~$83~~$91 million long-term investments denominated in foreign currencies. To manage exchange rate risk, our treasury policy is to transfer most cash and cash equivalents in excess of working capital requirements into U.S. dollar-denominated accounts in the United States and to enter into certain foreign exchange derivatives, such as currency forwards contracts, in order to mitigate our exposure to foreign exchange risk. As of ~~March 31,~~June 30, 2023, our U.S. dollar-denominated cash and cash equivalents, restricted cash and cash equivalents and short-term investments totaled ~~$1,099~~$1,502 million and our U.S. dollar-denominated long-term investments totaled ~~$195~~$58 million.

For the six and three-month ~~period~~periods ended ~~March 31,~~June 30, 2023, we had a consolidated loss on foreign currency of ~~$87~~$269 million and $182 million, respectively, mainly related to higher foreign exchange losses attributable to our own common stock acquisition in the Argentine market at a price that reflects the additional cost of accessing U.S. dollars through an indirect mechanism due to restrictions imposed by the Argentine government for buying U.S. dollars at the official exchange rate, higher foreign exchange losses from our Argentinian subsidiaries, ~~and lower~~partially offset by foreign exchange gains from our Brazilian and Mexican subsidiaries. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of operations—Other income (expenses), net” for more information.

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Foreign Currency Sensitivity Analysis

The table below shows the impact on our net revenues, cost of net revenues, operating expenses, other income (expenses) and income tax, net income and equity for a positive and a negative 10% fluctuation on all the foreign currencies to which we are exposed to at the moment of translating our financial statements to U.S. dollars ~~as of March 31,~~for the six-month period ended June 30, 2023:


Foreign Currency Sensitivity Analysis	Foreign Currency Sensitivity Analysis							Foreign Currency Sensitivity Analysis
(In millions)	(In millions)	-10%		Actual		+10%		(In millions)	-10%		Actual		+10%
		(1)				(2)			(1)				(2)
Net revenues	Net revenues	$	3,374	$	3,037	$	2,761	Net revenues	$	7,169	$	6,452	$	5,866
Expenses (*)	Expenses (*)	(2,983)		(2,697)		(2,463)		Expenses (*)	(6,143)		(5,554)		(5,073)
Income from operations	Income from operations	391		340		298		Income from operations	1,026		898		793

Other income/(expenses), equity in earning of unconsolidated entity and income tax related to P&L items	Other income/(expenses), equity in earning of unconsolidated entity and income tax related to P&L items	57		(52)		62		Other income/(expenses), equity in earning of unconsolidated entity and income tax related to P&L items	(182)		(166)		(151)
Foreign Currency impact related to the remeasurement of our Net Asset position	Foreign Currency impact related to the remeasurement of our Net Asset position	(204)		(87)		(193)		Foreign Currency impact related to the remeasurement of our Net Asset position	(274)		(269)		(264)
Net Income	Net Income	$	244	$	201	$	167	Net Income	$	570	$	463	$	378

Total Shareholders’ Equity	Total Shareholders’ Equity	$	2,348	$	2,040	$	1,788	Total Shareholders’ Equity	$	2,407	$	2,252	$	2,076

(1)Appreciation of the subsidiaries’ local currency against U.S. Dollar.

(2)Depreciation of the subsidiaries’ local currency against U.S. Dollar.

(*)Includes cost of net revenues and operating expenses.

The table above shows an increase in our net income when the U.S. dollar weakens against foreign currencies because of the positive impact of the increase in income from operations. On the other hand, the table above shows a decrease in our net income when the U.S. dollar strengthens against foreign currencies because of the negative impact of the decrease in income from operations.

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Brazilian Segment

Considering a hypothetical devaluation of 10% of the Brazilian ~~Reais~~Real against the U.S. dollar on ~~March 31,~~June 30, 2023, the reported net assets in our Brazilian subsidiaries would have decreased by approximately ~~$187~~$191 million with the related impact in Other Comprehensive Income. Additionally, we would have recorded a foreign currency loss amounting to approximately ~~$32~~$33 million in our Brazilian subsidiaries.

Argentine Segment

In accordance with U.S. GAAP, we have classified our Argentine operations as highly inflationary since July 1, 2018, using the U.S. dollar as the functional currency for purposes of reporting our financial statements. Therefore, no translation effect has been accounted for in other comprehensive income related to our Argentine operations since July 1, 2018. Argentina’s ~~quarterly~~ inflation rate for the ~~three-month~~six-month periods ended ~~March 31,~~June 30, 2023 and 2022 was ~~21.7%~~50.7% and ~~16.1%~~36.2%, respectively.

We use ~~the~~ Argentina’s official exchange rate to account for transactions in our Argentine segment, which as of ~~March 31,~~June 30, 2023 and December 31, 2022 was ~~209.01~~256.70 and 177.16 Argentine Pesos, respectively, against the U.S. dollar. For the ~~three-month~~six-month periods ended ~~March 31,~~June 30, 2023 and 2022 ~~the~~ Argentina’s ~~quarterly~~ depreciation of its local currency against the U.S. dollar was ~~18.0%~~44.9% and ~~8.1%~~21.9%, respectively.

Considering a hypothetical devaluation of 10% of the Argentine Peso against the U.S. dollar on ~~March 31,~~June 30, 2023, the effect on non-functional currency net asset position in our Argentine subsidiaries would have been a foreign exchange loss amounting to ~~approximat~~approxima~~ely $19~~tely $8 million in our Argentine subsidiaries.

See “Summary of significant accounting policies ~~and supplemental information~~ - Foreign currency translation - Argentine currency status and Argentine Exchange regulations” in Note 2 of our unaudited interim condensed consolidated financial statements for further detail on the currency status and the exchange regulations of our Argentine segment.

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Mexican Segment

Considering a hypothetical devaluation of 10% of the Mexican peso against the U.S. dollar on ~~March 31,~~June 30, 2023, the reported net assets in our Mexican subsidiaries would have decreased by approximately ~~$68~~$76 million with the related impact in Other Comprehensive Income. Additionally, we would have recorded a foreign currency loss amounting to approximately ~~$21~~$22 million in our Mexican subsidiaries.

Interest

Our earnings and cash flows are also affected by changes in interest rates. These changes could have an impact on the interest rates that financial institutions charge us prior to the time we sell our Mercado Pago receivables and on the financial debt that we use to fund Mercado Pago and Mercado Credito’s operations. As of ~~March 31,~~June 30, 2023, Mercado Pago’s receivables totaled ~~$2,799~~$2,835 million. Interest rate fluctuations could also impact interest earned through our Mercado Credito solution. As of ~~March 31,~~June 30, 2023, loans receivable from our Mercado Credito solution totaled ~~$1,908~~$2,127 million. Interest rate fluctuations could also negatively affect certain of our fixed rate and floating rate investments comprised primarily of time deposits, money market funds and sovereign debt securities. Investments in both fixed rate and floating rate interest earning products carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than predicted if interest rates fall.

As of ~~March 31,~~June 30, 2023, our short-term investments amounted to ~~$2,479~~$2,839 million and our long-term investments amounted to ~~$278~~$149 million. Our short-term investments, except for the ~~$1,409~~$1,399 million investment, which is mainly related to the Central Bank of Brazil Mandatory Guarantee, can be readily converted at any time into cash or into securities with a shorter remaining time to maturity. We determine the appropriate classification of our investments at the time of purchase and re-evaluate such designations as of each balance sheet date. See Notes 3 and 5 of our unaudited interim condensed consolidated financial statements for further detail on our restricted investments.

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Fluctuations of the interest rate could also have a negative impact on interest expense related to our Loans payable and other financial liabilities, as a portion of these instruments is subject to variable interest rates. As of ~~March 31,~~June 30, 2023, our loans payable and other financial liabilities, which accrue interest based on variable rates, amounted to ~~$2,692~~$2,669 million, while our loans payable and other financial liabilities, which accrue interest based on fixed rates, amounted to $2,098 million. See Notes 12 and 13 of our unaudited interim condensed consolidated financial statements for further detail. Considering a hypothetical increase of 10% of the interest rates on ~~March 31,~~June 30, 2023, the reported Loans payable and other financial liabilities would have increased by approximately ~~$95~~$4 million with the related impact in Interest expense and other financial losses. We have entered into swap contracts to hedge the interest rate fluctuation of ~~$752~~$472 million notional amount, ~~$365~~$161 million of which have been designated as hedging instruments. See Note 15 of our unaudited interim condensed consolidated financial statements for further detail on derivative instruments.

Equity Price Risk

Our Board, upon the recommendation of the compensation committee, approved the 2018 Long Term Retention Program (the “2018 LTRP”).

In order to receive an award under the 2018 LTRP, each eligible employee must satisfy the performance conditions established by the Board for such employee. If these conditions are satisfied, the eligible employee will, subject to his or her continued employment as of each applicable payment date, receive the full amount of his or her 2018 LTRP award, payable as follows:

•the eligible employee will receive a fixed payment, equal to 8.333% of his or her 2018 LTRP bonus once a year for a period of six years starting no later than April 30, 2019 (the “2018 Annual Fixed Payment”); and

•on each date we pay the respective Annual Fixed Payment to an eligible employee, he or she will also receive a payment (the “2018 Variable Payment”) equal to the product of (i) 8.333% of the applicable 2018 LTRP award and (ii) the quotient of (a) divided by (b), where (a), the numerator, equals the Applicable Year Stock Price (as defined below) and (b) the denominator, equals the 2017 Stock Price, defined as $270.84, which was the average closing price of our common stock on the NASDAQ Global Select Market during the final 60 trading days of 2017. The “Applicable Year Stock Price” shall equal the average closing price of our common stock on the NASDAQ Global Select Market during the final 60 trading days of the year preceding the applicable payment date.

Our Board, upon the recommendation of the compensation committee, approved the 2019, 2020, 2021, 2022 and 2023 Long Term Retention Program (the “2019, 2020, 2021, 2022 and 2023 LTRPs”), respectively, under which certain eligible employees have the opportunity to receive cash payments annually for a period of six years (with the first payment occurring no later than April 30, 2020, 2021, 2022, 2023 and 2024 for the 2019, 2020, 2021, 2022 and 2023 LTRPs, respectively).

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In order to receive the full target award under the 2019, 2020, 2021, 2022 and/or 2023 LTRPs, each eligible employee must remain employed as of each applicable payment date. The 2019, 2020, 2021, 2022 and 2023 LTRP awards are payable as follows:

•the eligible employee will receive 16.66% of half of his or her target 2019, 2020, 2021, 2022 and/or 2023 LTRP bonus once a year for a period of six years, with the first payment occurring no later than April 30, 2020, 2021, 2022, 2023 and 2024, respectively (the “2019, 2020, 2021, 2022 or 2023 Annual Fixed Payment”, respectively); and

•on each date we pay the respective Annual Fixed Payment to an eligible employee, he or she will also receive a payment (the “2019, 2020, 2021, 2022 or 2023 Variable Payment”) equal to the product of (i) 16.66% of half of the target 2019, 2020, 2021, 2022 or 2023 LTRP award and (ii) the quotient of (a) divided by (b), where (a), the numerator, equals the Applicable Year Stock Price (as defined below) and (b), the denominator, equals the average closing price of our common stock on the NASDAQ Global Select Market during the final 60 trading days of 2018, 2019, 2020, 2021 and 2022 defined as $322.91, $553.45, $1,431.26, $1,391.81 and $888.69 for the 2019, 2020, 2021, 2022 and 2023 LTRPs, respectively. The “Applicable Year Stock Price” shall equal the average closing price of our common stock on the NASDAQ Global Select Market during the final 60 trading days of the year preceding the applicable payment date.

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As of ~~March 31,~~June 30, 2023, the total contractual obligation fair value of our outstanding LTRP Variable Award Payment obligation subject to equity price risk amounted to ~~$460~~$419 million. As of ~~March 31,~~June 30, 2023, the accrued liability related to the outstanding Variable Award Payment of the LTRP included in Salaries and social security payable and Non-current other liabilities in our consolidated balance sheet amounted to ~~$31~~$50 million. The following table shows a sensitivity analysis of the risk associated with our total contractual obligation fair value related to the outstanding LTRP Variable Award Payment subject to equity price risk if our common stock price per share were to increase or decrease by up to 40%:

As of March 31, 2023
MercadoLibre, Inc
Equity Price 2018, 2019, 2020, 2021, 2022 and 2023 LTRP Variable contractual obligation
(In Millions, except equity price)
Change in equity price in percentage
40 % 1,853.60 644
30 % 1,721.20 598
20 % 1,588.80 552
10 % 1,456.40 506
Static (*) 1,324.00 460
-10 % 1,191.60 414
-20 % 1,059.20 368
-30 % 926.80 322
-40 % 794.40 276


			As of June 30, 2023
			MercadoLibre, Inc Equity Price	2018, 2019, 2020, 2021, 2022 and 2023 LTRP Variable contractual obligation
(In Millions, except equity price)
Change in equity price in percentage

40	%		1,667.02	587
30	%		1,547.95	545
20	%		1,428.88	503
10	%		1,309.80	461
Static		(*)	1,190.73	419
-10	%		1,071.66	377
-20	%		952.58	335
-30	%		833.51	293
-40	%		714.44	252

(*)Present value of average closing stock price for the last 60 trading days of the year preceding the applicable payment date.

In November 2021, we acquired Kangú Participações S.A. Former Kangú’s shareholders who after the acquisition became the Company’s employees will receive cash payments annually over a three-year period subject to certain performance and stay conditions. The payments will be indexed based on changes in equity price of our common stock. As of ~~March 31,~~June 30, 2023, the total contractual obligation fair value of the mentioned payments amounted to $8$7 million.

Item 4 — Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our Management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

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Evaluation of Disclosure Controls and Procedures

Based on the evaluation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) required by Exchange Act Rules 13a-15(b) or 15d-15(b), our chief executive officer and our chief financial officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.

Changes in Internal Controls Over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We permit remote work for most positions of our Company, and we monitor and assess the impact of this remote work environment on our internal controls.

PART II. OTHER INFORMATION

Item 1 — Legal Proceedings

See Item 1 of Part I, “Financial Statements—Note 10 Commitments and Contingencies—Litigation and other Legal Matters.”

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Item 1A — Risk Factors

As of ~~March 31,~~June 30, 2023,, there have been no material changes in our risk factors from those disclosed in the ~~Company~~’sCompany’s 2022 10-K.

Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Period Total Number of Shares Purchased (2) Average Price per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Program (in millions) (2)
January, 2023 — — — Up to $48
February, 2023 — — — Up to $900
March, 2023 50,144 2,341.28 50,144 Up to $783


Period	Total Number of Shares Purchased (2)	Average Price per Share (1)	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Program (in millions) (2)
April, 2023	—	—	—	Up to $783
May, 2023	69,349	2,682.27	69,349	Up to $597
June, 2023	46,275	2,546.25	46,275	Up to $479

(1)Average price paid per share does not include costs associated with the repurchases. It includes the foreign exchange loss recognized for the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023. Please refer to Note 16 of our unaudited interim condensed consolidated financial statements for additional detail.

(2)On August 4, 2021, the Board authorized the Company to repurchase shares of the Company’s common stock, for aggregate consideration of up to $150 million. This authorization, was scheduled to expire on August 31, 2022. On March 1, 2022, the Board authorized an increase in that Authorization of $300 million, from an aggregate consideration of up to $150 million to an aggregate consideration of up to $450 million (the ~~"Existing Program"~~“Prior Program”). On March 1, 2022, the Board also authorized a new extension of the term of the ~~Existing~~Prior Program, from August 31, 2022 to August 31, 2023. On February 21, 2023, the Board terminated the ~~Existing~~Prior Program and authorized a new program to repurchase shares of the Company’s common stock, for aggregate consideration of up to $900 million to expire on March 31, 2024 (the ~~"Program"~~“Program”). As of ~~March 31,~~June 30, 2023, the estimated remaining balance available for share repurchases under this Program was ~~$783~~$479 million. Please refer to Note 16 of our unaudited interim condensed consolidated financial statements for additional detail.

Item 5 — Other information

Rule 10b5-1 Trading Plans

During the three months ended June 30, 2023, none of the Company’s directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any “non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K.

Item 6 — Exhibits

The information set forth under “Index to Exhibits” below is incorporated herein by reference.

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MercadoLibre, Inc.

INDEX TO EXHIBITS

Incorporated by Reference

Exhibit Number

Exhibit Description

Filed (*) or
Furnished (**)
Herewith

Form

Filing Date

3.1

Registrant’s Amended and Restated Certificate of Incorporation.

S-1

May 11, 2007

3.2

Registrant’s Amended and Restated Bylaws.

S-1

May 11, 2007

4.1

Form of Specimen Certificate for the Registrant’s Common Stock.

10-K

February 27, 2009

4.2

Indenture with respect to the Registrant’s 2.00% Convertible Senior Notes due 2028, dated as of August 24, 2018, between the Registrant and Wilmington Trust, National Association, as trustee.

8-K

August 24, 2018

4.3

Indenture, dated January 14, 2021, between MercadoLibre, Inc., MercadoLibre S.R.L., Ibazar.com Atividades de Internet Ltda., eBazar.com.br Ltda., Mercado Envios Servicos de Logistica Ltda., MercadoPago.com Representações Ltda., MercadoLibre Chile Ltda., MercadoLibre, S. de R.L. de C.V., DeRemate.com de México, S. de R.L. de C.V. and MercadoLibre Colombia Ltda. and The Bank of New York Mellon, as trustee.

8-K

January 14, 2021

4.4

First Supplemental Indenture, dated January 14, 2021, between MercadoLibre, Inc., MercadoLibre S.R.L., Ibazar.com Atividades de Internet Ltda., eBazar.com.br Ltda., Mercado Envios Servicos de Logistica Ltda., MercadoPago.com Representações Ltda., MercadoLibre Chile Ltda., MercadoLibre, S. de R.L. de C.V., DeRemate.com de México, S. de R.L. de C.V. and MercadoLibre Colombia Ltda. and The Bank of New York Mellon, as trustee.

8-K

January 14, 2021

4.5

Form of Global Note representing the Registrant’s 2.375% Sustainability Notes due 2026.

8-K

January 14, 2021

4.6

Form of Global Note representing the Registrant’s 3.125% Notes due 2031.

8-K

January 14, 2021

4.7

Second Supplemental Indenture, dated October 27, 2021 among MP Agregador, S. de R.L. de C.V., MercadoLibre, Inc. and The Bank of New York Mellon, as Trustee

10-K

February 23, 2022

10.1

MercadoLibre, Inc. 2023 Long Term Retention Program

8-K

May 8, 2023

22.1

List of Subsidiary Guarantors for the Registrant’s 2.375% Sustainability Notes due 2026 and 3.125% Notes due 2031.

10-K

February 24, 2023

31.1

Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101

The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~June 30, 2023, formatted in Inline XBRL: (i) Interim Condensed Consolidated Balance Sheets, (ii) Interim Condensed Consolidated Statements of Income, (iii) Interim Condensed Consolidated Statements of Comprehensive Income, (iv) Interim Condensed Statements of Equity, (v) Interim Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Interim Condensed Consolidated Financial Statements.

104

The cover page from the Company’s Form 10-Q for the quarterly period ended ~~March 31,~~June 30, 2023, formatted in Inline XBRL and contained in Exhibit 101

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	MERCADOLIBRE, INC.
	Registrant

Date: ~~May 4,~~August 3, 2023.	By:	/s/ Marcos Galperin
		Marcos Galperin
		President and Chief Executive Officer

	By:	/s/ Pedro Arnt
		Pedro Arnt
		Executive Vice President and Chief Financial Officer

6671


	Three Months Ended March 31,
(in millions)(*)	2023		2022

Unique active users (1)	101		81
Gross merchandise volume(2)	$	9,434	$	7,665
Number of successful items sold (3)	309		267
Number of successful items shipped(4)	302		254
Total payment volume(5)	$	36,986	$	25,319
Total volume of payments on marketplace(6)	$	9,950	$	8,071
Total payment transactions(7)	1,875		1,091
Capital expenditures	$	89	$	137
Depreciation and amortization	$	126	$	84


			As of March 31, 2023
			MercadoLibre, Inc Equity Price	2018, 2019, 2020, 2021, 2022 and 2023 LTRP Variable contractual obligation
(In Millions, except equity price)
Change in equity price in percentage

40	%		1,853.60	644
30	%		1,721.20	598
20	%		1,588.80	552
10	%		1,456.40	506
Static		(*)	1,324.00	460
-10	%		1,191.60	414
-20	%		1,059.20	368
-30	%		926.80	322
-40	%		794.40	276