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 ~~June 30, 2020~~March 31, 2021

-OR-


¨	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)

~~Arias 3751, 7th~~Pasaje Posta 4789, 6th Floor

Buenos Aires, Argentina, ~~C1430CRG~~C1430EKG

(Address of registrant’s principal executive offices)

(+5411) 4640-8000

(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~~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 ¨

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.~~files). Yes x No ¨

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





Large ~~Accelerated Filer~~accelerated filer	x	Accelerated ~~Filer~~filer	¨
~~Non-Accelerated Filer~~Non-accelerated filer	¨	Smaller ~~Reporting Company~~reporting company	¨
		Emerging ~~Growth Company~~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~~Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ 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.

~~49,709,955~~49,852,319 shares of the issuer’s common stock, $0.001 par value, outstanding as of ~~August 7, 2020.~~

May 4, 2021.

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 ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020	1
Interim Condensed Consolidated Statements of Income for the ~~six and~~ three-month periods ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~	2
Interim Condensed Consolidated Statements of Comprehensive Income for the ~~six and~~ three-month periods ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~	3
Interim Condensed Consolidated Statements of Equity for the ~~six and~~ three-month periods ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~	4
Interim Condensed Consolidated Statements of Cash Flows for the ~~six-month~~three-month periods ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~	65
Notes to Interim Condensed Consolidated Financial Statements (unaudited)	76
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations	3631
Item 3 — Qualitative and Quantitative Disclosures About Market Risk	5952
Item 4 — Controls and Procedures	6255
PART II. OTHER INFORMATION	6356
Item 1 — Legal Proceedings	6356
Item 1A — Risk Factors	6356
Item 2 — Issuer Purchases of Equity Securities	57
Item 6 — Exhibits	6358
INDEX TO EXHIBITS	6458

Table of Contents

MercadoLibre, Inc.

Interim Condensed Consolidated Balance Sheets

As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020

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

(Unaudited)


	June 30,	December 31,	March 31,	December 31,
	2020	2019	2021	2020
Assets
Current assets:
Cash and cash equivalents	$ 1,169,550	$ 1,384,740	$ 862,720	$ 1,856,394
Restricted cash and cash equivalents	493,808	66,684	325,636	651,830
Short-term investments (530,660 and 522,798 held in guarantee)	2,124,872	1,597,241
Short-term investments (634,067 and 636,949 held in guarantee - see Note 4)			980,076	1,241,306
Accounts receivable, net	42,423	35,446	64,815	49,691
Credit cards receivable and other means of payment, net	646,739	379,969
Credit cards receivable and other means of payments, net			883,670	863,073
Loans receivable, net	139,148	182,105	416,600	385,036
Prepaid expenses	23,141	45,309	43,291	28,378
Inventory	20,831	8,626	131,460	118,140
Other assets	94,042	88,736	191,923	152,959
Total current assets	4,754,554	3,788,856	3,900,191	5,346,807
Non-current assets:
Long-term investments	5,790	263,983	175,601	166,111
Loans receivable, net	5,055	6,439	18,849	16,619
Property and equipment, net	263,041	244,257	458,640	391,684
Operating lease right-of-use assets	186,851	200,449	345,313	303,214
Goodwill	81,799	87,609	82,830	85,211
Intangible assets, net	15,942	14,275	20,271	14,155
Deferred tax assets	93,897	117,582	124,272	134,916
Other assets	45,807	58,241	71,888	67,615
Total non-current assets	698,182	992,835	1,297,664	1,179,525
Total assets	$ 5,452,736	$ 4,781,691	$ 5,197,855	$ 6,526,332
Liabilities
Current liabilities:
Accounts payable and accrued expenses	$ 417,759	$ 372,309	$ 612,206	$ 767,336
Funds payable to customers	1,324,605	894,057
Funds payable to customers and amounts due to merchants			1,527,971	1,733,095
Salaries and social security payable	114,944	101,841	193,166	207,358
Taxes payable	141,226	60,247	240,167	215,918
Loans payable and other financial liabilities	591,683	186,138	514,540	548,393
Operating lease liabilities	25,113	23,259	67,264	55,246
Other liabilities	44,449	114,469	49,635	108,534
Total current liabilities	2,659,779	1,752,320	3,204,949	3,635,880
Non-current liabilities:
Salaries and social security payable	25,279	26,803	20,695	49,852
Loans payable and other financial liabilities	610,899	631,353	1,659,898	860,876
Operating lease liabilities	168,589	176,673	277,264	243,601
Deferred tax liabilities	65,273	99,952	41,233	64,354
Other liabilities	15,825	12,627	24,220	20,191
Total non-current liabilities	885,865	947,408	2,023,310	1,238,874
Total liabilities	$ 3,545,644	$ 2,699,728	$ 5,228,259	$ 4,874,754

Commitments and Contingencies (Note 9)

Redeemable convertible preferred stock, $0.001 par value, 40,000,000 shares authorized,
100,000 shares issued and outstanding at June 30, 2020 and December 31, 2019	$ 98,843	$ 98,843

Equity

Common stock, $0.001 par value, 110,000,000 shares authorized,
49,709,955 shares issued and outstanding at June 30,
2020 and December 31, 2019	$ 50	$ 50
49,852,319 and 49,869,727 shares issued and outstanding at March 31,
2021 and December 31, 2020			$ 50	$ 50
Additional paid-in capital	1,964,140	2,067,869	275,632	1,860,502
Treasury stock	(1,440)	(720)	(80,126)	(54,805)
Retained earnings	350,860	322,592	280,103	314,115
Accumulated other comprehensive loss	(505,361)	(406,671)	(506,063)	(468,284)
Total Equity	1,808,249	1,983,120	(30,404)	1,651,578
Total Liabilities, Redeemable convertible preferred stock and Equity	$ 5,452,736	$ 4,781,691
Total Liabilities and Equity			$ 5,197,855	$ 6,526,332

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

Table of Contents

MercadoLibre, Inc.

Interim Condensed Consolidated Statements of Income

For the ~~six and~~ three-month periods ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~

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

(Unaudited)


	Six Months Ended June 30,		Three Months Ended June 30,		Three Months Ended March 31,
	2020	2019	2020	2019	2021	2020
Net service revenues					$ 1,230,904	$ 639,892
Net product revenues					147,537	12,199
Net revenues	$ 1,530,460	$ 1,019,012	$ 878,369	$ 545,242	1,378,441	652,091
Cost of net revenues	(790,474)	(509,578)	(451,197)	(272,812)	(787,064)	(339,277)
Gross profit	739,986	509,434	427,172	272,430	591,377	312,814
Operating expenses:
Product and technology development	(146,689)	(106,292)	(73,254)	(53,923)	(126,035)	(73,435)
Sales and marketing	(390,583)	(311,368)	(184,076)	(180,692)	(288,159)	(206,507)
General and administrative	(132,970)	(94,123)	(70,404)	(50,303)	(86,339)	(62,566)
Total operating expenses	(670,242)	(511,783)	(327,734)	(284,918)	(500,533)	(342,508)
Income (loss) from operations	69,744	(2,349)	99,438	(12,488)	90,844	(29,694)

Other income (expenses):
Interest income and other financial gains	55,566	58,128	18,782	33,684	25,071	36,784
Interest expense and other financial losses	(50,561)	(30,238)	(26,977)	(14,679)
Foreign currency (losses) gains	(2,089)	(2,886)	(1,903)	783
Net income before income tax (expense) gain	72,660	22,655	89,340	7,300
Interest expense and other financial losses ^(*)					(91,289)	(23,584)
Foreign currency losses					(15,089)	(186)
Net income (loss) before income tax expense					9,537	(16,680)

Income tax (expense) gain	(37,822)	5,426	(33,393)	8,917
Net income	$ 34,838	$ 28,081	$ 55,947	$ 16,217
Income tax expense					(43,549)	(4,429)
Net loss					$ (34,012)	$ (21,109)

Six Months Ended June 30,
Three Months Ended June 30,
2020
2019
2020
2019
Basic EPS
Basic net income
Available to shareholders per common share
$                       0.66
$                       0.45
$                       1.11
$                       0.31
Weighted average of outstanding common shares
49,709,964
47,658,610
49,709,973
49,318,522
Diluted EPS
Diluted net income
Available to shareholders per common share
$                       0.66
$                       0.45
$                       1.11
$                       0.31
Weighted average of outstanding common shares
49,709,964
47,658,610
49,709,973
49,318,522


(*)	Includes $49,247 thousands of loss on debt extinguishment and premium related to the 2028 Notes repurchase. See Note 11 to these unaudited interim condensed consolidated financial statements for further detail on 2028 Notes repurchase.


	Three Months Ended March 31,
	2021	2020
Basic EPS
Basic net loss
Available to shareholders per common share	$ (0.68)	$ (0.44)
Weighted average of outstanding common shares	49,867,625	49,709,955
Diluted EPS
Diluted net loss
Available to shareholders per common share	$ (0.68)	$ (0.44)
Weighted average of outstanding common shares	49,867,625	49,709,955

The accompanying notes are an integral part of these 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 ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~

(In thousands of U.S. dollars)

(Unaudited)

Six Months Ended June 30,
Three Months Ended June 30,
2020
2019
2020
2019
Net income
$                   34,838
$                   28,081
$                   55,947
$                      16,217
Other comprehensive (loss) income, net of income tax:
Currency translation adjustment
(100,650)
3,353
(6,052)
3,647
Unrealized gains on hedging activities
4,978
—
997
—
Unrealized net gains (loss) on available for sale investments
1,061
2,504
(1,207)
492
Less: Reclassification adjustment for gains from accumulated other comprehensive (loss) income
4,079
2,729
2,375
—
Net change in accumulated other comprehensive (loss) income, net of income tax
(98,690)
3,128
(8,637)
4,139
Total Comprehensive (loss) income
$                 (63,852)
$                   31,209
$                   47,310
$                      20,356


	Three Months Ended March 31,
	2021	2020
Net loss	$ (34,012)	$ (21,109)
Other comprehensive loss, net of income tax:
Currency translation adjustment	(41,869)	(94,597)
Unrealized gains on hedging activities	3,670	3,981
Unrealized net gains on available for sale investments	—	2,268
Less: Reclassification adjustment for gains from accumulated other comprehensive loss	(420)	1,705
Net change in accumulated other comprehensive loss, net of income tax	(37,779)	(90,053)
Total Comprehensive loss	$ (71,791)	$ (111,162)

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

‎

Table of Contents

MercadoLibre, Inc.

Interim Condensed~~Condensed~~ Consolidated Statements of Equity

For the ~~six and~~ three-month periods ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~

(In thousands of U.S. dollars)

(Unaudited)

Accumulated
Additional
other
Common stock
paid-in
Treasury
Retained
comprehensive
Total
Shares
Amount
capital
Stock
Earnings
loss
Equity
Balance as of December 31, 2019
49,710
$
50
$
2,067,869
$
(720)
$
322,592
$
(406,671)
$
1,983,120
Changes in accounting standards
—
—
—
—
(4,570)
—
(4,570)
Balance as of December 31, 2019 Restated
49,710
$
50
$
2,067,869
$
(720)
$
318,022
$
(406,671)
$
1,978,550
Stock-based compensation — restricted shares issued
—
—
179
—
—
—
179
Net loss
—
—
—
—
(21,109)
—
(21,109)
Redeemable convertible preferred stock dividend distribution ($9.99 per share)
—
—
—
—
(1,000)
—
(1,000)
Other comprehensive loss
—
—
—
—
—
(90,053)
(90,053)
Balance as of March 31, 2020
49,710
$
50
$
2,068,048
$
(720)
$
295,913
$
(496,724)
$
1,866,567
Stock-based compensation — restricted shares issued
1
—
187
—
—
—
187
Common Stock repurchased
(1)
—
—
(720)
—
—
(720)
Capped Call
—
—
(104,095)
—
—
—
(104,095)
Redeemable convertible preferred stock dividend distribution ($9.99 per share)
—
—
—
—
(1,000)
—
(1,000)
Net income
—
—
—
—
55,947
—
55,947
Other comprehensive loss
—
—
—
—
—
(8,637)
(8,637)
Balance as of June 30, 2020
49,710
$
50
$
1,964,140
$
(1,440)
$
350,860
$
(505,361)
$
1,808,249


											Accumulated
					Additional						other
	Common stock				paid-in		Treasury		Retained		comprehensive		Total
	Shares		Amount		capital		Stock		Earnings		loss		Equity(*)
Balance as of December 31, 2020	49,870	$	50	$	1,860,502	$	(54,805)	$	314,115	$	(468,284)	$	1,651,578
Stock-based compensation — restricted shares issued	—		—		178		—		—		—		178
Capped Call	—		—		(100,769)		—		—		—		(100,769)
Repurchase of 2028 Notes Conversion Option	—		—		(1,484,279)		—		—		—		(1,484,279)
Common Stock repurchased	(18)		—		—		(25,321)		—		—		(25,321)
Net loss	—		—		—		—		(34,012)		—		(34,012)
Other comprehensive loss	—		—		—		—		—		(37,779)		(37,779)
Balance as of March 31, 2021	49,852	$	50	$	275,632	$	(80,126)	$	280,103	$	(506,063)	$	(30,404)

‎

4(*) The Total Equity of the Company as of March 31, 2021 decreased from $1,651,578 thousands to $(30,404) thousands, mainly, due to the impact of 2028 Notes repurchased. See Note 11 to these unaudited interim condensed consolidated financial statements for further detail on 2028 Notes repurchase transaction.

~~Table of Contents~~

Accumulated
Additional
other
Common stock
paid-in
Retained
comprehensive
Total
Shares
Amount
capital
Earnings
loss
Equity
Balance as of December 31, 2018
45,203
$
45
224,800
$
503,432
$
(391,577)
$
336,700
Common Stock issued
4,116
4
1,866,496
—
—
1,866,500
Exercise of convertible notes
—
—
2
—
—
2
Unwind Capped Call
—
—
3
—
—
3
Net income
—
—
—
11,864
—
11,864
Amortization of Preferred Stock discount
—
—
5,841
(5,841)
—
—
Other comprehensive loss
—
—
—
—
(1,011)
(1,011)
Balance as of March 31, 2019
49,319
$
49
$
2,097,142
$
509,455
$
(392,588)
$
2,214,058
Transaction Costs
—
—
715
—
—
715
Exercise of convertible notes
—
—
2
—
—
2
Capped Call
—
—
(88,362)
—
—
(88,362)
Redeemable convertible preferred stock dividend distribution ($9.99 per share)
—
—
—
(1,000)
—
(1,000)
Net income
—
—
—
16,217
—
16,217
Other comprehensive income
—
—
—
—
4,139
4,139
Balance as of June 30, 2019
49,319
$
49
$
2,009,497
$
524,672
$
(388,449)
$
2,145,769


											Accumulated
					Additional						other
	Common stock				paid-in		Treasury		Retained		comprehensive		Total
	Shares		Amount		capital		Stock		Earnings		loss		Equity
Balance as of December 31, 2019	49,710	$	50	$	2,067,869	$	(720)	$	322,592	$	(406,671)	$	1,983,120
Changes in accounting standards	—		—		—		—		(4,570)		—		(4,570)
Balance as of December 31, 2019 Restated	49,710	$	50	$	2,067,869	$	(720)	$	318,022	$	(406,671)	$	1,978,550
Stock-based compensation — restricted shares issued	—		—		179		—		—		—		179
Net loss	—		—		—		—		(21,109)		—		(21,109)
Redeemable convertible preferred stock dividend distribution ($9.99 per share)	—		—		—		—		(1,000)		—		(1,000)
Other comprehensive loss	—		—		—		—		—		(90,053)		(90,053)
Balance as of March 31, 2020	49,710	$	50	$	2,068,048	$	(720)	$	295,913	$	(496,724)	$	1,866,567

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

Table of Contents

MercadoLibre, Inc.

Interim Condensed Consolidated Statements of Cash Flows

For the ~~six-month~~three-month periods ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~

(In thousands of U.S. dollars)

(Unaudited)


	Six Months Ended June 30,		Three Months Ended March 31,
	2020	2019	2021	2020

Cash flows from operations:
Net income	$ 34,838	$ 28,081
Adjustments to reconcile net income to net cash provided by operating activities:
Net loss			$ (34,012)	$ (21,109)
Adjustments to reconcile net loss to net cash used in operating activities:
Unrealized devaluation loss, net	29,348	13,366	24,772	18,505
Depreciation and amortization	44,202	32,975	38,416	21,550
Accrued interest	(28,933)	(24,684)	(4,045)	(22,352)
Non cash interest, convertible notes amortization of debt discount and amortization of debt issuance costs and other charges	75,568	11,140	34,137	(3,632)
Bad debt charges			83,829	24,419
Financial results on derivative instruments	(21,826)	(69)	(18,989)	(16,767)
Stock-based compensation expense — restricted shares	366	—	178	179
LTRP accrued compensation	51,907	32,208	22,916	15,664
Deferred income taxes	(31,145)	(34,743)	3,988	(4,199)
Changes in assets and liabilities:
Accounts receivable	23,147	(6,900)	21,064	19,748
Credit cards receivable and other means of payment	(343,229)	(61,562)
Credit cards receivables and other means of payments			(62,274)	(33,303)
Prepaid expenses	20,807	8,857	(15,218)	8,560
Inventory	(14,270)	(1,191)	(18,958)	(5,272)
Other assets	(6,965)	(12,651)	(34,882)	(5,796)
Payables and accrued expenses	170,100	41,798	(143,763)	(43,101)
Funds payable to customers	606,307	118,421
Funds payable to customers and amounts due to merchants			(106,866)	(21,344)
Other liabilities	(73,134)	3,587	(62,768)	(32,206)
Interest received from investments	27,597	17,292	9,478	14,805
Net cash provided by operating activities	564,685	165,925
Net cash used in operating activities			(262,997)	(85,651)
Cash flows from investing activities:
Purchase of investments	(2,326,013)	(2,332,544)	(2,415,091)	(1,323,631)
Proceeds from sale and maturity of investments	1,910,311	1,086,461	2,588,681	1,249,960
Receipts from settlements of derivative instruments	8,624	—	1,585	3,668
Payment for acquired businesses, net of cash acquired	(6,937)	—	0	(7,561)
Payment from settlements of derivative instruments			(3,897)	0
Purchases of intangible assets	(87)	(34)	(7,805)	(93)
Changes in principal of loans receivable, net	(39,092)	(97,468)	(148,734)	(27,250)
Purchases of property and equipment	(94,834)	(71,361)	(112,672)	(45,175)
Net cash used in investing activities	(548,028)	(1,414,946)	(97,933)	(150,082)
Cash flows from financing activities:
Proceeds from loans payable and other financial liabilities	1,781,040	95,603	1,839,617	749,617
Payments on loans payable and other financing liabilities	(1,353,658)	(55,236)
Payments on loans payable and other financial liabilities			(704,307)	(593,497)
Payments on repurchase of the 2028 Notes			(1,865,076)	0
Payment of finance lease obligations	(1,064)	(889)	(3,863)	(564)
Purchase of convertible note capped call	(104,095)	(88,362)	(100,769)	0
Dividends paid of preferred stock	(2,000)	(844)	0	(1,000)
Common Stock repurchased	(720)	—	(25,321)	0
Proceeds from issuance of convertible redeemable preferred stock, net	—	98,688
Proceeds from issuance of common stock, net	—	1,867,215
Net cash provided by financing activities	319,503	1,916,175
Net cash (used in) provided by financing activities			(859,719)	154,556
Effect of exchange rate changes on cash, cash equivalents, restricted cash and cash equivalents	(124,226)	(3,527)	(99,219)	(104,864)
Net increase in cash, cash equivalents, restricted cash and cash equivalents	211,934	663,627
Net decrease in cash, cash equivalents, restricted cash and cash equivalents			(1,319,868)	(186,041)
Cash, cash equivalents, restricted cash and cash equivalents, beginning of the period	$ 1,451,424	$ 464,695	$ 2,508,224	$ 1,451,424
Cash, cash equivalents, restricted cash and cash equivalents, end of the period	$ 1,663,358	$ 1,128,322	$ 1,188,356	$ 1,265,383

The accompanying notes are an integral part of these 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 ~~online~~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, ~~(including online classifieds for vehicles, services and real estate),~~ which allows users to buy and sell in most of Latin America.

Through Mercado Pago, the ~~FinTech~~fintech solution, MercadoLibre enables individuals and businesses to send and receive ~~online~~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 product 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 ~~June 30, 2020,~~March 31, 2021, MercadoLibre, through its wholly-owned subsidiaries, operated online ~~ecommerce~~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 and ~~Uruguay.~~Uruguay, and extends loans through Mercado Credito in Argentina, Brazil and Mexico. It also offers a shipping solution directed towards Argentina, Brazil, Mexico, Colombia, Chile and Uruguay.

2. Summary of significant accounting policies

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”). These 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 located in the foreign jurisdictions totaled ~~$360,133~~$552,837 thousands and ~~$345,204~~$490,464 thousands as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

These interim condensed consolidated financial statements reflect the Company’s consolidated financial position as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. These 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, 2020 and 2019 and statements of~~ cash flows for the ~~six-months~~three-month periods ended ~~June 30, 2020 and 2019.~~March 31, 2021. These 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.

From the quarter ended March 31, 2021 the Company disclosed Net product revenues as a separate line of Net revenues following its growth in significance relative to Net service revenues. As a result, the Company has reclassified the corresponding amount of the three month period ended March 31, 2020 to the line Net product revenues for an amount of $12,199 thousands for comparative purposes.

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, ~~2019,~~2020, contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”). The Company has evaluated all subsequent events through the date these condensed consolidated financial statements were issued. The 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 Form 10-K for the year ended December 31, ~~2019.~~2020. During the ~~six-month~~three-month period ended ~~June 30, 2020,~~March 31, 2021, there were no material updates made to the Company’s significant accounting ~~policies, except for the adoption of ASC 326 as of January 1, 2020.~~ S~~ee Note 2 to these interim condensed consolidated financial statements for more details.~~policies.

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Revenue recognition

Revenue recognition criteria for the services ~~mentioned above~~provided and goods sold by the Company are described in note 2 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~

2020.

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. Receivables are presented net of allowance for doubtful accounts, loans receivable and chargebacks of ~~$70,790~~$176,912 thousands and ~~$38,079~~$126,661 thousands as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

Deferred revenue consists of fees received related to unsatisfied performance obligations at the end of the period in accordance with ASC 606. Due to the generally short-term duration of contracts, the majority of the performance obligations are satisfied in the following reporting period. Deferred revenue as of December 31, 2020 and 2019 ~~and 2018~~ was ~~$16,590~~$32,519 thousands and ~~$5,918~~$16,590 thousands, respectively, of which ~~$8,475~~$9,413 thousands and ~~$4,193~~$5,562 thousands were recognized as revenue during the ~~six-month~~three-month periods ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively.

As of ~~June 30, 2020,~~March 31, 2021, total deferred revenue was ~~$17,052~~$18,556 thousands, mainly due to fees related to listing and optional feature services billed and loyalty programs that are expected to be recognized as revenue in the coming months.

Digital Assets

~~Allowances for doubtful accounts on accounts receivable and loans receivable~~

~~Since January 1, 2020~~During the first quarter of 2021, the Company ~~maintains allowances for doubtful~~purchased an aggregate amount of $7,800 thousands in bitcoins. The Company accounts for ~~Management’s estimate of current expected credit losses~~its digital assets—bitcoins— as indefinite-lived intangible assets, in accordance with Accounting Standards Codification (“~~CECL”~~ASC”) ~~that may result if customers do not make the required payments.~~

~~Measurement of current expected credit losses~~

The company estimates its allowance for credit losses as the lifetime expected credit losses of the accounts receivables mentioned above. The CECL represent the present value of the uncollectible portion of the principal, interest, late fees,350, Intangibles—Goodwill and ~~other allowable charges.~~

~~Loans Receivable~~

~~Loans Receivable in this portfolio include the products that the company offers to: 1) on-line merchant, 2) in-store merchant and 3) consumers.~~

For loans receivable that share similar risk characteristics such as product type, country, unpaid installments, days delinquent, and other relevant factors, the company estimates the lifetime expected credit loss allowance based on a collective assessment.

The lifetime expected credit losses is determined by applying probability of default and loss given default models to monthly projected exposures, then discounting these cash flows to present value using the portfolio’s loans interest rate, estimated as a weighted average of the original effective interest rate of all the loans that conform the portfolio segment.

The probability of default is an estimation of the likelihood that a loan receivable will default over a given time horizon. Probability of default models are estimated using a transition matrix method; these matrices are constructed using roll rates and then transformed, taking into account the expected future delinquency rate (forward-looking models). Therefore, the models include macroeconomic outlook or projections and recent performance. With this model, the Company estimates marginal monthly default probabilities for each delinquency bucket, type of product and country. Each marginal monthly probability of default represents a different possible scenario of default.

~~The exposure at default is equal to the receivables’ expected outstanding principal, interest and other allowable balances.~~Other. The Company ~~estimates the exposure~~has ownership of and control over its digital assets and uses third-party custodial services to store its digital assets. The Company’s digital assets are initially recorded at ~~default that the portfolio~~cost. Subsequently, they are measured at cost, net of ~~loans would have in each possible moment of default, meaning for each possible scenario mentioned above.~~

The loss given default is the percentage of the exposure at default that is not recoverable. The Company estimates this percentage using the transition matrix method mentioned above and the portfolio segment´s interest rate.

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~~The measurement of CECL is based on probability-weighted scenarios (probability of default for each month), in view of past events (roll rates), current conditions~~ and adjustments to reflect the reasonable and supportable forecast of future economic conditions which were affected, among other factors, by the COVID-19 pandemic. The Company will continue to monitor the impact of the pandemic on expected creditany impairment losses ~~estimates.~~

incurred since acquisition.

The Company ~~writes off loans receivable when~~performs an analysis each quarter to identify whether events or changes in circumstances, principally decreases in the ~~customer balance becomes 90 days past due.~~quoted prices on the active exchange, indicate that any decrease in the fair values of the digital assets below the carrying values for such assets subsequent to their acquisition will result in a recognition of impairment charges. The Company determines the fair value of its digital assets in accordance with ASC 820, Fair Value Measurement.

~~Accounts Receivable~~

To measure the CECL, accounts receivable have been grouped based on shared credit risk characteristics and the number of days past due. The Company has therefore concluded that the expected loss rates for accounts receivable is a reasonable approximation of the historical loss rates for those assets. Accounts receivable are recovered over a period of 0-180 days, therefore, forecasted changes to economic conditions are not expected to have a significant effect on the estimate of the allowance for doubtful accounts.

~~The Company writes off accounts receivable when the customer balance becomes 180 days past due.~~

~~Cash and cash equivalents, restricted cash and cash equivalents, short-term investments and credit cards receivable and other means of payment~~

~~The Company’s management assesses balances for credit~~Impairment losses included in cash and cash equivalents, restricted cash and cash equivalents, short-term investments (measured at amortized cost) and credit cards receivable and other means of payment, based on a review of the average period for which the financial asset is held, credit ratings of the financial institutions and probability of default and loss given default models.

The Company has arrangements with some unaffiliated entities under which MercadoLibre users are able to fund their Mercado Pago accounts by depositing an equivalent amount with the unaffiliated entity. In some of these arrangements, MercadoLibre credits the Mercado Pago account before the unaffiliated entity transfers the funds to MercadoLibre to settle the transaction. The amounts pending settlement are recognized in the ~~balance sheet as credit cards receivable~~period in which the impairment is identified. The impaired digital assets are written down to their fair value at the time of impairment and ~~other means of payment.~~this new cost basis will not be adjusted upward for any subsequent increase in fair value. Gains (if any) are not recorded until realized upon sale. In ~~June 2020,~~determining the gain to be recognized upon sale, the Company ~~became aware~~calculates the difference between the sales price and carrying value of the digital assets sold immediately prior to sale.

Repurchase of 2.00% Convertible Senior Notes due 2028 - Extinguishment of debt

The derecognition of a convertible debt is based on the principle that ~~$26,654 thousands of receivable had accumulated from one such unaffiliated~~an entity is extinguishing the liability component and reacquiring the equity component that was recognized at issuance. This approach is applied whether the debt was settled in ~~Argentina.~~ cash, shares, other assets (or any combination), or at maturity upon conversion or upon early extinguishment. The ~~aging of these receivables exceeded the expected aging for transactions of this kind. As of June 30, 2020, the Company recorded a $26,654 thousands allowance for doubtful accounts on receivables due~~settlement consideration is first allocated to the ~~Company by this entity.~~extinguishment of the liability component equal to the fair value of that component immediately prior to extinguishment. Any difference between that allocated amount and the net carrying amount of the liability component and unamortized debt issuance costs should be recognized as a gain or loss on debt extinguishment. Any remaining consideration is allocated to the reacquisition of the equity component and recognized as a reduction of stockholders’ equity. Any paid premium included in the repurchase price should be recognized as a loss when the debt is extinguished.

Foreign currency translation

All of the Company’s consolidated foreign operations use the local currency as their functional currency, except for Argentina, which has used the U.S. dollar as its functional currency since July 1, ~~2018, as described below.~~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 year-end exchange rates while income and expense accounts are translated at the average monthly rates in effect during the year, 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 loss.

~~Derivative Financial Instruments~~

The Company’s operations are in various foreign currencies and consequently are exposed to foreign currency risk. The Company uses derivative instruments to reduce the volatility of earnings and cash flows which were designated as hedges. All outstanding derivatives are recognized in the Company’s consolidated balance sheet at fair value. The effective portion of a designated derivative’s gain or loss in a cash flow hedge is initially reported as a component of accumulated other comprehensive (loss) income and is subsequently reclassified into the financial statement line item in which the variability of the hedged item is recorded in the period the hedging transaction affects earnings.

The Company also hedges its economic exposure to foreign currency risk related to foreign currency denominated monetary assets and liabilities with foreign derivative currency contracts which were not designated as hedges. The gains and losses on the foreign exchange derivative contracts economically offset gains and losses on certain foreign currency denominated monetary assets and liabilities recognized in earnings. Accordingly, these outstanding non-designated derivatives are recognized in the Company’s consolidated balance sheet at fair value, and changes in fair value from these contracts are recorded in other income (expense), net in the consolidated statement of income.

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Argentine currency status

As of July 1, 2018, the Company transitioned its Argentinian 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.

Since the second half of 2019, the Argentine government instituted certain foreign currency exchange controls, which may restrict or partially restrict access to foreign currency, like the US dollar, to make payments abroad, either for foreign debt or the importation of goods or services, dividend payments and others, without prior authorization. Those regulations have continued to evolve, sometimes making them more or less stringent depending on the Argentine government´s perception of availability of sufficient national foreign currency reserves. The above has led to the existence of an informal foreign currency market where foreign currencies quote at levels significantly higher than the official exchange rate. However, the only exchange rate available for external commerce and financial payments is the official exchange rate, which as of March 31, 2021 was 92.0.

The Company uses Argentina’s official exchange rate to record the accounts of Argentine subsidiaries. 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, 2021 and December 31, 2020:


	March 31,	December 31,
	2021	2020
	(In thousands)
Assets	$ 1,493,608	$ 1,470,885
Liabilities	1,154,563	1,230,326
Net Assets	$ 339,045	$ 240,559

Income taxes

The Company is subject to U.S. and foreign income taxes. The Company accounts for income taxes following the liability method of accounting which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred tax assets are also recognized for tax loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets or liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company’s income tax expense consists of taxes currently payable, if any, plus the change during the period in the Company’s deferred tax assets and liabilities.

A valuation allowance is recorded when, based on the available evidence, it is more likely than not that all or a portion of the Company’s deferred tax assets will not be realized. Accordingly, Management periodically assesses the need to establish a valuation allowance for deferred tax assets considering positive and negative objective evidence related to the realization of the deferred tax assets. ~~Management’s judgments related to~~In connection with this assessment, ~~consider,~~Management considers, among other factors, the nature, frequency and magnitude of current and cumulative losses on an individual subsidiary basis, projections of future taxable income, the duration of statutory carryforward periods, as well as feasible tax planning strategies ~~which~~that would be employed by the Company to prevent tax loss carryforwards from expiring unutilized. Based on Management’s assessment of available objective evidence and considering the future effect of the Company’s initiatives to capture long-term business opportunities, the Company accounted for a valuation allowance in certain subsidiaries in its Mexican operations of ~~$17,311~~$12,176 thousands and ~~$3,125~~$14,186 thousands for the ~~six and~~ three-month periods ended ~~June 30,~~March 31, 2021 and 2020, ~~respectively.~~

On August 17, 2011, the Argentine government issued a software development law and on September 9, 2013, the Argentine government issued a regulatory decree establishing the requirements to become a beneficiary of the software development law, including a requirement to comply with annual incremental ratios related to exports of services and research and development. The law expired on December 31, 2019.

The Argentine Industry Secretary approved the Company’s application for eligibility under the law for the Company’s Argentine subsidiary, MercadoLibre S.R.L. As a result, the Company’s Argentine subsidiary was granted a tax holiday retroactive from September 18, 2014. A portion of the benefits obtained is a 60% relief of total income tax related to software development activities and a 70% relief of payroll taxes related to software development activities.

As a result of the Company’s eligibility under the law, it recorded an income tax benefit of $4,093 thousands and $774 thousands during the six and three-month periods ended June 30, 2019, respectively. The aggregate per share benefit of the Argentine tax holiday amounted to $0.09 and $0.02 for the six and three-month periods ended June 30, 2019, respectively. Furthermore, the Company recorded a labor cost benefit of $4,637 thousands and $2,241 thousands during the six and three-month periods ended June 30, 2019, respectively. Additionally, $611 thousands and $211 thousands were accrued to pay software development law audit fees during the six and three-month periods ended June 30, 2019, respectively.

On June 10, 2019, the Argentine government enacted Law No. 27,506 (knowledge-based economy promotional regime), which established a regime that provides certain tax benefits for companies that meet specific criteria, such as companies that derive at least 70% of their revenues from certain specified activities related to the knowledge-based economy. Law No. 27,506 allows companies currently benefiting from the software development law, to apply for tax benefits under Law No. 27,506, which will be effective from January 1, 2020 to December 31, 2029.

The ~~above-mentioned~~ regime was suspended on January 20, 2020 ~~through a resolution issued by Argentina’s Ministry of Productive Development~~ until new rules for the application of the knowledge-based economy promotional regime were issued.

On June 25, 2020, the Chamber of Deputies passed changes to the knowledge-based economy promotional ~~regime,~~regime. The Chamber of Senates proposed further amendments, which ~~are still pending approval from~~were returned to the Chamber of ~~Senates~~Deputies and finally approved on October 7, 2020. The approved regime is effective as of ~~Argentina. If~~January 1, 2020 until December 31, 2029.

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Based on the ~~changes are approved,~~amended promotional regime, companies that meet new specified criteria shall be entitled to: i) a ~~60%~~ reduction inof the income tax burden of 60% (60% for micro and small enterprises, 40% for medium-sized enterprises and 20% for large enterprises) over the promoted activities for each fiscal year, applicable to both Argentine source income and foreign source income, ii) stability of the benefits established by the knowledge-based economy promotional regime (as long as the beneficiary is registered and in good standing), iii) a non-transferable tax credit bond amounting to 70% (which can be up to 80% in certain specific cases) of the Company’s contribution to the social security regime ~~for personnel~~of every employee whose job is related to the promoted activities (caps on the number of employees ~~could be~~are applicable). ~~The tax credit may~~Such bonds can be used within 24 months from their issue date (which period can be extended for an additional 12 months in certain cases) to offset certain federal taxes, such as value-added tax, ~~and~~but they cannot be used to offset income tax.

On December 20, 2020, Argentina’s Executive Power issued Decree No. 1034/2020, which set the rules to implement the provisions of the knowledge-based economy promotional regime. Eligible companies must enroll in a registry according to the terms and conditions to be established by the Application Authority, which will verify compliance with the requirements. The ~~Company~~Decree also set the mechanism for calculating the level of investment in research and development, the level of employee retention, exports, among others. It also establishes that exports of services from companies participating in this regime will ~~analyze whether it will~~not be subject to export duties.

On January 13, 2021, Argentina’s Ministry of Productive Development –current Application Authority of the knowledge-based economy promotional regime- issued Resolution No. 4/2021 which was followed by Disposition N° 11/2021 issued by the Under Secretariat of Knowledge Economy on February 12, 2021. Both rules establish further details on the requirements, terms, conditions, application, and compliance procedures to be eligible under the promotional regime.

MercadoLibre S.R.L. has submitted the application to be eligible to ~~benefit under~~ the ~~modified~~ knowledge-based economy promotional ~~regime and its related tax benefits once the modifications are passed by the Congress of Argentina and enacted into law.~~regime; such eligibility remains subject to Argentine government approval.

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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 from January 1, 2019 for several reasons including to avoid the mismatch generated by the recognition of certain linked instruments / transactions, separately, in consolidated statement of income and consolidated statement of other 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. As result of the election of the fair value option, the Company recognized gains in interest income and other financial gains of ~~$11,047~~$1,173 thousands and ~~$3,722~~$12,004 thousands as of ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively.

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Accumulated other comprehensive loss

The following table sets forth the Company’s accumulated other comprehensive loss as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:


	June 30,	December 31,	March 31,	December 31,
	2020	2019	2021	2020
	(In thousands)		(In thousands)
Accumulated other comprehensive loss:
Foreign currency translation	$ (508,749)	$ (408,099)	$ (508,438)	$ (466,569)
Unrealized gains on investments	1,343	2,029
Unrealized gains (losses) on hedging activities	3,245	(250)	3,728	(2,469)
Estimated tax expense on unrealized gains	(1,200)	(351)
Estimated tax (expense) benefit on unrealized gains (losses)			(1,353)	754
	$ (505,361)	$ (406,671)	$ (506,063)	$ (468,284)

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The following tables summarize the changes in accumulated balances of other comprehensive loss for the ~~six-months~~three-months ended ~~June 30, 2020:~~March 31, 2021:



	Unrealized	Unrealized	Foreign	Estimated tax		Unrealized	Foreign	Estimated tax
	(Losses) Gains on	(Losses) Gains on	Currency	(expense)		(Losses) Gains on	Currency	benefit
	hedging activities, net	Investments	Translation	benefit	Total	hedging activities, net	Translation	(expense)	Total
		(In thousands)				(In thousands)
Balances as of December 31, 2019	$ (250)	$ 2,029	$ (408,099)	$ (351)	$ (406,671)
Balances as of December 31, 2020						$ (2,469)	$ (466,569)	$ 754	$ (468,284)
Other comprehensive income (loss) before reclassifications	7,135	1,343	(100,650)	(2,439)	(94,611)	5,561	(41,869)	(1,891)	(38,199)
Amount of loss (gain) reclassified from accumulated other comprehensive loss	(3,640)	(2,029)	—	1,590	(4,079)
Amount of (gain) loss reclassified from accumulated other comprehensive loss						636	—	(216)	420
Net current period other comprehensive income (loss)	3,495	(686)	(100,650)	(849)	(98,690)	6,197	(41,869)	(2,107)	(37,779)
Ending balance	$ 3,245	$ 1,343	$ (508,749)	$ (1,200)	$ (505,361)	$ 3,728	$ (508,438)	$ (1,353)	$ (506,063)



	Amount of (Loss) Gain
	Reclassified from
Details about Accumulated	Accumulated Other
Other Comprehensive Loss	Comprehensive	Affected Line Item
Components	Loss	in the Statement of Income
	(In thousands)
Unrealized ~~gains on investments~~	~~$ 2,029~~	~~Interest income and other financial gains~~
~~Unrealized gains~~losses on hedging activities	~~3,640~~$ (636)	Cost of net revenues
Estimated tax ~~expense~~benefit on unrealized gains	~~(1,590)~~216	Income tax expense
Total reclassifications for the period	$ ~~4,079~~(420)	Total, net of income taxes

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Use of estimates

The preparation of 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 allowances for doubtful accounts and chargeback provisions, allowance for loans receivables, 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, compensation costs relating to the Company’s long term retention ~~program,~~plan, fair value of convertible debt, fair value of investments, fair value of derivative instruments, ~~recognition of~~ 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.

Recently Adopted Accounting Standards

On June 16, 2016 the FASB issued the ASU 2016-13 “Financial Instruments-Credit Losses (Topic 326): Measurement of credit losses on financial instruments”. This update amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, this update eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP, however this topic will require that credit losses be presented as an allowance rather than as a write-down. The Company adopted this standard effective January 1, 2020 using a modified retrospective approach transition method, resulting in a decrease of $4,570 thousands (net of income tax) to the opening balance of retained earnings.

On August 29, 2018 the FASB issued the ASU 2018-15 “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40)”. The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The amendments require an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. The amendments in this update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s financial statements.

~~Recently issued accounting pronouncements not yet adopted~~

On December 18, 2019 the FASB issued the ASU 2019-12 “Income taxes (Topic 740)—Simplifying the accounting for income taxes”. The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles and also improve consistent application by clarifying and amending existing guidance, such as franchise taxes and interim recognition of enactment of tax laws or rate changes. The amendments in this update are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The ~~Company is assessing the effects that the~~ adoption of this ~~accounting pronouncement may~~standard did not have a material impact on ~~its~~the Company´s financial statements.

Recently issued accounting pronouncements not yet adopted

On August 5, 2020 the FASB issued the ASU 2020-06 “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40)”. The amendments in this update address issues identified as a result of the complexity associated with applying generally accepted accounting principles for certain financial instruments with characteristics of liabilities and equity. For convertible instruments, accounting models for specific features are removed and amendments to the disclosure requirements are included. For contracts in an entity’s own equity, simplifies the settlement assessment by removing some requirements. Additionally, the amendments in this update affect the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments. The amendments in this update are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. The Company is assessing the effects that the adoption of this accounting pronouncement may have on its financial statements.

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3. Net ~~income~~loss per share

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

On ~~June 30, 2014, the Company issued $330 million of 2.25% Convertible Senior Notes due 2019 and on~~ 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 11 to these interim condensed consolidated financial statements). ~~Additionally, on March 29, 2019 the Company issued Preferred Stock (see Note 12 to these interim condensed consolidated financial statements).~~ The conversion of these notes ~~and the Preferred Stock~~ are included in the calculation for diluted earnings per share utilizing the “if converted” method. Accordingly, conversion of these Notes ~~and~~is not assumed for purposes of computing diluted earnings per share if the effect is antidilutive. Additionally, on March 29, 2019 the Company issued Preferred Stock. The conversion of Preferred Stock was included in the calculation for diluted earnings per share utilizing the “if converted” method. Accordingly, conversion of the redeemable convertible preferred stock ~~are~~is not assumed for purposes of computing diluted earnings per share if the effect is antidilutive.

The denominator for diluted net ~~income~~loss per share for the ~~six and~~ three-month periods ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ does not include any effect from ~~the 2019 Notes Capped Call Transactions or~~ the 2028 Notes Capped Call Transactions (as defined in Note 11) 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 Capped Call Transactions (as defined in Note 11) are designed to partially neutralize the dilutive effect of the shares that the Company would issue under the Notes. See Note 11 to these interim condensed consolidated financial statements and Note ~~15 of~~16 to the financial statements ~~as of~~for the year ended December 31, ~~2019~~2020, contained in the Company’s Annual Report on Form 10-K filed with the SEC for more details. For the ~~six and~~ three-month periods ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~, the effects of the conversion of the Notes and the redeemable convertible preferred stock would have been antidilutive and, as a consequence, they were not factored into the calculation of diluted earnings per share.

Net ~~income~~loss per share of common stock is as follows for the ~~six and~~ three-month periods ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:


	Six Months Ended June 30,				Three Months Ended June 30,				Three Months Ended March 31,
	2020		2019		2020		2019		2021		2020
	(In thousands)				(In thousands)				(In thousands)
	Basic	Diluted	Basic	Diluted	Basic	Diluted	Basic	Diluted	Basic	Diluted	Basic	Diluted
Net income per common share	$ 0.66	$ 0.66	$ 0.45	$ 0.45	$ 1.11	$ 1.11	$ 0.31	$ 0.31
Net loss per common share									$ (0.68)	$ (0.68)	$ (0.44)	$ (0.44)

Numerator:
Net income	$ 34,838	$ 34,838	$ 28,081	$ 28,081	$ 55,947	$ 55,947	$ 16,217	$ 16,217
Amortization of redeemable convertible preferred stock	—	—	(5,841)	(5,841)	—	—	—	—
Net loss									$ (34,012)	$ (34,012)	$ (21,109)	$ (21,109)
Dividends on preferred stock	(2,000)	(2,000)	(1,000)	(1,000)	(1,000)	(1,000)	(1,000)	(1,000)	—	—	(1,000)	(1,000)
Net income corresponding to common stock	$ 32,838	$ 32,838	$ 21,240	$ 21,240	$ 54,947	$ 54,947	$ 15,217	$ 15,217
Net loss corresponding to common stock									$ (34,012)	$ (34,012)	$ (22,109)	$ (22,109)

Denominator:
Weighted average of common stock outstanding for Basic earnings per share	49,709,964	—	47,658,610	—	49,709,973	—	49,318,522	—	49,867,625	—	49,709,955	—
Adjusted weighted average of common stock outstanding for Diluted earnings per share	—	49,709,964	—	47,658,610	—	49,709,973	—	49,318,522	—	49,867,625	—	49,709,955

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4. Cash, cash equivalents, restricted cash and cash equivalent and investments

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


	June 30,	December 31,	March 31,	December 31,
	2020	2019	2021	2020
	(In thousands)		(In thousands)
Cash and cash equivalents	$ 1,169,550	$ 1,384,740	$ 862,720	$ 1,856,394
Restricted cash and cash equivalents
Securitization Transactions	$ 51,753	$ 37,424	$ 100,758	$ 249,872
Sovereign Debt Securities (Secured lines of credit guarantee)	—	29,260
Sovereign Debt Securities (Central Bank of Brazil Mandatory Guarantee)			—	144,249
Bank account (Argentine Central Bank regulation)	217,158	—	185,560	237,511
Bank collateral account (*)	224,897	—
Bank collateral account (Secured lines of credit guarantee)			574	574
Money Market Funds (Secured lines of credit guarantee)			38,586	19,469
Cash in bank account			158	155
Total restricted cash and cash equivalents	$ 493,808	$ 66,684	$ 325,636	$ 651,830
Total cash, cash equivalents, restricted cash and cash equivalents (**)	$ 1,663,358	$ 1,451,424
Total cash, cash equivalents, restricted cash and cash equivalents (*)			$ 1,188,356	$ 2,508,224

Short-term investments
Time Deposits	$ 422,849	$ 189,660	$ 305,746	$ 158,818
Sovereign Debt Securities (Central Bank of Brazil mandatory guarantee)	530,660	506,175
Sovereign Debt Securities (Central Bank of Brazil Mandatory Guarantee)			562,797	565,705
Sovereign Debt Securities (Secured lines of credit guarantee)	—	16,623	71,270	71,244
Sovereign Debt Securities	1,171,363	884,720	40,263	445,539
Corporate Debt Securities	—	63
Total short-term investments	$ 2,124,872	$ 1,597,241	$ 980,076	$ 1,241,306

Long-term investments
Sovereign Debt Securities	$ —	$ 260,320	$ 157,023	$ 150,054
Corporate Debt Securities	—	173
Securitization Transactions			1,596	—
Other Investments	5,790	3,490	16,982	16,057
Total long-term investments	$ 5,790	$ 263,983	$ 175,601	$ 166,111

(*~~) Cash deposited and owned by the Company under the sole control and dominion of escrow agents as collateral of loans granted to a Brazilian subsidiary with due date in October 2020.~~

(**) Cash, cash equivalents, restricted cash and cash equivalents as reported in the consolidated statements of cash flow.

Regulation issued by ~~Argentine~~ Central Bank of Argentina (“CBA”)

In January 2020, the ~~Central Bank of Argentina~~CBA enacted regulations related to payment service providers that applies to Fintech companies that are not financial institutions, but nevertheless provide payment services in at least one of the processes of the payments system. On July 7, 2020, the ~~Central Bank of Argentina~~CBA approved the registration of the Argentine subsidiary in the registry for payment service providers. These regulations sets forth certain rules that require payment services providers to, among other things, (i) deposit and maintain users’ funds in specific banks’ accounts, payable on demand; (ii) implement a monthly reporting regime with the ~~Central Bank of Argentina;~~CBA; (iii) segregate information related to users’ investments funds; (iv) maintain different bank accounts to segregate the Company’s funds from users’ funds; and (v) introduce clarifications on advertising and documents about the standard terms and conditions of the payment service provider. As of ~~June 30, 2020,~~March 31, 2021, in accordance with the regulation, the Company held ~~$217,158~~$185,560 thousands in a bank account, payable on demand.

b)In October 2020, the CBA issued a regulation that applies to non-financial loan providers. In accordance with this regulation, the Company was registered in the "Registry of other non-financial loan providers" on December 1, 2020 and complied with a periodic information report within the framework of a monthly information regime as from March 1, 2021. In turn, the CBA established that the Company must comply with the obligations established by CBA rules, regarding, among other things: (i) interest rates in loan operations; (ii) protection of users of financial services; (iii) communication by electronic means for the care of the environment.
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Sovereign Debt Securities (Central Bank of Brazil ~~mandatory guarantee)~~

Mandatory Guarantee)

On November 1, 2018, the Company obtained approval from the Central Bank of Brazil to operate as an authorized payment institution. With this authorization, Mercado Pago in Brazil is subject to the supervision of the Central Bank of Brazil and must fully comply with all obligations established by current regulations. Among other obligations, the regulations require authorized payment institutions to hold any electronic balance in a payment institution account in either a specific account of the Central Bank of Brazil that does not pay interest or Brazilian federal government bonds registered with the “Sistema Especial de Liquidacao e Custodia.” 100% of electronic funds were required to be deposited as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, in accordance with the regulation, the Company held ~~$530,660~~$562,797 thousands and ~~$506,175~~$709,954 thousands deposited in Brazilian federal government bonds, respectively, as a mandatory ~~guarantee.~~

‎

~~Table~~guarantee (the “Central Bank of ~~Contents~~Brazil Mandatory Guarantee”).

5. Loans receivable, net

The Company manages loans receivable as “On-line merchant”, “Consumer” and “In-store merchant”. As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, Loans receivable, net were as follows:



		June 30,		December 31,		March 31,		December 31,
		2020		2019		2021		2020
	(In thousands)				(In thousands)
On-line merchant	$	91,750	$	130,102	$	202,146	$	180,063
Consumer		59,815		60,179		296,457		237,956
In-store merchant		18,469		18,707		77,273		61,452
Loans receivable		170,034		208,988		575,876		479,471
Allowance for uncollectible accounts		(25,831)		(20,444)		(140,427)		(77,816)
Loans receivable, net	$	144,203	$	188,544	$	435,449	$	401,655

Current	$	139,148	$	182,105
Non-current		5,055		6,439
Loans receivable, net	$	144,203	$	188,544

The credit quality analysis of loans receivable was as follows:


		June 30,		December 31,		March 31,		December 31,
		2020		2019		2021		2020
	(In thousands)				(In thousands)
1-30 days past due	$	12,206	$	20,430	$	45,623	$	34,706
31-60 days past due		3,643		6,916		28,644		16,977
61-90 days past due		8,526		7,580
61 -90 days past due						27,412		13,239
91 -120 days past due						19,763		10,632
121 -150 days past due						16,381		5,315
151 -180 days past due						11,684		3,649
Total past due		24,375		34,926		149,507		84,518
To become due		145,659		174,062		426,369		394,953
Total	$	170,034	$	208,988	$	575,876	$	479,471

The following table summarizes the allowance for uncollectible accounts activity during the ~~six-month periods~~three-month period ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~

2020:



	June 30,				March 31,
		2020		2019 (1)		2021		2020
	(In thousands)				(In thousands)
Balance at beginning of year	$	20,444	$	6,636	$	77,816	$	20,444
Adoption of ASC 326 ~~(2)~~(1)		4,977		-		-		4,977
Charged/credited to Net income		34,614		20,000
Charged/credited to Net loss						85,997		24,419
Charges/Utilized /Currency translation adjustments/Write-offs		(34,204)		(12,023)		(23,386)		(19,477)
Balance at end of period	$	25,831	$	14,613	$	140,427	$	30,363


(1)	~~The comparative information has not been restated and continues to be reported under the accounting standard in effect during 2019.~~
~~(2)~~	Cumulative pre-tax adjustments recorded to retained earnings as of January 1, 2020.

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6. Business combinations, goodwill and intangible assets

Business combinations

Acquisition of a software development company

In March 2020, the Company, through its subsidiary Meli Participaciones S.L., completed the acquisition of 100% of the equity interest of Kiserty S.A. and its subsidiaries, which is a software development company located and organized under the law of Uruguay. The objective of the acquisition was to enhance the capabilities of the Company in terms of software development.

The aggregate purchase price for the acquisition was $10,899 thousands, measured at its fair value amount, which included: (i) the total cash payment of $8,500 thousands at the time of closing; (ii) an escrow of $225 thousands and (iii) a contingent additional cash consideration up to $2,174 thousands.

The Company’s consolidated statement of income includes the results of operations of the acquired business as from March 9, 2020. The net income before intercompany eliminations of the acquired Company included in the Company’s consolidated statement of income ~~since the acquisition~~ amounted to ~~$213~~$2,061 thousands for the period ended ~~June 30, 2020.~~March 31, 2021.

In addition, the Company incurred in certain direct costs of the business combination which were expensed as incurred.

The purchase price was allocated based on the measurement of the fair value of assets acquired and liabilities assumed considering the information available as of the initial accounting date. The valuation of identifiable intangible assets acquired reflects Management’s estimates based on the use of established valuation methods.

The Company recognized goodwill for this acquisition based on Management’s expectation that the acquired business will improve the Company’s business. Arising goodwill was allocated to each of the segments identified by the Company’s Management, considering the synergies expected from this acquisition and it is expected that the acquisition will contribute to the earnings generation process of such segments. Goodwill arising from this acquisition is not deductible for tax purposes.

The results of operations for periods prior to the acquisitions, individually and in the aggregate, were not material to the Company’s consolidated statements of income and, accordingly, pro forma information has not been presented.

Goodwill and intangible assets

The composition of goodwill and intangible assets is as follows:


	June 30,	December 31,	March 31,	December 31,
	2020	2019	2021	2020
	(In thousands)		(In thousands)
Goodwill	$ 81,799	$ 87,609	$ 82,830	$ 85,211
Intangible assets with indefinite lives
- Trademarks	7,305	8,366	7,628	7,751
- Digital assets			7,588	—
Amortizable intangible assets
- Licenses and others	4,688	5,320	4,797	4,932
- Non-compete agreement	3,295	2,703	3,356	3,426
- Customer list	13,514	13,900	13,635	14,010
- Trademarks	7,180	4,723	7,808	7,879
Total intangible assets	$ 35,982	$ 35,012	$ 44,812	$ 37,998
Accumulated amortization	(20,040)	(20,737)	(24,541)	(23,843)
Total intangible assets, net	$ 15,942	$ 14,275	$ 20,271	$ 14,155

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Goodwill

The changes in the carrying amount of goodwill for the ~~six-month~~three-month period ended ~~June 30, 2020~~March 31, 2021 and the year ended December 31, ~~2019~~2020 are as follows:


	Six Months Ended June 30, 2020							Three Months Ended March 31, 2021
	Brazil	Argentina	Mexico	Chile	Colombia	Other Countries	Total	Brazil	Argentina	Mexico	Chile	Colombia	Other Countries	Total
	(In thousands)							(In thousands)
Balance, beginning of the period	$ 29,072	$ 6,991	$ 32,196	$ 14,872	$ 3,312	$ 1,166	$ 87,609	$ 19,762	$ 10,594	$ 31,697	$ 16,996	$ 4,390	$ 1,772	$ 85,211
Business Acquisitions	—	3,603	1,062	1,241	1,246	748	7,900
Effect of exchange rates changes	(6,543)	—	(5,371)	(1,306)	(408)	(82)	(13,710)	(1,360)	—	(522)	(170)	(295)	(34)	(2,381)
Balance, end of the period	$ 22,529	$ 10,594	$ 27,887	$ 14,807	$ 4,150	$ 1,832	$ �� 81,799	$ 18,402	$ 10,594	$ 31,175	$ 16,826	$ 4,095	$ 1,738	$ 82,830


	Year Ended December 31, 2019							Year Ended December 31, 2020
	Brazil	Argentina	Mexico	Chile	Colombia	Other Countries	Total	Brazil	Argentina	Mexico	Chile	Colombia	Other Countries	Total
	(In thousands)							(In thousands)
Balance, beginning of the year	$ 30,069	$ 6,946	$ 31,340	$ 16,014	$ 3,339	$ 1,175	$ 88,883	$ 29,072	$ 6,991	$ 32,196	$ 14,872	$ 3,312	$ 1,166	$ 87,609
Purchase price allocations adjustments	—	45	—	—	—	—	45
Business Acquisitions								—	3,603	1,062	1,241	1,246	748	7,900
Disposals								(3,480)	—	—	—	—	—	(3,480)
Effect of exchange rates changes	(997)	—	856	(1,142)	(27)	(9)	(1,319)	(5,830)	—	(1,561)	883	(168)	(142)	(6,818)
Balance, end of the year	$ 29,072	$ 6,991	$ 32,196	$ 14,872	$ 3,312	$ 1,166	$ 87,609	$ 19,762	$ 10,594	$ 31,697	$ 16,996	$ 4,390	$ 1,772	$ 85,211

Intangible assets with definite useful life

Intangible assets with definite useful life are comprised of customer lists, non-compete and non-solicitation agreements, acquired software licenses and other acquired intangible assets including developed technologies and trademarks. Aggregate amortization expense for intangible assets totaled ~~$1,711~~$1,318 thousands and ~~$919~~$808 thousands for the three-month periods ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, while aggregate amortization expense for intangible assets for the six-month periods ended June 30, 2020 and 2019 amounted to $2,519 thousands and $2,149 thousands,~~ respectively.

The following table summarizes the remaining amortization of intangible assets (in thousands of U.S. dollars) with definite useful life as of ~~June 30, 2020~~March 31, 2021:


For year ended 12/31/~~2020~~2021		$ ~~2,344~~
~~For year ended 12/31/2021~~		~~3,610~~2,450
For year ended 12/31/2022		~~1,453~~1,242
For year ended 12/31/2023		~~871~~973
For year ended 12/31/2024		341
Thereafter		~~359~~49
		$ ~~8,637~~5,055

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7. 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, Dominican Republic, Ecuador, Honduras, Nicaragua, El Salvador, Bolivia, Guatemala, Panama, Paraguay, Peru, Uruguay and the United States of America).

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 and general and administrative expenses over which segment managers have direct discretionary control, such as advertising and marketing programs, customer support expenses, allowances for doubtful accounts, payroll and third-party fees. All corporate related costs have been excluded from the Company’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 Company has re-named and grouped by nature its Revenue streams breakdown, given the increasing importance of its financial business in current and expected future revenue composition, which Management considers shows more meaningful information about the business. As such, the breakdown by revenue stream previously labeled as “Enhanced Marketplace” and “Non-marketplace”, is now presented under the titles of “Commerce” and “Fintech”, respectively. Also, as a result, a group of other services, including classifieds fees, ad sales and other ancillary services, which had historically been included in the “Non-marketplace” line, have, as of January 1, 2020, been included as a part of the “Commerce” revenue stream. Prior-period corresponding figures have been changed accordingly for comparative purposes.

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


	Six Months Ended June 30, 2020					Three Months Ended March 31, 2021
	Brazil	Argentina	Mexico	Other Countries	Total	Brazil	Argentina	Mexico	Other Countries	Total
	(In thousands)					(In thousands)
Net revenues	$ 862,745	$ 372,079	$ 220,703	$ 74,933	$ 1,530,460	$ 768,723	$ 297,236	$ 230,497	$ 81,985	$ 1,378,441
Direct costs	(647,382)	(272,433)	(225,315)	(62,547)	(1,207,677)	(618,037)	(188,969)	(220,906)	(64,310)	(1,092,222)
Direct contribution	215,363	99,646	(4,612)	12,386	322,783	150,686	108,267	9,591	17,675	286,219

Operating expenses and indirect costs of net revenues					(253,039)					(195,375)
Income from operations					69,744					90,844

Other income (expenses):
Interest income and other financial gains					55,566					25,071
Interest expense and other financial losses					(50,561)					(91,289)
Foreign currency losses					(2,089)					(15,089)
Net income before income tax expense					$ 72,660					$ 9,537

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	Six Months Ended June 30, 2019					Three Months Ended March 31, 2020
	Brazil	Argentina	Mexico	Other Countries	Total	Brazil	Argentina	Mexico	Other Countries	Total
	(In thousands)					(In thousands)
Net revenues	$ 643,242	$ 207,689	$ 118,944	$ 49,137	$ 1,019,012	$ 397,447	$ 132,875	$ 94,753	$ 27,016	$ 652,091
Direct costs	(501,260)	(151,401)	(150,801)	(44,888)	(848,350)	(322,628)	(101,025)	(114,762)	(27,604)	(566,019)
Direct contribution	141,982	56,288	(31,857)	4,249	170,662	74,819	31,850	(20,009)	(588)	86,072

Operating expenses and indirect costs of net revenues					(173,011)					(115,766)
Loss from operations					(2,349)					(29,694)

Other income (expenses):
Interest income and other financial gains					58,128					36,784
Interest expense and other financial losses					(30,238)					(23,584)
Foreign currency losses					(2,886)					(186)
Net income before income tax gain					$ 22,655
Net loss before income tax expense										$ (16,680)

Three Months Ended June 30, 2020
Brazil
Argentina
Mexico
Other Countries
Total
(In thousands)
Net revenues
$                           465,298
$                        239,204
$                          125,950
$                           47,917
$                           878,369
Direct costs
(324,754)
(171,408)
(110,553)
(34,943)
(641,658)
Direct contribution
140,544
67,796
15,397
12,974
236,711
Operating expenses and indirect costs of net revenues
(137,273)
Income from operations
99,438
Other income (expenses):
Interest income and other financial gains
18,782
Interest expense and other financial losses
(26,977)
Foreign currency losses
(1,903)
Net income before income tax expense
$                            89,340

Three Months Ended June 30, 2019
Brazil
Argentina
Mexico
Other Countries
Total
(In thousands)
Net revenues
$                           340,858
$                        113,913
$                            64,383
$                           26,088
$                           545,242
Direct costs
(275,917)
(83,909)
(85,216)
(24,441)
(469,483)
Direct contribution
64,941
30,004
(20,833)
1,647
75,759
Operating expenses and indirect costs of net revenues
(88,247)
Loss from operations
(12,488)
Other income (expenses):
Interest income and other financial gains
33,684
Interest expense and other financial losses
(14,679)
Foreign currency gains
783
Net income before income tax expense
$                               7,300

~~Table of Contents~~

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


	June 30,	December 31,	March 31,	December 31,
	2020	2019	2021	2020
	(In thousands)		(In thousands)
US property and equipment, net	$ 649	$ 937	$ 1,316	$ 586
Other countries
Argentina	112,904	100,536	137,270	123,589
Brazil	99,162	103,571	187,668	171,409
Mexico	36,215	30,131	102,135	73,315
Other countries	14,111	9,082	30,251	22,785
	$ 262,392	$ 243,320	$ 457,324	$ 391,098
Total property and equipment, net	$ 263,041	$ 244,257	$ 458,640	$ 391,684

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


	June 30,	December 31,	March 31,	December 31,
	2020	2019	2021	2020
	(In thousands)		(In thousands)
US intangible assets			$ 7,588	$ —
Other countries goodwill and intangible assets
Argentina	$ 13,879	$ 8,632	12,022	12,617
Brazil	23,329	30,142	18,523	19,958
Mexico	31,190	36,003	34,579	35,338
Chile	22,070	22,237	23,713	24,707
Other countries	7,273	4,870	6,676	6,746
			$ 95,513	$ 99,366
Total goodwill and intangible assets	$ 97,741	$ 101,884	$ 103,101	$ 99,366

Consolidated net revenues by similar products and services for the ~~six and~~ three-month periods ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ were as follows:


	Six Months Ended June 30,		Three months Ended June 30,		Three Months Ended March 31,

Consolidated Net Revenues	2020	2019	2020	2019	2021	2020
	(In thousands)		(In thousands)		(In thousands)
Commerce (*)	$ 962,413	$ 610,821	$ 581,703	$ 324,016
Commerce					$ 910,624	$ 380,710
Fintech	568,047	408,191	296,666	221,226	467,817	271,381
Total	$ 1,530,460	$ 1,019,012	$ 878,369	$ 545,242	$ 1,378,441	$ 652,091

~~(*) Includes marketplace fees, shipping fees, ad sales, classified fees and other ancillary services.~~

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8. Fair value measurement of assets and liabilities

The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:


		Quoted Prices in				Quoted Prices in				Quoted Prices in				Quoted Prices in
	Balances as of	active markets for	Significant other	Unobservable	Balances as of	active markets for	Significant other	Unobservable	Balances as of	active markets for	Significant other	Unobservable	Balances as of	active markets for	Significant other	Unobservable
	June 30,	identical Assets	observable inputs	inputs	December 31,	identical Assets	observable inputs	inputs	March 31,	identical Assets	observable inputs	inputs	December 31,	identical Assets	observable inputs	inputs
Description	2020	(Level 1)	(Level 2)	(Level 3)	2019	(Level 1)	(Level 2)	(Level 3)	2021	(Level 1)	(Level 2)	(Level 3)	2020	(Level 1)	(Level 2)	(Level 3)
	(In thousands)								(In thousands)
Assets
Cash and Cash Equivalents:
Money Market Funds	$ 526,204	$ 526,204	$ —	$ —	$ 688,760	$ 688,760	$ —	$ —	$ 166,133	$ 166,133	$ —	$ —	$ 166,483	$ 166,483	$ —	$ —
Sovereign Debt Securities	16,698	16,698	—	—	32,874	32,874	—	—	—	—	—	—	37,654	37,654	—	—
Restricted Cash and cash equivalents:
Money Market Funds	36,616	36,616	—	—	32,829	32,829	—	—	130,886	130,886	—	—	257,695	257,695	—	—
Sovereign Debt Securities (Central Bank of Brazil Mandatory Guarantee)									—	—	—	—	144,249	144,249	—	—
Investments:
Sovereign Debt Securities (Central Bank of Brazil Mandatory Guarantee)									562,797	562,797	—	—	565,705	565,705	—	—
Sovereign Debt Securities	—	—	—	—	29,260	29,260	—	—	270,152	270,152	—	—	666,837	666,837	—	—
Investments:
Sovereign Debt Securities (Central Bank of Brazil mandatory guarantee)	530,660	530,660	—	—	506,175	506,175	—	—
Sovereign Debt Securities	1,171,363	1,171,363	—	—	1,161,663	1,161,663	—	—
Corporate Debt Securities	—	—	—	—	236	178	58	—
Other Assets:
Derivative Instruments	16,443	—	—	16,443	1,249	—	—	1,249	17,477	—	—	17,477	199	—	—	199
Total Financial Assets	$ 2,297,984	$ 2,281,541	$ —	$ 16,443	$ 2,453,046	$ 2,451,739	$ 58	$ 1,249	$ 1,147,445	$ 1,129,968	$ —	$ 17,477	$ 1,838,822	$ 1,838,623	$ �� —	$ 199
Liabilities:
Contingent considerations	$ 4,506	$ —	$ —	$ 4,506	$ 2,201	$ —	$ —	$ 2,201	$ 4,684	$ —	$ —	$ 4,684	$ 4,622	$ —	$ —	$ 4,622
Long-term retention program	68,298	—	68,298	—	60,958	—	60,958	—
Long-term retention plan									69,331	—	69,331	—	136,816	—	136,816	—
Derivative Instruments	984	—	—	984	251	—	—	251	3,708	—	—	3,708	13,964	—	—	13,964
Total Financial Liabilities	$ 73,788	$ —	$ 68,298	$ 5,490	$ 63,410	$ —	$ 60,958	$ 2,452	$ 77,723	$ —	$ 69,331	$ 8,392	$ 155,402	$ —	$ 136,816	$ 18,586

As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company’s financial assets valued at fair value consisted of assets 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 assumptions. Fair value of derivative instruments are determined considering the prevailing risk free interest rate and spot exchange rate.

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As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020, the Company’s liabilities were valued at fair value using Level 2 inputs and Level 3 inputs (valuations based on unobservable inputs reflecting Company assumptions). Fair value of contingent considerations are determined based on the probability of achievement of the performance targets arising from each acquisition, as well as the Company’s historical experience with similar arrangements. Fair value of derivative instruments are determined considering the prevailing risk free interest rate and spot exchange rate.

The unrealized net gains or losses on short-term and long-term investments for which the Company has not elected the fair value option are reported as a component of other comprehensive (loss) income. The Company does not anticipate any significant realized losses associated with those investments in excess of the Company’s historical cost.

As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the carrying value of the Company’s financial assets and liabilities measured at amortized cost approximated their fair value mainly because of their short-term maturity. These assets and liabilities included cash, cash equivalents, restricted cash and cash equivalents and short-term investments (excluding money markets funds and debt securities), accounts receivable, credit cards receivable and other means of payment, loans receivable, funds payable to customers and amounts due to merchants, other assets (excluding derivative instruments), accounts payable, salaries and social security payable (excluding variable LTRP), taxes payable, provisions and other liabilities (excluding contingent considerations and derivative instruments). As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the estimated fair value of the 2028 Notes (liability component), which is based on Level 2 inputs, is ~~$660,931~~$333,759 thousands and ~~$686,366~~$672,345 thousands, respectively, and were determined based on market interest rates. 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 fair value level for those financial assets and liabilities of the Company measured at amortized cost as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:



	Balances as of	Significant other	Balances as of	Significant other	Balances as of	Significant other	Balances as of	Significant other
	June 30,	observable inputs	December 31,	observable inputs	March 31,	observable inputs	December 31,	observable inputs
	2020	(Level 2)	2019	(Level 2)	2021	(Level 2)	2020	(Level 2)
	(In thousands)				(In thousands)
Assets
Time Deposits	$ 422,849	$ 422,849	$ 189,660	$ 189,660	$ 305,746	$ 305,746	$ 158,818	$ 158,818
Accounts receivable	42,423	42,423	35,446	35,446
Accounts receivable, net					64,815	64,815	49,691	49,691
Credit Cards receivable and other means of payment, net	646,739	646,739	379,969	379,969	883,670	883,670	863,073	863,073
Loans receivable, net	144,203	144,203	188,544	188,544	435,449	435,449	401,655	401,655
Other assets	129,196	129,196	149,218	149,218	263,316	263,316	236,432	236,432
Total Assets	$ 1,385,410	$ 1,385,410	$ 942,837	$ 942,837	$ 1,952,996	$ 1,952,996	$ 1,709,669	$ 1,709,669
Liabilities
Accounts payable and accrued expenses	$ 417,759	$ 417,759	$ 372,309	$ 372,309	$ 612,206	$ 612,206	$ 767,336	$ 767,336
Funds payable to customers	1,324,605	1,324,605	894,057	894,057
Funds payable to customers and amounts due to merchants					1,527,971	1,527,971	1,733,095	1,733,095
Salaries and social security payable	71,925	71,925	67,686	67,686	144,530	144,530	120,394	120,394
Taxes payable	141,226	141,226	60,247	60,247	240,167	240,167	215,918	215,918
Loans payable and other financial liabilities (*)	1,202,582	1,274,558	817,491	927,903	2,174,438	2,205,705	1,409,269	1,479,165
Other liabilities	54,784	54,784	124,644	124,644	65,463	65,463	110,139	110,139
Total Liabilities	$ 3,212,881	$ 3,284,857	$ 2,336,434	$ 2,446,846	$ 4,764,775	$ 4,796,042	$ 4,356,151	$ 4,426,047

(*) The fair value of the 2028 Notes (including the equity component) is disclosed in Note 11.

As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020, the Company held 0 direct investments in auction rate securities and does 0t have any non-financial assets or liabilities measured at fair value.

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As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the fair value of money market funds ~~sovereign~~ and ~~corporate~~sovereign debt securities classified as available for sale securities are as follows:



	June 30, 2020				March 31, 2021
	Cost	Gross Unrealized Gains⁽¹⁾	Financial Gains	Estimated Fair Value	Cost	Financial Gains	Financial Losses	Estimated Fair Value

	(In thousands)				(In thousands)
Cash and cash equivalents
Money Market Funds	$ 526,204	$ —	$ —	$ 526,204	$ 166,133	$ —	$ —	$ 166,133
Sovereign Debt Securities	16,673	—	25	16,698
Total Cash and cash equivalents	$ 542,877	$ —	$ 25	$ 542,902	$ 166,133	$ —	$ —	$ 166,133

Restricted cash and cash equivalents
Money Market Funds	$ 36,616	$ —	$ —	$ 36,616	$ 130,886	$ —	$ —	$ 130,886
Total Restricted cash and cash equivalents	$ 36,616	$ —	$ —	$ 36,616	$ 130,886	$ —	$ —	$ 130,886

Short-term investments
Sovereign Debt Securities (Central Bank of Brazil mandatory guarantee) (2)	$ 527,098	$ —	$ 3,562	$ 530,660
Sovereign Debt Securities (3)	1,162,560	1,343	7,460	1,171,363
Sovereign Debt Securities (Central Bank of Brazil Mandatory Guarantee) (1)					$ 561,606	$ 1,192	$ (1)	$ 562,797
Sovereign Debt Securities (1)					111,111	422	—	111,533
Total Short-term investments	$ 1,689,658	$ 1,343	$ 11,022	$ 1,702,023	$ 672,717	$ 1,614	$ (1)	$ 674,330

Long-term investments
Sovereign Debt Securities (1)					$ 159,059	$ 86	$ (526)	$ 158,619
Total Long-term investments					$ 159,059	$ 86	$ (526)	$ 158,619
Total	$ 2,269,151	$ 1,343	$ 11,047	$ 2,281,541	$ 1,128,795	$ 1,700	$ (527)	$ 1,129,968

(1) Unrealized gains from securities are attributable to market price movements, net foreign exchange losses and foreign currency translation. Management does not believe any remaining significant unrealized losses represent credit losses based on the evaluation of available evidence including the credit rating of the investments, as of June 30, 2020.

~~(2) Brazilian government bonds measured~~Measured at fair value with impact on the consolidated statement of income for the application of the fair value option. (See Note 2 – Fair value option applied to certain financial instruments.)

(3) Includes $820,088 thousands of U.S treasury notes measured at fair value with impact on the consolidated statement of income for the application of the fair value option (See Note 2 – Fair value option applied to certain financial instruments).

‎

~~Table of Contents~~


	December 31, 2019					December 31, 2020
	Cost	Gross Unrealized Gains⁽¹⁾	Financial Gains	Financial Losses	Estimated Fair Value	Cost	Financial Gains	Estimated Fair Value

	(In thousands)					(In thousands)
Cash and cash equivalents
Money Market Funds	$ 688,760	$ —	$ —	$ —	$ 688,760	$ 166,483	$ —	$ 166,483
Sovereign Debt Securities(1)	32,851	—	23	—	32,874	37,595	59	37,654
Total Cash and cash equivalents	$ 721,611	$ —	$ 23	$ —	$ 721,634	$ 204,078	$ 59	$ 204,137

Restricted Cash and cash equivalents
Money Market Funds	$ 32,829	$ —	$ —	$ —	$ 32,829	$ 257,695	$ —	$ 257,695
Sovereign Debt Securities ~~(2)~~(1)	29,227	—	33	—	29,260	144,098	151	144,249
Total Restricted Cash and cash equivalents	$ 62,056	$ —	$ 33	$ —	$ 62,089	$ 401,793	$ 151	$ 401,944

Short-term investments
Sovereign Debt Securities (Central Bank of Brazil mandatory guarantee)(3)	$ 504,195	$ —	$ 1,980	$ —	$ 506,175
Sovereign Debt Securities (4)	898,922	2,080	400	(59)	901,343
Corporate Debt Securities	63	—	—	—	63
Sovereign Debt Securities (Central Bank of Brazil Mandatory Guarantee)(1)						$ 559,487	$ 6,218	$ 565,705
Sovereign Debt Securities (1)						514,894	1,889	516,783
Total Short-term investments	$ 1,403,180	$ 2,080	$ 2,380	$ (59)	$ 1,407,581	$ 1,074,381	$ 8,107	$ 1,082,488

Long-term investments
Sovereign Debt Securities (5)	$ 260,400	$ 2	$ 1	$ (83)	$ 260,320
Corporate Debt Securities	170	3	—	—	173
Sovereign Debt Securities (1)						$ 149,938	$ 116	$ 150,054
Total Long-term investments	$ 260,570	$ 5	$ 1	$ (83)	$ 260,493	$ 149,938	$ 116	$ 150,054

Total	$ 2,447,417	$ 2,085	$ 2,437	$ (142)	$ 2,451,797	$ 1,830,190	$ 8,433	$ 1,838,623

(1)Unrealized gains from securities are attributable to market price movements, net foreign exchange losses and foreign currency translation. Management does not believe any remaining significant unrealized losses represent other-than-temporary impairments based on the evaluation of available evidence including the credit rating of the investments, as of December 31, 2019.

~~(2)Held by the Company’s Argentine subsidiary in guarantee for secured lines of credit. (See Note 11 – Loans payable and other financial liabilities.)~~

~~(3)Brazilian government bonds measured~~Measured at fair value with impact on the consolidated statement of income for the application of the fair value option. (See Note 2 – ~~Investments -~~ Fair value option applied to certain financial instruments.)

~~(4)~~Includes $627,842 thousands of U.S treasury notes measured at fair value with impact on the consolidated statement of income for the application of the fair value option (See Note 2 – Investments - Fair value option applied to certain financial instruments.) and $16,623 thousands held by the Company’s Argentine subsidiary in guarantee for secured lines of credit. (See Note 11 – Loans payable and other financial liabilities.)

~~(5)~~Includes $260,230 thousands of U.S treasury notes measured at fair value with impact on the consolidated statement of income for the application of the fair value option. (See Note 2 –Investments - Fair value option applied to certain financial instruments.)

~~The material portion of the Sovereign Debt Securities consists of U.S. Treasury Notes, which carry no significant risk.~~

‎.

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As of ~~June 30, 2020,~~March 31, 2021, the estimated fair values (in thousands of U.S. dollars) of money market funds and sovereign debt securities classified by their effective maturities are as follows:


One year or less		~~2,281,541~~971,349
One year to two years		149,989
Two years to three years		563
Three years to four years		7,592
More than five years		475
Total		$ ~~2,281,541~~1,129,968

9. 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 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 ~~June 30, 2020,~~March 31, 2021, the Company had accounted for estimated liabilities involving proceeding-related contingencies and other estimated contingencies of ~~$7,485~~$8,726 thousands to cover legal actions against the Company in which its 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 ~~June 30, 2020,~~March 31, 2021, 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 for an estimated aggregate amount up to ~~$18,944~~$55,699 thousands. NaN loss amounts have been accrued for such reasonably possible legal actions.

Brazilian preliminary injunction against the Brazilian tax authorities

On November 6, 2014, the Brazilian subsidiaries, Mercadolivre.com Atividades de Internet Ltda., Ebazar.com.br ~~Ltda,~~Ltda., Mercado Pago.com Representações Ltda. and the Argentine subsidiary, Mercado Libre S.R.L., filed a writ of mandamus and requested a preliminary injunction with the Federal Court of Osasco against the federal tax authority to avoid the IR (income tax) withholding over payments remitted by the Brazilian subsidiaries to ~~the Argentine subsidiary,~~ MercadoLibre S.R.L., for the provision of IT support and assistance services by the latter, and requested reimbursement of the amounts improperly withheld over the course of the preceding five (5) years. The preliminary injunction was granted on the grounds that such withholding violated the convention signed between Brazil and Argentina that prevents double taxation. In August 2015, the injunction was revoked by the first instance judge in an award favorable to the federal tax authority. The Company appealed the decision and deposited with the court the disputed amounts. As of ~~June 30, 2020~~March 31, 2021 the total amount of the deposits were ~~$42,935~~$65,563 thousands (which includes ~~$4,249~~$5,918 thousands of interest). Such amounts are included in non-current other assets of the consolidated balance sheet. In June 2020, the Company’s appeal was dismissed. The Company ~~made~~submitted a new ~~filing~~remedy before the same court in July 2020, ~~and plans to~~which was dismissed on February 17, 2021. On March 18, 2021 the Company filed an appeal ~~the case to~~with the superior ~~courts.~~ courts, which is now pending. Management’s opinion, based on the opinion of external legal counsel, is that the ~~Company’s position~~risk of losing the case is ~~more likely than~~reasonably possible but not ~~to succeed in court~~ probable based on the technical merits of the Company’stax ~~position.~~position and the existence of favorable decisions issued by the Federal Regional Courts. For that reason, the Company has not recorded any expense or liability for the disputed amounts.

Other third parties have from time to time claimed, and others may claim in the future, that the Company was responsible for fraud committed against them, or that the Company has infringed their intellectual property rights. The underlying laws with respect to the potential liability of online intermediaries like the Company are unclear in the jurisdictions where the Company operates. Management believes that additional lawsuits alleging that the Company has violated copyright or trademark laws will be filed against the Company in the future.

Intellectual property and regulatory claims, whether meritorious or not, are time consuming and costly to resolve, require significant amounts of management time, could require expensive changes in the Company’s methods of doing business, or could require the Company to enter into costly royalty or licensing agreements. The Company may be subject to patent disputes, and be subject to patent infringement claims as the Company’s services expand in scope and complexity. In particular, the Company may face additional patent infringement claims involving various aspects of the payments businesses.

From time to time, the Company is involved in other disputes or regulatory inquiries that arise in the ordinary course of business. The number and significance of these disputes and inquiries are increasing as the Company’s business expands and the Company grows larger.

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Buyer protection program

The Company provides consumers with a buyer protection program (“BPP”) for all transactions completed through the Company’s online payment solution (“Mercado Pago”). This 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 or does not match the seller’s description. 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 (i.e. Black Friday, Hot Sale), 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 ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, Management’s estimate of the maximum potential exposure related to the Company’s buyer protection program is ~~$2,028,711~~$2,283,252 thousands and ~~$1,365,815~~$2,535,041 thousands, respectively, for which the Company recorded an allowance of ~~$5,916~~$7,384 thousands and ~~$3,808~~$8,364 thousands, respectively.

Commitments

The Company entered into a purchase commitment with 2 U.S. suppliers in relation to the purchase of cloud platform services as follows:

a)for a total amount of $240,500 thousands to be fully paid off between June 1, 2020 and May 31, ~~2024;~~2024. As of March 31, 2021, the Company paid $62,860 thousands in relation thereto; and

b)for a total amount of $30,000 thousands to be fully paid off between November 24, 2019 and March 23, 2023. As of ~~June 30, 2020,~~March 31, 2021, the Company paid ~~$1,864~~$7,670 thousands in relation thereto.

10. Long term retention program (“LTRP”)

The following table summarizes the ~~2011,~~ 2012, ~~2013,~~ 2014, 2015, 2016, 2017, 2018, 2019, 2020 and ~~2020~~2021 long term retention program accrued compensation expense for the ~~six and~~ three-month periods ended ~~June 30, 2020~~March 31, 2021 and ~~2019,~~2020, which are payable in cash according to the decisions made by the Board of Directors:


		Six Months Ended June 30,				Three Months Ended June 30,				Three Months Ended March 31,
		2020		2019	2020		2019			2021		2020
		(In thousands)			(In thousands)					(In thousands)
LTRP 2011		—		26		—		(29)
LTRP 2012		69		1,416		—		857		—		69
LTRP 2013		—		97		—		(96)
LTRP 2014		125		2,823		(1)		1,603		—		126
LTRP 2015		4,885		4,862		3,613		2,880		178		1,272
LTRP 2016		10,055		7,607		7,620		4,569		(538)		2,435
LTRP 2017		10,560		6,976		7,854		4,163		(708)		2,706
LTRP 2018		5,363		3,323		3,807		1,868		(210)		1,556
LTRP 2019		10,320		5,078		6,657		2,952		8,376		3,663
LTRP 2020		10,530		—		6,693		—		9,652		3,837
LTRP 2021										6,166		—
Total LTRP	$	51,907	$	32,208	$	36,243	$	18,767	$	22,916	$	15,664

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11. Loans payable and other financial liabilities

The following table summarizes the Company’s Loans payable and other financial liabilities as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:


								Book value as of										Book value as of

Type of instrument		Currency	Interest	Weighted Average Interest ‎Rate		Maturity		June 30, 2020		December 31, 2019		Currency	Interest	Weighted Average Interest ‎Rate		Maturity		March 31, 2021		December 31, 2020
								(In thousands)										(In thousands)
Current loans payable and other financial liabilities:	Current loans payable and other financial liabilities:										Current loans payable and other financial liabilities:
Loans from banks
Chilean Subsidiary		Chilean Pesos	Fixed	2.09	%	July 2020	$	54,261	$	38,780		Chilean Pesos	Fixed	1.44	%	April 2021	$	45,044	$	92,895
Brazilian Subsidiary		Brazilian Reais	Variable	CDI + 3.35	%	March 2021		66,826		-		Brazilian Reais	—	—	%	—		—		70,267
Brazilian Subsidiary		Brazilian Reais	Variable	CDI + 2.30	%	September 2020		37,072		-		Brazilian Reais	Variable	CDI + 3.25	%	May 2021		39,478		42,693
Brazilian Subsidiary		Brazilian Reais	Variable	CDI + 3.90	%	October 2020		5,552		-		Brazilian Reais	Variable	CDI + 2.10	%	June 2021		26,920		29,218
Brazilian Subsidiary		Brazilian Reais	Variable	CDI + 3.25	%	May 2021		40,532		-
Brazilian Subsidiary		Brazilian Reais	Variable	CDI + 2.9	%	December 2020		9,159		-
Mexican		Mexican Peso	Variable	TIIE + 2.55	%	October 2020		15,884		-
Mexican Subsidiary												Mexican Peso	Variable	TIIE + 2.20	%	April 2021		17,945		18,418
Argentine Subsidiary		Argentine Pesos	Fixed	32.50	%	November 2020		14,360		-		Argentine Pesos	Fixed	37.75	%	May 2021		13,185		14,400
Uruguayan Subsidiary												Uruguayan Pesos	Fixed	6.25	%	September 2021		7,921		—
Uruguayan Subsidiary		Uruguayan Pesos	Fixed	9.39	%	July- August 2020		13,321		-		Uruguayan Pesos	Fixed	5.37	%	April 2021		4,793		13,406

Secured lines of credit
Argentine Subsidiary		Argentine Pesos	-	-	%	-		-		49,499		Argentine Pesos	Fixed	31.76	%	April 2021		37,178		18,311
Brazilian Subsidiary (*)		Brazilian Reais	Variable	CDI + 1.00	%	October 2020		102,927		-
Argentine Subsidiary												Argentine Pesos	Fixed	34.84	%	April 2021		5,977		—
Brazilian Subsidiary (*)		Brazilian Reais	Variable	CDI + 1.50	%	October 2020		99,171		-		Brazilian Reais	Variable	CDI + 0.55	%	July 2021		52,978		58,437

Unsecured lines of credit
Uruguayan Subsidiary		Uruguayan Pesos	Fixed	9.88	%	July 2020		18,736		16,435		Uruguayan Pesos	Fixed	6.46	%	April 2021		20,808		20,055
Argentine Subsidiary		Argentine Pesos	Fixed	27.67	%	July 2020		36,221		9,645		Argentine Pesos	Fixed	39.21	%	April - May 2021		124,376		116,140
Chilean Subsidiary		Chilean Pesos	Variable	1.47	%	July 2020		2,607		1,951

Convertible notes								6,649		6,649
Deposit Certificates
Brazilian Subsidiary												Brazilian Reais	Variable	CDI + 0.52 to 0.80	%	June 2021		22,854		—
Brazilian Subsidiary												Brazilian Reais	Variable	107% to 122% of CDI		January - March 2022		43,460		—

2028 Notes																		1,124		6,649
2026 Sustainability Notes																		2,006		—
2031 Notes																		4,618		—
Finance lease obligations								1,832		2,008								6,251		7,394
Credit card collateralized debt								20,028		17,309								11,842		12,920
Collateralized debt								45,875		43,862								25,782		25,342
Other lines of credit								670		-								—		1,848
							$	591,683	$	186,138							$	514,540	$	548,393

Non Current loans payable and other financial liabilities:	Non Current loans payable and other financial liabilities:										Non Current loans payable and other financial liabilities:
Convertible notes								582,306		569,305
2028 Notes																		301,368		595,800
2026 Sustainability Notes																		396,282		—
2031 Notes																		693,347		—
Finance lease obligations								5,804		7,368								18,050		16,261
Collateralized debt								22,789		54,680								250,851		248,815
							$	610,899	$	631,353							$	1,659,898	$	860,876

(*)

Under the terms of the ~~loans agreements,~~loan agreement, the Company transferred ~~cash~~U.S. treasury notes to ~~deposit accounts~~an account owned by the Company but under the sole control and dominion of the escrow ~~agents~~agent as ~~collaterals. These collaterals are shown~~collateral. This collateral is accounted for in short-term investments and its coupon payment is accounted for in Restricted cash and cash equivalents of the consolidated balance sheet.

See Notes 1312 and 1413 to these interim condensed consolidated financial statements for details regarding the Company’s collateralized debt securitization transactions and finance lease obligations, respectively.
‎

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~~Convertible~~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 $400,000 thousands aggregate principal amount of 2.375% Sustainability Notes due 2026 (the “2026 Sustainability Notes”) and $700,000 thousands aggregate principal amount of 3.125% Notes due 2031 (the “2031 Notes”, and together with the 2026 Sustainability Notes, the “Notes”). The Company will 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. In connection with the Notes, the Company capitalized $10,647 thousands of debt issuance costs, which are amortized during the term of the Notes.

Certain of the Company’s subsidiaries (the “Subsidiary Guarantors”) fully and unconditionally guarantee the payment of principal, premium, if any, interest, and all other amounts in respect of each of the Notes (the “Subsidiary Guarantees”). The initial Subsidiary Guarantors are 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.

The Notes rank equally in right of payment with all of the Company’s other existing and future senior unsecured debt obligations from time to time outstanding. 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 from time to time outstanding, except for statutory priorities under applicable local law.

2.00% Convertible Senior Notes Due 2028

On August 24, 2018, the Company issued $800,000 thousands of 2.00% Convertible Senior Notes due 2028 and issued an additional $80,000 ~~thousand~~thousands of notes on August 31, 2018 pursuant to the partial exercise of the initial purchasers’ option to purchase such additional notes, for an aggregate principal amount of $880,000 thousands of 2.00% Convertible Senior Notes due 2028 (collectively, the “2028 Notes”). The 2028 Notes are unsecured, unsubordinated obligations of the Company, which pay interest in cash semi-annually, on February 15 and August 15 of each year, 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. For additional information regarding the 2028 Notes please refer to Note 2 and Note 1516 to the audited consolidated financial statements for the year ended December 31, ~~2019,~~2020, contained in the Company’s Annual Report on Form 10-K filed with the SEC.

During the ~~six-month~~three-month period ended ~~June 30, 2020, 1~~March 31, 2021, one Note was converted, for a total amount of $1 ~~thousands.~~thousand. Additionally, during the ~~second~~first quarter of ~~2020,~~2021, the conversion threshold was met and the Notes become convertible between ~~July~~April 1, ~~2020~~2021 and ~~September~~June 30, ~~2020. From July 1, 2020 to~~2021. As of the date of issuance of these interim condensed consolidated financial statements, the Company received ~~one~~ additional ~~request~~requests for ~~conversion.~~conversion of $900 thousands. The determination of whether or not the Notes are convertible must continue to be performed on a quarterly basis. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. ~~The intention of the Company is to share-settle the total amount due upon conversion of the Notes.~~

In connection with the issuance of the 2028 Notes, the Company paid $91,784 thousands, $11,472 thousands, $88,362 thousands, $104,095 thousands, $82,682 thousands, $120,012 thousands and ~~$104,095~~$100,769 thousands (including transaction expenses) in August 2018, November 2018, June 2019, ~~and~~ June 2020, August 2020, November 2020 and January 2021, respectively, to enter into capped call transactions with respect to shares of the common stock with certain financial institutions (the “2028 Notes Capped Call Transactions”). In addition, the Company paid $8,005 thousands in November 2019 to amend the strike and cap prices of the capped call transaction purchased in November 2018. 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 cost of the 2028 Notes Capped Call Transactions is included as a net reduction to additional paid-in capital in the stockholders’ equity section of the consolidated balance sheets.

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In January 2021, the Company repurchased $440,000 thousands principal amount of the outstanding of the 2028 Notes. The total amount paid amounted to $1,865,076 thousands, which includes principal, interest accrued and premium. As a result, $439,992 thousands of the principal amount of the 2028 Notes remains outstanding as of March 31, 2021. The settlement consideration was first allocated to the extinguishment of the liability component of the 2028 Notes repurchased. The difference of $29,953 thousands between the fair value of the liability component and the net carrying amount of the liability component and unamortized debt issuance costs was recognized as a loss on debt extinguishment; in addition, $19,294 thousands paid as a premium was recognized as a loss in Interest expense and other financial losses line in the consolidated statement of income for the three-month period ended March 31, 2021. The remaining consideration of $1,484,279 thousands (net of income tax effects) was allocated to the reacquisition of the equity component and recognized as a reduction of stockholders’ equity.

The total estimated fair value of the 2028 Notes was $~~2,017,169~~1,465,869 thousands and $~~1,338,014~~3,416,819 thousands as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, 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 Company considered the fair value of the 2028 Notes as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 to be a Level 2 measurement. 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 ~~$985.77~~$1,472.14 closing price of the Company’s common stock on ~~June 30, 2020~~March 31, 2021, the if-converted value of the 2028 Notes exceeded their principal amount by ~~$1,076,421~~$1,020,833 thousands.

The following table presents the carrying amounts of the liability and equity components related to the 2028 Notes as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020:


	June 30, 2020		December 31, 2019		March 31, 2021		December 31, 2020
	(In thousands)				(In thousands)
Amount of the equity component (1)	$	327,305	$	327,305	$	163,653	$	327,305

2.00% Convertible Senior Notes due 2028	$	879,999	$	880,000	$	439,992	$	879,993
Unamortized debt discount (2)		(288,500)		(301,227)		(134,257)		(275,299)
Unamortized transaction costs related to the debt component		(9,193)		(9,468)		(4,367)		(8,894)
Contractual coupon interest accrual		32,609		23,809		44,244		41,409
Contractual coupon interest payment		(25,960)		(17,160)		(43,120)		(34,760)
Net carrying amount	$	588,955	$	575,954	$	302,492	$	602,449

(1)Net of ~~$6,163~~$3,082 thousands of transaction costs related to the equity component of the 2028 Notes.

(2)As of ~~June 30, 2020,~~March 31, 2021, the remaining period over which the unamortized debt discount will be amortized is ~~8.2~~7.5 years.

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The following table presents the interest expense for the contractual interest, the accretion of debt discount and the amortization of debt issuance costs:


	Six month periods ended June 30,				Three month periods ended June 30,				Three month periods ended March 31,
	2020		2019		2020		2019		2021		2020
	(In thousands)				(In thousands)				(In thousands)
Contractual coupon interest expense	$	8,800	$	9,142	$	4,400	$	4,400	$	2,836	$	4,400
Amortization of debt discount		12,727		12,285		6,420		5,968		4,355		6,307
Amortization of debt issuance costs		275		239		140		117		102		135
Total interest expense related to the 2028 Notes	$	21,802	$	21,666	$	10,960	$	10,485	$	7,293	$	10,842

~~12. Equity Offerings~~

On March 15, 2019, the Company closed a public equity offering of approximately $1,150,000 thousands of common stock at a public offering price of $480 per share (the “Offering”). Pursuant to the Offering, the Company issued 2,395,834 shares of common stock, par value $0.001 per share (the “Common Stock”) which includes ~~the exercise in full of the underwriters’ option to purchase $150 million of additional shares of common stock.~~

In addition, on March 15, 2019 the Company closed its $750,000 thousands concurrent private placement of common stock to PayPal, Inc (“PayPal”). PayPal purchased 1,719,790 shares of Common Stock at a price of $436.10 per share.

On March 29, 2019, in a separate private placement, an affiliate of Dragoneer Investment Group purchased 100,000 shares of perpetual convertible preferred stock designated as Series A Perpetual Preferred Stock, par value $0.001 per share (the “Preferred Stock”) of the Company for $100,000 thousands in the aggregate. ~~The Preferred Stock is a class of equity security that ranks senior to the Common Stock with respect to dividend rights or rights upon liquidation.~~

Each share of Preferred Stock has a stated value of $1,000, is entitled to a cash dividend of 4% per annum, and is convertible into shares of the Company’s Common Stock at an initial conversion price of $479.71 (subject to adjustment). The Company may require the conversion of any or all of the Preferred Stock beginning on March 29, 2023 if certain conditions set forth in the Certificate of Designation are met. The Company may redeem any or all of the Preferred Stock for cash, shares of its Common Stock or a combination thereof (at its election, subject to certain conditions) at any time beginning on March 29, 2026 for a percentage of the stated value of each share of Preferred Stock, plus any accrued and unpaid dividends at such time. On March 15, 2026, September 15, 2026 and March 15, 2027, the holders of the Preferred Stock shall have the right to redeem all of the outstanding shares of Preferred Stock for cash, shares of the Company’s Common Stock or a combination thereof (at the Company’s election, subject to certain conditions) to be determined by the formula set forth in the Certificate of Designation. Upon the occurrence of a change of control, the holders will have the right to redeem their shares of Preferred Stock for cash at a price set forth in the Certificate of Designation. The holders of the Preferred Stock have the right to vote on matters submitted to a vote of the holders of Common Stock on an as-converted basis unless required by applicable law.

~~In the aggregate, the Company raised funds in the amount of $1,965,903 thousands net of issuance costs paid in the amount of $34,097 thousands.~~

~~13.~~

12. Securitization Transactions

The process of securitization consists of the issuance of securities collateralized by a pool of assets through a special purpose entity, 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 special purpose entities (“SPEs”) or the acquisition of loans receivable portfolios through 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 precluded from recording the transfers of assets in securitization transactions as sales or is required to consolidate the SPE.

~~Additionally, the~~

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The Company securitizes certain credit cards receivable related to user’s purchases through Argentine SPEs. According to the SPE contracts, the Company has determined that it has no obligation to absorb losses or the right to receive benefits of the SPE 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 vehicle, its assets, liabilities, and related results are not consolidated in the Company’s financial statements.

~~Table~~Additionally, the Company intends to securitize certain credit cards receivable related to user’s purchases through Brazilian SPE. According to the SPE contract in place, the Company has determined that it has the obligation to absorb losses or the right to receive benefits of ~~Contents~~

the SPE that could be significant because it retains subordinated interest in the SPEs. As the Company controls the vehicle, 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 the securitization transactions as if they were secured financing and therefore the assets, liabilities, and related results are consolidated in its financial statements.

~~As of June 30, 2020,~~The following table summarizes the ~~carrying value of the Brazilian~~Company’s collateralized debt ~~was $44,036 thousands, composed by: 1) $10,092 thousands bearing interest at a rate~~as of Brazilian DI plus 3.5% per annum for a term of 36 months, due in June 2021 and 2) $33,944 thousands bearing interest at a rate of Brazilian DI plus 3.25% per annum for a term of 30 months, due in May 2021. The carrying value of the Argentine collateralized debt was $1,666 thousands bearing interest at a variable rate equivalent to the BADLAR rate plus 200 basis points with a minimum 40% and a maximum 50% nominal rate per annum for a term of 9 months, due in August 2020. The carrying value of the Mexican collateralized debt was $22,962 thousands bearing interest at a variable rate equivalent to the equilibrium interbank interest rate published by Banco de Mexico in the Diario Oficial plus 3.34% per annum for term of 36 months, due in November 2022.March 31, 2021:


SPEs	Collateralized debt as of March 31, 2021	Interest rate	Currency	Maturity
Mercado Crédito Merchant Fundo de Investimento em Direitos Creditórios	1,769	DI plus 3.5%	Brazilian Reais	June 2021
Mercado Crédito I Brasil Fundo de Investimento Em Direitos Creditórios Não Padronizados	51,364	DI plus 2.5%	Brazilian Reais	November 2023
Fundo de Investimento Em DireitosCreditórios Arandu	173,713	DI plus 1.75%	Brazilian Reais	June 2023
Mercado Crédito Consumo II	5,478	Badlar rates plus 200 basis points with a min 27% and a max 37%	Argentine Pesos	July 2021
Mercado Crédito VIII	2,726	Badlar rates plus 200 basis points with a min 29% and a max 39%	Argentine Pesos	July 2021
Mercado Crédito Consumo III	6,325	Badlar rates plus 200 basis points with a min 29% and a max 41%	Argentine Pesos	August 2021
Mercado Crédito IX	9,202	Badlar rates plus 200 basis points with a min 30% and a max 44%	Argentine Pesos	February 2022
Fideicomiso de administración y fuente de pago CIB/3369	26,056	The equilibrium interbank interest rate published by Banco de Mexico in the Diario Oficial plus 3.34%	Mexican Pesos	November 2022

This secured debt is issued by the SPEs and includes collateralized securities used to fund Mercado Credito 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.
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The assets and liabilities of the SPEs are included in the Company’s interim condensed consolidated financial statements as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 as follows:



	March 31,		December 31,
	2021		2020
Assets	(In thousands)
Current assets:
Restricted cash and cash equivalents	$	100,758	$	249,872
Credit cards receivable and other means of payments, net		136,693		—
Loans receivable, net		133,588		113,846
Total current assets		371,039		363,718
Non-current assets:
Long-term investments		1,596		—
Loans receivable, net		10,106		9,581
Total non-current assets		11,702		9,581
Total assets	$	382,741	$	373,299
Liabilities
Current liabilities:
Accounts payable and accrued expenses	$	136	$	100
Loans payable and other financial liabilities		25,782		25,342
Total current liabilities		25,918		25,442
Non-current liabilities:
Loans payable and other financial liabilities		250,851		248,815
Total non-current liabilities		250,851		248,815
Total liabilities	$	276,769	$	274,257

June 30,
December 31,
2020
2019
Assets
(In thousands)
Current assets:
Restricted cash and cash equivalents
$
51,753
$
37,424
Loans receivable, net
51,294
104,419
Total current assets
103,047
141,843
Non-current assets:
Loans receivable, net
2,651
4,395
Total non-current assets
2,651
4,395
Total assets
$
105,698
$
146,238
Liabilities
Current liabilities:
Accounts payable and accrued expenses
$
67
$
128
Loans payable and other financial liabilities
45,875
43,862
Total current liabilities
45,942
43,990
Non-current liabilities:
Loans payable and other financial liabilities
22,789
54,680
Total non-current liabilities
22,789
54,680
Total liabilities
$
68,731
$
98,670

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~~14.~~13. Leases

The Company leases certain fulfillment, cross-docking and services centers, office space 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 (in thousands):~~follows:


		June 30,		December 31,		March 31,		December 31,
		2020		2019		2021		2020
Operating Leases					(In thousands)
Operating lease right-of-use assets	$	186,851	$	200,449	$	345,313	$	303,214

Operating lease liabilities	$	193,702	$	199,932	$	344,528	$	298,847

Finance Leases
Property and equipment, at cost		11,657		10,952		34,994		29,798
Accumulated depreciation		(2,703)		(1,563)		(5,730)		(4,086)
Property and equipment, net	$	8,954	$	9,389	$	29,264	$	25,712

Loans payable and other financial liabilities	$	7,636	$	9,376	$	24,301	$	23,655

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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 at ~~June 30, 2020:~~March 31, 2021:


Weighted average remaining lease term
Operating leases	87	Years
Finance leases	34	Years


Weighted average discount rate (*)
Operating leases	138	%
Finance leases	1713	%

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

The components of lease expense were as ~~follows (in thousands):~~follows:


		Six months ended June 30,				Three months ended March 31,
		2020		2019		2021		2020
					(In thousands)
Operating lease cost	$	18,721	$	13,874	$	16,105	$	9,051

Finance lease cost:
Depreciation of property and equipment		1,030		584		1,324		512
Interest on lease liabilities		896		489		837		508
Total finance lease cost	$	1,926	$	1,073	$	2,161	$	1,020

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Supplemental cash flow information related to leases was as ~~follows (in thousands):~~follows:


	Six months ended June 30,				Three months ended March 31,
		2020		2019		2021		2020
Cash paid for amounts included in the measurement of lease liabilities:					(In thousands)
Operating cash flows from operating leases	$	17,540	$	10,219	$	14,779	$	8,590
Financing cash flows from finance leases		1,064		889		3,863		564


Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	28,823	$	43,018	$	65,394	$	14,580
Finance leases		790		3,355		6,197		663

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 (in thousands):~~leases:


Period Ending June 30, 2020		Operating Leases		Finance Leases
Period Ending March 31, 2021						Operating Leases		Finance Leases
					(In thousands)
One year or less	$	39,493	$	3,037	$	69,830	$	8,522
One year to two years		38,056		3,037		68,741		8,522
Two years to three years		35,417		2,925		65,053		7,405
Three years to four years		33,951		1,564		61,152		4,657
Four years to five years		30,656		283		49,032		1,642
Thereafter		106,594		—		126,023		—
Total lease payments	$	284,167	$	10,846	$	439,831	$	30,748
Less imputed interest		(90,465)		(3,210)		(95,303)		(6,447)
Total	$	193,702	$	7,636	$	344,528	$	24,301

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~~15.~~14. Derivative instruments

The Company designates certain derivatives as hedges of particular risks associated with forecasted purchases. These transactions, mainly currency forward contracts, are classified as cash flow hedges.

As of ~~June 30, 2020~~March 31, 2021 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. Pursuant to these contracts, the Company will buy a notional amount of ~~$6,091~~$10,005 thousands in April 2021, $10,589 thousands in May 2021, $10,749 thousands in June 2021, $8,490 thousands in July ~~2020, $6,773~~2021, $8,659 thousands in August ~~2020, $6,971~~2021, $8,755 thousands in September ~~2020, $5,070~~2021, $4,326 thousands in October ~~2020, $4,100~~2021, $7,724 thousands in November ~~2020 and $4,533~~2021, $5,960 thousands in December ~~2020,~~2021, $2,337 thousands in January 2022, $2,175 thousands in February 2022 and $2,675 thousands in March 2022 at fixed currency rates. 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 ~~June 30, 2020,~~March 31, 2021, the Company estimated that the whole amount of net derivative gains related to its cash flow hedges included in accumulated other comprehensive income will be reclassified into earnings within the next 12 months.

In addition, as of ~~June 30, 2020,~~March 31, 2021, 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 a Brazilian subsidiary, whose functional currency is the Brazilian Reais, which were not designated as hedges for accounting purposes. Pursuant to these contracts, the Company will buy a notional amount of ~~$28,600~~$60,000 thousands in April 2021, $52,000 thousands in May 2021, $39,000 thousands in June 2021, $30,000 thousands in July ~~2020, $39,000~~2021 and $24,000 thousands in August ~~2020 and $46,000 thousands in December 2020,~~2021 at fixed currency rates.

Finally, 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 a Mexican subsidiary, whose functional currency is the Mexican Peso, which were not designated as hedges for accounting purposes. Pursuant to these contracts, the Company will buy a notional amount of ~~$10,000~~$66,470 thousands in ~~October 2020 and $10,000~~April 2021, $20,349 thousands in ~~December 2020,~~May in 2021, $27,000 thousands in June 2021 and $15,000 thousands in July 2021, at fixed currency rates.

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Foreign exchange contracts

The fair values of the Company’s outstanding derivative instruments as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 were as follows:


			June 30,		December 31,			March 31,		December 31,
	Balance sheet location		2020		2019	Balance sheet location		2021		2020
		(In thousands)					(In thousands)
Derivatives
Foreign exchange contracts not designated as hedging instruments	Other current assets	$	14,181	$	1,249	Other current assets	$	14,008	$	199
Foreign exchange contracts designated as cash flow hedges	Other current assets		2,262		—	Other current assets		3,469		—
Foreign exchange contracts not designated as hedging instruments	Other current liabilities		984		—	Other current liabilities		3,708		11,106
Foreign exchange contracts designated as cash flow hedges	Other current liabilities		—		251	Other current liabilities		—		2,858

The effects of derivative contracts on unaudited interim condensed consolidated of comprehensive income as of ~~June 30, 2020~~March 31, 2021 were as follows:

Amount of
Amount of gain reclassified
December 31,
Gain (Loss) recognized
from accumulated
June 30,
2019
in other comprehensive loss
other comprehensive loss (income)
2020
(In thousands)
Foreign exchange contracts designated as cash flow hedges
$                      (250)
$                     7,135
$                                               (3,640)
$                        3,245

Amount of

Amount of (gain) loss reclassified

December 31,

Gain (Loss) recognized

from accumulated

March 31,

2020

in other comprehensive loss

other comprehensive loss

2021

(In thousands)

Foreign exchange contracts designated as cash flow hedges

$ (2,469)

$ 5,561

$ 636

$ 3,728

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The effects of derivative contracts on unaudited interim condensed consolidated statement of income for the ~~six and~~ three-month periods ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ were as follows:

Six month periods ended June 30,
Three month periods ended June 30,
2020
2019
2020
2019
(In thousands)
(In thousands)
Foreign exchange contracts not designated as hedging instruments
$
21,826
$
69
$
5,059
$
69
Loss from foreign exchange contracts designated as fair value hedges
—
(1,030)
—
(1,030)
Gain from hedged items attributable to hedged risks
—
1,030
—
1,030



		Three Months Ended March 31,
	2021		2020
		(In thousands)
Foreign exchange contracts not designated as hedging instruments	$	18,989	$	16,767

15. Share repurchase program

On August 30, 2020, the Board of Directors of MercadoLibre authorized the Company to repurchase shares of the Company’s common stock, par value $0.001 per share, for aggregate consideration of up to $350,000 thousands.

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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 expires on August 31, 2021 and 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 repurchases.

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

March 31, 2021, the Company acquired 66,096 shares under the share repurchase program. The shares were acquired in the Argentine market and paid for in Argentine pesos at a price that reflects the additional cost of accessing US dollars through an indirect mechanism, because of restrictions imposed by the Argentine government for buying US dollars at the official exchange rate in Argentina. As a result, the Company recognized a foreign currency loss of $18,280 thousands for the three-month period ended March 31, 2021.

16. Impact of COVID-19 pandemic

In March 2020, the outbreak of a novel strain of the coronavirus, COVID-19 was recognized as a pandemic by the World Health Organization, and the outbreak has become increasingly widespread around the world. Government-imposed total or partial lockdowns or curfews instituted throughout Latin America ~~in late~~since March 2020, some of which have been subsequently extended, modified or rescinded, have led to a weakening of the macroeconomic environment, generating recession conditions and a devaluation of the local currencies in the countries in which the Company operates.

The Company has thus far not been required to suspend its operations in any country, but the Company’s business was, and may in the future again be, negatively affected by the pandemic in terms of operations, consumer buying trends, and consequently, net revenues. Despite the uncertainty generated by the pandemic, the Company’s revenues increased 61.1% during the second quarter in comparison with the same quarter of 2019, mainly as a result of an increase in gross merchandise value and total payment value.

Management believes that, given the uncertainty with respect to how long the pandemic will persist, what additional measures may be introduced by governments or private parties, what effect any such additional measures may have on our business or the macroeconomic impact of the pandemic in the countries where the Company operates, it is not possible to have certainty around business development and its cash generation ~~for~~until the ~~remainder~~outbreak of ~~2020.~~COVID-19 can be definitively contained. In terms of liquidity and cash management, relevant funding sources remain available ~~and new credit facilities have been obtained~~ at the geographical segment ~~level.~~ level and guaranteed senior notes were issued in January 2021 in an aggregate amount of $1,100,000 thousands.

As of ~~June 30, 2020,~~March 31, 2021, the Company’s main source of liquidity was ~~$2,763,762~~$1,208,729 thousands of cash and cash equivalents and short-term investments, which excludes a ~~$530,660~~$562,797 thousands investment related to the Central Bank of Brazil Mandatory ~~Guarantee.~~

Guarantee and a $71,270 thousands investment related to a guarantee for a secured line of credit in Brazil.

Lastly, the revenues sources of the Company’s subsidiaries are denominated in local currency. As a result, the current weak macro-economic environment ~~in 2020~~ in certain countries in which the Company operates coupled with the devaluations of certain local currencies in those countries against the U.S. dollar could cause a decline in year-over-year net revenues as measured in U.S. dollars.

Management has made its best estimation of the potential scenarios for ~~the rest of 2020.~~2021. However it is not possible to predict at this time with certainty the impact that COVID-19 could have and its effects, including its impact on the economies of the countries in which the Company operates, and therefore the extent of the impact on the Company’s financial condition and results of operations if conditions persist or materially deviate from those currently used in its estimates.

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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 ~~Exchange~~ 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. 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 ~~online commerce~~e-commerce and Internet usage in Latin America;

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 and central bank regulations on our business;

litigation and legal liability;

systems interruptions or failures;

our ability to attract and retain qualified personnel;

consumer trends;

security breaches and illegal uses of our services;

competition;

reliance on third-party service providers;

enforcement of intellectual property rights;

seasonal fluctuations;

political, social and economic conditions in Latin America;

the expected timing and amount of MercadoLibre’s share repurchases;

our long-term sustainability goals; and

the current and potential impact of COVID-19 on our net revenues, gross profit margins, operating margins and liquidity due to future disruptions in operations as well as the macroeconomic instability caused by the pandemic.

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.

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 our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019~~2020 filed with the Securities and Exchange Commission (“SEC”) on ~~February 14, 2020,~~March 1, 2021, as updated by those described in “Item 1A — Risk Factors” in Part II of our report on ~~Form10-Q~~this Form 10-Q for the quarter ended March 31, ~~2020~~2021 and in other reports we file from time to time with the SEC.

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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 our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. 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.

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 ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~;

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

~~MercadoLibre, Inc. (together with its subsidiaries “us”, “we”, “our” or the “Company”) is~~We are the largest online commerce ecosystem in Latin ~~America.~~America based on unique active users, and we are present in 18 countries: Brazil, Argentina, 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. We are a market leader in e-commerce in each of Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, Mexico, Peru, Uruguay~~transactions both digitally and Venezuela, based on the number of unique visitors and page views. We also operate online commerce platforms in the Dominican Republic, Honduras, Nicaragua, El Salvador, Panama, Bolivia, Guatemala and Paraguay.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 ~~644~~646 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 ~~an online~~a digital commerce platform in Latin America.

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

The Mercado Libre Marketplace, which we sometimes refer to as our 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 both businesses and individuals to list merchandise and conduct sales and purchases ~~online.~~digitally.

To complement the Mercado Libre Marketplace and also to enhance the user experience for our buyers and sellers, we developed Mercado Pago, ~~is our financial technology (FinTech) solution,~~an integrated digital payments solution. Initially designed to facilitate transactions ~~both~~ on ~~and off our marketplaces~~Mercado Libre’s Marketplaces by providing a mechanism that ~~allows~~allowed our users to securely, easily and promptly send and receive payments, ~~online. Outside~~it is now a full ecosystem of ~~our marketplaces,~~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 MercadoLibre’s Marketplaces. Currently, Mercado Pago ~~allows merchants to process~~processes and settles all transactions ~~via their websites~~on our Marketplaces in Brazil, Argentina, Mexico, Chile, Colombia and ~~mobile apps, as well as~~Uruguay, and is also available for our buyers and sellers in their brick-and-mortar stores through QR codes and mobile points of sale (“MPOS”) devices. It also enables users to easily transfer money to each other. Through Mercado Fondo, our asset management product, our users are able to invest the outstanding balance on theirPeru. In addition, Mercado Pago ~~account at competitive rates and in a simple way.~~grants through our Mercado Credito ~~our lending~~ solution, ~~allows us~~loans to ~~finance merchants’ working capital needs~~sellers and ~~consumers’ purchases.~~buyers in Argentina, Brazil and Mexico.

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~~To further enhance~~The Mercado Envios logistics solution enables sellers on our ~~suite of e-commerce~~platform to utilize third-party carriers and other logistics service providers, while also providing them with fulfillment and warehousing services. The logistics services we ~~launched~~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 Mercado Envios shipping program in Brazil, Argentina, Mexico, Colombia, Chile and Uruguay. Through Mercado Envios, we offer a cost-efficient way to utilize our existing distribution chain to fulfill sales on our platform. Sellers that opt into the program are able to offer a uniform and seamlessly integrated shipping experience to their buyers at competitive prices. full experience. As of ~~June 30, 2020,~~March 31, 2021, we also offer free shipping to buyers in Brazil, Argentina, Mexico, Chile and ~~Colombia.~~Colombia.

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.

Through ~~MercadoLibre~~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.~~platform, benefitting both the Commerce and Fintech businesses.

~~Furthermore, we developed~~We also offer our MercadoLibre advertising platform to enable businesses to promote their products and services on the Internet. Through this platform, MercadoLibre’s sellers and large advertisers are able to display ads on our webpages.

~~Additionally, through~~digital storefront solution, Mercado Shops, ~~our online store solution,~~allows users ~~can~~to set-up, manage and promote their own ~~online store.~~digital stores. These stores are hosted by ~~MercadoLibre~~Mercado Libre and offer integration with the ~~marketplace,~~rest of our ecosystem, namely our Marketplaces, payment services and ~~payment and advertising services we offer.~~logistics services. Users can ~~pay monthly subscriptions for enhanced functionality~~create a store at no cost, and can access additional functionalities and value added services on ~~their store.~~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, Dominican Republic, Ecuador, Panama, Peru, Bolivia, Honduras, Nicaragua, El Salvador, Guatemala, Paraguay, Uruguay and the United States of America). 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 ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:


	Six-month Periods Ended				Three-month Periods Ended				Three-month Periods Ended
	June 30,				June 30,				March 31,
(% of total consolidated net revenues) (*)	2020		2019		2020		2019		2021		2020
Brazil	56.4	%	63.1	%	53.0	%	62.5	%	55.8	%	60.9	%
Argentina	24.3		20.4		27.2		20.9		21.6		20.4
Mexico	14.4		11.7		14.3		11.8		16.7		14.5
Other Countries	4.9		4.8		5.5		4.8		5.9		4.1

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

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The following table summarizes the changes in our net revenues by segment for the ~~six and~~ three-month periods ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:


	Six-month Periods Ended				Change from 2019					Three-month Periods Ended			Change from 2019					Three-month Periods Ended			Change from 2020
	June 30,				to 2020 (*)					June 30,			to 2020 (*)					March 31,			to 2021 (*)
		2020		2019		in Dollars	in %			2020		2019	in Dollars		in %			2021		2020	in Dollars		in %
	(in millions, except percentages)								(in millions, except percentages)								(in millions, except percentages)
Net Revenues:
Brazil	$	862.7	$	643.2	$	219.5	34.1	%	$	465.3	$	340.9	$	124.4	36.5	%	$	768.7	$	397.4	$	371.3	93.4	%
Argentina		372.1		207.7		164.4	79.2			239.2		113.9		125.3	110.0			297.2		132.9		164.4	123.7
Mexico		220.7		118.9		101.8	85.6			125.9		64.4		61.6	95.6			230.5		94.8		135.7	143.3
Other Countries		74.9		49.1		25.8	52.5			47.9		26.1		21.8	83.7			82.0		27.0		55.0	203.5
Total Net Revenues	$	1,530.5	$	1,019.0	$	511.4	50.2	%	$	878.4	$	545.2	$	333.1	61.1	%	$	1,378.4	$	652.1	$	726.3	111.4	%

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

~~Recent Developments~~

~~Loss from transaction with an agent~~

We have arrangements with some unaffiliated entities under which our users are able to fund their Mercado Pago accounts by depositing an equivalent amount with the unaffiliated entity. In some of these arrangements, we credit the Mercado Pago account before the unaffiliated entity transfers the funds to us to settle the transaction. The amounts pending settlement are recognized in our balance sheet as credit cards receivable and other means of payment. In June 2020, we became aware that $26.7 million dollars of receivables had accumulated from one such unaffiliated entity in Argentina. The aging of these receivables exceeded the expected aging for transactions of this kind. Consequently, we conducted, with the assistance of an outside independent accounting advisor, an internal review. Our internal review on this matter did not identify any material errors in the consolidated financial statements for the year ended December 31, 2019 or the quarter ended March 31, 2020. However, based on the review, management has determined that there were deficiencies in the timely operation of certain internal controls. See Item 4 of Part I, “Controls and Procedures—Changes in Internal Controls Over Financial Reporting.”

As of June 30, 2020, we recorded a $26.7 million allowance for doubtful accounts on receivables due to us by this entity, and are attempting to collect the full outstanding balance from said unaffiliated entity.

~~Capped call transactions related to the 2.00% Convertible Senior Notes 2028~~

In connection with the issuance of the 2028 Notes, we paid $104.1 million (including transaction expenses) in June 2020 to enter into the 2028 Notes Capped Call Transactions with certain financial institutions. 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 our common stock is greater than the strike price of the 2028 Notes Capped Call Transactions. Please see note 11 to our unaudited condensed consolidated financial statements for further detail on the 2028 Notes Capped Call Transactions.

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~~Criminal complaint against our chief executive officer and others~~

~~On February 4, 2020, an Argentine federal prosecutor submitted to an Argentine judge a complaint~~ ~~alleging that certain sales of Argentine government securities, made by a common investment fund that holds balances for~~ Mercado Pago customers, were based on non-public information about the government’s plans to extend the maturities of the securities. The complaint named our chief executive officer, as well as others who are not specifically identified, as having committed criminal fraud against the Argentine federal government. The judge appointed another prosecutor to investigate the allegations described in the complaint. At the conclusion of the investigation, the prosecutor recommended dismissing the complaint, finding that there was no criminal conduct, which recommendation was accepted by the judge.

Description of Line Items

Net revenues

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

We have re-named and grouped by nature our Revenue streams breakdown, given the increasing importance of our financial business in current and expected future revenue composition, which our management considers shows more meaningful information about the business. As such, the breakdown by revenue stream previously labeled as “Enhanced Marketplace” and “Non-marketplace”, is now presented under the titles of “Commerce” and “Fintech”, respectively. Also, as a result, a group of other services, including classifieds fees, ad sales and other ancillary services, which had historically been included in the “Non-marketplace” line, have as of January 1, 2020, been included as a part of the “Commerce” Revenue stream. Prior-period corresponding figures have been changed accordingly for comparative purposes.

The following table summarizes our consolidated net revenues by revenue stream for the ~~six and~~ three-month periods ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:



	Six-month Periods Ended					Three-month Periods Ended				Three-month Periods Ended
	June 30, (*)					June 30, (*)				March 31, (*)
Consolidated net revenues by revenue stream	2020			2019		2020		2019		2021		2020
	(in millions)					(in millions)				(in millions)
Commerce (**)	$	962.4	$	610.8	$	581.7	$	324.0	$	910.6	$	380.7
Fintech		568.0		408.2		296.7		221.2		467.8		271.4
Total	$	1,530.5	$	1,019.0	$	878.4	$	545.2	$	1,378.4	$	652.1

(*) The table above may not total due to rounding.

(**) Includes marketplace fees, shipping fees, sales of goods, ad sales, classified fees and other ancillary services.

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;

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

classifieds fees;

ad sales up-front fees;

sales of goods; 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.

Shipping revenues are generated when a buyer elects to receive an item through our shipping service net of the third-party carrier costs.

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.

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Our Advertising revenues are generated by selling either display product and/or text link ads throughout our websites to interested advertisers.

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Revenues from inventory sales are generated when control of the good is transferred, upon delivery to our customers.

Fintech revenues correspond to our ~~MercadoPago~~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 credits granted under our Mercado Credito solution; and

revenues from the sale of mobile points of sale products.

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.

We have a highly fragmented customer revenue base given the large numbers of sellers and buyers who use our platforms. For the ~~six-month~~three-month periods ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ no single customer accounted for more than 5.0% of our net revenues.

Our Mercado Libre Marketplace is available in 18 countries (Argentina, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Mexico, Panama, Peru, Uruguay, Venezuela (deconsolidated as of December 1, 2017), Bolivia, Honduras, Nicaragua, El Salvador, Guatemala and Paraguay), and Mercado Pago is available in 7 countries (Argentina, Brazil, Chile, Peru, Colombia, Mexico and Uruguay). Additionally, Mercado Envios is available in 6 countries (Argentina, Brazil, Mexico, Colombia, Chile and Uruguay). 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 “Critical Accounting Policies and Estimates” in Note 2 of our unaudited interim condensed consolidated financial statements for further detail on foreign currency translation.

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 ~~7.4%~~8.2% of net revenues for the ~~six-month~~three-month period ended ~~June 30, 2020,~~March 31, 2021, as compared to ~~8.5%~~5.9% for the same period in ~~2019.~~2020. ~~For the three-month period ended June 30, 2020 these taxes represented 8.5% of net revenues, as compared to 8.4% for the same period in 2019.~~

Cost of net revenues

Cost of net revenues primarily includes bank and credit card processing charges for transactions and fees paid with credit cards and other payment methods, shipping operation costs (including warehousing costs), carrier and other operating costs, cost of sales of goods, fraud prevention fees, certain taxes on revenues, certain taxes on bank transactions, ~~cost of sales of goods,~~ hosting and site operation fees, compensation for customer support personnel, ISP connectivity charges and depreciation and amortization.

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 costs related to product and technology development, 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 programs, the salaries of employees involved in these activities, chargebacks related to our Mercado Pago operations, bad debt charges, branding initiatives, marketing activities for our users and depreciation and amortization costs.

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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.

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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.

General and administrative expenses

Our general and administrative expenses consist primarily of salaries for management and administrative staff, compensation of outside directors, long term retention program compensation, expenses for legal, audit and other professional services, insurance expenses, office space rental expenses, travel and business expenses, as well as depreciation and amortization costs. 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.

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 taxes 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.

Critical Accounting Policies and Estimates

The preparation of our unaudited interim condensed consolidated financial statements and related notes requires us to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We have based our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our Management has discussed the development, selection and disclosure of these estimates with our audit committee and our board of directors. Actual results may differ from these estimates under different assumptions or conditions.

An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our interim condensed consolidated financial statements. We believe that our critical accounting policies reflect the more significant estimates and assumptions used in the preparation of our interim condensed consolidated financial statements.

There have been no significant changes in our critical accounting policies, Management estimates or accounting policies since the year ended December 31, ~~2019~~2020 and disclosed in the Form 10-K, see “Critical Accounting Policies and Estimates”~~, other than those discussed in Note 2~~.

Table of ~~our unaudited interim condensed consolidated financial statements in connection with the adoption of ASC 326 as of January 1, 2020.~~Contents

Results of operations for the ~~six and~~ three-month ~~periods~~period ended ~~June 30, 2020~~March 31, 2021 compared to the ~~six and~~ three-month ~~periods~~period ended ~~June 30, 2019~~March 31, 2020

The selected financial data for the ~~six and~~ three-month periods ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ 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 periods ended ~~June 30, 2020~~March 31, 2021 are not necessarily indicative of the results that may be expected for the full year ending December 31, ~~2020~~2021 or for any other period.

~~Table of Contents~~

Statement of income data


	Six-month Periods Ended June 30,					Three-months Periods Ended June 30,				Three-months Periods Ended March 31,
(In millions)		2020 (*)		2019 (*)	2020 (*)		2019 (*)		2021 (*)		2020 (*)
		(Unaudited)				(Unaudited)				(Unaudited)
Net service revenues									$	1,230.9	$	639.9
Net product revenues										147.5		12.2
Net revenues	$	1,530.5	$	1,019.0	$	878.4	$	545.2		1,378.4		652.1

Cost of net revenues	(790.5)		(509.6)			(451.2)	(272.8)			(787.1)	(339.3)
Gross profit	740.0		509.4		427.2		272.4		591.4		312.8

Operating expenses:
Product and technology development		(146.7)		(106.3)		(73.3)		(53.9)		(126.0)		(73.4)
Sales and marketing		(390.6)		(311.4)		(184.1)		(180.7)		(288.2)		(206.5)
General and administrative		(133.0)		(94.1)		(70.4)		(50.3)		(86.3)		(62.6)
Total operating expenses	(670.2)			(511.8)		(327.7)	(284.9)			(500.5)	(342.5)
Income/(loss) from operations	69.7		(2.3)			99.4	(12.5)
Income (loss) from operations										90.8	(29.7)

Other income (expenses):
Interest income and other financial gains		55.6		58.1		18.8		33.7		25.1		36.8
Interest expense and other financial losses		(50.6)		(30.2)		(27.0)		(14.7)
Foreign currency (losses)/gains	(2.1)		(2.9)		(1.9)		0.8
Net income before income tax (expense)/gain	72.7		22.7		89.3		7.3
Interest expense and other financial losses (**)										(91.3)		(23.6)
Foreign currency losses									(15.1)		(0.2)
Net income (loss) before income tax expense									9.5		(16.7)

Income tax expense/(gain)	(37.8)		5.4			(33.4)	8.9
Net income	$	34.8	$	28.1	$	55.9	$	16.2
Income tax expense										(43.5)	(4.4)
Net loss									$	(34.0)	$	(21.1)

(*) The table above may not total due to rounding.

(**) Includes $49.2 million of loss on debt extinguishment and premium related to the 2028 Notes repurchase. See Note 11 of our unaudited interim condensed consolidated financial statements for further detail on 2028 Notes repurchase.

Principal trends in results of operations

Net revenues

Our net revenues maintained its growth trajectory during the first ~~half~~quarter of ~~2020,~~2021, specifically related to the increase in our gross merchandise volume ~~the decrease in the amount incurred in shipping subsidies netted from revenues~~ and the growth of our ~~Fintech~~FinTech solution services (off-platform transactions through Mercado Pago, credits business, financing payment transactions, etc.). Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of operations— Net Revenues” section in the current document for further detail on net revenues trends for the ~~six and~~ three-month periods ended ~~June 30,~~March 31, 2021 and 2020.

~~The~~As a consequence of the COVID-19 pandemic which has affected many ~~companies and industries~~countries in Latin America, ~~our Company included, especially during~~governments in the ~~end of first quarter of 2020 when government-imposed~~region imposed total or partial lockdowns and curfews ~~throughout Latin America~~ in ~~late~~ March 2020, some of which have been subsequently extended, modified or ~~rescinded.~~rescinded based on the evolution of the COVID-19 pandemic.

Despite the fact that the second quarter of 2020 was characterized by the solid performance of our business and our belief that our long-term growth in net revenues will continue in the future, given our leadership in the region and the ongoing opportunities for e-commerce and Fintech solutions in Latin America, weWe are not able to predict ~~the~~any negative impacts that the COVID-19 pandemic may have on our business in the future. See Note 16 to our unaudited condensed consolidated financial statements .

~~Lastly, our~~37

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Our sources of revenues are denominated in local currencies; therefore, the weak macro-economic environment in certain countries in which we operate, as a result of COVID-19, coupled with the devaluations of certain local currencies in those countries against the U.S. dollar, could cause a decline in year-over-year net revenues, measured in U.S. dollars.

~~Table of Contents~~

We continue to monitor the progress of the COVID-19 pandemic and will take additional measures to comply with the rapidly changing regulations of the countries where we operate and the related macroeconomic instability. However, we may see lower net revenues growth until COVID-19 is contained in the countries where we operate.

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 revenue, as stated above, and our cost of net revenues. In this sense, our main cost of net revenue are composed of bank and credit card processing charges for transactions and fees paid with credit cards and other payment methods, cost of products sold, fraud prevention fees, sales taxes, shipping operation costs (including warehousing costs), carrier and other operating costs, certain taxes on bank transactions, ~~cost of products sold,~~ 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 with no significant short-term maturities.~~structure.

However, in the future, our gross profit margin could decline if we are not able to apply appropriate measures regarding our business to prevent potential negative impacts of the COVID-19 pandemic, if we fail to maintain an appropriate relationship between our cost of revenue structure and our net revenues trend and if we continue ~~offering new shipping subsidies.~~building up our logistics network and growing our sales of goods business, which has a lower pure product margin.

For the ~~six-month~~three-month periods ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ our gross profit margins were ~~48.4%~~42.9% and ~~50.0%~~48.0%, respectively. The decrease in our gross profit margin resulted primarily from an increase in cost of product sold, shipping operating costs ~~as a percentage of net revenues, partially offset by a decrease in collection fees~~ and sales taxes, ~~as a percentage of revenues.~~

~~For the three-month periods ended June 30, 2020 and 2019, our gross profit margins were 48.6% and 50.0%, respectively. The decrease in our gross profit margin resulted primarily from~~ ~~an increase in shipping operating costs,~~ as a percentage of net revenues, partially offset by a decrease in collection fees, as a percentage of net revenues.

Operating margins

Our Operating margin is defined as total net revenues minus total cost of net revenues and total operating expenses, as a percentage of net revenues.

Our operating margin is affected by our operating expenses structure, which mainly consists of our employees’s salaries, our sales and marketing expenses related to those activities we incurred to promote our services, product development expenses, etc. As we continue to grow and focus on expanding our leadership in the region, we will continue to invest in product 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 margins.

The COVID-19 pandemic and its potential negative impacts on our business could also have negative impacts on our operating margins if we fail to closely monitor operating expenses on demand patterns and ~~non-critical~~ expenses are not adjusted in order to maintain an appropriate balance of such expenses with our actual rate of business development.

For the ~~six-month~~three-month period ended ~~June 30, 2020,~~March 31, 2021, as compared to the same period in ~~2019,~~2020, our operating margin increased from a negative margin of ~~0.2%~~4.6% to a positive margin of ~~4.6%~~6.6%. This increase is primarily a consequence of the increase in net revenues explained above and also due to marketing expenditures efficiencies that we achieved as a result of the growth in organic demand brought about by the effects of the COVID-19 pandemic consumer behavior.

For the three-month period ended June 30, 2020, as compared to the same period in 2019, our operating margin increased from a negative margin of 2.3% to a positive margin of 11.3%. This increase is primarily a consequence of marketing expenditures efficiencies we achieved as a result of the growth in organic demand brought about by the effects of the COVID-19 pandemic consumer behavior.

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Other Data

~~Other Data~~

The following table includes seven 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. In light of the evolution of our business, as from January 1, 2021, we no longer disclose “Number of confirmed new registered users during period” since Management considers that this indicator is no longer relevant to measuring the level of activity on our Mercado Libre Marketplace platform.

Six-month Periods Ended
‎ June 30,

Three-month Periods Ended
‎ June 30,
(in millions)

2020
2019
2020
2019




Unique active users⁽¹⁾

65.5

47.6

51.5

35.5
Number of confirmed new registered users during period ⁽²⁾

29.9

24.7

16.9

12.4
Gross merchandise volume⁽³⁾

$
8,459.0

$
6,485.5

$
5,044.8

$
3,397.7
Number of successful items sold ⁽⁴⁾

284.2

171.4

178.5

88.7
Number of successful items shipped⁽⁵⁾
247.7
132.6
157.5
70.2
Total payment volume⁽⁶⁾

$
19,308.8

$
12,156.5

$
11,214.3

$
6,517.4
Total volume of payments on marketplace⁽⁷⁾

$
7,966.5

$
6,016.1

$
4,763.2

$
3,120.0
Total payment transactions⁽⁸⁾
695.5
325.6
404.8
181.6
Capital expenditures

$
101.9

$
71.4

$
48.4

$
38.4
Depreciation and amortization

$
44.2

$
33.0

$
22.7

$
17.3


		Three-month Periods Ended ‎ March 31,
(in millions)		2021	2020

Unique active users⁽¹⁾		69.8		43.2
Gross merchandise volume⁽²⁾	$	6,057.2	$	3,414.1
Number of successful items sold ⁽³⁾		222.0		105.7
Number of successful items shipped⁽⁴⁾		208.1		90.2
Total payment volume⁽⁵⁾	$	14,717.7	$	8,094.5
Total volume of payments on marketplace⁽⁶⁾	$	5,840.0	$	3,203.3
Total payment transactions⁽⁷⁾		630.1		290.7
Capital expenditures	$	112.7	$	53.5
Depreciation and amortization	$	38.4	$	21.6

(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 or MercadoLibre Marketplace or Classified Marketplace (2) maintained an active listing on MercadoLibre 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 business we believe it provides a better indication of our active user base rather than a registration metric that does not reflect any sort of interaction.

(2)Measure of the ~~number of new users who have registered on the Mercado Libre Marketplace and confirmed their registration, excluding Classifieds users.~~

~~(3)Measure of the~~ total U.S. dollar sum of all transactions completed through the Mercado Libre Marketplace, excluding Classifieds transactions.

~~(4)~~(3)Measure of the number of items that were sold/purchased through the Mercado Libre Marketplace, excluding Classifieds items.

~~(5)~~(4)Measure of the number of items that were shipped through our shipping service.

~~(6)~~(5)Measure of the total U.S. dollar sum of all transactions paid for using Mercado Pago, including marketplace and non-marketplace transactions.

~~(7)~~(6)Measure of the total U.S. dollar sum of all marketplace transactions paid for using Mercado Pago, excluding shipping and financing fees.

~~(8)~~(7)Measure of the number of all transactions paid for using Mercado Pago.

Net revenues

Six-month Periods Ended
Change from 2019
Three-month Periods Ended
Change from 2019
June 30,
to 2020 (*)
June 30,
to 2020 (*)
2020
2019
in Dollars
in %
2020
2019
in Dollars
in %
(in millions, except percentages)
(in millions, except percentages)
Total Net Revenues
$
1,530.5
$
1,019.0
$
511.4
50.2%
$
878.4
$
545.2
$
333.1
61.1%



	Three-month Periods Ended					Change from 2020
	March 31,					to 2021 (*)
		2021		2020		in Dollars	in %
	(in millions, except percentages)
Total Net Revenues	$	1,378.4	$	652.1	$	726.3	111.4%

(*) Percentages have been calculated using whole-dollar amounts rather than rounded amounts that appear in the table. The table above may not total due to rounding.

Our net revenues grew ~~50.2% in~~111.4% for the ~~six-month~~three-month period ended ~~June 30, 2020~~March 31, 2021, as compared to the same period in ~~2019.~~2020. The increase in net revenues was primarily attributable to to:

a)an increase of ~~57.6%~~$529.9 million, or 139.2%, in Commerce ~~net~~ revenues, ~~resulting from increases in local currency gross merchandise volume in Argentina, Brazil and Mexico of 164%, 38% and 90%, respectively. Our net revenues grew 61.1% in~~for the three-month period ended ~~June 30, 2020~~March 31, 2021, as compared to the same period in ~~2019. The~~2020. This increase is mainly generated by a 77.4% increase in ~~net revenues was primarily attributable to~~our gross merchandise volume, partially offset by an increase of ~~79.5% in Commerce net revenues resulting from increases in local currency gross merchandise volume in Argentina, Brazil and Mexico of 230%, 58% and 122%, respectively.~~

~~The increase in our local currency gross merchandise volume was partially offset by the devaluation of the Brazilian Reais, the Mexican Peso and the Argentine Peso.~~

~~In addition, the increase in net revenues was attributable to:~~

a)~~a decrease of $65.2~~$145.3 million ~~or 48.5%,~~ in shipping ~~subsidies that~~carrier costs which are netted from revenues, ~~during the six-month period ended June 30, 2020 as compared to the same period in 2019. For~~from $174.6 million for the three-month period ended ~~June 30,~~March 31, 2020 ~~shipping subsidies that are netted from revenues decreased $29.8~~to $319.9 million ~~or 49.3%, as compared to~~for the ~~same~~three-month period ~~in 2019;~~ended March 31, 2021; and

b)an increase of ~~$37.7 million and $26.5~~72.4% in FinTech revenues, from $271.4 million for the ~~six~~three-month period ended March 31, 2020 to $467.8 million for the three-month period ended March 31, 2021. This increase is mainly generated by an increase of a $88.0 million in credit business, and increases in off-platform transactions and financing mainly associated to an 81.8% increase in our total payment volume, for the three-month ~~periods~~period ended ~~June 30, 2020,~~March 31, 2021, as compared to the same ~~periods~~period in ~~2019, respectively, mainly related to the flat fee we charge in Brazil, Argentina and Mexico for transactions below a certain merchandise value.~~2020.

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Our Fintech revenues increased 39.2%, from $408.2 million for the six-month period ended June 30, 2019 to $568.0 million for the six-month period ended June 30, 2020. Our Fintech revenues increased 34.1%, from $221.2 million for the three-month period ended June 30, 2019 to $296.7 million for the three-month period ended June 30, 2020

This increase is mainly generated by a 58.8% and 72.1% increase in our total payment volume, mainly associated with off-platform transactions, financing and credits business for the six and three-month periods ended June 30, 2020, respectively, as compared to the same period in 2019.


	Six-month Periods Ended				Change from 2019			Three-month Periods Ended				Change from 2019			Three-month Periods Ended				Change from 2020
	June 30,				to 2020 (*)			June 30,				to 2020 (*)			March 31,				to 2021 (*)
Consolidated Net Revenues by revenue stream		2020		2019	in Dollars		in %		2020		2019	in Dollars		in %		2021		2020	in Dollars		in %
		(in millions, except percentages)							(in millions, except percentages)							(in millions, except percentages)
Brazil
Commerce	$	517.5	$	360.6	$	156.9	43.5%	$	302.9	$	189.2	$	113.7	60.1%	$	490.9	$	214.6	$	276.3	128.8%
Fintech		345.2		282.6		62.6	22.1%		162.4		151.7		10.7	7.1%		277.8		182.8		94.9	51.9%
	$	862.7		643.2	$	219.5	34.1%	$	465.3	$	340.9	$	124.4	36.5%	$	768.7	$	397.4	$	371.3	93.4%
Argentina
Commerce	$	205.5	$	108.2	$	97.3	89.9%	$	138.0	$	59.3	$	78.8	132.9%	$	167.2	$	67.4	$	99.8	148.0%
Fintech		166.6		99.5		67.1	67.4%		101.2		54.6		46.5	85.1%		130.0		65.4		64.6	98.7%
	$	372.1		207.7	$	164.4	79.2%	$	239.2	$	113.9	$	125.3	110.0%	$	297.2	$	132.9	$	164.4	123.7%
Mexico
Commerce	$	182.8	$	102.3	$	80.5	78.7%	$	105.5	$	55.0	$	50.5	91.7%	$	187.9	$	77.3	$	110.6	143.2%
Fintech		37.9		16.7		21.2	127.5%		20.4		9.3		11.1	118.5%		42.6		17.5		25.1	143.5%
	$	220.7		118.9	$	101.8	85.6%	$	125.9	$	64.4	$	61.6	95.6%	$	230.5	$	94.8	$	135.7	143.3%
Other countries
Commerce	$	56.6	$	39.7	$	16.8	42.4%	$	35.2	$	20.5	$	14.7	71.5%	$	64.5	$	21.4	$	43.1	201.7%
Fintech		18.3		9.4		8.9	95.2%		12.7		5.6		7.2	128.8%		17.5		5.6		11.8	210.1%
	$	74.9		49.1	$	25.8	52.5%	$	47.9	$	26.1	$	21.8	83.7%	$	82.0	$	27.0	$	55.0	203.5%
Consolidated
Commerce	$	962.4	$	610.8	$	351.6	57.6%	$	581.7	$	324.0	$	257.7	79.5%	$	910.6	$	380.7	$	529.9	139.2%
Fintech		568.0		408.2		159.9	39.2%		296.7		221.2		75.4	34.1%		467.8		271.4		196.4	72.4%
Total	$	1,530.5	$	1,019.0	$	511.4	50.2%	$	878.4	$	545.2	$	333.1	61.1%	$	1,378.4	$	652.1	$	726.3	111.4%

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

Brazil

Commerce revenues in Brazil increased ~~43.5%~~128.8% in the ~~six-month~~three-month period ended ~~June 30, 2020~~March 31, 2021 as compared to the same period in ~~2019.~~2020. This increase was primarily generated by a ~~consequence of: i) a 38%~~53.6% increase in ~~local currency~~ our gross merchandise ~~volume (partially offset by a 21.9% approximate average devaluation of the local currency)~~; ii) a $66.0 million decrease in shipping subsidies related to our free shipping initiative, which is presented netted from revenues; and iii) an increase of $25.2 million as a result of the implementation of a flat fee for transactions below a certain merchandise value. volume. Fintech revenues grew by ~~22.1%~~51.9%, a ~~$62.6~~$94.9 million increase, during the ~~six-month~~three-month period ended ~~June 30, 2020~~March 31, 2021 as compared to the same period in ~~2019,~~2020, mainly driven by a ~~52.3% increase in the off-platform payments volume (which is partially monetized as a strategy to expand our ecosystem) and~~ ~~financing.~~

Commerce revenues in Brazil increased 60.1% in the three-month period ended June 30, 2020 as compared to the same period in 2019. This increase was primarily a consequence of: i) a 58% increase in local currency ~~gross merchandise~~ ~~volume (partially offset by a 27.3% approximate average devaluation of the local currency)~~; ii) a $35.2 million decrease in shipping subsidies related to our free shipping initiative, which is presented netted from revenues; and iii) an increase of $19.8 million as a result of the implementation of a flat fee for transactions below a certain merchandise value. ~~Fintech revenues grew by 7.1%, a $10.7 million increase, during the three-month period ended June 30, 2020 as compared to the same period in 2019, mainly driven by a 35.0%~~49.2% increase in the off-platform payments volume (which is partially monetized as a strategy to expand our ecosystem), credits business and financing~~financing and credits business.~~

~~Table of Contents~~

Argentina

Commerce revenues in Argentina increased ~~89.9%~~148.0% in the ~~six-month~~three-month period ended ~~June 30, 2020~~March 31, 2021 as compared to the same period in ~~2019.~~ 2020. This increase was primarily generated by a ~~consequence of: i) a 164%~~96.4% increase in ~~local currency~~our gross merchandise volume (~~partially offset bya 35.7% approximate average devaluation of the local currency); and ii)~~ ~~an increase of $4.4 million as a result of the implementation of a flat fee for transactions below a certain merchandise value.~~. Fintech revenues grew ~~67.4%~~98.7%, a ~~$67.1~~$64.6 million increase, during the ~~six-month~~three-month period ended ~~June 30, 2020~~March 31, 2021 as compared to the same period in ~~2019,~~2020, mainly driven by a ~~149.8%~~119.6% increase in the off-platform payments volume (which is partially monetized as a strategy to expand our ecosystem) ~~and~~ ~~financing,~~ ~~partially offset by the aforementioned devaluation of the local currency.~~

~~Commerce revenues in Argentina increased 132.9% in the three-month period ended June 30, 2020 as compared to the same period in 2019.~~ ~~This increase was primarily a consequence of: i) a 230% increase in local currency gross merchandise volume (partially offset by a 35.1% approximate average devaluation of the local currency) and ii)~~ ~~an increase of $2.0 million as a result of the implementation of a flat fee for transactions below a certain merchandise value. This increase was partially offset bya $3.3 million increase in shipping subsidies related to our free shipping initiative, which is presented netted from revenues~~. ~~Fintech revenues grew 85.1%~~, a $46.5 million increase, during the three-month period ended June 30, 2020 as compared to the same period in 2019, mainly driven by a 184.9% increase in the off-platform payments volume (which is partially monetized as a strategy to expand our ecosystem)credit business and financing, partially offset by the aforementioned devaluation of the local currency.

Mexico

Commerce revenues in Mexico increased ~~78.7%~~143.2% in the ~~six-month~~three-month period ended ~~June 30, 2020,~~March 31, 2021 as compared to the same period in ~~2019,~~ ~~mainly due to: i)~~2020. This increase was primarily generated by a ~~90%~~108.8% increase in ~~local currency~~our gross merchandise ~~volume (~~volume.~~partially offset by a 11.5% approximate average devaluation of the local currency); and ii) an increase of $7.7 million~~ ~~as a result of the implementation of a flat fee for transactions below a certain merchandise value~~. Fintech revenues grew ~~127.5%~~143.5%, a ~~$21.2~~$25.1 million increase, during the ~~six-month~~three-month period ended ~~June 30, 2020~~March 31, 2021 as compared to the same period in ~~2019,~~2020, mainly driven by a ~~116.1%~~115.8% increase in the off-platform payments volume (which is partially monetized as a strategy to expand our ecosystem), financing and credits business, partially offset by the aforementioned devaluation of the local currency.
‎

~~Commerce revenues in Mexico increased 91.7% in the three-month period ended June 30, 2020, as compared to the same period in 2019,~~ 40

~~mainly due to: i) a 122% increase in local currency gross merchandise volume (partially offset by an 18.0% approximate average devaluation~~Table of ~~the local currency); and ii) an increase of $4.5 million~~ Contents

~~as a result of the implementation of a flat fee for transactions below a certain merchandise value~~

~~. Fintech~~ revenues grew 118.5%, a $11.1 million increase, during the three-month period ended June 30, 2020 as compared to the same period in 2019, mainly driven by a 121.8% increase in the off-platform payments volume (which is partially monetized as a strategy to expand our ecosystem), ~~financing and credits business,~~ ~~partially offset by the aforementioned devaluation of the local currency.~~

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)
		(*)								(*)
2021
Net revenues									$	1,378.4	$	n/a	$	n/a	$	n/a
Percent change from prior quarter										4%
2020
Net revenues	$	652.1	$	878.4		n/a		n/a	$	652.1	$	878.4	$	1,115.7	$	1,327.3
Percent change from prior quarter		-3%		35%						-3%		35%		27%		19%
2019
Net revenues	$	473.8	$	545.2	$	603.0	$	674.3
Percent change from prior quarter		11%		15%		11%		12%

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

‎

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The following table sets forth the growth in net revenues in local currencies, for the ~~six and~~ three-month ~~periods~~period ended ~~June 30, 2020~~March 31, 2021 as compared to the same period in ~~2019:~~2020:

Changes from 2019 to 2020 (*)
(% of revenue growth in Local Currency)
Six-month period
Three-month period
Brazil
72.4%
87.4%
Argentina
181.2%
224.0%
Mexico
111.5%
137.9%
Other Countries
80.6%
118.3%
Total Consolidated
98.8%
123.4%


			Changes from 2020 to 2021 (*)
(% of revenue growth in Local Currency)			Three-month period
Brazil			138.9%
Argentina			223.0%
Mexico			147.6%
Other Countries			190.9%
Total Consolidated			158.4%

(*) The local currency revenue growth was calculated by using the average monthly exchange rates for each month during ~~2019~~2020 and applying them to the corresponding months in ~~2020,~~2021, 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.

In Argentina, the increase in local currency growth is due to an increase in our Argentine Commerce transactions volume, ~~an increase in our shipped items volume,~~ increases in our off-platform transactions business through Mercado Pago, an increase in our financing and a high level of inflation.

In Brazil, the increase in local currency growth is a consequence of an increase in our Commerce transactions volume and lower shipping subsidies that we granted, an increase in our off-platform transactions through Mercado Pago and an increase in our financing and credits ~~business, lower shipping subsidies and an increase in our Commerce transactions volume.~~business.

In Mexico, the increase in local currency growth is a consequence of an increase of our Commerce transactions volume, ~~increases~~an increase in our off-platform transactions through Mercado Pago and an increase in our financing and credits ~~business, and an increase in our shipped items volume.~~business.

Cost of net revenues



		Six-month Periods Ended				Change from 2019		Three-month Periods Ended					Change from 2019		Three-month Periods Ended					Change from 2020
		June 30,				to 2020 (*)		June 30,					to 2020 (*)		March 31,					to 2021 (*)
		2020		2019		in Dollars	in %		2020		2019		in Dollars	in %		2021		2020		in Dollars	in %
	(in millions, except percentages)							(in millions, except percentages)							(in millions, except percentages)
Total cost of net revenues	$	790.5	$	509.6	$	280.9	55.1%	$	451.2	$	272.8	$	178.4	65.4%	$	787.1	$	339.3	$	447.8	132.0%
As a percentage of net revenues (*)		51.6%		50.0%					51.4%		50.0%					57.1%		52.0%

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

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For the ~~six-month~~three-month period ended ~~June 30, 2020~~March 31, 2021 as compared to the same period in ~~2019,~~2020, the increase of ~~$280.9~~$447.8 million in cost of net revenues was primarily attributable to: i) a ~~$100.2~~$119.4 million increase in shipping operating costs; ii) a ~~$66.3~~$114.0 million increase in cost of sales of goods mainly in Brazil, Argentina and Mexico; iii) a $74.0 million increase in sales taxes; iv) a $58.0 million increase in collection fees, which was mainly attributable to our Argentine, Brazilian and Mexican operations as a result of the higher transactions volume of Mercado Pago in those countries; ~~iii) a $42.9 million increase in cost of sales of goods in Brazil, Argentina and Mexico; iv) a $27.5 million increase in sales taxes;~~ v) a ~~$19.1 million increase in hosting expenses and; vi) a $8.3 million increase in other payment costs mainly related to prepaid card costs and funding for our Mercado Pago business.~~

~~For the three-month period ended June 30, 2020 as compared to the same period in 2019, the increase of $178.4 million in cost of net revenues was primarily attributable to: i) a $57.1~~$23.8 million increase in shipping ~~operating costs; ii)~~carrier costs and; vi) a ~~$44.7~~$19.9 million increase in ~~collection fees, which was~~customer support costs mainly ~~attributable~~associated to ~~our Argentine, Brazilian~~salaries and Mexican operations as a result of the higher transactions volume of Mercado Pago in those countries; iii) a $29.0 million increase in sales taxes; iv) a $28.9 million increase in cost of sales of goods in Brazil, Argentinawages due to new hires and ~~Mexico and; v) a $11.8 million increase in hosting expenses.~~
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temporary customer support workers.

Product and technology development expenses



	Six-month Periods Ended				Change from 2019			Three-month Periods Ended				Change from 2019			Three-month Periods Ended				Change from 2020
	June 30,				to 2020 (*)			June 30,				to 2020 (*)			March 31,				to 2021 (*)
		2020		2019		in Dollars	in %		2020		2019		in Dollars	in %		2021		2020		in Dollars	in %
	(in millions, except percentages)							(in millions, except percentages)							(in millions, except percentages)
Product and technology development	$	146.7	$	106.3	$	40.4	38.0%	$	73.3	$	53.9	$	19.3	35.9%	$	126.0	$	73.4	$	52.6	71.6%
As a percentage of net revenues (*)		9.6%		10.4%					8.3%		9.9%					9.1%		11.3%

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

For the ~~six-month~~three-month period ended ~~June 30, 2020,~~March 31, 2021, the increase in product and technology development expenses as compared to the same period in ~~2019~~2020 amounted to ~~$40.4~~$52.6 million. This increase was primarily attributable to: i) a ~~$28.1~~$26.9 million increase in salaries and wages mainly related to new hiring; ~~and~~ ii) a ~~$5.4~~$14.3 million increase in ~~depreciation and amortization expenses.~~

~~For the three-month period ended June 30, 2020, the increase in product and technology development~~maintenance expenses ~~as compared to the same period in 2019 amounted to $19.3 million. This increase was primarily attributable to: i) a $13.9 million increase in salaries and wages~~ mainly related to ~~new hiring;~~higher software licenses expenses and ~~ii)~~iii) a ~~$2.1~~$5.0 million increase in depreciation and amortization expenses.

We believe product 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



	Six-month Periods Ended				Change from 2019			Three-month Periods Ended				Change from 2019			Three-month Periods Ended				Change from 2020
	June 30,				to 2020 (*)			June 30,				to 2020 (*)			March 31,				to 2021 (*)
		2020		2019		in Dollars	in %		2020		2019		in Dollars	in %		2021		2020		in Dollars	in %
	(in millions, except percentages)							(in millions, except percentages)							(in millions, except percentages)
Sales and marketing	$	390.6	$	311.4	$	79.2	25.4%	$	184.1	$	180.7	$	3.4	1.9%	$	288.2	$	206.5	$	81.7	39.5%
As a percentage of net revenues (*)		25.5%		30.6%					21.0%		33.1%					20.9%		31.7%

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

For the ~~six-month~~three-month period ended ~~June 30, 2020,~~March 31, 2021, the ~~$79.2~~$81.7 million increase in sales and marketing expenses as compared to the same period in ~~2019~~2020 was primarily attributable to: i) a ~~$43.0~~$59.1 million increase in bad debt expenses explained by the recognition of a charge of $27.0 million related to accumulated accounts receivable from an unaffiliated entity in Argentina as discussed above in “Recent Developments” and the adoption of the ASC 326 effective January 1, 2020;expenses; ii) a ~~$20.5~~$10.4 million increase in our buyer protection program expenses, mainly in Mexico and Argentina iii) a $ 13.8 million increase in other sales expenses mainly related to strategic marketing initiatives expenses; and iv) a $6.6 million increase in salaries and wages. This increase was partially offset by a $13.4 million decrease in online and offline marketing expenses mainly in Brazil, Mexico and Argentina asand; iii) a ~~consequence of marketing expenditures efficiencies that we achieved as a result of the growth in organic demand brought about by the effects of the COVID-19 pandemic consumer behavior.~~

For the three-month period ended June 30, 2020, the $3.4 million increase in sales and marketing expenses as compared to the same period in 2019 was primarily attributable to: i) a $25.5 million increase in bad debt expenses explained by the recognition of a charge of $27.0 million related to accumulated accounts receivable from an unaffiliated entity in Argentina as discussed above in “Recent Developments”; ii) a $14.5$10.0 million increase in our buyer protection program expenses, mainly in Mexico, Brazil and Argentina; iii) a $ 2.3 million increase in chargebacks from credit cards due to the increase in our Mercado Pago transactions volume; iv) a $ 1.6 million increase in other sales expenses mainly related to strategic marketing initiatives expenses; and v) a $1.5 million increase in salaries and wages. This increase was partially offset by a $43.1 million decrease in online and offline marketing expenses mainly in Brazil, Mexico and Argentina as a consequence of marketing expenditures efficiencies that we achieved as a result of the growth in organic demand brought about by the effects of the COVID-19 pandemic consumer behavior.
‎Argentina.

~~Table of Contents~~

General and administrative expenses



	Six-month Periods Ended				Change from 2019			Three-month Periods Ended				Change from 2019			Three-month Periods Ended				Change from 2020
	June 30,				to 2020 (*)			June 30,				to 2020 (*)			March 31,				to 2021 (*)
		2020		2019		in Dollars	in %		2020		2019		in Dollars	in %		2021		2020		in Dollars	in %
	(in millions, except percentages)							(in millions, except percentages)							(in millions, except percentages)
General and administrative	$	133.0	$	94.1	$	38.9	41.3%	$	70.4	$	50.3	$	20.1	40.0%	$	86.3	$	62.6	$	23.8	38.0%
As a percentage of net revenues (*)		8.7%		9.2%					8.0%		9.2%					6.3%		9.6%

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

Table of Contents

For the ~~six-month~~three-month period ended ~~June 30, 2020,~~March 31, 2021, the ~~$38.9~~$23.8 million increase in general and administrative expenses as compared to the same period in ~~2019~~2020 was primarily attributable to: i) a ~~$25.5~~$11.7 million increase in salaries and wages, mainly related to the ~~LTRPs; and~~LTRPs as a consequence of the increase in our common stock price; ii) a ~~$5.6~~$4.2 million increase in ~~legal, tax and other fees.~~

~~For the three-month period ended June 30, 2020, the $20.1~~temporary services primarily related to administrative workers and; iii) a $4.2 million increase in general and administrative expenses as compared to the same period in 2019 was primarily attributable to: i) a $13.9 million increase in salaries and wages, mainly related to the LTRPs; and ii) a $1.6 million increase in legal, tax and other fees.

Other income (expense), net


	Six-month Periods Ended				Change from 2019			Three-month Periods Ended				Change from 2019			Three-month Periods Ended				Change from 2020
	June 30,				to 2020 (*)			June 30,				to 2020 (*)			March 31,				to 2021 (*)
		2020		2019		in Dollars	in %		2020		2019		in Dollars	in %		2021		2020		in Dollars	in %
	(in millions, except percentages)							(in millions, except percentages)							(in millions, except percentages)
Other income (expense), net	$	2.9	$	25.0	$	(22.1)	-88.3%	$	(10.1)	$	19.8	$	(29.9)	-151.0%	$	(81.3)	$	13.0	$	(94.3)	-724.8%
As a percentage of net revenues (*)		0.2%		2.5%					-1.1%		3.6%					-5.9%		2.0%

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

For the ~~six-month~~three-month period ended ~~June 30, 2020,~~March 31, 2021, the ~~$22.1~~$94.3 million decrease in other income (expense), net as compared to the same period in ~~2019~~2020 was primarily attributable to: i) a ~~$20.3~~$67.7 million increase in interest expense and other financial ~~expenses~~losses mainly attributable to ~~financial loans entered into~~a $49.2 million of loss on debt extinguishment and premium recognized during the ~~second~~first quarter of ~~2020,~~2021 related to the repurchase of $440 million of principal of the 2028 Notes (refer to Note 11 of our unaudited interim condensed consolidated financial statements for further detail) and higher financial debt issued during 2021, mainly in ~~Brazil and~~U.S., Argentina and ~~interest expenses~~Brazil; ii) a $14.9 million increase in our foreign currency loss mainly related to a loss of $18.3 million attributable to the additional cost of accessing US dollars through an indirect mechanism in Argentina due to restrictions imposed by Argentine government for buying US dollars at the official exchange rate (refer to Note 15 of our unaudited interim condensed consolidated financial), partially offset by a $5.7 million gain on foreign exchange from our ~~trusts related to our factoring business in Argentina~~Argentine subsidiaries and; ~~and ii)~~iii) a ~~$2.6~~$11.7 million decrease in interest income and other financial gains from our financial investments as a result of lower interest rates ~~in our investment~~ as a consequence of the ~~pandemic. This decrease was partially~~pandemic and lower float in our U.S. investments, mainly offset by ~~a $0.8 million decrease in our foreign exchange loss.~~

~~For thethree-month period ended June 30, 2020, the $29.9milliondecrease in other income (expense), net as compared to the same period in~~ ~~2019~~ ~~wasprimarily attributable to: i)~~ ~~a $14.9 million decrease in~~higher interest income ~~from our financial investments as a result of lower interest rates~~ in ~~our investment as a consequence of the pandemic; ii) a $12.3 million increase in financial expenses mainly attributable~~Argentina due to ~~financial loans entered into during the second quarter of 2020, mainly in Brazil and Argentina and interest expenses from our trusts related to our factoring business in Argentina; and iii)~~ ~~a $2.7 million increase in our foreign exchange loss.~~higher float.

Income tax


	Six-month Periods Ended				Change from 2019			Three-month Periods Ended				Change from 2019			Three-month Periods Ended				Change from 2020
	June 30,				to 2020 (*)			June 30,				to 2020 (*)			March 31,				to 2021 (*)
		2020		2019		in Dollars	in %		2020		2019		in Dollars	in %		2021		2020		in Dollars	in %
	(in millions, except percentages)							(in millions, except percentages)							(in millions, except percentages)
Income tax (expense)/gain	$	(37.8)	$	5.4	$	(43.2)	-797.1%	$	(33.4)	$	8.9	$	(42.3)	-474.5%
Income tax expense															$	(43.5)	$	(4.4)	$	(39.1)	883.2%
As a percentage of net revenues (*)		-2.5%		0.5%					-3.8%		1.6%					-3.2%		-0.7%

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

During the three-month period ended March 31, 2021 as compared to the same period in 2020, income tax expense increased by $39.1 million mainly as a result of higher income tax expense in Argentina and Brazil as a consequence of higher pre-tax gain in our Argentine and Brazilian segment in 2021 and higher income tax expense due to withholding tax on dividends.

Our effective tax rate is defined as income tax expense as a percentage of income before income tax expense.

The following table summarizes our effective tax rates for the three-month periods ended March 31, 2021 and 2020:


	Three-month Periods Ended
	March 31, (*)
	2021	2020

Effective tax rate	456.6%	-26.6%

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

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~~During the six and three-month periods ended June 30, 2020 as compared to the same periods in 2019, income tax expense increased by $43.2 million and $42.3 million, respectively,~~ ~~mainly~~ ~~as a result of: i) higher income tax expense in Brazil, as a consequence of higher pre-tax gain in our Brazilian segment during 2020; ii)~~ ~~valuation allowances on certain deferred tax assets in Mexico accounted for in the first half of 2020 and iii) higher income tax expense in Argentina~~ ~~as a consequence of the temporary suspension of the knowledge-based economy promotional regime in 2020, which had a direct impact on the income tax rate for our Argentine business.~~

~~Our effective tax rate is defined as income tax (expense)/gain as a percentage of income before income tax (expense)/gain.~~

~~The following table summarizes our effective tax rates for the six and three-month periods ended June 30, 2020 and 2019:~~

Six-month Periods Ended
Three-month Periods Ended
June 30, (*)
June 30, (*)
2020
2019
2020
2019
Effective tax rate
52.1%
-23.9%
37.4%
-122.1%

~~(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.~~

Our effective tax rate for the ~~six and~~ three-month ~~periods~~period ended ~~June 30, 2020~~March 31, 2021 increased to a positive effective tax rate as compared to the same period in ~~2019,~~2020, largely as a result of: i) the loss on debt extinguishment related to 2028 Notes repurchase which is considered as non-deductible expense, ii) the foreign exchange loss related to our share repurchases during the first quarter of ~~an increase in our Argentine~~2021 which is considered a non-deductible expense, and iii) higher income tax expense due to withholding tax on dividends. For the three-month period ended March 31, 2020 the negative effective tax rate ~~mainly as~~ was a consequence of the ~~temporary suspension of the knowledge-based economy promotional regime in 2020 by Argentine government until new rules~~valuation allowance accounted for ~~the application of the regime are issued and the~~ ~~valuation allowances~~ on certain deferred tax assets in Mexico and ~~Colombia accounted for in the six and three-month ended periods ended June 30, 2020.~~Colombia.

The following table summarizes our effective tax rates for the ~~six and~~ three-month periods ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:



	Six-month Periods Ended		Three-month Periods Ended		Three-month Periods Ended
	June 30,		June 30,		March 31,
	2020	2019	2020	2019	2021	2020
Effective tax rate by country
Argentina	33.2%	7.4%	30.3%	0.5%	23.9%	45.1%
Brazil	29.5%	27.2%	30.8%	21.3%	29.5%	22.3%
Mexico	-1.1%	33.2%	-9.2%	32.5%	-12.9%	1.0%

The ~~increase~~decrease in ~~the~~our Argentine effective income tax rate ~~in our Argentine subsidiaries~~ during the ~~six and~~ three-month ~~periods~~period ended ~~June 30, 2020~~March 31, 2021, as compared to the same period in ~~2019~~2020, was mainly a consequence of ~~the temporary suspension of the knowledge-based economy promotional regime since 2020 by the~~higher tax deductible expenses on our Argentine ~~government until new rules for the application of the regime are issued, which had a direct impact~~business related to tax inflation adjustments on ~~the~~certain assets, in accordance with Argentine income tax ~~rate for our Argentine business.~~ law~~For information regarding the benefits granted to the Company under the software development law, please see Note 2 to our interim unaudited condensed consolidated financial statements.~~.

The increase in our Brazilian effective income tax rate for the ~~six and~~ three-month ~~periods~~period ended ~~June 30, 2020~~March 31, 2021, as compared to the same period in ~~2019,~~2020, was mainly related to higher ~~non-taxable expenses.~~taxable pre-tax gains.

The decrease in our Mexican effective income tax rate into a negative rate for the ~~six and~~ three-month ~~periods~~period ended ~~June 30, 2020~~March 31, 2021 as compared to the same period in ~~2019,~~2020, was mainly driven by the combined effect of higher income tax expense related to ~~valuation allowances on certain~~advertising business in Mexico and pre-tax losses that were not accounted for as deferred tax assets ~~in Mexico accounted for in~~as a consequence of the ~~period ended June 30, 2020~~valuation allowance..

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Segment information

(In millions, except for percentages)
Six-month Period Ended June 30, 2020 (*)
Brazil
Argentina
Mexico
Other Countries
Total
Net revenues
$
862.7
$
372.1
$
220.7
$
74.9
$
1,530.5
Direct costs
(647.4)
(272.4)
(225.3)
(62.5)
(1,207.7)
Direct contribution
$
215.4
$
99.6
$
(4.6)
$
12.4
$
322.8
Margin
25.0%
26.8%
-2.1%
16.5%
21.1%

Six-month Period Ended June 30, 2019 (*)
Brazil
Argentina
Mexico
Other Countries
Total
Net revenues
$
643.2
$
207.7
$
118.9
$
49.1
$
1,019.0
Direct costs
(501.3)
(151.4)
(150.8)
(44.9)
(848.4)
Direct contribution
$
142.0
$
56.3
$
(31.9)
$
4.2
$
170.7
Margin
22.1%
27.1%
-26.8%
8.6%
16.7%

Change from the Six-month Period Ended June 30, 2019 to June 30, 2020 (*)
Brazil
Argentina
Mexico
Other Countries
Total
Net revenues
in Dollars
$
219.5
$
164.4
$
101.8
$
25.8
$
511.4
in %
34.1%
79.2%
85.6%
52.5%
50.2%
Direct costs
in Dollars
$
(146.1)
$
(121.0)
$
(74.5)
$
(17.7)
$
(359.3)
in %
29.2%
79.9%
49.4%
39.3%
42.4%
Direct contribution
in Dollars
$
73.4
$
43.4
$
27.2
$
8.1
$
152.1
in %
51.7%
77.0%
85.5%
191.5%
89.1%


(In millions, except for percentages)	Three-month Period Ended June 30, 2020 (*)										Three-month Period Ended March 31, 2021 (*)

	Brazil		Argentina		Mexico		Other Countries		Total		Brazil		Argentina		Mexico		Other Countries		Total
Net revenues	$	465.3	$	239.2	$	125.9	$	47.9	$	878.4	$	768.7	$	297.2	$	230.5	$	82.0	$	1,378.4
Direct costs		(324.8)		(171.4)		(110.6)		(34.9)		(641.7)		(618.0)		(189.0)		(220.9)		(64.3)		(1,092.2)
Direct contribution	$	140.5	$	67.8	$	15.4	$	13.0	$	236.7	$	150.7	$	108.3	$	9.6	$	17.7	$	286.2
Margin		30.2%		28.3%		12.2%		27.1%		26.9%		19.6%		36.4%		4.2%		21.6%		20.8%



	Three-month Period Ended June 30, 2019 (*)										Three-month Period Ended March 31, 2020 (*)

	Brazil		Argentina		Mexico		Other Countries		Total		Brazil		Argentina		Mexico		Other Countries		Total
Net revenues	$	340.9	$	113.9	$	64.4	$	26.1	$	545.2	$	397.4	$	132.9	$	94.8	$	27.0	$	652.1
Direct costs		(275.9)		(83.9)		(85.2)		(24.4)		(469.5)		(322.6)		(101.0)		(114.8)		(27.6)		(566.0)
Direct contribution	$	64.9	$	30.0	$	(20.8)	$	1.6	$	75.8	$	74.8	$	31.9	$	(20.0)	$	(0.6)	$	86.1
Margin		19.1%		26.3%		-32.4%		6.3%		13.9%		18.8%		24.0%		-21.1%		-2.2%		13.2%

~~Table of Contents~~



	Change from the Three-month Period Ended June 30, 2019 to June 30, 2020 (*)										Change from the Three-month Period Ended March 31, 2020 to March 31, 2021 (*)

	Brazil		Argentina		Mexico		Other Countries		Total		Brazil		Argentina		Mexico		Other Countries		Total
Net revenues
in Dollars	$	124.4	$	125.3	$	61.6	$	21.8	$	333.1	$	371.3	$	164.4	$	135.7	$	55.0	$	726.3
in %		36.5%		110.0%		95.6%		83.7%		61.1%		93.4%		123.7%		143.3%		203.5%		111.4%
Direct costs
in Dollars	$	(48.8)	$	(87.5)	$	(25.3)	$	(10.5)	$	(172.2)	$	(295.4)	$	(87.9)	$	(106.1)	$	(36.7)	$	(526.2)
in %		17.7%		104.3%		29.7%		43.0%		36.7%		91.6%		87.1%		92.5%		133.0%		93.0%
Direct contribution
in Dollars	$	75.6	$	37.8	$	36.2	$	11.3	$	161.0	$	75.9	$	76.4	$	29.6	$	18.3	$	200.1
in %		116.4%		126.0%		173.9%		688.0%		212.4%		101.4%		239.9%		147.9%		3105.6%		232.5%

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

Net revenues

Net revenues for the ~~six and~~ three-month period ended ~~June 30, 2020~~March 31, 2021 as compared to the same ~~period~~periods in ~~2019~~2020 are described above in “Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Net revenues.”

Direct costs

Brazil

For the ~~six-month~~three-month period ended ~~June 30, 2020,~~March 31, 2021, as compared to the same period in ~~2019,~~2020, direct costs increased by ~~29.2%~~91.6%, mainly driven by: i) a ~~41.8%~~134.5% increase in cost of net revenues, mainly attributable to an increase in shipping operating costs, sales taxes, collection fees as a consequence of the higher transactions volume of our Mercado Pago business, cost of sale of goods as a consequence of an increase in sales of products and shipping carrier costs; ii) a 46.6% increase in sales and marketing expenses, mainly due to an increase in bad debt expenses and online and offline marketing expenses; iii) a 27.3% increase in product and technology development expenses, mainly due to an increase insalaries and wages, maintenance expenses mostly related to higher software licenses expenses and depreciation and amortization expenses; and iv) a 28.2% increase in general and administrative expenses, mostly attributable to an increase in salaries, mainly related to the LTRPs, taxes and other fees.

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Argentina

For the three-month period ended March 31, 2021, as compared to the same period in 2020, direct costs increased by 87.1%, mainly driven by: i) a 115.1% increase in cost of net revenues, mainly attributable to an increase in collection fees as a consequence of the higher transactions volume of our Mercado Pago business, shipping operating costs and cost of sale of goods as a consequence of an increase in sales of products and sales taxes; ii) a ~~4.6%~~11.6% increase in sales and marketing expenses, mainly due to ~~an increase~~buyer protection program expenses and increases in ~~bad debt expenses partially explained by the adoption of the ASC 326 effective January 1, 2020, other sales expenses~~salaries and wages and chargebacks ~~mainly related to strategic marketing initiatives expenses~~ partially offset by a decrease in online and offline marketing expenses as a consequence of marketing expenditures efficiencies that we achieved as a result of the growth in organic demand brought about by the effects of the COVID-19 pandemic consumer behavior; iii) a ~~35.2% increase in product and technology development expenses, mainly due to an increase in~~salaries and wages and depreciation and amortization expenses; and iv) a 48.9% increase in general and administrative expenses, mainly attributable to an increase in salaries and wages mainly related to the LTRPs and legal, tax and other fees.

For the three-month period ended June 30, 2020, as compared to the same period in 2019, direct costs increased by 17.7%, mainly driven by: i) a 47.3% increase in cost of net revenues, mainly attributable to an increase in shipping operating costs, collection fees as a consequence of the higher transactions volume of our Mercado Pago business, increase in cost of sale of goods as a consequence of an increase in sales of products and sales taxes; ii) a 18.6% increase in product and technology development expenses, mainly due to an increase insalaries and wages and depreciation and amortization expenses; and iii) a 14.5% increase in general and administrative expenses, mainly attributable to an increase in salaries, mainly related to the LTRPs and wages and legal, tax and other fees. This increase was partially offset by a 28.1% decrease in sales and marketing expenses, mainly due to a decrease in online and offline marketing expenses as a consequence of marketing expenditures efficiencies that we achieved as a result of the growth in organic demand brought about by the effects of the COVID-19 pandemic consumer behavior.

~~Argentina~~

For the six-month period ended June 30, 2020, as compared to the same period in 2019, direct costs increased by 79.9%, mainly driven by: i) a 90.5% increase in sales and marketing expenses, mainly due to an increase in bad debt expenses explained by the recognition of a charge of $27.0 million related to accumulated accounts receivable from an unaffiliated entity in Argentina as discussed above in “Recent Developments” and the adoption of the ASC 326 effective January 1, 2020~~, and buyer protection program expenses~~ partially offset by a decrease in online and offline marketing expenses as a consequence of marketing expenditures efficiencies that we achieved as a result of the growth in organic demand brought about by the effects of the COVID-19 pandemic consumer behavior; i~~i) a 78.5% increase in cost of net revenues, mainly attributable to an increase in shipping operating costs, sales taxes, finance costs~~ ~~mainly related to funding our Mercado Pago business,~~ an increase in cost of sale of goods as a consequence of an increase in sales of products, and an increase in collection fees as a consequence of the higher transactions volume of our Mercado Pago business and sales taxes; iii) a 39.1%54.3% increase in product and technology development expenses, mainly due to an increase in depreciation and amortization expenses; and iv) a ~~41.4%~~73.5% increase in general and administrative expenses, ~~mainly~~mostly attributable to an increase in salaries, ~~and wages,~~ mainly related to the ~~LTRPs.~~LTRPs, and other general and administrative expenses

principally related to certain tax withholdings.

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Mexico

For the three-month period ended ~~June 30, 2020,~~March 31, 2021, as compared to the same period in ~~2019,~~2020, direct costs increased by ~~104.3%~~92.5%, mainly driven by: i) a ~~117.4% increase in sales and marketing expenses, mainly due to an increase in bad debt expenses~~ explained by the recognition of a charge of $27.0 million related to accumulated accounts receivable from an unaffiliated entity in Argentina as discussed above in “Recent Developments” and the adoption of the ASC 326 effective January 1, 2020~~, and buyer protection program expenses~~ partially offset by a decrease in online and offline marketing expenses as a consequence of marketing expenditures efficiencies that we achieved as a result of the growth in organic demand brought about by the effects of the COVID-19 pandemic consumer behavior; i~~i) a 103.2%~~132.7% increase in cost of net revenues, mainly attributable to ~~an increase~~increases in shipping operating costs,, ~~an increase in~~ cost of sale of goods as a consequence of an increase in sales of products, ~~and an increase in~~ collection fees ~~as a consequence of the~~due to higher ~~transactions volume of our~~ Mercado Pago ~~business~~penetration and ~~sales taxes; iii)~~customer support costs; ii) a 63.1% increase in product and technology development expenses, mainly due to an increase in depreciation and amortization expenses; and iv) a 25.6% increase in general and administrative expenses, mainly attributable to an increase in salaries and wages, mainly related to the LTRPs.

~~Mexico~~

~~For the six-month period ended June 30, 2020, as compared to the same period in 2019, direct costs increased by 49.4%, mainly driven by: i) a 31.2%~~46.3% increase in sales and marketing expenses, mainly due to buyer protection program ~~expenses,~~and bad debt ~~expenses~~expenses; ~~partially explained by the adoption of the ASC 326 effective January 1, 2020~~and ~~, chargebacks from credit cards due to the increase in our Mercado Pago transaction volume and salaries and wages~~ partially offset by a decrease in online and offline marketing expenses as a consequence of marketing expenditures efficiencies that we achieved as a result of the growth in organic demand brought about by the effects of the COVID-19 pandemic consumer behavior; ii) a 63.8% increase in cost of net revenues, mainly attributable to an increase in shipping operating costs, an increase in collection fees due to higher Mercado Pago penetration, customer support costs and an increase in cost of sale of goods as a consequence of an increase in sales of products; iii) a ~~10.7%~~121.7% increase in product and technology development expenses, mainly attributable to depreciation and amortization ~~expenses; and iv) a 51.6% increase in general and administrative expenses, mainly attributable to an increase in salaries and wages.~~

For the three-month period ended June 30, 2020, as compared to the same period in 2019, direct costs increased by 29.7%, mainly driven by: i) a 63.5% increase in cost of net revenues, mainly attributable to an increase in shipping operating costs, an increase in collection fees due to higher Mercado Pago penetration, customer support costs and an increase in cost of sale of goods as a consequence of an increase in sales of products; and ii) a 77.6% increase in general and administrative expenses, mainly attributable to an increase in salaries and wages. This increase was partially offset by: a i) a 9.4% decrease in sales and marketing expenses, mainly due to a decrease in online and offline marketing expenses as a consequence of marketing expenditures efficiencies that we achieved as a result of the growth in organic demand brought about by the effects of the COVID-19 pandemic consumer behavior; and ii) a 45.4% decrease in product and development expenses.

Liquidity and Capital Resources

Our main cash requirement has been working capital to fund Mercado Pago financing operations. We also require cash for capital expenditures relating to technology infrastructure, software applications, office space, business acquisitions, to fund our credit business, to build out our logistics capacity and ~~the~~to make interest payments on our loans payable and other financial liabilities. ~~We have~~In 2020, we entered, into a purchase commitment in relation to the purchase of cloud services for a total amount of $240.5 million to be paid in the following 4 years. Please refer to Note 9 of our unaudited interim condensed consolidated financial statements for further detail on purchase commitments.

Since our inception, we have funded our operations primarily through contributions received from our stockholders during the first two years of operations, from funds raised during our initial public offering, and from cash generated from our operations. We issued the 2028 Notes for net proceeds of approximately $864.6 million. We have funded Mercado Pago mainly by discounting credit cards ~~receivable~~receivables and credit lines.

Additionally, we ~~started to fund~~have financed our Mercado Pago and Mercado Credito businesses through the securitization of credit cards receivable and certain loans through SPEs created in Brazil, Mexico and Argentina. ~~Please refer~~Refer to Note 1312 of our unaudited interim condensed consolidated financial statements for further detail on securitization transactions.

~~Finally,~~In January 2021, we ~~issued common~~closed a public offering of $400 million aggregate principal amount of 2.375% Sustainability Notes due 2026 (the “2026 Sustainability Notes”) and ~~preferred stock~~$700 million aggregate principal amount of 3.125% Notes due 2031 (the “2031 Notes”, and together with the 2026 Sustainability Notes, the “Notes”). The net proceeds from the offering of the 2031 Notes were applied in part towards the ~~securities offerings that closed on March 15, 2019 and March 29, 2019, respectively,~~purchase price of $1,865.1 million for ~~net~~the repurchase of $440 million in aggregate ~~proceeds~~principal amount of ~~$1,965.9 million, which are intended~~the 2028 Notes entered into in January 6, 2021. Refer to ~~be used to fund the growth of our payment initiatives, build out our logistics capacity, drive the adoption of these services and for general corporate purposes. Please see note 12~~Note 11 to our unaudited condensed consolidated financial statements for ~~additional information regarding our equity offerings.~~

~~Table~~further detail on the issuance of ~~Contents~~

the Notes.

Given the uncertain progress of the COVID-19 pandemic and the related macroeconomic instability in the countries where we operate, it is not possible to have certainty around business development and cash generation for ~~the remainder of the year 2020.~~2021. In terms of liquidity and cash management, our relevant sources of funding remain available and ~~new~~ credit facilities have been obtained at the geographic segment level. ~~During the first half of 2020, we obtained credit facilities in Brazil for $357.7 million. Please refer~~Refer to Note ~~11 of~~16 to our unaudited ~~interim~~ condensed consolidated financial statements ~~for further information on our loans and Note 16~~ for further detail on COVID-19 impacts.

As of ~~June 30, 2020,~~March 31, 2021, our main source of liquidity was ~~$2,763.8~~$1,208.7 million of cash and cash equivalents and short-term investments, which excludes a ~~$530.7~~$562.8 million investment related to the Central Bank of Brazil Mandatory Guarantee and $71.3 million investment related to restricted escrow accounts regarding a financial loan taken out in Brazil, and consists of cash generated from operations, proceeds from loans, ~~from~~ the issuance of the 2028 Notes and the Notes, and proceeds from the issuance of common and preferred stock.

The significant components of our working capital are cash and cash equivalents, restricted cash and cash equivalents, short-term investments, credit cards receivable and other means of payments, accounts receivable, loans receivable, inventory, accounts payable and accrued expenses, funds ~~receivable from and~~ payable to ~~Mercado Pago users,~~customers and amounts due to merchants and short-term debt.

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As of ~~June 30, 2020,~~March 31, 2021, cash and cash equivalents, restricted cash and cash equivalents and investments of our non-U.S. subsidiaries amounted to ~~$1,950.8~~$1,921.1 million, ~~51.4%~~82.0% of our consolidated cash and cash equivalents, restricted cash and cash equivalents and investments, and our ~~non-U.S. dollar-denominated~~cash, cash and equivalent, restricted cash and cash equivalent and investments held outside U.S. amounted to approximately ~~51.5%~~79.2% of our consolidated cash and cash equivalents, restricted cash and cash equivalents and investments. Our non-U.S. dollar-denominated cash and cash equivalents, restricted cash and cash equivalents and investments are located primarily in Brazil.

The following table presents our cash flows from operating activities, investing activities and financing activities for the ~~six-month~~three-month periods ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:


	Six-month Periods Ended				Three-month Periods Ended
	June 30, (*)				March 31, (*)
(In millions)		2020	2019			2021	2020
Net cash (used in) provided by:
Operating activities	$	564.7	$	165.9	$	(263.0)	$	(85.7)
Investing activities		(548.0)		(1,414.9)		(97.9)		(150.1)
Financing activities		319.5		1,916.2		(859.7)		154.6
Effect of exchange rates on cash and cash equivalents, restricted cash and cash equivalents		(124.2)		(3.5)		(99.2)		(104.9)
Net increase in cash and cash equivalents, restricted cash and cash equivalents	$	211.9	$	663.6
Net decrease in cash and cash equivalents, restricted cash and cash equivalents					$	(1,319.9)	$	(186.0)

(*) The table above may not total due to rounding.

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

Cash ~~provided by~~used in operating activities consists of net income adjusted for certain non-cash items, and the effect of changes in working capital and other activities:



		Six-month Periods Ended			Change from 2019				Three-month Periods Ended			Change from 2020
		June 30, (*)			to 2020 (*)				March 31, (*)			to 2021 (*)
		2020		2019	in Dollars		in %		2021		2020			in %
		(in millions, except percentages)							(in millions, except percentages)
Net Cash provided by:
Net Cash used in:
Operating activities	$	564.7	$	165.9	$	398.8	240.3%	$	(263.0)	$	(85.7)	$	(177.3)	207.1%

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

The ~~$398.8~~$177.3 million increase in net cash ~~provided by~~used in operating activities during the ~~six-month~~three-month period ended ~~June 30, 2020,~~March 31, 2021, as compared to the same period in ~~2019,~~2020, was primarily driven by a ~~$487.9~~$100.7 million ~~increase~~decrease in accounts payables and accrued expenses and a $85.5 million decrease in funds payable to ~~customer~~customers and ~~a $128.3 million increase in payables and accrued expenses, partially offset by an increase of $281.7 million in credit cards receivable and other means of payment.~~
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amounts due to merchants.

Net cash used in investing activities



		Six-month Periods Ended			Change from 2019				Three-month Periods Ended			Change from 2020
		June 30, (*)			to 2020 (*)				March 31, (*)			to 2021 (*)
		2020		2019	in Dollars		in %		2021		2020	in Dollars		in %
		(in millions, except percentages)							(in millions, except percentages)
Net Cash used in:
Investing activities	$	(548.0)	$	(1,414.9)	$	866.9	-61.3%	$	(97.9)	$	(150.1)	$	52.1	-34.7%

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

Net cash used in investing activities in the ~~six-month~~three-month period ended ~~June 30, 2020~~March 31, 2021 resulted mainly from purchases of investments of ~~$2,326.0~~$2,415.1 million, which was partially offset by proceeds from the sale and maturity of investments of ~~$1,910.3~~$2,588.7 million, asconsistent with our treasury strategy of investing part of our ~~financial strategy.~~available liquidity. We also ~~used: a) $94.8~~used $148.7 million in principal of loans receivable granted to merchants and consumers under our Mercado Credito solution and $112.7 million in the purchase of property and equipment (mainly in information technology assets in Argentina, Brazil and Mexico)~~, b) $39.1 million in principal~~.
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Table of loans receivable granted to merchants and consumers under our Mercado Credito solution and $6.9 million in payments related to the acquisition of Kiserty S.A. The cash used in investing activities in the six-month period ended June 30, 2020 was partially offset by receipts from settlements of derivative instruments for $8.6 million.Contents

Net cash (used in) provided by financing activities



		Six-month Periods Ended			Change from 2019				Three-month Periods Ended			Change from 2020
		June 30, (*)			to 2020 (*)				March 31, (*)			to 2021 (*)
		2020		2019	in Dollars		in %		2021		2020	in Dollars		in %
		(in millions, except percentages)							(in millions, except percentages)
Net Cash provided by:
Net Cash (used in) provided by:
Financing activities	$	319.5	$	1,916.2	$	(1,596.7)	-83.3%	$	(859.7)	$	154.6	$	(1,014.3)	-656.3%

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

For the ~~six-month~~three-month period ended ~~June 30, 2020, the $1,596.7 million decrease in~~ March 31, 2021, our net cash ~~provided by~~used in financing activities was ~~mainly~~primarily derived from ~~$1,867.2~~$1,865.1 million in payments of the repurchase of the 2028 Notes, $704.3 million in payments from loans payable and other financial liabilities and $100.8 million for the purchase of capped calls, partially offset by $1,839.6 million in net proceeds from ~~the issuance of Common Stock~~loans payable and ~~the $98.7 million in proceeds from the issuance of Preferred Stock in the first quarter of 2019.~~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.

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 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 repurchased $440 million principal amount of the outstanding 2028 Notes. The total amount paid to repurchase such 2028 Notes amounted to $1,865.1 million, which includes principal, interest accrued and premium. Approximately, $440 million of the principal amount aggregate principal amount of the 2028 Notes remains outstanding.

Please refer to note 11 to our unaudited interim condensed consolidated financial statements for additional information regarding the 2028 Notes and the related capped call transactions.

~~Credit Lines in Brazil~~

Due to the COVID-19 pandemic situation, we have obtained new credit facilities at the geographic segment level. During the first half of 2020, we have obtained credit facilities in Brazil for $357.7 million. Please refer to Note 11 of our unaudited interim condensed consolidated financial statements for further information on our loans and Note 16 for further detail on COVID-19 impacts.

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Mercado Pago Funding

In ~~2020,~~2021, we, through our subsidiaries, continued obtaining certain lines of credit in Argentina, Chile and Uruguay primarily to fund the Mercado Pago business. Additionally, we continue to securitize certain loans and credit card receivables through our Argentine, Mexican and Brazilian SPEs, formed to securitize loans ~~and credit cards receivable~~ provided by us to our ~~users.~~users and credit cards receivable. Please refer to Note 1311 and 12 to our interim unaudited condensed consolidated financial statements for additional detail.

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 are 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.

We will 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.

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The Notes rank equally in right of payment with all of the Company´s other existing and future senior unsecured debt obligations from time to time outstanding. 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 from time to time outstanding, 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

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.

See note 11 of our unaudited condensed consolidated financial statements for additional detail.

We are presenting the following summarized financial information for the issuer and the initial 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.

Summarized balance sheet information for the Obligor Group as of March 31, 2021 and as of December 31, 2020 is provided in the table below:


	March 31,		December 31,
(In millions)	2021			2020

Current assets ()(*)	$	2,932.5	$	4,339.4
Non-current assets (***)		1,224.9		1,121.2
Current Liabilities (****)		2,891.5		3,298.2
Non-current Liabilities		1,727.3		944.3

(*) Includes restricted cash and cash equivalents of $224.9 million and $402.0 million and guarantees in short-term investments of $634.1 million and $636.9 million as of March 31, 2021 and December 31, 2020, respectively.

(**) Includes Current assets from non-guarantor subsidiaries of $139.4 million and $156.4 million as of March 31, 2021 and December 31, 2020, respectively.

(***) Includes Non-current assets from non-guarantor subsidiaries of $107.8 million and $94.9 million as of March 31, 2021 and December 31, 2020, respectively.

(****) Includes Current liabilities to non-guarantor subsidiaries of $216.4 million and $144.7 million as of March 31, 2021 and December 31, 2020, respectively.

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Summarized statement of income information for the Obligor Group for the three-month period ended March 31, 2021 is provided in the table below:


	March 31,
(In millions)	2021

Net revenues (*)	$	1,189.6
Gross Profit (**)		451.7
Income from operations (***)		55.8
Net loss (****)		(47.7)

(*) Includes Net revenues from transactions with non-guarantor subsidiaries of $29.7 million for the three-month period ended March 31, 2021.

(**) Includes charges from transactions with non-guarantor subsidiaries of $65.9 million for the three-month period ended March 31, 2021.

(***) In addition to the charges included in Gross profit, Income from operations includes charges from transactions with non-guarantor subsidiaries of $39.1 million for the three-month period ended March 31, 2021.

(****) Includes other income from transactions with non-guarantor subsidiaries of $3.7 million for the three-month period ended March 31, 2021.

Capital expenditures

Our capital expenditures ~~(composed~~(comprised of our payments for property and equipment ~~(as~~(such as fulfillment centers), intangible assets (excluding digital assets) and acquired businesses) for the ~~six-month~~three-month periods ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ amounted to ~~$101.9~~$112.7 million and ~~$71.4~~$53.5 million, respectively.

During the ~~six-month~~three-month period ended ~~June 30, 2020~~March 31, 2021, we invested ~~$62.6~~$47.3 million in information technology in Brazil, Argentina and Mexico, and ~~$24.4~~$60.1 million in our Argentine, Brazilian and Mexican 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 ~~logistic~~logistics network capacity in the future as we strive to maintain our position in the Latin American e-commerce market.

We believe that our existing cash and cash equivalents, including the sale of credit cards receivable, 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 going forward.

Off-balance sheet arrangements

As of ~~June 30, 2020,~~March 31, 2021, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.

Recently issued accounting pronouncements

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

Non-GAAP Financial Measures

To supplement our consolidated financial statements presented in accordance with U.S. GAAP, we use foreign exchange (“FX”) neutral measures as a non-GAAP measure.

This non-GAAP measure 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, this non-GAAP measure is 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. This non-GAAP financial measure should only be used to evaluate our results of operations in conjunction with the most comparable U.S. GAAP financial measures.

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Reconciliation of this non-GAAP financial measure to the most comparable U.S. GAAP financial measure can be found in the table included in this quarterly report.

We ~~believe that reconciliation of FX neutral measures~~provide this non-GAAP financial measure to ~~the most directly comparable GAAP measure provides investors an~~enhance overall understanding of our current financial performance and its prospects for the ~~future. Specifically,~~future, and we understand that this measure provides useful information to both Management and investors. In particular, we believe ~~this~~that FX neutral ~~non-GAAP measure~~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.

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The FX neutral measures were calculated by using the average monthly exchange rates for each month during ~~2019~~2020 and applying them to the corresponding months in ~~2020,~~2021, so as to calculate what our results would have been if exchange rates had remained stable from one year to the next. The table below excludes intercompany allocation FX effects. Finally, ~~this~~these measures ~~does~~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 periods ended ~~June 30, 2020:~~March 31, 2021:

Six-month Periods Ended
‎June 30, (*)
As reported
FX Neutral Measures
As reported
(In millions, except percentages)
2020
2019
Percentage Change
2020
2019
Percentage Change
(Unaudited)
(Unaudited)
Net revenues
$                           1,530.5
$                    1,019.0
50.2%
$                           2,026.0
$                    1,019.0
98.8%
Cost of net revenues
(790.5)
(509.6)
55.1%
(1,027.0)
(509.6)
101.5%
Gross profit
740.0
509.4
45.3%
999.0
509.4
96.1%
Operating expenses
(670.2)
(511.8)
31.0%
(879.4)
(511.8)
71.8%
Income (loss) from operations
69.7
(2.3)
3070.4%
119.6
(2.3)
5192.4%


	Three-month Periods Ended ‎June 30, (*)						Three-month Periods Ended ‎March 31, (*)
	As reported			FX Neutral Measures	As reported		As reported			FX Neutral Measures	As reported
(In millions, except percentages)	2020	2019	Percentage Change	2020	2019	Percentage Change	2021	2020	Percentage Change	2021	2020	Percentage Change
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Net revenues	$ 878.4	$ 545.2	61.1%	$ 1,218.3	$ 545.2	123.4%	$ 1,378.4	$ 652.1	111.4%	$ 1,684.9	$ 652.1	158.4%
Cost of net revenues	(451.2)	(272.8)	65.4%	(613.4)	(272.8)	124.9%	(787.1)	(339.3)	132.0%	(951.4)	(339.3)	180.4%
Gross profit	427.2	272.4	56.8%	604.9	272.4	122.0%	591.4	312.8	89.1%	733.5	312.8	134.5%

Operating expenses	(327.7)	(284.9)	15.0%	(446.5)	(284.9)	56.7%	(500.5)	(342.5)	46.1%	(623.7)	(342.5)	82.1%
Income (loss) from operations	99.4	(12.5)	896.4%	158.4	(12.5)	1368.5%
Income (Loss) from operations							90.8	(29.7)	405.9%	109.8	(29.7)	469.5%

(*) The table above may not total due to rounding.

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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 the possibility that changes in interest rates and the U.S. dollar exchange rate with local currencies, particularly the Brazilian Reais and Argentine Peso due to Brazil’s and Argentine’s respective share of our revenues, may affect the value of our financial assets and liabilities. Latin American countries in which we operate have been negatively affected by the outbreak of COVID-19, which has generated macroeconomic instability and led to the devaluation of certain Latin American currencies.

Foreign currencies

We have significant operations internationally that are denominated in foreign currencies, primarily the Brazilian Reais, 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.

As of ~~June 30, 2020,~~March 31, 2021, 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 ~~June 30, 2020,~~March 31, 2021, the total cash, cash equivalents, restricted cash and cash equivalent denominated in foreign currencies totaled ~~$932.1~~$947.1 million, short-term investments denominated in foreign currencies totaled ~~$917.8~~$869.2 million and accounts receivable, credit cards receivable and other means of payment and loans receivable in foreign currencies totaled ~~$832.7~~$1,383.6 million. As of ~~June 30, 2020,~~March 31, 2021, we had no$8.6 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 ~~June 30, 2020,~~March 31, 2021, our U.S. dollar-denominated cash and cash equivalents, restricted cash and cash equivalents and short-term investments totaled ~~$1,938.3~~$352.1 million and our U.S. dollar-denominated long-term investments totaled ~~$5.8~~$167.0 million.

For the ~~six-month~~three-month period ended ~~June 30, 2020,~~March 31, 2021, we had a consolidated loss on foreign currency of ~~$2.1~~$15.1 million mainly related to a loss of $18.3 million attributable to the ~~loss~~additional cost of accessing US dollars through an indirect mechanism in Argentina due to restrictions imposed by Argentine government for buying US dollars at the official exchange rate (refer to Note 15 of our unaudited interim condensed consolidated financial), partially offset by a $5.7 million gain on foreign exchange in our ~~Brazilian subsidiaries. For the three-month period ended June 30, 2020,~~Argentina subsidiaries ~~we had a consolidated loss on foreign currency of $1.9 million~~ ~~mainly related to the loss on foreign exchange in our Argentine subsidiaries.~~. (See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of operations—Other income (expenses), net” for more information).

The following table sets forth the percentage of consolidated net revenues by segment for the ~~six and~~ three-month periods ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:


	Six-month Periods Ended				Three-month Periods Ended				Three-month Periods Ended
	June 30,				June 30,				March 31,
(% of total consolidated net revenues) (*)	2020		2019		2020		2019		2021		2020
Brazil	56.4	%	63.1	%	53.0	%	62.5	%	55.8	%	60.9	%
Argentina	24.3		20.4		27.2		20.9		21.6		20.4
Mexico	14.4		11.7		14.3		11.8		16.7		14.5
Other Countries	4.9		4.8		5.5		4.8		5.9		4.1

(*) Percentages have been calculated using whole-dollar amounts.

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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 ~~expenses~~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 at the moment of translating our financial statements to U.S. dollar as of ~~June 30, 2020:~~

March 31, 2021:



Foreign Currency Sensitivity Analysis (*)	Foreign Currency Sensitivity Analysis (*)				Foreign Currency Sensitivity Analysis (*)
(In millions)		-10%	Actual	+10%		-10%	Actual	+10%
		(1)		(2)		(1)		(2)
Net revenues		$ 1,700.5	$ 1,530.5	$ 1,391.4		$ 1,531.6	$ 1,378.4	$ 1,253.2
Cost of net revenues and operating expenses		(1,618.0)	(1,460.7)	(1,332.0)
Expenses (**)						(1,430.3)	(1,287.6)	(1,170.8)
Income from operations		82.4	69.7	59.4		101.2	90.8	82.4

Other income/(expenses) and income tax related to P&L items		(36.5)	(32.8)	(29.8)		(115.0)	(109.8)	(105.5)

Foreign Currency impact related to the remeasurement of our Net Asset position		(2.3)	(2.1)	(1.9)		(14.7)	(15.1)	(15.4)
Net Income		43.6	34.8	27.6
Net loss						(28.5)	(34.0)	(38.5)

Total Shareholders' Equity		$ 1,805.9	$ 1,808.2	$ 1,672.7		$ 73.0	$ (30.4)	$ (163.1)

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

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

(*) The table above may not total due to rounding.

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

The table above shows ~~an increase~~a decrease in our net ~~income~~loss 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~~an increase in our net ~~income~~loss when the U.S. dollar strengthens against foreign currencies because of the negative impact of the decrease in income from operations.

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.

As of ~~June 30, 2020,~~March 31, 2021, the Argentine Peso exchange rate against the U.S. dollar was ~~70.46.~~92.00.

In the second half of 2019, the Argentine government instituted exchange controls restricting the purchase of foreign currencies. Because of Argentine exchange controls, many Argentine entities use a trading mechanism, in which an entity buys U.S. dollar denominated securities in Argentina using Argentine Pesos, transfers the securities outside Argentina and sells the securities for U.S. dollars. The number of U.S. dollars that may be obtained through this mechanism are lower than the ones that would have resulted from buying them at the official rate if such transaction was not restricted.

Considering a hypothetical devaluation of 10% of the Argentine Peso against the U.S. dollar on ~~June 30, 2020~~,March 31, 2021, the ~~reported~~effect on non-functional currency net ~~asset~~liability position in our Argentine subsidiaries would have ~~recorded~~been a foreign exchange ~~loss~~gain amounting to approximately ~~$1.3~~$9.6 million in our Argentine subsidiaries.

See Item 7, “Management’s discussion and analysis of financial condition and results of operations—Critical accounting policies and estimates—Foreign Currency Translation” for details on the currency status of our Argentine segment.

Brazilian Segment

Considering a hypothetical devaluation of 10% of the Brazilian Reais against the U.S. dollar on ~~June 30, 2020,~~March 31, 2021, the reported net assets in our Brazilian subsidiaries would have decreased by approximately ~~$54.9~~$93.6 million with the related impact in Other Comprehensive Income. Additionally, we would have recorded a foreign ~~exchange~~currency loss amounting to approximately ~~$12.5~~$18.3 million in our Brazilian subsidiaries.

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Mexican Segment

Considering a hypothetical devaluation of 10% of the Mexican peso against the U.S. dollar on ~~June 30, 2020,~~March 31, 2021, the reported net assets in our Mexican subsidiaries would have decreased by approximately ~~$15.9~~$29.1 million with the related impact in Other Comprehensive Income. Additionally, we would have recorded a foreign ~~exchange~~currency loss amounting to approximately ~~$3.2~~$13.4 million in our Mexican subsidiaries.

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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. As of ~~June 30, 2020,~~March 31, 2021, Mercado Pago’s receivables totaled ~~$646.7~~$883.7 million. Interest rate fluctuations could also impact interest earned through our Mercado Credito solution. As of ~~June 30, 2020,~~March 31, 2021, loans ~~granted under~~receivable from our Mercado Credito solution totaled ~~$144.2~~$435.4 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 ~~investment grade corporate debt securities~~ 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.

Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes. As of ~~June 30, 2020,~~March 31, 2021, the average duration of our available for sale securities, defined as the approximate percentage change in price for a 100-basis-point change in yield, was ~~0.5%~~1.3%. If interest rates were to instantaneously increase (decrease) by 100 basis points, the fair ~~market~~ value of our available for sale securities as of ~~June 30, 2020~~March 31, 2021 could decrease (increase) by approximately ~~$5.2~~$2.6 million.

As of ~~June 30, 2020,~~March 31, 2021, our short-term investments amounted to ~~$2,124.9~~$980.1 million and our long-term investments amounted to ~~$5.8~~$175.6 million. Our short-term investments, except for the ~~$530.7~~$562.8 million investment related to the Central Bank of Brazil Mandatory Guarantee and $71.3 million investment related to restricted escrow accounts regarding financial loan taken in Brazil, 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.

Equity Price Risk

Our board of directors, upon the recommendation of the compensation committee, approved the 2015, 2016, 2017, and 2018 Long Term Retention Program (the “2015, 2016, 2017 and 2018 LTRPs”), respectively.

In order to receive an award under the 2015, 2016, 2017 and/or 2018 LTRP, each eligible employee must satisfy the performance conditions established by the Board of Directors 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 2015, 2016, 2017, and/or 2018 LTRP award, payable as follows:

the eligible employee will receive a fixed payment, equal to 8.333% of his or her 2015, 2016, 2017, and/or 2018 LTRP bonus once a year for a period of six years starting ~~in or about the first quarter of~~no later than April 30, 2016, 2017, 2018 and/or 2019 respectively (the “2015, 2016, 2017, or 2018 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 “2015, 2016, 2017, or 2018 Variable Payment”, respectively) equal to the product of (i) 8.333% of the applicable 2015, 2016, 2017, and/or 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 2014 (with respect to the 2015 LTRP), 2015 (with respect to the 2016 LTRP), 2016 (with respect to the 2017 LTRP) and 2017 (with respect to the 2018 LTRP) Stock Price, defined as $127.29, $111.02, $164.17 and $270.84 for the 2015, 2016, 2017 and 2018 LTRP, respectively, which was the average closing price of our common stock on the NASDAQ Global Select Market during the final 60 trading days of 2014, 2015, 2016 and 2017, 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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Our board of directors, upon the recommendation of the compensation committee, approved the 2019, 2020 and ~~2020~~2021 Long Term Retention Program (the “2019, 2020 and ~~2020~~2021 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 ~~in or about the first quarter of~~no later than April 30, 2020, 2021 and ~~2021,~~2022, respectively). In order to receive the full target award under the 2019, 2020 and/or ~~2020~~2021 LTRP, each eligible employee must remain employed as of each applicable payment date. The 2019, 2020 and ~~2020~~2021 LTRP awards are payable as follows:

the eligible employee will receive 16.66% of half of his or her target 2019, 2020 and/or ~~2020~~2021 LTRP bonus once a year for a period of six years, with the first payment occurring ~~in or about the first quarter of~~no later than April 30, 2020, 2021 and ~~2021~~2022 (the “2019, 2020 or ~~2020~~2021 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 or ~~2020~~2021 Variable Payment”) equal to the product of (i) 16.66 % of half of the target 2019, 2020 or ~~2020~~2021 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 and ~~2019~~2020 defined as $322.91, $553.45 and ~~$553.45~~$1,431.26 for the 2019, 2020 and ~~2020~~2021 LTRP, 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.

At ~~June 30, 2020,~~March 31, 2021, the total contractual obligation fair value of our ~~2015, 2016, 2017, 2018, 2019 and 2020~~outstanding LTRP Variable Award Payment obligation subject to equity price risk amounted to ~~$240.9~~$341.1 million. As of ~~June 30, 2020,~~March 31, 2021, the accrued liability related to the ~~2015, 2016, 2017, 2018, 2019 and 2020~~outstanding Variable Award Payment of the LTRP included in Salaries and Social security payable in our condensed consolidated balance sheet amounted to ~~$68.3~~$69.3 million. The following table shows a sensitivity analysis of the risk associated with our total contractual obligation fair value related to the ~~2015, 2016, 2017, 2018, 2019 and 2020~~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 June 30, 2020			As of March 31, 2021
		MercadoLibre, Inc	2015, 2016, 2017, 2018, 2019 and 2020		MercadoLibre, Inc	2016, 2017, 2018, 2019, 2020 and 2021
		Equity Price	LTRP Variable contractual obligation		Equity Price	LTRP Variable contractual obligation
(In thousands, except equity price)
Change in equity price in percentage

40%		1,380.58	337,241		2,063.37	477,546
30%		1,281.97	313,153		1,915.98	443,436
20%		1,183.35	289,064		1,768.60	409,325
10%		1,084.74	264,975		1,621.22	375,215
Static	(*)	986.13	240,887	(*)	1,473.83	341,104
-10%		887.51	216,798		1,326.45	306,994
-20%		788.90	192,709		1,179.07	272,884
-30%		690.29	168,621		1,031.68	238,773
-40%		591.68	144,532		884.30	204,663

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

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.

Evaluation of Disclosure Controls and Procedures

Based on the evaluation of our disclosure controls and procedures

~~As mentioned~~ (as defined in ~~“Management’s Discussion Analysis of Financial Condition~~Exchange Act Rules 13a-15(e) and Results of Operations-Recent Developments” in Item 2, we recognized a charge of $27.0 million in the three-month period ended June 30, 2020 resulting from an accumulation of accounts receivable from an unaffiliated entity in Argentina. This entity acts as a collection agent for certain amounts credited to the accounts of our Mercado Pago customers. After conducting a review of these receivables we concluded that there were deficiencies in the timely operation of certain internal controls that constitute a material weakness. We also concluded that there were no material errors in the financial results or balances identified as a result of the material weakness, and therefore, no need for the restatement of prior period financial statements.

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As15d-15(e)) required by ~~Rule 13a-15(b) under the Securities~~ Exchange Act ~~of 1934,~~Rules 13a-15(b) or 15d-15(b), our ~~management, with the participation of our principal~~chief executive officer and our ~~principal~~chief financial officer ~~evaluated our company’s disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our management~~have concluded that, as of the end of the period covered by this ~~quarterly~~ report, ~~on Form 10-Q,~~ our disclosure controls and procedures were ~~not effective because of the material weakness described above.~~

~~Our management has also concluded that, due to the material weakness discussed above, our internal control over financial reporting was not effective as of December 31, 2019.~~

Due to this material weakness, the following should no longer be relied upon: (a) Management’s Report on Internal Control Over Financial Reporting in Item 9A of the Form 10-K for the fiscal year ended December 31, 2019 (the “2019 Form 10-K”), (b) the statements concerning effectiveness of the Company’s internal control over financial reporting at December 31, 2019 contained in the report of Deloitte & Co. S.A. in the 2019 Form 10-K and (c) the statements under “Evaluation of Disclosure Controls and Procedures” in Item 9A of the 2019 Form 10-K and Item 4 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. The Company expects to file an amendment to its 2019 Form 10-K to include disclosures concerning this material weakness. In addition, the Company anticipates that the report of Deloitte & Co. S.A. in the 2019 Form 10-K will be revised to reflect the identification of this material weakness.

Notwithstanding the identified material weakness for the annual period, management, including our CEO (principal executive officer) and CFO (principal financial officer), believes that the consolidated financial statements included in the Annual Report for the period ended December 31, 2019 on Form 10-K fairly present in all material respects our financial condition, results of operations and cash flows as of and for the periods presented in accordance with U.S. GAAP.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 ~~six-month~~three-month period ended ~~June 30, 2020~~March 31, 2021 that have materially affected, or are reasonably

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likely to materially affect, our internal control over financial reporting. Most of our employees are working remotely due to the COVID-19 pandemic, and we continue to monitor and assess the impact of the COVID-19 pandemic on our internal controls.

To remediate the material weakness described above, we have undertaken to understand the root cause of the control deficiencies, and have begun implementing improvements in our internal controls for this type of accounts receivable. We deem the root cause to lie in lack of competence of the control owners in charge of these specific controls. Remediation steps being undertaken during the third quarter of 2020 include, but are not limited to, the following: i) changes to the control owners of these specific controls, ii) institution of an additional layer of reconciliation reviews and controls to be executed by a different team to guarantee mitigating controls on accounts receivables from means of payments, iii) an increase in the frequency of the control, iv) implementation of new systems to aid in these controls, and v) hiring of competent outsourced personnel and expertise to assist in the execution of these controls.

We expect that the remediation of this material weakness will be completed prior to the end of fiscal year 2020. The material weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and our management has concluded, through testing, that the controls are operating effectively.

PART II. OTHER INFORMATION

Item 1 — Legal Proceedings

See Item 1 of Part I, “Financial Statements—Note 9 Commitments and Contingencies—Litigation and other Legal Matters.”

Item 1A — Risk Factors

~~As of June 30, 2020, there have been no material changes in our~~We previously disclosed risk factors ~~from those disclosed~~under "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the ~~fiscal~~ year ended December 31, ~~2019, as updated~~2020 (the “2020 Form 10-K”) . The following information supplements and, to the extent inconsistent, supersedes some of the information appearing in the ~~Company’s Quarterly Report on~~Risk Factors section of our 2020 Form ~~10-Q for~~10-K. In addition to those risk factors and the ~~quarter ended March 31, 2020.~~other information included elsewhere in this report, you should also carefully consider the risk factor discussed below. The risk described below and in our 2020 Form 10-K, are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we deem to be immaterial also may materially adversely affect our business, financial condition and/or results of operations:

We hold and may acquire digital assets that may be subject to volatile market prices, impairment and unique risks of loss.

We have recently begun to use a portion of our cash to purchase digital assets or certain other alternative reserve assets. During the first quarter of 2021, we invested an aggregate $7,800 thousands in bitcoin, and we may expect to continue acquiring and holding digital assets from time to time.

The prices of digital assets have been and may continue to be highly volatile, including as a result of various associated risks and uncertainties. For example, the prevalence of such assets is a relatively recent development, and their long-term adoption by investors, consumers and businesses is unpredictable. Moreover, they rely on technology for their creation, existence and transactional validation and their decentralization may subject their integrity to the threat of malicious attacks and technological obsolescence. The status of such assets for a variety regulatory purposes is unclear and may change in the future.

As digital assets, including bitcoin, have grown in popularity and market size, there has been increasing focus on the extent to which digital assets can be used to launder the proceeds of illegal activities or fund criminal or terrorist activities, or entities subject to sanctions regimes. If we are found to have purchased bitcoin or other digital assets from persons that have used the digital assets to launder money or from persons subject to sanctions, we may be subject to regulatory proceedings and further transactions or dealings in bitcoin or other digital assets may be restricted or prohibited.

Digital assets are currently considered indefinite-lived intangible assets under applicable accounting rules, meaning that any decrease in their fair value below our carrying value for such assets at any time will require us to recognize impairment charges. This may adversely affect our operating results in any period in which such impairment occurs, which in turn could have a material adverse effect on the market price of our shares. We may not recognize any increases in fair value while we hold the assets.

As intangible assets without centralized issuers or governing bodies, digital assets have been, and may in the future be, subject to security breaches, cyberattacks or other malicious activities, as well as human errors or computer malfunctions, that may result in operational problems or the loss or destruction of private keys needed to access such assets, which may be irreversible and could adversely affect the value of our bitcoin and an investment in our Company. While we intend to take reasonable measures to secure any digital assets, if such threats are realized or the measures or controls we implement to secure our digital assets fail, it could result in a partial or total misappropriation or loss of our digital assets, and our financial condition and operating results may be adversely affected.

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Item 2 — Issuer Purchases of Equity Securities


Period	(a) Total Number of Shares Purchased	(b) Average Price per Share (1)(2)	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Program (in millions) (2)
January, 2021	—	—	—	Up to $251
February, 2021	—	—	—	Up to $251
March, 2021	17,408	2,513.84	17,408	Up to $251


(1)	Average price paid per share does not include costs associated with the repurchases.
(2)	On August 30, 2020 the Board authorized the repurchase of Shares for an aggregate consideration of up to $350 million. The share repurchase program expires on August 31, 2021 and may be suspended from time to time or discontinued. The repurchases are being executed from time to time, subject to general business and market and price conditions and other investment opportunities, through open-market purchases, block trades, derivatives, trading plans established in accordance with SEC rules, or privately negotiated transactions. Please refer to Note 15 of our unaudited interim condensed consolidated financial statements for additional detail.

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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


3.1		Registrant’s Amended and Restated Certificate of Incorporation. ⁽¹⁾
3.2		Registrant’s Amended and Restated Bylaws. ⁽¹⁾
~~3.3~~		~~Registrant’s Certificate of Designation of Series A Perpetual Preferred Stock.~~⁽²⁾
4.1		Form of Specimen Certificate for the Registrant’s Common Stock. ⁽³⁾⁽²⁾
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. ⁽³⁾
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.⁽⁴⁾
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.⁽⁴⁾
4.5		Form of Global Note representing the Registrant’s 2.375% Sustainability Notes due 2026.⁽⁴⁾
4.6		Form of Global Note representing the Registrant’s 3.125% Notes due 2031.⁽⁴⁾
10.1		Amended and Restated 2015 Long-Term Retention Program *
10.2		Amended and Restated 2016 Long-Term Retention Program*
10.3		Amended and Restated 2017 Long-Term Retention Program*
10.4		Amended and Restated 2018 Long-Term Retention Program*
10.5		Amended and Restated 2019 Long-Term Retention Program*
10.6		Amended and Restated 2020 Long-Term Retention Program*
10.7		2021 Long-Term Retention Program⁽⁵⁾
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 ~~June 30, 2020,~~March 31, 2021, 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 ~~June 30, 2020,~~March 31, 2021, formatted in Inline XBRL and contained in Exhibit 101


*	Filed or furnished herewith, as applicable.
(1)	Incorporated by reference to the Registration Statement on Form S-1 filed on May 11, 2007.
(2)	Incorporated by reference to the Registrant’s ~~Current Report on Form 8-K filed on March 29, 2019.~~
~~(3)~~	~~Incorporated by reference to the Registrant’s~~ Annual Report on Form 10-K for the year ended December 31, 2008 filed on February 27, 2009.
~~(4)~~(3)	Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on August 24, 2018.
(4)	Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on January 14, 2021.
(5)	Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on May 5, 2021.

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Table of Contents

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: ~~August 10, 2020.~~May 6, 2021.	By:	/s/ Marcos Galperin
		Marcos Galperin
		President and Chief Executive Officer

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

6559


		Three Months Ended June 30, 2020
		Brazil	Argentina	Mexico	Other Countries	Total
		(In thousands)
Net revenues		$ 465,298	$ 239,204	$ 125,950	$ 47,917	$ 878,369
Direct costs		(324,754)	(171,408)	(110,553)	(34,943)	(641,658)
Direct contribution		140,544	67,796	15,397	12,974	236,711

Operating expenses and indirect costs of net revenues						(137,273)
Income from operations						99,438

Other income (expenses):
	Interest income and other financial gains					18,782
	Interest expense and other financial losses					(26,977)
	Foreign currency losses					(1,903)
Net income before income tax expense						$ 89,340


		Three Months Ended June 30, 2019
		Brazil	Argentina	Mexico	Other Countries	Total
		(In thousands)
Net revenues		$ 340,858	$ 113,913	$ 64,383	$ 26,088	$ 545,242
Direct costs		(275,917)	(83,909)	(85,216)	(24,441)	(469,483)
Direct contribution		64,941	30,004	(20,833)	1,647	75,759

Operating expenses and indirect costs of net revenues						(88,247)
Loss from operations						(12,488)

Other income (expenses):
	Interest income and other financial gains					33,684
	Interest expense and other financial losses					(14,679)
	Foreign currency gains					783
Net income before income tax expense						$ 7,300


	Six-month Periods Ended ‎ June 30,					Three-month Periods Ended ‎ June 30,
(in millions)	2020		2019			2020	2019

Unique active users⁽¹⁾		65.5		47.6		51.5		35.5
Number of confirmed new registered users during period ⁽²⁾		29.9		24.7		16.9		12.4
Gross merchandise volume⁽³⁾	$	8,459.0	$	6,485.5	$	5,044.8	$	3,397.7
Number of successful items sold ⁽⁴⁾		284.2		171.4		178.5		88.7
Number of successful items shipped⁽⁵⁾		247.7		132.6		157.5		70.2
Total payment volume⁽⁶⁾	$	19,308.8	$	12,156.5	$	11,214.3	$	6,517.4
Total volume of payments on marketplace⁽⁷⁾	$	7,966.5	$	6,016.1	$	4,763.2	$	3,120.0
Total payment transactions⁽⁸⁾		695.5		325.6		404.8		181.6
Capital expenditures	$	101.9	$	71.4	$	48.4	$	38.4
Depreciation and amortization	$	44.2	$	33.0	$	22.7	$	17.3



	Changes from 2019 to 2020 (*)
(% of revenue growth in Local Currency)	Six-month period	Three-month period
Brazil	72.4%	87.4%
Argentina	181.2%	224.0%
Mexico	111.5%	137.9%
Other Countries	80.6%	118.3%
Total Consolidated	98.8%	123.4%


(In millions, except for percentages)	Six-month Period Ended June 30, 2020 (*)

	Brazil		Argentina		Mexico		Other Countries		Total
Net revenues	$	862.7	$	372.1	$	220.7	$	74.9	$	1,530.5
Direct costs		(647.4)		(272.4)		(225.3)		(62.5)		(1,207.7)
Direct contribution	$	215.4	$	99.6	$	(4.6)	$	12.4	$	322.8
Margin		25.0%		26.8%		-2.1%		16.5%		21.1%



	Six-month Periods Ended ‎June 30, (*)
	As reported			FX Neutral Measures	As reported
(In millions, except percentages)	2020	2019	Percentage Change	2020	2019	Percentage Change
	(Unaudited)			(Unaudited)
Net revenues	$ 1,530.5	$ 1,019.0	50.2%	$ 2,026.0	$ 1,019.0	98.8%
Cost of net revenues	(790.5)	(509.6)	55.1%	(1,027.0)	(509.6)	101.5%
Gross profit	740.0	509.4	45.3%	999.0	509.4	96.1%

Operating expenses	(670.2)	(511.8)	31.0%	(879.4)	(511.8)	71.8%
Income (loss) from operations	69.7	(2.3)	3070.4%	119.6	(2.3)	5192.4%