MELI - Earnings call transcript Q4 2018

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Federico Sandler

Hello, everyone, and welcome to the MercadoLibre Earnings Conference Call for the Quarter Ended December 31, 2018. I am Federico Sandler, Head of Investor Relations for MercadoLibre.

Our senior manager presenting today is Pedro Arnt, Chief Financial Officer.

Additionally, Marcos Galperin, Chief Executive Officer; and Osvaldo Giménez, Executive VP of Payment, will be available during today's Q&A session. This conference call is also being broadcasted over the Internet, and is available through the Investor Relations section of our website. initiatives. management continued forward-looking company, growth and and that such relating industry you product as matters prospects technology remind may statements make to trends, I for the information These and and statements about events. future on are currently projections in current assumptions, based our expectations available

view cautioned forward-looking believe assumptions, not undue on these in to we currently available projections are expectations place While the and information, statements. that reasonable our of you are reliance

for those actual and of our a Exchange results on our Investor available call may filings in Our and in Risk Statements the which other with of variety from including Forward-Looking discussed Relations described materially sections those XX-K website. reasons, and are Commission, Securities this differ the Factors

course non-GAAP call may our earnings nearest found Relations Finally, available I would fourth A like measures. comparable be on XXXX our to measures the this discuss GAAP we of remind to some in of quarter during you those reconciliation can the website. release measures conference press Investor that

let over to me Pedro. call turn Now, the

Pedro Arnt

Federico. Thanks

significant initiatives. today's off year recap that with kick year the We've call just level a a positive quick, ended. of combined few out has transformative has a by that closed challenging high doing challenges Let's

that and market. have average shipping combined On the marketplace that deceleration in in impacted in free the our despite changes year rates to remained as during fairly structure above with logistics claw a vibrancy of to growth year-over-year led challenging that shipping introduce These year the comps already lapped changes back on two-year marketplace. prior free shipping initiatives cost launch still business stable free the negatively more Brazil in fee our flat our front, our structure forced us and to progressed,

that On us extremely the run. up for set developments of also positive side, the year long flip well a significant was XXXX

at and strong to us We've terms to lower which own deliver better have gain year devices scale devices installed time levels beginning allow logistics and service MPOS During sold with both in Brazil. results base Argentina volume, Mexico and to will expanded of and our that Payments we of traction. begun in in launched our Mexico are costs last in Brazil in we network total

successfully Argentina We consistently into are momentum incentive and growth by in already launched wallet and we optimizing with year. improve initiatives to pricing and the QR EBITDA our the also accelerate fourth meaningfully move our prior Brazil those is during and initiatives quarters And as net quarter that revenue Mexico. investments we first of in It half replicating and so redesigned second finally, and positive constant of XXXX currencies the this beyond. programs

capitalizing consumers forward and purchasing Our efforts online trend means. be the their is The clear region adoption pay increasingly as of the move centered on in will wallet us. e-commerce millions continue to of digital of share through going on mobile for and

further and the As and Payments ecosystem through we our into go engagement shopping improve online of up, experience, confidence, our flow customer drive which ultimately positively trust, financials. and adoption retention

logistics the shipments on deliver into year-over-year allowing basis a on importantly, a or improved delivery most results. fourth delve to now advances quarter of made XX% were three front. times me Let the Perhaps XX% us basis our less. days mean meaningful consolidated On in

XX we through XX managed improved in volume made reached of were adoption in shipments percentage our Depth to selection, basis, fulfillment network. have out. only of XX points done is also XX being of Mexico, also a managed and and solution this remains consequence year in of over are on two business our service network being the partner of points gained Argentina we of of while last another not to MercadoEnvios On hours also or inventory during XX% shipping result delivered Specifically percentage the days. our and network. Brazil marketplace Brazil, packages able Overall gained XX% packages moving managed of for XX XX% XX% quarter the percentage our Penetration have delivered Brazil, median the docking delivery and to in the we by already the all in centers. fourth over and area levels points Brazil percentage in main gained consolidated Mexico also XX% robust. a XXXX. cross worth of Argentina all XX% in calling but logistics key been to advances in of XX%. This our on amount Mexico Brazil, Argentina of times points to reduced improve by less, network

when of we depth above XX% year-on-year to it discovery the of that still country. of assortment is to deepened During depth and example, improved choice the the for MercadoLibre quarter breadth quarter selection Brazil product for grew live In and selection. marketplace comes fourth and listings in reflecting consecutive XX%,

commercial intellectual brands, is XX% attributed on which Stores more brands penetration is from complete property solid Official by and comfort to only penetration marketplace. The program driven last quality on their up gross dates giving of Our year. on merchandise from XX%, a was in at solid the in initiatives also main last positive XX% rollout tools results year, but last the Brazil and at to Driven special XX% of better our hunting also season, X% further increase shopping Stores the in sell inventory also by year, to boarding volume MercadoLibre. with Official Argentina protection efforts X% up discovery from improving up countries; not growth delivered well-known level Stores Mexico and Official

quarter MAC, the likes the of Lauder Gap, a to few. fourth cosmetics, on-boarded just name we the Estée During

deconsolidated combination on in hits As years rate of of basis Venezuela is year-on-year. grew The year-on-year. a this result, XX%. yields that GMV toughest been XXXX a on yearly nearly back by an from average FX GMV XX% where grew both growth excluding XX% Keep comp that mind the has the neutral two-year

overview, a me in regional start Brazil. let For

During Brazil pricing year-on-year where grew versus quarter local year-on-year. currency adjustments well basis items we improve In XX% ticket the as when year-on-year allow grew of Tougher XX.X% most us part we the the to look at continue growth implemented on last at to fourth of year we and XXXX a Mexico, strength GMV and economics unit comparisons deceleration. profitability, the rebalance and a for of our and to purchases explained low have share GMV. position as

fourth quarter XXXX XX% momentum the local a GMV sustained currency at on during Additionally, growing basis, solid of year-on-year.

MercadoEnvios, during drive as on results of Mexico, growth XX our promoter last same experience more adoption more greater Just pushing an by greater improvement scores MercadoPago satisfaction of we've like observed control buying indicator tougher net and and quarter. of and period year that percentage over the part customer for rates with previous the over we for the having in clear in Staying the of delivered comps the most over a more explained point we is mandatory the Brazil can user greater experience. year. recently involved This end-to-end become the lower

a year-on-year demonstrate number by rollout to seller and fourth we Finally, resilience per the quarter. free during the spite the of headwinds grew strong GMV of XX% macroeconomic in that local listings of on limit allow. caps Argentina continues basis currency to

another and our move not that us. area MercadoPago payments but to MercadoCredito, We MercadoLibre. of MercadoLibre's the Payment based continue on and importance our off Payments on believe we Let's solutions we strategic marketplaces now deploy progress and Fintech to credit facilitating for only are report quarter, through of for online

those a our distribution opportunity of this partially instances been structural the as in formal of financial technology disruptive In and powerful economies inclusive services population and informal or of products the MercadoPago solutions. been segments underserved of who of we've Given particular, as the the historically online in the envision which accelerating provider for many operate off line region. size to we have

offering continued into a those MPOS billion are Within volume digits total the mobile local the XXX% result our to and year-on-year installed TPV an billion quarter $X.X a basis, triple the first our neutral in where still growth away reaching dollars north currencies on the TPV solutions, from FX sustained the marketplace an incremental to basis consolidated total Payments and TPV devices in and of on QX time by surpassed by Payments FX As base ever year MPOS of of POS our online for grew relevant. growing during most of O-to-O on services gain XXXX. aforementioned share both off-line driven XXX% mark continue grew $X for Argentina and year basis neutral volume. XXX% respectively. On push Brazil of

into initiatives. quarter Payments of mobile inroads the build through we the made our wallet our alternative During network out also

four was millions year wallet year-on-year. by three months times wallet payers was ended also reaching results it an December mobile than north transactions used the growing base digital ago XXXX delivered active XXX% that of For our of active solid larger mobile TPV a on was

usage payment focusing several is are the of wallet cases our scale in QR stores. One Payments mobile on we to

is our all to point, On successfully McDonald's TPV to to become merchants terms payments less launching latter, full Argentina. able for and wallet, in-store represents revenue more results that ranked offer we of to our country smaller than QR in-store was well number bring within encouraging we wallet solutions. that payments important begun stores. two in as equity on the Payments ubiquity to of Argentina of A XX% since been the TPV brand where case in one months has of were lighthouse in our total see We've off-line QR have the highlight first It line on-boarding it also as than network. online both

progress the in debit as credit fund to to their making wallets our products opposed cash with to We in inoperative incentives our align order users begin for cards. continue digital or expanding to right

we Argentina merchants. MercadoPago December been management the invested Results balances of MercadoPago it amount already launched of is have of of gain As and one percentage solution as the month traction so higher than a such, months asset Argentina is individuals asset six only as within In Brazil Brazil far already within of in represented money invested only for encouraging in our product in management to balances. stored in as XX% launch funds continues stored launch. what

financing offer also re-accelerated to expanded third-party $XX raising Our credit able traction. again by to also nicely, products Argentina sources credit are business roughly in originations We've for a further during merchant Loan we million. of quarter total XX% book funding products strengthening are loan merchant scaling users. as fourth growing and the our our consumer Brazil portfolio loan gain and the of financial to continues services the

During we to Inter-American from loan the access Bank, issued $XX book. to able our offload were to Argentina gave the public successfully we trust second the while Development markets this million which raise quarter, over in capital

by fast services execution re-accelerated in Uruguay, in Finally, during our through results quarter. solid this Gateway Brazil, has complemented Colombia, merchant growth the Successful explained business in during the solution, Peru Argentina quarter. our and business the growth

move taken of Now the and report. second EBITDA. highlights progress financial our significant consecutive that steps we profitability key past our the quarter covered I've as over year the quarter, operational to on growth strides made the let's recalibrate has The to delivered we've for positive

Our and conversion rates. our in and understanding improvement how in is leverage, a to part distribute shipping consequence optimize, better of sales large to subsidies profitability of maximize

make Going we to goal. continue prices to fully subsidies in adjustments to and forward fit see our achieve as shipping this order we will

as billings. delivered neutral consolidated was growth quarter year regions XX% an of Let's positive on delivered part important robust starting we by gross billings consecutive move XX% XX% particularly pace Mexico our in during improved delivered down in quarter execution We by of and On revenue our on platform year-on-year basis. the the off basis, growth driven growth. above Brazil XXth FX The to streams year-on-year, country monetization the continued year in as with the on most results billings gross a Argentina P&L XX%, marketplaces to throughout accelerated gross well Payments. reached

million last the of P&L, grow ascending continue remained FX also $XXX neutral healthy an revenues stable with deploying growth net devices and a to and representing realizable XX% year down during XX% year-on-year. versus MPOS Moving at to profit gross rate clip costs over revenues discounts of net the year. explain our margin quarter. cloud increasing the infrastructure costs value on public Warehousing last of shipping compression on Gross

also and about We margin these that this I evolution presentation. slides cover the accompany the in am have included of OpEx a detailed breakdown to of

XXXX OpEx net scale marketing main G&A. a to can of $XXX revenues to ascended XX% year the quarter mainly of year of If revenues Venezuelan this sales expenses in the expenses year-on-year would basis charges. XX% million scale exclude during XX.X% deconsolidation, revenues last development prior about $XXX.X fourth resulting been be operating OpEx of or and of we to reported, or deconsolidation cost the points. due the operating drivers million XXX As product of versus and of have The attributed

gross For comparative XX.X% this exclude leverage a year was purposes, a point XX.X% OpEx a Venezuelan deconsolidation, ago, basis if of same as the versus billings percentage we in expenses. the quarter quarter operational XXX

by losses volume program. saw interest the new mainly the a expenses invested in issued contracted shipping discounts in income also Brazil sequential higher to shipping XX% we as in we and the and in $XX.X the XXXX operating better The generated investment million of Chile. XX.X% interest returns. versus also result, we basis XXXX working capital quarter operating income in issued quarter convertible attributable due As Argentine financial to to accrual part on and last rates as our increased on availability the rising Uruguay of August out most low the last facilities optimized Interest proceeds attributed more for we a note the country, of convertible well Argentina, that $XX.X took stability which increased by million as year-on-year peso note despite

Our most over U.S. as a gain position of the the part was partially peso for negative dollar revaluation $X over million from net $X.X the arising our million U.S. by Argentine in from liability offset of loss attributed result asset appreciation Mexico. which peso million dollar the ForEx position line net Argentina the Mexican in $X.X was a

as our the laser saying of execution an I'd proposition previous the reported forward. $X.X at also improving resulting million end offering We across businesses leveraging going of of XXXX. $X.XX. we've more our Thank throughout as ever quarter can this, with end confident scalable net retail, of and As net ever call platform be competitive must we logistics that, loss the was our commerce market focused value product a this fintech review in region. in With as marketing, versus that of the the as always the fit, remain differentiate lower Latin validation questions focus basic for a That the result quarter we quarter main take will our in with money built now. ourselves of America. forward market your you. we fourth of to democratization share per And and push like on users to remain fourth are concludes the all by we loss as

Operator

question Thank from comes Olson Instructions] Mike you. Piper [Operator our Jaffray. first from And

line is Your open.

Mike Olson

Hey good afternoon.

then getting set in on environment anything of aggressive to growth. larger more forward You better, second kind to accelerating continue we just GMV or media And reported end? revenue kind an with question this interesting Thanks. if potentially more some see self-inflicted, and then but some of couple other metrics been is through was and I players was on your just GMV expect it should a like I'm just of chatter but of you QX the each on GMV impact all closely wondering competitive diverge? had growth Brazil, with going some decelerating seems Profitability the aligned e-commerce growth revenue months obviously there's of past in or

Pedro Arnt

Hi Mike.

act So incentives the year changes growth just find out of and the half and of shipping growth we've And is equilibrium a is the to and in there right of the and structure balancing back act that's underlying in profitability. the part last pricing level that finding Brazil. nature been between balancing between our carrying right business of the profitability after that throughout

our to that is an see as significant those, manner through piece the revenues. acceleration net shipping we a flow revenue natural P&L optimize other just of subsidies it's as in an sense contra The accounting portion

easier will what our that's Brazil commenting competitors. try terms certainly the move said we we've has doing. comfortable and I going I key into Competitively, probably on are GMV We XXXX progressively been think the very always forward, a comps understand at all get the on look market. as forward-looking always statements. of to front we're competitive think we others in trajectory

We growth market quarter. continue this to deliver above

account above would growth the significantly If two-year tough year. you to market say at from comp last I the stock look for

think users. We robust to most believe terms, we is smaller very need us. has network, logistics look and than encouraging long ecosystem to to give what grow our continues share potentially both I over us where play that platform of run. and for of to continue been players grow need quarters our continue to our longer fintech market out building certain will and are there we in we trend more solid be out if rolling terms initiatives retailing the continue on focusing our and But the our Payments

Mike Olson

Thank you.

Operator

you. Thank

question next Markets. comes KeyBanc Yruma from Our from Capital Edward

line open. is Your

Edward Yruma

Hi, quick do as date. Help proprietary us on think should usage questions how this good in 'XX? outlook afternoon and seeing we about results logistics of you guys. A understand strong network. build couple capabilities we the your Obviously out think capacity how the you. some to of and about grows Thank as slack you're have much

Pedro Arnt

Great.

think the by that first whether that be capacity last I this that network long-haul, approaching of has we're whatever. So that is in mile, future way capacity long-term multiple be we're sources ensuring delivery mile, building that

that demand multiple together are And that as combination it's stitch even we carriers well trying do independent drivers. of in able large and established more logistic technology, localized as businesses regional will scale that So midsize small truck sources. carriers we deliveries so through have we're to that from smaller to that and a can for our this of us ensures that all

scale entirely not not built what large where a multiple sources. in combination by players large seeing being the it's but it's e-commerce done U.S. So by certain is we're carriers, of unlike the volume the

out continue we think out reasons capacity capacity constraints. build future of always is and sheet network capacity. these of is far term long through it delivery that so what XPL felt guarantees the balance really makes the building as and different constraints off is capacity that we haven't hit sources allows we've avoid we to logistics most us so to sense, quickly scale I to one This believe the So,

Edward Yruma

one adoption it. about the MPOS how seems It you the if kind of follow environment on increasingly rate? other the and that I Thank market may competitive. how may. getting change up Got do devices think off pricing is and guess option like I competitive current And you.

Osvaldo Giménez

Edwards, Hi competition far is in we're has the device competitive, getting of prices. hello. Osvaldo, related seeing this Brazil is more so most but It been to

the We been have limit continue Brazil. have gave of competition continue we number and devices we not selling. yet the in And far able able charged to have the business grow in confident fee so discount we'll be this seen in and to are we upfront, what the we fees to merchants growth delivering recently the very we the are seen to

Edward Yruma

thank you. Great,

Operator

Thank you.

comes next from Our question Sgarz from Sachs. Irma Goldman

Your line is open.

Irma Sgarz

my hi Thanks afternoon. taking for Yes, question. good

think I margin a looked I confirmed on accelerated at the correctly bit. Firstly, if little the user the growth numbers actually

wondering in was I if or growth impressively mid the over so and consistent rates the with decade growth you So last could XXs.

in So to one in number you a hand sources the I it's number side whereas growth on of or driven growing the transactions are be we the wanted geographies entirely one the really customer the really by second been trends the whether just growth - seen that's TPV where between growth. been to ticket you've what some the it's the it being and seems hand are different transactions driving the big then or just like see or trends mostly on that's the of average GMV cohorts? of that different side two as And the ASP what of margin, question, understand terms growth seeing

you you. sort if basically off just the reflection front going the out could So and in parse of what whether forward platform TPV we just specifically that the specifically expecting initiatives you space? of should Thank be on that's a multiple have

Pedro Arnt

Irma. Hi

and volume versus me units So start with marketplace Payments the question. let

the marketplace. a series that's as a So to items, on price initiatives these that sold items low increase on weed of low so we've very the really cheap in worth generated tickets possibility launched we've and entirely focused out flat and significant introduced also average stuff units capped fee sold a an units the you to on know average sell of the on selling recently and website, ticket lot a have affected the deceleration the marketplace we've very as on of platform wasn't being the that

it's of I and ticket a Payments also that's utility than I like the a and will process and service cases I cases, both both multiple question Marketplace. we as that more very Payments would grow online QR, phone cell use be offline, to payments the also prices, are should after very has so top right fronts on attacked the go as and offline initiatives being explanation through Payments So store different story we posed to will ASPs, MPOS more On a QR Payments think for and obviously both average robust and online market lower something say, merchant and think have growth transactions in your now as use ASP have online business. continue our service in with different wallet and number on high we up,

trends are see both, in why [ph] sold. in that think I TPB in think units that's I very nicely growing growth underlying and deceleration and a they we've different seen and very you have marketplace can TBN So Payments

think bringing our and particularly we're quarter focus we disclose. don't who There of attracting In also is the terms really use millions to not necessarily I that millions we've and continue and a re-accelerating say pleased Obviously, early what confirmed still is I still the focus and growth on are of user services metric of who registered would we marketplace. stages Internet. of as growth, new and with in buyer on we buyer to on are users the in I there's acceleration is users, it's although that a the an think lot buyers, there one seen in

users also existing see GMV have growth higher we just base more trend of look also to from we when but a be per existing positively to users. whose that growth significant So or the engagement we users, new driver solid of with the user and orders I should has importantly user per think engagement continue large continued should at of

Irma Sgarz

Great, very thanks much.

Operator

you. Thank

Our next America. of Bank question comes from Ford Robert from

open. is line Your

Robert Ford

Pedro, good about Thank spoken while. you in haven't evening merchant loans you everybody. and a

Now business that different on a and terms you your you're how recalibrating, cohorts could scaling talk about that in pricing of sizing levels across comfort both you little and risk see risk bit and offline?

Pedro Arnt

Yes, so in we took seen the a we've seen pause books improvements the some originations have in as the middle profitability get from loan were provisions. and margin credit improved. in and What recalibrate we better loss of the to and provisions profits reacceleration loss is last of allowing loan because year also we've the models a

about. future. management to The grow manner, and time prudent the This foreseeable the continuing the to and continue amount continues is which extremely to be a gas opportunity when we I will on that. and should down business the think right we're see slow that we managing we business we're credit reason with continue more think little will that of in loan size originate we continue out skittish cautious comfortable to book we is and when little getting so in I step excited the so, into way and the of more large, the a for over the And this a that very originations, we're the bit encouraged whatever very, loss of provisions bit margins we're be

Robert Ford

they've your wide of incrementally cohorts have capital been And you are are more you, deployments riskiness far, spectrums risky? of into gradually or that going so across incrementally

Pedro Arnt

think, from this stage I is early about cohorts. not growth riskier just so it's again that So

we and portfolio. begin more of acquisition channels the As can that fintech more loan have cross-sell ecosystem we customer grows our to

QR So users, it's users, not into move only loans that on marketplace, Yelp we're riskier now we eventually MPOS in-store users. the extending into to and can necessarily we're moving cohorts wallet

managing feel So within that there growth. is who attractive room comfortable the line plenty, and also geographical cohorts of and there's are still grow loan we user the to then risk still plenty book

Robert Ford

Of course, thank much. very you

Operator

Thank you.

from James Our next question Susquehanna. comes from Friedman

open. is line Your

James Friedman

above Hi the going dynamic results I for Payments off-platform make specific eclipsing And about talk I so guess to dynamics billion gets now? on I Jamie on $X we before can it was and it's Great off-platform as on-platform? when is off-platform. on-platform traction just one Susquehanna. don’t and taking my was a marketplace, know then a projections, too like like the off-platform much Thanks some TPV. questions. what but Pedro, the there here. just I anticipate want question, It of on looked on couple at you that the between the ask so potentially are

Operator

Pardon me take speaker, please yourself off mute.

Pedro Arnt

about sorry off. button that. the I'll answer turned now mute with Yes,

for in our was we So off-platform, off-platform at the significantly from obviously on-marketplace. larger at business. the away markets look look first being growth. marketplace growth we opportunity your opportunity quarter continue the first the that doing by we're to last history there are to the everything And on-platform time in on-platform. in transactions off-platform growth for more than quarter is venues When To see significantly larger attacking of our obviously we'll and driven marketplace TPN growth grow in than when question, that terms we're of we've begun already

So I future multiple think be always the see distant we times as larger still on-platform. we in to also we've not on-platform off-platform look too off-platform the to on can and faster. is and at also see significantly if GMV with you divergent that off-platform Payments than than larger marketplace for TPV, aspire and that growth will TPV TPV growing said And being and rates were between already we

James Friedman

for gears, switch if that. could I thank it Got and you just

cetera. side, thinking was on how previous are logistics we journey light is light, know, So, South like the you've in where should seemed the about we the that assets et answer it we your in asset about emphasizing thinking build-out how we that, Yes, assets, in heavy be because versus like warehouse over be but process North then general described strategy time? should it and

Pedro Arnt

Okay.

asset retail useful are that this or in the light think, is and within these light not becoming a I'm e-commerce at lot happens industries I look you how evolving. sure way evolve. logistics if So, non asset so

talk vehicles, mile, it's we or airfreight, when about about of none we airplanes in talk when last sense So look, asset those that and warehouses first if mile, our we on light. sheet balance long-haul, warehouses, are

were you party operational design and in of increasing inject third levels cost. control logistics more operational if service the look try that continuously and operations, to those to operators the we and we level over Now exert more lower as it’s efficiency improve at

us of capabilities if are out XPLs. in think having now countries, build focused term we the term on we we don't the of more on Right results I way now. within any logistics network, And the for that our our gets over decision. out haven't best term as signaled and it oversight longer design. CapEx change And continuing OpEx using for will quality from significant most to terms logistics those sense I would makes hiring obviously, we longer in do the those company, bringing So short design by what to in we're necessarily moving of think own beyond, people but I logistics sheet. always things primarily for waist the different that's say and of assets But in away the users them a deep balance logistics and

James Friedman

color. the for Thanks

Operator

Thank you.

Our next from Morgan. question Santos JP. comes from Marcelo

is line Your open.

Marcelo Santos

thanks taking the for question. Hi,

not business, have level, you LatAm Pedro, but of and for asking business break could have profitability a specific the of you your So and conceptually kind like the you what down I'm business, credits above you what the have wallets various first is MPOS business. is the number,

more receive for a do question is from the the outlook right accounts, first And indirectly the to the like countries, make able banking be to about the specific being several of This think transfers, wallet bank what bring on and salaries to the services the to in to competitor components second could what features this we the wallet, profitability money because plan traditional could now? services. kind is to more into is the wallet potentially incorporated these how So question. users of

Pedro Arnt

of sense therefore, disclose how Okay, unnecessarily we businesses I'll we that we think so want and margin But a the now. give you about structures. always specific remember different right competitive general don't information don't so handover to

terms distribution And it's business obviously now in a else short subsidies, shipping logistics. behind one we the business everything tremendous platform in of that is is do. are for both right we aggressively our So build a marketplace term, also out the that of investing

so, a running low that a And at one but we're positive margin margin.

build to Credit and begins think The is I if simply generator positive long deliver point given that EBIT and that more we over business in changes from we reinvest. now of firmly has there as scalability right is now has QR the aren't that business line it that to And then as should in deliver term are to contribute alternative top a believe significant Obviously network. margins we OpEx Payments pricing more nice we wallet scale ones the Payments EBIT as the a term a or a base we business of investing installed that that things. growth business and business high gains it's leverage. gotten the cost. margins can longer will business scale out this of combination with also in-store aggressively it's improving a see it are that the

these for once say these all are I continue gains would and able have businesses? more the mode, we build foreseeable that at we we to growth be out behind leverage are investment be the obviously So in the right and scale, scale to future businesses will that margin of but businesses size deliver

Osvaldo Giménez

Argentina need think regards second front with year straight are money accounts. account to became in those the goodwill on in legal I to regulatory With on process, both are it easier regards is to now are, from bank the it's the legal kind into last that a make the that think same and it where salaries yet, account certainly, starting at It's right already the I fund transactions I was the through by it the is very, salary the virtual a regulated so that time. is one the pay transfer do legal it Central that Brazil to In now by you starting and and have and things promoted account. think to be should to But happen. Central to bank make into any pay where to And end past not it but happening point, this from we we front there banks of bank because [ph] have being money Bank. account. Not in it's regulated it a it's Bank Argentina country happen have is all it wallet straightforward to because

even Latin has countries, too in directed in that available you it it's do many could difference. Brazil there, is will countries steps that possible time online. product thing earnings salary, real big to from it's it and other are roadmap a you able easier pay to yet, in to be America, we service that not other At not and account. but behind This something a platform. but similar to something wanting to in be it with easier something happen still and our [indiscernible] where it of I is in several transfers our in central salaries, it been is but places, that Payments Eventually, some We make Europe need if expect and something America we where Mexico, system the to can as wouldn't conversation and but has funds hasn't say was those the happened and bank not in yet pull because there's because develop is happen could be out that and in mandated it starting in a many Latin mandated the

is, them from to out than product functionality bank pay funds And done product it's wallet but asset a to to rather of is meanwhile, a users what likely keep as in pay more the payments in one money and make so to that yet, be collect funds. withdrawing as scalable Argentina is to soft well starting as create in so wallet, It as to to supplier. encourage that because second for happen, to is the originally the out payments. is monitoring Brazil, our The and then more have make able we

our year. to see joining is it So on the of roadmap the expect in during progress we this countries and several much year totally

Marcelo Santos

you. thank Perfect,

Operator

you. Thank

comes Our Deepak from Mathivanan question Barclays. from next

Your line is open.

Mario Lu

Mario Hi, I Deepak. on a of questions. Lu for this is have couple

consumer mobile now credit that stickiness, and business, usage, can of on call wallet have users trends out see over you an the terms Thanks. Can multiple compared times levels us expect any few years. than rates four Payments increased give times whether And to last more update see the CRAIOS you cohorts in year? you multiple just you the secondly, to has spending On shipping traditional year, user any past cards? this

Osvaldo Giménez

wallet. get the to So, we'll

where with starting the are only a country cohort that but dating, of to see year. in We was launched end last launched that Argentina we Payments, in-store more a first mind keep which little of we May

much So pretty multiple people What payment. the we a seen start seeing paying products using we're who mobile have increased year is by use then results. utilities sometimes start only they phone, of half and so code it's up of QR ramping

is of are that year-on-year. think, started and people coming increase and new number the seeing Xx it's multiple a And used use because feel of are is in the users we use, majority and growth product recently new that from was we growing have cases. we I So

you probably during users continued growth use number for look and each more. to cases the of is it flat at to still year related these the and even receive all number the when So of numbers, but total we holiday is mostly

Pedro Arnt

more going unforecast year. In much increases expecting. a of what pricing believe to something line what's do we we expect were with price really in in absolutely CRAIOS, unlike other had that last years, in change I was occurred this year not and terms where think That's in we not really happen

as have will CRAIOS of price subsidies increase even cost we don't pass free And have think good what we to the onto our portion move the users, sense from the volume that. We a shipping of only we initiatives. continue optimize to of necessarily be. will away increase that full think a and I and we but

be this price a all the conversations given we've fairly increase So should manageable had.

Mario Lu

you. very helpful. it's Great, Thank

Operator

you. Thank

Ravi question next from from comes HSBC. Jain Our

Your line is open.

Ravi Jain

selection selection and the is the I Does you and a as mean goods have that Hi, in questions. now the out given you product And e-commerce. getting are Mexico your of adopt on on Brazil management to you Mexico? some of question Payments kind give cross-border for out thoughts you ecosystem color especially on packaged the good I competitive it pushing in perhaps maybe that in Do banks Thank asset second the the as initiatives Payments is well? country? going on the how quick Mexico afternoon. attractive to is Cody. Could environment and us system One couple is broaden or the you. the their mean accelerate Central to Bank Mexican of see need roll more payment consumer

Osvaldo Giménez

the second Let me in Mexico. regarding with start one Cody

out At able yet, institution impressed think regulated that of but in product, participate this impression we we the be at these we come for so so it look our first far regulated with did So would to a not I mandating point the institutions. Mexico not bank are Bank took is very it. a not and we

we not was I the we saying that. resource product is were the significantly about had very in as better Argentina encouraged that However, in

Also card their the are remains to [indiscernible] are it plan. comfortable willing these fees. to we seen encourage banks our debit So because be sticking networks it cannibalize how with to would

continue to So with what plan we doing replicate Argentina. in will our we're

Pedro Arnt

in think consumer GMV and and of marketplace trade, and just two Great, still cross-border goods put X% X% to represent between I lines combined of first those less all, packaged X%. perspective than

our offerings fulfillment recently CPG from are cross-border for the Most we tailored there sellers there from as our up manage efforts features full trade is of on still product, room have sourcing the grow logistics So we bulk been few last categories, and sales inventory that that and to into shift over count. allowing the those for for different those in glass is that that more quarters for product improving mix significant small. international sellers centers from of around SKU on skews in our but in are they're cross products, half stocking two or them China border U.S. send

more roughly CPG get be SKU but count. next this that XXXX our on objective for relatively of for overall and the really a potential making of I meaningful The and on is crossed efforts will focus we've an think our year portion both SKUs XX,XXX important that upside those I a lot it's year business we early to us. shows also continue us as to to GMV, in both think have

Ravi Jain

you. That's helpful. Thank

Operator

you. Thank

Our from Marvin BTIG. next Fong question comes from

open. line Your is

Marvin Fong

Hi. Thanks for taking my question.

very the there could a curious with revenue a the trajectory was you. about follow wallet you adoption driven reaching rate a might something a of digital Argentina. if up, adoption just Payments Brazil as your Thank TPV impressed disclose on I'm or structural one then Just you different might And follow on rate? QR thoughts the the XX% rapid quick in that and countries I what's is of have Payments in think quarter on was? similar what that

Osvaldo Giménez

Argentina. [indiscernible] Yes, a, QR let and Pedro. with of start me excited are And the we question start code to our very let payments with financial in

driver growth huge for all monthly I'd that top huge XX% is such active in a code King, one bring the to major and able after has have a And to cases say been that stations been as Burger of in up adopt from merchants payers. popular QR countries. McDonald's, shops and they have most the the of payments the use large country been We drive many in the and coffee gas

larger think and in to little are bit using longer in more a take a early need Brazil because why machine we little merchants. days. still are ERP I will with complex Now the integrate that's you bring the it the to us in Integrations with point-of-sale

major numbers. with the early but very have and cannot started it's still We we on Shell stations, comment days gas with

information to expect coming quarters. the have in we So more

Operator

you. Thank

from Cathcart Our Richard comes question Bradesco. from next

Your is line open.

Richard Cathcart

Hi. Good evening.

the proprietary the on Just question on shipping Brazil. in a quick

previously. where XX% GMV from think think going was were of I mentioned you increase that and Brazil a big I we in pretty for

shipped to are of the on of couple about costs that solutions? kind questions more on advantages are proprietary of then some are see XX% buy enthusiastic first question solution? unit the second through given So that, products through in the of the to beginning of all cost, a is of shipping improvements you beginning you're the just scale you And from propriety a now sellers, Thanks. they better kind working are see to that being beginning in

Osvaldo Giménez

Okay.

one piece around start the let which So the economics. unit me with is second

build I on is us the time we've what The that a best-in-class out the we to thing first is that, said first network our that with building competitive anyone might least focus think deliver logistics else allows network and always have primary that at really ensuring able driving or over to gets that's delivery don't network we with time then more else, be competitive because eventually to down and do. someone make scale something we unit advantage we complex costs that over that need and to hand sure as could be the would

obviously mile perspective, they see have are cost an first eliminate overall that a us having fulfilled is from said lower because now that, network altogether. what So by we items do

efforts competitive on [ph] you cost costs. control and give Brazil better us far over their screen Remember greater cross-docking dropship our look the the given many by they are allow don't scale player that largest at therefore do Our when in experience. necessarily and size. and lower routes Piraeus and for are service They network a

docking is yes, is cross So cheaper, fulfillment not.

that that over items are should on Scores Promoter that will those we when ability have say fairly achieve. to those that better it's something [indiscernible] be go we need that they and be able but down conversions the would items in confident terms improve. Net we'll and seller feedback we think driving continue time. we costs on give drive can early. of are I And to orders We sort of more ranking preference that fulfill and determine its listings we're I scale what out and that's in are sellers, we a and before better to fulfilled data is overall because user it volume able with the give search because once to over volume that Obviously are to who greater more to time full feedback on network time build better you we unit send something don't still than then through experience, more

Richard Cathcart

Thanks very much.

Operator

you. Thank

Madhukar comes question from Deutsche Bank. from next Our Kunal

Your open. is line

Kunal Madhukar

a Hi stepped investment thanks to multi-national that provider for up question. the… With certain about just taking e-commerce my how of regard Brazil, much in

Pedro Arnt

try we a barely louder, bit you to speak little Can you? hear can

Kunal Madhukar

better. this is sorry, I'm

Pedro Arnt

Yes. Better.

Kunal Madhukar

of of that great. the have income to just Okay kind much those markets with you, the entered investment they're what in up Brazil and regard their the focus stepped targeting terms certain or in like in how upper markets, those areas? multinational With lives your e-commerce markets, demographic GMV is in just Brazil, that

Pedro Arnt

cut little you a Can bit that of we're again? getting, us run it trouble Sorry, having off. by somewhat

Kunal Madhukar

Sure.

GMV or the active e-commerce sales demographic that areas, the Brazil how the in provider Brazil's that up income how in retail stepped upper footprint they're of much lives of targeting, just upper of investment is targeting, and footprint been that the the those for those Brazil, So demographic, what terms in much in income has they're proportion in areas?

Pedro Arnt

to what targeting, regarding want competitors I don't are I their potentially might So comment misspeak strategy. on because

overall the the Consequently going we've more percentage of I we and reasons the seen population. Brazil relevant of forward highest portions and in higher markets of the think Brazil a one of e-commerce other about market the demographic beyond region, market e-commerce than one the a think where e-commerce things have such income is of it's a that attractive does it's of the penetration in retail. permeate any as

have to being broadband in where their and proposition be individuals, on combination base focus in winning high grow most the decent Brazil Brazilians equipped significantly greater is a of think e-commerce only we a with installed smartphone I penetration much you will try already smartphones or market So and if not should as connectivity. a income are it's

and from of tailwinds going for we give focused forward. us lots should that growth I quarters on what secular trend think that's remain and

Kunal Madhukar

you. Thank

Operator

you. Thank

from Our Gustavo from Oliveira next question UBS. comes

open. line Your is

Gustavo Oliveira

Thank in by taking Brazil that to call mentioned perhaps for you of question. GMV understand my Pedro. the self-inflicted beginning decelerated I want Hi at you the adjustments.

there having your resources and but Does levers you're so in allocation no the XXXX-XXXX of I when your primarily how to subsidies shipping look the other You sellers know it allowed and efficiency as consumers do credit bullet, logistics shipping remove talking logistics? subsidies reallocate to to from most? think platform the Well, matters It that versus to was Stores. in on. what your you of in about getting you invest me platform, made your an and such some silver but investments indent the you or build-out, on Official focused to seems you're you forward, success XXXX-XXXX you're and which is in do

Pedro Arnt

Gustavo. Hi

from few that. a So

First reallocation of all, a lot the subsidies. is of the actually within shipping

us So they and I think challenging economics were the had were we're vibrancy ASP from a associating from perspective the items moving cost was on our that shipping. item generating Users platform. very moment were of unit But ticket for that we subsidizing down. decrease brand it obviously low right an because P&L or shipping doesn't free think challenging as I linearly with a for cheap goes the

as items for subsidies northeast up we across I number intelligently ticket the are actually XXXX, well. investment P&L had program where more shipping other down gives start us would capital target a we're level could we as we and the reinvest And insofar at out have. plan within to investment higher as routes more might we're board. freeing our mode. investing that for So subsidies that profit most fact now our the that When in of the but continue revenue relatively is up strategic we us freeing help some help sense like so out we that with reallocation say that we start comfortable you it and the for think and and profile now carry are margin north shut look to those to at business consumers you offering lines, a targeting a of whole, do number We aggressively of across the how look in feel general full I low our profitable, but revenue projected we

it it invest just how allocate So sense optimizing we're more we're and think make makes we investing the shipping to everywhere intelligent. to subsidies we

Gustavo Oliveira

you. Thank clear. Very

Operator

that management conference. closing does remarks. Thank today's now the call session to back conclude to question-and-answer over turn I'd like you. And any our for for

Pedro Arnt

Great.

thank So for questions. the everyone you

and questions. hope you were a lots of given I questions good think I those clear we've answer.

to around have of QX We'll updating the lost on things revenue make way. sure thank which give to year Thank forward reach think where so store, we to you a look got number. out answer Payments is XXXX beginning you I in of along the the you the we s in and lots you.

Operator

and wonderful in thanks day. and disconnect. have does conference. gentlemen, Ladies Everyone may program participating conclude you a This for the all today's

MercadoLibre (MELI) 26 Feb 192018 Q4 Earnings call transcript