Earnings call transcript Q1 2023

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Operator

Good day, and thank you for standing by Welcome to The MercadoLibre Earnings Conference Call. At this time all participants are in a listen-only mode. Due to some technical issues, we will begin this call with the Q&A segment. After the Q&A we will have the video available to play on this call. Thank you for your understanding.

Operator

we the time, I session, this mentioned. at will question-and-answer conduct as So Instructions] [Operator

comes of Our Morgan the first from question line Stanley. Andrew from Ruben

Your open. now line is

Andrew Ruben

Hey, the Was quarter the curious we I'm the increase bps the take much on XX shipping It value see great. if bps fees about the XX for rate. strong I'm on final you commerce question. a was of Thanks very seller fees. interested the for about items. any further it to on line take both in helpful, would the could pricing change just rate drove dig in your be those in thank a bit mix, of anything contra trying there policy? Was you expansion what maybe understand on revenue

Operator

Yes, we now. Pedro, you hear please. can One moment,

Pedro Arnt

me Can now? hear you

Operator

can, Yes, we Pedro.

Pedro Arnt

Sorry.

just encouraging And with done to everyone after a technical please Q&A. video the look difficulty. we So were at we're apologize the for take

the little mentioned. three bit you it's Andrew, of a things

on change began have we So different prices or and to selectively zones in markets. shipping select continued routes

the so of has improved from net shipping consequence actions. pricing those as a revenue And

driver the been also out rate at of different across categories. marketplace. selective beginning on the typically final year as there's value a we some higher mix And has Mix the the seller fees of take first fees, quarter, shift in towards improving pricing carry geos in

Andrew Ruben

again. the Is how more you warehousing of pricing in Thanks select on some tests that zones logistics any the different follow mentioned fulfillment and the as a markets. up, and implemented quick Great, routes and fees specifically? you've in for change core or

Pedro Arnt

no. Yeah,

fulfillment related the terms note pickup us our cost fulfillment. always increases anything, exiting monetization network, fulfillment as the drive priority quarter, a penetration. to fulfillment high in beginning passing of some to this for high throughout Brazil, So and primarily transportation to usage a on on seen up on sequential of by historical the of costs first more on said, I adoption continue Brazilian is really We've If in fulfillment incremental ramp is within to the less service. solid first to driven

So that we continue sequential accomplish first to goal.

monetization, fulfillment like we other second we've the the probably markets. once of Mexico levels reached in always said up in more one ramp The is sequentially,

improvements So driven services, price but on monetization on logistics the incremental increases monetization not more by transportation are much costs. fulfillment on by

Andrew Ruben

it's Great, clear. Thank very you.

Operator

moment we while one the you, question. Thank next prepare

question comes next Goldman Irma Our from from Sgarz Sachs.

line is Your open. now

Irma Sgarz

Hi, thanks for taking my question.

other in other leave you're But rise areas So tech continued XXXX? your innovation. doubt development commitment more little about my the question technology than relatively is your beyond are deploying and to adtech, spend there in expenses, to incrementally invest which any new product specific

products imagine part advances or particularly investment any future? CapEx there either months that new application I learning and And the the advances, functionalities. of question areas are then of cycle and these this on the opportunities so, to and line, you require a they is, Thank you. excited six second the number about related? through or greater the will already into use machine across over with But OpEx and technologies AI is last the you're

Pedro Arnt

Hi, Irma.

product most on the terms significant be line important, a continues it I deleveraging. to of So think, clarifications, couple yes, development, in of

from haven't our product primarily generate are taxes, sales basis two top expansion, solid to I basis think across points that able look margin been The on Brazil, on and incremental cost super line, then year-on-year lines. development. a we at of margin we've XXX when in most certain

mind hiring in of X,XXX. that down about to from come rate Bear X,XXX has the incremental engineers

engineers that all acceleration hirings. a of the and rate points hired in basis not annual realisation portion continued so the engineers significant a year, are And of we of consequence of XXX last those a

slowdown of which in a plans. So hirings, deleveraging unless to the currently significantly product is for development, from again, on next year, the we up not we level see begin ramp should

of of is advantage. really different board. are technology are of really products building split constantly. those across terms and or engineers And In that our the investment, a across our it areas we as the competitive improving product We and multiple out see services either

So the they're fairly among of. aware businesses evenly distributed you're existing well

of terms And In impact done what engineering on see work relevant, consumer of elements of we we the midterm companies, the think are of facing very to experiences positive as also AI, productivity. on. AI can terms I do most in some increasing short amount we deploy being

help of reps, more improving workflow and cases, focus and on for workflows to customer terms efficient. and the now search is the of of I AI products website, improving on better specific reps, service in quite -- obvious tools, discovery existing finding better and a streamlining specifications where deploying then understanding better and use right LLM through assisted products, our some with think interactions are AI

hope but ones currently think going we innovative with I just can come I on the consumer that that, we ones experience, And of the are of that work lot a And other working there's mentioned into most. the on. facing to AI up forms then we're place beyond the

Irma Sgarz

thanks Great, very much.

Operator

Thank the while stand prepare question. by you. Please next we

question next comes Marcelo from Our from Santos JPMorgan.

open. now Your line is

Marcelo Santos

pass more mostly the mentioned for that my because or about good in is cost improved Thanks to scale pricing or Hi, economics? benefits you the wanted efficiency I you. release. logistic This like Thank evening. ask improved experiencing based of to also you of are you taking economics question.

Pedro Arnt

price not it's driven so Yeah, just increases. by

continue in of of to portions improvements different see We productivity terms across network. our

--in scale and pricing a it's So of benefits. increases combination scale

Marcelo Santos

Perfect Thank you.

Operator

while please moment, One you. we Great. question. next prepare our Thank

Thiago from next from is Itau question BBA. Macruz Our

now is open. line Your

Thiago Macruz

you thank great a question. for my congrats on quarter. And taking guys. And Thanks

has Thanks, in reached the where now And plenty Would invest environment? turning somewhat that make that Brazil, of shed chiefly the guys. the see you're seeing consolidation we a business accelerate more market you you're be cash? the this of in the light mentioned a that today? operation generating it the Can differences to sense You've softer main competitive and warranty of QX. point also, on some economics

Pedro Arnt

Great.

a the So grown I few part And think party as slowed very it in the with significant was that to we reaccelerate initially operations amount healthy us able had had first down margin business, structure, we allow a over business wanted to we large to much be internal then which we fix, there fast. that signaled of past because internal operations. quarters, would and better

are phases beginning you're to that see of initial What now turnaround. the

you how if we different see And acceleration. some product lot you're is hence in that run, of being XP, improvements in the important continue to positive XP the to trends, give benefits we which we're see XP us more should categories growth seeing interesting across going business feel the accelerating margin and factor. So business can continue these beginning a should competitive confident an going forward, across lines to be where forward, see some

at more there look network, consolidate the you things we in grabs your market behind couponing think the efforts, will that look spend see for and term. of to you even more share I is On point XP at you certain logistics especially short investment Brazil, where market, aggressively share, if into our results, up investing market did like marketing certain lean

from actually investments was a in meant those dollar contributed very on perspective. it which was return that top-line, acceleration margin wise, The strong

more position. market that And share feel reflected that to we So leadership try investing in to our we we do numbers. more are strengthen see do aggressively rapidly

into on the areas incremental Investing as term. gets even where probably more sense, return much investments make thinking us those long don't

different to in to incremental the scale we at across a way growth. think be so and But come the market managing that have, incremental share for profitable. to those And understanding want above we And at first that gains market manage investments way, I that's we striving an aggressive way continue market that that time the we're share in P&L foremost the markets. continues and same

Thiago Macruz

sense. Thank you Makes much. very

Operator

we One you. next our moment, Thank please while question. compile

from BBI. Our Pedro from next question Pinto is

Your line is now open.

Pedro Pinto

you. I question. across the of like e-commerce taking would Addition from for everybody you, to regions. hear Thank

As market other are to would good increase basically, think in do strong? in share deliverables Mexico in Do may like you as Chile? you it's to shape. be timing focus such long I of seems regions what time know Brazil very in think as to gains and So

Pedro Arnt

great Yeah, question.

very some Peru. Chile, previous Andean into I the issues. money attractive a consumption. based put into large macro on think of midterm went markets, In continue years, opportunity has comps lot Colombia, to see tough was a in consumer we that Chile very in the pockets

GMV means so the of was previous over And that that revenue acceleration has few last already beginning quarter, around. and growth was positive been to the and slightly in we're positive growth even quarters. and beginning in than Chile more turn rebounded much rate significantly to And negative see that this quarters. down

pandemic. long that throughout of confident we're Chile that improvement our fastest-growing ago Chile should so that turnaround one the markets So and not was continue

comp of the once from a that potential us, market. think that are we so there's And issues lot behind

this for small versus prior we that Peru spend that year. P&L. quite over customer significant But is spend acquisition are of consolidated a nothing last our in and market, there size us, year increasing the that impact the marketing still ramp-up is dramatically for years, marketing

for can see most market us. we that, to enough hopefully, the but And on challenging is And double Peru. been returns on that's continue we then down Colombia potentially

not for see right P&L little better of that market that of we continue profitable, improve general, in more. for at think that matter amount receives Colombia think a the a us market. we point investing matter that for product attractive I results out. true an out the try don't and execution of of still to coming to but eventually, waiting to all is actually It's investment. I a in that And have and figure and e-commerce, on that market. can as that's will we rollouts I a mature We think of it's more so see bit this to

Pedro Pinto

you. Thank Okay.

Operator

Just one moment while next the question. we compile

question from from Elliott comes next Geoffrey Autonomous. Our

now Your open. line is

Geoffrey Elliott

bit It thanks an of know quite one side. bit seasonality a to bit like XQ, credit a lower bad question. they're if we look Hello, sequentially. XQ than IMAL I XQ the was the And taking around higher. the is provisions, slides, the element mentioned debt. debt, quite a higher you on when looks the down for at bad and in than but Wanted the ask IMAL But

how going help what's Is it shift can about there? cost? it change? driven And forward? we that mix is down? that think understand you. us better about you So pricing a a going Is Thank bit What's should funding on

Osvaldo Gimenez

of is exceptional think And Hi, down for it IMAL combination came an for the Jeffrey. a -- high down what I was think XX% from quarter, still Yes, quarter. things. I was

On see credits the higher quarter. had where quarter one a quarter and we the typically is a in revenue participation it lower slightly usually we first comes down hand, fourth of the merchant

gets book And with it the losses still initially volume. first the And which rose initially, the debt. because in initially, volume as you the impacts credit it down book IMAL paid thing most in the third Also little that not that the full. then change down. you why bit cards, comfortable there, came finally, also the in as of that bad the a the brings issuing IMAL. losses that generate quarter, also the does we impacts portfolio increased the but quarter, the That's XX% increases is We're in portfolio revenues

Geoffrey Elliott

mentioned up credit And to potential growth have that And continue confidence you to accelerating much cards. is more how costs. in do ramp given to you how What you that? that in seen

Osvaldo Gimenez

in and always we're first towards more I more latest issue segment in fourth of and we we were see first of rollway flow the that should felt felt comfortable with far, at say, willing cards how significantly rates, And remain. quarter We so issued. comfortable of with cohorts that half quarter, did last we'll confident, comps comfortable have seeing cards would than we are the we we the and second we're year. to so the the But the that we're we -- the quarter in conditions looking

Geoffrey Elliott

Great, thanks very much.

Operator

And [Operator International Friedman Group. Jamie Susquehanna Thank from Instructions] you.

now line is for you open. right, Your your All thank patience.

is next will your Deepak open We now queuing be our from Mathivanan, question. Research. call Wolfe

Deepak Mathivanan

But it. for about bit kind penetration we there question, penetration. the is in lower you I lumpiness the were efforts a taking as gains little and than questions. expected. the XXXX thanks first Great. can some Pedro, map talk product to road accelerate of Great, to understand

book credit grow that signals And then And merchants enabling the is the market you level book? of particularly of side. you consumer like again. can What question, growing hold we you in about on Thanks of sort there to the and the second talk the drivers IMAL to are you seeing in expect can kind much. as for book a lean the so growth,

Pedro Arnt

Great.

growth is It So is on business with year-on-year, grow advertising, rate quarters. in at This dollar which the XX% line to very over growth. the the very three continues nicely. much grew past

is momentum So strong. quite still

accelerate prior quarter. versus this GMV quarter did

by given we're increase have tougher quarter, the those advertising a to point lines. dividing similar makes basis the If penetration for Q-on-Q or penetration we had So GMV that prior on a it revenue metric. along been that ad growth comp business would XX had in GMV something

potentially, less seasonally And advertisers as mind bear of then in QX a to invest aggressively for QX. in also season that is as

sequential rollover is basis see gains. not necessarily from to one we where penetration on a So QX the significant QX should

And then the time quarters, saying, as of fully advertisers. launched the adopted being finally, a been over before gets that's few it lot technology some by potentially we've takes last

to once advertising penetration, to And revenues so expect the see that again growth. would quarters, see increases we GMV next we'd few outpacing in like given

quite to seasonality, encouraging. quite, gains strip look continue if be Finally, penetration year-on-year you to out those at the

Osvaldo Gimenez

so. more second of to origination mostly the card I willing comfortable the credit, and Deepak, was to that did Argentina that to origination always And was a out with in Argentina consumers in are expand number I'd and seeing if Mexico, to Brazil. Brazil, groups profitability. we increasing quarter. of feel it say, the half And of there Mexico regards order those having in Argentina, reason and take in Mexico profitable, thought mostly control lower risk reaching credit was and the we're degree we the case and in increase was we in and the mostly, -- the saw business towards was are and we continue we

a sure of credits, from not it quarter terms question you stable IMAL. remained in I'm that had the mostly. And merchant final got And regarding has I one.

Pedro Arnt

out credit think could affect Deepak, that products Yeah. Look, I there credit. a of is number growing there

a think We'll the we're trend. where think interest I basis. might So of margin to any back giving on on those you after not quarter-per-quarter losses we kind report directionality guys

cycle could from in incremental lower generate to Also us won't And the into credit terms originations. that be conditions as in because attractive we to in encourages begin are credit we move incremental improvement very Osvaldo in when opening was within margin actually just start the and again credit, as customer see of see, saying, an risk potentially but that even will segments segments, necessarily adjust you to dollars spigot IMAL.

So we'll keep you moves this guys posted forward. as

see shifts very, still segment very and margin young. in are potential structures you going books the And could of occur forward. volatility think might I mix that because product

Deepak Mathivanan

Pedro. much, Thanks so

Operator

Thank one the And prepare moment while next question. you. we

next Our Credit question Ju Stephen comes from from Suisse.

Your line is now open.

Stephen Ju

Thank you, Pedro.

bit growth So little back still positive, has the Argentina reverted that unit but it's number to see single unusual the in a digits.

So I a talk that perspective can from that But what can't you seeing digits or growth be around? we forever. we cyclical either be double grow get may secular a might high moving that about

the immediately -- was release. second, think of savings large one And it you a seen I owners that the operating of on sum gather mobile probably deposits pretty the a product, able system then release to account

pretty the on asset pro products, for with does the Thanks. already but directional well product greater you're So urgency you? credit development on this event management way your

Pedro Arnt

Argentina, I conditions. primarily weakness thanks. that in Stephen, business the macro to attribute very would volatile

You're correct.

it's we've a historically seen macro perform is case think for in that it MELI. generally well I even weaker the as business

I quarters, difficult to think have import currency few over the restrictions made goods. past

have than lower still saturation. a don't that the share there. and Argentina of probably where far penetration see anything e-commerce market of market Brazil, I is retail So It's example. has is a structural level strongest for from we

have the we be will to So volatility. market short-term navigate us and And long mid should attractive for term. through that an just

a And It's you on if are profitability those out Argentina, market structurally, bottom it's Bear the are of look extremely, less coming more we line results where growth. in competitive because mind than market. extremely at also still focused a that also strong.

Osvaldo Gimenez

usually X% order accounts in rates. it's of Brazil, of XX% money happened the the money high our that all that each And years and rates a it's last with But is interest line order three Argentina, what you incredibly instant It's accounts. availability offer And clearly, There's we an from five to the call or which of in and account we And of the -- of there's very the to vary a they do it's or in returns would interest -- up. how to incentive pay with savings regards do -- for have markets. into in market say four it, in advantage market in XX% has then banks, ones virtual out been have with going recently to return. the it's with Mexico, offering the in and top has the offers given I rates, similar X%. in local what

what is this we flow seen is under a is we growing believe to which continue. in over have likely asset So and management, significant year-over-year, that XXX% increase

And a have and cases believe has pay that launch Latin is accounts. huge America given in to most zero a that the this so in to zero opportunity over I continue that close banks in product, the one we

Stephen Ju

Thank you.

Operator

our question. Thank you. we One next while prepare

Our next HSBC. question Agarwala comes from from Neha

is line now Your open.

Neha Agarwala

Hi, impact of that that impact express more question. the about my that you are in costs What to of I accelerating very acceleration. should see taking or margin pace you take would the from gathered thank that, of XP. that be can coming Anything rate? XP you we terms open The helpful. gradually

Thank year? you Brazil? stabilizing you and remain would of as the selectively in And of maintain we Mexico business. originations mostly continued should of credit things There still resilient Argentina. so in of origination. bit kind question terms my second grow But and it's the understand the quarters is was from Or in the a coming rest acceleration see credit on a are for I much. and acceleration

Pedro Arnt

structure but across business margin. it of XP, EBIT lower our all terms has So the continues more margin margin be to precise, have negative than continues much of To its pretty categories, on the rest been a XP be businesses. improving in to

in It categories growth should to improve short XP XP help until having continue eventually better the where should which detrimental business selection turning positive. a XP us a term, margins. So long-term margins are our purchasing consumers logistics, gain on in for but the positive, be strengthening which now they're we continue within and under-index instrumental should in to scale all within

it's rates. revenue full to success book we In categories. terms Obviously, of revenue story. critical is in, and all again, specific But there, rate, take accelerating it's believe so XP opposite long-term improving take the catalyst the and base, of we for be a in going certain

And think margin business growth very given rates, so operation. be trajectory news up again forward we to experience and positive it's the that feel more deliver we're the pick of will we in that our we that able to in going user about terms that comfortable beginning that XP

Osvaldo Gimenez

the In say increased of terms credit is they in that terms important most users of originations, of models, credit risk. things would I one do to our sort

very And small calibrated. well so sale I'd say,

giving And that been have to we have beyond segment. there's so a that, to are we whenever But seeing not whenever group, to is we that we willing we're results, loans giving they And are to go see control whenever want good doing profitability in given what start past. the next one. expand to the that are groups a segment we willing loans in cohort, keep in we

in starts is to improve rooms Mexico. originate now on trade see in not Brazil. will control be case that Argentina Whenever Brazil. those willing profitability in going It and the is already happened has That more yet with faster to we

Neha Agarwala

so Understood. much. Thank you

Operator

while next One we you. moment question. Thank prepare

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

Your line open. is now

Robert Ford

you per agencies, Thank Pedro, items your across congratulations trends versus or services. drop-off the markets? you. driving the is enable quarter. new from areas And trial in return growth places GMV in the you centers on box without Thank as your that coming how returns various category of And and can terms distribution you. discuss those

Pedro Arnt

numbers as penetration very has and up continues Bob, material. as It's get trend order to significant the very to per better right. been steeping have gradual grow or we the a inventory, slightly and items been up very, at fulfillment but co-locating not had

purchases going continue on QX allows Brazil. and drive back slots items we of consumers said, will delivery We're a high bundle exited significantly up. allow help which to we single bundle lower to to record us to those fulfillment at should on grow I be numbers of consumers So think network them number cost to into penetration, like give innovating per certain the design or also as slower also I improvements on checkout select order, options to drive Hopefully, deliveries option. that some that up be who able for cost that for that to greater

an I'll offering and terms on return trial that. cross of we us category you which need consumers, to category seen improved our In NPS do of greater reference the part I better We return see the be experience, debt in returns are answer to with a haven't allows do consequence but the options. incremental as helping on to of growth. data increases in that see that to

know your to question. So I the don't answer

Robert Ford

on congratulations And again. Thanks, worries. the quarter. No

Operator

Thank prepare you. next please while One question. our moment we

comes question from Young Trevor next Our Barclays. from

now Your is line open.

Trevor Young

Okay. Great.

first anything down one, Was And year below those that make timing to on there expect network innovating forth. looks trend so on we Q-on-Q on in in the design recent some there? it's the that like related investments last quarters. one, design. innovating as network rebound in is and and It like should the CapEx dovetailing maybe of later Just

categories you. second seeding Did where certain are Or than competitors question more gains Brazil. was come broad-based then And that on from share? market it Thank share some in maybe that?

Pedro Arnt

Yeah.

third second, the in initially been fourth an were CapEx that that logistics certain have do element phasing into had first improvements of pushed we the had and quarter. investments So back budgeted quarter for there

an in of there is to CapEx. that slowdown phasing element So

Our new play out across depending nodes come we're Logistics. specific on rollouts network in at somewhat different different times scaling will new be into volatile also multiple MELI where as CapEx the and the markets trajectory geographies warehouses

below quarter. shipping quite low, did $XX related the But phasing for have elements specifically, CapEx million came and in the QX

gains consistent part relative share do I On as and those market structure that, multiple certain in in leaned we participants. change weakness across into categories. think share said, sheet of because gains, specific we market balance the they've are market been the

So categories. that fairly up it was but across coming share a other being lot by distributed from that's of is given players, all

ourselves we market categories. across when look category market gainers So share category as most seeing at we're per share,

Trevor Young

That's very Thanks. helpful.

Operator

One Thank for last you. our moment question.

last Jamie from question Our comes from Friedman Group. Susquehanna International

line open. is Your now

James Friedman

Thank back Hi. for stepping you in.

Pedro, QX So IMAL I think called of give a up. I in to know guidance, typical you wanted say, out but I Oswaldo, ask to follow you the seasonality. IMAL the Can you And don't QX terms about you to progression. typical how IMAL, remind think do know into us as about how QX? seasonality,

Osvaldo Gimenez

that fourth in I'd Jamie. say seasonality more there's probably quarter. the

Given quarter-to-quarter. usually there's more merchants general any would in to loans say seasonality quarter. give the specific fourth in Then I from going that we

the it segments think how obviously, will of growth related And to before, more the the markets. be, we to each I delinquencies as and then mentioned to evolved. faster what decide in happens portfolio

James Friedman

clear? Is Fintechs. government I Has the characterize how in would about very overall Historically, high-level incubating Brazil regulatory it changed? you Okay. apropos And Or of then would supportive, if that Fintech. and has Pago. to environment ask describe of a Credito could environment, it? I relative regulatory How especially credit the coast Mercado just question Is the benign? the think, Brazil, been you in especially

Osvaldo Gimenez

the to and the fintechs pro both say, has and compete encouraging really, would on that, government has competition say been Brazil Central in where banks most been one general, I'd equal I Bank and footing. country the the

probably been regulations the caps around been we And have prepaid on impacts so seen most most interchange successful such been on the of more recent lately as past example, cards. in fees but the has that. PIX the there have has

has would been pro say pro I always it and consumer competition. So

I think and practical. posing we -- not were have that the pragmatic things pointed we're have some that been of they very out that practical whenever

least I at heard. we think have

James Friedman

you the perfect. Okay, Thank for content.

Operator

Thank you.

to it was our company access question, last now mentioned, I turn Chief MercadoLibre's which to you video, the would as back website. IR play to remarks. As like for Pedro on I Financial we that prepare Officer a can closing Arnt,

Pedro Arnt

Thank you, everyone.

the and to top start pleased in margin ahead We're off continue of the the how year expectations, start to we if to users we going on the line customer And consumers our with year. quarters from well. going gotten gain here remaining very continue of throughout to the expand from execute did strong evolution. hard strong hopefully, So incredibly kind as response to first year, work the the invest at We're preference see has really in of share all MELI market to the we'll our business the quarter.

the on technical has it. of a take been advertising We the the product to lot questions encourage do video. you difficulty interesting I on at know of Apologies with It the target look has detail how some we're that product a on the improving the stack.

so. speaking look we quarter. next And again at, be report So that the encourage to forward we with when do to to do a look and we should you up and available take for you you

MercadoLibre (MELI) 3 May 232023 Q1 Earnings call transcript