Q3 2020 Mercadolibre Inc Earnings Call
Hello, everyone and welcome to the Mike I'll leave it at <unk> earnings Conference call for the quarter ended September Thirtyth 2020.
Having said that equal sunlit Investor Relations officer for Mike I would leave it.
Our senior manager presenting today, especially aren't chief financial Officer. Additionally, it was all of humanity CEO, if I got a Bible will be available during today's Q and a session.
I remind you that management may make forward looking statements relating to such matters as continued growth prospects for the company industry trends I'm protecting allergy initiatives.
These statements are based on currently available information and our current assumptions expectations and projections about future events.
Well, 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 these forward looking statements.
Our actual results may differ materially from those discussed in this call for a variety of reasons, including those described in the forward looking statements and risk factors sections of our 10-K for the year ended December 31st 2019 item one a risk factors in part two of our form 10-Q for the quarter ended March 31st 2020 on any of my colleagues event.
Other applicable filings with the Securities and Exchange Commission, which are available in our Investor Relations website.
Finally, I would like to remind you that during the course of this conference call. We may discuss some non-GAAP measures a reconciliation of those measures to the nearest comparable GAAP measures can be found on our third quarter 2020 earnings press release available on our Investor Relations website.
Now, let me turn the call over to Battle.
Hi, everyone and welcome to our third quarter 2020 earnings Conference call.
Before we begin I'd like to express our continued thoughts and well wishes to those affected by COVID-19, both at our company and everywhere.
We particularly extend our immense gratitude appreciation and recognition to those who continue to help us combat this unprecedented global health crisis.
Getting to our results Mercadolibre recorded another strong quarter, driven by high demand for E Commerce and fin Tech services.
Brazil, Chile, and Colombia delivered very strong results in both E Commerce and Fintech, while our Mexican operation is still experiencing robust growth despite slight deceleration.
Let me dive deeper starting with the third quarter E Commerce progress report.
Increased demand continued during the third quarter, despite the gradual reopening a physical retail throughout the region.
We attribute this to improve service levels and the incremental depth of assortment with which we served millions of buyers during the quarter.
In this particular regard during the quarter, we surpassed the 300 million milestone in live listings, reaching 304 million.
Since the beginning of the pandemic, we've observed the buyers have diversified their purchases across a wider range of verticals on our platform.
This in turn.
Activate and engages them in a greater number of services and increases overall purchase frequency.
The step up in online purchasing has been stable across all sites in the region.
Mercardolibre is consolidated gross merchandise volume growth accelerated to 117% year on year on an FX neutral basis.
At the regional level, Brazil, and Argentina accelerated to 74% in 242% year on year on an FX neutral basis, respectively.
Mexico's performance is notable given how cold it 19 impacted the region delivering yet another quarter of GMB growth above 100% year on year.
Also on an FX neutral basis.
The growth of our Mexican business has been remarkable over the past few quarters.
In fact, if we were to adjust our GMB growth for the Blue Chip exchange rate in Argentina, rather than the official exchange rate our Mexican business is already at a size comparable to that of Argentina.
This is a clear indicator of not only the phenomenal execution, we've delivered but the large opportunity that still lies ahead for us in Mexico.
Okay.
Brazil's excellent performance can be explained by our ability to identify and act on opportunities for improvement in overall execution product development and commercial initiatives that involve the selection and value proposition on sub categories, where we had lower market share.
During the quarter. These initiatives resulted in the launch of pricing per category renewed focus on under represented sub categories growth in official store mix improved rebate programs for merchants increases in payment approval rates and post sales service enhancement for sellers and buyers.
Yes.
Fundamentally we also continue to drive penetration on our managed network, which is the key pillars to generate better customer satisfaction and stickiness.
Consequently, these initiatives has translated into market share gains across Brazilian E commerce, as well as gains across key consumer electronics categories.
Additionally, we also improved our net promoter score by offering buyers some of the fastest delivery times in Brazil when items are shipped from our fulfillment centers.
Countries in the Andean region continued to outperform well above your opening expectations, particularly Chile, but also the case for Colombia.
During the quarter, we launched a few important product initiatives that we believe will help us scale faster, while improving the end to end shopping experience in those countries.
And on the logistics front, we continued expanding our services our flex App is now available in Chile, and Colombia, while we continue to scale our fulfillment services in parallel these.
These are important initiatives within our ecosystem that we believe will help bridge the gap in terms of delivery times and position mercadolibre extremely well in those markets.
Looking ahead, we will continue deploying our ecosystem Ics solutions in the Andean region in line with the offerings already available in the other main countries as we move into Q4 and 2021.
On the commerce demand side unique buyers reached an all time high of 35 million during the third quarter of 2020.
This growth year on year in unique buyers was achieved not only by being able to successfully retained existing users but.
But also by maintaining momentum in the growth of new buyers.
During the quarter, we added 2 million unique buyers in Brazil.
Retention of early cohorts also continues to improve.
On a category basis looking at consumer electronics, a key vertical for us we observed acceleration to approximately a 100% year on year growth on a consolidated basis during the third quarter.
Specifically in Brazil, the performance improvement in this vertical can be explained in part by greater corporate focus and execution the rollout of dynamic pricing structure and greater investment in performance marketing to reposition our platform as the go to destination for this specific vertical.
Another key vertical for us consumer package goods grew at a robust 181% year on year on a consolidated basis during the third quarter of 2020.
For all our top geos within the CPG vertical product launches product enhancements and partnerships were a key theme during the quarter.
In our Brazilian supermarket vertical within CPG, we implemented navigation improvements such as a progress bar to reach free shipping thresholds, along with new commercial promotional dates the relaunch of the supplement Carlo and specials in some categories and also continued working today.
Deepen assortment.
In Mexico, the third quarter, we've entered into agreements with JBT Diageo and Grupo Modelo A.B. I in order to further develop these categories within our platform while also promoting responsible consumption.
Additionally to promote this category beginning in the fourth quarter people waived flat fees for our sellers and brands for product that are delivered from our fulfillment centers.
Staying on E commerce, but turning now to marketing.
During the third quarter, we reignited marketing spend after an atypical second quarter double.
Doubling the size of our marketing investments in our marketplace on an absolute basis compared to the prior quarter.
With that said.
We are still investing at a lower rate than our original pre cobot plan due to the Pandemics continued impact in driving consumers online and because we are still generating robust organic traffic growth.
In the Andean region, we've accelerated the pace of marketing investments versus prior quarters, both in absolute values and as a percentage of GMP. This.
This increase was particularly notable in Chile, and Colombia, where we reinforced branding campaigns and invested in special dates and performance marketing campaigns with solid results.
Most notably our Chilean operations now lead the top of mind measurements that we carry out in that country for the first time.
Let me now turn over to logistics, a key enabler of growth for our commerce business.
Our logistics operations have been instrumental in helping us navigate through these trying times and its powerful synergies with our E commerce business have unlocked meaningful value.
Not only has helped us drive higher net promoter scores and customer satisfaction, but it is increasingly becoming a competitive advantage in multiple countries.
Our Mercadoenvios managed network continued gaining penetration during the third quarter, reaching 64% on a consolidated basis exiting the quarter at 74% overall adoption.
Brazil, Mexico, and Argentina reached 68%, 56% and 84% respectively.
Fulfillment in Brazil reached 22% of total shipments while in Mexico. It has already surpassed 55% share of shipment.
As a result, we've been able to deliver faster and more efficiently.
In Brazil, we managed to improve delivery times and lower cost despite the quarter radio strike, which lasted for approximately six weeks this year.
However, since we successfully migrated significant shipping volumes on to our managed network weve been able to not only almost double the amount of items, we've delivered versus last year, but also significantly enhanced service levels recording a 20 percentage point improvement in shipments being delivered and less.
In 48 hours.
The growth of our Meli logistics proprietary technology within the managed network combined with the addition of flex in the greater some power area help scale, our managed network, resulting in lower shipping costs and delivery times improvements versus last quarter.
Another development in Brazil was the reduction of our free shipping threshold to 99 realized during the quarter. This.
This had two key benefits first it broadened what was an already comprehensive free shipping program in Brazil second it enabled us to cover a greater share of our marketplace GMB within the free shipping program.
In Mexico the.
The incorporation of cross docking to our Mexican managed network is part of our expansion plan in order to reduce our dependence on commercial carriers, enabling us to find more capacity to accompany our increasing volumes and growth in that country.
And finally on logistics, we are happy to report that Colombia, and Chile continued to gain penetration of our managed network ramping at a very fast clip, reaching 14% and 15% respectively, an almost 10 percentage point improvement versus last quarter.
Execution and logistics has been stellar across multiple geos.
During the quarter as I've, just called out we simultaneously shifted volume into our own managed network, while continuing to invest and expand the buildout of our logistics infrastructure despite trying circumstances.
We are confident that the increased pace of execution in this expansion will enable us to be amongst the best in class in terms of service levels and continue to gain efficiencies in shipping costs going forward.
With that let's now move on to fin Tech side of the business another central building block of our ecosystem strategy and value proposition.
Mercadopago reached almost 60 million unique payers during the quarter, adding 7.5 million payers, mainly attributable to Brazil.
FX neutral consolidated total TPV grew by 161% year over year during the quarter.
Our off platform payments business accelerated sequentially to 197% year on year on an FX neutral basis, not only with the robust performance of online payments, but also an improvement in our in store payment solution, particularly mobile point of sale device.
Yes.
We have observed that some segments that had not been heavily impacted during the quarantine regimes have now began to recover.
The transportation segment. We serve is one example of hard hit segments that are now beginning to recover.
Off platform unique payers reached 36 million with Brazil, reaching almost 20 million spin.
Specifically in Brazil, we reached an all time high of unique payers added.
Adding almost 4.2 million over the prior year quarter.
On the collectors front, we reached almost 11 million active collectors with Brazil, leading on the merchant acquisition front.
Starting with online payments consolidated TPV accelerated to 204% year on year on an FX neutral basis during the quarter.
With growth have you been led by performances in Argentina and Brazil.
For Brazil, we saw solid online payments growth, especially in the long tail and social seller segments setting New records for seller acquisition more than tripling the number of active sellers the.
The growth in Brazil's online merchant base is the result of a series of actions. We took focused on the acquisition of sellers, especially those that started selling online for the first time.
In line with that we also relaunched marketing campaigns with healthy cellar acquisition costs and shorter payback periods.
We also expanded our cross sell actions with other mercadopago verticals, especially with the point in Q R.
Additionally, we launched incentive programs in conjunction with the main E commerce platforms to facilitate the onboarding of new sellers to the online world.
And in Argentina, the other strong performer online payments accelerated sequentially, mainly attributable to promotional dates social sellers and an improved checkout.
Social sellers monthly acquisition reached an average of 113000 in September versus the historical average of 33000, where our main focus was to generate better cross sell capabilities and optimization of marketing initiatives.
Our mpls business has delivered solid execution as governments begin to ease quarantined measures.
In Brazil, TPV accelerated 14 percentage points versus last quarter, almost reaching pretty cold at levels of growth.
The pace at which we are selling devices was also a positive surprise with more than 1.3 million devices sold across Latam during the quarter.
And staying on Brazil and Pos.
Third quarter TPV cohorts are incorporating more TPV compared to January cohorts, which shows a robust acceleration in the cadence of M. Pos growth.
This is in line with the sales levels of devices, which also grew at a faster pace. If we compare September to January.
In Brazil, we launched point smart are top of the line device focused on businesses that require a simple fast and modern terminal. This device should enable better cross sell for marketplace merchants, who have physical stores and now are able to cater to their in store payment needs given.
The new device, we are offering.
And in the case of Argentina during the quarter, we grew a 129% year on year on an FX neutral basis.
One important highlight from our in POS business. There is that as we evolved to multi product with the launch of our point plus device.
Such rollout has been very well received.
Moving on to our mobile wallet another key factor in our ecosystem.
Our wallet TPV growth continued to accelerated on a consolidated and FX neutral basis to 381% year over year.
The share of payments once again skewed towards PDP transactions utilities payments and cell phone top ups as a consequence of Covidien team.
Per our last call. The second quarter represented an important milestone in terms of product migration and adoption of payment flows from the physical World tour the digital world.
And during the third quarter, we've been able to maintain the payment volume reached in the prior quarter and continue growing.
We focused on minimizing churn in order to retain digitized users gained and acquired during the pandemic.
P to P payments continued to gain share of payments within the wallet.
This trend was evident across the region the large pickup in peer to peer during the quarter was not only driven by quarantines and shift to digital but also by the launch of a new product experience and new free pricing for all transfers made with account money and debit card when P to P try.
Its actions.
Finally on wallet during the third quarter, we were able to grow the active payers to almost 14 million on a consolidated basis.
In Brazil, we added a record high number of unique payers for a single quarter.
We also have made inroads on the opposite end of the wallet as our collector network continues to grow at a healthy pace, reaching 5.5 million active wallet collectors on a consolidated basis.
An all time high on this front more than doubling versus the prior quarter.
Let me now move on to our credit business, but it got liquidity too had a record third quarter with an all time high in terms of originations growing 157% Q on Q, while our loan portfolio also reached an all time high of 280.
$4 million as we've been able to originate more loans with lower npls.
During the quarter, we had to increase the p. ours as we calibrated for higher delinquency rates.
However, as the quarter progressed, we observed that defaults were in fact, improving resulting in better profitability profiles.
In Brazil, we extended terms for online merchants up to 18 months and increased caps, while also improving lifetime values uncut.
On consumer credit and express money users, we made our policies more flexible by lowering caps.
Additionally, we've been able to enhance adoption of our credit products by leveraging artificial intelligence methods that enable us to do a credit offer at a point in the user journey, where there is a greater tendency for adoption.
Originations on consumer credits accelerated 140% versus last quarter.
Within our credit products and Pos in store merchant originations almost doubled while our express money credit product more than tripled its volume versus last quarter.
Originations to merchants on our marketplace grew a solid 172% versus last quarter.
Additionally, we launched our Microcredits offering now representing about 15% of consumer credits in terms of originations.
With that let's now move on to our financial progress report for the quarter.
Let's start with the review of our piano with comments on consolidated net revenues.
For the third quarter, they reached $1.116 billion, surpassing the billion dollar Mark for the first time in a quarter.
And representing a year on year increase of 85% in us dollars and 149% on an FX neutral basis, mainly attributable to commerce net revenues that continued accelerating and reached their highest historical growth rate.
Gross profit for the third quarter was a 480 million with a margin of 43% compared to 47% during the third quarter of 2019.
The decrease in gross profit margin resulted primarily from an increase in shipping operation costs as a percentage of net revenues.
In the slides accompanying this presentation. We've included as we always do a detailed breakdown of these as well as the Opex margin evolutions that will cover quickly now.
Operating expenses were $397 million, an increase of 8.4% year on year in dollars.
As a percentage of revenues operating expenses were 35.6% compared to 60.7 during the third quarter of 2019.
The increase is primarily a consequence of marketing expenditure efficiencies representing over 1500 basis points improvement that we achieved as a result of the growth inorganic demand brought about by the effect of the cold 19 pandemic on consumer behavior.
Moving down the piano the company incurred $24.5 million and financing expenses this quarter.
Mainly attributable to financial loans entered into during the third quarter of 2020, primarily in Brazil, and Argentina and interest expenses from our trust related to the factoring of our credit card receivables in Argentina.
During the quarter. We also had a foreign exchange loss of $30.4 million, mainly related to the difference of the Argentine official exchange rate and the blue chip swap rate at which we effectively carry out stock repurchases in Argentine pesos.
We also believe this operation presents an added benefit of generating greater transparency around FX rate distortions that arise as a consequence of Argentina's multiple exchange rates.
Interest income was $24.6 million, a 13.7 decrease year over year as a result of lower interest rates in our investments as a consequence of the pandemic, mainly offset by higher interest income in Argentina as our float grows.
As a result of this net income for the third quarter was $50 million.
Wrapping up today's call, we want to reinforce our commitment to the democratisation of commerce and money.
The opportunity ahead of us remains sizeable and we feel increasingly confident that we can capitalize on it.
Thanks, everyone as always for joining the conference call and we look forward to keeping you updated on our progress report next quarter.
With that we can now take your questions.
Thank you as a reminder to ask the question you need to press star one on your telephone.
A question press the pound key our first question comes from Stephen Ju of Credit Suisse. Your line is now open.
Okay. Thank you so federal in your prepared remarks, you talked about consumer electronics growing up a 100% year over year.
I know, it's probably hard to tell given the circumstances, but do you think that is a supply led acceleration due to the change of the commission rate.
Or is there like a price elasticity factor there as well as merchants adjust your revenue rates and also in regards to the CPG effort.
Talk about I guess, a deeper assortment there also.
It's up mostly through third party sellers that you're getting a deeper assortment right now or have you started to form a I guess larger and deeper relationships with the brands directly. Thank you.
Okay.
So on consumer electronics, what we highlighted was that we've really focused on some of these categories that we had identified let's categories, where we were lagging in their share compared to our overall expectations for market.
Share and we really began to execute better on those categories. So it's a combination of product improvement new pricing very strong execution on the commercial front the source better.
Deals with Oems that are coming across and then a more aggressive pricing and rebate policy also on price points at which we sell.
So to get that kind of a turnaround it really takes I think concerted execution across the board.
On consumer practical goods, we continue to have.
A growing one Pete present.
But that business is still primarily threepi and again, we're just.
Sourcing well from existing marketplace vendors and really that's one of the areas, where if you look at the user experience over the last few months we've been.
Perhaps.
More novel than in many other places in terms of supermarket navigation and really improving the purchase.
Consumer packaged goods and then obviously assisted by the overall pandemic and a very strong shift of demand online in those.
Category, probably growing more than any other throughout the pandemic.
Thank you.
Thank you.
Question comes from Andrew Obin of Morgan Stanley. Your line is now open.
Hey, great. Thanks for the question so.
So we've seen a big pickup in your managed network penetration again this quarter. So I'm just curious for the quarter itself, how that Corrado strike impacted the figures in your short term strategy and then thinking longer term any update on where the man's network penetration could reach over time.
Thank you.
Yeah. So.
Counter intuitively I think the strike that we face end up being at an incredible positive for us long run.
Because a they.
Reinforce our commitment to moving volume onto our own manage marketplace at an accelerated pace.
But it also gives our merchants have very strong incentive to migrate volume on to the managed marketplace.
So.
Not only.
Only is Brazil, driving that increase in managed marketplace volume shift that's happening.
The other key markets as well with very positive results in terms of delivery times and delivery costs.
But yet the strike in Brazil accelerate that move and we see this as a one way door. So once merchants have moved on to our fulfilment cross docking and places operations.
They tend to stay and we make all the efforts for them to stay on the managed network and so our aspirations are to continue moving volume onto the managed marketplace because we see the significant positive impact it has on delivery time cost and.
Net promoter scores.
I don't think we give specific near term or long term objective suffice to say that the more we moved to the managed network the better it is for our consumers and for our merchants.
Yes that makes sense. Thank you.
Thank you and our next.
Question comes from Amar suppliers of Goldman Sachs. Your line is now open.
Yeah, Hi, Thanks for taking my question I mean I.
For opening remarks, and the press release, you made a comment about them that you're starting to strive for the highest segments of the merchant pyramid can you just expand a little bit on any.
Any specific measures that you're taking that you'd call out for fintech and ecommerce on that on that front. Thank you.
So I'll quickly start with commerce since I've already mentioned some of it.
We clearly are seeing incremental traction in our efforts to complement the historic core base. So that to me is that sell on our marketplace with a growing number of flagship store on an official stores across multiple categories.
And so this is somewhat driven by rapid consumer demand online that is forcing many of these brands and Oems to engage more constructively with online channels like our marketplace, but also as we improve our product and we improved our ability to sell into enterprises, we are able.
To onboard a growing number of companies that sell direct through US we mentioned some of them in the CPG category in the prepared remarks, and there are others across consumer electronic Samsung is rapidly becoming one of the largest marketplace sellers in many countries and the slew of others.
Well with regard to INTECH.
On the.
From a you know in the past week, mostly on individual it two quarters ago, we launch our one role.
The divide with the printer on it.
So was that they are going to want to look field or device was worked out on that.
Lets segment and now more recently, we launched a large deal that and again.
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The one we would be how do we do one grow so we continue to see good ones go to but.
I think we'll be able to put in place.
It can be which is above were out of school.
Thank you.
Thank you. Our next question comes from thought Florida Bank of America. Your line is now open.
Thank you getting could you bring it bridion and congratulations on the quarter Pedro can you talk a little bit about your use of their cargo there seems to be a lot going on besides the dedicated aircraft in Brazil, and I'm curious in terms of what the implications of excess passenger capacity means for trader availability and your costs and whether or not this has implications for network design.
And your buildup priorities and how should we think about other markets when it comes to air cargo.
So the overriding objective is how can we increase the number of parcels delivered in less than two days and then eventually continue to shorten that time and for that especially in the larger geos like Brazil, and Mexico Air is a crew.
Nickel piece of it.
We started with the air as you mentioned using excess capacity on commercial carriers and as we understood that part of the business better and the volume began to ramp up we've continued to sort of integrate in that value chain and we now start having freight only.
Threepl that provide exclusive routes an exclusive claims for us and the news yesterday the yellow.
Yellow Livered Mercadolibre air airplanes.
And that will be a growing part of our network design as we strive to go faster importantly, there's no capex involved in that these are third party.
Logistics EHR providers and when we look at unit costs.
We're trying to be selective in terms of routes, where we have enough scale, where the overall negative impact on unit cost is manageable yet the acceleration in delivery time is impactful.
No. It's not just the Brazil thing it already happened in Mexico, and I assume that the networks grow in other markets. We will also look into it.
Makes perfect sense and just one other question if I might can you talk little bit about app usage.
Year on year in terms of engagement conversion rates improve navigation impacts for client acquisition costs.
And then is there a reason to maintain separate separate mercado Pago apps or is there an opportunity that we should be considering longer term.
Okay.
So we continue to see traffic and volume migrate increasingly obviously to mobile I think we're already above 80% of volume is mobile and two thirds is already up volume and.
Obviously, that's the consequence of a combination of consumer demand shift, but also our continued focus on improving those app experiences.
In terms of number of downloads not always been ideal metric because our cadence of investment in downloads may vary Q on Q, but we continue to grow that base and we believe that our installed base of both meli apps and if they apps continue to be one of our strongest competitive.
Vantages on across the region.
Great. Thank you very much.
Thank you and our next question comes from Christopher <unk> Oliver Yes. Your line is now open.
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Good afternoon, I have two questions. The first one if lexus.
Let's understand a little bit better and the impact of the crawl on gross margins and perhaps on overall operating profit margin coming from.
Elevated penetration of one being the business I think in one of the charts to show here. There is a 210 bips impact coming from cost of sales.
Of goods and I wonder whether this is already coming from the increasing when people attrition. So we feel good.
Blog.
And that a little bit and then the second question.
As with respect to the grow off off platform unique payers in Brazil, the 4.2 million and new unique payers that you had in this quarter.
One of the drivers of this growth is this related to kind of any of your efforts associated with peaks.
And making sure that that that's probably helping your your your growing unique bears bays or there are other drivers behind that.
Yeah.
Okay.
Well double EBITDA would it second question on the what the one.
We got them, they've got to raise or not but from failure in libra field, and I'd say big not yet have an epic them that but well worth it.
Got it got pulled out was actually know much infill emergency payment made in Brazil.
So you can lump up in the number of people connecting the guidance account with the MCO bocom will be able to those funds to make payments up to use in mcallen, though that's only going to spike in them. So.
Loads on though.
Okay. Good and then they have been made by fuel given by two numbers until.
Okay, Yeah, and then on the one p. business to start the <unk>.
This is a business that we are investing behind we think that it has a key role to play going forward in terms of being able to step in with one p. offerings, where there are inventory breakage or inventory gaps from our marketplace. It allows us to be very competitive versus other.
One p. competitors in terms of promotional calendar and pricing and so this is an important part of our strategy going forward in the early years. It's a business that has less scale than what you have in the future and so when you look at current pure product margin.
And the overall P. and now it does compress gross margins I think the important thing here is to understand that we're investing into it.
Because we trust that as it scales and grows.
There will be leveraged on P.B.M. on down and that business longer term isn't necessarily going to be as much of a drag on gross margins as it is in the very early phase.
Currently president and whats the penetration of one picking your total JV.
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But it's growing nicely.
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Okay, Okay I could hear thank you.
Thank you and our next.
Sounds right.
Ravi Jain of HSBC. Your line is now open.
Hi, Thank you for taking my questions. So the first one is.
Given that your electronics GMV is growing nicely is that it is it a change in the way you think about like the big holiday sales like Black Friday at that time comes with promotions and and.
And things like that and the second one was more on the Andean region.
That has obviously been growing nicely and when you look at the revenue split its still under index quite a bit.
Maybe some color on what exactly do you want to focus on in Chile, Colombia in films off but there's going to be CPG electronics is it going to be logistic that's going to drive a lot of or is it going to be it.
The payments and loyalty together so some color on what exactly are your main focus for the Andean region that would be helpful.
Well, let me start with yes.
I think this goes to show the enormous opportunity.
Those markets.
Once we begin.
Enough resources to continue to.
Oh, but also start.
More aggressively in the market and by investing aggressively.
Really.
Spend those markets were actually profitable during the quarter, but I do mean, having great.
Human capital primarily engineering.
To be able to take the user experience knowledge.
To that level.
ER.
And so there is no different strategies.
All the things you mentioned that have allowed us to be Oh, the other market, yes logistics, it's already a big piece of the acceleration we have as you know were cheaply operational ones.
And the growing.
Market, we have a strong.
He did so in a way they are.
As we have more resources focused on those markets and they have the benefit of being able to leap frog something because they can benefit from a lot of innovation that's occurring in Brazil, Mexico that maybe.
Those markets they had.
That that Colombia, Mexico, sorry.
So similar strategy greater.
Behind them the demand in the market.
And we're now beginning to capture that.
Going forward, we continue to expect.
Solid growth Mark.
That's helpful.
And on the holiday events like that Black Friday, They do you see any change in your thought process.
I think in previous years.
Quite willing to stay on the <unk> line some of these.
Your and promotion that typically work.
Retailers.
We improved our one.
But.
No sourcing and execution across them.
I think we believe we are somewhat more aggressively.
User experience.
There are market.
And so you will see I think the less on the sideline during the Q4 critical promotional period.
That's helpful. Thank you so much.
Thank you and our next.
Question comes from Edward Keith.
<unk> capital markets. Your line is now open.
Hey, guys. Good evening, thanks for taking the questions I guess first on Mexico, I know you kind of highlighted the share opportunity. There I guess as you think in the medium term what kind of investments are necessary to kind of continue to propel growth in Mexico, and then second.
On on Brazil credit you know, it's nice to see leaning into that I know is maybe about a year going after that you had issues in Brazil.
What are you doing this time around to ensure that delinquencies and charge offs don't pick up.
And that I think you mentioned you know using add more as a tool. Thank you.
Okay. So I think Recapitulate, Inc.
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Which take a long term view and that's the.
Things that we know.
And obviously the logistics network there.
Mine, but there are other things we can do.
So that will continue to be the case.
We're not going to take a short term.
Yeah.
All right.
Having said that as you all know there are scale benefits to our business.
So if you look at the level of losses in the margin structure.
Right.
Extremely good.
That's also continue.
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And so I think Mexico has been playing out very positively.
So the long game.
That thing, but also understanding that.
Scale benefits will come to our P. an hour.
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Well you know.
Right.
No.
Great. Thank you.
Thank you and our next call.
Question contract tell my guys I T. I use your line is now open.
Thank you. Thank you for taking my question pivotal we've seen several players endeavoring to fresh goods in foodservice categories, especially here in Brazil in an attempt to generate traffic and decreased customer acquisition costs. You think you guys will play a part in those two categories as well I would I would like to understand why the pros and cons of UBS.
Doing that and regarding picks there there is clearly an impact here in the money in and out of digital wallets into country I'm curious to hear what other opportunities you believe can come from the launching of the spam and two in Brazil.
Thank you guys.
Yeah.
Look I think we aim to.
Be able to supply our.
<unk>.
We don't comment on future category.
But we are we look to be the.
Stop and online solution that are.
For all the things that it makes sense for us.
So clearly.
Our <unk>.
Laurie.
Yes.
Sure.
Summers, but we'd rather.
Category expansion once we launch something rather than.
Oh yeah.
<unk>.
Anybody else.
Hi.
So.
Well no they were not a bump on the <unk>.
The number will be.
So so they started.
No.
No.
Yeah.
Great.
Well, so far going but.
Well.
Definitely.
November.
Oh, Oh Oh no.
Right.
Oh, yes, sorry.
Got it.
Got it.
It will provide a more uh huh.
Yeah.
I'm, so sorry, so well that sounds so.
Well it would be a bit also oh.
Well.
Thank you Mark.
But nonetheless.
Let me get that.
Well let.
Only like it, but let's look at it but well see.
No no.
Well no.
No.
Alright, Thank you very much guys.
Thank you.
Comes from Deepak Mathivanan of Barclays. Your line is now open.
Hi, it's Trevor onboard the PUC on the Commerce side can you talk about how cohort level trends over the last three months of evolved producing active buyers that came to the platform in April and May still continue to exhibit similar frequency and spend.
And how about on the new customer trends, our cohort size is still similar lastly, any commentary on active buyer growth coming from like truly new customers versus existing customers that were dormant kind of reactivating. Thank you.
Yeah. So.
[noise] cohort performance.
It continues to be very strong.
Sequentially.
Ross most key metrics.
We look at.
Quarterly.
New buyers fired Uri.
Growth online.
Uh huh.
So user we acquired over the last.
Sorry.
We have continued to remain in <unk>.
The overall.
It's actually.
Financially order.
In terms of new cohorts.
I would say the last quarter was in line with the previous a pandemic cohort, perhaps like a low.
Their initial performance, but still historically strong compare.
The prior quarter.
Great. Thank you [laughter].
Thank you and our next question comes from Marcelo Santos of JP Morgan. Your line is now open.
Hi, good afternoon, thanks for taking my questions.
Question is in the pool regarding the post office strike.
Well there are negative back Dan in terms of growth and could you help to two <unk> first we have a feeling or the migration to manage logistics in the end.
Helped to offset completely that and the second question is about EBITDA margin EBITDA margin. So profitability all came quite strong again this quarter.
Are you, reaching a point where were you should kind of keep a more positive profitability at the more material businesses like.
Like generate results as you mentioned last year like the more mature ones should go more results or should you ramp up more investments and.
End up doing more to trade off in terms of.
Group. These are the two questions.
Yeah.
So it's.
Right right.
We believe long term something.
Sorry, its something that ends up being very beneficial to us we migrated thousands of incremental large merchants away from the dropship model onto our managed network consequence right.
Short term it still ahead.
So I think we calculate it.
Mid to high single digits.
Gross that we lost because during the strike delivery promises were longer conversion rates drop.
So it took longer to worldwide.
So again short term.
Negative mid.
Mid to long term positive.
The incremental argument merchants.
And we saw that significant increase.
Sellers now.
Really threw us for you.
For pick up and then junction.
No.
In terms of profitability profile, Oh, we don't guide, but I think conceptually the way.
Question is accurate.
Our more mature a bit.
The larger more mature.
I have strong natural scale.
And so they should.
Yeah right.
I'm operational leverage now don't forget.
Highly competitive market and again, we will.
So if we err on the side, meaning aggressive in our investment in driving growth in market share that continues to be our number one priority.
If were able to accomplish that and also take advantage of the economies of scale.
And then there are newer business unit.
We launched.
CPG, what you should expect that could be very very large opportunity and that we will be.
Perfect. Thank you very much for that.
Thank you and our next question comes from Jamie Friedman of Susquehanna. Your line is now open.
Okay do you have any view about the impact of the Corona vouchers. The stimulus program any way to detect how much that may have helped.
Helped your TPV.
Oh.
Okay.
<unk>.
They are well in the quarter.
<unk>.
Good.
You mean.
No.
Well do well.
Well.
Yeah.
Bye bye.
<unk>.
Okay, Thanks for that as well given.
Do you happen to have any update on the pay Pal operating agreement. What are you guys doing together what do you have operationalized in the market at this point and what are your future plans.
So I mean, what we.
I don't.
Or the ability for <unk>.
But they they cross border.
Correct.
Cool and also or update.
They have to they Burton.
Oh you got.
Now what.
But one of the baby for MACOM repay it yeah.
No well.
Okay and worked out on that so why do you focus on women.
Mexico.
But.
Bye bye.
Well.
Yep.
Well.
No.
Great. Thank you Oswald.
[laughter].
Thank you and our next question comes from Shawn Collins Jefferies. Your line is now open.
Hey, Thanks for the question.
Can you talk about how efforts across the Brazil retail landscape to spread out sales event. This holiday season could impact overall promotional spending this year and related to that dynamic I'm curious, whether you're seeing any signs that competitors with large physical store footprint putting.
Even more effort into driving sales to their E commerce offerings, giving given the impact that depend on mix may have on consumers' desire to shop in store. Thanks.
Yeah, I think I.
Recapping, how Q4 plays out.
We've actually gone.
The quarter.
Hey, how competitors.
Like I said okay.
Or execution, you should yeah last summer by line.
Years.
You bet.
Better.
To participate aggressively.
<unk>.
And then in terms of where consumer.
They didnt.
Our physical.
Physical store purchases.
I think as we see the opening.
We are seeing with traffic.
That we see primarily.
<unk>.
In store.
So I think that slowly consumers.
The returns.
Thank you.
Thank you and again, ladies and gentlemen, if you like asked a question. Please press Star then one on your touched on telephones and our next question comes from Cornell Medical right does change like no Ben.
All right. Thanks, guys for taking my questions. A couple if I could one with regard to the leasing a bit on Amazon prime to ER and be it'll be a better centric wouldn't have generally good for Congress in general typically what received the U.S. is a lot of other retailers competitors to Amazon <unk>.
Like high end growth.
Hi, Hi, higher trading volumes that on those days.
I was just curious what you saw and then Oh, you know again a bit of picking up on what Amazon is doing in the U.S. they've done so I was on flex where they've been to actually help finance.
Trucks trucks, and trailers and you know and what have you and balance for last mile delivery, if that's something which is which will be an option for you guys in Brazil, as a way to kind of get it on the equity owners a marketing.
So let me.
I think first of all.
Prime day was what's.
Well, we had some initiatives that we think blunted the value proposition that we.
Shipping offering during the week, we saw good results on our.
And then in terms of network design and what they're doing I think my only thought is we historically always try to understand very well what is happening in the global ecommerce landscape and if there are things that are applicable or things that are you. Maybe I think we've always been very adept at doing so.
I didn't get to whatever.
Yeah.
And our network is a case in point, we firmly believe that we are building out the most efficient.
Network in the region across multiple geographies not just in Brazil, Mexico and that obviously requires hiring the right people investing aggressively but also.
Replicating.
Thanks, Great. Thank you.
Thank you and ladies and gentlemen, this does conclude our question answer session.
Thank you for participating on today's conference call and you may now disconnect.
[music].