Q1 2025 MercadoLibre Inc Earnings Call
Hello, everyone and welcome to the Mercado Libre earnings Conference call for the quarter ended March 31st 2025. Thank you for joining us I'm, Richard Cathcart, Mercado Libre Investor Relations Officer.
Unknown Executive: Hello everyone and welcome to the MercadoLibre Earnings Conference call for the quarter ended March 31st, 2025. Thank you for joining us.
Richard Cathcart: I'm Richard Cathcart, MercadoLibre's Investor Relations Manager. Today we will share our quarterly highlights on video, after which we will begin our live Q&A session with our management. Before we go on to discuss our results for the first quarter of 2025, I remind you that management may make or refer to, and this presentation may contain, forward-looking statements and non-GAAP materials.
Today, we will share our quarterly highlights on video after which we will begin a live Q&A session with our management team.
Before we go on to discuss our results for the first quarter of 2025, I remind you that management may make or refer to in this presentation may contain forward looking statements and non-GAAP measures. So please refer to the disclaimer on the screen, which will also be available in our earnings materials on our Investor Relations website.
Unknown Executive: Please refer to the disclaimer on screen, which will also be available in our earnings materials on our investor relationship. Please note that this call is being recorded and a replay will be made available on our IR website.
Please note that this call is being recorded and a replay will be made available on our IR website as well.
Unknown Executive: With that, let's begin with a short message from our CFO. Hello, everyone. We are excited to kick off 2025 with another great quarter at MercadoLibre as we continue to deliver strong growth across both e-commerce Thank you. In Q1, we maintained the rapid pace of net revenue growth achieved in 2024 while making solid progress on all of our short-term goals. This momentum is fueled by continuous investments and improvements in the value proposition for and KOMARS, who continue to deliver strong growth, outstanding all of our members. Brand Preference Metrics for our marketplace reached all-time highs in Brazil, Mexico, Argentina and Chile during the quarter.
With that let's begin with a short message from our CFO.
Speaker Change: Hello, everyone. We are excited to kick off the 225 it was another great quarter.
Speaker Change: As we continue to deliver strong growth across both e-commerce.
Speaker Change: In Q1, the one day.
Speaker Change: Days of net revenue growth achieved in tranches for while making solid progress on all of our strategic initiatives.
Speaker Change: This momentum it feels like.
Speaker Change: Investments in these programs and the value proposition for our users.
Speaker Change: Omar we continue to deliver strong growth outpacing all of our major markets brand preference metrics for our marketplace reached all time highs in Brazil, Mexico, Argentina, and Chile in the quarter. You can see are evidence that our investments are working although we're further consolidated our position as a destination of choice for all.
Unknown Executive: This is clear evidence that our investments are working and that we are further consolidating our position as a destination of choice for online purchasing in Latin America. In crypto services, monthly active users continue to grow at startup rates of more than 30% year-on-year, reaching a total of 64 million. Our strategy of offering attractive regeneration of the... proving to be a powerful tool to attract, retain, and engage Our credit portfolio grew by 75% year-on-year, while maintaining delinquency at comfortable levels. In March, persevering defaults on the credit card in Brazil pushed a new all-time low, driven by ongoing improvements in our scoring models.
Speaker Change: Purchasing he's asking about.
Services objective.
Speaker Change: Continuing to grow sometimes raised more than 30% year on year, reaching a total of 64 million.
Speaker Change: So unless you're offering attractive or duration of deposits.
Speaker Change: Proving to be a powerful tool for Fox to retain and engage users I think the portfolio grew by 75% year on year well.
Speaker Change: The delinquency at comfortable levels.
Speaker Change: Or sort of a default on the credit card the Brazil reached a new all time low driven by ongoing improvements in our scoring models a successful move up market as a result, we are.
Unknown Executive: As a result, we are scaling the credit card business while improving its profitability. Argentina performs exceptionally well in Q1 in all of our tournaments.
Speaker Change: We're scaling the credit card business, while improving its profitability.
Speaker Change: He now performed exceptionally well in Q1 in all of our business.
Unknown Executive: U.S. Dollar Revenues More Than Bubbling Years The stabilization of the macroeconomic environment has helped us to fully leverage the strength of our brands and value proposition in the market. Income from Operations grew at a faster pace than revenue, helped by the strong performance We are very encouraged by the positive impact of our strategic investments across the MercadoLibre ecosystem, which are critical for us to capture the many long-term growth opportunities that we see in both commerce and fintech in Latin America.
Speaker Change: U S dollars revenues more than doubling year on year.
Do you have any station on the macroeconomic environment has helped us to fully leverage the strength of our brands and value proposition in the country income from operations grew at a faster based on revenue.
Speaker Change: And the strong performance in Argentina.
Speaker Change: We're very encouraged by the positive impact of our strategic investments across the Mercado Libre Eco system, which are critical for us to capture the many long term growth.
Speaker Change: We see both commerce.
Speaker Change: In Latin America. Thank you for your continued support and interest now I hand, it over to reach out for some exciting updates on.
Unknown Executive: Thank you for your continued support and interest.
Richard Cathcart: Now, I hand it over to Richard for some exciting updates on fintech. www.microsoft.com.ca Q1 was the most recent of a long series of quarterly results that reflect MercadoLibre's fantastic momentum. Monthly active users, for example, continue to grow above 30% year-on-year and reached 64 million in Q1 2025.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Hum.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Q1, with the most recent sort of a long series of quarterly results to reflect where I called Baggers fantastic momentum.
Speaker Change: The active users for example continue to grow above 30% year on year.
Speaker Change: 64 million in Q1, 'twenty fives today, we want to highlight some of the exciting changes that are taking place as we continue to democratize financial services in the region. Our aim is to transform people's relationships with financial services. So that as many people as possible have access to products such as the yielding accounts.
Unknown Executive: Today we want to highlight some of the exciting changes that are taking place. www.maurer.co.uk Our aim is to transform people's relationships with finance. that's as many people as possible have access to products such as the yielding account, credit, investments, insurance Perhaps more importantly, we want users to see the relationship as win-win. This is a core pillar of MercadoPago's positioning and, more importantly, how we intend to continue disrupting the markets in which we operate.
Speaker Change: Credit investments insurance and much more.
Speaker Change: Perhaps more importantly, we won't use is to see the relationship. It was win win this is a core pillar of Mercado Pago is positioning.
Speaker Change: Importantly, how we intend to continue disrupting the markets in which we operate is a short video. This should help investors understand how we're thinking about every decision we take as we build mercado pago to become used as primary financial relationship.
Unknown Executive: Here's a short video that should help investors understand how we're thinking about every decision we take as we build MercadoPago to become users' primary financial relationship. Late fees. Denied loans. Exploitation. That's finance as we know it. A win-lose game in a suit-and-tie discipline. But Mercado Pago is changing this game. Turning it into a win-win situation. A game with one unnegotiable rule. Every user feels like winning in every single financial move. every sale, every day. every new card, every yield check. This isn't just about transactions, it's about trans- When you win, the world around you wins, too.
Speaker Change: Late fees denied learns exploitation that finances.
Speaker Change: When Luke gain in a suit and tie the skies.
Speaker Change: Okay.
Speaker Change: But maybe kind of change in this game.
Speaker Change: Turning it into a win win situation again, this one I'm going to take.
Speaker Change: Thank you.
Speaker Change: We use it feels like every single financial needs.
Speaker Change: Every sale every time.
Speaker Change: Every call every year check.
Speaker Change: This isn't just a transaction.
Speaker Change: It's about transformation.
Speaker Change: When you went in the world around you limit to your favorite cafe try to.
Unknown Executive: Your favorite cafe thrives. Your local shop grows. Your community flourishes. Because real winning isn't about outdoing others. It's about progress we all share.
Speaker Change: The shock waves, you'll community flourishing.
Speaker Change: Cause real when it isn't about doing.
Speaker Change: It's about progress we all share.
Unknown Executive: Future of Finance And this time, everyone wins.
Speaker Change: Our future financing.
Speaker Change: At this time.
Speaker Change: Wayne.
Speaker Change: Okay.
Speaker Change: Aside from communicating the win win value proposition of Mercado Pago. We also wants it to be even more closely tied to Mercado Libre. The center of our ecosystem. This is why Mercado Pago just turned yellow and now shows the primary color of our ecosystem.
Unknown Executive: Aside from communicating the win-win value proposition of MercadoPago, we also want it to be even more closely tied to MercadoLibre at the centre of our economy. This is why Mercado Pago has turned yellow and now shares the primary color of orange. This allows us to feed off the huge awareness and high levels of confidence that consumers across the region have in our market. We don't want to have a yellow side of the ecosystem and a blue side of the ecosystem. We want to have.
Speaker Change: This allows us to feed off a huge awareness and high levels of confidence that consumers across the region have been all market place. We don't want to have a yellow side of the ecosystem and the blue side of the ecosystem. We want to have a single ecosystem, we launched a new branding and our out since fist in Chile, and Mexico in Q1 with Brazil following in mid April.
Unknown Executive: We launched the new branding in our absence sites in Chile and Mexico in Q1, with Brazil following in mid-April. Change doesn't only impact our FinTech services business, but also our acquiring. And alongside the yellow colorway, we're also implementing an updated visual identity that is more aspirational and more modern.
Speaker Change: This change doesn't only impact felt fintech services business, but also our acquiring business and alongside the yellow color. Why we're also implementing an updated visual identity that is more aspirational and more modern.
Unknown Executive: We have also updated MercadoBagos UX, evolving the in-app experience from something that resembled a super app to a look and feel that brings a more specialized banking experience. We're raising the bar so that all of the products we offer are displayed and can be navigated.
Speaker Change: We have also updated mercado Pago UX evolving that experience from something that was assembled a super app. So we'll look and feel that brings the most specialized banking experience we're raising the bar. So that's all of the products. We offer are displayed and can be navigated and the simplest way possible. These are all changes that should help us achieve our long term ambition of become.
Unknown Executive: These are all changes that should help us achieve our long-term ambition of becoming the largest and best digital account in Latin America. and it's another reason why we're excited that the best is yet to come.
Speaker Change: The largest digital accounts and lots of America.
Speaker Change: And it's another reason why we're excited that the best is yet to come.
Speaker Change: We will now begin the question and answer session.
Unknown Executive: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the key.
Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: You're using a speakerphone please pick up your handset before pressing the keys.
Unknown Executive: If at any time your question has been addressed, and you would like to withdraw your question... please press star, then.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two we also ask you. Please limit yourself to one question and if you have further questions you may reenter the question queue.
Unknown Executive: We also ask that you please limit yourself to one question and if you have further questions you may re-enter the question queue.
Unknown Executive: And at this time, we'll pause momentarily to assemble our roster.
Speaker Change: And at this time, we'll pause momentarily to assemble our roster.
Speaker Change: And the first question will come from Andrew Ruben with Morgan Stanley. Please go ahead.
Andrew Ruben: And the first question will come from Andrew Ruben with Morgan Stanley. Please go ahead. Hey, Andrew and Morgan Stanley here. Thanks very much for the question. I'd like to explore a bit the sustainability of some of the trends you're seeing in Argentina. Items sold, it looks like this step changed to 52% growth. So I'm trying to understand even quarter on quarter what drove such an acceleration. And similarly, when we look to the contribution profit in the country, you mentioned the reinvestment in Brazil, reinvestment in Mexico, but still quite strong margin in Argentina. So trying to understand the sustainability of that trend and how you're thinking about investments in the country going forward.
Speaker Change: Hey, Andrew have Morgan Stanley here, Thanks, very much for the question I'd like to explore a bit the sustainability of some of the trends you're seeing in Argentina, I'm items sold it looks like the step change to a 52% gross so I'm trying to understand even quarter on quarter, what drove such an acceleration and <unk>.
Speaker Change: Really when we look to the contribution profit in the country you mentioned the reinvestment in Brazil reinvestment in Mexico, but still quite strong margin in Argentina, So trying to understand the sustainability of that trend and how you're thinking about investments in the country going forward. Thank you.
Unknown Executive: Thank you. Perhaps our speaker lines are muted.
Speaker Change: Okay.
Speaker Change: Perhaps our speaker lines are muted.
Speaker Change: Hey, Andrew New Saudi and thanks for your questions. So.
Ariel Szarfsztejn: Hey, Andrew. This is Ariel. Thanks for your questions. So, as you said, we had an amazing quarter in Argentina. With last year's recovery in demand strengthening even farther, we were able to capture strong growth. As you said, 126% of GMB growth year over year, 52% on items sold. Items per unique buyer going up. Of course, there are different effects, right? On the one hand, we are comparing our numbers with a baseline from Q1 last year, which was a bit weak. But simultaneously, we see ourselves, and more importantly, we see ourselves gaining market share. And that's not just because of what happened last year, but it's also because of everything we've been executing over the last few months in order to help the business get recovered, being in shipping and making our prices more affordable, pushing for more financing, improving selection, and so on.
Andrew Ruben: As you said, we had an amazing quarter in Argentina.
Andrew Ruben: With last year recoveries recovery in demand strengthening even farther than we were able to capture strong growth a few 726% of GMB growth year over year and 52% on items sold.
Andrew Ruben: <unk> per unique buyer going up.
Andrew Ruben: Of course, there are the deepening of the fixed rate on the one we are comparing our numbers with a baseline from Q1 last year, which was a bit weak, but simultaneously, we see ourself and more importantly, we see ourselves gaining market share and that's not just because of what happened last year.
Andrew Ruben: But it's also because our favorite thing we've been executing.
Andrew Ruben: Over the last few months in order to help the business get recall, but being in shipping on making our prices more affordable.
Andrew Ruben: <unk> for the motor financing improving selection.
Andrew Ruben: And so one so in all we continue to enhance our value proposition.
Ariel Szarfsztejn: So, in all, we continue to enhance our value proposition, and we'll continue to do so in the coming quarters.
Andrew Ruben: And we will continue to do so in the coming quarters of course comparison will get tougher, but we are convinced we have the corner or what we need to continue having a great business coming from the country.
Ariel Szarfsztejn: Of course, comparables will get tougher, but we are convinced we have the core of what we need to continue having a great business coming from the country. And just to complement Andrew, yeah, we're seeing clearly stabilization of Argentina. We have seen it for the past few quarters, but obviously we have a tough comp last year was a really tough quarter Q1, so that also helped us with the comparison. But having said that, we've seen lower inflation, decreasing interest rates, which is helping us with our credit book. Our credit book grew by 4X year-on-year in Argentina in dollar terms. Not only that, but it improved profitability as well.
Speaker Change: Access to complement Andrew Yes, we are seeing clearly sterilization of Argentina, we have seen it for the past few quarters.
Andrew Ruben: But obviously we have it.
Andrew Ruben: Tough comp last year was a really tough quarter in Q1, so that also.
Andrew Ruben: It helped us with our comparison, but having said that we've seen lower inflation and decreasing interest rates, which is helping us with upgraded booking our credit book grew by Forex year on year in Argentina. It in dollar terms.
Andrew Ruben: But it improved profitability, that's why that's helping profitability in Argentina assets under management from a very large base that continues to grow 69% year on year.
Ariel Szarfsztejn: That's helping profitability in Argentina. Asset under management from a very large base in Argentina continues to grow, grew at 69% year-on-year. And profitability overall, the consolidated profitability for Argentina improved by 11 percentage points during the quarter compared to last year. So we think we are very optimistic about Argentina, not only because of macro, but more important than that, because of all the brands that we have in Argentina, both MercadoLibre and MercadoPago, the user experience that we have in Argentina performing extremely well, as Adi mentioned, both in commerce as well as in fintech. And we will continue to deploy and improve the user experience in Argentina, just like we're doing in the other countries.
Andrew Ruben: Profitability overall, the consolidated prohibited if Argentina improved by 11 percentage points during the quarter compared to last year. So we think we are very optimistic about Argentina, not only because of macro but more importantly, bad because of all the brands that we have enough sense you know both from our Guardian Mercado Pago and user experience that we have in Argentina.
Andrew Ruben: Yeah, Yeah, performing extremely well as S. Eddie mentioned, both e-commerce as well as a fintech I will continue to deploy and improve the user experience.
We're doing it in the other countries and if I were to add one comment is with regards to the reimbursement we're doing in Brazil, and Mexico on the Fintech side that is mostly related to <unk>.
Ariel Szarfsztejn: And if I were to add one comment is with regards to the reinvestment we're doing in Brazil and Mexico on the fintech side, that is mostly related to our credit card in those countries.
Andrew Ruben: In those countries and we have not the launch of credit cards in Argentina. So that when we do definitely we will invest also in build up the portfolio.
Ariel Szarfsztejn: And we have not yet launched a credit card in Argentina.
Ariel Szarfsztejn: So when we do, definitely we will invest also in building that portfolio. Great.
Andrew Ruben: Yeah.
Andrew Ruben: Great. Thank you all for the color.
Unknown Executive: Thank you all for the call.
Speaker Change: The next question will come from Irma <unk> with Goldman Sachs. Please go ahead.
Irma Sgarz: The next question will come from Irma Sgarz with Goldman Sachs. Please go ahead. here. So 1P GMB posted some really solid growth. Can you talk a little bit on... more detail about what drove this growth and what category.
Speaker Change: TNT and <unk> posted really solid growth can you talk a little bit in more detail about what drove this this growth and what categories, perhaps contributed more.
Ariel Szarfsztejn: Thank you very much and happyata Hey, Irma. How are you?
Speaker Change: Supermarket for example relevant force here.
Speaker Change: And if you can also comment on margin evolution here are you getting closer to breakeven ex ads and on a full cost basis or is it something on the cards for this year. Thank you.
Speaker Change: Hey, how are you how do you all here again, so yes, a few said won't be a tremendous Q1 with GMB growth are evolving.
Ariel Szarfsztejn: Ariel here again. So, yes, as you said, 1P had a tremendous Q1 with GMB growth evolving 102 year-over-year with strong performance across market and across categories. And I would say that's the consequence of continuing to improve selection and price competitiveness. We also continue to make progress in terms of managing the business through more and more technology. We are doing automatic onboarding, automatic buying, automatic pricing. And that's all contributing for us to get better economics and simultaneously continuing to grow. I would say growth in 1P is not driven by supermarket. 1P supermarket is growing. But our growth in 1P goes much beyond what happened in supermarket and is more and more spread across different categories of our business.
Speaker Change: <unk>, all being handed over to year over year with strong performance across markets and across categories and I would say that's a nickel in sequence all continuing to improve selection on price competitiveness and we also.
Speaker Change: Continue to make progress in terms of managing the business to more and more technology.
Speaker Change: Well, we are doing now telematic onboarding automatic buying OCA might be pricing on and that's all contributing.
Speaker Change: And for us to get better economics, and simultaneously continuing to grow I would say growth in one b is not driven by your supermarket one P supermarket is growing.
Speaker Change: But our growth in one b goes much beyond what companies supermarket, and as more and more of a spread across different categories of our of our business of course consumer electronics continues to hold.
Ariel Szarfsztejn: Of course, consumer electronics continues to hold a big share of what we are doing in 1P.
Speaker Change: A big share of what we are doing in in lumpy.
Ariel Szarfsztejn: So to the second part of the question, going to supermarkets, we are extremely satisfied with the consistent progress we have been making in supermarkets for some quarters already. In Q1, we grew 65% year-over-year, that's faster than any other category in our marketplace and sequentially accelerated. And I'd say that's the result of an improved value proposition across the board, right? So we have better and more consistent selection, we have better navigation with aisles that facilitate shopping experience, we have deployed features for repurchase and some other things that allow our users to fill in their cards and buy stuff easily.
Speaker Change: To the second.
Speaker Change: Or the question going to supermarket and we are extremely satisfied with the consistent progress we have been making in supermarket for some quarters already in Q1, we grew 65% year over year, that's faster than any other category.
Speaker Change: In our market place Unsecure actually accelerated and I'd say, that's the result of an improved value proposition across the board right. So we have better and.
Speaker Change: And more consistent.
Speaker Change: The selection, we have better navigation with ice that facilitates shopping expedience, we shot.
Speaker Change: Deployed features for repurchases on on some of the things that allow our users to filling datacard sun by staff.
Speaker Change: Easily we improved our promotional activities on special dates and last but not least we are increasing the share of lumpy within a supermarket and we are doing so.
Ariel Szarfsztejn: We improved our promotional activities and special dates, and last but not least, we are increasing the share of 1P within supermarkets, and we are doing so because it helps us get more effective in getting consistency and availability of supply day after day, but it also brings efficiency and improvement in economics, right? So 1P in supermarkets actually has better unit economics than 3P as we manage to operate with massive movements in our warehouses operating by pallets and master cases, we manage to get better revenues from advertising through our relationships with manufacturers. So 1P is and will definitely play a strategic role in supermarkets moving forward.
Speaker Change: Because it helps us get more effective in getting consistency and availability of supply.
Speaker Change: They yesterday, but it also brings efficiency and improvement in economics, right. So one being the supermarket actually have better unit economics than three b as we managed to operate with a massive movements in our warehouses operating by pallets and massive bases, we managed to get better revenues from advertising to the Huawei relationship.
Speaker Change: Swift manufacturers, so wont be east and will definitely play a strategic role and.
Speaker Change: In Super market moving forward.
Ariel Szarfsztejn: Going to the question on margins, year-over-year margins in supermarkets in particular continue to improve, so we are excited with that, and that's part of the reason why we feel comfortable investing behind doing more and more side merchandising to push for a category in which we have a lot of confidence and we have proven that can bring downstream impact in the users that do engage in buying consumer packaged goods in MercadoLibre.
Speaker Change: Going to the question on margins year over year margins in supermarkets in particular continued to improve so we are excited to do that and that's part of the reason why we feel confident that we'll.
Speaker Change: Investing behind and doing you know more and more site merchandising to push a 40 category in which we have a lot of confidence and we have proven that can bring downstream impact.
Speaker Change: In the us that do engage.
Speaker Change: In buying consumer package goods in Macau Libre.
Speaker Change: The next call. The next question will come from Robert for it with Merrill Lynch. Please go ahead.
Robert Forret: The next question will come from Robert Forret with Merrill Lynch, please go ahead. Hey, good, good evening, Richard, Martin, Ariel, Osvaldo, thanks for taking my question. With respect to, you know, fast-moving consumer goods, I was actually surprised that it was a highlight in Argentina. Can you talk a little bit about... you know, across the region. Maybe the halo effect for other categories, how you're thinking about subscribe and save. And you alluded to this idea, but how big of an unlock is this in terms of having now a full funnel solution and FMCG for FMCG?
Robert: Hey, good evening Richard Thanks.
Speaker Change: Thanks for taking the question.
Speaker Change: With respect to fast moving consumer goods I was actually surprised that it was a highlight in Argentina can you talk a little bit about the tan.
Speaker Change: Across the region, maybe the Halo effect for other categories, how youre thinking about subscribe and save.
Speaker Change: And you alluded to this already but how big of an unlock is this in terms of having now a full funnel solution.
Speaker Change: F N C G for advertising.
Bob: Hey, Bob I really once again, so thanks for the question.
Ariel Szarfsztejn: Hey Bob, Ariel once again, so thanks for the question. I think, in general terms, e-commerce penetration in FMCG is pretty, pretty low. So, longer term, the opportunity is huge. We are just starting with this category, both ourselves and probably some of our competitors. So, we are excited with everything we see and with everything we can build as to push that penetration closer to what e-commerce represents to the general retail.
Bob: I think in general terms e-commerce penetration in F. M. C D and E is pretty pretty low so longer term the opportunity is huge we're just starting with the scottrade already both ourselves and probably some of our competitors. So we are excited and when.
Bob: Everything we see and with everything we can we can build us to push that penetration closer to what E com at 3% to the journal and retail.
Ariel Szarfsztejn: On Halo Effect, I was just mentioning before, we do measure downstream impact of supermarkets. So, buyers who buy CPG in MercadoLibre end up buying more of general merchandise in MercadoLibre as well. And that's very positive.
Bob: On Halo effect I was just mentioning before we do measure downstream impact of supermarket, so buyers, who buy a CPG and medical EBITDA ended up buying more oh genuine merchandize in Medicare Libre as well.
Bob: That's very positive then there is a huge leased or product improvements that we need to deploy and we took hold first subscribe and save is definitely in the at least it will get a time in which we will be able to add.
Ariel Szarfsztejn: Then there is a huge list of product improvements that we need to deploy and we need to code first. Subscribe and save is definitely in that list. It will get a time in which we will be able to do that, but we are more on the basic feature building right now. So, many things to continue doing in order to get there. We will at some point, but again, excited with the progress. This is happening in every single market where we operate and we expect that to continue in the future.
Bob: To that but we're more on the basic feature or a building right now so many things to continue doing and in order to get there we will at some point, but again excited with the progress and this is happening in every single market, where we operate and we expect that to continue in the future.
Bob: Okay.
Marcelo Santos: The next question will come from Marcelo Santos with J.P. Morgan. Please go ahead. Hi Gurvini, thanks for taking. I would like to ask for an update on the logistics plan, especially on Brazil. I think there was some news saying that...
Marcelo Santos: The next question will come from Marcelo Santos with JP Morgan. Please go ahead.
Marcelo Santos: Hi, good evening, Thanks for taking my questions I would like to ask for an update on the logistics plan, especially on Brazil, I think there was some news, saying that youre planning to boost the distribution center deployments, where you are now where do you want to get then if you could also comment on other regions. Thank you very much.
Marcelo Santos: Hey, Marcelo how are you yeah, I think there's nothing changing in terms of our logistics plan and to be sure I mean in this quarter as we mentioned in the past with think logistics he said.
Unknown Executive: Hey, Marcelo, how are you? Yeah, I think there's nothing changing in terms of our logistics plan to be shared in this call. As we mentioned in the past, we think logistics is a key enabler for the growth of our business, and we don't want to take risks in terms of not having the required capacity to deal with demand.
Marcelo Santos: Key enabler for the growth of our business and we don't want to take risks in terms of not having that would be quite a capacity to deal with demand, but given our current scenario on our internal projections. There there are no changes to what we announced in the past.
Unknown Executive: But given our current scenario and our internal projections, there are no changes to what we announced in the past in terms of footprint. So we were very active in deploying a large number of fulfillment centers last year. I think this queue in particular, the number was a bit lower, but that's just because of seasonality and time to market in setting up new facilities. But we'll continue building and expanding our footprint as needed in order to deal with the demand that we think we will continue generating in the marketplace. And to complement from a financial perspective, you take logistics investment of CapEx and logistics this quarter as a percentage of revenues, it's consistent with what we had a year ago.
Marcelo Santos: In terms of footprint. So we were very active in deploying a large number of fulfillment centers last year I think the skew in particular and the number was a bit lower but that just because of seasonality and time to market in setting up new facilities, but we'll continue building.
Marcelo Santos: And expanding our footprint as needed in order to deal with the demand that we think we will continue generating in the marketplace and the complement from a financial perspective, you take logistics investments on Capex on logistic this quarter as a percentage of revenues is consistent with what we had a year ago. So similar path, okay ask of our sector.
Unknown Executive: So similar path from a financial perspective.
Marcelo Santos: Yeah.
Marcelo Santos: Okay.
Speaker Change: The next question will come from product Griego got them with a towel BBA. Please go ahead.
Rodrigo Gaston: The next question will come from Rodrigo Gaston with Etow BBA. Please go ahead. Thank you.
Speaker Change: Yes. Thank you good evening, everyone I'd, just like to double click here on the main drivers behind.
Martin Santos: Good evening, everyone. I just would like to double click here on the main drivers behind Argentina's contribution margin of You said it's easy comps, I understand that, but you've reached the highest contribution margin ever. So, just wondering here where it mostly came from. higher growth the fintech business with the acquiring business which has higher margins SG&A dilution from the faster top-line growth anything here on the main drivers, specific drivers in Argentina. Actually, to help us to understand the future would also be very.
Speaker Change: Argentina is contribution margin evolution.
Speaker Change: You said it it's easy comps understand that but you've reached the highest contribution margin ever. So just wondering here, where it's mostly came from is it coming from you know a higher take rates revenue mix with higher growth of Fintech business with quite a bit which has higher margins our.
Speaker Change: SG&A dilution from the faster topline growth so anything here on the main drivers specific drivers in Argentina.
Speaker Change: Actually to help us to understand the future would also be very helpful. Thank you guys.
Rodrigo Martin: Hi, Rodrigo Martin here I think.
Martin Santos: Hi, Rodrigo, it's Martin here. I think Argentina performed extremely well both on commerce and fintech. Most of our businesses grew very nicely in the quarter. One of the main drivers is growth that enabled us to dilute fixed costs in a very efficient way, also to find efficiencies in logistics and many other areas of our business. The credit business grew very nicely, I mentioned it before, and improved profitability, interest rates coming down in Argentina, helping us also with the credit business, not only because of more adoption of credit, because it's more affordable to people, but also by lowering the cost of funding, it improves our margins on that particular product.
Rodrigo Martin: Argentina performed extremely well both on commerce and Fintech most of our businesses grew very nicely in the quarter I think that's the main one of the main drivers of this growth that enabled us to dilute fixed costs in a very efficient way also to find efficiencies in logistics and in many other areas of our business the credit business.
Rodrigo Martin: Oh, very nicely I mentioned, it before and improve profitability interest rates coming down.
Rodrigo Martin: Helping us also with a credit this is not only because of more adoption of credit because it's more affordable to people, but also by lowering the cost of funding it improves our margins on that particular product. So I think for the most part we've seen recoveries in.
Martin Santos: So I think for the most part, we've seen recoveries, and as Ari mentioned earlier, in commerce, items sold growing at 50 plus percent year on year.
Speaker Change: Eddie mentioned earlier in and Commerce.
Speaker Change: It themselves growing at 50 plus percent year on year.
Martin Santos: So I think throughout the business, margins have improved, and this is the reason why, not only because of comp from last year, but also genuine and sustainable improvements on profitability we've seen in Argentina so far.
Speaker Change: So I think this is a.
Speaker Change: Throughout the business.
Speaker Change: Margins have improved.
Speaker Change: This is the reason why not only because of comp from last year, but also a genuine and sustainable improvement in profitability. We are seeing in Argentina. So far the only thing I would add to that is that as interest rates have continued coming down. We also saw an increase in the percentage of transactions that were paid with credit cards and installments, where we.
Neha Agarwala: The only thing I would add to that is that as interest rates have continued coming down, we also saw an increase in the percentage of transactions that were paid with credit The next question will come from Neha Agarwala with HSBC. Please go ahead.
Speaker Change: Have also.
Speaker Change: <unk> XR revenues on the next decade.
Niihau Agarwalla: The next question will come from Niihau Agarwalla with HSBC. Please go ahead.
Niihau Agarwalla: Hi, can you talk a bit about the asset quality trends you did expect some seasonality in terms of who is listening.
Martin Santos: Hi, can you talk a bit about the asset quality trends? We did expect some seasonality and some seasonal worsening, but I also see that there's stronger growth in credit cards which should dilute the asset quality, both early days and post-season, 90-day NPL. So if you can shed some more light on what kind of trends should we expect going forward, and also if there's any contribution of the growth in the Argentina credit business on these asset quality numbers that we are seeing. Thank you so much. So I'd say there are several moving parts when we look at our portfolio of loans.
Niihau Agarwalla: But I also see that the stronger growth in credit cards that you dilute the asset quality, but you Didnt think you. The 90 day Npls. If you can shed some more light on what kind of trend should we expect going forward and also if there's any contribution of the growth in the Argentina business R&D asset.
Niihau Agarwalla: Thank you so much.
Niihau Agarwalla: Yeah.
Niihau Agarwalla: Sure I'll say the.
Niihau Agarwalla: Several moving parts when we look at that.
Niihau Agarwalla: At our portfolio of loans basically had we are increasing the share of credit cards to the overall portfolio.
Martin Santos: Basically, on the one hand, we are increasing the share of credit cards to the overall portfolio. And even though, yes, credit cards have a lower NIMAL than other parts of the portfolio, the NIMAL of credit cards itself has been improving. We never had such a good quarter as this one. So the asset quality is super good. What is changing is the share there. And also, as we grow our portfolio and older cohorts mature, the percentage of cohorts that are older, and therefore with a positive NIMAL, will increase. And therefore, this goes in the opposite direction.
Niihau Agarwalla: The share of the.
Niihau Agarwalla: Our portfolio.
Niihau Agarwalla: Yeah.
Niihau Agarwalla: Even though.
Niihau Agarwalla: Yes, great guests have a lower NIM than other parts of the portfolio.
Speaker Change: For the <unk> Malouf, Craig cause itself has been improving we never had such a good quarter as these one so the asset quality is super good what has changed is the share there.
Niihau Agarwalla: Yes.
Niihau Agarwalla: And also us this.
Niihau Agarwalla: We grow our portfolio and all the cohorts mature and the percentage of.
Niihau Agarwalla: Cohorts that are older and therefore with a positive Nemo will.
Niihau Agarwalla: Will increase and therefore, it does goes in India, both direction this improves and offsets the change in mix.
Martin Santos: This improves and offsets the change in mix. And then we are moving up market and by moving up market both in the merchant and particularly in the consumer side of the credit book and this what means is we will have a little bit lower risk but also lower spread because of the credit we are offering. And so I would say that those have been the main drivers behind the change of mix in the credit portfolio.
Niihau Agarwalla: Then we are moving up market like women of marketing there both in the Merchandised, particularly in the consumer side of the cave book this quarter being fees, we will have a little bit lower risk, but also lower spreads because of the of the very great. We.
Niihau Agarwalla: Offering and so I would say that those have been the main drivers behind the change of mix in the in our credit portfolio with regards to Argentina in Argentina, I would say that.
Martin Santos: With regards to Argentina, in Argentina I would say that It's a country where we find delinquencies to be the lowest. Part of the reason behind that is that it's a country where the private sector has lower debt than in every other market just because the credit markets were closed for so long, and also that people really use MercadoPago pretty much every day, so they tend to pay us back quickly because we are, in many cases, their primary account and they need us for their everyday lives. So the credit quality in Argentina continues to be very good and that has driven up the increases Martin mentioned in terms of portfolio size, both on the consumer and on the merchant side of the business.
Niihau Agarwalla: You know or is the country, where we find delinquencies to be the lowest part of the reason behind that is that is a country where they.
Niihau Agarwalla: Where the private sector has lower depth then in every other market just because the credit markets were closed for so long and also that people really use Michael about pretty much every day. So they tend to pay us back quickly because we are.
Speaker Change: In many cases, the primary account that they need us for their everyday lives and so the credit quality in Argentina continues to be very good and that has driven that increase as Marty mentioned in terms of portfolio size. Both on the consumer on the merchant side of the business.
Niihau Agarwalla: Yeah.
Speaker Change: The next question will come from Geoffrey Elliott with Autonomous. Please go ahead.
Geoffrey Elliott: The next question will come from Geoffrey Elliott with Autonomous. Please go ahead. Hello, thanks very much for taking the question. Can you discuss the strategy in terms of deposits in Brazil? We've seen the 120% of CDI rate offered over the last few days. What's behind that? Is that about building customer loyalty? Is it about funding? Is it about something else? Can you give some thoughts?
Geoffrey Elliott: Hello, Thanks, very much for taking the question.
Geoffrey Elliott: Could you discuss the strategy.
Speaker Change: <unk> all deposits in Brazil, we've seen the 120% CDI rate offered over the last few days, but what's behind that is that about building customer loyalty is about funding is about something else can you give us some thoughts there.
Speaker Change: Sure Jeffrey I'll say that the main driver for that is really it.
Martin Santos: Geoffrey, I'll say that the main driver for that is really... marketing and positioning ourselves as really leading digital bank. It's something that when we look at our positioning, it's moving in this direction and this really adds to principality. Once consumers start bringing their money into MercadoPago, what they do is they start using MercadoPago more often. We increase their retention. We increase the use they do of their marketplace to our many, many positives.
Speaker Change: It's marketing on policies.
Speaker Change: Ourselves.
Speaker Change: Yes, really the leading digital bank is something done way when we look at our position in it is.
Speaker Change: Moving in this direction and these really adds to principality, whilst consumer subs, bringing their money into Macau about what they do is they started using mokobo more often we include include increase our retention we increase they use they they do have their money in the marketplace through our many many positives.
Martin Santos: We launched a campaign a few weeks back, very powerful marketing campaign in Brazil, where we are starting to use the yellow color as background instead of a blue color. Also, we have recruited Anita, which is a very popular singer in Brazil, to advertise MercadoPago and that is working very nicely. Part of the value position is that we are the account that pays the most in Brazil and so we are making sure that continues to be the case. There are limits to that, as you know, or There are three different conditions you have to keep in order to get the 120% of CDI.
Speaker Change: We launched the campaign a few weeks back.
Speaker Change: Very powerful.
Speaker Change: The marketing campaign in Brazil, where we are starting to use the yellow golar as background instead of a blue collar and also we have recruited a need that which is a very popular singular Brazil to to push for our two.
Speaker Change: <unk> advertised Michael about and that is working very nicely and part of the value proposition is that we are the account that pays the most in Brazil.
Speaker Change: So we are making sure that continues to be the case.
Speaker Change: <unk> to do that as you know.
Speaker Change: We see.
Speaker Change: Three different conditions, you have to keep in order to get the 120% of CDI has to be part of our loyalty program you have to put together the money in a special spot and there's a limit of a few thousand reais that you can invest in that part. So it's I think it's working nicely we have created a lot of awareness and people.
Martin Santos: You have to be part of our loyalty program. You have to put together the money in a special pot, and there's a limit of a few thousand reais that you can invest in that pot. So I think it's working nicely. We have created a lot of awareness, and people associate us with a digital bank. And so it's thinking, I would say, in the right direction.
Speaker Change: So as more and more with them.
Speaker Change: And digital bank, and so thinking I'd say in the direction.
Speaker Change: The next question will come from Tayo Pronto with UBS. Please go ahead.
Kaio Prato: The next question will come from Kaio Prato with UBS. Please go ahead. Hello and good evening. Thanks for the opportunity for asking questions here.
Tayo Pronto: Hello, Good evening, Thanks for the question here.
Kaio Prato: I would like to explore a little bit more about the correct business. First, I would like to understand how is your appetite today across the Moon products, if you can share. Last quarter you made clear that you were going to reduce the issuance of microcards, so just wondering if you can share a little bit the effects from that and more about the strategy going forward. Also, if you can talk a little bit about region, it would be helpful.
Tayo Pronto: I would like to start with it's more about the grad students.
Tayo Pronto: First I would like to understand how is your appetite today Robyn.
Speaker Change: If you can share next quarter, you made that you were going to reduce the issuance of micro pads. So just wondering if you can share.
Speaker Change: Thanks Beth.
Speaker Change: And more about the strategy going forward also if you can talk a little bit by region would be helpful. And finally, we noted a drop off your.
Kaio Prato: And finally, we noted a drop of your credit portfolio within one of your funding structures findings in Brazil in March. And in this report, you mentioned that you have almost $800 million from own cash for funding on the FinTech. So can you provide further details on this? What is the funding breakdown of the portfolio today? And if you are somewhat changing this strategy going forward, and if so, what's the rationale? Thank you very much.
Speaker Change: Credit portfolio, we see one of your funding took just fine English during March and it gives you talked you mentioned that you're almost $800 million on cash flow.
Speaker Change: So can you provide further details on these what is the spending breakdown.
Speaker Change: Today, a niche you are somewhat changing your strategy going forward.
Speaker Change: So what do they have I think very much.
Kyle: Hi, Kyle.
Martin Santos: Hi, Kaio.
Martin Santos: Let me start with how we are seeing the credit portfolio in general and let me start with Brazil and our risk capital in Brazil. We have not seen any deterioration in our portfolio. I think that both on the consumer side and on the credit side, we continue to be very profitable and NPLs continue to be very healthy. And now in Brazil, as I mentioned, the credit card book the recent cohort has the lowest first payment defaults we have seen. So, we are very excited with how our credit models are evolving.
Speaker Change: Let me start with <unk>.
Speaker Change: We're seeing the portfolio in general and let me start with Brazil, and our risk appetite in Brazil.
Speaker Change: We have not seen any deterioration in our portfolio.
Speaker Change: I think that both on the consumer side and on the credit side, we continue to be very profitable.
Speaker Change: Npls continue to be very healthy.
Speaker Change: And now in Brazil, as I mentioned the credit card book. The recent cohort has the lowest first payment default we have seen so we're very excited with how our models are evolving.
Martin Santos: That said, we have taken some more measures to reduce risk because we are looking at what's happening in the market and we have seen some deterioration from other players. And so, what we have done is beyond reducing the issuance of micro cards, we have been more conservative with regards to those customers who have the lower credit score. I'd say this tightening is rather small, but it's something that we have done and we are very comfortable with the level of risk we are currently taking.
Speaker Change: That said, we have taken some more measures to reduce risk because we're looking at what's happening in the market and we have seen some deterioration from other players and so what we have done is beyond reducing the issuance of micro cause we have been let's say more conservative with regard.
Speaker Change: As to the those customers will have the lower grade score.
Speaker Change: And.
Speaker Change: I would say this tightening is rather small, but its something that that.
Speaker Change: We have done that and we are very comfortable with the level of risk. We are currently taken something similar has happened in Mexico for even more towards the end of last year and early this year than we have been able to relax a little bit gradations of new cards, but we were also more conservative.
Martin Santos: Something similar has happened in Mexico, probably more towards the end of last year and early this year, then we have been able to relax a little bit the issuance of new cards, but we were also more conservative and tended a little with regards to those customers that have a lower credit score. But we have not seen any impact in our NPLs.
Speaker Change: And it in little with regards to those customers that have the <unk>.
Speaker Change: Lower credit score, but we have not seen any any impact in our our npls.
Speaker Change: They are having funding.
Martin Santos: Regarding funding, Kaio, the strategy continues to be the same, just as a reminder, we fund our books, our credit books, in Mexico and Brazil mostly with warehouse facilities, which are funded by large banks, JP Morgan, Goldman Sachs, and Citibank, and in Argentina, we typically go to the capital markets on a regular basis to fund our credit portfolio. In Brazil, specifically, which you asked, we also book certain loans on our financial institution, as opposed to sending it to the FIDIC, and sometimes we optimize the cost of funding by leaving some more loans in our financial institution, and this is what we did this quarter.
Speaker Change: The strategy continues to be the same session. As a reminder, we found our books already books in Mexico, and Brazil, mostly with warehouse facilities, which are funded by large banks JP Morgan Goldman Sachs and Citibank.
Speaker Change: Now we typically go to the capital markets on a regular basis to fund our upgraded portfolio.
Speaker Change: In Brazil, specifically would you ask we also booked certain loans on our execution as opposed to sending it to the athletic and sometimes we optimize the cost of funding by leaving somewhat loans in our franchise edition that is what we did this quarter is probably what you're referring to there's no change in terms of the <unk>.
Martin Santos: This is probably what you're referring to, but there's no change in terms of the share of third-party funding and the ways we are funding our credit book, this is mostly a practical adjustment that we did this quarter.
Speaker Change: Third party funding and the ways. We are funding our our credit book This is mostly done.
Speaker Change: The adjustment that we did this quarter.
Speaker Change: The next question will come from Joe Soares with Citigroup. Please go ahead.
João Soares: The next question will come from Joao Soares with Citigroup, please go ahead. Thank you for taking the questions. Very quick ones and kind of follow-ups. The first one is just to understand if there should expect any... What are the repercussions on ecommerce growth when you try to de-risk your concessions? I just wanted to understand if there will be any repercussions on the commerce growth.
Joe Soares: Thank you for taking the questions very quick points and kind of follow ups. The first one is just to understand if there you should expect any.
Speaker Change: What would be the broker questions on the college growth when you move when you try to do you will see a little bit.
Joe Soares: Your concession right initially we saw with the with the Microcredits.
Joe Soares: Eliminating back now you're moving towards cutting some of that.
Joe Soares: The.
Joe Soares: But even the level of risk here on the clients I just wanted to understand the reaney with the freshness of the commerce growth.
João Soares: Just to understand the opportunity of the credit card in Argentina, in any view on timing, should we expect a similar impact that we saw as you started to accelerate credit origination in other countries? Should we expect something similar in Argentina? I don't know how the behavior changes, varies, right, compared to Brazil and Mexico. Those would be the questions. Thank you.
Joe Soares: And just to understand the opportunity of the credit cards in Argentina in any view on timing.
Joe Soares: We expect a similar impact that we saw as you start to accelerate our credit origination and other countries should we expect something similar in Argentina, I don't know how.
Joe Soares: As the behavioral changes varies right.
Joe Soares: Compared to Brazil, and Mexico those are great questions. Thank you.
Speaker Change: Hi, John Let me address the first part of your question, which is.
João Soares: Hi, Joao. Let me address first the first part of the question, which is what repercussions it may have or not in the marketplace, what the actions we are taking with MercadoPago. I would say we don't expect any repercussions in the marketplace. When we look and what we track closely is what we call blue money, which is the total of payments on the marketplace that are coming from any of the MercadoPago sources, own sources, such as account-to-account or personal loans or credit cards, and some of those three variables continue to grow in all three markets in Brazil, Argentina and Mexico, and we expect that to continue to be the case.
Speaker Change: Regression it may have or not in there in the marketplace.
Speaker Change: Those were taken weighed with eh.
Speaker Change: When what Cal fire, all I'd say, we don't expect any repercussions in the marketplace. When we look on what wood tracks closely is what we called Blue money, what genius, which is the total of payments on the marketplace that are coming from any of them Okello power sources, all sources, such as account to account or personal loans or credit cards.
Speaker Change: And the sum of those three variables continue to grow in all three markets in Brazil, Argentina, and Mexico, and we expect that to continue to be the case. So we don't expect to see any deceleration in the marketplace driven by tightening a little bit on the on the credit side.
Martin Santos: So, we don't expect to see any deceleration in the marketplace driven by tightening a little bit on the credit side.
Martin Santos: And moving on to the second part, which was the potential evolution of the credit card in Argentina. expect this to be a very relevant card in the market. I would say that we have been learning. We first launched in Brazil. Then we were able to launch faster in Mexico. And I believe we have a very strong position in Argentina. And we would expect it to be interesting, obviously. We will be cautious as we adapt the models to the local country. Each country is different. But we expect to be able to do that in a second, to start issuing cards in the second half of the year.
Speaker Change: And moving onto the second part which was.
Speaker Change: The potential evolution of the credit card at Argentina, we.
Speaker Change: Expect this to be a very relevant card in the market is I would say that we have been learning we first launching in Brazil than we we were able to learn to foster in Mexico, and I believe we have a very strong position in Argentina, and we would expect it to be a interesting obviously, we will be cautious.
Speaker Change: As we are.
Speaker Change: Yeah.
Speaker Change: The more of those tools into the local country and each country is different but we expect to be able to do that in the in the cycle to start issuing cards in the second half of the year.
Speaker Change: Yeah.
Speaker Change: The next question will come from Marvin Fong with <unk>. Please go ahead.
Marvin Fong: The next question will come from Marvin Fong with VTIG, please go ahead. Great, thanks for taking my questions. Congratulations on the quarter. I would just like to drill down. I think on Mexico, you mentioned in the shareholder letter that there was one high ASP category that you saw a bit of softness on. I was just wondering if you could elaborate on that and what growth outside of that category looked like. What was it, was the growth outside that category consistent with what we've seen in prior quarters in Mexico? And then just a quick question on NYML.
Marvin Fong: Great. Thanks for taking my question and congratulations on the quarter.
Marvin Fong: I would just like to drill down I think on Mexico, you mentioned in the shareholder letter that there was one I S T category.
Marvin Fong: A bit of softness Ellen.
Marvin Fong: Just wondering if you could.
Marvin Fong: Elaborate on that and what growth outside of that category looked like what was that what was the growth outside of that category.
Marvin Fong: Consistent with what we've seen in prior quarters in Mexico, and then just a quick question on nine mall I think you referenced the seasonality factor that the fourth quarter was unusually high because of.
Ariel Szarfsztejn: I think you referenced the seasonality factor that the fourth quarter was unusually high because of the additional payment period. If we kind of normalize for all that, and I recognize all your commentary about the underlying strength and the credit card is gaining share there, but, you know, at a headline level would NIMAL have improved quarter over quarter without that seasonal factor or just kind of any visibility? when you think NIML at its finest.
Marvin Fong: The additional payment period.
Marvin Fong: No.
Marvin Fong: If we kind of normalize for all that I recognize all your commentary about the underlying strength.
Marvin Fong: And the credit cards of gaining share there but at.
Marvin Fong: At a headline level with nine mall.
Improved quarter over quarter.
Marvin Fong: That seasonal factor or just kind of any visibility on when do you think.
Mike: At a consolidated level, Mike My turn.
Unknown Executive: Thanks for watching.
Mike: We can begin expanding quarter over quarter would be great. Thank you.
Marvin Fong: Hey, Marvin how do you all here. Thanks for your question. So we are very satisfied with the progress of our business in Mexico in general on during Q1 in particular.
Ariel Szarfsztejn: Hey, Marvin. Ariel here. Thanks for your question. So we are very satisfied with the progress of our business in Mexico in general and during Q1 in particular. We continued compounding growth and value created for our millions of consumers, unique buyers, grew north of 25% and top line remained very solid. I would say we were still negatively impacted by a slower start of the year for our technology vertical. It grew below the average of the rest of the marketplace. We basically saw more aggressive competition both in terms of pricing and financing in this category. And in some cases, we lacked some of the selection that we needed to compete.
Marvin Fong: We continued compounding growth and value creation for our millions of consumers in unique buyers grew north of 25% in top line remained very solid.
Marvin Fong: I would say we were still negatively impacted by a slower start of the year for our technology vertical.
Marvin Fong: It grew below the average of the rest of the marketplace. We basically saw more aggressive competition, both in terms of pricing and financing in this category.
Marvin Fong: On an in some.
Marvin Fong: Cases, we lacked.
Marvin Fong: Some of the selection that we needed to do to compete we have clearly identified the issue and have several targets initiatives to deal with these.
Ariel Szarfsztejn: We have clearly identified the issue and have several target initiatives to deal with this, such as some selected adjustments to our premium take rates, some rebates to improve price competitiveness, and some other things. We are already seeing positive results coming from each of those. And by the way, the effect from technology was kind of isolated. Our overall GMB continued well ahead of the market, and the rest of the categories grew even farther, I would say with the trend that we used to have in the previous quarter, around 30% year-over-year in general terms, so very good momentum.
Marvin Fong: Such us some selected adjustments to our premium take rate some rebates to improved price competitiveness.
Marvin Fong: And some of the things we are already seeing positive results coming from each of those.
Marvin Fong: And by the way the effect from technology was kind of isolate these our overall.
Marvin Fong: G M. B continue will hit the market and the rest of the categories and grew even faster than I would say would the trend that we used to have in previous quarter.
Marvin Fong: Around 70% year over year in general terms, so so very good momentum.
Marvin Fong: And with regards to Nemo.
Ariel Szarfsztejn: And with regards to NIMAL, I would say that both sequentially and year-over-year, I'd say that part of the compression is due to the function of spreads and product and country mix. On the one hand, the mix, as I mentioned, is more towards credit cards, the share of credit cards increased by 8% of points over the year. And this is structurally a product that has a lower NIMAL than consumer loans, for example. And then also, as we are moving up market, both in the consumer and merchant originations, that also has an impact both on yield and in bad debt yield, basically.
Marvin Fong: I would say that bolting in both sequentially and year over year.
Marvin Fong: I would say that part of the compression is due to a function of spreads and product and country mix on the one hand, the mix as I mentioned is more towards credit card today, the share of credit cards increased by eight percentage points over the year and this is a structural problem that has a lower nemo done than consumer loans for.
Marvin Fong: For example, and then also as weak as we are moving up market. Both in the consumer merchant originations that also has an impact both on yield and in bad debt deals basically so it's safer who have less default by the we have an impacting revenue.
Ariel Szarfsztejn: So, it's safer, we have less default, but we have an impact in revenue yield and bad debt yield. And as for country mix, Argentina's share of the credit portfolio doubled year-over-year and this partially compensates for the NIMAL compression because we have higher margins in Argentina.
Marvin Fong: But the real.
Marvin Fong: And as for our country mix, Argentina zero of the credit portfolio doubled year over year and is partially compensates for the NIM compression because we have higher margins in Argentina.
Marvin Fong: Yeah.
Craig Maurer: The next question will come from Craig Maurer with Ft Partners. Please go ahead.
Craig Maurer: Your next question will come from Craig Maurer with FT Partners, please go ahead. Yes, hi, thanks for taking the questions. I wanted to ask a bit more specifically about the fintech competition in Mexico. Your product offering is, you know, trending more toward what we see from the New. And I was wondering if you can comment on how you see that evolving over time.
Craig Maurer: Yes, hi, thanks for taking the questions I wanted to ask a bit more specifically about the fintech competition.
Speaker Change: In Mexico your product offering is trending more toward what we see from the likes of <unk>.
Craig Maurer: New and I was wondering if you can comment on.
Craig Maurer: How you see that evolving over time secondly.
Unknown Executive: Secondly, With regards to the trade war dynamics that the U.S. is prop- We've been hearing that those... Income businesses that are getting shut out of the U.S. market are redeploying resources to Latin America. and I was wondering if you're seeing any change in behavior. from your competition, specifically from Asia in Latin.
Craig Maurer: With regards to the trade war dynamics that the U S is propagating.
Craig Maurer: We've been hearing that those.
Craig Maurer: E com businesses that are getting shut out of the U S market are redeploying resources to Latam and I was wondering if youre seeing any change in behavior from your competition specifically from Asia.
Craig Maurer: In Latin America.
Craig Maurer: Okay.
Unknown Executive: Craig, let me take the first question. I would say that definitely in Mexico, all over Latin America, what we want to be in MercadoLibre is on the one hand acquiring business, but on the other hand, we want to become the best and largest digital bank in the region. So definitely we'll be competing with the more traditional banks and with Fintechs, who are also the digital banks. We are very excited by the growth we are seeing. We are very excited by the net promoter score we are obtaining from our users, also from the frequency in which the users use MercadoPago, and also by the sheer growth of our user base in Mexico.
Craig Maurer: Greg Let me take the first question I'd say that it's definitely a Mexico all over Latin America.
Craig Maurer: We want to be in Merkel power is on the one hand, the acquiring business, but on the other hand, we want to become the best and largest digital bank in the region. So it definitely will be competing with the more traditional banks and Fintech also but also the digital banks.
Craig Maurer: And we are very excited by the growth we have seen we're very excited by the net promoter score. We are obtaining from our users also from the frequency increase the users use Macau apparel and also by the sheer growth of our user base in Mexico, I would say that they are the most relevant products for us have been super.
Unknown Executive: I would say that the most relevant products for us have been the SuperYielding account and the credit card, and both of them are growing strongly. And so I would say, yes, I think there is an opportunity in Mexico. We are seeing that what we saw happen in Brazil over the last 10 years in terms of increased use of financial services, and in particular of digital financial services, that is happening in Mexico right now, and we want to seize that opportunity.
Craig Maurer: You'll get an account on the credit card and both of them are growing strongly and so I would say yes.
Craig Maurer: There is an opportunity in Mexico, we are seeing that what we saw happen in Brazil over the last 10 years in terms of increased.
Craig Maurer: Use of financial services and in particular digital financial services that is happening in Mexico, right now and we want to seize that opportunity.
Unknown Executive: Yeah, I think the second part of your question was regarding international competition and cross-border trading to Latin America. We have been operating in a very competitive environment, many players coming to the region, not only shipping from Asia, but also building their operations locally in the region. So we haven't seen a change in that pattern, and we continue to.
Craig Maurer: Yeah, I think the second part of your question was regarding the Amazon competition in them.
Craig Maurer: Cross border trade into Latin America.
Craig Maurer: We have been operating at a very competitive environment down many players come into reach not only shipping from from Asia, but also building their operations locally in the region.
Craig Maurer: So we haven't seen a change in that.
Craig Maurer: Now we continue to.
Craig Maurer: Meet with them and nothing really changed at least the short term because of tariffs.
Craig Maurer: In fact, the other way around and there are certain tariffs that were imposed in Mexico, and Brazil, increasing the cost of shipping products into the country that that diminished a little bit the volume of cross border trade into the region.
Unknown Executive: It's been a great conversation. I hope you enjoyed it.
Craig Maurer: On the flip side, Argentina, Sexualize, there I hope in the market. So theres more volume coming don't have you know that represents an opportunity for us as well because we're shipping products from a problem from the U S. But at the same time some of them international repairs were coming to Argentina.
Unknown Executive: We're looking forward to coming to Argentina, but we'd much rather see an open market than a closed market. So, to summarize, I think, for the most part, we haven't seen a big impact related to the tariffs in the U.S.
Craig Maurer: We see an open market than in.
Craig Maurer: In a growth market. So so to summarize I think for the most part we haven't seen a big impact of <unk> related to the tariffs in the U S.
Craig Maurer: Okay.
Speaker Change: The next question will come from Deepak multi voronin with Cantor Fitzgerald. Please go ahead.
Deepak Mathivanan: The next question will come from Deepak Mathivanan with Cantor Fitzgerald, please go ahead. Hey, guys. Thanks for taking the question. So, Martin, EBIT margin in 1Q is up 70 basis points year on year, and you kind of have a relatively favorable comp in the next few quarters as some of the credit card portfolio headwinds stabilize. Argentina contribution margin trends have also been very good in 1Q.
Speaker Change: Hey, guys. Thanks for taking the question so Martin EBIT.
Speaker Change: EBIT margin in <unk> was up 70 basis points year on year, and you kind of have a relatively favorable comp in the next few quarters as some of the credit card portfolio of headwinds stabilize Argentina contribution margin trends have also been very good in <unk>. So I guess the question is should we still expect some of the investment plans that you have.
Martin Santos: So, I guess the question is, should we still expect some of the investment plans that you have constrain Full Year Margin Expansion? Can you give us an updated view on how you think about the margin?
Speaker Change: Strain our full year margin expansion can you all give us an updated.
Speaker Change: You are now how do you think about the margin trends and then the second question just to double click a little bit on ads the penetration as a percent of G. M. We seems to have gained a few more basis points quarter on quarter than we typically see can you expand how much is driven by AD units like display video, whereas some of them.
Deepak Mathivanan: And then second question, just to double click a little bit on ads, the penetration as a percent of GMV seems to have kind of gained a few more basis points quarter on quarter than we typically see. Can you expand how much is driven by ad units like display video versus some of the more traditional ad units? And can we expect this run rate of penetration gains to continue in the next few quarters?
Speaker Change: A more traditional AD units and it can we expect this run rate of penetration gains to continue in the next few quarters. Thank you so much.
Martin Santos: Thank you so much. Hi Deepak, how are you? Yeah, I mean, you're correct. I mean, margins, if you look at every margin, improved by 70 basis points year on year, from 12.2 to 12.9%. Most of the expansion for that is country mixed. Argentina, which by the way, has a larger, a bigger margin than the other countries, increased shares of revenues from 14% to 34%. So that on itself helps us in terms of improving margins. On the other hand, Argentina itself also improved margins, as we discussed earlier today. That also helped in positive direction. That more than compensated this quarter, the investments that we continue to make in Brazil and Mexico, mainly in logistics and credit card, that generated some margin compression in Brazil and Mexico.
Speaker Change: Hi, Deepak how are you.
Speaker Change: Yeah, I mean, Youre correct, I mean margins. If you look at the EBIT margin improved by 70 basis points year on year from $12 to $12, 9% most of the expansion for that this country mix, Argentina, which by the way have larger via.
Speaker Change: We are marching down the other countries increased shares on revenues from 14% to 34, so that in itself.
Speaker Change: It helps us in terms of improving margins.
Speaker Change: Yeah itself also improved margins as we discussed earlier today. So I'd also housing in positive direction.
Speaker Change: That more than compensated this quarter the investments that we continue to make in Brazil, and Mexico, mainly in logistics and credit card. That's already there is some margin compression in Brazil and Mexico.
Martin Santos: But I think obviously, we don't guide regarding margins, but we have been consistently saying that we don't manage the business to a short term margin goal. What we want to make sure is that we do not miss the large opportunity of growth that we have ahead of us in commerce and fintech. If we need to invest behind those opportunities, we will continue to do so, even if it might make some short term pressure on margins. I think the example of last year where we had in 2024, we had margins slightly lower than 2023. But we deliver strong growth.
Speaker Change: I think obviously, we don't guide regarding margins, but we have been consistently saying that we don't manage the business to a short term margin goals, what we want to make sure is that we do not miss the large opportunity of growth that we have ahead of us in commerce and Fintech.
Speaker Change: If we need to invest behind us opportunities, we'll continue to do so even if it might make some short term pressure on Marcia.
Temple of last year, we had 224 with margins slightly lower than 2023, but we deliver strong growth and this is something that we want to continue to linear because unfortunately, the continuous to be enormous in Latin America only for 15% of transactions are done online and will play an important role of bringing more people online.
Martin Santos: And this is something that we want to continue to deliver because the opportunity continues to be enormous in Latin America. Only 15% of transactions are done online. And we play an important role of bringing more people online. Fintech adoption and financial inclusion is very, very low. Most of the region, particularly Mexico, as Osvaldo was mentioning.
Speaker Change: Our fintech adoption.
Speaker Change: And as an inclusion is very very low most of the region, particularly in Mexico Oswaldo was mentioning so again the focus is on growth, but at the same time managing for a reasonable profitability.
Martin Santos: So again, the focus is on growth, but at the same time, managing for a reasonable profitability, as we call it in Melip, growth fit, finding the right balance between growth and profit.
Speaker Change: Got it.
Speaker Change: ROE fit balancing finding the right balance sheeting growth and profits.
Ariel Szarfsztejn: Hey Deepak, Ariel here. So to your question about that, we had a solid quarter. We grew about 50% year-over-year of an FX-neutral basis with penetration going up in Brazil, Mexico, and Argentina, and that's basically coming from an improvement in our product stack.
Deepak Voronin: Hey, Deepak a real tier so to your question about that.
Solid quarter.
Deepak Voronin: We grew about 50% year over year of an epic FX neutral basis with penetration going up in Brazil, Mexico, and Argentina, and that's basically coming from an improvement in our product stack, we had a great quarter in brand ads.
Deepak Voronin: And which is part of our search offering so although coming from a low base, we have seen a positive acceleration and coming from the extension of the product to sellers. So it was previously previously only available for the brands.
Deepak Voronin: And making it more widely available and is paying off kind of the same thing happened with <unk>.
Deepak Voronin: With display so we grew this quarter above 100% year over year in display and similarly, two brand that's coming from a widely available offer to more sellers and also coming from new features in the product.
Deepak Voronin: Nomadic generation of Dvds for campaigns, better analytics et cetera.
Deepak Voronin: <unk> continues to do very well so we remain optimistic right. So we have already and.
Deepak Voronin: Business that is the size of $1 billion in revenues per year, but we think we are just getting started.
Deepak Voronin: And last but not least are the launch of medical play on television is another exciting step in the direction of expanding our inventory beyond the marketplace on.
Deepak Voronin: It will definitely play a key role in our strategy in the long term.
Deepak Voronin: Okay.
Speaker Change: The next question will come from Josh Beck with Raymond James. Please go ahead.
Josh Beck: The next question will come from Josh Beck with Raymond James. Please go ahead. Yep, thank you so much for taking the question. I wanted to ask about the magnitude of Short-Term Margin Pressure that you're seeing from shipping, just would like to understand that.
Josh Beck: Yes. Thank you so much for taking the question.
Josh Beck: I wanted to ask about the magnitude of.
Josh Beck: Short term margin pressure that youre seeing from the strategic investments in shipping.
Josh Beck: Just would like to understand that and then a little bit of a follow on to <unk>.
Martin Santos: And then a little bit of a follow on to So I think Craig's. Are you seeing any impact from... The sourcing of some of your goods, if you have any notable, you know, exposure. Ocean Rao Volume. Volume. Yeah, I think, as I mentioned earlier, right, when you look at the margins in the different countries, and you can find this in our disclosures, their contribution margins in Argentina improved by 11 points compared to last year, for the reason that I explained earlier, whereas on the opposite side, Mexico and Brazil compressed roughly 5 percentage points, both of them compared to last year.
Josh Beck: So I think Craigs question.
Speaker Change: Are you seeing any impact from maybe higher ocean freight rates, because there's certainly been such a.
Josh Beck: The slowdown or maybe just kind of help us think through.
Josh Beck: The sourcing of some of your goods. If you have any notable exposure to some of these ocean routes that all of a sudden have a lot less.
Josh Beck: Volume would love an update there.
Josh Beck: Yeah, I think as I mentioned earlier right that when you look at the margins in the different countries and you can find this in our disclosures that you have contribution margins in Argentina improved by 11 points compared to last year for the reason that I explained earlier, whereas on the opposite side, Mexico and Brazil.
Josh Beck: Compressed roughly five percentage point, both of them compared to last year.
Martin Santos: And the reason for that, the main reason for that, I would say, I would point out to three reasons. First, because credit card continues to grow and put in some margin pressure in the short term. As we continue to improve the profitability of the credit card, that might change. If we look at credit cards other than two years are already profitable.
Josh Beck: And the reason for that the main reason for that I would say I would point out two or three reasons credit card continues to grow and putting some margin pressure in the short term as we continue to improve the profitability of a credit card that may change. If we look at credit cards other than two years are already profitable.
Martin Santos: The logistic infrastructure, we'll continue to build our logistic infrastructure to try to increase the penetration of fulfillment in Brazil and keep up with the levels that we have in Mexico, you know, in a market that's growing, you know, 25% to 30% year-on-year, so that requires investments. And then lastly, I think... If you look at year-over-year, both Mexico and Brazil were affected by the evaluation, so that also put a little pressure on both Mexico's contribution marks.
Josh Beck: Logistic infrastructure will continue to build our logistic infrastructure to try to increase their penetration of fulfillment in Brazil, and keep keep up with the levels that we have in Mexico.
Josh Beck: The market is growing.
Josh Beck: 35% to 30% year on year, So that requires investment and then lastly, I think if.
Josh Beck: If you look at year over year, both Mexico, and Brazil were affected by devaluation. So that also put a little pressure on.
Josh Beck: Gross.
Josh Beck: Contribution margins.
Martin Santos: The second part of your question, our CBT business is relatively small, it's mostly into Mexico, it's nascent into Argentina over the past, this quarter and the previous quarter we started to deliver products into Argentina, now that it's open, but we plan to continue to invest and develop that business because we think that it's a good opportunity for as a business on itself, but also to complement the offering that we have within our marketplace to continue shipping products from Asia directly into Latin America and from the Texas operation that we have in the US.
Presented as a second part of your question our CVT visa is relatively small it's mostly into Mexico.
Josh Beck: Recent into Argentina, where they pass this this quarter than in the previous quarter was started with your products into Argentina now that it's open but we plan to continue to invest and develop that business. Because we think it's a good opportunity for asbestos on itself, but also to complement the offering that we have we're in a market base to continue shipping products from from.
Josh Beck: From Asia directly into into Latin America, and from the Texas operation that we have in the U S.
Josh Beck: Okay.
Speaker Change: The next question will come from James Friedman with Susquehanna. Please go ahead.
James Friedman: The next question will come from James Friedman with Susquehanna. Please go ahead. Hi, it's Jamie Friedman at Susquehanna. Thanks for taking my question.
Josh Beck: Hi.
Jamie Friedman: Jamie Friedman Susquehanna. Thanks for taking my question.
Ariel Szarfsztejn: I was wondering if you could share any data that you might have on Perdido, the credit portfolio, and its attached rate to the market So, in some markets, I think you've occasionally disclosed that, but what sort of accelerator do you enjoy as you originate, and that attaches to purchasing in the broader marketplace ecosystem? Thank you. So I think that what we have disclosed in general is what we call blue money, which covers on the one hand credit, but also money that's already within the Mercado Pago system. And that is roughly in the order of, depending on the country, on 20 to 30% of the GMB we process on the marketplace that has been trending up, as I mentioned, but continues to be within that range for the mainstream countries.
Jamie Friedman: Was wondering if he could share any data that you might have on predict though the credit portfolio and its attach rate to the marketplace.
Jamie Friedman: In some markets I think you've occasionally disclose that but what sort of accelerated the enjoy as you originate and that attaches to purchasing in the in the broader marketplace ecosystem. Thank you.
Jamie Friedman: So I think that what we have disclosed in general these what we call blue money.
Jamie Friedman: Which covers on the one hand the grade.
Jamie Friedman: Great Boso money, that's already within the Merkel power system and that is roughly in the order of depending on the on the country on 20% to 30% of the GMB will process.
Jamie Friedman: The marketplace has been trending up as I mentioned <unk> continues to be within that range for for the mainstream countries.
Jamie Friedman: Yes.
Danny Elgar: The next question will come from Danny Elgar with X P. Please go ahead.
Danny Elger: The next question will come from Danny Elger with XP. Please go ahead. Hi, good evening. Thank you for taking my question. I have a quick one on competition. It's actually a follow-up. Regarding Brazil, if you could just update us on your view regarding the TikTok shop launch this month here. How do you see that in terms of maybe affecting you guys? And in Argentina, you mentioned about the increased interest. We even saw some news recently.
Danny Elgar: Hi, Good evening. Thank you for taking my question I have a quick one on competition.
Speaker Change: A follow up regarding Brazil, if you could just update us on your view regarding the day clock shop launch. This month here, how do you see that in terms of maybe affecting you guys and in Argentina, you mentioned about the increased interest we even saw some news recently and if you could also.
Ariel Szarfsztejn: If you could also share your view on the recent developments in terms of competition in Argentina, that would be interesting as well. Thank you.
Speaker Change: Share your view on the recent developments in terms of competition in Argentina that would be interesting. Thank you.
Danny Elgar: Hey, Danny how are you how do you all here so on.
Ariel Szarfsztejn: Hey, Danny, how are you? Ariel here. So on TikTok, I think it's still early days. So they launched in Mexico a few months back. They are just launching in Brazil. So we don't have too much info to share with you. Of course, we are paranoid. So we follow them closely. But there's not much to be shared. In Mexico, they seem to be focused on low value items coming from domestic sellers to be seen what their strategy is going to be in Brazil. Again, a step back, I would say that there seems to be a higher overlap in data value prop with some other platforms more than with MercadoLibre.
Speaker Change: Picked up.
Speaker Change: It's still early days, so they launched in Mexico.
Speaker Change: If you months back they they're just launching in Brazil. So we don't have a too much info to share with you of course, we are paranoid. So we follow them closely but they don't there's not much to be sure in Mexico. They seemed they seem to be focused on low value items coming from domestic sellers.
Speaker Change: To be seen what the strategy is going to be in in Brazil.
Speaker Change: Taking a step back I would say that there seems to be a higher overlap in data value prop with some other platforms more than with Mercado Libre.
Ariel Szarfsztejn: But again, time will tell, right? So we will follow that one closely and decide how to respond. To wrap this one up, I would say that typically when there's a new entrant in the e-commerce space, particularly when they come with a different playbook, they tend to bring new users who used to shop offline into the online world. And that will create another opportunity for us as well. And we hope we can take advantage of that one.
Speaker Change: But again.
Speaker Change: I will tell right. So so we will follow that one.
Speaker Change: Closely on on and decide how to respond to that.
Speaker Change: This one app.
Speaker Change: I'd say that typically when there's a new entrant in the E Commerce space I think really when they come with a different playbook. They tend to bring new users who used to shop offline into the online world and that will create another opportunity for us as well and we hope we can take advantage of that one.
Speaker Change: In terms of Argentina.
Ariel Szarfsztejn: In terms of Argentina, even more early, so we saw interest and we know that Temu launched operations in the country. Amazon has also been shipping items from the U.S. into Argentina, but not much to be said, right?
Speaker Change: Even even more early so we saw interest on and we know that table and launched operations in the country.
Speaker Change: Amazon has also been shipping items from the U S into Argentina, but not much to be said right. There are no numbers or or indications that they are getting.
Ariel Szarfsztejn: There are no numbers or indications that they are getting progress that is calling our attention. As Martin was saying before, this presents an opportunity for us as well.
Rodrigo Martin: Put all of this that is calling our attention as Martin was saying before this presents an opportunity for us as well so three weeks after the government opened.
Ariel Szarfsztejn: So three weeks after the government opened the regulatory framework, we were live with our drop shipping from the U.S. into Argentina. Now we are live with shipping items from our Texas inventory into Argentina as well, and we expect to continue expanding that selection to complement our local marketplace.
The regulatory framework, we went live with our drop shipping from the U S into Argentina now we are live with <unk>.
Rodrigo Martin: Shipping items from our takes us inventory into Argentina, as well and we expect to continue expanding that election to complement our local marketplace.
Rodrigo Martin: Okay.
Speaker Change: And this will conclude our question and answer session I would like to turn the conference back over to management for any closing remarks. Please go ahead.
Unknown Executive: And this will conclude our question and answer session.
Unknown Executive: I would like to turn the conference back over to management for any closing remarks. Please go ahead.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Unknown Executive: The conference is now concluded. Thank you for attending today's presentation.
Unknown Executive: You may now disconnect.
Speaker Change: [music].