Q2 2025 MercadoLibre Inc Earnings Call

Hello everyone and welcome to the MercadoLibre earnings conference call for the quarter ended June 30, 2025. Thank you for joining us. I am Richard Cathcart, MercadoLibre's investor relations officer. Today, we will share our quarterly highlights on video, after which we will begin our live Q&A session with our management team.

Before we go on to discuss our results of the second quarter of 2025, I remind you that management may make or refer to and this presentation may contain forward-looking statements and non-gaap measures. So, please refer to the disclaimer on screen which will also be available in our earnings materials, on our investor relations website, please note that this call is being recorded and a replay will be made available on our investor relations website as well.

As we continue to evolve our Communications with investors, we have decided to launch. Our quarterly product updates video after earnings rather than together with our results call. So watch out for this coming to your inboxes in the weeks after our results disclosure.

With that. Let's begin with a short message from our CFO.

Hello everyone in Q2 delivered, another quarter of strong financial performance.

Revenues growing over 30% year on year and record income from operations of 825 million.

These results, perfect the strength and consistency of our execution, as we continue to invest the discipline to advance our long-term Ambitions in Commerce, fintech crediting.

In Brazil, we lower our free shipping threshold for the third time in 5 years, as part of our objective of bringing offline retail online. By removing frictions

This strategic initiative is attracting new users to our e-commerce platform, increasing engagement among existing buyers and expanding our assortment.

Mexico, was another standout in Q2.

GMB growth accelerated sharply, and the number of items sold on the platform increased at the fastest pace in almost two years, driven by strong performance across both our 1P and cross-border businesses.

Advertising Revenue grew 38% year on year.

in Q2, we launched our integration with Google manager, an important milestone in position in Morrow ads,

As a key strategic partner for brand Focus, advertisers.

Fintech Services continue to gain strong Traction in Q2.

Monthly active users of MercadoPago reached 68 million.

Protecting rapid user growth and increasing engagement across our ecosystem.

As is under management, more than doubled year on year once again.

Our credit portfolios were passed. 9.3 billion dollars covered by 91% year-on-year.

We also encouraged by the quality of our credit business.

Nimal remaining broadly stable quarter of a quarter and 50 to 90 days mpls falling below 7% for the first time since we began reporting the metric.

Our credit card business continues to perform well in both Brazil and Mexico.

Strong asset quality and ongoing enhancements to our credit models. Enabled us to issue 1.5 million new cards in Q2.

We're also seeing consistent improvements in cohort profitability, with more than half of our portfolio in Brazil already being minimally positive.

We are pleased with our performance in Q2, as the benefits of years of disciplined investments continue to compound.

Engagement is rising across all areas of our ecosystem, reinforcing the strength of our platform and the long-term potential ahead.

Thank you for your continued support.

We will now begin the question and answer session.

to ask a question, you may press star then 1 on your telephone keypad,

If you are using a speaker-phone, please pick up your handset before pressing the keys.

To withdraw your question. Please. Press star. Then 2

Please limit yourselves to 1 question.

If you have additional questions, you may rejoin the queue.

Our first question today is from Andrew Rubin with Morgan Stanley. Please go ahead.

Hi. Thanks very much for the question, and congratulations as well on the CEO transition announcement. I'm curious about the shipping changes. I see you mentioned the lower free shipping minimum but also the cut in seller fees between $79 and about $200, right? I'm curious on the seller side what kind of return you see when you reduce the fees for sellers, if it gets reinvested into price, and how to understand the dynamic between that part of the shipping investment. Thank you.

Hey, Andrew, how are you? Are you here?

So uh before the change in in pricing you could see that there was a kind of a CLE a cliff Edge in the take rate from below 79, RI to above 79 RI which basically LED uh to steep increase in fees both in in in absolute terms but more importantly as a percentage of GMB. So basically with with this adjustment we are lowering that Cliff smoothening the curve uh from 79 RI is upward and and and we think this is the right thing to do. As let me, let me check back step back for a second. We tested and learned from executing this last year in, in a few

Categories, and our experience, actually shows.

uh, the the this initiative has a positive impact, uh, and and, and it comes from a

Merchants lowering uh, prices and B, bringing more more selection to, to our platform. And more importantly, those impacts are not necessarily perceived, uh, at the moment in which we execute the the changes, but but they get strengthened strengthening over time. So overall I would say this, uh, was a a positive change for us. We are happy with the early results we've seen, and we are encouraged by the fact that from our experience, we are expecting even more of a positive impact in the in the near future.

The next question is from Irma cigars with Goldman Sachs. Please go ahead.

Um for the opportunity. I I just wanted to go a little bit through the highest sales and marketing. Spend this quarter excluding the provisions, uh, the spend was almost up 50% in in US dollar terms. Now we know that you had 2 very specific high-profile campaigns in Brazil. This quarter and I think in the letter, you also called out, um, the campaigns in in Argentina and in Mexico. So should we think about the spend of this quarter as a little little bit of a, I don't want to call it 1 off. But as a maybe, perhaps a slight outlier, um, or do you see further opportunities to continue to lean in into the, into the back half of the year and in this context, if I met, um, do you see scope for AI to impact, both your the efficacy and efficiency of your own ad spend?

But also in terms of the ad inventory of a non-platform that you're showing to your ad clients or is that too early in in the life cycle. Thank you.

Hi. Martin here. Thank you for your question.

Is correct what you see and we shown on the, on the graphic on, on the graph on the investor presentation, we compress margin by 1 percentage point. This quarter compared to last year in sales and marketing

Uh, this is mostly because of several several things, we launched several campaigns different countries with celebrities, to, to promote, uh, our platform and, and the results have been very, very positive in terms of user growth as that the management doubling in Brazil, Chile, and, and Mexico downloads also improving very rapidly from from previous quarters. So, very successful campaign. But obviously, that put a little pressure short and pressure on on, on margins, on the Commerce side. We also invested, we we run a campaign similar size to a just like a Black Friday to promote our free shipping. That as you know, we launched in June. Uh, so that's also some investment that we did behind the lowering of free shipping in Brazil for in some pressure on on marching. And then, on top of that, we also increase a little bit of palm, you know, paid advertising in order to acquire more users.

Always with positive returns. Uh, so that's also an increased relative to last year. And finally, we invested a little bit more on social on our social strategy, by investing in Affiliates and content creators programs that that again, those those will bring results throughout the quarters. But in the short term, they put some some margin pressure. So I would think it's a combination of both ongoing investments in acquiring users, and downloads, but also couple of, you know, 1-off campaigns.

And the lower free shipping threshold that that we didn't receive this quarter.

Hey, Ma, Ariel here to the second part of your question. Uh, we definitely definitely think that there's huge room for AI to help us improve both our marketing, uh, execution and our ad spend, as well. So, on the marketing side, I I think there are many many dimensions in which we are testing and learning about AI. Uh, just to bring 1 example, out here out out there. Uh, for instance, when we think about branding and creativity, uh, AI brings us the opportunity to produce multiple creativity's for any given campaign and start testing and learning those creativity's across the board and with that deciding who we want to show what, uh, in the online world and and that's something we are already proving, uh, producing, uh, you know, uh,

Content online. Instead of of in the physical world is, is another thing that we are working on so many many dimensions in, which we think AI will add value. And the same is happening with advertising. We are using AI today in order to help our sellers better. Understand our ad stack to get on boarded into our ad, technology to optimize their bidding and, and so on. So yes, we are bullish with the impact, that AI will bring into this environment.

The next question is from Robert. Ford with Bank of America, please go ahead.

Good evening everybody and and thanks for taking my question. Um, yeah, I was curious. Where are you in terms of your your low, ASP selection versus your longer term plan in the shopy. Assortment you know how long is it going to take you to get to where you want to be? And and how is your low ASP strategy different from that have shot the in Brazil?

Level out there in Brazil.

I think there is opportunity for us to continue increasing the number of live listings in, in OSP. And part of what we are doing today. In Brazil is related to that. We are already seeing, uh, good traction on on new Sellers and new, uh, live listings on on low ticket items, coming into our platform bear in mind. That this in this quarter, you only see 4 weeks of the new free shipping policy in place uh in in our results.

So overall, we are positive with everything we've seen so far, we are encouraged with the seller reaction to the program. And, uh, with the the number of listings that we see every day coming into our platform,

The next question is from Marcelo Santos with JP Morgan. Please go ahead.

Hi, good evening. Thanks for taking my question. Uh, I wanted to ask a bit about the the uh, changing shipping strategy. Would it make sense to to apply this to other countries like Argentina and Mexico? I mean I I think you also have the same problem in terms of uh uh the Steep change in take rate after the the the free shipping threshold. I mean could you discuss the elements that

Uh, that would be important to consider in these other countries. Thank you.

Hey, Marcelo Ariel here. So let me, let me break this down in, in, in different things. So, in Brazil, we implemented 2 different things. On the 1 hand, uh, the lowering of the shipping fees for merchants, which is the 1. I was referring to about the cliff and and the take rates, then we lower the the free shipping policy for Brazil. In particular from 39, uh, 219 RI

To your point on bringing those policies into Mexico or Argentina. I would say that every Market is different, right? And we don't have the exact same policy and the exact same value proposition in in each 1 of our operations. For instance, we don't have the same level of cashbacks in our mailing mice program, in Brazil. And in Mexico, we don't have the same level of fulfillment penetration in the different countries. Mexico being the highest Brazil probably in the middle in Argentina the lowest and and so on, right? So while while we don't give guidance on our policies uh looking forward, what I can say is that as we always do, we will learn, we will evaluate and we will decide eventually which policies we want to bring where, but, but there's no hard commitment on executing 1 thing in the other place.

The next question is from Rodrigo gastine, with ital BBA please, go ahead. Yeah, good evening everyone. Uh, just on, on Brazil gmv, you mentioned and the letter items acceleration in Brazil after the free shipping campaign, um, and you say that you saw gmv following a similar pattern, so just to make it clear here guys, uh, can we understand that gmv in Brazil also accelerated after the free shipping campaign so far? This is very important for us to understand given, you know, all the Investments that you that have done. So ending, here would be very appreciated. Thank you.

so,

uh, let me try to answer that 1. So, we are very happy with the results that that we are seeing in Brazil, particularly items sold in Brazil accelerated to 34% growth year over year in June. Uh, so that's a, a, a major acceleration, of course. Given the fact that we are accelerating in the segment, where the ASP is the lowest, the impact in overall GMB growth is smaller, but both accelerated and you should bear in mind, that that Q2 is, is actually comparing to a Q2 last year in which we have a very, very strong performance.

Uh to 219 and we are excited because we see all the key, kpis trending in the right. Direction is too early to give you details on on, on the numbers. Beyond what I've just said, but but everything is pointing in the direction in which we wanted.

The next question is from Niha agarwala with HSBC. Please go ahead.

Hi, uh, on on the Commerce side, how much of the uh lower price and then you have for the sellers and being passed on to the consumers, eventually in your view? And on the on the syntax side, uh, the um, I have been coming down quite swiftly, but the npl region. I see, npl ratio remains elevated and picked up sequentially. If you can give us some color on that, when can we see and pills actually stabilize and how has the asset quality evolved uh in the 3 years? Thank you so much.

Hey Niha. So, on the first part of your question, I would say that given the mechanics with which we implemented the the the reduction in fees and the way sellers operate in Marco Libre, most of the lowering in integrates were passed into pricing so we saw a clear reduction

Prices in Mercado Libre. After the implementation of the changes in integration, I will let Oswaldo and Martin answer the second part of your question.

With regards to to, to npos. What we're seeing is that a reduction in in sequential reduction, in NPS between 15 and 90 days. And there was a slight increase in over 90 days but it's roughly,

In line with what it was before, it was 18.5% a year ago, and it's 18.5% now, sequentially up half a percentage point from 18.5%. But we don't have a concern with regards to NPS; actually, we are very happy with how they are evolving, and we have been able to reassure the issuance of cards, given that the models are performing very well.

And just to compliment. You have, if you look at the the other side of the business which is a revenues that we generate through, our portfolio are actual profitability of for most of our portfolios have improved sequentially and year-over-year. So we are very satisfied and this is the reason why you see an increase in acceleration in in the growth rates of our portfolios. The overall credit portfolio grew at 91% year on year and the credit card specifically grew 118% year 1 year. Uh, as we mentioned earlier, you know, because it's becoming a lot more profitable. Uh, and and we are very satisfied with the results of our credit cards. So I think you should look.

Not only at npls which short-term npls are coming down but it's true that you know, the the the longer npls are slightly up but the profitability is in pretty good shape and point and all magical pointing in the right direction.

the next question is from Deepak, Matan, with caner Fitzgerald, please go ahead

Hey, this is Jack on for Deepo. Um, so you saw nice growth in advertising this quarter. Uh, can you share a bit more color on how all platforms are trending in the early days? And then related, uh, you mentioned Argentina is narrowing the ad revenue gap with Brazil and Mexico. Um, what specific levers are driving the sketch up? Thanks.

Hey, Jack Ariel here. So yes, uh, we had a great quarter in ads, uh, revenues, uh, grew by 38% year-over-year in dollars. Uh, and 59%, you know where you had on on Netflix neutral. Argentina is going part is growing particularly. Well, I would say as a result on of both macro conditions and team execution,

It's nice to see product ads is performing well, well across, uh, countries and sites and not only in in Argentina. And this is on the back of improved ux and tools for sellers, uh, such as a new question flow focused on focused on on benefits of advertising smarter item selection, improved budget recommendation, using Ai and and some of the things that I was that I was, uh, mentioning before. So, yes, overall, very positive on everything we are doing on ads. Uh, we see ads, uh, as a percentage of, of GMB accelerating this quarter, so good news. Uh, but, but still the opportunity is huge ahead of us. So excited, but cautious, we need to continue executing.

The next question is from Jamie Freedman with cesco Hannah, please go ahead.

Um, thanks for taking the question. I did have a, my questions are about slide 13 and 14. Is there any way to help unpack the

Mix shift to credit cards. Impacting an IMO. It's still good at 23%, but I'm just

Curious as to how you think about that. And then the top of the photo looks really good, right? 6.7% down from 8.2%. In terms of NPLs, what is your overall message on credit and credit quality? Thank you.

with regards to an email, I think the...

Several effects working on at the same time, on the 1 hand, the most obvious ones with regards to credit card is anema for credit card is lower than for the other products and credit card is going significantly faster than than than the credit book. So as Martin was saying, is growing at over 100% you over a year and that's why even though the Nema for the credit card.

Remains out to what a flat for new segments and has been Improvement for all their segments as as the portfolio grows that has an impact on on the overall email. And then the other factor I mentioned is that is relevant, is is Argentina with inflation coming down, so so fast in Argentina. So, has Nemo with last year. Was was ridiculously high, I would say, but still it's super profitable and to, to counterbalance that to some degree. The other thing that is happening with Argentina is that this the size of Argentina within all of the of the loan portfolio has increased. So even though the Nema has come down a little bit, overall, the impact continues to be relevant because of this increasing in in in waiting in the portfolio.

Uh, then with overall regarding the overall great quality, I would say that we, uh, I think we are very bullish. I would say, on on how we are. Issuing credit, if you recall a couple of quarters ago at the end of fourth quarter, first quarter, we were a little bit more cautious, particularly in Brazil, because we saw there were concerns about interest rates, increasing and, and in general, in the market mpls increasing. And to some degree, we had some seen something similar in, in, in the overall Market in Argentina. More recently and nonetheless, we have continued to improve our models, and we felt comfortable increasing the speed of issuing cards in in, in Brazil, and in, in Mexico, in both countries but mostly in Brazil and we continue to see that the cohorts that are 2 years or older. All of them are are

Have neimat positive, for example, all pretty much all of the 2023 cohorts are already more positives and some of the early 2024 cohorts also. So we we continue to be bullish with we are using credits.

The next question is from Trevor Young with Barclays. Please go ahead.

Great. Thank you. Um just sticking with credit card for a second and the the comment and the letter around my Mall um just to be clear. The entire credit card business is now and I'm all break, even or was that a comment around some subset of the business and then relatedly? Should we assume that the credit card non-mobile now? Remain Break Even or even positive from here. Over the medium-term. Particularly as you look to launch credit cards in Argentina before too long.

Yeah, so nemal is break even in Brazil, which is the country where we have been issuing cards for, for the longer and is the largest market for us. Uh, it's not yet the case in Mexico, and whenever we start in Argentina, initially, it will be negative, but we expect that within a, a few years, it should achieve break, even so,

Focus moving forward. I would say some of the large cohorts were issued in 2023 and 2024. So, assuming there is a decrease in the speed at which we issued, those will have an impact in the next coming years. But Brazil is already positive.

The next question is from Jeffrey Elliott with autonomous. Please, go ahead.

Hello. Thanks very much for taking the C. The question the credit portfolio is growing quickly as it grows. How do you expect the funding mix behind that to evolve and what are the implications on nio specifically when you shift away from using your own funds more, external funding and all that way on the email. Thank you.

Hi. It's Martin here. Um I think if if you look at the different credit portfolios that we have you know the more mature portfolios consumer grades and Merchants grades we having funding it through third parties. So the majority of the funding comes through a third party and you see that as part of the cost in minimal, correct, the credit card has been funded by us so far. Uh, we're starting to fund it with third party. So you do not see, the funding costs. We, as we extend more funding to the credit card.

The third party that will have an effect on email, uh, in the way we account for that cost within an email. But that's something that will come in the future.

The next question is from Joe asaurus with cgroup. Please go ahead.

Hi. Thank you for taking my question. Um, you mentioned in the release how you're scaling faster infrastructure and adapting.

To, um, the the expected increase, uh, mix of lower aspects, right? Uh, I wanted to hear more about this adaptation. Imagine, right explaining low, the the slow shifting is 1 component, but also expanding probably higher Transit points. So I just wanted to understand how you're you're adapting the infrastructure. How should we think about the profitability of these, uh, lower ASP products and the free shipping, right? How should we think about, uh, uh, when or or if it can match, right? The

The, the margin of your higher uh ticket items, right? Thank you.

Okay, draw. This is Ariel here. So, when thinking about unit economics and profitability of the lower-ticket items in which we are now offering free shipping.

The the mindset, with which we approach. This problem is, is, is kind of broad, right? So we think about relationships with our users and not transactions.

Uh meaning that when evaluating the profitability of the initiative, you also need to consider a downstream impact that the higher engagement and frequency can generate in the context of this big opportunity. We have ahead of us of of bringing retail offline uh, to online in a country in which we only have 15% of e-commerce penetration.

Uh also in our slow delivery with wider delivery promises uh has just started, we have not done that before. So we have ample room to continue improving economics and there in the long run, we do expect that the additional scape scale, so it will help us reduce, uh, unit, shipping, uh, economics plus capturing, you know, the, the productivity opportunities that that the slow methods, uh, also bring to the table. So, in, in summary, if you look at purchases between 19 and 79 Rye on a standalone basis, there will be a range of margins. Not all of them will be positive. Not all of them, uh, will be, will be negative, but even so, we expect this to be net positive for the pnl, uh, in the, in the longer term. And and we are a more importantly convinced that this

This is the right investment to make to extend our position as the destination of shop of choice for e-commerce in Latin America.

The next question is from Carlo, PRAA, with UBS. Please go ahead.

Be seen a sharp increase in any bills for the traditional bankers in China, especially in the consumer portfolio. Just would like to understand what can you say about the asset quality for your operations. Is there any concern and what is the strategy going forward? Finally, we saw some changes regarding the reserve requirements on money market funds in Argentina.

As you are a moderator, accounts are in money market funds, if I'm not wrong. Just wondering if that could impact your fintech operations there at some point as well. Thank you.

So, yes, we have increased significantly the portfolio in Argentina. Basically, we were coming from a very, very small basis. If you the basically no credit in Argentina, if you were to look at product to the private sector in Argentina, was single digits, as, as percentage of of GDP is very, very small. So there was plenty of room to grow. We grew a lot. We have seen it works in a condition in the market. It has not been our case. We believe that part of that is that we have very strong principality in Argentina, people use Marco Polo daily, uh, and therefore, that could help help us in people paying us back first, rather than the other debts. They, they might have. So we we are not seeing a significant impact in terms of npls and then I think the second part of the question was regarding the the change in Gross ever requirements for money market funds. Uh, that have

Happened last week. Actually, it was a change in reserves for pretty much all of the banks and also money market funds. And.

We can dirty, we expect the impact in what we pay to users to be in the order of of 2%, meaning we were paying close to 30% to the 27% roughly to to customers before. And with this change, the impact will be roughly to 2 percentile points and will be around 25%.

The next question is from Marvin Fong with BTIG. Please go ahead.

Good evening, thanks for taking my questions. Um, just, uh, on the I know it's only been a few months now but with the lower free shipping threshold, you know, those purchases that are happening under $79. REI, uh, just curious, you know, how is the behavior there? Are you seeing a lot of the purchases near the low end of the free shipping threshold? And, um, you know, do you expect that to change over time? Would you expect the average order size to increase, you know, for those people that are, you know, storing the purchase from work out on eBay, but perhaps will start becoming more comfortable purchasing more items on the marketplace? And then second question, just would love some insight on just, um, your comfort with continuing this pace of credit card issuing.

In Brazil given um, some of the tightening that's going on. It looks like there's been some slowdown and and consumer spending but uh, just what any? Any color there would be much appreciated. Thank you very much.

Hey Marvin. Uh, so let me answer your question in a slightly different way.

We would not be a 50 plus billion dollar gmbb company today per year, if it were not because of building our Logistics infrastructure and launching our free shipping program back in 2017. And we think this is the same case. Now, we we are convinced that the best way to serve our customers in Brazil. It Is by offering more, uh, free free shipping and and and that's basically, uh, what what we are doing. So within that range, there are many, many things happening, simultaneously. We just launched this, uh, few weeks back and back. So it's, it's a bit early. But we definitely expect the trend that we see in traffic increases conversion rate, increasing more engagement, more frequency to continue in the future. And with that, we expect to see, uh, you know, uh orders, uh, going up order sizes, going up and

And so on, right? So this is not an a marketing investment that we are doing in order to generate transaction, uh, from 1 day to the other, this is a long-term play in which, in which we think this is the best way to serve, uh, our customers.

And that we will continue to do that. We cannot be sure about what that pace will be in the future, but we do know that if you look at our market share today, in terms of credit cards in Brazil, it is roughly 2%. So we believe there's plenty of opportunity to continue growing.

Such a compliment as we have done in the past. If we see something that we do not like in the market or in our, in our models, we will be willing to slow down just like we did in the past so far, we're very comfortable with the models, the collections and the performance of the credit card. So we will continue to to grow so long. As we can guarantee that we have a healthy book and a profit that we booked in the in the medium to long term.

This concludes our question and answer session. I would like to turn the conference back over to Martin de los Santos for any closing remarks.

Thank you all for joining today to the call and thank you for your questions. And we're very pleased with our results in Q2. What? Where once again we saw our businesses accelerating growth both in Commerce and fintech. Uh and we look forward to engaging again in October with you. And we present our Q3 results in the meantime, the investor relations team the available for any further questions. Thank you again and good night.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.