MercadoLibre, Inc.

Hello everyone and welcome to the Mercado Libre earnings conference call for the quarter ended June 30th, 2022. I am Lisa Schwerz, Investor Relations Officer for Mercado Libre. Today we will share our quarterly highlights on video, after which we will begin our live Q&A session with our Chief Financial Officer Pedro Arndt and Chief Executive Officer of Mercado Pago Osvaldo Jimenez. I remind you that management may make forward-looking statements relating to such matters as continued growth prospects for the company, industry trends and product and technology initiatives. These statements are based on currently available information and our current assumptions, expectations and projections about future events. While we believe that our assumptions, expectations and projections are reasonable in view of the currently available information, you are cautioned not to place undue reliance on these forward-looking statements. Our actual results may differ materially from those included in this conference call for a variety of reasons, including those described in the forward-looking statements and risk factor sections of our Form 10-K for the year ended December 31st, 2021, and any of MercadoLibre Inc.' 's other applicable filings with the Securities and Exchange Commission, which are available on our Investor Relations website. With that, let's begin with a summary of our results.

Hello, everyone. I'm pleased to present some of the highlights and key messages regarding the performance during the second quarter of 2022. Despite a challenging macroeconomic scenario, we delivered a strong quarter across all of our businesses. Our marketplace achieved consistent results despite the challenging environment for retail businesses, with a gross merchandise volume of over $8.5 billion delivering solid growth year on year despite tough comps for the second quarter. We reached over 40 million unique buyers during the second quarter with sustained levels of engagement and items sold per buyer. With a diverse seller base and an efficient logistics network for a wide variety of items, we have a differentiated user experience and product assortment to keep growing and drive further online commerce penetration throughout Latin America. On the fintech side, Mercado Pago continues to grow and gain relevance in our ecosystem, delivering strong results in Q2. TPV surpassed $30 billion for the first time, growing both in acquiring and digital wallet. Mercado Pago reached 38 million unique active users, growing across all geographies. Mercado Crédito continues to grow its credit book, reaching more consumers and sellers and delivering an important ecosystemic effect for engagement and loyalty. With sustained healthy trends in the second quarter, the credit business continues to contribute to our operating margin expansion. As a consequence of the consistent performance in commerce and fintech, we delivered record results in net revenues and EBIT. with strong improvements in cash generation during the second quarter. Revenues for fintech have surpassed $1 billion in the quarter for the first time ever as our fintech products gain more relevance in our ecosystem. In commerce, revenue growth comes mainly from our strength in third-party marketplace categories and the expansion of our advertising business. Our gross profit margin expanded year over year and quarter on quarter as we scaled our businesses and delivered operating leverage across most cost of goods sold. As a result of this, our operating profit reached a record in the quarter with operating margins that were directionally in line with last year's as we continue to balance investments mainly in product and technology and the credit business with cost leveraging across other operational expenses. The second quarter closed with net profit in our three main segments, including Mexico, and with improvements in net income margin year over year. We also optimized our cash conversion cycle, leading to improved cash generation for all business units and strong cash from operations results. We will continue to target growth with the correct profitability and cash generation profile. This will mean balancing our focus on the long term with a commitment to constructing sustainable businesses with scalable financial models. A more detailed, customary comment on the second quarter operational and financial highlights is now available in a management commentary letter to shareholders, which we release on our Investor Relations website. Before initiating the live Q&A sections of tonight's earnings, we want to share with you some additional news and achievements from the quarter.

Our marketplace continues to grow, and technology has an important role to improve the experience of our buyers and sellers, deploying continuous improvements to selection, search, and discovery. In our apparel section, we now have improved filters and brand searching. We expanded the Melly Places network, enabled for reverse logistics to improve the shopping experience for our customers. We also keep improving our delivery service throughout Latin America. The Melly Air network reduced our delivery times by two to six days in the north, northeast, and midwest regions of Brazil. In line with improvements in our buyer experience, Our loyalty program has been growing, reaching millions of subscribers and strong year-on-year growth. After reaching level six, the highest on the program, users have higher frequency, GMV and retention, enjoying multiple benefits from free shipping, special discounts and offers to access to content streaming partners. Our loyalty program also plays an important part in connecting and raising engagement both in Mercado Libre and Mercado Pago, offering benefits in all of our services for our users. On the fintech side, our credit business also plays an important ecosystemic role as a tool to provide our merchant base with working capital and our consumer base with personal loans and credit cards. to continue to provide these solutions for our ecosystem. We recently announced new funding partnerships to expand credit lines in Brazil and Mexico. All of these initiatives that potentialize our ecosystem are a result of our tech DNA and execution focus. We believe times like this are ideal to invest and create sustained long-term differentiation, leveraging technology. And we will continue to invest in technology and in hiring engineers throughout the next quarters. As we grow, we watch closely our impact in the communities and environment around us. That is why we just launched another round of investments in our preservation program, Cajunera America, in Brazil and Mexico, to preserve Latin American biomes and biodiversity. As always, the best is yet to come.