MercadoLibre, Inc.

Good evening, and welcome to MercadoLibre's Q3 2024 conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. We ask participants to limit themselves to one question and get back in the queue for any follow-ups or additional questions. Please note this event is being recorded. I would now like to turn the conference over to Richard Cathcart, Investor Relations Officer. Please go ahead.

Hello, everyone, and welcome to the MercadoLibre earnings conference call for the quarter ended September 30th, 2024. Thank you for joining us. I'm 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 for the third quarter of 2024, 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. With that, let's begin with a summary of our results.

Hello everyone, I am pleased to share that MercadoLibre had another quarter of outstanding growth. We had an excellent quarter across all of our businesses and geographies, so the strong performance was really all around. With these results, we reinforced our position as the leading e-commerce and fintech platform in Latin America. Every time we have invested in enhancing our customer experience, in the past, We have been rewarded with strong growth and improvements in a market position. In this quarter, we continue to make strategic investments in our platform, both commerce and fintech, and that resulted in GMB growth of 34% year-on-year in Brazil and 27% in Mexico. This also resulted in market share gains in both countries. In Argentina, item sold grew at 16% and we surpassed the 60 million items sold in our platform, which is the highest ever volume. But we continue to see improvements of the Argentinian market. We have added a record of almost 7 million new buyers into our platform. This is a number higher than the number that we saw during the peak of the pandemic. So let me be clear on that. Not even during the explosion of demand that we experienced in the pandemic, we saw a number of new users at this level. As most of you know, the penetration of e-commerce in Latin America continues to be relatively low when we compare it to other more developed regions. Only 15% of commerce is done online, so there's plenty of room to continue growing. As a leader player in the region, we have a crucial role in driving more volume online and increasing this penetration of e-commerce. For that purpose, we continue to invest in our strategic initiatives such as logistics and our loyalty program. In Q3, we opened six new fulfillment centers, five in Brazil and one in Mexico, and that helps us improve or increase the fulfillment penetration by 4.5 percentage points compared to a year ago. We know that having more volume shipped out of our own fulfillment facilities results in a much better user experience for buyers and sellers, in faster and more reliable delivery speeds, and in much better conversions of volume. In turn, it results in further growth of the ecosystem. Investment in technology also plays a critical role in bringing more business online. Because it removes buyer friction. Our large team of developers continue to be focused on improving the buyer experience and customizing it for each individual vertical. Our advertising business represents a powerful profit engine for MercadoLibre. And once again, we had a strong quarter despite FX headwinds that we experienced in Mexico and Brazil. Most of the volume of advertising continues to come from product ads, so we see a tremendous opportunity going forward on display and video advertising where we're just getting started. In fintech services, the impressive growth of our user base and the rising engagement that we see people having with our products shows that more and more people and consumers are choosing Mercado Pago as their main financial service provider. We continue to invest behind our credit card, as it's a critical product to achieve principality within our users. In Q3, we issued 1.5 million new credit cards, and the credit card TPV grew by 166% compared to last year. As we see improvements in our risk models, we have accelerated the underwriting of credit, not only credit cards, but also consumer and merchant credits. and this resulted in growth of our portfolio of 77% compared to last year. We know that the faster growth of our credit portfolio, combined with a shift towards more credit cards as percentage of total portfolio, puts some short-term pressure on 911 Express. The broader stable NPLs that we have seen, and the fact that the earlier cohorts of credit cards are already becoming profitable, gives us confidence in our investments. Turning now to our financial results, our strong operational KPIs translated into revenue growth of 35% year-on-year, despite FX headwinds that we suffer in Mexico and Brazil. Our successful Q3 performance is not just a result of the great execution of our team, but also a testament of the many growth opportunities that lie ahead of us in our business and our ecosystem. Our EBIT was $557 million with a 10.5% margin. The majority of the margin compression from last year comes from the strategic initiatives, strategic investments that we discussed earlier. Investors can find more detail on those investments in our shareholder letter. Net income rose by 11% compared to last year, reaching $397 million in the quarter, with lower EBIT partially offset by a reduction in FX losses. As we finish our 25th year anniversary, we continue to see tremendous growth opportunities ahead of us. both in commerce and fintech, and now also in advertising. We have a clear vision of the future and are focused on the long-term growth, profitability, and cash flow generation of our business. Now I want to share some examples of innovation that we have implemented during the quarter, so I'll send it back to Richard that will explain those to you.