MercadoLibre, Inc.

EBIT question, Irma asked and try a little bit differently. There are obviously seasonal headwinds in 1Q from credit business, you know, that partly eases off through the year. But are you now ramping investments in certain areas that's incremental, you know, that the seasonal effects are somewhat masked and we should expect EBIT margin for the year to be around 1Q levels? Any additional color you can provide that would be super helpful. Thank you so much.

Hey, Deepak. Ariel here. So let me take some time to address the first point on competitive intensity. So Brazil is one of the most attractive e-commerce markets in the world, so it's natural that it's getting more and more intense, as that has been the case for many years. While competition is intense, I would highlight a couple of things about the way we are thinking. about this, and perhaps this might be a bit different from how the market is thinking. So first, we thrive in competitive environments, right? Competition makes us stronger. It pushes us to evolve, to continue innovating, and that's exactly what we have been doing over the last few years, actually for 26 years, but it's been doing for the last few years as well. Every single engagement metric you look in MercadoLibre Brasil is strengthening frequency, multiple category shopping, retention. So all those are structural gains in our value proposition. Those are not short-term gains or growth that we are buying. So, once again, satisfied with that, as we are satisfied with reaching new records of MPS that really show how strong our value proposition is in the country. Our conversion rate in Brazil has increased one percentage point year over year. That's a huge increase when you think about conversions. And all these feeds into the rapid growth that we are delivering, the record market shares, So we have never been in a stronger position on that regard. The second point that I would highlight is that this competitive intensity is also having a positive impact in the market as a whole by bringing new consumers from the offline world into the online world, and we feel we are very much equipped to offer all those consumers the opportunity to buy in MercadoLibre. So the pie is increasing at a faster pace than it was before, and we are taking an even larger slice of that pie. Regarding the impact on what others are doing, our numbers speak for themselves, right? Our supply continues to grow. Our GMB continues to grow. Our successful items sold are accelerating. Our retention is improving. So we are basically comfortable and confident with the competitive position that we have, and we will continue to execute behind it.

It's Martin here. With regards to margins, as you know, we rather not talk about margins on a quarterly basis and what we're looking at. Let me say that in Q1, we decided to invest, we decided to level the intensity of our investment based on the performance of the different investments. I think on the shareholders' letter, we tried to go deeper into those results. As you can see, we're seeing very positive results in all of our investments, in the credit card, 1P, CBT, or a free shipping offering and so on. So we will continue to invest behind those initiatives. It might be some others like Ariel mentioned, some incremental investments that we're doing on our marketplace, particularly in Brazil. We have to see how energy costs play out. I don't see a big impact on that, but we need to monitor that situation. So I would say that The philosophy will continue to be the same. We will look at the investments, we will look at the results of investments, and we will invest behind our ecosystem to capture the opportunity in front of us. Again, we're not managing the business to a particular margin level. We feel very optimistic and comfortable about the level that we deliver this quarter, and we will continue to monitor the investment opportunities throughout the years to see where we position and the level of intensity that we continue to deliver in those different tracks.

The next question will come from Cal Pareto with UBS. Please go ahead.

Hi, guys. Good evening. Thanks for the opportunity. I have a follow-up on your credit book, please. So I think we are seeing some deterioration on the asset quality given these higher provisions, NPLs, and the lower level of NIMOS. And having said that, I would like to hear from you about your renegotiation strategy. How is this evolving over time, and if this higher duration of loans that you mentioned is related to any kind of renegotiation as well or not? And second, just to see if I understand, at this environment, should we expect the same pace of credit card insurance in Brazil, or should we see some slowdown? And finally, if this is the new recurrent level of NIMO going forward, or actually could be lower as you continue to expand in credit cards? Thank you.

So, Caio, with regards to NE-MAL, when you look at it on a quarter-by-quarter evolution, there is some seasonality in Q1, where typically we have lower NE-MAL in Q1, but I'd say it's normal to see the sequential compression. And then when it comes to year-on-year evolution, as we mentioned, A big part of that is the higher mix of credit cards, and the rest is more related to Brazil, both extending the average in terms of loans and expanding the reach of our personal loans portfolio. We have not seen any change in pro-negotiations. What we do see when we extend the duration is that more people are willing to prepay their loans. So the revenues of the interest we end up collecting of that loan is shorter just because in that case, the duration was not extended as we expected in the first place. But we are not seeing any impact of that in the quality or the type of regular negotiations we are doing.

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

Thanks. First, I would like to thank everybody for joining the call. I would like to close with some comments regarding our investment philosophy, and we will try to go deeper into that in our quarterly letter to shareholders. We at MercadoLibre are facing a once-in-a-generation opportunity. Both fintech and commerce have tremendous runway ahead in Latin America. And we are in the best position to capture this large opportunity. So for that, we choose to invest behind our ecosystem, as we mentioned throughout the call. We're investing in fintech and scaling our credit card portfolio, which is helping us bring millions of people to our Mercado Pago platform. In commerce, we continue to grow our free shipping offering. We are expanding our logistics. And we are investing behind our 1P and CVT operations. And obviously, those investments are putting some short-term pressure on margins, but they are delivering tremendous, you know, results. We've seen those investments working. Our market share, we continue to gain market shares in all of the businesses that we operate, in all of the countries where we operate. Engage in an NPS at record levels, and we are generating tremendous growth and scale. And proof to that is the 49 percent year-on-year growth that we deliver in Q1, which is the highest in the last four years. We are aware that that generates margin pressure, but we think that this is the right way to go, and we are as confident as ever that the choices that we're making today will maximize long-term cash flow and will lead us to significant higher margins over time. So with that, I would like to close the call. Thank you again, all of you, for joining, and please reach out to the IR team if you have any further questions. Good night.

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