美卡多 (MELI) 2008 Q3 法說會逐字稿

Welcome to the MercadoLibre third quarter 2008 earnings results conference call. Today's call is being recorded.

At this time, I'd like to turn the conference over to Mr. Pedro Arndt. Please go ahead.

Welcome, everyone, to MercadoLibre's earnings release conference call for the quarter ended on September 30th, 2008. Company management presenting today are Marcos Galperin, Chief Executive Officer, and Nicolas Szekasy, Chief Financial Officer.

This conference call is also being broadcast over the Internet, and is available through the Investor Relations section of our website.

Before I had the conference over to Marcos and Nicolas, I remind you that during this conference call, we will discuss some non-GAAP measures. A reconciliation of these measures to the nearest comparable GAAP measures can be found in our third quarter 2008 earnings press release available on our Investor Relations website.

In addition, 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 are 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 discussed in this call for a variety of reasons, including those described in the forward-looking statements and risk factor sections of our 10-Q, 10-K, and other filings with the Securities and Exchange Commission, which are also available on our Investor Relations website.

With that, let me hand things over to Marcos.

Good afternoon, and thank you to all who have joined us today for this call.

I will begin the call by providing some qualitative comments on our business outlook and discussing some of the highlights from the third quarter. I will then turn the call over to Nicolas, who will speak in greater detail about our financial performance. After that, we will both be available for your questions.

Let me begin by saying that, like many other management teams, we are closely monitoring the impact of the global economic slowdown on our business. Although it is still early to have a precise read on how our sector will perform, after all, we are only now beginning to enter the holiday shopping season throughout Latin America, we understand that the current global situation is one that may be challenging to our business and will require that we react with a renewed focus on efficiency, austerity, and sound risk management.

However, we also believe that specific factors, such as the continued adoption of the Internet across Latin America, the high growth rate of broadband and PC penetration in the region, and the less severe economic slowdown forecast for Latin America when compared to other parts of the world should help us during these times of economic weaknesses in other areas of the macro environment, at least for the foreseeable future.

More specifically, it is important to remember that Internet and e-commerce are still in the early stages throughout Latin America. With Internet penetration still below 25% of the population and broadband penetration still below 10% of the population, the continued adoption of these two technologies, driven by expanded access to personal computers, still offers significant growth opportunities for online companies.

In addition to the positive outlook for these circular trends, most of the macroeconomic forecasts available indicate that, while general growth rates for Latin America have slowed, the region continues to be a growth market with real GDP expansion for 2009 estimated to come in at 2% to 3%.

Partly because of these circular growth trends in our region, our underlying business has continued to perform extremely well over the past several months, seeing strong year-over-year growth in our key metrics. It is our belief that as we enter a period of slower global economic growth, these trends will continue to serve as catalysts for our businesses despite the less favorable macroeconomic conditions.

Before I move on to commenting on our third quarter results, I would like to address one other issue relating to our short-term outlook. In October, during the integration of the technological platform from our recently acquired DeRemate operations with the MercadoLibre platform, a human error caused the MercadoLibre site to suffer certain instabilities for four days, with sellers having trouble accessing the listings management area of the site. Furthermore, as part of the process to solve this mistake, MercadoPago was unavailable for those four days.

We have learned a valuable lesson from this period of site instability, and have taken the necessary measures to avoid an incident like this from occurring in the future. Although it is always difficult to measure the full impact of an incident like this on the business, we are comfortable with the situation at present and there appear to be no long-term effects stemming from this problem impacting the activity on that platform.

I would now like to move on to a high-level discussion of our third quarter results' operational highlights.

Overall, we are pleased with our results for the third quarter, as we experience continued solid momentum, rapid growth rates, and an expansion of our market leadership position.

Importantly, during the quarter we focused on strengthening our business infrastructure and management team so that we can better position the company for growth over the medium and long-term. In addition, we continued to make improvements to our product and technology infrastructure, and made good progress in integrating recent acquisitions, namely DeRemate and TuCarro.

All of these factors combined helped lead continued growth in GMV and TPV as well as improvements in take rate and rapid growth in our advertising and classifieds businesses.

Financially, for the third quarter, total net revenue was up 77% to $40.3 million over the third quarter of last year, driven by strong performance from both our Marketplaces and Payments businesses.

Revenue for our Marketplace segment, which also includes classifieds and advertising, was $31.7 million, up 75% from the third quarter of 2007. This was led by solid growth in live listings, unique sellers, unique buyers, gross merchandise volume, and ad space.

In Payments, revenue increased 83% to $8.5 million during the quarter. Continued increases in listings share and buyer adoption driven by the benefits offered on our efficient payment platform, fueled MercadoPago's robust revenue growth.

Income from operations grew 85% to $11.7 million, with an increase in operating income margins to 29%.

Net income was $5.9 million, resulting in earnings per share of $0.13 for diluted and basic share.

I would now like to highlight some business initiatives. As I mentioned at the beginning of my remarks, we continued to put considerable effort into strengthening our foundation so that we may position ourselves for sustainable, long-term growth. Most significantly, we made several important additions to our team in order to add more breadth and depth to our management ranks.

I would like to specifically mention four of our key hires, although we made several great additions throughout the course of this year.

Earlier this year, Marcelo Melamud become our Corporate Controller and Chief Accounting Officer. Marcelo has previously served in senior accounting and control positions at Fidelity Investments in the United States, Argentina, Brazil, and Mexico, as well as at MDM Hotel Group, a developer, owner, and operator of Marriott branded hotels. His hiring has been an important step in strengthening the depth of our financial team.

Pablo Setuain joined us as Vice President of Advertising. Pablo comes to us with high-level experience at Amazon and [Busale]. Pablo's appointment will allow MercadoLibre to continue to effectively respond to demand for advertising on MercadoLibre. He will also oversee the rollout of our beta advertising platform.

We also added Carlos Buglioni as our Director of Operations for our Brazilian operations. Carlos joins us after 10 years at Accenture.

And finally, Marcos Aurelio Bueno joins us as Financial Director of our Brazilian operation. He comes to us with over 10 years experience at multinational corporations such as Sony and Hasbro.

We stand to greatly benefit from the contributions of these and other new members of our team, as well as from the experience and tenure of our existing members of management. Their contributions will be key as we move into a new context of team consolidation and increased focus on productivity as a consequence of the tougher macroeconomic environment that has arrived.

Moving on to Payments, we continued to improve our beta MercadoPago 3.0 product during the quarter. We are advancing at a solid state, and are pleased with the advances made towards having a product in Argentina, Columbia, and Chile that we feel is ready to be rolled out to other markets.

Furthermore, the existing version of MercadoPago continues to thrive in Brazil, underscoring the continued growth opportunities we have in Payments.

Staying with Payments, during October we modified our approach to cash flow management in the business. As we witnessed interest rates for consumer financing in Brazil increase and the currency devalue, we decided to start discounting all of our credit card receivables and holding them in cash balances.

We are currently funding all the working capital needs of MercadoPago in Brazil through discounting receivables and therefore expect the Payments business to generate positive cash flow. Nicolas will talk more about the financial impact of our discounting in a moment.

Our classifieds Marketplace also continues to make important advances. During the third quarter, comScore Media Metrix figures showed that our motors category is the most visited vehicle site in each of Argentina, Brazil, and Mexico. This is the first time that we have taken over market leadership in this important metric in all three of these markets. We believe that this result is a testament to the success of our classifieds business and strategy.

Additionally, we are confident that the launch of our new platform for real estate in other markets where we operate will add to this positive momentum and allow us to continue fostering high expectations for the future prospects of our classifieds platform over the medium and long-term.

Another important initiative during the quarter has been the progress made in integrating our recent DeRemate acquisition. While, as I detailed earlier, the logistics surrounding the integration were more challenging that anticipated, we are pleased to say that at this point the integration is complete and we are in the process of capitalizing on the synergies that we identified at the inception of the deal, improved monetization, more traffic, more listings, and better conversion of traffic to transactions with zero additional employees and contractual obligations.

In addition to these synergies, we are also very pleased with the expanded market footprint in Chile and Argentina that the integration of DeRemate into MercadoLibre has generated.

As my closing set of remarks, I would like to get back to the issue of the current global context in order to mention that during periods of slower growth, we believe there are certain countercyclical aspects of our business that will allow us to perform well on a relative basis in spite of the challenging economic times that lie ahead.

First of all, during more austere times, consumer price sensitivity often leads buyers to bargain hunt for their goods on the MercadoLibre platform rather than shop retail. Additionally, small businesses that sell on our platform, who we call Mercado lideres or market leaders, are increasingly seeking additional sales streams for their products and are using our platform as a primary means to reach consumers in a more efficient manner.

In a similar fashion, entrepreneurs who were not users of our platform in the past are discovering MercadoLibre as an economical and practical alternative to more traditional brick and mortar retail channels. We look forward to additional revenue from this growing user base.

Finally, as a consequence of the global financial crisis, consumer credit should slow down. We believe that this slowdown will offer us the opportunity of added time to strengthen the consumer credit operations we offer our buyers and sellers vis-a-vis other retailers who currently offer more compelling terms than we do. In the meantime, the smaller reliance on consumer credit to drive sales on our platform means that the business of our sellers should be less affected by tighter lending conditions than that of other retailers.

In summary, as we move towards the end of our fiscal year, we remain optimistic about our prospects for 2009, and strongly believe that we remain well positioned to leverage the positive growth trends influencing Internet, broadband, and PC penetration rates in Latin America.

As we strive to provide our buyers and sellers with the access to the best possible online Marketplace, we will focus on ongoing improvement of our pricing and listing formats, constant expansion of our classifieds and advertising segments, improving the overall buying experience and financing options, expanding our presence in the social shopping space by enhancing content, and capturing additional revenue from small, medium, and large retailers both on and off our Marketplace platforms.

With that, I'd like to turn it over to Nicolas for a more detailed review of our financial performance, then we will both return to take your questions.

Thanks, Marcos.

I would like to use the rest of this call before taking questions to go into more detail on our financial performance.

Overall, Q3 was a very strong quarter in which we continued to deliver on the key drivers of our financial model, solid revenue growth, healthy gross margins, and year-over-year economies of scale in our operating expenses, all of which resulted in strong bottom line growth.

Specifically, net revenues grew 77% to $40.3 million. Gross profit margin was healthy at 79.7%, slightly above Q3 last year. Income from operations was $11.7 million. Operating income margin 29% and net income $5.9 million.

Revenue growth was driven primarily by the addition of 3.9 million new confirmed registered users, including 2.2 million coming from the DeRemate integration, bringing the total to 32 million users on MercadoLibre.

A steady rate of growth yielding a 49% increase in Marketplace gross merchandise volume to $590.1 million, an 87% increase in the total payment volume to $81.5 million, and an improvement in our consolidated take rate to 6.8% from 5.8% for Q3 of '07.

As always, we remind you that take rate is a measure of revenues as a percentage of GMV. On a consolidated basis, the take rate has increased in part because Payments continue to grow faster than the Marketplace, delivering additional revenues over GMV.

We also saw an increase in the Marketplace segment take rate to 5.4% from 4.6% in Q3 last year, more than offsetting the slight decrease in the payment segment take rate to 10.5% from 10.7% a year ago.

The Marketplace segment growth versus last year was driven primarily by solid growth in classifieds and advertising and, to a lesser extent, by better monetization in our core Marketplace.

The Payments take rate was slightly lower than in Q3 of '07, but higher than in any other quarter of 2007 and 2008, driven by revenues derived from financing.

The 77% total year-over-year revenue growth in Q3 of 2008 represented a slight deceleration versus Q2, but was still the second highest year-over-year rate of growth since the beginning of 2007.

Our Marketplace revenues grew 75% to $31.7 million, and our Payments revenues increased 83% to $8.5 million.

The Marketplace represented 79% of revenues, and Payments the remaining 21% versus an 80%/20% breakdown in the same quarter of last year.

In Q3 2008, we had a positive impact on revenue of $3.4 million when comparing versus Q3 of 2007 due to foreign exchange. Q3 year-to-date net positive ForEx effect represented almost $10 million or 10% of revenues. Q3 versus Q2 2008, however, exchange rates had no impact, and so far in Q4 this favorable trend in exchange rates has reversed. And based on external projections, it seems likely that for the balance of 2008 and for 2009, currencies in the region will remain weaker versus the US dollar than what we have seen through the end of Q3 2008.

TuCarro also continued to contribute in Q3 to the Company's revenue growth versus last year.

Gross profit grew 79% to $32.1 million, representing 79.7% of revenues, a 110 basis point improvement versus 78.6% for the same period one year earlier. Improvements throughout 2008 in costs of goods sold in the Payments segment was the key driver of this increase in gross profit margin, and more than offset the higher rate of growth in our Payments business, which has a lower gross margin.

Total operating expenses for the period were $20.4 million, a 76% increase year-over-year. As described for the top line year-over-year comparisons, both local currency appreciation and the acquisition of TuCarro had an impact in the growth of all the expense line items.

In addition, we should review some specific drivers for expense line that deserve mention.

Product and technology development expenses grew 51% versus the same quarter last year, reflecting mostly the expansion of our team. We believe product development is one of our key competitive advantages and intend to continue investing in this area.

Sales and marketing grew 64% for the quarter versus the same quarter the prior year. This increase was designed to capture new users and bolster our market position through our cost effective execution.

G&A grew 108% in Q3 of 2008. Public company expenses continue to be a significant factor in the year-over-year growth of G&A expenditures in addition to increased legal expenses and the cost of some key hires, as Marcos mentioned.

We believe that going forward we have an opportunity to leverage increases in G&A incurred over the last year.

In Q3, we accounted for $0.4 million in compensation of our long-term retention plan that was approved in August. This compensation cost is recognized in accordance with a graded vesting attribution method, which is different from the vesting schedule of the program. We have calculated a Q3 non-GAAP cost for this plan of $0.2 million by considering the vesting schedule instead of the graded vesting attribution method.

As a result of the factors just discussed, income from operations was $11.7 million, representing a 29% operating income margin and $11.9 million on a non-GAAP basis.

As Marcos said in his introduction, we are monitoring any potential impact of the global economic crisis in our business. We believe that in the current environment, it makes sense to increase the focus of the organization on cost controls and operational efficiencies. Even though a very austere culture has always been a part of MercadoLibre's DNA, we have taken several steps to ensure that we sustain a very disciplined approach towards spending and investing across the organization.

Below the operating income line, other expenses were driven by $2.6 million in foreign currency losses, which resulted mostly from the foreign exchange cost incurred as we transferred cash outside of Venezuela and $1.1 million of interest expenses and other financial charges which were mostly derived from financing costs incurred to fund MercadoPago working capital needs in Brazil.

Pretax net income was $8.3 million, 97% higher than the same quarter of last year.

Tax expense was $2.4 million in Q3 of 2008. This represented a blended tax rate of 29%. Our tax rate is down versus Q3 of last year and versus Q2 of this year as well, as a result of some efficiencies delivered and our tax planning initiatives.

As a reminder, though, that our blended tax rate is very sensitive to changes in either pretax income or to changes during the period in our deferred tax assets and liabilities.

Net income for the three months ended September 30, 2008 was $5.9 million, reflecting an increase of 111% when compared to $2.8 million during the same period of 2007, and resulting in a basic net income per common share of $0.13, or for $0.10 on a non-GAAP basis.

Net cash provided by operating activities for the nine months period ended September 2008 was $16.1 million versus $8.1 million for the same period of 2007. We continued to generate strong operating cash flows in our Marketplace segment, and we funded working capital requirements in our Payments segment by discounting credit card receivables and also by using funds generated in our Marketplace segment.

In October of this year, as Marcos mentioned, we saw increases in interest rates in Brazil. At that time, we suspended our buyer financing options for a week during which we evaluated our alternatives and decided we would introduce a few changes.

First, we increased the financing rates we charge our users to sustain our margins. And second, we decided that we would be funding 100% of the working capital needs externally through discounting all of the credit card receivables of MercadoPago upfront. As a consequence, we expect to have a positive impact on our cash flows but also project to incur higher interest expenses from the cost of discounting all the receivables.

We believe that this is the correct business decision to take, given tighter credit conditions that prevail in today's financial markets.

Net cash used in investing activities was $12.1 million year-to-date, driven by payments due on DeRemate acquisitions, CapEx for $3.9 million, and outflows of $2.3 million allocated to our real estate trust that's investing in the construction of an office building in Buenos Aires where we are buying five floors and where we are planning to move our headquarter offices in 2010 when the construction is completed.

These investments were partially offset by the net proceeds from the sale of financial investments.

Net cash used in financing activities year-to-date was $9.5 million, driven by the repayment of some of the loans backed with credit card receivables that we had obtained in prior quarters to finance MercadoPago.

Before wrapping up, I would like to provide you with an update on the DeRemate acquisition that we closed in September.

Strategically, this was another important step in consolidating the transactional trading Marketplace's space in Latin America. DeRemate in Argentina and Chile was the largest remaining competitor we had. Operationally, we acquired their URLs, brands, traffic, user base, and transactional volume. During the last few weeks, we have already completed the migration of all of those over to our platform.

Financially, as Marcos highlighted, we expect significant synergies between both businesses, first by improving the monetization of DeRemate's gross merchandise volume as we apply MercadoLibre's pricing structures, and second by generating significant efficiencies in operations and technology as we add the revenues of DeRemate without their costs given that, as part of the deal, we did not absorb any employees nor any fixed expenses.

I would like to wrap up by reiterating that we're very pleased with our strong growth in the quarter and with our continued ability to achieve solid bottom line gains.

And now, we would be pleased to answer your questions. Operator?

Thank you. (OPERATOR INSTRUCTIONS.) And we'll take our first question from Imran Khan with JPMorgan.

Yes. Hi. Thank you for taking my questions. Two questions. First, I was wondering if you can give some color in terms of what kind of activity you are seeing in the month of October in terms of user growth or average selling price and things like that.

And secondly, could you talk a little bit about how credit crunch impacting in Latin American e-commerce activity in the month of October? Thank you.

Imran, with respect to the credit crunch, the specific impact that we have seen affecting our business was an increase in interest rates in Brazil. As part of our MercadoPago strategy, what we have decided was to match this increase by increasing the rate of interest that we charge our buyers and sustain our margins.

But, I would say that, besides that in general in terms of that microenvironment, we have not seen any significant impacts on the economies. And as a matter of fact, expectations for next year are that the economies will decelerate their rates of growth but they will still be growing on average on the 2%, 3% rate of growth range.

With respect to your first question, specific color on our activity in October, as you know, we do not provide any guidance on the quarter. So, we will be reporting on that when we close Q4.

So, maybe a follow up question. In terms of the interest rate increase, have you seen a slowdown in the payment activities when the rate went up? Like, I know you shut it down for a week, but in terms of activity level, how much impact you saw in the business?

Hi, Imran. This is Marcos. October was clearly a month where we've seen many things going on. But, as Nicolas has said, I think we'd feel much more comfortable talking about Q4 early next year.

Okay. Thanks.

Thank you.

Thank you. Moving on, we'll take a question from Ricardo Fernandez with Bank of Itau.

Yes. Hi, guys. How you doing? A couple of questions. First, the DeRemate acquisition. Okay, did you begin -- how did you account for the sales volume that was prior to you taking it? I mean, how was the accounting done? Did you take the GMV for that from September going forward? Was there any volume going through that Marketplace while you integrated, or did it basically stop for a while? If you could just run me through the process.

Yes. During September, we operated DeRemate in parallel to MercadoLibre. The integration happened during Q4.

Specifically, the impact is that we had one month of DR, DeRemate results, incorporated into our Q3 numbers. We have reported that we had a one time, you could say, inventory of 2.2 million users that we added from DeRemate to the MercadoLibre space, and that is part of the total users that we have reported now.

GMV and revenue numbers, we had one month, September numbers, incorporated into the Q3 results. They were not material and they are not broken down.

And importantly, as we were operating DeRemate in parallel with most of their costs, from a net income point of view there was no impact whatsoever.

Going forward, as we integrated DeRemate without their costs, we expect to see a positive EBITDA result as of Q4 coming from DeRemate.

Okay. That clarifies things for me. I thought maybe that it was going to be able to book more of that -- would have been more relevant in the third quarter.

The other one was on MercadoPago 3.0. As I recall, you rolled it out in Chile, Argentina, and I think now you're mentioning that it's getting geared up to be rolled out in Brazil and other markets. Do you have any information as to in terms of whether -- where it was rolled out, how was it accepted, what were some of the metrics there? And when you do expect it to roll out in Brazil, for example?

So, we've made lots of progress during the last couple of quarters in improving the scalability of MercadoPago 3.0. As you know, in Chile and Columbia, those were very small markets for us and test markets.

When we brought it to Argentina, it has a larger scale. We had some scalability issues. We have been focused on in fixing those. We've made lots of progress. We are very satisfied with the way that is going.

On the meantime, we are not heavily promoting it in any of these markets, particularly in the ops platform. And we're starting to feel significantly more comfortable with the way the product is. So, we are not specifying any dates as to when we would be rolling it out. But, we are very happy with the progress we've made in the last couple of quarters, and are starting to feel significantly more comfortable with the product overall.

But, I mean, in terms of customer acceptance or rather seller acceptance, have you seen any resistance to it or has it been basically going along as planned? And if you're not promoting it very aggressively, I mean, in these markets, I mean, does that mean that the buyer can basically choose whether -- or the seller could choose the -- which form? Do you run both at the same time?

No, in the markets where we have launched MercadoPago 3.0, the prior version, the 2.0, is not available any longer. And it's going as planned.

Okay.

And the last question was on the accounts receivable. As I understand this, it wasn't a September problem. It's -- in other words, it's not a third quarter, it's a fourth quarter problem, the accounts -- I mean, basically needing to discount all your credit cards accounts receivables, is that right?

Yes. Just to frame it correctly, it was a business decision, but not a problem at all. We decided that under the current market conditions, we would be on the safer side if we discounted all the receivables upfront and we had the cash in our possession to make the payables have enough funding for the payables rather than do that for part of the receivables and fund the remainder of the payables with cash that we were generating in the Marketplace.

So, just to reiterate, this was a business decision but we didn't have any problems whatsoever.

Okay.

And, yes, it was during the month of October.

Sure.

Okay. So, then -- sorry. So, then basically third quarter has none of that. So, in the fourth quarter, what we should probably see, to continue with this business decision then, is a -- I guess I would assume a lower margin on MercadoPago because of higher costs. In other words, you're discounting the receivables. You're taking a chunk out of your commission, your take rate there. But, on the flip side, you're using up less of your own capital, correct?

Basically, yes.

Okay.

And then, the other thing is that, I mean --.

I think we need to move over to the next question, please.

Sure.

Thank you. Moving on, we'll take a question from Stephen Ju with RBC Capital Markets.

Hey, Marcos. Hi, guys. I think one of the business initiatives you had outlined a while ago, and bringing up again on this call, was to try to get the larger retailers to use MercadoLibre. Where are you guys on that initiative now? What is the pushback, if you get any at all? And in this environment, do you anticipate that it'll be easier to get these sellers on the platform as they hunt for more traffic? And also, how much overlap is there between the sellers and the buyers on DeRemate and MercadoLibre? Thanks.

So, with respect to the large retailers, we -- as you know, that's one of our medium and long-term strategic initiatives. We are very pleased to have launched our advertising platform on a beta format in Uruguay, which is a small market for us. Currently, it's only available for power sellers, but this is a tool that we intend to use to capture share of wallet from the large retailers.

We are the de factor destination for e-commerce in the region, and we believe they will be very interested in purchasing traffic from our platform as well. Initial contacts definitely reinforce our belief, so we believe there's a huge opportunity here. And in the medium and long-term, we intend to capture it.

As I just mentioned, we have just launched our beta advertising platform in Uruguay, and it's currently only available for power sellers on a promotional basis. So, it's going to take some time, but we are making progress.

With respect to the overlap between DeRemate and MercadoLibre users, it was as expected. So, nothing to -- we're not breaking it out, but it was as we were expecting.

Next question, please.

Thank you. Moving on, we'll take a question from Scott Devitt with Stifel Nicolaus.

Hi. Thank you. Just a few questions. The first one is could you give the organic growth rate excluding acquisitions and excluding currency in the quarter? The second question is as it relates to the integration challenges that you had for four days, could you give the countries? Did that impact all countries or just specific countries?

And then finally, this advertising initiative, it seems like from presentations that you've given in the past that you're following the lead of Gmarket in that area. And so, I'm interested in terms of the segmentation of that advertising business, if you believe you're going to have three different types of advertising such as Gmarket does, or if you're focusing one over the others. Thank you.

Yes. With respect to organic growth, approximately 10% of our revenues in Q3 can be assigned to ForEx relative to Q3 of last year, approximately $3 million.

With respect to acquisitions, we do not break that down. As we said before, DeRemate in Q3 is insignificant. TuCarro is not material enough to be broken down.

With respect to the impact of the instabilities we've had in October, it was across the different countries. So, MercadoPago was unavailable in the countries where it operates, and the power sellers and the sellers' area was unstable and often unavailable in all the countries.

Can you repeat the question regarding the advertising?

Just -- I was a little unclear as to the types of advertising that you're going after. In the explanation that you gave to the prior question, you mentioned power sellers having the ability to purchase advertising, but then you also mentioned retailers being able to acquire traffic from the site. And so, I was wondering if you'd just give some clarity as to what the initiatives are. Long-term, are you attempting to focus on power sellers that are buying placement within the site, or external merchants that are actually trying to drive traffic away from the site?

Yes. So, currently, advertising is -- it comes from two sources, display advertising that is sold to power sellers or to large retailers or branded products, and our zero results search pages that we have a deal with Google.

Moving forward, we launched our advertising platform which is a text links platform, and we believe this is a more scalable way of addressing advertising over the medium and long-term. And power sellers and/or large and medium sized retailers will be able to purchase specific words or categories from our platform and link those text links to their site or their products on our platform.

Next question, please.

Thank you. Yes, moving on, we'll take a question from Mark Argento with Craig-Hallum Capital.

Thanks, guys, for taking the call. Quickly, on -- now, I know historically a lot of the product in your site is either imported or brought in from the US or is denominated or purchased in dollars. With the FX impact, has you seen a real change in price in terms of ASPs of the products or an increased price on the -- on some of the higher end products? And more particularly, have you seen that impact buying behavior at all?

Yes. Basically as we ended Q3, currencies had not devalued relative to the dollar in any material way, particularly the reais was at around 1.8 per dollar, so nothing important to report.

Most of the devaluation has happened as of Q4, and as we said, we do not report on the results of Q4 at this stage. But, from a more theoretical point of view and also based on historical situations that we've been through, both with currencies devaluing or appreciating, definitely what we have seen is that, for example, a $1,000 notebook selling on our Brazilian platform in reais at a certain value, if the reais devalued we would see the same laptop selling for more reais. So, that is definitely something that we expect will be happening.

In some of our sites, you can even list in US dollars, so you are -- you don't have to adjust the prices in local currency. The prices stay in dollars and you have, as a seller, a natural hedge there.

And lastly, on the DeRemate listings, have you any anecdotal evidence suggests the take rates there on those listings, relative to the incumbent Mercado customer, that you're having success there?

Yes, the take rate of DeRemate prior to the integration was substantially lower in the marketplace. Ours was at least 50% higher. So, as we have migrated DeRemate into our platform, automatically sellers are listing within our pricing structure. So, our expectation is that the take rate from that volume will be happening -- or we will be monetizing the volume from DeRemate at exactly the same take rate as we do for MercadoLibre volume.

Great. Thank you.

Thank you. We have time for no further questions. I'd like to turn the conference back over to our speakers for additional or closing remarks.

Thank you, everyone, for assisting. We look forward to speaking with you once again. With our full year and Q4 results, we'll be able to give a lot more color on some of the questions that came up today.

Thank you very much.

Thank you again, ladies and gentlemen. That does conclude our conference call for today. Thanks very much for your participation and enjoy the rest of your day.