美卡多 (MELI) 2009 Q2 法說會逐字稿

Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to MercadoLibre's Second Quarter 2009 Results Conference Call. We would like to inform you that this event is being recorded. (Operator Instructions).

Now I'll turn the conference over to Pedro Arnt, Head of Investor Relations. Sir, you may begin the conference.

Thank you. Hello, and welcome, everyone, to MercadoLibre's earnings release conference call for the quarter and six-month period ended June 30, 2009. Company management presenting today are Marcos Galperin, Chief Executive Officer, and Hernan Kazah, 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 hand things over to Marcos and Hernan, let me to once again walk you through the standard disclaimer. I remind you that during the course of 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 second quarter 2009 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 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 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-Contract, and other filings with the Securities and Exchange Commission, which are available on our Investor Relations Website.

Having said that, Marcos, let me hand the floor over to you.

Good afternoon, and thank you for joining us today. As usual, I will begin the call by discussing some of the quarterly highlights. I will then turn the call over to Hernan Kazah, our CFO. After our prepared remarks, we will be available for your questions.

We are delighted to report a strong second quarter and continuation in the positive momentum that our business has experienced over the past several quarters. This strong (inaudible) is exemplified by our accelerated growth in many areas.

Allow me to highlight some of our key growth metrics. Items sold grew 35% year over year. Number of unique buyers and sellers both hit record numbers during the quarter. The number of total payments through MercadoPago grew 42% year over year, and local currency gross merchandise volume grew 51%.

This accelerated growth in key operational metrics on a consolidated level also occurred on a country-by-country level in almost all geographies, signaling the health of our business across the board. We're especially pleased to see that the growth we are experiencing is apparent in every country in which we operate, including those whose users are relatively new to e-commerce, as well as those whose users are slightly more established. We continue to see a great growth potential across Latin America and foresee high growth rates of e-commerce in the region during the next three to five years.

The underlying strength of our business metrics also translated to solid financial performance, including double-digit growth in revenue, over 120% growth in net income, and strong cash flow generation. Furthermore, it is worth noting that we achieved this growth even in light of a challenging economic environment and low consumer confidence, although stronger than in many other areas of the world and improving in recent months.

Additionally, as you'll note from our press release and Hernan's remarks, our year-over-year results were tempered by unfavorable shifts in currency exchanges due to the strengthening of the US dollar.

Let us now take a look at the quarterly performance of our business units.

We were very pleased with the growth that we experienced in MercadoPago during Q2. After having shown below-trend growth during the past two quarters as a consequence of a very tough macro environment, MercadoPago is once again growing strongly. We believe that the over 60% increase in payments revenue for the second quarter is a direct result of the both external factors and, more importantly, improved execution on our end.

On the external front, a more favorable credit environment in Brazil assisted our payments platform. Key situational factors included, most importantly, lower interest rates that we passed on to buyers via lower MercadoPago financing fees, thus increasing accessibility to credit versus past quarters. We also saw increased willingness on the part of consumers to take on more debt as they became more confident. Additionally, consumers continue to grow increasingly accustomed to online payment systems - basically, our own - and are feeling more knowledgeable and secure in their online transactions.

From an internal perspective, we are pleased with our execution against our plan to make MercadoPago a world-class payment solution. We are confident in attributing a part of the increased adoption levels of MercadoPago this quarter to our consistent and non-wavering dedication to driving our Pago system to the next level of performance. We view the results in this area of the business as a reward for our efforts and focus.

However, that said, we remain concentrated on driving further increases in adoption of our 3.0 version of MercadoPago in our Argentina, Chile, and Colombia and look forward to rolling out to Brazil, Mexico, and Venezuela a more advanced version of MercadoPago 3.0.

Our (inaudible) Marketplace business has also made significant progress this quarter. As I mentioned earlier, we achieved record numbers of unique buyers and sellers during the quarter and grew items sold at a year-over-year rate that has been the strongest since 2007.

One particular area that I'd like to mention is the enhancements that we are performing in our new seller listing and pricing system. During the quarter, we launched our new listing and pricing system in Colombia with very strong results. The new system allows sellers to decide their listing options and the costs associated with those in a much more simplified and user-friendly manner and also allows them to more intuitively decide how they want to (inaudible). And that adds final value.

We believe this easier and more transparent platform allows us to capture new segments of sellers who are less experienced and more price sensitive by allowing easier access to final-value, fee-only (inaudible), as well as enhances our ability to upsell higher-end (inaudible) fee services to higher volume sellers. These improvements in turn drive increased listings and transactions on our platform. They also improve the buyer experience by eliminating the additional clutter associated with the previous forms (inaudible), thus improving the overall user interface for buyers.

In addition to the new listing and pricing system launched in Colombia and being rolled out to more markets as we speak, we have placed focus on other key (inaudible) during the quarter, including a new, uncluttered homepage with a faster download time that has been launched in Colombia, Venezuela, and Chile and is being rolled out worldwide; the announcement of an improved (inaudible) system for measuring and disclosing information on seller quality, which is more useful to the buyer by focusing on the key metric of (inaudible) transactions. The new (inaudible) system, which will (inaudible), should also drive improved transaction and multi-(inaudible) levels by better aligning the incentives of our sellers with those of our buyers and MercadoLibre's.

Moving on to our Classifieds platform, I wanted to mention that our motor site remains the leading automotive commerce site in Latin America as a whole and in each of Argentina, Mexico, Colombia, and Venezuela. In Brazil, we're the second-most visited automotive e-commerce site. We consider ourselves to be the most reliable and trusted source for e-commerce auto transactions.

Over the past quarter, we believe we enhanced our leadership position through the positive gains we have made, increasing the participation of (inaudible) on our side. Across our whole site, the number of car dealer listings grew by 64% year over year during the quarter, which we believe is due to the combination of our product initiatives and updating the platform (inaudible) for dealerships, strong execution from our Classifieds sales force, as well as the strong synergies in traffic stemming from our core Marketplace business. This increase in auto supply coming from professional dealers is a great complement to our industry-leading position in for sale by owner listings.

It is also worth highlighting the great job done by our TuCarro team in Colombia and Venezuela. TuCarro incorporates to the already-mentioned online strength of our Classifieds platform our very efficient and well deployed (inaudible) presence to capture listings and expand its brand awareness, and we continue to leverage successfully to improve the service we offer our users.

Staying with our Classified operations, we did want to provide some comments on a temporary setback we suffered in Venezuela during the quarter. As a result of the government's review of the pricing practices in the auto industry, our TuCarro Website was temporarily restricted from posting new listings in Venezuela for a period of 20 days during the second quarter.

Although this was obviously not positive, the long-term impact seems to have been minimum. Perhaps as a consequence of pent-up demand and continued confidence in our platform, daily new listings immediately rebounded to above pre-restriction levels, and total (inaudible) surpassed the pre-restriction levels before the end of the quarter. As of today, our TuCarro Venezuela operations continue to operate in absolute normality, and the business continues to thrive.

Moving on, let me make a brief comment on the performance of our Advertising business. We continue to roll out our Mercado (inaudible) advertising network with positive results. Although the overall contribution to revenue and profit is still small, we are encouraged by the steady growth in usage the platform has shown and are taking advantage of the continuing weakness in advertising spending in the region to transfer the focus of our Advertisement business towards (inaudible). In this sense, our ambition is to have a comprehensive cost-per-click (inaudible) product available once the current environment turns and online spending in advertisement assumes a high-growth area.

Let me conclude by saying that, as you can gather from my comments, we continue to focus on offering our world-class products to our users. We are firmly convinced that all of these things that help us better serve our users and, through that customer focus, bolster our leadership position are the right set of priorities for the Company. As such, we are constantly focused on improvements to our platform as we strive to maintain our superior position vis-a-vis our competitors in the region.

Related to this growth we continue to grow our internal talent base, particularly in the areas of information technology (inaudible).

As we look ahead, we expect to keep (inaudible) with constant improvement to our offering, including further expansion and upgrades to Mercado 6, continuous enhancements and improvements to our search technology, and new and vastly improved checkout process with better MercadoPago and MercadoLibre integration, greater innovation in our shopping content and catalogs, and expanding the geographic coverage of MercadoPago 3.0.

We look forward to updating you on our progress in these areas and others in quarters to come.

With that, I'll turn it over to Hernan for a review of our financials.

Thanks, Marcos. I would now like to go into more detail on our financial performance before taking your questions.

Overall, we're very pleased with the strong results of our business during the quarter. (Inaudible), our results continue to reflect the strength of the key elements driving our business. (Inaudible) e-commerce division have proven business models and excellent execution.

During the second quarter, most of our key financial metrics have all been positive. Specifically, net revenue grew 19% year over year to $40.9 million, a 42% growth in local currency. Gross profit margin was healthy, at 79%. Income from operations was $12.4 million. Operating income margin - 30.3%. And net income was $6.7 million; a 16.3% net income margin.

Revenue growth was driven primarily by a 35% year-over-year increase in items sold, (inaudible) the marketplace gross merchandise volume to $662 million, a 37% annual increase in US dollars and a 51% jump in local currency, and a total payment volume of $79.6 million, 19% growth in US dollars, or 47% growth in local currency.

Our Marketplace revenues grew to $31 million, a 10% increase in US dollars and at 29% in local currency. Payment revenues reached $9.9 million, 61% growth in US dollars and 99% growth in local currency. With this, Marketplace accounted for 76% of our total revenues, and payments are the remaining 24%, representing an increased share of total revenues from our payments business relating to the 82%/18% breakdown for the second quarter of 2008.

In local currencies on a country basis consolidated net revenue growth, including both Marketplace and Payments businesses, was 41% for Brazil, 6% to 8% for Argentina, and 36% from Mexico, and 26% from Venezuela. These growth rates mostly reflect our strong volume growth across all countries, margin-enhanced in the case of Argentina and Chile (inaudible) in these two countries in September 2008.

On a consolidated basis, Payments fell to 6.27% from 6.69% in Q2 of 2008. (Inaudible), Marketplace segment take rates fell to 4.8% from 5.5% in Q2 of last year. And Payment segment take rates rose to 12.4% from 9.2% a year ago, as financing revenues (inaudible) with higher interest rate costs.

Marketplace segment decline versus last year was driven primarily by the same factors we mentioned in the first quarter - higher growth coming from our small-country operations that have a lower Marketplace monetization; increased mix of listings coming from final-value, fee-only listings, which carry a marginally lower take rate; and negative impact of currency devaluations on our fees that are a fixed price and not a percentage of sales; and a drop in advertising revenues as percentage of total revenues.

We continue to work on reverting these trends through a series of initiatives centered on pricing modifications and product improvements. And we believe that we have room to raise take rates over the long run, given the value of the services we offer and the relatively inefficient local retail markets we operate in. However, given the early stage of development of the internet and e-commerce in Latin America, our primary focus will continue to be market expansion rather than short-term take rate maximization.

Gross profit grew 17% year over year to $32.3 million, representing 79% of revenues versus 80% in Q2 of 2008. This fall was primarily due to two reasons. First, the Payments business, which has a lower gross profit margin, grew its revenues faster than the Marketplace segment in year-over-year comparison. Second, as of Q1 of this year, we reflect as cost of goods sold certain Venezuelan FX losses related to the intra-company payables and foreign supplier invoices previously reflected as ForEx below the operating income line.

Operating expenses for the period totaled $19.9 million, a 2% increase year over year, while decreasing approximately 700 basis points as a percentage of sales, to 39% from 56% in Q2 '08. We have already called out during the previous quarter year-over-year evolution of these operating expenses. It's not an entirely precisely comparison, since there are certain differences from this year to last.

Specifically, as part of our tax-planning initiatives, we have extra withholding taxes of $507,000 in this quarter. Also, in Q1 of 2009, we began to account as operational expenses all of our Venezuelan FX losses related to intra-company payables and foreign supplier invoices rather than reflect them as FX losses below the operating income line. The total impact of this change was $2 million when compared to the method of accounting used last year for these expenses.

Of these $2 million, $1.5 million were included as operating expenses - 32% in marketing, 16% in products and technology, and 51% in G&A. And $0.5 million were included as costs. And, additionally, in the first half of 2008, we included $1.9 million in compensation expenses related to the acquisition of TuCarro that negatively impacted last year's operating expenses. $400,000 were reported in Q1 of 2008, and $1.5 million were reported in Q2 of 2008.

In summary, the net results of these effects worsened the Q2 year-over-year comparison by approximately $1 million, or 250 basis points of revenues. In spite of this, we improved our income from operations margin to 30% versus 24% in the same period of 2008. Having made this clarification, sales and marketing remained the largest line item expense but contracted 1.8% for the quarter to $10.1 million, mainly due to efficient marketing investing and a stronger dollar versus last year. As a percentage of revenues, it declined significantly to 25% versus 30% for the same period last year.

Products and technology remains the area of focus for us. Expenses in this area grew 17% to $3.1 million, compared with $1.7 million for the second quarter of 2008, reflecting in part the expansion of our software development team.

G&A grew 15% in Q2 of 2009 due to the Venezuelan ForEx effects described before and also because we included $400,000 as costs of the 2008 and 2009 long-term retention plan for management, a concept which we started to accrue last year in Q3.

Resulting operating income for Q2 '09 was $12.4 million, 52% higher than the same period last year.

Below operating income, other relevant lines were $3.3 million of interest expense and other financial charges, which were mainly due to the cost of discounting MercadoPago credit card (inaudible) in Brazil; $1.3 million of FX loss driven by the cash and investment balances held by the subsidiaries in US dollars; and, in Q2, we recorded as interest income the remaining $130,000 gain from (inaudible) contracts sold during Q1.

As stated in our last release, in the first quarter of this year, we continued to carry out our strategy of selling put options in connection with our share repurchase program. We sold recent put options for 226,000 of our own shares, at strike prices of $10 and $12. We collected a premium of $296,000, net of commissions, and recognized a gain of $133,000 in Q1 and a gain $130,000 in Q2. No put options were sold during the second quarter, and there are no put option contracts outstanding.

Pretax net income was $8.3 million, 54% higher than same quarter last year.

Tax expense was $1.7 million in Q2 of 2009. This represented a blended tax rate of 20% versus 46% in Q2 of last year. Our year-over-year improvement in tax rate reflected certain one-time benefits, such as the reduction of the domestic valuation allowance for $0.5 million and the fact that during the second quarter of 2008 we accrued $1.5 million of compensation expense related to the TuCarro acquisition and reduced our pretax income, while the related tax credit had a full valuation allowance, as well as (inaudible) by our improved tax-planning efforts.

Net income for the three months ended June 30, 2009 was $6.7 million, reflecting an increase of 127% when compared with $2.9 million during the same period of 2008, a 16.3% net income margin, and resulting in a basic net income per common share of $0.15. Net income grew 168% versus Q2 of last year when measured in local currencies.

Net cash provided by operating activities for the three-month period ended June 30, 2009 was $8.2 million. We continued to generate strong operating cash flows in our Marketplace segment, and we continued to fund working capital requirements in our Payments segment by discounting credit card receivables, being cash flow-positive in this segment as well.

CapEx for the quarter was $0.5 million, and consequently, for the three-month period ended June 30, 2009, net cash provided by operating activities less CapEx, a non-GAAP metric for free cash flow, totaled $7.7 million. Cash, short-term investments, and long-term investments at the end of the quarter totaled $70.4 million.

With the solid momentum in our business and the e-commerce industry in general, we are looking forward to the remainder of the year and the continued growth of our Company. With that, let us take your questions.

(Operator Instructions). Gustavo Oliveira, Citigroup.

My question is regarding your Payment too. You are in the process of lower interest rates, and the countries are lowering interest rates. Why does that happen your penetration rates are still probably not very high or as high as they could be, but your take rate is much higher? What do you think would be the normalized take rate after you go through this process? And when do you think actually that could happen? That's the first question.

Gustavo, just to clarify, you're asking about the (inaudible) take rates for MercadoPago?

The normalized take rate that you could see in the MercadoPago after you continue to see the declining interest rates that's happening now.

Well, what we have been doing is passing on lower interest rates to consumers. So, as interest rates decline in Brazil, we continue to bring down our take rate. The (inaudible) -- that part of our take rate could go down. The processing fee part of our take rate is relatively constant though.

Do you think that it's going to normalize as, like, 10% that you had last year? Or do you think that 12% is a normalized take rate?

We don't make any projections. What we have been doing and likely continue to do as interest rates go down is transfer those lower interest rates to the consumers. However, our processing fees for MercadoPago are relatively constant.

Okay. My second question--

Just an extra clarification. For the second quarter, approximately half of the take rate came from financing fees and the other half from processing fees. Last year at this time of the year, we had lower financing fees. So, as Marcos said, if we continue to get better rates for MercadoPago, we'll pass those on to the buyers.

Okay. Understood. The second question is regarding your relationship with [Rent-a-Car] in Brazil-- if you've seen any news on the claim that they had and you guys had in the district that you have and if there was any resolution regarding the settlements of the transactions on [the Pago] and when you expect that to occur and if you're seeing, actually, that that could increase your costs.

We hadn't always paired with Rent-a-Car at all. (Inaudible). We had some conversations with them. And we understand that the local government is looking for a more competitive market there.

Do you expect any statement from the government or anything soon, or not really?

So far we haven't seen any (inaudible) in relationship with the credit card processors in Brazil.

Okay. Thank you.

Steve Weinstein, Pacific Crest.

A couple for you. First, you already talked about the different factors that were impacting the take rate, which is-- I'm talking about in the Marketplace right now, which has come down from last year and is now partially kind of in the 2007 levels. Can you help us understand maybe the weighting of those factors and the impact they're having on your Marketplace take rate, so we can get a better sense of where and when that may level out to help us with our forecasting?

Also, can you talk about just the rates you're being charged now for factoring out the receivables for Pago? And just, given the more stable economic environment we're in right now, are there any thoughts about reducing the amount of receivables that you're factoring?

So, the first question about take rate, first, we would like to make this very clear. Our main focus at this point and, given the early stage of the internet in Latin America and also of e-commerce, in general, in the region, we believe that we have to focus much more on market expansion rather than focusing on take rate maximization.

Having said that, some things impacted our take rate during this quarter and, as well, during the prior quarter. Those were related to country mix; also related to the fact that the new listing format that are final-value, fee-only listings have a marginally lower take rate. And also we saw a drop in advertising revenues as a percentage of total revenues. And, as you know, within our Marketplace, revenues (inaudible) include revenues coming from advertising.

We are working on reverting this, and we think that we have a lot of upside there because of how the market is structured and because we see how sellers are reacting to our take rate. But, again, we're not going to rush in that direction. We think that the most important part of our business is to continue growing and including more and more sellers and buyers onto our platforms.

Did you list those (inaudible) impact you were having?

Pardon?

When you're listing those-- off the factors that are impacting the take rate, is that the quarter in which they're impacting the take rate, because the introduction of the new final-value, fee-only listings and engrossing less mature markets-- Those seem like trends that would be continuing for a while. And so, if that's the case, I would assume that the take rate will continue to go lower over the next two quarters. We should see--

When we mentioned that in the script of the call, we mentioned four factors. That's the order in which those factors are impacting our business. So first is this country mix. Second is the fixed portion of our pricing scheme. Third is a listing mix. So that's related to the newer listing format and final-value fee listings. And the fourth one is related to advertising.

And you also had a question about the rate we are paying for discounting credit card coupons in Brazil. That rate for the quarter was approximately 1.6% per month, and it went down over the quarter. So, in June, that rate was 1.5%. And we hope that it will continue to go down, and our strategy is to continue to pass on the savings we get to the buyers to continue pushing the growth of MercadoPago in Brazil.

Thanks a lot.

Imran Khan, JPMorgan.

Hi. This is [Les Palinski] calling in for Imran. A couple of quick questions. One is-- It seems like, on a local currency basis, GMV grew faster than TPV. So I'm wondering if this is an issue of geographic mix and sort of what tools you have to increase the penetration of Pago.

And, then, can you give any sort of updated timeline on when you see rolling out Pago to the additional geographies?

We don't give out timelines with respect to when we will be rolling out Pago to the different countries. However, we are and have been for a few quarters working on that, and we are excited with the progress we are making. And, with respect to the lower take rate, it's definitely partly because of the country mix.

And can you talk about what you think you can do to improve that over time?

To improve what-- sorry-- over time?

To improve the penetration of Pago within GMB.

Yes. We are working on our new version of MercadoPago, version 3.0, in Argentina, Chile, and Colombia. We think we'll have tremendous opportunity there. The version we currently have live is mostly a beta version. And we are very excited with the progress we've made, but we haven't launched any new release yet. We feel we're getting closer to having a release that we feel comfortable with putting live. And, once that happens, we will put it live. We believe that the potential of Pago in these countries and in the other countries is really enormous.

Okay. Thanks so much.

[George Morrow], Legg Mason.

Actually, I have two questions. The first one is related to the direct contribution margin in Venezuela and in Peru. I just was wondering if this is a reflection of an exchange rate differential between your revenues and costs? Or it's a true margin expansion?

(Inaudible). And the second - If you could comment a bit, I'm trying to-- If you can, give us a sense on how much has been the real revenue growth in Venezuela (inaudible) between inflation and real listings. So that's my two questions.

The direct contribution margin basically improved everywhere, and Venezuela is the place where it grew the most. Part of the reason is because our business there is doing really, really well, so we're expanding margins. And there's nothing in particular that's impacting that business. Inflation is affecting, eventually, our revenues and also our costs in local currency. So, obviously, being that a very profitable operation there, you have some kind of an advantage, even that (inaudible) are higher than costs. But that's not very significant.

Thank you. But, I mean, (inaudible) exchange rate on net revenues on (inaudible) costs?

Pardon? Can you repeat?

Yes. When you look at revenue in local currency and then you (inaudible) report in US dollar, we need a translation. You are using the same exchange rate (inaudible) for both revenues and [via] costs.

What we're doing in Venezuela is what we've been doing all the time what we are asked to do by the current regulations in the US and also in Venezuela. So our revenues are being reported at the official exchange rate. All the expenses that we have in Venezuela in local currency are also being reported also on that same exchange rate. And those expenses that are being quoted in US dollars, being mostly suppliers (inaudible) in US dollars or the intra-Company charges that we place on Venezuela, those are reflected (inaudible) exchange rate.

I see. So most of your margin expansion would be for the depreciation in the (inaudible) exchange rate.

No. Actually, what that is doing is we're using our margins in Venezuela, because in Q2 of last year, we were using the local official exchange rate for all the expenses. And now, this quarter and also the prior quarter, we've been using the (inaudible) exchange rate for some of the expenses.

Okay. And just quickly on the second version, if you could (inaudible) volume growth versus (inaudible). Out of that 44% increase in (inaudible), roughly how much would be pricing versus volumes?

George, we're having some trouble listening to your question. Could you repeat that? There's some background noise.

Sorry. Just on the-- if you could (inaudible) 44% growth (inaudible) between prices and volume.

Sorry. We cannot understand the question. Perhaps we can take it later offline?

Okay. Thank you.

(Operator Instructions). Marianne Wolk, Susquehanna.

You've had two quarters now where your tax rate was extremely low. I know you're doing some tax management. Can we assume that the tax rate stays here in the 20s for the next several quarters?

Yes. As you well stated, the tax rate we had in the last two quarters has been lower than what we think going-forward tax rate should be. In most of the countries in which we operate, tax rates are between 28% and 35%. In Argentina, we have a lower tax rate because of subsidy that we get in software industry in Argentina. But, on average, our long-term tax rate should be somewhere in between 28% and 35%.

We had some particular one-timers in Q1 and Q2. We don't expect to have those in Q3 and Q4. So the average take rate for the full year should be around 30%, and, going forward, as I said, somewhere between 28% and 35%.

Thanks very much.

Stephen Ju, RBC Capital Markets.

Your CapEx seems to have been a little shy of where we were projecting. Have you changed your CapEx outlook for the balance of the year? Or can you give us some guidance on that?

No. We haven't changed our CapEx guideline. Obviously, the virtualization and all (inaudible) possibilities might offer some savings that we might try to capture. But no major new developments yet.

Thank you.

(Inaudible), Manning & Napier.

Could you talk a little bit about the overall e-commerce market in Latin America in terms of competition? Who are you seeing as maybe competitors? And, as well, how do you see the Amazon model having an appeal in Latin America and Brazil (inaudible) countries? Thank you.

We never focus on any specific competitor. We operate in a very competitive market that evolves very rapidly as technology evolves and changes. So the nature of our competitors continues to evolve and change. So we like to focus on our users and on our platforms. We believe will continue to see a very competitive market for the next several years because it's a market that has strong secular growth of internet users, broadband penetration, PC penetration, and mobile phone penetration.

Having said that, we are very confident about our position. We are the number-one e-commerce site in terms of traffic in every country where we operate by a large difference. And we believe we have a sustainable competitive advantage with our team of engineers and our proprietary technology.

At this time, there are no further questions. We'll turn it back to management for closing remarks.

Thank you very much, everyone, for participating in our conference call. And we look forward to talking to you next quarter. Thank you.

Thank you for participating in today's conference call. You may now disconnect.