美卡多 (MELI) 2009 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen.

At this time, we would like to welcome everyone to MercadoLibre's Third 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 the Company for opening remarks.

Please, sirs, you may begin your conference.

Thank you, operator.

Welcome to MercadoLibre's earnings release conference call for the quarter and nine-month period ended September 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 we start, let me remind you that during the course of this conference call we might discuss some non-GAAP measures.

A reconciliation of those measures to the nearest comparable GAAP measures can be found in our third 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-K, and other filings with the Securities and Exchange Commission, which are also available on our Investor Relations Website.

With that disclaimer out of the way, let me hand the conference call over to Marcos.

Thank you, Pedro, and welcome, everyone, to today's conference call.

Following a great Q2 and first half, we are delighted that we maintained our positive momentum and delivered excellent results for the third quarter.

The strategies we put in place, coupled with an intensified focus on providing our users with top-quality value and experience have come together very well and have allowed us to show very strong results for Q3.

We saw strong growth across our business as we benefited from strong internal execution, as well as a recovery in many of Latin America's individual economies.

During the third quarter, the Company generated impressive 43% year-on-year growth in items sold, 69% year-on-year growth in number of payments made through MercadoPago, 52% year-on-year growth in gross merchandise volume in local currencies, and 58% year-on-year growth in total payment volume in local currencies.

We added 2.4 million new users during the quarter, an extremely strong quarterly increase.

In addition, we now have more than 40 million confirmed, registered users, which is a 26% growth year on year.

Net revenues for the quarter moved beyond the $50-million level for the first time in our history, coming in at $50.6 million, a jump of 26% year on year.

We saw revenue growth across all business units.

Our marketplace revenues grew 17% year on year, and revenues were particularly strong in our payments business, which grew 58% year on year.

Net operating income grew 63% year on year, with an operating income margin of 37.5%.

Net income for the quarter was $9.9 million, a 68% year-on-year growth.

And earnings per share came in at $0.22, compared with $0.13 for the prior-year period.

Our performance in Q3 validates the strength of our business model, our execution capacity, and our long-term strategic opportunities.

Our strong performance for the third quarter and the first nine months of the fiscal year further validate the continued strength of our business model, as well as our ability to execute well on our strategic initiatives.

Moreover, we have succeeded in further strengthening the position of MercadoLibre and MercadoPago as the leading e-commerce sites in Latin America.

Each provides excellent foundations for our growing portfolio of online businesses that include MercadoLibre Classifieds, MercadoClics Advertisement, and our soon-to-be-launched Mercado shops online stores solution.

Over the course of the past 18 months, we have been laying out our strategy for driving growth in our businesses.

We have consistently focused on increasing the value of our platforms for our users by investing in product innovations and reaching out to understand the needs and demands of these users, both buyers and sellers alike.

Particularly, we have focused on simplifying our platforms and processes and improving overall buyer and seller customer service.

These efforts use the ongoing positive momentum that we experienced in Q3, where the year-on-year growth in items sold accelerated for the sixth consecutive quarter to a level not seen since 2006, when we were a much smaller company.

Further, on a per-business-unit basis, there are certain aspects of the quarter that I would like to comment on.

First, let me address our core marketplace, which continues to show solid growth in its major operational metrics with items sold, local currency gross merchandise volume, buyers, sellers, and new listings all growing at a rapid pace.

During the third quarter, we completed two key initiatives we had been working on for a while - the rollout of our new selling process and simplified pricing structure and (b) the launch of a new seller reputation system.

For the rollout of our new selling process and pricing structure, we sought to accomplish several goals.

First, we sought to generate a more intuitive and streamlined process for sellers to be able to list items, thus increasing the number of listings on the site.

We feel the new listing flow is a vast improvement from the previous one.

The strong growth of items listed on the site is a confirmation of this, as we have witnessed increasing in the completion ratio of users who initiate the listing flow process.

Second, we sought to simplify our pricing structure.

Hernan will walk you through the details on this later on in the call.

But, basically, we wanted to achieve a pricing scheme that, one, was easier to understand; two, charge for placement within search results while giving away for free wholesaler options that are beneficial to buyers, such as videos, additional features, and others; and, three, allowed us to increase prices to reflect the improved value the new listing formats are delivering to sellers.

Although it is still very early to tell, the new pricing system was launched in each of Brazil, Mexico, and Argentina less than two months ago, and we are encouraged by the preliminary results and believe that these stated objectives are being met.

The other key initiative for core marketplace launched during the third quarter was the new seller reputation system.

As I previous (technical difficulty) during the second quarter call, the new system focuses on improving the data made available to buyers.

We did this by focusing on the metrics most relevant to them in assessing seller quality and displaying this data in the most intuitive format possible.

This new reputation system, which is already live, should also drive improved transaction and monetization levels by better aligning sellers' incentives with revenue-generating capacity.

I would now like to talk about our MercadoPago business, which maintained its growth momentum in the quarter.

The growth was driven by our improved execution and by lower interest rates that spurred adoption of MercadoPago's consumer credit offering, particularly in Brazil.

As we have stated previously, we feel there is enormous, long-term potential in our payments business.

Some of the initiatives that we are testing at the moment could potentially prove to be important steps in unlocking that long-term potential.

More specifically, there are two modifications we made to MercadoPago in Argentina during the quarter that we hope will drive increased usage.

First, we launched a new and integrated checkout for MercadoPago.

This new checkout further integrates paying through MercadoPago into the marketplace [purchasing flow], enhances the buyer protection offered to users who opt to pay using MercadoPago, and offers real-time transaction scoring and approval for MercadoPago purchases.

Second, we changed the pricing structure of MercadoPago to create incentives for those sellers to deliver top service to buyers while also encouraging adoption of MercadoPago.

The combination of these improvements has accelerated usage of MercadoPago in Argentina since its launch in late Q3.

Now that we are satisfied with the quality of our MercadoPago offering in Argentina, during the next several quarters, we will continue to experiment with other pricing strategies to further its growth in adoption and penetration.

I would now like to share with you a few thoughts on our classified platform's performance during the quarter.

Our classified motors business continues to perform well, despite a weak macro market for automotive sales.

We continue to be market leaders in Argentina and Mexico in terms of traffic to our Websites.

And, in Brazil, we are firmly positioned as the second-largest site.

While we have built a very strong, competitive position in classified, there is still room to greatly improve the number of listings that we offer on the site as we aim to meet the large demand that we generate.

In an attempt to capture some of this opportunity, during the third quarter, we launched [fully free] classified listings in two test markets, Chile and Brazil.

The objective behind this initiative is to increase the depth of supply in classified.

We understand that in the short term this might generate a negative impact on classified's revenues.

However, we are confident that over the long run this strategy will maximize the potential of our classifieds business by capturing new sellers, including those who are not willing to pay for a listing but are nonetheless willing to list for free with less exposure.

We will look to monetize these free listings through our sales.

Additionally, as we improve our capacity to upsell paid listings to customers who have opted for the free listings, we should be able to offset the revenue lost from the initial migration towards free listings.

Finally, I would like to mention a major IT infrastructure project that we completed during the quarter, which has laid a robust, cost-effective, and innovative foundation for all future developments on our platform - the (inaudible) of our main data center located in Virginia.

Through this (inaudible), we have been able to produce cost savings from reduced travel and fixed-cost base requirements in our data centers and have simplified the overall infrastructure, administration, and maintenance of our data centers.

This (inaudible) project is acclaimed both internally at MercadoLibre and also by the technology community at large.

In fact, we were honored to receive the 2009 Oracle Innovation Award in the category of Management and Infrastructure at Oracle's 2009 OpenWorld Conference.

We feel implementation of this project has served a testament to the world-class technology team we have built at MercadoLibre.

Wrapping up, before I hand over, please, to Hernan, I would like to state how pleased all of us at MercadoLibre are with the overall health of the business and the opportunities ahead as we look toward the close of the year.

Our strong first half was followed by an outstanding Q3, with powerful momentum heading into Q4.

Looking forward, we see ourselves as ideally positioned for years of growth.

We continue to see strong prospects in the region for growth in internet adoption rate and e-commerce expansion and are confident in our ability to sustain our leading brand and market position.

The positive results we are seeing from our efforts leave us more committed than ever to continue executing against these opportunities with focus and consistency, creating value for both our shareholders and our community of users.

And now I'll turn it over to Hernan for a review of our financials.

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

Overall, we are pleased to report another strong quarter having witnessed very solid revenue growth in both our marketplace and payment businesses.

These results continued to reflect the underlying health of our business.

In addition, we believe the quarter reflects secular growth trends in Latin America accompanied by solid execution in the region and a proactive approach to managing our proven business model.

During the third quarter, most of our key financial metrics evolved positively.

Specifically, net revenue grew 26% year over year to $50.6 million, a 42% growth in constant currency.

Gross profit margin was healthy, at 79.5%.

Income from operations was $19 million; operating income margin up 27.5%.

And net income was $9.9 million and 19.5% net income margin.

Revenue growth was driven primarily by a 43% year-over-year increase in items sold, taking marketplace gross merchandise volume to $791 million, a 34% annual increase in US dollars and a 52% jump in local currency.

Within this total, Brazil maintains a very strong local currency gross margin and volume growth of 34%, a TPV of $114 million, 40% growth in US dollars, or 58% in local currency.

Our marketplace revenues grew to $37.1 million, a 17% increase in US dollars and 32% in local currency.

Payments revenues reached $13.5 million, 58% growth in US dollars and 80% in local currency.

With this, the marketplace accounted for 73% of our total revenues, and payments for the remaining 27%, representing an increased share of total revenues for our payments business relative to the 79% and 21% breakdown for the third quarter of 2008.

In local currency on a country basis, consolidated net revenue growth, including both marketplace and payments businesses, was 37% (technical difficulty), 61% to Argentina, 33% to Mexico, and 37% for Venezuela.

These growth rates mostly reflect how our strong volume growth extends throughout all countries.

On a consolidated basis, take rates fell to 6.4% from 6.82% in Q3 of 2008.

Seen independently, marketplace segment take rates fell to 4.69% from 5.38% in Q3 of last year.

And payment segment take rates grows to (inaudible) from 10.45% a year ago (technical difficulty) with higher interest rate costs.

Marketplace take rate decline versus last year was driven primarily by (technical difficulty).

(technical difficulty) coming from our smaller country operations that have a lower marketplace monetization, higher-value, fee-only listings which have a marginally lower take rate, representing a growing share of the total, and also the negative impact of currency innovations (technical difficulty)

(technical difficulty) a positive impact (technical difficulty).

Nonetheless, we are convinced that innovations to our pricing structure must come above (technical difficulty) user experience.

(technical difficulty) in terms of pricing.

The new selling process [is internally called] Sell Your Item 4.0.

During the third quarter of 2009, we changed our pricing structure (technical difficulty)

(technical difficulty) independently by sellers, for example, picture listing, are now offered at no extra cost in all listings options.

The most premium combo offers exposure (inaudible), as well as all the corresponding category homepage.

Following it in price is an alternative combo which offers only category homepage exposure.

Both of these options have favorable search results placement in relationship to the most basic (inaudible) combo, which, in turn, receives better placement than the already-existing and ongoing final value-fee-only alternatives.

This trimming of options, in addition to the (inaudible) higher revenues, which ensure the proper search results placement, adds to efficiency of our marketplace and swiftly gaining acceptance, as evidenced by the traction we are having in the markets where it is launched.

Under our previous system, the insertion fee was determined by the type of product being sold, while placement and features were purchased separately by the seller.

We believe our new pricing structure improves the experience of sellers by simplifying their choices without limiting the richness of options which allow them to enhance the offering.

Seller Item 4.0 is also aligned with our mission of constantly improving user experience; in this case, by presenting a cleaner format without sacrificing the breadth of offering on our side.

And now we turn into our financials.

Gross profit grew 25% year on year, to $40.2 million, representing 79.5% of revenues versus 79.7% in Q3 of 2008.

This is a slight loss in margin year over year, as our payment business with the lower gross margin gained share over marketplace and as we've begun to reflect as cost of goods sold certain Venezuelan FX losses related to intracompany payables and foreign supplier invoices previously reflected as FX below the operating income line.

The operating expenses for the period totaled $21.2 million, a 4% increase year over year, while decreasing approximately 900 basis points as a percentage of sales to 42% from 51% in Q3 of 2008.

As in previous occasions, we would like to clarify that year-over-year evolution of these operating expenses does not lend itself to entire precise comparisons since there are certain differences that negatively affect this year versus the last.

Specifically, in Q1 of 2009, we began to account as operational expenses all of our Venezuelan FX losses related to intracompany payables and foreign supplier invoices, rather than reflect them as FX losses below the operating income line.

The total impact of this change in Q3 was $2.7 million when compared to the method of accounting used last year for these expenses.

Of this, $2.2 million were included as operating expenses, $600,000 in marketing, $700,000 in product and technology, and $900,000 in G&A.

And $500,000 were included as costs.

Having made this clarification, sales and marketing remained the largest line item expense and contracted 3.3% year over year for the quarter to $11 million, mainly due to a decrease in our online advertising expenses related to strategic deals as we continued to find better rates at which to drive traffic to our sites.

The stronger dollar versus Q3 '08 was also a factor when observing the decrease versus last year.

As a percentage of revenues, sales and marketing declined significantly to 22% versus 28% for the same period last year.

Product and technology remains a principal focus for us.

Expenses grew 89% to $3.3 million, compared with $1.7 million for the third quarter of 2008.

We increased our (Inaudible) in this key area.

G&A 35% in Q3 of 2009, due primarily to a $600,000 decrease in outside services fees as we reduced our Brazilian and US legal fees and due to lower charges related to legal proceedings.

Resulting operating income for Q3 '09 was $19 million, 63% higher than the same period a year earlier.

Below operating income, other relevant lines were $3.9 million of interest expense and other financial charges, which were mainly due to the cost of discounting MercadoPago credit card coupons in Brazil and $3.3 million of FX loss, driven by the appreciation of local currencies, which impacted our cash and investment balances held by our subsidiaries in US dollars.

Pretax net income was $12.4 million, 50% higher than the same quarter last year.

Tax expense was $2.5 million in Q3 of 2009.

This represented a blended tax rate of 20.5% versus 28.9% in Q3 of last year.

This decrease in the blended tax rate was mainly due to the reversal of the Mexican valuation allowance for $1.2 million, in addition to our ongoing tax planning efforts.

Net income for the three months ended September 30, 2009 was $9.9 million, reflecting an increase of 68% when compared with $5.9 million during the same period of 2008, a 19.5% net income margin, and resulting in a basic net income per common share of $0.22.

Net income grew 107% versus Q3 of last year when measured in local currency.

Net cash provided by operating activities for the three-month period ended September 30, 2009 was $13.9 million, or 27.4% of net revenues.

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 use levels, being cash flow positive in this segment as well.

CapEx for the quarter was $800,000.

Consequently, for the three-month period ended September 30, 2009, net cash provided by operating activities less CapEx, a non-GAAP measure of free cash flow, totaled $13.1 million.

Cash, short-term investments, and long-term investments at the end of the quarter totaled $77.5 million.

Encouraged by signs of improvement in the region's macroeconomic context and by strong momentum driving e-commerce growth for the region, we're looking forward to Q4 and the (inaudible).

With that, let us take your questions.

(Operator Instructions).

Marianne Wolk, Susquehanna.

I had some questions about MPago.

First, I was a little bit surprised that the interest expense where you normally record receivable discounts wasn't larger.

It was almost flat Q over Q, despite the big pickup in business at MPago.

Is that because the business was so backend-loaded?

And should we expect that discount number to be much bigger in the fourth quarter?

Can you just explain that a little bit more?

And, just a little bit more detail-- I know most of Hernan's speech broke up, and I didn't hear it.

I don't know if others did.

But can you just explain some of the changes at MPago and what's driving that adoption in a little bit more detail?

Also, my final question was the massive margin improvement in the payments business.

Thanks.

Regarding the first part of your question, about interest expense in MercadoPago, rates have been going down throughout the year, and, currently, we are paying a little bit over 1% to discount credit card receivables, namely in Brazil.

Last year, Q3, we were paying below that.

When you do the year-on-year comparison, we have this quarter a higher interest rate compared to last year.

But the trend is positive.

And what we've been doing is, as we were receiving lower interest rates, we were passing them to the buyer.

And that clearly has pushed the penetration of MercadoPago.

But, Hernan, the Q over Q growth was so small in the amount you discounted.

Sorry.

I didn't hear the question.

The Q on Q-- Say it again.

Q over Q, the interest expense from discounting barely changed, despite the big pickup in business in MPago.

That's what's puzzling me.

Can you repeat it?

The rate that we are paying to accounts receivables went down, so it lowered our cost of financing.

And we also passed along those discounts to our buyers.

With respect to the second part of your question, the changes that we have made to MercadoPago in Argentina, it's a significantly improved checkout process, where online payment is integrated to the checkout process.

And we are also having online scoring of each one of the payments.

So we are currently very happy with the product we have in Argentina.

We are seeing increased usage of transactions and total payment volume growth in Argentina.

And we're experimenting with different pricing strategies for adoption and penetration in Argentina.

And I think you had a final question that referred to the margin improvement.

Do you want to comment on that, Hernan?

In terms of margin improvement, first of all, Q3 usually has higher margins than Q1, and (inaudible) Q2 on an ongoing basis.

What we're seeing is that-- (technical difficulty).

Sorry.

There was another question?

Just to finish on the point, margins are improving.

We continue to scale our business, particularly in sales and marketing and G&A.

As you can see, as percentage of revenue, those expense lines have gone down, and revenues are growing at a very nice pace, driven by successful item growth and by gross merchandise volume growth.

Imran Khan, JPMorgan.

It's (inaudible) and Imran both on the line.

One question that we wanted to understand a little bit better, and I think this was during the part of the call when you were breaking up a little bit, is understanding the take rate going down.

How much of that is a function of sort of the timing of switching to more of a backend-loaded, final-value-fee format for your listing fees?

And how much of it is some of the other factors-- and what kind of effect that has had?

And, then, any sort of takeaways that you have in the specific geographies where you have switched to the new sort of listing format would be very helpful.

Thanks so much.

Take rate has gone down this quarter compared to the same quarter last year.

And overall take rates have also gone down compared to Q2 of this year.

(inaudible) we think our main focus at this point has to be to keep on growing our top line and not so much worry about take rates.

Having said that, we are working on several initiatives to improve our take rates.

For instance, there's something that we don't break down but I can comment on, and it's that core marketplace take rates this quarter, Q3, went up compared to Q2 take rates.

So some of the initiatives we've been implementing in the last few weeks are starting to show positive results.

What's driving this drop in take rates?

Many things are happening at the same time.

One of the reasons is that final, value-fee-only listings and more backend listings are clearly showing smaller take rate with the initial pricing that they had.

But, again, as I said, we are correcting this.

And, also, there are other things that are impacting our take rate.

Core marketplace has been doing nicely.

But classified and advertising have been hit a little bit on a year-on-year comparison, and they've been growing at a lower pace than gross merchandise volume.

Also, we're still showing higher growth in smaller markets, and those markets do not have the full implementation of our pricing scheme, so the take rate there is lower.

And we're still having a negative comparison in terms of exchange rate with Q3 of last year.

And some big portions of our pricing are offsetting our take rate (inaudible).

It's Imran Khan.

I have a follow-up, quick question.

In terms of your classified business and the cost-per-click business that you are building, can you give us some sense on what trends you're seeing on the advertising front?

Imran, can you repeat?

Can you give us some color what trends you're seeing for your classified business.

And, also, you were building that billing platform.

Can you give us an update on what's going in the billing platform business?

Okay.

With respect to the classified business, we're seeing good momentum.

We're seeing growth in listings and traffic.

As we were mentioning during the earlier part of this call, we are the number-one site in terms of traffic in Argentina and Mexico and Colombia and Venezuela as well.

And we are the number-two site in Brazil.

We have recently experimented with free listings, which we will be monetizing through advertising.

We believe this is an important step to capture sellers who are unwilling to pay to list.

We want to have a solution for every type of seller on our platform and then try to upsell premium listings to these sellers as well.

So, overall, we're seeing good traction, and we're satisfied with the evolution of classified.

With respect to MercadoClics, we are happy with the way this new business is evolving.

We have recently launched in Uruguay an improved version of MercadoClics, and this was launched after Q3.

And we will continue to experiment and innovate on this-- on MercadoClics, and we are very happy the way it's going.

It's been a very early product, but we are very excited with the potential that it has.

Great.

Thank you very much.

Stephen Ju, RBC.

I'm taking a look at the ASPs, both in dollars and, I believe, in local currency.

It seems like it's up sequentially in year-over-year, which seems to me a little bit counterintuitive, given the current macro environment.

Can you give us some little color in terms of what's going on there?

Thanks.

In terms of average selling price in US dollars, as we said during the call, we are still having a negative comparison against last year.

So we had an almost 7% drop in ASP in US dollars in Q3 '09 compared with Q3 '08.

In terms of a comparison against Q2, take rates-- excuse me-- exchange rate have been improving in the region, so we're showing some of that-- Some of that is reflected in the ASPs.

Is that true on a local currency as well?

ASP increases sequentially?

Talking about the exchange rate, we are having negative comparison against Q3 of last year but a positive comparison against Q2 of this year.

Right.

But, if you look out at the ASPs for each of these countries on a local currency level, did you see an improvement quarter on quarter and year over year?

Yes.

Local currency average selling prices have been going up steadily across the different countries where we operate.

Okay.

What is the reason for that?

It seems a little bit counterintuitive, given the current macro environment.

I'm just curious as to why ASPs would be up sequentially on a local currency basis.

In general, we believe that macro environments are not that bad (inaudible).

We operate in an environment of very high secular growth for internet penetration, broadband penetration, [PT] penetration.

So whether the overall GDP growth 5% or growth of 2% hasn't impacted in the last ten years our business too much.

So, overall, having said that, we are seeing economies in Latin America rebounding and growth (inaudible) in the economies where we operate.

And one more follow-up, if I may.

Are you seeing some of the sellers migrate to some of the higher-tiered levels after going through the bronze level as you roll that platform out across all your territories?

Yes.

We're satisfied the way the different combos are working.

We've recently launched a better way to upgrade to premium listings.

You selected a cheaper listing, and the adoption of that was very significant.

So we have very good (inaudible) listings that sellers choose.

But what we want to do basically is to have a full menu of possibilities for sellers and let each one select that alternative that better fits the economics of that seller and try and increase as much as possible the breadth of sellers that we have on our platform.

We are very happy with the results we are having.

We are seeing record growth in the number of unique sellers on our platform.

And we're seeing record year-on-year growth in (inaudible) as well.

So we think we are definitely on the right track.

Steve Weinstein, Pacific Crest.

It's pretty obvious that the momentum in MercadoPago continues to be really solid.

But I'm wondering if you'll take a look at rolling out Pago 3.0 into Brazil maybe some time next year once you get past the holidays or if you just decided you're content with the current payment process as it stands today.

Yes.

With respect to MercadoPago, we are very pleased with the results we've had in Q3 and, actually, throughout the year.

We're also very pleased with the product that we have launched in Argentina, the 3.0 version, which we don't yet have in Brazil.

We are working on improving and increasing the penetration and adoption in Argentina with this new product.

We are seeing excellent progress.

The year-on-year growth in Argentina during Q3 was record.

And we will continue to work in that front.

And our strategy is to have an (inaudible) payment platform, long term, across the region.

With respect to when we will have it in Brazil, we really don't want to make any forecast or comment.

But we really are happy with the quality of the product we have now in Argentina.

Thank you.

Mark Argento, Craig-Hallum Capital.

I know you had mentioned earlier that you guys had just gone through a fairly significant IT infrastructure upgrade.

What are your thoughts in terms of additional CapEx and your IT infrastructure going into 2010 and 2011?

How much more capital do you think you need to deploy in the business from that aspect?

Long term, we're saying that the percentage of revenues that we will need to invest in CapEx is somewhere below 5% of total revenues.

(Inaudible) that Marcos described during the call-- We are trying to gain in some economies of scale on our IT infrastructure.

But, again, as you know, it's very important for us to keep on investing in technology.

So I think that a sound assumption going forward is somewhere below 5%.

Thank you.

(Operator Instructions).

There are no further questions at this time.

Great.

So, thank you, everyone who attended today's call by phone and via the Webcast.

We apologize for some minor glitches in the broadcasting.

A recording of this session will be available on our Investor Relations section of the Website (inaudible).

We look forward to speaking with you in the future.

And, as always, please feel free to contact me or Hernan with any follow-up questions from this call.

Thank you, everyone, once again for your participation and continued support.

This concludes our call today.

This concludes today's conference call.

You may now disconnect.