美卡多 (MELI) 2009 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the MercadoLibre Fourth Quarter and Full Year 2009 Earnings Call. (Operator instructions). As a reminder, this conference call is being recorded.

I will now hand the call over to management, Mr. Pedro Arnt.

Welcome, everyone, to MercadoLibre's earnings conference call for the quarter and full-year period ending December 31, 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, I want to remind you that during the course of this conference call, we will discuss some non-GAAP measures. The reconciliation of these measures to the nearest comparable GAAP measures can be found in our fourth 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 given 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.

Thank you, Pedro. Good afternoon, and thank you all for joining us today. On today's call, I will provide a brief overview of our business highlights for both the fourth quarter and the full year while also giving insight on our recent developments. Additionally, I will briefly discuss our outlook for the business as a whole before turning the call over to Hernan, who will address our financial performance in greater detail. After our prepared remarks, we will be available for your questions.

Overall, fiscal 2009 was an excellent year for us. We continued to accelerate growth in our core business while achieving even greater growth in our payments business, which allowed us to increase payment penetration of our marketplace consistently as the year progressed. This performance is a result of exemplary execution by the team against our stated goals, and it leaves me tremendously enthusiastic about the future growth and profitability of MercadoLibre.

We have a solid strategy in place that continues to prove successful, and our dedicated team of more than 1,400 employees continues to help the Company deliver superior results. Importantly, our platforms allow sellers' businesses to continue thriving, as witnessed by our great operational metrics. This advantage is carrying over to our own financial results as well.

In addition to our team's exemplary execution, our strong performance also highlights secular growth trends which remain very strong in the region and more than offset the economic slowdown witnessed in the first half of the year.

Total audience of unique [mix across] Latin America grew approximately 23%, and internet penetration for the entire region gained approximately 200 basis points, reaching 31% toward the end of 2009.

An addressable market of 170 million users, combined with the continuous growth of broadband connections and the advent of mobile internet in a continent where it is still just getting started, lead us to believe that secular trends will remain strong for many years.

Now I'd like to take a moment to highlight our results for the fourth quarter and full year before going into greater detail on the initiatives we undertook in 2009 and our ongoing strategy for growth.

For the fourth quarter, we continued our solid momentum and experienced high growth rates. Our number of live listings, unique buyers and sellers, and gross merchandise volume all grew substantially. More specifically, for the quarter, items sold grew 47%, and gross merchandise volume grew 50%. Total payments grew 108%, and total payments volume grew 146%.

Total net revenue was $49 million, up 47%. Income from operations grew 60% to $17.9 million, with an operating income margin of 36.5%. Net income was $11 million, a 42% increase over last year, and earnings per share was $0.26.

I would like to underline that we were able to post these positive results, even despite the fact that, in Q4, we decided to take the most conservative approach by beginning to report our Venezuela business at the parallel exchange rate, given the recent developments in that country. This had the effect of reducing our Q4 revenues by $7 million and our net income by $2 million. In a few minutes, Hernan will discuss this in greater detail.

In terms of the full year, items sold grew 39%, and gross merchandise volume grew 32%. Total payments grew 64%, and total payments volume grew 49%.

Total net revenues grew 26% to $173 million. Income from operations grew 49% to $56 million, with an operating income margin of 32%. Net income was $33 million, a 77% increase over last year, and earnings per share was $0.75.

Total unique sellers for the year were 3 million, a 25% increase over last year. Total unique buyers for the year were 9.1 million, a 39% increase over last year.

We are very pleased with the growth we have experienced in all of our businesses during the fourth quarter and throughout 2009.

During 2009, we made great progress towards increasing the value that our platform provides to users. We have done this by ensuring that we fully understand the needs and demands of both buyers and sellers and then investing in product innovations to meet these needs. Specifically, we have focused on simplifying our platforms, streamlining our processes, and improving overall customer service. It is great to see that these improvements are having a positive impact on the user experience and are translating into improved Company results. Namely, these improvements have increased our traction in terms of overall supply and demand in our marketplace, clearly flowing into our transaction volume as well. During previous calls, we have already gone over specific improvements to the shopping experience on our platform carried out during the first part of the year.

I would now like to draw particular attention to the following upgrades, which continued to push us in this direction in the final quarter of the year.

The new pricing system that was implemented toward the end of Q3 was off to a very promising start in Q4. Each one of our new selling options has attracted specific types of sellers based on the types and quantities of products they offer, the type of rotation they expect to have, and the placement they are willing to pay to achieve their objectives. This new pricing system provides choices to our sellers and offers them a simple number of selling alternatives.

Additionally, we have now extended selling enhancing features like listings photos to all of our offerings with no extra charges. This is yet another benefit to buyers and goes a long way towards improving the overall shopping experience on MercadoLibre.

As a result of these improvements, live listings at the end of Q4 were up 86% year over year, and seller feedback regarding the new pricing schemes during the yearend shopping season was overwhelmingly positive.

Also, in keeping with our goal of tying our success to that of our sellers, our new price points effectively back-loaded our fees, increasing the proportion of our revenues that derives from successful transactions. This has also been received very positively by our sellers and underscores our commitment to focus our business on the long-term success of our users.

Our new reputation system is proving to be an easier tool for everyone to understand. A reputation system that buyers understand and place their trust in is invaluable, as our sellers, who understand that ensuring value of their reputation and promote good practices on our site.

On the classifieds front, Q4 saw the newly launched, free-listing option gain traction in Brazil, Venezuela, Colombia, and Chile, allowing us to broaden our classified category selection and, consequently, increase our market share of total classified listings in those countries. Although these listings have lower monetization rates, we aim at attracting as many sellers as possible to our platform and recognize that a totally free listing is a necessity to accomplish this in the extremely fragmented classifieds market. Furthermore, we are confident that, as we engage these (inaudible) sellers segments within our trading ecosystem, we will be able to take advantage of the ensuing upgrades and cross-selling opportunities that a large and vibrant user base provides.

Finally, during the quarter, we made developments in our nascent MercadoClics segment, which allows businesses to access our vast pool of unique visitors paying on the basis of traffic generated for their sites. We launched a new category selection algorithm and continue to attract increasing number of advertisers, including Dell, Nextel, and Nokia, which are a few notable additions to the world renown brands that are already finding value in MercadoClics as they look to fortify their online presence.

Now I would like to take a moment to talk specifically about MercadoPago, which had an excellent year. We are very enthusiastic about our payments business today. Total payment volume is growing at an even faster pace than our gross merchandise volume, improving payment penetration on a consolidated level from 11% to 17% for the fourth quarter. This growth has been driven by our improved execution and interest rates that became gradually more accessible throughout the year, stirring adoption of MercadoPago's consumer credit offerings, particularly in Brazil.

Late in Q3, we implemented a few initiatives which showed very positive results in the fourth quarter. Specifically, MercadoPago penetration improved on a consolidated level but, particularly, in Argentina, which, as you may remember, is currently running on our newest platform, MP3.0. In many ways, this is serving as a very promising test run for future implementations in the region. Payments penetration in Argentina alone increased nearly threefold during the quarter as a result of our new checkout and online processing flows. In addition, our decision to offer MercadoPago (inaudible) listings for a small charge that is bundled along with the marketplace fees has greatly helped to expand penetration rates. The resulting improvement in penetration is all the more impressive as listings and gross merchandise volume grew at an even healthier pace during the fourth quarter and throughout the remainder of the year. We look forward to the continued success of this initiative and will continue to monitor it closely while preparing to carry it out in the new markets.

MercadoPago Argentina is also at the forefront of our efforts to promote third-party site transactions through our payments mechanism as we look to extend our payments tool beyond our own marketplace. In this regard, Q4 saw impressive gains in Argentina's offsite payment volume, albeit from a small base of comparison. Nonetheless, these short-term results revealed a substantial opportunity we have on our hands. With this in mind, we are already extending our tests to Brazil, receiving constant feedback on our offsite payment capabilities from a small subset of online merchants who are trying out the product in a very encouraging beta stage there.

At MercadoLibre, we have a portfolio of businesses that is growing not only as new business units feed on an extensive base of users who come into MercadoLibre on a daily basis but also as they find synergies and help offer an ever-more comprehensive online shopping solution to our users, all in one destination site. Our customer satisfaction levels reached an all-time high in Q4 of 2009 as our initiatives on many fronts have delivered solid holiday shopping experiences to new and experienced users alike.

Improved formats, faster sites, increasingly user-friendly policies, and more efficient trading processes are among the initiatives we've been able to address already. And we believe there are many more enhancements we can continue to deliver in coming quarters. Needless to say, we are very excited.

And, with that, I would now like to turn it over to Hernan, who will go into greater detail on our financial results for the full year and the quarter.

Thanks, Marcos. As Marcos mentioned, I will be providing additional detail on our financial performance.

Overall, we are very pleased with the results we delivered in the fourth quarter of 2009. The business continued to deliver strong top line growth, controlled operating expense levels, and solid profit, along with a sustained cash generation capacity. Notably, we were able to deliver these strong results despite our decision to report Venezuela's Q4 results at the parallel exchange rate of VEF5.7 instead of using the official exchange rate of VEF2.15 to the dollar. Recall that our Venezuelan operations had accounted for 19% of our revenues for the first three quarters of 2009. Therefore, this change had a negative impact on our Q4 revenues of $7 million and a negative impact on our net income of $2 million.

We firmly believe this to be the right decision, given the uncertainty that remains around the new Venezuelan official exchange rate of VEF4.30 to the dollar. Please keep in mind that, by choosing to account for our Venezuelan financials at the parallel rate starting in Q4, we have adopted the most conservative course of action available to us in keeping with the prudent approach that we believe characterizes our Company. If at a future time we find that our exchange operations indeed take place at the official rate, we'll undoubtedly revise our accounting practice to reflect this.

With this in mind, let us revise our Q4 results. Specifically, net revenues grew 47% to $49 million. In local currencies, net revenue grew 49%. Venezuela net revenues fell 36% versus last year in US dollars. In local currencies, Venezuela net revenues grew 68%.

Gross profit margin was healthy at 78.9%.

Income from operations was $17.9 million. Operating income margin was 36.5%. And net income was $11.3 million, representing a 43% annual growth in US dollars and a 55% growth in local currencies.

Revenue growth was driven primarily by the addition of 2.4 million new, confirmed, registered users, bringing the total to 42.6 million users on MercadoLibre as of December 31, 2009; the continued acceleration in items sold in the platform, reaching 8.6 million items for the quarter, 47% more than the same quarter of the previous year, a 50% increase in marketplace gross merchandise volume to $786.9 million, mostly as the result of successful item growth; and, in local currency, gross merchandise volume grew 58%; a 146% increase in TPV to $135.8 million based on significant product average, a much more favorable economic climate than in the prior year; and lower interest rates driving more demand for our financing options.

These positive results were achieved despite a few offsets that are worth mentioning - a decline in the interest rates, which, as we mentioned, had a positive effect on demand for MercadoPago financing options but also implied less financing revenues in our payments business for identical installment plans compared to the previous year; weaker fourth quarter results in the classifieds and advertising businesses, which tend to have slower recoveries from economic slowdowns; and a negative foreign exchange effect - specifically, in Venezuela - as we began to translate revenues at the country's parallel rate rather than the 2009 official rate of VEF2.15. This being said, our revenue growth continues to be excellent, remaining above the estimated level of e-commerce growth for the region in most countries.

By country and in local currencies, year-over-year growth in net revenues for the quarter was 60% for Argentina, 38% for Brazil, 36% for Mexico, and 68% for Venezuela. Total MercadoLibre revenue growth in local currencies came to 49% for the quarter, as I had mentioned earlier.

Gross merchandise volume growth in local currency was 58% for Argentina, 42% for Brazil, 39% for Mexico, and 101% for Venezuela.

On a consolidated basis, take rate for the quarter was 6.23%, a decrease from 6.39% in Q4 of 2008 and 6.4% in Q3 of 2009. It declined slightly in both our marketplace and payments businesses. Seen independently, marketplace segment take rate was 4.34% versus 4.97% in Q4 of last year and 4.69% in Q3 of 2009. Payments segment take rate was 10.95% compared to 13.39% a year ago and 11.84% in Q3 of 2009. And financing revenues (inaudible) fell in line with lower interest rates.

The marketplace take rate decline versus last year was driven primarily by the same factors we mentioned in previous quarters of this year, including slower growth in classifieds and advertising, as these sectors have been harder hit by the slow worldwide economy but should revert to previous levels at some time in the future; less developed markets with lower take rates growing their share of gross merchandise volume. This actually bodes well for the future, as we continue to deploy full pricing structures in these countries while implying a lower take rate in the shorter term and mix shifts in listing types towards final value fee only listings that, at current price levels, have a lower take rate.

But more importantly on take rate, I would like to remark again that, although it is a metric that we track and we believe that the value of the services we offer may eventually justify higher take rates, we don't believe that the focus should be on take rates at this stage in our business. With the internet and e-commerce still in the early phase in the region, we will continue to concentrate on showing the strong market share gains, solid increases in our gross merchandise volume, and healthy revenue growth that is sustainable through the long run rather than maximizing the monetizing efficiency of our platform.

The 47% total year-over-year revenue growth in Q4 of 2009 represented an impressive acceleration versus prior quarters, mainly driven by our payments business. For the quarter, marketplace revenues grew 31% to $34.1 million, and payments revenues increased 101% to $14.9 million, as higher financing activity far outweighed the fall in interest rates. The marketplace represented 70% of revenues with payments accounting for the remaining 30% versus a 78%/22% breakdown in the same quarter of last year.

Gross profit grew 43% to $38.7 million, representing 78.9% of revenues, a 178-basis-point decline versus 80.7% for the same period of 2008. This decline in gross profit margin was mainly due to an increased mix of our revenues coming from our lower gross margin payments business.

Operating expenses for the period totaled $20.8 million, a 31% increase year over year. I want to mention some specific drivers on the expense line.

Product and technology development remains a key area of focus for us. Expenses in this area grew 60% versus the same quarter last year as our payment grew in line with our business.

Sales and marketing grew 27% for the quarter, representing 23.5% of sales versus 27.1% of sales in the prior-year quarter. This lower percentage of sales reflects our careful selection of online investments, which have shown improving ROIs over time and the continued positive trends in our organic traffic growth.

G&A grew 32% in Q4 of 2009, once again at a rate below our revenue growth, demonstrating our efficient leverage for expenses.

Below the operating income line, we also booked $3.6 million of interest expense and other financial charges, which were mainly due to the cost of discounting credit card coupons in Brazil.

Pretax net income was $14.9 million, 38% higher than the same quarter of last year. Tax expense was $3.6 million in Q4 of 2009. This represented a blended tax rate of 24.4% versus 26.9% in the prior-year quarter. Our tax rate was lower than last year as a result of consistent efficiencies delivered by our tax-planning efforts thus far and a reversal of certain tax valuation allowances in Colombia and Brazil.

Net income for the three months ended December 31, 2009 was $11.3 million, reflecting an increase of 42% when compared with $7.9 million during the same period of 2008 and resulting in a basic net income per common share of $0.26. In local currencies, net income grew 55% versus Q4 of 2008.

Now a brief review of our 2009 full-year results.

In 2009, we demonstrated our capacity to sustain excellent growth in the face of economically challenging times by taking advantage of several trends and making additional innovations to an already world-class product. During 2009, we added 8.8 million new, confirmed, registered users, marketplace gross merchandise volume grew 32% to $2.8 billion, and payments segment total payment volume grew 49% to $382.5 million.

Our business generated net revenues of $172.8 million, growing 26% year over year. Revenue growth for the year was driven primarily by the combined growth in these key volume metrics. Our marketplace revenue grew 17% to $128.2 million, and payments revenue increased 63% to $44.6 million. For the full year, the marketplace represented 74% of revenues and payments 26% versus an 80%/20% breakdown last year. If we included the impact of currency rate exchanges and calculated 2009 revenue using 2008 exchange rates, the year-over-year growth would have been 43%.

Total operating expenses for the year were $80.9 million, a 20% increase year over year. These expenses represented for 46.8% of revenues, a 574-basis-point decrease when compared to 2008.

As a result of all the items described, income from operations grew 49% year on year to $56 million, representing a 32.4% operating income margin versus 27.4% for last year.

Net income for 2009 was $33.2 million, compared with $18.8 million during 2008, a 77% year-over-year growth. EPS for 2009 was $0.75, compared with $0.42 for 2008.

Other financial expenses were $13.4 million, mostly derived from the cost of discounting a couple of our receivables in Brazil.

In terms of taxes, we accounted for $9.5 million in 2009, which represented a full-year tax rate of 22.3%.

Net cash provided by operating activities for the 12-month period ended December 31, 2009 was $49.1 million as we continued to generate strong operating cash flows in our marketplace segment.

Throughout the year, we funded working capital requirements in our payments segment by discounting credit card receivables directly from some credit card processors, which we recorded as a reduction in the funds receivable from customers and by using liquidity generated in our marketplace business.

Net cash used in financing activities for the full year was $15.3 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.

Net cash used in investing activities was $3.1 million for the full year of 2009. Purchases of property and equipment were $3.8 million.

We are very pleased with our 2009 accomplishments and results. And we firmly believe that we are uniquely positioned to continue growing our business and generating value for both our customers and shareholders. We believe we have been at the forefront of the internet revolution in Latin America since we started this business ten years ago. And we intend to continue to enhance our leadership position to further the growth of our business and our brand.

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

Thank you. (Operator instructions). Mark Argento, Craig Hallum Capital.

Could you--? Did the SEC make you guys restate Q4, or you just decided that it-- not restate, but use the Venezuelan currency-- the more conservative approach there? Is that something that you just decided to do on your own?

We had the chance of reporting Q4 at the old, official exchange rate of VEF2.15. We had the chance of reporting Q4 at the new, official exchange rate of VEF4.3. And we also had the chance of reporting Q4 at the parallel exchange rate.

Given what's going on in Venezuela, given that, so far, we haven't been able to have access to dollars at the official exchange rate, we decided to go for the safer route that was to report everything at the parallel exchange rate. And we decided to do that, the sooner the better. And that's why we made this decision for Q4.

At this point, nobody made us do it. It was just a decision that we took together with our audit committee and our auditors. And we think it was the best thing to continue showing our results in the most conservative possible way.

And, in terms of the gross merchandise volume that you reported in the quarter, $787 million, do you have a like-currency or FX-neutral number there when factoring in Venezuela?

If we assume the same exchange rate for the entire business that we had in Q3 this year, gross merchandise volume would have been $878 million.

And do you have the full-year number as well? I don't know if you said that in your prepared remarks in terms of if you use the new exchange rate for the full year for GMV.

For the full year, gross merchandise volume would have been around $3.1 billion.

Okay. And, then, would you have a revenue and EPS number as well? I know you provided it on the quarterly basis, but I don't know if you did that for all of '09.

For the first three quarters, nothing changes on the Venezuelan side. So had we accounted Q4 also at the official exchange rate in Venezuela, revenues for that quarter would have been $7 million higher, and net income would have been $2 million higher.

I guess I was trying to get an apples-to-apples number if you kind of recast the first three quarters. But I can take that offline.

I understand your concerns around that, and I think that we tried to include that together with the press release that we sent out a few minutes ago. But, if there are more questions, we can definitely address them offline if you want, Mark.

Sure. And then one last question, and I'll hop back in the queue. In terms of your bundling strategy with the payments and the final value fees, can you talk a little bit about how that might have impacted numbers-- what kind of uptake in that and if you like what you're seeing there?

Yes. We are very pleased with the evolution of Pago in Argentina. We really like combining the price for Pago with the price for the MercadoLibre fees. We basically believe this is all part of one great buying experience and believe that it aligns incentives for everyone. So we will continue to move ahead and continue progressing-- making progress with this combined pricing structure.

If you look at the Q4, I know you said that it was up-- transactions were up 108%. Could you quantify what percentage of the million that you did in the quarter were from the bundle?

Well, penetration in Argentina tripled during the quarter. So we are really excited with the growth rate we are getting there.

Great. Thank you very much.

Imran Khan, JPMorgan.

This is actually Les Kulinski calling in for Imran. Imran, unfortunately, can't be on the call today.

A couple of questions; one question on the new take rate in the marketplace business. I know that you sort of talked about not wanting to focus on that too much. But I'm wondering, just so that we have a better understanding of it on a more apples-to-apples basis, sort of, if you have any way of quantifying how much of the decline in the take rate compared to fourth quarter of '08 was driven sort of by the classified and advertising business versus how much of it was driven by the various mixtures within the marketplace business.

It's a good question. Again, as you were saying, we think that, at this point in time, we don't need to focus too much on take rates. We do need to focus on growth.

But, having said that, I think if we had maintained the official exchange rate in Venezuela, core marketplace take rate would have been higher compared to last year. Given that we made that change, it ended up being negative. Classifieds and advertising did have a significant impact in that regard. Sorry. I said that it would have been higher versus Q4 last year. It would have been higher versus Q3 this year. Sorry.

Okay. And, then, I'm wondering if you can give any sort of updates-- it seems like the rollout of MP3.0 in Argentina has been piloted. Any sort of updates on how you're thinking about pushing that format to your other markets and, then, what you've seen in terms of the takeaways from the new listings formats in some of the geographies where they've been fairly new and how you plan to roll that out to further countries?

With respect to the rollout of the new open Pago version, we have users testing it in Brazil. We're very encouraged by the feedback we're getting there. Brazil is a market where (inaudible) platform as of Q1 adoption of Pago is mandatory. So that increases the usage of Pago substantially. This is not the situation we have in Argentina right now. And, with respect to the pricing, we really like the way it's working in Argentina. So, eventually, when we rolled it out, we're likely to go that route.

And with respect to-- I think the second part of your question referred to the new, distinct formats.

Yes, the different pricing formats for the marketplace.

We're very happy the way that is going. Live listings are growing. Unique sellers are growing across the board. We're getting tremendous selection on our platform. And, as Hernan was saying, take rate, if you look at it on a foreign exchange-neutral basis, excluding advertising and excluding classifieds, on a quarter-by-quarter basis actually increased. So, even though we're not focused on take rate, we really like-- We will continue to experiment with different pricing alternatives to continue growing live listings and to continue growing unique sellers.

And then one last question. If I look at 2009 versus 2008, your tax rate as reported was significantly lower. And I'm wondering if you can give any sort of commentary maybe as far as what we can expect going forward. I know you don't really talk about that. So maybe if you can talk about the extent to which the really lower tax rate was driven by one-time items versus some of your initiatives that you think can be sustainable and can-- we can see repeat going forward. Thank you very much.

Long term, we've been saying that our tax rate should be around 30% to 32%. Clearly, in 2009, it was below that, part because of all the tax-planning initiatives that we're executing and also part because we were able to use some tax credits from acquired companies. We still have some credits that we will try to use in 2010. We're not sure yet if we are going to be able to use them. But, if we do use them, we may end up 2010 with also a tax rate below 30% to 32%. Once that's over, the tax rate should be around those numbers.

Great. Thank you very much.

Scott Devitt, Morgan Stanley.

I have a few questions related to Pago. The first one is-- You mentioned the change in interest rates, I think, as an explanation for the lower take rate in Pago on a year-over-year basis. I was wondering if that is the same explanation sequentially. It looks like it went from 11.8% to, I think you quoted, 10.95% sequentially. Is there something else there that explains the decline sequentially? And then I have two follow-ups.

Certainly, interest rates have declined when you look at them compared to last year and, also, when you compare them to last quarter. So, what we see is that the processing part of the revenues of MercadoPago are going up. but the financing part of MercadoPago revenues are going down. They used to be 50/50. And, in this last quarter, they were 60% processing fees and around 40% financing fees.

So is this a new level and a run rate that we should think about in terms of modeling Pago take rates going forward?

Three comments on that. The first one is that it's hard to predict interest rates, and this depends a lot of that.

The second thing is that, whenever we get lower interest rates, we pass them on to the buyers. We think that's the best hope for our buyers and for our business. So if we keep on getting lower interest rates, we'll pass them on to our buyers.

And the third one is that it has to come in mind that we make a much higher margin on the processing fees than on the financing fees. So, as long as we keep on generating good revenues on the financing fees, that should not affect much the profitability long term of MercadoPago. On the processing side, we made approximately a 60%-- an 80% margin. And, on the financing fee, we make much less than that.

Okay. And, on Pago 3.0, the rollout in terms of trying to deploy into some other markets has been going on for some time. So, just as it relates to Brazil, can you just give maybe the one or two top constraints that you face in terms of taking the platform from Argentina to Brazil?

So, we're currently testing the platform in Brazil with a group of beta testers. That group is growing, and we're very encouraged with the results we're getting from this beta test in Brazil.

Okay. And the final question then is just around the payments. The breakdown that you give in terms of markets basis by country is great. I was just wondering if there were any significant distinctions in terms of the mix within payments by country that you could highlight.

As Marcos described in his prepared remarks, Argentina is doing very well and, in fact, was the country that grew the most in this last quarter because of all the changes we've done around MP3.0. And then Brazil had a great performance, given lower interest rates and also on the better integration of our MercadoPago 2.0 product.

Thank you.

Steve Weinstein, Pacific Crest.

Can you help us understand or put in perspective for us the difference in the marketplace take rate for Venezuela relative to, say, Brazil, so we can understand the impact that that's having on the overall take rate?

You have to have in mind that the [Tucarro] operation in Venezuela is quite significant. And that was impacted by the devaluation. So, when you look at the total take rate of Venezuela, including classifieds and advertising there, and compare that with-- that of the other markets, that take rate is above average. So, because of the impact that the devaluation had there, it decline overall take rate.

I guess, if you look at like Tucarro-- Actually, (inaudible) associated with that. Is the take rate in Venezuela marketplace higher than the corporate average?

If you include classifieds, yes. If you look just at the core marketplace, Brazil has the highest one.

Okay. In the segment breakout, there was a revenue adjustment that was new. Can you explain what that was for? Can you give the different countries? You break out payments, and then there was an adjustment of $379,000 revenue. What was that adjustment?

I'll take a look at that and answer you offline, Steve, if you don't mind.

Okay. No problem. Then I actually just want to clarify something. You gave FX-neutral growth-- I think you said 60% Argentina, 38% Brazil, 36% Mexico, and 69% Venezuela. I didn't quite get exactly what that was for. Is that for the marketplace? Or is that total revenue in those geographies?

Let me take a look at that what you're referring to. So that's growth in revenues for the total business.

Okay. So that includes the payment component.

Yes.

Okay. Great. I'll let someone else go. Thanks.

Marianne Wolk, Susquehanna.

I guess I'll start with another take rate question. Then I have a couple of others. I just wanted to understand the trends. So, we've already taken a hit here because you've cut classified pricing. And we've also seen a hit because of the Venezuelan devaluation. Does it feel like we're at the bottom here, or do we need to cut classified pricing in other countries? Or did we not get a full quarter's impact from the cuts that you did make in your fee schedule? I guess I'm trying to understand if we've sort of reached the bottom in these take rates in your view.

And then my second question was-- Would you mind breaking out the actual financing costs related to MPago this quarter?

And then my third question was-- In trying to dig around, it looks like the parallel rate for Venezuela is now VEF6.3 or VEF6.4 - almost 10% worse than the VEF5.7 you used in the fourth quarter. Is that correct? And should we expect that to impact results again in Q1? Thank you.

Sure. The first question about take rates-- Many parts are moving at the same time, so it's really hard to know exactly what the end result will be. Again, we're experimenting a lot on pricing, and we aspire to keep on doing that as long as we see good results from our sellers and buyers. What is happening is that, on the one hand, in most countries, we did see core marketplace take rates improving a little bit from the prior quarter. On the other hand, because of Venezuela and the negative impact that classifieds and advertising had on the overall marketplace take rates, we did see a decline there. And, at the same time, in terms of MercadoPago, because of lower interest rates, we saw a decline there as well. So many pieces moving at the same time, depending on how they move forward where we will end up.

We do expect to keep on moving forward with our strategy of offering free listings. We think that's the right thing to do. We want to monetize those listings through advertising and MercadoClics, and we will do so. But, eventually, short term, it might have a negative impact. And, at the same time, if we keep on working on the core marketplace, we might see an increase there. So hard to predict if this was the bottom or not. We don't see it going down significantly. But we are not working on moving it up either.

The second question you asked was about MercadoPago and breaking down processing fees and financing fees, if I remember correctly. It's something that, at this point, we're not doing. We will consider doing that in the future. We think that it's something that could help people better understand our business.

And the third question-- Now we are going to report Venezuela at the parallel exchange rate. Currently, you are correct; the exchange rate there is closer to VEF6.3 rather than the VEF5.7 that we used to report Q4. So it will fluctuate. And, depending on where it is, we will translate our bolivares in Venezuela to the US dollar using the new exchange rate, as we do with all the other markets.

Stephen Ju, RBC.

Historically, we've seen a payment penetration of [GMP] decrease sequentially from the fourth quarter to the first quarter. Are you seeing such a drop off in Argentina, given the promotion you have running now, or are you seeing a sequential increase? Thanks.

Well, we'll be happy to talk about Q1 when we announce those results. But you're correct. Historically, Q4 is a very good quarter for penetration. Typically, we can pass along to consumers some promotions that different financial entities provide to encourage Christmas shopping.

Okay. Thanks.

Does that answer your question, sir?

Yes. Thank you.

Thank you. I'm not showing any further questions. Would you like to continue with any further remarks?

Yes. So, we'll just close the earnings call at this point. Thanks to everyone who attended either on the phone or via the Webcast. A recording of this session is available at our IR Website. We look forward to speaking with everyone again next quarter. And, as always, please, feel free to call myself or [Inan] if you have any follow-up questions. Thank you once again for your participation and continued support. And, with this, we conclude tonight's call.

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may all disconnect. Everyone have a great evening.