美卡多 (MELI) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the MercadoLibre Q1 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions). As a reminder, this conference is being recorded. I'll now hand the call over to Company management. You may begin.

Welcome, everyone, to MercadoLibre's earnings conference call for the quarter ended March 31st, 2011. Company management presenting today are Marcos Galperin, Chief Executive Officer, and Hernan Kazah, Chief Financial Officer. Additionally, Osvaldo Gimenez, Senior Vice President with MercadoPago, and Pedro Arnt, VP of Strategic Planning, Treasury, and Investor Relations, will be available during today's Q&A session.

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

I remind you that 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-K and other filings with the Securities and Exchange Commission, which are available on our Investor Relations Website.

Now, let me turn the call over to Marcos.

Thank you. I would like to welcome everyone to today's conference call in which Hernan and I will address our first quarter 2011 results. I would like to start off by sharing a few of the key indicators that bring into focus the overall health of our business during what I believe was an excellent first quarter and an excellent beginning to a year that we all feel very enthusiastic about.

Hernan will later provide greater detail on our financials.

So, let me begin with a few key metrics in the first quarter. Please bear in mind that growth rates are year on year unless otherwise indicated. Confirmed registered users grew up 24%, indicating that our strong flow of Internet visitors translates to actual growth in users with the intent to buy and sell.

Items sold grew 31% as transactions on our site are not only growing through additional users but also with increased user engagement and additional buying and selling on a per capita basis.

Gross merchandise volume growth was very aligned with the growth in items sold, increasing 30%, totaling $954 million in the quarter. Our payments operations continued accelerating their impressive growth momentum with a 149% increase in number of payments made through MercadoPago.

These growth rates demonstrate the strength of our business and underscore positive secular trends that we continue to see in the region. More importantly, we are delivering solid growth even as our latest IT efforts remain primarily focused on our midterm goal of revamping our platform architecture, prioritizing our future competitiveness above initiatives that might have an impact on immediate growth.

Our business model has kept us on top of the fast-paced growth of e-commerce in our region as our unparalleled marketplace constantly enriches its selection and as we continue to build a network of relevant value-added services around it.

The successful evolution of our ecosystem is evident in the momentum of each of our businesses, which I will review separately in a moment. First, let me provide an overview of how this positive operational momentum flowed into our results.

In the first quarter, our Company generated revenues of $61.5 million, an increase of 34%; income from operations of $19.3 million, an increase of 24%; and net income of $14.1 million, an increase of 46%; resulting in earnings per share of $0.32.

As you may recall, our year-on-year revenue comparisons for the first half of this year are negatively impacted by a change in MercadoPago financing operations, as revenue generated from installment-related financing charges are now reported net of the cost of discounting credit card receivables. Had financing receivables also been presold in Q1 2010, respective year-on-year growth in net revenues would have been 44%, and an income from operations would have been 50%.

Let me now turn to a review of first quarter performance for each of our business units, starting with our core business. One of the strongest attributes of our marketing is its unparalleled selection as shoppers on MercadoLibre have access to the richest array of choice of any online platform in the region. In this context, I am always interested in signs of a vibrant supply that continues to outpace itself.

One very good indicator of a broadening supply base in the first quarter was a live listings growth of 48%, as our list for free and pay-for-placement approach continues to be extremely successful in reaching out to new seller profiles and as we see increasing engagement among our existing sellers as well.

In the first quarter, we saw growth of 35% in total unique sellers and 53% in new listings. The launch of free listings over the past quarters also contributed to our new seller growth this quarter allowing newcomers to test our marketplace at no cost through a limited trial and proving extremely valuable for sellers with unlimited number of articles to sell. Additionally, we were able to quickly bump up repeat sellers to our paid formats that offer greater conversion, joining our increasing base of repeat sellers.

As we accomplish the task of getting our sellers to list more, we're also placing a greater focus on driving them to deliver a quality user experience to our buyers. Our high-volume sellers in particular are increasing their efforts to meet the constantly higher standards that we set for them. We ensure that they remain aligned with us by rewarding quality sellers through our algorithms, giving them priority within their listing type, making our top-tier placement only to sellers with high buyer satisfaction ratings, and screening for sellers who don't comply with our criteria for service quality.

Consequently, that increasing number of our power sellers or [MercadoLibres] are committing themselves to new levels of excellence in their entire sales process, from presales, questions and answers, down to speed and quality of fulfillment. These sellers understand that by maintaining high service levels, they can obtain the best product placement and that teaming up with MercadoLibre's efforts to provide the best possible buyer experience benefits everyone in the short and the long run.

In addition to these initiatives to align buyer and seller incentives during the quarter, we continue to take any opportunity we see to improve the efficiency of our marketplace. This quarter, we delivered improvements to our page navigation and optimized our search across a diversity of products. For example, we improved the conversion performance of over 300,000 search queries. Our ongoing programming efforts promise similar efficiencies going forward in addition the larger opportunities implicit in our new architecture, which I will expand on shortly.

To close my review of our core business in the first quarter, our efforts on the industry's secular growth trends combined to generate an absolute volume of almost $1 billion with [GSB] growth accelerated to 30% versus 26% growth in Q4 and 12% growth in Q3 of 2010.

Turning to classifieds, in the first quarter, we saw excellent results along the lines we have drawn out for that business. Professional sellers have grown their share of listed volume and revenues year on year, reflecting the successful efforts of our sales force in reaching out to car dealers and real estate brokers with a substantial volume and monetization opportunities this entails. In the meantime, we have improved our product with our professional clients in mind, offering better Web tools, multiple listing functionalities, and also with the launch of premium listings that last until they are successful.

When achieving success on the dealer segment, we have also made our classifieds side more attractive to individuals through a premium model that offers access to the highest e-commerce traffic in the continent, starting at no cost and then offering the possibility for better exposure in our paid formats.

Free listings in the first quarter remained very successful at expanding our user base, while add rates continued on the rise. This and the higher degree of dealers placing multiple classifieds listings of their own has made for a very healthy growth in classifieds offerings for our buyers.

This constantly improved service has allowed us to add value to our offering and to bring more users to our paid formats, making for an excellent and sustained momentum in terms of classifieds revenue growth. I am very pleased with the excellent results we have had in reenergizing this business, maintaining our leadership in the classifieds market.

Moving onto another story of fast-paced growth, our advertising revenues had excellent year-on-year growth in the first quarter, while we continued to guide this business away from display banners increasingly in the realm of search advertising.

We like this move for many reasons. It eliminates banners that are potentially distracting to our shoppers, consistent with a greater tidiness and vision of clarity we have achieved on our site since the elimination of optional features and improvements to our view item page formats.

It is shift to a much more relevant and precise form of advertising for an e-commerce marketplace such as our own, driving eyeballs straight to what users are requesting in our search box, and it allows to better adjust our pricing on the basis of the added success that an e-commerce platform brings to retailers.

Most important of all, this transition leaves us positioned for further growth in a previously untapped area for us, one that we feel is highly scalable. Through MercadoClics, we continue to attract large retailers to our platform on a CPC basis as they recognize MercadoLibre to be the most relevant source of e-commerce traffic in the region. This explains the growing list of top brands and large retailers opting for MercadoClics.

Once again, Q1 saw the presence of the most established large retailers in each country when in the quarter we attracted new brand names as diverse as Microsoft, Edison, Renault, and Home Depot. It is therefore no surprise that MercadoClics has been immensely successful so far, continuing its triple digit growth momentum into the first quarter of 2011.

Search revenues now account for roughly two-thirds of total advertising revenues, whereas they represented a higher share than that just one year ago. I am very pleased with this high-potential business, which is already accretive to our ecosystem beyond the high-margin revenues it contributes, consolidating MercadoLibre as a foremost one-stop shopping solution for buyers seeking the widest range of choice and brands for any specific product and for sellers seeking the largest audience of online buyers in Latin America.

Moving onto payments, MercadoPago continues to grow its penetration of transactions on our marketplace, guaranteeing a quick and expedient payment and overall better experience and greater user engagement in the marketplace.

Our bundled pricing approach is paving the way for full adoption of MercadoPago in our largest markets, Brazil and Argentina and very recently in Mexico. In the first quarter, the share of total MercadoLibre live listings offering MercadoPago was 84%, up 14.5 percentage points over the same period of last year. We look forward to gradually bringing this number even higher as we rollout the bundled pricing approach and the new MercadoPago to our different operations.

In the first quarter, consolidated MercadoPago PPV accelerated its growth to 98% versus 74% in the fourth quarter. Total payment volume penetration of our [GMB] reached 26% in the first quarter of 2011 versus 17% a year ago. By March, Brazil penetration specifically reached 47%.

We have made an important gain in payments penetration. But the biggest gains are still to come. We treasure this opportunity because of the implicit improvement in user experience on our marketplace and the added user engagement it delivers. It is our intention to keep paving the way for on-platform payments growth through smart communication of incentives and benefits, such as installments, by continuing to bundle it with our marketplace, we rollout mp3 in more countries, and by gradually making payments through MercadoPago obligatory on purchases on our platforms.

I would now like to discuss the progress of off-platform MercadoPago, which continues to grow faster than the rest of our business and represents a huge opportunity for us. With a 47% Q-on-Q growth in its total payments volume, it now has approximately 10 times last year's volume for the same period.

Through our main focus, we'll continue to be expanding MercadoPago on the marketplace. We have very aggressive plans for this [incented] business, which targets the entire e-commerce market, nurturing itself on MercadoPago's on-platform growth, reputation, and stored balance, which will become increasingly meaningful to e-commerce merchants outside of MercadoLibre.

Merchant acquisition is high. And MercadoPago off-platform growth is occurring in step functions, which have led to the growing contribution to revenues. In the first quarter of the year, we rolled out off-platform mp3 in Mexico according to plan, as we did with mp3 on platform in this country on April 15th.

Through this and other well-timed deployments and increasing presence of the MercadoPago brand name as a whole, I think this business has tremendous potential going forward.

I would now like to update you on the progress we're making with regards to our new platform architecture, or [New World] project, as we call it. Many of the new APIs on the new architecture are already up and running. In Q1, we had a successful migration in aspects pertaining to search, item, and user administration. Our homepages, search results, and product description pages are all running on new technology already.

We also made lots of progress in other key parts of our site, although they are not yet visible to our users. We're excited about this latest phase of New World we're entering as every aspect of our business that is transferred to New World is immediately enabled for independent releases and better time to market.

Even as we continue to work on our back end, stages that are already complete will allow for immediate user-facing initiatives. Prominent among these are geolocation for improved local features and alternatives, catalog for greater uniformity and ease of choice when buying and selling standard products, vertical integration for category-specific user experiences, and third-party integration for better interaction with outside developers and partner applications pertaining to Web, desktop, and mobile devices. In other words, New World will pave the way for substantial advances in both the near term and the long term.

I am firmly convinced that our business model and its execution are what allow us to remain on top of such a strong e-commerce momentum as our region is experiencing. As always, we are doing everything we can to look ahead and perfect our business with a view to the long term while maintaining current leadership and improving our reaction time to new formats and devices as they become relevant to e-commerce in Latin America.

Our site is very different from what it was just a few years back. It is a more compelling place to shop, offering more simplicity and ease of use in what is now a much larger marketplace with a wider product selection, a much larger buyer and seller base, and a broader range of services offered. It provides more and better services, and our value proposition will continue to improve as our payments service spreads to more transactions as we improve existing processes and grow in compatibility with outside players and with new form factors.

We are doing more and doing it better. At the same time, we are conscious of ways we can keep improving our existing business through smart innovation. This, to me, is the ideal outlook.

Before turning the call over to Hernan, I would like to take a moment to talk about the planned management transition that we announced today. I want to thank Hernan for his outstanding work since the founding of this Company, as he has played a key role in its development. Working next to Hernan all these years has been a privilege. He's both a friend and an outstanding professional with strong analytical skills and execution capabilities. We are thankful that he will be present during this transition period as he hands his role over to Pedro.

In addition, we are pleased to continue to promote from within and provide our existing senior management team with new challenges and opportunities. We are confident that Pedro is exceptionally qualified for his new role as CFO, having worked at MercadoLibre for 11 years and the last several years reporting to Hernan as Head of Strategy and Treasury interactions in addition to the Investor Relations role many of you may have met him in.

Pedro also has extensive knowledge of our Company's aggregate operations and strategy. He will head a seasoned team of executives with extensive knowledge of our company and our industry, while he joins an executive that is eager to lead MercadoLibre on its continued growth trajectory, guiding the long-term success of our business.

Now, let me turn the call over to Hernan.

Thank you. As Marcos just mentioned, our first quarter was an excellent start to 2011, showing continued momentum for all of MercadoLibre's business units, as reflected in our strong top line growth. And our sound financial health allowed this to flow into even greater bottom line growth.

To put the quarter in perspective, let me provide some financial highlights. In the first quarter, we generated net revenues of $61.5 million, a gross profit margin of 76.7%, income from operations of $19.3 million, and net income of $14.1 million. Resulting EPS for the quarter was $0.32.

Our growth came from increasing volume from all of our business, led by 31% increase in items sold, taking marketplace gross merchandise volume to $954 million. This is a 30% increase in US dollars and a 23% increase in constant currency. Within this total, Brazil accelerated its growth in items sold to 34% versus 27% in the previous quarter. Brazil's local currency gross merchandise volume accelerated to 16% year on year versus 8% in the previous quarter. Gross merchandise volume growth for Brazil in US dollars was 26%.

Let me quickly remind you that the change in our MercadoPago financing operations effective since the second half of last year affects our year-on-year comparisons in terms of revenues, operating income, and margins over revenues, while having no impact on our net income or EPS. For this reason, I will also discuss growth in comparable terms when this applies.

During the first quarter, we generated solid growth in all of our key financial metrics. Specifically, net revenues grew 34% in US dollars and 26% in local currencies. Making revenues for the prior year quarter comparable by subtracting $3.4 million of cost directly associated with MercadoPago financing, growth was 44% in US dollars and 36% in local currencies.

Gross profit margin was healthy at 76.7% versus 77.9% in the fourth quarter of 2010, and 78.5% in the last year's first quarter. Income from operations grew 24% to $19.3 million with an operating income margin of 31.4% versus 33.8% in the first quarter of 2010. Had we presold receivables in last year's first quarter, operating income for that period would have been 30.3%, and year-on-year income from operations growth would have been 50%.

Net income before income and assets tax expense for the first quarter 2011 was $20.1 million, representing 46% growth in US dollars. Net income was $14.1 million, a 46% growth year on year. This represents a 22.9% net income margin versus 20.9% a year earlier. Had we presold receivables in last year's first quarter, net income margin for the first quarter 2010 would have been 22.6%.

Our year-on-year growth was benefited by the strong gross merchandise volume growth that I already mentioned and by our bundled pricing, which covers the equivalent last year's standalone [finding value] fees plus a higher total [profit] charge based on increased volume transacted through MercadoPago as our total payment volume grew 98% year on year in the quarter.

Finance volume for our site has grown hand in hand with accelerating payment volume, contributing increasing revenues from financing, even in the comparison to the prior year when we did not [preservicing levels]. We expect this favorable dynamic to continue as MercadoPago keeps gaining ground and as we rollout mp3 to more countries.

This quarter, we extended off-platform mp3 to Mexico and will keep pushing the growth of this thriving business. Also, as Marcos mentioned, classifieds continues showing excellent traction, growing its contribution to overall revenues in the quarter.

In terms of sponsorship revenues, the first quarter of 2011 showed the continued advance of our research advertising solution MercadoClics as it gradually phases out our display advertising. One year ago, MercadoClics contributed approximately for a quarter of our sponsorship revenues. But, it's consistent triple business growth since then has led it to represent a majority of our advertising revenues today. We expect this trend to continue while overall sponsorship revenues maintain very sound growth rates overall.

All of the points I just mentioned had a very positive combined effect on the revenues of each of our countries. To provide a breakdown by country, in local currencies, on a country basis, consolidated net revenue growth was 22% for Brazil, 32% for Argentina, 11% for Mexico, and 59% for Venezuela.

In US dollars, consolidated net revenues grew 32% for Brazil, 27% for Argentina, 17% for Mexico, and 95% for Venezuela. Note that Brazil's revenue growth is deeply impacted by the change in our financing operations involving the presale of MercadoPago financing receivables. Had we presold receivables in the first quarter of 2010, revenue growth for Brazil would have been 46% in US dollars and 35% in local currencies.

Consolidated (inaudible) rose to 6.44% versus 6.28% in the first quarter of 2010 and 6.31% in the fourth quarter of 2010.

Turning to our P&L for the first quarter, gross profit grew 31% to $47.1 million, representing 76.7% of revenues, declining from 78.5% in the first quarter of 2010 as payments penetration implied more processing cost over revenues.

Operating expenses for the period were 45.3% of sales, totaling $27.8 million, a 36% increase. Specifically, sales and marketing remained the largest line item expense, increasing 19% for the quarter to $13.2 million. As a percentage of revenues, sales and marketing was 21.5% versus 24.2% in the same period last year.

Product and technology remains a principle focus for us. Expenses grew 60% to $5.2 million compared with $3.2 million for the first quarter of 2010 as we continued growing our IP team, aware of how important it is to our growth.

G&A grew 52% year on year in the first quarter of 2011. This growth was primarily due to higher expenses than usual related to the Argentina headquarters move, yearly salary adjustments, which as in prior years were performed in the first quarter, and a new expense in Argentina specifically as we are now required to use a portion of that country's tax benefit to fund related audits.

Resulting operating income for the first quarter of 2011 was $19.3 million. Operating income margin for the quarter was 31.4% versus 33.8% in the first quarter of 2010. Had there been discounting of receivables in the first quarter of 2010, operating income for that period would have been 30.3%. We also benefited from $1.9 million of interest income, mainly from conservative fixed income investments.

Pre-tax net income was $20.1 million, 46% higher than in the same quarter of last year. Tax expense was $6 million in the first quarter of 2011. This represented a blended tax rate of 29.9% versus 27.8% in the fourth quarter of 2010 and 29.8% in the first quarter of 2010, an accurate reflection of the blended tax rate in the countries where we operate, optimized by our tax planning efforts.

Net income for the three months ended March 31st, 2011, was $14.1 million, reflecting an increase of 46% when compared with $9.6 million during the same period of 2010. This represents a 22.9% net income margin and resulted in a basic net income per common share of $0.32.

Measured in constant dollars, net income grew 39% versus first quarter of last year. Net cash provided by operating activities for the three months ended March 31st, 2011, was $15.2 million, or 24.7% of net revenues.

Property and equipment and intangible assets purchases for the quarter totaled $3 million. Consequently, for the period ended March 31st, 2011, net cash provided by operating activity less property and equipment and intangible asset purchases totaled $12.2 million. Thus, short-term investments and long-term investments at the end of the quarter totaled $156 million.

Additionally, as you have likely seen, our first dividend payment was made on April 15th, 2011, to all stockholders of record as of the close of business on March 31st, 2011, in the amount of $0.08 per share. We expect future quarterly dividends to be paid in April, July, October, and January.

The Company's healthy cash balance to date and expected positive cash flows should enable it to pay growing dividends going forward, always at the discretion of our Board of Directors as they consider the evolving context of our earnings and other factors they may deem relevant for the interest of our shareholders.

I remind you that we believe this establishes a very sound practice, as it is beneficial to our shareholders, and it enforces additional discipline on management, while still allowing the Company to accumulate sufficient cash from growth opportunities that may arise.

I believe these first quarter results are a continuation of the very positive momentum witnesses at the end of last year, while also reflecting the healthy evolution of our model as we add to an increasing number of transactions through our payments service. In the meantime, our ecosystem of connected business units is not only providing an excellent contribution to our results, but it's also improving our position as the one-stop shopping solution with the richest supply and demand in the region and the widest breadth of offering available.

Separately, as Marcos mentioned earlier, I will soon be stepping down from the role of CFO. This is entirely a personal decision that was very hard for me to make, as I love this Company, feel it as a fundamental part of my life, and see a bright future ahead for the business. It took us almost 11 years to reach over $200 million [of] revenues. It may take us much less to achieve multiples of that.

However, I feel I have completed a cycle with MercadoLibre and that it is the right time to reinvent myself and pursue new opportunities for the next 10 years of my life. Particularly, I think this is the right time because I leave the Company that is in great shape with the business accelerating its growth with MercadoPago transforming into reality what we have dreamed of for several years and with the most solid management team the Company has ever had.

Obviously, as I step down from my day-to-day role as CFO, I will remain an advisor to the Company to ensure a smooth transition for as long as Marcos and Pedro find it useful, though, in this case, I believe the transition will be seamless from the start since the role of CFO passes onto the hands of its natural heir, an extremely capable individual, whom I have had the pleasure of working with for the last 12 years.

Pedro, our current Head of Strategic Planning, Treasury, and Investor Relations, is the most capable professional, a very smart person, and someone who knows our Company and industry inside out as he has had several leading roles in our operations, participated actively in all our strategic decisions, and developed a unique sense for tech and consumer trends. I wish Pedro and his team great success in the years to come.

And before handing the floor over to Pedro to say a few words about his new position, I want to publicly thank Marcos for his great leadership and for having given me the chance to share with him the success of MercadoLibre and also to thank the entire MercadoLibre team for all the passion and effort that they show everyday to make our users happy.

Now, Pedro will join us. And after that, we will be back to take your questions.

Thanks, Hernan. Let me take a very brief moment to introduce myself to those of you who I have not had a chance to interact with in the past. As Marcos and Hernan have graciously pointed out, I've been with the team for nearly 12 years now. And I'm confident that this experience has given me the required expertise and commitment to carry on the legacy of strong financial and strategic stewardship of our business that's being handed over to me.

And to those of you who I have had the chance to work with, let me reaffirm my intention and enthusiasm in maintaining the open dialogue we have constructed over time.

Finally, I'm excited to take on this role at such a great time in MercadoLibre's history. Looking at the opportunities that lay ahead for the Company, I'm confident in our ability to build upon the successes of the past 10 years and to achieve continued growth going forward.

With the help of our highly qualified management team, I trust that the transition in the role of CFO will be seamless. And I look forward to serving our investors, business partners, employees, and community of users with the utmost commitment and passion going forward.

Thank you. And with that, the team will take your questions.

Thank you. (Operator Instructions). Our first question comes from Gene Munster of Piper Jaffray. Your line is open.

Good afternoon and congratulations, and also congratulations to Hernan and Pedro. My first question is regarding Brazil. This is the first consecutive quarter you've had accelerating revenue growth. How do we think about the sustainability of that growth? And I guess what is driving that? And then I have a follow-up question on take rate.

All right. Thank you. In Brazil, what we're seeing is a very solid momentum for the overall business. We had a decoupling for the last few quarters in terms of items sold and revenues versus gross merchandise volume. And as we've been anticipating, that decoupling is losing momentum. And now, gross merchandise volume is growing closer to items sold. We expect that to continue and not to see big changes in terms of ASP going forward.

I guess anything competitively that's changed? I know a couple quarters ago, there was a lot of concern before those numbers reaccelerated. But, competitively, has anything changed in Brazil in the last six months?

No, we haven't seen any significant change. We continue to say what we've been saying all along that it's always a competitive market. But we think that MercadoLibre is very well positioned in all its businesses and that we offer very competitive products to our buyers, an excellent payment solution. And we will continue working on it. We will probably face new competition in the future, but we think that we're very well set to compete against that and continue growing at least at the pace of e-commerce in Brazil.

Importantly, as we see large retailers focusing on their e-commerce operations, it's good to see that they are using MercadoClics to drive traffic to their site. So, largely, they are clients of ours.

Okay. And the take rate, we weren't expecting it to go up. But, it went up by 10 basis points. And is that to offset the increased adoption, the cost related to increased adoption of Pago? And how should we think about take rate for the balance of 2011?

There are several factors impacting our take rate. But, the one you mentioned clearly is one that is pushing the take rate up this quarter and may continue to push it up as MercadoPago continues to expand its penetration within the marketplace. So, yes, certainly, as MercadoPago penetration grows and we feel some cost pressure, we increase a little bit the prices of the marketplace to compensate for that increase in cost. And that has been pushing up the take rate.

Okay. And then just I guess going forward [amount] to increase slightly just to offset the increased adoption of Pago.

Yes, there are several factors we have [played] in here. On the one hand is that increased cost. On the other hand is that, as we continue to build more volume in MercadoPago, we're able to get better rates. And we're going to pass on any savings we would continue to get to our sellers and buyers. We also have some countries that are smaller and do not have such higher take rates. And when those grow faster than the average, we see take rates going down. So, to anticipate what will happen with take rate specifically is hard. But, certainly, we feel that long term we will continue to have lots of upside in that regard.

Great. Thank you.

Thank you. (Operator Instructions). Our next question comes from Jordan Rohan of Stifel Nicolaus. Your line is open.

Yes, a couple of questions. First of all, great quarter, and congratulations to both Pedro and Hernan on the transition. But, back to the questions, Venezuela is something that four or five quarters ago you had to make a change in how you recognized revenues from there. The growth out of that territory, while still small as a percentage of total is so extraordinary that it started to really accrete to your total or accelerate the total growth number for your Company.

Is this something that, as a company, you think is driven by the real fundamentals here? Is there some inflationary factor that we're not counting on related to currency that's causing this? And therefore, can we really trust this, or do you think there'll be situations where you can't get enough money out of the country through the processes that they've had? Any thoughts on that?

Certainly, our business in Venezuela is very, very vibrant. Just to give you a number, items sold in Venezuela in the quarter grew 49%. And that takes out any inflation consideration or any currency consideration. So, certainly, the business is working very well there. As you know, it's a country where we face some restrictions to buy dollars and take them out of the country. So far, we've been able to move money out of Venezuela, but not at the pace we want. So we hold approximately $6 million of cash in Venezuela in bolivars. But, everything else has been transferred to a US account in US dollars.

Okay. Follow-up question, MercadoPago outside of the territories that have gone through that transition, where it's bundled in with marketplace pricing, can you talk about timelines I guess outside of Argentina and Brazil when you would expect to flip it over?

So, we've recently launched mp3 in Mexico. We did off platform at the end of Q1. We did on platform on April the 15th. We think that is going to have a positive impact in the overall Mexican business and obviously particularly in MercadoPago.

Then what we've also been saying is that by the end of the year, we think that we're going to be able to have MercadoPago available also in Venezuela. And afterwards, we will continue to expand it to other countries. But, we're not committing to any particular date at this point.

All right. Thank you and congratulations.

Thank you. I'm showing no further questions in the queue. I'll hand the call back over to management.

Great. So, thank you, everyone, for attending. As always, we'll be available for any follow-up questions you might have directly on the line. Look forward to speaking to everyone soon.

Thank you. Ladies and gentlemen, this concludes the conference for today. You may all disconnect. And have a wonderful day.