美卡多 (MELI) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the MercadoLibre fourth quarter financial results. (Operator Instructions). As a reminder, this conference call is being recorded. I would now like to turn the call over to the company representative.

Ladies and gentlemen, please remain on your lines. Your conference will begin momentarily.

Hello everyone, and welcome to the MercadoLibre earnings conference call for the quarter ended December 31st, 2011. My name is Alex de Aboitiz and I am the head of Investor Relations for MercadoLibre. Company management presenting today are Marcos Galperin, Chief Executive Officer, and Pedro Arnt, our Chief Financial Officer. Additionally, Osvaldo Gimenez, Senior Vice President of MercadoPago, 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 all of you to today's call, where we will review the end of a very good year for MercadoLibre. Since Pedro will provide in-depth detail on our performance in the fourth quarter of 2011, I would like to take this opportunity to give you a more general overview of where we are today, our evolution since our IPO in 2007, and our game plan going forward.

Let's take a look at the growth of some key metrics since 2007. In 2011, 53 million items were sold on our marketplace, versus 17 million in 2007, for a 4-year average growth of 32%. Gross merchandise volume was $4.8 billion, versus $1.5 billion in 2007, a CAGR of 34%. We had 14 million transactions on our payments platform, versus 1.3 million in 2007, a CAGR of 80%. And total payment volume reached $1.3 billion, versus $160 million in 2007, a CAGR of 70%.

This growth and that of our adjacencies, allowed us to post full year 2011 revenues of $299 million, versus $85 million in 2007, a CAGR of 37%, and net income of $77 million, versus $10 million in 2007, a CAGR of 68%.

Looking back over the years since our IPO, we are proud of the evolution of MercadoLibre into the leading e-commerce ecosystem in the region, and are excited about the challenges ahead of us. Looking at our marketplace, GMVe and items sold show only part of the success story. Over the last four years we have worked from many angles to ensure that our services meet the expectations of a growing number of users. We have innovated in the options that we offer our growing supply base, making sure that different types of sellers find the ideal format to list their products.

An early distinction between the needs of professional sellers and eventual sellers allowed us to create well-differentiated formats for merchants with typically large, fixed-priced offerings of new and in-season products, as well as for hobby sellers with a single, secondhand item to sell. Our idea of a marketplace that didn't exclude either of these user profiles drove us to expand our offerings by launching listings that charge strictly on the basis of successful sales, followed by entirely free listings that allow sellers to sample the success of our marketplace.

Our classifieds business has also successfully implemented a Freemium strategy. Acknowledging that transactions for cars and houses are not likely to be settled online, we started out by charging fees for listings, but this quickly evolved into our current system which provides the basic service for free, while only charging for premium placement and for convenient multi-listing packages that meet the needs of our professional sellers.

This has brought millions of new users to our site, also driving important upgrades to our premium listings over time, and allowing us to remain the number one site in classifieds traffic in the entire region while also posting strong revenue growth. Over the last few years, our initiatives in the core marketplace and classifieds have added to what was already the widest selection of SKUs in our region's e-commerce. We had 114 million total new listings during 2011. This compares to 28 million in 2007, an average growth of 42% per year. This has ensured a breadth of offering and a long tail that remains unmatched.

Considering an average yearly growth of 22% in internet users since 2007, based on Comscore figures for Latin America, our growth rates give a sense of how we've boosted supply well beyond the healthy secular trends that accompany our business. Improvements to our search algorithms, a more intuitive buying and registration flow, and other constant upgrades to buyer experience, have kept demand just as active.

Moving from marketplace to payments, we have driven the success of MercadoPago through improved technology, a better integration with our marketplace, and by building a trusted brand name. Bundling payments with marketplace fees was the perfect strategy to promote our product within the marketplace.

We have seen TPV reach 28% of our GMV and expect this number to continue to grow going forward. In addition, our installment options have shown excellent traction, growing at the pace of payments and delivering additional revenues to our business. All of these factors, plus an important increase in stored balance, make us increasingly attractive in the off-platform market, as various e-commerce players seek access to the online wallets of our users.

We are proud of the rate at which this business is growing, providing a payments service for all types of merchants and group buying sites such as Groupon and Piexe Urbano. I look forward to the future of this fast growing business, as we continue to innovate in an industry that will require evolving payment solutions, particularly as mobile continues to gain penetration among Internet users.

Moving onto another natural adjacency of our core business, I am very pleased with the evolution of our advertising unit. The MercadoClics platform has proven an excellent tool for advertisers to access our unparalleled e-commerce traffic, while also providing our consumers with a priceless one-stop shopping experience. In addition, our search advertising solution has allowed us to capture sellers and inventories that were previously untapped for us. MercadoClics has proven the entryway for large retailers onto our platform, presenting us with a great opportunity to integrate them even further.

Such is the case of Walmart in Brazil, initially a client of MercadoClics, but now also a client of MercadoPago. I look forward to expanding our client base and constantly exploring new opportunities to service them in 2012.

MercadoShops is another business that exhibits great synergy with the rest of our ecosystem. We have a clear opportunity to leverage our technology when it comes to offering software as a service. This was evident early on, from our own sellers' requests for these solutions. Since then we've been constantly improving our e-building capabilities, and at the same time ensuring clients for our other business units.

Today, less than two years since launch, we have more than 30,000 active MercadoShops. Each MercadoShop we deliver is a client of MercadoPago off-platform. Many merchants with shops also offer parallel listings and search ads on our marketplace, building their own organic traffic at the same time as they rely on our demand.

Powering new e-commerce stores is therefore an important generator of business for all MercadoLibre. Recently we were proud to sign agreements with the governments of Brazil and Argentina, offering a version of MercadoShops for free to many small and medium-sized merchants, accompanying them in their first steps into e-commerce. Along the way we look to make new partners as we empower them through our technology.

As a company that uses technology to enable commerce, we are well aware of the need to stay competitive in this respect. Hence, our important investment in product development as we dedicate a growing programming team to innovation. The New World Project exemplifies the benefits of our asset light model, since it consists mainly of devoting programming resources to revamping our platform, making it more agile, and making our platform available to third party developers.

The benefits were evident in the second half of 2011, as we streamlined our registration process and made changes to our buying flow. In the fourth quarter we saw similar momentum, making improvements to MercadoPago's checkout process, to our classifieds user interface, and to our mobile offering, which is approaching a total of 1.5 million downloads since it was made available in September. The fact that we implemented these changes while still working on New World may give you an idea of the dynamic we are shooting for in 2012 and beyond.

While we keep rewriting parts of our platform, we free up others. We are already working on vertical formats that will make us better suited for the sale of sports and apparel, and on developing a standard shipping solution interface for our users. Along with payments, these initiatives continue to add value to our marketplace, allowing us to be more involved in each transaction.

In addition, we are working on moving our customer service tools to the new platform, allowing us to be better positioned to ensure a great user experience. I hope I have given you a good sense of the opportunities ahead and of some of the work we have in store for us. Also of the vast improvements that we have carried out to ensure our position thus far and a better time to market going forward.

Our next steps will require commitment, smart investing, and continued long-term vision, but I am confident in our ability to keep delivering. I speak for the entire MercadoLibre team when I say we are eager to keep managing this business to its full potential. And now, I will pass the call to Pedro for detail on our fourth quarter financial performance, and also his view on what's to come in 2012.

Thank you, Marcos. Following the full year perspective that we've just been provided, I'd like now to take a closer look at our financial results for the last quarter of 2011. In many ways our fourth quarter showed a continuation of the momentum we've been seeing across our entire business. Our marketplace continued to thrive, with 3.8 million new confirmed registered users, versus 3.6 million in the previous quarter, and 2.7 million a year earlier. This brings total users registered on our site to 65.8 million, a 24% expansion in our user base year-over-year.

Both new users and our existing user base contributed to increased activity on our platform as illustrated by a 41% growth in items sold for the fourth quarter, accelerating versus 38% in the third quarter and surpassing it as our highest growth in the last 2 years. At higher average tickets than one year ago, this led to a gross merchandise volume growth of 54% in local currencies, partially offset by foreign exchange headwinds in the quarter resulting in US dollar growth of 47%. US dollar GMVe for the quarter was thus $1.45 billion.

Within this total, Brazil grew items sold by 50% year-on-year versus 49% in the previous quarter, as our recent user-facing improvements keep showing excellent traction in the most developed e-commerce market in the region. Brazil's local currency GMVe accelerated to a growth of 50% year-on-year, while depreciation of the Brazilian Real kept US dollar GMVe reported growth at 42%.

Now I'd like to highlight some of our key financial metrics before going into further detail on our performance in the quarter. Specifically, for the final quarter of 2011, net revenues grew 39% in US dollars to $86.5 million, a 47% growth in local currencies. Gross profit margin was 76% versus 75.4% in the third quarter of 2011, and 77.9% in the fourth quarter of last year.

Income from operations grew 38% to $29 million, with an operating income margin of 33.5% versus 33.6% also in the fourth quarter of 2010. Net Income before Income/Asset Tax Expenses for the fourth quarter 2011 was $30.8 million, representing 40% growth. And net income came in at $21.6 million, a 35% growth year-on-year. This represents a 25% net income margin versus 25.6% one year earlier.

Let me now walk you through the most relevant aspects behind these results. The main driver of year-on-year revenue growth was the increase in gross merchandise volume on which we charge the variable portion of our marketplace fees. Another strong contribution came from the 70% increase in US dollar total payment volume versus the fourth quarter of last year, representing an 81% growth in local currencies and raising payments penetration, the ratio of TPV to GMVe, to 28% versus 24% a year ago.

Let me remind you that the lion's share of this volume consists of payments made on our platform, a service that is bundled into our marketplace fees. The increased use of MercadoPago on MercadoLibre is contemplated in higher marketplace fees than last year's.

While our off-platform payments volume still represents a small share of total payments volume, it continued to grow at the fastest pace of all our businesses, generating processing fees that are also growing their contribution to overall revenues. We were pleased to add Venezuela to the list of countries with off-platform payment capabilities at the end of the fourth quarter, as we rolled out our MP3 platform in that country, spreading the momentum across all of our main geographies.

Wrapping up a recap of our payments business, the growth in volume both on and off-platform continued to drive increased selection of our installment options, available exclusively on MercadoPago and generating additional revenues from our financing unit. In the meantime, our remaining adjacent businesses also grew at very competitive pace. Both classifieds and advertising grew on the basis of increased supply and demand in addition to well-timed innovations in each business.

In classifieds, prominent integration with social networks and existing geo-location and mapping services is driving more and more traffic to the recently revamped formats in the category including new vertical filters and a gallery mode for the motors category.

In the advertising space, MercadoClics growing revenues at a significant pace, adding new clients in the league of Renault, Chevrolet and Xbox. While doing so, we posted new improvements to our algorithms and enhanced the advertiser interface to offer the best possible user experience. MercadoShops, still a very small contribution to revenues, continues to post excellent growth on the basis of setting up new stores for small to medium-sized merchants, accumulating, as Marcos earlier mentioned, a total of 30,000 stores by the end of the year.

Consolidated take rate, or the measure of consolidated revenues over GMVe, was 5.96% in the fourth quarter versus 6.31% in the fourth quarter of last year. This decline in take rate is attributable to GMVe and its associated final value fees growing faster than classifieds and other placement fees as sales on the platform outpaced the growth of listings that generate placement fees.

This increase in the efficiency of our listings, although affecting our take rate negatively, bodes well for the long term prospects of our business as it also translates to increased success on the part of our sellers. Also growing below GMVe were our proceeds from financing. Despite having grown the total volume of installment purchases, this was accomplished at a more competitive spread than last year, leading to a slowdown in the pace of growth of the revenues we derive from consumer financing.

Advertising and MercadoPago off-platform processing fees, on the other hand, grew above GMVe, and contributed positively to the overall take rate of the quarter.

In summation, our revenue streams showed robust growth during fourth quarter, each based on its own healthy underlying drivers. And this was the case across all of our countries. To illustrate this, these are our growth rates on a reported segment basis. In local currencies, on a country basis, consolidated net revenue growth was 39% for Brazil, 70% for Argentina, 31% for Mexico, and 64% for Venezuela, each of these countries accelerating sequentially.

In US dollars, consolidated net revenues grew 31% for Brazil, 59% for Argentina, 19% for Mexico and 64% for Venezuela.

Now I'd like to take a detailed look at our cost structure during the fourth quarter. Gross profit grew 36% to $65.7 million, representing 76.0% of revenues, versus 77.9% in the fourth quarter of 2010, and 75.4% in the third quarter of 2011. Year-on-year gross margin contraction is almost entirely attributable to increased penetration of MercadoPago transactions and the interchange fees associated with processing this additional payment volume.

The slight sequential improvement in gross margin, on the other hand, is attributable to a small sales tax one-off impacting COGS in our favor, and also to the sequential leverage of our customer operations which is not necessarily representative of a trend going forward since we plan to grow our investment in customer service in line with the growth of our business.

Operating expenses for the period were 42.5% of revenues, down from 44.2% in the same period last year, a 170 basis point improvement in leverage of our operating expense structure. In absolute terms, operating expenses totaled $36.8 million, a 34% increase versus the fourth quarter of 2010. More specifically, sales and marketing remained the largest line item expense, increasing 38% for the quarter to $19.4 million. As a percentage of revenues, sales and marketing was 22.4% versus 22.5% for the same period last year.

Natural leverage in this line was mostly offset by credit card loss provisions or charge-backs that increase as a function of our rapidly growing payments volume, as well by a bad debt one-off adjustment during the quarter of $0.9 million. Product and technology expenses grew 52% to $6.7 million compared with $4.4 million for the fourth quarter of 2010 mainly through increased investments in headcount as we continue to expand and strengthen this team which is essential for the future plans of our business.

G&A grew 17% year-over-year to $10.6 million in the fourth quarter of 2011, mainly as strong leverage in this line was enough to offset higher salary costs related to inflation, new headcount, and an adjustment of $1.3 million in the accrual of our long-term retention plan based on our higher stock price during the quarter.

Consequently, operating income for the fourth quarter of 2011 was $29 million. Operating income margin for the quarter was 33.5% versus 33.6% in the fourth quarter of 2011, as gross margin compression was practically equal to gains in operating expense leverage. Below operating income, we benefited from $2.9 million of interest income, aided by higher cash balances and interest rate yields in Brazil, arriving at a pre-tax income of 30.8 million, 40% higher than in the same quarter of last year.

Tax expense was $9.2 million in the fourth quarter of 2011, resulting in a blended tax rate of 29.9% versus 27.8% in the fourth quarter of 2010 and 25.1% in the third quarter of 2011. Both of these comparison periods were aided by tax-loss carry-forwards, whereas the current quarter is closer to our business as usual expected tax rate, considering that corporate tax rates in the region are on average marginally higher. But we are currently the recipients of a tax benefit extended to software development companies in Argentina.

Net income for the three months ended December 31, 2011 was $21.6 million, reflecting an increase of 36% when compared with $15.9 million during the same period of 2010. This represents a 25% net income margin, resulting in a basic net income per common share of $0.47.

Property and equipment and intangible asset purchases for the quarter totaled $2 million and consequently for the period ended December 31, 2011, net cash provided by operating activities less property and equipment and intangible asset purchases, totaled $25.1 million. This measure of free cash flow would have been even higher had we discounted the entirety of our MercadoPago receivables in the before the end of the period.

Cash, short-term investments, and long-term investments at the end of the quarter totaled $186 million as we entered 2012 with strong liquidity to drive our business. In this context I would like to mention that, as announced today, in 2012 we will be paying dividends equivalent to approximately 25% of our full year 2011 net income. As a result, dividends per share will rise to $0.109 per share for each quarter of 2012, versus $0.08 per share, per quarter, in 2011. I am very pleased with this increase as it reflects our commitment to pass on some of the immediate value we are generating for our shareholders as we also retain these earnings necessary to meet our needs for future growth.

These dividend payments, which are made at the discretion of our board, attest to the increasing scale of our business, and to our robust financial position.

Wrapping up, all in all, MercadoLibre is in excellent financial shape. We must insure that 2012 we continue to strike the right balance between profitability and long-term focus. This implies, as Marcos put it, smart investing for our future. Our commitments to investing on our users' behalf implies maintaining a leading technology platform that continually adds value to the transactions it hosts. As you have seen, we have many projects underway with this objective. As we add layers of service to our core, we have the opportunity to remain the venue of choice in this quickly expanding e-commerce market which bodes well for our financial health as well.

We plan to continue investing aggressively in our business, while at the same time striving to deliver scale benefits, showing healthy margins, and generating the necessary cash to finance future growth as well as our commitment to a continued and growing dividend program.

We are off to a good start and I look forward to giving you updates on our progress throughout the year. With that, we would like to take your questions now.

(Operator Instructions). Gene Munster, Pipe Jaffray.

Good afternoon, and congratulations. I want to talk a little bit about the local currency GMVe growth. That was impressive growth. And as we look forward, is there anything, any factors that we should be aware of that could prevent this momentum from continuing? Any macro or comps or anything? Any kind of anomalies I guess in the March quarter that we should be aware of if this doesn't -- that would prevent that momentum from continuing? And then a follow up question.

Gene, I think we don't make projections that don't address the current quarter. So I think when the time comes, we'll be able to call out the quarter and be able to give details on that.

Okay, but there's nothing structurally that we should, you want to call out that would prevent that from continuing? I understand you're not giving guidance, but is there anything structural that would, that we should be aware of?

I think any out of the ordinary significant structural change we would try to be as transparent and as communicative as possible so there's nothing that was said that would lead to that kind of leading of what's happening in the business.

Okay, then in terms of take rates, obviously they've been moving around here and I know you gave a detailed explanation of the December quarter, but how should we think about that going forward?

I think as we've always said, there's no take rate target that we manage the business to. What we have is a multiplicity of different revenue streams that are all growing very robustly but at different paces. And I would say that the most relevant underlying trend of the last two quarters has been the GMVe growth has been so strong that it's outpaced the growth of a couple of the other business units that are also growing very strongly, but not as fast as GMVe. And so the math simply comes out to a lower take rate.

But more importantly, we think it's fantastic that GMVe continues to grow north of 50% in local currencies and that these other business units grow at very strong paces yet not that fast.

Okay, and then I guess the final, final question here is, you guys mentioned the recent user and facing improvements. Were those, the recent improvements, were they in the September quarter or the December quarter? First part. And second is, are there improvements that are coming in the March quarter or have come in the March quarter? Hello?

Aaron Kessler, Raymond James.

Yes, hi, guys. A couple of questions. One, can you just give us a sense for the timing of additional vertical rollouts? And also, how much of the -- I think you mentioned the financing spread change versus last year, if you can just give us a sense how much that changed versus last year and sequentially?

[Audio difficulties]. Ladies and gentlemen, please remain on your lines.

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Again, ladies and gentlemen, please remain on your lines. Your conference will begin again momentarily. Again, ladies and gentlemen, please remain on your line.

Hello?

Yes, sir, you're back on the call. We now have Aaron Kessler on the line.

Great, thanks, guys. A couple questions. One, just in terms of a couple of the one-time charges you mentioned, I think you mentioned the financing spread change versus last year. And also kind of the sales tax line. Can you just quantify those for us?

Okay, just a couple of different things. So the financing spread is not necessarily a one-off. I think the indication we're getting there, and we don't disclose the specific revenue stream from financing, is that our financing has been more competitive during the fourth quarter. Therefore, we've done more volume through financing. That business in terms of volume has grown. The spread at which we've offered the financing has come in and so one of the most significant drivers in the roughly 10 point basis point compression sequentially is that lower spread. So you can get a general size of the order of magnitude of the compression there because you can see what the Q on Q take rate decline was.

And in terms of the tax one-off, again, no disclosure there on the specific number. Nothing extremely material, but a one-off improvement in taxes in the COG line in Brazil.

Great. Just in terms of the off-platform payments, I mean it sounds like strong growth. Is there anything you need to do to maybe even drive a stronger percentage? I mean [obviously fee based having a two-thirds op payment], is there anything you need to do to maybe drive that percentage up or is just naturally going to happen as your overall payments gets more traction?

This is Osvaldo. We've been growing and we are growing off-platform TPV at a significantly faster pace than on-platform TPV, so we are gaining share in terms of off-platform business. We don't yet disclose what is the total TPV we are having off-platform mainly for competitive reasons. But we will continue and we will be investing more in marketing during this year to continue gaining share from our competitors.

Great. Thank you.

Jordan Rohan, Stifel Nicolaus.

Hey, guys. Can you drill in on some of the market dynamics specifically in Brazil and Venezuela? And for those of us not close enough to the Venezuelan e-commerce market, can you tell us how much share you're gaining? Is that market, by every metric, local currency or US dollar denominated, it seems like the growth at 68% is extraordinarily fast. What's the overall market growing there? How much share are you growing there? And also, Brazil, have you seen an acceleration or has there been an acceleration in e-commerce overall and how much share may you be gaining in that market as well? Thank you so much.

So we use various metrics to try and track overall e-commerce growth in the region. And it's been growing at between 20% and 40% in the various markets so we are very happy with the way we have been growing. We have been growing faster than e-commerce in general. The bigger the market, the more accurate these figures are. So in Brazil we have I think a better -- whereas there are also other public companies that disclose their numbers, we have a better idea of the overall market growth and it's quite clear that we are growing faster than the market in Brazil.

In Venezuela we believe we have a very large share of the market. We don't have as many good indicators of where the market is growing, but as is the case in Brazil and in other markets in the region, we believe we are gaining share of e-commerce in general in Venezuela as well.

All right. Thank you very much.

Dan Su, Morningstar.

Hi, thanks for taking my question. So this year the Company did acquisitions, the Company decided to raise dividends. So in general, can you talk about the Company's capital allocation strategies? And going forward in terms of growth, are you really focused on organic growth from within or you are maybe opportunistically looking at acquisition opportunities in specific markets? Thank you.

So a couple of questions there. I think we've always said that there is tremendous potential for growth organically through the ecosystem of business units we're building. And a significant portion of our growth will come from that. And at the same time, we are always scoping out prospective companies that we think we could tuck under the MercadoLibre group of companies that would add us either interest business, interesting technologies, or interesting people. So we're always open to M&A activity and we have carried out M&A over the past few years.

And in terms of capital allocation, our vision has always been that the cash generation capacity of this business and the current strength of our balance sheet allows us to pursue at the same time all our growth opportunities and at the same time pay out a dividend to shareholders that we think is good corporate governance and also forces us to remain very efficient in future capital allocation. And so the idea is to continue to pursue growth aggressively and at the same time be able to pay dividends and grow the dividend policy going forward.

Ross Sandler, RBC Capital Markets.

Hey, guys. I've got three questions. First two for Pedro and then the third one for Marcos. So Pedro, can you just give us the local currency GMVe growth for Argentina, Mexico and Venezuela? I either missed them earlier or I don't think you gave them.

Second one is, is the new platform rollout now live in all the major territories or is there still, is the new platform rolling out in Mexico and Venezuela in 2012? Can you remind us on that?

And then Marcos, Amazon recently launched AWS in Brazil, so how would [your] strategy change if at all if Amazon were to launch a retail presence in Brazil? Thank you.

Great. So let me just do a recap of local currency growth rates because I think ForEx was a headwind during this quarter. And if you look at local currency growth rates, really tremendous momentum of the business. GMV constant dollars, this is consolidated growing at 54%, TPV at 81%, revenues at 47%, and net income at 42%. So really tremendous local currency growth and obviously exchange rates are not something we control.

To your specific question, Brazil grew GMVe at 50%, Argentina at 59%, Mexico at 39%, Venezuela at 77%. So going back to Jordan's question, clearly growing at a rate that is above the rate of growth of e-commerce in every one of those markets.

In terms of the platform, I think as we've always said, the new platform is a complete rewrite of all our technology. The most significant components that we've talked about so far, registration, the buying flow, and portions of the checkout flow, have been rolled out in the large countries. There still are components that will be rolled out both in the larger countries and the smaller countries. And as Marco mentioned early, I think improvements to the platform and to the technology are our lifeblood and something that we will continue to carry out going forward. So it's never a finished process.

Actually, one of the main advantages of the new platform is that it enables us to deliver better products to our users more frequently. So the main idea of the new platform is to be more agile, implementing changes as we have done recently with our mobile apps, and the idea is to continue being very aggressive at launching upgrades to our platform now that most of our large countries are running on the new platform.

With respect to competition, you know we never focus on any one competitor at any given point in time. We have faced many competitors in the last 12 years since we launched. It has always kept us very focused. We are very focused on what we need to do, we will continue to be executing behind integrating payments on our platform very efficiently, providing great shipping solutions and great customer service, and great user experience for our users. And that's our game plan and we believe on the meantime we will continue to face lots of competition from different players and we will continue to watch each and every single one of them and if we see that they are doing something that is interesting, we will try to do it better. But that has been our formula until now and it has worked very well for us.

If I can just ask one more follow up. Pedro, so Mexico accelerated massively, like 20 percentage points off of a couple of comps if my math is correct. So was that partial kind of platform upgrade driven or is there anything else that you can talk about in terms of color on the Mexico growth rate? Thanks. And then I'm done.

I think like most of our growth, clearly the platform improvements have been very significant. Mexico, we've seen MercadoPago launched more recently than some of the other countries and some of the platform improvements were deployed a little bit later. So the fourth quarter is a full quarter of many of the improvements in technology. And so we think that explains the uptick in Q4 versus Q3 whereas some of the other markets had already seen some of that uptick Q3 versus Q2.

Steven Ju, Credit Suisse.

Good afternoon, guys. So Pedro, credit card receivables seem to be a bigger source of cash for this quarter than what we are used to seeing. That's due to discounting not being implemented prior to quarter close as you mentioned in the prepared remarks, and is this a matter of timing or a change in spend in terms of the cash management?

And also, given what appears to be a pretty robust job market in Brazil, especially for engineers, are you seeing any upward pressure on your wage structure? And additionally, are you finding it incrementally more difficult to hold onto or hire people? Thank you.

So no change in the way we manage the credit card receivables. We continue to factor all of them into the market. This was purely a timing issue. Brazilian interest rates had been moving around a little bit and so it made sense to hold off a few days in search of a better discount rate which effectively worked. What that means is that at yearend closing, the unfactored receivables on the balance sheet were larger than previous quarters because we had held onto a few additional days of receivables. But the strategy remains unchanged.

In terms of the technology market, I think we continue to be able to attract great engineers in Buenos Aries and San Luis, Argentina where we have both of our development centers. We are a highly sought out company to work for. We do recognize that these markets are all coming under increased competition for talent and so we do have a strategy to begin to open multiple IT development centers in different markets. We will have a very strong focus there in 2011 in a center in Montevideo, Uruguay which should help us to access that talent base. And I think we'll continue over the longer run to manage that in that way, by opening more centers in different countries and different cities and being able to access talent pools in a multiplicity of locations.

Thank you.

Marcelo Santos, JPMorgan.

Good evening. Thanks for taking the question. My first question is about interest rates. Brazil has been quoting Selic. I'd just like to understand a little bit better how it is your financing spread is expected to react to that, if at all, if we see lower spreads as rates decline.

Yes, so let me first of all address what happened and then I'll give you a very big picture, I think, vision going forward. Essentially what happened is that we gave back those Selic improvements and then some to our users to make our financing more competitive during the fourth quarter. That drove the volume of finance transactions up. It also helped in driving overall purchases made on the platform up. And I think at the end of the day that's our ultimate goal. We have a business in financing that makes money, but it also is a significant catalyst for more GMVe and more transactions and that's our number one priority.

Going forward, I think it's the same balancing act. It's a decision of how much of those Selic decreases do we give back to our consumers in lower interest rates and drive increased GMVe, and how much do we keep as added spread for ourselves. And that's by and large a quarter on quarter decision. The long term view has always been to try to return as much of that as we can to our users.

But you still want to keep making a profit on the (inaudible) -- I mean you're not making the credit business subsidized by the marketplace?

Well we certainly have always said that unlike some of the less we believe intelligent long term practices in the Brazilian market around the financing, we like to run a profit in that business And we also like to run it in a cash flow positive way. And that's the way we continue to do that going forward.

Okay, great. Thanks for that. My second question would be like if possible an update and what we should expect in 2012 for projects regarding logistics, verticalization, salesforce.com implementation.

I think you touched upon three of the issues Marcos mentioned earlier. We don't give out specific launch dates for our deployments and we beta test a lot of these things over time so there's never any secret date at which things get switched on for all users. But rather we typically take a gradual approach with a lot of AB testing. But I think relevantly, you hit upon some of the things that we're working on and that we think could have positive long term impact. Shipping, improvements in customer service through deeper integrations of Salesforce, verticalization of different categories, continued expansion of MercadoPago on the platform, better recommendation engines through catalog driven navigation and other things. And once these get deployed to a significant percentage of the user base, we will make sure to call them out and give a readout on what the impact has been.

Okay, thank you.

Gene Munster, Piper Jaffray.

Pedro, you just touched on it, too, as far as kind of on the shipping element, and can you talk a little bit about timing of when? I know you kind of talk about being an enabler, not obviously doing fulfillment. Is that still the case that you're not -- have ambitions to do fulfillment? And second is, when will the platform support make it easier for sellers to connect with shipping partners? Thanks.

We are still not thinking of providing fulfillment ourselves. And as Pedro said, we will be testing and working on the shipping solutions and shipping integration throughout this year and onward. So when that has been implemented on a substantial number of users and we have something to report, we will be doing. But hopefully we will have some news throughout this year.

Okay, so we could think of it maybe late this year kind of a thing?

Again, we don't want to give any specific dates, but it's an important strategic step for us.

Got it. Okay. Thank you.

(Operator Instructions). And I'm showing no further questions in the queue and I'd like to turn it over to our speakers for any closing remarks.

Great, so thanks, everyone, for attending. The transcript is up on our Investor Relations website for those of you that might have had some sound check problems. And we look forward to speaking again once the next quarter is over. Thank you very much.

Ladies and gentlemen, this does conclude our conference for today. Everyone have a great evening.