美卡多 (MELI) 2013 Q2 法說會逐字稿

Welcome, ladies and gentlemen, to the MercadoLibre second quarter 2013 earnings conference call. At this time, all participants are in a listen-only mode. After our prepared remarks, we will conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions) And, as a reminder, this call is being recorded.

I would now like to turn the conference over to Martin de los Santos. Please go ahead.

Hello everyone, and welcome to MercadoLibre's earnings conference call for the quarter ended June 30, 2013. My name is Martin de los Santos, and I am the head of Investor Relations for MercadoLibre. Our senior management presenting today is Pedro Arnt, Chief Financial Officer. Additionally, Marcos Galperin, Chief Executive Officer, 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 sections of our website.

I remind you that management may make forward-looking statements related to such matters as continued growth prospects for the Company, industry trends, and product and technology initiatives. These statements are based on our currently available information and our current assumptions, expectations, and projections about the 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 those 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 Security and Exchange Commissions, which are available on our Investor Relations website.

Finally, I would like to remind you that during the course of this conference call, we may discuss some non-GAAP measures. A reconciliation of those measures to the nearest comparable GAAP measures can be found in our second quarter 2013 earnings press release, available on our Investors Relations website.

Now, let me turn the call over to Pedro.

Thanks, Martin. Good afternoon, everyone, and as always, thanks for joining us.

I'd like to start today by providing an overview of the solid progress we made during the quarter, resulting from a set of well-defined and -executed initiatives along different aspects of our ecosystem.

Marketplace sold item acceleration for the second consecutive quarter combined with strong results across the board suggest that the current investment in product cycle around these initiatives is returning positive results. Furthermore, as these initiatives continue to come together, we are increasingly able to deliver what we have said is our primary objective -- a continuously improving trading experience for our users that consequently generates further growth for our business.

I'll update you on the specifics that have seen the most progress during the quarter but, first, let's take a look at some of our key metrics showing the results these initiatives are having on our business.

During the second quarter, 4.5 million new users registered on our site, growing our base of registered users 23% year on year.

Items sold grew 27%, reaching 20.1 million, and we believe increasing our market share of overall units shipped via ecommerce in Latin America.

Our number of payment transactions grew 35%, to 7.4 million.

Our gross merchandise volume was $1.7 billion, growing 33%, and total payment volume reached $578 million, growing 40% is US dollars. Bear in mind that we achieved these US dollar growth rates despite currency headwinds during the quarter. In local currencies, gross merchandise volume grew 45%, and total payment volume grew 54%, both year on year in the second quarter.

These results illustrate the vibrancy of a business driven by constant optimization on our part and the positive impact of secular trends that continue to favor us strongly. This combination has allowed us to overcome what we understand had been slower macro conditions present in our markets during the last quarter. Put another way, solid innovation, execution, and the continuing shift from offline to online purchasing continue to be the driving forces behind our ability to capture the tremendous opportunity presented to us.

With this in mind, let me now walk you through some details on the initiatives we understand had the most significant impact on our strong results. Our Marketplace is a great place to start, showing vibrancy in both supply and demand. We saw accelerating growth in buyers, sellers, and listings outpaced by even faster acceleration of sold items during the second quarter. More notably, this acceleration occurred across our largest countries.

Three key factors in addition to solid execution of the overall business plan are worth mentioning as important drivers of operational strength -- our branded marketing campaign; the continued mix shift into newer, new non-consumer electronics categories; and additional user interface enhancements carried out during the quarter.

Our TV campaign launched during the second quarter centers on our brand, on our mobile capabilities, and on the benefits of buying online versus offline. It is primarily a brand marketing campaign and, as such, is an initiative out of which we expect long-term impact. Ultimately, its success is measured on its ability to maintain MercadoLibre as the top-of-mind ecommerce brand in Latin America.

However, we have also seen positive immediate results in terms of improved traffic to our sites during the quarter, as we are seeing incremental visits since launching the campaign and have experienced a positive impact in our mobile efforts, as well.

In the meantime, our efforts in non-consumer electronic products yielded above-average growth rates in categories as diverse as apparel, home and garden, industrial and office supplies, toys and games, and auto parts, with some of these growing units sold at nearly 2x the average rate.

In addition to the way in which an increased vertical focus is improving trading volumes, we also saw positive impact from certain horizontal features launched in all categories during the quarter. We deployed a series of search optimizations aimed at improving the relevance of search results surfaced, added features that improved deal and product discovery, and continued to perfect the UI for providing both a more simple and faster-to-download visualization of product pages while at the same time surfacing more and better product information.

User interface improvements were also extended to our mobile initiatives, where the right adaptations are turning smartphones and tablets into buying tools on MercadoLibre at a remarkable speed. Mobile continues to make its way towards double digits as a percentage of total GMV, with certain markets already exceeding that level for the first time during the second quarter of this year and continuing to gain share of device mix yet again. Clearly, our mobile efforts continue to exceed expectations for such an early stage and show no signs of slowing down.

Steady penetration gains also characterize our early-stage shipping initiative, MercadoEnvios. In Argentina and Brazil combined, more than 10,000 unique shippers sent at least one parcel during June through our system. This still entails a very small share of our total volume in those countries, but share gains over sold items and GMV are consistent month after month.

In the meantime, we are bringing new carriers on board as shipping options and innovating with a local twist in each country. Last month for example in Argentina, we launched a beta version of a same-day delivery service through a deal with a local courier that is available in the city of Buenos Aires for a very reasonable flat fee. We are making it available to professional sellers meeting certain criteria with regard to volume and level of service provided. This is an example of how we are improving shipping, not only for the sake of our buyers but also to help further differentiate quality sellers.

We look forward to reporting further progress as shipping continues to become a reality on MercdoLibre in quarters to come.

Next, let me very briefly cover Payments. We continue seeing traction in our Payments business, as our total payment volume grew 54% in local currencies during the second quarter, while we posted near record level fraud loss provisions on that volume, thanks to improved execution and newly deployed technology for our fraud prevention efforts.

During the quarter, MercadoPago relaunched its brand and logos with the intent of generating a more explicit connection with the MercadoLibre umbrella brand. Let me remind you that the strongest competitive advantage we have over competitors is our ability to leverage MercadoPago usage on our Marketplace for our platform efforts.

Additionally, MercadoPago's checkout interface was updated once again during the quarter. Improvements included streamlined buying flows; increased features such as recurring payments, additional marketing tools, and one-click purchasing for off-platform merchants; as well as improved seller financing options that are being made to sellers on MercadoPago.

In all, then, a quarter with sustained Payments growth and an active pipeline of product improvements and launches.

As one final update on our initiatives, we continue to see steady traction in our platform approach. In addition to a growing number of third-party developers and other retailers that are integrating with MercadoLibre through our APIs, we have launched a fund to invest in companies that leverage our platform as a core part of their business models. So far, we have committed investments in businesses focusing on diverse business models, all leveraging our APIs.

Among current portfolio projects are companies in the microloan space to help fund working capital needs of MercadoLibre sellers, business intelligence solutions for these sellers on our platforms, and ERP solutions that focus on making trading on our platforms more efficient. These are primarily early-stage investments, typically in the $50,000 to $100,000 range, that if successful will add significant value to our users and generate both greater engagement and loyalty on our platforms.

Additionally, they serve as important early-phase users of our public APIs, giving us valuable feedback so as to continue improving on that front.

Wrapping up my review of the quarter's progress, we are pleased with the level of execution on most fronts and the growth of our business.

Now, let's move on to our financial performance for the second quarter. As usual, during my review of our P&L, I will call out year-on-year growth rates unless I specify otherwise.

During the second quarter of 2013, net revenues were $102.2 million (sic-press release), accelerating in local currencies and also in US dollars despite foreign exchange headwinds. Revenues grew 38% in local currencies and 26% in US dollars.

Gross profit margin was 72.3%, down only 81 basis points year over year.

Income from operations was $35.4 million, with an operating income margin of 31.6%. Year on year, operating income grew 11% in US dollars and 23% in local currencies.

Net income before income asset tax expense was $40.7 million, growing 16% in US dollars and 28% in local currencies.

Net income was $30 million, growing 18% year on year in US dollars and 30% in local currencies. This resulted in EPS of $0.67 for the quarter.

Top line growth was led by an accelerating core business. New users in the quarter were the highest ever, and sold items accelerated versus the prior quarter in all our key countries, primarily in Brazil, outpacing user growth, a sign of increased user engagement.

The resulting acceleration in GMV also drove core Marketplace revenue acceleration, though at a slightly less pace, resulting from listing type fee mix as growth in free listings accounting for an increased percentage of our GMV versus prior quarters.

Non-Marketplace revenue grew slightly faster than the core Marketplace, driven primarily by off-platform revenues that continue to grow at a faster pace than all other revenue sources, financing revenues that grew at a similar pace to the core Marketplace, both of these offset by motors and real estate growing at a slower pace than the core Marketplace, given the strong FX headwinds faced resulting from Venezuela's higher share of these Classified revenue streams.

The positive revenue trends we've just covered for each of our business units resulted in healthy growth for each of our largest countries. In the second quarter, consolidated revenues in local currencies grew -- 22% for Brazil, despite 33% sold item growth on lower ASPs and a slowdown in non-Marketplace growth; 66% for Argentina; 19% for Mexico; and 68% for Venezuela.

Advancing down our P&L, gross profit grew 25% in the second quarter, to $81.1 million.

Gross profit margin was 72.3% of revenues, versus 73.1% in the second quarter of 2012 and 72.1% in the first quarter of 2013. Both comparisons, year-on-year and sequential, show positive management of our gross margin profile, as investments in our platform and our customer experience both showed scale.

With Payments penetration relatively equal quarter on quarter, gross margins actually improved sequentially, while a higher proportion of Payments processing volume year on year was largely offset by efficiencies of scale in our variable costs related to MercadoPago. In fact, while Payments growth and its efficiencies are practically a wash, the 81 basis points of year-on-year gross margin contraction are essentially driven by further investments in our fraud prevention and trust and safety efforts, generating benefits that I will cover shortly further down on our P&L.

Operating expenses for the period totaled $45.7 million, 38% versus the second quarter of 2012. Operating expenses as a percentage of revenues were 40.7% in the second quarter, versus 37.2% in the same quarter last year and 44.3% in the first quarter of this year.

Year-on-year margin contraction basically arises from a higher accrual of our long-term retention plan, yearly wage adjustments, a 10% increase in headcount, and increased brand spending, all of these partially offset by efficiencies in chargebacks and bad debt. Within this frame, let me address each of our expense lines in greater detail.

Sales and marketing, which remains our largest line item, grew 24%, to $20.8 million, or 18.6% of revenues, versus 18.9% for the same period last year. Increased offline marketing accounts for 349 basis points of margin compression, as we aired our new TV campaign during the second quarter.

This step function in our brand spending was offset primarily by two factors also impacting within sales and marketing. First, we saw 255 basis points of scale in our chargebacks line. This resulted from a steady improvement in our rate of fraud loss provisions over TPV, as well as non-recurring recovery that accounts for 86 basis points of the total effect.

Second, once again we delivered a sequential improvement in bad debt, yielding a year-on-year reduction of 93 basis points when measured as a percentage of revenues.

Moving on to product development, expenses grew 59%, to $9.8 million, representing 8.7% of revenues in the second quarter, versus 6.9% in the same period last year. Salaries and wages are the principal driver of growth in this line, as we added more engineering talent through hirings as well as small scale acquisitions and took an 81-basis point margin hit as a consequence of increases to our long-term retention plan accruals.

Finally, G&A grew 49% year over year, to $15.1 million in the second quarter, or 13.4% of revenues, versus 11.4% a year ago. Once again, salaries and wages explain most of this growth, and long-term retention accrual alone accounts for 172 basis points of margin compression.

As a result, operating income for the second quarter of 2013 was $35.4 million. Operating income margin for the quarter was 31.6%, versus 35.9% in the second quarter of 2012.

Below operating income, we benefitted from $2.2 million of interest income, down 26% year on year as a result of lower interest rates on our investments.

We saw a $3.6 million gain in our ForEx line, almost $3 million more than a year ago, as the US dollar holdings of our subsidiaries appreciated, a natural hedge that we generate as part of our Treasury management.

As a result, pretax income was $40.7 million, 16% higher than in the second quarter of last year in dollars, and 28% higher in local currencies.

In the second quarter, income tax expense was $10.7 million, resulting in a blended tax rate of 26.3%, versus 27.7% in the second quarter of 2012.

Net income for the three months ended June 30, 2013, was $30 million, 18% higher than last year's $25.4 million net income. In local currencies, this was 30% higher than last year's second quarter result.

Net income margin was 26.8% in the second quarter, versus 28.6% for the same quarter of 2012, resulting in a basic net income per common share of $0.67.

Payments for the acquisition of property, equipment, intangible assets, and acquired businesses for the quarter totaled $35.2 million. The ramp-up in PPE was primarily driven by the purchase of additional offices in Argentina to accommodate future growth in headcount and purchases of commercial real estate in Venezuela as a strategy to preserve the value of assets that would otherwise be exposed to devaluatory risks.

Consequently, for the period ended June 30, net cash provided by operating activities less PPE totaled negative $6.2 million, versus $33.5 million last year.

Cash, short-term investments, and long-term investments at the end of the quarter totaled $261.9 million.

Concluding today's remarks, we are confident that the strong performance we have just reviewed further validates the strength of our ecosystem and highlights our ability to execute on our strategic initiatives. We are very pleased with these results, with the increasing strength of our balance sheet, and the strong momentum our business is experiencing. I look forward to further updating you on our progress over the remainder of the year.

And with that, we'd like to take your questions now.

Thank you. (Operator Instructions)

Jordan Rohan, Stifel Nicolaus.

Nice quarter, guys. I do have a question about the $3.6 million currency gain. You said it's from holding US dollars, but you report your earnings in US dollars. Can you remind me how this creates a gain when reported in US dollars, or perhaps what I might not be understanding about this? Thank you so much.

Sure. Hi, Jordan. So, essentially, the US dollar holdings of our local subsidiaries generate gains in the local P&Ls that then get consolidated in the consolidated reported numbers. So, it's the remeasurement that flows through the local P&Ls and then gets consolidated back into dollars.

And that would be different than if you had held the currency at the corporate level?

That's correct. So, if the currency is held at the corporate level, there is no dropdown to the local P&L before consolidating.

So, we should probably consider this a non-recurring, one-time thing and back it out from our estimates. Right?

No. All of our local subsidiaries have US assets, whether because they haven't paid dividends or they have assets that are US dollar-denominated. So, this actually happens on a quarterly basis. The distribution between US dollar assets and local currency assets, we try to manage in the most prudent way. So, we don't hold local currencies on the balance sheet beyond what our local currency obligations are.

So, all of our local subsidiaries have always had US dollar reserves that generate gains when the dollar appreciates but that also generate losses when the dollar depreciates. So, this could swing in either direction, but it's definitely recurring.

OK. Thank you very much. And I get most of that.

Ross Sandler, Deutsche Bank.

Thanks, guys. A couple of questions, Pedro. Can you just give us some additional color around the unit growth acceleration? Which categories and which regions are responsible for that acceleration?

And then, second question is I understand the rationale for the free cash flow being negative, given the property purchases, but just from cash flow from operations, it isn't really growing year on year despite obviously revenue growth and EBITDA growth. And it looks like it's mostly from credit card receivables being more of a downdraft this year. So, can you just give us a little color on what's driving that?

And then, the last question -- sorry for being so longwinded here -- is there's been a lot of scrutiny publicly in the press around financial reporting, given the hyperinflation in the region, and I know this is just par for the course, but if you were to report your 45% local currency GMV growth under the kind of, every day, FX rates, what would that look like in the quarter?

Thanks, guys.

OK. Great. So, three questions. The first one, units sold acceleration. I think we disclosed that one of the most positive data points of the Q was the strength of our Brazilian Marketplace. It's obviously our largest business, and we just called out the Brazilian growth rate of 33% in units sold for the quarter.

In terms of the other markets, strength I would say across the board. We haven't disclosed any of the other numbers and don't do that. But, in general, I would say Brazil driving the acceleration but no one that's lagging behind significantly.

So, that's the first one, and probably the most significant metric -- and I'll jump to your third question, because that's the one that strips out a lot of these currency-related issues and average ticket related issues. I think your question was, what's the impact of inflation on the business?

And I think anyone can do that number and back it out fairly easily. You have the revenue growths per country in both local currency and US dollars, and you can adjust in the inflationary countries for 20% to 30% inflation, Argentina and Venezuela. All the other countries are single-digit inflation. So, not as significant.

Again, this has usually been the case. We run a commission-based business, and so as cost of living in these countries escalate and there is inflation, we capture that immediately in the business model.

[And third], I think you were referring also to parallel or illegal exchange rates, particularly in Venezuela where the spread between the official rate and the parallel rate is most significant. That's also an additional driver of inflation. Don't have a number here on what the alternative reporting would be, simply because that's an illegal currency rate. I think important to stress that, that there's no optionality on our side. That's a rate that's not very liquid, illegal, and it would be impossible to carry out any accounting at that rate.

I think suffice to say that, yes, it does somewhat impact the overall inflation levels in Venezuela, and those are public, and it should be fairly easy to back out the numbers.

And then, the final question regarding cash flow from operations, essentially as our Payments business continues to grow, the stock of credit cards receivables also continues to grow. As you may recall, we have a policy of discounting all of those receivables back into the market. The timing of that discount varies at times, and so the balance sheet position and the subsequent cash flow from operation position could vary when you take the snapshot from one quarter to the other, if we decided to hold on to a larger percentage of those receivables than we had in previous quarters.

Again, this is usually a matter of max one to two weeks of additional holding of receivables. So, nothing that significantly changes the overall balance sheet exposure, but enough to impact the cash flow from operation metric.

Thanks, Pedro.

Gene Munster, Piper Jaffray.

Congratulations. If you could talk a little bit about the back half of the year and some of the comps that get progressively easier -- I know you don't give guidance beyond this quarter -- but how should we --? Is there any reason to think that that shouldn't make it easier for the business in the back half of the year? Does that have a measureable impact?

And then, second, is if you could go through take rate? Was the decrease due to a slowdown in smaller business lines, including Payments or Classified? Or, was it the fact that GMV accelerated?

Thanks.

I'll take the second question, mainly because we don't guide. So, yes, it's a fact that the comps get easier in the back half of the year. That's probably the only comment we'll make on that.

In terms of take rate, first of all, yes, the acceleration in GMV, which is the denominator in that equation, always has an impact on take rate. Additionally, just to give some more color on that, as I mentioned, we did see a slowdown in some of the [non-]Marketplace revenue streams. Classifieds, primarily motors and real estate, did grow at a slower pace than GMV, as did financing revenues from the consumer credit business. So, those two also dragged down take rate, because they're growing less than GMV.

And then, additionally, within the core Marketplace, there are some country mix dislocation, as countries with lower take rates have faster growth rate than, for example, Brazil, which has the highest take rate.

And additionally, we continue to see very strong success from our [premium] model, where we offer certain free listings to attract new sellers and then eventually upsell to those sellers. As a consequence of that, free listings as a percentage of overall GMV has gone up and since we don't immediately monetize those sales, because those listings are fully free and have no final value or insertion fees, that also drove core take rate down somewhat in addition to the country mix shift.

The great thing about those listings [is they have] been instrumental in capturing additional sellers and additional selection to the site. So, despite being somewhat of a drag on short-term take rate, we're actually extremely pleased with that premium component that we've been adding to the business model.

Great. Thank you.

Marcelo Santos, J.P. Morgan.

Good evening. I have a question about Brazil, actually two. First, I would like to understand a little bit better the new items, the changing mix that you're facing in Brazil, which you had declining revenues, but you had increasing item growth. So, I'd like to understand what kind of items you're attracting and how the mix is changing? That's quite remarkable, because there was a devaluation in the currency and even though this took place, it looks like that average selling price declined. So, I wanted to understand a little bit more about that.

And the second is financing revenues. What has been taking place? Why are they declining despite Pago remaining strong?

So, those are my two questions.

Great questions. So, the first one in terms of mix shift, we gave some color during the prepared comments. We're seeing extremely strong growth in some of the newer categories that we began to pursue over the last, I would say, 12 to 18 months. I called out a few of them -- home and garden, auto parts, toys and games, apparel and fashion. Some of those even growing twice as fast as the average. And those are lower ASP categories. So, that's I think a significant part of the story.

As we become less and less dependent on consumer electronics, that also helps us in moments of devaluation, because more and more of those categories are actually locally produced and don't have underlying dollar costs.

In terms of the decline in ASP, again it's mainly driven by category mix into these new lower ASP categories, but also -- and this will serve as a tie in to the financing business -- the higher ASP items within consumer electronics that are more dependent on financing have also decreased their overall share of sales. And so, we're selling more in new categories and for this quarter at least also sold lower ASP items within the consumer electronics category.

And then, in terms of financing, what we saw, just to put in perspective, was a slight deceleration. So, there isn't really much of a business trend to look at here. The take rate decline driven by financing revenues is in the low single digits. So, it's not very significant. If anything, I would say financing is mostly driven by our Brazilian business, and when you look at payment adoption it grew, but it grew less year over year than the previous quarter. And so, that also generates less growth in GPV that's available to cross sell the financing.

But, again, significantly lower growth rate than GMV, and I wouldn't look into a trend around this issue.

OK. Thank you very much.

Dan Su, Morningstar.

Thank you. Good afternoon. Thanks for taking my questions. I have a couple of questions regarding the mobile business. First off, you mentioned just now that mobile accounts for about a double-digit percentage of GMV. Can you talk about the trends in mobile traffic growth and the mobile conversion relative to your traditional PC traffic conversion?

And the second question is could you talk about if there is any differences in terms of product categories being researched, average purchase, and the payment method used on the mobile internet versus the traditional PC channel? And if you can talk across the major geographies -- Brazil, Argentina, et cetera -- that would be very helpful.

Thank you.

Hello. This is Marcos. With respect to mobile, as Pedro commented in the prepared remarks, it continues to grow steadily, quarter after quarter, reaching 10% of our volume and a higher percentage of traffic.

Mobile seems to complement desktop usage. Therefore, we see incremental transactions coming from mobile during the weekends and after office hours.

And with respect to average selling price, typically mobile transactions have a higher average selling price than desktop transactions.

And with respect to payment methods, as we have incorporated MercadoPago in the mobile checkout in the countries where it is offered, we are increasingly seeing increased usage of MercadoPago as a settlement mechanism in those countries.

Thank you very much.

Chad Bartley, Pacific Crest.

Hi. Thanks very much. I apologize if I've missed some of the information on this, but two questions. Can you give us any color or any sort of sense of the percent of listings that are free or maybe how that's changed over the recent quarters?

And then also, in the past you've given us some information on non-Marketplace revenue. I think you've broken that out as a percent of revenue and also how fast it's grown. Can you give us any information around the Q2 trends?

Sure. So, free listings, just to recap the strategy here very quickly, essentially we allow users who are new users or who do not have large volumes to sell up to a limited number of listings in the fully-free option, as a way to acquire new users. So, the overall percentage is obviously capped and controlled by us.

In terms of percentage of GMV, this is still in the single digits. So, it's not significant, but it has certainly been trending upwards for the last few quarters.

As a percentage of overall listings, it's higher than that. So, we've been able to capture more and more selection as a consequence of the free listings.

Now, because these listings by definition appear last on sorting algorithms, their conversions are obviously worse than any of the paid listings, and that's why they represent a larger portion of total listings than they do of successful listings and GMV.

I don't think we've disclosed specific trends or specific data, but single digits of GMV, more than that of listings, and with very positive traction over the last few quarters.

The second part of the question was the non-Marketplace businesses. So, I would say in general very much in line with Marketplace revenue growth. It's slightly up in terms of percentage, so growing a very small fraction more than the Marketplace year on year, I think in part mainly driven by the fact that in some of our larger markets Marketplace continues to accelerate in terms of GMV and successful items driving strong revenue metrics.

So, Q2 of 2012, non-Marketplace represented about 30.3% of the business, and Q3 of 2013, so this quarter, 30.5%. So, a 20-basis point increase in mix shift away from Marketplace.

Thank you very much.

Stephen Ju, Credit Suisse.

So, Pedro, I recall you mentioned the prospects of increasing the take rate on the last two conference calls, but it seems like you're backing off that move, given the volume acceleration. Where do you stand now?

And, another 4.5 million users added in the quarter, as the absolute number of users accelerated again. So, I recall you mentioned shortening up the user signup path that's accounting for the acceleration. Is that still the case? Or, was there another optimization move?

And, where are most of these users being added? Does the regional mix reflect your current revenue mix? Or, is it stronger in one particular region versus another?

Thanks.

Sure. So, let's see, take rate. I think the comments you're probably alluding to is we have said over the past few quarters that we haven't really increased core Marketplace final value fees in some of our key markets, like Brazil, for I would say many years now. And so, the thesis that we believe that there will be room in the future for take rate increases if we think that's the right decision to make is still intact.

Now, we've always said all along that we're managing this for the long term and that we're trying to grow the business and grow revenues driven by underlying unit growth and GMV growth and GPV growth and not so much by pricing. And so, we continue to not increase final value fee prices in most of our major markets, and we think that's a good strategy. It generates additional barriers to entry, and this continues to be extremely early stages of ecommerce in the region. And we like keeping prices low as long as the business and the P&L continue to be as healthy as it's been.

In terms of the acceleration in users, I did mention that we did run our branded advertising campaign. Again, just to reiterate the prepared remarks, I think the true measure of success for us of the branded campaign is continuing to see MercadoLibre as the top-of-mind ecommerce brand in the region in the surveys that we carry out and others carry out.

But we do notice also that it has had immediate impact in driving increased traffic and subsequently also increased new users to the site, and that probably explains some of the strength in the Marketplace business. So, the branded advertising despite being more of a long-term brand initiative does help to a certain extent quarterly results.

Thank you. And with that, I'm showing no further questions in queue. I'd like to thank everyone for your questions and for joining today's MercadoLibre second quarter 2013 earnings conference.

You may now disconnect. Have a great day.