美卡多 (MELI) 2013 Q3 法說會逐字稿

Welcome, ladies and gentlemen, to the MercadoLibre third quarter 2013 earnings conference call. (Operator Instructions) And, as a reminder, this call is being recorded.

I would now like to turn the conference over to the Company.

Hello everyone, and welcome to MercadoLibre's earnings conference call for the quarter ended September 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, CFO. Additionally, Marcos Galperin, Chief Executive Officer, and Osvaldo Gimenez, Executive Vice President of Payment, 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 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 Factors 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 third quarter 2013 earnings press release, available on our Investor Relations website.

Now, let me turn the call over to Pedro.

Good afternoon, and thanks for joining us. I'd like to start today's call with a brief update on the major trends we are seeing across the ecosystem, reviewing some of our KPIs, and delving into the most relevant qualitative aspects behind our progress, before jumping into a detailed review of our financial performance.

I'm pleased to say that our third quarter of 2013 saw good progress along many different fronts, as each of our ongoing strategic initiatives gained further traction and as we continue to execute against our plan, despite currency devaluations which still present headwinds for our reported financials.

As a result, our business delivered strong and accelerating revenue growth of 45% in local currencies, 27% in US dollars, given the aforementioned currency headwinds, and EPS growth of 30% in local currencies, and 12% in US dollars. We saw strength across most geographies, with accelerating revenue growth in local currencies in Brazil, Argentina, and Venezuela.

As we indicated last quarter, the Company's results confirm that our ability to consistently deliver solid execution in a market constantly expanding due to the secular shift of commerce towards online channels makes for a powerful business combination that continues to override the softer micro cycle in most countries where we operate.

Let me give you some data to illustrate this virtuous business cycle generated by secular tailwinds that we benefit from. According to comScore data for the first half of the year, internet unique visitors in Latin America are growing 13% year on year, the fastest consolidated pace of growth out of any continent worldwide. This growth in our addressable user base is compounded by our ability to further penetrate existing internet users, leading to 20% year-on-year growth in new users on our platforms during the third quarter.

Furthermore, as we maintain our pace of innovation and focus on delivering an improving trading experience to our users, we are able to drive incremental results in engagement metrics from those existing users, leading to volume growth that outpaces user growth, 25% in units and 32% in payments processed, both year-on-year.

This cycle of increasing user engagement and increasing market penetration atop increasing market size leads to incremental brand awareness for MercadoLibre among consumers. As a September 2013 study by Millward Brown quantifies, we not only remain the regional top-of-mind leader for ecommerce in each of the markets where we operate, but have also seen improved brand awareness as reflected by an unaided recognition level of our brand that surpasses 50% of respondents regionally and peaks at above 80% in some of our largest markets.

This improved brand awareness allows us to continue capturing new users as they move online and gain share of wallet of existing users, thus kick starting the cycle I just mentioned all over again.

Furthermore, we believe we have been able to maintain this strong brand position in Latin America by focusing on the following initiatives -- offering the widest possible selection of products and services at the lowest possible prices; while making our platform compatible with a broad base of devices and form factors as they become increasingly relevant; and by providing the right set of value-added functionalities and services, primarily through technology, to guarantee an outstanding user experience.

Each of our strategic initiatives is about improving on one of these key aspects. Let me then update you on how they advanced in the third quarter. First, we continued to diversify product mix on our platform, be it through our work on vertical categories or through our open platform, which in the third quarter enabled new integrations with renowned brands such as DC, Mizuno, Pony, Quiksilver, and Diesel, in apparel, and Philips in consumer electronics, to name a few.

Combined with the right commercial push, these initiatives are diversifying the basket of what gets bought on our platform.

In addition to apparel, sports and fitness, baby products, furniture, and office equipment all kept gaining share of the units sold on a quarter-on-quarter basis, not to mention year-on-year as well.

In terms of capturing share in new devices, our mobile initiatives continue breaking new ground, expanding as a point of entry and as an habitual gateway to our platform. Mobile keeps gaining share of sales, ahead of our own expectations, and in September, it broke into double-digit territory as a percentage of our total gross merchandise volume for the first time. In fact, mobile GMV has been growing in the triple digits all year, contributing to the vibrancy of our core Marketplace.

In the meantime, our key value-adding services kept gaining traction on our platform in the third quarter. Payments continue to outplace Marketplace growth, particularly in Brazil where on-platform total payment volume continued to reach record levels, gaining 4 percentage points of gross merchandise volume quarter on quarter. Argentina also saw good progress, as on-platform penetration rose by 3%, also quarter on quarter.

As this takes place, our shipping solution, MercadoEnvios, expands its runway. Operational in Brazil and Argentina, it is growing extremely well from a small base, claiming share of GMV on a monthly basis. We started the year with only a handful of transactions, but during September surpassed 4% of units sold in both countries, with Brazil leading the way with more than 5% of units being shipped through MercadoEnvios. We look forward to continuing on our roadmap of shipping initiatives by adding more countries, carriers, and logistics-related services to the offering.

Finally, as you recall, we are complementing all of these initiatives with parallel efforts and investments in our customer service operations. We are pleased to report that the sum of these efforts and functionalities contributed to important sequential and year-on-year improvements in our net promoter scores, and we believe we will be able to sustain this positive trend going forward.

Having covered these operational highlights, let's now review how our key metrics performed in the third quarter of 2013. New registered users on our platform grew 20%, as I mentioned earlier, with mobile contributing 12% of these in the quarter. Items sold grew 25%. GMV grew 49% in local currencies. Total payment transactions grew 32%. And total payment volume grew 55% in local currencies.

Let's now see how all this flowed through to our financials, beginning with our consolidated highlights for the quarter. All growths I'll mention are year-on-year unless I specify otherwise.

During the third quarter of 2013, net revenues came in at $123.1 million, accelerating in local currencies and in dollars, as well, despite foreign exchange headwinds. Revenues grew 45% in local currencies, and 27% in US dollars.

Gross profit margin was 72.3%, 133 basis points lower than last year.

Income from operations was $37.4 million, with an operating income margin of 30.4%. Year on year, operating income grew 11% in US dollars, but 28% in local currencies.

Net income before income or asset tax expense was $41.2 million, growing 15% in US dollars and 33% in local currencies.

Net income was $29.1 million, growing 12% year on year in dollars and 30% in local currencies. This resulted in earnings per share of $0.66 for the quarter.

Our revenue acceleration during the quarter was driven mainly by the Marketplace businesses, with strength across most markets, including Brazil where good traction on the supply front brought placement fee revenue acceleration and while favorable listing type mixes brought final value fee acceleration despite slightly decelerating GMV, leading to an increase in Marketplace take rate in that country.

Our non-Marketplace revenues also grew well. Classifieds and ad sales posted continued growth, in line with the previous quarters. The Motors Classifieds category was the driving force behind non-Marketplace revenue growth in Mexico and Venezuela, while in Brazil and Argentina non-Marketplace revenue growth was primarily [spurred] on by off-platform MercadoPago processing revenues, which remained our fastest growing revenue stream, while financing revenues despite slowing monetization due to increases in interest rates continued to grow, leading to a record volume of finance transactions during the quarter.

As a result, consolidated non-Marketplace revenues grew 21% year on year in US dollars and 39% in local currencies.

Consequently, total revenues accelerated, with good momentum heading into the fourth quarter, delivering local currency year-on-year revenue growth of 28% for Brazil, 66% for Argentina, 19% for Mexico, and 92% for Venezuela, where currency and inflationary distortions impact growth, but where nonetheless we continue to run a profitable and fully self-financing business that presents us with strong earnings potential in the mid to long term and where units sold grew 26% year on year during the third quarter, underlining the resilience of our business model even in tough macro conditions.

Furthermore, if we consider local currency growth for our consolidated revenues excluding Venezuela, we get year-on-year growth of 37% in the third quarter, as all our operations are witnessing robust volume growth, starting with Brazil which posted 29% growth in units sold during the third quarter year over year.

Advancing down on our P&L, gross profit grew 24% in the third quarter, to $88.9 million. Gross profit margin was 72.3% of revenues, versus 73.6% in the third quarter of 2012 and 72.3% also in the second quarter of 2013.

Gross margin compression year over year is primarily a consequence of our previous-year third quarter having had a 50-basis point non-recurring sales tax credit that generated a tough comparison, and an additional 70 basis points of margin contraction from our incremental investments in fraud prevention this year. Beyond those two items, a higher proportion of payments processing fees as a consequence of growth in MercadoPago have been offset by scale and efficiencies in site operations and customer service.

Operating expenses for the period totaled $51.5 million, 36% higher than in the same period of 2012. Operating expenses as a percentage of revenues were 41.9% in the third quarter, versus 38.9% in the same quarter last year and 40.7% in the second quarter of this year.

These expense levels are coming in according to plan, as we have been investing more aggressively than in the past in product development, brand spending, and in compensation costs to attract and retain talent. We believe that these three areas are critical to our long-term success, and we are comfortable with the margin profile the business continues to deliver, despite the year-on-year deleveraging generated by these line items.

I will now call out the most significant variations in OpEx levels in greater detail. Sales and marketing, which remains our largest line item, grew 30%, to $24.2 million, or 19.6% of revenues, versus 19.1% for the same period last year.

Our TV campaign accounts for 163 basis points of additional marketing spend versus last year's third quarter. Salaries and wages account for another 29 basis points, while both are largely offset by a 70-basis points improvement in our chargebacks line as we kept reducing our rate of fraud losses over credit card volume, and an 88-basis point improvement in bad debt and trust and safety combined.

Moving on to product development, expenses grew 51%, to $12.1 million, representing 9.8% of revenues in the third quarter, versus 8.2% in the same period last year, making this the line item where expenses grew most markedly versus revenues on a year-over-year basis. One quick note on this. As a fast-growing technology company, if there is one line where we believe short-term scale is less relevant, this is it.

And finally, G&A grew 35% year over year, to $15.3 million in the third quarter, or 12.4% of revenues, versus 11.6% a year ago, primarily driven by an increase in compensation-related costs.

As a result, operating income for the third quarter of 2013 was $37.4 million. Operating income margin for the quarter was 30.4%, versus 34.7% in the third quarter of 2012.

Below operating income, we benefited from $2.8 million of interest income, down 5% year on year as a result of lower interest rates on our investments.

We also saw a $1.6 million gain in our ForEx line, as the US dollar balances held by some of our subsidiaries appreciated quarter on quarter, whereas in the same period last year we saw negative $200,000 from an inverse effect.

As a result, our pretax net income was $41.2 million, 15% higher than in the third quarter of last year, in dollars, and 33% higher in local currencies.

During the third quarter, income tax expense was $12.1 million, resulting in a blended tax rate of 29.3%, versus 27.5% in the third quarter of 2012.

Net income for the three months ended September 30, 2013, was $29.1 million, 12% higher than last year's $26.1 million. Net income in local currencies was 30% higher than in the same period of last year.

Net income margin was 23.7% for the quarter, versus 26.8% for the same quarter last year, resulting in a basic net income per common share of $0.66.

Payments for the acquisition of property, equipment, intangible assets, advances for fixed assets, and acquired businesses net of cash acquired for the quarter totaled $38 million, driven by the purchase of commercial real estate in Venezuela as a strategy to protect value in that country from devaluation risks.

Consequently, for the period ended September 30, 2013, free cash flow totaled $25.7 million, versus $21.9 million last year, during the quarter, despite the investments made in fixed assets.

Cash, short-term investments, and long-term investments at the end of the quarter totaled $289.2 million.

Concluding this afternoon's review of our business, we are pleased with the operational results that all parts of our ecosystem are showing and feel that they are all falling in place to deliver a very solid financial performance.

The multiple initiatives we are focused on continue to align themselves nicely behind our ultimate goal of delivering world-class trading solutions for our community of buyers, sellers, and partners.

I look forward to reporting our progress during our next call, after the holiday shopping season.

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

(Operator Instructions) Gene Munster, Piper Jaffray.

Good afternoon, and congratulations on the GMV growth on the take rate. If you could give a little bit of context, I know you gave the growth rate at local currency ex-Venezuela was 33%. Pedro, what would have that number have been in the June quarter?

And then, a follow-up question.

Gene, I think we started disclosing the ex-Venezuela now. So, I don't have that in front of me, and we haven't made any disclosures on that.

OK. And then, separately, is you have some easy comps in December -- I know you don't give guidance -- making it a little bit more difficult in March. As we start thinking about 2014, can you give us some just general context about the acceleration in mobile and how that could impact? And the open API? And just in general, more or less just how to think about the sustainability of these impressive local currency growth numbers versus the reality that the numbers are just getting bigger? So, as you're thinking about 2014, I guess naturally those local currency GMV growth rates will come down, but how should we think about some of these other accelerators like mobile and the open API offsetting that? Thank you.

So, directionally, Gene, I think we continue to be extremely positive about the business. This is still very early for ecommerce in general, and I think law of large numbers, it's probably a bit early to speak about that.

I think we have embarked over the last 12 to 18 months on a series of strategic initiatives that we've been very consistent in giving readouts on them. And the reality is that many of these have I think their most significant upside still to come. These are mid- to long-term investment cycles in mobility, in opening our platform, in shipping, in payments. And as I mentioned in the prepared remarks, I think we feel very good about how many of these are beginning to fall in place and align themselves.

So, I think having said that, we believe 2013 has been a very good year of setting the stage for 2014 and beyond, in terms of growth and the opportunity behind our business.

Great. Thank you.

Mark Miller, William Blair.

Hi. Good afternoon. Pedro, can you put into perspective the modest deceleration in the rate of units sold quarter on quarter, versus the acceleration in local currency GMV quarter on quarter? Is the difference really just a higher rate of inflation? Or, is there something else that's impacting that average ticket?

So, a couple of things. If we look at the deceleration, it happened a few percentage points in Brazil. We had called out Brazil for the last quarter, 33% down to 29%. Brazil GMV as I mentioned in the prepared remarks is actually down slightly, offset by improved monetization in the Marketplace business, still growing units very strongly.

Average selling prices even when we isolate for inflationary impact and we look at mix shifts did improve somewhat in Brazil and some of the other markets. So, no, it isn't entirely inflation. There's also positive product mix shifts that goes into that.

And I think more importantly, on the inflation front, this is a commission-based business. So, from a revenue perspective, we do capture those price increases whether they be purely price inflation or mix shift across different categories.

OK. Got it. Yes, [that's an] important point. On the shipping solution, can you share with any metrics? I know this is very early; it's still small. But what do you think for customer satisfaction when the shipping solution is employed? How is this affecting fulfillment times? And then, what's the biggest pushback you get from sellers to engage with the shipping solution?

Hi. This is Marcos. So, as Pedro was saying on the prepared remarks, we're very happy with the way shipping is evolving. We finished the quarter at an all-time high, and we expect very strong and continued growth going forward.

The feedback we're getting from sellers is very positive. Obviously, we're growing from a low base, and the product is still in its early stages of development. We have many, many improvements that we are working on and that we will continue to work on for the following quarters.

But we see overall sellers are excited and eager to join, and they are joining at record numbers every day. So, [therefore,] we're very happy with this current efforts in this initiative, but it's going to take us several years to get to where we want to be.

OK. Then, I just have a final question on the TV marketing campaign. How do you assess the ROI on that? The [check kioske] campaign? I thought that was great.

Obviously, it's harder to measure ROI on offline campaigns, but we track, as Pedro was saying, brand awareness. We track ad visitors from [non-traceable] sources, from natural surge, and things like that. And we've seen a very healthy increase in all those metrics. We attribute an important part of those to the TV campaign.

But I would say overall in our overall marketing budget, offline is not the most important aspect of our marketing campaign by any means.

Ross Sandler, Deutsche Bank.

Thank you, guys. Two questions. First on unit growth, and then a housekeeping question on the model.

Pedro, the unit growth decel is somewhat surprising given the easier comparable versus last quarter and the increased marketing. So, can you give us a little bit more color on which regions are experiencing some of the deceleration versus those that are holding up, outside of the comments on Brazil going from 33% to 29%?

And then, the second question is just a housekeeping on sales and marketing, and this may be a really bad question. So, I apologize in advance. But you guys have continuously called out improvements in bad debt and fraud loss chargebacks within sales and marketing. So, the question is what's driving those improvements? It seems somewhat counter-intuitive given the macro trends that some of the regions are experiencing. So, can you just talk about what fundamentally you guys are doing to detect bad transactions, or drive those improvements?

Thanks.

So, let me start with the unit growth question, Ross. If we look sequentially, the decel has been about 200 basis points. As I called out, the majority of that is the Brazil decel from 33% to 29%, which is still a very solid number.

The other markets I would say are very much in line with the previous quarter. Some of them are slightly up, some are slightly down. But by and large, no significant change in the trajectory over the previous quarter in most of the markets.

So, Brazil has the biggest impact there on the deceleration.

In terms of the chargebacks if I've understood the question, I'll try to answer it. We have both invested significantly over the last year, and you can see that in the COGS line, but also we believe improved significantly our capability around fraud detection and fraud prevention.

And so, this is beyond a macro issue of what's happening at consumer loan default rates. But rather, this is operationally driven. It's gotten a lot harder for people to be able to charge something on MercadoPago and then intentionally not recognize that purchase, as our modeling and our operational capabilities have improved on that front. And that's what's driven the consistent improvements over the last few quarters.

There was a question around the marketing spend, I believe. I guess that was associated to the units sold. So, I think we've answered both your questions.

Thank you.

Jordan Rohan, Stifel Nicolaus.

Hi. This is Alex [Chavderhauf], for Jordan Rohan. Can you discuss the Treasury policy change with regard to Venezuela? Is it possible to get any dollars out of the country at all? And if not, how long do you think it will be that way? Thank you.

So, I wouldn't say there's been a change in the Treasury policy. We continue to have a fairly conservative and consistent Treasury policies in countries where those are applicable, where the vast majority of our cash is stored in US dollar balances in the US.

The point you allude to is over the last, I would say since the beginning of this year, even the small amounts of dollars that we were previously able to repatriate from Venezuela have not been granted. And so, the profit that the Venezuela subsidiary generates all stays within Venezuela.

So, as an asset management strategy, what we began to do to preserve that value in an asset that makes more sense mid term than bolivars is to buy either operational real estate -- so, our own offices -- or more recently, commercial real estate as an asset value protection.

In terms of understanding for how long Venezuela might continue to have restrictive policies on cash repatriation, I think your guess is as good as mine. I don't think it's anything that happens in the short term, and fortunately we don't manage this business for the short term.

So, in the meantime, we continue to grow our business there. As I just called out, our Venezuelan business continues to grow at 25%-plus units year on year, despite the tough macro. And I think mid term to long term, when Venezuela finally turns around, we will emerge from that with a very strong competitive position in a sizable market. And hopefully, we'll have an [interest] asset base in terms of real estate that we then will be able to repatriate back to the US.

Marcelo Santos, J.P. Morgan.

Hi. Good afternoon, and thanks for the opportunity. My question is related to shipping and delivery. You discussed a little bit of this in your prepared remarks and on the questions. I just wanted a little bit broader update on several initiatives you have. So, I think you had a pilot plan that you would work on fulfillment. You had in Argentina an initiative where you were working with I think a delivery company for I think same-day delivery. I'm not really sure if that was the case.

So, just a broader update would be very nice.

So, as I was saying earlier, we have a multi-year plan for shipping and for logistics. We're just starting on that plan. We're very happy with how we have started -- growing very rapidly, and with delivering a great user experience, bringing down prices, standardizing prices, incentivizing free shipping, providing additional traffic to those sellers that are using our shipping solution, and offering free shipping.

So, plenty of things that we like. But it's very early on our plan, and we intend to dive much deeper. And we will be more than happy to provide additional color on the initiatives that we are undergoing as they come live and start delivering actual results.

OK. About the customer relationship initiative, you migrated to Salesforce and you are implementing live chat and maybe live calls. Do you have any update on that front?

Yes, making great progress, as well. As Pedro was mentioning, we see consistent increases in our net promoter scores, both on a week-on-week basis, month-on-month basis, and even further on a year-on-year basis.

As we have said, we have recently started to experiment with [free to call], which is also providing great results and amazing net promoter scores.

So, we are opening different channels for people to be able to contact us and for us to be able to provide the best solution and the best response possible. And I think we are substantially better than what we were a year ago, but we still think we have a long ways to go to be where we want to be.

OK. Thank you very much.

You're welcome.

Stephen Ju, Credit Suisse.

Marcos, is there anything you can share in terms of the behavior of the incremental user you're adding either on desktop or mobile? It seems like the incremental items purchased for the new users are coming down. And I'm wondering if the newer users are taking longer to get comfortable buying stuff on the platform?

And Pedro, can you give us some additional color on the step-up in product development, in particular? What are the additional expenses going toward? Is it additional [regional talent] data centers? Or, is the market for talent getting tougher?

Thanks.

On mobility, I wouldn't attribute the deceleration in units shipped to either mobile or desktop or any shift in device. I think these are quarter-on-quarter oscillations. Given the rate at which the market is growing, what we're growing in terms of units is still probably slightly above market, or at market, with very solid results in our largest market, which is Brazil. And so, I wouldn't look for any trend line there, as consumers shift to other devices.

I think we are noticing some very interesting numbers coming out of our mobile devices and our overall strategies, and I shared some of those. We're seeing a significant uptick in user registration, as you just mentioned.

Average tickets on mobile devices are slightly higher than on desktops currently, which is to a certain degree somewhat counter-intuitive. I think we've attributed that perhaps to an increased amount of showrooming, where consumers actually have their hands on the product and are willing to buy more expensive things. Perhaps it's also a higher income demographic.

But still I think early days, and there's lot of data that we will continue to sift through going forward.

And the step-up in product development?

Your second question (multiple speakers). So, the step-up in product development, most of that is really compensation costs for growing the number of engineers and retaining talent. I think we've historically always said that over longer periods of time we're very focused on driving scale in the business in sales and marketing and G&A. Occasionally, we will enter investment cycles where that doesn't happen, but the longer-term trend for a business that is so scalable as ours should definitely be to scale those two lines.

Product development, we're less focused on driving scale from. It's the smallest of the three line items, and it's the one where we need to make sure that we continue to invest in. It's the most important line for the long-term prospect of the Company, and I think this quarter has been a case in point.

And most of that is actual compensation for engineers. There are some additional costs, but that's the biggest driver.

Got it. If I can log one more, just out of curiosity, what are you going to be doing with the new office buildings in Venezuela? And are these occupied right now? And are you going to be collecting some sort of rental income?

So, if you look at our purchasing of real estate, the initial purchase we carried out in the past was actually for our own operations. So, those we're using ourselves. The more recent ones, as you mention, we do have a tenant for it now. There will be monthly rental fees that we will accrue from that.

Again, the objective here is really to preserve the value in [bricks] and in commercial real estate that's of AAA quality, not to generate revenue from this. But it is a consequence of not leaving it idle.

OK. Thank you.

Michel Morin, Morgan Stanley.

Two questions. First, on Brazil, was there -- did you notice any disruption from the demonstrations that took place during the summer months and I suppose continue to take place on and off?

And then, secondly, if you can elaborate a little bit more on Venezuela? What is driving that 92%? Obviously, we know that there's inflation, but is the high inflation also affecting behavior of your users? Are they more inclined to look at acquiring some assets that [a little bit], as you're doing with commercial real estate, is becoming a bit of a store of value for them? I'm just wondering if you can explain a little bit better that 92% figure?

Thank you.

So, with respect to Brazil, I would say we cannot discern on any impact, if there was any. It's not something that we can account for.

Typically, macro factors and, very specific, I would say even micro factors, like those demonstrations in Brazil, have not had an impact on our business. Our business is mostly driven by the secular trends that are driving internet penetration from 3%, 10 years ago, to 50% in Brazil today, driving down the prices of devices, increasing the quality of broadband. All those things continue unabated in Brazil and in the region.

And whether the economy grows at 3%, at 1%, or declines at 2%, typically have not impacted our growth rate. And I think that the demonstrations are just one more anecdote in that.

We are growing very healthy in different countries like Venezuela or Brazil, which have very different economic indicators.

So, that goes to address the first question. And with respect to Venezuela, your question was --.

I think you were trying to get a sense if there's any element of I think carryforward of consumption under inflationary cycles? I think what we've always said about this is what is true about inflationary economies is that savings rates are very low. People don't typically hold on to their money for very long, and that's the case I think of any economy in an inflationary cycle and has been the case for as long as Venezuela has had high inflation, which has been over 10 years now.

So, I think that explains part of the strength of the business, despite the incredibly tough macro environment. We're still growing units -- again, 26% year on year -- and have been doing numbers similar to those over the last few quarters. So, no one is saving, and people are buying.

I think the gap between units and local currency GMV is probably driven more by inflation, as you were saying, and to a lesser extent any significant carryforward of purchasing.

Great. Thank you very much.

And with that, I'm showing no further questions in queue.

We'd like to thank you, ladies and gentlemen, for joining today's MercadoLibre's third quarter 2013 earnings conference call. You may now disconnect. Have a great rest of your day.

Thanks, everyone.