Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Hey listen, we have been really lucky in checking in
Speaker 2: on the c suite this week, and a lot of
Speaker 2: it has to do because so many companies around certainly
Speaker 2: across the United States, but around the globe also reporting
Speaker 2: their results. Shares of Mercado Libre they are actually trading
Speaker 2: up about two point eight percent in today's session. They
Speaker 2: will lower in the pre market, but certainly the regular
Speaker 2: session investors coming in. This is after the e commerce
Speaker 2: firm posted earnings that missed estimates. As the company ramps
Speaker 2: up marketing spending to recruit more users, now move to
Speaker 2: lower the threshold for free shipping in Brazil, also cripping profitability.
Speaker 2: We'll get into that in just a moment. We'll point
Speaker 2: out analysts the strategic value in these initiatives, saying they
Speaker 2: will help shore up long term growth even as they
Speaker 2: weigh on margins for the time being. So let's get
Speaker 2: into the business. Time for our CFO briefing with us,
Speaker 2: his Martin de los Santos, he's CEO of the e
Speaker 2: commerce firm Riccardo Libre. He joins us from Montevideo, Uruguay,
Speaker 2: and he will be featured we should point out in
Speaker 2: the upcoming edition of the Bloomberg CFO Briefing newsletter, which
Speaker 2: you can sign up for at Bloomberg dot com slash
Speaker 2: CFO Briefing. Also with us as Nina Trapman. She's Bloomberg
Speaker 2: News senior editor who writes the Bloomberg CFO Briefing newsletter.
Speaker 2: She's here in studio Martin. Great to have you here
Speaker 2: with Nina, Matt and myself talk to us about the quarter,
Speaker 2: because it does seem that investors analyst weighing in that
Speaker 2: the biggest question is on investments and what you are
Speaker 2: doing how they will provide some future growth. But welcome, welcome,
Speaker 2: thank you for having me.
Speaker 1: How are you?
Speaker 3: Yes, we had a great quarter, really in terms of
Speaker 3: the results that we delivered revenue Glubay thirty four percent
Speaker 3: a year, the delivery operating income a record operating income
Speaker 3: of eight hundred and twenty five million dollars. I'm more
Speaker 3: important than that we continue to grow our news surveys
Speaker 3: both on our commerce and fintech platform. Our buyers on
Speaker 3: the commerce platform luble by twenty five percent year a year.
Speaker 1: On fintech's rule Bay thirty percent.
Speaker 3: Credit book double year and year GMB, which is the
Speaker 3: volume to accepted America liver grule by twenty nine percent
Speaker 3: in Brazil thirty two percent in Mexico. In both cases
Speaker 3: we continue to gain market share, so very good, you know,
Speaker 3: very strong operating metrics. And like you said, this particular
Speaker 3: quorder was a quarter of investments. We opened two new
Speaker 3: food filming centers to add to the more than thirty
Speaker 3: four film centers that we have throughout the region.
Speaker 1: We also made a big change.
Speaker 3: In terms of lowering the free shipping threshold in Brazil,
Speaker 3: which is a strategic move that we have been doing
Speaker 3: for many years and it's paying off very nicely. And
Speaker 3: also we got you to invest in a credit card,
Speaker 3: but very excited normally about the results. More important than
Speaker 3: that about the future and the opportunity that we had
Speaker 3: ahead of us, both in commerce as well as filtech.
Speaker 4: You mentioned the threshold for free shipping in Brazil as
Speaker 4: one of the contributors. I think to you missing estimates
Speaker 4: for net off it as well as core earnings. I'm
Speaker 4: just wondering, as a CFO of a fast growing business,
Speaker 4: how do you think about profitability and how do you
Speaker 4: manage the short versus versus long term that's.
Speaker 3: I mean, we talked about this, Nina, I remember talking
Speaker 3: to you a few quarters ago.
Speaker 1: That's it.
Speaker 3: We try to balance, right, We try to balance short
Speaker 3: term profitability with the growth opportunities that we have ahead
Speaker 3: of us.
Speaker 1: So we want to make sure that we do not
Speaker 1: miss those opportunities.
Speaker 3: When you look at commerce penetration of e commerce in
Speaker 3: Latin America, it's roughly mid teams fifteen percent compared to
Speaker 3: maybe twenty five percent, thirty or forty percent in China,
Speaker 3: hour in the US, So there's plenty of room to
Speaker 3: continue growing the fintex side of the business. The same
Speaker 3: thing happened most people in Latin America have not been
Speaker 3: financially included by the financial system, so that we see
Speaker 3: a large opportunity to expand our footprint on the fintech
Speaker 3: side of the business and Marcalo Pao so at the
Speaker 3: same time, to capture our opportunity, it requires investments. Some
Speaker 3: of those investments might put some short pressure, but I
Speaker 3: think this is a good example. When we lower the
Speaker 3: free free shipping threshold, it does put pressure in the
Speaker 3: short term, but we have approve and over time, and
Speaker 3: we've been doing this since twenty seventeen when we introduced
Speaker 3: free shipping in Brazil. At that time the free shipping
Speaker 3: threashold was one hundred and twenty rarees. We brought it
Speaker 3: down to eighty and now we brought it down to twenty.
Speaker 3: So we have proved all the time that by lowering
Speaker 3: the free shipping threshold, we eliminate the most you know,
Speaker 3: the high, the most frictional point in terms of buying
Speaker 3: things online for people. So we're eliminating that friction, really
Speaker 3: generates a lot more volume and then eventually that translates
Speaker 3: into profits.
Speaker 1: So I think it's a it's a strategy that has paid.
Speaker 3: Out to us, and the long term investors of Margalivera
Speaker 3: understand it, and we're already comfortable with the investments that
Speaker 3: we're doing.
Speaker 4: You mentioned Brazil. It's of course an interesting market just
Speaker 4: in the current terror of debates that we're seeing with
Speaker 4: the Brazilian government so far holding out tow to Trump
Speaker 4: and basically not giving in on the Trump Terraff suggestions
Speaker 4: for Brazil. Just wondering and how far are you seeing
Speaker 4: that play out in terms of consumer confidence and consumer spending.
Speaker 4: Are you seeing any impacts in countries like Brazil I
Speaker 4: know you're also doing business in Mexico and other countries,
Speaker 4: all of which will face higher terrors as part of
Speaker 4: the US renegotiation of terrorsts around the world.
Speaker 3: Yes, this is something that we are monitoring closely. Obviously,
Speaker 3: we do not export into the US, so there's no
Speaker 3: direct impact on our business, but it can have secondary
Speaker 3: effects on the economy, as you mentioned, we have not
Speaker 3: seen that so far. As I mentioned earlier, we are
Speaker 3: growing by twenty nine percent our GMB in Brazil as
Speaker 3: that the management which is amount of money investing of
Speaker 3: our users, investor mark delivery more than DOW in Brazil
Speaker 3: ear year. Our credit card book has grown by one
Speaker 3: hundred and eighteen percent. The profitability of the acid quality
Speaker 3: of our credit will continue to be very solid in Brazil.
Speaker 1: So we have not seen any you.
Speaker 3: Know, any deterioration on macro, on consumption, but obviously it's
Speaker 3: something that we are monitoring closely.
Speaker 5: Martine Gwendia Matt Miller here in the studio with the ladies.
Speaker 5: I was really blown away by the growth at Mercado
Speaker 5: Credito and I wonder if you're watching closely for signs
Speaker 5: of credit stress there, because I think you had like
Speaker 5: ninety percent growth.
Speaker 1: That's correct, that's correct. Thank you for for a question.
Speaker 3: Yeah, obviously, when we look at credit, we take it
Speaker 3: very seriously. We are very careful in the way we
Speaker 3: manage credit, but the way I used to run the
Speaker 3: great business before taking the position of CFO. So the
Speaker 3: first thing we look at is the health of our book.
Speaker 3: We saw that npls and we disclosed this number are
Speaker 3: the lowest record, lowest number since we've been disclosed in
Speaker 3: the metric. The NAYMA, which is a measure of profitability,
Speaker 3: is also improving quarter on quarter. So we see very
Speaker 3: healthy science in terms of our book and a profiliarity.
Speaker 3: So the reason why you're seeing ninety one percent growth
Speaker 3: in our credit book is because we are seeing good
Speaker 3: results in terms of our models predicting default rates and
Speaker 3: the quality of our prede book continues to be very healthy.
Speaker 3: If we need something different, we will slow down because
Speaker 3: you know, we're very conscious with the way we manage
Speaker 3: our credit business.
Speaker 2: We're talking with Martin de los Santos. He is the
Speaker 2: CFO Mercado Libre joining us from Uruguay. We should also
Speaker 2: point out that this is the largest company we to
Speaker 2: point Latin America's most valuable company if you think about
Speaker 2: market caps, so really significant. We were talking about fintech,
Speaker 2: and you know, you were talking about kind of the
Speaker 2: health of that portfolio, but what can you tell us
Speaker 2: more Martine when it comes to the mix of customers
Speaker 2: that are in that portfolio.
Speaker 3: I think what we're seeing is we're seeing all the
Speaker 3: different type of customers within the economics segments of the population.
Speaker 3: Keep in mind that we acquire most of our users,
Speaker 3: most of our credit users from the marketplace and all
Speaker 3: types of people using our marketplace, so we have the
Speaker 3: advantage of having the distribution of medicalivery, but also they
Speaker 3: buying information that those people have on our marketplace, and
Speaker 3: we use that information through AI and machine learning models
Speaker 3: to escore people, and we have models that are very
Speaker 3: accurate at predicting credit risks.
Speaker 1: So you will find people of all kinds of.
Speaker 3: Social levels within our ecosystems that are like half of
Speaker 3: the people that we offer grade too. We offer credit
Speaker 3: for the first time they never had access to create.
Speaker 3: But also the other half are people that properly moving
Speaker 3: their fintech business to us because we offer it much
Speaker 3: better user experience than the traditional bands.
Speaker 4: Martin one question in terms of earnings, I noted that
Speaker 4: you also pointed out the impact of the Argentine peso
Speaker 4: on your results. Of course, we've seen JAVMLA make various
Speaker 4: changes in Argentina in recent months, including making changes to
Speaker 4: the companies to the country's currency, which has resulted to
Speaker 4: in basically the spread between the official and inofficial rate
Speaker 4: falling apart. Just wondering how that's impacting your business and
Speaker 4: specifically also are you changing your hedging strategy for Argentina.
Speaker 3: Yeah, I think that the HEADLFT of Argentia that we
Speaker 3: continue to see a big recovery. I mean unique virus
Speaker 3: in Argentina group by thirty percent your year, our GMB
Speaker 3: group by seventy five percent in local currency or thirty
Speaker 3: five percent in dollars, the items sold on the platform group.
Speaker 1: By forty six percent, so very strong recovery.
Speaker 3: As we see inflation coming down, consumption improving, and also
Speaker 3: as you mentioned, the FX market.
Speaker 1: Be normalized also helps our business.
Speaker 3: They opened the economy, so we are bringing more products
Speaker 3: from the US into Argentina as well.
Speaker 1: So most you know, most of the business.
Speaker 3: Are performed here extremely well in Argentina and we're very happy.
Speaker 1: With the way things are going for our business.
Speaker 5: There you mentioned, Martine, you ran credit before at Mayer Coutolibre.
Speaker 5: You ran also strategy into it and you were at
Speaker 5: Paine before that, so you know strategy up and down.
Speaker 5: I want to know about your strategy regarding ad revenue
Speaker 5: because it was also searched like up thirty eight percent.
Speaker 5: Is that a profit center for you, a future profit
Speaker 5: center or do you view that more as a tool
Speaker 5: to drive your core marketplace growth?
Speaker 1: Yeah? Other times in business is roughly a one billion
Speaker 1: dollar business.
Speaker 3: He's rowing at thirty eight percent, as you mentioned, and
Speaker 3: he's as a profit business for the company, but it
Speaker 3: has tremendous potential going forward.
Speaker 1: If you look at the number of people interacting with
Speaker 1: our ecosystem.
Speaker 3: Last year we had more than one hundred million people
Speaker 3: buying on Marcaire have sixty eight millium monthly active users
Speaker 3: of our fintech platform.
Speaker 1: So in terms of a.
Speaker 3: Number of eyeballs within Latin America, we are the third
Speaker 3: largest pan regional platform and that gives us a great
Speaker 3: opportunity to continue distributing advertising. We also can leverage all
Speaker 3: the one first part the information that we have on
Speaker 3: our users or to target marketing campaigns. So we see
Speaker 3: a big, very large opportunity. I think it's more future
Speaker 3: to the past and advertising business. We're just getting started,
Speaker 3: but as you mentioned, we have been growing very rapidly
Speaker 3: for the past several years.
Speaker 1: There's plenty of growth going forward.
Speaker 2: Martin just got about twenty seconds. We always liked to
Speaker 2: when we've got lucky enough to have someone like yourself
Speaker 2: a global CEO, how would you describe the global outlook?
Speaker 2: And just quickly.
Speaker 3: Yeah, I think well, obviously we operate in Latin America
Speaker 3: and depending on the countries and countries have some tough
Speaker 3: micro situations and some others might be in a very
Speaker 3: conditioned we're talking about Argentina recovering. But at the end
Speaker 3: of the day, I think in our business in particular,
Speaker 3: the trend of people moving online is so much stronger
Speaker 3: than macroduct We have plenty of opportunities ahead of us.
Speaker 3: And the same thing on fintech. Right where we're operating
Speaker 3: in America, where petuation of fintech products is very very low,
Speaker 3: we play a big role in terms of generating financial.
Speaker 1: Inclusion throughout the region. So we're very optimistic about at
Speaker 1: least on our.
Speaker 2: Region, So glad we could get some time with you.
Speaker 2: Martin de la Santa Ceo, Mercado Libro, cfo, excuse me.
Speaker 2: Mercado Libre gave him a little bit of a promotion
Speaker 2: in Inina treatment.
Speaker 1: Thank you.