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