MercadoLibre Aktie

Hello, everyone, and welcome to the MercadoLibre Earnings Conference Call for the quarter ended March 31, 2026. Thank you for joining us. I'm Richard Cathcart, MercadoLibre's Investor Relations Officer. Today, we will share our quarterly highlights on video. After which, we will begin our live Q&A session with our management team.

Before we go on to discuss our results for the first quarter of 2026, I remind you that management may make or refer to and this presentation may contain forward-looking statements and non-GAAP measures. So please refer to the disclaimer on screen, which will also be available in our earnings materials on our Investor Relations website. Please note that this call is being recorded, and a replay will be made available on our Investor Relations website.

With that, let's begin with a short message from our CFO.

Hello, everyone. Thank you for joining us. I'm pleased to report that MercadoLibre delivered another excellent quarter to start 2026 with net revenue up 49% year-over-year, our strongest growth rate since Q2 2022.

This performance reflects the strategic investments we've made consistently over the past several quarters, which are bearing fruit with increasing clarity. Chief among them is our decision to lower the free shipping threshold in Brazil, which has proven to be a sustained growth engine across multiple quarters.

By bringing more buyers into the ecosystem, we're strengthening network effects with higher purchase frequency, broader assortment and a logistics network that becomes more efficient with every incremental package. As a result, Brazil delivered another standout quarter for commerce. GMV grew 38% year-over-year as items sold growth accelerated to 56%. This is more than double the quarterly growth rate prior to lowering the free shipping threshold.

Free shipping penetration reached a new record and unit economics continue to improve with cost per shipment down 17% year-over-year in local currency. In other words, higher demand is driving lower costs. Outside Brazil, we delivered solid growth in commerce and continue to gain share across key markets.

In Mexico, GMV grew 28% year-over-year while in Argentina, GMV grew by 41%. Chile remains strong with GMV also up 40% year-over-year, driven by higher free shipping penetration and faster deliveries.

Fintech services momentum also remains strong with solid growth across our core indicators. Mercado Pago monthly active users grew 29% year-over-year. AUM grew 77%, and our credit portfolio nearly doubled to $14.6 billion. This highlights that engagement is both broadening and deepening as more users choose our ecosystem as their primary financial relationship, supporting our long-term objective of becoming Latin America's largest digital bank. We continue to invest in our credit card as a central pillar of this long-term objective, issuing 2.7 million credit cards this quarter. Credit card TPV grew 90% year-over-year and monthly active users grew 68%.

The credit card is an excellent example of fintech cross-sell occurring at scale as a meaningful share of cardholders were previously marketplace-only users and are now active fintech users. This reinforces the cross-sell flywheel and generates positive ecosystemic effects across engagement, usage and retention.

Growth of our credit portfolio is supported by disciplined underwriting and continuous enhancements to our models that are improving decision accuracy at scale. This validation gives us strong conviction as we extend the playbook beyond Brazil, continuing to scale the credit card in Mexico and building from an earlier base in Argentina.

Overall, Q1 2026 was an outstanding quarter of top line growth with revenue increasing 49% year-over-year. We delivered $611 million of income from operations, representing a 6.9% margin. The margin compression reflects our choice to invest in strategic initiatives and the results of each investment reinforce our conviction that we are taking the right steps to build the largest and most engaged commerce and fintech platform in Latin America.

Our investment decisions are guided by clear observable evidence and that evidence tells us that now is precisely the right moment to invest boldly in a market with significant multiyear growth runways ahead. That is the foundation on which we are choosing to invest. We look ahead to the rest of 2026 with strong momentum and full conviction that the investments we're making today will compound into structural advantages that define this company in the years ahead. We appreciate your continued support.

And with that, we'll open it up for questions.

[Operator Instructions] And the first question will come from Irma Sgarz with Goldman Sachs.

I think a key question I'd like to ask is that on the shareholder letter, you mentioned that you chose to set the dial at this level of the first quarter, and you point out quite explicitly that, there was a deliberate investment decision. I think that's quite clear.

However, you also mentioned that there were some -- you alluded to some incremental opportunities that you've been able to identify. And also, you note that you don't expect this level to materially change in the near term. So I think my question is, could you just help us understand what perhaps changed from the fourth quarter that you reported in late February to now, after the first quarter?

What new opportunities have you identified to invest behind? And whether this sort of this margin level that we saw in the first quarter, again, I know you don't provide guidance, but is that roughly the right level that we should think about for the remainder of 2026?

It's Martin here. Let me start with the end. I think the investment philosophy hasn't changed. In fact, we decided to invest behind initiatives -- similar initiatives that we have been investing over the past several quarters.

What we have seen, and we tried to be very explicit about that on the letter this quarter, as a result of those investments. We're seeing very good results in terms of our credit card portfolio. As we mentioned, all the cohorts in Brazil continues to improve and become profitable. The repayment periods in both Brazil and Mexico are also improving.

So that gives us more confidence to continue investing and investing boldly in terms of growing our credit card portfolio, and now we're also launching it in Argentina. The same could be said on the commerce side, we continue to expand our fulfillment infrastructure in order to keep up with the growth of our business. We expanded -- we probably invested a little bit more boldly in CVT.

We see a huge opportunity on CVT as well as 1P, and we're investing behind that. And then if you compare year-over-year, we continue to expand our free shipping offering, which is a critical component of our value proposition.

So I would say that for the most part, we did not change anything in terms of the investment philosophy. We have seen very strong results on those investments. As we always said, we're not trying to optimize short-term margins. We're trying to -- what we're doing is we're investing for the long term. So we will continue to invest boldly in those initiatives.

The next question will come from Andrew Ruben with Morgan Stanley.

Great. And thanks for the additional color on the investments within the release. One other item I'd like to understand more about was the Brazil seller promotions you announced in recent months, lowering take rates for competitively priced sellers in certain price points. So I'd like to understand what drove the decision?

And when you're thinking about allocating price investment dollars, how you balance that between seller investments versus buyer initiatives such as free shipping? And maybe to the extent it relates to Irma's question, if these seller promotions represented any area of change in your philosophy or approach over the past few months?

Andrew, Ariel here. So let me walk you through what we have done regarding take rates in Brazil for everyone to have the full picture. So basically, we lowered take rates in some categories, in some specific price ranges. So this is not a platform-wide take rate cut. It's a targeted investments where we see the greatest opportunity. And by opportunity, I mean both elasticity of demand and elasticity of supply.

And basically, all the discounts that we are providing to merchants are conditional on sellers maintaining a competitive pricing on their listings in Mercado Libre. So why is it that we are doing this, and this is probably the most important part of the answer. We started -- if you go back a few years, we started lowering take rates back in 2024, targeting specific ranges and categories.

And if you look at results since then, sorry, unique buyers have grown 62%. GMV has grown even faster. The number of live listings in our platform and the effective sellers have hit record high even after a few years of much slower growth, engagement and frequency in the platform continue to increase at an excellent rate.

So basically, the last take rate reduction are a function of the results that we have already proven and we've seen over the last 18 months. And if you were to take a step back in the last 12 months, going to the second part of your question on whether we are doing these for merchants or investing for buyers. Over the last 12 months, we have lowered the free shipping threshold to BRL 19. We have expanded free and fast shipping in many miles.

We have expanded our affiliate program. We continue to build the best and most reliable logistics network across Latin America. And clearly, all those investments compounded generate tremendous volume and tremendous value for our merchants. And we want to make sure that those investments, which benefits sellers directly are translating in the best possible prices for our buyers in the platform.

So basically, this is another piece of a complex puzzle of initiatives that we are putting together in order to drive engagement and create the very best value proposition for users in MercadoLibre.

There is a complement those investments that Ari mentioned regarding lowering shipping take rate to merchants were implemented towards the end of Q1. So they were not -- did not flow through our P&L in Q1. They will flow through in Q2.

The next question will come from Bob Ford with Bank of America.

In the press release, you mentioned a 30-point NPS gap with incumbent banks. Can you talk a little bit about your NPS rank across the marketplaces? And what you think you need to do to replicate that NPS leadership with respect to marketplaces and maybe specifically in Brazil?

Bob, so we are at record high NPS across every single market. In e-commerce, we feel pretty comfortable with the competitive position in terms of customer satisfaction in every single market where we operate.

So if you were to compare our NPS with traditional retail, which is kind of the similar example to traditional banks, you would see a huge gap. And we are satisfied with all the progress we've made and the continuous improvement in such a metric across Brazil, Mexico, Argentina, Chile and so on.

The next question will come from Marcelo Santos with JPMorgan.

I wanted to discuss a bit the Brazil NIM compression. You mentioned that 1/3 of the provisions came from higher provisions in Brazil. Is that part of the upmarket move, like you say you're taking longer loans. Just wanted to understand what kind of products you are growing that take this, what kind of risk these products come? And how far you are in this move? That will be the question.

Marcelo, yes, as you mentioned and as we mentioned in the call, a big part of that is related to a higher mix of credit cards which have a significantly smaller NIMAL and because they are still immature cohorts in the portfolio. And then we are taking provisions in Brazil, and that is related on the one hand, to extending the average term of our loans.

We used to have loans typically on average of 5 months, and that has moved to 8 months. And also, we are expanding the reach on our personal loans portfolio. And that is in part what you mentioned is we are reaching out to customers who had a line of credit in the past and we were not -- they were not taking it.

So we are lowering the spread to see if we entice them to start trying our personal loan products and also reaching out to segments where they are either more risky or where we have to work with smaller spreads.

So it has been a deliberate decision to reach out to further segments to continue accelerating growth. But I'll add to that, that asset quality remains quite stable and reflects how well the models are working and in general, how the underwriting process is working.

The next question will come from Rodrigo Gastim with Itau BBA.

I'd just like to turn the discussion here to Argentina and the credit book in Argentina. If you could discuss a little bit about the potential acceleration in the credit book in the country or give us some idea of the growth recently of the credit book in Argentina, specifically for the card book, which has been quite new, but we felt you quite enthusiastic with this initiative.

And also share with us some early signs of the profitability of the credit card in Argentina, the MIMO or the maturation of the cohort, how it's behaving, it would be very helpful.

Rodrigo, let me start with credit and then I move on to credit card. I would say that in general, the 15-90 NPL in Argentina has improved sequentially. When we look at the market, we see that some banks are having worsening NPLs, but that has not been our case.

And I think that the reason for that is that we have several advantages is that we are issuing loans with very short durations relative to the banks. And we have a very nimble approach to pricing those loans. And we have high levels of principality in Argentina. A lot of our users use their Mercado Pago account every day, and we have very sophisticated underwriting models. So I think that our portfolio has proved to be very, very resilient in Argentina.

With regards to the credit card, we just started issuing cards in August, September of last year, and we are excited with the evolution. And given the, I would say, the ubiquity of Mercado Pago, we have been able to reach out to those clients, which we deem to be less risky, and that has been -- that has enabled us to be aggressive in the number of cards we are issuing.

Still, it's early to tell how quickly those cars will repay themselves, but we are seeing initial impression is that the cohort in Argentina is very similar to our first steps in Brazil. So we are happy with how they are evolving.

Your next question will come from Josh Beck with Raymond James.

It sounds like unit costs were down, I believe, 17% year-over-year. I assume a lot of this has to do with better utilization of idle capacity. As we look later into this year and next, how do you kind of think about maybe the next step down in terms of unit costs?

And then just quickly on agentic, we've heard a number of the U.S. players speak to really embedded agentic experiences within their own e-commerce platform, driving better conversion, bigger baskets. Just curious if there's any early learnings in that area for you.

Josh, Ariel here. So indeed, we are very pleased with the results on shipping costs, 17% reduction year-over-year, further accelerating from the 11% reduction we saw in Q4, even while absorbing 56% volume growth in the same period.

And basically, the improvements are coming from 3 main things: a, volume and volume density. So more shipments allow us to dilute fixed costs across the network while also ramping up facilities to utilization levels far more quickly. And that, combined with new tech features, also allow us to improve shipments per route in both last mile and line haul.

B, our slow shipping network, and this is a key lever that allows us to take advantage of the idle capacity, both in fulfillment and cross-docking in order to ship items at a marginally lower cost whenever there's space available in our value chain.

And c, there were lots of work in terms of deployment of operational and technological improvements that did change and improve productivity across every node of our network. So very pleased with that. There's a commentary that we left there in the letter that shares a bit more on the story. So variable contribution per shipment for the items between BRL 19 and BRL 79 has improved materially since we launched our free shipping program in June and several brackets within that range are already breaking even. So we are positive with this. This is the same type of trajectory that we saw when we launched our initial free shipping program back in 2016. I would say this case was even faster the improvement.

And looking forward, I would say that we expect the direction of travel in unit shipping costs to continue to be downwards, but this is not going to be linear, right? So we will be adding more capacity for sure, given the growth rates that we are having -- and clearly, some of the incremental gains may take longer time to achieve, but we are confident on the trajectory that we'll continue to see.

In terms of agentic and impact, I think it's worth highlighting the fact that we deployed LLMs in search in commerce for the first time this quarter. And basically, that is live in Brazil, Mexico and Argentina. So now we are using this technology to better understand users' intent, combining both knowledge on the user behind the query and better interpretation of the query itself. And the impact is basically very visible across the funnel. We have higher conversions as buyers find what they are looking for much faster.

We have better ad returns as our search also improves the quality of the results that our ad tech stack is generating. We have higher -- stronger engagement from our users as the discovery experience actually improves. And clearly, this is one of the contributors to the great performance we had this quarter. This is one piece in a much more broad Gen AI strategy for the marketplace, and we are very happy with the results that we've seen so far.

The next question will come from Danni Eiger with XP.

I have a quick one here. I would just like to know how you guys are seeing the potential work scale revision in Brazil as well as higher oil prices becoming additional cost challenges to be dealt with in the short term.

I think we've seen -- in the first quarter, we didn't see any change in terms of energy costs. We are seeing some parts of our logistics passing on some increases in costs because of energy in the second quarter, beginning a couple of the last month or so, and we are passing most of those to consumers. So for the most part, we don't expect a significant impact on our results because of that so far. We're obviously monitoring the situation closely, but it's something that we need to go month by month. But so far, we haven't seen any impact on our P&L because of that.

And in terms of labor costs, I think we -- the same thing. I mean we -- for the most part, we -- obviously, we're increasing our labor mostly on logistics, and we adjust our logistic cost based on labor costs every twice a year, I would say, in Brazil. So that's not a major issue for us and has impacted our performance.

The next question will come from Geoffrey Elliott with Autonomous.

There's some interesting language in the looking ahead statement where you talk about margins and you say you can dial them up, you can dial them down. We've chosen where to set the dial, and we do not anticipate this changing materially in the near term. It's unusual for you to give that near-term clarity. What has prompted that? And then what could cause it to change? What unforeseen circumstance could cause margins to be lower or to be higher in the near term?

It's Martin here. Basically, what we're trying to explain on the letter is the fact that the margins are a consequence of our investment posture, and we can dial in up or down the investment intensity based on the results that we're seeing on the different channels or different tracks in which we're investing.

In this particular quarter, as you saw, we are accelerating the offering of credit cards. Our credit card book is growing more than 100% year-on-year. We're also accelerating CBT and 1P, and we continue to offer more free shipping. So we're investing in both commerce and fintech. And based on the investments that we're making is the margin that we're delivering.

As I said earlier, we are not optimizing for short-term margin. We are making investments based on the results that we're seeing and the results are very positive. When you look at revenue growing at 49%, which is the highest rate of growth over the past 4 years, that's one example of our investments performing very, very well.

So I think what we try to say there is that we will continue to invest disciplined in the similar areas that we're investing today. And if we see opportunities and we see results of those investments performing according to plan, we will continue to invest. I will not shy away from it. And again, we're not trying to optimize short-term margins. We're looking at a big opportunity ahead of us. We want to make sure that we capture that opportunity as opposed to just focus on the short-term margins.

Let me complement that, Martin, on the fintech side, and you mentioned credit cards, definitely, we see this as a huge opportunity. And the better we get at improving our models and allows us to issue even more credit cards, always within the same payback period we set as targets. So the better we are at improving those models, the more we are willing to invest because we know how predictable the payback period is.

And then the flip side would be if we wanted to improve margins in the short term, it will be fairly easy for us to slow down certain investments, but we don't think it's the right way to go given the large opportunity that we have in front of us for both commerce and fintech.

The next question will come from Craig Maurer with FT Partners.

I wanted to dig in a little bit further on the decision to both go longer duration and to expand the credit box when it comes to the credit card in Brazil and personal loans in Brazil. With the price of oil up and I'm just curious what gave you the confidence to make those changes now and really lean in versus what was already a fast growth rate. So I just want to make sure I understand how you balance the risk/reward here.

Let me split the question. I would say that on the credit card side, we are very comfortable with the repayments we are seeing. The repayments are very similar to what we were seeing before. And so the impact the credit card has on provisions and the NIM is mostly given that it is gaining share in terms of the total credit book.

Now when it comes to personal loans, and that's where we extended the duration, that was on purpose. Basically, our duration was fairly small. It was only 5 months and it was very profitable. It continues to be very profitable, less so than a year ago, but it continues to be fully profitable. And given that we are growing well and it's profitable, we wanted to reach out to segments where we believe we can make money even if the -- on the margin, the spread we make is smaller than with the segments we were already serving. And then, again, those segments which sometimes are -- we're not willing to take a credit before to start taking them. Again, we can't change the periods at which we lend at any point in time, but we wanted to experiment with this, and this confirmed that we could do this in a profitable way.

And I would say that we continue to monitor and manage our credit book very cautiously. And if you look at the NPLs, despite the macro conditions that you described, continue to be fairly stable in all of the countries where we operate, including Brazil.

The next question will come from Joao Soares with Citi. We'll move on to our next question that will come from Lucas Alves Lastino with Santander.

Also regarding the credit portfolio, it's clear that you're increasing exposure to credit cards, but also accelerating in consumer and merchant loans, which I believe require higher provisioning at the time the credit is released, both to the nature of the credit and also the longer durations.

So it may explain a big part of the NIM reduction. Does it make sense? And combined to it, those category of credits have lower spreads than credit cards, but accrue interest over the full balance compared to credit cards that you depend on users to delay payments.

If my understanding is right, is it fair to assume that this static NIM is much lower than it could reach over time as you start collecting interest and even potentially reverting provision on this balance?

Lucas, so in general, the spreads in consumer and merchant books are better than those on the credit card because again, on the credit card, we have to book all of the potential lines we have as provisions.

And so initially, we take a loss whenever we issue a credit card and then only after some time, do we start making money on those cards we issued in the past. So I would say that what contributes to an increase -- lower NIM and higher provision is mostly first, 2/3 of it is coming from the increase in the proportion of credit cards.

And then with regards to the loans, yes, increasing duration make us take larger provisions, and we also assume a larger early repayment risk, and that is part of the was part of the equation of moving towards longer durations, but we expect that with time and as we regulate and we already understand better how repayments will work, we will be able to again expand the spread in those loans, in those personal loans in Brazil.

And just to complement, the consumer loan portfolio in Brazil, which is the only one that Osvaldo was referring to, continues to be a very profitable operation. It has margins of double-digit margins. It's just that there -- it is a little bit less profitable than it was a year ago, just to clarify that, and we continue to perform very, very well.

Yes. And merchant loans, which were the last one we mentioned, have very, very healthy spread, probably have the highest spread of all the products as of today.

The next question will come from Neha Agarwala with HSBC.

I wanted to go back on the provisions question. But the cost of risk increased quite substantially this quarter. It's now around 37% as per my calculation. Could you zoom in on which particular loan segment or any particular region that might have led to this increase in cost of risk? And do you see it as a one-off? Or do you see closer to 37%, 38% as a going rate for cost of risk as you continue growing the credit business?

Second question is there's a lot of discussion about payroll loans in Brazil, which are less risky, but gives a good alternative to personal loans. Is that something that you would contemplate entering into for Brazilian market?

Neha, it's Martin here. Let me take the first part of your question regarding the provisions in this quarter. You're probably looking at -- there's a chart on our investor presentation where we show a waterfall in terms of margin compression. There's 4 points of margin compression because of bad debt because of the provisions.

This is something that's been happening for quite some time. The fact that our credit book grows at a faster pace than revenues, the credit book grows at 87% year-on-year and our revenues for MercadoLibre growth at 49%, that generates margin compression.

And the reason for that is because as we issue any new loan, we have to provision for the full amount of the expected loss of that loan. And when we accelerate growth, we need to provision more.

So 2/3 of the margin compression comes from that. That's natural. That's something that we have seen over time. And in fact, if you look at the credit business because it's so profitable, it is actually accretive to margin to overall MELI. Then the 1/3 of the compression that you see on that waterfall comes from the consumer credit book in Brazil. But as we mentioned earlier, it is profitable, but it's less profitable than it was a year ago, and that generates a compression.

So there's no really a change in terms of the -- except for Brazil, there's no change in terms of the performance. We continue to be very excited about the performance of the credit cards, which is continue to improve. quarter after quarter the performance of the other cohorts and consumer and merchant base are very profitable business as they have been for many years now.

And then regarding the second part of the question regarding payroll loans, basically, we have seen a significant increase in Brazil of payroll loans, and we are about to launch the private payroll loans. We have already integrated with the government, and we will launch the product soon.

The next question will come from Deepak Mathivanan with Cantor Fitzgerald.

Two questions, please. First, can you talk about the competitive intensity in Brazil? Amazon has made several changes recently. Are you seeing any impact on the seller side or supply on the platform at this time? And then second one for Martin.

Can I go back to the EBIT question Irma asked and try a little bit differently. There are obviously seasonal headwinds in 1Q from credit business that partly eases off through the year. But are you now ramping investments in certain areas that's incremental that the seasonal effects are somewhat masked and we should expect EBIT margin for the year to be around 1Q levels? Any additional color you can provide there would be super helpful.

Deepak, Ariel here. So let me take some time to address the first point on competitive intensity. So Brazil is one of the most attractive e-commerce markets in the world. So it's natural that it's getting more and more intense and as that has been the case for many years. While competition is intense, I would highlight a couple of things about the way we are thinking about this and perhaps this might be a bit different from how the market is thinking.

So first, we thrive in competitive environments, right? Competition makes us stronger. It pushes us to evolve to continue innovating, and that's exactly what we have been doing over the last few years, actually for 26 years, but it's been doing for the last few years as well. Every single engagement metric you look in MercadoLibre Brazil is strengthening frequency, multi-category shopping, retention.

So all those are structural gains in our value proposition. Those are not short-term gains or growth that we are buying. So once again, satisfied with that as we are satisfied with reaching new records of NPS that really show how strong our value proposition is in the country. Our conversion rate in Brazil has increased 1 percentage points year-over-year. That's a huge increase when you think about conversions. And all this feeds into the rapid growth that we are delivering, the record market shares. So we have never been in a stronger position on that regard.

The second point that I would highlight is that this competitive intensity is also having a positive impact in the market as a whole by bringing new consumers from the offline world into the online world, and we feel we are very much equipped to offer all those consumers the opportunity to buy in MercadoLibre. So the pie is increasing at a faster pace than it was before, and we are taking an even larger slice of that pie.

Regarding the impact on what others are doing, our numbers speak for themselves, right? Our supply continues to grow. Our GMV continues to grow, our successful items sold accelerating. Our retention is improving. So we are basically comfortable and confident with the competitive position that we have, and we will continue to execute behind it.

Martin here. With regards to margins, as you know, we rather not talk about margins on a quarterly basis and forward-looking. But let me say that in Q1, we decided to invest, we said this -- the level of intensity of our investment based on the performance of the different investments.

I think on the shareholders' letter, we tried to go deeper into those results. As you can see, we're seeing very positive results in all of our investments in the credit card, 1P, CBT, our free shipping offering and so on. So we will continue to invest behind those initiatives.

There might be some others like Ariel mentioned some incremental investments that we're doing on our marketplace, in particular in Brazil. We have to see how energy costs play out. I don't see a big impact on that, but we need to monitor that situation. So I would say that the philosophy will continue to be the same. We will look at the investments. We will look at the results of investments, and we will invest behind our ecosystem to capture the opportunity in front of us.

Again, we're not managing the business to a particular margin level. We feel very optimistic and comfortable about the level that we delivered this quarter, and we will continue to monitor the investment opportunities throughout the year to see where we position and the level of intensity that we continue to deliver in those different tracks.

The next question will come from Kaio Prato with UBS.

I have a follow-up on your credit book, please. So I think we are seeing some deterioration on the asset quality given the higher provisions, NPLs and the lower level of NIMAL. And having said that, I would like to hear from you about your renegotiation strategy. How is this evolving over time? And if this higher duration of loans that you mentioned is related to any kind of renegotiation as well or not?

And second, just to see if I understand, at this environment, should we expect the same pace of credit card issuance in Brazil? Or should we see some slowdown? And finally, if this is the new recurrent level of NIMAL going forward or actually could be lower as you continue to expand in credit cards?

Kaio, with regards to NIMAL, when you look at it on a quarter-by-quarter evolution, there is some seasonality in Q1 when typically we have lower NIM in Q1, but it's -- I say it's normal to see the sequential compression that you see in the results. And then when it comes to year-on-year evolution, as we mentioned, a big part of that is the higher mix of credit cards and the rest is more related to Brazil and both extending the average in terms of loans and expanding the reach of our personal loan portfolio.

We have not seen any change in negotiations. What we do see when we extended the duration is that more people are willing to prepay their loans. So the revenues of the interest we end up collecting of that loan is shorter just because in that case, the duration wasn't extended as we expected in the first place. But we are not seeing any impact of that in the quality or the type of negotiations we are doing.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Martin de Los Santos for any closing remarks. Please go ahead.

Thanks. First, I would like to thank everybody for joining the call. I would like to close with some comments regarding our investment philosophy, and we will try to go deeper into that in our quarterly letter to shareholders.

We, at Mercado, are facing a once-in-a-generation opportunity. Both fintech and commerce have tremendous runway ahead in Latin America, and we are in the best position to capture this such opportunity. So for that, we choose to invest behind our ecosystem, as we mentioned throughout the call, we're investing in fintech and scaling our credit card portfolio, which is helping us bring millions of people to our Mercado Pago platform. In commerce, we continue to grow our free shipping offering. We are expanding our logistics, and we are investing behind our 1P and CBT operations. And obviously, those investments are putting some short-term pressure on margins. but they are delivering tremendous results. We've seen those investments working.

Our market share -- we continue to gain market share in all of the business that we operate in all of the countries where we operate. Engagement and NPS are at record levels, and we have generated tremendous growth and scale. And proof to that is the 49% year-on-year growth that we delivered in Q1, which is the highest in the last 4 years. We are aware that, that generates margin pressure, but we think that this is the right way to go, and we are as confident as ever that the choices that we're making today will maximize long-term cash flow and will lead us to significant higher margins over time.

So with that, I would like to close the call. Thank you again, all of you for joining, and please reach out to the IR team if you have any further questions. Good night.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

[Audio Gap] basically, we look at the main areas of investment, like you said, a lowering of the shipping threshold that we did last year in Brazil. The credit card, we are investing in Brazil, Mexico and now Argentina, and the 1B, which is continuous its path to profitability, but still not profitable on its own. The same thing with CBT, which we are expanding now to the China and the U.S. corridor and then we also add the smaller countries where we continue to invest as we reach scale in those countries.

So when we put all that together, we wanted to give you a sense of the pressure that, that generated on our margins. and that gives you a range of between 5 and 6 points. So that's the intention of putting it on the letter. In terms of the trajectory, I think it's in line with what we have been talking about this in the past. CVT is a business that when it's locally fulfilled, is profitable, international fulfillment needs to continue scaling and moving in the right direction, but it will continue to scale and it will put some pressure on margins because of that.

When you look at our 1P, I think we talked a lot about 1P. It continues to be profitable on a variable basis level before allocating central cost, indirect cost is profitable. So the scale will play in our favor in terms of continuing to improve profitability. I think the credit card, Oswaldo will talk about this, I'm sure, in some of the questions, but the credit card continues to improve its profitability, in particular in Brazil, where we're seeing already a significant part of the portfolio, the other cohorts being profitable.

So I think a lot of moving parts, right? The individual businesses are moving in the right direction. Then you have a shift issue because some of these are growing at a faster pace. But the bottom line is that we're very confident that the investments that we're making in our platform and addressing the long-term opportunities that we see ahead of us, and we're also improving user experience in our platform.

This particular quarter, we mentioned that we have the highest NPS level in commerce and fintech in Argentina, Brazil and Mexico. So that's a consequence of investments that we have been doing, and we're very comfortable with these levels of investments in our ecosystem.

The next question is from Irma Sgarz with Goldman Sachs.

So quick question on the direct contribution margin in Argentina, which was down a little bit quarter-over-quarter. And I know there were some specific pressures last quarter that perhaps you managed to address this quarter in terms of repricing of the credit spreads, whereas others may have still lasted, especially on the logistics and shipping side. And the fourth quarter is also more promotional in general.

But I was just hoping if you could break it down for us a little bit more and how we should think about this margin going into 2026 just in terms of some of those pressure points rather than specific guidance.

And the other question I had was just as you had some very interesting comments around how you deploy AI across the demand and search side as well as the supply side for merchants. How one of the debates around the gentecommerce obviously relates to the long-term opportunity for ad monetization. So I was hoping you could perhaps share some of your thoughts about or early initial thoughts about how you think about the risks and preparing for some of those risks of ad monetization moving further up the funnel.

Martin here. I'll take the first part. We see, as you mentioned, some compression in Argentina. Keep in mind, Argentina continues to be the highest profitability market in terms in terms of margins. But we did see some compression mostly coming from fulfillment. As you know, we opened couple of new fulfillment centers recently, so that generated some year-on-year compression on COGS. Also, provisions for bad debt because of the credit card, we launched the credit card in the middle of last year. So we're still -- we're seeing some compression because of that. As you know, the credit card requires investments upfront. And there is some year-on-year increase on funding costs.

It's true what you said. Sequentially, quarter-on-quarter, the funding cost of our credit portfolio was lower in Q4 relative to Q3, but it still was higher relative to a year ago. So those are the main reasons for the compression that we saw in this quarter.

Irma, Ariel here. So let me try to take a step back in answering your question on AI and the impact of our revenues. But let me start with the idea of agentic e-commerce and how that will play out for us and potentially disintermediating, which is something that I've been asked over and over.

So I think it's still a bit early in the game, but we don't think that solving one part of the value chain will actually change the rules of the game, meaning that we still think -- but the key is to provide the best end-to-end experience for our customer. So we know that searching for an item is 1 important task but reading reviews, making sure the package arrives on time offering the widest selection, having the best prices, the best financing, preventing fraud, having the best customer support and so on. are also key parts of the end-to-end job on -- that we need to solve and to drive the decisions on where buyers will end up buying, right?

So -- and by the way, -- to complement this comment, I would say that the part where we're putting most of our efforts is in developing our own agent experience inside alive think, and we are convinced that we have the first-party data to create the best search, best recommendation, best discovery engine on which we can personalize and lay over the agentic experience that the new technology drives.

So -- and by the way, if you believe that there is a world of agent commerce, that could mean that retail will move even faster from the offline to the online world. So all this to say that I do think that we are well positioned to actually capturing revenues in the future. because we still think that MercadoLibre will be both to place for demand to do shopping online.

On top of that, then there's an issue on what happens with all the agentic commerce that will occur outside of MercadoLibre because for sure, we will not have 100% market share. And we think that, that also represents an incremental opportunity for many, right? So today, we are providing with our tech stack advertising services to third parties, we do that with Google Ad Manager, with Disney. We do that with Roku with HBO Max. And the reason behind that is that we have a unique set of data, customer knowledge, attribution capabilities that we think are very hard to match.

So we eventually -- what I'm trying to convey is that on the one hand, we are confident on MarcadoLibre's own ability to capture traffic through its own identic experience. And on top of that, we do think that advertising represents an additional revenue opportunity in a world in which there is agentic commerce.

And by the way, the agentic world can also imply a faster shift of advertising dollars moving from traditional offline channels into digital advertising, which generates the opportunity to be even bigger. So we remain positive, we remain focused. The only thing that we know for sure is that we need to put our developers to work to have the best tax stack for advertising and the best agentic experience inside MercadoLibre.

Next question is from Bob Ford with Bank of America.

Just to expand on the discussion on the genetic solutions. The press release comments on the Genetic solution for Pago in terms of handling queries without human intervention. But the functionality appears to be far more sophisticated than that. And I was curious, how is that Pago agent increasing engagement impacting borrowing or savings behavior or promoting the adoption of new financial products? And -- and Adi, maybe you could comment about how you're thinking about a personal agent solution or solutions for the marketplace and the functionality and how to deploy that you're anticipating?

Hi, Bob. We are very excited by MercadoPago's AI assistant it is already helping mostly with solving questions and concerns from our users. We have built a lot of functionality into our agent basically you can do pretty much everything you do with Maraba with the agent. For example, you can tell them you can tell him, please tell me all of the invoices I have that are due in the next week.

[Audio Gap]

Next question is from Rodrigo Gastim with Itau BBA.

I just would like to double-click here on these margin investments in Brazil. So just wondering how do you see the balance -- this balance of keeping up with this strong GMV growth above 30% in Brazil and eventually dealing with this margin pressure in 2026. In other words, with the market share you've been able to clearly capture over the last couple of quarters, do you already believe we should start to see further operating leverage in Brazil going forward just to see how you are thinking this balance?

Martin here. I think you -- first, it's important to put in context when we talk about margins, the growth that we're delivering. Most of the margin pressure comes from deliberate decisions that we're making in terms of pursuing investments that are generating tremendous growth and improving user experience. As you mentioned, in Brazil, in particular, we have been growing our GMV and gaining market share, mainly because of these investments. Our top line grew by 45% year-on-year. As I mentioned earlier, our NPS is at record levels, and that's because of the investments that we have been doing.

You mentioned CBT, 1P, the lower shipping presold, expanding more free shipping, increasing booking capacity. So we feel very comfortable with these investments and the current margin levels because we are seeing the results in terms of growth market share gains and improvements in user experience and engagement. As I said in the past, our main focus is on capturing the large opportunities in front of us in commerce, fintech and advertising. And we will not hesitate to invest and to order to capture those opportunities as we have done in the past, even if that puts some short-term margin pressure, we're not trying to optimize short-term margin. We manage the business for long term -- from a long-term perspective, we believe these investments are creating a foundation for future growth, and we remain confident in our long-term margin trajectory.

So again, we are confident in the investments that we're doing in credit card and commerce, and we are seeing already the results. So that's our strategy, and that's the way for us to create long-term value for our shareholders.

The next question is from Josh Beck with Raymond James.

Thank you for question. I'm kind of curious where maybe the business plan shook out versus your expectation with respect to the lower shipping threshold. Certainly, it seems like there's been a very nice frequency lift. Is that pretty much what you had anticipated or modeled?

And then related to the improvement in unit cost, I believe it was 11% decline in unit costs in Brazil. Is that something that is sustainable as you build out this parallel slow delivery network? Or how should we think about the prospects there?

Josh, how are you? Ariel here. So indeed, we are very pleased with the results of our lower free shipping threshold in Brazil. This is the third time that we have lowered the threshold and the results we are seeing now are no different from the results we've seen in the past. So growth has accelerated frequency has accelerated. We had a record conversion rates, record retention rates for new and existing buyers.

We are having more new buyers, our NPS in Brazil is at its peak. We have more sellers, more live listings per seller. We are expanding market share and reaching our record levels. So yes, indeed, we are pleased, and this is very much aligned to what we were planning for. Items sold growth accelerated from 26% year-over-year in Q2, 242 in Q3, 245 In Q4, I think that is huge, considering the size of MercadoLibre. The same happened with GMV from 29 to 34, now to 35. So -- and of course, this on top, all the growth and the size that we've achieved after 25, 26 years of existence and after anemic in which we accelerated growth a lot.

I think that as we mentioned in our shareholder letter, new buyers that have come to MercadoLibre since June when we launched the new value prop are buying more items across a larger number of categories with higher retention rates compared to cohorts of new buyers prior to that change. So we are very encouraged by the impact that we've seen, and this gives us great optimism about the foundations we are building as we look to be the driving force for e-commerce or for commerce shipping from the offline into the online, which is at the end of the day, the goal that we are pursuing, right, serving our customers better, providing the best value proposition out there.

In terms of shipping costs, I would say we are pleased with the performance that we are having the cost improvements come from several parts of the equation. On the one hand, of course, more volume is diluting more cost. Also, we are taking advantage of idle capacity through our slow shipping network, meaning that we are able to ship items whenever we see space in the value chain.

And of course, we continue working on technology and productivity in order to make our operation even more efficient and more sustainable. So we don't see a reason for this not to change or not to continue, right? So we are positive. I think the team has done a tremendous job but we still think we have more things to do.

The next question is from Geoffrey Elliott with Autonomous.

Can you discuss the changes that you announced to the shipping model in Brazil, I believe, on January 20 and getting a little bit more variable around different shipping rates for different types of shipments? And then high level, how do you see that impacting financials impacting margins?

So basically, we are trying to deleverage a bit the way we charge merchants and we think shipping costs do correlate a lot with measurements and weight. And for that reason, we decided to move to a different type of table in which we are able to charge merchants in a much more correlated way to the cost structure that we have based on actual dimensions and weights of the items.

I think it's early to make comments on impacts on financials. As you know, we don't guide. So probably at the end of Q1 with our results at the time, we will be able to share more details and color on impact. But again, as always, we continue to evolve and sophisticate the way we manage the business and what we've done with the shipping tables is no different from that.

The next question is from Kyle Brado with UBS.

Hello. Good evening, everyone. I have two quick questions on my side, please, on Mercado Pago. First, specifically in Brazil, we are seeing a really solid growth on our deposit franchise. -- basically the double year-on-year looking to the Central Bank data. So can you please clarify if these deposits are now being used for funding to your credit business or not? If so, how much of that? I would like to understand how do you see this usage going forward and what type of impact it may bring to your NIM as well.

And quickly, the second is in terms of your NPL ratio, the early NPL ratio between 50 and 90 days, it increased a little bit. Can you go through the increase of that as extra seasonality is usually positive in the 4Q and expertise going forward?

Let me start with the first question regarding deposits. Today, mostly, we are not using deposits for funding. We are not doing fractional banking the way. But nonetheless, we are very happy with the growth in those deposits. And since -- we last year, a year ago, basically, when we introduced pots and a higher interest rate on ports, we saw a significant increase in the deposit rate. And what we saw is that those users that use ports and in general, have more money with us, we see a significantly higher level of engagement.

And we see that across the board on MercadoPago and also MercadoLibre. So we see these users doing more transactions using our credit products more often be more likely to use in our debit cards or getting a credit card. So we see it as a significant driver of engagement and a driver of of not remodel score that is. And as you know, this is a metric we follow closely, and we are very happy to have finished the year leading the NPS score tables for financial institutions in Brazil.

The second part of the question, if I got it right, was regarding NPLs and the impact of a little bit -- a slight deterioration in NPLs from the third quarter to the fourth quarter. that is -- so that is -- I would say that in general, NPLs of the credit card book fell to an all-time low of 4.4% in the fourth quarter Nonetheless, the increase in NPL was mostly related to the consumer and merchant books.

But having said that, I think that more important than NPLs are [indiscernible] and those improve, meaning we are more profitable than we were a quarter before. Before, what we did was we increased the number of people and the riskier number of people we give credit to, but we price that risk accordingly. And therefore, we ended up having a significant -- a larger spread than we did on the prior quarter. So I think this was a calculated risk and it worked out well.

Your next question is from Neha Argawala with HSBC.

I'd like to follow up on the last question. We have certainly seen a pickup in loan yields quarter-on-quarter in the fourth quarter. And as you mentioned, you're taking more risk, which is resulting in the early delinquencies going up in fourth quarter despite positive seasonality.

Does this mean that maybe in the next quarter or 2, we will start seeing an impact on 90-day NPLs and they will start going up again since you're taking more risk? Although I understand that your pricing for it, but is this a trend that we should continue to see going forward?

And just to confirm, the increase in loan yields was just from taking higher risk in the New Mexico and not coming from an increase in the share of the portfolio in Argentina?

As you know, we don't guide, but we are very comfortable with the amount of risk we are taking. We have seen our model is improving. And what we have been doing is pricing risk accordingly and having good spreads. When we expect the loss, we booked that in advance. So we don't believe there will be any surprises there.

And then I would say that we don't see an increase in yields coming I'd say we are growing in all 3 countries in a very similar fashion. We were more cautious in the fourth quarter in Argentina because of the election because of we saw some macro instability because of the election. So we were a little more cautious. Also, there was a spike in interest rates prior to the elections and then they came down and therefore, being interest rates higher, there was less demand for credit. But beyond that, we did not see any significant change in the other markets in terms of demand for credit or change in loan yields.

Maybe to complement, Martin here. I think the philosophy on credit has always been that we will grow our credit books as long as we have a healthy book. And as sale mentioned, you're seeing only part of it -- part of the equation -- but obviously, we are pricing those ahead of time. And the margins in Argentina Mexico are extremely high. I mean much better than last quarter. In fact, when you look at NIM, that looks at the whole equation because not only looks at bad debt and provisions, but also the revenues that are generated on that portfolio, you can see that NIM improved quarter-on-quarter.

So we feel very, very comfortable about the quality and the health of our portfolio. And that's the reason why you see our credit book growing at 90% because we are confident in our models and our collection.

Your next question is from Donnie Tiger with XP.

I would like to explore a little bit the sales and marketing and provision of that flow account dynamics. Firstly, regarding sales and marketing, we see an increase Q-on-Q in terms of investments as a percentage of sales. But you also mentioned in the release some tactical investments being done because of seasonality.

So it would be interesting for you to share with us some color around how we should think about this investment going forward, especially as we see a lower intensity coming from competition especially in Brazil in the beginning of the year.

And also regarding the acceleration of consumer books that you mentioned in Brazil and Mexico and that being the key lever for this doubtful accounts not improving Q-on-Q. You also mentioned that you are benefiting from a higher cross-selling with your marketplace while as you mentioned, overall metrics remain healthy. Should we think that maybe this pressure is a consequence of you guys capturing this opportunity of kind of increasing the overlap between the two platforms? And since you have a strong momentum in commerce that is fueling the consumer book growth?

Let me start in here. I think in the first part of the question is related to sales and marketing, I think it's consistent what we have been saying over the past couple of quarters. Specifically this quarter, we increased our spending by 60 basis points and year-on-year by 1.4 basis points on marketing.

For the most part, is the result of expansion of our social channels. As we mentioned in the past, we are scaling our affiliate program with very positive results. In Brazil, for instance, the number of affiliates almost doubled in Q4 relative to Q3. And year-on-year, we have 6x the number of affiliates that are selling or promoting products to MercadoLibre. So we see as a very positive and very -- it's a channel that should help us drive growth in the future. So we are investing in that particular channel.

So that explains most of the increase in investments and marketing. The rest of the lines remaining the same. There might be some seasonality in Q4. But for the most part, this is the affiliate program.

And just to put in perspective, -- if you look at the past several years, the range of investment in calamarket is between 11% and 12%. We are on the upper range of that level, but it's within those lines that we have been investing over the past several years.

Second part of the question.

I think the second part of the question was if there was an acceleration of credit driven by the momentum of e-commerce, I'd say, to some degree, that could be the case. But I would say it's mostly that we're -- we have been mostly on the -- let's split this answer in two main areas.

On the one hand, I would say that the yielding account, we have been advertising it strongly last year, and that has been the main driver, where we play a larger return the super yielding account. And that has been the main driver for the acceleration. I would not say that it's necessarily related to the extra activity in the marketplace.

And then on the credit card front, I would say it's a combination of two things. One, definitely, we have been improving the integration of the offer of the credit card in the checkout and also offering more installments in the checkout. So definitely, the marketplace is a big driver for the growth of the use of the credit card. But on top of that, we have continued being continuously been improving the quality of our models as we improve our credit models, we feel more comfortable issuing more cards. And therefore, I'd say the main driver for more cost, I would say, has been the increase in the accuracy of these credit models, but also definitely the integration with the checkout of the marketplace is also a big driver.

Next question is from Craig Maurer with FT Partners.

I'd like to ask the flip side of the prior question, which is if you look over time at the -- considering the investments you've made in provisions as well as growing out the credit book through credit cards and other types of loans, I was wondering if you could dimensionalize the lift that you get on a basket size or a GMV spend basis for those that have the credit card or a borrowing versus those that are not and perhaps also the degree of retention that you see in those customers versus those that don't.

Craig, look, we have not disclosed a specific number in terms of a lift. We see neither spend or retention, but definitely is, I'd say, significant. We measure several things. One of them is how much interaction they have with the marketplace, also Net Promoter Scores, there's a significant lift when someone start using our credit product, so they get a credit card in Net Promoter Score.

And I would say, on top of those two things, we do see a higher engagement and higher net spend. Also, when we look at each of the main countries, I'm talking about Brazil, Mexico and Argentina; and we look at what percentage of mix of all of the NMB is paid with Mercado Power products those lines have been growing steadily in all 3 markets.

So if you combine by no pay later, credit card, store balance and so on, that is growing and is becoming a more significant part of NMB in each of the market. And those transactions are great because typically, they have a significantly higher approval rate and a lower cost and many times, we are double-dipping because we have some income also on the MercadoLibre side.or at least a lower cost. So I think there is really a big synergy going on between the marketplace and Marcelo Pao there.

The next question is from Marvin Fong with BTIG.

Two quick ones also on credit card. You -- I believe you mentioned in prepared remarks you issued $3 million plus in the fourth quarter. I believe that's up substantially, I think the last time you mentioned in the second quarter, you issued $1.5 million. So it didn't sound like Argentina was the main driver of that. But could you just kind of break out -- are you -- is the growth in Brazil and Mexico dramatically higher compared to the second quarter?

And then the second part of the question, as the NPL performance in credit card continue to get better. Are you? Or is there an opportunity in the future to kind of take a lower provision in the upfront and make it more margin attractive at an earlier stage?

Marvin, let me take the first question with regards to the number of credit cards we issued in the fourth quarter, we issued nearly 3 million cards versus, as you said, 1.5 million in the second quarter and 2 million in the third quarter. I would say, from the second quarter to the third quarter, the main increase came from Brazil. where improvements in our models meant that we were able to find more users that fit into our payback targets. And that was from the second quarter into the third one.

But then from the third quarter to the fourth quarter, there were two drivers. One of them was Argentina, as you mentioned, we started issuing cards in, let's say, halfway through the third quarter. but significantly sped up through the fourth quarter, and we issued several -- a few, I'd say, 100,000 cards as we begin to ramp up our surge in that country. Early results are promising and cards are being issued to lower-risk users and the typical ones that could use our consumer loans. So we are excited with how Argentina is growing, and we are just getting started.

And then in Mexico, I would say that better-than-expected payback periods enabled us to pick up the pace of issuance and we are comfortable with the pace we're taking. So I'd say the first, we have an acceleration in the third quarter in Brazil and then in the fourth quarter in Mexico and Argentina, and now we're working with the 3 countries at full speed, I would say.

In terms of the profitability of a product, if you look at Brazil, which is the oldest cohort we have been issued credit cards in Brazil since 2021. cohorts that are older than 2 years are already profitable at a [indiscernible] level. So that gives us a lot of encouragement to continue expanding the user base.

But obviously, as we incorporate a large number of new users, the average is still not profitable, but we are seeing light at the end of the tunnel, right? So it should be a profitable business, it should add to profitability when it comes to maturity. But still, we are at a stage where we are growing the user base. So an average is not profitable yet.

So just to put in perspective, we have 3 books of credit. We have consumer grades, which is a roughly high-margin business in terms of NIM. If you look at NIMs in the high 40s merchant credit, the credit card -- at this point, it's not NIM positive on average, but the half of the portfolio is already NIM on average in Brazil.

We are seeing positive positive trends also in Mexico and have been too early to tell.

The next question is from Jamie Friedman with Susquehanna International Group.

So I had a question about the acquiring TPV. In terms of the mix of on and off platform acquiring TPV, how does that mix impact, say, that the consolidated take rate of acquiring? And if it does, is the interchange component of that now facing the regulatory caps that I think are underway in Mexico?

Jamie, let me clarify on acquiring. So we have you won 3 segments, you mentioned on platform of platform. But basically, all of what is on platform we are measuring setaway on the marketplace economics. So you don't see that on the acquiring side.

However, we do see on the acquiring side, both online and off-line. So that is typically POS, and we providing merchant services for other merchants. And there, typically, since there is higher risk and it's more complex to do online transactions. We have a higher take rate in online transactions and a lower take rate in POS transactions because, in many cases, there is really no risk in those kind of transactions.

So I would say most -- the higher margin is on the online transactions. Nonetheless, offline is growing a lot, and we see a lot of potential because we have a lower market share in the in that part of the business.

And then with regards to the interchange cap in Mexico that did not go through the size -- the regulator decided to postpone that or to put that on hold. So there will be no change in interchanges in Mexico for the time being.

The next question is from Joao Soares with Citigroup. .

I appreciate the broader strategic upside you've outlined on engine-comrce. and I fully agree with the merits of the driving online retail penetration and digital advertising. I want to hear is your thoughts on the risk component. So essentially, how these independent agent systems could introduce new forms of the intermediation and engage clients directly, right, leading to potential changes in -- the most obvious 1 we can think of and discuss a lot is the dollar full of advertising. So I really want to hear how you view these risks and how you're approaching them strategically.

Yes. Thank you, Joao. Let me try to rephrase what I meant earlier as I tried to address your point I think there are things that we know and there are things that we don't know. So we don't know which hardware people will use in 10 years to buy. We don't know whether the winning model will be X Y or Z and so on.

We do know that consumers do value or do look for the best end-to-end experience. We do know -- and that means not only searching for products, but also getting products fast, having the wider selection, pricing, the best financing alternatives, post-purchase support and so on.

We also know there's a technology today that can dramatically improve the product discovery process. And for that reason, we are putting all of our efforts and deploying lots of engineers in building our own agents and our own shopping assistant within MercadoLibre.

It's early to know what will happen with other shopping assistant. I take your point that it might present a risk. I understand where you're coming from. But we are confident that we are playing this 1 from a position of strength that we have the relationship with consumers. We have a brand that Latin America loved. We have information and data about past purchases that allow us to offer them a great shopping assistant. And we are betting and putting our efforts on what we can control, which is building the best assistant possible -- and then we'll see, right? And time will tell, it's a bit early in the process. But once again, I think that Marelli is well positioned to capture this technology transformation, which, as I said before, I think we'll accelerate the migration from offline retail into online retail, which will be particularly relevant in a geography like Latin America, where we are somehow like 10 years before where in the U.S., the U.K. or Asia is today.

This concludes our question-and-answer session. I would like to turn the conference back over to Martin de los Santos for any closing remarks.

Thank you all for joining the call and for your questions. We are very excited with the results that we're seeing across our ecosystem. In 2025, we achieved record market share gains in e-commerce in Brazil and Mexico. In fintech, we also saw important market share gains in our acquiring business, and we continue to scale our credit portfolio, which is very profitable, as we discussed earlier. This resulted in Q4 revenues growing at 45% year-on-year, marked the 28th consecutive quarter of growth above 30%, which is another sign of effectiveness of the long-term investment and customer focus that we have within our ecosystem and the way we manage our ecosystem.

In 2025, we reached a record NPS in commerce and fintech in Brazil, Mexico and Argentina, which is a great achievement that should enable us to sustain future growth as we look into 2026. I look forward to coming to you again in May when we disclose Q1 results. In the meantime, the Investor Relations team is available for any further questions. Thank you again, and good evening.

The conference has now concluded thank you for attending today's presentation. You may now disconnect.

Hello, everyone, and welcome to the MercadoLibre Earnings Conference Call for the quarter ended September 30, 2025. Thank you for joining us.

I'm Richard Cathcart, MercadoLibre's Investor Relations Officer. Today, we will share our quarterly highlights on video, after which we'll begin our live Q&A session with our management team.

Before we go on to discuss our results for the third quarter of 2025, I remind you that management may make or refer to, and this presentation may contain forward-looking statements and non-GAAP measures. So please refer to the disclaimer on screen, which will also be available in our earnings materials on our Investor Relations website.

Please note that this call is being recorded and a replay will be made available on our IR website as well. Our quarterly product updates video will now be released after earnings instead of alongside our conference call. So watch out for this coming into your inboxes in the weeks after our results disclosure.

With that, let's begin with a short message from our CFO.

Hello, everyone. This quarter, we continue to invest to capture the immense growth opportunities that are ahead of us e-commerce and FinTech. We are exceptionally well positioned to drive financial inclusion, the offline to online retail shift in Latin America.

Revenues grew by 39% year-on-year, marked the 27th consecutive quarter of growth above 30%. Our consistent top line growth comes as a result of the investments we have made across our ecosystem. The recent reduction in the free shipping threshold in Brazil has already delivered strong results with both GMV and items sold accelerating in the quarter.

We also saw a strong growth in buyers with improved conversion rates, redemption and frequency of purchase. Seller's are also benefiting from the increase in demand of the lower threshold is generating. More sellers are coming to our platform and the number of listings has increased sharply in the BRL 19 to BRL 79 price range. Higher transaction volumes helped us reduce unit shipping costs in Brazil by 8%, with slow deliveries enabling us to leverage on the unused capacity.

Brand preference scores reached new record highs across the region, helped by our marketing investments and preshipment policies. We had a great quarter in Mexico with GMV growth accelerating and unit shipping costs in fulfillment continue to fall. Mercado Pago had a stellar quarter. Monthly active users growth accelerated as our NPS hit record highest in Brazil. This is the result of continued efforts to deliver the best value proposition to our users through UX improvements, our credit card and remunerated account products. This strong growth in asset under management and credit portfolio reflect the potential of Mercado Pago.

Our credit card, which plays a key role in NPS and principality is growing very rapidly, driven by higher users and share of wallet. We have grown our loan portfolio without compromising credit quality, all-time low first paying deputeand more credit cards are reaching maturity. In Argentina, growth of GMV, buyers and TPV remained resilient in Q3, but trends slowed through the quarter due to the challenging macro backdrop. This impacts not only growth but also pressures our EBIT margin. Despite the headwind, Argentinia continues to be a very profitable market with strong long-term growth perspective.

Operating income of USD 724 million, grew by 30% year-on-year. This demonstrates our ability to balance growth investments and profitability and the power of scale, which should continue to play in our favor. Our strategic investments in free shipping, logistics, 1P and credit card continued to deliver strong top line growth while putting some margin pressure. At the same time, this growth has enabled us to scale key OpEx lines such as product development and G&A expenses.

We will continue to invest with discipline, focusing on the long-term potential and scale of our ecosystem. Thank you for your continued support. We will now move on to Q&A.

[Operator Instructions] And today's first question comes from Andrew Ruben with Morgan Stanley.

So maybe a question on Argentina, you cited some macro challenges on GMV, TPV, higher funding costs. So I'm curious to understand first how these items evolved over the course of the quarter?

And then second, on a related note, we know you've been through political cycles, but I'm curious following Sunday's election to hear your latest views on the Argentina economic outlook. And how this feeds into your plans for growth investments in the country, fulfillment centers, credit cards or otherwise.

Andrew, it's Martin here. Thank you for your question.

Yes, as you know, Argentina continues to be a very important market for us, not only because of the size of the opportunity but because of the leadership position that we have in the country. So we, as always, we remain much more focused on continue to improve the value proposition. As we always said, more than macro, the important thing about our business is what we do with our users and our platform. So we continue to invest in Argentina. We opened the second fulfillment center this quarter.

We launched the credit card. So we are optimistic about the prospects for Argentina in the long term for our business. In the first half of the year. As you know, we had a very strong -- we saw very strong growth in both commerce and FinTech. And in Q3, due to macro and stability related to the midterm elections. we saw some slowdown of growth and some increases in interest rates will affect the consumption and increased our funding cost.

Having said that, despite macro, we saw solid growth in Argentina, revenues grew by 39% year-on-year in U.S. dollars, 97% in local currency items also grew by 34%. We had a very tough comp last year. Our credit book, even though we took a more cautious stance, grew by 100% year-on-year, and we maintained very solid healthy portfolio and very solid metrics in terms of NPL of bad debt.

So we are used to managing volatility. I think this quarter as an example to that. And then looking ahead, we think that hopefully some of the volatility will go away after the results of the elections. I will continue to be very optimistic in Argentina for the long time. It continues to be a very profitable market with a lot of growth potential for us in the future.

Our next question today comes from Irma Sgarz with Goldman Sachs.

Can you talk a bit about the impressive growth in the active user base that you had. When you look at the 6 million to 7 million new quarterly active users that you added from the second to the third quarter, can you break down increase by brand-new users versus those that were previously active users, but perhaps not at each and every quarter and that just increase this frequency?

And what are the demographics of the new users you're attracting? Is there -- is there potential -- and I'm asking this because if there's a potential risk of those new users being a little bit more promotion focused so that it might churn if you were to pull back on any measures around couponing or marketing spend.

And perhaps in that context, if you can talk about how we should think about marketing spend as we progress into next year. and whether we can come back to some degree of dilution to the investments that you're making there right now.

Ariel here. pleasure to hear you. So we had an amazing quarter in terms of our user base. We grew the total unique buyers in our platform, very, very fast this quarter, reaching the 35 million active buyers that you are referring to. Out of those more or less 4 million were new buyers to the platform. And then the others, there were buyers that did buy at some point in MercadoLibre, we believe both the total number of buyers and the number of new users are -- is very healthy, and it's a great testament of everything we are doing in MercadoLibre by improving the value proposition, both in Brazil, where we are lowering the free shipping threshold, take rates and so on, which you know, but also in the other countries, we had a great quarter in Mexico. We had a great quarter in Chile, Colombia, Argentina, which Martin was referring to.

So we are excited with everything that is happening with the vibrancy that we are generating in our platform and the engagement and frequency that we see from those users that we're bringing into the platform.

And Irma, Martin here. In terms of marketing spending, I think if you look at this particular quarter, it was represented about 11% of revenues, which is in line with what we saw last quarter in Q2. As we mentioned last quarter, we were stepping up a little bit of investment in user acquisition in terms of performance plus our affiliate channel.

We invested more in our final channel, which grew by 4x year-on-year, this is the way to attract new segments of the population, in particular, younger people and has been a very effective way of bringing more volume to our platform.

So I think going forward, will continue with a similar range of investment. And as we said in the past, we are acquiring users. We have a very sophisticated methodology to acquire users to make sure that those users that we bring are actually contributing to profitability and are adding to the volume sold on our ecosystem.

So we're very confident that the level of investment is the right one to support the growth that we are delivering quarter after quarter.

Our next question today comes from Bob Ford of Bank of America.

Congratulations on the quarter. Ariel, can you comment on merchant adherence to your recent relative value notice in Brazil, the implied changes to the search algorithm and the qualification for promotional support. And as competitive dynamics intensify, particularly in Brazil, how should we be thinking about cost structure and ancillary revenue streams?

Bob, Ariel here. So let me touch on price monitoring and seller adherence. Let me first start saying that this short-term initiative that you are starting to test for a handful of months as we -- as our competition is also testing their own initiatives for the same period.

So as we said consistently over time, we want to have the best possible value proposition for buyers and sellers in our platform. We want to present users the best speed, the best prices, the best payment alternatives available for them, and we want them to buy more. And when they buy more, they will generate more demand for our seller base. And we believe it's natural for us to put in our storefront, the items that do generate the best experience for the customers. And with that to generate higher sales for our consumers.

And that's why we are introducing this system in order to make sure that our buyers always see the most competitive offering and the best experience generating items in the MercadoLibre platform. Of course, this initiative is coming alongside our record investment levels, meaning faster logistics, more free shipping, lower shipping charges, discounts, lots of promotions and lots of coupons that we're going to invest during our Black Friday campaign.

So we expect adherence to be high because this is the real way to improve the proposal for buyers and for sellers. As you know, our on-site real estate and our ability to invest is limited by nature. And for that reason, is that we want to make sure we make the best use of those limited and available resources for the merchants who are providing and the items that are providing the best experience for our customers. So it's too early to discuss results of that one, but we think this simple system will generate the right proposal for our buyers and for our sellers as well.

Our next question today comes from Marcelo Santos with JPMorgan.

And it appears we're not receiving in the audio there. Let me get to our next caller, and that will be Josh Beck with Raymond James.

Yes. I wanted to ask a little bit about the unit costs on the shipping side. I believe you said it was down 8% year-over-year. I assume a lot of this has to do with better utilization and particularly some of the slow shipping efforts that you have. I don't expect a specific answer, but I'm curious how much headroom you think you have on this utilization angle?

And then related to that, how much are you investing in robotics and automation on more of a mid- to long-term opportunity?

Josh, it's Martin here. Let me just first clarify that the number that we disclosed is the lowering of the cost of shipping in Brazil is 8% Q-on-Q -- as a decrease in cost of shipping in local currency sequentially. And the reason for that is because as we mentioned, the extraordinary growth that we're seeing in volume is helping us dilute fixed costs of our logistic operations has also enabled us to use spare capacity and be more efficient in the way we run our operation in addition to the things that we do on a day-to-day basis in terms of improving efficiencies.

So I think that's, for the most part, the main explanation for the lowering of cost. There is some room to continue optimizing the low shipping method in the future, but that will take some more time. I think for the most part, the decrease in cost is related to scale.

Yes. Just to complement, Ariel here. So the decline in cost per shipment, 8% Q-over-Q in Brazil, it's a great result for us. Bear in mind that this is not only impacting slow shipments, but this is a decline of the total cost per shipment in a country in which we are operating and dealing with strong pressure from -- coming from the extra volume.

We believe that unit shipping costs should trend downwards over time, although this might not be a straight line. So there will be future gains that we will be able to capture through productivity and process improvements, but we need to continue iterating adjusting our systems, implementing technology.

So to the second part of your question, we are deploying robotics. We are deploying technology in the different warehouses, we are testing and learning with different technologies in different places. And we're optimistic. We see great results in productivity, both and put away in picking and packing every time we deploy some type of technology around the people that work in our warehouses.

Our next question today comes from Craig Maurer with FT Partners.

I wanted to ask on the profitability of the credit card business, specifically the cohorts from last year. I believe you said they were had been approaching breakeven, but I wanted to understand if that could become a tailwind going into next year?

Craig. So what we have been consistently saying is that cohorts that are older than 2 years old are profitable, and that continues to be the case. So the profitability of the overall portfolio of credit cards in a given country depends mostly on the mix of cohorts we have.

And -- but that continues to be the case that for cohorts of 2023 and older than those in Brazil, they are already profitable.

Our next question today comes from Vinicius Pretto with Itaú BBA.

We've been discussing a lot to trade-off between GMV growth and profitability in Brazil. And this quarter, we saw the first response with GMV accelerating significantly, but contribution margin was one of the lowest levels in the past couple of years.

When we think about these margin levels, do you view the margin investment made so far as sufficient to achieve your aspirations in terms of growth and market share given the recent developments in terms of competition, would you be willing to go below these levels in terms of margins to accelerate market share gains?

Martin here. I think, first, when we talk about margins, let's put this in context of growth. I mean we are -- we see a huge opportunity to grow not only on cores, but also in FinTech. And as we have consistently said, the main priority for us is to make sure that we capture those growth opportunities that we have ahead of us, and we will continue to invest behind those opportunities as we have done in the past, right?

Last year, you saw when we invested on credit card, it requires some margin compression -- resulting in margin compression. But now as Osvaldo mentioned, the credit card is starting to mature and that tons around. This quarter, we invested significantly on the lowering of free shipping. As you can see, had very strong results related to that with not only GMV but if you look at items sold in Brazil, it accelerated from 26% last quarter to 42% this quarter.

So very strong acceleration of items and volume, new users, more engagement, better conversion rate. We have all-time high NPS levels in Brazil because of this measure. So I think it's important to put that in context. We are not managing the business for short-term margin. We are managing for long-term value creation. And we think that if we continue to sustain the levels of growth that we are delivering, we are in the right track.

As we said in the past, we are not going to hesitate to invest behind that even if we put some short-term margin pressure. But in the long term, we continue to be very optimistic about the margin profile of our business as we continue to scale the business and as some of the investments that we're making continue to mature, such as the case of the credit card and 1P investments and many other things that we're doing throughout the ecosystem.

Our next question today comes from Trevor Young of Barclays.

Great. Just on NIMAL, should we expect the same seasonal dynamics to play out in the coming quarters, such that 4Q should be up sequentially before we step down again in 1Q?

And then as we head into next year, should we assume NIMAL remains pressured as you ramp up credit card issuance in Argentina and face potentially the same higher funding costs that you flagged this quarter even as those older cohorts in other countries get more profitable.

Tell you a little bit of what has happened lately with NIMAL. I would say that the -- what we have seen is that change in terms of mix basically. We saw a reduction in the last quarter of NIMAL, mostly coming from when you look at the overall credit market, and then I will double-click on credit card. But overall credit, what we saw was a reduction of NIMAL, coming mostly from Argentina and driven by the increase in funding cost we saw last quarter, which was significant because of some stability in the market. But I would say that is rather constrained to that in Argentina, pretty much everything else was working similarly to prior quarters.

Now when it comes to credit cards, what we're seeing is Brazil is getting to a point that we have enough older cohorts that nearly 50% of the volume of cars we have issued and TPV is already profitable. And so it will depend on the speed at which we continue issuing cards in Brazil, but that is a country where we should see in the medium term, I would say, the overall credit cards becoming profitable.

That is not yet the case in Mexico when we started significantly later and still we are issuing cards at a volume that is very significant compared to the legacy we have. And when we look at those cohorts that are 2, 3 years older are a smaller part of the overall portfolio.

And yes, as we mature in Brazil and eventually in Mexico, we will be accelerating the issuance of cards in Argentina, where we're just starting. So definitely, we'll be investing there for the next several years.

As to complement in terms of mature seasonality. It's typically a little bit of seasonality in Q4, which is a little bit better than Q1, is weaker for collection.

But I would say, for the most part, the fluctuations that you've seen over the last several quarters is related to mix, as Osvaldo mentioned, not so much for seasonality.

Thank you our next questions today comes from Deepak Mathivanan with Cantor Fitzgerald.

This is Jack on for Deepak.

Kind of sticking with the Argentina credit card topic. Can you just provide any like early engagement metrics on the new credit card launch there? Maybe how is the adoption curve compared to Brazil? Is there any reason to think that, that kind of 2 years to breakeven stat that you guys have called out would be any different in Argentina? And then lastly, kind of what are the penetration rates you're targeting over the next 12 to 18 months?

So I'd say it's still very early to tell. We only launched a credit card in Argentina towards the end of the quarter. So there is not yet enough information. It's too early to comment on its performance.

We -- as we have said in the letter, we are very confident that this will be a successful product because we have a huge user base in Argentina, and they are very engaged with Mercado Pago. And on top of that, because Argentina is a country where most of the credit card -- nearly all of the credit cards charge a monthly fleet, and we don't.

So we believe that that's a huge plus for [ uncard ]. And also It has good offers in the market of liver ecosystem for those reasons and on our current cost network. So for all of these reasons, we are encouraged and we are excited about the opportunity, but I'd say it's still very early to comment on results because it was like only for a couple of weeks during the quarter. And we cannot comment on -- we cannot give guidance on 12 or 18 months, but we are very bullish with the product.

Our next question today comes from Neha Agarwala with HSBC.

On the fulfillment centers, you mentioned that there's been a big increase in the number of shipments, would you require to add more fulfillment centers than what you already had on the road map?

And if you can give us a bit more color on the further investments that we can expect in the coming quarters in Brazil, especially? And my second question is on the credit side of the business. In Mexico, there's a lot of competition coming in. What are the early trends that you're seeing? Which products have been doing very well with the Mexican consumers? And what kind of asset quality are you seeing in Mexico specifically?

Neha, this is Ariel. So before jumping into the answer to your question, let me rewind a bit and make one small comment on an answer that I gave to Irma before.

So total number of unique buyers in the marketplace this quarter was indeed $75 million, but new buyers was actually 7.8 million -- million people, sorry, new buyers was 7.8 million. I did bring up the number of something like 4, which is the number for Brazil, but total LatAm new buyers was 7.8 million, sorry, guys, if I mixed it for you guys.

So going back to the question on fulfillment. Indeed, we saw a 28% quarter-over-quarter increase in volume in Brazil, which naturally puts pressure in our network capacity. Still, we were ready to manage that. Of course, having part of the volume in the slow method does help us manage the volume flowing through the different parts of the value chain.

So to -- specifically to your question, we did not open any new fulfillment center that was not planned. And as you probably know, it's not so easy to open any warehouse of this type and this size from 1 quarter to the other. So we are not changing the super short-term plans, we feel that we have the capacity that we need to deal with the volume that is coming.

But of course, we are always reevaluating the mid- to long-term capacity that we need to deal with the volume that we're bringing. And as part of that ongoing evaluation, we will, for sure, build the required capacity as to deal with the volume that will create. As we said over and over, fulfillment is strategic having speed fast and reliable network turns to be strategic for us in order to continue serving our customers to increase their retention to increase their NPS and we'll continue investing behind logistics as we need to serve our customer.

And then when it comes to credits in Mexico, I think that we are very encouraged by what we're seeing about, by the size of the opportunity, we believe that we have a few advantages. One is the strength of our ecosystem in Mexico which gives us a huge distribution channel and also a lot of insights and that lets us issue cards and issue credits with a very small customer acquisition cost.

When we look at the market in general, we already -- including banks, we are already the second largest financial institution in terms of monthly active users. Already #1 in terms of monthly downloads. So we are seeing how we are gaining a lot of traction in the Mexican market, both in consumer credit and in credit cards.

And if you recall, during the first part of this year, we decelerated a little bit the additions of credit cards, but we have been reaccelerating again, and we are encouraged by the results we are seeing. So I'd say I'll summarize that we believe we have a flywheel where MercadoLibre facilitates a lot of what we do with regards to credits in Mexico.

Our next question today comes from Jamie Friedman with Susquehanna.

I wanted to ask about principality. You have these interesting call-outs in the shareholder letter on Page 2. You show that there's an 11-point increase in Brazil and 2 points in Mexico.

I'm just wondering, one, how you're defining principality. And two, are there any services that you currently don't offer that you may contemplate offering financial services in order to further escalate the principality or do you have the things that you need?

So, I would say that we are excited by the growth in principality, which you mentioned, mostly in Brazil, but to some degree also in Mexico. The way we measure or we try to estimate principalities with some principallity if at least 50% of the income of a given client passes through Mercado Pago.

And this, in some cases, we're able to assess to surveys and in other cases, with open banking data. And I would say we have already put in place the 2 of the most important things. And those are yielding account and a strong trade offering. And we -- what we don't have yet is the ability to collect your salary in the market of power account. In the case of Mexico, this is because we are not yet a bank. We are in the process of obtaining a banking license and that is a requirement. And in the case of Brazil, we -- some people collect a salary in Mercado Pago, mostly through portability. But this still is fully small, and we believe there's a large opportunity there.

Our next question today comes from João Soares with Citi.

I wanted to double-click on an earlier question, and I think is important. I mean you are in the midst of an investment cycle, but at the same time, you're also gaining -- you're achieving operating leverage, especially on the product and development lines.

So just wanted to understand, I mean, are you currently satisfied with the investment level that you're making. Is there any -- are there any areas -- additional areas that you think could use additional resources or should we think about this continued operating leverage across certain OpEx lines. I mean I just wanted to understand where you are at, at the current stage of investment?

Joe, it's Martin again. Yes, I think obviously, as I mentioned before, we are extremely satisfied with the results of the investment that we did. We actually announced it last quarter, right? Remember, last quarter, we showed only 1 month of investment.

Now we're seeing the full effect of investment in the full quarter. So we're very excited about the results. The impact on the market place is really enormous. We talked about volume growing, but also a number of sellers and items listed on the range of BRL 19 to BRL 79 are growing very rapidly as well. So the supply side is also benefiting from this. So we're extremely happy.

And on top of that, as we mentioned, we lowered the shipping costs, but still, this is a longer-term process where we're going to optimize the slow shipping layer of our logistic network. So we are optimistic about the investments, the results that we're seeing. And then on top of that, we continue to make investments in other areas of the ecosystem. 1P, as we mentioned, I think, on the letter, grew very rapidly this quarter as well. It continues to improve profitability, but still requires investments.

The credit card, as Osvaldo mentioned, is still is very profitable the older cohorts. However, we continue to invest, and we are launching it in Argentina. There are some smaller initiatives that we continue to invest. We're opening new fulfillment centers. We increased our capacity -- capacity by 41% year-on-year. That required investments as well. So I think a lot of moving parts on that front.

On the flip side, we mentioned in the letter, we're going at 39% year-on-year. As I said, 27 consecutive quarters of growth above 30%. This is something that no other public company has delivered of this time frame at the scale that MercadoLibre is doing it. So that obviously is helping us dilute fixed costs and we saw this quarter strong dilution on G&A and product development.

So when you put all that together, I think we're optimistic about the long-term margin trajectory for our company. As I said before, we are very much focused on continuing to deliver growth in both FinTech and commerce, and we will make the investments that are required to capture that those roll opportunities. As we have done in the past, we will continue to do so we're disciplined, but we'll continue to invest.

Just to reinforce Martin's point. Ariel here. So we have amazing growth higher frequency from our buyers, record conversion rates, record retention rates for new buyers and record retention rates for existing buyers. We have more new buyers we had our record high NPS in Brazil. We have more live listings and more sellers than what we had before. So indeed to Martin's point, we are very encouraged by the impact that we see -- we are having -- and this gives us great optimism about the foundations we are building as we look to be the driving force between shifting physical retail into e-commerce.

And at the end of the day, that's our goal, right? We want to -- we know that the opportunity ahead of us is huge we need to continue reducing frictions of buying online and bringing more people into our platform. And while we do that, we need to continue finding efficiencies in order to fund that process. But definitely, we are excited and encouraged and very positive with the results we had this quarter.

Our next question today comes from Marvin Fong with BTIG.

Great. I'd like to start with a few developments in recent months. I think you announced a B2B initiative as well as a partnership with Casas Bahia. And I just wanted to see if you could help dimensionalize the potential impact for that, not necessarily to your business per se. I know you won't speak to that specifically, but just kind of frame the opportunity for us. And how we should be thinking about the ability to drive future GMV growth?

And then secondly, on the credit card, just overall, I noticed that the average loan size has been growing. And I know that you have a risk discipline to kind of start with small loans. So even though you're growing the issuing of new cards still continues to rise. So I just wanted to understand better like how are you loosening up or extending more credit to your borrowers from the outset? Or are you still kind of maintaining the same levels of underwriting and credit quality as you have been. So I just want to understand what's driving that dynamic.

Marvin, Ariel here. So let me start touching on Casas Bahia. So this is an exciting opportunity for us. I mean, while our 1P business continues to perform extremely well, we grew 1% year-over-year on FX neutral.

Our strategy with 1P has always been to fill the gaps in selection or price competitiveness that 3P sellers were unable to fill. And as many times I've said in this call, we are a 3P preferred companies. And Casas Bahia is a seller that is able to bring more selection competitive prices to a category where we are under-indexing in market share.

So our penetration in the total market for heavy and bulky items, white goods, in particular, is definitely below our average market share. So we are excited, we think -- and by the way, Casas Bahia not only brings selection and prices, they also bring some expertise in dealing with the logistics of those complex items to ship. So we are excited. We think this is complementary to everything that we are doing, both in 1P and 3P, and we believe this is another opportunity to continue improving the 2 sides of our network. I think to B2B, this is a multibillion-dollar opportunity for the super long run.

For now, we are making the first steps into it. It will be long. We need to learn, we need to adjust. But again, we think it's another way to serve our customers and our seller base.

And Marvin, with regards to the credit card, I would say that we are definitely maintaining the same underwriting discipline that we had in the past, whenever we saw that there were worsening of NPLs, we were more cautious as we were towards the end of last year, early this year in the case of Mexico.

And then as we saw that we were able to improve our models and continue to grow with NPLs under control and continue to increase the number of cards we issue, but always maintaining the same repayment target. We were more willing to issue more cards and that has been the case. In this process throughout this time, not only have we created new generations of credit models in each of the markets roughly twice a year.

But also, we have been able to improve the technology we use which allows us to upsell customers more frequently. And therefore, when we start working with someone and if they pay us back according to plan, we are able to every month or every couple of months, being able to increase the line if we deem that to be appropriate.

So I would say we are comfortable. We have been able to accelerate the issuance of cards, and we are comfortable that we are doing this, maintaining the underwriting discipline that we had.

Our next question today comes from Kaio Prato with UBS.

I have a question on the payment business, please. Can you talk a little bit about the pace of growth of the acquiring TPV in the ecosystem and more specifically about Brazil.

Because in the country -- in the industry, we are seeing which is lower growth, at least on cat. And looking to your numbers, it implied a significant market share gain, which potentially accelerated actually this quarter with growth of around 28% year-on-year. So just wonder if you can share refers the drivers behind that and how sustainable is it going forward?

Absolutely, Kaio. So I think that you're right. What we're seeing is that we are both accelerating and growing faster than the market in Brazil. If you recall, a couple of years ago, we decided to pretty much changed all of our go-to-market strategy in Brazil with regards to in-store to POS, and we were relying a lot on third party.

We started building more on old sales force. We started building more our direct-to-consumers Yes, direct to consumers, both via MercadoLibre and via our own Mercado Pago. And those resulted in acceleration that started, I would say, over a year ago and has remained growing faster than the market for some time now. We are comfortable with that. And sort of the same thing has been happening in online payments. We also see an acceleration, particularly when it comes to credit card acquiring.

We were more selective towards the beginning of this year with regards to fix acquiring became successes. We were working with very, very same margins -- and we decided that some customers were not having those price points, but we're really focused on credit card, and we have been able to gain share.

And one more thing I'd like to point out is that this has been also the case in all of the other top markets. This has been the case in Brazil, in Mexico, in Argentina and Chile. So we're really comfortable with how we have been able to gain share in all of these markets.

Our next question comes from Marcelo Santos with JPMorgan.

My question is regarding the other countries where you had very strong metrics across the board GMV revenues, TPV margins. Just disclose a bit of the initiatives that you are doing in these markets? Is it was like med-ed or market-led and what to expect going forward? .

Marcelo, Ariel here. So yes, we are extremely satisfied with the performance of the other countries. Let me give you some colors on the consolidated numbers for the commerce side.

So GMV growth in Chile accelerated for the third consecutive quarter, while Colombia growth picked up more than 10 percentage points Q-over-Q, both trends driven by successful items. So we are increasing market share in both markets, particularly in Chile, the gain of market share has been stronger. So I would say there is no silver bullet to explain what's happening over there. It's more fulfillment, better logistics, lots and lots of work in selection strong work in demand generation, promotional activity and so on.

NPS is higher Q-over-Q in Chile as well. So we are very pleased with the performance we had because it shows that what we are building is a very solid way -- a very solid base in which we can continue to grow to bring, again, off-line retail into online and to continue consolidating our leadership in each market.

Let me add to that, Ari. If you want, on the fintech side, the 1 country where we had to focus the most, the new country we have focused most over the last couple of years has been Chile. And really, we are seeing the results of that. our user base or monthly user base is growing at 75% year-over-year.

The yield in account is growing a lot, too. and we see an acceleration in the number of products our clients are using. So we are very excited about the results we are seeing in Chile. There are products still to be launched there, but we are very encouraged by the results we all do so.

Our next question today comes from Pedro [indiscernible] with [ Exxon ].

Congratulations on the results. If I may, I wanted to hear from you how you are thinking about OpenAI's recent move into e-commerce? The launch its browser and partner with players such as Shopify, Walmart, and I was wondering how you're seeing potential opportunities or threats here? And could there be something similar in South America?

Pedro, Ariel here. So before jumping into OpenAI, let me say that we are extremely excited about the potential of Agent to enhance discovery, service and productivity within our ecosystem. There are several examples of things that we are doing on that regard. We just launched our own seller assistant, which is a conversational tool that gives sellers personalized advice and recommendations on how to manage data activity in our platform.

In FinTech, as you probably know, we just launched our first AI assistant that can help our users with a wide range of tasks like making or scheduling money transfer through a conversation platform, asking for questions on the user's operation and so on. But this is the first step of many to come for Mercado Pago and for MercadoLibre. I think to the specifics of your question, the key message there is that we need to continue to focus ourselves in building the best genic experience within our platform, and that will give us optionality on what to do next and how to move forward.

I think it's early to make comments on OpenAI and their partnership with Etsy, Shopify, and so on. We need to understand how this will develop in the long run, what role agent will play in the relationship with consumers. And eventually, decide if there's something different that we need to do for sure. We need to put the technology in place in order to have an agentic experience in MercadoLibre and in Mercado Pago in the near term.

And our final question today comes from Geoffrey Elliott with Autonomous.

You've talked a lot about what you're doing in Brazilian e-com and how you're growing, you're picking up share. But can you talk a bit about the competitive environment? Do you think that your competitors are behaving rationally? Or do you see any signs of irrational competition in the market?

Geoffrey. How are you? So let me start by saying something that I've said before here in this call that Brazil has always been an intensely competitive market. And I think the reason for that is that it's very attractive, large population, 1 of the 10 largest economies in the world, e-commerce penetration is still well below the global standards or benchmarks from the U.K., U.S. or China.

So over the last 26 years, we've built a business with a formidable value proposition for buyers, for sellers, and this has put us in a position of market leadership. Our own market share in e-commerce has tripled since 2014, it has doubled since the pandemic, but we are still very, very small when you compare our sales in the country with the total retail sales. So the position that we've built with record of NPLs, record and preference, record retention, record conversion.

This is something about the strength of everything we've done. And we are very confident that we can successfully compete against the different players in Brazil in the exact same way that we've been competing with many of them over the last 26 years. I can't speak for other players in the market, but we do not believe that anything we're doing is irrational. Just look at the results we are seeing from the lower free shipping threshold.

That is a very rational move that significantly strengthens our competitive position, our ability to bring people in the online world that were driving satisfaction. We're driving retention. So as long as we maintain the strategy that served us in the past, which is to be always focused on the user and not on our competitors. We are confident that we will be able to be the platform or choice -- of choice, sorry, for buyers and for sellers in the long run.

Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Martin de los Santos for any closing remarks.

Thank you all for joining the call today and for your questions. As you heard, we're very excited about the results of Q3, in particular, with the results of the strategic investment that we're making the lowering of the free ship interest in Brazil has enabled us to accelerate growth in the marketplace and to continue to gain market share, which, by the way, grew by double over the past 5 years.

The investment that we're making on credit and the credit card specifically, as Osvaldo mentioned, is maturing and helping us with profitability in addition to principality, which is very important for our FinTech initiatives. So these investments have enabled us to continue to deliver growth, we delivered 39% year-on-year growth. As I mentioned earlier, that marks the 27th consecutive quarter of above 30% year-on-year growth, which is something remarkable really at the size of MercadoLibre today. So we are very excited about that.

And again, looking forward to getting in touch with you once again in February when we deliver Q4 results, in the meantime, the Investor Relations team is available for further questions. Once again, thank you very much for your interest and good night.

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

Welcome to the MercadoLibre fireside chat at the Goldman Sachs Communacopia & Technology Conference. I'm pleased to welcome here CFO, Martin de los Santos, CFO of MercadoLibre. My name is Irma Sgarz. I cover the Latin America e-commerce and retail sector for Goldman Sachs. Martin, thanks for being here.

Thank you, Irma. Good morning, everybody.

Good morning. So Martin, thanks for being here again. I started with a similar question last year where I asked you about the unlock of the value of the ecosystem across fintech and e-commerce. And when you look at the progress that you've made in the year-to-date, it feels like there's been some really important initiatives. Can you talk a little bit about the initiatives between Pago and the marketplace and the results you've driven so far?

Yes, definitely. As we've been saying for many years, one of the most important competitive advantage that we have is the fact that we run the largest e-commerce platform in Latin America. And also, we have a very large fintech ecosystem. Just to give you a sense of the size on the marketplace, last year, we had more than 110 million unique buyers throughout the region. We processed volume of products sold on MercadoLibre by more than $56 billion, more than 2 billion items sold last year. And all those metrics growing very rapidly. Users growing at 25%, GMV growing at 30% plus in the different countries.

On the other side, we have the fintech platform, where we have 68 million monthly active users. We have a credit book of $9.4 billion, that is also growing very rapidly, doubling year-on-year. We processed payments worth $230 billion in the last 12 months. So a very large 2-sided ecosystem. And the important thing is that there are big synergies among each other, and we continue to develop those, and that continues working very nicely for us.

So let me give you some examples that we implemented the last year, as you asked. If you take the credit card in Brazil, we issued 1.3 million credit cards last quarter only. Most of those now come from the marketplace. So these are people who are using or buying on MercadoLibre for many years. We know them very well. We understand them from a credit perspective. And we also integrated the flow of acquisition for the credit card in the buying flow of MercadoLibre. So if you are navigating and you see a product and you are a user that we have a preapproved credit card, you can actually buy that particular product with a credit card at the same time that you're asking for the credit card, and then we ship the credit card in a couple of days. So that increases the conversion, increases the activation of the credit card and also has no cost for Mercado Pago.

So that's the way in which MercadoLibre is helping Mercado Pago push a very important product like the credit card in Brazil.

Another example is in Mexico, it's the other way around. In Mexico, as you know, the credit card penetration is very low, it's less than 20%. So buying online without a credit card is a very bad user experience. So we have to develop our own payment methods within Mercado Pago. So you can have money on your account, then you can use the funds that you have in your account to pay for a transaction on MercadoLibre. You can pay with a buy now, pay later that we developed at Mercado Pago or you can pay with a credit card that we launched in Mexico 3 years ago.

If you take those 3 payment methods together, today, 20% -- 30% of the transactions in the marketplace in Mexico are paid using our own payment methods. So those are transactions that might have not happened if we didn't have the payment methods from Mercado Pago. So Mercado Pago is actually helping the transactions happening on MercadoLibre.

And the final example, we mentioned this a couple of -- last year that we upgraded, that we improved our loyalty program. Our loyalty program traditionally has been based on content and free shipping. And about a year ago, we also introduced benefits tied to the fintech ecosystem. So if you are a loyalty member today, in addition to the free shipping and content, you also get better remuneration on your deposits, you get extra free installments on your purchases with your credit card, you get cash back on anything you buy using Marcado Pago. So that's the way we can tie both sides of the ecosystem and the loyalty program, that creates a loyalty program that is very unique. It's very hard for somebody to replicate because they don't have the 2 sides of it.

And like that, there are many, many other areas where we are collaborating with each other. In fact, I used to run the credit business, which was very much operating in both sides of the ecosystem and leverage both sides of the ecosystem. So, it is very important for us that we continue to expand that and take advantage of that opportunity as a competitive advantage.

Great. Of course, the changes to the shipping policies in Brazil, I'd be remiss not to ask, have been top of mind in many investor conversations. Can you talk a little bit about how that's driven changes in user behavior? And also, of course, the balance between the benefits on the one hand side and the costs associated with implementing this new lower free shipping threshold?

Yes. This quarter, you probably heard that we took a very important strategic decision, which is to lower the free shipping threshold in Brazil from BRL 79 to BRL 19. If you step back a little bit, you might remember, we started offering free shipping in Brazil back in 2017. Back then, the threshold was BRL 120. And since then, we lowered the threshold 3 times, the latest one being this one. So this is not something new. We have been doing this over the years. And every time we lower the free shipping threshold, we've seen an acceleration in growth of GMV, TPV, more frequency of purchase, number of new users coming online. Remember, we're operating in a region that penetration of online commerce is very, very low. So still, we play an important role on bringing people online by eliminating frictions of online transactions.

And one of the most important friction points is the shipping costs. So we have proven over time that lowering the free shipping threshold has been a very good tool for us to accelerate growth. And you can see it in the numbers. If you take longer-term view over the past 5 years since we have been doing these and other things, obviously, we doubled our market share in Brazil. Only in the last year, we increased 4 percentage points of market share. Our growth continues to be significantly larger than the market. So we're very excited about what we're doing and we have been doing it in the past. We think it's the right way to go.

And we have seen already the acceleration. Remember, we implemented this in the end -- at the end of last quarter in June. So during the quarter, you can see the growth of items in Brazil was 26% for the full quarter. But if you were to look only at June, which is the month in which we implemented, it accelerated to 34%. So you have single partial -- the partial effect of the lowering of the free shipping threshold. We will see that in full in Q3.

On the other hand, it does require investment. I mean as many things that we do, we are investing and we are not hesitating to invest if we believe this is the right way to go to make sure that we capture the growth opportunity. So again, that puts some short-term margin pressure. You've seen it in Q2, but also partially one month. In Q3, the full amount will come in. And then eventually, over time, through more volume and through optimizations of the slow shipping method, we should be able to compensate that. But we are confident like in the past, this is the right way to go to make sure that we capture the growth opportunity that we see in e-commerce in Brazil and then in other markets as well.

Great. And from an operational standpoint, so far, you've optimized your shipping network mostly towards speed of delivery, right? And now you've -- with the launch of Meli Más or the relaunch of Meli Más 2 years ago, you introduced a layer of slower shipping. So you already have some experience with that. But obviously, there's more to come from what I understand. Can you just catch us up on where you are in the process of recalibrating your shipping network? And maybe what the early learnings have been in this process?

So to recap, right, it's correct. For the past 10 years, since we built our own logistic infrastructure, we have always been focused on fast shipping. Today, more than 75% of the items sold on MercadoLibre are delivered within 2 days in Latin America, which is something that would have been unthinkable 10 years ago. But more recently, and you mentioned it correctly, in the MELI Delivery Day, we started to have a share of our volume being delivered in slow format. Now with the lowering of the threshold, maybe I should clarify this, the threshold, we lowered from BRL 79 to BRL 19, so if you buy something within that range, you get it for free, but slow. Slow meaning that instead of getting within the next 2 days, you might get it in 4 days, right? And you have the optionality to pay for [indiscernible].

So as we scale that and we have a larger share of our volume in slow, we should be able to optimize the cost of slow deliveries. Today, it's very early, right? We are using the same network and the same optimized network for fast. So we're not getting the benefits of slow. In the future, as this continues to scale, and as we develop this low shipping method, we should be able to capture efficiencies that will enable us to lower costs.

So let me give you a couple of examples. If you were to go to one of our warehouse facilities on Monday, you will see that it's at full capacity because we are delivering products that were sold on Monday -- on Saturday and Sunday, and we're going to wait because we need to deliver same day or next day, right? But if you go on Thursday or Friday, the capacity is below that level. So now when we have a stack of products that are waiting to be delivered and slow, you can plug it into the system on Friday, and you can optimize that capacity.

The same thing with the truck. If you have a truck going from Sao Paulo to Rio, and it needs to deliver the product the next day, it has to leave at 7:00 p.m. even if it's at 75% capacity. Whereas if you have other products that you can fill, you can optimize that long-haul truck. So those are 2 basic examples. It sounds very easy to do, but it's very complex in terms of -- it requires a lot of coding, it requires a lot of changes on our logistic infrastructure and way of working, and it takes time. But again, we're just getting started, but there's a big opportunity that we should be able to continue to optimize the cost of delivery, taking advantage of the slow shipping method.

Understood. Now competition in Brazil e-commerce, also another topic that remains top of mind. And I do get a lot of questions from investors whether the recent moves were more defensive, or more front-footed in their nature. So I just want to ask you, has it become more competitive in e-commerce in Brazil? And how is MercadoLibre differentiating its value proposition within that?

Brazil is a very attractive market, right? It's a 200 million people market with a very low penetration of e-commerce. So big prospects for growth. So that obviously generates a lot of competition by definition, right? I think Brazil is probably one of the most competitive markets in the world today in e-commerce. For many years, we competed with the local retailers, then the Americans, more recently the Asians. So there's a lot of competition. It has always been like that. And even in the middle of that competition, as I mentioned earlier, we continue to gain market share. We continue to deliver very high growth. We grew 30% GMV. We're growing also on the fintech side.

So it's a very competitive market, but we are defending that position from a position of strength. I mean, like I mentioned, the lowering of the free shipping threshold was something that we have done in the past, and we're doing it today because we continue to gain efficiencies on the cost of shipping. So I think we sustain our competitive position by leveraging the ecosystem, the large logistic infrastructure that we have built, which is unparalleled. We have more than 15 warehouses throughout Brazil, more than 50% of the products that are delivered come from our own warehouses, so we control the whole delivery process. We have the payment infrastructure that I mentioned before as well. And then we have 16,000 developers that continue to work every single day to improve the user experience, vertical by vertical, bringing more supply, improving the user experience.

We have the trust of the people and the trust of the brands that sell through MercadoLibre. We have the buyer protection program. So it's not one single bullet that explains why we have been successful in a very competitive market. It's the fact that we're executing at a very high level in a lot of fronts. And again, the opportunity is enormous really. So we're very excited about Brazil, even though it's very competitive.

Exciting. Marketing investments since last quarter were up quite notably. And of course, some of these were associated to one-off campaigns for promoting MercadoLibre and Mercado Pago in Brazil and of course, also communicating the lower free shipping threshold in Brazil. But -- sort of the baseline around social spend on social media and paid traffic was also up, and I think you signaled it might stay a little bit higher. Can you talk to us about what's driven the change in how the team thinks about spending on these channels and on acquiring users through these channels?

Yes, if you take a longer view on a broader picture, it's not a significant change. I mean the spending on marketing is in the range between 11% and 12%, has been fluctuating. It's in an upper level of a band last quarter. I would point out to a couple of things. Obviously, there were some branding campaigns that we did in Brazil, specifically, one for Mercado Pago that we are -- we had Anitta, which is a famous singer in Brazil. If you know the region, you'd probably know her, that she's promoting our Mercado Pago Digital Bank. So we have had a very successful campaign with her. We have seen a number of credit cards that I mentioned before, part of that was because of Anitta. So we're very excited, but that requires some investment.

Also, the lowering of the free shipping threshold, we invested on a campaign with Neymar and Ronaldo. I'm sure you probably know those guys, too. So that was a very successful campaign as well. And we've seen the brands of MercadoLibre and Mercado Pago at all-time high in terms of brand health. So we are very excited about that, but that requires some investment in this particular quarter, and will stay for the following quarters as well.

Then on acquiring users on TAM, we leaned a little bit more on social commerce. We are investing more behind the content providers and influencers channels that promote our products. We have seen an improvement in the -- on the return on investments on that channel. So we are investing a little bit more. We also leaned a little bit more on acquiring users through TikTok this quarter. If you look at the share of traffic and GMV that comes from TikTok, it doubled year-on-year, and this is because we have a much better integration with them, the technology integration that enables us to be more efficient in the way we invest in TikTok in particular.

And then the philosophy of our marketing team is we have very accurate models that -- to predict the return on investment on the incremental dollar that we invest on customer acquisitions. So, so long as we find users that are positive to the -- on a variable basis, we will continue to invest. So this particular quarter, we were a little bit more aggressive. And you can see the results, right? Users growing by 25% on the marketplace year-on-year, we had more than -- about 7 million new users on MercadoLibre this past quarter. Think about after 25 years of history in Latin America, we still have 7 million people who came for the first time to MercadoLibre, part of that comes with that investment.

So there was a pickup in investment, but we are very cautious and very disciplined in the way we invest in marketing to make sure that it increases the -- it increases the user base in a profitable way.

Great. Now I ask version of this question probably every year in this fireside chat, but I need to ask about sort of the balance between growth and margins. One of the questions we're getting, and I'm sure you're getting at the moment is, are you in an investment cycle? And how do you -- how should -- how would you encourage investors to think about whether it's more percentage margin or ultimately EBIT dollar growth?

Yes. First to clarify, when we talk about investment cycle, people tend to think about what happened back in 2017. At that time, we were at a really strong investment cycle when we're starting to build our logistic infrastructure. It's not like that right now. What we have been saying for the past 2 years consistently is that we have ahead of us a very large growth opportunity, both on commerce, fintech, advertising, all of the businesses that we operate. So the first thing is we do not want to miss those opportunities. So we have to invest behind them, we will, and we will not shy away from investing even though it might put some short-term margin pressure. We are not optimizing for short-term margin. We're trying to optimize for long-term value creation.

So if you look at last year as an example, 2024, we compressed margin by 2 points because we were investing on the credit card in Brazil and Mexico, which is a critical product for the value proposition of Mercado Pago to get principality. And we're also investing on our logistic infrastructure, which is a critical product to deliver the 30% growth on GMV or the 34% growth of revenues that we delivered in Q4. So I think the philosophy continues to be the same.

If we find the right investment opportunity, we will do it to make sure that we capture the growth opportunity. If you look at the past 10 years, we have been very disciplined in the way we manage investments. So we are very disciplined in the way we manage it, but we do not hesitate to invest even if it puts pressure on margin in the short term.

Understood. And just over pivoting a little bit to MELI adds, at just over 2% penetration of GMV, this remains a huge opportunity. You recently integrated your tech stack with Google Ad Manager, which allows you to move closer -- more closely to a full funnel solution that you can offer to brands and advertisers on your platform showing also inventory that is beyond your platform, correct? Now when you -- maybe tell us a little bit about how that is changing your conversations with the brands and sellers and some early results that you've seen from this?

Yes, we've had about a little more than $1 billion business in advertising, growing very rapidly, growing 38% year-on-year last quarter. But for the past 3 years, has been growing above that, too. But if you look at that revenue, most of it, more than 80% of that comes from search advertising. So those are our merchants promoting their products within MercadoLibre, which is obvious, we are a retail platform. So that's -- the balance of that, the rest is branding and video and display that is growing very fast. It's growing 100% year-on-year in the last quarter, but from a very slow base, okay? And for us to grow that branding advertising, we need to fix some things in our platform.

The first thing is that we realize that advertisers for branding, they require reach and frequency. So we were not giving them that within MercadoLibre and Mercado Pago. So we needed to expand the boundaries outside of our ecosystem. So last year, we reached an agreement with Disney, so we are placing advertisement on their digital platform. And as you mentioned, we just announced an agreement with Google for the Google manager -- Google Ad Manager that enables us to also expand the footprint of our branding ecosystem.

So now we have the pieces in place. We think we have a bigger reach and we plan to do other deals as well. And we also have the first-party data, which is very, very important for advertisers for branding advertising because it enables us -- enables our advertisers to do very sophisticated targeting to our users to the more than 100 million users that we have in the marketplace and the millions that we have on Mercado Pago.

The challenge now is to convince and to continue to work with the brands and with agencies to bring their advertising to their branding budgets to MercadoLibre. And that takes time. I mean I remember back in the days when we were trying to convince the brands, the large international brands to come to MercadoLibre for many years, the Nikes and the Adidas of this world, would say they will never sell on MercadoLibre, and now we have all of them mainly even the luxury brands are selling on MercadoLibre.

So it takes time. When we build the fulfillment infrastructure also, it took a long time to complete and to increase penetration, but then we proved to the users that we were -- it was better to bring their inventory with us and that picked up. And today, we have north of 75% penetration of fulfillment in Mexico, for instance. So I think this is going to be the same case. It takes time. We need to continue to execute to work with the brands, work with the agencies, but it's definitely a huge opportunity going forward. When you look at the number of users that we have throughout the regions, the first-party data that we have, and if we expand the footprint, I think branding should be a much larger share of advertising than it is today.

Very powerful, but it's naturally a gradual progression, if you see.

Exactly. I mean like many things that we do at MELI, they don't come easy. They will take -- will take time. We should not cut corners. We need to execute and eventually it will come.

Great. Let's switch gears and talk a little bit about fintech. The credit card in Brazil continues to grow very well. I think more than half of the cohorts are now actually 9-month profitable or positive. And can you talk a little bit about type of customer you're attracting with your card in Brazil specifically, given that this is a market where credit cards are a bit more penetrated than in Mexico specifically, but also Argentina?

Yes. [indiscernible] the credit card portfolio is growing very rapidly. The consolidated portfolio, Mexico and Brazil is growing at 91% year-on-year, but most of that comes from Brazil. And we are very excited because we are seeing the malls performing better, collections are performing better. We have the -- last quarter, we had the all-time low in terms of NPLs, [indiscernible] rates ever in credit cards. And as you mentioned, more than half of the portfolio -- credit card portfolio is already NIMAL positive.

So all the signals are pointing in the right direction. We are acquiring users, obviously very much tied to the ecosystem because of what I mentioned before, we are capturing them in the marketplace. We tie it with the loyalty program that provides benefits to credit card users related to marketplace as well as the Mercado Pago platform. And also, we are seeing -- we continue to see that when somebody picks up the credit card, they become more engaged with the ecosystem. They tend to buy more on MercadoLibre, they become more principal users of Mercado Pago, which is a critical metric that we follow.

So we are very, very excited about the -- what we're doing with the credit card, not only for the credit card itself, but because of the side benefits that it brings to the ecosystem. And the same thing, Mexico is a little bit behind because we launched the Mexico credit card 2 years later than Brazil, but still we're seeing good signals and good acceleration in Mexico as well, and we are waiting for Argentina that we announced that this quarter, we're going to be -- we are launching the credit card in Argentina.

Yes. So I did want to ask you about the credit card in Argentina as well. Can you talk a little bit about how that could perhaps be different from Brazil and Mexico? Could we see a faster ramp up there?

Yes. We are very, very excited about the credit card in Argentina. Think about Argentina as a country where most about adult people already use Mercado Pago. If you were -- if you went to Argentina, you will realize that every single store on the street uses Mercado Pago, everybody gets the salary on their bank, but they bring the money right away to Marcado Pago because we remunerate deposits in a more appropriate way than the banks. Our credit book in Argentina tripled year-on-year last year. Asset under management more than doubled in Argentina.

So all the -- the fintech value prop in Argentina is really, really incredible and it's working very, very nicely. The last piece of the puzzle that we needed is a credit card. So we are very excited about the fact that we are launching the credit card in Argentina.

And in terms if you compare it to Brazil and Mexico, first, we have the advantage of having 5 years of experience. We have a much better product today in Argentina that we had 5 years ago when we launched it in Brazil. We have much better models that are a lot more experienced, but better collections. So the value prop is a lot better in Argentina. The other thing is because in Argentina, everybody uses Mercado Pago and MercadoLibre, we have a larger TAM of people that we can choose from to offer the credit card, so we can reach higher net -- higher income levels of the population in Argentina than we reach in Brazil and Mexico. So we think that in Argentina, we expect the credit book to be profitable in a faster way, in a faster pace than Mexico and Brazil.

Obviously, we require investments upfront as all the credit card books, but we are very excited. We think that the profit -- the profitability of the book will be faster because of the reasons that I mentioned before.

That's exciting. How should we be thinking about your 1P offering? We've seen nice acceleration growth in Brazil there. What are some of the categories that you're leaning into and what you're looking to accomplish with the 1P offering?

Yes. If you step back, again, just recap the strategy of 1P. We are mainly a 3P platform, right? More than 90% of the volume that is transacted on MercadoLibre is done by our SMB, some brands and so on third-party merchants, and we don't want to compete with our 3P merchants, right? But we did find over the years that there were certain categories where the product offering or the price competitiveness was not there. Consumer electronics is a good example. For many years, we were under-indexed in terms of the share that we have in consumer electronics. So we had to lean in with our own offering, 1P offering in consumer electronics. And today, we are at par with other categories.

When you look at that category, in particular, which is the older one in 1P, we -- it require investment upfront, but over time, as we scale, as we improve the negotiations with suppliers, as we implement the technology and better management, we have been improving the economics of that particular vertical. But there are other categories that we're leaning into right now, as you mentioned, right? Heavy and bulk is one area where we are doing 1P. We realized that some of the local merchants have a bigger share than us. So we need to get involved in that in white goods. So we are scaling that and that requires investment. Supermarket is an area also, we do CPG. We don't do fresh. But CPG, when you do CPG from third party, it's not that efficient as a 3P category. So we are doing 1P, that also requires investment, but also brings more advertisement on CPG.

So overall, when you look at our 1P strategy is to complement the 3P offering on certain categories, it has been growing very nicely. It surpassed the $1 billion for the first time last quarter. But again, it's a complement. We don't want to compete with our merch -- with our 3P merchants, and we will, for the most part, continue to be a 3P marketplace.

Right. And the B2B initiatives that you launched recently or you actually -- you had it already in a couple of countries, you brought it to Brazil and in the name of MELI Negócios. And can you talk a little bit about what you're seeking to accomplish or what you're offering that's different from your usual marketplace?

We announced this, I think, a couple of weeks ago, the launch of the B2B initiative in Brazil, but we already have it in Mexico and Argentina. When you look at MercadoLibre, a lot of companies, particularly SMBs are buying on MercadoLibre. It's a very large segment of the market. But they buy the same way as you and I buy, right? And so we need to customize the user experience more targeted to SMBs, to businesses. They have -- they need a particular type of invoices. They might need different users so they can -- many people can buy in the name of the company, as opposed to just one person. We have to give them the ability to buy in bulk at a discount price.

So we are adjusting the user experience to increase the volume of transaction that is already happening, but we think the potential is much larger. When companies buy on a marketplace like MELI, they tend to buy more volume with more frequency with less fewer returns. So it's a big opportunity for us. And we think that by customizing the user experience, just like we do with any vertical where we operate, we should be able to increase that category. So that's what we announced recently in Brazil.

I would imagine a large part of that market is still offline?

Exactly, exactly. I mean, there's lower penetration of online. We think we can do a lot more bringing it online, correct?

Right. And when we look at Mexico, you had a softer start to the year in terms of GMV growth, but then accelerated quite notably into the second quarter. And this comes at a time where a lot of investors are debating the macro softening incrementally in Mexico. So it looks like you're doing something different from that's really undefining the macro softness in Mexico. So talk to us a little bit about what to expect there and what you've done?

Yes. Just to be honest, we think that it's a lot more important the things that we do within our ecosystem, the macro. I mean, if you have a good macro, you might grow at 30%. If you have a bad macro, you grow at 28%. But the main thing is that we continue to improve the user experience, bring more assortment, continue to expand the ecosystem and also bring more people online, eliminate frictions to people to come online.

Specifically, Mexico, as you said, we had in Q1, 23% year-on-year growth, which was a disappointment for us, even though it was much larger than the market and we were gaining market share. So we needed to fix certain things. We mentioned in the consumer electronics segment, we need to fix certain things the way we are negotiating with suppliers and a couple of other things. We did that, and we grew at 32% year-on-year in Q2. So we accelerated growth.

One other thing to point out is 1P. Obviously, 1P and particularly in consumer electronics, grew at a fast pace in Mexico and helped that growth. And then CBT. We have a cross-border business into Latin America, but most of that comes into Mexico. And we see -- we made some changes in the way sellers, in particular, sellers from China, the way they interact with the platform that enabled us to grow and accelerate that volume of CBT. So that's helping also the Mexican marketplace.

Great. And I'd be remiss not to ask about AI, given how much of a focus that is here at the conference. You've talked about it a little bit on past conference calls and some use cases, but Agentic AI, I think, is very early days for you, but maybe talk a little bit about your approach towards and some of the efficiency unlocks that you've been seeing?

The question we get in all the meetings, right? I think we have been using AI for many years at MELI, fraud prevention, search algorithm, the credit business that we run -- that run for several years was based on the AI models that were very accurate of predicting default rates. More recently, we are starting to -- we have been starting to use LLM models. And I will break it down in 2, right, for cost saving initiatives and consumer-facing initiatives that are helping us with growth.

For cost savings, there are many, many -- nothing really radical, but a lot of examples in different areas where we operate in legal, customer service is a good example, right? We had -- about 3 years ago, we have 10,000 customer service representatives, both internal and external. Today, we have 7,000, and we had -- our business multiplied by 3x over that period of time in terms of the number of interactions that we have with users. So we are providing a better user experience, taking care of more cases with fewer people because more than 50% of the interactions are done by the models, right, and in a very accurate way. So that's one example of the many things that we're doing in finance, in legal. They're helping us with lowering cost.

The developers, we have 18,000 developers that are leveraging AI models to help them code faster and more efficiently, that's helping. Consumer facing, a lot of examples in terms of how we interact with our users, how we summarize products, how we overuse products, how we answer questions from our users that are posed to our merchants. We can answer those automatically now. In the past, we have to wait until the merchant actually answer the question and that affected conversion. So there are many different things that we're doing consumer facing.

In advertising, we are helping our advertisers create content using AI. They can do -- through A/B testing, they can do A/B testing with 50 different videos or images. So a lot of different areas where we're applying AI. And then more on a platform basis, we have -- we're putting a lot of thought in terms of Agentic AI, trying to build the agents that will help people interact with fintech and commerce platform. I think there's more questions than answer on that front yet, but we have a lot of smart people thinking the way to do that. And we probably in the next quarters, we'll have more to say about that.

Great. Thank you so much, Martin. Thank you very much for tuning in and listening to this session. Thank you.

Thank you, everybody.

Hello, everyone, and welcome to the MercadoLibre Earnings Conference Call for the quarter ended June 30, 2025. Thank you for joining us. I am Richard Cathcart, MercadoLibre's Investor Relations Officer. Today, we will share our quarterly highlights on video, after which we will begin our live Q&A session with our management.

Before we go on to discuss our results of the second quarter of 2025, I remind you that management may make or refer to and this presentation may contain forward-looking statements and non-GAAP measures. So please refer to the disclaimer on screen, which will also be available in our earnings materials on our Investor Relations website. Please note that this call is being recorded, and a replay will be made available on our Investor Relations website as well. As we continue to evolve our communications with investors, we have decided to launch our quarterly product update video after earnings rather than together with our results call. So watch out for this coming to your inboxes in the weeks after our results disclosure. With that, let's begin with a short message from our CFO.

Hello, everyone. In Q2, MercadoLibre delivered another quarter of strong financial performance with revenues growing over 30% year-on-year and record income from operations of $825 million. These results reflect the strength and consistency of our execution as we continue to invest with discipline to advance our long-term ambitions in commerce, fintech and advertising. In Brazil, we lowered our free shipping threshold for the third time in 5 years as part of our objective of bringing offline retail online by removing frictions.

This strategic initiative is attracting new users to our e-commerce platform, increasing engagement among existing buyers and expanding our assortment. The enhanced value proposition resulted in accelerated GMV growth in June following the implementation of the new pricing. Mexico was another standout in Q2. GMV growth accelerated sharply and the number of items sold in the platform increased at the fastest pace in almost 2 years, driven by strong performance across both our 1P and cross-border businesses. Advertising revenue grew 38% year-on-year. In Q2, we launched our integration with Google Manager, an important milestone in positioning Mercado Ads as a key strategic partner for brand-focused advertisers. FinTech services continued to gain strong traction in Q2.

Monthly active users of Mercado Pago reached 68 million, reflecting rapid user growth and increasing engagement across our ecosystem. Assets under management more than doubled year-on-year once again. Our credit portfolio surpassed $9.3 billion, growing by 91% year-on-year. We're also encouraged by the quality of our credit business, NIMAL remaining broadly stable quarter-over-quarter and 50 to 90 days NPLs falling below 7% for the first time since we began reporting the metric.

Our credit card business continues to perform well in both Brazil and Mexico. Strong asset quality and ongoing enhancements to our credit models enabled us to issue 1.5 million new cards in Q2. We're also seeing consistent improvements in cohort profitability with more than half of our portfolio in Brazil already being NIMAL positive. We are pleased with our performance in Q2 as the benefits of years of disciplined investments continue to compound. Engagement is rising across all areas of our ecosystem, reinforcing the strength of our platform and the long-term potential ahead. Thank you for your continued support. Our first question today is from Andrew Ruben with Morgan Stanley.

[Operator Instructions]

Our first question today is from Andrew Ruben with Morgan Stanley.

Congratulations as well on the CEO transition announcement. I'm curious around the shipping changes. I see you mentioned the lower free shipping minimum, but also the cut in seller fees between BRL 79 and about BRL 200. I'm curious on the seller side, what kind of return you see when you reduce the fees for sellers if it gets reinvested into price and how to understand the dynamic between that part of the shipping investment.

Andrew, Ariel here. So before the change in pricing, you could see that there was a kind of a cliff edge in the take rate from below BRL 79 to above BRL 79, which basically led to steep increase in fees, both in absolute terms, but more importantly, as a percentage of GMV. So basically, with this adjustment, we are lowering that cliff, smoothening the curve from BRL 79 upward.

And we think this is the right thing to do. Let me step back for a second. We tested and learned from executing this last year in a few categories. And our experience actually shows that this initiative has a positive impact. And it comes from, a, merchants lowering prices; and b, bringing more selection to our platform. And more importantly, those impacts are not necessarily perceived at the moment in which we execute the changes, but they get strengthening over time. So overall, I would say this was a positive change for us. We are happy with the early results we've seen, and we are encouraged by the fact that from our experience, we are expecting even more of a positive impact in the near future.

The next question is from Irma Sgarz with Goldman Sachs.

I would just wanted to go a little bit through the higher sales and marketing spend this quarter, excluding the provisions, the spend was almost up 50% in U.S. dollar terms. Now we know that you had 2 very specific high-profile campaigns in Brazil this quarter. And I think in the letter, you also called out the campaigns in Argentina and in Mexico. So should we think about the spend of this quarter as a little bit of a -- I don't want to call it one-off, but as maybe perhaps a slight outlier? Or do you see further opportunities to continue to lean into the back half of the year? And in this context, if I may, do you see scope for AI to impact both your -- the efficacy and efficiency of your own ad spend, but also in terms of the ad inventory of and non-platform that you're showing to your ad clients? Or is that too early in the life cycle?

It's Martin here. Thank you for your question. It's correct. What you see and we've shown on the graphic -- on the graph on the investor presentation, we compressed margin by 1 percentage point this quarter compared to last year in sales and marketing. And this is mostly because of several things. In Mercado Pago, we launched several campaigns in different countries with celebrities to promote our platform.

And the results have been very, very positive in terms of user growth, asset under management doubling in Brazil, Chile and Mexico. downloads also improving very drastically from previous quarters. So very successful campaign, but obviously, that puts a little pressure -- short-term pressure on margins. On the commerce side, we also invested -- we run a campaign similar size to like a Black Friday to promote our free shipping that as you know, we launched in June. So that's also some investment that we did behind the lowering of free shipping threshold in Brazil, putting some pressure on margin. And then on top of that, we also increased a little bit of paid advertising in order to acquire more users, always with positive returns. So that's also an increase relative to last year.

And finally, we invested a little bit more on our social strategy by investing in affiliates and content creators program that, again, those will bring results throughout the quarters. But in the short term, they put some margin pressure. So I would think it's a combination of both ongoing investments in acquiring users and downloads, but also a couple of one-off campaigns, in particular in Mercado Pago and the lower free shipping threshold that we did in Brazil this quarter.

Irma, Ariel here. To the second part of your question, we definitely think there is huge room for AI to help us improve both our marketing execution and our ad spend as well. So on the marketing side, I think there are many, many dimensions in which we are testing and learning about AI. Just to bring one example out there. For instance, when we think about branding and creativities, AI brings us the opportunity to produce multiple creativities for any given campaign and start testing and learning those creativities across the board and with that, deciding who we want to show what in the online world, and that's something we are already proving, producing content online instead of -- in the physical world is another thing that we are working on.

So many, many dimensions in which we think AI will add value. And the same is happening with advertising. We are using AI today in order to help our sellers better understand our ad stack to have onboarded into our ad technology to optimize their bidding and so on. So yes, we are bullish with the impact that AI will bring into this environment.

Next question is from Robert Ford with Bank of America.

I was curious, where are you in terms of your low ASP selection versus your longer-term plan in the Shopee assortment? How long is it going to take you to get to where you want to be? And how is your low ASP strategy different from that of Shopee in Brazil?

Bob, so this is Ariel. Let me answer this differently. We are convinced that we have, in general terms, the widest selection available out there in Brazil. I think there is opportunity for us to continue increasing the number of live listings in low ASPs and part of what we are doing today in Brazil is related to that.

We are already seeing good traction on new sellers and new live listings on low-ticket items coming into our platform. Bear in mind that in this quarter, you only see 4 weeks of the new free shipping policy in place in our results. So overall, we are positive with everything we've seen so far, we are encouraged with the seller reaction to the program and with the number of listings that we see every day coming into our platform.

Next question is from Marcelo Santos with JPMorgan.

I wanted to ask a bit about the change in shipping strategy, would it make sense to apply this to other countries like Argentina and Mexico. I mean I think you also have the same problem in terms of the step change in take rate after the free shipping threshold. Could you discuss the elements that, that would be important to consider in these other countries.

Marcelo, Ariel here. So let me break this down in different things. So in Brazil, we implemented 2 different things. On the one hand, the lowering of the shipping fees for merchants, which is the one I was referring to about the cliff and the take rates. Then we lowered the free shipping policy for Brazil, in particular, from BRL 39 to BRL 19. To your point on bringing those policies into Mexico or Argentina, I would say that every market is different, right? And we don't have the exact same policy and the exact same value proposition in each one of our operations. For instance, we don't have the same level of cash backs in our Meli Más program in Brazil and in Mexico, we don't have the same level of fulfillment penetration in the different countries, Mexico being the highest, Brazil probably in the middle and Argentina, the lowest and so on, right?

So while we don't give guidance on our policies looking forward, what I can say is that as we always do, we will learn, we will evaluate and we will decide eventually which policies we want to bring where, but there's no hard commitment on executing one thing in the other place.

Next question is from Rodrigo Gastim with Itau BBA.

Just on Brazil, GMV, you mentioned the latter items acceleration in Brazil after the free shipping campaign. And you say that you saw GMV following a similar pattern. So just to make it clear here, guys, can we understand that GMV in Brazil also accelerated after the free shipping campaign so far? It is very important for us to understand, given all the investments that have done. So anything here would be very appreciated.

So let me try to answer that one. So we are very happy with the results that we are seeing in Brazil, particularly items sold in Brazil accelerated to 34% growth year-over-year in June. So that's a major acceleration. Of course, given the fact that we are accelerating in the segment where the ASP is the lowest, the impact in overall GMV growth is smaller, but both accelerated.

And you should bear in mind that Q2 is actually comparing to a Q2 last year in which we have a very, very strong performance. On top of that, we see that the program we've put in place also has generated impact in traffic, in buyer acquisition, new buyers, engagement and so on. But more importantly, I think it deserves kind of a step back, right? We are doing this because we think and we are committed to bringing offline retail to the online world. We have proven over and over since 2017 that offering more free shipping to our buyers has a direct impact in customer satisfaction, in customer retention, in frequency, and that creates long-term value for us, right? We've done the lowering of the free shipping 3 times already. We moved from BRL 120 to BRL 99 then from BRL 99 to BRL 79 and this time from BRL 79 to BRL 19. And we are excited because we see all the key KPIs trending in the right direction. It's too early to give you details on the numbers beyond what I've just said, but everything is pointing in the direction in which we wanted.

Next question is from Neha Agarwala with HSBC.

On the commerce side, how much of the lower pricing that you have for the sellers is being passed on to the consumers eventually in your view? And on the fintech side, the early delinquencies have been coming down quite swiftly, but the NPL ratio -- and the NPL ratio remains elevated and picked up sequentially. If you can give us some color on that, when can we see NPLs actually stabilize? And how has the asset quality evolved in the 3 geos.

So on the first part of your question, I would say that given the mechanics with which we implemented the reduction in fees and the way sellers operate in MercadoLibre. Most of the lowering in take rates were passed into pricing. So we saw a clear reduction of prices in MercadoLibre after the implementation of the changes in take rate. I will let Osvaldo and Martin answer the second part of your question.

So Neha, with regards to NPLs, what we're seeing is that a reduction -- sequential reduction in NPLs between 15 and 90 days. And there was a slight increase in over 90 days, but it's roughly in line with what it was before. It was 18.5% a year ago, and it's 18.5% now, sequentially up 0.5 percentage point from 18% to 18.5%. But we don't have a concern with regards to NPLs. Actually, we are very happy with how they are evolving, and we have been able to reaccelerate issuance of cards given that the malls are performing very well.

And just to complement, Neha, if you look at the other side of the business, which is the revenues that we generate through our portfolio, actual profitability of most of our portfolios have improved sequentially and year-over-year. So we are very satisfied. And this is the reason why you see an increase -- an acceleration in the growth rates of portfolios. The overall credit portfolio grew at 91% year-on-year and the credit card specifically grew 118% year-on-year.

As we mentioned earlier, because it's becoming a lot more profitable, and we are very satisfied with the results of our credit card. So I think you should look not only at NPLs, which short-term NPLs are coming down, but it's true that the longer NPLs are slightly up, but the profitability is in pretty good shape and all metrics are pointing in the right direction.

The next question is from Deepak Mathivanan with Cantor Fitzgerald.

This is Jack on for Deepak. So you saw nice growth in advertising this quarter. Can you share a bit more color on how off-platform adds are trending in the early days. And then related, you mentioned Argentina is narrowing the ad revenue gap with Brazil and Mexico. What specific levers are driving this catch up.

Jack, Ariel here. So yes, we had a great quarter in ads. Revenues grew by 38% year-over-year in dollars and 59% year-over-year on FX neutral. Argentina is growing particularly well, I would say, as a result of both macro conditions and team execution. So lower inflation, more stocks on the hands of sellers and so on is kind of giving them the space and the oxygen to be able to invest as to promote sales. But also on top of that, I think our team has done a tremendous job in explaining the value proposition and helping sellers understand the value that our tech stack can bring to them. On top of that, going back to ads performance in general, display and video has almost doubled year-over-year.

I know we are starting from a low base, but still triple-digit growth is nice to see. Product ads is performing well across countries and sites and not only in Argentina, and this is on the back of improved UX and tools for sellers, such as a new question flow focused on benefits of advertising, smarter item selection, improved budget recommendation using AI and some of the things that I was mentioning before.

So yes, overall, very positive on everything we are doing on ads. We see ads as a percentage of GMV accelerating this quarter. So good news, but still, the opportunity is huge ahead of us. So excited, but cautious. We need to continue executing.

Next question is from Jamie Friedman with Susquehanna.

I did have a -- my questions are about Slide 13 and 14. Is there any way to help unpack the mix shift to credit cards impacting the NIMAL. It was still good at 23%, but I'm just curious as to how you think about that. And then the top of the funnel looks really good, right, 6.7%, down from 8.2% in terms of NPLs. What is your overall message on credit and credit quality.

With regards to NIMAL, I think there are several effects working on at the same time. On the one hand, the most obvious ones with regards to credit card is that NIMAL for credit card is lower than for the other products and credit card is growing significantly faster than the credit book. So as Martin was saying, it's growing at over 100% year-over-year. And that's why even though the NIMAL for the credit card remains, I would say, rather flat for new segments and it has been improving for all the segments as the portfolio grows, that has an impact on the overall NIMAL. And then the other factor I would mention is that is relevant is Argentina with inflation coming down so fast in Argentina, so how NIMAL last year was ridiculously high, I would say. But still, it's super profitable. And to counterbalance that to some degree, the other thing that is happening with Argentina is that the size of Argentina within all of the loan portfolio has increased.

So even though the NIMAL has come down a little bit, overall, the impact continues to be relevant because of this increase in weight in the portfolio. Then with overall -- regarding the overall credit quality, I'll say that we -- I think we are very bullish, I would say, on how we are issuing credit.

If you recall, a couple of quarters ago at the end of the fourth quarter, early first quarter, we were a little bit more cautious, particularly in Brazil because we saw -- there were concerns about interest rates increasing and in general, in the market, NPLs increasing. And to some degree, we have seen something similar in the overall market in Argentina more recently. Nonetheless, we have continued to improve our models, and we felt comfortable increasing the speed of issuing cards in Brazil and in Mexico in both countries, but mostly in Brazil. And we continue to see that cohorts that are 2 years or older, all of them are -- have NIMAL positive. For example, all -- pretty much all of the 2023 cohorts are already NIMAL positives and some of the early 2024 cohorts also. So we continue to be bullish with how we are issuing credit.

The next question is from Trevor Young with Barclays.

Great. Just sticking with credit card for a second and the comment in the letter around NIMAL. Just to be clear, the entire credit card business is now NIMAL breakeven? Or was that a comment around some subset of the business? And then relatedly, should we assume that the credit card NIMAL now remain breakeven or even positive from here over the medium term, particularly as you look to launch credit cards in Argentina before too long.

Yes. So NIMAL is breakeven in Brazil, which is the country where we have been issuing cards for the longer and it's the largest market for us. It's not yet the case in Mexico. And whenever we start in Argentina, initially, it will be negative, but we expect that within a few years, it should achieve breakeven. So what we should forecast moving forward, I would say, some of the large cohorts were issued in 2023 and 2024. So assuming there is a decrease in the speed at which we issued, those will have an impact in the next coming years, but Brazil is already positive.

Next question is from Geoffrey Elliott with Autonomous.

Thanks very much for the question. The credit portfolio is growing quickly as it grows, how do you expect the funding mix behind that to evolve? And what are the implications on Neal, specifically, will you shift away from using your own funds to more external funding and it that way on the NIMAL.

It's Martin here. I think if you look at the different credit portfolios that we have, the more mature portfolios, consumer credits and merchant credits, we have been funding it through third parties. So the majority of the funding comes through third party, and you see that as part of the cost in NIMAL, correct? The credit card has been funded by us so far. We're starting to fund it with third parties. So you do not see the funding cost in NIMAL. As we extend more funding to the credit card via third parties, that will have an effect on NIMAL in the way we account for that cost within NIMAL. But that's something that will come in the future.

The next question is from Joao Soares with Citigroup.

You mentioned in the release how you're scaling faster infrastructure and adapting to the expected increased mix of lower ASPs, right? I wanted to hear more about this adaptation. Imagine, right, expanding this low shipping is one component, but also expanding probably higher transit points. So I just wanted to understand how you're adapting the infrastructure? And how should we think about the profitability of these lower ASP products and the free shipping, right? How should we think about when or if it can match, right, the margin of your higher ticket items, right?

Okay, Joao, this is Ariel here. So when thinking about unit economics and profitability of the lower ticket items in which we are now offering free shipping, the mindset with which we approach this problem is kind of broad, right? So we think about relationships with our users and not transactions, meaning that when evaluating the profitability of the initiative, you also need to consider the downstream impact that the higher engagement and frequency can generate in the context of this big opportunity we have ahead of us of bringing retail offline to online in a country in which we only have 15% of e-commerce penetration. Also in our slow delivery with wider delivery promises has just started.

We have not done that before. So we have ample room to continue improving economics there. In the long run, we do expect that the additional scale, sorry, will help us reduce unit shipping economics plus capturing the productivity opportunities that the slow methods also bring to the table.

So -- in summary, if you look at purchases between BRL 19 and BRL 79 on a stand-alone basis, there will be a range of margins. Not all of them will be positive, not all of them will be negative. But even so, we expect this to be net positive for the P&L in the longer term. And we are more importantly convinced that this is the right investment to make to extend our position as the destination of choice for e-commerce in Latin America.

The next question is from Kaio Prato with UBS.

I would like to explore a little bit more the credit operations in Argentina, if I may, please. Last quarter, you mentioned that we grew 4x the portfolio in dollars. So just wondering if you can share more details about the growth pace this quarter as well. And we have been seeing a sharp increase in NPLs for the traditional bank in Argentina, especially in the consumer portfolio.

Just would like to understand what can you say about the asset quality for your operations, if there is any concern and the strategy going forward? And finally, we saw some change regarding the reserve requirements on money market funds in Argentina. As your remunerated accounts are in money market funds, if I'm not wrong. Just wondering if that could impact your FinTech operations there at some point as well.

So yes, we have increased significantly the portfolio in Argentina. Basically, we were coming from a very, very small basis. If you -- there was basically no credit in Argentina. If you were to look at credit to the private sector in Argentina was single digits as a percentage of GDP.

It's very, very small. So there was plenty of room to grow. We grew a lot. We have seen a worsening condition in the market. It has not been our case. We believe that part of that is that we have very strong principality in Argentina. People use Mercado Pago daily.

And therefore, that could help us in people paying us back first rather than other debt they might have. So we are not seeing significant impacts in terms of NPLs. And then I think the second part of the question was regarding the change in reserve requirements for money market funds. That happened last week.

Actually, there was a change in reserves for pretty much all of the banks and also money market funds. And quick and dirty, we expect the impact in what we pay to users to be in the order of 2%, meaning we were paying close to 30%, 27% roughly to customers before. And with this change, the impact will be roughly 2 percentage points and will be around 25%.

The next question is from Marvin Fong with BTIG.

Just on the -- I know it's only been a few months now, but with the lower free shipping threshold, those purchases that are happening under BRL 79, just curious how is the behavior there? Are you seeing a lot of the purchases near the low end of the free shipping threshold? And do you expect that to change over time?

Would you expect the average order size to increase for those people that are starting to purchase from MercadoLibre, but perhaps will start becoming more comfortable purchasing more items on the marketplace? And then second question, just would love some insight on just your comfort with continuing this pace of credit card issuance in Brazil given some of the tightening that's going on. It looks like there's been some slowdown in consumer spending, but just any color there would be much appreciated.

Marvin, so let me answer your question in a slightly different way. We would not be a $50-plus billion GMV company today per year if it were not because of building our logistics infrastructure and launching our free shipping program back in 2017. And we think this is the same case now. We are convinced that the best way to serve our customers in Brazil is by offering more free shipping, and that's basically what we are doing. So within that range, there are many, many things happening simultaneously.

We just launched this a few weeks back. So it's a bit early, but we definitely expect the trend that we see in traffic increases, conversion rate increasing, more engagement, more frequency to continue in the future. And with that, we expect to see orders going up, order sizes going up and so on, right? So this is not a marketing investment that we are doing in order to generate transaction from one day to the other. This is a long-term play in which we think this is the best way to serve our customers.

And Marvin, when it comes to credit cards, I'll say that what we have been doing consistently is improve our models and issue cards at a pace that allows us to have payback periods of roughly between 2 and 3 years, and that we will continue to do that. We cannot be sure about what that pace will be in the future. But we do know that if you look at our market share today in credit cards in Brazil, it's roughly 2%. So we believe there's plenty of opportunity to continue growing.

Just to complement, as we have done in the past, if we see something that we do not like in the market or in our models, we will be willing to slow down just like we did in the past. So far, we're very comfortable with the models, the collections, NPLs and the performance of the credit card. So we will continue to grow so long as we can guarantee that we have a healthy book and a profitable book in the medium to long term.

This concludes our question-and-answer session. I would like to turn the conference back over to Martin de los Santos for any closing remarks.

Thank you all for joining today to the call and thank you for your questions. We're very pleased with our results in Q2, where once again, we saw our businesses accelerating growth, both in commerce and FinTech and we look forward to engaging again in October with you when we present our Q3 results. In the meantime, the Investor Relations team will be available for any further questions. Thank you again, and good night.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.