How are energy investors positioned?
MercadoLibre Inc. (MELI) reported its second-quarter 2025 earnings, revealing a mixed financial performance. The company posted earnings per share (EPS) of $10.31, falling short of the forecasted $12.21, marking a 15.56% negative surprise. Despite this, revenue exceeded expectations, reaching $6.79 billion against a forecast of $6.59 billion, a 3.03% positive surprise. Following these results, MercadoLibre’s stock price rose 1.35% in after-hours trading, closing at $2,408.02. However, premarket activity showed a slight decline of 0.17%, with the stock priced at $2,332.01. According to InvestingPro data, the stock is trading near its Fair Value, with a market capitalization of $118.7 billion and impressive gross profit margins of 51.5%.
Key Takeaways
- Revenue growth exceeded expectations with a 3.03% surprise.
- EPS fell short of forecasts by 15.56%.
- Stock price showed a positive after-hours reaction, rising 1.35%.
- Strong performance in advertising and fintech segments.
- Continued investment in AI and marketing strategies.
Company Performance
MercadoLibre demonstrated strong revenue growth, driven by robust performances in its commerce, fintech, and advertising segments. The company achieved a record income from operations of $825 million, with advertising revenue climbing 38% year-over-year. The credit and credit card portfolios also saw significant growth, increasing 91% and 118% respectively. Despite the EPS miss, MercadoLibre’s strategic investments and market expansion continued to bolster its position in key regions such as Brazil, Mexico, and Argentina.
Financial Highlights
- Revenue: $6.79 billion, up over 30% year-on-year
- Earnings per share: $10.31, below the forecast of $12.21
- Income from operations: $825 million, a record high
- Advertising revenue growth: 38% year-on-year
- Credit portfolio growth: 91% year-on-year
Earnings vs. Forecast
MercadoLibre’s EPS of $10.31 missed the forecast by 15.56%, a significant deviation that contrasts with the company’s historical trend of meeting or exceeding expectations. The revenue, however, surpassed forecasts by 3.03%, indicating strong sales execution despite the EPS shortfall.
Market Reaction
Following the earnings release, MercadoLibre’s stock experienced a 1.35% increase in after-hours trading, closing at $2,408.02. This positive movement suggests investor confidence in the company’s growth strategies, despite the EPS miss. In premarket trading, the stock saw a minor decline of 0.17%, aligning with broader market trends.
Outlook & Guidance
Looking ahead, MercadoLibre remains focused on expanding its credit card offerings and integrating AI into its marketing and advertising platforms. The company anticipates continued growth in its e-commerce and fintech sectors, driven by strategic investments and market penetration efforts. Future revenue forecasts suggest a steady upward trajectory, with projections reaching $35.3 billion by FY2026.
Executive Commentary
Ariel, an executive at MercadoLibre, emphasized the company’s commitment to expanding its market presence, stating, "We are convinced that we have the widest selection available out there in Brazil." He also highlighted the potential for advertising growth, noting, "We think ads as a percentage of GMV will continue to accelerate."
Risks and Challenges
- Fluctuating economic conditions in key markets like Argentina could impact growth.
- Intense competition in the e-commerce and fintech sectors may pressure margins.
- Execution risks associated with AI and new market strategies.
- Regulatory changes in Latin American markets could pose challenges.
Q&A
During the earnings call, analysts inquired about the company’s shipping strategy and credit quality. Executives explained that lowering shipping thresholds aims to attract more sellers and buyers, while improvements in non-performing loan (NPL) ratios, particularly in Brazil, reflect enhanced credit quality. The potential of AI in marketing and advertising optimization was also discussed, highlighting its importance in future growth strategies.
Full transcript - MercadoLibre Inc (MELI) Q2 2025:
Richard Cathcart, Investor Relations Officer, MercadoLibre: Hello, everyone, and welcome to the MercadoLibre earnings conference call for the quarter ended 06/30/2025. 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 and A session with our management team. Before we go on to discuss our results of the 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. Disclosure. With that, let’s begin with a short message from our CFO.
Martin De Los Santos, CFO, MercadoLibre: Hello, everyone. In Q2, MercadoLibre delivered another quarter of strong financial performance. Revenues growing over 30% year on year and record income from operations of $825,000,000 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 five years as part of our objective of bringing offline retail online by removing frictions. 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 two 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 68,000,000, reflecting rapid user growth and increasing engagement across our ecosystem. Assets under management more than doubled year on year once again. And our credit portfolio surpassed $9,300,000,000 growing by 91% year on year.
We’re also encouraged by the quality of our credit business, stable quarter over quarter and fifty to ninety day NPLs falling below 7% for the first time since we began reporting the metric. Our credit card business continues well in both Brazil and Mexico. Strong asset quality and ongoing enhancements to our credit models enabled us to issue 1,500,000 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.
Conference Moderator, MercadoLibre: In the question and answer session. Our first question today is from Andrew Rubin with Morgan Stanley. Please go ahead.
Andrew Rubin, Analyst, Morgan Stanley: Hi. Thanks very much for the question and 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 79 and about 200. Right?
I’m curious on the seller side, what kind of return you see when you reduce the fees for sellers, if it gets reinvested in the price, and how to understand the dynamic between that part of the shipping investment? Thank you.
Ariel, Executive, MercadoLibre: Hey, Andrew. How are you? Ariel here. So, before the change in in pricing, you could see that there was a kind of a cleat a cliff edge in the take rate from below 79 reais to above 79 reais, which basically led, to steep increase in fees, both in in in absolute terms, but more importantly, as a percentage of of GMV. So, basically, with with this adjustment, we are lowering that cliff, smoothing the curve, from 79 reais upward, and and and we think this is the right thing to do.
Let me let me step back step back for a second. We tested and learned from executing this last year in in a few categories, and and our experience actually shows, that the this initiative has a positive impact. And and and it comes from a, merchants lowering, prices and b, bringing more more selection to to our platform. And more importantly, those impacts are not necessarily perceived at the moment in which we execute the the changes, but but they get strengthened 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 in the near future.
Conference Moderator, MercadoLibre: The next question is from Irma Sagars with Goldman Sachs. Please go ahead.
Irma Sagars, Analyst, Goldman Sachs: Yes. Hi. Thank you, for the opportunity. I I would just wanted to go a little bit through the highest 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 two 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 it 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 a non platform that you’re showing to your ad clients, or is that too early in the in the life cycle? Thank you.
Martin De Los Santos, CFO, MercadoLibre: Hi, Yermai. It’s Martin here. Thank you for your question. It’s correct. What you see and we shown on the on the graphic on on the graph on the investor presentation, we compressed margin by one percentage point this quarter compared to last year in sales and marketing.
And this is mostly because of several several things. Mercado Pago, we launched several campaigns, different countries with celebrities to to promote, our our platform, and and the results have been very, very positive in terms of user growth after that the management doubling in Brazil, Chile, and and Mexico. Downloads also improving very drastically from from previous quarters. So very successful campaign, but, obviously, that put little pressure short term pressure on on on margin. On the commerce side, we also invested we we run a campaign similar size to a just 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 on marching. And then on top of that, we also increased a little bit of phone, you know, or paid advertising, you know, 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 social on our social strategy by investing in affiliates and content creator program that that, again, those those will bring, results throughout the quarters. But in the short term, they put some some margin pressure.
So I would think it’s a combination of both ongoing investments in acquiring users and downloads, but also couple of, you know, one off campaigns, in particular, Mercado Bago and the lower free shipping threshold that that we did in Brazil this quarter.
Ariel, Executive, MercadoLibre: Hey, Irma. Ariel here. To the second part of your question, we definitely think that there’s huge room for AI to help us improve both our marketing, execution and our ad spend, as well. So on the marketing side, I I think there are many, many dimensions in which we are testing and learning about AI. Just to bring one example out here out 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 and that’s something we are already proving. Producing, know, content online instead of in the physical world is is another thing that we’re 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 get onboarded, into our ad technology to optimize their bidding and and so on.
So, yes, we are bullish with the impact that AI will bring, into this environment.
Conference Moderator, MercadoLibre: The next question is from Robert Ford with Bank of America. Please go ahead.
Robert Ford, Analyst, Bank of America: Good evening, everybody, and and thanks for taking my question. Yeah.
Joel Souris, Analyst, Citigroup: I was curious, where are you
Analyst: in terms of your your low ASP selection versus your longer term plan in the Shopee assortment? You know, how long is it gonna take you to get to where you wanna be? And and how is your low ASP strategy different from that of Shopee in Brazil?
Ariel, Executive, MercadoLibre: Hey, 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 in Brazil. I think there is opportunity for us to continue increasing the number of live listings in in OSPs, and part of what we are doing today in Brazil is related to that.
We are already seeing good traction on on new sellers and new, live listings on on low ticket items coming into our platform. Bear in mind that this in this quarter, you only see four weeks of the new free shipping policy in place in 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 the number of listings that we see every day coming into our platform.
Conference Moderator, MercadoLibre: The next question is from Marcelo Santos with JPMorgan. Please go ahead.
Marcelo Santos, Analyst, JPMorgan: Hi, good evening. Thanks for taking my question. I wanted to ask a bit about the change in shipping strategy. Would it make sense to apply these to other countries like Argentina and Mexico? I mean, I I I think you also have the same problem in terms of, the steep change in take rate after the the the free shipping threshold.
I mean, could you discuss the elements that, that would be important to to consider in these other countries? Thank you.
Ariel, Executive, MercadoLibre: Hey, Marcelo. Ariel here. So let me let me break this down in in in different things. So in Brazil, we implemented two 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 and the take rates, then we lower the the free shipping policy for Brazil in particular from 39, to 19 reais.
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 in each one of our operations. For instance, we don’t have the same level of cash backs in our minimize 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, Argentina the lowest, and and so on.
Right? So while 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 but there’s no hard commitment on executing one thing in the other place.
Conference Moderator, MercadoLibre: The next question is from Rodrigo Gastim with Itau BBA. Please go ahead.
Martin De Los Santos, CFO, MercadoLibre0: Yes. Good evening, everyone. Just on Brazil, GMV, you mentioned on the letter 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’s very important for us to understand given, you know, all the investments that you that you’ve done. So ending here would be very appreciated. Thank you.
Ariel, Executive, MercadoLibre: So, let me try to answer that one. So we are very happy with the results that that we are seeing in Brazil. Particularly, items sold in Brazil accelerated to 34% growth year over year in June. So that’s major a 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 q two is is actually comparing to a q two last year in which we have a very, very strong performance. On top of that, we see that that the the program we 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 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 free the lowering of the free shipping three times already. We moved from 120 reais to 99, then to 9 from 99 to 79, and this time from 79, to to 19. And we’re excited because we see all the key KPIs trending in the right direction.
It’s too early to give you details on on the numbers beyond what I’ve just said, but everything is pointing in the direction in which we wanted.
Conference Moderator, MercadoLibre: The next question is from Neha Agarwala with HSBC. Please go ahead.
Martin De Los Santos, CFO, MercadoLibre1: Hi. On on the commerce side, how much of the lower pricing did you have for the sellers is being passed on to the consumers eventually in your view? And on the on the fintech side, the oil inventories have been coming down quite swiftly, but the NPL ratio actually, 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 three geos? Thank you so much.
Ariel, Executive, MercadoLibre: Hey, Neha. So on the first part of your question, I would say that given the mechanics with which we implemented the the the reduction in fees and the way sellers operate in MercadoLibre, most of the lowering in in take rates were passed into pricing. So we saw a clear reduction of prices in MercadoLibre after the implementation of the changes in intake rate. I will let, Osvaldo and Martin answer the second part of your question.
Martin De Los Santos, CFO, MercadoLibre2: So, Neha, with regards to to to NPLs, what we’re seeing is that a reduction in in sequential reduction in NPLs between fifteen and ninety days, and there was a slight increase in over ninety 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 half a percent of points from 18 and a half, but we we don’t have a concern with regards to NPS. Actually, we are very happy with how they are evolving, and we have been able to to reaccelerate issuance of cards given that the the the models are performing very well.
Martin De Los Santos, CFO, MercadoLibre: And just to complement, Neha, if you look at the the other side of our business, which is the revenues that we generate through our portfolio, actual profitability of most of our portfolios have have improved sequentially and year over year. So we are very satisfied, and this is the reason why you see an increase in acceleration in in the growth rates of portfolios. Overall credit portfolio grew at 91% year on year, and the credit card specifically grew 118% year on year. As we mentioned earlier, you know, because it’s becoming a lot more profitable, and and we are very satisfied with the results of our credit cards. So I think you should look not only at NPLs, which short term NPLs are coming down, but it’s true that, you know, the the the the longer NPLs are slightly up, but the profitability is in pretty good shape and point on all metrics are pointing in the right direction.
Conference Moderator, MercadoLibre: The next question is from Deepak Mathivanan with Cantor Fitzgerald. Please go ahead.
Martin De Los Santos, CFO, MercadoLibre3: Hey. 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 ads are trending in the early days? And then related, you mentioned Argentina is narrowing the ad revenue gap with Brazil and Mexico.
What’s what specific levers are driving this catch up? Thanks.
Ariel, Executive, MercadoLibre: Hey, 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 on FX neutral. Argentina is going part is growing particularly well, I would say, as a result on of both macro conditions and team execution.
So lower inflation, more stocks on the hands of sellers, and 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 and and, you know, 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 digits, growth is nice to see. Product ads is performing well well across, countries and sites and not only in in Argentina, and this is on the back of improved UX and tools for sellers, such as a new question flow focused on focused on on benefits of advertising, smarter item selection, improved budget recommendation using AI, and and some of the things that I was that I was, mentioning before.
So, yes, overall, very positive on everything we are doing on ads. We see ads, as a percentage of of GMV accelerating this quarter. So good news, but but still the opportunity is huge ahead of us. So excited but cautious. We need to continue executing.
Conference Moderator, MercadoLibre: The next question is from Jamie Friedman with Susquehanna. Please go ahead.
Martin De Los Santos, CFO, MercadoLibre4: Thanks for taking the question. I did have a my questions are about slide thirteen and fourteen. Is there any way to help unpack the mix shift to credit cards impacting the NIM? 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? Thank you.
Martin De Los Santos, CFO, MercadoLibre2: With with regards to Nemo, I think there are several effects working on at the same time. On the one hand, the most of the ones with regards to credit card is that Nemo for credit card is lower than for the other products, and credit card is growing significantly faster than than than the credit book. So as Martin was saying, it’s growing at over a 100% year over year. And that’s why even though the NIMAP for the credit card remains as well flat for new segments and it has been improving for all the segments as as the portfolio grows that has an impact on on the overall email. And then the other factor I’ll mention is that is relevant is is Argentina with inflation coming down so so fast in Argentina.
So how Nemo with last year was was ridiculously high, I would say. But still, it’s super profitable. And, to to counterbalance that to some degree, the other thing that is happening with Argentina is that the the size of Argentina within all of the of the loan portfolio has increased. So even though the NIM has come down a little bit, overall, the impact continues to be relevant because of this increase in in weight in 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 on how we are issuing credit.
If you recall, a couple of quarters ago at the end of fourth quarter, early first quarter, we were a little bit more cautious, particularly in Brazil because we thought there there were concerns about interest rates increasing and and in general in the market, NPLs increasing. And to some degree, had something seen something similar in 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 in in Brazil and in in in Mexico in both countries, but mostly in Brazil. And we continue to see that the cohorts that are two years or older, all of them are are, have Neiman positive. For example, all pretty much all of the 2023 cohorts are already Neiman positives and some of the early twenty twenty four cohorts also.
So we will continue to be bullish with and we are issuing credit.
Conference Moderator, MercadoLibre: The next question is from Trevor Young with Barclays. Please go ahead.
Martin De Los Santos, CFO, MercadoLibre5: Great. Thank you. Just sticking with credit card for a second and the comment in the letter around nine mall. Just to be clear, the entire credit card business is now nine mall breakeven, or was that a comment around some subset of the business? And then relatedly, should we assume that the credit card nine mall will 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?
Martin De Los Santos, CFO, MercadoLibre2: Yeah. So Nima is breakeven in Brazil, which is the country where we have been issuing cards for for 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 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 in 2023 and 2024.
So assuming there is a decreasing at the the speed that which we issued, those will have an impact in the next coming years, but, Brazil is already positive.
Conference Moderator, MercadoLibre: The next question is from Jeffrey Elliott with Autonomous. Please go ahead.
Martin De Los Santos, CFO, MercadoLibre6: Hello. Thanks very much for taking 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 NEEMA?
Specifically, will you shift away from using your own funds to more external funding, and will that weigh on the email? Thank you.
Martin De Los Santos, CFO, MercadoLibre: Hi. It’s Martin here. I think if you look at the different credit portfolios that we have, you know, the more mature portfolios, consumer grades, the merchant grades, 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 in email. 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 email. As we extend more funding to the credit card via third parties, that will have an effect on email, in the way we account for for that cost within email. But that’s something that will come in the future.
Conference Moderator, MercadoLibre: The next question is from Joel Souris with Citigroup. Please go ahead.
Joel Souris, Analyst, Citigroup: Thank you for taking my question. Joel, I you mentioned in the release how you’re scaling faster infrastructure and adapting to the expected increase mix of lower ASPs, right? I wanted to hear more about this adaptation. Imagine, right, expanding the low 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 the margin of your higher, ticket items. Right? Thank you.
Ariel, Executive, MercadoLibre: Hey, Joe. This is Ariel here. So when thinking of unit economics and and profitability of the lower ticket items in which we are now offering for shipping, The the mindset with which we approach this problem is is 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 a downstream impact that the higher engagement and frequency can generate, in the context of this big opportunity we have ahead of us of of bringing retail offline, to online in a country in which we only have 15% of ecommerce 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 scape scale, SOTI, will help us reduce, unit shipping, economics plus capturing, you know, the the productivity opportunities that that the slow methods, also bring to the table. So in in summary, if you look at purchases between 19 and 79 reais on a standalone basis, there will be a range of margins.
Not all of them will be positive. Not all of them, will be will be negative. But even so, we expect this to be net positive for the p and l in the in the longer term, and and we are more importantly convinced that this is the right investment to make to extend our position as the destination of shop of choice for ecommerce in Latin America.
Conference Moderator, MercadoLibre: The next question is from Carlo Prado with UBS. Please go ahead.
Robert Ford, Analyst, Bank of America: Hello, everyone. Good evening. I would like to explore a little bit more the credit operations in Argentina, if I may, please. Last quarter, you mentioned that we were four times 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 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 marked funds in Argentina. As your remunerated accounts are in money marked funds, if I’m not wrong, just wondering if that could impact your fintech operations there at some point as well. Thank you.
Martin De Los Santos, CFO, MercadoLibre2: 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, it was single digits as as percentage of of GDP. It’s very, small, so there was plenty of room to grow.
We grew a lot. We have seen 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 MercadoPalo daily, and therefore, that could help help us if people paying us back first rather than the other debts they might they might have.
So we we’re not seeing a significant impacts in terms of NPLs. And then, I think the second part of the question was regarding the 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 all of the banks and also money market fund. We can dirty we expect the impact in what we pay to users to be in the order of of 2%, meaning, we were paying close to 30%, twenty twenty seven percent roughly, to to customers before.
And with this change, the impact will be roughly 22% of points and will be around 25%.
Conference Moderator, MercadoLibre: The next question is from Marvin Fong with BTIG. Please go ahead.
Martin De Los Santos, CFO, MercadoLibre7: Good evening. Thanks for taking my questions. Just, on the I know it’s only been a few months now, but with the lower free shipping threshold, you know, those purchases that are happening under 79 real, just curious, you know, how is the behavior there? Are you seeing a lot of the purchases near the the low end of the of the free shipping threshold? And, you know, do you expect that to change over time?
Would you expect the average order size to increase, you know, for those people that are, you know, starting to purchase from MercadoLibay, but perhaps we’ll 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 of credit card issuance in Brazil given, some of the tightening that’s going on. It looks like there’s been some slowdown in in consumer spending, but, just would any any color there would be much appreciated. Thank you very much.
Ariel, Executive, MercadoLibre: Hey, Marvin. So let me answer your your question in a slightly different way. We would not be a 50 plus billion dollar GMV company today or a 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 we are convinced that the best way to serve our customers in Brazil is is by offering more, fresh free shipping, and and and that’s basically what what we are doing.
So within that range, there are many, many things happening simultaneously. We just launched these, few weeks backs back, so it’s 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, you know, orders, going up, order size is going up, and and and so on. Right?
So this is not an 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 in which we think this is the best way to serve, our customers.
Martin De Los Santos, CFO, MercadoLibre2: And, Marvin, when it comes to credit cards, I’d 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 two and and three 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 mark in in credit cards in Brazil, it’s roughly 2%. So we believe there’s plenty of opportunity to continue growing.
Martin De Los Santos, CFO, MercadoLibre: 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 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’ll continue to to grow so long as we can guarantee that we have a healthy book and a profitable book in the in the medium to long term. This
Conference Moderator, MercadoLibre: concludes our question and answer session. I would like to turn the conference back over to Martin De Los Santos for any closing remarks.
Martin De Los Santos, CFO, MercadoLibre: Thank you all for joining today to call, and thank you for your questions. We’re very pleased with our results in q two where where, once again, we saw our businesses accelerating growth both in commerce and fintech. We look forward to engaging again in October with you when we present our q three results. In the meantime, the investor relations team will be available for any further questions. Thank you again, and good night.
Conference Moderator, MercadoLibre: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
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