Good day, ladies and gentlemen, and welcome to MercadoLibre's first quarter earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. (Operator instructions) As a reminder, this conference call may be recorded. I would now like to turn the conference over to your host, Mr. Pedro Arnt. Sir, you may begin.

Thank you. Welcome everyone to MercadoLibre's earnings release conference call for the quarter ended March 31st, 2010. The company management presenting today are Marcos Galperin, CEO; and Hernan Kazah, CFO. This conference call is also being broadcast over the Internet and is available through the Investor Relations section of our Website. Let me quickly remind you that during the course of this call, management may make forward-looking statements relating to such matters as continued growth prospects for the company, industry trends, and products and technology initiatives. These statements are based on currently available information and our assumptions, expectations, and projections about future events. While we believe that these assumptions, expectations, and projections are reasonable in view of the currently available data, you are cautioned not to place undue reliance on these forward-looking statements. Our actual results may differ materially from those discussed in this call for a variety of reasons, including those described in the forward-looking statements and Risk Factor sections of our 10-Q, 10-K, and other filings with the Securities and Exchange Commission, which are available on our Investor Relations Website. With those disclaimers, let me hand the floor over to Marcos to initiate the conference call.

Thank you, Pedro, and welcome everyone to today's conference call. First of all, let me say that following an excellent 2009, we are off to an exciting and promising start in 2010 as well. Our first quarter results demonstrate the continued progress of ongoing strategies and recent initiatives. All our different business units showed tremendously positive traction during the first quarter as we continue to carry-forward the momentum gained from the many innovations that were launched during last year. Before I move on, let me just clarify that all growth rates that I would be mentioning refer to year-on-year growth rates unless specifically stated. During the first quarter, the company generated impressive 39% growth in items sold, 103% growth in number of payments made to MercadoPago, 40% growth in gross merchandise volume, 49% growth in gross merchandise volume in local currencies, and 99% growth in total payments volume in local currencies. During Q1, we added 2.3 million new users to our community of buyers and sellers, giving total confirmed registered users at $44.9 million, a growth rate of 26%. Net revenues for the quarter came in at $45.9 million, a jump of 42%. Our marketplace revenues grew 27%. And revenues were particularly strong in our payments business, which grew 103%. Income from operations grew 123%, with an operating income margin of 32.9%. All in all, we believe Q1 performance validates the strength of our business model; efficient execution by our teams, our leading brand, and market position; and, the still compelling secular growth trends that benefit our industry throughout Latin America. The strong reserves we posted for Q1 also highlight another important factor that I would like to bring to your attention. The fact that we not only continued to strengthen our business units on an individual basis, but even…

Thanks, Marcos. I would now like to go into more detail on our financial performance before taking any questions. First of all, I would like to stress what an excellent start of the year our Q1 represented as already mentioned by Marcos. We continued to see great topline momentum driven by very solid volume growth that we owe both to our own internal improvements and also to the strong tailwinds of Internet and e-commerce growth in the region. Closely neighboring the health of our core business is the interdependent network of subsidiary businesses we are running, the performance of which has us very excited indeed. I would like to briefly review our main financial metrics before delving into all our different segments. Please remember that all growth rates refer to year-over-year growth rates unless specified. With this, during the first quarter, most of our key financial metrics evolved positively. Specifically, net revenue grew 42% to $45.9 million, a 45% growth in constant currency. Gross profit margin was healthy at 78.5%. Income from operations was $15.5 million, with an operating income margin of 33.8%. And net income was $9.6 million, a 20.9% net income margin, compared to $5.4 million on an income margin of 16.7% a year earlier. Revenue growth was driven primarily by a 39% increase in items sold, taking marketplace gross merchandise volume to $731.6 million, a 40% increase in US dollars and a 49% jump in local currency. Within this total, Brazil maintains a very strong local currency gross merchandise volume growth of 31% and a total payments volume of $123.8 million, 133% growth in US dollars or 99% growth in local currency. Our marketplace revenues grew to $33 million, a 27% increase in US dollars and a 39% increase in local currency. Payments revenues reached $12.9 million,…

Thank you. (Operator instructions) Our first question comes from Marianne Wolk from Susquehanna. Marianne Wolk – Susquehanna: Yes, thank you very much. Can you discuss the rollout of free classifieds more broadly, and also the introduction of free listings and how that might affect your marketplace's take rate as we head into the second quarter? And then, another question on the payments business, I know you have been talking for a while about introducing MP3 in Brazil. Can you talk a little bit about the timing for that and what might be delaying the rollout there? And yes, that would be it. Thank you.

Hi. Hello, this is Marcos. So, with respect to the first part of your question, we launched free listings in classifieds in Brazil and Chile last year, late last year. And in that case, we did have an impact in take rate. We did not have the upgrade mechanisms to access paid listings to free listing centers. We corrected some of those things, and we launched free listing in our core marketplace, not in classifieds. So, in all our categories, except for cars, real estate and services in Argentina and with proper upgrade mechanisms in place. And we are very happy with the results we have seen so far, even though it's early. We have seen all the right responses in terms of listings, and also, very good to see good response in terms of positive take rate developments. So overall, we're very satisfied with our results so far of our experiment in Argentina. And we feel it's very likely that we will roll out this to other markets throughout the year. Marianne Wolk – Susquehanna: So, just to confirm, the rollout of the further three listings has not put any negative pressure on the take rate?

It has not, and we don't expect that it will. Marianne Wolk – Susquehanna: Great.

With respect to your question regarding payments in Brazil, we are also very pleased to announce that we have opened the off-platform payment solution MP3 in Brazil during Q1. It's now available to every seller who wants to use it or who wants to put it on their site. Initial results are also very encouraging. The off-platform volume of payments we are processing in Brazil is already larger than the one we are processing in Argentina, which have had the resolution for a much longer period of time. And we will be introducing MP3 on-platform, which involves a migration sometime, hopefully during 2010, and we are making no commitments with respect to timing. Marianne Wolk – Susquehanna: Thank you.

Thank you.

Our next question comes from Imran Khan from JP Morgan. Imran Khan – JP Morgan: Yes, hi. Thank you so much for taking my questions. A couple of questions, first, starting with it seems like your successful (inaudible) growth slowed down a little bit, and you are going to have some tough comps through the rest of the year. How should we think about the ability to maintain the growth of the successful listing items and the GMV growth over the next couple of quarters? And secondly, in terms of just to better understand the seasonality, I know the World Cup Soccer is an important sports event in Brazil and Argentina. How do you think that may or may not impact your business given that time? Thank you.

So with respect to the growth rate in the operating metrics successful items and gross merchandise volume, 40% in terms of items and roughly 49% in terms of gross merchandise volume in local currencies, so with a very, very good growth, even though it implies a slight deceleration after eight quarters of successive acceleration. Clearly, some of the improvements have led to an acceleration outside the year-on-year process. And we expect to continue executing and improving our platform and our practices to continue maintaining our accelerated growth rate as we move along. Overall, we operate in an environment of high secular growth rate in terms of Internet users, broadband penetration, PC, and mobile smart phone penetrations, and now netbooks and iPods, so all these devices clearly continue to help our industry to grow, our Internet users to grow and broadband to grow. So, we continue to rely on these secular growth trends, in our leadership position, our leading brand, and in innovations that would perform to our marketplace to continue growing very healthily. With respect to the soccer tournament, we'll see how it goes. In the past, clearly, when there is a game going along, there is not much trading going on. But it’s too early to say if that would have an impact or not, we always catch up after the games. So, we'll see how it goes. Imran Khan – JP Morgan: Okay. Thank you, Marcos.

Thank you, Imran.

Our next question comes from Scott Devitt from Morgan Stanley. Scott Devitt – Morgan Stanley: Hi. Thanks for taking the question. The first one is, on the Pago business, the fee business, yes, it's great that credit is much more accessible to your customers today, and I know that that's been a – that has actually been a negative drag on take rate for the Payments business for at least a few quarters now. Within that segment of Pago, do you believe that the take rate there has stabilized, going forward, just from a modeling perspective? And then, the second question would be, what do you think about the competitive landscape from a payment standpoint in Brazil in terms of the opportunities for an alternative payment platform to emerge, and would you ever allow an alternative on the MercadoLibre platform? Thank you.

Well, Devitt, this is Hernan who will take your first question. Regarding take rates of MercadoPago, as you all said, the decline in interest rates has shown a decline in total payment take rate. Though honestly, we believe that it is positive given that we've had some declines in interest rate. We are passing along the benefits with the buyers. And we are able to have access to credits at a cheaper rate. What will happen in the future? It's hard to say. We believe interest rates (inaudible) in Brazil where we do local financing, so having the negative Forex. It's important to highlight that most of the margins of our payments business come out of processing fees. And those fees as a percentage of total payment volume have remained constant throughout the last few quarters. So, we don't see a fall in (inaudible) of profitability and margins. So, we might continue to see a decline as interest rates continue to go down and again, that would be good for the buyers.

With respect to the second part of your question, Scott, we obviously operate in a competitive environment and have operated in that competitive environment for the past 11 years. We have done very well in a competitive environment. We believe we will continue to do well. We see a future opportunity with various strong secular growth rates as I was mentioning earlier. And obviously, this encourages other people to enter the field. That's good. That's positive for the industry. That's positive for us. And on the payments, as Hernan said, I think we have done very well in competitive environments. We have excellent competitive advantages. We have a market business, which is growing very healthily. We have very good technology, have a very good team, and great payments brand as well. And we look forward to continue to grow both on-platform and off-platform in the next several years. Scott Devitt – Morgan Stanley: Thanks and congratulations on the results.

Thank you.

Our next question comes from Gene Munster from Piper Jaffray. Gene Munster – Piper Jaffray: Good afternoon and I will add my congratulations. And Marcos, in the prepared comments, you talked and you have referenced a couple of times about changes in pricing the platform. I think it was Colombia that you had said, and a comment that you had is that you are making aggressive changes to the platform. Can you talk a little bit about what the gives and takes are as far as what the impact could be on take rates, for example, in that region particular? I mean, should we be thinking that some of these aggressive impacts are going to have positive or negative, just directionally can you give us some guidance on that? Thank you.

What we did with the final part of Q1 was add price increase in some of the caps as the pricing structure that we have in Colombia. We saw positive – actually low impact in terms of volume and positive impact in terms of revenue. So, we are rolling that out to other markets. We have done in the first quarter of Q2. So that will help us improve the take rate of our core marketplace though it is just in caps in some market, so maybe it should go up, but don’t expect a big change.

It’s just fine-tuning and something that we continue doing as we see good opportunities within our pricing structure. Gene Munster – Piper Jaffray: Okay, so that should hopefully have a positive impact on take rate?

Coming out of that, certainly. Then you have to have into consideration many other things that might be moving throughout the course. Gene Munster – Piper Jaffray: And then you anticipate you are saying you are going to make those changes and other geographies as well?

Yes. We have had that in some of the geographies at the beginning of Q2, and we expect to do that in most countries. Gene Munster – Piper Jaffray: Okay. One just quick follow-up question regarding the margin, it was better than what we were looking for. It looks like you have had some good, as you mentioned, cost control on the G&A in some of the sales and marketing. Is that generically kind of how we should think about operating margin going forward? I know you don't give guidance specifically, but was there anything that was an anomaly, I guess, in some of the – on the expense items last quarter that may reverse, again higher in the June quarter?

We continue to see scalability in most of the expense line. We are going to investing more aggressively in product and technology, but we do see leveraged marketing and G&A. You have to have in mind when you look at consolidated margins, that MercadoPago revenue share of growth, that could come quicker and our margins (inaudible) margins. Gene Munster – Piper Jaffray: Okay. Great, thank you.

Thank you.

Our next question comes from Steve Weinstein from Pacific Crest. Steve Weinstein – Pacific Crest: Great, thank you. Got a couple of questions on MercadoPago. Now that you have more experience with the pricing model you are using in Argentina, I am wondering if you think that, that is the best model for you to be using, going forward, and how we will see – how the 3.0 rolled out into the other markets? And do you think you have the right kind of systems in place to be able to manage the pricing on the system with the increasing adoption of Pago as it happens? That would be one. And then two, you are talking about Pago being used off-platform now. And I was just wondering if we could get some color around what kind of transactions are occurring off-platform? Are they MercadoLibre sellers that are just – have sales going on their own site, or is this a new market or new types of products or services that are occurring using MercadoPago?

Hi Steve, this is Marcos. So, with respect to the second part of your question, it’s both, we are seeing on all sorts of transaction going on in the off-platform market rates. With respect to the first part of your question, we are very happy with the approach we have been taking in Argentina and with the one we continue to take. So in Argentina, we have eliminated the MercadoPago fee. And there is only one fee in our marketplace, which covers success fees and payments processing. And MercadoLibre fees and MercadoPago have an inter-company fees. This has enabled us to dramatically increase adoption, and later on what we have done both in Argentina and Brazil is to make MercadoPago adoption compulsory for all centers. We see other marketplaces around the world that make payments an integral part of the marketplace experience. Very successful marketplaces around the world are doing this, and we believe that’s the right way to go. Clearly, it brings many benefits to the marketplace experience, it reduces friction. It makes all payments flow through the market sector and accelerates trading. It provides significantly more safety both to the buyers and to the sellers as the payments flow through MercadoLibre and MercadoPago, and therefore, we will continue to experiment in making the usage of MercadoPago more and more, to increase penetration of MercadoPago on our marketplace. So, we believe we have the right systems to cope with the increasing adoption. Already adoption is basically 100% in Brazil and very close to it in Argentina as well. Steve Weinstein – Pacific Crest: Well, as I understand it, right, so on the final value fee, all sellers are paying a final value fee that's the same whether or not Pago is used to complete the transaction or not, which would imply that, if the transaction's completed and not paid with Pago, that transaction is subsidizing the Pago expenses for the listings that do use Pago. So, I mean, that would indicate that as more – as a higher percentage of the transactions close with Pago, do you need to continue to raise the final value fee? I mean, how do you model that out to stay in front of it so it doesn't come back to you as an expense? And then, did you say this was now happening in Brazil, as well, that you made the switch in Brazil?

So, the first part of what you stated is correct. That’s exactly the case. Eventually, we aspire to have 100% of the transactions flowing through our payments gateway as we see other marketplaces around the world doing. In Brazil, we have 100% adoption, but in Brazil on-platform, we still have a buyer phase model. So, we still don’t have the MP3 version of our payments mechanism in place. We have made adoption compulsory, but it’s still higher phase in Brazil. Steve Weinstein – Pacific Crest: Thank you.

Welcome.

Our next question comes from Stephen Ju from RBC. Stephen Ju – RBC: Hi guys. As you continue to tweak the takeaway from MercadoPago to drive adoption, at what usage level, as a percentage of GMV, would you feel that you are comfortable to start thinking or start walking up the take rate, granted this may vary from region-to-region? Thanks.

Marcos was saying when he answered the prior question, it's something that we are monitoring constantly. The idea of this bundling of MercadoPago and MercadoLibre is great for the user. It’s a way of driving with addition that we have of 100% penetration of MercadoPago on the marketplace, but is not intended to reduce our take rate. So, as we see the penetration of MercadoPago growing, we will make some adjustments on the fees that we charge to sellers. But one clarification that everyone has (inaudible) following up on the payer question and also complementing when they are asking. When there's a transaction in Argentina and that transaction is not using MercadoPago, in that case, 100% of the revenues are allocated to the marketplace. When we do have a transaction which MercadoPago is used, that transaction will allocate roughly 60% of both revenues to MercadoPago and 40% of the revenues to the marketplace.

This concludes our question-and-answer session for today. I would now like to turn the conference back over to management for any closing remarks.

Thanks everyone for your time and for the questions, and we look forward to our next conversation when we report our Q2 results. Thank you very much. Bye-bye.

Ladies and gentlemen, thank you for participating in today’s conference. This concludes our program for today. You may all disconnect and have a wonderful day.