Good day, ladies and gentlemen and welcome to MercadoLibre Third Quarter 2015 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. As a reminder, this conference is being recorded. I would now like to hand the meeting over to management. Please go ahead.

Hello, everyone, and welcome to MercadoLibre earnings conference call for the quarter ended September 30, 2015. I am Martin de los Santos, Senior Vice President of Finance and Head of Investor Relations for MercadoLibre. Our senior management presenting today is Pedro Arnt, Chief Financial Officer. Additionally, Osvaldo Gimenez, Executive Vice President of Payments, will be available during today's Q&A session. This conference call is also being broadcast over the Internet and is available through the Investor Relations section of our website. I remind you that management may make forward-looking statements relating to such matters as continued growth prospects for the company, industry trends and product and technology initiatives. These statements are based on currently available information on our current assumptions, expectations and projections about future events. While we believe that our assumptions, expectations and projections are reasonable in view of the currently available information, you are cautioned not to place undue reliance on those 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 Factors sections of our 10-K and other filings with the Securities and Exchange Commission, which are available on our Investor Relations website. Finally, I would like to remind you that during the course of this conference call, we might discuss some non-GAAP measures. A reconciliation of those measures to the nearest comparable GAAP measures can be found in our third quarter 2015 earnings press release available on our Investor Relations website. Now, let me turn the call over to Pedro.

Thanks, Martin. Good afternoon and welcome to our third quarter conference call for 2015. As we report our earnings results and exit this third quarter I'd like to kick off the conference call by saying that we continue to be optimistic about the future opportunities that lie ahead of us going forward. Latin America offers a formidable growth market with solid business prospects and multiple factors which make us feel confident about the direction and shape our business is taking. Complementing these external factors our own internal strengths being a larger company with increasingly diversified revenue streams with better access to capital and an ever more capable team of employees will serve as powerful advantages in order to continue to effectively capitalize on and execute the forthcoming growth opportunities. We are fortunate to do business in an industry that continues to grow even in adverse economic scenarios consequence of a still under penetrated secular trend e-commerce, MercadoLibre is at the epicenter of this trend a leader and benchmark when it comes to regional coverage, market share, unique visitors and brand recognition. Furthermore our company has a proven business model functioning as the platform of choice for the region's growing e-commerce ecosystem. This platform approach serves as a growth catalyst that continuously generates incremental business opportunities while being financially sound and profitable. We believe this quarter's results are a testament to all this. Consequently the cornerstone of our focus will continue to be centered on the execution of our platform centered growth strategy and on scaling the business for the long-term. We plan to achieve this by continuing to invest behind inoperative and compelling e-commerce solutions for small and medium-sized businesses as well as individual sellers, while also continuing to expand our relationships with large retail brands. We envision MercadoLibre as…

Thank you. [Operator Instructions] Our first question comes from the line of Ross Sandler from Deutsche Bank.

Hi, thanks for taking the question. This is [indiscernible] on behalf of Ross. Couple of quick questions, we know you don’t provide guidance looking forward a bit, given the environment. Could you give us a sense of what should be the EBITDA margin in long-term and medium-term and then I just have a quick follow-up on that? Thank you.

Hi, so as you mentioned we don't give guidance I think what we try to do as an indicator of what’s happening with the business is to give you very specific callouts and how much of the margin contraction has been slowing exchange related and how much of it has actually been the operational cadence of investing behind our business. And I think going forward what you should see and of course stripping currency is what we said at the beginning of the year. We feel extremely positive about some of the initiatives that we've been rolling out on the shipping and logistics front, on the payments front, on the off platform payments front, in customer service and we feel that this is the right moment to invest behind these initiatives to continue to consolidate our topline growth and grow what probably are above market rates in most of our markets.

Great. And then just a quick one, could you give us a sense of what is the beneficiation of free installment in Argentina and maybe the other countries you operate in?

Sorry, can you repeat that.

Yes, just wondering if you could give us a sense of the penetration of free installments in Argentina and the other countries you operate in?

Sure, absolutely. So yes, let me give you total financed volume for the different market which is a combination of refinancing and not free financing, but it’s the overall flow of credit and over time should migrate towards free installments. So in Argentina it’s in the mid-30s, Brazil is about 75%, Mexico is in the low-20s and very recent launch in Chile.

Great, thank you so much.

Thank you. And our next question comes from the line of Gene Munster from Piper Jaffray.

Hey good afternoon and congratulations. And Pedro you just mentioned that you believe that you can grow at or above overall ecommerce rates in most of your geographies, would Brazil be considered one of those countries that you believe you can grow at or above. And then the second in terms of the impact of what's happening in Argentina and the broader view about a potential devaluation. How should investors kind of map out that potential impact over the next several quarters? Thanks.

Hi Gene, thank you. So what we saw this quarter, let me just give you some of the callouts again, revenues in Brazil reais at 46%, GMV in Brazilian reais at 30% so we believe we will have to wait and see some newer reported numbers from others, but all the data that we’ve seen out of Brazil showed significantly weaker numbers in terms of ecommerce growth for this quarter. So our sense is that certainly our marketplace at this point in time is growing at above the rate of ecommerce in Brazil. With regards to Argentina, I think we’ve had some overall market fund in use on the political side with the first round of elections, there is still a second round of elections to come and I think we should probably wait to see what the outcome is and at that point it might make more sense to give some color on what we’ll see going forward in terms of the prospects for Argentina.

Okay. And then just I guess one final question you talked about the impact of shipping and finance on making more money from existing users, is that – you assume that the trend that you would expect to continue, is there any reason why that trend may cause temporarily?

Sure. So I think when we look at our monetization rates we continue to see our shipping initiatives and are financing initiatives as businesses that are both important drivers of a better user experience for anyone buying or selling on MELI and additionally they also generate incremental volume for us in terms of revenues. Now if you look at what the evolution in the different geographies is, right now we have Brazil very well penetrated with both of those services and the other markets a few steps behind and growing. So long-term we expect to see levels of penetration across the board and our different geographies reaching Brazilian levels and that should be very incremental to revenues. Short-term if you look at sequential monetization you might see it flat line a little bit it actually did this quarter sequentially simply because the catch-up from the smaller markets towards Brazilian levels is it happening overnight and so there's a mix shift away from Brazil in terms of revenue to other countries that are still lower in terms of take rate. So the answer is long-term we continue to see improved monetization in take rate from shipping and from finance there might be some smooth line quarters sequentially.

Great. Thank you.

Thank you. And our next question comes from the line of Stephen Ju from Credit Suisse.

Okay, hi, Pedro, anything you can share in terms of the uptake rate among your sellers on the new surcharge unit and how do you think your sellers are going to be balancing this product versus the use of interest repayments as it means for incremental lead generation on your platform? Thanks.

Steven, can you just repeat sorry about that. The second half of the question, I got the first half.

Yes, so I mean they could either use the ads and the search results or they can use interest-fee financing as a means of lead generation. So I mean your sellers have multiple I guess channels for generating leads. So how do you think the balance the use of one versus the other?

Great. So let me just start with search products, what we are doing just to make sure, because I think they are different flavors in different markets globally as we have them in Brazil to inject within search results sponsored ads, they look a lot like the core listings. But if you click on them, they redirect back to a MELI listing. And it does have a legend that says that it's a sponsored insertion. So it’s not that we are actually charging CPC on the core search results, but every X core search result listings whether on mobile or desktop we will inject a paid advertising. So we think there is tremendous potential there in terms of incremental inventory, it keeps the user within our website by or mobile experience by redirecting back to a listing on MELI and the initial uptick is actually quite positive. So I think we’re optimistic about that product going forward it's only been rolled out to 50% of the Brazilian volume as we speak and to no other markets, so we need to continue monitoring that going forward. In terms of the choice between installments as a way to get preferred search result or opting for the advertising product we’re seeing a bit of both so depending on the seller profile, the ASP side is it an item that credit will really drive more volume or is it perhaps a lower ASP item where placement is more relevant sellers are choosing. So I don't think it's one or the other we have done away with placement fees in Brazil and so many of the sellers that used to pay out for the placement fees are opting for the search advertising. So at this point I think there is no conclusive data that says it's one over the other, it's very driven by seller profile and byproduct profile.

Thank you.

Thank you. And our next question comes from the line of Marcelo Santos from JP Morgan.

Yes, good evening. So thank you for taking the question. My question is about GMV growth in Brazil, you mentioned the figure of 30% and looking to your regulatory filings, it looks like this figures more close to mid-teens in the first half of the year, may be I am not reading that correctly but that's what I get from the filings, so was there actually a real acceleration in GMV in the country and this is the first question?

Yes. Marcelo hi, how are you? So when we look at GMV in reais in Brazil you are correct, it grew 11% Q1, 15% Q2 and 30% Q3 so definitely we’ve seen very strong improvement in our business in Brazil. And I would say it's a combination of first of all the continued penetration of payments of financing and shipping which make for an improving user experience and also if you recall one of the things we called out is that as we aggressively pushed the enhanced marketplace to a certain extent, certain transaction profile that didn't want to use the incremental services were by design being left out of the marketplace. We are not at the point where we’re beginning to lag over the part of last year where we did away with that transaction profile and so this is genuine growth on what we believe is a much better transaction profile in terms of the user experience and also that we monetize better. Remember that in Brazil, we are already doing roughly 95% of all marketplace transactions through MercadoPago, 75% of those have a credit overlay and over 60% are being done using NVOs. So really very, very strong deployment of the enhanced marketplace there driving that growth.

Okay. And the second question more or less related with new way of pricing that you have, what was the impact on take rate specifically on the marketplace so excluding that take rate increase that’s spills over to more marketplace?

Yes, so there are a couple of things to bear in mind so as you anticipate there the new pricing two things happened. First of all is it shifts revenues away from placement fees that we used to have towards either financing fees because one way to get the preferred placement is to offer the listing through, that’s the largest [indiscernible] and also to a lesser degree referring back to Stephen's question those placement revenues are also moving towards advertising which are both non-marketplace segment. So one thing you'll see in Brazil is a dislocation from marketplace take rates to non-marketplace take rates, okay. And then the second piece it's probably too early to draw any definitive conclusions, it's only been live for a part of the third quarter so going forward we can give you more detail, but after margin there is a slight decrease in core marketplace take rates as a consequence of this revenue shift and of the incremental revenue not necessarily covering for the placement fees that we used to charge.

Okay, thank you very much.

Sorry, just one final verification, all in on a sequential basis there is order intake rate is just to give you an order of magnitude, its 10 basis points so it's essentially flat Q1 consolidated Brazilian take rates. Year-over-year obviously it’s up significantly.

All right, thank you.

Thank you. And our next question comes from the line of Steve Weinstein from ITG.

Great, thank you for taking my questions. I have two questions. The first one I think you may have just partially answered, but in looking at the new pricing structure in Brazil do you think from a sellers perspective it's a price increased neutral or decreased from their point of view. And then second without having the placement fees the incentive is actually to list a lot more items and there is probably less discretions coming from the seller's standpoint. I’m wondering what you've done from either a technology search algorithm standpoint or how you are choosing to display via the inventory to make sure that buyers are seeing the best items in the most relevant items when they visitor site?

Yes, so let me just start with the second question first, because I think that's really what drove the decision. When you look at what we done with pricing clearly what were trying to accomplish year was not a price increase or price decrease. It was a by removing placement fees which were not success driven to make it more enticing for sellers to list large and larger inventories with us. Also as we work more and more with large retailers and branded retailers what they want to be able to do is to put inventory up and not have to worry about duration dates for that inventory. For retailer inventory basically is live until you run out of units. Placement fees had 30 day or 60 day durations so we were adding complexity that branded retailers typically don't want to deal with. By no longer having the placement fees we can have inventory that is live on the site until there no longer are any SKUs last which is going to be instrumental in helping us continue to push more aggressively with large retailers and branded retailers on the official story initiative. Obviously we’re doing this because were confident that our search and our sorting capabilities can handle this without hurting discovery or search or relevance for buyers so it's not something that concerns we think we've come a long way and we can handle that. And in the first question is it a price increase or is a price decrease it's really we try to manage this and as price neutral away as possible you can't always predict the electricity so that’s an ongoing process but by and large I think are our calculations have been pretty accurate as I send before sequential take rate in Brazil has been pretty much in line with what was the previous quarter. So far all the data we seen we’ve been able to switch pricing from a still placement fee model to a fully back loaded variable model without affecting monetization which was our goal coming into this.

It sounds great thank you. End of Q&A

Thank you. And I have no additional questions at this time. I would like to turn the conference back over to management for any additional comments.

Great no additional comments thanks everyone for listening and as always we look forward to updating you again with full-year results next quarter and giving you some idea as to what our plans are for 2016. So thank you very much.