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