Welcome, ladies and gentlemen, to the MercadoLibre Second Quarter Earnings Conference Call. (Operator Instructions) Later we will hold a question-and-answer session and instructions will follow at that time. (Operator Instructions) And as a reminder, this call is being recorded. I would like to turn the conference over to the company management. Please go ahead.

Hello, everyone, and welcome to the MercadoLibre earnings conference call for the quarter ended June 30, 2012. My name is Alex de Aboitiz and I am the Head of Investor Relations for MercadoLibre. Our senior manager presenting today is Pedro Arnt, Chief Financial Officer. Additionally, Marcos Galperín, Chief Executive Officer, and Osvaldo Gimenez, Senior Vice President of MercadoPago, 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 and 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 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-K and other filings with the Securities and Exchange Commission, which are available on our Investor Relations website. Now let me turn the call over to Pedro.

Thank you. Welcome and thanks for joining us on our recap of MercadoLibre’s second quarter of 2012. Having closed a strong first half of the year, I’d like to start by reviewing some of the drivers behind the solid performance across all our business units, both at the top and bottom lines as revenue grew 47% in local currencies, 28% in U.S. dollars and net income grew 91% in local currencies, 71% in U.S. dollars during the quarter. To start out let me note that having posted these solid financial results despite significant currency headwinds and signs of slowing economies throughout the region confirms our understanding that sustained positive e-commerce trends and solid internal execution continue to be determinant drivers of our company’s growth. Accordingly, capturing market growth through innovation on our platforms is where we remain focused, conscious of the great mid- to long-term prospects of technology enterprises in rapidly developing regions such as Latin America. Internet penetration continues on the rise and better connections are allowing Internet users to become increasingly engaged online. A growing middle class is therefore adapting its shopping habits in the countries where we operate and the search for convenience, competitive prices and unmatched variety leads them to MercadoLibre. As e-commerce gains share of retail, we continue to benefit from the strong top of mind presence that we’ve built and from our commitment to deploying the best user-facing products and technologies, offering the right solution for each user’s needs and thus increasing the relevance and ubiquity of the services we offer. To quantify the success we believe we are having, here is a quick over view of key operational metrics that illustrate the underlying foreign exchange neutral growth of our business. During the second quarter, 3.7 million new users were registered and confirmed on…

Thank you. (Operator Instructions) And our first question is from the line of Mark Miller of William Blair. Your line is open. Please, go ahead. Mark Miller – William Blair: Hi. Good afternoon, everyone. Pedro, can you highlight the primary reasons why revenue growth in Brazil you think reaccelerated this quarter on a constant currency basis? And to what extent do you think the rollout of the functionality for the apparel vertical may have contributed to that?

Sure. So I think I wouldn’t focus exclusively on the new verticals as drives of growth. I think the Brazilian operation saw strength in the marketplace across many categories. The payments business, as we said, continued to perform well as did classifieds. And so, it was more across-the-board rather than driven by the new verticals although the new verticals I think signal going forward that there’s still a significant opportunity for us as we expand into new categories where we haven’t historically been that strong. But it’s not like we’ve seen significant mix shift towards the apparel category over the last quarter. Mark Miller – William Blair: Okay. And then with regard to the initial earnings from shipping, are there any metrics you’re able to share with us? Things that you’re providing to sellers as incentives that could give us some idea of where the adoption rate could go? In other words, what are the potential cost savings and other incentives that you think will draw more of the sellers into that program?

Sure. So first of all in terms of where we are, I think it was a landmark for us and the program is up and running and operational. The adoption rates are still extremely low. We only began to onboard sellers in the open fashion over the last four or five weeks. I think going forward the value proposition is pretty strong for most of our middle market sellers in that it allows them to use our rates, which are obviously significantly scaled once we begin to combine different sellers. And it also makes for a much better buying experience because you’re able to integrate shipping data, shipping costs within the checkout flow rather than the old marketplace concept where you needed to settle parts of the shipping and fulfillment offline with the seller. So we believe the strongest value position going forward for sellers is that it should improve our conversion rates because it delivers a much-improved buyer experience. As the program grows and scales, we’ll try to keep you posted with what specific metrics. At this point, it’s still in the very days. Mark Miller – William Blair: Thanks. And just a final one for me. I’ll turn it over then. Why did the accrual go down for long-term retention?

Yeah. So a significant portion of the long-term compensation is tied to equity capital market performance. And so, as the stock moves that changes the amount that we provision for the year and payment. So if the stock trends as negative during the previous quarter that generates a cost saving in the provision. Mark Miller – William Blair: Okay. Thanks, Pedro.

Thank you. Our next question in queue is from Gene Munster of Piper Jaffray. Your line is open. Please, go ahead. Gene Munster – Piper Jaffray: Good afternoon, and congratulations. Pedro, you probably can guess what my question is here just in terms of the comp on September. And I realize that you don’t give guidance but we’re a month into the quarter and is there any way that you can – any sort of feedback you can give us just this quarter just to help us try to baseline what the local currency GMVe growth is going to be in September? We can take from there but any feedback would be helpful?

Yeah. So I’m going be consistent with what I said last time when I said I was being consistent with what we’ve been saying all along, essentially I think as you know we don’t guide and we don’t address the ongoing quarter. What is important to make sure that everyone is aware of, and I’m sure they are now, is that we had significant technology deployed this last year combined with a previous year comp. So when you go back to 2010 which was fairly weak on the back half which generated extremely high growth rates last year and so that generates tough comps going forward. I think when we address the Q3 numbers in October we’ll be able to go into the specifics of what’s happening. At this point, I think we’re going to continue to say what we have been saying which is it’s a tough comp. It doesn’t change the momentum our business has and again we’re looking at this long term, not the next two quarters. Gene Munster – Piper Jaffray: Okay. And then a follow-up. You talked about some of the shipping components that have just ramped up and I know at New World there’s also the API side of things to give other merchants the ability to more easily add inventory to the platform. Do have any idea when that could go onboard? And second is I guess the combination of both the shipping and the API, when that could have some sort of a positive again on GMVe growth? Marcos Galperín: Hi, how are you? This is Marcos. With referred to the API, we’ve seen during Q2 some very strong momentum with real estate sellers onboarding several thousands of real estate listings so we’re already seeing some of the benefits of the APIs. Although they are publicly open, they are already – we already interact with developers from various e-building sites companies and we are seeing some ramp up there. And with respect to the shipping API, I think as Pedro was saying we’re giving our first steps. We’re very happy to have deployed the integration with Correios with several sellers already live but it’s a first step and we still have many more steps to go. Gene Munster – Piper Jaffray: When is the merchant API going to be publicly available? Marcos Galperín: Well, we are hoping to launch a developers conference in October in Brazil when we will make all of our marketplace platforms publicly available to all the developers. So we are aiming on October in Brazil to launch this conference. Gene Munster – Piper Jaffray: Great. Thank you.

Thank you. Our next question is from the line of Nat Brogadir of Stifel, Nicolaus. Your line is open. Nat Brogadir – Stifel Nicolaus: Hey, guys. Thanks for taking the question. Two quick ones. One is take rate as a percent of GMVe was materially up both quarter-over-quarter and year-over-year. Just wondering what drove that and if that’s sustainable going forward? And then secondly, GMVe per item the AOV is continuing to go down. How much of that is currency and how much of that is a mix shift in the items sold? Thanks.

Sure. So take rates essentially were first and foremost driven by the strong momentum of the payments business and then I’d say through equal measure core marketplace growth and growth in the classifieds business. Take rates were up across all of the BUs which I think reflects what we were saying that it was a quarter of strength across the business. But certainly Pago was the most accretive of those. And then core marketplace and classifieds in line with each other. In terms of average selling prices, so obviously currency does impact that, but if you were to look at local currency average tickets, those are also coming down and so there is a mix shift trend towards lower ASP categories and sub-categories, that continues to occur. So it’s a bit of both. Nat Brogadir – Stifel Nicolaus: Thanks for that. And then just quickly on the competitive front, can you talk about what you guys are seeing out there? Obviously a big U.S. competitor coming into the market, everyone’s talking about. Can you just address that quickly? Marcos Galperín: What was the specific question? Nat Brogadir – Stifel Nicolaus: How Amazon or how the competitive marketplace is shaping out in Brazil? Are you seeing any impact on that? Marcos Galperín: Well, we’ve been operating in a very competitive environment for the last 13 years and we expect to continue operating in a very competitive environment for the next decade. So what has worked for us in the past is to watch what everyone is doing and then focus on what we need to do and that is what we intend to continue doing. Nat Brogadir – Stifel Nicolaus: All right. Thanks for your time. Marcos Galperín: Thank you.

Thank you. Our next question in queue is from Marcelo Santos of JP Morgan. Your line is open. Please go ahead. Marcelo Santos – JP Morgan: Hi, guys. Thanks for taking the question. I have actually two questions. The first one is I would like to know if you are seeing impact in your sales in Brazil regarding to the federal police operation called Mara Vallelia that is according to the newspapers making it difficult to bring items from abroad to Brazil? And the second question, I would like to understand a little bit better the dynamics of financing spreads. I understand that in the previous quarters you saw the spreads in Pago declined a little bit and now I understand they increased again. I just wanted to understand a little bit better the dynamics and how that relates to competitors, if it relates to competitors.

I guess I’ll take the first one. If you look at units sold growth and perhaps even more importantly live listings and unique sellers, we haven’t seen any impact from Mara Vallelia in terms of our listing trends or our selection trends. So nothing to report there.

With regards to – this is Osvaldo, Marcelo – with regards to financing spreads, what has happened over the most of this year is that interest rates have been coming down in Brazil. We were under no pressure to cover prices since we are very, very competitive versus our competitors and therefore, we have not done so. And therefore, our cost spreads have increased in the last two quarters. Marcelo Santos – JP Morgan: In December, in the end of the fourth quarter, the financing revenue complement was lower, right?

Yeah, it is. We did cut prices in December in Brazil but we have not done so again this year while the Central Bank has cut cap rates. Marcelo Santos – JP Morgan: Okay. Got it. Thank you.

Thank you. Our next question is from the line Stephen Ju of Credit Suisse. Your line is open. Please, go ahead. Stephen Ju – Credit Suisse: Hi, Marcos, Pedro and Alex. Just wondering which e-commerce or retail sectors are the biggest users of the off-platform MercadoPago right now. Is it the daily deal sites or the OTAs or is there no one particular sector you can call out? And you said mobile traffic is 5% of total but a smaller percentage GMVe which to mean seems a little bit counterintuitive. But what do you think is different about your mobile shopper in that they’re either converting at a lower rate or perhaps converting at a lower ASP? Thanks.

I would say that (inaudible) the first part of your question regarding off-platform growth. Two industries we have seen growing very strongly are coupons in more countries, and then small core retailers. I’d say those are two of the segments that are growing the most.

I think mobile has two explanations for that. One is, I think is just a use case this year and moving from the region are – be willing to feel increasing comfortable buying and paying online through their mobile phones so there might be just a development curve issue. And the second is, as we’ve said in the past, is kind of self-inflicted. The whole search-go-pay complete checkout experience has been rolled out on our apps more recently. So you could only complete the entire search through payment mobile on the HTML5 version of the website, not on the native apps. I think as we roll out complete data apps with toggle checkout integrated, we should see volume and traffic hopefully begin to converge. So I think part of it is adoption of mobile converts in the region and a big part of it is self-inflicted in the state of evolution of our own native apps. Stephen Ju – Credit Suisse: Gotcha. And one more on part development expense if I may, part development expense came down and you said you capitalized some of the software developments on the balance sheet. How much are you capitalizing right now? And I’m not quite sure where this is appearing on the balance sheet. Is it appearing in the other assets line in the current assets?

So I think what we disclosed in the call where there’s about a little less than a million dollars of incremental capitalization of development given the nature of the projects and our increased comfort in capitalizing the CapEx. In terms of the balance sheet disclosures, I have to get back to you on that offline. I don’t know off the top of my head how much of that disclosed in that but I’ll get back to you. The incremental versus previous years is about $900,000. Stephen Ju – Credit Suisse: Okay. Thank you.

Thank you. And our next question in queue is from Rudy Martin of Latin Capital Market. Please go ahead. Your line is open. Rudy Martin – Latin Capital Market: Good afternoon. I had a quick cash flow question. It showed in your press release that you have a $33.5 million for the three months and I was wondering if you could just give us some general comments on trends and cash flow, your financial flexibility and can you address any issues around Argentine dollar restrictions?

Sure. So I think one of the virtues of our financial model as we’ve always said is that we’ve set it up in a way that it is generally there are free cash flow. Even parts of our business that could be consumers of cash flow, such as payments business, the way we structured it by factoring receivables makes it a business that does not consume working capital. So our conversions from net income between cash tend to be fairly positive and I think that should be the case going forward. Last year we engaged in purchase and preparation of a series of office buildings throughout the different countries and so that generated perhaps a lower cash flow generation when you’d be in expected run rate for our business. The Argentine situation and many within our layer is one where there are very strict capital controls at the moment. Not too different to the way we had to manage the Valenzuelan situation for many years so it’s something that I think we’ve grown accustomed to managing and that we feel very comfortable that we can manage through a series of issues. The first one and it’s alluded to a certain extent in the call is we had now opened operational centers in Uruguay but will be servicing many of the shared services that used to be rendered out of Argentina. That’s generating less cash that flows to Argentina. And I think the other advantage versus the flavor with Argentina as a country where there are technology assets that we can invest in that can drive our business which is a slightly different case to Venezuela where there really isn’t that much to invest in and so we’ve invested in real estate to preserve the value of that cash. So the current situation in Argentina is we’re under very strict capital controls. That’s leading us to move certain operational units away from Argentina and we feel pretty comfortable that the cash that does get generated here can be re-invested in the business locally. Rudy Martin – Latin Capital Market: Thank you.

Thank you. Our next question is from Scott Devitt of Morgan Stanley. Your line is open. Please go ahead. Zack – Morgan Stanley: Hi. It’s Zack calling in for Scott. Just a quick question about the customer service improvements. I’m wondering if there’s any metrics or benefits you can provide or give us color on besides the improving net promoter score. Maybe something on repeat users or active users as a percentage of registered users.

Great. So we’ve typically disclosed active users on a yearly basis and so that should come out when we go through the year. I think the reason we highlighted the net promoter score issue is that we constantly strive obviously for improving the overall user experience. This is a much more specific call-out of our customer service efforts which we feel is an area where we have room to improve and where we’ve baited an investment cycle over the past three, four quarters and are beginning to see very good results witnessed by the improvements in that promoter score. I think the overall health of the business, thinking of customer experience more broadly can be seen in the sustained growth levels of successful items and the fact that we continue to grow above market in all the markets where we operate and by a significant margin in some of those countries. Zack – Morgan Stanley: Thanks.

Thank you. Our next question is from Robert Larity of Rose Advisors. Your line is open. Please go ahead. Robert Larity – Rose Advisors: Yes. Hi. Sorry if I missed this in the opening comments but could you tell us what the local currency GMVe growth was in Brazil?

Yeah. So we actually haven’t disclosed local currency GMVe growth this time around. I think as we see significant competition in the retailing space in these markets, we felt at a bit of disadvantage that we’re the only company that actually discloses country-per-country growth rates. So you have country-per-country revenue growth. We’ve had them disclose local product GMVe except for items at this point. I think if everybody else were disclosing, then it would make it easier for yourself.

Thank you. Our next question is from Chad Bartley of Pacific Crest. Your line is open. Please go ahead. Chad Bartley – Pacific Crest: Thank you for taking a question. It’s actually been asked, so I will maybe ask just one follow-up question. As you think about all the initiatives that you have going on, you’ve talked about verticalization and different categories, you’ve talked about payments and shipping and other areas. What’s probably the biggest driver as you think about near-term results? Maybe not in Q3, but what’s potentially the biggest impact to your revenue in Q4 for example? Or maybe Q1 next year out of all the new initiatives that you have? Thanks.

I think looking at the current quarter, and I feel fairly comfortable that you can extrapolate this quarter to the next few quarters. Probably the most significant driver of growth will continue to be payments for both on and off platform. I think shipping and mobile are items that I would place under the extremely significant mid to long-term initiatives that could be tremendous growth opportunities for us, but I don’t think have significant impact over the next three or four quarters. Verticalization I think falls somewhere in between. We are seeing a mix shift towards newer categories and our dependence on consumer electronics continues to fall quarter-on-quarter. That shift is happening slowly but in a sustained fashion. And because our business is in those newer categories that are typically small, a lot of that new business is probably accretive. So that would probably be the third one. But adding something that I think is sort of at the core of what we do is the continued focus on the overall user experience and how that can simply sustain or perhaps even accelerate at some point the rate of growth of the overall marketplace beyond any specific vertical category. That’s probably where we focus on the most. Chad Bartley – Pacific Crest: Okay. Thank you, Pedro. That’s helpful.

I’m showing now further questions in queue. This concludes today’s conference. Thank you for your participation. You may now disconnect. Have a great day.