Good day, ladies and gentlemen, and welcome to MercadoLibre Fourth Quarter 2014 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 is being recorded. At this time, I would like to hand the conference over to Mr. Martin de los Santos. Sir, you may begin.

Hello, everyone, and welcome to the MercadoLibre earnings conference call for the quarter-ended December 31, 2014. I am Martin de los Santos, VP of Finance and Head of Investor Relations for MercadoLibre. Our senior management presenting today is, Pedro Arnt, Chief Financial Officer. Additionally, Marcos Galperín, Chief Executive Officer; and Osvaldo Giménez, 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 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 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 may discuss some non-GAAP measures. A reconciliation of these measures to the nearest comparable GAAP measures can be found on our fourth quarter 2014 earnings press release available on our Investor Relations website. Now, let me turn the call over to Pedro.

Thanks Martin. Good afternoon, everyone, and welcome to our fourth quarter and fiscal year 2014 earnings call. As we close out fiscal 2014 and report fourth quarter earnings, I’d like to start by once again outlining the sizable business opportunity that the digital landscape in Latin America represents for our company. As MELI continues to perform, both, financially and operationally, leading or exceeding our key performance indicators, we do so void as a way in which e-commerce continues to develop throughout our region. According to Forrester Research, many of the large markets where we operate grew at about 20% in dollars in this past year and our forecast to sustain similar levels of growth over the next five years. That level of compounded growth rapidly scales into a sizable addressable market for e-commerce throughout Latin America in the near future. Moreover, as shown by those numbers, e-commerce growth remains strong both, short and long-term, thus generating not only the appropriate tailwinds that explain the results I will walk you through now, but more importantly, sustained new opportunities for us to pursue, always as an industry that shows healthy signs and ample room to expand and to have many profitable years ahead. Secular trends such as the adoption of mobile internet, increasing demand for online financial services, growing interest on the part of traditional retailers and brands to find technology partners to aid them in their strategies and increased consumer familiarity and preference for shopping online, all advanced the cause further and they’re all common seen trends, which deal with the growth in the region I am referring to. And as an early-mover in Latin America, we remain the leading brand and the premier e-commerce destination within the markets that we serve, positioning us incredibly well to capture significant portions of…

Thank you. [Operator Instructions] And our first question comes from Gene Munster from Piper Jaffray. Your line is open. Please go ahead.

Good afternoon and congratulations. A couple of questions. First is, across the board it seems that all the initiatives cumulatively are having a profound impact on the business. And I’m curious as we start to look forward, I know you don’t give any guidance, but if we start to think about the March/June quarter, are there any things that’s kind of changed whether it’s political or macro that would lead you - lead us to believe that something is fractionally changed in the momentum in the business? And separately, can you talk a little bit more about the developers that you acquired, the BVision developers. What some of their areas of focus would be? Is it just kind of continuation of existing developments, or are they going to be focused on new areas? Thanks. Marcos Galperín: Hi Gene, this is Marcos. With respect to the first part of your question, no, we believe our model is very resilient to political changes or even macro changes. As you said, the model is performing very well across the board, despite the fact that there are very different political and economic conditions in the various countries in Latin America where we operate. So we believe that the secular trends, Pedro was mentioning in the prepared remarks, are occurring across the board throughout the region. And as far as we can continue to implement our enhanced marketplace with all the additional services that we are implementing, such as greater penetration of MercadoPago, financing, shipping, etcetera, we will continue to grow at healthy rates hopefully for many years to come. And perhaps, Pedro will give you some light on the second part of your question.

Hi Gene. So just a continuation I think of Marcos’s statement, the company we acquired brings with an engineering talent that we will now deploy on building out this enhanced marketplace vision. Hopefully it will give us greater clarity in rolling out some of these things to new countries, and also to be able to push the countries that already have payments, financing, shipping rolled out with new features and enhanced and improved technology on those services. So it just allows us to carry out the blueprint that we’re seeing, be very successful in Brazil and Argentina, and to a lesser extent Mexico to other markets, and accelerate in those three large markets.

Okay. And just I guess a follow-up to the first part of the question, maybe itself I’ll ask slightly a different way. Is there any reason to think that the momentum in the business will continue into the March quarter or the June quarter? Marcos Galperín: Well, as you suggested, we don’t give any guidance, but we will be happy to discuss about the Q1 in May of this year.

That’s all. Thank you. Marcos Galperín: Welcome.

Our next question comes from Ross Sandler from Deutsche Bank. Your line is open. Please go ahead.

Hi guys. Can we talk about the interest-free listings in Brazil? How much is that changed from - I think it was 0% in middle of 2014 up to 18% of listings. How would you impact on conversion rates having? And I know that’s not available for all listings in Brazil, but what percent I guess of the total listings, where do we cap out at in terms of penetration, how high can that 18% go? And then second question is around take rates. So Pedro from what you’ve explained the merchants are paying higher take rate now that you’ve rolled out these interest-free installments. So can you just walk us through how the unit economics work under the several hundred dollar purchase under the old model versus the interest-free model, and is this one-time uptick in take rate? When do we start to level out? Will that be in 3Q of 2015 when we lap the rollout of interest-free listings? Thanks. Osvaldo Giménez: Hi Ross, this is Osvaldo. Regarding the interest-free financing in Brazil during the fourth quarter, 18% of the listings had the option of refinancing and also represented 33% of the growth merchandize volume in Brazil. So the conversion was nearly twice the average for the Brazilian side. And both these numbers, the listing number and the GMV number, those are averages for the quarter. And since we saw a positive trend in the quarter, we would expect those numbers to be higher in the first quarter.

Great. And on the take rate piece, Ross, I think conceptually what we said is, we’ve - on a marginal basis, so on a per transaction basis, the overall take rates in the new financing system versus the old system are not dramatically different. We’ve tried to price them marginally similar. What has happened is that the adoption of financing has grown significantly because in the new system, the merchant is bearing that cost, not the buyer. And so adoption has been tremendous. It’s driven incremental volume on the marketplace. And a lot of these take rate gains are actually coming from volume increases in financing, and not different unit economics, which is the way we like to drive take rate, not so much through pricing but more through volume.

Okay, great. And I guess just we should lap through that, I guess, once the interest-free listings are at a steady state in terms of penetration, four quarters ahead it will level out again. Is that the right way to think about it?

So I think we need to see what the cadence of that adoption curve going forward is. It’s grown very nicely, but hard to predict going forward whether the amount of finance transactions could approach most of MercadoPago, only half of that. So tough to tell when the run room for growth begins to peter out. I think we’ll have to accompany that quarter-by-quarter. And then we’re also beginning to launch this out in other markets. They won't necessarily have as rapid adoption as Brazil, but there is opportunity to replicate at least part of this success in some other markets. So we’ll have to wait and see.

Great. Thanks guys.

Thank you. Our next question comes from Michel Morin from Morgan Stanley. Your line is open. Please go ahead.

Thank you. So Pedro, I just wanted to ask about the balance sheet a little bit. If I look at your cash and short-term investments, the total there I think is around $370 million. So it seems to have come down since the convertible bond issue to the tune of about $120 million. So I was wondering if you could parse out where that’s gone. I know there was an acquisition a few months ago and then this most recent one, I don’t know if that’s in these fourth quarter results, I believe it is, but I’m not sure how meaningful that might have been. And also on that acquisition, whether or not there is any other operating impact either on the cost or revenue side this quarter? And then secondly, on Brazil, very solid top line growth there, but when I look at things sequentially, I don’t see a significant move in contribution profit. So I don’t know if it’s a lot of the same line items that you walked us through in your prepared remarks that are really impacting Brazil more specifically, or if there is something else going on there may be in terms of shipping perhaps? Thank you.

So just on the first one on the balance sheet position. To give you a general sense in terms of M&A spend, the number has been - the BVision acquisition is not material at all. It’s actually very cost-efficient acquisition in terms of cost per engineer. The Portal acquisition early on in the year was in the range of $35 million. So what you’re seeing in terms of the delta in the cash position is actually more driven by the payments business, either because of just a short-term holding on to more receivables than prior period. Additionally, we are beginning to use some of our cash for MercadoPago working capital, which improves the profitability of the Pago business slightly. So you might see oscillations on a Q-on-Q basis on the cash position, but that’s primarily driven by the payments business. There is some incremental CapEx in terms of office spaces, but the majority of that delta is going to be the payments business, and either just a short-term weekly dislocation in how many receivables we’ve factored versus prior period, or a decision to in some countries hold onto small portion of the receivables, not discount them and not take that additional P&L impact from the discounting. The second question in terms of the cadence or the evolution in profitability for the segment. By and large, a lot of the drivers that explain the consolidated OpEx and COG movements apply very much to Brazil. So the tremendous success we’re seeing in payments in Brazil drives gross margin compression. Some of the gross margin compression is also driven by taxes on shipping and that’s very pertinent for Brazil. And then the biggest drivers in terms of compensation costs and marketing costs also apply for our Brazilian segment. So in general terms, what we explained for the consolidated margin evolution, most of that applies for Brazil.

Great. Thank you, Pedro. And if I can just follow-up on that first - your first answer. How much - if you can tell us how much of that cash and investments is in Venezuela and Argentina at this point?

Okay. So very quickly, Venezuela in terms of cash holdings, if we look at balance sheet, it’s going to be roughly in the $10 million range at the Q4 exchange rate. So it’s not a very significant cash holding, and MercadoPago is not very large in Venezuela. So in terms of funds payable to customers on the balance sheet is not very relevant there. In terms of Argentina, we don’t really hold retained earnings or corporate cash. The entirety is going to be funds payables to customers. We have about - we don’t disclose the number, but roughly half of funds payables to customers we have matched and localized in Argentina. I can try to get back to you with the specific number. I don’t want to - I want to make sure that there is disclosure around that. But it’s not going to be a significant portion of that number again, because we don’t hold any of our own retained earnings, and all we hold are funds payable to customers, which we want to have locally, so that we don’t have currency mismatch. So really that’s the money that belongs to Pago users that we carry the yield on, but that they can withdraw.

That makes sense. Okay. Thank you very much.

Thank you. Our next question comes from Marcelo Santos from JPMorgan. Your line is open. Please go ahead.

Hi, good afternoon, and thanks for taking my question. The first one would be about the tax holiday in Argentina. So I understand that the previous one is over and you made a filing for the new one. Is there - could you give any color like how it’s going for you and for the other companies, has anybody received any authorization, and what would be a reasonable timeframe to think about this? This is the first question. And the second question is about Mexico and shipping in zero interest. Looking at this two new features, and looking at the Mexican e-commerce environment, the consumer, how they behave, how do you think will be attractiveness of this two features versus it is in Brazil where people are very used to paying zero interest and shipping is well accepted? Those are my two questions.

Great. Marcelo, so thanks for the questions. Let me just take advantage and give the answer I was owing to Michel. There is about $30 million in Argentina which are funds payable to customers. So again, it’s a small portion of the overall cash position. The tax holiday in Argentina, and just one additional clarification there, part of the compression that we’re seeing in margin driven by salaries and wages in the quarter is driven by the fact that we’ve accounted for the quarter as if we will not be granted the renewal of the tax holiday. That’s about 100 basis points of the margin compression. So if we are to be granted retroactively the holiday, the margin structure would have been better this quarter. In terms of where company stand? Most companies have not received confirmation yet, so we stand with the majority of the software development companies. Some began to receive. And I think there is an intent on part of authority to start replying to those applications. Conversations continue to be fluid, but that’s probably as much as we can comment right now. Marcos Galperín: And Marcelo, this is Marcos. With respect to Mexico, shipping is very strong, early starts. We are there partnered with DHL that has a really good service, and we think that the potential is great, but we’re just starting. We’re very happy with the early traction. Osvaldo Giménez: And with regards to free interest in Mexico, I would say that, we just launched it towards the end of the quarter. So it’s still early to tell. I think we’re encouraged by the early results, but since penetration in Mexico is lower than it is in Brazil, on the one hand, the results will have a less impact in Brazil, but it should help us to increase the penetration of payments of MercadoPago in the marketplace in Mexico.

Okay. Thank you very much.

Thank you. Our next question comes from Stephen Ju from Credit Suisse. Your line is open. Please go ahead.

Hi guys. Congrats on the quarter. This is Nick on for Stephen. Just a quick question on the higher marketing investment. Is this mostly brand or direct response, and is it - could you kind of break down the mix of, is it more offline marketing or is it kind of mostly online stuff? Thanks.

Yes. So in general terms, there hasn’t been any significant change in the investment channels. So it’s similar to what we had been doing with incremental spend. What we have done more this year than in the past and it has been successful, both MercadoLibre but also the e-commerce industry as a whole, are more concentrated investments around special days like Cyber Monday or Black Friday or certain specific industry events. And a lot of those happen to come in the fourth quarter holiday season. So that’s been incremental spend versus other years. And then in terms of mobile advertising, as we continue to grow mobile as a percentage of the overall business, our marketing spend in mobile is also going up. Now that’s not entirely incremental. Some of that is simply shifting of the portfolio, but there is more spend in the mobile space where the ROI is somewhat different than in previous years. Other than those two data points, by and large, it’s same old - the vast majority of its performance and online. There weren’t any significant offline investments during the fourth quarter.

Thank you.

Thank you. We have a follow-up question from Michel Morin from Morgan Stanley. Your line is open. Please go ahead.

Yes, thanks for the follow-up. I was just wondering if you can comment a little bit about the competitive environment in Brazil in particular. I think we’ve been seeing a little bit more headlines around AliExpress and their gains in the market. So, just a little bit of an update on what you’re seeing there, also considering that some of the traditional competitors are trying to move into the marketplace space. Obviously you’re posting very, very strong results, but any anecdotal comments you’d make on that would be very helpful. Thank you. Marcos Galperín: So with respect to competition in Brazil, I would say, it continues to be a market with lots of participants and we believe it will continue to be like that for many more years. As always, we look at everyone, try to imitate the things that we like about our competitors, but mostly focus on our model and our business plan. So I wouldn’t like to focus on any one particular competitor, but I would just like to highlight that some of the players you mentioned are focused in cross-border trade. That is not a market that today we are focused. We do trading mostly - the majority of our transactions are buyers and sellers, both located within each one of the countries that we cover. Although we think and we believe that cross-border trade is a huge opportunity, and if it continues to be unregulated and goods are allowed to flow from China to Latin America, in those markets where that is a possibility, it’s obviously also a huge opportunity for us to onboard Chinese sellers onto our platform. So we see that as a big opportunity, but that is not a market that we are focused on right now. And with respect to the other players, as you mentioned, there are many - everybody seems to be - everybody seems to want to create a marketplace these days. We are very happy with the way our marketplace is performing and the growth rates we’re having, particularly in Brazil. And we just know that we will continue to have lots of competitors and we will just try to execute as best as we can in the coming years.

So if I may just to paraphrase I think the first part of your answer, so essentially someone like AliExpress right now, you don’t really view them as being a direct competitor? That may change over time, but as of right now, it’s not that relevant? Marcos Galperín: Right now we are not focused in having Chinese sellers list on our platform for Brazilian buyers. That is not a market that we are targeting. If we see that this is a market that is growing very rapidly, and if it continues to grow and it remains unregulated, obviously it’s an opportunity for us.

Okay, great. And if I may squeak in a quick one. I didn’t - maybe I missed it, but I didn’t see the percentage of revenues that was from marketplace. Pedro, I don’t know if that was in there somewhere, either overall or for the different regions? I know it will be in the K later.

Sorry, just one second and I’ll give you the exact number.

Thank you.

So marketplace is at roughly 65% and the non-marketplace revenues are at roughly 35%.

Great. Thank you very much.

Thank you. I am showing no further questions at this time.

Great. So thanks, everyone, and we look forward to giving you another update in a quarter and share with you the progress on our business.