Good day, ladies and gentlemen. Welcome to the MercadoLibre Third Quarter 2016 Earnings 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 call may be recorded. I would now like to turn the conference over to Federico Sandler (0:24). Your line is now open.

Hello, everyone, and welcome to the MercadoLibre earnings conference call for the quarter ended September 30, 2016. I am Federico Sandler (0:39), Head of Investor Relations for MercadoLibre. Our senior manager presenting today is Pedro Arnt, Chief Financial Officer. Additionally, Marcos Galperin, Chief Executive Officer, will be available during today's Q&A session. This conference call is also being broadcasted 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 under 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 disclosed 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 in 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 in our third quarter 2016 earnings press release available in our Investor Relations website. Now, let me turn over the call to Pedro.

Thanks, Federico (2:07), and welcome to everyone to our third quarter conference call for 2016. I'd like to kick-off by stating that this has been another excellent quarter for us. We continue to make progress in expanding our enhanced marketplace across all our geographies, as we grow the adoption of our payments, credit and shipping solutions in our marketplaces. More importantly, as a consequence of this, we have been able to sustain high growth rates in our trading volume, revenue and customer satisfaction metrics. Our off-marketplace business also had an excellent quarter, as our merchant services offerings for third-party online customers and also off-line customers through mobile POSs continued to gain share of overall revenue and payments volume, and are becoming a growing portion of our business. With that in mind, let me walk you through some high-level operational results that we've delivered. During the third quarter of 2016, successful items grew 40%, reaching 47.6 million units. Gross merchandise volume rose 46% in local currencies reaching $2 billion. Total payment transactions grew 68% to $36.8 million. Total payment volume grew 85% on an FX-neutral basis, reaching $2.1 billion and surpassing our marketplace GMV for the first time in our history. And 7.7 million new users were registered on MercadoLibre, 26% more than during the third quarter of 2015, bringing our confirmed registered users to 159.3 million. These operational highlights I have just walked you through have led to a solid top-line growth on an FX-neutral basis of 66% year-on-year. Revenues in U.S. dollars grew 37% year-on-year, 14 percentage points above our three-year compounded annual growth rate and the highest growth rate we've delivered over the last four years. Going forward, we remain committed to building and executing our enhanced marketplace as the central focus of our strategy, with a shift…

Thank you. Our first question comes from the line of Gene Munster of Piper Jaffray. Your line is now open. Eugene Charles Munster - Piper Jaffray & Co.: Hey. Good afternoon, and congratulations on your continued operational excellence. I have a question on the enhanced marketplace. You talked about shipping fulfillment and payments as being the focus. Can you give us any sense in terms of what the necessary investments are to maintain the momentum in those in the next year? And then, separately, is some of the acceleration in the growth that you had talked about was because the change in the pricing started in December. I guess it's a two-part question. One is, I guess, starting this December, should we start to expect a little bit of a step-down as we anniversary that benefit? And second, in Mexico in particular, that's a jump despite the fact that Amazon is more of a player there. And any sense in terms of how Amazon, overall, is doing relative to your business in Mexico? Thanks.

Thanks, Gene. Hi. So the first question on pace of investment. As you know, we don't guide. I think you're seeing, if you look at the recent P&L, that we have been investing behind these businesses and we've been seeing very strong results. What we're building out today in terms of fulfillment and shipping continues to be for now an asset-light approach, where we're working through partners in both the carrier and also the warehousing spaces. So we don't anticipate under the current plan huge increases in CapEx. The same goes in payments where we're seeing margin compression at the gross margin level as that business grows. But I think if you look at the recent past, you can get a sense of the cadence at which margins have been compressing as a consequence of growth in those businesses. And again, always important to mention that we firmly believe that the strong top line we're seeing is a consequence of continuing to push payments, credit, shipping, fulfillment, because they build a much better user experience. In terms of changes in pricing, if you recall, the changes in pricing have been staggered in the different countries throughout the last year. And if we look at the evolution of live listings in the different countries, they continue to be very solid. But we can see there that Brazil is beginning to slow down its rate of listing and SKU growth somewhat as it anniversaries the changes in pricing. But that's getting, to a large extent, covered by other countries, like Argentina, Mexico, Chile and Colombia, where we're continuing to see acceleration in the growth of live listings, because those countries launched the new pricing schemes somewhere later. And even Brazil, where we're decelerating, listing count is still growing close to 90% year-on-year. So still very, very strong metrics in terms of listing growth. And then, finally, the question on Mexico. We've seen very strong performance in Mexico, and it's a consequence, again, of the roll-out of our enhanced marketplace and our ability to deliver a better experience for our users. Still work to be done there; we're going to continue investing and improving what we offer our users in terms of payments and shipping. Mexico is the country where we first launched fulfillment services and, hopefully, as we continue to focus on that, the business will continue to perform well. Eugene Charles Munster - Piper Jaffray & Co.: Thank you.

Thank you. And our next question comes from the line of James Friedman of Susquehanna. Your line is now open.

Hi. Thanks. It's Jamie. Pedro, I was wondering if you could help us dimensionalize some of the payments volume. I know you spoke to some of this, but how should we be thinking about the non-marketplace TPV? And where is that originating from? Is that the physical point of sale? Is that at small businesses? Is it micro-merchants? Is it mobile, iPods (28:51)? Some color about where that growth is coming from would be helpful.

Great. So the payments business away from the marketplace has been performing very well through its different channels. It's about 21% of our TPV comes from non-marketplace. As we just said in the prepared remarks, that's growing at 1 percentage point above 100%, so 101%; so very, very solid growth. That's on an FX-neutral basis. We also indicated that in Brazil, which is the country where we have the longest track record now of the physical POSs, so the off-line business, that already represents about one-fifth of Brazilian off-marketplace TPV. So, that would be what's coming in terms of off-line growth. And then customer segments are fairly varied. I think we highlighted two that are growing very strongly. We're performing very well in cross-border payments, helping global players process and settle payments in Latin America. And then, also, it's a business where we continue to work with large customers, and also with the long tail, and the growth is fairly even across most of that merchant service business. Again, when you're growing 101% on an FX-neutral basis, you're growing quite well across most of your segments.

If I could just have one follow-up. Could you give us some perspective about the mix of large versus small merchant as you're growing the non-marketplace revenue – TPV?

Yeah. I don't think we've been disclosing the specific growth rates for the different segments, but, again, we see solid growth across the board.

Okay. Thanks for the follow-up.

Thank you. Our next question comes from the line of Irma Sgarz of Goldman Sachs. Your line is now open. Again, Irma Sgarz...

Yes. Hi. Good afternoon. Good evening. Just following up on Mexico, just from judging from the rate of growth that both you are reporting and from what we understand some of the main players are growing in that market, do you understand that potentially the market is now getting to that sort of long-awaited tipping point of finally taking off and realizing its potential? Do you think you are actually creating some of the access system that was needed for the customer to be moving online? And what do you think is sort of the key catalyst there? Is it more on the payments side or is it more on shipping? You mentioned the free shipping that you're offering there at very attractive conditions. Or is it something else? That's my first question. And then, in terms of returning back to the off-platform off-line payments, the POS systems, specifically in Brazil, where do you think your competitive advantages lie compared to some of the other operators in the market, because we understand it's quite a competitive marketplace? Where do you think your offering that is different that is driving the rapid adoption rates? Thanks.

Hi, Irma. So, first of all on Mexico, we're seeing, obviously, strength coming out of our Mexican business. It's been some of the highest growth rates in a very long time. I still think, and we believe, there's still significant growth around Mexican e-commerce. This is still very early stages. Mexico has lower levels of retail online than other countries in the region. So are we getting closer to a tipping point or not? Hopefully, but there's still significant run room for growth, and this is still very early stage not only in Mexico, but everywhere; but I would say even more so in Mexico. Catalysts, I don't think we try to separate. I think we see the power of combining the different pieces of the marketplace. You can pay online if you have access to credit. If you have free shipping, which we think is helping a lot in Mexico and improving selection, all of that goes into just a combined better user experience. And I think if you try to offer only one of those, it's not nearly as powerful. So we look at it as a bundled ecosystem and enhanced services that all play off of each other. And then, if you look at the penetration rates in Mexico of the different services, there's still room to grow. Shipping, we said, is at 43% for the full quarter in Mexico. Payments, we said, is at 75% full quarter. So there's still room to grow the adoption of those services on our platform. Moving over to your second question on Brazil in terms of mobile POSs, first of all, it's a very large addressable market still in its very early stages. We're coming in with what we believe is a disruptive approach to this. We are using the distribution capabilities that we have on our marketplace, our contact with merchants, our ability to do effective online marketing. And we're also servicing segments that haven't historically been a strong focus for large banks and large acquirers. So, in a very large market with underserved segments, there's also significant room for us to grow and to continue to offer that service effectively.

Perfect. Thank you very much.

Thank you. Our next question comes from the line of Marcelo Santos of JPMorgan. Your line is now open.

Hi. Good evening. Thanks for taking the question. My first question is regarding the cross-border payments that you mentioned had a good performance. So, just a little bit more color on what kind of users and usage is this. And the second one is about the competitive environment in Brazil. Just wanted to understand how you're seeing, given that there are other players that are growing marketplace? So, if you're seeing some maybe pressure into larger sellers? Or if it's something that is really not moving the needle? So, that's my two questions.

Great. So, cross-border payments is facilitating the operations, typically, of larger global consumer Internet companies who do business in Latin America, sometimes cross-border business, to collect and settle their payments throughout the regions. So we work with large Asian companies, we work with many North American companies that essentially need to collect throughout Latin America from Latin American or foreign consumers in the region, and use our cross-border capabilities to collect and then settle. We can offer them local credit cards, local payment means and a lot of very local capabilities that they otherwise might not have if they use other global partners. Clearly, it's a very rapidly growing segment, which reflects that we're doing a good job there. Competitive environment, I think we focus on our business and how it's performing in Brazil. This is the fifth consecutive quarter of units sold acceleration. Our Brazilian business grew 61% in terms of units sold, which is obviously an incredibly strong number. And I think that's what we need to continue to do, focus on our users and how our business is performing. And if it continues to perform this way, then obviously we'll continue to gain shares.

Okay. Thank you very much.

Thank you. Our next question comes from the line of Michel Morin of Morgan Stanley. Your line is now open. Michel Morin - Morgan Stanley & Co. LLC: Thank you. So, two quick questions, Pedro. First, the free shipping in Mexico, can you give us a little bit more detail as to kind of what led you to that decision, to start offering that? And is that something that is still ongoing and how long would you expect to keep that going? And then, secondly, on Argentina, you mentioned the switchover and the impact that that's had on growth in terms of forcing Pago adoption. How long should we expect that to take before we see the growth rate recover? Thank you.

Michel, sorry, can you repeat the second one? We got cut off slightly. Michel Morin - Morgan Stanley & Co. LLC: Yeah. It was on Argentina and the impact of the Pago adoption. Based on your experience elsewhere, how long of an impact should we expect? How long before your growth rates...

Okay. Got it. Michel Morin - Morgan Stanley & Co. LLC: ...kind of return to where they should have been?

Right. So, first question on free shipping in Mexico. First of all, consumers like free shipping and it improves the user experience and the Net Promoter Scores. So we're experimenting with that and the results we've seen so far are positive, and we'll continue to experiment. Just one note, remember that because of the way we account for the shipping where we are not the ones actually doing the shipping but our carrier partners, free shipping in our financials come up as contra rev, not incremental cost. Just bear that in mind. So, continue to experiment and if we continue to see positive results, we'll give you guys update in the future. Pago, I think in Brazil if you look at the sequence towards the back half of 2014, in the case of Brazil, and that doesn't necessarily mean it's the same everywhere, it took two to three quarters before it really began to spike up again, the growth, once we had been through the transition of getting users accustomed to paying mandatorily through Pago. Obviously, in the case of Brazil, the results eventually have been very, very strong. Let's see if Argentina performs in a similar way or not. And just bear in mind that although Argentina did slow down, it's continued to grow GMV on an FX-neutral basis at a healthy rate. Michel Morin - Morgan Stanley & Co. LLC: Right. Okay. Perfect. Thank you. And, sorry, coming back to the free shipping, is that something you've ever done anywhere else before, or is this new?

No. I think it's something that we've communicated widespread in a program as comprehensive as the one we have in Mexico. This is the first time we've experimented at that scale. Michel Morin - Morgan Stanley & Co. LLC: Okay. Great. Thank you very much.

Thank you. Our next question comes from the line of Tom Champion of Cowen. Your line is now open. Thomas Champion - Cowen & Co. LLC: Hi. Good afternoon. Thanks for taking the question. Just curious if you could comment on the relationship between listings growth and marketplace items sold. It looks like listings growth was very healthy again this quarter, but items sold growth might have ticked down a little bit, and maybe that has something to do with the policy changes in Argentina. But wondering if we should think of the very healthy listings growth as a tailwind to items sold growth going forward? And then, just looping back to Brazil, understand that units growth accelerated. I'm just curious if Brazil GMV growth decelerated from 64% to 56%? I'm just curious if I heard that right? Thank you.

Sure. So obviously, selection, depth of SKU count and being able to find what you're looking for on the marketplace is a key driver of our business. I wouldn't necessarily say that they have to be very closely matched, unit growth and listings. But over longer periods of time, we think that better selection and improved selection is one of the critical components of growing units. It did decelerate somewhat Q-on-Q, as I said, but it's still growing on a consolidated basis very, very strongly. We're growing listing counts by 67% year-on-year during the quarter. So we do believe that if we continue to sustain this kind of growth, it will be a tailwind for our business. Oh, yeah. Right. So, yeah, Brazil gross merchandise volume, on an FX-neutral basis, grew at 55% for Q3 and unit growth grew at 61%. So we continue to see a little bit of category mix shift toward lower ticket items. Thomas Champion - Cowen & Co. LLC: Okay. Thank you.

Thank you. And our next question comes from the line of Stephen Ju of Credit Suisse. Your line is now open. Stephen Ju - Credit Suisse Securities (USA) LLC (Broker): Okay. So, thanks. And I apologize if this was covered already, but just wondering, from a product perspective, where you guys are in terms of I guess serving of shipping as a service? It seems like if you are – and I think you made that acquisition a quarter ago, which helps you track packages across the region. So I would imagine that over time that is going to be a very good service for the sellers to adopt. And I think you guys mentioned, I think, penetration of Brazil in terms of the number of packages that are being used with MercadoEnvíos. So, just wondering from a seller-by-seller standpoint if you guys are already managing the vast majority of what the sellers sell on MercadoLibre. Or if this is sort of small batches of durable volume, but greater seller adoption? Thanks.

So let's see. The shipping penetration rates, like we called out, and if you are looking specifically at Brazil, is at 72% of all units bought are shipped through our platform. So, obviously, that's a very high percentage. We don't break that up by sellers' segment, but suffice to say that for most sellers, we're doing most of their shipping on our platform, given how high penetration is. And there's a tendency on shipping for it to be even higher when you look at larger sellers in the long tail. Mexican penetration is at 43%. That's almost – it's more than double versus a year ago, so growing also extremely well, as is the case for Colombia and Chile. So, as we continue to drive overall penetration of the shipping solution, that will mean that a greater percentage of our sellers' businesses are being shipped through us. And then, the other relevant data point is that, as I mentioned earlier, in Mexico, as of the second half of this year, we've also began to offer our sellers fulfillment services and capabilities, which should also help us onboard a larger amount of our large sellers' business as they also fulfill through us. Stephen Ju - Credit Suisse Securities (USA) LLC (Broker): Currently, and I think most of this is largely passed through on the income statement where you're not making that much money on it, but as a service, is there an opportunity for you guys to, I guess, charge for the service either on a per-package basis or on a fixed amount basis at some point in the future?

I would say that the focus right now is on improving the user experience, onboarding more and more merchants. We see a significantly better cohort in terms of most key performance indicators, both Net Promoter Scores, average selling prices, engagement metrics, when they are buying from merchants who ship through us. And so, really the focus now, rather than improving our margin or making margin off of the shipping services, is to drive adoption on the merchant side and usage on the buyer side. Hence, the free shipping promotion in Mexico and the fact that we're not running this business right now with profit in mind. Longer-term, we'll see when we get there. Stephen Ju - Credit Suisse Securities (USA) LLC (Broker): Thank you.

Thank you. Our next question comes from the line of Michel Morin of Morgan Stanley. Your line is now open. Michel Morin - Morgan Stanley & Co. LLC: Thanks for taking the follow-up. Pedro, you gave us some data around the number of buyers and the growth in buyers in the last couple of quarters. So I was wondering if you could do the same again today. And I also wanted to just follow up on the earlier question about the average selling price because, on a consolidated basis, it has been declining rapidly. So I was wondering if you can give us a little bit more color as to what's happening there and maybe update us on where you are in terms of your exposure to consumer electronics. Thank you.

Great. So, unique buyer growth came in roughly in line with where it was the last quarter, slightly down, again driven by Argentina. Brazilian buyer growth was 41%, up from 39% the previous quarter. Argentina was down, given the issues we had mentioned, from about 25% into the mid-teens. So it's consistent with the successful item growth, what's happening on the geography-per-geography base on buyers. In terms of average selling price, as I said, we continue to see mix shift. Consumer electronics lost another 2 percentage points, sequentially, in terms of overall mix from 43% to 41% this quarter. And that's being replaced, in part, by some lower ASP categories. Fashion is up about 1%, and then the other categories that aren't CE probably account for the rest of that change. So the mix shift away from consumer electronics continues to carry out. Remember that that is very much by design as we began to focus on expanding into more and more categories. And that's something we should continue to do as we start looking at consumer packaged goods and other areas of opportunity. Michel Morin - Morgan Stanley & Co. LLC: Right. And these are percentages of GMV, right?

Correct; percentage of total GMV. Michel Morin - Morgan Stanley & Co. LLC: Of GMV. Okay. And this is really the main thing that's driving the average selling price lower, or there were other kind of country-related factors?

Currency tends to be, at times, an issue. I don't have that in front of me right now. I do have the mix shift and that's been one of the biggest drivers. Michel Morin - Morgan Stanley & Co. LLC: Okay.

Then you could also have trading down and currency issues, but I don't have that off the top of my head. Michel Morin - Morgan Stanley & Co. LLC: Okay. That's fine. Thank you very much.

Thank you. And our next question comes from the line of Robert Ford of Bank of America. Your line is now open.

Thank you and good evening, everybody, and congratulations on the quarter, Pedro, Federico (49:22). I was curious, what percent of GMV in Argentina goes through Correo OCA and how long was that strike?

Hi, Bob. Just one second; let me see if I can look at the data here for that.

Yeah. Because I would expect that OCA moves most of the packages for the drop-ship folks too, right?

Yeah. So, Bob, OCA is most; most is probably we're talking maybe here slightly more than three-quarters of the roughly 30% that goes through MercadoEnvíos, okay? So call that somewhere in the mid-20s of total units shipped. The strike itself lasted about a week maybe. The impact lingers on a little bit, as you have delays once those operations start picking up again. And consumers are seeing longer promised delivery windows. Remember that our algorithms predict when you will receive the package. When there is backlog, those delivery promises get extended, and so conversions get hurt as a consequence of that.

And did that have implications for buyer protection in the quarter as well?

No, because when we adjust the delivery promises, the buyer protection is when we are off on what we promise to deliver. So, when the algorithm is aware of what's happening and we can bake in some added time for the strike, that hasn't had a significant impact on buyer protection.

Okay. No, great. And then, if I could ask one question and maybe you can dumb it down for me if I'm asking something that's improper. But I was curious with respect to the conversion rates on your native apps. And when you look at the deltas versus a desktop experience, do you see opportunities to further improve those conversions? Or do you think there are just simply limitations to the interface which will be too difficult to overcome?

No, I think everything we've learned in this business is that through iteration and improving the UX you can continue to drive improved conversions. When we look at the deltas that still exist, for example if you look at Web mobile, not even native apps, the delta is huge. And I'm sure we can continue to improve that. And the same applies for the native apps as well. I mean every time we redesign, we review, we A/B test, we find ways in which we can improve it. And those conversions have been going up fairly consistently, and that delta has been shortening. And I expect that would continue to happen going forward.

No, that's helpful. Thank you, and congratulations again.

Thank you.

Thank you. And at this time, I am showing no further question. So I'd like to hand the call back over to our CFO, Pedro Arnt, for any closing remarks.

Great. Thank you, everyone, and we look forward to giving you our next update at the end of the fourth quarter and beginning of next year. Bye-bye.

Ladies and gentlemen, thank you for participating in today's conference. That does conclude today's program. You may all disconnect. Everyone have a great day.