Good day, ladies and gentlemen, and welcome to the MercadoLibre's Second Quarter 2017 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 follow at that time. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Federico Sandler. Sir, you may begin.

Hello, everyone, and welcome to the MercadoLibre earnings conference call for the quarter ended June 30, 2017. I am Federico Sandler, Head of Investor Relations for MercadoLibre. Our Senior Manager presenting today is Pedro Arnt, Chief Financial Officer. Additionally, Marcos Galperin, Chief Executive Officer, and Osvaldo Giménez, Executive VP of Payments, 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 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 current available information, you're 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 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 those measures to the nearest comparable GAAP measures can be found in our second quarter 2017 earnings press release available on our Investor Relations website. Now, let me turn the call over to Pedro.

Thanks, Federico. Hello to everyone and welcome to our second quarter conference call for 2017. We are pleased to see the continued execution of our business plans and sustained top-line momentum throughout the first half of the year. This first half has marked the initial stages of the deployment of our free shipping and loyalty programs, meaningfully improving and deepening the already powerful value proposition that we offer our buyers. We believe that the sustained rollout and broadening of these two major initiatives over time will foster the ongoing switch from offline buying to online buying, as the cost and time of delivery are significant barriers to adoption to online shopping. This in turn should serve as a catalyst for sustained growth as we gain scale advantages and benefit from a leadership position within an accelerating e-commerce market. Just as we continue making significant strides in improving this value proposition on the marketplace retailing business, we are also thrilled of what we are building in the realm of Fintech and payments. Although still in early stages, one of the most interesting things about this nascent and growing industry is that large portions of financial services still remain untouched by digital technologies. Just to put this in perspective, less than 1% of loans currently originate online. This means that there will be a significant demand for new digital products to transform existing financial services in the coming years, and we believe that Mercado Pago will be at the forefront of this transformation, generating financial inclusion for millions of people in the region where we have a presence. The success we have seen so far this year continues to give us confidence to further invest behind key initiatives that will help us grow the business as fast as possible and continue to…

Our first question comes from the line of Deepak Mathivanan with Barclays. Your line is open.

Great. Thanks, guys. Two questions for me. First, can you talk about the adoption of free shipping program in Brazil? What is the penetration currently as percentage of units, and what is the average order value for the free shipping units? I know minimum is like $40. And then second, in Brazil, can you help quantify the impact of direct contribution margin had between free shipping and marketing? Should we sort of expect the incremental marketing investments to continue for driving adoption of free shipping, or is it some sort of like a launch promotion that you did during launch? Thanks a lot, guys.

Hey, Deepak, how are you? Thanks. So, we're very pleased with what we're seeing with our free shipping initiatives in different countries, in terms of driving customer engagement, customer loyalty, and we can see that in the growth of our business. We haven't disclosed what percentage of our units shipped in any of the markets are free, but we are very pleased with the evolution of the initiative. In terms of cost, in general terms within COGS for Brazil, which I think was your question, the actual free shipping costs represented about 13 percentage points of revenue in COGS from free shipping. And then across the board, there were investments in marketing, a portion of those were to support the launch of free shipping. But again, the lion's share of our marketing investments have actually been in customer acquisition, as we see improved lifetime values, and we're convinced that we're bringing new customers on to a much improved experience, and so it makes more sense to spend more money on customer acquisition. But yes, there was a portion during the quarter, which was focused on the initial stages of free shipping.

Okay. Thanks, Pedro.

Thank you. Our next question comes from the line of Stephen Ju with Credit Suisse. Your line is open. If your phone is on mute, please unmute.

Hi, guys. Sorry, it's Chris on for Stephen. It seems like we have a new playbook for customer acquisition and monetization especially in Mexico. So, would you guys be able to walk us through kind of the new and updated math in the return on invested capital? And then, secondarily, any way you can characterize the customer acquisition cost in Mexico, and what are the signs that once you acquire these customers, they continue to stick with purchasing on MercadoLibre? Thanks.

Right. So, let us take those in reverse order. First of all, what we're looking at is a obviously very detailed analysis on cohorts. Those cohorts are both vintages, when we acquired them, but perhaps the more interesting ones are the cohorts that look at the performance of users that are purchasing our full ecosystem, so they're purchasing for the first time or in their latest purchases with free shipping plus obviously Envíos plus payments plus credit, and when you compare the cohorts, cohorts that have the full usage and adoption of the ecosystem, perform consistently better across geographies going forward. So we're really seeing the impact on customer engagement of getting users to buy on MELI with Mercado Pago, with Mercado Envíos, and free credit, and that's been pretty consistent across the different markets as we roll these initiatives out. We're not giving out any specifics on ROICs or on customer acquisition costs, we're not working to externally communicated targets on that front, as you know, we don't guide. And I think you used the term a new playbook, as we've been saying, we will continue to solve for growth, for top line, for market share, and for continuing to see positive recurrence in customer engagement metrics and the NPS metrics. We feel we found the right leverage to invest behind the business, and that's what we're going to continue to do, as long as we see this kind of growth and of customer engagement and satisfaction metrics.

Perfect. Thank you, guys.

Thank you. Our next question comes from the line of Mike Olson with Piper Jaffray. Your line is open. Mike J. Olson - Piper Jaffray & Co.: Hey, good afternoon. Thanks for taking my question. So you're pressing the accelerator on growth through free shipping and loyalty programs that's clearly impacting margins in the near-term, and I realize, you don't provide guidance, but I don't know if you could say qualitatively how long of an investment period would you suggest investors should expect before margins begin to trend higher again? And then I have another question, which is you mentioned not having the platform rolled out in Argentina to the extent you do in other markets, is that purposeful because Argentina is just a weaker environment right now, or is there something slowing down your initiatives in that market that's not as much in your control? Thank you.

Hi, Mike. This is Marcos. Just following up on Pedro's comment before we are – we don't guide, but when we look at this quarter, obviously excluding the one-time in Venezuela, we are very pleased with the numbers in this quarter, as we like to focus in growth, in market share, and in customer engagement, and we believe the initiatives that we have pursued and will continue to pursue going forward will continue to provide those dynamics. So, without giving any guidance that we don't give, we do feel comfortable saying that going forward, we will expect to do the same with regards to how we manage the business focusing in growth, because we believe we now have a product that provides very good customer satisfaction and we see that in the Net Promoter Scores and in the customer engagement that we see when we look at the different cohorts. With respect to different countries, we have been implementing free shipping and the loyalty program in different geographies, and it's a question of timing and execution and nothing else than that. Mike J. Olson - Piper Jaffray & Co.: Thank you.

And just to complement that, I think on the Argentina piece as Marcos was saying, there is method behind the way that we're approaching the different markets, and our decision was there's a significant investment cycle going on in Brazil, Mexico. We've started now with Chile and Colombia, and we felt Argentina could wait a little bit, but eventually, we will also look to have the platform rolled out everywhere. Mike J. Olson - Piper Jaffray & Co.: Okay. Got it. Thanks.

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

Yes. Hi. Good afternoon. Good evening. And turning back to a question or comments that you made on the introduction of the shipping card in Mexico, as you think of rolling out this very important innovation also to potentially other markets, how do you think, is that – is this to be sold off as one of the key levers that is important to – for this free shipping equation to close and eventually sort of start getting some leverage on those investments that you're making? And to the extent that this maybe – that you'll see that as just part of the solution, what other metrics would you – are you looking to sort of get out to a more positive effect or a net positive effect on the margin? And in absolute terms, from the free shipping investment that you're making right now, is it maybe bringing down the average cost of shipping by working through larger volumes with these suppliers or with your partners, or is it by shifting the equation of the subsidies a little bit just for us to understand like which dials you're thinking about there? Thanks.

Hi, Irma. I think you've given the answer in many of the way you framed the questions. So, shopping card I think is one tool, it's early, it's only been launched in Mexico during Q2. I think we're seeing interesting results in terms of increasing units per order, and that obviously helps us longer term in terms of shipping costs. But moving forward, I think there are many levers that we can optimize and drive efficiencies behind. Scale is perhaps the most relevant one, and one of the reasons we are focused on top-line growth, I think our entire logistics operation from a cost perspective will benefit tremendously from scale as we grow, logistics are very scale-sensitive. You touched upon some of the other more immediate levers that we've already started working on, pricing and also subsidies and how the subsidies are arranged. As I mentioned in the remarks, we have a different menu of subsidies in different countries, in some countries, we are subsidizing 100%, in others, it's based on cohorts and it's not 100% of the subsidies, and that gives you a good idea of the multiple levers we have to manage the level of investment behind shipping and logistics, always focusing on trying to sustain customer engagement and top-line growth. So there's plenty of work and there are plenty of levers across the board for us to optimize around.

Perfect. Thanks.

Thank you. And our next question comes from the line of Andre Baggio with JPMorgan. Your line is open.

How are you? Good afternoon, everyone. So, Pedro, I'd like to understand a little bit how the financial calculation of how much subsidy are you willing to throw into each of the client, like how do you do this equation for you to know if throwing more free shipping is worth or not, like what are main metrics that you are using?

Sure. So, I think conceptually, we've been very consistent when we've said that I think the key elements behind how we're trying to manage the business, and obviously we have significant visibility, but essentially, we're going to continue to solve for growth and for engagement, so the results we're getting in those metrics will be critical in how we assess the success of free shipping and the level at which we invest in free shipping. The second piece, as I said, is there are multiple levers and we look at these levers on a consolidated basis. We were not necessarily trying to optimize one specific country segment, we're trying to look at the consolidated P&L, and make sure that we're comfortable on a full-year annualized period on what the results are looking like, and that determines how much we can be in terms of aggressive on one segment versus another, driven by competitive factors, by how ready our carrier partners are, to deliver great service as we increase volume and other factors that we look at that. So, again, I think the most important message is, we think that we're getting the results that we strive for, we think that on an annualized basis, we're on the way to deliver the P&L that we'd like to deliver, and we continue to take a long-term view of this business, and as long as we continue to grow market share and grow top line at this rate, we will be in a unique position for the long-term.

Thank you.

Thank you. And our next question comes from the line of Thomas Champion with Cowen & Company. Your line is open.

Hi, this is Bill (46:48) on for Tom. Thanks for taking the question. I was just hoping you could give us a bit of an update on a competition that you're seeing from Amazon in Mexico? Thanks.

Yeah. I think we don't really comment on our competitors. I think we're seeing phenomenal results in our Mexican business. You can see that in the top line numbers and the market share gains. It's taking us investing behind the business there, but that's exactly what we need to be doing, given what the competitive dynamics are, and the results I think are probably even slightly ahead of the expectations that we might have had in terms of how fast that business is growing and how well consumers are responding to what we're building. So I think competitively, given the results we're having in terms of share and growth, Mexico is a market where we're pleased with the results we're getting.

Okay. Great. Thank you.

Thank you. And I'm showing no further questions at this time. I'd like to turn the call back to management for closing remarks.

Great. Thanks, everyone, thank you for the questions. We look forward to continuing to update on the playbook and how things evolve for the rest of the year, so we will speak again in a quarter. Good night, everyone.

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