MercadoLibre, Inc. Q1 FY2025 earnings call

• Commerce: Delivered strong growth outpacing major markets, brand preference metrics in key markets at all-time highs.
• Fintech: Monthly active users grew >30% YOY to 64M, credit portfolio up 75% YOY, Argentina had exceptional dollar revenue growth.
• Branding: Mercado Pago updated branding, UX, aiming to be the largest digital account in Latin America, with new branding launched in Chile, Mexico, and Brazil.

In commerce, MercadoLibre maintained strong growth outpacing major markets, with brand preference metrics for the marketplace reaching all-time highs in Brazil, Mexico, Argentina, and Chile. In fintech services, monthly active users grew over 30% year-on-year to 64 million, credit portfolio grew 75% year-on-year, and Argentina saw U.S. dollar revenues more than double year-on-year. Commerce contributed through strong market growth and brand preference, while fintech benefited from user growth and credit portfolio expansion.

Management is optimistic about continued growth in commerce and fintech, emphasizing investments in value proposition to capture long-term growth opportunities in Latin America's e-commerce and fintech sectors, expecting to leverage market dynamics despite upcoming comparables.

No major specific risks discussed, but competitive pressures from new entrants like TikTok, Amazon, etc., could pose challenges.

Q: Andrew Ruben from Morgan Stanley asked about the sustainability of Argentina's growth and investment plans.

A: Ariel Szarfsztejn and Martin de los Santos responded that Argentina had strong growth due to recovery in demand, market share gain, and macroeconomic stabilization, with plans to continue improving user experience.

Q: Irma Sgarz from Goldman Sachs inquired about 1P GMV growth and margin evolution.

A: Ariel Szarfsztejn stated 1P had strong growth from improved selection and technology, with supermarket growing 65% YOY and progress towards better economics.

Q: Robert Ford from Merrill Lynch asked about FMCG TAM and subscribe and save.

A: Ariel Szarfsztejn mentioned low e-commerce penetration in FMCG as a large opportunity, with halo effects and plans for feature building.

Q: Marcelo Santos from JPMorgan asked about logistics plan in Brazil.

A: Ariel Szarfsztejn said logistics is a key enabler, with ongoing deployment of fulfillment centers.

Q: Rodrigo Gastim from Itau BBA asked about Argentina's contribution margin drivers.

A: Martin de los Santos and Osvaldo Gimenez replied that growth, cost dilution, credit business growth, and interest rate drops contributed to margin improvement.

Q: Neha Agarwala from HSBC asked about asset quality trends.

A: Osvaldo Gimenez discussed portfolio mix, credit card NIMAL improvement, and Argentina's low delinquencies.

Q: Geoffrey Elliott from Autonomous asked about Brazil deposit strategy.

A: Ariel Szarfsztejn said it's a marketing and loyalty strategy to position as leading digital bank.

Q: Kaio Prato from UBS asked about credit business appetite and funding.

A: Osvaldo Gimenez and Martin de los Santos discussed credit card risk adjustments, funding structures, and tactical funding adjustments.

Q: Joao Soares from Citigroup asked about commerce growth derisking and Argentina credit card timing.

A: Osvaldo Gimenez responded no impact on commerce growth and expected Argentina credit card launch in H2.

Q: Marvin Fong from BTIG asked about Mexico category softness and NIMAL.

A: Ariel Szarfsztejn addressed technology category softness and NIMAL mix factors.

Q: Craig Maurer from FT Partners asked about Mexico fintech competition and trade war impact.

A: Osvaldo Gimenez and Martin de los Santos discussed fintech competition and no major trade war impact.

Q: Deepak Mathivanan from Cantor Fitzgerald asked about margin trends and ads.

A: Martin de los Santos and Ariel Szarfsztejn talked about margin improvement from country mix and ad growth from product extensions.

Q: Josh Beck from Raymond James asked about shipping margin pressure.

A: Ariel Szarfsztejn discussed margin pressure from credit card growth, logistics investment, and valuation.

Q: James Friedman from Susquehanna asked about credit portfolio attachment.

A: Osvaldo Gimenez mentioned low money covering credit and marketplace activity.

Q: Unidentified Participant from XP asked about TikTok and Argentina competition.

A: Ariel Szarfsztejn said TikTok launch is early, with new entrants bringing offline users online as opportunity.