MercadoLibre MELI Q1 2026 Earnings Transcript

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DATE

Thursday, May 7, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• Chief Financial Officer — Martin De Los Santos
• President, MercadoLibre Commerce — Ariel Szarfsztejn
• President, Mercado Pago FinTech — Osvaldo Giménez

TAKEAWAYS

• Net Revenue Growth -- Up 49% year over year, the highest rate since Q2 2022, attributed to compounding effects of prior investments.
• Brazil GMV -- Increased 38% year over year, with items sold up 56%, more than double the rate before the free shipping threshold was lowered.
• Unit Economics (Brazil Logistics) -- Cost per shipment declined 17% year over year in local currency, supported by record free shipping penetration.
• Mexico GMV -- Grew 28% year over year, part of ongoing share gains across key markets.
• Argentina GMV -- Rose 41% year over year, indicating continued regional growth outside Brazil.
• Chile GMV -- Advanced 40% year over year, driven by stronger free shipping and faster deliveries.
• Monthly Active Users (Mercado Pago) -- Grew 29% year over year, signaling broader engagement with financial services.
• Assets Under Management (AUM) -- Increased 77% year over year, underscoring deeper user relationships.
• Total Credit Portfolio -- Almost doubled to $14.6 billion year over year, with disciplined underwriting supporting expansion.
• Credit Card Issuance -- 2.7 million credit cards were issued during the quarter, with credit card TPV up 90% year over year and monthly active users up 68%.
• Income from Operations -- Reported at $611 million with an operating margin of 6.9%, reflecting margin compression due to strategic investments.
• Take Rates (Brazil) -- Select category- and price-range take rates were lowered to target supply and demand elasticity, with changes effective in Q2.
• GenAI Deployment -- LLM technology was launched in Search across Brazil, Mexico, and Argentina, resulting in higher conversions, improved ad returns, and stronger engagement.
• Credit Card Expansion (Geography) -- Credit card issuance and cross-sell strategy is extending from Brazil to Mexico and building early traction in Argentina.
• Average Loan Duration (Brazil) -- Personal loan durations extended from five to eight months as the company targets broader customer segments and lower spread opportunities.
• Competitive Position (Brazil) -- Conversion rates improved by 1 percentage point year over year, with engagement and supply metrics setting new records, despite heightened competition.
• Private Payroll Loans (Brazil) -- Integration with the government completed and private payroll loans are set to launch soon.

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RISKS

• "You are probably looking at the chart in our investor presentation where we show a waterfall of margin compression. There are four points of margin compression because of bad debt or provisions. This is something that has been happening for quite some time. Our credit book grows at a faster pace than revenues—credit book up 87% year over year and MercadoLibre (NASDAQ:MELI) revenues up 49%—and that generates margin compression."
• "The one third of compression you see on that waterfall comes from the consumer credit book in Brazil. As mentioned earlier, it is profitable but less profitable than a year ago, and that generates compression."
• "With regards to NIM, quarter by quarter there is some seasonality—typically we have lower NIM in Q1—so it is normal to see the sequential compression in the results."

SUMMARY

Management provided explicit strategic clarity around accelerating ecosystem investments, maintaining high spend in free shipping, credit cards, and technology innovation while accepting operating margin compression as an intended consequence. Shipping efficiency gains were realized simultaneously with surging volumes, with further improvement projected as facility utilization increases. FinTech momentum remains notable, supported by robust active user growth, rapid AUM expansion, and deepening cross-sell into both new and existing geographic markets.

• Direct quotes from leadership emphasized that investments are being guided by "clear, observable evidence," with management stating, "now is precisely the right moment to invest boldly"—signaling continued prioritization of scale over short-term margin management.
• Compliance with provisioning standards leads to immediate bad-debt impacts when rapidly expanding the credit portfolio, with two-thirds of margin compression attributed to this dynamic.
• Management confirmed readiness to "dial up or down the investment intensity based on the results we are seeing," but currently sees little chance of near-term margin improvement as large growth initiatives progress.
• Deployment of GenAI for Search has delivered higher conversion and ad performance, directly cited as a contributing factor to recent e-commerce strength.
• The upcoming launch of private payroll loans, enabled by government integration, could further expand the FinTech addressable market.

INDUSTRY GLOSSARY

• CBT (Cross-Border Trade): International commerce facilitated on the MercadoLibre platform, enabling sellers in one country to reach buyers in another.
• 1P (First-Party): E-commerce model where MercadoLibre sells inventory directly to consumers, as opposed to facilitating third-party seller transactions.
• NIM (Net Interest Margin): Measure of the profitability of credit products, calculated as the difference between interest income and interest expense, relative to average interest-earning assets.
• NPL (Non-Performing Loan): A loan for which the borrower is not making the scheduled payments; referenced using specific delinquency windows (e.g., 15–90 days past due).
• TPV (Total Payment Volume): The aggregate value of payments processed through Mercado Pago during the reporting period.
• AUM (Assets Under Management): Total customer funds invested or held within Mercado Pago financial products.

Full Conference Call Transcript

Martin De Los Santos: Hello, everyone. Thank you for joining us. I am pleased to report that MercadoLibre, Inc. delivered another excellent quarter to start 2026, with net revenue up 49% year over year, our strongest growth rate since Q2 2022. This performance reflects the strategic investments we have made consistently over the past several quarters, which are bearing fruit with increasing clarity. Chief among them is our decision to lower the free shipping threshold in Brazil, which has proven to be a sustained growth engine across multiple quarters. By bringing more buyers into the ecosystem, we are strengthening network effects: higher purchase frequency, broader assortment, and a logistics network that becomes more efficient with every incremental package.

As a result, Brazil delivered another standout quarter for commerce. GMV grew 38% year over year, as items sold growth accelerated to 56%. This is more than double the quarterly growth rate prior to lowering the free shipping threshold. Free shipping penetration reached a new record and unit economics continued to improve, with cost per shipment down 17% year over year in local currency. In other words, higher demand is driving lower cost. Outside Brazil, we delivered solid growth in commerce and continued to gain share across key markets. In Mexico, GMV grew 28% year over year, while in Argentina, GMV grew by 41%.

Chile remained strong with GMV up 40% year over year, driven by higher free shipping penetration and faster deliveries. FinTech services momentum also remained strong, with solid growth across our core indicators. Mercado Pago monthly active users grew 29% year over year, AUM grew 77%, and our credit portfolio nearly doubled to $14.6 billion. This highlights that engagement is both broadening and deepening as more users choose our ecosystem as their primary financial relationship, supporting our long-term objective of becoming Latin America’s largest digital bank. We continue to invest in our credit card as a central pillar of this long-term objective, issuing 2.7 million credit cards this quarter.

Credit card TPV grew 90% year over year and monthly active users grew 68%. The credit card is an excellent example of fintech cross-sell occurring at scale, as a meaningful share of cardholders were previously marketplace-only users and are now active fintech users. This reinforces the cross-sell flywheel and generates positive ecosystemic effects across engagement, usage, and retention. Growth of our credit portfolio is supported by disciplined underwriting, and continuous enhancements to our models are improving decision accuracy and scale. This validation gives us strong conviction as we extend the playbook beyond Brazil, continuing to scale the credit card in Mexico and building an earlier base in Argentina.

Overall, Q1 2026 was an outstanding quarter of top-line growth with revenue increasing 49% year over year. We delivered $611 million of income from operations, representing a 6.9% margin. The margin compression reflects our choice to invest in strategic initiatives, and the results of each investment reinforce our conviction that we are taking the right steps to build the largest and most engaged commerce and fintech platform in Latin America. Our investment decisions are guided by clear, observable evidence, and that evidence tells us that now is precisely the right moment to invest boldly in a market with significant multiyear growth runways ahead. That is the foundation on which we are choosing to invest.

We look ahead to the rest of 2026 with strong momentum and full conviction that the investments we are making today will compound into structural advantages that define this company in the years ahead. We appreciate your continued support. And with that, we will open it up for questions.

Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Please limit yourself to one question, and if you have further questions, you may reenter the question queue. We will pause momentarily to assemble our roster. The first question will come from Irma Sgarz with Goldman Sachs. Please go ahead.

Irma Sgarz: Yes, hi. Thank you for the opportunity. In the shareholder letter, you mentioned that you chose to set the dial at this level in the first quarter, and you point out quite explicitly that there was a deliberate investment decision. That is clear. You also alluded to some incremental opportunities that you have been able to identify, and you note that you do not expect this level to materially change in the near term. What perhaps changed from the fourth quarter that you reported in late February to now after the first quarter? What new opportunities have you identified to invest behind?

And whether this margin level that we saw in the first quarter—again, I know you do not provide guidance—but is that roughly the right level that we should think about for the remainder of 2026? Thank you so much.

Martin De Los Santos: Hi, Irma. It is Martin here. Let me start with the end. I think the investment philosophy has not changed. In fact, we decided to invest in initiatives similar to those we have been investing over the past several quarters.

Ariel Szarfsztejn: What we have seen, and we tried to be very explicit about that in the letter this quarter, are the results of those investments. We are seeing very good results in terms of our credit card portfolio. As we mentioned, all the cohorts in Brazil continue to improve and become profitable. The repayment periods in both Brazil and Mexico are also improving, so that gives us more confidence to continue investing—and investing boldly—in terms of growing our credit card portfolio, and now we are also launching it in Argentina. The same could be said on the commerce side. We continue to expand our fulfillment infrastructure in order to keep up with the growth of our business. We expanded that.

We probably invested a little bit more broadly in CBT. We see a huge opportunity in CBT as well as 1P, and we are investing behind that. And then if you compare year over year, we continue to expand our free shipping offering, which is a critical component of our value proposition. So I would say that for the most part, we did not change anything in terms of the investment philosophy. We have seen very strong results from those investments. As we always said, we are not trying to optimize short-term margins. We are trying to invest for the long term, and we will continue to invest boldly in those initiatives.

Operator: The next question will come from Andrew Ruben with Morgan Stanley. Please go ahead.

Andrew Ruben: Thanks for the additional color on the investments within the release. One other item I would like to understand more about was the Brazil seller promotions you announced in recent months—lowering take rates for competitively priced sellers in certain price points. What drove the decision, and when you are allocating price investment dollars, how do you balance that between seller investments versus buyer initiatives such as free shipping? And to the extent it relates to Irma’s question, did these seller promotions represent any area of change in your philosophy or approach over the past few months? Thank you.

Ariel Szarfsztejn: Hey, Andrew. Ariel here. Let me walk you through what we have done regarding take rates, so everyone has the full picture. We lowered take rates in some categories and in specific price ranges, so this is not a platform-wide take-rate cut. It is a targeted investment where we see the greatest opportunity—and by opportunity, I mean both elasticity of demand and elasticity of supply. All the discounts that we are providing to merchants are conditional on sellers maintaining competitive pricing on their listings in MercadoLibre, Inc. Why are we doing this? This is probably the most important part of the answer.

If you go back a few years, we started lowering take rates back in 2024, targeting specific ranges and categories. If you look at results since then, unique buyers have grown 62%, GMV has grown even faster, the number of live listings on our platform and effective sellers have hit record highs, and engagement and frequency on the platform continue to increase at an excellent rate—even after a few years of much slower growth. So the latest take-rate reductions are a function of results we have already proven and seen over the last 18 months.

On your second point—whether we are investing for merchants or for buyers—over the last 12 months, we lowered the free shipping threshold to R$19, we have free and fast shipping in many miles, we expanded our affiliate program, and we continue to build the best and most reliable logistics network across Latin America. Clearly, all those investments compound to create tremendous volume and tremendous value for our merchants, and we want to make sure those investments, which benefit sellers directly, translate into the best possible prices for our buyers on the platform.

This is another piece of a complex set of initiatives we are putting together to drive engagement and create the very best value proposition for users on MercadoLibre, Inc.

Martin De Los Santos: To complement those investments Ariel mentioned regarding lowering take rates: they did not flow through our P&L in Q1. They will flow through in Q2.

Operator: The next question will come from Robert Ford with Bank of America. Please go ahead.

Robert Ford: Good evening, everybody. Thanks for taking my question. In the press release, you mentioned a 30 NPS gap with incumbent banks. Can you talk a little bit about your NPS rank across the marketplaces and what you think you need to do to replicate that NPS leadership with respect to marketplaces, maybe specifically in Brazil?

Ariel Szarfsztejn: Hey, Bob. We are at record-high NPS across every single market. In e-commerce, we feel pretty comfortable with the competitive position in terms of customer satisfaction in every single country where we operate. If you were to compare our NPS with traditional retail—which is a similar example to traditional banks—you would see a huge gap. We are satisfied with all the progress we have made and the continuous improvement in this metric across Brazil, Mexico, Argentina, Chile, and so on.

Operator: The next question will come from Marcelo Santos with JPMorgan. Please go ahead.

Marcelo Santos: Hi. Good evening. Thanks for taking my question. I wanted to discuss a bit the Brazil NIMAL compression. You mentioned that one third of the provisions came from higher provisions in Brazil. Is that part of the up-market move? You say you are taking longer loans. I want to understand what kind of products you are growing, what kind of risk these products carry, and how far you are in this move. Thank you.

Osvaldo Giménez: Hi, Marcelo. As you mentioned and as we mentioned on the call, a big part of that is related to the higher mix of credit card, which has a significantly smaller NIM and because those are still immature cohorts in the portfolio. We are taking heavier provisions in Brazil, and that is related, on the one hand, to extending the average term of our loans. We used to have loans with an average of five months, and that has moved to eight months. Also, we are expanding the reach of our personal loans portfolio.

In part, we are reaching out to customers who had a line of credit in the past and were not taking it, so we are lowering the spread to entice them to start trying our personal loan products, and also reaching out to segments that are either more risky or where we have to work with smaller spreads. It has been a deliberate decision to reach further segments to continue accelerating growth. I will add that asset quality remains quite stable and reflects how well the models are working and, in general, how the underwriting process is working.

Operator: The next question will come from Rodrigo Gastim with Itau BBA. Please go ahead.

Rodrigo Gastim: Good evening, everyone. I would like to turn the discussion to Argentina and the credit book in Argentina. Could you discuss the potential acceleration in the credit book in the country, or give us some idea of the growth recently of the credit book in Argentina, specifically for the card book, which is quite new? You sounded enthusiastic with this initiative. Also, share early signs of the profitability of the credit card in Argentina—the NIM or the maturation of the cohorts and how it is behaving. Thank you.

Osvaldo Giménez: Hi, Rodrigo. Let me start with credits, then move on to credit cards. In general, the 15–90 NPL in Argentina has improved sequentially. When we look at the market, we see that some banks are having worsening NPLs, but that has not been our case. The reason is we have several advantages: we issue loans with very short durations relative to banks, we have a very nimble approach to pricing those loans, we have high levels of principality in Argentina—lots of our users use their Mercado Pago account every day—and we have very sophisticated underwriting models. Our portfolio has proved to be very resilient in Argentina.

Regarding the credit card, we started issuing cards in August–September of last year, and we are excited with the evolution. Given the liquidity of Mercado Pago, we have been able to reach clients we deem to be less risky, which has enabled us to be aggressive in the number of cards we are issuing. It is still early to tell how quickly those cards will repay themselves, but our initial impression is that the cohorts in Argentina are very similar to our first steps in Brazil. We are happy with how they are evolving.

Operator: Your next question will come from Josh Beck with Raymond James. Please go ahead.

Josh Beck: Thank you for taking the question. It sounds like unit costs were down, I believe, 17% year over year. I assume a lot of this has to do with better utilization of idle capacity. As we look later into this year and next, how do you think about the next step down in terms of unit costs? And then, on GenAI, we have heard a number of U.S. players speak to really embedded GenAI experiences within their e-commerce platforms driving better conversion and bigger baskets. Any early learnings in that area for you? Thank you.

Ariel Szarfsztejn: Hey, Josh. Indeed, we are very pleased with the results on shipping cost—17% reduction year over year—further accelerating from the 11% reduction we saw in Q4, even while absorbing 56% volume growth in the same period. The improvements are coming from three main things. A, volume and volume density: more shipments allow us to dilute fixed costs across the network while also ramping up facilities to hit utilization levels far more quickly. Combined with new tech features, this allows us to improve shipments per route in both last mile and line haul.

B, our slow-shipping network is a key lever that allows us to take advantage of idle capacity both in fulfillment and cross-docking in order to ship items at a marginally lower cost whenever there is space available in our value chain. C, there was lots of work in terms of deploying operational and technological improvements that improve productivity across every node of our network. There is a commentary we left in the letter that shares more on the story: variable cost per shipment for the items between R$19 and R$79 has improved materially since we launched our free shipping program in June, and several brackets within that range are already breaking even.

We are positive about this; it is the same type of trajectory that we saw when we launched our initial free shipping program back in 2016, and this case improved even faster. Looking forward, we expect the direction of travel in unit shipping costs to continue to be downwards, but this will not be linear. We will be adding more capacity given the growth rates we are having, and incremental gains may take longer to achieve, but we are confident in the trajectory. In terms of GenAI, it is worth highlighting that we deployed LLMs in Search in commerce for the first time this quarter in Brazil, Mexico, and Argentina.

We are using this technology to better understand user intent, combining knowledge of the user behind the query with better interpretation of the query itself. The impact is visible across the board: higher conversions as buyers find what they are looking for much faster; better ad returns as our search improves the quality of results our ad tech stack is generating; and stronger engagement as the discovery experience improves. This is one contributor to the great performance we had this quarter. It is one piece in a broader GenAI strategy for the marketplace, and we are very happy with the results so far.

Operator: The next question will come from an Analyst with XP. Please go ahead.

Analyst: Hi. Thanks for taking my question. A quick one. How are you seeing the potential wholesale energy tariff revision in Brazil, as well as higher oil prices, becoming additional cost challenges to deal with in the short term? Thank you.

Martin De Los Santos: In the first quarter, we did not see any change in energy costs. We are seeing some parts of our logistics pass on some increases in energy costs in the second quarter, beginning in the last month or so, and we are passing most of those to consumers. For the most part, we do not expect a significant impact on our results because of that so far, but we are monitoring the situation closely. It is something we need to review month by month. So far, we have not seen any impact on our P&L because of that. In terms of labor costs, it is similar.

We are increasing our labor mostly in logistics, and we adjust our logistics costs based on labor cost once or twice a year in Brazil. That is not a major issue for us and has not impacted our performance.

Operator: The next question will come from Geoffrey Elliott with Autonomous. Please go ahead.

Geoffrey Elliott: Hello. Thanks very much for taking the question. There is interesting language in the “looking ahead” statement where you talk about margins—you can dial them up, you can dial them down. You have chosen where to set the dial, and you do not see this changing materially in the near term. It is unusual for you to give that near-term clarity. What has prompted that? And then what could cause it to change—what unforeseen circumstance could cause margins to be lower or higher in the near term? Thank you.

Martin De Los Santos: Hi. It is Martin here. Basically, what we are trying to explain in the letter is the fact that margins are a consequence of our investment posture. We can dial up or down the investment intensity based on the results we are seeing across different channels and tracks. This quarter, as you saw, we are accelerating the offering of credit cards—our credit card book is growing more than 100% year on year. We are also accelerating CBT and 1P. We continue to offer more free shipping. So we are investing in both commerce and fintech, and based on those investments is the margin that we are delivering. As I said earlier, we are not optimizing for short-term margin.

We are making investments based on the results we are seeing, and the results are very positive. Revenue grew 49%, the highest rate of growth over the past four years. That is one example of our investments performing very well. We tried to say we will continue to invest with discipline in the areas we are investing today. If we see opportunities and see results performing according to plan, we will continue to invest and will not shy away from it. We will not try to optimize short-term margins. We are looking at a big opportunity ahead of us and want to make sure we capture it as opposed to focusing on short-term margins.

Osvaldo Giménez: To complement that on the fintech side: you mentioned credit cards. We see this as a huge opportunity. The better we get at improving our models, the more it allows us to issue credit cards within the same payback period we set as target. The better we are at improving those models, the more we are willing to invest, because we know how predictable the payback period is.

Martin De Los Santos: And the flip side is, if we wanted to improve margins in the short term, it would be fairly easy for us to slow down certain investments. But we do not think that is the right way to go, given the large opportunity we have in front of us for both commerce and fintech.

Operator: The next question will come from Craig Maurer with FT Partners. Please go ahead.

Craig Maurer: Yes, hi. Thanks. I wanted to dig in further on the decision to both go longer duration and to expand the credit box for the credit card in Brazil and for loans in Brazil. With the price of oil up, what gave you the confidence to make those changes now and really lean in versus what was already a fast growth rate? How do you balance the risk-reward here?

Osvaldo Giménez: Let me split the question. On the credit card side, we are very comfortable with the repayments we are seeing. Repayments are very similar to what we were seeing before, so the impact the credit card has on provisions and NIM is mostly because it is gaining share in the total credit book. When it comes to personal loans, that is where we extended the duration. Our duration was fairly small—only five months—and it was very profitable. It continues to be very profitable, less so than a year ago, but fully profitable.

Given that we are growing well and it is profitable, we wanted to reach segments where we believe we can make money even if, on the margin, the spread is smaller than with the segments we were already serving, and entice those segments which sometimes were not willing to take credit before to start taking it. We can change the periods at which we lend at any point in time, but we wanted to experiment with this, and this confirmed we could do this profitably.

Martin De Los Santos: I would add that we continue to manage our credit book very cautiously. If you look at NPLs, despite the macro conditions you described, they continue to be fairly stable in all the countries where we operate, including Brazil.

Operator: The next question will come from an Analyst with Citi. Please go ahead. Mr. Suarez, your line is open. We will move on to our next question. That will come from an Analyst with Santander. Please go ahead.

Analyst: Good evening. Thanks for taking my question. Also regarding the credit portfolio, it is clear that you are increasing exposure to credit cards, but also accelerating in consumer and merchant loans, which I believe require higher provisioning at the time the credit is released, both due to the nature of the credit and the longer durations. So it may explain a big part of the NIM reduction. Does that make sense? Combined with this, those categories have lower spreads than credit cards but accrue interest over the full balance, contrary to credit cards where you depend on users to delay payment.

If my understanding is right, is it fair to assume that static NIM is much lower than it could reach over time as you start collecting interest and potentially reverting provisions on this balance?

Osvaldo Giménez: Hi. In general, the spreads in the consumer and merchant books are better than those on the credit card. On the credit card, we have to book provisions on the potential lines we have, so initially we take a loss whenever we issue credit cards, and only after some time do we start making money on those cards we issued in the past. I would say what contributes to lower NIM and higher provisions is mostly, first, the increase in the proportion of credit cards—about two thirds of it.

With regards to the loans, yes, increasing duration makes us take larger provisions and also assume a larger early repayment risk, which was part of the equation in moving toward longer durations. Over time, as we regulate and better understand how repayments will work, we will be able to expand the spread in those personal loans in Brazil.

Ariel Szarfsztejn: To complement, the consumer loan portfolio in Brazil—which is the only one Osvaldo was referring to—continues to be very profitable with double-digit margins. It is just a little less profitable than a year ago. It continues to perform very well. And merchant loans, which were the last ones we mentioned, have very healthy spreads—probably the highest spreads of all the products today.

Operator: The next question will come from Neha Agarwala with HSBC. Please go ahead.

Neha Agarwala: Hi. Thank you for taking my question. Going back to provisions: the cost of risk increased quite substantially this quarter. It is now around 37%, by my calculation. Could you zoom in on which particular loan segment or region might have led to this increase in cost of risk? Is this a one-off, or is 37–38% a going rate for cost of risk as you continue growing the credit business? Second question: there is a lot of discussion about payroll loans in Brazil, which are less risky but a good alternative to personal loans. Is that something you would contemplate entering for the Brazilian market? Thank you.

Martin De Los Santos: Hi, Neha. It is Martin here. Let me take the first part regarding provisions this quarter. You are probably looking at the chart in our investor presentation where we show a waterfall of margin compression. There are four points of margin compression because of bad debt or provisions. This is something that has been happening for quite some time. Our credit book grows at a faster pace than revenues—credit book up 87% year over year and MercadoLibre, Inc. revenues up 49%—and that generates margin compression. The reason is that as we issue any new loan, we must provision for the full amount of expected loss of that loan, and when we accelerate growth, we need to provision more.

Two thirds of the margin compression comes from that. That is natural and something we have seen over time. In fact, because the credit business is so profitable, it is accretive to overall MercadoLibre, Inc. margins. The one third of compression you see on that waterfall comes from the consumer credit book in Brazil. As mentioned earlier, it is profitable but less profitable than a year ago, and that generates compression. There is no change in performance except for Brazil. We continue to be very excited about the performance of credit cards, which has continued to improve quarter after quarter, and consumer and merchant credits are very profitable businesses as they have been for many years.

Osvaldo Giménez: Regarding payroll loans, we have seen a significant increase in Brazil. We are about to launch private payroll loans. We have already integrated with the government, and we will launch the product soon.

Operator: The next question will come from Deepak Mathivanan with Cantor Fitzgerald. Please go ahead.

Deepak Mathivanan: Great, two questions, please. First, can you talk about the competitive intensity in Brazil? Amazon has made several changes recently. Are you seeing any impact on the seller side or supply on the platform at this time? Second, for Martin: there are seasonal headwinds in Q1 from the credit business that partly ease through the year. Are you now ramping investments in certain areas that are incremental such that the seasonal effects are somewhat masked, and we should expect EBIT margin for the year to be around Q1 levels? Any additional color would be helpful. Thank you.

Ariel Szarfsztejn: Hey, Deepak. Let me address the first point on competitive intensity. Brazil is one of the most attractive e-commerce markets in the world, so it is natural that it is getting more intense—and that has been the case for many years. While competition is intense, I would highlight a couple of things about how we think about this. First, we thrive in competitive environments. Competition makes us stronger; it pushes us to evolve and continue innovating—and that is exactly what we have been doing for 26 years, and certainly over the last few years. Every engagement metric you look at in MercadoLibre, Inc. Brazil is strengthening: frequency, multi-category shopping, retention.

These are structural gains in our value proposition, not short-term gains or growth we are buying. We are satisfied with reaching new records of NPS that show how strong our value proposition is in the country. Our conversion rates in Brazil have increased 1 percentage point year over year—that is a huge increase—and it feeds into rapid growth and record market shares. We have never been in a stronger position on that front. Second, this competitive intensity is bringing new consumers from offline into online, and we feel well equipped to offer those consumers the opportunity to buy on MercadoLibre, Inc. The pie is increasing faster than before, and we are taking an even larger slice.

Regarding the impact of what others are doing, our numbers speak for themselves: our supply continues to grow, our GMV continues to grow, successful items sold are accelerating, and retention is improving. We are comfortable and confident with our competitive position and will continue to execute behind it.

Martin De Los Santos: Deepak, it is Martin here. With regards to margins, as you know, we avoid talking about margins on a quarterly forward-looking basis. In Q1, we decided on the level of investment intensity based on the performance of different investments. In the shareholder letter, we went deeper into those results. We are seeing very positive results in our credit card, 1P, CBT, our free shipping offering, and so on. We will continue to invest behind those initiatives. There might be some others, like Ariel mentioned, including incremental marketplace investments in Brazil. We have to see how energy costs play out; I do not see a big impact, but we need to monitor.

The philosophy remains the same: we look at investments, we look at results, and we invest behind our ecosystem to capture the opportunity in front of us, not managing the business to a particular margin level. We feel optimistic and comfortable about the level we delivered this quarter and will continue to monitor opportunities throughout the year to determine the level of intensity across different tracks.

Operator: The next question will come from an Analyst with UBS. Please go ahead.

Analyst: Hi, good evening. Thanks for the opportunity. A follow-up on your credit book, please. I think we are seeing some deterioration in asset quality given higher provisions and NPLs and the lower level of NIMs. How is your renegotiation strategy evolving over time? Is the higher duration of loans related to any kind of renegotiation? And in this environment, should we expect the same pace of credit card issuance in Brazil, or a slowdown? Finally, is this the new recurrent level of NIM going forward, or could it be lower as you continue to expand in credit cards? Thank you.

Osvaldo Giménez: With regards to NIM, quarter by quarter there is some seasonality—typically we have lower NIM in Q1—so it is normal to see the sequential compression in the results. Year on year, as we mentioned, a big part is the higher mix of credit cards, and the rest is more related to Brazil—both extending average terms of loans and expanding the reach of our personal loan portfolio. We have not seen any change in renegotiations. What we do see when we extend duration is that more people are willing to prepay their loans, so the interest revenue we collect on that loan is shorter, because the duration was not extended as expected in those cases.

We are not seeing any impact from this on the quality or the type of renegotiations we are doing.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Mr. Martin De Los Santos for any closing remarks. Please go ahead.

Martin De Los Santos: First, I would like to thank everybody for joining the call. I will close with some comments regarding our investment philosophy, which we also discussed in our quarterly letter to shareholders. We at MercadoLibre, Inc. are facing a once-in-a-generation opportunity. Both fintech and commerce have tremendous runway ahead in Latin America, and we are in the best position to capture this large opportunity. We choose to invest behind our ecosystem. In fintech, we are scaling our credit card portfolio, helping us bring millions of people to our Mercado Pago platform. In commerce, we continue to grow our free shipping offering, expand our logistics, and invest behind our 1P and CBT operations.

Those investments put short-term pressure on margins, but they are delivering tremendous results. We continue to gain market share in all the businesses and countries where we operate. Engagement and NPS are at record levels, and we are generating tremendous growth and scale—proof of that is the 49% year-over-year growth we delivered in Q1, the highest in the last four years. We are aware that this generates margin pressure, but we believe this is the right way to go, and we are as confident as ever that the choices we are making today will maximize long-term cash flow and lead us to significantly higher margins over time. With that, I would like to close the call.

Thank you again for joining. Please reach out to the IR team if you have any further questions. Good night.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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