MercadoLibre, Inc. (MELI)

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Mercadolibre Inc. (MELI)

Participate in Credit Suisse Annual Technology Conference Call

November 27, 2012 12:00 pm ET


Pedro Arnt – Chief Financial Officer and Executive Vice President


Stephen Ju – Credit Suisse


Stephen Ju

We’ll go ahead and get started. Good afternoon everybody. It’s Steven Ju from the Credit Suisse Internet team. Very excited to have with us Pedro Arnt, CFO of Mercadolibre. Welcome Pedro and thank you for making a long trip out.

Pedro Arnt

Thank you.

Stephen Ju

So for those of us in the room, who are not very familiar with the Mercadolibre story, if you can kind of give us the quick overview.

Pedro Arnt

Sure. Absolutely. We run the leading e-commerce platforms in Latin America, presence in 12 markets across the region, and initially started with a very similar business to e-base running marketplaces and has evolved since and the strategic vision for the company is to become a platform for online trading for merchants.

So today in addition to the core marketplace business that does about 70% of our revenue, we also have a product called MercadoPago which is in essence very similar to PayPal and then newer business units that revolve around online advertising, capabilities for merchants, software-as-a-service model for setting up your own web stores online through our technology and very deeply integrated with the other portions of the ecosystem.

And even more recently also, technology solutions for online shipping and fulfillment management both for purchases carried out on the marketplace and off the marketplace. So increasingly trying to broaden the scope of the services we offer to address all the needs of any merchant who wants to start selling online.

Stephen Ju

I mean your stock has become one that’s quite controversial as of late. The long term message has been I guess 25% to 35% growth rate for e-commerce in the region and the aspiration I think for Mercadolibre to grow at excess of those regional rates. Now I think what’s kind of I’m asking your growth rate right now is you guys start to hit the tough comps right, that have been generated when you guys rolled out a new world platform in the third quarter of 2011. So presumably than as you just entered to be a tough comp, so the next three quarters are also tough comps as well. So what’s your view point in terms of what your growth rate might look like back over the longer term? We still feel that it’s within the 25% to 35% range and you outperforming that range?

Pedro Arnt

So I think Forestry came out recently with their latest projection for e-commerce in the region and I think over the next five years we are probably talking at CAGR that’s more in the high teens, low 20s and the 25% to 30% was the last five years. We’ve always said that given the position we have the leader in e-commerce in each of the markets where we operate, the growing ecosystem of complimentary properties, we aspired to be growing above the market and if we are not we have some tough questions to answer. I think we still stand by that affirmation.

You mentioned the comp issues, certainly our business has decelerated in the latest reported quarter and that’s something that we had stayed quite ahead of and had been mentioning to investors way back as early as Q1 of this year that there were some very tough comps in the back half of the year and it was important for people to be cognizant of that.

But I think additionally and perhaps even more importantly, there is something else going on which I think long term we are extremely optimistic about, but does generate a short term transition period and that’s also part of what we are seeing in the back half of this year and its that we are being to address certain portions the buying flow on the marketplace that marketplaces had historically not really addressed namely payments and shipping. So we are getting increasingly involved with those two parts of the transaction.

And long term I think that begins to built some very solid competitive advantages and that if you can offer a great buying experience not only around what has been our core value proposition, selection and price, but you can also address the convenience portion of buying by having integrated payments that are seamless and that flow through us. And then by participating in the shipping and delivery portion of the transaction, you begin to close the loop around the consumer.

Now the tricky piece of it, as you begin to do that, you are also changing by your behavior we thought buyers over the last 12 years that the payments part and the shipping part was something that to a large degree they could settle on their own with the merchant regardless of the complexity of lack of convenience that caused. Now that we are bringing that more and more into one integrated seamless flow there is some education of our buyers and some changes in buyer behavior that we will carry out that have some short-term impacts on how the platform is converting.

Stephen Ju – Credit Suisse

So it seems like to me that you are talking about taking away some of the frictions of the business mainly around payments as well as logistics, the logistics part of it first. So I think in the past you’ve talked about perhaps coming up with some sort of the fulfillment solution for some of your seller base and may be partnering up with logistics or distribution partners regionally what is the status of that initiative and you can [put] forward in that regard?

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