WEBVTT 1 00:00:08.300 --> 00:00:11.200 Hello and welcome to this vidcast which is devoted to 2 00:00:11.200 --> 00:00:13.000 Mercado Libre. 3 00:00:13.600 --> 00:00:16.900 We already discussed evolution of this company, which 4 00:00:16.900 --> 00:00:19.500 is extremely successful distributor in 5 00:00:19.500 --> 00:00:22.300 Latin America. There wasn't educational film 6 00:00:22.300 --> 00:00:26.200 in September 2021 describing opening a 7 00:00:25.200 --> 00:00:29.700 Marketplace in 1999 Payment 8 00:00:28.700 --> 00:00:32.100 Systems Pago in 2003, 9 00:00:31.100 --> 00:00:35.500 and then wallet in 2006 for operational 10 00:00:34.500 --> 00:00:37.500 reasons. Also the company became an 11 00:00:37.500 --> 00:00:41.700 extremely professional distributor Logistics mbos 12 00:00:40.700 --> 00:00:43.300 in 2013. 13 00:00:45.200 --> 00:00:48.800 The company is operating in Latin America, but predominantly in 14 00:00:48.800 --> 00:00:49.400 three countries. 15 00:00:50.200 --> 00:00:53.100 The first one is Brazil Brazil represents in 16 00:00:53.100 --> 00:00:56.400 2021, almost 4 billion dollars 17 00:00:56.400 --> 00:00:59.200 of revenues which is more than 50% of the 18 00:00:59.200 --> 00:01:00.700 total revenues of the company. 19 00:01:01.700 --> 00:01:04.800 Second to Brazil Argentina quite growing 20 00:01:04.800 --> 00:01:08.100 as well Mexico third quite 21 00:01:07.100 --> 00:01:10.700 growing. So the company's definitely growing and 22 00:01:10.700 --> 00:01:13.400 if you look at the evolution of its revenues from 23 00:01:13.400 --> 00:01:14.900 2006 to today. 24 00:01:15.600 --> 00:01:18.600 You understand that predominantly the company was 25 00:01:18.600 --> 00:01:24.700 growing smoothly up to to 2017-2018. 26 00:01:21.700 --> 00:01:25.300 And 27 00:01:24.300 --> 00:01:28.500 then it's exceptional growth exponential 28 00:01:27.500 --> 00:01:31.700 growth since 2019, 2021 29 00:01:30.700 --> 00:01:33.300 and even 22 30 00:01:34.200 --> 00:01:37.600 But what's very interesting to observe is the evolution of the portfolio 31 00:01:37.600 --> 00:01:41.100 of Commerce as opposed to fintech services? 32 00:01:42.100 --> 00:01:46.000 Obviously as it was a development in a traditional Marketplace activity, 33 00:01:45.200 --> 00:01:49.700 but it was representing 64% of total revenues 34 00:01:48.700 --> 00:01:51.700 in 2020 and it's 35 00:01:51.700 --> 00:01:54.500 down to 57% If you 36 00:01:54.500 --> 00:01:57.800 look at the last four quarters from 37 00:01:57.800 --> 00:02:01.000 Q4 2021 to Q3 2022 38 00:02:00.100 --> 00:02:03.700 in the meantime, the fintech activity 39 00:02:03.700 --> 00:02:06.500 has so much increased that it's 40 00:02:06.500 --> 00:02:10.000 now representing 43% of the total revenues as 41 00:02:09.400 --> 00:02:12.300 opposed to 36% for the same 42 00:02:12.300 --> 00:02:12.700 period 43 00:02:14.200 --> 00:02:17.100 Both businesses aren't growing but not at the same rate. 44 00:02:17.900 --> 00:02:21.100 The Commerce activity was growing traditionally at 45 00:02:20.100 --> 00:02:23.600 60 and then 80% per year. 46 00:02:23.600 --> 00:02:26.700 Now. If you look at the last four quarters, 47 00:02:26.700 --> 00:02:29.300 it's only 20% only between 48 00:02:29.300 --> 00:02:30.400 quotes obviously. 49 00:02:31.700 --> 00:02:34.500 If you compare that with the fintech activity 50 00:02:34.500 --> 00:02:37.900 fintech was growing at 50 and then 51 00:02:37.900 --> 00:02:40.900 70 and then 70 again. So 52 00:02:40.900 --> 00:02:43.100 basically fintech is getting 53 00:02:43.100 --> 00:02:46.500 closer and closer to the Commerce activity. 54 00:02:47.600 --> 00:02:50.800 Now this is about growth. But what about profitability 55 00:02:50.800 --> 00:02:54.300 interestingly the fintech gross 56 00:02:53.300 --> 00:02:56.700 margin sales Minus cost of good soul is 57 00:02:56.700 --> 00:02:59.200 greater than the Commerce gross margin. 58 00:02:59.800 --> 00:03:02.800 So as a consequence when the company was growing 59 00:03:02.800 --> 00:03:05.500 very quickly and predominantly in 60 00:03:05.500 --> 00:03:08.300 the Commerce activity. The gross margin rate 61 00:03:08.300 --> 00:03:11.500 was gradually declining from 80 to something 62 00:03:11.500 --> 00:03:15.200 like 40 to 50% Then it's 63 00:03:14.200 --> 00:03:17.500 stabilization in 2021. And 64 00:03:17.500 --> 00:03:20.600 it's up into it too because of the Improvement that 65 00:03:20.600 --> 00:03:24.100 development of the fintech activity higher growth 66 00:03:23.100 --> 00:03:24.200 rate. 67 00:03:25.400 --> 00:03:28.400 Now it's about gross. Margin. If you want to move from gross margin 68 00:03:28.400 --> 00:03:31.100 to the ebit to the operating income. You have 69 00:03:31.100 --> 00:03:33.900 to deduct the indirect call the Opex. 70 00:03:34.400 --> 00:03:37.700 R&D product development technology development 71 00:03:38.600 --> 00:03:41.700 sales and marketing and general an admin. 72 00:03:41.700 --> 00:03:45.100 Let's have a look at these three items separately. 73 00:03:44.100 --> 00:03:47.200 If you look at the evolution of 74 00:03:47.200 --> 00:03:50.800 R&D as a percentage to revenues, it's quite 75 00:03:50.800 --> 00:03:53.800 interesting to observe that it was representing something 76 00:03:53.800 --> 00:03:56.700 like 5% of revenues 2006 to 77 00:03:56.700 --> 00:03:59.800 2008. Then it gradually moved 78 00:03:59.800 --> 00:04:02.900 up to get to a peaking 2015 of 79 00:04:02.900 --> 00:04:04.300 about 12% 80 00:04:05.300 --> 00:04:08.800 The company was growing but the R&D to 81 00:04:08.800 --> 00:04:12.200 revenue ratio was growing. So R&D 82 00:04:11.200 --> 00:04:14.800 was growing at a rate, which is more than the 83 00:04:14.800 --> 00:04:15.200 sales figure. 84 00:04:16.100 --> 00:04:19.400 What's interesting to observe is then it's stabilized at 85 00:04:19.400 --> 00:04:22.700 a level of 12% and gradually went down 86 00:04:22.700 --> 00:04:25.200 not because the companies eat less 87 00:04:25.200 --> 00:04:28.400 investing in research and development, but because sales and revenues are 88 00:04:28.400 --> 00:04:29.200 skyrocketing. 89 00:04:30.200 --> 00:04:33.500 So first you invest in research and development and 90 00:04:33.500 --> 00:04:36.700 Innovation to create the product then you 91 00:04:36.700 --> 00:04:39.200 promote and you sell the product. This is 92 00:04:39.200 --> 00:04:42.300 why the sales and marketing figure when down from 93 00:04:42.300 --> 00:04:45.500 45% in 2006 down to a 94 00:04:45.500 --> 00:04:49.200 kind of stabilization at 20% And in 95 00:04:48.200 --> 00:04:51.800 2017. Once the products 96 00:04:51.800 --> 00:04:55.100 are ready. The company's very much investing 97 00:04:54.100 --> 00:04:58.300 in sales and marketing as 98 00:04:57.300 --> 00:05:00.500 a consequence the sales and marketing figure 99 00:05:00.500 --> 00:05:03.700 represented 35% to revenues 100 00:05:03.700 --> 00:05:06.600 in 2018 and 2019 and 101 00:05:06.600 --> 00:05:09.900 then went back to a kind of normal figure 102 00:05:09.900 --> 00:05:11.100 which is about 20% 103 00:05:12.700 --> 00:05:15.900 So the company's first developing the product then 104 00:05:15.900 --> 00:05:18.300 marketing the product so that 105 00:05:18.300 --> 00:05:22.100 you can generate higher revenues in the meantime General 106 00:05:21.100 --> 00:05:25.100 and admin figures where absolutely manage 107 00:05:24.100 --> 00:05:28.600 showing economies of scale gradually declining 108 00:05:27.600 --> 00:05:30.400 year after your rituals 109 00:05:30.400 --> 00:05:33.400 15% in 2006 and today's 110 00:05:33.400 --> 00:05:36.400 about six seven percent. So the company's 111 00:05:36.400 --> 00:05:39.700 generating economies of scale. The company's investing developing 112 00:05:39.700 --> 00:05:41.200 product marketing the product. 113 00:05:42.300 --> 00:05:44.600 What is a consequence in terms of revenues? 114 00:05:45.200 --> 00:05:48.100 You remember what I described in terms of evolution of 115 00:05:48.100 --> 00:05:51.400 sales in 2016. The company's generating sales of about 116 00:05:51.400 --> 00:05:55.100 1 billion in 2021. It's 117 00:05:54.100 --> 00:05:57.500 about 7 billion and growth 118 00:05:57.500 --> 00:06:00.200 will keep on in 2022. 119 00:06:01.200 --> 00:06:04.500 But if you look at the evolution of the ebit the 120 00:06:04.500 --> 00:06:07.700 operating income the operating income was about 121 00:06:07.700 --> 00:06:11.600 30 to 35% in 2010 122 00:06:10.600 --> 00:06:13.600 in 2012. Then as 123 00:06:13.600 --> 00:06:17.100 a company was not spending but investing 124 00:06:16.100 --> 00:06:19.200 a lot. He beat went down 125 00:06:19.200 --> 00:06:22.400 its stabilized at the level of 20% Then it 126 00:06:22.400 --> 00:06:26.400 went down close to zero and in 2018 and 2019. 127 00:06:25.400 --> 00:06:28.500 The company's generating operating 128 00:06:28.500 --> 00:06:29.100 losses. 129 00:06:29.800 --> 00:06:32.300 Not because the company is not doing good 130 00:06:32.300 --> 00:06:35.000 job, but simply because the company is investing. 131 00:06:36.200 --> 00:06:40.400 When investment is down in a p&l in 2020 132 00:06:39.400 --> 00:06:42.800 the EB transposit again, and 133 00:06:42.800 --> 00:06:45.500 then it goes up because then the company 134 00:06:45.500 --> 00:06:48.500 is capitalizing on the investment and generating 135 00:06:48.500 --> 00:06:51.300 economies of scale in marketing and research and development. 136 00:06:52.500 --> 00:06:56.100 It gives me the opportunity to show you again. My 137 00:06:55.100 --> 00:06:58.500 favorite Slide the one which 138 00:06:58.500 --> 00:07:01.500 I show any time. I teach it is 139 00:07:01.500 --> 00:07:06.000 the Amazon letter to shareholders dated 1997. 140 00:07:04.600 --> 00:07:07.800 The first one issued by 141 00:07:07.800 --> 00:07:10.600 the company when it was listed and basically 142 00:07:10.600 --> 00:07:13.500 it says it's all about the long 143 00:07:13.500 --> 00:07:16.900 term we invest and invest and invest maybe 144 00:07:16.900 --> 00:07:20.100 at the detriment that the expense of short-term profitability, 145 00:07:19.100 --> 00:07:22.300 but it's not important. What is absolutely key 146 00:07:22.300 --> 00:07:25.900 is to create a long-term Market leadership. 147 00:07:26.500 --> 00:07:29.500 And what's very interesting is that this later has been 148 00:07:29.500 --> 00:07:33.800 reprinted in the annual report every year since 1997, 149 00:07:32.800 --> 00:07:35.700 even though the CEO 150 00:07:35.700 --> 00:07:37.600 has changed recently changed. 151 00:07:38.900 --> 00:07:42.200 this very interesting confrontation between 152 00:07:41.200 --> 00:07:44.700 evolution of revenues and evolution 153 00:07:44.700 --> 00:07:47.900 of the current ebit as a percentage to revenues 154 00:07:47.900 --> 00:07:51.000 is confirmed if you look at the last four 155 00:07:50.000 --> 00:07:51.800 quarters 156 00:07:52.700 --> 00:07:55.500 Of course in 2020 revenue is 157 00:07:55.500 --> 00:07:58.200 up and profit is back. 158 00:07:58.900 --> 00:08:01.700 In 2021, both are up 159 00:08:01.700 --> 00:08:04.000 sales are up. And now if you 160 00:08:04.300 --> 00:08:07.300 look at the trailing 12 months, we are at 161 00:08:07.300 --> 00:08:08.900 about 10 billion dollars. 162 00:08:09.500 --> 00:08:12.500 Now as a company's generating economies a 163 00:08:12.500 --> 00:08:15.800 scale and getting the return on its investment. The return 164 00:08:15.800 --> 00:08:17.400 on sales is up again. 165 00:08:18.300 --> 00:08:21.600 So you understand that following the recommendation of 166 00:08:21.600 --> 00:08:22.700 Mr. Bezos? 167 00:08:23.300 --> 00:08:26.300 Mercado Libre is investing and investing and 168 00:08:26.300 --> 00:08:29.400 investing in order to reach long-term Market 169 00:08:29.400 --> 00:08:30.100 leadership. 170 00:08:30.800 --> 00:08:34.100 Even though this might be at the expense at 171 00:08:33.100 --> 00:08:36.200 the detriment of shorter profitability. 172 00:08:37.100 --> 00:08:40.300 Now that was the investment which you show in a p&l. 173 00:08:40.300 --> 00:08:43.400 What about the balance sheet you remember that in 174 00:08:43.400 --> 00:08:46.200 a balance sheet, you have non-current assets and 175 00:08:46.200 --> 00:08:49.900 working capital requirement, which is basically the cash 176 00:08:49.900 --> 00:08:52.700 conversion cycle in the cash conversion cycle 177 00:08:52.700 --> 00:08:55.500 you have inventories, which is about 0 for 178 00:08:55.500 --> 00:08:58.900 the company just a few handsets for points of 179 00:08:58.900 --> 00:08:59.000 sales. 180 00:08:59.900 --> 00:09:02.300 It's also accounts receivable a cast 181 00:09:02.300 --> 00:09:02.600 payable. 182 00:09:03.500 --> 00:09:06.600 What's interesting is that accounts people as always been higher 183 00:09:06.600 --> 00:09:09.700 than accounts receivable moving in parallel Direction 184 00:09:09.700 --> 00:09:11.600 up to 2017. 185 00:09:12.500 --> 00:09:15.800 In 2018 accounts receivable is significantly 186 00:09:15.800 --> 00:09:18.800 down. And again in 2019 in 187 00:09:18.800 --> 00:09:20.700 the meantime accounts payable is a little bit down. 188 00:09:21.600 --> 00:09:25.400 But if you look at the evolution of 2020 accounts payable 189 00:09:25.400 --> 00:09:29.100 and receivables are both app in 2021 190 00:09:28.100 --> 00:09:31.900 accounts receivable is up accounts 191 00:09:31.900 --> 00:09:32.700 payable is down. 192 00:09:33.600 --> 00:09:36.500 And as a consequence the working capital requirement 193 00:09:36.500 --> 00:09:39.700 the cash conversion cycle, which had always been a 194 00:09:39.700 --> 00:09:42.400 very negative figure contributing to 195 00:09:42.400 --> 00:09:45.700 the financing of the company is still negative, 196 00:09:45.700 --> 00:09:48.100 but much less negative. It's not 197 00:09:48.100 --> 00:09:51.800 minus 130 140 days 198 00:09:51.800 --> 00:09:54.200 of sales. It's minus 15. 199 00:09:55.200 --> 00:09:58.400 Now this is about Karen assets and current liabilities. What 200 00:09:58.400 --> 00:10:02.400 about fixed assets industrial investment Capital expenditures? 201 00:10:03.200 --> 00:10:06.200 If You observe the evolution of the cabinet in a long 202 00:10:06.200 --> 00:10:09.800 term you get something which is about 5% capex 203 00:10:09.800 --> 00:10:12.400 to revenues then it goes up to more than 204 00:10:12.400 --> 00:10:15.900 five five six seven and what 205 00:10:15.900 --> 00:10:19.100 is obvious is that in 2021 definitely 206 00:10:18.100 --> 00:10:21.500 there is an increase in the 207 00:10:21.500 --> 00:10:25.300 capital expenditures so the company has to invest in 208 00:10:24.300 --> 00:10:27.500 order to increase its capacity, you 209 00:10:27.500 --> 00:10:30.500 know to increase its ability to deliver services to 210 00:10:30.500 --> 00:10:33.100 its customers, it's always the same 211 00:10:33.100 --> 00:10:33.400 story 212 00:10:34.100 --> 00:10:37.100 Now if on top of that you add the fact 213 00:10:37.100 --> 00:10:41.100 that the company had to invest in the financial services 214 00:10:40.100 --> 00:10:42.000 assets. 215 00:10:42.600 --> 00:10:45.200 You observe that the company whose capital and 216 00:10:45.200 --> 00:10:48.800 plot was absolutely negligible and even negative in 217 00:10:48.800 --> 00:10:51.900 2020 turn positive in 218 00:10:51.900 --> 00:10:54.600 2021 and is now quite 219 00:10:54.600 --> 00:10:57.900 significantly positive in 2022 about 220 00:10:57.900 --> 00:11:00.400 2 billion dollars when it 221 00:11:00.400 --> 00:11:03.600 was minus 600 minus seven hundred 222 00:11:03.600 --> 00:11:06.000 million dollars in 2020 223 00:11:06.800 --> 00:11:09.900 So of course a revenues are growing but 224 00:11:09.900 --> 00:11:12.600 what is definitely a difference comparing 225 00:11:12.600 --> 00:11:16.200 today as opposed to yesterday is yesterday. 226 00:11:15.200 --> 00:11:19.200 The capital employed was negative uncontributing 227 00:11:18.200 --> 00:11:21.800 to growth financing now Capital 228 00:11:21.800 --> 00:11:24.800 employed is positive and has to 229 00:11:24.800 --> 00:11:25.800 be financed. 230 00:11:26.400 --> 00:11:30.300 It is always the same story growth consumes Financial 231 00:11:29.300 --> 00:11:32.500 Resources. The company is 232 00:11:32.500 --> 00:11:35.400 growing its capex to revenue 233 00:11:35.400 --> 00:11:38.700 figure the cash conversion cycle is less 234 00:11:38.700 --> 00:11:40.800 favorable than it was before. 235 00:11:41.500 --> 00:11:44.400 Fintag Rose, of course, you're growing 236 00:11:44.400 --> 00:11:47.400 the fintech. It's successful. It's higher growth. 237 00:11:47.400 --> 00:11:50.900 Margin you generating a return on your investment, but the 238 00:11:50.900 --> 00:11:53.900 assets which are devoted to fintech are no 239 00:11:53.900 --> 00:11:56.300 more 1.5 billion, which is what 240 00:11:56.300 --> 00:12:00.000 it was three years ago, but it's now 4.3 billion. 241 00:11:59.500 --> 00:12:02.700 It's an increase by almost 3 242 00:12:02.700 --> 00:12:05.600 billion than the question is. How do you finance grows? 243 00:12:07.100 --> 00:12:11.300 Ounce grows, you'll remember there are two ways basically debt 244 00:12:10.300 --> 00:12:13.600 and Equity inequity. You 245 00:12:13.600 --> 00:12:17.300 have profit and Equity Capital the bottom 246 00:12:16.300 --> 00:12:19.700 line is positive but far from 247 00:12:19.700 --> 00:12:22.400 contributing to the level, which is required to 248 00:12:22.400 --> 00:12:25.200 finance growth 83 million dollars in 249 00:12:25.200 --> 00:12:27.700 2021. It's far from being enough. 250 00:12:28.600 --> 00:12:31.300 This is why the company in 2021 the same 251 00:12:31.300 --> 00:12:32.900 year made an equity is you. 252 00:12:33.700 --> 00:12:36.400 But the objective of the equity issue was 253 00:12:36.400 --> 00:12:39.700 to repurchase the nodes convertible kinds 254 00:12:39.700 --> 00:12:42.400 of convertible bonds and also to contribute to 255 00:12:42.400 --> 00:12:45.900 simplifying the balance sheet preparing the balance sheet 256 00:12:45.900 --> 00:12:48.800 for its future. So it's not much cash 257 00:12:48.800 --> 00:12:51.500 coming from Equity. What about net financial debt? 258 00:12:51.500 --> 00:12:55.100 It was significantly negative to recently 259 00:12:54.100 --> 00:12:58.400 but Q3 2022 shows 260 00:12:57.400 --> 00:13:00.100 a net financial debt, which 261 00:13:00.100 --> 00:13:03.200 is positive by 300 million dollars. Of course, if 262 00:13:03.200 --> 00:13:06.400 you compare that with a market capitalization, which is 263 00:13:06.400 --> 00:13:10.800 48 billion dollars, it looks negligible, but 264 00:13:09.800 --> 00:13:12.200 you understand that the company will 265 00:13:12.200 --> 00:13:15.800 probably need some additional Equity tomorrow 266 00:13:15.800 --> 00:13:16.800 and the day after 267 00:13:18.200 --> 00:13:21.300 To issue Equity you have to look at your stock price if you 268 00:13:21.300 --> 00:13:24.400 compare the stock price of Mercado Libre with 269 00:13:24.400 --> 00:13:27.800 the NASDAQ You observe that during your 270 00:13:27.800 --> 00:13:30.800 as a masdaq was up and America dolibre was 271 00:13:30.800 --> 00:13:31.900 a little bit up. 272 00:13:32.500 --> 00:13:35.400 Then there was an interesting period from 2015 to 273 00:13:35.400 --> 00:13:38.500 2019. It was getting higher and 274 00:13:38.500 --> 00:13:42.100 higher and higher in 2020 was an explosion 275 00:13:41.100 --> 00:13:43.500 of the stock price. 276 00:13:44.300 --> 00:13:47.300 Now the company made the equity issue when the 277 00:13:47.300 --> 00:13:49.900 stock price was almost at the highest level. 278 00:13:50.600 --> 00:13:54.000 But you remember that during the last month the NASDAQ 279 00:13:53.200 --> 00:13:56.900 went down as a consequence Mercado Libre 280 00:13:56.900 --> 00:13:59.800 when done also the beta which 281 00:13:59.800 --> 00:14:02.900 represents a systematic risk, the sensitivity 282 00:14:02.900 --> 00:14:05.500 of stock market return to stock market 283 00:14:05.500 --> 00:14:08.700 index is 1.6 at Mercado 284 00:14:08.700 --> 00:14:11.400 Libre. What does it mean? It means that when the 285 00:14:11.400 --> 00:14:15.500 NASDAQ is up or down by one percent Americare on 286 00:14:15.500 --> 00:14:18.800 the average is up or down by one point six percent. 287 00:14:19.600 --> 00:14:22.900 So when NASDAQ is down Mercado Libre 288 00:14:22.900 --> 00:14:25.800 is amplifying the downside and 289 00:14:25.800 --> 00:14:28.600 lost almost 50% of its 290 00:14:28.600 --> 00:14:29.100 stock price. 291 00:14:30.100 --> 00:14:33.400 So as a company was quite opportunistic is three shares 292 00:14:33.400 --> 00:14:36.800 at 1,500 and something dollars quite 293 00:14:36.800 --> 00:14:41.500 close to the highest figures was 1,900. But 294 00:14:40.500 --> 00:14:43.300 now when the stock price is less 295 00:14:43.300 --> 00:14:46.900 than 1000 dollars if you want to issue shares, you're 296 00:14:46.900 --> 00:14:48.200 going to dilute the shareholders. 297 00:14:49.400 --> 00:14:52.700 Now as a conclusion Mercado Libre 298 00:14:52.700 --> 00:14:56.400 is an outstanding company. It's experiencing Commercial 299 00:14:55.400 --> 00:14:58.700 Success fantastic growth 300 00:14:58.700 --> 00:15:01.700 in sales. Why because the company 301 00:15:01.700 --> 00:15:05.100 understand the market market inside 302 00:15:04.100 --> 00:15:07.700 is absolutely great and because also, 303 00:15:08.400 --> 00:15:11.900 impious Logistics of the quality of execution 304 00:15:12.700 --> 00:15:15.200 we've been privileged to observe this 305 00:15:15.200 --> 00:15:18.300 very successful sequence. You'll develop 306 00:15:18.300 --> 00:15:21.800 the product R&D you Market the product sales 307 00:15:21.800 --> 00:15:25.400 and marketing then you generate skyrocketing revenues 308 00:15:24.400 --> 00:15:27.300 at firstly a bit is negative 309 00:15:27.300 --> 00:15:30.800 because you're investing then EBT is profiting from 310 00:15:30.800 --> 00:15:33.700 the increase in revenues. You generally economies 311 00:15:33.700 --> 00:15:36.900 are scale. And this is a successful sequence again. 312 00:15:36.900 --> 00:15:39.700 Now the day you want 313 00:15:39.700 --> 00:15:42.600 to go through this sequence. You have to invest if you 314 00:15:42.600 --> 00:15:45.600 want to invest you have to accept lower profits 315 00:15:45.600 --> 00:15:48.300 today to create the conditions of 316 00:15:48.300 --> 00:15:51.500 this long-term Market leadership, which was 317 00:15:51.500 --> 00:15:53.800 observed unprivileged at Amazon. 318 00:15:54.800 --> 00:15:58.200 What is interesting is that in Latin 319 00:15:57.200 --> 00:16:00.700 America? Americado Libre is a 320 00:16:00.700 --> 00:16:03.300 successful Amazon is not 321 00:16:03.300 --> 00:16:04.200 locally. 322 00:16:05.100 --> 00:16:09.000 Bad growth consumes financial resources, of 323 00:16:08.200 --> 00:16:11.100 course, it accelerates a value which 324 00:16:11.100 --> 00:16:14.600 is created by performing firm and mercado Libre 325 00:16:14.600 --> 00:16:17.300 is performing but that you consume 326 00:16:17.300 --> 00:16:20.700 Financial Resources. The question is where will 327 00:16:20.700 --> 00:16:21.900 the money come from? 328 00:16:22.700 --> 00:16:26.100 So far so good so far excellent for 329 00:16:25.100 --> 00:16:28.400 Mercado Libre, but what will be 330 00:16:28.400 --> 00:16:31.200 very interesting to observe is how the company is 331 00:16:31.200 --> 00:16:33.300 going to finance its growth tomorrow? 332 00:16:34.800 --> 00:16:35.400 Thank you very much.