Federico Sander - Mercadolibre, Inc. Pedro Arnt - MercadoLibre, Inc..

Irma Sgarz - Goldman Sachs do Brasil CTVM SA Robert E. Ford - Bank of America Marcelo Santos - JPMorgan CCVM SA Brad Erickson - Pacific Crest Securities Thomas Champion - Cowen & Co. LLC Richard Cathcart - HSBC.

Good day, ladies and gentlemen and welcome to the MercadoLibre Fourth Quarter 2016 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, today's program is being recorded.

I would now like to introduce your host for today's program, Federico Sander. Please go ahead..

Hello, everyone, and welcome to the MercadoLibre earnings conference call for the quarter ended December 31, 2016. I am Federico Sander, 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 then our current assumptions, expectations and projections about future events.

While we believe that our assumptions, expectations and projections are reasonable in view of the currently available information, you are 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 in 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 these measures to the nearest comparable GAAP measure can be found in our fourth quarter 2016 press release available on our Investor Relations website. Now, let me turn the call over to Pedro..

payment solutions both on and offline as well; logistics for fulfillment and free or subsidized shipping, expanding our credit offerings, and a sustained focus on customer service and experience as measured by Net Promoter Scores, as these seem to be the current key levers for sustained value creation for our users and consequently our shareholders.

With that, let me now address the quarter that just ended specifically. During Q4 2017 (sic) [2016] (8:31) items sold grew 40%, reaching 51.6 million; gross merchandise volume rose 48% on an FX neutral basis, reaching $2.2 billion; total payment volume grew 84% on an FX neutral basis, reaching $2.4 billion.

While total payment transactions grew 67% to 42.5 million and registered users were up 26% year-on-year after adding 7.9 million new users during the fourth quarter of 2016. This strong growth has led to solid top-line results for the fourth quarter with revenues increasing 68% on an FX neutral basis year-on-year and in U.S.

dollar accelerating for the fourth consecutive quarter to a multi-year high of 42% year-over-year growth. Now, let's take a closer look at some of the key initiatives and quarterly results by business units starting with our marketplace.

Execution there remains robust across most markets, with Brazil and Mexico being highlights for a second consecutive quarter. Brazilian units sold accelerated for the fifth consecutive Q to a multi-year high of 62% year-on-year, up from 22% growth during the fourth quarter of 2015.

Let me remind you that this is the fastest pace of growth in over four years for that metric. Revenue growth accelerated for the fourth consecutive quarter on an FX neutral basis to 64%, five percentage points above its four-year compounded annual growth rate.

On an FX neutral basis, GMV grew 51%, the fourth consecutive quarter of growth above 50% for that metric, and almost 20 percentage points higher than during the same period in 2015.

As a result of execution and free shipping offerings, combined with growth in MercadoPago penetration, we continue to deliver strong performance in our Mexican marketplace.

Mexican units sold accelerated for the fifth consecutive quarter to a multi-year high of 47% year-on-year, up from 15% a year ago, and almost 32 percentage points above its four-year compounded annual growth rate.

On an FX neutral basis, GMV growth continues to grow very well, accelerating for the fifth consecutive quarter to 25% year-on-year, a 20% improvement versus last year, and the fastest pace of growth in the last three years.

Although we remain confident that the long-term benefits of our decision to make the adoption of MercadoPago mandatory on all listings in Argentina is the right one, conversion rates in that market have continued to be negatively affected during the last quarter of 2016 by the decision, partially explaining the slowdown that we have seen in growth rates for that market.

I am also pleased to report of the ongoing development and expansion our vertical experiences across different product categories.

Categories like home and outdoor, fashion and apparel and auto parts continued to steadily grow their contribution to total GMV at the expense of our historically over-indexed category, consumer electronics, that now accounts for 42% of GMV and only 18% of listings.

Unique buyers as well as repeat buyers keep displaying robust growth rates across most markets, with the first group growing over 20% for the fourth consecutive quarter, and 10 percentage points higher than a year ago.

Brazil was a highlight here as unique buyers grew at a multiyear high of 43% year-over-year, the highest growth rate in over three years, and a 32-point improvement versus the fourth quarter of 2015.

As a result, during the fourth quarter of 2016, units sold per buyer in Brazil, one of the metrics we use to measure user engagement has grown almost 40% over the past four years.

This is not only a testament to the success we are having in driving customer loyalty from our buyers, but also the result of the improved user experience we are delivering. Our mobile platform, another key initiative and area of focus for us, continued to make strides over the course of 2016.

Downloads of our native app reached slightly above 52 million, representing 16% of total Internet users in Latin America. Additionally, mobile is the largest contributor of new users to our platform as new registrations from either mobile web or native apps represent close to two-thirds of new users registering on MercadoLibre today.

During the quarter, mobile GMV grew 99% year-on-year on an FX neutral basis, representing 39% of total GMV, a gain of 10 percentage points versus last year. We continue to drive penetration of MercadoPago in countries beyond Brazil as we remain focused on paving the way to improve transaction quality and frequency across all our markets.

During the fourth quarter, penetration of Pago on our marketplace rose to 78%, up by 23 percentage points when compared to the fourth quarter of 2015. On a country-by-country basis, Argentina led, ascending to 92% and up 32 points from the previous year, while Mexican penetration of our payments solution grew almost 36 percentage points to 86%.

Colombia is picking up nicely as well, as MercadoPago already accounts for 60% of all GMV in that country. Our merchant service business continues to deliver great results as well. During the fourth quarter, total payment volume grew 84% year-on-year on an FX neutral basis.

Revenue growth from merchant services came in at an equally strong (15:38) 91% year-on-year on an FX neutral basis. Shipping usage metrics continue on firm footing as well as we aspire to drive adoption of MercadoEnvíos to levels analogous to that of MercadoPago over time and across all our markets.

In Mexico, adoption of MercadoEnvíos has reached 50% of units sold as a result of the success we have had with the launch of our free shipping and fulfillment initiatives during the second half of 2016. Consequently, within only three months of launch, free shipping accounts for 60% of items shipped in Mexico.

Additionally, we have successfully added FedEx as an additional carrier as we continue strengthening our already compelling shipping value proposition in that market. Colombia was a highlight as well during the quarter.

Within only 18 months of launch, penetration of MercadoEnvíos is at almost 40% in that country, increasing 29 percentage points when compared to the same period in 2015 and the fastest pace of adoption of all markets where the service has been made available.

Argentina in turn is the country where we have made the most inroads in cross-docking inventory and having it delivered from our network's warehouse with nearly one-third of MercadoEnvíos deliveries going through our sortation center.

In line with that, we have been able to regain incremental penetration of our shipping solution in that country, gaining six percentage points on a sequential basis to 32% of all units sold. With that, I've covered quarterly highlights.

All in all, we are moving forward at a steady pace with our initiatives to offer a marketplace where we have more control over transaction flows and can thus deliver a better user experience to our buyers and sellers across all devices, while also delivering solid scale gains in our off-platform FinTech services.

Now, let's take a look at how these operational highlights I have walked you through flow through (18:06) to our financials for the quarter. Net revenue accelerated for the third consecutive quarter to $256 million, a growth rate of 68% year-on-year on an FX neutral basis, and one of our strongest quarters from a top line perspective. In U.S.

dollar, revenues grew 42%, the highest rate of growth in five years. On a country-by-country basis, revenue growth for the quarter, on an FX neutral basis, was as follows. Brazil 64%, Argentina 60%, Mexico 29% affected by classifieds and shipping as I will describe shortly, Colombia 58%, and Chile 31%.

Specifically, on marketplace revenues, the acceleration of unit volumes in Brazil and Mexico were again significant contributors to the strong segment revenue growth during the fourth quarter of 2016.

Consequently, considering strong marketplace growth in those two markets plus Chile and Colombia, consolidated marketplace revenues grew 74% year-on-year on an FX neutral basis. In U.S. dollars, marketplace revenue growth also accelerated at the fastest pace of growth in over two years, coming in at an equally strong 41% year-on-year.

Brazil's performance is worth noting here as well, as marketplace revenues on an FX neutral basis accelerated to 79% year-on-year. This is a 56-point increase versus the same period last year, and the fastest pace of growth in over five years. U.S.

dollar revenues accelerated for the fourth consecutive quarter to 108% year-on-year, also a multiyear high. Non-marketplace revenues also experienced solid growth rates during the quarter. In local currencies, non-marketplace revenues grew 59% and in U.S. dollar revenues accelerated to 43% year-on-year.

The main contributors to this growth story came from the following items. MercadoPago processing revenues accelerated to 91% year-on-year on an FX neutral basis, driven by the solid growth of payment volume outside the marketplace as we onboard more clients and increase the usage of existing one.

Brazil and Mexico lead the way when it comes to off-platform payments growth, as each business continued to grow revenues above 100% on an FX neutral basis. Brazil has grown over 100% on an FX neutral basis for six consecutive quarters now, while Mexico has done so for seven.

Financing revenues accelerated to 43% growth on a FX neutral basis, driven for the most part by the adoption of our credit offerings in Brazil and Argentina.

Lastly, shipping revenues grew 65% year-on-year on an FX neutral basis as the pace of adoption of our shipping solution in Brazil, Mexico, Argentina, Colombia, and Chile continue to penetrate units sold and gross merchandise volume.

Shipping revenues in Brazil grew by 118%, in Argentina by 10%, while in Mexico shipping generated contra-revenues as a consequence of our free shipping offering of $1.2 million, resulting in revenue contraction for shipping in that country.

Shipping revenues in Colombia and Chile are growing at a very fast clip, albeit from a very low base since implementation remains fairly recent in both geographies.

And finally, classified revenues grew 23% on an FX neutral basis, with strong performance in Argentina, which grew 72% offset by a contraction of 29% in Mexico as a consequence of combining the platforms of recently acquired Metros Cúbicos and (22:28) under one single technology in order to gain cost and development efficiencies for the long run.

Moving down our P&L, gross profit grew 38% to $162.7 million. That led to a gross profit margin of 64% of revenues versus 65% a year ago, and 63% in the third quarter of 2016.

The year-on-year margin contraction is attributable to investments in hosting, representing 30 basis points of contraction and 114 basis points of contraction from higher sales due to taxes in the incremental adoption of payments, financing and shipping services, as well as COGS related to the sales of our mobile POS payment devices.

Operating expenses totaled $98.1 million, up 17% from last year's fourth quarter on an as-reported basis. A breakdown of OpEx lines is as follows. Sales and marketing grew 15% year-on-year to $49 million, growing 27 percentage points less than revenues and representing 19% of net revenues, as we invested less in brand marketing this year than last.

Product development expenses also grew less than revenues at 17% year-on-year to $26.3 million, representing 10% of revenues despite having grown the engineering count by 43% head count versus 2015. General and administrative expenses grew 21% year-on-year to $23.2 million, growing 21 points less than revenues and representing 9% of sales.

Consequently, on an as-reported basis, operating income for the quarter was $64.7 million, up 92% versus last year. The low operating income we saw $6.8 million in financial expenses mostly corresponding to the interest accrual on the convertible bond we issued in mid-2014.

Interest income was $10.3 million, up 77% year-on-year explained by higher interest rates on a larger invested base as our MercadoPago stored balances have increased versus the fourth quarter of last year. Our forex line was negative $500,000, down 103% year-on-year as we compare against the forex gains made on U.S.

dollar balances held by our subsidiaries, due for the most part to the currency devaluation that occurred in the fourth quarter of last year in Argentina.

Income tax expenses ascended to $16.3 million during the quarter, yielding a blended tax rate for the period of 24%, mainly due to higher share of pre-tax profits in Argentina and to tax credits in Brazil.

Consequently, as reported, net income came in at $51.3 million or 20% of revenues during the fourth quarter, resulting in a basic net income per common share of $1.16. Purchases of property, equipment, intangible assets and advances for property and equipment, totaled $13 million. For the period ended December 2016, free cash flow was $26.9 million.

Cash, short-term investments and long-term investments at the end of the quarter totaled $641.2 million.

And with that, I'd like to end today's call by saying that MercadoLibre's excellent 2016 results across key operational, financial, and performance metrics reflect the benefits of adding layers of services to our core as we continue to invest in maintaining a leading technology platform that adds value to the transactions it hosts.

We will continue to make sure that during this year, we continue to invest behind our business through product driven innovation with a customer-centric culture across our BUs, while also making sure we strike the right balance between profitability and our long-term focus.

I look forward to keeping you updated over the course of the year in our progress against this strategic vision and our business updates. With that, we can take your questions..

Certainly. Our first question comes from the line of Irma Sgarz from Goldman Sachs. Your question, please..

Yes. Hi. Good afternoon and congratulations on the results.

So, first of all, I wanted to ask about the update on logistics and shipping initiatives in Brazil and you made some helpful comments early on regarding Argentina and Mexico, but I was just curious in terms of where you are at this point in terms of rolling out your own sortation centers and cross-docking merchandise through such sorting centers.

And in that same context with the impending end of the e-Sedex product in Brazil, how will you encourage us to think about the tradeoff between passing that higher cost through to your customers and maintaining profitability and on the other hand maintaining the value proposition for both your sellers and your buyers.

And I think you mentioned early in the call that you're always looking at sort of the rollout of and right rollout of free shipping and subsidized shipping initiatives.

So I was curious how you would think about dealing with this environment sort of how much you think you need to absorb into your own margins and how much you can pass on to your customers? So, I'll leave it at that point and maybe then I have another follow-up. Thanks..

Hi, Irma. So....

Some of you will get us in ....

Sorry, Hi, Irma. So on logistics and shipping in Brazil and more specifically on fulfillment done by us and cross-docking, those initiatives are very important for us this year, but most of that work is still being done in-house. So in Brazil, we have one sortation center, we plan to grow that number over the next few quarters.

And we haven't yet started offering fulfillment services. In Mexico, we do offer fulfillment since last year and that business is scaling. And in Argentina, as we noted, our cross-docking efforts account for about 30% of our shipping units and it's the country where we've advanced the most in terms of sortation.

So Brazil is something that we will be very focused on for the remainder of the year, but still is very, very early stage.

In terms of e-Sedex, I think, in general, what we're trying to accomplish here is how can we manage our cost base as efficiently as possible so as to offer the lowest price shipping and wherever possible free shipping to our users.

So I think ongoing changes in cost that we need to then offset with more scale and better negotiations will be a critical part of how we have to manage the business going forward beyond what might happen in Brazil around the specific removal or non-removal of e-Sedex..

Okay, great.

And if I – if we think about maybe the – how is the initiatives that you're planning to roll out the investments that you're making and these important initiatives in Brazil this year, when we think about that, how it sort of goes through your P&L and your cash flow and how that could be impacting either your margins or your returns, how you – should we think that this could be a near-term source of pressure, but longer term obviously it's an important investment to support the market share and growth or do you think you'll be able to offset that with others which is of cost efficiencies already at the start-out?.

I think what we've learned is that free shipping or low-cost shipping is a fantastic driver of volume and customer management.

And so, it's one area where we're comfortable if we have to invest margin in the short-term, because we really believe that it generates long-term returns in terms of customer loyalty, customer engagement, and just more volume.

And we are more focused right now in continuing to drive top-line and hopefully continue to gain market share as we had this year. So it wouldn't be something that concerns us in terms of managing the financial model if we did see loss of margin as a consequence of being able to offer very efficient from a price perspective shipping to our users..

Okay. Thanks..

Thank you. Our next question comes from the line of Robert Ford from Bank of America Merrill Lynch. Your question, please..

Thank you and good day, everybody, and congratulations on a very impressive quarter. Yeah, I was hoping if you might expand perhaps on the Net Promoter Score improvements in Brazil, and the time lag between side improvements and the acceleration that you've seen in unique buyer and item growth.

And as you roll out those enhancements to new markets, what are you doing, if anything, to speed the process and perhaps accelerate user recognition of those improvements?.

Hi, Bob..

Hey..

So in terms of Net Promoter Scores and improvements, I think the way we've tried to characterize it is as the enhanced marketplace has grown in the different markets, we have seen consistent improvement in our consolidated Net Promoter Scores over time.

And perhaps more importantly, when you break down those Net Promoter Scores by different levels of adoption of the enhanced marketplace, so users who aren't using payments or shipping or credit and then those that are using two of those and then those that are using all three consistently as more services are used, the Net Promoter Scores increased.

As a matter of fact, when we look at the Net Promoter Scores of the full ecosystem, those become almost best-in-class when we benchmark those against competitors.

So it makes sense that as we continue to drive the enhanced marketplace and we continue to focus on all the improvements we're talking about that hopefully we should continue to see that same kind of NPS improvement going forward.

I don't have a specific answer for you what the timeline is, but again, the improvements in NPS have been consistent year-over-year for the last few years. In terms of the other markets, I would say that we moved as fast as we can.

And that obviously as you replicate a lot of these new products or services in new markets, you come with the accumulated learning of having built the technology and the product elsewhere. So for example, when we look at the adoption of shipping in Colombia, it's been extremely fast. If we look at payments in Uruguay, that's been extremely fast.

But I wouldn't necessarily say that there are specifics that we're working on to go faster, we always try to go as fast as we can. And we also recognize that sometimes these things take a little bit longer, we have to iterate on what gets initially rolled out.

And we have confidence that over time, the results begin to follow, we've seen that in Brazil, we've seen that in Mexico and we should see it elsewhere..

That's very helpful. Thank you again..

Thank you. Our next question comes from the line of Marcelo Santos from JPMorgan. Your question, please..

Hi, good evening. Thanks for taking the question. My first question is about mobile, so we're seeing very strong development in that front.

I just wanted to get some color about the profile of the new users that are coming through mobile, if there is different behavior, purchasing behavior, different conversion, so just a little bit more color in there. And the second question would be about your R&D expenditure.

So you say that you're prepared to make even more investments this year, so I just – if you could outline briefly what are the key areas of development and which initiatives are getting most of your engineers' time? No further questions..

Hi, Marcelo. So, in terms of mobile, we haven't really disclosed any significant differences between mobile and non-mobile cohorts. I think when you look at some countries where more than half of the traffic is already mobile, it really is more about the existing user base moving over to mobile by and large.

And I think everything we've seen there is positive. In terms of R&D, just a couple of things. What we were trying to highlight is we have continued to very aggressively invest behind growing our engineering talent pool and the number of engineers, that's really where most of our R&D spend comes from.

We grew that by 43% in terms of head count last year, and despite that we are able to scale the business in large part also aided by FX since a lot of our development centers are in Argentina.

So it was one example of a confluence between positive cost out of Argentina and still being able to meet our growth and investment targets without losing scale.

So I think going forward, the more important thing is to understand that we will continue to invest in more engineering, it continues to be a critical area for us, and then depending, I think, on what happens on a currency front and given the level of revenue growth that we've been delivering that might still scale just because the revenue growth has been very solid.

In terms of areas, it's the things we have been talking about and highlighted in the script. It's a focus on shipping and logistics initiatives.

It's a focus on payments and the different areas of FinTech and credit and payment processing and offline mobile POS solutions for our businesses, customer service, and then continuing to find new avenues of growth on the marketplace..

Okay. Thank you very much..

Thank you. Our next question comes from the line of Stephen Ju from Credit Suisse. Your question, please..

Hi, guys. Congrats on the quarter. It's Chris Hum (38:29) for Stephen.

So I'm curious about the comment you just made about the adoption and penetration of new products and markets, how you've kind of learned from the rollout and other markets and should we think of that as kind of another arrow in the quiver that you guys have against maybe, I mean, from the outside looking in it looks like competition in Mexico has probably intensified over the last year, but yet you guys put up items acceleration there.

So as you roll out these new products to the markets where it may be more competitive on the ground, should we think that sort of another way for you to execute through it?.

Hi. So, when we look at many of the areas that we think are driving the improved user experience like payments or logistics, more so than the traditional marketplace business, those have significant tie-ins to local players.

So for each country that you operate in, you need to be plugged into the existing financial services system for payment, different banks, different funding sources, different credit sources.

When you look at logistics for each different market in the region, you need to find multiple logistics providers where it be warehouse providers or shipping companies and you need to integrate your marketplace with their systems.

So there is a lot of building of pipelines with the different ecosystem players that comprise our overall service offering that we do believe become a competitive advantage over time. We always say Latin American is a huge market, but it's not a single market like Europe might be.

And so you need to replicate this market-by-market and it's something that we've been doing over the last multiple years and any new entrant would have to build from scratch. So, yes, I do think it's a very relevant piece of the competitive mode that we're trying to build..

Okay. Thanks, guys..

Thank you. Our next question comes from the line of Brad Erickson for Pacific Crest Securities. Your question, please..

Yeah. Hi. Thanks for taking my questions.

I guess, to start given what you're finding thus far with the free shipping in Mexico, how should we handicap the likelihood that, that could become a strategy at some point in either Brazil and/or Argentina, and I guess would competition be the biggest determinant of that strategy and how should we be thinking about that?.

So, as you know, we don't offer guidance going forward, but I think we've been quite clear about the fact that we see very positive results out of offering either subsidized or free shipping and it's giving us very solid results in terms of Mexico.

And so we will look to see how we can replicate that in other markets hopefully getting similar results to the ones we're seeing in Mexico.

Like I said to the answering the first question, I think going forward for us, clearly shipping is a key component of the value proposition that we want to build and we will have to be able to find the right balance between managing cost and offering those service to our users. So, yes, you should expect that to get offered in more countries..

Got it.

And then second, you mentioned the pullback in brand marketing spending that led to some of the leverage during 2016, given where you are growth wise meaning very, very high levels obviously, how are you viewing sort of general ad spending that drive further growth or do you feel comfortable of where you're at that the growth is more sustainable amid, say, lower sales and marketing spending levels? Thanks..

So, historically, we've focused more and we believe there is more long-term value to create from focusing on product and user experience, which doesn't mean that we won't continue to invest behind the brand and at the rate that our revenues are growing even if you're investing similar levels as a percentage of revenue, that's a significant increase in the marketing budget from one year to the next.

So, I think we're comfortable with the marketing budget we have in terms of user acquisition that might vary for some of the newer products we have and it's something that we look at in a fluid manner.

But we don't have a sense that we're under-investing in marketing and we feel that there are many other areas where we can invest in that might have a more significant impact on our users..

Got it. Great. Thanks..

Thank you. Our next question comes from the line of Tom Champion from Cowen. Your question, please..

Hi. Good afternoon.

Relative to the marketplace business in Argentina, can you talk a little bit about the user and merchant experience improvements since moving to mandatory MercadoPago payments? And then, I'm curious if you could maybe just talk a little bit about the off-platform opportunity for Pago, and maybe your thoughts on the proliferation of POS devices as a driver? Thank you..

Hi. This is Osvaldo (44:10). Let me start with the MPOS question. We have been in the business in Brazil for 18 months now and it's growing very nicely. There is strong competition, but I think we have a very strong value prop. And we are very excited with the results we are seeing.

And in the second half of last year, we launched both in Mexico and in Argentina, it's still too early to have results. I would say the market is more competitive in Mexico where there are several players, and Argentina is just past and they acquired (44:46) for business. So, it's a profile with only two competitors.

With the (44:52) problem, we are very excited with how MPOS is adding to (44:58) in Brazil and we expect to replicate the same in Argentina and Mexico..

Great. And then, in terms of mandatory adoption of payments in Argentina, as we highlighted, our Argentine business has slowed a little bit. There were other factors also that might have influenced that and we had some issues with the strike with some of our logistics providers last quarter.

So no reassessment of the long-term importance of having compulsory Pago and I think we need to continue to focus to see how we can reignite growth in our Argentine business, but we actually think like I said before that just like in the other markets, integrating payments on all marketplace purchases is very good for the user experience and will generate improved velocity of trade over the long run..

Thank you..

Thank you. And our next question comes from the line of Richard Cathcart from Bradesco. Your question, please..

Hi, guys, good evening. I just wanted to pick up on the question that Irma made at the beginning of the call.

And you said that you got one sortation center already up and running in Brazil and I was just wondering if you could give us a bit more information on the results of that and what you've learned so far, are you getting practical (46:33) to consumers faster, as cheaper.

And then just the second point just on the fulfillment centers perhaps you could give us a bit more detail on when exactly you expect that to be up and running. And kind of how old the negotiations have gone with selecting the warehouse providers (46:50) logistics providers to that fulfillment center as well? Thanks very much..

Great. So, in terms of results, I think the one sortation center we have represents a small overall volume of our shipping in Brazil, low single-digits.

More importantly, it's allowed us to focus that operation around building the TMS, the transportation management systems, and the warehouse management systems that we believe will be core assets and so we're building those in-house.

Now that we have the transportation management system up and running, we're able to start deploying that across more sortation centers and eventually with the warehouse management systems finished, we can start the fulfillment offering as well.

We haven't communicated or signaled any specific date as to when that will happen, but they are ongoing projects. And yes, the endgame of that is certainly that we should be able to deliver faster shipping and also over time cheaper shipping because it allows us to optimize different routes and to break up first mile long haul and last mile.

So we believe that both fulfillment and sortation will be very strong complements to the existing drop shipping solution that we have in Brazil..

Okay. Thanks very much..

Thank you. And this does conclude the question-and-answer session of today's program. I'd like to hand the program back over to Federico Sander for any further remarks..

Great. So, thanks everyone for listening in. For us, it's back to work, lots to do in 2017 and we look forward to updating you again next quarter. Thank you..

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day..