Osvaldo Gimenez: So, there were two components to the increase in early delinquencies. On the one hand, as you mentioned, we have been taking more risk going to riskier segments. And the reason we are doing that is because our models are better at forecasting risk and rightly evaluating the risk of each user. And therefore, we are also pricing this accordingly. And so even though there are higher NPL, these credits have been priced with an adequate spread. So, it’s not a source of concern there. And the other factor that happened was the last week of March, the last week of the quarter ended with four days that were either weekend or holidays. And therefore, collections were typically lower than typical. Because in the last four days of the month, there was an invoice that we had been due in those days, that was passed over to the following months and there was a small effect for the fact that Good Friday and Good Thursday were the last two nonworking days of the month.
Neha Agarwala: If I can ask another question. When I look at your average interest rate and this is excluding the increase in provisions, there has been a drop of about 800 basis points quarter-on-quarter on the average interest rate for your loan book. I understand part of that is probably driven by the expansion in the credit card portfolio. But given the fact that you’re moving into riskier cohorts, which are priced accordingly, why such a sharp decline quarter-on-quarter? Thank you.
Martin de los Santos: Hi, Neha Agarwala. It’s Martin here. I think — well firstly, when we compare year-on-year, the NIMAL margins I think is what you’re referring to is improving despite the fact that we have a larger share of credit cards, which as you know is lower NIMAL product. On a sequential basis, typically Q1 — actually let’s put the way, Q4 tends to be a good quarter for credits, because of a very strong collections, because of the 13 months in the quarter — in the year. So, Q4 is a good month for collection. Q3 is seasonally a lower month for collections. So that’s normal. It’s something that is expected. In addition to two other things happening. Speed in terms of growth of our credit card portfolio is also contributing to that, and also the fact that we accelerated originations of other products and that generates more provisions upfront.
Remember, we provision 100% of the losses upfront when we originate. So we have a Q like Q1, where we accelerated sequentially originations that tends to put pressure on margin. Like Osvaldo mentioned, there’s nothing to worry about. We continue to have very strong EBIT margin, the NIMAL margin at 31.5 percentage points. So it’s something that is under control and as expected.
Neha Agarwala: Yes. Outlook on the credit business changed or modified slightly in the last month given that we are now looking at probably a higher for longer kind of rate scenario in both Brazil and Mexico?
Martin de los Santos: Sorry, Neha, could you repeat the question, please?
Neha Agarwala: With your outlook in terms of picking up in originations in both Brazil and Mexico, has that changed over the last month given that we are probably now looking for a higher for longer rate scenario in both countries?
Martin de los Santos : No, it hasn’t. We continue to have the same strategy as we have in the past, which is to continue to cautiously increase our credit book as we feel more confident in terms of our underwriting capabilities, as Osvaldo mentioned. And then also, we are focusing a lot on growing our credit card, which is a critical product for or fintech strategy because it has all — many benefits in addition to the credit card, users that pick on — start using the credit card, use most of our other fintech products to bring their salaries into our account. They might take a loan, they might get insurance, and start using the debit card and so on. So it’s an important part of our strategy.
Osvaldo Gimenez : With regards to interest rates being a little bit higher, expectations then being higher — as I — relatively very small factor when compared to the spreads we have.
Martin de los Santos : Just to complement that, the fact that our loans are typically short maturity allow us to adjust very rapidly to changing interest environment, so.
Neha Agarwala: Perfect. Thank you so much. Very helpful.
Operator: One moment for our next question. Our next question comes from Maria Clara Infantozzi with Itau BBA
Maria Clara Infantozzi: Hi. Good evening. Thanks for taking my question. I wanted to explore the potential of monetization of logistics services ahead given that you showed consistent improvement in the average speed of delivery and also accelerated penetration for another quarter. So does the company intend to start being more vocal on charging for the procurement services. How far are we from such a scenario? Thank you.
Ariel Szarfsztejn: Hi, Maria Clara, Ariel here. Thanks for your question. I think there’s no change in strategy for us. As we’ve been saying over the last few quarters, we know that there’s an opportunity in the long run to increase our monetization on our shipping infrastructure. For now, we remain focused on a, capturing the most out of the efficiencies potential that we have, which means continue driving productivity gains and reducing costs; b, I would say, getting sellers to operate with our network, particularly continue improving our fulfillment penetration, which has been going up consistently and three, being disciplined regarding passing through inflation increases. But we know we have another lever for the longer term as to continue monetizing. We just don’t think it’s the right time.
Maria Clara Infantozzi: Great. Thank you.
Operator: One moment for our next question. Our next question comes from Marvin Fong with BTIG.
Marvin Fong: Hi. Good evening. Thanks for taking my questions and congratulations on 25 years. So a couple of questions. I’d like to get a little more detail on origination side. I believe it was about the same growth rate as last quarter in dollar terms. But just curious if how much Argentina factored into that. So perhaps you can give us some detail by country. Like how originations performed, did accelerate versus last quarter? And then second question, just on MELI Delivery Days. I believe you gave us some disclosure about how many of your shipments are generated by that channel. Just curious if you could give us an idea, is that all a significant money favor for you guys? Or is it really just designed to kind of lower stress on the network, but it’s not particularly saving on cost. And additionally, just maybe some idea of where that percentage can go over time? Thanks.
Osvaldo Gimenez : Hi, Marvin, in terms of origination, most of the acceleration is coming from Brazil, where we are very comfortable with how our models are performing, and we see increased demand for loans. In Argentina, we continue to be cautious. We have accelerated versus last quarter — we have grown versus last quarter, but we are at a rate, which is significantly low in dollar terms significantly, lower than what it was prior to the elections. And in Mexico, we are growing on a year-on-year basis, but the origination was similar to that of prior quarter.
Martin de los Santos: And I would add to that that we had a devaluation in the middle. So that also affects the growth rates in Argentina, when you compare year-on-year basis. But we’ll continue to have a very healthy book in Argentina, is probably the lowest NPLs on our regions [ph] but we are cautious as Osvaldo mentioned.
Ariel Szarfsztejn: Hey, Marvin, Ariel here. Regarding MELI Delivery Day I think for the first time in our investor presentation, we have provided you with some details on slow shipment share. So you can see that — more than 5% of our shipments were delivered with a slow method. Most of which is coming from MELI Delivery Day, which basically means that we saw a good adoption of MDD whenever buyers were using the Meli Más offering to get free shipping in low ASP items. To your question on economics, I think we are seeing savings coming from that delivery model as more and more we can consolidate items in the same box and the same delivery route, but still we think that there’s ample room for the program to continue scaling and driving costs down even more, through more density in routes, more items per box or even incremental transactions that could be delivered in the same delivery as well.
So, good progress so far. We are excited with the results that we’ve seen, but the opportunity there is also relevant.
Marvin Fong: Thanks so much. Appreciate it, everyone.
Operator: One moment for our next question. Our next question comes from Craig Maurer with FT Partners.
Q – Craig Maurer: Yes. Hi. Thanks for taking the question. Happy anniversary. I wanted to ask about the ad penetration rate that moved up from 1.6% to 1.9%. Was this related to the GMV coming down Argentina? Or was this an actual improvement in adoption? Thanks.
Ariel Szarfsztejn: Hi, Craig. Ariel, here again. So we had a very strong quarter in ad. As you said, penetration went up 30 basis points Q-on-Q and revenues grew 64% in dollars year-over-year almost 100% in constant currency. I think the increase in penetration is definitely not coming only from Argentina. We saw a consistent increase in penetration, across every country and Mexico actually presented the highest growth both in terms of dollars, and in terms of revenues as a percentage of GMV. So overall, excited what happened this quarter and more importantly, convinced that the opportunity we have in front of us remains to be big and we have many levers to continue capturing that.
Q – Craig Maurer: Can you just remind, if there’s any seasonality in that number that we should be watching out for?
Ariel Szarfsztejn: No, we don’t think there’s a specific reason, on seasonality. We made several product improvements both in terms of the algorithms that we use for the bidding processes, we made changes in our placements in our sales results. So many moving parts that did help us get some acceleration there.
