Feb 25, 2016
Executives
Martin de los Santos - Senior Vice President-Finance & Corporate Development Pedro Arnt - Chief Financial Officer Osvaldo Giménez - Executive Vice President - MercadoPago, Payments
Analysts
James Friedman - Susquehanna Financial Group LLLP Ross Sandler - Deutsche Bank Securities, Inc. Eugene Charles Munster - Piper Jaffray & Co (Broker) Michel Morin - Morgan Stanley & Co.
LLC Marcelo Santos - JPMorgan CCVM SA Richard Cathcart - HSBC Corretora de Títulos e Valores Mobiliários SA Bo Yang - Credit Suisse Securities (USA) LLC (Broker)
Martin de los Santos - Senior Vice President-Finance & Corporate Development
Hello everyone, and welcome to the MercadoLibre Earnings Conference Call for the Quarter Ended December 31, 2015. I am Martin de los Santos, Senior Vice President of Finance and Head of Investor Relations for MercadoLibre.
Our senior manager presenting today is Pedro Arnt, Chief Financial Officer. Additionally, Marcos Galperín, Chief Executive Officer; and Osvaldo Gimenez, Executive Vice President of Payments will be available in today's Q&A session.
This conference call is also being broadcast over the Internet and is available through the Investor Relations section of our website. I remind you that management may make forward-looking statements related to such matters as continued growth prospects for the company, industry trends and products and technology initiatives.
These statements are based on currently available information and 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 those forward-looking statements.
And 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 on our Investor Relations website. Finally, I would like to remind you that during the course of this conference call, we might discuss some non-GAAP measures.
A reconciliation of those measures to the nearest comparable GAAP measures can be found in our fourth quarter 2015 earnings press release available on our Investor Relations website. Now, let me turn the call over to Pedro.
Pedro Arnt - Chief Financial Officer
Thanks, Martin. Welcome everyone to our fourth quarter results conference call for the 2015 fiscal year.
I'd like to kick off the call by saying that in our view, 2015 was one of the strongest years ever in terms of the steps made towards executing the strategic vision we set forth for the company. We exited the year on a favorable trajectory across nearly all our major initiatives, allowing us to not only wrap up a great 2015 but also giving us confidence that we can continue to execute well and make progress on multiple fronts during 2016.
Our Marketplace business with its growing service offerings in logistics, payments, credit and Advertising ended the year with greater vibrancy than it entered it, with strong user engagement metrics in GMV and items sold growth, as well as an acceleration in the number of buyers, sellers and listing count. Execution on MercadoPago's financial technology offerings continue to exceed our expectations with marketplace adoption of payments having reached the stated goal of full addressable penetration in Brazil while also delivering consistently improving rates of adoption across the rest of our geographies.
Our platform merchant service business continues to show strong results with revenues growing at triple digits for the third consecutive quarter when measured in local currencies. Additionally, our financing business unit continues to grow and reach a scale that encourages us to accelerate the pace of innovation and focus on the segment.
And while these core MercadoPago offerings continue to grow, we have also been seeding new opportunities such as our mobile wallets and mobile POS solutions, all of these we believe can be significantly large opportunities. Our shipping solution, MercadoEnvios, took advantage of the last year to lay a firm foundation for all our future efforts in shipping and fulfillment.
Over the last year, we have built MercadoEnvios into a business with the pieces in place to transform logistics into an important value proposition for our user base in the geographies where we have made MercadoEnvios operational. And finally, it's also worth noting the rapid growth of our Advertising business unit during 2015.
The overall execution accompanied by successful launches of new ad formats across our main geographies are delivering strong results that increasingly contribute to our top-line. As we head into 2016 and beyond, we will remain focused on the sustained growth of these strategic initiatives.
We plan to achieve this through the application of a disciplined investment approach that will lay the foundations for our long-term growth in a sustainable manner. Such investment approach involves deploying more capital than in the past behind the initiatives within our ecosystem that we deem to be both critical to our users and where we have evidence that we are succeeding.
These primarily include; continuing to drive the penetration of our payments, shipping and financing solutions as strategic facilitators of e-commerce both on and off our platforms in all our markets, persistent development of our mobile product offering, category-specific verticalization capabilities so as to continue to gain share of wallet from customers transacting on our platform with particular emphasis on this front continuing to go to our classifieds verticals in motors and real estate, continuing to expand and develop our relationships with large retail brands in order to serve as strategic partners in their omni-channel strategies while also continuing to cater to small and medium sized businesses as well as individual sellers effectively allowing us to provide compelling transactional technology solutions to all merchants regardless of their size, and finally, delivering a consistently improving user experience through the development of new functionalities, features and services that meet the needs of our users through investments in technology, product development and customer experience. The success we have already seen across these fronts makes us optimistic about the long-term growth prospects of our business.
The buy-in for the aforementioned initiatives by our user base also increases our commitment to invest in them during 2016 with a midterm return outlook. We feel confident that we are allocating capital in the right places in order to generate long-term value and feel that the opportunities for growth that Latin America offers justifies this disciplined, yet rapidly increasing investment approach we have been taking.
I'd like to now take a step back and briefly look at some of the full year business metrics so as to review the progress we have made during the past four quarters of the year. Throughout 2015, successful items grew 27% reaching 128 million, Gross Merchandise Volume rose 81% in local currencies reaching $7.2 billion, Total Payment Transactions grew 74% to $80.4 million while Total Payment Volume grew 100% in local currencies, reaching $5.2 billion representing over 70% of our Gross Merchandise Volume for the year, and registered users were up 20% year-over-year, reaching 145 million after adding 23.7 million new users during 2015.
The solid operational highlights I have just listed are a testament to the effective execution of our initiatives and prove that the strong secular tailwinds in e-commerce serve as growth drivers as well as a powerful counterbalance to the cyclical macro headwinds we are facing. Case in point, local currency top-line grew 80% year-over-year.
Excluding our Venezuelan operations, revenue growth came in at an equally solid 57% year-on-year in local currencies. So despite strong currency devaluations, revenues in U.S.
dollars still grew at a healthy 17% year-on-year. Excluding our Venezuelan operations, revenues in U.S.
dollars grew at 23%. To give some perspective on this, when compared to the fourth quarter of 2014, the Brazilian real has weakened by 34%, the Argentine peso by 16%, the Mexican peso by 17% and the Venezuelan bolívar by 75%.
Now, let's take a closer look at the key initiatives and quarterly results by business units starting with our Marketplace BU. Our Marketplace BU continues to show its resiliency.
Units sold sustained high growth rates on a consolidated basis, growing at 27% year-on-year. In Argentina, units sold grew nearly 60%.
Brazilian units sold also accelerated to a healthy rate of 22% year-over-year, while in Mexico, units also accelerated sequentially to 15% year-on-year. When looking at Gross Merchandise Volume figures, the results were equally encouraging.
During the fourth quarter, we continued to experience the positive trends seen in the third quarter with Gross Merchandise Volume growing in dollars at 12% year-on-year, while in constant currencies it grew 86% for total MercadoLibre and 45% excluding our Venezuelan operations. Brazilian GMV trends were particularly strong, accelerating sequentially in local currency during the quarter to 33% year-on-year.
User engagement metrics within our ecosystem confirmed that our efforts and investments behind user experience improvements, category diversification, and customer service continue to pay off when it comes to stimulating demand and providing vibrancy across our marketplaces. Unique buyers as well as repeat buyers keep displaying robust growth rates across all our geographies, with the first group growing close to 20% year-on-year while repeat buyers keep growing at an even faster clip.
It's no coincidence that live listings and successful items per buyer have continued to accelerate for eight consecutive quarters as this can be interpreted as further proof that the improved experience being offered to our user base is resulting in greater customer loyalty. Continuing with our Marketplace business unit, our Official Stores efforts continue to evolve positively as it not only enhances the selection and quality of products available on our ecosystem, but also brings improved brand equity to MercadoLibre.
As of the end of the fourth quarter, we had 1,580 Official Stores versus 545 a year ago, a clear indicator that we are able to successfully on-board all types of sellers on our platform regardless of their breadth and size. Although the percentage of GMV coming from Official Stores is still in the single digits on a consolidated basis, performance continues to pick up as GMV from this initiative increased by a factor of two this year alone.
Commercial dates such as Black Friday and Cyber Monday were strong contributors for this improvement as we get better and better at merchandising the listings for sale on our platforms. Mobile is another key avenue for growth and investment for us as we continue to transition from a desktop-centric to a multi device ecosystem.
Penetration of mobile GMV on our platform continues to grow, as well as the amount of successful items sold through such devices, as both operational metrics grew sequentially for the fourth consecutive quarter across all our markets. New registrations through mobile grew at a healthy pace as an ever increasing amount of users transact with our platform through multiple devices other than desktops.
And finally, during the fourth quarter, we also successfully completed the roll out of marketplaces in three new geographies; Bolivia, Paraguay and Guatemala, thus laying the initial groundwork for future expansion beyond the major markets in the region. Moving on to our payments platform, MercadoPago, it also performed well across our main markets both in terms of payment volume and the number of transactions processed during the quarter.
We are very satisfied with the shape our payments business is taking. MercadoPago is not only a powerful tool to reduce friction and increase engagement within our ecosystem, but also is increasingly being adopted by merchants who conduct e-commerce outside our marketplace through our merchant service offerings.
For the last quarter of 2015, Total Payment Volume on our platform measured in local currencies grew 91% year-on-year, while in U.S. dollars Total Payment Volume on our platform grew at an equally healthy 34% year-on-year.
Mexico, Colombia and Chile each saw over 10 percentage points of on-platform penetration growth during the quarter. We remain convinced that our focus on aggressively encouraging transactions that use our payment solution is resonating well with users who increasingly view us as offering a safe, frictionless, and trusted manner of transacting online.
As a result, penetration of MercadoPago as a percentage of GMV on our Marketplace continues to make significant strides, as it reached the highest penetration ever this quarter, 61% versus 50% during the fourth quarter of 2014. On the financing front, we have also continued to make significant advances when it comes to adoption of our interest-free financing offering.
In Mexico, roughly a quarter of all GMV is being done at zero cost credit plans. In line with that, taking into consideration that our free financing offering was recently launched in November in Argentina, we are pleased to report that adoption is picking up nicely as we exit the quarter.
And in Brazil, the earliest market to launch, the product is at half of all Gross Merchandise Volume in that country. Our merchant service business also continues to fire on all cylinders.
2015 has seen key milestones for us as our platform payments business processed over $1 billion in payment volume outside of our Marketplace for the first time ever. Off-platform payments processing is one of the fastest growing segments within MELI.
Exiting the quarter, off-platform Total Payment Volume grew on a consolidated basis over 120% year-on-year in constant currency, while in U.S. dollars Total Payment Volume grew 78% year-on-year.
These are remarkable figures which confirm our thesis that the off-platform payments business could become many times larger than our Marketplace business given the size of its addressable market in addition to being a conduit to cross-sell additional e-commerce solutions already offered in our Marketplace such as financing and Shipping. On the mobile payments front, we are pleased to report that we saw an encouraging result in our peer-to-peer transfer products as well as in adoption of mobile POS systems by merchants.
Our Shipping initiatives keep contributing important synergies to our enhanced Marketplace strategy, and play an ever-important role in growing our ecosystem's engagement metrics. MercadoEnvios was one of the highlights of the quarter as it continues to consolidate on our platform with items shipped growing at 150% year-on-year to 15 million units.
Adoption of MercadoEnvios has performed well above expectations across all markets, with close to 70% of units shipped in Brazil. Considering only the countries where MercadoEnvios is available, approximately half of all items shipped on our platform are done through our shipping solution.
In particular, it's worth taking a second to highlight the swift rate of adoption that MercadoEnvios is achieving in Colombia and in Mexico. Our efforts to increase the quality of our shipping offerings so as to shorten delivery times also continued to advance on firm ground, as we have successfully launched cross-stocking initiatives in Buenos Aires to complement the existing operation in São Paulo.
We are currently operating sortation centers with encouraging results, as the percentage of shipments that pass through these centers are growing at a quick pace as we continue to scale the business for the long-term, cross-stocking will become an important piece of our Shipping and logistics strategy as it is a tool to maximize value to our users as well as a contributor to providing the best prices and service quality to our customers. We are also looking to expand MercadoEnvios to off-platform merchants across our geographies as we believe that the addressable market for our shipping solution is very large.
There are already select merchants using MercadoEnvios for non-MercadoLibre sales in pilot cases. Continuing with our advertising efforts, we remain enthusiastic in regards to what we have done and developed out of this business unit.
Product ads and ad placements on search results have continued to deliver not only by providing additional ad revenue streams without negatively affecting conversion, but also by demonstrating they are superior advertising products that deliver better click-through rates for advertisers, all this in addition to being native formats which also performed very well on mobile devices. In local currency, Advertising revenue grew north of 140% year-on-year while in U.S.
dollar revenues, they grew at an equally healthy 60% year-on-year. Our classifieds business keeps making strides as it transitions into a freemium monetization model that charges listing fees mainly to dealers and realtors as the for-sale by owner category has become primarily free of charge.
In line with our change in monetization strategy and as a result of the success of our strategic acquisitions in Chile and Mexico, KPIs from this BU are once again moving in the right direction as revenues from professional sellers grew 35% year-on-year in local currencies while the number of active professional realtors and dealers engaging with our platform, as well as live listings keep delivering encouraging results. Finally, one last thing on customer satisfaction.
2015 was another great year for us as we have executed well on the customer service front. During the fourth quarter, we experienced the 10th consecutive quarter of increases in net promoter scores and 20 percentage point improvement when compared to where our NPS was during the same period of 2014.
With that, I've covered the key initiatives that serve as the foundations of our enhanced Marketplace vision and long-term strategy; Marketplace, payments, financing, Shipping, Official Stores, Advertising and classifieds. As I have described through our strong performance metrics, there is abundant room for further growth as we continue to firmly penetrate our strategic initiatives across our geographies and even more so, as we continue to make a solid footing outside of our largest market, Brazil.
Moving on, I'd now like to review financial results for the quarter. As always, growth rates are year-on-year unless I specify otherwise.
For the fourth quarter of 2015, net revenues came in at $180.7 million, a 12% growth in dollars and 69% FX adjusted. Excluding Venezuela, net revenues grew 51% FX adjusted.
Income from operations was $33.7 million, decreasing by 26% in U.S. dollars, but growing by 11% in constant currencies and 1% in constant currencies, if we exclude Venezuela.
Net income before income and asset tax expenses was $53 million, increasing 6% in U.S. dollars and growing 52% in constant currencies.
Net income came in at $39 million, growing 14% in U.S. dollars and 38% in local currencies or 72% in local currencies excluding Venezuela, all this resulting in earnings per share of $0.88.
During the fourth quarter, we continued to experience healthy growth rates in Marketplace revenues. When measured in local currencies, Marketplace revenues grew 63% as GMV growth in local currencies accelerated to 86% and items sold accelerated to 27% versus last year on a consolidated basis.
Argentina in particular posted strong results in underlying metrics, with items sold growing at 58%. This is the third consecutive quarter of items sold growth in that country.
This also drove Marketplace revenue growth of 69% in Argentina and 77% GMV growth in local currency. On a consolidated basis, in U.S.
dollars Marketplace revenue from this business grew 2% as a result of currency headwinds. Excluding Venezuela, marketplace top-line growth was 36% in local currencies and 3% in U.S.
dollars driven by the growth of Brazil of 23% and Argentina of 70%. Moreover, as our service layovers keep penetrating our GMV, non-Marketplace revenue growth continues to outpace Marketplace revenue growth rates across our geographies.
During the fourth quarter, non-Marketplace revenues experienced local currency growth rates of 79% year-on-year while in U.S. dollar, revenues grew at an equally robust rate of 30% despite FX headwinds.
This mix shift in revenue streams from Marketplace to non-Marketplace have been an indicator that things are moving in the right direction for us, as it validates the success we continue to have in executing our enhanced Marketplace vision. Adding service layers such as financing and Shipping to our Marketplace as well as processing payments outside our platform, just to name a few initiatives, is not only generating incremental take rate and improving our top-line results but also allowing us to monetize more per user and maximize customer engagement within our platform.
In order of relevance, the main contributors to the growth story of this revenue segment came from: our merchant service business which continues to deliver strong results as it's the third consecutive quarter of uninterrupted year-on-year growth at 100% in local currencies, greater number of clients being on-boarded as well as an increase in usage of MercadoPago in existing off-platform merchants explain such high growth rates. Brazil and Mexico lead the way when it comes to off-platform payments growth as each business continued to accelerate revenue sequentially and grew over 150% year-on-year in local currencies.
Financing revenues grew 57% in local currencies, driven for the most part by the adoption of our interest-free listing combo in Mexico and Brazil. Additionally, adoption of our interest-free listing type in Argentina launched late in the fourth quarter has shown good advances as it penetrates our platform growing at a fast rate, albeit from a very low base since full implementation remains fairly recent.
And last, Shipping and Advertising revenues continued to consolidate as one of the fastest growing segments to our revenues as the pace of adoption of the aforementioned solutions continued to gain traction and steadily penetrate our geographies. On the classifieds front, revenue contribution to our top-line continues to grow at a steady pace as we keep improving the monetization of our most profitable segment, professional sellers.
The combined efforts of the factors mentioned above resulted in solid total revenue growth on a consolidated basis accelerating sequentially to 69% year-on-year in local currency. Excluding Venezuela, that revenue growth came in at an equally robust 51%.
Total top-line growth in local currencies in our largest markets broke down as follows. Brazil 42%, Argentina 80%, Mexico 29% and 272% for Venezuela.
Consolidated revenue growth in U.S. dollars was a healthy 12% and excluding Venezuela was 14%.
Moving on, let's now take a look at our bottom-line results and margin structures as we do every quarter. Gross profit grew 3% year-over-year during the fourth quarter to $117.6 million.
Gross profit margin was 65.1% of revenues versus 70.5% in the fourth quarter of 2014 and 66.3% in the third quarter of 2015. As MercadoPago and MercadoEnvios continue to grow payment volume and gain share of MELI revenues, the incremental impact of payment processing fees and sales taxes associated with these businesses explained, for the most part, the margin contraction.
Of the 541 basis points of contraction, 172 are attributable to currency fluctuations and the rest can primarily be attributed to the just mentioned mix shift. Operating expenses grew 23% year-on-year reaching $83.9 million and representing 46.4% of revenues versus 42.4% in the same quarter last year and 39.5% during the third quarter.
Of these 398 basis points of margin decline, an estimated 358 basis points can be attributed to currency devaluations. I will now break down OpEx growth for you.
Sales and marketing grew 26% year-on-year to $42.2 million or 23.3% of revenues versus 20.7% for the same period last year and 18.5% last quarter. The 263 basis points of margin contraction were mainly driven by costs related to increases in salaries and wages to our Buyer Protection Program and fraud-prevention related charges since these last two are essential trust retention mechanisms we offer buyers and sellers on our platform.
These effects were somewhat offset by scale improvements in bad debt expenses due to the continued increase of MercadoPago penetration. Product development expenses grew 40% to $22.5 million, representing 12.4% of revenue during the fourth quarter versus 9.9% in the same period last year and 10.1% in the third quarter of 2015.
Growth in costs reflect increases in compensation from salaries and wages resulting from continuing investments in our product development talent pool which grew 33% versus last year in head count and incremental costs from software maintenance and licenses. General and administrative expenses increased 1% year-over-year to $19.2 million, representing 10.6% of revenues versus 11.8% a year ago and 10.9% during the third quarter of 2015.
The 117 basis points of scale was driven mainly by a reduction in long-term retention plan accruals, which were partially offset by higher fees for outside services. As a result of these COGS, operational expenses and currency devaluations, operating income for the quarter was $33.7 million or 18.6% of revenues versus 28% in the fourth quarter of 2014 and 26.8% last quarter.
Below operating income, we saw $4.2 million in financial expenses, mostly corresponding to interest accrual on our convertible bond issued in 2014. Further down, interest income was $5.8 million dollars, up 33% year-on-year.
Most importantly, we saw a $17.8 million gain in our forex line explained by the appreciation of U.S. dollar balances held by our subsidiaries, mainly due to currency devaluation in Argentina in December of 2015.
Consequently, net income before taxes totaled $53 million, up 6% year-over-year and representing 29.3% of revenues versus 31% during the fourth quarter of last year. Income tax expense was $14.1 million during the fourth quarter.
The blended tax rate for the period was 26.5%, down from 31.6% in the fourth quarter of 2014, explained by the reinstated tax benefit from the software development law we are beneficiaries of in Argentina. Net income after all this came in at $39 million, or 21.6% of revenues versus 21.2% in the fourth quarter of 2014.
This resulted in a basic net income per common share of $0.88 versus $0.76 in the same period last year. Purchases of property, equipment, intangible assets and advances for property and equipment net of financial liabilities during the quarter totaled $25.9 million.
For the period ended December 2015, free cash flow defined as cash from operating activities less payments for the acquisition of property, equipment, intangible assets, advances for property and equipment, net of financial liabilities was $84.2 million versus $39.4 million in the same period last year. Cash, short-term investments and long-term investments at the end of the quarter totaled $556.6 million.
Wrapping up, we declared our quarterly dividend of $6.6 million, or $0.15 per share payable on April 15, 2016 to shareholders of record as of the close of business on March 31, 2016. This concludes our financial review as we exit the last quarter of 2015, a record year for us in terms of the pace of execution and adoption of our enhanced Marketplace vision.
Our focus will be centered on continuing to execute and invest behind our strategic initiatives in order to scale our business for the long-term while delivering solid top line growth, creating value for our users, and preserving a balance of profitability and investment in the business. As we delve into our 2016 plan and beyond, we remain constant in our belief that product-driven innovation and a customer-centric culture across our BUs will be the cornerstones of our quest to offer users a consistently improving user experience that meets their needs when it comes to trading online.
We look forward as always to keep you updated over the next few quarters on our progress. And with that, we will take your questions.
Thank you.
Operator
Our first question is from James Friedman of Susquehanna. Your line is open.
James Friedman - Susquehanna Financial Group LLLP
Hi. Thanks for taking my question.
Congratulations on the results. I wanted to ask about some of the trends that you might be seeing on the payments side, especially off-platform in light of some of your comments.
So if you could talk to what types of merchants you're engaging with Pago off-platform, what some of the pricing trends may be and what your distribution strategy is getting payments outside of Libre?
Osvaldo Giménez - Executive Vice President - MercadoPago, Payments
Hi. This is Osvaldo.
What we've seen is a lot of traction in all of the markets we're in. We have seen in Brazil mostly, a transition from the typical MercadoPago checkout to our open platform solution where our merchants connect server to server and that is where we have seen most of the traction in that country.
In terms of types of merchant, in many cases, we have seen cross-border merchants who are selling goods from China into Brazil, and we are processing the payments for them. Then, both in Argentina and to some degree in Mexico, which are our largest markets together with Brazil, we have seen broader diversification in terms of industries of the merchants.
A few years back there was some concentration around the coupon industry. Today it's pretty much diversified between many, many industries, such as travel, e-commerce, and then also services.
Does that answer the question?
James Friedman - Susquehanna Financial Group LLLP
Yes. That's helpful.
And then if you could comment as to how you're distributing payments. At this stage, are you using merchant acquirers like Cielo to distribute Pago off-platform?
Or are you doing it with a direct sales force? How do you introduce your payment solution into other merchants?
Osvaldo Giménez - Executive Vice President - MercadoPago, Payments
Yes. We have our own sales force which reaches to larger merchants and then we use marketing to reach the long tail who is self-service.
James Friedman - Susquehanna Financial Group LLLP
Great. Thank you for your commentary.
Operator
Thank you. Our next question is from Ross Sandler of Deutsche Bank.
Your line is open.
Ross Sandler - Deutsche Bank Securities, Inc.
Yeah hi. Thanks guys.
Pedro, I just had one on mobile and then one on Argentina. So I think at the last Analyst Day, it's been a while now but you said I think, mobile was about 11% of GMV if we strip out Venezuela.
So just curious where is that figure today ex-Venezuela? And do you think mobile is the bigger driver of the strong growth that you're seeing right now, or is it still the roll-out of the enhanced Marketplace strategy in the various countries just broadly?
And then the second one on Argentina. So unit growth has been very strong over the past two quarters or three quarters, beginning of the year 2015 it was low 30%s and now we're closer to 60%.
So is this move in Argentina just further penetration of Envios and Pago? Or is there something else driving the acceleration?
And with the interest-free roll-out in November, is Argentina growing even faster today than exiting the year? That's it.
Thank you.
Pedro Arnt - Chief Financial Officer
Great, Ross. So in terms of mobile, mobile has consistently grown in terms of percentage of our business, roughly a third of our volume is already coming from mobile, so significantly higher than at the Analyst Day and growing consistently quarter-on-quarter.
When we look at new user sign-ons, that number is even higher, and so is traffic. So definitely mobile is a strong driver of growth and something that we're focusing on and executing well on.
I would say that it's a part of explaining the growth across the board, but definitely the full ecosystem is very significant in terms of better shipment, better payments, better customer service, all the initiatives that we're working on. So I wouldn't attribute the growth to any of these in isolated fashion, and that's a very similar explanation for Argentina.
Argentina is a country along with Brazil where the ecosystem has rolled-out quite well, and that is a significant part of explaining why it's performed so well.
Operator
Thank you. Our next question is from Gene Munster of Piper Jaffray.
Your line is open.
Eugene Charles Munster - Piper Jaffray & Co (Broker)
Hey, good afternoon and I'll add my congratulations and a follow-up on Pago, and then one on Envios. But in terms of Pago, can you talk about long-term vision for the product?
Do you see this as being more desktop and mobile-centric? Or do you – could you see this eventually evolving into something where you're doing in-store and peer-to-peer and you kind of have a longer term roadmap for Pago?
And my second question is on Envios. You talked about kind of outsourcing this or allowing third parties to access this.
Can you talk a little bit about how you see that business and how you make money in it? And is this going to be I guess more important to the story in the future?
Osvaldo Giménez - Executive Vice President - MercadoPago, Payments
Hi, Gene. This is Osvaldo again.
So in terms of strategy for Pago, we started focusing on initially on MercadoLibre transactions, then we're growing very strongly off-platform, but mostly web-based. And now we are expanding to our two big segments, one is what we call mobile, which means both mPOS, which we started selling in Brazil last year, and peer-to-peer payment.
We launched a wallet about a year ago in all countries, and it's generating some significant traction. And then the other segment we're expanding too is credit.
And here we are just starting, but we are in the process of creating a Marketplace to help merchants get better financing and eventually the same with consumers.
Eugene Charles Munster - Piper Jaffray & Co (Broker)
And let me – if I can interrupt here, is the in-store part would that be NFC enabled, or would it have to be email and password?
Osvaldo Giménez - Executive Vice President - MercadoPago, Payments
Today, the mPOS is focused on – it's more similar to Square. We do have researches and we have a beta pilot for NFC functionality, but we have – it has not yet taken off in Latin America.
Eugene Charles Munster - Piper Jaffray & Co (Broker)
Okay.
Pedro Arnt - Chief Financial Officer
Gene, on the Envios piece, I would say most of the growth and most of the focus for the next few quarters is on platform. We are seeing the enormous positive impact of the shipping and logistics ecosystem in Brazil, and we want to continue to grow that in Brazil and roll-out to the other markets.
Having said that, some merchants that are using Envios for their MELI sales also show interest in being able to use the platform for some of their off-platform sales, and though on a selective basis we can open it up for them. But again, most of the focus and a lot of the growth is going to be primarily on MercadoLibre growth of Envios in the different countries.
Eugene Charles Munster - Piper Jaffray & Co (Broker)
Okay. That's helpful.
Thank you.
Operator
Thank you. Our next question is from Michel Morin of Morgan Stanley.
Your line is open.
Michel Morin - Morgan Stanley & Co. LLC
Thank you. Pedro, so one question on Brazil, and in particular, the selling of your receivables to banks.
I'm wondering if given the current macro environment, you're running into more difficulties selling receivables to the banks given the bank results themselves have been pretty weak recently? And then secondly, in Argentina, I know you typically won't give forward guidance, but given that we've had a more secured evaluation and there's been some changes in the economy, has that changed anything as you start the year, in the first couple of months of the year, have you seen any change in trend there?
And if I can throw a third quick one is, just wondering what FX rate you used for Venezuela. Thank you.
Pedro Arnt - Chief Financial Officer
So in terms of the market to sell receivables in Brazil, as we've always said, it's always been an extremely liquid market. I think in the many years we've operated MercadoPago we always anecdotally say that the only 24-hour window where we had any difficulty in moving receivables was the day Lehman Brothers went under.
So the answer is no. No change in that and it continues to be a very liquid market and we don't anticipate restrictions to selling those.
Obviously, price fluctuates but unless systemic risk exists, we don't see that as a challenge. Argentina, I think it's a matter of putting it into perspective.
So our Argentine business has been performing incredibly well for many quarters. And even if it, for whatever reason decelerates somewhat, it's still performing incredibly well growing extremely well and a business that we're very pleased with.
So we can give you the numbers when we report the quarter, but in general, I'd say that there's no significant material shift in trends and that's all that we can comment at right now.
Michel Morin - Morgan Stanley & Co. LLC
FX..
Pedro Arnt - Chief Financial Officer
And the question on FX, we continue to use the same SIMADI rate that we did in the prior quarters. The average for the quarter was right around 200 bolívars to the dollar.
Michel Morin - Morgan Stanley & Co. LLC
Great. Thank you.
Operator
Thank you. Our next question is from Marcelo Santos from JPMorgan.
Your line is open.
Marcelo Santos - JPMorgan CCVM SA
Hi. Good evening.
Thanks for taking the question. My first question is about Brazil and the new ICMS law.
Just wanted get a glimpse, how your sellers are being affected. It's all over the press that the small – mid, small sellers are suffering.
So I just want to get an update there. And the second question was about this increased deployment of capital.
Just wanted to understand, so it's likely that we're going to see 2016 with lower margins and higher growth, so just wanted to get more color on how we see that in our numbers. Thank you.
Hello?
Operator
Please stand by, sir. Ladies and gentlemen, please stand by.
Operator
Ladies and gentlemen, our speakers have rejoined us.
Pedro Arnt - Chief Financial Officer
Great. So operator or Marcelo, I don't know if you're still on the line.
I don't know how far I got on the answer before both the main line and the backup line dropped. So if Marcelo is still on the line and you can give me an indication of which questions were left unanswered, we can pick up from there.
Marcelo Santos - JPMorgan CCVM SA
Hello?
Pedro Arnt - Chief Financial Officer
Yeah. Hello.
Operator
Your line is open, Mr. Santos.
Marcelo Santos - JPMorgan CCVM SA
It's Marcelo here. I don't know if you can hear me.
I couldn't hear anything about the answer. Sorry.
Pedro Arnt - Chief Financial Officer
Great. Marcelo, did you get the answer on [ICMS] or that one didn't come through either?
Marcelo Santos - JPMorgan CCVM SA
No.
Pedro Arnt - Chief Financial Officer
No, so let me start. Right, very quickly; no impact on our business so far.
Obviously, it's still very early and we'll monitor it. The latest Supreme Court injunction exempting from the ruling the small businesses that report under Simples we think is a very positive occurrence and should help mitigate any eventual impact.
And also, we will be working alongside our merchants to help them meet any of the new requirements that occur. Our ERP solution KPL is already compliant with the new ICMS laws.
So we feel that merchants on MercadoLibre will be in relatively good shape to face whatever happens with the fiscal situation and we haven't seen any impact yet. And then you asked about the capital allocation for the quarter – for the year that we're indicating.
I think what we're trying to say is that we've seen the positive impact of building out our full ecosystem of shipments, of payments, of credit. We're convinced that it offers a significantly better user experience and that that's the future for our marketplace.
It's the enhanced marketplace vision that we've been outlining. And so we will continue to invest in those initiatives in the near future to grow the penetration of payments, to grow the penetration of credit, and to grow the penetration of Shipping and logistics.
Obviously that changes our margin profile. You can see it in the trend line, but we continue to think that that's the right direction to take the business in.
Operator
Thank you. Our next question is from Richard Cathcart of HSBC.
Your line is open, sir.
Richard Cathcart - HSBC Corretora de Títulos e Valores Mobiliários SA
Hi, guys. Thanks very much for taking the question, just a couple of quick ones.
If you could just talk for a little bit about what you're seeing from the strategy that you announced at the end of last quarter of discontinuing the listing fees in Brazil and moving towards the free listing; the classic and the premium, if you could just talk through the results that you're seeing from that? And then just secondly on Argentina versus Brazil, I mean this year you've had constant currency growth of around 85% in Argentina, 50% in Brazil.
The difference there, I mean is that really due to inflation, or is there something else that we should be seeing that's perhaps performing better or being more well-received in Argentina than in Brazil? Thanks.
Pedro Arnt - Chief Financial Officer
So in terms of the transition away from placement fees to a fully commission-based or final-value fee listing model in Brazil, we are very pleased with results. If you look at Brazilian take rates, or monetization levels, they've remained relatively flat despite the transition.
So we've been able to not negatively affect monetization, and yet we offer a listing format that we think is much more attractive for sellers and we continue to see very strong results in terms of live listing count and the number of SKUs in inventory that we've brought on to the platform. So that listing format is one that we will be rolling out to other markets, and we also see significant improvement in seller satisfaction and buyer satisfaction.
So, definitely, that's the direction we want to take our pricing. Back-end commissions, we share the risk with our sellers.
If they list then don't sell, they don't pay anything. If they sell, they pay us.
It'll help us maximize inventory which is our goal. And it's also allowed us to grow new sellers at an interesting pace.
That metric has picked up again. So it's going to be rolled out to the other geographies, and hopefully, we can be equally successful in doing so without negatively affecting monetization.
Argentina, obviously a part of the volume growth can be explained by inflation, but even if you look at organic growth adjusted by inflation, Argentina is still growing at an extremely strong clip, even faster than Brazil, which is also growing very healthily, especially given the macro in Brazil. So I would say inflation explains a part of it, but it certainly doesn't explain all of it.
Unit growth in Argentina, which is units sold, is slightly below 60% for the quarter. So that gives you a good sense of how healthy the business is in Argentina even if you adjust for inflation.
Richard Cathcart - HSBC Corretora de Títulos e Valores Mobiliários SA
Okay. Thanks very much.
And just a quick follow-up. Just wondering if there's anything that you can see from the business or from your sellers that makes you think the weak macro environment in Brazil is maybe beginning or will begin to have a negative impact, because your sales growth looks remarkably resilient whereas a lot of the other online operators, albeit with a different model, have seen a big deceleration in sales growth.
Pedro Arnt - Chief Financial Officer
So again I think as we report the remainder of the year, we'll be able to address that issue fully. What I would say is what we always say, marketplaces are very resilient.
Sometimes in tough macro consumers will look more for the value proposition of a marketplace with is depth of selection, very competitive pricing. They will also look to supplement income.
So they'll come to the Marketplace to sell. And so again we've been very consistent on saying that macro, I think for a Marketplace business, sometimes can be weathered more easily than if it's a bricks-and-mortar business or a first-party business.
And we are fairly comfortable that we are gaining share in Brazil. So could the macro effect grow somewhat?
Yes, but on a relative basis, I think the Marketplace should stand to perform very well.
Richard Cathcart - HSBC Corretora de Títulos e Valores Mobiliários SA
Okay. Thanks very much.
Operator
Thank you. Our next question is from Stephen Ju of Credit Suisse.
Your line is open.
Bo Yang - Credit Suisse Securities (USA) LLC (Broker)
This is Bo on for Stephen. Congrats on the quarter, guys.
Just a couple of questions, if I may. Pedro, is there anything in the employee contract in Argentina that guarantees certain salary levels or peg salaries to the U.S.
dollar so that in the event, if relative devaluation of the peso, you may not see as much leverage? And another question on mobile, are you able to call out at this point a relative conversion rate, or transaction velocity gap between mobile and desktop right now?
And what that might have been a year ago? Secondarily, are the new users registering recently primarily mobile first?
Or are you still receiving new users on the desktop? Thank you.
Pedro Arnt - Chief Financial Officer
Okay. So let me start with the compensation issue.
There is no guarantee that pegs compensation to dollar levels. The only dollar-denominated compensation item which affects key employees and certain senior managers is the long-term retention plan, which is a U.S.
dollar denominated amount but the vast majority of employees in Argentina have peso compensation with no sort of anchor to the U.S. dollar.
So we should see wage cost benefits from the Argentine devaluation. In terms of mobile, as is the case with most e-commerce companies, yes mobile conversions are lower than desktop.
We don't disclose what the relative gap is. Obviously all our efforts and focus is on continuing to improving our mobile efforts to close that gap, but it's not a number that we disclose.
And could you repeat the final question pertaining to new users, please?
Bo Yang - Credit Suisse Securities (USA) LLC (Broker)
Are the new users that you're seeing primarily from mobile, are you still receiving new users on the desktop?
Pedro Arnt - Chief Financial Officer
So new user registration is already primarily mobile, but obviously we continue to have desktop registrations as well. More than half are from mobile devices already.
Bo Yang - Credit Suisse Securities (USA) LLC (Broker)
Okay. Cool.
Thank you.
Operator
Thank you. At this time, I see no other questions in queue.
I'd like to turn it back to management for any closing remarks.
Pedro Arnt - Chief Financial Officer
So thank you everyone. A great start to the year.
A lot of energy within the company, and we look forward to get back to you and report on our advances next quarter.
Operator
Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program.
You may now disconnect. Everyone have a great day.