UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2017~~March 31, 2019

-OR-


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-33647

MercadoLibre, Inc.

(Exact name of Registrant as specified in its Charter)



Delaware		98-0212790
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

Arias 3751, 7th Floor

Buenos Aires, Argentina, C1430CRG ~~Argentina~~

(Address of registrant’s principal executive offices)

(+5411) 4640-8000

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files. Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒



8
Securities registered pursuant to Section 12(b) of the Act:
Title of Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	MELI	Nasdaq Global Select Market

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

~~44,157,364~~49,318,513 shares of the issuer’s common stock, $0.001 par value, outstanding as of ~~November~~May 1, ~~2017.~~2019.

Table of Contents

MercadoLibre, Inc.

Interim Condensed Consolidated Balance Sheets

As of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018

(In thousands of U.S. dollars, except par value)

(Unaudited)


	September 30,	December 31,	March 31,	December 31,
	2017	2016	2019	2018
Assets
Current assets:
Cash and cash equivalents	$ 461,198	$ 234,140	$ 1,295,886	$ 440,332
Short-term investments	175,165	253,321
Restricted cash and cash equivalents			10,375	24,363
Short-term investments (238,029 and 284,317 held in guarantee)			1,648,457	461,541
Accounts receivable, net	28,564	25,435	34,524	35,153
Credit cards receivables, net	406,883	307,904
Credit cards receivable, net			308,468	360,298
Loans receivable, net	51,843	6,283	134,640	95,778
Prepaid expenses	8,199	15,060	24,132	27,477
Inventory	2,309	1,103	3,003	4,612
Other assets	47,995	26,215	60,968	61,569
Total current assets	1,182,156	869,461	3,520,453	1,511,123
Non-current assets:
Long-term investments	45,550	153,803	275,432	276,136
Property and equipment, net	136,101	124,261	188,956	165,614
Operating lease right-of-use assets			153,499	—
Goodwill	95,249	91,797	89,827	88,883
Intangible assets, net	24,642	26,277	17,683	18,581
Deferred tax assets	66,163	45,017	160,846	141,438
Other assets	68,431	56,819	41,464	37,744
Total non-current assets	436,136	497,974	927,707	728,396
Total assets	$ 1,618,292	$ 1,367,435	$ 4,448,160	$ 2,239,519
Liabilities and Equity
Liabilities
Current liabilities:
Accounts payable and accrued expenses	$ 181,557	$ 105,106	$ 246,767	$ 266,759
Funds payable to customers	519,420	370,693	680,746	640,954
Salaries and social security payable	61,168	48,898	76,123	60,406
Taxes payable	27,923	27,338	34,414	31,058
Loans payable and other financial liabilities	24,701	11,583	141,162	132,949
Operating lease liabilities			12,585	—
Other liabilities	1,400	6,359	56,418	34,098
Dividends payable	6,624	6,624
Total current liabilities	822,793	576,601	1,248,215	1,166,224
Non-current liabilities:
Salaries and social security payable	22,124	16,173	31,827	23,161
Loans payable and other financial liabilities	309,444	301,940	602,061	602,228
Operating lease liabilities			143,047	—
Deferred tax liabilities	40,435	34,059	97,006	91,698
Other liabilities	17,340	9,808	13,258	19,508
Total non-current liabilities	389,343	361,980	887,199	736,595
Total liabilities	$ 1,212,136	$ 938,581	$ 2,135,414	$ 1,902,819

Equity:
Redeemable convertible preferred stock, $0.001 par value, 40,000,000 shares
authorized, 100,000 shares issued and outstanding at March 31, 2019 (Note 10)			$ 98,688	$ —

Equity

Common stock, $0.001 par value, 110,000,000 shares authorized,
44,157,364 shares issued and outstanding at September 30,
2017 and December 31, 2016	$ 44	$ 44
49,318,498 and 45,202,859 shares issued and outstanding at March 31,
2019 and December 31, 2018			$ 49	$ 45
Additional paid-in capital	70,674	137,982	2,097,142	224,800
Retained earnings	612,269	550,641	509,455	503,432
Accumulated other comprehensive loss	(276,831)	(259,813)	(392,588)	(391,577)
Total Equity	406,156	428,854	2,214,058	336,700
Total Liabilities and Equity	$ 1,618,292	$ 1,367,435
Total Liabilities, Redeemable convertible preferred stock and Equity			$ 4,448,160	$ 2,239,519

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

For the ~~nine and~~ three-month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

For the ~~nine and~~ three-month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018

The accompanying notes are an integral part of these interim condensed consolidated financial statements.


									Accumulated
					Additional				other
	Common stock				paid-in		Retained		comprehensive		Total
	Shares		Amount		capital		Earnings		loss		Equity
Balance as of December 31, 2018	45,203	$	45	$	224,800	$	503,432	$	(391,577)	$	336,700

Common Stock issued	4,116		4		1,866,496		—		—		1,866,500
Exercise of convertible notes	—		—		2		—		—		2
Unwind Capped Call	—		—		3		—		—		3
Net income	—		—		—		11,864		—		11,864
Amortization of Preferred Stock discount	—		—		5,841		(5,841)		—		—
Other comprehensive loss	—		—		—		—		(1,011)		(1,011)
Balance as of March 31, 2019	49,319	$	49	$	2,097,142	$	509,455	$	(392,588)	$	2,214,058


									Accumulated
					Additional				other
	Common stock				paid-in		Retained		comprehensive		Total
	Shares		Amount		capital		Earnings		loss		Equity
Balance as of December 31, 2017	44,157	$	44	$	70,661	$	537,925	$	(282,851)	$	325,779

Capped Call	—		—		(45,692)		—		—		(45,692)
Changes in accounting Standards	—		—		—		2,092		—		2,092
Net loss	—		—		—		(12,919)		—		(12,919)
Other comprehensive loss	—		—		—		—		(16,393)		(16,393)
Balance as of March 31, 2018	44,157	$	44	$	24,969	$	527,098	$	(299,244)	$	252,867

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

For the ~~nine-month~~three-month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018


	Nine Months Ended September 30		Three Months Ended March 31,
	2017	2016	2019	2018

Cash flows from operations:
Net income	$ 81,500	$ 85,017
Adjustments to reconcile net income to net cash provided by operating activities:
Unrealized Devaluation Loss, net	28,463	5,162
Impairment of Long-Lived Assets	2,837	13,717
Net income (loss)			$ 11,864	$ (12,919)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Unrealized devaluation loss, net			1,886	—
Depreciation and amortization	29,953	20,698	15,694	11,084
Accrued interest	(16,391)	(12,643)	(8,699)	(4,447)
Non cash interest and convertible bonds amortization of debt discount and amortization of debt issuance costs	9,234	9,122
Non cash interest and convertible notes amortization of debt discount and amortization of debt issuance costs			3,018	7,063
LTRP accrued compensation	28,734	19,251	13,441	15,737
Deferred income taxes	(14,769)	(5,895)	(14,456)	(30,601)
Changes in assets and liabilities:
Accounts receivable	(13,380)	(2,409)	337	(9,347)
Credit Card Receivables	(113,514)	(92,811)
Credit card receivables			35,893	(33,870)
Prepaid expenses	6,800	(272)	3,316	(16,164)
Inventory	(1,172)	(1,048)	1,652	(872)
Other assets	(31,528)	(15,865)	(5,085)	(13,009)
Accounts payable and accrued expenses	71,794	13,852	(491)	22,773
Funds payable to customers	151,635	100,322	63,730	20,613
Other liabilities	3,703	136	12,735	3,041
Interest received from investments	18,490	11,348	3,536	3,912
Net cash provided by operating activities	242,389	147,682
Net cash provided by (used in) operating activities			138,371	(37,006)
Cash flows from investing activities:
Purchase of investments	(3,180,633)	(2,548,060)	(1,624,226)	(632,734)
Proceeds from sale and maturity of investments	3,371,543	2,525,118	439,712	683,909
Payment for acquired businesses, net of cash acquired	—	(7,284)
Purchases of intangible assets	(84)	(49)	(34)	(97)
Advance for property and equipment	(12,777)	(6,129)	—	(3,390)
Changes in principal of loans receivable, net	(46,951)	—	(42,609)	(52,243)
Purchases of property and equipment	(39,280)	(55,510)	(32,928)	(19,542)
Net cash provided by (used in) investing activities	91,818	(91,914)
Net cash used in investing activities			(1,260,085)	(24,097)
Cash flows from financing activities:
Purchase of convertible note capped call			—	(45,692)
Proceeds from loans payable and other financial liabilities	13,153	3,892	33,977	80,925
Payments on loans payable and other financing liabilities	(4,304)	(6,492)	(23,816)	(4,583)
Payment of finance lease obligations			(662)	—
Dividends paid	(19,871)	(17,795)	—	(6,624)
Purchase of convertible note capped call	(67,308)	—
Net cash used in financing activities	(78,330)	(20,395)
Effect of exchange rate changes on cash and cash equivalents	(28,819)	(14,259)
Net increase in cash and cash equivalents	227,058	21,114
Cash and cash equivalents, beginning of the period	$ 234,140	$ 166,881
Cash and cash equivalents, end of the period	$ 461,198	$ 187,995
Proceeds from issuance of convertible redeemable preferred stock, net			98,688	—
Proceeds from issuance of common stock, net			1,866,500	—
Net cash provided by financing activities			1,974,687	24,026
Effect of exchange rate changes on cash, cash equivalents, restricted cash and cash equivalents			(11,407)	(772)
Net increase (decrease) in cash, cash equivalents, restricted cash and cash equivalents			841,566	(37,849)
Cash, cash equivalents, restricted cash and cash equivalents, beginning of the period			$ 464,695	$ 388,260
Cash, cash equivalents, restricted cash and cash equivalents, end of the period			$ 1,306,261	$ 350,411

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

Deferred revenue consists of fees received related to unsatisfied performance obligations at the end of the period in accordance with ASC 606. Due to the generally short-term duration of contracts, the majority of the performance obligations are satisfied in the following reporting period. Deferred revenue as of December 31, 2018 and 2017 was $5,918 thousands and $6,116 thousands, respectively, of which $3,188 thousands and $4,316 thousands were recognized as revenue during the three-month periods ended March 31, 2019 and 2018, respectively.

As of March 31, 2019, total deferred revenue was $5,958 thousands, mainly due to fees related to listing and optional feature services billed and loyalty programs that are expected to be recognized as revenue in the coming months.

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term, which is a non-monetary asset, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease, which is a monetary liability. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the leases do not provide an implicit rate, the Company uses incremental borrowing rates based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease prepaid payments made. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

According to transition guidance, finance leases that existed at December 31, 2018 are included in property and equipment, and loans payable and other financial liabilities in the consolidated balance sheets.

All of the Company’s consolidated foreign operations ~~have determined~~use the local currency ~~to be~~as their functional currency, except for ~~Venezuela~~Argentina, which has used the U.S. dollar as its functional currency since ~~January~~July 1, ~~2010,~~2018, as described below. Accordingly, ~~these~~the foreign ~~operating~~ subsidiaries with local currency as functional currency translate assets and liabilities from their local currencies into U.S. dollars by using ~~period-end~~year-end exchange rates while income and expense accounts are translated at the average monthly rates in effect during the ~~period,~~year, unless exchange rates fluctuate significantly during the period, in which case the exchange rates at the date of the transaction are used. The resulting translation adjustment is recorded as a component of other comprehensive income (loss) ~~income.~~.

As of July 1, 2018, the Company ~~has~~ transitioned its ~~Venezuelan~~Argentinian operations to highly inflationary status ~~as from January 1, 2010, which requires that transactions~~in accordance with U.S. GAAP, and ~~balances are re-measured as if the U.S. dollar was~~changed the functional currency for ~~such operation. The cumulative three year inflation rate as~~Argentine subsidiaries from ~~December 31, 2010 exceeded 100% at each period end. Thus, the Company continues to treat the economy of Venezuela as highly-inflationary.~~

On March 9, 2016 the Central Bank of Venezuela (“BCV”) issued the Exchange Agreement No.35. The agreement established a “protected” exchange rate (“DIPRO”) for certain transactions, such as but not limited to: imports of goods of the food and health sectors, as well as supplies associated with the production of said sectors; expenses relating to health treatments, sports, culture, scientific research, and other urgent matters defined by the exchange regulations. All foreign currency transactions not expressly provided in Exchange Agreement No.35 will be processed on the alternate foreign currency markets governed by the exchange regulations, at the floating supplementary market exchange rate (“DICOM”).

Additionally, the agreement established that the alternate foreign currency markets referred to in Exchange Agreement No.33 of February 10, 2015 (“SIMADI”) will continue to operate until replaced by others. From March 31, 2016 through June 30, 2016, the SIMADI exchange rate increased from 273 BsF per U.S. dollar to 628 BsF per U.S. dollar, a 130% increase in the exchange rate. As a consequence of the local currency devaluation, the Company recorded a foreign exchange loss of $4.9 million during the second quarter of 2016.

Considering the significant devaluation and the lower U.S. dollar-equivalent cash flows then expected from the Venezuelan business, the Company reviewed its long-lived assets (including non-current other assets), goodwill and intangible assets with indefinite useful life for impairment and concluded that the carrying value of certain real estate investments in Venezuela as of June 30, 2016 would not be fully recoverable. As a result, on June 30, 2016, the Company recorded an impairment of offices and commercial property under construction included within non-current other assets of $13.7 million. The carrying amount of offices and commercial property under construction was adjusted to its estimated fair value of approximately $12.5 million as of June 30, 2016, by using the market approach, and considering prices for similar assets.

On May 19, 2017, the BCV issued the Exchange Agreement No.38, which established a new foreign exchange mechanism under DICOM, replacing SIMADI. The new mechanism consists of auctions, administered by an auction committee, where sellers and buyers from the private sector may offer foreign currency under certain limits determined by the BCV.

~~In light of the disappearance of SIMADI (which closed at 728.0 per U.S. dollar), and the Company’s inability to gain access~~Argentine Pesos to U.S. dollars, ~~under SIMADI, it started requesting U.S. dollars through DICOM. As a result,~~which is the Company expects to settle its transactions through DICOM going forward and concluded that the DICOM exchange rate should be used as from June 1, 2017 to measure its bolivar-denominated monetary assets and liabilities and to measure the revenues and expensesfunctional currency of the Venezuelan subsidiaries. Therefore, as of June 30, 2017, monetary assets and liabilities in Bolivares Fuertes (“BsF”) were re-measured to the U.S. dollar using the DICOM closing exchange rate of 2640.0 BsF per U.S. dollar. As a consequence of the local currency devaluation, the Company recorded a foreign exchange loss of $22.0 million during the second quarter of 2017.their immediate parent company.

Considering the significant devaluation and the lower U.S. dollar-equivalent cash flows then expected from the Venezuelan business, the Company reviewed its long-lived assets (including non-current other assets), goodwill and intangible assets with indefinite useful life for impairment and concluded that the carrying value of certain real estate investments in Venezuela as of June 30, 2017 would not be fully recoverable. As a result, on June 30, 2017, the Company recorded an impairment of offices and commercial property under construction included within non-current other assets of $2.8 million. The carrying amount of offices and commercial property under construction was adjusted to its estimated fair value of approximately $9.7 million as of June 30, 2017, by using the market approach and considering prices for similar assets. As of September 30, 2017, the DICOM exchange rate was 3,345.0 BsF per U.S. dollar.

~~Notes~~Pursuant to ~~Interim Condensed Consolidated Financial Statements (unaudited)~~the change in the functional currency, monetary assets and liabilities are remeasured at closing exchange rate, and non-monetary assets, revenues and expenses are remeasured at the rate prevailing on the date of the respective transaction. The effect of the re measurement is recognized as foreign currency (losses) gains.

~~Until 2010~~Argentina is the Company was able to obtain U.S. dollars for any purpose, including dividends distribution, using alternative mechanisms other than through the Commission for the Administration of Foreign Exchange Control (CADIVI). Those U.S. dollars, obtained at a higher exchange rate than the one offered by CADIVI, and held at U.S. bank accounts of its Venezuelan subsidiaries, were used until 2011 for dividend distributions from its Venezuelan subsidiaries. The Company has not distributed dividends from the Venezuelan subsidiaries since 2011.

~~The following table sets forth the assets, liabilities and net assets~~second largest principal market of the Company’s ~~Venezuelan subsidiaries, before intercompany eliminations~~business, as measured by net revenue (see Note 5 – Segment Reporting). The economic environment in Argentina has been volatile with weak economic conditions, devaluation of ~~a net liability of $29,594 thousands and $ 15,843 thousands, as of September 30, 2017 and December 31, 2016 and net revenues for the nine-month periods ended September 30, 2017 and 2016:~~

As of September 30, 2017, the net assets (before intercompany eliminations) of the Venezuelan subsidiaries amounted to 6.2% of consolidated net assets, and cash and investments of the Venezuelan subsidiaries held in local currency, ~~in Venezuela amounted~~high interest rates, high level of inflation and a large public deficit which led Argentina to ~~2.2% of our consolidated cash and investments.~~

~~The Company’s ability to obtain U.S. dollars in Venezuela is negatively affected by~~request financial assistance from the exchange regulations in Venezuela that are described above and elsewhere in these interim condensed consolidated financial statements. In addition, its business and ability to obtain U.S. dollars in Venezuela would be negatively affected by additional material devaluations or the imposition of significant additional and more stringent controls on foreign currency exchange by the Venezuelan government.

~~Despite the current difficult macroeconomic environment in Venezuela, the Company continues to actively manage, through its Venezuelan subsidiaries, its investment in Venezuela.~~International Monetary Fund.

The Company is subject to U.S. and foreign income taxes. The Company accounts for income taxes following the liability method of accounting which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred tax assets are also recognized for tax loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets or liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded when, based on the available evidence, it is more likely than not that all or a portion of the Company’s deferred tax assets will not be realized. The Company’s income tax expense consists of taxes currently payable, if any, plus the change during the period in the Company’s deferred tax assets and liabilities.

On August 17, 2011, the Argentine government issued a new software development law and on September 9, 2013 the Argentine government issued a regulatory decree ~~was issued, which established~~establishing the ~~new requirement~~requirements to become a beneficiary of the new software development ~~law. The decree establishes compliance requirements~~law, including a requirement to comply with annual incremental ratios related to exports of services and research and ~~development expenses that must be achieved to remain within the tax holiday.~~development. The ~~Company’s Argentine subsidiary has to achieve certain required ratios annually under the software development~~new law ~~in order to be eligible for the benefits mentioned below.~~will expire on December 31, 2019.

~~On September 17, 2015, the~~The Argentine Industry Secretary ~~issued Resolution 1041/2015 approving~~approved the Company’s application for eligibility under the ~~new software development~~ law for the Company’s ~~Argentinean~~Argentine subsidiary, Mercadolibre S.R.L. Furthermore, on September 18, 2016, the Argentine Industry Secretary issued Resolutions 93/2016 and 97/2016 approving the Company’s application for eligibility under the new software development law for the Company’s Argentinean subsidiaries, Neosur S.RL. and Business Vision S.A. As a result, the Company’s ~~Argentinean subsidiaries have~~Argentine subsidiary has been granted a tax holiday retroactive from September 18, 2014. A portion of the benefits obtained ~~as beneficiaries of the new law~~ is a 60% relief ~~of 60%~~ of total income tax related to software development activities and a 70% relief inof payroll taxes related to software development activities.

~~The benefits to the Company under the software development law will expire on December 31, 2019.~~ As a result of the Company’s eligibility under the new law, it recorded an income tax benefit of ~~$17,672~~$3,319 thousands and ~~$6,367~~$7,299 thousands during the ~~nine and~~ three-month periods ended ~~September 30, 2017,~~March 31, 2019 and 2018, respectively. Aggregate per share effect of the Argentine tax holiday amounted to ~~$0.40~~$0.07 and ~~$0.14~~$0.17 for the ~~nine and~~ three-month periods ended ~~September 30, 2017,~~March 31, 2019 and 2018, respectively. Furthermore, the Company recorded a labor cost benefit of ~~$5,513~~$2,396 thousands and $2,016 thousands during the ~~nine and~~ three-month periods ended ~~September 30, 2017,~~March 31, 2019 and 2018, respectively. Additionally, ~~$1,623~~$400 thousands and ~~$587~~$652 thousands were accrued to pay software development law audit fees during the ~~nine~~first quarter of 2019 and ~~three-month periods ended September 30, 2017,~~2018, respectively. ~~During~~

On March 29, 2019 an affiliate of Dragoneer Investment Group purchased, in a private placement, 100,000 shares of perpetual convertible preferred stock designated as Series A Preferred Stock, par value $0.001 per share (the ~~nine months~~“Preferred Stock”), of the Company for $100 million in the aggregate.

The Company determined that the shares of Preferred Stock should be classified as mezzanine equity upon their issuance since they are contingently redeemable as explained in Note 10. The Company also determined that there is a beneficial conversion feature of $5,841 thousands attributable to the Preferred Stock because the initial conversion price was lower than the fair value of MercadoLibre’s common stock on March 29, 2019 (the commitment date). The beneficial conversion feature was fully amortized at issuance, increasing the Preferred Stock’s carrying amount, since the shares of Preferred Stock are perpetual and the holders of Preferred Stock have the right to convert immediately.

In addition, the Company determined that there were no embedded derivatives requiring bifurcation.

Under ASC 825, U.S. GAAP provides an option to elect fair value with impact on the statement of income as an alternative measurement for certain financial instruments and other items on the balance sheet.

The Company has elected to measure certain financial assets at fair value with impact on the statement of income from January 1, 2019 for several reasons including to avoid the mismatch generated by the recognition of certain linked instruments / transactions, separately, in consolidated statement of income and consolidated statement of other comprehensive income and to better reflect the financial model applied for selected instruments.

The Company’s election of the fair value option applies to the: i) Brazilian federal government bonds and ii) U.S. treasury notes. As result of the election of the fair value option, the Company recognized gains in interest income and other financial gains of $3,048 thousands for the period ended September 30, 2016, the Company recorded an income tax benefit of $16,018 thousands, a labor cost benefit of $4,173 thousands and $1,416 thousands were accrued to pay software development law audit fees. Additionally, during the third quarter of 2016, the Company recorded an income tax benefit of $6,823 thousands, a labor cost benefit of $2,167 thousands and $631 thousands were accrued to pay software development law audit fees. ~~Aggregate per share effect of the Argentine tax holiday amounted to $0.46 and $0.20 for the nine and three-month periods ended September 30, 2016, respectively.~~

~~As of September 30, 2017 and December~~March 31, 2016, the Company had included under non-current deferred tax assets the foreign tax credits related to the dividend distributions received from its subsidiaries for a total amount of $11,588 thousands and $13,515 thousands, respectively. Those foreign tax credits will be used to offset the future domestic income tax payable.2019.

The following table sets forth the Company’s accumulated other comprehensive loss as of ~~September 30, 2017~~March 31, 2019 and ~~the year ended~~ December 31, ~~2016:~~2018:

The following tables summarize the changes in accumulated balances of other comprehensive loss for the ~~nine-month~~three-month period ended ~~September 30, 2017:~~March 31, 2019:

Unrealized

Foreign

Estimated tax

(Losses) Gains on

Currency

(expense)

Investments

Translation

benefit

Total

(In thousands)
Balances as of December 31, 2016

$                          (909)

$             (259,226)

$                    322

$           (259,813)

Other comprehensive loss before reclassifications adjustments for gains (losses) on available for sale investments

518

(17,945)

(178)

(17,605)

Amount of gain (loss) reclassified from accumulated other comprehensive loss

909

—

(322)

587

Net current period other comprehensive income gain (loss)

1,427

(17,945)

(500)

(17,018)

Ending balance

$                            518

$             (277,171)

$                  (178)

$           (276,831)



	Unrealized	Foreign	Estimated tax
	(Losses) Gains on	Currency	(expense)
	Investments	Translation	benefit	Total
	(In thousands)
Balances as of December 31, 2018	$ 3,345	$ (394,306)	$ (616)	$ (391,577)
Other comprehensive income (loss) before reclassifications	2,025	(294)	(13)	1,718
Amount of loss (gain) reclassified from accumulated other comprehensive loss	(3,345)	—	616	(2,729)
Net current period other comprehensive income (loss)	(1,320)	(294)	603	(1,011)
Ending balance	$ 2,025	$ (394,600)	$ (13)	$ (392,588)

The Company reviews its long-lived assets (including non-current other assets) for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

As explained in section “Foreign Currency Translation” of the present Note to these interim condensed consolidated financial statements, Venezuelan currency experienced a steep devaluation in the second quarter of 2017 and 2016.

Considering this change in facts and circumstances and the lower U.S. dollar-equivalent cash flows expected from the Venezuelan business, and long-lived assets expected use, the Company concluded that certain real estate investments held in Caracas, Venezuela, should be impaired. The fair value of long-lived assets was estimated through market approach using level 3 inputs in the fair value hierarchy. These level 3 inputs included, but are not limited to, executed purchase agreements in similar assets and third party valuations. As a consequence, the Company estimated the fair value of the impaired long-lived assets, and recorded impairment losses of $2.8 million and $13.7 million on June 30, 2017 and June 30, 2016, respectively.

The preparation of interim condensed consolidated financial statements in conformity with U.S. GAAP requires ~~management~~Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used for, but not limited to, accounting for ~~allowance~~allowances for doubtful accounts and chargeback provisions, allowance for loans receivables, recoverability of goodwill, ~~and~~ intangible assets with indefinite useful ~~life, useful life of long-lived assets~~lives and ~~intangible assets,~~tax loss carryforwards, impairment of short-term and long-term investments, impairment of long-lived assets, compensation costs relating to the Company’s long term retention plan, fair value of convertible debt, ~~note,~~fair value of investments, recognition of income taxes and ~~contingencies.~~contingencies and determination of the incremental borrowing rate at commencement date of lease operating agreements. Actual results could differ from those estimates.

In 2014, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance related to revenue recognition. This new standard will replace all current GAAP guidance on this topic and eliminate all industry-specific guidance. The new revenue recognition guidance provides a unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. In 2016, the FASB issued several amendments to the standard, including principal versus agent considerations when another party is involved in providing goods or services to a customer and the application of identifying performance obligations. The Company has substantially completed the assessment on the adoption of this standard concluding that it is not expected to have a material measurement impact on the Company´s financial statements. However, the Company continues assessing the potential impacts regarding the presentation of certain incentives recorded as an expense under current guidance. The adoption of this standard will also require to expand and include certain additional disclosures. The standard is required to be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. The Company continues evaluating the transition method upon adoption. The Company will adopt the new revenue standard in its first quarter of 2018.

OnIn February ~~25,~~ 2016, the FASB issued ~~ASU 2016-02. The amendments in this update create Topic 842, Leases, which supersedes Topic 840, Leases. The core principle~~a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of ~~Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. Previous GAAP did not require lease~~right-of-use (ROU) assets and lease liabilities ~~to be recognized for most leases. A lessee should recognize~~on the balance sheet. Most prominent among the changes in the ~~statement~~standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases under current U.S. GAAP. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. Under the new standard, disclosures are required to meet the objective of enabling users of financial ~~position~~statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

The guidance permits the use of a ~~liability~~modified retrospective approach, which requires an entity to ~~make~~recognize and measure leases existing at, or entered into after, the beginning of the earliest comparative period presented. Alternatively, the guidance permits a “Comparatives Under 840 Option” that changes the date of initial application to the beginning of the period of adoption. The Company elected the Comparatives Under 840 Option in which it must apply ASC 840 to all comparative periods, including disclosures, and there were no effects of applying ASC 842 as a cumulative-effect adjustment to retained earnings as of January 1, 2019. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows to carryforward the historical lease ~~payments (the~~classification. In addition, the Company elected certain practical expedients and accounting policies including the lessee practical expedient to not separate lease ~~liability) and a right-of-use asset representing its right~~components. The Company also made an accounting policy election to ~~use the underlying asset for the lease term. For~~keep leases with aan initial term of 12 months or less off of the balance sheet. The Company recognizes those lease payments in the Consolidated Statements of Income on a ~~lessee is permitted to make an accounting policy election by class~~straight-line basis over the lease term.

The standard had a material impact on the Company’s consolidated balance sheets. The most significant impact was the recognition of ~~underlying asset not to recognize lease~~ROU assets and lease ~~liabilities. Topic 842 retains a distinction between~~liabilities for operating leases, while the accounting for existing finance leases ~~and operating leases. The classification criteria for distinguishing between finance leases and operating leases are~~remains substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance. The result of retaining a distinction between finance leases and operating leases is that under the lesseeunchanged.

Recently issued accounting model in Topic 842, the effect of leases in the statement of comprehensive income and the statement of cash flows is largely unchanged from previous GAAP. Based on existing leases currently classified as operating leases, the Company expects to recognize on the statements of financial position right-of-use assets and lease liabilities. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is assessing the effects that the adoption of this accounting pronouncement may have on the Company’s financial statements.pronouncements not yet adopted

On June 16, 2016 the FASB issued the ASU 2016-13 “Financial Instruments-Credit Losses (Topic 326): Measurement of credit losses on financial instruments”. This update amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, this update eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP, however this topic will require that credit losses be presented as an allowance rather than as a write-down. The new standard is effective for fiscal years beginning after December 15, 2019. The Company is assessing the effects that the adoption of this accounting pronouncement may have on its financial statements.

On ~~October 24, 2016~~August 28, 2018 the FASB issued ~~“ASU 2016-16—Income Taxes~~the ASU 2018-13 “Fair value measurement (Topic ~~740)~~820): ~~Intra-Entity Transfers of Assets Other Than Inventory”~~Disclosure Framework—Changes to the disclosure requirements for fair value measurement”. This update ~~eliminates~~modified the ~~prohibition~~disclosure requirements on ~~recognizing current and deferred income tax consequences for an intra-entity asset transfer until~~fair value measurements based on concepts in the ~~asset or assets have been sold to an outside party. Consequently,~~FASB Concepts Statement. The amendments in this update ~~requires recognition of the current and deferred income tax consequences of an intra-entity asset transfer when the transfer occurs. The new standard is~~are effective for fiscal years beginning after December 15, ~~2017.~~ ~~The adoption of this standard is not expected to have a material impact on the Company´s financial statements.~~

On September 29, 2017 the FASB issued “ASU 2017-13—Revenue recognition (Topic 605), Revenue from contracts with customers (Topic 606), Leases (Topic 840), and Leases (Topic 842)”. This update addresses Transition Related to Accounting Standards Updates No. 2014-09, Revenue from Contracts with Customers (Topic 606), and No. 2016-02, Leases (Topic 842). This Update also supersedes SEC paragraphs pursuant the rescission of SEC Staff Announcement, “Accounting for Management Fees Based on a Formula”, effective upon the initial adoption of Topic 606, Revenue from Contracts with Customers, and SEC Staff Announcement, “Lessor Consideration of Third-Party Value Guarantees,” effective upon the initial adoption of Topic 842, Leases.2019, including interim periods within those fiscal years. The adoption of this standard is not expected to have a material impact on the ~~Company´s~~Company’s financial statements.

On August 29, 2018 the FASB issued the ASU 2018-15 “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40)”. The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The amendments require an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. The amendments in this update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company is assessing the effects that the adoption of this accounting pronouncement may have on its financial statements.

Basic earnings per share for the Company’s common stock is computed by dividing, net income (loss) available to common shareholders attributable to common stock for the period by the weighted average number of common shares outstanding during the period.

On June 30, 2014, the Company issued $330 million of 2.25% Convertible Senior Notes due 2019 and on August 24, 2018 and August 31, 2018 the Company issued an aggregate principal amount of $880 million of 2.00% Convertible Senior Notes due 2028 (see Note 9 ofto these interim condensed consolidated financial ~~statements for discussion regarding~~statements). Additionally, on March 29, 2019 the Company issued Preferred Stock (see Note 2 and Note 10 to these ~~debt notes)~~interim condensed consolidated financial statements). The conversion of these ~~debt~~ notes and the Preferred Stock are included in the calculation for diluted earnings per share utilizing the “if converted” method. ~~The effect~~Accordingly, conversion of ~~that conversion is~~these Notes and the redeemable convertible preferred stock are not assumed for purposes of computing diluted earnings per share if the effect is antidilutive.

The denominator for diluted net income (loss) per share for the ~~nine and~~ three-month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 does not include any effect from the ~~2014 and 2017~~2019 Notes Capped Call Transactions (as defined ~~below)~~in Note 9) or the 2028 Notes Capped Call Transactions because it would be antidilutive. In the event of conversion of any or all of the 2019 Notes or the 2028 Notes, the shares that would be delivered to the Company under the Capped Call Transactions (as defined in Note 9) are designed to partially neutralize the dilutive effect of the shares that the Company would issue under the Notes. See Note 9 ofto these interim condensed consolidated financial statements and Note 17 of the financial statements as of December ~~31,2016~~31, 2018 on Form 10-K for more details.

For the three-month~~nine and three-month~~ periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018, the effects ~~on diluted earnings per share were~~of the Capped Call Transactions would have been antidilutive and, as a consequence, they were not ~~computed for~~factored into the calculation of diluted earnings per share.

Net income (loss) per share of common stock is as follows for the ~~nine and~~ three-month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016:~~2018:


				Nine Months Ended September 30,					Three Months Ended September 30,				Three Months Ended March 2019,
		2017					2016		2017		2016		2019		2018
				(In thousands)					(In thousands)				(In thousands)
			Basic		Diluted	Basic		Diluted	Basic	Diluted	Basic	Diluted	Basic	Diluted	Basic	Diluted
Net income per common share		$ 1.85			$ 1.85	$ 1.93		$ 1.93	$ 0.63	$ 0.63	$ 0.88	$ 0.88
Net income (loss) per common share															$ 0.13	$ 0.13	$ (0.29)	$ (0.29)

Numerator:	Numerator:
Net income		$ 81,500			$ 81,500	$ 85,017		$ 85,017	$ 27,666	$ 27,666	$ 38,912	$ 38,912
Net income (loss)															$ 11,864	$ 11,864	$ (12,919)	$ (12,919)
Amortization of redeemable convertible preferred stock															(5,841)	(5,841)	—	—
Net income (loss) corresponding to common stock															$ 6,023	$ 6,023	$ (12,919)	$ (12,919)

Denominator:	Denominator:
Weighted average of common stock outstanding for Basic earnings per share	Weighted average of common stock outstanding for Basic earnings per share	44,157,364				44,157,215			44,157,364		44,157,341		45,980,255	—	44,157,364	—
Adjusted weighted average of common stock outstanding for Diluted earnings per share	Adjusted weighted average of common stock outstanding for Diluted earnings per share				44,157,364			44,157,215		44,157,364		44,157,341	—	45,980,255	—	44,157,364

The changes in the carrying amount of goodwill for the ~~nine-month~~three-month period ended ~~September 30, 2017~~March 31, 2019 and the year ended December 31, ~~2016~~2018 are as follows:

Intangible assets with definite useful life are comprised of customer lists, non-compete and non-solicitation agreements, acquired software licenses, and other acquired intangible assets including developed technologies and trademarks. Aggregate amortization expense for intangible assets totaled $~~1,182~~1,230 thousands and $~~1,144~~1,672 thousands for the three-month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016, respectively, while for the nine-month periods ended at such dates amounted to$3,247thousands and$2,863thousands,~~2018, respectively.

The following table summarizes the remaining amortization of intangible assets (in thousands of U.S. dollars) with definite useful life as of ~~September 30, 2017~~March 31, 2019:

Reporting segments are based upon the Company’s internal organizational structure, the manner in which the Company’s operations are managed and resources are assigned, the criteria used by ~~management~~Management to evaluate the Company’s performance, the availability of separate financial information and overall materiality considerations.

Segment reporting is based on geography as the main basis of segment breakdown ~~to reflect~~in accordance with the criteria used for evaluation of the Company’s performance ~~defined~~as determined by ~~the management.~~Management. The Company’s segments include Brazil, Argentina, Mexico ~~Venezuela~~ and other countries ~~(such as~~(which includes Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, ~~Panama,~~ Honduras, Nicaragua, El Salvador, Bolivia, Guatemala, Panama, Paraguay, Peru, ~~Portugal,~~ Uruguay and ~~USA)~~the United States of America).

Direct contribution consists of net revenues from external customers less direct ~~costs. Direct~~ costs, which include costs of net revenues, product and technology development expenses, sales and marketing expenses and general and administrative expenses over which segment managers have direct discretionary control, such as advertising and marketing programs, customer support expenses, allowances for doubtful accounts, payroll and ~~third party~~third-party fees. All corporate related costs have been excluded from the Company’s direct contribution.

Expenses over which segment managers do not currently have discretionary control, such as certain technology and general and administrative costs are monitored by ~~management~~Management through shared cost centers and are not evaluated in the measurement of segment performance.

The following tables summarize the financial performance of the Company’s reporting segments:


	Nine Months Ended September 30, 2017						Three Months Ended March 31, 2019
	Brazil	Argentina	Mexico	Venezuela	Other Countries	Total	Brazil	Argentina	Mexico	Other Countries	Total
	(In thousands)						(In thousands)
Net revenues	$ 569,320	$ 250,692	$ 58,324	$ 38,329	$ 44,452	$ 961,117	$ 302,384	$ 93,776	$ 54,561	$ 23,049	$ 473,770
Direct costs	(390,008)	(150,973)	(95,683)	(16,841)	(37,052)	(690,557)	(225,343)	(67,492)	(65,585)	(20,447)	(378,867)
Impairment of Long-lived Assets	-	-	-	(2,837)	-	(2,837)
Direct contribution	179,312	99,719	(37,359)	18,651	7,400	267,723	77,041	26,284	(11,024)	2,602	94,903

Operating expenses and indirect costs of net revenues						(146,841)					(84,764)
Income from operations						120,882					10,139

Other income (expenses):
Interest income and other financial gains						37,020					24,444
Interest expense and other financial losses						(19,686)					(15,559)
Foreign currency losses						(19,475)					(3,669)
Net income before income tax expense						$ 118,741					$ 15,355

Table of Contents

~~MercadoLibre, Inc.~~

~~Notes to Interim Condensed Consolidated Financial Statements (unaudited)~~

Nine Months Ended September 30, 2016

Brazil

Argentina

Mexico

Venezuela

Other Countries

Total

(In thousands)
Net revenues

$                    311,427

$                    185,885

$                   34,375

$                   26,451

$                   29,983

$                        588,121
Direct costs

(188,772)

(105,217)

(29,004)

(12,691)

(21,281)

(356,965)
Impairment of Long-lived Assets

-

-

-

(13,717)

-

(13,717)
Direct contribution

122,655

80,668

5,371

43

8,702

217,439

Operating expenses and indirect costs of net revenues

(101,055)
Income from operations

116,384

Other income (expenses):

Interest income and other financial gains

25,192
Interest expense and other financial losses

(18,807)
Foreign currency losses

(5,062)
Net income before income tax expense

$                        117,707



		Three Months Ended September 30, 2017						Three Months Ended March 31, 2018
		Brazil	Argentina	Mexico	Venezuela	Other Countries	Total	Brazil	Argentina	Mexico	Other Countries	Total
		(In thousands)						(In thousands)
Net revenues	Net revenues	$ 229,475	$ 91,308	$ 22,604	$ 9,751	$ 17,523	$ 370,661	$ 184,155	$ 101,939	$ 17,065	$ 17,817	$ 320,976
Direct costs	Direct costs	(182,858)	(56,210)	(36,038)	(4,582)	(14,409)	(294,097)	(176,980)	(57,295)	(26,323)	(17,272)	(277,870)
Direct contribution	Direct contribution	46,617	35,098	(13,434)	5,169	3,114	76,564	7,175	44,644	(9,258)	545	43,106

Operating expenses and indirect costs of net revenues	Operating expenses and indirect costs of net revenues						(49,022)					(72,525)
Income from operations							27,542
Loss from operations												(29,419)

Other income (expenses):	Other income (expenses):
	Interest income and other financial gains						14,200
	Interest expense and other financial losses						(6,709)
	Foreign currency gains						1,622
Net income before income tax expense							$36,655
Interest income and other financial gains												9,195
Interest expense and other financial losses												(10,734)
Foreign currency gains												5,601
Net loss before income tax gains												$ (25,357)

Three Months Ended September 30, 2016

Brazil

Argentina

Mexico

Venezuela

Other Countries

Total

(In thousands)
Net revenues

$131,003

$69,983

$11,807

$6,885

$11,169

$230,847
Direct costs

(77,012)

(39,026)

(10,353)

(3,462)

(7,943)

(137,796)
Direct contribution

53,991

30,957

1,454

3,423

3,226

93,051

Operating expenses and indirect costs of net revenues

(39,342)
Income from operations

53,709

Other income (expenses):

Interest income and other financial gains

9,892

Interest expense and other financial losses

(6,492)

Foreign currency losses

(4,823)
Net income before income tax expense

$52,286

The following table summarizes the allocation of property and equipment, net based on geography:

The following table summarizes the allocation of the goodwill and intangible assets based on geography:

Consolidated net revenues by similar products and services for the ~~nine and~~three-month ~~three-month~~ periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 were as follows:

(**) Includes, among other things, Ad Sales, Classified Fees, Payment Fees ~~Shipping Fees~~ and other ancillary services.

(***) Includes ~~an amount of $232,426~~$186,965 thousands and ~~$139,630 thousands of Payment Fees for the nine-month periods ended September 30, 2017 and 2016, respectively. Includes an amount of $92,254 thousands and $52,444~~$144,763 thousands of Payment Fees for the three-month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, respectively.

The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016:~~

Quoted Prices in

Quoted Prices in

Balances as of

active markets for

Significant other

Unobservable

Balances as of

active markets for

Significant other

Unobservable

September 30,

identical Assets

observable inputs

inputs

December 31,

identical Assets

observable inputs

inputs
Description

2017

(Level 1)

(Level 2)

(Level 3)

2016

(Level 1)

(Level 2)

(Level 3)

(In thousands)
Assets

Cash and Cash Equivalents:

Money Market Funds

$                  189,574

$               189,574

$                           —

$           —

$          111,198

$                111,198

$                  —

$               —
Investments:

Sovereign Debt Securities

$                   21,786

$                 21,786

$                           —

$           —

$            50,703

$                  50,703

$                  —

$                —
Corporate Debt Securities

30,468

28,384

2,084

—

207,633

61,986

145,647

—
Certificates of deposit

—

—

—

—

35,374

—

35,374

—
Total Financial Assets

$                  241,828

$               239,744

$                      2,084

$           —

$          404,908

$               223,887

$         181,021

$             —
Liabilities:

Contingent considerations

$                          —

$                        —

$                           —

$           —

$              4,213

$                         —

$                  —

$        4,213
Long-term retention plan

38,503

—

38,503

—

27,135

—

27,135

—
Total Financial Liabilities

$            38,503

$                        —

$            38,503

$           —

$            31,348

$                         —

$           27,135

$        4,213


		Quoted Prices in				Quoted Prices in
	Balances as of	active markets for	Significant other	Unobservable	Balances as of	active markets for	Significant other	Unobservable
	March 31,	identical Assets	observable inputs	inputs	December 31,	identical Assets	observable inputs	inputs
Description	2019	(Level 1)	(Level 2)	(Level 3)	2018	(Level 1)	(Level 2)	(Level 3)
	(In thousands)
Assets
Cash and Cash Equivalents:
Money Market Funds	$ 239,269	$ 239,269	$ —	$ —	$ 179,252	$ 179,252	$ —	$ —
Restricted Cash and cash equivalents:
Money Market Funds	9,556	9,556	—		24,363	24,363	—	—
Investments:
Sovereign Debt Securities (Central Bank of Brazil mandatory guarantee)	238,029	238,029	—	—	284,317	284,317	—	—
Sovereign Debt Securities	1,344,778	1,344,778	—	—	429,602	429,602	—	—
Corporate Debt Securities	255	245	10	—	262	237	25	—
Total Financial Assets	$ 1,831,887	$ 1,831,877	$ 10	$ —	$ 917,796	$ 917,771	$ 25	$ —
Liabilities:
Contingent considerations	$ 2,170	$ —	$ —	$ 2,170	$ 2,097	$ —	$ —	$ 2,097
Long-term retention plan	53,422	—	53,422	—	42,625	—	42,625	—
Total Financial Liabilities	$ 55,592	$ —	$ 53,422	$ 2,170	$ 44,722	$ —	$ 42,625	$ 2,097

As of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, the Company’s financial assets valued at fair value consisted of assets valued using i) Level 1 inputs: unadjusted quoted prices in active markets (Level 1 instrument valuations are obtained from observable inputs that reflect quoted prices (unadjusted) for identical assets in active markets) ~~and;~~; and ii) Level 2 inputs: obtained from readily-available pricing sources for comparable instruments as well as instruments with inactive markets at the measurement date.

As of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018, the ~~Company´s~~Company’s liabilities were valued at fair value using ~~level~~Level 2 inputs and level 3 inputs (valuations based on unobservable inputs reflecting Company assumptions). Fair value of contingent considerations are determined based on the probability of achievement of the performance targets arising from each acquisition, as well as the Company’s historical experience with similar arrangements. ~~For~~During the ~~nine-month~~three-month period ended ~~September 30, 2017,~~March 31, 2019, the Company recognized in earnings a gain of $3,164 thousands and a loss of $166 thousands within other comprehensive income, in relation with contingent considerations. In addition, during the nine-month period ended September 30, 2017, the Company settledassumed contingent considerations for an amount of ~~$1,215~~$2,170 thousands.

The unrealized net gains or ~~loss~~losses on ~~short term~~short-term and ~~long term~~long-term investments are reported as a component of other comprehensive income. The Company does not anticipate any significant realized losses associated with those investments in excess of the Company’s historical cost.

As of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, the carrying value of the Company’s financial assets and liabilities measured at amortized cost approximated their fair value mainly because of ~~its short term~~their short-term maturity. These assets and liabilities included cash, cash equivalents, restricted cash and cash equivalents and short-term investments (excluding money markets funds and corporate debt security), accounts receivable, credit cards receivable, loans receivable, funds payable to customers, other assets, accounts payable, 2019 Notes (liability component), salaries and social security payable (excluding variable LTRP), taxes payable, provisions and other liabilities (excluding contingent ~~consideration)~~considerations). The ~~convertible senior notes~~estimated fair value of the 2028 Notes (liability component), ~~the~~which is based on Level 2 inputs, is $593,905 thousands and was determined based on market interest rates. The rest of the loans payable and other financial liabilities and operating lease liabilities approximate their fair value because the effective interest rates are not materially different from market interest ~~rates~~. rates.

The following table summarizes the fair value level for those financial assets and liabilities of the Company measured at amortized cost as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016:~~2018:



	Balances as of	Significant other	Balances as of	Significant other	Balances as of	Significant other	Balances as of	Significant other
	September 30,	observable inputs	December 31,	observable inputs	March 31,	observable inputs	December 31,	observable inputs
	2017	(Level 2)	2016	(Level 2)	2019	(Level 2)	2018	(Level 2)
	(In thousands)				(In thousands)
Assets
Time Deposits	$ 167,224	$ 167,224	$ 113,414	$ 113,414	$ 337,637	$ 337,637	$ 20,056	$ 20,056
Accounts receivable	28,564	28,564	25,435	25,435	34,524	34,524	35,153	35,153
Credit Cards receivable	406,883	406,883	307,904	307,904	308,468	308,468	360,298	360,298
Loans receivable, net	51,843	51,843	6,283	6,283	134,640	134,640	95,778	95,778
Other assets	89,097	89,097	58,900	58,900	105,622	105,622	102,753	102,753
Total Assets	$ 743,611	$ 743,611	$ 511,936	$ 511,936	$ 920,891	$ 920,891	$ 614,038	$ 614,038
Liabilities
Accounts payable and accrued expenses	$ 181,557	$ 181,557	$ 105,106	$ 105,106	$ 246,767	$ 246,767	$ 266,759	$ 266,759
Funds payable to customers	519,420	519,420	370,693	370,693	680,746	680,746	640,954	640,954
Salaries and social security payable	44,789	44,789	37,936	37,936	54,528	54,528	40,942	40,942
Taxes payable	27,923	27,923	27,338	27,338	34,414	34,414	31,058	31,058
Dividends payable	6,624	6,624	6,624	6,624
Operating lease liabilities					155,632	155,632	—	—
Loans payable and other financial liabilities (*)	334,145	334,145	313,523	313,523	743,223	784,182	735,177	735,177
Other liabilities	18,740	18,740	11,954	11,954	67,506	67,506	51,509	51,509
Total Liabilities	$ 1,133,198	$ 1,133,198	$ 873,174	$ 873,174	$ 1,982,816	$ 2,023,775	$ 1,766,399	$ 1,766,399

(*) The fair value of the ~~convertible senior notes~~2019 Notes and the 2028 Notes (including the equity component) isare disclosed in Note 9.

As of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018, the Company held no direct investments in auction rate securities ~~collateralized debt obligations or structured investment vehicles,~~ and does not have any non-financial assets or liabilities measured at fair value.

As of ~~September 30,~~ ~~2017~~March 31, 2019 and December 31, ~~2016,~~2018, the fair value of money market funds, short and long-term investments classified as available for sale securities are as follows:



	September 30, 2017				March 31, 2019
	Cost	Gross Unrealized Gains (1)	Gross Unrealized Losses (1)	Estimated Fair Value	Cost	Gross Unrealized Gains (1)	Gross Unrealized Losses (1)	Financial Gains	Estimated Fair Value

	(In thousands)				(In thousands)
Cash and cash equivalents
Money Market Funds	$ 189,574	$ —	$ —	$ 189,574	$ 239,269	$ —	$ —	$ —	$ 239,269
Total Cash and cash equivalents	$ 189,574	$ —	$ —	$ 189,574	$ 239,269	$ —	$ —	$ —	$ 239,269

Restricted cash and cash equivalents
Money Market Funds					$ 9,556	$ —	$ —	$ —	$ 9,556
Total Restricted cash and cash equivalents					$ 9,556	$ —	$ —	$ —	$ 9,556

Short-term investments
Sovereign Debt Securities (Central Bank of Brazil mandatory guarantee) (*)					$ 236,309	$ —	$ —	$ 1,720	$ 238,029
Sovereign Debt Securities (**)					1,071,309	98	—	1,327	1,072,734
Corporate Debt Securities	7,250	1	(4)	7,247	57	—	—	—	57
Sovereign Debt Securities	697	—	(3)	694
Total Short-term investments	$ 7,947	$ 1	$ (7)	$ 7,941	$ 1,307,675	$ 98	$ —	$ 3,047	$ 1,310,820

Long-term investments
Sovereign Debt Securities	$ 21,196	$ —	$ (104)	$ 21,092	$ 270,206	$ 1,837	$ —	$ 1	$ 272,044
Corporate Debt Securities	23,210	43	(32)	23,221	197	2	(1)	—	198
Total Long-term investments	$ 44,406	$ 43	$ (136)	$ 44,313	$ 270,403	$ 1,839	$ (1)	$ 1	$ 272,242
					��

Total	$ 241,927	$ 44	$ (143)	$ 241,828	$ 1,826,903	$ 1,937	$ (1)	$ 3,048	$ 1,831,887

(1) Unrealized gains (losses) from securities are attributable to market price movements, net foreign exchange losses and foreign currency translation. Management does not believe any remaining significant unrealized losses represent other-than-temporary impairments based on the evaluation of available evidence including the credit rating of the investments, as of March 31, 2019 and December 31, 2018.

(*) Brazilian government bonds measured at fair value with impact on the consolidated statement of income for the application of the fair value option. (See Note 2 – Investments fair value option)

(**) Includes $806,087 thousands of U.S treasury notes measured at fair value with impact on the consolidated statement of income for the application of the fair value option. (See Note 2 – Investments fair value option)


	December 31, 2016				December 31, 2018
	Cost	Gross Unrealized Gains (1)	Gross Unrealized Losses (1)	Estimated Fair Value	Cost	Gross Unrealized Gains (1)	Gross Unrealized Losses (1)	Estimated Fair Value

	(In thousands)				(In thousands)
Cash and cash equivalents
Money Market Funds	$ 111,198	$ —	$ —	$ 111,198	$ 179,252	$ —	$ —	$ 179,252
Total Cash and cash equivalents	$ 111,198	$ —	$ —	$ 111,198	$ 179,252	$ —	$ —	$ 179,252

Restricted Cash and cash equivalents
Money Market Funds					$ 24,363	$ —	$ —	$ 24,363
Total Restricted Cash and cash equivalents					$ 24,363	$ —	$ —	$ 24,363

Short-term investments
Sovereign Debt Securities (Central Bank of Brazil mandatory guarantee)					$ 282,752	$ 1,565	$ —	$ 284,317
Sovereign Debt Securities	$ 2,166	$ —	$ —	$ 2,166	156,910	237	—	157,147
Corporate Debt Securities	102,509	26	(168)	102,367	21	—	—	21
Certificates of deposit	35,336	40	(2)	35,374
Total Short-term investments	$ 140,011	$ 66	$ (170)	$ 139,907	$ 439,683	$ 1,802	$ —	$ 441,485

Long-term investments
Sovereign Debt Securities	$ 48,943	$ —	$ (406)	$ 48,537	$ 271,024	$ 1,431	$ —	$ 272,455
Corporate Debt Securities	105,632	90	(456)	105,266	244	—	(3)	241
Total Long-term investments	$ 154,575	$ 90	$ (862)	$ 153,803	$ 271,268	$ 1,431	$ (3)	$ 272,696

Total	$ 405,784	$ 156	$ (1,032)	$ 404,908	$ 914,566	$ 3,233	$ (3)	$ 917,796

The material portion of the Sovereign Debt Securities consists of U.S. Treasury Notes, which carry no significant risk.

On November 1, 2018, the Company obtained the approval from the Central Bank of Brazil to operate as an authorized payment institution. With the authorization, MercadoPago in Brazil is subject to the supervision of the Central Bank of Brazil and must fully comply with all the obligations established in the current regulation. Among other obligations, the regulation requires authorized payment institutions to hold the balance available in the payment institution account in either in a specific account of Central Bank of Brazil that does not pay interest or in Brazilian federal government bonds registered with the “Sistema Especial de Liquidacao e Custodia”. The percentage of the electronic currency that must be deposited was 100% and 80% as of March 31, 2019 and December 31, 2018, respectively. As of ~~September 30, 2017,~~March 31, 2019 and December 31, 2018 and in accordance with the regulation, the Company held $238,029 thousands and $284,317 thousands deposited in Brazilian federal government bonds, respectively, as mandatory guarantee.

As of March 31, 2019, the estimated fair values (in thousands of U.S. dollars) of ~~cash equivalents,~~money market funds and short-term and long-term investments classified by their effective maturities are as follows:

The Company is subject to certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings. The Company accrues liabilities when it considers probable that future costs will be incurred and such costs can be reasonably estimated. ~~The proceeding-related reserve is~~Proceeding-related liabilities are based on developments to date and historical information related to actions filed against the Company. As of ~~September��30, 2017,~~March 31, 2019, the Company had ~~established reserves~~accounted for estimated liabilities involving proceeding-related contingencies and other estimated contingencies of ~~$6,208 thousand~~$4,782 thousands to cover legal actions against the Company in which its ~~management~~Management has assessed the likelihood of a final adverse outcome as probable. Expected legal costs related to litigations are accrued when the legal service is actually provided.

In addition, as of ~~September 30, 2017~~March 31, 2019 the Company and its subsidiaries are subject to certain legal actions considered by the Company’s ~~management~~Management and its legal counsels to be reasonably possible for an estimated aggregate amount up to ~~$6,506 thousand.~~

$12,561 thousands. No loss ~~amount has~~amounts have been accrued for such reasonably possible legal ~~actions of which most significant (individually or in the aggregate) are described below and in note 15 is to the financial statements in the Form 10-K for the year ended December 31, 2016.~~

As of September 30, 2017, there were 56 lawsuits pending against our Argentine subsidiary in the Argentine ordinary courts and 1,856 pending claims in the Argentine Consumer Protection Agencies, where a lawyer is not required to file or pursue a claim.

~~As of September 30,~~ ~~2017, there were~~ 10 ~~claims pending against our Mexican subsidiaries in the Mexican ordinary courts~~ ~~and 248~~ ~~claims pending~~ ~~against our Mexican subsidiaries in the Mexican Consumer Protection Agencies, where a lawyer is not required to file or pursue a claim.~~

~~As of September 30, 2017, 700~~ ~~legal actions were pending in the Brazilian ordinary courts. In addition, as of September 30, 2017, there were~~ ~~4,016~~ ~~cases still pending in Brazilian consumer courts. Filing and pursuing of an action before Brazilian consumer courts do not require the assistance of a lawyer.~~

On July 12, 2017, São Paulo tax authorities assessed taxes and fines against one of our Brazilian subsidiaries (iBazar) relating to “ICMS Publicidade” for the period from July 2012 to December 2013 in an amount of R$ 12.2 million or $ 3.7 million according to the exchange rate in effect at that time. The Company will present administrative defense against the authorities’ claim. The opinion of the Company´s management, based on the opinion of external legal counsel, is that the risk of losing the case is reasonably possible, but not probable.

In most of the cases filed against the Company, the plaintiffs asserted that the Company was responsible for fraud committed against them, or responsible for damages suffered when purchasing an item on the Company’s website, when using MercadoPago or MercadoEnvios, or when the Company invoiced them.actions.

Other third parties have from time to time claimed, and others may claim in the future, that the Company was responsible for fraud committed against them, or that the Company has infringed their intellectual property rights. The underlying laws with respect to the potential liability of online intermediaries like the Company are unclear in the jurisdictions where the Company operates. Management believes that additional lawsuits alleging that the Company has violated copyright or trademark laws will be filed against the Company in the future.

Intellectual property and regulatory claims, whether meritorious or not, are time consuming and costly to resolve, require significant amounts of management time, could require expensive changes in the Company’s methods of doing business, or could require the Company to enter into costly royalty or licensing agreements. The Company may be subject to patent disputes, and be subject to patent infringement claims as the Company’s services expand in scope and complexity. In particular, the Company may face additional patent infringement claims involving various aspects of the payments businesses.

From time to time, the Company is involved in other disputes or regulatory inquiries that arise in the ordinary course of business. The number and significance of these disputes and inquiries are increasing as the Company’s business expands and the Company grows larger.

The Company provides consumers with a buyer protection program (“BPP”) for all transactions completed through the Company’s online payment solution (“~~MercadoPago”~~Mercado Pago”). This program is designed to protect buyers in the Marketplace from losses due primarily to fraud or counterparty non-performance. The Company’s BPP provides protection to consumers by reimbursing them for the total value of ~~the unfulfilled transaction, if~~ a purchased item and the value of any shipping service paid if it does not arrive or does not match the seller’s description. The Company is entitled to recover from the third-party carrier companies performing the shipping service certain amounts paid under the BPP. Furthermore, in some specific circumstances (i.e. Black Friday, Hot Sale), the Company enters into insurance contracts with ~~third party~~third-party insurance companies in order to cover contingencies that may arise from the BPP.

The maximum potential exposure under this program is estimated to be the volume of payments on the Marketplace, for which claims may be made under the terms and conditions of the Company’s ~~existing user agreements.~~BPP. Based on historical losses to date, the Company does not believe that the maximum potential exposure is representative of the actual potential exposure. The Company records a liability with respect to losses under this program when they are probable and the amount can be reasonably estimated.

As of ~~September 30, 2017, management's~~March 31, 2019 and December 31, 2018, Management’s estimate of the maximum potential exposure related to the Company’s buyer protection program is ~~$663,139~~$993,500 thousands and $988,664 thousands, respectively, for which the Company recorded an allowance of ~~$1,212~~$4,670 thousands and $4,146 thousands, respectively.

During the last quarter of 2018, the Company, through its Chilean subsidiary, obtained two lines of credit from Scotiabank Chile denominated in Chilean Pesos, to be applied to working capital needs. As of March 31, 2019, the amount outstanding under these lines of credit is $4,424 thousands and $2,949 thousands with maturity in April 2019 (renewed upon maturity) and both bear interest at a fixed rate of 3.72%. In addition, the Chilean subsidiary, obtained two lines of credit from Banco de Chile denominated in Chilean pesos, to be applied to working capital needs. As of March 31, 2019, the amount outstanding under these lines of credit is $8,869 thousands and $7,376 thousands with maturity in April 2019 (renewed upon maturity) and both bear interest at a fixed rate of 3.60% per annum. Lastly, the Chilean subsidiary obtained an unsecured line of credit from Banco de Chile denominated in local currency for an amount of $1,494 thousands which bears interest at a fixed rate of 3.65% per annum.

During the first quarter of 2019, the Company, through its Argentine subsidiary obtained two lines of credit from Citibank, N.A, denominated in local currency, to be applied to working capital needs. As of March 31, 2019, the amount outstanding under these lines of credit is $12,066 thousands and $12,053 thousands with maturity in April 2019 and bears interest at a fixed rate of 37.75% and 40.50% per annum, respectively. These lines of credit were fully paid off upon maturity. In addition, the Argentine subsidiary obtained an unsecured line of credit denominated in local currency for an amount of $3,121 thousands which bears interest at a fixed rate of 55.50% per annum. This line of credit was fully paid off as of ~~that date.~~May 3, 2019.

As of March 31, 2019 the Company, through its Mexican subsidiary, had three finance leases contracts related to facilities for its fulfillment center. The outstanding amount is $5,458 thousands which bears interest at a fixed rate of 6.39% per annum with maturity within the next 5.25 years, $1,089 thousands which bears interest at a fixed rate of 9.00% per annum with maturity within the next 4.0 years and $177 thousands which bears interest at a fixed rate of 9.90% per annum with maturity within the next year.

During the first quarter of 2019, the Company, through its Uruguayan subsidiary obtained a line of credit from Citibank, N.A, denominated in local currency, to be applied to working capital needs. As of March 31, 2019, the amount outstanding under this line of credit is $898 thousands with maturity in April, 2019 and bears interest at a fixed rate of 9.11% per annum. In addition, the Uruguayan subsidiary obtained an unsecured line of credit denominated in local currency for an amount of $10,195 thousands which bears interest at a fixed rate of 9.11% per annum.

See Notes 9 and 11 to these interim condensed consolidated financial statements for details regarding the Company’s 2019 Notes and 2028 Notes and collateralized debt securitization transactions, respectively.

The following table summarizes the 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018 and 2019 long term retention plan accrued compensation expense for the three-month periods ended March 31, 2019 and 2018, which are payable in cash according to the decisions made by the Board of Directors:

On August 24, 2018, the Company issued $800,000 thousands of 2.00% Convertible Senior Notes due 2028 and issued an additional $80,000 thousand of notes on August 31, 2018 pursuant to ~~Interim Condensed Consolidated Financial Statements (unaudited)~~the partial exercise of the initial purchasers’ option to purchase such additional notes, for an aggregate principal amount of $880,000 thousands of 2.00% Convertible Senior Notes due 2028 (collectively, the “2028 Notes”). The 2028 Notes are unsecured, unsubordinated obligations of the Company, which pay interest in cash semi-annually, on February 15 and August 15 of each year, at a rate of 2.00% per annum. The 2028 Notes will mature on August 15, 2028 unless earlier redeemed, repurchased or converted in accordance with their terms prior to such date. The 2028 Notes may be converted, under specific conditions, based on an initial conversion rate of 2.2553 shares of common stock per $1,000 principal amount of the 2028 Notes (equivalent to an initial conversion price of $443.40 per share of common stock), subject to adjustment as described in the indenture governing the 2028 Notes. For additional information regarding the 2028 Notes please refer to Note 2 and Note 17 to the audited consolidated financial statements for the year ended December 31, 2018, contained in the Company’s Annual Report on Form 10-K filed with the SEC.

In connection with the issuance of the 2028 Notes, the Company paid $91,784 thousands and $11,472 thousands (including transaction expenses) in August 2018 and November 2018, respectively, to enter into the 2028 Notes Capped Call Transactions with certain financial institutions. The 2028 Notes Capped Call Transactions are expected generally to reduce the potential dilution upon conversion of the 2028 Notes in the event that the market price of the Company’s common stock is greater than the strike price of the 2028 Notes Capped Call Transactions. The cost of the 2028 Notes Capped Call Transactions is included as a net reduction to additional paid-in capital in the stockholders’ equity section of the consolidated balance sheets.

The total estimated fair value of the 2028 Notes was$1,181,391 thousandsand$787,266 thousandsas of March 31, 2019 and December 31, 2018, respectively. The fair value was determined based on the closing trading price per $100 principal amount of the 2028 Notes as of the last day of trading for the period. The Company considered the fair value of the 2028 Notes as of March 31, 2019 and December 31, 2018to be a Level 2 measurement. The fair value of the 2028 Notes is primarily affected by the trading price of our common stock and market interest rates.Based on the $507.7 closing price of the Company’s common stock on March 31, 2019, the if-converted value of the 2028 Notes exceeded their principal amount by $127,673 thousands.

The following table presents the carrying amounts of the liability and equity components related to the 2028 Notes as of March 31, 2019:

~~On April 3, 2017, the Board of Directors, upon the recommendation of the Compensation Committee, adopted the 2017 Long-Term Retention Plan (“2017 LTRP”).~~ ~~In addition to the annual salary and bonus of each employee, certain employees (“Eligible Employees”) are eligible to participate in the 2017 LTRP, which provides for the grant~~ ~~to an Eligible Employee~~ of ~~a cash-settled fixed (a “2017 LTRP Fixed Award”) and a cash-settled variable award, (a “2017 LTRP Variable Award”, and together with any 2017 LTRP Fixed Award, the “2017 LTRP Awards”).~~ In order to receive payment in respect of the 2017 LTRP Awards, each Eligible Employee must satisfy the performance conditions established by the Board of Directors for such employee. If these conditions are satisfied, the Eligible Employee will, subject to his or her continued employment as of each applicable payment date, receive the full amount of his or her 2017 LTRP Awards, payable as follows:

The following table ~~summarizes~~presents the ~~2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016 and 2017 long term retention plan accrued compensation~~interest expense for the ~~nine~~contractual interest, the accretion of debt discount and ~~three-month periods ended September 30, 2017 and 2016, which are payable in cash according to~~ the ~~decisions made by the Board~~amortization of ~~Directors:~~

On June 30, 2014, the Company issued ~~$330 million~~$330,000 thousands of 2.25% ~~convertible senior notes~~Convertible Senior Notes due 2019 (the ~~“Notes”~~“2019 Notes”). The 2019 Notes are unsecured, unsubordinated obligations of the Company, which pay interest in cash semi-annually, on January 1 and July 1, at a rate of 2.25% per annum. The 2019 Notes will mature on July 1, 2019 unless earlier repurchased or converted in accordance with their terms prior to such date. The 2019 Notes may be converted, under specific conditions, based on an initial conversion rate of 7.9353 shares of common stock per $1,000 principal amount of the 2019 Notes (equivalent to an initial conversion price of $126.02 per share of common stock), subject to adjustment as described in the indenture governing the 2019 Notes.

~~Holders may convert their notes at their option at any time prior~~In connection with the issuance of the 2019 Notes, the Company paid $19,668 thousands, $67,308 thousands and $45,692 thousands (including transaction expenses) in June 2014, September 2017 and March 2018, respectively, to ~~January 1,~~enter into capped call transactions with respect to shares of the common stock (the “2019 Notes Capped Call Transactions” and together with the 2028 Notes Capped Call Transactions, the “Capped Call Transactions”), with certain financial institutions. The 2019 ~~only under~~Notes Capped Call Transactions are expected generally to reduce the ~~following circumstances: (1) during any calendar quarter commencing after~~potential dilution upon conversion of the ~~calendar quarter ending on September 30, 2014 (and only during such calendar quarter), if~~2019 Notes in the ~~last reported sale~~event that the market price of the common stock ~~for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter~~ is greater than ~~or equal to 130%~~the strike price of the ~~conversion price on each applicable trading day; (2) during~~2019 Notes Capped Call Transactions. The cost of the ~~five business day period after any five consecutive trading day period (the “measurement period”)~~2019 Notes Capped Call Transactions is included as a net reduction to additional paid-in capital in ~~which~~ the ~~trading price per $1,000~~stockholders’ equity section of the consolidated balance sheets.

On August 24, 2018, the Company used a portion of the net proceeds from the 2028 Notes to repurchase or exchange and retire $263,724 thousands principal amount of ~~notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price~~its outstanding 2019 Notes. The consideration paid included $348,123 thousands in cash and 1,044,298 shares of the Company’s common ~~stock~~stock. Additionally, the Company entered into agreements with certain financial institutions who were counterparties to the existing 2019 Notes Capped Call Transactions entered into in June 2014 and September 2017 to terminate a portion of those transactions, in each case, in a notional amount corresponding to the amount of 2019 Notes repurchased or exchanged and retired. In connection with the termination of existing 2019 Capped Call Transactions and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events. On or after January 1, 2019 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their notes at any time, regardlessrelated unwinding of the ~~foregoing circumstances.~~ existing hedge position, the Company received from certain financial institutions the amount of $121,703 thousands and $14,405 thousands in August 2018 and November 2018, respectively.

During the period from October 1, 2016 through ~~December~~March 31, ~~2016, 12~~2019, 291 Notes were converted for a total amount of ~~$12~~$291 thousands. During the period from April 1, 2017 through September 30, 2017, 16 Notes were converted for a total amount of $16 thousands. Additionally, during the third quarter of 2017, the conversion threshold was met again and the Notes became convertible at the holders’ option beginning on October 1, 2017 and ending on December 31, 2017. The determination of whether or not the Notes are convertible must continue to be performed on a quarterly basis. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. The intention of the Company is to share-settle the ~~total amount~~excess conversion value due upon conversion of the 2019 Notes.

From ~~October~~April 1, ~~2017~~2019 to the date of issuance of these interim condensed consolidated financial statements, no additional conversion requests for 2 Notes were made.

In connection with the issuance of the Notes, the Company paid $19.7 million and $67.3 million (including transaction expenses) in June 2014 and September 2017, respectively, to enter into capped call transactions with respect to shares of the common stock (the “Capped Call Transactions”), with certain financial institutions. The Capped Call Transactions are expected generally to reduce the potential dilution upon conversion of the Convertible Notes in the event that the market price of the common stock is greater than the strike price of the Capped Call Transactions. The cost of the Capped Call Transactions is included as a net reduction to additional paid-in capital in the stockholders’ equity section of the consolidated balance sheets.

The total estimated fair value of the 2019 Notes was $~~687.9 million~~264,992 thousands and $~~458.8 million~~150,572 thousands as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively. The fair value was determined based on the closing trading price per $100 principal amount of the 2019 Notes as of the last day of trading for the period. The Company considered the fair value of the 2019 Notes as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018 to be a Level 2 measurement. The fair value of the 2019 Notes is primarily affected by the trading price of our common stock and market interest rates. Based on the ~~$258.9~~$507.7 closing price of the Company’s common stock on ~~September 30, 2017,~~March 31, 2019, the if-converted value of the 2019 Notes exceeded their principal amount by ~~$348.0 million.~~$199,868 thousands.

The following table presents the carrying amounts of the liability and equity components related to the ~~2.25% Convertible Senior~~2019 Notes ~~Due 2019~~ as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016:~~2018:

The following table presents the interest expense for the contractual interest, the accretion of debt discount and the amortization of debt issuance costs:

~~In each~~On March 15, 2019, the Company closed a public equity offering of ~~February, May, August and November~~approximately $1,150,000 thousands of ~~2016,~~common stock at a public offering price of $480 per share (the “Offering”). Pursuant to the ~~Board~~Offering, the Company issued 2,395,834 shares of ~~Directors approved a quarterly cash dividend~~common stock, par value $0.001 per share (the “Common Stock”) which includes the exercise in full of ~~$6,624thousands (or$0.150per share) on~~ the ~~Company’s outstanding~~underwriters’ option to purchase $150 million of additional shares of common stock. ~~The dividends were paid~~

In addition, on ~~April~~March 15, ~~July 15,October 14, 2016 and January 16, 2017~~2019 the Company closed its $750,000 thousands concurrent private placement of common stock to ~~stockholders~~PayPal, Inc (“PayPal”). PayPal purchased 1,719,790 shares of ~~record as~~Common Stock at a price of ~~the close of business onMarch 31, June 30, September 30, andDecember 31, 2016.~~$436.10 per share.

On March ~~2, 2017, the Board~~29, 2019, in a separate private placement, an affiliate of ~~Directors approved a change to the Company’s dividend policy for providing for a fixed quarterly dividend payment in 2017~~Dragoneer Investment Group purchased 100,000 shares of ~~$0.150~~perpetual convertible preferred stock designated as Series A Perpetual Preferred Stock, par value $0.001 per share ~~($0.600 per share annually). The new dividend policy took effect following the payment of the $0.150 per share dividend declared by the Board of Directors~~ of the Company ~~which was paid on April 17, 2017~~for $100,000 thousands in the aggregate. The Preferred Stock is a class of equity security that ranks senior to ~~shareholders~~the Common Stock with respect to dividend rights or rights upon liquidation.

Each share of ~~record as~~Preferred Stock has a stated value of ~~the close of business on March 31, 2017.~~

~~On May 2, 2017, the Board of Directors approved~~$1,000, is entitled to a ~~quarterly~~ cash dividend of ~~$6,624 thousands (or $0.150~~4% per ~~share)~~annum, and is convertible into shares of the Company’s Common Stock at an initial conversion price of $479.71 (subject to adjustment). The Company may require the conversion of any or all of the Preferred Stock beginning on March 29, 2023 if certain conditions set forth in the ~~Company´s~~Certificate of Designation are met. The Company may redeem any or all of the Preferred Stock for cash, shares of its Common Stock or a combination thereof (at its election, subject to certain conditions) at any time beginning on March 29, 2026 for a percentage of the stated value of each share of Preferred Stock, plus any accrued and unpaid dividends at such time. On March 15, 2026, September 15, 2026 and March 15, 2027, the holders of the Preferred Stock shall have the right to redeem all of the outstanding shares of ~~common stock. The second quarterly dividend was paid on July 14, 2017 to stockholdersof record as~~Preferred Stock for cash, shares of the ~~close~~Company’s Common Stock or a combination thereof (at the Company’s election, subject to certain conditions) to be determined by the formula set forth in the Certificate of ~~business on June 30, 2017.~~

~~On July 31, 2017,~~Designation. Upon the ~~Board~~occurrence of ~~Directors approved~~ a ~~quarterly cash dividend~~change of~~$6,624thousands (or$0.150per share) on ouroutstanding~~ control, the holders will have the right to redeem their shares of ~~common stock.~~Preferred Stock for cash at a price set forth in the Certificate of Designation. The ~~third quarterly dividend was paid onOctober 16, 2017to stockholders of record as~~holders of the ~~close of business~~Preferred Stock have the right to vote on~~September 30, 2017.~~

~~On October 31, 2017, the Board of Directors approved~~ matters submitted to a ~~quarterly cash dividend of$6,624thousands (or$0.150per share) on ouroutstandingshares of common stock. This quarterly dividend is payable on January 16, 2018to stockholders of record as~~vote of the ~~close~~holders of ~~business~~Common Stock on~~December 31, 2017.~~ an as-converted basis unless required by applicable law.

In the aggregate, the Company raised funds in the amount of $1,965,188 thousands net of issuance costs paid in the amount of $34,812 thousands.

The process of securitization consists of the issuance of securities collateralized by a pool of assets through a special purpose entity, often under a VIE.

The Company securitizes financial assets associated with its loan receivables portfolio. The Company’s securitization transactions typically involve the legal transfer of financial assets to bankruptcy remote special purpose entities (“SPEs”) or the acquisition of loans receivable portfolios through SPEs. The Company generally retains economic interests in the collateralized securitization transactions, which are retained in the form of subordinated interests. For accounting purposes, the Company is precluded from recording the transfers of assets in securitization transactions as sales or is required to consolidate the SPE.

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The Company securitizes certain loan receivables through Brazilian and Argentine SPEs, formed to securitize loan receivables provided by the Company to its users or purchased from financial institutions that grant loans to the Company’s users through Mercado Pago. According to the SPE contracts, the Company has determined that it has both the power to direct the activities of the entity that most significantly impact the entity’s performance and the obligation to absorb losses or the right to receive benefits of the entity that could be significant because it retains the equity certificates of participation, and would therefore also be consolidated. When the Company controls the vehicle, it accounts the securitization transactions as if they were secured financing and therefore the assets, liabilities, and related results are consolidated in its financial statements.

As of March 31, 2019, the carrying value of the Brazilian collateralized debt was $46,687 thousands, composed of: 1) $15,568 thousands, which bears interest at a rate of Brazilian DI plus 3.5% per annum for a term of 36 months, due in June 2021 and 2) $31,119 thousands, which bears interest at a rate of Brazilian DI plus 3.25% per annum for a term of 30 months, due in May 2021. The carrying value of the Argentine collateralized debt was $7,582 thousands, composed of: 1) $5,593 thousands bearing interest at a variable rate equivalent to the BADLAR rate plus 200 basis points with a minimum 33% and a maximum 48% nominal rate per annum for a term of 8 months, due in October 2019 and 2) $1,989 thousands bearing interest at a variable rate equivalent to the BADLAR rate plus 200 basis points with a minimum 30% and a maximum 45% nominal rate per annum for a term of 12 months, due in July 2019. This secured debt is issued by the SPEs and includes collateralized securities used to fund MercadoCredito business. The third-party investors in the securitization transactions have legal recourse only to the assets securing the debt and do not have recourse to the Company. Additionally, the cash flows generated by the SPEs are restricted to the payment of amounts due to third-party investors, but the Company retains the right to residual cash flows.

The assets and liabilities of the SPEs are included in the Company’s interim condensed consolidated financial statements as of March 31, 2019 as follows:



	March 31,		December 31,
	2019		2018
Assets		(in thousands)		(in thousands)
Current assets:
Restricted cash and cash equivalents	$	10,375	$	24,363
Loans receivable, net		70,757		51,471
Total current assets		81,132		75,834
Total assets	$	81,132	$	75,834
Liabilities
Current liabilities:
Accounts payable and accrued expenses	$	103	$	113
Loans payable and other financial liabilities		8,089		7,539
Total current liabilities		8,192		7,652
Non-current liabilities:
Loans payable and other financial liabilities		46,180		46,441
Total non-current liabilities		46,180		46,441
Total liabilities	$	54,372	$	54,093

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12. Leases

The Company leases certain fulfillment centers and office space in the various countries in which it operates. The lease agreements do not contain any residual value guarantees or material restrictive covenants.

Supplemental balance sheet information related to leases was as follows (in thousands):


		March 31,
		2019
Operating Leases
Operating lease right-of-use assets	$	153,499

Operating lease liabilities	$	155,632

Finance Leases
Property and equipment, at cost		9,119
Accumulated depreciation		(284)
Property and equipment, net	$	8,835

Loans payable and other financial liabilities	$	6,724

The following table summarizes the weighted average remaining lease term and the weighted average incremental borrowing rate for operating and finance leases at March 31, 2019:


Weighted average remaining lease term
Operating leases	9	Years
Finance leases	5	Years


Weighted average discount rate
Operating leases	10.44	%
Finance leases	6.91	%

The components of lease expense were as follows (in thousands):


		March 31,
		2019

Operating lease cost	$	6,477

Finance lease cost:
Depreciation of property and equipment		235
Interest on lease liabilities		152
Total finance lease cost	$	387

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Supplemental cash flow information related to leases was as follows (in thousands):


		Three months ended
		March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	4,124
Financing cash flows from finance leases		662


Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	35,926
Finance leases		177

The following table summarizes the fixed, future minimum rental payments, excluding variable costs, which are discounted by the Company’s incremental borrowing rates to calculate the lease liabilities for the operating and finance leases (in thousands):


Year Ending March 31,		Operating Leases		Finance Leases
One year or less	$	26,507	$	1,905
One year to two years		27,364		1,719
Two years to three years		26,469		1,719
Three years to four years		25,383		1,719
Four years to five years		23,826		1,399
Thereafter		112,956		359
Total lease payments	$	242,505	$	8,820
Less imputed interest		(86,873)		(2,096)
Total	$	155,632	$	6,724

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Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Regarding Forward-Looking Statements

Any statements made or implied in this report that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements within the meaning of Section 27 A of the Securities Exchange Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and should be evaluated as such. The words “anticipate,” “believe,” “expect,” “intend,” “plan,” “estimate,” “target,” “project,” “should,” “may,” “could,” “will” and similar words and expressions are intended to identify forward-looking statements. Forward-looking statements generally relate to information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, future economic, political and social conditions in the countries in which we operate and their possible impact on our business, and the effects of future regulation and the effects of competition. Such forward-looking statements reflect, among other things, our current expectations, plans, projections and strategies, anticipated financial results, future events and financial trends affecting our business, all of which are subject to known and unknown risks, uncertainties and other important factors (in addition to those discussed elsewhere in this report) that may cause our actual results to differ materially from those expressed or implied by these forward-looking statements. These risks and uncertainties include, among other things:

our expectations regarding the continued growth of online commerce and Internet usage in Latin America;

our ability to expand our operations and adapt to rapidly changing technologies;

our ability to attract new customers, retain existing customers and increase revenues;

the impact of government and central bank ~~regulations;~~regulations on our business;

litigation and legal liability;

systems interruptions or failures;

our ability to attract and retain qualified personnel;

consumer trends;

security breaches and illegal uses of our services;

competition;

reliance on third-party service providers;

enforcement of intellectual property rights;

~~our ability to attract new customers, retain existing customers and increase revenues;~~

seasonal fluctuations; and

political, social and economic conditions in Latin ~~America in general, and Venezuela in particular, and possible future currency devaluation and other changes to its exchange rate systems.~~America.

Many of these risks are beyond our ability to control or predict. New risk factors emerge from time to time and it is not possible for ~~management~~Management to predict all such risk factors, nor can it assess the impact of all such risk factors on our company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

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 our forward-looking statements. These statements are not guarantees of future performance. They are subject to future events, risks and uncertainties–many of which are beyond our ~~control-as~~control– as well as potentially inaccurate assumptions that could cause actual results to differ materially from our expectations and projections. Some of the material risks and uncertainties that could cause actual results to differ materially from our expectations and projections are described in “Item 1A — Risk Factors” in Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~2018 filed with the Securities and Exchange Commission (“SEC”) on February 24~~, 2017,~~28, 2019, as updated by those ~~described in “Item 1A — Risk Factors” in Part II of this report and~~ in other reports we file from time to time with the SEC.

You should read that information in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I of this report, our unaudited interim condensed consolidated financial statements and related notes in Item 1 of Part I of this report and our audited consolidated financial statements and related notes in Item 8 of Part II of our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018. We note such information for investors as permitted by the Private Securities Litigation Reform Act of 1995. There also may be other factors that we cannot anticipate or that are not described in this report, generally because they are unknown to us or we do not perceive them to be a material ~~risk~~ that could cause results to differ materially from our expectations.

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Forward-looking statements speak only as of the date they are made, and we do not undertake to update these forward-looking statements except as may be required by law. You are advised, however, to review any further disclosures we make on related subjects in our periodic filings with the SEC.

The discussion and analysis of our financial condition and results of operations ~~presents~~has been organized to present the following:

a brief overview of our company;

a discussion of our principal trends and results of operations for the ~~nine and the~~ three-month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016;~~2018;

a review of our financial presentation and accounting policies, including our critical accounting policies;

a discussion of the principal factors that influence our results of operations, financial condition and liquidity;

a discussion of our liquidity and capital resources and a discussion of our capital expenditures;

a description of our non-GAAP financial measures; and

a discussion of the market risks that we face.

Other Information

We routinely post important information for investors on our Investor Relations website, http://investor.mercadolibre.com. We use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under SEC Regulation FD (Fair Disclosure). Accordingly, investors should monitor our Investor Relations website, in addition to following our press releases, SEC filings, public conference calls and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this report.

Business Overview

MercadoLibre, Inc. (together with its subsidiaries “us”, “we”, “our” or the “Company”) is ~~one of~~ the largest online commerce ~~ecosystems~~ecosystem in Latin America. Our platform is designed to provide users with a complete portfolio of services to facilitate commercial transactions. We are a market leader in e-commerce in each of Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, Mexico, Peru, Uruguay and Venezuela, based on the number of unique visitors and page views. We also operate online commerce platforms in the Dominican Republic, Honduras, Nicaragua, El Salvador, Panama, Bolivia, Guatemala ~~Paraguay~~ and ~~Portugal.~~Paraguay.

Through our platform, we provide buyers and sellers with a robust environment that fosters the development of a large e-commerce community in Latin America, a region with a population of over ~~610~~644 million people and with one of the fastest-growing Internet penetration rates in the world. We believe that we offer technological and commercial solutions that address the distinctive cultural and geographic challenges of operating an online commerce platform in Latin America.

We offer our users an ecosystem of six integrated e-commerce services: the MercadoLibre Marketplace, the Mercado Pago FinTech platform, the Mercado Envios logistics service, the MercadoLibre Classifieds ~~Service, the MercadoPago payments solution, the MercadoEnvios shipping~~ service, the MercadoLibre advertising ~~program~~solution and the MercadoShops online webstores solution.

The MercadoLibre Marketplace, which we sometimes refer to as our marketplace, is a fully-automated, topically-arranged and user-friendly online commerce ~~service.~~platform, which can be accessed through our website and mobile app. This ~~service permits~~platform enables both businesses and individuals to list merchandise and conduct sales and purchases ~~online in either a fixed-price or auction-based format.~~online.

~~To complement the MercadoLibre Marketplace, we developed MercadoPago, an integrated online payments solution. MercadoPago~~Mercado Pago is our financial technology (FinTech) solution, designed to facilitate transactions both on and off our ~~marketplace~~marketplaces by providing a mechanism that allows our users to securely, easily and promptly send and receive payments online. Outside of our marketplaces, Mercado Pago ~~is currently available in: Argentina, Brazil, Mexico, Colombia, Venezuela, Uruguay, Perú and Chile. MercadoPago~~ allows merchants to ~~facilitate checkout and payment processes on~~process transactions via their websites and mobile apps, as well as in their brick-and-mortar stores through QR codes and mobile points of sale (“MPOS”) devices. It also enables users to ~~simply~~easily transfer money to each ~~other either through~~other. Through MercadoFondo, our asset management product, our users are able to invest the ~~website or using the MercadoPago App, available on iOS~~stored balance from their Mercado Pago account at competitive rates and ~~Android. Additionally, during 2016, we launched~~in a simple way. MercadoCredito, ~~which is designed to extend loans to specific merchants and consumers. Our MercadoCredito~~our lending solution, allows us to ~~deepen our engagement with our merchants, in Argentina, Brazil~~finance merchants’ working capital needs and ~~Mexico, and consumers, in Argentina, by offering them additional services and is currently available.~~ consumers’ purchases.

To further enhance our suite of e-commerce services, we launched the ~~MercadoEnvios~~Mercado Envios shipping program in Brazil, Argentina, Mexico, Colombia, Chile and ~~Chile.~~Uruguay. Through ~~MercadoEnvios,~~Mercado Envios, we offer ~~our sellers~~ a cost-efficient way to utilize our existing distribution chain to fulfill ~~their sales.~~sales on our platform. Sellers ~~opting~~that opt into the program are able to offer a uniform and seamlessly integrated shipping experience to their buyers at competitive prices. As of March 31, 2019, we also offer free shipping to buyers in Brazil, Argentina, Mexico, Chile and Colombia.

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Through MercadoLibre Classifieds, ~~Service,~~ our online classified listing service, our users can also list and purchase motor vehicles, ~~vessels, aircraft,~~ real estate and services in ~~all~~the countries where we operate. Classifieds listings differ from Marketplace listings as they only charge optional placement fees and ~~never~~not final value fees. Our classifieds pages are also a major source of traffic to our ~~website,~~platform, benefitting both the Enhanced Marketplace and ~~non-marketplace~~non-Marketplace businesses.

~~To enhance the MercadoLibre Marketplace,~~Furthermore, we developed our MercadoLibre advertising ~~program,~~platform to enable businesses to promote their products and services on the Internet. Through ~~our advertising program,~~this platform, MercadoLibre’s sellers and large advertisers are able to display ~~product~~ ads on our ~~webpages and our associated vertical sites in the region.~~webpages.

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Additionally, through MercadoShops, our online store solution, users can set-up, manage and promote their own online store. These stores are hosted by MercadoLibre and offer integration with the ~~other~~ marketplace, and payment and advertising services we offer. Users can ~~choose from a basic, free store or~~ pay monthly subscriptions for enhanced functionality and value added services on their store.

~~MercadoLibre also began developing and selling enterprise software solutions to e-commerce business clients in Brazil during the second quarter of 2015.~~

Reporting Segments and Geographic Information

Our segment reporting is based on geography, which is the current criterion ~~we are using~~our Management uses to evaluate our segment performance. Our geographic segments ~~include~~are Brazil, Argentina, Mexico ~~Venezuela~~ and ~~other countries~~Other Countries (including Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Panama, Peru, ~~Portugal,~~ Bolivia, Honduras, Nicaragua, El Salvador, Guatemala, Paraguay, Uruguay and the United States of America ~~(real~~(through real estate classifieds in the State of Florida only)). Although we discuss long-term trends in our business, it is our policy not to ~~not~~ provide earnings guidance in the traditional sense. We believe that uncertain conditions make the forecasting of near-term results difficult. Further, we seek to make decisions focused primarily on the long-term welfare of our company and believe focusing on ~~short term~~short-term earnings does not best serve the interests of our stockholders. We believe that execution of key strategic initiatives as well as our expectations for long-term growth in our markets will best create stockholder value. ~~We, therefore, encourage potential investors to consider this strategy before making an investment in our common stock.~~ A long-term focus may make it more difficult for industry analysts and the market to evaluate the value of our company, which could reduce the value of our common stock or permit competitors with ~~short term~~short-term tactics to grow ~~stronger~~more rapidly than us. We, therefore, encourage potential investors to consider this strategy before making an investment in our common stock.

The following table sets forth the percentage of our consolidated net revenues by segment for the ~~nine and the~~ three-month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016:~~

2018:


	Nine-months Periods Ended				Three-month Periods Ended				Three-month Periods Ended
	September 30,				September 30,				March 31,
(% of total consolidated net revenues) (*)	2017		2016		2017		2016
(% of total consolidated net revenues) () (*)									2019		2018
Brazil	59.2	%	53.0	%	61.9	%	56.7	%	63.8	%	57.4	%
Argentina	26.1		31.6		24.6		30.3		19.8		31.8
Mexico	6.1		5.8		6.1		5.1		11.5		5.3
Venezuela	4.0		4.5		2.6		3.0
Other Countries	4.6		5.1		4.7		4.8		4.9		5.6

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

(**) The amount incurred in shipping subsidies are netted from revenues, when we act as an agent, was $74.0 million and $112.5 million for the three-month periods ended March 31, 2019 and 2018, respectively.

The following table summarizes the changes in our net revenues by segment for the three-month periods ended March 31, 2019 and 2018:

(*)Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

(**) The ~~following table summarizes the changes~~amount incurred in ~~our net~~shipping subsidies are netted from revenues, ~~by segment~~when we act as an agent, was $74.0 million and $112.5 million for the ~~nine and~~ three-month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016:~~

~~(*)~~2018, respectively. ~~Percentages have been calculated using whole-dollar amounts rather than rounded amounts that appear in the table. The table above may not total due to rounding.~~

~~In September 2017,~~On March 15, 2019, we ~~paid~~ ~~$67.3~~closed a public equity offering of approximately $1,150 million ~~(including transaction expenses)~~of common stock at a public offering price of $480 per share (the “Offering”). Pursuant to ~~enter into privately negotiated capped call transactions with respect to~~ the Offering, we issued 2,395,834 shares of ~~our~~ common stock, ~~with several financial institutions. The 2017 Capped Call Transactions are~~par value $0.001 per share (the “Common Stock”) which includes the exercise in ~~addition to the 2014 Capped Call Transactions and are expected generally to reduce the potential dilution upon conversion~~full of the ~~Convertible Notes~~underwriters’ option to purchase $150 million of additional shares of Common Stock.

In addition, on March 15, 2019 we closed our $750 million concurrent private placement of common stock to PayPal, Inc. (PayPal). Based on the securities purchase agreement, PayPal purchased 1,719,790 shares of Common Stock at a price of $436.10 per share.

On March 29, 2019, in a separate private placement, an affiliate of Dragoneer Investment Group purchased 100,000 shares of perpetual convertible preferred stock designated as Series A Perpetual Preferred Stock, par value $0.001 per share (the “Preferred Stock”), for $100 million in the ~~event that~~aggregate.

In the ~~market price~~aggregate, we raised funds in the amount of $1,965.2 million net of issuance costs paid in the amount of $34.8 million.

Please see note 10 to our ~~common stock is greater than the strike price of the Capped Call Transactions, initially set at $295.67~~ ~~per common share. The 2017 Capped Call Transactions are subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the Notes, and have a cap price of approximately $366.06~~ ~~per common share.~~ ~~If any portion of the Notes are converted prior to maturity or we repurchase any portion of the Notes prior to maturity, a corresponding portion of the Capped Call Transactions may be terminated~~unaudited condensed consolidated financial statements for ~~value at~~additional information regarding our ~~election.~~equity offering.

We recognize revenues in each of our ~~five~~four geographical reporting segments. Within each of our segments, the services we provide generally fall into two distinct revenue ~~streams, “Marketplace” which includes our core business~~streams: “Enhanced Marketplace” and “Non-Marketplace” ~~which includes ad sales, classified fees, payment fees, shipping fees and other ancillary businesses.~~.

The following table summarizes our consolidated net revenues by revenue stream for the ~~nine and the~~ three-month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016:~~2018:

(**) Includes final value fees and shipping fees. The amount incurred in shipping subsidies are netted from revenues when we act as an agent, was $74.0 million and $112.5 million for the three-month periods ended March 31, 2019 and 2018, respectively.

(***) Includes, among other things, ~~Ad Sales, Classified Fees, Payment Fees, Shipping Fees~~ad sales, classified fees, payment fees and other ancillary services.

(****) Includes ~~an amount of $232.4~~$187.0 million and ~~$139.6 million of Payment Fees for the nine-month periods ended September 30, 2017 and 2016, respectively. Includes an amount of $92.3 million and $52.4~~$144.8 million of Payment Fees for the three-month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, respectively.

~~For Marketplace services,~~from final value fees ~~representing~~and shipping fees net of the third-party carrier costs.

Final value fees represent a percentage of the sale value that ~~are~~is charged to the seller once ~~the~~an item is successfully sold. ~~Up-front fees~~Shipping revenues are ~~charged~~generated when a buyer elects to ~~the seller in exchange for improved exposure~~receive an item through our shipping service net of the ~~listings throughout our platform and are not subject to the successful sale of the items listed.~~third-party carrier costs.

~~With respect to~~Non-Marketplace revenues also come from our ~~MercadoPago service,~~Mercado Pago FinTech solution, where we generate payment fees attributable to:

~~Although we also process payments on the Marketplace, we do not charge sellers an added commission for this service, as it is already included in the Marketplace final value fee we charge.~~

Through our classifieds offerings inof motor vehicles, vessels, aircraft, real estate and services, we generate revenues from up-front ~~fees. These~~ fees ~~are charged~~for all classifieds offerings. We charge additional fees to sellers who opt to give their listings greater exposure throughout our websites.

Our Advertising revenues are generated by selling either display product and/or text link ads throughout our ~~websites to interested advertisers.~~

~~Finally, our shipping revenues are generated when a buyer elects to receive the item through our shipping service.~~websites.

When more than one service is included in one single arrangement with the same customer, we recognize revenue according to multiple element arrangements accounting, distinguishing between each of the services provided and allocating revenues based on their respective estimated selling prices.

We have a highly fragmented customer revenue base given the large numbers of sellers and buyers who use our platforms. For the ~~nine month period~~three-month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, no single customer accounted for more than 5.0% of our net revenues.

Our MercadoLibre Marketplace is available in 1918 countries (Argentina, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Mexico, Panama, Peru, ~~Portugal,~~ Uruguay, Venezuela (deconsolidated as of December 1, 2017), Bolivia, Honduras, Nicaragua, Salvador, Guatemala and Paraguay), and ~~MercadoPago~~Mercado Pago is available in 87 countries (Argentina, Brazil, Chile, Peru, Colombia, Mexico ~~Uruguay~~ and ~~Venezuela)~~Uruguay). Additionally, ~~MercadoEnvios~~Mercado Envios is available in ~~5 countries: Argentina,~~6 countries (Argentina, Brazil, Mexico, Colombia, Chile and ~~Chile.~~Uruguay). The functional currency for each country’s operations is the country’s local currency, except for ~~Venezuela~~Argentina where the functional currency iswas the U.S. dollar due to ~~Venezuela’s~~Argentina’s status as a highly inflationary economy. See—“Critical accounting policies and estimates—Foreign Currency Translation” included ~~below. Therefore,~~below and Note 2 to our unaudited interim condensed consolidated financial statements for highly inflationary economy details. Our net revenues are generated in multiple foreign currencies and then translated into U.S. dollars at the average monthly exchange rate.

Our subsidiaries in Brazil, Argentina ~~Venezuela~~ and Colombia are subject to certain taxes on revenues which are classified as a cost of net revenues. These taxes represented ~~7.0%~~8.5% of net revenues for the three-month period ended ~~September 30, 2017,~~March 31, 2019, as compared to ~~9.5%~~9.3% for the same period in ~~2016.~~2018.

Cost of net revenues primarily represents bank and credit card processing charges for transactions and fees paid with credit cards and other payment methods, fraud prevention fees, certain taxes on revenues, ~~free shipping costs,~~ certain taxes on bank transactions, cost of mobile point of sale products sold, hosting and site operation fees, compensation for customer support personnel, ISP connectivity charges, depreciation and amortization, ~~hosting and site~~shipping operation ~~fees, cost of mobile point of sale products sold~~costs (including warehousing costs) and other ~~operation~~operating costs.

Our product and technology development related expenses consist primarily of compensation for our engineering and web-development staff, depreciation and amortization costs related to product and technology development, telecommunications costs and payments to third-party suppliers who provide technology maintenance services to us.

Our sales and marketing expenses consist primarily of costs ofrelated to marketing our platforms through online and offline advertising and agreements with portals and search engines, charges related to our buyer protection programs, the salaries of employees involved in these activities, chargebacks related to our ~~MercadoPago~~Mercado Pago operations, bad debt charges, public relations costs, marketing activities for our users and depreciation and amortization costs.

We carry out the majority of our marketing efforts on the Internet. We enter into agreements with portals, search engines, social networks, ad networks and other sites in order to attract Internet users to the MercadoLibre Marketplace and convert them into registered users and active traders on our platform.

We also work intensively on attracting, developing and growing our seller community through our customer support efforts. We have dedicated professionals in most of our operations that work with sellers through trade show participation, seminars and meetings to provide them with important tools and skills to become effective sellers on our platform.

Our general and administrative expenses consist primarily of salaries for management and administrative staff, compensation ~~for~~of outside directors, long term retention plan compensation, ~~impairment of Long-Lived assets,~~ expenses for legal, audit and other professional services, insurance expenses, office space rental expenses, travel and business expenses, as well as depreciation and amortization costs. Our general and administrative expenses include the costs of the following areas: general management, finance, administration, accounting, legal and human resources.

Other income (expenses) consists primarily of interest income derived from our investments and cash equivalents, interest expense related to financial liabilities and foreign currency gains or losses.

We are subject to federal and state taxes in the United States, as well as foreign taxes in the multiple jurisdictions where we operate. Our tax obligations consist of current and deferred income taxes ~~and asset taxes~~ incurred in these jurisdictions. We account for income taxes following the liability method of accounting. A valuation allowance is recorded when, based on the available evidence, it is more likely than not that all or a portion of our deferred tax assets will not be realized. Therefore, our income tax expense consists of taxes currently payable, if any (given that in certain jurisdictions we still have net operating loss carry-forwards), plus the change in our deferred tax assets and liabilities during each period.

The preparation of our unaudited interim condensed consolidated financial statements and related notes requires us to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We have based our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our ~~management~~Management has discussed the development, selection and disclosure of these estimates with our audit committee and our board of directors. Actual results may differ from these estimates under different assumptions or conditions.

An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our interim condensed consolidated financial statements. We believe that the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of our interim condensed consolidated financial statements.

There have been no significant changes in our critical accounting policies, ~~management~~Management estimates or accounting policies since the year ended December 31, ~~2016~~2018 and disclosed in the Form ~~10-K. See~~10-K, see Item – “Critical Accounting Policies”.

All of our foreign operations (other than Venezuela since January 1, 2010, as described below) use the local currency as their functional currency. Accordingly, these operating foreign subsidiaries translate assets and liabilities from their local currencies to U.S. dollars using period-end exchange rates while income and expense accounts are translated at the average exchange rates in effect during the period, unless exchange rates fluctuate significantly during the period, in which case the exchange rates at the date of the transaction are used. The resulting translation adjustment is recorded as part of other comprehensive (loss) income, a component of equity. Gains and losses resulting from transactions denominated in non-functional currencies are recognized in earnings. Net foreign currency exchange losses or gains are included in the consolidated statements of income under the caption “Foreign currency (losses) gains”.

Pursuant to U.S. GAAP, we have classified our Venezuelan operations as highly inflationary since January 1, 2010, using the U.S. dollar as the functional currency for purposes of reporting our financial statements. Therefore, no translation effect has been accounted for in other comprehensive income related to our Venezuelan operations.

On March 9, 2016 the Central Bank of Venezuela (“BCV”) issued the Exchange Agreement No.35, which is effective since March 10, 2016. The agreement established a “protected” exchange rate (“DIPRO”) for certain transactions, such as but not limited to: imports of goods of the food and health sectors, as well as supplies associated with the production of said sectors; expenses relating to health treatments, sports, culture, scientific research, and other urgent matters defined by the exchange regulations. All foreign currency transactions not expressly provided in Exchange Agreement No.35 will be processed on the alternate foreign currency markets governed by the exchange regulations, at the floating supplementary market exchange rate (“DICOM”).

On May 19, 2017, the BCV issued the Exchange Agreement No.38, which established a new foreign exchange mechanism under DICOM, replacing previous SIMADI. The new mechanism consists of auctions, administered by an auction committee, where sellers and buyers from the private sector may offer foreign currency under certain limits determined by the BCV.

In light of the disappearance of SIMADI (which closed at 728.0 per U.S. dollar), and the Company’s inability to gain access to U.S. dollars under SIMADI, it started requesting U.S. dollars through DICOM. As a result, the Company expects to settle its transactions through DICOM going forward and concluded that the DICOM exchange rate should be used as from June 1, 2017 to measure its bolivar-denominated monetary assets and liabilities and to measure the revenues and expenses of the Venezuelan subsidiaries. Therefore, as of June 30, 2017, monetary assets and liabilities in Bolivares Fuertes (“BsF”) were re-measured to the U.S. dollar using the DICOM closing exchange rate of 2640.0 BsF per U.S. dollar. As a consequence of the local currency devaluation, the Company recorded a foreign exchange loss of $22.0 million during the second quarter of 2017.

Considering the significant devaluation and the lower U.S. dollar-equivalent cash flows then expected from the Venezuelan business, the Company reviewed its long-lived assets (including non-current other assets), goodwill and intangible assets with indefinite useful life for impairment and concluded that the carrying value of certain real estate investments in Venezuela as of June 30, 2017 would not be fully recoverable. As a result, on June 30, 2017, the Company recorded an impairment of offices and commercial property under construction included within non-current other assets of $2.8 million. The carrying amount of offices and commercial property under construction was adjusted to its estimated fair value of approximately $9.7 million as of June 30, 2017, by using the market approach, and considering prices for similar assets. ~~As of September 30, 2017, the DICOM exchange rate was 3,345.0 BsF per U.S. dollar~~

~~Until 2010 we were able to obtain U.S. dollars for any purpose, including dividend distributions, using alternative mechanisms~~ other than ~~through the Commission for the Administration~~those discussed in Note 2 of ~~Foreign Exchange Control (CADIVI). Those U.S. dollars, obtained at a~~ ~~higher~~ exchange rate than the one offered by CADIVI and held in balance at U.S. bank accounts of our Venezuelan subsidiaries, were used for dividend distributions from our Venezuelan subsidiaries. We have not distributed dividends from our Venezuelan subsidiaries since 2011.

The following table sets forth the assets, liabilities and net assets of our Venezuelan subsidiaries, before intercompany eliminations of a net liability of $29.6 million and $15.8 million, as of September 30, 2017 and December 31, 2016 and net revenues for the nine-month periods ended September 30, 2017 and 2016:

As of September 30, 2017, the net assets (before intercompany eliminations) of our Venezuelan subsidiaries amounted to approximately 6.2% of our consolidated net assets, and cash and investments of our Venezuelan subsidiaries held in local currency in Venezuela amounted to approximately 2.2% of our consolidated cash and investments.

~~Our ability to obtain U.S. dollars in Venezuela is negatively affected by the exchange restrictions in Venezuela that are described above. If~~ ~~our~~ access to U.S. dollars becomes widely available at a more unfavorable rate than the current DICOM exchange rate (or if DICOM exchange rate experiences significant devaluation in the future), and we decided to use that alternative mechanism considering that exchange rate as the one applicable for re-measurement, our results of operations, earnings and value of our net assets in Venezuela would be negatively impacted, and we cannot assure that the impact would not be material. In addition, our business and ability to obtain U.S. dollars in Venezuela would be negatively affected by any additional material devaluations or the imposition of significant ~~additional~~ ~~and more stringent controls on foreign currency exchange by the Venezuelan government in the future.~~

~~Despite the current difficult macroeconomic environment in Venezuela, we continue managing, through our Venezuelan~~ ~~subsidiaries~~, our investment in Venezuela. Despite the current operating, political and economic conditions and certain other factors in Venezuela, we currently plan to continue supporting our business in Venezuela in the long run.

In November 2013 the Venezuelan Congress approved an “enabling law” granting the president of Venezuela the authority to enact laws and regulations in certain policy areas by decree. This authority includes the ability to restrict profit margins and impose greater ~~controls~~ on foreign exchange and the production, import, and distribution of certain goods. Among other actions, the president has used this decree power to pass the Law of Costs, Earnings, and Fair Profits, which became effective in January 2014 and, among other provisions, authorizes the Venezuelan government to set “fair prices” and maximum profit margins in the private sector. On October 26, 2015, the decree number 2,074 was published in the Official Gazette of Venezuela, establishing certain definitions related to the determination of prices in that country.

~~Despite we do not expect that this law together with the decree issued by the Venezuelan Government will have a material adverse~~ ~~impact~~ on our financial condition or results of operations, considering the current difficult macroeconomic environment in Venezuela, the final potential effects remains uncertain. The effects of such potential effects, if any, would be recognized in our financial statements once the mentioned uncertainty is resolved.

We are exposed to losses due to uncollectible accounts and credits to sellers. Allowances for these items represent our estimate of future losses based on our historical experience. The allowances for doubtful accounts and for chargebacks are recorded as charges to sales and marketing expenses. Historically, our actual losses have been consistent with our charges. However, future adverse changes to our historical experience for doubtful accounts and chargebacks could have a material impact on our future consolidated statements of income and cash flows.

~~We believe that the accounting estimate related to allowances for doubtful accounts and for chargebacks is a critical accounting estimate~~ ~~because~~ ~~it requires management to make assumptions about future collections and credit analysis. Our management’s assumptions about future collections require significant judgment~~.

In ~~connection~~ with certain pending litigation and other claims, we have estimated the range of probable loss and provided for such losses through charges to our interim condensed consolidated statement of income. These estimates are based on our assessment of the facts and circumstances and historical information related to actions filed against us at each balance sheet date and are subject to change based upon new information and future events.

~~On June 30, 2014, we issued $330 million of 2.25% convertible senior notes due 2019 (the “Notes”). The Notes may be converted, under~~ ~~specific~~ conditions, based on an initial conversion rate of 7.9353 shares of common stock per $1,000 principal amount of Notes, subject to adjustment as described in the indenture governing the Notes. The convertible debt instrument, within the scope of the cash conversion subsection, was separated into debt and equity components at issuance and a fair value was assigned. The value assigned to the debt component was the estimated fair value, as of the issuance date, of a similar debt without the conversion feature. As of June 30, 2014, we determined the fair value of the liability component of the Notes by reviewing market data that was available for senior, unsecured nonconvertible corporate bonds issued by comparable companies. The difference between the cash proceeds and this estimated fair value represents the value assigned to the equity component and was recorded as a debt discount. The debt discount is amortized using the effective interest method from the origination date through its stated contractual maturity date.

~~In connection with the issuance of the Notes, we paid $19.7 million and~~ ~~$67.3 million (including transaction expenses)~~ ~~in June 2014 and September 2017, respectively, to enter into capped call transactions with respect to shares of our~~ ~~common~~ stock (the “Capped Call Transactions”), with certain financial institutions. The Capped Call Transactions are expected generally to reduce the potential dilution upon conversion of the Convertible Notes in the event that the market price of our common stock is greater than the strike price of the Capped Call Transactions. The cost of the ~~Capped~~ ~~Call~~ ~~Transactions is included as a net reduction to additional paid-in capital in the stockholders’ equity section of our consolidated balance sheets.~~

~~For~~ ~~more~~ ~~detailed information in relation to the Notes and the Capped Call~~ Transactions, see “—Results of operations for the nine-month period ended September 30, 2017 compared to the nine-month period ended September 30, 2016 and the three-month period ended September 30, 2017 compared to the ~~three-month period ended September 30, 2016—Debt” and Note 9 to~~ our unaudited interim condensed consolidated financial ~~statements.~~

~~Impairment~~statements in connection with the adoption of ~~long-lived assets, goodwill~~ASC 842 – New leasing accounting standard as of January 1, 2019 and ~~intangible assets with indefinite useful life~~

We review long-lived assets for impairments whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Furthermore, goodwill and certain indefinite life trademarks are reviewed for impairment at each year-end or more frequently when events or changes in circumstances indicate that their carrying value may not be recoverable.

We believe that the accounting estimate related to impairment of long lived assets and goodwill is critical since it is highly susceptible to change from period to period because: (i) it requires management to make assumptions about gross merchandise volume growth, total payment volume, total payment transactions, future interest rates, sales and costs; and (ii) the impact that recognizing an impairment would have on the assets reported on our balance sheet as well as our net income would be material. Management’s assumptions about future sales and future costs require significant judgment.

~~For additional information, see “Critical~~ ~~Accounting Policies” section~~ ~~in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.~~

We are required to recognize a provision for income taxes based upon taxable income and temporary differences between the book and tax bases of our assets and liabilities for each of the tax jurisdictions in which we operate. This process requires a calculation of taxes payable under currently enacted tax laws in each jurisdiction and an analysis of temporary differences between the book and tax bases of our assets and liabilities, including various accruals, allowances, depreciation and amortization. The tax effect of these temporary differences and the estimated tax benefit from our tax net operating losses are reported as deferred tax assets and liabilities in our consolidated balance sheet. We also assess the likelihood that our net deferred tax assets will be realized from future taxable income. To the extent we believe that it is more likely than not that some portion or all of our deferred tax assets will not be realized, we establish a valuation allowance. As of September 30, 2017, we had a valuation allowance on certain foreign net operating losses based on our assessment that it is more likely than not that the deferred tax asset will not be realized. To the extent we establish a valuation allowance or change the allowance in a period, we reflect the change with a corresponding increase or decrease in our “Income/asset tax expense” line in our consolidated statement of income.

Our board of directors adopted long-term retention plans (“LTRPs”), under which certain eligible employees receive awards. See “Item 3. Quantitative and Qualitative Disclosures About Market Risk —Equity Price Risk” for details on the LTRPs. The variable LTRP awards are calculated based on the fair value ~~of our common stock on NASDAQ Global Market.~~option applied to certain financial instruments.

Results of operations for the ~~nine-month period ended September 30, 2017 compared to the nine-month period ended September 30, 2016 and~~ three-month period ended ~~September 30, 2017~~March 31, 2019 compared to the three-month ~~period~~periods ended ~~September 30, 2016~~March 31, 2018

The selected financial data for the ~~nine and~~ three-month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 discussed herein is derived from our unaudited interim condensed consolidated financial statements included in Item 1 of Part I of this report. These statements include all normal recurring adjustments that ~~management~~Management believes are necessary to fairly state our financial position, results of operations and cash flows. The results of operations for the ~~nine and~~ three-month ~~period~~periods ended ~~September 30, 2017~~March 31, 2019 are not necessarily indicative of the results that may be expected for the full year ending December 31, ~~2017~~2019 or for any other period.


	Nine-months Periods Ended September 30,		Three-months Periods Ended September 30,			Three-month Period Ended March 31,
(In millions)	2017 (*)	2016 (*)	2017 (*)	2016 (*)	2019 (*)		2018 (*)
	(Unaudited)		(Unaudited)			(Unaudited)
Net revenues	$961.1	$588.1	$370.7	$230.8
Net revenues (**)					$	473.8	$	321.0
Cost of net revenues	(444.9)	(214.0)	(194.8)	(85.2)		(236.8)	(158.2)
Gross profit	516.2	374.1	175.8	145.6	237.0		162.8

Operating expenses:

Product and technology development	(93.0)	(72.2)	(32.4)	(26.1)		(52.4)		(38.4)
Sales and marketing	(207.9)	(107.7)	(84.1)	(39.7)		(130.7)		(110.7)
General and administrative	(91.6)	(64.1)	(31.8)	(26.2)		(43.8)		(43.1)
Impairment of Long-Lived Assets	(2.8)	(13.7)	-	-
Total operating expenses	(395.4)	(257.7)	(148.3)	(91.9)		(226.9)	(192.2)
Income from operations	120.9	116.4	27.5	53.7
Income/(loss) from operations						10.1	(29.4)

Other income (expenses):
Interest income and other financial gains	37.0	25.2	14.2	9.9		24.4		9.2
Interest expense and other financial charges	(19.7)	(18.8)	(6.7)	(6.5)
Foreign currency (loss) gain	(19.5)	(5.1)	1.6	(4.8)
Net income before income tax expense	118.7	117.7	36.7	52.3
Interest expense and other financial losses						(15.6)		(10.7)
Foreign currency (loss)/gain					(3.7)		5.6
Net income/(loss) before income tax (expense)/gain					15.4		(25.4)

Income tax expense	(37.2)	(32.7)	(9.0)	(13.4)
Net income	$81.5	$85.0	$27.7	$38.9
Income tax (expense)/gain						(3.5)	12.4
Net income/(loss)					$	11.9	$	(12.9)

Since our inception, we have consistently generated revenue growth from both our Enhanced Marketplace and Non-Marketplace revenue streams, driven by the strong growth of our key operational metrics. Our net revenues grew ~~63.4%~~47.6% in the ~~nine-month~~three-month period ended ~~September 30, 2017~~March 31, 2019 as compared to the same period in ~~2016.~~2018. Our ~~successful items sold~~net revenues grew as a result of increases in local currency gross merchandise volume in Argentina, Brazil and Mexico of 69.6%, 17.9% and 48.0%, respectively and a 35.1% increase in our total payment volume ~~increased 45.8% and 76.9%, respectively,~~ in the ~~nine-month~~three-month period ended ~~September 30, 2017~~March 31, 2019 as compared to the same period in ~~2016.~~2018. Additionally, our ~~number of~~ ~~confirmed~~ ~~registered users~~growth in net revenues was ~~21.0% higher~~boosted by the decrease in our shipping subsidies, which are netted from net revenues when we act as ~~of September 30, 2017 as compared~~an agent, from $112.5 million to ~~the number of confirmed registered users as of September 30, 2016. Furthermore, our gross merchandise volume (“GMV”) increased 39.6%~~$74.0 million in the ~~nine-month~~three-month period ended ~~September 30, 2017~~March 31, 2018 as compared to the same period in ~~2016.~~2019, respectively and the effect of the flat fee for those transactions related to low gross merchandise volume in Brazil. Finally, our ~~shipped items volume increased~~growth in net revenues were partially offset by the ~~nine-month period ended September 30, 2017~~devaluation of the Argentine Peso and Brazilian Reais of approximately 53.5% and 14.7%, as of March 31, 2019 compared to ~~the same period in 2016.~~March 31, 2018, respectively.

We believe that ~~the~~our growth in net revenues should continue in the future. However, despite this positive historical trend, the current weak ~~global~~ macro-economic environment in certain countries in Latin America, coupled with devaluations of certain local currencies in ~~Latin America~~those countries versus the U.S. dollar ~~the effects of Venezuelan translations of local currencies into~~ ~~the U.S. dollar, Venezuelan Government limits~~ ~~on prices~~ and high interest rates in ~~Latin America,~~those countries could cause a decline in year-over-year ~~of our~~ net revenues, particularly as measured in U.S. dollars. Moreover, in the future, net revenues could decline if we continue offering free shipping and the costs of providing the service grow faster than our sales.

During the past two years, our business has experienced decreasing gross profit margins, defined as total net revenues minus total cost of net revenues, as a percentage of net revenues.

Our gross profit margins were ~~53.7%~~50.0% and ~~63.6%~~50.7% for ~~the nine-month periods ended September 30, 2017 and 2016, respectively. For~~ the three-month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016, our gross profit margins were 47.4% and 63.1%,~~2018, respectively. The decrease in our gross profit margins resulted primarily ~~from:~~from increases in components of cost of net revenues, each as described below:

(i) ~~Increased~~An increase in shipping operating costs of ~~providing free shipping in Mexico and Brazil of $102.6 million and $65.7~~$31.7 million for the ~~nine and~~ three-month period ended ~~September 30, 2017,~~March 31, 2019, as compared with the same ~~periods~~period in ~~2016, respectively.~~2018, mainly related to shipping operating costs, including warehousing expenses.

(ii) Higher penetration of our payments and shipping solution, ~~into~~particularly in our Argentine, Brazilian and Mexican marketplaces. For the ~~nine and~~ three-month period ended ~~September 30, 2017,~~March 31, 2019, total volume of payments on our marketplace represented ~~81.4% and 84.3%~~93.8% of our total GMV (excluding motor vehicles, vessels, aircraft, real estate and ~~real estate), respectively;~~services); as compared to ~~66.4% and 74.5%~~89.9%, for the ~~nine and~~ three-month period ended ~~September 30, 2016.~~March 31, 2018. Additionally, for the ~~nine and~~ three-month period ended ~~September 30, 2017,~~March 31, 2019, the total number of items shipped through our shipping solution represented ~~54.2% and 56.2%~~81.3%, of our total number of successful items sold ~~respectively;~~in the countries where our shipping solution is available, as compared to ~~46.8% and 48.5%~~71.3%, for the ~~nine and~~ three-month period ended ~~September 30, 2016.~~March 31, 2018. Transactions that include such services intrinsically incur incremental costs such as collection fees, which result in lower gross profit margins ~~associated with these~~ as compared to other services we offer. In addition, our ~~financing and shipping~~ revenues are typically disclosed net of third party provider costs while sales taxes are paid on the gross amount of revenues, thus, decreasing our gross profit margins in terms of revenues. For the ~~nine-month~~three-month period ended ~~September 30, 2017,~~March 31, 2019, collection fees ~~and sales taxes~~ increased ~~$62.4~~$15.7 million, ~~and $23.3 million, respectively,~~ as compared to the same period in ~~2016.~~2018. For the three-month period ended ~~September 30, 2017, collection fees and~~March 31, 2019, sales ~~taxes~~tax increased ~~$21.9~~$10.2 million, ~~and $4.0 million, respectively,~~ as compared to the same period in ~~2016.~~2018.

(iii) Increased other payment costs of $7.2 million for the three-month period ended March 31, 2019, as compared to the same period in 2018, mainly related to higher MercadoPago transactional expenses.

(iv) Increased cost of products sold of $4.8 million for the three-month period ended March 31, 2019, as compared to the same period in 2018, related to a higher volumes of mobile point of sale devices sold in Brazil, Argentina and Mexico. This increase generated lower profit margins.

(v) Increased customer support costs of ~~$15.3 million and $4.8~~$4.7 million for the ~~nine and~~ three-month ~~periods~~period ended ~~September 30, 2017,~~March 31, 2019, as compared with the same period in ~~2016;~~2018, mainly as a consequence of an increase in salaries and wages. The number of ~~employees related to~~ customer support employees was ~~2,343~~2,943 as of ~~September 30, 2017~~March 31, 2019 as compared ~~with 1,740~~to 2,651 as of ~~September 30, 2016.~~March 31, 2018.

~~(iv)~~(vi) Increased hosting costs of ~~$9.3 million and $2.8~~$3.7 million for the ~~nine and~~ three-month period ended ~~September 30, 2017,~~March 31, 2019, as compared ~~with~~to the same ~~periods~~period in ~~2016, respectively.~~2018.

In the future, gross profit margins could continue to decline if we continue to offer free shipping ~~volume increase or if~~and the penetration of our payment solution and our shipping service grows faster than our ~~marketplace.~~marketplace sales.

For the ~~nine-month~~three-month period ended ~~September 30, 2017~~March 31, 2019 as compared to the same period in ~~2016,~~2018, our operating ~~income~~income/(loss) margin ~~decreased~~increased from ~~19.8%~~a negative margin of 9.2% to ~~12.6%~~a positive margin of 2.1%, mainly as a consequence of ~~increases~~the explained increase in ~~costs of~~ net revenues ~~(driven mainly by free shipping costs), as described under “Gross profit margins”~~ above and ~~increases~~a decrease in sales and marketing expenses, ~~(driven mainly by on and off portal deals, salaries, buyer protection program and chargebacks from credit cards). For the three-month period ended September 30, 2017~~calculated as ~~compared to the same period in 2016, our operating income margin decreased from 23.3% to 7.4%, for the same reasons.~~a percentage of net revenues.

We anticipate that as we continue to invest in product development, sales and marketing and human resources in order to promote our services and capture the long-term business opportunity offered by the Internet in Latin America, it iswill be increasingly difficult to ~~sustain growth in~~maintain our operating ~~income~~ margins, and we may even could ~~continue experiencing~~experience decreases in our operating ~~income~~ margins.

(*) Percentages have been calculated using whole-dollar amounts rather than rounded amounts that appear in the table. The table above may not total due to rounding.

Our net revenues grew 47.6% in the three-month period ended March 31, 2019 as compared to the same period in 2018. The increase in net revenues was primarily attributable to increases in the enhanced marketplace transactions volume related to an increase in local currency gross merchandise volume in Argentina, Brazil and Mexico of 69.6%, 17.9% and 48.0%, respectively. In addition, the increase in net revenues was attributable to:

The 22.4% increase in our non-marketplace revenues from $180.3 million for the three-month period ended March 31, 2018 compared to $220.7 million for the three-month period ended March 31, 2019, is mainly generated by a 35.1% increase in our total payment volume, mainly associated to off-platform transactions.

The increase in our net revenues was partially offset by the devaluation of the Argentine Peso and Brazilian Reais by approximately 53.5% and 14.7%, respectively, as of March 31, 2019 as compared to March 31, 2018.



	Nine-month Periods Ended		Change from 2016		Three-month Periods Ended		Change from 2016		Three-month Periods Ended		Change from 2018
	September 30,		to 2017 (**)		September 30,		to 2017 (**)		March 31,		to 2019 (***)
Consolidated Net Revenues by revenue stream	2017	2016	in Dollars	in %	2017	2016	in Dollars	in %	2019	2018	in Dollars	in %
	(in millions, except percentages)				(in millions, except percentages)				(in millions, except percentages)
Brazil
Marketplace	$ 340.6	$ 172.7	$ 167.9	97.3%	$ 139.6	$ 74.7	$ 64.9	86.8%
Enhanced Marketplace									$ 157.8	$ 71.4	$ 86.3	120.8%
Non-Marketplace	228.7	138.8	90.0	64.8%	89.9	56.3	33.6	59.7%	144.6	112.7	31.9	28.3%
	569.3	311.4	257.9	82.8%	229.5	131.0	98.5	75.2%	302.4	184.2	118.2	64.2%
Argentina
Marketplace	$ 145.8	$ 112.8	$ 33.1	29.3%	$ 54.1	$ 41.2	$ 12.9	31.3%
Enhanced Marketplace									$ 42.0	$ 52.1	$ (10.1)	-19.3%
Non-Marketplace	104.9	73.1	31.7	43.4%	37.2	28.8	8.4	29.2%	51.8	49.8	1.9	3.8%
	250.7	185.9	64.8	34.9%	91.3	70.0	21.3	30.5%	93.8	101.9	(8.2)	-8.0%
Mexico
Marketplace	$ 41.6	$ 20.0	$ 21.7	108.5%	$ 16.6	$ 7.6	$ 9.1	119.8%
Non-Marketplace	16.7	14.4	2.3	15.8%	6.0	4.3	1.7	41.0%
	58.3	34.4	23.9	69.7%	22.6	11.8	10.8	91.4%
Venezuela
Marketplace	$ 35.4	$ 24.0	$ 11.4	47.6%	$ 9.2	$ 6.1	$ 3.1	50.6%
Enhanced Marketplace									$ 42.5	$ 10.0	$ 32.5	324.2%
Non-Marketplace	2.9	2.5	0.5	19.2%	0.6	0.8	(0.2)	-25.7%	12.0	7.0	5.0	71.0%
	38.3	26.5	11.9	44.9%	9.8	6.9	2.9	41.6%	54.6	17.1	37.5	219.7%
Other countries
Marketplace	$ 19.0	$ 12.4	$ 6.6	53.6%	$ 7.8	$ 4.8	$ 3.0	62.2%
Enhanced Marketplace									$ 10.7	$ 7.1	$ 3.6	50.6%
Non-Marketplace	25.4	17.6	7.8	44.5%	9.7	6.4	3.4	52.9%	12.3	10.7	1.6	15.2%
	44.5	30.0	14.5	48.3%	17.5	11.2	6.4	56.9%	23.0	17.8	5.2	29.4%

Marketplace	582.5	341.7	240.7	70.4%	227.3	134.4	92.9	69.1%
Non-Marketplace (*)	378.6	246.4	132.3	53.7%	143.4	96.5	46.9	48.6%
Consolidated
Enhanced Marketplace (*)									253.0	140.7	112.3	79.8%
Non-Marketplace (**)									220.7	180.3	40.5	22.4%
Total	$ 961.1	$ 588.1	$ 373.0	63.4%	$ 370.7	$ 230.8	$ 139.8	60.6%	$ 473.8	$ 321.0	$ 152.8	47.6%

(*) The amount incurred in shipping subsidies are netted from revenues, when we act as an agent, was $74.0 million and $112.5 million for the three-month periods ended March 31, 2019 and 2018, respectively.

(**) Includes, among other things, payment fees, ad sales, classified ~~fees, payment fees, shipping~~ fees and other ancillary services.

(***) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

Enhanced Marketplace revenues ~~for~~in Brazil increased 120.8% in the ~~nine and~~ three-month period ended ~~September 30, 2017 increased in all of our geographic segments.~~

~~Marketplace revenue in Brazil increased 97.3% in the nine-month period ended September 30, 2017~~March 31, 2019 as compared to the same period in ~~2016. The~~2018. This increase was primarily a consequence of i) a ~~33.6% increase in our take rate (which we define as net revenues as a percentage of gross merchandise volume), a 31.9%~~17.9% increase in local currency ~~volume~~gross merchandise volume; ii) a decrease of $35.9 million in shipping subsidies related to our free shipping initiative, which is presented netted from revenues when we act as an agent and iii) the implementation of a ~~12.0% average appreciation~~flat fee for those transactions related to low gross merchandise volume. The increase was partially offset by a 14.7% devaluation of the local currency. Non-Marketplace revenues grew ~~64.8%~~28.3%, a ~~$90.0~~$31.9 million increase, during the same period, mainly driven ~~by: i)~~by a ~~90.5%~~144.4% increase in the off-platform payments volume, partially offset by the devaluation of ~~payments transactions; and ii) a 51.4% increase in ad sales volume.~~the Brazilian Reais.

Enhanced Marketplace revenues in ~~Brazil increased 86.8%~~Argentina decreased 19.3% in the three-month period ended ~~September 30, 2017~~March 31, 2019 as compared to the same period in ~~2016.~~ 2018. The ~~increase~~decrease was primarily a consequence of i) a ~~64.9%~~53.5% devaluation of the local currency and ii) an increase of $5.1 million in shipping subsidies related to our ~~take rate,~~free shipping initiative, which is presented netted from revenues when we act as an agent. This decrease was partially offset by a ~~10.4%~~69.6% increase in local currency ~~volume and a 2.6% average appreciation of local currency.~~ gross merchandise volume. Non-Marketplace revenues grew ~~59.7%~~3.8%, a ~~$33.6~~$1.9 million increase, during the same period, mainly driven ~~by: i)~~by a ~~85.0 %~~83.1% increase in the off-platform payments volume, partially offset by the devaluation of ~~payments transactions; and ii) a 39.9 % increase in ad sales volume.~~the local currency.

Enhanced Marketplace revenues ~~of our Argentine segment~~in Mexico increased ~~29.3%~~324.2% in the ~~nine-month~~three-month period ended ~~September 30, 2017,~~March 31, 2019, as compared to the same period in ~~2016. The increase was primarily~~2018, mainly due to i) the effect of not netting from revenues the shipping costs related to certain shipping services given that we started acting as principal as of November 2018 and ii) a ~~consequence of an increase of 33.8% in our take rate and a 7.4%~~48.0% increase in local currency ~~volume, partially offset by a 10.0% average devaluation of local currency. Non-Marketplace~~gross merchandise volume. Non-Marketplace revenues grew ~~43.4%~~71.0%, a ~~$31.7~~$5.0 million increase, during the same period, mainly driven ~~by: i) a 43.7% increase~~by increases in the volume of off-platform payments ~~transactions; ii) a 29.1% increase in the volume of shipped items; and iii) a 68.8% increase in classifieds volume.~~transactions.

~~Marketplace revenues of our Argentine segment increased 31.3% in the three-month period ended September 30, 2017 as compared to the same period in 2016.~~ ~~The increase was primarily a consequence of a 62.8% increase in our take rate, partially offset by a 13.5% average devaluation of the local currency and~~ ~~a 6.7% decrease in local currency volume.~~ Non-Marketplace revenues grew 29.2% in the three-month period ended September 30, 2017, a $8.4 million increase, during the same period, mainly driven by: i) a 38.4% increase in the volume of payments transactions; ii) a 41.0% increase in the volume of shipped items; and iii) a 38.8% increase in ad sales volume.

~~Marketplace revenues of our Mexican segment increased by approximately 108.5% in the nine-month period ended September 30, 2017, as compared to the same period in 2016,~~ ~~mainly due to a 58.7% increase in our take rate, and a 35.6% increase in local currency volume, partially offset by an average local currency devaluation of 3.1%.~~ Non-Marketplace revenues increased 15.8% or $2.3 million during the same period, mainly driven by increases in the volume of payment transactions and volume of shipped items, partially offset by a decrease in our classified fees.

~~Marketplace revenues of our Mexican segment increased by approximately 119.8% in the three-month period ended September 30, 2017, as compared to the same period in 2016,~~ ~~mainly due to a 74.2% increase in our take rate, a 19.9% increase in local currency volume,~~ ~~and a 5.2% average appreciation of local currency. N~~on-Marketplace revenues increased 41.0% in the three-month period ended September 30, 2017, or $1.7 million during the same period, mainly driven by increases in the volume of payment transactions and shipped items.

~~Marketplace revenues of our Venezuelan segment increased by approximately 47.6% in the nine-month period ended September 30, 2017, as compared to the same period in 2016,~~ ~~mainly due to a 296.2% increase in local currency volume and a 41.2% increase in our take rate, partially offset by an average local currency devaluation of 73.6%.~~ ~~Non-Marketplace revenues increased 19.2%, or $0.5 million during the same period, mainly by an increase in the volume of payment transactions.~~

~~Marketplace revenues of our Venezuelan segment increased by approximately 50.6% in the three-month period ended September 30, 2017, when compared to the same period in 2016,~~ ~~mainly due to a 340.1% increase in local currency volume and a 59.8% increase in our take rate, partially offset~~ ~~by an average local currency devaluation of 78.6%~~.~~Non-Marketplace revenues decreased 25.7%, or $0.2 million during the same period, mainly due to a decrease in the volume of classified fees.~~

The following table sets forth our total net revenues and the sequential quarterly growth of these net revenues for the periods described below:

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table.

(**) The amount incurred in shipping subsidies, which are netted from revenues, when we act as an agent, was $74.0 million and $112.5 million for the three-month periods ended March 31, 2019 and 2018, respectively.

The following table sets forth the growth in net revenues in local currencies for the ~~nine and~~ three-month period ended ~~September 30, 2017~~March 31, 2019 as compared to the same period in ~~2016:~~2018:

(*) The local currency revenue growth was calculated by using the average monthly exchange rates for each month during ~~2016~~2018 and applying them to the corresponding months in ~~2017,~~2019, so as to calculate what our financial results would have been had exchange rates remained stable from one year to the next. See also “Non-GAAP Financial Measures” section below for details on FX neutral measures.

In ~~Venezuela,~~Argentina, the increase in our net revenues is mainly due to higher Marketplace volume and average selling prices posted by sellers during the nine and three-month period ended September 30, 2017, which we do not control. The increase in average selling prices in Venezuela is a consequence of: (i) the high inflation rate; (ii) a shortage of products and (iii) changes in the mix of categories of the items sold in our Marketplace.

~~In Brazil, the increase in~~ local currency growth is ~~mainly a consequence of~~due to an increase ofin our ~~Brazilian Marketplace take rate~~Argentine transactions volume and our shipped items volume, increases in our ~~MercadoPago~~ Mercado Pagotransactions and ~~our shipped~~ ~~items~~ ~~volume.~~

~~In the case~~a high level of ~~Argentina, the increase inour net revenues is due to an increase in the Argentine take rate, successful items volume and increases inourMercadoPagotransactions.~~inflation.

In Mexico and Brazil, the increase in local currency growth is a consequence of an increase of our ~~Mexican~~ Marketplace ~~take rate and volume,~~transactions volumes and increases in our ~~MercadoPago transactions.~~Mercado Pago transactions and shipped items volumes.

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

For the ~~nine-month~~three-month period ended ~~September 30, 2017~~March 31, 2019 as compared to the same period of ~~2016,~~2018, the increase of ~~$230.9~~$78.5 million in cost of net revenues was primarily attributable to: i) ana $31.7 million increase in shipping ~~costs amounting to $102.6 million, related to our Brazilian~~carrier and ~~Mexican free shipping initiative;~~operating costs; ii) an increase in collection fees of ~~$62.4~~$15.7 million, which was mainly attributable to our Argentine and Brazilian operations as a result of the higher transactions volume of ~~MercadoPago~~Mercado Pago in those ~~countries;~~countries and higher off-platform transactions; iii) an increase in sales taxes ~~amounting to $23.3~~of

$10.2 million, mainly related to the growth of our Argentine and Brazilian operations; iv) an increase in cost of products sold of $4.8 million attributable to higher volumes of mobile point of sale devices sold in Brazil, Argentina and Mexico; v) a ~~$15.3~~$4.7 million increase in customer support costs mainly as a consequence of higher salaries and wages ~~and v) $9.3 million in hosting costs~~ due to ~~higher traffic in our web-site.~~

For the three-month period ended September 30, 2017 as compared to the same period of 2016, the increase of $109.6 million in cost of net revenues was primarily attributable to: i) a increase in shipping costs amounting to $65.7 million, due to our Mexicannew hirings and ~~Brazilian free shipping initiative; ii)~~vi) an increase in ~~collection fees amounting to $21.9 million, which was mainly attributable to our Argentine and Brazilian operations as a result~~hosting expenses of the higher transactions volumne of MercadoPago in those countries and higher off-platform transactions; iii) an increase in cost of product sold amounting to $5.2 million as a consequence of higher volumes of mobile points of sales devices sold in Brazil and Argentina; iv) a $ 4.8 million increase in customer support costs mainly as a consequence of salaries and wages, and; v) an increase in sales taxes amounting to $4.0 million, mainly related to the growth of our Argentine and Brazilian operations.

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

For the ~~nine and~~ three-month period ended ~~September 30, 2017,~~March 31, 2019, the increase in product and technology development expenses as compared to the same ~~periods~~period in ~~2016~~2018 amounted to ~~$20.8 million and $6.3 million, respectively. These~~$14.0 million. This increase ~~were~~was primarily attributable to: i) an increase in other product and technology development expenses of ~~$10.9~~$7.0 million primarily related to certain taxes and withholdings; ii) a $3.9 million increase in salaries and ~~wages, respectively; ii) an~~wages; iii) a $1.4 million increase in maintenance expenses; and ~~depreciation~~iv) a $1.1 million increase in depreciation and ~~amortization expenses of $6.2 million and $2.3 million, respectively.~~amortization.

We believe product development is one of our key competitive advantages and intend to continue to invest in hiring engineers to meet the increasingly sophisticated product expectations of our customer base.

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

For the ~~nine and~~ three-month ~~periods~~period ended ~~September 30, 2017,~~March 31, 2019, the ~~$100.2 and $44.4~~$20.0 million increase in sales and marketing expenses ~~when~~as compared to the same ~~periods~~period in ~~2016~~2018 was primarily attributable to: i) an increase of ~~$59.3 million and $25.0~~$8.0 million in ~~on-line~~online and offline marketing expenses mainly in Brazil, Mexico and ~~Mexico;~~Argentina; ii) a ~~$15.4~~$3.9 million ~~and $6.7 million~~increase in our buyer protection program expenses, mainly in Brazil; iii) a $3.9 increase in chargebacks from credit cards due to the increase in our MercadoPago transactions volume ~~respectively; iii)~~and iv) a ~~$12.1 million and $3.8~~$2.5 million increase in salaries and ~~wages, respectively; and iv) a $10.7 million and $7.1 million increase in our buyer protection program expenses, respectively.~~wages.

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

For the nine-month period ended September 30, 2017, the $27.5 million increase in general and administrative expenses when compared to the same period in 2016 was primarily attributable to: i) a $19.8 million increase in salaries and wages; ii) a $2.9 million increase in tax, audit and legal fees; iii) a $2.3 million increase in other general and administrative expenses and; iv) a $ 0.9 increase in depreciation and amortization.

For the three-month period September 30, 2017, the $5.6 million increase in general and administrative expenses when compared to the same period in 2016 was primarily attributable to: i) a $2.1 million increase in salaries and wages; ii) a $1.4 million increase in tax, audit and legal fees; iii) a $1.0 million increase in other general and administrative expenses; and iv) a $ 0.4 increase in depreciation and amortization.

~~Impairment~~For the three-month period ended March 31, 2019, the $0.8 million increase in general and administrative expenses as compared to the same period in 2018 was primarily attributable to a $4.3 million increase other general and administrative expenses mainly related to certain taxes and withholdings. This increase was partially offset by a decrease of ~~Long-Lived assets~~

~~(*) Percentages have been calculated using whole-dollar amounts rather than rounded amounts that appear~~$3.6 million in ~~the table. The table above may not total due~~salaries and wages, mainly related to ~~rounding.~~

~~We recorded an impairment~~devaluation of ~~certain real estate investments owned by our Venezuelan subsidiaries of $2.8 million~~Argentine Peso and ~~$13.7 million during the second quarter of 2017 and 2016, respectively. For further information, see section “Foreign Currency~~ ~~Translation—Venezuelan currency status.~~”

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

For the ~~nine-month period ended September 30, 2017, the $3.4millionincrease in other expenses when compared to a gain in the same period in 2016 was~~primarily attributable to: i) an increase in foreign exchange loss of $14.4 million, from $5.1 million in 2016 to $19.5 million in 2017, and ii) an increase in financial expenses amounting to $ 0.9 million, from $ 18.8 million in 2016 to $ 19.7 million in 2017, due mainly to our convertible notes and other financial charges in Brazil. This increase was partially offset by an increase in interest income amounting to $11.8 million, from $25.2 million in 2016 to $37.0 million in 2017 ~~arising mainly from our financial investments in Brazil and Argentina~~. The 2017 foreign exchange loss was mainly a consequence of a $25.5 million loss arising from the U.S. Dollar revaluation over our Bolivares Fuertes net asset position in Venezuela, partially offset by and a $ 4.2 million gain arising from the Mexican Peso revaluation over our U.S. Dollar net liability position in México and a $1.9 million gain arising from the Argentine Peso devaluation over our U.S. Dollar net asset position in Argentina. The 2016 foreign exchange loss was a consequence of a $7.4 million loss arising from the U.S. Dollar revaluation over our Bolivares Fuertes net asset position in Venezuela and a $ 3.7 million loss arising from the Mexican Peso devaluation over our U.S. Dollar net liability position in Mexico, partially offset by a $6.5 million gain arising from the Argentine Peso devaluation over our U.S. Dollar net asset position in Argentina.

~~For the~~three-month period ended ~~September 30, 2017,~~March 31, 2019, the ~~$10.5~~$1.2 million increase in other income ~~when~~(expense), net as compared to ~~a loss in~~ the same period in ~~2016~~2018 was primarily attributable ~~to: i)~~ to a ~~decrease in foreign exchange loss of $6.4 million, from $4.8 million losses in 2016 to $1.6 million gain in 2017 and ii)~~ ~~a $4.3~~$15.2 million increase in interest income ~~arising~~ from our financial investments as a result of a higher float in Argentina and Brazil and ~~Argentina.~~the proceeds of the 2028 Notes, which generated more invested volume and interest gain. This increase was partially offset ~~by an increase in our financial expenses amounting to $ 0.2 million, from $ 6.5 million in 2016 to $6.7 million in 2017~~ ~~due mainly to our convertible notes and other financial charges in Brazil. The 2017~~by: i) a higher foreign exchange loss ~~was~~of $9.3 million and ii) an increase of $4.8 million in financial expenses, mainly ~~as a consequence of a $3.1 million gain arising from~~attributable to financial interest related to the ~~Reais revaluation over our U.S. Dollar net liability position in Brazil, partially offset by a $ 2.6 million loss arising from~~ ~~the U.S. Dollar revaluation over our Bolivares Fuertes net asset position in Venezuela.~~ The 2016 foreign exchange loss was mainly as a consequence of a $ 2.1 million loss arising from the Reais devaluation over our U.S. Dollar net liability position in Brazil and a $ 1.7 million loss arising from Mexican Peso devaluation over our U.S. Dollar net liability position in Mexico.2028 Notes.

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

During the ~~nine-month~~three-month period ended ~~September 30, 2017~~March 31, 2019 as compared to the same period in ~~2016,~~2018, income tax expense increased by ~~$4.5 million~~ ~~mainly~~ ~~as a consequence of: i) an increase in our pre-tax gains mainly in our Brazilian subsidiaries,~~ ~~partially offset by higher pre-tax losses recorded in Mexico during 2017 (as a result mainly of an increase in our operating costs); and ii) the~~ ~~loss carryforwards generated in our Venezuelan subsidiaries mainly as a consequence of the local currency devaluation, which was not considered recoverable for tax purposes in 2017~~.

~~During the three-month period ended September 30, 2017 as compared to the same period in 2016, income tax decreased by $4.4~~$15.9 million mainly as a consequence of ~~higher~~pre-tax gains in Brazil (resulting primarily from lower free shipping subsidies) compared to the pre-tax losses recorded in ~~Mexico and lower pre-tax tax gains recorded in~~ Brazil during ~~2017~~2018 (as a result mainly of ~~an increase in our~~higher operating ~~costs); partially offset by a higher income tax expense in our Argentinean subsidiaries~~and shipping costs during the third quarter of 2017, as compared to the same period in 2016, due to a higher pre-tax in 2017 and because, in the comparative quarter, we applied tax holiday granted to Neosur S.R.L. and Business Vision S.A. retroactively to be effective as of September 18, 2014.2018).

Our blended tax rate is defined as income tax ~~expense~~(expense)/gain as a percentage of ~~income~~income/(loss) before income tax. Our effective income tax rate is defined as the provision for income taxes ~~(net of charges related to dividend distributions from foreign subsidiaries that are offset with domestic foreign tax credits)~~payable as a percentage of ~~income~~income/(loss) before income tax. The effective income tax rate excludes the effects of the deferred income tax, and complementary income tax.

The following table summarizes our blended and effective tax rates for the ~~nine and~~ three-month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016:~~2018:

Our blended tax rate for the ~~nine-month~~three-month period ended ~~September 30, 2017~~March 31, 2019 decreased as compared to the same period in 2018 mainly due to the effect of the compensation during the first quarter of 2018 between pre-tax losses and gains which generated a reduction of our interim consolidated pre-tax result and a higher blended tax rate also due to the combination of different tax rates. This effect did not take place in 2019, where we had pre-tax gains at consolidated level that were taxable at lower tax rate, mainly due to the benefits of Argentine software development law.

Our effective tax rate for the three-month period ended March 31, 2019 increased as compared to the same period in ~~2016~~2018 mainly due to: i) the devaluation loss recorded in our Venezuelan subsidiaries as described above which was not considered recoverable for tax purposes in 2017; and ii) a higher increase in our pre-tax gains in our Brazilian subsidiaries as compared with other locations, which are taxable at a higher tax rate.

~~Our blended tax rate for the three-month period ended September 30, 2017 decreased as compared~~ to the ~~same period in 2016 mainly due to: i) an~~combined effect of the increase in our pre-tax losses ~~in our Mexican subsidiaries as compared with other locations, which are taxable~~for Mexico at ~~a higher tax rate;~~the segment level and ii) a decrease in our pre-tax gains in our Brazilian subsidiaries as compared with other locations, which are taxable at a higher tax rate, partially offset by a higher income tax expenses in Argentina as described above.

~~Our effective tax rate for~~ the nine and three-month periods ended September 30, 2017 increased as compared to the same period in 2016 mainly due to an increase in our pre-tax losses in our Mexican subsidiaries, which reduce our consolidated pre-tax gain without any corresponding recognition of provision for income ~~taxes.~~tax corresponding to certain subsidiaries with pre-tax gains. Additionally, during the first quarter of 2018, Brazil had pre-tax losses at the segment level but also provision for income tax corresponding to certain subsidiaries with pre-tax gains and during the first quarter of 2019, Brazil had pre-tax gains at the segment level, increasing its effective tax rate.

The following table sets forth our effective income tax rate on a segment basis for the ~~nine and~~ three-month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016:~~2018:

The increase in the effective income tax rate in our Argentine subsidiaries during the nine-month period ended September 30, 2017 as compared to the same period in 2016 was mainly related to higher temporary differences in the current period. The decrease in the effective income tax rate in our Argentine subsidiaries during the three-month period ended ~~September 30, 2017~~March 31, 2019 as compared to the same ~~periods~~period in ~~2016,~~2018 was mainly related to lower ~~temporary differences~~pre-tax gains and higher non-deductible expenses, mainly associated to the functional currency change related to our Argentine operations in the ~~current period.~~first quarter of 2019.

On August 17, 2011, the Argentine government issued a new software development law and on September 9, 2013 a regulatory decree was issued, which established the new requirements to become a beneficiary of the new software development law. The new decree establishes compliance requirements with annual incremental ratios related to exports of services and research and development expenses that must be achieved to remain within the tax holiday. Our Argentine subsidiary will have to achieve certain required ratios annually under the new software development law to remain eligible for the benefits.

On September 17, 2015, the Argentine Industry Secretary approved our application for eligibility under the new software development law for our Argentinean subsidiary, Mercadolibre S.R.L. Furthermore, on September 18, 2016, the Argentine Industry Secretary approved our application for eligibility under the new software development law for our Argentinean subsidiaries, Neosur S.RL. and Business Vision S.A. As a result, our Argentinean subsidiaries have been granted a tax holiday retroactive from September 18, 2014. A portion ofFor information regarding the benefits ~~obtained as beneficiaries of~~granted to the ~~new law is a relief of 60% of total income tax related to software development activities and a 70% relief in payroll taxes related to software development activities.~~

~~Our benefits~~Company under the software development law, ~~will expire on December 31, 2019. As a result of~~please see Note 2 to our eligibility under the new law, we recorded an income tax benefit of $17.7 million and $6.4 million during the nine and three-month periods ended September 30, 2017, respectively. Aggregate per share effect of the Argentine tax holiday amounted to $0.40 and $0.14 for the nine and three-month periods ended September 30, 2017, respectively. Furthermore, we recorded a labor cost benefit of $5.5 million and $2.0 million during the nine and three-month periods ended September 30, 2017, respectively. Additionally, $1.6 million and $0.6 million were accrued to pay software development law audit fees during the nine and three-month periods ended September 30, 2017, respectively. During the nine-month period ended September 30, 2016, we recorded an income tax benefit of $16.0 million, a labor cost benefit of $4,2 million and $1.4 million were accrued to pay software development law audit fees. Additionally, during the third quarter of 2016, we recorded an income tax benefit of $6.8 million, a labor cost benefit of $2.2 million and $0.6 million were accrued to pay software development law audit fees. ~~Aggregate per share effect of the Argentine tax holiday amounted to $0.46 and $0.20 for the nine and three-month periods ended September 30, 2016, respectively~~interim unaudited condensed consolidated financial statements.

The increase in our Brazilian effective income tax rate, ~~for the nine-month periods ended September 30, 2017 as compared to the same periods in 2016,~~which was ~~mainly related to higher temporary differences in the current period. There is no significant variation in the effective income tax rate~~negative for the three-month period ended ~~September 30, 2017~~March 31, 2018 as compared to the same period in ~~2016.~~ 2019, was mainly related to pre-tax gains during first quarter of 2019. During the first quarter of 2018, the effective tax rate in Brazil was lower and negative because of pre-tax losses (as a result of a decrease in net revenues because of the increase in our shipping subsidies described above) without any corresponding impact in our provision for income taxes.

The decrease in our Mexican negative effective income tax rate for the three-month period ended March 31, 2019 as compared to the same period in 2018 was mainly related to the combined effect of the increase in our pre-tax losses in Mexico at the segment level (as a result of an increase in our shipping subsidies described above) and the provision for income tax corresponding to certain subsidiaries with pre-tax gains.

For the nine and three-month periods ended September 30, 2017 and 2016, our Venezuelan effective income tax rate was driven mainly by losses recorded in our Venezuelan subsidiaries related to impairment of long-lived assets and foreign exchange losses, which generated net loss before income tax; except for the third quarter of 2016 which generated pre-tax gains. The loss carryforwards generated in Venezuela were considered not recoverable for tax purposes.

~~The increase in our Mexican~~ ~~effective income tax rate for~~ the nine and three-month periods ended September 30, 2017 as compared with the same periods in 2016, is due to the higher pre-tax losses recorded during 2017 (as a result mainly of an increase in our operating costs) without any corresponding impact in our provision for income taxes.

We do not expect the domestic effective income tax rate related to dividend distributions from foreign subsidiaries to have a significant impact on our company since our strategy is to reinvest our cash surplus in our international operations, and to distribute dividends when they can be offset with available tax credits.

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

Net revenues for the ~~nine and~~ three-month period ended ~~September 30, 2017~~March 31, 2019 as compared to the same period in ~~2016,~~2018 are described above in “Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Net revenues”.

For the ~~nine-month~~three-month period ended ~~September 30, 2017~~March 31, 2019 as compared to the same period in ~~2016,~~2018, direct costs increased by ~~106.6%~~27.3%, mainly driven by: i) a ~~140.6%~~40.8% increase in cost of net revenues, mainly attributable to an increase in ~~shipping costs,~~ collection fees as a consequence of higher transactions volume of our ~~MercadoPago~~Mercado Pago business, shipping operating costs, sales tax and salaries and ~~wages;~~wages related to customer service; ii) a ~~81.7%~~11.9% increase in sales and marketing expenses, mainly due to an increase in online and offline marketing expenses, buyer protection program expenses, bad debt expenses, salaries and wages and chargebacks from credit cards due to the increase in our ~~MercadoPago volume and buyer protection program expenses~~;Mercado Pago transaction volume; iii) a ~~39.7%~~28.0% increase in product and technology development expenses, mainly due to an increase in depreciation and amortization expenses and ~~other product development expenses~~salaries and wages and; iv) a ~~33.6%~~6.3% increase in general and administrative expenses, mainly attributable to an increase in ~~salary~~tax and ~~wages~~other fees and ~~legal fees.~~ other general and administrative expenses.

For the three-month period ended ~~September 30, 2017~~March 31, 2019 as compared to the same period in ~~2016,~~2018, direct costs increased by ~~137.4%~~17.8%, mainly driven by: i) a ~~178.4%~~20.3% increase in cost of net revenues, mainly attributable to an increase in cost of products sold as a consequence of higher volume of mobile point of sale devices, salaries and wages related to customer service and other payments costs and ii) a 9.3% increase in sales and marketing expenses, mainly due to an increase in buyer protection program expenses, chargebacks from credit cards and salaries and wages.

For the three-month period ended March 31, 2019 as compared to the same period in 2018, direct costs increased by 149.2%, mainly driven by: i) a 316.3% increase in cost of net revenues, mainly attributable to an increase in shipping costs, collection fees as a consequence of higher transactions volume of our MercadoPago business, sales tax and salaries and wages related to customer service; ii) a 120.7% increase in sales and marketing expenses, mainly due to an increase in online marketing expenses, chargebacks from credit cards due to increase in our MercadoPago volume and salaries and wages; iii) a 36.3% increase in product and technology development expenses, mainly due to an increase in depreciation and amortization expenses and other product development expenses; and iv) a 19.5% increase in general and administrative expenses, mainly attributable to an increase in depreciation and amortization expenses and legal fees.

For the nine-month period ended September 30, 2017 as compared to the same period in 2016, direct costs increased by 43.5%, mainly driven by: i) a 75.5% increase in sales and marketing expenses, mainly due to an increase in online marketing expenses, buyer protection program expenses and chargebacks from credit cards due to increase in our MercadoPago volume; ii) a 68.4% increase in product and technology development expenses, mainly due to an increase in depreciation and amortization expenses; iii) a 37.5% increase in cost of net revenues, mainly attributable to an increase in collection fees as a consequence of a higher operation volume of MercadoPago business, customer support costs and sales taxes. This increase was partially offset by a 3.7% decrease in general and administrative expenses.

For the three-month period ended September 30, 2017 as compared to the same period in 2016, direct costs increased by 44.0%, mainly driven by: i) a 111.9% increase in sales and marketing expenses, mainly due to an increase in online marketing expenses, buyer protection program expenses and chargebacks from credit cards due to increase in our MercadoPago volume; ii) a 58.9% increase in product and technology development expenses, mainly due to an increase in depreciation and amortization expenses; iii) a 39.5% increase in general and administrative expenses mainly attributable to an increase in salaries and wages and other general and administrative expenses; and iv) a 30.0% increase in cost of net revenues, mainly attributable to an increase in collection fees as a consequence of a higher operation volume of MercadoPago business, customer support costs and sales taxes.

For the nine-month period ended September 30, 2017 as compared to the same period in 2016, direct costs increased by 229.9%, mainly driven by: i) a 358.3% increase in cost of net revenues, mainly attributable to an increase in shipping costs ,collection fees as a consequence of higher penetration of our MercadoPago business and customer support costs; ii) a 236.8% increase in sales and marketing expenses, mainly due to increases in online and offline marketing expenses; and iii) a 21.0% increase in general and administrative expenses. This increase was partially offset by a 10.3% decrease in product and technology development expenses, mainly attributable to a decrease in salaries and wages.

For the three-month period ended September 30, 2017 as compared to the same period in 2016, direct costs increased by 248.1%, mainly driven by: i) a 421.7% increase in cost of net revenues, mainly attributable to an increase in shippingoperating costs, collection fees due to higher ~~MercadoPago~~Mercado Pago penetration, ~~and~~ customer support ~~costs;~~costs and cost of products sold as a consequence of higher volume of mobile point of sale devices; ii) a ~~205.8%~~51.1% increase in sales and marketing expenses, mainly due to increases in online and offline marketing expenses, ~~and~~buyer protection program expenses, chargebacks from credit cards due to the increase in our ~~MercadoPago volume;~~Mercado Pago volume and salaries and wages; iii) a ~~31.9%~~133.3% increase in general and administrative expenses ~~and;~~mainly due to a increase in salaries and wages and other general and administrative expenses and iv) a ~~22.3%~~83.2% increase in product and technology development expenses, mainly attributable to depreciation and ~~amortization.~~

~~During second quarter of 2016~~amortization and ~~the second quarter of 2017, we recorded an impairment of long-lived assets of $13.7 million~~salaries and ~~$2.8 million respectively in our Venezuelan subsidiaries.~~wages.

For the nine-month period ended September 30, 2017 as compared to the same period in 2016, direct costs increased by 32.7%, mainly driven by: i) a 47.7% increase in cost of net revenues that was mainly attributable to an increase in customer support costs and collection fees due to higher MercadoPago penetration and certain new taxes on payment business; ii) a 28.1% increase in product and technology development expenses attributable to an increase in depreciation and amortization expenses; iii) a 13.2% increase in general and administrative expenses; and iv) a 10.1% increase in sales and marketing expenses, mainly due to an increase in the buyer protection program and bad debt expenses

For the three-month period ended September 30, 2017 as compared to the same period in 2016, direct costs increased by 32.4%, mainly driven by: i) a 63.2% increase in product and technology development expenses, mainly attributable to an increase in depreciation and amortization expenses; ii) a 36.6% increase in cost of revenues, mainly attributable to an increase in customer support costs, collection fees and sales taxes; and iii) a 29.2% in sales and marketing expenses, mainly due to increases in the buyer protection program, bad debt expenses. This increase was partially mitigated by a 10.6% decrease in general and administrative expenses.

Our main cash requirement ~~historically~~ has been working capital to fund ~~MercadoPago~~Mercado Pago financing ~~operations in Brazil.~~operations. We also require cash for capital expenditures relating to technology infrastructure, software applications, office space, business acquisitions, to fund our credit business, to ~~fund the payment of quarterly cash dividends on shares of~~build out our ~~common stock~~logistics capacity and ~~to fund~~ the interest payments on our ~~Convertible Notes.~~issued convertible notes.

Since our inception, we have funded our operations primarily through contributions received from our stockholders during the first two years of operations, from funds raised during our initial public offering, and from cash generated from our operations. We issued ~~on June 30, 2014, $330 million principal balance of Convertible~~the 2019 Notes and 2028 Notes for net proceeds ~~to us~~ of approximately $321.7 ~~million.~~million and $864.6 million, respectively. We have funded ~~MercadoPago~~Mercado Pago mainly by discounting credit card receivables and credit lines.

Additionally, we continue funding our MercadoCredito business through ~~cash advances derived from~~securitization of certain loan receivables through SPEs created in Brazil and Argentina, formed to securitize loan receivables provided by us to our ~~business.~~users. We will be using this alternative funding as the MercadoCredito business requires financing to develop and improve its operations. Please refer to Note 11 of our unaudited interim condensed consolidated financial statements for further detail on securitization transactions.

Finally, we issued common and preferred stock in the securities offerings that closed on March 15, 2019 and March 29, 2019, respectively, for net aggregate proceeds of approximately $2,000 million, which are intended to be used to fund the growth of our payment initiatives, build out our logistics capacity, drive the adoption of these services and for general corporate purposes. Please see note 10 to our unaudited condensed consolidated financial statements for additional information regarding our equity offerings.

As of ~~September 30, 2017,~~March 31, 2019, our main source of liquidity, amounting to ~~$636.4~~$2,706.3 million of cash and cash equivalents and short-term investments which excludes a $238.0 million investment related to the Central Bank of Brazil Mandatory Guarantee, and ~~$45.6~~$275.4 million of long-term investments, ~~was provided by~~consists of cash generated from operations, ~~and~~proceeds from loans, from the issuance of the ~~Convertible Notes.~~2019 Notes and the 2028 Notes and proceeds from the issuance of common and preferred stock. We consider our long-term investments as part of our liquidity because long-term investments are comprised of available-for-sale securities classified as long-term as a consequence of their contractual maturities.

The significant components of our working capital are cash and cash equivalents, restricted cash and cash equivalents, short-term investments, accounts receivable, loans receivable, accounts payable and accrued expenses, funds receivable from and payable to ~~MercadoPago~~Mercado Pago users, and short-term debt. ~~As long as we continue transferring credit card receivables to financial institutions in return for cash, we will continue generating cash from those receivables.~~

As of ~~September 30, 2017,~~March 31, 2019, cash and investments of our ~~foreign~~non-U.S. subsidiaries amounted to ~~$481.8~~$875.1 million, ~~or 70.6%~~a 27.1% of our consolidated cash, restricted cash and cash equivalents and investments, and our non-U.S. dollar-denominated cash and investments amounted to approximately 23.7% of our consolidated cash and ~~investments, and approximately 62.3% of our consolidated~~investments. Our non-U.S. dollar-denominated cash and investments ~~were held outside the U.S., mostly~~are located primarily in Brazil and Argentina. Our strategy is to reinvest the undistributed earnings of our foreign operations in those operations and to distribute dividends when they can be offset with available tax credits. We do not expect a material impact in any repatriation of undistributed earnings of foreign subsidiaries on our operations since the taxable domestic gains generated by any dividend distributions will be mostly offset with foreign tax credits that arise from income tax paid in our foreign operations, which we are allowed to compute for domestic income tax purposes.Brazil.

In the event we change the way we manage our business, our working capital needs could be funded, as ~~we did~~ in the past, through a combination of the sale of credit card coupons to financial institutions, ~~and~~ cash advances from our ~~business.~~business and securitization of financial assets through a special purpose vehicle, such as a trust.

The following table presents our cash flows from operating activities, investing activities and financing activities for the ~~nine-month~~three-month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016:~~2018:

Cash provided byby/(used in) operating activities consists of net income adjusted for certain non-cash items, and the effect of changes in working capital and other activities:

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

The $175.4 million increase in net cash provided by operating activities during the three-month period ended March 31, 2019, as compared to the same period in 2018, was primarily driven by a $69.8 million increase caused by a reduction in credit card receivables, a $43.1 million increase in funds payable to customers, a $24.8 million increase in our net income, a $19.5 million increase caused by a reduction in prepaid expenses and a $9.7 million increase in other liabilities.

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

Net cash used in investing activities in the three-month period ended March 31, 2019 resulted mainly from purchases of investments of $1,624.2 million, which was partially offset by proceeds from the sale and maturity of investments of $439.7 million, as part of our financial strategy. We used $42.6 million in principal of loans receivable granted to merchants and consumers under our MercadoCredito solution; and $32.9 million in the purchase of property and equipment (mainly in information technology in Argentina, Brazil and the United States).

(*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding.

~~The $94.7~~For the three-month period ended March 31, 2019, the $1,950.7 million increase in net cash provided by ~~operating~~financing activities ~~during the nine-month period ended September 30, 2017, as compared to the same period in 2016,~~ was primarily driven by a $57.9 million increase in accounts payable and accrued expenses and a $51.3 million increase in funds payable to customers of MercadoPago partially offset by a $ 20.7 decrease in credit card receivables.

~~(*) Percentages have been calculated using whole-dollar amounts rather than rounded amounts that appear in the table. The table above may not total due to rounding.~~

~~Net cash provided by investing activities in the nine-month period ended September 30, 2017 resulted~~ mainly derived from ~~purchases of investments of $3,180.6 million, which was offset by proceeds from the sale and maturity of investments of $3,371.5 million, as part of our financial strategy. We used $ 47.0~~$1,866.5 million in principal of loans receivable granted to merchants and consumers under our MercadoCredito solution, $39.3 million in the purchase of property plant and equipment (mainly in information technology in Argentina, Brazil and the United States) and $12.8 million in advances for property and equipment.

~~(*) Percentages have been calculated using whole-dollar amounts rather than rounded amounts that appear in the table. The table above may not total due to rounding.~~

~~For the nine-month period ended~~ ~~September~~ 30, 2017, our primary use of cash was to fund $ 67.3 million for the 2017 Capped Call Transactions, $19.9 million in cash dividends and $4.3 million for the payments on loans payable and other financing. In addition, we generated $13.2 million proceeds from the issuance of ~~loans.~~Common Stock, $98.7 million in proceeds from issuance of Preferred Stock.

In the event that we decide to pursue strategic acquisitions in the future, we may fund them with available cash, third-party debt financing, or by raising equity capital, as market conditions allow.

On August 24, 2018, we issued $800 million of 2.00% Convertible Senior Notes due 2028 and on August 31, 2018 we issued an additional $80 million of notes pursuant to the partial exercise of the initial purchasers’ option to purchase such additional notes, resulting in an aggregate principal amount of $880 million of 2.00% Convertible Senior Notes due 2028.The 2028 Notes are unsecured, unsubordinated obligations of us, which pay interest in cash semi-annually, on February 15 and August 15, at a rate of 2.00% per annum. The 2028 Notes will mature on August 15, 2028 unless earlier repurchased or converted in accordance with their terms prior to such date. The 2028 Notes may be converted, under specific conditions, based on an initial conversion rate of 2.2553 shares of common stock per $1,000 principal amount of the 2028 Notes (equivalent to an initial conversion price of $443.40 per share of common stock), subject to adjustment as described in the indenture governing the 2028 Notes.

On June 30, 2014, we issued $330 million of 2.25% ~~Convertible Senior Notes~~convertible senior notes due 2019 (the ~~“Notes”~~“2019 Notes”). The 2019 Notes are unsecured, unsubordinated obligations of ~~our~~the Company, which pay interest in cash semi-annually, on January 1 and July 1 of each year, at a rate of 2.25% per annum. The 2019 Notes will mature on July 1, 2019 unless earlier repurchased or converted in accordance with their terms prior to such date. The 2019 Notes may be converted, under ~~the~~specific conditions, ~~specified below,~~ based on an initial conversion rate of 7.9353 shares of common stock per $1,000 principal amount of the 2019 Notes (equivalent to an initial conversion price of ~~approximately~~ $126.02 per share of common stock), subject to adjustment as described in the indenture governing the Notes.

Holders may convert their notes at their option at any time prior to January 1, 2019 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2014 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events. On or after January 1, 2019 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their notes at any time, regardless of the foregoing circumstances.

As of September 30, 2017, the conversion threshold had been met and the Notes became convertible at the holders’ option beginning on October 1, 2017 and ending on December 31, 2017. The determination of whether or not the Notes are convertible must continue to be performed on a quarterly basis. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. The intention of the Company is to share-settle the amount due upon conversion of the Notes.

~~From October 1 to the date of issuance of this form, no additional conversion request were made.~~

~~The~~ ~~total~~ ~~estimated fair value of the Notes was$687.9 millionand~~$~~458.8~~ ~~millionas of~~ ~~September~~ ~~30, 2017 and December 31, 2016, respectively. The fair value was determined based on the closing trading price per $100 of the Notes as of the last day of trading for the period.~~ ~~Based on the $258.9 closing price of the Company’s common stock on September 30, 2017, the if-converted value of the Notes exceeded their principal amount by approximately $348.0 million.~~

The net proceeds from the Notes were approximately $321.7 million after considering the transaction costs in an amount of $8.3 million. In connection with the issuance of the Notes, we paid approximately $19.7 million in June 2014 to enter into ~~privately negotiated capped call transactions with respect to~~ ~~our common stock~~ ~~with certain financial institutions (the “2014 Capped Call Transactions”). In September 2017, we paid~~ ~~$67.3 million (including transaction expenses) to~~ ~~enter into additional privately negotiated capped call transactions with certain financial institutions~~ (the “2017 Capped Call Transactions”; and together with the 2014 Capped Call Transactions, the “Capped Call Transactions”). The 2017 Capped Call Transactions are in addition to the 2014 Capped Call Transactions and have a higher strike price and cap price. The 2014 Capped Call ~~Transactions have a cap price of approximately $155.78 per common share and the 2017 Capped Call Transactions have a cap price of approximately $366.06~~ per common share. The Capped Call Transactions are expected generally to reduce the potential dilution upon conversion of the Convertible Notes in the event that the market price of our common stock is greater than the strike price of the Capped Call Transactions~~. The strike price of the 2014 Capped Call Transactions was initially set at $126.02 per common share, which corresponds to the initial conversion price of the Notes. The strike price of the 2017 Capped Call Transactions was initially set at $295.67~~ per common share. The Capped Call Transactions are subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the Notes. The Capped Call Transactions allow us to receive shares of our common stock and/or cash related to the excess conversion value that we would pay to the holders of the Notes upon conversion, up to the ~~applicable cap price.~~

~~Cash Dividends~~Please refer to note 9 to our unaudited interim condensed consolidated financial statements for additional information regarding the 2019 Notes, the 2028 Notes and the related capped call transactions.

During 2019, we, through our subsidiaries, continued obtaining certain lines of ~~February, May, August~~credit in Argentina, Chile and ~~November of 2016,~~Uruguay primarily to fund the Board of Directors approved a quarterly cash dividend of $6,624 thousands (or $0.150 per share) on the Company’s outstanding shares of common stock. The dividends were paid on April 15, July 15, October 14, 2016Mercado Pago business. Additionally, we started to securitize certain loan receivables through its Argentine and ~~January 16, 2017~~Brazilian SPEs, formed to ~~stockholders of record as of the close of business on March 31, June 30, September 30, and December 31, 2016.~~

~~On March 2, 2017, the Board of Directors approved a change~~securitize loan receivables provided by us to ~~the Company’s dividend policy~~our users. Please refer to Note 11 to our interim unaudited condensed consolidated financial statements for providing for a fixed quarterly dividend payment in 2017 of $0.150 per share ($0.600 per share annually). The new dividend policy took effect following the payment of the $0.150 per share dividend declared by the Board of Directors of the Company, which was paid on April 17, 2017 to shareholders of record as of the close of business on March 31, 2017.

On May 2, 2017, the Board of Directors approved a quarterly cash dividend of $6,624 thousands (or $0.150 per share) on the Company´s outstanding shares of common stock. The second quarterly dividend was paid on July 14, 2017 to stockholders of record as of the close of business on June 30, 2017.

On July 31, 2017, the Board of Directors approved a quarterly cash dividend of $6,624 thousands (or $0.150 per share) on our outstanding shares of common stock. The third quarterly dividend was paid on October 16, 2017 to stockholders of record as of the close of business on September 30, 2017.

On October 31, 2017, our board of directors approved a quarterly cash dividend of $6,624 thousands (or $0.150 per share) on our outstanding shares of common stock. This quarterly dividend is payable on January 16, 2018 to stockholders of record as of the close of business on December 31, 2017.

We currently expect to continue paying comparable cash dividends on a quarterly basis. However, any future determination as to the declaration of dividends on our common stock will be made at the discretion of our board of directors and will depend on our earnings, operating and financial condition, capital requirements and other factors deemed relevant by our board of directors, including the applicable requirements of the Delaware General Corporation Law.

Our capital expenditures (composed of our payments for property and equipment (as fulfillment centers), intangible assets and acquired ~~business)~~businesses) for the ~~nine-month~~three-month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 amounted to ~~$52.1~~$33.0 million and ~~$69.0~~$23.0 million, respectively.

During the ~~nine-month~~three-month period ended ~~September 30, 2017~~March 31, 2019, we invested ~~$32.9~~$12.2 million in ~~Information Technology~~information technology in Brazil, Argentina ~~the United States~~ and Mexico, and ~~$2.3~~$12.1 million in our Argentine, Brazilian and ~~Argentinean~~Mexican offices.

On February 12, 2016, through our subsidiaries Meli Participaciones S.L. and Marketplace Investment LLC, we acquired 100% of the issued and outstanding shares of capital stock of Monits S.A., a software development company located and organized under the laws of Buenos Aires, Argentina, for the purchase price of $3.1 million, measured at its fair value.

In April 2016, our Venezuelan subsidiary acquired commercial properties still in the construction process and totaling 135.81 square meters in Caracas, Venezuela for a total purchase price of approximately BF$1,359 million, or $3.7 million, for investment purposes and included in non-current other assets. The Venezuelan subsidiary paid the purchase price in Bolivares Fuertes. According to the purchase agreements, the commercial properties will be delivered in December 2018.

On June 1, 2016, through our subsidiary Ebazar.com.br Ltda., we acquired 100% of the issued and outstanding shares of capital stock of Axado, a company that develops logistic software for the e-commerce industry in Brazil, for the purchase price of $5.5 million, measured at its fair value. We believe this acquisition will allow us to enhance our software development capabilities on Transportation Management System and will contribute to our shipping business performance.

We are ~~permanently~~continually increasing ~~the~~our level of investment onin hardware and software licenses necessary to improve and update ~~the~~our platform’s technology ~~of our platform~~ and ~~cost of~~ computer software developed internally. We anticipate continued investments in capital expenditures related to information technology in the future as we strive to maintain our position in the Latin American e-commerce market.

We believe that our existing cash and cash equivalents, including the sale of credit card receivables and cash generated from operations will be sufficient to fund our operating activities, property and equipment expenditures and to pay or repay obligations going forward.

As of ~~September 30, 2017,~~March 31, 2019, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.

See Item 1 of Part I, “Unaudited Interim Condensed Consolidated Financial Statements-Note 2-Summary of significant accounting ~~policies-Recently~~policies-Recently Adopted Accounting Standards and Recently issued accounting ~~pronouncements.~~pronouncements not yet adopted.”

To supplement our consolidated financial statements presented in accordance with U.S. GAAP, we use foreign exchange (“FX”) neutral measures as a non-GAAP measure.

This non-GAAP measure should not be considered in isolation or as a substitute for measures of performance prepared in accordance with U.S. GAAP and may be different from non-GAAP measures used by other companies. In addition, this non-GAAP measure ~~are~~is not based on any comprehensive set of accounting rules or principles. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with U.S. GAAP. This non-GAAP financial measure should only be used to evaluate our results of operations in conjunction with the most comparable U.S. GAAP financial measures.

Reconciliation of this non-GAAP financial measure to the most comparable U.S. GAAP financial measure can be found in the table included in this quarterly report.

We believe that reconciliation of FX neutral measures to the most directly comparable GAAP measure provides investors an overall understanding of our current financial performance and its prospects for the future. Specifically, we believe this FX neutral non-GAAP measure provide useful information to both ~~management~~Management and investors by excluding the foreign currency exchange rate impact that may not be indicative of our core operating results and business outlook.

The FX neutral measures were calculated by using the average monthly exchange rates for each month during ~~2016~~2018 and applying them to the corresponding months in ~~2017,~~2019, so as to calculate what our results would have been ~~had~~if exchange rates remained stable from one year to the next. The table below excludes intercompany allocation FX effects. Finally, ~~these~~this measures dodoes not include any other macroeconomic effect such as local currency inflation effects, the impact on impairment calculations or any price adjustment to compensate local currency inflation or devaluations.

The following table sets forth the FX neutral measures related to our reported results of the operations for the ~~nine and~~ three-month periods ended ~~September 30, 2017:~~March 31, 2019:

The table above shows a loss from operations on an FX neutral basis mainly as result of a 53.5% Argentine local currency devaluation as of March 31, 2019 compared to March 31, 2018, which has a strong impact if we estimate our Argentine operating expenses on an FX neutral basis.

We are exposed to market risks arising from our business operations. These market risks arise mainly from the possibility that changes in interest rates and the U.S. dollar exchange rate with local currencies, particularly the Brazilian ~~real~~Reais and Argentine ~~peso~~Peso due to Brazil’s and Argentine’s respective share of our revenues, may affect the value of our financial assets and liabilities.

We have significant operations internationally that are denominated in foreign currencies, primarily the Brazilian Reais, Argentine Peso, Mexican Peso, Colombian Peso and Chilean Peso, subjecting us to foreign currency risk which may adversely impact our financial results. We transact business in various foreign currencies and have significant international revenues and costs. In addition, we charge our international subsidiaries for their use of intellectual property and technology and for certain corporate services. Our cash flows, results of operations and certain of our intercompany balances that are exposed to foreign exchange rate fluctuations may differ materially from expectations and we may record significant gains or losses due to foreign currency fluctuations and related hedging activities.

As of ~~September 30, 2017,~~March 31, 2019, we hold cash and cash equivalents in local currencies in our subsidiaries, and have receivables denominated in local currencies in all of our operations. Our subsidiaries generate revenues and incur most of their expenses in the respective local currencies of the countries in which they operate. As a result, our subsidiaries use their local currency as their functional currency except for our ~~Venezuelan~~Argentine subsidiaries ~~which use~~whose functional currency is the U.S. dollar ~~as if it is the functional currency~~ due to ~~Venezuela being a highly~~the inflationary environment. As of ~~September 30, 2017,~~March 31, 2019, the total cash and cash equivalents denominated in foreign currencies totaled ~~$255.0~~$306.2 million, short-term investments denominated in foreign currencies totaled ~~$167.2~~$422.3 million and accounts receivable, credit cards receivable and loans receivable in foreign currencies totaled ~~$487.2~~$342.7 million. As of ~~September 30, 2017,~~March 31, 2019, we had no long-term investments denominated in foreign currencies. To manage exchange rate risk, our treasury policy is to transfer most cash and cash equivalents in excess of working capital requirements into U.S. dollar-denominated accounts in the United States. As of ~~September 30, 2017,~~March 31, 2019, our U.S. dollar-denominated cash and cash equivalents and short-term investments totaled ~~$214.2~~$2,226.2 million and our U.S. dollar-denominated long-term investments totaled ~~$45.6~~$275.4 million.

For the ~~nine-month~~three-month period ended ~~September 30, 2017,~~March 31, 2019, we had a consolidated loss on foreign currency of ~~$19.5~~$3.7 million primarily as a result of a ~~$25.5~~$3.5 million loss arising from the strengthening of the U.S. ~~Dollar revaluation~~dollar over our Bolivares Fuertes net asset position in Venezuela, partially offset by a $ 4.2 million gain arising from the Mexican Peso revaluation over our U.S. Dollar net liability position in México and a $1.9 million gain arising from the Argentine Peso ~~devaluation over our U.S. Dollar~~ net asset position in Argentina.

If the U.S. dollar weakens against foreign currencies, the translation of these foreign-currency-denominated transactions will result in increased net revenues, operating expenses, and net income while the re-measurement of our net asset position in U.S. dollars will have a negative impact in our Statement of Income. Similarly, our net revenues, operating expenses and net income will decrease if the U.S. dollar strengthens against foreign currencies, while the re-measurement of our net asset position in U.S. dollars will have a positive impact in our Statement of Income.

The following table sets forth the percentage of consolidated net revenues by segment for the ~~nine and~~ three-month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016:~~2018:

(**)The amount incurred in shipping subsidies, which are netted from revenues, when we act as an agent, was $74.0 million and $112.5 million for the three-month periods ended March 31, 2019 and 2018, respectively.

The table below shows the impact on our net revenues, expenses, other expenses and income tax, net income and equity for a positive and a negative 10% fluctuation on all the foreign currencies to which we are exposed to for the ~~nine-month~~three-month period ended ~~September 30, 2017:~~March 31, 2019:

The table above shows an increase in our net income when the U.S. dollar weakens against foreign currencies because of the net negative impact of the re-measurement of our net asset position in U.S. dollars ~~has a lesser impact than~~and the increase in our ~~net revenues, operating expenses,~~income from operations and other expenses, net and income tax lines related to the translation effect. Similarly, the table above shows a decrease in our net income when the U.S. dollar strengthens against foreign currencies because the re-measurement of our net asset position in U.S. dollars has a lesser impact than the decrease in our ~~net revenues, operating expenses,~~loss from operations and other expenses, net and income tax lines related to the translation effect.

~~During the nine and three-month period ended September 30, 2017, we did not enter into any such hedging transaction.~~

In accordance with U.S. GAAP, we have classified our Venezuelan operations as highly inflationary since January 1, 2010, using the U.S. dollar as the functional currency for purposes of reporting our financial statements. Therefore, no translation effect has been accounted for in other comprehensive income related to our Venezuelan operations. As of September 30, 2017, monetary assets and liabilities in BsF were re-measured to the U.S. dollar using the DICOM closing exchange rate of 41,478.0 BsF per U.S. dollar.

See Item 2 of Part I, “Management’s discussion and analysis of financial condition and results of operations—Critical accounting policies and estimates—Foreign Currency Translation” for details on the currency status of our Venezuelan segment.

Although the current mechanisms available to obtain U.S. dollars for dividend distributions to shareholders outside of Venezuela imply increased restrictions, we do not expect that the current restrictions to purchase U.S. dollars will have a significant adverse effect on our business ~~strategy with regard to the investment in Venezuela.~~

In order to assist investors in their overall understanding of the impact on our Venezuelan segment reporting, we developed a scenario that considers a 1240% additional devaluation over the DICOM rate as of the date of this report, applied for the period starting on January 1, 2017 to September 30, 2017. These disclosures may help investors to project sensitivities, on segment information captions, to devaluations of whatever order of magnitude they choose by simple arithmetic calculations. The information is just a scenario and does not represent a forward-looking statement about our expectations or projections related to future events in Venezuela. The investors and other readers or users of the financial information presented in this caption are cautioned not to place undue reliance on this scenario. This information is not a guarantee of future events.

The information disclosed below does not include any inflation effect, nor the devaluation impact related to the assumed devaluation or any other effect derived from the assumed devaluation, such as further impairments of long-lived assets. The information below should not be considered in isolation or as a substitute for measures of performance prepared in accordance with U.S. GAAP. In addition, this information is not based on any comprehensive set of accounting rules or principles.

The evolution of the Venezuelan economy and any future governmental interventions in the Venezuelan economy are beyond our ability to control or predict. New events could happen in the future in Venezuela and it is not possible for management to predict all such events, nor can it assess the impact of all such events on our Venezuelan business.

The table below provides specific sensitivity information of our Venezuelan segment reporting for the period indicated assuming approximately a 1240% additional devaluation over the DICOM rate as of the date of this report, applied for the period starting on January 1, 2017 to September 30, 2017:

(**) Computing a hypothetical devaluation of the Venezuelan segment from January 1 to September 30, 2017 assuming an exchange rate of 41,478.0 BsF per U.S. dollar (1240% of the exchange rate as of September 30, 2017).

Despite the continued uncertainty and restrictions relating to foreign currency exchange in Venezuela as described above, we believe that our underlying business in that country is competitively well-positioned and continues to exhibit solid growth, in terms of units sold, even while economic conditions in the Venezuelan economy remain difficult. As economic conditions in that country improve, we expect that our business in Venezuela will benefit accordingly. Although during the first half of 2017, we experienced a strong devaluation of ~~our~~ business in Venezuela, we cannot assure you that the BsF will not experience further devaluations or that the Venezuelan government will not default on its obligations to creditors in the future, which may be significant and could have a material negative impact on our future financial results of our Venezuela segment and value of our bolivar denominated net assets. However, for the reasons stated at the beginning of this paragraph, we remain strongly committed to our business and investment in Venezuela.

In accordance with U.S. GAAP, we have classified our Argentine operations as highly inflationary since July 1, 2018, using the U.S. dollar as the functional currency for purposes of reporting our financial statements. Therefore, no translation effect has been accounted for in other comprehensive income related to our Argentine operations since July 1, 2018.

As of ~~September 30, 2017,~~March 31, 2019, the Argentine Peso exchange rate against the U.S. dollar was ~~17.3.~~43.35.

Had a hypothetical devaluation of 10% of the Argentine ~~peso~~Peso against the U.S. dollar occurred on ~~September~~ ~~30, 2017,~~March 31, 2019, the reported net ~~assets~~asset in our Argentine subsidiaries would have ~~decreased by approximately $20.6 million with a related impact on Other Comprehensive Income. Additionally, we would have~~ recorded a foreign exchange ~~gain~~loss amounting to approximately ~~$0.4~~$1.7 million in our Argentine subsidiaries.

As of ~~September 30, 2017,~~March 31, 2019, the Brazilian Reais exchange rate against the U.S. dollar was ~~3.2.~~3.90.

Had a hypothetical devaluation of 10% of the Brazilian Reais against the U.S. dollar occurred on ~~September~~ 30~~, 2017,~~March 31, 2019, the reported net assets in our Brazilian subsidiaries would have decreased by approximately ~~$10.4~~$30.9 million with the related impact in Other Comprehensive Income. Additionally, we would have recorded a foreign exchange ~~loss~~gain amounting to approximately ~~$2.1~~$2.4 million in our Brazilian subsidiaries.

Our earnings and cash flows are also affected by changes in interest rates. These changes could have an impact on the interest rates that financial institutions charge us prior to the time we sell our ~~MercadoPago~~Mercado Pago receivables. As of ~~September 30, 2017, MercadoPago’s~~March 31, 2019, Mercado Pago’s receivables totaled ~~$406.9~~$308.5 million. Interest rate fluctuations could also impact interest earned through our MercadoCredito solution. As of ~~September~~ ~~30, 2017,~~March 31, 2019, loans granted under our MercadoCredito solution totaled ~~$51.8~~$134.6 million. Interest rate fluctuations could also negatively affect certain of our fixed rate and floating rate investments comprised primarily of time deposits, money market funds, investment grade corporate debt securities and sovereign debt securities. Investments in both fixed rate and floating rate interest earning products carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than predicted if interest rates fall.

Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes. As of ~~September 30, 2017,~~March 31, 2019, the average duration of our available for sale securities, defined as the approximate percentage change in price for a 100-basis-point change in yield, was ~~0.52%~~0.8%. If interest rates were to instantaneously increase (decrease) by 100 basis points, the fair market value of our available for sale securities as of ~~September 30, 2017~~March 31, 2019 could decrease (increase) by approximately ~~$1.0~~$10.0 million.

As of ~~September 30, 2017,~~March 31, 2019, our short-term investments amounted to ~~$175.2~~$1,648.5 million and our long-term investments amounted to ~~$45.6~~$275.4 million. These investments, except for the $238.0 million investment related to the Central Bank of Brazil Mandatory Guarantee, can be readily converted at any time into cash or into securities with a shorter remaining time to maturity. We determine the appropriate classification of our investments at the time of purchase and re-evaluate such designations as of each balance sheet date.

Our board of directors adopted the ~~2010,~~ 2011 and 2012 long-term retention plans (the ~~“ 2010, 2011~~“2011 and 2012 LTRPs”, respectively), under which certain eligible employees receive awards (“LTRP Awards”), which are payable as follows:

~~The 2010, 2011 and 2012 LTRPs are filed as Exhibits 10.02, 10.03 and 10.04, respectively, to our Quarterly Report on Form 10-Q filed with the SEC on August 5, 2016, and the above description~~Our board of ~~such LTRPs is qualified in its entirety by reference to such exhibits.~~

~~On September 27, 2013, our Board of Directors,~~directors, upon the recommendation of the compensation committee, approved the 2013, 2014, 2015, 2016, 2017, and 2018 Long Term Retention Plan (the “2013, ~~LTRP”~~2014, 2015, 2016, 2017 and 2018 LTRPs”), on March 31, 2014, the Board of Directors, upon the recommendation of the compensation committee, approved the 2014 employee retention plan (the “2014 LTRP”) and on August 4, 2015, the Board of Directors, upon the recommendation of the compensation committee, approved the 2015 employee retention plan (the “2015 LTRP”).respectively.

In order to receive an award under the 2013, 2014, 2015, 2016, 2017 and/or ~~2015~~2018 LTRP, each eligible employee must satisfy the performance conditions established by the Board of Directors for such employee. If these conditions are satisfied, the eligible employee will, subject to his or her continued employment as of each applicable payment date, receive the full amount of his or her 2013, 2014, 2015, 2016, 2017, and/or ~~2015~~2018 LTRP award, payable as follows:

The 2013, 2014 and 2015 LTRPs are filed as Exhibits 10.05, 10.06 and 10.07, respectively, to our Quarterly Report on Form 10-Q filed with the SEC on August 5, 2016, and the above description of such LTRPs is qualified in its entirety by reference to such exhibits.

~~On August 2, 2016, the Board~~Our board of ~~Directors,~~directors, upon the recommendation of the ~~Compensation Committee, adopted~~compensation committee, approved the ~~2016 LTRP which~~ ~~provides~~ ~~for the grant to eligible employees of a fixed award~~2019 Long Term Retention Plan (the ~~2016 LTRP Fixed Award) and a variable award (the 2016 LTRP Variable Award)~~“2019 LTRP”). In order to receive ~~awards~~the full target award under the ~~2016~~2019 LTRP, each eligible employee must satisfy the performance conditions established by the Board of Directors for such employee, which generally are expected to be based on pre-set goals for the Company’s financial and operational performance. If these conditions are satisfied, the eligible employee will, subject to his or her continued employmentremain employed as of each applicable payment ~~date, receive the full amount of his or her 2016~~date. The 2019 LTRP ~~Awards,~~award is payable as follows:

The 2016 LTRP is filed as Exhibit 10.08 to our Quarterly Report on Form 10-Q filed with the SEC on August 5, 2016, and the description of the 2016 LTRP above is qualified in its entirety by reference to such exhibit.

On April 3, 2017, the Board of Directors, upon the recommendation of the Compensation Committee, adopted the 2017 LTRP which provides for the grant to eligible employees of a fixed award (the 2017 LTRP Fixed Award) and a variable award (the 2017 LTRP Variable Award). In order to receive awards under the 2017 LTRP, each eligible employee must satisfy the performance conditions established by the Board of Directors for such employee, which generally are expected to be based on pre-set goals for the Company’s financial and operational performance. If these conditions are satisfied, the eligible employee will, subject to his or her continued employment as of each applicable payment date, receive the full amount of his or her 2017 LTRP Awards, payable as follows:

At ~~September 30, 2017,~~March 31, 2019, the total contractual obligation fair value of our ~~2010,~~ 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018 and ~~2017~~2019 LTRP Variable ~~Award~~ Payment obligation amounted to ~~$67.4~~$106.0 million. As of ~~September 30, 2017,~~March 31, 2019, the accrued liability related to the ~~2010,~~ 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018 and ~~2017~~2019 Variable ~~Award~~ Payment of the LTRP included in Salaries and Social security payable in our condensed consolidated balance sheet amounted to ~~$38.5~~$53.4 million. The following table shows a sensitivity analysis of the risk associated with our total contractual obligation fair value related to the ~~2010,~~ 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018 and ~~2017~~2019 LTRP Variable ~~Award~~ Payment if our common stock price per share were to increase or decrease by up to 40%:

(*) Average closing stock price for the last 60 trading days of the closing date.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our ~~management,~~Management, including our ~~chief executive officer~~Chief Executive Officer and ~~chief financial officer,~~Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Based on the evaluation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) required by Exchange Act Rules 13a-15(b) or 15d-15(b), our chief executive officer and our chief financial officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.

There were no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the ~~nine-month~~three-month period ended ~~September 30, 2017~~March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

See Item 1 of Part I, “Financial Statements—Note 7 Commitments and Contingencies—Litigation and other Legal Matters.”

As of ~~September~~ ~~30, 2017,~~March 31, 2019, there have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2018.

The information set forth under “Index to Exhibits” below is incorporated herein by reference.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


PART I. FINANCIAL INFORMATION
Item 1 — Unaudited Interim Condensed Consolidated Financial Statements
Interim Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018	1
Interim Condensed Consolidated Statements of Income for the ~~nine and~~ three-month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018	2
Interim Condensed Consolidated Statements of Comprehensive Income for the ~~nine and~~ three-month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018	3
Interim Condensed Consolidated Statements of Equity for the three-month periods ended March 31, 2019 and 2018	4
Interim Condensed Consolidated Statements of Cash Flows for the ~~nine-month~~three-month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018	45
Notes to Interim Condensed Consolidated Financial Statements (unaudited)	56
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations	2427
Item 3 — Qualitative and Quantitative Disclosures About Market Risk	5146
Item 4 — Controls and Procedures	5649
PART II. OTHER INFORMATION	5650
Item 1 — Legal Proceedings	5650
Item 1A — Risk Factors	5650
Item 6 — Exhibits	5650
INDEX TO EXHIBITS	5850


	Nine Months Ended September 30		Three Months Ended September 30,
	2017	2016	2017	2016
Net income	$ 81,500	$ 85,017	$ 27,666	$ 38,912
Other comprehensive (loss) income, net of income tax:
Currency translation adjustment	(17,945)	(11,056)	(5,180)	(2,974)
Unrealized net gains (losses) on available for sale investments	340	712	(1,413)	1,106
Less: Reclassification adjustment for losses on available for sale investments	(587)	(672)	—	—
Net change in accumulated other comprehensive loss, net of income tax	(17,018)	(9,672)	(6,593)	(1,868)
Total Comprehensive income	$ 64,482	$ 75,345	$ 21,073	$ 37,044



	Amount of (Loss) Gain
	Reclassified from
Details about Accumulated	Accumulated Other
Other Comprehensive Loss	Comprehensive	Affected Line Item
Components	Loss	in the Statement of Income
	(In thousands)
Unrealized ~~losses~~gains on investments	$ ~~(909)~~3,345	Interest ~~expense~~income and other financial ~~losses~~gains
Estimated tax gain on unrealized losses on investments	~~322~~ (616)	Income tax ~~gain~~loss
Total reclassifications for the ~~year~~period	$ ~~(587)~~2,729	Total, net of income taxes


	September 30,	December 31,	March 31,	December 31,
	2017	2016	2019	2018
	(In thousands)		(In thousands)
Goodwill	$ 95,249	$ 91,797	$ 89,827	$ 88,883
Intangible assets with indefinite lives
- Trademarks	13,153	12,490	8,733	8,584
Amortizable intangible assets
- Licenses and others	6,565	8,738	5,445	5,406
- Non-compete agreement	2,491	1,787	2,786	3,028
- Customer list	15,215	14,580	14,844	14,897
- Trademarks	1,854	993	4,676	4,565
Total intangible assets	$ 39,278	$ 38,588	$ 36,484	$ 36,480
Accumulated amortization	(14,636)	(12,311)	(18,801)	(17,899)
Total intangible assets, net	$ 24,642	$ 26,277	$ 17,683	$ 18,581


	Period ended September 30, 2017								Period ended March 31, 2019
	Brazil	Argentina	Chile	Mexico	Venezuela	Colombia	Other Countries	Total	Brazil	Argentina	Mexico	Chile	Colombia	Other Countries	Total
	(In thousands)								(In thousands)
Balance, beginning of the period	$ 27,660	$ 6,587	$ 17,388	$ 29,342	$ 5,989	$ 3,643	$ 1,188	$ 91,797	$ 30,069	$ 6,946	$ 31,340	$ 16,014	$ 3,339	$ 1,175	$ 88,883
- Effect of exchange rates changes	245	(809)	783	3,158	—	50	25	3,452
Purchase price allocation adjustments									—	45	—	—	—	—	45
Effect of exchange rates changes									(145)	—	567	392	76	9	899
Balance, end of the period	$ 27,905	$ 5,778	$ 18,171	$ 32,500	$ 5,989	$ 3,693	$ 1,213	$ 95,249	$ 29,924	$ 6,991	$ 31,907	$ 16,406	$ 3,415	$ 1,184	$ 89,827



	Year ended December 31, 2016								Year ended December 31, 2018
	Brazil	Argentina	Chile	Mexico	Venezuela	Colombia	Other Countries	Total	Brazil	Argentina	Mexico	Chile	Colombia	Other Countries	Total
	(In thousands)								(In thousands)
Balance, beginning of year	$ 18,526	$ 7,430	$ 16,438	$ 33,834	$ 5,729	$ 3,437	$ 1,151	$ 86,545
- Business acquisition	5,635	700	—	190	260	57	32	6,874
Balance, beginning of the year									$ 32,492	$ 5,761	$ 30,396	$ 18,805	$ 3,632	$ 1,193	$ 92,279
- Business acquisitions									3,110	3,175	543	61	80	53	7,022
- Effect of exchange rates changes	3,499	(1,543)	950	(4,682)	—	149	5	(1,622)	(5,533)	(1,990)	401	(2,852)	(373)	(71)	(10,418)
Balance, end of the year	$ 27,660	$ 6,587	$ 17,388	$ 29,342	$ 5,989	$ 3,643	$ 1,188	$ 91,797	$ �� 30,069	$ 6,946	$ 31,340	$ 16,014	$ 3,339	$ 1,175	$ 88,883


For year ended 12/31/~~2017~~2019						$ ~~1,343~~2,720
~~For year ended 12/31/2018~~						~~4,475~~
~~For year ended 12/31/2019~~						~~2,201~~
For year ended 12/31/2020						~~956~~2,383
For year ended 12/31/2021						1,815
For year ended 12/31/2022						1,083
Thereafter						~~2,514~~949
						$ ~~11,489~~8,950


	Nine Months Ended September 30, 2016
	Brazil	Argentina	Mexico	Venezuela	Other Countries	Total
	(In thousands)
Net revenues	$ 311,427	$ 185,885	$ 34,375	$ 26,451	$ 29,983	$ 588,121
Direct costs	(188,772)	(105,217)	(29,004)	(12,691)	(21,281)	(356,965)
Impairment of Long-lived Assets	-	-	-	(13,717)	-	(13,717)
Direct contribution	122,655	80,668	5,371	43	8,702	217,439

Operating expenses and indirect costs of net revenues						(101,055)
Income from operations						116,384

Other income (expenses):
Interest income and other financial gains						25,192
Interest expense and other financial losses						(18,807)
Foreign currency losses						(5,062)
Net income before income tax expense						$ 117,707


		Three Months Ended September 30, 2016
		Brazil	Argentina	Mexico	Venezuela	Other Countries	Total
		(In thousands)
Net revenues		$131,003	$69,983	$11,807	$6,885	$11,169	$230,847
Direct costs		(77,012)	(39,026)	(10,353)	(3,462)	(7,943)	(137,796)
Direct contribution		53,991	30,957	1,454	3,423	3,226	93,051

Operating expenses and indirect costs of net revenues							(39,342)
Income from operations							53,709

Other income (expenses):
	Interest income and other financial gains						9,892
	Interest expense and other financial losses						(6,492)
	Foreign currency losses						(4,823)
Net income before income tax expense							$52,286


	Nine-months Ended September 30,		Three-months Ended September 30,		Three months Ended March 31,

Consolidated Net Revenues	2017	2016	2017	2016	2019	2018
	(In thousands)		(In thousands)		(In thousands)
Marketplace	$ 582,475	$ 341,749	$ 227,269	$ 134,374
Non-marketplace () (*)	$ 378,642	$ 246,372	$ 143,392	$ 96,473
Enhanced Marketplace (*)					$ 253,035	$ 140,695
Non-marketplace () (*)					220,735	180,281
Total	$ 961,117	$ 588,121	$ 370,661	$ 230,847	$ 473,770	$ 320,976


One year or less		~~197,515~~1,559,645
One year to two years		~~20,331~~272,020
Two years to three years		~~16,847~~133
Three years to four years		~~7,135~~43
Four years to five years		46
Total		$ ~~241,828~~1,831,887


	Three month periods ended March 31,
	2019
	(In thousands)
Contractual coupon interest expense	$	4,742
Amortization of debt discount		6,317
Amortization of debt issuance costs		121
Total interest expense related to the 2028 Notes	$	11,180


	Nine-months period ended September 30,				Three-months period ended September 30,				Three month periods ended March 31,
	2017		2016		2017		2016		2019		2018

	(In thousands)		(In thousands)		(In thousands)		(In thousands)		(In thousands)		(In thousands)
Contractual coupon interest expense	$	5,569	$	5,569	$	1,856	$	1,856	$	373	$	1,856
Amortization of debt discount		7,188		6,806		2,440		2,310		531		2,508
Amortization of debt issuance costs		1,106		998		381		344		88		399
Total interest expense related to the Notes	$	13,863	$	13,373	$	4,677	$	4,510
Total interest expense related to the 2019 Notes									$	992	$	4,763



	Nine-month Periods Ended September 30,
	2017	2016
Venezuelan operations	(In millions)
Net Revenues	$ 38.3	$ 26.5


	Nine-months Periods Ended September 30,					Three-month Periods Ended September 30,				Three-month Periods Ended March 31,
(in millions)		2017		2016		2017	2016			2019	2018

Number of confirmed registered users at end of period (1)		201.2		166.3		201.2		166.3		280.1		223.1
Number of confirmed new registered users during period (2)		27.0		21.7		10.0		7.7		12.3		11.2
Gross merchandise volume (3)	$	8,131.6	$	5,826.0	$	3,075.3	$	2,040.2	$	3,087.8	$	3,126.4
Number of successful items sold (4)		188.9		129.6		74.2		47.6		82.8		80.1
Number of successful items shipped (5)		102.4		60.7		41.7		23.1		62.4		52.5
Total payment volume (6)	$	9,388.9	$	5,306.9	$	3,667.1	$	2,114.0	$	5,639.1	$	4,175.3
Total volume of payments on marketplace (7)	$	6,620.3	$	3,867.8	$	2,592.9	$	1,519.9	$	2,896.1	$	2,809.5
Total payment transactions (8)		158.2		96.2		62.3		36.8		143.9		74.3
Unique buyers (9)		27.6		23.0		16.3		12.4		18.8		17.0
Unique sellers (10)		8.7		7.7		4.6		4.0		4.2		5.0
Capital expenditures	$	52.1	$	69.0	$	17.5	$	24.1	$	33.0	$	23.0
Depreciation and amortization	$	30.0	$	20.7	$	10.9	$	7.5	$	15.7	$	11.1



	Quarter Ended
	March 31,	June 30,	September 30,	December 31,
	(in millions, except percentages)
	(*)
2017
Net revenues	$ 273.9	$ 316.5	$ 370.7	n/a
Percent change from prior quarter	7%	16%	17%
2016
Net revenues	$ 157.6	$ 199.6	$ 230.8	$ 256.3
Percent change from prior quarter	-13%	27%	16%	11%




(% of revenue growth in Local Currency) () (*)			Three-month period
Brazil			91.1%
Argentina			82.6%
Mexico			227.3%
Other Countries			43.9%
Total Consolidated			92.9%



	Changes from 2016 to 2017 (*)
(% of revenue growth in Local Currency)	Nine-months	Three-months
Brazil	66.1%	70.6%
Argentina	50.4%	50.9%
Mexico	72.9%	82.0%
Venezuela	432.6%	571.1%
Other Countries	42.3%	54.7%
Total Consolidated	74.3%	79.4%


(In millions, except for percentages)	Nine-month Period Ended September 30, 2017 (*)

	Brazil	Argentina	Mexico	Venezuela	Other Countries	Total
Net revenues	$ 569.3	$ 250.7	$ 58.3	$ 38.3	$ 44.5	$ 961.1
Direct costs	$ (390.0)	$ (151.0)	$ (95.7)	$ (16.8)	$ (37.1)	$ (690.6)
Impairment of Long-lived Assets	—	—	—	(2.8)	—	(2.8)
Direct contribution	179.3	99.7	(37.4)	18.7	7.4	267.7
Margin	31.5%	39.8%	-64.1%	48.7%	16.6%	27.9%


	Change from the Nine-month Period Ended September 30, 2016 to September 30, 2017 (*)

	Brazil	Argentina	Mexico	Venezuela	Other Countries	Total
Net revenues
in Dollars	$ 257.9	$ 64.8	$ 23.9	$ 11.9	$ 14.5	$ 373.0
in %	82.8%	34.9%	69.7%	44.9%	48.3%	63.4%
Direct costs
in Dollars	$ (201.2)	$ (45.8)	$ (66.7)	$ (4.1)	$ (15.8)	$ (333.6)
in %	106.6%	43.5%	229.9%	32.7%	74.1%	93.5%
Impairment of Long-Lived Assets
in Dollars	$ —	$ —	$ —	$ 10.9	$ —	$ 10.9
in %	0.0%	0.0%	0.0%	-79.3%	0.0%	-79.3%
Direct contribution
in Dollars	$ 56.7	$ 19.1	$ (42.7)	$ 18.6	$ (1.3)	$ 50.3
in %	46.2%	23.6%	-795.6%	43274.4%	-15.0%	23.1%


(In millions, except for percentages)	Three-month Period Ended September 30, 2017 (*)						Three-month Period Ended March 31, 2019 (*)

	Brazil	Argentina	Mexico	Venezuela	Other Countries	Total	Brazil	Argentina	Mexico	Other Countries	Total
Net revenues	$ 229.5	$ 91.3	$ 22.6	$ 9.8	$ 17.5	$ 370.7	$ 302.4	$ 93.8	$ 54.6	$ 23.0	$ 473.8
Direct costs	(182.9)	(56.2)	(36.0)	(4.6)	(14.4)	(294.1)	$ (225.3)	$ (67.5)	$ (65.6)	$ (20.4)	$ (378.9)
Direct contribution	46.6	35.1	(13.4)	5.2	3.1	76.6	77.0	26.3	(11.0)	2.6	94.9
Margin	20.3%	38.4%	-59.4%	53.0%	17.8%	20.7%	25.5%	28.0%	-20.2%	11.3%	20.0%



	Three-month Period Ended September 30, 2016(*)						Three-month Period Ended March 31, 2018 (*)

	Brazil	Argentina	Mexico	Venezuela	Other Countries	Total	Brazil	Argentina	Mexico	Other Countries	Total
Net revenues	$ 131.0	$ 70.0	$ 11.8	$ 6.9	$ 11.2	$ 230.8	$ 184.2	$ 101.9	$ 17.1	$ 17.8	$ 321.0
Direct costs	(77.0)	(39.0)	(10.4)	(3.5)	(7.9)	(137.8)	$ (177.0)	$ (57.3)	$ (26.3)	$ (17.3)	$ (277.9)
Direct contribution	54.0	31.0	1.5	3.4	3.2	93.1	7.2	44.6	(9.3)	0.5	43.1
Margin	41.2%	44.2%	12.3%	49.7%	28.9%	40.3%	3.9%	43.8%	-54.3%	3.1%	13.4%



	Change from the Three-month Period Ended September 30, 2016 to September 30, 2017 (*)						Change from the Three-month Period Ended March 31, 2018 to March 31, 2019 (*)

	Brazil	Argentina	Mexico	Venezuela	Other Countries	Total	Brazil	Argentina	Mexico	Other Countries	Total
Net revenues
in Dollars	$ 98.5	$ 21.3	$ 10.8	$ 2.9	$ 6.4	$ 139.8	$ 118.2	$ (8.2)	$ 37.5	$ 5.2	$ 152.8
in %	75.2%	30.5%	91.4%	41.6%	56.9%	60.6%	64.2%	-8.0%	219.7%	29.4%	47.6%
Direct costs
in Dollars	$ (105.8)	$ (17.2)	$ (25.7)	$ (1.1)	$ (6.5)	$ (156.3)	$ (48.4)	$ (10.2)	$ (39.3)	$ (3.2)	$ (101.0)
in %	137.4%	44.0%	248.1%	32.4%	81.4%	113.4%	27.3%	17.8%	149.2%	18.4%	36.3%
Direct contribution
in Dollars	$ (7.4)	$ 4.1	$ (14.9)	$ 1.7	$ (0.1)	$ (16.4)	$ 69.9	$ (18.4)	$ (1.8)	$ 2.1	$ 51.8
in %	-13.7%	13.4%	-1023.9%	51.0%	-3.5%	-17.6%	973.8%	-41.1%	19.1%	376.8%	120.2%


	Nine-month Periods Ended		Three-month Periods Ended
	September 30, (*)		March 31, (*)
(In millions)	2017	2016	2019	2018
Net cash provided by (used in):
Operating activities	$ 242.4	$ 147.7	$ 138.4	$ (37.0)
Investing activities	91.8	(91.9)	(1,260.1)	(24.1)
Financing activities	(78.3)	(20.4)	1,974.7	24.0
Effect of exchange rates on cash and cash equivalents	(28.8)	(14.3)	(11.4)	(0.8)
Net increase in cash and cash equivalents	$ 227.1	$ 21.1
Net increase/(decrease) in cash and cash equivalents			$ 841.6	$ (37.8)


	Nine-months Periods Ended September 30, (*)
	As reported			FX Neutral Measures
(In millions, except percentages)	2017	2016	Percentage Change	2017	2016	Percentage Change
	(Unaudited)			(Unaudited)
Net revenues	$ 961.1	$ 588.1	63.4%	$ 1,024.8	$ 588.1	74.3%
Cost of net revenues	(444.9)	(214.0)	107.9%	(449.5)	(214.0)	110.1%
Gross profit	516.2	374.1	38.0%	575.3	374.1	53.8%

Operating expenses:	(392.6)	(244.0)	60.9%	(413.1)	(244.0)	69.3%
Impairment of Long-Lived Assets	(2.8)	(13.7)	-79.3%	(2.8)	(13.7)	-79.3%
Total operating expenses	(395.4)	(257.7)	53.4%	(415.9)	(257.7)	61.3%
Income from operations	120.9	116.4	3.9%	159.4	116.4	37.0%


	Three-month Periods Ended March 31, (*)
	As reported			FX Neutral Measures	As reported
(In millions, except percentages)	2019	2018	Percentage Change	2019	2018	Percentage Change
	(Unaudited)			(Unaudited)
Net revenues	$ 473.8	$ 321.0	47.6%	$ 619.2	$ 321.0	92.9%
Cost of net revenues	(236.8)	(158.2)	49.6%	(317.1)	(158.2)	100.4%
Gross profit	237.0	162.8	45.6%	302.2	162.8	85.7%

Operating expenses	(226.9)	(192.2)	18.1%	(332.9)	(192.2)	73.3%
Income (Loss) from operations	10.1	(29.4)	-134.5%	(30.8)	(29.4)	4.6%



Foreign Currency Sensitivity Analysis (*)	Foreign Currency Sensitivity Analysis (*)				Foreign Currency Sensitivity Analysis (*)
(In millions)		-10%	Actual	+10%		-10%	Actual	+10%
		(1)		(2)		(1)		(2)
Net revenues		$ 1,067.8	$ 961.1	$ 873.8		$ 526.4	$ 473.8	$ 430.7
Expenses		(933.7)	(840.2)	(763.8)		(515.2)	(463.6)	(421.4)
Income from operations		134.1	120.9	110.0		11.2	10.1	9.3

Other expenses and income tax related to P&L items		(21.0)	(19.9)	(19.0)		6.6	5.4	4.4

Foreign Currency impact related to the remeasurement of our Net Asset position		(21.5)	(19.5)	(17.8)		(4.1)	(3.7)	(3.3)
Net income		91.7	81.5	73.2
Net Income						13.7	11.9	10.4

Total Shareholders' Equity		$ 457.9	$ 406.2	$ 365.9		$ 2,551.3	$ 2,214.1	$ 2,366.9


	Nine-month period ended September 30, 2017		Three-month period ended September 30, 2017
	Actual (*)	Sensitivity() ()	Actual (*)	Sensitivity (**)
	(In million)		(In million)
Net revenues	$38.3	$1.3	$9.8	$0.7
Direct costs	(16.8)	(5.4)	(4.6)	(1.8)
Direct contribution before impairment of Long-lived assets	$21.5	$(4.1)	$5.2	$ (1.0)
Direct Contribution Margin before impairment %	56.1%	-314.6%	53.0%	-144.8%
Non-current other assets impairment	(2.8)	(2.8)	-	-
Direct Contribution after impairment	18.7	$(7.0)	5.2	$(1.0)
Direct Contribution Margin after impairment %	48.7%	-530.7%	53.0%	-144.8%



		As of September 30, 2017			As of March 31, 2019
		MercadoLibre, Inc	2010, 2011, 2012, 2013, 2014, 2015, 2016 and 2017		MercadoLibre, Inc	2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018 and 2019
		Equity Price	variable LTRP contractual obligation		Equity Price	LTRP Variable contractual obligation
(In thousands, except equity price)
Change in equity price in percentage

40%		372.04	94,320		560.52	148,353
30%		345.47	87,583		520.48	137,757
20%		318.89	80,846		480.44	127,160
10%		292.32	74,109		440.41	116,563
Static	(*)	265.74	67,372	(*)	400.37	105,967
-10%		239.17	60,634		360.33	95,370
-20%		212.59	53,897		320.30	84,773
-30%		186.02	47,160		280.26	74,177
-40%		159.45	40,423		240.22	63,580


3.1		Registrant’s Amended and Restated Certificate of Incorporation.(1)
3.2		Registrant’s Amended and Restated Bylaws.(1)
3.3		Registrant’s Certificate of Designation of Series A Perpetual Preferred Stock.(2)
4.1		Form of Specimen Certificate for the Registrant’s Common Stock.(3)
4.2		Indenture with respect to the Registrant’s 2.25% Convertible Senior Notes due 2019, dated as of June 30, 2014, between the Registrant and Wilmington Trust, National Association, as trustee.(4)
4.3		Indenture with respect to the Registrant’s 2.00% Convertible Senior Notes due 2028, dated as of August 24, 2018, between the Registrant and Wilmington Trust, National Association, as trustee.(5)
10.1		Amended 2018 Long-Term Retention Plan*
10.2		2019 Long-Term Retention Plan *
10.3		Securities Purchase Agreement, dated as of March 11, 2019, by and between MercadoLibre, Inc. and PayPal, Inc.(6)
10.4		Securities Purchase Agreement, dated as of March 11, 2019, by and between MercadoLibre, Inc. and Merlin DF Holdings, LP.(6)
31.1		Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2		Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase


*	Filed or furnished herewith, as applicable.
(1)	Incorporated by reference to the Registration Statement on Form S-1 filed on May 11, 2007.
(2)	Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on March 29, 2019.
(3)	Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 filed on February 27, 2009.
(4)	Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on June 30, 2014.
(5)	Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on August 24, 2018.
(6)	Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on March 13, 2019.



	MERCADOLIBRE, INC.
	Registrant

Date: ~~November~~May 3, ~~2017.~~2019.	By:	/s/ Marcos Galperin
		Marcos Galperin
		President and Chief Executive Officer

	By:	/s/ Pedro Arnt
		Pedro Arnt
		Executive Vice President and Chief Financial Officer



~~3.1~~		~~Registrant’s Amended and Restated Certificate of Incorporation.(1)~~
~~3.2~~		~~Registrant’s Amended and Restated Bylaws.(1)~~
~~4.1~~		~~Form of Specimen Certificate for the Registrant’s Common Stock.(2)~~
~~4.2~~		~~Second Amended and Restated Registration Rights Agreement, dated September 24, 2001, by and among the Registrant and the investors named therein.~~ ~~(1)~~
~~4.3~~		~~Indenture with respect to the Registrant’s 2.25% Convertible Senior Notes due 2019, dated as of June 30, 2014, between the Registrant and Wilmington Trust, National Association, as trustee.~~ ~~(3)~~
~~31.1~~		~~Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~ *
~~31.2~~		~~Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~ *
~~32.1~~		~~Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~ *
~~32.2~~		~~Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~ *
~~101.INS~~		~~XBRL Instance Document~~
~~101.SCH~~		~~XBRL Taxonomy Extension Schema Document~~
~~101.CAL~~		~~XBRL Taxonomy Extension Calculation Linkbase Document~~
~~101.LAB~~		~~XBRL Taxonomy Extension Label Linkbase Document~~
~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document~~
~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase~~


*	~~Filed or furnished herewith, as applicable.~~
~~(1)~~	~~Incorporated by reference to the Registration Statement on Form S-1 filed on May 11, 2007.~~
~~(2)~~	~~Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 filed on February 27, 2009.~~
~~(3)~~	~~Incorporated by reference to the Registrant’s Current Report on form 8-K filed on June 30, 2014.~~

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