MERCADOLIBRE INC

Previous wording

■a discussion of our principal trends and results of operations for the three-month periods ended March 31, 2024 and 2023;

Current wording

■a discussion of our principal trends and results of operations for the six and three-month periods ended June 30, 2024 and 2023;

Previous wording

The following table sets forth the percentage of our consolidated net revenues by segment for the three-month periods ended March 31, 2024 and 2023:

Current wording

The following table sets forth the percentage of our consolidated net revenues by segment for the six and three-month periods ended June 30, 2024 and 2023:

Previous wording

The following table summarizes the changes in our net revenues by segment for the three-month periods ended March 31, 2024 and 2023:

Current wording

The following table summarizes the changes in our net revenues by segment for the six and three-month periods ended June 30, 2024 and 2023:

Previous wording

Results of operations for the three-month period ended March 31, 2024 compared to the three-month period ended March 31, 2023

Current wording

Results of operations for the six and three-month periods ended June 30, 2024 compared to the six and three-month periods ended June 30, 2023

Previous wording

The selected financial data for the three-month periods ended March 31, 2024 and 2023 discussed herein is derived from our unaudited interim condensed consolidated financial statements included in Item 1 of Part I of this report. The results of operations for the three-month period ended March 31, 2024, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2024 or for any other period.

Current wording

The selected financial data for the six and three-month periods ended June 30, 2024 and 2023 discussed herein is derived from our unaudited interim condensed consolidated financial statements included in Item 1 of Part I of this report. The results of operations for the six and three-month periods ended June 30, 2024, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2024 or for any other period.

Previous wording

■interest, cash advances and fees from merchant and consumer loans granted under our Mercado Credito solution;

Current wording

■interest, cash advances and fees from credit cards, merchant and consumer loans granted under our Mercado Credito solution;

Previous wording

We have a highly fragmented customer revenue base given the large numbers of sellers and buyers who use our platforms. For the three-month periods ended March 31, 2024 and 2023, no single customer accounted for more than 5.0% of our net revenues and financial income.

Current wording

We have a highly fragmented customer revenue base given the large numbers of sellers and buyers who use our platforms. For the six and three-month periods ended June 30, 2024 and 2023, no single customer accounted for more than 5.0% of our net revenues and financial income.

Previous wording

Our net revenues and financial income grew during the three-month period ended March 31, 2024 as compared to the same period in 2023, boosted by the growth of our gross merchandise volume, credits business originations and an increase in the share of shipping services where we act as principal, as opposed to agent. This growth was partially offset by Argentine currency depreciation.

Current wording

Our net revenues and financial income grew during the six and three-month periods ended June 30, 2024 as compared to the same period in 2023, boosted by an increase in the share of shipping services where we act as principal, as opposed to agent, the growth of credits business originations and our gross merchandise volume. This growth was partially offset by the negative effect on net revenues of the Argentine currency depreciation.

Previous wording

The following table summarizes our consolidated net revenues and financial income for the three-month periods ended March 31, 2024 and 2023:

Current wording

The following table summarizes our consolidated net revenues and financial income for the six and three-month periods ended June 30, 2024 and 2023:

Previous wording

The following table summarizes our consolidated net revenues and financial income by revenue stream and geographic segment for the three-month periods ended March 31, 2024 and 2023:

Current wording

The following table summarizes our consolidated net revenues and financial income by revenue stream and geographic segment for the six and three-month periods ended June 30, 2024 and 2023:

Previous wording

See Note 9 – Segments of our unaudited interim condensed consolidated financial statements for further information regarding our net revenues and financial income disaggregated by similar products and services for the three-month periods ended March 31, 2024 and 2023.

Current wording

See Note 9 – Segments of our unaudited interim condensed consolidated financial statements for further information regarding our net revenues and financial income disaggregated by similar products and services for the six and three-month periods ended June 30, 2024 and 2023.

Previous wording

Our Commerce revenues grew $820 million, or 48.9%, for the three-month period ended March 31, 2024, as compared to the same period in 2023. This increase in Commerce revenues was primarily attributable to:

Current wording

Our Commerce revenues grew $1,854 million and $1,034 million, or 51.3% and 53.4%, for the six and three-month periods ended June 30, 2024, respectively, as compared to the same periods in 2023. This increase in Commerce revenues was primarily attributable to:

Previous wording

■(i) an increase of $713 million in our Commerce services revenues mainly related to a 20.5% increase in gross merchandise volume, (ii) a 25.6% increase in our shipped items, and (iii) higher flat fee contributions for low gross merchandise volume transactions. Shipping carrier costs, which are netted against revenues, decreased $174 million, from $535 million for the three-month period ended March 31, 2023 to $361 million for the three-month period ended March 31, 2024, mainly due to an increase in the share of shipping services where we act as principal, as opposed to agent; and

Current wording

■(i) an increase of $1,631 million and $918 million in our Commerce services revenues for the six and three-month periods ended June 30, 2024, respectively, mainly related to a 20.4% and 20.4% increase in gross merchandise volume, respectively, (ii) a 28.2% and 30.4% increase in our shipped items, respectively, and (iii) higher flat fee contributions for low gross merchandise volume transactions. Shipping carrier costs, which are netted against revenues, decreased $519 million and $344 million, from $1,100 million and $563 million for the six and three-month periods ended June 30, 2023, to $581 million and $220 million for the six and three-month periods ended June 30, 2024, respectively, mainly due to an increase in the share of shipping services where we act as principal, as opposed to agent; and

Previous wording

■an increase of $107 million in our revenues from Commerce products sales for the three-month period ended March 31, 2024, as compared to the same period in 2023, mainly in Brazil and Mexico, partially offset by Argentina, mainly due to an increase in the Argentina's official exchange rate against U.S. dollar.

Current wording

■an increase of $223 million and $116 million in our revenues from Commerce products sales for the six and three-month periods ended June 30, 2024, respectively, as compared to the same period in 2023, mainly in Brazil and Mexico, partially offset by Argentina, mainly due to an increase in the Argentina’s official exchange rate against U.S. dollar.

Previous wording

Our Fintech revenues grew 21.7%, from $1,510 million for the three-month period ended March 31, 2023, to $1,837 million for the three-month period ended March 31, 2024. This increase was mainly generated by:

Current wording

Our Fintech revenues grew 24.7% and 27.5%, from $3,159 million and $1,649 million for the six and three-month periods ended June 30, 2023, respectively, to $3,940 million and $2,103 million for the six and three-month periods ended June 30, 2024, respectively. This increase was mainly generated by:

Previous wording

■an increase of $234 million in our credits revenues, mainly as a consequence of higher originations; and

Current wording

■an increase of $513 million and $279 million in our credits revenues for the six and three-month periods ended June 30, 2024, respectively, mainly as a consequence of higher originations; and

Previous wording

(2)The main driver of Argentina’s net revenues and financial income decrease is explained by the increase in Argentina’s official exchange rate against the U.S. dollar from an average exchange rate of 192.41 for the three-month period ended March 31, 2023, as compared to an average exchange rate of 834.46 for the three-month period ended March 31, 2024, partially offset by an average inter-annual inflation rate in our Argentine segment of 272.8% for the three-month period ended March 31, 2024.

Current wording

The main driver of Argentina’s net revenues and financial income decrease in the six-month period ended June 30, 2024 is explained by an average inter-annual increase of Argentina’s official exchange rate against U.S. dollar of 308.4% for the six-month period ended June 30, 2024, partially offset by an average inter-annual inflation rate in our Argentine segment of 275.9% for the six-month period ended June 30, 2024, respectively.

Previous wording

The main driver of Argentina’s net revenues and financial income decrease is explained by the increase in Argentina’s official exchange rate against the U.S. dollar from an average exchange rate of 192.41 for the three-month period ended March 31, 2023, as compared to an average exchange rate of 834.46 for the three-month period ended March 31, 2024, partially offset by an average inter-annual inflation rate in our Argentine segment of 272.8% for the three-month period ended March 31, 2024. Commerce revenues decreased 26.7% in the three-month period ended March 31, 2024 as compared to the same period in 2023. This decrease was generated by a decrease of $48 million in our Commerce services revenues and a decrease of $25 million in our revenues from Commerce products sales. Fintech revenues decreased 19.3%, a $99 million decrease, during the three-month period ended March 31, 2024 as compared to the same period in 2023, mainly driven by a decrease of $58 million in our revenues from Fintech services and financial income and a decrease of $40 million in our Credits revenues.

Current wording

Commerce revenues decreased 11.8% in the six-month period ended June 30, 2024 as compared to the same period in 2023. This decrease was generated by a decrease of $38 million in our revenues from Commerce products sales and a decrease of $30 million in our Commerce services revenues. Fintech revenues decreased 9.0%, a $96 million decrease, during the six-month period ended June 30, 2024 as compared to the same period in 2023, mainly driven by a decrease of $69 million in our Credits revenues and a decrease of $26 million in our revenues from Financial services and income.

Previous wording

The following table sets forth the growth in net revenues and financial income in local currencies, for the three-month period ended March 31, 2024 as compared to the same period in 2023:

Current wording

The following table sets forth the growth in net revenues and financial income in local currencies, for the six and three-month periods ended June 30, 2024 as compared to the same period in 2023:

Previous wording

(2)Average inter-annual increase of Argentina’s official exchange rate against U.S. dollar for the three-month period ended March 31, 2024 was 334.2%. This effect was offset by an average inter-annual inflation rate in our Argentine segment of 272.8% for the three-month period ended March 31, 2024.

Current wording

(2)Average inter-annual increase of Argentina’s official exchange rate against U.S. dollar for the six and three-month periods ended June 30, 2024 was 308.4% and 282.5%, respectively. This effect was partially offset by an average inter-annual inflation rate in our Argentine segment of 275.9% and 279.1% for the six and three-month periods ended June 30, 2024, respectively.

Previous wording

Cost of net revenues and financial expenses primarily includes cost of goods sold, shipping operation costs (including warehousing costs), carrier and other operating costs, collection fees, sales taxes, funding costs related to our credits and Mercado Pago business, fraud prevention expenses, certain taxes on bank transactions, hosting and site operation fees, certain tax withholding related to export duties, compensation for customer support personnel and depreciation and amortization. The following table presents cost of net revenues and financial expenses for the periods indicated:

Current wording

Cost of net revenues and financial expenses primarily includes cost of goods sold, shipping operation costs (including warehousing costs), carrier and other operating costs, collection fees, sales taxes, funding costs related to our credits and Mercado Pago business, fraud prevention expenses, hosting and site operation fees, certain tax withholding related to export duties, compensation for customer support personnel and depreciation and amortization. The following table presents cost of net revenues and financial expenses for the periods indicated:

Previous wording

For the three-month period ended March 31, 2024 as compared to the same period in 2023, the increase in cost of net revenues and financial expenses was primarily attributable to a: i) $487 million increase in shipping operating and carrier costs mainly due to an increase in the share of shipping services where we act as principal, as opposed to agent; ii) $73 million increase in collection fees, which was mainly attributable to our Brazilian and Mexican operations as a result of the higher transactions volume of Mercado Pago in those countries; iii) $65 million increase in cost of sales of goods mainly in Brazil and Mexico, partially offset by a decrease in Argentina; iv) $59 million increase in sales taxes; v) $31 million increase in hosting and site operation fees; and vi) $20 million increase in other fintech costs mainly related to higher funding costs in connection with our credits business. This increase was partially offset by a $22 million decrease in financial expenses mainly attributable to lower levels of indebtedness and lower rates in 2024 (mainly in Brazil).

Current wording

For the six-month period ended June 30, 2024 as compared to the same period in 2023, the increase in cost of net revenues and financial expenses was primarily attributable to a: i) $1,160 million increase in shipping operating and carrier costs mainly due to an increase in the share of shipping services where we act as principal, as opposed to agent; ii) $185 million increase in collection fees, which was mainly attributable to our Brazilian and Mexican operations as a result of the higher transactions volume of Mercado Pago in those countries; iii) $159 million increase in cost of sales of goods mainly in Brazil and Mexico, partially offset by a decrease in Argentina; and iv) $101 million increase in sales taxes.

Previous wording

Our subsidiaries in Brazil, Argentina and Colombia are subject to certain taxes on revenues and financial income, which are classified as a cost of net revenues and financial expenses. These taxes represented 7.1% of net revenues and financial income for the three-month period ended March 31, 2024, and 7.8% for the same period in 2023.

Current wording

Our subsidiaries in Brazil, Argentina and Colombia are subject to certain taxes on revenues and financial income, which are classified as a cost of net revenues and financial expenses. These taxes represented 6.6% and 6.2% of net revenues and financial income for the six and three-month periods ended June 30, 2024, and 7.7% and 7.6% for the same period in 2023.

Previous wording

For the three-month periods ended March 31, 2024 and 2023, our gross profit margins were 46.7%, and 50.7%, respectively. The decrease in our gross profit margin resulted primarily from the increase in our shipping operating and carrier costs, as a percentage of net revenues and financial income, partially offset by a decrease of our other fintech costs, collection fees, cost of sales of goods and sales tax, as a percentage of net revenues and financial income.

Current wording

For the six and three-month periods ended June 30, 2024 and 2023, our gross profit margins were 46.7% and 46.6%, and 50.9% and 51.1%, respectively. The decrease in our gross profit margin resulted primarily from an increase in our shipping operating and carrier costs, as a percentage of net revenues and financial income mainly due to an increase in the share of shipping services where we act as principal, as opposed to agent, partially offset by a decrease of our other fintech costs, sales taxes, cost of sales of goods and collection fees, as a percentage of net revenues and financial income.

Previous wording

For the three-month period ended March 31, 2024, the increase in product and technology development expenses as compared to the same period in 2023 was primarily attributable to a: i) $38 million increase in salaries and wages mainly related to the increase of 17% in our product and technology development headcount and increases in amounts accrued under the LTRPs as a consequence of the increase in our common stock price; ii) $23 million increase in other product and technology development expenses mainly related to certain disputed amounts regarding withholding income tax contingencies in Brazil and higher tax withholding in connection with intercompany export services billing duties; and iii) $12 million increase in depreciation and amortization expenses mainly related to capitalized information and technology assets.

Current wording

For the six-month period ended June 30, 2024, the increase in product and technology development expenses as compared to the same period in 2023 was primarily attributable to a: i) $82 million increase in salaries and wages mainly related to the increase of 17% in our product and technology development headcount and increases in amounts accrued under the LTRPs as a consequence of the increase in our common stock price; ii) $50 million increase in other product and technology development expenses mainly related to certain disputed amounts regarding withholding income tax contingencies in Brazil and higher tax withholding in connection with intercompany export services billing duties; and iii) $23 million increase in depreciation and amortization expenses mainly related to capitalized information and technology assets.

Previous wording

We carry out a relevant part 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 Mercado Libre Marketplace and convert them into registered users and active traders on our platform.

Current wording

We enter into agreements with portals, search engines, social networks, ad networks and other sites in order to attract Internet users to the Mercado Libre Marketplace and convert them into registered users and active traders on our platform.

Previous wording

For the three-month period ended March 31, 2024, the increase in sales and marketing expenses as compared to the same period in 2023 was primarily attributable to a: i) $64 million increase in online and offline marketing expenses mainly in Brazil and Mexico; ii) $14 million increase in salaries and wages mainly related to the increase of 12% in our sales and marketing headcount and increases in amounts accrued under the LTRPs as a consequence of the increase in our common stock price; and iii) $10 million increase in our buyer protection program expenses.

Current wording

For the three-month period ended June 30, 2024, the increase in sales and marketing expenses as compared to the same period in 2023 was primarily attributable to a: i) $71 million increase in online and offline marketing expenses mainly in Brazil and Mexico; ii) $19 million increase in our buyer protection program expenses; iii) $15 million increase in chargebacks; and iv) $10 million increase in salaries and wages mainly related to the increase of 18% in our sales and marketing headcount and increases in amounts accrued under the LTRPs as a consequence of the increase in our common stock price.

Previous wording

For the three-month period ended March 31, 2024, as compared to the same period in 2023, the provision for doubtful accounts increased $122 million due to the increase in originations (mainly related to credit card product) growing at 71%, and an increase of our 15-90 days non-performing loans ratio from 7.8% as of March 31, 2023 to 9.3% as of March 31, 2024.

Current wording

For the six and three-month period ended June 30, 2024, as compared to the same period in 2023, the provision for doubtful accounts increased $350 million and $228 million, respectively, due to the increase in originations growing at 75% and 79% (mainly related to the credit card and consumer product), respectively, and an increase of our 15-90 days non-performing loans ratio from 7.5% as of June 30, 2023 to 8.2% as of June 30, 2024.

Previous wording

For the three-month period ended March 31, 2024, the increase in general and administrative expenses as compared to the same period in 2023 was primarily attributable to a: i) $16 million increase in salaries and wages, mainly related to the increase of 9% in general and administrative headcount and increases in amounts accrued under the LTRPs as a consequence of the increase in our common stock price; and ii) $3 million increase in tax and other fees. This increase was partially offset by $16 million gain related to the fair value of digital assets.

Current wording

For the six-month period ended June 30, 2024, the increase in general and administrative expenses as compared to the same period in 2023 was primarily attributable to a: i) $25 million increase in salaries and wages, mainly related to the increase of 11% in general and administrative headcount and increases in amounts accrued under the LTRPs as a consequence of the increase in our common stock price; and ii) $9 million increase in tax and other fees. This increase was partially offset by $12 million gain related to the change in the fair value of digital assets.

Previous wording

For the three-month period ended March 31, 2024, as compared to the same period in 2023, our operating income margin decreased from 13.1% to 12.2%. This decrease was mainly explained by an increase in cost of net revenues and financial expenses as a percentage of net revenues and financial income, mainly due to an increase in the share of shipping services where we act as principal, as opposed to agent and provision of doubtful accounts, as a percentage of net revenues and financial income. This decrease was partially offset by lower salaries and wages, as a percentage of net revenues and financial income.

Current wording

For the six and three-month periods ended June 30, 2024, as compared to the same period in 2023, our operating income margin decreased from 16.1% and 18.7% to 13.3% and 14.3%. This decrease was mainly explained by an increase in cost of net revenues and financial expenses as a percentage of net revenues and financial income, mainly due to an increase in the share of shipping services where we act as principal as opposed to agent, and provision of doubtful accounts, as a percentage of net revenues and financial income. This decrease was partially offset by product and technology development related expenses and general and administrative expenses, as a percentage of net revenues and financial income.

Previous wording

For the three-month period ended March 31, 2024, the decrease in other expense, net as compared to the same period in 2023 was primarily attributable to foreign exchange losses that were $53 million lower than foreign exchange losses for the same period in 2023, mainly because in 2024 there were no acquisitions of our own common stock in the Argentine market at a price that reflects an additional cost of accessing U.S. dollars through an indirect mechanism due to restrictions imposed by the Argentine government for buying U.S. dollars at the official exchange rate (refer to Note 17 – Share repurchase program of our unaudited interim condensed consolidated financial statements for further detail), and due to lower foreign exchange losses from our Argentine subsidiaries. This was partially offset by higher foreign exchange losses from our Brazilian subsidiaries and lower foreign exchange gains from our Mexican subsidiaries.

Current wording

For the three-month period ended June 30, 2024, the decrease in other expense, net as compared to the same period in 2023 was primarily attributable to lower foreign exchange losses of $145 million due to acquisitions of financial instruments in the Argentine market at a price that reflects an additional cost of accessing U.S. dollars through an indirect mechanism due to restrictions imposed by the Argentine government for buying U.S. dollars at the official exchange rate, and due to lower foreign exchange losses from our Argentine subsidiaries. This was partially offset by higher foreign exchange losses from our Brazilian and Mexican subsidiaries.

Previous wording

We are subject to federal and state income tax 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 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.

Current wording

We are subject to federal and state income tax 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 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 as a result of the estimate tax rate, adjusted for discrete items that are accounted for in the relevant period.

Previous wording

The following table summarizes the composition of our income taxes for the three-month periods ended March 31, 2024 and 2023:

Current wording

The following table summarizes the composition of our income taxes for the six and three-month periods ended June 30, 2024 and 2023:

Previous wording

During the three-month period ended March 31, 2024 as compared to the same period in 2023, income tax expense increased mainly as a result of higher income tax expense in Brazil and Mexico as a consequence of higher pre-tax gains in those segments in 2024. This increase was partially offset by lower income tax expense in Argentina, due to lower pre-tax gains in that segment.

Current wording

During the six and three-month periods ended June 30, 2024 as compared to the same periods in 2023, income tax expense decreased mainly as a result of lower income tax expense in Argentina due to lower pre-tax gains in that segment and higher tax loss carry forward in our Mexican segment. This decrease was partially offset by higher income tax expense in Brazil as a consequence of higher pre-tax gains in that segment in 2024 and higher income tax expense due to withholding tax on dividends.

Previous wording

The following table summarizes our estimated effective tax rates for the three-month periods ended March 31, 2024 and 2023:

Current wording

The following table summarizes our estimated effective tax rates for the six and three-month periods ended June 30, 2024 and 2023:

Previous wording

Our estimated effective tax rate for the three-month period ended March 31, 2024 decreased as compared to the same period in 2023, mainly as a result of (i) no foreign exchange losses recognition during the period related to the acquisition of our own common stock in the Argentine market, which was considered as a non-deductible expense, ii) lower taxable foreign exchange gains accounted for in Argentina for local tax purposes that are not recorded for accounting purposes since, under U.S. GAAP, the Argentine operations’ functional currency is the U.S. dollar due to the highly inflationary status of the country and (iii) higher deductions related to tax inflation adjustments in Argentina.

Current wording

Our estimated effective tax rate for the six and three-month periods ended June 30, 2024 decreased as compared to the same periods in 2023, mainly as a result of (i) no foreign exchange losses recognition during the period related to the acquisition of our own common stock in the Argentine market, which was considered as a non-deductible expense, (ii) lower taxable foreign exchange gains accounted for in Argentina for local tax purposes that are not recorded for accounting purposes since, under U.S. GAAP, the Argentine operations’ functional currency is the U.S. dollar due to the highly inflationary status of the country, (iii) higher pre-tax gains in a Mexican subsidiary that has accounted for a valuation allowance on tax loss carry forward, and (iv) higher deductions related to tax inflation adjustments in Argentina.

Previous wording

Net revenues and financial income for the three-month period ended March 31, 2024 as compared to the same period in 2023 are described above in “Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations—Principal trends in results of operations— Net revenues and financial income”.

Current wording

Net revenues and financial income for the six and three-month periods ended June 30, 2024 as compared to the same periods in 2023 are described above in “Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations—Principal trends in results of operations— Net revenues and financial income”.

Previous wording

For the three-month period ended March 31, 2024, as compared to the same period in 2023, direct costs increased mainly driven by a: i) $537 million increase in cost of net revenues and financial expenses, mainly attributable to an increase in shipping operating and carrier costs mainly due to an increase in the share of shipping services where we act as principal, as opposed to agent, sales tax, cost of goods sold as a consequence of an increase in first-party sales, collection fees as a consequence of the higher transactions volume of our Mercado Pago business and hosting and site operation fees; ii) $84 million increase in provision for doubtful accounts mainly related to our credit card and consumer credits business growth; and iii) $58 million increase in sales and marketing expenses mainly due to an increase in online and offline marketing expenses and buyer protection program expenses.

Current wording

For the three-month period ended June 30, 2024, as compared to the same period in 2023, direct costs increased mainly driven by a: i) $546 million increase in cost of net revenues and financial expenses, mainly attributable to an increase in shipping operating and carrier costs mostly due to an increase in the share of shipping services where we act as principal, as opposed to agent, collection fees as a consequence of the higher transactions volume of our Mercado Pago business, cost of goods sold as a consequence of an increase in first-party sales, sales tax and hosting and site operation fees; ii) $153 million increase in provision for doubtful accounts mainly related to our credit card and consumer credits business growth; and iii) $42 million increase in sales and marketing expenses mainly due to an increase in online and offline marketing expenses and buyer protection program expenses.

Previous wording

For the three-month period ended March 31, 2024, as compared to the same period in 2023, direct costs increased mainly driven by a: i) $192 million increase in cost of net revenues and financial expenses, mainly attributable to increases in shipping operating and carrier costs, collection fees due to higher Mercado Pago penetration, cost of goods sold as a consequence of an increase in first-party sales, other payments costs mainly related to higher funding cost related to our credits business and hosting expenses; ii) $51 million increase in provision for doubtful accounts mainly related to our credit card business growth; and iii) $30 million increase in sales and marketing expenses mainly due to an increase in online and offline marketing expenses.

Current wording

For the three-month period ended June 30, 2024, as compared to the same period in 2023, direct costs increased mainly driven by a: i) $346 million increase in cost of net revenues and financial expenses, mainly attributable to increases in shipping operating and carrier costs mostly due to an increase in the share of shipping services where we act as principal, as opposed to agent, collection fees due to higher Mercado Pago penetration, cost of goods sold as a consequence of an increase in first-party sales, other payments costs mainly related to higher funding cost related to our credits business and hosting expenses; ii) $75 million increase in provision for doubtful accounts mainly related to our credit card business growth; and iii) $54 million increase in sales and marketing expenses mainly due to an increase in online and offline marketing expenses, chargebacks and buyer protection program expenses.

Previous wording

Finally, on March 31, 2022, we entered into a $400 million revolving credit arrangement (“the Credit Arrangement”). The interest rates under the Credit Arrangement are based on Adjusted Term SOFR plus an interest margin of 1.25% per annum. Any loans drawn under the Credit Arrangement must be repaid on or prior to March 31, 2025. We are also obligated to pay a commitment fee on the unused amounts of the facility at an annual rate of 0.3125%. As of March 31, 2024, no amounts had been borrowed under the facility. See Note 13 – Loans payable and other financial liabilities of our unaudited interim condensed consolidated financial statements for further detail.

Current wording

On March 31, 2022, we entered into a $400 million revolving credit arrangement (“the Credit Arrangement”). The interest rates under the Credit Arrangement are based on Adjusted Term SOFR plus an interest margin of 1.25% per annum. Any loans drawn under the Credit Arrangement must be repaid on or prior to March 31, 2025. We are also obligated to pay a commitment fee on the unused amounts of the facility at an annual rate of 0.3125%. As of June 30, 2024, no amounts had been borrowed under the facility. See Note 13 – Loans payable and other financial liabilities of our unaudited interim condensed consolidated financial statements for further detail.