MERCADOLIBRE INC

Previous wording

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

Current wording

■a review of our critical accounting policies and estimates;

Previous wording

We are the largest online commerce ecosystem in Latin America based on unique visitors and orders processed, and we are present in 18 countries: Argentina, Brazil, Mexico, Chile, Colombia, Peru, Uruguay, Venezuela, Bolivia, Costa Rica, Dominican Republic, Ecuador, Guatemala, Honduras, Nicaragua, Panama, Paraguay and El Salvador. Our platform is designed to provide users with a complete portfolio of services to facilitate commercial transactions both digitally and offline.

Current wording

We are the largest online commerce and fintech ecosystem in Latin America based on unique visitors and orders processed, and our fintech platform is the leader in MAUs amongst fintech companies in Argentina, Chile and Mexico, and the second largest in Brazil. Mercado Libre's e-commerce platform is present in 18 countries (Argentina, Brazil, Mexico, Chile, Colombia, Peru, Uruguay, Venezuela, Bolivia, Costa Rica, Dominican Republic, Ecuador, Guatemala, Honduras, Nicaragua, Panama, Paraguay and El Salvador) and our fintech platform, Mercado Pago, is present in 8 countries (Argentina, Brazil, Mexico, Chile, Colombia, Peru, Uruguay and Ecuador). Our ecosystem provides consumers and merchants with a complete portfolio of services to enable buying and selling online and the processing of payments online and offline, as well as offering a wide array of simple day-to-day financial services.

Previous wording

We offer our users an ecosystem of six integrated e-commerce services and digital financial services: the Mercado Libre Marketplace, the Mercado Pago Fintech platform, the Mercado Envios logistics service, the Mercado Ads solution, the Mercado Libre Classifieds service and the Mercado Shops online storefronts solution.

Current wording

We offer our users an ecosystem of integrated e-commerce and digital financial services, which includes: the Mercado Libre Marketplace, the Mercado Pago fintech platform, the Mercado Envios logistics service, the Mercado Ads solution and the Mercado Libre Classifieds service.

Previous wording

Through our e-commerce platform, we provide buyers and sellers with a robust and safe environment that fosters the development of a large e-commerce community in Latin America, a region with a population of over 650 million people and with one of the fastest-growing Internet penetration and e-commerce growth rates in the world. We believe that we offer world-class technological and commercial solutions that address the distinctive cultural and geographic challenges of operating a digital commerce platform in Latin America.

Current wording

Our e-commerce platform provides buyers and sellers with a robust and safe environment that fosters the development of a large e-commerce community in Latin America, a region with a population of over 650 million people where penetration of e-commerce over total retail significantly lags benchmarks such as the United States of America ("U.S."), the U.K. and China. We believe that we offer world-class technological and commercial solutions that address the distinctive cultural and geographic challenges of operating a digital commerce platform in Latin America.

Previous wording

The Mercado Libre Marketplace, is a fully-automated, topically-arranged and user-friendly online commerce platform, which can be accessed through our website and mobile app. This platform enables us (when we act as sellers in our first party sales), merchants and individuals to list merchandise and conduct sales and purchases digitally. The Marketplace has an ample assortment of products, with a wide range of categories such as consumer electronics, apparel and beauty, home goods, automotive accessories, toys, books and entertainment and consumer packaged goods.

Current wording

The Mercado Libre Marketplace is a user-friendly online commerce platform that can be accessed through our mobile app or website. Third-party sellers ("3P") account for most of the GMV transacted on the Marketplace. We complement this by selling directly to consumers on a first-party basis ("1P") in selected categories where we can enhance price competitiveness and assortment; this accounts for less than 10% of GMV. The Marketplace has an extensive assortment of products, with a wide range of categories including consumer electronics, apparel and beauty, home goods, automotive accessories, toys, books and entertainment and consumer packaged goods. We also have a selection of international products available, primarily from sellers in China and the U.S., through our cross-border trade (“CBT”) operations. Our users can also list vehicles, properties and services they are looking to sell via Mercado Libre Classifieds. These listings differ from our Marketplace listings because we charge placing fees only, not final value fees.

Previous wording

To complement the Mercado Libre Marketplace and enhance the user experience for our buyers and sellers, we developed Mercado Pago, an integrated digital payments solution. Mercado Pago was initially designed to facilitate transactions on Mercado Libre’s Marketplaces by providing a mechanism that allowed our users to securely, easily and promptly send and receive payments. Now, Mercado Pago is a full ecosystem of financial technology solutions both in the digital and physical world. Our digital payments solution enables any MercadoLibre registered user to securely and easily send and receive digital payments and to pay for purchases made on any of Mercado Libre’s Marketplaces. Currently, Mercado Pago processes and settles all transactions on our Marketplaces in Argentina, Brazil, Mexico, Chile, Colombia, Uruguay, Peru and Ecuador.

Current wording

Mercado Pago was initially designed to facilitate transactions on Mercado Libre’s Marketplace by providing a mechanism that allowed our users to securely, easily and promptly send and receive payments. This brought trust to the merchant-consumer relationship. In the countries in which Mercado Pago operates, it processes and settles all transactions on our Marketplace.

Previous wording

Beyond facilitating Marketplace transactions, over the years we have expanded our array of Mercado Pago services to third parties outside Mercado Libre’s Marketplace. We began first by satisfying the growing demand for online-based payment solutions by providing merchants the necessary digital payment infrastructure for e-commerce to flourish in Latin America. Today, Mercado Pago’s digital payments business not only allows merchants to facilitate checkout and payment processes on their websites through a branded or white label solution or software development kits, but it also enables users to transfer money in a simple manner to each other through the Mercado Pago website or on the Mercado Pago app. Through Mercado Pago, we brought trust to the merchant customer relationship, allowing online consumers to shop easily and safely, while giving them the confidence to share sensitive personal and financial data with us. Finally, we have also deepened our fintech offerings by growing our online-to-offline (“O2O”) products and services.

Current wording

Beyond facilitating Marketplace transactions, over the years we have expanded our array of Mercado Pago services to third parties outside Mercado Libre’s Marketplace. We began first by satisfying the growing demand for online-based payment solutions by providing merchants the necessary digital payment infrastructure for e-commerce to flourish in Latin America.

Previous wording

Mercado Credito, our credit solution available in Argentina, Brazil, Mexico and Chile, leverages our user base, which is loyal and engaged, and in part has also been historically underserved or overlooked by financial institutions and suffers from a lack of access to needed credit. Facilitating credit is a key service overlay that enables us to further strengthen the engagement and lock-in rate of our users, while also generating additional touchpoints and incentives to use Mercado Pago as an end-to-end financial solution.

Current wording

Our lending solution is available in Argentina, Brazil, Mexico and Chile. We offer credits mostly to merchants and consumers that already form part of our user base, many of whom have historically been underserved or overlooked by financial institutions and therefore suffer from a lack of access to credit. Facilitating credit is a key service overlay that enables us to further strengthen the engagement and lock-in rate of our users, while also generating additional touchpoints and incentives to use Mercado Pago as an end-to-end financial solution.

Previous wording

As an extension of our asset management and savings solutions for users, we launched a digital assets feature as part of the Mercado Pago wallet in Brazil, Mexico and Chile, in 2021, 2022 and 2023, respectively. This service allows our millions of users to purchase, hold and sell selected digital assets through our interface without leaving the Mercado Pago application, while a partner acts as the custodian and exchange and offers the blockchain infrastructure platform. This feature is available for all users through their Mercado Pago wallet.

Current wording

As an extension of our asset management and savings solutions for users, we launched a digital assets feature as part of the Mercado Pago account in Brazil, Mexico and Chile, in 2021, 2022 and 2023, respectively. This service allows our millions of users to purchase, hold and sell selected digital assets through our interface without leaving the Mercado Pago application, while a partner acts as the custodian and offers the blockchain infrastructure platform. This feature is available for all users through their Mercado Pago account. In 2024, in Brazil and Mexico we launched "Meli Dólar", a stablecoin that is pegged to the US dollar. Members of our loyalty program receive their cashback in Meli Dólar and all Mercado Pago users can buy, hold and sell the stablecoin without any fees.

Previous wording

Our segment reporting is based on geography, which is the criterion our Management currently uses to evaluate our segment performance. Our geographic segments are Brazil, Argentina, Mexico and Other Countries (including Chile, Colombia, Costa Rica, Ecuador, Peru and Uruguay). Although we discuss long-term trends in our business, it is our policy not to 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 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. 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 tactics to grow more rapidly than us. We, therefore, encourage potential investors to consider this strategy before making an investment in our common stock.

Current wording

Our segment reporting is based on geography, which is the criterion our Management currently uses to evaluate our segment performance. Our geographic segments are Brazil, Mexico, Argentina and Other Countries (including Chile, Colombia, Costa Rica, Ecuador, Peru, Uruguay and the U.S.). Although we discuss long-term trends in our business, it is our policy not to 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 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. 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 tactics to grow more rapidly than us. We, therefore, encourage potential investors to consider this strategy before making an investment in our common stock.

Previous wording

The following table sets forth the percentage of our consolidated net revenues by segment for the years ended December 31, 2023, 2022 and 2021:

Current wording

The following table sets forth the percentage of our consolidated net revenues and financial income by segment for the years ended December 31, 2024, 2023 and 2022:

Previous wording

The following table summarizes the changes in our net revenues by segment for the years ended December 31, 2023, 2022 and 2021:

Current wording

The following table summarizes the changes in our net revenues and financial income by segment for the years ended December 31, 2024, 2023 and 2022:

Previous wording

For loans receivable that share similar risk characteristics such as product type, country, unpaid installments, days delinquent, and other relevant factors, we estimate the lifetime expected credit loss allowance based on a collective assessment. The lifetime expected credit losses are determined by applying probability of default and loss given default models to monthly projected exposures, then discounting these cash flows to present value using the portfolio’s loans interest rate, estimated as a weighted average of the original effective interest rate of all the loans that conform to the portfolio segment. The probability of default is an estimation of the likelihood that a loan receivable will default over a given time horizon. Probability of default models (“PDs”) are estimated using a survival methodology; these PDs are constructed using individual default information through time, taking into account the expected future delinquency rate (forward-looking models) using, since 2022, three probability-weighted macroeconomic scenarios (base, optimistic and pessimistic) following the increased complexity and possible outcomes of the global, regional and domestic macroeconomic performance, so that the models include macroeconomic outlook or projections and recent performance, instead of using one scenario as prior years. With this model, we estimate marginal monthly default probabilities for each delinquency bucket, type of product and country. Each marginal monthly probability of default represents a different possible scenario of default. The exposure at default is equal to the receivables’ expected outstanding principal, interest and other allowable balances. We estimate the exposure at default that the portfolio of loans would have in each possible moment of default, meaning for each possible scenario mentioned above. For credit cards we estimate an amortization scheme based on historical information. Also, for credit cards, since 2022, the Company has used, as applicable, credit conversion factor (“CCF”) estimated according to terms and conditions, considering the increase in the volume of credit cards portfolio. The loss given default (“LGD”) is the percentage of the exposure at default that is not recoverable. The LGD is estimated using Work-out and Chainladder approaches. This percentage depends on days past due, type of product and country, and is estimated by measuring an average of historical recovery rates from defaulted credits. The measurement of the current expected credit losses (“CECL”) is based on probability-weighted scenarios (probability of default for each month), in view of past events, current conditions and adjustments to reflect the reasonable and supportable forecast of future economic conditions. Considering a hypothetical increase in the probability of default of 10%, we would have recognized an increase in our allowance for doubtful accounts for loans receivable of approximately $34 million.

Current wording

For loans receivable that share similar risk characteristics such as product type, country, unpaid installments, days delinquent, and other relevant factors, we estimate the lifetime expected credit loss allowance based on a collective assessment. The same methodology is applied for the measurement of the current expected credit losses (“CECL”) for the exposure to off balance sheet unused agreed loan commitment on credit cards portfolio. The lifetime expected credit losses is determined by applying probability of default and loss given default models to monthly projected exposures, then discounting these cash flows to present value using the portfolio’s loans interest rate, estimated as a weighted average of the original effective interest rate of all the loans that conform to the portfolio segment. The probability of default is an estimation of the likelihood that a loan receivable will default over a given time horizon. For most of the products, probability of default models (“PDs”) are estimated using a survival methodology; these PDs are constructed using individual default information through time, taking into account the expected future delinquency rate (forward-looking models) using three probability-weighted macroeconomic scenarios (base, optimistic and pessimistic) following the increased complexity and possible outcomes of the global, regional and domestic macroeconomic performance, so that the models include macroeconomic outlook or projections and recent performance. With this model, we estimate marginal monthly default probabilities for each delinquency bucket, type of product and country. Each marginal monthly probability of default represents a different possible scenario of default. However, for new products with limited historical information such as asset-backed loans, we use a work-out approach for the estimation of the PD. The exposure at default is equal to the receivables’ expected outstanding principal, interest and other allowable balances. We estimate the exposure at default that the portfolio of loans would have in each possible moment of default, meaning for each possible scenario mentioned above. For credit cards loans we estimate an amortization scheme based on historical information. Also, for Brazil credit cards loans, we use, as applicable, a one month credit conversion factor (“CCF”) estimated according to terms and conditions, considering the increase in the volume of credit cards portfolio. The loss given default (“LGD”) is the percentage of the exposure at default that is not recoverable. The LGD is estimated using work-out and Chainladder approaches. This percentage depends on days past due, type of product and country, and is estimated by measuring an average of historical recovery rates from defaulted credits. For asset-backed products, since there is almost no information to apply either a work-out or Chainladder approach, we use the Basel III guidelines for credit risk management. The measurement of the CE…

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Previous wording

Revenues from commerce transactions are mainly generated from:

Current wording

Commerce revenues are mainly generated from:

Previous wording

■marketplace fees that include final value fees and flat fees. Final value fees represent a percentage of the sale value that is charged to the seller once an item is successfully sold and flat fees represent a fixed charge for transactions below a certain merchandise value;

Current wording

■marketplace fees that include final value fees and flat fees. Final value fees represent a percentage of the sale value that is charged to the seller once an item is successfully sold and flat fees represent a fixed charge for certain transactions below a certain merchandise value;

Previous wording

■shipping fees, which are generated when a buyer elects to receive an item through our shipping service, net of the third-party carrier costs (when we act as an agent), and storage fees, which are charged to the seller for the utilization of the Company’s fulfillment facilities;

Current wording

■shipping fees, which are generated when a buyer elects to receive an item through our shipping service, net of the third-party carrier costs (when we act as an agent). When the Company acts as principal, revenues derived from shipping services are recognized upon delivery of the good to the customer, and presented on a gross basis. In addition, the Company generates storage fees, which are charged to the seller for the utilization of the Company’s fulfillment facilities;

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 lending solution;

Previous wording

■commissions from additional fees we charge when our sellers elect to withdraw cash.

Current wording

■commissions from additional fees we charge when our sellers elect to withdraw cash; and

Previous wording

Our Mercado Libre Marketplace is available in 18 countries (Argentina, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Peru, Mexico, Panama, Honduras, Nicaragua, El Salvador, Uruguay, Bolivia, Guatemala, Venezuela (deconsolidated since December 1, 2017) and Paraguay), while Mercado Pago and Mercado Envios are available in 8 countries (Argentina, Brazil, Mexico, Colombia, Chile, Peru, Uruguay and Ecuador).

Current wording

Our Mercado Libre Marketplace is available in 18 countries (Argentina, Brazil, Mexico, Chile, Colombia, Peru, Uruguay, Venezuela, Bolivia, Costa Rica, Dominican Republic, Ecuador, Guatemala, Honduras, Nicaragua, Panama, Paraguay and El Salvador) and our fintech platform, Mercado Pago, is present in 8 countries (Argentina, Brazil, Mexico, Chile, Colombia, Peru, Uruguay and Ecuador).

Previous wording

The functional currency for each country’s operations is the country’s local currency, except for Argentina, where the functional currency is the U.S. dollar due to Argentina’s status as a highly inflationary economy. Our net revenues are generated in multiple foreign currencies and then translated into U.S. dollars at the average monthly exchange rate. Please refer to Note 2 – Summary of significant accounting policies to our audited consolidated financial statements for further detail on foreign currency translation.

Current wording

The functional currency for each country’s operations is the country’s local currency, except for Argentina, where the functional currency is the U.S. dollar due to Argentina’s status as a highly inflationary economy. Our net revenues and financial income are generated in multiple foreign currencies and then translated into U.S. dollars at the average monthly exchange rate. Please refer to Note 2 – Summary of significant accounting policies to our audited consolidated financial statements for further detail on foreign currency translation.

Previous wording

We have a highly fragmented customer revenue base given the large numbers of sellers and buyers who use our platforms. For the years ended December 31, 2023, 2022 and 2021, no single customer accounted for more than 5.0% of our net revenues.

Current wording

We have a highly fragmented customer revenue base given the large numbers of sellers and buyers who use our platforms. For the years ended December 31, 2024, 2023 and 2022, no single customer accounted for more than 5.0% of our net revenues and financial income.

Previous wording

The following table summarizes our consolidated net revenues for the years ended December 31, 2023, 2022 and 2021:

Current wording

The following table summarizes our consolidated net revenues and financial income for the years ended December 31, 2024, 2023 and 2022:

Previous wording

The following table summarizes our consolidated net revenues by revenue stream and geographic segment for the years ended December 31, 2023, 2022 and 2021:

Current wording

The following table summarizes our consolidated net revenues and financial income by revenue stream and geographic segment for the years ended December 31, 2024, 2023 and 2022:

Previous wording

See Note 9 – Segments of our audited consolidated financial statements for further information regarding our net revenues disaggregated by similar products and services for the years ended December 31, 2023, 2022 and 2021.

Current wording

See Note 10 – Segments of our audited consolidated financial statements for further information regarding our net revenues and financial income disaggregated by similar products and services for the years ended December 31, 2024, 2023 and 2022.

Previous wording

Our Commerce revenues grew $2,393 million, or 41.2%, for the year ended December 31, 2023, as compared to the year ended December 31, 2022. This increase in Commerce revenues was primarily attributable to:

Current wording

Our Commerce revenues grew $3,958 million, or 48.3%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023. This increase in Commerce revenues was primarily attributable to:

Previous wording

■(i) an increase of $1,990 million in Commerce services revenues mainly related to a 30% increase in gross merchandise volume, (ii) a 25% increase in our shipped items and (iii) higher flat fee contributions for low gross merchandise volume transactions, which was offset by Shipping carrier costs, which are netted against revenues, that increased $653 million, from $1,809 million for the year ended December 31, 2022 to $2,462 million for the year ended December 31, 2023; and

Current wording

■(i) an increase of $3,322 million in Commerce services revenues mainly related to a 15.0% increase in gross merchandise volume and (ii) higher flat fee contributions for low gross merchandise volume transactions. Shipping carrier costs, which are netted against revenues, decreased $1,441 million, from $2,462 million for the year ended December 31, 2023 to $1,021 million for the year ended December 31, 2024, 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 $403 million in our revenues from Commerce products sales, mainly in Brazil and Mexico.

Current wording

■an increase of $636 million in our revenues from Commerce products sales, mainly in Brazil and Mexico.

Previous wording

Our Fintech revenues grew 32.6%, from $4,729 million for the year ended December 31, 2022, to $6,272 million for the year ended December 31, 2023. This increase is mainly generated by:

Current wording

Our Fintech revenues grew 24.8%, from $6,906 million for the year ended December 31, 2023, to $8,618 million for the year ended December 31, 2024. This increase is mainly generated by:

Previous wording

■an increase of $513 million in our Credits revenues, mainly as a consequence of higher originations.

Current wording

■an increase of $1,054 million in our Credits revenues, mainly as a consequence of higher originations.

Previous wording

Commerce revenues in Argentina increased 16.2% in the year ended December 31, 2023 as compared to 2022. This increase was generated by an increase of $222 million in our commerce services revenues, partially offset by a decrease of $46 million in our revenues from commerce products sales. Fintech revenues grew 39.9%, a $564 million increase, during the year ended December 31, 2023 as compared to 2022, mainly driven by an increase of $388 million in our revenues from fintech services and an increase of $178 million in our credits revenues.

Current wording

Commerce revenues in Argentina increased 11.6% in the year ended December 31, 2024, as compared to 2023. This increase was generated by an increase of $171 million in our Commerce services revenues, partially offset by a decrease of $25 million in our revenues from Commerce products sales. Fintech revenues grew 5.3%, a $122 million increase, during the year ended December 31, 2024 as compared to 2023, mainly driven by an increase of $146 million in our revenues from Financial services and income, partially offset by a decrease of $25 million in our Credits revenues.

Previous wording

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

Current wording

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

Previous wording

The following table sets forth the growth in net revenues in local currencies, for the years ended December 31, 2023 and 2022 as compared to the same periods in 2022 and 2021, respectively:

Current wording

The following table sets forth the growth in net revenues and financial income in local currencies, for the years ended December 31, 2024 and 2023 as compared to the same periods in 2023 and 2022, respectively:

Previous wording

(3) Average inter-annual inflation rates in our Argentine segment for the years ended December 31, 2022 and 2021 was 70.7% and 48.1%, respectively. This effect was partially offset by an average inter-annual increase of Argentina’s official exchange rate against the U.S. dollar of 38.7% and 36.6% for the years ended December 31, 2022 and 2021, respectively. During the first eleven months of 2023, the average intern-annual inflation rate and the increase of the average intern-annual Argentina’s official exchange rate against the U.S. dollar were 120.4% and 107.8%, respectively. During December 2023, the Argentine government devaluated its local currency by 55.4% and monthly inflation rate was 25.5%. See also "Item 1A. Risk Factors - Risks related to doing business in Latin America - Local currencies used in the conduct of our business are subject to depreciation, volatility and exchange controls".

Current wording

(3) For the year ended December 31, 2024, 2023 and 2022, the average inter-annual inflation rate in our Argentine segment was 236.8%, 127.9% and 70.7%, respectively. See also "Item 1A. Risk Factors - Risks related to doing business in Latin America - Local currencies used in the conduct of our business are subject to depreciation, volatility and exchange controls".

Previous wording

Cost of net revenues 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 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 for the years indicated:

Current wording

Cost of net revenues and financial expenses primarily includes shipping operation costs (including warehousing costs), carrier and other operating costs, cost of goods sold, collection fees, sales taxes, funding costs related to our lending solution 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 years indicated:

Previous wording

For the year ended December 31, 2023 as compared to the year ended December 31, 2022, the increase in cost of net revenues was primarily attributable to a: i) $625 million increase in shipping operating and carrier costs; ii) $329 million increase in sales taxes (which includes $31 million of one-off expenses regarding ICMS-DIFAL tax contingency in Brazil, see Note 15 – Commitments and Contingencies -Interstate rate of ICMS-DIFAL on interstate sales under Law No. 190/22); iii) $314 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; iv) $254 million increase in cost of goods sold mainly in Brazil and Mexico; v) $213 million increase in other Fintech costs mainly related to higher funding costs in connection with our credits business; and vi) $140 million increase in hosting and site operation fees (which includes$58 million of one-off expenses regarding certain disputed amounts from withholding income tax contingencies in Brazil, see note Note 15 – Commitments and Contingencies).

Current wording

For the year ended December 31, 2024 as compared to the year ended December 31, 2023, the increase in cost of net revenues and financial expenses was primarily attributable to a: i) $2,542 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) $474 million increase in cost of sales of goods mainly in Brazil and Mexico, partially offset by a decrease in Argentina; iii) $341 million increase in collection fees, which was mainly attributable to our Brazilian and Mexican operations as a result of growth of total payment volume of Mercado Pago in those countries; iv) $202 million increase in sales taxes; and v) $109 million increase in hosting and site operation fees.

Previous wording

Our subsidiaries in Brazil, Argentina and Colombia are subject to certain taxes on revenues, which are classified as a cost of net revenues. These taxes represented 7.7%, 7.5% and 8.0% of net revenues for the years ended December 31, 2023, 2022 and 2021, respectively.

Current wording

Our subsidiaries in Brazil, Argentina and Colombia are subject to certain taxes on revenues, which are classified as a cost of net revenues and financial expenses. These taxes represented 6.6%, 7.7% and 7.5% of net revenues and financial income for the years ended December 31, 2024, 2023 and 2022, respectively.

Previous wording

Our gross profit margin is defined as total net revenues minus total cost of net revenues, as a percentage of net revenues.

Current wording

Our gross profit margin is defined as total net revenues and financial income minus total cost of net revenues and financial expenses, as a percentage of net revenues and financial income.

Previous wording

For the years ended December 31, 2023 and 2022, our gross profit margins were 49.8% and 49.0%, respectively. The increase in our gross profit margin resulted primarily from the decrease in our cost of goods sold in Argentina and Mexico and customer experience expenses in Brazil and Mexico, partially offset by higher fintech costs in Argentina and Mexico, as a percentage of net revenues.

Current wording

For the years ended December 31, 2024 and 2023, our gross profit margins were 46.1% and 50.2%, 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 and collection fees, as a percentage of net revenues and financial income.

Previous wording

In the future, our gross profit margin could decline if we continue growing our sales of goods business, which has a lower pure product margin, building up our logistics network and if we fail to maintain an appropriate relationship between our cost of revenue structure and our net revenues trend.

Current wording

In the future, our gross profit margin could continue declining if we maintain the growth of our sales of goods business, which has a lower pure product margin, building up our logistics network and if we fail to maintain an appropriate relationship between our cost of revenue structure and our net revenues and financial income trend.

Previous wording

For the year ended December 31, 2023, the increase in product and technology development expenses as compared to the year ended December 31, 2022, was primarily attributable to a: i) $334 million increase in other product and technology development expenses mainly related to a one-off charge of$261 million due tothe risk of losing the case became probable in certain disputed amounts regarding withholding income tax contingencies in Brazil and higher tax withholding in connection with intercompany export services billing duties; ii) $332 million increase in salaries and wages mainly related to the increase of 13% 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; and iii) $49 million increase in depreciation and amortization expenses mainly related to capitalized information and technology assets.

Current wording

For the year ended December 31, 2024, the increase in product and technology development expenses as compared to the year ended December 31, 2023, was primarily attributable to a: i) $181 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; and ii) $37 million increase in depreciation and amortization expenses mainly related to capitalized information and technology assets. This increase was partially offset by a $148 million decrease in other product and technology development expenses mainly related to a one-off charge recorded during the year ended December 31, 2023, due to the risk of losing the case became probable in certain disputed amounts regarding withholding income tax contingencies in Brazil, partially offset by higher tax withholding in connection with intercompany export services billing duties.