Hello, everyone, and welcome to the MercadoLibre Earnings Conference Call for the Quarter Ended March 31, 2017. I am Federico Sandler, Head of Investor Relations for MercadoLibre. Our Senior Manager presenting today is Pedro Arndt, Chief Financial Officer. Additionally, Marcos Valperin, Chief Executive Officer and Osvaldo Jimenez, Executive Vice President of Payment, will be available during today's Q and A session. This conference call is also being broadcasted over the Internet and is available through the Investor Relations section of our website.
I remind you that management may make forward looking statements relating to such matters as continued growth prospects for the company, industry trends and product and technology initiatives. These statements are based on currently available information and on our current assumptions, expectations and projections about future events. While we believe that our assumptions, expectations and projections are reasonable in view of the current available information, you are cautioned not to place undue reliance on these forward looking statements. Our actual results might differ materially from those discussed in this call for a variety of reasons, including those described in the forward looking statements and risk factors sections of our 10 ks and other filings with the Securities and Exchange Commission, which are available on our Investor Relations website. Finally, I would like to remind you that during the course of this conference call, we may discuss some non GAAP measures.
A reconciliation of those measures to the nearest comparable GAAP measures can be found on our Q1 2017 earnings press release available on our Investor Relations website. Now, let me turn the call over to Pedro.
Thanks, Federico. Hello to everyone, and welcome to our Q1 conference call for 2017. We have kicked off the year with a strong Q1, sustaining the momentum from 2016, which was one of the best years in history. The consistent pace of execution this quarter is a direct reflection of our relentless drive to deliver disruptive technology solutions to our users across platforms, devices and countries where we operate. We remain focused on transforming commerce and financial services through product innovation, fostering entrepreneurship and delivering best in class user experiences, and thus cementing our leadership position in technology, online payments and e commerce throughout Latin America.
We are excited to see how the business has continued to outperform market growth rates in a consistent manner as we render the value proposition of our enhanced marketplace more complete in terms of quality, quantity and reach of value added services available both on and off our marketplaces. Before I dive into financial results, let's quickly take a look at some of the KPIs that underscore our strong performance during the Q1 of 2017. Units sold grew 38.6 percent year on year to 53,200,000 dollars maintaining the strong momentum in unit volumes we observed all through the 4 quarters of last year. Gross merchandise volume reached $2,300,000,000 accelerating by 20 percentage points sequentially to 31% year on year in U. S.
Dollars, while on an FX neutral basis, gross merchandise volume accelerated for the 3rd consecutive quarter to 61.4% year over year. Total payment volume grew 81.3 percent on an FX neutral basis, reaching $2,600,000,000 while total payment transactions grew 60.1 percent to 44,100,000 payments processed. All this led to solid revenue growth, both on an FX neutral basis and in U. S. Dollars, growing 78.3% and 73.8%, respectively.
The latter is the fastest pace of U. S. Dollar revenue growth in over 5 years. Finally, we continue to grow our user base as registered users were up 20.3% year on year, reaching 182,000,000 after we added 8,100,000 new users during the quarter. These are some of the headlines, but what best showcases our strong Q1 performance is the consistent progress we have made in delivering a transformative user experience to our buyers and sellers through our enhanced marketplace, while complementing it with our growing financial technology solutions.
Starting on the marketplace, let me take a closer look at the building blocks that facilitate growth in this business unit: engagement and retention, vibrancy of trade, monetization and supply. We continue to make strides on the user engagement and retention front. Unique buyers grew by 20% year over year and maintained the solid pace of demand growth observed over the course of last year. Engagement rates are also moving in the right direction as items purchased per unique buyer grew by 15% versus the same quarter a year ago. So we are seeing growth on growth, more active users and more purchases per active user.
The performance of our Brazilian marketplace was noteworthy as well as we witnessed firsthand how the virtuous cycle of full penetration of our enhanced marketplace offering delivers solid rates of growth and vibrancy even on top of tough comparisons from last year and a still challenging macro environment. The resilience of our Brazilian business and the type of results it is delivering this quarter have been extraordinary from a unit volume and GMV perspective. Units sold achieved the 4th consecutive quarter of growth in excess of 50% year over year. On an FX neutral basis, GMV grew 12% above its 2 year compound annual growth rate at 39%, also maintaining a strong momentum during 2016. Additionally, during the Q1 of this year, items growth in Brazil was 52.7 percent year on year, 26 percentage points above its 2 year CAGR.
Demand metrics and conversion rates in Brazil are giving us the conviction that we are taking the right approach to attract and retain buyers on our ecosystem. Unique buyers in Brazil accelerated year on year, frequency continued to grow to record highs. GMV from repeat buyers is also at record levels, being this a leading indicator of how much the improved user experience we are delivering is driving better engagement among our users. Mexico was also a highlight during the quarter. Gross merchandise volume on an FX neutral basis accelerated for the 7th consecutive quarter to 33% year over year, the fastest pace of GMV growth in 4 years.
On the unit sold front, results are even more encouraging as they grew at a multi year high of 71% year over year reaching 4,500,000 items. That's the 6th consecutive quarter of acceleration in unit volumes in Mexico. As a result of our free shipping strategy and investments in customer acquisition in Mexico, we reignited unique buyer growth as well. Unique buyers accelerated for the 3rd consecutive quarter to 18%, the fastest pace of growth in 4 years. I also would like to point out that this quarter in Mexico, we improved purchase frequency per unique buyer by 45%, delivering the highest purchase frequency growth rate on record in that country.
Not coincidentally and confirming that onboarding payments and shipping are key drivers to accelerate the marketplace, 9 When looking at monetization levels, results are also encouraging for us as it continues to improve. On an FX neutral basis, revenues in Mexico, Brazil and Argentina are all growing above 55% year on year as we see the pickup of the enhanced marketplace with shipping, credit and payment processing revenues penetrating GMV at a rapid clip. Mexico is worth noting here as its FX neutral revenue growth rate was the highest in over 5 years during this quarter. These figures I have just walked you through for Brazil and Mexico starkly contrast with physical retail sales in those countries, which are growing less than 5%. Figures like these are the ones that not only give us confidence that there is still significant room to continue gaining share from online retail as well as offline retail, but also that secular tailwinds continue to trump macroeconomic headwinds for our business.
On the supply side, we are successfully onboarding more inventory as product assortment continues to deepen on our platform. Live listings being offered on MercadoLibre Marketplace grew 58% during the Q1 of 2017, reaching 85,000,000 live listings. In line with that, we are also gaining incremental share of wallet as we become the go to destination for online buyers throughout the continent. Case in point, verticals such as fashion and apparel grew GMV 50% versus a year ago, while auto parts and home and garden each grew GMV at over 30% year on year respectively. On a not so positive note, Argentina continues to offset the strength we saw throughout other countries for the marketplace business during the Q1 of 2017.
Despite still delivering solid top line growth, results there decelerated across many important operational metrics. Moving on to the payments front, MercadoPago's strong results this quarter demonstrate that we are well on track to consolidate our payments business as a regional leader in open digital payment platforms. We continue to build our strategies for democratizing the movement and management of money from cash to digital payments, placing our millions of users in a position to benefit from the mobile revolution Penetration of MercadoPago on our platform showed solid gains as it continues to reduce friction, build trust, improve purchase frequency and the overall user experience for our buyers and sellers. As a result, on platform total payment volume reached $2,000,000,000 growing at a fast clip both on an FX neutral basis at 77.3 percent year on year and in U. S.
Dollars at an even stronger 84.1% year on year. During the Q1, penetration of MercadoPago was up by 21 percentage points from 56% a year ago. On a country per country basis, Colombia, Uruguay and Chile are delivering promising results as well, with year on year penetration gains of 27%, 29% and 33 percentage points respectively. Our merchant service businesses has consolidated as one of our fastest growing segments within Mercado and becoming an increasingly important component of our FinTech value proposition. During the Q1, total payment volume grew 81.3 percent year on year on an FX neutral basis, while revenue growth for merchant services, the name we give to payments processed away from our marketplace came in at a solid 79% year on year on an FX neutral basis.
As the strength and reliability of our 2 sided network engages both merchants and consumers, the stronger our network effect becomes as we grow our scale's advantages. As a result, the size of our merchant base is becoming a competitive advantage, increasingly harder to replicate the larger we grow. In this sense, during the quarter, we made progress on this respect, as we continue to onboard large and well established merchants. Some of these include online travel and tourism vertical Despegar in Argentina AssistCard, one of the largest travel assistant plans in Argentina, Mexico and Colombia and Copel, one of the leading Mexican department store chains. We have also made progress in our mobile payments initiatives.
We are content to report that our MercadoPago mobile wallet app is delivering encouraging results in Brazil and Argentina as we build more repeat usage cases around it, making it more convenient for our users to pay for goods and services with a simple tap or scan from their mobile devices. Although still in early seed stage, we are excited to see strong pickup in active payers and total payments volume driven by utility and bill payment services as well as continued growth in our mobile top up offerings. Adoption of our mobile point of sale systems by real world physical merchants in Brazil also continues to gain traction. Within less than 2 years since launching the product, it has already become one of the largest contributors to off platform total payment volume in Brazil. Argentina is beginning to show positive results on that front as well, growing rapidly, but from a small base since the product was only launched in the last quarter of 2016.
One last point in the Payments segment is our fraud prevention efforts. As a consequence of our investment in machine learning and AI to prevent and detect fraud on our payment platforms over the last few years, we have achieved historic highs in approval rates, while maintaining fraud loss provision ratios all time lows, while also reducing the number of manually reviewed payments consistently quarter over quarter. This is important for us as it signals that not only are we delivering to our merchants leading ratios on the key factors of approval rates and low fraud loss provisions, which are significant drivers in the merchant selection process of a payment processor, but also we are saving costs and scaling as we further automate our internal fraud monitoring processes. Our shipping initiatives are playing a determinant role in accompanying and driving the fast pace of growth of our marketplace, growing items shipped through Mercado and Vios by 59% year on year to over 27,000,000 units. During the quarter, we also reached an important milestone in our shipping business unit as we processed over 10,000,000 orders for the first time in 1 month since we launched the service 4 years ago.
MercadoEnvios in Mexico continues to advance on a firm trajectory as drop shipping penetration increased by 29 percentage points versus last year, reaching 59 percentage points as a result of the success of free shipping. Within just 6 months of launch, free shipping already accounts for 67% of items sold and 87% of GMV. Colombia and Chile are also delivering solid and sustained growth both in unit volumes and revenues, while also quickly growing in Vios penetration. As a percentage of items, Chile grew 13 percentage points to 14% within a year of launch of the shipping solution, while Colombia reached 41%, gaining 26 percentage points versus the Q1 of 2016. Moving on, we are also pleased with the shape of our classifieds business as it maintains vibrancy and healthy growth rates as we evolve into a model that monetizes listing fees principally to professional clients such as car dealerships and realtors.
Professional active clients are at multi year highs, growing 29% versus last year and topping 21,000 in motors and real estate. Supply is growing triple digits year on year, reaching an all time high of nearly 4,000,000 listings. Lastly, I am happy to report that as a result of investments we have made in enhancing the classifieds product, we are seeing our lead generation volume grow 79% year on year, highlighting the increased liquidity and value we are driving to dealers and realtors. And with regard to customer experience, overall, we continue to improve on how quickly and effectively we respond to our users as our net promoter score rose once again during the Q1 of 20 17. Providing our users consistently higher rates of immediate access to customer service representatives through real time online and phone channels is resulting in shorter wait queues and most importantly is playing a determinant factor in reducing overall contact rates and improving satisfaction levels.
With that, let's review how these operational highlights I have just walked you through have impacted our financials during the quarter. Net revenue accelerated for the 4th consecutive quarter to $273,900,000 a growth rate of 78.9 percent on an FX neutral basis and the 9th quarter in a row of growth above 50% in top line. In U. S. Dollar results, we have also seen a very strong quarter as net revenues accelerated for the 3rd consecutive quarter to 73.8%, also the fastest pace of growth in U.
S. Dollar revenues in over 5 years, driven in part by currency stability like we had not seen for some time. On a country by country basis, revenue growth for the Q1 of 2017 was as follows: Argentina, 58.5 percent Brazil, 66.4 percent Mexico, 55.2 percent Colombia, 33.3 percent and Chile, 30.2 percent, all of these on an FX neutral basis. Once again, we observed robust marketplace revenue growth as unit volumes in Mexico and Brazil continued to grow at a fast clip and consequently were the most significant contributors to the strong results the segment delivered during the quarter. On an FX neutral basis, total marketplace revenues accelerated to 85.8% year on year, delivering the 6th consecutive quarter of growth above 60%.
Core marketplace revenues in dollars delivered the fastest pace of growth in over 4 years coming in at 68.4% year on year. We continue to experience solid growth rates in our non marketplace revenue segment as well. On an FX neutral basis, non marketplace revenues grew 68.6% and in U. S. Dollars an equally solid 81.8%.
In order of relevance, the main contributors to this growth were as follows: MercadoPago payment processing revenue accelerating to 78.8% year on year on an FX neutral basis, driven by the growth of payment volume in off platform. Brazil was a highlight here as it has delivered 8 consecutive quarters of revenue growth north of 90%. Financing fees growing on an FX neutral basis 42 point 4% year on year aided by the adoption of installment purchases in Brazil, Mexico and Chile. This was partially offset by a slowdown in financing revenues in Argentina due to changes in the regulatory environment for consumer financing. And finally, shipping revenue more than doubled to 182.2 percent year on year on an FX neutral basis propelled by adoption of our shipping and logistics solutions in Brazil, Argentina and Colombia.
Moving down our income statement, gross profit was $168,900,000 Gross profit margin was 61.6 percent of revenues versus 64.8 percent a year ago and 63.5% in the Q4 of 2016. These 3 18 basis points of year on year margin contraction are attributable to investments in hosting representing around 50 basis points of contraction and 2 10 basis points of contraction that stem from higher investments in free shipping initiatives in Mexico, higher collection fees and sales taxes due to the incremental adoption of our enhanced marketplace. Cost of goods sold related to the sale of our mobile POS payment devices accounted for the remaining 60 basis points of gross margin contraction. Operating expenses totaled $105,500,000
up by
47.2 percent from last year's Q1, a 6 95 basis point margin improvement on an as reported basis. Breaking down these OpEx lines, sales and marketing grew 43.6% year on year to $46,900,000 growing less than revenues and representing 7.1% of sales. The 360 basis points year on year leverage was attributed for the most part to cost savings in buyer protection, bad debt and salary and wages, which were partially offset by marketing spend. Product development expenses grew less than revenues at $30,300,000 representing 11.1 percentage of revenues, notwithstanding having grown the engineering headcount by 37% versus the Q1 of 2016. General and administrative expenses grew 66% year on year to $28,300,000 growing less than revenues and representing 10.3 percent of sales.
Salaries and wages explained most of the G and A expense growth, driven for the most part by accruals to our long term retention plan. As a result of this, on an as reported basis, operating income for the quarter was $63,300,000 up 100 and financial expenses, mostly corresponding to the interest accrual on the convertible bond we issued in June of 2014. Further down, interest income was $12,200,000 up 67.7 percent year on year, explained by higher interest rates on a larger investment base as our MercadoPago store balances have increased versus the Q1 of last year. Our ForEx line was $663,000 during the quarter as we compare against the appreciation of our U. S.
Dollar balances held by our Argentine subsidiary as a result of the strong devaluation of the peso during the same period last year. Income tax expense was $21,100,000 during the quarter. The blended tax rate for the period was 30.4%. The increase in the tax rate is attributed to tax loss carry forwards gained in Venezuela last year as a result of the devaluation of the Bolivar and a lower concentration of pre tax profit in Argentina, where we are beneficiaries of a software law tax holiday. Consequently, as reported net income came in at $48,500,000 we delivered 17.7% of net income margin during the quarter, which resulted in a basic net income per common share of $1.10 Purchases of property equipment intangible assets and advances for property and equipment totaled $12,800,000 For the period that ended on the 31st March of 2017, free cash flow defined as cash flow from operating activities less payments for the acquisition of property equipment intangible assets, advances for property and equipment net of financial liabilities was $92,000,000 versus negative $29,100,000 in the same period last year.
Cash, short term investments and long term investments at the end of the quarter thus totaled $736,900,000 Wrapping up, we declared a quarterly dividend of $6,600,000 or $0.15 per share payable on July 14, 2017 to shareholders of record as of the close of business on June 30, 2017. To close, and as the quarter results clearly attest, we continue to execute against our strategic vision in a disciplined yet ambitious manner. We are fortunate to operate in one of the world's most exciting and dynamic industries, which energize and inspire our team every day. We still have a lot of work and heavy lifting ahead of us, but I'd like to take a moment and thank all the employees at MercadoLibre for another quarter of hard work and dedication on behalf of our users. It really is making a difference in the value that we are adding to our clients and our shareholders.
And with that, we'd like to take your questions now.
Our first question comes from Robert Ford with Bank of America.
Hey, good afternoon everybody and congratulations on the quarter. It was impressive across the board. With respect to Mexico and the acceleration there Pedro, can you talk a little bit about the margin pressure? And given the growth that you're seeing, how do you expect the business in Mexico to scale as we go forward?
Hi, Bob. So the focus right now is on continuing to deliver the service that we've been delivering to our users, continue to drive top line growth, and sustain our leadership position and not focus so much on short term margin. We're pretty convinced that if we continue to roll out the kind of services we're rolling out that do generate margin pressure in the short term, these are mid to long term scale sensitive services, particularly shipping. And if we continue to grow the business, eventually we'll be able to start focusing more on scaling and on margins. Right now that's not where the focus is.
And you've made some changes in terms of shipping, right?
So I think right now we haven't made any significant changes. We are obviously we're seeing very, very strong results of the shipping initiative, I would say across the board in terms of customer satisfaction, terms of driving acceleration, repeat usage. And so there's a lot of dynamism around what we're doing with shipping operationally in terms of pricing. So I think it's constantly in flux. There hasn't been anything significant over the last quarter, that comes to mind right now.
And but I think you'll continue to see us significantly involved and aggressive on the shipping front.
That makes perfect sense. Thank you very much.
Our next question comes from Stephen Ju with Credit Suisse.
Hi, guys. This is Chris Ford on for Stephen. Two questions, if I may. Any further update on the rollout of free shipping in Brazil? And should we expect this to roll out kind of gradually with certain higher priced items coming first?
And then secondarily, any high level commentary on what you guys changed in the customer acquisition strategy in Mexico that was effective?
So we've communicated to our community that we will start our free shipping program in Brazil in early May, so over the course of the next few weeks. And remember that with shipping and this is what I was referring to before and that it's fluid and dynamic, We control a lot of the levers in terms of prices at which you get free shipping, seller profiles, buyer profiles. So this is something that we can launch it one way and then see what kind of returns we're getting and how the business is performing. And it's something that we can dial up or down, dial down levers according to what we think is best for the business and for our users. And just adding on to the previous answer, I think also part of the way we're trying to manage the financial model is not focusing too much on specific segment profitability, but rather looking at the business as a whole and understanding what our consolidated financial model should look like.
And then based on that being very aggressive investing in regions or in businesses that we think require a faster pace of investment right now and maybe in other segments we will have a more long term investment approach and derive more margin for those short term. Second part of your question was customer acquisition strategy in Mexico. I would say that as we've seen improving engagement and return metrics from our users, I think we're increasingly more comfortable investing more behind user acquisition, lifetime values are improving and we're just more confident that long term health of newer cohorts that we're acquiring look increasingly better. So I don't think that there necessarily has been a change in execution, but rather just incremental investment because we are able to feel comfortable about the mid to long term return of those new user cohorts.
Okay. Thank you. Congrats on the quarter, guys.
Our next question comes from Deepak Mathivanan with Barclays.
Hey, guys. Thanks for taking the questions. Two questions from me. So first, it looks like the listings per seller, if you do the math, is up like 40%. Is that because you're bringing in more high volume sellers recently over the last few quarters and bringing in more selection to the platform?
What would you call out as a What would you call out as a reason for that? Is it in any specific category? Is it across the board? And then second question on OpEx, the leverage in 1Q was pretty strong. It seems like sales and marketing and then you called out buyer protection cost savings into it.
Is that sales and marketing and then you called out bioprotection cost savings into it. Is that something we can expect as a trend to continue for the rest of the year? Thanks.
Hi, thanks. So on the selection front, I think it's a continuation of a trend that has been going on for quite some quarters now. As sellers are able to sell more on the platform, they grow increasingly comfortable listing more and more inventory. API integrations are becoming more and more frequent. So it's also, sellers also are more efficiently uploading larger catalogs.
And I think in overall, it's part of the virtuous cycle that you begin to generate when your demand metrics continue to grow as healthily as ours have and supply will follow that. We also think it's part of strengthening the network effect of a marketplace business. So essentially it's a continuation of a trend we've been seeing for quite some quarters now and I think it's very positive. We believe that we continue to be by far the deepest selection of inventory across Latin America online. And then in terms of margin going forward, as you know, we don't guide.
And again, I think we're focused on delivering a healthy consolidated financial model, with priority right now being placed on top line growth and continuing to drive scale gains and continuing to defend the leadership position we have in terms of GMV and size among e commerce players in the region.
Great. That makes sense. Thanks, Pedro.
Our next question comes from Marcelo Santos with JPMorgan.
Hi, thanks for taking the question. 2 of those. First is, I wonder if you could provide us some update on the logistics front. How are your like cross dock initiatives ramping up? And the second question is just to explore a little bit better the Argentinian situation.
So just if you could explain a little bit more the drivers of the deceleration. Are the buyers still not accepting that well to the Pago adoption? Or is it more deceleration on the financing front? So just some comment on there would be good.
So cross docking still continues to be very important to us going forward. It's still small portion of shipped units in most countries. Argentina is still the one that has the highest penetration of cross docking and that's about 1 5th of total shipped items. We're beginning to focus in Brazil in growing our number of cross docking points. And so hopefully going forward that will drive increased penetration of cross docking, but it's still very small.
And in Mexico, the focus is more on fulfillment by MercadoLibre, less so on cross docking. That's also still relatively small, but also trending very well. And it's a lot of our focus over the next few years will be on scaling out those fulfillment and cross docking initiatives that are still quite early stage. Argentina, I think when we look at the Argentine business, there are probably a few drivers behind it not reaccelerating. Argentina, we believe is still growing at a healthy pace when you look at revenues, but it certainly has decelerated.
In one area and one aspect, Argentina continues to have some of the longest shipping delivery times. And so as we improve and focus more and more on the efficiency of our logistics that could potentially be a catalyst for reacceleration. There have been changes on the financing front driven by some changes in regulation that have also made us change how we offer financing and that's probably also generated some negative demand elasticity. We think buy equals pay is already something that's been a few quarters now and probably most users have become increasingly accustomed to that. So I think we're attributing more of the current deceleration to the other two factors at this point.
Okay. Thank you very much.
Our next question comes from Irvin Skars with Goldman Sachs.
Hi, thanks for taking the question. Two questions, one a little bit more philosophical and one more short term practically oriented. Firstly, on the competitive mode, there has been a little bit more noise or interest in the potential uptick of competition from both local as well as international entrants and that's something that you're already battling with in Mexico obviously, but there's obviously a concern that something similar could be replicated in Brazil and in Argentina. Could you just talk a little bit of without having to comment directly about these competitors or potential competitors, you just talk a little bit about how you see the competitive mode? What you see sort of as a 3 key areas?
And I think you first you earlier you mentioned the big platform of deep inventory and sellers, obviously, there's networking effects. But what else would you mention in terms of the key competitive drivers that you feel are really hard for any other company to replicate and where you're already seeing that local competitors are struggling to sort of get into the business? And then the second question on the Brazil business in terms of just an update on the situation with Correios, I think this recent strikes that may be impacting your operation. If you can just talk about sort of how you're seeing this quarter shape up in terms of logistics and whether there's been any disruption in your Brazilian business? Thank you.
Great. So let me get the short term one out of the way first. We haven't seen any significant impact from last week's strike. I think it hasn't been prolonged enough to really disrupt things significantly. In terms of competition, I think if we continue to focus on what we're doing and on the many, many levers we still have to improve the user experience in our business, I think we'll be in great shape.
And we're seeing that in Mexico where regardless of what's happening at a competitive level, I think we've been investing in the right areas and executing quite well and we're seeing the results in many aspects. We do have a business that does have network externalities. So I think as we continue to scale that works to our advantage. We've built out pipelines and we've built out relationships with financial institutions with carriers over 17 years and that's not necessarily something that's easy to replicate short term. These integrations are not easy to do efficiently.
We continue to think that on the technology and product front, we have an outstanding world class team and we believe more than ever that this is about great products and really focusing on technology. And I think finally when you look at the scale we're beginning to reach and the margin structure that we have, we really are investing very significant amounts of money back into the business in Latin America year on year. If you look at what our revenue run rate could this year could be, and what our margin structure is looking like, you realize that the investment back into the business is quite, quite substantial for an annual period. And so I think scale also is something that will help us very much going forward. Thanks.
Our next question comes from Richard Gaspart with Bradesco.
Hi, guys. Good evening. Just a couple of questions. The first one, you mentioned the cross docking centers in Brazil. Could you just give us a bit of an update on where you're at to with the fulfillment center, kind of where it is in its stage of development and when that might come online?
And then the second question is you mentioned the rise in the NPS score and some of that being driven by the improvements in customer service. Can you just give us a bit more information on kind of what exactly has driven those improvements? So you mentioned lower wait times. Has this been a function of kind of hiring more people in a a bit of color on whether that Net Promoter score is coming through across the board versus a particular country doing well within that? Thanks very much.
Great. So on the fulfillment piece in Brazil, we're still building the innards of that service. So we're still building the WMS, working with our warehouse provider partner to build out the actual on-site warehouse and the technology that will run it. So it's not a product that's live yet. It's something that we'd like to launch this year, but we haven't announced any specific date either.
In terms of net promoter scores, I would say that foremost what's driving the improvement is the combination of shipping, payments and being able to control the purchase and sale experience end to end. When we look at the net promoter scores on transactions that use the full ecosystem, they're significantly higher than those that don't use any of the services or only partially use the services. So that's the biggest driver. I think incrementally we've also opened more channels, particularly phone and live chat, which tend to help in terms of speed of answering and for certain queues are more efficient than traditional email. We've done more and more work around automation.
So there were many tasks that consumers or users could actually do for themselves if we provide the right tools for them and that's immediate solution of the problem rather than having to interact or wait for a back and forth with a customer service rep. So those automation efforts are also yielding very positive results. And then finally, I think it's just better execution, better tools, better training of our existing people and we are growing that business. I mean with revenues growing the way they've been growing, they still scale. But when we look at incremental headcount and incremental investments behind customer experience and customer service, they are very, very solid year on year growth in how much we're investing behind that area.
Okay, great. Thanks very much.
Our next question comes from Tom Champion with Cowen.
Good afternoon, guys. I'd like to pick up on the previous logistics questions. I'm curious if you could comment on what the asset footprint will look like by year end in terms of fulfillment centers and sortation centers and perhaps you could talk about the longer term objectives? And then second, you've got about $740,000,000 in cash on the balance sheet. I'm curious if you could just update us on your thoughts about the use of cash.
Thank
you. Great. So again, I think conceptually what we're doing is we're moving from feeling increasingly comfortable with the dropship solutions that we've rolled out to most markets, but still need to grow penetration of those. There are many markets where it's still sub-fifty percent and we'd like to get those to as close as 100 as we can. And now we're increasingly beginning to focus on how we can also build out sortation center capabilities for drop ship.
So picking up inventory at our merchants warehouses and then sorting at these cross docking stations and having them on their way to the consumer with at most an overnight stop at the DC and also a fulfillment product where we will actually store the inventory for our merchants. That's the vision that we're building out over the next many, many years. And depending on different product types, buyer, seller types or geographies, we will have one of those three flavors of delivery in place. We also believe that the combination is what allows us to scale out the logistics operation most efficiently and quicker given how rapid our business has been growing. On specifics or where we intend to be by year end, I think we'd rather update you on a quarterly basis on what we've built out rather than give any forward looking guidance.
And then in terms of use of cash, I think remember that part of that cash is cash that is stored balance that has a matching liability, which is the user's interest in withdrawing that cash from their Pueblo accounts. Still significant amount of that cash is not stored balance and no short term commitments on how to use that. I think there are a lot of areas we can invest, fulfillment, financing is a business that's growing very nicely as well. And we also run a cash positive and cash generative business for now and we like it that way. But as we grow out logistics and as we grow out our FinTech services, we will have areas in which we can invest that cash.
Great. Thank you.
And I'm not showing any further questions at this time. I'll turn the call back over to our host.
Great. Thank you everyone, as always for attending. And we will speak again in a few months when we announce the next quarter. For us, it's back to work. Bye bye.
Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day.