5. Segment reporting

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

Segment reporting is based on geography as the main basis of segment breakdown in accordance with the criteria used for evaluation of the Company’s performance as determined by management. The Company’s segments include Brazil, Argentina, Mexico and other countries (which includes Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Panama, Honduras, Nicaragua, Salvador, Bolivia, Guatemala, Paraguay, Peru, Uruguay and the United States of America). As of September 30, 2017, the Company’s segments included Brazil, Argentina, Mexico, Venezuela and other countries.

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

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

As a consequence of the implementation of ASC 606 further described in Note 2, the Company reassessed the definition of its customers for each service, which resulted in a change of the information presented for net revenues by similar services. As from January 1, 2018, net revenues from shipping services are included as part of our Enhanced Marketplace Services. Such change has been applied retroactively for comparative purposes.

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


	Nine Months Ended September 30, 2018
	Brazil	Argentina	Mexico	Other Countries	Total
	(In thousands)
Net revenues	$ 600,822	$ 285,763	$ 63,567	$ 61,482	$ 1,011,634
Direct costs	(544,139)	(185,755)	(101,086)	(57,183)	(888,163)
Direct contribution (loss)	56,683	100,008	(37,519)	4,299	123,471

Operating expenses and indirect costs of net revenues					(192,135)
Loss from operations					(68,664)

Other income (expenses):
Interest income and other financial gains					27,746
Interest expense and other financial losses					(39,805)
Foreign currency gains					22,102
Net loss before income tax gain					$ (58,621)



	Nine Months Ended September 30, 2017
	Brazil	Argentina	Mexico	Venezuela	Other Countries	Total
	(In thousands)
Net revenues	$ 493,508	$ 250,692	$ 33,618	$ 38,329	$ 42,332	$ 858,479
Direct costs	(314,196)	(150,973)	(70,977)	(16,841)	(34,932)	(587,919)
Impairment of Long-lived Assets	-	-	-	(2,837)	-	(2,837)
Direct contribution (loss)	179,312	99,719	(37,359)	18,651	7,400	267,723

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

Other income (expenses):
Interest income and other financial gains						37,020
Interest expense and other financial losses						(19,686)
Foreign currency losses						(19,475)
Net income before income tax expense						$ 118,741


		Three Months Ended September 30, 2018
		Brazil	Argentina	Mexico	Other Countries	Total
		(In thousands)
Net revenues		$ 220,828	$ 83,714	$ 28,962	$ 21,777	$ 355,281
Direct costs		(190,172)	(60,409)	(35,229)	(18,822)	(304,632)
Direct contribution (loss)		30,656	23,305	(6,267)	2,955	50,649

Operating expenses and indirect costs of net revenues						(61,652)
Loss from operations						(11,003)

Other income (expenses):
	Interest income and other financial gains					8,636
	Interest expense and other financial losses					(15,869)
	Foreign currency gains					3,924
Net loss before income tax gain						$ (14,312)


		Three Months Ended September 30, 2017
		Brazil	Argentina	Mexico	Venezuela	Other Countries	Total
		(In thousands)
Net revenues		$ 176,575	$ 91,308	$ 11,489	$ 9,751	$ 15,798	$ 304,921
Direct costs		(129,958)	(56,210)	(24,923)	(4,582)	(12,684)	(228,357)
Direct contribution (loss)		46,617	35,098	(13,434)	5,169	3,114	76,564

Operating expenses and indirect costs of net revenues							(49,022)
Income from operations							27,542

Other income (expenses):
	Interest income and other financial gains						14,200
	Interest expense and other financial losses						(6,709)
	Foreign currency gains						1,622
Net income before income tax expense							$ 36,655

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


	September 30,	December 31,
	2018	2017
	(In thousands)
US property and equipment, net	$ 3,667	$ 7,037
Other countries
Argentina	46,646	26,028
Brazil	70,394	68,796
Mexico	7,458	3,570
Other countries	10,252	9,406
	$ 134,750	$ 107,800
Total property and equipment, net	$ 138,417	$ 114,837

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


	September 30,	December 31,
	2018	2017
	(In thousands)
US intangible assets	$ 58	$ 119
Other countries goodwill and intangible assets
Argentina	5,091	6,059
Brazil	31,879	36,462
Mexico	38,280	38,600
Chile	26,026	28,985
Other countries	6,035	5,228
	$ 107,311	$ 115,334
Total goodwill and intangible assets	$ 107,369	$ 115,453

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



	Nine months Ended September 30,		Three months Ended September 30,

Consolidated Net Revenues	2018	2017	2018	2017
	(In thousands)		(In thousands)
Enhanced Marketplace (*)	$ 477,216	$ 539,079	$ 180,319	$ 181,140
Non-marketplace () (*)	534,418	319,400	174,962	123,781
Total	$ 1,011,634	$ 858,479	$ 355,281	$ 304,921

(*) Includes Final Value Fees and Shipping fees.

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

(***) Includes $432,603 thousands and $232,426 thousands of Payment Fees for the nine-month periods ended September 30, 2018 and 2017, respectively. Includes an amount of $143,925 thousands and $92,254 thousands of Payment Fees for the three-month periods ended September 30, 2018 and 2017, respectively.