Segment Reporting

6 Months Ended

Jun. 30, 2019

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, Honduras, Nicaragua, El Salvador, Bolivia, Guatemala, Panama, Paraguay, Peru, Uruguay and the United States of America).

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

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


		Three Months Ended June 30, 2019
		Brazil	Argentina	Mexico	Other Countries	Total
		(In thousands)
Net revenues		$ 340,858	$ 113,913	$ 64,383	$ 26,088	$ 545,242
Direct costs		(275,917)	(83,909)	(85,216)	(24,441)	(469,483)
Direct contribution		64,941	30,004	(20,833)	1,647	75,759

Operating expenses and indirect costs of net revenues						(88,247)
Loss from operations						(12,488)

Other income (expenses):
	Interest income and other financial gains					33,684
	Interest expense and other financial losses					(14,679)
	Foreign currency gains					783
Net income before income tax gain						$ 7,300


		Three Months Ended June 30, 2018
		Brazil	Argentina	Mexico	Other Countries	Total
		(In thousands)
Net revenues		$ 195,839	$ 100,110	$ 17,540	$ 21,888	$ 335,377
Direct costs		(176,987)	(68,051)	(39,534)	(21,088)	(305,660)
Direct contribution		18,852	32,059	(21,994)	800	29,717

Operating expenses and indirect costs of net revenues						(57,959)
Loss from operations						(28,242)

Other income (expenses):
	Interest income and other financial gains					9,915
	Interest expense and other financial losses					(13,202)
	Foreign currency gains					12,577
Net loss before income tax gain						$ (18,952)


	Six Months Ended June 30, 2019
	Brazil	Argentina	Mexico	Other Countries	Total
	(In thousands)
Net revenues	$ 643,242	$ 207,689	$ 118,944	$ 49,137	$ 1,019,012
Direct costs	(501,260)	(151,401)	(150,801)	(44,888)	(848,350)
Direct contribution	141,982	56,288	(31,857)	4,249	170,662

Operating expenses and indirect costs of net revenues					(173,011)
Loss from operations					(2,349)

Other income (expenses):
Interest income and other financial gains					58,128
Interest expense and other financial losses					(30,238)
Foreign currency losses					(2,886)
Net income before income tax gain					$ 22,655



	Six Months Ended June 30, 2018
	Brazil	Argentina	Mexico	Other Countries	Total
	(In thousands)
Net revenues	$ 379,994	$ 202,049	$ 34,605	$ 39,705	$ 656,353
Direct costs	(353,967)	(125,346)	(65,857)	(38,361)	(583,531)
Direct contribution	26,027	76,703	(31,252)	1,344	72,822

Operating expenses and indirect costs of net revenues					(130,483)
Loss from operations					(57,661)

Other income (expenses):
Interest income and other financial gains					19,110
Interest expense and other financial losses					(23,936)
Foreign currency gains					18,178
Net loss before income tax gain					$ (44,309)

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


	June 30,	December 31,
	2019	2018
	(In thousands)
US property and equipment, net	$ 1,758	$ 2,959
Other countries
Argentina	90,560	58,358
Brazil	92,143	78,227
Mexico	22,503	16,497
Other countries	9,041	9,573
	$ 214,247	$ 162,655
Total property and equipment, net	$ 216,005	$ 165,614

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


	June 30,	December 31,
	2019	2018
	(In thousands)
US intangible assets	$ 21	$ 46
Other countries goodwill and intangible assets
Argentina	8,417	9,050
Brazil	32,147	32,955
Mexico	36,222	35,993
Chile	25,371	24,638
Other countries	5,005	4,782
	$ 107,162	$ 107,418
Total goodwill and intangible assets	$ 107,183	$ 107,464

Consolidated net revenues by similar products and services for the six and three-month periods ended June 30, 2019 and 2018 were as follows:


	Six months Ended June 30,		Three months Ended June 30,

Consolidated Net Revenues	2019	2018	2019	2018
	(In thousands)		(In thousands)
Enhanced Marketplace (*)	$ 541,333	$ 296,897	$ 288,298	$ 156,202
Non-marketplace () (*)	477,679	359,456	256,944	179,175
Total	$ 1,019,012	$ 656,353	$ 545,242	$ 335,377

(*) Includes Final Value Fees and Shipping fees.

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

(***) Includes $408,191 thousands and $288,678 thousands of Payment Fees for the six-month periods ended June 30, 2019 and 2018, respectively. Includes an amount of $221,226 thousands and $143,915 thousands of Payment Fees for the three-month periods ended June 30, 2019 and 2018, respectively.

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