10-QPeriod: Q3 FY2009

MERCADOLIBRE INC Quarterly Report for Q3 Ended Sep 30, 2009

Filed November 6, 2009For Securities:MELI

Summary

MercadoLibre, Inc. (MELI) reported strong growth in its third quarter and first nine months of 2009, with net revenues increasing by 25.7% and 19.6% respectively compared to the prior year. This growth was driven by robust performance in both its Marketplace and Payments segments, with the latter showing a particularly high growth rate. The company also demonstrated improved profitability, with a significant increase in net income and operating income margins, indicating successful cost management and economies of scale. Financially, MELI strengthened its balance sheet with a substantial increase in cash and cash equivalents, driven by strong operating cash flows. The company also managed its debt effectively, repaying a significant portion of its seller financing. Despite ongoing litigation and foreign currency risks, particularly related to Venezuela's economy, MELI appears to be in a solid financial position, with continued investment in technology and expansion across Latin America.

Financial Highlights

29 data points
Beta

Revenue

$50.60M

79.5% Gross Margin

Net Income

$9.85M

19.5% Net Margin

EPS (Diluted)

$0.22

Cash & Equivalents

$33.33M

Free Cash Flow

$13.17M

Financial Statements
Beta
Revenue$50.60M
Cost of Revenue$10.39M
Gross Profit$40.21M
Operating Expenses$21.23M
Operating Income$18.98M
Interest Expense-$2K
Net Income$9.85M
EPS (Basic)$0.22
EPS (Diluted)$0.22
Shares Outstanding (Basic)44.09M
Shares Outstanding (Diluted)44.14M

Key Highlights

  • 1Net revenues increased by 25.7% to $50.6 million for the third quarter and 19.6% to $123.8 million for the first nine months of 2009, compared to the prior year periods.
  • 2The Payments segment showed accelerated growth, increasing net revenues by 58.3% for the third quarter and 48.4% for the first nine months.
  • 3Net income grew significantly by 67.7% to $9.9 million in Q3 2009 and 101.3% to $21.9 million for the first nine months of 2009, compared to the prior year.
  • 4Operating income margins improved to 37.5% in Q3 2009 from 29.0% in Q3 2008, reflecting strong operational efficiency.
  • 5Cash and cash equivalents increased substantially to $33.3 million as of September 30, 2009, up from $17.5 million at December 31, 2008, supported by strong operating cash flow.
  • 6The company managed its debt, reducing short-term debt and making significant payments towards seller financing related to the DeRemate acquisition.
  • 7Product and technology development expenses saw a significant increase (72.8% for nine months) reflecting continued investment in platform enhancements and talent.

Frequently Asked Questions

MercadoLibre's revenue growth is driven by both its Marketplace and Payments segments. The Payments segment, MercadoPago, is experiencing particularly strong growth, contributing significantly to the overall revenue increase. Growth in the Marketplace is fueled by increased Gross Merchandise Volume (GMV) and Total Payment Volume (TPV).

MercadoLibre has a healthy cash position, with a significant increase in cash and cash equivalents. Operating activities generated strong cash flow, allowing the company to reduce short-term debt and make substantial payments on seller financing related to past acquisitions. The company expects its current liquidity to be sufficient for future operations and obligations.

Yes, MercadoLibre faces several risks. These include potential foreign currency fluctuations, particularly with the Venezuelan economy's highly inflationary status, ongoing litigation and potential intellectual property infringement claims, and competition within the e-commerce and payments space in Latin America. The company also notes the impact of macroeconomic conditions and currency devaluations on its reported U.S. dollar revenues.

The company completed significant acquisitions in 2008, including Classified Media Group and DeRemate operations. While these acquisitions contributed to goodwill and intangible assets on the balance sheet, the current report focuses on organic growth and operational improvements. The cash outflow related to acquisitions was significant in 2008 but has normalized in 2009, with a focus on debt repayment related to these acquisitions.