10-QPeriod: Q1 FY2013

MERCADOLIBRE INC Quarterly Report for Q1 Ended Mar 31, 2013

Filed May 7, 2013For Securities:MELI

Summary

MercadoLibre, Inc. (MELI) reported its first-quarter 2013 financial results, showcasing continued growth in net revenues and user engagement. Net revenues increased by 22.7% year-over-year, reaching $102.7 million, driven by a 20.5% rise in items sold and a significant 44.9% increase in non-marketplace revenues from financing and off-platform payments. The company also saw strong growth in its payment solutions, MercadoPago, with total payment volume up 43.8% year-over-year. Despite a notable foreign currency loss of $6.4 million due to the devaluation of the Venezuelan Bolivar, MercadoLibre's net income attributable to shareholders was $17.5 million, a decrease from the previous year's $19.6 million, largely influenced by this currency fluctuation. However, the company's operational performance remained robust, with income from operations increasing by 14.6%. MercadoLibre also continued to invest in its platform, evidenced by a 23.7% rise in product and technology development expenses, and made a strategic acquisition of a software development company in Argentina.

Financial Highlights

50 data points
Beta

Revenue

$102.73M

72.1% Gross Margin

Net Income

$17.52M

17.1% Net Margin

EPS (Diluted)

$0.40

Total Assets

$503.22M

Cash & Equivalents

$122.17M

Free Cash Flow

$27.23M

Financial Statements
Beta
Revenue$102.73M
Cost of Revenue$28.65M
Gross Profit$74.08M
Operating Expenses$45.51M
Operating Income$28.57M
Net Income$17.52M
EPS (Basic)$0.40
EPS (Diluted)$0.40
Shares Outstanding (Basic)44.15M
Shares Outstanding (Diluted)44.15M

Key Highlights

  • 1Net revenues grew 22.7% to $102.7 million in Q1 2013 compared to Q1 2012.
  • 2Gross merchandise volume (GMV) increased by 18.3% year-over-year.
  • 3Total payment volume (TPV) through MercadoPago surged by 43.8%.
  • 4A significant foreign currency loss of $6.4 million was recorded due to the devaluation of the Venezuelan Bolivar.
  • 5Income from operations increased by 14.6% to $28.6 million.
  • 6The company acquired a software development company in Argentina for approximately $3.5 million.
  • 7Quarterly cash dividends are being paid consistently, with $6.3 million approved for Q1 2013.

Frequently Asked Questions

The primary driver for the 22.7% increase in net revenues to $102.7 million was a combination of a 20.5% increase in items sold on the marketplace and a substantial 44.9% growth in non-marketplace revenues from financing and off-platform payments via MercadoPago.

The devaluation of the Venezuelan Bolivar in February 2013 resulted in a foreign currency loss of approximately $6.4 million, significantly impacting the 'Other income (expenses)' line item and contributing to a decrease in net income compared to the prior year's quarter.

MercadoLibre holds a significant portion of its cash and investments outside the U.S. (approximately 60.2%) primarily in Brazil, Argentina, and Venezuela. The company's strategy is to reinvest earnings in its international operations and distribute dividends when tax credits can offset them, aiming not to materially impact operations through repatriation of foreign earnings.

Key risks include the volatile political and economic conditions in Latin America, particularly in Venezuela (highly inflationary economy, currency devaluations) and Argentina (currency controls). The company also faces risks related to foreign currency fluctuations, potential legal and intellectual property claims, and the need for continuous investment in technology and platform enhancements.