10-QPeriod: Q1 FY2015

MERCADOLIBRE INC Quarterly Report for Q1 Ended Mar 31, 2015

Filed May 7, 2015For Securities:MELI

Summary

MercadoLibre Inc. (MELI) reported its first-quarter 2015 financial results, showing a significant increase in net revenues of 28.4% year-over-year to $148.1 million. This growth was primarily driven by strong performance in Argentina and Brazil, with marketplace revenues growing across most segments. However, net income attributable to shareholders saw a sharp decline, falling to $1.7 million ($0.04 per share) from $30.3 million ($0.69 per share) in the prior year's quarter. A major factor impacting profitability was a substantial $16.2 million impairment of long-lived assets related to real estate investments in Venezuela, coupled with significant foreign currency losses stemming from the re-measurement of Venezuelan operations using the SIMADI exchange rate, resulting in a $20.4 million foreign exchange loss. Despite these challenges, the company continued to invest in product and technology development and sales and marketing, reflecting a strategic focus on long-term growth.

Financial Highlights

49 data points
Beta

Revenue

$148.10M

69.8% Gross Margin

Net Income

$1.72M

1.2% Net Margin

EPS (Diluted)

$0.04

Total Assets

$976.78M

Cash & Equivalents

$219.77M

Free Cash Flow

$30.86M

Financial Statements
Beta
Revenue$148.10M
Cost of Revenue$44.71M
Gross Profit$103.39M
Operating Expenses$77.81M
Operating Income$25.59M
Interest Expense$4.28M
Net Income$1.72M
EPS (Basic)$0.04
EPS (Diluted)$0.04
Shares Outstanding (Basic)44.15M
Shares Outstanding (Diluted)44.15M

Key Highlights

  • 1Net revenues increased by 28.4% to $148.1 million, driven by strong performance in Argentina (69.6% growth) and Brazil (30.6% growth).
  • 2Net income attributable to shareholders decreased significantly to $1.7 million ($0.04 EPS) from $30.3 million ($0.69 EPS) in Q1 2014.
  • 3A $16.2 million impairment of long-lived assets was recorded for Venezuelan real estate investments.
  • 4Significant foreign currency losses of $20.4 million were incurred due to the re-measurement of Venezuelan operations using the new SIMADI exchange rate.
  • 5Product and technology development expenses increased by 40.7% to $17.2 million, reflecting continued investment in platform enhancements.
  • 6Sales and marketing expenses increased by 17.2% to $26.2 million.
  • 7The company ended the quarter with $219.8 million in cash and cash equivalents.

Frequently Asked Questions

The substantial decrease in net income is primarily attributable to a $16.2 million impairment of long-lived assets in Venezuela and a significant foreign currency loss of $20.4 million related to the re-measurement of Venezuelan operations due to the adoption of the SIMADI exchange rate. These one-time events heavily impacted the quarter's profitability.

MercadoLibre is navigating the difficult macroeconomic and foreign exchange environment in Venezuela by re-measuring its operations using the SIMADI exchange rate, which led to a significant foreign exchange loss and an impairment charge. Despite these challenges, the company states its intention to continue supporting its business in Venezuela for the long term.

The company reported strong revenue growth of 28.4%, driven by significant increases in Argentina and Brazil. This growth is attributed to increased local currency volume, higher take rates, and expansion in non-marketplace services. While Venezuela's revenue decreased due to devaluation, other regions showed positive growth, suggesting a continued positive trajectory for overall revenue.

The $330 million in convertible senior notes issued in June 2014 impacted the 'Other income (expenses)' line. Interest expense increased by $4.0 million for the quarter compared to the prior year, reflecting the cost associated with these notes. The conversion conditions had not been met as of the reporting date, so they did not affect earnings per share directly in this quarter.