01—Abstract
Summary
Summary of the 10-Q filed August 5, 2016. Cited figures are marked; the original filing is the authoritative source.
MercadoLibre, Inc. (MELI) reported solid revenue growth in the second quarter of 2016, with total net revenues increasing by 29.4% year-over-year to $199.6 milliona.
This growth was driven by strong performance across its key geographic segments, particularly Brazil and Argentina, with double-digit percentage increases in local currency volumes. The company also saw significant growth in its payment and shipping solutions, contributing to an overall increase in Gross Merchandise Volume (GMV) and Total Payment Volume (TPV). However, gross profit margins experienced a slight decrease due to higher costs associated with increased penetration of these services and higher customer support expenses.
Despite increased operating expenses, including a notable impairment charge of $13.7 millionb related to Venezuelan real estate investments, the company's income from operations remained relatively stable. The significant devaluation of the Venezuelan currency continued to impact the company, leading to foreign exchange losses and the aforementioned impairment.
Investors should note the company's continued investment in technology and sales and marketing to support its long-term growth strategy. The company also maintained its quarterly cash dividend, demonstrating a commitment to returning value to shareholders.
02—Key points
Key Highlights
- Net revenues increased 29.4% year-over-year to $199.6 million for the three months ended June 30, 2016.
- Gross profit margin decreased to 63.3% from 67.4% in the prior year's quarter, impacted by higher payment and shipping solution costs.
- Operating income decreased to $32.2 million from $34.6 million due to increased operating expenses, including a $13.7 million impairment charge related to Venezuelan real estate.
- Net income decreased to $15.9 million ($0.36 per diluted share) from $19.5 million ($0.44 per diluted share) in the same period last year.
- Total payment volume (TPV) grew significantly by 50.6% year-over-year, indicating strong adoption of MercadoPago.
- The company acquired Axado Informação e Tecnologia S.A., a Brazilian logistics software developer, for $5.5 million to enhance its shipping capabilities.
- The Venezuelan operations continue to face challenges due to currency devaluation, leading to a significant foreign exchange loss and an impairment of long-lived assets.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2016, Mercadolibre Inc kept $0.08.
- Revenue$199.6M100.0%
- Cost of revenue−$73.3M36.7%
- Gross profit$126.3M63.3%
- Operating costs−$94.1M47.1%
- Operating income$32.2M16.1%
- Interest, other & tax−$16.3M8.2%
- Net income$15.9M7.9%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2016filed August 5, 2016Financial Statements
Q2 FY2016 against Q2 FY2015
| Line item | Q2 FY2016Q2 FY2015 | Change |
|---|---|---|
| Revenue | $199.64M$154.31M | +29.4% |
| Cost of Revenue | $73.35M$50.31M | +45.8% |
| Gross Profit | $126.30M$104.00M | +21.4% |
| Operating Expenses | $94.11M$69.37M | +35.7% |
| Operating Income | $32.19M$34.64M | −7.1% |
| Interest Expense | $4.43M$4.28M | +3.6% |
| Net Income | $15.86M$19.46M | −18.5% |
| EPS (Basic) | $0.36$0.44 | −18.2% |
| EPS (Diluted) | $0.36$0.44 | −18.2% |
| Shares Outstanding (Basic) | 44.16M44.16M | 0.0% |
| Shares Outstanding (Diluted) | 44.16M44.16M | 0.0% |
05—Questions
Frequently Asked Questions
What was the primary driver of MercadoLibre's revenue growth in Q2 2016?
MercadoLibre's revenue growth was primarily driven by a significant increase in local currency volumes in its key markets, particularly Brazil and Argentina. This growth was also supported by the increasing adoption of its payment (MercadoPago) and shipping (MercadoEnvios) solutions, which contributed to higher Gross Merchandise Volume (GMV) and Total Payment Volume (TPV).
What factors led to the decrease in gross profit margins?
The decrease in gross profit margins was mainly due to the higher penetration of MercadoLibre's payment and shipping solutions. These services inherently incur incremental costs, such as collection fees and sales taxes, which reduced the overall gross profit margin percentage. Additionally, increased customer support costs also contributed to this decline.
How are the company's Venezuelan operations performing, and what are the key challenges?
The Venezuelan operations are facing significant challenges due to severe currency devaluation. The company recorded a foreign exchange loss of $4.9 million in Q2 2016 and an impairment charge of $13.7 million on real estate investments due to the expected lower U.S. dollar-equivalent cash flows. Despite these challenges, the company plans to continue its investment in Venezuela.
What strategic acquisitions did MercadoLibre make during this period?
During the second quarter of 2016, MercadoLibre acquired Axado Informação e Tecnologia S.A., a Brazilian company specializing in logistics software for the e-commerce industry, for $5.5 million. This acquisition is intended to enhance the company's software development capabilities in transportation management and support its shipping business.
06—Continue