01—Abstract
Summary
Summary of the 10-Q filed August 4, 2017. Cited figures are marked; the original filing is the authoritative source.
MercadoLibre, Inc. (MELI) reported strong revenue growth in the second quarter of 2017, with net revenues increasing by 58.5%a year-over-year.
This growth was driven by robust performance across its marketplace and non-marketplace services, particularly in Brazil and Argentina. The company experienced significant increases in key operational metrics such as successful items sold, total payment volume, and shipped items. Despite strong revenue growth, gross profit margins saw a decline due to increased penetration of payment and shipping solutions and higher customer support and hosting costs.
Operating income margins also decreased, reflecting these increased costs and continued investment in product development, sales, and marketing. The company also faced significant foreign currency losses, primarily due to the devaluation in Venezuela, which impacted net income. MELI continues to focus on long-term growth in Latin America and is actively managing its investments despite economic challenges in certain regions.
02—Key points
Key Highlights
- Net revenues increased by 58.5% to $316.5 million in Q2 2017 compared to Q2 2016.
- Total Payment Volume (TPV) increased by 73.5% year-over-year for the three-month period ended June 30, 2017.
- Gross profit margin decreased from 63.3% in Q2 2016 to 54.2% in Q2 2017, impacted by higher costs of services and sales taxes.
- Significant foreign currency losses of $21.8 million were recorded in Q2 2017, primarily due to the devaluation of the Venezuelan bolivar.
- Impairment charges of $2.8 million were recognized in Q2 2017, related to Venezuelan real estate investments, compared to $13.7 million in Q2 2016.
- Operating income margin decreased from 16.1% in Q2 2016 to 9.5% in Q2 2017 due to higher operating expenses.
- The company continues to invest heavily in sales and marketing, with expenses increasing by 117.5% year-over-year in Q2 2017.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2017, Mercadolibre Inc kept $0.02.
- Revenue$283.9M100.0%
- Cost of revenue−$112.3M39.6%
- Gross profit$171.6M60.4%
- Operating costs−$141.5M49.9%
- Operating income$30.0M10.6%
- Interest, other & tax−$24.7M8.7%
- Net income$5.3M1.9%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2017filed August 4, 2017Financial Statements
Q2 FY2017 against Q2 FY2016
| Line item | Q2 FY2017Q2 FY2016 | Change |
|---|---|---|
| Revenue | $283.88M$199.64M | +42.2% |
| Cost of Revenue | $112.33M$73.35M | +53.1% |
| Gross Profit | $171.55M$126.30M | +35.8% |
| Operating Expenses | $141.53M$94.11M | +50.4% |
| Operating Income | $30.02M$32.19M | −6.7% |
| Interest Expense | $4.59M$4.43M | +3.6% |
| Net Income | $5.32M$15.86M | −66.5% |
| EPS (Basic) | $0.12$0.36 | −66.7% |
| EPS (Diluted) | $0.12$0.36 | −66.7% |
| Shares Outstanding (Basic) | 44.16M44.16M | 0.0% |
| Shares Outstanding (Diluted) | 44.16M44.16M | 0.0% |
05—Questions
Frequently Asked Questions
How did MercadoLibre's revenue perform in the second quarter of 2017?
MercadoLibre reported a significant increase in net revenues, growing 58.5% to $316.5 million for the three-month period ended June 30, 2017, compared to $199.6 million in the same period of 2016. This growth was broad-based across its segments, with Brazil and Argentina showing particularly strong performance.
What factors impacted MercadoLibre's profitability in Q2 2017?
Profitability was impacted by several factors. Gross profit margins declined due to increased costs associated with higher penetration of payment and shipping solutions, along with higher customer support and hosting expenses. Operating income margins also decreased due to higher costs of net revenues and increased sales and marketing expenses. Additionally, significant foreign currency losses, primarily from Venezuela, negatively affected net income.
What is the company's outlook and strategy given the current economic conditions in Latin America?
MercadoLibre continues to focus on long-term growth opportunities in Latin America, believing that execution of its strategic initiatives will create stockholder value. Despite weak global macroeconomic conditions and currency devaluations in the region, the company expects revenue growth to continue, although it acknowledges potential impacts on U.S. dollar-denominated revenues. It is actively managing its investments and operations, including those in challenging environments like Venezuela.
How is the Venezuelan economic situation affecting MercadoLibre?
The Venezuelan economy's high inflation and currency devaluation have led to significant foreign exchange losses for MercadoLibre. In Q2 2017, the company recorded a $22.0 million foreign exchange loss due to re-measuring its bolivar-denominated assets and liabilities at the DICOM exchange rate. This also led to an impairment of $2.8 million in Venezuelan real estate investments. Despite these challenges, the company is committed to its investment in Venezuela and actively manages its operations there.
06—Continue