01—Abstract
Summary
Summary of the 10-Q filed November 3, 2017. Cited figures are marked; the original filing is the authoritative source.
MercadoLibre Inc. (MELI) reported its third quarter 2017 financial results, showcasing robust revenue growth across its Latin American operations.
The company demonstrated strong top-line expansion, with net revenues increasing by 63.4%a for the nine-month period and 60.6% for the three-month period ended September 30, 2017, compared to the prior year. This growth was driven by increases in key operational metrics such as successful items sold, total payment volume, and gross merchandise volume. While revenue growth was impressive, gross profit margins experienced a decline due to increased costs associated with free shipping initiatives, higher penetration of payment and shipping solutions, increased customer support, and hosting costs.
Operating income margins also decreased, reflecting these higher costs and continued investment in product development, sales, and marketing. Despite margin pressures, the company maintains a strong focus on long-term growth and strategic investments in its platform and services.
02—Key points
Key Highlights
- Net revenues grew significantly by 63.4% year-over-year for the nine-month period and 60.6% for the third quarter, demonstrating strong market traction.
- Key operational metrics like Gross Merchandise Volume (GMV) and Total Payment Volume (TPV) showed substantial increases, indicating healthy platform activity.
- Gross profit margins declined due to increased costs related to free shipping, payment/shipping solution adoption, customer support, and hosting.
- Sales and marketing expenses increased significantly, driven by higher marketing spend, chargebacks, and personnel costs.
- The company experienced a foreign currency loss, primarily due to the devaluation of the Venezuelan Bolivar.
- Significant investments were made in product and technology development, reflecting a commitment to enhancing the platform.
- MercadoPago continues to expand its reach and transaction volume, contributing significantly to non-marketplace revenues.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2017, Mercadolibre Inc kept $0.09.
- Revenue$304.9M100.0%
- Cost of revenue−$129.1M42.3%
- Gross profit$175.8M57.7%
- Operating costs−$148.3M48.6%
- Operating income$27.5M9.0%
- Interest, other & tax$124,0000.0%
- Net income$27.7M9.1%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2017filed November 3, 2017Financial Statements
Q3 FY2017 against Q3 FY2016
| Line item | Q3 FY2017Q3 FY2016 | Change |
|---|---|---|
| Revenue | $304.92M$230.85M | +32.1% |
| Cost of Revenue | $129.09M$85.20M | +51.5% |
| Gross Profit | $175.83M$145.65M | +20.7% |
| Operating Expenses | $148.28M$91.94M | +61.3% |
| Operating Income | $27.54M$53.71M | −48.7% |
| Interest Expense | $4.68M$4.51M | +3.7% |
| Net Income | $27.67M$38.91M | −28.9% |
| EPS (Basic) | $0.63$0.88 | −28.4% |
| EPS (Diluted) | $0.63$0.88 | −28.4% |
| 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 Q3 2017?
MercadoLibre's revenue growth was primarily driven by strong performance in its key operational metrics, including a significant increase in successful items sold, total payment volume, and gross merchandise volume (GMV). Geographic segments, particularly Brazil, Argentina, and Mexico, showed substantial year-over-year revenue increases.
Why did MercadoLibre's gross profit margins decrease?
The decrease in gross profit margins was mainly attributed to increased costs associated with providing free shipping in key markets like Mexico and Brazil, higher adoption rates of MercadoPago and MercadoEnvios, increased customer support costs, and higher hosting expenses. These factors outweighed the revenue growth.
How did the Venezuelan currency devaluation impact the company?
The company recorded a foreign currency loss of $19.5 million for the nine-month period, largely due to the revaluation of the U.S. Dollar against the Venezuelan Bolivar. The highly inflationary status of Venezuela requires its operations to be reported using the U.S. dollar as the functional currency, leading to significant foreign exchange impacts.
What is the company's outlook regarding future investments and growth?
MercadoLibre continues to prioritize long-term growth and invests heavily in product development, sales, and marketing. The company believes that strategic initiatives and its focus on capturing the long-term opportunity in Latin America's e-commerce market will create stockholder value, even if it leads to short-term margin pressures.
06—Continue