10-QPeriod: Q3 FY2017

MERCADOLIBRE INC Quarterly Report for Q3 Ended Sep 30, 2017

Filed November 3, 2017For Securities:MELI

Summary

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% 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.

Financial Highlights

52 data points
Beta

Revenue

$304.92M

57.7% Gross Margin

Net Income

$27.67M

9.1% Net Margin

EPS (Diluted)

$0.63

Total Assets

$1.62B

Cash & Equivalents

$461.20M

Free Cash Flow

$2.94M

Financial Statements
Beta
Revenue$304.92M
Cost of Revenue$129.09M
Gross Profit$175.83M
Operating Expenses$148.28M
Operating Income$27.54M
Interest Expense$4.68M
Net Income$27.67M
EPS (Basic)$0.63
EPS (Diluted)$0.63
Shares Outstanding (Basic)44.16M
Shares Outstanding (Diluted)44.16M

Key Highlights

  • 1Net 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.
  • 2Key operational metrics like Gross Merchandise Volume (GMV) and Total Payment Volume (TPV) showed substantial increases, indicating healthy platform activity.
  • 3Gross profit margins declined due to increased costs related to free shipping, payment/shipping solution adoption, customer support, and hosting.
  • 4Sales and marketing expenses increased significantly, driven by higher marketing spend, chargebacks, and personnel costs.
  • 5The company experienced a foreign currency loss, primarily due to the devaluation of the Venezuelan Bolivar.
  • 6Significant investments were made in product and technology development, reflecting a commitment to enhancing the platform.
  • 7MercadoPago continues to expand its reach and transaction volume, contributing significantly to non-marketplace revenues.

Frequently Asked Questions

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.

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.

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.

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.