Summary
MercadoLibre Inc. (MELI) reported its financial results for the period ending June 29, 2018, in its 10-Q filing. The company experienced significant revenue growth, with an 18.6% increase in net revenues for the six-month period and an 18.1% increase for the three-month period compared to the prior year. This growth was driven by increases in gross merchandise volume, successful items sold, and successful items shipped. However, gross profit margins saw a decline from 61.5% to 49.1% for the six-month period year-over-year, primarily due to increased shipping subsidies, higher penetration of payment and shipping solutions, increased cost of products sold, customer support, and hosting costs. Operating expenses also rose, leading to an operating loss for both the six and three-month periods, compared to an operating income in the prior year. The company also noted the adoption of ASC 606, impacting revenue recognition, and the impending transition of its Argentine operations to highly inflationary accounting status.
Financial Highlights
52 data points| Revenue | $335.38M |
| Cost of Revenue | $175.63M |
| Gross Profit | $159.75M |
| R&D Expenses | $33.44M |
| Operating Expenses | $187.99M |
| Operating Income | -$28.24M |
| Interest Expense | $4.76M |
| Net Income | -$11.25M |
| EPS (Basic) | $-0.25 |
| EPS (Diluted) | $-0.25 |
| Shares Outstanding (Basic) | 44.16M |
| Shares Outstanding (Diluted) | 44.16M |
Key Highlights
- 1Net revenues increased by 18.6% for the six-month period and 18.1% for the three-month period ended June 30, 2018, compared to the prior year.
- 2Gross profit margins declined significantly, from 61.5% to 49.1% for the six-month period year-over-year, driven by increased shipping subsidies and higher costs of net revenues.
- 3The company reported an operating loss for both the six-month ($57.7 million) and three-month ($28.2 million) periods ended June 30, 2018, a reversal from the prior year's operating income.
- 4Sales and marketing expenses more than doubled in the six-month period ended June 30, 2018, increasing by 87.4% year-over-year, driven by higher marketing spend and buyer protection program expenses.
- 5Argentina's economy was designated as highly inflationary, requiring a transition to U.S. dollar functional currency for accounting purposes starting July 1, 2018.
- 6The company suspended dividend payments in Q1 2018 to reinvest capital into business growth opportunities.
- 7Cash provided by operating activities decreased substantially by 52.7% to $107.2 million for the six-month period ended June 30, 2018, compared to the prior year.