01—Abstract
Summary
Summary of the 10-Q filed November 2, 2018. Cited figures are marked; the original filing is the authoritative source.
MercadoLibre, Inc. (MELI) reported its third-quarter 2018 financial results, showing continued revenue growth despite significant currency devaluation and operational cost pressures.
For the nine months ended September 30, 2018, net revenues increased by 17.8% year-over-year, reaching $1.01 billiona, driven by strong performance in its Non-Marketplace segment, particularly payment services, and solid growth in Brazil. The company experienced a net loss of $34.2 million for the nine-month period, a significant shift from the $81.5 million net income in the prior year, largely due to increased operating expenses, particularly in sales and marketing and cost of net revenues, impacted by free shipping initiatives and currency devaluations in key markets like Argentina and Brazil. Despite these challenges, MELI continues to invest in its technology and expand its service offerings, including acquisitions in machine learning and software development, signaling a focus on long-term growth and competitive positioning.
02—Key points
Key Highlights
- Net revenues grew 17.8% to $1.01 billion for the nine months ended September 30, 2018, compared to the same period in 2017.
- The company reported a net loss of $34.2 million for the nine-month period, a reversal from a net income of $81.5 million in the prior year.
- Sales and marketing expenses increased significantly by 64.7% for the nine months ended September 30, 2018, primarily due to higher marketing spend and buyer protection program costs.
- Cost of net revenues rose 51.8% for the nine-month period, driven by increased collection fees, sales taxes, and shipping operating costs.
- MercadoLibre issued $880 million in 2.00% Convertible Senior Notes due 2028 and used a portion to repurchase $263.7 million of its 2019 Notes.
- The company adopted ASC 606 (Revenue from Contracts with Customers) effective January 1, 2018, impacting revenue recognition, particularly for shipping subsidies.
- Argentina's operations were transitioned to a highly inflationary status as of July 1, 2018, changing its functional currency to USD and impacting financial reporting.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q3 FY2018, Mercadolibre Inc lost $0.03.
- Revenue$355.3M100.0%
- Cost of revenue−$185.6M52.2%
- Gross profit$169.7M47.8%
- Operating costs−$180.7M50.9%
- Operating income−$11.0M3.1%
- Interest, other & tax$925,0000.3%
- Net income−$10.1M2.8%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2018filed November 2, 2018Financial Statements
Q3 FY2018 against Q3 FY2017
| Line item | Q3 FY2018Q3 FY2017 | Change |
|---|---|---|
| Revenue | $355.28M$304.92M | +16.5% |
| Cost of Revenue | $185.56M$129.09M | +43.7% |
| Gross Profit | $169.72M$175.83M | −3.5% |
| R&D Expenses | $35.48M— | — |
| Operating Expenses | $180.72M$148.28M | +21.9% |
| Operating Income | -$11.00M$27.54M | −139.9% |
| Net Income | -$10.08M$27.67M | −136.4% |
| EPS (Basic) | $-0.23$0.63 | −136.5% |
| EPS (Diluted) | $-0.23$0.63 | −136.5% |
| Shares Outstanding (Basic) | 44.59M44.16M | +1.0% |
| Shares Outstanding (Diluted) | 44.59M44.16M | +1.0% |
05—Questions
Frequently Asked Questions
What was the company's revenue performance in the reported period?
For the nine months ended September 30, 2018, MercadoLibre reported net revenues of $1.01 billion, an increase of 17.8% compared to the same period in 2017. This growth was driven by strong performance in its Non-Marketplace segment, particularly payment services, and expansion in Brazil.
What is the main reason for the company's shift from net income to net loss in the nine-month period?
The company reported a net loss of $34.2 million for the nine months ended September 30, 2018, a significant decrease from the $81.5 million net income in the prior year. This was primarily due to increased operating expenses, including higher sales and marketing costs, increased cost of net revenues due to shipping subsidies and currency devaluations in key markets like Argentina and Brazil.
How did the adoption of ASC 606 affect the financial statements?
MercadoLibre adopted ASC 606 effective January 1, 2018. This standard requires shipping subsidies to be presented as a reduction of net revenues, rather than as a cost of net revenues. For the nine-month period ended September 30, 2018, this resulted in a reported decrease in net revenues and cost of net revenues by $102.6 million for the comparable 2017 period.
What significant financing activities occurred during the period?
During the third quarter of 2018, MercadoLibre issued $880 million of 2.00% Convertible Senior Notes due 2028. A portion of these proceeds was used to repurchase $263.7 million of its outstanding 2019 Notes.
06—Continue