10-QPeriod: Q1 FY2019

MERCADOLIBRE INC Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 3, 2019For Securities:MELI

Summary

MercadoLibre, Inc. (MELI) reported its first quarter 2019 financial results, showcasing significant top-line growth and a return to profitability. The company experienced a substantial 47.6% increase in net revenues, reaching $473.8 million, driven by robust performance across its Enhanced Marketplace and Non-Marketplace segments. This growth was fueled by strong local currency Gross Merchandise Volume (GMV) increases in key markets like Argentina, Brazil, and Mexico, alongside a significant increase in Total Payment Volume (TPV) facilitated by Mercado Pago. Operationally, MELI transitioned from a net loss in the prior year's quarter to a net income of $11.9 million. This turnaround was supported by improved operating income and a reduction in shipping subsidies, which positively impacted gross profit margins. The company also successfully completed significant equity offerings in March 2019, raising approximately $2 billion to fuel future growth initiatives, particularly in payment solutions and logistics. Despite currency headwinds in Argentina and Brazil, MELI's strategic focus on expanding its e-commerce ecosystem and fintech offerings positions it for continued expansion in the Latin American market.

Financial Highlights

52 data points
Beta

Revenue

$473.77M

50.0% Gross Margin

Net Income

$11.86M

2.5% Net Margin

EPS (Diluted)

$0.13

Total Assets

$4.45B

Cash & Equivalents

$1.30B

Free Cash Flow

$105.44M

Financial Statements
Beta
Revenue$473.77M
Cost of Revenue$236.77M
Gross Profit$237.00M
R&D Expenses$52.37M
Operating Expenses$226.87M
Operating Income$10.14M
Net Income$11.86M
EPS (Basic)$0.13
EPS (Diluted)$0.13
Shares Outstanding (Basic)45.98M
Shares Outstanding (Diluted)45.98M

Key Highlights

  • 1Net revenues surged by 47.6% year-over-year to $473.8 million, driven by strong GMV and TPV growth.
  • 2The company returned to profitability with a net income of $11.9 million for the quarter, compared to a net loss of $12.9 million in the prior year.
  • 3Gross profit margins improved slightly to 50.0% from 49.3% year-over-year, despite increased shipping and payment-related costs.
  • 4Significant equity offerings in March 2019 raised approximately $2 billion, strengthening the company's financial position for future investments.
  • 5Brazil continues to be the largest revenue contributor, showing strong growth of 64.2% year-over-year, while Mexico exhibited exceptional growth of 219.7%.
  • 6Despite strong local currency growth in Argentina (82.6%), reported revenues were negatively impacted by a significant currency devaluation.
  • 7Operating expenses as a percentage of net revenues decreased, contributing to the improved operating income.

Frequently Asked Questions

MercadoLibre's revenue growth was primarily driven by a significant increase in both Gross Merchandise Volume (GMV) on its marketplace and Total Payment Volume (TPV) processed through Mercado Pago. Strong performance in Brazil and Mexico, along with substantial growth in Argentina's local currency GMV, were key contributors. A reduction in shipping subsidies also positively impacted net revenues.

MercadoLibre achieved a significant turnaround in profitability, reporting a net income of $11.9 million for the first quarter of 2019, compared to a net loss of $12.9 million in the same period of 2018. This improvement was driven by higher net revenues, better control of operating expenses as a percentage of revenue, and a shift from an operating loss to an operating income.

Currency fluctuations, particularly the devaluation of the Argentine Peso and Brazilian Real against the U.S. Dollar, had a mixed impact. While strong local currency growth was evident in Argentina (82.6% in local currency), the reported U.S. Dollar revenue was negatively affected by the 53.5% devaluation of the Argentine Peso. Brazil also experienced a 14.7% devaluation. The company reported a foreign currency loss of $3.7 million for the quarter.

The equity offerings, including a public offering and a private placement to PayPal, Inc., raised approximately $2 billion in net proceeds. This capital infusion significantly strengthens MercadoLibre's financial position and is earmarked for investing in payment initiatives, expanding logistics capacity, and driving service adoption, which are crucial for its long-term growth strategy in Latin America.