MERCADOLIBRE INC Quarterly Report for Q2 Ended Jun 30, 2019

Summary

MercadoLibre, Inc. (MELI) reported strong top-line growth in its second quarter of 2019, with net revenues increasing by 55.3% year-over-year for the six-month period ended June 30, 2019, reaching $1,019.0 million. This growth was driven by robust performance across its key segments, particularly in Brazil, Argentina, and Mexico, with significant increases in both enhanced marketplace and non-marketplace revenues. The company's FinTech solution, Mercado Pago, also demonstrated substantial growth in total payment volume, indicating continued expansion of its ecosystem. Despite the strong revenue growth, the company reported a net loss of $2.3 million from operations for the six-month period, an improvement from the $57.7 million loss in the prior year. This improvement reflects increased gross profit margins and more efficient operating expense management, though investments in product development and sales/marketing continue to pressure profitability in the short term. The balance sheet shows a substantial increase in cash and cash equivalents, bolstered by recent equity offerings, providing the company with significant liquidity to fund its growth initiatives. The company's strategic focus on expanding its integrated e-commerce ecosystem, including its FinTech, logistics, and advertising services, appears to be paying off with sustained revenue growth across its Latin American markets. The reported figures highlight the company's ability to navigate complex economic environments in regions like Argentina, with FX-neutral revenue growth further underscoring underlying operational strength. Investors should monitor the ongoing investments in technology and marketing, as well as the impact of macroeconomic conditions in Latin America, on future profitability.

Key Highlights

• 1Net revenues increased by 55.3% to $1,019.0 million for the six months ended June 30, 2019, compared to the prior year period.
• 2Gross profit margin improved to 50.0% for the six months ended June 30, 2019, up from 49.1% in the prior year period.
• 3Operating loss significantly decreased to $2.3 million for the six months ended June 30, 2019, from $57.7 million in the same period of 2018.
• 4Total payment volume (TPV) grew substantially, indicating strong adoption of Mercado Pago's FinTech services.
• 5Cash and cash equivalents and short-term investments increased significantly to $2,568.7 million (excluding specific investments), supported by recent equity offerings.
• 6The company experienced strong growth in local currency gross merchandise volume across key markets like Argentina, Brazil, and Mexico.
• 7Investments in Product and Technology Development increased by 48.0% to $106.3 million, reflecting continued focus on platform innovation.

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