01—Abstract
Summary
Summary of the 10-Q filed November 1, 2019. Cited figures are marked; the original filing is the authoritative source.
MercadoLibre, Inc. (MELI) reported strong top-line growth in its Q3 2019 10-Q filing, with net revenues increasing by 60.3%a for the nine-month period and 69.7% for the three-month period ended September 30, 2019, compared to the prior year.
This growth was primarily driven by a significant increase in Gross Merchandise Volume (GMV) across key markets like Argentina, Brazil, and Mexico, along with a robust expansion in total payment volume facilitated by its Mercado Pago platform. The company also benefited from a reduction in shipping subsidies. Despite the impressive revenue growth, MELI reported a net loss for both periods, primarily due to increased operating expenses, particularly in sales and marketing, and higher cost of net revenues related to shipping and payment processing.
The balance sheet shows a substantial increase in cash and cash equivalents, reflecting the proceeds from recent equity offerings and convertible notes, bolstering the company's liquidity. MELI continues to invest heavily in technology and marketing to fuel its long-term growth strategy in the dynamic Latin American e-commerce landscape. Investors should monitor the impact of currency devaluations in certain regions and the company's ability to manage its growing operating expenses while maintaining its rapid expansion.
02—Key points
Key Highlights
- Net revenues saw substantial growth, increasing by 60.3% year-over-year for the nine months ended September 30, 2019, and 69.7% for the three-month period, driven by strong GMV and payment volume expansion.
- Gross Merchandise Volume (GMV) increased significantly in key markets, with Argentina, Brazil, and Mexico showing strong double-digit growth in local currency.
- Total Payment Volume (TPV) through Mercado Pago surged by 49.9% for the nine months and 66.2% for the three months, indicating strong adoption of its fintech services.
- The company reported a net loss of $118.0 million for the nine months and $146.1 million for the three months ended September 30, 2019, impacted by increased operating expenses.
- Cash and cash equivalents significantly increased to $1.42 billion as of September 30, 2019, up from $440.3 million at the end of 2018, due to strong financing activities.
- Operating expenses, particularly sales and marketing, increased substantially, reflecting continued investment in market expansion, branding, and credit-related bad debt expenses.
- The company has implemented new accounting standards for leases (ASC 842), resulting in the recognition of operating lease right-of-use assets and liabilities on the balance sheet.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q3 FY2019, Mercadolibre Inc lost $0.24.
- Revenue$603.0M100.0%
- Cost of revenue−$318.7M52.8%
- Gross profit$284.3M47.2%
- Operating costs−$366.3M60.7%
- Operating income−$81.9M13.6%
- Interest, other & tax−$64.2M10.6%
- Net income−$146.1M24.2%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2019filed November 1, 2019Financial Statements
Q3 FY2019 against Q3 FY2018
| Line item | Q3 FY2019Q3 FY2018 | Change |
|---|---|---|
| Revenue | $603.03M$355.28M | +69.7% |
| Cost of Revenue | $318.69M$185.56M | +71.7% |
| Gross Profit | $284.34M$169.72M | +67.5% |
| R&D Expenses | $59.49M$35.48M | +67.7% |
| Operating Expenses | $366.27M$180.72M | +102.7% |
| Operating Income | -$81.92M-$11.00M | −644.6% |
| Net Income | -$146.08M-$10.08M | −1349.5% |
| EPS (Basic) | $-2.96$-0.23 | −1187.0% |
| EPS (Diluted) | $-2.96$-0.23 | −1187.0% |
| Shares Outstanding (Basic) | 49.71M44.59M | +11.5% |
| Shares Outstanding (Diluted) | 49.71M44.59M | +11.5% |
05—Questions
Frequently Asked Questions
What was MercadoLibre's revenue growth in the reported period, and what drove it?
MercadoLibre reported strong revenue growth, with net revenues increasing by 60.3% for the nine-month period and 69.7% for the three-month period ended September 30, 2019, compared to the prior year. This growth was primarily driven by increases in Gross Merchandise Volume (GMV) in key markets like Argentina, Brazil, and Mexico, and a significant rise in total payment volume (TPV) for its Mercado Pago platform.
Despite revenue growth, why did MercadoLibre report a net loss?
The company reported a net loss due to increased operating expenses. For the nine months, the net loss was $118.0 million, and for the three months, it was $146.1 million. This was primarily driven by higher sales and marketing expenses, which included increased online and offline marketing, bad debt expenses related to the credit business, and higher costs of net revenues, such as shipping carrier costs and payment processing fees.
How has the company's cash position evolved, and what are the primary uses of its cash?
MercadoLibre's cash and cash equivalents significantly increased to $1.42 billion as of September 30, 2019, up from $440.3 million at the end of 2018. This increase was largely due to proceeds from recent equity offerings and the issuance of convertible notes. The company's primary cash requirements include funding its Mercado Pago operations, capital expenditures for technology infrastructure, supporting its credit business (Mercado Credito), and general corporate purposes.
What is the impact of currency fluctuations on MercadoLibre's financial results?
MercadoLibre operates in multiple countries with significant currency fluctuations, particularly the Argentine Peso and Brazilian Real. While revenue growth in local currency was strong, the devaluation of these currencies against the U.S. dollar partially offset reported U.S. dollar net revenue growth. The company reported foreign currency losses in certain periods due to these fluctuations, primarily related to its net asset/liability position in Argentina.
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