01—Abstract
Summary
Summary of the 10-Q filed May 6, 2020. Cited figures are marked; the original filing is the authoritative source.
MercadoLibre, Inc. (MELI) reported its first-quarter 2020 financial results, ending March 31, 2020.
The company experienced a significant year-over-year increase in net revenues, growing by 37.6% to $652.1 milliona, driven by strong performance in both its Commerce and Fintech segments. Despite revenue growth, the company reported a net loss of $21.1 million for the quarter, a decrease from a net income of $11.9 million in the prior year's quarter. This decline was impacted by increased operating expenses, particularly in sales and marketing, and the early effects of the COVID-19 pandemic on consumer behavior and local currency devaluations.
02—Key points
Key Highlights
- Net revenues increased by 37.6% year-over-year to $652.1 million, driven by a 32.7% rise in Commerce revenues and a 45.2% rise in Fintech revenues.
- The company reported a net loss of $21.1 million, compared to a net income of $11.9 million in Q1 2019, primarily due to increased operating expenses and the impact of COVID-19.
- Gross profit margin decreased from 50.0% in Q1 2019 to 48.0% in Q1 2020, mainly due to higher shipping operating and carrier costs.
- Operating expenses increased significantly, with Sales and Marketing expenses rising by 58.0%, impacting the operating loss margin which shifted from positive 2.1% to negative 4.6%.
- The company held $1.27 billion in cash, cash equivalents, and restricted cash as of March 31, 2020, providing a solid liquidity position despite operational challenges.
- The COVID-19 pandemic began to impact operations in late March, leading to shifts in consumer spending and deceleration in payment processing, though early April data showed signs of recovery.
- The company acquired Kiserty S.A., a software development company, in March 2020 to enhance its software development capabilities.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q1 FY2020, Mercadolibre Inc lost $0.03.
- Revenue$652.0M100.0%
- Cost of revenue−$339.0M52.0%
- Gross profit$313.0M48.0%
- Operating costs−$342.7M52.6%
- Operating income−$29.7M4.6%
- Interest, other & tax$8.7M1.3%
- Net income−$21.0M3.2%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2020filed May 6, 2020Financial Statements
Q1 FY2020 against Q1 FY2019
| Line item | Q1 FY2020Q1 FY2019 | Change |
|---|---|---|
| Revenue | $652.00M$473.77M | +37.6% |
| Cost of Revenue | $339.28M$236.77M | +43.3% |
| Gross Profit | $313.00M$237.00M | +32.1% |
| R&D Expenses | $73.44M$52.37M | +40.2% |
| Operating Expenses | $342.51M$226.87M | +51.0% |
| Operating Income | -$29.69M$10.14M | −392.9% |
| Net Income | -$21.00M$11.86M | −277.0% |
| EPS (Basic) | $-0.44$0.13 | −438.5% |
| EPS (Diluted) | $-0.44$0.13 | −438.5% |
| Shares Outstanding (Basic) | 49.71M45.98M | +8.1% |
| Shares Outstanding (Diluted) | 49.71M45.98M | +8.1% |
05—Questions
Frequently Asked Questions
How did COVID-19 impact MercadoLibre's Q1 2020 results?
In the latter half of March 2020, COVID-19 began to impact MercadoLibre's operations. This led to a deceleration in payment processing, shifts in consumer buying trends (favoring essential goods over non-essentials), and some disruptions in logistics. While net revenues still grew year-over-year due to strong performance earlier in the quarter, the pandemic contributed to increased operational costs and a shift towards a net loss.
What drove the increase in net revenues?
Net revenues grew by 37.6% to $652.1 million, primarily driven by strong performance in both the Commerce segment (up 32.7%) and the Fintech segment (up 45.2%). Key contributors included increased gross merchandise volume in Brazil, Argentina, and Mexico, a reduction in shipping subsidies, and growth in off-platform payment volumes and credit offerings.
Why did MercadoLibre report a net loss in Q1 2020?
Despite revenue growth, MercadoLibre reported a net loss of $21.1 million compared to a net profit in the prior year. This was mainly due to a significant increase in operating expenses, particularly sales and marketing expenses (up 58.0%), which included higher marketing initiatives and increased bad debt expenses due to the adoption of new accounting standards (ASC 326) related to credit risk. Higher shipping operating and carrier costs also compressed gross profit margins.
What is the company's liquidity position as of March 31, 2020?
MercadoLibre maintained a strong liquidity position, with cash, cash equivalents, and short-term investments totaling approximately $2.28 billion (including restricted cash and excluding certain mandatory guarantees). This provides the company with substantial financial flexibility to navigate the uncertain economic environment brought on by the pandemic and fund ongoing growth initiatives.
06—Continue