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MercadoLibre, Inc. Reports Fourth Quarter Financial Results

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Net Revenues of $428.0 million, up 61.8% on an FX neutral basis

$5.3 billion Total Payment Volume, up 68.5% on an FX neutral basis

$3.2 billion Gross Merchandise Volume, up 17.6% on an FX neutral basis

BUENOS AIRES, Argentina, Feb. 26, 2019 (GLOBE NEWSWIRE) -- MercadoLibre, Inc. (NASDAQ:MELI) (http://www.mercadolibre.com), Latin America's leading e-commerce technology company, today reported financial results for the quarter ended December 31, 2018.

Pedro Arnt, Chief Financial Officer of MercadoLibre, Inc., commented, "I am pleased to report another quarter of solid performance in our business, across our key business units. During the 4Q'18 we have continued our efforts to re-calibrate our P&L with initiatives such as continued changes to our discounted shipping initiatives, and free listing caps, which allowed us to improved enhanced marketplace monetization. As a consequence our Net Revenues accelerated for the 3rd consecutive quarter, reaching 61.8% YoY on an FX neutral basis."

Fourth Quarter 2018 Business Highlights1

  • Total payment volume through MercadoPago surpassed the $5 billion mark for the first time, reaching $5.3 billion, a year-over-year increase of 22.1% in USD and 68.5% on an FX neutral basis. Total payment transactions increased 71.7% year-over-year, totaling 125.6 million transactions for the quarter.
  • MercadoPago experienced continued success in execution of off-platform payments (online and offline) through merchant services, mobile point-of-sale ("MPOS") devices, and mobile wallet business. On a consolidated basis, off-platform total payment volume grew 90.1% year-over-year in USD and 172.2% on an FX neutral basis.
  • For the first time ever, off-platform payments processed more than $2 billion in transactions, reaching almost 70 million payment transactions in a single quarter.
  • MPOS business is still one of the fastest growing non-marketplace business units, representing 46.6% of total off-platform payment volume for the quarter. On a consolidated basis, total payment volume grew 365.3% year-over-year on an FX neutral basis.
  • Our mobile wallet reached 4x more active payers during the fourth quarter than the same period of last year, while total payment volume from mobile wallet in Argentina, Brazil and Mexico is growing by triple digits year-over-year.
  • We launched our asset management product, MercadoFondo, in Brazil, the second country in which we have begun to offer our entire suite of FinTech solutions: MPOS devices, QR code in-store payments, mobile wallet and asset management.
  • Gross merchandise volume again surpassed the $3 billion mark, reaching $3.2 billion, a 10.6% year-over-year decrease in USD, and a 17.6% year-over-year increase on an FX neutral basis.
  • Items sold reached 85.6 million, growing 5.4% year-over-year versus 57.5% during the same period last year. The decrease year-over-year is attributable to Brazil, where last quarter we launched a R$5 flat listing fee on items below R$ 120 and removed listings below R$ 6 as we shift towards incentivizing buyers to purchase higher ticket items.
  • Unique buyers grew 7.5% year-over-year versus 9.4% in the third quarter. This declining growth rate is attributable primarily to pricing adjustments, including eliminating low-priced ticket items from our platform and making payments mandatory in Chile and Colombia, which also temporarily affected buyer growth.
  • Live listings offered on MercadoLibre's marketplace grew to 182.1 million in the fourth quarter of 2018, a 59.7% year-over-year increase, surpassing the 150 million mark for the third time.
  • Mobile gross merchandise volume grew 42.5% on an FX neutral basis year-over-year reaching 60.9% of GMV.
  • Items shipped through MercadoEnvíos reached 62.1 million, a 28.5% year-over-year increase, driven primarily by increases in our free shipping program. The number of items shipped in Argentina, Mexico, Chile and Colombia were highlights of the quarter, growing 84.0%, 88.3%, 72.0%, and 54.7% respectively year-over-year.

             1 Percentages have been calculated using whole amounts rather than rounded amounts.

Adoption of ASC 606

Effective January 1, 2018, the Company adopted ASC 606, Revenue from Contracts with Customers related to revenue recognition ("ASC 606") issued by the Financial Accounting Standards Board ("FASB"). The Company has adopted ASC 606 using the full retrospective transition method and has accordingly revised its consolidated financial statements for the year ended December 31, 2017, and applicable interim periods within the year ended December 31, 2017, as if ASC 606 had been effective for those periods. Because the Company did not offer free shipping in 2016, net revenue for that year does not need to be recast.

As a result of adopting ASC 606, the Company must present net revenue net of amounts paid in connection with the Company's free shipping initiative, when the Company acts as an agent, rather than including these amounts in the cost of net sales, as previously recorded. For the three-month period ended December 31, 2018 the Company incurred $108.1 million of shipping subsidies that have been netted from revenues.

As a result of adopting ASC 606, our net revenues for the periods indicated below have been recast as presented below. Our adoption of 606 does not affect our operating or net income/loss.

    In Millions***
     YTD 2017*    YTD 2018**    Q4 2017*    Q4 2018**
Gross Billings $ 1,398.1   $ 1,864.5   $ 437.0   $ 536.2  
                 
    In Millions***
     YTD 2017*    YTD 2018**    Q4 2017*    Q4 2018**
Adjustments (Decrease) $ (181.6 ) $ (424.8 ) $ (78.9 ) $ (108.1 )
                 
    In Millions***
     YTD 2017*    YTD 2018**    Q4 2017*    Q4 2018**
Net Revenues $ 1,216.5   $ 1,439.7   $ 358.1   $ 428.0  
                         

*As Recast **As Reported
***The table above may not total due to rounding.

The tables below present our gross billing and amounts paid by us in connection with our free shipping service.

      In Millions***
       YTD 2017    YTD 2018    Q4 2017    Q4 2018
  Brazil $ 831.4 $ 1,213.8 $ 262.1 $ 358.1
Gross Argentina $ 359.4 $ 402.1 $ 108.7 $ 99.0
Billings Mexico $ 86.5 $ 150.3 $ 28.2 $ 50.4
  Venezuela $ 54.3 $ 0.0 $ 16.0 $ 0.0
  Others $ 66.5 $ 98.3 $ 22.1 $ 28.7
                   


      In Millions***
       YTD 2017    YTD 2018    Q4 2017    Q4 2018
  Brazil $  (140.6 ) $  (347.7 ) $  (64.8 ) $  (92.7 )
Adjustments Argentina $  -   $  (25.5 ) $  -   $  (8.2 )
(Decrease) Mexico $  (35.2 ) $  (41.2 ) $  (10.4 ) $  (4.9 )
  Venezuela $  -   $  -   $  -   $  -  
  Others $  (5.8 ) $  (10.5 ) $  (3.7 ) $  (2.3 )
                           


      In Millions***
       YTD 2017*    YTD 2018**    Q4 2017*    Q4 2018**
  Brazil $ 690.8   866.2   197.3   265.4
Net Argentina $ 359.4   376.6   108.7   90.8
Revenues Mexico $ 51.3   109.1   17.7   45.5
  Venezuela $ 54.3   0.0   16.0   0.0
  Others $ 60.7   87.8   18.4   26.3
                   

*As Recast **As Reported
***The table above may not total due to rounding.

Fourth Quarter 2018 Financial Highlights

  • Net revenues for the fourth quarter grew to $428.0 million, a year-over-year increase of 19.5% in USD and 61.8% on an FX neutral basis.
  • Enhanced marketplace revenues increased 13.5% year-over-year in USD, and increased 51.9% on an FX neutral basis, while non-marketplace revenues increased 27.0% year-over-year in USD and 74.2% on an FX neutral basis.
  • Gross profit was $204.8 million with a margin of 47.8%, compared to 56.8% in the fourth quarter of 2017. Most of the gross margin compression is attributed to an increase in free shipping subsidies.
  • Total operating expenses were $205.6 million, down 23.3% year-over-year. As a percentage of revenues, operating expenses were 48.0%, as compared to 74.8% during the fourth quarter of 2017.
  • Loss from operations was $0.8 million, down 92.6% from last quarter and 98.8% year-over-year in USD. As a percentage of revenues, loss from operations was 0.2%, compared to a loss of 18.0% during the fourth quarter of 2017.
  • Interest income was $14.3 million, a 60.9% increase year-over-year, mainly attributable to the effect of a stable FX in Argentina, a significant rise in interest rates, an increase in volume managed in Brazil and the proceeds of the convertible note issued in August 2018, which generated more invested volume and interest gains.
  • The company incurred $16.4 million in financial expenses in the fourth quarter of 2018, mainly attributable to financial interest related to the 2028 Convertible Notes and financial loans in Argentina, Uruguay and Chile.
  • The foreign exchange loss for the fourth quarter of 2018 was $3.9 million, mainly as a consequence of a $4.7 million loss from the U.S. Dollar revaluation over our Argentine Peso net asset position in Argentina, which was partially offset by a $0.9 million gain arising from the appreciation of the Mexican Peso over our U.S. Dollar net liability position in Mexico.
  • Net loss before taxes was $6.8 million, up 89.5% year-over-year.
  • Income tax gain was $4.5 million during the fourth quarter, yielding a blended tax rate for the period of 65.8%.
  • Net loss as reported for the fourth quarter was $2.3 million, resulting in basic net loss per share of $0.05.
  • Operating cash flow was $34.8 million. Net decrease in cash, restricted cash and cash equivalents was $613.0 million during the fourth quarter of 2018.

The following table summarizes certain key performance metrics for the twelve and three months ended December 31, 2018 and 2017.

    Years Ended
 December 31,
    Three months Ended
 December 31,
(in millions) (*)     2018   2017 (**)     2018 2017 (**)
                       
Number of confirmed registered users at end of period      267.4     211.9       267.4       211.9 
Number of confirmed new registered users during period      55.5     37.7       18.8       10.7 
Gross merchandise volume   $  12,504.9  $  11,749.3    $  3,233.0    $  3,617.7 
Number of successful items sold      334.7     270.1       85.6       81.2 
Number of successful items shipped      221.7     150.7       62.1       48.3 
Total payment volume   $  18,455.9  $  13,731.7    $  5,302.1    $  4,342.8 
Total volume of payments on marketplace   $  11,274.5  $  9,627.6    $  2,950.4    $  2,947.4 
Total payment transactions      389.3     231.4       125.6       73.2 
Unique buyers      37.4     33.7       19.0       17.7 
Unique sellers      10.8     10.1       4.1       4.6 
Capital expenditures   $  102.0  $  83.5    $  21.5    $  31.4 
Depreciation and amortization   $  45.8  $  40.9    $  11.9    $  11.0 
                       

(*) Figures have been expressed using rounding amounts. Growth calculations using this table may not total due to rounding.
(**) Data for 2017 includes Venezuelan metrics up to November 30, 2017 due to deconsolidation. Please refer to Note 2 of our audited consolidated financial statements for additional detail.

Table of Year-over-year USD Revenue Growth Rates by Quarter

  Year-over-year Growth rates
         
Consolidated Net Revenues Q4'17   Q1'18   Q2'18   Q3'18   Q4'18  
                 
Brazil 37 % 15 % 25 % 25 % 34 %
                 
Argentina 42 % 43 % 14 % (8 )% (16 )%
                 
Mexico 48 % 51 % 62 % 152 % 157 %
                 

Table of Year-over-year Local Currency Revenue Growth Rates by Quarter

  Year-over-year Growth rates
             
Consolidated Net Revenues Q4'17   Q1'18   Q2'18   Q3'18   Q4'18  
                     
Brazil 35 % 19 % 40 % 56 % 58 %
                     
Argentina 62 % 80 % 68 % 68 % 77 %
                     
Mexico 41 % 39 % 71 % 168 % 170 %
                     

Conference Call and Webcast

The Company will host a conference call and audio webcast on Feb 26th, 2019 at 4:30 p.m. Eastern Time. The conference call may be accessed by dialing (877) 303-7209 / (970) 315-0420 (Conference ID 3497822) and requesting inclusion in the call for MercadoLibre. The live conference call can be accessed via audio webcast at the investor relations section of the Company's website, at http://investor.mercadolibre.com. An archive of the webcast will be available for one week following the conclusion of the conference call.

Definition of Selected Operational Metrics

Gross Billings - Total accrued fees, commissions, interest, and other sales received from users.

Foreign Exchange ("FX") Neutral – Calculated by using the average monthly exchange rate of each month of 2017 and applying it to the corresponding months in the current year, so as to calculate what the results would have been had exchange rates remained constant. Intercompany allocations are excluded from this calculation. These calculations do not include any other macroeconomic effect such as local currency inflation effects or any price adjustment to compensate local currency inflation or devaluations.

Gross merchandise volume – Measure of the total U.S. dollar sum of all transactions completed through the MercadoLibre Marketplace, excluding Classifieds transactions.

Total payment transactions – Measure of the number of all transactions paid for using MercadoPago.

Total volume of payments on marketplace - Measure of the total U.S. dollar sum of all marketplace transactions paid for using MercadoPago, excluding shipping and financing fees.

Total payment volume – Measure of total U.S. dollar sum of all transactions paid for using MercadoPago, including marketplace and non-marketplace transactions.

Enhanced Marketplace - Revenues from the Enhanced Marketplace service, include the final value fees and shipping fees charged to the Company's customers.

Items sold – Measure of the number of items that were sold/purchased through the MercadoLibre Marketplace, excluding Classifieds items.

Items shipped – Measure of the number of items that were shipped through our shipping service.

Local Currency Growth Rates – Refer to FX Neutral definition.

Net income margin – Defined as net income as a percentage of net revenues.

New confirmed registered users – Measure of the number of new users who have registered on the MercadoLibre Marketplace and confirmed their registration, excluding Classifieds users.

Operating margin – Defined as income from operations as a percentage of net revenues.

Total confirmed registered users – Measure of the cumulative number of users who have registered on the MercadoLibre Marketplace and confirmed their registration, excluding Classifieds users.

Unique Buyers – New or existing users with at least one purchase made in the period, including Classifieds users.

Unique Sellers – New or existing users with at least one new listing in the period, including Classifieds users.

About MercadoLibre

Founded in 1999, MercadoLibre is Latin America's leading e-commerce technology company. Through its primary platforms, MercadoLibre.com and MercadoPago.com, it provides solutions to individuals and companies buying, selling, advertising, and paying for goods and services online.

MercadoLibre.com serves millions of users and creates a market for a wide variety of goods and services in an easy, safe and efficient way. The site is among the top 50 in the world in terms of page views and is the leading retail platform in unique visitors in the major countries in which it operates according to metrics provided by comScore Networks.  The Company is listed on NASDAQ (NASDAQ:MELI) following its initial public offering in 2007.

For more information about the Company visit: http://investor.mercadolibre.com.

The MercadoLibre, Inc. logo is available at https://resource.globenewswire.com/Resource/Download/6ab227b7-693f-4b17-b80c-552ae45c76bf?size=0

Forward-Looking Statements

Any statements herein regarding MercadoLibre, Inc. that are not historical or current facts are forward-looking statements. These forward-looking statements convey MercadoLibre, Inc.'s current expectations or forecasts of future events. Forward-looking statements regarding MercadoLibre, Inc. involve known and unknown risks, uncertainties and other factors that may cause MercadoLibre, Inc.'s actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Certain of these risks and uncertainties are described in the "Risk Factors," "Forward-Looking Statements" and "Cautionary Note Regarding Forward-Looking Statements" sections of MercadoLibre, Inc.'s annual report on Form 10-K for the year ended December 31, 2018, and any of MercadoLibre, Inc.'s other applicable filings with the Securities and Exchange Commission. Unless required by law, MercadoLibre, Inc. undertakes no obligation to publicly update or revise any forward-looking statements to reflect circumstances or events after the date hereof.

MercadoLibre, Inc.
Consolidated Balance Sheets
As of December 31, 2018 and 2017
(In thousands of U.S. dollars, except par value)

       
  December 31,   December 31,
  2018   2017
Assets      
Current assets:      
Cash and cash equivalents $  440,332     $  388,260  
Restricted cash and cash equivalents    24,363        —  
Short-term investments (284,317 held in guarantee - see Note 4)    461,541        209,432  
Accounts receivable, net    35,153        28,168  
Credit cards receivable, net    360,298        521,130  
Loans receivable, net    95,778        73,409  
Prepaid expenses    27,477        5,864  
Inventory    4,612        2,549  
Other assets    61,569        58,107  
Total current assets    1,511,123        1,286,919  
Non-current assets:      
Long-term investments    276,136        34,720  
Property and equipment, net    165,614        114,837  
Goodwill    88,883        92,279  
Intangible assets, net    18,581        23,174  
Deferred tax assets    141,438        57,324  
Other assets    37,744        63,934  
Total non-current assets    728,396        386,268  
Total assets $  2,239,519     $  1,673,187  
       
Liabilities and Equity      
Current liabilities:      
Accounts payable and accrued expenses $  266,759     $  221,095  
Funds payable to customers    640,954        583,107  
Salaries and social security payable    60,406        65,053  
Taxes payable    31,058        32,150  
Loans payable and other financial liabilities    132,949        56,325  
Other liabilities    34,098        3,678  
Dividends payable    —        6,624  
Total current liabilities    1,166,224        968,032  
Non-current liabilities:      
Salaries and social security payable    23,161        25,002  
Loans payable and other financial liabilities    602,228        312,089  
Deferred tax liabilities    91,698        23,819  
Other liabilities    19,508        18,466  
Total non-current liabilities    736,595        379,376  
Total liabilities $  1,902,819     $  1,347,408  
       
Equity:      
       
Common stock, $0.001 par value, 110,000,000 shares authorized, 45,202,859 and 44,157,364 shares issued and outstanding at December 31, 2018 and December 31, 2017 $  45     $  44  
Additional paid-in capital    224,800        70,661  
Retained earnings    503,432        537,925  
Accumulated other comprehensive loss    (391,577 )      (282,851 )
Total Equity    336,700        325,779  
Total Liabilities and Equity $  2,239,519     $  1,673,187  
               

MercadoLibre, Inc.
Consolidated Statements of Income
For the years ended December 31, 2018, 2017 and 2016
(In thousands of U.S. dollars, except for share data)

                   
  Year Ended December 31,   Three Months Ended December 31,
    2018       2017       2016       2018       2017  
Net revenues $  1,439,653     $  1,216,542     $  844,396     $  428,019     $  358,064  
Cost of net revenues    (742,645 )      (496,942 )      (307,538 )      (223,235 )      (154,701 )
Gross profit    697,008        719,600        536,858        204,784        203,363  
                   
Operating expenses:                  
Product and technology development    (146,273 )      (127,160 )      (98,479 )      (38,963 )      (34,161 )
Sales and marketing    (482,447 )      (325,375 )      (156,296 )      (140,035 )      (117,433 )
General and administrative    (137,770 )      (122,194 )      (87,310 )      (26,605 )      (30,621 )
Impairment of Long-Lived Assets    —        (2,837 )      (13,717 )      —        —  
Loss on deconsolidation of Venezuelan subsidiaries    —        (85,761 )      —        —        (85,761 )
Total operating expenses    (766,490 )      (663,327 )      (355,802 )      (205,603 )      (267,976 )
(Loss) income from operations    (69,482 )      56,273        181,056        (819 )      (64,613 )
                   
Other income (expenses):                  
Interest income and other financial gains    42,039        45,901        35,442        14,292        8,881  
Interest expense and other financial losses    (56,249 )      (26,469 )      (25,605 )      (16,443 )      (6,783 )
Foreign currency gains (losses)    18,240        (21,635 )      (5,565 )      (3,862 )      (2,157 )
Net (loss) income before income tax gain (expense)    (65,452 )      54,070        185,328        (6,832 )      (64,672 )
                   
Income tax gain (expense)    28,867        (40,290 )      (48,962 )      4,496        (3,048 )
                   
Net (loss) income $  (36,585 )   $  13,780     $  136,366     $  (2,336 )   $  (67,720 )
                                       


  Year Ended December 31,   Three Months Ended December 31,
    2018       2017       2016       2018       2017  
Basic EPS                  
Basic net (loss) income                  
 Available to shareholders per common share $  (0.82 )   $  0.31     $  3.09     $  (0.05 )   $  (1.53 )
Weighted average of outstanding common shares    44,529,614        44,157,364        44,157,251        45,202,859        44,157,364  
Diluted EPS                  
Diluted net (loss) income                  
Available to shareholders per common share $  (0.82 )   $  0.31     $  3.09     $  (0.05 )   $  (1.53 )
Weighted average of outstanding common shares    44,529,614        44,157,364        44,157,251        45,202,859        44,157,364  
                   
Cash Dividends declared (per share)    —       0.600       0.600        —        —  
                                       

MercadoLibre, Inc.
Consolidated Statement of Cash Flows
For the years ended December 31, 2018, 2017 and 2016
(In thousands of U.S. dollars)

           
  Year Ended December 31,
    2018       2017       2016  
   
Cash flows from operations:          
Net (loss) income $  (36,585 )   $  13,780     $  136,366  
Adjustments to reconcile net (loss) income to net cash provided by operating activities:          
Unrealized devaluation loss, net    11,131        28,463        4,967  
Impairment of Long-Lived Assets    —        2,837        13,717  
Loss on deconsolidation of Venezuelan subsidiaries    —        85,761        —  
Depreciation and amortization    45,792        40,921        29,022  
Accrued interest    (17,811 )      (20,192 )      (17,794 )
Non cash interest and convertible bonds amortization of debt discount and amortization of debt issuance costs    11,408        10,855        9,837  
LTRP accrued compensation    27,525        35,719        22,983  
Deferred income taxes    (92,585 )      (24,575 )      (6,188 )
Changes in assets and liabilities:          
Accounts receivable     (27,105 )      (21,817 )      (15,428 )
Credit cards receivable    42,655        (257,563 )      (180,592 )
Prepaid expenses    (23,342 )      8,670        (9,133 )
Inventory    (3,015 )      (1,549 )      (787 )
Other assets    (17,617 )      (54,780 )      (24,425 )
Accounts payable and accrued expenses    90,123        150,215        47,980  
Funds payable to customers    175,398        242,037        164,060  
Other liabilities    28,202        7,680        (45 )
Interest received from investments    16,733        22,548        15,719  
Net cash provided by operating activities    230,907        269,010        190,259  
Cash flows from investing activities:          
Purchase of investments    (3,176,078 )      (4,553,649 )      (3,501,283 )
Proceeds from sale and maturity of investments    2,662,800        4,713,934        3,508,293  
Payment for acquired businesses, net of cash acquired    (4,195 )      (8,568 )      (7,284 )
Reduction of cash due to Venezuela deconsolidation    —        (27,230 )      —  
Purchases of intangible assets    (192 )      (33 )      (431 )
Changes in principal loans receivable, net    (57,232 )      (72,244 )      (6,599 )
Advance for property and equipment    (4,426 )      (19,695 )      (8,412 )
Purchases of property and equipment    (93,136 )      (55,156 )      (68,527 )
Net cash used in investing activities    (672,459 )      (22,641 )      (84,243 )
Cash flows from financing activities:          
Funds received from the issuance of convertible notes    880,000        —        —  
Transaction costs from the issuance of convertible notes    (16,264 )      —        —  
Payments on convertible note    (348,123 )      —        —  
Purchase of convertible note capped calls    (148,943 )      (67,308 )      —  
Unwind of convertible note capped calls    136,108        —        —  
Proceeds from loans payable and other financial liabilities    236,873        47,905        11,435  
Payments on loans payable and other financing    (123,822 )      (5,004 )      (6,684 )
Dividends paid    (6,624 )      (26,496 )      (24,419 )
Payment of finance lease obligations    (323 )      —        —  
Net cash provided by (used in) financing activities    608,882        (50,903 )      (19,668 )
Effect of exchange rate changes on cash, cash equivalents, restricted cash and cash equivalents    (90,895 )      (41,346 )     (19,089 )
Net increase in cash, cash equivalents, restricted cash and cash equivalents    76,435        154,120       67,259  
Cash, cash equivalents, restricted cash and cash equivalents, beginning of the year    388,260        234,140       166,881  
Cash, cash equivalents, restricted cash and cash equivalents, end of the year $ 464,695     $ 388,260     $ 234,140  
                       

Financial results of reporting segments

    Year Ended December 31, 2018
    Brazil   Argentina   Mexico     Other Countries   Total
    (In thousands)
Net revenues   $  866,175     $  376,563     $  109,096       $  87,819     $  1,439,653  
Direct costs     (762,636 )     (254,539 )     (164,637 )       (79,581 )     (1,261,393 )
Direct contribution     103,539       122,024       (55,541 )       8,238       178,260  
                       
Operating expenses and indirect costs of net revenues                       (247,742 )
Loss from operations                       (69,482 )
                       
Other income (expenses):                      
Interest income and other financial gains                       42,039  
Interest expense and other financial losses                       (56,249 )
Foreign currency gains                       18,240  
Net loss before income tax gain                     $  (65,452 )
                           


  Year Ended December 31, 2017 (*)
  Brazil   Argentina   Mexico   Venezuela   Other Countries   Total
  (In thousands)
Net revenues $  690,808     $  359,357     $  51,335     $  54,327     $  60,715     $  1,216,542  
Direct costs   (471,588 )     (215,831 )     (107,408 )     (22,101 )     (53,201 )   $  (870,129 )
Impairment of Long-lived Assets   -       -       -       (2,837 )     -     $  (2,837 )
Loss on deconsolidation of Venezuelan subsidiary   -       -       -       (76,617 )     -     $  (76,617 )
Direct contribution   219,220       143,526       (56,073 )     (47,228 )     7,514       266,959  
                       
Operating expenses and indirect costs of net revenues                       (201,542 )
Loss on Deconsolidation of Venezuelan's Intercompany balances                       (9,144 )
Income from operations                       56,273  
                       
Other income (expenses):                      
Interest income and other financial gains                       45,901  
Interest expense and other financial losses                       (26,469 )
Foreign currency losses                       (21,635 )
Net income before income tax expense                     $  54,070   
                           

(*)Excludes results of operations for Venezuela for the month of December 2017.

  Three Months Ended December 31, 2018
                     
  Brazil   Argentina   Mexico     Other Countries   Total
                     
Net revenues $ 265,353     $ 90,800     $ 45,529       $ 26,337     $ 428,019  
Direct costs   (218,497 )     (68,783 )     (63,550 )       (22,397 )     (373,227 )
Direct contribution   46,856       22,017       (18,021 )       3,940       54,792  
                     
Operating expenses and indirect costs of net revenues                     (55,611 )
Income from operations                     (819 )
                     
Other income (expenses):                    
Interest income and other financial gains                     14,292  
Interest expense and other financial losses                     (16,443 )
Foreign currency losses                     (3,862 )
Net loss before income tax gain                   $ (6,832 )
                     


  Three Months Ended December 31, 2017 (*)
                       
  Brazil   Argentina   Mexico   Venezuela   Other Countries   Total
                       
Net revenues $ 197,300     $ 108,666     $ 17,717     $ 15,999     $ 18,381     $ 358,063  
Direct costs   (157,391 )     (65,215 )     (36,434 )     (5,260 )     (18,269 )     (282,569 )
Loss on deconsolidation of Venezuelan subsidiary   -       -       -       (76,617 )     -       (76,617 )
Direct contribution   39,909       43,451       (18,717 )     (65,878 )     112       (1,123 )
                       
Operating expenses and indirect costs of net revenues                       (54,346 )
Loss on Deconsolidation of Venezuelan's Intercompany balances                       (9,144 )
Income from operations                       (64,613 )
                       
Other income (expenses):                      
Interest income and other financial gains                       8,881  
Interest expense and other financial losses                       (6,783 )
Foreign currency losses                       (2,157 )
Net loss before income tax gain                     $ (64,672 )
                       

(*)Excludes results of operations for Venezuela for the month of December 2017.

Non-GAAP Financial Measures

To supplement our consolidated financial statements presented in accordance with U.S. GAAP, we use foreign exchange ("FX") neutral measures.

This non-GAAP measure should not be considered in isolation or as a substitute for measures of performance prepared in accordance with U.S. GAAP and may be different from non-GAAP measures used by other companies. In addition, this non-GAAP measure is not based on any comprehensive set of accounting rules or principles. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with U.S. GAAP. This non-GAAP financial measure should only be used to evaluate our results of operations in conjunction with the most comparable U.S. GAAP financial measures.

Reconciliation of this non-GAAP financial measure to the most comparable U.S. GAAP financial measures can be found in the tables included in this quarterly report.

The Company believes that reconciliation of FX neutral measures to the most directly comparable GAAP measure provides investors an overall understanding of our current financial performance and its prospects for the future. Specifically, we believe this non-GAAP measure provide useful information to both management and investors by excluding the foreign currency exchange rate impact that may not be indicative of our core operating results and business outlook.

The FX neutral measures were calculated by using the average monthly exchange rates for each month during 2017 and applying them to the corresponding months in 2018, so as to calculate what our results would have been had exchange rates remained stable from one year to the next. The table below excludes intercompany allocation FX effects. Finally, this measure does not include any other macroeconomic effect such as local currency inflation effects, the impact on impairment calculations or any price adjustment to compensate local currency inflation or devaluations.

The following table sets forth the FX neutral measures related to our reported results of the operations for the three-month period ended December 31, 2018:

  Three-months Period Ended
December 31, (*)
  As reported   FX Neutral Measures
(In millions, except percentages)   2018       2017     Percentage Change     2018       2017     Percentage Change
                                       
Net revenues $ 428.0     $ 358.1     19.5 %   $ 579.5     $ 358.1     61.8 %
Cost of net revenues   (223.2 )     (154.7 )   44.3 %     (309.3 )     (154.7 )   100.0 %
Gross profit   204.8       203.4     0.7 %     270.2       203.4     32.8 %
                       
Operating expenses   (205.6 )     (182.2 )   12.8 %     (289.4 )     (182.2 )   58.8 %
Loss on Deconsolidation of Venezuelan Subsidiaries         (85.8 )   -100.0 %           (85.8 )   -100.0 %
Total operating expenses   (205.6 )     (268.0 )   -23.3 %     (289.4 )     (268.0 )   8.0 %
Loss from operations   (0.8 )     (64.6 )   -98.8 %     (19.2 )     (64.6 )   -70.2 %
                       

(*) The table above may not total due to rounding.

CONTACT: MercadoLibre, Inc.
Investor Relations
investor@mercadolibre.com

http://investor.mercadolibre.com

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