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MercadoLibre, Inc. Reports First Quarter 2019 Financial Results

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Net Revenues of $473.8 million, up 92.9% on an FX neutral basis

$5.6 billion Total Payment Volume, up 82.5% on an FX neutral basis

$3.1 billion Gross Merchandise Volume, up 26.6% on an FX neutral basis

BUENOS AIRES, Argentina, May 02, 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 March 31, 2019.

Pedro Arnt, Chief Financial Officer of MercadoLibre, Inc., commented, "I am very pleased with the results we delivered this quarter. It is encouraging to enter the new year with continued momentum in our business and to see our strategy delivering on multiple fronts in a sustainable manner. Our Marketplace business showed great resiliency, our Payments business is gaining traction in its online to offline efforts, and our Shipping efforts continue growing the size of our managed network. From a financial perspective, the 1Q'19 was a very strong quarter, as net revenues accelerated to 92.9% YoY growth on an FX neutral basis."

First Quarter 2019 Business Highlights1

  • Total payment volume through MercadoPago surpassed the $5.5 billion mark for the first time, reaching $5.6 billion, a year-over-year increase of 35.1% in USD and 82.5% on an FX neutral basis. Total payment transactions increased 93.7% year-over-year, totaling 143.9 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 the mobile wallet business. On a consolidated basis, off-platform total payment volume grew 118.8% year-over-year in USD and 194.2% on an FX neutral basis.
  • For the first time ever, off-platform payments processed over $2.5 billion in transactions, surpassing 80 million payment transactions in a single quarter with 88.2 million payment transactions.
  • MPOS business is still one of the fastest growing non-marketplace business units, representing 43.9% of total off-platform payment volume for the quarter. On a consolidated basis, MPOS total payment volume grew 260.4% year-over-year on an FX neutral basis.
  • Our mobile wallet again reached four times the number of active payers during the quarter as compared to the same period in 2018, and total payment volume from mobile wallet in Argentina, Brazil and Mexico continued to reflect triple digits growth year-over-year.
  • Our asset management product, Mercado Fondo, is now available in Argentina and Brazil, where we offer our entire suite of FinTech solutions: MPOS devices, QR code in-store payments, mobile wallet and asset management.
  • Gross merchandise volume ("GMV") reaccelerated surpassing the $3 billion mark, reaching $3.1 billion, a 1.7% year-over-year decrease in USD, and a 26.6% year-over-year increase on an FX neutral basis, following a decrease of 10.6% in USD and growth of 17.6% on an FX neutral basis in the fourth quarter of 2018.
  • Items sold reached 82.8 million, growing 3.3% year-over-year, compared to a growth of 50.8% in the first quarter of 2018. The decline in the year-over-year growth rate is attributable to Brazil, where in July of last year we launched the 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 also reaccelerated increasing 10.8% year-over-year versus 7.5% during the fourth quarter of 2018.
  • Live listings offered on MercadoLibre's marketplace surpassed for the first time the 200 million mark reaching 200.6 million in the first quarter of 2019, a 57.9% year-over-year increase.
  • Mobile gross merchandise volume grew 10.9% year-over-year on an FX neutral basis reaching 62.9% of GMV.
  • Items shipped through MercadoEnvios reached 62.9 million, an 18.6% year-over-year increase, driven primarily by the expansion of our free shipping program. The number of items shipped in Argentina, Mexico, Chile and Colombia were highlights of the quarter, growing 110.8%, 74.9%, 29.8% and 44.0%, respectively, year-over-year.

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

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

The Company presents 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 March 31, 2019 the Company incurred $74.0 million of shipping subsidies that have been netted from revenues.

             
      In Millions (*)
       Q1 2019      Q1 2018
  Brazil $ 358.6   $ 276.3
Gross Argentina $ 103.0   $ 106.1
Billings Mexico $ 61.2   $ 29.4
  Others $ 25.0   $ 21.8
  Total $ 547.8   $ 433.5


             
      In Millions (*)
       Q1 2019      Q1 2018
  Brazil $  (56.2 )   $  (92.1 )
Free Shipping Argentina $  (9.2 )   $  (4.1 )
service cost Mexico $  (6.6 )   $  (12.3 )
  Others $  (2.0 )   $  (3.9 )
  Total $  (74.0 )   $  (112.5 )


             
             
      In Millions (*)
       Q1 2019      Q4 2018
  Brazil $ 302.4   $ 184.2
Net Argentina $ 93.8   $ 101.9
Revenues Mexico $ 54.6   $ 17.1
  Others $ 23.0   $ 17.8
  Total $ 473.8   $ 321.0

*The table above may not total due to rounding.

First Quarter 2019 Financial Highlights

  • Net revenues for the first quarter grew to $473.8 million, a year-over-year increase of 47.6% in USD and 92.9% on an FX neutral basis.
  • Enhanced marketplace revenues increased 79.8% year-over-year in USD, and increased 128.4% on an FX neutral basis, while non-marketplace revenues increased 22.4% year-over-year in USD and 65.2% on an FX neutral basis.
  • Gross profit was $237.0 million with a margin of 50.0%, compared to 50.7% in the first quarter of 2018. Most of the gross margin compression is attributable to shipping carrier and operating costs.
  • Total operating expenses were $226.9 million, an increase of 18.1% year-over-year in USD. As a percentage of revenues, operating expenses were 47.9%, as compared to 59.9% during the first quarter of 2018.
  • Income from operations was $10.1 million, as compared to a loss of $0.8 million last quarter and a loss of $29.4 million during the first quarter 2018. As a percentage of revenues, income from operations was 2.1%.
  • Interest income was $24.4 million, a 165.9% increase year-over-year, mainly attributable to a higher float in Argentina and Brazil, as well as the proceeds from the convertible note issued in August 2018.
  • The company incurred $15.6 million in financial expenses in the first quarter of 2019, attributed to interest paid on the 2028 convertible notes.
  • The foreign exchange loss for the first quarter of 2019 was $3.7 million, mainly as a consequence of the U.S. Dollar revaluation over our Argentine Peso net asset position in Argentina.
  • Net income before taxes was $15.4 million, up from a loss of $25.4 million during the first quarter 2018.
  • Income tax loss was $3.5 million, yielding a blended tax rate for the period of 22.7%.
  • Net income was $11.9 million, resulting in basic net income per share of $0.13.
  • Operating cash flow was $138.4 million. Net increase in cash, cash equivalents, restricted cash and cash equivalents was $841.6 million.

The following table summarizes certain key performance metrics for the three months ended March 31, 2019 and 2018.

             
      Three-month Periods Ended
 March 31, (*)
(in millions)     2019 2018
             
Number of confirmed registered users at end of period      280.1       223.1 
Number of confirmed new registered users during period      12.3       11.2 
Gross merchandise volume   $  3,087.8    $  3,126.4 
Number of successful items sold      82.8       80.1 
Number of successful items shipped      62.4       52.5 
Total payment volume   $  5,639.1    $  4,175.3 
Total volume of payments on Marketplace   $  2,896.1    $  2,809.5 
Total payment transactions      143.9       74.3 
Unique buyers      18.8       17.0 
Unique sellers      4.2       5.0 
Capital expenditures   $  33.0    $  23.0 
Depreciation and amortization   $  15.7    $  11.1 

(*) Figures have been expressed using rounding amounts. Growth calculations using this table may not total due to rounding.

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

Consolidated Net Revenues   Q1'18   Q2'18   Q3'18   Q4'18   Q1'19  
                       
Brazil   15%   25%   25%   34%   64 %  
                       
Argentina   43%   14%   (8)%   (16)%   (8)%  
                       
Mexico   51%   62%   152%   157 %   220%  
                       

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

Consolidated Net Revenues   Q1'18   Q2'18   Q3'18   Q4'18   Q1'19  
                       
Brazil   19%   40%   56%   58%   91%  
                       
Argentina   80%   68%   68%   77%   83%  
                       
Mexico   39%   71%   168%   170%   227%  
                       

Conference Call and Webcast

The Company will host a conference call and audio webcast on May 2nd, 2019 at 4:30 p.m. Eastern Time. The conference call may be accessed by dialing (877) 303-7209 / (970) 315-0420 (Conference ID 2466479) 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 2018 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 Mercado Libre

Founded in 1999, Mercado Libre is the largest online commerce ecosystem in Latin America, serving as an integrated regional platform and as a provider of the necessary online and technology- based tools that allow businesses and individuals to trade products and services in the region. The Company enables commerce through its marketplace platform (including online classifieds for motor vehicles, vessels, aircraft, services and real estate), which allows users to buy and sell in most of Latin America.

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
(In thousands of U.S. dollars, except par value)

       
  March 31,   December 31,
    2019       2018  
Assets      
Current assets:      
Cash and cash equivalents $  1,295,886     $  440,332  
Restricted cash and cash equivalents    10,375        24,363  
Short-term investments (238,029 and 284,317 held in guarantee)    1,648,457        461,541  
Accounts receivable, net    34,524        35,153  
Credit cards receivable, net    308,468        360,298  
Loans receivable, net    134,640        95,778  
Prepaid expenses    24,132        27,477  
Inventory    3,003        4,612  
Other assets    60,968        61,569  
Total current assets    3,520,453        1,511,123  
Non-current assets:      
Long-term investments    275,432        276,136  
Property and equipment, net    188,956        165,614  
Operating lease right-of-use assets    153,499        —  
Goodwill    89,827        88,883  
Intangible assets, net    17,683        18,581  
Deferred tax assets    160,846        141,438  
Other assets    41,464        37,744  
Total non-current assets    927,707        728,396  
Total assets $  4,448,160     $  2,239,519  
Liabilities      
Current liabilities:      
Accounts payable and accrued expenses $  246,767     $  266,759  
Funds payable to customers    680,746        640,954  
Salaries and social security payable    76,123        60,406  
Taxes payable    34,414        31,058  
Loans payable and other financial liabilities    141,162        132,949  
Operating lease liabilities    12,585        —  
Other liabilities    56,418        34,098  
Total current liabilities    1,248,215        1,166,224  
Non-current liabilities:      
Salaries and social security payable    31,827        23,161  
Loans payable and other financial liabilities    602,061        602,228  
Operating lease liabilities    143,047        —  
Deferred tax liabilities    97,006        91,698  
Other liabilities    13,258        19,508  
Total non-current liabilities    887,199        736,595  
Total liabilities $  2,135,414     $  1,902,819  
       
Redeemable convertible preferred stock, $0.001 par value, 40,000,000 shares      
authorized, 100,000 shares issued and outstanding at March 31, 2019 (Note 10) $  98,688     $  —  
       
Equity      
       
Common stock, $0.001 par value, 110,000,000 shares authorized,      
49,318,498 and 45,202,859 shares issued and outstanding at March 31,      
2019 and December 31, 2018 $  49     $  45  
Additional paid-in capital    2,097,142        224,800  
Retained earnings    509,455        503,432  
Accumulated other comprehensive loss    (392,588 )      (391,577 )
Total Equity    2,214,058        336,700  
Total Liabilities, Redeemable convertible preferred stock and Equity $  4,448,160     $  2,239,519  

MercadoLibre, Inc.
Consolidated Statements of Income
For the three months ended March 31, 2019 and 2018
(In thousands of U.S. dollars, except for share data)

         
    Three Months Ended March 31,
      2019       2018  
Net revenues   $  473,770     $  320,976  
Cost of net revenues      (236,766 )      (158,218 )
Gross profit      237,004        162,758  
Operating expenses:        
Product and technology development      (52,369 )      (38,396 )
Sales and marketing      (130,676 )      (110,723 )
General and administrative      (43,820 )      (43,058 )
Total operating expenses      (226,865 )      (192,177 )
Income (loss) from operations      10,139        (29,419 )
         
Other income (expenses):        
Interest income and other financial gains      24,444        9,195  
Interest expense and other financial losses      (15,559 )      (10,734 )
Foreign currency (losses) gains      (3,669 )      5,601  
Net income (loss) before income tax (expense) gain      15,355        (25,357 )
         
Income tax (expense) gain      (3,491 )      12,438  
Net income (loss)   $  11,864     $  (12,919 )


         
    Three Months Ended March 31,
      2019     2018  
Basic EPS        
 Basic net income (loss)        
 Available to shareholders per common share   $  0.13   $  (0.29 )
Weighted average of outstanding common shares      45,980,255      44,157,364  
Diluted EPS        
Diluted net income (loss)        
Available to shareholders per common share   $  0.13   $  (0.29 )
Weighted average of outstanding common shares      45,980,255      44,157,364  
         

MercadoLibre, Inc.
Consolidated Statement of Cash Flows
For the three months ended March 31, 2019 and 2018

         
    Three Months Ended March 31,
      2019       2018  
     
Cash flows from operations:        
Net income (loss)   $  11,864     $  (12,919 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:        
Unrealized devaluation loss, net      1,886        —  
Depreciation and amortization      15,694        11,084  
Accrued interest      (8,699 )      (4,447 )
Non cash interest and convertible notes amortization of debt discount and amortization of debt issuance costs      3,018        7,063  
LTRP accrued compensation      13,441        15,737  
Deferred income taxes      (14,456 )      (30,601 )
Changes in assets and liabilities:        
Accounts receivable       337        (9,347 )
Credit card receivables      35,893        (33,870 )
Prepaid expenses      3,316        (16,164 )
Inventory      1,652        (872 )
Other assets      (5,085 )      (13,009 )
Accounts payable and accrued expenses      (491 )      22,773  
Funds payable to customers      63,730        20,613  
Other liabilities      12,735        3,041  
Interest received from investments      3,536        3,912  
Net cash provided by (used in) operating activities      138,371        (37,006 )
Cash flows from investing activities:        
Purchase of investments      (1,624,226 )      (632,734 )
Proceeds from sale and maturity of investments      439,712        683,909  
Purchases of intangible assets      (34 )      (97 )
Advance for property and equipment      —        (3,390 )
Changes in principal of loans receivable, net      (42,609 )      (52,243 )
Purchases of property and equipment      (32,928 )      (19,542 )
Net cash used in investing activities      (1,260,085 )      (24,097 )
Cash flows from financing activities:        
Purchase of convertible note capped call      —        (45,692 )
Proceeds from loans payable and other financial liabilities      33,977        80,925  
Payments on loans payable and other financing liabilities      (23,816 )      (4,583 )
Payment of finance lease obligations      (662 )      —  
Dividends paid      —        (6,624 )
Proceeds from issuance of convertible redeemable preferred stock, net      98,688        —  
Proceeds from issuance of common stock, net      1,866,500        —  
Net cash provided by financing activities      1,974,687        24,026  
Effect of exchange rate changes on cash, cash equivalents, restricted cash and cash equivalents      (11,407 )      (772 )
Net increase (decrease) in cash, cash equivalents, restricted cash and cash equivalents      841,566        (37,849 )
Cash, cash equivalents, restricted cash and cash equivalents, beginning of the period   $  464,695     $  388,260  
Cash, cash equivalents, restricted cash and cash equivalents, end of the period   $  1,306,261     $  350,411  

Financial results of reporting segments

                       
    Three Months Ended March 31, 2019
    Brazil   Argentina   Mexico     Other Countries   Total
                      (In thousands)                    
Net revenues   $  302,384     $  93,776     $  54,561       $  23,049     $  473,770  
Direct costs     (225,343 )     (67,492 )     (65,585 )       (20,447 )     (378,867 )
Direct contribution     77,041       26,284       (11,024 )       2,602       94,903  
                       
Operating expenses and indirect costs of net revenues                       (84,764 )
Income from operations                       10,139  
                       
Other income (expenses):                      
Interest income and other financial gains                       24,444  
Interest expense and other financial losses                       (15,559 )
Foreign currency losses                       (3,669 )
Net income before income tax expense                     $  15,355  


    Three Months Ended March 31, 2018
    Brazil   Argentina   Mexico     Other Countries   Total
                      (In thousands)                    
Net revenues   $  184,155     $  101,939     $  17,065       $  17,817     $  320,976  
Direct costs     (176,980 )     (57,295 )     (26,323 )       (17,272 )     (277,870 )
Direct contribution     7,175       44,644       (9,258 )       545       43,106  
                       
Operating expenses and indirect costs of net revenues                       (72,525 )
Loss from operations                       (29,419 )
                       
Other income (expenses):                      
Interest income and other financial gains                       9,195  
Interest expense and other financial losses                       (10,734 )
Foreign currency gains                       5,601  
Net loss before income tax gains                     $  (25,357 )

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 2018 and applying them to the corresponding months in 2019, 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 March 31, 2019:

                         
    Three-month Periods Ended
March 31, (*)
    As reported   FX Neutral Measures   As reported    
(In millions, except percentages)     2019       2018     Percentage Change     2019       2018     Percentage Change
    (Unaudited)       (Unaudited)    
Net revenues   $  473.8     $  321.0     47.6 %   $  619.2     $  321.0     92.9 %
Cost of net revenues      (236.8 )      (158.2 )   49.6 %      (317.1 )      (158.2 )   100.4 %
Gross profit      237.0        162.8     45.6 %      302.2        162.8     85.7 %
                         
Operating expenses      (226.9 )      (192.2 )   18.1 %      (332.9 )      (192.2 )   73.3 %
Income (Loss) from operations      10.1        (29.4 )   -134.5 %      (30.8 )      (29.4 )   4.6 %

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

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