Market Overview

MercadoLibre, Inc. Reports Second Quarter 2019 Financial Results

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Net Revenues of $545.2 million, up 102.1% YoY on an FX neutral basis

$6.5 billion Total Payment Volume, up 90.3% YoY on an FX neutral basis

$3.4 billion Gross Merchandise Volume, up 33.0% YoY on an FX neutral basis

BUENOS AIRES, Argentina, Aug. 08, 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 June 30, 2019.

Pedro Arnt, Chief Financial Officer of MercadoLibre, Inc., commented, "We are pleased and optimistic about how 2019 is playing out for us. We delivered another very strong quarter as we continue to grow and scale our leading e-commerce and FinTech ecosystems across Latin America."

Second Quarter 2019 Business Highlights1

  • Total payment volume through Mercado Pago surpassed $6.5 billion for the first time, reaching $6.52 billion, a year-over-year increase of 47.2% in USD and 90.3% on an FX neutral basis. Total payment transactions increased 112.5% year-over-year, totaling 181.6 million transactions for the quarter.
  • Mercado Pago delivered successful execution in off-platform payments (online and offline) through merchant services, mobile point-of-sale ("MPOS") devices and its mobile wallet business. On a consolidated basis, off-platform total payment volume grew 121.5% year-over-year in USD and 197.5% on an FX neutral basis.
  • For the first time ever, off-platform payments processed almost $3.2 billion in transactions, surpassing 120.0 million payment transactions in a single quarter with 120.1 million payments. Off-platform reached an important milestone in June, as it was the first month in our history that off platform TPV surpassed on platform TPV.
  • Our MPOS business continues to be one of the fastest growing non-marketplace business units, representing 41.9% of total off-platform payment volume during the quarter. On a consolidated basis, MPOS total payment volume grew 172.2% year-over-year on an FX neutral basis.
  • Mobile wallet reached 4.5 million active payers during the quarter, while total payment volume from mobile wallet in Argentina, Brazil and Mexico are all growing by triple digits year-over-year.
  • Our asset management product, Mercado Fondo, is 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. Mercado Fondo has invested over 70% and 50% of customer funds in Mercado Pago in Brazil and Argentina, respectively.
  • Gross merchandise volume ("GMV") increased surpassing again $3 billion mark reaching $3.4 billion, representing an 8.4% and 33.0% increase in USD and on an FX neutral basis, respectively.
  • Items sold reached 88.7 million, growing 3.8% year-over-year versus 38.8% during the same period last year. The decrease in growth rates year-over-year 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, as well as the implementation of the same initiative in Argentina during the second quarter of 2019.
  • Unique buyers numbers continue to accelerate versus the prior quarter, growing 20.8% year-over-year versus 10.8% in the first quarter.
  • Live listings offered on MercadoLibre's marketplace surpassed 200 million for the second time, reaching 224.1 million in the second quarter of 2019, a 50.6% year-over-year increase.
  • Mobile gross merchandise volume grew 23.5% year-over-year on an FX neutral basis reaching 59.6% of GMV.
  • Items shipped through Mercado Envios reached 70.2 million, a 33.0% year-over-year increase, driven primarily by optimizations in our free shipping program.

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

The tables below present our gross billings 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 June 30, 2019 the Company incurred $60.5 million of shipping subsidies that have been netted from revenues.

             
      In Millions (*)
       Q2 2019      Q2 2018
  Brazil $ 385.1   $ 270.5
Gross Argentina $ 121.6   $ 105.9
Billings Mexico $ 70.7   $ 31.3
  Others $ 28.3   $ 24.3
  Total $ 605.7   $ 432.0
             


      In Millions (*)
       Q2 2019      Q2 2018
  Brazil $  (44.3 )   $  (74.7 )
Free Shipping Argentina $  (7.7 )   $  (5.7 )
service cost Mexico $  (6.3 )   $  (13.8 )
  Others $  (2.2 )   $  (2.4 )
  Total $  (60.5 )   $  (96.7 )
                 


      In Millions (*)
       Q2 2019      Q2 2018
  Brazil $ 340.9   $ 195.8
Net Argentina $ 113.9   $ 100.1
Revenues Mexico $ 64.4   $ 17.5
  Others $ 26.1   $ 21.9
  Total $ 545.2   $ 335.4
             

*The table above may not total due to rounding.

Second Quarter 2019 Financial Highlights

  • Net revenues for the second quarter were $545.2 million, a year-over-year increase of 62.6% in USD and 102.1% on an FX neutral basis.
  • Enhanced marketplace revenues increased 84.6% year-over-year in USD and 122.7% on an FX neutral basis, while non-marketplace revenues increased 43.4% year-over-year in USD and 73.0% on an FX neutral basis.
  • Gross profit was $272.4 million with a margin of 50.0%, compared to 47.6% in the second quarter of 2018.
  • Total operating expenses were $284.9 million, an increase of 51.6% year-over-year in USD. As a percentage of revenues, operating expenses were 52.3%, as compared to 56.1% during the second quarter of 2018.
  • Loss from operations was $12.5 million, compared to a loss of $28.2 million during the second quarter of 2018. As a percentage of revenues, the loss from operations reached 2.3%.
  • Interest income was $33.7 million, a 239.7% increase year-over-year, as a result of the proceeds of the 2028 Convertible Notes and equity offering in 2019, which generated more invested volume and interest gain, a higher float in Brazil and a higher interest rates in Argentina.
  • The Company incurred $14.7 million in financial expenses in the second quarter of 2019, mainly attributable to interest expense related to the 2028 Convertible Notes.
  • Foreign exchange gain for the second quarter of 2019 was $0.8 million, primarily as a result of the strengthening of the Brazilian Reais over our U.S. dollar net liability position in Brazil during the second quarter of 2019.
  • Net income before taxes was $7.3 million, up from a loss of $19.0 million during the second quarter 2018.
  • Income tax gain was $8.9 million during the second quarter driven by tax loss carry forward in Mexico partially offset for the income tax in Argentina and Brazil, yielding a negative effective tax rate for the period of 122.1%.
  • Net income was $16.2 million, resulting in basic net income per share of $0.31.
  • Operating cash flow was $27.6 million. Net decrease in cash, cash equivalents, restricted cash and cash equivalents was $177.9 million mostly driven by purchase of investments and a broader credit line offering.

The following table summarizes certain key performance metrics for the six and three months periods ended June 30, 2019 and 2018.

    Six-month Periods Ended
 June 30, (*)
    Three-month Periods Ended
 June 30, (*)
(in millions)   2019 2018     2019 2018
                         
Number of confirmed registered users at end of period      292.5       234.9       292.5       234.9 
Number of confirmed new registered users during period      24.7       23.0       12.4       11.8 
Gross merchandise volume   $  6,485.5    $  6,276.6    $  3,397.7    $  3,135.4 
Number of successful items sold      171.4       165.6       88.7       85.4 
Number of successful items shipped      132.6       105.3       70.2       52.8 
Total payment volume   $  12,156.5    $  8,601.4    $  6,517.4    $  4,426.1 
Total volume of payments on marketplace   $  6,016.1    $  5,603.8    $  3,120.0    $  2,794.3 
Total payment transactions      325.6       159.8       181.6       85.5 
Unique buyers      28.6       25.0       20.4       16.9 
Unique sellers      6.9       6.8       4.3       4.2 
Capital expenditures   $  71.4    $  46.8    $  38.4    $  23.7 
Depreciation and amortization   $  33.0    $  22.6    $  17.3    $  11.5 
                         

(*) 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 Q2'18     Q3'18   Q4'18   Q1'19   Q2'19  
                       
Brazil 25 %   25 % 34 % 64 % 74 %
                       
Argentina 14 %   (8 )% (16 )% (8 )% 14 %
                       
Mexico 62 %   152 % 157 % 220 % 267 %
                       

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

Consolidated Net Revenues   Q2'18     Q3'18   Q4'18   Q1'19   Q2'19  
                         
Brazil   40 %   56 % 58 % 91 % 89 %
                         
Argentina   68 %   68 % 77 % 83 % 115 %
                         
Mexico   71 %   168 % 170 % 227 % 261 %
                         

Conference Call and Webcast

The Company will host a conference call and audio webcast on August 7th, 2019 at 4:30 p.m. Eastern Time. The conference call may be accessed by dialing (877) 303-7209 / (970) 315-0420 (Conference ID –5289808–) 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 Mercado Pago.

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

Total payment volume – Measure of total U.S. dollar sum of all transactions paid for using Mercado Pago, 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 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)

       
  June 30,   December 31,
    2019       2018  
Assets      
Current assets:      
Cash and cash equivalents $  1,118,662     $  440,332  
Restricted cash and cash equivalents    9,660        24,363  
Short-term investments (339,299 and 284,317 held in guarantee)    1,789,354        461,541  
Accounts receivable, net    40,175        35,153  
Credit cards receivable, net    433,046        360,298  
Loans receivable, net    192,881        95,778  
Prepaid expenses    18,618        27,477  
Inventory    5,950        4,612  
Other assets    68,086        61,569  
Total current assets    3,676,432        1,511,123  
Non-current assets:      
Long-term investments    207,047        276,136  
Property and equipment, net    216,005        165,614  
Operating lease right-of-use assets    157,843        —  
Goodwill    90,375        88,883  
Intangible assets, net    16,808        18,581  
Deferred tax assets    184,926        141,438  
Other assets    46,056        37,744  
Total non-current assets    919,060        728,396  
Total assets $  4,595,492     $  2,239,519  
Liabilities      
Current liabilities:      
Accounts payable and accrued expenses $  314,703     $  266,759  
Funds payable to customers    778,128        640,954  
Salaries and social security payable    78,007        60,406  
Taxes payable    45,672        31,058  
Loans payable and other financial liabilities    162,983        132,949  
Operating lease liabilities    13,957        —  
Other liabilities    56,059        34,098  
Total current liabilities    1,449,509        1,166,224  
Non-current liabilities:      
Salaries and social security payable    23,648        23,161  
Loans payable and other financial liabilities    619,670        602,228  
Operating lease liabilities    147,555        —  
Deferred tax liabilities    98,997        91,698  
Other liabilities    11,501        19,508  
Total non-current liabilities    901,371        736,595  
Total liabilities $  2,350,880     $  1,902,819  
       
Commitments and Contingencies (Note 7)      
       
Redeemable convertible preferred stock, $0.001 par value, 40,000,000 shares authorized, 100,000 shares issued and outstanding at June 30, 2019 (Note 10) $  98,843     $  —  
       
Equity      
       
Common stock, $0.001 par value, 110,000,000 shares authorized, 49,318,543 and 45,202,859 shares issued and outstanding at June 30, 2019 and December 31, 2018 $  49     $  45  
Additional paid-in capital    2,009,497        224,800  
Retained earnings    524,672        503,432  
Accumulated other comprehensive loss    (388,449 )      (391,577 )
Total Equity    2,145,769        336,700  
Total Liabilities, Redeemable convertible preferred stock and Equity $  4,595,492     $  2,239,519  
               

MercadoLibre, Inc.
Consolidated Statements of Income
For the six and three month periods ended June 30, 2019 and 2018
(In thousands of U.S. dollars, except for share data)

  Six Months Ended June 30,   Three Months Ended June 30,
    2019       2018       2019       2018  
Net revenues $ 1,019,012     $ 656,353     $ 545,242     $ 335,377  
Cost of net revenues   (509,578 )     (333,847 )     (272,812 )     (175,629 )
Gross profit   509,434       322,506       272,430       159,748  
Operating expenses:              
Product and technology development   (106,292 )     (71,833 )     (53,923 )     (33,437 )
Sales and marketing   (311,368 )     (231,939 )     (180,692 )     (121,216 )
General and administrative   (94,123 )     (76,395 )     (50,303 )     (33,337 )
Total operating expenses   (511,783 )     (380,167 )     (284,918 )     (187,990 )
Loss from operations   (2,349 )     (57,661 )     (12,488 )     (28,242 )
               
Other income (expenses):              
Interest income and other financial gains   58,128       19,110       33,684       9,915  
Interest expense and other financial losses   (30,238 )     (23,936 )     (14,679 )     (13,202 )
Foreign currency (losses) gains   (2,886 )     18,178       783       12,577  
Net income (loss) before income tax gain   22,655       (44,309 )     7,300       (18,952 )
               
Income tax gain   5,426       20,138       8,917       7,700  
Net income (loss) $ 28,081     $ (24,171 )   $ 16,217     $ (11,252 )
                               


  Six Months Ended June 30,   Three Months Ended June 30,
  2019     2018     2019     2018  
Basic EPS              
Basic net income (loss)              
Available to shareholders per common share $ 0.45   $ (0.55 )   $ 0.31   $ (0.25 )
Weighted average of outstanding common shares   47,658,610     44,157,364       49,318,522     44,157,364  
Diluted EPS              
Diluted net income (loss)              
Available to shareholders per common share $ 0.45   $ (0.55 )   $ 0.31   $ (0.25 )
Weighted average of outstanding common shares   47,658,610     44,157,364       49,318,522     44,157,364  
               

MercadoLibre, Inc.
Consolidated Statement of Cash Flows
For the six month periods ended June 30, 2019 and 2018

       
  Six Months Ended June 30,
    2019       2018  
   
Cash flows from operations:      
Net income (loss) $  28,081     $  (24,171 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:      
Unrealized devaluation loss, net    13,366        6,976  
Depreciation and amortization    32,975        22,566  
Accrued interest    (24,753 )      (7,845 )
Non cash interest and convertible notes amortization of debt discount and amortization of debt issuance costs    11,140        9,684  
LTRP accrued compensation    32,208        16,792  
Deferred income taxes    (34,743 )      (54,818 )
Changes in assets and liabilities:      
Accounts receivable     (6,900 )      (21,807 )
Credit card receivables    (61,562 )      97,097  
Prepaid expenses    8,857        (10,143 )
Inventory    (1,191 )      (6,299 )
Other assets    (12,651 )      (24,441 )
Payables and accrued expenses    41,798        42,771  
Funds payable to customers    118,421        32,513  
Other liabilities    3,587        20,213  
Interest received from investments    17,292        8,066  
Net cash provided by operating activities    165,925        107,154  
Cash flows from investing activities:      
Purchase of investments    (2,332,544 )      (1,248,452 )
Proceeds from sale and maturity of investments    1,086,461        1,390,713  
Purchases of intangible assets    (34 )      (242 )
Advance for property and equipment    —        (4,426 )
Changes in principal of loans receivable, net    (97,468 )      (66,629 )
Purchases of property and equipment    (71,361 )      (42,092 )
Net cash (used in) provided by investing activities    (1,414,946 )      28,872  
Cash flows from financing activities:      
Purchase of convertible note capped call    (88,362 )      (45,692 )
Proceeds from loans payable and other financial liabilities    95,603        146,666  
Payments on loans payable and other financing liabilities    (55,236 )      (14,893 )
Payment of finance lease obligations    (889 )      —  
Dividends paid    —        (6,624 )
Dividends paid of preferred stock    (844 )      —  
Proceeds from issuance of convertible redeemable preferred stock, net    98,688        —  
Proceeds from issuance of common stock, net    1,867,215        —  
Net cash provided by financing activities    1,916,175        79,457  
Effect of exchange rate changes on cash, cash equivalents, restricted cash and cash equivalents    (3,527 )      (79,732 )
Net increase in cash, cash equivalents, restricted cash and cash equivalents    663,627        135,751  
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 $  1,128,322     $  524,011  
               

Financial results of reporting segments

    Three Months Ended June 30, 2019
    Brazil   Argentina   Mexico     Other Countries   Total
    (In thousands)
Net revenues   $  340,858      $  113,913      $  64,383        $  26,088      $  545,242   
Direct costs     (275,917 )     (83,909 )     (85,216 )       (24,441 )     (469,483 )
Direct contribution     64,941       30,004       (20,833 )       1,647       75,759  
                       
Operating expenses and indirect costs of net revenues                       (88,247 )
Loss from operations                       (12,488 )
                       
Other income (expenses):                      
Interest income and other financial gains                       33,684  
Interest expense and other financial losses                       (14,679 )
Foreign currency gains                       783  
Net income before income tax gain                     $  7,300   
                       


                       
    Three Months Ended June 30, 2018
    Brazil   Argentina   Mexico     Other Countries   Total
    (In thousands)
Net revenues   $  195,839      $  100,110      $  17,540        $  21,888      $  335,377   
Direct costs     (176,987 )     (68,051 )     (39,534 )       (21,088 )     (305,660 )
Direct contribution     18,852       32,059       (21,994 )       800       29,717  
                       
Operating expenses and indirect costs of net revenues                       (57,959 )
Loss from operations                       (28,242 )
                       
Other income (expenses):                      
Interest income and other financial gains                       9,915  
Interest expense and other financial losses                       (13,202 )
Foreign currency gains                       12,577  
Net loss before income tax gain                     $  (18,952 )
                           

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 June 30, 2019:

    Three-month Periods Ended
June 30, (*)
    As reported   FX Neutral Measures   As reported    
(In millions, except percentages)     2019       2018     Percentage Change     2019       2018     Percentage Change
    (Unaudited)       (Unaudited)    
Net revenues   $  545.2     $  335.4     62.6 %   $  677.9     $  335.4     102.1 %
Cost of net revenues      (272.8 )      (175.6 )   55.3 %      (345.0 )      (175.6 )   96.4 %
Gross profit      272.4        159.7     70.5 %      332.9        159.7     108.4 %
                         
Operating expenses      (284.9 )      (188.0 )   51.6 %      (384.9 )      (188.0 )   104.8 %
Loss from operations      (12.5 )      (28.2 )   -55.8 %      (52.0 )      (28.2 )   84.3 %
                                             

(*) 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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