MercadoLibre, Inc.'s Q1 2019 financial results

MercadoLibre, Inc., a leading e-commerce technology company in Latin America, has 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 Mexicocontinued 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, Chileand 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.

^{*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.

^{(*) 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

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

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. 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.

SOURCE MercadoLibre

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