2017093010Q

Table of Contents

 







 



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





 

 



 

 



FORM 10-Q



 

 



 

 



(Mark One)



 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

-OR-





 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 001-33647





 

 



 

 

MercadoLibre, Inc.

(Exact name of Registrant as specified in its Charter)





 

 



 

 







 

 



 

 

Delaware

 

98-0212790

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

Arias 3751, 7th Floor

Buenos Aires, C1430CRG, Argentina

(Address of registrant’s principal executive offices)

(+5411) 4640-8000

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)





 

 



 

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes       No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.    Yes       No  

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:





 

 

 

 

 

 



 

 

 

 

 

 



 

 

 

 

 

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

  (Do not check if a smaller reporting company)

 

Smaller reporting company

 



 

 

 

Emerging growth company

 



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes       No  

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

44,157,364 shares of the issuer’s common stock, $0.001 par value, outstanding as of November 1, 2017.







 



 

 


 

Table of Contents

 



MERCADOLIBRE, INC.

INDEX TO FORM 10-Q

 



 

PART I. FINANCIAL INFORMATION

 

Item 1 — Unaudited Interim Condensed Consolidated Financial Statements

 

Interim Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016

Interim Condensed Consolidated Statements of Income for the nine and three-month periods ended September 30, 2017 and 2016

Interim Condensed Consolidated Statements of Comprehensive Income for the nine and three-month periods ended September 30, 2017 and 2016

Interim Condensed Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2017 and 2016

Notes to Interim Condensed Consolidated Financial Statements (unaudited)

Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

24 

Item 3 — Qualitative and Quantitative Disclosures About Market Risk

51 

Item 4 — Controls and Procedures

56 

PART II. OTHER INFORMATION

56 

Item 1 — Legal Proceedings

56 

Item 1A — Risk Factors

56 

Item 6 — Exhibits

56 

INDEX TO EXHIBITS

58 



 

 


 

Table of Contents

 

MercadoLibre, Inc.

Interim Condensed Consolidated Financial Statements

as of September 30, 2017 and December 31, 2016

and for the nine and three-month periods

ended September 30, 2017 and 2016

 



 

 


 

Table of Contents

 



MercadoLibre, Inc.

Interim Condensed Consolidated Balance Sheets

As of September 30, 2017 and December 31, 2016

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

(Unaudited)







 

 

 



September 30,

 

December 31,



2017

 

2016

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$                461,198

 

$                234,140

Short-term investments

175,165 

 

253,321 

Accounts receivable, net

28,564 

 

25,435 

Credit cards receivables, net

406,883 

 

307,904 

Loans receivable, net

51,843 

 

6,283 

Prepaid expenses

8,199 

 

15,060 

Inventory

2,309 

 

1,103 

Other assets

47,995 

 

26,215 

Total current assets

1,182,156 

 

869,461 

Non-current assets:

 

 

 

Long-term investments

45,550 

 

153,803 

Property and equipment, net

136,101 

 

124,261 

Goodwill

95,249 

 

91,797 

Intangible assets, net

24,642 

 

26,277 

Deferred tax assets

66,163 

 

45,017 

Other assets

68,431 

 

56,819 

Total non-current assets

436,136 

 

497,974 

Total assets

$             1,618,292

 

$             1,367,435

Liabilities and Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued expenses

$                181,557

 

$                105,106

Funds payable to customers

519,420 

 

370,693 

Salaries and social security payable

61,168 

 

48,898 

Taxes payable

27,923 

 

27,338 

Loans payable and other financial liabilities

24,701 

 

11,583 

Other liabilities

1,400 

 

6,359 

Dividends payable

6,624 

 

6,624 

Total current liabilities

822,793 

 

576,601 

Non-current liabilities:

 

 

 

Salaries and social security payable

22,124 

 

16,173 

Loans payable and other financial liabilities

309,444 

 

301,940 

Deferred tax liabilities

40,435 

 

34,059 

Other liabilities

17,340 

 

9,808 

Total non-current liabilities

389,343 

 

361,980 

Total liabilities

$             1,212,136

 

$                938,581



 

 

 

Equity:

 

 

 



 

 

 

Common stock, $0.001 par value, 110,000,000 shares authorized,

 

 

 

 44,157,364 shares issued and outstanding at September 30,

 

 

 

2017 and  December 31, 2016

$                          44

 

$                          44

Additional paid-in capital

70,674 

 

137,982 

Retained earnings

612,269 

 

550,641 

Accumulated other comprehensive loss

(276,831)

 

(259,813)

Total Equity

406,156 

 

428,854 

Total Liabilities and Equity

$             1,618,292

 

$             1,367,435















The accompanying notes are an integral part of these interim condensed consolidated financial statements.

 

 

1


 

Table of Contents

 

MercadoLibre, Inc.

Interim Condensed Consolidated Statements of Income

For the nine and three-month periods ended September 30, 2017 and 2016

(In thousands of U.S. dollars, except for share data)

(Unaudited)









 

 

 

 

 

 

 

 

 



 

Nine Months Ended September 30

 

 

Three Months Ended September 30,



 

2017

 

2016

 

 

2017

 

2016

Net revenues

 

$                961,117

 

$                588,121

 

 

$                370,661

 

$                230,847

Cost of net revenues

 

(444,879)

 

(213,993)

 

 

(194,834)

 

(85,199)

Gross profit

 

516,238 

 

374,128 

 

 

175,827 

 

145,648 

Operating expenses:

 

 

 

 

 

 

 

 

 

Product and technology development

 

(93,019)

 

(72,223)

 

 

(32,380)

 

(26,066)

Sales and marketing

 

(207,925)

 

(107,743)

 

 

(84,139)

 

(39,723)

General and administrative

 

(91,575)

 

(64,061)

 

 

(31,766)

 

(26,150)

Impairment of Long-Lived Assets

 

(2,837)

 

(13,717)

 

 

 —

 

 —

Total operating expenses

 

(395,356)

 

(257,744)

 

 

(148,285)

 

(91,939)

Income from operations

 

120,882 

 

116,384 

 

 

27,542 

 

53,709 



 

 

 

 

 

 

 

 

 

Other income (expenses):

 

 

 

 

 

 

 

 

 

Interest income and other financial gains

 

37,020 

 

25,192 

 

 

14,200 

 

9,892 

Interest expense and other financial losses

 

(19,686)

 

(18,807)

 

 

(6,709)

 

(6,492)

Foreign currency (loss) / gain

 

(19,475)

 

(5,062)

 

 

1,622 

 

(4,823)

Net income before income tax expense

 

118,741 

 

117,707 

 

 

36,655 

 

52,286 



 

 

 

 

 

 

 

 

 

Income tax expense

 

(37,241)

 

(32,690)

 

 

(8,989)

 

(13,374)

Net income

 

$                  81,500

 

$                  85,017

 

 

$                  27,666

 

$                  38,912







 

 

 

 

 

 

 

 

 



 

Nine Months Ended September 30

 

Three Months Ended September 30,



 

2017

 

2016

 

 

2017

 

2016

Basic EPS

 

 

 

 

 

 

 

 

 

Basic net income

 

 

 

 

 

 

 

 

 

Available to shareholders per common share

 

$                     1.85

 

$                     1.93

 

 

$                     0.63

 

$                     0.88

Weighted average of outstanding common shares

 

44,157,364 

 

44,157,215 

 

 

44,157,364 

 

44,157,341 

Diluted EPS

 

 

 

 

 

 

 

 

 

Diluted net income

 

 

 

 

 

 

 

 

 

Available to shareholders per common share

 

$                     1.85

 

$                     1.93

 

 

$                     0.63

 

$                     0.88

Weighted average of outstanding common shares

 

44,157,364 

 

44,157,215 

 

 

44,157,364 

 

44,157,341 



 

 

 

 

 

 

 

 

 

Cash Dividends declared (per share)

 

0.450 

 

0.450 

 

 

0.150 

 

0.150 















The accompanying notes are an integral part of these interim condensed consolidated financial statements.

 

 

2


 

Table of Contents

 

MercadoLibre, Inc.

Interim Condensed Consolidated Statements of Comprehensive Income

For the nine and three-month periods ended September 30, 2017 and 2016

(In thousands of U.S. dollars)

(Unaudited)









 

 

 

 

 

 

 



Nine Months Ended September 30

 

Three Months Ended September 30,



2017

 

2016

 

2017

 

2016

Net income

$                  81,500

 

$                  85,017

 

$                  27,666

 

$                  38,912

Other comprehensive (loss) income, net of income tax:

 

 

 

 

 

 

 

Currency translation adjustment

(17,945)

 

(11,056)

 

(5,180)

 

(2,974)

Unrealized net gains (losses) on available for sale investments

340 

 

712 

 

(1,413)

 

1,106 

Less: Reclassification adjustment for losses on available for sale investments

(587)

 

(672)

 

 —

 

 —

Net change in accumulated other comprehensive loss, net of income tax

(17,018)

 

(9,672)

 

(6,593)

 

(1,868)

Total Comprehensive income

$                  64,482

 

$                  75,345

 

$                  21,073

 

$                  37,044







The accompanying notes are an integral part of these interim condensed consolidated financial statements.

 

 

3


 

Table of Contents

 



MercadoLibre, Inc.

Interim Condensed Consolidated Statements of Cash Flow

For the nine-month periods ended September 30, 2017 and 2016

(In thousands of U.S. dollars)

(Unaudited)







 

 

 

 



 

Nine Months Ended September 30



 

2017

 

2016



 

 

Cash flows from operations:

 

 

 

 

Net income

 

$                  81,500

 

$                  85,017

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Unrealized Devaluation Loss, net

 

28,463 

 

5,162 

Impairment of Long-Lived Assets

 

2,837 

 

13,717 

Depreciation and amortization

 

29,953 

 

20,698 

Accrued interest

 

(16,391)

 

(12,643)

Non cash interest and convertible bonds amortization of debt discount and amortization of debt issuance costs

 

9,234 

 

9,122 

LTRP accrued compensation

 

28,734 

 

19,251 

Deferred income taxes

 

(14,769)

 

(5,895)

Changes in assets and liabilities:

 

 

 

 

Accounts receivable 

 

(13,380)

 

(2,409)

Credit Card Receivables

 

(113,514)

 

(92,811)

Prepaid expenses

 

6,800 

 

(272)

Inventory

 

(1,172)

 

(1,048)

Other assets

 

(31,528)

 

(15,865)

Accounts payable and accrued expenses

 

71,794 

 

13,852 

Funds payable to customers

 

151,635 

 

100,322 

Other liabilities

 

3,703 

 

136 

Interest received from investments

 

18,490 

 

11,348 

Net cash provided by operating activities

 

242,389 

 

147,682 

Cash flows from investing activities:

 

 

 

 

Purchase of investments

 

(3,180,633)

 

(2,548,060)

Proceeds from sale and maturity of investments

 

3,371,543 

 

2,525,118 

Payment for acquired businesses, net of cash acquired

 

 —

 

(7,284)

Purchases of intangible assets

 

(84)

 

(49)

Advance for property and equipment

 

(12,777)

 

(6,129)

Changes in principal of loans receivable, net

 

(46,951)

 

 —

Purchases of property and equipment

 

(39,280)

 

(55,510)

Net cash provided by (used in) investing activities

 

91,818 

 

(91,914)

Cash flows from financing activities:

 

 

 

 

Proceeds from loans payable and other financial liabilities

 

13,153 

 

3,892 

Payments on loans payable and other financing liabilities

 

(4,304)

 

(6,492)

Dividends paid

 

(19,871)

 

(17,795)

Purchase of convertible note capped call

 

(67,308)

 

 —

Net cash used in financing activities

 

(78,330)

 

(20,395)

Effect of exchange rate changes on cash and cash equivalents

 

(28,819)

 

(14,259)

Net increase in cash and cash equivalents

 

227,058 

 

21,114 

Cash and cash equivalents, beginning of the period

 

$                234,140

 

$                166,881

Cash and cash equivalents, end of the period

 

$                461,198

 

$                187,995

















The accompanying notes are an integral part of these interim condensed consolidated financial statements.

 



 

 

4


 

Table of Contents

 

MercadoLibre, Inc.

Notes to Interim Condensed Consolidated Financial Statements (unaudited)

 



1. Nature of Business

MercadoLibre, Inc. (“MercadoLibre” or the “Company”) was incorporated in the state of Delaware, in the United States of America in October 1999. MercadoLibre is the leading e-commerce company in Latin America, serving as an integrated regional platform and as an enabler of the necessary online and technology tools to 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. 

Through MercadoPago, MercadoLibre enables individuals and businesses to send and receive online payments; through MercadoEnvios, MercadoLibre facilitates the shipping of goods from sellers to buyers; through our advertising products, MercadoLibre facilitates advertising services to large retailers and brands to promote their product and services on the web; through MercadoShops, MercadoLibre facilitates users to set-up, manage, and promote their own on-line web-stores under a subscription-based business model; and through MercadoCredito, MercadoLibre extends loans to specific merchants and consumers. In addition, MercadoLibre develops and sells software enterprise solutions to e-commerce business clients in Brazil.

As of September 30, 2017, MercadoLibre, through its wholly-owned subsidiaries, operated online ecommerce platforms directed towards Argentina, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Peru, Mexico, Panama, Honduras, Nicaragua, Salvador, Portugal, Uruguay, Bolivia, Guatemala, Paraguay and Venezuela. Additionally, MercadoLibre operates an online payments solution directed towards Argentina, Brazil, Mexico, Venezuela, Colombia, Chile, Peru and Uruguay. It also offers a shipping solution directed towards Argentina, Brazil, Mexico, Colombia and Chile. In addition, the Company operates a real estate classified platform that covers some areas of State of Florida, in the United States of America.

 

2. Summary of significant accounting policies

Basis of presentation

The accompanying unaudited interim condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) and include the accounts of the Company and its wholly-owned subsidiaries. These interim condensed consolidated financial statements are stated in U.S. dollars, except for amounts otherwise indicated. Intercompany transactions and balances with subsidiaries have been eliminated for consolidation purposes.

Substantially all net revenues, cost of net revenues and operating expenses, are generated in the Company’s foreign operations. Operating income of foreign operations amounted to 96.7% and 99.9% of the consolidated amounts during the nine-month periods ended September 30, 2017 and 2016. Long-lived assets, Intangible assets and Goodwill located in the foreign jurisdictions totaled $247,401 thousands and $232,314 thousands as of September 30, 2017 and December 31, 2016, respectively.

These interim condensed consolidated financial statements reflect the Company’s consolidated financial position as of September 30, 2017 and December 31, 2016. These financial statements also show the Company’s consolidated statements of income and comprehensive income for the nine and three-month periods ended September 30, 2017 and 2016; and statement of cash flows for the nine-month periods ended September 30, 2017 and 2016. These interim condensed consolidated financial statements include all normal recurring adjustments that management believes are necessary to fairly state the Company’s financial position, operating results and cash flows.

Because all of the disclosures required by U.S. GAAP for annual consolidated financial statements are not included herein, these unaudited interim condensed financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2016, contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”). The condensed consolidated statements of income, of comprehensive income and of cash flows for the periods presented herein are not necessarily indicative of results expected for any future period. For a more detailed discussion of the Company’s significant accounting policies, see note 2 to the financial statements in the Form 10-K. During the nine-month period ended September 30, 2017, there were no material updates made to the Company’s significant accounting policies.

 

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Table of Contents

 

MercadoLibre, Inc.

Notes to Interim Condensed Consolidated Financial Statements (unaudited)

 

Foreign currency translation

All of the Company’s foreign operations have determined the local currency to be their functional currency, except for Venezuela since January 1, 2010, as described below. Accordingly, these foreign operating subsidiaries translate assets and liabilities from their local currencies into U.S. dollars by using period-end exchange rates while income and expense accounts are translated at the average rates in effect during the period, unless exchange rates fluctuate significantly during the period, in which case the exchange rates at the date of the transaction are used. The resulting translation adjustment is recorded as a component of other comprehensive (loss) income.

Venezuelan currency status

Pursuant to U.S. GAAP, the Company has transitioned its Venezuelan operations to highly inflationary status as from January 1, 2010, which requires that transactions and balances are re-measured as if the U.S. dollar was the functional currency for such operation. The cumulative three year inflation rate as from December 31, 2010 exceeded 100% at each period end. Thus, the Company continues to treat the economy of Venezuela as highly-inflationary.

On March 9, 2016 the Central Bank of Venezuela (“BCV”) issued the Exchange Agreement No.35. The agreement established a “protected” exchange rate (“DIPRO”) for certain transactions, such as but not limited to: imports of goods of the food and health sectors, as well as supplies associated with the production of said sectors; expenses relating to health treatments, sports, culture, scientific research, and other urgent matters defined by the exchange regulations. All foreign currency transactions not expressly provided in Exchange Agreement No.35 will be processed on the alternate foreign currency markets governed by the exchange regulations, at the floating supplementary market exchange rate (“DICOM”).

Additionally, the agreement established that the alternate foreign currency markets referred to in Exchange Agreement No.33 of February 10, 2015 (“SIMADI”) will continue to operate until replaced by others. From March 31, 2016 through June 30, 2016, the SIMADI exchange rate increased from 273 BsF per U.S. dollar to 628 BsF per U.S. dollar, a 130% increase in the exchange rate. As a consequence of the local currency devaluation, the Company recorded a foreign exchange loss of $4.9 million during the second quarter of 2016.

Considering the significant devaluation and the lower U.S. dollar-equivalent cash flows then expected from the Venezuelan business, the Company reviewed its long-lived assets (including non-current other assets), goodwill and intangible assets with indefinite useful life for impairment and concluded that the carrying value of certain real estate investments in Venezuela as of June 30, 2016 would not be fully recoverable. As a result, on June 30, 2016, the Company recorded an impairment of offices and commercial property under construction included within non-current other assets of $13.7 million. The carrying amount of offices and commercial property under construction was adjusted to its estimated fair value of approximately $12.5 million as of June 30, 2016, by using the market approach, and considering prices for similar assets.

On May 19, 2017, the BCV issued the Exchange Agreement No.38, which established a new foreign exchange mechanism under DICOM, replacing SIMADI. The new mechanism consists of auctions, administered by an auction committee, where sellers and buyers from the private sector may offer foreign currency under certain limits determined by the BCV.

In light of the disappearance of SIMADI  (which closed at 728.0 per U.S. dollar), and the Company’s inability to gain access to U.S. dollars under SIMADI, it started requesting U.S. dollars through DICOM. As a result, the Company expects to settle its transactions through DICOM going forward and concluded that the DICOM exchange rate should be used as from June 1, 2017 to measure its bolivar-denominated monetary assets and liabilities and to measure the revenues and expenses of the Venezuelan subsidiaries. Therefore, as of June 30, 2017, monetary assets and liabilities in Bolivares Fuertes (“BsF”) were re-measured to the U.S. dollar using the DICOM closing exchange rate of 2640.0 BsF per U.S. dollar. As a consequence of the local currency devaluation, the Company recorded a foreign exchange loss of $22.0 million during the second quarter of 2017.

Considering the significant devaluation and the lower U.S. dollar-equivalent cash flows then expected from the Venezuelan business, the Company reviewed its long-lived assets (including non-current other assets), goodwill and intangible assets with indefinite useful life for impairment and concluded that the carrying value of certain real estate investments in Venezuela as of June 30, 2017 would not be fully recoverable. As a result, on June 30, 2017, the Company recorded an impairment of offices and commercial property under construction included within non-current other assets of $2.8 million. The carrying amount of offices and commercial property under construction was adjusted to its estimated fair value of approximately $9.7 million as of June 30, 2017, by using the market approach and considering prices for similar assets. As of September 30, 2017, the DICOM exchange rate was 3,345.0 BsF per U.S. dollar.

 

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Table of Contents

 

MercadoLibre, Inc.

Notes to Interim Condensed Consolidated Financial Statements (unaudited)

 

Until 2010 the Company was able to obtain U.S. dollars for any purpose, including dividends distribution, using alternative mechanisms other than through the Commission for the Administration of Foreign Exchange Control (CADIVI). Those U.S. dollars, obtained at a higher exchange rate than the one offered by CADIVI, and held at U.S. bank accounts of its Venezuelan subsidiaries, were used until 2011 for dividend distributions from its Venezuelan subsidiaries. The Company has not distributed dividends from the Venezuelan subsidiaries since 2011.

The following table sets forth the assets, liabilities and net assets of the Company’s Venezuelan subsidiaries, before intercompany eliminations of a net liability of $29,594 thousands and $ 15,843 thousands, as of September 30, 2017 and December 31, 2016 and net revenues for the nine-month periods ended September 30, 2017 and 2016:





 

 

 

 

 

 

 

 



 

 

 

September 30,



 

 

2017

 

2016

 



 

 

(In thousands)

Venezuelan operations

 

 

 

 

 

 



Net Revenues

 

$

38,329 

 

$

26,451 

 



 

 

 

 

 

 

 

 



 

 

September 30,

 

December 31,

 



 

 

2017

 

2016

 



 

 

(In thousands)

 



Assets

 

 

62,648 

 

 

66,165 

 



Liabilities

 

 

(37,269)

 

 

(22,950)

 



Net Assets

 

$

25,379 

 

$

43,215 

 







As of September 30, 2017, the net assets (before intercompany eliminations) of the Venezuelan subsidiaries amounted to 6.2% of consolidated net assets, and cash and investments of the Venezuelan subsidiaries held in local currency in Venezuela amounted to 2.2% of our consolidated cash and investments.

The Company’s ability to obtain U.S. dollars in Venezuela is negatively affected by the exchange regulations in Venezuela that are described above and elsewhere in these interim condensed consolidated financial statements. In addition, its business and ability to obtain U.S. dollars in Venezuela would be negatively affected by additional material devaluations or the imposition of significant additional and more stringent controls on foreign currency exchange by the Venezuelan government.

Despite the current difficult macroeconomic environment in Venezuela, the Company continues to actively manage, through its Venezuelan subsidiaries, its investment in Venezuela.

Income and asset taxes

The Company is subject to U.S. and foreign income taxes. The Company accounts for income taxes following the liability method of accounting which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred tax assets are also recognized for tax loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets or liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded when, based on the available evidence, it is more likely than not that all or a portion of the Company’s deferred tax assets will not be realized. The Company’s income tax expense consists of taxes currently payable, if any, plus the change during the period in the Company’s deferred tax assets and liabilities.

On August 17, 2011, the Argentine government issued a new software development law and on September 9, 2013 the regulatory decree was issued, which established the new requirement to become beneficiary of the new software development law. The decree establishes compliance requirements with annual incremental ratios related to exports of services and research and development expenses that must be achieved to remain within the tax holiday. The Company’s Argentine subsidiary has to achieve certain required ratios annually under the software development law in order to be eligible for the benefits mentioned below.

 

7


 

Table of Contents

 

MercadoLibre, Inc.

Notes to Interim Condensed Consolidated Financial Statements (unaudited)

 

On September 17, 2015, the Argentine Industry Secretary issued Resolution 1041/2015 approving the Company’s application for eligibility under the new software development law for the Company’s Argentinean subsidiary, Mercadolibre S.R.L. Furthermore, on September 18, 2016, the Argentine Industry Secretary issued Resolutions 93/2016 and 97/2016 approving the Company’s application for eligibility under the new software development law for the Company’s Argentinean subsidiaries, Neosur S.RL. and Business Vision S.A. As a result, the Company’s Argentinean subsidiaries have been granted a tax holiday retroactive from September 18, 2014. A portion of the benefits obtained as beneficiaries of the new law is a relief of 60% of total income tax related to software development activities and a 70% relief in payroll taxes related to software development activities.

The benefits to the Company under the software development law will expire on December 31, 2019. As a result of the Company’s eligibility under the new law, it recorded an income tax benefit of $17,672 thousands and $6,367 thousands during the nine and three-month periods ended September 30, 2017, respectively. Aggregate per share effect of the Argentine tax holiday amounted to $0.40 and $0.14 for the nine and three-month periods ended September 30, 2017, respectively. Furthermore, the Company recorded a labor cost benefit of $5,513 thousands and $2,016 thousands during the nine and three-month periods ended September 30, 2017, respectively. Additionally, $1,623 thousands and $587 thousands were accrued to pay software development law audit fees during the nine and three-month periods ended September 30, 2017, respectively. During the nine months period ended September 30, 2016, the Company recorded an income tax benefit of $16,018 thousands, a labor cost benefit of $4,173 thousands and $1,416 thousands were accrued to pay software development law audit fees. Additionally, during the third quarter of 2016, the Company recorded an income tax benefit of $6,823 thousands, a labor cost benefit of $2,167 thousands and $631 thousands were accrued to pay software development law audit fees. Aggregate per share effect of the Argentine tax holiday amounted to $0.46 and $0.20 for the nine  and three-month periods ended September  30, 2016, respectively.

As of September 30, 2017 and December 31, 2016, the Company had included under non-current deferred tax assets the foreign tax credits related to the dividend distributions received from its subsidiaries for a total amount of $11,588 thousands and $13,515 thousands, respectively. Those foreign tax credits will be used to offset the future domestic income tax payable.

Accumulated other comprehensive loss

The following table sets forth the Company’s accumulated other comprehensive loss as of September 30, 2017 and the year ended December 31, 2016:





 

 

 

 



 

September 30,

 

December 31,



 

2017

 

2016



 

(In thousands)

Accumulated other comprehensive loss:

 

 

 

 

Foreign currency translation

 

$                    (277,171)

 

$             (259,226)

Unrealized gains (losses) on investments

 

518 

 

(909)

Estimated tax (loss) gain on unrealized gains (losses) on investments

 

(178)

 

322 



 

$                    (276,831)

 

$             (259,813)



The following tables summarize the changes in accumulated balances of other comprehensive loss for the nine-month period ended September 30, 2017:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

Unrealized

 

Foreign

 

Estimated tax

 

 

 



 

(Losses) Gains on

 

Currency

 

(expense)

 

 

 



 

Investments

 

Translation

 

benefit

 

Total

 



 

(In thousands)

Balances as of December 31, 2016

 

$                          (909)

 

$             (259,226)

 

$                    322

 

$           (259,813)

 

Other comprehensive loss before reclassifications adjustments for gains (losses) on available for sale investments

 

518 

 

(17,945)

 

(178)

 

(17,605)

 

Amount of gain (loss) reclassified from accumulated other comprehensive loss

 

909 

 

 —

 

(322)

 

587 

 

Net current period other comprehensive income gain (loss)

 

1,427 

 

(17,945)

 

(500)

 

(17,018)

 

Ending balance

 

$                            518

 

$             (277,171)

 

$                  (178)

 

$           (276,831)

 







 

8


 

Table of Contents

 

MercadoLibre, Inc.

Notes to Interim Condensed Consolidated Financial Statements (unaudited)

 



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

Amount of (Loss) Gain

 

 

 

 

 

 



 

Reclassified from

 

 

 

 

 

 

Details about Accumulated

 

Accumulated Other

 

 

 

 

 

 

Other Comprehensive Loss

 

Comprehensive

 

Affected Line Item

Components

 

Loss

 

in the Statement of Income



 

(In thousands)

 

 

 

 

 

 

Unrealized losses on investments

 

$                          (909)

 

Interest expense and other financial losses

Estimated tax gain on unrealized losses on investments

 

322 

 

Income tax gain

Total reclassifications for the year

 

$                          (587)

 

Total, net of income taxes



 

Impairment of long-lived assets

The Company reviews its long-lived assets (including non-current other assets) for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

As explained in section “Foreign Currency Translation” of the present Note to these interim condensed consolidated financial statements, Venezuelan currency experienced a steep devaluation in the second quarter of 2017 and 2016.



Considering this change in facts and circumstances and the lower U.S. dollar-equivalent cash flows expected from the Venezuelan business, and long-lived assets expected use, the Company concluded that certain real estate investments held in Caracas, Venezuela, should be impaired. The fair value of long-lived assets was estimated through market approach using level 3 inputs in the fair value hierarchy. These level 3 inputs included, but are not limited to, executed purchase agreements in similar assets and third party valuations. As a consequence, the Company estimated the fair value of the impaired long-lived assets, and recorded impairment losses of $2.8 million and $13.7 million on June 30, 2017 and June 30, 2016, respectively.



Use of estimates

The preparation of interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used for, but not limited to accounting for allowance for doubtful accounts and chargeback provisions, recoverability of goodwill and intangible assets with indefinite useful life, useful life of long-lived assets and intangible assets, impairment of short-term and long-term investments, impairment of long-lived assets, compensation costs relating to the Company’s long term retention plan, fair value of convertible debt note, recognition of income taxes and contingencies. Actual results could differ from those estimates.

Recently issued accounting pronouncements

In 2014, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance related to revenue recognition. This new standard will replace all current GAAP guidance on this topic and eliminate all industry-specific guidance. The new revenue recognition guidance provides a unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. In 2016, the FASB issued several amendments to the standard, including principal versus agent considerations when another party is involved in providing goods or services to a customer and the application of identifying performance obligations. The Company has substantially completed the assessment on the adoption of this standard concluding that it is not expected to have a material measurement impact on the Company´s financial statements. However, the Company continues assessing the potential impacts regarding the presentation of certain incentives recorded as an expense under current guidance.  The adoption of this standard will also require to expand and include certain additional disclosures. The standard is required to be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. The Company continues evaluating the transition method upon adoption. The Company will adopt the new revenue standard in its first quarter of 2018.

 

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Table of Contents

 

MercadoLibre, Inc.

Notes to Interim Condensed Consolidated Financial Statements (unaudited)

 

On February 25, 2016 the FASB issued ASU 2016-02. The amendments in this update create Topic 842, Leases, which supersedes Topic 840, Leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. Previous GAAP did not require lease assets and lease liabilities to be recognized for most leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. Topic 842 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance. The result of retaining a distinction between finance leases and operating leases is that under the lessee accounting model in Topic 842, the effect of leases in the statement of comprehensive income and the statement of cash flows is largely unchanged from previous GAAP. Based on existing leases currently classified as operating leases, the Company expects to recognize on the statements of financial position right-of-use assets and lease liabilities. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is assessing the effects that the adoption of this accounting pronouncement may have on the Company’s financial statements.

On June 16, 2016 the FASB issued ASU 2016-13 “Financial Instruments-Credit Losses (Topic 326): Measurement of credit losses on financial instruments”. This update amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, this update eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP, however this topic will require that credit losses be presented as an allowance rather than as a write-down. The new standard is effective for fiscal years beginning after December 15, 2019. The Company is assessing the effects that the adoption of this accounting pronouncement may have on its financial statements. 

On October 24, 2016 the FASB issued “ASU 2016-16—Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory”. This update eliminates the prohibition on recognizing current and deferred income tax consequences for an intra-entity asset transfer until the asset or assets have been sold to an outside party. Consequently, this update requires recognition of the current and deferred income tax consequences of an intra-entity asset transfer when the transfer occurs. The new standard is effective for fiscal years beginning after December 15, 2017. The adoption of this standard is not expected to have a material impact on the Company´s financial statements. 

On September 29, 2017 the FASB issued “ASU 2017-13—Revenue recognition (Topic 605), Revenue from contracts with customers (Topic 606), Leases (Topic 840), and Leases (Topic 842)”. This update addresses Transition Related to Accounting Standards Updates No. 2014-09, Revenue from Contracts with Customers (Topic 606), and No. 2016-02, Leases (Topic 842). This Update also supersedes SEC paragraphs pursuant the rescission of SEC Staff Announcement, “Accounting for Management Fees Based on a Formula”, effective upon the initial adoption of Topic 606, Revenue from Contracts with Customers, and SEC Staff Announcement, “Lessor Consideration of Third-Party Value Guarantees,” effective upon the initial adoption of Topic 842, Leases. The adoption of this standard is not expected to have a material impact on the Company´s financial statements.  



 

10


 

Table of Contents

 

MercadoLibre, Inc.

Notes to Interim Condensed Consolidated Financial Statements (unaudited)

 



3. Net income per share

Basic earnings per share for the Company’s common stock is computed by dividing, net income available to common shareholders attributable to common stock for the period by the weighted average number of common shares outstanding during the period.

On June 30, 2014, the Company issued 2.25% Convertible Senior Notes due 2019 (see Note 9 of these interim condensed consolidated financial statements for discussion regarding these debt notes). The conversion of these debt notes are included in the calculation for diluted earnings per share utilizing the “if converted” method. The effect of that conversion is not assumed for purposes of computing diluted earnings per share if the effect is antidilutive.

The denominator for diluted net income per share for the nine and three-month periods ended September 30, 2017 and 2016 does not include any effect from the 2014 and 2017 Capped Call Transactions (as defined below) because it would be antidilutive. In the event of conversion of any or all of the Notes, the shares that would be delivered to the Company under the Capped Call Transactions are designed to partially neutralize the dilutive effect of the shares that the Company would issue under the Notes. See Note 9 of these interim condensed consolidated financial statements and Note 17 of the financial statements as of December 31,2016 on Form 10-K for more details.

For the nine and three-month periods ended September 30, 2017 and 2016, the effects on diluted earnings per share were antidilutive and, as a consequence, they were not computed for diluted earnings per share.

Net income per share of common stock is as follows for the nine and three-month periods ended September 30, 2017 and 2016:





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Nine Months Ended September 30,

 

Three Months Ended September 30,



 

2017

 

2016

 

2017

 

2016



 

(In thousands)

 

(In thousands)



 

Basic

Diluted

 

Basic

 

Diluted

 

Basic

 

Diluted

 

Basic

 

Diluted

Net income per common share

 

$      1.85

$         1.85

 

$         1.93

 

$         1.93

 

$         0.63

 

$         0.63

 

$         0.88

 

$        0.88



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$  81,500

$     81,500

 

$     85,017

 

$     85,017

 

$     27,666

 

$     27,666

 

$     38,912

 

$     38,912



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average of common stock outstanding for Basic earnings per share

 

44,157,364 

 

 

44,157,215 

 

 

 

44,157,364 

 

 

 

44,157,341

 

 

Adjusted weighted average of common stock outstanding for Diluted earnings per share

 

 

44,157,364 

 

 

 

44,157,215 

 

 

 

44,157,364 

 

 

 

44,157,341 



 

 

11


 

Table of Contents

 

MercadoLibre, Inc.

Notes to Interim Condensed Consolidated Financial Statements (unaudited)

 

4. Goodwill and intangible assets

Goodwill and intangible assets

The composition of goodwill and intangible assets is as follows:







 

 

 

 



 

September 30,

 

December 31,



 

2017

 

2016



 

(In thousands)

Goodwill

 

$                  95,249

 

$                  91,797

Intangible assets with indefinite lives

 

 

 

 

- Trademarks

 

13,153 

 

12,490 

Amortizable intangible assets

 

 

 

 

- Licenses and others

 

6,565 

 

8,738 

- Non-compete agreement

 

2,491 

 

1,787 

- Customer list

 

15,215 

 

14,580 

- Trademarks

 

1,854 

 

993 

Total intangible assets

 

$                  39,278

 

$                  38,588

Accumulated amortization

 

(14,636)

 

(12,311)

Total intangible assets, net

 

$                  24,642

 

$                  26,277



Goodwill

The changes in the carrying amount of goodwill for the nine-month period ended September 30, 2017 and the year ended December 31, 2016 are as follows:





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Period ended September 30, 2017



 

Brazil

 

Argentina

 

Chile

 

Mexico

 

Venezuela

 

Colombia

 

Other Countries

 

Total



 

(In thousands)

Balance, beginning of the period

 

$          27,660 

 

$               6,587 

 

$             17,388 

 

$                29,342 

 

$                                       5,989 

 

$                            3,643 

 

$                     1,188 

 

$             91,797 

- Effect of exchange rates changes

 

245 

 

(809)

 

783 

 

3,158 

 

 —

 

50 

 

25 

 

3,452 

Balance, end of the period

 

$          27,905 

 

$               5,778 

 

$             18,171 

 

$                32,500 

 

$                                       5,989 

 

$                            3,693 

 

$                     1,213 

 

$             95,249 









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Year ended December 31, 2016



 

Brazil

 

Argentina

 

Chile

 

Mexico

 

Venezuela

 

Colombia

 

Other Countries

 

Total



 

(In thousands)

Balance, beginning of year

 

$             18,526 

 

$               7,430 

 

$             16,438 

 

$             33,834 

 

$                            5,729 

 

$                   3,437 

 

$               1,151 

 

$             86,545 

- Business acquisition

 

5,635 

 

700 

 

 —

 

190 

 

260 

 

57 

 

32 

 

6,874 

- Effect of exchange rates changes

 

3,499 

 

(1,543)

 

950 

 

(4,682)

 

 —

 

149 

 

 

(1,622)

Balance, end of the year

 

$             27,660 

 

$               6,587 

 

$             17,388 

 

$             29,342 

 

$                            5,989 

 

$                   3,643 

 

$               1,188 

 

$             91,797 



Intangible assets with definite useful life

Intangible assets with definite useful life are comprised of customer lists, non-compete and non-solicitation agreements, acquired software licenses, other acquired intangible assets including developed technologies and trademarks. Aggregate amortization expense for intangible assets totaled $1,182 thousands and $1,144 thousands for the three-month periods ended September 30, 2017 and 2016, respectively, while for the nine-month periods ended at such dates amounted to $3,247 thousands and $2,863 thousands, respectively.

 

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Table of Contents

 

MercadoLibre, Inc.

Notes to Interim Condensed Consolidated Financial Statements (unaudited)

 

The following table summarizes the remaining amortization of intangible assets (in thousands of U.S. dollars) with definite useful life as of September 30, 2017:







 

 

 

 

 

 

For year ended 12/31/2017

 

 

 

 

 

$                    1,343

For year ended 12/31/2018

 

 

 

 

 

4,475 

For year ended 12/31/2019

 

 

 

 

 

2,201 

For year ended 12/31/2020

 

 

 

 

 

956 

Thereafter

 

 

 

 

 

2,514 



 

 

 

 

 

$                  11,489





 



5. Segment reporting

Reporting segments are based upon the Company’s internal organizational structure, the manner in which the Company’s operations are managed and resources are assigned, the criteria used by management to evaluate the Company’s performance, the availability of separate financial information, and overall materiality considerations.

Segment reporting is based on geography as the main basis of segment breakdown to reflect the evaluation of the Company’s performance defined by the management. The Company’s segments include Brazil, Argentina, Mexico, Venezuela and other countries (such as Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Panama, Honduras, Nicaragua, Salvador, Bolivia, Guatemala, Paraguay, Peru, Portugal, Uruguay and USA).

Direct contribution consists of net revenues from external customers less direct costs. Direct costs include costs of net revenues, product and technology development expenses, sales and marketing expenses, and general and administrative expenses over which segment managers have direct discretionary control, such as advertising and marketing programs, customer support expenses, allowances for doubtful accounts, payroll and third party fees. All corporate related costs have been excluded from the Company’s direct contribution.

Expenses over which segment managers do not currently have discretionary control, such as certain technology and general and administrative costs are monitored by management through shared cost centers and are not evaluated in the measurement of segment performance.

The following tables summarize the financial performance of the Company’s reporting segments:







 

 

 

 

 

 

 

 

 

 

 

 



 

Nine Months Ended September 30, 2017



 

Brazil

 

Argentina

 

Mexico

 

Venezuela

 

Other Countries

 

Total



 

(In thousands)

Net revenues

 

$           569,320 

 

$              250,692 

 

$               58,324 

 

$                38,329 

 

$               44,452 

 

$             961,117 

Direct costs

 

(390,008)

 

(150,973)

 

(95,683)

 

(16,841)

 

(37,052)

 

(690,557)

Impairment of Long-lived Assets

 

-

 

-

 

-

 

(2,837)

 

-

 

(2,837)

Direct contribution

 

179,312 

 

99,719 

 

(37,359)

 

18,651 

 

7,400 

 

267,723 



 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses and indirect costs of net revenues

 

 

 

 

 

 

 

 

 

 

 

(146,841)

Income from operations

 

 

 

 

 

 

 

 

 

 

 

120,882 



 

 

 

 

 

 

 

 

 

 

 

 

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income and other financial gains

 

 

 

 

 

 

 

 

 

 

 

37,020 

Interest expense and other financial losses

 

 

 

 

 

 

 

 

 

 

 

(19,686)

Foreign currency losses

 

 

 

 

 

 

 

 

 

 

 

(19,475)

Net income before income tax expense

 

 

 

 

 

 

 

 

 

 

 

$             118,741 









 

 

 

 

 

 

 

 

 

 

 

 

 

13


 

Table of Contents

 

MercadoLibre, Inc.

Notes to Interim Condensed Consolidated Financial Statements (unaudited)

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Nine Months Ended September 30, 2016



 

Brazil

 

Argentina

 

Mexico

 

Venezuela

 

Other Countries

 

Total



 

(In thousands)

Net revenues

 

$                    311,427 

 

$                    185,885 

 

$                   34,375 

 

$                   26,451 

 

$                   29,983 

 

$                        588,121 

Direct costs

 

(188,772)

 

(105,217)

 

(29,004)

 

(12,691)

 

(21,281)

 

(356,965)

Impairment of Long-lived Assets

 

-

 

-

 

-

 

(13,717)

 

-

 

(13,717)

Direct contribution

 

122,655 

 

80,668 

 

5,371 

 

43 

 

8,702 

 

217,439 



 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses and indirect costs of net revenues

 

 

 

 

 

 

 

 

 

 

 

(101,055)

Income from operations

 

 

 

 

 

 

 

 

 

 

 

116,384 



 

 

 

 

 

 

 

 

 

 

 

 

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income and other financial gains

 

 

 

 

 

 

 

 

 

 

 

25,192 

Interest expense and other financial losses

 

 

 

 

 

 

 

 

 

 

 

(18,807)

Foreign currency losses

 

 

 

 

 

 

 

 

 

 

 

(5,062)

Net income before income tax expense

 

 

 

 

 

 

 

 

 

 

 

$                        117,707 











 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

Three Months Ended September 30, 2017



 

 

 

 

 

 

 

Brazil

 

Argentina

 

Mexico

 

Venezuela

 

Other Countries

 

Total



 

 

 

 

 

 

 

(In thousands)

Net revenues

 

$            229,475 

 

$           91,308 

 

$               22,604 

 

$                     9,751 

 

$               17,523 

 

$                        370,661 

Direct costs

 

(182,858)

 

(56,210)

 

(36,038)

 

(4,582)

 

(14,409)

 

(294,097)

Direct contribution

 

46,617 

 

35,098 

 

(13,434)

 

5,169 

 

3,114 

 

76,564 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses and indirect costs of net revenues

 

 

 

 

 

 

 

 

 

 

 

(49,022)

Income from operations

 

 

 

 

 

 

 

 

 

 

 

27,542 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 



Interest income and other financial gains

 

 

 

 

 

 

 

 

 

 

 

14,200 



Interest expense and other financial losses

 

 

 

 

 

 

 

 

 

 

 

(6,709)



Foreign currency gains

 

 

 

 

 

 

 

 

 

 

 

1,622 

Net income before income tax expense

 

 

 

 

 

 

 

 

 

 

 

$36,655 











































 

14


 

Table of Contents

 

MercadoLibre, Inc.

Notes to Interim Condensed Consolidated Financial Statements (unaudited)

 







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

Three Months Ended September 30, 2016



 

 

 

 

 

 

 

Brazil

 

Argentina

 

Mexico

 

Venezuela

 

Other Countries

 

Total



 

 

 

 

 

 

 

(In thousands)

Net revenues

 

$131,003 

 

$69,983 

 

$11,807 

 

$6,885 

 

$11,169 

 

$230,847 

Direct costs

 

(77,012)

 

(39,026)

 

(10,353)