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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x

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

For the quarterly period ended June 30, 2019

-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, Argentina, C1430CRG

(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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value per share

MELI

Nasdaq Global Select Market

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   x     No   ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files.    Yes   x     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”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

x

Accelerated filer

¨

Non-accelerated filer

¨  

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   x

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.

49,709,956 shares of the issuer’s common stock, $0.001 par value, outstanding as of August 6, 2019.

 

 


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 June 30, 2019 and December 31, 2018

1

Interim Condensed Consolidated Statements of Income for the six and three-month periods ended June 30, 2019 and 2018

2

Interim Condensed Consolidated Statements of Comprehensive Income for the six and three-month periods ended June 30, 2019 and 2018

3

Interim Condensed Consolidated Statements of Equity for the six and three-month periods ended June 30, 2019 and 2018

4

Interim Condensed Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2019 and 2018

5

Notes to Interim Condensed Consolidated Financial Statements (unaudited)

6

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

30

Item 3 — Qualitative and Quantitative Disclosures About Market Risk

53

Item 4 — Controls and Procedures

56

PART II. OTHER INFORMATION

57

Item 1 — Legal Proceedings

57

Item 1A — Risk Factors

57

Item 6 — Exhibits

57

INDEX TO EXHIBITS

58

 

 


Table of Contents

MercadoLibre, Inc.

Interim Condensed Consolidated Balance Sheets

As of June 30, 2019 and December 31, 2018

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

(Unaudited)

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

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 six and three-month periods ended June 30, 2019 and 2018

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

(Unaudited)

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

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 six and three-month, periods ended June 30, 2019 and 2018

(In thousands of U.S. dollars)

(Unaudited)

Six Months Ended June 30,

Three Months Ended June 30,

2019

2018

2019

2018

Net income (loss)

$                         28,081

$              (24,171)

$                   16,217

$               (11,252)

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

Currency translation adjustment

3,353

(102,530)

3,647

(86,956)

Unrealized gains on hedging activities

912

912

Unrealized net gains on available for sale investments

2,504

65

492

88

Less: Reclassification adjustment for gains from accumulated other comprehensive income

2,729

1,718

922

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

3,128

(103,271)

4,139

(86,878)

Total Comprehensive income (loss)

$                         31,209

$            (127,442)

$                   20,356

$               (98,130)

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 Equity

For the six and three-month periods ended June 30, 2019 and 2018

(In thousands of U.S. dollars)

(Unaudited)

Accumulated

Additional

other

Common stock

paid-in

Retained

comprehensive

Total

Shares

Amount

capital

Earnings

loss

Equity

Balance as of December 31, 2018

45,203

$

45

$

224,800

$

503,432

$

(391,577)

$

336,700

Common Stock issued

4,116

4

1,866,496

1,866,500

Exercise of convertible notes

2

2

Unwind Capped Call

3

3

Net income

11,864

11,864

Amortization of Preferred Stock discount

5,841

(5,841)

Other comprehensive loss

(1,011)

(1,011)

Balance as of March 31, 2019

49,319

$

49

$

2,097,142

$

509,455

$

(392,588)

$

2,214,058

Transaction Costs

715

715

Exercise of convertible notes

2

2

Capped Call

(88,362)

(88,362)

Redeemable convertible preferred stock dividend distribution ($9.99 per share)

(1,000)

(1,000)

Net income

16,217

16,217

Other comprehensive income

4,139

4,139

Balance as of June 30, 2019

49,319

$

49

$

2,009,497

$

524,672

$

(388,449)

$

2,145,769

Accumulated

Additional

other

Common stock

paid-in

Retained

comprehensive

Total

Shares

Amount

capital

Earnings

loss

Equity

Balance as of December 31, 2017

44,157

$

44

$

70,661

$

537,925

$

(282,851)

$

325,779

Capped Call

(45,692)

(45,692)

Changes in accounting Standards

2,092

2,092

Net loss

(12,919)

(12,919)

Other comprehensive loss

(16,393)

(16,393)

Balance as of March 31, 2018

44,157

$

44

$

24,969

$

527,098

$

(299,244)

$

252,867

Net loss