Mercadolibre, Inc.
Aug 3, 2017

MercadoLibre, Inc. Reports Second Quarter Financial Results

61.5 million Sold Items, up 41.0%, 52.1 million Total Payment Transactions, up 63.3%

Net Revenues of $316.5 million, growing 58.5% in USD, 64.7% on an FX neutral basis

Net Income of $5.3million, resulting in EPS of $0.12

BUENOS AIRES, Argentina, Aug. 03, 2017 (GLOBE NEWSWIRE) -- MercadoLibre, Inc. (Nasdaq:MELI) (http://www.mercadolibre.com), Latin America's leading e-commerce technology company, today reported financial results for the second quarter ended June 30, 2017.

Pedro Arnt, Chief Financial Officer of MercadoLibre, Inc., commented, "This first half has marked the initial stages of the deployment of our free shipping and loyalty programs, meaningfully improving and deepening the already powerful value proposition that we offer our buyers. We believe that our sustained focus on consumer centered efforts such as these will foster the ongoing switch from offline buying to online buying. This in turn should serve as a catalyst for Mercado Libre´s sustained growth, as we gain scale advantages and benefit from a leadership position within an accelerating e-commerce market."

Second Quarter 2017 Business Highlights

Second Quarter 2017 Financial Highlights

(*) See note on "Non-GAAP Financial Measures"

Second Quarter 2017 Corporate Highlights

The following table summarizes certain key performance metrics for the three months ended June 30, 2017 and 2016.

 

   Three months ended June 30, (in MM) 
   2016  2017  %YoY 
  %YoY Local
Currency
 
Total confirmed registered users at the end of period              158.6  191.2 20.6%  
New confirmed registered users during the period  7.0  9.0 27.3%  
Gross merchandise volume $2,004.7 $2,722.4 35.8% 55.6%
Number of successful items sold  43.7  61.5 41.0%  
Number of successful items shipped  20.3  33.4 64.7%  
Total payment volume $1,816.9 $3,152.0 73.5% 76.1%
Total volume of payments on marketplace $1,335.4 $2,201.6 64.9%  
Tota payments transactions $31.9 $52.1 63.3%  
Unique Buyers  11.9  14.6 23.4%  
Unique Sellers            3.7  4.2 14.2%  

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

Table of Year-on-Year Local Currency Revenue Growth Rates by Quarter

   YoY Growth rates 
Consolidated Net Revenues                                                 
   Q2'16 
  Q3'16 
  Q4'16 
  Q1'17 
  Q2'17 
Brazil 61% 62% 64% 66% 60%
Argentina 89%   68%   60%   58%   44%
Mexico           35% 36% 29% 55% 80%
Venezuela 185% 152% 199% 291% 353%
Others 30% 33% 42% 36% 34%
Total 73% 66% 68% 79% 65%

Table of Year-on-Year USD Revenue Growth Rates by Quarter

   YoY Growth rates 
Consolidated Net Revenues                                                 
   Q2'16 
  Q3'16 
  Q4'16 
  Q1'17 
  Q2'17 
Brazil 41% 76% 92% 106% 75%
Argentina 19% 4% 4% 48% 30%
Mexico 15%   19%   8%   40% 76%
Venezuela               31% -22% -10% 19%   90%
Others 14% 33% 46% 47% 39%
Total 29% 37% 42% 74% 59%

Conference Call and Webcast

The Company will host a conference call and audio webcast on August 3rd, 2017 at 4:30 p.m. Eastern Time. The conference call may be accessed by dialing +(970) 315-0420 or +(877) 303-7209 (Conference ID 58231198) and requesting inclusion in the call for Mercado Libre. 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
Blended tax rate — Defined as income and asset tax expense as a percentage of income before income and assets tax.

Free Cash Flow — Defined as cash flows from operating activities less payment and advances for the acquisition of property, equipment, intangible assets net of financial liabilities and payment for acquired business net of cash acquired.

Foreign Exchange ("FX") Neutral — Calculated by using the average monthly exchange rate of each month of 2016 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 Mercado Libre Marketplace, excluding motor vehicles, vessels, aircraft, real estate, and services.

Total payment transactions — Measure of the number of all transactions completed 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.

Items sold — Measure of the number of items sold/purchased through the Mercado Libre Marketplace.

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 Mercado Libre platform (including Mercado Pago) and confirmed their registration. Since July'12, registration and confirmation take place in the same step of the registration flow.

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 Mercado Libre platform (including Mercado Pago) and confirmed their registration. Since July '12, registration and confirmation take place in the same step of the registration flow.

Unique Buyers — New or existing buyers with at least one purchase made in the period.

Unique Sellers — New or existing sellers with at least one sale made in the period.

About Mercado Libre

Founded in 1999, Mercado Libre is Latin America's leading e-commerce technology company. Through its primary platforms, Mercado Libre.com and Mercado Pago.com, it provides solutions to individuals and companies buying, selling, advertising, and paying for goods and services online.

Mercado Libre.com serves millions of users and creates a market for a wide variety of goods and services in an easy, safe and efficient way. The site is among the top 50 in the world in terms of page views and is the leading retail platform in unique visitors in the major countries in which it operates according to metrics provided by comScore Networks.  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 Mercado Libre, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4193 


Consolidated balance sheets
(In thousands of U.S. dollars, except par value)
 
   June 30, December 31,
    2017   2016 
Assets     
Current assets:     
Cash and cash equivalents  $ 382,791  $ 234,140 
Short-term investments    206,165    253,321 
Accounts receivable, net    24,733    25,435 
Credit cards receivables, net    265,212    307,904 
Loans receivable, net    25,290    6,283 
Prepaid expenses    9,570    15,060 
Inventory    1,034    1,103 
Other assets    43,390    26,215 
Total current assets    958,185    869,461 
Non-current assets:     
Long-term investments    186,322    153,803 
Property and equipment, net    130,594    124,261 
Goodwill    94,118    91,797 
Intangible assets, net    25,359    26,277 
Deferred tax assets    58,065    45,017 
Other assets    58,795    56,819 
Total non-current assets    553,253    497,974 
Total assets  $ 1,511,438  $ 1,367,435 
Liabilities and Equity     
Current liabilities:     
Accounts payable and accrued expenses  $ 154,423  $ 105,106 
Funds payable to customers    425,609    370,693 
Salaries and social security payable    47,512    48,898 
Taxes payable    22,084    27,338 
Loans payable and other financial liabilities    18,240    11,583 
Other liabilities    1,545    6,359 
Dividends payable    6,624    6,624 
Total current liabilities    676,037    576,601 
Non-current liabilities:     
Salaries and social security payable    19,179    16,173 
Loans payable and other financial liabilities    306,706    301,940 
Deferred tax liabilities    37,696    34,059 
Other liabilities    12,805    9,808 
Total non-current liabilities    376,386    361,980 
Total liabilities  $ 1,052,423  $ 938,581 
      
Equity:     
      
Common stock, $0.001 par value, 110,000,000 shares authorized,     
  44,157,364 shares issued and outstanding at June 30,     
2017 and  December 31, 2016, respectively  $ 44  $ 44 
Additional paid-in capital    137,982    137,982 
Retained earnings    591,227    550,641 
Accumulated other comprehensive loss    (270,238)   (259,813)
Total Equity    459,015    428,854 
Total Liabilities and Equity              $ 1,511,438  $ 1,367,435 


Consolidated statements of cash flows    
(In thousands of U.S. dollars, except par value)    
     
  Six Months Ended June 30
   2017   2016 
   
Cash flows from operations:    
Net income $ 53,834  $ 46,105 
Adjustments to reconcile net income to net cash provided by operating activities:      
Unrealized Devaluation Loss, net   25,502    5,162 
Impairment of Long-Lived Assets   2,837    13,717 
Depreciation and amortization   19,083    13,178 
Accrued interest   (10,930)   (7,918)
Non cash interest and convertible bonds amortization of debt discount and
   amortization of debt issuance costs
   4,798    4,705 
LTRP accrued compensation   22,068    10,126 
Deferred income taxes   (10,451)   (1,981)
Changes in assets and liabilities:    
Accounts receivable    (5,165)   (2,833)
Credit Card Receivables   34,161    (78,334)
Prepaid expenses   5,462    9 
Inventory   102    (637)
Other assets   (22,074)   (7,704)
Accounts payable and accrued expenses   33,633    (15,133)
Funds payable to customers   63,164    59,309 
Other liabilities   (498)   (566)
Interest received from investments   10,788    7,650 
Net cash provided by operating activities   226,314    44,855 
Cash flows from investing activities:    
Purchase of investments   (2,186,528)   (1,559,095)
Proceeds from sale and maturity of investments   2,200,172    1,565,336 
Payment for acquired businesses, net of cash acquired   —    (7,284)
Purchases of intangible assets   (74)   (49)
Advance for property and equipment   (8,351)   (4,963)
Changes in principal of loans receivable, net   (20,143)   — 
Purchases of property and equipment   (26,147)   (32,590)
Net cash used in investing activities   (41,071)   (38,645)
Cash flows from financing activities:    
Proceeds from loans payable and other financial liabilities   7,800    — 
Payments on loans payable and other financing liabilities   (2,969)   (6,299)
Dividends paid   (13,247)   (11,172)
Net cash used in financing activities   (8,416)   (17,471)
Effect of exchange rate changes on cash and cash equivalents   (28,176)   (11,604)
Net increase (decrease) in cash and cash equivalents   148,651    (22,865)
Cash and cash equivalents, beginning of the period $234,140  $ 166,881 
Cash and cash equivalents, end of the period       $382,791  $ 144,016 


Consolidated statements of income
(In thousands of U.S. dollars, except for share data)
 
   Six Months Ended June 30   Three Months Ended June 30, 
  2017 2016  2017   2016 
Net revenues $590,455  $357,274  $316,529  $199,644 
Cost of net revenues  (250,045)  (128,794)    (144,975)  (73,346)
Gross profit  340,410   228,480   171,554   126,298 
Operating expenses:        
Product and technology development          (60,639)  (46,157)  (30,338)  (24,216)
Sales and marketing  (123,786)  (68,020)  (76,856)  (35,337)
General and administrative  (59,808)  (37,910)  (31,498)  (20,841)
Impairment of Long-Lived Assets  (2,837)  (13,717)  (2,837)  (13,717)
Total operating expenses  (247,070)  (165,804)  (141,529)  (94,111)
Income from operations    93,340   62,676   30,025   32,187 
         
Other income (expenses):        
Interest income and other financial gains  22,820   15,300   10,663   8,049 
Interest expense and other financial losses    (12,977)  (12,315)  (6,506)  (6,631)
Foreign currency losses  (21,097)  (240)  (21,760)  (5,387)
Net income before income tax expense  82,086   65,421   12,422   28,218 
         
Income tax expense  (28,252)  (19,316)  (7,106)  (12,360)
Net income $53,834  $46,105  $5,316  $15,858 


  Six Months Ended June 30   Three Months Ended June 30,
 2017
 2016   2017 2016
Basic EPS       
Basic net income       
Available to shareholders per common share$1.22 $1.04 $0.12 $0.36
Weighted average of outstanding common shares  44,157,364  44,157,151  44,157,364  44,157,341
Diluted EPS       
Diluted net income       
Available to shareholders per common share$1.22 $1.04 $0.12 $0.36
Weighted average of outstanding common shares 44,157,364  44,157,151  44,157,364  44,157,341
        
Cash Dividends declared (per share) 0.150  0.150  0.150  0.150


Financial results of reporting segments
 
 Three Months Ended June 30, 2017
  Brazil  Argentina Mexico Venezuela Other Countries Total
 (In thousands)
Net revenues$180,n  $87,992  $20,185  $14,181  $14,107  $316,529 
Direct costs(120,112)  (49,697)  (42,802)  (5,708)  (12,908)  (231,227)
Impairment of Long-lived Assets-   -   -   (2,837)  -   (2,837)
Direct contribution59,952   38,295   (22,617)  5,636   1,199   82,465 
               
Operating expenses and indirect costs of net revenues           (52,440)
Income from operations             30,025 
               
Other income (expenses):              
Interest income and other financial gains             10,663 
Interest expense and other financial losses                       (6,506)
Foreign currency losses             (21,760)
Net income before income tax expense        $    12,422 


                  
       Three Months Ended June 30, 2016
       Brazil Argentina Mexico Venezuela Other Countries Total
       (In thousands)
Net revenues $102,889  $67,701  $11,452  $7,461  $10,141  $199,644 
Direct costs  (61,462)  (38,446)  (9,200)  (4,094)  (7,138)  (120,340)
Impairment of Long-lived Assets  -   -   -   (13,717)  -   (13,717)
Direct contribution  41,427   29,255   2,252   (10,350)  3,003   65,587 
                  
Operating expenses and indirect costs of net revenues           (33,400)
Income from operations            32,187 
                  
Other income (expenses):            
Interest income and other financial gains            8,049 
Interest expense and other financial losses            (6,631)
Foreign currency losses            (5,387)
Net income before income tax expense           $28,218 

Non-GAAP Financial Measures

To supplement our consolidated financial statements presented in accordance with U.S. GAAP, we use free cash flows and foreign exchange ("FX") neutral measures as non-GAAP measures.

These non-GAAP measures 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, these non-GAAP measures are 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. These non-GAAP financial measures should only be used to evaluate our results of operations in conjunction with the most comparable U.S. GAAP financial measures.

Reconciliation of these non-GAAP financial measures to the most comparable U.S. GAAP financial measures can be found in the tables included in this quarterly report.

Non-GAAP financial measures are provided to enhance investors' overall understanding of our current financial performance. Specifically, we believe that free cash flow provides useful information to both management and investors by excluding payments for the acquisition of property and equipment net of financial liabilities, of intangible assets and of acquired businesses net of cash acquired, that may not be indicative of our core operating results. In addition, we report free cash flows to investors because we believe that the inclusion of this measure provides consistency in our financial reporting.

Free cash flow represents cash from operating activities less payment and advances for the acquisition of property and equipment, intangible assets and acquired businesses net of cash acquired. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by our operations after the purchases of property and equipment, of intangible assets and of acquired businesses net of cash acquired. A limitation of the utility of free cash flow as a measure of financial performance is that it does not represent the total increase or decrease in our cash balance for the period.

The following table shows a reconciliation of Operating Cash Flows to Free Cash Flows:

           
   Six-month Periods Ended Three-month Periods Ended
    June 30, June 30,
(In millions)    2017   2016   2017   2016 
           
Net Cash provided by Operating Activities   $ 226.3  $ 44.9  $ 121.6  $ 56.7 
Payment for acquired business, net of cash acquired     -    (7.3)   -    (5.5)
Advance for property and equipment     (8.4)   (5.0)   (5.8)   (4.1)
Purchase of intangible assets     (0.1)   (0.0)   (0.1)   (0.0)
Purchase of property and equipment     (26.1)   (32.6)   (15.9)   (18.0)
Free cash flow     191.7    (0.0)   99.8    29.1 

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

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 these non-GAAP measures 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 2016 and applying them to the corresponding months in 2017, 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, these measures do 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 periods ended June 30, 2017:

  Three-months Periods Ended
June 30, (*)
  As reported FX Neutral Measures
(In millions, except percentages)  2017   2016  Percentage
Change
  2017   2016  Percentage
Change
  (Unaudited)   (Unaudited)  
Net revenues $ 316.5  $ 199.6  58.5% $ 328.8  $ 199.6  64.7%
Cost of net revenues   (145.0)   (73.3) 97.7%   (145.2)   (73.3) 98.0%
Gross profit   171.6    126.3  35.8%   183.6    126.3  45.3%
             
Operating expenses   (138.7)   (80.4) 72.5%   (144.4)   (80.4) 79.6%
Impairment of Long-Lived Assets   (2.8)   (13.7) -79.3%   (2.8)   (13.7) -79.3%
Total operating expenses   (141.5)   (94.1) 50.4%   (147.2)   (94.1) 56.4%
Income from operations   30.0    32.2  -6.7%   36.4    32.2  13.1%

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

Moreover, the Company presents adjusted net income before income tax, adjusted income tax, adjusted net income, adjusted blended tax rate and adjusted earnings per share (the "Venezuela adjusted measures") because it believes they provide useful information to both management and investors by excluding the foreign exchange loss attributable to the devaluation in Venezuela and the corresponding impairment of long-lived assets. The company believes that investors may use these non-GAAP Venezuela adjusted measures to analyze the financial performance without the impact of factors that may not be indicative of the ordinary course of our business. The Company reports Venezuela adjusted measures to investors because they provide consistency in the Company's financial reporting and because they provide useful information to management and investors about what our corresponding GAAP measures would have been if the foreign exchange loss in Venezuela and the corresponding impairment of long-lived assets had not occurred. A limitation of the utility of Venezuela adjusted measures as measures of financial performance is that these measures do not represent the total foreign exchange effect in our Income Statement for the six and three-month periods ended June 30, 2017 and 2016:

 Six-months periods ended (*) Three-months periods ended (*)
 June 30, 2017
 June 30, 2016 June 30, 2017 June 30, 2016
Net income before income tax expense$ 82.1  $ 65.4  $ 12.4  $ 28.2  
Devaluation loss in Venezuela  22.9    7.2    22.0    4.9  
Impairment of long-lived assets in Venezuela  2.8    13.7    2.8    13.7  
Adjusted Net income before income tax expense$ 107.8  $ 86.3  $ 37.2  $ 46.8  
Income tax expense$ (28.3) $ (19.3) $ (7.1) $ (12.4) 
Income tax effect on devaluation loss in Venezuela    (3.5)   (4.8)   (3.2)   (1.7) (1)
Adjusted Income tax$ (31.8) $ (24.1) $ (10.3) $ (14.1) 
Net Income$ 53.8  $ 46.1  $ 5.3  $ 15.9  
Devaluation loss in Venezuela  22.9    7.2    22.0    4.9  
Impairment of long-lived assets in Venezuela  2.8    13.7    2.8    13.7  
Income tax effect on devaluation loss in Venezuela  (3.5)   (4.8)   (3.2)   (1.7) (1)
Adjusted Net Income$ 76.1  $ 62.2  $ 26.9  $ 32.7  
Weighted average of outstanding common shares  44,157,364    44,157,151    44,157,364    44,157,341  
Adjusted Earnings per share$ 1.72  $ 1.41  $ 0.61  $ 0.74  
Adjusted Blended Tax Rate (2) 29.4%  27.9%  27.6%  30.1% 

(*)  Stated in millions of U.S. dollars, except for share data. The table above may not total due to rounding.

(1)    Deferred income tax charge related to the Venezuela devaluation under local tax norms.

(2)      Adjusted Income and asset tax over Adjusted Net income before income / asset tax expense.

CONTACT: 
MercadoLibre, Inc,
Investor Relations
investor@mercadolibre,com
http://investor,mercadolibre,com