Mercadolibre, Inc.
Aug 4, 2016

MercadoLibre, Inc. Reports Second Quarter 2016 Financial Results

43.7 million Sold Items, up 45%, 31.9 million Total Payment Transactions, up 76%

Net Revenues of $199.6 million, growing 29% in USD, 73% in local currencies

Net Income of $15.9 million, resulting in EPS of $0.36.

BUENOS AIRES, Argentina, Aug. 04, 2016 (GLOBE NEWSWIRE) -- MercadoLibre, Inc. (Nasdaq:MELI) (http://www.mercadolibre.com), Latin America's leading e-commerce technology company, today reported financial results for the three month period ended June 30, 2016.

Pedro Arnt, Chief Financial Officer of Mercado Libre, Inc., commented, "The second quarter of 2016 was one of our strongest quarters ever. Not only have we maintained high growth rates on key operational and financial metrics by executing well, but we are also pleased to report that our enhanced marketplace vision continues to consolidate in our larger markets, and, perhaps more importantly, is starting to materialize outside of those main geographies."

Second Quarter 2016 Business Highlights

Materializing our enhanced marketplace vision through successful execution

Second Quarter 2016 Financial Highlights

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

Second Quarter 2016 Corporate Highlights

The following table summarizes certain key performance metrics for the three months ended June 30, 2016 and 2015.

   Three months ended June 30, (in MM) 
         %YoY Local
   2016  2015  %YoY  Currency 
 Total confirmed registered users at the end of period 158.6  132.3  19.9% - 
 New confirmed registered users during the period 7.1  5.6  27.2% - 
 Gross merchandise volume$2,004.7 $1,653.5  21.2% 67.7%
 Items sold 43.7  30.2  44.7% - 
 SI Shipped 20.3  10.0  104% 
 Total payment volume$1,816.9 $1,206.0  50.6% 101.6%
 Total payment transactions 31.9  18.1  76.0% - 
              

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

   YoY Growth rates 
  Consolidated Net Revenues      
   Q2'15  Q3'15  Q4'15  Q1'16  Q2'16 
 Brazil 58% 47% 42% 54% 61%
 Argentina 90% 83% 79% 71% 89%
 Mexico 26% 26% 29% 42% 35%
 Ven 284% 281% 272% 249% 185%
 Others 12% 3% 14% 19% 30%
 Total 88% 68% 69% 75% 73%
                 

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

  YoY Growth rates 
 Consolidated Net Revenues      
  Q2'15  Q3'15  Q4'15  Q1'16  Q2'16 
Brazil 15% -5% -6% 13% 41%
Argentina 71% 64% 52% 2% 19%
Mexico 7% 0% 6% 18% 15%
Ven -65% -4% -7% -13% 31%
Others -4% -13% -8% -1% 14%
Total 17% 14% 12% 6% 29%
      

Conference Call and Webcast 

The Company will host a conference call and audio webcast on August 4, 2016 at 4:30 p.m. Eastern Time. The conference call may be accessed by dialing +(970) 315-0420 or +(877) 303-7209 (Conference ID 53806354) 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.

Excluding Venezuela — Given the current currency distortions and hyperinflation present in Venezuela, the Company's growth data disclosed above excludes the impact of the results of operations from its Venezuelan subsidiaries. The disclosure of this data enables investors to evaluate the company's operating performance from period to period without the distortions caused by Venezuela's hyperinflation and foreign exchange policies.

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 2015 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.

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

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.

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

Total payment volume — Measure of total U.S. dollar sum of all transactions paid for using MercadoPago.

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

    
 June 30, December 31,
  2016   2015 
Assets   
Current assets:   
Cash and cash equivalents$144,016  $166,881 
Short-term investments 251,416   202,112 
Accounts receivable, net 40,055   28,428 
Credit cards receivables, net 215,437   131,946 
Prepaid expenses 6,004   6,007 
Inventory 990   222 
Other assets 15,349   9,577 
Total current assets 673,267   545,173 
Non-current assets:   
Long-term investments 157,832   187,621 
Property and equipment, net 104,808   81,633 
Goodwill 96,150   86,545 
Intangible assets, net 29,126   28,991 
Deferred tax assets 36,417   29,688 
Other assets 42,549   43,955 
Total non-current assets 466,882   458,433 
Total assets$1,140,149  $1,003,606 
Liabilities and Equity   
Current liabilities:   
Accounts payable and accrued expenses$86,068  $62,038 
Funds payable to customers 277,528   203,247 
Salaries and social security payable 32,786   32,918 
Taxes payable 16,419   10,092 
Loans payable and other financial liabilities 782   1,965 
Other liabilities 2,148   7,667 
Dividends payable 6,624   4,548 
Total current liabilities 422,355   322,475 
Non-current liabilities:   
Salaries and social security payable 10,239   10,422 
Loans payable and other financial liabilities 296,691   294,342 
Deferred tax liabilities 32,099   27,049 
Other liabilities 14,198   9,860 
Total non-current liabilities 353,227   341,673 
Total liabilities$775,582  $664,148 
    
Equity:   
    
Common stock, $0.001 par value, 110,000,000 shares authorized,   
44,157,341 and 44,156,854 shares issued and outstanding at June 30,   
2016 and December 31, 2015, respectively$44  $44 
Additional paid-in capital 137,979   137,923 
Retained earnings 473,627   440,770 
Accumulated other comprehensive loss (247,083)  (239,279)
Total Equity 364,567   339,458 
Total Liabilities and Equity$1,140,149  $1,003,606 
        

Consolidated statements of income

   Six Months Ended June 30, Three Months Ended June 30,
    2016   2015   2016   2015 
   (In thousands) (In thousands)
Net revenues  $ 357,274  $ 302,417  $ 199,644  $ 154,314 
Cost of net revenues    (128,794)   (95,019)   (73,346)   (50,311)
Gross profit    228,480    207,398    126,298    104,003 
          
Operating expenses:         
Product and technology development    (46,157)   (36,885)   (24,216)   (19,639)
Sales and marketing    (68,020)   (55,317)   (35,337)   (29,115)
General and administrative    (37,910)   (38,746)   (20,841)   (20,612)
Impairment of Long-Lived Assets    (13,717)   (16,226)   (13,717)  —
Total operating expenses    (165,804)   (147,174)   (94,111)   (69,366)
Income from operations    62,676    60,224    32,187    34,637 
          
Other income (expenses):         
Interest income and other financial gains    15,300    8,991    8,049    4,683 
Interest expense and other financial losses    (12,315)   (10,151)   (6,631)   (5,201)
Foreign currency losses    (240)   (9,217)   (5,387)   (648)
Net income before income / asset tax expense    65,421    49,847    28,218    33,471 
          
Income / asset tax expense    (19,316)   (28,663)   (12,360)   (14,008)
Net income  $ 46,105  $ 21,184  $ 15,858  $ 19,463 


          
  Six Months Ended June 30, Three Months Ended June 30,
   2016   2015    2016   2015 
Basic EPS         
Basic net income         
Shareholders per common share $1.04  $0.48   $0.36  $0.44 
Weighted average of outstanding common shares  44,157,151   44,155,035    44,157,341   44,155,271 
Diluted EPS         
Diluted net income         
Shareholders per common share $1.04  $0.48   $0.36  $0.44 
Weighted average of outstanding common shares  44,157,151   44,155,035    44,157,341   44,155,271 
          
Cash Dividends declared  0.150   0.206    0.150   0.103 
                  

Consolidated statements of cash flows

     
  Six Months Ended June 30,
   2016   2015 
   
Cash flows from operations:    
Net income $46,105  $21,184 
Adjustments to reconcile net income to net cash provided by operating activities:    
Unrealized Devaluation Loss, net  5,162   10,862 
Impairment of Long-Lived Assets  13,717   16,226 
Depreciation and amortization  13,178   10,970 
Accrued interest  (7,918)  (5,769)
Non cash interest and convertible bonds amortization of debt discount and Amortization of debt issuance costs  4,705   8,562 
LTRP accrued compensation  10,126   8,463 
Deferred income taxes  (1,981)  7,736 
Changes in assets and liabilities:    
Accounts receivable  (2,833)  (19,342)
Credit Card Receivables  (78,334)  (52,553)
Prepaid expenses  9   (2,327)
Inventory  (637) 
Other assets  (7,704)  (4,122)
Accounts payable and accrued expenses  (15,133)  40,974 
Funds payable to customers  59,309   52,006 
Other liabilities  (566)  (652)
Interest received from investments  7,650   4,613 
Net cash provided by operating activities  44,855   96,831 
Cash flows from investing activities:    
Purchase of investments  (1,559,095)  (950,636)
Proceeds from sale and maturity of investments  1,565,336   926,058 
Payment for acquired businesses, net of cash acquired  (7,284)  (45,009)
Purchases of intangible assets  (49)  (1,367)
Advance for property and equipment  (4,963)  (7,473)
Purchases of property and equipment  (32,590)  (16,305)
Net cash used in investing activities  (38,645)  (94,732)
Cash flows from financing activities:    
Payments on loans payable and other financing  (6,299)  (4,438)
Dividends paid  (11,172)  (11,878)
Repurchase of Common Stock   (2,714)
Net cash used in financing activities  (17,471)  (19,030)
Effect of exchange rate changes on cash and cash equivalents  (11,604)  (35,822)
Net decrease in cash and cash equivalents  (22,865)  (52,753)
Cash and cash equivalents, beginning of the period $166,881   223,144 
Cash and cash equivalents, end of the period $144,016  $170,391 
         

Financial results of reporting segments

                   
        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 / asset tax expense           $28,218 
                   


                   
          Three Months Ended June 30, 2015
        Brazil Argentina Mexico Venezuela Other Countries Total
        (In thousands)
Net revenues $72,867  $56,830  $9,991  $5,714  $8,912  $154,314 
Direct costs  (43,995)  (29,057)  (6,646)  (2,631)  (5,912)  (88,241)
Direct contribution  28,872   27,773   3,345   3,083   3,000   66,073 
                   
Operating expenses and indirect costs of net revenues            (31,436)
Income from operations            34,637 
                   
Other income (expenses):            
 Interest income and other financial gains            4,683 
 Interest expense and other financial losses            (5,201)
 Foreign currency loss            (648)
Net income before income / asset tax expense           $33,471 
               

Non-GAAP Financial Measures

To supplement the condensed consolidated financial statements presented in accordance with U.S. GAAP, the Company uses the following non-GAAP measures: free cash flows, foreign exchange neutral measures, and, for the purpose of excluding Venezuela from consolidated results, "Venezuela adjusted measures" including adjusted net income before income / asset tax, adjusted income / asset tax, adjusted net income, adjusted blended tax rate and adjusted earnings per share. 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 the Company's results of operations as determined in accordance with U.S. GAAP. These non-GAAP financial measures should only be used to evaluate the Company's results of operations in conjunction with the most comparable U.S. GAAP financial measures.

Free cash flow provides useful information to both management and investors by excluding payments for the acquisition of property, equipment, of intangible assets net of financial liabilities and of businesses net of cash acquired that may not be indicative of the Company's core operating results. In addition, free cash flows are reported to investors because the Company believes that the inclusion of this measure provides consistency in the financial reporting. The Company considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the Company's 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 the Company's cash balance for the period.

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

             
      Three-month Periods Ended 
       June 30, 
(In millions)       2016   2015  
           
Net Cash provided by Operating Activities      $ 56.7  $ 58.6  
Payment for acquired business, net of cash acquired        (5.5)   (45.0) 
Advance for property and equipment        (4.1)   (7.5) 
Purchase of intangible assets        (0.0)   (0.5) 
Purchase of property and equipment        (18.0)   (9.0) 
Free cash flow        29.1    (3.3) 
               

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

The Company believes that FX neutral measures compared with the most directly GAAP measure provides investors a better understanding of the current financial performance of our business excluding the FX impact in each line of our P&L. Specifically, the Company believes 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 following table sets forth the FX neutral measures related to our reported results of the operations for the three-month period ended June 30, 2016:

             
  Three-months Periods Ended
June 30, (*)
  As reported FX Neutral Measures
(In millions, except percentages)  2016   2015  Percentage
Change
  2016   2015  Percentage
Change
Net revenues $ 199.6  $ 154.3   29.4% $ 266.2  $ 154.3   72.5%
Cost of net revenues   (73.3)   (50.3)  45.7%   (97.5)   (50.3)  93.7%
Gross profit   126.3    104.0   21.5%   168.8    104.0   62.3%
             
Operating expenses:   (80.4)   (69.4)  15.9%   (135.8)   (69.4)  95.8%
Impairment of Long-Lived Assets   (13.7)     -100.0%   (13.7)     -100.0%
Total operating expenses   (94.1)   (69.4)  35.7%   (149.5)   (69.4)  115.5%
Income from operations   32.2    34.6   -7.1%   19.3    34.6   -44.4%
                         

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

Moreover, the Company believes that the Venezuela adjusted measures provide useful information to both management and investors by excluding the foreign exchange loss attributable to the devaluation in Venezuela and the impairment of long-lived assets, because it may not be indicative of the ordinary course of our business. In addition, the Venezuela adjusted measures are reported to investors to provide consistency in the Company's financial reporting and because these financial measures provide useful information to management and investors about what the Venezuela adjusted measures, would have been, had the foreign exchange loss in Venezuela and the impairment of long-lived assets not occurred. A limitation of the utility of the Venezuela measures, as measures of financial performance is that they do not represent the total foreign exchange effect in the Income Statement for the periods presented:

    
 Six-month period ended (**) Three-month period ended (**)
 June 30, 2016June 30, 2015 June 30, 2016 June 30, 2015
Net income before income / asset tax expense$  65.4 $  49.8  $  28.2  $  33.5  
Devaluation loss in Venezuela   7.2    20.4     4.9       
Impairment of long-lived assets in Venezuela   13.7    16.2     13.7       
Adjusted Net income before income / asset tax expense$  86.3 $  86.5  $  46.8  $  33.5  
Income and asset tax expense$  (19.3)$  (28.7) $  (12.4) $  (14.0) 
Income tax effect on devaluation loss in Venezuela   (4.8)   (3.8)    (1.7)       (1)
Adjusted Income and asset tax$  (24.1)$  (32.5) $  (14.1) $  (14.0) 
Net Income$  46.1 $  21.2  $  15.9  $  19.5  
Devaluation loss in Venezuela   7.2    20.4     4.9       
Impairment of long-lived assets in Venezuela   13.7    16.2     13.7       
Income tax effect on devaluation loss in Venezuela   (4.8)   (3.8)    (1.7)       (1)
Adjusted Net Income$  62.2 $  54.0  $  32.7  $  19.5  
Weighted average of outstanding common shares   44,157,151    44,155,035     44,157,341     44,155,271  
Adjusted Earnings per share$  1.41 $  1.22  $  0.74  $  0.44  
Adjusted Blended Tax Rate (2)  28.0%  37.5%   30.1%   41.9% 
  

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

    
  (1) Income tax charge related to the Venezuela devaluation under local tax regulations.
  (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