Mercadolibre, Inc.
MERCADOLIBRE INC (Form: 8-K, Received: 11/04/2016 06:05:47)
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________

Form 8-K
_____________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event Reported): November 3, 2016  

MercadoLibre, Inc.
(Exact Name of Registrant as Specified in Charter)

Delaware 001-33647 98-0212790
(State or Other Jurisdiction of Incorporation) (Commission File Number) (I.R.S. Employer Identification Number)

 

Arias 3751, 7th Floor, Buenos Aires, Argentina C1430CRG
(Address of Principal Executive Offices) (Zip Code)

011-54-11-4640-8000
(Registrant's telephone number, including area code)


(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

  [ ]   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
  [ ]   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
  [ ]   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
  [ ]   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

Item 2.02. Results of Operations and Financial Condition.

On November 3, 2016, the Registrant issued a press release, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

Exhibit 99.1. Press release dated November 3, 2016


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

  MercadoLibre, Inc.
     
   
Date: November 3, 2016 By:  /s/ PEDRO ARNT        
    PEDRO ARNT
    Chief Financial Officer
   

EXHIBIT 99.1

MercadoLibre, Inc. Reports Third Quarter 2016 Financial Results

47.6 million Sold Items, up 40.0%, 36.8 million Total Payment Transactions, up 67.6%

Net Revenues of $230.8 million, growing 36.9% in USD, 66.3% in local currencies

Net Income of $38.9 million, resulting in EPS of $0.88.

BUENOS AIRES, Argentina, Nov. 03, 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 September 30, 2016.

Pedro Arnt, Chief Financial Officer of Mercado Libre, Inc., commented, “We continue to make progress in expanding our enhanced marketplace vision across all our geographies, as we grow the adoption of our payments, credit and shipping solutions in our marketplaces. More importantly, as a consequence of this, we have been able to sustain high growth rates in our trading volume, revenue, and customer satisfaction metrics”   

Third Quarter 2016 Business Highlights

Materializing our strategic vision through successful execution

Third Quarter 2016 Financial Highlights

 (*) See note on “Non-GAAP Financial Measures”

Third Quarter 2016 Corporate Highlights

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

     Three months ended September 30, (in MM)
      2016     2015    %YoY  %YoY Local
Currency
   Total confirmed registered users at the end of period   159.3     138.4     15.1 %   -  
   New confirmed registered users during the period   7.7     6.1     26.3 %   -  
   Gross merchandise volume $   2,040.2   $   1,842.1     10.8 %   45.9 %
   Number of successful items sold    47.6     34.0     40.0 %   -  
   Number of successful items shipped    23.1     12.4     86 %  
   Total payment volume $   2,114.0   $   1,384.4     52.7 %   84.5 %
   Total volume of payments on marketplace $   1,519.9   $   1,002.3     51.6 %  
   Total payment transactions   36.8     22.0     67.6 %   -  
                           

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

     YoY Growth rates
   Consolidated Net Revenues          
     Q3'15  Q4'15  Q1'16  Q2'16  Q2'16
   Brazil   47 %   42 %   54 %   61 %   62 %
   Argentina   83 %   79 %   71 %   89 %   68 %
   Mexico   26 %   29 %   42 %   35 %   36 %
   Venezuela   281 %   272 %   249 %   185 %   152 %
   Others   3 %   14 %   19 %   30 %   33 %
   Total   68 %   69 %   75 %   73 %   66 %
                                 

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

   YoY Growth rates
 Consolidated Net Revenues          
   Q3'15  Q4'15  Q1'16  Q2'16  Q3'16
 Brazil   -5 %   -6 %   13 %   41 %   76 %
 Argentina   64 %   52 %   2 %   19 %   4 %
 Mexico   0 %   6 %   18 %   15 %   19 %
 Venezuela   -4 %   -7 %   -13 %   31 %   -22 %
 Others   -13 %   -8 %   -1 %   14 %   33 %
 Total   14 %   12 %   6 %   29 %   37 %
                               

Conference Call and Webcast

The Company will host a conference call and audio webcast on November 3, 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 4696845) 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 volume of payments on marketplace - Measure of the total U.S. dollar sum of all marketplace transactions paid for using MercadoPago, excluding shipping and financing fees.

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

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)

 
  September 30,   December 31,
    2016       2015  
Assets      
Current assets:      
Cash and cash equivalents $  187,995     $  166,881  
Short-term investments    283,650        202,112  
Accounts receivable, net    31,086        28,428  
Credit cards receivables, net    226,818        131,946  
Prepaid expenses    6,299        6,007  
Inventory    1,388        222  
Other assets    21,871        9,577  
Total current assets    759,107        545,173  
Non-current assets:      
Long-term investments    155,178        187,621  
Property and equipment, net    121,006        81,633  
Goodwill    94,493        86,545  
Intangible assets, net    27,725        28,991  
Deferred tax assets    44,066        29,688  
Other assets    54,482        43,955  
Total non-current assets    496,950        458,433  
Total assets $  1,256,057     $  1,003,606  
Liabilities and Equity      
Current liabilities:      
Accounts payable and accrued expenses $  95,970     $  62,038  
Funds payable to customers    313,837        203,247  
Salaries and social security payable    43,676        32,918  
Taxes payable    27,810        10,092  
Loans payable and other financial liabilities    6,077        1,965  
Other liabilities    2,319        7,667  
Dividends payable    6,624        4,548  
Total current liabilities    496,313        322,475  
Non-current liabilities:      
Salaries and social security payable    14,801        10,422  
Loans payable and other financial liabilities    299,472        294,342  
Deferred tax liabilities    36,070        27,049  
Other liabilities    14,414        9,860  
Total non-current liabilities    364,757        341,673  
Total liabilities $  861,070     $  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 September 30,      
2016 and December 31, 2015, respectively $  44     $  44  
Additional paid-in capital    137,979        137,923  
Retained earnings    505,915        440,770  
Accumulated other comprehensive loss    (248,951 )      (239,279 )
Total Equity    394,987        339,458  
Total Liabilities and Equity $  1,256,057     $  1,003,606  
               

Consolidated statements of income

(In thousands of U.S. dollars)
  Nine Months Ended September 30,   Three Months Ended September 30,
      2016       2015       2016       2015  
                 
Net revenues   $  588,121     $  471,058     $  230,847     $  168,641  
Cost of net revenues      (213,993 )      (151,832 )      (85,199 )      (56,813 )
Gross profit      374,128        319,226        145,648        111,828  
Operating expenses:                
Product and technology development      (72,223 )      (53,927 )      (26,066 )      (17,042 )
Sales and marketing      (107,743 )      (86,442 )      (39,723 )      (31,125 )
General and administrative      (64,061 )      (57,127 )      (26,150 )      (18,381 )
Impairment of Long-Lived Assets      (13,717 )      (16,226 )            —  
Total operating expenses      (257,744 )      (213,722 )      (91,939 )      (66,548 )
Income from operations      116,384        105,504        53,709        45,280  
                 
Other income (expenses):                
Interest income and other financial gains      25,192        14,768        9,892        5,777  
Interest expense and other financial losses      (18,807 )      (16,162 )      (6,492 )      (6,011 )
Foreign currency (loss) gain      (5,062 )      (6,647 )      (4,823 )      2,570  
Net income before income / asset tax expense      117,707        97,463        52,286        47,616  
                 
Income / asset tax expense      (32,690 )      (30,639 )      (13,374 )      (1,976 )
Net income   $  85,017     $  66,824     $  38,912     $  45,640  


    Nine Months Ended September 30,   Three Months Ended September 30,
      2016       2015         2016       2015  
Basic EPS                  
Basic net income                  
Shareholders per common share   $  1.93     $  1.51       $  0.88     $  1.03  
Weighted average of outstanding common shares      44,157,215        44,155,303          44,157,341        44,155,830  
Diluted EPS                  
Diluted net income                  
Shareholders per common share   $  1.93     $  1.51       $  0.88     $  1.03  
Weighted average of outstanding common shares      44,157,215        44,155,303          44,157,341        44,155,830  
                   
Cash Dividends declared     0.450       0.309         0.150       0.103  
                                   

Consolidated statements of cash flows

(In thousands of U.S. dollars)
  Nine Months Ended September 30,
      2016       2015  
     
Cash flows from operations:        
Net income   $  85,017     $  66,824  
Adjustments to reconcile net income to net cash provided by operating activities:        
Unrealized Devaluation Loss, net      5,162        6,080  
Impairment of Long-Lived Assets      13,717        16,226  
Depreciation and amortization      20,698        16,956  
Accrued interest      (12,643 )      (9,311 )
Non cash interest and convertible bonds amortization of debt discount and amortization of debt issuance costs      9,122        12,917  
LTRP accrued compensation      19,251        8,032  
Deferred income taxes      (5,895 )      6,206  
Changes in assets and liabilities:        
Accounts receivable       (2,409 )      (50,105 )
Credit Card Receivables      (92,811 )      (122,328 )
Prepaid expenses      (272 )      (4,922 )
Inventory      (1,048 )      (169 )
Other assets      (15,865 )      (13,089 )
Accounts payable and accrued expenses      13,852        66,898  
Funds payable to customers      100,322        100,938  
Other liabilities      136        2,226  
Interest received from investments      11,348        7,900  
Net cash provided by operating activities      147,682        111,279  
Cash flows from investing activities:        
Purchase of investments      (2,548,060 )      (1,435,655 )
Proceeds from sale and maturity of investments      2,525,118        1,424,150  
Payment for acquired businesses, net of cash acquired      (7,284 )      (45,009 )
Purchases of intangible assets      (49 )      (1,502 )
Advance for property and equipment      (6,129 )      (17,779 )
Purchases of property and equipment      (55,510 )      (19,063 )
Net cash used in investing activities      (91,914 )      (94,858 )
Cash flows from financing activities:        
Proceeds from loans payable and other financial liabilities      3,892        5,015  
Payments on loans payable and other financing      (6,492 )      (4,622 )
Dividends paid      (17,795 )      (16,426 )
Repurchase of Common Stock            (2,714 )
Net cash used in financing activities      (20,395 )      (18,747 )
Effect of exchange rate changes on cash and cash equivalents      (14,259 )      (47,794 )
Net increase (decrease) in cash and cash equivalents      21,114        (50,120 )
Cash and cash equivalents, beginning of the period   $ 166,881        223,144  
Cash and cash equivalents, end of the period   $ 187,995     $  173,024  
                 

Financial results of reporting segments

                                       
                  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 )       (3,462 )     (7,943 )     (137,796 )
Direct contribution     53,991       30,957       1,454         3,423       3,226       93,051  
                                       
Operating expenses and indirect costs of net revenues                           (39,342 )
Income from operations                           53,709  
                                       
Other income (expenses):                          
  Interest income and other financial gains                           9,892  
  Interest expense and other financial losses                           (6,492 )
  Foreign currency losses                           (4,823 )
Net income before income / asset tax expense                         $ 52,286  
                                       


                                     
                Three Months Ended September 30, 2015
                Brazil   Argentina   Mexico   Venezuela   Other Countries   Total
                (In thousands)
Net revenues   $ 74,286     $ 67,234     $ 9,880     $ 8,860     $ 8,381     $ 168,641  
Direct costs     (43,730 )     (38,705 )     (8,560 )     (3,665 )     (5,345 )     (100,005 )
Direct contribution     30,556       28,529       1,320       5,195       3,036       68,636  
                                     
Operating expenses and indirect costs of net revenues                         (23,356 )
Income from operations                         45,280  
                                     
Other income (expenses):                        
  Interest income and other financial gains                         5,777  
  Interest expense and other financial losses                         (6,011 )
  Foreign currency gains                         2,570  
Net income before income / asset tax expense                       $ 47,616  
                             

Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements presented in accordance with U.S. GAAP, we use free cash flows and foreign exchange (“FX”) neutral measures, adjusted net income before income / asset tax, adjusted income / asset tax, adjusted net income, adjusted blended tax rate and adjusted earnings per share 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, of intangible assets and of 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:

               
        Three-month Periods Ended
          September 30,(*)
(In millions)           2016       2015  
               
Net Cash provided by Operating Activities         $  102.8     $  14.4  
Payment for acquired business, net of cash acquired            -        -  
Advance for property and equipment            (1.2 )      (10.3 )
Financial liabilities for acquisition of property and equipment        -        5.0  
Purchase of intangible assets            (0.0 )      (0.1 )
Purchase of property and equipment            (22.9 )      (2.8 )
Free cash flow            78.7        6.3  
 
(*) The table above may not total due to rounding.
 

The Company 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 following table sets forth the FX neutral measures related to our reported results of the operations for the three-month period ended September 30, 2016:

                         
    Three-months Periods Ended
September 30, (*)
    As reported   FX Neutral Measures
(In millions, except percentages)     2016       2015     Percentage
Change
    2016       2015     Percentage
Change
Net revenues   $  230.8     $  168.6       36.9 %     280.5     $  168.6       66.3 %
Cost of net revenues      (85.2 )      (56.8 )     50.0 %      (102.5 )      (56.8 )     80.5 %
Gross profit      145.6        111.8       30.2 %      178.0        111.8       59.1 %
                         
Operating expenses:      (91.9 )      (66.5 )     38.2 %      (117.9 )      (66.5 )     77.2 %
Total operating expenses      (91.9 )      (66.5 )     38.2 %      (117.9 )      (66.5 )     77.2 %
Income from operations      53.7        45.3       18.6 %      60.0        45.3       32.6 %
 
(*) The table above may not total due to rounding.
 

Moreover, the company believes that adjusted net income before income / asset tax, adjusted income / asset tax, adjusted net income, adjusted blended tax rate and adjusted earnings per share 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 company reports adjusted net income before income / asset tax, adjusted income / asset tax, adjusted net income, adjusted blended tax rate and adjusted earnings per share to investors because the company believes that the inclusion of these measures provides consistency in the Company’s financial reporting and because these financial measures provide useful information to management and investors about what our adjusted net income before income / asset tax, adjusted income / asset tax, adjusted net income, adjusted blended tax rate and adjusted earnings per share, 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 adjusted net income before income / asset tax, adjusted income / asset tax, adjusted net income, adjusted blended tax rate and adjusted earnings per share, as measures of financial performance, is that these measures do not represent the total foreign exchange effect in our Income Statement for the nine and three-month periods ended September 30, 2016 and 2015:

  Nine-month periods ended (**)   Three-month periods ended (**)
  September 30, 2016 September 30, 2015   September 30, 2016   September 30, 2015
Net income before income / asset tax expense $    117.7   $    97.5     $    52.3     $    47.6    
Devaluation loss in Venezuela      7.4        20.7          0.2          0.1    
Impairment of long-lived assets in Venezuela      13.7        16.2                    
Adjusted Net income before income / asset tax expense $    138.8   $    134.4     $    52.5     $    47.7    
Income and asset tax expense $    (32.7 ) $    (30.6 )   $    (13.4 )   $    (2.0 )  
Income tax effect on devaluation loss in Venezuela      (4.8 )      (3.8 )                    (1 )
Adjusted Income and asset tax $    (37.5 ) $    (34.4 )   $    (13.4 )   $    (2.0 )  
Net Income $    85.0   $    66.8     $    38.9     $    45.6    
Devaluation loss in Venezuela      7.4        20.7          0.2          0.1    
Impairment of long-lived assets in Venezuela      13.7        16.2                    
Income tax effect on devaluation loss in Venezuela      (4.8 )      (3.8 )                    (1 )
Adjusted Net Income $    101.3   $    100.0     $    39.1     $    45.7    
Weighted average of outstanding common shares      44,157,215        44,155,303          44,157,341          44,155,830    
Adjusted Earnings per share $    2.29   $    2.26     $    0.89     $    1.03    
Adjusted Blended Tax Rate (2)     27.0 %     25.6 %       25.5 %       4.1 %  
                                       
(**) 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.


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