Mercadolibre, Inc.
MERCADOLIBRE INC (Form: 8-K, Received: 02/23/2017 17:37:27)
 

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): February 23, 2017  

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 February 23, 2017, 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 February 23, 2017


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: February 23, 2017 By:  /s/ PEDRO ARNT        
    PEDRO ARNT
    Chief Financial Officer
   

EXHIBIT 99.1

MercadoLibre, Inc. Reports Fourth Quarter and Full Year 2016 Financial Results

51.6 million Sold Items, up 40.2%, 42.5 million Total Payment Transactions, up 67.1%

Net Revenues of $256.3 million, growing 41.8% in USD, 68.0% on an FX neutral basis

Net Income of $51.3 million, resulting in EPS of $1.16.

BUENOS AIRES, Argentina, Feb. 23, 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 fourth quarter and fiscal year ended December 31, 2016.

Pedro Arnt, Chief Financial Officer of MercadoLibre, Inc., commented, Last year was one of our most significant in terms of the tangible results of the quality work and level of execution that the entire team at MELI delivered. The scope of control over the customer experience that we are now able to deliver is something that would have been hard for us to anticipate five years ago.  This end to end servicing of each e-commerce transaction that we now offer puts us in an excellent position to focus on delivering a best in class user experience to our buyers and sellers, which is the driving principle behind everything we do.”   

Full Year 2016 Operational & Financial Highlights

Fourth Quarter 2016 Business Highlights

Fourth Quarter 2016 Financial Highlights

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

The following table summarizes certain key performance metrics for the three months ended December 31, 2016 and 2015.

          Three months ended Dec 31, (in MM)  
          Q4'15 Q4'16 %YoY %YoY LC
Number of Confirmed Registered Users at end of period     144.6   174.2 20.4 %  
Number of Confirmed Registered Users During Period     6.3   7.9 25.6 %  
Gross merchandise volume       $ 2,006.1 $ 2,222.1 10.8 % 48.3 %
Number of successful items sold       368   51.6 40.2 %  
Total payment volume       $ 1,557.4 $ 2,446.8 57.5 % 83.8 %
Total payment volume on marketplace     $ 1,109.4 $ 1,759.6 58.6 %  
Total payment transactions         25.4   42.5 67.1 %  
Number of successful items shipped       14.8   25.9 74.9 %  
Unique Buyers         10.7   13.2 22.8 %  
Unique Sellers         3.3   3.9 18.2 %  
                     

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

    YoY Growth rates
  Consolidated Net Revenues          
    Q4'15 Q1'16 Q2'16 Q3'16 Q4'16
  Brazil 42 % 54 % 61 % 62 % 64 %
  Argentina 79 % 71 % 89 % 68 % 60 %
  Mexico 29 % 42 % 35 % 36 % 29 %
  Venezuela 272 % 249 % 185 % 152 % 199 %
  Others 14 % 19 % 30 % 33 % 42 %
  Total 69 % 75 % 73 % 66 % 68 %
                       

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

    YoY Growth rates
  Consolidated Net Revenues          
    Q4'15 Q1'16 Q2'16 Q3'16 Q4'16
  Brazil -6 % 13 % 41 % 76 % 92 %
  Argentina 52 % 2 % 19 % 4 % 4 %
  Mexico 6 % 18 % 15 % 19 % 8 %
  Venezuela -7 % -13 % 31 % -22 % -10 %
  Others -8 % -1 % 14 % 33 % 46 %
  Total 12 % 6 % 29 % 37 % 42 %
                       

Conference Call and Webcast

The Company will host a conference call and audio webcast on February 23, 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 65991410) 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 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.

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.

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)

  December 31,   December 31,
    2016       2015  
Assets      
Current assets:      
Cash and cash equivalents $ 234,140     $ 166,881  
Short-term investments   253,321       202,112  
Accounts receivable, net   25,435       28,428  
Credit cards receivable, net   307,904       131,946  
Loans receivable, net   6,283        
Prepaid expenses   15,060       6,007  
Inventory   1,103       222  
Other assets   26,215       9,577  
Total current assets   869,461       545,173  
Non-current assets:      
Long-term investments   153,803       187,621  
Property and equipment, net   124,261       81,633  
Goodwill   91,797       86,545  
Intangible assets, net   26,277       28,991  
Deferred tax assets   45,017       29,688  
Other assets   56,819       43,955  
Total non-current assets   497,974       458,433  
Total assets $ 1,367,435     $ 1,003,606  
       
Liabilities and Equity      
Current liabilities:      
Accounts payable and accrued expenses $ 105,106     $ 62,038  
Funds payable to customers   370,693       203,247  
Salaries and social security payable   48,898       32,918  
Taxes payable   27,338       10,092  
Loans payable and other financial liabilities   11,583       1,965  
Other liabilities   6,359       7,667  
Dividends payable   6,624       4,548  
Total current liabilities   576,601       322,475  
Non-current liabilities:      
Salaries and social security payable   16,173       10,422  
Loans payable and other financial liabilities   301,940       294,342  
Deferred tax liabilities   34,059       27,049  
Other liabilities   9,808       9,860  
Total non-current liabilities   361,980       341,673  
Total liabilities $ 938,581     $ 664,148  
       
Equity:      
       
Common stock, $0.001 par value, 110,000,000 shares authorized,      
44,157,364 and 44,156,854 shares issued and outstanding at December 31,      
2016 and December 31, 2015, respectively $ 44     $ 44  
Additional paid-in capital   137,982       137,923  
Retained earnings
  550,641       440,770  
Accumulated other comprehensive loss   (259,813 )     (239,279 )
Total Equity   428,854       339,458  
Total Liabilities and Equity $ 1,367,435     $ 1,003,606  
               

Consolidated statements of cash flows
(In thousands of U.S. dollars, except par value)

    Year Ended December 31,
      2016       2015       2014  
     
Cash flows from operations:            
Net income attributable to MercadoLibre, Inc. Shareholders   $ 136,366     $ 105,789     $ 72,581  
Adjustments to reconcile net income to net cash provided by operating activities:            
Net income attributable to Redeemable Noncontrolling Interest                 72  
Unrealized Devaluation Loss, net     4,967       14,717       13,808  
Impairment of Long-Lived Assets     13,717       16,226       49,496  
Depreciation and amortization     29,022       23,209       16,947  
Accrued interest     (17,794 )     (12,783 )     (9,029 )
Non cash interest and convertible bonds amortization of debt discount and amortization of debt issuance costs     9,837       17,272       7,874  
LTRP accrued compensation     22,983       10,213       11,852  
Deferred income taxes     (6,188 )     4,354       (20,237 )
Changes in assets and liabilities:            
Accounts receivable     (15,428 )     (36,476 )     (36,120 )
Credit cards receivable     (180,592 )     (109,139 )     (45,521 )
Prepaid expenses     (9,133 )     (3,907 )     (157 )
Inventory     (787 )     (237 )      
Other assets     (24,425 )     (2,340 )     (5,982 )
Accounts payable and accrued expenses     47,980       63,668       68,780  
Funds payable to customers     164,060       119,353       61,072  
Other liabilities     (45 )     1,765       1,675  
Interest received from investments     15,719       9,686       9,682  
Net cash provided by operating activities     190,259       221,370       196,793  
Cash flows from investing activities:            
Purchase of investments     (3,501,283 )     (1,949,769 )     (2,577,130 )
Proceeds from sale and maturity of investments     3,508,293       1,875,516       2,330,836  
Payment for acquired businesses, net of cash acquired     (7,284 )     (45,009 )     (36,814 )
Payment of remaining amount from business acquisition                 (4,000 )
Purchases of intangible assets     (431 )     (1,746 )     (857 )
Changes in principal loans receivable, net     (6,599 )            
Advance for property and equipment     (8,412 )     (23,380 )      
Purchases of property and equipment     (68,527 )     (39,150 )     (34,426 )
Net cash used in investing activities     (84,243 )     (183,538 )     (322,391 )
Cash flows from financing activities:            
Funds received from the issuance of convertible notes                 330,000  
Transaction costs from the issuance of convertible notes                 (8,084 )
Purchase of convertible note capped call                 (19,668 )
Proceeds from loans payable and other financial liabilities     11,435       5,033        
Payments on loans payable and other financing     (6,684 )     (9,059 )     (7,704 )
Dividends paid     (24,419 )     (20,974 )     (28,303 )
Repurchase of Common Stock           (2,714 )     (1,944 )
Net cash (used in) provided by financing activities     (19,668 )     (27,714 )     264,297  
Effect of exchange rate changes on cash and cash equivalents     (19,089 )     (66,381 )     (55,840 )
Net increase (decrease) in cash and cash equivalents     67,259       (56,263 )     82,859  
Cash and cash equivalents, beginning of the year     166,881       223,144       140,285  
Cash and cash equivalents, end of the year   $ 234,140     $ 166,881     $ 223,144  
                         

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

    Year Ended December 31,     Three Months Ended December 31,  
      2016       2015       2014         2016       2015    
Net revenues   $ 844,396     $ 651,790     $ 556,536       $ 256,275     $ 180,732    
Cost of net revenues     (307,538 )     (214,994 )     (158,978 )       (93,546 )     (63,162 )  
Gross profit     536,858       436,796       397,558         162,729       117,570    
Operating expenses:                        
Product and technology development     (98,479 )     (76,423 )     (53,600 )       (26,256 )     (22,497 )  
Sales and marketing     (156,296 )     (128,609 )     (111,627 )       (48,554 )     (42,167 )  
General and administrative     (87,310 )     (76,342 )     (62,364 )       (23,250 )     (19,215 )  
Impairment of Long-Lived Assets     (13,717 )     (16,226 )     (49,496 )                
Total operating expenses     (355,802 )     (297,600 )     (277,087 )       (98,060 )     (83,879 )  
Income from operations     181,056       139,196       120,471         64,669       33,691    
                         
Other income (expenses):                        
Interest income and other financial gains     35,442       20,561       15,336         10,250       5,792    
Interest expense and other financial losses     (25,605 )     (20,391 )     (11,659 )       (6,799 )     (4,229 )  
Foreign currency (losses) gains     (5,565 )     11,125       (2,352 )       (501 )     17,772    
Net income before income  tax expense     185,328       150,491       121,796         67,619       53,026    
                         
Income tax expense     (48,962 )     (44,702 )     (49,143 )       (16,272 )     (14,062 )  
Net income   $ 136,366     $ 105,789     $ 72,653       $ 51,347     $ 38,964    
                         
Less: Net Income attributable to Redeemable Noncontrolling Interest                 72                  
Net income attributable to MercadoLibre, Inc. shareholders   $ 136,366     $ 105,789     $ 72,581       $ 51,347     $ 38,964    


    Year Ended December 31,   Three Months Ended December 31,
      2016     2015     2014     2015     2015  
Basic EPS                      
Basic net income attributable to MercadoLibre, Inc.                      
Shareholders per common share   $ 3.09   $ 2.40   $ 1.63   $ 1.16   $ 0.88  
Weighted average of outstanding common shares     44,157,251     44,155,680     44,153,884     44,157,355     44,156,800  
 

Diluted EPS
                     
Diluted net income attributable to MercadoLibre, Inc.                      
Shareholders per common share   $ 3.09   $ 2.40   $ 1.63   $ 1.16   $ 0.88  
Weighted average of outstanding common shares     44,157,251     44,155,680     44,153,884     44,157,355     44,156,800  
                       
Cash Dividends declared per common share     0.600     0.412     0.664     0.150     0.103  
                                 

Financial results of reporting segments

    Year Ended December 31, 2016
    Brazil   Argentina   Mexico   Venezuela   Other Countries   Total
    (In thousands)
Net revenues   $ 455,024     $ 262,252     $ 46,332     $ 37,185     $ 43,603     $ 844,396  
Direct costs     (270,922 )     (152,103 )     (40,951 )     (17,732 )     (31,549 )     (513,257 )
Impairment of Long-lived Assets     -       -       -       (13,717 )     -       (13,717 )
Direct contribution     184,102       110,149       5,381       5,736       12,054       317,422  
                         
Operating expenses and indirect costs of net revenues                         (136,366 )
Income from operations                         181,056  
                         
Other income (expenses):                        
Interest income and other financial gains                         35,442  
Interest expense and other financial losses                         (25,605 )
Foreign currency losses                         (5,565 )
Net income before income tax expense                       $ 185,328  


    Year Ended December 31, 2015
    Brazil   Argentina   Mexico   Venezuela   Other Countries   Total
    (In thousands)
Net revenues   $ 290,602     $ 245,011     $ 40,338     $ 40,475     $ 35,364     $ 651,790  
Direct costs     (180,394 )     (134,750 )     (31,282 )     (15,287 )     (24,605 )     (386,318 )
Impairment of Long-lived Assets     -       -       -       (16,226 )     -       (16,226 )
Direct contribution     110,208       110,261       9,056       8,962       10,759       249,246  
                         
Operating expenses and indirect costs of net revenues                         (110,050 )
Income from operations                         139,196  
                         
Other income (expenses):                        
Interest income and other financial gains                         20,561  
Interest expense and other financial losses                         (20,391 )
Foreign currency gain                         11,125  
Net income before income tax expense                       $ 150,491  


    Three Months December 31, 2016  
    Brazil   Argentina   Mexico   Venezuela   Other Countries   Total  
    (In thousands)
Net revenues   $ 143,597     $ 76,367     $ 11,957     $ 10,734     $ 13,620     $ 256,275    
Direct costs     (82,150 )     (46,886 )     (11,947 )     (5,041 )     (10,268 )     (156,292 )  
Impairment of Long-lived Assets     -       -       -       -       -       -    
Direct contribution     61,447       29,481       10       5,693       3,352       99,983    
                           
Operating expenses and indirect costs of net revenues                         (35,311 )  
Income from operations                         64,672    
                           
Other income (expenses):                          
Interest income and other financial gains                         10,250    
Interest expense and other financial losses                         (6,798 )  
Foreign currency gain                         (503 )  
Net income before income tax expense                       $ 67,621    



    Three Months December 31, 2015  
    Brazil   Argentina   Mexico   Venezuela   Other Countries   Total  
    (In thousands)
Net revenues   $ 74,951     $ 73,515     $ 11,030     $ 11,946     $ 9,290     $ 180,732    
Direct costs     (52,988 )     (42,203 )     (10,107 )     (4,787 )     (8,178 )     (118,263 )  
Impairment of Long-lived Assets     -       -       -       -       -       -    
Direct contribution     21,963       31,312       923       7,159       1,112       62,469    
                           
Operating expenses and indirect costs of net revenues                         (28,777 )  
Income from operations                         33,692    
                           
Other income (expenses):                          
Interest income and other financial gains                         5,793    
Interest expense and other financial losses                         (4,229 )  
Foreign currency gain                         17,772    
Net income before income tax expense                       $ 53,028    
                               

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 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 net of financial liabilities, 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
    December 31,
  (In millions)   2016       2015  
         
  Net Cash provided by Operating Activities $ 42.6     $ 110.1  
  Advance for property and equipment   (2.3 )     (5.6 )
  Purchase of intangible assets   (0.4 )     (0.2 )
  Purchase of property and equipment   (13.0 )     (20.1 )
  Free cash flow   26.9       84.2  
 

(*) 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 FX neutral measures were calculated by using the average monthly exchange rates for each month during 2015 and applying them to the corresponding months in 2016, 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 months periods ended December 31, 2016 and 2015:

    Three-months Periods Ended
December 31, (*)
    As reported   FX Neutral Measures
(In millions, except percentages)   2016       2015     Percentage
Change
    2016       2015     Percentage
Change
                 
Net revenues   $ 256.3     $ 180.7     41.8 %   $ 304.1     $ 180.7     68.3 %
Cost of net revenues   (93.5 )     (63.2 )   47.9 %     (108.7 )     (63.2 )   72.2 %


Gross profit
    162.7       117.6     38.4 %     195.4       117.6     66.2 %
                         
Operating expenses:   (98.1 )     (83.9 )   16.9 %     (120.9 )     (83.9 )   44.1 %
Total operating expenses   (98.1 )     (83.9 )   16.9 %     (120.9 )     (83.9 )   44.1 %
Income from operations   64.7       33.7     91.8 %     74.5       33.7     121.0 %
                         

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

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