Mercadolibre, Inc.
MERCADOLIBRE INC (Form: 8-K, Received: 08/03/2017 17:02:48)
 

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): August 3, 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))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [   ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [   ]

 
 

Item 2.02. Results of Operations and Financial Condition.

On August 3, 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 August 3, 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: August 3, 2017 By:  /s/ PEDRO ARNT        
    PEDRO ARNT
    Chief Financial Officer
   

EXHIBIT 99.1

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 3 rd , 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 contribution 59,952       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