MercadoLibre, Inc. (Nasdaq: MELI)
(http://www.mercadolibre.com), Latin America’s leading e-commerce
technology company, today reported financial results for the
quarter ended June 30, 2023.
To our Shareholders
MercadoLibre had another record quarter in
Q2’23, demonstrating our increasing ability to drive leverage in
our financial model. Income from operations of $558mn more than
doubled year-on-year, with a margin of 16.3% over net revenue of
$3,415mn. We continue to extend our leadership position in
Commerce, with FX-neutral GMV growth of 47% year-on-year (YoY) that
includes an acceleration of sold items to +18% YoY (from +16% in
Q1’23). Our Fintech operation’s momentum remains strong, with
year-on-year FX-neutral growth of 129% in Off-platform TPV and a
NIMAL spread of almost 37% in our credit business. The strong
financial performance has been broad-based across geographies, with
Brazil and Mexico making major contributions to the quarter’s
profit growth, and further diversifying our profit base. This gives
us confidence as we continue to execute our growth plans across
Latin America.
Brazil
In Q2’23, MercadoLibre’s independently measured
top-of-mind and brand consideration scores reached 2-year and
all-time highs (respectively) in Brazil, which is a reflection of
the strength of our value proposition and market position. This
ever increasing consumer preference is what drives the growth in
our GMV, which was 25% higher year-on-year on an FX-neutral basis
in Q2’23. As a result, our market share has risen both
quarter-on-quarter and year-on-year, which we believe demonstrates
that we are a highly trusted and natural destination for buyers and
sellers of millions of products. Our Commerce business is
better-placed than ever in Brazil, yet we continue to work on
improving our value proposition even further. A strong case in
point is the rekindled increase in Fulfillment penetration, which
rose more than 4ppts vs. Q1’23 and almost 10ppts year-on-year,
unlocking same- and next-day delivery for millions of additional
items sold. Another example is the expansion of our first-party
business, whose GMV grew well above the Brazil average and the
overall 1P business (+59% YoY FX-neutral) in Q2’23. This is helping
to fill assortment gaps and improve price competitiveness in
consumer electronics, which is the largest e-commerce category in
Brazil, and also the category where we have historically
under-indexed in market share. This is being achieved alongside
major improvements in our 1P margins.
We are seeing solid results from the cohorts of
Mercado Pago credit cards that were issued in recent months in
Brazil. This gives us confidence that our underwriting for this
product has improved, and is enabling us to increase issuance of
cards. Our other credit products in Brazil delivered healthy levels
of profitability and delinquency, still driven by a continued
cautious approach to originations. Credit is an important piece of
the value proposition of our digital account, but we are also
seeing some encouraging data from other services. For example, the
number of people using our remunerated account - which pays
interest at 100% of the benchmark rate as soon as funds are
deposited - increased substantially, contributing to a 90% YoY
increase in assets under management. Our insurance products also
continue to gain traction. We have seen improvements in perceptions
of Mercado Pago as a “one-stop shop” for financial services,
although we still have ample opportunity to improve brand
consideration in this service sector.
Our Acquiring business in Brazil continues to
grow at a healthy rate, albeit a little slower than the prior
quarter. We saw a pick-up in the FX-neutral TPV growth of our
Merchant Services and QR products, which offset some of the impact
of weaker market growth for POS services. That said, POS TPV growth
remains robust and based on available data, we believe to have
outperformed the market in Q2’23.
Mexico
In Q2’23, Mexico surpassed Argentina as our
second-largest Commerce market measured by GMV, even though it has
been our second largest market in items sold since the end of 2020.
Mexico continues to deliver higher growth in items sold than any of
our six largest markets, and this metric accelerated again to reach
+34% year-on-year in the quarter, broadly in-line with Mexico’s
FX-neutral GMV growth. The strong performance was helped by a
well-executed and successful Hot Sale event, which helped new buyer
growth reach its highest level for more than two years. We are
investing in our logistics network in Mexico so that we may
continue to offer faster delivery than our competitors on the
growing base of items sold. As a result, we opened two new
fulfillment centers in Mexico City and Merida during Q2’23. We also
launched successful pilots to give buyers a greater range of
delivery options, and a choice of whether to optimize speed or
price for purchases below our free shipping threshold.
Our credit business in Mexico continues to
perform very well, with broadly stable profitability and
delinquency in the consumer book, which is growing at an
accelerated pace. The penetration of our own credit as a means of
payment on the marketplace in Mexico is well above the average of
other countries, demonstrating the synergy between our Commerce and
Fintech platforms. This helps us develop a deeper understanding of
the buyer and their ability to repay, which is useful as we begin
the process of developing our credit card product in Mexico
following its launch in Q1’23. In Q2’23, we also enabled the
purchase of extended warranty insurance products for cross-border
purchases.
Our Merchant Services and POS payments
processing services in Mexico are growing at high double- and
triple- digit rates respectively. TPV per device doubled
year-on-year, which reflects our strategy of moving upmarket to
serve larger merchants, and higher take-up of a more sophisticated
device that attracts merchants with greater transactionality than
the more basic devices. Scaling the payments processing business is
an important piece of the wider strategy in Mexico to be one of the
leaders in the digitalization of cash, which we are pursuing from
both the merchant and the individual sides of transactions.
Argentina
The challenging macro environment in Argentina
is reducing demand for, and tightening the supply of, goods in the
short-term; as such, our Commerce business saw items sold grow by
just 1% year-on-year, making just a minor contribution to
FX-neutral GMV growth of 119% YoY. That said, the macroeconomic
backdrop is also increasing demand for financial solutions that
enable consumers to better manage their money in an inflationary
environment. This is creating a powerful tailwind for Mercado Pago,
which saw an 80% year-on-year increase in the number of users of
our investment product, which pays an annualized interest rate of
approximately 80%, and an even larger increase in invested funds.
As a result, Mercado Pago now hosts the largest retail money market
fund in the country. This comes with the halo effects of
strengthening our QR network and the engagement users have with our
platform on the back of higher money flows through our digital
account.
Other Countries
We are seeing encouraging signs in some of our
smaller markets as a consequence of the investments we have been
making to lay the foundations for future growth. In Chile, brand
consideration is at its highest level ever, and was market-leading
for the second successive quarter. Fulfillment in Chile is enabling
same- and next-day deliveries above the MercadoLibre average, and
in Q2’23 its penetration reached a new high, with plenty of room
for additional growth. Our Acquiring business in Chile continues to
scale on the back of the Redelcom acquisition with triple-digit TPV
growth (FX-neutral), and we expect to be able to begin the process
of offering merchants the full suite of Mercado Pago services
following regulatory clearance to proceed with its full
integration. All of these points give us confidence that momentum
is building in Chile, both in Commerce and in Fintech, and that the
country has the potential to be a sizable business for MercadoLibre
in the long-term.
Consolidated Results
Our Advertising business had another strong
quarter in Q2’23, with FX-neutral revenue growth above 70% for the
fifth successive quarter. Revenue as a percentage of GMV hit 1.6%.
We are encouraged to see rising engagement with our advertising
platform, with a large part of the quarter’s revenue growth driven
by an increase in the number of sellers using our Product Ads
service. This was due to wider access, enhancements to the bidding
process, and improvements in the user experience for self-service
sellers. We are encouraged by the early feedback that we have
received from brands and agencies that have interacted with our Ads
Console - launched at the end of Q1’23 - and we continue to work on
positioning MercadoLibre as a destination for Display Ads and brand
building with Chief Marketing Officers.
We are pleased with our financial results for
Q2’23. Consolidated revenue growth was 57% year-on-year on an
FX-neutral basis (31% US dollars). Revenue growth in Commerce (65%
YoY FX-neutral) accelerated versus the prior quarter due to higher
marketplace monetization and the step-change in the growth of 1P;
Fintech revenue growth (48% YoY FX-neutral) slowed versus the prior
quarter as the business lapped the 2022 peak of growth in credit
revenues. That said, both platforms are sustaining high levels of
growth even as margin expansion accelerated.
Income from operations reached a new quarterly
record of $558mn, more than doubling year-on-year, as previously
mentioned. The 6.7ppts YoY margin gain was ahead of our
expectations, and was the result of a 100bps gross margin gain, and
operating expenses falling by 5.8ppts relative to revenue. Within
the gross margin, efficiencies in collection fees, scaling of CX
(customer experience) and fewer POS device sales costs more than
offset headwinds from 1P growth (margins are improving, but are
still dilutive), rising Fulfillment penetration and higher Credits
funding costs. At the income from operations line, we have seen
notable profit growth and margin expansion across geographies and
business lines. This has diversified the drivers of our margins. So
although our high margin services - namely Ads and Credits -
delivered solid growth year-on-year, their overall contribution to
income from operations was diluted materially by the strong growth
and margin expansion of other businesses. Our Credits business, for
example, had a broadly neutral impact on the quarter’s margin
expansion, with its income from operations rising approximately
from $100mn in Q2’22 to $150mn in Q2’23.
At the country level, direct contribution (DC)
growth was particularly strong in Mexico (175% YoY in US dollars)
and Brazil (77% YoY); these two countries accounted for 64% of
reported DC, and 72% of incremental DC (when comparing Q2’23 with
Q2’22).
Below the income from operations line, interest
income rose significantly year-on-year to $188mn, a large part of
which relates to the funds stored by our users in the Mercado Pago
wallet, particularly in Argentina and Brazil. As discussed above,
this is an early indication of growing engagement with our Fintech
platform. Net income of $262mn was up 113% year-on-year, despite
being negatively impacted by $182mn of FX losses, of which $157mn
was related to our share repurchases in the Argentine market. Cash
flow from operations rose to $1,412mn in Q2’23 from $907mn in
Q2’22, demonstrating that our profit growth and margin expansion
are translating into cash generation.
With regards to the continued depreciation of
the Argentine Peso: if we were to simulate the effect of a
devaluation of 100% of the Argentine Peso vs. the US Dollar on our
first half 2023 results, we estimate that income from
operations would have been approximately $195mn lower than our
reported income from operations of $898mn. However, we also incur a
significant FX loss on our P&L related to our Argentine
operations, which amounted to $213mn in the six months ended June
30, 2023, as a result of our repatriation of funds via the
repurchase of our own shares in the Argentine market. Those
purchases are made at the Blue Chip Swap rate, which had a spread
of 93.1% over the official exchange rate as of June 30, 2023. As a
result of our cash management strategy in Argentina, we believe
that our net income and cash flow already incorporate much of the
potential effect of a devalued exchange rate. We estimate the
impact of the simulation described above on our first half 2023 net
income to be broadly neutral to slightly positive. The table below
shows revenue and cost of net revenue plus operating expenses that
were denominated in Argentine Pesos before being translated into US
dollars.
US dollars (in millions) |
|
Six Months Ended June 30,
2023 |
|
Twelve Months Ended June 30,
2023 |
Net revenues |
|
1,492 |
|
2,880 |
Cost of net revenues and operating expenses |
|
1,103 |
|
2,106 |
|
|
|
|
|
Looking Ahead
We are pleased to see that our top line growth
and profit expansion are broad-based across geographies and
business lines. This highlights the tremendous leverage in our
financial model as the business scales. Given our optimism about
the many growth opportunities that still lie ahead of us, we intend
to use some of the headroom created by this operating leverage to
lean into certain areas of the business during the second half of
the year. We believe that a core component of our success has been
our commitment to allocating capital with a long term view. Our
goal is to deliver consistent margin improvements, while making
sure we are also deploying capital so as to continuously drive
above market top line growth that enhances our future scale
potential, improves our user’s experience, and seeds future engines
of growth. Consequently, we view in a positive light our
disciplined approach to re-investing short term margin gains so as
to strengthen MercadoLibre’s long-term competitive position. This
is another indication of our belief that the best is yet to
come.
The following table summarizes certain
key performance metrics for the six and
three-month periods
ended June 30,
2023 and
2022.
|
|
Six Months Ended June 30, |
|
Three Months Ended June 30, |
(in millions, except percentages)
(*) |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
Unique active users |
|
|
135 |
|
|
|
107 |
|
|
|
109 |
|
|
|
84 |
|
Gross merchandise volume |
|
$ |
19,939 |
|
|
$ |
16,216 |
|
|
$ |
10,506 |
|
|
$ |
8,551 |
|
Number of items sold |
|
|
634 |
|
|
|
542 |
|
|
|
325 |
|
|
|
275 |
|
Number of items shipped |
|
|
620 |
|
|
|
518 |
|
|
|
319 |
|
|
|
264 |
|
Total payment volume |
|
$ |
79,051 |
|
|
$ |
55,513 |
|
|
$ |
42,064 |
|
|
$ |
30,194 |
|
Total volume of payments on marketplace (**) |
|
$ |
21,024 |
|
|
$ |
17,090 |
|
|
$ |
11,074 |
|
|
$ |
9,019 |
|
Total payment transactions |
|
|
4,007 |
|
|
|
2,353 |
|
|
|
2,132 |
|
|
|
1,262 |
|
NIMAL (***) |
|
|
33.8 |
% |
|
|
28.0 |
% |
|
|
36.8 |
% |
|
|
29.8 |
% |
Capital expenditures |
|
$ |
203 |
|
|
$ |
237 |
|
|
$ |
114 |
|
|
$ |
100 |
|
Depreciation and amortization |
|
$ |
254 |
|
|
$ |
184 |
|
|
$ |
128 |
|
|
$ |
100 |
|
(*) Figures have been calculated using rounded amounts. Growth
calculations based on this table may not total due to
rounding. |
(**) As from January 1, 2022, we no longer disclose our total
volume of payments on marketplace net of shipping and financing
fees. Given the growth of our shipping and fintech businesses,
management believes that including shipping and financing fees in
the calculation of total volume of payments on marketplace results
in a more accurate indicator of that performance on a go-forward
basis. Consequently, total volume of payment on marketplace for the
six and three month periods ended June 30, 2022 has been recast to
include shipping and financing fees. |
(***) Net interest margins after losses (“NIMAL”) represents the
annualized ratio between the total credits revenues less funding
costs and provision for doubtful accounts for the period and total
average gross loans receivable of the period. Management uses NIMAL
to monitor how effectively we are pricing and managing the credit
products relative to their risk and setting targets. Accordingly,
we believe NIMAL provides useful information to investors and
others related to the Company’s risk appetite through the different
periods and showing how effectively we are pricing risk. |
|
Year-over-year USD Revenue Growth Rates by
Quarter
Consolidated Net Revenues |
Q2’22 |
|
Q3’22 |
|
Q4’22 |
|
Q1’23 |
|
Q2’23 |
Brazil |
53 |
% |
|
35 |
% |
|
36 |
% |
|
26 |
% |
|
23 |
% |
Argentina |
62 |
% |
|
72 |
% |
|
50 |
% |
|
39 |
% |
|
30 |
% |
Mexico |
65 |
% |
|
60 |
% |
|
55 |
% |
|
62 |
% |
|
64 |
% |
|
|
|
|
|
|
|
|
|
|
Commerce |
23 |
% |
|
20 |
% |
|
22 |
% |
|
31 |
% |
|
38 |
% |
Fintech |
113 |
% |
|
94 |
% |
|
73 |
% |
|
40 |
% |
|
24 |
% |
Gross Merchandise Volume |
Q2’22 |
|
Q3’22 |
|
Q4’22 |
|
Q1’23 |
|
Q2’23 |
Brazil |
28 |
% |
|
20 |
% |
|
29 |
% |
|
29 |
% |
|
24 |
% |
Argentina |
33 |
% |
|
35 |
% |
|
13 |
% |
|
15 |
% |
|
12 |
% |
Mexico |
30 |
% |
|
22 |
% |
|
35 |
% |
|
41 |
% |
|
52 |
% |
Total Payment Volume |
Q2’22 |
|
Q3’22 |
|
Q4’22 |
|
Q1’23 |
|
Q2’23 |
On-Platform |
25 |
% |
|
22 |
% |
|
23 |
% |
|
23 |
% |
|
23 |
% |
Off-Platform |
105 |
% |
|
71 |
% |
|
58 |
% |
|
57 |
% |
|
46 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-over-year Local Currency Revenue
Growth Rates by Quarter
Consolidated Net Revenues |
Q2’22 |
|
Q3’22 |
|
Q4’22 |
|
Q1’23 |
|
Q2’23 |
Brazil |
42 |
% |
|
35 |
% |
|
28 |
% |
|
26 |
% |
|
23 |
% |
Argentina |
104 |
% |
|
140 |
% |
|
143 |
% |
|
151 |
% |
|
156 |
% |
Mexico |
66 |
% |
|
62 |
% |
|
46 |
% |
|
48 |
% |
|
45 |
% |
|
|
|
|
|
|
|
|
|
|
Commerce |
23 |
% |
|
33 |
% |
|
36 |
% |
|
54 |
% |
|
65 |
% |
Fintech |
107 |
% |
|
115 |
% |
|
93 |
% |
|
64 |
% |
|
48 |
% |
Gross Merchandise Volume |
Q2’22 |
|
Q3’22 |
|
Q4’22 |
|
Q1’23 |
|
Q2’23 |
Brazil |
19 |
% |
|
20 |
% |
|
22 |
% |
|
28 |
% |
|
25 |
% |
Argentina |
66 |
% |
|
87 |
% |
|
83 |
% |
|
107 |
% |
|
119 |
% |
Mexico |
30 |
% |
|
23 |
% |
|
28 |
% |
|
28 |
% |
|
34 |
% |
Total Payment Volume |
Q2’22 |
|
Q3’22 |
|
Q4’22 |
|
Q1’23 |
|
Q2’23 |
On-Platform |
42 |
% |
|
39 |
% |
|
44 |
% |
|
48 |
% |
|
53 |
% |
Off-Platform |
135 |
% |
|
122 |
% |
|
121 |
% |
|
121 |
% |
|
129 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conference Call and Webcast
The Company will host an earnings video as well
as a conference call and audio webcast for any questions that
investors may have on August 2nd, 2023, at 5:00 p.m. Eastern
Time.
In order to access our video webcast and the
live audio, investors, analysts and the market in general, may
access the following link at
https://edge.media-server.com/mmc/p/zrgzoi9j and register to attend
the live event.
To participate in our conference call,
investors, analysts and the market in general may access the
following link at
https://register.vevent.com/register/BI3eb2a110fbb24146aacfe5423d272068
to be provided with the dial-in number and personal pin code to
join the conference call.
Access to our video webcast and the live audio
will be available in 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
Unique Active User – New or existing user who
performed at least one of the following actions during the reported
period: (1) made one purchase, or reservation, or asked one
question on MercadoLibre Marketplace or Classified Marketplace (2)
maintained an active listing on MercadoLibre Marketplace or
Classified Marketplace (3) maintained an active account in Mercado
Shops (4) made a payment, money transfer, collection and/or advance
using Mercado Pago (5) maintained an outstanding credit line
through Mercado Credito or (6) maintained a balance of more than $5
invested in a Mercado Fondo asset management account.
Unique Fintech User – Users who engage in at
least one of the following services within the quarter: wallet
payments online, in app or in store; transfers; withdrawals;
consumer or merchant credit borrowers; card users; fintech sellers;
and fintech active products such as asset management and insurtech
users.
Foreign Exchange (“FX”) Neutral – Calculated by
using the average monthly exchange rate of each month of 2022 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 Classifieds transactions.
Total payment transactions – Measure of the
number of all transactions paid for 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.
Total payment volume – Measure of total U.S.
dollar sum of all transactions paid for using Mercado Pago,
including marketplace and non-marketplace transactions.
MPOS – Mobile point-of-sale is a dedicated
wireless device that performs the functions of a cash register or
electronic point-of-sale terminal wirelessly.
Commerce – Revenues from core marketplace fees,
shipping fees, first-party sales, ad sales, classified fees and
other ancillary services.
Fintech – Revenues includes fees from
off-platform transactions, financing fees, interest earned from
merchant and consumer credits and sale of MPOS.
Items sold – Measure of the number of items that
were sold/purchased through the Mercado Libre Marketplace,
excluding Classifieds items.
Items shipped – Measure of the number of items
that were shipped through our shipping service.
G&A - General and administrative
expenses
Local Currency Growth Rates – Refer to FX
Neutral definition.
Net income margin – Defined as net income as a
percentage of net revenues.
Operating margin – Defined as income from
operations as a percentage of net revenues.
Net Interest Margins After Losses (NIMAL)
– NIMAL is the spread between credit revenues and
the expenses associated with provisions for doubtful accounts
and funding costs, and usually expressed as a percentage of the
average portfolio for the period.
Non-performing loan (NPL) ratio - Shows the
percentage of the loan portfolio that is not being paid
on-time.
About MercadoLibre
Founded in 1999, MercadoLibre is the largest
online commerce ecosystem in Latin America, serving as an
integrated regional platform and as a provider of the necessary
digital and technology-based tools that allow businesses and
individuals to trade products and services in the region. The
Company enables commerce through its marketplace platform which
allows users to buy and sell in most of Latin America.
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 MercadoLibre, Inc. logo is available at
https://resource.globenewswire.com/Resource/Download/6ab227b7-693f-4b17-b80c-552ae45c76bf?size=0
Forward-Looking Statements
Any statements herein regarding MercadoLibre,
Inc. that are not historical or current facts are forward-looking
statements. These forward-looking statements convey MercadoLibre,
Inc.’s current expectations or forecasts of future events.
Forward-looking statements regarding MercadoLibre, Inc. involve
known and unknown risks, uncertainties and other factors that may
cause MercadoLibre, Inc.’s actual results, performance or
achievements to be materially different from any future results,
performances or achievements expressed or implied by the
forward-looking statements. Certain of these risks and
uncertainties are described in the “Risk Factors,” “Forward-Looking
Statements” and “Cautionary Note Regarding Forward-Looking
Statements” sections of MercadoLibre, Inc.’s annual report on Form
10-K for the year ended December 31, 2022, and any of MercadoLibre,
Inc.’s other applicable filings with the Securities and
Exchange Commission. Unless required by law, MercadoLibre,
Inc. undertakes no obligation to publicly update or revise any
forward-looking statements to reflect circumstances or events after
the date hereof.
MercadoLibre, Inc. - Interim
Condensed Consolidated Balance Sheets as of
June 30, 2023 and
December 31, 2022(In millions of
U.S. dollars, except par value) (Unaudited)
|
June 30,2023 |
|
December 31,2022 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
1,860 |
|
|
$ |
1,910 |
|
Restricted cash and cash equivalents |
|
1,964 |
|
|
|
1,453 |
|
Short-term investments |
|
2,839 |
|
|
|
2,339 |
|
Accounts receivable, net |
|
160 |
|
|
|
130 |
|
Credit card receivables and other means of payments, net |
|
2,835 |
|
|
|
2,946 |
|
Loans receivable, net of allowances of $1,095 and $1,074 |
|
2,051 |
|
|
|
1,704 |
|
Prepaid expenses |
|
55 |
|
|
|
38 |
|
Inventories |
|
236 |
|
|
|
152 |
|
Customer crypto-assets safeguarding assets |
|
21 |
|
|
|
15 |
|
Other assets |
|
269 |
|
|
|
266 |
|
Total current assets |
|
12,290 |
|
|
|
10,953 |
|
Non-current assets: |
|
|
|
Long-term investments |
|
149 |
|
|
|
322 |
|
Loans receivable, net of allowances of $28 and $30 |
|
76 |
|
|
|
32 |
|
Property and equipment, net |
|
1,090 |
|
|
|
993 |
|
Operating lease right-of-use assets |
|
779 |
|
|
|
656 |
|
Goodwill |
|
166 |
|
|
|
153 |
|
Intangible assets, net |
|
22 |
|
|
|
25 |
|
Deferred tax assets |
|
348 |
|
|
|
346 |
|
Other assets |
|
323 |
|
|
|
256 |
|
Total non-current assets |
|
2,953 |
|
|
|
2,783 |
|
Total assets |
$ |
15,243 |
|
|
$ |
13,736 |
|
Liabilities |
|
|
|
Current liabilities: |
|
|
|
Accounts payable and accrued expenses |
$ |
1,831 |
|
|
$ |
1,393 |
|
Funds payable to customers |
|
3,734 |
|
|
|
3,454 |
|
Amounts payable due to credit and debit card transactions |
|
585 |
|
|
|
483 |
|
Salaries and social security payable |
|
394 |
|
|
|
401 |
|
Taxes payable |
|
447 |
|
|
|
414 |
|
Loans payable and other financial liabilities |
|
2,286 |
|
|
|
2,131 |
|
Operating lease liabilities |
|
166 |
|
|
|
142 |
|
Customer crypto-assets safeguarding liabilities |
|
21 |
|
|
|
15 |
|
Other liabilities |
|
152 |
|
|
|
129 |
|
Total current liabilities |
|
9,616 |
|
|
|
8,562 |
|
Non-current liabilities: |
|
|
|
Amounts payable due to credit and debit card transactions |
|
56 |
|
|
|
5 |
|
Loans payable and other financial liabilities |
|
2,481 |
|
|
|
2,627 |
|
Operating lease liabilities |
|
595 |
|
|
|
514 |
|
Deferred tax liabilities |
|
112 |
|
|
|
106 |
|
Other liabilities |
|
131 |
|
|
|
95 |
|
Total non-current liabilities |
|
3,375 |
|
|
|
3,347 |
|
Total liabilities |
$ |
12,991 |
|
|
$ |
11,909 |
|
Commitments and contingencies |
|
|
|
Equity |
|
|
|
Common stock, $0.001 par value, 110,000,000 shares authorized,
50,092,669 and 50,257,751 shares issued and outstanding |
$ |
— |
|
|
$ |
— |
|
Additional paid-in capital |
|
2,309 |
|
|
|
2,309 |
|
Treasury stock |
|
(1,138 |
) |
|
|
(931 |
) |
Retained earnings |
|
1,376 |
|
|
|
913 |
|
Accumulated other comprehensive loss |
|
(295 |
) |
|
|
(464 |
) |
Total Equity |
|
2,252 |
|
|
|
1,827 |
|
Total Liabilities and Equity |
$ |
15,243 |
|
|
$ |
13,736 |
|
|
|
|
|
|
|
|
|
MercadoLibre, Inc.Interim
Condensed Consolidated Statements
of IncomeFor the six and
three-month periods ended
June 30, 2023 and
2022(In millions of U.S. dollars,
except for share data) (Unaudited)
|
Six Months Ended June 30, |
|
Three Months Ended June 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net service revenues |
$ |
5,814 |
|
|
$ |
4,329 |
|
|
$ |
3,051 |
|
|
$ |
2,332 |
|
Net product revenues |
|
638 |
|
|
|
516 |
|
|
|
364 |
|
|
|
265 |
|
Net revenues |
|
6,452 |
|
|
|
4,845 |
|
|
|
3,415 |
|
|
|
2,597 |
|
Cost of net revenues |
|
(3,196 |
) |
|
|
(2,488 |
) |
|
|
(1,695 |
) |
|
|
(1,313 |
) |
Gross profit |
|
3,256 |
|
|
|
2,357 |
|
|
|
1,720 |
|
|
|
1,284 |
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
Product and technology development |
|
(749 |
) |
|
|
(496 |
) |
|
|
(368 |
) |
|
|
(262 |
) |
Sales and marketing |
|
(766 |
) |
|
|
(583 |
) |
|
|
(383 |
) |
|
|
(296 |
) |
Provision for doubtful accounts |
|
(474 |
) |
|
|
(557 |
) |
|
|
(222 |
) |
|
|
(303 |
) |
General and administrative |
|
(369 |
) |
|
|
(332 |
) |
|
|
(189 |
) |
|
|
(173 |
) |
Total operating expenses |
|
(2,358 |
) |
|
|
(1,968 |
) |
|
|
(1,162 |
) |
|
|
(1,034 |
) |
Income from operations |
|
898 |
|
|
|
389 |
|
|
|
558 |
|
|
|
250 |
|
|
|
|
|
|
|
|
|
Other income (expenses): |
|
|
|
|
|
|
|
Interest income and other financial gains |
|
349 |
|
|
|
77 |
|
|
|
188 |
|
|
|
46 |
|
Interest expense and other financial losses |
|
(186 |
) |
|
|
(129 |
) |
|
|
(92 |
) |
|
|
(73 |
) |
Foreign currency losses, net |
|
(269 |
) |
|
|
(63 |
) |
|
|
(182 |
) |
|
|
(60 |
) |
Net income before income tax expense and equity in earnings of
unconsolidated entity |
|
792 |
|
|
|
274 |
|
|
|
472 |
|
|
|
163 |
|
|
|
|
|
|
|
|
|
Income tax expense |
|
(332 |
) |
|
|
(85 |
) |
|
|
(210 |
) |
|
|
(39 |
) |
Equity in earnings of unconsolidated entity |
|
3 |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
Net income |
$ |
463 |
|
|
$ |
188 |
|
|
$ |
262 |
|
|
$ |
123 |
|
|
Six Months Ended June 30, |
|
Three Months Ended June 30, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Basic earning per share |
|
|
|
|
|
|
|
Basic net income |
|
|
|
|
|
|
|
Available to shareholders per common share |
$ |
9.23 |
|
$ |
3.73 |
|
$ |
5.22 |
|
$ |
2.43 |
Weighted average of outstanding common shares |
|
50,203,652 |
|
|
50,386,519 |
|
|
50,162,687 |
|
|
50,364,529 |
Diluted earning per share |
|
|
|
|
|
|
|
Diluted net income |
|
|
|
|
|
|
|
Available to shareholders per common share |
$ |
9.12 |
|
$ |
3.73 |
|
$ |
5.16 |
|
$ |
2.43 |
Weighted average of outstanding common shares |
|
51,193,920 |
|
|
50,386,519 |
|
|
51,152,955 |
|
|
50,364,529 |
|
|
|
|
|
|
|
|
|
|
|
|
MercadoLibre, Inc.Interim
Condensed Consolidated Statements of Cash
FlowsFor the
six-month periods ended
June 30, 2023 and
2022 (In millions of U.S. dollars)
(Unaudited)
|
Six Months Ended June 30, |
|
|
2023 |
|
|
|
2022 |
|
Cash flows from operations: |
|
|
|
Net income |
$ |
463 |
|
|
$ |
188 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
Equity in earnings of unconsolidated entity |
|
(3 |
) |
|
|
1 |
|
Unrealized foreign currency losses, net |
|
305 |
|
|
|
134 |
|
Impairment of digital assets |
|
— |
|
|
|
11 |
|
Depreciation and amortization |
|
254 |
|
|
|
184 |
|
Accrued interest income |
|
(147 |
) |
|
|
(65 |
) |
Non cash interest expense, convertible notes amortization of debt
discount and amortization of debt issuance costs and other
charges |
|
117 |
|
|
|
154 |
|
Provision for doubtful accounts |
|
474 |
|
|
|
557 |
|
Results on derivative instruments |
|
21 |
|
|
|
22 |
|
Long term retention program (“LTRP”) accrued compensation |
|
83 |
|
|
|
35 |
|
Deferred income taxes |
|
24 |
|
|
|
(67 |
) |
Changes in assets and liabilities: |
|
|
|
Accounts receivable |
|
(38 |
) |
|
|
(32 |
) |
Credit card receivables and other means of payments |
|
200 |
|
|
|
(642 |
) |
Prepaid expenses |
|
(14 |
) |
|
|
(36 |
) |
Inventories |
|
(66 |
) |
|
|
81 |
|
Other assets |
|
(33 |
) |
|
|
(81 |
) |
Payables and accrued expenses |
|
308 |
|
|
|
32 |
|
Funds payable to customers |
|
119 |
|
|
|
119 |
|
Amounts payable due to credit and debit card transactions |
|
127 |
|
|
|
80 |
|
Other liabilities |
|
(47 |
) |
|
|
(55 |
) |
Interest received from investments |
|
124 |
|
|
|
54 |
|
Net cash provided by operating activities |
|
2,271 |
|
|
|
674 |
|
Cash flows from investing activities: |
|
|
|
Purchases of investments |
|
(10,046 |
) |
|
|
(6,190 |
) |
Proceeds from sale and maturity of investments |
|
9,923 |
|
|
|
5,043 |
|
Payments from settlements of derivative instruments |
|
(14 |
) |
|
|
(7 |
) |
Purchases of intangibles assets |
|
— |
|
|
|
(1 |
) |
Changes in principal loans receivable, net |
|
(866 |
) |
|
|
(1,170 |
) |
Investments of property and equipment |
|
(203 |
) |
|
|
(236 |
) |
Net cash used in investing activities |
|
(1,206 |
) |
|
|
(2,561 |
) |
Cash flows from financing activities: |
|
|
|
Proceeds from loans payable and other financial liabilities |
|
12,317 |
|
|
|
7,315 |
|
Payments on loans payable and other financing liabilities |
|
(12,569 |
) |
|
|
(6,646 |
) |
Payments of finance lease obligations |
|
(13 |
) |
|
|
(9 |
) |
Common Stock repurchased |
|
(207 |
) |
|
|
(74 |
) |
Net cash (used in) provided by financing activities |
|
(472 |
) |
|
|
586 |
|
Effect of exchange rate changes on cash, cash equivalents,
restricted cash and cash equivalents |
|
(132 |
) |
|
|
(94 |
) |
Net increase (decrease) in cash, cash equivalents, restricted cash
and cash equivalents |
|
461 |
|
|
|
(1,395 |
) |
Cash, cash equivalents, restricted cash and cash equivalents,
beginning of the period |
|
3,363 |
|
|
|
3,648 |
|
Cash, cash equivalents, restricted cash and cash equivalents, end
of the period |
$ |
3,824 |
|
|
$ |
2,253 |
|
|
|
|
|
|
|
|
|
Financial results of reporting
segments
|
Three Months Ended June 30, 2023 |
|
Brazil |
|
Argentina |
|
Mexico |
|
Other Countries |
|
Total |
|
(In millions) |
Net revenues |
$ |
1,780 |
|
|
$ |
771 |
|
|
$ |
703 |
|
|
$ |
161 |
|
|
$ |
3,415 |
|
Direct costs |
|
(1,331 |
) |
|
|
(436 |
) |
|
|
(524 |
) |
|
|
(148 |
) |
|
|
(2,439 |
) |
Direct contribution |
|
449 |
|
|
|
335 |
|
|
|
179 |
|
|
|
13 |
|
|
|
976 |
|
|
|
|
|
|
|
|
|
|
|
Operating expenses and indirect costs of net revenues |
|
|
|
|
|
|
|
|
|
(418 |
) |
Income from operations |
|
|
|
|
|
|
|
|
|
558 |
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses): |
|
|
|
|
|
|
|
|
|
Interest income and other financial gains |
|
|
|
|
|
|
|
|
|
188 |
|
Interest expense and other financial losses |
|
|
|
|
|
|
|
|
|
(92 |
) |
Foreign currency losses, net |
|
|
|
|
|
|
|
|
|
(182 |
) |
Net income before income tax expense and equity in earnings of
unconsolidated entity |
|
|
|
|
|
|
|
|
$ |
472 |
|
|
Three Months Ended June 30, 2022 |
|
Brazil |
|
Argentina |
|
Mexico |
|
Other Countries |
|
Total |
|
(In millions) |
Net revenues |
$ |
1,451 |
|
|
$ |
594 |
|
|
$ |
428 |
|
|
$ |
124 |
|
|
$ |
2,597 |
|
Direct costs |
|
(1,198 |
) |
|
|
(372 |
) |
|
|
(363 |
) |
|
|
(117 |
) |
|
|
(2,050 |
) |
Direct contribution |
|
253 |
|
|
|
222 |
|
|
|
65 |
|
|
|
7 |
|
|
|
547 |
|
|
|
|
|
|
|
|
|
|
|
Operating expenses and indirect costs of net revenues |
|
|
|
|
|
|
|
|
|
(297 |
) |
Income from operations |
|
|
|
|
|
|
|
|
|
250 |
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses): |
|
|
|
|
|
|
|
|
|
Interest income and other financial gains |
|
|
|
|
|
|
|
|
|
46 |
|
Interest expense and other financial losses |
|
|
|
|
|
|
|
|
|
(73 |
) |
Foreign currency losses, net |
|
|
|
|
|
|
|
|
|
(60 |
) |
Net income before income tax expense and equity in earnings of
unconsolidated entity |
|
|
|
|
|
|
|
|
$ |
163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Measures of Financial
Performance
To supplement our unaudited interim condensed
consolidated financial statements presented in accordance with U.S.
GAAP, we present earnings before interest income and other
financial gains, interest expense and other financial losses,
foreign currency losses, income tax expense, depreciation and
amortization and equity in earnings of unconsolidated entity
(“Adjusted EBITDA”), net debt and foreign exchange (“FX”) neutral
measures as non-GAAP measures. Reconciliation of these non-GAAP
financial measures to the most comparable U.S. GAAP financial
measures can be found in the tables below.
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.
We believe that reconciliation of these non-GAAP
measures to the most directly comparable GAAP measure provides
investors an overall understanding of our current financial
performance and its prospects for the future.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure
that represents our net income, adjusted to eliminate the effect of
depreciation and amortization charges, interest income and other
financial gains, interest expense and other financial losses,
foreign currency losses, income tax expense and equity in earnings
of an unconsolidated entity. We have included this non-GAAP
financial measure because it is used by our Management to evaluate
our operating performance and trends, make strategic decisions and
the calculation of leverage ratios. Accordingly, we believe this
measure provides useful information to investors and others in
understanding and evaluating our operating results in the same
manner as our Management. In addition, it provides a useful measure
for period-to-period comparisons of our business, as it removes the
effect of certain items.
The following table presents a reconciliation of
net income to Adjusted EBITDA for the period indicated (in millions
of U.S. dollars):
|
Three Months Ended June 30, |
|
|
2023 |
|
|
|
2022 |
|
Net income |
$ |
262 |
|
|
$ |
123 |
|
Adjustments: |
|
|
|
Depreciation and amortization |
|
128 |
|
|
|
100 |
|
Interest income and other financial gains |
|
(188 |
) |
|
|
(46 |
) |
Interest expense and other financial losses |
|
92 |
|
|
|
73 |
|
Foreign currency losses, net |
|
182 |
|
|
|
60 |
|
Income tax expense |
|
210 |
|
|
|
39 |
|
Equity in earnings of unconsolidated entity |
|
— |
|
|
|
1 |
|
Adjusted EBITDA |
$ |
686 |
|
|
$ |
350 |
|
|
|
|
|
|
|
|
|
Net debt
We define net debt as total debt which includes
current and non-current loans payable and other financial
liabilities and current and non-current operating lease
liabilities, less cash and cash equivalents, short-term investments
and long-term investments, excluding foreign government debt
securities held in guarantee, securitization transactions and
equity securities held at cost. We have included this non-GAAP
financial measure because it is used by our Management to analyze
our current leverage ratios and set targets to be met, which will
also impact other components of the Company’s balance sheet, cash
flows and income statement. Accordingly, we believe this measure
provides useful information to investors and other market
participants in showing the evolution of the Company’s indebtedness
and its capability of repayment as a means to, alongside other
measures, monitor our leverage based on widely-used measures.
The following table presents a reconciliation of
net debt for each of the periods indicated (in millions of U.S.
dollars):
|
June 30, 2023 |
|
December 31, 2022 |
Current Loans payable and other financial liabilities |
$ |
2,286 |
|
$ |
2,131 |
Non-current Loans payable and other financial liabilities |
|
2,481 |
|
|
2,627 |
Current Operating lease liabilities |
|
166 |
|
|
142 |
Non-current Operating lease liabilities |
|
595 |
|
|
514 |
Total debt |
$ |
5,528 |
|
$ |
5,414 |
Less: |
|
|
|
Cash and cash equivalents |
$ |
1,860 |
|
$ |
1,910 |
Short-term investments (1) |
|
1,440 |
|
|
1,120 |
Long-term investments (2) |
|
68 |
|
|
245 |
Net debt |
$ |
2,160 |
|
$ |
2,139 |
(1) Excludes foreign government debt securities
held in guarantee and investments held in VIEs as a consequence of
securitization transactions.(2) Excludes investments held in VIEs
as a consequence of securitization transactions and equity
securities held at cost.
FX neutral
We believe that FX neutral 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 2022 and
applying them to the corresponding months in 2023, 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, 2023 (in millions of U.S.
dollars, except for percentages):
|
|
Three Months Ended June 30, |
|
|
As reported |
|
FX Neutral Measures |
|
As reported |
|
|
(In millions, except percentages) |
|
|
2023 |
|
|
|
2022 |
|
|
PercentageChange |
|
|
2023 |
|
|
|
2022 |
|
|
PercentageChange |
|
|
(Unaudited) |
|
|
|
(Unaudited) |
|
|
Net revenues |
|
$ |
3,415 |
|
|
$ |
2,597 |
|
|
31.5 |
% |
|
$ |
4,083 |
|
|
$ |
2,597 |
|
|
57.2 |
% |
Cost of net revenues |
|
|
(1,695 |
) |
|
|
(1,313 |
) |
|
29.1 |
% |
|
|
(1,973 |
) |
|
|
(1,313 |
) |
|
50.3 |
% |
Gross profit |
|
|
1,720 |
|
|
|
1,284 |
|
|
34.0 |
% |
|
|
2,110 |
|
|
|
1,284 |
|
|
64.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
(1,162 |
) |
|
|
(1,034 |
) |
|
12.4 |
% |
|
|
(1,422 |
) |
|
|
(1,034 |
) |
|
37.5 |
% |
Income from operations |
|
$ |
558 |
|
|
$ |
250 |
|
|
123.2 |
% |
|
$ |
688 |
|
|
$ |
250 |
|
|
175.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTACT: MercadoLibre, Inc.
Investor Relations
investor@mercadolibre.com
http://investor.mercadolibre.com
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