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MercadoLibre’s 3rd quarter ’18 financial results

By Victoria Haviland 0 Comments NEWS, News

A leader in Latin American e-commerce technology, MercadoLibre, Inc. has released its financial results for the third quarter of 2018, September 30.

Pedro Arnt, Chief Financial Officer of MercadoLibre, Inc., commented, “I am pleased to report another quarter of solid performance in our business, across our key business units. During the quarter we have: strengthened our online-to-offline payments offering, successfully expanded the financial services portfolio, once again confirmed the great resiliency of our marketplace business, and made important strides with the development of our proprietary logistics network. All this has translated into a strong top-line growth, as gross billings grew 48% on an FX neutral basis year over year. And, from a bottom line perspective, operating losses showed a 61% reduction versus last quarter as we delivered breakeven EBITDA during Q3.”

Third Quarter 2018 Business Highlights1

  • Total payment volume through MercadoPago reached $4.6 billion, a year-over-year increase of 24.1% in USD and 69.5% on an FX neutral basis. Total payment transactions increased 66.7% year-over-year, totaling 103.9 million for the quarter.
  • Successful execution in off-platform payments (online and offline) through merchant services, mobile point-of-sale devices, and mobile wallet business. On a consolidated basis, off-platform total payment volume grew 87.8% year-over-year in USD and 152.1% on an FX neutral basis.
  • In September for the first time ever, MercadoPago not only processed more total payment transactions off-platform than on MELI’s marketplaces, but total payment transactions surpassed the hundred million mark in a single quarter.
  • Mobile-point-of-sale business is quickly becoming one of the fastest growing non-marketplace business units, representing 46.5% of total off-platform payment volume for the quarter and growing total payment volume on a consolidated basis 636% year-over-year on an FX neutral basis.
  • Mobile wallet reached 1 million active payers during the month of September, while total payment volume from mobile wallet in ArgentinaBrazil, and Mexico is growing triple digits year-over-year.
  • Launched asset management in Argentina, the first country where we have begun to offer the entire suite of fintech solutions: mobile point-of-sales devices, QR codes in-store payments, mobile wallet, and asset management.
  • Gross merchandise volume reached almost $3 billion, a 2.6% year-over-year decrease in USD, and a 27.9% year-over-year increase on an FX neutral basis.
  • Items sold reached 83.5 million, growing 12.5% year-over-year versus 55.7% during the same period last year. The decrease year-over-year deceleration is attributable to Brazil with the launch of R$ 5 flat fee on items below R$ 120 and the removal of listings below R$ 6 as we shift incentives for buyers to purchase higher ticket items.
  • Unique buyers grew 9.4% year-over-year versus 16.0% in the second quarter. This declining growth rate is attributable primarily to pricing adjustments we have done in our value proposition, including eliminating low priced ticket items from our platform and making payments mandatory in Chile and Colombia which also affects buyer growth temporarily.
  • Live listings offered on MercadoLibre’s marketplace grew to 168.1 million in the third quarter of 2018, a 58.8% year-over-year increase, surpassing for the second time the 150 million mark.
  • Mobile gross merchandise volume penetration grew 19.5% year-over-year reaching 58.1%.
  • Items shipped through MercadoEnvíos reached 54.3 million, a 30.2% year-over-year increase, driven primarily by increasing our free shipping program. Items shipped in ArgentinaMexicoChile, and Colombia were highlights of the quarter, growing 74.4%, 99.4%, 146.7%, and 83.4% respectively year-over-year.
  • MercadoLibre launched its MELI Flex logistics solution, enabling our sellers to adopt proprietary technology and leverage their existing logistics relationships with small carriers to deliver products within hours in large metropolitan areas within the MercadoEnvíos network.

__________________________________
1 Percentages have been calculated using whole amounts rather than rounded amounts.

Adoption of ASC 606

  • Effective January 1, 2018, the Company adopted ASC 606, Revenue from Contracts with Customers related to revenue recognition (“ASC 606”) issued by the Financial Accounting Standards Board (“FASB”). The Company has adopted ASC 606 using the full retrospective transition method and has accordingly revised its consolidated financial statements for the year ended December 31, 2017, and applicable interim periods within the year ended December 31, 2017, as if ASC 606 had been effective for those periods. Because the Company did not offer free shipping in 2016, net revenue for that year does not need to be recast.
  • As a result of adopting ASC 606, the Company must present net revenue net of amounts paid in connection with the Company’s free shipping initiative rather than including these amounts in the cost of net sales, as previously recorded. For the three-month period ended September 30, 2018, the Company incurred $107.6 million of shipping subsidies that have been netted from revenues.
  • As a result of adopting ASC 606, our net revenues for the periods indicated below have been recast as presented below. Our adoption of 606 does not affect our operating or net income/loss.
In Millions
Gross  YTD 2017*  YTD 2018**  Q3 2017*  Q3 2018**
Billings $   961.1 $   1,328.3 $   370.7 $   462.8
In Millions
Adjustments  YTD 2017*  YTD 2018**  Q3 2017*  Q3 2018**
(Decrease) $   102.6 $   316.7 $   65.7 $   107.6
In Millions
Net  YTD 2017*  YTD 2018**  Q3 2017*  Q3 2018**
Revenues $   858.5 $   1,011.6 $   304.9 $   355.3

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

The tables below present our gross billing and amounts paid by us in connection with our free shipping service.

In Millions
 YTD 2017  YTD 2018  Q3 2017  Q3 2018
Gross
Billings
Brazil $ 569.3 $ 855.8 $ 229.5 $ 309.0
Argentina $ 250.7 $ 303.1 $ 91.3 $ 91.2
Mexico $ 58.3 $ 99.8 $ 22.6 $ 39.1
Venezuela $ 38.3 $ - $ 9.8 $ -
Others $ 44.5 $ 69.7 $ 17.5 $ 23.6
In Millions
 YTD 2017  YTD 2018  Q3 2017  Q3 2018
Adjustments
(Decrease)
Brazil $ 75.8 $ 254.9 $ 52.9 $ 88.2
Argentina $ - $ 17.3 $ - $ 7.5
Mexico $ 24.7 $ 36.3 $ 11.1 $ 10.1
Venezuela $ - $ - $ - $ -
Others $ 2.1 $ 8.2 $ 1.7 $ 1.8
In Millions
 YTD 2017*  YTD 2018**  Q3 2017*  Q3 2018**
Net
Revenues
Brazil $ 493.5 $ 600.8 $ 176.6 $ 220.8
Argentina $ 250.7 $ 285.8 $ 91.3 $ 83.7
Mexico $ 33.6 $ 63.6 $ 11.5 $ 29.0
Venezuela $ 38.3 $ - $ 9.8 $ -
Others $ 42.3 $ 61.5 $ 15.8 $ 21.8

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

Third Quarter 2018 Financial Highlights

  • Net revenues for the third quarter grew to $355.3 million, a year-over-year increase of 16.5% in USD and 58.3% on an FX neutral basis.
  • Enhanced marketplace revenues decreased 0.5% year-over-year in USD, and increased 35.6% on an FX neutral basis, while non-marketplace revenues increased 41.3% year-over-year in USD and 91.4% on an FX neutral basis.
  • Gross profit was $169.7 million with a margin of 47.8%, compared to 57.7% in the third quarter of 2017. Most of the gross margin compression is attributed to an increase in free shipping subsidies.
  • Total operating expenses were $180.7 million, up 21.9% year-over-year. As a percentage of revenues, operating expenses were 50.9%, as compared to 48.6% during the third quarter of 2017.
  • Loss from operations was down 61% versus last quarter to $11.0 million, or 139.9% year-over-year. As a percentage of revenues, loss from operations was 3.1%, as compared to a gain of 9.0% during the third quarter of 2017.
  • Interest income was $8.6 million, a 39.2% decrease year-over-year as a, mainly attributable to a $5.6 million decrease from our financial investments as a result of Argentine Peso devaluation and lower float in Argentina.
  • The company incurred $15.9 million in financial expenses in the third quarter of 2018 mainly attributable to financial interest related to the 2028 Convertible Notes and financial loans in ArgentinaUruguay, and Chile.
  • The foreign exchange gains for the third quarter of 2018 were of $3.9 million, mainly as a consequence of a $5.1 million gain arising from the U.S. Dollar revaluation over our Argentine Peso net liability position in Argentina, partially offset by a $1.3 million loss arising from the appreciation of the Mexican Peso over our U.S. Dollar net asset position in Mexico.
  • Net loss before taxes was $14.3 million, down 139.0% year-over-year.
  • Income tax gain was $4.2 million during the third quarter, yielding a blended tax rate for the period of 29.6%.
  • Net loss as reported for the third quarter was $10.1 million, resulting in basic net loss per share of $0.23.
  • Operating cash flow was $96.6 million. Net increase in cash, restricted cash, and cash equivalents was $553.7 million in during the third quarter of 2018.

The following table summarizes certain key performance metrics for the three months ended September 30th, 2018 and 2017.

Nine-months Periods Ended Three-month Periods Ended
 September 30,  September 30,
(in millions)*  2018  2017 (**)  2018 2017 (**)
Number of confirmed registered users at end of period 248.9 201.2 248.9 201.2
Number of confirmed new registered users during period 36.7 27.0 14.0 10.0
Gross merchandise volume $ 9,271.8 $ 8,131.6 $ 2,995.2 $ 3,075.3
Number of successful items sold 249.1 188.9 83.5 74.2
Number of successful items shipped 159.6 102.4 54.3 41.7
Total payment volume $ 13,153.8 $ 9,388.9 $ 4,552.4 $ 3,667.1
Total volume of payments on marketplace $ 8,324.1 $ 6,620.3 $ 2,720.3 $ 2,592.9
Total payment transactions 263.7 158.2 103.9 62.3
Unique buyers 33.1 27.6 17.9 16.3
Unique sellers 12.9 8.7 4.3 4.6
Capital expenditures $ 72.1 $ 52.1 $ 25.3 $ 17.5
Depreciation and amortization $ 33.9 $ 30.0 $ 11.3 $ 10.9

(*) Figures have been expressed using rounding amounts. Growth calculations using this table may not total due to rounding.
(**) Data for 2017 includes Venezuelan metrics. Please refer to Note 2 of our unaudited interim condensed consolidated financial statements for additional details

Table of Year-over-year USD Revenue Growth Rates by Quarter

Year-over-year Growth rates
Consolidated Net Revenues Q3’17 Q4’17 Q1’18 Q2’18 Q3’18
Brazil 35% 37% 15% 25% 25%
Argentina 30% 42% 43% 14% (8)%
Mexico (3)% 48% 51% 62% 152%

Table of Year-over-year Local Currency Revenue Growth Rates by Quarter

Year-over-year Growth rates
Consolidated Net Revenues Q3’17 Q4’17 Q1’18 Q2’18 Q3’18
Brazil 31% 35% 19% 40% 56%
Argentina 51% 62% 80% 68% 68%
Mexico (7)% 41% 39% 71% 168%

SOURCE MercadoLibre
Edited by V. Haviland

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