MELI reports 4th Quarter Earnings

Third Quarter 2020 Financial Highlights

-Net revenues for the third quarter were $1,115.7 million, a year-over-year increase of 85.0% in USD and 148.5% on an FX neutral basis, mainly attributable to commerce net revenues that continued accelerating and reached the highest historical growth rate.

-Commerce revenues increased 109.3% year-over-year in USD reaching $724.5 million, while Fintech revenues increased 52.3% year-over-year in USD reaching $391.2 million.

-Gross profit was $480.2 million with a margin of 43.0%, compared to 47.2% in the third quarter of 2019.
Total operating expenses were $397.1 million, an increase of 8.4% year-over-year in USD. As a percentage of revenues, operating expenses were 35.6%, compared to 60.7% during the third quarter of 2019.

-Income from operations was $83.1 million, compared to a loss of $81.9 million during the third quarter of 2019. As a percentage of revenues, income from operations reached 7.4%.

Third Quarter 2020 Business Highlights

-Unique active users grew 92.2% reaching 76.1 million.

-Gross merchandise volume (“GMV”) reached $5.9 billion, representing an increase of 62.1% in USD and 117.1% on an FX neutral basis.

-Items sold reached 205.7 million, growing 109.9% year-over-year.

-Live listings offered on Mercado Libre’s marketplace reached 303.9 million, a 22.3% year-over-year growth.

-Mobile gross merchandise volume grew 283.8% year-over-year on an FX neutral basis, reaching 70.0% of GMV.

-Even through these trying times and challenging increases in managed volumes, Mercado Envios was able to ship 187.6 million items during the quarter without any significant disruptions, representing a 131.1% year-over-year increase.

-Total payment volume (“TPV”) through Mercado Pago reached $14.5 billion, a year-over-year increase of 91.7% in USD and 161.2% on an FX neutral basis. Total payment transactions increased 146.6% year-over-year, totaling 559.7 million transactions for the quarter.

Full Press Release:

http://investor.mercadolibre.com/news-releases/news-release-…

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Sorry folks, I copy and pasted Q3, not Q4.

? Net revenues for the fourth quarter were $1.3 billion, a year-over-year increase of 96.9% in
USD and 148.5% on an FX neutral basis.
? Commerce revenues increased 124.2% year-over-year in USD reaching $872.9 million, while
Fintech revenues increased 59.5% year-over-year in USD reaching $454.4 million.
? Gross profit was $489.0 million with a margin of 36.8%, compared to 45.7% in the fourth
quarter of 2019.
? Total operating expenses were $514.2 million, an increase of 36% year-over-year in USD. As a
percentage of revenues, operating expenses were 38.7%, compared to 55.9% during the
fourth quarter of 2019.
? Loss from operations was $25.1 million, compared to a loss of $68.9 million during the prior
year. As a percentage of revenues, income from operations was (1.9)%.

Business Highlights

Unique active users grew by 71.3% year-over-year, reaching 74.0 million.
? Gross merchandise volume (“GMV”) grew to $6.6 billion, representing an increase of 69.6% in USD and
109.7% on an FX neutral basis.
? Items sold reached 229.4 million, increasing by 109.5% year-over-year.
? Live listings offered on MercadoLibre’s marketplace reached 275.4 million.
? Mobile gross merchandise volume grew by 271.4% year-over-year on an FX neutral basis, reaching 72.1%
of GMV.
? Mercado Envios shipped 214.0 million items during the quarter, representing a 131.2% year-over-year
increase, totaling almost 650 million deliveries for the full year 2020

4th Quarter Presentation Below

http://investor.mercadolibre.com/static-files/a68e6258-3742-…

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Everything looks pretty good. The growth the companies continues to show is pretty unbelievable. Love the Pago business. The one thing thats that doesn’t look so good is gross margins. These are down from 45%->36.8%. does anybody know if they explained this or if it was expected? Does anything FX related go into cost of revenue?

Bnh

There was an FX charge plus a major impact of constant currency variance within reported numbers in USD vs Local $. Also there were some write downs on loan financing in Brazil and Argentina I think.
Ant

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I understood it as they took this margin hit both for tactical reasons and as on ongoing strategy to build upon their 1P business to close on some product and pricing gaps they see in their 3P listings as well as to keep customers become sticky by doubling down on faster shipping during the peak season.

This is what I noted as their reasons for Gross margin drop from their prepared remarks and then in Q&A

“Gross profit for the quarter was $489 million with a margin of 37%, down from 46% during the fourth quarter of 2019. The decrease in gross profit margin resulted from an increase in cost of goods sold from our 1P business with aggressive holiday season pure product margins and from shipping operation costs as we invested in excess capacity to ensure best-in-class service levels on our managed network during the peak shopping season.”

And following response to a question around 1P impact on margins going forward and expectations around investments for excess capacity

“So I would say that we are definitely not yet at what we think the long-term steady-state margin structure for 1P can be. We are still building out scale.

There’s a category mix that is tilted to some lower-margin categories like CPG. As we build out more 1P capabilities in higher-margin categories, that will also help. But even if you look at our PPMs, our product margins, they are still, we believe, lower than they will be as we gain more purchasing scale, we optimize processes, etc. So this is a business that we’re investing in to build it out.

And like most businesses in the early stages, we invest aggressively because we trust, going forward, we will be able to optimize the economics around that. So certainly the longer-term story for 1P should be of margin improvements versus where it is today at a relatively low scale still. On shipping, very quickly, I think what we intended to mean by excess capacity is leading into the peak holiday season. I think we tend to err on the side of making sure that we are – we have enough excess capacity so that people don’t receive their holiday purchases after Christmas.”

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