MercadoLibre Q1 2023 Results - still in hyper growth

On the heels of their strong close to 2022, (Strong MercadoLibre Q4 2022 results), MercadoLibre - the dual eCommerce and Fintech market leader of Latin America, has produced a stunning set of results for Q1 that even sees some FX neutral acceleration in places. The figures are outstanding from top line revenue growth to bottom line net income expansion. If you are frustrated at the lack of hyper growth opportunities out there and hold concerns over the state of B2B SaaS and are looking for a more consumer oriented play - then this could firmly qualify.

  • Total Net Revenues of $3.0 billion, up 58.4% year-over-year on an FX neutral basis

  • Commerce Revenue of $1.676 billion up 54% YoY on an FX neutral basis

  • Fintech Revenue of $1.361 billion up 64% YoY on an FX neutral basis

  • Gross Profit of $1.536 billion (at 50.6% GM) up 72.6% YoY on an FX neutral basis (up 285 basis points YoY)

  • Income from operations of $340 million, with a 11.2% margin up 188.2% YoY on an FX neutral basis

  • $37.0 billion Total Payment Volume, up 96.1% year-over-year on an FX neutral basis

  • $9.4 billion Gross Merchandise Volume, up 43.3% year-over-year on an FX neutral basis

  • Advertising revenue grew to 1.4% of GMV up 30bps YoY up 62% on an FX neutral basis, (supported by the launch of their Ads console)

  • Financial services has been launched as a full service digital account in Brazil and Mexico and has gone far beyond just payments and digital wallets

  • Total unique active users in the quarter reached 100m




Thanks for the update anthonyms . my main concern with MELI preventing me from starting a position is their credit portfolio and bad debts. For e.g in Q1 they say 28.2% of their $3,049m credit portfolio is gone past 90 days bad debt and a further 9.5% is less than 90days due. they are recognising c$250m as provision for bad debt each quarter but would not this c$1,000m annual run rate pose a huge risk to their free cash flows when those bad debts actually start being recognised on the cashflow statement? i.e in other words is free cashflow likely to suffer from current levels in the future given the current state of the economy and and any incoming credit tightening.


I actually saw this part of their business improving and it isn’t a worry for me in terms of cash flow or liabilities.


Thanks can you elaborate a bit further how you see it improving ? I see circa 250m in bad debts provisions in Q123 vs a similar figure in Q122?
I really would like to take a position but just can’t seem to get comfortable about how to derisk their bad credit portfolio


It’s a good question because the balance sheet is certainly more complex as the payments business has grown.

If you look at the cash flow statement, the biggest swings come from the credit card receivables line. Bad debts provisions, as you point out, have been flat YoY and they hit the income statement as well. So if you see EBIT margins deteriorate significantly, bad debt might have something to do with it. But EBIT margins grew very nicely to 11% this quarter.

If you look at bad debt as a percentage of its credit card portfolio, it is coming down as a percentage and management made it very clear in Q3 that they were going to slow the rate of credit growth. This obviously means payment growth will be slower but it’s the right decision as you originally pointed out due to the tightening of the economy.

So management is well aware of this and bad debt isn’t ballooning. It’s flat YoY and improving compared to the size of the credit book.

Cash flow shot up because of a decrease in credit card receivables. Basically, this means that the company is not extending as much credit. When the credit book is growing fast, the company has to use more cash to support the short term loans. But now that they are cracking down a little more on credit terms and volume, cash flow improved. It’s a valid concern but the evidence so far points to the fact that management has things under control.


Hi Student007 - yep actually it was the exact same points that fish13 raised.

  1. credit held level but the business increased making it a relatively a diminished issue (as a percentage and ratio)
  2. they have been consciously holding back from extending credit and risk exposure
  3. their profitability and cashflow improvements are enabling them to withstand the credit exposure better