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, 2020.

Pedro Arnt, Chief Financial Officer of MercadoLibre, Inc., commented, “The pandemic generated significant changes in consumer behavior, which translated into a new milestone in the penetration of e-commerce and online payments in the region. We continue to focus on the wellbeing of our teams, and we are proud to report that we’ve been able to provide an uninterrupted operation of our commerce and fintech solutions throughout the second quarter, helping millions of merchants and buyers to safely transact.”

Second Quarter 2020 Business Highlights

  • Unique active users grew 45.2% reaching 51.5 million.
  • Gross merchandise volume (“GMV”) reached $5.0 billion, representing an increase of 48.5% in USD and 101.5% on an FX neutral basis.
  • Items sold reached 178.5 million, growing 101.4% year-over-year.
  • Live listings offered on MercadoLibre’s marketplace reached 289.0 million, a 26.2% year-over-year growth.
  • Mobile gross merchandise volume grew 272.8% year-over-year on an FX neutral basis, reaching 69.4% of GMV.
  • Even through these trying times and surge in managed volumes, Mercado Envios was able to ship 157.5 million items during the quarter without any significant disruptions, representing a 124.2% year-over-year increase.
  • Total payment volume (“TPV”) through Mercado Pago reached $11.2 billion, a year-over-year increase of 72.1% in USD and 142.1% on an FX neutral basis. Total payment transactions increased 122.9% year-over-year, totaling 404.8 million transactions for the quarter.
  • Off-platform TPV grew 92.1% in USD and 174.7% year-over-year on a FX neutral basis reaching $6.1 billion in transactions and 280.7 million payments, a 133.7% year-over-year growth.
  • Merchant Services had a strong performance, aided by the shift to e-commerce consumption, accelerating sequentially to 163.9% on an FX neutral basis.
  • Mobile wallet delivered $2.1 billion in transactions on a consolidated basis, leading to also 373.2% year-over-year growth on an FX neutral basis. Our mobile wallet consumer base grew by 109.3% compared to the second quarter of 2019, reaching 9.5 million unique payers. TPV from mobile wallet in Argentina, Brazil and Mexico continues to grow by triple digits year-over-year.
  • Our asset management product, Mercado Fondo already has more than $500 million under management and almost 11.4 million users across Latin America.
  • On a consolidated basis MPOS TPV grew 80.1% on an FX neutral basis, decelerating sequentially around 20%, mainly due to lower foot traffic as a consequence of partial or total lockdowns throughout the region. The resilience that our MPOS business showed during the quarter is a result of the long tail base of merchants we cater to plus a relevant share of merchants who continued to operate their business with lesser disruptions throughout the lockdowns.
  • The pace of sales of devices reached a milestone this quarter, surpassing the 1 million mark of new MPOS sold throughout Latin America.
  • PayPal is now available for cross-border transactions on Mercado Libre in Brazil and Mexico and is also available as a payment option within Mercado Pago’s online checkout for foreign shoppers.

Second Quarter 2020 Financial Highlights

  • Net revenues for the second quarter were $878.4 million, a year-over-year increase of 61.1% in USD and 123.4% on an FX neutral basis.
  • Commerce revenues increased 79.5% year-over-year in USD reaching $581.7 million, while Fintech revenues increased 34.1% year-over-year in USD reaching $296.7 million.
  • Gross profit was $427.2 million with a margin of 48.6%, compared to 50.0% in the second quarter of 2019.
  • Total operating expenses were $327.7 million, an increase of 15.0% year-over-year in USD. As a percentage of revenues, operating expenses were 37.3%, compared to 52.3% during the second quarter of 2019. The $14.8 million improvement in operating expenses quarter-over-quarter was mostly driven by marketing expenditure efficiencies.
  • During the quarter we recorded an allowance for doubtful accounts on receivables from a Mercado Pago collection agent, for $26.7 million. Upon review we realized that collection efforts for these receivables had not been carried out effectively, and that the ageing of these receivables exceeded what our internal control policies allow. We assessed the impact of this matter on the effectiveness of our internal controls, and have included the results of that assessment in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.
  • Income from operations was $99.4 million, compared to a loss of $29.7 million during the prior quarter. As a percentage of revenues, income from operations reached 11.3%.
  • Interest income was $18.8 million, a 44.2% decreased year-over-year, as a result of lower interest rates in our investment as a consequence of the pandemic.
  • The Company incurred $27.0 million in financial expenses this quarter, mainly attributable to financial loans entered into during the second quarter of 2020, mainly in Brazil and Argentina and interest expenses from our trusts related to our factoring business and the 2028 Convertible Note.
  • Net income before taxes was $89.3 million, up from a loss of $16.7 million during last quarter.
  • Income tax expense was $33.4 million, mainly as a result of higher income tax expense in Brazil, as a consequence of higher pre-tax gain in our Brazilian segment during 2020; valuation allowances on certain deferred tax assets in Mexico accounted for in the first half of 2020 and higher income tax expense in Argentina as a consequence of the temporary suspension of the knowledge-based economy promotional regime in 2020, which had a direct impact on the income tax rate for our Argentine business.
  • Net income was $55.9 million, resulting in net earnings per share of $1.11.

       The following table summarizes certain key performance metrics for the six and three-months periods ended June 30, 2020 and 2019.

                         
    Six-month Periods Ended  June 30,     Three-month Periods Ended  June 30,
(in millions)   2020   2019     2020 2019
                         
Unique active users      65.5       47.6       51.5       35.5 
Number of confirmed new registered users during period      29.9       24.7       16.9       12.4 
Gross merchandise volume   $  8,459.0    $  6,485.5    $  5,044.8    $  3,397.7 
Number of successful items sold      284.2       171.4       178.5       88.7 
Number of successful items shipped      247.7       132.6       157.5       70.2 
Total payment volume   $  19,308.8    $  12,156.5    $  11,214.3    $  6,517.4 
Total volume of payments on marketplace   $  7,966.5    $  6,016.1    $  4,763.2    $  3,120.0 
Total payment transactions      695.5       325.6       404.8       181.6 
Capital expenditures   $  101.9    $  71.4    $  48.4    $  38.4 
Depreciation and amortization   $  44.2    $  33.0    $  22.7    $  17.3 

(*) Figures have been calculated using rounded amounts. Growth calculations based on this table may not total due to rounding.

Year-over-year USD Revenue Growth Rates by Quarter

                         
                         
Consolidated Net Revenues   Q2’19     Q3’19   Q4’19   Q1’20   Q2’20  
                         
Brazil   74 %   77 % 61 % 31 % 37 %
                         
Argentina   14 %   39 % 46 % 42 % 110 %
                         
Mexico   267 %   146 % 86 % 74 % 96 %
                         

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

                         
                         
Consolidated Net Revenues   Q2’19     Q3’19   Q4’19   Q1’20   Q2’20  
                         
Brazil   89 %   77 % 74 % 55 % 87 %
                         
Argentina   115 %   119 % 133 % 123 % 224 %
                         
Mexico   261 %   153 % 80 % 81 % 138 %
                         

Conference Call and Webcast

The Company will host a conference call and audio webcast on August 10th, 2020 at 9:00 a.m. Eastern Time. The conference call may be accessed by dialing (877) 303-7209 / (970) 315-0420 (Conference ID –2688761–) and requesting inclusion in the call for MercadoLibre. 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

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.

Foreign Exchange (“FX”) Neutral – Calculated by using the average monthly exchange rate of each month of 2019 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, excluding shipping and financing fees.

Total payment volume– Measure of total U.S. dollar sum of all transactions paid for using Mercado Pago, including marketplace and non-marketplace transactions.

Commerce - Revenues from core marketplace fees, shipping fees (net out of shipping subsidies), ad sales, classified fees and other ancillary services

Fintech - Revenues includes fees from payments revenue stream

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.

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 Marketplace and confirmed their registration, excluding Classifieds users.

Operating margin – Defined as income from operations as a percentage of net revenues.

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 online 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 (including online classifieds for motor vehicles, services and real estate), 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, 2019, “Item 1A-Risk Factors” in Part II of our Form 10-Q for the quarter ended March 31, 2020, 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(In thousands of U.S. dollars, except par value)

       
  June 30,   December 31,
    2020       2019  
Assets      
Current assets:      
Cash and cash equivalents $  1,169,550     $  1,384,740  
Restricted cash and cash equivalents    493,808        66,684  
Short-term investments (530,660 and 522,798 held in guarantee)    2,124,872        1,597,241  
Accounts receivable, net    42,423        35,446  
Credit cards receivable and other means of payment, net    646,739        379,969  
Loans receivable, net    139,148        182,105  
Prepaid expenses    23,141        45,309  
Inventory    20,831        8,626  
Other assets    94,042        88,736  
Total current assets    4,754,554        3,788,856  
Non-current assets:      
Long-term investments    5,790        263,983  
Loans receivable, net    5,055        6,439  
Property and equipment, net    263,041        244,257  
Operating lease right-of-use assets    186,851        200,449  
Goodwill    81,799        87,609  
Intangible assets, net    15,942        14,275  
Deferred tax assets    93,897        117,582  
Other assets    45,807        58,241  
Total non-current assets    698,182        992,835  
Total assets $  5,452,736     $  4,781,691  
Liabilities      
Current liabilities:      
Accounts payable and accrued expenses $  417,759     $  372,309  
Funds payable to customers    1,324,605        894,057  
Salaries and social security payable    114,944        101,841  
Taxes payable    141,226        60,247  
Loans payable and other financial liabilities    591,683        186,138  
Operating lease liabilities    25,113        23,259  
Other liabilities    44,449        114,469  
Total current liabilities    2,659,779        1,752,320  
Non-current liabilities:      
Salaries and social security payable    25,279        26,803  
Loans payable and other financial liabilities    610,899        631,353  
Operating lease liabilities    168,589        176,673  
Deferred tax liabilities    65,273        99,952  
Other liabilities    15,825        12,627  
Total non-current liabilities    885,865        947,408  
Total liabilities $  3,545,644     $  2,699,728  
       
Commitments and Contingencies      
       
Redeemable convertible preferred stock, $0.001 par value, 40,000,000 shares authorized,      
100,000 shares issued and outstanding at June 30, 2020 and December 31, 2019 $  98,843     $  98,843  
       
Equity      
       
Common stock, $0.001 par value, 110,000,000 shares authorized,      
49,709,955 shares issued and outstanding at June 30,      
2020 and December 31, 2019 $  50     $  50  
Additional paid-in capital    1,964,140        2,067,869  
Treasury stock    (1,440 )      (720 )
Retained earnings    350,860        322,592  
Accumulated other comprehensive loss    (505,361 )      (406,671 )
Total Equity    1,808,249        1,983,120  
Total Liabilities, Redeemable convertible preferred stock and Equity $  5,452,736     $  4,781,691  

MercadoLibre, Inc.Interim Condensed Consolidated Statements of IncomeFor the six and three month periods ended June 30, 2020 and 2019(In thousands of U.S. dollars, except for share data)

                 
    Six Months Ended June 30,   Three Months Ended June 30,
      2020       2019       2020       2019  
Net revenues   $  1,530,460     $  1,019,012     $  878,369     $  545,242  
Cost of net revenues      (790,474 )      (509,578 )      (451,197 )      (272,812 )
Gross profit      739,986        509,434        427,172        272,430  
Operating expenses:                
Product and technology development      (146,689 )      (106,292 )      (73,254 )      (53,923 )
Sales and marketing      (390,583 )      (311,368 )      (184,076 )      (180,692 )
General and administrative      (132,970 )      (94,123 )      (70,404 )      (50,303 )
Total operating expenses      (670,242 )      (511,783 )      (327,734 )      (284,918 )
Income (loss) from operations      69,744        (2,349 )      99,438        (12,488 )
                 
Other income (expenses):                
Interest income and other financial gains      55,566        58,128        18,782        33,684  
Interest expense and other financial losses      (50,561 )      (30,238 )      (26,977 )      (14,679 )
Foreign currency (losses) gains      (2,089 )      (2,886 )      (1,903 )      783  
Net income before income tax (expense) gain      72,660        22,655        89,340        7,300  
                 
Income tax (expense) gain      (37,822 )      5,426        (33,393 )      8,917  
Net income   $  34,838     $  28,081     $  55,947     $  16,217  
                 
    Six Months Ended June 30,   Three Months Ended June 30,
      2020     2019     2020     2019
Basic EPS                
 Basic net income                
 Available to shareholders per common share   $  0.66   $  0.45   $  1.11   $  0.31
Weighted average of outstanding common shares      49,709,964      47,658,610      49,709,973      49,318,522
Diluted EPS                
Diluted net income                
Available to shareholders per common share   $  0.66   $  0.45   $  1.11   $  0.31
Weighted average of outstanding common shares      49,709,964      47,658,610      49,709,973      49,318,522
                 

MercadoLibre, Inc.Interim Condensed Consolidated Statements of Cash FlowsFor the six months period ended June 30, 2020 and 2019

         
    Six Months Ended June 30,
      2020       2019  
     
Cash flows from operations:        
Net income   $  34,838     $  28,081  
Adjustments to reconcile net income to net cash provided by operating activities:        
Unrealized devaluation loss, net      29,348        13,366  
Depreciation and amortization      44,202        32,975  
Accrued interest      (28,933 )      (24,684 )
Non cash interest, convertible notes amortization of debt discount and amortization of debt issuance costs and other charges      75,568        11,140  
Financial results on derivative instruments      (21,826 )      (69 )
Stock-based compensation expense — restricted shares      366        —  
LTRP accrued compensation      51,907        32,208  
Deferred income taxes      (31,145 )      (34,743 )
Changes in assets and liabilities:        
Accounts receivable       23,147        (6,900 )
Credit cards receivable and other means of payment      (343,229 )      (61,562 )
Prepaid expenses      20,807        8,857  
Inventory      (14,270 )      (1,191 )
Other assets      (6,965 )      (12,651 )
Payables and accrued expenses      170,100        41,798  
Funds payable to customers      606,307        118,421  
Other liabilities      (73,134 )      3,587  
Interest received from investments      27,597        17,292  
Net cash provided by operating activities      564,685        165,925  
Cash flows from investing activities:        
Purchase of investments      (2,326,013 )      (2,332,544 )
Proceeds from sale and maturity of investments      1,910,311        1,086,461  
Receipts from settlements of derivative instruments      8,624        —  
Payment for acquired businesses, net of cash acquired      (6,937 )      —  
Purchases of intangible assets      (87 )      (34 )
Changes in principal of loans receivable, net      (39,092 )      (97,468 )
Purchases of property and equipment      (94,834 )      (71,361 )
Net cash used in investing activities      (548,028 )      (1,414,946 )
Cash flows from financing activities:        
Proceeds from loans payable and other financial liabilities      1,781,040        95,603  
Payments on loans payable and other financing liabilities      (1,353,658 )      (55,236 )
Payment of finance lease obligations      (1,064 )      (889 )
Purchase of convertible note capped call      (104,095 )      (88,362 )
Dividends paid of preferred stock      (2,000 )      (844 )
Common Stock repurchased      (720 )      —  
Proceeds from issuance of convertible redeemable preferred stock, net      —        98,688  
Proceeds from issuance of common stock, net      —        1,867,215  
Net cash provided by financing activities      319,503        1,916,175  
Effect of exchange rate changes on cash, cash equivalents, restricted cash and cash equivalents      (124,226 )      (3,527 )
Net increase in cash, cash equivalents, restricted cash and cash equivalents      211,934        663,627  
Cash, cash equivalents, restricted cash and cash equivalents, beginning of the period   $  1,451,424     $  464,695  
Cash, cash equivalents, restricted cash and cash equivalents, end of the period   $  1,663,358     $  1,128,322  

Financial results of reporting segments

                         
      Three Months Ended June 30, 2020
      Brazil   Argentina   Mexico     Other Countries   Total
      (In thousands)
Net revenues   $  465,298      $  239,204      $  125,950        $  47,917      $  878,369   
Direct costs     (324,754 )     (171,408 )     (110,553 )       (34,943 )     (641,658 )
Direct contribution     140,544       67,796       15,397         12,974       236,711  
                         
Operating expenses and indirect costs of net revenues                       (137,273 )
Income from operations                       99,438  
                         
Other income (expenses):                      
  Interest income and other financial gains                       18,782  
  Interest expense and other financial losses                       (26,977 )
  Foreign currency losses                       (1,903 )
Net income before income tax expense                     $  89,340   
                         
                         
      Three-months Ended June 30, 2019
      Brazil   Argentina   Mexico     Other Countries   Total
      (In thousands)
Net revenues   $  340,858      $  113,913      $  64,383        $  26,088      $  545,242   
Direct costs     (275,917 )     (83,909 )     (85,216 )       (24,441 )     (469,483 )
Direct contribution     64,941       30,004       (20,833 )       1,647       75,759  
                         
Operating expenses and indirect costs of net revenues                       (88,247 )
Loss from operations                       (12,488 )
                         
Other income (expenses):                      
  Interest income and other financial gains                       33,684  
  Interest expense and other financial losses                       (14,679 )
  Foreign currency gains                       783  
Net income before income tax expense                     $  7,300   

Non-GAAP Financial Measures

To supplement our consolidated financial statements presented in accordance with U.S. GAAP, we use foreign exchange (“FX”) neutral measures.

This non-GAAP measure 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, this non-GAAP measure is 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. This non-GAAP financial measure should only be used to evaluate our results of operations in conjunction with the most comparable U.S. GAAP financial measures.

Reconciliation of this non-GAAP financial measure to the most comparable U.S. GAAP financial measures can be found in the tables included in this quarterly report.

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 this non-GAAP measure 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 2019 and applying them to the corresponding months in 2020, 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, this measure does 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-months period ended June 30, 2020:

                         
    Three-month Periods Ended June 30, (*)
    As reported   FX Neutral Measures   As reported    
(In millions, except percentages)     2020       2019     Percentage Change     2020       2019     Percentage Change
    (Unaudited)       (Unaudited)    
Net revenues   $  878.4     $  545.2     61.1 %   $  1,218.3     $  545.2     123.4 %
Cost of net revenues      (451.2 )      (272.8 )   65.4 %      (613.4 )      (272.8 )   124.9 %
Gross profit      427.2        272.4     56.8 %      604.9        272.4     122.0 %
                         
Operating expenses      (327.7 )      (284.9 )   15.0 %      (446.5 )      (284.9 )   56.7 %
Income (loss) from operations      99.4        (12.5 )   896.4 %      158.4        (12.5 )   1368.5 %

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

CONTACT: MercadoLibre, Inc.

 Investor Relations

 investor@mercadolibre.com

 http://investor.mercadolibre.com

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