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Mercadolibre (MELI) Misses on Q3 Earnings, Beats Revenues

Mercadolibre, Inc. MELI reported mixed third-quarter 2017 results.

Adjusted earnings of 63 cents missed the Zacks Consensus Estimate by 5 cents. Earnings were up 3.3% sequentially but down 39.7% year over year. Revenues of $371 million beat the consensus mark by $22 million, up 17.1% sequentially and 60.6% year over year.

Shares rallied 12.6% since the earnings release. Year to date, shares have gained a massive 70.1%, outperforming the industry’s gain of 60.1%.

In the quarter, top-line growth was substantially supported by solid momentum across all the key performance metrics. Mercadolibre continues to prudently invest in free shipping, loyalty, product, technology and customer acquisition initiatives, which, in turn, boosts traffic and conversions in its marketplaces. The company’s mobile initiatives are also delivering results and currently represent 50% of total GMV.

Let’s check out the numbers.

Revenues in Detail

Brazil contributed 62% of third-quarter revenues (up 27.4% sequentially and 75% year over year); Argentina accounted for 24% (up 3.8% sequentially and 30.5% year over year); Mexico brought in 6% (up 12% sequentially and a massive 91.4% year over year); Venezuela accounted for 3% (down 31.2% sequentially but up 41.6% year on year) and other countries contributed 5% (up 24.2% sequentially and 56.9% year over year).

The year-over-year improvement in all the geographies was driven by investments in free shipping, loyalty, and customer acquisition.

MercadoLibre, Inc. Revenue (TTM)

Key Metrics

Total confirmed registered users at the end of period were 201.2 million, improving 5.2% sequentially and 21% year over year.

New confirmed registered users during the period were 10 million, increasing 11.1% sequentially and 29.9% on a year-over-year basis.

Gross merchandise volume of $3.1 billion increased 13% sequentially and 50.7% year over year (93.8% on an FX neutral basis).

Number of successful items sold was 74.2 million, up 20.7% sequentially and 55.8 % year over year.

Number of successful items shipped increased 24.9% sequentially and 80.4% year over year to 41.7 million. The year-over-year surge was driven by strong momentum in free shipping and loyalty program, Mercado Puntos, and customer acquisition.

Total payment volume was up 16.3% sequentially and 73.5% on a year-over-year basis to $3.7 billion (86% on an FX neutral basis).

Total volume of payments on marketplace was $2.6 billion up 17.8% sequentially and 70.6% year over year.

Total payments transactions saw sequential and year-over-year growth of 19.6% and 69.4% respectively, to 62.3 million.

Unique buyers grew 11.6% sequentially and 31.1% year over year to 16.3 million. The year-over-year growth was driven by strong performance in Brazil, Mexico, Chile and Columbia.

Unique sellers were up 9.5% sequentially and 14.1% year over year to 4.6 million.

Live listings grew 51% year over year and exceeded the 100 million mark for the first time.

Margins

Non-GAAP gross profit was $175.8 million, up from $171.6 million in the previous quarter and $145.6 million in the year-ago quarter. Gross margin of 47.4% was down 676 basis points (bps) sequentially and 1566 bps year over year. The year-over-year gross margin compression was due to increased investments toward free shipping in Brazil, Mexico, Chile and Colombia.

Adjusted operating expenses were $148.3 million, reflecting an increase of 27% sequentially and 61.3% year over year. Operating margin of 7.4% was down 989 bps sequentially and 1584 bps year over year. The year-over-year operating margin compression was due to increased online and offline marketing, mainly in Mexico and Brazil. Pro forma net income was $27.7 million, up 2.8% sequentially but down 28.9% year over year.

Balance Sheet

Mercadolibre exited the quarter with cash and cash equivalents of $461.2 million compared with $382.8 million in the prior quarter. The company does not have any long-term debt. Cash from operations was $242.4 million in the third quarter compared with $121.6 million in the prior quarter.

Zacks Rank and Stocks to Consider

Mercadolibre currently has a Zacks Rank #5 (Strong Sell).

Better-ranked stocks in the broader technology sector include Adobe Systems Incorporated ADBE, Fair Isaac Corporation FICO and Autohome Inc. ATHM, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Adobe, Fair Isaac and Autohome is projected to be 17%, 10% and 18.8%, respectively.

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MercadoLibre, Inc. (MELI): Free Stock Analysis Report
 
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