Full Year Revenue Increases 61% to $137.0 Million Full Year Net Income Increases 94.1% to $18.8 Million Generates $49.6 Million in Full Year Free Cash Flow
BUENOS AIRES, Argentina, Feb. 24, 2009 (GLOBE NEWSWIRE) -- MercadoLibre, Inc. (Nasdaq:MELI) (http://www.mercadolibre.com), host of the largest online commerce platform in Latin America, today reported financial results for the fourth quarter and full year ended December 31, 2008.
Marcos Galperin, President and Chief Executive Officer of MercadoLibre, Inc. commented, "Fiscal year 2008 was a very good year for us. We grew our business on a number of fronts, and despite the global economic slowdown in the latter months of the year, still produced a very solid fourth quarter and only moderately felt the impact of the macro economy on our business. As we enter a new fiscal year, we remain optimistic about our prospects as we remain well positioned to leverage the positive growth trends influencing Internet, broadband and PC penetration rates in Latin America. We believe these trends will allow us to capture additional revenue and grow our total presence as users and content evolve and improve over time."
Financial Results
Fourth Quarter Results Summary
MercadoLibre reported consolidated net revenues for the three months ended December 31, 2008 of $33.4 million, representing a quarterly year over year growth rate of 24.4%. Revenue growth was solid in both the Marketplace and Payments businesses despite a challenging consumer environment and the unfavorable impact of foreign exchange rates changes throughout the quarter. Marketplace revenue grew 23.5% to $26.0 million while Payments revenue grew 27.6% to $7.4 million.
Gross profit grew 28.6% compared with the fourth quarter of 2007 to $27.0 million. Gross profit margin expanded to 80.7% from 78.0% for the prior year period.
Income from operations grew 47.7% to $11.2 million in the fourth quarter, compared to $7.6 million in the fourth quarter of 2007. Operating income margin, defined as income from operations as a percentage of revenues, for the fourth quarter of 2008 was 33.4%.
Net income for the three-month period ending December 31, 2008 was $7.9 million, an increase of 48.8% over the $5.3 million of net income for the same period of 2007. Earnings per share for the quarter were $0.18. Non GAAP net income for the quarter was $4.8 million and Non GAAP earnings per share were $0.11.
Full Year Results Summary
Revenue for the full year ended December 31, 2008 increased 61.0% to $137.0 million compared with $85.1 million for the full year ended December 31, 2007. Marketplace revenue for the full year 2008 grew 57.6% over 2007 to $109.6 million while Payments revenue grew 75.8% to $27.4 million.
Gross profit increased 63.8% to $109.5 million from $66.9 million from the prior year. Gross profit margin expanded to 79.9% from 78.5% for the prior year period.
Operating expenses were $72.0 million in 2008, representing 52.5% of net revenues, compared to $45.2 million during 2007, or 53.1% of revenues.
Income from operations increased 73.2% to $37.5 million from $21.7 million for the year ended December 31, 2007. Operating income margin for the full year increased to 27.4% from 25.4% for the previous year.
Other expenses increased to $8.1 million during 2008, compared with other expenses of $7.2 million in 2007.
The blended tax rate for the fiscal year 2008 was 36.1% compared with 32.8% for the prior year, while the effective tax rate for 2008 and 2007 was 27.7% and 33.2% respectively.
Net income for the full year ended December 31, 2008 was $18.8 million, compared to $9.7 million during 2007, an increase of 94.1%. Earnings per share for the year were $0.43. Non GAAP net income for the year was $18.7 million and Non GAAP earnings per share were $0.42.
Net cash provided by operating activities for 2008 totaled $54.5 million as compared to $6.8 million for 2007, and increase of 706.6%. The main driver for improved operating cash generation was the discounting of credit card receivables from the Payments operation. Free cash flow, a non-GAAP metric defined as net cash provided by operating activities less property, plant and equipment investments, for 2008 totaled $49.6 million compared to $3.7 million for 2007.
As of December 31, 2008, cash and cash equivalents, short-term investments and long-term investments totaled $58.3 million.
Key Performance Metrics
The following table summarizes certain key performance metrics for the year and quarter ended December 31:
Year ended Three Months December 31, ended December 31, --------------------------------------- (in millions) 2007 2008 2007 2008 --------------------------------------- Total confirmed registered users at end of period/year 24.9 33.7 24.9 33.7 New confirmed registered users during period/year 6.7 8.8 1.6 1.7 Gross merchandise volume $1,511.5 $2,078.9 $ 461.0 $ 523.7 Successful items 17.5 21.1 4.8 5.8 --------------------------------------------------------------------- Total payment volume $ 158.0 $ 255.9 $ 56.8 $ 55.3 Total payment transactions 1.3 1.9 0.4 0.5 ---------------------------------------------------------------------
Conference Call and Webcast
MercadoLibre will host a conference call and audio webcast on February 24, 2009 at 4:30 p.m. Eastern Time. The conference call may be accessed by dialing 719-325-2159 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.
Non-GAAP Financial Measures
This press release includes the following financial measures defined as "non-GAAP financial measures" by the Securities and Exchange Commission (SEC). See "Non GAAP Measures of Financial Performance" for more information about these measures.
Definition of Selected Operational Metrics
New confirmed registered users -- Measure of the number of new users who have registered on the MercadoLibre Marketplace and confirmed their registration.
Total confirmed registered users -- Measure of the cumulative number of users who have registered on the MercadoLibre Marketplace and confirmed their registration.
Gross merchandise volume -- Measure of the total U.S. dollar sum of all transactions completed through the MercadoLibre Marketplace, excluding motor vehicles, vessels, aircraft, real estate, and services.
Successful items -- Measure of the number of items sold/purchased through the MercadoLibre Marketplace.
Total payment volume -- Measure of total U.S. dollar sum of all transactions paid for using MercadoPago.
Total payment transactions -- Measure of the number of all transactions paid for using MercadoPago.
Gross profit margin -- Defined as gross profit as a percentage of net revenues.
Operating margin -- Defined as income from operations as a percentage of net revenues.
Blended tax rate -- Defined as income and alternative income taxes plus deferred income tax as a percentage of pre-tax income.
Effective tax rate -- Defined as the provision for income taxes as a percentage of pre-tax income.
About MercadoLibre
MercadoLibre is the largest online commerce platform in Latin America. We are market leaders in e-commerce in each of Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Peru, Uruguay and Venezuela, based on unique visitors and page views during 2008. Additionally, we have recently launched online trading platforms in Costa Rica, the Dominican Republic and Panama. With a population of over 550 million people and a region with one of the world's fastest-growing Internet penetration rates, we provide buyers and sellers a robust online trading environment that fosters the development of a large and growing e-commerce community. We offer a technological and commercial solution that addresses the distinctive cultural and geographic challenges of operating an online trading platform in Latin America.
The MercadoLibre, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4193
Forward-Looking Statements
Any statements contained in this press release that are not statements of historical fact, including statements about the company's beliefs and expectations, are forward-looking statements and should be evaluated as such. Such forward-looking statements reflect, among other things, the company's current expectations, plans, projections and strategies, anticipated financial results, future events and financial trends affecting the company's business, all of which are subject to known or unknown risk and uncertainties that may cause the company's actual results to differ materially from those expressed or implied by these forward-looking statements, including general market conditions, adverse changes in the company's markets and other risks disclosed in the company filings with the Securities and Exchange Commission. Because of the risks, uncertainties and assumptions, investors should not place undue reliance on any forward-looking statements.
Financial Tables
Consolidated balance sheets
December 31, December 31, 2008 2007 ------------ ------------ Assets Current assets: Cash and cash equivalents $ 17,474,112 $ 15,677,407 Short-term investments 31,639,400 52,300,007 Accounts receivable, net 3,856,392 3,211,252 Funds receivable from customers 2,322,416 29,162,763 Prepaid expenses 426,869 283,477 Deferred tax assets 1,628,871 3,445,101 Other assets 2,953,164 894,163 ------------ ------------ Total current assets 60,301,224 104,974,170 Non-current assets: Long-term investments 9,218,153 1,323,789 Property and equipment, net 5,940,160 4,143,204 Goodwill and intangible assets, net 72,911,546 23,428,646 Deferred tax assets 14,270 269,596 Other assets 8,353,396 353,395 ------------ ------------ Total non-current assets 96,437,525 29,518,630 Total assets $156,738,749 $134,492,800 ------------ ------------ Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued expenses $ 16,941,173 $ 9,278,138 Funds payable to customers 14,727,891 16,418,177 Social security payable 4,387,943 3,778,236 Taxes payable 4,989,704 2,493,749 Loans payable and other financial liabilities 14,963,421 9,713,227 Provisions 299,753 69,979 ------------ ------------ Total current liabilities 56,309,885 41,751,506 Non-current liabilities: Social security payable 339,854 -- Loans payable 3,050,061 -- Deferred tax liabilities 2,556,120 -- Other liabilities 1,058,848 1,068,155 ------------ ------------ Total non-current liabilities 7,004,883 1,068,155 Total liabilities $ 63,314,768 $ 42,819,661 ============ ============ Commitments and contingencies Shareholders' equity: Common stock, $0.001 par value, 110,000,000 shares authorized, 44,070,367 and 44,226,563 shares issued and outstanding at December 31, 2008 and December 31, 2007, respectively 44,071 44,227 Additional paid-in capital 119,807,007 121,890,138 Accumulated deficit (15,552,256) (34,363,917) Accumulated other comprehensive (loss) income (10,874,841) 4,102,691 ------------ ------------ Total shareholders' equity 93,423,981 91,673,139 ------------ ------------ Total liabilities and shareholders' equity $156,738,749 $134,492,800 ============ ============
Consolidated statements of income
Year Ended December 31, 2008 2007 2006 ------------ ------------ ------------ Net revenues $137,022,620 $ 85,126,341 $ 52,058,890 Cost of net revenues (27,536,573) (18,272,940) (12,085,648) ------------ ------------ ------------ Gross profit 109,486,047 66,853,401 39,973,242 Operating expenses: Product and technology development (7,307,008) (4,369,376) (3,066,304) Sales and marketing (39,975,307) (27,598,683) (23,358,510) General and administrative (22,759,931) (13,223,522) (8,150,499) Compensation Cost related to acquisitions (1,919,870) -- -- ------------ ------------ ------------ Total operating expenses (71,962,116) (45,191,581) (34,575,313) ------------ ------------ ------------ Income from operations 37,523,931 21,661,820 5,397,929 ------------ ------------ ------------ Other income (expenses): Interest income and other financial gains 1,822,385 1,609,403 520,508 Interest expense and other financial charge (8,442,427) (2,737,901) (1,743,315) Foreign currency loss (1,531,144) (3,106,515) (391,981) Other income (expenses), net 73,159 (3,006,416) (1,468,220) ------------ ------------ ------------ Net income before income / asset tax expense 29,445,904 14,420,391 2,314,921 ------------ ------------ ------------ Income / asset tax expense (10,634,243) (4,727,451) (1,242,838) ------------ ------------ ------------ Net income $ 18,811,661 $ 9,692,940 $ 1,072,083 ============ ============ ============ Accretion of preferred stock -- (309,299) (494,878) ------------ ------------ ------------ Net income available to common shareholders $ 18,811,661 $ 9,383,641 $ 577,205 ============ ============ ============ Year Ended December 31, ---------------------------------------- 2008 2007 2006 (1) ------------ ------------ ------------ Basic EPS Basic net income per share $ 0.43 $ 0.22 $ 0.01 ============ ============ ============ Weighted average shares 44,239,443 25,149,405 13,149,139 ============ ============ ============ Diluted EPS Diluted net income per common share $ 0.42 $ 0.22 ============ ============ Weighted average shares 44,348,950 25,478,336 ============ ============ (1) For the year ended December 31, 2006, the Diluted EPS is equal to the Basic EPS. Three Months Ended December 31, 2008 2007 ------------ ------------ Net revenues $ 33,449,739 $ 26,893,586 Cost of net revenues (6,460,230) (5,903,630) ------------ ------------ Gross profit 26,989,509 20,989,956 Operating expenses: Product and technology development (2,089,803) (1,212,344) Sales and marketing (9,070,276) (7,969,681) General and administrative (4,671,508) (4,253,290) Compensation Cost related to acquisitions -- -- ------------ ------------ Total operating expenses (15,831,587) (13,435,315) ------------ ------------ Income from operations 11,157,922 7,554,641 ------------ ------------ Other income (expenses): Interest income and other financial gains 472,317 737,196 Interest expense and other financial charge (4,988,757) (1,049,625) Foreign currency loss 4,158,793 (1,299,995) Other income (expenses), net 31,286 -- ------------ ------------ Net income before income / asset tax expense 10,831,561 5,942,217 ------------ ------------ Income / asset tax expense (2,910,464) (619,824) ------------ ------------ Net income $ 7,921,097 $ 5,322,393 ============ ============ Accretion of preferred stock -- (61,860) ------------ ------------ Net income available to common shareholders $ 7,921,097 $ 5,260,533 ============ ============ Three Months Ended December 31, ----------------------------- 2008 2007 ------------ ------------ Basic EPS Basic net income per share $ 0.18 $ 0.13 ============ ============ Weighted average shares 44,264,906 41,226,563 ============ ============ Diluted EPS Diluted net income per common share $ 0.18 $ 0.13 ============ ============ Weighted average shares 44,369,635 41,375,907 ============ ============
Consolidated statements of cash flows
Year Ended December 31, 2008 2007 2006 ------------- ------------- ------------- Cash flows from operations: Net income $ 18,811,661 $ 9,692,940 $ 1,072,083 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,335,673 2,307,649 2,016,939 Foreign currency gains (7,827,112) -- -- Interest expense 300,368 -- 96,833 Realized gains on investments (1,232,036) (845,398) (184,094) Unrealized losses (gains) on investments 57,293 (228,877) (46,926) Stock-based compensation expense - stock options 4,719 15,477 33,223 Stock-based compensation expense - restricted shares 105,560 15,966 -- Stock-based compensation LTRP 839,303 -- -- Change in fair value of warrants -- 3,045,992 1,269,377 Deferred income taxes 446,287 (198,368) (1,291,549) Changes in assets and liabilities, excluding the effect of acquisitions: Accounts receivable 4,026,218 (736,431) 403,075 Funds receivable from customers 26,573,209 (15,517,486) (6,026,226) Prepaid expenses (153,582) 56,399 (207,130) Other assets (1,415,575) (967,264) 167,593 Accounts payable and accrued expenses 10,610,141 4,282,955 4,651,264 Funds payable to customers 2,294,847 5,423,976 4,704,108 Provisions (1,277,664) (274,101) (559,734) Other liabilities (952,169) 689,154 59,518 Net cash provided by operating activities 54,547,141 6,762,583 6,158,354 ------------- ------------- ------------- Cash flows from investing activities: Purchase of investments (110,056,368) (75,267,070) (4,944,956) Proceeds from sale and maturity of investments 116,574,567 29,765,780 2,184,822 Payment for businesses acquired, net of cash acquired (39,181,473) -- -- Purchase of intangible assets (58,238) (28,748) (346,365) Purchases of property and equipment (4,904,991) (3,058,813) (2,097,555) ------------- ------------- ------------- Net cash used in investing activities (37,626,503) (48,588,851) (5,204,054) ------------- ------------- ------------- Cash flows from financing activities: Increase in short term debt -- 8,883,104 -- Decrease in short term debt (9,137,223) -- (2,058) Loans paid -- (9,000,000) (3,000,000) Repurchase of Treasury Stock (2,598,223) -- -- Stock options exercised 83,089 38,576 7,107 Exercise of warrants -- 749,991 -- Issuance of common stock -- 49,573,239 -- Net cash (used in) provided by financing ------------- ------------- ------------- activities (11,652,357) 50,244,910 (2,994,951) ------------- ------------- ------------- Effect of exchange rate changes on cash and cash equivalents (3,471,576) 115,738 203,840 ------------- ------------- ------------- Net (decrease) increase in cash and cash equivalents 1,796,705 8,534,380 (1,836,811) Cash and cash equivalents, beginning of the year 15,677,407 7,143,027 8,979,838 ------------- ------------- ------------- Cash and cash equivalents, end of the year $ 17,474,112 $ 15,677,407 $ 7,143,027 ============= ============= =============
Consolidated statements of cash flows
Year Ended December 31, 2008 2007 2006 ------------- ------------- ------------- Supplemental cash flow information: Cash paid for interest $ 7,138,402 $ 1,572,909 $ 851,667 Cash paid for income taxes 7,921,206 3,864,908 1,916,975 Non-cash financing activities: Accretion of preferred stock $ -- $ 309,299 $ 494,878 Conversion of mandatorily redeemable convertible preferred stock into common stock -- 64,385,844 -- Reclassifications of warrants -- 4,636,456 -- Acquisition of DeRemate and Classified Media Group: Cash and cash equivalents $ 691,632 $ -- $ -- Funds receivable from customers 117,473 -- -- Accounts receivable 6,569,098 -- -- Tax credits 604,419 -- -- Other current assets 918,856 -- -- Non current assets 504,927 -- -- ------------- ------------- ------------- Total assets acquired 9,406,405 -- -- ------------- ------------- ------------- Accounts payable and accrued expenses 4,578,830 -- -- Funds payable to customers 146,191 -- -- Taxes payable 1,204,479 -- -- Social security payable 395,112 -- -- Other liabilities 1,590,371 -- -- Non current liabilities 14,000 -- -- Provisions 1,548,391 -- -- ------------- ------------- ------------- Total liabilities assumed 9,477,374 -- -- ------------- ------------- ------------- Net assets acquired (70,969) -- -- ------------- ------------- ------------- Goodwill 52,638,036 -- -- Trademarks 5,622,188 -- -- Customer lists 1,227,600 -- -- Non compete agreement 573,484 -- -- Deferred income tax on intangible assets (2,598,145) -- -- ------------- ------------- ------------- Total purchase price 57,392,194 -- -- ------------- ------------- ------------- Cash and cash equivalents acquired (691,632) -- -- ------------- ------------- ------------- Payment for businesses acquired, net of cash acquired $ 39,181,473 $ -- $ -- ============= ============= ============= Seller financing for DeRemate business acquisition $ 17,519,088 $ -- $ -- ------------- ------------- -------------
The following tables summarize the financial results of our reporting segments
Year Ended December 31, 2008 ---------------------------------------------------- Marketplaces ---------------------------------------------------- Brazil Argentina Mexico Venezuela ------------- ------------ ------------ ----------- Net revenues $ 50,509,927 $ 18,254,621 $ 12,473,883 $ 21,972,235 Direct costs (32,367,689) (8,710,260) (7,909,615) (11,455,690) ------------- ------------ ------------ ------------ Direct contribution 18,142,238 9,544,361 4,564,268 10,516,545 Operating expenses and indirect costs of net revenues Income from operations Other income (expenses): Interest income Interest expense and other financial results Foreign exchange Other expenses, net Net Income before Income Tax
Year Ended December 31, 2008 ------------------------------------------------------ Marketplaces ------------------------------------------------------ Other Total Payments Consolidated Countries ------------ ------------- ------------- ------------- Net revenues $ 6,369,110 $ 109,579,776 $ 27,442,844 $ 137,022,620 Direct costs (4,184,086) (64,627,340) (16,125,594) (80,752,934) ------------ ------------- ------------- ------------- Direct contribution 2,185,024 44,952,435 11,317,250 56,269,686 Operating expenses and indirect costs of net revenues (18,745,754) Income from ------------ operations 37,523,932 ------------ Other income (expenses): Interest income 1,822,385 Interest expense and other financial results (8,442,427) Foreign exchange (1,531,144) Other expenses, net 73,160 ------------ Net Income before Income Tax $ 29,445,906 =============
Year Ended December 31, 2007 --------------------------------------------------- Marketplaces --------------------------------------------------- Brazil Argentina Mexico Venezuela ------------ ------------ ------------ ------------ Net revenues $ 37,560,419 $ 11,342,792 $ 9,628,121 $ 7,084,995 Direct costs (24,079,798 (5,657,006) (6,339,762) (2,713,470) ------------ ------------ ------------ ------------ Direct contribution 13,480,621 5,685,786 3,288,359 4,371,525 Operating expenses and indirect costs of net revenues Income from operations Other income (expenses): Interest income Interest expense and other financial results Foreign exchange Other expenses, net Net Income before income / asset tax expense
Year Ended December 31, 2007 ---------------------------------------------------- Marketplaces ---------------------------------------------------- Other Total Payments Consolidated Countries ------------ ------------- ----------- ------------- Net revenues $ 3,901,190 $ 69,517,517 $15,608,824 $ 85,126,341 Direct costs (3,434,102) (42,224,138) $(10,509,002) (52,733,140) ------------ ------------- ----------- ------------- Direct contribution 467,088 27,293,379 5,099,822 32,393,201 Operating expenses and indirect costs of net revenues (10,731,381) Income from ------------- operations 21,661,820 ------------- Other income (expenses): Interest income 1,609,403 Interest expense and other financial results (2,737,901) Foreign exchange (3,106,515) Other expenses, net (3,006,416) ------------- Net Income before income / asset tax expense $ 14,420,391 =============
Three Months Ended December 31, 2008 --------------------------------------------------- Marketplaces --------------------------------------------------- Brazil Argentina Mexico Venezuela ------------ ------------ ------------ ------------ Net revenues $ 10,062,014 $ 5,070,476 $ 2,864,378 $ 6,390,457 Direct costs (6,127,876) (2,325,166) (1,678,670) (3,314,515) ------------ ------------ ------------ ------------ Direct contribution 3,934,138 2,745,310 1,185,708 3,075,942 Operating expenses and indirect costs of net revenues Income from operations Other income (expenses): Interest income Interest expense and other financial results Foreign exchange Other expenses, net Net Income before Income Tax
Three Months Ended December 31, 2008 ------------------------------------------------------ Marketplaces ------------------------------------------------------ Other Total Payments Consolidated Countries ------------ ------------- ------------ ------------- Net revenues $ 1,659,115 $ 26,046,440 $ 7,403,299 $ 33,449,739 Direct costs (1,241,169) (14,687,396) (3,311,230) (17,998,626) ------------ ------------- ------------ ------------- Direct contribution 417,946 11,359,044 4,092,069 15,451,113 Operating expenses and indirect costs of net revenues (4,293,191) Income from ------------- operations 11,157,922 ------------- Other income (expenses): Interest income 472,317 Interest expense and other financial results (4,988,756) Foreign exchange 4,158,793 Other expenses, net 31,286 ------------- Net Income before Income Tax $ 10,831,562 =============
Three Months Ended December 31, 2007 -------------------------------------------------- Marketplaces -------------------------------------------------- Brazil Argentina Mexico Venezuela ------------ ------------ ------------ ----------- Net revenues $ 11,253,902 $ 3,482,976 $ 2,710,341 $ 2,403,038 Direct costs (6,972,636) (1,669,608) (1,841,322) (860,120) ------------ ------------ ------------ ----------- Direct contribution 4,281,266 1,813,368 869,019 1,542,918 Operating expenses and indirect costs of net revenues Income from operations Other income (expenses): Interest income Interest expense and other financial results Foreign exchange Other expenses, net Net Income before Income Tax
Three Months Ended December 31, 2007 ---------------------------------------------------- Marketplaces ---------------------------------------------------- Other Total Payments Consolidated Countries ----------- ------------- ------------ ------------- Net revenues $ 1,243,193 $ 21,093,450 $ 5,800,136 $ 26,893,586 Direct costs (975,378) (12,319,064) (3,735,078) (16,054,142) ----------- ------------- ------------ ------------- Direct contribution 267,815 8,774,386 2,065,058 10,839,444 Operating expenses and indirect costs of net revenues (3,542,217) ------------- Income from operations 7,297,227 ------------- Other income (expenses): Interest income 737,196 Interest expense and other financial results (792,212) Foreign exchange (1,299,994) Other expenses, net -- ------------- Net Income before Income Tax $ 5,942,217 =============
Non-GAAP Measures of Financial Performance
This press release includes certain non-GAAP financial measures as defined under Securities and Exchange Commission (SEC) Rules to supplement the company's consolidated financial statements presented in accordance with generally accepted accounting principles, or GAAP.
These measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are 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 MercadoLibre's results of operations as the corresponding GAAP measures.
Reconciliation to the most comparable GAAP measure of all non-GAAP financial measures included in this press release can be found in the tables included at the end of this press release.
These non-GAAP measures are provided to enhance investors overall understanding of the company's current financial performance. Specifically, the company believes the non-GAAP measures provide useful information to both management and investors by excluding certain non-recurring compensation expenses and unusual foreign currency effects that may not be indicative of its core operating results, thereby enhancing an investor's ability to make period over period comparisons of the company's results. The company believes the inclusion of these non-GAAP measures provides an element of consistency in the company's financial reporting and uses these measures in internal budgets and models and in determining executive compensation benchmarks.
EBITDA is a common financial measure defined by MercadoLibre as income from operations plus depreciation and amortization.
Free cash flow is defined by MercadoLibre as net cash provided by operating activities less property, plant and equipment investments.
In this press release MercadoLibre also includes each of income from operations, net income, earnings per basic and diluted share, EBITDA, blended and effective tax rates and certain margin percentages for the year and quarter ended December 31, 2008 after excluding (or adding back) the following charges required by GAAP:
Compensation Costs Related to Acquisitions: This amount relates to the purchase price of the shares of CMG and its subsidiaries. Under EITF 95-8 "Accounting for Contingent Consideration Paid to the Shareholders of an Acquired Enterprise in a Purchase Business Combination", we have recognized a contingent consideration paid to former shareholders as compensation for services. Total compensation paid in cash amounts to $1,919,870, for the year ended December 31, 2008. This compensation was paid out in the second quarter of 2008. The following tables show a reconciliation of this exclusion from the GAAP measures to the non GAAP measures.
Long term retention plan compensation: On August 8, 2008, the Board of Directors approved a long-term employee retention program for certain executives based on 2008 performance that will be payable 50% in cash and 50% in MercadoLibre common stock, in addition to their annual salary and bonus. Payments will be made during the first quarter on an annual basis according to the following vesting schedule: year 1 (2009): 17%, year 2 (2010): 22%, year 3 (2011): 27%, year 4 (2012): 34%. The cost for each year is accrued in the full fiscal year immediately preceding the payment date according to the same payment schedule. For example, 17% of the cost of the program was taken by MercadoLibre in 2008.
The US GAAP compensation cost is recognized in accordance with the graded-vesting attribution method and is accrued up to each payment day. The non-GAAP measures for 2008 were calculated based on the simple vesting schedule described above, in which 17% of the cost of the plan vests during the first year. The following tables show a reconciliation of this cost from the GAAP measures to the non-GAAP measures.
Venezuelan foreign currency re-measurement effect: This amount relates to re-measurement of assets and liabilities in U.S. dollars in the Venezuelan statutory Financial Statements. Based on paragraph 27 of FAS 52 "Foreign Currency Translation", the Venezuelan subsidiaries have re-measured the assets and liabilities outstanding at December 31, 2008 in U.S. dollar balances at the parallel exchange rate and translated them to the official exchange rate. The following tables exclude the foreign currency re-measurement effect generated from applying different exchange rates in order to facilitate comparisons to other quarters and to highlight this exchange rate matter.
The following tables provide a reconciliation of certain Non-GAAP financial measures to the most comparable GAAP financial measures.
MELI_F
-------------------------- -------------------------- Year Ended Dec. 31, Three Months Ended Dec. 31, -------------------------- -------------------------- 2008 2007 2008 2007 -------------------------- -------------------------- Income from operations $ 37,523,931 $ 21,661,819 $ 11,157,922 $ 7,554,641 Long term retention plan compensation 475,808 -- 255,416 -- Compensation costs related to acquisitions 1,919,870 -- -- -- -------------------------- -------------------------- Non-GAAP income from operations $ 39,919,609 $ 21,661,819 $ 11,413,339 $ 7,554,641 -------------------------- -------------------------- Non-GAAP income from operations margin 29.1% 25.4% 34.1% 28.1% -------------------------- -------------------------- Depreciation and Amortization 3,335,673 2,307,649 859,823 639,731 -------------------------- -------------------------- Non-GAAP EBITDA $ 43,255,282 $ 23,969,468 $ 12,273,162 $ 8,194,372 -------------------------- -------------------------- Non-GAAP EBITDA operating margin 31.6% 28.2% 36.7% 30.5% ------------ ------------ ------------ ------------
-------------------------- -------------------------- Year Ended Dec. 31, Three Months Ended Dec. 31, -------------------------- -------------------------- 2008 2007 2008 2007 -------------------------- -------------------------- Net income $ 18,811,663 $ 9,692,940 $ 7,921,097 $ 5,322,393 Long term retention plan compensation net of tax effect 407,747 -- 188,867 -- Venezuelan foreign currency re-measurement effect (2,390,963) -- (3,292,033) -- Compensation costs related to acquisitions 1,919,870 -- -- -- -------------------------- -------------------------- Non-GAAP net income $ 18,748,317 $ 9,692,940 $ 4,817,932 $ 5,322,393 -------------------------- -------------------------- ------------ ------------ ------------ ------------ Basic net income per common share: $ 0.43 $ 0.22 $ 0.18 $ 0.13 ------------ ------------ ------------ ------------ Non-GAAP basic net income per common share: $ 0.42 $ 0.11 ------------ ------------ ------------ ------------ Shares used in basic net income per share calculation: 44,239,443 25,149,405 44,264,906 41,226,563 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Diluted net income per common share $ 0.42 $ 0.22 $ 0.18 $ 0.13 ------------ ------------ ------------ ------------ Non-GAAP diluted net income per common share: $ 0.42 $ 0.11 ------------ ------------ ------------ ------------ Shares used in diluted net income per share calculation: 44,348,950 25,478,336 44,369,635 41,375,907 ------------ ------------ ------------ ------------
-------------------------- -------------------------- Year Ended Dec. 31, Three Months Ended Dec. 31, -------------------------- -------------------------- 2008 2007 2008 2007 -------------------------- -------------------------- Income and asset tax expense $ 10,634,243 $ 4,727,451 $ 2,910,464 $ 619,824 Income taxes related with long term retention plan compensation 68,061 -- 36,536 -- Income taxes related with Venezuelan foreign currency effects (1,231,708) -- (1,695,896) -- ------------ ------------ ------------ ------------ Non-GAAP income and asset tax expense $ 9,470,596 $ 4,727,451 $ 1,251,104 $ 619,824 ------------ ------------ ------------ ------------ Income before income taxes $ 29,445,906 $ 14,420,391 $ 10,831,561 $ 5,942,217 Long term retention plan compensation 475,808 -- 255,416 -- Venezuelan foreign currency re-measurement effect (3,622,671) -- (4,987,928) -- Compensation costs related to acquisitions 1,919,870 -- -- -- ------------ ------------ ------------ ------------ Non-Gaap income before income taxes $ 28,218,913 $ 14,420,391 $ 6,099,049 $ 5,942,217 ------------ ------------ ------------ ------------ Blended tax rate (1) 36.1% 32.8% 26.9% 10.4% ------------ ------------ ------------ ------------ Non-GAAP Blended tax rate (1) 33.6% 32.8% 20.5% 10.4% ------------ ------------ ------------ ------------ Effective tax rate (2)(3) 27.7% 33.2% 9.17% 20.4% ------------ ------------ ------------ ------------ Non-Gaap Effective tax rate (2)(3) 29.1% 16.9% ------------ ------------ ------------ ------------ 1) Blended tax rate defined as income and asset tax expense as a percentage of income before income and asset tax 2) Effective income tax rate defined as the provision for income taxes as a percentage of income before income tax 3) The effective tax rate does not include the effect of the Mexican Tax call Impuesto Empresarial a Tasa Unica (IETU)
---------------------------- Year Ended Dec. 31, ---------------------------- 2008 2007 ---------------------------- Net cash provided by operating activities $ 54,547,141 $ 6,762,583 Compensation costs related to acquisitions 1,919,870 -- ---------------------------- Non-GAAP net cash provided by operating activities $ 56,467,011 $ 6,762,583 ---------------------------- Net cash used in investing activities $(37,626,503) $(48,588,851) Purchase of intangible assets (1,919,870) -- ---------------------------- Non-GAAP net cash used in investing activities $(39,546,373) $(48,588,851) ---------------------------- ---------------------------- Year Ended Dec. 31, ---------------------------- 2008 2007 ---------------------------- Net cash provided by operating activities $ 54,547,141 $ 6,762,583 Less: Purchase of property and equipment, net $ (4,904,991) $ (3,058,813) ---------------------------- Free cash flow $ 49,642,150 $ 3,703,769 ----------------------------