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
----------------------------