* Accelerating Net Revenues of $134.6 million, a 50% growth in local currencies, 30% in USD
* Gross Merchandise Volume of $2.1 billion, a 49% growth in local currencies, 30% in USD
* Accelerating Total Payments Volume of $746.0 million, a 66% growth in local currencies, 42% in USD
* Earnings per share during Q4'13 were $0.93
BUENOS AIRES, Argentina, Feb. 27, 2014 (GLOBE NEWSWIRE) -- MercadoLibre, Inc. (Nasdaq:MELI) (http://www.mercadolibre.com), Latin America's leading e-commerce technology company, today reported financial results for the fourth quarter ended December 31, 2013.
Marcos Galperin, President and Chief Executive Officer of MercadoLibre, Inc., commented, "MercadoLibre's e-commerce ecosystem clearly benefited from our ongoing initiatives in 2013, with growing functionalities complementing the unmatched value and selection of our marketplace. Strong fourth quarter results showed positive momentum in marketplace and payments as we kept driving improvements to user experience. I look forward to more innovation in 2014, as we continue to unlock the huge potential behind Latin America's shift from offline to online commerce."
Financial Results Summary
MercadoLibre reported consolidated net revenues for the three months ended December 31, 2013 of $134.6 million, representing a year-over-year growth of 29.8% in USD and 49.7% in local currencies.
For the three months ended December 31, 2013, gross merchandise volume grew to $2,138.9 million, while total payment volume reached $746.0 million, representing year-over-year growth of 29.9% and 42.1% respectively. In local currencies, gross merchandise volume grew 49.3% year-over-year, while payment volume grew 66.1% year-over-year.
Items sold on MercadoLibre during the fourth quarter 2013 increased 20.1% to 22.8 million, while total payment transactions through MercadoPago increased 33.8% to 9.0 million.
Gross profit for the fourth quarter of 2013 was $98.4 million. Gross profit margin for the period was 73.1%, down from 73.6% during the fourth quarter of 2012, as the lower margin payments volume continued to grow at a faster pace than the merchandise volume.
Total operating expenses during the fourth quarter 2013 were $46.3 million. Total operating expenses as a percentage of net revenues for the fourth quarter of 2013 were 34.4%, a decrease of 148 basis points from 35.9% for the same quarter one year earlier, and a decrease of 747 basis points from 41.9% in third quarter of 2013.
Income from operations for the fourth quarter 2013 was $52.1 million, representing a year-over-year growth of 33.2% in USD and 55.5% in local currencies. Operating income margin for the period was 38.7%, up 100 basis points from 37.7% during the fourth quarter of 2012. Operating income margin increased 832 basis points from 30.4% in the third quarter of 2013.
Net income before taxes was $55.8 million. The blended tax rate for the quarter was 26.8%, as compared to 28.4% during the same quarter one year earlier.
Consequently, net income for the three months ended December 31, 2013, was $40.8 million, growing 35.0% year-on-year in USD, and 58.1% in local currencies.
Free cash flow, defined as cash from operating activities less payment for the acquisition of property, equipment, intangible assets and payment for acquired business net of cash acquired, was -$18.7 million for the three months ended December 31, 2013.*
For the full year, MercadoLibre generated $7.3 billion in gross merchandise volume, consolidated net revenues of $472.6 million, and net income of $117.5 million, or $2.66 per share. Gross merchandise volume was up 28.1% in 2013 when compared to the full year 2012, while net revenues increased 26.5% and net income increased 16.0%. In constant dollars, gross merchandise volume increased 44%, consolidated net revenues were up by 43%, and net income was up by 32%, all versus the previous year.
(*) See note on "Non-GAAP Financial Measures"
The following table summarizes certain key performance metrics for the three months ended December 31, 2013 and 2012.
| Three months ended December 31, (in MM) | 2013 | 2012 | %YoY | %YoY Constant USD |
| Total confirmed registered users at the end of period | 99.5 | 81.5 | 22.1% | -- |
| New confirmed registered users during the period | 4.5 | 4.3 | 4.2% | -- |
| Gross merchandise volume | $ 2,138.9 | $ 1,646.5 | 29.9% | 49.3% |
| Items sold | 22.8 | 19.0 | 20.1% | -- |
| Total payments volume | $ 746.0 | $ 524.9 | 42.1% | 66.1% |
| Total payments transactions | 9.0 | 6.7 | 33.8% | -- |
Table of Year-on-Year Local Currency Revenue Growth Rates by Quarter
| YoY Growth rates at previous years exchange rates | |||||
| Consolidated Net Revenues | |||||
| Q4'12 | Q1'13 | Q2'13 | Q3'13 | Q4'13 | |
| Brazil | 19% | 28% | 22% | 28% | 29% |
| Argentina | 62% | 63% | 66% | 66% | 69% |
| Mexico | 19% | 15% | 19% | 19% | 20% |
| Venezuela | 43% | 49% | 68% | 92% | 104% |
| Others | 15% | 13% | 19% | 13% | 15% |
| Total | 31% | 36% | 38% | 45% | 50% |
Conference Call and Webcast
The Company will host a conference call and audio webcast on February 27, 2014 at 4:30 p.m. Eastern Time. The conference call may be accessed by dialing +(970) 315-0420 or +(877) 303-7209 (Conference ID 2067277 ) 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
Total confirmed registered users – Measure of the cumulative number of users who have registered on the MercadoLibre platform (including MercadoPago) and confirmed their registration. As of July'12, registration and confirmation take place in the same step of the registration flow.
New confirmed registered users – Measure of the number of new users who have registered on the MercadoLibre platform (including MercadoPago) and confirmed their registration. As of July'12, registration and confirmation take place in the same step of the registration flow.
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.
Items sold – 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 completed using MercadoPago.
Operating margin – Defined as income from operations as a percentage of net revenues.
Blended tax rate – Defined as income and asset tax expense as a percentage of income before income and assets tax.
Net income margin – Defined as net income as a percentage of net revenues.
Free Cash Flow – Defined as cash flows from operating activities less property, equipment, intangible assets and payment for acquired business net of cash acquired.
Local Currency Growth Rates – Calculated by using the average monthly exchange rate for each month during the previous year and applying it to the corresponding month in the current year, so as to calculate what the growth would have been had exchange rates been the same throughout both periods.
About MercadoLibre
Founded in 1999, MercadoLibre is Latin America's leading e-commerce technology company. Through its primary platforms, MercadoLibre.com and MercadoPago.com, it provides solutions to individuals and companies buying, selling, advertising, and paying for goods and services online.
MercadoLibre.com serves millions of users and creates a market for a wide variety of goods and services in an easy, safe and efficient way. The site is among the top 50 in the world in terms of page views and is the leading retail platform in unique visitors in the major countries in which it operates according to metrics provided by comScore Networks. 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 http://www.globenewswire.com/newsroom/prs/?pkgid=4193
Consolidated balance sheets
| December 31, | December 31, | |
| 2013 | 2012 | |
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $ 140,285,104 | $ 101,489,002 |
| Short-term investments | 76,593,214 | 93,694,805 |
| Accounts receivable, net | 25,884,260 | 19,837,022 |
| Credit cards receivables, net | 52,045,851 | 35,816,506 |
| Prepaid expenses | 3,836,081 | 2,080,079 |
| Deferred tax assets | 16,030,880 | 11,040,543 |
| Other assets | 11,488,845 | 11,403,218 |
| Total current assets | 326,164,235 | 275,361,175 |
| Non-current assets: | ||
| Long-term investments | 45,719,737 | 85,955,584 |
| Property and equipment, net | 131,371,909 | 37,726,222 |
| Goodwill | 55,101,218 | 60,366,063 |
| Intangible assets, net | 6,591,585 | 7,279,865 |
| Deferred tax assets | 3,014,905 | 5,862,247 |
| Other assets | 24,399,184 | 6,118,120 |
| Total non-current assets | 266,198,538 | 203,308,101 |
| Total assets | $ 592,362,773 | $ 478,669,276 |
| Liabilities and Equity | ||
| Current liabilities: | ||
| Accounts payable and accrued expenses | $ 34,405,333 | $ 23,976,613 |
| Funds payable to customers | 129,038,663 | 101,472,662 |
| Salaries and social security payable | 23,182,811 | 19,974,463 |
| Taxes payable | 17,854,110 | 19,210,568 |
| Loans payable and other financial liabilities | 13,370,823 | 84,570 |
| Dividends payable | 6,313,869 | 4,812,396 |
| Total current liabilities | 224,165,609 | 169,531,272 |
| Non-current liabilities: | ||
| Salaries and social security payable | 9,185,269 | 3,452,445 |
| Loans payable and other financial liabilities | 2,489,819 | 59,493 |
| Deferred tax liabilities | 5,339,359 | 8,975,290 |
| Other liabilities | 3,699,109 | 2,837,150 |
| Total non-current liabilities | 20,713,556 | 15,324,378 |
| Total liabilities | $ 244,879,165 | $ 184,855,650 |
| Commitments and contingencies (Note 15) | ||
| Redeemable noncontrolling interest | $ 4,000,000 | $ 4,000,000 |
| Equity: | ||
| Common stock, $0.001 par value, 110,000,000 shares authorized, 44,153,473 and 44,150,920 shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively | $ 44,153 | $ 44,151 |
| Additional paid-in capital | 121,562,193 | 120,468,759 |
| Treasury stock | (1,012,216) | -- |
| Retained earnings | 310,345,448 | 218,083,844 |
| Accumulated other comprehensive loss | (87,455,970) | (48,783,128) |
| Total Equity | 343,483,608 | 289,813,626 |
| Total Liabilities, Redeemable Noncontrolling Interest and Equity | $ 592,362,773 | $ 478,669,276 |
Consolidated statements of income
| Year Ended December 31, | |||
| 2013 | 2012 | 2011 | |
| Net revenues | $ 472,594,709 | $ 373,601,494 | $ 298,931,625 |
| Cost of net revenues | (130,076,879) | (98,085,644) | (72,055,835) |
| Gross profit | 342,517,830 | 275,515,850 | 226,875,790 |
| Operating expenses: | |||
| Product and technology development | (40,888,139) | (28,626,880) | (23,349,787) |
| Sales and marketing | (90,484,296) | (72,002,954) | (64,968,755) |
| General and administrative | (57,606,340) | (45,228,145) | (38,785,083) |
| Total operating expenses | (188,978,775) | (145,857,979) | (127,103,625) |
| Income from operations | 153,539,055 | 129,657,871 | 99,772,165 |
| Other income (expenses): | |||
| Interest income and other financial gains | 10,668,593 | 11,877,375 | 9,905,829 |
| Interest expense and other financial losses | (2,355,929) | (1,138,379) | (3,648,733) |
| Foreign currency gains | 1,258,476 | 11,597 | 2,353,005 |
| Other (losses) gains, net | (751) | (190,938) | 73,894 |
| Net income before income / asset tax expense | 163,109,444 | 140,217,526 | 108,456,160 |
| Income / asset tax expense | (45,583,181) | (38,871,379) | (31,659,821) |
| Net income | $ 117,526,263 | $ 101,346,147 | $ 76,796,339 |
| Less: Net Income attributable to Redeemable Noncontrolling Interest | 18,825 | 98,849 | 16,286 |
| Net income attributable to MercadoLibre, Inc. shareholders | $ 117,507,438 | $ 101,247,298 | $ 76,780,053 |
| Year Ended December 31, | |||
| 2013 | 2012 | 2011 | |
| Basic EPS | |||
| Basic net income attributable to MercadoLibre, Inc. Shareholders per common share | $ 2.66 | $ 2.30 | $ 1.73 |
| Weighted average of outstanding common shares | 44,152,600 | 44,147,861 | 44,138,397 |
| Diluted EPS | |||
| Diluted net income attributable to MercadoLibre, Inc. Shareholders per common share | $ 2.66 | $ 2.30 | $ 1.73 |
| Weighted average of outstanding common shares | 44,152,600 | 44,149,838 | 44,151,437 |
| Three Months Ended December 31, | ||
| 2013 | 2012 | |
| (Unaudited) | ||
| Net revenues | $ 134,630,171 | $ 103,754,645 |
| Cost of net revenues | (36,205,508) | (27,402,861) |
| Gross profit | 98,424,663 | 76,351,784 |
| Operating expenses: | ||
| Product and technology development | (9,670,938) | (6,686,830) |
| Sales and marketing | (23,147,365) | (19,182,428) |
| General and administrative | (13,487,284) | (11,354,005) |
| Total operating expenses | (46,305,587) | (37,223,263) |
| Income from operations | 52,119,076 | 39,128,521 |
| Other income (expenses): | ||
| Interest income and other financial gains | 2,295,481 | 2,880,600 |
| Interest expense and other financial losses | (976,413) | (273,902) |
| Foreign currency gains | 2,331,729 | 489,094 |
| Other gains, net | 43,806 | 31 |
| Net income before income / asset tax expense | 55,813,679 | 42,224,344 |
| Income / asset tax expense | (14,977,714) | (11,977,955) |
| Net income | $ 40,835,965 | $ 30,246,388 |
| Less: Net Income attributable to Redeemable Noncontrolling Interest | 72,037 | 55,985 |
| Net income attributable to MercadoLibre, Inc. shareholders | $ 40,763,928 | $ 30,190,403 |
| Three Months Ended December 31, | ||
| 2013 | 2012 | |
| (Unaudited) | ||
| Basic EPS | ||
| Basic net income attributable to MercadoLibre, Inc. Shareholders per common share | $ 0.93 | $ 0.69 |
| Weighted average of outstanding common shares | 44,153,185 | 44,150,920 |
| Diluted EPS | ||
| Diluted net income attributable to MercadoLibre, Inc. Shareholders per common share | $ 0.93 | $ 0.69 |
| Weighted average of outstanding common shares | 44,153,185 | 44,152,895 |
| Consolidated statements of cash flows | |||
| Year Ended December 31, | |||
| 2013 | 2012 | 2011 | |
| Cash flows from operations: | |||
| Net income attributable to MercadoLibre, Inc. Shareholders | $ 117,507,438 | $ 101,247,298 | $ 76,780,053 |
| Adjustments to reconcile net income to net cash provided by operating activities: | |||
| Net income attributable to Redeemable Noncontrolling Interest | 18,825 | 98,849 | 16,286 |
| Net Devaluation Loss in Venezuela | 6,420,929 | -- | -- |
| Depreciation and amortization | 11,878,565 | 8,959,293 | 7,268,075 |
| Accrued interest | (9,882,991) | (7,630,203) | (7,354,746) |
| LTRP accrued compensation | 11,645,077 | 4,442,822 | 4,079,265 |
| Deferred income taxes | (7,847,513) | (492,362) | 1,022,797 |
| Changes in assets and liabilities: | |||
| Accounts receivable | (22,764,177) | (8,651,951) | (9,274,653) |
| Credit Card Receivables | (27,315,403) | (15,570,142) | (19,494,707) |
| Prepaid expenses | (2,074,543) | (898,959) | (436,310) |
| Other assets | (23,127,493) | (5,809,218) | (6,532,978) |
| Accounts payable and accrued expenses | 26,037,488 | 18,061,683 | 10,808,788 |
| Funds payable to customers | 47,557,504 | 39,889,201 | 27,875,755 |
| Other liabilities | 2,986,452 | 1,153,610 | 490,838 |
| Interest received from investments | 11,473,203 | 5,091,468 | 4,177,168 |
| Net cash provided by operating activities | 142,513,361 | 139,891,389 | 89,425,631 |
| Cash flows from investing activities: | |||
| Purchase of investments | (1,135,940,553) | (539,355,434) | (379,044,395) |
| Proceeds from sale and maturity of investments | 1,174,789,615 | 472,871,652 | 336,835,026 |
| Payment for acquired businesses, net of cash acquired | (3,423,439) | -- | (5,468,180) |
| Purchases of intangible assets | (458,804) | (1,390,654) | (280,706) |
| Purchases of property and equipment | (113,755,566) | (16,747,746) | (18,924,161) |
| Net cash used in investing activities | (78,788,747) | (84,622,182) | (66,882,416) |
| Cash flows from financing activities: | |||
| Proceeds from loans payable and other financial liabilities | 31,453,613 | -- | -- |
| Payments on loans payable and other financial liabilities | (15,936,551) | -- | -- |
| Dividends paid | (23,754,005) | (17,968,004) | (10,593,206) |
| Common Stock repurchased | (1,012,225) | -- | -- |
| Stock options exercised | 3,020 | 5,700 | 11,175 |
| Net cash used in financing activities | (9,246,148) | (17,962,304) | (10,582,031) |
| Effect of exchange rate changes on cash and cash equivalents | (15,682,364) | (3,199,578) | (1,409,973) |
| Net increase in cash and cash equivalents | 38,796,102 | 34,107,325 | 10,551,211 |
| Cash and cash equivalents, beginning of the year | 101,489,002 | 67,381,677 | 56,830,466 |
| Cash and cash equivalents, end of the year | $ 140,285,104 | $ 101,489,002 | $ 67,381,677 |
| Year Ended December 31, | |||
| 2013 | 2012 | 2011 | |
| Supplemental cash flow information: | |||
| Cash paid for interest | $ 657,776 | $ 68,916 | $ 58,559 |
| Cash paid for income and asset taxes | $ 55,995,590 | $ 38,837,721 | $ 31,050,206 |
| Non-cash financing activities: | |||
| Stock based compensation | $ 58,492 | $ -- | $ -- |
| LTRP shares issued | $ 1,031,933 | $ -- | $ -- |
| Acquisition of business | 2013 (1) | 2012 | 2011 (2) |
| Cash and cash equivalents | $ 31,058 | $ -- | $ 3,876 |
| Accounts receivable | 537,706 | -- | -- |
| Tax credits | -- | -- | 49,951 |
| Other current assets | 14,674 | -- | -- |
| Non current assets | 94,367 | -- | 99,522 |
| Fixed Assets | 5,800 | -- | -- |
| Total assets acquired | 683,605 | -- | 153,349 |
| Accounts payable and accrued expenses | 143,071 | -- | -- |
| Taxes payable | 179,545 | -- | -- |
| Payroll and social security payable | 123,098 | -- | -- |
| Total liabilities assumed | 445,714 | -- | -- |
| Net assets acquired | 237,891 | -- | 153,349 |
| Goodwill, Identifiable Intangible Assets and deferred tax liabilities | 2,668,661 | -- | 8,966,744 |
| Escrow for employment relationship | 547,945 | -- | -- |
| Non-controlling interest | -- | -- | (3,648,037) |
| Total purchase price | 3,454,497 | -- | 5,472,056 |
| Cash and cash equivalents acquired | 31,058 | -- | 3,876 |
| Payment for acquired businesses, net of cash acquired | $ 3,423,439 | $ -- | $ 5,468,180 |
| (1) Related to the acquisition of software development company - Neosur | |||
| (2) Related to the acquisition of Autoplaza.com | |||
| Financial results of reporting segments | ||||||
| Year Ended December 31, 2013 | ||||||
| Brazil | Argentina | Mexico | Venezuela | Other Countries | Total | |
| Net revenues | $ 206,394,480 | $ 122,123,347 | $ 32,843,482 | $ 84,572,485 | $ 26,660,915 | $ 472,594,709 |
| Direct costs | (119,422,924) | (66,492,770) | (18,558,010) | (29,578,762) | (12,339,112) | (246,391,578) |
| Direct contribution | 86,971,556 | 55,630,577 | 14,285,472 | 54,993,723 | 14,321,803 | 226,203,131 |
| Operating expenses and indirect costs of net revenues | (72,664,076) | |||||
| Income from operations | 153,539,055 | |||||
| Other income (expenses): | ||||||
| Interest income and other financial gains | 10,668,593 | |||||
| Interest expense and other financial losses | (2,355,929) | |||||
| Foreign currency gain | 1,258,476 | |||||
| Other losses, net | (751) | |||||
| Net income before income / asset tax expense | $ 163,109,444 | |||||
| Year Ended December 31, 2012 | ||||||
| Brazil | Argentina | Mexico | Venezuela | Other Countries | Total | |
| Net revenues | $ 179,639,592 | $ 88,513,640 | $ 26,987,130 | $ 54,676,170 | $ 23,784,962 | $ 373,601,494 |
| Direct costs | (104,501,652) | (41,841,587) | (14,912,375) | (17,768,989) | (11,458,627) | (190,483,230) |
| Direct contribution | 75,137,940 | 46,672,053 | 12,074,755 | 36,907,181 | 12,326,335 | 183,118,264 |
| Operating expenses and indirect costs of net revenues | (53,460,393) | |||||
| Income from operations | 129,657,871 | |||||
| Other income (expenses): | ||||||
| Interest income and other financial gains | 11,877,375 | |||||
| Interest expense and other financial losses | (1,138,379) | |||||
| Foreign currency gain | 11,597 | |||||
| Other losses, net | (190,938) | |||||
| Net income before income / asset tax expense | 140,217,526 | |||||
| Year Ended December 31, 2011 | ||||||
| Brazil | Argentina | Mexico | Venezuela | Other Countries | Total | |
| Net revenues | $ 165,905,789 | $ 56,714,941 | $ 22,275,213 | $ 34,828,878 | $ 19,206,804 | $ 298,931,625 |
| Direct costs | (96,910,310) | (23,463,871) | (12,472,204) | (13,287,279) | (10,062,446) | (156,196,110) |
| Direct contribution | 68,995,479 | 33,251,070 | 9,803,009 | 21,541,599 | 9,144,358 | 142,735,515 |
| Operating expenses and indirect costs of net revenues | (42,963,350) | |||||
| Income from operations | 99,772,165 | |||||
| Other income (expenses): | ||||||
| Interest income and other financial gains | 9,905,829 | |||||
| Interest expense and other financial losses | (3,648,733) | |||||
| Foreign currency gain | 2,353,005 | |||||
| Other income, net | 73,894 | |||||
| Net income before income / asset tax expense | $ 108,456,160 | |||||
| Three Months Ended December 31, 2013 | ||||||
| Brazil | Argentina | Mexico | Venezuela | Other Countries | Total | |
| (Unaudited) | ||||||
| Net revenues | $ 55,249,748 | $ 34,362,444 | $ 9,086,505 | $ 28,877,100 | $ 7,054,374 | $ 134,630,171 |
| Direct costs | (30,193,588) | (18,427,699) | (4,207,763) | (9,169,908) | (3,391,509) | (65,390,467) |
| Direct contribution | 25,056,160 | 15,934,745 | 4,878,742 | 19,707,192 | 3,662,865 | 69,239,704 |
| Operating expenses and indirect costs of net revenues | (17,120,628) | |||||
| Income from operations | 52,119,076 | |||||
| Other income (expenses): | ||||||
| Interest income and other financial gains | 2,295,481 | |||||
| Interest expense and other financial losses | (976,413) | |||||
| Foreign currency gain | 2,331,729 | |||||
| Other gains, net | 43,806 | |||||
| Net income before income / asset tax expense | $ 55,813,679 | |||||
| Three Months Ended December 31, 2012 | ||||||
| Brazil | Argentina | Mexico | Venezuela | Other Countries | Total | |
| (Unaudited) | ||||||
| Net revenues | $ 47,067,048 | $ 25,713,148 | $ 7,620,346 | $ 16,803,819 | $ 6,550,285 | $ 103,754,646 |
| Direct costs | (26,395,391) | (12,884,121) | (3,745,018) | (5,134,006) | (2,890,020) | (51,048,556) |
| Direct contribution | 20,671,657 | 12,829,027 | 3,875,328 | 11,669,813 | 3,660,265 | 52,706,090 |
| Operating expenses and indirect costs of net revenues | (13,577,569) | |||||
| Income from operations | 39,128,521 | |||||
| Other income (expenses): | ||||||
| Interest income and other financial gains | 2,880,600 | |||||
| Interest expense and other financial losses | (273,902) | |||||
| Foreign currency loss | 489,094 | |||||
| Other gains, net | 31 | |||||
| Net income before income / asset tax expense | $ 42,224,344 | |||||
Non-GAAP Financial Measures
To supplement our interim condensed consolidated financial statements presented in accordance with generally accepted accounting principles in the United States (U.S. GAAP), we use free cash flows as non-GAAP measure.
This non-GAAP measure should not be considered in isolation or as a substitute for measures of performance prepared in accordance with 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 GAAP. This non-GAAP financial measure should only be used to evaluate our results of operations in conjunction with the most comparable GAAP financial measures.
Reconciliation of this non-GAAP financial measure to the most comparable GAAP financial measure can be found in the tables included in this press release.
Non-GAAP financial measures are provided to enhance investors' overall understanding of our current financial performance. Specifically, we believe that free cash flow provides useful information to both management and investors by excluding payments for the acquisition of property, equipment, of intangible assets and of acquired businesses net of cash acquired, that may not be indicative of our core operating results. In addition, we report free cash flows to investors because we believe that the inclusion of this measure provides consistency in our financial reporting.
Free cash flow represents cash from operating activities less payment for the acquisition of property, equipment and intangible assets and acquired businesses net of cash acquired. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by our operations after the purchase of property, equipment, of intangible assets and of acquired businesses net of cash acquired. A limitation of the utility of free cash flow as a measure of financial performance is that it does not represent the total increase or decrease in our cash balance for the period.
Reconciliation of Operating Cash Flows to Free Cash Flows:
| Three Months Ended December 31, | ||
| 2013 | 2012 | |
| Net Cash provided by Operating Activities | $ 19.7 | $ 56.2 |
| Purchase of intangible assets | (0.5) | (0.0) |
| Purchases of property and equipment | (37.9) | (5.1) |
| Free cash flows | $ (18.7) | $ 51.1 |
| The table above may not total due to rounding. | ||
Venezuela foreign currency status
As of December 31, 2013, the exchange rate used to re-measure our net monetary assets of our Venezuelan operations was the official rate of 6.30 Bolivares Fuertes per U.S. dollar and transactions carried out by the Company's Venezuelan subsidiaries were re-measured at the monthly average exchange rate for the year ended December 31, 2013.
On January 23, 2014, the Exchange Agreement number 25 was published in the Special Official Gazette Number 6,122, providing the exchange rate applicable to foreign currency sales for certain transactions such us but not limited to: contracts for leasing and services, use and exploitation of patents, trademarks, foreign investments and payments of royalties, contracts for technology import and technical assistance, which will be the exchange rate from the most recent auction conducted by the SICAD and published on its website.
As a result of the above described change in regulations, the Company will have to use the auction resulting SICAD exchange rate to re-measure the Venezuelan subsidiaries' non-U.S. dollar denominated monetary assets and liabilities from January 2014, which management estimates would result in a loss of approximately between $1.5 million and $ 2.5 million to be recorded in the first quarter of fiscal year 2014. Also, the use of the SICAD exchange rate from fiscal year 2014 implies that the company´s revenues and costs will be re-measured using the auction resulting rate, which would vary from auction to auction.
Foreign Currency Sensitivity Analysis – Venezuela Segment
In order to assist investors in their overall understanding of the impact of a hypothetical Venezuelan devaluation on our Venezuelan segment reporting, we developed a scenario that approximates a 60% devaluation of the SICAD rate as of the date of this release. Under this analysis, the assumed exchange rate was applied starting on January 1, 2013. These disclosures may help investors project sensitivities, on segment information captions, to devaluations of whatever order of magnitude they choose by simple arithmetic calculations.
| Year Ended December 31, 2013 | Year Ended December 31, 2013 | |||||
| Venezuela | Other Countries | Total | Venezuela | Other Countries | Total | |
| Net revenues | $ 84,572,485 | $ 388,022,224 | $ 472,594,709 | $ 28,101,429 | $ 388,022,224 | $ 416,123,653 |
| Direct costs | (29,578,762) | (216,812,816) | (246,391,578) | (13,411,094) | (216,812,816) | (230,223,910) |
| Direct contribution | $ 54,993,723 | $ 171,209,408 | 226,203,131 | $ 14,690,335 | $ 171,209,408 | 185,899,744 |
| Operating expenses and indirect costs of net revenues | (72,664,076) | (72,664,076) | ||||
| Income from operations | $ 153,539,055 | $ 113,235,668 | ||||
| Direct Contribution Margin % | 65.0% | 44.1% | 47.9% | 52.3% | 44.1% | 44.7% |
| Income from operations Margin % | 32.5% | 27.2% | ||||