MercadoLibre, Inc. (NASDAQ:MELI) Q1 2024 Earnings Call Transcript May 3, 2024
MercadoLibre, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Richard Cathcart: Hello, everyone, and welcome to the MercadoLibre Earnings Conference Call for the quarter ended March 31, 2024. Thank you for joining us. I’m Richard Cathcart, MercadoLibre’s Investor Relations Officer. Today, we will share our quarterly highlights on video, after which we will begin our live Q&A session with our management team. Before we go on to discuss our results for the first quarter of 2024, I remind you that management may make or refer to and this present may contain forward-looking statements and non-GAAP measures. So please refer to the disclaimer on screen, which will also be available in our earnings materials on our Investor Relations website. With that, let’s begin with a summary of our results.
Martin de los Santos: Hello, everyone. I’m pleased to report another quarter of solid results with excellent operational and financial performance in Brazil and Mexico. Both countries posted GMV growth, approximately 30% year-on-year as we carry over a strong momentum from Q4. This above market growth is being driven by several factors, to improvement of user experience we minimized as a highlight, our strategic investment in chip infrastructure, which are driving faster growth in specific target regions and a well-executed marketing campaign that is leveraging on the awareness we generated in Q4 around peak season. In addition, our advertising business continues to grow nicely and reached regular levels of GMV penetration in all of the markets where we operate.
Mercado Pago also had a solid performance in Mexico and Brazil. Some of the highlights being the acquiring business growing at accelerated rate sequentially in both countries. We had a solid credit growth portfolio surpassing the $4.4 million and growing strongly from last year and a strong quarter for Mercado Pago credit card. We issued 1.5 million cards during this quarter. The TPV reached $1.9 billion, growing 133% from last year. In summary, in Q1, we delivered a strong operational performance in commerce and fintech both in Brazil and Mexico, which has offset the negative impact of a weak macro in Argentina, and the peso devaluation in the country. Before turning to our financial performance in more detail, I’d like to highlight that there are a couple of reporting updates that have taken effect in this quarter.
Investors can find a summary of the impacts on our financials in this quarter, shareholders letter and a full reconciliation in our earnings presentation. My comments today will refer to the numbers that are comparable to the figures we reported in Q1 last year. Consolidated revenues grew at a fast pace on the back of the strong operational momentum that I mentioned earlier. Brazil and Mexico, had an outstanding quarter and the revenues growth was sufficient to offset the impact of headwinds in Argentina. Income from operations grew strongly year-on-year, once again, with margin expansion being driven by Mexico and Brazil. This reflects the combination of growth, scale and cost efficiency that drives operational leverage. And our long-term ambition is to continue delivering both growth and profit, and we are confident in our ability to achieve that.
Net income grew at a faster pace than income from operation as lower FX losses in Argentina were partially offset by lower operational income in that country. Furthermore, the reporting updates I mentioned earlier have a broadly neutral impact on net income. Overall, we are very pleased with the performance of the business in Q1 despite the headwind from Argentina. And this is a great way to kick off MercadoLibre’s 25th anniversary. Now, I’ll pass over to Richard for more on the solid foundations we have built over the past 25 years, looking ahead for the next 25 years of MercadoLibre.
Richard Cathcart: In 2024, MercadoLibre will celebrate its 25th anniversary. And we look back on the progress we’ve made in the merchandise, commerce and financial services in Latin America. Today, MELI is the leading technology company in the region and a major tech company globally, and is being recognized for its innovation, growth and impact in the region. In addition to business growth and impact, MercadoLibre has a consistent track record of generating shareholder value since our IPO in 2007. We look forward to the next 25 years with great confidence and optimism as we still see plenty of opportunities to continue to grow and fulfill our mission in a region that provides us with a large addressable market. In Latin America, e-commerce is far from mature and financial services are right for disruption.
We are the leading e-commerce platform in the region, which has significant potential for growth from new buyer and higher frequency as engagement and penetration of retail rise. By building the fastest and most extensive delivery network in the region and by offering the widest assortment and the best UX, we have become a natural destination for buyers and sellers. This drives a uniquely powerful and self-reinforcing network effect as sellers invest to maximize their sales by capitalizing on our traffic while buyers receive an ever-improving value prop which drives more traffic and growth. We’re also building one of the largest retail media platforms in the region which leverages our extensive first-party data to offer advertisers unique audience targeting capabilities and complete full funnel strategies.
We are challenging the status quo in financial services and by offering a wide array of easy-to-use services for individuals and merchants in large markets underserved by incumbents, we have become one of the region’s leading fintechs. Our ecosystem is our competitive advantage in fintech services. Its data is uniquely rich and enables us to cross-sell. It also enables us to have a better view of credit risk and operate a business which matches the lowest cost to serve in the region. We have built a highly profitable acquiring business on the back of the technology and know-how developed for our marketplace. We are one of the largest fintechs in this market and are well-placed for market share gains across the region. We are also building Meli Mas with the ambition of being the largest and most valued loyalty program in the region by leveraging our ecosystem to offer unique benefits.
Technology is at the heart of everything we do and having one of the largest teams of engineers in the region ensures non-stop innovation and product development. We have a diversified mix of revenue with ample opportunities for growth monetization. Our scale financial discipline and tech-growth mentality mean we have low-cost structures with solid and sustainable profitability. MercadoLibre’s’s powerful intrinsic impact on the people we serve encourages entrepreneurship and promotes financial inclusion. We are proud of the achievements of the last 25 years but our mission is far from complete. As a leader in an e-commerce market that is far from mature and one of the leaders in a financial services market that is ripe for disruption, we are confident and optimistic in our future growth.
As we look forward to the next 25 years, we’re confident that the best is yet to come.
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