Mercado Libre Q1 Earnings Review

Mercado Libre reported quarterly results on May 2^nd after the market closed. The company has done phenomenal over the past half-a-decade. Revenue growing fast, strong operating leverage, ads increasing penetration of GMV. In this article, I’ll go over Meli’s financial performance and management’s commentary. At the end, I’ll share my take on the quarter as well as what I’m doing portfolio-wise.

The company had revenues of 4.33 billion dollars, growing 36% on a yearly basis, decelerating from last Q’s 42%. It’s interesting to note how well is the company sustaining these levels while being at a 16bn run rate. I will dive into sales’ components after a general financial analysis.

Meli’s gross profit amounted to 2.02bn during the quarter, implying a margin of 46.7%, which was down 400bps. The company generated 528M in operating income, with a margin of 12.1%, down 100bps from last year. Finally, Mercado Libre had a net profit margin of 7.9%, increasing 160bps YoY, and generating 344M in net income.

After the pandemic, Meli’s cash flow has risen dramatically. During the last quarter, Mercado Libre brought in 1.51 billion dollars in cash from operating activities, up from 859M in the comparable quarter. It is to be observed that a large portion of the increase is explainable by changes in working capital. On the other hand, capital expenditures amounted to 146M.

Prior to diving into segment specifics, I find the following table very illustrative to get a broad perspective. The ecosystem is growing on every single dimension, acquiring more users on both the commerce and fintech side.