Cautionary Statement Regarding Forward-Looking Statements
Any statements made or implied in this report that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements within the meaning of Section 27 A of the Securities Act of 1933, as amended, (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and should be evaluated as such. The words "anticipate," "believe," "expect," "intend," "plan," "estimate," "target," "project," "should," "may," "could," "will" and similar words and expressions are intended to identify forward-looking statements. These forward-looking statements are contained throughout this report. Forward-looking statements generally relate to information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, future economic, political and social conditions in the countries in which we operate and their possible impact on our business, and the effects of future regulation and the effects of competition. Such forward-looking statements reflect, among other things, our current expectations, plans, projections and strategies, anticipated financial results, future events and financial trends affecting our business, all of which are subject to known and unknown risks, uncertainties and other important factors (in addition to those discussed elsewhere in this report) that may cause our actual results to differ materially from those expressed or implied by these forward-looking statements. These risks and uncertainties include, among other things:
•our expectations regarding the continued growth of e-commerce and Internet
usage in
•competition;
•our ability to expand our operations and adapt to rapidly changing technologies;
•our ability to attract new customers, retain existing customers and increase revenues;
•the impact of government, central bank and other regulations on our business;
•credit risk and other risks of lending, such as increases in defaults by customers and other delinquencies;
•litigation and legal liability;
•security breaches and illegal uses of our services;
•systems interruptions or failures;
•our ability to attract and retain qualified personnel;
•consumer trends;
•reliance on third-party service providers;
•enforcement of intellectual property rights;
•our expectations regarding benefits and synergies from recent or future strategic investments, acquisitions of businesses, technologies, services or products;
•seasonal fluctuations; •our indebtedness;
•volatility of market prices, impairment and unique risks related to loss of the digital assets that we acquire;
•political, social and economic conditions in
•our long-term sustainability goals.
Many of these risks are beyond our ability to control or predict. New risk factors emerge from time to time and it is not possible for Management to predict all such risk factors, nor can it assess the impact of all such risk factors on our company's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. 36
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These statements are based on currently available information and our current assumptions, expectations and projections about future events. While we believe that our assumptions, expectations and projections are reasonable in view of the currently available information, you are cautioned not to place undue reliance on our forward-looking statements. These statements are not guarantees of future performance. They are subject to future events, risks and uncertainties -many of which are beyond our control- as well as potentially inaccurate assumptions that could cause actual results to differ materially from our expectations and projections. Some of the material risks and uncertainties that could cause actual results to differ materially from our expectations and projections are described in "Item 1A - Risk Factors" in Part I of the Company's 2022 10-K filed with theSEC onFebruary 24, 2023 and in other reports we file from time to time with theSEC . You should read that information in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 2 of Part I of this report, our unaudited interim condensed consolidated financial statements and related notes in Item 1 of Part I of this report and our audited consolidated financial statements and related notes in Item 8 of Part II of the Company's 2022 10-K. We note such information for investors as permitted by the Private Securities Litigation Reform Act of 1995. There also may be other factors that we cannot anticipate or that are not described in this report, generally because they are unknown to us or we do not perceive them to be material that could cause results to differ materially from our expectations. Certain monetary amounts included elsewhere in this document have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be the arithmetic aggregation of the figures that precede them. Forward-looking statements speak only as of the date they are made, and we do not undertake to update these forward-looking statements except as may be required by law. You are advised, however, to review any further disclosures we make on related subjects in our periodic filings with theSEC .
The discussion and analysis of our financial condition and results of operations has been organized to present the following:
•a brief overview of our company;
•a review of our financial presentation and accounting policies, including our critical accounting policies;
•a discussion of our principal trends and results of operations for the
three-month periods ended
•a discussion of the principal factors that influence our results of operations, financial condition and liquidity;
•a discussion of our liquidity and capital resources and a discussion of our capital expenditures; and
•a description of our non-GAAP financial measures.
Other Information
We routinely post important information for investors on our Investor Relations website, http://investor.mercadolibre.com. We use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under SEC Regulation FD (Fair Disclosure). Accordingly, investors should monitor our Investor Relations website, in addition to following our press releases,SEC filings, public conference calls and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this report.
Business Overview
We are the largest online commerce ecosystem inLatin America based on unique visitors and orders processed, and we are present in 18 countries:Argentina ,Brazil ,Mexico ,Chile ,Colombia ,Peru ,Uruguay ,Venezuela ,Bolivia ,Costa Rica ,Dominican Republic ,Ecuador ,Guatemala ,Honduras ,Nicaragua ,Panama ,Paraguay andEl Salvador . Our platform is designed to provide users with a complete portfolio of services to facilitate commercial transactions both digitally and offline. Through our e-commerce platform, we provide buyers and sellers with a robust and safe environment that fosters the development of a large e-commerce community inLatin America , a region with a population of over 650 million people and with one of the fastest-growing Internet penetration and e-commerce growth rates in the world. We believe that we offer world-class technological and commercial solutions that address the distinctive cultural and geographic challenges of operating a digital commerce platform inLatin America .
We offer our users an ecosystem of six integrated e-commerce services and
digital financial services: the
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The Mercado Libre Marketplace , is a fully-automated, topically-arranged and user-friendly online commerce platform, which can be accessed through our website and mobile app. This platform enables us (when we act as sellers in our first party sales), merchants and individuals to list merchandise and conduct sales and purchases digitally. The Marketplace has an ample assortment of products, with a wide range of categories such as consumer electronics, apparel and beauty, home goods, automotive accessories, toys, books and entertainment and consumer packaged goods. To complement theMercado Libre Marketplace and enhance the user experience for our buyers and sellers, we developedMercado Pago , an integrated digital payments solution.Mercado Pago was initially designed to facilitate transactions onMercado Libre's Marketplaces by providing a mechanism that allowed our users to securely, easily and promptly send and receive payments. NowMercado Pago is a full ecosystem of financial technology solutions both in the digital and physical world. Our digital payments solution enables anyMercadoLibre registered user to securely and easily send and receive digital payments and to pay for purchases made on any ofMercado Libre's Marketplaces. Currently,Mercado Pago processes and settles all transactions on our Marketplaces inArgentina ,Brazil ,Mexico ,Chile ,Colombia ,Uruguay andPeru and is available to process and settle transactions on our Marketplace inEcuador . Beyond facilitating Marketplace transactions, over the years we have expanded our array ofMercado Pago services to third parties outsideMercado Libre's Marketplace. We began first by satisfying the growing demand for online-based payment solutions by providing merchants the necessary digital payment infrastructure for e-commerce to flourish inLatin America . Today,Mercado Pago's digital payments business not only allows merchants to facilitate checkout and payment processes on their websites through a branded or white label solution or software development kits, but it also enables users to transfer money in a simple manner to each other through the Mercado Pago website or onMercado Pago app. ThroughMercado Pago , we brought trust to the merchant customer relationship, allowing online consumers to shop easily and safely, while giving them the confidence to share sensitive personal and financial data with us. Finally, we have also deepened our fintech offerings by growing our online-to-offline ("O2O") products and services. The Mercado Envios logistics solution enables sellers on our platform to utilize third-party carriers and other logistics service providers, while also providing them with fulfillment and warehousing services. The logistics services we offer are an integral part of our value proposition, as they reduce friction between buyers and sellers, and allow us to have greater control over the full experience. Sellers that opt into our logistics solutions are not only able to offer a uniform and seamlessly integrated shipping experience to their buyers at competitive prices, but are also eligible to access shipping subsidies to offer free or discounted shipping for many of their sales on our Marketplaces. In 2020, we launchedMeli Air with a fleet of dedicated aircraft covering routes acrossBrazil andMexico , with the aim of improving our delivery times. We have also developed a network of independent neighborhood stores and commercial points (known as "Meli Places") to receive and store packages that are in transit using our integrated technology. Meli Places network allows buyers and sellers to pick-up, drop-off, or return packages with a better experience, reducing the travel distance for all parties. As ofMarch 31, 2023 , we offer our shipping solution directed towards deliveries inArgentina ,Brazil ,Mexico ,Chile ,Colombia ,Uruguay ,Peru andEcuador and we also offer free shipping to buyers inArgentina ,Brazil ,Mexico ,Chile ,Colombia ,Uruguay andPeru .Mercado Credito , our credit solution available inArgentina ,Brazil ,Mexico andChile , leverages our user base, which is loyal and engaged, and in part has also been historically underserved or overlooked by financial institutions and suffers from a lack of access to needed credit. Facilitating credit is a key service overlay that enables us to further strengthen the engagement and lock-in rate of our users, while also generating additional touchpoints and incentives to useMercado Pago as an end-to-end financial solution. Our asset management product, which is available inArgentina ,Brazil andMexico , is a critical pillar to build our alternative two-sided network vision. It incentivizes our users to begin to fund their digital wallets with cash as opposed to credit or debit cards given that the return our product offers is greater than traditional checking accounts. As an extension of our asset management and savings solutions for users, we launched a digital assets feature as part of the Mercado Pago wallet inBrazil in 2021, inMexico in 2022 and inChile in 2023. This service allows our millions of users to purchase, hold and sell selected digital assets through our interface without leaving the Mercado Pago application, while a partner acts as the custodian and offers the blockchain infrastructure platform. This feature is available for all users through theirMercado Pago wallet. Our advertising platform, Mercado Ads, enables businesses to promote their products and services on the Internet. Through our advertising platform,MercadoLibre's brands and sellers are able to display ads on our webpages through product searches, banner ads, or suggested products. Our advertising platform enables merchants and brands to access the millions of consumers that are on our Marketplaces at any given time with the intent to purchase, which increases the likelihood of conversion. 38
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Through Mercado Libre Classifieds, our online classified listing service, our users can also list and purchase motor vehicles, real estate and services in the countries where we operate. Classifieds listings differ from Marketplace listings as they only charge optional placement fees and not final value fees. Our classifieds pages are also a major source of traffic to our platform, benefiting both the commerce and fintech businesses. Complementing the services that we offer, our digital storefront solution,Mercado Shops , allows users to set-up, manage and promote their own digital stores. These stores are hosted byMercado Libre and offer integration with the rest of our ecosystem, namely our Marketplaces, payment services and logistics services. Users can create a store at no cost, and can access additional functionalities and value added services on commission.
Reporting Segments and Geographic Information
Our segment reporting is based on geography, which is the criterion our Management currently uses to evaluate our segment performance. Our geographic segments areBrazil ,Argentina ,Mexico and Other Countries (includingChile ,Colombia ,Costa Rica ,Ecuador ,Peru andUruguay ). Although we discuss long-term trends in our business, it is our policy not to provide earnings guidance in the traditional sense. We believe that uncertain conditions make the forecasting of near-term results difficult. Further, we seek to make decisions focused primarily on the long-term welfare of our Company and believe focusing on short-term earnings does not best serve the interests of our stockholders. We believe that execution of key strategic initiatives as well as our expectations for long-term growth in our markets will best create stockholder value. A long-term focus may make it more difficult for industry analysts and the market to evaluate the value of our Company, which could reduce the value of our common stock or permit competitors with short-term tactics to grow more rapidly than us. We, therefore, encourage potential investors to consider this strategy before making an investment in our common stock.
The following table sets forth the percentage of our consolidated net revenues
by segment for the three-month periods ended
Three Months Ended March 31, (% of total consolidated net revenues) 2023 2022 Brazil 52.0 % 55.7 % Argentina 23.7 23.0 Mexico 19.5 16.2 Other Countries 4.8 5.1
The following table summarizes the changes in our net revenues by segment for
the three-month periods ended
Three Months Ended Change from 2022 March 31, to 2023 2023 2022 in Dollars in % (in millions, except percentages) Net Revenues: Brazil$ 1,579 $ 1,252 $ 327 26.1 % Argentina 721 518 203 39.2 Mexico 591 364 227 62.4 Other Countries 146 114 32 28.1 Total Net Revenues$ 3,037 $ 2,248 $ 789 35.1 % Description of Line Items Net revenues We disaggregate revenues into four geographical reporting segments. Within each of our segments, the services we provide and the products we sell generally fall into two distinct revenue streams: "Commerce" and "Fintech". 39
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The following table summarizes our consolidated net revenues by revenue stream
for the three-month periods ended
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