MercadoLibre (NASDAQ:MELI), the leading e-commerce platform in Latin America, reported robust results for the third quarter of 2023, as announced by CFO Martin de los Santos. The company saw significant revenue growth in Mexico and Brazil, contributing the most to total revenues. The commerce business experienced accelerated growth, driven by improvements in logistics and delivery. The fintech arm, Mercado Pago, also saw growth and increased user engagement. The company issued over 1 million credit cards and surpassed $1 billion in originations for the first time.
Key takeaways from the earnings call include:
- MercadoLibre reported an EBITDA margin of 18%, an increase from the previous quarter's 16%, indicating increased profitability.
- The company's commerce business saw accelerated growth in Gross Merchandise Volume (GMV) and items sold, driven by improvements in logistics and delivery.
- Mercado Pago, the company's fintech arm, saw increased growth in off-platform Total Payment Volume (TPV) and user engagement.
- The company issued over 1 million credit cards and surpassed $1 billion in originations for the first time.
- MercadoLibre launched its loyalty program, MELI Mas, offering shipping benefits, premium content, and access to various streaming services.
- The company is investing in logistics, with a 6% increase in fulfillment penetration, and in product development, branding, and expansion in smaller countries like Chile and Colombia.
- The advertising business showed growth of over 70% in revenue for the sixth consecutive quarter, with product ads being the main driver of growth.
MercadoLibre continues to focus on innovation, investment, and long-term prospects. The company is actively trying to gain market share in regions that are currently underrepresented and sees increased demand from areas further away from fulfillment centers. The MELI Delivery Day service is slowly gaining traction. The company utilizes AI in fraud prevention and credit scoring, which have been successful in predicting outcomes and improving efficiency.
The company also discussed its in-store point-of-sale (POS) business, which is seen as a significant part of its fintech offering. MercadoLibre has been able to provide this solution profitably and has made changes to attract larger merchants, resulting in higher activation rates and higher total payment volume per device. The POS business has synergy with MercadoLibre's online sales platform and allows for cross-selling of additional banking products to merchants.
In terms of the MELI Mas subscription plans, while it is too early to share subscriber counts, the company is excited about the program. The executives also discussed the cross-border market in Mexico and Brazil, stating that they continue to compete with new entrants and are confident in their competitive advantages. They are investing in improving their cross-border trade capabilities and are looking to compete in cross-border in Brazil as they are doing in Mexico, Chile, and Colombia.
Finally, they discussed the 1P business, noting that they are gradually accelerating in that area, but did not provide further details on their vision for the future. They also mentioned that there was a slight uptick in early delinquencies in credit quality but did not provide specific reasons for this increase.
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