MercadoLibre, Inc. (MELI)
Q1 2010 Earnings Call Transcript
May 6, 2010 4:30 pm ET
Pedro Arnt – IR
Marcos Galperin – Chairman, CEO and President
Hernan Kazah – CFO and EVP
Marianne Wolk – Susquehanna
Imran Khan – JP Morgan
Scott Devitt – Morgan Stanley
Gene Munster – Piper Jaffray
Steve Weinstein – Pacific Crest
Stephen Ju – RBC
Previous Statements by MELI
» MercadoLibre, Inc. Q4 2008 Earnings Call Transcript
» Mercadolibre, Inc. Q2 2008 Earnings Call Transcript
» MercadoLibre, Inc. Q1 2008 Earnings Call Transcript
Good day, ladies and gentlemen, and welcome to MercadoLibre's first quarter earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. (Operator instructions) As a reminder, this conference call may be recorded. I would now like to turn the conference over to your host, Mr. Pedro Arnt. Sir, you may begin.
Thank you. Welcome everyone to MercadoLibre's earnings release conference call for the quarter ended March 31st, 2010. The company management presenting today are Marcos Galperin, CEO; and Hernan Kazah, CFO. This conference call is also being broadcast over the Internet and is available through the Investor Relations section of our Website.
Let me quickly remind you that during the course of this call, management may make forward-looking statements relating to such matters as continued growth prospects for the company, industry trends, and products and technology initiatives. These statements are based on currently available information and our assumptions, expectations, and projections about future events.
While we believe that these assumptions, expectations, and projections are reasonable in view of the currently available data, you are cautioned not to place undue reliance on these forward-looking statements. Our actual results may differ materially from those discussed in this call for a variety of reasons, including those described in the forward-looking statements and Risk Factor sections of our 10-Q, 10-K, and other filings with the Securities and Exchange Commission, which are available on our Investor Relations Website.
With those disclaimers, let me hand the floor over to Marcos to initiate the conference call.
Thank you, Pedro, and welcome everyone to today's conference call. First of all, let me say that following an excellent 2009, we are off to an exciting and promising start in 2010 as well. Our first quarter results demonstrate the continued progress of ongoing strategies and recent initiatives. All our different business units showed tremendously positive traction during the first quarter as we continue to carry-forward the momentum gained from the many innovations that were launched during last year.
Before I move on, let me just clarify that all growth rates that I would be mentioning refer to year-on-year growth rates unless specifically stated. During the first quarter, the company generated impressive 39% growth in items sold, 103% growth in number of payments made to MercadoPago, 40% growth in gross merchandise volume, 49% growth in gross merchandise volume in local currencies, and 99% growth in total payments volume in local currencies.
During Q1, we added 2.3 million new users to our community of buyers and sellers, giving total confirmed registered users at $44.9 million, a growth rate of 26%.
Net revenues for the quarter came in at $45.9 million, a jump of 42%. Our marketplace revenues grew 27%. And revenues were particularly strong in our payments business, which grew 103%. Income from operations grew 123%, with an operating income margin of 32.9%. All in all, we believe Q1 performance validates the strength of our business model; efficient execution by our teams, our leading brand, and market position; and, the still compelling secular growth trends that benefit our industry throughout Latin America.
The strong reserves we posted for Q1 also highlight another important factor that I would like to bring to your attention. The fact that we not only continued to strengthen our business units on an individual basis, but even more notably that we are hitting a freefall in terms of the synergies and interplay between these business units. And as we deepen these relationships between the different platforms, marketplaces, payments, advertising, and the soon-to-be- launched Web stores, we are constructing a powerful ecosystem of complementing e-commerce services.
The positive consequences of this ecosystem are many, increasing network externalities, higher switching costs, more cross-selling opportunities, and deeper knowledge of our customers; all advantages that we are successfully putting into place in order to further cement our leadership in the e-commerce industry.
Most evident among these synergies during Q1 were those between MercadoLibre and MercadoPago. Kazah will go into greater detail later on, these two platforms mutually strengthen each other's position and generate easily identifiable growth opportunities for them. As the marketplace business grows, the addressable market for MercadoPago on-platform transaction also grows. And as MercadoPago increases penetration of marketplace transactions, trading frictions are reduced and the potential for even further marketplace growth is augmented. We believe this positive interplay is one of the key factors behind MercadoPago's triple-digit total payment volume levels and the MercadoLibre's marketplace market share gains during the quarter.
Cross-platform benefits are not restricted to marketplaces and payments. Our other portfolio businesses are also benefiting from the positive interplays within the ecosystem. Our classifieds business is leveraging cross-selling opportunities and classic derivation from the marketplace, making it the most visited automotive Website throughout Latin America.
Our advertising business is taking advantage of the customer relationships and the account managing teams we already have to market its offerings to our large centers enabling it to post impressive growth. And our nascent Web store solution, MercadoShops, targeted to sellers that want to pursue a multi-channeled strategy will soon be launched with built-in payment and advertising capabilities offered to MercadoPago and Mercado Click, and will be linked to and from our marketplace to facilitate sellers to our strategy of having inventory on our marketplace and on their own Web store.