MercadoLibre SA (MELI)
Q2 2010 Earnings Call
August 04, 2010 04:30 pm ET
Pedro Arnt - IR
Marcos Galperín - President and CEO
Hernán Kazah - EVP and CFO
Imran Khan - JPMorgan
Gene Munster - Piper Jaffray
Marianne Wolk - Susquehanna
Robert Ford - Bank of America
Jordan Rohan - Stifel Nicolaus
Steve Weinstein - Pacific Crest
Previous Statements by MELI
» MercadoLibre, Inc. Q1 2010 Earnings Call Transcript
» MercadoLibre, Inc. Q4 2008 Earnings Call Transcript
» Mercadolibre, Inc. Q2 2008 Earnings Call Transcript
Good day, ladies and gentlemen, and welcome to the MercadoLibre's Q2 2010 Earnings Conference Call. At this time, all participant lines 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 is being recorded.
I would now like to turn the conference over to company management. Please go ahead.
Welcome, everyone, to MercadoLibre's earnings release conference call for the quarter ended June 30, 2010. Company management presenting today are Marcos Galperín, Chief Executive Officer, and Hernán Kazah, Chief Financial Officer. This conference call is also being broadcast over the Internet and is available through the “Investor Relations” section of our website.
I remind you that during the course of this conference call, we will discuss some non-GAAP measures. The reconciliation of these measures to the nearest comparable GAAP measures can be found in our second quarter 2010 earnings press release, available on our Investor Relations website.
In addition, management may make some forward-looking statements relating to such matters as continued growth prospects for the company, industry trends, and product and technology initiatives. 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 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 Factors” sections of our 10-Q, 10-K and other filings with the Securities and Exchange Commission, which are available on our Investor Relations website.
Now, let me hand the floor over to Marcos.
Thank you and welcome, everyone, to today's conference call. I would start us off today by discussing our second quarter performance, including some insights into market trends and how they compare to our business growth.
I will also provide additional detail on certain product and service enhancements that we carried out during the quarter as part of our ongoing efforts to continuously improve online buying and selling experience. Then, I will hand the call over to Hernán, who will take you through our financial performance in greater detail. After Hernán's comments, we will open up the call for questions.
Overall, we turned in a solid performance, despite Q2 being affected by softer demand as a result of the FIFA World Cup and no major launches on our platform that could have served as growth catalysts for our business. I will discuss these two items in more detail shortly.
During Q2, we added $2.5 million new users to our community of buyers and sellers, ending the quarter with $47.4 million total confirmed registered users, representing approximately one quarter of the total Internet population in the region. This also represented a 25% increase in our registered user base over the previous year, outpacing Internet audience growth for the region, which comScore recently estimated at 23%.
Gross merchandise volume for the quarter was $798 million, a 22% increase year-over-year and 35% higher than last year when measured in local currencies. Putting this in market context, this is an excellent rate of growth even within Latin America quickly evolving e-commerce space.
Importantly, many of the underlying drivers behind the positive evolution of e-commerce in the region remain strong as broadband penetration, business per household, and mobile penetration are all growing at double-digit rate. As new users come online they also choose to use MercadoLibre for their online shopping. Our second quarter results reflect the positive impact these trends are having on our top line.
Notably, our core business sustained an excellent rate of expansion. In MercadoPago, our payments business grew even faster, maintaining its growth and growth dynamic as it continues to penetrate our marketplace business as well as growth of platform. To further illustrate all this let me highlight some of the key operational metrics. In the second quarter, we generated a following year-on-year comparisons, 34% growth in items sold, 91% growth in number of payments made to MercadoPago, 35% growth in gross merchandise volume in local currencies, 74% growth in total payments volume in local currencies.
Importantly, we were able to post these growth rates despite the negative effect of the Soccer World Cup on our second quarter volume. In terms of our business, there were four dates in June when each of the three largest economics in the region showed transaction volumes close to about half their normal volume corresponding with the days in which those countries played the World Cup matches. Additionally, in anticipation of the adverse impact on user attention and increased rates for TV advertising during the World Cup, we postponed our outline cable TV campaign for 2010 until August, whereas our 2009 campaign started to run in May. Last year we saw measurable increase in the initial traffic when this campaign launched.
Despite these factors we are extremely pleased with our growth momentum for the quarter. Turning to our financial results, net revenues for the quarter were $52.5 million an increase of 28% year-on-year, income from operations grew 52% with an operating income margin of 35.8%. Net income reached $11.7 million, a 75% improvement over last year.