MercadoLibre (NASDAQ: MELI) reported Q1 EPS of ($0.44), $0.04 better than the analyst estimate of ($0.48). Revenue for the quarter came in at $652.1 million versus the consensus estimate of $633.73 million.

First Quarter 2020 Financial Highlights

• Net revenues for the first quarter were $652.1 million, a year-over-year increase of 37.6% in USD and 70.5% on an FX neutral basis.
• Commerce revenues increased 32.7% year-over-year in USD and 62.0% on an FX neutral basis, while Fintech revenues increased 45.2% year-over-year in USD and 83.4% on an FX neutral basis.
• Gross profit was $312.8 million with a margin of 48.0%, compared to 50.0% in the first quarter of 2019.
• Total operating expenses were $342.5 million, an increase of 51.0% year-over-year in USD. As a percentage of revenues, operating expenses were 52.5%, compared to 47.9% during the first quarter of 2019. The $34.7 million improvement in operating expenses quarter-over-quarter was mostly driven by a decrease of $60.2 million in marketing expenditure, partially offset by a deterioration in bad debt.
• Loss from operations was $29.7 million, compared to a loss of $68.9 million during the prior quarter. As a percentage of revenues, the loss from operations reached 4.6% improving 567 bps sequentially.
• Interest income was $36.8 million, a 50.5% increase year-over-year, as a result of equity offering during March 2019, which generated more invested volume and interest gain, and a higher float in Argentina.
• The Company incurred $23.6 million in financial expenses this quarter, mainly attributable to secured financial loans and interest expenses from our trusts related to our factoring business in Argentina.
• Net loss before taxes was $16.7 million, up from a loss of $63.0 million during last quarter.
• Income tax expense was $4.4 million.
• Net loss was $21.1 million, resulting in basic net loss per share of $0.44.

First Quarter 2020 Business Highlights

• Unique active users grew 30.9% reaching 43.2 million.
• Total payment volume (“TPV”) through Mercado Pago reached $8.1 billion, a year-over-year increase of 43.5% in USD and 82.2% on an FX neutral basis. Total payment transactions increased 102.0% year-over-year, totaling 290.7 million transactions for the quarter.
• Off platform TPV grew 84.2% in USD and 139.5% year-over-year on a FX neutral basis reaching $4.7 billion in transactions and 217.3 million payments, a 146.2% year-over-year growth.
• On a consolidated basis MPOS TPV grew 103.3% on an FX neutral basis.
• Mobile wallet delivered this quarter $1.3 billion in transactions on a consolidated basis, leading to a 299.2% year-over-year growth on a FX neutral basis for the full first quarter 2020. Our mobile wallet consumer base grew by 155.1% compared to the first quarter 2019, surpassing the 8 million unique payers mark. TPV from mobile wallet in Argentina, Brazil and Mexico continues to grow by triple digits year-over-year.
• Our asset management product, Mercado Fondo, is now available in Argentina, Brazil and Mexico. Mexico was launched during the quarter, leading Mercado Fondo with more than $ 350 million under management and more than 7.3 million users across Latin America.
• Our online off-platform payments solution, Merchant Services, had the lowest deceleration during the quarter growing on a consolidated basis 81.7% year-over-year on a FX Neutral basis.
• Gross merchandise volume (“GMV”) reached $3.4 billion, representing an increase of 10.6% in USD and 34.2% on an FX neutral basis.
• Items sold reached 105.7 million, growing 27.6% year-over-year.
• Live listings offered on MercadoLibre’s marketplace reached 267.4 million, a 29.8% year-over-year growth.
• Mobile gross merchandise volume grew 197.6% year-over-year on an FX neutral basis, reaching 69.8% of GMV.
• Items shipped through Mercado Envios reached 90.2 million, a 44.6% year-over-year increase, driven primarily by optimizations in our free shipping program.

Recent COVID-19 related key trends

• Government-imposed total or partial lockdowns instituted throughout Latin America in late March impacted geographic segments and business lines differently. Additionally, the magnitude of negative impact was greater in the initial weeks following government mandated lockdowns, with gradual improvements as time elapsed.
• The marketplace KPI’s hit a low point during the week of the 18th to the 24th of March. Year-over-year growth for items sold during that week troughed at 3.3%, with Fx Neutral GMV declining by 1.4%. From then onwards, we have seen a strong rebound, with growth rates accelerating in April to 75.8% year-over-year in Items Sold and 72.6% Fx Neutral year-over-year in GMV for the full month.
• Initially, consumers seem to have pulled back on expenditures on non-essential items. This led to a mix shift in sales. Categories such as health, consumer packaged goods and toys and games showed strength, with volume growth in those categories exceeding 100% year-over-year on an FX neutral basis in some markets. Conversely, certain higher ticket, non-essential categories such as auto parts and consumer electronics saw marked declines in growth rates.
• Managed logistics network continued operating normally, guaranteeing timely deliveries for orders shipped through it. Warehouses remain with no significant disruptions, rapidly approaching having half of our shipments already running on our own logistics network, not only improving average cost per order and shipping times but also service levels.
• The fintech business also experienced an initial slowdown during the third week of March, followed by sequential weekly improvements through the last week of March and into April. Off marketplace TPV growth during the second half of March was 95.4% year-over-year on an FX Neutral basis, and TPN was 87.3% year-over-year. By April these growth rates had accelerated to 155.6% and 119.8% respectively. Deceleration in number and volume of payments processed was a consequence primarily of lower foot traffic in physical retail, which had a direct impact on lower mobile point of sale and QR total payment volume growth partially offset by the relative strength in Merchant Services.
• By the end of the quarter, the non performing loan ratios had not shown a deterioration due to the COVID-19 crisis.
• Nonetheless, to manage our exposure to merchant and consumer credits amidst a global pandemic, we slowed credit originations to both cohorts.
• In terms of liquidity and cash management for the fintech business, all relevant funding sources remained available, drawing on credit facilities to maximize liquidity at a local subsidiary level. The consolidated Balance Sheet currently holds approximately $2.3 billion dollars in cash, cash equivalents and liquid securities.

Pedro Arnt, Chief Financial Officer of MercadoLibre, Inc., commented, “Given the difficult circumstances the world is facing, we are optimistic about the results we've delivered during the first quarter of 2020. Although less affected than others, our business did register this impact, primarily during the first weeks of the imposed lockdowns, with a rebound throughout April. We remain committed to doing our part, by empowering our merchants to continue operating and securing deliveries of goods needed by households. We feel MercadoLibre has the opportunity to emerge from this situation stronger and with an even greater sense of purpose. We trust the dedication and commitment being demonstrated by our entire organization will allow us to continue executing our strategy with no significant interruptions, and in doing so play our part in contributing to making things less difficult to our users during these trying times. Finally, and most importantly, our hearts go out to those individuals and families affected by COVID-19, and our gratitude and appreciation go out to all those brave individuals who are on the front lines working through this unprecedented global health crisis.”

For earnings history and earnings-related data on MercadoLibre (MELI) click here.