3Q23 earnings beat street comprehensively
- 3Q23 net income of US$359m (+37% q-o-q, +178% y-o-y) in 3Q23 beating street estimates by 26% on improving operating margin.
- Revenue of US$3,760m (+10% q-o-q, +39% y-o-y) above consensus expectation by 6%, continued growth in both Commerce and Fintech from Brazil and Mexico.
- Credit business showed higher profitability, with improving asset quality, resulting in a decrease in non-performing loans.
MELI’s 3Q23 net income of US$359 million (+37% q-o-q, +178% y-o-y) exceeded street estimates by 26%. In 3Q23, Mercadolibre Inc (MELI) reported a net income of US$359 million (36% q-o-q, +178% y-o-y), surpassing the street estimate of US$284 million. The 3Q23 operating profit margin stood at US$685 million (+23% q-o-q, +131% y-o-y), with an operating margin of 18.2% compared to the Street’s 16.5% (2Q23 margin at 16.3%). The Opex-to-revenue ratio declined to 35.1% in 3Q23 (from 36.3% in 2Q23). MELI’s investments in logistics in Q3 helped it achieve a record level of fulfillment penetration, accounting for 48% of shipments.
MELI reported 3Q23 revenue of US$3,760m (+10% q-o-q, +39% y-o-y), 6% higher than street estimates. Commerce gross merchandise value (GMV) continued to grow, reaching US$11,360 million (+8% q-o-q, +31% y-o-y) and Fintech Total Processing Value (TPV) increased to US$47,256m (+12 q-o-q, +121% y-o-y). Commerce net revenue stood at US$2,128m (+9% q-o-q, +45% y-o-y), followed by Fintech net revenue at US$1,632 (+19% q-o-q, +33% y-o-y). MELI highlighted the impact of relaunching its loyalty program (MELI+) during the quarter, which initiated in Brazil and Mexico in late August. The revamped bundle reduced the threshold for free shipping to R$29 from R$79. Additionally, MELI saw a 27% y-o-y acceleration in items sold in Brazil, marking the highest rate of growth in that country since Q4 2021.
Improving fintech profitability with better credit quality. MELI’s credit business reported NIMAL (Net Interest Margin After Losses) of 37.4%, compared to 36.8% in 2Q23, led by Brazil and Mexico to partially offset Argentina’s portfolio compression due to FX and the macro environment. The credit portfolio grew to US$3,402m (+4% q-o-q, +49% y-o-y). The portfolio’s non-performing loan (NPL) ratio declined sequentially to 30.9% from 35% in 2Q23 due to the write-off of a large portion of the 270+ dpd from Q2 (all fully provisioned). The largest portion of the USD improvement in longer NPLs is now concentrated over 210 dpd, continuing the downward trend that commenced in 2022.