MERCADOLIBRE INC - Quarter Report: 2019 September (Form 10-Q)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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(Mark One)
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x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2019
-OR-
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¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 001-33647
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MercadoLibre, Inc.
(Exact name of Registrant as specified in its Charter)
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Delaware |
| 98-0212790 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification Number) |
Arias 3751, 7th Floor
Buenos Aires, , C1430CRG
(Address of registrant’s principal executive offices)
(+5411) 4640-8000
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
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Securities registered pursuant to Section 12(b) of the Act: | ||||
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, $0.001 par value per share | MELI | Nasdaq Global Select Market |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files. Yes x No ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
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Large Accelerated Filer |
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| Accelerated Filer |
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Non-Accelerated Filer |
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| Smaller Reporting Company |
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| Emerging Growth Company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
49,709,955 shares of the issuer’s common stock, $0.001 par value, outstanding as of October 28, 2019.
MERCADOLIBRE, INC.
INDEX TO FORM 10-Q
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PART I. FINANCIAL INFORMATION |
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Item 1 — Unaudited Interim Condensed Consolidated Financial Statements |
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Interim Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018 | 1 |
2 | |
3 | |
4 | |
6 | |
Notes to Interim Condensed Consolidated Financial Statements (unaudited) | 7 |
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations | 31 |
Item 3 — Qualitative and Quantitative Disclosures About Market Risk | 53 |
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MercadoLibre, Inc.
Interim Condensed Consolidated Balance Sheets
As of September 30, 2019 and December 31, 2018
(In thousands of U.S. dollars, except par value)
(Unaudited)
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| September 30, |
| December 31, |
| 2019 |
| 2018 |
Assets |
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Current assets: |
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Cash and cash equivalents | $ 1,419,934 |
| $ 440,332 |
Restricted cash and cash equivalents | 37,031 |
| 24,363 |
Short-term investments (371,572 and 284,317 held in guarantee) | 1,726,189 |
| 461,541 |
Accounts receivable, net | 35,791 |
| 35,153 |
Credit cards receivable, net | 288,588 |
| 360,298 |
Loans receivable, net | 176,074 |
| 95,778 |
Prepaid expenses | 17,898 |
| 27,477 |
Inventory | 10,132 |
| 4,612 |
Other assets | 68,993 |
| 61,569 |
Total current assets | 3,780,630 |
| 1,511,123 |
Non-current assets: |
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Long-term investments | 3,595 |
| 276,136 |
Property and equipment, net | 220,854 |
| 165,614 |
Operating lease right-of-use assets | 175,022 |
| — |
Goodwill | 86,114 |
| 88,883 |
Intangible assets, net | 15,114 |
| 18,581 |
Deferred tax assets | 108,551 |
| 141,438 |
Other assets | 49,461 |
| 37,744 |
Total non-current assets | 658,711 |
| 728,396 |
Total assets | $ 4,439,341 |
| $ 2,239,519 |
Liabilities |
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Current liabilities: |
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Accounts payable and accrued expenses | $ 342,433 |
| $ 266,759 |
Funds payable to customers | 708,716 |
| 640,954 |
Salaries and social security payable | 92,452 |
| 60,406 |
Taxes payable | 39,230 |
| 31,058 |
Loans payable and other financial liabilities | 108,908 |
| 132,949 |
Operating lease liabilities | 17,441 |
| — |
Other liabilities | 75,630 |
| 34,098 |
Total current liabilities | 1,384,810 |
| 1,166,224 |
Non-current liabilities: |
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Salaries and social security payable | 27,393 |
| 23,161 |
Loans payable and other financial liabilities | 623,114 |
| 602,228 |
Operating lease liabilities | 159,001 |
| — |
Deferred tax liabilities | 96,925 |
| 91,698 |
Other liabilities | 11,081 |
| 19,508 |
Total non-current liabilities | 917,514 |
| 736,595 |
Total liabilities | $ 2,302,324 |
| $ 1,902,819 |
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Commitments and Contingencies (Note 7) |
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Redeemable convertible preferred stock, $0.001 par value, 40,000,000 shares |
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authorized, 100,000 shares issued and outstanding at September 30, 2019 (Note 10) | $ 98,843 |
| $ — |
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Equity |
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Common stock, $0.001 par value, 110,000,000 shares authorized, |
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49,709,955 and 45,202,859 shares issued and outstanding at September 30, |
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2019 and December 31, 2018 | $ 50 |
| $ 45 |
Additional paid-in capital | 2,075,693 |
| 224,800 |
Treasury stock | (720) |
| — |
Retained earnings | 377,590 |
| 503,432 |
Accumulated other comprehensive loss | (414,439) |
| (391,577) |
Total Equity | 2,038,174 |
| 336,700 |
Total Liabilities, Redeemable convertible preferred stock and Equity | $ 4,439,341 |
| $ 2,239,519 |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
MercadoLibre, Inc.
Interim Condensed Consolidated Statements of Income
For the nine and three-month periods ended September 30, 2019 and 2018
(In thousands of U.S. dollars, except for share data)
(Unaudited)
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| Nine Months Ended September 30, |
| Three Months Ended September 30, | ||||
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| 2019 |
| 2018 |
| 2019 |
| 2018 |
Net revenues |
| $ 1,622,043 |
| $ 1,011,634 |
| $ 603,031 |
| $ 355,281 |
Cost of net revenues |
| (828,267) |
| (519,410) |
| (318,689) |
| (185,563) |
Gross profit |
| 793,776 |
| 492,224 |
| 284,342 |
| 169,718 |
Operating expenses: |
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Product and technology development |
| (165,787) |
| (107,311) |
| (59,495) |
| (35,478) |
Sales and marketing |
| (564,271) |
| (342,382) |
| (252,903) |
| (110,443) |
General and administrative |
| (147,992) |
| (111,195) |
| (53,869) |
| (34,800) |
Total operating expenses |
| (878,050) |
| (560,888) |
| (366,267) |
| (180,721) |
Loss from operations |
| (84,274) |
| (68,664) |
| (81,925) |
| (11,003) |
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Other income (expenses): |
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Interest income and other financial gains |
| 86,590 |
| 27,746 |
| 28,462 |
| 8,636 |
Interest expense and other financial losses |
| (44,689) |
| (39,805) |
| (14,451) |
| (15,869) |
Foreign currency (losses) gains |
| (1,899) |
| 22,102 |
| 987 |
| 3,924 |
Net loss before income tax (loss) gain |
| (44,272) |
| (58,621) |
| (66,927) |
| (14,312) |
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Income tax (loss) gain |
| (73,729) |
| 24,372 |
| (79,155) |
| 4,234 |
Net loss |
| $ (118,001) |
| $ (34,249) |
| $ (146,082) |
| $ (10,078) |
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| Nine Months Ended September 30, |
| Three Months Ended September 30, | ||||
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| 2019 |
| 2018 |
| 2019 |
| 2018 |
Basic EPS |
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Basic net loss |
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Available to shareholders per common share |
| $ (2.60) |
| $ (0.77) |
| $ (2.96) |
| $ (0.23) |
Weighted average of outstanding common shares |
| 48,350,165 |
| 44,302,724 |
| 49,710,723 |
| 44,588,704 |
Diluted EPS |
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Diluted net loss |
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Available to shareholders per common share |
| $ (2.60) |
| $ (0.77) |
| $ (2.96) |
| $ (0.23) |
Weighted average of outstanding common shares |
| 48,350,165 |
| 44,302,724 |
| 49,710,723 |
| 44,588,704 |
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The accompanying notes are an integral part of these interim condensed consolidated financial statements.
MercadoLibre, Inc.
Interim Condensed Consolidated Statements of Comprehensive Income
For the nine and three-month periods ended September 30, 2019 and 2018
(In thousands of U.S. dollars)
(Unaudited)
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| Nine Months Ended September 30, |
| Three Months Ended September 30, | ||||
| 2019 |
| 2018 |
| 2019 |
| 2018 |
Net loss | $ (118,001) |
| $ (34,249) |
| $ (146,082) |
| $ (10,078) |
Other comprehensive loss, net of income tax (loss) gain: |
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Currency translation adjustment | (22,195) |
| (101,980) |
| (25,548) |
| 550 |
Unrealized gains on hedging activities | — |
| 2,406 |
| — |
| 1,494 |
Unrealized net gains on available for sale investments | 2,062 |
| 142 |
| (442) |
| 77 |
Less: Reclassification adjustment for gains from accumulated other comprehensive income | 2,729 |
| 3,497 |
| — |
| 1,779 |
Net change in accumulated other comprehensive loss, net of income tax (loss) gain | (22,862) |
| (102,929) |
| (25,990) |
| 342 |
Total Comprehensive loss | $ (140,863) |
| $ (137,178) |
| $ (172,072) |
| $ (9,736) |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
MercadoLibre, Inc.
Interim Condensed Consolidated Statements of Equity
For the nine and three-month periods ended September 30, 2019 and 2018
(In thousands of U.S. dollars)
(Unaudited)
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| Accumulated |
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| Additional |
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| other |
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| paid-in |
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| Treasury |
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| Retained |
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| comprehensive |
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| Total | |||
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| Shares |
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| Amount |
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| capital |
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| Stock |
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| Earnings |
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| loss |
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| Equity |
Balance as of December 31, 2018 |
| 45,203 |
| $ | 45 |
| $ | 224,800 |
| $ | — |
| $ | 503,432 |
| $ | (391,577) |
| $ | 336,700 |
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Common Stock issued |
| 4,116 |
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| 4 |
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| 1,866,496 |
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| — |
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| — |
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| 1,866,500 |
Exercise of convertible notes |
| — |
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| — |
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| 2 |
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| — |
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| — |
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| — |
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| 2 |
Unwind Capped Call |
| — |
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| — |
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| 3 |
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| — |
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| — |
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| — |
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| 3 |
Net income |
| — |
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| — |
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| — |
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| — |
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| 11,864 |
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| — |
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| 11,864 |
Amortization of Preferred Stock discount |
| — |
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| — |
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| 5,841 |
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| — |
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| (5,841) |
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| — |
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| — |
Other comprehensive loss |
| — |
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| — |
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| — |
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| — |
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| — |
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| (1,011) |
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| (1,011) |
Balance as of March 31, 2019 |
| 49,319 |
| $ | 49 |
| $ | 2,097,142 |
| $ | — |
| $ | 509,455 |
| $ | (392,588) |
| $ | 2,214,058 |
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Transaction Costs |
| — |
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| — |
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| 715 |
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| — |
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| — |
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| — |
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| 715 |
Exercise of convertible notes |
| — |
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| — |
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| 2 |
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| — |
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| — |
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| — |
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| 2 |
Capped Call |
| — |
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| — |
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| (88,362) |
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| — |
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| — |
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| — |
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| (88,362) |
Redeemable convertible preferred stock dividend distribution ($9.99 per share) |
| — |
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| — |
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| — |
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| — |
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| (1,000) |
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| — |
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| (1,000) |
Net income |
| — |
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| — |
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| — |
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| — |
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| 16,217 |
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| — |
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| 16,217 |
Other comprehensive income |
| — |
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| — |
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| — |
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| — |
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| — |
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| 4,139 |
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| 4,139 |
Balance as of June 30, 2019 |
| 49,319 |
| $ | 49 |
| $ | 2,009,497 |
| $ | — |
| $ | 524,672 |
| $ | (388,449) |
| $ | 2,145,769 |
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Exercise of convertible notes |
| 523 |
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| 1 |
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| 65,952 |
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| — |
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| — |
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| — |
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| 65,953 |
Exercise of capped call option - shares retirement |
| (132) |
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| — |
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| 30 |
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| — |
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| — |
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| — |
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| 30 |
Redeemable convertible preferred stock dividend distribution ($9.99 per share) |
| — |
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| — |
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| — |
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| — |
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| (1,000) |
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| — |
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| (1,000) |
Stock-based compensation — restricted shares issued |
| 1 |
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| — |
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| 214 |
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| — |
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| — |
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| — |
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| 214 |
Common Stock repurchased |
| (1) |
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| — |
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| — |
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| (720) |
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| — |
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| — |
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| (720) |
Net loss |
| — |
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| — |
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| — |
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| — |
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| (146,082) |
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| — |
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| (146,082) |
Other comprehensive loss |
| — |
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| — |
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| — |
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| — |
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| — |
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| (25,990) |
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| (25,990) |
Balance as of September 30, 2019 |
| 49,710 |
| $ | 50 |
| $ | 2,075,693 |
| $ | (720) |
| $ | 377,590 |
| $ | (414,439) |
| $ | 2,038,174 |
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| Accumulated |
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| Additional |
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| other |
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| Common stock |
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| paid-in |
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| Retained |
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| comprehensive |
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| Total | |||
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| Shares |
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| Amount |
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| capital |
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| Earnings |
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| loss |
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| Equity |
Balance as of December 31, 2017 |
| 44,157 |
| $ | 44 |
| $ | 70,661 |
| $ | 537,925 |
| $ | (282,851) |
| $ | 325,779 |
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Capped Call |
| — |
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| — |
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| (45,692) |
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| — |
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| — |
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| (45,692) |
Changes in accounting Standards |
| — |
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| — |
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| — |
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| 2,092 |
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| — |
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| 2,092 |
Net loss |
| — |
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| — |
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| — |
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| (12,919) |
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| — |
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| (12,919) |
Other comprehensive loss |
| — |
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| — |
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| — |
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| — |
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| (16,393) |
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| (16,393) |
Balance as of March 31, 2018 |
| 44,157 |
| $ | 44 |
| $ | 24,969 |
| $ | 527,098 |
| $ | (299,244) |
| $ | 252,867 |
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Net loss |
| — |
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| — |
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| — |
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| (11,252) |
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| — |
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| (11,252) |
Other comprehensive loss |
| — |
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| — |
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| — |
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| — |
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| (86,878) |
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| (86,878) |
Balance as of June 30, 2018 |
| 44,157 |
| $ | 44 |
| $ | 24,969 |
| $ | 515,846 |
| $ | (386,122) |
| $ | 154,737 |
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Common Stock Issued in exchange of 2019 Notes |
| 1,045 |
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| 1 |
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| 342,999 |
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| — |
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| — |
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| 343,000 |
Exercise of Convertible Notes |
| — |
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| — |
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| (156) |
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| — |
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| — |
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| (156) |
Repurchase of 2019 Notes Conversion Option |
| — |
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| — |
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| (433,289) |
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| — |
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| — |
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| (433,289) |
Convertible notes - 2028 Notes Equity Component |
| — |
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| — |
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| 257,277 |
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| — |
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| — |
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| 257,277 |
Unwind Capped Call |
| — |
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| — |
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| 121,703 |
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| — |
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| — |
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| 121,703 |
Capped Call |
| — |
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| — |
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| (91,784) |
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| — |
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| — |
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| (91,784) |
Net loss |
| — |
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| — |
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| — |
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| (10,078) |
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| — |
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| (10,078) |
Other comprehensive income |
| — |
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| — |
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| — |
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| — |
|
| 342 |
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| 342 |
Balance as of September 30, 2018 |
| 45,202 |
| $ | 45 |
| $ | 221,719 |
| $ | 505,768 |
| $ | (385,780) |
| $ | 341,752 |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
MercadoLibre, Inc.
Interim Condensed Consolidated Statements of Cash Flow
For the nine-month periods ended September 30, 2019 and 2018
(In thousands of U.S. dollars)
(Unaudited)
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| Nine Months Ended September 30, | ||
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| 2019 |
| 2018 |
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Cash flows from operations: |
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Net loss |
| $ (118,001) |
| $ (34,249) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
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Unrealized devaluation loss, net |
| 45,857 |
| 9,262 |
Depreciation and amortization |
| 52,518 |
| 33,861 |
Accrued interest |
| (39,550) |