Mercadolibre, Inc. Earnings: Rolling With the Venezuelan Punches

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Mercadolibre (MELI -0.94%) reported second-quarter results on Thursday night, lighting a fire under the stock. Shares of the Latin American online sales and auctions operator rose as much as 14.4% on Friday, on about triple the average trading volume. At 3:20 p.m., the stock was up roughly 13.5% from the previous day's close.

Let's have a closer look at that market-moving earnings report.

Mercadolibre's results: The raw numbers

Source: Mercadolibre.

What happened with Mercadolibre this quarter?

The company facilitated the sale of 43.7 million items, a 45% increase from the year-ago period. This was the fastest sales volume growth rate Mercadolibre has seen since 2009.

• Local-currency sales increased by 61% year-over-year in Brazil, behind 89% higher Argentinean revenues and a soaring 185% improvement in Venezuela. Of course, the Venezuelan equation changes when you account for massive inflation. In U.S. dollars, that market only saw 31% higher sales.
• Excluding write-offs in a politically unstable Venezuela, net income in the second quarter would have jumped 68% higher year-over-year, landing at $0.74 per share.
• Revenues collected by the MercadoPago merchant services division doubled year-over-year in local currencies, as Mercadolibre continued to improve its online payment systems.
• Advertising sales increased by 124% in local currencies, with heavy support from mobile ads.

What management had to say

In a prepared statement, Mercadolibre CFO Perdo Arnt celebrated this report as "one of our strongest quarters ever."

"Not only have we maintained high growth rates on key operational and financial metrics by executing well," Arnt continued, "but we are also pleased to report that our enhanced marketplace vision continues to consolidate in our larger markets, and, perhaps more importantly, is starting to materialize outside of those main geographies."

Looking ahead

As Arnt explained, Mercadolibre is looking to stretch its operations into brand-new markets. These efforts are sometimes fairly obvious, like the June launch of MercadoPago payment tools in Peru. Other times, the expansion opportunities may be less clear, including marketing campaigns to bootstrap sales growth in smaller markets.

Straddled in between those extremes, MercadoLibre is currently rolling out mobile point-of-sale platforms in the core markets of Brazil, Argentina, and Mexico. This is an attempt to move MercadoLibre out of the purely online world and into traditional retail operations. Small business is king in Latin America, and Mercadolibre is smart to tap into that market from several angles.