MercadoLibre (MELI) reported its first-quarter results after the market close on Tuesday, and despite headwinds as the result of the pandemic, the Latin American e-commerce powerhouse turned in another performance worthy of a standing ovation. After reviewing the numbers, Wall Street was happy to oblige, sending the stock soaring to record highs in the wake of its earnings report.
Net revenue grew to $652 million, up 38% year over year when translated to U.S. dollars, but up more than 70% in local currencies. Operating expenses grew even faster, up 51% year over year, the result of increased marketing spend to raise consumer awareness of its e-commerce platform. This resulted in a net loss of $21 million and a loss per share of $0.44.
Both top- and bottom-line numbers crushed expectations, but even that doesn't tell the whole story.
1. The payments business is growing
Latin America is still largely a cash-based culture, and many residents don't have a bank account or credit card. To address that issue, MercadoLibre developed Mercado Pago, a payment solution modeled after PayPal.
During the first quarter, total payment volume (TPV) reached $8.1 billion, up 44% year over year when translated to U.S. dollars, but up 82% in local currencies. The number of payment transactions surged to 291 million, up 102% year over year.
As impressive as those numbers are, some of the underlying metrics are even more impressive. Off-platform TPV -- which includes transactions from other online platforms and brick-and-mortar stores -- grew even faster to $4.7 billion, up 84% year over year, or 140% in local currencies. The number of transactions soared to 217 million, up 146%.
2. E-commerce gained converts
Much like what happened in the U.S., Latin American consumers embraced online shopping to get what they needed in the face of widespread stay-at-home orders, with many of them conducting digital transactions for the first time. As the largest e-commerce provider in the region, MercadoLibre was perfectly positioned to benefit from this trend.
The number of unique active users on MercadoLibre's platform grew 31% year over year to more than 43 million. This helped drive gross merchandise volume on the platform to $3.4 billion, up 34% in local currencies, while the number of items sold grew 28% to 106 million.
Management noted changes in demand as online shopping trends shifted during the quarter. Consumers focused more on "essential items," as health-related products, consumer packaged goods, and toys and games all generated strong volume growth, with each category generating growth of more than 100% year over year in a variety of markets. Other categories, like auto parts and consumer electronics, saw significant declines.
3. Other metrics are booming
A number of other operational metrics show the strength of MercadoLibre's business.
The number of items shipped using Mercado Envios -- the company's shipping solution -- grew 45% year over year. It's important to note that nearly half of the company's shipments now pass through its expanding logistics network. At the same time, fulfillment penetration is nearly 20%.
Live listings on the marketplace grew to more than 267 million, up 30% compared to the prior-year quarter, while items sold during the quarter grew 28%.
These metrics illustrate that each of the company's products and services serve to spin MercadoLibre's flywheel, bringing more customers into its ecosystem.
MercadoLibre had already cracked the code to become an e-commerce leader in Latin America, and adoption of its payment system was already soaring. The widespread government-mandated lock-downs helped accelerate the trend to e-commerce and digital payments, and MercadoLibre was perfectly positioned to help consumers take that final step.