MercadoLibre, Bill.com, and Green Dot: 3Q Earnings Rundown

We've now heard third-quarter earnings from most of our favorite companies. Three in particular that investors might want to pay attention to are MercadoLibre (MELI -0.45%), Bill.com (BILL -1.48%), and Green Dot (GDOT 0.45%).

In this Fool Live video clip from our Nov. 9 "Industry Focus: Financials" show, host Jason Moser and Fool.com contributor Matt Frankel, CFP, discuss the numbers and what investors need to know. 

Jason Moser: Another company that we talked about on the show here and a company that I featured recently in the show when we talked about the stocks, something we're going to buy next, Bill.com. Bill.com reported for the quarter and it was, again, another quarter of just what looked like impressive growth, I mean, total revenue was $42.1 million, it was up 33% from the fourth quarter of fiscal 2019. We saw a nice little bump up in gross margin, thanks to the business scaling and more volume going through the system. They served 98,000 customers at the end of the fourth quarter of fiscal 2020, that was growth of 28%, processed $25.4 billion in total payment volume on the platform in the quarter, that was up 26 percent from the year-ago, processed 5.6 million transactions for the quarter, again, at the end of quarter, they had 2.5 million network members, that was up almost 40% from the year-ago. Again, for a business, it's really focused in on that small to medium-sized business demographic and helping tighten up back-office operations, eliminate paper, create more efficiencies using that artificial intelligence. As a shareholder in Bill.com, I was certainly very encouraged by that quarter. Speaking of businesses that we each follow pretty closely, Matt, Green Dot also announced earnings last week, tell me how that quarter went?

Matt Frankel: Well, it was pretty good actually. Their revenue was up about 21% year-over-year, beating their own expectations. The primary driver of increasing revenue is, well, there's two actually: There's stimulus checks which prompted a whole lot because they do prepaid debit cards, that's one of their big businesses, that prompted a whole lot of usage of those products. But their banking as-a-service platform, which they let companies like Apple and Intuit and Uber use as their banking network because they are a chartered bank, unlike a lot of the fintechs we followed, let them use their infrastructure to offer their own banking products to their customers and employees; like the feature that allows Uber drivers to instantly get paid is powered by Green Dot. So that revenue was up. The real key thing to mention is that that's where you really want to see that growth momentum in Green Dot because that's the higher margin of their revenue. So that's growing, their margins are up, their margin expanded by 100 basis points year-over-year actually. The new CEO who took over a couple of quarters ago, Dan Henry, is doing a fantastic job. I know everybody was rolling their eyes at me every time I mentioned Green Dot when it was down in the 20s earlier this year. He's done a great job of turning it around, turning the ship around since then, and really focusing efforts on the banking as-a-service offerings, which is where he should be focusing.

Jason Moser: You know, Green Dot was dealing with its fair share of challenges earlier on. But it's really been a tremendous year for the stock. I know that listeners appreciate having been able to keep up with them because they've made a lot of progress, and patient shareholders are really being rewarded in exercising that patience. So now it's great to see that success for Green Dot. What about MercadoLibre, Matt? This is a company that we've often referred to as the Amazon of Latin America. To me, that is just such a small part of the story. It feels like when you look at the actual the fintech operations, the payment operations that they have there, not to mention things like fulfillment logistics and whatnot, but I mean, another tremendous quarter from, let's just call it the Amazon of Latin America, right?

Matt Frankel: Yeah, well, I call them like the Amazon and Square of Latin America, all-in-one. 

Jason Moser: It's not a bad combo.

Matt Frankel: It's kind of how I would put it because there's really two sides to their business, there is the e-commerce platform, which is the Amazon of Latin America. Then there's the payments platform, Mercado Pago, which is kind of Square, PayPal, if you will, of Latin America. Growth on both sides of the business was extremely impressive. This is not Amazon, where it's a really mature e-commerce marketplace, this is still in the earlier stages of growth. I call this like Amazon circuit 2005; if I had to put a year on it. On the e-commerce side of the business, the gross merchandise volume sold on the platform is up 117%, so that more than doubled year-over-year, 205 million items fore sold on the platform. Which sounds like a lot, but go look at how much Amazon sold on its platform and it will seem like a tiny number.

Jason Moser: Yeah.

Matt Frankel: On the payment side of the business, that's where it gets really impressive. They did $14.5 billion U.S. equivalent in payment volume, which as we just mentioned, PayPal numbers, that's about 120th of what PayPal does. But it's growing at an off-the-charts pace, 161% year-over-year payments volume growth. The best part is that the payment volume that came from off of its e-commerce platform is growing even faster, that tripled year-over-year. It's easy enough for MercadoLibre to promote its payments platform to people already selling on its platform. To think of this as eBay (NASDAQ: EBAY) getting people to use PayPal, back when they were both the same company.

Jason Moser: Yeah.

Matt Frankel: But it was tougher for PayPal to get people who weren't on eBay to use their platform.

Jason Moser: Yeah.

Matt Frankel: That's kind of what you're seeing MercadoLibre doing a great job of right now. I became a shareholder during the pandemic and I've been meaning to pull the trigger on that one for years. I wish I listened to myself a few years ago, but better late than never, and the recent results show me that this is still in the early stages.

Jason Moser: Yeah, and I think for me, when I look at MercadoLibre, I mean, to me it really is all about the boom in Latin America's middle-class, even the room that they have still to run there. I mean, if you look at the numbers between 2008 and 2018, Latin America's middle-class, expanded from 33 million households to 46 million households and making up a far greater proportion of overall households as well. It seems like that number is poised to continue growing, which obviously speaks volumes for the opportunity in front of MercadoLibre. I tend to probably think not, but do you think there's ever the chance that they would spin that payment side of the business out as its own separate publicly traded company, or do you feel like they would be better off keeping that in house?

Matt Frankel: For the time being, they should keep it in-house. I think I mentioned the PayPal eBay kind of example. I think when it becomes kind of a more mature business like PayPal and eBay were, where the growth within the platform is kind of limited at that point, things like that, then it might be worth looking at spending it out. But for right now, it's a very valuable asset that they are doing a great job of growing alongside their core business.