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Hi Fellow Fools,

The notes provided below come from three sources: MELI’s earnings press release, here:

http://investor.mercadolibre.com/releasedetail.cfm?ReleaseID...

MELI’s conference call transcript here:

http://files.shareholder.com/downloads/MELI/4024797665x0x811...

Additionally, if any of you are more visual, you can see MELI’s investor relations earnings slide show here:

http://files.shareholder.com/downloads/MELI/4024797665x0x811...

I also include metrics from Q3 for comparison.

For Q3 2014:
- new registered users increased 21%
- Items sold grew 22.3%
- payment transactions on MercadoPago grew 48.8%
- Gross merchandise volume DOWN 10.4% USD (residual hit from the first full quarter of the Venezuelan bolivar devaluation), 79.1% in local currencies
- Total payment volume up 99.2% in local currencies, 52% in USD
- Net revenues were $147.9M, up 89.0% in local currencies, 20.2% in USD (58.9% in local currencies excluding Venezuela)
- Gross profit margin was 70.7%
- Income from operations was $47.1M, operating income margin of 31.9%
- Operating income grew 26.1% in U.S. dollars and 145.2% in local currencies (74.7% excluding Venezuela)
- Net income was $33.8M
- EPS .76 cents
- Declared a quarterly dividend of $0.166 per share, payable on January 15, 2015 to shareholders of record as of the close of business on December 31, 2014

For Q4 2014:
- new registered users increased 22% to 120.9M
- Items sold grew 27.2% to 29.0M
- payment transactions on MercadoPago grew 58.2% to 14.2M
- items shipped via MercadoEnvios 15M (I believe this is the first time MELI has reported this metric)
- Gross merchandise volume down 16% in USD, up 85% in local currencies to $1.8B (up 27.8% excluding Venezuela)
- Total payment volume up 107.3% in local currencies, 47.3% in USD to $1.1B
- Net revenues were $161.4M, up 109% in local currencies, 20% in USD (70% in local currencies, 40% in USD excluding Venezuela)
- Gross profit margin was 70.5%
- Income from operations was $45.2M, down 13% in USD, up 107% in local currencies (4% excluding Venezuela)
- Net income was $34.2M, down 16% YOY USD, up 76% in local currencies (down 7% excluding Venezuela)
- EPS .76 cents
- Declared a quarterly dividend of $0.103 per share, payable on April 15, 2015 to shareholders of record as of the close of business on March 31, 2015

This quarter shows that even in difficult economic environments – devaluation of the Venezuelan bolivar, inflationary pressures in Argentina and a strong US dollar – MELI continues to execute successfully and lay the foundation for what I believe will be an extraordinary investment for years to come.

MELI has been pursuing numerous avenues to enhance the customer experience over the last several years that is referred to Enchanced Marketplace. These include MercadoPago payments, MercadoEnvios shipping, interest-free item listings, an increased diversification of product mix, the Official Stores initiative, all resulting in a differentiated customer service experience. MELI has shown that reducing the friction points results in increased conversion rates – more customers that make a purchase after browsing.
A few points indicative of the success of these initiatives:
- MercadoEnvios, MELI’s shipping solution, shipped 35% if items sold in Brazil and 14% in Argentina and was launched in Mexico during the quarter
- Financing revenues increased 90% YOY in local currencies
- introduced MercadoPago’s digital wallet mobile app
- MercadoPago accounted for 80% of all GMV in Brazil
- Interest-free financing is driving adoption of MercadoPago in Brazil and has launched in Mexico
- Items over a certain price require MercadoPago in order to make the purchase
- Since using MercadoEnvios shipping requires paying with MercadoPago, this is driving penetration and adoption
- Investments in customer service have resulted in record net promoter scores and decreased customer service contacts, also at record levels
- Investments in mobile are also paying off, a customer that access the site through multiple platforms (desktop, tablet and mobile) tend to have higher sales conversion rates
I haven’t listened to the call yet, but will post my notes from the Q&A once it is available.
Even as MELI hovers near all-time highs, starting a position at these levels will likely be a wise investment years from now. Don’t let the macroeconomic headwinds dissuade you from a really well run company with great potential. Remember that internet penetration is still low in Latin America, internet retail is still in its infancy and mobile retail is just beginning. MELI is the first-mover and trusted brand in the region and standing at the intersection of these trends.

One Fool’s opinion; your mileage may vary,

Danny
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Phoenix 1 Team
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