Mercado Libre, Inc. (Nasdaq: MELI)—a leading company in technology for e-commerce and financial services in Latin America—ended the third quarter with a strong performance, driven by a combination of fast growth, gains in scale, and higher margins, confirming the strength of its economic model. Investments in technology improve the user experience and allow for greater cost efficiency. Its total revenue in the period reached $3.8 billion, up 39.8% in dollar terms compared with the same period last year.

Looking at the three main geographies, Mexico’s revenue advanced by 66%, followed by Brazil, where revenue grew by 40%, and Argentina with 22% growth year-over-year. Revenue continues to be driven by the increase in the user base. The operating result  showed an increase of more than 100% for the fourth consecutive quarter, reaching a record $685 million, up 131.4% in dollars year-over-year—with strong contribution from Brazil and Mexico—and a margin of 18.2%.

Between July and September, net income reached $359.0 million—$7.18 per share—up 178,2% in dollar terms year-over-year. Operational cash generation remained resilient in the period, allowing the total position to reach $3.3 billion in the third quarter of the year.

Net revenue from commerce increased 45.2% in dollars year-over-year to more than $2.1 billion due to higher sales volume in the period, when total unique buyers reached an all-time high of 50.3 million, up 18.4%. As a result, market share is growing, especially in Brazil and Mexico. Net revenue from fintech reached $1.6 billion, up 33.2%  in dollars, with a slight increase in the pace of credit originations and growth in total payments volume. In the third quarter, Mercado Pago exceeded 48.8 million active users, up 17.2%—in the last 12 months alone, more than 7.1 million users were added.

Revenue growth, both in commerce and fintech, was accelerated by strong contribution from all geographies. Mexico was particularly strong, with revenues growing by over 60% compared to the previous year, while Brazil also performed very well with approximately 40% growth. Both countries once again increased their share of the ecosystem's total revenues. Strong performance of all businesses, coupled with cost discipline, helped to dilute operating expenses as the business advances. Operating profit more than doubled year-over-year for the fourth consecutive quarter, with expanding margins. Brazil was the biggest contributor to this increase in profits in the period.

“We saw a third quarter with solid operational and financial results, with improvements in all geographies both in our e-commerce and fintech businesses. During 2023 our ecosystem continues to demonstrate its ability to achieve sustainable growth and improve its profitability”, stated Martin de los Santos, Chief Financial Officer of Mercado Libre. “In the remainder of this year we will continue to invest in our technology allowing us to continue with innovation to create solutions for the needs of our users. We are optimistic about the growth opportunities we have ahead,” he adds.

Commerce

For the first time, the sales volume for Marketplace (GMV) topped $11.4 billion, up 31.8% in dollars year-over-year. Growth in GMV, driven by the significant increase in the volume of items sold, was recorded in the three main geographies, including the number of items per buyer. In total, 357.0 million items were sold in Latin America, up 25.6%, with 7.1 items per unique buyer. The total number of products listed on the marketplace reached 456.8 million, an increase of 15.0%.

In the quarter, the three main markets delivered solid growth in sales volume, in dollars, especially Brazil, which grew by 37.5%, and Mexico by 59.3%. Brazil stands out for its gain in market share, where GMV is driven by the volume of items sold, which increased 27.1% year-over-year—the highest growth rate since the fourth quarter of 2021. Mexico, with solid growth in GMV, was also impacted by the higher volume of items sold, up 38.2% reaching its highest level since the first quarter of 2021. Argentina posted a better performance, with a growth in the number of items sold above 12.6%, impacted by new buyers.

A total of 349.8 million items were shipped in Latin America, a 26.9% increase over the same period last year. Advances continue to be significant in the execution of the logistics operation, with more than 94.2% corresponding to Mercado Libre's managed network—with 48% of shipments via the fulfillment model, a new record above the 40% registered in the same quarter last year, with Brazil leading the expansion. The logistics area continues to be one of the main destinations for investments, contributing to fast shipping that generates a better experience and greater conversion. On-time deliveries reached record levels in Brazil, Mexico, Chile, and Colombia. Of the General Merchandise Volume, 78.3% was delivered within 48 hours in the region and close to 54% was delivered on the same day or the day after the purchase.

Digital advertising services, led by Mercado Ads, continue to grow, mainly due to the increase in the number of sellers who use this service and the constant improvement in performance and engagement of the ads in the ecosystem. In the third quarter, its revenue grew at a fast pace, by more than 70% in constant currency and for the sixth consecutive quarter, corresponding to approximately 1.7% of the GMV of the marketplace operation.

Fintech

The Total Payment Volume (TPV) via Mercado Pago reached $47.3 billion for the first time, an increase of 46.9% in dollar year-over-year. The volume of payments outside the Mercado Libre platform has picked up in the main markets, largely due to the increase in the number of users and greater engagement with the ecosystem, as Mercado Pago is increasingly adopted for its comprehensive offer of financial services.

At the end of the third quarter, the company had reached more than 26.1 million unique users of investment products in Latin America, an increase of 34.0%. The total payment transactions (TPN) in the period increased by 74.2% year-over-year, topping 2.5 billion in the third quarter for the first time. The total payment volume via Mercado Pago, outside the Mercado Libre platform, also maintained its growth rate, reaching $35.3 billion, an increase of 52.9% in dollars.

In Brazil, the growth of TPV outside the Mercado Libre platform rose 41.9% in dollars, stemming from the strong growth trend in payment processing and digital account. Mexico, which has experienced solid growth and profitability, saw its off-platform TPV exceed the volume of payments within the Mercado Libre ecosystem for the first time in September, with growth of more than 122.7% in dollars, driven by digital payments and payments via physical terminals. The rapid growth of this operation, especially in cards and credit products, allows gains in market share as the adoption of digital payments advances in the Mexican market.

In Argentina, Mercado Pago advanced in terms of brand perception, as its solutions have supported users in an inflationary scenario, mainly due to the benefits of the digital account, for payments outside of the Mercado Libre platform, and of the interest-bearing account—the latter of which surpassed the 10 million customer mark for the first time, with a financial volume invested five times higher year-over-year. With a solid business base, operations continue to grow well above the inflation rate.

In the period, more than 2.1 million insurance policies were issued, 152.7% higher than the number recorded in the third quarter of last year. In Brazil, Mexico, and Argentina, the company maintained its offer of insurance products, both in marketplace and fintech, with emphasis on life insurance, extended warranty and account, which continue to exceed expectations in terms of the volume of policies issued per user. 

The loan portfolio grew by 22.6% in Latin America, reaching $3.4 billion. The period was marked by good profitability, as a result of a cautious approach to originations, where defaulting remained at healthy levels in operations up to 90 days. Credit card issuance was accelerated in the region in the third quarter, with the operation reaching over $1 billion in total payment volume for the first time, an increase of nearly 70% year-over-year. Highlights for Brazil and Mexico, where investment in loan capacity increased as a result of the significant improvement in the quality of assets over the last 12 months. Product development helped improve credit analysis models, making it possible to offer larger lines of credit, with longer terms, to an even greater number of consumers.