Mercado Libre's Q1 net revenue rose 67.4%; the company says it is managing to offset costs through pricing

Mercado Pago, Mercado Libre's fintech arm, helped offset a post-pandemic slowdown in new clients at the core e-commerce business

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Mercado Libre said it was so far managing to recoup higher costs by boosting its prices as the South American e-commerce giant reversed a year-ago loss, helped by growth in its financial services unit.

Chief Financial Officer Pedro Arnt said in a call with analysts that Mercado Libre was trying to “pass on” costs due to increases in transport, labor and oil prices. “I think we’ve done a good job of trying to offset that pressure through pricing,” he said.

The Nasdaq-listed Argentine company posted quarterly earnings of $65 million after a year-ago loss of $34 million, although the profit figure missed the Refinitiv analysts’ forecast.

READ ALSO: Mercado Libre announces a $1.47 billion investment in Mexico by 2022

The company’s net revenue rose 67.4% in local currency to $2.2 billion. Brazil accounted for 55% of Mercado Livre’s total net revenue, reaching $1.2 billion and a growth of 54.8% in local currency.

The results were mainly driven by the growth of its fintech unit, Mercado Pago, whose net revenue grew 107.9% in dollars, reaching $971.1 million, year over year. In Q1, Mercado Pago reported almost 36 million active users, up 31.1%, with growth mainly in payment services via digital wallet and credit users.

Mercado Pago reported a 72% jump in total payment volume to $25.3 billion. The unit, which operates in credit, insurance, and investments, now accounts for 45% of the group’s revenues in Brazil, its main market. Also, Mercado Pago’s loan book reached $2.4 billion in the quarter, more than four times higher than the same period from 2021.

READ ALSO: Stelleo Tolda to step down as Mercado Libre CEO in April

This strong growth in its fintech unit helped Mercado Libre to offset a post-pandemic slowdown in new clients at the core e-commerce business. Although net revenue from the commerce business also increased, up 40.2% in dollars year-on-year to $1.3 billion. The e-commerce platform reached about 40 million unique shoppers in the quarter.

Its gross merchandise volume (GMV), a widely watched figure for the e-commerce industry’s performance, rose 26.5% from a year earlier to $7.7 billion.

The company, present in 18 countries including Brazil, Mexico and Colombia, said active users rose 15.7% rise over a year ago to 80.7 million, although that represented a slight drop from the end of December. “Marketplace growth remained consistent, mainly due to the behavior and growth of buyer base,” Arnt said in a statement.

READ ALSO: Mercado Libre and Brazilian airline Gol join into a logistics partnership

According to the strategy and investments expected for Latin America in 2022 – which include an investment of $1.4 billion in Mexico, an increase of about a third compared to what was invested last year – Mercado Livre also announced more than 14,000 new jobs in the e-commerce and fintech arms. With this, the total number of employees will jump from the current 29,000 to more than 44,000 by the end of 2022.

For 2022, the company also plans to offer new types of investments linked to cryptocurrencies. The first move in this direction was taken in January when Mercado Libre bought a stake in 2TM, the parent company of the crypto unicorn Mercado Bitcoin, a platform for buying and selling cryptocurrencies. Recently, Mercado Libre also announced a strategic investment in Paxos, a blockchain platform that partnered with Mercado Pago in offering the cryptocurrency buying, custody, and selling service launched in December.

Still on Mercado Livre’s bets for its financial services unit, executives said on the conference call with analysts that they were looking to “significantly expand” their Buy Now Pay Later service, called Mercado Credito, in the future.

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