You should read the following discussion and analysis of our financial condition and results of our operations in conjunction with our "Selected Financial Data" and our audited consolidated financial statements and the notes to those statements included elsewhere in this report. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the section entitled "Risk Factors" and elsewhere in this report.
The discussion and analysis of our financial condition and results of operations
has been organized to present the following:
?a brief overview of our company;
?a review of our financial presentation and accounting policies, including our
critical accounting policies;
?a discussion of our principal trends and results of operations for the years
ended
?a discussion of the principal factors that influence our results of operations,
financial condition and liquidity;
?a discussion of our liquidity and capital resources and a discussion of our
capital expenditure; and
?a discussion of the market risks that we face.
For discussion on results from 2020 compared to 2019, please refer to "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K filed with theSEC for the year endedDecember 31, 2020 . Business Overview We are the largest online commerce ecosystem inLatin America based on unique visitors and page views, and we are present in 18 countries:Brazil ,Argentina ,Mexico ,Chile ,Colombia ,Peru ,Uruguay ,Venezuela ,Bolivia ,Costa Rica ,Dominican Republic ,Ecuador ,Guatemala ,Honduras ,Nicaragua ,Panama ,Paraguay andEl Salvador . Our platform is designed to provide users with a complete portfolio of services to facilitate commercial transactions both digitally and offline. We offer our users an ecosystem of six integrated e-commerce services: theMercado Libre Marketplace , the Mercado Pago Fintech solution, the Mercado Envios logistics service, the Mercado Libre Ads solution, the Mercado Libre Classifieds service and theMercado Shops online storefronts solution. Through our e-commerce platform, we provide buyers and sellers with a robust and safe environment that fosters the development of a large e-commerce community inLatin America , a region with a population of over 650 million people and with one of the fastest-growing Internet penetration and e-commerce growth rates in the world. We believe that we offer world-class technological and commercial solutions that address the distinctive cultural and geographic challenges of operating a digital commerce platform inLatin America .The Mercado Libre Marketplace , is a fully-automated, topically-arranged and user-friendly online commerce platform, which can be accessed through our website and mobile app. This platform enables us (when we act as sellers in our first party sales), merchants and individuals to list merchandise and conduct sales and purchases digitally. The Marketplace has an ample assortment of products, with a wide range of categories such as consumer electronics, apparel and beauty, home goods, automotive accessories, toys, books and entertainment and consumer packaged goods. To complement theMercado Libre Marketplace and enhance the user experience for our buyers and sellers, we developed Mercado Pago, an integrated digital payments solution. Mercado Pago was initially designed to facilitate transactions onMercado Libre's Marketplaces by providing a mechanism that allowed our users to securely, easily and promptly send and receive payments. Now, Mercado Pago is a full ecosystem of financial technology solutions both in the digital and physical world. Our digital payments solution enables anyMercadoLibre registered user to securely and easily send and receive digital payments and to pay for purchases made on any ofMercadoLibre's Marketplaces. Currently, Mercado Pago processes and settles all transactions on our Marketplaces inBrazil ,Argentina ,Mexico ,Chile ,Colombia ,Uruguay andPeru . In addition, Mercado Pago grants through ourMercado Credito solution, loans to sellers and buyers inArgentina ,Brazil ,Mexico andChile . Beyond facilitating Marketplace transactions, over the years we have expanded our array of Mercado Pago services to third parties outsideMercado Libre's Marketplace. We began first by satisfying the growing demand for online-based payment solutions by providing merchants the necessary digital payment infrastructure for e-commerce to flourish inLatin America . Today, Mercado Pago's digital payments business not only allows merchants to facilitate checkout and payment processes on their websites through a branded or white label solution or software development kits, but it also enables users to transfer money in a simple manner to each other through the Mercado Pago website or on Mercado Pago app. Through Mercado Pago, we brought trust to the merchant customer relationship, allowing online consumers to shop easily and safely, while giving them the confidence to share sensitive personal and financial data with us. 39
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The Mercado Envios logistics solution enables sellers on our platform to utilize third-party carriers and other logistics service providers, while also providing them with fulfillment and warehousing services. The logistics services we offer are an integral part of our value proposition, as they reduce friction between buyers and sellers, and allow us to have greater control over the full user experience. Sellers that opt into our logistics solutions are not only able to offer a uniform and seamlessly integrated shipping experience to their buyers at competitive prices, but are also eligible to access shipping subsidies to offer free or discounted shipping for many of their sales on our Marketplaces. In 2020, we launchedMeli Air with a fleet of dedicated aircrafts covering routes acrossBrazil andMexico , with the aim of improving our delivery times. We have also developed a network of independent neighborhood stores and commercial points (known as "MELI Places") to receive and store packages that are in transit using our integrated technology. MELI Places network allows buyers and sellers to pick-up, drop-off, or return packages with a better experience, reducing the travel distance for all parties.Mercado Credito , our credit solution, leverages our user base, which is not only loyal and engaged, but has also been historically underserved or overlooked by financial institutions and suffers from a lack of access to needed credit. Facilitating credit is a key service overlay that enables us to further strengthen the engagement and lock-in rate of our users, while also generating additional touchpoints and incentives to use Mercado Pago as an end-to-end financial solution.
Our asset management product, which is available in
vision. It incentivizes our users to begin to fund their digital wallets with
cash as opposed to credit or debit cards given that the return our product
offers is greater than traditional checking accounts.
As an extension of our asset management and savings solutions for users, in 2021 we launched inBrazil a cryptocurrency feature as part of the Mercado Pago wallet. This service allows our millions of users to purchase, hold and sell selected cryptocurrencies through our interface without leaving the Mercado Pago application, while a partner acts as the custodian and offers the blockchain infrastructure platform. This feature is available for all users through their Mercado Pago wallet. Our advertising platform, Mercado Ads, enables businesses to promote their products and services on the Internet. Through our advertising platform,MercadoLibre's brands and sellers are able to display ads on our webpages through product searches, banner ads, or suggested products. Our advertising platform enables merchants and brands to access the millions of consumers that are on our Marketplaces at any given time with the intent to purchase, which increases the likelihood of conversion. Through Mercado Libre Classifieds, our online classified listing service, our users can also list and purchase motor vehicles, real estate and services in the countries where we operate. Classifieds listings differ from Marketplace listings as they only charge optional placement fees and not final value fees. Our classifieds pages are also a major source of traffic to our platform, benefitting both the Commerce and Fintech businesses. Complementing the service we offer our digital storefront solution,Mercado Shops , which allows users to set-up, manage and promote their own digital stores. These stores are hosted byMercado Libre and offer integration with the rest of our ecosystem, namely our Marketplaces, payment services and logistics services. Users can create a store at no cost, and can access additional functionalities and value added services on commission.
Reporting Segments and Geographic Information
Our segment reporting is based on geography, which is the criterion our Management currently uses to evaluate our segment performance. Our geographic segments areBrazil ,Argentina ,Mexico and Other Countries (includingChile ,Colombia ,Costa Rica ,Dominican Republic ,Ecuador ,Panama ,Peru ,Bolivia ,Honduras ,Nicaragua ,El Salvador ,Guatemala ,Paraguay ,Uruguay andthe United States of America ). Although we discuss long-term trends in our business, it is our policy not to provide earnings guidance in the traditional sense. We believe that uncertain conditions make the forecasting of near-term results difficult. Further, we seek to make decisions focused primarily on the long-term welfare of our company and believe focusing on short-term earnings does not best serve the interests of our stockholders. We believe that execution of key strategic initiatives as well as our expectations for long-term growth in our markets will best create stockholder value. A long-term focus may make it more difficult for industry analysts and the market to evaluate the value of our Company, which could reduce the value of our common stock or permit competitors with short-term tactics to grow more rapidly than us. We, therefore, encourage potential investors to consider this strategy before making an investment in our common stock. ? 40
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The following table sets forth the percentage of our consolidated net revenues
by segment for the years ended
Years Ended
December 31,
(% of total consolidated net revenues) (*) 2021 2020 2019
Brazil 55.3 % 55.2 % 63.6 %
Argentina 21.7 24.7 19.9
Mexico 16.6 14.5 12.0
Other Countries 6.5 5.6 4.5
(*) Percentages have been calculated using whole-dollar amounts rather than the
rounded amounts that appear in the table. The table above may not total due
to rounding.
The following table summarizes the changes in our net revenues by segment for
the years ended
Years Ended Change from 2020 Years Ended Change from 2019
December 31, to 2021 (*) December 31, to 2020 (*)
2021 2020 in Dollars in % 2020
2019 in Dollars in %
(in millions, except percentages) (in millions, except percentages)
Net
Revenues:
Brazil $ 3,909.6 $ 2,194.0 $ 1,715.5 78.2 % $ 2,194.0 $ 1,461.5 $ 732.5 50.1 %
Argentina 1,531.0 980.3 550.8 56.2 980.3 456.3 523.9 114.8
Mexico 1,172.4 575.2 597.2 103.8 575.2 275.1 300.0 109.1
Other
Countries 456.4 224.0 232.5 103.8 224.0 103.3 120.6 116.7
Total Net
Revenues $ 7,069.4 $ 3,973.5 $ 3,095.9 77.9 % $ 3,973.5 $ 2,296.3 $ 1,677.2 73.0 %
(*) Percentages have been calculated using whole-dollar amounts rather than the
rounded amounts that appear in the table. The table above may not total due
to rounding.
?
41
-------------------------------------------------------------------------------- Table of Contents Recent Developments ? ?Acquisition of online payment service company inChile OnDecember 13, 2021 , we, through our subsidiariesMercado Pago LLC andSFSC LLC , completed the acquisition of 100% of the equity interest ofRedelcom S.A. , a payment services provider that also offers point-of-sales terminals with the latest technology to retailers in theRepublic of Chile . The Company is located and organized under the laws ofChile . The objective of the acquisition was to consolidate the Company's value proposition inChile and enhance the growth of its multiple payment tools and digital financial solutions. We paid$24.1 million in relation to this acquisition. Refer to Note 7 to our audited consolidated financial statements for additional detail.
Equity Offering
OnNovember 18, 2021 , we closed a public equity offering for an aggregate of 1,000,000 shares of common stock, par value$0.001 per share (the "Common Stock"), at a public offering price of$1,550 per share. The aggregate proceeds of the equity offering were$1,519.5 million net of issuance costs paid. Refer to Note 22 to our audited consolidated financial statements for additional detail. Description of line items Net revenues
We recognize revenues in each of our four geographical reporting segments.
Within each of our segments, the services we provide and the products we sell
generally fall into two distinct revenue streams: “Commerce” and “Fintech.”
The following table summarizes our consolidated net revenues by revenue stream
for the years ended
Years ended
December 31 , (*)
Consolidated net revenues by revenue stream 2021 2020 2019
(in millions) Commerce$ 4,635.4 $ 2,559.8 $ 1,346.4 Fintech 2,434.0 1,413.7 949.9 Total$ 7,069.4 $ 3,973.5 $ 2,296.3
(*) The table above may not total due to rounding.
Revenues from commerce transactions are mainly generated from:
?marketplace fees that include final value fees and flat fees for transactions
below a certain merchandise value;
?first-party sales;
?shipping fees, net of the third-party carrier costs (when we act as an agent);
?ad sales up-front fees; ?classifieds fees; and
?fees from other ancillary businesses.
Final value fees represent a percentage of the sale value that is charged to the seller once an item is successfully sold and flat fees represent a fixed charge for transactions below a certain merchandise value.
Revenues from inventories sales are generated when control of the good is
transferred, upon delivery to our customers.
Shipping revenues are generated when a buyer elects to receive an item through our shipping service net of the third-party carrier costs (when we act as an agent).
Our Advertising revenues are generated by selling either display product and/or
text link ads throughout our websites to interested advertisers.
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Through our classifieds offerings in vehicles, real estate and services, we
generate revenues from up-front fees. These fees are charged to sellers who opt
to give their listings greater exposure throughout our websites.
Fintech revenues correspond to our Mercado Pago service, which are attributable
to:
?commissions representing a percentage of the payment volume processed that are
charged to sellers in connection with off Marketplace-platform transactions;
?commissions from additional fees we charge when a buyer elects to pay in
installments through our Mercado Pago platform, for transactions that occur
either on or off our Marketplace platform;
?commissions from additional fees we charge when our sellers elect to withdraw
cash;
?interest, cash advances and fees from merchant and consumer credits granted
under our
?commissions that we charge from transactions carried out with Mercado Pago
credit and debit cards; and
?revenues from the sale of mobile points of sale products and insurtech fees.
Although we also process payments on the Marketplace, we do not charge sellers
an added commission for this service, as it is already included in the
Marketplace final value fee that we charge.
When more than one service is included in one single arrangement with the same customer, we recognize revenue according to multiple element arrangements accounting, distinguishing between each of the services provided and allocating revenues based on their respective estimated selling prices. We have a highly fragmented customer revenue base given the large numbers of sellers and buyers who use our platforms. For the years endedDecember 31, 2021 , 2020 and 2019, no single customer accounted for more than 5.0% of our net revenues. The functional currency for each country's operations is the country's local currency, except forArgentina , where the functional currency is theU.S. dollar due toArgentina's status as a highly inflationary economy. Our net revenues are generated in multiple foreign currencies and then translated intoU.S. dollars at the average monthly exchange rate. Please refer to "Summary of significant accounting policies" in Note 2 to our audited consolidated financial statements for further detail on foreign currency translation.
Cost of net revenues
Cost of net revenues primarily includes bank and credit card processing charges for transactions and fees paid with credit cards and other payment methods, shipping operation costs (including warehousing costs), carrier and other operating costs, financing costs related to our financing and credit business, cost of goods sold, fraud prevention fees, certain taxes on revenues, certain taxes on bank transactions, hosting and site operation fees, compensation for customer support personnel, ISP connectivity charges and depreciation and amortization. Our subsidiaries inBrazil ,Argentina andColombia are subject to certain taxes on revenues which are classified as a cost of net revenues. These taxes represented 8.0%, 8.2% and 8.2% of net revenues for the years endedDecember 31, 2021 , 2020 and 2019, respectively.
Product and technology development expenses
Our product and technology development related expenses consist primarily of compensation for our engineering and web-development staff, depreciation and amortization costs related to product and technology development, certain tax withholding related to export duties, telecommunications costs and payments to third-party suppliers who provide technology maintenance services to us.
Sales and marketing expenses
Our sales and marketing expenses consist primarily of costs related to marketing our platforms through online and offline advertising and agreements with portals, search engines and other sales expenses related to strategic marketing initiatives, charges related to our buyer protection programs, the salaries of employees involved in these activities, chargebacks related to our Mercado Pago operations, bad debt charges, branding initiatives, marketing activities for our users and depreciation and amortization costs. We carry out the majority of our marketing efforts on the Internet. We enter into agreements with portals, search engines, social networks, ad networks and other sites in order to attract Internet users to theMercado Libre Marketplace and convert them into registered users and active traders on our platform. We also work intensively on attracting, developing and growing our seller community through our customer support efforts. We have dedicated professionals in most of our operations that work with sellers through trade show participation, seminars and meetings to provide them with important tools and skills to become effective sellers on our platform. 43 -------------------------------------------------------------------------------- Table of Contents General and administrative expenses Our general and administrative expenses consist primarily of salaries for management and administrative staff, compensation of outside directors, long term retention program compensation, expenses for legal, audit and other professional services, insurance expenses, office space rental expenses, impairment losses from digital assets, travel and business expenses, as well as depreciation and amortization costs. Our general and administrative expenses include the costs of the following areas: general management, finance, treasury, internal audit, administration, accounting, tax, legal and human resources.
Other income (expenses), net
Other income (expenses) consists primarily of interest income derived from our investments and cash equivalents, interest expense and other financial charges related to financial liabilities and foreign currency gains or losses.
Income tax
We are subject to federal and state income tax inthe United States , as well as foreign taxes in the multiple jurisdictions where we operate. Our tax obligations consist of current and deferred income taxes incurred in these jurisdictions. We account for income taxes following the liability method of accounting. A valuation allowance is recorded when, based on the available evidence, it is more likely than not that all or a portion of our deferred tax assets will not be realized. Therefore, our income tax expense consists of taxes currently payable, if any (given that in certain jurisdictions we still have net operating loss carry-forwards), plus the change in our deferred tax assets and liabilities during each period.
The following table summarizes the composition of our income taxes for the years
ended
Year ended December 31,
(In millons) 2021 (*) 2020 (*) 2019 (*)
Current:
U.S. $ - $ - $ 8.7
Non U.S. 178.3 152.3 39.6
178.3 152.3 48.3
Deferred:
U.S. (3.3) (5.4) (13.6)
Non U.S. (26.2) (64.9) 30.0
(29.5) (70.3) 16.5
Income tax expense $ 148.8 $ 82.0 $ 64.8
(*) The table above may not total due to rounding. No asset tax expense was
recorded for the years ended
Equity in earnings of unconsolidated entity
Equity in earnings of unconsolidated entity consists primarily of earnings and
losses related to our share in our equity investment.
Critical Accounting Policies and Estimates
The preparation of our audited consolidated financial statements and related notes require us to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We have based our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management has discussed the development, selection and disclosure of these estimates with our audit committee and our board of directors. Actual results may differ from these estimates under different assumptions or conditions. An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements. We believe that the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of our audited consolidated financial statements. You should read the following descriptions of critical accounting policies, judgments and estimates in conjunction with our audited consolidated financial statements and the notes thereto and other disclosures included in this report.
For an analysis of our Critical Accounting Policies and Estimates please refer
to Note 2 “Summary of significant accounting policies” to our audited
consolidated financial statements included elsewhere in this report.
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Impairment of long-lived assets, goodwill and intangible assets with indefinite
useful life
We review long-lived assets for impairments whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount of a long-lived asset to its undiscounted future net cash flows expected to be generated by such asset. If such asset is considered to be impaired on this basis, the impairment loss to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value.
If the carrying amount of the reporting unit exceeds its fair value, goodwill or
indefinite useful life intangible assets are considered impaired.
Goodwill and intangible assets with indefinite useful life are reviewed at the end of the year for impairment or more frequently, if events or changes in circumstances indicate that the carrying value may not be recoverable.Goodwill is tested for impairment at the reporting unit level (considering each of our segment as a reporting unit) by comparing the reporting unit's carrying amount, including goodwill, to the fair value of such reporting unit. For the year endedDecember 31, 2021 , the fair values of the reporting units were estimated using the income approach. Cash flow projections used were based on financial budgets approved by Management. We use discount rates to each reporting unit in the range of 14.9% to 20.8%. The average discount rate used for 2021 was 16.9%. That rate reflected our estimated weighted average cost of capital. Key drivers in the analysis include Average Selling Price ("ASP"), Take Rate defined as marketplace revenues as a percentage of Gross Merchadise Volume ("GMV"), Total Payment Volume Off Platform ("TPV Off"), Off Platform Take Rate defined as off platform revenues as a percentage of TPV Off, Wallet and Point TPV per Payer, Wallet Users over Total Population andActive Point devices. In addition, the analysis includes a business to e-commerce rate, which represents growth of e-commerce as a percentage of Gross Domestic Product, Internet penetration rates as well as trends in our market share. For the year endedDecember 31, 2021 , based on quantitative assessments, we have determined that the fair value of all the reporting units and the intangible assets with indefinite useful lives, are greater than their respective carrying amounts, except for the digital assets which are accounted for as indefinite-lived intangible assets and for which we have recorded an impairment of$8.6 million during the year endedDecember 31, 2021 . No impairment loss has been recognized in the years endedDecember 31, 2020 and 2019. We believe that the accounting estimate related to impairment of long lived assets and goodwill is critical since it is highly susceptible to change from period to period because: (i) it requires Management to make assumptions about gross merchandise volume growth, total payment volume, total payment transactions, future interest rates, sales and costs; and (ii) the impact that recognizing an impairment would have on the assets reported on our balance sheet as well as our net income would be material. Management's assumptions about future sales and future costs require significant judgment.
Allowances for doubtful accounts, for chargebacks and credit losses
We are exposed to losses due to uncollectable accounts, chargebacks and credits to users. The allowances for doubtful accounts and for chargebacks are recorded as charges to sales and marketing expenses. Historically, our actual losses have been consistent with our estimated charges. However, future adverse changes to our historical experience for doubtful accounts, loans receivable and chargebacks could have a material impact on our future consolidated statements of income and cash flows. For loans receivable that share similar risk characteristics such as product type, country, unpaid installments, days delinquent, and other relevant factors, the company estimates the lifetime expected credit loss allowance based on a collective assessment. The lifetime expected credit losses is determined by applying probability of default and loss given default models to monthly projected exposures, then discounting these cash flows to present value using the portfolio's loans interest rate, estimated as a weighted average of the original effective interest rate of all the loans that conform the portfolio segment.The probability of default is an estimation of the likelihood that a loan receivable will default over a given time horizon. Probability of default models are estimated using a transition matrix method; these matrices are constructed using roll rates and then transformed, taking into account the expected future delinquency rate (forward-looking models). Therefore, the models include macroeconomic outlook or projections and recent performance. With this model, we estimate marginal monthly default probabilities for each delinquency bucket, type of product and country. Each marginal monthly probability of default represents a different possible scenario of default.The exposure at default is equal to the receivables' expected outstanding principal, interest and other allowable balances. We estimate the exposure at default that the portfolio of loans would have in each possible moment of default, meaning for each possible scenario mentioned above. The loss given default is the percentage of the exposure at default that is not recoverable. This percentage depends on days past due, type of product and country, and is estimated by measuring an average of historical recovery rates from defaulted credits. The measurement of CECL is based on probability-weighted scenarios (probability of default for each month), in view of past events (roll rates), current conditions and adjustments to reflect the reasonable and supportable forecast of future economic conditions which were affected, among other factors, by the COVID-19 pandemic. Considering a hypothetical increase in the probability of default of 10%, the company would have recognized an increase in its allowance for uncollectible accounts for its loans receivable of approximately$19.6 million . We will continue to monitor the impact of the pandemic on expected credit losses estimates. 45
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For accounts receivable, they have been grouped based on shared credit risk characteristics and the number of days past due. We have therefore concluded that the expected loss rates for accounts receivable is a reasonable approximation of the historical loss rates for those assets. Accounts receivable are recovered over a period of 0-180 days, therefore, forecasted changes to economic conditions are not expected to have a significant effect on the estimate of the allowance for doubtful accounts. For credit cards receivable and other means of payment, we assess balances for credit losses, based on a review of the average period for which the financial asset is held, credit ratings of the financial institutions and probability of default and loss given default models. We believe that the accounting estimate related to allowances for doubtful accounts, loans receivable and for chargebacks is a critical accounting estimate because it requires Management to make different assumptions and scenarios to estimate the CECL. Legal contingencies In connection with certain pending litigation and other claims, we have estimated the range of probable loss and provided for such losses through charges to our consolidated statement of income. These estimates are based on our assessment of the facts and circumstances and historical information related to actions filed against the Company at each balance sheet date and are subject to change based upon new information and future events. From time to time, we are involved in disputes that arise in the ordinary course of business. We are currently involved in certain legal proceedings as discussed in "Item 3-Legal Proceedings," and in Note 14 to our audited consolidated financial statements. We believe that we have meritorious defenses to the claims against us, and we will defend ourselves accordingly. However, even if successful, our defense could be costly and could divert Management's time. If the plaintiffs were to prevail on certain claims, we might be forced to pay material damages or modify our business practices. Any of these consequences could materially harm our business and could have a material adverse impact on our financial position, results of operations or cash flows.
Income taxes
We are required to recognize a provision for income taxes based upon taxable income and temporary differences between the book and tax bases of our assets and liabilities for each of the tax jurisdictions in which we operate. This process requires a calculation of taxes payable under currently enacted tax laws in each jurisdiction and an analysis of temporary differences between the book and tax bases of our assets and liabilities, including various accruals, allowances, depreciation and amortization. The tax effect of these temporary differences and the estimated tax benefit from our tax net operating losses are reported as deferred tax assets and liabilities in our consolidated balance sheet. We also assess the likelihood that our net deferred tax assets will be realized from future taxable income. To the extent we believe that it is more likely than not that some portion or all of our deferred tax assets will not be realized, we establish a valuation allowance. AtDecember 31, 2021 , we had a valuation allowance on certain foreign net operating losses and foreign tax credit based on our assessment that it is more likely than not that the deferred tax asset will not be realized. To the extent we establish a valuation allowance or change the allowance in a period, we reflect the change with a corresponding increase or decrease in our "Income tax expense" line in our consolidated statement of income. Please refer to note 2 and 13 to the audited consolidated financial statements for additional information regarding income tax.
Recent accounting pronouncements
See Item 8 of Part II, “Financial Statements and Supplementary Data” and Note 2,
“Summary of significant accounting policies-Recently Adopted Accounting
Standards and Accounting Pronouncements Not Yet Adopted”.
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Results of operations
The following table sets forth, for the year ended presented, certain data from
our consolidated statements of income. This information should be read in
conjunction with our audited consolidated financial statements and the notes to
those statements included elsewhere in this report.
Statement of income data
Years Ended
December 31,
(In millions) 2021 (*) 2020 (*) 2019 (*)
Net service revenues $ 6,149.3 $ 3,690.0 $ 2,265.7
Net product revenues 920.1 283.5 30.6
Net revenues 7,069.4 3,973.5 2,296.3
Cost of net revenues (4,064.4) (2,264.3) (1,194.2)
Gross profit 3,005.1 1,709.2 1,102.1
Operating expenses:
Product and technology development (590.3) (352.5) (223.8)
Sales and marketing (1,509.5) (902.6) (834.0)
General and administrative (464.5) (326.5) (197.5)
Total operating expenses (2,564.3) (1,581.5) (1,255.3)
Income (loss) from operations 440.7
127.7 (153.2)
Other income (expenses):
Interest income and other financial gains 138.0
102.8 113.5
Interest expense and other financial losses (**) (228.7) (106.7) (65.9)
Foreign currency losses (109.3)
(42.5) (1.7)
Net income (loss) before income tax expense 240.6
81.3 (107.2)
Income tax expense (148.8)
(82.0) (64.8)
Equity in earnings of unconsolidated entity (8.5) - - Net Income (loss)$ 83.3 $ (0.7) $ (172.0)
(*) The table above may not total due to rounding.
(**) Includes
to the 2028 Notes repurchase recognized in
consolidated financial statements for further detail on 2028 Notes repurchase
?
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Years Ended
December 31,
(% of net revenues) 2021 (*) 2020 (*) 2019 (*)
Net service revenues 87.0 92.9 98.7
Net product revenues 13.0 7.1 1.3
Net revenues 100.0 100.0 100.0
Cost of net revenues (57.5) (57.0) (52.0)
Gross profit 42.5 43.0 48.0
Operating expenses:
Product and technology development (8.4) (8.9) (9.7)
Sales and marketing (21.4) (22.7) (36.3)
General and administrative (6.6) (8.2) (8.6)
Total operating expenses (36.3) (39.8) (54.7)
Income (loss) from operations 6.2 3.2 (6.7)
Other income (expenses):
Interest income and other financial gains 2.0 2.6
4.9
Interest expense and other financial charges (3.2) (2.7) (2.9)
Foreign currency losses
(1.5) (1.1)
(0.1)
Net income (loss) before income tax expense 3.4 2.0
(4.7)
Income tax expense (2.1) (2.1)
(2.8)
Equity in earnings of unconsolidated entity (0.1) - - Net Income (loss) 1.2 (0.0) (7.5)
(*) Percentages have been calculated using whole dollar amounts rather than
appear in the table. The table above may not total due to rounding.
48 -------------------------------------------------------------------------------- Table of Contents Principal trends in results of operations
Net revenues
Our net revenues maintained its growth trajectory during the year 2021, specifically related to the increase in our gross merchandise volume and the growth of our Fintech solution services (off-platform transactions through Mercado Pago, credit business, etc.). Please refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations-Results of operations- Net Revenues" section in the current document for further detail on net revenues trends for the year endedDecember 31, 2021 . As a consequence of the COVID-19 pandemic which has affected many countries inLatin America , governments in the region imposed total or partial lockdowns and curfews inMarch 2020 , some of which have been subsequently extended, modified or rescinded based on the evolution of the COVID-19 pandemic. On balance, the effect of such measures on consumer behavior has resulted in revenue growth for our business, however, it is uncertain how consumer behavior will evolve in the future as measures to limit the spread of COVID-19 are further eased or lifted, and how and whether that will impact our revenues. Our sources of revenues are denominated in local currencies; therefore, the weak macro-economic environment in certain countries in which we operate coupled with the devaluations of certain local currencies in those countries against theU.S. dollar, could cause a decline in year-over-year net revenues, measured inU.S. dollars. We continue to monitor the progress of the COVID-19 pandemic and the impact of new variants, as well as the availability, distribution and effectiveness of vaccines and or other treatments in the countries where we operate and will take additional measures to comply with the rapidly changing regulations of the countries where we operate and the related macroeconomic instability. However, we may not be able to predict the negative impacts that the COVID-19 pandemic may have on our business in the future.
Gross profit margins
Our gross profit margin is defined as total net revenues minus total cost of net
revenues, as a percentage of net revenues.
Our gross profit trends are directly affected by our net revenue, as stated above, and our cost of net revenues. In this sense, our main cost of net revenue are composed of cost of goods sold, bank and credit card processing charges for transactions and fees paid with credit cards and other payment methods, sales taxes, shipping operation costs (including warehousing costs), carrier and other operating costs, financing costs related to our financing and credit business, hosting and site operation fees, compensation for customer support personnel and ISP connectivity charges. This cost structure is directly affected by the level of operations of our services, and our strategic plan on gross profit is built on factors such as an ample liquidity to fund expenses and investments and a cost-effective capital structure. However, in the future, our gross profit margin could decline if we continue growing our first-party sales, which has a lower pure product margin, and building up our logistics network, if we fail to maintain an appropriate relationship between our cost of revenue structure and our net revenues trend and if we are not able to appropriately adapt to prevent future negative impacts of the ongoing COVID-19 pandemic. For the years endedDecember 31, 2021 and 2020, our gross profit margins were 42.5% and 43.0%, respectively. The decrease in our gross profit margin resulted primarily from an increase in shipping operating costs and cost of products sold, as a percentage of net revenues, partially offset by a decrease in collection fees, as a percentage of net revenues.
Operating income margins
Our Operating margin is defined as total net revenues minus total cost of net
revenues and total operating expenses, as a percentage of net revenues.
Our operating margin is affected by our operating expenses structure, which mainly consists of our employees's salaries, our sales and marketing expenses related to those activities we incurred to promote our services, product development expenses, etc. As we continue to grow and focus on expanding our leadership in the region, we will continue to invest in product development, sales and marketing and human resources in order to promote our services and capture long-term business opportunities. As a result, we may experience decreases in our operating margins. The COVID-19 pandemic and its potential negative impacts on our business could also have negative impacts on our operating margins if we fail to closely monitor operating expenses on demand patterns and expenses are not adjusted in order to maintain an appropriate balance of such expenses with our actual rate of business development. For the years endedDecember 31, 2021 , as compared to the year endedDecember 31, 2020 , our operating margin increased from a margin of 3.2% to a margin of 6.2%. This increase is primarily a consequence of the increase in net revenues explained above, marketing expenditures efficiencies that we achieved as a result of the growth in organic demand brought about by the effects of the COVID-19 pandemic consumer behavior, a decrease in buyer protection program expenses, as a percentage of net revenues, and social security benefits granted pursuant to the knowledge-based economy promotional regime inArgentina , partially offset by an increase in bad debt expenses, as a percentage of net revenues. 49 --------------------------------------------------------------------------------
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Net revenues
For the years ended Change from 2020 For the years ended Change from 2019
December 31, to 2021 (*) December 31, to 2020 (*)
2021 2020 in Dollars in % 2020 2019 in Dollars in %
(in millions, except percentages) (in millions, except percentages)
Total Net Revenues $ 7,069.4 $ 3,973.5 $ 3,095.9 77.9% $
3,973.5
(*) Percentages have been calculated using the whole figures instead of rounding
figures. The table above may not total due to rounding.
Our net revenues grew 77.9% for the year endedDecember 31, 2021 , as compared to the same period in 2020. The increase in net revenues was primarily attributable to: a)an increase of$2,075.7 million , or 81.1%, in Commerce revenues, for the year endedDecember 31, 2021 , as compared to the same period in 2020. This increase is mainly generated by a 35.5% increase in our gross merchandise volume, an increase of$629.6 million in our first-party sales and an increase of$357.6 million in shipping services billed net of carrier costs for the year endedDecember 31, 2021 , as compared to the same period in 2020. The aforementioned increase was partially offset by an increase of$365.9 million of shipping carrier costs netted from revenues from$1,110.7 million for the year endedDecember 31, 2020 to$1,476.6 million for the year endedDecember 31, 2021 ; and b)an increase of 72.2%, in Fintech revenues, from$1,413.7 million for year endedDecember 31, 2020 , to$2,434.0 million for the year endedDecember 31, 2021 . This increase was mainly generated by an increase of 229.2% in credit business revenues and increases in off-platform transactions and financing mainly associated to a 55.5% increase in our total payment volume for the year endedDecember 31, 2021 , as compared to the same period in 2020; ? 50
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For the years ended Change from 2020 For the years ended Change from 2019
December 31, to 2021 (*) December 31, to 2020 (*)
Consolidated Net
Revenues by 2021 2020 in Dollars in % 2020 2019 in Dollars in %
revenue stream
(in millions, except
(in millions, except
percentages)
percentages)
Commerce$ 2,481.2 $ 1,356.8 $ 1,124.4 82.9%$ 1,356.8 $ 793.4 $ 563.4 71.0% Fintech 1,428.4 837.3 591.1 70.6%
837.3 668.1 169.2 25.3%
$ 3,909.6 $ 2,194.0 $ 1,715.5 78.2% $ 2,194.0 $ 1,461.5 $ 732.5 50.1%
Argentina
Commerce $ 855.6 $ 561.3 $ 294.3 52.4% $ 561.3 $ 240.2 $ 321.1 133.7%
Fintech 675.4 419.0 256.4 61.2%
419.0 216.2 202.8 93.8%
$ 1,531.0 $ 980.3 $ 550.8 56.2% $ 980.3 $ 456.3 $ 523.9 114.8%
Mexico
Commerce $ 924.5 $ 471.4 $ 453.1 96.1% $ 471.4 $ 230.2 $ 241.2 104.8%
Fintech 247.8 103.7 144.1 138.9% 103.7 44.9 58.8 130.8%
$ 1,172.4 $ 575.2 $ 597.2 103.8% $ 575.2 $ 275.1 $ 300.0 109.1%
Other countries
Commerce $ 374.1 $ 170.3 $ 203.8 119.7% $ 170.3 $ 82.7 $ 87.6 105.9%
Fintech 82.3 53.7 28.6 53.4% 53.7 20.6 33.0 160.1%
$ 456.4 $ 224.0 $ 232.5 103.8% $ 224.0 $ 103.3 $ 120.6 116.7%
Consolidated
Commerce$ 4,635.4 $ 2,559.8 $ 2,075.7 81.1%$ 2,559.8 $ 1,346.4 $ 1,213.3 90.1% Fintech 2,434.0 1,413.7 1,020.3 72.2% 1,413.7 949.9 463.8 48.8% Total$ 7,069.4 $ 3,973.5 $ 3,095.9 77.9%$ 3,973.5 $ 2,296.3 $ 1,677.2 73.0% .
(*) Percentages have been calculated using whole-dollar amounts rather than the
rounded amounts that appear in the table. The table above may not total due
to rounding.
Brazil
Commerce revenues in Brazil increased 82.9% in the year ended December 31, 2021
as compared to the same period in 2020. This increase was primarily a
consequence of a 34.9% increase in our gross merchandise volume and the increase
in our first-party sales and shipping services billed net of carrier costs for
the year ended December 31, 2021 , as compared to the same period in 2020.
Fintech revenues grew by 70.6%, a $591.1 million increase, during the year ended
December 31, 2021 as compared to the same period in 2020, mainly driven by a
61.6% increase in the off-platform payments volume, credit business and
financing.
Commerce revenues inArgentina increased 52.4% in the year endedDecember 31, 2021 as compared to the same period in 2020. This increase was primarily a consequence of a 23.5% increase in our gross merchandise volume and the increase in our first-party sales for the year endedDecember 31, 2021 . Fintech revenues grew 61.2%, a$256.4 million increase, during the year endedDecember 31, 2021 as compared to the same period in 2020, mainly driven by a 73.5% increase in the off-platform payments volume, credit business and financing.
Commerce revenues inMexico increased 96.1% in the year endedDecember 31, 2021 , as compared to the same period in 2020. This increase was primarily a consequence of a 52.7% increase in our gross merchandise volume and the increase in our first-party sales for the year endedDecember 31, 2021 . Fintech revenues grew 138.9%, a$144.1 million increase, during the year endedDecember 31, 2021 as compared to the same period in 2020, mainly driven by a 109.1% increase in the off-platform payments volume and credit business. 51
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The following table sets forth our total net revenues and the sequential
quarterly growth of these net revenues for the periods described below:
Quarter Ended
March 31, June 30, September 30, December 31,
(in millions, except percentages)
(*)
2021
Net revenues $ 1,378.4 $ 1,702.7 $ 1,857.5 $ 2,130.8
Percent change from prior quarter 4% 24% 9%
15%
2020
Net revenues$ 652.1 $ 878.4 $ 1,115.7 $
1,327.3
Percent change from prior quarter -3% 35% 27%
19%
2019
Net revenues$ 473.8 $ 545.2 $ 603.0 $
674.3
Percent change from prior quarter 11% 15% 11%
12%
(*) Percentages have been calculated using whole-dollar amounts rather than the
rounded amounts that appear in the table.
The following table set forth the growth in net revenues in local currencies for
the years ended
Changes from (*)
(% of revenue growth in Local Currency) 2020 to 2021 2019 to 2020
Brazil 84.5% 97.4%
Argentina 106.3% 218.4%
Mexico 93.6% 132.2%
Other Countries 102.4% 141.2%
Total Consolidated 93.9% 126.5%
(*) The local currency revenue growth was calculated by using the average
monthly exchange rates for each month during 2020 and applying them to the
corresponding months in 2021, so as to calculate what our financial results
would have been had exchange rates remained stable from one year to the
next.
The local currency revenue growth was calculated by using the average
monthly exchange rates for each month during 2019 and applying them to the
corresponding months in 2020, so as to calculate what our financial results
would have been had exchange rates remained stable from one year to the
next.
See also the “Non-GAAP Financial Measures” section for details on FX neutral
measures.
In
Argentine Commerce transactions volume, increases in our off-platform
transactions business through Mercado Pago, an increase in our credit and
financing business and a high level of inflation.
InBrazil , the increase in local currency growth is a consequence of an increase in our Commerce transactions volume, an increase in our off-platform transactions through Mercado Pago and an increase in our financing and credit business. InMexico , the increase in local currency growth is a consequence of an increase of our Commerce transactions volume, an increase in our off-platform transactions through Mercado Pago and an increase in our financing and credit business. Cost of net revenues Years ended Change from 2020 Years ended Change from 2019 December 31, to 2021 (*) December 31, to 2020 (*) 2021 2020 in Dollars in % 2020 2019 in Dollars in % (in millions, except percentages) (in millions, except percentages) Total cost of net revenues$ 4,064.4 $ 2,264.3 $ 1,800.1 79.5%$ 2,264.3 $ 1,194.2 $ 1,070.1 89.6% As a percentage of net revenues (*) 57.5% 57.0%
57.0% 52.0%
(*) Percentages have been calculated using whole-dollar amounts rather than the
rounded amounts that appear in the table. The table above may not total due
to rounding.
For the year endedDecember 31, 2021 as compared to the year endedDecember 31, 2020 , the increase of$1,800.1 million in cost of net revenues was primarily attributable to: i) a$616.1 million increase in cost of goods sold mainly inBrazil ,Argentina andMexico ; ii) a$478.7 million increase in shipping operating costs; iii) a$243.8 million increase in sales taxes; iv) a$169.6 million increase in collection fees, which was mainly attributable to our Argentine, Brazilian and Mexican operations as a result of the higher transactions volume of Mercado Pago in those countries; v) a$77.3 million increase in shipping carrier costs. 52 -------------------------------------------------------------------------------- Table of Contents Product and technology development Years ended Change from 2020 Years ended Change from 2019 December 31, to 2021 (*) December 31, to 2020 (*) 2021 2020 in Dollars in % 2020 2019 in Dollars in % (in millions, except percentages) (in millions, except percentages) Product and technology development$ 590.3 $ 352.5 $ 237.9 67.5%$ 352.5 $ 223.8 $ 128.7 57.5% As a percentage of net revenues (*) 8.4% 8.9% 8.9% 9.7%
(*) Percentages have been calculated using whole-dollar amounts rather than the
rounded amounts that appear in the table. The table above may not total due
to rounding.
For the year endedDecember 31, 2021 , the increase in product and technology development expenses as compared to the year endedDecember 31, 2020 , amounted to$237.9 million . This increase was primarily attributable to: i) a$133.9 million increase in salaries and wages mainly related to new hires, partially offset by social security benefits granted pursuant to the knowledge-based economy promotional regime inArgentina ; ii) a$49.9 million increase in maintenance expenses mainly related to higher software licenses expenses; and iii) a$30.8 million increase in depreciation and amortization expenses. We believe that product development is one of our key competitive advantages and we intend to continue to invest in hiring engineers to meet the increasingly sophisticated product expectations of our customer base. Sales and marketing Years ended Change from 2020 Years ended Change from 2019 December 31, to 2021 (*) December 31, to 2020 (*) 2021 2020 in Dollars in % 2020 2019 in Dollars in % (in millions, except percentages) (in millions, except percentages) Sales and marketing$ 1,509.5 $ 902.6 $ 606.9 67.2%$ 902.6 $ 834.0 $ 68.5 8.2% As a percentage of net revenues (*) 21.4% 22.7%
22.7% 36.3%
(*) Percentages have been calculated using whole-dollar amounts rather than the
rounded amounts that appear in the table. The table above may not total due
to rounding.
For the year endedDecember 31, 2021 , the$606.9 million increase in sales and marketing expenses as compared to the year endedDecember 31, 2020 was primarily attributable to: i) a$302.4 million increase in bad debt expenses explained, mainly, by an increase in our credit business volume; ii) an$174.7 million increase in online and offline marketing expenses principally inBrazil ,Mexico andArgentina ; iii) a$46.5 million increase in other sales expenses mainly related to strategic marketing initiatives; and iv) a$37.3 million increase in salaries and wages. General and administrative
Years ended Change from 2020 Years ended Change from 2019
December 31, to 2021 (*) December 31, to 2020 (*)
2021 2020 in Dollars in % 2020 2019 in Dollars in %
(in millions, except percentages) (in millions, except percentages)
General and
administrative $ 464.5 $ 326.5 $ 138.0 42.3% $ 326.5 $ 197.5 $ 129.0 65.3%
As a percentage of
net revenues (*) 6.6% 8.2% 8.2% 8.6%
(*) Percentages have been calculated using whole-dollar amounts rather than the
rounded amounts that appear in the table. The table above may not total due
to rounding.
For the year endedDecember 31, 2021 , the$138.0 million increase in general and administrative expenses as compared to the year endedDecember 31, 2020 was primarily attributable to: i) a$62.2 million increase in salaries and wages, mainly related to new hires; and ii) a$36.9 million increase in tax, legal and other fees; and iii) a$26.0 million increase in temporary services primarily related to administrative worker. 53 -------------------------------------------------------------------------------- Table of Contents Other income (expense), net Years ended Change from 2020 Years ended Change from 2019 December 31, to 2021 (*) December 31, to 2020 (*) 2021 2020 in Dollars in % 2020 2019 in Dollars in % (in millions, except percentages) (in millions, except percentages) Other income (expense), net$ (200.1) $ (46.4) $ (153.7) 331.4%$ (46.4) $ 45.9 $ (92.3) -201.0% As a percentage of net revenues (*) -2.8% -1.2%
-1.2% 2.0%
(*) Percentages have been calculated using whole-dollar amounts rather than the
rounded amounts that appear in the table. The table above may not total due to
rounding.
For the year endedDecember 31, 2021 , the$153.7 million increase in other income (expense), net as compared to year endedDecember 31, 2020 was primarily attributable to: i) a$122.0 million increase in financial expenses mainly attributable to a$49.2 million of loss on debt extinguishment and premium recognized during the first quarter of 2021 related to the repurchase of$440 million of principal of the 2028 Notes (refer to Note 16 of our audited consolidated financial statements for further detail) and higher level of indebtedness during 2021, mainly incurred inU.S. ,Argentina andBrazil ; and ii) a$66.9 million increase in our foreign currency loss mainly related to higher foreign exchange losses attributable to our own common stock acquisition in the Argentine market at a price that reflects the additional cost of accessing US dollars through an indirect mechanism due to restrictions imposed by the Argentine government for buying US dollars at the official exchange rate (refer to Note 25 of our audited consolidated financial statements for further detail), and higher foreign exchange losses from our Brazilian subsidiaries. This increase was partially offset by a$35.2 million increase in interest income and other financial gains from our financial investments as a result of higher interest income inArgentina due to higher float, inBrazil due to higher float and higher rates, partially offset by lower float in ourU.S. investments. Income tax Years ended Change from 2020 Years ended Change from 2019 December 31, to 2021 (*) December 31, to 2020 (*) 2021 2020 in Dollars in % 2020 2019 in Dollars in % (in millions, except percentages) (in millions, except percentages) Income tax expense$ (148.8) $ (82.0) $ (66.8) 81.4%$ (82.0) $ (64.8) $ (17.3) 26.7% As a percentage of net revenues (*) -2.1% -2.1%
-2.1% -2.8%
(*) Percentages have been calculated using whole-dollar amounts rather than the
rounded amounts that appear in the table. The table above may not total due
to rounding.
During the year endedDecember 31, 2021 as compared to the year endedDecember 31, 2020 , income tax expense increased by$66.8 million mainly as a result of higher income tax expense inArgentina andBrazil as a consequence of higher pre-tax gain in our Argentine and Brazilian segments in 2021 and higher income tax expense due to withholding tax on dividends from our Argentine subsidiary offset by the income tax benefit that our Argentine subsidiary,MercadoLibre S.R.L., obtained upon the approval of its eligibility under the knowledge-based economy promotional regime (see Note 13 of our audited consolidated financial statements for further detail).
Our effective tax rate is defined as income tax expense as a percentage of net
income (loss) before income tax expense.
The following table summarizes the changes in our effective tax rate for the
years ended
Years ended
December 31,
2021 2020 2019
Effective tax rate 61.8% 100.9% -60.4%
Our effective tax rate for the year ended December 31, 2021 as compared to the
same period in 2020, decreased largely as a result of the income tax benefit
that our Argentine subsidiary, MercadoLibre S.R.L., obtained upon the approval
of its eligibility under the knowledge-based economy promotional regime and
higher non-taxable pre-tax gains in Brazil .
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The following table sets forth our effective income tax rate related to our main
locations for the years ended
Years ended
December 31,
2021 2020 2019
Effective tax rate by country
Argentina 22.1% 34.4% 5.2%
Brazil 5.9% 5.6% 16.7%
Mexico -7.2% -2.0% -33.4%
The decrease in the effective income tax rate in our Argentine subsidiaries
during the year ended December 31, 2021 as compared to the same period in 2020
was mainly a consequence of the income tax benefit that our Argentine
subsidiary, MercadoLibre S.R.L., obtained upon the approval of its eligibility
under the knowledge-based economy promotional regime (see Note 13 of our audited
consolidated financial statements for further detail).
The increase in our Brazilian effective income tax rate for the year ended
higher non-deductible expenses.
The increase in our Mexican negative effective income tax rate for year endedDecember 31, 2021 as compared to the same period in 2020, was mainly driven by the combined effect of higher income tax expense related to advertising business due to higher pre-tax gains inMexico and pre-tax losses from other entities inMexico that were not accounted for as deferred tax assets as a consequence of the valuation allowance. Deferred Income Tax
The following table summarizes the composition of our deferred tax assets for
the years ended
Year Ended Year Ended
December 31, (*) December 31, (*)
Deferred tax assets 2021 in % 2020 in %
(in millions, except (in millions, except
percentages) percentages)
Brazilian operations $ 127.8 26.5 % $ 101.4 30.4 %
Argentine operations 47.6 9.9 35.1 10.5
Mexican operations 232.8 48.4 162.7 48.8
U.S. deferred tax assets 52.3 10.9 18.3 5.5
Operations in other countries 20.9 4.3 16.0 4.8
Total $ 481.4 100.0 % $ 333.5 100.0 %
(*) Percentages have been calculated using whole-dollar amounts rather than the
rounded amounts that appear in the table. The table above may not total due to
rounding.
As of December 31, 2021 , and 2020 our deferred tax assets, were comprised mainly
of loss carry forwards representing 40.2% and 48.6% of our total deferred tax
assets, respectively, provisions representing 18.5% and 21.1% of our total
deferred tax assets, respectively, and allowance for doubtful accounts
representing 13.6% and 5.4% of of our total deferred tax assets, respectively.
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The following table summarizes the composition of our deferred tax assets from
loss carryforwards for the years ended
Year Ended
Year Ended
December 31, (*) December 31, (*)
Loss carryforwards 2021 in % 2020 in %
(in millions, except
(in millions, except percentages) percentages)
? ?
Mexican operations $ 165.4 85.4 % $ 125.1 77.2 %
Brazilian operations 16.4 8.5 28.5 17.6
Argentine operations 5.5 2.8 0.3 0.2
Colombian operations 2.2 1.1 4.8 3.0
Operations in other countries 4.2 2.2 3.3 2.0
Total $ 193.7 100.0 % $ 162.0 100.0 %
(*) Percentages have been calculated using whole-dollar amounts rather than the
rounded amounts that appear in the table. The table above may not total due to
rounding.
We also assess the likelihood that our net deferred tax assets will be realized
from future taxable income. To the extent we believe that it is more likely than
not that some portion or the total deferred tax assets will not be realized, we
establish a valuation allowance.
At
million
The following table summarizes the composition of our valuation allowance for
the years ended
Year Ended Year Ended
December 31, (*) December 31, (*)
Valuation Allowance 2021 in % 2020 in %
(in millions, except
(in millions, except percentages) percentages)
Mexican operations $ 197.0 75.2 % $ 151.9 84.7 %
U.S. foreign tax credits 51.5 19.7 17.5 9.8
Colombian operations 9.4 3.6 8.0 4.5
Argentine operations 2.5 1.0 1.8 1.0
Operations in other countries 1.2 0.5 - -
Total $ 261.6 100.0 % $ 179.2 100.0 %
(*) Percentages have been calculated using whole-dollar amounts rather than the
rounded amounts that appear in the table. The table above may not total due to
rounding.
Our valuation allowance is based on our assessment that it is more likely than
not that the deferred tax asset will not be realized. The fluctuations in the
valuation allowance will depend on the capacity of each country's operations to
generate taxable income or our execution of future tax planning strategies that
allow us to use the aforementioned deferred tax assets. To the extent we
establish a valuation allowance or change the allowance in a period, we reflect
the change with a corresponding increase or decrease in our tax provision in our
consolidated statement of income.
Our future effective tax rates could be adversely affected by earnings being
lower than anticipated in countries where we have lower statutory rates and
higher than anticipated in countries where we have higher statutory rates, by
changes in the valuations of our deferred tax assets or liabilities, or by
changes or interpretations in tax laws, regulations or accounting principles.
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Equity in earnings of unconsolidated entity
Years ended Change from 2020 Years ended Change from 2019
December 31, to 2021 (*) December 31, to 2020
2021 2020 in Dollars in % 2020 2019 in Dollars in %
(in millions, except percentages) (in
millions, except percentages) Equity in earnings of unconsolidated entity$ (8.5) $ -$ (8.5) 100.0% $ - $ - $ - - As a percentage of net revenues (*) -0.1% 0.0% - - (*) Percentages have been calculated using whole-dollar amounts rather than the rounded amounts that appear in the table. The table above may not total due to rounding. For the year endedDecember 31, 2021 , the$8.5 million loss in equity in earnings of unconsolidated entity was attributable to losses derived from the equity investment inMELI Kaszek Pioneer Sponsor LLC . Segment information
See Note 8 to our audited consolidated financial statements for detailed
description about our reporting segments.
(In millions, except
for percentages) Year Ended December 31, 2021 (*)
Brazil Argentina Mexico Other Countries Total
Net revenues $ 3,909.6 $ 1,531.0 $ 1,172.4 $ 456.4 $ 7,069.4
Direct costs (3,233.2) (997.8) (1,138.9) (380.5) (5,750.4)
Direct contribution $ 676.4 $ 533.2 $ 33.5 $ 75.9 $ 1,319.0
Margin 17.3% 34.8% 2.9% 16.6% 18.7%
Year Ended December 31, 2020 (*)
Brazil Argentina Mexico Other Countries Total
Net revenues $ 2,194.0 $ 980.3 $ 575.2 $ 224.0 $ 3,973.5
Direct costs (1,766.0) (708.7) (586.0) (186.4) (3,247.1)
Direct contribution $ 428.1 $ 271.6 $ (10.8) $ 37.5 $ 726.4
Margin 19.5% 27.7% -1.9% 16.8% 18.3%
Change from the Year Ended December 31, 2021 to December 31, 2020 (*)
Brazil Argentina Mexico Other Countries Total
Net revenues
in Dollars $ 1,715.5 $ 550.8 $ 597.2 $ 232.5 $ 3,095.9
in % 78.2% 56.2% 103.8% 103.8% 77.9%
Direct costs
in Dollars $ (1,467.2) $ (289.1) $ (552.8) $ (194.1) $ (2,503.3)
in % 83.1% 40.8% 94.3% 104.1% 77.1%
Direct contribution
in Dollars $ 248.3 $ 261.6 $ 44.4 $ 38.4 $ 592.7
in % 58.0% 96.3% 408.8% 102.2% 81.6%
(*) Percentages have been calculated using whole-dollar amounts rather than the
rounded amounts that appear in the table. The table above may not total due
to rounding.
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(In millions, except
for percentages) Year Ended December 31, 2020 (*)
Brazil Argentina Mexico Other Countries Total
Net revenues $ 2,194.0 $ 980.3 $ 575.2 $ 224.0 $ 3,973.5
Direct costs (1,766.0) (708.7) (586.0) (186.4) (3,247.1)
Direct contribution $ 428.1 $ 271.6 $ (10.8) $ 37.5 $ 726.4
Margin 19.5% 27.7% -1.9% 16.8% 18.3%
Year Ended December 31, 2019 (*)
Brazil Argentina Mexico Other Countries Total
Net revenues $ 1,461.5 $ 456.3 $ 275.1 $ 103.3 $ 2,296.3
Direct costs (1,245.4) (347.7) (390.2) (105.0) (2,088.2)
Direct contribution $ 216.1 $ 108.6 $ (115.0) $ (1.6) $ 208.1
Margin 14.8% 23.8% -41.8% -1.6% 9.1%
Change from the Year Ended December 31, 2020 to
December 31, 2019 (*) Brazil Argentina Mexico Other Countries Total Net revenues in Dollars$ 732.5 $ 523.9 $ 300.0 $ 120.6$ 1,677.2 in % 50.1% 114.8% 109.1% 116.7% 73.0% Direct costs in Dollars$ (520.6) $ (360.9) $ (195.9) $ (81.5)$ (1,158.9) in % 41.8% 103.8% 50.2% 77.6% 55.5% Direct contribution in Dollars$ 211.9 $ 163.0 $ 104.2 $ 39.2$ 518.3 in % 98.1% 150.1% 90.6% 2396.7% 249.1%
(*) Percentages have been calculated using whole-dollar amounts rather than the
rounded amounts that appear in the table. The table above may not total due
to rounding.
Net revenues
Net revenues for the years ended December 31, 2021 , 2020 and 2019 are described
above in "Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations - Net revenues".
Direct costs
For the year endedDecember 31, 2021 , as compared to the same period in 2020, direct costs increased by 83.1%, mainly driven by: i) a 88.3% increase in sales and marketing expenses, mainly due to an increase in bad debt expenses online and offline marketing, salaries and wages and other sales expenses mainly related to strategic marketing initiative; ii) a 87.5% increase in cost of net revenues, mainly attributable to an increase in shipping operating costs, sales taxes, collection fees as a consequence of the higher transactions volume of our Mercado Pago business, cost of goods solds as a consequence of an increase in sales of products and shipping carrier costs; and iii) a 78.8% increase in general and administrative expenses, mostly attributable to an increase in salaries mainly related to new hires, taxes and legal and other fees. 58
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For the year endedDecember 31, 2021 , as compared to the same period in 2020, direct costs increased by 40.8%, mainly driven by: i) an 49.2% increase in cost of net revenues, mainly attributable to an increase in collection fees as a consequence of the higher transactions volume of our Mercado Pago business, shipping operating costs, cost of goods sold as a consequence of an increase in sales of products, sales taxes and shipping carrier costs; ii) a 53.6% increase in product and technology development expenses, mainly attributable to depreciation and amortization expenses; and iii) a 97.2% increase in general and administrative expenses, mostly attributable to an increase in salaries mainly related to new hires, taxes and other fees and other general and administrative expenses principally related to certain tax withholding.
For the year endedDecember 31, 2021 , as compared to the same period in 2020, direct costs increased by 94.3%, mainly driven by: i) a 99.1% increase in cost of net revenues, mainly attributable to increases in shipping operating costs, cost of goods sold as a consequence of an increase in sales of products, collection fees due to higher Mercado Pago penetration and shipping carrier costs; ii) an 84.0% increase in sales and marketing expenses, mainly due to buyer protection program, bad debt expenses, online and offline marketing expenses, salaries and wages and other sales expenses mainly related to strategic marketing initiative; iii) a 137.7% increase in product and technology development expenses, mainly attributable to maintenance expenses mainly related to higher software licenses expenses and depreciation and amortization expenses; and iv) a 86.4% increase in general and administrative expenses, mostly attributable to an increase in salaries, mainly related to new hires.
Liquidity and Capital Resources
Our main cash requirement has been working capital to fund Mercado Pago financing operations. We also require cash for capital expenditures relating to technology infrastructure, software applications, office space, business acquisitions, to fund our credit business, to build out our logistics capacity and to make interest payments on our loans payable and other financial liabilities. In 2020, we committed to purchase cloud services for: i) a total amount of$240.5 million to be paid within a 4-year period starting onJune 1, 2020 , which was amended inSeptember 2021 , for a total amount of$824.0 million to be paid within a 5-year period starting onOctober 1, 2021 and ii) a total amount of$30.0 million to be paid betweenNovember 24, 2019 andMarch 23, 2023 , which was amended inSeptember 2021 for a total amount of$108.0 million to be paid within 3-year period starting onSeptember 17, 2021 . Refer to Note 14 of our audited consolidated financial statements for further detail on purchase commitments. Further, in connection with the closing of MELI Kaszek Pioneer Corp ("MEKA")'s initial public offering onOctober 1, 2021 , MEKA (a special purpose acquisition company sponsored byMELI Kaszek Pioneer Sponsor LLC (the "Sponsor"), which is a joint venture between our subsidiary,MELI Capital Ventures LLC , andKaszek Opportunity II, L.P. ) entered into a forward purchase agreement with the Sponsor, pursuant to which the Sponsor committed to purchase from MEKA 5 million Class A ordinary shares at a price of$10 per share in a private placement to close substantially concurrently with the consummation of MEKA's initial business combination. Additionally, we have several committed leases, mainly, related to our fulfillment and service centers which are one of the most important investments for ourMercado Envios business. In this sense, as ofDecember 31, 2021 , we have committed rental expenditures with our lessors for$597.5 million and$60.9 million for operating leases and finance leases, respectively. Please see note 23 of our audited consolidated financial statements for further detail on leases. We have funded Mercado Pago mainly by discounting credit cards receivables and credit lines. Additionally, we have financed our Mercado Pago andMercado Credito businesses through the securitization of credit cards receivable and certain loans through SPEs created inBrazil ,Mexico andArgentina . Finally, we obtained funding through our financial institution inBrazil through deposit certificates and financial bills. Refer to Note 16 and 21 of our audited consolidated financial statements for further detail.
In
1,000,000 shares of Common Stock at a public offering price of
The aggregate proceeds of the equity offering were
issuance costs paid. See note 22 to our audited consolidated financial
statements for additional information regarding our equity offerings.
Finally, we issued common and preferred stock in the securities offerings that closed onMarch 15, 2019 andMarch 29, 2019 , respectively, for net aggregate proceeds of$1,965.9 million , which are intended to be used to fund the growth of our payment initiatives, build out our logistics capacity, drive the adoption of these services and for general corporate purposes. Given the uncertain progress of the COVID-19 pandemic and the related macroeconomic instability in the countries where we operate, it is not possible to have certainty around future business development and cash generation. In terms of liquidity and cash management, our relevant sources of funding remain available and credit facilities have been obtained at the geographic segment level. As ofDecember 31, 2021 , our main source of liquidity was$2,791.9 million of cash and cash equivalents and short-term investments, which excludes a$602.2 million investment mainly related to theCentral Bank of Brazil Mandatory Guarantee , and consists of cash generated from operations and proceeds from loans. 59
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The significant components of our working capital are cash and cash equivalents, restricted cash and cash equivalents, short-term investments, credit cards receivable and other means of payments, accounts receivable, loans receivable, inventory, accounts payable and accrued expenses, funds payable to customers, amounts payable due to credit and debit card transactions and short-term debt. As ofDecember 31, 2021 , cash and cash equivalents, restricted cash and cash equivalents and investments of our non-U.S. subsidiaries amounted to$2,994.7 million , 65.9% of our consolidated cash and cash equivalents, restricted cash and cash equivalents and investments, and our non-U.S. dollar-denominated cash, cash and equivalent, restricted cash and cash equivalent and investments held outsideU.S. amounted to approximately 64.9% of our consolidated cash and investments. Our non-U.S. dollar-denominated cash and investments are located primarily inBrazil andArgentina . The following table presents our cash flows from operating activities, investing activities and financing activities for the years endedDecember 31, 2021 , 2020 and 2019: Years ended December 31, (*) (In millions) 2021 2020 2019 Net cash provided by (used in): Operating activities$ 965.0 $ 1,182.6 $ 451.1 Investing activities (1,596.5) (252.2) (1,447.8) Financing activities 1,925.0 242.3 2,021.0 Effect of exchange rates on cash and cash equivalents, restricted cash and cash equivalents (153.8) (115.8) (37.6) Net increase in cash and cash equivalents, restricted cash and cash equivalents$ 1,139.7 $
1,056.8
(*) Percentages have been calculated using whole-dollar amounts rather than the
rounded amounts that appear in the table. The table above may not total due
to rounding.
Net cash provided by operating activities
Cash provided by operating activities consists of net loss adjusted for certain
non-cash items, and the effect of changes in working capital and other
activities:
Years ended Change from 2020
December 31, (*) to 2021 (*)
2021 2020 in Dollars in %
(in millions, except percentages)
Net Cash provided by:
Operating activities $ 965.0 $ 1,182.6 $ (217.5) -18.4%
(*) Percentages have been calculated using whole-dollar amounts rather than the
rounded amounts that appear in the table. The table above may not total due
to rounding.
The$217.5 million decrease in net cash provided by operating activities during the year endedDecember 31, 2021 , as compared to the same period in 2020, was primarily driven by a$540.8 million increase in credit cards receivable and a decrease of$204.5 million increase in accounts payable and accrued expenses. This decrease was partially offset by an increase of$302.4 million in bad debt charges during 2021 primary related to an increase in volume of our credit business and an increase of$272.0 million in amounts payable due to credit and debit card transactions. ? 60 -------------------------------------------------------------------------------- Table of Contents Net cash used in investing activities Years ended Change from 2020 December 31, (*) to 2021 (*) 2021 2020 in Dollars in % (in millions, except percentages) Net Cash used in: Investing activities$ (1,596.5) $ (252.2) $ (1,344.4) 533.1%
(*) Percentages have been calculated using whole-dollar amounts rather than the
rounded amounts that appear in the table. The table above may not total due
to rounding.
Net cash used in investing activities in the year endedDecember 31, 2021 resulted mainly from purchases of investments of$7,370.7 million , which was partially offset by proceeds from the sale and maturity of investments of$7,800.5 million , consistent with our treasury strategy of investing part of our available liquidity, principally, inU.S. treasury securities and money market funds. We used: i)$1,347.7 million in principal loans receivable granted under ourMercado Credito solution; ii)$572.9 million in the purchase of property and equipment (mainly related to our shipping network and information technology assets inArgentina ,Brazil andMexico ); iii)$50.6 million in payments related to the acquisition of Kangu Participações S.A. andRedelcom S.A. and; iv)$36.6 million in the purchase of intangible assets. Net cash provided by financing activities Years ended Change from 2020 December 31, (*) to 2021 (*) 2021 2020 in Dollars in % (in millions, except percentages)Net Cash provided by: Financing activities$ 1,925.0 $ 242.3 $ 1,682.7 694.6%
(*) Percentages have been calculated using whole-dollar amounts rather than the
rounded amounts that appear in the table.
For the year endedDecember 31, 2021 , our cash provided by financing activities was primarily derived from$1,519.5 million in proceeds from issuance of common stock from the equity offering that we closed during the fourth quarter of 2021,$9,261.7 million in net proceeds from loans payable and other financial liabilities and$396.7 million proceeds from the termination of certain of our 2028 Notes Capped Call Transactions. The cash flow provided by these financing activities was partially offset by$1,865.1 million in payments of the repurchase of the 2028 Notes,$6,781.6 million in payments from loans payable and other financial liabilities,$485.9 million related to repurchases of our common stock, and$100.8 million for the purchase of a capped call. In the event that we decide to pursue strategic acquisitions in the future, we may fund them with available cash, third-party debt financing, or by raising equity capital, as market conditions allow. Debt Convertible Senior Notes OnAugust 24, 2018 , we issued$800 million of 2.00% Convertible Senior Notes due 2028 and onAugust 31, 2018 we issued an additional$80 million of notes pursuant to the partial exercise of the initial purchasers' option to purchase such additional notes, resulting in an aggregate principal amount of$880 million of 2.00% Convertible Senior Notes due 2028 (collectively the "2028 Notes"). The 2028 Notes are unsecured, unsubordinated obligations, which pay interest in cash semi-annually, onFebruary 15 andAugust 15 , at a rate of 2.00% per annum. The 2028 Notes will mature onAugust 15, 2028 unless earlier redeemed, repurchased or converted in accordance with their terms prior to such date. The 2028 Notes may be converted, under specific conditions, based on an initial conversion rate of 2.2553 shares of common stock per$1,000 principal amount of the 2028 Notes (equivalent to an initial conversion price of$443.40 per share of common stock), subject to adjustment as described in the indenture governing the 2028 Notes. InJanuary 2021 , we signed agreements with 2028 Notes holders to repurchase$440,000 thousands principal amount of our outstanding of the 2028 Notes. The total amount paid amounted to$1,865.1 million which includes principal, interest accrued and premium. As of the date of the issuance of this annual report, approximately$440 millions of our principal amount of the 2028 Notes remains outstanding. 61
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Please refer to Notes 2 and 16 to our audited consolidated financial statements for additional information regarding the 2028 Notes and the related capped call transactions. Mercado Pago Funding In 2021, we obtained funding through our financial institution inBrazil through deposit certificates and financial bills, and continued obtaining, through our subsidiaries, certain lines of credit inArgentina ,Chile andUruguay primarily to fund the Mercado Pago business. Additionally, we continue to securitize certain loans and credit card receivables through our Argentine, Mexican and Brazilian SPEs, formed to securitize loans provided by us to our users and credit cards receivable. Please refer to Notes 16 and 21 to our audited consolidated financial statements for additional detail.
Debt Securities Guaranteed by Subsidiaries
OnJanuary 14, 2021 , we issued$400 million aggregate principal amount of 2.375% Sustainability Notes due 2026 (the "2026 Sustainability Notes") and$700 million aggregate principal amount of 3.125% Notes due 2031 (the "2031 Notes" and collectively, the "Notes"). The payment of principal, premium, if any, interest, and all other amounts in respect of each of the Notes, is fully and unconditionally guaranteed (the "Subsidiary Guarantees"), jointly and severally, on an unsecured basis, by certain of our subsidiaries (the "Subsidiary Guarantors"). The initial Subsidiary Guarantors are MercadoLibre S.R.L., Ibazar.com Atividades de Internet Ltda., eBazar.com.br Ltda.,Mercado Envios Servicos de Logistica Ltda., MercadoPago.com Representações Ltda.,MercadoLibre Chile Ltda.,MercadoLibre ,S. de R.L. de C.V. , DeRemate.com de México,S. de R.L. de C.V. and MercadoLibre Colombia Ltda. OnOctober 27, 2021 ,MercadoLibre ,S. de R.L. de C.V. became an excluded subsidiary pursuant to the terms of the Notes and, therefore, it was automatically released from its Subsidiary Guaranty. OnOctober 27, 2021 , MP Agregador,S. de R.L. de C.V. became a Subsidiary Guarantor under the Notes. We pay interest on the Notes onJanuary 14 andJuly 14 of each year, beginning onJuly 14, 2021 . The 2026 Sustainability Notes will mature onJanuary 14, 2026 , and the 2031 Notes will mature onJanuary 14, 2031 . The Notes rank equally in right of payment with all of the Company´s other existing and future senior unsecured debt obligations from time to time outstanding. Each Subsidiary Guarantee will rank equally in right of payment with all of the Subsidiary Guarantor's other existing and future senior unsecured debt obligations from time to time outstanding, except for statutory priorities under applicable local law. Each Subsidiary Guarantee will be limited to the maximum amount that would not render the Subsidiary Guarantor's obligations subject to avoidance under applicable fraudulent conveyance provisions of applicable law. By virtue of this limitation, a Subsidiary Guarantor's obligation under its Subsidiary Guarantee could be significantly less than amounts payable with respect to the Notes, or a Subsidiary Guarantor may have effectively no obligation under its Subsidiary Guarantee. Under the indenture governing the Notes, the Subsidiary Guarantee of a Subsidiary Guarantor will terminate upon: (i) the sale, exchange, disposition or other transfer (including by way of consolidation or merger) of the Subsidiary Guarantor or the sale or disposition of all or substantially all the assets of the Subsidiary Guarantor (other than to the Company or a Subsidiary) otherwise permitted by the indenture, (ii) satisfaction of the requirements for legal or covenant defeasance or discharge of the Notes, (iii) the release or discharge of the guarantee by such Subsidiary Guarantor of the Triggering Indebtedness (as defined in the applicable indenture) or the repayment of the Triggering Indebtedness, in each case, that resulted in the obligation of such Subsidiary to become a Subsidiary Guarantor, provided that in no event shall the Subsidiary Guarantee of an Initial Subsidiary Guarantor terminate pursuant to this provision, or (iv) such Subsidiary Guarantor becoming an Excluded Subsidiary (as defined in the applicable indenture) or ceasing to be a Subsidiary. We may, at our option, redeem the 2026 Sustainability Notes, in whole or in part, at any time prior toDecember 14, 2025 (the date that is one month prior to the maturity of the 2026 Sustainability Notes) and the 2031 Notes, in whole or in part, at any time prior toOctober 14, 2030 (the date that is three months prior to the maturity of the 2031 Notes), in each case by paying 100% of the principal amount of such Notes so redeemed plus the applicable "make-whole" amount and accrued and unpaid interest and additional amounts, if any. We may, at our option, redeem the 2026 Sustainability Notes, in whole or in part, onDecember 14, 2025 or at any time thereafter and the 2031 Notes onOctober 14, 2030 or at any time thereafter, in each case at the redemption price of 100% of the principal amount of such Notes so redeemed plus accrued and unpaid interest and additional amounts, if any. If we experience certain change of control triggering events, we may be required to offer to purchase the notes at 101% of their principal amount plus any accrued and unpaid interest thereon through the purchase date.
See note 16 of our audited consolidated financial statements for additional
detail.
We are presenting the following summarized financial information for the issuer and the Subsidiary Guarantors (together, the "Obligor Group ") pursuant to Rule 13-01 of Regulation S-X, Guarantors and Issuers ofGuaranteed Securities Registered or Being Registered. For purposes of the following summarized financial information, transactions between the Company and the Subsidiary Guarantors, presented on a combined basis, have been eliminated. Financial information for the non-guarantor subsidiaries, and any investment in a non-guarantor subsidiary by the Company or by any Subsidiary Guarantor, have been excluded. Amounts due from, due to and transactions with the non-guarantor subsidiaries and other related parties, as applicable, have been separately presented. ? 62
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Summarized balance sheet information for the
2021
December 31,
(In millions) 2021 2020
Current assets (1) (2)
Non-current assets (3)
1,770.3 1,121.2
Current Liabilities (4) 4,937.9 3,298.2
Non-current Liabilities (5) 2,011.7 944.3
(1) Includes restricted cash and cash equivalents of
million and guarantees in short-term investments of$602.2 million and$636.9 million as ofDecember 31, 2021 andDecember 31, 2020 , respectively.
(2) Includes Current assets from non-guarantor subsidiaries of
and
respectively.
(3) Includes Non-current assets from non-guarantor subsidiaries of
million and
respectively.
(4) Includes Current liabilities to non-guarantor subsidiaries of
million and
respectively.
(5) Includes Non-current liabilities to non-guarantor subsidiaries of
million as of
Summarized statement of income information for the
ended
Year Ended
? December 31, (*)
(In millions) 2021
Net Revenues (1) $ 6,067.4
Gross Profit (2) 2,256.8
Income from operations (3) 221.0
Net loss (4) (5) (23.4)
(*) On
subsidiary pursuant to the terms of the Notes and, therefore, it was
automatically released from its Subsidiary Guaranty. On
MP Agregador,
Notes. As a result, our current period figures are not directly comparable
to prior periods.
(1) Includes Net revenues from transactions with non-guarantor subsidiaries of
(2) Includes charges from transactions with non-guarantor subsidiaries of
(3) In addition to the charges included in Gross profit, Income from operations
includes charges from transactions with non-guarantor subsidiaries of
(4) Includes other income from transactions with non-guarantor subsidiaries of
(5) Includes
to the 2028 Notes repurchase recognized in
audited consolidated financial statements for further detail on 2028 Notes
repurchase.
Cash Dividends
See "Item 5-Market for registrant's common equity, related stockholder matters
and issuer purchases of equity securities-Dividend Policy" for more information
regarding our dividend distributions.
Our Board of Directors suspended the payment of dividends on our common stock as
of the first quarter of 2018 after reviewing our capital allocation process and
concluding that we have multiple investment opportunities that should generate
greater returns to shareholders through investing capital into the business as
compared to paying dividends. Any future determination as to the declaration of
dividends on our common stock will be made at the discretion of our Board of
Directors and will depend on our earnings, operating and financial condition,
capital requirements and other factors deemed relevant by our Board of
Directors, including the applicable requirements of the Delaware General
Corporation Law.
Capital expenditures
Our capital expenditures (comprised of our payments for property and equipment (such as fulfillment centers), intangible assets (excluding digital assets) for the years endedDecember 31, 2021 and 2020 amounted to$630.1 million and$254.1 million , respectively. During 2021, we invested$218.5 million in information technology inBrazil ,Argentina andMexico , and$327.4 million in our Argentine, Brazilian and Mexican shipping premises and offices. 63
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We are continually increasing our level of investment in hardware and software licenses necessary to improve and update our platform's technology and our computer software developed internally. We anticipate continued investments in capital expenditures related to information technology in the future as we strive to maintain our position in the Latin American e-commerce market. We believe that our existing cash and cash equivalents and cash generated from operations will be sufficient to fund our operating activities, property and equipment expenditures and to pay or repay obligations going forward.
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