MercadoLibre Inc (NASDAQ:MELI) stock rose 10.28% (As on May 3, 11:26:09 AM UTC-4, Source: Google Finance) after the company reported first-quarter earnings that surpassed analyst expectations. FXneutral GMV growth remained strong in Brazil (30% YoY) and Mexico (30% YoY), led by items sold growth of 32% YoY and 28% YoY, respectively. This was despite high comps and Easter falling in Q1 this year (versus Q2 last year). Income from operations reached $528mn on a reported basis, growing 26% YoY against Q1’23 figures that have been recast to reflect the reclassification of Mercado Pago interest income and expenses. YoY growth is lower on a reported basis because the reclassified interest income & expense declined, primarily related to Argentina. The geographies outside of Argentina delivered excellent results, with YoY income from operations margin expansion of 560bps on a reported basis. Net income grew 71% YoY to $344mn in Q1’24 with a margin of 7.9%. The net income margin has risen by 500bps over the last two years on revenue that has almost doubled. This is primarily due to strong growth and profitability gains in Brazil and Mexico, which is a result of the combination of growth, scale and operational efficiency that drove operating leverage in Q1’24. Whilst the devaluation of the Argentine Peso negatively impacts income from operations, it also reduces FX losses as the distortions created by the country’s dual FX rate regime begin to normalize. FX losses fell to $34mn in Q1’24 (of which $21mn relate to cash repatriation) from $107mn in Q4’23 and $87mn in Q1’23.

MELI in the first quarter of FY 24 has reported the adjusted earnings per share of $6.78, beating the analysts’ estimates for the adjusted earnings per share of $6.64, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue growth of 36 percent to $4.33 billion in the first quarter of FY 24, beating the analysts’ estimates for revenue by 9.86%. Revenue growth was robust in both Commerce (+49% YoY; +31% excluding reporting updates) and Fintech (+22% YoY; +28% excluding reporting updates).

Additionally, Capex investments totaled $148mn in Q1’24, similar to previous quarters, as we continue to steadily invest in the logistics network. Debt ratios have improved on the back of the strong results and cash flow over the last 12 months, with net debt to adjusted EBITDA falling to 0.5x in Q1’24 from 1.25x a year ago.