Table of Contents
SECURITIES AND EXCHANGE COMMISSION
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware (State of incorporation) | 98-0212790 (I.R.S. Employer Identification Number) |
Buenos Aires, C1430DNN, Argentina
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Class | Name of Exchange upon Which Registered | |
Common Stock, $0.001 par value per share | Nasdaq Global Market |
Large Accelerated Filerþ | Accelerated Filero | Non-Accelerated Filero | Smaller reporting companyo | |||
(Do not check if smaller reporting company) |
FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 2009
Page | ||||||||
3 | ||||||||
4 | ||||||||
13 | ||||||||
30 | ||||||||
31 | ||||||||
32 | ||||||||
35 | ||||||||
35 | ||||||||
37 | ||||||||
39 | ||||||||
68 | ||||||||
71 | ||||||||
71 | ||||||||
71 | ||||||||
72 | ||||||||
72 | ||||||||
72 | ||||||||
72 | ||||||||
74 | ||||||||
74 | ||||||||
75 | ||||||||
75 | ||||||||
75 | ||||||||
78 | ||||||||
Exhibit 10.19 | ||||||||
Exhibit 10.20 | ||||||||
Exhibit 10.21 | ||||||||
Exhibit 10.22 | ||||||||
Exhibit 10.23 | ||||||||
Exhibit 10.24 | ||||||||
Exhibit 10.25 | ||||||||
Exhibit 10.26 | ||||||||
Exhibit 21.01 | ||||||||
Exhibit 23.01 | ||||||||
Exhibit 31.01 | ||||||||
Exhibit 31.02 | ||||||||
Exhibit 32.01 | ||||||||
Exhibit 32.02 |
2
Table of Contents
• | continued growth of online commerce and Internet usage in Latin America; | ||
• | our ability to expand our operations and adapt to rapidly changing technologies; | ||
• | government regulation; | ||
• | litigation and legal liability; | ||
• | systems interruptions or failures; | ||
• | our ability to attract and retain qualified personnel; | ||
• | consumer trends; security breaches and illegal uses of our services; | ||
• | competition; | ||
• | reliance on third-party service providers; | ||
• | enforcement of intellectual property rights; | ||
• | our ability to attract new customers, retain existing customers and increase revenues; | ||
• | seasonal fluctuations; and | ||
• | political, social and economic conditions in Latin America in general, and Venezuela and Argentina in particular, including Venezuela’s status as a highly inflationary economy. |
3
Table of Contents
• | The MercadoLibre marketplace: The MercadoLibre marketplace is a fully-automated, topically-arranged and user-friendly online commerce service. This service permits both businesses and individuals to list items and conduct their sales and purchases online in either a fixed-price or auction-based format. Additionally, through online classified listings, our registered users can list and purchase motor vehicles, vessels, aircraft, real estate and services. Users and advertisers are also able to place, display and/or text advertisements on our web pages in order to promote their brands and offerings. Any Internet user can browse through the various products and services that are listed on our web site and register with MercadoLibre to list, bid for and purchase items and services. As a further enhancement to the MercadoLibre marketplace, in 2009 we launched our MercadoClics program to allow businesses to promote their products and services on the web. MercadoClics offers advertisers a cost efficient and automated platform with which to acquire traffic from us. Advertisers purchase, on a cost per clicks basis, advertising space that appear alongside product search results for specific categories. These advertising placements are clearly differentiated from product search results and direct traffic both on or off-platform to the advertisers destination of choice. | ||
• | The MercadoPago online payments solution: To complement the MercadoLibre marketplace, we developed MercadoPago, an integrated online payments solution. MercadoPago is designed to facilitate transactions both on and off the MercadoLibre marketplace by providing a mechanism that allows our users to securely, easily and promptly send and receive payments online. |
MercadoLibre | MercadoPago | |||||
Country | Launch date | Office opening | Launch date | |||
Argentina | August 1999 | July 1999 | November 2003 | |||
Brazil | October 1999 | September 1999 | January 2004 | |||
Mexico | November 1999 | October 1999 | January 2004 | |||
Uruguay | December 1999 | September 2004 | N/A |
4
Table of Contents
MercadoLibre | MercadoPago | |||||
Country | Launch date | Office opening | Launch date | |||
Colombia | February 2000 | January 2000 | December 2007 | |||
Venezuela | March 2000 | March 2000 | April 2005 | |||
Chile | March 2000 | April 2000 (*) | September 2007 | |||
Ecuador | December 2000 | N/A | N/A | |||
Peru | December 2004 | N/A | N/A | |||
Costa Rica | November 2006 | N/A | N/A | |||
Dominican Republic | December 2006 | N/A | N/A | |||
Panama | December 2006 | N/A | N/A |
(*) | During 2009 the office was closed |
5
Table of Contents
• | Continue to grow our business and maintain market leadership. We have focused and intend to continue to focus on growing our business by strengthening our position as the preferred online marketplace in each of the countries in which we operate. We also intend to grow our business and maintain our leadership by taking advantage of the expanding potential client base that has resulted from the growth of Internet penetration rates in Latin America. We intend to achieve these goals through organic growth, by entering into new countries and category segments, by launching new transactional business endeavours, such as our MercadoClics program and other advertising sales on our websites and, when possible and advantageous, through potential strategic acquisitions of key businesses and assets. | ||
• | Increase monetization of our transactions. We have focused and will continue to focus on improving the revenue generation capacity of our business by implementing initiatives designed to maximize the revenues we receive from transactions on our platform. Some of these initiatives include increasing our fee structure, and selling advertising and Internet marketing services on our platform. Additionally, we intend to take advantage of the natural synergies that exist between our marketplace and payments service by promoting increased use of MercadoPago so that it becomes the preferred online payment method on and off our platform. | ||
• | Expand into additional transactional service offerings.Our strategic focus is to enable on-line transactions of multiple types of goods and services throughout Latin America. Consequently, we strive, and will continue to strive, to launch on-line transactional offerings in new product and service categories where we consider business opportunities exist. These new transactional offerings include, but are not limited to,efforts involving: (a) the offer of additional product categories in our marketplace business, (b) the expansion of our presence in vehicle, real estate and services classifieds, (c) the expansion of our off platform payments services, (d) the increase of our on-line advertisement services and (e) the offer of on-line software as service e-commerce solutions. We believe that a significant portion of our future growth will be derived from these new or expanded product and service launches. | ||
• | Enhance brand awareness. We believe that enhancing awareness of theMercadoLibrebrand is important to achieve our business objectives. We intend to continue to promote, advertise and increase recognition of our brand through a variety of marketing and promotional campaigns. These may include marketing agreements with companies with significant online presence and advertising through traditional media, such as cable television. We may also use leading web sites and other media such as affiliate programs, banner advertisements and keyword searches. In addition, by enhancing our e-commerce community experience, we believe we will promote brand awareness through word of mouth. | ||
• | Focus on user loyalty and web site enhancement. We will continue to focus on increasing purchase frequency and transaction volumes from our existing users. We intend to do so by maintaining an appealing and convenient platform for e-commerce, improving the functionality of our web site to deliver a more efficient user experience and providing our users with the help of a dedicated customer support department. We employ a number of programs aimed at fostering customer loyalty and repeated purchases, such as our MercadoLider loyalty program for high-volume sellers, our targeted and segmented direct marketing program, and our MercadoPago special promotions. | ||
• | Increase operational efficiency. We believe our business model provides us with an opportunity to generate healthy profit margins. We plan to maximize this potential by achieving economics of scale, maintaining controls on overhead costs and reducing variable costs whenever possible. | ||
• | Continue to develop innovative and creative solutions. We intend to continually enhance our commerce platform in order to better serve both individuals and businesses that want to buy or sell goods and services online. We intend to continue investing to develop new tools and technologies that facilitate e-commerce on our platform and improve our users’ online experience on MercadoLibre, while addressing the distinctive cultural, geographical and other challenges of online commerce in Latin America. |
6
Table of Contents
• | Serve our dynamic and active user community. We seek to operate MercadoLibre as an open and trusted Web-based marketplace where users can access a broad market of products. We believe in treating our users with respect by applying a consistent set of policies that reinforce good online and offline behavior within our user community. We also seek to offer superior customer care in order to maintain the loyalty and satisfaction of our active user base. |
7
Table of Contents
• | A personal account that is available to all users and withholds payments for 12-14 days to ensure the security of the transaction; and | ||
• | a professional account available to users who have a good track record or who complete a credit scoring process. Sellers with professional accounts may withdraw their payments two days after receiving them. In the countries where direct payments are available, we expect our high volume sellers will progressively migrate to a professional account improving the speed of the transaction versus the escrow method. |
• | Entering into agreements with portals, networks and web sites that we believe could reach our target audience. These agreements allow us to purchase online advertising positions where we can market ourselves and show relevant promotions to potential and already registered users. | ||
• | Actively managing our “MercadoSocios” program, an affiliates program that financially rewards site owners for directing to our platform buyers, sellers and new users who ultimately register with, and conduct transactions on MercadoLibre. The MercadoSocios program is available in all countries where we operate, except Ecuador, Uruguay, Costa Rica, Dominican Republic, Perú and Panama. With our MercadoSocios program any site or online tool owner can place a link to our web site with a pre-approved creative design that we provide or XML data feeds. If an Internet user clicks on the link, arrives at our web site, registers as a user and completes transactions on our platform, we compensate the site or tool owner. For each new registered user that completes a transaction on our platform, we pay the site or tool owner that directed the user to us a fee per active registered user and a percentage of the commissions that that selling user pays us for transactions carried out in the first 30 days after that user registered. |
8
Table of Contents
• | Investing in preferential placing on the most popular search engines in each country where we operate, such as Google and Yahoo Search. We purchase advertising space next to the results of certain keyword searches related to our activities. | ||
• | Structuring our web site so that it appears among the top natural results for certain keyword searches. |
9
Table of Contents
10
Table of Contents
Number of | ||||
Country | employees | |||
Argentina | 829 | |||
Brazil | 410 | |||
Colombia | 45 | |||
Chile | 3 | |||
Mexico | 33 | |||
Uruguay | 4 | |||
Venezuela | 142 | |||
Total | 1,466 |
11
Table of Contents
12
Table of Contents
ITEM 1A. | RISK FACTORS |
13
Table of Contents
14
Table of Contents
15
Table of Contents
16
Table of Contents
17
Table of Contents
18
Table of Contents
19
Table of Contents
• | Disruptions to the capital markets or the banking system may impair the value of investments or bank deposits we currently consider safe or liquid. We may be unable to find suitable alternative investments that are safe, liquid, and provide a reasonable return. This could result in lower interest income or longer investment horizons. | ||
• | We may be required to increase the installment and financing fees we charge to customers for purchases made in installments or cease offering installment purchases altogether, each of which may result in a lower volume of transactions completed. | ||
• | We may be unable to access financing in the credit and capital markets at reasonable rates in the event we find it desirable to do so. Due to the nature of our MercadoPago business we generate high account receivable balances that we typically sell to financial institutions, and accordingly, lack of access to credit, or banks liquidations could cause us to experience severe difficulties in paying our sellers. |
20
Table of Contents
• | The failure of financial institution counterparties to honor their obligations to us under credit instruments could jeopardize our ability to rely on and benefit from those instruments. Our ability to replace those instruments on the same or similar terms may be limited under poor market conditions. |
21
Table of Contents
22
Table of Contents
23
Table of Contents
24
Table of Contents
25
Table of Contents
26
Table of Contents
27
Table of Contents
28
Table of Contents
• | advance notice requirements for stockholder proposals and director nominations; | ||
• | a staggered board of directors; | ||
• | limitations on the ability of stockholders to remove directors other than for cause; | ||
• | limitations on the ability of stockholders to own and/or exercise voting power over 20% of our common stock; | ||
• | limitations on the ability of stockholders to amend, alter or repeal our by-laws; | ||
• | the inability of stockholders to act by written consent; | ||
• | the authority of the board of directors to adopt a stockholder rights plan; | ||
• | the authority of the board of directors to issue, without stockholder approval, preferred stock with any terms that the board of directors determines and additional shares of our common stock; and | ||
• | limitations on the ability of certain stockholders to enter into certain business combinations with us, as provided under Section 203 of the Delaware General Corporation Law. |
29
Table of Contents
ITEM 1B. | UNRESOLVED STAFF COMMENTS |
30
Table of Contents
ITEM 2. | PROPERTIES |
Approximate | ||||||||||
City and | Square | Lease | ||||||||
Country | Facility | Address | Meters | Expiration Date | ||||||
Bogotá, Colombia | Colombia operation | Calle 93 B # 17-25 Ofc.406, Bogotá, Colombia | 107 | April 2010 | ||||||
Bogotá, Colombia | TuCarro Colombia operation | Calle 93 B # 17-25 Ofc.210 and 211, Bogotá, Colombia | 132 | January 2010. In process of renewal | ||||||
Buenos Aires, Argentina | Corporate headquarters, Argentina operation & Customer service center | Tronador 4890—floors 6th, 8th and 2nd, Buenos Aires, 1430—Argentina | 2,282.5 | March 2010, March 2011 and May 2011 | ||||||
Buenos Aires, Argentina | Customer service center | Av. Costanera Rafael Obligado y Geronimo Salguero, Buenos Aires, Argentina | 1,740 | January 2012 | ||||||
Caracas, Venezuela | Venezuela operation | Piso 7° Edificio Torre Country, Francisco de Miranda, Urbanización El Rosal, Municipio de Chacao, Estado de Miranda | 436 | April 2011 | ||||||
Lithia Springs, Georgia, U.S.A. | SAVVIS Data Center | 375 Riverside Parkway Lithia Springs, Georgia 30122, | 2.6 | July 2010 | ||||||
Mexico City, Mexico | Mexico operation | Ibsen 43-101, 102, 301 and 304, Colonia Polanco, Miguel Hidalgo, Código Postal 11650, Mexico D.F. Mexico | 425 | June 2010 | ||||||
Sterling, Virginia, U.S.A. | SAVVIS Data Center | 45901 Nokes Blvd. Sterling, Virginia 20166 | 135 | June 2010 | ||||||
San Luis, Argentina | Technology Development center | Av. Universitaria s/n, Ciudad de la Punta, San Luis, Argentina | 207 | No End Date | ||||||
Santana do Parnaíba, Brazil | Brazilian Subsidiary main office — Customer service center | Rua Yojiro Takaoka, 4350 Cep 06541-038—Santana do Parnaíba, São Paulo, Brazil | 1,020 | October 2014 | ||||||
São Paulo, Brazil | Brazilian subsidiary Office | Rua Gomes de Carvalho, 1306 Vila Olimpia, Cep 04547-005—São Paulo, Brazil | 598 | November 2011 | ||||||
Zona America, Uruguay | Uruguay Staff | Ruta 8, km 17.5 Edificio 200, local 208-07 Zona America, Uruguay | 37 | December 2010 |
31
Table of Contents
ITEM 3. | LEGAL PROCEEDINGS |
32
Table of Contents
33
Table of Contents
34
Table of Contents
ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Closing stock price | ||||||||
High | Low | |||||||
2007: | ||||||||
3rd quarter | $ | 41.06 | $ | 18.00 | ||||
4th quarter | $ | 78.81 | $ | 35.18 | ||||
2008: | ||||||||
1st quarter | $ | 70.01 | $ | 31.72 | ||||
2nd quarter | $ | 56.05 | $ | 37.11 | ||||
3rd quarter | $ | 36.98 | $ | 20.10 | ||||
4th quarter | $ | 21.58 | $ | 8.28 | ||||
2009: | ||||||||
1st quarter | $ | 19.61 | $ | 12.47 | ||||
2nd quarter | $ | 28.94 | $ | 18.53 | ||||
3rd quarter | $ | 38.93 | $ | 23.22 | ||||
4th quarter | $ | 54.45 | $ | 35.60 |
35
Table of Contents
36
Table of Contents
ITEM 6. | SELECTED FINANCIAL DATA |
Year ended December 31, | ||||||||||||||||||||
(in millions) | 2005 | 2006 | 2007 | 2008 | 2009 | |||||||||||||||
Statement of income data: | ||||||||||||||||||||
Net revenues | $ | 28.2 | $ | 52.1 | $ | 85.1 | $ | 137.0 | $ | 172.8 | ||||||||||
Cost of net revenues | (6.1 | ) | (12.1 | ) | (18.3 | ) | (27.5 | ) | (36.0 | ) | ||||||||||
Gross profit | 22.1 | 40 | 66.9 | 109.5 | 136.9 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Product and technology development | (2.2 | ) | (3.1 | ) | (4.4 | ) | (7.3 | ) | (12.1 | ) | ||||||||||
Sales and marketing | (14.7 | ) | (23.4 | ) | (27.6 | ) | (40.0 | ) | (42.9 | ) | ||||||||||
General and administrative | (4.4 | ) | (8.2 | ) | (13.2 | ) | (22.8 | ) | (25.8 | ) | ||||||||||
Compensation cost related to acquisitions | — | — | — | (1.9 | ) | — | ||||||||||||||
Total operating expenses | (21.3 | ) | (34.6 | ) | (45.2 | ) | (72.0 | ) | (80.9 | ) | ||||||||||
Income from operations | 0.8 | 5.4 | 21.7 | 37.5 | 56.0 | |||||||||||||||
Other income (expenses): | ||||||||||||||||||||
Interest income and other financial gains | 0.4 | 0.5 | 1.6 | 1.8 | 2.7 | |||||||||||||||
Interest expense and other financial charges | (0.5 | ) | (1.7 | ) | (2.7 | ) | (8.4 | ) | (13.4 | ) | ||||||||||
Foreign currency (loss) gain | 0.3 | (0.4 | ) | (3.1 | ) | (1.5 | ) | (2.7 | ) | |||||||||||
Other income (expenses), net | (0.3 | ) | (1.5 | ) | (3.0 | ) | 0.1 | — | ||||||||||||
Net income before income and asset tax and cumulative effect of change in accounting principle | 0.7 | 2.3 | 14.4 | 29.4 | 42.7 | |||||||||||||||
Income and asset tax (expense) benefit | 1.4 | (1.2 | ) | (4.7 | ) | (10.6 | ) | (9.5 | ) | |||||||||||
Net income before cumulative effect of change in accounting principle and gain from discontinued operations | 2.0 | 1.1 | 9.7 | 18.8 | 33.2 | |||||||||||||||
Cumulative effect of change in accounting principle | 0.3 | — | — | — | — | |||||||||||||||
Net income | 2.4 | 1.1 | 9.7 | 18.8 | 33.2 | |||||||||||||||
Accretion of preferred stock | (0.5 | ) | (0.5 | ) | (0.3 | ) | — | — | ||||||||||||
Net income available to common stockholders | $ | 1.9 | $ | 0.6 | $ | 9.4 | $ | 18.8 | $ | 33.2 | ||||||||||
37
Table of Contents
At December 31, | ||||||||||||||||||||
(in millions) | 2005 | 2006 | 2007 | 2008 | 2009 | |||||||||||||||
Balance sheet data: | ||||||||||||||||||||
Total assets | $ | 44.4 | $ | 53.8 | $ | 134.5 | $ | 156.7 | $ | 182.6 | ||||||||||
Long term debt | 12.0 | 9.0 | — | 3.1 | — | |||||||||||||||
Total liabilities | 23.2 | 30.5 | 42.8 | 63.3 | 68.4 | |||||||||||||||
Net assets | 21.2 | 23.3 | 91.7 | 93.4 | 114.2 | |||||||||||||||
Mandatorily redeemable convertible preferred stock | 63.6 | 64.1 | — | — | — | |||||||||||||||
Common stock | 0.1 | 0.1 | 0.1 | 0.1 | 0.1 | |||||||||||||||
Stockholders’ equity (deficit) | $ | (42.4 | ) | $ | (40.7 | ) | $ | 91.7 | 93.4 | 114.2 |
Year Ended December 31, | ||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
Earnings (loss) per share data: | ||||||||||||||||||||
Basic net income (loss) available to common stockholders per common share | $ | 0.05 | $ | 0.01 | $ | 0.22 | $ | 0.43 | $ | 0.75 | ||||||||||
Diluted net income per common share | $ | 0.05 | $ | — | $ | 0.22 | $ | 0.42 | $ | 0.75 | ||||||||||
Weighted average shares (2): | ||||||||||||||||||||
Basic | 13,065,496 | 13,149,139 | 25,149,405 | (1) | 44,239,443 | 44,086,892 | ||||||||||||||
Diluted | 13,671,359 | — | 25,478,336 | 44,348,950 | 44,144,368 |
(1) | Includes the effect of the issuance of 3,000,000 shares of our common stock in connection with our initial public offering in August 2007. | |
(2) | Shares outstanding at December 31, 2009 were 44,120,269. |
Year ended December 31, | ||||||||||||||||||||
(in millions) | 2005 | 2006 | 2007 | 2008 | 2009 | |||||||||||||||
Other data: | ||||||||||||||||||||
Number of confirmed registered users at end of period (1) | 12.2 | 18.2 | 24.9 | 33.7 | 42.6 | |||||||||||||||
Number of confirmed new registered users during period (2) | 5.7 | 6.0 | 6.7 | 8.8 | 8.9 | |||||||||||||||
Gross merchandise volume (3) | $ | 607.7 | $ | 1,075.1 | $ | 1,511.5 | $ | 2,078.9 | $ | 2,750.7 | ||||||||||
Number of successful items sold (4) | 8.4 | 13.8 | 17.5 | 21.1 | 29.5 | |||||||||||||||
Total payment volume (5) | $ | 38.5 | $ | 89.0 | $ | 158.0 | $ | 255.9 | $ | 382.5 | ||||||||||
Total payment transactions (6) | — | — | 1.3 | 1.9 | 3.1 | |||||||||||||||
Capital expenditures | $ | 2.0 | $ | 2.4 | $ | 3.1 | $ | 5.0 | $ | 4.8 | ||||||||||
Depreciation and amortization | $ | 1.6 | $ | 2.0 | $ | 2.3 | $ | 3.3 | $ | 3.9 |
(1) | Measure of the cumulative number of users who have registered on the MercadoLibre marketplace and confirmed their registration. | |
(2) | Measure of the number of new users who have registered on the MercadoLibre marketplace and confirmed their registration. As of December 31, 2008 the number of confirmed new registered users includes 2.2 million coming from the DeRemate integration. |
38
Table of Contents
(3) | Measure of the total U.S. dollar sum of all transactions completed through the MercadoLibre marketplace, excluding motor vehicles, vessels, aircraft and real estate. | |
(4) | Measure of the number of items that were sold/purchased through the MercadoLibre marketplace. | |
(5) | Measure of total U.S. dollar sum of all transactions paid for using MercadoPago. | |
(6) | Measure of the number of all transactions paid for using MercadoPago. |
ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | 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 December 31, 2007, 2008, and 2009; | ||
• | a discussion of the principal factors that influence our results of operations, financial condition and liquidity; | ||
• | a discussion of our liquidity and capital resources, a discussion of our capital expenditures and a description of our contractual obligations; and | ||
• | a discussion of the market risks that we face. |
39
Table of Contents
• | The MercadoLibre marketplace: The MercadoLibre marketplace is a fully-automated, topically-arranged and user-friendly online commerce service. This service permits both businesses and individuals to list items and conduct their sales and purchases online in either a fixed-price or auction-based format. Additionally, through online classified listings, our registered users can list and purchase motor vehicles, vessels, aircraft, real estate and services. Users and advertisers are also able to place, display and/or text advertisements on our web pages in order to promote their brands and offerings. Any Internet user can browse through the various products and services that are listed on our web site and register with MercadoLibre to list, bid for and purchase items and services. As a further enhancement to the MercadoLibre marketplace we have launched our MercadoClics program to allow businesses to promote their products and services on the web. MercadoClics offers advertisers a cost efficient and automated platform with which to adquire traffic from us. Advertisers purchase, on a cost per clicks basis, advertising space that appear alongside product search results on specific categories. These advertising placements are clearly differentiated from product search results and direct traffic both on or off-platform to the advertisers destination of choice. | ||
• | The MercadoPago online payments solution: To complement the MercadoLibre marketplace, we developed MercadoPago, an integrated online payments solution. MercadoPago is designed to facilitate transactions both on and off the MercadoLibre marketplace by providing a mechanism that allows our users to securely, easily and promptly send and receive payments online. |
40
Table of Contents
• | listing fees; | ||
• | optional feature fees; | ||
• | final value fees; and | ||
• | online advertising fees. |
• | up front fees; | ||
• | final value fees; and | ||
• | online advertising fees. |
41
Table of Contents
Year ended December 31, | ||||||||||||
(% of total MercadoLibre marketplace net revenues) | 2007 | 2008 | 2009 | |||||||||
Brazil | 54.0 | % | 46.1 | % | 42.6 | % | ||||||
Venezuela | 10.2 | 20.1 | 20.4 | |||||||||
Argentina | 16.3 | 16.7 | 18.3 | |||||||||
Mexico | 13.8 | 11.4 | 10.7 | |||||||||
Other countries | 5.7 | 5.7 | 8.0 |
Year Ended | ||||||||||||
December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
Net Revenues breakdown by businesses | ||||||||||||
As a percentage of total net revenues: | ||||||||||||
Marketplaces | 81.7 | % | 80.0 | % | 74.2 | % | ||||||
Payments | 18.3 | % | 20.0 | % | 25.8 | % |
Year ended December 31, | ||||||||||||
(% of total consolidated net revenues) | 2007 | 2008 | 2009 | |||||||||
Brazil | 59.0 | % | 53.8 | % | 53.9 | % | ||||||
Venezuela | 9.0 | 16.9 | 15.8 | |||||||||
Argentina | 14.8 | 14.5 | 15.5 | |||||||||
Mexico | 12.6 | 10.1 | 8.9 | |||||||||
Other countries | 4.6 | 4.7 | 6.0 |
42
Table of Contents
43
Table of Contents
Year ended December 31, | ||||||||||||
(in millions) | 2007 | 2008 | 2009 | |||||||||
Current: | ||||||||||||
Federal | $ | — | $ | — | $ | — | ||||||
Foreign | 5.0 | 8.1 | 11.5 | |||||||||
5.0 | 8.1 | 11.5 | ||||||||||
Deferred: | ||||||||||||
Federal | — | — | — | |||||||||
Foreign | (0.1 | ) | 1.6 | (2.5 | ) | |||||||
(0.1 | ) | 1.6 | (2.5 | ) | ||||||||
4.9 | 9.8 | 9.0 | ||||||||||
Asset Tax: | ||||||||||||
Federal | — | — | — | |||||||||
Foreign | (0.2 | ) | 0.8 | 0.5 | ||||||||
(0.2 | ) | 0.8 | 0.5 | |||||||||
Income / asset tax expense | $ | 4.7 | $ | 10.6 | $ | 9.5 | ||||||
Quarter ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
2009 | ||||||||||||||||
Net Revenues | 32,322,501 | 40,901,799 | 50,599,276 | 49,020,045 | ||||||||||||
Gross profit | 25,688,515 | 32,306,322 | 40,208,605 | 38,682,129 | ||||||||||||
Net Income | 5,391,176 | 6,679,779 | 9,852,268 | 11,285,570 | ||||||||||||
Net Income per share-basic | 0.12 | 0.15 | 0.22 | 0.26 | ||||||||||||
Net Income per share-diluted | 0.12 | 0.15 | 0.22 | 0.26 | ||||||||||||
Weighted average shares | ||||||||||||||||
Basic | 44,069,134 | 44,074,462 | 44,088,936 | 44,108,207 | ||||||||||||
Diluted | 44,130,866 | 44,127,208 | 44,138,031 | 44,143,281 | ||||||||||||
2008 | ||||||||||||||||
Net Revenues | 28,840,730 | 34,471,508 | 40,260,643 | 33,449,739 | ||||||||||||
Gross profit | 22,822,449 | 27,570,005 | 32,106,781 | 26,986,812 | ||||||||||||
Net Income | 2,067,677 | 2,947,095 | 5,875,792 | 7,921,097 | ||||||||||||
Net Income per share-basic | 0.05 | 0.07 | 0.13 | 0.18 | ||||||||||||
Net Income per share-diluted | 0.05 | 0.07 | 0.13 | 0.17 | ||||||||||||
Weighted average shares | ||||||||||||||||
Basic | 44,227,460 | 44,238,166 | 44,290,540 | 44,264,906 | ||||||||||||
Diluted | 44,368,011 | 44,369,317 | 44,379,682 | 44,369,635 | ||||||||||||
2007 | ||||||||||||||||
Net Revenues | 16,459,337 | 18,973,288 | 22,800,130 | 26,893,586 | ||||||||||||
Gross profit | 12,971,998 | 14,973,366 | 17,918,082 | 20,989,955 | ||||||||||||
Net Income / (Loss) | 994,187 | 590,886 | 2,785,474 | 5,322,393 | ||||||||||||
Net Income per share-basic | 0.02 | 0.01 | 0.07 | 0.13 | ||||||||||||
Net Income per share-diluted | 0.02 | 0.01 | 0.07 | 0.13 | ||||||||||||
Weighted average shares | ||||||||||||||||
Basic | 13,375,482 | 13,575,158 | 27,538,652 | 41,226,563 | ||||||||||||
Diluted | 13,375,482 | 13,987,128 | 27,685,028 | 41,375,907 |
44
Table of Contents
• | At the date of these financial statements, we do not have a history of having obtained dividends remittances at the official exchange rate, | ||
• | The industry in which we operate may not influence our ability to access to the official exchange rate, |
45
Table of Contents
• | The CADIVI volume of approvals of the use of the Official Rate was down 50% on a year-to-year basis measured in July 2009. | ||
• | CADIVI has not only delayed approvals but also removed many items from priority lists, further delaying approvals (current priorities appear to be food and medicine) and causing delays in the repatriation of dividends for many companies. |
46
Table of Contents
Year ended December 31, | ||||||||||||
(in millions, except percentages) | 2007 | 2008 | 2009 | |||||||||
Net revenues | $ | 85.1 | $ | 137.0 | $ | 172.8 | ||||||
Bad debt charges | 6.2 | 8.7 | 10.0 | |||||||||
Bad debt charges as a percentage of net revenues | 7.3 | % | 6.3 | % | 5.8 | % |
Year Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
Deferred tax assets | 2009 | in % | 2008 | in % | ||||||||||||
(in millions, except percentages) | (in millions, except percentages) | |||||||||||||||
2005 DeRemate.com acquisition | 5.5 | 28.4 | % | 4.8 | 30.1 | % | ||||||||||
Brazilian operations | 4.7 | 24.5 | % | 3.5 | 21.7 | % | ||||||||||
Foreign tax credits & others domestic deferred tax assets | 3.1 | 16.0 | % | 1.5 | 9.3 | % | ||||||||||
Operations in others countries | 1.1 | 6.0 | % | 0.6 | 3.8 | % | ||||||||||
2008 DeRemate.com acquisition | 1.0 | 5.5 | % | 1.8 | 11.4 | % | ||||||||||
Mexican operations | 0.9 | 4.7 | % | 1.0 | 6.1 | % | ||||||||||
Venezuelan operations | 0.9 | 4.6 | % | 1.8 | 11.1 | % | ||||||||||
Argentine operations | 2.0 | 10.2 | % | 1.0 | 6.4 | % | ||||||||||
Total | 19.2 | 100.0 | % | 16.1 | 100.0 | % | ||||||||||
47
Table of Contents
Year Ended | Year Ended | |||||||||||||||
Loss carryforwards | December 31, | December 31, | ||||||||||||||
2009 | in % | 2008 | in % | |||||||||||||
(in millions, except percentages) | (in millions, except percentages) | |||||||||||||||
2005 DeRemate.com acquisition | 5.0 | 47.1 | % | 4.6 | 43.1 | % | ||||||||||
Brazilian operations | 3.0 | 28.2 | % | 2.2 | 20.7 | % | ||||||||||
2008 DeRemate.com acquisition | 1.0 | 9.4 | % | 1.8 | 16.4 | % | ||||||||||
Mexican operations | 0.6 | 5.9 | % | 0.6 | 5.2 | % | ||||||||||
Domestic loss carry forwards | 0.1 | 0.5 | % | 1.0 | 9.2 | % | ||||||||||
Chilean operations | 0.5 | 5.2 | % | 0.5 | 4.6 | % | ||||||||||
Operations in others countries | 0.4 | 3.8 | % | 0.1 | 0.8 | % | ||||||||||
Total | 10.5 | 100 | % | 10.8 | 100 | % | ||||||||||
Year Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
Valuation Allowance | 2009 | in % | 2008 | in % | ||||||||||||
(in millions, except percentages) | (in millions, except percentages) | |||||||||||||||
2005 DeRemate.com acquisition | 4.6 | 49.9 | % | 4.8 | 41.6 | % | ||||||||||
Brazilian operations | 2.0 | 21.4 | % | 2.2 | 19.1 | % | ||||||||||
2008 DeRemate.com acquisition | 1.0 | 11.3 | % | 1.8 | 15.8 | % | ||||||||||
Operations in others countries | 1.6 | 17.4 | % | 1.2 | 10.6 | % | ||||||||||
United States | 0.0 | 0.1 | % | 1.5 | 12.9 | % | ||||||||||
Total | 9.3 | 100 | % | 11.7 | 100 | % | ||||||||||
Year ended December 31, | ||||||||||||
(in millions, except percentages) | 2007 | 2008 | 2009 | |||||||||
Income and asset tax expense | $ | (4.7 | ) | $ | (10.6 | ) | $ | (9.5 | ) | |||
As a percentage of income before income and asset tax | (32.8 | )% | (36.1 | )% | (22.3 | )% | ||||||
48
Table of Contents
Number of | ||||
restricted | ||||
Grant date | Shares | |||
September 17, 2007 | 2,000 | |||
January 24, 2008 | 600 | |||
June 9, 2008 | 1,348 | |||
June 10, 2009 | 2,305 | |||
June 10, 2009 | 8,350 |
• | Year One — Paid on or before March 31, 2009: 17% (8.5% in cash and 8.5% in common stock); | ||
• | Year Two — Paid on or before March 31, 2010: 22% (11% in cash and 11% in common stock); | ||
• | Year Three — Paid on or before March 31, 2011: 27% (13.5% in cash and 13.5% in common stock); and | ||
• | Year Four — Paid on or before March 31, 2012: 34% (17% in cash and 17% in common stock). |
49
Table of Contents
• | the eligible employee will receive a fixed cash payment equal to 6.25% of his or her 2009 LTRP bonus once a year for a period of eight years starting in 2010 (the “Annual Fixed Payment”); and | ||
• | on each date we pay the Annual Fixed Payment to an eligible employee, he or she will also receive a cash payment (the “Variable Payment”) equal to the product of (i) 6.25% of the applicable 2009 LTRP bonus and (ii) the quotient of (a) divided by (b), where (a), the numerator, equals the Applicable Year Stock Price (as defined below) and (b), the denominator, equals the 2008 Stock Price, defined as $13.81, which was the average closing price of the Company’s common stock on the NASDAQ Global Market during the final 60 trading days of 2008. The “Applicable Year Stock Price” shall equal the average closing price of the Company’s common stock on the NASDAQ Global Market during the final 60 trading days of the year preceding the applicable payment date. |
50
Table of Contents
Year Ended December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
Net revenues | $ | 85.1 | $ | 137.0 | $ | 172.8 | ||||||
Cost of net revenues | (18.3 | ) | (27.5 | ) | (36.0 | ) | ||||||
Gross profit | 66.9 | 109.5 | 136.9 | |||||||||
Operating expenses: | ||||||||||||
Product and technology development | (4.4 | ) | (7.3 | ) | (12.1 | ) | ||||||
Sales and marketing | (27.6 | ) | (40.0 | ) | (42.9 | ) | ||||||
General and administrative | (13.2 | ) | (22.8 | ) | (25.8 | ) | ||||||
Compensation cost related to acquisitions | — | (1.9 | ) | — | ||||||||
Total operating expenses | (45.2 | ) | (72.0 | ) | (80.9 | ) | ||||||
Income from operations | 21.7 | 37.5 | 56.0 | |||||||||
Other income (expenses): | ||||||||||||
Interest income and other financial gains | 1.6 | 1.8 | 2.7 | |||||||||
Interest expense and other financial charges | (2.7 | ) | (8.4 | ) | (13.4 | ) | ||||||
Foreign currency loss | (3.1 | ) | (1.5 | ) | (2.7 | ) | ||||||
Other income (expenses), net | (3.0 | ) | 0.1 | — | ||||||||
Net income before income / asset tax expense | 14.4 | 29.4 | 42.7 | |||||||||
Income / asset tax expense | (4.7 | ) | (10.6 | ) | (9.5 | ) | ||||||
Net income | $ | 9.7 | $ | 18.8 | $ | 33.2 | ||||||
Accretion of preferred stock | (0.3 | ) | — | — | ||||||||
Net income available to common shareholders | $ | 9.4 | $ | 18.8 | $ | 33.2 | ||||||
51
Table of Contents
Year Ended December 31, | ||||||||||||
(% of net revenues) | 2007 | 2008 | 2009 | |||||||||
Net revenues | 100 | % | 100 | % | 100 | % | ||||||
Cost of net revenues | (21.5 | ) | (20.1 | ) | (20.8 | ) | ||||||
Gross profit | 78.5 | 79.9 | 79.2 | |||||||||
Operating expenses: | ||||||||||||
Product and technology development | (5.1 | ) | (5.3 | ) | (7.0 | ) | ||||||
Sales and marketing | (32.4 | ) | (29.2 | ) | (24.8 | ) | ||||||
General and administrative | (15.5 | ) | (16.6 | ) | (15.0 | ) | ||||||
Compensation cost related to acquisitions | — | (1.4 | ) | — | ||||||||
Total operating expenses | (53.1 | ) | (52.5 | ) | (46.8 | ) | ||||||
Income from operations | 25.4 | 27.4 | 32.4 | |||||||||
Other income (expenses): | ||||||||||||
Interest income and other financial gains | 1.9 | 1.3 | 1.6 | |||||||||
Interest expense and other financial charges | (3.2 | ) | (6.2 | ) | (7.7 | ) | ||||||
Foreign currency loss | (3.6 | ) | (1.1 | ) | (1.5 | ) | ||||||
Other income (expenses), net | (3.5 | ) | — | — | ||||||||
Net income before income / asset tax expense | 16.9 | 21.5 | 24.7 | |||||||||
Income / asset tax expense | (5.6 | ) | (7.8 | ) | (5.5 | ) | ||||||
Net income | 11.4 | 13.7 | 19.2 | |||||||||
Accretion of preferred stock | (0.4 | ) | — | — | ||||||||
Net income available to common shareholders | 11.0 | % | 13.7 | % | 19.2 | % | ||||||
52
Table of Contents
Year Ended | Change from 2008 | |||||||||||||||
December 31, | to 2009 | |||||||||||||||
2009 | 2008 | in Dollars | in % | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
Net Revenues by Business: | ||||||||||||||||
Marketplaces | $ | 128.2 | $ | 109.6 | $ | 18.6 | 17.0 | % | ||||||||
Payments | 44.6 | 27.4 | 17.2 | 62.6 | % | |||||||||||
Total Net Revenues | $ | 172.8 | $ | 137.0 | $ | 35.8 | 26.1 | % | ||||||||
53
Table of Contents
Year Ended | Change from 2008 | |||||||||||||||
December 31, | to 2009 | |||||||||||||||
2009 | 2008 | in Dollars | in % | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
Net Revenues by Segment: | ||||||||||||||||
Brazil Marketplace | $ | 54.6 | $ | 50.5 | $ | 4.1 | 8.1 | % | ||||||||
Argentina Marketplace | 23.5 | 18.2 | 5.3 | 28.5 | % | |||||||||||
Mexico Marketplace | 13.7 | 12.5 | 1.2 | 9.8 | % | |||||||||||
Venezuela Marketplace | 26.2 | 22.0 | 4.2 | 19.3 | % | |||||||||||
Others Marketplace | 10.2 | 6.4 | 3.8 | 60.4 | % | |||||||||||
Payments | 44.6 | 27.4 | 17.2 | 62.6 | % | |||||||||||
Total Net Revenues | $ | 172.8 | $ | 137.0 | $ | 35.8 | 26.1 | % | ||||||||
Year Ended | Change from 2008 | |||||||||||||||
December 31, | to 2009 | |||||||||||||||
2009 | 2008 | in Dollars | in % | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
Net Revenues by Geography: | ||||||||||||||||
Brazil | $ | 93.1 | $ | 73.7 | $ | 19.4 | 26.3 | % | ||||||||
Venezuela | 27.3 | 23.1 | 4.2 | 18.2 | % | |||||||||||
Argentina | 26.7 | 19.9 | 6.8 | 34.6 | % | |||||||||||
México | 15.3 | 13.9 | 1.4 | 10.2 | % | |||||||||||
Other Countries | 10.4 | 6.4 | 4.0 | 60.8 | % | |||||||||||
Total Net Revenues | $ | 172.8 | $ | 137.0 | $ | 35.8 | 26.1 | % | ||||||||
54
Table of Contents
Quarter Ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
2009 | ||||||||||||||||
Net Revenues | $ | 32.3 | $ | 40.9 | $ | 50.6 | $ | 49.0 | ||||||||
Percent change from prior quarter | -3 | % | 27 | % | 24 | % | -3 | % | ||||||||
2008 | ||||||||||||||||
Net Revenues | $ | 28.8 | $ | 34.5 | $ | 40.3 | $ | 33.4 | ||||||||
Percent change from prior quarter | 7 | % | 20 | % | 17 | % | -17 | % | ||||||||
2007 | ||||||||||||||||
Net Revenues | $ | 16.5 | $ | 19.0 | $ | 22.8 | $ | 26.9 | ||||||||
Percent change from prior quarter | 6 | % | 15 | % | 20 | % | 18 | % |
Year Ended | Change from 2008 | |||||||||||||||
December 31, | to 2009 | |||||||||||||||
2009 | 2008 | in Dollars | in % | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
Total cost of net revenues | $ | 36.0 | $ | 27.5 | $ | 8.5 | 30.9 | % | ||||||||
As a percentage of net revenues | 20.8 | % | 20.1 | % |
55
Table of Contents
Year Ended | Change from 2008 | |||||||||||||||
December 31, | to 2009 | |||||||||||||||
2009 | 2008 | in Dollars | in % | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
Product and technology development | $ | 12.1 | $ | 7.3 | $ | 4.8 | 66.1 | % | ||||||||
As a percentage of net revenues | 7.0 | % | 5.3 | % |
Year Ended | Change from 2008 | |||||||||||||||
December 31, | to 2009 | |||||||||||||||
2009 | 2008 | in Dollars | in % | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
Sales and marketing | $ | 42.9 | $ | 40.0 | $ | 2.9 | 7.2 | % | ||||||||
As a percentage of net revenues | 24.8 | % | 29.2 | % |
56
Table of Contents
Year Ended | Change from 2008 | |||||||||||||||
December 31, | to 2009 | |||||||||||||||
2009 | 2008 | in Dollars | in % | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
General and administrative | $ | 25.8 | $ | 22.8 | $ | 3.1 | 13.6 | % | ||||||||
As a percentage of net revenues | 15.0 | % | 16.6 | % |
Year Ended | Change from 2008 | |||||||||||||||
December 31, | to 2009 | |||||||||||||||
2009 | 2008 | in Dollars | in % | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
Other income (expenses) | $ | -13.3 | $ | -8.1 | $ | -5.2 | 64.9 | % | ||||||||
As a percentage of net revenues | -7.7 | % | -5.9 | % |
57
Table of Contents
Year Ended | Change from 2008 | |||||||||||||||
December 31, | to 2009 | |||||||||||||||
2009 | 2008 | in Dollars | in % | |||||||||||||
Income and asset tax | 9.5 | 10.6 | (1.1 | ) | -10.6 | % | ||||||||||
As a percentage of net revenues | 5.5 | % | 7.8 | % |
Year Ended | ||||||||
December 31, | ||||||||
2009 | 2008 | |||||||
Blended tax rate | 22.3 | % | 36.1 | % | ||||
Effective tax rate | 26.9 | % | 27.7 | % |
Year Ended | Change from 2007 | |||||||||||||||
December 31, | to 2008 | |||||||||||||||
2008 | 2007 | in Dollars | in % | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
Net Revenues by Business: | ||||||||||||||||
Marketplaces | $ | 109.6 | $ | 69.5 | $ | 40.1 | 57.6 | % | ||||||||
Payments | 27.4 | 15.6 | 11.8 | 75.8 | % | |||||||||||
Total Net Revenues | $ | 137.0 | $ | 85.1 | $ | 51.9 | 61.0 | % | ||||||||
58
Table of Contents
Year Ended | Change from 2007 | |||||||||||||||
December 31, | to 2008 | |||||||||||||||
2008 | 2007 | in Dollars | in % | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
Net Revenues by Segment: | ||||||||||||||||
Brazil Marketplace | $ | 50.5 | $ | 37.6 | $ | 12.9 | 34.5 | % | ||||||||
Argentina Marketplace | 18.3 | 11.3 | 6.9 | 60.9 | % | |||||||||||
Mexico Marketplace | 12.5 | 9.6 | 2.8 | 29.6 | % | |||||||||||
Venezuela Marketplace | 22.0 | 7.1 | 14.9 | 210.1 | % | |||||||||||
Others Marketplace | 6.4 | 3.9 | 2.5 | 63.3 | % | |||||||||||
Payments | 27.4 | 15.6 | 11.8 | 75.8 | % | |||||||||||
Total Net Revenues | $ | 137.0 | $ | 85.1 | $ | 51.9 | 61.0 | % | ||||||||
Year Ended | Change from 2007 | |||||||||||||||
December 31, | to 2008 | |||||||||||||||
2008 | 2007 | in Dollars | in % | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
Net Revenues by Geography: | ||||||||||||||||
Brazil | $ | 73.7 | $ | 50.3 | $ | 23.4 | 46.6 | % | ||||||||
Venezuela | 23.1 | 7.7 | 15.4 | 201.1 | % | |||||||||||
Argentina | 19.9 | 12.6 | 7.3 | 57.9 | % | |||||||||||
México | 13.9 | 10.7 | 3.2 | 29.9 | % | |||||||||||
Other Countries | 6.4 | 3.9 | 2.5 | 65.1 | % | |||||||||||
Total Net Revenues | $ | 137.0 | $ | 85.1 | $ | 51.9 | 61.0 | % | ||||||||
Quarter Ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
2008 | ||||||||||||||||
Net Revenues | $ | 28.8 | $ | 34.5 | $ | 40.3 | $ | 33.4 | ||||||||
Percent change from prior quarter | 7 | % | 20 | % | 17 | % | -17 | % | ||||||||
2007 | ||||||||||||||||
Net Revenues | $ | 16.5 | $ | 19.0 | $ | 22.8 | $ | 26.9 | ||||||||
Percent change from prior quarter | 6 | % | 15 | % | 20 | % | 18 | % |
59
Table of Contents
Year Ended | Change from 2007 | |||||||||||||||
December 31, | to 2008 | |||||||||||||||
2008 | 2007 | in Dollars | in % | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
Total cost of net revenues | $ | 27.5 | $ | 18.3 | $ | 9.3 | 50.7 | % | ||||||||
As a percentage of net revenues | 20.1 | % | 21.5 | % |
Year Ended | Change from 2007 | |||||||||||||||
December 31, | to 2008 | |||||||||||||||
2008 | 2007 | in Dollars | in % | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
Product and technology development | $ | 7.3 | $ | 4.4 | $ | 2.9 | 67.2 | % | ||||||||
As a percentage of net revenues | 5.3 | % | 5.1 | % |
Year Ended | Change from 2007 | |||||||||||||||
December 31, | to 2008 | |||||||||||||||
2008 | 2007 | in Dollars | in % | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
Sales and marketing | $ | 40.0 | $ | 27.6 | $ | 12.4 | 44.8 | % | ||||||||
As a percentage of net revenues | 29.2 | % | 32.4 | % |
60
Table of Contents
Year Ended | Change from 2007 | |||||||||||||||
December 31, | to 2008 | |||||||||||||||
2008 | 2007 | in Dollars | in % | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
General and administrative | $ | 22.8 | $ | 13.2 | $ | 9.5 | 72.1 | % | ||||||||
As a percentage of net revenues | 16.6 | % | 15.5 | % |
Year Ended | Change from 2007 | |||||||||||||||
December 31, | to 2008 | |||||||||||||||
2008 | 2007 | in Dollars | in % | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
Other income (expenses) | $ | -8.1 | $ | -7.2 | $ | -0.9 | 11.8 | % | ||||||||
As a percentage of net revenues | -5.9 | % | -8.5 | % |
61
Table of Contents
Year Ended | Change from 2007 | |||||||||||||||
December 31, | to 2008 | |||||||||||||||
2008 | 2007 | in Dollars | in % | |||||||||||||
Income and asset tax | 10.6 | 4.7 | 5.9 | 124.9 | % | |||||||||||
As a percentage of net revenues | 7.8 | % | 5.6 | % |
Year Ended | ||||||||
December 31, | ||||||||
2008 | 2007 | |||||||
Blended tax rate | 36.1 | % | 32.8 | % | ||||
Effective tax rate | 27.7 | % | 33.2 | % |
62
Table of Contents
• | continued growth of online commerce and Internet usage in Latin America; | ||
• | our ability to expand our operations and adapt to rapidly changing technologies; | ||
• | governmental regulation in the countries where we operate, including exchange controls; | ||
• | litigation, legal liability and intellectual property rights enforcement; | ||
• | system interruptions or failures; | ||
• | our ability to attract and retain qualified personnel; | ||
• | the announcement or introduction of new sites, services and products by us or our competitors, and price competition; | ||
• | Reliance on third-party service providers; | ||
• | increasing consumer confidence in and acceptance of the Internet and other online services for commerce and, in particular, the trading of products such as those listed on our web site; | ||
• | Security breaches and consumer confidence in the security of transactions over the Internet; | ||
• | consumer trends and popularity of certain categories of items; | ||
• | our ability to attract new customers, retain existing customers and increase revenues; | ||
• | seasonal fluctuations; and | ||
• | political, social and economic conditions in Latin America, particularly Venezuela, including foreign exchange rate fluctuations. |
63
Table of Contents
Year Ended December 31, | ||||||||||||
(In millions) | 2009 | 2008(*) | 2007(*) | |||||||||
Net cash provided by operating activities | $ | 49.7 | $ | 55.8 | $ | 7.6 | ||||||
Net cash used in investing activities | (3.1 | ) | (38.9 | ) | (49.4 | ) | ||||||
Net cash (used in) provided by financing activities | (15.3 | ) | (11.7 | ) | 50.2 | |||||||
Effect of exchange rates on cash and cash equivalents | 1.0 | (3.5 | ) | 0.1 | ||||||||
Total increase in cash and cash equivalents | $ | 32.3 | $ | 1.8 | $ | 8.5 | ||||||
(*) | Certain items have been reclassified to comform with actual presentation. See Note 2 “Out of period adjustments” to our consolidated financial statements for more detail. |
Year Ended | Change from 2008 | |||||||||||||||
December 31, | to 2009 | |||||||||||||||
2009 | 2008 | in Dollars | in % | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
Net Cash provided by: | ||||||||||||||||
Operating activities | $ | 49.7 | $ | 55.8 | $ | -6.1 | -10.9 | % |
Year Ended | Change from 2007 | |||||||||||||||
December 31, | to 2008 | |||||||||||||||
2008 | 2007 | in Dollars | in % | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
Net Cash provided by: | ||||||||||||||||
Operating activities | $ | 55.8 | $ | 7.6 | $ | 48.2 | 633.2 | % |
64
Table of Contents
Year Ended | Change from 2008 | |||||||||||||||
December 31, | to 2009 | |||||||||||||||
2009 | 2008 | in Dollars | in % | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
Net Cash (used in) provided by: | ||||||||||||||||
Investment activities | $ | (3.1 | ) | $ | (38.9 | ) | $ | 35.8 | -92.1 | % |
65
Table of Contents
Year Ended | Change from 2007 | |||||||||||||||
December 31, | to 2008 | |||||||||||||||
2008 | 2007 | in Dollars | in % | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
Net Cash (used in) provided by: | ||||||||||||||||
Investment activities | $ | (38.9 | ) | $ | (49.4 | ) | $ | 10.5 | -21.3 | % |
Year Ended December 31, | Change from 2008 to 2009 | |||||||||||||||
2009 | 2008 | in Dollars | in % | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
Net Cash used in: | ||||||||||||||||
Financing activities | $ | (15.3 | ) | $ | (11.7 | ) | $ | (3.6 | ) | 31.2 | % |
Year Ended December 31, | Change from 2007 to 2008 | |||||||||||||||
2008 | 2007 | in Dollars | in % | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
Net Cash (used in) provided by: | ||||||||||||||||
Financing activities | $ | (11.7 | ) | $ | 50.2 | $ | (61.9 | ) | -123.2 | % |
66
Table of Contents
67
Table of Contents
Payment due by period | ||||||||||||||||||||
Less than | 1 to 3 | 3 to 5 | More than | |||||||||||||||||
(in millions) | Total | 1 year | Years | years | 5 years | |||||||||||||||
Operating lease obligations (1) | $ | 2.9 | $ | 1.5 | $ | 1.1 | $ | 0.3 | $ | — | ||||||||||
Purchase obligations (2) | 6.0 | 5.5 | 0.5 | — | — | |||||||||||||||
Total | $ | 8.9 | $ | 7.0 | $ | 1.6 | $ | 0.3 | $ | — | ||||||||||
(1) | Includes leases of office space. | |
(2) | On June 19, 2008, our Argentine subsidiary agreed to participate in a real estate trust, which investment represents a beneficial ownership interest in 5,340 square meters divided in five floors of an office building and 70 parking spots under construction in the City of Buenos Aires, Argentina. We expect to relocate our office headquarters to this newly acquired office space upon completion of the building, which we expect to occur in the third quarter of 2010. As of December 31, 2009, the Argentine subsidiary has invested $7.2 million in the aforementioned trust and is expected to invest an additional $2.2 million in the following 6 months. Due to the impact of inflation and/or currency fluctuations, future payments could differ from our estimates. Certain of our officers and former officers also entered into an investment in a portion of the trust, which investment represents a beneficial ownership interest in a separate floor of the same building. We do not intend to occupy the space to be owned by this group. |
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
68
Table of Contents
Year Ended December 31, | ||||||||||||
(In millions) | 2007 | 2008 | 2009 | |||||||||
Brazil | 50.3 | 73.7 | 93.1 | |||||||||
Argentina | 12.6 | 19.9 | 26.7 | |||||||||
Mexico | 10.7 | 13.9 | 15.3 | |||||||||
Venezuela | 7.7 | 23.1 | 27.3 | |||||||||
Other countries | 3.9 | 6.4 | 10.4 | |||||||||
Total | 85.1 | 137.0 | 172.8 | |||||||||
69
Table of Contents
(In millions) | -10% | Actual | +10% | |||||||||
(1) | (2) | |||||||||||
Net revenues | 191.9 | 172.8 | 157.2 | |||||||||
Expenses | (129.6 | ) | (116.8 | ) | (106.3 | ) | ||||||
Income from operations | 62.3 | 56.0 | 50.9 | |||||||||
Other income (expenses) and income tax related to P&L items | (22.2 | ) | (20.1 | ) | (18.3 | ) | ||||||
Foreign Currency impact related to the remeasument of our Net Asset position | (8.5 | ) | (2.7 | ) | 1.9 | |||||||
Net income | 31.6 | 33.2 | 34.5 | |||||||||
Total Shareholders’ Equity | 115.2 | 114.2 | 116.0 | |||||||||
(1) | Apreciation of the subsidiaries local currency against U.S. Dollar | |
(2) | Depreciation of the subsidiaries local currency agains U.S. Dollar |
70
Table of Contents
As of December 31, 2009 | ||||||||
MercadoLibre, Inc | 2009 variable | |||||||
(In US dollars) | Equity Price | LTRP liability | ||||||
Change in equity price in percentage | ||||||||
40% | 64.05 | 6,240,285 | ||||||
30% | 59.48 | 5,794,550 | ||||||
20% | 54.90 | 5,348,815 | ||||||
10% | 50.33 | 4,903,081 | ||||||
Static (*) | 45.75 | 4,457,346 | ||||||
-10% | 41.18 | 4,011,611 | ||||||
-20% | 36.60 | 3,565,877 | ||||||
-30% | 32.03 | 3,120,142 | ||||||
-40% | 27.45 | 2,674,408 |
(*) | Average closing stock price for the last 60 trading days of the closing date |
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
ITEM 9A. | CONTROLS AND PROCEDURES |
71
Table of Contents
ITEM 9B. | OTHER INFORMATION |
ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
ITEM 11. | EXECUTIVE COMPENSATION |
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS |
72
Table of Contents
Equity Compensation Plan Information | ||||||||||||
Number of securities | ||||||||||||
remaining available for | ||||||||||||
Number of securities | Weighted-average | future issuance under | ||||||||||
to be issued upon exercise | exercise price of | equity compensation plans | ||||||||||
of outstanding options, | outstanding options, | (excluding securities | ||||||||||
Plan Category | Warrants and rights | warrants and rights | reflected in column (a)) | |||||||||
(a) | (b) | (c) | ||||||||||
Equity compensation plans approved by security holders | — | — | 294,529 | |||||||||
Equity compensation plans not approved by security holders(1) | 18,889 | 2.02 | — | |||||||||
Total | 18,889 | 2.02 | 294,529 |
(1) | Our Amended and Restated 1999 Stock Option and Restricted Stock Plan was entered into prior to our IPO. |
73
Table of Contents
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE |
ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
74
Table of Contents
Page | ||||
F-1 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-7 | ||||
F-9 |
Exhibit | ||||
Number | Exhibit Title | |||
2.01 | Stock Purchase Agreement, dated August 25, 2008, by and among Hammer.com, LLC, MercadoLibre, Inc., Hispanoamerican Educational Investments BV, S.A. La Nación, DeRemate.com de Argentina S.A., DeRemate.com Chile S.A., Interactivos y Digitales México S.A. de C.V. and Compañía de Negocios Interactiva de Colombia E.U. (4) | |||
2.02 | Asset Purchase Agreement, dated August 25, 2008, by and among Hispanoamerican Educational Investments BV, S.A. La Nación, Intangible Assets LLC, Emprendimientos Veta, S.A., DeRemate.com USA, Inc., MercadoLibre, Inc. and Hammer.com, LLC. (4) | |||
3.01 | Registrant’s Amended and Restated Certificate of Incorporation. (1) | |||
3.02 | Registrant’s Amended and Restated Bylaws. (1) | |||
4.01 | Form of Specimen Certificate for Registrant’s Common Stock (5) | |||
4.02 | Second Amended and Restated Registration Rights Agreement, dated September 24, 2001, by and among the Registrant and the investors named therein. (1) | |||
10.01 | Form of Indemnity Agreement entered into by Registrant with each of its directors and executive officers. (2) | |||
10.02 | Lease Agreement, dated as of March 31, 2007, between Curtidos San Luis S.A. and MercadoLibre S.A. (2) (translated from Spanish) | |||
10.03 | Amendment Agreement, dated as of November 13, 2008, to the Lease Agreement, dated March 31, 2007, between Curtidos San Luis S.A. and MercadoLibre S.A. (5) (translated from Spanish) | |||
10.04 | Lease Agreement, dated as of April 1, 2008, between Curtidos San Luis S.A. and MercadoLibre S.A. (translated from Spanish) (5) | |||
10.05 | Lease Agreement, dated as of May 5, 2008, between Curtidos San Luis S.A. and MercadoLibre S.A. (translated from Spanish) (5) | |||
10.06 | Concession Contract, dated as February 7, 2007, between Border’s Parking S.R.L. and MercadoLibre S.A. (1) | |||
10.07 | Property Lease Agreement, dated June 28, 2005, between MercadoLivre.com Atividades de Internet Ltda. and KW Radar Construtora e Incorporadora Ltda. (1) | |||
10.08 | Property Lease Agreement, dated as of November 1, 2004, between MercadoLivre.com Atividades de Internet Ltda. and Barros e Spitaletti Empreendimentos Ltda. (1) | |||
10.09 | Property Lease Agreement, dated of April, 1, 2008, between MercadoLivre.com Atividades de Internet Ltda. And CNA Spitaletti Construtora e Incorporadora Ltda. (5) |
75
Table of Contents
Exhibit | ||||
Number | Exhibit Title | |||
10.10 | Arias Trust Contract, dated as of June 5, 2006 and amended as of May 29, 2008 (translated from Spanish) (5) | |||
10.11 | Management Incentive Bonus Plan of the Registrant. (2) | |||
10.12 | Amended and Restated 1999 Stock Option and Restricted Stock Plan (2) | |||
10.13 | Employment Agreements with Officers.(2) | |||
10.14 | Form of Restricted Stock Award for Outside directors. (3) | |||
10.15 | Employment Agreement with Osvaldo Gimenez, dated as of March 26, 2008* (5) | |||
10.16 | 2009 Equity Compensation Plan* (7) | |||
10.17 | 2008 Long-Term Retention Plan (6) | |||
10.18 | 2009 Long-Term Retention Plan (6) | |||
10.19 | Property Lease Agreement, dated February 01, 2010, between MercadoLivre.com Atividades de Internet Ltda. and Verbo Empreendimentos e Participações Ltda.* | |||
10.20 | Property Lease Agreement, dated June 28, 2005, between MercadoLivre.com Atividades de Internet Ltda. and KW Radar Construtora e Incorporadora Ltda.* | |||
10.21 | Amendment Agreement, dated October 30, 2009, between MercadoLivre.com Atividades de Internet Ltda. and KW Radar Construtora e Incorporadora Ltda.* | |||
10.22 | Property Lease Agreement, dated as of November 1, 2004, between MercadoLivre.com Atividades de Internet Ltda. and Barros e Spitaletti Empreendimentos Ltda.* | |||
10.23 | Amendment Agreement, dated October 30, 2009, between MercadoLivre.com Atividades de Internet Ltda. and KW Radar Construtora e Incorporadora Ltda.* | |||
10.24 | Property Lease Agreement, dated of April, 1, 2008, between MercadoLivre.com Atividades de Internet Ltda. and CNA Spitaletti Construtora e Incorporadora Ltda.* | |||
10.25 | Amendment Agreement, dated October 30, 2009, between MercadoLivre.com Atividades de Internet Ltda. and CNA Spitaletti Construtora e Incorporadora Ltda.* | |||
10.26 | Property Lease Amendment, dated May 5, 2008, between MercadoLibre Venezuela S.A. and G4 Grupo 4 Inmobiliaria Internacional Industrial Comercial, C.A.* | |||
21.01 | List of Subsidiaries* | |||
23.01 | Consent of Price Watherhouse & Co. S.R.L., Independent Registered Public Accounting Firm* | |||
31.01 | CEO Certification pursuant to Securities Exchange Act Rule 13a-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | |||
31.02 | CFO Certification pursuant to Securities Exchange Act Rule 13a-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | |||
32.01 | CEO Certification required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** | |||
32.02 | CFO Certification required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** |
* | Filed Herewith |
76
Table of Contents
** | Furnished Herewith | |
(1) | Incorporated by reference to the Registration Statement on Form S-1 of MercadoLibre, Inc. filed on May 11, 2007; | |
(2) | Incorporate by reference to Amendment No. 1 to the Registration Statement on Form S-1 of MercadoLibre, Inc. filed on July 13, 2007. | |
(3) | Incorporated by reference to the Registration Statement on Form S-1 of MercadoLibre, Inc. filed on January 25, 2008 | |
(4) | Incorporated by reference to the Current Report on Form 8-K filed on August 26, 2008. | |
(5) | Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 2008 filed on February 27, 2009 | |
(6) | Incorporated by reference to the Current Report on Form 8-K filed on July 21, 2009 | |
(7) | Incorporated by reference to the Registration Statement on Form S-8 filed on June 11, 2009 |
77
Table of Contents
MERCADOLIBRE, INC. | ||||||
By: | /s/ Marcos Galperín | |||||
Chief Executive Officer | ||||||
Date: February 26, 2010 |
78
Table of Contents
Signature | Title | Date | ||
/s/ Marcos Galperín | Chief Executive Officer and Director (Principal Executive Officer) | February 26, 2010 | ||
/s/ Hernán Kazah | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | February 26, 2010 | ||
/s/ Mario Vazquez | Director | February 26, 2010 | ||
/s/ Anton Levy | Director | February 26, 2010 | ||
/s/ Michael Spence | Director | February 26, 2010 | ||
/s/ Verónica Allende Serra | Director | February 26, 2010 | ||
/s/ Nicolás Galperín | Director | February 26, 2010 | ||
/s/ Emiliano Calemzuk | Director | February 26, 2010 | ||
/s/ Martin de los Santos | Director | February 26, 2010 |
79
Table of Contents
as of December 31, 2009 and 2008
and for the three years in the period
ended December 31, 2009
Table of Contents
Shareholders of MercadoLibre, Inc.
F-1
Table of Contents
By | (Partner) |
February 26, 2010
F-2
Table of Contents
As of December 31, 2009 and 2008
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 49,803,402 | $ | 17,474,112 | ||||
Short-term investments | 14,580,185 | 31,639,400 | ||||||
Accounts receivable, net | 4,868,377 | 3,856,392 | ||||||
Funds receivable from customers | 3,785,802 | 2,322,416 | ||||||
Prepaid expenses | 547,138 | 426,869 | ||||||
Deferred tax assets | 5,481,182 | 1,628,871 | ||||||
Other assets | 3,068,930 | 2,953,164 | ||||||
Total current assets | 82,135,016 | 60,301,224 | ||||||
Non-current assets: | ||||||||
Long-term investments | 26,627,357 | 9,218,153 | ||||||
Property and equipment, net | 5,948,276 | 5,940,160 | ||||||
Goodwill and intangible assets, net | 64,338,564 | 72,911,546 | ||||||
Deferred tax assets | 2,897,492 | 14,270 | ||||||
Other assets | 667,944 | 8,353,396 | ||||||
Total non-current assets | 100,479,633 | 96,437,525 | ||||||
Total assets | $ | 182,614,649 | $ | 156,738,749 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 11,583,053 | $ | 16,941,173 | ||||
Funds payable to customers | 31,453,410 | 14,727,891 | ||||||
Social security payable | 7,428,340 | 4,387,943 | ||||||
Taxes payable | 6,797,516 | 4,989,704 | ||||||
Loans payable and other financial liabilities | 3,213,992 | 14,963,421 | ||||||
Provisions | 16,581 | 299,753 | ||||||
Total current liabilities | 60,492,892 | 56,309,885 | ||||||
Non-current liabilities: | ||||||||
Social security payable | 1,355,006 | 339,854 | ||||||
Loans payable | — | 3,050,061 | ||||||
Deferred tax liabilities | 5,170,799 | 2,556,120 | ||||||
Other liabilities | 1,402,715 | 1,058,848 | ||||||
Total non-current liabilities | 7,928,520 | 7,004,883 | ||||||
Total liabilities | $ | 68,421,412 | $ | 63,314,768 | ||||
Commitments and contingencies (Note 16) | ||||||||
Shareholders’ equity: | ||||||||
Common stock, $0.001 par value, 110,000,000 shares authorized, 44,120,269 and 44,070,367 shares issued and outstanding at December 31, 2009 and December 31, 2008, respectively | $ | 44,120 | $ | 44,071 | ||||
Additional paid-in capital | 120,257,998 | 119,807,007 | ||||||
Retained earnings / (Accumulated deficit) | 17,656,537 | (15,552,256 | ) | |||||
Accumulated other comprehensive loss | (23,765,418 | ) | (10,874,841 | ) | ||||
Total shareholders’ equity | 114,193,237 | 93,423,981 | ||||||
Total liabilities and shareholders’ equity | $ | 182,614,649 | $ | 156,738,749 | ||||
F-3
Table of Contents
For the three years ended December 31, 2009
Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Net revenues | $ | 172,843,621 | $ | 137,022,620 | $ | 85,126,341 | ||||||
Cost of net revenues | (35,958,050 | ) | (27,536,573 | ) | (18,272,940 | ) | ||||||
Gross profit | 136,885,571 | 109,486,047 | 66,853,401 | |||||||||
Operating expenses: | ||||||||||||
Product and technology development | (12,140,521 | ) | (7,307,008 | ) | (4,369,376 | ) | ||||||
Sales and marketing | (42,861,735 | ) | (39,975,307 | ) | (27,598,683 | ) | ||||||
General and administrative | (25,849,596 | ) | (22,759,931 | ) | (13,223,522 | ) | ||||||
Compensation cost related to acquisitions (Note 6) | — | (1,919,870 | ) | — | ||||||||
Total operating expenses | (80,851,852 | ) | (71,962,116 | ) | (45,191,581 | ) | ||||||
Income from operations | 56,033,719 | 37,523,931 | 21,661,820 | |||||||||
Other income (expenses): | ||||||||||||
Interest income and other financial gains | 2,695,109 | 1,822,385 | 1,609,403 | |||||||||
Interest expense and other financial charges | (13,357,554 | ) | (8,442,427 | ) | (2,737,901 | ) | ||||||
Foreign currency loss | (2,658,476 | ) | (1,531,144 | ) | (3,106,515 | ) | ||||||
Other income (expenses), net | — | 73,159 | (3,006,416 | ) | ||||||||
Net income before income / asset tax expense | 42,712,798 | 29,445,904 | 14,420,391 | |||||||||
Income / asset tax expense | (9,504,005 | ) | (10,634,243 | ) | (4,727,451 | ) | ||||||
Net income | $ | 33,208,793 | $ | 18,811,661 | $ | 9,692,940 | ||||||
Accretion of preferred stock | — | — | (309,299 | ) | ||||||||
Net income available to common shareholders | $ | 33,208,793 | $ | 18,811,661 | $ | 9,383,641 | ||||||
Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Basic EPS | ||||||||||||
Basic net income per common share | $ | 0.75 | $ | 0.43 | $ | 0.22 | ||||||
Weighted average shares | 44,086,892 | 44,239,443 | 25,149,405 | |||||||||
Diluted EPS | ||||||||||||
Diluted net income per common share | $ | 0.75 | $ | 0.42 | $ | 0.22 | ||||||
Weighted average shares | 44,144,368 | 44,348,950 | 25,478,336 | |||||||||
F-4
Table of Contents
For the three years ended December 31, 2009
Accumulated | ||||||||||||||||||||||||||||||||||||
Additional | Preferred | other | ||||||||||||||||||||||||||||||||||
Comprehensive | Common stock | paid-in | Treasury | stock | Accumulated | comprehensive | ||||||||||||||||||||||||||||||
income | Shares | Amount | capital | Stock | warrants | deficit | income (loss) | Total | ||||||||||||||||||||||||||||
Balance as of December 31, 2006 | 13,166,982 | $ | 131,670 | $ | 2,694,404 | $ | — | $ | — | $ | (44,054,817 | ) | $ | 500,536 | $ | (40,728,207 | ) | |||||||||||||||||||
Shares issued in 2000 and 2001 (1) | 204,000 | 2,040 | — | — | — | (2,040 | ) | — | — | |||||||||||||||||||||||||||
Stock options exercised | 483,470 | 4,835 | 33,742 | — | — | — | — | 38,577 | ||||||||||||||||||||||||||||
Stock-based compensation — stock options | — | — | 15,477 | — | — | — | — | 15,477 | ||||||||||||||||||||||||||||
Stock-based compensation — restricted shares | — | — | 15,966 | — | — | — | — | 15,966 | ||||||||||||||||||||||||||||
Accretion of mandatorily redeemable convertible preferred stock | — | — | (309,299 | ) | — | — | — | — | (309,299 | ) | ||||||||||||||||||||||||||
Change in par value of common stock | — | (124,690 | ) | 124,690 | — | — | — | — | — | |||||||||||||||||||||||||||
Issuance of common stock | 3,000,000 | 3,000 | 49,570,239 | — | — | — | — | 49,573,239 | ||||||||||||||||||||||||||||
Conversion of mandatorily redeemable convertible preferred stock into common stock preferred stock | 27,187,838 | 27,188 | 64,358,656 | — | — | — | — | 64,385,844 | ||||||||||||||||||||||||||||
Reclassification of warrants | — | — | — | — | 4,636,456 | — | — | 4,636,456 | ||||||||||||||||||||||||||||
Exercise of warrants | 184,273 | 184 | 5,386,263 | — | (4,636,456 | ) | — | — | 749,991 | |||||||||||||||||||||||||||
Net income | 9,692,940 | — | — | — | — | — | 9,692,940 | — | 9,692,940 | |||||||||||||||||||||||||||
Currency translation adjustment | 3,755,601 | — | — | — | — | — | — | 3,755,601 | 3,755,601 | |||||||||||||||||||||||||||
Unrealized net gains on investments | 153,876 | — | — | — | — | — | — | 153,876 | 153,876 | |||||||||||||||||||||||||||
Realized net gain on investments | (307,322 | ) | — | — | — | — | — | — | (307,322 | ) | (307,322 | ) | ||||||||||||||||||||||||
Comprehensive income | 13,295,095 | |||||||||||||||||||||||||||||||||||
Balance as of December 31, 2007 | 44,226,563 | $ | 44,227 | $ | 121,890,138 | $ | — | $ | — | $ | (34,363,917 | ) | $ | 4,102,691 | $ | 91,673,139 | ||||||||||||||||||||
Stock options exercised and restricted shares issued | 93,504 | 94 | 82,995 | — | — | — | — | 83,089 | ||||||||||||||||||||||||||||
Stock-based compensation — stock options | — | — | 4,719 | — | — | — | — | 4,719 | ||||||||||||||||||||||||||||
Stock-based compensation — restricted shares | — | — | 105,560 | — | — | — | — | 105,560 | ||||||||||||||||||||||||||||
Stock -based compensation — long term retention plan (“LTRP”) | — | — | 321,568 | — | — | — | — | 321,568 | ||||||||||||||||||||||||||||
Repurchase of Treasury Stock | — | — | — | (2,598,223 | ) | — | — | — | (2,598,223 | ) | ||||||||||||||||||||||||||
Retirement of Treasury Stock | (249,700 | ) | (250 | ) | (2,597,973 | ) | 2,598,223 | — | — | — | — | |||||||||||||||||||||||||
Net income | 18,811,661 | — | — | — | — | — | 18,811,661 | — | 18,811,661 | |||||||||||||||||||||||||||
Currency translation adjustment | (14,923,284 | ) | — | — | — | — | — | — | (14,923,284 | ) | (14,923,284 | ) | ||||||||||||||||||||||||
Unrealized net gains on investments | 3,642 | — | — | — | — | — | — | 3,642 | 3,642 | |||||||||||||||||||||||||||
Realized net gains on investments | (57,890 | ) | — | — | — | — | — | — | (57,890 | ) | (57,890 | ) | ||||||||||||||||||||||||
Comprehensive income | 3,834,129 | |||||||||||||||||||||||||||||||||||
Balance as of December 31, 2008 | 44,070,367 | $ | 44,071 | $ | 119,807,007 | $ | — | $ | — | $ | (15,552,256 | ) | $ | (10,874,841 | ) | $ | 93,423,981 | |||||||||||||||||||
(1) | These shares were issued in 2000 and 2001, but were not recorded until 2007. The amounts are immaterial to revise prior years financial statements. |
F-5
Table of Contents
Consolidated Statements of Changes in Shareholders’ Equity (Deficit)
For the three years ended December 31, 2009
Accumulated | Accumulated | |||||||||||||||||||||||||||||||||||
Additional | Preferred | deficit / | other | |||||||||||||||||||||||||||||||||
Comprehensive | Common stock | paid-in | Treasury | stock | Retained | comprehensive | ||||||||||||||||||||||||||||||
income | Shares | Amount | capital | Stock | warrants | Earnings | income (loss) | Total | ||||||||||||||||||||||||||||
Balance as of December 31, 2008 | 44,070,367 | 44,071 | $ | 119,807,007 | $ | — | $ | — | $ | (15,552,256 | ) | $ | (10,874,841 | ) | $ | 93,423,981 | ||||||||||||||||||||
Stock options exercised | 35,031 | 35 | 28,319 | — | — | — | — | 28,354 | ||||||||||||||||||||||||||||
Stock-based compensation — stock options | — | — | 1,752 | — | — | — | — | 1,752 | ||||||||||||||||||||||||||||
Stock-based compensation — restricted shares | — | — | 74,382 | — | — | — | — | 74,382 | ||||||||||||||||||||||||||||
Stock-based compensation LTRP | — | — | 175,453 | — | — | — | — | 175,453 | ||||||||||||||||||||||||||||
Restricted shares issued | 10,655 | 10 | 171,089 | — | — | — | — | 171,099 | ||||||||||||||||||||||||||||
LTRP shares issued | 3,600 | 3 | (3 | ) | — | — | — | — | — | |||||||||||||||||||||||||||
Shares issued | 616 | 1 | (1 | ) | — | — | — | — | ||||||||||||||||||||||||||||
Net income | $ | 33,208,793 | — | — | — | — | — | 33,208,793 | — | 33,208,793 | ||||||||||||||||||||||||||
Currency translation adjustment | $ | (12,914,565 | ) | — | — | — | — | — | — | (12,914,565 | ) | (12,914,565 | ) | |||||||||||||||||||||||
Unrealized net gains on investments | $ | 27,630 | — | — | — | — | — | — | 27,630 | 27,630 | ||||||||||||||||||||||||||
Realized net gains on investments | $ | (3,642 | ) | — | — | — | — | — | (3,642 | ) | (3,642 | ) | ||||||||||||||||||||||||
Comprehensive income | $ | 20,318,216 | ||||||||||||||||||||||||||||||||||
Balance as of December 31, 2009 | 44,120,269 | $ | 44,120 | $ | 120,257,998 | $ | — | $ | — | $ | 17,656,537 | $ | (23,765,418 | ) | $ | 114,193,237 | ||||||||||||||||||||
F-6
Table of Contents
For the three years ended December 31, 2009
Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Cash flows from operations: | ||||||||||||
Net income | $ | 33,208,793 | $ | 18,811,661 | $ | 9,692,940 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 3,893,752 | 3,335,673 | 2,307,649 | |||||||||
Foreign currency gains | — | (7,827,112 | ) | — | ||||||||
Interest expense | 213,878 | 300,368 | — | |||||||||
Stock-based compensation expense — stock options | 1,752 | 4,719 | 15,477 | |||||||||
Stock-based compensation expense — restricted shares | 74,382 | 105,560 | 15,966 | |||||||||
LTRP accrued compensation | 1,924,149 | 839,303 | — | |||||||||
Change in fair value of warrants | — | — | 3,045,992 | |||||||||
Deferred income taxes | (3,607,292 | ) | (2,151,858 | ) | (198,368 | ) | ||||||
Changes in assets and liabilities, excluding the effect of acquisitions: | ||||||||||||
Accounts receivable | (2,974,890 | ) | 4,026,218 | (736,431 | ) | |||||||
Funds receivable from customers | (942,407 | ) | 26,573,209 | (15,517,486 | ) | |||||||
Prepaid expenses | (287,836 | ) | (153,582 | ) | 56,399 | |||||||
Other assets | (2,591,353 | ) | (1,415,575 | ) | (967,264 | ) | ||||||
Accounts payable and accrued expenses | 8,686,334 | 10,610,141 | 4,282,955 | |||||||||
Funds payable to customers | 12,421,412 | 2,294,847 | 5,423,976 | |||||||||
Provisions | 302,987 | (1,277,664 | ) | (274,101 | ) | |||||||
Other liabilities | (713,014 | ) | 1,645,976 | 689,154 | ||||||||
Accrued interest | 90,339 | 57,293 | (228,877 | ) | ||||||||
Net cash provided by operating activities | 49,700,986 | 55,779,177 | 7,607,981 | |||||||||
Cash flows from investing activities: | ||||||||||||
Purchase of investments | (80,060,909 | ) | (110,056,368 | ) | (75,267,070 | ) | ||||||
Proceeds from sale and maturity of investments | 81,728,485 | 115,342,531 | 28,920,382 | |||||||||
Payment for businesses acquired, net of cash acquired | — | (39,181,473 | ) | — | ||||||||
Purchases of intangible assets | (955,679 | ) | (58,238 | ) | (28,748 | ) | ||||||
Purchases of property and equipment | (3,798,170 | ) | (4,904,991 | ) | (3,058,813 | ) | ||||||
Net cash (used in) provided by investing activities | (3,086,273 | ) | (38,858,539 | ) | (49,434,249 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Increase in short term debt | — | — | 8,883,104 | |||||||||
Decrease in short term debt | (310,634 | ) | (9,137,223 | ) | — | |||||||
Loans paid | (15,000,000 | ) | — | (9,000,000 | ) | |||||||
Repurchase of Treasury Stock | — | (2,598,223 | ) | — | ||||||||
Stock options exercised | 28,354 | 83,089 | 38,576 | |||||||||
Exercise of warrants | — | — | 749,991 | |||||||||
Issuance of common stock | — | — | 49,573,239 | |||||||||
Net cash (used in) provided by financing activities | (15,282,280 | ) | (11,652,357 | ) | 50,244,910 | |||||||
Effect of exchange rate changes on cash and cash equivalents | 996,857 | (3,471,576 | ) | 115,738 | ||||||||
Net increase in cash and cash equivalents | 32,329,290 | 1,796,705 | 8,534,380 | |||||||||
Cash and cash equivalents, beginning of the year | 17,474,112 | 15,677,407 | 7,143,027 | |||||||||
Cash and cash equivalents, end of the year | $ | 49,803,402 | $ | 17,474,112 | $ | 15,677,407 | ||||||
F-7
Table of Contents
Consolidated Statements of Cash Flows
For the three years ended December 31, 2009
Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Supplemental cash flow information: | ||||||||||||
Cash paid for interest | $ | 12,332,592 | $ | 7,138,402 | $ | 1,572,909 | ||||||
Cash paid for income taxes | $ | 11,650,007 | 7,921,206 | 3,864,908 | ||||||||
Non-cash financing activities: | ||||||||||||
Accretion of preferred stock | $ | — | $ | — | $ | 309,299 | ||||||
Conversion of mandatorily redeemable convertible preferred stock into common stock | $ | — | $ | — | $ | 64,385,844 | ||||||
Reclassifications of warrants | $ | — | $ | — | $ | 4,636,456 | ||||||
Acquisition of DeRemate and Classified Media Group: | ||||||||||||
Cash and cash equivalents | $ | — | $ | 691,632 | $ | — | ||||||
Funds receivable from customers | — | 117,473 | — | |||||||||
Accounts receivable | — | 6,569,098 | — | |||||||||
Tax credits | — | 604,419 | — | |||||||||
Other current assets | — | 918,856 | — | |||||||||
Non current assets | — | 504,927 | — | |||||||||
Total assets acquired | — | 9,406,405 | — | |||||||||
Accounts payable and accrued expenses | — | 4,578,830 | — | |||||||||
Funds payable to customers | — | 146,191 | — | |||||||||
Taxes payable | — | 1,204,479 | — | |||||||||
Social security payable | — | 395,112 | — | |||||||||
Other liabilities | — | 1,590,371 | — | |||||||||
Non current liabilities | — | 14,000 | — | |||||||||
Provisions | — | 1,548,391 | — | |||||||||
Total liabilities assumed | — | 9,477,374 | — | |||||||||
Net assets acquired | — | (70,969 | ) | — | ||||||||
Goodwill | — | 52,638,036 | — | |||||||||
Trademarks | — | 5,622,188 | — | |||||||||
Customer lists | — | 1,227,600 | — | |||||||||
Non Compete Agreement | — | 573,484 | — | |||||||||
Deferred income tax on intangible assets | — | (2,598,145 | ) | — | ||||||||
Total purchase price | — | 57,392,194 | — | |||||||||
Cash and cash equivalents acquired | — | (691,632 | ) | — | ||||||||
Payment for businesses acquired, net of cash acquired | $ | — | $ | 39,181,473 | $ | — | ||||||
Seller financing for DeRemate business acquisition (1) | $ | — | $ | 17,519,088 | $ | — | ||||||
(1) | The Seller financing for DeRemate business acquisition is presented net of working capital adjustment (See note 6 for more details) |
F-8
Table of Contents
F-9
Table of Contents
Notes to Consolidated Financial Statements
1. | Nature of Business (Continued) |
F-10
Table of Contents
Notes to Consolidated Financial Statements
F-11
Table of Contents
Notes to Consolidated Financial Statements
F-12
Table of Contents
Notes to Consolidated Financial Statements
F-13
Table of Contents
Notes to Consolidated Financial Statements
F-14
Table of Contents
Notes to Consolidated Financial Statements
F-15
Table of Contents
Notes to Consolidated Financial Statements
F-16
Table of Contents
Notes to Consolidated Financial Statements
F-17
Table of Contents
Notes to Consolidated Financial Statements
F-18
Table of Contents
Notes to Consolidated Financial Statements
F-19
Table of Contents
Notes to Consolidated Financial Statements
F-20
Table of Contents
Notes to Consolidated Financial Statements
Year Ended December 31, | ||||||||||||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||||||||||
Basic | Diluted | Basic | Diluted | Basic | Diluted | |||||||||||||||||||
Net income | $ | 33,208,793 | $ | 33,208,793 | $ | 18,811,661 | $ | 18,811,661 | $ | 9,692,940 | $ | 9,692,940 | ||||||||||||
Accretion of preferred stock | — | — | — | — | (309,299 | ) | (309,299 | ) | ||||||||||||||||
Net income available to common shareholders | $ | 33,208,793 | $ | 33,208,793 | $ | 18,811,661 | $ | 18,811,661 | $ | 9,383,641 | $ | 9,383,641 | ||||||||||||
Net income available to common shareholders attributable to unvested restricted shares preferred stock | 3,515 | 3,515 | — | — | (3,772,510 | ) | (3,734,758 | ) | ||||||||||||||||
Net income available to common shareholders attributable to common stock | $ | 33,205,278 | $ | 33,205,278 | $ | 18,811,661 | $ | 18,811,661 | $ | 5,611,131 | $ | 5,648,883 | ||||||||||||
F-21
Table of Contents
Notes to Consolidated Financial Statements
Year Ended December 31, | ||||||||||||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||||||||||
Basic | Diluted | Basic | Diluted | Basic | Diluted | |||||||||||||||||||
Net income available to common shareholders per common share | $ | 0.75 | $ | 0.75 | $ | 0.43 | $ | 0.42 | $ | 0.22 | $ | 0.22 | ||||||||||||
Numerator: | ||||||||||||||||||||||||
Net income available to common shareholders | $ | 33,205,278 | $ | 33,205,278 | $ | 18,811,661 | $ | 18,811,661 | $ | 5,611,131 | $ | 5,648,883 | ||||||||||||
Denominator: | ||||||||||||||||||||||||
Weighted average of common stock outstanding for Basic earnings per share | 44,086,892 | 44,086,892 | 44,239,443 | 44,239,443 | 25,149,405 | 25,149,405 | ||||||||||||||||||
Adjustment for stock options | — | 46,413 | — | 98,507 | — | 328,931 | ||||||||||||||||||
Adjustment for restricted shares | — | — | — | 498 | — | — | ||||||||||||||||||
Adjustment for additional Shares | — | 3,366 | — | 10,502 | — | — | ||||||||||||||||||
Adjustment for shares granted under LTRP | — | 7,697 | — | — | — | — | ||||||||||||||||||
Adjusted weighted average of common stock outstanding for Diluted earnings per share | 44,086,892 | 44,144,368 | 44,239,443 | 44,348,950 | 25,149,405 | 25,478,336 | ||||||||||||||||||
Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Anti-dilutive shares | ||||||||||||
Warrants | — | — | 114,603 | |||||||||
Restricted shares | — | 3,082 | 3,895 | |||||||||
Shares granted under LTRP | — | 21,591 | — | |||||||||
— | 24,673 | 118,498 | ||||||||||
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
Short-term investments | ||||||||
Time Deposits | $ | 6,332,738 | $ | 21,365,613 | ||||
Money Market Funds | — | 2,408,294 | ||||||
Sovereign Debt Securities | — | 1,530,034 | ||||||
Corporate Debt Securities | 8,247,447 | 6,335,459 | ||||||
Total | $ | 14,580,185 | $ | 31,639,400 | ||||
Long-term investments | ||||||||
Arias Trust (1) | $ | 7,169,425 | $ | 3,287,823 | ||||
Time Deposits | 19,191,406 | 2,559,465 | ||||||
Corporate Debt Securities | 266,526 | 3,370,865 | ||||||
Total | $ | 26,627,357 | $ | 9,218,153 | ||||
(1) | As this investment represents an undivided interest for more than 20% of the total amount of the real estate trust, it is accounted for under the equity method and it is classified as Long-Term Investments in the balance sheet (See note 16 — Other Commitments). |
F-22
Table of Contents
Notes to Consolidated Financial Statements
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
Accounts receivable, net: | ||||||||
Users | $ | 4,711,641 | $ | 9,664,598 | ||||
Credit cards and other means of payments | 1,882,430 | 1,471,203 | ||||||
Advertising | 1,852,786 | 1,203,710 | ||||||
Others debtors | 119,527 | 27,008 | ||||||
8,566,384 | 12,366,519 | |||||||
Allowance for doubtful accounts | (3,698,007 | ) | (8,510,127 | ) | ||||
$ | 4,868,377 | $ | 3,856,392 | |||||
F-23
Table of Contents
Notes to Consolidated Financial Statements
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
Funds receivable from customers | ||||||||
Credit cards and other means of payments | $ | 3,873,351 | $ | 2,489,436 | ||||
Allowance for chargebacks | $ | (87,549 | ) | (167,020 | ) | |||
$ | 3,785,802 | $ | 2,322,416 | |||||
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
Other current assets: | ||||||||
VAT credits | $ | 447,998 | $ | 681,660 | ||||
Restricted assets | — | 358,900 | ||||||
Other taxes | 1,705,650 | 931,348 | ||||||
Other | 915,282 | 981,256 | ||||||
$ | 3,068,930 | $ | 2,953,164 | |||||
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
Other non current assets: | ||||||||
Foreign currency effect on assets (1) | $ | — | $ | 7,827,112 | ||||
Other | 667,944 | 526,284 | ||||||
$ | 667,944 | $ | 8,353,396 | |||||
(1) | As of December 31, 2008, the Venezuelan subsidiaries maintained a foreign currency denominated asset in the form of US dollar denominated cash and cash equivalents. In accordance with the Company’s stated accounting policy, this investment should first be re-measured into its functional currency “Bolivares Fuertes”. Upon re-measurement into its functional currency, the investment will then be translated into the reporting currency of the Company (US Dollar). As of the December 31, 2008, the asset was re-measured at a parallel exchange rate of 5.4 “Bolivares Fuertes” per US dollar. Further, the Venezuelan subsidiaries assets, liabilities, income and expense accounts were translated at the rate applicable for dividend remittances, which as of December 31, 2008 is the official rate of 2.15 “Bolivares Fuertes” per US dollar. Accordingly, as of December 31, 2008, the asset was the result of applying the Company’s accounting policy for the related asset. As explained in Note 2, starting in the fourth quarter of 2009, the Venezuelan subsidiaries assets, liabilities, income and expenses accounts have been translated using the parallel exchange rate and, as such, this asset no longer exists. |
F-24
Table of Contents
Notes to Consolidated Financial Statements
Estimated | ||||||||||||
useful life | December 31, | December 31, | ||||||||||
(years) | 2009 | 2008 | ||||||||||
Property and equipment, net: | ||||||||||||
Equipment | 3-5 | $ | 8,958,580 | $ | 10,636,641 | |||||||
Furniture and fixtures | 3-5 | 2,847,345 | 2,413,000 | |||||||||
Software | 3 | 2,424,533 | 1,693,951 | |||||||||
14,230,458 | 14,743,592 | |||||||||||
Accumulated depreciation | (8,282,182 | ) | (8,803,432 | ) | ||||||||
$ | 5,948,276 | $ | 5,940,160 | |||||||||
Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Depreciation and amortization: | ||||||||||||
Cost of net revenues | $ | 308,260 | $ | 333,029 | $ | 103,772 | ||||||
Product and technology development | 2,552,921 | 2,205,369 | 1,854,345 | |||||||||
Sales and marketing | 38,567 | 154,130 | 22,772 | |||||||||
General and administrative | 994,004 | 643,145 | 326,760 | |||||||||
$ | 3,893,752 | $ | 3,335,673 | $ | 2,307,649 | |||||||
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
Accounts payable and accrued expenses: | ||||||||
Accounts payable | $ | 7,230,325 | $ | 7,980,983 | ||||
Accrued expenses | ||||||||
Advertising | 2,594,322 | 2,205,954 | ||||||
Professional fees | 586,945 | 807,577 | ||||||
Other expense provisions (1) | 1,168,371 | 5,941,831 | ||||||
Other current liabilities | 3,090 | 4,828 | ||||||
$ | 11,583,053 | $ | 16,941,173 | |||||
(1) | As of December 31, 2008, includes $ 4,204,441 related to the re-measuarement of the Venezuelan subsidiaries denominated in US dollars. See footnote (1) in Other non current assets for more detail. |
F-25
Table of Contents
Notes to Consolidated Financial Statements
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
Loans payable and other financial liabilities: | ||||||||
Loans related to DR operations acquisition (1) | $ | 3,213,878 | $ | 14,769,395 | ||||
Written Put Options | — | 185,000 | ||||||
Other Loans | 114 | 9,026 | ||||||
$ | 3,213,992 | $ | 14,963,421 | |||||
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
Non current loans payable: | $ | — | $ | 3,050,061 | ||||
Loans related to DR operations acquisition (1) | $ | — | $ | 3,050,061 | ||||
(1) | Due to the acquisition of DeRemate, on September 5, 2008, the Company issued to the Sellers ten (10) unsecured promissory notes having an aggregate principal amount of $18,000,000. According to the modification of terms dated February 12, 2009, these promissory notes mature as follows: (i) 3,000,000 on June 5, 2009 (ii) 9,000,000 on September 5, 2009, (iii) 3,000,000 on December 5, 2009 and, (iv) 3,000,000 on March 5, 2010. The promissory notes bear interest at 3.17875% plus 1.5% for the first four months, 2.0% for the second four months and 2.5% for the remaining period up to its maturity and can be prepaid by the Company without penalty. As of December 31, 2009, the outstanding seller financing includes accrued interest for $213,878. As of December 31, 2008, the figures shown above include accrued interest of $250,306 and $50,061 related to the current and non-current related liabilities, respectively. As of December 31, 2008, the Seller financing for the DeRemate acquisition is presented net of working capital adjustment (See note 6 for more detail). |
December 31, | December 31, | December 31, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
Accumulated other comprehensive income: | ||||||||||||
Foreign currency translation | $ | (23,793,048 | ) | $ | (10,878,483 | ) | $ | 4,044,801 | ||||
Unrealized gains on investments | 41,466 | 5,603 | 89,061 | |||||||||
Estimated tax loss on unrealized gains on investments | (13,836 | ) | (1,961 | ) | (31,171 | ) | ||||||
$ | (23,765,418 | ) | $ | (10,874,841 | ) | $ | 4,102,691 | |||||
F-26
Table of Contents
Notes to Consolidated Financial Statements
F-27
Table of Contents
Notes to Consolidated Financial Statements
Purchase Price | $ | 17,024,380 | ||
Post-closing working capital adjustments | 150,000 | |||
Direct cost of the business combination | 204,424 | |||
Total aggregate purchase price | $ | 17,378,804 | ||
Compensation Cost | 1,919,870 | |||
Total Cash paid | $ | 19,298,674 | ||
Post | Net Tangible | Identifiable | Deferred | Aggregate | ||||||||||||||||||||||
Acquisition | Assets / | Intangible | Tax | Purchase | ||||||||||||||||||||||
Company Name | Country | Ownership | (Liabilities) | Assets | Liabilities | Goodwill | Price | |||||||||||||||||||
CMG Classified Media Group Inc. | Panama | 100 | % | $ | 846.3 | $ | — | $ | — | $ | — | $ | 846.3 | |||||||||||||
Venecapital Group Inc. | Panama | 100 | % | (26.8 | ) | — | — | — | (26.8 | ) | ||||||||||||||||
Grupo Veneclasificados C.A. | Venezuela | 100 | % | (125.4 | ) | 4,934.2 | (1,727.0 | ) | 11,442.0 | 14,523.8 | ||||||||||||||||
Clasificados Internacionales S.A. | Panama | 100 | % | (44.8 | ) | — | — | — | (44.8 | ) | ||||||||||||||||
ColClasificados S.A. | Colombia | 100 | % | 36.4 | 688.0 | (240.8 | ) | 1,595.5 | 2,079.1 | |||||||||||||||||
Clasificados Florida LLC | USA | 100 | % | 1.2 | — | — | — | 1.2 | ||||||||||||||||||
Total | $ | 686.9 | $ | 5,622.2 | $ | (1,967.8 | ) | $ | 13,037.5 | $ | 17,378.8 | |||||||||||||||
F-28
Table of Contents
Notes to Consolidated Financial Statements
F-29
Table of Contents
Notes to Consolidated Financial Statements
Cash paid | $ | 22,000,000 | ||
Seller financing | 18,000,000 | |||
Working Capital adjustment | (480,912 | ) | ||
Direct cost of the business combination | 494,301 | |||
Total aggregate purchase price | $ | 40,013,389 | ||
Post | Net Tangible | Identifiable | Deferred | Aggregate | ||||||||||||||||||||||||
Acquisition | Assets / | Intangible | Tax | Purchase | ||||||||||||||||||||||||
Company Name | Country | Ownership | (Liabilities) | Assets | Liabilities | Goodwill | Price | |||||||||||||||||||||
DeRemate.com de Argentina S.A. | Argentina | 100 | % | $ | 2,555.2 | $ | 1,444.1 | $ | (505.4 | ) | $ | 30,658.9 | $ | 34,152.8 | ||||||||||||||
DeRemate.com Chile S.A. | Chile | 100 | % | (1,978.9 | ) | 302.2 | (105.8 | ) | 6,659.4 | 4,876.9 | ||||||||||||||||||
Compañía de Negocios Interactiva de Colombia E.U. | Colombia | 100 | % | (753.4 | ) | 25.6 | (9.0 | ) | 1,417.2 | 680.4 | ||||||||||||||||||
Interactivos y Digitales México S.A. de C.V. | Mexico | 100 | % | (580.7 | ) | 29.2 | (10.2 | ) | 864.9 | 303.2 | ||||||||||||||||||
Total | $ | (757.8 | ) | $ | 1,801.1 | $ | (630.4 | ) | $ | 39,600.4 | $ | 40,013.3 | ||||||||||||||||
F-30
Table of Contents
Notes to Consolidated Financial Statements
CMG | DeRemate | Total | ||||||||||
Cash and cash equivalents | $ | 554,739 | $ | 136,893 | $ | 691,632 | ||||||
Funds receivable from customers | — | 117,473 | 117,473 | |||||||||
Accounts receivable | 56,613 | 6,512,485 | 6,569,098 | |||||||||
Tax Credits | — | 604,419 | 604,419 | |||||||||
Other current assets | 904,791 | 14,065 | 918,856 | |||||||||
Non current assets | 365,190 | 139,737 | 504,927 | |||||||||
Total assets acquired | $ | 1,881,333 | $ | 7,525,072 | $ | 9,406,405 | ||||||
Accounts payable and accrued expenses | 69,516 | 4,509,314 | 4,578,830 | |||||||||
Funds payable to customers | — | 146,191 | 146,191 | |||||||||
Taxes payable | 459,462 | 745,017 | 1,204,479 | |||||||||
Social security payable | 243,141 | 151,971 | 395,112 | |||||||||
Other liabilities | — | 1,590,371 | 1,590,371 | |||||||||
Non current liabilities | 14,000 | — | 14,000 | |||||||||
Provisions | 408,336 | 1,140,055 | 1,548,391 | |||||||||
Total liabilities assumed | $ | 1,194,455 | $ | 8,282,919 | $ | 9,477,374 | ||||||
Net tangible assets (liabilities) | $ | 686,878 | $ | (757,847 | ) | $ | (70,969 | ) | ||||
F-31
Table of Contents
Notes to Consolidated Financial Statements
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
Indefinite lived assets | ||||||||
- Goodwill | $ | 59,822,746 | $ | 65,652,774 | ||||
- Trademarks | 2,415,874 | 5,537,715 | ||||||
Amortizable intangible assets | ||||||||
- Licenses and others | 2,227,315 | 1,313,901 | ||||||
- Non-compete agreement | 1,218,393 | 1,051,531 | ||||||
- Customer list | 1,593,861 | 1,534,969 | ||||||
Total intangible assets | $ | 67,278,189 | $ | 75,090,890 | ||||
Accumulated amortization | (2,939,625 | ) | (2,179,344 | ) | ||||
$ | 64,338,564 | $ | 72,911,546 | |||||
Year Ended December 31, 2009 | ||||||||||||||||||||||||||||||||||||||||
Marketplaces | ||||||||||||||||||||||||||||||||||||||||
Brazil | Argentina | Chile | Mexico | Venezuela | Colombia | Other Countries | Total | Payments | Consolidated | |||||||||||||||||||||||||||||||
Balance, beginning of year | $ | 9,361,697 | $ | 25,504,101 | $ | 5,252,283 | $ | 4,517,690 | $ | 13,636,502 | $ | 4,647,681 | $ | 1,220,332 | $ | 64,140,286 | $ | 1,512,488 | $ | 65,652,774 | ||||||||||||||||||||
- Effect of exchange rates changes | 3,203,365 | (2,328,927 | ) | 1,339,741 | 252,870 | (8,790,472 | ) | 453,258 | 138,955 | (5,731,210 | ) | (98,818 | ) | (5,830,028 | ) | |||||||||||||||||||||||||
Balance, end of the year | $ | 12,565,062 | $ | 23,175,174 | $ | 6,592,024 | $ | 4,770,560 | $ | 4,846,030 | $ | 5,100,939 | $ | 1,359,287 | $ | 58,409,076 | $ | 1,413,670 | $ | 59,822,746 | ||||||||||||||||||||
Year Ended December 31, 2008 | ||||||||||||||||||||||||||||||||||||||||
Marketplaces | ||||||||||||||||||||||||||||||||||||||||
Brazil | Argentina | Chile | Mexico | Venezuela | Colombia | Other Countries | Total | Payments | Consolidated | |||||||||||||||||||||||||||||||
Balance, beginning of year | $ | 12,351,542 | $ | — | $ | — | $ | 4,898,867 | $ | 2,194,480 | $ | 2,257,830 | $ | 1,297,748 | $ | 23,000,467 | $ | — | $ | 23,000,467 | ||||||||||||||||||||
-Purchase of CMG | — | — | — | — | 11,442,022 | 1,595,482 | — | 13,037,504 | — | $ | 13,037,504 | |||||||||||||||||||||||||||||
-Purchase of DR Operations | — | 29,064,574 | 6,518,624 | 864,945 | — | 1,417,239 | — | 37,865,382 | 1,735,151 | 39,600,533 | ||||||||||||||||||||||||||||||
- Effect of exchange rates changes | (2,989,845 | ) | (3,560,473 | ) | (1,266,341 | ) | (1,246,122 | ) | — | (622,870 | ) | (77,416 | ) | (9,763,067 | ) | (222,663 | ) | (9,985,730 | ) | |||||||||||||||||||||
Balance, end of the year | $ | 9,361,697 | $ | 25,504,101 | $ | 5,252,283 | $ | 4,517,690 | $ | 13,636,502 | $ | 4,647,681 | $ | 1,220,332 | $ | 64,140,286 | $ | 1,512,488 | $ | 65,652,774 | ||||||||||||||||||||
F-32
Table of Contents
Notes to Consolidated Financial Statements
For year ended 12/31/2010 | $ | 923,127 | ||
For year ended 12/31/2011 | 641,700 | |||
For year ended 12/31/2012 | 535,054 | |||
For year ended 12/31/2013 | 63 | |||
$ | 2,099,944 | |||
F-33
Table of Contents
Notes to Consolidated Financial Statements
Year Ended December 31, 2009 | ||||||||||||||||||||||||||||||||
Marketplaces | ||||||||||||||||||||||||||||||||
Brazil | Argentina | Mexico | Venezuela | Other Countries | Total | Payments | Consolidated | |||||||||||||||||||||||||
Net revenues | $ | 54,624,180 | $ | 23,463,144 | $ | 13,699,140 | $ | 26,219,636 | $ | 10,216,056 | $ | 128,222,156 | $ | 44,621,465 | $ | 172,843,621 | ||||||||||||||||
Direct costs | (32,921,030 | ) | (9,634,092 | ) | (7,924,863 | ) | (12,995,971 | ) | (5,788,657 | ) | (69,264,613 | ) | (22,825,009 | ) | (92,089,622 | ) | ||||||||||||||||
Direct contribution | 21,703,150 | 13,829,052 | 5,774,277 | 13,223,665 | 4,427,399 | 58,957,543 | 21,796,456 | 80,753,999 | ||||||||||||||||||||||||
Operating expenses and indirect costs of net revenues | (24,720,280 | ) | ||||||||||||||||||||||||||||||
�� | ||||||||||||||||||||||||||||||||
Income from operations | 56,033,719 | |||||||||||||||||||||||||||||||
Other income (expenses): | ||||||||||||||||||||||||||||||||
Interest income and other financial gains | 2,695,109 | |||||||||||||||||||||||||||||||
Interest expense and other financial results | (13,357,554 | ) | ||||||||||||||||||||||||||||||
Foreign currency loss | (2,658,476 | ) | ||||||||||||||||||||||||||||||
Net income before income / asset tax expense | $ | 42,712,798 | ||||||||||||||||||||||||||||||
Year Ended December 31, 2008 | ||||||||||||||||||||||||||||||||
Marketplaces | ||||||||||||||||||||||||||||||||
Brazil | Argentina | Mexico | Venezuela | Other Countries | Total | Payments | Consolidated | |||||||||||||||||||||||||
Net revenues | $ | 50,509,927 | $ | 18,254,621 | $ | 12,473,883 | $ | 21,972,235 | $ | 6,369,111 | $ | 109,579,777 | $ | 27,442,843 | $ | 137,022,620 | ||||||||||||||||
Direct costs | (32,367,688 | ) | (8,710,260 | ) | (7,909,615 | ) | (11,455,690 | ) | (4,184,088 | ) | (64,627,341 | ) | (16,125,593 | ) | (80,752,934 | ) | ||||||||||||||||
Direct contribution | 18,142,239 | 9,544,361 | 4,564,268 | 10,516,545 | 2,185,023 | 44,952,436 | 11,317,250 | 56,269,686 | ||||||||||||||||||||||||
Operating expenses and indirect costs of net revenues | (18,745,755 | ) | ||||||||||||||||||||||||||||||
Income from operations | 37,523,931 | |||||||||||||||||||||||||||||||
Other income (expenses): | ||||||||||||||||||||||||||||||||
Interest income and other financial gains | 1,822,385 | |||||||||||||||||||||||||||||||
Interest expense and other financial results | (8,442,427 | ) | ||||||||||||||||||||||||||||||
Foreign currency loss | (1,531,144 | ) | ||||||||||||||||||||||||||||||
Other income, net | 73,159 | |||||||||||||||||||||||||||||||
Net income before income / asset tax expense | $ | 29,445,904 | ||||||||||||||||||||||||||||||
Year Ended December 31, 2007 | ||||||||||||||||||||||||||||||||
Marketplaces | ||||||||||||||||||||||||||||||||
Brazil | Argentina | Mexico | Venezuela | Other Countries | Total | Payments | Consolidated | |||||||||||||||||||||||||
Net revenues | $ | 37,560,419 | $ | 11,342,792 | $ | 9,628,121 | $ | 7,084,995 | $ | 3,901,190 | $ | 69,517,517 | $ | 15,608,824 | $ | 85,126,341 | ||||||||||||||||
Direct costs | (24,079,798 | ) | (5,657,006 | ) | (6,339,762 | ) | (2,713,470 | ) | (3,434,102 | ) | (42,224,138 | ) | (10,509,002 | ) | (52,733,140 | ) | ||||||||||||||||
Direct contribution | 13,480,621 | 5,685,786 | 3,288,359 | 4,371,525 | 467,088 | 27,293,379 | 5,099,822 | 32,393,201 | ||||||||||||||||||||||||
Operating expenses and indirect costs of net revenues | (10,731,381 | ) | ||||||||||||||||||||||||||||||
Income from operations | 21,661,820 | |||||||||||||||||||||||||||||||
Other income (expenses): | ||||||||||||||||||||||||||||||||
Interest income and other financial gains | 1,609,403 | |||||||||||||||||||||||||||||||
Interest expense and other financial results | (2,737,901 | ) | ||||||||||||||||||||||||||||||
Foreign currency loss | (3,106,515 | ) | ||||||||||||||||||||||||||||||
Other expenses, net | (3,006,416 | ) | ||||||||||||||||||||||||||||||
Net income before income / asset tax expense | $ | 14,420,391 | ||||||||||||||||||||||||||||||
F-34
Table of Contents
Notes to Consolidated Financial Statements
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
US long-lived tangible assets | $ | 2,746,059 | $ | 2,881,210 | ||||
Other countries long-lived tangible assets | ||||||||
Argentina | 1,978,652 | 1,573,708 | ||||||
Brazil | 883,712 | 596,940 | ||||||
Mexico | 71,064 | 81,873 | ||||||
Venezuela | 196,846 | 749,605 | ||||||
Other countries | 71,943 | 56,824 | ||||||
$ | 3,202,217 | $ | 3,058,950 | |||||
Total long-lived tangible assets | $ | 5,948,276 | $ | 5,940,160 | ||||
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
US intangible assets | $ | 17,535 | $ | 35,058 | ||||
Other countries goodwill and intangible assets | ||||||||
Argentina | 26,188,435 | 28,196,325 | ||||||
Brazil | 12,597,173 | 9,397,304 | ||||||
Mexico | 4,818,438 | 4,585,212 | ||||||
Venezuela | 6,602,677 | 18,585,234 | ||||||
Other countries | 14,114,306 | 12,112,413 | ||||||
$ | 64,321,029 | $ | 72,876,488 | |||||
Total goodwill and intangible assets | $ | 64,338,564 | $ | 72,911,546 | ||||
F-35
Table of Contents
Notes to Consolidated Financial Statements
Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Brazil | 93,087,757 | $ | 73,692,604 | $ | 50,260,134 | |||||||
Argentina | 26,737,938 | 19,862,790 | 12,580,873 | |||||||||
Mexico | 15,314,982 | 13,894,730 | 10,700,597 | |||||||||
Venezuela | 27,331,095 | 23,123,837 | 7,679,857 | |||||||||
Other countries | 10,371,849 | 6,448,659 | 3,904,880 | |||||||||
Total net revenues | $ | 172,843,621 | $ | 137,022,620 | $ | 85,126,341 | ||||||
Quoted Prices in | Quoted Prices in | |||||||||||||||
Balances as of | active markets for | Balances as of | active markets for | |||||||||||||
December 31, | identical Assets | December 31, | identical Assets | |||||||||||||
Description | 2009 | (Level 1) | 2008 | (Level 1) | ||||||||||||
Assets | ||||||||||||||||
Cash and Cash Equivalents: | ||||||||||||||||
Money Market Funds | $ | 26,298,189 | $ | 26,298,189 | $ | — | $ | — | ||||||||
Investments: | ||||||||||||||||
Money Market Funds | — | — | 2,408,294 | 2,408,294 | ||||||||||||
Corporate Debt Securities | 8,045,048 | 8,045,048 | — | — | ||||||||||||
Total financial Assets | $ | 34,343,237 | $ | 34,343,237 | $ | 2,408,294 | $ | 2,408,294 | ||||||||
Liabilities Loans payable and other financial liabilities: | ||||||||||||||||
Put Options | $ | — | $ | — | $ | 185,000 | $ | 185,000 | ||||||||
Total financial Liabilities | $ | — | $ | — | $ | 185,000 | $ | 185,000 | ||||||||
F-36
Table of Contents
Notes to Consolidated Financial Statements
Number of | ||||
Class of Common Stock | shares | |||
Class A | 65,000,000 | |||
Class B-1 | 6,400,000 | |||
Class B-2 | 6,400,000 | |||
Class C | 8,600,000 | |||
Class D-1 | 3,000,000 | |||
Class D-2 | 3,000,000 | |||
Class E-1 | 8,200,000 | |||
Class E-2 | 8,200,000 | |||
Total number of shares | 108,800,000 | |||
F-37
Table of Contents
Notes to Consolidated Financial Statements
F-38
Table of Contents
Notes to Consolidated Financial Statements
Series | ||||||||||||||||||||||||||||||||||||
A | B-1 | B-2 | C | D-1 | D-2 | E-1 | E-2 | Total | ||||||||||||||||||||||||||||
Balances at December 31, 2006 | $ | 1,670,600 | $ | 1,935,051 | $ | 4,329,699 | $ | 36,118,251 | $ | 1,873,862 | $ | 10,634,628 | $ | 6,458,239 | $ | 1,056,215 | $ | 64,076,545 | ||||||||||||||||||
Accretion | 5,875 | 6,805 | 15,227 | 165,156 | 8,569 | 48,628 | 50,741 | 8,298 | 309,299 | |||||||||||||||||||||||||||
Conversión of Preferred stock | (1,676,475 | ) | (1,941,856 | ) | (4,344,926 | ) | (36,283,407 | ) | (1,882,431 | ) | (10,683,256 | ) | (6,508,980 | ) | (1,064,513 | ) | (64,385,844 | ) | ||||||||||||||||||
Balances at December 31, 2007 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
F-39
Table of Contents
Notes to Consolidated Financial Statements
F-40
Table of Contents
Notes to Consolidated Financial Statements
F-41
Table of Contents
Notes to Consolidated Financial Statements
2009 | 2008 | |||||||||||||||
Weighted- | Weighted- | |||||||||||||||
Number of | average | Number of | average | |||||||||||||
options | exercise price | options | exercise price | |||||||||||||
Outstanding, beginning of year | 53,919 | $ | 1.23 | 144,174 | $ | 1.04 | ||||||||||
Forfeited or expired | — | — | (703 | ) | 1.29 | |||||||||||
Exercised | (35,030 | ) | 0.81 | (89,552 | ) | 0.93 | ||||||||||
Outstanding, end of the year | 18,889 | 2.02 | 53,919 | 1.23 | ||||||||||||
Exercisable, end of the year | 17,211 | $ | 1.90 | 47,217 | $ | 1.06 | ||||||||||
F-42
Table of Contents
Notes to Consolidated Financial Statements
December 31, 2009 | December 31, 2008 | |||||||||||||||||||||||||||
Outstanding | Exercisable | Outstanding | Exercisable | |||||||||||||||||||||||||
Weighted-average | Weighted-average | |||||||||||||||||||||||||||
remaining | remaining | |||||||||||||||||||||||||||
Exercise | Number of | contractual | Number of | Exercise | Number of | contractual | Number of | |||||||||||||||||||||
price | options | life (years) | options | price | options | life (years) | options | |||||||||||||||||||||
$0.01 | 1,000 | 1.00 | 1,000 | $ | 0.01 | 11,531 | 4.22 | 11,531 | ||||||||||||||||||||
$1.00 | — | — | — | $ | 1.00 | 20,000 | 1.07 | 20,000 | ||||||||||||||||||||
$1.50 | 15,389 | 5.38 | 14,336 | $ | 1.50 | 18,888 | 6.37 | 13,561 | ||||||||||||||||||||
$3.00 | — | — | — | $ | 3.00 | 1,000 | 1.41 | 1,000 | ||||||||||||||||||||
$6.00 | 2,500 | 6.55 | 1,875 | $ | 6.00 | 2,500 | 7.55 | 1,125 | ||||||||||||||||||||
18,889 | 5.30 | 17,211 | 53,919 | 3.91 | 47,217 | |||||||||||||||||||||||
Weighted average Exercise Price | Weighted average Exercise Price | |||||||||
- Options outstanding | $ | 2.02 | - Options outstanding | $ | 1.23 | |||||
- Options exercisable | $ | 1.90 | - Options exercisable | $ | 1.06 |
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
Aggregate intrinsic value | ||||||||
- Options outstanding | $ | 941,679 | $ | 818,363 | ||||
- Options exercisable | $ | 859,979 | $ | 724,626 |
F-43
Table of Contents
Notes to Consolidated Financial Statements
• | If the purchase price is equal or greater than $20,000,000, then Participants shall be entitled to receive i) a sale bonus equal to 5.5% of the purchase price and ii) a stay bonus equal to 7.1% of the purchase price; provided, however, that in no event shall the amount paid or payable by the purchaser considered for the Incentive Plan calculation exceed $78,335,000. Each Participant shall participate on these bonuses based on its Participation Percentage. | ||
• | If the purchase price is less than $20,000,000, then Participants shall be entitled to receive a stay bonus equal to 7.1% of the purchase price. Each Participant shall participate on this stay bonus based on its Participation Percentage. |
F-44
Table of Contents
Notes to Consolidated Financial Statements
Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
United States | $ | (842,576 | ) | $ | (2,280,498 | ) | $ | (4,702,517 | ) | |||
Brazil | 17,516,520 | 11,684,179 | 11,414,462 | |||||||||
Argentina | 11,462,508 | 9,903,988 | 3,807,411 | |||||||||
Venezuela | 7,838,746 | 7,998,791 | 1,765,927 | |||||||||
Mexico | 2,605,974 | 2,568,619 | 1,748,510 | |||||||||
Other Countries | 4,131,626 | (429,175 | ) | 386,598 | ||||||||
$ | 42,712,798 | $ | 29,445,904 | $ | 14,420,391 | |||||||
Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Current: | ||||||||||||
Federal | $ | — | $ | — | $ | — | ||||||
Foreign | 11,489,043 | 8,149,523 | 5,023,182 | |||||||||
11,489,043 | 8,149,523 | 5,023,182 | ||||||||||
Deferred: | ||||||||||||
Federal | — | — | — | |||||||||
Foreign | (2,512,958 | ) | 1,645,474 | (114,964 | ) | |||||||
(2,512,958 | ) | 1,645,474 | (114,964 | ) | ||||||||
8,976,085 | 9,794,997 | 4,908,218 | ||||||||||
Asset Tax: | ||||||||||||
Federal | — | — | — | |||||||||
Foreign | 527,920 | 839,246 | (180,767 | ) | ||||||||
527,920 | 839,246 | (180,767 | ) | |||||||||
Income / asset tax expense | $ | 9,504,005 | $ | 10,634,243 | $ | 4,727,451 | ||||||
F-45
Table of Contents
Notes to Consolidated Financial Statements
Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Net income before income tax | $ | 42,712,798 | $ | 29,445,904 | $ | 14,420,391 | ||||||
Blended income tax rate | 33 | % | 35 | % | 33 | % | ||||||
Provision at blended tax rate | $ | 14,083,389 | $ | 10,192,881 | $ | 4,749,688 | ||||||
Permanent differences: | ||||||||||||
Non-deductible expenses | 338,873 | 1,560,262 | 409,453 | |||||||||
Dividend distibutions | 1,246,218 | 3,172,495 | — | |||||||||
Non-taxable income | (3,025,270 | ) | (2,774,711 | ) | (145,945 | ) | ||||||
Currency translation | (269,553 | ) | (214,950 | ) | (293,740 | ) | ||||||
Change in valuation allowance | (3,430,348 | ) | (1,827,217 | ) | 557,759 | |||||||
Business Combination | — | (362,381 | ) | — | ||||||||
True up | 32,776 | 48,618 | (368,997 | ) | ||||||||
Income tax expense | $ | 8,976,085 | $ | 9,794,997 | $ | 4,908,218 | ||||||
F-46
Table of Contents
Notes to Consolidated Financial Statements
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
Deferred tax assets | ||||||||
Allowance for doubtful accounts | $ | 2,032,421 | $ | 1,571,322 | ||||
Property and equipment, net | 17,493 | 401,402 | ||||||
Accounts payable and accrued expenses | 71,800 | 36,975 | ||||||
Social security payable | 743,360 | 270,224 | ||||||
Other liabilities | 472,543 | 1,474,360 | ||||||
Customer lists | 58,450 | 44,422 | ||||||
Taxes payable | 620,380 | 196,093 | ||||||
Provisions | 1,786,431 | 1,310,009 | ||||||
Foreign tax credit | 2,879,999 | — | ||||||
Tax loss carryforwards | 10,533,478 | 10,771,859 | ||||||
Total deferred tax assets | 19,216,355 | 16,076,666 | ||||||
Valuation allowance | (9,269,395 | ) | (11,652,192 | ) | ||||
Net deferred tax assets | 9,946,960 | 4,424,474 | ||||||
Deferred tax liabilities | ||||||||
Unrealized net gains on investments | (14,258 | ) | — | |||||
Property and equipment, net | (301,807 | ) | (75,265 | ) | ||||
Customer lists | (289,717 | ) | (401,016 | ) | ||||
Non compete agreement | (96,327 | ) | (187,338 | ) | ||||
Outside basis dividends | (3,623,134 | ) | — | |||||
CMG trademarks | (845,556 | ) | (1,967,766 | ) | ||||
Foreign exchange effect | (1,568,286 | ) | (2,706,068 | ) | ||||
Total deferred tax liabilities | (6,739,085 | ) | (5,337,453 | ) | ||||
$ | 3,207,875 | $ | (912,979 | ) | ||||
F-47
Table of Contents
Notes to Consolidated Financial Statements
2010 | $ | 231,807 | ||
2011 | $ | 267,962 | ||
2012 | $ | 219,477 | ||
2013 | $ | 1,893,785 | ||
Thereafter | $ | 31,660,850 | ||
Total | $ | 34,273,881 | ||
F-48
Table of Contents
Notes to Consolidated Financial Statements
F-49
Table of Contents
Notes to Consolidated Financial Statements
F-50
Table of Contents
Notes to Consolidated Financial Statements
For the year ended December 31, 2010 | 1,542,139 | |||
For the year ended December 31, 2011 | 884,066 | |||
For the year ended December 31, 2012 | 227,731 | |||
For the year ended December 31, 2013 | 136,199 | |||
Thereafter | 96,242 | |||
$ | 2,886,377 | |||
• | Year 1 (2008): 17% | ||
• | Year 2 (2009): 22% | ||
• | Year 3 (2010): 27% | ||
• | Year 4 (2011): 34% |
F-51
Table of Contents
Notes to Consolidated Financial Statements
December 31, | December 31, | |||||||
Number of Shares | 2009 | 2008 | ||||||
Granted | 21,591 | 21,591 | ||||||
Non-vested at the beginning of the year | 21,591 | — | ||||||
Non-vested at the end of the period / year | 15,015 | 21,591 | ||||||
Forfeited | 2,976 | — | ||||||
Vested and paid to the employees | 3,600 | — | ||||||
Outstanding | 15,015 | 21,591 |
December 31, 2009 | ||||||||
Weighted-average | ||||||||
Aggregate | remaining | |||||||
Intrinsic | contractual | |||||||
value | life (years) | |||||||
Shares outstanding | 778,828 | 1.39 |
F-52
Table of Contents
Notes to Consolidated Financial Statements
• | 6.25% of the amount will be calculated in nominal terms (“the nominal basis share”), | ||
• | 6.25% will be adjusted by multiplying the nominal amount by the average closing stock price for the last 60 trading days of the year previous to the payment date and divided by the average closing stock price for the last 60 trading days of 2008 which is $13.81 (“the variable share”). |
December 31, 2009 | ||||||||
Weighted-average | ||||||||
Aggregate | remaining | |||||||
Intrinsic | contractual | |||||||
value | life (years) | |||||||
Outstanding | 4,457,346 | 3.75 |
F-53
Table of Contents
Notes to Consolidated Financial Statements
Total | ||||
Number of Shares | 185,000 | |||
Premium | 341,508 | |||
Average Price | 1.85 | |||
Commissions and other fees | (5,552 | ) | ||
Cash received | 335,956 |
F-54
Table of Contents
Notes to Consolidated Financial Statements
Total | ||||
Number of Shares | 226,000 | |||
Premium | 302,997 | |||
Average Price | 1.34 | |||
Commissions and other fees | (6,782 | ) | ||
Cash received | 296,215 |
F-55
Table of Contents
Notes to Consolidated Financial Statements
• | Principal amount: $12,000,000 | ||
• | Interest Rate: 7% | ||
• | Maturity: 5 years, or upon an issuance of securities, such as an initial public offering |
F-56
Table of Contents
Notes to Consolidated Financial Statements
Charged / | ||||||||||||||||||||
Balance at | credited to | Charges | Balance | |||||||||||||||||
beginning of | Net income / | DeRemate | Utilized / | at end of | ||||||||||||||||
year | (loss) | acquisition | Write-offs | year | ||||||||||||||||
Allowance for doubtful accounts | ||||||||||||||||||||
Year ended December 31, 2007 | 4,428,271 | 5,306,423 | — | (3,122,269 | ) | 6,612,425 | ||||||||||||||
Year ended December 31, 2008 | 6,612,425 | 8,369,652 | — | (6,471,950 | ) | 8,510,127 | ||||||||||||||
Year ended December 31, 2009 | 8,510,127 | 9,681,048 | — | (14,493,168 | ) | 3,698,007 | ||||||||||||||
Funds receivable from customers allowance for chargebacks | ||||||||||||||||||||
Year ended December 31, 2007 | 191,235 | 928,409 | — | (530,540 | ) | 589,104 | ||||||||||||||
Year ended December 31, 2008 | 589,104 | 64,839 | — | (486,923 | ) | 167,020 | ||||||||||||||
Year ended December 31, 2009 | 167,020 | 572,555 | — | (652,026 | ) | 87,549 | ||||||||||||||
Tax valuation allowance | ||||||||||||||||||||
Year ended December 31, 2007 | 13,140,096 | 3,880,190 | — | (2,023,098 | ) | 14,997,188 | ||||||||||||||
Year ended December 31, 2008 | 14,997,188 | (1,507,873 | ) | (1,837,123 | ) | — | 11,652,192 | |||||||||||||
Year ended December 31, 2009 | 11,652,192 | (897,123 | ) | — | (1,485,674 | ) | 9,269,395 | |||||||||||||
Contingencies | ||||||||||||||||||||
Year ended December 31, 2007 | 493,165 | 2,024,946 | — | (1,499,580 | ) | 1,018,531 | ||||||||||||||
Year ended December 31, 2008 | 1,018,531 | — | — | 31,785 | 1,050,316 | |||||||||||||||
Year ended December 31, 2009 | 1,050,316 | 1,543,438 | — | (1,354,174 | ) | 1,239,580 |
F-57
Table of Contents
Notes to Consolidated Financial Statements
• | sale of 3,000,000 shares of common stock, net of underwriting discount and offering expenses, | ||
• | conversion of all of the Company’s outstanding shares of Preferred Stock and different classes of common stock into shares of one class of common stock, | ||
• | final adjustment to fair value and reclassification from liability to equity of all of the Company’s outstanding warrants, | ||
• | issuance of 184,273 shares upon the exercise of the Company’s outstanding warrants. |
F-58
Table of Contents
Notes to Consolidated Financial Statements
Quarter ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
2009 | ||||||||||||||||
Net Revenues | $ | 32,322,501 | $ | 40,901,799 | $ | 50,599,276 | $ | 49,020,045 | ||||||||
Gross profit | 25,688,515 | 32,306,322 | 40,208,605 | 38,682,129 | ||||||||||||
Net Income | 5,391,176 | 6,679,779 | 9,852,268 | 11,285,570 | ||||||||||||
Net Income per share-basic | 0.12 | 0.15 | 0.22 | 0.26 | ||||||||||||
Net Income per share-diluted | 0.12 | 0.15 | 0.22 | 0.26 | ||||||||||||
Weighted average shares | ||||||||||||||||
Basic | 44,069,134 | 44,074,462 | 44,088,936 | 44,108,207 | ||||||||||||
Diluted | 44,130,866 | 44,127,208 | 44,138,031 | 44,143,281 | ||||||||||||
2008 | ||||||||||||||||
Net Revenues | $ | 28,840,730 | $ | 34,471,508 | $ | 40,260,643 | $ | 33,449,739 | ||||||||
Gross profit | 22,822,449 | 27,570,005 | 32,106,781 | 26,986,812 | ||||||||||||
Net Income | 2,067,677 | 2,947,095 | 5,875,792 | 7,921,097 | ||||||||||||
Net Income per share-basic | 0.05 | 0.07 | 0.13 | 0.18 | ||||||||||||
Net Income per share-diluted | 0.05 | 0.07 | 0.13 | 0.17 | ||||||||||||
Weighted average shares | ||||||||||||||||
Basic | 44,227,460 | 44,238,166 | 44,290,540 | 44,264,906 | ||||||||||||
Diluted | 44,368,011 | 44,369,317 | 44,379,682 | 44,369,635 | ||||||||||||
2007 | ||||||||||||||||
Net Revenues | $ | 16,459,337 | $ | 18,973,288 | $ | 22,800,130 | $ | 26,893,586 | ||||||||
Gross profit | 12,971,998 | 14,973,366 | 17,918,082 | 20,989,955 | ||||||||||||
Net Income | 994,187 | 590,886 | 2,785,474 | 5,322,393 | ||||||||||||
Net Income per share-basic | 0.02 | 0.01 | 0.07 | 0.13 | ||||||||||||
Net Income per share-diluted | 0.02 | 0.01 | 0.07 | 0.13 | ||||||||||||
Weighted average shares | ||||||||||||||||
Basic | 13,375,482 | 13,575,158 | 27,538,652 | 41,226,563 | ||||||||||||
Diluted | 13,375,482 | 13,987,128 | 27,685,028 | 41,375,907 |
F-59
Table of Contents
Exhibit | ||||
Number | Exhibit Title | |||
2.01 | Stock Purchase Agreement, dated August 25, 2008, by and among Hammer.com, LLC, MercadoLibre, Inc., Hispanoamerican Educational Investments BV, S.A. La Nación, DeRemate.com de Argentina S.A., DeRemate.com Chile S.A., Interactivos y Digitales México S.A. de C.V. and Compañía de Negocios Interactiva de Colombia E.U. (4) | |||
2.02 | Asset Purchase Agreement, dated August 25, 2008, by and among Hispanoamerican Educational Investments BV, S.A. La Nación, Intangible Assets LLC, Emprendimientos Veta, S.A., DeRemate.com USA, Inc., MercadoLibre, Inc. and Hammer.com, LLC. (4) | |||
3.01 | Registrant’s Amended and Restated Certificate of Incorporation. (1) | |||
3.02 | Registrant’s Amended and Restated Bylaws. (1) | |||
4.01 | Form of Specimen Certificate for Registrant’s Common Stock (5) | |||
4.02 | Second Amended and Restated Registration Rights Agreement, dated September 24, 2001, by and among the Registrant and the investors named therein. (1) | |||
10.01 | Form of Indemnity Agreement entered into by Registrant with each of its directors and executive officers. (2) | |||
10.02 | Lease Agreement, dated as of March 31, 2007, between Curtidos San Luis S.A. and MercadoLibre S.A. (2) (translated from Spanish) | |||
10.03 | Amendment Agreement, dated as of November 13, 2008, to the Lease Agreement, dated March 31, 2007, between Curtidos San Luis S.A. and MercadoLibre S.A. (5) (translated from Spanish) | |||
10.04 | Lease Agreement, dated as of April 1, 2008, between Curtidos San Luis S.A. and MercadoLibre S.A. (translated from Spanish) (5) | |||
10.05 | Lease Agreement, dated as of May 5, 2008, between Curtidos San Luis S.A. and MercadoLibre S.A. (translated from Spanish) (5) | |||
10.06 | Concession Contract, dated as February 7, 2007, between Border’s Parking S.R.L. and MercadoLibre S.A. (1) | |||
10.07 | Property Lease Agreement, dated June 28, 2005, between MercadoLivre.com Atividades de Internet Ltda. and KW Radar Construtora e Incorporadora Ltda. (1) | |||
10.08 | Property Lease Agreement, dated as of November 1, 2004, between MercadoLivre.com Atividades de Internet Ltda. and Barros e Spitaletti Empreendimentos Ltda. (1) | |||
10.09 | Property Lease Agreement, dated of April, 1, 2008, between MercadoLivre.com Atividades de Internet Ltda. And CNA Spitaletti Construtora e Incorporadora Ltda. (5) | |||
10.10 | Arias Trust Contract, dated as of June 5, 2006 and amended as of May 29, 2008 (translated from Spanish) (5) | |||
10.11 | Management Incentive Bonus Plan of the Registrant. (2) | |||
10.12 | Amended and Restated 1999 Stock Option and Restricted Stock Plan (2) | |||
10.13 | Employment Agreements with Officers.(2) |
Table of Contents
Exhibit | ||||
Number | Exhibit Title | |||
10.14 | Form of Restricted Stock Award for Outside directors. (3) | |||
10.15 | Employment Agreement with Osvaldo Gimenez, dated as of March 26, 2008* (5) | |||
10.16 | 2009 Equity Compensation Plan* (7) | |||
10.17 | 2008 Long-Term Retention Plan (6) | |||
10.18 | 2009 Long-Term Retention Plan (6) | |||
10.19 | Property Lease Agreement, dated February 01, 2010, between MercadoLivre.com Atividades de Internet Ltda. and Verbo Empreendimentos e Participações Ltda.* | |||
10.20 | Property Lease Agreement, dated June 28, 2005, between MercadoLivre.com Atividades de Internet Ltda. and KW Radar Construtora e Incorporadora Ltda.* | |||
10.21 | Amendment Agreement, dated October 30, 2009, between MercadoLivre.com Atividades de Internet Ltda. and KW Radar Construtora e Incorporadora Ltda.* | |||
10.22 | Property Lease Agreement, dated as of November 1, 2004, between MercadoLivre.com Atividades de Internet Ltda. and Barros e Spitaletti Empreendimentos Ltda.* | |||
10.23 | Amendment Agreement, dated October 30, 2009, between MercadoLivre.com Atividades de Internet Ltda. and KW Radar Construtora e Incorporadora Ltda* | |||
10.24 | Property Lease Agreement, dated of April, 1, 2008, between MercadoLivre.com Atividades de Internet Ltda. and CNA Spitaletti Construtora e Incorporadora Ltda.* | |||
10.25 | Amendment Agreement, dated October 30, 2009, between MercadoLivre.com Atividades de Internet Ltda. and CNA Spitaletti Construtora e Incorporadora Ltda.* | |||
10.26 | Property Lease Amendment, dated May 5, 2008, between MercadoLibre Venezuela S.A. and G4 Grupo 4 Inmobiliaria Internacional Industrial Comercial, C.A.* | |||
21.01 | List of Subsidiaries* | |||
23.01 | Consent of Price Watherhouse & Co. S.R.L., Independent Registered Public Accounting Firm* | |||
31.01 | CEO Certification pursuant to Securities Exchange Act Rule 13a-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | |||
31.02 | CFO Certification pursuant to Securities Exchange Act Rule 13a-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | |||
32.01 | CEO Certification required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** | |||
32.02 | CFO Certification required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** |
* | Filed Herewith | |
** | Furnished Herewith |
Table of Contents
(1) | Incorporated by reference to the Registration Statement on Form S-1 of MercadoLibre, Inc. filed on May 11, 2007; | |
(2) | Incorporate by reference to Amendment No. 1 to the Registration Statement on Form S-1 of MercadoLibre, Inc. filed on July 13, 2007. | |
(3) | Incorporated by reference to the Registration Statement on Form S-1 of MercadoLibre, Inc. filed on January 25, 2008 | |
(4) | Incorporated by reference to the Current Report on Form 8-K filed on August 26, 2008. | |
(5) | Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 2008 filed on February 27, 2009 | |
(6) | Incorporated by reference to the Current Report on Form 8-K filed on July 21, 2009 | |
(7) | Incorporated by reference to the Registration Statement on Form S-8 filed on June 11, 2009 |