Release Date: May 14, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- DLocal Ltd (DLO, Financial) achieved record highs in revenue and gross profit, with revenue reaching $217 million and gross profit at $85 million.
- The company's Total Payment Volume (TPV) grew by 53% year-over-year, reaching $8 billion, with a 72% increase in constant currency.
- DLocal Ltd (DLO) demonstrated strong cash flow, with free cash flow to net income conversion at 85%.
- The company continues to expand its footprint in emerging markets, with significant growth in regions like Chile, Pakistan, Nigeria, Turkey, and Brazil.
- Strategic investments in technology and operations are enhancing operational efficiency and service quality, with advancements in AI and automation driving improved customer experience and compliance monitoring.
Negative Points
- DLocal Ltd (DLO) experienced a decline in local-to-local TPV by 3% quarter-over-quarter, attributed to seasonality and partial loss of share with a large merchant in Mexico.
- The company faced increased processing costs in South Africa and Nigeria, impacting gross profit margins.
- Revenue in Brazil declined due to a migration to a payment orchestration model, resulting in lower take rates.
- The advertising sector showed weakness, impacting the net take rate by 4 basis points quarter-over-quarter.
- Despite ongoing investments, operational expenses are expected to increase throughout the year, potentially impacting short-term profitability.
Q & A Highlights
Q: Can you provide more details on the growth in Argentina and the situation in Mexico regarding volume loss with a large merchant?
A: Pedro Arnt, CEO: Argentina's growth appears sustainable, driven by increased interest from global merchants and alternative payment methods. As capital controls ease, the market is becoming more attractive. In Mexico, the volume loss is due to shifts in share of wallet among a few large merchants. We expect to reignite growth with better execution, as there are no structural issues preventing this.
Q: Are the higher take rates in Argentina sustainable, especially with increased interest in the market?
A: Pedro Arnt, CEO: The higher take rates in Argentina are sustainable due to our involvement in discounting receivables and financing alternatives for merchants. This is inherent to our business model, particularly when consumers buy on installments, leading to more factoring of receivables.
Q: Operating expenses grew by 3% in the quarter. Is this growth expected to continue, and what about the impact from the advertising client?
A: Jeffrey Brown, Interim CFO: There is a timing element to the OpEx growth, but we remain focused on managing expenses responsibly. Pedro Arnt, CEO: The impact from the advertising client is due to a mix shift in TPV away from a higher take rate merchant. This is a global mega cap merchant, and the impact is due to a shift in merchant mix.
Q: Can you provide more color on the strong performance in other LATAM markets and the outlook for EBITDA margins?
A: Pedro Arnt, CEO: Other LATAM markets showed strong TPV growth, particularly in frontier markets with higher take rates. Chile was notably strong. Regarding EBITDA margins, while there is an element of timing in expenses, we expect modest margin expansion this year, with potential for further improvement as we leverage AI and automation.
Q: Could you elaborate on the revenue and gross profit decline in Brazil and the rationale behind the dividend policy?
A: Pedro Arnt, CEO: Brazil's revenue and gross profit decline are due to a repricing from our largest merchant and a migration to a lower take rate gateway product. There were also one-off costs impacting gross profit. Regarding the dividend policy, our asset-light model allows us to return capital to shareholders while maintaining flexibility for growth investments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
