DLocal Ltd. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Business Resilience: Despite macroeconomic volatility, Q1 2025 showed strong execution with record TPV, revenue, and gross profit. Net retention rate of TPV was 144%, and TPV grew over 50% for two consecutive quarters.
• Strategic Investments: Continued investments in technology and operations, including AI and automation initiatives to drive operational efficiency and leverage. These initiatives aim to slow mid-term hiring growth, improve operational leverage, and create a scalable business.
• Commercial Updates: Strengthened partnerships with Temu, Zepz, and Rappi. Added new licenses in Argentina (aggregator and payment facilitator) and Chile (sub-acquirer cross-border system operator).
• Performance Optimization: Enhanced smart request strategies, deployed Smart 3DS in African markets to improve payment security and conversion rates, and supported network tokenization in Latin American markets to boost system-wide conversion rates.

Segment Performance

• TPV: Reached $8 billion, a 53% year-over-year growth (72% in constant currency) and 5% quarter-over-quarter increase. Driven by cross-border payment volumes in Chile, Pakistan, Nigeria, Turkey, Brazil, and growth in remittances, commerce, financial services, and streaming.
• Revenue: Reached a record high of $217 million, up 18% year-over-year (36% in constant currency) due to volume growth in Argentina and other markets in Latin America, Africa, and Asia.
• Gross Profit: Hit a record $85 million, up 35% year-over-year (close to 60% in constant currency) from volume growth in Argentina, Egypt, Chile, and Turkey.
• Cross-border flows: Grew 14% quarter-over-quarter and 76% year-over-year, reaching $4 billion.
• Local-to-local TPV: Decreased 3% quarter-over-quarter but increased 33% year-over-year.
• Pay-ins: Grew 2% quarter-over-quarter and 49% year-over-year, strong in on-demand delivery, commerce, and streaming.
• Pay-outs: Grew 12% quarter-over-quarter and 61% year-over-year, driven by remittances and financial services.

Guidance

• Dividend Announcement: Board approved a dividend policy and an extraordinary cash dividend of ~$0.525 per common share ($150 million total). The dividend policy will pay 30% of the company's free cash flow annually, with the first regular dividend in 2026. The 2025 extraordinary dividend is payable on June 10th to shareholders of record on May 27th.
• Full Year Guidance: Reaffirmed full-year guidance, confident in disciplined execution and long-term sustainable growth, with ongoing investments in technology, operations, and strategic initiatives to support growth.

Risks

• Market Volatility: Global macroeconomic conditions could impact business performance and growth prospects.
• Competitive Pressures: Intensifying competition in emerging markets may affect market share and revenue growth.
• Regulatory Changes: Shifts in regulatory environments in various markets could pose challenges to compliance and operations.

Question and Answer Q: Color on growth in Argentina and Mexico's volume loss?

A: Argentina's growth is sustainable with global merchants seeking alternative payments as capital controls ease. Mexico's volume loss is due to share shift from a few large merchants, but execution can reignite growth.

Q: OpEx growth and take rate impact from advertising client?

A: OpEx growth has timing elements; take rate impact from a large advertising client is due to merchant mix shift and lower take rates in some markets.

Q: Brazil and Mexico volume softness and processing costs in Africa?

A: Brazil and Mexico's softness is about execution; processing costs in Africa are due to prioritizing performance over cost and payment type mix shifts.

Q: M&A and OpEx cadence?

A: Actively looking at M&A opportunities in attractive valuations. OpEx will increase with investments, focusing on technology and prudent spending.

Q: Trends in April/May and take rate outlook?

A: Trends in line with expectations; take rate decline is managed through innovation and expansion into higher take rate markets, tracking in line with guidance.