dLocal 2Q24

Duas características importantes do negócio para relembrar: (i) o crescimento estrutural de TPV é a validação do negócio pelos clientes e (ii) a qualidade do resultado da empresa melhorou significativamente com a mudança de mix para L2L.

  • These are not Software-as-a-Service contracts. We're actually having to regain our business every day with them, and we do the best we can in trying to project how we think the year will come out.
  • Where we're coming at is we continue to see a strong adoption of our products and services, and I think that's reflected in the TPV guidance and the TPV growth. When you get to gross profit, we do see a greater share towards existing Tier 0 merchants. We see a continued outperformance in the local-to-local business, which in one-hand doesn't have the FX monetization. So that drives take rate down modestly, but down. On the other hand, you could argue those local-to-local businesses both prove the staying power of what we offer and our pure transactional revenues. So in a way, those are less volatile and you could argue lower margin, higher quality volume that we think mix will skew towards more than we did a quarter ago.
  • But still, I think we need to continue focusing on the TPV metric. If we compound that over time and we continue to deliver solid sequential growth. That's really, I think the core of the investment thesis here, is looking back in multiple quarters and at that level of sequential compounding. For example, if you look at these results or you look at the high-end of the guidance and you play that out, it's really a remarkable opportunity and driven by the TAM we have, and how increasingly important emerging markets are becoming to global companies.

Sobre a questão da reprecificação de contratos e o porquê da renegociação do trimestre passado com o maior cliente não ser extrapolável para o resto:

  • So, visibility, as we mentioned last quarter, our pricing is not stipulated in long term contracts or dated contracts. They're stipulated in the contract. But the merchant has the option to approach us and discuss pricing at any moment. And therefore, there are no predetermined moments of pricing renegotiation. That's both good and bad, right? So the visibility is really driven by the constant conversation the Commercial team has with different merchants, and if the pricing issue is being brought up or not. The way we try to avoid this becoming a constant conversation is most of our contracts are tier-driven. And so the merchant knows that as he attains greater volumes, there's a built-in, automatic, prenegotiated repricing.
  • The first one is, starting point is a very relevant part of the conversation. I think, as we disclosed last time, this was a merchant who we had accompanied through a phenomenal execution and growth across the region, where their focus in managing us was very much on efficiency, conversion, reliability, redundancy. They were pushing go-to-market very quickly and weren't necessarily optimizing around cost. That's the typical go-to-market strategy, and they've clearly been very successful.
  • That also meant that we were running them at a net take rate like we said, which was literally 10x what they were being offered by certain local processors. So it really wasn't sustainable. And that's not the case with all the Tier 0 merchants. We just mentioned, another very large Asian cross-border merchant who have been also been assisting with across all of LatAm. Their starting point from a take rate perspective is much lower. So the risk of downside is smaller.

    So as they've gone to a more sustainable take rate in the 40, 50, 60 net take rate range, which is still 3x, 4x, 5x what they could get with local providers, I think that shows the value of what we offer them. That's probably more along the lines of what an incredibly large merchant in that vertical with their country footprint potentially should be running at, and not where they were running prior to that.

Respondendo uma pergunta sobre as razões da diferença de take rates entre mercados desenvolvidos e subdesenvolvidos e como o serviço que ele presta é diferente de empresas como stripe e adyen:

  • I think in developed markets it's really began become a race for features and a race for volume. Primarily, those companies you mentioned have all built the stacks in the markets where they operate. If you were to try to replicate that across 40, 50 emerging markets, it simply doesn't translate because many of these markets are subscale, so you might see greater vertical integration in a Brazil or in India. You're not going to go build a full fledged acquirer across 50 markets. So I always like to say DLocal is less of a vertical play and it's more of a horizontal play.
  • We are this API layer and this middleware, one single that abstracts all of the complexity, both technological but also regulatory conciliations across 40-plus financial mark -- 40-plus emerging markets. And that's a very different build to what you have to build if you're building for developed markets. So we've always said we don't think we have something to offer in developed markets, and hence we've retained our focus on the Global South.

    I think, it's fair to say many of our developed market competitors with their playbooks, we don't believe will fare as well as we do in emerging markets because the key success factors are others. It's how do you make this network of multiple acquirers, multiple digital wallets, multiple Central Bank-sponsored payment systems in a highly-fragmented, highly-volatile world work, which is different to what works in the U.S. or Europe.

    On take rates, don't forget that what currency pairs you're doing on your FX and your cross-border make a big difference. So our developed world competitors are doing Euro to Dollar. There's no spread there. When you're doing Argentine Peso, Egyptian Pound, Nigerian Naira, Peruvian Sol, you begin to see currency pairs that actually generate much more FX spread. That's always been the case. That's the case for credit cards, and that's part of the attractiveness of the emerging market play, is that you do have that cross-border overlay, which is much higher in terms of take rates than if you focus on developed markets.

O porquê do Egito ter ido melhor que o previsto:

  • On Egypt. I think, Egypt has been a better performer than maybe we anticipated. We have seen the macro conditions play out as we anticipated, with a tightening of the spreads between the market rate and the official rate, which that dynamic compresses our gross profit in the market. However, that has been made off by very strong TPV growth of roughly 30%-plus. So we continue to be one of the most reliable providers of liquidity in that market for our global merchants to be able to do cross-border transactions. And as a consequence of that, and our strong both pay-in and pay-out combination in that market, that generates that liquidity, we've seen significant growth in payments volumes there cross-border, which has offset the compression in the unit gross profit, so to speak.

Argentina se beneficiou de uma melhora do negócio e não só uma normalização nas bases antigas:

  • It was one of the strong performers in Q2. Bear in mind that isn't because the spreads have widened dramatically there, although they have widened, but it's driven by a genuine acceleration in our Argentine business.

Buybacks:

  • Before I pass it over to Pedro, let me give you a more detailed update on our share buyback program. As a reminder, we disclosed in the first quarter results that our Board had authorized up to $200 million share buyback program to purchase Class A common shares as part of our capital allocation strategy. During the second quarter, we purchased $82 million, representing 9.2 million shares using our own funds.

Novo guidance:

  • Our new TPV expectation is explained by lower probability of volume ramp-ups on certain merchants, pipeline development that is skewed even more towards Tier 0 merchants with lower take rates and weaker emerging market currency expectations, going forward. For gross profit, our forecast takes into consideration these impacts that I just mentioned for TPV, while also assuming a growth of volumes in our local-to-local flows as our local businesses continue to thrive.

Opex:

  • We need to continue hiring more IT and product talent, strengthening our internal controls for the ever more complex businesses we manage and investing in control functions that protect our merchants' business and reputations across the Global South. I want to make sure I remind you that we still see significant operational leverage in the business midterm once these investments are carried out.

Remittances:

  • So one new vertical for us that we really started to lean into about 1.5 years, 2 years ago, but has really begun to pick up over the last few quarters. It's an interesting business in itself, but as we've also said, it also allows us to have very efficient liquidity in certain markets where netting is permissible. The list of markets where netting is permissible is actually a quite long one. There are some markets where it can't be done. Historically, Brazil was one where that was not possible. That's potentially in flux. But we don't really net in Brazil.