Money transfer company Western Union (NYSE:WU) and payments platform dLocal (NASDAQ:DLO) announced on Tuesday a strategic alliance to enable digital payment methods on the former's online platforms in Latin America. The agreement incorporates alternative and locally relevant payment methods—such as ...

Core Viewpoint - dLocal Limited has successfully closed a secondary offering of 17,250,000 Class A common shares at a price of $12.75 per share, with no proceeds going to the company itself [1]. Group 1: Offering Details - The offering included 2,250,000 Class A common shares from the full exercise of the underwriters' option [1]. - The underwriting group was led by J.P. Morgan, Goldman Sachs & Co. LLC, and Morgan Stanley, with BTG Pactual and Citigroup also participating as joint bookrunners [2]. Group 2: Regulatory Information - dLocal has filed an automatically effective shelf registration statement with the SEC for the offering, which was made only by means of a prospectus [3]. Group 3: Company Overview - dLocal operates a technology-first payments platform that facilitates local payments in emerging markets, connecting global enterprise merchants with billions of consumers across over 40 countries in Africa, Asia, and Latin America [5]. - The "One dLocal" platform allows global companies to manage payments, payouts, and fund settlements without the need for multiple local entities or payment processors [5].

Core Insights - DLocal's stock price fell nearly 8% following the announcement of a secondary offering of shares by a major shareholder, contrasting with the S&P 500 index, which rose almost 1% on the same day [1][2]. Group 1: Secondary Offering Details - A major shareholder associated with General Atlantic is offering 15 million shares of DLocal's Class A common stock at a price of $12.75 each, which is significantly lower than the previous closing price [2]. - The underwriting syndicate for this offering includes JPMorgan Chase, Goldman Sachs, and Morgan Stanley, who have a 30-day option to purchase an additional 2.25 million shares [4]. Group 2: Market Reaction and Investor Sentiment - The sale of shares at a discount typically raises concerns among investors, but it does not necessarily reflect a loss of confidence in the company, as there are various reasons for such actions that may relate more to the seller's circumstances than the investment itself [5].

Group 1 - dLocal Limited announced a secondary offering of 15,000,000 Class A common shares at a price of $12.75 per share, with no proceeds going to the company [1] - The offering is expected to close on September 5, 2025, subject to customary closing conditions [1] - Underwriters have a 30-day option to purchase an additional 2,250,000 Class A common shares from the Selling Shareholder at the public offering price [1] Group 2 - The offering is being managed by an underwriting group led by J.P. Morgan, Goldman Sachs & Co. LLC, and Morgan Stanley, with BTG Pactual and Citigroup as joint bookrunners [2] - dLocal has filed an automatically effective shelf registration statement with the SEC for the offering [3] Group 3 - dLocal operates a technology-first payments platform that connects global enterprise merchants with consumers in over 40 emerging market countries across Africa, Asia, and Latin America [5] - The "One dLocal" platform allows global companies to manage payments, pay-outs, and fund settlements without needing multiple local entities or payment processors [5]

Core Viewpoint - dLocal Limited has initiated a secondary offering of 15,000,000 Class A common shares, with no proceeds going to the company itself [1] Group 1: Offering Details - The offering is led by an entity associated with General Atlantic, and dLocal will not sell any shares in this offering [1] - The Selling Shareholder plans to provide underwriters with a 30-day option to purchase an additional 2,250,000 Class A common shares at the public offering price [2] - The underwriting group includes J.P. Morgan, Goldman Sachs & Co. LLC, and Morgan Stanley as global coordinators and joint bookrunners, along with BTG Pactual and Citigroup as joint bookrunners [2] Group 2: Regulatory Information - dLocal has filed an automatically effective shelf registration statement with the SEC for this offering [3] - Interested investors are encouraged to read the prospectus and related documents filed with the SEC for comprehensive information [3] Group 3: Company Overview - dLocal operates a technology-first payments platform that facilitates local payments in emerging markets, connecting global merchants with consumers in over 40 countries across Africa, Asia, and Latin America [5] - The "One dLocal" platform allows global companies to manage payments, payouts, and fund settlements without needing multiple local entities or payment processors [5]

Core Viewpoint - DLocal Limited has experienced a significant surge in its stock price following a strong earnings report, indicating a potential shift in market sentiment towards the company's growth prospects and operational efficiency [2][12]. Financial Performance - Total Payment Volume (TPV) reached a record $9.2 billion, reflecting a 53% year-over-year increase and a 14% sequential growth, marking the third consecutive quarter of over 50% growth [2]. - Revenue for the quarter was $256.5 million, exceeding estimates of $229.7 million, representing a 50% year-over-year growth and an 18% increase from the previous quarter, with constant currency revenue growth at 63% [3]. - Adjusted EBITDA was $70.1 million, surpassing expectations of $55.8 million, up 64% from the previous year, with margins steady at over 27% [4]. - Free cash flow increased by 156% year-over-year to $48 million, demonstrating strong cash generation even amid ongoing investments [4]. - Operating expenses grew only 9% year-over-year, significantly lower than revenue growth, indicating effective cost management and operational leverage [5]. Guidance and Market Sentiment - Management raised full-year guidance, now projecting revenue of approximately $1.01 billion and adjusted EBITDA of $274 million, reinforcing confidence in sustained growth momentum [7]. - The company has improved its communication and execution under CEO Pedro Arnt, which has positively influenced investor perception [8]. Growth Drivers and Competitive Positioning - DLocal's growth is supported by three structural tailwinds: a large addressable market in underpenetrated digital payments, increased share-of-wallet with existing merchants, and early-stage adoption by new clients [9]. - The company differentiates itself by innovating local payment infrastructure in emerging markets, serving global companies in regions with low digital penetration while maintaining high margins [10]. Analyst Attention and Stock Outlook - Following the strong quarterly results, HSBC upgraded DLocal's stock from Hold to Buy, raising its price target from $11.50 to $15, citing cost discipline and improved capital efficiency as key factors [11]. - The recent stock rally of 43% raises questions about whether the optimism has already been priced in or if further revaluation is possible for this payments leader [13].

Core Viewpoint - DLocal's strong Q2 performance led to a significant stock price increase and an upgrade in rating by HSBC, reflecting positive market sentiment and growth potential [1][2]. Financial Performance - DLocal reported Q2 revenue of $256 million, exceeding market expectations by 11% and up from $171 million in the same period last year [1]. - The company's Q2 earnings per share (EPS) were $0.14, surpassing the market average estimate of $0.13, although slightly down from $0.15 in the previous year [1]. - HSBC raised its target price for DLocal to $15, indicating a potential upside of 28.31% from the closing price [1]. Analyst Insights - Analyst Neha Agarwal highlighted DLocal's significant long-term growth potential and recent growth momentum, suggesting the company is on the right track [2]. - HSBC increased its EPS forecasts for DLocal for 2025 to 2027 by 6% to 9%, with a projected gross profit of $396 million for 2025 [2]. - Morgan Stanley maintained a "neutral" rating on DLocal but raised its target price to $15, noting a year-to-date stock price increase of over 25% compared to a 10% rise in the S&P 500 [2].

Group 1 - DLocal Limited (NASDAQ: DLO) is characterized by a low price-to-earnings ratio combined with a 50% revenue growth, indicating strong growth potential despite being a small company [1] - The company is well established in its industry, suggesting a solid market position and operational stability [1] - The analysis focuses on identifying undervalued stocks with growth potential, aligning with value investment strategies [1]

Group 1 - DLocal reported quarterly earnings of $0.14 per share, exceeding the Zacks Consensus Estimate of $0.13 per share, but down from $0.15 per share a year ago, representing an earnings surprise of +7.69% [1] - The company posted revenues of $256.46 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 11.00%, compared to $171.28 million in the same quarter last year [2] - DLocal has surpassed consensus EPS estimates three times over the last four quarters and topped consensus revenue estimates two times in the same period [2] Group 2 - The stock has underperformed the market, losing about 2.6% since the beginning of the year, while the S&P 500 gained 9.6% [3] - The current consensus EPS estimate for the coming quarter is $0.15 on revenues of $245.84 million, and for the current fiscal year, it is $0.60 on revenues of $969.24 million [7] - The Zacks Industry Rank for Financial Transaction Services is in the top 22% of over 250 Zacks industries, indicating a favorable outlook for the industry [8]

Financial Data and Key Metrics Changes - The company achieved a record high Total Payment Volume (TPV) of $9.2 billion, marking a 53% year-over-year growth and a 14% quarter-over-quarter increase [4][18] - Revenue reached $256 million, growing 50% year-over-year or 63% on a constant currency basis, with an 18% quarter-over-quarter increase [5][19] - Gross profit hit a record of $99 million, up 42% year-over-year or approximately 55% on a constant currency basis [5][20] - Net income for the quarter totaled $43 million, negatively impacted by the Argentine peso devaluation [5][25] - Free cash flow was $48 million, a significant 22% increase from the first quarter [8][25] Business Line Data and Key Metrics Changes - Growth was particularly strong in remittances and commerce, followed by SaaS, delivery, streaming, and ride-hailing, with some weaknesses in advertising [18] - The company added three new licenses in the UAE, Turkey, and the Philippines, enhancing its portfolio of financial services licenses [8] Market Data and Key Metrics Changes - The top three markets now represent less than 50% of revenues, down eight percentage points since 2023, indicating increased geographic diversification [12] - Revenue in the rest of the markets is growing almost three times faster compared to the last four quarters [12] Company Strategy and Development Direction - The company is focused on expanding its merchant base and increasing share of wallet by integrating additional Alternative Payment Methods (APMs) [9] - The strategy includes significant investment in product innovation, with recent launches such as SmartPix in Brazil and buy now, pay later integrations [13][14] - The company aims to leverage stablecoin solutions, positioning itself as a key player in the emerging technology space [14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of 2025, citing strong performance in the first half and sustained momentum across businesses [27][29] - Risks highlighted include evolving macroeconomic conditions, regulatory changes, and potential currency devaluation [28][29] Other Important Information - The company announced a transition to a majority independent Board and the cancellation of treasury shares held on the balance sheet [30][32] Q&A Session Summary Question: What drove the better-than-expected results? - Management noted strong momentum across Brazil, Mexico, and other markets, with a significant increase in localization of payments by global merchants [36][39] Question: Is the growth coming from a few particular merchants or across the board? - The growth is driven by the top 20 merchants, indicating a broad-based increase rather than concentration in a few [41][43] Question: Can you clarify the one-off processing costs in Brazil? - Management confirmed that part of the gain was a reversal, but Brazil is expected to sustain momentum in gross profit [47][50] Question: How do you see stablecoins impacting the business? - Management views stablecoins as an opportunity rather than a threat, emphasizing the company's unique position in providing on-ramps and off-ramps for stablecoin transactions [51][53] Question: What is the outlook for take rates? - Management expects a gradual decline in take rates, influenced by increased volumes and the introduction of new products [56][57] Question: Can you elaborate on tariffs as a risk? - Management highlighted potential risks from increased tariffs on cross-border e-commerce, particularly in Mexico, but noted no current negative impacts [66][70] Question: What is the strategy for offline payments? - The company is developing capabilities for offline payments in response to specific merchant contracts, indicating a shift in strategy [71][72] Question: What should be expected regarding operating expenses in the second half of the year? - Management anticipates an increase in operating expenses due to hiring and expansion into new markets and products [73][74]