DLocal (US:DLO)2024-11-14 04:17Financial Data and Key Metrics Changes - Total payment volume (TPV) reached $6.5 billion, up 41% year-over-year and 8% quarter-over-quarter [26] - Gross profit reached a record of $78 million, up 5% year-over-year, with adjusted EBITDA of $52 million, representing an adjusted EBITDA margin of 28% [30][39] - Net income was $27 million, down 42% quarter-over-quarter and 34% year-over-year, primarily impacted by lower finance results [40] Business Line Data and Key Metrics Changes - Cross-border flows grew 12% quarter-over-quarter and 35% year-over-year, reaching $3 billion in TPV [26] - Local-to-local TPV increased by 4% quarter-over-quarter and 47% year-over-year, with strong performance in Mexico and Argentina [26] - Pay-ins business grew 8% quarter-over-quarter and 35% year-over-year, while payouts business grew 7% quarter-over-quarter and nearly 60% year-over-year [28] Market Data and Key Metrics Changes - Strong performance reported in Argentina, Mexico, Egypt, and other Latin American countries, particularly Colombia and Peru [11][26] - Significant growth in Africa and Asia, with gross profit in these regions increasing by almost 50% year-over-year [31] Company Strategy and Development Direction - The company is focused on expanding its merchant base and enhancing its product offerings, including the launch of new payment methods and technology improvements [18][22] - Continued investment in licenses across emerging markets is seen as a competitive advantage, with new licenses obtained in Nigeria, Ecuador, and Uganda [23][87] - The orchestration product allows merchants to maintain flexibility while benefiting from the company's technology stack [90] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term growth potential, driven by the increasing demand for digital payments and the company's ability to innovate [48][49] - The company is cautious about Q4 results due to seasonality but noted strong trends in TPV so far [93] - Management emphasized the importance of diversification in mitigating risks associated with emerging markets [53][64] Other Important Information - The company achieved a cash conversion rate of nearly 100% to net income, with a strong liquidity position of $320 million [42] - Operating expenses reached $37 million, a 6% decrease quarter-over-quarter, while still investing in product development and IT capabilities [37] Q&A Session Summary Question: Gross profit loss in Brazil - Management explained that the loss was due to a specific merchant's regulatory changes requiring direct contracts with acquirers, which is not expected to affect other merchants [54][56] Question: Decrease in G&A expenses - Management confirmed that while G&A expenses decreased, investments in product and IT would continue, with expectations of slight increases in costs moving forward [57][58] Question: Strong gross profit growth in other geographies - Management highlighted that many newer markets are cross-border and that diversification is driving long-term growth opportunities [62][64] Question: Fourth quarter guidance as a run rate for 2025 - Management indicated that while Q4 is expected to show strong seasonal growth, it is too early to provide guidance for 2025 [66][68] Question: Competitive advantage in remittances - Management noted that speed of payout and competitive FX pricing are key advantages, along with a strong technology stack and local integrations [70][72] Question: Gross profit margin expectations - Management discussed the potential for cost reductions as the business scales, but noted that predicting specific margins is challenging due to various factors [75][78] Question: Future investments and operational leverage - Management indicated that disciplined investments would continue for several quarters before achieving full operational leverage [81][82] Question: Impact of new licenses on income statement - Management clarified that while licenses do not directly reduce costs, they provide a competitive advantage that could lead to increased volumes over time [87][88] Question: Payments orchestration solution - Management explained that the orchestration solution is optional for merchants, allowing them to choose between maintaining simplicity or having direct contracts with processors [90]