Dlocal Limited Reports Record Earnings Amid Growth and Challenges

Dlocal Limited ((DLO)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call of Dlocal Limited painted a picture of robust financial health, marked by record-breaking revenue and gross profit figures. The company showcased impressive growth in Total Payment Volume (TPV) and strategic advancements in partnerships and technology. However, the call also highlighted some challenges, such as declining revenues in Brazil and increased costs in certain markets. The introduction of a dividend policy underscored the company’s confidence in its cash generation capabilities.

Record Highs in Revenue and Gross Profit

Dlocal Limited reported record highs in both revenue and gross profit, with revenue reaching $217 million and gross profit hitting $85 million. This performance underscores the company’s strong operational capabilities and its ability to drive financial growth.

Significant TPV Growth

The company achieved a Total Payment Volume (TPV) of $8 billion, marking a 53% year-over-year growth or 72% in constant currency, along with a 5% increase from the previous quarter. This growth reflects the company’s expanding footprint in the payment processing industry.

Strong Geographic Diversification

Dlocal’s geographic diversification strategy paid off with notable contributions from regions such as Chile, Pakistan, Nigeria, Turkey, Brazil, and other Latin American markets. This was driven by cross-border payment volumes and sector growth in areas like remittances, commerce, and streaming.

Strategic Partnerships and Technological Advancements

The company strengthened its partnerships with major players like Temu, Zepz, and Rappi. Technological advancements, including the use of AI and automation, led to a 1.2 percentage point increase in conversion rates through machine learning models, enhancing operational efficiency.

High Free Cash Flow Conversion

Dlocal demonstrated strong cash generation capabilities with an 85% conversion rate of free cash flow to net income, highlighting its efficient financial management.

Dividend Policy and Extraordinary Dividend

The announcement of a one-off dividend of approximately $0.525 per common share and a new policy providing annual dividends equal to 30% of the company’s free cash flow reflects Dlocal’s commitment to delivering shareholder returns while maintaining growth flexibility.

Brazil Revenue and Gross Profit Decline

Despite overall strong performance, Brazil experienced a 20% decline in revenue and a 27% drop in gross profit year-over-year. This was primarily due to a shift to a lower take rate model and one-off incremental processing costs.

Softness in Mexico

Mexico saw a 3% quarter-over-quarter decrease in local-to-local TPV, impacted by a partial loss of share of wallet with a large merchant, affecting transaction volumes.

Increased Processing Costs in Africa

Higher processing costs in South Africa and Nigeria negatively impacted gross profit, presenting challenges in these markets.

Forward-Looking Guidance

Looking ahead, Dlocal Limited remains optimistic about its growth trajectory. The company plans to continue investing in technology and operations to sustain its financial performance. With a net retention rate of 144% in TPV and an adjusted EBITDA to gross profit ratio of 68%, Dlocal is well-positioned for future growth. The introduction of a dividend policy aligns with their strategy to balance shareholder returns with growth opportunities.

In conclusion, Dlocal Limited’s earnings call highlighted a strong financial performance with record revenue and gross profit, alongside significant TPV growth and strategic advancements. While challenges in certain markets were acknowledged, the company’s confidence in its cash generation capabilities and commitment to shareholder returns were evident. Investors will be keenly watching how Dlocal navigates these challenges and leverages its strengths for continued success.