dLocal Reports 2024 Third Quarter Financial Results

Third Quarter 2024

Robust TPV growth, up 41% YoY and 8% QoQ, driven by strong performance across various verticals and countries

Record gross profit reaching $78M in the quarter, with net take rate stable at 1.2% since Q1 2024

Operating leverage expansion for the 2nd consecutive quarter, with Adjusted EBITDA over gross profit margin reaching 67% in Q3 2024 (+6 p.p. QoQ)

dLocal reports in US dollars and in accordance with IFRS as issued by the IASB

MONTEVIDEO, Uruguay, Nov. 13, 2024 (GLOBE NEWSWIRE) -- DLocal Limited ("dLocal", "we", "us", and "our") (NASDAQ:DLO), a technology - first payments platform today announced its financial results for the third quarter ended September 30, 2024.

We are encouraged by how we see the business evolving. After a soft first quarter, we see ourselves consistently gaining momentum. Despite a tough 2023 comparison, we have once again returned to delivering a quarter of record results in Total Payment Volume and Gross Profit. Our margins, cash position, and cash conversion have all improved quarter after quarter throughout 2024. A year that started off admittedly weak, has gained positive momentum.

We continue to deliver significant growth, with TPV re-accelerating to over 40% year-over-year, driven by our continued ability to expand our share of wallet of our existing global merchant base, and onboard new merchants. Our performance this quarter was strong across diverse verticals, countries and products, notably:

   -- We  ramped up operations in more countries, offered more payment methods 
      and gained share of wallet across important logos in the financial 
      services, SaaS, on demand delivery, advertising, ride-hailing and 
      commerce verticals. 
 
   -- We increased payments volume in Argentina, Mexico, Egypt and Other Latam 
      - mainly in Colombia and Peru - as well as Other Africa and Asia, with 
      strong performance in South Africa. 
 
   -- We reported record volume in our higher take rate cross-border $(XB)$ 
      business, surpassing the $3 billion quarterly mark in flows for the first 
      time. 

Our pipeline remains robust, including both growth opportunities with existing merchants as well as new merchants. During the period, we successfully integrated major players, including MoneyGram, one of the largest global providers of money transfer and payment services, and other significant remittance companies to serve them across countries in Latam, Africa and Asia. We also continued to ramp up volumes with one of the main Asian commerce players, expanding the regions in which we serve them, and have now gone live in Brazil with one of the largest global Fintech companies, out of Asia.

Moving on to profitability, this quarter's results showcase the resilience of our business model. We reached record gross profit of $78 million with net take rate stable at 1.2% since Q1 2024. This is a consequence of our differentiated value proposition, continuous pursuit of cost efficiencies, and the real value in solving complexities across emerging markets for our global merchants, which grants pricing power and differentiates from more commoditized payments offerings in the developed world. We achieve those results despite weakness in most emerging market currencies.

Our Adjusted EBITDA reached $52 million, despite continued investments in our engineering team, back-office capabilities and our license portfolio, all crucial for our long-term success. Although Adjusted EBITDA was down year-over-year, this represents the second consecutive quarter of increased operational leverage, with adjusted EBITDA over gross profit margin now at 67%. This demonstrates the operational leverage inherent in our business model, general philosophy of expense control and disciplined investment to deliver our long-term growth ambitions.

Cash generation, another strength of our financial model, was also solid. During the past 3 months we had net cash from operating activities, excluding merchant funds, less CAPEX amounting to $26 million, a cash conversion of practically 100% of Net Income.

On that note, our guidance remains unchanged in light of our Q3 2024 results and what we have seen through Q4. However, it is important to reinforce that Q4 results are heavily weighted towards the next 3-4 weeks, given the expected seasonal lift in commerce volumes and Black Friday.

In terms of technology and product development deployments during the quarter, we have launched our Smart Requests functionality, boosting our transaction performance, thereby improving conversion rate. We have also continued to develop increasingly advanced real-time cost calculation models to optimise processing costs, which also contributed to our gross profit achievement and stable net take rate.

A third area of innovation has been our launch of new and promising alternative payment methods $(APM.AU)$, with the successful deployment of integrations with Nupay in Brazil for global merchants.

Finally, we launched a new product to our suite of offerings, a stand alone Payment Orchestration option, which allows merchants to retain our Smart Routing, fraud detection, and unified reporting, while obtaining their own licenses and contracting directly with processors in each market. Although this model may result in a lower net take rate net of acquiring costs, it enhances our ability to capture share of wallet with relevant clients, and continues to add value to merchants through our single API connection and product functionalities, while delivering optimized conversion and cost results.

These improvements to our platform, as well as the development of new solutions, serve to deepen our competitive advantages in our markets, enhance the stickiness of our products, and potentially bring future revenue streams - all important pillars to our long-term growth opportunities.

As a reminder, dLocal is a young and dynamic company, less than eight years old, and yet, during this period, it has delivered extraordinary growth. We have expanded our roster of sophisticated enterprise merchants, increased our share of wallet with them, and built operations across the most relevant emerging markets globally, adding products, new APMs and licenses over these years.

Our growth underscores our success in serving and supporting these most demanding digital merchants with tailored solutions that meet their evolving needs. We navigate the highly complex and changing payment landscape and regulatory environments across emerging markets with one of the most complete emerging market processing ecosystems. The comprehensiveness of our One dLocal solution allows our merchants to add new markets and payment methods at a marginal incremental implementation cost, providing cost-efficient and speedy geographic expansion. This value supports the resilience of our business, despite operating in the volatile global south.

Secular trends also favour us. We have a huge and growing TAM underpinned by shifts towards payment digitalization, the growing importance of emerging and frontier markets, and surging demand for cross-border and instant payment methods. Industry forecasts predict the retail cross-border payments market will reach $65 trillion by 2030(1) , and we are well-positioned to be capturing a reasonable portion of the growth in this immense addressable market. Our ability to innovate and capitalize on these trends, coupled with our financial model characterized by operational leverage and high cash conversion, will fuel long-term value creation for our shareholders and merchants. We are just beginning to realize the compounding nature of this strategy, and we remain steadfast in our mission to deliver on this promise, in all the relevant geographies that our merchants present needs.

Thank you to those who have shown us continued support and confidence. We look forward to updating you on our progress in the coming quarters.

Third quarter 2024 Financial Highlights

   -- Total Payment Volume ("TPV") reached a record US$6.5 billion in the third 
      quarter, up 41% year-over-year compared to US$4.6 billion in the third 
      quarter of 2023 and up 8% compared to US$6.0 billion in the second 
      quarter of 2024. 
 
   -- Revenues amounted to US$185.8 million, up 13% year-over-year compared to 
      US$163.9 million in the third quarter of 2023 and up 8% compared to 
      US$171.3 million in the second quarter of 2024. This quarter-over-quarter 
      increase was mostly driven by the performance in Argentina and Egypt, as 
      well as the positive results in Other Latam and Other Africa and Asia. 
 
   -- Gross profit was US$78.2 million in the third quarter of 2024, up 5% 
      compared to US$74.5 million in the third quarter of 2023 and up 12% 
      compared to US$69.8 million in the second quarter of 2024. The 
      improvement in gross profit quarter-over-quarter was primarily due to 
      volume growth in Egypt, South Africa, Mexico and Other Latam markets. 
      These positive factors were partially offset by (i) Brazil, given the 
      share losses on credit card payments of a top merchant, as they were 
      granted a payment license and were required to connect directly with 
      acquirers in order to remain compliant; and (ii) Argentina, as we had 
      higher expatriation costs. 
 
   -- As a result, gross profit margin was 42% in this quarter, compared to 45% 
      in the third quarter of 2023 and 41% in the second quarter of 2024. 
 
   -- Gross profit over TPV was at 1.2% decreasing from 1.6% in the third 
      quarter of 2023 and stable compared to the second quarter of 2024. 
 
   -- Operating income was US$41.1 million, down 20% compared to US$51.5 
      million in the third quarter of 2023 and up 36% compared to US$30.2 
      million in the second quarter of 2024, a result of re-ignited growth and 
      cost management. In this context, operating expenses grew by 61% 

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November 13, 2024 16:17 ET (21:17 GMT)