Dlocal Ltd Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Tito Labarta - Goldman Sachs Group Inc - Analyst : Hi, I'm Tito. Thanks for taking my question. I got one question for two parts, I guess. Can you maybe give some color on the growth in Argentina. You mentioned there that there was some increase in advance and volume. So just to understand that a little bit better. How sustainable is that? Do you think that can increase? Was there any seasonality to that? And then in Mexico, I understand the deep volume from the commerce players. Just the partial volume loss with the large merchant. Can you give any additional color? Do you expect that to be a risk at all? The volume there, just understand what's going to happen? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 14, 2025 / 9:00PM, DLO.OQ - Q1 2025 Dlocal Ltd Earnings Call

Question: Tito Labarta - Goldman Sachs Group Inc - Analyst : Thanks, Pedro. That's helpful. Maybe just on the take rates in Argentina, you mentioned that those advanced involving set higher take rates. How sustainable is that, particularly if there's more interest in Argentina, maybe things become a little bit easier? Are those take rates in Argentina sustainable, you think?

Question: Tito Labarta - Goldman Sachs Group Inc - Analyst : Okay, that's good. Thank you, Pedro.

Question: James Friedman - Susquehanna International Group. - Analyst : Hey, guys. Congratulations. Good start to the year. I'll ask a couple just up front to get them out of way. So first, on the operating expenses, Pedro, they grew 3%. This is adjusted operating expenses, grew 3% in the quarter. That did seem to be lower than what was contemplated on an annual basis. So just trying to figure out, is that going to come back? Was that temporary? That's the first one. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 14, 2025 / 9:00PM, DLO.OQ - Q1 2025 Dlocal Ltd Earnings Call Then, yeah, in terms of that five basis point impact from the advertising client that's on slide, I closed the deck already, but it's that slide where you show the reconciliation of take rate. I was just wondering, that seems like a lot for what seemed to be one client. Is that contemplated to continue in the current guidance, and you know, any context on that one? So those are the two questions. Thank you.

Question: James Friedman - Susquehanna International Group. - Analyst : Okay, that makes sense. I'll drop back in the queue. Thank you.

Question: Guilherme Grespan - JPMorgan Chase & Co - Analyst : Thank you, Pedro, Jeff. Congratulations on the quarter and on the capital agenda, interesting announcement. The two questions on my side, the first one is related to other LATAM. Pretty strong performance in the quarter. I tried to calculate here the gross profit margin. It was 40%, so nothing crazy. It seems to be less related to take rates and more related to volumes. So just want a little bit more color if that statement makes sense or not? And if you can provide a little bit more granularity, what happened in other LATAM that was so strong? And then the second quarter is actually a follow-up, just in terms of the margins of the business EBITDA margins, also strong this quarter. Just want to understand how you're seeing the evolution throughout the quarters. If we should see these margins by some reason decline, or if it's natural to expect some either stable or some increase on those margins? Thank you.

Question: Guilherme Grespan - JPMorgan Chase & Co - Analyst : That's clear, thank you for the explanation. Congratulations again.

Question: Jorge Kuri - Morgan Stanley & Co LLC - Analyst : Thank you. Hi, everyone, and congrats on the quarterly numbers. I have two questions if I may. The first one is on Brazil. Would you mind double clicking on both revenues and gross profit in Brazil? Revenues are down 20% year on year. Gross profit, down 27%. Your gross profit margin, down 400 basis points. You did mention that there was a one-off cost impact. How much of that decline in gross profit is that one of how much of the decline in revenues is something you can gain back out of the path forward look for Brazil both revenues and gross profits? I mean, given it's still your biggest or second biggest market, I think it's important to drill a little bit more on the dynamics there. And then my second question is, I know you don't have a big CapEx, you're generating a decent amount of cash flow, but it still feels like distributing half of your cash back to investors. By the way, your float is very small, so it's back to the founders. In these early days of emerging market growth and e-commerce growth and everything you said, Pedro, at the end of your presentation about just the excitement and massive opportunity in emerging markets, wouldn't that be just best used in redeploying to the company? Thank you.

Question: Jorge Kuri - Morgan Stanley & Co LLC - Analyst : Great. Thank you, Pedro, and congrats again.

Question: Neha Agarwala - HSBC - Analyst : Hi, Pedro. And congratulations on the quarter. Just two quick questions. First, on visit to Mexico, the softness of volumes, where do you think these volumes are going in terms of your competitors? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 14, 2025 / 9:00PM, DLO.OQ - Q1 2025 Dlocal Ltd Earnings Call And second question, you noted that the processing costs in South Africa and Nigeria inched up a bit. Could you explain why that happened? Because we're noticing that the cost of services percentage of revenues have been going up. So just like to get more clarity on that and how that should trend. Thank you so much.

Question: Neha Agarwala - HSBC - Analyst : That's good. If I could just go back on the competition, could you point out maybe one or two things that you could do differently or that you're trying to do to reignite growth in Brazil and Mexico as you pointed out?

Question: Neha Agarwala - HSBC - Analyst : Perfect, thank you so much.

Question: John Coffey - Barclays - Analyst : Great, thank you very much for taking my call. Pedro, one question for you. I think I read an interview that you made earlier in the year. I think you had mentioned that dLocal was considering some kind of M&A. And then again, you mentioned M&A, either in your prepared comments or in response to somebody. So I was wondering, when it comes to M&A, are you just sort of casually browsing the store right now or their particular functions or licenses or capabilities or Rolodex of clients that you're actively pursuing and considering a purchase for?

Question: John Coffey - Barclays - Analyst : Great. Thank you. I just have one follow up for Jeff. When we consider your OpEx for the remaining three quarters, I was wondering -- and I know it's hard to say, but given that you're in this period of investment, when we think about like technology costs or sales costs or G&A, should we expect the Q2, Q3, Q4, are these roughly in line with what you see in Q1 or is there some sort of like higher peaks or low points during the remaining three quarters? Just trying to get a certain sense of what that investment cadence could look like?

Question: John Coffey - Barclays - Analyst : All right, thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 14, 2025 / 9:00PM, DLO.OQ - Q1 2025 Dlocal Ltd Earnings Call

Question: Cassie Chan - Bank of America Merrill Lynch - Analyst : Great. Thanks. I just wanted to ask about trends that you're seeing in April or May that have been relatively similar to what you've seen in the first quarter or in March. And are you kind of assuming that macro continues to remain volatile, but relatively steady overall for the remainder of the year? Thank you.

Question: Cassie Chan - Bank of America Merrill Lynch - Analyst : Okay, that's helpful. And then I guess on that -- the take rate bridge that you guys provided, so the higher share of payouts, was some weakness in the key advertising merchant and then the one-off processing cost. Are these expected to all continue into QQ and the rest of the year? Just thinking about how the shape of the rest of the year comes out in terms of the gross profit take rates that we should be modeling.

Question: Cassie Chan - Bank of America Merrill Lynch - Analyst : Okay, thank you.