Dlocal Ltd Q2 2024 Earnings Call Transcript

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

Question: Tito Labarta - Goldman Sachs & Company, Inc. - Analyst : Hi, good evening. Thank you for the call and taking my question. I guess my question is on the guidance, just to understand a little bit the dynamics there and thanks for the explanation. That was helpful. If I go back a little bit, in your first-quarter conference call, you were already kind of halfway through 2Q and you felt comfortable that you could deliver the lower end of the guidance, and I completely understand all the volatility in emerging markets. So I just want to understand if something changed from the last conference call to now. One, your gross profit, you had kind of mentioned that March was very strong. This looks like it had been running below that March rate. And going forward, you expect a modest increase in gross profit from here, it seems. But just to understand if there was anything different from 2Q from when you had the 1Q conference call to today to have you a little bit more cautious on delivering that guidance on? And then I have another question after that. 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. AUGUST 14, 2024 / 9:00PM, DLO.OQ - Q2 2024 Dlocal Ltd Earnings Call

Question: Tito Labarta - Goldman Sachs & Company, Inc. - Analyst : Okay. No, that's very helpful. Pedro. Thanks for the color there. And I guess a follow-up on that, right. And you mentioned you're growing more in local to local. We did see a big drop in the gross take rate, but the net take rate, I guess, maybe positively held up fairly well. I guess, do you expect this shift towards more local to local to continue? Could that put maybe more pressure on the gross take rate? Do you think may be -- And again, I know this is hard to predict -- but that the net take rate is maybe stabilizing a little bit from what we had seen in the prior quarters?

Question: Soomit Datta - New Street Research - Analyst : Hi, there. Thanks, guys, for the opportunity to ask a couple of questions. And first of all, first of all, just on -- just to go back to the group, the merchant repricing point. As you said, you're saying that there is a kind of long queue of people lining up to try and reduce prices, but how much visibility do you have on that in terms of looking forward in the coming months? I guess we're all a little surprised by developments the beginning of the year. What sort of visibility do you have on that process, particularly given the concentration of merchants remains still pretty high? So that's the first question. If I could just squeeze in another quick one, just a more detailed one on Egypt, actually, where there was obviously the devaluation effect, but actually the gross profits seemed to hold up pretty well relative to what I was looking for and relative to how things trended in Argentina. So maybe just a bit of detail on how that will play through in Egypt would be helpful. Thanks very much.

Question: Guilherme Grespan - J.P. Morgan Securities LLC - Analyst : Hello. Thank you, Pedro, for the call. Two questions on my side. The first one is, I guess, Pedro, if you can't provide a quick remittances evolution. I think was this one of the opportunities that (technical difficulty) going forward. Just highlight of how this is evolving? And if (technical difficulty) specifically, can you comment a little bit on which countries you can use those remittances different flows (technical difficulty) into some preservation to offset the cross-border business? And then the second question is actually not sure if a technicality, but just to understand. Nigeria gross profit was higher than (technical difficulty) Just want to understand what exactly drove this mismatch. Thank you

Question: Guilherme Grespan - J.P. Morgan Securities LLC - Analyst : That's super clear. And Nigeria, (technical difficulty) for the gross profit to be higher.

Question: Carlos Gomez - HSBC Securities, Inc. - Analyst : Hello, good afternoon. This is Carlos Gomez from HSBC. I have two questions. The first one refers to your assumptions. You mentioned that you are trying to forecast, to some degree, also what the foreign exchange is doing. Which markets are of particular concern for you? Which ones do you think we could see another significant foreign exchange adjustment? Is it Egypt, Argentina, any others that we are not looking at right now? And second, regarding your investment phase and the necessary investments that you are making now, would you be able to quantify how many quarters or years do you consider this investment phase will take? Thank you.

Question: Carlos Gomez - HSBC Securities, Inc. - Analyst : Thank you very much for that detailed answer on the ForEx. I understand that you are saying that you expect the general depreciation of the currencies versus the US dollar. But as you have seen, particular market can have an impact on the company. Again, Argentina, Egypt, Turkey, any other currencies that we should be watching carefully?

Question: Cassie Chan - BofA Global Research - Analyst : Hey, this is Cassie from Bank of America. I just wanted to ask if there's anything you can tell us about quarter-to-date trends in July and August, relative to the second quarter, anything you're seeing there either by TPV or gross profit? And I guess how should we think about the third quarter versus the fourth quarter? Understanding you don't give quarterly guidance? And just how should we think about it in terms of -- maybe it's third quarter and your mind is probably the [trough Q4], we're expecting to see reacceleration in fourth quarter. Anything there would be helpful. Thank you.

Question: Cassie Chan - BofA Global Research - Analyst : Got it. That's helpful. And then I guess just wanted to ask you guys had mentioned some delays in new launches last quarter. Did that materialize in the second quarter? Are you expecting that back half? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 14, 2024 / 9:00PM, DLO.OQ - Q2 2024 Dlocal Ltd Earnings Call And I guess the NRR, is that what's kind of driving the NRR, which was about 100% this quarter? I know you guys mentioned Nigeria but Just any thoughts or details there. And [can] we know what you're expecting that metric to be for fiscal '24?

Question: Cassie Chan - BofA Global Research - Analyst : Thank you.

Question: John Coffey - Barclays Capital Inc - Analyst : Hi. Thanks for taking my call. Just two quick questions I can ask; both at once. I think you had mentioned the tax rate had declined to about 18% this quarter. Is that a good way to think about the dLocal tax rate going forward in future periods quarters years? And the second is, it seems like Pedro, from your comments, it doesn't seem like there's any real change in your medium-term guidance. Are there any other little caveats you'd like to add from the guidance given last year in your Investor Day?

Question: John Coffey - Barclays Capital Inc - Analyst : Great. Thank you.

Question: Jamie Friedman - Susquehanna International Group. - Analyst : Hi. Thank you. Pedro, it's Jamie at Susquehanna. I just wanted to ask about constant currency. Is there a structure that you may be thinking about you could share to gauge the performance of the company on a constant currency basis, both from and as reported, but also from an investor relations perspective because I think a lot of us in the buy-side are struggling to meter that. Your old chart used to be more forthcoming about that. Is it possible to share that with an Investor Relations message?

Question: Jamie Friedman - Susquehanna International Group. - Analyst : Okay. I mean, yes, I think it would be helpful. You may be giving us too much credit if you think we could do it. And I mean, we try by certain markets of 40 markets is, it's a treasury assignment. It's hard for an analyst. And then so to go back to John's question about the medium-term guidance. I mean, I guess asked another way, is there anything that, you know, now that you didn't know when you took the job? I mean, you said in your prepared remarks, this is still a great TAM, a great company. And I know you love the payments universe, but is there anything operationally that you know now that you didn't know.

Question: Jamie Friedman - Susquehanna International Group. - Analyst : Great. Thank you. I'll jump back in the queue.

Question: Matt Coad - Autonomous Research - Analyst : Hey, guys. Thanks for taking the question. I just wanted to go back to the net take rate discussion. And Pedro, you gave some great detail on like kind of what drove the conversation with your largest client. But I was hoping we could have pine on that a little bit more, right, to like what are -- what were the factors in the market that allowed your largest merchant to make you sit down and lower those tiers? And why wouldn't your merchants 2 through 10 be able to do the same thing? If we could better understand that, I think we could maybe put a floor on the net take rate and get excited about the stock again. Thanks.

Question: Matt Coad - Autonomous Research - Analyst : That's super helpful, Pedro. And then just one follow-up kind of thinking about like the long term, right. I was hoping you could opine a little bit on like what you believe your moat is. And this is kind of from a competitive dynamic standpoint as well, just thinking your net take rate is [115] basis points today, your largest global peers like [Australia and Ardi] and sub company like Nuvei, they all have net take rates in there developed markets have save 15, 20 basis points, right? So you have a really attractive revenue pool that they might want to come after. So I was hoping you could kind of like just talk big picture about like what's your moat? Why won't your merchants leave if a company like [Ardi are stripe] offers them more attractive rights. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 14, 2024 / 9:00PM, DLO.OQ - Q2 2024 Dlocal Ltd Earnings Call

Question: Matt Coad - Autonomous Research - Analyst : That's really comprehensive answer, Pedro. Thank you.