Dlocal Ltd Q4 2023 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. Good morning, everyone, thank you for the call and taking my questions. A couple of questions, I guess if I can. Maybe to start with Argentina, just given all the moving parts there, just to clarify from the comments from -- I think you mentioned that there was more local to local transactions now, is that mean that your existing merchants, are they getting a local subsidiary and then are able to interact locally or are they being as they are and not being able to do cross-border keeping money in the country? Just to understand some of the mechanics given the issue there. And then would you expect this to sort of normalize in 1Q already or would it take longer to normalize? And somewhat related to that, just on the gross profit guidance of $320 million to $360 million, what does that imply for Argentina, does that mean if Argentina sort of remains as it is -- you're sort of at the midpoint of that guidance. Do you expect Argentina to improve deliver either at the higher and the refinery, we are in a good course at the lower end. And then my second question, I guess is more on Nigeria and Egypt. Could you also see big devaluations there in the first quarter of this year and we did see a big growth in both Nigeria and other Asia and Africa, if you can help us understand what the potential impact of those devaluation should be, I guess in 1Q and how that may have been reflected in the guidance? Thank you.

Question: Tito Labarta - Goldman Sachs Group, Inc. - Analyst : Great. That's helpful. Very clear, Pedro. Maybe just a follow-up, if I can. On -- back on Argentina, just to make sure I understood correctly, see that merchants are opting for local settlement, that means that they're basically keeping money in Argentina, and I guess they're not bringing that -- I'm just trying to think how that necessarily impact their business. But I guess the assumption would be as things normalize, they would eventually expatriate that money back to their home country. And then could you get some additional revenues as that happened, just to make sure I understood that correctly.

Question: Neha Agarwal - HSBC, Research Division - Analyst : Hi. Thank you for taking my question. Just a quick one in terms of volume growth, are you seeing a pickup or slowdown from your key merchandising changes in terms of which verticals are more important or less important, anything to highlight in terms of volume growth? And then second question is again on Argentina, should we expect Argentina, Nigeria -- Nigeria, you mentioned could be a bit of a headwind, but what other distortions can we expect a decent first half of this year from countries like Argentina, Nigeria and any specific colour would be veery helpful. Thank you very much.

Question: Neha Agarwal - HSBC, Research Division - Analyst : Perfect. Super clear Pedro. One last one, I know this year, the focus is more on setting up the organization and investing a bit more on setting up the company, but any plans in terms of revenue diversification? You talked about additional services like (Inaudible) is any of new services on your mind that we would expect during this year or next year? Thank you so much.

Question: Jamie Friedman - Susquehanna International Group, LLP. - Analyst : Hi, guys. Thank you for taking my questions. I like the new format of the presentation by the way I just want to mention, but I wanted to ask about the revenue growth from new merchants up 68.6%, which accelerated from the third quarter. Can you help unpack that? Is that from the new merchants that you had alluded to earlier in the year or if you could share a framework about how to think about new framework by new merchant contribution, it would be helpful. Still there Pedro?

Question: Jamie Friedman - Susquehanna International Group, LLP. - Analyst : Okay. Just wanted to make sure you guys didn't get disconnected.

Question: Jamie Friedman - Susquehanna International Group, LLP. - Analyst : Okay. And maybe just as a follow-up to that same direction, I should know this, but can you remind us how much of the TPV or revenue come from the installed base each year? If that's an obvious question, I apologize. But if not, is there a way to think about that?

Question: Jamie Friedman - Susquehanna International Group, LLP. - Analyst : Great Thank you, Maria. Thank you, Pedro.

Question: Matt Coad - Autonomous Research - Analyst : I think that was for me. The [Matt Coad] from Autonomous Research. Guys your language, I feel like changed a little bit in terms of potential M&A. Just wanted to ask a question about that. Just if you could double-click on kind of like what assets -- what type of assets would you treat.

Question: Matt Coad - Autonomous Research - Analyst : Super helpful Seba. Thank you. And then just as my follow-up guys, the short term investment cycle that you guys have touched on so far today, just kind of wanted to unpack that a little bit more and just -- it makes sense to us right like there's a lot of reinvestment that needs to occur to run a complicated cross-border payment system. Could you unpack a little bit like of why that's occurring today and why it hasn't occurred over time? And kind of just reinforce why you think this is kind of a onetime investment cycle rather than just natural reinvestment that needs to occur consistently over time.

Question: Matt Coad - Autonomous Research - Analyst : All right. Thank you. I just had one follow up, given that I think we only have, like, you know, 10 or 12 more days left in Q1, you've seen a lot of the quarter already. Do you have any idea early comments you could say about anything that you may have seen in January, February or what we've seen of March so far regarding any early indicators and just any thoughts you have Q1

Question: Matt Coad - Autonomous Research - Analyst : All right. Thanks, Pedro.

Question: Ashwin Shirvaikar - Citigroup Inc., Research Division - Analyst : Thank you. I appreciate all the detail and colour on the call, Pedro, a question for you. As I sort of look at the stock over time. One of the repeat issues for the stock has been just dearly definition of where you focus, which is emerging markets, which implies, narrow situations, volatility, influence of regulation by country so on. So is there anything you think you could do from a organizational design or risk management perspective, and I know it may already be in progress, but just want to figure out what you can do to and avoid sort of the quarter to quarter volatility by country that has played the stock for many quarters in a row now.

Question: Ashwin Shirvaikar - Citigroup Inc., Research Division - Analyst : Okay. Now that makes a ton of sense. I guess the second question is just with the with regards to all the changes that have been going on at Dlocal, as you've been having conversations with your clients, do they care about all the internal changes going on? Or is it more or less that they need these capabilities in emerging markets? The list of companies that provide services across multiple markets is a short list. And so the TPV growth should continue at a healthy level.

Question: Ashwin Shirvaikar - Citigroup Inc., Research Division - Analyst : Thank you.

Question: Kaio Prato - UBS Investment Bank, Research Division - Analyst : Hello, everyone. Good morning. Thanks for the opportunity. I have two on my side, please. First is a quick follow-up on Argentina, please. You mentioned in your first answer that believe that merchants will probably come back, it's quite for operations. But just to understand here what makes you comfortable with that? Like in other words, why do think it would make sense for merchants to opt for cross border again to today, you have probably worked with other options. So just like to understand if you're already seeing increasing demand for cross border again at this point and then I will come back to the second thing. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 19, 2024 / 12:30PM, DLO.OQ - Q4 2023 Dlocal Ltd Earnings Call

Question: Kaio Prato - UBS Investment Bank, Research Division - Analyst : Okay, good. This is very clear. Thank you, Pedro. And the second one is regarding to your latter that you mentioned that about the license portfolio, I just would like to understand if you could give us an example of license that you are in to pursue this year and what benefits could that bring to the company, just wondering if you are thinking about the process in Brazil at this point. Thank you.

Question: Kaio Prato - UBS Investment Bank, Research Division - Analyst : Okay, great. Thank you very much.