Dlocal Ltd Q4 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, Pedro, Mark, Sergio, thank you for the call and taking my question. I have a couple questions if I can -- to start -- when I guess, just how do you think about FX when you set the guidance, right? Because I mean it was a headwind in 2024, right, I think you mentioned on an FX neutral basis I think grew like 80%, I think it was in the quarter so the guidance for this year does imply a slowdown. But do you expect -- do you factor in maybe more currency depreciation? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 10:00PM, DLO.OQ - Q4 2024 Dlocal Ltd Earnings Call I mean, to start the year we've had some appreciation. You -- just want to understand how you think about effects and I know there's a lot of countries involved but if you can help us understand how you think about it when you set the guidance. And then a second question. And I know you're getting rid of the mid-term guidance which probably makes sense but just to help us think about the long-term growth outlook. Can you help us understand kind of where do you think you are in terms of like your wallet share with your merchants? I think you, I mean overall, I think the industry is growing. How do you think about like overall payments growth in the market that you're in and your wallet shares to help us at least kind of think about what that long-term growth could be? Thank you.

Question: Tito Labarta - Goldman Sachs & Company, Inc. - Analyst : Sorry to interrupt but so you kind of think of it like on an FX neutral basis is you're saying?

Question: Tito Labarta - Goldman Sachs & Company, Inc. - Analyst : Okay, perfect. Great, thanks. I'm sorry to cut you off the phone.

Question: Tito Labarta - Goldman Sachs & Company, Inc. - Analyst : Okay, great. That's helpful. Thank you. Bye now. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 10:00PM, DLO.OQ - Q4 2024 Dlocal Ltd Earnings Call

Question: Guilherme Grespan - J.P. Morgan Securities LLC - Analyst : Hi Peter, Mark, thank you for the presentation and opening for questions. Two on my side. The first one is related to the cash. There was a big cash decrease in the quarter. You put a bullet there in the release mentioned there was some temporary settlement delay as well as some changes in settlement with merchants. Just -- if you can provide a little bit more color, what exactly those changes in settlement to understand the movement on the cash. And then the second question is related to gross profit on the guidance. The guidance, it's basically 20% to 25%, right, but we had a big ramp up in gross profit in the second half of 2024. I was doing my math here, 25 midpoint against second half. It's only a 10% increase. Seems a big slowdown going forward in the midpoint. You touched a little bit some of the points that you see to build up the guidance but just if you can provide a little bit more color where you're seeing pressure because it seems that when you benchmark against the second half kind of momentum it seems to be a big slowdown. Thank you.

Question: Guilherme Grespan - J.P. Morgan Securities LLC - Analyst : And just a follow up, if I may, the change in the settlement period because of the orchestration product, are you financing the motion for more days? Meaning, at the end of the day, I want to see if there's going to be implications to net financial results. Was there an increase in how many days you financed the motion? Is there a mismatch, meaning you're using our own cash to prepay the motion in some way? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 10:00PM, DLO.OQ - Q4 2024 Dlocal Ltd Earnings Call

Question: Guilherme Grespan - J.P. Morgan Securities LLC - Analyst : That's clear. Okay.

Question: Guilherme Grespan - J.P. Morgan Securities LLC - Analyst : Okay, that's great. Thank you, Pedro.

Question: Unidentified Participant - - Analyst : Hi. Thanks, it's Jamie Freeman. So my math is that at the midpoint of the '25 guidance you got about a 15-basis-point deterioration in the take rate. I was wondering if you could comment on that with the logic of slide 18. So in slide 18 you show that 12 basis points of the deterioration was really through these zero merchant clients. You said, Pedro, in your prepared remarks that You were suffering from the '23, '24 boarding of those prices, right. And then actually those increased as a percentage of the total volume; that's a second slide. So I was just wondering in terms of like what -- that's what we are trying to find is the capitalizing a take rate for this company and for the industry, frankly. So if you could provide some more quantitative logic like you do in slide 18, not going backwards but going forwards about how you're thinking about where the take rate is headed? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 10:00PM, DLO.OQ - Q4 2024 Dlocal Ltd Earnings Call

Question: Unidentified Participant - - Analyst : Thank you. And then I realize you're not doing the midterm guidance. You did say though in your prepared remarks, I'm paraphrasing, that you're in the middle still of an investment cycle. And you could, I think you said something like you could return to the profitability of the [past]. Is the rule of 100 that you shared at the Analyst Day in November three years ago, is that, I mean -- your rule -- that ratio is rising. It was a very strong sequence across the quarters of the year; a good end. So is the rule 100 still possible or what would be the factors that would move that like up or down? Thank you.

Question: Unidentified Participant - - Analyst : Got it. Thank you, Pedro. Thank you very much.

Question: Neha Aggarwal - HSBC - Analyst : Hi. Thank you, Pedro, Mark for taking my questions. First one is during your remarks you mentioned things like not losing merchants due to price and focus on market share gains. Could you elaborate on that? Anything significant that we can expect for that in terms for the compression in key markets like Brazil and Mexico? Second is regarding the orchestration model which you expect to expand. So do you expect to expand in other [GOs], or what is -- what are the further plans for this payment or orchestration model? Thank you so much.

Question: Neha Aggarwal - HSBC - Analyst : Perfect. If I can follow up on on my first question. Typically, in our experience when you talk to large merchants the discussion is not just about pricing. Large part of deciding, which player to go with for the merchant would include pricing the -- how the platform is, the conversion rates, all of these things are probably equally important in the. During the last year have you seen pricing discussions gaining more importance when you're talking to merchants about winning an RFP and are you seeing any of your competitors being more aggressive in terms of pricing which has changed the ball game a bit for you and you're required to talk more about pricing versus a year ago, say.

Question: Neha Aggarwal - HSBC - Analyst : Super clear. If I can just ask another question on the licensing. Now you have you're trying to build your licensing portfolio. Does that give you any advantage in winning RSPs or in terms of pricing or is it just more from a regulatory oversight perspective you're safeguarding yourself and improving your compliance?

Question: Neha Aggarwal - HSBC - Analyst : Perfect. Thank you so much, Pedro, for your answers.

Question: Cassie Chan - Bank of America Merrill Lynch - Analyst : Thanks for taking my question at the end. I'll just ask my two quick questions just up front. So first just wanted to ask how you know the pipeline is looking like for you guys and what you're expecting growth from new merchants versus existing to look like in 2025? And typically when you ramp up these new merchants these also come at a higher take rate typically. And then my second question is just how to think about free cash flow in 2025 relative to 2024 as a percentage of conversion or anything that we should be thinking about that could impact that? Thank you.