Rising Costs Hit the Uruguayan Fintech dLocal in the Last Quarter of 2022

A rise in operating costs is what led Uruguayan digital payments company dLocal to experience a drop in profits in the last quarter of 2022. That at least was what the firm explained at a conference with analysts after reporting its financial statements for the October-December period last year.

Specifically, fourth-quarter earnings fell 18% year-on-year from $23.5 million in 2021 to $19.4 million. Meanwhile, revenues rose 55% to $118 million.

The company explained that the result had been affected because they incurred extra expenses, among which it mentioned deposits for $5.6 million trapped in the bankrupt cryptocurrency platform FTX and another $2 million in costs related to “a report from a short seller.”

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dLocal Ebitda rose 39% year-on-year to $40 million

It should be recalled that last year the Muddy Waters fund accused the Uruguayan fintech of possible fraud, which was denied by the company, arguing that the allegations were unfounded.

Diego Canay, the firm’s chief financial officer (CFO), explained that, in addition to the extra costs, net income for the period was affected by net financial losses of $3 million, mainly driven by negative exchange differences and higher income taxes.

Despite the late-period setback, the company managed to increase its earnings for the year to US$ 108 million, 40% more than the US$ 76.3 million with which it closed the previous year. The story was similar with sales, which rose 77% to $418 million (versus $244 million in 2021).

Had this scenario not materialized, dLocal assured that net income for the quarter would have been $116 million, up 49% year-on-year.

The fintech, which manages payments in most of Latin America, as well as in Africa and Asia, reported that its quarterly adjusted earnings before interest, taxes, depreciation, and amortization (Ebitda) rose 39% year-on-year to $40 million.

At the end of 2022, the Uruguayan company managed a Total Payment Volume (TPV) of $10.56 billion, up 75% year on year.

dLocal operation according to market

As reported by the company, in 2022 all the markets in which it operates experienced growth in terms of revenues, although in the last stretch, there was a limited drop in Argentina.

In that territory, dLocal grew 54% in 12 months, but in the last quarter, it fell 6.43%. “Despite the challenges in accessing the foreign exchange market in Argentina, we delivered solid year-over-year revenue growth. The situation has largely normalized and we have been able to operate without major problems,” Canay explained.

The year-on-year growth of 103% in Mexico was followed by other markets in the region, such as Peru and Colombia, which posted a percentage variation of around 44%.

DLocal started its expansion in the Brazilian market and quickly reached other jurisdictions. It currently has a presence in 40 countries in Latin America, Africa and Asia, its latest addition being Honduras in the fourth quarter of 2022.

dLocal plans for 2023

In its results presentation, the company outlined what it expects to achieve in the current fiscal year.

In the first part of the year – as of March 31st – they expect to reach a TPV of between $3.5 billion and $3.6 billion, which would translate into an expected growth of between 66% and 71% versus the same period of 2022; and between 6% and 9% if compared to the immediately preceding quarter.

With this scenario as a base, they estimate revenues in the first quarter in a range between $135 million and $138 million. Gross profit estimates range from $57 million to $59 million.

Looking at the full year, they project revenues between $620 million and $640 million, with an implied Net Revenue Retention (NRR) between 140% and 150%. For adjusted Ebitda, the projected range is from $200 million to $220 million. In 2020 they closed at $153 million.

“In 2023, we will continue with our expansion strategy based on two factors: the needs of our audience and the attractiveness of potential new markets. In addition, we will continue to balance the demands of adding new countries along with deepening our presence in those in which we already operate,” said Maria Oldham, vice president of Corporate Development.

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(Featured image by 334557 via Pixabay)

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