Dlocal just delivered $161m of revenue, up 59% yoy with a 148% NRR and a 28% net profit margin. That’s pretty impressive. The market cap is around $6bn for a 11x run-rate revenue multiple and a 48x ttm GAAP PE.
The campany has had some discussion around these parts, and I’ve taken a small starter position. I know that @anthonyms owns a little as well.
I think that Fintech has had a long and probably well-deserved winter, with the likes of Upstart leading the way down. I also think that therein may lie opportunity for companies that have perhaps unfairly been caught in the downdraught.
I wonder if Dlocal might be such a company and would love to hear others’ views.
Dlocal is the Stripe or Adyen of emerging markets. They enable online payments via a single API focused on markets outside the US and EU. The bulk of their revenue and growth is from South America, with Africa and the Middle East second.
The founders are from Uruguay and attended the same university there. The CEO Sebastián Kanovich was recruited by the founders Sergio Fogel (currently Chief Strategy Officer - Insead MBA, Computer Science in Israel, ex IBM) and Andrés Bzurovski (on the BoD) as general manager and now sports the title CEO and co-founder (and almost billionnaire). Here’s the back-story which is well worth a read:
Their solution is clearly resonating with customers, as can bee seen in their sky-high NRR in the past (although this has come down of late):
Revenue has been going up and to the right, and accelerated in the last quarter:
|Revenue $m||Q1||Q2||Q3||Q4||QoQ Q1||Q2||Q3||Q4|
That led to the highest raw $ added of $24m in their history. This was fuelled by Latam and a nice uptick in TPV - below is the sequential $ TPV added per quarter:
In addition, they have been profitable for many quarters already, with net income margins solidly in the 30%-ish range - very impressive:
|Net Inc %||Q1||Q2||Q3||Q4|
They are also cash-generative, so what’s not to like?
I find the recent addition of a veteran in Latam, the ex CFO of MELI - Pedro Arndt - interesting, but also wonder why this is happening. Are they planning for a CEO transition? Co-CEO’s don’t work well in the best of situations imo (remember Blackberry/RIM) and I don’t think they are made to last when there is a new one brought in. Would love to hear other views here, but to me this sounds like Pedro is being set up to succeed the current CEO, and I wonder whether that will be a good thing…
They’ve got customer concentration issues, and have been whittling that down in prior periods, but this has been going the wrong way again of late:
The good progress of the past:
And the recent reversal:
The Q2 strength was all Latam - Africa&Asia actually decreased sequentially, and was pretty much flat even when reversing currency headwinds in Nigeria:
I’m left wondering whether to hang on to my position given the hypergrowth and recent acceleration in Latam, but worry that the leadership transition, customer concentration and apparent African stagnation could point to trouble ahead.