dLocal Limited (Form 20-F) — FY 2022
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone Q4 filing; the filing does not provide a clear set of Q4-only financial results. Financial statements are audited and prepared under IFRS as issued by the IASB. Amounts below are U.S. dollars; financial-statement figures are converted from thousands to millions where applicable.
Business context
dLocal provides payment processing for global merchants in emerging markets, offering pay-in, pay-out, foreign exchange and related services through one platform. It operated in 40 countries and reported a single operating segment. Revenue is primarily transaction-based. Latin America generated 82% of 2022 revenue, down from 92% in 2021.
Financial and operating performance
| Metric | FY 2022 | FY 2021 | Change |
|---|---|---|---|
| Total payments volume (TPV) | $10.57bn | $6.05bn | +74.7% |
| Revenue | $418.9m | $244.1m | +71.6% |
| Gross profit / gross margin | $202.2m / 48.3% | $130.4m / 53.4% | Margin down 5.1 percentage points |
| Operating profit | $127.9m | $83.8m | +52.6% |
| Profit for the year / net margin | $108.7m / 25.9% | $77.9m / 31.9% | Profit +39.6% |
| Adjusted EBITDA / margin | $153.1m / 36.5% | $99.2m / 40.6% | Margin down 4.1 percentage points |
| Net cash from operating activities | $154.5m | $108.5m | +42.4% |
| Cash and cash equivalents at year-end | $468.1m | $336.2m | +$131.9m |
Existing merchants generated $401.8m of 2022 revenue; new merchants contributed $17.1m. Net revenue retention was 165%, compared with 219% in 2021. The top 10 merchants represented 50% of revenue, versus 56% in 2021; no individual customer exceeded 10% in 2022.
Cash flow, debt and liquidity
- Operating cash flow was $154.5m. Investing activities provided $4.3m, compared with $37.9m used in 2021; financing activities used $27.3m, versus $153.7m provided in 2021, which included IPO and share-issuance proceeds.
- Capital expenditures were $12.4m, or 3.0% of revenue, versus $48.0m, or 19.7%, in 2021. The prior-year amount included the PrimeiroPay asset acquisition.
- Year-end borrowings were zero after repayment during 2022. Lease liabilities were $4.1m. The company reported net cash of $464.8m, including lease liabilities and derivative financial instruments in its calculation.
- Cash included $220.3m of merchant-client funds and $247.8m of company funds. Management said available cash and operating cash flow should cover ordinary working-capital and capital needs for the next 12 months.
- Liquidity is subject to settlement and geographic constraints: $14.0m was awaiting regulatory approval for repatriation at year-end, and $43.8m of own funds and investments were held in escrow or as guarantees.
Material changes, outlook and risks
- Revenue growth remained strong, but gross margin, Adjusted EBITDA margin and net margin declined. Cost of services increased 90.7%, faster than revenue, and average processing cost rose from 1.8% to 2.0% of TPV.
- Finance costs rose to $24.7m, principally due to the forward element of currency derivatives and borrowing interest; finance income rose to $18.1m, mainly reflecting higher short-term investments and interest rates.
- Impairment losses on financial assets were $5.5m, including a $5.6m deposit with FTX that remained unrecovered at filing. The company included the deposit in its loss allowance.
- The company incurred $2.0m in non-recurring costs for reviews of short-seller allegations. Management said the Audit Committee’s review found the allegations unsubstantiated. Securities class actions filed in February 2023 allege material misstatements or omissions in IPO offering documents; the company said it would defend itself and could not estimate potential losses.
- The board authorized a share-repurchase program of up to $100m in December 2022. The company repurchased 134,946 shares for $2.0m during 2022; subsequent repurchases through issuance of the financial statements totaled 2,652,211 shares for $41.3m.
- No specific revenue, profit or margin guidance was provided. Management described continued investment in merchant growth, products and new markets, while emphasizing disciplined, profitable growth. It also stated it was not aware of post-year-end trends reasonably likely to materially adversely affect results, subject to the risks described in the filing.
- Principal risks include merchant concentration and contract termination, intense competition, foreign-exchange volatility and capital controls, emerging-market political and economic instability, licensing and regulatory compliance, cybersecurity and fraud, reliance on third-party processors and cloud providers, and working-capital needs. The filing also describes AML remediation requested by a Maltese regulator and ongoing regulatory-license applications.
Most important facts for investors to verify
- Whether revenue growth can be sustained while processing costs and margins stabilize, and whether the decline in NRR continues.
- The amount and accessibility of company cash versus merchant funds, escrowed guarantees and funds subject to repatriation restrictions.
- Recovery prospects for the $5.6m FTX deposit and any further credit or impairment losses involving processors, acquirers or merchants.
- The status, potential exposure and developments in the securities class actions, and any further findings or costs related to the short-seller review.
- Progress on licensing, AML remediation and internal controls as the company expands across jurisdictions; management and the auditor reported effective financial-reporting controls at December 31, 2022.