dLocal Limited (Nasdaq: DLO) — FY 2023 Form 20-F
Reporting period: Year ended December 31, 2023. This is an annual report, not a standalone Q4 filing; the supplied text does not provide clear standalone Q4 results. Financial statements are prepared under IFRS and presented in U.S. dollars. Amounts below are in millions unless stated otherwise.
Business context and key results
dLocal provides payment processing, foreign-exchange and related services to global merchants in emerging markets, operating in 40 countries. Its pay-in and pay-out platform processed total payments volume (TPV) of $17.7 billion in 2023.
| Metric | FY 2023 | FY 2022 | Change |
|---|---|---|---|
| TPV | $17.7bn | $10.6bn | +67.3% |
| Revenue | $650.4 | $418.9 | +55.2% |
| Gross profit | $276.9 | $202.2 | +36.9% |
| Operating profit | $179.7 | $127.9 | +40.5% |
| Profit for the year | $149.1 | $108.7 | +37.2% |
| Adjusted EBITDA | $202.3 | $153.1 | +32.2% |
| Adjusted EBITDA margin | 31.1% | 36.5% | Down 5.4 percentage points |
| Profit margin | 22.9% | 25.9% | Down 3.0 percentage points |
| Net revenue retention | 150% | 165% | Down 15 percentage points |
Cash flow, liquidity and debt
- Net cash from operating activities was $293.5, up from $154.5 in 2022. Management attributed the increase partly to working-capital movements, including higher trade payables and lower escrow balances.
- Investing activities used $84.7, principally reflecting $117.5 spent on Argentine government bonds and $17.3 of intangible-asset additions, partly offset by interest and other financial-asset collections.
- Financing activities used $133.9, primarily due to $97.9 of share repurchases. The repurchase program concluded in July 2023.
- Cash and cash equivalents were $536.2 at year-end, including $313.4 of merchant funds; the company’s own cash balance was $222.8. A further $59.9 of merchant funds was pending transfer to own balances. Management said cash and operating cash flows should cover ordinary working-capital needs and capital expenditures for the next 12 months.
- The company reported no third-party borrowings at year-end. Lease liabilities were $4.0. Its stated net cash measure was $633.9, which includes cash and financial assets and deducts lease liabilities and derivative liabilities.
Material changes and unusual items
- Cost of services rose 72.3%, faster than revenue growth, while gross profit increased 36.9%; processing costs remained about 2.0% of TPV. Adjusted EBITDA and profit margins declined year over year.
- Finance income rose to $128.2, including $49.6 of interest income and $78.6 of fair-value gains on financial assets, principally Argentine bonds. Finance costs increased to $116.8, including $82.6 of foreign-exchange losses, mainly from an intra-group loan involving Argentina. The company also recorded a $12.5 inflation-adjustment loss related to Argentina.
- The company acquired Argentine government bonds as part of a stated plan to invest up to $100 in Argentina over time. The bonds had a reported year-end fair value of $104.4. The filing describes the investment plan as including local operating expenses and investment.
- The company recovered $3.5 from deposits trapped at FTX after its bankruptcy, compared with a $5.6 impairment provision in 2022.
- Top 10 merchants generated 60% of revenue, versus 50% in 2022; one merchant exceeded 10% of 2023 revenue. Latin America represented 76% of revenue. Brazil, Mexico, Argentina and Chile accounted for 24%, 18%, 12% and 9%, respectively.
Outlook, risks and contingencies
No quantitative revenue or earnings guidance is provided in the supplied text. Management describes plans to pursue profitable growth through existing-merchant expansion, new customers, geographic expansion and product development, while emphasizing disciplined investment. Direct Issuing remained in pilot phase; dLocal for Platforms is among the newer offerings.
- Regulatory and country exposure: The business operates across evolving payment, licensing, tax, AML and foreign-exchange regimes. dLocal processes payments in some jurisdictions where it is not licensed, relying on its interpretation of local requirements, exemptions or licensed partners. Argentina’s foreign-exchange controls and hyperinflation are notable exposures; $5.0 of funds required regulatory approval before repatriation at year-end.
- Legal matters: The filing reports 229 legal proceedings. Securities class actions relate to alleged IPO disclosure issues and alleged statements about Argentine foreign-exchange risks and compliance controls. The company says the cases are preliminary, intends to defend them, and recorded no provision because loss likelihood and potential amounts could not be estimated. Other possible-loss claims totaled approximately $0.3, with no provision recorded.
- Compliance and operations: A Maltese regulator requested remedial measures to strengthen AML risk assessment, onboarding, oversight, transaction monitoring and outsourcing controls. The filing also identifies manual processes, technology and third-party dependencies, cyber risk, fraud, and merchant/processor credit risk. The company reported no cybersecurity threat in 2023 that materially affected or was reasonably likely to materially affect the business, while noting that undetected incidents cannot be ruled out.
- Concentration and governance: Class B holders owned 45.29% of shares but controlled 80.54% of voting rights at year-end. The dual-class structure gives those holders significant influence, including board appointment rights. The CFO was scheduled to depart in March 2024, with a successor expected to assume the role in April 2024.
- Audit and controls: The auditor issued an unqualified IFRS opinion and concluded internal control over financial reporting was effective at year-end. Transaction revenue, 97.95% of total revenue, was identified as a critical audit matter due to the complexity of merchant-specific fee arrangements and related testing.
Important facts for investors to verify
- How much of reported cash is freely available to the company versus merchant funds, and whether repatriation restrictions or settlement timing could constrain liquidity.
- Whether the margin decline and faster growth in service costs persist, and how management’s Adjusted EBITDA definition and exclusions compare with IFRS profit.
- The valuation, liquidity and realized returns of the Argentine bond holdings, alongside the effects of peso movements, inflation and foreign-exchange controls.
- Developments in the securities litigation, Argentine inquiries and Malta AML remediation, including any subsequent estimates or provisions.
- Whether customer concentration, regional concentration and declining NRR create meaningful pressure on growth, pricing or merchant retention.