The company, which connects global merchants to emerging market customers across Latin America, Africa and Asia, saw 319% year-on-year growth in total payments volume, passing $1bn for the first time to reach $1.5bn. This follows an already strong Q1 2021, where the company saw 139% growth in TPV.
Revenues also saw 186% growth to $59m, while adjusted EBITDA margin reached 44%, up slightly on Q2 2020’s 40%.
Much of this growth came from existing customers, with dLocal seeing its net revenue retention rate (NRR), which is calculated from the dollar revenues earned from existing merchants, growing by 196% compared to Q2 2020. This passes the already strong NRR of Q1 21, 186%, and FY 20, 159%. However, the company also onboarded more than 10 new clients in the quarter, who were responsible for $19m of revenue.
Meanwhile, dLocal has also widened its market, adding four countries in H1 21, including Vietnam, Malaysia and Guatemala in Q2, meaning the countries served now top 30.
The big questions
Key to dLocal’s opportunity is that it is driving revenue for many digital companies riding the ecommerce wave, which has been particularly strong in emerging markets. It now has the obvious challenge that having grown under the radar for a number of years, its excellent numbers are now front and center and very public (no pun intended). In return though, the company can look to gain profile to grow its customer base.
Two thirds of the company's business is payouts, one third pay-ins. As the company expands to more geographic markets, what competition will it encounter outside of its strong-hold of Latin America? What pricing will it offer to retain its customers?
dLocal's take rate for this past quarter is an amazing 406bp. This industry-high take rate is like waiving a giant flag at the competition. dLocal's take rates have been volatile (from 593bp in Q2 2020 but closer to today's rates back in 2019). The open question is: what is the steady-state take rate dLocal can stabilise growth at before take rates then steadily decline, as customers grow and move onto low-priced tiers? Adyen (see section below) operates in mainly developed markets and squeezes out a take rate at 21bp. Payoneer, with plenty of emerging markets exposure, is at 82bp.
As long as dLocal can drive meaningful marginal revenue for its customers (lower fraud, higher acceptance rates), it will have an edge against the competition and encounter less price sensitivity from its customers. The company remains bullish over the 12-18 months and investors currently agree – the stock is up c.40% since it released its Q2 earnings.