Q3 2021 Dlocal Ltd Earnings Call
[music].
Thank you for standing by and welcome to the local limited reports third quarter 2021 financial results Conference call. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question.
Jen during the session you will need to press star one on your telephone. Please be advised that today's conference maybe recorded should you require any further assistance. Please press star zero I would now like to hand, the conference over to the company.
Thank you good afternoon, and welcome to the local earnings conference call for the 2021.
The slide presentation to accompany our prepared remarks.
<unk> is being broadcast live via webcast.
Webcast and presentation may be accessed.
And in the third bedroom.
Tom.
Replay will be available from the SNB event is concluded.
Before proceeding let me mention that any forward statements included in the presentation or mentioned in this conference call.
On currently available information and the local assumption expectation.
The sanctions about future events.
The company believes that the assumptions expectations and projections are reasonable in view of currently available information you are cautioned not to place undue reliance on those forward looking statements.
Actual results may differ materially from those included in the presentation.
In this conference call for a variety of reasons, including those described in the forward looking statements and risk factors section of the locals registration statements on form F. One and other filings with the Tvs and Exchange Commission.
Which are available on <unk> Investor Relations website.
Now I will turn the conference over to our Chief Executive Officer.
Hello, everyone and thanks for joining us today.
Today I'm joined by submit the funded our Chief operating officer, and Yieldco recognized our Chief Financial Officer.
We are excited to present, an update on our business and we thank you for your interest in our company.
On slide three.
The local enables global merchants to connect seamlessly with billions of emerging market currencies. Our platform one day local since a single API single integration on single contract solution toward merchants, where it is.
Charlie we do we focus on we are proud to count some of the largest global merchants of our customers such as Microsoft Rafi quite show Melksham with media in driver.
Today I will refer structure supports our merchants across 32 emerging markets in Latin America Africa Asia.
Now to the results.
The third quarter has been another outstanding quarter.
It'll process volume CPB grew 217% year over year, when compared to the third quarter of 2012, reaching one 8 billion during the quarter.
Revenues for the quarter up $69 million represents 133% growth year over year, when compared to the third quarter of 2020.
Adjusted EBITDA for the third quarter 2020, 110%.
Year over year compared to the third quarter of 2020.
On slide four.
Let us briefly compare our Q3 2021 performance vis vis Q2, 2021 as well our full year 2020.
Our Q3, 2021 revenue growth of 133% compared to 186% year over year in Q2, an 88% year over year growth in full year 2020.
We have previously highlighted the net retention rate metric.
We manage our business, we achieved 185% NRI in Q3 2021 versus 196% in Q2 2021 on 159% in full year 2020.
Our adjusted EBITDA margin in Q3, 2021 was 38% in comparison to 44% due to a 2021 and 40% for the full year 2020, as you continue to invest in our people platform and technology to pursue a path of growth.
We expect our full year 2021, adjusted EBITDA margin to be aligned with our full year 2020, adjusted EBITDA margin.
During this quarter, we have seen continued growth in our business from both existing and new merchants using our drug we are seeing more digitalization less cash on why they are the alternative payment methods. We have continued our efforts on the expansion from growing our presence in Africa Southeast Asia, We've launched two new countries in the last quarter.
<unk>, Thailand.
For the year to date 2021, we have added six new countries our network infrastructure.
We have other temp last new merchant marine material volumes in the third quarter of 2021.
We continue to benefit from the diversification of our business across the vertical we have maintained our strong adjusted EBITDA margin, even with continued investment in our infrastructure and people. We have continued to hire on strengthen our employee count in key functions. The head count in the low cost grew 105% year over year in the third quarter 2020.
One.
On slide five.
There are three primary challenges that we are calling for our merchants.
One payment methods are local by nature I'm very diverse in 32 countries, where we serve.
The fragmentation continues as consumers adopt newly available payment metrics merchants.
To access this rapidly growing end market without building the payments relative to themselves.
To achieve healthy conversion rates, while keeping under control, it's a challenge in emerging market.
Three we make the complex simple for our merchants by enabling our merchants would keep up with the changing regulatory and tax framework.
Merging market.
On slide six.
The complexity of the markets. We serve makes our solution powerful slide six provides a breakdown of payment methods in Latin America, Middle East and Africa and Asia.
To showcase the complexity that our merchants face when doing business. It is mark each market. It won't be differently. For example, the proportion of digital mobile wallet is much higher in Asia Pacific Bank structure and cash on delivery are much more dominant in immediately East Africa region. There are also differences by country in each one of our content.
Merchants are seeking choice and agility in this end market to keep up with the consumer preference.
Slide seven.
On our website that we have made available a market study completed by <unk> on the key markets. We serve our CPB for the third quarter 2021 was $1 $8 billion or 217% year over year growth. Our TBD for the last 12 months at $4 9 billion was two four hour TPB.
For full year 2020.
<unk> very small portion of our addressable market that is expected to continue to grow at 27% CAGR in the next few years.
Slide eight.
On slide eight we present that case study of a representative merchant on our block.
As shown we typically takes three to six quarters to ramp up volume.
For this particular merchant we started with a local to local payment flow. We've added payment methods. We have added new countries. We've been other cross border flow for a few market. We went from 18 to 109 payment methods for these particular merchant we've expanded to nine countries that merchant has seen growth of 30 X volume over approximately three years.
Yeah.
Every merchant is of course unique on the example provided is representative of how we grow as our merchant organically growth on our platform.
I will now hand, it over to Sumit that the worst of our vector of future growth.
Thanks Deborah.
On slide nine.
We have three primary vectors of growth commercial effort, that's expansion and geographic expansion.
And that's what our focus on the land and expand secondly, as growth and driven by the organic growth.
Cross sell through account management, and our ability to active clients.
In about mid <unk> for the third quarter was an impressive 185% in comparison with 69% in 2020.
We calculate an alloy.
Getting the dollar revenue.
Are you seeing much as we had on that platform.
Italy.
That's a $100 of revenue.
<unk> <unk> from the things that does much in between $185 in Q2 2021.
Revenues from new lines with $12 million in the third quarter 2021 in comparison that $9 million for full year, 2020, and 3 million in the third quarter of 2020.
We continue to enhance our product portfolio with improvements in that Peter will be instantly out together with the development and launch of new product lines, such as easily as it sounded.
John will take expansion vector we are constantly deepening our presence in the countries that we currently operate and adding these added pilot and opens the door to our platform in the third quarter.
Our revenue growth plus EBITDA margin 40, 161% in the third quarter was there anything any one versus 129% and full year.
Thank you.
We believe that the strong cash flows emulation of our business support and inorganic strategies that lastly is our time to market, we plan to pursue inorganic opportunities to accelerate any of our people connected.
Slide 10.
Existing clients.
Our account management team is solely focused on harvesting our existing client relationships.
<unk> worked closely with our clients to solve their existing needs and cross sell to new payment methods, new countries and new product cases at any given time, we have over 50 pricing coupled with extended to our existing clients about this less in the testing stage and about 20, plus we think the go lives.
On slide 11, new clients continue to see that industrial market.
The rapid expansion and ramp up of margins bottom line growth of the Canadian economy, the emphasis on much in place and digital marketing that in many cases have mostly obviously.
Finally, the vital clinical users that some of our highest gross margins <unk> has continued to expand its partners. We expect this trend to continue as we see new companies and margin becomes dominant online much more quickly today than even at the attack the new lease companies global and it's flowing across national and regional boundaries and we enable them to.
The consumer is any of that in the right.
As shown on slide 11 at the given time.
About 175 less margins in the early stages of our funnel and over 75, plus Nathan people lives. One slide you typically do.
<unk> thousand six quarters to ramp up volumes up that much and you've on boarded 10 plus months in fourth quarter.
Slide two our comprehensive and differentiated solution suites.
That team is constantly working on optimization of packages and solutions Slide 12 provides a snapshot of our platform. The backend supports a much into a regulation compliance collection facility, Mark Belting and settlement.
<unk> provides them much instantly.
Remind us for alternative payment methods subscriptions installments for mobile or desktop support at checkout.
Slide 13, you've added.
Thanks to our network year to date.
These strategies, both merchandise that is being caused by that much in fact set for the solution as well as the lead we have a pipeline of merchants looking to launch in the new markets. We've expanded into more recently, we have not.
Not dependent on any single country for outperformance, we also don't forecast that performance by country slide.
Slide 14, we see strong growth across verticals with a 217%, Italy CTV growth as our business benefits from diversification.
This model is not dependent on the performance and outlook with any single industry vertical.
Also excluding additional opportunities with Martin's including to provide payment solutions in connection with cryptocurrency you will continue to evaluate that as single add ons to current seem to provide that much into the appropriate solution.
Slide 15.
I had mentioned at the beginning of this call we continue to invest in our business our people our biggest competitive advantage at the end of Q3, we had 532 employees from 30 plus nationality the head count in the local grew 105% year over year in the third quarter 2021.
Slide 16 deal will now review our financial highlights.
Thanks, Tara lets start with slide 17.
We have another quarter with a record EBITDA of $1 $8 billion and record revenues of 69 million.
In the third quarter of 2021, PPV has grown to 17% year over year at 24% quarter over quarter.
We continued benefiting from secular trends in e-commerce and digital payments.
Things are back to normal as well from our merchants performance success, and bringing them to more countries and payment methods.
This growth is benefiting from the performance of our merchants in specific verticals, such as ride hailing streaming devices as well as a sequential recovery of traveling.
Revenues have grown 123% year over year, and 16% quarter over quarter, both very similar to what we grew in the first quarter of 2021.
Our revenue of our TBD ratio or <unk> was three 8% versus four 1% in Q2 2021. This ratio by rice as a result of changes in business mix of products countries and payment methods.
I think that in this quarter some large a hybrid based on merit just with a basically lower then I'll, let us reaching but our pricing deals have grown significantly.
Higher volumes with our largest metros typically decreases to be great, but they are great for our business, but they bring incremental EBITDA.
It is also important to note that our revenue exposure to ramp up in the Marcellus continuous decreasing from 62% in the second quarter of 2021% to 57% in the third quarter of 2021.
Slide 18.
Definitely EBITDA for the third quarter of 2021 was $26 million or 38, 3% of our revenues, which compares to 46% in the third quarter of 2020. These.
This margin decrease is a result of our commitment to continue investing and building the foundations for long term growth as well as the combination of an outstanding growth in our large high potential milestones with lower take rate.
Our cost of services in Q3, 2020 was two 4% of MTBE in comparison, our cost of services for the third quarter. This year plus one 9%. This increase year over year is the result of efficiencies and changes in business mix.
If we look at operating expenses, excluding onetime and noncash items in line with our adjusted EBITDA calculation, we see the bake up <unk>, 2% year over year more or less in line with our head count increase of 105%.
We intend to continue investing in growth and therefore, our Marcellus may continue the gifting in the coming quarters, while maintaining our discipline to drive profitable growth with every additional dollar that we process.
Slide 19.
Continued delivering a total revenue growth both from our existing from our new customers rare.
Revenues from existing merchants are those revenues that are driven by metal that we're already processing in the same quarter of last year.
Revenues from new merchants are those revenues that are driven by metal target operating with us after the same quarter of last year.
With our <unk> typically have a three to six quarter firm BDO. We believed that revenue from Newmont, just just on initial indication of the potential of our customers.
During the third quarter, our revenue from existing merchants was $57 million more than double the revenues of $28 million in the same period of 2000 and trading revenue from new merchants was $12 million four times, the 3 million <unk> of 2020.
Some fast growing match us on board in Q3, 2020 moved these quarters into the existing merchants bucket. They contributed to our sustained high revenue retention this quarter, which adjust for 185% and reduced quarter over quarter contribution of the new merchants bucket, we addressed our all time high last quarter.
In the medium term, we expect our net revenue rotation to be in the 150 to 160 range.
Slide 20.
Of the 123 year over year revenue growth in Q3, 2021, 85% or $26 million cable existing metals, 38% or $12 million came from new margins.
Our net revenue retention remains at an outstanding level of 185% significantly above our historical others on a performance of 159% and does have some trading and also the revenue from the Americas remained higher than what we have achieved last year.
As a recap our net revenue retention is driven by having minimal levels of churn of less than 1% by the growth of our metals that are some.
The ecommerce world leaders typically growing from 20% to 30% annually in emerging markets.
South of our performance in terms of gaining share of wallet within the same payment methods and bringing them to more countries products and.
And payment methods and with that I would have done the cloud to server to go global.
Thanks Neil.
On slide 20.
We are break excited about the future ahead of US we remain focused on our large and expanding our direct integrations with our merchants our scalable infrastructure on our exposure to other adverse mix of vertical on our focus on growth and profitability, we think our merchants employees and investors for your continued support our request the operator to open it.
Four questions.
As a reminder to ask a question. Please press star one on your telephone to withdraw your question press the pound key again Thats Star one on your Touchtone telephone SaaS question. Please standby, while we compile the Q&A roster.
Our first question comes from George Kurian Morgan Stanley. Your line is open.
Hi.
Good evening, everyone hope everyone is doing well congrats on the numbers I have two questions.
First one is on your.
The gross profit take rate.
Which is.
I think the right way to look at your.
Profitability on a revenue basis.
It was one 9% this quarter, which was a 40 basis point reduction versus 2.3 in the previous quarter.
Decline was actually pretty steep relative to the revenue yield which fell roughly half of that so I wanted to understand I get it that you said that the revenue yield came because you're offering.
Your volumes in very large clients grew and you need to offer lower prices I get it but.
D wave will also too.
Get better transaction costs out of the.
<unk> acquires as you pass on more volumes I mean, your volumes are up to 272% year on year. So shouldn't you also be getting some of these benefits on hopefully keep that relationship between the revenue yield on the gross profit yield flattish.
Evidently deteriorating. So so that's the first question that you are going to help us understand why that's happening and what do you think it will look like over the next few quarters.
My second question is on.
On the comment you made on lower EBITDA margins.
What exactly does that mean I mean, I think it will be super helpful for us to understand the dimension data comment the magnitude and the duration of that decline when do you think it will look flat backhaul.
Just any color that we can have just to.
Put it in the right context, and not getting getting carried away either up or down. Thank you.
Hi, Jorge.
Thank you very much further question. So here so on the first part of your question around gross profit.
First there has to be a constant the fact of the business mix our business continues to evolve and keep in mind, we are offering multiple products across multiple geographies and those will have different take rate. That's why we continue to insist on the fact that we don't help you might take rate because we know that number will move around.
Agree with you in terms of us getting better rates from acquire something and methods.
Can see that our transaction costs have continuously declined.
But again, you might see them going up because it might also be a function of us processing payments in countries or in payment methods are more expensive. So.
We continue to optimize for NR arent, making sure that we are bringing more additional dollars that come at a profit.
And yes, definitely we are constantly getting better rates from acquired from payment methods from banks.
But that sounds like we are optimizing for we want to make sure that as more dollars are coming through.
They always contributory margin, that's how we think of.
So maybe I'll, let you take the second part of your question around DVD margin.
Yes. Thanks for the question. So I think as we mentioned even in our second quarter earnings call. If you look at our margin.
Performance for this quarter.
Very comparable to our margin performance in the same quarter last year.
I think we are planning towards that that overall margin for the full year 2021 will be within the range of the lever for the full year 2020.
So and that guidance hasn't changed.
Guidance that we're giving you is what we are planning towards as a management team. We expect the margin to be in and around that level, having said that I think that we're not tying ourselves to a specific number.
Because we do feel that we have to continue to invest in the business.
Thanks, <unk>, so maybe just a follow up on this last part.
So I guess 2021 is behind right. So what the margin is going to be in the fourth quarter or not.
Relevant at this point I guess I'm thinking more about two.
2022, so when you say youre going to see lower margins I mean, youre talking about throughout 2022, and if you can help us again dimension, what that lower level will look like.
What is it that youre thinking how much is lower which is always lower.
Yeah.
I think it won't be too far away from our 2020 numbers. So if you look at our 2020 margin b that.
That is our short term expectation of daily will keep margin what I don't want to say is that it's definitely going to be a 40% number it's going to be in that range, it's going to be too different from what you've seen us perform in 2020.
Great. Thank you very much that's very helpful.
Yes.
We think the opportunity ahead as market, we want to make sure we have enough.
Opportunity to invest in the opportunities. We think makes sense. So we don't want to tie ourselves up to not be able to pursue those opportunities I think we've built a track record of being profitable and doing so at scale. So we think that the we think our capital allocation really seriously, but we want to have their different needs to invest into the future and thats why we don't want to give.
A particular number.
Great. Thanks again.
Thank you. Our next question comes from Jason Kupferberg.
Bank of America. Your line is open.
Thanks, guys. Good afternoon, really nice top line momentum here. So in the third quarter, you delivered mid teens quarter over quarter revenue growth, despite having a really tough comparison there.
So I'm wondering based on your expectations for growth at both new and existing merchants.
And we see double digit quarter over quarter growth again in the fourth quarter.
I can start Diego instead, I'll jump in with additional cost I think Jason Thanks for that question I think that.
We are focused on year over year metrics, we want to continue to build our business in the long run we are not as focused on quarter over quarter trends, because we think that that can be misleading in terms of how we think about our business in the long run if you look at our current quarter.
Our PPD in this quarter.
17%.
If you look at Q2 2020, because I think it's helpful to think about where you were last year, but do you see 2020, a year over year growth was 65% for between 65 gross or 17 in this quarter.
For the next quarter, we continue to remain focused on what would that number look like versus Q4 of last year keep in mind that Q4 of last year was are these terribly strong quarter a lot of the impact of Covid had gone a V in Q4.
<unk> was already looking very strong.
EBIT dollar.
Dollar growth from our Q4 2020 number but it may not be the same for us it doesn't increase that youre seeing in Q3 versus Q2 of last year.
Okay, Yes, I see that I mean, the comp on TTC get tougher the compound revenue is pretty similar but obviously you've got the large merchant mix.
Take rate is going to be lower in Q4, 'twenty, one and then Q4 'twenty. So.
Maybe maybe double digit quarter over quarter growth is maybe a little bit too much to ask.
Got it okay feel great year over year growth.
And then just sorry, just one thing on that if you can go back to just take a look at our revenue growth numbers, we have that in our press release. It was not in the independent nation, but again that would give you some sense of where do you bet on the revenue growth numbers in Q3 of last year, which was 96% versus maybe right now which is $100.
You keep ascent and then give you a little bit insight into how we have continued to escalate our overall growth for the business.
Right right, Okay. Thanks for that.
Just as a follow up I am curious to get your latest views just on the competitive landscape I mean, we've heard some players talking about potentially planning a bigger move into.
Latin America, and wondering if thats, something youre watching as well and whether or not you think that could have implications for pricing.
Sure Hi, Jason Thanks for the question so in terms of competitive landscape there.
I think there's a few key aspects here number one this is a huge market.
We're expecting more players to acquire redi participating to do so at scale.
We continue to be obsessed with differentiating that's why you'll see us expanding geographically youll see that we are constantly.
More product lines because at the end of the day, we want to make sure we have enough touch points with our merchants.
If you only do one market or region, you are easier to replicate the more problems. We are solving for merchants. The tougher it is for someone to come and compete so yes, we will have competitors in particular payment methods in particular geographies, but we are yet to see companies building in emerging markets, what youre trying to build up scale across pains payout issuing fraud prevention.
<unk>.
How wide how long white, we've got to differentiate.
Okay. Thank you for those thoughts.
Thank you again to ask a question. Please press star one on your Touchtone telephone again Thats Star one on your Touchtone telephone to ask a question.
Our next question comes from the line of Miha Agarwalla of HSBC. Your question. Please.
Hi, Thank you for taking my question.
Wanted to follow up a bit more on the mortgage question earlier.
Cost of.
Services actually went up quite a lot. It was 43% of revenue in the last quarter and knowledge in this quarter is less than 50%.
I understand that there's a lot of sympathy.
But.
Is that a level around that is that what we should expect in the coming quarters because of whatever change in the mix that does happen.
So just a bit more color on that would be very helpful. My second question is on the margin base you've added.
There's more margin this quarter you mentioned.
Are you focusing I understand that most of the margins on U S and Europe and you'll have a few margin.
Chinese merchants.
That would be a focus area for you would you like to concentrate on more serving the Chinese market.
That's not our focus it's not been right.
And my last question is on.
Competition.
You mentioned that.
Have a mode of geographic presence that is what it does in Q2.
Are you seeing more pricing competition, where are you you mentioned earlier that.
What does not.
Volumes for the months when they work with you.
And do you continue to believe that.
Our margin.
Bottom margin it makes sense to work with two or three players not just walk with one player and this is not a zero sum game and you can have two or three key players for that particular market.
Any thoughts on that would be very helpful. Thank you so much.
I will answer the first part and leave the rest to submit answer.
So basically as we mentioned before.
One quarter, what those coming for us in kind of a profitability both of them.
The changes between the two clubs accountable with medicines on business mix.
Yes.
As we mentioned the third quarter profitability is more inline with what we had in Q4, our Q3 of last year.
And yes that is more in line with what do you expect going forward. So the numbers that we see I think is one 9% of PPV of cost again, we will not commit to a number that makes it quite to up or down in the long run. We believe that that number would sequentially go down as we access to new pricing deals and negotiate better pricing with them.
The methods, but you would expect that to be similar.
You're seeing that range is actually adding these notes.
Hi, Thanks for the question. So in terms of your question around what merchants we target.
First of all we were not targeting any company in the world that wants to do business across more than two geographies and that means that we today onboard merchants that are coming from the U S from Europe and definitely from China.
You look at our customer base on some of the things we've been able to disclose youll see that there are some of the Chinese leaders I wanted to make that clarification, because I think it's a really important one we're not processing payments inside China. So we are helping Chinese company to go into the emerging markets. The same way, we do for American company for European Company on more and more through local leaders that are coming out of Africa.
Asia Latam will also are becoming relevant across more than one geography. So China is a big focus for us and it's going to continue to be again, helping Chinese company process payments internationally.
In terms of.
Competition. So we don't compete on price and keeping in mind, we are serving some of the biggest companies on earth. They have a lot of bargaining power.
So we wouldn't be able to charge much more done the alternative if we wouldn't be if it wouldn't be differentiating. So we don't compete on price we compete on making sure we will have a better conversion rate.
Making sure that our merchants, we get a higher access where revenue navy or merchants come to us because they want to drive their business in the emerging markets where they operate.
And the last point around redundancy I think we have been super consistent around it we are almost never the sole provider for our merchants keep in mind, we don't process payments in Western Europe and in the U S. So it is expected for our merchants to have another provider.
Are they going to decide to have redundancy our market. It really depends it depends we sometimes see one country haven't redundancy and others don't.
Continues to evolve, but we don't believe that is sustainable and we don't expect to be the sole provider for any of these global companies that balloon BFS practice for them.
That's super clear. Thank you so much sibling Diego.
Thank you. Our next question comes from Tito Laboratory of Goldman Sachs. Your line is open.
Hi, Good evening, Thank you for the call and taking my question I.
I guess just following up on the net revenue retention rate still remains pretty healthy just to think in terms of the $1 50 to 160 guidance.
Mentioned that in the midterm is that still what you're thinking like 12 to 18 months and you normalize for that $1 50 to 160 levels do you think.
Any indication on how that can evolve even in the next few quarters and then also I guess thinking longer term.
How long could that be sustainable.
Within that range and then the second question also I guess a bit on competition, but more in terms of.
How are you seeing competition in terms of like the wallet share and make the investments that youre, making.
Is that to protect against competitors, taking either some existing clients is it to get more get more clients or just to be able to increase the wallet share you have with those clients just to understand like where does the competitive threats may be in terms of either existing clients or new clients and how you.
The message that you're doing can help protect against that thank you.
Yeah.
Peter Thanks for the question I'll take the first part.
On your question on net retention rate and what we think we should be achieving in the in the more medium term as we have mentioned to you in the last quarter results. So we still think that in the near term, which is 12 to 18 months, 150% to 150% net retention rate is achievable and Thats. What we are planning Paul We've also mentioned to you.
You bet.
The reason why <unk> is so high right now as we are benefiting from some of the clients that were in our new client bucket moving into our existing client bucket.
As a result in the absolute near term Youre seeing these very high end at one.
180, plus it was 196% in Q2 and 185 in this quarter.
In the medium term it will be around 150 to 160 regarding your question on how long will that sustain that that's a more difficult question for us to answer, but we have guided you to believe that.
In the more long term, it's probably come down to one <unk> to 130.
We ought to be focused enterprise business, and we think one to one.
It seems by some of the best software companies in the World and we think that they will come to that level, which would also be very close to the organic growth rate of our merchants in this end market.
Okay, but do you want to take that they Don Hinson, Yes sure thing.
Further question around our investments we invest in to get things number one is to continue to have the best platform in.
In the markets, where we operate and making sure we have the best commercial rates that our merchants to get the best results to confront under control, we are working with us on having the teams to support them.
We are serving some of the most demanding companies on Earth, which makes it very important for us to have the right team on the other side of this.
Same time, we continued to invest in expanding.
Announced our issue and got the service product, we've announced some of the new markets, where we are.
Starting to process payments and the reality is that that's those are always to differentiate those apply both for our existing customers on our newer customers who come.
Whenever we open a new geography, or a new payment methods, we have a new set of opportunities both discussed with our current customer, but obviously, we also expect that those new payment methods those new geographies. So those products are going to allow us to bring new merchants onto the platform. But then those new merchants are one they're going to go into that bucket and we are going to be discussing all the other opportunities.
We think those two things are.
The continued to complement each other.
We think continue to invest at the right thing because that's a way for us to differentiate on the long run.
<unk>.
Thanks, Kevin.
That's very clear.
Okay.
Thank you. Our next question comes from Domingos <unk> of.
J P. Morgan your line is open.
Thank you congrats on the results again.
Just a quick question around cost of funding.
Specifically in Brazil, So I understand you guys, usually pay around seven days to 10.
We all know the credit cycle is a bit longer than that we are seeing some funding pressures taking place and to acquire.
Which I'm, assuming they are passing onto us.
Basically assuming these flows in the cost of service lines.
The 34 million if I'm mistaken so question is.
How much did that in fact.
Rising cost of funds in Brazil in fact, your cost of service lines.
And I'm, assuming this should be an ongoing pressure in future quarters.
Yes, sure so just keep in mind that.
Obviously restaurants are relevant country about roughly.
One third of our volume is going to talk about within that.
Not that much is installment we discount everything policy everything that is cross border with these countries to mitigate any FX risk.
<unk>.
Yes.
Interest rates may increase.
We built that in the pricing that we set blood margins right. So.
The pricing that we send to our merchants I assumes that we discount in Brazil, as we have in Brazil related to install them.
And if I may complement a little bit more here Don thanks for the question keeping.
Keep in mind that Brazil is one of five countries just didn't matter for us as we mentioned to you we don't have necessarily a big concentration in Brazil.
And therefore youre looking at a very very small portion of our business and even within that context. We don't think of this as a big big factor in how we think about.
Cost of services in the country.
Submit about like 30% of volumes.
Slide even 30 days anticipation 50 bps 100 bps. It makes a difference right. So I'm just trying to carve out from the 34, what's kind of recurring and should continue to increase from what's not.
Financially related.
Dan we haven't seen our cost per dollar going up we've always advanced all of our funds and I think we've discussed this in the bus that's another source of revenue for US. So we've always stayed the acquired their fifth we understand that that's where many of them do their.
Their margins in Brazil.
But this hasn't been a driver of our cost of service again, there's also the component of local to local so it's 30%, but when it's when it's local to local we don't have the need of a bumping funds because we don't have FX risks. So this hasnt been.
Big driver of the increase in costs.
Alright.
We don't expect it to be.
Okay. Thank you.
Again to ask a question. Please press star one and you touched on telephone again Thats star one on your Touchtone telephone to ask a question.
As there appear to be no further questions in queue. At this time I would like to turn the call back over to Sebastian kind of itch FERC closing remarks, Sir.
Thanks, everyone for taking the time and for your attention really appreciate the questions have a great one.
And this concludes today's conference call. Thank you for participating you may now disconnect.
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Thank you for standing by and welcome to the local limits of reports third quarter 2021 financial results Conference call. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your.
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