Q1 2022 Dlocal Ltd Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the <unk> local first quarter 2022 results call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the special need to press Star one on your telephone if you require any further assistance. Please press star zero I would now like to turn the call over to your wholesale you may begin.
Thank you good morning, everyone and welcome to the local first quarter 2022 earnings call.
On the call today I'm joined by Sebastien kind of at our Chief Executive Officer.
Japan is our chief operating officer, and Diego cavity that Tonight, our Chief Financial Officer.
We are providing a slide presentation to accompany our prepared remarks.
This event is being broadcast live via webcast and both the webcast and presentation may be accessed through <unk> website at Investor day local dot com.
The replay will be available shortly after the event is concluded.
Before proceeding let me mention that any forward statements included in the presentation or mentioned in this conference call.
Are based on currently available information and current assumptions expectations and projections about future events.
While the company believes that our 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 local <unk> presentation or discussed in this conference call for a variety of reasons, including those described in the forward looking statements and risk factor sections of the local filings with the Securities and Exchange Commission, which are way.
On the logos Investor Relations website.
Now I will turn the conference over to Sabre.
Hello, everyone. Thanks for joining us today I'm pleased to share that we are off to a strong start to the year delivering record Q4 results.
Our business continues to show strong growth trends and we continue to execute our business plan with both our existing and new merchants across our burgers.
Our business continues to show resilience to specific factors impacting the global economy, such as challenges in logistics in specific geographies, the Russia, great conflict or changes in consumption from the return to work high inflation in some developed markets as well as the higher interest rate environment.
As discussed in our annual 2021 results our business benefits from the parents diversification across geography sector products has.
No exposure to Russia or Ukraine.
Therefore, despite the challenging global macro context, our total process volume to profit $2 billion threshold for the first time, we've more than doubled our TPB decreasing by 127% year over year for the fifth consecutive quarter. We grew our revenue triple digits, reaching $87 million for that.
Quarter on 117% increase over prior Q1 2021, we continue to retain our clients. We are strong in our are about 90% in Q1 2022, as we grew wallet share with our existing merchants had minimal churn.
Adjusted EBITDA for the quarter grew 84% year over year to $33 million with a strong adjusted EBITDA margin of 38% in line with our margin levels in the second half of 2021.
It was achieved while we continued to make disciplined investments in our infrastructure and people to support our long term expansion strategy.
Our performance this quarter reinforces our strong growth momentum and we expect to continue delivering growth supported by the performance of our existing and new merchants using our platform.
On slide four we have always operated with a philosophy of delivering disciplined profitable growth our adjusted EBITDA for the first quarter of 2022 reached $33 million, increasing by 84% year over year. If we look at our adjusted EBITDA for the last 12 months of 2022, because more than double.
Compared to the last 12 months of 2021, reaching a $140 million that's up 118% increase in the last few quarters, given our strong profitability. We have continued to strengthen our cash position and our balance sheet. We believe this gives us continued flexibility to execute our long term growth strategy.
On slide five.
As I have mentioned in the first quarter of the year, our PPV has more than doubled year over year.
The significant increase has been supported by the fast growth of our global merchant.
Our business model is not dependent on the performance and outlook of any single industry vertical we have merchants from more than 10 different vertical time every vertical well balanced the outbreaks like no single vertical accounted for more than 20% of our TPB Q1, 2022, Although Q1 2022 has been marked by a challenging global.
Macro environment due to the specific factors that have mentioned our business continues to benefit from the diversity of our merchants across industry verticals or geographies products and consumer behavior. We.
We have seen different vertical go to specific cycle, but our overall business benefits from vertical showing strong growth while another vertical made both to our short term down cycle balancing each other out.
So while individual merchants may have idiosyncratic exposure to these factor when we look at our overall volume it remains quite stable.
You can see on the right hand side of the slide I'm on slide five all of our vertical to show strong year over year growth in Q1, 2020 with consumption experiencing the highest growth increasing by more than five times year over year, driven by both on demand delivery and e-commerce on demand delivery extreme high growth as we've on boarded a leading Latin America.
On demand delivery platform last year, we have also grew existing customers by taking them to new geographies.
<unk> Commerce, we have seen our merchant skill their volume quickly I always have continued to gain wallet share with these customers by adding new geographies and payment methods with them.
Mobility increased by more than two times year over a year, especially Australia picked up pace around the world and the attainment on services also experienced high growth created by more than one five times year over year.
I will now hand, it over to meet that discuss our expansion strategy.
Thank you <unk> on slide six our margins are not only well diversified across diverse verticals, but also on a geography basis.
An important strategic priority for us is to continue to grow our business outside Latin America. We believe in the long run. This will further strengthen our business as much as you look for a single API and a single integration to access multiple emerging markets, including markets in Africa and Asia.
We have continued to grow our presence outside Latin America, adding ivory coast and Rhonda to our infrastructure network. During Q1 2022, bringing the total number of countries in which the mix of services available to 37.
Continuing to add new countries based on better merchants want us with program as well as our internal view of the prospects for our new country across our merchant base and the wider industry.
Typically you have a merchant and reaching when we add a new country and this enables us to generate a higher ROI on our expansion into a new country do you believe that the infrastructure. We are building across geographies makes us an important partner for that margin to achieve their own growth objectives. We are.
Focused on growing with our margins as they grow organically, adding new countries and establishing multiple local connections with complex and Martin to Brian He will be infrastructure and network.
Thanks.
Slide seven.
Our focus on building our global footprint has continued to yield results. We continued to see strong revenue growth across all geographies dollar revenues in Latam increased triple digits by 116% year over year in the U S. Dollar 78 million dollar revenues in Africa and Asia.
All increased double digit by 127% year over year and represented 11% of our total revenues in this quarter.
Revenue from Asia, and Africa, while the U S dollar 10 million in the quarter as a comparison for the 2021 on revenue from Africa, and Asia with $21 million.
We are pleased with our run rate expectations for our business in Asia and Africa.
Expect our share of Asia, and Africa revenue to gradually increase over time as we continue to cross sell too much in that originally started their relationship with us and Latin America.
Any such as Nigeria, South Africa, India and Indonesia.
We're also increasingly starting to see margins initiated their relationships with us.
Markets in Asia, and Africa, and then expanding to Latin America.
Slide eight we continue to invest in our business just bonding to the incremental opportunities species via.
We are fully committed to further diversify our geographic footprint, especially in Africa and Asia to estimate this growth cobalt Zynga President of Billboard is making South Africa. His base for the near future to build the team develop the local culture and enhance our infrastructure and network setting the foundation for our long term growth in the region.
In early 2020, Dolby also move senior leaders to become general managers of our business in Asia and Africa.
Move to Nigeria in Singapore, respectively in the last few months.
Senior executive members in these new regions.
Hasbro to emphasize and retain are the local culture.
The end of the first quarter of 2020, we had 562 employees, increasing by 54% or by 197 ftes year over year.
During the quarter the grille significantly in all areas with particular focus on technology and product and sales and marketing head.
Head count has significantly expanded outside the Americas as we focus on hiring globally to grow faster.
About 100, Ftes outside the Americas by the end of March <unk> increase.
Increasing by 104% year over year.
We're also proud to share that during the quarter, you've added more than 50, plus new payment methods in Asia and Africa.
Continue to evaluate select M&A opportunities to accelerate our growth in those regions.
Moving to slide nine during the quarter, we continued to onboard new merchants with strong cross sell we've added 10, new significant margin to our portfolio rich.
Rich.
Starting to process the bus in Africa or Asia.
We've been able to not only add new countries, but also to deepen our presence in the countries, where we currently operate by bringing new merchants and Upselling and cross selling to our existing merchant fees included a few examples in EMEA and Asia.
Land and expand strategy.
Increase in the total number of merchants in India, Indonesia, Nigeria, and South Africa shows our continued success.
R&D lab business in new geographies for example in India. We started our operations back in 2018 and during the past year, we provided our services to pipe lost margin.
Today, we are processing payments to 55, plus margins in India, our operations in Indonesia, Nigeria, and South Africa are more events, but we have more than doubled the number of merchants in these three countries. Since we opened up these markets.
Given our broad offering in terms of product payment methods and geography.
Such as value the convenience of a one stop shop and this gives us an immense opportunity to continue scaling our customers and increase the barriers of entry product competitiveness, we remain laser focused on monetizing our existing client base and gaining share of wallet.
Diego will now review our financial highlights thank you.
Thanks, Amit.
Let's start with slide 10, we have seen strong PPV growth during the quarter.
One 2020 to RTW surpassed the $2 billion of freshwater increasing by 147% year over year, and 13% compared to the fourth quarter of 2021.
As mentioned in slide four the growth is attributable to the performance and continued growth of our merchants across most of our <unk>.
Particularly on the Monday, Liberty travel commerce advertising and software for Savage.
I would also like to highlight that we have experienced growth both in the us and the yards during the quarter.
For <unk>.
We have seen a steady increase in PPV quarter after quarter, specifically in Q1 2022 by income tripled year over year.
As we commented Internet last earnings presentation, but youll see because these short term fluctuations in Q4 of 2021.
We are already starting to see improvement in our pls volumes with double digit growth year over year, and mid single digit growth quarter over quarter.
Revenues also reached a new record high of $87 million during Q1 2022, having.
Having grown 117% year over year and 15% over the fourth quarter of 2021.
We are in the Americans and skate existing ones or revenue share from them, but the maintenance costs continued to decrease from 62% in Q1, 2021% to 52% in this quarter.
Our revenue somewhat TBD on take rate was four 2% during the quarter slightly better than our fourth quarter 2021 big rate of four 1% and fairly in line with the levels seen in Q1 2021 of 12, 3%.
In this quarter, we saw slight increase in the local to local sheriff's TBD compared to Q1 2020, while the.
The local to local and cross border speak for this quarter was in line with what we processed in Q4 2021, let's move to slide 11.
So.
On our revenues, we continue delivering strong revenue growth both.
From our existing and new customers.
Revenues from existing merchants are those revenues that are driven by merchants that we're already processing in the same period of last year.
And revenues from new merchants are those revenues that are driven by med chunks of that started operating with us after the same period of last year.
As our merchants typically have three to six quarters to ramp up period, we believe that revenues from your merchants are just an indication of the potential of our new customers.
You didn't do you want to sell something in two of the work coming out of 17 year over year revenue growth, 90% are $36 million came from existing merchants are.
Our revenue from existing merchants continues to grow from quarter to quarter, reaching $77 million in Q1 2010 to more than doubling the $33 million that we achieved in the same period of last year.
Our net revenue retention for the first quarter of 2013 was a strong 190%.
Calculate net revenue retention at the revenue from existing merchants over the total revenues of the same period of last year.
As we commented in previous earnings presentations with Olympics spectrum maintained the same net revenue retention levels in 2022.
2021 represented an all time high in terms of revenue and PBT growth and therefore, we expect the comparisons get tougher starting from the second quarter of 2022.
We reaffirm our expectations that we provided during our previous earnings in March 2022 that we expect to maintain a healthy net revenue retention north of 150% in the full year 2017.
The remaining 27% year over year revenue growth of $11 million came from new medicines.
This compares to the $7 million quarterly in the same period of 2021 8 million in the fourth quarter of 2021, increasing by 61% year over year and 43% quarter over quarter move.
Moving to slide 12, we continued to expand our gross profit and EBITDA.
Starting with our gross profit as we have mentioned in the past our commercial focus is to increase our gross profit dollars per merchant.
So our gross profit continues to grow at a healthy rate.
We were able to scale, our gross profit to $44 million in Q1, 2022 up 87% year over year and 12% quarter over quarter.
Gross margin came at 50% in language marching levels seen during the second half of 2021.
Our cost of processing for the quarter represented 2% of a TBD compared to $1 90 in the fourth quarter of 2001 on one seven in the first quarter of 2021.
These increases were mainly driven by a change in business mix.
<unk>, which have higher processing cost increased their relative contribution, particularly year over year move.
Moving to adjusted EBITDA.
He was $33 million for the first quarter 2022, increasing by 84% year over year and 13% quarter over quarter.
I'm pleased that our adjusted EBITDA margin was 38% in line with our margin in the second half of 2021.
Well, if there's nothing to be too we affirm our expectations that we provided during the last earnings that we expect our EBITDA margin to remain north of 35%.
If we look at operating expenses for the quarter, excluding onetime and noncash items, we see that they have grown 95% year over year.
We expanded our team and how they're more senior members.
In addition, we increased our travel and in person marketing events things went back to normal and we also increased third party professional services part of becoming a public company.
With that I will turn the call back to say that to conclude thanks deal before moving to the Q&A section of today's earnings call. Let me say that we are excited about the opportunities that we foresee for the rest of 'twenty two to continue expanding our payments infrastructure across emerging markets. We remain committed to agile decision, making on providing tailored.
<unk> for our merchants to help them achieve their growth plans in emerging markets, where do we operate.
Shown throughout the presentation, our business truly benefits from the diversity of our merchant geography, and consumer behavior partner. Therefore, we reaffirm our expectation of our net retention rates will be at the 150 plus level in 2022.
The healthy new client revenue based on the current pipeline, we see despite the global macro uncertainty disciplined growth will continue to roll our business, we focus on making every merchant dollar accretive our strong performance of the quarter has led us to a combined revenue growth plus EBITDA margin of 115%.
We continue to expect our EBITDA margin for the full year 2022.
To be north of 35%, we continue to expect operating leverage in the medium term and therefore, the ability to expand our margins our business is stronger than ever before but our aspirations are even greater.
Just getting started thank you to all our merchants employees and investors for their continued support with this I turn it back to the operator to open it up for questions. Thank you very much.
Ladies and gentlemen, if you have a question or a comment at this time. Please press. The Star then the one key on your Touchtone telephone. If your question has been answered or you wish to move yourself from the queue. Please press <unk>.
Sebastian will be hosting the Q&A and our first question comes from Jorge <unk> with Morgan Stanley .
Okay.
Hi, Ken.
Once you meet that thank you for taking the time to talk.
Quick question can you hear me.
Yes, Okay. How are you good morning.
Two quick questions first could.
Could you share some color on <unk> dynamics this quarter I understand you don't provide guidance, but you do have shown no correlation with ecommerce volumes in the region. So could you explain how should we think about CTV growth going forward.
And my second question is regarding the EBITDA margin.
<unk> <unk> technology.
But you are reiterating the guidance above 35% this year.
38% this quarter, so could we expect larger lower margin in the coming quarters and a material increase in technology expenses going forward.
I asked because $1 4 million in technology expenses mix somewhat low relative to the growth opportunity in big scaling costs required to capture this growth and also considering.
You are starting to ramp up other products like you shrunk with the survey we local go. So shouldnt you didn't think expenses ramp up thank you.
Okay. Thanks, Thanks very much for the question, let me just start the cocoa our press and it's all about joining the Q&A today.
In terms of TPB makes I'll, let diego give the dynamics in terms of growth, but fundamentally we are seeing both products.
Very healthy growth and we've shared that in Q4 and the split on the evolution of those two products. The reality is that we don't.
We don't we don't see there is that the way we all were thinking.
From a merchant standpoint.
At time Bill.
<unk> chose more payoffs Hubbard pains.
Very bullish on both and we think that they're both highly complementary.
In terms of your question around fixed expenses.
It's a fair point.
We continue to invest really heavily on deck.
Anything that's a place where we've added the most head count keep in mind many of our hires are coming or all of our hires in the tech side are coming in the emerging markets. So that's why you probably expect a slightly different cost structure than what you would expect from others companies hiring in the U S or even in Europe .
We are not shying away from any expenses on the tech side, we want to make sure we continue to compound on.
Our growth on the way to do that it's continued to add more geographies more products and make our infrastructure more valuable deal I don't know if you want to add something on the on the TPB mix.
Yes, we're very happy that that was as we commented in Q4.
We are already seeing the payouts speaking up yeah, as we mentioned in discrete both by you and somebody outgrow corporate group corporate our corporate debt in the medium.
In the case of <unk> mid single digits in the case of <unk>.
Sorry in the case of mid teens and it goes up mid single digits.
And we see huge opportunities in both fronts I mean in terms of a great festive I mentioned, we are mainly focused on growing revenue.
Tpb's more more like an output.
Conceptually typically but TBD growth in language revenues.
Somewhat higher.
But we don't guide on specific <unk> antibody.
And just to complement on your point our guidance is another 35% at 75% plus.
In terms of color yes.
Okay perfect. Thanks, so much.
Thanks for the question.
Our next question comes from Tito <unk> with Goldman Sachs.
Hi, good morning, Sarah.
And David Thanks for the call and taking my question first.
First question on the net revenue retention rates and you're still well above the guidance at 190% you're guiding for 150% plus I think Gayla, you mentioned that you'd come down, particularly because of tougher comps next quarter. So that's the right you should be much closer to that 150%.
In Q and also just to complement that.
I think we've seen e-commerce in general globally kind of suffering a bit some streaming services showed subscribers following.
Yet you continue to deliver just just can you give some color on sort of like the health of your merchants, particularly with what we're seeing happening globally and how that could impact.
Growth in net revenue retention rate. Thank you.
Sure I'll take the second part of the question on summit that will cover the first part.
We are very proud of the of the quarter, we just posted its been our best quarter ever.
I think it's a function of our base has been extremely diversified in terms of products geographies. Most importantly vertical no single vertical accounted for more than 20% of fiber revenue in the last quarter. So we do expect to see different verticals go into drops on balance we've seen it again and again in our Q3, we've seen it.
Last year with Covid.
But even through crisis like those we manage to grow the reality is that having a very diverse business with no concentration whatsoever. We believe a very strong hedge. The other thing is that emerging markets continue to be a focus for the company as we start.
Many of our merchants are having harder time to find growth in their core markets and continue to double down in the emerging markets, where we operate so.
Gentlemen, diversification and making sure we are serving them with more products across more geographies, we think it's going to be a great.
Predictor of our growth in the future.
Thats, how where our core focus.
I'll, let you cover on the NRC.
Thanks, Heather I think due to the point I would also emphasizes that this is our fifth consecutive quarter of triple digit growth.
You saw we've grown 117% year over year as far as that revenue that concern and I think it's coming from both existing and new margin.
Existing merchants I think we've been pretty consistent about where we think got it in our dogs than mature. We've always said it is around the 150% plus in that region.
As you've seen last quarter about an allowed 198% this quarter, we added 190% odd of expectation for the full year. It is 150% plus I think there'll be some I would say changes quarter over quarter over the next few quarters.
Keep in mind also that last quarter.
The second quarter of last year was very high benchmark meeting that we had an excellent performance last year. So you expect D analogue for the next few quarters to reflect that but we are still extremely bullish and we believe that we will stick to a 150% plus and that our expectation for the open yet.
Great. Thank.
Thank you hi, Brian and to meet that and then a second question.
Just to follow up on the the EBITA margin in kind of margins in general.
You stayed above that 35% plus margin that you guided for expenses to grow a little bit less than revenues.
Just in terms of.
How that kind of may evolve through the year I think previously you mentioned that maybe the first half of the year you see a bit more pressure on margins I don't know if how you tailor investments throughout the year, if there'll be any seasonality effect in terms of the margin outlook and also just specifically on the gross margin, which was a little.
Lower.
This quarter can you talk about the just the different dynamics of different margin between getting pains versus payout.
Which one has better gross margins are or which of the products impacted the margin specifically.
Yeah.
Okay.
I will take the second part then I led to meet that covered the first part so in terms of gross margin that we are extremely proud to have added $5 million in gross margin quarter over quarter with him.
And extremely healthy metrics and that's a function of our and our Ark do you keep that.
The level of static test, we are never optimizing for our gross margin percentage. We I think we've discussed this in the past we will always trade lower gross margin percentage for more dollar amount. That's how we optimize that that's how we're running our business when we ask our commercial teams on the way we incentivize them. It's purely on gross profit dollars to make sure that.
We are adding more dollars two hour sorry, if I were to our P&L all those doral side very accretive and we make sure that every dollar that comes into our platform contributes to the margin.
Different businesses and different products will have different margin profiles and that's a function of.
How big those partnerships are with geography, we are operating.
It's very hard for us at Brady, that's exactly where it's going to land in terms of percentage, we think Utah <unk>.
Very stable.
Situations, where we are today, but again I want to emphasize the fact that we are entirely focusing on the dollar amount that we are optimizing for and that's the way we incentivize our working so Mike I'll, let you take the first part of your question.
Thanks, So I think if you look at our gross margin. Our gross profit has actually increased 87% year over year, and 12% quarter over quarter to $44 million.
Okay.
Our gross margin depends not only on our pricing and in our cost structure, but also on the product mix and the relative growth of each cohort. If you think about our cost of services as a percentage of D. TV for the first quarter. It was a it's about two 1% compared to about 2% a quarter ago.
And this increase was mainly driven by a change in business mix.
Have a slightly higher processing costs and they did increase their relative contribution this quarter, but again keep in mind. When we are selling when our sales team is out there in the field getting that much into give us small volume we are quite indifferent between being sent out via not optimizing product mix. We are optimizing for wallet share and we are all.
All of these optimizing for gross profit dollars, but the SP. The relative contribution went up a little bit and beans have a higher processing cost for the payment methods that increase this quarter.
Okay great.
And sorry, just the first part of the question also in terms of any seasonality in terms of like the EBITA margin in like you're hiring and other investments.
Ah I can take Thats about I think that we don't we don't have a typical seasonality that you would expect in other businesses I think we have a lot of discretion in how we can ramp up.
Cost me, especially related to Heidi I would emphasize that our market lead today's is excellent for our business.
I think everything that you are seeing outside makes us stronger as you know we are profitable and that gives us a huge strategic advantage in a market like today that we can go out and get really good talent to come and join US. So this is actually a great opportunity for us.
Okay, great. Thank you tamika.
Our next question comes from Jason Kupferberg with Bank of America.
Hi, guys I wanted to ask a follow up on <unk> I know you're maintaining the full year guidance. Obviously you started the year really really strong I mean, I guess I'm curious the 190 in Q1, how did that come in versus your expectations and do you now have a higher degree of confidence in.
Potential upside to the $1 50, plus target for the year just given the strong start that we've observed.
Thanks for the question I'll also.
Go ahead go ahead, so going back.
Thanks for the question I think on the <unk> as I said the continued to emphasize that we will be 150% plus analog I think they are not changing our outlook yet I think that what is that expectation at the beginning of the <unk> and the management team behind those numbers.
I think that we've had a really good quarter again, this quarter and we feel bullish.
As I said that for the next few quarters, you will see some quarter over quarter changes because the comparison quarters of last year, the very high but for the full year D C pretty focused on delivering a 150%.
Okay. So it sounds like you just wanted to be conservative, which is obviously understandable.
I was curious also just on top line metrics in general how those have trended through the first half of the second quarter and just any seasonal considerations you want us to keep in mind from a modeling perspective as it relates to <unk>.
Volume growth revenue growth.
Jason we continue to see.
Underlying it.
Trend obviously.
We are here discussing Q1 results on its very early in the in Q2.
I think fundamentally we have never been a better business then that's what we as management are optimizing store, we want to make sure we have more touch points with our merchants.
That means more products more tools for our salespeople to go out there and our.
<unk> continues to drive a lot of our growth.
So nothing.
Significantly changed as of now.
Continued to be very bullish about their prospects for RBC.
Okay. So nice to see these results. Thank you for the comments.
Thanks.
Our next question comes from <unk> with HSBC.
Hi, Thank you for taking my question.
Can I just don't satisfy first on the revenue concentration did you mentioned that it has and the drop in margins has it declined to 52% in.
In the quarter.
Bill.
Yes that is right. We were in 62 last year. We are in 52 now I think we guided 450 in Q4, we have so we are we are on those numbers.
Okay and.
Oscar TPG growth in the coming quarters.
Are you cautious in terms of agenda global slowdown could impact <unk>.
Some of your key margin and do you have any kind of sensitivity as to what kind of exposure would you have to adjourn the slowdown in the economy.
Sure Nicole Thanks for the question. So many of the things or many of the recent that <unk> seen for others. The slowdown, particularly in Europe . We are top tier exposure until we've discussed I think Q4, we have no exposure to Russia.
Ukraine whatsoever in our.
Our business has been entirely focused in emerging markets, which continues to be.
That's growing regions in the world.
We are very diversified so no particular, we don't have any concentration by country and by vertical that that's a very important pitching our business we've been through crisis before in Latin America in Africa in APAC on we've been able to continue to grow on both really high levels of growth, we might see Bernie golf going through lower growth cycles, that's perfectly normal.
But that's why we care so much are having a very diverse customer base will see winners and losers in the future definitely we continue to expect so but our visits have shown resilience to dose exposures in Dubai.
This is Debra and my last question is on <unk>.
Great.
Throughout last year have you seen compression in Nebraska.
The gross take rate, except for the fourth quarter and this quarter again, there were some pick up in the gross take rate.
I think some of your comments it seems that it is.
Our mortgage entirely explained by higher share the fans who has the scale disconnect with the increase in gross take rate.
But how do you see this evolving in the coming quarters do you think as the payouts maybe gather more facts.
And second half of the year.
Could see some more pressure on the gross decrease.
Nathan Thanks for thanks for the question, we are not optimizing for dig right. So we've been able and Douglas important for us to be able to show that take rate goes up and go down you've seen that effect last year. So we might continue to see the same evolution. It's a function of our basis make toward their merchants are growing the fastest what are the regions that are growing deposits on board.
Are there product, we don't optimize for our for our growth.
Gross take rate, we don't think that's the right way of building our business. We are optimizing for gross profit and making sure that every built on our platform contributes dollar margins.
And again the way, we incentivize our our commercial team. So we'll happy to take deals at lower take rates provided that they contribute to our gross profit margin ours is a business that benefits from scale.
We've always thought up the business that way and we intend to continue to do so the fact that we've always had this approach disciplined profitable growth I think it's very much baked in.
In our DNA as a company we are net we never optimized for just a blend we always made sure that that top line contributor to our margin and that hasn't changed today.
Perfect. Thank you said less limit that Diego for your comments and congratulations on the earnings.
Okay.
Our next question comes from Carlos <unk> with UBS.
Hi, Shaver and team. Thank you for the President's risk questions I have two on my side. Please the first one is on the financial losses that you posted this quarter. So SBA my understanding and please correct me if I'm wrong, you are not directly exposed to higher policy reach in Brazil and Mexico.
As all of the prepayment is don't lease your acquired partners and you just charge a fee for these and as you have a net cash position to be in this environment of higher policy rates. It would be likely to have a positive impact into our financial results. So if you could please the video a little bit to what drove this financial losses this quarter.
And what can we expect going forward and then I'll ask my second question. Please.
Sure.
Do you want to take it.
Sure.
So this quarter was very particular for financial results.
As you.
No there were a presentation of several emerging market currencies at the mercy of Reais to the peso.
Colombian peso and so on we are very conservative whenever we have excess of funds and we keep them.
We keep them in emerging markets, we keeping in U S dollars and example of these could be any earnings pending distribution with Japan and U S. Dollar as the functional currency in these Montana can be seen as a function of our guarantee of these countries are they look at guarantees whenever you have U S. Dollar is that considered a foreign exchange.
Currency, although bright guy.
You can grab on rates you would have a loss for having us on us right. So they we kept the same U S dollar.
But because of having those U S dollars in these emerging markets.
Perspective, and we have to recall that in FX now that typically in a quarter has happened to the opposite and we kept light.
So besides us ethane.
The main reason of that.
But if you look at while eventually you will see it in the financial statements. If you look at the the equity you will see that we have are not proceed.
<unk> of roughly $1 million, if that makes sure that Jasmine and that's because we did that is typically rebounds whenever we consolidate the local entities.
Hi, guys, if I might just comment on that our basic thought.
Counted for in dollar amounts.
Thanks.
Fluctuations are going to be marginal.
Regards stood up in dollars are expected amount what you discussed on the financial notice. It's a pure accounting premium question on sort of how we hold our our own pilot our own funds off of what you took home for that but youll see that our business continues to perform very closely to the expected dollar amount and why because there are natural hedges in terms of what are the products we serve so Spain.
I got that natural hedge the currency exposure, but also whenever we have whenever we have a <unk>.
Closure to local currency will make sure we hedge our position our work it's a transactional business we are not.
In the business of taking FX positions and if anything that you've seen that we might have we broadly.
Benefited marginally during this quarter.
We have marginal losses in the bus, but you should expect our direct to be break consulting their animals.
The other important thing is that our net income continues to grow we posted $26 3 million barrels of net income in this quarter.
That's a really important metric for us as well.
Okay, great. Thank you and just on.
My second question here is that the company logic I think in the recent weeks a new initiative called the local Ghoul returned us to this targeting smbs.
So he is our new platform <unk>, maybe I'll start ups and SMB, which is differently from the focus of the global market that you already have so if you could please tell you a little bit about this opportunity and why would you focus on this at this moment given the huge opportunity. That's used you have on the global merchants. Please.
Sure Yeah. Thanks.
Thanks for the question. So we've launched the look I'll go a few days ago. So it's extremely early we'd always been consistent that we are believers in volume seen in the emerging markets coming either through here.
Tier one merchants have global enterprises or through a smaller company selling through marketplaces look I'll go with our effort to make sure we're covering smaller merchants that have their bankruptcy. Some spice of markets, we want to make to make sure that merchants have Debbie ETF onboarding into us and better and faster.
I need your experience to navigate it.
And that's the reason behind we continue to be very bullish on what our existing core business none of the local golf, it's baked into our forecast. So this is if anything a potential upside to everything we do.
But at the same time, we see an opportunity and we wanted to make sure we are serving more.
Smaller merchants have hub participation.
Participation through marketplace.
Okay, great. Thank you. Thank you very much.
Thanks, Greg.
Our question comes from Andrew <unk> with SMB <unk> Nikko Securities.
Hi team. Thank you for taking my question wanted to follow up on your comments around M&A in Asia and Africa.
We haven't seen you really do anything super.
Super transformational thus far on that front and so if you could give us a little bit of color on what types of capabilities you'd be looking at is it is it something horizontal horse or maybe.
Something to help build out the tech stack even further.
Sumit I wonder if I could.
Yes, Thanks, Doug. Thanks for the question I think we've always been consistent about how we think we may use M&A as a strategic priority for us going forward, which is we will make sure that the many that we are going to do is additive to what we are building internally as you out of bed.
The entire tech stack a day local has been built in pilots and we want to be careful about what kind of an M&A. We do last year, we did a small D pulse that might not be in Brazil for about $40 million, that's been really really accretive to our business in that case, we went after.
A platform that had some merchants that we felt that was going to be acceleration in our ability to onboard those much incentive why we acquired from Adobe.
It's the kind of deal we are looking for which is either it needs to add to our commercial footprint for us or gives us more access to certain geographies everything building organically could take us longer.
And be the main focus so yes, we've not announced anything transformational.
But we are very carefully following the current market environment today in fact that current revaluations of assets presents us with an amazing opportunity and we remain focused on seeing if there was an M&A transaction that we could execute that would be accretive to us having said that nothing as eminent as of today.
Got it makes sense and then hoping you could walk us through kind of the conversations you're having with your existing enterprise merchants when you start to expand into these new geos.
Is there competitive dynamics that you face when you move into those new Geos in regards to taking the share of wallet for your existing merchants in a new location I just want to better understand.
The conversations you're having there.
Sure Andre Thanks for the question so.
We built a whole platform of local on the premise that it's one API a one plus one contract on one platform for everything we do so it's extremely painful for our merchants to expand with us and that's the key driver behind our in our merchant starts with asking one geography on the continued to move into other product and geography without any friction.
And Thats why Youll see us continue expanding geographically, we want to make sure we have more touch one so typically what you will see it.
Our customer a merchant the flowers, starting one two or three geographies I'm very quickly decided to expand into more places obviously willing to reflect the dynamics in the in the new places, where we are going to be expanding so what is it they're going to be the cost structure, what's the right pricing.
But it's always our expansion keep in mind, we exceeded our revenue Navy or we go to our merchants and we allowed them to collect more dollars disburse more daughter.
And that's the type of discussion we have with them. We also tried to listen to their needs on a reflect that in our own strategy and we are lucky enough to have some of the biggest.
Most savvy companies on Earth, and so whenever they pointed us into an opportunity. We typically know that number one they're going to have your merchant merchants waiting before weeks months, but number two is that that opportunity is huge so.
That continues to be our key focus our existing merchant base.
Growing fast on it.
Some of the <unk>.
Most savvy companies on Earth. So that's the way our discussions work, we start somewhere where do we go next what is the next product. What's your next point point on Hong Kong, we fulfilled all of that goes into our gross profit and so every time, we integrated one and.
There is no other show integration effort whatsoever for many of our companies take resources our scarf.
Having those integration, it's a huge distribution advantage someone that started with us in India and then you see the move to Mexico, or Brazil somewhat that started with us in Brazil can easily move to Nigeria, and thus have unified platform.
Very clear thank you.
Our next question comes from Christopher <unk> with Piper Sandler.
Hi, Good morning, Thanks for taking my questions wanted to ask another one about your merchant conversations.
Given the challenges globally around higher interest rates higher inflation.
The logistics.
Is anything changing with conversations with merchants or is it still very much there focused on the things they were focused on a year or two ago with their plans for moving into emerging markets like has anything changed from their perspective.
Okay.
Thanks for the question no we haven't seen and no changes in plans if anything again emerging markets continue to be.
Very promising.
Land, if you will on the areas, where we operate are very fast growth. So our merchants are saying how do we make sure we navigate.
These countries how they make sure we have the rights offering.
These sorts of conversations we're having we haven't seen it.
Merchants are deciding to retreat from emerging markets quite the opposite.
Many of them are fighting hard time growing in China, Europe , and the U S. Okay.
Most of their growth is coming from Latam from APAC from Asia.
We benefit from that so that's the that's the way that's what we are seeing today on the ground.
Okay. That's.
That's very helpful. And then as we think about the revenue from new merchants.
And the.
The comparisons from 2021, the new merchant revenue was so strong.
Yes.
Is it reasonable to expect that 2022 in general should be down I think you said that last quarter in terms of revenue from new merchants and I know you don't specifically guide, but just.
Ballpark it as a <unk>.
Alan Junior right from the how much revenue from new merchants you pick relative to 2021 is that fair to say.
Sure So maybe I want to take it.
Yeah.
I think people always delivered solid numbers for customer additions I think this quarter. We've indicated that we've added 10 plus significant customers during this quarter.
Highlight that these are significant customers, we've actually added many more than 10, but we always like to look at our new customer additions and look at what is the prospect of increasing those customer relationships.
We think we have several opportunities on the way and we remain extremely bullish on our new client opportunities.
As you would have noted when we gave our guidance for the full year. We gave you a net retention rate guidance of 150% glass, but we did not give you a new client revenue guidance and the reason is that when we add merchants to our platform. We have a lot of visibility on when those market merchantville onboard with us.
Do not have as much control over how quickly the volumes exactly ramp up sometimes that happens in two quarters, sometimes that happens in three quarters.
There is variation in the ramp up of the volume.
As you saw on new merchant revenue in this quarter was $11 million that compares extremely well with the 8 million last quarter and a $7 million. If you do it on a year over year basis, and we believe that our new customer Lindsay quarters are extremely strong and we are extremely bullish, but we're not giving a specific guidance on what on mute.
Longevity Award.
Understood. Thank you for the context there.
And I'm not showing any further questions at this time I'd like to turn the call back to management for any closing remarks.
Once again, thanks to everyone for your time on further questions. We continue to be extremely bullish on what our basis on thanks to our team.
For all the support.
This is <unk>.
Partly because of them. So thank you very much.
Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.
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