Q3 2022 Dlocal Ltd Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Good day, and thank you for standing by welcome to the local third quarter 2022 results conference call. At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one one when your phone and you will then hear an automated message advising your hands raised.
Be advised that today's conference is being recorded I would now like to hand, the conference over to your <unk>.
Speaker today saw a dog Nagar head of Investor Relations. Please go ahead.
Thank you very much prefer a darn good morning, everyone and thank you for joining our third quarter 2022 earnings call today.
<unk> not seen our earnings release, a copy is both in the financial section of our Investor Relations website.
On the call today I'm joined by Dave I can kind of at our Chief Executive Officer, Hucklebone thing got our precedent CLO. They look at the data can I, our chief Financial Officer, and Maria Oldham, Vice President of corporate development.
We are providing a slide presentation to accompany our prepared remark.
This event is being broadcast live via webcast on both the one that I'm person based on maybe that's true do you look at what type of investor that the locale dot com.
The recording will be available shortly after the event is concluded.
Before proceeding let me mention that any forward looking statement included in the presentation or mentioned in this conference call are based on currently available information.
Local current assumptions expectations and projections about future events.
While the company believes that I would've Samsung expectation and prediction of reasonable Keybanc Kawczynski available information you are cautioned not to place undue reliance on those forward looking statements.
Actual results may differ materially.
Really from those included in the local presentation or pick up in the conference call. What about you already have freedom, including those described in the forward looking statement.
What are some of the local filings with the Securities and Exchange Commission, we tear available on the local investor relation website.
Now I will turn the conference over to Sarah Thank you.
Hello, everyone. Thanks for joining us today.
I'm very pleased to report another strong quarter with record financial results combining growth disciplined investment laser focused execution and significant progress towards building the best financial infrastructure in emerging market.
We now operate in 39 markets, enabling our global merchants to reach over 2 billion consumers. All this access through our one day local model, meaning one contract one single platform on one API in Q3, our total process volume reached <unk> dollars 7 billion record.
$112 million in revenue despite the high baseline set in 2021, we saw robust growth at TPB are revenue, increasing by 61%, 63% year over year, respectively, PPV grew by 12% quarter over quarter, our revenue by 11% quarter over quarter.
We continue to retain our clients with a solid <unk> of 152% in Q3 2022.
Moreover, it is important to highlight that we continue to grow our gross profit and EBITDA dollar amount consistently quarter after quarter gross profit increased to $54 million up 56% year over year, adjusted EBITDA was up 58% year over year to 42 million both grew.
And 9% quarter over quarter.
We continue to operate with a philosophy of delivering disciplined profitable growth.
Maintained our adjusted EBITDA margin relatively stable at 37% compared to 38% in the past four quarters.
Six our geographic expansion efforts outside Latin America continued to yield outstanding results during the quarter. We saw I'm part of growth from Africa, and Asia with revenues, increasing by four times year over year at 80% quarter over quarter, reaching $35 million. This is more than the 21.
<unk> revenue, we record that for the 12 months of 2020. One we expect to continue to see solid growth as we cross sell to merchants that originally started their relationships with us and Latin America going to Africa, and Asia and vice versa.
Rates at bar for the network effect of our financial infrastructure and the quality of our solutions on slide seven.
Our Latam business revenue increased by 39% year over year to eight seven Bcf flat quarter on quarter due to temporary market limitations Edr did Jim Cross border operations, if we exclude Argentina cross border business Latam revenue increased by a solid 43% year over year or 7%.
Quarter over quarter, the Argentina government temporarily changed the conditions to access the foreign exchange market for the imports of certain goods and services.
Negative impacting our Argentina cross border books.
Ratio has improved during the quarter, we have managed to continue processing most of our deep UV.
Overall, our business continues to benefit from diversification across geographies with no single country accounted for more than 20% of our total revenues in Q3, 2022, I will now hand, it over to <unk> to comment on our international expansion.
Thanks, Hello, everyone. We continued to execute on our strategy to expand to new markets I'm happy to announce that this quarter. We have added two more countries to our portfolio, meaning we now operate in 39 different emerging markets.
During the quarter, we added Nicaragua, bringing the total number of markets certainly Latin America to 16.
We have also added in Saudi Arabia to our financial infrastructure network, bringing the total number of market savvy nature to our geographic expansion continues to be driven by two main factors number one addressing the needs of our merchants are number two attractiveness of the market our investment needs are geographically.
Typically how our phosphate hill because.
First we normally come up Meg something waiting when we add a new country, providing immediate demand. This was the case for both Nicaragua and Saudi Arabia.
And second with our wanted to look at platform and in new jewelry up your payment method become immediately available to our entire Mexican base without being executing not only do our new countries, but also to deepen our presence in the countries in which we already operate providing a best in class local solutions for our global merchants.
During the last quarter, we continue to enhance our infrastructure our network, adding more than 10, new payer metals in Africa and Asia.
Our growth strategy continues to be fundamentally based on our organic growth.
However, we continue to explore selective inorganic opportunities to improve our scale network.
Across the markets.
We bought where merchants from a diverse verticals from all over the globe. Our business model is not dependent on the performance and outlook of any single vertical as we operate across more than 10 of them.
Over the years, we have seen different verticals go through cycles, but there are always winners and losers.
We're constantly looking for new opportunities to further diversify our business and increase our.
We are proud to partner with some of the largest global merchants, our marketplaces in beauty, Microsoft Shopify, Dropbox, Shane Spotify delivery hero.
Neil.
Well.
Hi, Mike Bullock always that's called disclosure restrictions as you can see on the left side of the slide we continue to see more merchants joining our platform.
Total enterprise merchants on our platform have grown to more than 600, and we currently manage around 200 key accounts arguably our merchants baidu our deck DNA a merchant first approach addressing complex units with a convenient one stop solution. The chart on the right shows our continued success.
Our merchants operate in more countries and more payments.
In the first nine months of 2022, our enterprise merchants on Alberta processes payment in eight countries attempting on average 78 payment metrics.
This compares with an average of six countries on a gross 44 payment methods in 2020.
As you can see on top of growing with our existing Merck Johnson organically and gaining share of wallet. We have got an immense opportunity to continue growing through new geographies, new pay methods and continuous development of our brands.
I will now pass it to Marie yet to comment on some rent on Kpis for our top 10 merchants. Thanks, Michael Hi, everyone. My name is Maria or Adam and I'm very excited to be leading corporate development and investor relations at the local.
Look forward to meeting many of you going forward.
The revenue from our top 10, Martin's continues to increase quarter after quarter, reaching $59 million in Q3, 2022, and accounting for 53% of our total revenue.
In the medium term, we seek customer concentration decree.
Though in this quarter, our top 10 markets outperform the average.
Our top 10 markets may vary from quarter to quarter, as we add new markets and SKU existing ones.
In Q3, 2022, our top 10 margins were spread across various verticals, including ride hailing commerce trading.
Training advertising financial services and on demand delivery.
The successful growth within our larger margins is driven by a combination of continuous product innovation and a highly customer centric approach our account managers have deep and trusted relationships with our margins.
Giving us continued insights into their needs and allowing us to keep developing and cross selling products to fulfill those demands.
We have been successfully expanding our geographic footprint, we've seen ourselves in March.
Our top 10 markdowns in Q3 2022 gross debt payments grew fast in 10 countries on average versus seven countries last year.
Their maximum in 19 countries versus 11 last year.
We continue to take our existing customers from Lockdown to Africa and Asia.
Brian .
Nine out of our top 10 markets are already processing for asking is region compared to five out of 10 a year ago.
As you can see we also have several growth levers we've seen our sock Martin's.
On top of growing through new geographies, new payment methods. We also maintain our focus on gaining share of wallet in order to further increase monetization right. Now is to March now will cover our team growth in distribution first of all it is important to remind you about our culture and the way that you operate.
Since day, one we have had a lean culture being highly disciplined with every dollar we spend and always focus on profitable growth.
Additionally.
Given that you operate in a very fast growing emerging markets.
Spain has been essential for us to remain agile and react.
This has been any barton competitive advantage that we are proud of and we continue to Vietnam.
In a challenging macro environment.
Within the context of these lean culture, we continue to invest carefully in expanding our global team.
Responding to the new opportunity with G and driving towards our long term objectives.
At the end of Q3, 2020, Q, we had 712 employees up 34% or by 180 ftes year over year.
Our headcount has significantly expanded outside the Americas.
As we focus on hiring locally to leverage on the ground knowledge and develop a deep understanding of local marketing just secret.
We reached 146 Ftes in Africa, and Asia by the end of September 2022.
Corresponding to 21% up our workforce and an increase of 103% yield.
Year to date, we have going into all of our areas to support our growth opportunities.
Including sales and marketing operations and expansion.
And second product teams.
SEC related growth continue to represent around 40% of our RFP.
With our sales and marketing and operation is an expansion team each accounting for around 20% of our S. T.
Diego will now review the financial highlights Thanks, Marty Hi, everyone, let's begin with slide 12.
We continue to scale our business supported by a well diversified segment base, we saw strong TBB growth during the quarter, reaching $2 7 billion up by 51% year over year, and 12% compared to the second quarter of 2022.
As you can see in the Pie chart on the right we have merchants from more than 10 vertical and.
In every vertical is well balanced in our portfolio with no single one accounting for more than a low 20% of our TPB in Q3 2022, thus.
Thus our business model is not dependent on the performance and outlook of any single industry brought it together.
But TBD growth is attributable to our performance and continued growth of Americans across most verticals, particularly in commerce on demand delivery driver software as a service advertising and financial services.
I would also like to highlight that we have experienced growth both in billions and payouts during the quarter. Specifically in Q3 2022 banks have shown double digit growth year on year, a high single digit growth quarter over quarter, we continue to see improvement in our payouts volumes with double digit growth quarter on quarter and also year over year. Despite the higher.
As we have higher volumes from certain maintenance running marketing campaigns during that period.
Regarding our cross border and local to local volumes, both showed solid growth year over year and quarter over quarter.
During this quarter, we experienced growth in local to help LTV due to strong performance of some of our merchants and as cross border volumes in Argentina slowdown as previously mentioned.
Revenue also reached a new record of having grown 63% year over year, and 11% quarter over quarter to $112 million in Q3 2022.
Our revenue silver PPV are gross take rate was four 1% during the quarter compared to four 2% in the second quarter 2022, and three 8% in the third quarter of 2021 fluctuations from quarter to quarter is driven by changes in business mix.
I'll drop compared to Q2 2000 and for mutual is driven by a higher share of payouts and local to local flows whereas take rate increase compared to Q3 2021 advanced increased their relative contribution year over year. So meaning on revenues, we continued delivering strong revenue growth both for our existing and from our new customers.
Revenues for our existing maritime are those revenues that are driven by merit, but we're already processing with us in the same period of last year and revenues from new merchants out of those revenues that are driven by ameritox the target operating with us after the same video of last year.
During Q3 2022 of the 63% year over year revenue growth, 52% or $45 million came from existing merchants our revenue from existing merchants continue to grow quarter after quarter, reaching $104 million in Q3 2000 going to <unk>.
Increasing by eight 3% compared to $57 million that we achieved in the same video of last year. Our net revenue retention for the third quarter was 152%. This is the result of having almost no churn less than 1% organic growth of our emergency in emerging markets and our ability to continue bringing them to new countries.
Payment methods and increase share of wallet.
This.
Is in language or you have any guidance of 150 plus for the full year 2022.
The remaining 11% year over year revenue growth or $8 million came from new maritime.
This compares to $9 million recorded in the second quarter, because I think when you talk to $12 million from the same period of 2021.
<unk> typically have a three to six quarter ramp up period, we believe that the revenues from new marathons or just an initial indication of the potential of our new customers.
Moving to slide 14, we remain focused on growing gross profit and EBITDA dollars.
During the quarter, we were able to scale, our gross profit to 54 million up 56% year over year and 9% quarter over quarter.
Gross margin came at 48% relatively in line with the 49% marching levels seen during the first half of 2022.
The slight decrease in gross margin is a reflection of our country and product mix.
Our cost of processing for the quarter represented 2% of our TPB stable quarter over quarter and compared to one 8% a year ago.
The increase versus Q3, 2021 was driven by business mix, particularly in increasing <unk>, which have a higher processing costs and payouts.
Moving on to adjusted EBITDA was $42 million for the third quarter of 2022, increasing by 58% year over year, and 9% quarter over quarter. Our adjusted EBITDA margin was 37% relatively in line with 38% margins seen in the past four quarters. This is in line with our yearly guidance of 35.
5% plus for 2022.
If we look at operating expenses for the quarter, we see that they had grown 26% year over year as we saw an increase in salaries as we continue expanding our team with focus on sales expansion and technology.
We increased our travel and marketing expenses.
We operate in a hyper growth business I want to keep investing in Midland infrastructure are inheriting long term sustainable growth with a very disciplined and lean approach.
Before handing the call back to Sara for any closing remarks, I will briefly touch on our net income and liquidity.
Net income totaled $113 million in the last 12 months compared to $72 million in the full year 2021, and 28 million in 2020.
Our net income in Q3, 2022, which are a $2 million, increasing by 64% year over year and 5% quarter over quarter.
Net income for the quarter includes $2 $5 million of net financial losses, as a result of higher cost of hedges as we adapt to sudden changes in FX regulations I'm faced higher interest rates, we follow our disciplined hedging strategy covering any relative imbalance that we temporarily closed in local currencies.
We continue to deliver positive free cash flow generating $121 million a form of funds in the last 12 months compared to $59 million in the full year of 2021, excluding the <unk> acquisition and $44 million in 2020 with a strong net income to cash conversion of 107% for the last 12 months.
BDO.
Besides we continue to strengthen our cash position.
As a result as of September sorry in 2022, we have a robust cash position of $320 million from France, and $222 million of matching funds.
Our strong balance sheet and continuous positive free cash flow generation remained a key competitive advantage and give us flexibility to pursue our long term growth strategy.
Sir the floor is yours.
Thanks, Neil to summarize our performance in this quarter Joseph distinctive strength of our business that we continue to build focus for long term profitable growth combining.
Number one from a financial standpoint robust dollar amount growth on our PPV revenue gross profit and adjusted EBITDA with solid <unk> for the nine months of 2022 at 166%.
Sure.
From a strategic standpoint, a proven track record on executing our merchant cross sell strategy outstanding geographic expansion capitalizing on the huge opportunity in Africa, and Asia, all underpinned by our Tech DNA on merchant centric approach revenue from Africa, and Asia accumulated for the media.
The FERC nine months a year.
Last and most importantly, our lean undisciplined culture, we delivered all that with a team of 712 people continuously striving for exiting our culture is a key factor for us to continue delivering our longer term ambition.
We are very proud of what we have achieved this past quarter and even more excited with what is ahead of US we have just started well.
We will continue to remain humble and focused on providing the best and most comprehensive solution for merchants in emerging market big Thank you to our <unk> team our customers and our investors for their continued support and I'll now turn it back to the operator to open it up for questions. Thank you all for listening we lost a pleasure being here today.
As a reminder to ask a question press star one one on your telephone.
Please standby, while we compile the Q&A roster.
Our first question comes from Jorge Kuri with Morgan Stanley . Your line is now open.
Hi, everyone.
Morning.
Could I ask you to please explain.
What exactly happened with those.
FX limitations that you have in Argentina.
The temporary nature of them it just doesn't feel that.
It's going to have a bunch of <unk> with CPI at Triple digits Central Bank rates, probably are triple digits on the government running out of FX reserves.
What exactly happened what gives you comfort that this is not going to be a recurrent issue at least until.
Things improving Argentina.
Also if you can tell us.
What would have been your revenues.
Excluding this effect.
Because we did see.
Significant deceleration of your revenue growth you grew 15% sequentially in the first quarter, 16% sequentially in the second quarter, and then were down 11% this quarter and so want to understand.
How much of that deceleration was because of these Argentina issue. Thank you.
Hey, good morning, Thanks for the question, so David Hugley, I'll start but contributes to complement so we've been navigating a complex situation in Argentina from from the beginning of this current quarter.
If anything what we've seen is that typically in Argentina seems to get tougher.
And then US months first weeks go by there is more clarity around that.
The local framework, if anything we see everything trending on the right direction obviously.
<unk>, it's a complex country represent.
No other country of ours, it's not a big portion of what we do.
But we also hurricane node that deal with complex geographies.
Part of the value that we bring to the table is continuing to navigate countries.
Situations like this we've been in Argentina from 2016, we've been through ups and downs in all the creativity. The local governments have done so far we've been able to navigate it if anything we are very comfortable today, because we've seen things trending in all directions also coming into Q4.
Highlighted being towards Argentina growth, we probably could cover it at 4% to 5% more in revenues.
I need to emphasize is we are extremely proud with the growth numbers.
We've shared today.
Our African APAC business is booming.
That's a key factor going forward, we continue to not have reliance on any particular geographies and situations like this like the one we are facing Argentina will help and in emerging markets. It is expect double we have 38 39 30 countries, where we operate today, it's only to be expected, but what's really important is our resilience our understanding our deep understanding.
Funding of the local regulatory frameworks and most importantly from the moment. These things have been how we navigated how do we ensure continuity to our merchants, which is something we are very happy to be able to maintain for the most part.
Neil how go feel free to complement it.
Or is there anything you want to.
From my side.
Asia is substantially normalized by the end of the quarter. So we have an update on maybe how that fits under central Bank adapted to these regulations. They were 700 changes during the quarter from the beginning of July to the end of September in General if there's one more.
Negative.
They adapted to more positive, but also the bank to take time to adapt to these regulations.
We think those challenges as we face many time.
And we started Q4 in a much better position and growing from there.
Thanks for that.
I appreciate that the company is resilient and.
Thats you adapt to changes in.
Sorry, I would really want to know exactly what happened.
Im not sure that the response was clear what exactly happened how did it limited our ability to grow your revenues and what exactly is happening now that you feel that the situation has been normalized if you can just to be a bit more clear.
So we can understand.
Exactly.
Thank you.
Sure. So typically when the Argentina government comes up with new regulation around FX, they come up with a very blanket.
Ray will add road rollout 30 framework, where they say all of these industries are not restricted in our experience working with the local central bank. They typically want to preserve the ability for global companies that are key to the population.
To access the dollars we are speaking about our merchant base, who you know very well. So these are key services for the local population. So typically what happens is while the initial.
Regulatory change, it's very tough.
You'll see it flexibility I think over the weeks and months Theres also one deal was mentioned there is also some time.
It takes for that for banks to understand the new regulation under firm navigate it. So our expectation is that things will continue to evolve in Argentina, obviously, it's a very volatile country.
It doesn't represent as much of our business.
Part of our business model to be able to navigate this stuff and the reason why we have more confidence because we are speaking from the last week of Q3 was 100 times better than the first week of Q3, and therefore, we are seeing the trend.
Were very comfort ongoing into Q4 and next year that things will continue to.
Do level for our merchants.
Thank you.
Please standby for our next question.
Our next question comes from Tito Laboratory with Goldman Sachs. Your line is now open.
Hi, Good morning, Thank you for the call and taking my questions. A couple of questions. If I can.
First just a quick follow up on the question.
On Argentina are you able to price for that so maybe because of these issues you increase the take rate just trying to say if there is any offset given these issues that you faced there and this also impact your financial costs or financial costs.
Went up a lot in the quarter just thank you mentioned related to hedging or so just if you could give some more color on that and then I have a second question.
But I'll, let Katherine.
Sure.
Thanks, Good morning, guys. Thanks, very much for the question I'll start with the FERC HEICO covered second yes, our price always reflects complexity in countries that are easier to navigate.
Typically have lower take rates in countries, where they are.
<unk>.
Regulatory farmers that are challenging davita youll see our take rates being higher it was just a function of the complexity, we're solving for our merchants.
Yes, we typically have the ability of having higher take rates in markets that are more volatile like this case.
But when a compliment.
Sure.
Thanks for your question, so regarding financial expenses unrelated.
To these part of keeping our attention on regulation.
Yes part of Q3, we have incurring through high cost of credit of just because of the attention regulation.
We see these being temporary changes, which we need to incur extraordinary.
Extraordinary.
To cover our positions.
As we have always been saying.
Take a very conservative approach towards the effects, we have never being in the business of taking risk.
Doug.
Homebuilder amounts.
If anything we expect in the coming quarters.
These costs.
Again normalized going.
Going forward.
Great. Thank you.
Paul.
And my second question more on the net revenue retention rate continued to be.
<unk> hundred 50, plus that you've guided for maybe if you don't have these issues in Argentina. It could've been close to where you were in <unk>.
Just to think about the trajectory from here, you've seen very strong growth in Asia and Africa.
Any color you can give on either <unk>, but even beyond that into next year should we expect continued deceleration in that net revenue retention rate anything that can drive.
Got it increase it from here, maybe some seasonality in <unk> and any color on 2023 would be helpful. Thank you.
Sure. So I think that we've had a very tough comp and we are extremely proud of the 152. We've just posted we've remained very consistent and we've guided due to a 150 plus for the year. We are very very confident that that's going to be the lever. We've never had a better business all of the growth engines in the comeback.
<unk> from strategics that nine point from a commercial standpoint continue to be at full throttle. So we are extremely optimistic on what is going to come for Q4.
2023.
We are taking.
The advice on discrete and trying to give you some more clarity on how we're going to navigate 2023.
Sorry, how we are going to guide for 2023, but we are extremely extremely optimistic in terms of what's going to come for Q4 in the future years.
We've never been a better company I know I repeat it again and again, but we've never had more product when you see countries emerge on when you see it.
Geographic diversification everything points into into the right direction, though things are long term building blocks that we are happy to be to have in place today. So.
Very optimistic for Q4, Im very optimistic for 2023 or four.
Great. Thanks, Sebastian maybe just one quick follow up on that in terms of what gives you that optimism is it near the growth Youre seeing in Asia and Africa that maybe I can see now coming back to some extent.
Because particularly a lot of the global online merchants, having tough time in some of their local markets, but maybe theres still a lot of growth in developed markets just any color on what makes you optimistic.
Sure. So in Latam, we are clear market leaders with think that differentiation is going to continue to compound and we have a clear mode, where they are.
Biggest merchants rely or not for the most complex.
Operations in these countries and wishing thats going to continue to evolve, obviously Africa and APAC has been.
A great great story for ourselves when we went public we told you we wanted to do this.
That's become a clear reality, we have a run rate of 100 million voters outside of that so nothing is going to continue to be our strong hold our part of our growth engine, but having that complemented with our strategy across other emerging market continues to be key.
So overall we cannot.
Being positive.
Our pipeline itself here than ever merchants rely on us more geographies for more payment methods.
Those are the key things that drive value.
We know we need to solve complex problems for our merchants, we feel we are solving more and more than ever. So we it's impossible for us not to be very bullish on their thing hopefully that authority.
No. There is some of these merchants are going through a very tough microenvironment, but emerging markets have proven to be a growth engine for them, we fall right into that strategy and if anything you have seen many of them doing layoffs, what we've seen in the party that when layoffs carbon our services become more muted because they do outsource more of that.
Worked for us so all of those strengths are for us in the right direction.
We're pretty optimistic.
That's great color thanks, Kevin.
Please standby for our next question.
Our next question comes from.
Tyler Dupont with Bank of America. Your line is now open.
Hi, This is Jason Kupferberg from Bank of America can you hear me.
Hi, Jason Good morning, good morning, Thank you.
Now that Q4 is halfway over I assume you have really good visibility here in the near term I mean, just as a general frame of reference should we assume that the full year guidance for both NR and adjusted EBITA margins.
Is valid for Q4, specifically.
So Jason we've never updated our guidance, we haven't done it in Q1, we havent that until we're not going to do at this time.
I think the color, though it's important to share everything thats trending under our direction, we've seen nothing that makes us.
Worry in the short term, we continue to see positive underlying growth in our business.
So there is no reason why we shouldn't be able to continue to deliver on those numbers.
Okay understood.
And just given the explosive growth you've seen in Asia and Africa can you talk about any notable differentials in either gross or net take rate in those geographies relative to Latam.
Then anything Youre seeing just in terms of your.
Youre merchant clients setting up local legal entities.
More frequently to turn cross border transactions into domestic thank you.
Sure I'll go through and I think sure.
So Jason Hey.
Thank you very much for the question.
No.
We are super positive.
The steps we have we have big <unk> Africa, and Asia. The two regions have become very relevant to us.
In terms of net take rate is still too early to refine it depends.
On the on the payment mix on the on the countries, where merchants are going to be penetrating if anything we see merchants trusting us more and more in our servicing both the geographies and we don't see them going.
Hi themselves say, we build entity.
Quite the opposite direction penetrating these two complex regions they preferred to leading partnership with us. So we remain very very optimistic.
On the on the on the step we have been giving towards those those two.
New geographies for us above has been translating into revenues, we are posting this quarter into it.
<unk>.
Due to the two geographies and I think <unk>.
Okay.
We are agnostic.
We are an agnostic to the payment method onto a typo sorry April merchants.
We're agnostic either local to local or cross border, we are able to offer both type of services to our merchants.
If anything and it gave us the chance to two.
Called the merchants.
We delve into more geographies and that's the reason why most of the merchants never grades.
Okay. Thank you.
Please standby for our next question.
Our next question comes from Summit data New Street Research. Your line is now open.
Thanks, very much couple of quick questions. Please.
Again, firstly, just returning to Asia and Africa.
Very good performance I mean, you kind of almost doubled your.
Revenues in the in the second sorry in the third quarter. So can I just.
Try to ask the same question again, but just curious as to was there anything in particular in this quarter, which was.
Cut it is happening.
Inventory is coming online.
A couple of months here or there.
Is this the kind of run rate, we should expect going forward, just such a such a strong performance.
And then secondly unrelated places please.
Just curious what kind of.
Carload volumes or mix of cloud versus non cloud are you seeing in these newer markets I would assume days less called <unk>.
<unk>. So I'm just wondering if that was having any impact on the on the economics of these transactions. Thanks very much.
Hi, and thanks very much for the question.
So what has happened in both Africa and APAC, it's what we expected to happen, which is one API one contract not being able to bring our global merchants into the new region nine out of our top their merchants use us today in Africa and APAC.
Uniti ahead as Matthew we've been bullish in this region.
We continue to believe that theyre going to be a huge growth driver for us we are not updating any guidance because that's not what we've done with proactive.
But we believe that.
There is plenty of opportunity ahead heiko can complement on the cargo has been spending his time in South Africa can give you a much better view.
And in terms of of cards.
The expectation what we've seen is very similar to what we've seen historically in other markets in Latam. Some countries are cars heavier others are not.
Not that relevant we ask our goal as I mentioned before we are payment method agnostic in the sense that we need to offer whatever payment methods users went up a way that we intend to continue to do so keeping in mind typically our net take rates reflect our cost of processing. So we shouldnt expect significant differences between one payment method and the others are going to want a compliment.
On the growth drivers for Africa, and APAC go ahead.
Sure.
So I think overall.
Hey.
What would say about one thing.
<unk> that we have a single API.
There are a lot of analogies between the Harrison will have been provided that number you got the opportunities. There are in Africa on the on the Asia, we have been able to replicate our playbook.
Latam is in those in those two contents on the merchants that they bought the.
The fact that that is constant.
On the same API MFA may on the same agreement allows them to test our terribly from Brooklyn hours have you seen the region.
Foster done doing any Io solution before.
So being able to understand the complexity, Nigeria on the relevance of variable lump payment method or the redevelopments of embracing Danielle I'll refer you need you've got encouraged David great, maybe it's causing South Africa famous we have done with UBI in India, I think Doug you have leverage.
Two two.
Cross sell to our merchants and to get paid.
The return on our.
The investments for the content for the region.
Okay. Thank you.
Sure.
Please standby for our next question.
Our next question comes from Andy Andrew Bock with SMB see your line is now open.
Hey, good morning team and thanks for taking the question you spoke to.
The success within your top 10 merchants.
Being a derivative of new product innovation and adoption of some of your solutions. So maybe you could provide everybody with some specific examples.
Things that Youre doing now within that base that you may have not been last year.
For that.
Sure Hi, Andrew Good morning, and thanks for the question. So I think it's always a matter of broke innovation plus scale, so things like credit card acquiring in Nigeria, or the acceptance of Upi as Carlos mentioned in India or some of the what we've been able to offer Indonesia or being able to peak.
Cash cash collections in Egypt, all of those all of those malls things compounding payments innovation comes in small incremental steps.
<unk>.
<unk> solution means that you are solving multiple programs for your merchants at the same time. So those are the beyond sexy things that compounds and allows us to differentiate on a daily basis, that's what our product and engineering team are constantly evolving and then there are things I will have more scale and are easier to point out two things like marketplaces, where we use the <unk>.
Technology, we have for paying somebody else and we mix it together to allow marketplaces, which as many sellers on menu buyers at the same time those complexities when you add them up to the local regulatory framework to the local payment methods or things that allow us to differentiate.
We are doing what we've always done at a much bigger scale. We are able today to provide the building blocks for our merchants to be great. Some of them. Just one of those are just some time payouts.
It's something that requires deep infrastructure connections with every single bank and that's a hard work that we've been investing on for many years now and that's how we'll be furnishing. So theres no theres no go.
It's continuous incremental innovation and Thats, what we are determined to them.
Yeah.
Got it.
And then.
Sorry, just on at least one of them I think last year. The top merchants were in five countries.
Five of them were in Asia, and Africa with US this year in this quarter nine of them are already in Asia and Africa without so basically our merchants are growing and expanding with us in these markets.
And it's nice to see that that geographic expansion.
Your head counts stepped up pretty considerably over the last couple of quarters I'm, just trying to get a sense of the pace of hiring that you guys anticipate over the next year, even as the world becomes more uncertain should we anticipate that that level of of new heads to come onto the platform in the coming year.
So you expect to slow down any additional insight there would be much appreciated.
Sure. So Andrew we've always operated with a small team 700.
People for the size of our business is considerably smaller done.
<unk> done what Youll see other companies at our scale operating with we intend to continue to do so this is the time for us to invest presuming. This massive our business has shown to have already operating leverage so.
It's very clear that it's the opportunity for us to invest we don't foresee and we've never had a hiring targets, we never set ourselves a number of people with.
We make sure we have the right culture in place, we really care about being profitable are growing fast some billion.
Keep in mind, we bootstrap the local for the first few years of our Q3 and that DNA has become really BP Grant. So we are always going to be a company that's going to be extremely cautious in terms of how we spend we believe there is a massive opportunity ahead of us and we wouldn't be able to invest against it but we're also big believers in small teams.
We believe that small teams, we greatly talented people aligned with the right culture can achieve amazing things.
Always been the formula for Us and if anything that formula It's now more impactful.
You want that number.
No absolutely.
As a reminder, please.
Please press star one one on your telephone to ask a question. Please standby for our next question.
Our next question comes from Leonardo Li with UBS. Your line is now open.
Yes.
Yes.
Hey, everyone.
Vessels from UBS, thanks for the opportunity.
We're asking the question.
I have a follow up in terms of G&A. If we take a look on your G&A expenses, we had actually a relevant increase quarter over quarter basis more than 25%. So I understand that you continue to hire more people, but I also see that it also had been like last quarter. So just would like to have a sensor mouthwash.
Massive increase during this quarter and what can we expect going forward, especially for the fourth quarter and just to complement if you are now more comfortable to say that you will be able to maintain this level of 37, 38% in the margin also in the fourth quarter and if not can.
Can we see any type of pressure going forward. Thank you.
But when I take it.
Yes sure Steve.
So.
But I think we're heading in the third quarter, we comped midyear salary increases.
We also got some additional professional expenses on one off technology expenses. So they werent specific situations I would say in Q3 going forward, we see a lot of operating leverage. So I mentioned, we will continue where we kept calm which is our main line of expenses, a pretty great technology say, if our marketing and expansion, but most of all the other areas corporate areas.
Like staff finance and compliance.
One I mean, how much more mature and sophisticated page. So we expect those wants to scale quite that'd be going forward.
Okay. Thank you in terms of the EBITDA margin.
What is the question I'm sorry.
So just to complement like.
Now that the <unk>.
Middle of the fourth quarter.
And having said that you hired like most of the people already for this year.
Maintaining levels of 37%, 38% margin for the fourth quarter as well and if not what can we see any type of expression.
Sure. So we gave annual guidance, so we're not giving guidance per quarter as we mentioned on the on the oldest strength continue in terms of growth if I may.
Sean we have.
An increase in Opex in third quarter, but we don't expect that type of increase in the coming quarter or.
So.
We expect operating dividends going forward, we will guide for annual EBITDA margin level.
In the next year.
But these are the trends that we're seeing right now.
Okay.
Just to complement on that we believe we are already very profitable, we are and generating cash.
Entity ahead of US is massive and we believe it's important for us to have.
Enough dollars to invest.
We've clearly shown that when we invest there's a clear ROI.
<unk> been good garden scrappy kind of wind tend to continue to be so we're not going to splurge, we want to continue to be very lean, but whenever we see an opportunity for growth for investment in growth. We want to continue to pursue it because we think that's the long term but.
But for us and we're very excited about those prospects. We don't think it's time now to optimize for half a point here or there and be EBITDA will really care about having the right investments in place, making sure that those drive growth and then we know because we've seen it that our business has significant operating leverage.
Okay, great. Thank you Steve.
At this time I show no further questions.
I'd now like to turn the conference back to Sebastian <unk> CEO for closing remarks.
Thank you very much so I don't want to be repetitive, but I wouldnt say, we are extremely proud with the results we posted this quarter.
We are extremely excited about the opportunities that we see for the company.
In Q4, FY 2023, our strong performance year to date has shown that the strategic decisions. We've made in the last year together with a very strong execution are putting us on a great position. So I wonder if buy sides that we are very bullish for Q4.
For 2023 really appreciate all of your questions and thanks very much.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
Yes.
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