DLocal Limited (DLO, Financial) experienced a significant drop today, nearing all-time lows despite a robust increase in total payment volume (TPV) in Q1. The company, which operates as a payment processor in emerging markets across Latin America, Asia, and Africa, reported a nearly 50% growth in TPV. Its e-commerce business almost tripled. However, DLocal struggled with gross profit growth, leading to a 19% decrease in adjusted EBITDA to $45.5 million.
The company's financial results fell below expectations, with adjusted EPS at $0.06 and revenue growth of 34.3% year-over-year, totaling $184.4 million. Gross profits grew only by 2% year-over-year to $63.0 million, significantly missing analyst projections. These results have put DLocal in a challenging position to meet its full-year forecasts for gross profit and adjusted EBITDA, which are now expected to hit the lower end of the $320-360 million and $220-260 million ranges, respectively.
Several factors contributed to the quarter's underperformance:
- A key merchant renegotiated fees upon contract renewal, adversely affecting revenue due to a shift in DLocal's tiered pricing scheme.
- Merchants opted for products with lower monetization rates, aligning with a softer e-commerce and advertising market. Additionally, delays in crucial product launches hindered expected volume increases.
- Despite these challenges, DLocal continued to increase investments, similar to strategies employed by Sea Limited (SE, Financial), focusing on long-term growth over immediate profitability.
Despite the setbacks, March showed signs of improvement with gross profits exceeding Q4 levels and cross-border business growing by 9% to a record $2.4 billion TPV in Q1. DLocal also announced a new $200 million stock repurchase program, signaling confidence in its long-term business strategy. However, these positive developments have not fully alleviated investor concerns about the company's performance trajectory, following what many hoped was a temporary downturn.
