Overview of TIP834: DLocal (DLO)
In this episode of The Investor’s Podcast, Daniel Mahncke pitches DLocal (NASDAQ: DLO) as a high-growth, profitable payments infrastructure business with a potentially long runway in emerging markets. The discussion centers on how DLocal helps major global merchants like Amazon, Meta, Netflix, Uber, Spotify, Alibaba, and Pinduoduo collect and pay out money across fragmented payment systems in Latin America, Africa, and Asia. The core debate is whether DLocal can sustain growth and defend margins as its take rate declines, or whether it remains a valuable “picks-and-shovels” platform for the digital expansion of the Global South.
What DLocal Does
DLocal is a B2B cross-border payments platform focused on emerging markets. It helps large merchants process payments locally without having to build separate infrastructure, licenses, and bank integrations in every country.
Core problem it solves
- Emerging markets often do not rely on Visa/Mastercard-style card rails the way Western markets do.
- Payment systems are fragmented by:
- local payment methods
- regulatory barriers
- currency controls
- banking differences
- FX conversion requirements
- For global merchants, building local payment operations market-by-market is expensive, slow, and complex.
DLocal’s role
- Offers a single API for merchants to:
- accept payments locally
- pay out to local users, drivers, sellers, or contractors
- manage multiple payment methods in one integration
- Acts as a bridge between global companies and local payment rails in emerging markets.
Why the Hosts Are Bullish
1) Exposure to two major megatrends
DLocal benefits from:
- Emerging market digitalization and income growth
- Global tech and commerce companies expanding into those markets
That means DLocal can grow both because:
- local markets are becoming more digital, and
- its clients are increasing penetration in those markets.
2) Strong customer credibility
DLocal’s customer base includes globally trusted companies such as:
- Amazon
- Meta
- Netflix
- Uber
- Spotify
- Alibaba
- Pinduoduo
The hosts view this as a strong validation of the platform’s reliability and utility.
3) Attractive profitability despite payment-company skepticism
Even though payments businesses often face pressure on pricing, DLocal still shows:
- strong revenue and TPV growth
- high operating leverage
- meaningful free cash flow
- buybacks and dividends
4) Experienced leadership
CEO Pedro Arnt is seen as a major positive:
- Former long-time CFO at MercadoLibre
- Helped scale one of Latin America’s best-known tech companies
- Brings credibility, operational experience, and conviction in the opportunity
How DLocal Makes Money
DLocal’s business is built around two main flows:
Pay-in
- Merchant receives money from customers in emerging markets
- Example: a user in Brazil pays Netflix through local rails
Pay-out
- Merchant sends money to local recipients
- Example: Uber pays drivers or contractors in local currency
Value-added products
The episode highlights several products designed to improve conversion and payment success:
- Smart APMs / Smart Pix
- Enables recurring or automated payments on rails that otherwise don’t support stored-card-style repeat billing
- Smart routing
- Dynamically chooses the best local acquirer or payment path to maximize approval rates
- BNPL aggregation
- DLocal connects merchants to local buy-now-pay-later providers without taking credit risk itself
Key Financial and Operating Themes
TPV is the main growth engine
- Total payment volume (TPV) reached roughly $40B last year
- Growth was around 60% YoY
- Long-term CAGR since 2019 has been extremely strong
Take rate is falling
- DLocal’s take rate fell from around 2.9% in 2020 to about 0.9% today
- This is a major debate point
- Daniel argues that lower take rates are partly strategic:
- DLocal prices aggressively to win volume
- operating leverage can still drive earnings higher even if take rate compresses
Operating leverage matters
The hosts emphasize that:
- TPV can grow faster than gross profit
- gross profit can grow faster than revenue quality metrics suggest
- net income can outgrow gross profit if operating expenses scale more slowly
Retention and stickiness remain strong
A key metric discussed is net revenue retention:
- 2023: 150%
- 2024: 113%
- 2025: back to 145%
- over 140% for several recent quarters
That suggests existing customers are still sending more volume through DLocal over time.
Geographic and Customer Concentration Risks
This is one of the biggest concerns in the pitch.
Geographic concentration
- Latin America is about 80% of revenue
- Brazil, Argentina, and Mexico dominate the business
- Africa and Asia are still smaller
Customer concentration
- DLocal has about 760 enterprise customers
- The top 10 customers account for 62% of revenue
- This creates risk if a major merchant:
- brings payments in-house
- diversifies to a competitor
- negotiates lower pricing
The hosts agree this is a real risk, but argue that:
- the top merchants still need DLocal’s local expertise
- fragmentation and regulation make in-house replacement difficult
The Take Rate Debate
This is the central bear-vs-bull argument.
Bear case
- Payments are commoditized
- Competition should push fees lower over time
- DLocal’s take rate has already declined sharply
- Eventually TPV growth could slow while pricing pressure remains
Bull case
- DLocal is not simply a commodity processor
- It provides:
- local conversion uplift
- regulatory access
- payment routing optimization
- productization of fragmented local rails
- Lower prices are part of the strategy to win volume, not a sign of collapse
- Scale and data may allow DLocal to defend or even improve economics over time
CEO’s view
Pedro Arnt argues the business is not a race to zero because:
- DLocal is building merchant relationships
- it can become a pricing influencer as the market consolidates
- it may be able to monetize more effectively once scale and trust deepen
Competitive Landscape
DLocal is compared to several types of competitors:
Western payment players
- Stripe
- Adyen
- PayPal
These companies usually:
- dominate Western rails
- focus on their home markets
- have less incentive to deeply invest in fragmented emerging markets
Local fintechs and rails
- Pix in Brazil
- UPI in India
- Verve in Nigeria
- bank-led domestic payment systems
DLocal’s advantage is that it integrates many of these systems into a single platform for global merchants.
Stablecoins: Opportunity or Threat?
The hosts discuss whether stablecoins could reduce the need for DLocal.
Potential risk
- Stablecoins could lower settlement costs
- They may compress FX-related fees and cross-border friction
Why the hosts think DLocal can still win
- Merchants still need local conversion into fiat currency
- They still need compliance, bank access, and local payout infrastructure
- DLocal can also integrate stablecoins into its own platform
- So stablecoins may reduce cost, but not eliminate the need for DLocal’s middle layer
Short Report and Governance Concerns
DLocal was hit by a Muddy Waters short report in 2022, which caused the stock to drop sharply.
Allegations included
- TPV overstated
- take rate too high to be believable
- misuse of merchant funds
- insider selling after IPO lockup
Outcome
- Independent review found merchant cash and corporate cash were properly separated
- Merchants largely stayed with the company
- The short thesis appears to have had limited substance
Governance / communication issues
There were still some concerns:
- especially around Argentina and currency-control disclosure
- the company’s communication quality improved after leadership changes
Capital Allocation
DLocal is framed as a shareholder-friendly business.
Buybacks
- ~$100M repurchased in both 2023 and 2024
- New $300M buyback authorization announced in 2025
Dividend
- DLocal pays out about 30% of free cash flow
- Dividend yield is roughly 3%–4%
M&A
- DLocal does not appear to be an aggressive acquirer
- It explored Aza Finance, but ultimately only acquired part of the business/technology
- The hosts generally like the discipline and prefer buybacks over empire-building
Valuation and Portfolio Decision
Valuation
DLocal is described as:
- high-growth
- profitable
- cash-generative
- trading at around a mid-teens earnings multiple
Base case
Daniel models:
- strong TPV growth through 2028
- gradual take-rate compression
- improving operating leverage
- ongoing dividends and buybacks
Expected return
- Base-case expected return: about 22%
- Bear case: the stock could fall sharply if margins fail to expand and pricing pressure worsens
Portfolio conclusion
- Daniel personally owns the stock
- The hosts lean toward a small starter position
- Suggested portfolio sizing: around 2%
- They are open to adding more on weakness if the business continues to perform
Key Takeaways
- DLocal is a payments infrastructure play on emerging-market digital growth
- Its value comes from solving complexity, not just moving money
- The biggest debate is whether take rate compression will overwhelm volume growth
- Customer and geography concentration remain meaningful risks
- The company’s leadership, capital returns, and operating leverage make it a compelling, if volatile, long-term candidate
- The hosts view it as a potential multibagger, but one that requires patience and close monitoring
Notable Quote
“I never ask if the market is going to go up or down because I don’t know. And besides, it doesn’t matter. I search nation after nation for stocks asking, where’s the one that is lowest price in relation to what I believe it’s worth.”
This Templeton quote captures the episode’s investing philosophy: focus on intrinsic value and long-term opportunity rather than short-term market noise.