Uruguayan Fintech dLocal Explores Acquisitions and Buybacks Amid Market Consolidation

Uruguayan fintech company dLocal is considering acquisitions to expand its commercial distribution, services, and geographic reach, according to co-CEO Sebastian Kanovich. The company, which focuses on digital payments in emerging markets, reported its fourth-quarter results on Monday and announced that Kanovich would step down to join a committee dedicated to potential acquisitions.

Chief Executive Pedro Arnt noted that the company expects market consolidation, with many companies lacking strong financial models running out of cash. Despite receiving numerous offers to purchase companies, dLocal remains cautious in its approach to acquisitions. With $536 million in cash and equivalents reported at the end of 2023, the company is also considering share buybacks.

Although dLocal’s quarterly earnings increased, they fell short of analysts’ forecasts, causing the company’s stock to plummet 18% in early trading, erasing approximately $950 million from its market value. JPMorgan analysts described the quarter as “another polluted quarter,” with 2024 guidance suggesting slower growth than anticipated.

Arnt emphasized the lumpiness of the business, noting that some emerging market merchants, while initially slow to ramp up, can experience aggressive growth once established. He highlighted Chinese e-commerce firms targeting Latin American markets as a source of this growth. dLocal’s customers include notable companies such as Shein, Temu, Didi, Amazon, Google, and Spotify.

In Argentina, dLocal anticipates an increase in cross-border transactions in the medium term as President Javier Milei’s government works to lift capital controls. The company has also invested in new government bonds to protect its funds from currency fluctuations amidst the country’s severe economic crisis.

Regarding an Argentine tax probe announced last year, Arnt stated that there were no significant updates and that dLocal was being treated as a source of information rather than an investigated party.

Despite the challenges faced over the past year, Kanovich expressed optimism about the company’s growth in its customer base and its prospects for the future.