Buenos Aires — Pedro Arnt, CEO of dLocal (DLO), is anticipating a year of growth and potential acquisitions for the Uruguayan fintech, as the company aims to strengthen its position in Africa and Asia. Additionally, the company is seeing promising signs for demand in Argentina, one of its largest sources of revenue, following the economic reforms implemented by President Javier Milei.
“During this year, I’d like to come back to you with some acquisition announcements,” Arnt said in an interview with Bloomberg Línea on the podcast La Estrategia del Día Argentina, emphasizing that the tech company, which processes payments for giants like Netflix and Spotify, already has a clear map of potential acquisitions in the cross-border payment sector.
M&A Opportunities and Market Position
Arnt, who assumed the CEO role in August 2023 after serving as CFO of MercadoLibre (MELI), is seeing a unique opportunity to make acquisitions that will strengthen dLocal’s market position. Currently, its only major competitor in Latin America is Brazil’s Ebanx, but the company’s M&A strategy will focus on smaller players, and potentially in other markets outside of Latin America.
“During the fintech boom that ended around 2022, a large number of cross-border payment companies received seed funding,” he explained. “These companies are now running out of funds, struggling to compete against players of our size and scale, and will therefore seek what we often call strategic solutions.”
To date, dLocal’s only acquisition took place in 2021, when it bought Brazil’s PrimeiroPay for US$40 million, according to information from S&P Capital IQ. That startup, founded in 2021, provided “efficient and reliable payments and financial solutions for merchants who want to expand their online businesses into emerging markets, without the need for a local entity”.
Optimism for the Argentine Market
The Uruguayan payment processor is noticing a significant shift in global clients’ interest in the Argentine market. “With recent changes around tariffs and greater openness for cross-border e-commerce purchases, we’ve seen a spike in interest from many of our global clients in revisiting Argentina,” Arnt said.
Last year was one of transitions for dLocal in Argentina, following a highly profitable 2023 with “three extremely strong quarters.” However, the company experienced a significant slowdown in the last quarter of 2023 due to currency devaluation and declining demand.
“Global clients were losing interest because of the lack of clarity about Argentina’s future,” Arnt emphasized.
Now, he sees positive signs for 2025, including improvements like a reduced currency gap. While this can “sometimes slightly reduce profitability,” it strengthens the business’s long-term prospects.
“We’re definitely seeing growing interest, curiosity, and demand for solutions in Argentina,” he added. He noted that many global companies that had scaled back their presence are now considering expanding operations, along with companies that had never entered the Argentine market.
Regulatory Challenges and Clarifications
Regarding an investigation launched in 2023 during Alberto Fernández’s administration over alleged capital repatriation transactions worth US$400 million, Arnt clarified: “dLocal is not under investigation; individuals or companies who used our payment gateway are.” He emphasized that “all these transactions were reported to the Central Bank (BCRA).”
The company has actively cooperated with authorities and, according to Arnt, “the Argentine government never filed any complaints with the SEC” in the United States.
“Hockey Stick” Growth Strategy
dLocal’s growth strategy hinges on what Arnt describes as a “hockey stick” curve in technology adoption in emerging and frontier markets, referencing a McKinsey study.
“What McKinsey sees is that with the significant reduction in technology costs and mass distribution enabled by mobile phones, these curves, instead of being an ‘S,’ resemble a hockey stick,” he explained.
This theory underpins dLocal’s aggressive expansion in Africa and the Middle East. “It wouldn’t be surprising if, in a few years, more than half of our business shifts from Latin America to the rest of the world,” Arnt projected.
Challenges in Brazil
In Brazil, its largest market, dLocal faced a 20% quarterly drop in gross profit between July and September 2024. Arnt attributed this to “a few specific contracts and a regulatory change in Brazil that required some of our clients to redirect traffic due to obtaining regulatory licenses that prevented them from processing through ours.”
However, the company is already seeing signs of recovery. “The changes in our product and contracts will allow them to process with us again under these new licenses,” Arnt explained.
Growth in Mexico
Mexico is emerging as a strategic market, with a 45% quarterly increase in gross profit during Q3 2024, driven primarily by Chinese e-commerce companies and ride-sharing services. “We continue to see Mexico as a market with significant potential,” Arnt said.
This growth aligns with dLocal’s business model. “We combine the volume of multiple global players, negotiating on their behalf instead of them negotiating individually. This creates significant cost advantages,” the CEO added.
Global Competitive Edge
dLocal’s value proposition, known as “one dLocal,” allows clients to access over 40 countries through a single integration. “If you’re choosing a payment stack provider in Peru, the decision isn’t just about who offers the service in Peru,” Arnt explained. “Choosing different providers for Ecuador, Costa Rica, and El Salvador becomes cost-inefficient.”
Outlook for 2025
Despite dLocal’s stock remaining roughly 80% below its historical peak, Arnt remains optimistic. “If we can continue delivering consistent results without major negative news for a few more quarters, I’m confident there will be a reassessment,” he noted.
With regulatory approval to operate in the UK and over 40% growth in total payment volume, Arnt anticipates margin expansion. “We have a financial model with strong operational leverage. Medium-term margins should expand significantly, and our volume growth will translate into more EBITDA and cash generation,” he said.
Consolidation Potential
While dLocal isn’t formally for sale, Arnt acknowledges the fiduciary duty to consider offers. “We have a duty to evaluate who the potential buyer is, their strategic vision, and what premium they’re willing to pay above the current stock price,” he said.
However, such conversations “rarely lead anywhere,” and the company isn’t actively seeking a buyer. “dLocal is not for sale, but it’s an attractive asset. What we’ve built across the global south over the last seven or eight years has tremendous value,” he concluded.
