DLocal Limited (DLO) Earnings Call Transcript & Summary

Good morning. I am John Hall. I'm Vice Chairman of Investment Banking at JPMorgan and have been a longtime fintech banker. We are thrilled today to have Sebastian Kanovich, who's the CEO and Founder -- are you Founder also?

Yes.

Founder of dLocal. It is also Sebastian's birthday today, so we won't be singing Happy Birthday, but we wish him a good birthday. As many know, dLocal powers local payments in emerging markets. The company went public last June with much fanfare, as many of you are aware, given its huge TAM, super growth and impressive profitability. The stock went public and we went public at $21. I think it peaked at $74 in September, and I think closed a little below $24 yesterday. Still even with that up and down, it's one of the most best-performing IPOs of the cohort of '21. So we're thrilled to have you here. Maybe we start with a little bit of perspective on the vision you had for the company and how that's evolved, if it has at all.

Absolutely. Thanks, John. And hi, everyone. Thanks for being here. So our -- the vision has been expanding. That's the reality. When we first started, we thought of Brazil as our market. And the original idea was we were going to power one American customer in Brazil. We thought we have solved everything there was to be solved. Obviously, we were wrong. And what we recognized was that payments friction existed not only in Brazil but in Latin America, so we set up to start to integrate local payment methods all across Latin America, from Mexico to Argentina to Colombia to Peru. And at some point, some of our key customers came to us and said, we face the same challenges in India, we face the same challenges in Morocco, in Egypt. So a few years back, we made a decision that emerging markets had the same frictions and the same challenges that we are facing in Latin America. And we've decided to go fix that and go build infrastructure for global companies to be able to do business in emerging markets. We're extremely early in that journey. We've announced that we have launched our 37th country. There's many more. Our business continues to grow really fast. But the reality is that our merchants are huge, and the opportunity is massive. Emerging markets continue to get bigger. So we are only scratching the surface of that journey, and we generally feel we are only getting started. The challenges we are facing are tough. They are hard to solve, and that's what gets us excited. We are not trying to be the one more company solving for payments in the U.S. and Europe, which is there's great companies being built in this space. We want to be going after countries that are full of friction but, at the same time, have lots of growth ahead of them. So that's who we are. And once again, thanks very much for being here.

Are there parts of your story and business that are not as fully appreciated by particularly the investor base?

I think it's important to -- obviously, as our business is growing really fast, and we've just posted our fifth triple-digit growth in revenue quarter, so our growth plus margin for the last quarter was 155%. So I think it sometimes means the fact that we've been growing really, really fast, probably faster than most out there, but we've been doing so profitably. And being profitable, it's not something that we decided in the last few months with the current market environment. We've always cared about disciplined profitable growth. We think that's the right way of building a company in the long run. We make sure that the incentives are in place, that we're building partnerships for the long run with our customers. Another comment is, I think for the first time, we've made our disclosure in Q4 and now in Q1 in terms of how big our business is outside of Latin America. In Q1, we had revenues of $11 million, which run rate means $44 million. We don't like to deal with run rates. We'd like to be very consistent in that. But just to give you a sense, in 2021, our business for Africa and APAC was $21 million. So we are already at pace to double. And we believe that the opportunity is massive. The other thing is that the most -- the more we do, the more touch points we have with our customers, the more entrenched we become, the more valuable we become. So we are constantly trying to find ways for understanding what's the next pain point, what's the next thing we can solve for our customers. And sometimes, those won't reflect on the P&L. We just launched Rwanda, and we were discussing with some of you this. Rwanda won't be a huge market for us, but sometimes being able to solve that problem for a merchant in Egypt or in Indonesia will then allow you to do Mexico or India. So that's why it's so important for us, it's wide coverage. The more -- our average customer today uses us in 7 countries. And that speaks to how much value they see. They integrate once with us. They never churn, so we have churn history of less than 1%. And we have these key concept of net revenue retention that we keep insisting on not only because it's an important financial metric, but it's also a metric of the health of the business. Our merchants start with us and systematically continue to expand their partnership with us either because they grow organically because they decide to add more products with us, to add more geographies, and that's where we generally focus. We want to build partnerships with our customers and last for many, many years.

Let's talk about Q1. You reported last Wednesday, if I recall correctly, it was another super quarter. Maybe you could give the audience a couple highlights to the quarter. You already touched on a few, but...

Sure. So our TPV, our total processed volume, grew 127%. Revenues growing at 117% year-over-year, we did revenues of $87.5 million. We've done so with a gross profit margin of 50%. I want to be accurate. I have [ Soledad ] here helping us with that. And we did -- we posted an EBITDA margin of 38%. Fundamentally, what's important to us is that the business is in a very healthy position, growing faster than it's ever been. When we first decided to go public last year, we were profitable, so it wasn't a capital event for us. It was important to raise awareness of what our brand was, what is it that we were doing for our customers. I think that objective has been fulfilled. I mean we are starting to see some of the benefits of that, a bigger pipeline translating into bigger opportunities and customers using us across more geographies. That's on the financial side. But at the end of the day, that's a function of how good the product is. We continue to invest really heavily on adding more products, adding more geographies. We've launched a few quarters back issuing. We have a fraud prevention solution. We continue to add geographies. And the more this complexity compounds, the harder it will become to replace. And that's how -- that's why we continue to invest in this opportunity.

So let's talk about the yin and the yang, your greatest strengths and what are the risks to the business today.

I think the greatest strength that dLocal has is that it's positioned right in the middle of a few very positive ways, things moving online, emerging markets becoming more and more important and our merchant's growing really, really fast. So if we don't -- we grow organically really fast, and there's a lot of embedded growth in our model. The biggest risk is that we have a complex operation. Ours is a business of execution, and I know I sometimes bore with this answer because every time I get that question, I continue to answer execution. It's really hard. We are operating across 37 countries. Having the right culture in place, making sure we are finding the right talent in the places where we need them to join us, it's definitely a problem or a challenge. We are very much of the idea that there's going to be a massive company being built in emerging markets. We are very well positioned to be that. But the biggest risk we have is are we going to be able to execute on that. And that's where we spend our days in and our days out making sure we have the right incentives in place, that we are doing business the right way, that we are building for the long term. That's extremely important. We go in public, there's some learnings in terms of reporting quarterly. We never thought of our business that way. We were always doing the right thing for the long run. We want to continue to do that. We think that's smart thing of doing it, continue to invest infrastructure, continue to add value to your customers, and then the financial results will continue to follow.

What are your 2 biggest learnings in the last year or 2 in terms of building this business and maintaining its growth and success?

One is definitely that we exist because of our customers. And when companies get a little bit bigger, it's sometimes easy to forget that. When you look at our product journey, it's always been very much the aggregation of the needs of our customers. So we don't innovate in a vacuum. We like to speak to our customers, ask them what are the next pain points, where should we go next, aggregate that and turn that into our product road map. Making sure we follow to that principle, it's something that we continue to learn. And then that things can happen fast. We like to make things happen at a very fast speed. When we decided to go public, we managed to do it in a very short time frame. And I think speed is of essence. Speed is sometimes undervalued. We believe speed is an attribute on itself. Being able to be first to market, being able to solve the problem first for our customers, it's extremely important, so we continue to level down on those concepts.

Having been an adviser on the IPO, I can attest to the fact that they operate at hypersonic speed. It's been very impressive how hard you guys work. Let's talk a little bit about the trade-off between growth and margin and how you've managed it. I know it's an important concept for you guys in principle, but maybe you could give the audience a bit of perspective on that.

Sure. So we will never trade growth for margins. So whenever we can invest more and make sure that that will translate into growth, we'll do it. The challenges in our business, those -- there's no linear connection or this we haven't found it. It's not that you put one more dollar and you get one more dollar of output. There's obviously a relationship, and you need to have the right investments in place, but this is not a -- we always discuss this internally. You cannot throw money at the problem. If there are problems where we can throw money at them, we will definitely do it. But that's not the case. So -- and we believe payments companies have -- we have healthy business models where we are allowed to grow really fast but do so profitably. So with one trade margin for growth, we'll continue to invest, but we need to do so disciplined, in a very disciplined way. We care about every dollar that goes out of our P&L. We think that's the right way of doing it culturally. We want to make sure we have a very lean organization. As of Q1, we had 562 employees. We like small teams. We think small teams can achieve huge things. Obviously, you'll see our head count expanding, but we don't fall in love with bigger organization just for the sake of. We don't want to hire thousands of people just to look bigger. We think you look bigger when you're delivering value to your customers, and therefore, your results are coming. So that's how we see it. We are lucky enough to come in or have -- we’ve came to our IPO with already very healthy margins. We posted last year 40% EBITDA margin. We’ve just announced 38%. We are guiding to 35% plus for the year. So I think that's not going to be a challenge for us. It's more about finding again those -- where are those growth pockets, where is the right way of investing in those and how do we make sure we are the winners in these markets.

Maybe you can talk a little bit about geographies and geos and how you view expansion and what's your priorities at least for the next year or 2.

Sure. So geographic expansion, it's probably the biggest priority we have as a company in dLocal for multiple reasons. We want to make sure we are not -- we don't want to be competing in a commoditized product. We want to make sure we have differentiation. And being able to solve multiple countries at the same time under one API, it's extremely, extremely powerful. We see it again and again. We've expanded -- last year, we've added 10 new countries. This year, we've added 2 new -- sorry, this quarter, we've added 2 new countries. There's always a natural evolution of expanding wider and then going deeper. So probably, you'll see us going a little bit deeper in the next few quarters, making sure we consolidate our position there before we go into the next wave. But fundamentally, we want to be a one-stop shop for global companies that want to do business in emerging market. And that means every emerging market. So from India to Vietnam, to Indonesia, to Nigeria, to South Africa, Mexico, Brazil, all these key markets, we need to have a great offering. And we want to be the safe for your funds for merchants doing business there. It's a huge priority for us. It’s compound because we've been launching more products, so it's a matrix that gets bigger. The more products and the more geographies, the more things we need to develop. But we think those -- that's the best way for us to differentiate.

And if there were 3 or 4 countries that you're most focused on, I know you avoided that part of the question. So...

It's very hard. It's very hard to answer because we've learned not to try to guide our customers one way or the other. I have my personal favorites. I think countries like South Africa, Nigeria, Indonesia are going to be extremely powerful. But then India, Brazil, Mexico are countries that have been driving a lot of growth for us for years. So there are things that we don't build our business from a geographic standpoint. So if you’re to see the way we forecast, we don't have a forecast for Indonesia and one for South Africa. We'll always forecast from a merchant's standpoint first because we want to make sure we are reflecting their needs. So we're not pushing countries one over the other. We want to make sure that we have the discussions with our customers that are strategic, that drive or help them drive growth, and that's how we look at it.

Well, and your cofounders moving to South Africa, which I think is a telling sign of how important you look at it, you feel about the continent.

Absolutely. Yes, I'm hoping to be seeing him soon.

Now what are you hearing from your merchant customers in terms of not so much where they're focused geographically but how the current macro is impacting their view of what's going to happen going forward and what impact does it have on your business?

John, it's a great question. So our business is extremely well diversified, so no vertical accounted for more than 20% of our revenues last quarter. So we've been through crises in the past. We've been through COVID. We came out from Latin America, so in 7 years, you see many, many crises, political crises, devaluations, revaluations. And we've seen -- and we’ve been able to grow through it all. Obviously, there's going to be winners and losers. During the pandemic, the ridesharing industry disappeared overnight for one quarter. And then the following quarter, they were booming because of the delivery business. Entertainment picked up, and you see the streaming services way offsetting that decline. So we expect to see winners and losers. We are seeing 2 type of reactions, some that are more conservative, but many others that recognize that emerging markets are a growth driver. Many companies are having a very hard time growing here in the U.S., in Europe or in China, which is where our merchant base is, so they're looking at emerging market. That's a huge growth opportunity. We need to play to that strength. And again, I always say this, we are micro in a macro world. So yes, obviously, the macro does affect us, but we are still small, and we should be able to grow very well independently of the macro conditions. We've been able to do it again and again in all context.

So macro is one of the big themes at this conference in the market today just given the recessionary fears, inflation and interest rates going up. We've got global conflicts here and there. It's a messy world. Are you seeing any change in your TPV or any change in buying activity? Because I think talking to some clients in the last 24 hours, it's only in the last 4 weeks that people have started to see some change, whether it's advertisers and/or consumer behavior.

So we haven't seen any significant change as of now. Obviously, it's impossible for us to predict what would happen in the following weeks or months. We have no exposure to Russia or Ukraine whatsoever. Typically, a higher inflation or devaluation environment helps our business because people move online, and we've seen that happening again and again in the markets where we operate. So it's very hard to say. Again, we are trying to make sure that we have the right structure in place to grow in any macro environment. When you look at the wallet share of what percentage of what our merchants do in emerging markets versus how much we process, we are a drop in the ocean. So even if their business grows a little bit slower, we should still have plenty of opportunity to gain more traction and still grow significantly. What's going to happen at the macro level, John, I'm sorry, but I won't be able to answer that.

No, I understand. So let's talk about your product road map, and you already mentioned it, and you've started introducing new products and extending the platform. Maybe you could talk a little bit about how you foresee that evolving over time and what's of most importance to you going forward.

Absolutely. So if you look at our product journey, historically, we started with pay-in, so user buying from a company. That was the first thing we've launched. At some point, 2 of our key customers came to us and said, we want to do the opposite flow, meaning pay-out, and that's how our pay-outs business came to exist. Today, it represents roughly 1/3 of our book. We've launched last year issuing as a service. We've launched fraud prevention. We've just announced a product called dLocal Go catering to marketplaces. Fundamentally, we want to make sure we are adding value to the same customer base. We want to make sure when we launch a product, the first thing we see is that is it complementary to the other things we do. We don't want to have conversations with our customers that guide us in a totally different direction. So a product like issuing go straight in that direction. In the few quarters since we've launched, if there's anything we've been able to prove is that it's highly complementary to pay-ins and pay-outs. When you look at the ecosystem for any merchant, typically, they want to have the ability of collecting from users. They need to have the ability to disburse. Many of them are trying to have more financial products, and that's where issuing comes in. Fraud prevention is a challenge for any company doing business in emerging market, so it comes right into our core. Marketplace is definitely an important driver of growth going forward. So we try to have a product road map that is very consistent and it's very -- if you will, very obvious. We want to make the obvious next step. We think that's the right way of thinking of a product organization like ours, where we have the merchants, we already have the distribution, what else can we do for them? What other pain point can we solve?

And which of the -- 2 questions. Which of the kind of new extending products are you most excited about? And then could you just talk a little bit about dLocal Go?

Sure. So I personally don't get more excited with one product versus the other. I think it's -- again, we don't forecast that way. We are always thinking. The same way, we don't do it geographically. We don't do it product-wise. So you won't see a line in our internal forecast for issuing or for fraud. We are thinking from a merchant standpoint. The reason why I don't choose this because I'm perfectly happy if a customer decides to use us in pay-ins or pay-outs or issuing or fraud, it's -- I want to make sure we are driving more touch points. That's something we do measure a lot. We speak about 7 geographies per merchant. We are making sure they -- how many products of ours our customers use, that's something that is extremely important because it shows traction. But then what product is going to get bigger adoption in any given quarter, it's very agnostic. In terms of dLocal Go, we've been long -- for many, many years, we believe that volumes in the Internet or growth or, yes, online economy and the Internet will be coming from either the biggest companies on earth, so the Tier 1s, the real leaders or through the smaller companies selling to marketplaces. That's the way we've always seen it. We wanted to make sure we had a better offering for marketplaces. And part of being great for the marketplaces, it’s making sure you have a great SMB offering, and that's what dLocal Go comes to do. It's extremely early. None of that growth is baked into our forecasting, so it's all upside. The same goes for issuing. But we believe that if we do it right for SMBs, it will have the right tools to be great for marketplaces. That means being able to do more for thousands of merchants at the same time, being able to run risk for thousands of merchants. And that's something we want to be better at. And that's why that product comes to exist.

Why don't I open up to the -- I've got more questions, but why don't I open it up to the audience and see if people have questions. And if you do, there's a microphone.

Yes. Sorry, a real basic question. But how much of your business is global in a global merchants penetrating emerging markets versus merchants that operate in those local markets? And how do you see those 2 opportunities?

I don’t think we've disclosed the exact number, and I don't know it in the back of my mind. Historically, it was 100% global merchants because there weren't many regional winners. And the regional winners here are coming to see now companies in Latin America are doing great across multiple countries or companies in Africa or in India going international, it's something that is relatively new. We've had to adapt to that. It's -- historically, our sales teams were always in the U.S., in Europe and in China, and we don't have many sales teams on the ground, on the markets where we operated. If anything, we've seen that there's new winners coming up from countries in Africa. There are some new winners coming up from definitely India, definitely from APAC, obviously from Lat Am. So that opens up a whole new set of opportunities. We don't want to onboard customers that only do business in one country. We think that's a very weak position. That becomes commoditized very fast, and you're competing on price, which is something we don't want to do. So the way we define our customer’s target, it’s any company that wants to do business in more than 2 countries. And there are many of those that are regional.

So just a couple of questions. Just on growth, you're growing very fast, clearly, very high incremental margins. What growth constraints do you have? Is it getting more payment licenses as you go? Is it onboarding new alternative payment methods? Is it resources? Just curious what you see. And then also just from a competitive standpoint, any change there? Is it more the global providers? Or do you see the local providers starting to shift as well?

Sure. Thanks, [ Nanjing ]. I think the biggest constraint of growth is the long sales cycles that our merchants have. Whether we like it or not, it takes time. So when we launch our new product, even if they say we love this and we want to launch it, it might take 1 year, it might take 2 years. So that's the biggest, if you will, restriction. On the expansion side, getting new licenses, it's always challenging. So the technology piece is never the bottleneck for us. We are really good at integrating our built in technology. But going through the process with the central banks, understanding the way they want to do business in each one of their countries, it's typically what takes the longest. When we are looking at the geographic expansion, that's our bottleneck, and that's something we don't necessarily control. It takes time. There's countries that have taken us over 2 to 3 years to be able to launch. The thing is we are doing those investments today. And so we think it's a matter of time before all of them will unlock. Some will unlock faster than others, some -- and that's a balance we need to maintain. But if there's any restriction on growth, it's how fast can our merchants adapt what we are doing. That's why we care so much about the net revenue retention, and we don't speak so much about new sales. New sales is a more volatile metric by definition because things might kick in, in a quarter versus the other. While net revenue retention means customers that are already integrated and using your service, and there's much less friction. There's no additional integration efforts. There's no technology resources that they need to invest. It's pure strategic decision. We want to go there. There's no friction whatsoever. And that's why we feel so comfortable about our numbers versus new sales. And I think that goes to answer that question. In terms of competitive landscape, we haven't seen many changes. The reality is that we continue to compete with the same players that we've been competing for 4 years now. We have 2 sets of competitors, if you will. The local players in each one of the countries where we operate, obviously, every time we expand into a new product or into a new country, we are buying ourselves a new set of competitors, and that's a reality. So the fact that we now do business in Indonesia means that we have someone doing business in Indonesia competing with us. At a global level, we continue to see Adyen as our main competitor. We really admire Adyen. I say this constantly, so I'll say it here as well. We think they've built an amazing business. And the reason why we compete with them, it's not because we do exactly the same business because we don't. We are entirely focused in emerging markets, and they are mostly focused in the U.S. and Europe. But we are serving many of the same customers. On payments, it's very much a distribution game, so the fact that they are serving the customers we serve, it's always a competitive threat. That's what we see every day of the week.

Do you worry about Adyen competing with you in the emerging market?

Yes, sure. I worry every day. That's what I do. But jokes aside, yes, we've been competing with Adyen for 7 years now. Adyen has had an offering in Mexico and Brazil for pretty much all of our history as a company. And we've been able to outperform them systematically because we have a more localized solution, because it's deeper integrated, because we have better reach, we have better fraud prevention and better conversion rates. So we've been able to compete with them and win. But obviously, they're an admirable company. They built something amazing, and it will be very dumb of myself not to say that we are worried. We are worried about understanding the competitive dynamics. Having said that, our industry is not a winner takes all. So the fact that we've been growing as fast as we have, has meant nothing for Adyen growth and for many others are continuing to grow very healthily. So that's our view. We think that the market it’s big enough for competitive dynamics, not to be that important in our industry. There's plenty of opportunities for us to be extremely successful and for others to be successful as well. Obviously, we like to compete, we like to win, but that's not the key dynamic here.

We have a question right up front here. Then we'll go to the back to guy by the door.

Clearly, I mean, in Lat Am, you have won against Adyen quite significantly over the last few years. But every emerging market is not the same. So do you see the challenges in different emerging markets different to win against the global or the incumbent leaders as such?

Absolutely. So each country it’s very different. Going back to Adyen, they don't have an offering in Africa, so we are not competing with them. We are competing with local players. And we should count on that. We know we are competing with different alternatives. And that's why it's so important to differentiate. If we are competing with a local player in South Africa, that local player cannot offer Brazil. Whether they like it or not, they are restricted to that given country or they don't do pay-outs or they don't do issuing or they don't do fraud prevention. That's why we are looking for all these ways to differentiate systematically, and that's a core strength. Global merchants do not want to integrate with 50 different providers. They are trying systematically to consolidate. They can maintain 1, 2, 3 partnerships. They don't want to offer 40. And that's a big differentiator. It's one-stop shop to be able to do Lat Am, Africa and the APAC, and that's the biggest way we different. Obviously, we need to be good at a country level. We cannot say, no, we're going to give you something that's subpar. That will never fly. We are working with some of the most savvy companies on earth. We -- they are measuring conversion rates, they are measuring fraud rates, and now we need to be best-in-class. But we always want to differentiate on the fact that we can solve more problems at the same time.

The gentleman in the back.

The IPO, you talked a lot about the complexity that you abstract away for merchants wanting to deal in all these emerging markets. Could you talk a bit to the risks that you have to take in order to meet that complexity, whether that's around tax filings, FX, capital controls, charge-offs, just what risk comes with that complexity?

Sure. Great question. So yes, we try to attract as much complexity as possible for our merchants. On the tax side, we don't take any tax liability, so we don't give any tax indemnity to our merchants. Obviously, we want to make sure that they are doing the right thing, and we need to help them navigate that. But let me give you an example. When we do a pay-out into Brazil for a tier some company, we need to make sure we retain income tax on behalf of the host or the driver. That means understanding how much that given driver drove last month, how much therefore we need to pay to the tax authority, all of that logic will be -- we have built in, in our system. So there's no financial risk there where if there's a miscalculation, but there's reputational risk, we want to make sure we are very, very accurate. In terms of FX, FX is a key component of our business. We are not in the business of having FX positions, where we are not a trading desk, we are a transactional business. But obviously, we have FX exposure, and we work constantly to minimize those exposures by having hedges. By having [ built it ], the fact that we do pay-ins and pay-outs work as a natural hedge and the fact that we do multiple currencies as well. So understanding those risks and being able to manage it, it's extremely important for us.

I saw one other hand out there or somebody else.

If we could go back to your discussion about Adyen and sort of competition in Brazil and markets where you overlap, over time, won't that lead to your margins getting bid away? You talked about it being commoditized products and kind of mono country solutions. Will that not happen when you're talking about customers who have both you and Adyen? Won't they just turn you off and turn on Adyen if it's cheaper? And then sort of on that same note, what keeps them from continuing to sort of onboard your bigger geographies over time and chipping away at sort of your TPV?

Absolutely. So those competitive dynamics are already in place. So when you look at our financial profile, a lot of that effect that you're describing is already baked in. We prefer discussing credit card acquiring in Brazil today, that's very much a commodity. And that has become something that there's -- to any companies that can solve for. And so probably there, yes, our margins will be lower. The question is, what else can we do on top to offer Brazil, is it pay-ins and pay-outs? Do you need us to disburse to multiple customers and collect from multiple customers? Do you need help with dealing with the FX? So are we going to be extra trading currency? How will that process go? All of those additional products or all of the additional frictions that we are extracting for essentially go to margin. So in countries where we are doing something that is very basic, we'll make less money, and that's to be expected. That's why we're so focused on not doing basic stuff and finding the real hard problems to solve. And what prevents them, it's a great question. I think they are very focused in the U.S. and Europe. You've seen their push into banking services. And emerging markets are not easy. It's not something you do as an afterthought. You don't expand into South Africa or into Nigeria as a nice to have. If you're not fully committed, if your company's heart is not there, it's very hard to succeed. I can tell you the opposite. We don't go to Europe. And Europe is way easier than many of the markets we are trying to unlock. And the reason behind that is because that's not our DNA. We want to compete in places where we can differentiate. And I think they understand that really well as well.

Any other questions? So maybe you could talk a little bit about the local to local versus the cross-border business and kind of relative percentage and how you see that evolving over time.

Sure. So local to local came to exist because we were always obsessed with the idea that merchants should never graduate from our service. So whatever way they wanted to do business in a given country, historically, we work in what we call cross-border where we collected currency in a country, and we settled in one other. At some point, we realized that we were onboarding merchants that had local entities. We were onboarding some of the global leaders, and they had local entities in Brazil. And they wanted us to settle locally, and that's why became local to local. For us, it's 2 flavors of the same product, and we are perfectly agnostic of what they decide to -- what they choose to use. We're going to see countries where are going to be more prevalent in the local-to-local business model, Brazil, probably Mexico, India. And there are other countries where probably are never going to go local to local, countries like Egypt, Chile, Colombia, those countries will take longer. So both products contribute to our margin. That's very important. We never process a dollar that doesn't contribute to our gross profits. That's a big definition we've taken long ago. So we are not subsidizing customers in one country to be able to get money in others. We make sure that every dollar that is processed in our platform contributes to our gross profit. And the reason behind that is because we like to have incentives aligned with our customers. We want to make sure that when we wake up and they did really well the previous day, we are all happy. And that only comes to exist if the gross profit dollars are there for every dollar.

Let's talk -- why don't you go ahead and ask your question quickly.

Yes, I was just curious of interest in sort of omni-solution. Is offline just a market that you're not going to touch?

It's not a hard no, but it's very close to a hard no because we think many of our markets are going to leap frog the POS. So when you look at what's going on in many of the countries where we operate, I don't think POS is a platform of the future. We do a lot of offline. We help -- we accept many cash methods that by definition are offline. So people are going online and paying cash not to us. We are not a cash method ourselves, but we are sitting on top of the payment methods. We do a lot on the wallet side, where many of those wallets have QR codes, and those are the things that get us a little bit more excited. I don't see our future becoming -- or going to compete on the POS side. I don't want to say a hard no, but I would find it very hard.

Let's quickly -- this is the last question. Let's talk about crypto digital currencies, DeFi and Web3, which are really 2 questions. What role is crypto or digital currencies playing in your business today? And then how do you prepare? And how do you think the world is going to evolve?

Sure. So we have virtually zero exposure to the crypto world today as a company. So if anything, we see it as a potential upside. We've shared last quarter that we are looking into the space now. We've always taken a very conservative approach in terms of compliance and regulatory work because we're already working in hard ecosystem, so we didn't want to add that complexity. In the results you've seen us posted, we have had zero exposure to -- or virtually zero exposure to that vertical. It's a big opportunity. And in terms of what is the potential for disruption, there's plenty of things that I think can be done with crypto, but we also think that there's a long, long way for people to still want fiat. And building those bridges between fiat and crypto, we think it's going to present a huge opportunity. And that's the role we think we can play in this ecosystem.

Well, Sebastian, thank you very much, and happy birthday. Hopefully, you have a great day.

Thank you, everyone. Thanks very much.