DLocal Limited (DLO) Earnings Call Transcript & Summary

Hello, everybody, and thanks for being with us on today's call covering our Q1 2024 results. Should you have missed the earnings release, you can find a copy in the Financial section of the Investor Relations website. With us on this call are Pedro Arnt, our Chief Executive Officer; Mark Ortiz, our Chief Financial Officer; Maria Oldham, SVP of Corporate Development, Investor Relations and Strategic Finance; and Soledad Nager, Head of Investor Relations. A slide deck has been made available to go along with the prepared remarks. This event is streaming live over webcast, and you can reach both the webcast and the presentation on DLocal's site at investor.dlocal.com. A recording will be accessible soon after the event wraps up. Before we move ahead, I want to note that any forward-looking statements contained in the presentation or referenced on this conference call rest on information available right now, along with DLocal's present assumptions, expectations and projections regarding future events. Although the company regards our assumptions, expectations and projections as reasonable in light of currently available information, you should be careful not to rely excessively on those forward-looking statements. Actual results could differ materially from those contained in DLocal's presentation or addressed on this conference call for many reasons, including those laid out in the forward-looking statements and risk factors sections of DLocal's filings with the Securities and Exchange Commission, which you can access on DLocal's Investor Relations website. I'll now hand the conference over to DLocal.

Thank you all for being here. We've seen a mixed beginning to 2024. Once again, we set a quarterly TPV record at $5.3 billion, which is an increase of almost 50% compared to the same period last year. Growth in TPV was robust across several verticals: e-commerce almost tripled, remittances nearly doubled, and both ride-hailing and Software-as-a-Service grew over 50% year-on-year. All of this demonstrates the worth of the solution we provide to merchants in different verticals, as well as our strengthening competitive standing and ongoing gains in share of wallet; in our view, nothing positions us better for lasting success than this sort of persistent TPV expansion that compounds across multiple years. Moving further down the P&L, the quarter is not as unambiguously positive as our TPV growth might suggest. We achieved healthy revenue growth exceeding 30% year-on-year, but gross profit growth remained flat, which resulted in a lower adjusted EBITDA. Several key factors explain these mixed first-quarter results, and I want to spell them out clearly. First, one of our biggest merchants reached a new tier in our pricing structure and also negotiated new fees when their contract came up for renewal. Because the business still has high concentration among Top 10 merchants, a renegotiation like this has a direct effect on revenue growth. Second, there was a shift in product mix toward payout volumes that monetize at a lower rate, since core pay-in verticals like e-commerce and advertising tend to be seasonally weaker in Q1. In addition, several significant new launches planned for the first quarter were pushed back by our merchants — something outside our control — which slowed the expected volume ramp-ups that would have helped offset the take-rate declines from the events I just mentioned; and lastly, we chose to maintain our planned increases in investment that support long-term growth, even at the present gross profit level. We're confident that gross profit will ultimately recover, and we view these OpEx investments in capability building, internal mechanisms and technology as strategic for our long-term success. In terms of trends, things improved as the quarter went on. The first 2 months of the year were weak, totaling $37 million in gross profit, while March GP reached $25 million, which is higher than Q4 levels. Maria and Mark will walk you through more detail on the Q1 specifics shortly, but let me first take some time to update you on how we're executing against our priorities. Our cross-border businesses went back to 9% quarter-on-quarter growth and reached a new record of $2.4 billion in TPV during Q1. This comes after we saw declining growth in the fourth quarter, caused by, among other things, the temporary slowdown in cross-border transactions in Argentina that we discussed last quarter. Cross-border is still at the heart of our value proposition, and seeing sequential growth return is a very encouraging sign. The local-to-local processing business, even though it was flat Q-on-Q — again due to seasonal effects — delivered TPV growth of nearly 80% year-on-year. The fact that our local processing keeps performing well puts to rest a structural worry people once had regarding our business. It shows that our orchestrating product — which is truly best-in-class — gives worldwide merchants a stronger product and service than what they'd get by going straight to local acquirers on their own. That's because our AI-driven smart routing can optimize the paths traffic takes to produce better conversion rates, plus we bring strong fallback and redundancy, effective fraud prevention engines, a top-tier KYC and compliance layer, and features tailored to each merchant. The money we've put into reshaping our infrastructure so it fits what global remittance partners and marketplace merchants need is paying off nicely too. Our payout business was up 17% Q-on-Q and more than 50% year-on-year. That quarterly acceleration is especially noteworthy, and it comes from a powerful Q1 ramp-up in the remittance corridors we're able to provide our partners. A rising count of corridors isn't just a compelling vertical on its own for us — it also opens up chances for cross-border expansion in pay-ins, since it boosts our liquidity and the pricing we can extend to merchants. Beyond that, while we kept developing what we offer across all our businesses — cross-border, local, pay-ins and payouts — in Q1 we also stayed committed to investing efficiently and with discipline in key capabilities, which includes expanding our license portfolio, strengthening ties with banking partners around the world, and scaling up our operations and back-office effectiveness. In the quarter, we received licenses in a strategic market like Egypt, along with new payment operator registrations in Argentina, Ecuador, the Dominican Republic and Kenya. We still believe that our expanding set of regulatory approvals will become a growing competitive edge as our global merchants try to work through the complicated regulatory landscapes of emerging markets. With that said, I'll pass things to Maria, who will walk you through a more detailed look at these first quarter results.

Thanks, Pedro. Hello, everyone. As Pedro said a moment ago, in Q1 we achieved robust TPV expansion of 49% versus the same period last year and 4% compared with the prior quarter, hitting $5.3 billion. That TPV set a record even though the first quarter tends to be slow for our biggest vertical, e-commerce, and despite significant currency devaluations, especially in Argentina. Turning to revenue. In Q1, we saw 34% growth compared with a year earlier, totaling $184 million; this was fueled by ongoing robust results in our most competitive markets; Brazil, where revenues rose 89% versus the prior-year period, and Mexico, up 50% versus the prior-year period. In addition to Brazil and Mexico growing, we recorded a 20% increase versus the prior-year period in Other LatAm, which includes gains in Colombia, Costa Rica, Dominican Republic and Ecuador, stemming from streaming, SaaS, on-demand delivery and ride-hailing verticals. Argentina weighed on revenue growth, falling 31% versus the prior-year period. The comparison for Argentina on a yearly basis is difficult. To begin with, the official rate has weakened by over 70%. Next, FX spreads have narrowed, producing lower FX revenues within our mix, along with a greater share of local-to-local volume. Last, Argentina also experienced a drop in TPV, since numerous merchants of ours have retreated from that market, owing to macro instability across the past 12 months. Chile likewise held back our year-on-year revenue growth, declining 13%, chiefly because of a customer churn at one of our financial service merchants. It isn't that a merchant was lost, but rather that one of our major financial service partners saw its volume in Chile fall substantially after losing a key client in that market, which hurt our revenues; in Africa and Asia, the primary sources of revenue growth were Egypt, South Africa, Turkey and Philippines. Egypt's growth came from; the overall expansion of our business there with TPV rising 71% versus the prior-year period, the wide spreads on FX rates between official and the market rates and our robust liquidity position for that market, since we had a solid combination of cross-border pay-ins and pay-out flows during the quarter. South Africa's revenue came from 2 large e-commerce merchants expanding into that market. One of these merchants increased volume substantially during 2023. The other is a merchant we onboarded at the end of 2023 and began processing volumes in South Africa in the first quarter of 2024, quickly becoming the second largest merchant in their region. And last, the largest drag on year-on-year revenue growth was Nigeria, where revenues dropped $20 million over the last year, mainly because of; the narrowing of the spreads between market and official rates following the Naira devaluation in February 2024, resulting in lower FX fees and a greater share of local to local volumes in Q1, 2024. Now let me provide a quick summary of the main factors behind the quarter-over-quarter change in revenues. Versus Q4 2023, revenues declined by 2%. This sequential drop was largely due to seasonality, since Q4 is a very strong quarter for our e-commerce vertical. On top of that, one of our biggest merchants moved up a tier in our tiered pricing structure, and since their contract was approaching renewal, we renegotiated fees as well. As Pedro said, because our merchant concentration is still elevated, a renegotiation like this has a direct effect on revenue growth. Those 2 items go a long way toward explaining the 14% decline in Brazil revenues and the 4% decline in Mexico revenues. Beyond that, revenues in Chile fell as well, pulled down by reduced volumes from certain merchants in the e-commerce vertical because of seasonality. Those volumes were offset by greater volumes from financial service payout flows, though those carry a lower gross take rate than e-commerce volumes do. The revenue declines in Brazil, Mexico and Chile were partly offset by Argentina, where revenues rose 31% quarter-over-quarter, mostly due to increased cross-border settlement. As we said last quarter, we expect merchants to keep gradually expanding cross-border volumes as liquidity gets better. Other LatAm also contributed to quarter-over-quarter revenue growth, rising 9%, lifted by a reacceleration in the ride-hailing and on-demand delivery verticals across Central America and Peru. In Africa and Asia, revenues climbed 5% quarter-over-quarter. As noted earlier in the year-on-year discussion, Egypt's revenues more than doubled quarter-over-quarter, helped by a widening gap between the official and market exchange rates during the first 2 months of the year. We also saw healthy quarter-over-quarter growth in South Africa, Indonesia, Turkey and the Philippines, with the same dynamics at work as those we described year-over-year. Nigeria's revenues took a heavy hit from the devaluation, falling 74% sequentially and wiping out a substantial portion of the gains elsewhere in African and Asian markets; apart from the devaluation, revenues suffered from a 35% sequential drop in TPV, since our financial service vertical recorded a significant volume decline following the devaluation, with fewer FX trades taking place on our merchants' platforms. Now let's turn to gross profit. As shown in Slides 8 and 9 of the earnings material accompanying this quarter, we've added a regional breakdown of gross profit. So I'd like to take you through the gross profit variation we saw in a bit more detail. For the quarter, we posted 2% year-over-year growth, reaching $63 million. In LatAm, gross profit came to $49 million, down 8% year-over-year; Argentina weighed heavily on that result, with gross profit falling 71% year-over-year. Because FX revenue was lower, we benefited from wide FX spreads, just as we have before. Those, along with Argentina's smaller share of cross-border volumes, account for the gross profit margin shrinking from 89% a year ago to 37% in Q1, 2024. In Q1, 2023, Argentina made up 29% of our gross profit; in Q1, 2024, that figure was 8%. Leaving Argentina aside, LatAm gross profit was up 24% year-over-year, mainly on the strength of our most competitive markets, with Brazil rising 63% and Mexico rising 44% year-over-year. In Brazil, gross profit margin shrank by 7 percentage points compared with a year earlier. This came from the renegotiation Pedro described recently, plus expansion among other Tier 0 merchants and a bigger portion of payouts in local-to-local. Chile's gross profit declined 18% versus the prior year, caused by reduced cross-border volumes stemming from customer churn at one of our financial service merchants, which was discussed earlier. In Other LatAm, gross profit was up slightly, 1%, versus a year ago, mostly due to growth from Tier 0 merchants. Turning to Africa and Asia, gross profit rose 60% compared with the same period last year, helped by robust expansion in Egypt, where gross profit climbed 4x, powered by our merchants' growth there. As in Argentina, in Egypt we gained from wide spreads and our liquidity position, having built cross-border pay-in and payout flows; we saw gross profit margin contract year-over-year in Egypt because of reduced liquidity on our platform, caused by pay-in cross-border growing faster than pay-outs cross-border. Egypt's gross profit increase was partly offset by Nigeria's results, as already covered. Comparing quarter to quarter, gross profit shrank 10%. Within Latin America, gross profit declined only in Brazil and Chile; this stemmed primarily from, first, the key merchant renegotiation mentioned before. Second, e-commerce seasonality reducing volumes in this vertical with a higher net take rate. Third, a larger payout mix. Also, consistent with the revenue drop, we recorded an 18% fall in gross profit in Chile; Mexico, Argentina and Other LatAm partly made up for these negative movements. In Mexico, even though revenues declined quarter-over-quarter, gross profit rose 7%, thanks to cost structure improvements as we achieved greater scale and bargaining leverage with processors. In Argentina, gross profit increased 30%, matching revenues. And in Other LatAm, gross profit was up 16% quarter-over-quarter. In Asia and Africa, the quarter-over-quarter gross profit changes for Egypt and Nigeria mirror the same patterns seen in the year-over-year comparison. Nigeria was down by $1 million, whereas Egypt was up by $1 million. While we recognize that the quarterly gross profit figures are disappointing, we don't view this as a structural problem. Year-over-year, Q1 gross profit is of higher quality and more sustainable, since the share of Argentina FX revenues has dropped considerably. Quarter-over-quarter, merchant repricing has affected us, yet we expect that in time, greater global volume from these merchants will counterbalance these pricing negotiations. Now, I'll pass it to Mark, so we can keep moving down the P&L.

Hello, everyone, and thanks, Maria. It's a pleasure to be with you today, and I'm quite enthusiastic about what lies ahead for us following my first month at DLocal. As Pedro noted when he kicked things off, we'll keep putting money into our capabilities, but at the same time we're exploring ways to operate with greater efficiency throughout every part of our business. Over the quarter, we kept on investing further in expanding the team, strengthening capabilities, and setting up processes and systems that will underpin our long-term growth goals. These investments, which we believe will deliver returns over the mid-term, pushed total operating expenses to $36 million for the quarter. The primary drivers of the quarter-on-quarter expense growth were: technology-related costs, which include engineers, software licenses and infrastructure; plus salaries and wages throughout our operations, compliance and finance teams. Because of this, operating expenses accounted for 57% of gross profit. For a closer look, please turn to Slide 16 of the earnings material that accompanies this call. I'd also like to note that our worldwide team now numbers 951 people after we brought in 50 net FTEs during the quarter, with the bulk of those hires in tech, sales and operations across Uruguay, Argentina, Brazil and Spain. All of this produced an operating profit of $27 million for the quarter, which fell 32% year-on-year and 34% quarter-on-quarter. In the same way, adjusted EBITDA landed at $37 million, a decline of 19% year-on-year and 25% quarter-on-quarter, while adjusted EBITDA margin stood at 20%, down 6 percentage points quarter-on-quarter. Roughly half of that decline came from the gross profit compression we discussed earlier, and the remaining half from the higher operating expenses I just described. In a similar vein, the ratio of adjusted EBITDA to gross profit was 58% for the quarter. Net income for the quarter was $18 million, a drop of 50% year-on-year and 38% quarter-on-quarter. The earnings presentation lays out the quarter-on-quarter movement in net income, which was chiefly affected by lower EBITDA. On top of that, our effective income tax rate climbed to 29% from 21% in the prior quarter, driven by the revenue mix shifting toward entities with higher tax rates. Turning to cash flow. We produced $12 million of free cash flow during the quarter. With that, our net income to free cash flow conversion was 69% for the quarter. That said, when you look at the last 12 months, our net income to free cash flow conversion remains above 100%; we closed the quarter in a strong liquidity position of $320 million, comprising $212 million of available cash for general corporate purposes along with $108 million of short-term investments. Given this solid cash position, the Board has approved a share buyback program of up to $200 million to repurchase Class A common shares. The plan will expire at the earliest of May 2025 or when the $200 million repurchase limit is reached. Our business keeps delivering strong margins and solid cash conversion. This share buyback program reflects where our current capital allocation framework stands. As we've noted on several occasions, a share of that cash is going toward beefing up what the company can do, through upgrades to our in-house systems and our teams; you can see the effect of this in the near-term pressure on margins within our P&L. Regarding input on corporate development, our approach will be highly disciplined, yet if appealing opportunities come along, our balance sheet remains under-leveraged and available to put to work alongside our cash reserves. And lastly, given that cash generation ought to stay robust moving forward, we have every confidence that this buyback program serves as one more component of the capital allocation framework. It makes for an appealing deployment of capital in light of the path we believe DLocal is capable of taking over time as it pursues its vast opportunity. So this buyback program reflects our belief in where our business is headed and in our capacity to keep producing enough future cash to fulfill our ambitious strategic plan; with that said, I'll turn things back over to Pedro for his closing remarks.

Thank you, Mark. Also, it's a pleasure to have you join us on today's call. Working alongside you and the other members of the leadership team in Montevideo throughout these last few weeks has been something I've truly enjoyed. So now, allow me to bring things to a close. How we actually perform relative to guidance will, as always, depend primarily on how well we execute ourselves, yet several external factors will also play a role — things like foreign exchange rates, the broader macroeconomic environment, when merchants go live on contracts already signed, and shifts in regulation, to mention just a handful. We do our best to manage and mitigate these factors, but they continue to carry a degree of unpredictability that comes with the emerging markets we concentrate on; that's just how this business works; so keeping that backdrop in mind, we are focused on executing our 2024 plan, which lines up with the guidance we provided at the start of the year. As of right now, and based on the best information, expectations and knowledge available to us, we see ourselves as on track toward those targets, though there is a stronger chance we finish nearer the bottom of the ranges we put out. For the rest of 2024, our mission is to achieve that and do even better. Setting near-term ups and downs to one side, the overall progress we've made is very heartening, and we stay extraordinarily optimistic about the larger opportunity to build profitable growth over the long run. For digital companies, emerging markets continue to offer an unmatched opportunity, and payments are still a significant source of friction. Mark's earlier announcement of our new share repurchase program, along with the brief outline of our capital allocation framework, stands as proof of the faith we hold in our company and in what its business can become. Having said all that, we would now welcome your questions. Many thanks.

Hello, this is Jorge Kuri with Morgan Stanley. I'd like to ask about the EBITDA-to-gross-profit margin, which came in at 58% for this quarter, versus your full-year guidance — and I did catch Pedro's comment about perhaps aiming for the lower bound of that guidance, which hopefully won't happen; even so, that's still 69% to 72%. So could you perhaps take us through how you bridge from 58% up to 69%? Is there something in this quarter that's clearly a one-off item you can strip out and arrive at a gross profit margin you believe better reflects what we might see over the coming couple of quarters? If you could help us bridge that gap, I think it would be quite useful for understanding how things will evolve from here.

Thank you, Jorge; so, 3 points regarding how we're approaching the financial model. First, clearly, there's a top line acceleration we must concentrate on. The cost structure landed where it landed because, on the gross profit side, we're trailing where we want to be; therefore, part of narrowing that gap — and I'd call it the most significant part — is converting the existing pipeline so we can land inside the guidance range provided on a gross profit basis. Second, clearly, we continuously examine our cost structure relative to where we stand on revenue or gross profit, and the lever where we can have the greatest effect is likely what we spend. The third point is that, since this margin compression is driven by the top line, we must ensure we balance our near-term objectives against our long-term ambition, and ensure that whenever we make cost adjustments, we do so bearing in mind that equilibrium between the short and long term.

If I could, perhaps just build on that point. For the quarter, gross profit take rate came in at 1.19%, which is a decline of 18 basis points versus the prior quarter. As some of those items you referenced return to normal levels, how should we think about the remainder of the year?

Well, as we've mentioned before, ours is a business made up of many moving pieces spanning 40 markets, with numerous merchants and markets that fluctuate a great deal. So we have provided guidance; we've shown you where we believe we stand relative to that guidance. And my sense is we would prefer to keep the questions centered on discussing the quarter that was just reported rather than repeatedly walking through the exercise of how we arrive at the guidance; broadly speaking, and I will address your question, but leaning a bit more toward the first quarter. If you examine what drove gross margin compression during the quarter, a significant portion of that comes from seasonality. For our e-commerce vertical, Q1 is a softer quarter, and that vertical typically carries a higher take rate and is also pay-in driven. Consequently, the pay-ins versus pay-outs mix that we observed shifted toward payouts in Q1. Ideally, as the e-commerce vertical makes progress, particularly toward the latter part of the year, that supports higher take rates. On the merchant renegotiation side, which is another driver we've laid out, we could go deeper in other questions, but our genuine belief is that this is not necessarily something that extends into a structural problem, but instead is confined to very large global relationships. So I think one could argue take rate moves either way and doesn't necessarily keep declining the way it did from Q4 to Q1. That said, we need to allow the year to unfold and observe how all the many variables play out.

I appreciate you having this call and giving me the chance to ask a question — I'll also say a little about the guidance. Pedro, you mentioned feeling comfortable, perhaps, with the guidance's low end, yet you also noted that gross profit for March reached $25 million. Do you consider that a fairly dependable foundation to grow from in order to achieve that guidance? After all, even using that as a starting point, you would still require additional growth to get to the lower end of the guidance. What I'm trying to understand is whether January and February contained anything unusual, and whether pent-up demand might have given March a boost, or whether March serves as a stronger base to reason from? Given the substantial clustering of major merchants in your business, how might you reduce that reliance? Or, because those merchants are so large, will your growth always depend on them to some degree—particularly for hitting the longer-term outlook you've projected? I'll save my follow-up for later.

Sure. I'll address your questions starting with the second one. Regarding diversification, our position has been that as the company continues expanding and we bring on an increasing number of merchants, that concentration should decrease. In other words, as the business scales, reliance on the Top 10 merchants ought to diminish. When you examine it quarter by quarter, a bit of that pattern showed up. Our Top 10 merchants actually represent a somewhat smaller share of volume than they did in the prior quarter, so I believe we still have plenty of room to keep bringing on hundreds of big enterprise customers and to build a customer base that grows more balanced as time goes on. What we've witnessed over the past few quarters, I'd say, is really remarkable progress in holding onto wallet share within several very large global partnerships, and in fact growing alongside those merchants as they move into emerging markets — and that is what produced the concentration level we currently have. When it comes to March, the factors at play look different in some ways. To put it another way, what took place in March shouldn't be used to project the next nine months. When we put our guidance together, we go through a thorough, bottom-up review of each merchant prospect in our pipeline, then apply a likelihood adjustment, so what we hand you is our strongest estimate of how the year will unfold. My read on March is that it showed total payment volume climbing across the quarter and improving as we neared the quarter's close. The positive trend in TPV carried over into Q2, which signals that when it comes to share of wallet and the expansion of business we handle for our merchants, we're still moving the right way. On the other hand, March gave us another quarter where Egypt contributed a fair amount of positive gross profit, and after the devaluation, that number begins to shrink throughout all of Q2. So again, you've got gains and losses working against each other; the core TPV metric, plus how many merchants are adopting our platform, demonstrates strong momentum as we enter Q2. After that, we have to watch how matters unfold across the various geographies and how those pieces combine into an overall Q3 figure.

All right, that's really useful. My second thing was simply — Egypt's revenues saw a significant jump, especially compared to the same period last year, yet the currency there has undergone some devaluation, and usually that sort of thing hurts revenue. So I just want to grasp what exactly took place in Egypt. Also, how might Egypt's gross margin stack up against what we see in other markets? And could more FX depreciation in Egypt turn into a headwind?

Yeah. As you've observed across emerging markets, again and again, chances like these show up in countries that either lack FX liquidity or impose capital controls. That means the service we provide to our merchants at those moments is incredibly valuable and distinctive for them, and we can benefit from those widening FX spreads. In 2023, H1 Argentina was the prime example. In H2 of 2023, Argentina started narrowing spreads, but then Egypt came to the fore. What we're now observing as we move out of Q1 and into Q2 is that Egypt's currency has devalued, its spreads have gotten tighter, and we have to find out whether during the rest of the year another such opportunity appears or not. So yes, Egypt represented a situation of elevated margins and take rates stemming from wide FX spreads, and because of the devaluation, those margins shrink for Q2. As a result, the Egyptian business, quarter on quarter, turns into a headwind that must be compensated for through volume and wins in the other markets. I consider it a plus that our business is reasonably diversified, though circumstances don't always work out such that the moment you lose one market, you instantly gain another. Looking at the trend over time, opportunities of this sort are constantly arising throughout our markets and our footprint.

Melissa here, sitting in for Jason. I've got one question. You mentioned that during the quarter, gross profit declined, and one contributing factor was a big merchant that reached a new pricing tier and renegotiated its fees. Do you foresee any other major or perhaps Top 10 merchants with contracts up for renewal that could affect your capacity to hit the low end of your gross profit guidance? Also, regarding the postponed launches, can you see when they'll actually go live?

Thank you, Melissa. Two excellent questions. Let me add some further context about that merchant, all right? First off, the merchant in question represents an extremely, extremely large global contract for us; and regarding the renegotiated rates, as far as we can tell, they remain above what this merchant might have otherwise secured via different options in the markets where the renegotiation took place. Even so, we've managed to keep most of their volume in those markets, despite a higher price point, which I believe speaks to the caliber of our platform and the services we provide them. So what I'm getting at is that this is far more the organic result of the massive volumes they've reached with us; and should we have other merchants — and at present we have none — we think a comparable process would occur. Possibly this merchant could do so in additional markets, though not other merchants. In fact, I'd contend that's actually positive news; it shows we have merchants reaching substantial volume thresholds that warrant that sort of tiering effect and contract renegotiation. Another key thing to note is that we're examining the effect of this renegotiation in a single market, since we want to give the Street transparent visibility into what occurred in Brazil. Our actual approach to managing merchant relationships involves both a global perspective and ensuring a long-term outlook; and because of that, with this specific merchant, we've also managed to keep growing with them into new markets, and we're confident that as they expand their emerging market presence, they'll keep doing so via us; so what ought to occur across longer timeframes is that, in hindsight, the compounded growth rate of our ties with these very large merchants should warrant the sort of pricing they're commanding, correct? Thus, we don't view this as a sign of structural change or competitive dynamics, but merely the pricing dynamics of very large global relationships and the volume discounts that make sense to extend to them so we can keep growing alongside them. You had a second question, which was...?

I wanted to ask about the pushbacks affecting a few of those rollouts.

Yeah, that's right. A number of them are actually already running as of the second quarter. A few of these are extremely big, multi-year engagements with substantial upside, and our goal was to have them up and running during Q2, so it's possible that in certain instances we'll already see an effect within the second quarter. For others, whatever we see in the second quarter may remain limited. Over the longer term, though, several of these customers are highly appealing names that we've spent a considerable amount of time either chasing or developing. Down the road, once they're live and we begin scaling from a more extended viewpoint, I believe these hold tremendous promise, and with luck, we can share news when we report Q2 that they've gone live.

I should say, Maria, that I value the extra details you've provided, particularly the gross profit breakdown by region — that's useful. But as you're aware, once you disclose anything, people immediately ask for more. So I'm curious: could we somehow think through the margin profile shown on Slide 5, the verticals, even if you're unable to discuss what margins those verticals carry — the inherent pay-in and pay-out traits they have, since those could serve as an indicator?

Well, Jamie, as we mentioned, broadly speaking, the payout side of things operates with a smaller take rate. Yet during most quarters, its margin edges out pay-ins slightly, while pay-ins generate bigger take rates. When pay-out providers give us liquidity in markets where netting is allowed, that genuinely affects how profitable the pay-ins side is, since that's exactly where using liquidity to bring pay-ins back home through FX spreads shows up. Consequently, the two sides are tightly interconnected; as for take rates by vertical, once more, we haven't made that public, so there's little to say; we'll keep it in mind. Should we eventually determine it would be useful, we'll look into it.

All right. And if I may ask a quick follow-up, Pedro — during your prepared remarks, you mentioned how March compared with January and February in terms of relative strength. Besides Egypt, could you identify any other regions that might have posted better growth in March? Or does that have more to do with bringing new merchants on board?