Uruguayan payment services company DLocal Ltd. plans to keep plenty of cash on hand to support its growth even as it spends $100 million to buy back shares, Chief Executive Officer Sebastian Kanovich said.
(Bloomberg) — Uruguayan payment services company DLocal Ltd. plans to keep plenty of cash on hand to support its growth even as it spends $100 million to buy back shares, Chief Executive Officer Sebastian Kanovich said.
“I’ve learned you can never have too much cash,” Kanovich said in an interview on the sidelines of a company event near the beach town of Punta del Este, Uruguay. “I’m always going to be happy having excess cash and not too little.”
DLocal, Uruguay’s first unicorn to be listed on a U.S. stock exchange, is a relatively rare example of a profitable young tech company, with profits of $89.3 million in the first nine months of 2022. Last month, it approved a share buyback program after cash on its balance sheet swelled to more than $542 million at the end of September.
Company shares have risen almost 10% since the buyback announcement, closing Wednesday at $16.05 for a market capitalization of $4.7 billion. However, the stock is down 24% from its closing price the day before short seller Muddy Waters Capital accused DLocal of alleged irregularities in November. Kanovich declined to comment on the matter beyond the company’s written rebuttal on December 20.
In 2022, the company had sought to use its cash pile to grow through acquisitions. DLocal is still considering deals to gain access to new markets, products and corporate clients, Kanovich said, adding that no transaction is imminent.
“There are better uses of cash than a dividend,” he added.
EM Focus
The company, which provides payment solutions to businesses in emerging markets, aims to deepen its presence in the 39 nations where it currently operates, said Kanovich, who didn’t rule out launching in a few new markets.
DLocal has grown its geographic reach since it was founded in 2016, and last year added four new countries, including Saudi Arabia and Ivory Coast. Its efforts to reduce its dependence on Latin American economies like Brazil and Mexico are starting to pay off with Africa and Asia’s share of revenue more than doubling year-on-year to 22% in the third quarter of 2022.
“We’ve covered most of the key geographies where we want to be,” Kanovich said. “We are going to be focusing on the core markets where we are.”
DLocal shareholders include blue-chip hedge funds such as D1 Capital Partners and Tiger Global Management, according to data compiled by Bloomberg based on regulatory filings through Sept. 30.
Other key points from the interview:
- Domestic payment methods are booming in emerging markets thanks to competition rules and central bank payment platforms like Brazil’s PIX, India’s UPI
- Kanovich thinks that trend could reduce the importance of Visa and MasterCard, while creating opportunities for DLocal
- ”It makes local payments easier, but adds another layer of complexity for international firms,” he said
- DLocal won’t offer crypto payment solution to businesses until there is demand for that product
- ”As a payment method, we still don’t see adoption,” he said
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.