{ "docId": "019dd923-622c-750b-8b97-535532caa115", "docSlug": "b0d4509b946d", "documentTitle": "dLocal (DLO)", "authorId": "51_Muddy_Waters", "authorName": "Carson Block", "documentKindSlug": "research-note", "documentKindLabel": "Research note", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2022-11-16 00:00:00", "orientation": "portrait", "aspectRatio": 0.77272725, "pageNumber": 21, "pageCount": 47, "prevPage": 20, "nextPage": 22, "slideType": "appendix_disclosure", "function": "cite_precedent", "density": "overcrowded", "nDataPoints": 4, "notes": "Contains extensive footnotes citing former DLocal executives and public data sources.", "elementsJson": [ "paragraph", "footnote" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b97-535532caa115/21", "deckHref": "/decks/019dd923-622c-750b-8b97-535532caa115", "deckJsonHref": "/decks/019dd923-622c-750b-8b97-535532caa115.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b97-535532caa115#slide-21", "components": [ { "bbox": null, "kind": "callout", "text": "Across multiple conversations with two former DLO executives, we learned that Google's local-to-local business with DLO in Brazil was operating on gross Take Rates of just 0.1% to 0.3% per transaction.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-25b5-768c-bb2d-4913d73c55aa", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "metric", "text": "gross take rate: 0.1% to 0.3%", "attrs": null, "subkind": "primary", "toolName": "Quantification", "toolSlug": "quantification", "confidence": null, "componentId": "019dd953-25b5-768c-bb2d-538b41a218d1", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.13, "w": 0.66, "x": 0.17, "y": 0.33 }, "kind": "paragraph", "text": "Augmenting our skepticism is the 2020 on-boarding of the new high-volume but extremely low margin customer, Google. According to former executives familiar with the account, Google went live on DLO’s platform in early- to mid-2020, placing it in the 2020 new merchant cohort.30 The margins from Google are low for several reasons: 1) Google was reportedly collaborating with DLO primarily on a local-to-local basis,31,32 2) Google’s payment volumes were allocated by a routing algorithm necessitating PSPs be competitive, and 3) it was competing head-to-head with Adyen.33", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "33656bf9-f1a5-4020-97d5-0d3d1d722248", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.11, "w": 0.66, "x": 0.17, "y": 0.47 }, "kind": "paragraph", "text": "Across multiple conversations with two former DLO executives, we learned that Google’s local-to-local business with DLO in Brazil was operating on gross Take Rates of just 0.1% to 0.3% per transaction.34,35 DLO was competing head-to-head with Adyen for this business and was slightly more expensive, but only by 0.01% or 0.02% per transaction.36 However, soon after onboarding, Google’s processing volumes were apparently running at over $1 million per day.37 The conversation excerpt below illustrates this (emphasis added):", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "47443d16-9e3e-480c-bf40-2cede9428804", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.05, "w": 0.66, "x": 0.17, "y": 0.09 }, "kind": "paragraph", "text": "main selling point was less the cross-border option, but more the multiple connections with one PSP option. And I think that was what Google saw on this company. So that’s why it’s one of the biggest customers.”28", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "50da0d5e-7d0e-42b9-8d3e-f9ab34cc9e59", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.66, "x": 0.17, "y": 0.16 }, "kind": "paragraph", "text": "Source B: “One way to look at this is, in the beginning Brazil was the largest market, and they solved the issue for so many merchants, because of the regulatory change. Then the focus shifted quite a bit into the rest of the world, because the merchants who were large enough had finished the process to become local in Brazil for card, and kept Dlocal for alternatives. And then went with their own kind of local processors for Brazil, for local card, because it became such a critical market and so focus came up on all other areas from a large merchant perspective. So, if I’m talking about the Googles, the Amazons, the Facebooks, the Netflixes of the world don’t necessarily use Dlocal for card processing in Brazil, but they use them for alternative processing in Brazil.”29", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "8941aa96-31a6-4c92-b106-980f9bb4f43c", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "One way to look at this is, in the beginning Brazil was the largest market, and they solved the issue for so many merchants, because of the regulatory change. Then the focus shifted quite a bit into the rest of the world, because the merchants who were large enough had finished the process to become local in Brazil for card, and kept Dlocal for alternatives. And then went with their own kind of local processors for Brazil, for local card, because it became such a critical market and so focus came up on all other areas from a large merchant perspective. So, if I’m talking about the Googles, the Amazons, the Facebooks, the Netflixes of the world don’t necessarily use Dlocal for card processing in Brazil, but they use them for alternative processing in Brazil. — Source B, a former DLO senior executive responsible for revenues", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd953-25b5-768c-bb2d-4c05257d0bb8", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.2, "w": 0.66, "x": 0.17, "y": 0.7 }, "kind": "source-note", "text": "28-37 Footnotes detailing sources and supporting data links.", "attrs": null, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "e3bf803c-6aeb-45fc-9425-824c5cef3976", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [], "arcBeats": [], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }