TIP834: DLocal (DLO): Multibagger Potential with Decade-Long Runway w/ Daniel Mahncke & Shawn O’Malley

What It Covers

Daniel Mahncke pitches dLocal (DLO), a Uruguay-founded B2B payments company serving global tech giants like Amazon, Netflix, and Uber across 60+ emerging markets. Trading at 15x earnings with 50%+ revenue growth, dLocal processes $40B annually in total payment volume, acting as the single API connecting Western merchants to fragmented emerging market payment rails.

Key Questions Answered

• •Dual megatrend positioning: dLocal captures two simultaneous growth engines — emerging market digitalization and Western tech giants expanding into those markets. Unlike betting on which local company wins in Brazil or Nigeria, dLocal profits regardless of which local player dominates, because its revenue grows when Amazon, Netflix, and Spotify grow their emerging market volumes. This reduces single-company risk while maintaining full exposure to the secular trend.
• •Take rate vs. margin distinction: dLocal's take rate fell from 2.9% in 2020 to 0.9% today, but this metric misleads. The relevant framework is the V-shape: TPV grows fastest, gross profit grows slower due to take rate compression, but net profit grows faster than gross profit due to operating leverage. Investors should track EBIT-to-gross-profit ratio, not take rate alone, to assess whether the business is actually compounding value.
• •Regulatory moat via licensing: dLocal holds 38 regulatory licenses across 60+ markets with roughly 12-15 more pending. Each license takes years to obtain, creating a durable barrier that Stripe, Adyen, or any new entrant cannot replicate quickly. Adyen has operated in Brazil for over a decade without matching dLocal's penetration, suggesting that regulatory depth and local relationships compound into a structural advantage that capital alone cannot shortcut.
• •Smart routing and conversion uplift: dLocal's smart routing system dynamically selects the highest-approval payment path per transaction across multiple local acquirers, varying by card type, time of day, and transaction size. Cross-border payment failure rates reach 15-25% without optimization. dLocal's local processing delivers a 20 percentage point conversion rate improvement versus international card processing, a measurable value-add that justifies merchant pricing and reduces churn risk.
• •SmartPix solves subscription billing gap: Brazil's PIX system, like India's UPI, requires customers to manually approve each payment, making automatic subscription billing impossible natively. dLocal's SmartPix product adds a software layer enabling recurring charges without customer re-approval each cycle — replicating stored-card tokenization behavior. This directly protects subscription revenue for Netflix, Spotify, and similar clients, and represents a concrete monetization lever beyond raw payment routing.
• •Valuation model with 22% base-case return: At roughly $4B market cap and 15x earnings, the base case assumes TPV growing ~38% through 2028 decelerating to ~20%, take rate declining to below 0.7%, gross profit compounding at 19-20% annually, and operating leverage expanding EBIT margins. A $300M buyback program plus a 30% free cash flow dividend yield of 3-4% adds ~2.5% annual share count reduction. Bear case risk is margin compression without operating leverage materializing, which could halve the stock.