John Coffey

John Coffey asked for clarification on dLocal's M&A strategy, inquiring whether the company is casually looking or actively pursuing specific targets for their functions, licenses, or client lists.

Answer

CEO Pedro Arnt confirmed that the company is actively looking at M&A opportunities. He noted a growing number of subscale fintech companies are available at attractive valuations, and dLocal's corporate development team is actively evaluating these potential add-ons.

John Coffey asked how the recent investments in licenses in Nigeria, Ecuador, and Uganda would appear on the income statement—as higher volume or lower COGS. He also requested more information on the new payment orchestration solution, including how merchants are enrolled and how its financials differ.

Answer

Executive Pedro Arnt clarified that licenses are a long-term commercial advantage that builds merchant trust and wins more volume, rather than directly lowering costs. He described the orchestration solution as a flexible offering for merchants who want to use their own processor contracts while retaining dLocal's technology stack, viewing it as a tool to capture incremental business from clients with different operational needs.

John Coffey of Barclays inquired about the current consumer spending environment, particularly at the top of the credit funnel, and asked about REPAY's capital allocation strategy following the increased share buyback authorization.

Answer

CEO John Morris stated that nondiscretionary consumer spending has remained resilient year-to-date with no major macro-related impacts observed. On capital allocation, Morris confirmed the company will opportunistically repurchase shares when the price appears disconnected from intrinsic value. CFO Tim Murphy elaborated that the priority order is organic growth, then buybacks, ensuring liquidity for the 2026 convertible notes, and finally, tuck-in M&A.

John Coffey asked about the outlook for conversion rates for the remainder of the year and questioned the reason for changes to the Upstart Macro Index (UMI) slide in the investor presentation.

Answer

CEO David Girouard stated that conversion rates, which rose from 14% to 19% year-over-year, are expected to continue increasing due to model improvements and automation. CFO Sanjay Datta explained the UMI slide was moved and simplified to avoid confusion, clarifying that the index is correlated with, not derived from, the previously shown Fed data points.

John Coffey, on behalf of Barclays, asked for an update on the credit recovery of prime customers and questioned the expected trajectory for adjusted EBITDA following the return to positivity.

Answer

CFO Sanjay Datta explained that credit performance across both prime and lower-prime segments is reconverging to a state of stability, which supports the company's T-Prime initiative. He projected that as long as model improvements and volume growth continue, adjusted EBITDA should follow a positive trajectory.

John Coffey asked for a way to quantify the P&L impact of increases in customer 'principality' and questioned what the primary bottleneck is that keeps Nu's loan-to-deposit (LDR) ratio low.

Answer

CFO Guilherme Marques do Lago explained that while a single percentage point increase is hard to model, principality is a 'holy grail' because primary customers have an ARPAC 3-4x higher and delinquency 48% lower than non-primary customers. Regarding the LDR, he stated the low ratio is not a weakness but a sign of a strong, strategic deposit franchise. The bottleneck to a higher LDR is not a lack of opportunity but a commitment to responsible, systematic credit growth, rather than rapidly expanding loans just because deposits are available. He noted that rapid deposit growth in new markets like Mexico has also temporarily suppressed the ratio.

John Coffey asked what is constraining a faster increase in the loan-to-deposit ratio and followed up on the 15-90 day NPL decline, asking to parse the effects of seasonality versus increased risk exposure.

Answer

CFO Guilherme Marques do Lago explained that the main bottleneck to growing the loan-to-deposit ratio, particularly in Mexico and Colombia, is not capital or funding but a disciplined credit underwriting appetite as the company develops its models. President and COO Youssef Lahrech added that the 10 bps decline in 15-90 NPLs was straightforward and largely in line with typical seasonality of 10-20 bps, with offsetting forces from mix shifts creating relative stability.

John Coffey asked about the impact of Brazil's SELIC interest rate on pricing. Given the rising rate environment, he inquired about the company's plans for raising prices in the near term and into 2025.

Answer

Executive Mateus Schwening explained that pricing has become a dynamic monthly process where macroeconomic conditions, including interest rates, are considered. He stated that while they intend to pass through some of the expected rate increases, the process has a lag, and a significant impact from repricing should not be expected until 2025.

Asked for details on the opportunity and economics of offering early payment on receivables from other acquirers, and inquired about the nature of their recent geographic expansion within Brazil.

Answer

The company explained that the geographic expansion involves adding hyperlocal sales forces in specific regions to better serve certain niches. Regarding early payments from other acquirers, it's a new initiative for their SMB clients launching in Q3. While the market is large, it's too early to size the economics, but they plan to leverage their competitive cost of funding from deposits.