dLocal Limited has reported fourth-quarter results that fell short of expectations after it incurred additional expenses related to allegations of fraud and impaired deposits trapped with bankrupt cryptocurrency exchange FTX.
The Uruguayan payments company reported total payment volume (TPV) of $3.3 billion for the three months to December 31, 2022, up 78% from 4Q 2021, while revenue rose 55% to $118 million. Adjusted underlying earnings (EBITDA) increased 39% year-over-year to $40.4 million but net profit declined by 18% to $19.4 million.
The company said it faced higher operating expenses in the final quarter of 2022, including deposits of $5.6 million with bankrupt cryptocurrency exchange FTX Trading which were recorded as a loss allowance. It also incurred fees of $2 million from independent counsel, independent global expert services and forensic accounting advisory related to an internal review of fraud allegations made by a short-seller report.
Excluding these expenses that it said are non-recurring in nature, 4Q profit would have amounted to $27 million, it added.
For the full year, total payment volume rose 75% to $10.6 billion, while revenue improved by 72% to $419 million and adjusted EBITDA jumped 54% to $153 million. Net profit of $108.8 million was 40% ahead of 2021.
“Our strong 2022 results, with TPV growing 75% year–over–year to US$10.6 billion, are a testament to the value of our solutions and to our true long-term partnerships,” dLocal CEO Sebastian Kanovich said in a statement.
“Our flexible and scalable platform has been a cornerstone of our success from day one. In response to global merchant needs and payments ecosystems, we have introduced new solutions and capabilities, expanding our technology platform”
Short-seller accusations
In December, Reuters reported that short-seller Muddy Waters had accused dLocal of potential fraud in the quarter, which dLocal has denied.
The company’s board said in December that the key allegations made by the short-seller were "without merit" following an internal review, without going into detail.
The company has yet to issue a detailed written response to Muddy Waters' claims, which included the allegation that dLocal accessed client funds, had fudged reporting of its total payment volume, and was "likely a fraud,” per the Reuters report.
dLocal’s shares were down 18% at $13.82 mid-morning in New York.
Contact the author at stephen.gunnion@proactiveinvestors.com