Hello. Thank you for standing by, and welcome to the dLocal Fourth Quarter 2021 Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator instructions] Please be advised that today's conference may be recorded.

[Operator Instructions] I would now like to hand the conference over to your speaker today, Soledad Nager, please go ahead..

Thank you. Good morning, everyone, and welcome to dLocal Fourth Quarter and Full Year 2021 Earnings Call. I hope you and your families are safe. I am Soledad Nager, the new Head of Investor Relations at dLocal. Let me start by saying that it's my pleasure to have joined dLocal, the leading technology payment platform focused on emerging markets.

On the call today, I'm joined by Sebastian Kanovich, our Chief Executive Officer; Sumita Pandit, our Chief Operating Officer; and Diego Cabrera, our Chief Financial Officer. We are providing a slide presentation to accompany our prepared remarks. This event is being broadcast live via webcast.

And both the webcast and presentation may be accessed through dLocal website at investor.dlocal.com. The replay will be available shortly after the event is concluded.

Before proceeding, let me mention that any forward statements included in the presentation or mentioned in this conference call are based on currently available information and dLocal current assumptions, expectations and projections about further events.

While the Company believes that our assumptions, expectations and projections are reasonable in view of currently available information, you are cautioned not to place undue reliance on those forward-looking statements.

Actual results might differ materially from those included in dLocal presentation or discussed in this conference call for a variety of reasons, including those described in the forward-looking statements and risk factors section of the local filings within the Securities and Exchange Commission, which are available on dLocal Investor Relations website.

Now, I will turn the conference over to Seba..

Thanks, Sole. Hello, everyone. Thanks for joining us today. Before we dig into our Q4 and full year 2021 results, let me start this presentation by saying that our debut as a public company in June 2021 set the beginning of a new chapter for dLocal.

We're extremely proud of what we have achieved since we started serving global e-commerce merchants over six years ago. Our priorities and values have remained unchanged. We remain laser-focused on building infrastructure, connecting the emerging markets to the rest of the world.

We continue to turn the complex into simple for our global merchants, and we continue to redefine the online payments experience in emerging markets. We also value the continued support of our global team and our investors. And we have continued to grow and deliver despite the challenges posed by the pandemic.

Our strong performance in 2021 has laid a solid foundation to fulfill our long-term vision. We are literally just getting started. On Slide 3, 2021 was a record year for us with triple-digit growth in total payments volumes, revenues and EBITDA. In 2021, total processed volume surpassed the $6 billion threshold.

We have almost tripled our TPV, increasing by 193% over prior year 2020. If we compare our TPV in 2021 versus three years back, we have increased it by 11x. Revenues for the year reached $244 million, 134% increase over prior year 2020. If we compare our revenues in 2021 with 2018, we have increased it by an impressive 7x.

We reached an all-time high NRR of 219% in 2021 and 198% in the fourth quarter as we grew wallet share with our existing merchants and had minimal churn of merchants. Adjusted EBITDA for the year 2021 grew 136% year-over-year to $99 million. We posted a strong adjusted EBITDA margin of 41% during the full year 2021.

This was comparable to the 40% we posted in the full year 2020. Our EBITDA margin for Q4 2021 was 38%, in line with our expectations for the second half of the year as we focus on growing with large global merchants and continued investing in infrastructure and people to support our long-term growth strategy.

These results were driven by the continued expansion of our relationship with both existing and new merchants using our platform mainly driven by increased levels of digitalization in emerging markets. The inherent diversification of our business has continued to strengthen our business fundamentals.

We serve a broad set of merchants across geographies, sectors and products. This acts as a robust natural hedge to different economic cycles and consumption patterns. We remain committed to agile decision-making, helping our merchants achieve their growth plans in emerging markets. We remain bullish and are optimistic about our prospects for 2022.

Our relationship with our existing customers and our commercial pipeline is stronger than ever. We are not currently seeing a major change in our business from specific factors such as a higher interest rate, higher inflation in some developed markets, challenges in logistics in specific geographies, the Russia-Ukraine conflict or the return to work.

On Slide 4, as I have mentioned, our TPV has nearly tripled in 2021 year-over-year. The significant increase has been supported by the fast growth of our global merchants.

We are proud to count some of the largest global merchants and marketplaces as our customers such as Microsoft, Rappi, Mailchimp, Shopify, Dropbox and Deel, amongst various others we cannot name here given confidentiality clauses.

Besides, during the year, we have onboarded high-growth merchants who are looking to expand outside their home geographies such as Wish and Kuaishou, among many others.

Our TPV growth will continue to be supported by the strong organic growth of our merchant TPV as well as our ability to expand wallet share, sell additional products to our existing merchants and take them to new geographies and payment methods.

On Slide 5, our business model is not dependent on the performance and outlook of any single industry vertical. As you can see, we have merchants from more than 10 different verticals.

In the last two years, we have seen different verticals go through specific cycles, but our overall business benefits from verticals showing growth while another vertical may go through a short-term down cycle. Ride-hailing and streaming during 2020 are a great example of this balancing curve.

We are constantly looking for new opportunities to further diversify our business while following the best industry standards in terms of risk. We have added crypto as a new vertical. We are still in our early stages of pilots that we are running as well as use cases we are exploring in multiple geographies with several merchants.

We will continue to evaluate the risk framework and explore areas of growth. On Slide 6, our merchants are also well diversified on a geographical basis. We see merchants located in more than 40 countries.

We have continued to grow our presence in Africa and Southeast Asia, adding Pakistan, Tanzania and Uganda to our infrastructure network during Q4 2021. For the full year 2021, we've added nine countries to our network, bringing the total number of countries which we make our service available to 35 compared to 26 in 2020.

We have added new countries based on where our merchants want us to serve them as well as our internal view of the prospects for a new country across our merchant base and the wider industry. We typically have our merchants in waiting when we add a new geography, and this enables us to generate a high ROI on our expansion into a new country.

We believe that infrastructure we are building across geographies is a key strategic differentiator for our business because adding new countries and establishing multiple local connections is complex, and merchants value the infrastructure network we are creating.

On Slide 7, our expansion efforts are reflected in our strong revenue growth across all geographies. Our dollar revenues in LatAm increased by 140% year-over-year. LatAm accounted for 92% of the total revenues in 2021, whereas Asia and Africa accounted for 8% of the total revenues.

This was despite the fact that Asia and Africa revenues increased by 86% year-over-year and grew almost 5x in the last two years. Our addressable market in our core markets in Latin America is immense.

And we are pleased to note that our core markets in LatAm continue to see solid triple-digit growth as we deepen our relationship with current merchants or add new lows.

We expect our share of Asia and Africa revenue to gradually increase over time as we continue to cross-sell to merchants that originally started their relationship with us in Latin America to countries such as Nigeria, Kenya, India and Indonesia.

We are also increasingly starting to see merchants initiate their relationship with us through markets in Asia and Africa and then expanding to Latin America. The opportunity remains significant across our different regions, and we will continue to take steps to further diversify our geographic footprint, especially in Africa and Asia. Slide 8.

During the year, we have been able to not only up-sell and cross-sell to our existing merchants, but also to onboard new merchants with solid prospects such as a leading U.S.

video streaming platform that launched 13 geographies with us, a leading Chinese short video social lab that has been explosive growth globally and a leading Latin America on-demand delivery platform. Our total merchants on our platform have grown steadily from 300 plus in 2020 to 400 plus in 2021.

If we focus on merchants with TPV greater than $100,000 annually as a threshold, we see that our merchants count increased massively from 150 plus in 2020 to 240 plus in 2021. Going forward, we will focus on a minimum TPV threshold to provide a merchant comp for our large global merchants as it is a better indicator of the performance of our clients.

As we add new merchants and scale existing ones, our revenue share from our top 10 merchants has continued to decrease. Revenues from top 10 merchants dropped to 56% in 2021 compared to 64% in 2020 and 73% back in 2018. I will now hand it over to Sumita..

commercial efforts, product expansion and geographic expansion. Our commercial efforts are focused on a land-and-expand strategy. Our growth is driven by the organic growth of our merchants, our ability to cross-sell through account management and our ability to add new clients. Our NRR for the fourth quarter was an impressive 198%.

We calculate NRR by measuring the dollar revenues we earn from existing merchants we had on our platform on a year-over-year basis. As we have mentioned in the past, we expect the NRR to be at the 150%-plus level in the next 12 months. Our product innovation journey is never static.

Emerging markets are constantly changing, and we need to remain vigilant and agile. This is what keeps us at the forefront of the industry.

During the year, we continued to enhance our product portfolio with improvements in our features for pay-ins and pay-outs, together with the development and launch of new product lines such as Issuing as a Service.

On the geographic expansion vector, as Seba previously mentioned, we have added nine new countries during 2021, of which six are outside of Latin America. We will continue to deepen our presence in the countries where we currently operate and add new countries.

As an example of our commitment to growing our non-Latin America business, we have moved two senior executives to Singapore and South Africa to lead our commercial and expansion efforts in Asia and Africa, respectively. This allows us to retain our local culture in a new geography. And at the same time, we are focused on hiring locally to grow faster.

We believe that the strong cash flow generation of our business supports a complementary inorganic strategy that will accelerate our time to market. We plan to pursue selective inorganic opportunities to accelerate any of our three growth vectors. The correction and valuation of fintech assets has made many more businesses more attractive.

And we continue to evaluate M&A, though nothing is imminent. Next slide, Slide 11. Slide 11 shows our continued success in bringing our merchants to more countries and payment methods. In 2021, our enterprise merchants on average processed payments in seven countries and through more than 67 payment methods.

In comparison, in 2018, on average, we were processing payments in four countries and through 29 payment methods. Credit cards continue to account for about 35% of our volume. So a significant portion of our businesses includes a noncredit card-based payment method.

As we offer more than 700 payment methods in 35 countries, our merchants value the convenience of a one-stop shop that gives them access to so many alternatives through a single API. This gives us an immense opportunity to continue scaling our customers and increase the barriers of entry for our competitors.

We remain focused on continuing to monetize our existing client base and gaining share of wallet. Slide 12. On this slide, we show the number of opportunities we have in our sales funnel for both existing and new clients and how this compares with the opportunities we had in March 2021 before our IPO.

We have seen a major increase in the opportunities for both existing and new clients in the last year. Our IPO has significantly enhanced the visibility of our company and capabilities to our merchants. And it has reinforced our credibility as a solid and trusted payments partner.

Starting with our existing clients, we have an account management team solely focused on harvesting these relationships. This team works closely with our clients to solve their existing needs and cross-sell new payment methods, new countries as well as new product use cases.

We have over 190 open opportunities with existing clients to expand to new markets, products or payment methods. These proposals are at different stages, having over 50 pricing proposals extended to our existing clients and about 40-plus waiting to go live. The total number of open opportunities compares with about 60-plus back in March of 2021.

We're presenting a strong increase of 3x in less than a year. Moving to our new clients.

We have seen that our sales funnel continues to expand given the rapid expansion and ramp-up of merchants online, the growth of the creator economy, the emphasis our merchants place on digital marketing that, in many cases, have no geographic boundaries and the viral growth of users that some of our highest-growth merchants experience.

We expect this trend to continue as we see new companies emerge and become dominant online much more quickly today than even a few years back. These companies, as we call them the next tier of merchants, are not always the same size and type of the mega merchants we already have in our portfolio. But they are also not SMBs.

They are mainly regional players that want to expand outside their home markets, and we enable them to access consumers anywhere in the world. As shown on this slide, we have open opportunities with more than 640 new merchants with over 250 pricing proposals extended to new clients and over 100 waiting to go live.

Once live, we typically take three to six quarters to ramp up volumes with the merchant. The number of opportunities have scaled significantly by about 2x compared to the 350 plus we had in March of 2021.

The merchants we expect to onboard during 2022 came from diverse businesses such as commerce, gaming, crypto, messaging apps, payroll, amongst many others. Slide 13. On this slide, we show a recap of the main enhancements done during the year to our existing product portfolio.

On pay-ins, we started offering new integrations to add redundancy to our card processing in existing as well as new markets during the year. We enhanced our solution with new features such as network tokenization, removing the need to handle sensitive cardholder data as network tokens are maintained and automatically updated.

The integrated PIX in Brazil, enabling instant payments for users, which provides better user experience, new integration options through full API solutions and even giving local merchants their own PIX keys. We recently received an award for our PIX integration that you can find on our website, where we provide you more details on that initiative.

We improved our tax manager to allow tax handling by payment methods, both debit or credit. In Q4, we introduced a new auto debit payment solution for subscription business model companies in India for both domestic and cross-border transactions to comply with the latest auto debit regulations.

We also increased our card and ATM acceptance rates with better smart routing, chaining and UX improvements through rigorous AB testing. On the pay-out side, we expanded instant pay-outs offering in more countries previously only available in Nigeria and Brazil and improved our PIX pay-out solution with our PIX mobile app.

We also enhanced our logic and automations to overcome local rates processing limitations. Besides, during the year, we added 20-plus direct connections with new partners and banks for processing redundancy and capability enhancements in both existing and new markets. Slide 14. We also broadened our product portfolio.

We launched Defense Suite, including our Smart Defense and Defense Manager products. Additionally, we continued improving our fraud and data modules with new machine learning models tailored for retail and gaming verticals. We added profiling and fingerprinting tool live, device ID live, among other KYC improvements.

In the middle of last year, we had also launched our Issuing-as-a-Service solution, which enables merchants to create new lines of revenue and easily issue prepaid cards in local currencies to reach millions of consumers in emerging markets.

This product comes to our offering as another building block for what we consider to be a one-stop shop, particularly appealing when analyzing bankerization rates, which are significantly lower than in developed countries.

We have launched this solution in four markets and have signed new deals that we are in the process of integrating and are soon to go live. We have partnered with local banks as issuers to help grow the product. Although we are still at very early days, we remain bullish about the evolving use cases for our merchants. Slide 15.

We continue to invest in our business, responding to the incremental opportunities we face. At the end of 2021, we had 535 employees, increasing by 73% or by 225 FTEs year-over-year.

During the year, we grew significantly in all areas with particular focus on technology and products as well as sales and marketing, but also in our support areas to upgrade them to the standards and best practices of public companies. We will continue hiring and scaling our team with focus on technology and product and sales and marketing.

We intend to do so with a balanced approach, making sure we identify talents that fit with our culture. With that, I'm going to turn it over to Diego to review our financial highlights..

Thanks, Sumita. Let's start with Slide 17. We have seen strong TPV growth during the year. In 2021, our TPV surpassed the $6 billion threshold, increasing by 193% year-over-year. And in the fourth quarter of 2021, TPV has grown 145% year-over-year.

The growth is attributable to the performance and continued growth of our enterprise merchants across most verticals, particularly in ride-hailing, streaming, advertising, Software-as-a-Service, on-demand delivery and commerce. During 2021, both our pay-ins and pay-outs experienced triple-digit growth.

For pay-ins, we have seen a steady increase in TPV quarter after quarter. Specifically in Q4 2021, pay-ins have grown 190% year-over-year and 14% compared to the third quarter of 2021.

Pay-outs TPV has seen short-term fluctuations resulting in a quarter-over-quarter drop in Q4 2021, given higher-than-normal volume that came from certain margins in Q2 and Q3 of 2021 as they decided to run big marketing campaigns in these quarters. On a year-over-year basis, our TPV before pay-out still show strong double-digit growth.

The strength of our business is best measured over a slightly longer time periods as we continue to grow our relationship with our merchants. Going forward, we expect our business to continue growing strongly in 2022, both in pay-ins and pay-outs. Slide 19.

Revenues also reached a new record high of $76 million during Q4 2021 and $244 million for the year 2021, having grown 120% and 134% year-over-year, respectively, and 11% over the third quarter of 2021.

Our revenues over TPV or take rate decreased from 5% in 2020 to 4% in 2021 mainly explained by changes in the underlying business mix towards larger global merchants and higher share of local-to-local payments, as explained before by Sumita.

Particularly in Q4, we see a slight increase in take rate from 3.8% to 4.1% when compared to the third quarter of 2021 mainly explained by a higher share of pay-ins. Slide 20. Zooming in our revenue, we continue delivering strong revenue growth, both from our existing and from our new customers.

Revenues from existing merchants are those revenues that are driven by merchants that we're already processing in the same period of last year. And revenues from new merchants are those revenues that are driven by merchants that started operating with us after the same period of last year.

As our merchants typically have a three to six quarters ramp-up period, we believe that the revenues from new merchants are just an initial indication of the potential of our new customers. During 2021, of the 134% year-over-year revenue growth, 119% or $124 million came from existing merchants. And 15% or $16 million came from new merchants.

For Q4 2021, of the 120% year-over-year revenue growth, 98% or $34 million came from existing merchants, and 22% or $8 million came from new merchants.

As some of the fast-growing merchants on boarded in late 2020 moves existing merchants bucket during 2021, they contributed to the high net revenue retention of 219% for the year and 198% for the fourth quarter.

Our high net revenue retention is driven by having a minimum level of churn by the growth of our merchants and by the result of our own performance in terms of gaining share of the wallet. However, we do not expect to maintain the same net revenue retention levels in 2022. 2021 represented an all-time high in terms of revenue and TPV growth.

And therefore, the comparison gets tougher, particularly since the second quarter of 2022. Thus, in the next 12 months, we expect to maintain a healthy net revenue retention north of 150% in line with what we have been able to achieve in the previous years. Slide 21.

As Sumita mentioned, our commercial focus is to increase our gross profit dollars per merchant. As a result, our gross profit continues to grow at a healthy rate. In 2021, we more than doubled our gross profit increasing 117% year-over-year to $130 million.

And we were able to scale our gross profit each quarter, reaching $39 million in Q4 2021, up by 88% year-over-year and by 13% when compared to the third quarter of 2021. Our cost of services for the full year 2021 represented 1.9% of our TPV compared to 2.1% in 2020.

This decrease was mainly driven by an increase in the share of local-to-local pay-ins with a cost below our average. In the fourth quarter of 2021, our cost of processing was 2% compared to 1.9% in the third quarter of 2021 and 1.8% in the fourth quarter of 2020.

These sequential increases were mainly driven by a higher share of pay-ins, both local to local and cross-border with higher average cost than pay-outs. Slide 22. Our adjusted EBITDA for the fourth quarter of 2021 was $29 million, increasing by 112% year-over-year.

Our adjusted EBITDA margin was 38% compared to 39% in Q4 2020 and flat on a quarter-over-quarter basis. Adjusted EBITDA for the year increased by 136% year-over-year to $99 million and represented 41% of revenue compared to 40% in 2020. This shows our commitment to continue driving profitable growth.

If we look at operating expenses for the year, excluding onetime or noncash items in line with our adjusted EBITDA calculation, we see that they have grown 81% year-over-year, slightly above our headcount increase of 73% as we added more senior members to our team, and we increased our professional services as part of becoming a public company.

We expect our EBITDA margin for 2022 to remain north of 35%. In the medium term, as we grow our top line and gain scale, we continue to expect operating leverage in our business, and therefore, the ability to expand margin. With that, I will turn the call back to Seba to conclude..

Thanks, Diego. On Slide 24, as we look ahead, we are very excited with the opportunities we foresee. We remain focused on our large and expanding TAM, our direct integrations with our merchants, our scalable infrastructure, our exposure to a diverse mix of verticals and our focus on growth and profitability.

We do not anticipate a change in our expectations for our overall business for 2022 from specific factors such as a high interest rate, high inflation in some developed markets, challenges in logistics in specific geographies, the Russia-Ukraine conflict or the return to work.

While individual merchants may have idiosyncratic exposure to these factors, we continue to benefit from the diversity of our merchant base, geographies and consumer behavior partners as we expand our payment infrastructure across 35 countries and 700-plus payment methods.

We remain bullish about our business and our expectations for 2022 from both our existing clients as well as the addition of new clients.

As mentioned in our previous quarterly earnings calls, we reiterate our expectation of our net retention rate to be at the 150-plus level in the next 12 months, and we expect a healthy new client revenue based on the current pipeline we see. We expect our EBITDA margin for the full year 2022 to be north of 35%.

In the medium term, we continue to expect operating leverage in our business, and therefore, the ability to expand our markets. We are immensely grateful to our merchants, employees and investors for your continued support. I'll now turn it back to the operator to open it up for questions..

[Operator Instructions] Our first question comes from Kaio Prato with UBS. You may proceed with your question..

So I have two questions here if I may start with the first one. The first one is that. I would like to understand what kind of impact you could have in your business because of this geopolitical scenario currently? I understand that you don't have presence in any of these countries today.

But I believe you have some clients who've headquarters in some of this. So I just would like to understand if that is the case, and what is the Company doing about that if we should see any impact in terms of TPV and revenues because of this? And then I will follow up with my second question, please..

Kaio, it's Sebastian here. Thank you very much for the question. We have fewer exposures today to Ukraine and Russia businesses. We've explained -- we don't process payments in any of those two countries, and we don't have a merchant base either in Russia. So, we don't expect any impact in 2022, that's right..

Okay. Okay. Great. And the second question is that this year, you added nine new countries and looks like more than 100 merchants according to the slide.

So I was wondering if you could give us some details about the pipeline for 2022? And how should we expect in terms of revenues coming from new merchants throughout the year, please?.

Sure. So Kaio, I think it's important to breakdown the geographic expansion, so isolate the geographic expansion from our new revenue. We'll continue to increase our geographic footprint. We do have, and Sumita covered this, a focus on making sure we continue to double down on our current 35 geography.

And we do expect to continue to be able to add new geographies as our merchants will require it. Keep in mind, we typically have a merchant in line when launching a new country. Europe is extremely important to us. Our geographic expansion is extremely important to us in the sense that it allows us to have more touch points with our merchants.

The more footprints we have, the better chances we have to be able to get a merchant to integrate into us. And that's where the whole net revenue retention kicks in. We know once we are integrated, our merchants don't churn, but not only that continue to drive more revenue dollars to our platform..

Okay. Great.

And just a follow-up, how could we expect in terms of revenues coming from new merchants throughout the year? Because you mentioned that net revenue retention rate around 150, but coming from new merchants do you have an estimate?.

Sure.

Sumita, do you want to take this?.

Yes, sure. Kaio, I think as you heard us say, we think that our pipeline is super strong. We are not giving a specific guidance on new client revenue. You've seen how we have performed consistently as far as new client revenue is concerned not just in the whole year, but in every given quarter. We think it's going to be a strong growth.

But given how quickly we are growing, we are giving you what we think is our best estimate of net retention rate, which comes from existing clients that we can measure more accurately. For new clients, we are not giving a specific range at this point in 2022, but we expect it to be strong..

Our next question comes from Jason Kupferberg with Bank of America. You may proceed with your question..

This is Kathy on for Jason.

I first wanted to ask, will you guys provide medium-term financial targets at your upcoming Analyst Day?.

Thanks for the question..

Sumita, yes. Go ahead..

Sorry, Seba. Thanks for the question. We don't have an exact date for our Analyst Day yet. We expect it to be in the next few weeks. We decided to delay it because of the current geopolitical situation. When we have our Analyst Day, we will share our views of our business at that point in time.

But we are not giving specific guidance for the full year other than what we've shared with you, which includes our net retention rate. We expect it to be 150% plus. We are also indicating that as far as our EBITDA margin is concerned, we expect it to be 35% plus.

As you've seen, we've continued to perform above our expectations in every quarter since we went public and the guidance that we have given since then. So, it's very consistent with the guidance that we've given to you in Q2, Q3 as well as Q4 that we are giving you now..

Okay. Got it. And on the margins that you mentioned, the 35% plus, I mean, can you quantify some of the specific investments that you're making? I mean, you guys did 40%, north of 40% of EBITDA margins in 2021. I know you guys talked about sales and sales and marketing investments and headcount.

But can you give a little bit more quantification of where these additional investments will come in 2022 versus 2021?.

Sure. Thanks for the question. So for us, investments always come down to technology and infrastructure and the sales -- sorry, and the team to support that. We have an expansion -- a very aggressive infrastructure expansion plan where we continue to add new geographies, new products, and that does require investment.

We do expect those investments to pay off in the long term. We think our business has shown the ability of being very profitable. So, we do want to have some leeway to be able to invest more as we see fit. We'll continue to expand our commercial teams, our sales teams and our support teams.

Keep in mind, we are still running on a relatively small organization. We like it that way. We want to preserve the culture, but we do expect to be able to invest more in the future. At the end of the day, to make sure we have a better product, better technology and better infrastructure for our merchants..

Okay. Got it. And if I could ask a really quick follow-up.

I just wanted to ask, are there any mix effects on volume or take rate that we should be aware of in the near term?.

Sumita, feel free to complement. No. We just come from an amazing quarter and a year we are extremely proud of. We've never been more bullish about our expectations for next year. We've never been in a better place from an offering perspective, the product we have, infrastructure we have. So we do expect take rates to fluctuate over time.

You've seen it going up and going down in Q2, Q3, now in Q4. So, that's entirely a function of the business mix. We think that's healthy. That means that we have multiple business lines and multiple geographies that are being used by our merchants. So, we don't have any specific expectations, but we are extremely bullish about the coming 2022..

Okay..

So in Q4, you see that take rate went up from 3.8% to 4.1%. And that is why we always explained that our business mix change from quarter-to-quarter. Going forward, as we always said, on the medium term, we expect the rate to initially go down, but any quarter may go up and down.

And when we talk about the 150-plus net revenue retention, we see potential growth both in the pay-in, pay-outs, cross-border, locally and also cross dilutions..

[Operator Instructions] Our next question comes from Andrew Bauch with SMBC. You may proceed with your question..

Just wanted a point of clarification.

So, the NRR rate of 150% that you're calling out in 2022, is that a full year number? Or is that kind of where you should be as like an exit rate in the fourth quarter? And how should we think about the cadence of that number as we kind of progress throughout the year?.

Sumita, do you want to take it?.

Yes. Thanks for that question. The 150%-plus guidance that we are giving for net retention rate is for the full year. We expect that for the full year, that's where we'll come out in NRR. In any given quarter, we expect it to be within that range, obviously, because it is going to come down to about 150% plus.

And you're seeing that our current NRR is much, much higher for Q4. There will be some linear decrease whether that will happen in Q2 or Q3 will depend on where we come out in those quarters. As you know, Q2, Q3 of last year were extremely strong quarters for us. And so our base is already higher in the previous year.

And therefore, we expect changes in the quarters going forward. But we want to reiterate that it is 150% plus NRR guidance for the full year 2022..

Got it. And so look, you had the increased volumes on pay-outs in Q2 and Q3 from the marketing campaigns called out from certain clients.

I mean, how much visibility do you have into these marketing campaigns? And do you expect the pay-outs to reaccelerate as we kind of get through the next couple of years? And maybe if there were any COVID impacts that affected certain verticals in the fourth quarter, it'd be interesting to hear that..

Sure. Andrew, thanks for the question. So we have a fair amount of [indiscernible] in terms of our pay-outs business, the same with our pay-ins business. We are extremely bullish on what we see for that product. Nothing has changed from a fundamental perspective. We continue to have a very healthy pipeline.

We continue to be able to onboard merchants, and our existing merchants continue to operate at a very healthy rate. We do expect our pay-outs which is slightly more chunky than our pay-ins business. So, we do expect to have some situations. We have had fewer churn in this space. That's a very important point.

So, all the merchants that were driving these volumes are still with us. We are very bullish in terms of the ability of pay-outs to not only recover but continue to grow. Keep in mind, and I want to insist on this point, we continue to look at our products together. We think of merchants first.

So, we'll have some of those volumes moving from pay-ins to pay-out. That's only natural as our merchants close different cycles. But we do feel extremely confident that our pay-outs business will continue to perform over time..

Great. Congratulations for the first year as a public company..

Appreciate it..

Our next question comes from Neha Agarwala with HSBC. You may proceed with your question..

Apologies if you've already discussed this.

But could you please explain the impact of cost that might be there this quarter?.

Yes. Thanks very much for the question.

Would you care to repeat the question?.

The impact of FX movements that might happen on financials in the fourth quarter, if there was any?.

Yes. I can take that one. So as you remember, Neha, FX for us is a source of revenue, so which I [indiscernible] with the right growth. You have a lot of noise, Neha, can you mute for a second? When you -- when we provide cross-border services to any of our merchants which are for [indiscernible] as part of the total revenue.

And from a cost perspective, we manage that as a cost. So, we discount our receivables to minimize FX exposure and compared to U.S. dollar on a daily basis all the balances. Whenever we have an amount for more than one or two days, we hedge it. So, we compare that risk into cost. The number is actually in the financial statements.

If you look at 2021, we combined together what is called FX variations or volatility and broker costs. And that two together was roughly 3% of our revenues in 2021 and actually also 3% in 2020. Roughly half of that is broker cost and the other half is volatility. So it's a cost for us. It's very minimum compared to our total revenues.

And obviously, for us, FX is more a source of income and a source of costs..

And in terms of impact on your volumes because of the currency conversion to you as well..

Can you say that again, please?.

Apologies.

More in terms of volume is because of the FX movement that impacted your volumes in the fourth quarter?.

No. Yes, I got the question. So basically, you see that in the slide that shows pay-ins and pay-outs. We typically don't measure our TPV on an FX intra basis. We think of the Company in U.S. dollars. Obviously, if we were to reproduce growth in local currencies, we'll be slightly higher than in U.S. dollars.

But the main driver of the 2.5% roughly quarter-over-quarter increase in TPV from Q3 to Q4 is what you see in Slide 18 of pay-outs that we have the seasonal short-term marketing campaigns from short video social media companies that did a strong investment in those periods in Latin America and they are reducing these investments.

As we always mentioned, we have no churn. This company still works with us, but they reduced significantly the level of investment. Pay-outs work this way are a little bit more chunky than pay-ins. But going forward, as mentioned, we have very strong opportunities in both pay-ins and pay-outs, and we see them growing going forward..

That's very helpful. If I could just -- if any, I can get any thoughts on your expansion in Asia and Africa. The growth in Latin America was stronger than in Asia and Africa.

But can you give us any sort of sense of how can the proportion of total revenues change in the next three, four years? Like currently 92% is on North America, where do you see it in the next three, four years?.

Neha, thanks for the question. I think there's two sides to this question. Number one, we continue to grow really, really heavily on LatAm. I think that's a really important point. Our -- that's where we started, and our TAM continues to expand in our or in our regional LatAm market.

If you look at our non-LatAm business, including Africa and Asia, it's already very healthy, where we've done over $20 million in revenue for the year. We are not optimizing for a share of split between LatAm and Africa and Asia. We don't think that's the right way to do it. We do expect Africa and Asia to continue to grow. We've grown this year to 86%.

So, it's very healthy growth. We do have the positive challenge of LatAm going even higher at 140%. We highlighted this. We are investing very heavily in both Africa and Asia regions, where we move more people -- we are moving more of our headcount there.

So while we don't commit to a specific share between both regions, we do expect our Asia and Africa business to continue to grow very heavily because we do see massive opportunity. And we do see a lot of the frictions and challenges we faced back in the day LatAm replicating themselves in Africa, in Southeast Asia and in India..

If I may also emphasize here, Neha, I think one really important point to also stay focused on is that our LatAm business actually grew by 140% year-over-year, a very, very strong growth on a much bigger base. We grew it to $223 million for 2021.

So we think it's a great sign to know that even our core business can continue to grow at those levels within LatAm..

Very clear. Thank you so much for the answers and congratulations for this year..

Thank you. And I'm not showing any further questions at this time. I would now like to turn the call back over to Sebastian for any further remarks..

I want to thank everyone once again for joining the call. And for merchants, employees, investors, thanks for being with us along the way. We've had an amazing 2021. We are very, very bullish in terms of our capability of continuing to grow not only in 2022 but in the long term. I want to thank you, everyone, once again.

And I hope you all have a great day..

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect..