dLocal, the Uruguay-based cross-border payments company, has seen its fortunes dramatically shift in Africa as Nigeria, once a cornerstone of its regional operations, plummeted to the bottom of its performance metrics. The company’s third-quarter 2024 earnings reveal an over 80% year-over-year revenue loss in Nigeria, a stark contrast to the robust gains reported in Egypt, which is now dLocal’s most lucrative market on the continent.

Revenue from Egypt soared to $18.6 million in Q3 2024, accounting for 10% of dLocal’s global revenue. This represents a staggering 318% year-over-year increase, underscoring Egypt’s rapid evolution as a linchpin for the company’s African operations. For the first nine months of 2024, Egypt contributed $72.6 million — 13% of global revenue — compared to just $18.3 million during the same period in 2023.

The surge in Egypt’s contribution is largely attributed to a burgeoning e-commerce sector and a seamless integration of dLocal’s payment solutions across the country. South Africa also played a supporting role in boosting the company’s African prospects, with strong merchant adoption driving revenue growth in the commerce sector.

Nigeria: From Star Performer to Underperformer

Nigeria, hitherto Africa’s largest economy, painted a grim picture for dLocal. Revenues fell to $2.1 million in Q3 2024, a mere 1% of total company revenues, down from $55 million during the first nine months of 2023. The devaluation of the naira has emerged as the primary factor behind this drastic decline, significantly reducing the local currency’s purchasing power and, consequently, the value of payments processed by dLocal.

While Nigeria’s transaction volumes remained steady, the weakened currency has made revenue growth elusive. This marks a sharp reversal for a country that had once been a growth engine for dLocal’s African operations.

Despite setbacks in Nigeria, dLocal posted a 41% year-over-year increase in Total Payment Volume (TPV), reaching a record $6.5 billion in Q3 2024. Revenue rose by 13% to $185.8 million, supported by strong performances in Argentina, Egypt, and South Africa.

Africa and Asia collectively accounted for 29% of dLocal’s gross profit in Q3, with the Africa region alone generating $22.6 million in gross profit — a 49% year-over-year increase. For the first nine months of 2024, Africa contributed $132.2 million to dLocal’s global revenue, representing 24% of the total, up from 22% in the same period last year.

Breakdown of Gross Profit by Geography (in millions of US$, except for %)

Profitability Challenges Amid Investments

While revenue and TPV growth painted a positive picture globally, profitability metrics highlighted mounting pressures. Gross profit margins slipped to 42% in Q3 2024, down from 45% a year earlier, as higher expatriation costs in Argentina and share losses in Brazil weighed on margins.

Operating expenses rose sharply by 61% year-over-year, driven by significant investments in product development and IT infrastructure. Adjusted EBITDA decreased by 6% year-over-year to $52.4 million, with the adjusted EBITDA margin narrowing to 28% from 34% in Q3 2023.

The contrasting fortunes of Nigeria and Egypt underscore the complexities of operating in Africa’s diverse markets. Nigeria’s economic volatility highlights the risks inherent in markets heavily influenced by currency fluctuations and regulatory challenges.

On the other hand, Egypt’s rapid rise as a profitability hub offers a blueprint for dLocal’s expansion strategy in the region. By capitalizing on the country’s growing e-commerce sector and fostering robust partnerships with local merchants, dLocal has successfully mitigated losses from underperforming markets like Nigeria.

As dLocal navigates the challenges and opportunities across its global footprint, Africa remains a strategic focus. However, sustaining growth in a region marked by significant economic disparities will require a careful balance of investment, risk management, and adaptability.

The company’s Q3 2024 performance reflects both its resilience in adapting to favorable markets like Egypt and the vulnerabilities exposed in more volatile ones like Nigeria. As Egypt solidifies its position as dLocal’s African anchor, the company must now pivot its strategy to address Nigeria’s decline while continuing to tap into Africa’s broader potential.