Earnings Call
dLocal Ltd (DLO)
Earnings Call Transcript - DLO Q4 2021
Operator, Operator
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. Please be advised that today's conference may be recorded. I would now like to hand the conference over to your speaker today, Soledad Nager, please go ahead.
Soledad Nager, Head of Investor Relations
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 the dLocal website. 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's 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's 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's Investor Relations website. Now, I will turn the conference over to Seba.
Sebastian Kanovich, CEO
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 the 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, a 134% increase over the 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, among 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 to 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 the 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 total revenues in 2021, whereas Asia and Africa accounted for 8% of 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 ones. 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 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 comparison 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.
Sumita Pandit, COO
Thanks, Seba. I'm pleased to join you all today. I'm on Slide 9. There's a lot of data on this slide, so let me try to simplify the key messages. We show the performance of each of our cohorts we have added in the last few years on this slide. Let's focus on the left-hand side. There are three key takeaways here. One, each cohort is posting solid TPV growth year after year. Two, each cohort starts at a higher starting point than the previous year. This demonstrates our ability to continue adding incremental volume from new merchants in the first year of our relationships. Three, the 2018 and 2020 cohorts showed the highest growth in 2021. The merchants we add in a given year typically take a few quarters to show relevant growth on our platform. These specific cohorts' growth was driven by the performance of some blue-chip clients that have scaled their volume very fast while we were able to add new geographies and payment methods with them, thus gaining significant share of wallet with these customers. Let us now look at the right-hand side of this slide. You can see the trend for revenues over TPV or take rate for each cohort during 2021. For those of you who followed our post-IPO journey, you have heard us say that we do not manage our business to maximize the take rate, and the take rate is not an input to our model. It is an output based on business mix, volume per merchant, and volume-based pricing tiers for merchants with increasing volumes. The take rate also varies by region. For example, LatAm is different from Africa, which is different from Asia, product as well as payment method. Thus, our take rate has gone up as well as come down in the last few quarters given these factors. There are three key takeaways for the right-hand side of this slide. For each cohort, the take rate remains almost unchanged versus 2020. Different cohorts have different pricing points depending on the business mix. And we continue to see that there are multiple factors that make our merchants want to do business with us, and pricing is just one of them. The drop in our average take rate from 5% in 2020 to 4% in 2021 is mainly explained by changes in the underlying business mix. The cohorts that grew the most in 2021 were the 2018 and 2020 cohorts, and these cohorts came with a lower take rate mainly driven by the business mix of higher pay-outs and local-to-local payment flows. Third, it is worthwhile to highlight that the 2021 cohort of merchants posted a higher take rate than our overall take rate in 2021. We have included this slide to show our strong performance by cohort. And going forward, we expect to share this cohort data sporadically. Before moving on to the next slide, let me say that our focus is on increasing our gross profit dollars as Diego will show you in the financial section. This is how we manage our business. We do not manage our business on a take rate basis. Our sales team is not incentivized to maximize gross take rate; instead, building negotiated contracts aiming to maximize the net dollar total value while deducting processing costs that the agreement will bring to dLocal. Slide 10. On this slide, you can see that we have three primary vectors of growth: 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 in the valuation of fintech assets has made many more businesses more attractive. And we continue to evaluate M&A, though nothing is imminent.
Diego Cabrera, CFO
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 shows strong double-digit growth. The strength of our business is best measured over 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 a 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 on 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 onboarded in late 2020 moves into the 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 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 a 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 one-time or non-cash 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.
Sebastian Kanovich, CEO
Thanks, Diego. On Slide 24, as we look ahead, we are very excited about 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 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, Operator
Our first question comes from Kaio Prato with UBS. You may proceed with your question.
Kaio Prato, Analyst
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.
Sebastian Kanovich, CEO
Kaio, it's Sebastian here. Thank you very much for the question. We currently have limited exposure to businesses in Ukraine and Russia. We do not process payments in either of those countries, and we also do not have any merchants located in Russia. Therefore, we do not expect any impact in 2022.
Kaio Prato, Analyst
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?
Sebastian Kanovich, CEO
Sure. So Kaio, I think it's important to break down 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 geographies. 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 touchpoints 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.
Kaio Prato, Analyst
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?
Sumita Pandit, COO
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.
Operator, Operator
Our next question comes from Jason Kupferberg with Bank of America. You may proceed with your question.
Unidentified Analyst, Analyst
This is Kathy on for Jason. I first wanted to ask, will you guys provide medium-term financial targets at your upcoming Analyst Day?
Sumita Pandit, COO
Thanks for the question.
Sebastian Kanovich, CEO
Sumita, yes. Go ahead.
Sumita Pandit, COO
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.
Unidentified Analyst, Analyst
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?
Sebastian Kanovich, CEO
Sure. Thank you for the question. For us, investments are fundamentally about technology, infrastructure, and the support team. We have a very ambitious plan for infrastructure expansion, which involves entering new markets and developing new products, necessitating investment. We anticipate that these investments will yield long-term benefits. Our business has demonstrated strong profitability, and we want the flexibility to increase our investments as needed. We will continue to grow our commercial, sales, and support teams. It's important to note that we are operating with a relatively small team, which we appreciate because it helps maintain our culture, but we foresee the opportunity to invest more in the future. Ultimately, our goal is to enhance our products, technology, and infrastructure for our merchants.
Unidentified Analyst, Analyst
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?
Sebastian Kanovich, CEO
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.
Diego Cabrera, CFO
So in Q4, you see that the take rate went up from 3.8% to 4.1%. And that is why we always explained that our business mix changes 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, Operator
Our next question comes from Andrew Bauch with SMBC. You may proceed with your question.
Andrew Bauch, Analyst
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?
Sebastian Kanovich, CEO
Sumita, do you want to take it?
Sumita Pandit, COO
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.
Andrew Bauch, Analyst
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.
Sebastian Kanovich, CEO
Sure. Andrew, thanks for the question. So we have a fair amount of insight 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-outs. 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.
Andrew Bauch, Analyst
Great. Congratulations for the first year as a public company.
Sebastian Kanovich, CEO
Appreciate it.
Operator, Operator
Our next question comes from Neha Agarwala with HSBC. You may proceed with your question.
Neha Agarwala, Analyst
Apologies if you've already discussed this. But could you please explain the impact of cost that might be there this quarter?
Sebastian Kanovich, CEO
Yes. Thanks very much for the question. Would you care to repeat the question?
Neha Agarwala, Analyst
The impact of FX movements that might happen on financials in the fourth quarter, if there was any?
Diego Cabrera, CFO
Yes, I can address that. As you may recall, foreign exchange is a revenue source for us, which I've noted reflects the right growth. When we offer cross-border services to our merchants involving various currencies, it contributes to our total revenue. From a cost perspective, we treat it as a cost. We discount our receivables to limit our exposure to foreign exchange and we monitor our balances against the U.S. dollar daily. Whenever we hold an amount for more than one or two days, we use hedging. We account for that risk in our costs. The financial statements show that in 2021, what we refer to as foreign exchange variations or volatility and broker costs combined represented approximately 3% of our revenues in both 2021 and 2020. About half of that was broker costs and the other half was from volatility. Therefore, it is a minor expense relative to our total revenues. For us, foreign exchange primarily serves as both a source of income and a cost.
Neha Agarwala, Analyst
And in terms of impact on your volumes because of the currency conversion to you as well.
Diego Cabrera, CFO
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.
Neha Agarwala, Analyst
That's very helpful. Can you share your thoughts on your expansion in Asia and Africa? The growth in Latin America has outpaced that in Asia and Africa. What can you tell us about how the proportion of total revenues might change over the next three to four years? Currently, 92% of revenues come from North America; where do you envision that percentage in the next few years?
Sebastian Kanovich, CEO
Thank you for the question, Neha. There are two aspects to consider. Firstly, we're experiencing significant growth in Latin America, which is crucial as that’s where we began and our total addressable market is expanding in that region. Looking at our business outside of Latin America, encompassing Africa and Asia, it's performing well, with over $20 million in revenue this year. We're not focusing on balancing the revenue split between Latin America and Africa or Asia, as we believe that's not the right approach. We anticipate continued growth in Africa and Asia, where we've seen an 86% increase this year. While Latin America is growing even faster at 140%, we're heavily investing in both Africa and Asia, with more of our workforce being allocated there. Though we don't plan to commit to a specific revenue share between the regions, we expect substantial growth in our business across Asia and Africa due to the significant opportunities available there, and we notice similar challenges and friction emerging in those regions as we experienced in Latin America previously.
Sumita Pandit, COO
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.
Neha Agarwala, Analyst
Very clear. Thank you so much for the answers and congratulations for this year.
Operator, Operator
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.
Sebastian Kanovich, CEO
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.
Operator, Operator
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.