Mirele de Aragao: Good afternoon, and thank you all for joining our Earnings Call today. If you have not seen the earnings release, as always, a copy is posted in the financial section of the Investor Relations website. On the call today, you have Pedro Arnt, Chief Executive Officer; Guillermo López Pérez, Chief Financial Officer; Christopher Stromeyer, SVP of Corporate Development; and Mirele de Aragao, Head of Investor Relations. A slide presentation has been provided to accompany the prepared remarks. This event is being broadcast live via webcast, and both the webcast and presentation may be accessed through dLocal’s website at investor.dlocal.com. The recordings will be available shortly after the event is concluded. Before proceeding, let me mention that any forward-looking 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 future events.

Whilst the company believes that our assumptions, expectations and projections are reasonable given currently available information, you are cautioned not to place undue reliance on those forward-looking statements. Actual results may 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 dLocal’s filings with the Securities and Exchange Commission, which are available on dLocal’s Investor Relations website. Now I will turn the conference over to dLocal. Thank you.

Pedro Arnt: Good afternoon, everyone, and thank you for joining us today. This year, 2026, marks 2 important milestones for dLocal. Ten years since we founded the company, and 5 years since our NASDAQ IPO. Before I go into the quarter’s results, I wanted to reflect briefly on what has been built over the past decade and why it matters for where we’re going. The story of the past 10 years is one of consistent compounding growth built on a vision of helping world-class merchants reach consumers across emerging markets or, as we like to call them, the markets of the future. If we look back at 2016, we processed $100 million in TPV in a single country. On the last 12 months basis, as of this quarter, we’ve crossed $47 billion across the entire Global South.

So we now process more in a single day than we did in our entire first year of operations, only a decade ago. That’s an almost 90% compound annual growth rate sustained over a decade. And what is most notable about that trajectory is not the scale itself, but the consistency throughout every phase from Latin America into Africa and Asia, from a handful of payment methods to over 1,000 from a start-up to a publicly-listed company. The strategic model has not changed, one API, deep local infrastructure, continuous expansion of payment method coverage, licensing, regulatory capabilities, and products. The same focus on helping merchants operate efficiently in markets where the next wave of digital consumers is moving online. dLocal now operates in more than 60 countries, including new markets such as Algeria, Qatar, Kuwait and Oman.

We now hold 38 licenses and authorizations across 26 markets with 16 additional applications in process. Our platform reaches approximately 70% of the world’s population serving over 760 enterprise merchants through a single API. It took a decade of investing in infrastructure, building regulatory IP, forging relationships with local ecosystem stakeholders and learning how to operate at scale in markets that most find too complex to enter. Those foundations are not easy to replicate and even harder to outperform. The reason all of this infrastructure matters is quite simple. Localization is what ultimately drives success throughout emerging markets. Local payment methods are no longer alternative options. In many of our markets, they are the primary way consumers transact online, and their share continues to grow.

For merchants, supporting them is not just about improving the checkout experience, but also reaching consumers who do not transact in any other way. In Peru, for example, Yape drives 40% net new customers to some of our merchants. In South Africa, Payflex drives 80%. And our own innovation layer such as SmartPix and Biometric-Enabled Pix lets us drive differential performance on top of those existing local rails. Even within the global credit card schemes, local processing is key to maximizing authorization and conversion rates in emerging markets. Compared to international acquiring, when merchants use international card rails to complete transactions, we’re able to deliver up to 20 percentage points conversion uplift in certain markets. The same Visa or MasterCard card converts significantly better when processed locally, but Visa and MasterCard are only part of the story.

There is a growing base of local card schemes emerging across the Global South. In Saudi Arabia, Mada represents around 90% of cards issued. Verve is roughly 60% of Nigeria’s digital payment market, and Meeza is held by about half of eligible adults in Egypt. If you don’t support these schemes, you simply cannot win in those markets. That’s what One dLocal is. Local payments, local processing of global card schemes, and local scheme coverage all in a single API. Vertical diversification is the other dimension of resilience to our model. Many payment companies tend to be concentrated in 1 or 2 verticals. Our platform has demonstrated the ability to scale across a wide range of industries and use cases. Every single vertical in our portfolio grew between the first quarter of 2024 and the first quarter of 2026, and our mix has become increasingly diverse across categories.

E-commerce remains our largest vertical. We work with half of the top global platforms in our markets, and they keep expanding with us. In ride-hailing, we serve 4 of the 5 largest players operating throughout emerging markets and continue to expand global deals with them. For several of those players, we also processed their on-demand delivery businesses. Both of these verticals inherently carry a higher local-to-local component with stronger adoption of local payment methods, which supports the strength you are seeing in our local-to-local volumes. In remittances, one of our fastest-growing verticals, we continue to partner with major players and support their geographic expansion, driven by sustained strategic focus and ongoing merchant onboarding.

Looking forward, we’re excited about the prospects of our travel and gaming verticals as we continue to build these vertical payment flows that optimize for the particularities of multiple industries. Perhaps the most compelling illustration of our business model in practice is at the individual merchant level. So I wanted to take a minute to walk through 3 examples of top 10 TPV merchants for us that demonstrate how it is that we scale alongside our customers over time. What we see consistently is that after an initial ramp-up period, relationships deepen as merchants expand into new countries, adopt products and add payment methods. One of our ride-hailing merchants who we’ve worked with since 2016, initially started with one specific use case and later expanded into on-demand delivery.

We now serve this client end-to-end across 18 countries and are expanding through recently signed new deals that further reinforces the long-term growth potential of this relationship. An Internet service provider who we’ve categorized as Software-as-a-Service merchant, onboarded in 2021, has expanded from 19 countries to 40 in the last 3 years, a testament to the trust these merchants place in dLocal to power their international expansion. What enables that pace is our licensing portfolio, our local payment method coverage and our ability to open frontier markets very quickly. In markets such as Kenya, for example, over half of users transacting with this merchant via mobile money or net new customers, they would not have reached otherwise.

And an e-commerce merchant we onboarded in 2023 started with only 2 countries, but now operates in 21 with Buy Now Pay Later having gone live in Mexico and South Africa over the past 2 quarters, which are driving higher ticket sizes and over 50% net new users for them. Examples like these are why our revenue retention has exceeded 140% for 4 consecutive quarters. But as we like to say, we’re still in the early, early days. These 3 merchants, for example, all grew TPV north of 70% year-on-year during the first quarter of 2026. So to wrap up, 10 years and the thesis is intact. The opportunity is larger than ever, and we’re better equipped to capture it than ever before. The infrastructure we’ve built, licenses, payment methods, stakeholder relationships and data, the technology, it all abstracts local complexity and compounds in value over time.

The combination of a strong base business momentum, a product roadmap that is beginning to gain traction and secular tailwinds across our markets as merchants increasingly convert to local processing gives us confidence that the next decade can be as impressive as the last. With that, let me hand the call over to Guillermo to cover our quarterly financials.

Guillermo Perez: Thank you, Pedro. Good afternoon, everyone. Let me take you through our Q1 results. Topline momentum continued to accelerate with TPV north of $14 billion for the first time and gross profit reaching a new record. The bottom line, though, reflects 2 specific dynamics I want to address upfront. The expected and already flagged higher OpEx carrying over from our 2025 investments, and a nonrecurring prior year tax adjustment. TPV reached $14.1 billion in Q1, up 73% year-on-year and 7% quarter-on-quarter, our sixth consecutive quarter above 50% growth, and that’s a number we’re very proud of. And more importantly, this growth isn’t concentrated in just one place. It’s broad-based and runs across different countries, verticals, merchants and products.

Our top 3 markets, Mexico, Brazil and Argentina, continue to grow consistently. And we’re also seeing a strong contribution from markets like Chile, Nigeria, Colombia and Vietnam. On verticals, travel-led quarter-on-quarter growth at 38%, driven by a new expansion deal with a key global travel merchant. This is a vertical that is still early for us, but it’s gaining real traction. On-demand delivery also grew strongly quarter-on-quarter at 24%, fueled by the expansion of deals with both regional and global merchants. On the other hand, E-commerce and remittances delivered soft results sequentially, consistent with the expected seasonality, following the fourth quarter peak. Gross profit reached a record $119 million, up 40% year-on-year and up 2% quarter-on-quarter.

On a sequential basis, the gross profit performance is explained by 2 key positive drivers. Argentina recovery, which we show a strong volume growth and normalized funding cost and growth in Africa and Asia with notable contribution from Nigeria, Mozambique and Vietnam, which is also helping us drive a more diversified geographic mix. Those were partially offset by Brazil’s normalization after an exceptionally strong Q4, together with a modest mix shift to lower take rate merchants across all the LatAm and other smaller markets. But most of these markets are still growing strongly in volume, and the quarter-on-quarter dynamics are driven by mix and seasonality, not by an underlying softness in demand. Very importantly, this quarter, we decided to book a one-off prior period tax adjustment.

During an internal review of certain tax items and after consulting with our advisers, we adjusted our tax treatment for prior periods of one of our installment payment products in certain markets to reflect where we’re determined to be the most appropriate position and the applicable rules. This out-of-period adjustment was not material to any previously reported annual or interim period, and we do not expect to record comparable items in future quarters. The total impact was $9.7 million, of which approximately $5.3 million landed in the corporate tax line and $4.4 million in operating expenses. This related to indirect and other taxes. Given its nonrecurring and prior period nature, within the normalized numbers tell the real bottom line story better.

Operating profit for the quarter was $53 million as reported, but $57 million, excluding this one-off out-of-period adjustment, representing a 25% growth year-on-year and a 48% operating profit to gross profit ratio, excluding the one-off. On the cost side, total operating expenses were $62 million, excluding the out-of-period adjustment, up 58% year-on-year and 16% quarter-on-quarter. This reflects the expected carryover of the second half of 2025 OpEx into the first quarter, something we have flagged at our last earnings call. As we close out our investment cycle, a portion of that cost base is annualized into 2026, and the first half of the year is naturally where that pressure is most visible. This reflects the timing of our 2024-2025 investment cycle moving to our P&L.

We expect that to moderate as the year progresses. Below the operating line, net income came in at $42 million, as reported. Adjusted for the same one-off, we would be at $52 million, which represents about 11% year-on-year growth. It’s worth noting that Q1 2025 benefited from approximately $7 million in noncash mark-to-market gains in our Argentina bond holdings, that’s a low 10% effective tax rate. The reported effective tax rate for the quarter was approximately 26%, elevated by the nonrecurring item, but excluding it, the effective tax rate would have been approximately 16%. Adjusted free cash flow was impacted by temporary working capital effects, primarily timing in tax credit, netting and higher receivables from our advancements operations.

We expect this to gradually reverse over the coming quarters. We continue to see healthy cash generation with cash flow from operations before working capital changes at $69.3 million, growing by close to 10% year-over-year. So the underlying cash generation is working as it should. So to wrap it up, topline momentum was strong again this quarter with new records on both volume and gross profit. Reported operating profit and net income was weighed down by a one-off other previous tax adjustment, but the underlying business is in great shape, and we’re keeping our full year guidance unchanged. With that, I’ll hand it over to Chris.

Christopher Stromeyer: Hello, everyone. Before we open the floor to questions, we thought we try something a little bit different today. A brief conversation with Pedro and Guillermo here covering the key themes we had in the quarter that we think will be most interesting to investors.

Christopher Stromeyer: Guillermo, let’s start with you, and let’s start with the results. Gross profit came in quite strong this quarter, even above our own expectations. And this is typically a seasonally softer quarter for the business after the fourth quarter. What drove this performance?

Guillermo Perez: Yes. And I think it’s worth unpacking because the headline number, as you said, was very strong in Q1. The standout definitely was Argentina. To give some context, Q4 was a weak quarter for us in Argentina. We saw election-related FX volatility. We saw pressure on funding costs, and that pushed our margins down in the quarter. Now what we saw in Q1 was a clear recovery from that. So those specific pressures like funding costs came down materially, and volumes have continued to grow very strongly in the market. So you have both a real recovery in the market and then improvement in gross profit quarter-on-quarter. So a very good story in Argentina. On the other hand, Brazil works in the opposite direction in the quarter.

So Q4 was particularly strong in Q4. You had the seasonal peak of like Black Friday and holiday e-commerce installments that helped the quarter quite a lot. And you saw what you usually expect in Q1, which is a sequential decline from that. What matters in Brazil, though, is that if you look at the performance, it’s very strong year-on-year. So we almost doubled — more than doubled the gross profit in the quarter year-on-year. So the other thing that I would highlight as well is Africa and Asia. They represent now approximately 29% of gross profit, and they grew by 16% quarter-on-quarter. So more than the average of the company. So that is meaningfully outpacing how the company is growing, and it’s actually helping us from a diversification of geography as well.

So the key message is very simple. All our core markets are growing in volume. The sequential movements are mainly explained by mix, seasonality and, in the case of Argentina, a clear recovery from a weak Q4. The most important thing is that diversification that I’m talking about in the gross profit base, which is pointing into a more healthy portfolio of countries.

Christopher Stromeyer: Great. And staying on the financial results for a second and talking more about bottom line dynamics, specifically on operating expenses. We’ve previously communicated, we talked about this quite a bit during the fourth quarter, that are our expectations for OpEx trajectory this year and indicated that operating leverage would be much more pronounced in the second half of the year than the first half. Based on what you’ve seen so far, has anything changed? And how should investors think about operating leverage going forward?

Guillermo Perez: Okay. So I don’t think it’s changed. So from — on OpEx side, the first quarter shows — well, we already flagged in Q4 last year in the earnings call. We are carrying over from the investment cycle costs that happened at the end of 2025. And as we said, they are more visible at the beginning, the first half of 2026. And the operating profit to gross profit ratio obviously reflect that. OpEx was also impacted by the prior year tax adjustment I mentioned. Specifically, of the $9.7 million, $4.4 million were in OpEx. That’s the portion that relates to indirect and other taxes. And obviously, that flows through operating expenses and the operating profit to gross profit ratio. So it’s important to normalize this when you want to get a clear picture of the underlying expense performance.

Excluding that one-off, which I’ll discuss a little bit more in a moment, the underlying operating profit to gross profit ratio would have been 48%. So it’s still relatively healthy. As we lap the 2025 cost build-out, OpEx growth rates should naturally moderate throughout the year. So that’s the mechanics that we’re waiting to see throughout the year. So with that, combined with the continued topline momentum, that should drive improving operating leverage in the back half of the year. So that trajectory is what matters to us, more than like the results of a single quarter. Now looking ahead, the ongoing impact from this updated tax treatment that I mentioned, we expect it to be limited. We are actively working with merchants to pass these costs through commercially.

And to the extent that we cannot fully do so, we believe the residual impact will be manageable. And we do not foresee, at this point, any meaningful additional prior period adjustments in relation to this. Again, you need to normalize for the tax adjustment that I mentioned to get a clear picture. So excluding this item, operating profit grew 25% year-over-year, and net income grew approximately 11% year-over-year, which I think that was the real story of the underlying performance.

Christopher Stromeyer: Yes. So putting this all together on going to U.K. and as a reminder, our investor community, unless there are material changes, we only expect to provide updates to our guidance twice yearly. But just for the avoidance of doubt here, how should investors interpret our results in the connection to our full year guidance.

Pedro Arnt: Yes. So guidance remains unchanged, as Guillermo mentioned at the end of his prepared remarks. We continue to see a lot of strength across topline. We expected costs to come in heavy from a margin perspective in H1 and improving towards H2 on a year-on-year basis. And I’d say they came in slightly ahead even of that expectation, but we’re already addressing that. So guidance remains unchanged.

Christopher Stromeyer: Great. I want to talk now about the commercial side. What really fuels our business? You spent time, Pedro, with some of our most important merchants during our large annual event just a few weeks ago. In these conversations with these merchants, what stood out to you? What are their priorities?

Pedro Arnt: So yes, it was generally a very energizing event. And to me, what was most interesting is how much the conversation has shifted over the past 3, 4 years. In the past, merchants would typically come to us with a very specific market or payment method problem. And there was usually something in one of the few very large emerging markets where we operate. Conversations now show that they’re thinking about emerging market payments infrastructure as a core part of what they need to solve as part of their overall go-to-market strategy across emerging markets. So the conversations are deeper and merchants are definitely increasingly more sold on the concept of localizing payments as a key unlock to growth. And so the conversations with us are much more central to them, not in a few markets and a few payment methods, but truly across the Global South.

So it goes beyond your typical BRICS conversation, and they start asking for solutions for a vast number of frontiers market. Merchants who used to come to us with a very basic local-acquiring coverage of just Visa or MasterCard now start to ask about real-time networks like Pix and Bre-B in Colombia, we’re beginning to see a strong pickup in curiosity around credit solutions and Buy Now Pay Later, local wallets and certainly, local card schemes that are also becoming increasingly important in different markets. And so all of this raises the bar for what they expect from us. It also raises the share of wallet that we can capture from these merchants globally. I think one illustrative conversation was one of our very, very large clients basically told us, look, you’ve now reached a scale with us where you are among our largest payment partners.

And this is exactly where we want to be sitting with these merchants with significant growth in share of wallet, but also our relationship with them becoming very relevant for them on a global basis. That’s how you really are able to sustain the kind of compounding of growth that we aim to sustain.

Christopher Stromeyer: Great. And switching topics slightly. There’s one more question I want to ask you, Pedro. The asset transaction, which we spoke about last year closed during this last quarter. How should investors think about what this opens for us strategically and what it means for dLocal’s presence in Africa more broadly.

Pedro Arnt: Yes. So I think we need to frame this correctly. The most useful thing is to be very precise about what the asset transaction is and also what it’s not. So to be very upfront, the transaction is not material or meaningful in the results that we’ve just announced. And that has a lot to do with a number of legal and regulatory hurdles that we faced prior to being able to close. I’m glad we’ve crossed that finish line. But in that time period, the deal structure mutated a lot. It ended up being an asset purchase. And also because it took so long as this topline was definitely negatively affected by the time that it took. On the positive side, what we do get is strategically important to deepen the capabilities and the positioning that we have in Africa.

So it brought us customer relationships. It brought us intellectual properties and some licenses and key talent that will help us continue to expand our leadership across African markets. And it would definitely have taken us a lot longer to build all of that without having gotten this acquisition across the finishing line. And I think most importantly, Africa is a region that we’ve been investing into consistently and where the long-term opportunity in terms of digital payment adoption, cross-border commerce growth and the expansion of financial inclusion remains among the most compelling when we look at the globe. And so the transaction, above all else, reinforces our commitment to the region and positions us even better to capture the opportunity as it develops.

We’re not signaling any near-term revenue impact from this. I’d say, by and large, it shouldn’t have any sort of distortion in future quarters that would force you to want to look at the business on the same-store sale-type metric or anything. So happy to have concluded it. Happy to have the — as a team and assets on board, and we continue to build a phenomenal business across the continent.

Christopher Stromeyer: Great. One final question for you, Guillermo, as we wrap up here. You’ve now been at dLocal for about 6 months. I would love to hear your early assessment of the company where we stand today, where you’re focused, and what surprised you?

Guillermo Perez: Yes. That’s right, 6 months in. And I have to say my conviction in the opportunity, that first made me join dLocal has all increased. I think at the beginning, I was talking about, we’re just scratching the surface. And definitely, that’s what I’m seeing 6 months in. The business is really exceptional at what it does. So if you look at the depth of the local infrastructure that we have, the quality of the relationships that we have with merchants and then how consistently we execute in markets that are difficult to operate, I think that’s something that has really impressed me. And that combination, I think, is rare and it’s difficult to replicate. Second, on where I see my work ahead, I am focused on 3 key things.

The first one is to continue improving how we translate the topline growth that we, for example, see in this quarter into operating profit, especially as we exit the investment cycle that dLocal has been in the past few years. The mechanics are favorable, but that leverage doesn’t just happen by itself. I think my role is to make sure that we have the discipline as a company to capture it. And also something very close to home is to make sure that our financial model translate the strong cash generation that the business produces into higher return for our shareholders. And we’ve already taken meaningful steps already to execute in these, like, for example, the $300 million buyback authorization that we got and we mentioned in the last quarter of last year.

And finally, and also making sure that the finance organization continues to build and evolve the processes and the systems in a way that are appropriate for our business that now processes north of $14 billion of volume every quarter and that is growing by more than 70% year-on-year. So the last thing I would mention is having come from businesses that were at different stages of maturity, the opportunity ahead for dLocal is generally immense. I think even I appreciate this opportunity and it has really surprised me. The markets we operate are still in early stages in the digital payment adoption. And our merchant base continues to expand, growth, deepen. The product roadmap that Pedro mentioned, I think he talked about BNPL and stablecoins.

I mean these are real growth opportunities and levels that are just beginning to contribute. So what can I say is, strong business, clear work ahead in my hands and a large opportunity ahead for the company. So all exciting work.

Christopher Stromeyer: Great. Pedro, Guillermo, thank you both. We hope this has been a useful conversation to our investors. This concludes it, and we can now open the line to your questions.

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Operator: [Operator Instructions] Our first question coming from the line of Daer Labarta with Goldman Sachs.

Daer Labarta: Just wanted to follow up, I guess, particularly on the expenses a little bit. And Pedro, you mentioned that it did come a little bit higher than expected. Looking at the guidance, you’re above on gross profit, but a little bit below on the OpEx. So what drove that to be a little bit higher than expected? You mentioned some corrective measures. What do you — what are those measures just to think about how that can evolve from here if you can bring that closer to the higher end of guidance by year-end? Or is this — should that continue to be maybe a little bit below the trend of gross profit?

Guillermo Perez: Yes, happy to start taking that one. So I think it’s important to say that the Q1 has the full annualized impact of the investment cycle ramp-up that we started to see in late ’25, and we’re already tracking Q4. The important thing you know, this is the largest single driver, the year-over-year growth in OpEx, okay? And if you moderate as we move through 2026. Now you’re right that in our remarks, I said that OpEx did come in slightly above that we were expecting in the quarter. And to be honest, there wasn’t a single factor. It was a handful of smaller items from some discretionary categories and third-party spend to slightly higher average salaries. And we have already initiated some targeted corrective actions.

For example, we don’t expect any new net hiring throughout the rest of the year. So when you think about the remainder of ’26, I think there’s 4 things that you should combine to have a more favorable OpEx growth trajectory. The first one is what I mentioned at the beginning, the natural phasing of the late ’25 investment cycle annualization. The second one is we’re starting to accelerate all of our automation agenda. We also have the corrective actions that I just mentioned, and then we’re also mechanically expecting lower share-based payments expenses as the great investing attribution method flows through the remainder of the year. So I think together these should contribute to improving operating leverage as we move through the year, in particular, in the second half of the year.

Pedro Arnt: Yes. I just complement that by reminding everyone that, first of all, as Guillermo just said, the OpEx will come under control moving forward. We had signaled last quarter that the first half of the year would be a bit weak on margin, and then that sequentially improves. But more importantly, let’s not forget that the investments we had been making over the prior 2 years, and as Guillermo said, are rolling over into the first half of this year with a less expense-heavy comp in H1 of ’25, are exactly what is allowing us to deliver the kind of TPV revenue and gross profit acceleration and consistency that we’ve been delivering. And that’s what sets us up long term to be scale leaders to have the widest number of commercial relationships with global merchants, which, if we take a longer-term view, is exactly how we believe we should be managing this business.

So now that the investment cycle is behind us, we start entering a phase over the next few quarters, where that innate operating leverage of the business model should begin to flow through the P&L.

Daer Labarta: No, that’s very helpful. And one clarification. Just there was the one-off, which I think did impact operating expenses. Are you considering that in the guidance or you’re not considering that? I mean we should adjust for that, right, or just to make sure?

Pedro Arnt: Look, Tito, we’ve moved away from adjusted metrics and have given a guidance on operating income because at the end of the day, philosophically, that’s what we manage for. So let’s see how topline comes in. I think we’re off to a good start through April. But in general, our guidance comments they don’t try to adjust anything else out. It makes it more difficult to give guidance, but we think it reflects the philosophy of how we’re managing this, which is to true operating income and to true EPS.

Operator: Our next question coming from the line of Pedro Leduc, Itau BBA.

Pedro Leduc: First on that, you saw it on the working capital, you guys mentioning a period of more prepayment services for clients. So first, around that topic, how do you see the revenues for that? Does it come part of the fee revenues or generate financial income? Second, how are you seeing the business building up potentially in more than one region. And that’s one question. And then the second would be on the — again, on the gross profit part when I look at the Delta revenues, Delta gross profit for Brazil, and you guys mentioned Argentina, but Brazil, it looks like the incremental leverage is coming a lot of profitability. If you can just give double-click on that a little bit.

Pedro Arnt: Okay. So I think I understood your first question. We do drive revenues from very, very short-duration merchant advances, typically for liquidity needs that a merchant may have in a market. And we do advance installments for our merchants in markets where installment advances are common, such as Brazil and Argentina. We don’t break out the revenue derived from that business yet, I think at some point when it becomes sufficiently material, we will. It’s important, but it’s not anything massive. More importantly, on the working capital, just one clarification here. It’s not that these businesses are inherently working capital consumptive. It’s the architecture we have to fund these businesses in Argentina short term is something that has hit working capital.

That gets reversed, and this is important, ideally over the next few quarters. And not only does it mean that going forward, that business is no longer working capital negative, but that the last few quarters, Q3 and Q1 of this year, that had this negative impact on working capital, all of those funds get released from this SPV that we’re using to fund this. And so there’s a big one-off free cash flow gain from the stuff that had been sent into the SPV and negatively affects working capital. So this is a temporary hit to the free cash flow that, ideally, over the next 3 quarters, gets reversed.

Guillermo Perez: Yes. If I may add to that on free cash flow. I think if you look at the underlying cash generation, it remains strong and in line with our expectations. So I think this quarter, this type of quarter volatility, we’ve already seen in the past. So to be honest, we don’t see this quarter as a structural change to our cash generation capacity.

Pedro Arnt: And on Brazil, a couple of things. First of all, I think Brazil, year-on-year, extremely strong gross profit more than doubled. The comps get more difficult going forward, but Brazil has really been one of the strongest performers when we take a multi-quarter view. It is down sequentially driven primarily by seasonality. E-commerce in Brazil is very relevant. And within the e-commerce segment, these installments we’re talking about typically are more prevalent by consumers during the holiday shopping season. So there have been less installment revenues in Q1 and slowdown in the e-commerce merchants. And the other thing driving the sequential decrease in Brazil is we have seen an increase in Pix mix once we move out of Q4 and Pix does have lower monetization than cards, which typically are more prevalent in Q4.

So I would say Brazil sequentially is seasonal. Brazil performing very well. Comps get harder, but I think the underlying strength of the business is still there.

Pedro Leduc: Yes. Even with the seasonality, it looks like it was maybe stronger even than it could have been. Yes, I appreciate it.

Operator: Our next question in the queue coming from the line of Camilla with UBS.

Unknown Analyst: I have just one from my side. So Africa and Asia showed broad-based growth, but experts suggest Asia is significantly more challenging due to a more developed local financial landscape. So you also mentioned that merchants are increasing its interest in more regions. So how is dLocal’s strategy in blue ocean markets like Nigeria and Egypt different from its approach in highly competitive markets like Vietnam or Indonesia?

Pedro Arnt: Yes. Great question. Thank you. So the strength in the Africa and Asia segment is still driven by Africa, including the Middle East. Asia, for us, is still initial steps. I think what has changed in our view of Asia is that the more work we’ve done around Asia, our thinking has really evolved from thinking that we were late to Asia and that it was a market that was entirely well served to increasingly understanding from our merchants and leveraging the merchant relationships we already have with most of the most relevant global merchants that the high level of fragmentation across Asia, the prevalence of alternative payment methods and the relatively still improvable performance they have on cards means 2 things about Asia, that we think that our strategy and the key success factors that have led us to be very successful in Africa and Latin America actually are applicable to Asia as we cross-sell our growing Asian capabilities to our global merchants.

And the second, I think, myth we’ve dispelled is that Asia necessarily was a lower take rate market for the enterprise segment. From what we’re seeing in our current Asian operations as it scales out, that doesn’t seem to be the case either. So I think you will see us increasingly build out capabilities in Asia. And ideally, Asia over a multiyear period becomes quite relevant to our overall P&L. And that really could be trajectory changing just because when you look at the size of the total market, Asia still dwarfs LatAm and Africa. So encouraging initial steps. We’re seeing markets like Vietnam, Philippines performing well for us, and it’s giving us increasing confidence to continue to build out in Asia. That doesn’t mean significant investments.

It just means executing the playbook that has been so successful across the rest of emerging markets across Southeast Asia as well.

Operator: The next question coming from the line of Matt Coad with Truist.

Matthew Coad: Wanted to ask about some of the new verticals that you’re seeing success in travel and gaming. Just curious if you guys could kind of like double-click on what’s driving that new success there? Is it kind of like go-to-market investments? Is it product related? Any additional detail would be really helpful.

Pedro Arnt: Yes. Thanks, Matt. So I think — and we tried to highlight this in the opening remarks, we’ve actually gotten fairly good at being able to leverage the core payment capabilities which are universal across most verticals with the right amount of verticalization, both from a product perspective but also from an account management and understanding the specifics of payments in multiple verticals. So dLocal is not a specialist in any one payment vertical, but has strength across multiple verticals, which sets us up very well for sustained growth. And we keep adding more and more verticals. I’d say right now, travel and gaming are slightly different situations. Travel has been growing driven by 1 or 2 very large wins that took a long time.

The pipeline is typically slow, but that have landed and are beginning to ramp up with very, very large global leaders. And it has a very solid pipeline within the travel space, both OTAs, direct travel, airlines, payment facilitators that work with the industry. Gaming is slightly earlier on in its development. Gaming is one where the merchant of record product that we have is quite relevant, where you take on not just the payment, but some incremental parts of the digital distribution which makes it a higher take rate category, which is why it’s attractive for us. But I’d say from pipeline and actual commercial deals that are ramping up, gaming is slightly behind travel. Over time, this should be a natural part of our strategy, which is to add more verticals that we verticalize the user experience, the merchant experience and the sales efforts, and we’re able to move into a growing number of categories.

Matthew Coad: Super helpful, Pedro. And then just a quick follow-up, kind of on same topic of expanding your TAM here. You guys kind of talked a little bit last quarter about moving into the Card-Present world. I was just hoping that you could provide an update on your integrations there, any investments that you’re making there and kind of like early success that you’re seeing in the Card-Present world?

Pedro Arnt: Yes. The Card-Present product is one that is being developed as a solution for a very large client, a global client. Ideally, we’ll be able to announce it when it goes live. So that contract allows us to fund the build. But more importantly, that will be the maiden launch of our Card-Present efforts by powering their Card-Present payment operations initially in a few Latin American countries and then if successful, expanding. So that’s not live yet, and therefore, that product hasn’t gone live yet. It will, once that initial large deal goes to market, which is scheduled for some time in the second half of this year. Hopefully, we can meet deadlines. The physical world is more difficult, it’s slightly more complex. It involves physical hardware logistics. So it’s a project that is one that we need to make sure we delve into step-by-step alongside our merchant clients.

Operator: Our next question coming from the line of Jamie Friedman with Susquehanna.

James Friedman: Thank you for all of the perspective and details on the results. Pedro, I was hoping you could just remind us at a high level, what the investments were that you made over the last, I’m going to say, a year. And how you’re seeing those return because your confidence in the increased profitability in the company in the second half is noteworthy. So that’s my first one. And then at a very high level, if you could share from your merchant perspective, which conversations are more urgent? Are they related to stablecoin or agentification? Or neither? Or both? But which of those do the merchants ask you about most?

Pedro Arnt: Let me take those back to front, Jamie, because the first one is straightforward. I would say neither. Really the biggest interest is alternative payment methods, real-time networks that are very, very rapidly expanding throughout the emerging world, digital wallets that were invented in the emerging world and they’ve become very relevant in many markets. Local card schemes, as I mentioned. So most of the financial infrastructure across the Global South, before we even get to stable or agentic, is very different to the developed world. And that’s what we solve for and abstract complexity away from global merchants that aren’t accustomed and don’t really want to deal with all of that. So I’d say stable and agentic are things that we’re working on, but it’s not really where the short-term volumes and business are.

Those are things we need to be prepared for. Stablecoins, first, which is actually, I’d say, a reality already. We launched our stable full solution about 2 or 3 weeks ago. So we have significant capabilities, and we’re already beginning to see a rapid increase in settling to and settlement from merchants in stablecoins. Agentic, I think the focus is simply to make sure that all these global APMs that we serve somehow are included in the agentic protocols that are emerging. And so we’re trying to work closely with most of the more relevant ones. But those 2 things are way smaller than just the core digital wallets, real-time networks, local card schemes, and localization of credit cards, which is still the bread and butter of our volume. In terms of the investments, again, just to reiterate, and thanks for asking the question.

We have a business that’s growing TPV this quarter at 70% and actually has been accelerating off of an increasingly larger base. Now there’s a lot of operational leverage in our business, and we hope and strive to show that over the next few quarters. But it still does require when you’re adding markets, you’re adding payment methods and you’re growing your volume at that rate, to make sure that you’ve invested in the people, in the systems to be able to manage that growth over the long run. And then we also have a growing product development pipeline. We’ve talked about new verticals, new products. And so a big part of the increase in spend in the ’24, ’25 cycle was in engineering head count and product headcount. As we said all along, towards the end of ’25, we’ve staffed and we’ve invested in most of the things we saw as necessary to do some catch-up on.

And what we’re seeing now, as Guillermo pointed out, is kind of the flow over from those investments into the first half of this year, but the pace of incremental headcount and the pace of incremental investment in systems will significantly decelerate so that the operational leverage can begin to kick in.

Operator: Thank you. And there are no further questions in the queue at this time. Ladies and gentlemen, this concludes today’s program. Thank you all for participating, and you may now disconnect.

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DLOCAL LTD

Q1 2026

Earnings Transcript

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