DLO

Welcome to DLocal First Quarter 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Instructions will be given at that time. I will now hand the call over to the company.

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 Aragão, 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.

While 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.

Good afternoon, everyone, and thank you for joining us today. This year, 2026, marks two important milestones for DLocal, 10 years since we founded the company and five 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.

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. 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 startup 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%. Our own innovation layer, such as Smart Pix 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. 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 one or two 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 four of the five largest players operating throughout emerging markets and continue to expand global deals with them. For several of those players, we also process 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. I wanted to take a minute to walk through three 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 hot 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 three 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 are net new customers they would not have reached otherwise.

An e-commerce merchant we onboarded in 2023 started with only two countries but now operates in 21, with buy now, pay later having gone live in Mexico and South Africa over the past two 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 four consecutive quarters. As we like to say, we're still in the early, early days. These three merchants, for example, all grew TPV north of 70% year-on-year during the first quarter of 2026. 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.

Thank you, Pedro. Good afternoon, everyone. Let me take you through 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 two specific dynamics I want to address upfront: the expected and already flagged high OpEx carrying over from our 2025 investments, and a non-recurring 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. That's a number we're very proud of. 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 three 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 two key positive drivers: Argentina recovery, which we saw 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. 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 advisors, we adjusted our tax treatment for prior periods of one of our installment payment products in certain markets to reflect what we 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 non-recurring and prior period nature, we think 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 had 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 through 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 billion in non-cash mark-to-market gains in our Argentina bond holdings plus a low 10% effective tax rate. The reported effective tax rate for the quarter was approximately 26%, elevated by the non-recurring item. 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. The underlying cash generation is working as it should. To wrap it up, top-line 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 out of period 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.

Hello, everyone. Before we open the floor to questions, we thought we'd try something a little bit different today, a brief conversation with Pedro and Guillermo here covering the key themes behind the quarter that we think will be most interesting to investors. 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?

Yes, 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. Those specific pressures like funding costs came down materially and volumes have continued to grow very strongly in the market. You have both a real recovery in the market and then improvement in gross profit quarter on quarter. A very good story in Argentina. On the other hand, Brazil works on the opposite direction in the quarter. 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. We almost double, more than double the gross profit in the quarter year-on-year. 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, more than the average of the company. That is meaningfully outpacing how the company is growing and is actually helping us from a diversification of geography as well. The key message is very simple.

All our core markets are growing in volume, the sequential movements are mostly 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 to a more healthy portfolio of countries.

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 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?

I don't think it's changed. From on OpEx, the first quarter shows what 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. As we said, they're more visible at the beginning, at the first half of 2026. 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. Obviously that flows through operating expenses and the operating profit to gross profit ratio.

It's important to normalize this when you want to get a clear picture of the underlying expense performance. Excluding that one-off, which, you know, I'll discuss a little bit more in a moment, the underlying operating profit to gross profit ratio would have been 48%. It's still relatively healthy. As we lap the 2025 cost build-out, OpEx growth rate should naturally moderate throughout the year. That's the mechanics that we're waiting to see throughout the year. That combined with the continued top-line momentum, that should drive improving operating leverage in the back half of the year. 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 this cost through commercially, and to the extent that we cannot fully do so, we believe the residual impact will be manageable. 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. Excluding this item, operating profit grew 25% year-over-year, and net income grew approximately 11% year-over-year, which I think tells the real story of the underlying performance.

Putting this all together and going to you, Pedro, and as a reminder to our investor community, unless there are material changes, we only expect to provide updates to our guidance twice yearly. Just for the avoidance of doubt here, how should investors interpret our results, in the connection to our full year guidance?

Yeah. Guidance remains unchanged, as Guillermo mentioned at the end of his prepared remarks. We continue to see a lot of strength across top line. We expected costs to come in heavy from a margin perspective in H1 and improving towards H2 on a year-on-year basis. I'd say they came in slightly ahead even of that expectation, but we're already addressing that. Guidance remains unchanged.

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? Where are their priorities?

Yeah, it was genuinely a very energizing event. To me, what was most interesting is how much the conversation has shifted over the past three, four years. In the past, merchants would typically come to us with a very specific market or payment method problem, and it 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. The conversations are deeper, and merchants are definitely increasingly more sold on the concept of localizing payments as a key unlock to growth.

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. 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. 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." 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.

Great, switching topics slightly, there's one more question I want to ask you, Pedro. The AZA transaction, which we spoke about last year, closed during this last quarter. How should investors think about what this opens for strategically, and what it means for DLocal's presence in Africa more broadly?

Yeah. I think we need to frame this correctly. The most useful thing is to be very precise about what the AZA transaction is and also what it's not. 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, in that time period, the deal structure mutated a lot. It ended up being an asset purchase, also because it took so long, AZA's top line was definitely negatively affected by the time that took. On the positive side, what we do get is strategically important to deepen the capabilities and the positioning that we have in Africa.

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. It would definitely have taken us a lot longer to build all of that without having gotten this acquisition across the finishing line. 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. 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 a same-store sale type metric or anything. Happy to have concluded it, happy to have the AZA team and assets on board, and we continue to build a phenomenal business across the continent.

Great. One final question for you, Guillermo, as we wrap up here. You've now been at DLocal for about six months. Would love to hear your early assessment of the company, where we stand today, where you're focused, and what surprised you.

Yeah. That's right, six months in. I have to say my conviction in the opportunity, that at first made me join DLocal has only increased. I think at the beginning I was talking about we're just scratching the surface, definitely that's what I'm seeing six months in. The business is really exceptional at what it does. 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. That combination, I think, is rare, and it's difficult to replicate. Second, on where I see my work ahead, I am focused on three key things.

The first one is to continue improving how we translate the top line 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 two 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. 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. We've already taken meaningful step already to execute on these. Like, for example, the $300 million payback, the authorization that we got and we mentioned in the last quarter of last year.

Finally, also making sure that the finance organization continues to build and evolve the processes and the systems in a way that are appropriate for a business that now processes north of $14 billion of volume every quarter, and that is growing by more than 70% year-on-year. The last thing I would mention is, having come from businesses that were at different stages of maturity, the opportunity ahead for DLocal is genuinely immense. I think even I underappreciate that this opportunity has really surprised me. The markets we operate are still in early stages in their 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 levers that are just beginning to contribute. What can I say? A strong business, clear work ahead in my hands and a large opportunity ahead for the company, all exciting work.

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.

Ladies and gentlemen, to ask question at this time you will need to press star one one on your telephone keypad, and wait for your name to be announced. Please stand by while we compiled the Q&A roster. Our first question coming from the line of Tito Labarta with Goldman Sachs. Your line is now open.

Hi. Good evening, Pedro, Guillermo, Chris. Thank you for the call, and taking my questions. Just wanted to follow up by, I guess, particularly on the expenses a little bit. You know, Pedro, you mentioned that it did come a little bit higher than expected. You know, looking at the guidance, you're above on gross profit, but a little bit below on the OpEx. What drove that to be a little bit higher than expected? You mentioned some corrective measures. 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 should that continue to be maybe a little bit below the trends of gross profit? Thank you.

Happy to start taking that one. I think it's important to say that Q1 has the full annualized impact of the investment cycle ramp-up that we started to see in late 2025, and we already flagged in Q4. The important thing to know is this is the largest single driver of the year-over-year growth in OpEx. It should moderate as we move through 2026. Now, you're right that in our remarks, I said that OpEx did come in slightly above where we were expecting in the quarter. 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. We have already initiated some targeted corrective actions.

For example, we don't expect any new net hiring throughout the rest of the year. When you think about the remainder of 26, I think there's four things that we should combine to have a more favorable OpEx growth trajectory. The first one is what I mentioned at the beginning, the natural fading of the late 2025 investment cycle annualization. The second one is, we're planning to accelerate all of our automation agenda. We also have the corrective actions that I just mentioned, we're also mechanically expecting lower share-based payments expenses as the graded vesting attribution method flows through the remainder of the year. I think together, these four should contribute to improving operating leverage as we move through the year, in particular in the second half of the year.

I'd 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, that sequentially improves. More importantly, let's not forget that the investments we had been making over the prior two years, as Guillermo said, are rolling over into the first half of this year with a less expense-heavy comp in H1 of 2025.

Exactly what is allowing us to deliver the kind of TPV revenue and gross profit acceleration and consistency that we've been delivering. 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. Now that the investment cycle is behind us, we start entering a phase over the next few quarters where the innate operating leverage of the business model should begin to flow through the P&L.

All right. No, that's very helpful. Thanks, Pedro, Guillermo for a clarify. One clarification, just there was the one-off, which I think they didn't impact operating expenses. Are you considering that in the guidance or you're not considering that? I mean, we should adjust for that, right? Just to make sure.

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. Let's see how top line comes in. I think we're off to a good start through April. 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.

Okay, that makes sense. Thanks for clarifying and opening. Very good strong results on the TPV and gross profit. Good to see that doing very well. Thank you.

Thank you. Our next question coming from the line of Pedro Leduc with Itaú BBA. Your line is now open.

Thank you so much. Good evening. First on that, we saw it on the working capital, you guys mentioning a period of more prepayment services, you know, for clients. First around that topic, how do you see the revenues for that as they come part of the fee revenues or generate financial income? Second, how are you seeing that, the business building up potentially, it's in more than one region? That's one question. The second would be on the, again, on the gross profit part. When I look at the delta revenues, delta gross profit for Brazil, you guys mentioned Argentina, but Brazil, I mean, it looks like the incremental revenue is coming a lot of profitability. If you can just give double click on that a little bit. Thank you.

Okay. I think I understood your first question. We do drive revenues from very short duration merchant advances, typically for liquidity needs a merchant may have in a market. 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.

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 the SPV that we're using to fund this. 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. This is a temporary hit to the free cash flow that ideally over the next three quarters gets reversed.

Yeah. 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. I think this quarter, this type of quarter volatility we've already seen in the past. To be honest, we don't see this quarter as a structural change to our cash generation capacity at all.

Thank you.

Okay, great. On Brazil, couple of things. First of all, I think Brazil year-over-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. There have been less installment revenues in Q1 and slowdown in the e-commerce merchants. The other thing driving the sequential decrease in Brazil is we have seen an increase in Pix mix once we move out of Q4. Pix does have lower monetization than cards, which typically are more prevalent in Q4. 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.

Yeah. Thank you. Even with the seasonality, it looks like it was maybe stronger even than it could have been, though. Yeah. Appreciate it. Thank you.

Thank you. Our next question in the queue coming from the line of [Camilla Arceno] with UBS. Your line is now open.

Hi, Pedro, Guillermo, Christopher. Thank you so much for the space. I have just one from my side. Africa and Asia showed broad-based growth, but experts suggest Asia is significantly more challenging due to a more developed local financial landscape. You also mentioned that merchants are increasing its interest in more regions. How is the local strategy in Blue Ocean markets like Nigeria and Egypt different from its approach in highly competitive markets like Vietnam or Indonesia? Thank you.

Yeah, great question. Thank you. 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 two things about Asia.

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. 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. I think you will see us increasingly build out capabilities in Asia, and ideally, Asia over a multi-year period becomes quite relevant to our overall P&L. That really could be trajectory-changing, just because when you look at the size of the total market, Asia still dwarfs LATAM and Africa. 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.

That's super clear. Thanks.

Thank you. Our next question coming from the line of Matt Coad with Truist. Your line is now open.

Hey, good evening, guys. Thanks for taking the question here. Wanted to ask about some of the new verticals that you're seeing success in, travel and gaming. Just curious if you guys could kinda like double-click on, you know, what's driving that new success there. Is it kinda like go-to-market investments? Is it product related? Any additional detail would be really helpful.

Yeah. Thanks, Matt. I think, 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. DLocal's not a specialist in any one payment vertical, but has strength across multiple verticals, which sets us up very well for sustained growth. 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 one or two 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.

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. 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.

Super helpful, Pedro. Then just quick follow-up, kinda 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. Was just hoping that you could provide an update on, you know, your integrations there, any investments that you're making there, and kinda, like, early success that you're seeing in the card-present world. Thank you.

Yeah. 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. That contract allows us to fund the build, but more importantly, that'll 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. 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, it's a project that is one that we need to make sure we delve into step by step alongside our merchant client.

Awesome. Thank you, Pedro.

Thank you. Our next question coming from the line of Jamie Friedman with Susquehanna. Your line is now open.

Hi. 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, you know, last, I'm gonna say year, and how you're seeing those return, 'cause your confidence in the increased profitability in the company in the second half is noteworthy. That's my first one. At a very high level, if you could share from your merchant perspectives, which conversations are more urgent? Are they related to stablecoin or agentification or neither or both? Which of those do the merchants ask you about most? Thank you.

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 have become very relevant in many markets, local card schemes, as I mentioned. 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. 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 two or three 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. We're trying to work closely with most of the more relevant ones. Those two 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. 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. We also have a growing product development pipeline. We've talked about new verticals, new products. A big part of the increase in spend in the 2024/2025 cycle was in engineering headcount and product headcount.

As we settle along towards the end of 2025, we've staffed and we've invested in most of the things we saw as necessary to do some catch-up on. 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. 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.

Makes sense. Thanks, Pedro. I'll drop back in the queue.

Thank you. 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.

Good day. Thank you for standing by. Welcome to the dLocal Fourth Quarter 2025 Results. [Operator Instructions] Please be advised that today's call is being recorded. I would now like to hand it over to the company for opening remarks.

Good afternoon, everyone, and thank you for joining the fourth quarter 2025 earnings call. 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, we have Pedro Arnt, Chief Executive Officer; Guillermo Lopez Perez, 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 recording will be available shortly after the event 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. While 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 the conference call. Forever reasons, including those described in the forward-looking statements and Risk Factors sections 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.

Good afternoon, everyone, and thank you for joining us today. 2025 was a year of exceptional execution, one that proved the strength of our business as we continue to build a world-leading financial infrastructure platform for emerging markets. Our business flywheel is accelerating. High growth in a massive and expanding TAM, strong customer loyalty and retention, a growing capacity to innovate and an asset-light high cash conversion financial model. We demonstrated the scale of the emerging market opportunity. Our TPV reached $41 billion, up 60% year-over-year and accelerating as the year progressed. Revenue crossed the important milestone of $1 billion for the first time. We continue to deepen our merchant relationships. TPV retention reached 158% and net revenue retention, 145%, both strong testaments to the value of the service we offer and our ability to ride the secular waves of emerging market growth alongside our merchants. We also continue to advance our developing innovation engine. Buy Now Pay Later fused products are now live across 6 countries with solid merch adoption. We've completed the launch of our full-service stablecoin suite, enabling merchants to on- and off-ramp fiat to stablecoins, settle and be settled in stablecoins and collect at checkout in stablecoins. And we continue to add an ever-growing portfolio of APMs, a SmartAPM platform. We also delivered strong cash generation in the year that ended adjusted free cash flow was $191 million, up 110% year-over-year with a 97% conversion ratio, all this strength in our P&L was driven primarily from our sustained TPV growth with merchants in 2025. Flowing on from TPV growth, gross profit grew 37% year-on-year. And despite a still active investment year, we expanded adjusted EBITDA as a percentage of gross profit by 5 percentage points, underscoring the operating leverage inherent in our financial model. As a consequence, net income reached $197 million, up 63% year-over-year. Taking a step back, it's important to acknowledge the consistency of our TPV growth over our entire history. From 2020 to 2025, TPV has grown at an 82% compound annual growth rate. It hasn't really decelerated that much when we see 60%-plus growth in 2025. At the size we have today, these high levels of growth drive significant incremental dollar volumes. Case in point, in Q4 2025 alone, we added more TPV quarter-over-quarter than in the prior 3 quarters combined. The scale of this is worth pausing to reflect on. In 2025, we processed in a single day what we processed in all of 2016. Over the year, we handled approximately 3.5 billion pay-in transactions which is equivalent to around 6,700 payments every minute, every hour of every day. On the payout side, more than 100 million individuals received a payment through dLocal. And so despite it still being the early days for our company, this kind of scale sets us up well for competitive advantage in costs, operating leverage data accumulation and organizational knowledge. We now process payments in 44 markets across the Global South, nearly doubling our footprint over the last 5 years. With an increasing number of markets becoming meaningful contributors to overall volume, 2025 also represented acceleration in financial metrics. When we compare our 2021 to 2024 gross profit, adjusted EBITDA and net income against our 2025 growth rates, the sustainability of high levels of growth at much larger size is clear across every line. The business continues compounding solid growth even as it scales, and there's a reason for this. Merchants are increasingly global, but financial infrastructure remains local and ever more complex and locally regulated. Emerging markets continue to be defined by fragmented payment infrastructure, regulatory complexity and rapidly evolving localized consumer behaviors. The structural challenges are exactly why our platform exists and has such wide adoption among the world's most successful digital companies. We address complex financial infrastructure challenges that our merchants lack expertise in and prefer not to focus on. And there is still room to continue doing this for a very long time. I'd like to share a few examples of such complexity. We now hold 37 licenses across 26 markets, adding 4 in 2025 alone, including Argentina, Chile, the UAE and the Philippines, with 16 additional applications in process including for the United States. Without these, serving customers with the local financial infrastructure that their consumers expect would not be possible. Alternative payment methods already account for the majority of e-commerce volumes across EM markets. And our APM volumes continue to grow as we deepen capabilities around tokenization, biometrics, improved regulatory compliance and increasingly offer instant rails being built across the Global South. On stablecoins, we've offered a full suite of stablecoin solutions for merchants. And on AI agents, a possible new frontier for commerce, we are collaborating with Google on the AP2 open standard for interoperable AI engine payments to ensure local payment methods across emerging markets are part of that infrastructure for the ground up. Most importantly, we simplify and abstract away all this complexity through a single, unified, world-class platform. Our ability to offer one integration covering the widest and deepest footprint across the Global South, the most markets, the most payment methods per market is our durable differentiator. That is the One dLocal proposition. And the more complex the environment becomes the more valuable it gets. I think it's worth highlighting a few examples from this last quarter alone that exemplify what I've been talking about. On stablecoins, we now offer merchants a complete infrastructure suite for digital assets from treasury and effects through on and off ramps all the way to stablecoin acceptance at checkout and settlements in stable with leading partners, including Circle, BVNK, Fireblocks and Felix. On Buy Now Pay Later, our Fuse product grew 88% quarter-on-quarter during the fourth quarter. a clear signal that merchant and consumer appetite for installment-based payments is real and rapidly accelerating. And on alternative local payment methods, we continue expanding depth and intelligence across markets and use cases to deliver improved performance; from biometric authentication and tokenized card on file to instant payment rails, DHL Express and Open English are among the latest merchants to go live with these capabilities. APMs currently account for a significant portion of our quarterly TPV. The value to our existing merchants of the product and service model we offer becomes clear when looking on our retention metrics. As merchant rides the secular trends in our markets, scale into new geographies and adopt new payment methods or expand them into new use cases, dLocal grows with them. This is the compounding nature of our model reflected in our TPV retention rate and net revenue retention. Equally important to our growth algorithm is the size of the market we are pursuing. Estimates place the total addressable market for digital payments across the urging markets at over $2 trillion and expect it to double by 2030. And we currently hold the less than 2% of that market, while our share of wallet with existing merchants is only approximately 10%. We're scaling fast and yet the runway ahead remains enormous. This dynamic is also visible in the breadth and depth of our merchant base. Total merchant count reached more than 760 in 2025 and the diversity of that base continues to increase. Revenue concentration in our top 3 markets has declined. And our top 10 merchants account for a lower share of total revenue than in the prior year, reflecting broader platform adoption across geographies and verticals. And while admittedly, concentration remains, the business has become not only increasingly diversified, but also stickier. Today, we serve our top 50 merchants across an average of 12 countries and 50 payment methods. That multi-country multi-payment method engagement is the clearest expression of the resilience and compounding nature of what dLocal has to offer. All along, these results have been delivered with best-in-class efficiency. Our gross profit per employee has improved despite continued investment levels, with AI and automation as growing key enablers. In 2025, AI-driven automation delivered the productivity equivalent of roughly 7% of total headcount, allowing us to scale without proportional cost increases. More importantly, we expect further progress throughout this year. We have a clear self-reinforcing logic to our business model. high growth drive scale, scale drives efficiency and efficiency generates the cash we reinvest to extend our lead or generate greater shareholder returns. This continued our track record of strong cash generation, which positions us to reinvest in technology product and commercial capabilities, while maintaining sufficient liquidity and returning capital to shareholders. As previously announced, I'm very pleased to have Guillermo Lopez Perez, on board as our new Chief Financial Officer. This will be Guillermo's first earnings call in the role and we're all very excited to have him leading our finance organization. And so with that intro, let me hand the call over to him.

Thank you, Pedro. I am thrilled to have joined dLocal and report of this team's next chapter, and good afternoon, everyone. As I shared with some of you in London a few weeks ago, the opportunity ahead of dLocal is enormous. And the business this team has built over the past 10 years is exceptional. I look forward to having more conversations with you in the coming months about how we are strengthening and scaling dLocal. So Pedro walked us through some full year results. Let me focus on our performance in the fourth quarter. TPV surpassed $13 billion for the quarter, growing 70% year-on-year and 26% quarter-on-quarter. This is our highest quarterly volume in dLocal's history and our fifth consecutive quarter of above 50% year-over-year TPV growth, a sustained trend that reflects the strength and consistency of our business. As you can see as well, we are exiting 2025 with very strong momentum in TPV growth. This growth was broad-based across our key markets and verticals. It was particularly strong in Brazil, in Mexico, South Africa and Colombia. On the vertical side, on-demand delivery stood out in the quarter, driven by existing merchants ramping up expansion deals across Argentina, South Africa, Mexico and Colombia. E-commerce continued its positive trajectory, delivering a seasonally strong quarter, particularly in Mexico, Brazil and South Africa. And advertising recovered quarter-on-quarter, supported by the partial return of volumes in Egypt. Q4 was a strong quarter to finish the year as well from both a revenue and gross profit perspective. Revenue reached an all-time high of $338 million, up 65% year-on-year and 20% quarter-on-quarter, demonstrating that our TPV momentum is translated into very strong top line performance. Gross profit reached $116 million, up 38% year-on-year and 12% over Q3. It reflects the natural margin pressure dynamic of scaling volume with established merchants and into new payment methods, products and countries. But even with that natural margin pressure, we added $32 million of gross profit year-over-year in the quarter, nearly a 40% growth. On a sequential basis, besides higher local-to-local volumes and the typical Q4 enrollment seasonality, the gross profit story was driven by 5 main contributors. Brazil led the growth where we saw very strong seasonal e-commerce growth, supported by solid trends across streaming, advertising, financial services and remittances. Egypt partially recovered versus Q3, reflecting the return of a large merchant and the ramp-up of new e-commerce streaming and ride-hailing metals. Mexico contributed thanks to a strong volume growth in e-commerce, on-demand delivery and ride hailing and Other Africa and Asia contributed with broad-based growth, with a notable contribution from South Africa, where we are increasingly operating with more global merchants. Argentina, on the other hand, was the primary drag to growth. While underlying volume growth was very strong, gross profit was held back by higher cost amid election-related FX and rate volatility. Q4 continued to demonstrate the operating leverage inherent in our business. Total operating expenses were $53 million for the quarter, up 28% year-on-year, driven primarily by our investment cycle related head count growth and higher average salaries following our merit cycle. Adjusted EBITDA reached $78 million, up 38% year-on-year and 9% quarter-on-quarter. Starting 2026, we are introducing operating profit to provide investors with greater transparency into our operating performance. As the business scales, adjustments represent a declining share of revenue and we believe this metric offers a more standardized basis for comparison with industry peers. Net income totaled $56 million for the quarter, up 87% year-on-year. and 7% quarter-on-quarter. Year-over-year growth reflects a lower effective tax rate in the quarter, driven by a more favorable jurisdictional mix and the nonrecurrence of a onetime tax settlement recorded in Q4 of last year. Return on equity reached 35% on a last 12-month basis, up 10% points year-over-year and continued on to increase every quarter. The improvement in ROE reflects both a stronger profitability and the effects of our capital return policy, mostly the inaugural dividend payment in 2025. Finally, adjusted free cash flow for the quarter was $65 million, doubling year-over-year with an adjusted free cash flow to net income conversion ratio of 117%. The quarterly conversion can fluctuate with items like tax payment timing. But on a full year basis, we converted close to 100% of net income into free cash flow. This is a business that converts growth into cash at an exceptional rate. With that, I'll pass it back to Pedro, who will speak to how we are deploying this strength.

Thank you, Guillermo. 2025 confirmed what we've long believed. The opportunity in emerging markets is massive our model is the right one to capture it, and our team executes consistently across a complex and dynamic environment. We enter 2026 with a clear strategy, a strong platform and a proven track record. This year also marks 2 milestones, 5 years as a listed company and 10 years since our finding, a reminder of how far we've come in so little time and how much of the opportunity still lies ahead. Let me turn to our outlook for 2026. We expect continued strong growth in the key market share and product market fit measurement that is total payment volume. We currently see TPV growth in the range of 50% to 60% year-over-year. Greater volume drives pricing leverage with downstream providers, improves FX liquidity and generates better data that feeds conversion rates. This is the compounding logic that excites me the most about our long-term trajectory in this business. We're guiding for gross profit growth of 22.5% to 27.5% year-over-year. As existing merchants grow and large clients continue to scale, we expect more volume-based discounting that is embedded in our long-term customer relationships. At the midpoint, this implies gross profit dollars, what we managed to of $0.5 billion in the year. On profitability, we are guiding for operating profit growth of 27.5% to 32.5% year-over-year. Following a 2025 investment cycle, which has overhang into early 2026 as salaries and wages spend from '25 hirings gets annualized, we expect operating leverage acceleration to become evident more towards the second half of the year and then flow into the following year. As a reminder, emerging markets remain inherently volatile, and our projections reflect those uncertainties. These conditions are not new to us. We've built this business to navigate exactly this kind of complexity, and we remain confident in our guidance. We believe we are only scratching the surface of the opportunity ahead when I take a longer-term view. So I wanted to leave you with a way of thinking of that opportunity further into the future. First, the growth of our existing merchants in markets where we serve them today. The world-class companies we serve are riding some of the strongest secular trends: digitization, middle-class income growth and e-commerce penetration. In many cases, there are entire lines of businesses for which they have not yet localized their payments infrastructure. Second, geographic expansion with existing merchants. We serve merchants across an average of 12 countries today, but we operate in over 44. Further expansion into Asia, the Middle East and Africa where we see increasing merchant interest will be an even greater growth vector going forward. These 2 elements are what will drive increases in our consolidated share of wallet of our existing merchants. And they also explain why we expect continued high TPV retention rates with these merchants. On top of that, our growth will be powered by new merchants. Our last 2 years have been predominantly driven by the strength of our existing base. However, we're seeing strong commercial traction with new merchants across priority verticals such as travel, crypto, gaming and AI as they move further along the emerging market payment adoption curve. We expect new merchant contributions, therefore, to increase over the medium term. And fourth is our innovation engine. While near-term P&L impact is still expected to be modest we see multibillion TPV opportunities in our wider financial infrastructure bets such as Buy Now Pay Later, enhanced merchant of record solutions, virtual accounts and our soon-to-launch card-present offerings. Finally, and before I close, I'd like to cover capital allocation. We continue to have enormous confidence in the cash generation capacity of dLocal. The asset-light nature of the business, negative working capital requirements and potential for operating leverage ahead of us gives us a growing free cash flow profile even under conservative projection scenarios. In addition, we currently operate with minimal debt. And while we remain disciplined do not rule out using it in the future as a way to secure additional cash or enhance the efficiency of our capital structure. Our allocation framework is structured around 4 priorities: first, invest to sustain high levels of growth that we aspire to; second, ensure the appropriate liquidity buffers given the volatility of the markets where we operate; third, selectively be prepared for M&A if it accelerates our strategy; and fourth, return excess capital to shareholders. On this last point, through the end of 2025, we have returned 64% of adjusted free cash flow generated since 2022 to our shareholders. We intend to maintain this disciplined approach to capital returns going forward. Consequently, we're confirming our dividend policy of 30% of the prior year's free cash flow, which this year translates to $57 million. Additionally and upon thorough analysis and consultation, we believe that our business will generate sufficient cash in the medium term beyond our minimum liquidity requirements and dividend policy commitments. This allows us to increase returns to shareholders. As a result, the Board has approved a new share repurchase program of up to $300 million of our Class A common shares. The policy is a first step in what should become a multiyear capital allocation model that combines the predictable discipline of our diligent policy with add-on allocations for share buybacks that will prove accretive to EPS. The precise quantum of these plans will be determined by multiple factors. Among them, trading volumes to ensure the adequate liquidity for our shares, continued confidence in excess free cash flow generation and analysis of the potential for other areas of investment that can generate even higher total shareholder returns. We trust that these corporate finance decisions and programs highlight our commitment to be prudent allocators and custodians of your capital as shareholders in dLocal. And now finally, these are turbulent times. So to close, I want to highlight what makes our story special and more importantly, durable. We have a business that is growing rapidly highly profitable on a cash basis with low leverage and high and increasing return on equity. That combination of growth, profitability and financial strength is where as a team, we remain fully focused on the lung game, disciplined growth, continued product innovation and sustainable value creation for our merchants and our shareholders. The opportunity across the emerging market landscape is vast. Our platform is uniquely positioned to capture it. and our track record gives us confidence in our ability to continue to execute against this strategic vision. Thanks, everyone, for your continued support, and we can now open the call to take your questions.

[Operator Instructions] Our first question will come from the line of Tito Labarta from Goldman Sachs.

A couple of questions, I guess, to start. First on the TPV growth guidance, as you mentioned, Pedro, you have continued strong opportunity for growth there. Just if you can give a little bit more color on where you're seeing the growth come from this year? Is it a continuation of like Brazil, which has been growing quite a bit more in Africa. Just any color that you can give on where you think the PPV growth will come from by country, by vertical, like e-commerce has been strong. Any color on that, I think, would be helpful. And then my second question, specifically on the quarter, in Argentina, we saw actually very good revenues. Gross profit were lower. I mean, I think you mentioned FX and some other things impacting costs. But how do you think about the gross margin in Argentina? Should we think of this as a one-off this quarter given everything going on there? And should that gross margin sort of recover to levels that we saw before? Just to think about the growth that we can expect, not just on revenues, but also gross profit for Argentina.

Great. Thanks, Tito. I'll take the first one. I'll leave the second one to Guillermo. So the strength of our business continues to be broad-based in terms of the guidance. Latin America will continue to deliver strong growth. We consolidate our position further in Africa with some critical markets there, sustaining growth. We've seen Egypt pick back up in the fourth quarter, and we assume that, that rolls into the '26 guidance. And we're also becoming increasingly ambitious in the Middle East and in Asia, where, despite being a late entrant we do see significant opportunity and will lean into that market as a long-term growth vector. The other part that we indicate, if you look at Page 27 of the slides is we also begin to see increasingly a better distributed set of growth vectors in the guidance, whereas our '25 results were extremely concentrated on share of wallet gains and organic growth of our existing merchants in existing countries. When we take our bottoms-up approach and probability adjust our pipeline to get to the 26% guidance numbers, we begin to see more participation coming from taking those merchants into new countries, which shows the depth of the relationships we're building and also the growing importance of frontier markets and smaller markets within the emerging world footprint as well as our expanding footprint into more parts of the globe, for example, Asia, as I just mentioned. And then also, we expect a pickup in new merchant impact in year 1. So a very strong cohort. And finally, still small, but I think if we take a midterm view, a very, very important part of what we're building are our new products. which allow us to further monetize and gain traction with our merchants. And more importantly, many of these ideally also become take rate accretive because they are higher monetization products.

Okay. So, let me take a start to your question on Argentina and feel free, Pedro, to chime in. So Argentina had a significant rate in FX volatility leading into the elections in Q3. I think this macro volatility was already mentioned in the previous earnings. Unfortunately, we show it remained elevated throughout Q4. which affected the cost of the funding sources that we use for our attachment business. But I think on a positive note, we continue to see very strong volume growth and Argentina remains a highly attractive market for us. It is one of our fastest growing countries. And when we calculate the returns on capital deployed really well above our cost of capital. So our thinking on Argentina, it is high growth, high return market despite this increasing volatility that we have seen.

Okay. Very helpful, Pedro and Guillermo. If I can, just a quick follow-up on each. So we should expect that gross margin, which kind of suffered from the FX volatility as the FX normalizes, that should recover maybe closer to what we were seeing in the past. Is that correct for Argentina? And then Pedro, just curious on the stablecoin by now, I'll say later, I mean you mentioned those as opportunities. When do you expect those to become a sort of like significant contributors you expect already in '26? Is it more a '27, '28 story? just to think about the potential there? And what can -- how much that can contribute?

So '26 is more about the confirmation of product market fit and solid growth we gave an idea of quarter-on-quarter growth and Buy Now Pay Later above 80%. Now obviously, coming from a small base, so it still doesn't move the needle, unlikely that it moves the needle in 2026 but compounding at those levels of growth sequentially by 2027, ideally, that does become material in our P&L. And then on Argentina, we'll comment on how the market evolves when we get into it. As you know, Argentina is a particularly volatile country. I'd rather not be making forward-looking statements. I think Guillermo's point was, if we abstract ourselves from the short term, we look at TPV growth, we look at merchant interest in the country. We look in general at a country that seems to be on the right track. We expect a lot out of Argentina over the long term.

Our next question will come from line of Guilherme Grespan from JPMorgan.

Congrats on the quarter, very strong print. Two questions on my side. The number one is just on stablecoins. You mentioned a little bit on stablecoins by an operator APMs, but specifically on stablecoins. If you're seeing any pickup, Pedro or not in the volumes of table point, I think on the treasury of dLocal makes more sense, maybe it's picking up. But my interest is more on the pains and kind of adoption in if we're seeing any signal that stablecoins technologies already picking up in some way? And then my second question is just to check the box on United States license, should we read this as a U.K. license similar to that movement? Or it's specific to any service or product here?

On stablecoins, we are not seeing significant volumes or pick up in stablecoin at checkout. We do begin to see growing interest in merchants and understanding the product that we've come to market with, understanding regulatory requirements and how each market works but I would not say we've seen volume. Where we're seeing the most volume within that vertical is serving digital asset marketplaces exchanges with the legs on the way in and the way out, so what we call pay-ins and payouts. And then increasing and growing conversations with corporate treasuries and our clients' treasuries on the usage of stablecoins in particular markets where they may have a cost benefit or a speed benefit or a 24/7 settlement benefit, which I think over the next few years, will probably be the largest of those 3 segments that we offer products around, which is stablecoins as a payment means or settlement means, stablecoin on and off ramps to fiat and corporate treasury adoption.

That's clear.

There's a second part to this question or a second question, which was on U.S. licenses. We continue to be solely focused on the emerging market global footprint. As I said, we're very excited in our forays into the Middle East and Asia. So there's not an ambition here to offer developed market solutions. We see our strength and our differentiation and our ability to leverage over 10 years of building infrastructure, and pipelines across the emerging world. Those licenses just facilitate settlements to merchants and simply allows us to operate on our own licenses in an increasing compliant way rather than have to rely on licensed partners.

Now for our next question will come from line of Pedro Leduc from IBBA.

Congratulations on the strong close of the year. First question on Brazil revenues and gross profits. Gross profits growing much faster than revenues here this quarter. I was wondering if you could detail to us a little bit, if it's product mix, client mix? Second, if you want to develop a little more on what dragged up the G&A expenses this quarter. And there's a comment in the prepared remarks that operating leverage should kick in, in the second half of the year you see it protrude within the profit and gross profit guidance. But if it's something that we should also expect the 4Q level to be still upon us here in this first half of the year? And if I may squeeze on the third. Just to clarify, I think there was a comment about present card operations going forward, if you want to detail a little bit more about that.

Okay. On Brazil, I would say, in general, Brazil really has begun to rebound. If we look at the TPV growth, it shows this tremendous strength in that market. And then Brazil also benefited from very strong monetization A portion of that is it's one of our largest markets. It's where we have a lot of TPV from mid-tiered merchants, which typically have slightly higher take rates. The vertical mix there with advertising performing well, that usually tends to be a slightly higher take rate. But it was a particularly strong quarter. I don't think that level of dispersion between TPV growth and gross profit growth is something that you should necessarily project into the future. So very strong in general, structurally strong really glad to see Brazil turnaround after a difficult '24. There's also an easy comp to a certain extent, but I think mission accomplished by the team there. We always said that we were confident that '24 was more about volatility and that there was still significant growth for us ahead in Brazil. It was particularly strong. I don't think that kind of strength necessarily should be extrapolated into the future. On G&A, very quickly because I think we tried to explain this, but important to understand the cadence into the quarter. If you look at our year, A lot of the growth in head count within our investment cycle was more backloaded to the second half of the year than the first half, not necessarily by design, but the way it played out. So what you're seeing there is very much driven by increased investment in engineers, in commercial teams and in operational teams. And that does have a spillover into 2026. I'll let us Guillermo cover that, but I think it's relevant.

Yes. I think you asked specifically about G&A, I mean, there were some one-off items, but actually you normalize for them. These nonrecurring at the underlying time on G&A is consistent with what we see in rest of OpEx. And the story of OpEx is on our Q4. It reflects the last leg of the hiring coming out of the investment cycle that Pedro started 2 years ago. We invested mostly in headcount, and there's also a component of our annual merit cycle increases. Now to help you understand how this is going to pan out in 2026, we are not planning to add any significant head count at this point in 2016, beyond a few hirings already mentioned at the end of '25. But given this '25 hiring is back loaded in the year, you should see higher levels of OpEx year-over-year growth in the first few months of and this cost as discussed are advertised. This growth should produce in the later months of 2026. But overall, we expect OpEx growth for the full year to be below gross profit growth, and the operating leverage imparted in our guidance is probably going to be a story for the second half of the year. It is worth noting as well that when you compare us to our peers, as we show in the presentation, we believe we are our own best-in-class in terms of the resources required to run a business of this scale and growth rate. And I think that's a reflection as well of the operating model that we built and very comfortable with the levels we are maintaining.

You had a third part to your question, I didn't jot it down.

There's some mention about card-present transactions that you're going to upgrade? Maybe I misunderstood it, but there's something in the call that mentioned that.

Yes. That's part of our innovation pipeline. I think there are select verticals where we have inbound interest from merchants who would like to use dLocal technology stack embedded in smart hardware and smart POS. So that would be our first foray in being able to capture some share of wallet in card-present processing, which is by far the largest market. If you look at dLocal until today, 100% of the merchants we process are digital merchants, so not card-present transactions. And through this new card-present platform, we'd be launching it would allow us to start having some share of wallet of the card-present market. Still focused a lot on global international merchants, where the advantage of one integration and then being able to deploy that across multiple markets remains unchanged. We're not changing our go-to-market strategy, but it does open a very large addressable market for us.

Our next question will come from the line of Matt Coad from Truist.

Pedro, I just wanted to do one more on the card present offering there. Could you kind of like touch on -- I assume that's more of like a 2027, 2028, even maybe 2029 story. But could you talk about if there's any kind of like upfront OpEx investment in 2026 to drive some of that growth? And then just second question. It seems like the large merchant coming back on board in Egypt is a pretty unique situation, bodes pretty well for dLocal. Could you guys kind of provide a little bit of color there? Like why did you lose share of wallet? And why ultimately did the merger come back to dLocal?

Great. Let's see. I don't want to get too dragged into this card present thing to not make too much out of an embryonic product launch. Everything we build is actually typically very determined by a specific merchant contract that's existing. And therefore, rarely ever do we invest significant OpEx ahead of having concomitant revenues backing it up. And I think this is yet another case where we will build alongside our client. And that allows us to gradually see if there's product market fit and how much more interest there is for what we're building and how much we can grow with that initial merchant. In general, that's one of the reasons we're so encouraged by the cash generation of our financial model is that we don't really make big investments ahead of existing real enterprise merchant demand to fund the build-out of the products. Egypt. I think Egypt, we've walked through this. I think regaining share of wallet is phenomenal. It doesn't surprise us, but losing it in the first place, we explained this was a merchant that we had a 100% share of wallet in. The merchant started rolling out redundancy. And in the initial phases of that redundancy, we lost a significant amount of that share. And through performance, we've gradually been recovering it. We will never return to 100% because the merchant understandably will always have redundancy. But certainly, at least over the last quarter, it's been 1 of recovering a lot of the market share that was initially lost when we moved to 100% to sub-50%.

I think the other thing to add on it is we're diversifying our business with the ramp-up of e-commerce is trimming and right-headed merchants, it's good to have and see that diversification.

Next question will come from the line of Jamie Friedman from Susquehanna.

I appreciate the new disclosures especially Slides 12, 13 and 27. So I want to ask about those. So in terms of the -- so if you don't have it in front of you, the share of wallet analysis on Slide 12, I think, is important. So if I'm reading this right, you're getting 300 basis points of share of wallet increase year-over-year is your estimate from your installed base, if that's right. I'm just trying to reconcile that, Slide 12 with Slide 27. How do we think about the share of wallet contribute to growth going forward and the contribution from new merchants, which you're articulating is expanding next year?

Jamie, so I think you've understood correctly. Slide 12 is an actual breakout of what was driving growth, which then informs the left-hand column of the slide further down. And if you look at '25, our TPV retention was phenomenal. And within that retention, it was very much driven by the growth of our merchants in the markets where we already serve them and share of wallet gains within those merchants in those markets. So think of that almost as the enormous expansion of the existing market we're in, and that's one of the great things about emerging markets is just riding the growth of our business partners as emerging market consumers become more and more digital and consume more and more of these global digital products gives us significant growth. On top of that, as we gain share of wallet in some of these merchants, things play out as they did in '25. What we see in our pipeline for '26 is that we see a pickup in growing into new markets with those merchants, better impact coming from new merchants. So we're beginning to see increasing pickup in new merchants globally looking to localize payments, and so we expect a lot out of the '26 cohort. And then finally, beginning to see, as I said before, product market fit and new products coming to market, whether that is buy now pay later, card-present, virtual accounts, and a few other things we've indicated. If you take a longer-term look, what we'd like is to see new products and new merchants increasingly becoming a bigger and bigger part of the story.

And then if I could just follow up, Pedro. With the new merchant contribution contemplate for '26, Slide 27, 10%, I would have thought that those would be accretive to the gross profit take rate because they probably don't have the volume discounts because they're new. Is that a fair assumption? And because that is a bigger number next year than this year, so why is it that we're landing at like an 80 basis gross profit take rate at the midpoint next year if new merchants are ramping the way that they are?

So I think that's a generalization. And it depends very much on the new merchant and the new merchant potential and the size of their projected volume as well. So if you have the possibility to engage in a conversation with some of these new gen companies that are growing 11x Q-on-Q and convince them to adopt localized payments think you're going to focus on volume there and give them an attractive take rate. So it's not that easy to generalize. And I think more importantly and again, sorry for being so reiterative on this but the more we look at the size of the emerging market opportunity, the more convinced we are that the single most important thing for us is to continue to grow total payment volume to continue to drive to max scale and to not lose merchants or lose accounts on trying to maximize for take rate. at the end of the day at high TPV growth, which drives incremental gross profit dollars and solid gross profit growth with operating leverage, which drives even more solid operating income growth, we get the best of both worlds. Long term, we guarantee that we continue to be one of the scale leaders across emerging markets. And we feel fairly confident that if you have the merchant relationship and you're processing for them, we will figure out ways to monetize those relationships and all that TPV. So focused on TPV growth, focused on gross profit dollar growth and being scale leaders across emerging markets is what's implied in the guidance. not all new merchants that come in necessarily come in at higher take rates. It depends on the vertical, and it depends on the size and the potential of the new merchants. The new products do all tend to be accretive to take rate, but those are still quite small in terms of their impacts in the '26 guidance.

Our next question will come from the line of Neha Agarwala from HSBC.

Congratulations on the results. Just a quick clarification on the OpEx on what I understand you're done with all the hirings that you needed, most of the investments. The reason why the operational efficiency will be visible more in the second half of this year is mostly because of base effect because some of those expenses will be on the first half. right? But most of the investments, the changes that needed to be done, those are already done. We don't have significant investments per se in 2026? And my second question is where do you see upside or downside risk to your guidance? What are the main factors that we should work out for during this year that could bring in volatility or diversion from the guidance that you have provided?

Let me take the first one and hand the second one to Pedro. So you're right, you're thinking about OpEx. We see a lot of the hiring in the second half of this year. There were just a few handles of positions that were open at the time that come in 2026. But from an OpEx perspective, what you're going to see is the annualization of those late in the year hirings budding out in '26. And so you will see that high year-over-year growth in the first few months, and that should normalize and come down in the latter part of the year in which we are predicting a reduction in the level of growth, that's correct.

Great. Let's say, I don't want to give you a trite answer. Clearly, as an emerging market operator, global macro, geopolitical and primarily how that flows through to FX are the clear -- we don't control, we don't know, but they can have an impact on our results. I'd say if we take a more micro approach within the things we do control, probably the largest risk. And this somewhat also answers Jamie question on the take rate implied is there have been some very strong global wins with some of our large merchants. I think the way we like to say it is we feel like we've moved into a new category of partnership with many of the world's leading digital companies where we now are one of the largest global payment processors, operating for them across multiple markets across the emerging world. And the expectation of the delivery on those contracts is a big part of the growth in 2026. So it is guidance that remains concentrated in a merchant perspective, less and less so in a country perspective because we're serving these merchants across many, many more markets and payment methods. But that's probably the biggest risk is that we do have to deliver on these net new adds in terms of markets and payment methods so that we continue to roll out everything that has been jointly agreed to in these large global contracts where we become one of their most important and trusted global financial infrastructure providers.

So I mean, if I put it differently, you said it probably goes upside risk to the volume growth with more of these big wins coming through but your ratio, which is the take rate ratio might get diluted because of that, but because you are very focused on volume growth. as that's the right strategy for the long term?

Gross profit growth, operating profit growth, obviously, earnings above all else and convinced that this is a race to scale as payments and financial infrastructure always are. And that, as I said before, if we have the TPV, we have the merchant relationships as our product portfolio widens, we have that TPV and those relationships to cross-sell new products and also to figure out different ways that we can help our merchants across the markets where we operate with them. So we continue to see take rate as an output metric. The metrics we manage to our TPV growth which reflect market share, share of wallet and how our merchants choose. Remember that TPV for us is revenue for our merchants and then be able to drive gross profit growth operating profit growth and earnings growth as a consequence of that sustained high level of compounding TPV growth.

And with that, this concludes the question-and-answer session. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.