DLocal Limited (DLO) Earnings

Management highlights

### 10-Year Company Milestone & Core Strategic Thesis - The company marks its 10th founding anniversary and 5th anniversary of its NASDAQ IPO, with sustained 90% compound annual TPV growth from $100 million in 2016 to $47 billion in the trailing 12 months ending Q1 2026, now operating in over 60 markets, including new entries Algeria, Qatar, Kuwait, and Oman. - The core strategy remains unchanged: deliver localized payment infrastructure for global merchants across emerging markets via a single API, with 38 active licenses/authorizations across 26 markets and 16 additional license applications pending. The platform reaches ~70% of the global population, serving over 760 enterprise merchants. - Localization is a core competitive moat: local payment methods are the primary transaction method in most emerging markets, and local processing of global card schemes delivers up to a 20 percentage point conversion uplift versus international processing. Coverage of domestic card schemes (e.g., MADA in Saudi Arabia, Verve in Nigeria, MISA in Egypt) is required to compete in these markets, creating high barriers to entry for competitors. ### Business Diversification & Merchant Growth - The company has broad vertical diversification, with all verticals growing between Q1 2024 and Q1 2026. Top verticals include e-commerce (largest), ride-hailing/on-demand delivery, remittances (fast-growing), travel, and gaming (high potential emerging verticals). - Revenue retention has exceeded 140% for four consecutive quarters, with deepening merchant relationships: top large merchants consistently expand their footprint with D-Local, adding new markets, payment methods, and products over time. Three of the company's top 10 TPV merchants all grew TPV over 70% YoY in Q1 2026. ### Completed Strategic Acquisition - The acquisition of AZA assets closed in Q1 2026. While the acquisition is not material to near-term results due to regulatory delays that changed the final deal structure, it adds key customer relationships, intellectual property, licenses, and talent that accelerate the company's expansion across African markets, reinforcing its long-term commitment to the high-growth region.

Guidance

- Full-year 2026 guidance remains unchanged from prior updates, with no material upward or downward revision. Management reaffirms that H1 2026 will see continued margin pressure from the 2025 investment cycle annualization, with operating leverage expected to improve meaningfully in H2 2026. - OPEX growth is expected to moderate throughout 2026 as the 2024-2025 investment cycle concludes, with targeted corrective actions (a hiring freeze for the remainder of 2026, accelerated automation, and lower expected share-based compensation expense) expected to drive an improving OPEX trajectory in the second half of the year. - The temporary working capital drag from merchant advance operations in Argentina is expected to gradually reverse over the coming quarters, releasing previously tied-up capital and delivering a one-off positive free cash flow impact by the end of 2026. - The card present product, being built for a large global merchant client, is scheduled to launch in H2 2026, initially in a small number of Latin American markets, with expansion dependent on initial success.

Segment performance

Overall: Total Payment Volume (TPV) reached $14.1 billion, up 73% year-on-year (YoY) and 7% quarter-on-quarter (QoQ), marking the sixth consecutive quarter of over 50% growth. Gross profit hit a new record high, with reported operating profit of $53 million ($57 million excluding a one-off $9.7 million prior-period tax adjustment), growing 25% YoY on an adjusted basis. Reported net income was $42 million ($52 million adjusted), growing 11% YoY adjusted. By geography: Mexico, Brazil, and Argentina (top three markets) grew consistently; Chile, Nigeria, Colombia, and Vietnam also contributed strongly. Argentina saw a strong Q1 recovery from Q4 2025 election-related FX volatility and high funding costs, with materially lower funding costs and strong volume growth. Brazil had more than doubled gross profit YoY, but saw a sequential Q1 decline after an exceptionally strong holiday season Q4, driven by seasonal e-commerce seasonality and a mix shift to lower-monetization PIX payments. Africa and Asia contributed 29% of total gross profit, growing 16% QoQ (outpacing the company's average growth rate), driven by strong performance in Nigeria, Mozambique, and Vietnam. By vertical: Travel led QoQ growth at 38% following a new large expansion deal with a key global travel merchant. On-demand delivery grew 24% QoQ, driven by expanded deals with regional and global merchants. E-commerce, the company's largest vertical, grew 40% YoY and 2% QoQ, with sequential softness driven by seasonality after the Q4 holiday peak. Remittances, one of the fastest-growing verticals, saw sequential softness also driven by seasonal trends.

Risks & headwinds

- A one-off $9.7 million prior-period tax adjustment was recorded in Q1 2026 related to updated tax treatment for an installment payment product in certain markets. Management is working to pass associated costs through to merchants, and any residual unpassed impact is expected to be manageable, with no additional material prior-period adjustments expected. - Seasonality and mix shifts can create sequential quarterly volatility in gross profit and margins, particularly in large markets like Brazil following strong holiday quarter performance. - Expansion into new markets like Southeast Asia and new product lines like card present payments carries inherent execution risk, as these expansions require new capabilities and operational adjustments.

Analyst Q&A

• Q: OPEX came in slightly above expectations in Q1 2026. What drove this overage, what corrective actions are being taken, and what should investors expect for the rest of the year? /

  A: The overage stemmed from multiple small factors: higher discretionary third-party spending and slightly higher average salaries, not one large single item. A full net hiring freeze is now in place for the remainder of 2026, alongside accelerated automation and expected lower share-based compensation expense for the rest of the year. Combined with the natural fade of the late 2025 investment cycle annualization, these actions will drive improving operating leverage, particularly in H2 2026, keeping full-year guidance on track.

• Q: How do merchant advance/prepayment services impact revenue and working capital, and how is this business progressing? /

  A: Revenue from short-term merchant advances and installment advances is included in fee revenue, but the business is not yet large enough to require separate breakout. The temporary Q1 working capital drag is limited to the SPV funding structure used for Argentine operations, not an inherent feature of the business. This drag will reverse over the next three quarters, releasing all tied-up capital and delivering a one-off positive free cash flow impact, with no structural change to underlying cash generation, which remains strong.

• Q: What is D-Local's strategy for Asian markets, given the more developed, competitive local financial infrastructure compared to African markets? /

  A: Most of the current Africa and Asia segment growth comes from Africa and the Middle East; Asia is still in early stages of expansion. D-Local has found that high fragmentation across Asian markets and poor existing conversion for global merchants means its core emerging market localization playbook is applicable to Asia, and take rates for the enterprise segment are not as low as initially expected. The company will build out Asian capabilities gradually by cross-selling to its existing global merchant base, with no large step-up in planned investment, and multi-year growth potential due to the large size of the Asian market.

• Q: What is driving recent growth in the new travel and gaming verticals, and what is the update on the planned card present expansion? /

  A: Growth in new verticals comes from leveraging D-Local's core cross-market payment infrastructure with targeted vertical-specific product customization. Travel growth is driven by recently closed large deals with global leaders that are now ramping, with a solid ongoing pipeline. Gaming is earlier stage, with attractive higher take rates from the company's merchant-of-record offering, but slower commercial ramp. The card present product is being built for a large global client, and is on track to launch in H2 2026 in initial Latin American markets, with step-by-step expansion planned after launch.