DLocal Ltd. Q3 FY2026 earnings call

• Volume Growth: Total Payment Volume (TPV) reached $18.3 billion, up 77% year-over-year, marking the eighth consecutive quarter of >50% growth. Net revenue retention was 140%, and TPV retention was 173%, driven by deepening relationships with existing merchants.
• Profitability & Efficiency: Gross profit grew 28% YoY to $132 million. Operating profit increased 37% YoY to $76 million, achieving an operating profit-to-gross-profit ratio of 58%, the highest since 2023. This was supported by automation and cost discipline, which reduced total OPEX by 11% sequentially.
• Regulatory Moat: The company secured additional licenses in the US, Canada, and Tanzania, now holding 42 licenses/registrations plus 10 authorizations across 26 markets, providing a competitive advantage in complex regulatory environments.
• Geographic Expansion: While Latin America remains core, management highlighted Asia as a major future growth vector, citing large addressable markets and fragmentation that favors D-Local’s localized infrastructure approach.
• Shareholder Returns: Adjusted free cash flow reached $99 million for the quarter ($182 million YTD). The company repurchased ~$34 million in shares during Q3, contributing to record diluted EPS of 23 cents.

D-Local operates as a unified payment infrastructure provider for emerging markets; the transcript does not break down financial performance by distinct product segments. However, volume trends indicate that Ride Hailing and On-Demand Delivery contributed significantly to growth (representing 62% of TPV), followed by Financial Services and Remittances (25% of TPV). Social Media Advertising saw strong but seasonal spikes in Brazil, while E-commerce remained stable with growth in social commerce offsetting cross-border softness.

• TPV Growth: Reiterated guidance for full-year TPV growth in the upper end of the 60%-70% range. Management noted that growth is moderating due to tougher comparisons from prior merchant ramp-ups.
• FX Headwinds: Expressed concern regarding unanticipated foreign exchange headwinds in Brazil, Mexico, and Argentina for Q4, estimating a potential negative swing of 6 percentage points.
• Seasonality: Warned that Q4 results are highly sensitive to the upcoming peak shopping season, which could alter current expectations in either direction.
• Margins: Expressed confidence in continued margin expansion on an annual basis, driven by automation and scale, though quarterly figures may remain 'lumpy'.

• Foreign Exchange Volatility: Significant exposure to FX fluctuations in key markets like Brazil, Mexico, and Argentina, which recently impacted gross profit margins.
• Market-Specific Cost Pressures: Mexico experienced elevated processing costs and lower take rates due to concentration among large merchants at lower pricing tiers, temporarily impacting profitability.
• Seasonal Sensitivity: Heavy reliance on Q4 holiday spending patterns creates uncertainty in short-term revenue projections.
• Long Sales Cycles: New merchant acquisition involves lengthy sales cycles, making near-term revenue contributions from new logos unpredictable.

Q: Analyst asked about the timeline for Asia's contribution to gross profit after hiring a local CEO, and clarified the use of proceeds for the $150M credit facility. / A: Pedro stated Asia is too early for material impact in 2027 but expects mid-to-high single-digit top-line contribution once operationalized. Guillermo confirmed the credit facility provides holding-level liquidity for general corporate purposes and buybacks, noting the balance sheet remains conservative with leverage around half a turn of EBITDA.