DLocal Limited Class A Common Shares 2026 Q2 Earnings Call

Thank you. Good afternoon, everyone, and thank you for joining us today.

Our results for the second quarter of 2026 are yet another proof point of our continued traction and execution. There are four main trends I'd like to kick off with that best summarize the current strength of our business. TPV reached $17.7 billion, accelerating to 92% year-over-year, the highest growth rate since the first quarter of 2022. We've processed more in the second quarter than what we did throughout all of 2023. Second, our net revenue retention was 153%, the fifth straight quarter above 140% as we continue to deepen our relationships with our merchants. Our gross profit hit $127 million, up 29% year-on-year. We've now hit an annualized rate of more than $500 million in gross profit. Finally, our operating leverage is improving.

With operating profit as a percentage of gross profit up 6 percentage points quarter-over-quarter to reach 50%. As messaged previously, we expect further operating leverage improvements to kick in during the next 2 quarters as we benefit from the deployment of automations and AI we have been investing in and spending in key areas that was front-loaded to the first semester of this year softens out. On TPV, the metric that reflects market share, growth was extraordinary this quarter, but even more importantly, has been consistently strong. TPV growth has remained above 50% year-over-year for 7 consecutive quarters, with the last 3 quarters at above 70%. Furthermore, growth has accelerated over the past 5 quarters, reaching its higher year-over-year rate in over 4 years.

Although the pace and scale of this growth will naturally create more demanding comparisons as we move through the second half of the year and into 2027, what we are seeing today reflects the positive returns on investments we have made in our platform and our portfolio of licenses. It serves as a testament to the trust merchants place in us as they build and grow across emerging markets. This trust is a direct result of the execution on our value proposition. Through a single integration, our merchants access the locally relevant payment methods, local card schemes, and the financial infrastructure they need to operate and grow across more than 60 emerging markets. Our licenses, local teams, and operating expertise help them navigate complexity and improve performance in each country, ultimately increasing substantially their chances of a successful go-to-market deployment in the places that they partner with us.

Today, more than 760 leading global merchants trust DLocal. This includes 4 of the largest ride-hailing companies operating in emerging markets, 5 of the 10 largest e-commerce platforms, the top 5 video streaming platforms, and 7 of the 10 largest remittance companies, amongst many other of the world's best businesses. We are now also starting to serve some of the world's preeminent AI companies and digital asset exchanges. The trust that these merchants place in us is translating into deeper relationships over time as they add countries, payment methods, and products. Consequently, our TPV retention rate of 188% this quarter demonstrates the depth of these relationships. This quarter alone, several Tier Zero merchants had significant ramp-ups in some of our largest markets, such as Brazil and Argentina, demonstrating that the opportunity remains substantial even in more established markets.

We also continue to see our merchants expand into new geographies at a very rapid pace. Across our portfolio, we continue to gain both share of wallet and market share across the Global South. Share of wallet increased by 2 percentage points year-over-year in the first half to the low teens, and we now estimate our share of EM digital payments to be in the low single digits. Despite our growth, the opportunity to deepen relationships across our merchant base and capture even more new merchants remains massive. Asia-Pacific is a clear example of this and one we're increasingly excited about. It is the largest, very fast-growing, and highly fragmented region with significant untapped opportunity that we serve. It has become one of our strategic priorities as we have been expanding our presence and investments throughout that region.

All of this growth that we're seeing today reflects the investments we've made in our platform over the last several quarters and years. Those investments are delivering tangible results, and they continue to strengthen the foundation for our next phase of growth. Our focus remains on three areas. First, we continue to broaden our offering and invest in performance through our optimization capabilities. In the end, the performance and breadth of our One dLocal offering is the single most important factor for our continued growth and success. Second, we are embedding AI and automation across the business. This is already increasing our development capacity with meaningfully higher monthly deployments and shorter lead times. We expect the positive impact on our cost structure from our automation efforts to become increasingly visible starting in the second half of the year across different areas of the company.

Third, we're expanding the value-added services we offer merchants, creating additional opportunities and revenue streams over time. We will soon launch dMor, our dLocal Merchant of Record solution, through which DLocal acts as the legal seller on behalf of the merchant, allowing us to offer our clients a more comprehensive go-to-market solution. Our buy now, pay later offering continues to expand and improve and is now live in eight markets. We will continue to invest with discipline behind these priorities and the others we have as we continue to scale out the business. With that, let me turn it over to Guillermo to walk you through our quarterly financial results.

Thank you, Pedro. Good afternoon, everyone. Let me start by briefly summarizing the key financial highlights for this record quarter. As Pedro mentioned, we had an exceptional quarter in volume, which translated into another quarter of record gross profit. Operating profit improved 22% sequentially, and we also began to see operating leverage improvements emerge during the quarter, with operating profit as a percentage of gross profit up six percentage points sequentially. Net income increased 28% year-over-year and roughly 30% sequentially. EPS also benefited from the execution of our share repurchase program. Cash generation remained strong with adjusted free cash flow conversion of 86% of net income in the first half of the year. Let me now dive into the details, beginning with volume performance. Volume reached $17.7 billion in the second quarter, up 92% year-on-year.

First half growth was exceptional, broad-based across our merchants and verticals, and helped by favorable FX. Ride hailing was the largest contributor to sequential growth. One large global merchant was an important driver, but the growth wasn't concentrated just there. Several ride hailing and on-demand delivery merchants expanded meaningfully too. Travel remittances, e-commerce, SaaS, and advertising also contributed to growth. Financial services were down modestly, mostly seasonality as some travel-related merchants in LATAM. Our business mix continues to evolve. Local-to-local flows hit 61% of TPV, up six percentage points from Q1. The increase in Local-to-local mix was primarily driven by the growth of ride hailing and on-demand delivery, which are inherently Local-to-local businesses. This volume growth translated into another record quarter of gross profit. Gross profit reached $127 million, up 29% year-over-year and 7% sequentially. Brazil and Argentina were the primary drivers.

In Brazil, gross profit reached a record $40 million, supported by the ramp-up of ride hailing and travel merchants alongside sustained e-commerce growth. Argentina also delivered record gross profit with $20 million, driven by broad-based growth across e-commerce, ride hailing, and on-demand delivery, as well as lower advancements costs. Elsewhere in Latin America, gross profit grew 6% sequentially and 32% year-over-year. Mexico kept growing volume well. Gross profit was modestly lower sequentially, though, and the mix shifted to Local2Local, and some large merchants ramp-ups reached their final pricing tiers. In Africa and Asia, gross profit was down sequentially. That is mainly due to a lower share of higher spread markets like Mozambique and Vietnam, where Q1 had gains that do not necessarily recur, as we flagged last quarter. Turning to expenses, total operating expenses were $63 million, up 46% year-over-year, and down 4% sequentially.