Welcome, everybody. My name is Sebastian Rodriguez. I'm a Managing Director with the Fintech Investment Banking franchise, and I am joined today by Pedro Arnt, who's CEO of dLocal, one of the very high growth and interesting stories in Fintech that I had the pleasure of covering. Thank you first and foremost, Pedro, for making the time today to join us and attend our conference. I thought I'd start our conversation a little bit where you kind of remind us what are some of those competitive advantages, what are some of those distinctive elements of the dLocal story that you think place you best or makes you great within the ecosystem? Yeah. Thanks for having me. I think it's been two years that I hadn't been back. Great to be here. The investment thesis, and I think understanding why we add so much value to our merchant, starts with understanding how different payment ecosystems and financial infrastructure ecosystems are between the developed world and the emerging world. The emerging world is characterized by extreme fragmentation, very different payment ecosystems from one market to the next, and in many instances, legacy technology that is hard to optimize on. If you're one of our large enterprise clients whose core markets payments are a bit of an afterthought for you because everything runs quite well, and you're now figuring out your go-to-market strategy for the emerging world, very quickly you realize that payments is a significant friction point and bottleneck to growth. You also realize that if you were to try to solve for that, you'd have to go knee-deep in building teams, building infrastructure across dozens of markets that on a standalone basis are just not that relevant to you. Or you can choose a single integration into dLocal, which automatically allows you to then toggle on and off 60+ emerging markets, thousands of payment mechanisms being done through a company, ourselves, who has built the pipelines, have built the stakeholder relationships, have the necessary licenses and regulatory IP to abstract all that complexity away for you, and we've been building this for over 10 years now. That's a significant moat, A, to anyone else who would like to enter the market and replicate what we've built. More importantly, it's a phenomenal value construction for our merchants, and that's why you see net revenue retentions like we've been delivering of north of 150%. That's great to hear, and obviously we've all been witnesses of the incredible performance of the company. You at the helm now close to four years since you joined the company. Obviously a lot of ground has been covered both operationally as well as with clients. Where are you focusing your time primarily these days? Where are you seeing the opportunity for dLocal? It feels like four. It's actually been two as a sole CEO and getting up on three, considering the joint CEO stint. A lot has happened. I think, I'd characterize it as the first year or 18 months, a lot of that was about just making sure that we had relayed the foundations for future growth. The CEO usually needs to tend towards the stuff that needs tending to. You don't always have to focus on the more long-term strategic stuff. We had to rebuild large parts of the team. We had to focus on really ramping up investments and focus on areas such as, you know, middle offices, back offices, built out a more robust regulatory outreach. I'd characterize a lot of that as somewhat of a defensive agenda. I think over the last six months, I'm spending a lot more of my time on what I think is a more offensive agenda and what the CEO agenda should be longer term. Spending more and more time on the product innovation pipeline. How do we ensure that some of the newer products that we're coming to market with so that we're not so mono-product, just pay-ins and payouts, but our buy now, pay later platform, our alternative payment method platform, our merchant of record platform, omnichannel, so physical payments presence. How do we make sure that those products are shipping on time and then iterating sufficiently so that they're successful? Geographic expansion, I think, is back on the map, not necessarily in terms of adding new markets, but we are, I think, consolidated leaders in LATAM. We have a very strong position in Africa that we need to sustain, but we're now beginning to look at Southeast Asia as the final frontier to continue growing. More and more of my time will be spent on figuring out how do we unlock what we think is tremendous value out of leveraging the existing merchant relationships we have, but offering them Asia and Southeast Asian countries to go along with the African and Latin American portfolio we already offer them. Okay. That's great. I wanna start digging a little bit into the performance. During your most recent earnings, you held your guidance unchanged, and particularly for Total Payment Volume, which is obviously best in class and very attractive at 50%-60% growth coming mostly from your existing merchants. What are some of the elements that could potentially impact that guidance to the upside and then potentially to the downside? Yeah. I think our indication, we have this slide where we even when we don't raise guidance, we give an indication of where we think we're coming in in terms of the top end of the existing guidance or the bottom end. If you look at that, I think we're clearly indicating that we're seeing really strong momentum on what we consider the more important part, which is TPV and gross profit, right? How are we doing in terms of share of wallet and growth? That's looking really good when we look at the business through May. We indicated that's coming in towards the top end of guidance, and it's pretty broad-based strength when you look at different verticals, different markets. There are more markets where we're ahead of schedule, way more than markets where we're behind schedule. I think we'll talk about OpEx in a second. I think that's an important one to cover. In terms of general outlook on the business, it started off the year with really good momentum. Risks are more, I think, the conceptual risks that typically are part of an emerging market story, right? What happens with FX relative to the dollar? Do we have any major geopolitical disruption that hurts emerging markets? Or do we see any changes in tariff or trade barriers that hurt many of our cross-border merchants? Even on that front, it's actually looking positive. Brazil just lowered de minimis on e-commerce imports, which typically helps our merchants a lot. The risks are, I think, the inherent risks in operating across 60 very volatile emerging markets, none that particularly come to mind. So far throughout the year, I'd say more optimism than anything. That's great to hear. Obviously it is an evolving situation with a lot of things to continue to monitor. One of the other elements of the dLocal story that has always been a focus from investors is the evolution of your take rates. It's been a focal point ever since the IPO. When we parse through the different elements of the dLocal story, pay in versus pay out, local to local versus cross-border, card versus APMs, where do you see or where have you identified the most competitive pressure or where you're paying a little bit more attention to that take rate? If I can ask a quick follow-up there, how does that change as your relationships with your enterprise clients get even larger? I increasingly am tempted to say that declining take rates are an inherent feature of what we're trying to build and not a bug to our strategy. Now, I recognize that for the capital market story, it's complex because at the end of the day, you need to underwrite a model. What are we trying to manage for? Payments eventually will be a scale play, right? I would much rather have these very sizable global contracts across multiple markets with the world's leading and most demanding technology companies, because eventually I'll figure out the monetization. We will launch new products to cross-sell. We will be able to sell them on much more complex frontier markets with higher FX spreads and higher processing fees. I need to have them processing through me and not through a competitor. That'll give me the scale to lower my cost, and it'll give me these massive commercial relationships from which to cross-sell into. As a management team, our algorithm is much more around how do I continue to win share of wallet, win these large deals that generate incremental gross profit dollars so that once the operational leverage kicks in, that's even more earnings. Take rate is an outcome where you then divide my TPV by my revenue. As long as my revenue is growing as solidly as it's been growing, and my OpEx is growing less than that so that I'm generating incremental earnings and cash, that's the right strategy. Because when I look out five years, if we're the scale leader for the Global South, only good things will come from that, regardless of what the take rate is. If on the other hand, we try to defend current pricing too much, things could go in the different direction. That's, I think, the overall strategy where maybe, I don't wanna say the Street isn't getting it, but it's a slightly different focus where for modeling purposes you need take rate. We just need to continue to deliver these kinds of growth. If you look at our gross profit growth for Q1, for example, we're growing gross profit at 40% on TPV of 70% with a midpoint of guidance for gross profit, which was at 25%. I think we're absolutely killing it versus our own stated expectations, regardless of what's happening at a take rate level. That's a great way to look at it and definitely appreciate that context. You talk about the Global South, which I love the expression, that focus on emerging markets, where we've seen a lot of growth as of recently in the global economy, but obviously does come with exposure to countries that are viewed as more volatile or potentially less predictable. Talk to us a little bit about what have you done from a hedging perspective, from a treasury management perspective or otherwise to try to protect the business from any sudden changes in capital controls or sharp devaluations or otherwise? From I'd say that first degree of exposure to inherent emerging market volatility, the business is pretty sophisticated in its management of that kind of exposure. Currency risk is, I would say, fully hedged either because if it's a contract by which we take on the FX risk, that's literally hedged. A lot of our contracts, the merchant will take on the short-term FX exposure until we expatriate for them. The way that FX volatility and emerging volatility typically affects us, and it is inherent to the volatility in our results, is not direct exposure that we don't manage away. It's simply that when you do have these emerging markets where currencies will devalue significantly or where macro becomes very volatile, merchants will typically de-emphasize those markets. There will be less marketing spend, less focus on that market, and just TPV slows down overall. Things like capital controls or regulatory shifts, that's not really under our control. What we have gotten a lot better at is at having very constructive and fluid relationships with regulators, so insofar as there are ways to advocate on behalf of our merchants for the regulation to not hurt their businesses too much. Remember, many of these merchants are very relevant across the digital south. At the core of our mission, it's how do we bridge the digital gap that exists? How do we get a student in Lagos to be able to access Microsoft 365, right? We do have some, I'd say, weight with regulators, but institution of capital controls, changes in fintech regulation, they are what they are, and our job is really just to help our merchants navigate it as best as possible. The inherent volatility is there. There are always second-order impacts. The first order direct management of risk and volatility, I think we've done a good job at. Okay. I wanna maybe stay still on the financial profile elements. Let's talk a little bit about OpEx. OpEx, big focus in your most recent quarter. You mentioned there's an expectation that your operating leverage should resume or should start to kick in a little bit further in the back half of the year. We've heard from industry participants, others in the payments industry, about the need to make investments as they prepare for the impact and the adoption of be it agentic commerce, stablecoins, other new technologies. Are there additional pockets of investment that you envision for dLocal in the near to medium- term beyond what has been shared with the public? Yeah. Let me just take us on a little bit of a ride on this OpEx one because I think it's important. I mean, we set out and communicated very clearly about two years ago that there was an investment cycle that we were going to go through where we were playing a little bit of catch-up in areas of the business that we wanted to invest in more aggressively. A lot of that was product R&D. Some of it was feet on the ground. We cover 60 markets. A big part of what we, in essence, sell to our merchant base is, "I will be your feet on the ground for financial infrastructure." A lot of that was compliance and regulatory, and another pocket of investment has been on AI and automation, and I'll circle back to that in a while. How much we wanted to spend in OpEx for that catch-up, nothing's ever set in stone, but I'd say it was a clear, pretty clear understanding of this is the stuff we need to do regardless of the financial algorithm we want to deliver on the model. We were going to do that. We also started signaling to the street that that investment cycle would end last year. The third thing we signaled is like any investment cycle, and especially the way this one played out, where in 2025, not by design here, but it was more back-ended in the second half of 2025. When you then roll over into Q1 of this year and annualize that OpEx, in addition with the fact that we always give our merit cycles and salary adjustments in January. We were going to have weak margins in the first half of this year, even though the investment cycle had ended. The sequential increase in OpEx you will see slows down a lot, then when you hit the second half of the year, because the comp gets easier, you begin to see the operational leverage kicking in. That's been very much by design. Our objective is to deliver on that, and that's also why we've been saying in terms of guidance that even with the prior period one-off that made the OpEx issue even worse in Q1, 'cause that was unexpected and it was about $9 million from 2023, 2024, and 2025. We're still on track to hit our guidance even if you don't need to adjust away that incremental cost. It shows the confidence we have in managing how much we spend. Now getting to your question. What about the dynamically changing landscape around you and all the innovation that's occurring? I think my answer to that is when your top line is growing the way ours is, it's not a matter of I don't have any incremental spend to lean into these new technologies. I'm still growing GP in Q1 at 40%. Even if I'm growing my OpEx at 20%, that's significant incremental spend that I can lean into a lot of these new technologies and still deliver operational leverage. I think you're in a different situation if your top line is growing a lot less than that, where do I find the incremental dollars for innovation? Fortunately, that's not a challenge we have. I think I'm fairly confident that we can still continue to invest in the business sequentially for growth to sustain these really high levels of TPV we're delivering and have the inherent operational leverage of our financial model kick in. Mm-hmm. Okay. Why don't we shift gears a little bit into competition? We know that the dLocal strategy is one that is very emerging market focused. What has prevented some of the larger global guys, like the Adyens and the Stripes of the world, to name a couple, from further their presence in some of the locations where you partake beyond the Brazils and the Mexicos, which are deemed to be very large focal points of opportunity? Do you see them being more front-footed going forward, or do you see any new challengers coming into the arena that you should be on the lookout for? Yeah. I think I'm supposed to answer this one first of all by saying I can't speak on behalf of the strategies of those companies that I respect tremendously. I can just give you my view of what I think is different about emerging markets, which requires a very different type of company to be successful in, right? If you think of the developed world of payments, one could argue that probably the success of Adyen and Stripe in large part is due to having controlled their entire stack, to having built vertically to compete with many legacy players that had become an agglomeration of M&A through the years, older technology stacks. It was very hard for these legacy players to move at the speed of someone who owned every single line of code. That's absolutely the right strategy for the developed world, where the overwhelming majority of transactions occur on credit card rails, and where primarily you are a merchant acquirer with a very sophisticated tech stack. When you move over to the developing world or to the emerging world, it's a very different market structure, right? First of all, you have more than half of the population that doesn't use or more likely doesn't have a credit card. Fragmentation is massive. Performance from existing acquirers actually varies tremendously. What is required and what we're great at is not so much that vertical owning of the entire stack. What's required is speed to market, speed to add new payment methods, and optimize on top of them. It's much more of what I call a horizontal layer, where global merchants plug into us, and then we abstract all that complexity, not by trying to rebuild the financial infrastructure stacks of each market, but by simply integrating into it and optimizing for it. It's a completely different playbook. It's a completely different set of key success factors, and one that quite frankly I don't think translates that successfully for my developed market peers that have structured their companies in a very different way. We've been competing with these guys in Brazil, for example, for over a decade. Adyen has been in Brazil for longer than dLocal has existed, and so far we've done phenomenally well in that competitive battle. You could say it's 'cause they haven't leaned into it. I don't think that's the answer. I think the answer is we're particularly equipped for those kinds of markets, and those are the only markets we do. Brazil, for me, is a matter of life and death. For them, it's probably market number whatever in a long list of markets that are much larger and more relevant to them than that. Again, I think we're uniquely built to be successful across emerging and frontier markets, and I don't know if that ports over to these other competitors. I don't even know if most of our footprint will ever be of interest to them. I like the competitive dynamics of the business I'm in. That's great to hear. I wanna talk also a little bit about new technologies, and there has been a lot of buzz recently around agentic commerce in particular. In your most recent call, you mentioned that, to use a baseball term, we're probably early innings as it relates to the impact that these technologies have in your financial profile today, and that your merchants are perhaps a little bit more interested on APM, real-time networks, local card schemes, other more near-term-oriented needs. However, medium to long- term, there's obviously a big opportunity as there's further adoption to agentic commerce and other new technologies. How do you view dLocal's positioning today to take advantage of growing adoption of agentic, and is there anything you have that potentially positions you even better to face that opportunity? I'll give you a very candid answer on agentic, which is more a process approach than an actual answer to your question. The reason for that is, quite frankly, I don't think anyone knows how this one plays out. I'd be very wary of everyone who tells you they do. I think once we came to that realization, the question for us was less about what are we going to build for the agentic future and how that will look. By the way, if you look at some of the more recent things around OpenAI and agentic commerce, it's kind of been like two steps forward, three steps back now. Rather how do we build in the appropriate process to make sure that as the picture clarifies, we're in the right spot and we can very quickly then move to where the puck is going because we don't even know where the puck is going to right now, to use a hockey analogy. What does that mean in more specifics? We said, okay, there are certain things that we absolutely need to deliver in 2025. The first one is we need to enable our stack so that if any agent shows up at dLocal, so to speak, with a payment mandate, we can receive and process that payment mandate and all the posterior pain points that may exist in accordance with the protocol. Second, we need to be close to the protocols that we think may have the biggest chance of winning. We work with Google, we work with OpenAI and Stripe, we work with Visa and Mastercard to make sure that we're ready and enabled should mandates from those protocols arrive. The third piece we're doing is if you think about it, these protocols are being written very much with a developed market mindset. They're being optimized first and foremost for stable and then probably for credit cards. Who's advocating on behalf of Pix or of Yape in Colombia or Mobile Money in Kenya so that they're also included in these protocols? That's something we're trying to take upon ourselves to say, "Hey, what about global APMs and local payment methods that have completely different logics? Can we also get those included into what an agent can offer? Those are the building blocks of what we wanna do 2026. We think that that keeps us close enough to what's happening so that if and when it becomes clearer, we can start adapting. One more thought. If you assume these agents will be fully rational optimizers per transaction of how to pay, I actually think that that generates greater fragmentation, and that plays to our advantage ’cause it's not, "Hey, I'm just gonna use my credit card ’cause of the loyalty points." It's, "No, wait a minute. On this one, you should be using this payment method. On this one, you should be using this other one." That increased fragmentation plays to our advantage, we'll have to see how all this plays out. That's a great way to think about it in terms of the positioning that you serve in the ecosystem where you have all these deep connectivity into different APMs. I wanna turn a little bit to cash flow generation and capital policy, if you don't mind. With cash flow first, perhaps a little bit of movement in your most recent quarter as it relates to working capital, which you expect to reverse in the near future. Anything from a long-term trend perspective from cash flow realization or cash flow conversion that could impact the financial profile going forward? Yeah, and I think it's positive. First of all, just to be categorical, if you look at cash flow from operations this quarter, or another way is if you adjust back, and we gave the disclosures on two interim issues that from a reporting perspective made the optics of our free cash flow look bad, we're still converting free cash flow at roughly 100% which is very consistent with our historical trend. This business has been a cash-generating machine. When you look at our capital allocation policy, I think it reflects the confidence we have in that. We said, "Look, I've just told you how going forward I actually think the business delivers more margin. That means that I can self-fund my strategic vision by generating more cash. It's extremely asset light. I don't have big CapEx investments. I do need a liquidity buffer because I operate in volatile parts of the world. So fine, let's assume a liquidity buffer. I'm still generating sufficient cash. Let's have a dividend policy. That's a predictable, repeatable way of returning cash to investors. 30% of annualized prior year free cash flow. I still have excess cash. Do we let it sit on the balance sheet and e ventually look like a central bank or do we also try to give that back to investors? What we said is, "Look, when I do the math, this is an unlevered balance sheet, so I even have room to lever it up a little bit. When I look at my ability to buy back shares, it makes all the sense in the world from a return on equity and a positive impact on earnings per share." We've announced just year one, $300 million of share buybacks. If you think of our share count trajectory going forward, it should have decreasing number of shares on growing earnings power and free cash power. It's an incredibly powerful financial model if we execute behind it. That's one disconnect that I do see between, I think, how investors are looking at the name and the actual power of the financial model we've been delivering on. Okay, that's great. You touched a little bit about two of the elements of capital policy that I wanted to touch upon, dividends and share buybacks. Obviously, dLocal has been known for being an incredibly powerful organic story from a growth perspective compounding over time, but you have done a couple of M&A deals, most recently the AZA deal. How should we think or how should investors think about your M&A strategy going forward and how does that play into your overall equation? Good. We did spend a lot of time thinking this one through when we were laying out that capital allocation policy. The reality with M&A is we'd like it to be a part of our arsenal, but, and there's a big but there. First of all, right now the disconnect between private world valuations and public market valuations in the payment space make most of these conversations 30-second conversations. Even when we've tried to do anything actionable, it's very difficult because that disconnect still persists. Obviously private markets are right and public markets are wrong, right? Second, in general in tech, M&A, at least my experience, unless you're a really good serial acquirer, like some folks in the audience who know how to do that, you destroy value more often than you generate value. You need to integrate tech stacks. It's difficult. We're not big fans. What's left in the M&A landscape is if there's something that's really transformative and you're looking for an amazing asset, f ine, go tell your shareholders that there's a specific reason why you're either doing an equity raise or you may interrupt your share buyback program because there's this just absolutely crystal clear opportunity that you don't wanna miss out on. M&A isn't really baked in to the capital allocation policy except for the kind of stuff we've been doing, which is small scale tuck-ins, which we can more than cover either with our liquidity buffer or just the annual margin, and these are usually small deals where you're buying capabilities, you're buying contracts, or you're buying people. Okay. That's great to hear. We only have a couple minutes left. I really like that element of the story in terms of the conversion of EBITDA, the ability to reduce your overall share stack and the compounding elements therein. I thought that that was really good. Anything else in the dLocal story that perhaps the market doesn't fully appreciate that would be good to clarify? I tend to not like to be one of those company leaders that blames the market for not getting it. I think public markets are incredibly efficient, right? I do think right now what happens, but this is normal, is there's a little bit of throwing out the baby with the bathwater. We're all bucketed into sort of, you know, "Oh, it's the payment space." I genuinely believe that dLocal is unique in where it plays in the payment space, right? It's a secular bet on emerging market digitalization, you don't have to go and choose who's gonna be the African e-commerce winner, who's gonna get AI right in Brazil among Brazilian companies. This is a proxy investment for the success of the largest and most successful digital companies. If the Googles, Netflix, Spotify, Amazon, Shein, DiDi, all my clients do well across the Global South, I will simply ride their coattails to sustained high levels of compounding growth, and those players will do well across the emerging world over the next three, five, and 10 years. Yes, it's a financial infrastructure company, but one that is positioned within that space in a very unique, I think, combination of profitable cash generative growth that sometimes I worry when we get bundled in with everyone else in the space. I'm a big believer in that over time the weighing machine beats the voting machine. It's just a matter of keep executing. Okay. Well, on that good note, thank you, Pedro, for making the time for us. Appreciate you taking our questions. Have a great conference. Thank you very much. Thank you, everybody.