Good day, thank you for standing by. Welcome to the dLocal First Quarter 2025 Results Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to dLocal. Please go ahead.

Good afternoon, everyone, and thank you for joining the first quarter 2025 earnings call today. If you have not seen the earnings release, a copy is posted in the Financials section of the Investor Relations website. On the call today, you have Pedro Arnt, Chief Executive Officer; Jeffrey Brown, Interim Chief Financial Officer; 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 recording 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 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.

Thanks, everyone, for joining us today. Despite a more volatile global macroeconomic backdrop in 2025, the year has started broadly in line with our expectations. Building on the momentum of previous quarters, dLocal continues to demonstrate strong execution and to prove the resilience of our business model, once again achieving record highs across key financial and operational metrics, despite Q1 not benefiting from seasonal strength in e-commerce. We believe that consistent sequential growth is a confirmation of our company's ability to compound growth over extended periods of time, consequently, delivering shareholder returns. Net retention rate of TPV reached an impressive 144%. This figure demonstrates the defensibility of our business with our merchant base. Additionally, we're encouraged by TPV that grew north of 50% for a second consecutive quarter, underscoring the success of our strategy and the increasing demand for our services. These results reflect our continued commitment to innovation, customer satisfaction and expanding our footprint throughout emerging markets. Furthermore, we continue to carry out strategic investments in technology and operations that are directly fueling the strong results of the quarter and building a robust foundation for sustained financial performance by strengthening our infrastructure, optimizing efficiency, expanding our service offerings and elevating the quality of our service. Key accomplishments highlighted during the quarter include our TPV that reached the milestone of $8 billion, reflecting a 53% year-over-year growth or 72% in constant currency, and a 5% quarter-over-quarter increase in this volume. This performance has been driven by sustained expansion in cross-border payment volumes, supported by Chile, Pakistan, Nigeria, Turkey and Brazil, as well as robust growth across multiple verticals with notable contributions from sectors such as remittances, commerce, financial services and streaming. Revenue and gross profit hit record highs of $217 million and $85 million, respectively. And as in previous quarters, we continue to see the strength of continued geographic diversification with notable contributions from other LatAm markets during this quarter. While we do continue to invest in OpEx to support and accelerate our future growth trajectory, we are still driving operational efficiencies across the organization. The adjusted EBITDA to gross profit ratio for the quarter reached 68%, a slight improvement even when compared to the previous quarter, reflecting our ability to scale effectively. Despite ongoing investments, we've also continued to improve our revenue per headcount over the last four quarters. Finally, we've generated strong cash flow, with free cash flow to net income conversion at 85%, reinforcing our commitment to a high growth, expanding margin and cash generating financial model. Now moving on to our commercial update, I'd like to share some of the highlights from the quarter. You'll find additional detail in the accompanying slides. These results highlight our ability to maintain and strengthen these relationships over time, ultimately increasing our share of wallet with merchants. We continue to strengthen our partnership with Temu, enabling their customers to transact seamlessly across over 15 emerging markets in Africa, Asia and Latin America. Our partnership with Zepz is ramping up across key markets, demonstrating strong growth in Latin America as well as in several African and Asian countries. We remain committed to supporting the merchant's global expansion efforts, launching operations in further markets in Africa, which further strengthened their global footprint. And another noteworthy partnership has been Rappi, which has been achieving significant growth in both Colombia and Argentina after a latest round of new feature deployments on their behalf. On the technology front, our advancements were centered on leveraging automation and AI to drive operational efficiency and optimize performance across key areas. On the artificial intelligence front, the implementation of AI improved efficiency and customer experience and compliance monitoring by automating tasks and decisions previously handled manually. On the process automation front, automations have enhanced the handling of chargebacks and refunds, substantially augmenting merchant win rate on chargebacks and accelerating refund flows. On integration efficiencies, a redesigned integration system has accelerated the setup process for new integrations, cutting down the time required to fully integrate with dLocal from days to just a few hours. We've also made interesting advances in our MCP server and LLM-friendly API documentation for integration to dLocal, aiming for a near-future where simple prompts will allow our merchants' engineers to complete end-to-end integration with our systems through AI agents. And on the merchant settlement front, the implementation of an improved settlement system has streamlined operations and greatly reduced the need for manual intervention in merchant settlements. These automation initiatives are beginning to deliver results. More importantly, this is not a side project; it's a core strategic imperative that will shape our future. Over the mid-term, these results should deliver operational leverage and enhanced capabilities as we progressively integrate these technologies across the entire organization over the coming years. We anticipate these efforts will lead to a noticeable slowdown in mid-term hiring growth, improved operational leverage and ultimately a more robust and scalable business. Another key area of investment focuses on continuously optimizing performance to maximize conversion rates and TPV, while delivering trusted and agile services to our merchants. During the first quarter, we enhanced our smart request strategies further. These are machine-learning models that optimize conversion rates by dynamically changing the API message to the acquirer during authorization, which resulted in a 1.2 percentage point increase in conversion rates. On another front, in some African markets, we deployed Smart 3DS, strengthening payment security protocols for higher-risk transactions and driving a 6 percentage point improvement in conversion rates in those markets. We've also continued to be a driving force behind network tokenization readiness and support across networks in Argentina, Colombia, Uruguay and Peru, boosting system-wide conversion rates in those countries, with notable gains in Colombia at 1.6 percentage points and Argentina at nearly 1.5 percentage points. Finally, it's important to highlight our continuous efforts in growing our license portfolio, which increase our competitive advantage as our global merchants seek to navigate the complex regulatory environments we serve them in. During the first quarter, we added three new registrations to our portfolio: two in Argentina as aggregator and payment facilitator, and one in Chile as a sub-acquirer cross-border system operator. This first quarter of 2025 demonstrated strong execution across many of the levers of our strategic plan. Our commercial team effectively leveraged existing merchant relationships and established new partnerships. Financially, we executed our investment plan in a responsible and efficient manner. In addition, our operations and technology teams delivered improved effectiveness to our merchants, and our legal and regulatory teams focused on expanding our license portfolios. With that intro, let me hand it over to Jeff to take you through a more detailed overview of these first quarter results.

Thank you, Pedro. Good afternoon, everyone. I am pleased to be with you today for my first earnings call as Interim CFO. I want to thank the Board and the leadership team for their trust and support. And I look forward to working with all of you. Let's now turn to the results for the quarter. As mentioned by Pedro, our first quarter has progressed as expected, continuing the trends observed since the second quarter of 2024. We have consistently executed our strategy, demonstrating strong operational performance by once again delivering record levels of revenue and gross profit, along with disciplined cost management and ongoing geographic diversification. As a result, in the first quarter of 2025, TPV reached $8.1 billion, representing a growth of 53% year-over-year and 5% quarter-over-quarter. In constant currency, TPV would have grown 72% year-over-year. From a business line perspective, our cross-border flows grew 14% quarter-over-quarter and 76% year-over-year, reaching a milestone of $4 billion for the first time, mainly driven by remittances, commerce, financial services and streaming across different markets. Our local-to-local TPV decreased by 3% quarter-over-quarter and increased 33% year-over-year. The quarter-over-quarter comparison is explained by the commerce performance in Mexico, given the seasonality effect in the fourth quarter and partial loss of share of wallet with a large merchant. Our pay-ins business grew 2% quarter-over-quarter and 49% year-over-year with strong performance in on-demand delivery, commerce and streaming, partially offset by weakness in the advertising vertical. Our pay-outs business grew 12% quarter-over-quarter and 61% year-over-year, driven by remittances and financial services. Moving on to revenue. Revenue reached $217 million in the first quarter, up 18% year-over-year or up 36% on a constant currency basis, driven by the volume growth in Argentina and the performance in other markets in Latin America and Africa and Asia, with strong growth across commerce, remittances and on-demand delivery verticals. These results were partially offset by Brazil, despite experiencing year-over-year volume growth, reported a decline in revenue primarily due to the migration to the Payment Orchestration model, which brings lower take rates, and a shift in the payment mix from a large merchant. Furthermore, Egypt demonstrated strong year-over-year volume growth, however, its revenue performance faced tough comps due to a wider gap between the official and market exchange rates during the first two months of Q1 2024. On a quarter-over-quarter basis, revenue grew 6% above TPV growth positively impacted by higher cross-border share in the mix. The positive result was partially offset by Mexico, as I explained earlier. Turning to gross profit dynamics. We continue to benefit from the increasing geographic diversification of our operations. This diversification, as highlighted in previous quarters, enables the company to sustain strong growth momentum, even in the face of short-term challenges in certain markets. During the quarter, gross profit reached a record level of $85 million, up 35% year-over-year or close to 60% on a constant-currency basis, driven by the volume growth in Argentina, performance in Egypt and growth in other markets, particularly Chile and Turkey. These results were partially offset by Brazil, which in addition to the revenue effects previously explained, was also impacted by one-off incremental processing costs. On a quarter-over-quarter basis, gross profit increased by 1%, driven by Argentina with gross profit following revenue trends in addition to increasing advancement volumes, which have higher take rates and a wider gap between official and parallel effects in Q1 2025 versus Q4 2024, and two other LatAm markets with highlights being the positive performance in Chile. This result was offset by drivers in Brazil and Mexico as explained previously. In addition, despite volume growth across various countries, other Africa and Asia was adversely affected by increased processing costs in South Africa and Nigeria. Net take rate was down 4 basis points quarter-over-quarter, driven by mostly by one, weakness in a key merchant in the advertising sector, and two, the one-off increase in costs in Brazil, as I just explained. Those effects were partially compensated by higher FX fees in Argentina, higher shares of cross-border and the growth in frontier markets. Moving down our P&L, we maintained our disciplined expense management, improving operational leverage this quarter. While planned investments in technology and operations are expected to increase throughout the rest of the year, these results demonstrate our company's frugal culture and the inherent leverage within our business model. With this, for the first quarter, our total operating expenses are at $39 million, a 6% decrease quarter-over-quarter and an 8% increase year-over-year. On an annual comparison, most of the OpEx growth is explained by the increase in headcount as we continue to invest in our capabilities. On a quarterly basis, the decrease in OpEx is primarily attributed to a reduction in G&A and technology and development expenses, driven by the decrease in third-party services and travel expenses, combined with the timing of the implementation of new initiatives. This decrease was partially offset by growth in headcount within both technology and operations, particularly through the hiring of engineers and the expansion of our operational footprint in strategically important markets, and an increase in sales and marketing expenses driven by key commercial events that typically occur in the first half of the year. As a result, we delivered an operating profit of $46 million for the quarter, up 8% quarter-over-quarter and 70% year-over-year. Adjusted EBITDA reached $58 million, up 2% quarter-over-quarter and 57% year-over-year, representing an adjusted EBITDA margin of 27%. The ratio of adjusted EBITDA to gross profit was 68% for the quarter, slightly above the fourth quarter, marking the fourth consecutive quarter of improvement. Moving on to net income. Net income was $47 million for the quarter, up 57% quarter-over-quarter and 163% year-over-year. Compared to the prior quarter, the result was impacted by a positive non-cash mark-to-market effect related to our Argentine bond investments and lower finance costs. Our effective income tax rate ended at 10% for the quarter compared to 27% in the fourth quarter of 2024 or 16% when excluding the tax settlement as mentioned in the last earnings release, as a result of higher cross-border share of pretax income and a lower pretax income in Brazil given the higher costs as explained previously. Lastly, free cash flow for the quarter, which is the net cash from operating activities, excluding merchant funds, less CapEx amounted to $40 million, up from $33 million in the fourth quarter of 2024, representing a 22% increase. We ended the quarter with cash and cash equivalents totaling approximately $512 million, up $86 million versus the previous period and $125 million of short-term investments. Related to cash, you have probably already seen in our filings that the company has made some announcements regarding dividends. I'll turn it over to Pedro to tell you more.

Thanks, Jeff. So on the capital allocation front, we are announcing that our Board of Directors has approved both a dividend policy as well as the payment of an extraordinary cash dividend. The one-off dividend will be of approximately $0.525 per common share for a total cash outlay of $150 million. This decision reflects our commitment to returning value to our shareholders, while maintaining a disciplined approach to capital allocation. After careful consideration of our capital allocation strategy, we concluded that a dividend policy aligns with our long-term objectives. Our company expects to generate consistent cash flows over time. This cash generation will suffice to meet our strategic goals, including possible inorganic growth through targeted mergers and acquisitions, increases in CapEx when required and investments in larger business development deals. The dividend policy, which we are launching will provide an annual dividend payment equal to 30% of the company's free cash flow. This approach will allow us to return capital to shareholders in a methodical fashion, while ensuring that we maintain the flexibility to reinvest in growth opportunities as they arise. The first dividend under this policy would be payable in 2026 based on our free cash flow performance for the preceding year, once audited financials are released and pending Board approval at that time. The 2025 extraordinary dividend will be paid to all shareholders as of the record day of May 27 with a payment date of June 10th. In evaluating the most efficient way to return capital to investors, we carefully weighed the option of a dividend versus share buybacks. Given the current limited liquidity in our stock, we, along with advisors determined that a dividend was the optimal choice. A buyback program in the order of $150 million with future repurchases in the order of 30% of our free cash flow would have placed further liquidity constraints on trading volumes, potentially impacting the stock's performance. By opting for a dividend, we ensure a direct and equitable return of capital to our shareholders, while preserving the flexibility needed to execute our strategic initiatives effectively without placing additional strain on the daily liquidity of trading in dLocal shares. Before we wrap up, I'd like to take a step back and reflect on the bigger picture as we announce how we started 2025. While short-term macroeconomic headwinds persist across emerging markets, we remain deeply confident in the strength of the secular growth trends shaping these regions. Our long-term investment thesis is built around a massive and expanding addressable market, supported by powerful demographic and technological shifts. Nearly 90% of the global population under the age of 20 will reside in emerging markets by 2050. These regions are also projected to account for approximately 65% of global economic growth by 2035. This youthful, tech-native population is driving the rapid adoption of digital solutions, especially in areas like mobile payments, digital wallets and embedded financial services. This demographic and macroeconomic momentum reinforces our investment thesis, a massive addressable market, high top-line growth, attractive margins, strong cash generation and a robust innovation pipeline that allows us to be a market leader. At the same time, global trade dynamics are rapidly evolving. The ongoing discussion around tariffs and the fragmentation of traditional trade models are creating opportunities for both emerging markets and for dLocal. We are seeing a shift to a more multilateral, diversified global trading environment. And this shift is prompting developed economies to engage with emerging markets more strategically and with greater urgency, an environment that plays directly into our mission of empowering global merchants to localize and optimize their payment strategies in high-growth emerging regions of the world. While global players such as many of the Mega Cap companies have already embraced localization and alternative payment methods, a significant portion of the market remains as of yet unserved on this front. And as emerging markets gain prominence, demand for seamless localized payment solutions should only accelerate, substantially expanding our total addressable market. Crucially, this shift also underscores the importance of flawless execution. Competition in this space is expected to intensify. But we continue to differentiate ourselves through our ability to deliver reliable, cost-effective and frictionless payment solutions. Our ongoing improvements in Net Promoter Score, which results from our focus on addressing emerging market-specific payments fragmentation and merchant pain points through bespoke financial infrastructure solutions evidences stronger relationships with our partnerships, and the fact that we are uniquely positioned to capture the incremental volume arising from these structural shifts I've just mentioned. So the opportunity ahead is both massive and tangible, and we are confident in our ability to seize it. That's why we are reaffirming our full year guidance and remaining fully committed to disciplined execution and relentless drive on long-term sustainable growth. Thank you for your continued trust and support. And with that, we'd like to take your questions.

Operator Instructions. And our first question comes from the line of Tito Labarta of Goldman Sachs. Your line is now open.

Hi, good evening. Thank you for the call and for taking my question. I have one question with two parts. Can you provide more details about the growth in Argentina? You mentioned an increase in advance volumes, and I'd like to understand how sustainable that is. Do you think it can increase further, or was there any seasonality involved? Additionally, regarding Mexico, I recognize the peak volumes from commerce players, but I'm concerned about the partial volume loss with the largest merchants. Can you offer any further insights? Do you foresee this being a risk for the volumes there? Just trying to grasp what exactly is happening. Thank you.

Sure, Tito. Argentina appears to be a sustainable market. We've noticed an increase in interest from global merchants and a growing demand for alternative payment methods. As capital controls in Argentina are lifted gradually, companies are starting to view that market more positively and are willing to engage. In Mexico, we need to improve our execution and reignite growth. From a structural standpoint, there is nothing preventing us from achieving this with better execution. Despite the seasonal challenges, the market showed sequential growth, which is encouraging. Regarding the share loss, Mexico had been a strong performer for much of 2024, largely driven by a few key merchants. Therefore, even small changes in volumes from those merchants can significantly impact the market's performance. As we expand and diversify our merchant base, the influence of any single merchant will be less pronounced. There is no churn among merchants; rather, these are minor fluctuations in share of wallet that could go either way in the coming quarters.

Thanks, Pedro. That's helpful. I would like to discuss the take rate in Argentina, particularly in relation to the investments in higher volumes. How sustainable do you believe these take rates are in Argentina? Is there growing interest there, and do you think conditions may be improving?

Great. So Argentina is one of the markets where one of the products that we sell is a full payment suite, white-label, and as part of that, we also get involved in the discounting of receivables and in different financing alternatives for our merchants. There's no credit risk involved, nothing of that type. But it does generate an incremental take rate when there are periods where consumers are buying more on installments. Hence therefore, there's more advancing of receivables or factoring of receivables. So it's inherent to the business model. It's inherent to a particular product that Argentina has the greatest exposure to that product. And so, I think it's sustainable in that we have a higher take rate there as a consequence of periods where consumers are buying on longer installments and there's more factoring involved.

Okay. That's clear. Thank you, Pedro.

Thank you. One moment for our next question. And our next question comes from the line of Jamie Friedman of Susquehanna International Group. Your line is now open.

Hi everyone, congratulations on a strong start to the year. I have a couple of questions to address. First, regarding operating expenses, Pedro, I noticed they increased by 3% this quarter. This appears to be lower than what we expected on an annual basis, so I'm curious whether this is a temporary situation or if we can expect a return to higher growth. Secondly, concerning the 5 basis points impact from the advertising client, I closed the deck, but I remember there's a slide that shows the reconciliation of the take rate. It seems significant for just one client, so I’d like to know if this impact is expected to persist in the current guidance, along with any additional context you can provide. Those are my two questions. Thank you.

Hi, Jamie, this is Jeff. Thanks for your questions. On the OpEx side, I think I would just say mostly that there is a slight element of timing there, but I think really we're continuing to make sure, we're laser-focused on the expense base of the business and just being really responsible there.

It's a very large global client in the advertising space. And if their growth slows down relative to others, which doesn't necessarily mean that they're decreasing, then we have merchant mix shift in the TPV away from a higher take rate merchant with significant operations with us in Egypt, which is one of the very high take rate markets. And so as other merchants in other verticals outpace that merchant, it drives down the take rate. So it's a mix shift issue. This is a global very, very, very, very large Mega Cap merchant. And so that explains the 5 basis points of impact.

Okay. That makes sense. I'll drop back in the queue. Thank you.

Thank you. One moment for our next question. And our next question comes from the line of Guilherme Grespan of JPMorgan. Your line is now open.

Thank you, Pedro and Jeff. Congratulations on the quarter and on the capital agenda, interesting announcement. The two questions on my side. The first one is related to other LatAm. Pretty strong performance in the quarter. I tried to calculate here the gross profit margin. It was 40%, so nothing crazy. It seems to be less related to take rates and more related to volumes. So just want a little bit more color if that statement makes sense or not? And if you can provide a little bit more granularity on what happened in other LatAm that was so strong. And then the second question is actually a follow-up just in terms of the margins of the business, EBITDA margins also strong this quarter. Just wanted to understand how you're seeing the evolution throughout the quarters if we should see these margins by some reason decline or if it's natural to expect some either stable or some increase on those margins? Thank you.

I’m just gathering the numbers for you. Other Latin America has experienced significant growth in total payment volume, particularly in some of the emerging markets that are expanding their payment capabilities. There’s a factor regarding what we typically consider in terms of take rate, but we can also evaluate it from a gross margin perspective. In these emerging markets, we're seeing an increase in volume along with higher take rates. This trend is evident in some Central American markets and smaller South American economies. The improvements in take rates in these regions align with our overall strategy. Despite an overall decline in take rates, we believe there are strong compensating factors as we continue to enter new markets. Notably, Chile is performing particularly well within this region and has a higher gross margin profile compared to Brazil or Mexico, more closely resembling Argentina. This is attributed to the mix of merchants and payment methods. To summarize, the gross profit from other Latin America appears robust, with strong total payment volume growth and above-average take rates in these smaller markets. Regarding the evolution of EBITDA, there are timing factors related to our operating expenses throughout the year, which means it's not a straight line. There are additional expenses expected in the upcoming quarters. As we have communicated, this year is primarily focused on investment for us. However, the advantage of our financial model is that it is asset-light with considerable leverage potential. As we invest efficiently and in a controlled manner, we expect to achieve modest margin expansion this year. By the end of the year, we anticipate that the natural leverage of our model will begin to materialize. Considering the advancements in AI and automation that will enhance our cost structures, I believe we are well-positioned to return to previous margin levels and potentially exceed them when taking a mid-term approach to our cost structures and the opportunity to generate additional EBITDA. However, let's not rush ahead when considering projections for 2025.

That's clear, Pedro. Thank you for the explanation and congratulations again.

Thank you. One moment for our next question. Our next question comes from the line of Jorge Kuri of Morgan Stanley. Your line is now open.

Thank you. Hi, everyone, and congrats on the quarterly numbers. I have two questions, if I may. The first one is on Brazil. Would you mind double-clicking on both revenues and gross profit in Brazil? Revenues are down 20% year-on-year, gross profit down 27%, your gross profit margin down 400 basis points. You did mention that there was a one-off cost impact. How much of that decline in gross profit, is that one-off? How much of the decline in revenues is something you can gain back? How does the path forward look for Brazil, both revenues and gross profit? I mean, given it's still your biggest or second biggest market, I think it's important to drill a little bit more on the dynamics there. And then my second question is, I mean, I know you don't have a big CapEx, you're generating decent amount of cash flow, but it still feels like you know distributing half of your cash back to investors, which by the way, your float is very small. So it's back to the founders. In these early days of emerging market growth and e-commerce growth and everything you said, Pedro, at the end of your presentation about just the excitement and massive opportunity in emerging markets, wouldn't that be just best use in redeploying to the company? Thank you.

Great. Good questions, Jorge. So first one on Brazil where I think the glass half full is it's beginning to stabilize after a few quarters of shrinking in terms of volume as well as gross profit. At least the volumes have begun to pick up again far from where it needs to be, much like my answer on Mexico, nothing structural there. I think the tendency of moving from negative TPV to at least growing TPV is the right direction. And as we continue to grow and execute, ideally, we can see Brazil accelerate. And if not, it's not market dynamics, it's purely execution. Going into greater detail on the drivers of your question, there's two things. If you will recall, we had on a year-on-year basis, the now infamous repricing from our largest merchant, which was still present in our Q1 '24 numbers. So we don't really comp away from that until Q2. You also had the migration to the gateway product of a portion of our Brazilian volume, which as we said at the time is at a lower take rate. So that's what's driving the gross profit compression. Part of that is comped away starting Q2. The launch of the gateway product is more towards the second half of the year. And then there are about $2.5 million of one-off costs, which don't repeat themselves in subsequent quarters. So that's the impact on gross profit of these one-off costs in Q1 for Brazil. Brazil is still an enormous market with huge opportunities for us. We've seen cross-border flows pick up. We're seeing a lot of innovation on Pix, Automated Pix coming up and the emergence more and more of digital wallets. So again, if we execute, Brazil will deliver growth for the foreseeable future and it's down to us to capture that. On the capital allocation policy, a couple of thoughts, Jorge. One is, if you look at our history over the last few years, it's not that big of a divergence. I mean, the company deployed over $100 million in share buybacks in 2023. It deployed another $100 million in share buybacks in 2024. So to your point of reinvesting back in the business for growth, we get that, but the beauty of this business model and this financial model is that you don't need to throw capital at it. It's asset light, it's very driven by innovation, execution and service model differentiation and not by CapEx or compressing margins. If anything, I think we've said, it's another investment year. I don't know if the market love that, but we know it's what we need to do. So we are investing back into the business and then there's significant natural leverage in the business. Leaving all that cash on the balance sheet, I think doesn't make sense from an ROE perspective. It leaves us with an unlevered balance sheet with significant cash on it, which from a defensibility perspective is potentially not ideal either. And so we're executing the way we have been executing over the last few years, which is ensuring that we're investing where we need to invest, confident in the business model's ability to generate cash and then giving the portion of that cash that we feel is unnecessary back to investors. Share buybacks at this level of daily float is probably not a good idea, hence the dividend. In terms of our dry powder, we do also have significant short-term investments of about $120 million. So the overall cash available and the portion of this that we're returning is not exactly half of it. But again, it's fairly consistent with the level of cash returns from prior years. And the business has continued to grow and to be able to invest everywhere it needed to invest.

Great. Thank you, Pedro, and congrats again.

Thank you. One moment for our next question. And our next question comes from the line of Neha Agarwala of HSBC. Your line is now open.

Hi, Pedro and Jeff, congratulations on the quarter. Just two quick questions. First on Brazil and Mexico, the softness of volumes, where do you think these volumes are going in terms of your competitors? And second question, you noted that the processing costs in South Africa and Nigeria inched up a bit. Could you explain why that happened? Because you're noticing that the cost of service as a percentage of revenues have been going up. So just like to get more clarity on that and how that should trend? Thank you so much.

Mexico, when we refer to share of wallet losses, by definition, it means it's going to someone else. I think that's the nature of this business. We compete across over 40 markets. We generally are significant share gainers in most of our merchants and in most markets, that doesn't always play out that way from one quarter to the next. The beauty of an increasingly diversified Global South business, as I've been saying for a few quarters now is that weakness in one market in one quarter increasingly gets offset by strength elsewhere. So this quarter, we had weakness in gross profit in emerging Africa and Asia. We didn't have a great quarter in Brazil or Mexico, but the rest of LatAm and Argentina were able to pick up, whereas in the past, maybe we had a different situation. So, again, I don't think competitive dynamics are such that we can't reignite growth in any of these markets, but there will be quarters where we will lose share on some merchants and in some markets and many others where we will win share. Nigeria and South Africa, just a couple of quick thoughts there that I think are relevant. Typically, when you see these costs inching up, it will be driven by one of two factors, not lack of scale or lack of ability to flex that scale to improve cost on a per processor basis, but it typically means that either through smart routing decisions or merchant overrides, we've prioritized performance over cost on the pipes that we are routing merchant volume to in a specific market. So part of our management of all this is, we will at times send volume through a slightly more expensive pipe to ensure merchant performance thinking long-term. We will then work with processors where performance is weak, but have a better cost to see if we can improve that performance and then reroute back through those processors. And that's really the bread-and-butter of what we do. And the reason over longer periods of time, we believe we add enormous value to global merchants that simply don't have that kind of local capability to manage around multiple processors and their respective performances. The other driver that affects Nigeria and South Africa is also payment type mix. When you move away from just credit cards and you begin to look at ATMs and bank transfers, that could also have an impact as the mix between those different payment types shifts from one quarter to another.

That's great. If I can just go back on the competition, could you point out maybe one or two things that you could do differently or that you're trying to do to reignite growth in Brazil and Mexico as you pointed out?

I mean, our strategy continues to be one of landing new merchants. Brazil and Mexico for that should actually be very fertile ground. If you think of merchants that begin to look at localization of payments across emerging markets, typically the first markets where you do that are the larger, more attractive markets across the Global South. So you will start with Brazil, with Mexico, with an India, with an Indonesia. So there's a lot of trying to attract more merchants to our solutions in those markets. It's selling those markets to existing merchants that don't use us there and it's ensuring competitive conversion rates, pricing, uptime and latency for existing merchants that are already processing with us in those markets, so that they give us more share of wallet and not less share of wallet there. So there are multiple growth drivers and hence my conviction that there are no structural issues, this is about execution. And let's see what happens over the next few quarters. And ideally, we've found a way to reignite growth in those markets. And again, just to stress again, the increased diversification leaves us with confidence that weakness in one market will increasingly be able to be offset by strength in a growing number of other markets.

Perfect. Thank you so much.

Thank you. One moment for our next question. And our next question comes from the line of John Coffey of Barclays. Your line is now open.

Great. Thank you very much for taking my call. Pedro, one question for you. I think I read an interview that you made earlier in the year, I think you had mentioned that dLocal is considering some kind of M&A. And then again, you mentioned M&A, I think in either in your prepared comments or in response to somebody. So I was wondering when it comes to M&A, are you just sort of casually browsing the store right now or are there particular functions or licenses or capabilities or Rolodex of clients that you're actively pursuing and considering purchase for?

We believe the discussions surrounding mergers and acquisitions are becoming relevant as we observe a significant number of funded companies in the FinTech sector that, after a prosperous period, have become under-scaled. These companies are starting to recognize the need to align their products and services with larger firms that have stronger financial backing to sustain their growth. Consequently, we are exploring numerous promising opportunities within a valuation range that aligns with our available cash resources and future revenue prospects. While I wouldn't describe it as a Rolodex, there are many attractive assets available at appealing valuations that could serve as valuable additions to our current operations. If we identify a feasible opportunity and proceed with it, we will make sure to update the market accordingly. This is currently where our Corporate Development team is focusing their efforts.

Thank you. I have a follow-up for Jeff. Regarding your operating expenses for the next three quarters, I'm curious about the technology costs, sales expenses, and general and administrative costs. Should we expect Q2, Q3, and Q4 to be similar to what you experienced in Q1, or will there be higher peaks or lower points throughout these quarters? I'm trying to understand what the investment cadence might look like.

Hi, thanks. Looking ahead, there are some timing aspects to consider. We anticipate that operating expenses will increase along with our investments. We remain focused on avoiding overspending and maintaining diligence in our approach. Regarding the investment mix, we expect to continue shifting more towards technology, while also seeing increases in other areas.

All right. Thank you.

Thank you. One moment for our next question. And our next question comes from the line of Cassie Chan of Bank of America. Your line is now open.

Great. Thanks. I just wanted to ask you about trends that you're seeing in April or May thus far. Have they been relatively similar to what you've seen in the first quarter or in March? And are you kind of assuming that macro continues to remain volatile, but relatively steady overall for the remainder of the year? Thank you.

Sure. We're continuing to see things trend within the range of expectations. I think any bad news, we'd be informing it. I'd rather talk about Q2 once we report Q2, but I think that's the answer. Nothing significant to report at this time and a business that we understand had strong Q3, stronger Q4, continued momentum into Q1, and we're not seeing any relevant signs of slowdown.

That's helpful. Regarding the take rate bridge you provided, the increase in payouts is accompanied by some weakness in the key advertising merchant and one-off processing costs. Are these issues expected to persist into the second quarter and beyond? I'm considering how the gross profit take rate for the rest of the year should be modeled.

Okay. So if you look at the midpoint of our annual guidance, we expected a continued, yet, I would say, increasingly asymptotic compression in take rates. I think it was somewhere in the low teens full-year. So if you think of 4 basis points, 5 basis points for Q1, in general, things are tracking in line with our expectations on the product mix pricing front as well. Again, I think the bearish thesis that the repricing last year was the first shoe to drop. By now, we can eliminate that thesis. And now there's a secular trend towards take rate decline. We need to manage around that through pricing, through expansion into higher take rate frontier markets, as I mentioned earlier. I think you'll see as the year progresses, we're feeling better about our innovation pipeline. So our ability to push new products and services that ideally help us monetize better. So we're managing for take rate and Q1 decline, you have the bridge there and in line with our expectations.

Okay. Thank you.

Thank you. I'm showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.