Participants

Mirele Aragão; Head, Investor Relations; Dlocal Ltd

Pedro Arnt; Chief Executive Officer, Director; Dlocal Ltd

Jeffrey Brown; Interim Chief Financial Officer; Dlocal Ltd

Tito Labarta; Analyst; Goldman Sachs Group Inc

James Friedman; Analyst; Susquehanna International Group.

Guilherme Grespan; Analyst; JPMorgan Chase & Co

Jorge Kuri; Analyst; Morgan Stanley & Co LLC

Neha Agarwala; Analyst; HSBC

John Coffey; Analyst; Barclays

Cassie Chan; Analyst; Bank of America Merrill Lynch

Presentation

Operator

Thank you for standing by. Welcome to the dLocal first-quarter 2025 results call. (Operator Instructions) Please be advised that today's conference is being recorded.
 I will now like to hand the conference over to dLocal. Please go ahead.

Mirele Aragão

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 financial 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.

Pedro Arnt

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 benefitting from seasonal strength in e-commerce.
 We believe consistent sequential growth is a confirmation of our company's ability to compound growth over extended periods of time, consequently delivering shareholder returns. Our net retention rate of TPV reached an impressive 144%. This figure demonstrates the defensibility of our business with our merchant base.
 Additionally, we are 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 our strong results this quarter and building a robust foundation for sustained financial performance by strengthening our infrastructure, optimizing efficiency, expanding our service offerings, and elevating service quality.
 Key accomplishments highlighted during the quarter include: our TPV 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 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. As in previous quarters, we continue to see the strength of continued geographic diversification, with a notable contribution from other LATAM markets during the period.
 While we 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 reached 68%, a slight improvement when compared to the previous quarter, reflecting our ability to scale effectively. Despite ongoing investments, we have continued to improve our revenue per headcount over the last four quarters.
 Finally, we 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, we would like to share some of the highlights from the quarter. You will 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 them.
 We continue to strengthen our partnership with Temu, enabling their customers to transact seamlessly across more than 15 emerging markets across Africa, Asia, and Latin America. The partnership with Zepz is ramping up across key markets, demonstrating strong growth in LATAM, as well as in several African and Asian countries. We remain committed to supporting the merchant's global expansion efforts, launching operations in new markets in Africa, further strengthening 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 optimized performance across key areas.
 On the artificial intelligence front, the implementation of AI improved efficiency in customer experience and compliance monitoring, by automating tasks previously handled manually.
 On the process automation front, automation was enhanced in handling chargebacks and refunds, substantially augmenting merchant win rate on chargebacks and accelerating refund flows.
 On integration efficiencies, a redesigned integration system dramatically accelerated the setup process for new integrations, cutting down the time required from days to just a few hours. We’ve also made advances in our MCP server and LLM-friendly API documentation for integrating to dLocal, aiming for a near future where simple prompts will allow our merchant’s engineers to complete end to end integration with our systems through AI agents.
 And on the merchant settlement front, the implementation of an improved merchant settlement system 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 midterm, the 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 midterm 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, a machine learning model that optimizes 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.
 In some African markets, we deployed Smart 3DS, strengthening payment security protocols for high-risk transactions and driving a 6 percentage point improvement in conversion rates in those markets. We've 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 yearly 1.2 percentage points.
 Finally, it's important to highlight our continuous effort in growing our license portfolio, which increases our competitive advantage as our global merchants seek to navigate complex regulatory environments we serve them in. During this quarter, we added three new registrations to our portfolio, two in Argentina as aggregator/payment facilitator and one in Chile as sub-acquirer cross-border system operator.
 The 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 our first quarter results.

Story Continues

Jeffrey Brown

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 growth 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, growth 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 increasing 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 2024, or 16% when excluding the tax settlement as mentioned in the last earnings release, as a result of higher cross-border share of pre-tax income and a lower pre-tax 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 filing the company has made some announcements regarding dividends. I'll turn it over to Pedro to tell you more.

Pedro Arnt

So, on that 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 while ensuring that we maintain 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 FY 2025 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 date of May 27, with a payment date of June 10.
 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 our 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 our 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 would like to take a step back and reflect on the bigger picture as we announce how our 2025 has started. 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 momentum reinforces our investment thesis; a massive addressable market, high topline 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 evolving. The ongoing discussions around tariffs and the fragmentation of traditional trade models are creating opportunities for both emerging markets and 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 dLocal’s mission of empowering global merchants to localize and optimize their payment strategies in these high-growth 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 underserved on this front. As emerging markets gain prominence, demand for seamless, localized payment solutions will 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 partners and the fact that we are uniquely positioned to capture the incremental volume arising from these structural shifts.
 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 with relentless focus on long-term, sustainable growth.
 Thank you for your continued trust and support. And with that, we are happy to take your questions.

Question and Answer Session

Operator

(Operator Instructions) Tito Labarta, Goldman Sachs.

Tito Labarta

Hi, I'm Tito. Thanks for taking my question. I got one question for two parts, I guess. Can you maybe give some color on the growth in Argentina. You mentioned there that there was some increase in advance and volume. So just to understand that a little bit better. How sustainable is that? Do you think that can increase? Was there any seasonality to that?
 And then in Mexico, I understand the deep volume from the commerce players. Just the partial volume loss with the large merchant. Can you give any additional color? Do you expect that to be a risk at all? The volume there, just understand what's going to happen? Thank you.

Pedro Arnt

Sure, Tito. So Argentina seems sustainable. We've seen a pick up in interest in that market from global merchants and a search for more alternative payment methods. So as capital controls are gradually lifted in Argentina, we do begin to see companies begin to look at that market again with favorable eyes and leaning into it. Mexico, we need to execute better and reignite growth there.
 We don't see anything from a structural perspective that shouldn't allow us to accomplish that with better execution. It did grow sequentially despite the seasonal weakness. So that's, I think, positive.
 And on the specific explanation on share loss, I think Mexico had been the strongest grower throughout large parts of 2024 with concentration around a few merchants that drove a lot of those growth. And so small shifts in volumes from those merchants can drive a lot of the slowdown in that market. As we continue to scale it out and diversify across more merchants, then the impact of a single merchant isn't as big. There is no merchant churn. These are small changes in share of wallet that can go in either direction in subsequent quarters.

Tito Labarta

Thanks, Pedro. That's helpful. Maybe just on the take rates in Argentina, you mentioned that those advanced involving set higher take rates. How sustainable is that, particularly if there's more interest in Argentina, maybe things become a little bit easier? Are those take rates in Argentina sustainable, you think?

Pedro Arnt

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 merchant. 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. And 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.

Tito Labarta

Okay, that's good. Thank you, Pedro.

Operator

Jamie Friedman, Susquehanna International Group.

James Friedman

Hey, guys. Congratulations. Good start to the year. I'll ask a couple just up front to get them out of way. So first, on the operating expenses, Pedro, they grew 3%. This is adjusted operating expenses, grew 3% in the quarter. That did seem to be lower than what was contemplated on an annual basis. So just trying to figure out, is that going to come back? Was that temporary? That's the first one.
 Then, yeah, in terms of that five basis point impact from the advertising client that's on slide, I closed the deck already, but it's that slide where you show the reconciliation of take rate. I was just wondering, that seems like a lot for what seemed to be one client. Is that contemplated to continue in the current guidance, and you know, any context on that one? So those are the two questions. Thank you.

Jeffrey Brown

Hi, Jamie, this is Jeff. Thanks for your questions. On the OpEx side, 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.

Pedro Arnt

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 and other verticals outpace that merchant, it drives down the take rate. So it's a mixed shift issue. This is a global -- very, very, very, very large mega cap merchant. And so that explains the five basis points of impact.

James Friedman

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

Operator

Gail Elmer, JPMorgan.

Guilherme Grespan

Thank you, Pedro, 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, what happened in other LATAM that was so strong?
 And then the second quarter is actually a follow-up, just in terms of the margins of the business EBITDA margins, also strong this quarter. Just want 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.

Pedro Arnt

Sorry, just trying to get the numbers for you. So other LATAM has shown really strong TPV evolution across some of the more frontier-ish markets that are showing positive growth as merchants globalize payments more and more. So there is an element of what we typically look at in terms of take rate. But you could also look at it in terms of gross margin, where you're beginning to have more volume and more frontier markets with higher take rates, some of the Central American markets, some of the markets in South America that are not the large economies.
 So it is partially driven by improved take rates in frontier markets, which we've always said is part of our thesis and part of the reason that we believe that although there is a secular decline in take rates, there are strong offsets to that as well as we continue to diversify into more and more markets. Chile was particularly strong within that segment of other Latin America. Chile does have a higher gross margin profile than Brazil or Mexico, more in line with Argentina, and that's a consequence of merchant mix and payment mix.
 So that's the answer on other LATAM gross profit TPV versus take rates. I think it's double strength there. It's strong TPV growth. And yes, because they are smaller markets, they tend to command take rates that are above the average.
 On the EBITDA evolution, as Jeff mentioned, there is an element of timing of the expenses throughout the year on OPEX. So this is not linear. There's more expenses planned for subsequent quarters. And as we made clear, this is still a year of investment for us.
 Having said that, I think the beauty of this financial model is that it is an asset-like model with significant leverage opportunity. And so when we say we're still investing behind the business, if we do so efficiently and in a controlled manner, we can hit our target of modest margin expansion this year. And then exiting this year, we should be able to allow the natural leverage of the model to begin to flow through.
 If you overlay to that everything that's happening on the AI front in automation, particularly to help you improve cost structures, and I tried to address this in the prepared remarks, I think it's positive in terms of our ability to return to margin levels we've had in the past and eventually even surpass those when you take more of a midterm view of how we're thinking through cost structures and potential to generate incremental EBITDA. But let's not get ahead of our skis for 2025 just yet.

Guilherme Grespan

That's clear, thank you for the explanation. Congratulations again.

Operator

Jorge Kuri, Morgan Stanley.

Jorge Kuri

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 of how much of the decline in revenues is something you can gain back out of the path forward look for Brazil both revenues and gross profits? 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 know you don't have a big CapEx, you're generating a decent amount of cash flow, but it still feels like distributing half of your cash back to investors. 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 used in redeploying to the company? Thank you.

Pedro Arnt

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 began 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 lower take rate. So that's what's driving the gross profit compression. So 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 picks, automated picks coming up, 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. Don't know if the market loved 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 a 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, and 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 had to continue to grow. and to be able to invest everywhere it needed to invest.

Jorge Kuri

Great. Thank you, Pedro, and congrats again.

Operator

Neha Agarwala, HSBC.

Neha Agarwala

Hi, Pedro. And congratulations on the quarter. Just two quick questions. First, on visit to 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 we're noticing that the cost of services 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.

Pedro Arnt

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 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 eking up, it'll 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 APMs, bank transfers, that could also have an impact as the mix between those different payment-type shifts from one quarter to another.

Neha Agarwala

That's good. If I could 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?

Pedro Arnt

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 a Brazil, with a 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 the 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.

Neha Agarwala

Perfect, thank you so much.

Operator

John Coffey, Barclays.

John Coffey

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 was considering some kind of M&A. And then again, you mentioned M&A, 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 their particular functions or licenses or capabilities or Rolodex of clients that you're actively pursuing and considering a purchase for?

Pedro Arnt

So I think the comments on M&A and the way we're looking at M&A right now is, we do see something that I think many of us in the fintech space had kind of been talking about for a few years now, but is finally happening, which is you begin to have a fairly large cohort of funded companies through the heydays of fintech that have become subscale and really begin to realize that they need to nestle their product, their service, under a larger company with a more robust balance sheet to be able to continue to grow.
 And so we're looking at a lot of interesting opportunities in a valuation ZIP code that we can carry out with the cash that we have on hand and the cash that we look to generate. So the answer to the Rolodex, think, I don't know if it's a Rolodex, but there are a lot of opportunities to find good assets at now attractive valuations that could be interesting add-ons to what we're doing. And if we find something that is executable and we execute, obviously, we'll communicate to the market. But that's where the Corp Dev team is spending their time.

John Coffey

Great. Thank you. I just have one follow up for Jeff. When we consider your OpEx for the remaining three quarters, I was wondering -- and I know it's hard to say, but given that you're in this period of investment, when we think about like technology costs or sales costs or G&A, should we expect the Q2, Q3, Q4, are these roughly in line with what you see in Q1 or is there some sort of like higher peaks or low points during the remaining three quarters? Just trying to get a certain sense of what that investment cadence could look like?

Jeffrey Brown

I think, looking forward, again, we mentioned there's some timing elements here. We do think OpEx will go up and the investments will go up, again, still staying very focused on not overspending and being very diligent there or prudent there. When we think about the mix, I think that we'll continue to invest more and more and shift more onto the tech side more than anything, but I think we will see an increase across the board.

John Coffey

All right, thank you.

Operator

Cassie Chan, Bank of America.

Cassie Chan

Great. Thanks. I just wanted to ask about trends that you're seeing in April or May that have 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.

Pedro Arnt

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.

Cassie Chan

Okay, that's helpful. And then I guess on that -- the take rate bridge that you guys provided, so the higher share of payouts, was some weakness in the key advertising merchant and then the one-off processing cost. Are these expected to all continue into QQ and the rest of the year? Just thinking about how the shape of the rest of the year comes out in terms of the gross profit take rates that we should be modeling.

Pedro Arnt

So if you look at the midpoint of our annual guidance, it expected a continued, yet I would say, increasingly asymptotic compression and take rates. I think it was somewhere in the low-teens, full year. So if you think of four or five 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.

Cassie Chan

Okay, thank you.

Operator

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.

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