dLocal Q1 2025: Record Growth,Rising Profits
Taking a Look at dLocal's (DLO) Earnings Results.
dLocal (DLO) kicked off 2025 with impressive momentum, delivering its highest quarterly results to date. The Uruguay-based payments platform continues to connect global merchants with emerging market consumers at scale, & Q1 showed record transaction volumes and significantly improved profitability. Total Payment Volume (TPV) surged by over 50% YoY, fueling double-digit revenue growth. Despite a slight decline in take rates (revenue per dollar of TPV), DLO managed to expand its margins through disciplined cost control and a richer mix of cross-border transactions. The result was a notable jump in earnings & even a sizable cash dividend declaration, a strong signal of management’s confidence. Below is a summary of the key financial highlights for the quarter:
Q1 2025 Key Financials
TPV (Total Payment Volume): $8.1B, up 53% YoY (72% growth in constant currency) a record high, reflecting stronger demand.
Revenue: $216.8M, up 18% YoY, and up 6% sequentially from Q4.
Gross Profit: $84.9M, up 35% YoY, on gross margin of 39.2% (vs 34% a year ago).
Net Take Rate (Gross Profit/TPV): 1.05%, down from 1.19% in Q1 2024 (indicating some yield compression on volume).
Adjusted EBITDA: $58M, up 57% YoY, with Adjusted EBITDA margin rising to 27% (from 20% a year ago).
Net Income: $46.7M, up 163% YoY (more than doubling last year’s profit). Diluted EPS came in at $0.15 (vs $0.06 a year ago).
Free Cash Flow: $39.7M, up 200% YoY, representing 85% conversion of net income complimenting a strong cash-generative model.
Cash Balance: $512M as of quarter-end, strengthened by Q1 earnings.
Dividend: Declared a cash dividend of $0.525/share (totaling $150M) and signaled a plan to initiate annual dividends going forward.
This performance marks DLO’s strongest quarter ever in terms of scale & profit. Revenue growth of 18% lagged TPV expansion, which points to a lower blended take rate; however, the quality of revenue improved, more cross-border volumes (which carry higher fees) helped revenue outpace volume on a sequential basis. Meanwhile, operating expenses grew only 8% YoY, far below gross profit growth, pointing to operating leverage. As a result, Adjusted EBITDA and net income climbed sharply, and margins expanded notably from last year. It’s also worth noting that on a constant-currency basis (excluding FX swings in volatile emerging market currencies), revenue growth would have been 36%, indicating underlying business momentum is even stronger than the headline USD figures suggest.
Key Operational Highlights
Merchant Relationships: DLO continues to deepen its role with major global merchants. In Q1, management said they strengthened partnerships with fast-growing players like Temu, Rappi, and Zepz. Temu, the popular global e-commerce marketplace, is leveraging DLO to reach customers in 15+ emerging markets, exposing their appeal as a one-stop solution for local payments. Latin American super-app Rappi expanded its integration with the company (for instance, enabling Brazil’s PIX payments for Rappi users), signals their importance in regional fintech plumbing. And on the pay-out side, Zepz (parent of remittance platforms WorldRemit and Sendwave) is now partnering with DLO to streamline cross-border payouts. These wins demonstrate their strong value proposition for both pay-in and pay-out use cases, attracting marquee clients in e-commerce, digital services, and fintech verticals.
Geographic Dynamics: LatAm remains the growth engine for DLO, contributing the majority of volume & revenue. The company saw especially strong results in markets like Argentina and Chile in Q1. In Argentina, they benefited from increased volumes (partly inflation-driven) and wider FX spreads, boosting gross profit. Chile and other “Other LatAm” markets also delivered growth as more merchants and payment methods were added. On the other hand, a couple of factors tempered the overall picture: Brazil experienced a take-rate headwind as some large clients were migrated to a new Payment Orchestration model (offering merchants a unified gateway to multiple providers), which comes with lower fees for DLO. This strategic move should help retain and capture high volumes in Brazil long-term, but it did pinch margins in the short run (along with some one-off implementation costs). Meanwhile, Mexico saw a seasonal dip after a strong holiday quarter and even a partial volume loss from one large e-commerce client, a reminder of competitive pressures in that market. Africa and Asia (the “Other” regions) delivered growth in payment volumes, but FX depreciation and higher processing costs (notably in South Africa and Nigeria) meant that in USD terms these regions contributed less to profit growth. S, currency volatility was a theme this Q, with many emerging market currencies weaker vs a year ago, creating an FX drag on reported growth. Even so, dLocal’s broad geographic reach (30+ countries) and multi-currency operations provide diversification, and LatAm’s outperformance more than offset softer spots this quarter.
Vertical Trends & Product Mix: Their expansion remains broad-based across sectors and use cases. On the pay-in side (merchant payments from consumers), online retail/marketplaces and on-demand services continue to drive volumes, for example, international merchants like Temu, as well as streaming, ride-hailing, and travel companies using DLO to localize payments. On the pay-out side (mass payouts and remittances), the company is gaining traction with digital platforms that need to disburse funds to users in emerging markets, Zepz being a prime example in remittances, and other clients in areas like freelance marketplaces and gig economy payouts. The balance between pay-ins and pay-outs provides them with multiple growth levers: cross-border e-commerce flows, local alternative payment methods (like Pix in Brazil), & global remittance/cash-out flows are all part of its network. Also, cross-border transactions increased as a share of the mix in Q1, which helped boost revenue per volume on a sequential basis. As they integrate more local payment methods and offers value-added services (like its orchestration platform), it aims to capture a greater share of each transaction flowing through its system, albeit sometimes at the expense of a lower percentage take rate. The overall trend is of scale with diversification, more countries, more verticals, and a healthy mix of pay-in & pay-out, which together contributed to the record $8.1B TPV this quarter.
Valuation & Outlook
With this strong quarter, management sounded optimistic about sustaining growth while continuing to invest efficiently. Although the company hasn’t provided formal full-year guidance, the Q1 results set a positive tone for 2025. Profitability is ramping faster than expected, Adjusted EBITDA margin of 27% is already ahead of where the company was a year ago, and net income margins have improved substantially (net profit was 22% of revenue in Q1). This profitability, combined with strong cash flows, allowed them to initiate a new dividend policy without hampering its ability to fund growth. The decision to pay out $150M to shareholders and plan for annual dividends suggests that management is confident in the stability and trajectory of future earnings. It’s a noteworthy development for a high-growth tech company, essentially balancing growth with shareholder returns.
From a valuation perspective, I am reaffirming my intrinsic value estimate in the mid-teens ($14-$15 per share) for DLO. This is based on growth rates, margins, and risk profile. My model’s outputs following Q1 remain roughly in the same range as before, if anything, the stronger cash generation and profit uptick slightly bolster the valuation, while the moderation in take rate and continued FX volatility temper excessive optimism. At the time of writing, DLO shares trade in the low-teens, which is in line with, or at a modest discount to, this intrinsic value range. That implies the stock is reasonably valued relative to fundamentals, with some upside if they can continue executing well. In short, Q1’s performance supports the $14–$15/share fair value assessment, and I feel comfortable sticking with that target for now, perhaps with a bias toward the upper end if current trends persist.
My Take
As an investor watching/holding DLO, I come away pretty optimistic. The company delivered what I hoped it would: accelerating volumes, improving profitability, & tangible signs of business momentum across clients/regions. That said, it’s important to remain clear-eyed about the challenges and risks that come with DLO’s growth story, especially in the complex markets it operates in. Let’s break down the picture:
The “Bad”
One flag from the quarter is the continued compression in take rates. Gross profit as a percentage of TPV (around 1.05%) has edged down both yoY & sequentially. This trend isn’t entirely unexpected, as DLO scales with large merchants and enters more competitive segments, the pricing (fee %) can come under pressure. We saw a bit of that in Mexico, where the loss of some volume from a big client hints that either a competitor stepped in or the merchant negotiated better terms. Similarly, in Brazil the shift to the orchestration model, while strategic for keeping volumes, means they are passing through more of the transaction value to partners (hence a lower cut for itself on those flows). In essence, they are betting that it can make up for a lower take rate with much higher volume and stickier merchant relationships, which is a reasonable trade-off, but investors should watch this metric. If TPV growth were to slow without a stabilization in take rate, revenue growth could disappoint.
Another risk factor is FX and obvious macro volatility. By nature, their business is tied to emerging markets, which is a double-edged sword. These regions offer high growth, but their currencies and economies can swing unpredictably. Q1’s constant-currency growth of 36% (vs 18% reported) tells the story: sharp devaluations in places like Argentina and Turkey, or economic hiccups in Africa, can materially drag on the USD results. While DLO has navigated these headwinds well so far (and even benefits from some inflation-driven volumes in countries like Argentina), there’s no guarantee that won’t become a bigger issue in the future. A sudden currency restriction, regulatory change, or economic crisis in a key market could impact transaction volumes or profitability. The company does mitigate some risk by being diversified geographically, but it’s something to keep in mind here, investing in a payments provider across 30+ emerging economies is not going to be a smooth, linear ride every quarter.
Also, competitive pressure looms in the background. DLO has a unique niche connecting global merchants to local payment methods, but it’s not without rivals. Regional players (for example, domestic payment processors in Brazil or Asia) and global fintechs (like Adyen, Stripe, PayU, etc.) are all eyeing emerging market flows. There’s also the possibility of large merchants attempting in-house solutions or local integrations to bypass third-parties. So far, the company’s one-stop platform and deep local expertise have been key differentiators, a Temu or Netflix would rather plug into DLO than juggle dozens of local integrations themselves. However, as the opportunity grows, we should expect more competition on price and features. The fact that their opex only grew 8% YoY in Q1 suggests disciplined management, but also one that must continue investing in tech, compliance, and sales to stay ahead. Any slowdown in innovation or service quality could open the door for competitors, so I’ll be watching how they continue to differentiate its offerings (for instance, its move into orchestration, value-added services, & perhaps additional financial products for merchants).
The “Good”
On the brighter side, their execution this quarter was excellent, and it reinforces my confidence in the long-term thesis. The company proved that its growth is not just flash-in-the-pan post-COVID rebound, but rather a sustained trend. TPV growth above 50% YoY, on an ever-larger base, is truly impressive. It tells me that global merchants are seeing strong consumer demand in these markets and that DLO is capturing more of that flow. Even more encouraging, profits are rising even faster. Net income more than doubled YoY, which indicates the business model can scale profitably. The fact that Adjusted EBITDA grew 57% on 35% gross profit growth means they kept a tight handle on costs while expanding, another sign of operational discipline. This kind of margin expansion (EBITDA margin up to 27% from 20% YoY) is exactly what you want to see as an investor in a fintech growth story: as volumes surge, the incremental cost to process each additional dollar is low, and that operating leverage is now flowing through to the bottom line.
I’m also very encouraged by management’s shareholder-friendly moves and what they signal. Initiating a substantial dividend (roughly a 5% yield at the time of announcement) is not common for a young high-growth fintech. They didn’t need to do this, they’re already profitable and had plenty of cash, so the decision to return $150M to shareholders speaks volumes. To me, it shows that the leadership (under CEO Pedro Arnt) is confident in the predictability and durability of the company’s cash generation. They’re effectively saying: “We’re generating more cash than we need to reinvest at the moment, and we want to reward investors without compromising growth.” That’s a great position to be in. Even after the dividend, their balance sheet is very strong (over $350M in corporate cash remains, aside from merchant float). This means they have room to pursue strategic investments, geographic expansion, or even targeted acquisitions, all while keeping shareholders happy. It’s a delicate balance to strike, and so far they’re doing it.
The strategic trajectory looks very promising. The addition of high-profile clients like Temu, Rappi, and Zepz in Q1 isn’t just about name-dropping, it shows DLO is becoming an indispensable partner for the new wave of global businesses expanding into emerging markets. These relationships tend to be sticky and volume-rich. For example, Temu’s expansion could bring a flood of transactions through DLO’s pipes as the platform gains popularity in places like LatAm, Southeast Asia, and Africa, exactly their wheelhouse. Each new merchant or use-case also adds to their network effects: more local payment methods and payout corridors get built out, which in turn attracts more merchants who need that coverage. It’s a virtuous cycle. Moreover, the company’s willingness to adapt, exemplified by rolling out the orchestration model and continuously adding payment alternatives like Pix, digital wallets, local cards, etc., bodes well for keeping its edge.
Bottom line here, the company is growing rapidly, becoming more profitable, and building partnerships that could unlock even more growth ahead. Yes, there are macro bumps and competitive pressures to navigate, that’s par for the course in this space, but DLO has shown it can execute through them. At around $11-$12per share (after a post-earnings jump), the stock reflects much of this progress yet still trades at a valuation that leaves reasonable upside if the company continues on its current trajectory. I remain bullish in the long run, with the caveat that I’ll be watching those take rates and external risks closely. For now, the combination of growth, profitability, and prudent management makes it one of the more compelling fintech stories in emerging markets. After a rocky period over a year ago, it’s great to see the company hitting its stride, and as an investor, I’m looking forward to what comes next, albeit with eyes open to the challenges we’ve discussed.