Form 6-K dLocal Ltd For: Mar 31

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of May 2022

Commission File Number: 001-40451

 

 

DLocal Limited

(Exact name of registrant as specified in its charter)

 

 

Dr. Luis Bonavita 1294

Montevideo

Uruguay 11300

+1 (424) 392-7437

(Address of principal executive office)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F ☒ Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes ☐ No ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes ☐ No ☒

 

 

 

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TABLE OF CONTENTS

EXHIBIT

 

99.1		Press release dated May 17, 2022 - DLocal Limited Reports 2022 First Quarter Results
99.2		DLocal Limited Unaudited Consolidated Condensed Interim Financial Statements as of March 31, 2022 and for the three-month periods ended March 31, 2022 and 2021
99.3		Quaterly Report 2022 - dLocal Reports 2022 First Quarter Financial results
99.4		dLocal Q1 2022 Earnings Presentation

 

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	DLocal Limited
	By:	/s/ Diego Cabrera Canay
	Name:	Diego Cabrera Canay
	Title:	Chief Financial Officer

 

Date: May 18, 2022

 

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DLocal Limited Reports 2022 First Quarter Financial Results

 

First Quarter 2022

US$2.1 billion Total Payment Volume, up 127% year-over-year

Revenues of US$87.5 million, up 117% year-over-year

190% Net Revenue Retention Rate

38% Adjusted EBITDA Margin

 

 

dLocal reports in US dollars and in accordance with IFRS as issued by the IASB

 

Montevideo, Uruguay May 17, 2022 — DLocal Limited (“dLocal”, “we”, “us”, and “our”) (NASDAQ: DLO), a technology- first payments platform, announced its financial results today for the first quarter ended March 31, 2022.

 

“We are pleased to share that we are off to a strong start to the year, delivering record Q1 results, with TPV surpassing US$2 billion and increasing 127% year-over-year. For the fifth consecutive quarter we grew our revenue triple digits, increasing it by 117% year-over-year to US$87 million, and we continue to deliver positive Adjusted EBITDA, increasing it by 84% year-over-year to US$33 million. Our performance this quarter reinforces our strong growth momentum, and we expect to continue delivering growth supported by the performance of our existing and new merchants using our platform.

 

While Q1 2022 has been marked by a challenging global macro environment due to specific factors such as higher interest rates, higher inflation in some developed markets, challenges in logistics in specific geographies, the Russia - Ukraine conflict, our business has shown resilience and continues to benefit from the diversity of our merchants across industry verticals, geographies, products, and consumer behavior patterns. Our business has no exposure to Russia or Ukraine.

 

We continue to expand our footprint in emerging markets, launching operations in two new countries, Ivory Coast and Rwanda, bringing the total number of countries in which we make our services available to 37. We continue to make disciplined investments in our infrastructure and people to support our expansion strategy while maintaining an Adjusted EBITDA margin of 38%. Our total number of employees increased to 562 by the end of March 2022, a 54% year-over-year increase,” said Sebastian Kanovich.

 

 

First Quarter 2022 Financial Highlights

 

 

 

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The following table summarizes our key performance metrics:

 

	Three months ended
	March 31, 2022		March 31, 2021
	(in millions of US$ except for %)
Key Performance Metrics
TPV	2,104		926
TPV growth YoY	127%		139%
Revenue	87.5		40.3
Revenue growth YoY	117%		124%
Adj. EBITDA	32.9		17.8
Adj. EBITDA Margin	38%		44%

 

First Quarter 2022 Business Highlights

Special Note Regarding Adjusted EBITDA and Adjusted EBITDA Margin

dLocal has only one operating segment. dLocal measures its operating segment’s performance by Revenues, Adjusted EBITDA and Adjusted EBITDA Margin, and uses these metrics to make decisions about allocating resources.

 

Adjusted EBITDA as used by dLocal is defined as the profit from operations before financing and taxation for the year or period, as applicable, before depreciation of property, plant and equipment, amortization of right-of-use assets and intangible assets, and further excluding the changes in fair value of financial assets and derivative instruments carried at fair value through profit or loss, impairment gains/(losses) on financial assets, transaction costs, share-based payment non-cash charges, secondary offering expenses, and inflation adjustment. dLocal defines Adjusted EBITDA Margin as the Adjusted EBITDA divided by consolidated revenues.

 

Although Adjusted EBITDA and Adjusted EBITDA Margin may be commonly viewed as non-IFRS measures in other contexts, pursuant to IFRS 8, (“Operating Segments”), Adjusted EBITDA and Adjusted EBITDA Margin are treated by dLocal as IFRS measures based on the manner in which dLocal utilizes these measures. Nevertheless, dLocal’s Adjusted EBITDA and Adjusted EBITDA Margin metrics should not be viewed in isolation or as a substitute for net income for the periods presented under IFRS. dLocal also believes that its Adjusted EBITDA and Adjusted EBITDA Margin metrics are useful metrics used by analysts and investors, although these measures are not explicitly defined under IFRS. Additionally, the way dLocal calculates operating segment’s performance measures may be different from the calculations used by other entities, including competitors, and therefore, dLocal’s performance measures may not be comparable to those of other entities.

 

The table below presents a reconciliation of dLocal’s Adjusted EBITDA and Adjusted EBITDA Margin to net income:

 

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In thousands of U.S. dollars	Three-months ended March 31
	2022	2021
Profit for the period	26,273	16,927
Income tax expense	1,213	1,379
Depreciation and amortization	1,723	515
Secondary offering expenses1	89	705
Transaction costs	—	113
Share-based payment non-cash charges	2,034	565
Other operating (gain)/loss	—	(2,896)
Other charges, net	1,524	533
Adjusted EBITDA	32,856	17,841
Revenues	87,453	40,256
Adjusted EBITDA	32,856	17,841
Adjusted EBITDA Margin	37.6%	44.3%

 

1 Secondary expenses for Q1 2022 corresponds to expenses assumed by dLocal in relation to the secondary offering of its shares occurred in 2021.

 

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Earnings per share:

We calculate basic earnings per share by dividing the profit attributable to equity holders by the weighted average number of common shares issued and outstanding during the three-months periods ended March 31, 2022 and 2021.

 

Our diluted earnings per share is calculated by dividing the profit attributable to equity holders of dLocal by the weighted average number of common shares outstanding during the period plus the weighted average number of common shares that would be issued on conversion of all dilutive potential common shares into common shares.

 

The next table presents the information used as base for such calculation

 

	For the three-month period ended March 31
	2022	2021
Profit attributable to common shareholders (U.S. Dollars)	26,291,715	16,919,575
Weighted average number of common shares	295,044,763	271,140,500
Adjustments for calculation of diluted earnings per share	18,144,357	22,954,000
Weighted average number of common shares for calculating diluted earnings per share	313,189,120	294,094,500
Basic earnings per share	0.09	0.06
Diluted earnings per share	0.08	0.06

 

This press release does not contain sufficient information to constitute an interim financial report as defined in International Accounting Standards 34, “Interim Financial Reporting” nor a financial statement as defined by International Accounting Standards 1 “Presentation of Financial Statements”. The financial information in this press release has not been audited.

 

Conference Call and Webcast

 

dLocal’s management team will host a conference call and audio webcast on May 18, 2022 at 9:00 a.m. Eastern Time. The conference call may be accessed by dialing (888) 705-0197/ (409) 981-0764 (Conference ID – 7488285 –) and requesting inclusion in the call for dLocal.

 

The live conference call can be accessed via audio webcast at the investor relations section of dLocal’s website, at https://investor.dlocal.com/. An archive of the webcast will be available for a year following the conclusion of the conference call. The investor presentation will also be filed on EDGAR at www.sec.gov.

 

About dLocal

 

dLocal powers local payments in emerging markets, connecting global enterprise merchants with billions of emerging market consumers in 37 countries across APAC, the Middle East, Latin America, and Africa. Through the “One dLocal” platform (one direct API, one platform, and one contract), global companies can accept payments, send pay-outs and settle funds globally without the need to manage separate pay-in and pay-out processors, set up numerous local entities, and integrate multiple acquirers and payment methods in each market.

 

 

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Definition of Selected Operational Metrics

 

“API” means application programming interface, which is a general term for programming techniques that are available for software developers when they integrate with a particular service or application. In the payments industry, APIs are usually provided by any party participating in the money flow (such as payment gateways, processors, service providers) to facilitate the money transfer process.

 

“Enterprise Global Merchants” means merchants with at least US$6 million of annual TPV processed through our platform.

 

“Local payment methods” refers to any payment method that is processed in the country where the end user of the merchant sending or receiving payments is located, which include credit and debit cards, cash payments, bank transfers, mobile money, and digital wallets.

 

“NRR” means net revenue retention rate, which is the U.S. dollar-based measure of retention and growth of our merchants. We calculate the NRR of a period by dividing the current period revenue by the prior period revenue. The prior period revenue is the revenue billed by us to all of our merchant customers in the corresponding period for the prior fiscal year. The current period revenue is the revenue billed by us in the corresponding period for the current fiscal year to the same merchant customers included in the calculation of the prior period revenue. Current period revenue includes any upsells and cross sells of products, geographies, and payment methods to such merchant customers, and is net of any contractions or attrition, but excludes revenue from new customers on-boarded during the last 12 months.

 

“Pay-in” means a payment transaction whereby dLocal’s merchant customers receive payment from their customers.

 

“Pay-out” means a payment transaction whereby dLocal disburses money in local currency to the business partners or customers of dLocal’s merchant customers.

 

“Revenue from New Merchants”: means the revenue billed by us to merchant customers that we did not bill revenues in the same quarter (or period) of the prior year.

 

“Revenue from Existing Merchants”: means the revenue billed by us in the last twelve months to the merchant customers that we billed revenue in the same quarter (or period) of the prior year.

 

Forward Looking Statements

This press release contains certain forward-looking statements. These forward-looking statements convey dLocal’s current expectations or forecasts of future events. Forward-looking statements regarding dLocal involve known and unknown risks, uncertainties and other factors that may cause dLocal’s actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Certain of these risks and uncertainties are described in the “Risk Factors,” “Forward-Looking Statements” and “Cautionary Note Regarding Forward-Looking Statements” sections of dLocal’s filings with the U.S. Securities and Exchange Commission. Unless required by law, dLocal undertakes no obligation to publicly update or revise any forward-looking statements to reflect circumstances or events after the date hereof.

 

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DLocal Limited

 

Certain interim financial information

Consolidated Condensed Statements of Comprehensive Income for the three-month periods ended March 31, 2022 and 2021

(In thousands of U.S. dollars, except per share amounts, unaudited)

 

		March 31, 2022		March 31, 2021
Continuing operations
Revenues		87,453		40,256
Cost of services		(43,899)		(16,989)
Gross profit		43,554		23,267
Technology and development expenses		(1,406)		(520)
Sales and marketing expenses		(2,844)		(1,042)
General and administrative expenses		(10,294)		(5,762)
Impairment gain/(loss) on financial assets		75		(54)
Other operating gain		—		2,896
Operating profit		29,085		18,785
Finance income		6		18
Finance costs		(1,299)		(463)
Inflation adjustment		(306)		(34)
Other results		(1,599)		(479)
Profit before income tax		27,486		18,306
Income tax expense		(1,213)		(1,379)
Profit for the period		26,273		16,927
Profit attributable to:
Owners of the Group		26,292		16,920
Non-controlling interest		(19)		7
Profit for the period		26,273		16,927
Earnings per share
Basic Earnings per share		0.09		0.06
Diluted Earnings per share		0.08		0.06
Other comprehensive Income
Items that may be reclassified to profit or loss:
Exchange difference on translation on foreign operations		1,162		212
Other comprehensive income for the period, net of tax		1,162		212
Total comprehensive income for the period		27,435		17,139
Total comprehensive income for the period is attributable to:
Owners of the Group		27,454		17,123
Non-controlling interest		(19)		16
Total comprehensive income for the period		27,435		17,139

 

 

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DLocal Limited

 

Certain interim financial information

Consolidated Condensed Statements of Financial Position as of March 31, 2022 and December 31, 2021

(In thousands of U.S. dollars, except per share amounts, unaudited)

		March 31, 2022		December 31, 2021
ASSETS
Current Assets
Cash and cash equivalents		410,064		336,197
Financial assets at fair value through profit or loss		1,286		1,004
Trade and other receivables		217,191		190,966
Other assets		1,188		1,339
Total Current Assets		629,729		529,506
Non-Current Assets
Deferred tax assets		578		133
Property, plant and equipment		2,377		2,485
Right-of-use assets		3,799		3,915
Intangible assets		48,056		46,969
Total Non-Current Assets		54,810		53,502
TOTAL ASSETS		684,539		583,008
LIABILITIES
Current Liabilities
Trade and other payables		346,776		277,160
Borrowings		6,077		5,014
Lease liabilities		502		502
Tax liabilities		13,568		13,126
Derivative financial instruments		1,121		221
Provisions		1,759		1,710
Contingent consideration liability		665		665
Total Current Liabilities		370,468		298,398
Non-Current Liabilities
Deferred tax liabilities		576		883
Lease liabilities		3,367		3,426
Total Non-Current Liabilities		3,943		4,309
TOTAL LIABILITIES		374,411		302,707
EQUITY
Share Capital		590		590
Share Premium		157,750		157,151
Capital Reserve		14,534		12,741
Other Reserves		1,466		(30)
Retained earnings		135,825		109,867
Total Equity Attributable to owners of the Group		310,165		280,319
Non-controlling interest		(37)		(18)
TOTAL EQUITY		310,128		280,301

 

 

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dLocal was incorporated on February 10, 2021, as a Cayman Islands exempted company with limited liability, duly registered with the Cayman Islands Registrar of Companies. The contribution of dLocal Group Limited (a limited liability company incorporated in Malta, the former holding entity or “dLocal Malta”) shares to dLocal was the Cayman Islands company has been finalized as of April 14, 2021. Until the contribution of dLocal Malta shares to it, dLocal had not commenced operations, consequently the historical information previous to that date presented in here corresponds to dLocal Malta, our predecessor. This reorganization was done, among other things, to facilitate the initial public offering of the Group. dLocal had no prior assets, holdings or operations.

 

 

 

 

 

 

Investor Relations Contact:

[email protected]

 

Media Contact:

[email protected]

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Exhibit 99.2

 

 

 

DLocal Limited

Unaudited Consolidated Condensed Interim Financial Statements as of March 31, 2022 and for the three-month periods ended March 31, 2022 and 2021

 

 

 

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DLocal Limited

Consolidated Condensed Interim Statements of Comprehensive Income

For the three-month periods ended March 31, 2022 and 2021

(All amounts in thousands of U.S. Dollars except share data or as otherwise indicated)

 

		Notes		March 31, 2022		March 31, 2021
Continuing operations
Revenues		6		87,453		40,256
Cost of services		6		(43,899)		(16,989)
Gross profit				43,554		23,267
Technology and development expenses		7		(1,406)		(520)
Sales and marketing expenses		8		(2,844)		(1,042)
General and administrative expenses		8		(10,294)		(5,762)
Impairment gain/(loss) on financial assets		14		75		(54)
Other operating gain				—		2,896
Operating profit				29,085		18,785
Finance income				6		18
Finance costs				(1,299)		(463)
Inflation adjustment				(306)		(34)
Other results				(1,599)		(479)
Profit before income tax				27,486		18,306
Income tax expense		11		(1,213)		(1,379)
Profit for the period				26,273		16,927
Profit attributable to:
Owners of the Group				26,292		16,920
Non-controlling interest				(19)		7
Profit for the period				26,273		16,927
Earnings per share
Basic Earnings per share		12		0.09		0.06
Diluted Earnings per share		12		0.08		0.06
Other comprehensive Income
Items that may be reclassified to profit or loss:
Exchange difference on translation on foreign operations				1,162		212
Other comprehensive income for the period, net of tax				1,162		212
Total comprehensive income for the period				27,435		17,139
Total comprehensive income for the period is attributable to:
Owners of the Group				27,454		17,123
Non-controlling interest				(19)		16
Total comprehensive income for the period				27,435		17,139

 

The accompanying notes are an integral part of these Consolidated Condensed Interim Financial Statements.

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DLocal Limited

Consolidated Condensed Interim Statements of Financial Position

As of March 31, 2022 and December 31, 2021

(All amounts in thousands of U.S. Dollars except share data or as otherwise indicated)

 

		Notes		March 31, 2022		December 31, 2021
ASSETS
Current Assets
Cash and cash equivalents		13		410,064		336,197
Financial assets at fair value through profit or loss				1,286		1,004
Trade and other receivables		14		217,191		190,966
Other assets		15		1,188		1,339
Total Current Assets				629,729		529,506
Non-Current Assets
Deferred tax assets				578		133
Property, plant and equipment				2,377		2,485
Right-of-use assets				3,799		3,915
Intangible assets		16		48,056		46,969
Total Non-Current Assets				54,810		53,502
TOTAL ASSETS				684,539		583,008
LIABILITIES
Current Liabilities
Trade and other payables		17		346,776		277,160
Borrowings				6,077		5,014
Lease liabilities				502		502
Tax liabilities		18		13,568		13,126
Derivative financial instruments		19		1,121		221
Provisions		20		1,759		1,710
Contingent consideration liability				665		665
Total Current Liabilities				370,468		298,398
Non-Current Liabilities
Deferred tax liabilities				576		883
Lease liabilities				3,367		3,426
Total Non-Current Liabilities				3,943		4,309
TOTAL LIABILITIES				374,411		302,707
EQUITY
Share Capital		12		590		590
Share Premium		12		157,750		157,151
Capital Reserve		12		14,534		12,741
Other Reserves		12		1,466		(30)
Retained earnings		12		135,825		109,867
Total Equity Attributable to owners of the Group				310,165		280,319
Non-controlling interest				(37)		(18)
TOTAL EQUITY				310,128		280,301

 

The accompanying notes are an integral part of these Consolidated Condensed Interim Financial Statement

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DLocal Limited

Consolidated Condensed Interim Statements of Changes in Equity

For the three-month periods ended March 31, 2022 and 2021

(All amounts in thousands of U.S. Dollars except share data or as otherwise indicated)

 

		Notes		Share Capital		Share Premium		Capital Reserve		Other Reserves		Retained Earnings		Total		Non- controlling interest		Total equity
Balance as of January 1st, 2022				590		157,151		12,741		(30)		109,867		280,319		(18)		280,301
Comprehensive Income for the period
Profit of the period				—		—		—		—		26,292		26,292		(19)		26,273
Exchange difference on translation on foreign operations				—		—		—		1,496		(334)		1,162		—		1,162
Total Comprehensive Income for the period				—		—		—		1,496		25,958		27,454		(19)		27,435
Transactions with Group owners in their capacity as owners
Share-options exercise		12		—		599		(241)		—		—		358		—		358
Forfeitures		12		—		—		(73)		—		—		(73)		—		(73)
Share-based payments		9		—		—		2,107		—		—		2,107		—		2,107
Transactions with Group owners in their capacity as owners				—		599		1,793		—		—		2,392		—		2,392
Balance as of March 31st, 2022				590		157,750		14,534		1,466		135,825		310,165		(37)		310,128
Balance as of January 1st, 2021				602		—		12,582		119		31,749		45,052		(4)		45,048
Comprehensive Income for the period
Profit of the period				—		—		—		—		16,920		16,920		7		16,927
Exchange difference on translation on foreign operations				—		—		—		160		43		203		9		212
Total Comprehensive Income for the period				—		—		—		160		16,963		17,123		16		17,139
Transactions with Group owners in their capacity as owners
Issue of ordinary shares		12		26		46,314				—		—		46,340		—		46,340
Share-options exercise		12		—		3,221		(3,221)		—		—		—		—		—
Share-based payments		9		—		—		565		—		—		565		(163)		402
Transactions with Group owners in their capacity as owners				26		49,535		(2,656)		—		—		46,905		(163)		46,742
Balance as of March 31st, 2021				628		49,535		9,926		279		48,712		109,080		(151)		108,929

 

The accompanying notes are an integral part of these Consolidated Condensed Interim Financial Statements.

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DLocal Limited

Consolidated Condensed Interim Statements of Cash Flows

For the three-month periods ended March 31, 2022 and 2021

(All amounts in thousands of U.S. Dollars except share data or as otherwise indicated)

 

		Notes		March 31, 2022				March 31, 2021
Cash flows from operating activities
Profit before income tax					27,486				18,306
Adjustments:
Interest income from financial instruments					(6	)			(26	)
Interest charges for lease liabilities					163				3
Other finance expense					1,136				460
Amortization of Intangible assets		10			1,422				427
Depreciation of Property, plant and equipment		10			188				51
Amortization of Right-of-use asset		10			113				37
Revenue reduction related to prepaid assets		15			158				50
Share-based payment expense, net of forfeitures		9			2,034				565
Net exchange differences					1,490				174
Fair value gain on financial assets at fair value through profit or loss					—				8
Other operating gain		19			—				(2,896	)
Net Impairment (gain)/loss on financial assets		14			(75	)			54
					34,109				17,213
Changes in working capital
Increase in Trade and other receivables		14			(26,200	)			(20,062	)
Increase in Other assets		15			(141	)			(469	)
Increase in Trade and other payables		17			69,616				7,558
Decrease in Tax Liabilities		18			(200	)			(171	)
Increase/(decrease) in Provisions		20			49				(33	)
Cash from operating activities					77,233				4,036
Income tax paid		12			(1,323	)			(641	)
Net cash from operating activities					75,910				3,395
Cash flows from investing activities
Acquisitions of Property, plant and equipment					(80	)			(435	)
Additions of Intangible assets		16			(2,509	)			(1,215	)
Advance Payment for Assets acquisition					—				(38,670	)
Net collections of financial assets at FVPL					618				7,050
Interest collected from financial instruments					6				26
Net cash used in investing activities					(1,965	)			(33,244	)
Cash flows from financing activities
Proceeds from issuance of shares		12			—				46,340
Proceeds from transaction between shareholders					—				149,411
Increase in Restricted cash					—				(149,411	)
Share-options exercise					358				—
Interest payments on lease liability					(163	)			(3	)
Principal payments on lease liability					(92	)			(49	)
Other finance expense paid					(37	)			(460	)
Net cash provided by financing activities					66				45,828
Net increase in cash flow					74,011				15,979
Cash and cash equivalents at the beginning of the period					336,197				111,733
Effects of exchange rate changes on cash and cash equivalents					(144	)			(211	)
Cash and cash equivalents at the end of the period					410,064				127,501

 

The accompanying notes are an integral part of these Consolidated Condensed Interim Financial Statements.

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DLocal Limited

Notes to the Consolidated Condensed Interim Financial Statements

At March 31, 2022

(All amounts in thousands of U.S. Dollars except share data or as otherwise indicated)

 

 

1. General information and Significant Events during the period

 

1.1. General information

 

DLocal Limited (“dLocal” or the “Company”) is a holding company, referred to together with its subsidiaries as the “Group”. dLocal is a limited liability company. The Group was established on October 5, 2016, under the holding company dLocal Group Limited, domiciled and incorporated in Malta, and on April 14, 2021 it was reorganized under dLocal, domiciled and incorporated in the Cayman Islands. The Company is the ultimate controlling party of the Group.

 

The Group processes online payment transactions, enabling enterprise merchants located in developed economies (mainly United States, Europe and China) to get paid (“payins”) from customers in emerging markets and to make payments (“payouts”) to customers in emerging markets. As of the date of issuance of this Consolidated Condensed Interim Financial Statements, the Group continued to focus on its expansion efforts bringing the total number of countries in the geographic network to 37.

 

In order to conduct its business, the Group has direct connections with banks, acquirers and payments processors to process payments locally in emerging markets. It also operates with financial institutions to expatriate/ repatriate the funds to/from the developed economies where the merchant customers elect to settle their funds in the currency of their preference (mainly U.S. Dollar and Euro). These consolidated condensed interim financial statements include dLocal’s subsidiaries and details of the structure are included under Note 4: Consolidation of subsidiaries.

 

The Group is licensed and regulated in the EU as an Electronic Money Issuer, or EMI, and Payment Institution, or PI, and registered as a Money Service Business with the Financial Crimes Enforcement Network of the U.S. Department of the Treasury, or FinCEN, and we operate and are licensed, as applicable, in 37 in emerging markets, primarily in the Americas, Asia and Africa.

 

In addition, the Group is subject to laws aimed at preventing money laundering, corruption and the financing of terrorism. This regulatory landscape is constantly changing, including as a consequence of the implementation of the Fourth Anti-Money Laundering Directive (Directive 2015/849/EU, “MLD4”) and the proposed amendments to the MLD4, often referred to as the fourth Anti-Money Laundering Directive.

 

1.2. Significant events during the period

 

On May 2, 2022, the Group filed its annual report on Form 20-F as of December 31, 2021, and 2020 and for the years ended December 31, 2021, 2020, and 2019.

 

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On March 3, 2022, DLocal Group Limited (the “Borrower”) entered into a Credit Agreement (the “Agreement”) with Bank J. Safra Sarasin (Gibraltar) Ltd, acting through its London Branch (the “Bank”), pursuant to which the Bank grants a facility to the Borrower of a maximum amount of a total of U$S 4,000 (the “Credit Facility”). The Borrower may utilize the Credit Facility for options and futures transactions as well as structured products subject to margin requirements.

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2. Presentation and preparation of the Consolidated Condensed Interim Financial Statements and significant accounting policies

 

2.1. Basis of preparation of consolidated condensed interim financial information

 

These Consolidated Condensed Interim Financial Statements for the three-month periods ended March 31, 2022 have been prepared in accordance with International Accounting Standard 34, “Interim Financial Reporting” as issued by the International Accounting Standard Board.

 

These Consolidated Condensed Interim Financial Statements do not include all the notes of the type normally included in an annual consolidated financial statement. Accordingly, this report should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2021 (the “Annual Financial Statements”).

 

The accounting policies and critical accounting estimates and judgments adopted, except for those explicitly indicated on these Consolidated Condensed Interim Financial Statements, are consistent with those of the previous financial year and corresponding interim reporting period.

 

All amounts are presented in thousands of U.S. Dollars except share data or as otherwise indicated.

 

These Consolidated Condensed Interim Financial Statements for the three-month periods ended March 31, 2022 were authorized for issuance by the dLocal’s Board of Directors on May 17, 2022.

 

2.2. Share-based payments

 

During the three-month period ended March 31, 2022 , the Group granted new share options and restricted share units under the Amended and Restated 2020 Global Share Incentive Plan to executives and employees in return for their services, which represented changes in the composition of share options outstanding at the end of the period.

 

2.2.1. Employee Share Purchase Plan (“ESPP”)

 

Set out below are summaries of restricted share units and share options granted under the plan:

 

		March 31, 2022				December 31, 2021 *
		Average				Average
		exercise price				exercise price
		per share				per share
		option		Number of		option		Number of
		(U.S. Dollars)		options and RSUs		(U.S. Dollars)		options and RSUs
At the beginning of the period		1.16		4,032,345		1.22		17,361,000
Granted during the period		29.56		263,622		3.69		2,371,345
Exercised during the period		3.17		(113,000)		2.03		(15,685,000)
Forfeited during the period		5.94		(21,912)		4.15		(15,000)
At the end of the period		5.13		4,161,055		1.16		4,032,345
Vested and exercisable at the end of the period		2.00		641,688		3.54		486,750

 

* Retroactively adjusted to reflect the effect of the stock split described in Note 1 to the Annual Financial Statements for the year ended December 31, 2021.

No options expired during the periods covered by the above table.

 

Share options and restricted share units outstanding at the end of the period have the following expiry dates and exercise prices:

 

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Grant date		Vesting period		Expiry date		Exercise price (U.S. Dollars per A Share)		Share options and RSUs March 31, 2022		Share options and RSUs December 31, 2021 *
August 1st, 2018		3 years		August 1st, 2021		0.74		90,500		90,500
October 1st, 2019		3 years		October 1st, 2022		2.18		77,000		90,000
August 24th, 2020		5 years		August 24th, 2025		3.30		735,000		835,000
November 15th, 2020		4 years		November 15th, 2024		4.15		135,000		135,000
November 23rd, 2020		5 years		November 23rd, 2025		3.88		525,500		525,500
January 1st, 2021		5 years		January 1st, 2026		3.88		210,000		210,000
March 1st, 2021		1 year		March 1st, 2022		0.002		5,500	**	5,500	**
March 2nd, 2021		5 years		March 2nd, 2026		7.44		10,000		10,000
March 11th, 2021		5 years		March 11th, 2026		0.002		1,031,000		1,031,000	**
March 11th, 2021		5 years		March 11th, 2026		7.44		36,000		36,000
March 12nd, 2021		5 years		March 12nd, 2026		7.44		7,000		7,000
March 15th, 2021		5 years		March 15th, 2026		7.44		—		7,500
March 29th, 2021		5 years		March 29th, 2026		7.44		—		10,000
May 11th, 2021		5 years		May 11th, 2026		7.44		927,500		927,500
May 11th, 2021		3 years		May 11th, 2024		0.002		22,500	**	22,500	**
May 18th, 2021		5 years		May 18th, 2026		16.17		10,000		10,000
December 9th, 2021		5 years		December 9th, 2026		0.002		75,833	**	79,345	**
February 21st, 2022		5 years		February 21st, 2027		0.002		6,604	**	—
March 16th, 2022		5 years		March 16th, 2027		30.47		20,000		—
March 16th, 2022		5 years		March 16th, 2027		30.47		180,862		—
March 28th, 2022		5 years		March 28th, 2027		30.27		55,256		—
Total								4,161,055		4,032,345
Weighted average remaining contractual life of restricted share units and share options outstanding at end of the year								3.71 years		4.24 years

 

* Retroactively adjusted to reflect the effect of the stock split described in Note 1 to the Annual Financial Statements for the year ended December 31, 2021. ** It corresponds to Restricted Share Units (RSUs) granted.

 

2.3. New accounting pronouncements

 

The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective. The Group did not change its accounting policies or make retrospective adjustments as a result of new accounting standards made applicable on January 1, 2022.

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3. Accounting estimates and judgments

 

Accounting estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

The critical accounting estimates and judgments adopted on these Consolidated Condensed Interim Financial Statements are consistent with those of the previous financial year and corresponding interim reporting period.

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4. Consolidation of subsidiaries

 

DLocal Limited, located in Cayman Islands, is the parent company of the Group and acts as a holding company for subsidiaries whose main activity is cross-border and local payments, enabling international merchants to access end customers in emerging markets. Its revenue comes from dividends receivable from subsidiaries and share of profit from subsidiary partnership.

 

The consolidated financial statements of the Group include the following subsidiaries:

 

 

						% of equity interest held by Dlocal
Entity name		Country of incorporation		Principal activities		March 31, 2022		December 31, 2021
Dlocal Group Limited		Malta		Holding Company		100%		100%
Dlocal Limited		Malta		Payments provider		99.999%		99.999%
Dlocal Markets Limited		Malta		Holding Company		100%		100%
Dlocal Hold Ops Limited		Cayman Islands		Holding Company		100%		-
Dlocal LLP		United Kingdom		Payments provider		99.999%		99.999%
Dlocal Corp LLP		United Kingdom		Payments provider		99.99%		99.99%
Dlocal Inc.		United States of America		Holding Company		100%		100%
Dlocal PTE Limited		Singapore		Holding Company		100%		100%
Dlocal Technologies S.A.		Uruguay		Service provider		100%		100%
Dlocal Uruguay S.A.		Uruguay		Collection agent		100%		100%
Dlocal Israel Limited		Israel		Service provider		100%		100%
Dlocal Brasil Instituição de Pagamento S.A.		Brazil		Collection agent		100%		100%
Demerge Brasil Facilitadora de Pagamentos Ltda.		Brazil		Collection agent		100%		100%
Dlocal Brasil Holding Financeira		Brazil		Holding Company		100%		100%
Webpay Brasil Pagamentos Ltda.		Brazil		Collection agent		100%		-
Dlocal Argentina S.A.		Argentina		Collection agent		100%		100%
Demerge Argentina S.A.		Argentina		Service provider		100%		100%
Dlocal Services Arg S.A.		Argentina		Service provider		100%		100%
Demerge Mexico S.A. de C.V.		Mexico		Collection agent		99.999%		99.999%
Dlocal Mexico S.A. DE C.V.		Mexico		Collection agent		99.999%		99.999%
Dlocal Technologies Mexico S.A. DE C.V.		Mexico		Service provider		100%		100%
Dlocal Chile SPA		Chile		Collection agent		100%		100%
Demerge Chile SPA		Chile		Collection agent		100%		100%
Pagos y Servicios Limitada		Chile		Collection agent		99%		100%
Dlocal Colombia S.A.S.		Colombia		Collection agent		100%		100%
Demerge Colombia S.A.S.		Colombia		Collection agent		100%		100%
W-Collect S.A.S.		Colombia		Collection agent		100%		100%
BH Collect S.A.S.		Colombia		Collection agent		100%		100%
Kupa Colombia S.A.S.		Colombia		Collection agent		100%		-
Demerge Peru S.A.C.		Peru		Collection agent		99%		99%
Depansum Solutions Private Limited		India		Collection agent		99%		99%
Dlocal India Pvt Limited		India		Collection agent		99.99%		99.99%
Guisol Solutions Private Limited		India		Collection agent		100.00%		-
Demerege Ecuador S.A. (1)		Ecuador		Collection agent		0.15%		0.15%
PT Dlocal Solutions Indonesia		Indonesia		Collection agent		100%		100%
DLocal Bangladesh Limited		Bangladesh		Collection agent		100%		100%
Dlocal Egypt LLC		Egypt		Collection agent		100%		100%
DLocal Morocco SARL AU		Morocco		Collection agent		100%		100%

 

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Demerge Nigeria Limited		Nigeria		Collection agent		100%		100%
Dlocal Panama S.A.		Panama		Collection agent		100%		100%
Dlocal Paraguay S.A.		Paraguay		Collection agent		100%		100%
Demerge República Dominicana SAS		República Dominicana		Collection agent		99.99%		99.99%
Depansum PTY Limited		South Africa		Collection agent		100%		100%
Dlocal El Salvador S.A de C.V.		El Salvador		Collection agent		100%		-
Dlocal Payments Kenya Limited		Kenya		Collection agent		100%		-
Dlocal Vietnam Company Limited		Vietnam		Collection agent		100%		-
Demerge Japan Ltd		Japan		Collection agent		66%		-
Depansum Malaysia SDN. BHD.		Malaysia		Collection agent		100%		-
Demerge (Thailand) Co. LTD		Thailand		Collection agent		49%		-

 

(1) Although Dlocal is the owner of 0.15% of Demerege Ecuador S.A., the Group controls its operations according to the guidelines in IFRS 10.

 

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5. Segment reporting

 

The Group operates in a single operating segment, which is “payment processing”. Operating segments are defined as components of an enterprise for which separate financial information is regularly evaluated by the chief operating decision maker, who in the Group’s case is the Executive Team, in deciding how to allocate resources and assess performance. The Executive Team is composed of the Chief Executive Officer (“CEO”), the Chief Operating Officer (“COO”), the Chief Financial Officer (“CFO”) and the President of Dlocal Limited.

 

The Executive Team evaluates the Group’s financial information and resources and assesses the financial performance of these resources on a consolidated basis on the basis of Revenues, Adjusted EBITDA and Adjusted EBITDA margin as further described below.

 

The Group’s revenue, results and assets for this one reportable segment can be determined by reference to the Consolidated Condensed Statement of Comprehensive Income and Consolidated Condensed Statement of Financial Position.

 

As required by IFRS 8 Operating Segments, below are presented applicable entity-wide disclosures related to dLocal’s revenues.

 

Revenue breakdown by region

 

The Group’s revenues arise from operations in 35 countries, where the merchants´ customers are based.

 

Based on the region where payments from/to such customers are processed this is the revenue breakdown:

 

		March 31, 2022		YoY%		March 31, 2021
LatAm 1		77,608		116.0%		35,923
Asia and Africa		9,845		127.2%		4,333
Revenues 2		87,453		117.2%		40,256

 

Revenue with large customers

 

During the three-month period ended March 31, 2022 the Group operated with more than 475 merchants (more than 300 merchants in the period ended March 31, 2021).

 

For the three-month period ended March 31, 2022, the Group’s revenue from its top 10 merchants represented 54.0% of revenue (62% of revenue for the three-month period ended March 31, 2021). For the three-month period ended March 31, 2022 there are no customers (one for the three-month period ended March 31, 2021) that on an individual level accounted for more than 10% of the total revenue.

 

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Adjusted EBITDA and Adjusted EBITDA Margin

 

The Executive Team assesses the financial performance of the Group’s sole segment by Revenues, Adjusted EBITDA and Adjusted EBITDA Margin. The Adjusted EBITDA is defined as the consolidated profit from operations before financing and taxation for the year or period, as applicable, before depreciation of property, plant and equipment, amortization of right-of-use assets and intangible assets, and further excluding the changes in fair value of financial assets and derivative financial instruments carried at fair value through profit or loss, impairment gain/loss on financial assets, transaction costs, share-based payment non-cash charges, secondary offering expenses and inflation adjustment. The Group defines Adjusted EBITDA Margin as the Adjusted EBITDA divided by consolidated revenues.

The Group reconciles the segment’s performance measure to profit for the period as presented in the Consolidated Condensed Statements of Comprehensive Income as follows:

 

		Note	March 31, 2022		March 31, 2021
Profit for the period			26,273		16,927
Income tax expense		11	1,213		1,379
Inflation adjustment			306		34
Interest charges on leases			163		3
Interest income from financial assets at FVPL			(6)		(26)
Fair value losses / (gains) on financial assets at FVPL			—		8
Other operating (gain) / loss		19	—		(2,896)
Other finance expense			1,136		460
Impairment loss / (gain) on financial assets		14	(75)		54
Depreciation and amortization		10	1,723		515
Secondary offering expenses (i)		8	89		705
Transaction costs (ii)		8	—		113
Share-based payment non-cash charges, net of forfeitures		9	2,034		565
Adjusted EBITDA			32,856		17,841
Revenues		6	87,453		40,256
Adjusted EBITDA			32,856		17,841
Adjusted EBITDA Margin			37.6%		44.3%

 

 

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6. Revenues and Cost of Services

 

(a) Revenue and Gross profit description

 

dLocal derives revenue from processing payments for international merchants to enable them to operate in selected emerging markets.

 

The breakdown of revenue from contracts with customers per type of service is as follows:

 

		March 31, 2022		March 31, 2021
Transaction revenues (i)		84,736		38,519
Other revenues (ii)		2,717		1,737
Revenues from payment processing (iii)		87,453		40,256
Cost of services		(43,899)		(16,989)
Gross profit		43,554		23,267

 

 

(b) Revenue recognized at a point in time and over time

 

Transaction revenues are recognized at a point in time when the payment transaction is processed. Other revenues are recognized as revenue at a point in time when the respective performance obligation is satisfied. The Group did not recognize revenues over time for the three-month periods ended March 31, 2022 and 2021.

 

(c) Cost of services

 

Cost of services are composed of the following:

 

		March 31, 2022		March 31, 2021
Processing costs (i) (1)		41,793		15,966
Hosting expenses (ii)		927		474
Salaries and wages (iii)		281		122
Amortization of intangible assets (iv)		898		427
Cost of services		43,899		16,989

 

 

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7. Technology and development expenses

 

Technology and development expenses are composed of the following:

 

		March 31, 2022		March 31, 2021
Salaries and wages (i)		824		191
Software licenses (ii)		158		87
Infrastructure expenses (iii)		308		141
Information and technology security expenses (iv)		37		32
Other technology expenses		79		69
Total Technology and development expenses		1,406		520

 

 

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8. Sales and marketing expenses and General and administrative expenses

 

Sales and marketing expenses and General and administrative expenses are composed of the following:

 

Sales and marketing expenses		March 31, 2022		March 31, 2021
Salaries and wages (i)		2,262		932
Marketing expenses (ii)		582		110
Total Sales and marketing expenses		2,844		1,042
General and administrative expenses		March 31, 2022		March 31, 2021
Salaries and wages (iii)		5,580		3,556
Third-party services (iv)		2,180		1,391
Office expenses (v)		666		288
Travel and other operating expenses		1,043		439
Amortization and depreciation (vi)		825		88
Total General and administrative expenses		10,294		5,762

 

 

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9. Employee Benefits

 

As of March 31, 2022, the Group’s FTEs were 562 (365 as of March 31, 2021) where 42% corresponded to information technology and product engineers and related roles (45% for the three-month period ended March 31, 2021).

 

Employee benefits is composed of the following:

 

		March 31, 2022		March 31, 2021
Salaries, wages and contractor fees (i)		9,346		5,384
Share-based payments (ii)		2,034		565
Total employee benefits		11,380		5,949

 

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10. Amortization and Depreciation

 

Amortization and depreciation expenses are composed of the following:

 

		March 31, 2022		March 31, 2021
Amortization of intangible assets		1,422		427
Right-of-use asset amortization		113		37
Depreciation of Property, plant & equipment		188		51
Total Amortization and Depreciation		1,723		515

 

For further information related to amortization of intangible assets refer to Note 16: Intangible Assets.

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11. Income Tax

 

Income tax expense is recognized based on management’s estimate of the weighted average effective annual income tax rate expected for the full financial year. The estimated average income tax rate used for the three-month period ended March 31, 2022 is 4.4%, compared to 7.5% for the three-month period ended March 31, 2021.

 

The income tax charge recognized in profit and losses is the following:

 

Current Income Tax		March 31, 2022		March 31, 2021
Current Income Tax on profits for the period		(1,965)		(1,137)
Total Current Income Tax expense		(1,965)		(1,137)
Deferred income tax		March 31, 2022		March 31, 2021
Increase/(decrease) in deferred income tax assets		445		(79)
Decrease/(increase) in deferred income tax liabilities		307		(163)
Total Deferred income tax benefit/(expense)		752		(242)
Income Tax expense		(1,213)		(1,379)

 

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12. Capital management

 

(a) Share capital

 

Authorized shares, as well as issued and fully paid-up shares, are presented below:

 

		March 31, 2022								March 31, 2021 *
		Amount				USD				Amount						USD
Authorized Shares of USD 0.002 USD each
Class A common shares			1,000,000,000				2,000				—			—			—
Class B common shares			250,000,000				500				—						—
Undesignated shares			250,000,000				500				—			—			—
Authorized Shares of USD 1.1211 USD each **
Common shares			—				—				618,363						693
			1,500,000,000				3,000				618,363						693
Issued and Fully Paid Up Shares of USD 0.002 each *
Class A Common Shares			134,167,192				268				268,598,000						602
Class B Common Shares			160,974,249				322				—						—
			295,141,441				590				268,598,000						602
Share Capital evolution
Share Capital as at January 1			295,028,441				590				268,598,000						602
i) Issue of common shares at USD 0.002			113,000				—		***		—						—
Share capital as of March 31			295,141,441				590				268,598,000						602

 

* Retroactively adjusted to reflect the effect of the stock split (Note 1 to the Annual Consolidated Financial Statements for the year ended December 31, 2021).

** Amounts do not reflect the effect of the stock split explained in Note 1 to the Annual Consolidated Financial Statements for the year ended December 31, 2021.

*** Amount is rounded to the nearest thousand and should not be interpreted as zero.

 

The rights of the holders of Class A Common Shares and Class B Common Shares are identical, except with respect to voting, conversion and transfer restrictions applicable to the Class B Common Shares. Each Class A Common Share is entitled to one vote while Class B Common Shares are entitled to five votes each. Each Class B Common Share is convertible into one Class A Common Share automatically upon transfer, subject to certain exceptions. Holders of Class A Common Shares and Class B Common Shares vote together as a single class on all matters unless otherwise required by law.

 

 

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(b) Capital reserve

 

The Capital reserve corresponds to reserves related to the share-based plans, as described in Note 2.11: Share-based payments and warrants. Accordingly, this reserve is related to share-based payment compensation plans of the Group.

 

The following table shows a breakdown of the consolidated condensed interim statement of financial position line item ‘Capital Reserves’ and the movements in these reserves during the periods.

 

		2022		2021
Balances as of January 1		12,741		12,582
Share-options exercise (i)		(241)		(3,221)
Share-based payments charges		2,107		565
Forfeitures		(73)		—
Balance as at March 31		14,534		9,926

 

 

 

(c) Other Reserves

 

The reserves for the Group relate to cumulative translation adjustment representing differences on conversion of assets and liabilities at the reporting date.

 

The following table shows a breakdown of the consolidated statement of financial position line item ‘Other Reserves’ and the movements in these reserves during the periods.

 

		2022		2021
		Cumulative Translation Adjustment		Cumulative Translation Adjustment
Balances as of January 1		(30)		119
Movement of other reserves		1,496		160
Balance as at March 31		1,466		279

 

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(d) Retained Earnings

 

Movements in retained earnings were as follows:

 

		2022		2021
Balance as at January 1		109,867		31,749
Comprehensive income for the period		25,958		16,963
Balance as at March 31		135,825		48,712

 

(e) Earnings per share

 

dLocal calculates basic earnings per share by dividing the profit attributable to equity holders by the weighted average number of common shares issued and outstanding during the three-months periods ended March 31, 2022 and 2021.

 

For diluted earnings per share is calculated by dividing the profit attributable to equity holders of dLocal by the weighted average number of common shares outstanding during the period plus the weighted average number of common shares that would be issued on conversion of all dilutive potential common shares into common shares.

 

The next table presents the information used as base for such calculation:

 

		March 31, 2022		March 31, 2021 *
Profit attributable to common shareholders (U.S. Dollars)		26,291,715		16,919,575
Weighted average number of common shares		295,044,763		271,140,500
Adjustments for calculation of diluted earnings per share(1)		18,144,357		22,954,000
Weighted average number of common shares for calculating diluted earnings per share		313,189,120		294,094,500
Basic earnings per share		0.09		0.06
Diluted earnings per share		0.08		0.06

 

 

* Retroactively adjusted to reflect the effect of the stock split (Note 1 to the Annual Consolidated Financial Statements for the year ended December 31, 2021)

1 For the three-month period ended March 31, 2022, the adjustment corresponds to the dilutive effect of i) 14,924,873 average shares related to share-based payment warrants; and ii) 3,219,484 average shares related to share-based payment plans with employees (15,676,000 and 7,278,000 respectively for the three-month period ended March 31, 2021).

 

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13. Cash and cash equivalents

 

Cash and cash equivalents breakdown is presented below:

 

		March 31, 2022		December 31, 2021
Own Balances		251,844		227,913
Merchant Clients Funds		158,220		108,284
		410,064		336,197

 

As of March 31, 2022, USD 410,064 (USD 336,197 on December 31, 2021) represents cash on hand, demand deposits with financial institutions and other short-term liquid financial instruments.

 

Own Balances correspond to cash and cash equivalents of the Group while Merchant Clients Funds correspond to freely available funds collected from the merchants’ customers, that can be invested in secure, liquid low-risk assets until they are transferred to the merchants in accordance with the agreed conditions with them or transferred to Own Funds accounts for the portion that corresponds to the Group fees.

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14. Trade and other receivables

 

Trade and Other Receivables of the Group are composed of the following:

 

		March 31, 2022		December 31, 2021
Trade receivables		197,095		179,199
Loss allowance		(247)		(322)
Trade receivables net		196,848		178,877
Advances and other receivables		20,343		12,089
		217,191		190,966

 

Trade Receivables correspond to uncollateralized gross amounts due from acquirers, processors, merchants and preferred suppliers for services performed that will be collected in less than one year, so they are classified as current. No financial assets are past-due and all Trade and other receivables are categorized as within “normal” credit risk rating.

 

Loss allowance and impairment losses

 

The following table presents the evolution of the loss allowance:

 

		2022		2021
Opening book value as at January 1		(322)		(341)
Decrease/(increase) in loss allowance for trade receivables		75		(54)
Total as at March 31		(247)		(395)
Net impairment gain/(loss) on financial assets		75		(54)

 

Initial recognition and subsequent measurement the Group applies the simplified approach to determine expected credit losses on trade receivables.

 

To measure the expected credit losses, trade and other receivables have been grouped based on shared credit risk characteristics and the days past due (only 0-30 past due bucket as of March 31, 2022 and December 31, 2021 because there are no other material buckets of the outstanding receivables).

 

The expected loss rates are based on the payment profiles of debtors over a period of 36 months before year end and the corresponding historical credit losses experienced within this period. The historical loss rate is adjusted to reflect current and forward-looking information on credit risk ratings of the countries in which the Group sells its services which affects the ability of the debtors to settle the receivables. On that basis, the average expected credit loss rate of the 0-30 past due bucket was determined at 0.3% for the three-month period ended March 31, 2022 (0.5% in the three-month period ended March 31, 2021).

 

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15. Other Assets

 

Other assets are composed of the following:

 

Current		March 31, 2022		December 31, 2021
Money held in escrow for: (i)		221		211
-Requirements for other processors		90		80
-Credit card requirements		131		131
Rental guarantees		560		561
Prepaid assets (ii)		407		567
Total current Other Assets		1,188		1,339

 

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16. Intangible Assets

 

Intangible assets of the Group correspond to acquired software as well as to capitalized expenses related to internally generated software and are stated at cost less accumulated amortization.

 

		2022						2021
At January 1, 2020		Internally generated software		Acquired intangible assets (ii)		Total		Internally generated software
Cost		12,387		39,335		51,722		4,989
Accumulated amortization		(3,179)		(1,574)		(4,753)		(836)
Opening book value as at January 1		9,208		37,761		46,969		4,153
Additions (i)		2,509		—		2,509		1,215
Amortization of the period		(898)		(524)		(1,422)		(427)
Total as at March 31		10,819		37,237		48,056		4,941
Cost		14,896		39,335		54,231		6,204
Accumulated amortization		(4,077)		(2,098)		(6,175)		(1,263)

 

 

(i) The additions of the three-month period ended March 31, 2022 include USD 2,433 related to capitalized salaries and wages (USD 1,148 as of March 31, 2021).

 

		As of March 31, 2022		As of December 31, 2021
Cost		54,231		51,722
Accumulated amortization		(6,175)		(4,753)
Net book amount		48,056		46,969

 

As of March 31, 2022 , and December 31, 2021 no indicator of impairment related to intangible assets existed, so the Group did not perform an impairment test.

 

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17. Trade and other payables

 

Trade and Other Payables are composed of the following:

 

		March 31, 2022		December 31, 2021
Trade Payables		334,621		269,227
Accrued Liabilities		3,958		3,173
Other Payables		8,197		4,760
Total Trade and other payables		346,776		277,160

 

These payables are classified as current liabilities as the payment is due within one year or less. Moreover, the carrying amounts are considered to be the same as fair values, due to their short – term nature.

 

Trade Payables correspond to liabilities with Merchants, either related to payin transactions processed or payout transactions to be processed at their request. Accrued Liabilities mainly correspond to obligations with legal and tax advisors, and auditors. Other Payables mainly correspond to obligations related to processors´ costs and the acquisitions of office goods and services necessary for the ordinary course of the business.

 

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18. Tax Liabilities

 

The tax liabilities breakdown is as follows:

 

		March 31, 2022		December 31, 2021
Income tax payable		2,582		1,940
Other tax liabilities		10,986		11,186
Income tax perception (RG 4815) (1)		7,920		7,490
Digital services withholding VAT		2,051		2,796
Other Taxes		1,015		900
Total Tax Liabilities		13,568		13,126

 

 

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19. Derivative financial instruments

 

Other derivative financial instruments

 

During the three-month period ended March 31, 2022 and the year-ended December 31, 2021, dLocal entered into short-term derivative contracts (delivery and non-delivery forwards) with different counterparties in different countries in which the Group operates, according to the following detail:

 

Transaction		Type of Forward Transaction		Local currency		Outstanding notional amount in USD as of March 31, 2022		Outstanding balance as of March 31, 2022 - Derivative financial liabilities		Outstanding notional amount in USD as of December 31, 2021		Outstanding balance as of December 31, 2021 - Derivative financial liabilities
Non-delivery forwards (1)		Buy USD		Brazilian Reais		15,185,610		(573)		5,500,000		(152)
Non-delivery forwards (1)		Sell USD		Brazilian Reais		5,400,000		(15)		—		—
Non-delivery forwards (1)		Buy USD		Argentine Peso		5,000,000		—		2,500,000		—
Delivery forwards (1)(2)		Buy USD		Chilean Peso		12,920,450		—		12,391,928		(8)
Delivery forwards (1)		Buy USD		Uruguayan Peso		1,963,678		(90)		—		—
Non-delivery forwards		Buy USD		Egyptian Pound		2,258,749		(36)		—		—
Non-delivery forwards		Buy EUR		Moroccan Dirham		3,700,159		(19)		—		—
Non-delivery forwards		Buy USD		Nigerian naira		16,021,270		(108)		—		—
Non-delivery forwards		Buy USD		Indian Rupee		4,000,000		(36)		1,000,000		(14)
Non-delivery forwards (1)		Buy USD		South African Rand		8,921,781		(244)		4,000,000		(47)
Total								(1,121)				(221)

 

(1) During the three-month period ended March 31, 2022, dLocal entered into hedge operations of trade and other receivables in Brazilian Reais, Argentine Peso, Chilean Peso, Uruguayan Peso and South African Rand subject to foreign exchange exposure using delivery and non-delivery forward contracts. The transactions have been elected for hedge accounting and classified as fair value hedge in accordance with IFRS 9. The Group has elected to designate only the spot element of these forward contracts as the hedging instrument. During the three months ended March 31, 2022, dLocal recognized a net loss of USD 2,567 included in the line item "Costs of services" and a net loss of USD 1,166 included in the line item "Finance costs".

 

(2) During the last quarter of the year-ended December 31, 2021, dLocal entered into hedge operations of trade and other receivables in Chilean Peso subject to foreign exchange exposure using the delivery forward contracts. The transactions have been elected for hedge accounting and classified as fair value hedge in accordance with IFRS 9.

 

Option to purchase common shares

 

As of the beginning of the three-month period ended March 31, 2021, DLocal Limited had an option agreement in place with one shareholder (“Investor”), pursuant to which the Investor had outstanding options to purchase up to 18,068,000 common shares from certain existing shareholders, or by direct issuance of Company shares, which could be exercised by the Investor on or before December 16, 2021.

 

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On March 3, 2021, the investor exercised the right to purchase 18,068,000 Class A Ordinary shares in DLocal Group Limited, by acquiring them from other existing shareholders, without being required the issuance of new shares by dLocal. In this sense, as of March 3, 2021 the obligations of dLocal under this agreement have ceased.

 

Considering that as of December 31, 2020 the derivative financial instrument represented a liability for dLocal of USD 2,896, a gain for the same amount was recognized within Operating profit in the line item “Other operating gain/(loss)” in the Consolidated Condensed Interim Statements of Comprehensive Income for the three-month period ended March 31, 2021.

 

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20. Provisions

 

(a) Current or potential proceedings

 

Provisions for the period are related to current or potential proceedings where the management understands, based on the Group’s legal advisors’ assessment, that it is more likely than not that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

 

(b) Movements in current or potential proceedings

 

Movements in current or potential proceedings are set out below:

 

		2022		2021
Carrying amount as at January 1		1,710		1,393
Increase/(reversal) to labor provision		49		(33)
Carrying amount as at March 31		1,759		1,360

 

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21. Related parties

 

(a) Related Party Transactions

 

Related party transactions are linked to the options agreement that is reflected presented in Note 19 of these financial statement.

 

(b) Key Management compensation

 

The compensation of the Executive Team during the period can be analysed as follows:

 

		March 31, 2022		March 31, 2021
Short-term employee benefits – Salaries and wages		436		522
Long-term employee benefits – Share-based payment		2,034		565
		2,470		1,087

 

(c) Transactions with other related parties

 

The following transactions occurred with related parties:

 

		March 31, 2022		March 31, 2021
Transactions with merchants – Revenues		311		382
Transactions with preferred suppliers (Collection agents) – Costs		(251)		(116)

 

(d) Outstanding balances arising from transactions with other related parties

 

The following balances are outstanding at the end of the reporting period in relation to transactions with related parties:

 

		March 31, 2022		December 31, 2021
Transactions with merchants – accounts payable		(1,393)		(622)
Transactions with preferred suppliers (Collection agents) – accounts payable		(149)		(125)
Transactions with preferred suppliers (Collection agents) – accounts receivable		8,493		6,058

 

All transactions with related parties were made on normal commercial terms and conditions and at market rates. Outstanding balances are unsecured and are repayable in cash.

 

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22. Fair value hierarchy

 

The following tables show financial instruments recognized at fair value for the period ended March 31, 2022 and December 31, 2021, analyzed between those whose fair value is based on:

 

• Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.

 

• Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.

 

• Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based upon observable market data.

 

The table also includes financial instruments measured at amortized cost. The Group understands that the book value of such instruments approximates their fair value.

 

March 31, 2022		FVPL		Amortized cost		Total		Level 1		Level 2		Level 3
Assets
Financial Assets at Fair Value through Profit or Loss		1,286		—		1,286		1,286		—		—
Other Assets		—		1,188		1,188		—		—		—
Trade and Other Receivables		—		217,191		217,191		—		—		—
Cash and Cash Equivalents		—		410,064		410,064		—		—		—
		1,286		628,443		629,729		1,286		—		—

 

December 31, 2021		FVPL		Amortized cost		Total		Level 1		Level 2		Level 3
Assets
Financial Assets at Fair Value through Profit or Loss		1,004		—		1,004		1,004		—		—
Other Assets		—		1,339		1,339		—		—		—
Trade and Other Receivables		—		190,966		190,966		—		—		—
Cash and Cash Equivalents		—		336,197		336,197		—		—		—
		1,004		528,502		529,506		1,004		—		—

 

March 31, 2022		FVPL		Amortized cost		Total		Level 1		Level 2		Level 3
Liabilities
Trade and Other Payables		—		(346,776)		(346,776)		—		—		—
Financial liabilities		—		(6,077)		(6,077)		—		—		—
Derivative financial instruments		(1,121)		—		(1,121)		—		(1,121)		—
Contingent consideration liability		(665)		—		(665)		—		—		(665)
		(1,786)		(352,853)		(354,639)		—		(1,121)		(665)

 

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December 31, 2021		FVPL		Amortized cost		Total		Level 1		Level 2		Level 3
Liabilities
Trade and Other Payables		—		(277,160)		(277,160)		—		—		—
Financial liabilities		—		(5,014)		(5,014)		—		—		—
Derivative financial instruments		(221)		—		(221)		—		(221)		—
Contingent consideration liability		(665)		—		(665)		—		—		(665)
		(886)		(282,174)		(283,060)		—		(221)		(665)

 

Level 3 Financial Instruments

 

As of March 31, 2022 and December 31, 2021., the Group has recognized a contingent consideration liability amounting to USD 665, classified in Level 3. The amount of the Level 3 contingent consideration was calculated by the finance team of the Group, using a discounted cash flow analysis, considering the expected cash flows based on terms of the contract, the entity’s knowledge of the business and how the current conditions are likely to impact it. As described in note 1.3.e to the Annual Consolidated Financial Statements, such contingent liability is capped in USD 665 thousands, and is expected to be paid conditioned to finalizing the migration process estimated during 2022.

 

There were no changes in level 3 items for the periods ended March 31, 2022 and December 31, 2021. Also, there were no transfer of items between level 2 and level 3, acquisitions, disposals nor gains or losses recognized in profit for the period related to level 3 instruments.

 

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23. Subsequent events

 

During April 2022, dLocal repaid the borrowings that were received during 2021 from a financial institution in Brazilian Reais (BRZ) amounting to USD 5,000 (BRZ 27 million).

 

On April 19, 2022, dLocal has received borrowings from a financial institution in Brazilian Reais (BRZ) amounting to USD 15.8 million (BRZ 75 million) for working capital, with expiration date on January 16, 2023 and accruing interest at an annual fixed interest rate of 1.70%.

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