DLocal (DLO) - 2022 Q2 - Quarterly Report

Consolidated Condensed Interim Financial Statements Consolidated Condensed Interim Statements of Comprehensive Income DLocal Limited achieved significant revenue and profit growth in the first half and second quarter of 2022, with revenue increasing by 90.1% and net profit by 64.5% for the six-month period, alongside improved basic and diluted earnings per share Metric (Thousand USD) | Metric (Thousand USD) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :-------------------- | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Revenue | 188,633 | 99,217 | 101,180 | 58,961 | | Cost of Services | (95,440) | (42,159) | (51,541) | (25,170) | | Gross Profit | 93,193 | 57,058 | 49,639 | 33,791 | | Operating Profit | 64,177 | 37,703 | 35,092 | 18,918 | | Profit for the Period | 56,995 | 34,635 | 30,722 | 17,708 | | Profit Attributable to Owners of the Group | 56,864 | 34,628 | 30,572 | 17,708 | | Basic Earnings Per Share | 0.19 | 0.12 | 0.10 | 0.06 | | Diluted Earnings Per Share | 0.18 | 0.11 | 0.10 | 0.06 | - For the six-month period, revenue increased by 90.1%, gross profit by 63.3%, operating profit by 70.2%, and profit for the period by 64.5% year-over-year[3] - For the three-month period, revenue increased by 71.6%, gross profit by 46.9%, operating profit by 85.5%, and profit for the period by 73.5% year-over-year[3] Consolidated Condensed Interim Statements of Financial Position As of June 30, 2022, DLocal Limited's total assets and equity increased from year-end 2021, driven by higher cash and cash equivalents and trade and other receivables, with a corresponding rise in liabilities Metric (Thousand USD) | Metric (Thousand USD) | As of June 30, 2022 | As of December 31, 2021 | | :-------------------- | :---------------- | :------------------ | | ASSETS | | | | Cash and Cash Equivalents | 453,985 | 336,197 | | Trade and Other Receivables | 197,548 | 190,966 | | Total Current Assets | 655,068 | 529,506 | | Total Non-Current Assets | 55,636 | 53,502 | | TOTAL ASSETS | 710,704 | 583,008 | | LIABILITIES | | | | Trade and Other Payables | 335,576 | 277,160 | | Borrowings | 14,656 | 5,014 | | Total Current Liabilities | 363,681 | 298,398 | | Total Non-Current Liabilities | 3,821 | 4,309 | | TOTAL LIABILITIES | 367,502 | 302,707 | | EQUITY | | | | Total Equity Attributable to Owners of the Group | 343,089 | 280,319 | | TOTAL EQUITY | 343,202 | 280,301 | - As of June 30, 2022, total assets increased to USD 710,704 thousand, a 21.9% growth from USD 583,008 thousand as of December 31, 2021[5] - Cash and cash equivalents increased from USD 336,197 thousand to USD 453,985 thousand, a 35.0% increase[5] - Total equity increased from USD 280,301 thousand to USD 343,202 thousand, a 22.4% increase[5] Consolidated Condensed Interim Statements of Changes in Equity For the six months ended June 30, 2022, DLocal Limited's total equity increased from USD 280,301 thousand as of January 1, 2022, to USD 343,202 thousand, primarily due to profit for the period and increased share capital and share premium from share option exercises Metric (Thousand USD) | Metric (Thousand USD) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------- | :----------------------- | :----------------------- | | Balance as of January 1, 2022 | 280,301 | 45,048 | | Profit for the Period | 56,995 | 34,635 | | Exercise of Share Options | 2,714 | 82 | | Share-Based Payments | 3,606 | 2,681 | | Balance as of June 30, 2022 | 343,202 | 232,942 | - As of June 30, 2022, total equity increased from USD 280,301 thousand at the beginning of the year to USD 343,202 thousand, a 22.4% increase[6] - In H1 2022, the exercise of share options resulted in a USD 2,714 thousand increase in equity, and share-based payments contributed an additional USD 3,606 thousand to equity[6] Consolidated Condensed Interim Statements of Cash Flows For the six months ended June 30, 2022, DLocal Limited experienced significant growth in operating cash flow, a substantial reduction in investing cash outflows, and a sharp decrease in financing cash outflows, leading to a notable increase in cash and cash equivalents at period-end Metric (Thousand USD) | Metric (Thousand USD) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------- | :----------------------- | :----------------------- | | Net Cash Inflow from Operating Activities | 109,526 | 39,699 | | Net Cash Outflow from Investing Activities | (46) | (35,259) | | Net Cash Inflow from Financing Activities | 8,694 | 149,841 | | Net Increase in Cash and Cash Equivalents | 118,174 | 154,281 | | Cash and Cash Equivalents at End of Period | 453,985 | 265,954 | - Net cash inflow from operating activities increased from USD 39,699 thousand in H1 2021 to USD 109,526 thousand in H1 2022, a 175.9% increase[7] - Net cash outflow from investing activities significantly decreased from USD 35,259 thousand in H1 2021 to USD 46 thousand in H1 2022[7] - Net cash inflow from financing activities decreased from USD 149,841 thousand in H1 2021 to USD 8,694 thousand in H1 2022, primarily due to significant financing activities like IPO and share issuance in 2021[7] Notes to the Consolidated Condensed Interim Financial Statements 1. General information and Significant Events during the period DLocal Limited, a Cayman Islands-registered holding company, provides online payment transaction processing services in global emerging markets through its subsidiaries, expanding its network to 37 countries, with significant events including filing its 20-F annual report and securing a USD 4,000 thousand secured credit facility - DLocal Group, a Cayman Islands-registered holding company, primarily processes online payment transactions for merchants in developed economies (mainly the US, Europe, and China), enabling them to collect payments ('payins') and make payments ('payouts') in emerging markets[9][10] - As of the reporting date, the Group's geographical network has expanded to 37 countries, holding Electronic Money Issuer (EMI) and Payment Institution (PI) licenses in the EU, and registered as a Money Services Business with the US Treasury's Financial Crimes Enforcement Network (FinCEN)[10][12] - On March 3, 2022, DLocal Group Limited entered into a secured credit agreement with Bank J. Safra Sarasin (Gibraltar) Ltd for up to USD 4,000 thousand for options, futures trading, and structured products[15] 2. Presentation and preparation of the Consolidated Condensed Interim Financial Statements and significant accounting policies These consolidated condensed interim financial statements are prepared in accordance with IAS 34 'Interim Financial Reporting' and are consistent with the 2021 annual consolidated financial statements, with new share options and restricted stock units granted during the period and disclosure of new accounting standard amendments not yet adopted - These consolidated condensed interim financial statements are prepared in accordance with IAS 34 'Interim Financial Reporting' and should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2021[16][17] Overview of Share Options and Restricted Stock Units (RSUs) | Metric | As of June 30, 2022 (End of Period) | As of December 31, 2021 (End of Period) | | :---------------------------------- | :----------------------- | :----------------------- | | Number of Share Options and RSUs at Beginning of Period | 4,032,345 | 17,361,000 | | Granted during the period | 746,499 | 2,371,345 | | Exercised during the period | (766,500) | (15,685,000) | | Forfeited during the period | (261,341) | (15,000) | | Number of Share Options and RSUs at End of Period | 3,751,003 | 4,032,345 | | Number of Vested and Exercisable at End of Period | 534,200 | 486,750 | - The Group has not early adopted amendments to IAS 1, IFRS Practice Statement 2, IAS 8, and IAS 12, which are not expected to have a significant impact on the Group's financial statements and are effective on or after January 1, 2023[25][26] 3. Accounting estimates and judgments The key accounting estimates and judgments applied in these consolidated condensed interim financial statements are consistent with the prior fiscal year and corresponding interim reporting period, and are continuously evaluated - Accounting estimates and judgments are continuously evaluated based on historical experience and other factors, including expectations of future events, which are considered reasonable under current circumstances[28] - The key accounting estimates and judgments applied in these consolidated condensed interim financial statements are consistent with the prior fiscal year and corresponding interim reporting period[28] 4. Consolidation of subsidiaries DLocal Limited, as a holding company, consolidates its subsidiaries across multiple countries globally, including Malta, UK, US, Uruguay, Singapore, Argentina, Brazil, Chile, Colombia, India, Indonesia, Israel, Mexico, Morocco, Nigeria, Panama, Paraguay, Peru, South Africa, UAE, primarily engaged in cross-border and local payment operations - DLocal Limited is the Group's parent company, acting as a holding company whose subsidiaries primarily engage in cross-border and local payment operations, enabling international merchants to access end customers in emerging markets[29] - The Group owns wholly-owned or controlled subsidiaries in multiple countries globally, including Malta, UK, US, Uruguay, Singapore, Argentina, Brazil, Chile, Colombia, India, Indonesia, Israel, Mexico, Morocco, Nigeria, Panama, Paraguay, Peru, South Africa, UAE[30][31] - Subsidiaries acquired or formed during 2022 do not constitute a business as defined by IFRS 3[31] 5. Segment reporting DLocal Limited operates solely within the 'Payment Processing' segment, with the executive team assessing financial performance using revenue, Adjusted EBITDA, and Adjusted EBITDA margin; in H1 2022, both Latin America and Asia & Africa regions saw significant revenue growth, though Adjusted EBITDA margin declined - The Group operates solely within one operating segment, 'Payment Processing,' with the executive team (comprising the CEO, COO, CFO, and President) using revenue, Adjusted EBITDA, and Adjusted EBITDA margin as key performance indicators[32][33] Revenue Breakdown by Region (Thousand USD) | Region | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Y-o-Y Growth Rate | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Y-o-Y Growth Rate | | :------------ | :----------------------- | :----------------------- | :--------- | :----------------------- | :----------------------- | :--------- | | Latin America | 165,178 | 89,555 | 84.4% | 87,570 | 53,632 | 63.3% | | Asia and Africa | 23,455 | 9,662 | 142.8% | 13,610 | 5,329 | 155.4% | | Total Revenue | 188,633 | 99,217 | 90.1% | 101,180 | 58,961 | 71.6% | Adjusted EBITDA and Adjusted EBITDA Margin (Thousand USD) | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :-------------------- | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Profit for the Period | 56,995 | 34,635 | 30,722 | 17,708 | | Adjusted EBITDA | 71,039 | 43,766 | 38,183 | 25,925 | | Revenue | 188,633 | 99,217 | 101,180 | 58,961 | | Adjusted EBITDA Margin | 37.7% | 44.1% | 37.7% | 44.0% | - In H1 2022, revenue from the top ten merchants accounted for 51% of total revenue, down from 62% in the same period of 2021, indicating a decrease in customer concentration[38] 6. Revenues and Cost of Services DLocal Limited's revenue primarily stems from payment processing services, with transaction revenue as the main component recognized at the point of transaction processing; cost of services, including payment processing fees, hosting, operational salaries, and intangible asset amortization, significantly increased in H1 2022, leading to a lower gross profit margin - DLocal generates revenue by processing payments for international merchants, enabling them to operate in selected emerging markets[40] Revenue and Cost of Services by Service Type (Thousand USD) | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :-------------------- | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Transaction Revenue | 181,435 | 95,648 | 96,699 | 57,129 | | Other Revenue | 7,198 | 3,569 | 4,481 | 1,832 | | Payment Processing Revenue | 188,633 | 99,217 | 101,180 | 58,961 | | Cost of Services | (95,440) | (42,159) | (51,541) | (25,170) | | Gross Profit | 93,193 | 57,058 | 49,639 | 33,791 | - Cost of services primarily includes processing fees charged by financial institutions (typically a percentage of transaction value or a fixed fee), hosting fees, salaries for the operations department, and amortization of internally generated software[43][44] - In H1 2022, processing costs within cost of services included USD 11,155 thousand for broker costs, currency exchange costs, and foreign exchange losses (net of hedging), a significant increase from USD 1,039 thousand in the same period of 2021[45] 7. Technology and development expenses DLocal Limited's technology and development expenses significantly increased in H1 2022, primarily driven by higher wages and software license fees to support platform development and maintenance Metric (Thousand USD) | Metric (Thousand USD) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :------------------------ | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Wages and Salaries | 1,669 | 385 | 845 | 194 | | Software License Fees | 447 | 160 | 289 | 73 | | Infrastructure Costs | 722 | 301 | 414 | 160 | | Information and Technology Security Costs | 76 | 73 | 39 | 41 | | Other Technology Costs | 135 | 197 | 56 | 128 | | Total Technology and Development Expenses | 3,049 | 1,116 | 1,643 | 596 | - In H1 2022, technology and development expenses increased from USD 1,116 thousand in the same period of 2021 to USD 3,049 thousand, a 173.2% increase[46] - Wages and salaries, a major component of technology and development expenses, reached USD 1,669 thousand in H1 2022, a significant increase from USD 385 thousand in the same period of 2021[46] 8. Sales and marketing expenses and General and administrative expenses DLocal Limited's sales and marketing expenses significantly increased in H1 2022, driven by higher wages and marketing activities, while general and administrative expenses remained relatively stable, with a decrease in third-party service fees primarily due to secondary offering and transaction costs in the prior period Sales and Marketing Expenses (Thousand USD) | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :-------------------- | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Wages and Salaries | 4,592 | 1,925 | 2,330 | 993 | | Marketing Expenses | 1,380 | 244 | 798 | 134 | | Total Sales and Marketing Expenses | 5,972 | 2,169 | 3,128 | 1,127 | General and Administrative Expenses (Thousand USD) | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :------------------------ | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Wages and Salaries | 10,245 | 9,921 | 4,665 | 6,365 | | Third-Party Services | 4,158 | 6,130 | 1,978 | 4,739 | | Office Expenses | 1,335 | 1,290 | 669 | 1,002 | | Travel and Other Operating Expenses | 2,038 | 948 | 995 | 509 | | Amortization and Depreciation | 1,613 | 904 | 788 | 816 | | Total General and Administrative Expenses | 19,389 | 19,193 | 9,095 | 13,431 | - In H1 2022, sales and marketing expenses increased from USD 2,169 thousand in the same period of 2021 to USD 5,972 thousand, a 175.3% increase[47] - Third-party service fees decreased to USD 4,158 thousand in H1 2022 from USD 6,130 thousand in the same period of 2021, primarily due to the inclusion of USD 3,747 thousand in secondary offering expenses and USD 454 thousand in transaction costs in H1 2021[47] 9. Employee Benefits DLocal Limited's total employee benefits significantly increased in H1 2022, primarily due to growth in wages, salaries, contractor fees, and share-based payment expenses, alongside an increase in full-time employees Employee Benefits (Thousand USD) | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :------------------------ | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Wages, Salaries and Contractor Fees | 18,755 | 12,354 | 9,409 | 6,970 | | Share-Based Payments | 3,275 | 2,681 | 1,241 | 2,116 | | Total Employee Benefits | 22,030 | 15,035 | 10,650 | 9,086 | - As of June 30, 2022, the Group's full-time employees (FTEs) increased to 632, up from 427 as of June 30, 2021, with 35% engaged in information technology, product engineering, and related roles[48] - In H1 2022, total employee benefits increased from USD 15,035 thousand in the same period of 2021 to USD 22,030 thousand, a 46.5% increase[49] 10. Amortization and Depreciation DLocal Limited's amortization and depreciation expenses significantly increased in H1 2022, primarily driven by the growth in intangible asset amortization Metric (Thousand USD) | Metric (Thousand USD) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :------------------------ | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Amortization of Intangible Assets | 3,016 | 1,479 | 1,594 | 1,052 | | Amortization of Right-of-Use Assets | 223 | 208 | 110 | 171 | | Depreciation of Property, Plant and Equipment | 341 | 172 | 153 | 121 | | Total Amortization and Depreciation | 3,580 | 1,859 | 1,857 | 1,344 | - In H1 2022, total amortization and depreciation expenses increased from USD 1,859 thousand in the same period of 2021 to USD 3,580 thousand, a 92.6% increase[50] - Amortization of intangible assets, a major component of amortization and depreciation expenses, reached USD 3,016 thousand in H1 2022, a 103.9% increase from USD 1,479 thousand in the same period of 2021[50] 11. Income Tax DLocal Limited's income tax expense significantly increased in H1 2022, primarily due to higher profits and an increase in the weighted average annual effective income tax rate Income Tax Expense (Thousand USD) | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :------------------------ | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Current Income Tax | (6,110) | (2,450) | (4,145) | (1,313) | | Deferred Income Tax Benefit/(Expense) | 746 | (525) | (6) | (283) | | Income Tax Expense | (5,364) | (2,975) | (4,151) | (1,596) | - In H1 2022, income tax expense increased from USD 2,975 thousand in the same period of 2021 to USD 5,364 thousand, an 80.3% increase[52] - In H1 2022, the estimated weighted average annual effective income tax rate was 8.6%, higher than 7.9% in the same period of 2021[51] 12. Capital management DLocal Limited's capital management involves Class A and Class B ordinary shares with identical rights except for voting, conversion, and transfer restrictions; in H1 2022, share capital increased due to share option exercises, capital reserves changed due to share-based payment expenses, retained earnings grew from comprehensive income for the period, and earnings per share significantly improved Share Capital Evolution (Thousand USD) | Metric | As of June 30, 2022 | As of June 30, 2021 | | :------------------------ | :---------------- | :---------------- | | Share Capital as of January 1 | 590 | 602 | | Ordinary Shares Issued | 2 | 45 | | Ordinary Shares Issued in IPO | — | 9 | | Share Capital as of June 30 | 592 | 586 | - Class A and Class B ordinary shares have identical rights, except Class B ordinary shares carry five votes per share, while Class A ordinary shares carry one vote per share[54] Changes in Capital Reserve (Thousand USD) | Metric | 2022 | 2021 | | :-------------------- | :----- | :----- | | Balance as of January 1 | 12,741 | 12,582 | | Exercise of Share Options | (3,640)| (6,898)| | Share-Based Payments | 3,606 | 2,681 | | Forfeitures | (331) | — | | Balance as of June 30 | 12,376 | 8,365 | Earnings Per Share (USD) | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :-------------------- | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Profit Attributable to Ordinary Shareholders | 56,864,047 | 34,628,192 | 30,572,332 | 17,708,117 | | Basic Earnings Per Share | 0.19 | 0.12 | 0.10 | 0.06 | | Diluted Earnings Per Share | 0.18 | 0.11 | 0.10 | 0.06 | 13. Cash and cash equivalents DLocal Limited's cash and cash equivalents significantly increased in H1 2022, primarily driven by growth in both own balances and merchant customer funds Cash and Cash Equivalents Breakdown (Thousand USD) | Metric | As of June 30, 2022 | As of December 31, 2021 | | :-------------------- | :---------------- | :------------------ | | Own Balances | 270,219 | 227,913 | | Merchant Customer Funds | 183,766 | 108,284 | | Total Cash and Cash Equivalents | 453,985 | 336,197 | - As of June 30, 2022, total cash and cash equivalents amounted to USD 453,985 thousand, a 35.0% increase from USD 336,197 thousand as of December 31, 2021[65] - Merchant customer funds included USD 24,649 thousand pending transfer to own funds accounts, compared to USD 7,827 thousand as of December 31, 2021[66] 14. Trade and other receivables DLocal Limited's trade and other receivables slightly increased in H1 2022, primarily driven by higher prepayments and other receivables, while loss allowance decreased Trade and Other Receivables Breakdown (Thousand USD) | Metric | As of June 30, 2022 | As of December 31, 2021 | | :-------------------- | :---------------- | :------------------ | | Trade Receivables | 177,009 | 179,199 | | Loss Allowance | (240) | (322) | | Net Trade Receivables | 176,769 | 178,877 | | Prepayments and Other Receivables | 20,779 | 12,089 | | Total Trade and Other Receivables | 197,548 | 190,966 | Changes in Loss Allowance (Thousand USD) | Metric | 2022 | 2021 | | :-------------------- | :----- | :----- | | Carrying Amount as of January 1 | (322) | (341) | | Decrease/(Increase) in Loss Allowance for Trade Receivables | 82 | (167) | | Total as of June 30 | (240)| (508)| - Trade receivables are unsecured, expected to be recovered within one year, and classified with a 'normal' credit risk rating[67] - As of June 30, 2022, the average expected credit loss rate for trade receivables aged 0-30 days overdue was 0.2%, lower than 0.3% in the same period of 2021[70] 15. Other Assets DLocal Limited's other assets increased in H1 2022, primarily driven by growth in funds in custody and lease deposits, while prepaid assets decreased due to amortization Other Assets Breakdown (Thousand USD) | Metric | As of June 30, 2022 | As of December 31, 2021 | | :-------------------- | :---------------- | :------------------ | | Funds in Custody | 770 | 211 | | Lease Deposits | 619 | 561 | | Prepaid Assets | 249 | 567 | | Other | 50 | — | | Total Current Other Assets | 1,688 | 1,339 | - Funds in custody are primarily held to meet processor and credit card requirements[71] - Prepaid assets decreased by USD 211 thousand in H1 2022 (compared to a USD 100 thousand decrease in H1 2021), accounted for as a reduction in revenue, related to minimum revenue agreements with merchants[71] 16. Intangible Assets DLocal Limited's intangible assets increased in H1 2022, primarily driven by the growth of internally generated software, alongside amortization Changes in Intangible Assets (Thousand USD) | Metric | As of June 30, 2022 | As of December 31, 2021 | | :------------------------ | :---------------- | :------------------ | | Cost | 56,448 | 51,722 | | Accumulated Amortization | (7,769) | (4,753) | | Net Book Value | 48,679 | 46,969 | - Intangible assets include capitalized costs for acquired software and internally generated software, presented at cost less accumulated amortization[72] - In H1 2022, additions to intangible assets amounted to USD 4,726 thousand, including USD 4,916 thousand in capitalized wages and salaries[73] - As of June 30, 2022, and December 31, 2021, there were no indications of impairment for intangible assets[74] 17. Trade and other payables DLocal Limited's trade and other payables significantly increased in H1 2022, primarily driven by growth in trade payables and accrued liabilities Trade and Other Payables Breakdown (Thousand USD) | Metric | As of June 30, 2022 | As of December 31, 2021 | | :-------------------- | :---------------- | :------------------ | | Trade Payables | 318,973 | 269,227 | | Accrued Liabilities | 8,142 | 3,173 | | Other Payables | 8,461 | 4,760 | | Total Trade and Other Payables | 335,576 | 277,160 | - These payables are classified as current liabilities as their payment terms are within one year or less[75] - Trade payables are primarily related to collection transactions from merchants or payment transactions processed at their request; accrued liabilities are mainly related to obligations to legal and tax advisors and auditors[76] 18. Borrowings DLocal Limited repaid 2021 borrowings and secured new Brazilian Real borrowings for working capital in H1 2022, leading to an increase in total borrowings - The USD 5,000 thousand (BRL 27 million) borrowing obtained in 2021 was repaid in April 2022[77] - On April 19, 2022, DLocal secured two new borrowings totaling USD 15.8 million (BRL 37.5 million each) for working capital, maturing on January 16, 2023, and bearing interest at CDI rate plus 1.70% and 118.14% of the CDI floating rate, respectively[78] - As of June 30, 2022, total borrowings amounted to USD 14,656 thousand, compared to USD 5,014 thousand as of December 31, 2021[78] 19. Tax Liabilities DLocal Limited's tax liabilities decreased in H1 2022, primarily due to reductions in other tax liabilities and VAT withholding on digital services Tax Liabilities Breakdown (Thousand USD) | Metric | As of June 30, 2022 | As of December 31, 2021 | | :-------------------- | :---------------- | :------------------ | | Income Tax Payable | 4,122 | 1,940 | | Other Tax Liabilities | 6,465 | 11,186 | | Income Tax Withholding (RG 4815) | 5,384 | 7,490 | | VAT Withholding on Digital Services | 990 | 2,796 | | Other Taxes | 91 | 900 | | Total Tax Liabilities | 10,587 | 13,126 | - As of June 30, 2022, total tax liabilities amounted to USD 10,587 thousand, a 19.4% decrease from USD 13,126 thousand as of December 31, 2021[79] 20. Derivative financial instruments DLocal Limited entered into multiple short-term derivative contracts (deliverable and non-deliverable forward contracts) in H1 2022 to hedge foreign exchange risk on trade and other receivables across various currencies, while a 2021 option agreement to purchase ordinary shares was terminated Overview of Derivative Financial Instruments (Thousand USD) | Transaction Type | Currency | Outstanding Notional Amount as of June 30, 2022 | Derivative Financial Assets/(Liabilities) as of June 30, 2022 | Outstanding Notional Amount as of December 31, 2021 | Derivative Financial Liabilities as of December 31, 2021 | | :-------------------- | :------------- | :----------------------- | :------------------------------- | :----------------------- | :----------------------- | | Non-Deliverable Forward Buy USD | Brazilian Real | 6,900 | 189 | 5,500 | (152) | | Deliverable Forward Buy USD | Chilean Peso | 12,193 | 404 | 12,392 | (8) | | Non-Deliverable Forward Buy USD | Indian Rupee | 14,000 | 131 | 1,000 | (14) | | Total | | | 706 | | (221) | - In H1 2022, DLocal entered into multiple forward contracts to hedge foreign exchange risk on trade and other receivables across currencies including Brazilian Real, Argentine Peso, Chilean Peso, Uruguayan Peso, Egyptian Pound, Nigerian Naira, Indian Rupee, and South African Rand[80] - On March 3, 2021, an option agreement to purchase 18,068,000 Class A ordinary shares was exercised, terminating DLocal's obligations and recognizing a USD 2,896 thousand gain in 'Other operating income/(loss)' in the consolidated statement of comprehensive income[83][84] 21. Provisions DLocal Limited's provisions primarily relate to current or potential litigation, with management, based on legal counsel's assessment, deeming it probable that an outflow of resources will be required to settle obligations and that a reliable estimate can be made; total provisions slightly decreased in H1 2022 - Provisions are related to current or potential litigation, with management, based on legal counsel's assessment, deeming it probable that an outflow of resources will be required to settle obligations and that a reliable estimate can be made[85] Changes in Current or Potential Litigation Provisions (Thousand USD) | Metric | 2022 | 2021 | | :-------------------- | :----- | :----- | | Carrying Amount as of January 1 | 1,710 | 1,393 | | Reversal of Labor Provisions | (200) | — | | Interest Expense on Labor Provisions | 63 | 881 | | Carrying Amount as of June 30 | 1,573| 2,274| - As of June 30, 2022, total provisions amounted to USD 1,573 thousand, a decrease from USD 1,710 thousand as of January 1, 2022[86] 22. Related parties DLocal Limited's related party transactions primarily involve merchants, preferred suppliers, and key management personnel compensation; in H1 2022, key management personnel compensation significantly increased, while transaction revenue with merchants decreased Key Management Personnel Compensation (Thousand USD) | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :------------------------ | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Short-term Employee Benefits – Wages and Salaries | 2,526 | 1,121 | 2,090 | 599 | | Long-term Employee Benefits – Share-Based Payments | 3,275 | 2,116 | 1,241 | 1,551 | | Total | 5,801 | 3,237 | 3,331 | 2,150 | Transactions with Other Related Parties (Thousand USD) | Transaction Type | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :------------------------ | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Transactions with Merchants – Revenue | 8 | 517 | (303) | 135 | | Transactions with Preferred Suppliers – Costs | (173) | (204) | 78 | (88) | - All related party transactions are conducted on normal commercial terms and market prices, with outstanding balances unsecured and repayable in cash[89] 23. Cash flow disclosures DLocal Limited's cash flow disclosures highlight the most significant non-cash transactions during the period, including the recognition of right-of-use assets and other receivables arising from the exercise of share awards Most Significant Non-Cash Transactions (Thousand USD) | Transaction Type | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :---------------------------- | :----------------------- | :----------------------- | | Recognition of Right-of-Use Assets and Increase in Lease Liabilities | (110) | (3,915) | | Other Receivables Arising from Exercise of Share Awards | 1,808 | — | 24. Fair value hierarchy DLocal Limited's financial instruments are classified by fair value hierarchy (Level 1, Level 2, and Level 3); as of June 30, 2022, the Group's financial assets and liabilities are primarily in Level 1 and Level 2, with Level 3 mainly comprising contingent consideration liabilities and no changes in Level 3 items during the period - Financial instruments are classified by fair value hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[93] Fair Value Hierarchy of Financial Assets as of June 30, 2022 (Thousand USD) | Asset | Fair Value Measurement | Amortized Cost Measurement | Total | Level 1 | Level 2 | Level 3 | | :---------------------------------- | :----------- | :----------- | :------ | :------ | :------ | :----- | | Financial Assets at Fair Value Through Profit or Loss | 1,065 | — | 1,065 | 1,065 | — | — | | Derivative Financial Instruments | 782 | — | 782 | — | 782 | — | | Cash and Cash Equivalents | — | 453,985 | 453,985 | — | — | — | | Total | 1,847 | 653,221 | 655,068 | 1,065 | 782 | — | Fair Value Hierarchy of Financial Liabilities as of June 30, 2022 (Thousand USD) | Liability | Fair Value Measurement | Amortized Cost Measurement | Total | Level 1 | Level 2 | Level 3 | | :---------------------------------- | :----------- | :----------- | :------ | :------ | :------ | :----- | | Derivative Financial Instruments | (76) | — | (76) | — | (76) | — | | Contingent Consideration Liability | (665) | — | (665) | — | — | (665) | | Total | (741) | (350,232)| (350,973) | — | (76)| (665)| - As of June 30, 2022, the Group recognized a contingent consideration liability of USD 665 thousand, classified as Level 3, calculated through discounted cash flow analysis, and paid on July 29, 2022[98]