DLocal Limited

Hello, everyone. Welcome to D-Local's second quarter 2021 results conference call. This event is being recorded. At this time, all participants are in a listen-only mode. After the D-Local management team concludes their personal remarks, prepared remarks, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. If you require any further assistance, please press star 0. I'm going to turn the call over to D-Local.

Thanks, Operator. Welcome to our first quarterly earnings conference call after our IPO. As a reminder, this event is also being broadcast live via webcast and may be accessed through the LOCOS website at investor.thelocos.com, where the presentation is also available. The replay will be available shortly after the event is concluded. Before proceeding, let me mention that any forward statements included in the presentation or mentioned in this conference call are based on currently available information and the local's current assumptions, expectations, and projections about future events. While the company believes that their assumptions, expectations, and projections are reasonable in view of currently available information, you are cautioned not to place and do reliance on those forward-looking statements. Actual results may differ materially from those included in the local's presentation or discussed in this conference call for a variety of reasons, including those described in the forward-looking statements and risk factor sections of the local's registration statements on Form F-1 and other filings with the Securities and Exchange Commission, which are available on the local's Investors Relations website. Now, I will turn the conference over to Sebastian Canavich, our Chief Executive Officer. Trevor, you may begin your presentation.

Hello, everyone, and thanks for joining our second quarter results conference call. Today, I'm joined by Sumita Pandit, our Chief Operating Officer, and Diego Cabrera Canay, our Chief Financial Officer. This is our first earnings call after our IPO on June 3rd, 2021, and we are excited to present an update on our business, and we thank you for your interest in our company. Let's get right into it on slide three. We are aware that some of you are joining us to hear our story for the first time, so we are providing a recap of who we are, what are the requirements we are addressing for our merchants, and what we believe is our addressable market. We will then provide an update on our vectors of future growth, followed by a review of our financial performance. We will leave time for a Q&A session at the end. So, who are we? The Local enables global merchants to connect seamlessly with billions of emerging market consumers. Our platform, 1D Local, presents a single API, single integration, and single contract solution to our merchants. We are entirely B2B focused, and we are proud to count some of the largest global merchants as our customers. such as Microsoft, Rappi, Kuaishou, Mailchimp, Wikimedia, Indriver, and Wix. Today, our infrastructure supports our merchants across 30 emerging markets in Latin America, Africa, and Asia. Now to the results. The second quarter has been our best quarter ever. Total process volume, TPV, grew 319% year-over-year when compared to the second quarter of 2020, reaching US dollars $1.5 billion during the quarter. Our TPV this quarter represents a milestone for the company, as it's the first time we have surpassed $1 billion in a single quarter. As you may remember, we grew our TPV 139% year-over-year in our first quarter of 2021, so our growth has continued to accelerate both year-over-year as well as quarter-over-quarter. Our revenues in the second quarter of 2021 increased to $59 million, representing 186% year-over-year growth compared to the second quarter of 2020. Our business continues to benefit from cost discipline and efficiency as we continue to maintain our adjusted EVDA margin along with high growth. Slide four, let us briefly compare our Q2 2021 performance vis-a-vis Q1 2021 as well as full year 2020. We have improved every financial metric we have discussed with you. Our second quarter revenue of 59 million is 46% quarter over quarter growth versus 40 million in Q1. Our Q2 2021 revenue growth of 186% compared to 124% in Q1 and 88% in full year 2020. We have previously highlighted the net retention rate metric as a key KPI we obsessively track. We achieved 196% net revenue retention in Q2 2021 versus an already impressive 186% in Q1 2021 and 159% in full year 2020. Our adjusted EVDA margin in Q2 2021 remains stable at 44% in comparison with our adjusted EVDA margin for the first quarter and higher than our Q2 2020 adjusted EVDA margin of 40%. Merchants and consumers continue to evolve on their behaviors as the pandemic goes through its different stages in the multiple countries we operate in. We are seeing more digitalization, less cash, and wider adoption of alternative payment methods. We believe these new consumer behavior changes are here to stay and will continue to have a positive effect on our business. During this quarter, we have seen continued growth in our business from both existing and new merchants using our platforms. Our global employee base has continued to thrive and will remain focused on serving our merchants. We have embraced a hybrid model of work, office or home, as we continue to be flexible about where our employees choose to work from. This is not new for us. As even pre-COVID, we had a flexible approach to physical locations, given our global roster of merchants and extensive emerging market network. For example, The three of us on this call today are based in different locations. I am calling from Israel while Sumita is in California and Diego is in Uruguay. We have continued our efforts on the expansion front, growing our presence in Africa and Southeast Asia. We have launched four new countries in the first half of this year. We have added 10 plus new merchants in the second quarter of 2021. We continue to benefit from the diversification of our business across verticals. Some verticals, such as retail, streaming, advertising, saw accelerated growth as businesses benefited from post-pandemic return to work and the gradual opening of economies. Our margins have remained stable in comparison with our previous quarter, even with continued investment in our infrastructure and people. We have continued to hire and strengthen our employee count in key functions, The headcount in the local grew 100% year over year. We see tremendous opportunity in the markets, merchants, and products that we serve, and we intend to continue to invest in our people, platform, and technology as we pursue a path of growth. Our disciplined approach to growth and profitability to date has provided us with a unique position. We intend to continue investing in growth, and therefore, our margins may decrease in the coming quarter. We will maintain our discipline to ensure that every new dollar we process will contribute to our market. Slide five. What are the problems we are addressing? There are three primary challenges that we are solving for our merchants. First, payment methods are local by nature and very diverse in the 30 countries we serve. On top of that, we are seeing a trend of continued fragmentation as consumers adopt newly available payment methods. Cash methods are getting replaced by digital payment methods, offering even more opportunities for consumers to participate in digital online commerce. Merchants are keen to access this rapidly growing end market without building the payment rails themselves. Second, achieving healthy conversion rates While keeping fraud under control, it's a challenge in emerging markets. We deliver high conversion rates and lower friction through automatic validation and dynamic routing of transactions to multiple acquirers and payment methods. And third, we make the complex simple for our merchants. For those of you who have traveled to any of the markets we serve, you will know that no two markets in these regions are the same. We enable our merchants to keep up with the changing regulatory and DAX frameworks in emerging markets. Slide six. As you may remember, we offer both paying and payout capabilities to our merchants. A typical fund flow for a paying transaction from an emerging market user to a global enterprise merchant requires smart routing, payments processing, withholding tax collection, FX management, and merchant fund settlement. A typical payoffs fund flow in the opposite direction from a global merchant to an emerging market user, imagine, if you will, a ride-hailing company driver or a food delivery worker, requires user payment disbursement, income tax management, FX management, payments processing, and merchant fund collections. Our platform enables all of this by leveraging our connectivity to 600-plus local payment methods, including cards, bankrolls, wallets, and alternative payment methods, as well as local acquirers, banks, and non-financial institutions. We are not an acquirer ourselves and instead connect to multiple acquirers in the local markets where we operate. We have recently launched issuing as a service to our global merchants. We have launched our first pilot with a merchant and expect this product to be highly complementary to our current product offering. Sumita, over to you.