DLocal Limited

Thank you for standing by, and welcome to the Local Limited Reports third quarter 2021 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference may be recorded. Should you require any further assistance, please press star zero. I would now like to hand the conference over to the company.

Thank you. Good afternoon and welcome to the local earnings conference call for the third quarter of 2021. We're providing a slide presentation to accompany our prepared remarks. This event is being broadcast live via webcast and both the webcast and presentation may be accessed through the local website at investor.thelocal.com. 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 in the local 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 under reliance on those forward-looking statements. Actual results may differ materially from those included in the LOCUS presentation or discussed in this conference call for a variety of reasons, including those described in the forward-looking statements and risk factors section of the LOCUS registration statements on Form F-1, and other filings with Securities and Exchange Commission, which are available on the local investor relations website. Now, I will turn the conference over to Sebastian Canoich, our Chief Executive Officer.

Hello, everyone, and thanks for joining us today. On the call today, I'm joined by Sumita Pandit, our Chief Operating Officer, and Diego Cabrera Canay, our Chief Financial Officer. We are excited to present an update on our business, and we thank you for your interest in our company. On slide three, dLocal enables global merchants to connect seamlessly with billions of emerging market consumers. Our platform, 1dLocal, 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, Raffi, Kuaishou, MailChimp, Wikimedia, Indriver, and Wix. Today, our infrastructure supports our merchants across 32 emerging markets in Latin America, Africa, and Asia. Now to the results. The third quarter has been another outstanding quarter. Total process volume, TPV, grew 217% year over year when compared to the third quarter of 2020. reaching $1.8 billion during the quarter. Revenues for the quarter of $69 million represent 123% growth year-over-year when compared to the third quarter of 2020. Adjusted EBDAs for the third quarter of 2021 grew 110% year-over-year as compared to the third quarter of 2020. On slide four. Let us briefly compare our Q3 2021 performance vis-a-vis Q2 2021 as well as full year 2020. Our Q3 2021 revenue growth of 123% compares to 186% year-over-year in Q2 and 88% year-over-year growth in full year 2020. We have previously highlighted the net retention rate metric as a key KPI we manage our business on. We achieved 185% NRR in Q3 2021 versus 196% in Q2 2021 and 159% in full year 2020. Our adjusted EVDA margin in Q3 2021 was 38% in comparison to 44% in Q2 2021 and 40% for the full year 2020. As we continue to invest in our people, platform, and technology to pursue a path of growth. We expect our full year 2021 adjusted EBITDA margin to be aligned with our full year 2020 adjusted EBITDA margin. During this quarter, we have seen continued growth in our business from both existing and new merchants using our platform. We are seeing more digitalization, less cash, and wider adoption of alternative payment methods. We have continued our efforts on the expansion front, growing our presence in Africa and Southeast Asia. We've launched two new countries in the last quarter, Thailand and El Salvador. For the year to date, 2021, we have added six new countries to our network infrastructure. We have added 10 plus new merchants with material volumes in the third quarter of 2021. We continue to benefit from the diversification of our business across verticals. We have maintained our strong adjusted VDA margin, 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 105% year-over-year in the third quarter of 2021. On slide five, there are three primary challenges that we are solving for our merchants. One, payment methods are local by nature and very diverse in the 32 countries where we serve. The trend of fragmentation continues as consumers adopt newly available payment methods. are key to access this rapidly growing end market without building the payment rails themselves. Two, achieving healthy conversion rates while keeping fraud under control is a challenge in emerging markets. And three, we make the complex simple for our merchants by enabling our merchants to keep up with the changing regulatory and tax framework in emerging markets. On slide six, the complexity of the markets we serve makes our solution powerful. Flight 6 provides a breakdown of payment methods in Latin America, Middle East, and Africa and Asia Pacific to showcase the complexity that our merchants face when doing business in this market. Each market is evolving differently. For example, the proportion of digital mobile wallets is much higher in Asia Pacific. Bank transfers and cash and delivery are much more dominant in the Middle East-Africa region. There are also differences by country in each one of the continents. Merchants are seeking choice and agility in these end markets to keep up with the consumer preference. Slide seven. On our website, we have made available a market study completed by AMI on the key markets we serve. Our TPV for the third quarter 2021 was $1.8 billion at 217% year-over-year growth. Our TPV for the last 12 months at $4.9 billion was 2.4x our TPV for full year 2020. Our TPB is a very small portion of our addressable market that is expected to continue to grow at 27% CAGR in the next few years. Slide 8. On slide 8, we present a case study of a representative merchant on our platform. As shown, we typically take three to six quarters to ramp up volume. For this particular merchant, we started with a local-to-local payment flow. We've added payment methods, we've added new countries, and we've then added cross-border flow for a few markets. We went from 18 to 109 payment methods for this particular merchant. We've expanded to nine countries. The merchant has seen growth of 30x volume over approximately three years. Every merchant is, of course, unique, and the example provided is representative of how we grow as our merchants organically grow on our platforms. I will now hand it over to Sumita to go through our vectors of future growth.