DLocal Limited

Thank you for standing by and welcome to the DLocal Limited second quarter 2025 results conference call. I will now hand the call over to the company.

Good afternoon, everyone, and thank you for joining the second quarter 2025 earnings call. If you have not seen the earnings release, a copy is posted in the financials section of the Investor Relations website. On the call today, you have Pedro Arndt, Chief Executive Officer, Jeffrey Brown, Interim Chief Financial Officer, Christopher Strohmeyer, SVP of Corporate Development, and Mirela Aragao, Head of Investor Relations. A slide presentation has been provided to accompany the prepared remarks. This event is being broadcast live via webcast, and both the webcast and presentation may be accessed through DLocal's website at investor.dlocal.com. The recording will be available shortly after the event is concluded. Before proceeding, let me mention that any forward-looking statements included in the presentation or mentioned in this conference call are based on currently available information and DLocal's current assumptions, expectations, and projections about future events. While the company believes that our assumptions, expectations, and projections are reasonable given currently available information, you are cautioned not to place undue reliance on those forward-looking statements. Actual results may differ materially from those included in D-Local's presentation or discussed in this conference call for a variety of reasons, including those described in the forward-looking statements and risk factors sections of D-Local's filings, With the Securities and Exchange Commission, which are available on DLocal's Investor Relations website, now I will turn the conference over to DLocal. Thank you.

Good afternoon, and thank you for joining us today. We delivered another quarter of solid growth and disciplined execution, with significant acceleration across key financial metrics. These quarterly results are another testament to our high growth, expanding margin, and healthy free cash flow business model. They also demonstrate how we provide substantial value to our merchants. We continue to experience strong momentum across the business, once again setting a record high TPV of $9.2 billion and achieving our third consecutive quarter of over 50% year-over-year growth. Both revenue and gross profit also reached all-time highs of $256 million and $99 million, respectively. Our core markets, particularly Brazil and Mexico, rebounded to deliver solid performance while the rest of our geographies are growing even faster. All this underscores our increased business diversification and the resilience of our larger markets. Despite our ongoing investment cycle to support our future growth trajectory, we've posted five consecutive quarters of improvement in the adjusted EBITDA over gross profit ratio, demonstrating our commitment to investing towards right-sizing our business, but doing so in a disciplined manner. Net income for the quarter totaled $43 million. negatively impacted by the Argentine pesos devaluation on our bond portfolio. Given the shifting market dynamics, we took the opportunity to expatriate funds more efficiently, reducing our position by over 80% and reallocating to U.S. Treasuries. This move reduces the expected volatility and increases our funds available for general corporate purposes. If we exclude these effects, net income would have been $53 million. These are all very positive outcomes over the long run, despite the negative impact on this quarter's bottom line. The business also continues to deliver strong cash generation, with $48 million in free cash flow this quarter, a clear reflection of the strength of our underlying operations and our solid financial position. During the quarter, we added three new licenses, UAE, Turkey, and Philippines, an important milestone for us in our strategy to offer our merchants the advantages of our growing portfolio of financial services licenses across the Global South. Before we go into greater depth on this quarter's results, I'd like to take a few minutes to revisit the broader trends driving these strong results in our business. First of all, we continue to observe a substantial long-term opportunity within the markets where we operate. Our addressable market in terms of total payment volume is valued at trillions of dollars. And because it still exhibits low penetration in digital adoption and card usage, is projected to experience double-digit annual growth through 2030. Second, if we look at our current merchants business in the countries where we operate in, we see significant opportunities to grow our share of wallet with those merchants. This will happen as we expand with them into new countries, as we integrate additional APMs, and unlock new lines of businesses that we do not yet serve. The third growth vector is the addition of new merchants. One way to think about the potential growth in that merchant base is that we are still in the early stages of the S-curve of digital merchants adopting emerging markets payment localization. This growth we've observed follows an identifiable pattern. Merchants will typically start by launching their businesses in developed markets and then, as they expand into emerging markets, do so using only international acquiring. This nets them initial access to only a portion of the population, delivers lower conversion rates and a generally poor user experience, ridden with hidden costs and friction. Eventually, the size of these businesses across EMs reach a scale that demands the localization of payments to solve for those barriers to adoption. And finally, they initiate a phased expansion into other emerging and frontier markets, repeating the cycle. the local is able to accompany them through that journey. So as we move up the S-curve with these merchants, we build a more diversified, stickier and less volatile business that serves more merchants across more countries and in a greater number of payment methods. We see this playing out in our numbers. We now serve nearly 760 merchants. If we consider the top 50 clients, they operate with us on average in 11 countries and using 48 payment methods. This is up from 8 and 35 only 18 months ago. Our geographic diversification has increased as a consequence, with our top 3 markets now representing less than 50% of revenues, down 8 percentage points since 2023. The revenue in the rest of our markets are growing almost three times faster if we look at the last four quarters. And so as we increase our merchant base and move up the S-curve with them, we expect merchant diversification to increase as well going forward. As I've highlighted in the past quarters, we continue to increase our pace of investment in product innovation. I'd like to share some of the highlights from the last three months of these deployments. Just last week, we launched Smart PIX in Brazil. This first-in-the-market groundbreaking solution redefines the PIX experience and replicates most of the functionalities and convenience of card-on-file payments for merchants. SmartPix is already live with clients and demonstrates our commitment to being leaders in the alternative payment methods space throughout the Global South. During the second quarter, we also launched multiple buy-now-pay-later integrations in several markets, where we integrate market-leading BNPL solutions to our global merchants' checkouts. Following our installment offerings in Brazil and Argentina, this is another important step towards enabling our merchants to benefit from the massive demand for credit that exists throughout emerging markets. It is important to note that we are not taking credit risk ourselves, but are able to revenue share on the credit yields being made by our BNPL partners. We also continue to make progress on our stablecoin solutions, where we believe we are uniquely positioned to take advantage of some of the opportunities arising. With our broad EM presence, highly developed payout and pay-in infrastructure, local FX liquidities and capabilities, and years of experience with stablecoins, we are a perfect on-ramp and off-ramp provider for stablecoin players and merchants looking to leverage the advantages of this emerging technology. Our partnerships with Circle and BVNK are some examples of the advances we are making in this space. Before I turn it over to Jeff to give you a detailed breakdown of our P&L for the quarter, I'd like to make a few comments regarding the operating leverage in our financial model. As you know, and as we've been very clear, we've been in an investment cycle focused on product, tech, operations, and compliance capabilities. Yet, despite this investment cycle, we've turned a corner and continue to deliver higher revenues per employee that are increasing and that are better than many of our public company best-in-class peers, all of whom, by the way, process more TPV than we do. This reflects that despite smaller scale, we have a very lean and efficient culture. Furthermore, we believe there are efficiency and scalability gains ahead of us from our ongoing AI and automation initiatives, which are a core part of where the technology resources from our investment cycle are being allocated. Great. So with that introduction, I'll now hand it over to Jeff to provide a more detailed review of our second quarter results.