Good afternoon, everyone. Thanks for joining. I have the pleasure of hosting Pedro Arnt, CEO of DLocal. I am the LatAm financial analyst at Goldman. Pedro, thanks for joining us. I think third, fourth year now, becoming a regular. Third year at DLocal. This conference has been forever. It is always good to be here. Yeah. Great to appreciate you coming. Let us jump into it right away. Maybe just in second quarter, you had very strong results, particularly when you look at a TPV growing more than 90%, well above expectations on the TPV side, right? So maybe what surprised you and how do you think about the growth algorithm sort of going forward, particularly on the back of that quarter? Yep. I think TPV growth kind of reflected most of the multiple growth vectors this company has in that it was broad-based. It was broad-based across different verticals. It was broad-based in terms of markets in general, with most markets performing quite well, save a few exceptions. And also with interesting ramp-ups from merchants that go to show that a lot of the investments we have been making over the last few years now place us within a position where these very large global enterprise merchants are willing to significantly increase the amount of business they do with us, where we are becoming one of their top three or four global PSPs. So from a volume perspective, share of wallet perspective, and ultimately market share perspective, I think nearly doubling TPV year-on-year off of what was already a strong base is phenomenal. The other data point we gave, which substantiates how broad-based the growth is that even if you eliminate the largest grower, which we said that our largest merchant is also the one that is growing the most, you still get to TPV growth year-on-year, which is in the high 60s. So very, very strong. Yeah. Great. If we look, and you had a chart, I think, on the addressable market as well, where, let's get the exact number, but you are like 3% of the total addressable market with your merchants' wallet shares closer to 10%. So just to think about how that can evolve over time, how much of that can you really serve and how big can you get with your merchants? Yeah. So I think let's take a step back just to understand why it is that despite the size of the opportunity, the starting point is still so early stage, right? Your typical go-to-market strategy for emerging and frontier markets for a large global digital company is to start off by offering its service in that market, but to continue to use its existing developed world payment rails. So what typically is called international acquiring in credit cards. Then as those local markets start becoming useful for them, large for them, and they begin to realize that to unlock further growth in those markets, they need to start localizing payments and offering the payment methods that consumers in those countries want to use is where DLocal comes onto their radar screen and they start thinking, okay, which payment methods do I start offering locally and gradually see the shift of volumes from international acquiring credit cards to other payment methods locally or local credit cards. We are still at a fairly early stage in that S-curve of adoption, and that is why our wallet share is still low, because there are many payment methods that merchants will be able to adopt through us that they do not yet adopt, and because so much of their volumes are still done through international acquiring. When we look at merchants that are further down that path of localizing payments, I think it's realistic to think that you could have anywhere between 50%-80% of their payments in a specific market. Why not 100%? Because most of these merchants will at least have one redundancy pipe. So they'll typically split things 80/20, 50/50, or maybe 50/ 30/ 20. But even if you take the 50% objective, that's still significantly more than what we have today. Yeah. When you think your top 10 merchants are still a sizable portion of your volumes. But it evolves over time, right? So when we think of that continued growth in terms of growing with existing merchants, getting new merchants, replacing those top 10, how do you think about that evolution? Yeah. So just to quantify what you just said, right? Of the top 10 merchants reported in the last quarter, if you were to go back two years, only half of them were in that top 10 list. So although the concentration in the top 10 and the top 20 has remained fairly unchanged, unfortunately, we'd like to see that diversify, it's not the same top 10 or top 20. Not because some merchants are churning, but because new merchants are coming in that very rapidly move into top 10 or top 20. So in that sense, when you look at a moving picture, the business is actually more diversified than the picture in one quarter would seem to indicate. But I think more importantly, when I talk about an S-curve, I think the reality is that for the vast majority of digital businesses that still have global aspirations, they're very early on in their journey of actually worrying about localizing payments. They're much more focused on other elements of their go-to-market strategies, marketing, product development. I think that the secular tailwinds behind the concept of localizing payments are quite significant and still early stage. So this is a rapidly expanding TAM, and one that I trust will continue to expand for many years into the future as this notion of, "Hey, I need to localize payments," becomes more and more prevalent. Not only because of merchant understanding and kind of figuring out this playbook, but also because if we look at global geopolitics and how things are playing out, this concept of payment sovereignty, I think, is something I hear from central bankers more and more. It is the idea that it is critical that countries have their own payment rails, their own payment champions, their own payment methods that power their economies and not necessarily depend on foreign credit card schemes or on international wire transfers for their economies to run fluidly. So that gives us confidence that Global South payment ecosystems will continue to be increasingly local and increasingly fragmented, which generates increasing value to what we offer our clients. Because at the end of the day, what we do is we simplify and abstract away that fragmentation, that complexity, and that localization for them. Yeah. I guess maybe thinking about that, maybe Pix in Brazil is a good example, right? How does your value proposition able to serve that versus cards and relative to the competition as well? What gives you the competitive advantage to be the provider for these merchants? Yeah. So I think to be quite frank, when you get to local payment methods as large as Pix and as relevant as Pix, most of our competitors also offer it. Even the companies that traditionally are credit card focused, when there is something like a Pix, they will build that into their product offering. Conceptually, I think what DLocal does is DLocal is able to offer you a unique breadth of market coverage and payment method coverage. So in addition to Pix, we can offer PicPay, we can offer Mercado Pago, we can offer a lot of the Brazilian buy now, pay later offerings, all under a single integration and a single APM. Then we can do that for you not only in Brazil, but across 60 emerging markets. So when you are a merchant, again, I go back to this point of abstracting complexity. You are trying to avoid having to do this yourself in each of the 60 markets. But if at the end of the day, you need to pick 20 suppliers to cover the 60 markets, that is not very attractive either. You keep down that line of thinking, the ideal solution is a solution where through one partner, you have access to all 60 markets and the deepest breadth of APMs. That is probably the strongest point of our pitch to our merchants. It is this concept of one DLocal, and then you can start toggling on merchants and payment methods in a very efficient manner. Yeah. There are other global payment players as well, although the focus tends to be a little bit different, right? You mentioned the Global South. I think I get to how DLocal, the value add that DLocal has by being maybe more Global South than some APMs. We have asked ourselves this question many times, right? Given the merchant roster we have, should we start offering our services in the U.S. or in Europe as well? I think we have consistently landed on the conclusion that our solution in these markets would be a me-too solution. Furthermore, I think I would argue that these markets are more about the product, the technology, and the integration, and less about the feet on the ground. When you move over into emerging markets, again, because of the fragmentation, because of the changing and ever-shifting regulatory landscapes, the actual feet on the ground are a big part of what allows you to deliver better payment performance. It is advocating with the regulators and shaping the direction of regulation. It is interacting with local issuing banks and local acquirers to optimize performance. Those are all things that require being in those markets over the long run and really having deep local market knowledge. Because of that, I think we have defined our markets and where we believe we can differentiate solely in Global South emerging markets. The other interesting thing which I think led us to that is it is remarkable how similar the pain points and the problems within payments ecosystems are from Latin America to Africa to the Middle East to Asia. It is very different to developed markets. That similarity of problems is what has also allowed us to port playbooks and best practices across markets in a way that is very efficient for our merchants. Yep. No, makes sense. I think along with that, take rate is always a question that the market tries to figure out, right? I think being an emerging market player, take rates are naturally higher, but we have even last quarter with the strong growth in volumes that we saw compression in the take rate. Given all the moving parts, ultimately, I think the market wants to what is the floor for take rate? I am not asking that direct question, but just the evolution of take rates and all the moving parts and how you see that relative to the TPV growth, I guess. Yeah. In general, within the payments industry, take rates are coming down. That is the first trend that is unavoidable. Second, within the emerging world, the starting point was significantly higher, and so the slope of that decline, I think, has been more marked and a greater cause of concern to investors. Third, as these merchant relationships that we are so successful with grow and their volumes with us become significant, by definition, they hit volume discounts as they grow with us. That is still all very accretive from a gross profit and earnings perspective, but at a lower take rate. Then finally, there is a mix shift issue going on all the time. About 30% of our business is FX. FX spreads across emerging markets tend to be volatile, so that also generates movement in take rates. I think the unavoidable reality is that take rates are coming down. Silver lining to this, and I think it is quite significant. A, we do think we have reached a point where the rate of decline should begin to slow down. So the line is asymptotic, and we think we are getting closer and closer to that asymptote. If you look at the midpoint of our guidance, we are actually guiding to somewhat flat-ish take rates at least for the second half of this year. The second piece is, for us, take rate really is an output, right? So we are managing the gross profit dollars. So when a merchant either hits a new tier or is negotiating a five basis point discount, the question is, how much volume are you going to give me? Or how much volume is not going to migrate away? And that is always gross profit accretive. That is why we have delivered such consistent gross profit growth over the past many, many quarters, is because despite the take rate decreases, volume growths have been enough to offset that and continue delivering very solid gross profit growth. Where it goes from here, I think we have avoided signaling what we think the floor is, but we have been pretty clear in saying that we think we are getting closer and closer to that floor. Yeah. When we think of maybe breaking it down a little bit by verticals, because some of your merchants like ride hailing last quarter grew significantly, and that probably came with lower pricing. But there is also a different country mix, right? So maybe thinking about the different segments, ride hailing, e-commerce, that have been really big growers, how is that growth potential relative maybe other verticals that you are not serving today or smaller? Take rates are very affected by verticals. There is typically a fairly linear relationship between the margin structure in an industry and how willing they are to pay for payments. Ride hailing, e-commerce are both notoriously tight margin verticals, and therefore they do exert a lot of pressure on payments. We have other verticals like advertising or like travel that tend to be better margin and therefore higher take rate. We happen to be in a period over the last few years actually, where the two biggest growers have been, or the three biggest growers, because remittance is the third one, and that is also low take rate, have been lower take rate verticals. That does not mean that going forward you will not have periods where maybe advertising or travel or, I am trying to think of some others, but anyway, another higher take rate vertical could grow. That is on the vertical side, right? Then market dynamics are also very significantly, the more "mature" or the less immature a payment market is and the more competed it is, like a Mexico, will have lower take rates. Mexican acquirers have lower margins than other markets. Then at the other extreme, some of the African markets, some of the Middle Eastern markets have higher take rates. As these newer geographies begin to become more relevant in mix, that should offset some of the take rate compression. Then the final piece is FX, right? About a third of the business is FX. So I think that also defends take rates quite nicely when compared to developed world payments processors that typically do not have an FX component or have a dollar-euro pairing where you make no spread. Right. Yeah, that said, recently you have had very strong growth in Brazil and Mexico, which I would think are lower take rate countries. How much of that was because a merchant wants to grow there, yet on average, I think merchants have only 12 countries out of the 60 that you serve. How do you see that evolve, like the country outlooks, let us say to some extent? As is usually the case with Brazilian financial institutions, the margins are actually better than we would expect. Mexico is very tight. Sorry, you had asked on. Yeah. We've had strong growth in Brazil, Mexico, maybe some other countries that have higher take rates. How that can evolve. We typically don't really have that much of a push product service on where merchants go. Merchants have their own emerging market growth strategies, and they dictate markets. We can suggest, we can kind of give them market insights, but I would say we are told where the merchant's next market entries are, and then we prepare to serve them there. So in that sense, it's very reactive to what merchants are looking for, and therefore it's expected that you're still continuing to see a lot of growth in Mexico, in Brazil, Argentina, maybe Indonesia, some of the larger markets. But I think over time, our expectation is that number that today is at about 12 markets on average and was at 8 not that long ago should continue to grow as two things happen. Merchants look more and more to the Global South for growth. But maybe more importantly, they've grown increasingly familiar and trust our solutions to say, "Okay, you've shown me enough in the markets where I work with you that now I'm more comfortable pushing the boundary." And that's typically what happens with the largest relationships. I think the merchant that does the most markets with us does over 32 now. They're very comfortable really pushing the boundary and saying, "Let's go do Senegal together. Let's go do markets that typically won't be where a merchant relationship will start from. Yeah. Okay. Makes sense. What about from on value-added services? You have buy now, pay later. You recently announced the merchant of record, dMoRe. How does that contribute to take rate longer term? When does that really become relevant? Also, how much stickiness does that create with your merchant? Yeah. From a strategic perspective, I think we identified about two years ago that not having more products that we could cross-sell to our merchant base didn't make sense. We were primarily pay ins and payouts, and we still are primarily pay ins and payouts. We identified different pieces of financial infrastructure that we think are very complementary to what we offered, and that we had a credible reason to be able to sell those financial services to our merchants. So integrations into buy now, pay later platforms, dMoRe, which is essentially an enhanced merchant of record model where we take on almost like an authorized reseller role so that the merchant really has to do very little when launching a new market. Better FX OTC products, and then getting into physical payments with physical POSs. The advantage we have is the distribution, right? These were chosen because these are financial infrastructure products that most of our existing enterprise merchants are interested in. Now we need to go and build those products, see which ones stick, and execute. They were also chosen because in all except for one of them, they are higher take rate and stickier. The one that isn't higher take rate, which is physical payments, is by far the largest addressable market. Physical world payments. As we continue to execute, and once these actually become large enough to have an impact on the P&L, they should be take rate accretive. Now whether that's in a year's time or two years' time, that'll depend a lot on the execution. Yeah. I don't know if you have any metrics, but how are you seeing adoption from merchants of these products? Yeah. So it varies by product. I think by and large, I would say none of these are above 1%, 2% of the business. So still more of an upside opportunity and optionality than something that is already impacting the P&L. Yeah. Okay. Thinking about AI, particularly in a tech conference, I guess, and different aspects of it for you. Where you can benefit from AI, maybe you have agentic commerce and serving some AI players. Thinking about all those different components and how you see yourself positioned. I have to congratulate Goldman because you have not rebranded it into tech, comm, and AI yet. That will come soon. Let us see. You laid it out. I think there are three areas that we are very focused on. The first one is how do we add the AI labs and the AI companies as a relevant vertical, given the mind-blowing growth that we are seeing in their businesses. What has been interesting there is for most of these guys, I would say until very recently, the conversation was, "This is really interesting. I have so many other things on my plate right now that localizing payments in emerging markets is not one of them. Let us keep the dialogue going, and once I have the resources and my EM businesses justify it or my growth in any of these businesses is beginning to be negatively affected by not having local payments, let us re-pick up the conversation." That has happened over the last few months. So we have landed one of them as a client, and we continue to pursue some of the others. I think this is a category that if we execute well two, three years out, should be massive for us. If we do not, then someone else did, and we will have to figure it out. But so far, very good traction. There is an advantage here, which is typically when you start landing your first merchants, you start really understanding their business and their needs, and more importantly, how to optimize for that client base. That becomes a virtuous cycle where you have better results to show the other guys, and it takes off from there. The second piece is how could AI impact our cost structure? I think as is the case with most financial service companies, the impact is massive. We have these back offices and middle offices that have historically been very people-driven. 80% of our cost structure of our OpEx is payroll. The more I look at the work we're doing with agentic deployment and more old school automations, the ability to dramatically change our cost structure in all these middle and back offices is significant. That is why I think we are optimistic about the operational leverage that is still inherent in the financial model over the next few years. You should start seeing some of that already being delivered in the back half of this year. The third element is payments sort of a loser or winner in the AI space? How much is this radically transforming the payments landscape? This is always where I fear that this is my Ballmer moment with the iPhone. I always make the same joke. But the more we are looking at this, we are not really seeing too many scenarios where agentic commerce and agentic payments are actually diminishing the size of the pie in payments. But actually, we think it will increase it. Agents will generate more transactions, more payments. Agents theoretically will be better at optimizing multiple payment methods rather than always using the credit card you have kept in your pocket. Leaving out certain more maximalist scenarios where agents are only using stablecoins and entire economies are powered on stablecoins, and therefore card schemes, PSPs, digital wallets, have all been somehow disintermediated by on-chain transactions, which I do not think will happen for multiple reasons. I actually think the rise of agentic commerce and AI in commerce actually expands the pie for payments companies. Great. Maybe on the stablecoin, that has been in the past a risk, but you are also providing on-ramps, off-ramps for some of these stablecoin providers. Maybe delineate the risk, but also the opportunity that you may have there. In a world where stables are an intrinsic part of the financial piping of how money moves around, but in essence, consumers and economies still move on fiat, I think that's a huge opportunity for us, and we're seeing it. We offer for a growing number of customers, what we call on-ramps and off-ramps. If someone in Argentina wants to buy from Argentina in pesos USDC, we had already built all that piping for them to buy things, whether it was a Netflix subscription or an Amazon purchase. For us, it's very simple to now allow exchanges to sell to them USDC. When they want to sell their USDC to receive fiat again, we also have those off-ramps. That vertical is really beginning to gain some traction now and is becoming an interesting vertical for us. The second piece is actually moving money around for our merchants, not using wire transfers, but using stablecoins, which is, I think, the future of cross-border money movement. That's an interesting one. We have those solutions, but we're seeing adoption in pockets, in verticals and corners. For example, for remittance companies who have to send us money and instruct us, okay, now deliver these remittances to these 50,000 people in Kenya. About 40% of that initial settlement is already done to us in stablecoin, primarily because it's immediate settlement. Otherwise, they have to send us the instruction, and either they have a balance that they've been holding with us, or we have to foot that working capital for them, and we charge them for it. With the stablecoin, it immediately hits our balance sheet. We settle on their behalf. In that vertical, it's picked up very rapidly. I'd say that across most other verticals, it's very piecemeal. If there's a specific corridor that's very slow or if there's a specific corridor where for one reason or another stablecoin settlement is more cost-efficient than fiat, we've seen some of that, but I wouldn't say we've seen massive adoption yet. No. The final one is we offer the technology for our merchants to be able to charge in stablecoin at checkout. So you can pay with a credit card, you can pay with a digital wallet, you can pay cash, or you can pay with stablecoin. That's the one that I thought would have the least adoption for quite some time. Interestingly enough, and this is more anecdotal than material, but we do see some very large merchants beginning to use our technology for that. Not because they think it's a necessity or because they see massive customer demand, but because they want to play with the technology and they want to see what we jointly learn about it. We're actually beginning to see more deployments of stablecoin payments at checkout by large global enterprise merchants than I thought we would. Yeah. Great. I also wanted to go back a little bit on the countries, because in some of the meetings I've sat in, you've been talking a little bit more about Asia, that opportunity there. But how do you see that opportunity maybe outside of LatAm, Asia, Africa? Yeah. So our business today, just to give you a sense, is directionally still 75-ish% LatAm, 20% Africa, and then 5% Middle East and Asia. So Middle East and Asia are very small for us. We attributed that for a long time to the fact that we were somewhat late to Asia. We thought that Asia had been figured out, so we had really never aggressively leaned into it. We've had presence there for a long time, but it's small. I think what we've learned over the last few years is that we actually think that a lot of our playbook for Africa and LatAm is applicable in Asia. The more we talk to our merchants and the more we win deals in Asia, the more we identify that the pain points are similar. So we've now made the decision to actually invest more aggressively in our Asia team, in our license portfolio in Asia. I think we have aspirations for growing out Asia, which are more ambitious than they had been in the past. Just because of the sheer size of that market, even if we're not as successful as we are in LatAm, that could be very accretive to growth over the next three to five years. Yeah. Then maybe also to question a little on operating leverage and efficiency. For this year, you increased the gross profit guidance on the back of the strong TPV growth, but your operating profit guidance remained the same, although I think it's still a little bit higher. But how do you think about operating leverage? You had some investments last year that seemed to be done with that or anything else to invest in. We did that first and foremost because we tried to move away from the adjusted metrics where I get to pick and choose what I leave in, what I take out. So we're guiding to straightforward IFRS operating income. As everyone knows, in the first half, we had about $4 million of prior year tax charges, so we're kind of running up against expenses that we never thought were going to be in the P&L, so we stayed cautious on what happens with the guidance. Were it not for those prior year costs or if we were adjusting, we very likely would have also raised the guidance on the adjusted operating income. Longer term, given what I said about how significant the impact on our cost structure that AI can be, I think I'm quite optimistic about the ability to deliver very consistent margin expansions and therefore very consistent cash flow growth. So I think the financial algorithm is something like high TPV growth, lower gross profit growth because of take rate compression, operating leverage that gets us to better operating income growth than gross profit growth. Then because we're generating so much cash and we have been committed to share buybacks, you then have better earnings growth. We then need to see Pillar Two and all these things, but I think that's generally how we're thinking about capital generation and capital allocation and the trends on the financial model. Yeah. Maybe just to wrap up on that, you have buyback, you have dividends, but how do you think about capital allocation and further buybacks or dividends from here? Yeah. I think in the absence of any M&A, and I think you never want to write that off because obviously Fintech is prime for some level of consolidation. There are just so many companies out there, more than the world needs. But in the absence of cash deployed for those special situations, this is very cash generative. We convert cash at high 90s, low 100s, and we're signaling strong EBITDA growth and expanding margins. So I think even after reinvesting back into our strategic plan and the 30% of free cash flow for dividends, which is the stated dividend policy, it's still likely that there's leftover cash for sustaining a share buyback program consistently over time. Now, whether it's going to be closer to 8% of market cap like this year's or lower, I think we'll have to take it very much year by year. But I think it is an important part of the capital allocation framework. Great. Makes sense. I think with that, we are out of time. Thank you, Pedro. Pleasure. Thank you.