PagSeguro Digital Ltd. Q3 FY2023 earnings call

Management Statement and Operational Highlights

• Reached the largest net income, both GAAP and non-GAAP, in the company's history. Non-GAAP net income was BRL 440 million, growing 7% year-over-year.
• Total revenue was BRL 4 billion, flat year-over-year but up 5% quarter-over-quarter. EBITDA reached BRL 894 million, the highest margin since Q3 2021.
• PagBank cash-in was BRL 56 billion, driving deposits to a record BRL 21.6 billion.
• TPV grew 11% year-over-year to almost BRL 100 billion, with better growth in the first weeks of Q4. POS sales showed an uptrend, with 6.7 million active merchants.
• Credit portfolio focused on secured products like payroll loans and FGTS, with NPL 90+ at 10.7%.

Segment Performance

• Payments: Total revenue from Payments unit grew 5% quarter-over-quarter, with gross profit growing 4% in the same period. TPV reached almost BRL 100 billion, growing 11% year-over-year.
• Financial Services: Total revenues reached BRL 260 million in Q3 2023, 8% higher than Q2. Gross profit decreased to BRL 101 million, down 9% quarterly, but adjusted EBITDA grew back to positive territory. Deposits at PagBank reached a record BRL 21.6 billion, driven by BRL 56 billion in cash-in.

Guidance

• Expect take rates to stabilize in 2024 as the footprint in larger merchants stabilizes.
• Cash earnings momentum continues, with CapEx expected to be similar or lower than the previous year.
• Optimistic about Q4 due to Brazilian interest rate decreases and the holiday season driving TPV growth.

Risks

• Competitive environment could impact take rates.
• Uncertainties in credit portfolio growth and market conditions for unsecured lending.
• Regulatory changes and market dynamics may affect funding costs and revenues.

Question and Answer Q: On the decline in take rate and future trends, what's the outlook?

A: Eric Oliveira discussed mix change, seasonality, and that take rates should stabilize in 2024 as the merchant mix stabilizes.

Q: Regarding the credit portfolio, what's the risk appetite?

A: Artur Schunck mentioned focus on secured products and waiting for market conditions to improve before expanding into unsecured credit.

Q: How are deposits growing and what are the drivers?

A: Artur Schunck cited factors like AAA rating, better client service, and TPV growth as drivers for deposit growth.