PagSeguro Digital Ltd. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Client Growth: Ended Q3 2025 with 33.7 million clients, growing 1.6 million year over year. Active client base reached 17.8 million, with a 2% year-over-year increase in banking-only clients.
• Financial Performance: Total net revenue excluding interchange and card scheme fees increased 14% year over year to BRL 3.4 billion; non-GAAP net income was flat year over year; GAAP diluted EPS increased 1.814% year over year.
• Capital Allocation: Returned BRL 2 billion to shareholders through dividends and share repurchase; repurchased 3.3 million shares year to date and distributed over BRL 600 million in dividends.
• Banking Business: Banking revenue grew 50% year over year; banking gross profit grew 59% year over year, now representing more than 28% of total gross profit; banking gross profit margin was 72% in Q3.
• Cost Management: Operating expenses decreased 3% year over year; financial costs increased 45% due to higher interest rates, but partially offset by funding strategy; total losses fell 26%.

Segment Performance

• Acquiring Business: Total payment volume remained stable sequentially at BRL 130 billion.
• Credit Portfolio: Total credit portfolio reached BRL 4.2 billion, a 30% year-over-year increase; unsecured lending portfolio, particularly working capital loans, accelerated.
• Deposits: Total deposits increased to BRL 39.4 billion, a 15% year-over-year increase; cost of funding as a percentage of CDI reduced for the sixth consecutive quarter.
• Revenue: Total net revenue excluding interchange and card scheme fees increased 14% year over year to BRL 3.4 billion; banking revenue grew 50% year over year to BRL 744 million.

Guidance

• Gross profit growth guidance revised from a range of 7%-11% to a revised range of 5%-7%.
• Nine-month diluted EPS growth guidance narrowed from 11%-15% growth year over year to 13%-15% growth year over year.
• CapEx levels remain aligned with expectations for the year.

Risks

• Macroeconomic Challenges: Slowing economic activity and sustained high interest rates.
• Competitive Environment: All market players are rational, focused on profitability rather than irrational market share gains.
• Credit Risk: Potential impact of unsecured lending portfolio growth on NPLs, though NPL 90 ratio remains below market average.

Question and Answer

Q: Daniel Vaz asks about 2026 credit target for working capital loans.

A: Carlos Malaj discusses working capital loan origination, with current monthly origination around BRL 70 million, testing clusters to push higher, and upcoming products like fixed financing and payroll personal loans.

Q: Ricardo Buchpiguel asks about TPV challenges and competitive environment.

A: Ricardo Dutra states TPV was flat sequentially due to hard comp from Q3 2024 and macroeconomic pressures, and competition remains rational with focus on profitability.

Q: Kaio Prato asks about working capital loan client profile and chargeback improvements.

A: Carlos Malaj provides details on working capital loan clients with average tickets between BRL 20,000 and BRL 30,000 and interest rates between 4%-7%, and chargebacks improved due to KYC/onboarding process enhancements.

Q: Thiago Binsfeld asks about operating expense management and tax exemption impact.

A: Carlos Malaj discusses OpEx management with AI-driven customer service reducing costs, and Ricardo Dutra notes tax exemption for low-income earners could slightly boost liquidity.

Q: Yuri Fernandes asks about personnel expenses and NPL outlook.

A: Artur Schunck explains lower personnel expenses due to leaner structure and share price volatility, and Carlos Malaj states NPLs may marginally increase with unsecured lending growth but remain below market average.

Q: Hasan Shirazi asks about deposit trends.

A: Ricardo Dutra discusses deposit growth to BRL 39.4 billion, 15% year over year, and cost of funding as a percentage of CDI reduction.

Q: Pedro Leduc asks about gross profit margin evolution.

A: Carlos Malaj and Ricardo Dutra talk about TPV mix recovery and gross profit margin outlook, noting TPV sensitivity to interest rates and focus on sustainable revenue growth.