Release Date: November 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• PagSeguro Digital Ltd (NYSE:PAGS) achieved a record total revenue of 4.8 billion, marking a 20% year-over-year growth.
• The company reported its highest quarterly net income of 572 million, a 30% increase from the previous year.
• PagSeguro Digital Ltd (NYSE:PAGS) added 2 million clients over the past 12 months, reaching a total of 32 million clients.
• The company's TPV (Total Payment Volume) grew by 37% year-over-year, reaching 136 billion.
• The banking segment revenue grew by 52% year-over-year, driven by interest income and service fees.

Negative Points

• The active merchant client base decreased by 3% year-over-year due to a strategic focus on more profitable merchants.
• There is a potential risk from the macroeconomic environment, including interest rate fluctuations that could impact financial expenses.
• The unsecured lending segment is still in a pilot phase, indicating cautious growth in this area.
• The company faces challenges in maintaining its cost of funding amidst rising interest rates.
• Despite strong growth, the company remains exposed to economic cycles and industry dynamics that could affect future performance.

Q & A Highlights

• Warning! GuruFocus has detected 10 Warning Signs with PAGS.

Q: Can you provide insights on the strong TPV growth, particularly in the MSNB segment, and any comments on non-Pix MSNB trends? A: Our TPV growth in the MSNB segment is largely due to investments in our hubs, enhancing productivity and offering better value propositions for SMBs. This includes combining payment solutions with banking services. We are seeing consistent trends in Q4 as well. (Answered by Unidentified_3)

Q: How has your lending appetite changed, especially considering the macroeconomic environment and potential pressures on SMBs? A: Our lending appetite has slightly changed as we pilot unsecured products. However, we continue to see growth opportunities in secured lending. Despite macroeconomic challenges, we believe there are low-risk opportunities within our client base. (Answered by Unidentified_3)

Q: Could you elaborate on your strategy for the LMAC segment, particularly regarding large retail accounts and online clients? A: We are targeting profitable clients in the LMAC segment, focusing on those with monthly TPV above 1 million reals. Our strategy is not to buy market share but to attract clients that add value to our bottom line. (Answered by Unidentified_3)

Q: What is the impact of a 100 basis point change in interest rates on your financials? A: A 100 basis point change in interest rates would impact our financial expenses by approximately 300 million reals over 12 months. We are actively working to mitigate these impacts through various strategies, including pricing adjustments and funding diversification. (Answered by Unidentified_8 and Unidentified_3)

Q: Can you provide an update on your buyback program and any future plans? A: We completed our first buyback program of $250 million and launched a second $200 million program, which is partially executed. We are executing opportunistically based on market conditions and continue to assess capital allocation opportunities. (Answered by Unidentified_8)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.