PagSeguro Digital(PAGS) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics - Total revenue grew 19% YoY to BRL 4.6 billion, driven by strong TPV and revenue growth across all client segments [6] - Gross profit margin reached nearly 40%, an 86 basis points increase compared to Q2 2023, and 40.3% on a year-to-date basis [6] - Net income reached BRL 542 million, a 31% YoY growth, with EPS at BRL 1.68, a 32% increase YoY [6] - Deposits reached a record BRL 34.2 billion, an 87% YoY increase, reflecting strong client engagement and lower funding costs [7] - TPV grew 34% YoY to BRL 124 billion, significantly outpacing the card industry's 11% growth [8] Business Line Performance - Payments TPV grew 34% YoY to BRL 124 billion, with TPV per merchant up 42% YoY [10] - MSMB segment TPV grew 28% YoY to BRL 83.6 billion, driven by cross-selling and productivity improvements [11] - LMEC segment TPV grew 50% YoY to BRL 40.8 billion, accounting for one-third of total TPV, with strong growth in e-commerce and cross-border transactions [12] - Banking segment cash-in reached BRL 76.4 billion, a 52% YoY growth, with active banking clients growing 5% YoY to 17.3 million [13] - Credit portfolio grew 11% YoY to BRL 2.9 billion, with secured products representing 80% of the portfolio [15] Market Performance - The company added 2 million clients in the last 12 months, reaching 31.6 million clients by the end of June, with 17.7 million active clients [7] - PagBank app received high ratings of 4.9 stars on the App Store and 4.8 stars on Google Play [8] - The company achieved an AAA rating from both Moody's and S&P, enhancing its financial strength and CDS distribution [14] Strategic Direction and Industry Competition - The company is focused on expanding its payments business with a merchant profile that offers better engagement and profitability [10] - The strategy includes attracting merchants with monetization potential in financial services, particularly in the MSMB and LMEC segments [8] - The company is leveraging its banking platform to provide a seamless experience combining payments, value-added services, and banking, driving higher client engagement [13] - The company is exploring alternatives to reduce the cost of funding, supported by its strong deposit franchise [15] Management Commentary on Operating Environment and Future Outlook - Management highlighted the strong operational and financial performance, with all-time highs in key metrics such as revenue, net income, and TPV [6] - The company expects to maintain a gross profit margin above 40% for the year, with TPV guidance increased to BRL 480-505 billion [23] - Management emphasized the importance of balancing growth and profitability, with a focus on sustainable growth and long-term value creation [27] Other Important Information - The company is investing in customer care, product development, and service level agreements to improve client experience and engagement [21] - Tax efficiency initiatives are running above expectations, reducing income tax charges and optimizing the tax structure [20] - The company is increasing its guidance for the year, reflecting strong performance in larger segments and new growth avenues such as cross-border transactions [23] Q&A Session Summary Question: Guidance Adjustment and P&L Impact [25] - The company adjusted its TPV guidance upwards by 10%, but net income guidance increased only 2%, reflecting higher financial expenses due to increased interest rates [26] - Management explained that the company is managing costs and balancing growth with profitability, despite higher-than-expected interest rates [27] Question: SG&A Expenses and Future Efficiency [29] - SG&A expenses increased due to higher marketing and personnel costs, but management expects these to stabilize in the second half of the year [30] - The company is investing in customer experience and product development, which is expected to drive higher client engagement and cross-selling [30] Question: LMEC Segment Growth and Profitability [34] - The LMEC segment grew 50% YoY, but margins are lower compared to the MSMB segment, though still accretive to the bottom line [35] - Management expects the LMEC segment to continue growing faster than the MSMB segment, driven by e-commerce and cross-border transactions [41] Question: Deposits and Credit Portfolio Growth [83] - Deposits grew 87% YoY, but the loan-to-deposit ratio remains low at 8%, with management focusing on growing the credit portfolio, particularly in working capital and overdraft products [83] - The company expects the credit portfolio to become more balanced between retail and wholesale loans in the future [87] Question: CapEx and Future Investments [91] - CapEx is running above guidance at BRL 2.4 billion annualized, with investments focused on technology and product development rather than POS [92] - Management expects CapEx to stabilize in the coming quarters, with a focus on supporting business expansion and future growth [92] Question: Gross Profit Margin and Funding Costs [94] - Gross profit margin as a percentage of TPV declined by 11 basis points, partly due to the growth of the LMEC segment and the mix of products such as PIX [95] - The company is exploring alternatives to reduce funding costs, with no specific target for cost versus CDI, but a focus on diversifying funding sources [98]