PagSeguro Digital(PAGS) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - PagSeguro Digital achieved a record total payment volume (TPV) of BRL 518 billion, representing a 32% year-over-year growth [6] - Net revenues increased by 18% year-over-year, reaching BRL 18.8 billion, while net income reached an all-time high of BRL 2.3 billion, a 28% growth compared to 2023 [7] - Diluted earnings per share (EPS) on a GAAP basis reached BRL 6.62, growing 30% versus the previous year [7] - Return on average equity (ROE) improved to 15.2%, a 198 basis points increase year-over-year [8] Business Line Data and Key Metrics Changes - The banking business segment saw a record revenue of BRL 513 million, growing 58% year-over-year, primarily driven by interest income from the expanding credit portfolio [31] - The merchant acquiring business recorded a TPV of BRL 146 billion in Q4 2024, growing 28% year-over-year, with TPV per merchant increasing by 33% [18] - The credit portfolio reached BRL 3.4 billion, a 36% year-over-year increase, with secured products making up 85% of the loan book [27] Market Data and Key Metrics Changes - The overall client base grew to 33.2 million, adding 2.1 million clients year-over-year, with 17.8 million active clients [16] - Cash-in per active client grew 35% year-over-year, reaching BRL 5,400 per client [23] - Total deposits increased by 31%, reaching BRL 36.1 billion, despite ongoing initiatives to reduce funding costs [24] Company Strategy and Development Direction - The company aims to explore new growth verticals and improve shareholder value through a buyback program, having executed over 50% of a $200 million buyback program launched in August 2024 [11] - PagSeguro is focused on integrating payments and banking services to enhance customer engagement and transactionality [22] - The strategy includes a dynamic repricing approach to mitigate the impact of rising interest rates while maintaining client relationships [72] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating macroeconomic challenges, having outperformed guidance despite a higher-than-expected SELIC rate [10] - For 2025, the company expects gross profit growth between 7% and 11% and EPS growth in the range of 11% to 15% [43] - The management highlighted the increasing relevance of the banking segment, which achieved a remarkable year-over-year revenue growth of 34% [47] Other Important Information - The company has maintained a conservative capital structure while achieving consistent results, with a focus on creating shareholder value [48] - The total credit portfolio has been growing steadily, with a significant reduction in non-performing loans (NPL) from 3.2% to 2.3% [28] Q&A Session Summary Question: Inquiry about the credit portfolio and collateralized loans - Management confirmed a healthy credit portfolio growing at 36% year-over-year and plans to continue growing secured loans faster than the market [54] Question: Clarification on transaction activities revenue decrease - Management explained that while transaction activities revenue decreased by 8% year-over-year, financial income increased by 51%, leading to an overall revenue growth of 18% [58] Question: Guidance on EPS growth and net income expectations - Management clarified that the EPS guidance does not factor in buybacks and expects net income to grow at a similar rate [62] Question: Details on TPV growth expectations - Management indicated that they expect to continue growing TPV faster than the industry, with ABECS projecting a 9% to 11% growth in cards for 2025 [68] Question: Breakdown of TPV expansion in the LMEC segment - Management noted that LMEC grew 45% year-over-year, with e-commerce and cross-border transactions being significant contributors [76] Question: Insights on repricing strategy - Management stated that repricing is a dynamic process and they have already begun repricing in 2025, with plans to continue as necessary [74] Question: Capital allocation and excess capital investment - Management emphasized a cautious approach to capital allocation, preferring buybacks over dividends in the current market environment [92] Question: Impact of new regulations on PAGS business - Management reported no material changes since the new regulations were implemented, maintaining a focus on growing the card-not-present transaction segment [125]