PagSeguro Digital(PAGS) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a total payment volume (TPV) of BRL92.7 billion, with cash earnings growing 24% year-over-year [58][90] - Adjusted EBITDA reached BRL849 million, reflecting a 90 basis points increase compared to the second quarter of 2022 [84] - Net income on a non-GAAP basis was BRL415 million, marking a 7% year-over-year increase [90] Business Line Data and Key Metrics Changes - The Financial Services division maintained a breakeven point despite regulatory impacts, with adjusted EBITDA improving by BRL66 million year-over-year [51] - The Payments division's TPV grew 10%, nearly double the industry growth rate [51] - Total revenues from Financial Services reached BRL242 million, down 27% from the previous quarter due to regulatory changes [66] Market Data and Key Metrics Changes - The company experienced a TPV growth of 8.5% year-over-year in the first 45 days of Q3 2023, up from 4% in Q2 2023 [59][114] - The overall market for card payments in Brazil is showing signs of deceleration, attributed to macroeconomic factors rather than market saturation [72] Company Strategy and Development Direction - The company is focusing on a mix shift towards larger merchants, which is expected to enhance EBITDA growth despite lower take rates [36][91] - The strategy includes diversifying the merchant base and enhancing omni-channel offerings to drive incremental volumes and gross profit [52] - The company aims to leverage its strong value proposition for SMBs, emphasizing instant settlement and digital banking services [27][28] Management's Comments on Operating Environment and Future Outlook - Management noted that competition remains stable, particularly in the MSMB segment, with no significant changes impacting their strategy [14][15] - The company anticipates that the interchange cap effects will ease in Q2 2024, potentially leading to easier comparisons and revenue growth [113] - There is optimism regarding TPV growth acceleration in the second half of 2023, with expectations of double-digit growth in volumes [114] Other Important Information - The company has a net cash balance exceeding BRL10 billion, with cash generation of BRL3.5 billion over the past 12 months [95] - Capital expenditures were reported at BRL530 million, down 8% year-over-year, but higher quarter-over-quarter due to increased POS inventory needs [94] Q&A Session Summary Question: Can you discuss the dynamics of the SMB segment and its growth potential? - Management highlighted a strong value proposition for SMBs, with a 10% growth rate in TPV, which is twice the industry average [29][30] Question: What is the impact of competition on the company's ability to benefit from lower SELIC rates? - Management indicated that competition remains stable, and they do not plan to be the first to decrease prices in response to lower interest rates [15][16] Question: How is the company addressing the decline in active merchants in the long tail segment? - Management acknowledged churn in the long tail but noted an increase in gross adds and a healthy activation rate [30][33] Question: What are the expectations for revenue growth in 2024? - Management expects revenue growth to accelerate post-Q1 2024, driven by easing regulatory impacts and a growing payroll loan portfolio [113][114]