Q2 2021 PagSeguro Digital Ltd Earnings Call
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Good evening My name is Skyler and I'll be your conference operator today.
At this time I would like to welcome everyone to her pocket Bank Bugs <unk> earnings conference call for the second quarter of 2021, the events being recorded and all participants will be in listen only mode. During the Companys presentation. After the Speakers' remarks, there will be a question and answer session at that time further instructions will.
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This event is also being broadcast live via webcast and may be accessed through Pogy Bank Pak <unk> website at investors Dot Axa group Dot Com, where the presentation is also available participants may view the slides not any order. They wish the replay will be available shortly after the event concluded those following the.
A presentation via webcast may pose their questions on <unk> website.
Before proceeding let me mention that any forward statements included in the presentation or mentioned on this conference call are based on currently available information and packaging <unk> current assumptions expectations and projections about future events, while <unk> Bank securities believes that their assumptions expectations and projections are.
Isn't in Boeing's Europe currently available information you are cautioned not to place undue reliance on these forward looking statements actual results may differ materially from those included in <unk> presentation or discussed on this conference call for a variety of reasons, including those described in the forward looking statements and risk factor sections.
A biobank bugs they go to registration statement on form 20-F, and other filings with the Securities and Exchange Commission, which are available on public bank Bugs. They go to <unk> Investor Relations website. Finally, I would like to remind you that during the conference call. The company May discuss some non-GAAP measures for more details the foregoing non.
GAAP measures and the reconciliation of those non-GAAP financial measures to the most directly comparable GAAP measures are presented in the last page of this webcast presentation.
Now I will turn the conference over to hit kind of Dutra, Chief Executive Officer. Please Mr. Dutra, you may begin your presentation.
Good evening for so Paulo, everyone and thanks for joining our second quarter results Conference call.
Tonight I have.
Here with me are two soup or chief financial.
Financial Officer, and Erik <unk>, our head of Investor Relations.
We hope you and your families are well and safe.
Before we proceed let.
Let me share a quick update about the current situation related to the pandemic and its impact is in Brazil.
Last quarter, we shared or improving confidence that it would seem that the worst was over.
Vaccination continues to take place.
Currently approximately 70% of the population took at least one shot and there are 30% to two shots already.
The contamination debt ratios have been decreasing which has been encourage your thirty's to ease the social distance measures in several regions of the country.
The ongoing secular shift from cash to electronic and digital transactions continues.
Reinforcing the EDA consumer behaviors are changing.
Despite the reopening.
And we have seen medians of people being included into the financial system.
We also see.
Cause award.
Several companies embracing the digital banking strategy to explore this unique opportunity.
For example in this quarter.
We're honored to see people any square announcing their initiatives to expanding into financial services, which is the move we have done in May 2019, with the launch of Piggy Bank.
In addition.
And the regulators in Brazil continue to foster competition.
Layers with Tech DNA.
Strong execution and a robust balance sheet have the chance to explore new verticals cross selling strategies.
Close existing loop between merchants and consumers, while optimizing the gross profit generation per user.
Having consistent investing during the last years in our two sided ecosystem has been paying off.
In June 2021, the number of Penguin clients surpassed 11 million.
And engagement continues to increase.
As the number of logins all in are at their workday reaches 10 million or one log in per user per work day.
Another example is the credit expertise.
After more than three years.
The combination of sophisticated data analytics and incredible team banking license and unique active merchant base gave was a genius decelerated in their writing amid the pandemic.
To warm up and Giants for the reopening.
We are delighted to announce that our credit portfolio surpassed the mark of 1 billion Reais with an increasing origination for the coming months and control NPL ratios.
In payments.
This scenario also looks brighter.
Or a quantity PV continues to grow strongly giving us the confidence to review our board or our payments volumes guidance for 2021.
Compared with Q2.2020.
Basically what it was the company in the Brazilian market with the highest acquire anti PD growth among the top five Brazilian acquirers.
89% year over year and probably.
The highest total net revenue growth, 75% year over year.
Our strong brand superior logistics infrastructure and complete bank that offered to our emotions among others twins.
Allowed us to keep growing the long tail and to roll out our hubs faster than expected.
Or rubs results.
Have been impressive reinforcing our thesis that it's easier to go up in the pyramid than to go do it.
And it even smbs.
Underserved in the country.
With these new TP remix as income in the last quarter or take rates are stable and we expect to stick with level for the rest of the year.
Finally, we continue to pursue for the optimal capital allocation and the best balance between growth and profitability.
We reduce the capex per se ratio from 25% in Q2, 2020% to 70% in Q2.2021.
A positive surprise, leading to our guidance review for our Capex in 2021, driven by lower B U S acquisitions. Since we took the right decision last year to prepare the winter levels, which we force it or a massive scale and purchasing forward improving the unit economic opera cohorts.
Investments in technology have been helping us to maintain our strategy to grow organically and we are happy to highlight four new products.
Cell phone insurance.
Or for issuers product distributed by bags.
We also launched an exclusive investment fund.
<unk> Bank, all seasons, which gives us the options to our clients to diversify their investments.
We will also launch Brazilian treasury bonds trade platform.
Or bag invest vertical already cards with five cities in 50 investment firms with several asset allocation strategies, such as equities corporate bonds FX gold even crypto currencies.
Finally, we are launching an overdraft loss product initially offered only to our best cohorts would you expand the credit options for our clients.
All the positive impacts we have been producing nurses site.
We'll be sharing next month in our first sustainability report, where all the stakeholders, we have the opportunity to follow closer or initiatives to serve better our clients measured by the highest standards of they are in the market.
Also we plan to have our first Investor day in November.
A brand new initiatives to discuss the strategic players for the company for the coming years, where at least three years or our founder and chairman and part of the bags Senior management team, who shared his thoughts about the trends the future of finance and how we are preparing the company to keep consolidate its leadership in financial services and payments.
I'm very encouraged by the recovery trajectory and pleased with the momentum in both businesses <unk> group and <unk> Bank.
Finally.
Nothing of this would have happened without the confidence of our shareholders. The commitment of our suppliers and the best and most committed team working hard everyday to promote our emission.
Being part of the financial lifecycle for every Brazilian citizen promoting a massive financial inclusion in our country.
Thank you very much by the bank Brexit routine.
That said.
Arthur and I will present, some slides and who have Q&A session at the end.
On slide three.
We highlight that humans of the second quarter.
Record total revenue of $2.4 billion Reais up 75% with a cargo revenue, reaching $2.2 billion Reais in fact can make revenue of 182 million reais.
All time high consolidated the PV of 102 billion Reais up a 154% with a quality PV growing 89% with hopes to Dizzy and all anti PV, maintaining the strong growth trends observed in the past quarters, and peg Banki PV growing 341%.
Both in comparison to the same period of last year.
Adjusted EBITDA of $620 million up 6% to 4% with acquired adjusted EBITDA, reaching $730 million and Peggy bank adjusted EBITDA, reducing losses as a percentage of <unk> revenue gaining traction to reach the breakeven in the coming quarters.
Non-GAAP net income of 245 million reais up 12% year over year.
Capex for sales went down from 25% in Q2, 2020% to 17% in Q2.2021.
In June our bank and make active clients surpassed 11 million.
Given by an outstanding $2.1 million. Net addition in the quarter, while active merchants continue to be healthy. Net addition, pace above 220000, reaching seven 6 million active motions.
Next slide we present legacy grows highlights.
While in Q2.2021 versus Q2.2020 as total cards interesting, Brazil grew 52%.
Our current GPU grew 89%.
Driven by the secular shift to where the 20th payments combined with our successful go to market strategy to serve not only long tail merchants, but also sellers larger little tiers to our hopes.
Our active merchants, which is $7.6 million.
Lower metric for active merchants consider at least one transaction in the last 12 months and it may differ from other players in chart below we can see our dominance in number of merchants when compared with other players in the industry.
In Q2, we had 226000 merchants net ads.
Although it is a strong number.
As in banner, because we saw a higher churn in April 2021 related to the billions of mortality from April 2020 during the peak of pandemic Lockdowns in Brazil.
S proactive merchants, we consider at least one transaction last 12 months.
Businesses that closed in April 2000, and planning and did not generate any PPV since then.
Only affects our churn rates in April 2021.
Important to say.
We did not observe higher churn in May in June and who had healthy net adds in these two months.
Moving to the right side of the light TPP trends observed in July and first day of August are also encouraging.
Despite the hard comps due to the Corona voucher program distributor last year.
Loans grew.
55% year over year in July.
Additionally.
During the last week, the Saturday before father's day in Brazil, We reached a new all time high daily TBD.
Bottom right, we see that in the first seven months of the year.
Our quality PV grew 70%.
Moving to slide five.
Total revenues grew 77% in comparison to the same period last year or 35% on a two year CAGR basis.
The growth was due to a better TP remix towards Creditcards volumes.
In our successful strategies to serve larger motions, which supported acquiring net take rate of 224% stable in comparison with the first quarter.
Bottom right.
Our adjusted EBITDA reached 730 million Reais.
Almost a 6% growth in comparison to second quarter of 2020.
Important to mention that last year, there was a tax provision reversal in the amount of 84 million Reais, which we excluded for a better comparison.
Despite the high investment to rollout our hubs and continuous improvements in our payment services to our merchants were able to gain market share consolidates, our position and increase EBITDA.
Moving to next slide.
<unk> taken the opportunity to explore on the previous slide one to share the results of our hubs hubs CTV grew four times year over year.
Outpacing the best estimate the firm orders due to the economy reopening and a disciplined execution to serve larger merchants combining with a powerful competitive advantage, which is pegged bank.
We are the only payments company in the market with a complete new stockout and without any conflict of interest with controlling shareholders or partners, which allow us to look for the best combination to serve merchants leveraging gross profit per clients exploring both money flows to cashing Knicker shop.
We are targeting merchants on average four to five times larger than our average long tail seller and by the end of 2021, we're expecting to cover more than 80% of the Brazilian GDP with approximately 300 hubs throughout the country.
Second by a strong sales culture, which mingles young professionals with seasonal sales professionals for other sectors. We are creating a unique relationship model driven not only by clients activation, but also by clients engagement.
We are also observing a larger number of software subscribers, which was 800.
1000 already represent 11% of bags active motions.
Finally, <unk> continued to be the best strategies to engage motions and increase cross selling opportunities in June.
We reached 82% of have users tagged.
Tags motions that use it payments and destock banking within the last 12 months a growth of 54 percentage points in comparison to Q2.2019.
Moving to slide seven will give some equals about our online and omnichannel volumes.
Bottom left all IMT PV grew 104% year over year, driven by web Checkouts Cross border transactions in league of payments.
Omnichannel volumes, which considers volumes from motions that looks at not only Pos transactions, but also use online payment solutions double their share and compares to Q1.2020 last quarter before the outbreak of COVID-19 in Brazil.
We continue to take advantage of a wide platform increasingly barriers against competition and potential pressures on yields was its anti fraud system guarantees the best approval rates in the market and split the split payment solutions is highly customized before e-commerce marketplaces and other payment methods.
On the border right, although it represents a small portion of our total PV.
Lower Cobra or soon as either a focus on providing cross border transactions for merchants is growing steadily.
Moving to slide eight.
Another grateful surprise you.
We had a record net addition of $2.1 million, new bagman clients surpassed the mark of 11 million <unk> active users.
45% of describes composite by consumers.
Combined with the increase in product per user ratio, which went from two six projects in Q2.2022 three products in this quarter accelerated Bang Bang, TPB, which grew 341% year over year.
If I could make revenues continue to present healthy trends.
Reaching 182 million reais up 89% year over year.
With the better trends in adjusted EBITDA losses, which had a negative margin of 80% in Q2.2020 versus negative margin of 55% in Q2.2021.
Moving to slide nine.
I'm going to share some additional information about the engagement metrics.
The number of active cards indexed to 100 increase at four times and compares to Q2.19.
Card spend doubling compared to Q2.2020.
<unk> Bank App logging is reaching an incredible mark of $783 million.
Three times more than the same period of 2020.
Which is similar to say that everybody bank clients logging in Europe on average one time ever workday.
The number of payroll portability skyrocketed.
Seven times beckoned by our cashback incentive to clients with formal paychex to make the portability biobank being able to receive up to 600, reais or $120 in the next 36 months.
Finally diverse assets under custody almost reached 5 billion reais up 85% year over year, driven by our increasing number of registered clients with access to Cds and investment funds offers.
In July <unk>.
<unk> clients were 647000, and we are offering almost 50 investment of funds on our platform, which has been key to deepen our relationship with our clients as well to attract new ones.
As I said in my initial remarks, we are happy to launch our Brazilian Treasury trades platform in the next week.
Now I would like to turn the conference over to our CFO, who will talk about our credit portfolio and our financial results for the quarter or two of please go ahead.
Thanks, Ricardo and good evening, everyone. I also hope all of you and your family are well and in a good house.
Following our presentation in the slide 10, the performance of our credit portfolio is improving every day based on efficient growth models, our experienced team and several learnings from the last three years of operation.
June ended with a total credit portfolio, surpassing 1 billion Harris being 56% of your working capital loans.
41% of credit cards, and 2% of other credit products I would like to reinforce that credit underwriting in Brazil is not the 100 meter sprinter phase.
If there is a marathon we're learning from the experience patients and preparation make all the difference we have been preparing the company since day, one and now we already achieved more than three years of credit underwriting to micro merchants.
The portfolio is 100% book it in our balance sheet, which provided us the awareness and diligence to decelerate in the past and to speed up now. Additionally, we see the registry of receivables as an opportunity for tech companies, which provide financial services.
Even though markets should not assume the registry.
As a parachute for full credit underwriting.
On the right side, our cash position remained at very strong with a positive balance of $8.2 billion Reais reinforces by the issuance of <unk> to fund the credit disbursements Lawrence to deposits ratio was 62% guarantee stamina to grow our.
Our credit portfolio in a healthy and sustainable way.
Moving to slide 11, we present, our quarterly financial results in the top left our consolidated net take rates, Richard 242% two basis points higher in comparison to first quarter, 2021, and 13 basis points versus fourth quarter's training.
Driven by better TPG mix with more credits lower debit transactions and a healthier by a larger body banking revenue.
In the top right graphic we share our non-GAAP total costs and expenses, which totaled $1.9 billion of hedges in the second quarter of 2021 eight.
87% year over year.
Cost of sales and services represented 67% of total costs and expenses, increasing 63% year over year at the same level of TPG growth driven by higher interchange and card scheme fees higher depreciation and amortization related to our solid active merchants.
Additions during the past quarters and expenses to implement new products and services selling expenses represented 26% of total costs and expenses, an increase of 155% year over year due to the headcount you exposure for our hubs and packaging teams.
And higher marketing expenses for new campaigns financial services jumped up from a share of 2% in second quarter of training.
Two 7% in the second quarter of 2021 mainly due to a TPG mix improvement.
Wiring additional working capital volumes to prepay of our emotions.
On top of that the increase of the Brazilians basic interest rate.
And the exchange rate devaluation for international transactions for more content also push up expenses versus last year.
In the bottom left chart. The adjusted EBITDA went from 384 million Reais in the second quarter of China Chinese excluding the benefit of 84 million here is related to a tax provision reversal last year to an adjusted EBITDA of 629 million Hey is this year.
With a growth of 64% versus the same period of 2020.
Finally in the bottom right, we shared at our capital allocation.
During the second quarter of <unk>, we invested almost 407 million reais being 50% in Prs acquisitions, and almost down another 50% in R&D to develop new products features and services as.
As a percentage of revenues Capex decrease of eight percentage points, reaching 17% versus 25% in the second quarter of planned training.
Moving to slide 12, the last one off this conference call as Dutra said in his initial remarks, the positive trends of the first semester led us to review of our acquiring TPG growth guidance from above 40% to above 45% in 2021.
We also project a reduction of capital expenditures in 200 million Harris setting a new level of $1.8 billion the highest for this year optimizing the cash flow generation.
Now we end our presentation and we can start the Q&A session.
Operator please.
Thank you.
We'll now begin the question and answer session to make a question. Please press star one to remove yourself from the queue Press star two.
Our first question comes from Mariana Taddeo with UBS. Please Mariana go ahead.
Hi, good evening, everyone. Thanks for the opportunity of asking a question.
My question is related to our net adds in the acquiring space.
In this quarter. It decelerate is there any impacts of business mortality from COVID-19, one year ago, and a good quarter last year and good luck.
We'll compete on the competitive scenario and your expectation for net adds going forward do you think that Fox would it be able to accelerate the pace of net adds again. Thank you.
Hi, Mariana this is ricardo good to hear thank you for the question.
Let's talk first about the net adds in Q2, we we saw a increase in business mortality from from motion.
In April 2020, so as our active emotions metrics.
Considered at least one transaction in the last 12 months. So the business that were closed the door shut down in April 2020, the generic churn in April 2021.
If you remember well in Brazil, April's dozens where it was the worst month in terms of the pandemic and lockdown. So that's why we had impacting churn related to business more tonnage from one year ago, but it is also worth to say that these motions. They were not transaction since may 2000 planes. So we didn't see we didn't.
Have any PPV from them. Since then so it's the metric for the chair of the impacted with TPG. We didn't have the CPB since may 2020. So that's why we saw this.
236000, which is a very decent number.
But it could be bad there if you didn't have it as more guidance from last year regarding the competitive scenario, what do you see here as we've been talking in the past quarters.
Some of the the acquired from the comments from the banks they decided not to play in the long tail.
Market anymore.
Some of them they were vocal saying they will not play some of them just increase the price by five times or things like that it is a way.
Not to work in this in this market and I mean.
You don't say no, but it just increase the prices is a wafer for not to play anymore.
Keep seeing some.
Competition from the same players that we had one year ago, everybody everyone knows about the natural competitor is Mercado Pago.
We keep adding thousands of merchants every month, we saw some of our competitors increasing prices this week.
Some of that increase in the prepayment rates some of Dan made different price for different card schemes, mainly in the local card schemes, such as <unk> and Apple card. So we saw more rationality in pricing not crazy movements scenario is similar to what we had in the past quarters or even better.
We we didn't give this year our guidance for net adds body keep talking to some of you that we expect to have 1 million net adds in the year, we had more than 500.530 in the first semester. So it keeps saying it's feasible to have this one medium or even more so.
Let's see the following months and then we can give you more color, but I mean, the best information could be.
Thinking about 1 million net adds in this 2021.
Yeah.
That's good thank you. Thank you.
Yes.
Our next question comes from Craig Maurer with Autonomous Research. Please Craig go ahead.
Yes, hi, thanks.
The take rate in the quarter held up better than my expectation can you talk about <unk>.
Just to address pricing in general but.
Can you talk about how we should think about that trend.
Can be hubs continue to grow and that will have a dilutive effect on take rate I would imagine.
Secondly, if you could talk about the progress and lending products specific to peg bank and how that will drive take rate there and just a last modeling question. How we should think about financial expense going forward. Thanks.
Hi, Craig. This is Ricardo also good to hear and thank you for the question I'm going to start and then artwork and can help me here regarding take rates. We have this different moving parts or so to say D. The tailwind and the headwind. So the tailwind would be if you had the consumption.
Back in Brazil, we are having a higher inflation pandemic is still here, we are not 100% back in the office people are not traveling so I mean, the consumption was not happening because of COVID-19 and because of also the inflation that is kind of.
Preventing some consumption so that's that would be the tailwind.
What is showing in this quarter, we already saw a slightly better kinetic rate in long tail for instance, because the mix is getting better.
And in the headwind, which I would say.
Not really a headwind, but I mean in terms of take rate is because we are having better performance in hubs than we expected. So we are exceeding our expectations you know that our.
Motion full hubs they have usually four to five times larger TPG that long tail and of course, they had a lower take rate. So if you look at the percentage.
It's going to be lower but in absolute terms should be better because they have a PPP. That's five times larger than the lung data. So that's why we are targeting the Nicole before here that we expect to be flat or a little bit higher than that looking forward. So a few basis points here and there, let's see how it's going to be.
The recovery here and then we.
He can give more more information for you, but that's the moving parts those are the moving parts that you have costs.
Consumption that could be back in on the other hand, we are increasing and growing faster in our.
Hubs operations to serve Smbs.
Regarding the landing products we.
We have been working in these models for.
Let's say three years, we learned a lot.
We were supposed to have.
Increases in disbursement.
Last year, but because of COVID-19, we just decided to stop not to give any credit. The same movement that you saw there banks doing in Brazil, and then we are giving some credit again in this year. The npls are under control, we see some of our emotions, having better TPG recovery. So.
It will help our take rates it could help our take rate.
The lending.
Lending. It is also worth to say that I guess, Arthur can give them more and more numbers here, but I'm going to finish in an auto can complement and talk about financial expenses. It's worth to say that we use here I FRS nine so when he gives them credit we need to make a provision why did the beginning so to some extent we are let's.
Let's say, making the provision at the beginning and then the result is going to happen in the future. So that's why if we increase the credit it could be even let's say not to help that much in short term.
Of this I FRS nine debt.
That we follow here and about furniture expenses, I guess artwork and can also help us. Thank you.
Craig. Thank you for question good talk to you again, and so regarding to our financial expenses the big the two.
Big impacts in this quarter was related to the TPG growth that is higher than our expectation.
And also in.
In fact in our larger working capital needs related to the advances of receivables.
To our clients and also the increasing of Brazilian basic interest rate that.
This increase in the cost of packaging Cds and also the adventures of receivables with bank issuers going forward, we expect that the basic interest ready to achieve a 7% from the end of this year.
Obviously, we will increase our expenses what I can tell you is there through Q3 will be higher than Q2, and Q4 will be higher than Q3, but we are following very close while the market is doing related to that.
Because we can adjust the prices for SMB and larger clients that these.
User to have the prices paid to these are related to this basic interest rates and also for SME for long tail as total SaaS. Some players in the market inquiries are the prices.
We don't have this plan for now, but we are very close to this movement in the market and we've taken action is necessary.
Okay. Thank you very much guys I appreciate it thank you Craig.
You too.
Our next question comes from Matt <unk> with Bank of America. Please Mario <unk> go ahead.
Good afternoon, everybody. Congratulations on your results, let me ask you two questions as well the first one is on your credit portfolio.
As you just talked about right last year, you are being cautious now youre accelerating landing.
Something that we're hearing from some of your peers that they are having problems with that.
Credit product because of problems at the chambers of receivables.
What makes you comfortable to start accelerating your credit growth now.
You know why aren't you are having the same problems that some of your peers and then the second question is related for your.
It's about your appetite for inorganic growth.
About a month ago, there was some news or some rumors that you were interested in making an acquisition for BV. So if you could tell us a little bit about what.
And what is the strategy how do you look at inorganic opportunities. Thank you.
Hey, My headset Arthur speaking, thank you for class for your two questions I'll take the first one related to credit portfolio and after it is how we will continue with the inorganic question.
As <unk> said, we have last year and you mentioned two last year, we stopped our operations related to the pandemic and the crisis that we we Havent Award.
And this year, what encourages us to disburse more than last year.
It was related to the NPL cohorts that are improving every time.
And now we have three years of experience a more sophisticated credit models.
And that those those models does not taking care of the jumbo for his favorable okay. We are not considering the timber of receivables, helping us to collect so I would say that our models need to work without the chamber of used vehicles.
Obviously, we know that the chamber call to help us.
Uh huh.
Could help us in all of the credit products, but we are not considering at this point okay.
MRO and regarding the rumors that you mentioned.
Okay.
We made these.
Communication in the same day in a year confirmed that there is no intent to acquire a big bank or BV bank to name here.
There are no related simons agreements to do so.
We.
We reinforce that during the call here.
We do talk to many players in the market, we need to be aware of what's going on the market.
It's my duty to be here to understand what's going on in our Fintech environment of course, we cannot follow everything, but the big deals or the hot deals they came to us through advisor or people just getting comfort with us to talk about the <unk> and we need to talk understand what's being sold what's the price and so on so we did talk to.
Too many players in but it was a warmer nothing more than that.
Our mind for for inorganic growth is to look for targets that can speed up our our initiatives here or ecosystem. So just to give some examples we bought <unk> and wipe in the online theme.
Payments, we bought Beaver and volatile flex for a faster deployment for credit.
We bought our tech and <unk> in vehicle for software features to ecosystem and things like that.
So that's why we usually look for I would say you that every week. There is a suite of acquiring coming to us trying to sell volumes and we don't buy volumes. We know that it is a niche at some points the supercars needs to be that's a consolidated or they will consolidate with someone else or with another sudhakar. So.
We had the super system by volumes and we don't have that in mind, because some points of prices is not competitive and so they may idea here is to speed up our ecosystem to have same culture, because the you know better than me.
Out of tenet M&A at least eight of them don't go well because of the day. After so we need to be.
Very careful what we are acquiring and if the culture, that's gonna be fit and its going to be easy to integrate and you'll have a better service for our clients. So that's why do we have in mind share to have let's say complex to speed up our ecosystem.
Very clear guys. Thank you.
Thank you Mario.
Our next question comes from George <unk> with Morgan Stanley. Please charge go ahead.
Hi, good afternoon, everyone and congrats on the numbers.
Great results.
I have two questions. Please the first one is on Europe.
Capex guidance.
A tad lower I know, it's not a lot, but it is slower.
And so I'm wondering if.
What should we read into it.
Could we.
Maybe start to seeing that.
Expense growth is going to slow down as well given that you're already.
We already have built enough of infrastructure for the new businesses or is this just related to <unk>.
And then my second question sorry to go back to this but I wanted to understand a little bit better.
I'm sorry to the.
Receivables chamber, what does it mean that your underwriting models don't consider that.
I mean don't you need to make sure that.
Credit card receivables are not being used as a guarantee elsewhere for you to leverage them.
Just trying to understand exactly what the comment from Alcoa was thank you.
Hi, George This is Ricardo Thank you for the question.
I'll start with the chamber of receivables and artwork and can come back and talk about the capex.
The Capex we.
Well I guess, what Arthur was trying to say is that our models when he looked at our models. We consider the behavior, we have with our clients with us.
<unk> D.
Behave with those in the transaction history that you have from them.
How much they sell which they are growing or not what is the mix and so on.
Today as the timber oversee was not 100% working it's not even possible for us to go there and look if this motion is making transactions in another acquired in or if they have some.
Other.
Players that are serving them. So that's why I went out to a side is just like we are looking forward to behavior that you have in our database. There was no timber receivables until June and we keep collecting these clients. So that's why the jimbo received was going to be an additional way to collect but we don't count only one chamber of receivables too.
Let's take two collected the money from from from the land for the working capital was that we offer for our clients.
I would just take advantage of a question just to give you an overview of audit chamber receivables.
It's a complex project Youll know that central bank in all the industry is working hard to make it work.
Although it's not 100% as we've seen lots of progress in the past weeks, it's going to work let's.
Let's say in the next two weeks.
Because there is some integration that is happening between the registration registered and so on.
We do believe that is going to be very good for credit.
We see an opportunity there because today, we have 9% market share in the acquiring business.
There is 90%, 91% that is making transactions to other players that you can go there and even though for credit.
Through a very effective way to collectively chamber receivables is working 100%. So I guess, what the answer was trying to say that today. We don't go there to see if the motion is using another player and we don't consider that to collect the money as today, we are not using the <unk> because it's not working 100% so im done.
Not clear just let me know.
No that's clear. Thank you. Thank you Carla.
Okay.
Thank you Jorge for your question related to Capex and good to talk to you again soon.
And what we consider.
For our Capex is that will support the growth of the company for the future and there is two big points inside the Capex one is Pos and the other the other is R&D. So both when you consider towards to support the growth of the company.
We changed the guidance to $1.8 billion here is because now we have a better view of the year.
Comparing to what we projected in the beginning of this year.
We have a lower.
Uh huh.
<unk>.
Currency rates right now versus also what we projected.
Yep.
Related to the mix of clients, so changes already, albeit the vessels, what we projected Shaw.
And we are always looking for to be more.
Efficient and the investments that we're doing the company. So now we can say that the $1.8 billion Reais is more fear.
For this year.
And also as the last point is related to the expenses that we don't have any relevant change for now.
If we have any movement in terms of expenses depreciation and amortization. So we will communicate to the market.
Great. Thank you outdoor and congrats again to everyone. Thank you. Thank you Jorge.
Our next question comes from Bryan Keane with Deutsche Bank. Please Brian go ahead.
Hi, guys solid results here too.
Two questions if I may.
Just on the hub strategy it sounds like it's coming in better than anticipated. So wondering about the volume trends I think last quarter, you indicated maybe the top end of the range of 6% to 11%.
Given the the the.
Growth in the hub strategy is that still hold or are we now and maybe even get them push above that range for 2021 volumes.
And then secondly, the net income margin was 14, six I think in the quarter and I know, you're making a lot of investments in the business and I'm just trying to figure out going forward should we be at or a little bit below that margin level or just any guidance on that thanks. So much.
Hi, Bryan this is Ricardo Thank you for the question good to hear regarding hubs Youre right.
We are exceeding our expectations in terms of volumes in terms of the performance.
Even the D D.
Production of the people the salespeople in the street. So I mean, it's it's get embedded in what he had in our in our assumptions.
And you will be probably higher than 11% that's something that we will surpass this 11% is a combination of the execution we are having here.
Better efficiency and sales force.
Probably will be higher than that we are in half of the year. It's hard to give you the number right now, but there's going to be.
It seems that it would be higher than the 11% the top of the range, which is good news I mean, we were let's say conservative when we thought about the volumes from Pearl hubs and we're going to get more.
It's I mean, we saw that even the smbs in Brazil are underserved.
The majority of store for Smbs much of say, 100%. They already have another player. So it's different the long tail that we are bringing new new motions to the system.
In the SMB is we need to go there to talk and to get clients from from competitors that we use a lot of the strategy to talk about <unk> Bank did you still bank is 100% free and they can use for four daily tasks financial daily activities, such as Spain suppliers and so on so.
We are being successful there and going back to your question it will be probably higher than 11%.
Hey, Brian It's <unk> speaking.
Good to talk to you and thank you for your question regarding to net income margin as we have been sharing in the last calls we are not obsessed by margin right now.
Our focus is continuing to deliver a healthy and positive nominal results that.
Means a nominal positive nominal results for adjusted EBITDA and net income so orientations create a larger company for the future.
In 2022 or 2023 inquiries.
Our our margins.
Regarding to the next quarters I can say that we expect a slight improvement versus Q2.
Q3, probably will be better than Q2, Q4, better than Q3 and for the full year, we're expecting something above 15%.
And also excluding interchange fee interchange.
And fees.
From the schemes so our our net income margin should be above 22% or something above 33%.
Just to be clear here, Bryan Arthur was saying that the net income margin.
As we are reporting is going to be higher than 15%. This year, it's going to be better in Q2, we can for <unk>.
When he talks about 22% when you use the same methodology. Some of other players that are discounting their change in card scheme fees from net revenue. So that's going to be close to 24%. If we exclude interchange in card scheme fees from the revenues.
Thanks, again and congrats thank you rice. Thank you.
Our next question comes from Michael Calvi with <unk>.
BBA. Please Michael go ahead.
Hi, Good evening two questions here on the first one on the non op on the acquiring.
Take rate of two <unk>.
Core and you guys disclosed that during the quarter, we saw a growth like portable, Florida, or a flattish quarter over quarter and our growth over the fourth quarter can you guys share with us the trends of acquiring.
Matt a great given that you guys are moving towards a larger client that even so.
At least comparing to the last two quarters has been net take rate on the acquired business.
Either see flattish or or in private.
And my second question is on your software business.
Guys mentioned that you guys ended the quarter, we both need 200000.
Clients and.
And inflation close to 11% of the active merchants.
Just wondering what sort of softly software are you referring to.
And if you can.
Sure the average.
Typically on the software product thank you guidance.
Hi, Marco this is Ricardo Thank you for the question good to hear.
Regarding 90 grades in the acquiring business.
So as you could see in Q4, we have 2.06, then $2.23 in Q1 to 24 in Q2.
And looking forward, we see at least two big moving parts here.
Or the headwind or tailwind so in detail when do we.
We see the.
Better consumption or increasing consumption in the country, even though we are having higher inflation unemployment is still here pandemic steel here, we're not 100% back to our normal lives and so that's the tailwind that people will start consumption of more getting some business trips or even the.
Trips with the family and so on so that's the tailwind and the headwind.
In terms of take rates, because we are having better.
Performance in the hubs. So we are changing the mix of Iot PV.
The hub discounts they have TPB four to five times larger than the long tail. So when you bring this does larger motion the SMB de impact net take rates in absolute terms is a good business because the volume is much higher than the long tail, even with a lower net take rate, but if you look at spin.
Typically net take rate we have these headwinds so that's why we prefer to say it is going to be flattish.
Forward.
But there are these two moving parts. The one is the consumption is going to help genetic rate. The headwind is the performance of the hub just going to let's say decrease the genetic right regarding the software business we.
We consider your users usually the point of sale that people can go they're used for management their businesses at the end of the day take some reports suggest how many quarters you dissect how much they sell through cards to debit cards credit cards and cash so usually is more.
Let's say software that helps people to measure their business better. We also consider here to tackle where conciliation.
Business that some of the clients used to make this match between sales and the money that goes to their bank accounts. So at the end of the day. They can see how much they sold and if the money is coming to their bank account. So those are the two.
May software. We also have some other sorts of their smaller motions using two Jews museum to make this point of sales to work did the example that I gave about the reports.
Usually we don't charge for software servers simple they don't require <unk>.
Our implementation they don't require someone to go there to install anything we don't sell licenses you just need to download the App and next next next few clicks you can use did softer so.
I, usually don't charge for the software, we see that as a way to give a better service for our clients increase their loyalty and keep them working with our client solutions for a longer time.
Okay.
Great. Thank you.
Thank you Michael.
Our next question comes from window or the horsemen with BTG. Please Eduardo go ahead.
Hi, everyone. Congrats on the numbers two questions here first one we just saw Sir but I you know publishing our service.
Servier is saying that they more than 50% of small merchants in Brazil. They are still not accepting cards. So just want to to get to know your your feedback on the ground.
What can we expect to know where that kind of idea.
For maybe next year. If you think you know, adding you know a 300000 merchants per quarter is still doable.
If you think you can grow in all more than 30% PPP in the acquiring segment is still you know for another couple of years. So it would be interesting.
<unk> just have a qualitative view I know about what you expect to know for the coming years on Europe segment and the second one is on Piggy bank.
Mentioned that you expect breakeven to come in the next few quarters, you know, but but EBITDA was still kind of a 100% 100 million reais negative right. This quarter. So can you elaborate to know do you have Ah shall.
Should we expect that to know to breakeven second part of next year 2023, yeah.
So that's it thanks a lot.
Hi, Roslan. Thank you for the question good to hear.
Regarding the <unk> survey Youre right.
They said many pieces in Brazil, or the small businesses don't accept cards yet.
Uh huh.
I would say you there are no other companies in the in our industry more prepared to let's say to take advantage of a bed or to serve this wave.
With all of the history that you have the expertise that they have to serve long tail distribution channels to leverage D O audience and all of the ecosystem that we have been building all these years old this quarter. So.
That's why we keep adding 1 million net adds per year, that's what I expect to keep adding the following quarters Theres a SKU.
Many opportunities out there and and I would say that we are the company more prepared to serve those that are out of the financial system, because I mean, we've been doing that since 2006 and the online.
And since 2012 with the pass.
But you're right. There's a great information just reinforce what has been say for for many quarters that there's too many businesses in Brazil don't accept cards. Some of these most of these startups have debit and then after a while they start as a credit so we see as an opportunity in the survey from Sabre I just reinforce.
Our view regarding Piggy bank are just introducing it out who can help me here, but youre right. We the margin in absolute terms increase but as a percentage of revenues decreased from 80% to 55%. So the business is growing we need to dilute fixed costs, but we're keeping.
First in the business so that's why.
To some extent the the absolute terms depths in the numbers.
Our growing share but are too Ken can you just complement here yes.
We'll see.
Uh huh.
Just more awards related to like a bank or the bank as a long term project to us.
We are succeeding because we are adding millions of clients.
Every every every month every quarter.
We are monetizing both clients.
It's true that.
For consumers.
Normally consumers take more time to start to monetize it through because the cash is not automatically.
This is the biggest advantage that we have in terms of promotions using packet bank because we have the caching automatically.
As <unk> said, we are at the moment to invest a lot in the <unk>.
The ecosystem.
Have a more complete offer of products.
Out of pocket Bank and so we are investing people marketing campaigns R&D and everything that is necessary to have a big digital bank in the future.
Hey, Mike This is Derek thanks for the question I, just like to highlight here that we.
We don't have two Ceos, one for payments one for banking, we have one CEO one CFO, taking all the decisions here to maximize revenue per client. So there's no conflict of interest and we're gradually here to increase revenue per user in the profitability.
Better for the coming years.
Great. Thanks, a lot.
Thank you.
Our next question comes from James Friedman with Susquehanna. Please James go ahead.
Hi, let me echo the congratulations glad to hear everyone's doing well, it's Jamie at Susquehanna.
To ask a couple of questions upfront.
So the AAA <unk> per merchant continue to expand our great. So your TPB grew double merchant growth roughly is that the hubs or is that COVID-19 or something else. That's the first one historically you've had some seasonality.
Industry seasonality into Q3.
And then I wanted to ask about that do you expect any.
Any promotions in the Q3 at an industry level, because sometimes we see that at the Black Friday.
That was the second one and then the third one is what are you going to talk about at analyst day.
Hi, James can you repeat just last one I'm sorry, it couldn't hear Oh what.
Did you talk about at the analyst day.
Okay. Okay.
Right.
Well regarding all I'll start with the TPB promotion.
Okay.
We.
We saw this Q2 of course is a easy comps James distributions to be pure here I guess around the world that was the worst quarter in terms of Covid and Lockdowns and the impact of the economy around the world in Brazil was not different so the worst.
For US last year was April 2020, but sports we had impacts from Covid.
Rover.
Second quarter was the worst one.
When we compare we are growing a lot.
Part of this growth is coming from I mean from every business that we have here from different clients the size.
But the majority of the growth is coming from Paul hubs, we gave some information here the hubs PPV quarter over quarter going four times.
And the company as a whole grew 89% so.
The long tail also grew strongly steadily but not the same level studies trying to hubs. So just going back to your question to be clear here. The DPP promotion increase can be more explaining because of the hubs that help it.
Because those are the guys that we have more volumes and grew four times year over year regarding Q3 seasonality, we don't think.
That's going to be any.
Let's say impact from from the industry here.
More.
Beef promotions, we have in mind so one.
I'll just take advantage here.
We plan to have a new marketing campaign for <unk> bank in the following days.
We see opportunities here to Peggy bank.
We have this window of opportunity to grow back bank, we grew $2.1 million new clients in Q2, we see the opportunity to keep growing strong in Q3, and we will start a new marketing campaign in the following days.
Regarding the analyst day. The idea here is to have a meeting.
November.
We don't have studio details, which you have to.
To decide.
How did the specific date, but theres going to be a meeting with the last three years, our chairman and founder of the company.
And some of the <unk> senior management team to give them. Moreover view about we have in mind why do we see the future for our industry what is going on in Brazil in terms of in financial margin and Fintech.
Anna.
<unk> be more close to the investors in and of course share our ideas and our future plans to to many of you. So let's see let's idea.
Yes.
Great. Thank you.
Our next question comes from Chitra Lombardo with Goldman Sachs. Please go ahead.
Hi, good evening, thanks for the call and taking my question as well.
Couple of questions also I guess.
And to go back on your margin and sorry to harp on this point just wanted to make sure I understand because if we look at your margin last year.
20% I remember on the <unk> call you mentioned, if you take out Covid and Pac banking margin would've been 30%. So now you're roughly half of that in and you pegged Bank margin has improved so is this mostly because of the growth in the hubs just wanted to understand the decline.
And kind of what's driving that particularly with bank bankers and improving and then and then I'll ask the second question.
Oh.
Just to start is that those speaking thanks for your question and good to talk to you Haegarda.
Regarding to margin.
It's.
All the things that you mentioned is right and and the impact of what we are seeing today is related to hubs because it's an operation that does not mature.
And also the investments that we are doing for <unk> bank and so.
When we have a more stable company in the future a larger company, we will leverage those investments that we are doing right now and then the expectation that we have today is the margin grow again.
Yes.
Okay. Thanks.
Well I had to do.
No I was just going to say, but you pegged bank margin is improving right.
You're still investing but I mean revenues growing faster.
So just to understand the pressure on the margin wouldn't be coming from pack bank compared to last year is it more of just the hubs.
H.
Hubs and impact.
As I said remember also Tito this is <unk> higher depreciation and amortization given that we had 2 billion reais in capital expenditures last year being $1.5 billion of debt related to Pos as acquisition. This year remember that previous guidance considered 2 billion reais in capital expenditures for 2021.
Arthur just reviewed as information to one 8 billion, so higher depreciation and amortization also higher financial expenses given the rising of interest rates. So this is why we saw these impacts and remember.
You remember in Q1, we have the digital account losses chew that impacted for the full year numbers that we already sold to this okay. So basically these are the reasons why we saw this impact in the short term.
Okay perfect. Thank you that's helpful. And then my second question you mentioned earlier, our board comprised in going cross border transactions as well.
Is that something that is significant for you do you see a lot of growth potential and that just kind of curious on that opportunity for you.
Well digital to be C series, a small part of our CTV it.
It is growing.
Very fast, but it is a small part of royalty PV, we already had this company.
For a few years now.
Some of the clients don't line clients. They asked us to serve them in other countries of Latin America.
And then he used more comfort to serve them. So it's something that we are always looking for opportunities here.
We know there is some some counters there more development in terms of cards industry than others.
You keep looking to that.
But it's it's hard to compete with the opportunity that you have in Brazil, we are.
Number one in terms of clients here, we have bag bank, we have uol, but do you keep evaluating if there is some opportunity there are some opportunities in other countries, but to be sincere. It's a small part of otp beech helps it is important to serve some clients.
But at this point is not something that's a P&L transformation to be to be clear here.
Okay.
Okay, Great. That's helpful. Thank you very much and congratulations on the results. Thank you very much at all.
Our next question comes from Domingos <unk> with Jpmorgan. Please Domingos go ahead.
Thank you hi, guys. Good evening, everyone also thanks for taking the call I'm just.
Wanted to brush off ideas and get your point of view as well on the debit side of the operation basically.
Back to the card association without the industry wide fish.
Not too long ago, and what we saw is basically a debit accelerating.
It's really hard to exclude COVID-19 year, obviously.
But I mean, if we compare versus 2019 and see kind of an average CAGR of 19 over over 'twenty, one or I should say 'twenty one over 19.
April may and June actually accelerated even above credit card I agree you know, 19%, 20% year on year, which even fixed it came across as a surprise.
When we look at the market share we did see obviously I think you guys mentioned that cannot really hurt you the market share of credit used to be in 2019 and before 63% It came down to 59.
And in this series is striking around 61% credit and the rest being debit and prepaid. So my question for you as well.
What are you what else can you share like how are you seeing those debit volumes, how you've seen big soon.
And.
Do you have any guess on on what's big substituting and what Youre seeing in your base.
And congrats on the original schedule.
Thank you Domingos would you view this is ricardo.
Well, let's start with peaks.
We have the option for all our devices. So even though we have seven 6 million merchants active motions.
On average we have more than one device promotions so.
Easily more than $7.6 million.
Pos in the streets all of them except peaks.
Alright.
We see the penetration of peaks in our acquiring business very very small.
We know there might be some motions here and there to try to use speaks to avoid M. D ours, but if you think that debit MTR is only a 1.99 is so small that at some point as easily afford emotion even to accept debit if they need to pay.
The 1.9.90, Dana we'd safe they know the money's going to come to Piggy Bank account right. After transaction. So we don't see peaks are penetrating our base.
We don't see peaks are increasing the churn of the company, we do see peaks, replacing.
Ted wire transfers for those who are not familiar with the names in Brazil.
For for obvious reasons Z. It works 24 hours a day seven days a week, it's automatic so we see peaks.
Let's say, placing a wire transfers in terms of debit.
Debit growth has been strong during all these years and I would say that part of that is because also the people getting into the financial system.
I my our guests use the debit is kind of replacing the cash you know there is a lot of the economy Brazilians to based in cash.
And people are getting let's say destock ounce getting.
New cards, we saw these facilitating the pandemic people that win could not go to the banks to withdraw money in Atms. They couldnt do not go to agency branches because they were close at so many millions of people who opened their accounts. So there are more of a larger base of debit cards.
All the countries. So that's our guests here.
And there is this secular.
Shifting here happen in Brazil from cash to card studies is still happening you know what I mean.
It's different than other economies that more developed people have disclosure to you have cards into use guards, but again in Brazil have lots of people are used to using cash. So that's why do we have this is a strong tailwind for the English as a whole if we consider the whole industry grew 52% year over year.
I know, it's an easy comp from Covid, but anyway, it's 52% a strong number.
And we grew 89% so I don't know if I if I answer your question here.
You did especially when you said you're not seeing the biggest.
Penetration just out of curiosity when you say this total PPP on on the <unk>.
Your site is that including or not including pics.
It includes but is very very small very small domingos, if we exclude is gonna be.
Probably the same 89%.
Alright I appreciate it guys. Thank you okay. Thank you.
Yes.
Our next question comes from the HOKA will allow with HSBC. Please go ahead.
Hi, Thank you for taking my questions May have Nevada from HSBC.
Reservations on the result.
I wanted to take a bit of thought.
On the Park Bank revenue last quarter was the testing to the charge backs from the digital account losses, but this quarter that was a small improvement.
Not not as strong as what we saw in the fourth quarter of 2020, so could.
Could you explain a bit more what was the composition of the Postbank revenues.
How do you see it accelerating in the coming quarters now that you are.
The growth of the credit book should we expect an accelerated growth in deposit bank revenue, so a bit more color on that and my second question is on the charge backs I mean, if you look at the chargeback numbers that you have in the in the in the past.
It picked up a lot in the first quarter 2021 of which was due to the account.
Account losses.
It has gone down in the second quarter, but still it seems elevated was the last quarter. So if I understand and I think it's related to the credit box. So could you talk a bit more about about that why the charge backs Austin.
Elevated versus the same quarter last year. Thank you so much.
Finally, I. Thank you for the question good to hear Oh. This is Ricardo I'm going to talk about <unk> revenues and NR to can give you more color about charge backs, but youre right to multi credit credit books.
So the pigment revenues as I said it is it is growing.
Remember, we added $2.1 million clients in this quarter end.
The majority of disclaimers are consumers.
What I mean by consumers they don't have the automatic cashing.
Just like we have with the motions because the emotions when they have a say in the past the mining Australia, Indonesia account and they can make transactions there. They can use some services in the Destocking that you can monetize.
<unk> take a while to put the money there it takes a while to start generating revenue. So we we'd be St.
There is some lag between the decline comes to plug a bank and starting to generate revenues.
But it is increasing revenues that that is true. We also made some promotions for some clients.
Just to give an example, we have some withdraw fees if people will to HTM to withdraw the money. We have some some fees that are charged for some of the clients, we decided not to charge it.
In exchange to have more engagement from them.
We made some research some of declines that we use here. They also use it on their bank because of that so we decided to take it out this discharge. So that's why we.
End of the day for some clients. We are exchanging short term revenue for a higher engagement and a longer term relationship so but I mean, it's growing it's fine with us Delever that you have.
Acquiring is growing fast as well. So I mean, we are we are very happy what we had in the country in this in this quarter with the bank.
Revenues, but opens the door to Arthur to talk you talked to you about charge backs.
And it's starting to speaking thank you for question.
Talk to you.
To charge you back as we said last conference call, it's important to mention that.
We did not have the same issues of.
Q1, 'twenty one for digital losses as represented in.
In the first quarter of this year.
And also in the Q2, when we exclude the digital loss when we compare to Q1, excluding digital losses.
Charge back over acquiring TPG group six basis points due to more online transactions. That's naturally brings more charge backs and the growth of credit portfolio is dutra said.
Related to credit portfolio since we use I FRS nine the highest accounting standard procedures.
For delinquency provisions.
Both the 12 months of a write off in the first month of the cohort that we represent a new dynamic for our chargeback as a percentage of acquiring TPG going forward and if we compare the credit portfolio that grew 42% quarter over required.
Our TPG grew at 12%. So this is the reason that increase of the charter back as a percentage of the TBD.
So its provisions at the end of the day you have provisions following the I FRS nine.
Well.
Okay.
Understood. Thank you so much and congratulations once again, thank you very much anyhow.
Our next question comes from David <unk> with Evercore ISI ISI.
David go ahead.
Good evening and thanks for taking my question. This is Spencer Kennedy on for David.
So great to see the continued strong momentum in the park bank ecosystem.
Wanted to better understand the monetization differences between your consumer and merchant clients now have around 82% of your merchants as park bank clients, which implies the future client additions.
Ultimately come from new merchants or sorry, new consumers.
Any stark differences between these two groups.
In the credit and interchange revenue or product usage.
Okay.
Hi, David Thank you for the question.
<unk>.
What do you see here is just in terms of dynamics is because.
When where immersion and you use our a P. O S. You already received the Pos in Europe cash fund.
So once we start we will start making transaction the money goes to yard destock count and you can have the cards in our hands, we start using your stock buying stuff, you're staying with your money and we started withdrawing money. So we.
We start generating revenues, because it's a let's say.
Our closed loop, so to say because the money goes from the past two year destock ought to have the cards in our hands. So it's very easy for you to to use entergy new revenues.
When you are a consumer and U S for a card of course, we need to make some some QA C checks here although.
Although we are probably the fastest company in terms of sending you the card in Brazil, but it takes a while for you to send the money and to start using usually let's say work in Brazil, you received twice a month so the money doesn't go straight.
It's trading the data they received the card. So you open you opened Europe look at the balance is zero. There is nothing to do there and we cannot generating revenue. So we need to wait for you to put the money there and didn't start monetizing so.
And usually the consumers they have a lower.
Average cashing when compared with motions because the measures. The caching is automatic so what you see here is that it's just a leg of.
Lack of time between Europe, and the account to start generating revenues today.
The main difference because is that we don't offer.
Credit products or products with credit risk for consumers, we only offer working capital loans and credit cards for promotions.
The consumers that we offer credit cards, we only offer if they have a collateral if the make the salary portability here are each day investing ACD because if you get.
If you don't pay as we can we have this collateral too.
We have visa as a collateral you have your salary or your RCD. So usually it takes that's also another difference between generate revenues between consumer emotions, we really start to generate some credit products for our consumers in the following weeks, we launched yesterday, the overdraft loans, which is.
A very well known product around the world and also in Brazil is more tickets has more risk.
Good interest rate. So we will start offering overdraft for consumers. We will also start making some pilots in credit cards once the consumers become more and more importantly, piggy bank, we expect to be able to monetize them accordingly as well. So that's the difference during this call.
When you're building this ecosystem with consumers and merchants in parallel, but youre right. It takes a little bit more to generate revenue from consumers.
Okay got it and as my follow up I, just wanted to better understand that.
$2.1 million client additions and just I guess thinking through the sustainability.
Additions because I guess historically I guess, you guys have talked about $1 million.
New client ads per quarter is kind of how we should think about that so I guess is are the factors that drove that this quarter are those sustainable.
David It's hard to give you. This information is going to be two two meters again, we would rather say that we keep with our let's say soft guidance between <unk>.
One and $1.4 million per quarter.
If we see the opportunity that it accelerates some niches that we can make some partnerships you can find.
Of clients will do it.
But it.
It was exceptional Q2 for US we saw some marketing changes working better than we use it to be.
We made some new campaigns that are working very well.
Sure.
<unk> is also getting more mature people understood that so I mean, we are we would rather say there's going to be more than 1 million in Q3, and so let's see if you have more color on that we can update you.
Okay, great. Thanks, very much thank you.
Okay.
Our next question comes from Jeff Cantwell Guggenheim Securities. Please Jeff go ahead.
Hi can you hear me.
Yes.
Hey, congrats on the results. Thanks for taking my question most of them in the last.
Slide four of the presentation How's that interesting chart in the upper left corner. There is a clear progression there shows that you're clearly gaining market share at acquiring so your shares increased by 200, perhaps over the past year and 30 basis points over the past two years Ricardo can you talk a little more about what's driven that can you think back on and talk about where those share gains.
I'm from why they come about what Youre seeing out of the market that's different about toxic Earl the crux of my question and you know as you look back at the strategy and the execution company.
What's really driven those share gains in your opinion is it you know the toxic or approach to distribution of product to sell.
The strength of the ecosystem.
Where do you believe those share gains are coming from.
New businesses competitive wins.
Any kind of detail there would be very useful to hear about what <unk> seen occur as you gain share.
Thank you.
Hi, James Thank you for the question.
Youre right we grew from.
72292 in one year.
Part of the explanation here of course is because we started the hubs and we keep growing E in long tail.
As I said before when we go to a hub.
Approach for and SMB.
The majority of them not to sell 100% already accept cards with another player.
We see many many smbs.
Any such fires are not satisfied with their current provider with their current a player.
We don't we try not to go down and just beat on price because that's not the smartest way to gain this client we try to use piggy bank as a differentiator.
And it is working of course, you need to negotiate that's why you have the hubs because if you're if we're not able to negotiate with just people could go computer and by Europe pass through the website and we know that smbs have better take rates than those that we offer in our in the website. So that's the main idea to talk to the right person.
To the owner of the business.
And get the deal done so we we try as I said, we try not to compete with price we use bank bankers.
Competitive advantage here there is no conflict of interest we are under the same umbrella the same parent company with the same targets. So we are everyone looking forward the same direction here.
I don't have here in the top of my mind to say you from this two percentage points home how much was from new business that you've got a long tail how much room from the hubs.
You can get this information later.
And regarding your second question I would say you here we are very.
<unk> Zeng company.
We try not to have distractions and to make the best for our clients I guess, that's our DNA. That's what everyone. Here is committed to we have a very committed team looking for the best for the clients. We don't do things just because we think its core because you think that the market. We liked it we will do things.
Really declined two like it.
We deepened relationship with legacy grew up by the bank and so on.
We do believe that technology also is up to that you need to use downward brought us since 2006 and two today.
The technology the way that we have here two scaled solutions do cost to serve going down with time passes by so that's why we believe so to make the best for our clients using technology.
And B a hands on taking very attention to detail is because at the end of the day. This clients they need to be very well served with otherwise they can they can move to another player. So that's why we tried to do vary a lot of focus on execution here. So that would say I mean, there is no secret sauce here just working hard.
Every day and taking additional details using technology and the best way to clients.
Okay, that's great color.
And then separately I wanted to ask you impact back you were touching on those a.
A bit can.
Can you talk a little more about your efforts right now to get more probably bank cards into the hands of your users and get them active.
We can see that the you know the.
Four times increase in cards.
Nine right over the past two years.
405000.
When we think about that $11.2 million active user base. The obvious question for houses how many of them do carts.
Potentially you know customers using pack brand cartoon shows how much further expansion.
We expect to see from that 405000 could you give us any thoughts there about execution in the strategy and how to continue to bring that number forward with within your <unk>.
Your customer base.
Yes.
Yeah, James well win when someone comes here to open an account we don't know if I mean, it's hard it from the beginning they're going to be a let's say a good client with lots of money coming to the store count or if they do not put a lot of money here, if there be a heavy user or or not so.
We tried to get some data from the market, we try to get to to get some data from that you have here inside the company to try to to offer let's say to make the best offer for these clients, but at the end of the day I would say you that the.
The main.
The most usage featuring our account is the wire transfers and secondly is the cards because those are the two tools.
Clients have to move the money. So that's the what they use more to of course, they paid views and so one but the do our transfers to send money from one account to another one and then also the cards to make purchasing to withdraw the money those are the two most use it features.
If declined asked for a card and they don't use it we have a let's say a communication.
Process here to send promotions to make some incentives for them to activate the car and to use the cards. So our goal here is to have 100% of our clients using the cards tools that received a card so.
I mean, it's it's key for US it's key to to make the people to use a biobank as the main bank. We are not the main bank for the majority of declines at this point, but I mean, it's a decent percentage of our clients say to us by the bank as their main bank and it is getting better month after month.
So we are developing new features we are putting new new new features in the accounts. So that people can use those as the main bank, but the goal here is to have more and more people using the cards and Cds TPG from cards, increasing it just queue today.
<unk> with the TPB from the acquiring because the majority of the Kashi is coming from the acquiring so we've decorating comes up the usually the PPV from cards also goes up.
When you have these acquiring companies now why do we had in Q1 because of seasonality. We saw also the DTP from cards and with the same trend because the majority of the caching is from the motions, but going back to your question. The idea here is to have I would say, you're 100% of our clients using the card the cash card.
We will start offering credit cards for some consumers as a pilot as I mentioned before.
But we will start so it's hard to say, how it's going to be the performance. We can again give you more color in the following quarters and following calls.
Okay.
Got it got it I appreciate all that color.
Thanks, and congrats on the results.
Thank you very much James take care.
Okay.
That concludes our question and answer session for today.
I'd now like to turn the floor over to Mr had kind of two for final remarks. Please Mr. Dutra go ahead.
Hi, everyone and thank you very much for the time. Thank you for the questions. Thank you for all the support through all this quarters and hope to talk to you soon in person and.
For some of them that we don't don't meet in person. We can talk in the next conference call next quarter. Thank you very much.
The pocket Bank <unk> conference call is now over thank you for your participation have a great night and you may now disconnect.