Q4 2022 PagSeguro Digital Ltd Earnings Call
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Speaker 1: and I will be your conference operator today. Welcome to PegBank Peg Seguro's webcast results for the third quarter 2022. At this time, all lines have been placed on mute to prevent any background noise. Should any participant need assistance during the call, please press cap.
Speaker 1: star zero to reach the operator. This event is also being broadcast live via webcast and may be accessed through PegBank PegSiguro's website at investors.pegsiguro.com. Participants may view the slides in any order they wish.
Speaker 1: Today's conference is being recorded and will be available after the event is concluded. I would now like to turn the call over to your host, Adeke Oliveira, Investor Relations and ESG Director. Please go ahead. Hello everyone. I'm Adeke Oliveira, Investor Relations and ESG Director.
Speaker 2: Thanks for joining our fourth quarter 2022 earnings call.
Speaker 2: After the speaker's remarks, there will be a question and answer session. Before proceeding, let me mention that any forward-looking statements included in the presentation or mentioned on this conference call are based on currently available information in PAG Bank, PAG Seguro's pursuant Essensions.
Speaker 2: expectations and projections about future events.
Speaker 2: While PAG Bank, PAG Segur believes that the assumptions, expectations and projections are reasonable in view of currently available information, PAG is not a
Speaker 2: You are cautioned not to place undue reliance on these forward-looking statements.
Speaker 2: Actual results may differ materially from those included in PAC Bank PAC Seguro's presentation or discussed on this conference call for a variety of reasons including those described in the forward-looking statements.
Speaker 2: and risk factor sections.
Speaker 2: of PAG Bank, PAG Seguro's most recent annual report on Form 20F and other filings with the Securities Exchange Commission which are available on PAG Bank, PAG Seguro's investor relations website.
Speaker 2: Finally, I would like to remind you that during the conference call the company may discuss some non-GAAP measures including those disclosed in the presentation.
Speaker 2: We present non-GAAP measures when we believe that the additional information is useful and meaningful to investors.
Speaker 2: Presentation of this don't get financial information which is not prepared under any comprehensive set of accounting rules or principles is not intended to be considered separately from or as a sub-institute for.
Speaker 2: Our final information prepared and presented in accordance.
Speaker 2: with IFRS as issued by the IASB.
Speaker 2: for more details. The foregoing non-GAAP measures and the reconciliation of these non-GAAP financial measures to the most directly comparable IFRS measures I presented in the last page of this webcast presentation and earnings release.
Speaker 3: With that...
Speaker 2: Let me turn the call over to Ricardo. Thank you.
Speaker 4: Good evening from São Paulo everyone and thanks for joining our webcast for the 4th Quarter 2022 results.
Speaker 4: Tonight I have the company of Alessandro Magnani, our CEO , Artur Schunk, our CFO , and Eric Olivera, Head of Investor Relations and ESG.
Speaker 4: Before I turn to Alexandre, I would like to share a quick overview of our journey, as we completed five years as a public listed company last January .
Speaker 4: I would like to share a quick overview of our journey as we completed five years as a public listed company last January . After that...
Speaker 4: I will share the main 2022 achievements and comments about our ESG initiatives.
Speaker 4: Go to slide 3.
Speaker 4: We share the five years keeper forms indicators for our company and the three years keeper form indicators for five banks over financial services in the East of Bank unit launched in May 2019.
Speaker 4: Our company truly experienced an exponential growth in the scale over the years.
Speaker 4: including millions into the financial system, initially through payments, and then through digital bank through services.
Speaker 4: We have been successfully unlocking new addressable markets in payments and financial services, always balancing growth and profitability.
Speaker 4: To start with PIPES Ibloo data, our TPV grew 9 times in 5 years, reaching 354 billion REIs, and we have the largest payments network acceptance in Brazil, accounting for more than 7 million active merchants.
Speaker 5: Thank you.
Speaker 4: Our financial services and digital bank business has been growing consistently in all important metrics, increasing engagement, unlocking cross-selling opportunities and leveraging our banking license to reduce our cost of funding.
Speaker 4: The bank's TPV increased 19 times with total deposits growing 10 times, surpassing more than 20 billion reais.
Speaker 4: All credit portfolio goes seven times reaching 2.7 billion reais is still very small compared to the opportunity we have ahead of us.
Speaker 4: Our credit portfolio grew seven times reaching 2.7 billion REIs, still very small compared to the opportunities we have ahead of us. And finally, our credit portfolio grew seven
Speaker 4: Even with all investments in our organic growth and the macroeconomic challenges such as interest rate increase inflation and uncertainty about consumer spending, not only in Brazil but around the world, or a profits group three times. And our equity position increases from less than one billion reais in 2017.
Speaker 6: Thank you. Thank you.
Speaker 4: Going to slide 4.
Speaker 4: Going to slide four, we can see some of our 2022 achievements.
Speaker 4: We successfully implemented our repricing to offset financial expenses increase.
Speaker 4: At the same time, we had strong deposit growth which helped to reduce our funding costs and help it to diversify our funding sources.
Speaker 4: We also have been successful diversifying our payment business and in 2022, marked the consolidation for our hubs initiative to extend our best-in-class services to small and mid-sized clients and Pang Bank consolidated as the second largest digital bank in Brazil with 28 medium clients.
Speaker 4: In credit underwriting, we took the right decision in Q1 2022 to shift our underwriting from unsecured products to secured products. By doing so, we were able to unlock new growth avenues such as the payroll loans and credit cards backed by CDs and account balance savings.
Speaker 4: improving our growth profits in TagBank.
Speaker 4: Finally, our discipline, capital allocation, light-just significant improvement in operating and investing cash flow generation, paving our path to further explore the opportunities in payments and financial services in Brazil and territory in the coming years.
Speaker 4: our disciplined capital allocation led to a significant improvement in operating and investing in cash flow generation, paving our path to further explore the opportunity in payment and financial services in the Brazilian territory in the coming years. The next movement is like 5 seconds to go, so we can get 15 seconds until we hit the
Speaker 4: Our natural call for disruption and value creation led us to set a high bar for delivers in ESG.
Speaker 4: In December 2022, we released our second sustainability report where every stakeholder can follow our main initiatives and post impact in society.
Speaker 4: One point to highlight here is that our financial inclusion has been massive. Through a safe and health free platform empowering clients, employees and communities.
Speaker 4: With that, I finish my presentation and pass the word to Alexander Mayani.
Speaker 2: Thank you Ricardo, hello everyone. After Ricardo shared our management for 2022, I would like to share our highlights only for the fourth quarter beginning on the slide 6. Our investment for the loss of to balance growth and profitability while keeping a disciplinary capital allocation led us to report...
Speaker 2: Cash earnings of 410 million RIs almost four times higher than for Q21.
Speaker 2: and 9.8 billion rise in net cash position, further boosted by our efficiency in OPEX and CAPEX.
Speaker 2: In payments, our strategic pillar to grow in a profitable and efficient way while we continue to diversify our merchant base resulted in...
Speaker 2: 94 billion Reais in PAGS Seguro TPC with 33% coming from hubs and 1.3 billion in Grosscroft, 14% higher than for Q21.
Speaker 2: financial service
Speaker 2: We have continued diversifying our revenue streams through the consolidation of tag bank.
Speaker 2: Brust-broughed of 131 mAh, 70% higher than 4q21 and 3q22.
Speaker 2: 28 million clients accounting for 21 billion rising deposits.
Speaker 2: and 2.7 billion rise in credit portfolio with increasing exposure to secured products.
Finally, our two-sided ecosystem, which is just in the early stages to fully explore synergies related to lower transaction costs and lower cost of funding through our closed loop LAD2.
More than 200 billion Reais in TPV, PagiBank and Pagsiguro, 10% in market share of BIX transactions. And new features to further increase our cross-selling with clients, SMB, Buro platform and automatic savings from account balance.
Moving to slide 7 we present our client base and caching evolution.
Our number of pack-bank clients, more than double, in comparison to 2020, moving up from 13 million to almost 28 million in two years.
Active clients accounted for more than 16 million were 60% of consumers and 50% of the merchants considered Spagbank their primary account.
Our growth in cash in reached 38 billion reais versus 4 Q2 021.
Led by Pugs, you go to TPPV Growth and pick transactions.
by the security TV growth and pickstrums actions. As a result,
Slide 8 reviews are deposits growth and their respective annual percentage yields.
deep diving, we were able to reach an important milestone this quarter, especially in such an uncertain scenario related to credit market.
given the recent events and the interest rate trends in Brazil in 2023.
The ongoing improvement in product and service levels combined to the seasonality led to strong account balance growth.
Total deposits reached 21 billion, 1.3 billion reais more than 3Q, 22 and 12 billion reais more than 4Q, 21. The increasing share of account balance in the quarter allowed us to reduce our pack bank CD distribution through third-part partners
reducing costs related to distribution fee and the ATY's in Pag Bank CDs, driving down our costs related to deposits without harming our go-to-marks strategy to attract a new client and further engage the current ones. Account Balance APY.
In 422, reached 69% of the CDI, the Brazilian Interbank Rate, and increasing comparison to the previous quarter. These increase was mainly related to a higher number of days our clients kept their savings in bank bank.
APY on total deposits reached 96% of CDI, a lower level in comparison to the past two quarters, reflecting the higher share of account balance and the downtrade in APYs for peg bank CDs.
Moving to the next slide, I would like to share two features that we recently roll out to our clients.
Thinking about the challenge of Brazilian merchants to manage direct deposits of paychecks for employees, we launched our SMB payroll platform fully integrated in our Pag Bank app and in our iBank platform.
Merchants can count with this feature to organize and scatter paychecks payments for their employees with a hassle-free solution.
is the new version of our automatic savings.
Initially, it was mounted for merchants where they could define a percentage of their sales to be invested in bank bank CDs.
Now, merchant and consumer can also get automatic savings according to their account balance, facilitating the investment from other cash-in sources such as peaks, salary, portability, and other sources of deposits.
With this product, we reinforce our commitment to financial inclusion and education, why are we foster PAC bank account engagement? Moving to slide 10, we also would like to share a few updates about the ongoing improvements in our service levels.
During the past two years, our teams have been working hard to increase client satisfaction while promoting additional cost savings through processes, automation and optimization. On the left side, we can see our improvements in customer care.
On the top left, our contact rate decreased 49% in two years, an important metric as it represents a reduction on clients' problems with our products.
On the bottom chart, we have also reduced the average service time by 29% in the same period.
On the right side, we shared an update about our logistics operation at key department for service levels.
It's important to highlight that our operation is already extremely efficient with points additional challenges but it did not prevent us to look for even better service levels.
The average time for POS delivery won down 10% in 2 years and the average time for POS replacement decreased 25% in the same period.
Even though pricing remains one of the most relevant factors for merchants' decisions about their acquire option, we observe that service levels have become more and more relevant in client decision.
Before I turn over to Arthur, let me talk about our credit portfolio.
As we have been discussing over the past quarters, the company decided in early 2022 to reduce the credit on the right of unsecured products and balance.
It's portfolio with secured products. These decisions open new addressable market for us, special in consumers with payroll always to retirees and public sector employees.
At the same time, we increased our provisions considering the asset quality of unsecured products.
As time passes by, we were able to reach 2.7 billion rice in outstanding credit portfolio.
where secured products increase its share from 7% in 4K-21% to 40% in 4K-22. The diversification of our credit portfolio contributed not only to our business diversification, but also to reduce the provision for losses lowering our exposure to high risk clients.
Additionally, we launched a disruptive credit card where clients can tie their credit limits to their investments with Pag Bank, further promoting financial education while we manage
We have no rush to grow materially our credit portfolio in the short term, giving the uncertainties of the macroeconomic outlook, but our ongoing improvement in credit models, process, collections, and client risk assessment will potentially speed up our uptight in the future.
Now, I will pass the word to Arthur to present our financial results.
Thanks a lot, Shandit. Hello everyone and thank you for joining us tonight.
I will continue the presentation on slide 12 with our Q422 and annual results.
on the July 12th with our 2 422 and annual results.
Talking about the fourth-quarri results, total revenue and income, which is almost four billion reais, growing 22% year-over-year. This performance was likely lower than last-quarred, due to higher share of debt-card transactions, last-quarri's limits available in the market.
soccer World Cup impact. Gross profit, neutral off-effects, grew 18% year-over-year and was stable versus less quarter.
Financial expenses decreased by 7% Quire over Quire due to 5 working days last then 2-3.
and the replacement of expensive funding lines to lower cost sources.
On top of that, total losses decreased by 30% on quarterly basis.
driven by lower level of provisions for credit delinquency requested by secured credit products.
I also would like to highlight that Bhagavank Cross Profit improved 72% versus less quarter.
Once again, operating expenses grew last year, total revenue income, yearning growth.
showing 230 basis points of operational leverage. Controlling costs and expenses is a recurrent process under our DNA and a key component of our superior execution.
Agios Televida closed at 788 million Reais, up 29% in comparison to the last quarter of 2021.
EBDAMANOS CAPIX, included by 53% versus Q322, that represents a cash earnings of 400 PayPal logo for lateral exchange and at the same time be filled with cash and variance of
Net income non-gap, achieve it 411,000 of hair eyes, and then income gap, increase 35% year-over-year.
reaching the highest profit impact history.
Total in 400 and 8 million reais.
This represents an earnings per share of $0.0124 in the quarter.
33 cents or 26% better than 2.421. During the last quarter, we hit the chase at 1.9 million shares under our buyback program.
Our strategy and focus continued to better balance growth and profitability, targeting to improve shareholders' return.
On a yearly basis, perhaps close in 2022, with 15.3 billion reais in total revenue in
and increase of 47% versus 2021. Gross profit total.
5.5 feet of hair, and increase of 19% year-over-year.
Even with a significant increase of almost four times in financial expenses.
and with total losses growing 48% over the year due to additional provisions for delinquency on credit products.
As a result, no gap net income reached 1.6 billion reais, while you get net income amounted to 1.5 billion reais, increase of 29% when compared to 2021, and representing an early pressure of 4 reais and 57 cents.
or 30% higher than last year.
Moving to slide 13, parks to PV grew 19% year-over-year, totaling a 9.4.3 billion reais during the core. Better than expected, giving the negative impact of the soccer world cup on business days and credit limits constraint in Brazil.
but with a good performance on holidays. Total revenue and income grew faster than TPV growth, reaching 3.7 billion reais or plus 25% year-over-year due to the positive results from the massive immersion to hit rising demand in 2022.
As a result, gross profit reached 1.3 billion reais, an increase of 14% when compared to the same period of last year.
In slide 14, Park's TPU reaches 115 billion reais in Q422.
28% higher than 2421.
reinforcing the customer's engagement on PagiBank account that resulted in a strong deposit growth and increase of cash out through day-to-day banking services.
5Banks total revenue grew 7% year over year, and in the quarter at 329 million pounds. And slightly lower than 2-3 because of our focus on security credit products which have low APWRs and longer duration comparison to insecure exceeds 3 relay period support, MSP Credit oil, or Verizon heavy lift, or Flow Co.
On the other hand, Gross Profit, the Hitchett 131 V1 has an increase of 71% year-over-year men due to our delicious credit and the writing of secured products that naturally leads to lower provisions for losses.
In the next slide, in the first chart on the left side, operating expenses reached 621 million RAs until 422, up 7% year-over-year. This amount represents 15.7% of PIV's revenue versus 18% in the same period of last year, and is stable when compared to last part.
The improved efficiency has come from personal and marketing expenses leverage, as well as the contribution of ARG bank and herbs revenue growth.
In the right chart financial expenses closer to 855 million reais versus 403 million reais in Q421, around 90% of this increase is explained by the hike of silly to rate and the remaining portion.
was related to higher TPPV volume, pre-payment of receivables to motions and credit card mix.
These effects were partially upset by the lower cost of funding as we leverage our banking license and increased private bank deposits combined to lower spread negotiated get-to-markets.
We continue to focus on improving our funding process, diversifying sources, and extending terms to support the company's growth. Financial expenses was our biggest challenge during the year in 2013, as we will see in the next slide. However, the Brazilian central bank has been keeping interest rates stable.
The last interest rate increase was announced and we expect for 2023 and average rate of 13.75% early year.
versus 12.53% per year in 2022. The graphic in the slide 16 is to illustrate how far the results evolved during 2022.
Revenue growth was strong, mainly expanded by Pepsi-Gurus TV growth and our successful repricing process.
Cost efficiency and operational leverage captured also contributed positively for the yearly performance.
Financial expenses was the major impact over the year, representing an increase of more than 2 billion reais into parks costs and expenses. DNA and POS write-offs also impacted negatively on our results.
which we expect to decrease as a percentage of revenue in the coming years.
Another impact came from total losses mainly related to rise on provisions for credit losses during the year that is expected to reduce in 2023.
Owing, we have reported all time high figures.
with net income non-gap increasing by 12% when compared to 2021, and net income gap increasing by 29% versus 2021, totaling 1.5 billionaires.
In the next slide, adjust the review down minus graphics, reach the positive amount of $410-000!
more than three times versus Q421. Cash earnings represented 10.3% of PIPES revenue, reflecting management's focus on maximizing LTV2 calculation by reducing POS subsidies and adding more valuable emotions into the ecosystem.
In the following chart, CPEX to Revenuvation, which at 9.5% is quarter versus 16.8% in the Q421 and 12.4% in Q332. This decrease is driven by lower CPEX related to the strategy of being more selective in motions.
Special like these two levels part in beta.
and the increase of herbs and pideventiline.
On the bottom chart, depreciation and amortization, including POS write-off, total 336 million reais representing 8.5% of Pikes revenue.
On slide 18, Pirates Net Cash Balance ended the fourth quarter at 9.8 billion reais, increasing almost 1 billion reais year-over-year. At the same time, we have been improving our capital structure and diversifying funding sources to support volume growth. With deposits now representing...
around 67% of our third party funding source. To conclude our presentation, I will turn back to Alicia and you for the final comments.
Thank you. Thanks Arthur. Before we conclude our call and begin our Q&A session, I would like to recap our guidance and results for 2022 and our business priorities.
Last quarter, we shared our guidance for Q422 and full year 2022.
When comparing guidance and results, we saw revenues growing at 47% year-over-year, very close to our guidance. The MISMatch was mainly related to a higher than expected share of debit cards in Q422, leading to a better than expected TPPV at a lower- than expected.
for the three metrics, total revenue and income, net income gap, and non-gap basis.
Important to highlight that during the pandemic, we decided to provide quarterly guidance to increase investors' visibility about how business was evolving during this highly uncertain period.
From now on, we decide not to share guidance to avoid short-term oriented view that is disconnected from how we manage the company, focusing on long-term and fully explored opportunities we have ahead of us in financial services and payments, always balance growth and profitability.
We will keep improving our communication and investment deck to address important topics with analysts and investors about our equity story and clarify potential questions about business development.
It has been proved how resilient our business is independently of the economy, industry or regulatory change.
Our investment philosophy of balanced growth and profitability has not changed and the opportunities remain extremely compelling for our company. Looking ahead, our main focus are growth-proffedably in payments and keeping increasing market sharing key segments.
Foster Peg Bank engagement to diversify ravenous and increase ravenous per customer.
develop our two-sided ecosystem providing a unique and superior value proposition.
Improve models and process to reduce loss and costs, and execute Discipline at capital management to improve EPS and cash flow generates. Now we have ended our presentation and we will open the Q&A session. Operator please.
Thank you. We are now beginning the question and answer session. If you have a question, please press star one.
Our first question comes from Mario Piere, Lincoln for America. Hey guys, good afternoon. Congratulations on the quarter. Let me ask you two questions. I know you're not providing guidance and I'm not looking for specific numbers either, but...
just wanted to get a sense from you. How are you seeing the operating environment in Brazil for this year? Especially recently, I think, Apex reported that they were forecasting volume growth of about 14% in 2023. I was just wondering.
if this number makes sense to you, if you think you can maintain your market share, gain market share or not. And also related to the competitive environment, how are you seeing prices behaving in Brazil? Do you think you have room to continue to raise prices or are we getting to the point where...
Thank you. Thank you for the question. Would you hear you?
Let me start with the big picture that you ask, then we can go to the part of the prices and so on. So as you said, the question A-BEC is expecting the market to grow between 14 and 18%.
So we only had two months at this point. So it's hard to say that it's okay if it's going to be higher than that or lower than that because we only had January and February . But we are working to keep growing payments in a possible way.
Market share, to be honest, is a consequence.
We are looking for growing our TPC in specific segments, which is the Delaun Teo, my conversions and the SMBs.
So of course we are not disconnected from the whole economy, from the whole card industry but so far we saw January and February according to our business plan. So that's what he had in the January plus February or according to our business plan.
Talking about the prices we We didn't change the prices for the long tail in the past years and we don't point to do that because we just want to keep simple and looking forward.
Although, a few months ago, we expect the interest rates to go down and then what is the interest rates to keep stable? So we don't see...
increasing prices for Luntave at this point, but if you think about SMBs and other niches that you have in our base.
There are some opportunities, some segments, some issues that we could increase prices if necessary in short term. Also, we don't have any plan to decrease prices ahead of possible interest rate decrease because you don't have this visibility at this point. Once you have this visibility, you can discuss here, but at this point, all the...
The data that you have in now the interest rates, the core of the future we see, the interest rates are the same level that I have today, which is 13.75% per year.
Okay, now that's clear. Let me ask them to follow up with regards, you know, to the overall health of the system. We will continue to see your client base decline. I think it's four consecutive quarters here that we have seen lower client base.
Can you break that down between the SMB and the micro merchant segments and talk about mortality? Because again, we're starting to see that on the credit side, like the corporates in Brazil are starting to have some financial problems because of the high rates, environments, weak economy, etc. Is that what explains as well the decline in your client base?
So Mario, the decline in our base, the majority of this decline is in non-immersion.
are responsible for a very very small part of 40 pv less than 3% 40 pv.
So, look at the number of versions, although we are decreasing our TPP is growing.
growing on a yearly basis, growing on a TPP promotion. If you look at the year figure, we are growing faster than the industry. And of course, the profitability are reaching record levels as you could see in the presentation. So, although the net ads are the active merchants' base.
is a metric that everyone follows. The fact that we are losing non-emersions doesn't correlate with financial metrics. So we are looking for clients in key segments which are micro-emersions with some levels of TPV and SMBs where we have profitability in payments and we have opportunities to cross-sell and to penetrate back bank. So.
That's why if you ask me the active merchants base looking forward, there could be a downtrend.
But we are not concerned with that because we're losing clients that they have very low TPP low probability of bag-bank penetration And that's why even losing these clients we are growing TPP 40% year over year and reaching record levels of cost ability
But we are not concerned with that because we are losing clients that they have very low TPV, low probability of packed bank penetration and that's why even losing these clients we are growing TPV 40% year over year and reaching record levels of profitability. Regarding credit. We are not concerned with that because we are losing clients that they have very low TPV 40% year over year. Regarding credit. We are not concerned with that because we are losing clients that they have very low TPV 40% year over year.
We took the right decision in 2021-22 to shift our credit from the secret products to secret products.
Today we have 40% of our credit portfolio that is secured. We expect that to reach 60% in the short term in the following quarters. That's why even with this credit crisis we are seeing in Brazil, even in the corporate.
We are not seeing our NPLs having problems because we have the full collateral for this Part of our credit portfolio. So That's the overall picture that I have in terms of credit. What we what could have happened in Brazil in Q4? Is that some banks?
Decrease the limits for the credit card holders they have and that's why some extent could Constraint consumption people that had some limits in credit and now they have a lower limit because some banks are decreasing and if you look at the Results from banks the quarterly call from some banks
We've seen seven PLs going up there. So that could be the impact for us, but in the acquiring business, I'm saying, I mean, people with lower credit to spend money. But overall, we don't see these crisis incorporate generating any problem with lower credit portfolio or any other operational aid to Paxigura or Paxi Bank.
Okay, not perfect. Thank you very much.
Okay, not perfect. Thank you very much.
Our next question comes from Ryan K. Dijaybank. Hi guys. I wanted to ask about the Peggybank revenues and the Delta to volume. I just want to make sure I understand the Delta and you expect. let's do it.
Or when do you expect maybe the delta between the gap between volume to revenue growth to close in Peggy Bank?
Hi Ryan, thank you for the question. I guess you are talking about the volumes of tag bank TPPV and correlate that with the revenues. Right, right. Yeah, a large part of this TPPV in tag bank, they are not monetized because it's based on people sending money from tag bank and sending money to tag bank or from tag bank to someone else. So.
change or related to credit. Those are the three main drivers for our revenue. So what we had in Q4 is that as we are having the shift from unsecured products to secure products,
The duration of these loans are higher than what you had in an unsecure project. So we had a decrease in revenues related to credit and that's why the revenues went down 10 million reais in impact banking queue 4 compared to queue 3.
So we cannot correlate that, Brian , because we are seeing people using more and more bank account. That's why CD plots are growing, so on. So making this math as a percent of a TPPV doesn't mean too much, to be honest.
We cannot correlate that, Brian , because we are seeing people using more and more bank account. That's why we see the plots are growing, so on. So, making this math as a percent of your TPPV doesn't mean too much, to be honest. Got it. Got it.
And my second question is just on the rates and the financial expenses. Obviously, that higher rate is pressured.
the profitability all year. Can you talk a little bit about how much additional pressure you expect in the financial expenses this year that could pressure net income margin and then
Secondly, you mentioned the possibility of cutting rates if rates dropped and not actually keeping the benefit from a rate drop. Can you just make sure you can explain how you guys would go about doing that? Because I was under the assumption that you guys would be able to benefit from lower rates.
into the profitability would improve. Thanks. Hi Brian , this is Ricardo. I will start with the second question and then Artur can help us with the first part of the question related to financial expenses and the rates.
profitability would improve. Thanks. Hi Brian , this is Ricardo. I will start with the second question and then Artur can help us with the first part of the questions related to financial expenses and the rates. If the rate
Interest rates goes down, over financial expenses we go down, and we do not expect to decrease prices automatically. The dynamics or the moving parts here would be the following. In long tail, we had the same rates since 2016. I mean, the past years is exactly the same rates, the prepayment, MDR and so on.
So if the rates interest rates goes down, we're going to recover margins in long tail with the next business day. In the SMBs, we will not decrease price automatically. We'll try to keep a advantage of this decreasing cost and keep the same levels of MDRs in prepayment so that we can have a better margin SMBs as well. Of course there will be some price that we will.
Contact us asking if they could have a better condition or a better price and some clients will not do that so The same dynamic that we had when the interest rates went up and we waited a little bit to increase prices
We're going to have the opposite movement at this point. The interest rates go down and we will not decrease the price automatically for SMBs. So on average, we should have some benefits in the SMBs as well because not everyone will decrease prices in the next days. It's going to take a while and some of the clients probably will not even decrease the price for a long time.
a long time. So in long tail, we're going to receive the benefit automatically. And in SMBs, we'll try to have the benefit as much as we can. Of course, it depends on competition, depends on many variables, but there could be some, some advantages. That's for sure. Because when you have seven million clients, you have everything. You have clients that you call with the next business day and clients that don't even pay attention to that.
of two reasons. The first one is the volume growth of our pre-payment business and the second point is related to average interest rate for the country that in 2022 was 12.5% and in 2023 we are expecting at this point that will be stable during the year at 13.75%.
So based on those two things, the expenses that we are expecting for 2020 will be higher in nominal terms versus 2020. That's helpful. Just a quick one. Is there still reprising benefit you will see positively in fiscal year 23 or did that benefit in slide 16, the 668? Yes.
Was that just a fiscal year 22 phenomenon and you won't see a benefit of reprising in fiscal year 23?
Brian , there are some moving parts here again, as you can imagine. We will have some benefits in re-pricing, as I mentioned in the previous answer to the other analysts.
We are looking at some niche that we may reprice in the near term. But on the other hand, we have a change in the mix. SMBs are gaining share and SMBs, they are good business because they have five times more volume than long tail, but they have a lower take rate. So if you look in absolute terms...
we should have benefits. If you look at the percentage or net take rate or percentage of the revenues probably we're going to have this this pressure because of the mix. So we have these two big moving parts here. We're pricing from one hand, from one side and the change in the mix. SMB going faster than other clients.
and then pressureing a little bit, take great. So those are the moving parts here. But as we said before, we expect the EPS accretion in 2023 versus 2002. That's why we're working for.
pressure on you a little bit, take great. So those are the moving parts here. But as we said before, we expect the EPS accretion in 2023 versus 2002. That's why we're working for. Great. Thanks for taking the questions.
Thank you, Brian . Our next question comes from Josh Siegler, Cantor, Feet, You're Out.
Hi guys, thanks for taking my question today. I was wondering, so far year to date, have you seen any notable changes in the micro merchant behavior either in volume or how they're interacting with your platform? Thanks.
Hi, Josh. Thank you for the question. No, we didn't see any change in the micro-mortem transformation change. Of course, we are trying to penetrate the PAG bank as much as we can. So we see some segments or supplies that are using PAG bank more and more, as you could see in the deposits figure that we presented.
If you make the math between the average account balance for client, you see that we grew almost 100% over year So that's a good change in behavior for my conversions and that's all That's yeah, every CPV is also growing but no no no big changes that we
Good comment for you Okay understood and then I'd like to focus on the payroll platform a little bit because it seems like it represents a significant growth Opportunity for the company. How are you thinking about the overall impact that this can have third-party era?
Well, that's great. I mean, we have this payroll platform because we have some clients that would like to use a bank to pay their employees.
And of course they don't want to come here and make 30 wire transfers 50 wire transfers 100 wire transfers. They just want to have an spreadsheet or A file that can just upload and then with one click they can do that for up to 2,000 employees so the idea is to have more Client using us as a primary bank for their businesses and Of course, we're gonna try to make this cross-sell for their employees as well. So the idea is to
to have companies using us to pay their employees so that we can also try to bring their employees to work with us and increase the account balance that you have here because the more money coming in, the more money flowing through our ecosystem the higher the probability of this money to stay with us and then we have all the benefits with deposits
and lower cost in the deposit that we gave some discussion to presentation. So there is more related to engagement and to make businesses to use private bank as their primary account.
cost in the deposit that we gave some disclosure in the presentation. So there is more related to engagement and to make businesses to use by the bank as their primary account. Understood. I appreciate the color. Thank you.
Thank you, Josh. Our next question comes from Pedro Le Duque, Itaú Bíeay.
Thank you very much for taking the question and so on. Thank you for the incremental disclosure. Okay.
I want to dig into the financial expense line a little bit more, but for this quarter specifically down 7% sequentially. Within that, the securitization of receivables line was the main contributor down a lot, sequentially 30%. However, there's more evidence toorg
Can you help us understand this perhaps a little bit more? Fill in the gaps between was it a lower prepayment share from working capital seems like it was a little bit less. Of course, we had less credit this quarter. Maybe it was a lower duration that you securitized or much lower costs. So just help us fill in this line for the quarter financial expenses.
watch through the synchronization now, that'll be great. Thank you so much. Pedro, thank you for the question. It's time to speak. So related to the Q4, 22 expenses that we have compared to Q3. So the first point that helped us in these expenses in the oil was related to the five working days.
less in Q4 in comparison to Q3. The second point was related to share of debits in comparison to Q3. Higher mix of debit cards helped us in these working capital needs and also the most important point to reduce the cost for us was related to deposits.
We increase the number of deposits in Q4 mainly related to the balance accounts from our clients in Pagabank account And also because we have a banking license in our group so we can use these deposits to fund our merchants Prepayment operation on top of that based on the results that we Obtain in across the year and across the old year
your achievable. How did you see those costs?
I think the percentage of sleek rice may during the fourth quarter. And how you seeing it, if different now in the first quarter post the credit event that we have in Brazil has it changed overall for you. Thank you.
Yeah, related to account securitization, we saw during 2022 our reduction in the spread that we are paying for the banks.
to address these receivables to them. And especially in Q4, we also see, we also saw some reduction in comparison to Q3, in comparison to Q3. So it's better to us that we have a good negotiation with the banks. And for Q1, 2023, we are seeing almost the same cost that we are paying for Q4.
So there is no concern about the AR secretization that we have at this point. Great. Thank you very much again, O'Korez.
Thank you. Our next question comes from Domingu's Falagena, JP Morgan.
Thank you guys for taking the question. Two quick ones. The first, you had some reversals in stock-based compensation and was running 30 to 40 million. My question is, what's kind of a normal live level that you guys think makes sense for that expense line into 2023? I didn't mention that in the video.
limits.
to the banks. And I mentioned in total credit debit plus prepaid, but debit has other headwinds such as pigs and others. My question is, while you don't have any guidance for next year, what would be your best guess for industry DPV growth next year? Do you guys think it grows above 12, 12 to 15, 9 to 12? I think it could provide a better educated guess for us. It would help.
of capitalization of long term incentive plan for R&D, especially specifically for R&D, it's a non-cash impact, so it's important to mention that it's a non-cash impact. So we here classified some expenses related to mobilization that was...
book it in the wrong place. That was affected the non-gap previously. And now in Q4, we adjusted that because it's fine from non-gap to gap. On top of that,
We concluded the year missing some goals that we had in the long-term incentive plan and So we reverted the provision that we booked before on top of that the share price reduced from Q3 22 to Q4 22 from thirteen point twenty two dollars to eight dollars and seventy four cents
Based on that, we also had a reversion of the provisions that we boaked until Q3 2022. Related to 2023, we are expecting to back to the same level that we had in Q3 2022, around 30, 35 million reais.
or in the year 150 million reais. The Minos regarding the growth of the industry in 2023.
The best data that you have is the ABEC data going from 14% to 18%. So we had a good January , February , we didn't have current evolving to 2022. Now we had current going to 2023 so it's not comparable. We know that part of the government that we have is...
try to increase consumption or we'll try to increase consumption. So the best data that they have is to the ABAC data to grow between 14 to 18%. The industry has a whole world.
That's why we are basing our assumptions. That's where we are working at this point. If something changes, we can come back to you. But the assumptions that you have are those grew between 14 to 18%. They industry as a whole.
Super fear. Thank you guys. Our next question comes from Nihah Argerwala, HSBC.
Hi, congratulations on the results and I have two questions. First on Parkbank, I seem like Parkbank achieved good operational efficiency class benefited from provision declining quarter and quarter.
What other levels do you have for the 823 to improve the profitability at Park Bank because the revenues are going to be hit to onwards? And related to Park Bank, most of the growth that you are talking about for the credit business is going to come from the secured loans portfolio and you expect it to go to 60% of total loans.
But what about the unsecured loans? Do you still think that the macro is not supporting to grow on the unsecured side or the unsecured side and you want to be cautious or do you think that you can pick up growth maybe in the second half of the year, the better on that part would be very helpful. My second question is more longer term. So we understand that in the short term you are focusing on the more profitable merchants and...
profitable enough for you to service them. So, anything about that from a more medium to long term perspective would be helpful. Thank you so much. I need to introduce Ricardo. I will start and then Artur can help us with the provisions
When you look at nano-merchants we see, as always, there are many moving parts here. There are nano-merchants that became merchants because of the COVID, because of unemployment, because of pandemic. There are some of these businesses that the mortality of these businesses, there are some nano-merchants that got a formal job and decided not to work by themselves anymore.
So there are many moving parts and that's why I also did the nano-mershans base. At some point we are not only one reason that it's going down. There are many reasons some people may shut down their businesses, they get a job, and so on. Nano-mershans, we think they could be profitable.
parts and that's why I also did nano-mersions base. Some points we is not only one reason that it's going down. There are many reasons some some people may shut down their businesses, they get a job and so on. Nano-mersions we think they could be profitable but...
In such a way that we have a PagBank account, they use their account, we can get the data, they have a CD, we can have the benefit of the fraud and so on. But if you had to subsidize POS, the level that they have today in subsidies.
the exchange rate between realizing dollars or one it doesn't make sense for us to invest in an unamersion with this risk of mortality and churn and so on that I mentioned because There's no payback, but we can't work with these non-immersions in peg bank. We are happy to work with them And to some point we keep working with them to sell device and so on, but we are not subsidizing the same levels that we had in the past
in the past, we are investing in this department in the company, but definitely microeconomic scenario doesn't help. We see even the banks that have a lot of experience doing this type of credit in Brazil, one is struggling when have difficulties with NPLs and so on. So definitely is not the time to go to the unscrupulous products. And by the way, we have a lot of demand for secure products, so that's why we are growing.
5% in terms of credit for photo every quarter. The JNSecure product used to be 35 now is 40, so we have demand for secure products. So there is no reason for us to vote for a secure that is point. If we will be able to do that or if you do that in Q2, we've got to wait a little bit. But at this point,
The best info that we have is that we don't have plans to go to one secured product in short term. So what can you help with the provisions and so on? Yeah, in terms of provisions on the internet, we included a lot of the level of provisions in Q1, Q2, Q3. Now in Q4, we could reduce the level of provisions because...
the level that we have is enough to support the losses that we are expecting for the next 12 months. During the year, we also worked to adjust all the credit models that we had. We adjusted the structure and also the processes. On top of that, we have two other effects that to create a good expectation for those in 2023 that is improved in the IFRS 9 provisional model that we improved this.
and create some comfort to us that we also have this right level for provisions for the future. And also the secure product that now we are originating requests less provisions for the future. So we have a good expectation for Fag Bank in 2023.
Perfect. Thank you so much.
Our next question comes from Tito LaBarda, Good Massac.
All right, good evening. Thank you for the call and taking my questions. A couple questions also. First, you know, good job on expenses. It's just, is there room to improve further? You know, particularly like the admin expenses, selling expenses that were down in the quarter. Is there room to cut a bit more? And, you know, with that in any way, in fact, the growth outlook.
going forward. And then my second question, just a little follow up, I guess, on the take rate. I know you said David was higher and somewhat lower growth on Pag Bank from the secured credit. But the big decline compared to the RQ, as the mix perhaps maybe normalizes than you get more credit.
Can that take great, get back to where you were last level. Do you see any other pressure on the take rate just to think about how that can evolve from here? Thank you. I will start with the take rate and then we can go back to the expenses. Thank you for the higher participation to me.
As we said, the fact that we are shifting our credit portfolio from unsecured to secured, we are kind of postponing the revenues because the duration before for unsecured products was around one year, 12 months. Now we have something that is unsecured three times.
longer than that. So that's why we are postponing the revenues and that's the impact that you have in pack bank in terms of revenues. Looking for 2023, we are not decreasing prices in long tail. We had same prices in SMBs, it's an ongoing process, some clients will increase prices, some clients will decrease prices, some clients will negotiate. So but overall, we've seen stable and that created this point.
We are not feeling pressure to decrease the rate at all, but what we have here is the changing the mix. More SMBs work with us, more volumes come from SMBs. So if you look at the weighted net-equated, it could go down, not because we are decreasing prices, but because SMBs are gaining share within our TPPV. And as you mentioned before, we are not feeling pressure to decrease the rate at all.
It's good news because SMBs have more volumes than long-tail. So overall it should make sense in absolute terms. It should be better for us. In terms of our packs, what I can say is we are expecting expenses growth lower than revenue growth for 2023. And based on the layoffs that we applied in the beginning of January , marketing optimization and also leverage from the infrastructure that we developed in 2020, 2021, 2022.
and also leverage coming from hubs with more revenue, more volumes with the same structure built until 2021. Okay, that's very helpful. Thank you. Thank you, Chitun.
Our next question comes from Shariq Sumar Evercore. Please, you may proceed. Hello. Can you hear me? Yes, you can hear me. Yes, great.
So my question is on the market share dynamics. I see that you haven't provided updated stats for how much was it in this quarter. So any color would be great on that. And secondly, how has the competitive dynamics evolved over the past year, and where does Paxagoro maintain the edge?
And secondly, my second question is on PIX. Nice to see the market share gains, but are there any further investments that you need to make on the sales front or on the technology front? So if you can provide some color on that that would be great as well. Hi Sherik. When you asked about market share, I assume you were talking about the TPV market share in the aquarium. That's right, yeah. Okay, thank you. When you look at an yearly basis, when you compare 2022 with 2021, we gain a hundred...
quarter of a quarter we are losing this small percentage of share. Market share is a consequence of what we're doing but it's not our main target. We could increase our market share if we wanted to buy decreasing prices and so on but we want to have a
healthy levels of margins and work with clients that see developer position that they have, in such a way that they have good levels of stability and reaching these record levels of net income that you're showing Q4. If you look at the market overall, we also see some moving parts here that the players who benefit from
in Q4 were those from BigBank, two of them from BigBanks, they are in comments. And as far as we know, they got some advantage. Some tailwind related to big chain hotels, airlines, and these type of merchants that have lower or no exposure. So in the segments that we work, we are happy with the share that we have. We are working with these clients, increasing QPP promotion, increasing our net income.
So we'll keep working with the clients and the way that we think is better for the company. Market share is a consequence of what we're doing but it's not our main target at this point. So that's the main idea of market share. And related to peaks, we don't need to do additional investments to increase our peak share as we saw in the presentation with 9.8% of the peak transactions in the country. This is very important for us because people...
Use Faggy Bank as primary account people leave the money here people leave the money account balance which help us to With those costs of funding so But going back to our question straight to the point. There's no additional investments in technology to be made in order to To increase our peaks share in the country Thank you so much. That's helpful. Thank you
Our next question comes from James Friedman, Susquehanna. Good results here. I was wondering if you could share at least some high-level thoughts on the margins.
Is there any reason that the company structurally can't return to the teens, margins you enjoyed when rates...
Say, any reason that the company structurally can't return to the team's margins you enjoyed when rates were more favorable?
So James, it's definitely we had this, we had actually this had wind related to interest rate in the country in 2022.
Although we were able to offset that by repricing our base so that's deep.
the main feature we had this headwind and we repriced our base in such a way that it could have set
feature. We had this headwind and we repriced our base in such a way that it could offset this inclusion financial expenses.
Interest rate is important for us, it's an important driver for profitability because of course the effects of cost or cost of funding. So if this rate goes down from 13.75% per year to what level below that.
would take advantage. So how big is going to be the advantage? How big is going to be our benefit? It's hard to say to you at this point. But definitely, if Interstate goes down, we should have better margins. And remember here that, as you mentioned before,
SMBs are gaining share in RTPV in acquiring. They have more volumes than compared to long tail, but they have lower take rate.
It makes sense in absolute terms to keep working with this client and we will keep investing on that We launched the payroll platform and so on But if you look at the percentage of the revenues, it's a kind of the the headwind
And just to finish here, we margin this is not something that we are looking for as a main priority because we know that we are increasing our SMBs mix and also we are the most profitable company in our industry. So if you compare us...
on a basis that you divide that income by a TPPV. You see that we are three to five times more larger than our competitors. So we have the highest profitability of the industry. We are growing, we are having records of profitability as you could see in the presentation, the record in Q4, the record of the year, 29% higher than what it had in 2021 on a gap basis.
So we are happy with the profitability that you have at this point because we are balancing our growth with profitability. So we're going back to our question. If Interstate goes down, it should be a tailwind for us. How big is going to be the tailwind? It's hard to say.
And my follow-up, I think Alex shared some commentary about the investment in the hubs....
And I know that it disclosed the hubs as a percent of the volume or revenue. How, where are we in the hubs investment journey? Is it now closer to the middle or the beginning or the end? James, let's say that we are more closer to the end because we...
We invest in some hubs and we are the hubs that we might open.
in 2023 is going to be more related to small places or places, specific places that we see that we need to have an additional hub, but we will not grow massively our hubs the way that we grew in 2021 and 2022. So we are more...
working to increase productivity for our Hubs sales people You try to to get more clients in the hubs of course, but we are not planning to Grow massively the number of hubs the same movement that we had in 2021 and the part of 2022 James this is Eric
There is no silver bullet. I think the superior value proposition that we have is based on sales channels, logistics, body bank fully integrated to the payment service. So Hub is just a sales channel that we are still exploring and increasing productivity. But at this time, I think most of the investments in Hubs.
Thank you both. Thank you. Our next question comes from Alex McGrath, key bank. Hey guys, thanks for taking my question. Can you provide just a bit more context on the upsell and cross sell opportunity with an merchant base that you've been speaking around just kind of describe more or less what that looks like and
If there's any way to quantify the opportunity there at WHL, then I have one follow up as well. Hi, Alex. We have, I would say, very decent penetration levels in our immersion space when you think about bag of bank. But you know there are some clients that are not using us as a primary bank at this point.
So half of them are using as a primary bank and half is not using So that's why we keep investing in the pack bank Features the example that we gave about payable platform and so on we launched debit cars a few quarters of what we are still working on to For plans to use more and more so I don't have it to quantify to you how big is this?
is opportunity but let's say you that the merchants base we have a very very huge opportunity ahead of us because we we see that they the users as the the acquiring they might use some features in our bag bank but we are not the primary bank yet once you become the primary bank you have many many tailwinds like account balance and take advantage of the float and so on so I don't have here a number to give to you
But the idea is to increase the penetration of peg bank and the usage of peg bank in some clients that some of them we don't have the features yet, some of them we need to make them to use, some of them need to convince them to switch from their banks to us.
So when you have seven million clients in that part, you can imagine that you have everything. Some of the clients, they use the feature the way the data allows some of them. They don't even be notation. So I mean, a lot of work, but it's great that you have this huge base, seven million clients.
to explore as we invest more and more in PAG Bank would be, I would say we are going to have more value to offer to these clients. Okay, that's helpful. And then my second question was just kind of around PAG Bank customer ad expectations. I know you're not guiding, but just very...
substantial that adds in 22 as we look at some of the charts and the slide deck here. I guess just any sort of thought so to how AgBank that adds could look in 2023 just given a really noticeable uptick in 2022. Okay Alex, so it's kind of related with the previous question. So we close it to 2022 with 28 million clients, 16 million of the 16 million of the slides active clients.
And 60% of those are pure consumers. So in less than four years, we are the second largest bank, digital banking Brazil. And it's kind of natural, then we have this level of clients or the level of business, the growth might slow down a little bit. But we expect to keep growing net-add spec bank in 2023. So we will keep growing.
Probably not in the same levels that they had in 2022, but we'll keep growing the number of clients into in in bag of bank But the most important thing is just related to your previous question which is to penetrate more and more bag of bank and making more revenues per client that from the clients that they have today and from the clients that are using us Maybe as a past true and we need to convince them to use us more and more so that's the very big idea. So the generates won't be as big as was in 2022 but we also
update on where you stand on charging for pics. It looks on the website as if you're now offering free pics on quite a few of your offers. And then secondly, and update.
price
For long tail is 1.89% So with 10 beeps
lower than the debit that we offer for long tail. This kind of transaction could happen online or it could happen in one of our devices that we just generate the QR code in the POS and the consumer can pay with their mobile phones.
To be honest, debate is very small, so it is growing, but it is a very small participation in the mix of the transactions in TPP.
Regarding to peaks and debit we know that peaks is similar to a debit card transaction because it goes straight to your balance.
We don't see that cannibalizing the clients that you have. Maybe it's cannibalizing part of the debit carton's actions.
But in Q4 for instance, we didn't see this kind of movement because debit cards were actually increasing in our base. So people keep using debit cards, the usage is easy, it saves, people know how to use it, they know if they have a problem, they have chargebacks and so on.
we don't see that as a big transformational movement, although people are using PIX to replace wire transfers, replace cash, and replace bank slips, Bolletos in e-commerce. Those are the main features that people are using for PIX. It's also important to say that PIX is a big transformational movement.
as you show in the presentation, PICS was very important headwind for cashing in Pagabank. So we also take a tailwind in Pagabank. As you could see the cashing through PICS in Pagabank was massive and grew like from 50 billion, I-59 billion, I-2021 to close to 150 billion, 150 billion in 2022.
Let's go over all the features about the peaks. Our next question comes from Jeff Candlewell, Wells Fargo. Hey, thanks very much. Appreciate it. I wanted to ask you if you could give us some high level thoughts on revenue. We could see your revenue.
and income of about 4 billion over the past couple quarters. 2Q was about 3.9. And so I was curious if you could sort of walk us through…
whether 4 billion can grow. Clearly, there's a lot of moving parts to your model right now. So we're trying to think through active users on the Pog Bank side, active merchants on the Pugs are growing side, and take great and so forth. So it was hoping you might be able to give us a little bit of a...
Of course we had this small decreasing pegbank revenues because of the...
duration of the credit products that I mentioned before. So we had this 10 million REIs lower into four versus Q3. In overall, PegBank, we had a decrease about 50 million REIs in acquiring in PegSiguro, mainly because of the
increase the participation of debit and shorter duration for credit card with this time. So those are the made drivers so that's why we're kind of flat quarter to quarter. In 2023 as we expect the volumes to grow, revenues should grow as well and this component should be
Fugged bank would expect to grow because credit will keep growing the secure products.
And in privacy growth, we should expect, we should not expect a great to grow up because the participation of SMBs in the mix will kind of pressure this net-grade to go down. But overall, revenues should grow. Talking about Q1 usually in Q1 TPS.
As we're going to have an increase in volumes, even with the higher participation of SMBs in the mix, we should see increase in the total revenues of the company for the 2023.
Thanks very much for all that, Connor. Much appreciated. And if I could ask a quick follow-up, similar thinking on the expense lines, what was interesting this quarter was the revenue came in and we noticed that the selling line and the admin expense line were a little better versus our model.
And so I'm curious if there's a read-through there for 2023 in the context of your prior statements where 10% net income margin seems to be the gaining factor. So I was hoping to get either clarification or any additional comment about how you guys
chargebacks and provisions for credit losses as we reduce it 30% in comparison to Q3 so we see a great result on this line.
Going forward, we also expect a good performance in this ceiling expenses line. So you can check on page 19 in the earnings release, this reconciliation of ceiling expenses. So we are expecting for the future a good performance in this line because we are working hard to reduce the chargebacks in the issue.
in the acquiring and also the credit losses because of the volume and the level of secured products that we have in our credit operation. Okay, great. Thanks very much. Congrats again.
also the credit losses because of the volume and the level of secured products that we have in our credit operation. Okay, great. Thanks very much. Congrats again. Okay, thank you.
Thank you. The Q&A session is now concluded. I pass the floor over to Mr. Dutra for his closing statements. Hi everyone. Thank you very much for the participation. Thank you for the questions, for investing the time to talk to us.
if you have any problems with connections and so on, we are going to.
We have to issue to that and evaluate what you should do to get a better connection for next call. Thank you very much. Back bank conference call is now concluded. Have a nice evening. Thank you. Thank you.