Q3 2025 PagSeguro Digital Ltd Earnings Call

November 12, 2025

Roger: Good evening. My name is Roger. I'll be your conference operator today. Welcome to PagSeguro Digital's Q3 2025 Earnings Call. The slide presentation for today's webcast is available on PagSeguro Digital's investor relations website at investors.pagbank.com. Please refer to the forward-looking statements and reconciliation disclosure in this presentation and in the company's earnings release appendix. All participants will be in listen-only mode. To ask a live question after the presentation, please use the Raise Hand button to join the queue. Once you're announced, a request to activate your microphone will appear on your screen. Please ask all your questions at once. Today's conference is being recorded and will be available at the company's IR website after the event is concluded. I'll turn the call over to Gustavo Sechin, IR Director. Please go ahead, sir.

Speaker #5: Ojir, and I'll be your confidence operator today. Welcome to PagSeguro Digital's earnings call for the third quarter of 2025. Please like the presentation for today's webcast is available on pagsegurodigital's investor relations website at investors.pagbank.com.

Speaker #5: Please refer to the forward-looking statements and reconciliation disclosure in this presentation and in the company's earnings release appendix. All participants will be enlisted in only mode.

Speaker #5: To ask a live question after the presentation, please use the raise hand button to join the queue. Once you're announced, a request to activate your microphone will appear on your screen.

Speaker #5: Please ask all your questions at once. Today's conference is being recorded and will be available at the company's IR website after the event is concluded.

Speaker #5: Now, I'll turn the call over to Gustavo Sequin, IR Director. Please go ahead,

Speaker #6: Hello, everyone, and welcome sir. to the PagBank earnings conference call for the third quarter 2025. I am Gustavo Sequin, PagBank's investor relations director. Thank you for taking the time to join us today.

Gustavo Sechin: Hello, everyone, welcome to the PagBank Earnings Conference Call for Q3 2025. I am Gustavo Sechin, PagBank's Investor Relations Director. Thank you for taking the time to join us today. Tonight, I am joined by Ricardo Dutra, our Principal Executive Officer, Alexandre Magnani, our CEO, Carlos Mauad, our COO, and Artur Schunck, our CFO. We will begin by sharing the highlights for the quarter, followed by our live Q&A session. Now, I would like to turn it over to Dutra. Please, Dutra.

Speaker #6: Tonight, I am joined by Ricardo Dutra, our principal executive officer, Alexandre Miami, our CEO, Carlos Mawad, our COO, and Arthur Chung, our CFO. We will begin by sharing the highlights for the quarter followed by our live Q&A session.

Speaker #6: Now, I would like to turn it over to Dutra. Please, Dutra.

Speaker #7: Hello, everyone. And thank you for joining our third quarter 2025 earnings call. I will begin with slide four, which summarizes our key operations and financial highlights.

Ricardo Dutra: Hello, everyone, thank you for joining our Q3 2025 earnings call. I will begin with slide 4, which summarizes our key operational and financial highlights. This quarter, we continued to execute our strategy with discipline, navigating a more challenging macroeconomic environment while maintaining our focus on long-term value creation. We end the quarter with 33.7 million clients, growing 1.6 million clients year-over-year. In Q3 2025, we continue to demonstrate resilience and protect profitability, navigating a challenging macroeconomic environment while facing tougher year-over-year comparisons from Q3 2024. On our acquiring business, total payment volume remained stable sequentially and reached BRL 130 billion. This performance reflects our ability to sustain momentum even amid broader market pressures.

Speaker #7: This quarter, we continue to execute our strategy with discipline, navigating a more challenging macroeconomic environment while maintaining our focus on long-term value quarter with creation.

Speaker #7: 33.7 million clients, The end of the growing 1.6 million clients year over year. In Q3 25, we continue to demonstrate resilience and protect profitability, navigating a challenging macroeconomic environment while facing tougher year-over-year comparisons from Q3 2024.

Speaker #7: On our acquiring business, total payment volume remained stable sequentially and reached 130 billion reais. This performance reflects our ability to sustain momentum even amid broader market pressures.

Speaker #7: Our credit portfolio and funding base continue to expand at a double-digit pace compared to the same period last year, with NPLs that are half of the industry.

Ricardo Dutra: Our credit portfolio and funding base continued to expand at a double-digit pace compared to the same period last year with NPLs that are half of the industry. During the quarter, we once more accelerated our unsecured lending portfolio with a particular focus on working capital loans. Meanwhile, we advanced our funding efficiency initiatives, further reducing deposits APY. These efforts reinforce the strength of our ecosystem and our commitment to democratize access to financial services in a responsible and sustainable way. Moving on to financial highlights. Our total net revenue, excluding interchange and card scheme fees, increased 14% year-over-year, reaching BRL 3.4 billion. Our non-GAAP net income was BRL 571 million, flat year-over-year, while diluted EPS on a GAAP basis reached BRL 1.88, 14% higher year-over-year, supported by consistent cost discipline and capital efficiency.

Speaker #7: During the quarter, we once more accelerated our unsecured lending ing portfolio, with a particular focus on working capital loans. Meanwhile, we advanced our funding efficiency initiatives, further reducing deposits APY.

Speaker #7: These efforts reinforce the strength of our ecosystem and our commitment to democratize access to financial services in a responsible and sustainable way. Moving on to financial highlights, our total net revenue, excluding interchange and card-skimming fees, increased 14% year over year, reaching 3.4 billion reais.

Speaker #7: Our non-gap net income was 571 million reais, flat year over year, while diluted EPS on a gap basis reached 1.88 reais, 14% higher year over year, supported by consistent cost discipline and capital efficiency.

Speaker #7: On capital efficiency, we have returned 2 billion to shareholders through dividends and share repurchases. We repurchased 3.3 million shares year to date, and distributed more than 600 million reais in dividends following our May 2025 announcement, reinforcing our balanced approach to capital allocation.

Ricardo Dutra: On capital efficiency, we have returned BRL 2 billion to shareholders through dividends and share repurchases. We repurchased 3.3 million shares year-to-date and distributed more than BRL 600 million in dividends following our May 2025 announcement, reinforcing our balanced approach to capital allocation. In conclusion, our performance this quarter reflects the strength, profitability, and resilience of our business model. We have delivered positive earnings every single quarter since IPO, a track record we are committed to uphold through disciplined execution, operational efficiency, and a clear strategy focus. Moving on to slide 5. Despite a more cautious economic backdrop, our track record continues to reflect the resilience and consistency of our business model and generate long-term value. Once again, we showcase the evolution of our GAAP diluted EPS since going public in 2018.

Speaker #7: In conclusion, our performance this quarter reflects the strength, profitability, and resilience of our business model. We have delivered positive earnings every single quarter since IPO, a track record we are committed to uphold through disciplined execution operational efficiency and a clear strategy focus.

Speaker #7: five, despite a more cautious economic Moving on to slide backdrop, our track record continues to reflect the resilience and consistency of our business model in generating long-term value.

Speaker #7: Once again, we showcase the evolution of our gap diluted EPS since going public in 2018. Over the past years, EPS has grown approximately 2.3 times translating into a compound annual growth rate of 15%, even in a scenario where we navigate global disruptions and ongoing macroeconomic volatility.

Ricardo Dutra: Over the past years, EPS has grown approximately 2.3 times, translating into a compound annual growth rate of 15%, even in a scenario where we navigate global disruptions and ongoing macroeconomic volatility. Throughout this journey, we have reached key strategic milestones that expanded our addressable market and reinforced profitability. These efforts have laid a solid foundation for sustained EPS growth, driven by operational leverage and disciplined execution. Our performance reflects a clear focus on building strong earnings visibility with a high share of recurring revenues, which enhance predictability and supports long-term value creation. It also stems from a thoughtful capital allocation strategy, balanced share repurchase, and dividend distributions with a total yield of approximately 15.5%. Combined with our robust capital position, we remain well-equipped to pursue value-accretive opportunities with flexibility and confidence.

Speaker #7: Throughout this journey, we milestones that expanded our addressable market and reinforced have reached key strategic profitability. These efforts have laid a solid foundation for sustained EPS growth, driven by operational leverage and disciplined execution.

Speaker #7: Our performance reflects a clear focus on building strong earnings visibility with a high share of recurring revenues, which enhances predictability and supports long-term value creation.

Speaker #7: strategy balancing share repurchase and dividend distributions, with a total yield of It approximately 15.5%. Combined with our robust capital position, we remain well-equipped to pursue value-accretive opportunities with flexibility and confidence.

Speaker #7: As we move to slide seven, we highlight how our long-term way we build and evolve the vision continues to shape the company. Our fully integrated ecosystem, which integrates payments and banking, creates orthosynergies that allow each side of the business to leverage the other.

Ricardo Dutra: As we move to slide seven, we highlight how our long-term vision continues to shape the way we build and evolve the company. Our fully integrated ecosystem, which integrates payments and banking, creates powerful synergies that allow each side of the business to leverage the other. By delivering a diverse and complementary range of products, we have deepened client engagement, enhancing monetization, and expanded our share of wallet. This approach position us not just as a service provider, but also as the primary financial partner for our clients, supporting their needs across every stage of their journey. Moving to the next slide. As we have emphasized in the recent quarters, there is still meaningful room to grow across our platform.

Speaker #7: By delivering a diverse and complementary range of products, we have deepened client engagement, enhanced monetization, and expanded our share of wallet. This approach positions us not just as a service provider, but also as the primary financial partner for our clients, supporting their needs across every stage of their journey.

Speaker #7: Moving to the next slide, as we have emphasized in the recent quarters, there is still meaningful room to grow across our platform. In several areas of our banking business, our market share remains below 1%, which reinforces our conviction that we are only scratching the surface of what we are capable of building.

Ricardo Dutra: In several areas of our banking business, our market share remains below 1%, which reinforces our conviction that we are only scratching the surface of what we are capable of building. As we continue to scale our banking operations, we are opening new paths for growth, whether to deeper cross-sell, a stronger and more efficient deposit base, or a broader and more diversified credit portfolio, all handled with discipline. With that, I'll hand it over to Alex, who will walk through the operational highlights for the quarter. Thank you.

Speaker #7: As we continue to scale our banking operations, we are opening new paths for growth, whether to deeper cross-sell, a stronger and more efficient deposit base, or a broader and more diversified credit portfolio, all handled with discipline.

Speaker #7: With that, I'll hand it over to Alex, who will walk through the operational highlights for the quarter. Thank you.

Speaker #2: Thank you, Ricardo. Hello, everyone. In this section, we walk through the performance of our business units for the third quarter of 2025. On slide 10, we highlight the continued evolution of our client base in 3Q25.

Alexandre Magnani: Thank you, Ricardo. Hello, everyone. In this section, we walk through the performance of our business units for Q3 2025. On slide 10, we highlight the continued evolution of our client base in Q3 2025. We ended the quarter with 33.7 million clients, adding 1.6 million over the past 12 months. Our active client base reached 17.8 million, supported by a 2% year-over-year increase in banking-only clients. On slide 11, we showcase the evolution of our cash-in, which continues to be one of the most meaningful indicators of transactionality on our platform. In Q3 2025, cash-in totaled BRL 95 billion, representing 14% increase compared to the same period last year. On a per-client basis, the figure advanced to BRL 5.5 thousand, making a 12% annual increase.

Speaker #2: We ended the quarter with 33.7 million clients adding 1.6 million over the past 12 months. Our active client base reached 17.8 million, supported by a 2% year-over-year increase in banking-only clients.

Speaker #2: On slide 11, we showcase the evolution of our cashing, which continues to be one of the most meaningful indicators of transactionality on our platform.

Speaker #2: In the third quarter of 2025, cashing totalled 95 billion reais, representing 14% increase compared to the same period last year. On a per-client basis, the figure advanced to 5.5 thousand reais, making a 12% annual increase.

Speaker #2: These results reflect the strength of our ecosystem and the growing intensity of client engagement across surveys. In addition, we are eyewitnessing broader uptake of due payments, fixed transactions, investment, and insurance solutions, signaling stronger relationships and monetization, as customers increasingly entrust with us a wider share of their financial needs.

Alexandre Magnani: These results reflect the strength of our ecosystem and the growing intensity of client engagement across our base. In addition, we are eyewitnessing broader uptake of bill payments, Pix transactions, investment, and insurance solutions, signaling stronger relationships and monetization as customers increasingly entrust with us a wider share of their financial needs. On slide 12, we present the continuous strength of our deposit base, coupled with meaningful progress in reducing our funding cost. During the quarter, total deposits increased to BRL 39.4 billion, representing an increase of 15% year-over-year. This expansion is particularly significant given our strategy to lower funding costs. This quarter, we have reached a 6th quarter of consecutive reduction of our cost of funding as a percentage of the CDI, demonstrating our ability to attract and retain client deposits while simultaneously enhancing the efficiency and resiliency of our liability structure.

Speaker #2: On slide 12, we present the continued strength over deposit base, coupled with meaningful progress in reducing our funding cost. During the quarter, total deposits increased to 39.4 billion reais, representing an increase of 15% year-over-year.

Speaker #2: These expansions are particularly significant given our strategy to lower funding costs. This quarter, we have reached a sixth quarter of consecutive reduction of our cost of funding as a percentage of the CDI, demonstrating our ability to attract and retain client deposits while simultaneously enhancing the efficiency and resiliency of our liability structure.

Speaker #2: One we include other funding sources: total funded reached 43.7 billion reais in the quarter, an increase of 14% year-over-year. This performance underscores not only the growth in deposits but also our ongoing commitment to diversifying the funding mix supporting a more balanced and resilient capital structure.

Alexandre Magnani: When we include other funding source, total funding reached BRL 43.7 billion in the quarter, an increase of 14% year-over-year. This performance underscores not only the growth in deposits, but also our ongoing commitment to diversifying the funding mix, supporting a more balanced and resilient capital structure. It's also important to emphasize that deposits remain a cornerstone of our funding strategy, primarily allocated to finance merchant prepayment and our loan portfolio. As of September, our loan-to-funding ratio, which compares our expanded portfolio to total funding, stood at 113%, reflecting prudent balance sheet management and disciplined capital allocation. On slide 13, let me turn to our credit performance. We see credit as a strategic lever to drive our greater transaction activity across both our banking and payment segments. In doing so, we unlock cross-sell opportunities and capture the full potential of our ecosystem.

Speaker #2: It's also important to emphasize that deposits remain a cornerstone of our funding strategy, primarily allocated to finance merchant prepayments and our loan portfolio. As of September, our loan-to-funding ratio which compares our expanded portfolio to total funding is stood at 113%, reflecting prudent balance sheet management and disciplined capital allocation.

Speaker #2: On slide 13, let me turn to our credit performance. We see credit as a strategic lever to drive our greater transaction activity across both our banking and payment segments.

Speaker #2: In doing so, we unlock cross-sell opportunities and capture the full potential of our ecosystem. In the third quarter, our total credit portfolio reached 4.2 billion reais, a 30% year-over-year increase.

Alexandre Magnani: In Q3, our total credit portfolio reached BRL 4.2 billion, a 30% year-over-year increase. Since the second half of 2024, we have been gradually accelerating credit underwriting for unsecured products, particularly focused on working capital loans. This has been supported by continuous enhancement in our risk assessment and collection processes leveraged by artificial intelligence. This quarter, we originated more than 2.5 times the volume of working capital loans compared to Q2 2025. If we include financial operations linked to merchant prepayments facilitated by our instant settlement feature on the acquiring side, our expanded credit portfolio now exceeds BRL 49 billion, up 12% in the last 12 months. Now turning to asset quality, as shown at the bottom right of the slide, our NPL 90 ratio remains below the market average, underscoring the strength of our risk management practice.

Speaker #2: Since the second half of 2024, we have been gradually accelerating credit underwriting for unsecured products, particularly focused on working capital loans. This has been supported by continuous enhancement in our risk assessment and collection processes, leveraged by artificial intelligence.

Speaker #2: This quarter, we originated more than 2.5 times the volume of working capital loans compared to the second quarter of 2025. If we include financial operations linked to merchant prepayments, facilitated by our extensive settlement feature, on the upcoming side, our expanded credit portfolio now exceeds 49 billion reais, up 12% in the last 12 months.

Speaker #2: Now, turning to asset quality, as shown at the bottom right of the slide, our NPL 90 ratio remains below the market average, underscoring the strength of our risk management practice.

Speaker #2: With that, I will now hand it over to Arthur, who will walk through the financial highlights of the third quarter of

Alexandre Magnani: With that, I will now hand it over to Arthur, who will walk through the financial highlights of Q3 2025.

Speaker #3: Thanks, Alexandre.

Artur Schunck: Thanks, Alexandre. Hello, everyone, thank you for joining us today. I'm following the presentation with our consolidated financial results for Q3 2025. Turning to slide 15, total revenue and income, net of interchange and card scheme fees totaled BRL 3.4 billion in Q3 2025, a 14% increase year-over-year. This performance reflects the repricing strategy we began rolling out for acquiring products in Q4 2024. These initiatives have been crucial to offsetting higher financial costs and to securing a more sustainable revenue base in a more challenging growth environment. Our revenue growth once again outpaced TPV, showing that our repricing strategy is working to boost profitability. As we wrap up the year, we are staying alert to economic conditions that could bring challenges.

Speaker #3: Hello, everyone, and thank you for 2025. joining us today. I'm following the presentation with our consolidated financial results for the third quarter of 2025.

Speaker #3: Turning to slide 15, total revenue and income net of interchange and card scheme fees totaled 3.4 billion reais in Q325. A 14% increase year over year.

Speaker #3: This performance reflects the pricing strategy we began rolling out for acquiring products in the fourth quarter of 2024. This initiative has been crucial to offsetting higher financial costs and to securing a more sustainable revenue base in a more challenging growth environment.

Speaker #3: Our revenue growth, once again, outpaced TPV, showing that our pricing strategy is working to boost profitability. As we wrap up the year, we are staying alert to economic conditions that could bring challenges.

Artur Schunck: Still the progress we have made puts us in a strong position to maintain solid growth and profits into 2026 as we stay focused on executing our disciplined strategy. Looking at the charts on the right side, payments revenue net of interchange fees totaled BRL 2.7 billion, supported by the successful execution of our repricing strategy. Banking revenue reached BRL 744 million in the quarter, a strong growth of 50% year-over-year. This performance was driven by the expansion of our credit portfolio, stronger engagement, and higher monetization. It was also benefited by the growth in deposit volumes and increases in fee generation, particularly from card usage and account-related services. Moving on to the next slide. Here we present a comparison of our gross profit over the last 12 months.

Speaker #3: Still, the progress we have made puts us in a strong position to maintain solid growth and profits into 2026, as we stay focused on executing our disciplined strategy.

Speaker #3: Looking at the charts on the right side, payments revenue net of interchange fees totaled 2.7 billion reais, supported by the successful execution of our pricing strategy.

Speaker #3: Banking revenue reached 744 million reais in the quarter, a strong growth of 50% year over year. This performance was driven by the expansion of our credit portfolio and stronger engagement and higher monetization.

Speaker #3: It was also benefited by the growth in deposit volumes, an increase in fee generation, particularly from card usage and account-related services. Moving on to the next slide, here we present a comparison of our gross profit over the last 12 months.

Speaker #3: Our strong banking performance combined with the pricing strategy we implemented helped partially offset the negative impact of higher interest rates, which arose by more than 400 basis points during the period.

Artur Schunck: Our strong banking performance, combined with the repricing strategy we implemented, helped partially offset the negative impact of higher interest rates, which rose by more than 400 basis points during the period. Gross profit totaled BRL 1.9 billion and increased 2% year-over-year. Buyback and dividend distribution negatively impacted by BRL 64 million. Excluding this effect, gross profit would have increased 5% year-over-year. On the right side of this slide, I'd like to highlight the robust performance of our banking business, which has become an increasingly important pillar of our overall results. Banking gross profit grew 59% year-over-year and now represents more than 28% of our total gross profit. In addition, our banking gross profit margin reached 72% in the quarter, up from 68% in the same period last year.

Speaker #3: Gross profit totaled 1.9 billion reais and increased 2% year over year, buyback and dividend distribution negatively impacted by 64 million reais. Excluding this effect, gross profit would have increased 5% year over year.

Speaker #3: On the right side of the slide, I'd like to highlight the robust performance of our banking business, which has become an increasingly important pillar of our overall results.

Speaker #3: Banking gross profit grew 59% year over year, and now represents more than 28% of our total gross profit. In addition, our banking gross profit margin reached 72% in the quarter.

Speaker #3: Up from 68% in the same period last year. These results highlight the strength of our platform. The diversification of our revenue streams and our ability to efficiently scale complementary products and services.

Artur Schunck: These results highlight the strength of our platform, the diversification of our revenue streams, and our ability to efficiently scale complementary products and services. On slide 17, we dive into our cost and expense structure this quarter. Our disciplined approach to managing expenses continues to be a cornerstone of our strategy. It played an important role in helping us navigate the pressures of rising financial costs, allowing us to balance sustainable growth and profitability. On the cost side, financial costs increased 45%, primarily due to higher interest rates and the impact of recent capital structure adjustments. As noted earlier, these effects were partially offset by our funding strategy, which focused on diversifying sources and reducing interest expenses. Concurrently, total losses fell 26%, reflecting improvements in our QIC and onboarding processes, resulting in fewer chargebacks, partially mitigated by the natural increase of ECLs, given the acceleration of our credit operation.

Speaker #3: On slide 17, we dive into our cost and expense structure this quarter. Our disciplined approach to managing expenses continues to be a cornerstone of our strategy.

Speaker #3: It played an important role in helping us navigate the pressures of rising financial costs. Allowing us to balance sustainable growth and profitability. On the cost side, financial costs increased 45%, primarily due to higher interest rates and the impact of recent capital structure adjustments.

Speaker #3: As noted earlier, these effects were partially offset by our funding strategy, which focused on diversifying sources and reducing interest expenses. Concurrently, total losses fell 26%, reflecting improvements in our QIC and onboarding processes.

Speaker #3: Resulting in fewer chargebacks, partially mitigated by the natural increase of ECLs given the acceleration of our credit operation. Operating expenses decreased 3% year over year, reflecting our continued focus on efficiency cost management.

Artur Schunck: Operating expenses decreased 3% year-over-year, reflecting our continued focus on efficiency cost management. This reduction was driven mainly by lower personal expenses along with more disciplined market investments. As a percentage of total revenue and income, we achieved 400 basis points of operating leverage compared to the same period of last year. Moving on to slide 18. We achieved a non-GAAP net income of BRL 571 million, reflecting a 1% sequential growth and stable year-over-year. Shareholder value creation, measured by diluted GAAP earnings per share, reached BRL 1.88 in the last quarter, reflecting an increase of 14% year-over-year. On the right side of this slide, I'm pleased to present the improvement of 30 basis points in our annual return on average equity, which increased to 15.1% from 14.8% as reported in Q3 2024.

Speaker #3: This reduction was driven mainly by lower personal expenses, along with more disciplined market investments. As a percentage of total revenue and income, we achieved 400 basis points of operating leverage, compared to the same period of last year.

Speaker #3: Moving on to slide 18, we achieved a no gap net income of 571 million reais, reflecting a 1% sequential growth and stable year over year.

Speaker #3: Shareholder value creation measured by diluted gap earnings per share reached 1 real and 88 cents in the last quarter. Reflecting an increase of 14% year over year.

Speaker #3: On the right side of the slide, I'm pleased to present the improvement of 30 basis points in our annual return on average equity. Which increased to 15.1% from 14.8% as reported in Q3 2024.

Speaker #3: Even with a conservative capital structure, we have consistently delivered solid returns to our shareholders. Now moving on to slide 19, let's turn to the initiatives we have been executing to drive shareholders' value and reinforce our capital structure.

Artur Schunck: Even with a conservative capital structure, we have consistently delivered solid returns to our shareholders. Moving on to Slide 19, let's turn to the initiatives we have been executing to drive shareholders value and reinforce our capital structure. Throughout 2025, we maintained consistent momentum in our buyback program, repurchasing over 18.5 million shares. In Q3, we advanced into our 3rd repurchase program, which authorizes the company to buy back up to an additional $200 million in outstanding shares, demonstrating our commitment to returning capital to shareholders and enhancing long-term value. In addition to the $670 million in cash dividends already paid in 2025, we announced in September our $1.4 billion dividend distribution for 2026 to be paid in 4 installments, further reinforcing our commitment to enhance shareholder value.

Speaker #3: Throughout 2025, we maintained consistent momentum in our buyback program, repurchasing over 18.5 million shares. In the third quarter, we advanced into our third repurchase program.

Speaker #3: Which authorizes the company to buy back up to an additional 200 million dollars in outstanding shares. Demonstrating our commitment to returning capital to shareholders and enhancing long-term value.

Speaker #3: In addition to the 670 million in cash dividends already paid in 2025, we announced in September a 1.4 billion dividend distribution for 2026. To be paid in four installments.

Speaker #3: Further reinforcing our commitment to enhance shareholder value. Our better index consistently declined from Q3 24 to Q3 25, reflecting an improvement of approximately 2 percentage points in capital allocation.

Artur Schunck: Our Basel index consistently declined from Q3 2024 to Q3 2025, reflecting an improvement of approximately two percentage points in capital allocation. Moving on to the next slide. While our performance has remained considerably throughout the year, we recognize that the outlook for the rest of 2025 is more challenging, driven by slowing economic activity and sustained high interest rates. We are revising our guidance to align with the current market conditions while staying focused on sustainable growth, capital efficiency, and long-term value creation. We are adjusting our gross profit growth guidance from a range of 7% to 11% to a revised range of 5% to 7%, reflecting the impact of elevated financial costs in a high interest rate environment. For reference, our gross profit for the first nine months of 2025 grew 6.2% year-over-year.

Speaker #3: Moving on to the next slide, while our performance has remained consistently throughout the year, we recognize that the outlook for the rest of 2025 is more challenging.

Speaker #3: Driven by slowing economy activity and sustained high interest rates. Accordingly, we are revising our guidance to align with the current market conditions. While staying focused on sustainable growth, capital efficiency, and long-term value creation.

Speaker #3: We are adjusting our gross profit growth guidance from a range of 7% to 11% to a revised range of 5% to 7%, reflecting the impact of elevated financial costs in a high interest rate environment.

Speaker #3: For reference, our gross profit for the first nine months of 2025 grew 6.3% year over year. Our nine months diluted EPS calculated using the same share count as of December 2024 and excluding the impact of share repurchases and long-term incentive plan grants in 2025 grew 15.7% year over year, reflecting the resilience of our business model.

Artur Schunck: Our nine-month diluted EPS, calculated using the same share count as of December 2024 and excluding the impact of share repurchases and long-term incentive plan grants in 2025, grew 15.7% year-over-year, reflecting the resilience of our business model and the disciplined execution of our strategy. For this metric, we are narrowing our full year guidance from 11% to 15% growth year-over-year to 13% to 15% growth year-over-year. Finally, CapEx levels remain aligned with expectations for this stage of the year. With that, I will invite Alexandre for the closing remarks.

Speaker #3: And the disciplined execution of our strategy. For this metric, we are narrowing our full year guidance from 11% to 15% growth year over year to 13 to 15% growth year over year.

Speaker #3: Finally, CAPEX levels remain aligned with expectations for this stage of the year. With that, I will invite Alexandre for the closing remarks.

Speaker #2: Thank you, Arthur. Before we conclude, let's move to the next slide for a few final thoughts. Throughout 2025, we continue to deliver consistent results, even as the macroeconomic environment remains one of the key challenges.

Alexandre Magnani: Thank you, Artur. Before we conclude, let's move to the next slide for a few final thoughts. Throughout 2025, we've continued to deliver consistent results, even as the macroeconomic environment remains one of the key challenges. In this context, our margin discipline and operating leverage have been critical in sustaining profitability and protecting returns. A key highlight this quarter was the expansion of our banking business, which now accounts for over 27% of total gross profit, growing 56% year-over-year. This performance was driven by consistent credit acceleration and strong client engagement, reinforcing the strategic relevance of this segment within our ecosystem. Looking ahead, our focus remains on mitigating financial cost pressures while preparing the company to capture growth opportunities in 2026 and beyond.

Speaker #2: In this context, our margin discipline and operating leverage have been critical in sustaining profitability and protecting returns. A key highlight this quarter was the expansion of our banking business, which now accounts for over 27% of total gross profit, growing 56% year over year.

Speaker #2: This performance was driven by consistent credit acceleration and strong plan engagement, reinforcing the strategic relevance of this segment within our ecosystem. Looking ahead, our focus remains on mitigating financial cost pressures while preparing the company to capture growth opportunities in 2026 and beyond.

Speaker #2: We remain committed to our long-term ambition to become the primary financial interface for individuals, macro, small, and medium-sized businesses, supported by strong growth potential and a proven track record of creating shareholder value.

Alexandre Magnani: We remain committed to our long-term ambition to become the primary financial interface for individuals, micro, small, and medium-sized businesses, supported by strong growth potential and a proven track record of creating shareholder value.

Speaker #2: To that end, as a reminder, our 2029 strategic targets include 25 billion reais in credit portfolio, supported by a balanced mix of secured and unsecured products, with an emphasis on working capital loans, and AI-powered solutions like private payroll and fixed finance.

Ricardo Dutra: To that end, as a reminder, our 2029 strategic targets include BRL 25 billion in credit portfolio, supported by a balanced mix of secured and unsecured products, with an emphasis on working capital loan and AI-powered solutions like private payroll and Pix financing. Above 10% gross profit CAGR, driven by stronger banking contribution, cross-sell opportunities, and efficiency gains, and above 16% EPS CAGR as we continue converting growth and operational improvements into consistent shareholder returns. These targets reflect our confidence in the scalability of the platform and the strength of our execution. Thank you once again for joining us today. I will now hand it over to Ricardo Dutra for a special announcement. Before I move to Q&A, I'd like to share some leadership updates.

Speaker #2: Above 10% gross profit CAGR, driven by stronger banking contribution, cross-sell opportunities, and efficient gains. And above 16% EPS CAGR, as we continue converting growth and operational improvements into consistent shareholder returns.

Speaker #2: These targets reflect our confidence in the scalability of a platform and the strength of our execution. Thank you once again for joining us today.

Speaker #2: I will now hand it over to Ricardo Dutra for a special announcement. Before I move to Q&A, I'd like to share some leadership updates.

Speaker #2: Effective January 1st, 2026, as part of our plan succession process, started last year, Carlos Mawad, our current Chief Operations Officer, will become our new Chief Executive Officer.

Ricardo Dutra: Effective 1 January 2026, as part of our planned succession process we started last year, Carlos Mauad, our current Chief Operating Officer, will become our new Chief Executive Officer. Gustavo Sechin, our Investor Relations Officer, will become our new Chief Financial Officer. Alexandre Magnani, our current CEO, and Artur Schunck, our current CFO, will keep supporting Carlos and Gustavo in their transition to the new roles. The company expresses gratitude to Alex and Arthur for their extraordinary contribution as executive officers. The company will send notice of a general meeting of shareholders in order to vote to approve the appointment of both Alex and Arthur to the company's board of directors. Looking ahead, I'm confident that Carlos, who joined PagBank one year ago, will build on this solid foundation and lead the company in this next chapter of growth.

Speaker #2: And Gustavo Sequin, our Investor Relations Officer, will become our new Chief Financial Officer. Alexandre Mayani, our current CEO, and Arthur Schunk, our current CFO, will keep supporting Carlos and Gustavo in their transition to the new roles.

Speaker #2: The company expresses gratitude to Alex and Arthur for their extraordinary contributions as executive officers. The company will send notice of a general meeting of shareholders in order to vote to approve the appointment of both Alex and Arthur to the company's board of directors.

Speaker #2: Looking ahead, I'm confident that Carlos will join PagBank one year ago to build on the solid foundation and lead the company into its next chapter of growth.

Speaker #2: He brings more than two decades of extensive experience in the banking sector and credit market in Brazil, which will be fundamental as we continue to expand our digital bank and financial ecosystem aligned with our long-term strategy.

Ricardo Dutra: He brings more than 2 decades of extensive experience in the banking sector and credit market in Brazil, which will be fundamental as we continue to expand our digital bank and financial ecosystem, align it with our long-term strategy. Gustavo, who also joined PagBank last year and has more than 25 years of experience in the financial sector, brings an extensive background to continue strengthening our financial organization and execution. Finally, I'd like to thank all our teams, the people who works hard every day to make PagBank what it is today. With a strong team, a culture of excellence, and a clear strategic vision, we are well-positioned to capture the opportunities ahead and achieve our full potential in the coming years.

Speaker #2: Gustavo, who also joined Pagbank last year and has more than 25 years of experience in the financial sector, brings an extensive background to continue strengthening our financial organization and execution.

Speaker #2: Finally, I'd like to thank all our teams, the people who work hard every day to make PagBank what it is today. With a strong team, a culture of excellence, and a clear strategic vision, we are well positioned to capture the opportunities ahead and achieve our full potential in the coming quarters.

Speaker #2: years. Thank you for the

Roger: Thank you for the presentation. We will now begin the Q&A session for investors and analysts. If you wish to ask a question, please press the raise hand button. If your question has already been answered, you can leave the queue by clicking on the same button. There is also the possibility to ask questions throughout the Q&A icon at the bottom of your screen. You may select the icon and type your questions with your name and company. Written questions that are not addressed during the earnings call will be returned by the investor relations team. Wait while we pull for questions. Our first question comes from Daniel Vaz from Safra. Please, Mr. Vaz, your microphone is open.

Speaker #1: presentation. We will now begin the Q&A session for investors and analysts. If you wish ish to ask a question, please press the raise hand button.

Speaker #1: If your question has already been answered, you can leave the queue by clicking on the same button. There's also the possibility to ask questions throughout the Q&A icon at the bottom of your screen.

Speaker #1: You may select the icon and type your questions with your name and company. Written questions that are not addressed during the earnings call will be returned by the Investor Relations team.

Speaker #1: Wait while we pull for

Speaker #1: questions. Our first question

Speaker #2: comes from Daniel Vaz from Safra. Please, Mr. Vaz, your microphone is open.

Daniel Vaz: Hi, everyone. first of all, congrats on the appointments of Carlos Mauad and Gustavo Sechin to CEO and CFO, and also recognize the work so far of Mayani and Arthur during this transition. in the middle of the quarter, you announced a strategic update, right? you put together a bunch of KPIs and guidances for 2029. You've mentioned on your credit portfolio that 2026 could be more of a transition year before a stronger credit origination cycle, right? especially in working capital. Looking at your numbers in Q3, unsecured lending is already showing meaningful sequential acceleration in concessions, right, in the origination. probably the portfolio could close like this year at BRL 1 billion.

Speaker #3: all, congrats on the Hi. Hi, everyone. First of Gustavo Sequin to CEO and CFO. And also recognize the work so far of Mayani and Arthur during this transition.

Speaker #3: So in the middle of the quarter, you announced a strategic update, right? So you put together a bunch of KPIs and guidances for 2029.

Speaker #3: And you've mentioned on your credit portfolio that 2026 could be more of a transition year before a stronger credit organizational cycle, right? So especially in working capital.

Speaker #3: But looking at your numbers in the third quarter, unsecured lending is already showing meaningful sequential acceleration in the concessions, right, in the origination. So probably the portfolio could close like this year at 1 billion reais.

Speaker #3: So it feels like there's room to grow well above like two times next year, particularly considering your expansion right now. So the question is, given this momentum, how should we think about the what is your target for 2026?

Daniel Vaz: feels like there's room to grow well above like 2 times next year, particularly considering your expansion right now. The question is, like, given this momentum, how should we think about what is your target for 2026? Is it still a transition year, or does the run rate suggest like a steeper curve in your appetite for working capital loans? Thank you.

Speaker #3: Is it still a transition year, or does the run rate suggest like a steeper curve in your appetite for working capital loans? Thank

Speaker #3: you. Daniel

Ricardo Dutra: Hello, Vaz. This is Carlos Mauad. Thank you for your question. Just to give you a overview on how we are thinking about our credit products here, we could say that we have three different work streams on where we are working in a different set of products. We have the secured products that we already have processing systems in place. We have channels implemented. We have credit policies already developed and tested. These we have the vision here to keep accelerating, but it is the same thing that we are doing today and we have been done on the past few years.

Speaker #2: Daniel Vaz, this is Carlos Mawad. Thank you for your question. Just to give you an overview on how we are thinking about our credit products here, we could say that we have three different work streams.

Speaker #2: On where we are working in a different set of products. We have the secured products that we already have processed in systems in place.

Speaker #2: We have channels implemented. We have credit policies already developed and tested. And these we have the vision here to keep accelerating but it is the same thing that we are doing today and we have been done on the past few years.

Carlos Mauad: We have this second work stream that I'm calling here a scale-up work stream, where we are talking about products that we already have the platforms in place, but we're still finding the right credit balance to finding different levels of credit production. Those products are working capital that you saw the production increasing on the Q3 of this year. The overdraft with it is a quite important product to us, especially due to the reason which is a very high yield product, and credit cards that's still a challenger to us here. Again, we already see the working capital producing something around BRL 70 million in terms of credit production in a monthly base.

Speaker #2: have this second work stream Then we that I'm calling here a scale-up work stream. Where we are talking about products that we already have the platforms in place, but we still finding the right credit balance to finding different levels of credit production.

Speaker #2: Those products are working capital that you saw the production increasing on the third quarter of this year. The overdraft with it is a quite important product to us, especially due to the reason which is a very high-yield product.

Speaker #2: And credit cards that's still a challenge to us here. So again, we already see the working capital producing something around 70 million reais in terms of credit production in a monthly base.

Speaker #2: And we already have credit clusters testing in test that can push these production up to 100 million reais. So this is what we have on a very short timeframe.

Carlos Mauad: we already have credit clusters in test that can push this production up to BRL 100 million. this is what we have on a very short time timeframe. you can see a little bit where we are in terms of credit production on working capital. there is a third work stream which is gonna show up on 2026, which it is the two main products that are being developed as we speak here, which is the Pix financing and the payroll personal loans that's gonna have a perfect fit for us here due to the change that we saw on the FGTS changes or regulatory milestone that we saw a few weeks ago. that's a little bit how we are.

Speaker #2: So you can see a little bit where we are in terms of credit production on working capital. And that is a third work stream which is going to show up on 2026, which it is the two main products that are being developed as we speak here, which is the PIX financing and the payroll personal loans that's going to have a perfect fit for us here due to the change that we saw on the FGTS changes or regulatory milestone that we saw a few weeks ago.

Speaker #2: So that's a little bit how we are. Yes, we are accelerating, but as you know, taking credit risk, it is a matter of testing different levels, different credit clusters, different ways to collect, to test actual the collections products here.

Carlos Mauad: Yes, we are accelerating. As you know, taking credit risk, it is a matter of testing different levels, different credit clusters, different ways to collect, to test the collections products here, so we can push up observing the right performance in terms of net credit margin. Hopefully, I answered your question.

Speaker #2: So we can push up observing the right performance in terms of net credit margin. Hopefully, I asked your question. I answered your question.

Speaker #3: Yeah, that's super clear for my follow-up on your scale-up portfolio that you mentioned about the working capital loans. Is it too soon for you to share a bit of the KPIs here on the new origination you could put up of 70 million per month?

Daniel Vaz: Yeah, that's super clear. If I may follow up on your scale-up portfolio that you mentioned about the working capital loans, is it too soon for you to share a bit of the KPIs here on the new origination you could put up of BRL 70 million per month? Is it, like, exciting you for going above this number, or sorry, BRL 70 million could be like a good estimate for us to work on?

Speaker #3: Is it like exciting you for going above this number or 70% could be like a, sorry, 70 million could be like a good estimate for us to work on?

Speaker #2: No, no. We're going to push this production. We are just on the very beginning of this journey here. We are being very careful to test all kinds of clusters and customer profiles embedded in our database.

Carlos Mauad: Oh, no. We're gonna push this production. We are just on the very beginning of this journey here. We are being very careful to test all kinds of clusters and customer profiles, embedded in our database. Probably you're gonna see higher numbers on quarters as we evolve on the credit strategy.

Speaker #2: So probably you're going to see higher

Speaker #2: numbers. Perfect.

Daniel Vaz: Perfect. Thanks a lot for the answers.

Speaker #3: Thanks a lot for the answers.

[Operator]: Our next question comes from Ricardo Buchpiguel from UBS. From Bitshi, back to you.

Speaker #2: Our next question comes from Ricardo Botego from

Speaker #2: UBS. Hi, everyone, and thank

Ricardo Buchpiguel: Hi, hi, everyone, thank you for the opportunity of making questions. In the quarter, we saw that acquiring TPV was kind of flat quarter-over-quarter, fell around, like, 5% year-over-year. Could you comment on the challenges faced in growing volumes during the quarter, what initiatives are being taken to enable an eventual reacceleration in volume growth? Also eventually, if it's all right that we can already see some signs of reacceleration in Q4 adjusting for the seasonal effect. Thank you.

Speaker #4: you for the opportunity of making questions. In the quarter, we saw that acquiring TPV was kind of a flat quarter over quarter and fall fell around like 5% year over year.

Speaker #4: Could you comment on the challenges faced in growing volumes during the quarter? And what initiatives are being taken to enable an eventual acceleration in volume growth and also eventually if it's all right that we can already see some signs of reacceleration in Q4 adjusting for the seasonal effect?

Speaker #4: Thank you.

Carlos Mauad: Hi, Ricardo. Thank you for the question. Yes, you're right. The TPV was flat sequentially. We do understand TPV is one of the metrics that we should follow here. As has been said in the past quarters, TPV per se is not the main important metric for us, but of course, it's part of the volumes that we need to manage here. I'm gonna talk to you about the past to Q3 and then looking forward. Looking past Q3, we have... First, it is important to remember we have a very hard comp from Q3 2024, where we grew 36% versus previous year. That was the largest TPV percentage growth in a quarter, I guess, in the past couple of years.

Speaker #2: Ricardo, thank you for the question. Yes, you're right. The TPV was flat sequentially. We do understand TPV is one of the metrics that we should follow here.

Speaker #2: As we've said, in the past quarters, TPV is not the most important metric for us. However, it is, of course, part of the volumes that we need to manage here.

Speaker #2: We I'm going to talk to you about the past to Q3 and then looking forward. Looking past Q3, we have first, it is important to remember we have a very, very hard comp from Q3 '24 where we grew 36% versus previous year.

Speaker #2: That was the largest TPV percentage growth in a quarter I guess in the past couple of years. So Q3 '24 was a very, very strong quarter.

Carlos Mauad: Q3 2024 was a very, very strong quarter. We have this hard comp. We also understand the macro and the lower economic activity could have impacted our merchants as well, especially those with a lower income profile. Looking forward, when we look at what happened in last month or the beginning of this year, we had some strategies to go to market that we evaluated and we adjusted a few months ago. I would say to you that looking at year-over-year base, August was the bottom in terms of growth or decreases in August. September was better than August. October is better than September. It seems that we reached the bottom in August.

Speaker #2: So, we have this hard comp. We also understand that the macro environment and lower economic activity could have impacted our merchants as well, especially those with a lower income profile.

Speaker #2: And looking forward, when we look at what happened in the last month or the beginning of this year, we had some strategies to go to market that we evaluated and we adjusted a few months ago.

Speaker #2: And I would say to you that the looking a year over year base, August was the bottom. In terms of growth or decrease it in August.

Speaker #2: September was better than August. October is better than September. So it seems that we reached the bottom in August with the changes that we did a few months ago when you have this cohort spiring up.

Carlos Mauad: With the changes that we did a few months ago, when you have these cohorts piling up, we expect to see a looking forward a better TPV results looking forward. That's the, the overall picture here. Remember that we always look on the client as a whole, focus on the increasing the gross profit and EPS. If you have a TPV that is accretive, we'll go for it. That's pretty much what the scenario about TPV.

Speaker #2: We expect to see a looking forward a better TPV results looking forward. So that's the overall picture here. And remember that we always look on the client as a whole.

Speaker #2: Focus on increasing the gross profit and EPS. So if you have a TPV that is accretive, we're going to go for it. So that's pretty much what the scenario is about TPV.

Ricardo Buchpiguel: That's very clear. Just a quick follow-up. If you could also comment about the competitive environment in the acquiring segment, if you notice any changes during Q3 and the start of Q4 will also be very helpful. Thank you.

Speaker #4: That's very clear. And just a quick follow-up: if you could also comment about the competitive environment in their current segment, if you notice any changes during Q3 and the start of Q4, that would also be very helpful.

Speaker #4: Thank

Speaker #4: you. Ricardo, we don't

Carlos Mauad: We don't see changes in the competition in terms of irrationality. We see all players being rational. You know, when you have a interest rate in the country that is 15% per year, everyone is very concerned about profitability, about the cost of funding. We don't see companies trying to get market share at any price. Everyone is trying to be rational and preserve profitability. By having this 15%, of course, we have everyone being more focused on the bottom line and less in the market share. Go back to your answer to our question here. No big changes in competition in Q3, not even in Q4.

Speaker #2: see changes in the competition in terms of irrationality. We see all players being rational. When you have an interest rate in the country that is 15% per year, everyone is very concerned about profitability, about the cost of funding.

Speaker #2: So we don't see companies trying to get market share at any price. Everyone is trying to be rational and preserve profitability. By having this 15%, of course, we have everyone being more focused on the bottom line and less on market share.

Speaker #2: So going back to your answer to your question here, no big changes in competition in Q3. Not even in Q4.

Speaker #4: Perfect. Thank you.

Ricardo Buchpiguel: Perfect. Thank you.

Speaker #2: Next question comes from Beatrice. Your microphone's open.

[Operator]: Next question comes from Beatriz Abreu from UBS. Ms. Beatriz Abreu, your microphone is open.

Speaker #4: Hey, so it's Caio Prato here from UBS. I have two questions, please. First, a follow-up on working capital loans. I'm just wondering if you can share a little bit more about the profile of the client that you are accelerating today?

Kaio Prato: Hey, sorry. It's Kaio Prato here from UBS. I have 2 question, please. First, a follow-up on working capital loans. Just wondering if you can share a little bit more about the profile of this client that you are accelerating today. What is the size, average size of this client? If you can share the some numbers on the economics as well, interest rates, and level of upfront provisions that should be required, just to understand when this product should start to contribute positively to your gross profit. This is the first. The second, if you can talk a little bit more about the improvements that you are doing on your chargeback process. I think we had another solid quarter on that line.

Speaker #4: What is the size, average size of this client? If you can share the some numbers on the economics as well. Interest rates and level of upfront provisions that should be required.

Speaker #4: Just to understand when these products should start to contribute positively to your gross profit. So this is the first. And the second, if you can talk a little bit more about the improvements that you are doing on your chargeback process.

Speaker #4: I think we had another solid quarter on that line. Just wondering if you are talking about sustainable levels of chargebacks as a percentage of TPV now, or if we can see even further improvement going forward.

Kaio Prato: Just wondering if you're talking about sustainable levels of chargebacks as a percentage of TPV now, or if we can see even further improvement going forward. Thank you.

Speaker #4: Thank you.

Carlos Mauad: Well, thank you very much for your question. Just to give you a 10,000 feet high number here on the working capital. We are talking about some average tickets between 20,000 and 30,000 reais. The range of our interest rate here is between 4 and 7, depending on the risk level of this customer. There is not a specific size of customer that we're targeting. What we are trying here it is to optimize and to have a deep credit offer to most of our customers here, trying to optimize the net credit margin of this specific product.

Speaker #3: Well, thank you very much for your question. Just to give you a 10,000-foot-high number here, on the working capital, we are talking about some average tickets between $20,000 and $30,000 AIs.

Speaker #3: The average not the average, the range of our interest rate here is between 4 and 7 depending on the risk level of this customer.

Speaker #3: And that is not a specific size of customer that we are targeting, what we are trying here is to optimize and to have a deep credit offer to most of our customers here trying to optimize the net credit margin of this specific product.

Speaker #3: So again, as long as we are testing a lot of different clusters here with different offers, trying to optimize conversion, optimize net credit margin, as I mentioned here.

Carlos Mauad: Again, as long as we are testing a lot of different cluster here with different offers, trying to optimize conversion, optimize net credit margin, as I mentioned here. Every month here, we pretty much put a few tests to make sure that we can create this environment where we can penetrate most of our customers here that are eligible to a credit offer. The second question, talking a little bit about risk management under the chargeback perspective. I could tell you that we have, let's say, a business as usual level on chargebacks here. There is no concern in front of us.

Speaker #3: So, every month here, we pretty much put a few tests to make sure that we can create these environments where we can penetrate most of our customers that are eligible for a credit offer.

Speaker #3: Second question: talking a little bit about risk management from the chargeback perspective. I can tell you that we have, let's say, a business-as-usual level on chargebacks here.

Speaker #3: That is no concern in front of us. We have been involved in our let's say real-time credit not credit, I'm sorry, risk engine here to make sure that we can filter the bad transactions and as Artur mentioned here on the first part of the presentation, we have a different level in terms of quality on our onboarding process that also helps out to filter the bad customers and the bad transactions out of our ecosystem.

Carlos Mauad: We are being involved in our, let's say, real-time, not credit, I'm sorry, risk team here to make sure that we can filter the bad transactions. As Arthur mentioned here on the first part of the presentation, we have a different level in terms of quality on our onboarding process that also helps out filter the bad customers and the bad transactions out of our ecosystem. Looking forward, I could say that this relative level of chargeback that you see on the Q3, we will see this number across on the next few quarters.

Speaker #3: So looking forward, I could say that this relative level of chargeback that you see on the third quarter we will see this number across over the next few quarters.

Speaker #4: Okay. Thank you very much.

Kaio Prato: Okay. Thank you very much.

Speaker #2: Our next question comes from Thiago Binsfeld from Goldman Sachs. Goldman Sachs, Binsfeld, your microphone's open.

[Operator]: Our next question comes from Tiago Binsfeld from Goldman Sachs. Mr. Binsfeld, your microphone is open.

Speaker #4: Hi, good evening everyone. Thank you for taking our questions. Two questions from our side as well. First one on efficiency. If you can discuss your main initiatives to manage operating expenses into 2026.

Ricardo Buchpiguel: Hi, good evening, everyone. Thank you for taking our questions. Two questions from our side as well. First one on efficiency. If you can discuss your main initiatives to manage operating expenses into 2026.

Tiago Binsfeld: If there are any big projects in marketing personnel that could allow further gains in margins. Second question, more on the macro side of the business, if you have any views on the impact from the income tax exemption for individuals that earn up to 5,000 BRL in Brazil, your assessment of potential impacts to volumes and to credit. I think you have been alluding to a more challenging macro, but would like to hear if that could perhaps be a positive catalyst in the short term. Thank you.

Speaker #4: If there are any big projects in marketing, personnel, that could allow further gains in margins. And second question more on the macro side of the business.

Speaker #4: If you have any views on the impact from the income tax exemption for individuals who earn up to 5,000 AIs in Brazil, could you provide your assessment of the potential impact on volumes and on credit?

Speaker #4: I think you have been alluding to a more challenging macro, but I would like to hear if that could perhaps be a positive catalyst in the short term.

Speaker #4: Thank you.

Carlos Mauad: Well, I'm gonna jump up here to try to at least answer part of your questions. On the OpEx side here, we are being very diligent. As long as we have a macro that's a little tougher than everybody expected, we've been quite, as I mentioned here, diligent on to manage OpEx. Of course, that it's some dis-discipline to prioritize better everything that we're doing here to keep the platform evolving. That goes through marketing expenses also, and through some evolution on our, especially on our customer service OpEx here, where we probably have the most successful AI implementation in the company at this point, which is delivering a better service as a whole with a lower OpEx deploy.

Speaker #3: Well, I'm going to jump up here to try to at least answer part of your questions. On the OPEC side, we are being very diligent as long as we have a macro that's a little tougher than everybody expected.

Speaker #3: We've been quite, as I mentioned here, diligent in managing OPEC. Of course, it requires some discipline to prioritize better everything that we're doing here to keep the platform evolving.

Speaker #3: That goes through marketing expenses also, and through some evolution on our customer service OPEX here, where we probably have the most successful AI implementation in the company at this point, which is delivering a better service as a whole with a lower OPEX deployment.

Speaker #3: So again, we are being very diligent about everything that we are doing here. And probably OPEC is going to keep offering us some room to reinvest in our customers.

Carlos Mauad: Again, we are being very diligent on everything that we are doing here, and probably OpEx is gonna keep offering us some room to reinvest on our customers. That's the first part of the question here.

Speaker #3: So that's the first part of the question.

Speaker #3: here. Regarding the second

Artur Schunck: Regarding the second part, about the taxes for people that have a salary that is lower than BRL 5,000 per month. As we've been seeing in the media, that's gonna help for the low-income people or for people that receive this BRL 5,000 or less to have more availability of cash to expand, so to spend. Of course, that could be beneficial for us. We don't know how big it's gonna be, but definitely it could be slightly positive because there's gonna be more liquidity for the low-income people of the country.

Speaker #2: part, about the Texas for people that have a Saturday is lower than 5,000 AIs per month. As we've been saying in the media, that's going to help to for the low-income people or for the people that receive this 5,000 AIs or less, to have more availability of cash to expand.

Speaker #2: So, to expand on that, it could be beneficial for us. We don't know how big it's going to be, but it could definitely be slightly positive because there's going to be more liquidity for low-income people in the country.

Tiago Binsfeld: That's clear. Thank you.

Speaker #4: That's clear. Thank you.

Speaker #2: Our next question comes from Yuri Fernandez from JP Morgan. Goldman Sachs, Fernandez, your...

[Operator]: Our next question comes from Yuri Fernandes from JP Morgan. Mr. Fernandes, your back phone's open.

Speaker #2: microphone's open.

Speaker #4: No, thank you

Yuri Fernandes: No, thank you all. Good evening. Wishing the best luck for the previous or the current administration, the new management. I have a question regarding expenses here, notably personal expenses. This was a line that was down this quarter, and it seems to be related to share-based compensation. I know usually there is volatility regarding share prices and all that, but the drop was pretty important here, right? It seems to be a 30, 40 million BRL per quarter line. I think it was like 3, 4 million BRL this quarter.

Speaker #4: All. Good evening. So we see the best luck for the previous or the current administration, the new management. I have a question regarding expenses here.

Speaker #4: Notably, personal expenses. This was a line that was down this quarter. And it seems to be related to share-based compensation. And I know usually there is volatility regarding your share prices and all that.

Speaker #4: But the drop was pretty important here, right? It tends to be a 30, 40 million AIs per quarter line. And I think it was like 3, 4 million this quarter.

Speaker #4: So if you can provide a little bit of explanation what drove a lower share-based compensation and what is driving this better personal expenses line here for you.

Yuri Fernandes: If you can provide a little bit of explanation, what drove lower share-based compensation, what is driving, you know, this better personal expenses line here for you? That's my first one. A second one, just on the NPL, pretty stable, like 10 BP increase. I think it's totally fair. Your portfolio is growing a lot on unsecured mix, right? Just trying to understand what to expect for the NPLs on this growth out-outlook you have. Like, should we continue to see NPL going marginally up every quarter? Not really. Like, any color on what should we expect on asset quality given your mix, I think would be appreciated. Thank you very much.

Speaker #4: That's my first one. And a second one, just on the NEPL, pretty stable like 10 bp increase. I think it's totally fair. But your portfolio is growing a lot.

Speaker #4: Unsecured mix, right? So just trying to understand what to expect for the NEPLs on this growth outlook you have. Should we continue to see NEPL going marginally up every quarter, not really?

Speaker #4: Any color on what should we expect on asset quality given your mix? I think it would be appreciated. Thanks very

Speaker #4: much. Thank

Artur Schunck: Thank you, Yuri, for the questions. I will answer the first one related to the personal expenses. Part of the gains that we see in Q3 is related to a linear institute that we are working. As Mauad mentioned, we are so diligent to control expenses here, and personal expense is so important to us and part of the division process that we have. The layoffs that we applied in January and May also contributed to this performance right now. In terms of long-term incentive plan, it is related to the volatility of the share price, US dollars, and those things impacted the number. Going forward, I am expecting increase a little bit, not much. The level will be, roughly speaking, in the same of Q3.

Speaker #3: you, Yuri, for the questions. I will answer the first one related to the personal expenses. Part of the gains that we see in Q3 is related to a linear structure that we are working as Mawad mentioned we are so diligent to control expenses here.

Speaker #3: And personal expenses is so important to us. And part of the diligence that we diligent process that we have the layoffs that we applied in January and May also contributed to this performance right now.

Speaker #3: In terms of loan term incentive plan, it is related to the volatility of the share price US dollars. And those things impacted the number.

Speaker #3: Going forward, I am expecting an increase a little bit, not too much. So the level will be, roughly speaking, the same as.

Speaker #3: Q3. And jumping to the second

Carlos Mauad: Jumping to the second part of your question. We're gonna keep NPLs lower than the average of the market here, but of course, due to the high concentration in terms of mix that we have on secured loans today, we're gonna see NPLs going up, quarter-over-quarter, is likely respecting the new mix that we're deploying here on our credit strategy.

Speaker #2: Part of your question, we're going to keep NEPLs lower than the average of the market here. But, of course, due to the high concentration in terms of mix that we have on secured loans today, we're going to see NEPLs going up quite a bit over a quarter.

Speaker #2: It's likely respecting the new mix that we're deploying here on our credit strategy.

Yuri Fernandes: Oh, super clear. Thank you very much.

Speaker #4: Super Super clear. Thank you very much.

Speaker #2: Our next question comes from Arnaud Frasi from City. Mr. Frasi, your microphone's open.

[Operator]: Our next question comes from Arnon Shirazi from Citi. Mr. Ceruzzi, your microphone is open.

Speaker #5: Hi. Hi, y'all. Thanks for the opportunity of making questions. I want to dive in in the profits. I see it grew 15% year over year, which is something in line with last 12 months' selling rate.

Arnon Shirazi: Hi, all. Thanks for the opportunity of making questions. I want to dive in in deposits. I see it grew 15% year-over-year, which is something in line with last 12 months, Selic rate, though I want to understand better the underlying trends, if there's inflows, what you have been seeing. Thank you.

Speaker #5: Though I want to understand better the underlying trends, if there's inflows, what you have been seeing. Thank you.

Speaker #3: All right, Arnaud. Can you repeat the metric? We didn't get it here.

Artur Schunck: Arnon, can you repeat the metric? We didn't get it here, the 15%. What is the metric?

Speaker #3: 15%. What is the metric?

Speaker #5: The deposits—we see a 15% increase in deposits year over year, which is in line with the selling rate, right? The average for the past 12 months is maybe around 12% to 14%.

Arnon Shirazi: Deposits. Yeah, we see a 15% increase in deposits year-over-year, which is in line with the Selic rate, right? The average for the past 12 months may be around 12, 14%. Want to understand better the inflows and outflows during this period and expectations from now on since should be growing mostly on salary. Thank you.

Speaker #5: So, I want to understand better the inflows and outflows during this period and expectations from our sales, which seem to be growing mostly on sales. Thank you.

Speaker #3: Arnaud, yeah, we grew this from 34 billion AIs to 39.4 billion AIs compared year-over-year. I don't think there is a relationship with selling.

Carlos Mauad: Arnon Shirazi, Yes, it grew this from BRL 34 billion to BRL 39.4 billion compared year-over-year. I don't think there is a relationship with Selic. Of course, we try to make the ecosystem stronger and stronger. If you look at some of the slides, you see the cash-in fees that grew 14%, reaching more than BRL 95 billion. What we try to do here is to make the ecosystem more engaged for the clients so that we have this more, I would say, complete relationship with them, not only the acquiring, but also in terms of deposits, in terms of use of cards and so on. But it's a very decent growth when you think that it's 34% to 39%, 15% growth in terms of the deposit.

Speaker #3: Of course, we try to make the consistency stronger and stronger. So if you look at some of these lines, you see the cashing peaks that grew 14%, reaching more than $95 billion.

Speaker #3: So what we try to do here is to make the ecosystem more engaged for the clients so that we have these more, I would say, complete relationships with them, not only in terms of acquiring, but also in terms of deposits, in terms of the use of cards, and so on.

Speaker #3: But it's a very decent growth when you think that it's 34% to 39%, a 15% growth in terms of the deposit. So, with our cost of funding going down.

Carlos Mauad: With our cost of funding going down, that is important to highlight, that even we are growing 15% in terms of deposits with the cost of funding as a percentage of CDI, going down. Thank you.

Speaker #3: So, it is important to highlight that even though they are growing 15% in terms of deposits, the cost of funding as a percentage of CDI is going down.

Speaker #3: Thank

Speaker #3: you. Thank

Speaker #5: you. Our next

Arnon Shirazi: Thank you.

Artur Schunck: Our next question comes from Neha Agarwala from HSBC. Yes, Mrs. Agarwala, your microphone is open. Mrs. Neha, you're still on mute. Please rejoin the queue if you want to ask a question. Our next question comes from Pedro Leduc from Itaú BBA. Yes, Mr. Leduc, your microphone is open.

Speaker #2: Question comes from Neha Agrawala from HSBC. Just Mr. Agrawala, your microphone's open. Hello, Mrs. Neha. Your microphone's open. Mrs. Neha, can you please unmute? Please rejoin the queue if you want to ask a question.

Speaker #2: Our next question comes from Pedro Duque from NITA OPPA. Mr. Duque, your microphone's on.

Speaker #2: Our next question comes from Pedro Duque from NITA OPPA. Mr. Duque, your microphone's open. Thanks.

Pedro Leduc: Thanks. Good evening, everybody. Question, please, on the gross profit evolution. We talked about volumes here briefly, about slightly recovering at the margin. We know year-over-year, when I look at your gross profit margins, they're hurt by the higher Selic rates. At least, you know, Q4 onwards, they should be more stable with Q3. If I could maybe get a sense on how the TPV volume mix is recovering, what's driving it, also for us to have a sense here. Also, if you could share your views on how gross profit margins are gonna evolve over the next couple quarters. Thank you.

Speaker #6: Good evening, everybody. I have a question regarding the gross profit evolution. We briefly talked about volumes and the slight recovery at the margin. Year over year, when I look at your gross profit margins, I see that they are impacted by the higher selling rates.

Speaker #6: But at least for Q4 onward, they should be more stable with Q3. So if I could maybe get a sense on how that TPV volume mix is recovering, what's driving it, also for us to have a sense here, and also if you could share with viewers on how gross profit margins are going to evolve over the next couple of quarters.

Speaker #6: Thank

Carlos Mauad: LeDuc, thank you for your question here. Our recovery here in terms of TPV and how this is affecting the cost of funds of the company comes with the same mix that we see today. As you saw throughout the year, our TPV is more sensitive to the cost of funds or to the Selic rate due to the kind of customer that we have here and the dynamics of the business as long as we pay most of our TPV upfront, and that makes the company more capital intensive. Of course, when we see the other side of the macro cycle, we also then trend to capture a better spreads when we see the basic interest rates going down.

Speaker #2: Leduc, thank you for your question here. Our recovery, in terms of TPV and how this is affecting the cost of funds for the company, comes with the same mix that we see today.

Speaker #2: As you saw, throughout the year, our TPV is more sensitive to the cost of funds or to the selling rate due to the kind of customer that we have here and the dynamics of the business, as long as we pay most of our TPV upfront.

Speaker #2: And that makes the company more capital intensive. And of course, when we see the other side of the macro cycle, we tend to capture a better spread when we see the basic interest rates going down.

Speaker #2: So again, the TPV, the new TPV that we are bringing to push growth in the company, is coming pretty much with the same mix. Therefore, we do not expect to have a different rate between TPV and the spreads that we see on our customers.

Carlos Mauad: Again, the TPV, the new TPV that we're bringing to push growth, and the company is coming pretty much with the same mix. We do not expect to have a different ratio between TPV and the spreads that we see on our customers.

Speaker #3: And just to complement here, Leduc, Pedro, we, of course, follow TPV, but most importantly, we follow revenues. So if you look at revenues year over year, we're going up 14%.

Artur Schunck: Just to complement here, LeDuc, Pedro, Of course, we follow TPV, but most importantly, we follow revenues. If you go to revenues year-over-year, we're growing 14%. It's a very, very decent growth year-over-year because you know that there are low quality TPV out there that we are not interested on. The idea, of course, is to grow in a sustainable way. I would say that one of the metrics that show we are doing successful work here is the growth of revenues, 14%, and also the growth of EPS that is related to the expenses control that we've been doing throughout this year. Thank you.

Speaker #3: So, it's a very, very decent growth year over year. Because you know that there are low-quality TPV out there that we are not interested in.

Speaker #3: So the idea, of course, is to grow in a sustainable way. But I would say that one of the metrics that shows we are doing successful work here is the growth of revenues, 14%.

Speaker #3: And also the growth of EPS, which is related to the expense control that we've been implementing throughout this year. Thank you.

Speaker #6: Thank

Speaker #6: you. Hi, everyone.

Pedro Leduc: Thank you.

Artur Schunck: Everyone, thank you very much for your time. See you next call. I'd like to take advantage here to say thank you to Alexandre Magnani and Artur for the excellent and extraordinary job as active bosses in this company. They are gonna join as board directors to keep supporting the company, and wish you luck and to count on all the support for Carlos Mauad and Gustavo Sechin in their new roles. Thank you very much.

Speaker #2: Thank you very much for your time. See you on the next call. I'd like to take this opportunity to thank Alexander, Marianne, and Artur for the excellent job they have done as executive officers in this company.

Speaker #2: They are going to join as board directors to continue supporting the company. We wish them luck and encourage everyone to count on the full support for Carlos Mawad and Gustavo Saquin in their new roles.

Speaker #2: Thank you very much.

Arnon Shirazi: This thus concludes PagSeguro Digital's conference call. We thank you for your participation, and we wish you a very good evening.

Speaker #7: These tests concludes PagSeguro Digital's conference call. We thank you for participation and wish you a very good evening.

Operator: Goodbye.

Q3 2025 PagSeguro Digital Ltd Earnings Call

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