3Q23
Earnings Release
November 16, 2023
PAGS Reports Third Quarter 2023 Results
Net Income (Non-GAAP) of R$ 440 million, +7% y/y
Net Income (GAAP) of R$ 411 million, +8% y/y
São Paulo, November 16, 2023 - PagSeguro Digital Ltd. ("PAGS," "PagBank" or "we") announced today its third quarter results for the period ended September 30, 2023. The consolidated financial statements are presented in Reais (R$) and prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").
.
3Q23 Highlights
Total Finance Volume (TFV) | Total Payment Volume (TPV) | Total Banking Volume (TBV) | ||||||
R$ 244 Billion | R$ 99.8 Billion | R$ 143.9 Billion | ||||||
Total Revenue and Income | Payments | Gross Profit | Financial Services | Gross Profit | |||||||
R$ 4.03 Billion | R$ 1.4 Billion | R$ 101 Million | |||||||
Net Income | Non-GAAP | Payments | Adj. EBITDA | Financial Services | Adj. EBITDA | ||||||||
R$ 440 Million | R$ 892 Million | R$ 2 Million | ||||||||
2
To our shareholders
We are happy to announce our earnings results for the third quarter and first nine months of 2023 and to continue to share our recent developments and milestones.
In September 2023, we reached 30.2 million clients, amounting to R$669 billion in transactions occurring over the first nine months of the year. These numbers comprise of R$389 billion in Total Banking Volume (formerly known as PagBank TPV) and R$281 billion in Total Payment Volume (formerly known as PagSeguro TPV).
In the third quarter, TPV grew faster than the industry's growth, driven by growth in all merchant segments: micro- merchants, SMBs and large accounts. Also, as of November 2023, PIX has been operational for 3 years in the Brazilian market, and we are very well positioned to take advantage of its capabilities. PagBank Cash-in, which comprise of all PIX P2P transactions and wire transfers sent from different financial institution to us, amounted to R$ 56 billion.
Improved trends in our TPV and PagBank Cash-in resulted in our deposits reaching a record level of almost R$ 22 billion. We have now concluded an important 12-month cycle through which we managed the impact of high interest rates for an extended period through a repricing process, while at the same time diversified our funding structure backed by deposits. As a result, we have executed a valuable strategy to keep increasing our gross profit by disassociating the reliance on take rate trajectory, driven by merchants' mix change, lowering our average cost of funding. For example, this quarter our financial expenses decreased in comparison to the same period in 2022, a trend we have not observed since early 2021 when interest rate hikes began in Brazil.
Consequently, our net income reached an all-time high, posting R$ 440 million on a non-GAAP basis, representing +7% year-over-year, and pushing our net cash balance to R$ 10.6 billion, which is our cornerstone against economic turmoil and a buffer for new investments without causing shareholder dilution. Also, we totaled over R$ 1 billion in share buybacks since 2021, executing more than 80% of our current program.
We see compelling opportunities to further expand our footprint in different geographies in Brazil through our HUBs and by boosting our online payments penetration, providing a seamless omnichannel solution. As we are expecting to address the mismatch between capital expenditures and depreciation/amortization levels in the second half of 2024, we have started to increase our salesforce to reach our goals and foster the natural cross-selling of our financial services, making the financial lives of our clients easier and empowering them through a one-stop-shop financial ecosystem.
We continue to pursue technological disruptions. In October, we executed our first transaction using DREX, the Brazilian digital currency through the blockchain platform, embracing the digital assets revolution. In November, we announced a facial authentication feature for our clients aiming to use our payment link option, reinforcing our security features while improving user experience and confidence.
Our management principles remain the same:
- Superior execution in balancing growth with profitability;
- Robust financials with high liquidity, sustainable results, and low funding costs; and
- Solid and ethical corporate governance.
I am looking forward to the next milestones of our journey.
Alexandre Magnani, Chief Executive Officer
3
Selected Capsule of Income Statement Data1
R$ Million | 3Q23 | 3Q22 | Var. y/y | 2Q23 | Var. q/q | 9M23 | 9M22 | Var. y/y | |||||||
Total Revenues and Income | 4,026 | 4,035 | -0.2% | 3,826 | 5.2% | 11,602 | 11,373 | 2.0% | |||||||
(-) Other Financial Income | (66) | (46) | 42.2% | (65) | 1.0% | (195) | (132) | 47.2% | |||||||
(-) Transactions Costs | (1,508) | (1,424) | 5.9% | (1,414) | 6.7% | (4,311) | (4,141) | 4.1% | |||||||
Net Take Rate | 2,452 | 2,565 | -6.3% | 2,347 | 4.5% | 7,095 | 7,099 | -0.8% | |||||||
(-) Financial Expenses | (820) | (921) | -10.9% | (796) | 3.1% | (2,429) | (2,297) | 5.7% | |||||||
(-) Total Losses² | (165) | (273) | -39.4% | (122) | 35.8% | (413) | (793) | -47.9% | |||||||
(+) FX Expenses | 10 | 12 | -20.7% | 9 | 15.7% | 36 | 34 | 4.0% | |||||||
Gross Profit | 1,477 | 1,384 | 6.7% | 1,438 | 2.7% | 4,289 | 4,044 | 6.1% | |||||||
Payments | 1,376 | 1,272 | 8.2% | 1,327 | 3.7% | 3,899 | 3,813 | 2.3% | |||||||
Financial Services | 101 | 113 | -10.5% | 111 | -9.1% | 390 | 231 | 68.9% | |||||||
(-) Operating Expenses | (583) | (615) | -5.1% | (589) | -1.0% | (1,759) | (1,778) | -1.1% | |||||||
Adj. EBITDA³ | 894 | 770 | 16.1% | 849 | 5.3% | 2,530 | 2,265 | 11.7% | |||||||
Payments | 892 | 832 | 7.2% | 850 | 4.9% | 2,460 | 2,471 | -0.4% | |||||||
Financial Services | 2 | (62) | n.a. | (1) | n.a. | 70 | (205) | n.a. | |||||||
(-) POS Write-off | (64) | (41) | 54.9% | (65) | -1.5% | (191) | (134) | 42.0% | |||||||
(-) D&A | (329) | (290) | 13.5% | (310) | 6.3% | (941) | (810) | 16.1% | |||||||
(+/-) Other Income (Expense), Net | 56 | 34 | 65.5% | 56 | -1.2% | 159 | 98 | 62.4% | |||||||
EBT | 557 | 472 | 17.9% | 531 | 4.8% | 1,557 | 1,419 | 9.8% | |||||||
(-) Income Tax and Social Contribution | (117) | (61) | 91.0% | (116) | 0.7% | (310) | (233) | 32.9% | |||||||
Net Income | Non-GAAP | 440 | 411 | 7.0% | 415 | 6.0% | 1,248 | 1,186 | 5.2% | |||||||
EPS | Non-GAAP | 4 | R$ | 1.36 | R$ | 1.25 | 8.7% | R$ | 1.28 | 6.6% | R$ | 3.83 | R$ | 3.60 | 6.5% | |
(-)Non-GAAP Effects | (29) | (31) | -5.0% | (30) | -2.4% | (82) | (89) | -7.8% | |||||||
Net Income | GAAP | 411 | 380 | 8.0% | 385 | 6.7% | 1,166 | 1,097 | 6.3% | |||||||
EPS | GAAP | 4 | R$ | 1.27 | R$ | 1.16 | 9.7% | R$ | 1.18 | 7.2% | R$ | 3.58 | R$ | 3.33 | 7.6% | |
Cash Earnings | Adj. EBITDA (-) CapEx | 365 | 267 | 36.4% | 319 | 14.5% | 1,063 | 507 | 109.6% | |||||||
Capital Expenditures (CapEx) | 529 | 502 | 5.3% | 530 | 29.5% | 1,467 | 1,758 | -16.6% |
- This selected capsule income statement data is presented only to facilitate a general overview of highlights of our financial performance for the periods indicated for informational purposes. For our complete Income Statement information, see our consolidated financial statements prepared in accordance with IFRS as issued by the IASB, in our Form 6-K related to the Financial Statements, published on the date hereof;
- Total Losses: Chargebacks and Expected Credit Losses;
- Adj. EBITDA: EBITDA net of Financial Expenses;
- Considering the Weighted Average Number of Diluted Common Shares:
3Q23: 323,773,637 shares;
2Q23: 325,480,431 shares;
3Q22: 328,898,070 shares;
9M23: 325,596,375 shares;
9M22: 329,612,792 shares.
Key Performance Indicators
KPIs | 3Q23 | 3Q22 | Var. y/y | 2Q23 | Var. q/q | 9M23 | 9M22 | Var. y/y | |||||
ARPAC¹ | |||||||||||||
Payments | R$ | 2,080 | R$ | 1,764 | 17.9% | R$ | 2,022 | 2.9% | R$ | 2,080 | R$ | 1,764 | 17.9% |
Financial Services | R$ | 73 | R$ | 96 | -23.9% | R$ | 82 | -10.6% | R$ | 73 | R$ | 96 | -23.9% |
Efficiency Ratio² | 16.4% | 20.5% | (4.1) p.p. | 16.2% | 0.2 p.p. | 16.0% | 20.1% | (3.7) p.p. | |||||
Credit Portfolio | R$ Billion | 2.5 | 2.7 | -7% | 2.6 | -6% | 2.5 | 2.7 | -7% | |||||
Total Deposits | R$ Billion | 21.6 | 19.4 | 11% | 18.3 | 18% | 21.6 | 19.4 | 11% |
- ARPAC: Sum of LTM revenues / Average of active clients over the last 5 quarters;
- Efficiency Ratio: Selling, Administrative and Other Expenses required for each amount of Total Revenue and Income generated.
4
Selected Capsule of Balance Sheet Data¹
Balance Sheet | R$ Million | 3Q23 | 3Q22 | Var. y/y | 2Q23 | Var. q/q | |||||
Total Assets | 47,327 | 43,276 | 9.4% | 42,836 | 10.5% | |||||
Current Assets | 41,147 | 37,709 | 9.1% | 36,898 | 11.5% | |||||
Cash and Financial Investments | 2 | 3,053 | 2,478 | 23.2% | 2,846 | 7.3% | ||||
Accounts Receivable | 37,521 | 34,570 | 8.5% | 33,440 | 12.2% | |||||
Others | 3 | 573 | 661 | -13.4% | 611 | -6.3% | ||||
Non-current Assets | 6,180 | 5,567 | 11.0% | 5,939 | 4.1% | |||||
Accounts Receivable | 1,000 | 731 | 36.7% | 918 | 8.9% | |||||
PP&E and Intangible Assets | 4 | 4,962 | 4,671 | 6.2% | 4,833 | 2.7% | ||||
Others | 5 | 218 | 164 | 32.8% | 188 | 16.2% | ||||
Total Liabilities and Equity | 47,327 | 43,276 | 9.4% | 42,836 | 10.5% | |||||
Current Liabilities | 28,665 | 28,287 | 1.3% | 25,890 | 10.7% | |||||
Accounts Payable | 6 | 16,971 | 8,214 | 106.6% | 8,374 | 102.7% | ||||
PagBank | Checking Accounts | 1,736 | 6,734 | -74.2% | 8,258 | -79.0% | |||||
PagBank | Savings Accounts and CDs | 8,577 | 10,795 | -20.5% | 7,813 | 9.8% | |||||
Borrowings | 193 | 987 | -80.5% | 292 | -34.0% | |||||
Others | 7 | 1,189 | 1,558 | -23.7% | 1,153 | 3.1% | ||||
Non-current Liabilities | 5,793 | 3,477 | 66.6% | 4,421 | 31.0% | |||||
Accounts Payable | 6 | 159 | 0 | n.a. | 127 | 25.1% | ||||
PagBank | Savings Accounts and CDs | 3,337 | 1,843 | 81.0% | 2,219 | 50.4% | |||||
Others | 8 | 2,297 | 1,634 | 40.6% | 2,074 | 10.7% | ||||
Equity | 12,868 | 11,512 | 11.8% | 12,526 | 2.7% | |||||
Retained Net Income | 7,403 | 5,830 | 27.0% | 6,992 | 5.9% | |||||
Capital | 5,465 | 5,682 | -3.8% | 5,533 | -1.2% | |||||
Net Cash Balance | 9 | 10,573 | 9,050 | 16.8% | 10,089 | 4.8% | ||||
1. This selected capsule balance sheet data is presented only to facilitate a general overview of the highlights of our financial performance for the periods indicated for informational purposes. For our complete Balance Sheet information, see our consolidated financial statements prepared in accordance with IFRS as issued by the IASB, in our Form 6-K related to the Financial Statements, published on the date hereof.
Balance Sheet Reconciliation:
- Cash & Financial Investments: Cash and Cash Equivalents + Financial Investments;
- Others: Inventories + Taxes Recoverable + Other Receivables + Receivables from Related Parties;
- PP&E & Intangible Assets: Property and Equipment + Intangible Assets;
- Others: Judicial Deposits + Prepaid Expenses + Deferred Income Tax and Social Contribution + Investments + Receivables from Related Parties;
- Accounts Payable: Payables to third parties (including (i) transactions of sales and services to settle with merchants, net of PagSeguro's revenue, (ii) the balance of client bank accounts that are invested by the client in Certificate of Deposits, and (iii) the balance of merchant payment accounts through which PagSeguro acquires treasury bonds to comply with certain requirements);
- Others: Trade Payables + Payables to Related Parties + Derivative Financial Instruments + Salaries and Social Charges + Taxes and Contributions + Provision for Contingencies + Deferred Revenue + Other Liabilities;
- Others: Deferred Income Tax and Social Contribution + Provision for Contingencies + Deferred Revenue + Other Liabilities;
- Net Cash Balance: Cash and Cash Equivalents + Financial Investments + Current & Non-Current Account Receivables - Current & Non-Current Payables to Third Parties - Borrowings - Derivative Financial Investments - Current & Non-Current Deposits.
Capital Markets¹
Capital Markets | 3Q23 | 3Q22 | Var. y/y | 2Q23 | Var. q/q | |||
Market Cap | ||||||||
In BRL billion | R$ | 14.21 | R$ | 23.58 | -39.7% | R$ | 14.99 | -5.2% |
In USD billion | $ | 2.84 | $ | 4.36 | -34.9% | $ | 3.11 | -8.8% |
Stock Price | ||||||||
In BRL | R$ | 43.12 | R$ | 71.53 | -39.7% | R$ | 45.49 | -5.2% |
In USD | $ | 8.61 | $ | 13.23 | -34.9% | $ | 9.44 | -8.8% |
Book Value per Share | ||||||||
In BRL | R$ | 40.25 | R$ | 35.29 | 14.0% | R$ | 38.89 | 3.5% |
In USD | $ | 8.88 | $ | 13.64 | -34.9% | $ | 9.73 | -8.8% |
1. As of September 30, 2023; |
Brazilian Central Bank Currency Exchange Rate (PTAX) BRL/USD: 3Q23: R$ 5.0076;
3Q22: R$ 5.4066;
2Q23: R$ 4.8192.
5
Operational Performance
Total Finance Volume
R$ Million | 3Q23 | 3Q22 | Var. y/y | 2Q23 | Var. q/q | 9M23 | 9M22 | Var. y/y | ||
Total Finance Volume | 243,691 | 195,485 | 24.7% | 221,050 | 10.2% | 669,477 | 522,415 | 28.2% | ||
Total Payment Volume | 1 | 99,836 | 90,261 | 10.6% | 92,676 | 7.7% | 280,609 | 259,576 | 8.1% | |
Total Banking Volume | 2 | 143,855 | 105,224 | 36.7% | 128,374 | 12.1% | 388,868 | 262,839 | 47.9% | |
- Total Payment Volume: includes debit cards, credit cards, prepaid cards, vouchers, boletos and PIX P2M (fee-based product);
- Total Banking Volume: includes prepaid card top-ups, PagBank card issuing TPV (debit, credit, prepaid), mobile top-ups, wire transfers to third-parties,cash-in through boletos, bill payments, tax collections, P2P transactions, PIX P2P (no fee-based), credit underwriting, super app top-ups and GMV.
Total Finance Volume (TFV), formerly known as PAGS TPV, totaled R$ 243.7 billion, representing an increase of
+24.7% vs. 3Q22 due to the growth in both Total Payment Volume and Total Banking Volume.
Total Payment Volume (TPV), formerly known as PagSeguro TPV, totaled R$ 99.8 billion, representing an increase of +10.6% vs. 3Q22 mainly due to:
- larger share of wallet mainly driven by the cash conversion into electronic payments;
- maturation of existing cohorts due to increasing productivity of our sales channels; and
- better performance of all merchants' segments, consisting of micro-merchants, SMBs and large accounts.
Total Banking Volume (TBV), formerly known as PagBank TPV, totaled R$ 143.9 billion, representing an increase of
+36.7% vs. 3Q22. This growth is mainly related to our clients' higher engagement with digital bank features (such as PIX, bill payments, mobile top-up), cards' spending and credit underwriting.
PagBank Clients
# Million | 3Q23 | 3Q22 | Var. y/y | 2Q23 | Var. q/q | |
1 | 30.2 | 25.9 | 16.4% | 29.5 | 2.5% | |
Total Clients | ||||||
Active Clients | 2 | 16.7 | 15.8 | 6.3% | 16.4 | 1.8% |
Consumers | 10.6 | 9.1 | 16.4% | 10.2 | 3.5% | |
Merchants | 6.1 | 6.6 | -7.6% | 6.2 | -1.0% |
- Total Clients: Number of bank accounts registered at Brazilian Central Bank;
- Active Clients: Active merchants using one additional digital account feature/service beyond acquiring and consumers with a balance in their digital account on the last day of the month.
PagBank ended the quarter with 30.2 million clients, representing an increase of +16.4% vs. 3Q22, and Active Clients of 16.7 million, an increase of +6.3% vs. 3Q22. This increase is mainly related to higher penetration in the consumers segment which represents 63% of PagBank clients vs. 58% in 3Q22.
Active Merchants
# Million | 3Q23 | 3Q22 | Var. y/y | 2Q23 | Var. q/q | 9M23 | 9M22 | Var. y/y | |||
Active Merchants | 1 | 6.7 | 7.3 | -9.1% | 6.8 | -1.7% | 6.7 | 7.3 | -9.1% | ||
Net Addittions | (0.1) | (0.2) | -39.8% | (0.1) | -22.3% | (0.4) | (0.4) | 13.3% | |||
TPV per Merchant | 2 | | R$ thousand | 14.9 | 12.2 | 22.2% | 12.9 | 15.7% | 40.9 | 36.1 | 13.3% | |
- Active Merchants: At least one transaction in the last twelve months;
- TPV per Merchant: Amount of TPV divided by the average of active merchants during the period.
Active Merchants ended the quarter with 6.7 million, representing a decrease of -9.1% vs. 3Q22. Since early 2022, the company has been adopting a more selective go-to-market strategy focusing on clients with better unit economics, higher activation ratio, and higher engagement in PagBank financial services. Additionally, we have been improving our onboarding and risk assessment processes since early 2023 to reduce chargebacks and losses.
6
Credit Portfolio
R$ Million | 3Q23 | 3Q22 | Var. y/y | 2Q23 | Var. q/q | |
Credit Portfolio | 2,462 | 2,653 | -7.2% | 2,609 | -5.6% | |
Working Capital | 471 | 813 | -42.0% | 625 | -24.6% | |
Credit Card | 816 | 1,014 | -19.6% | 886 | -7.9% | |
Payroll Loan + Others | 1 | 1,175 | 826 | 42.3% | 1,099 | 7.0% |
Provision for Losses | (651) | (903) | -27.9% | (816) | -20.2% | |
Working Capital | (387) | (494) | -21.7% | (513) | -24.6% | |
Credit Card | (236) | (400) | -40.9% | (288) | -18.1% | |
Payroll Loan + Others | 1 | (28) | (9) | 210.2% | (14) | 95.6% |
Credit Portfolio, net | 1,811 | 1,751 | 3.5% | 1,794 | 1.0% |
1. Payroll Loan + Others: Refers to loan portfolios, including advance Brazil's Severance Indemnity Fund (FGTS) withdrawals and payroll loans to public sector employees and retirees.
R$ Million | 3Q23 | 3Q22 | Var. y/y | 2Q23 | Var. q/q |
Credit Portfolio | 2,462 | 2,653 | -7.2% | 2,609 | -5.6% |
Secured Products | 1,469 | 926 | 58.6% | 1,347 | 9.1% |
% Credit Portfolio | 60% | 35% | 24.8 p.p. | 52% | 8.1 p.p. |
Unsecured Products | 993 | 1,727 | -42.5% | 1,263 | -21.4% |
% Credit Portfolio | 40% | 65% | (24.8) p.p. | 48% | (8.1) p.p. |
Credit Portfolio reached R$ 2.5 billion in 3Q23, representing a decrease of -7.2% vs. 3Q22, mainly driven by our strategy to grow in secured products, which represented 60% of the portfolio, combined with the run-off of working capital loans and the write-offs of the working capital loans and payroll loans in 3Q23 and credit cards in 2Q23, according to the credit models update based on IFRS 9 and our tax planning.
Total Deposits
R$ Million | 3Q23 | 3Q22 | Var. y/y | 2Q23 | Var. q/q | ||
Total Deposits | 21,569 | 19,402 | 11.2% | 18,290 | 17.9% | ||
Average Percentage Yield (APY) | 1 | 93.4% | 99.0% | (5.5) p.p. | 94.3% | (0.9) p.p. | |
Checking Accounts | 9,655 | 6,734 | 43.4% | 8,258 | 16.9% | ||
Average Percentage Yield (APY) | 1 | 72.0% | 66.0% | 6.0 p.p. | 73.0% | (1.0) p.p. | |
Merchant's Payment Accounts | 1,736 | 832 | 108.5% | 762 | 127.9% | ||
Banking Accounts | 7,919 | 5,901 | 34.2% | 7,496 | 5.6% | ||
Savings Accounts | 11,914 | 12,668 | -5.9% | 10,033 | 18.8% | ||
Average Percentage Yield (APY) | 1 | 110.8% | 116.5% | (5.7) p.p. | 111.8% | (1.0) p.p. | |
Certificate of Deposits | 9,583 | 10,215 | -6.2% | 8,273 | 15.8% | ||
Interbank Deposits | 2,331 | 2,248 | 3.7% | 1,759 | 32.5% | ||
Corporate Securities | 0 | 205 | n.a. | 0 | n.a. |
1. As % of CDI (Brazilian Interbank Rate).
Total Deposits reached R$ 21.6 billion, representing an increase of +11.2% vs. 3Q22. This increase was driven by the
+43.4% y/y growth in Checking Accounts Balance (following better trends observed in TPV and PagBank cash-in), which allowed us to further reduce annual percentage yields, resulting in lower costs of funding.
Brazilian Interest Rates | 3Q23 | 3Q22 | Var. y/y | 2Q23 | Var. q/q | 9M23 | 9M22 | Var. y/y |
SELIC | 12.75% | 13.75% | (1.0) p.p. | 13.75% | (1.0) p.p. | 11.75% | 13.75% | (1.0) p.p. |
SELIC | Average | 13.38% | 13.58% | (0.2) p.p. | 13.75% | (0.4) p.p. | 13.62% | 12.14% | 1.2 p.p. |
CDI | 12.65% | 13.65% | (1.0) p.p. | 13.65% | (1.0) p.p. | 10.75% | 12.75% | (0.1) p.p. |
CDI | Average | 13.28% | 13.47% | (0.2) p.p. | 13.65% | (0.4) p.p. | 13.52% | 12.04% | 1.2 p.p. |
7
Financial Performance
Total Revenue and Income
GAAP | R$ Million | 3Q23 | 3Q22 | Var. y/y | 2Q23 | Var. q/q | 9M23 | 9M22 | Var. y/y | ||
Total Revenue and Income | 1 | 4,026 | 4,035 | -0.2% | 3,826 | 5.2% | 11,602 | 11,373 | 2.0% | |
Payments | 3,771 | 3,712 | 1.6% | 3,575 | 5.5% | 10,796 | 10,443 | 3.4% | ||
Financial Services | 2 | 260 | 376 | -30.8% | 243 | 7.0% | 834 | 1,052 | -20.8% | |
Other Financial Income | 66 | 46 | 42.2% | 65 | 1.0% | 195 | 132 | 47.2% |
- Including Other Financial Income;
- Including Float, intercompany revenue from Payments' business unit.
Total Revenue and Income reached R$ 4,026 million in 3Q23, representing a slight decrease from R$ 4,035 million reported in 3Q22, but represented an increase of +5.2% quarter-over-quarter. The breakdown of Payments, Financial Services and Other Financial Income differs from Total Revenue and Income amount due to the Float from Financial Services unit, which is an intercompany revenue from Merchant Acquiring funding, not accounted for Total Revenue and Income. Before 1Q23, Float from Checking Accounts Balance was partially booked in Payments. Going forward, 100% of Float will be fully booked in Financial Services, similar to other financial institutions. The main differences will be:
- Total Revenue and Income: The mismatch between Total Revenue and Income and the managerial Total Revenue and Income's breakdown in Payments, Financial Services and Other Financial Income increase given the intercompany Float will no longer offset a portion of the Financial Expenses. In 3Q23, intercompany Float amounted to R$ 71 million vs. R$ 99 million in 3Q22 and R$ 57 million in 2Q23.
- Payments: No change in revenue except for an increase in Financial Expenses, since the share of such expenses offset by the Float usually booked in Payments will no longer occur. Consequently, Gross Profit and Adj. EBITDA will decrease.
- Financial Services: An increase in Revenue since the Float will lead to a higher interest income. Consequently, Gross Profit and Adj. EBITDA will increase.
For more details about Float accounting reconciliation between Financial Services and Payments, please refer to page 16.
GAAP | R$ Million | 3Q23 | 3Q22 | Var. y/y | 2Q23 | Var. q/q | 9M23 | 9M22 | Var. y/y |
Total Revenue and Income | 4,026 | 4,035 | -0.2% | 3,826 | 5.2% | 11,602 | 11,373 | 2.0% |
Transaction Activities and Other Services | 2,269 | 2,292 | -1.0% | 2,166 | 4.8% | 6,586 | 6,602 | -0.2% |
Financial Income | 1,691 | 1,697 | -0.4% | 1,595 | 6.0% | 4,820 | 4,638 | 3.9% |
Other Financial Income | 66 | 46 | 42.2% | 65 | 1.0% | 195 | 132 | 47.2% |
Total Revenue and Income performance is explained below:
- Transaction Activities and Other Services in 3Q23 amounted to R$ 2,269 million, representing a slight decrease of -1.0%vs. 3Q22, but represented an increase of +4.8% quarter-over-quarter.This performance is mainly due to the focus on revenues with higher margins, increasing share of larger merchants in Payments, the impact of the regulatory change on prepaid/debit cards that came into force on April 1, 2023 and the mix change in credit portfolio towards secured products with lower yields and longer duration in Financial Services.
- Financial Income, which represents the discount fees we withhold from credit card transactions in installments for the early payment of Accounts Payable to Third Parties (merchants), reached R$ 1,691 million, representing a slight decrease of -0.4% vs R$ 1,697 million in 3Q22, mainly due to the increasing share of larger merchants with lower take rates and shorter duration of TPV of Credit Card installments.
- Other Financial Income reached R$ 66 million in 3Q23, an increase of +42.2% vs. 3Q22, mainly due to the increase in interest accrued on Cash and Cash Equivalents and higher position.
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Total Cost and Expenses explained by function
Non-GAAP | R$ Million | 3Q23 | 3Q22 | Var. y/y | 2Q23 | Var. q/q | 9M23 | 9M22 | Var. y/y |
Total Costs and Expenses | (3,469) | (3,563) | -2.6% | (3,295) | 5.3% | (10,044) | (9,954) | -0.9% |
Cost of Sales and Services | (2,028) | (1,911) | 6.1% | (1,923) | 5.4% | (5,875) | (5,545) | -5.6% |
Selling Expenses | (377) | (531) | -29.0% | (320) | 17.7% | (1,013) | (1,510) | 49.1% |
Administrative Expenses | (166) | (141) | 17.4% | (162) | 2.4% | (473) | (429) | -9.2% |
Financial Expenses | (820) | (921) | -10.9% | (796) | 3.1% | (2,429) | (2,297) | -5.4% |
Other Expenses, Net | (79) | (59) | 33.3% | (94) | -16.1% | (255) | (173) | -32.3% |
GAAP | R$ Million | 3Q23 | 3Q22 | Var. y/y | 2Q23 | Var. q/q | 9M23 | 9M22 | Var. y/y |
Total Costs and Expenses | (3,514) | (3,610) | -2.7% | (3,341) | 5.2% | (10,168) | (10,088) | -0.8% |
Cost of Sales and Services | (2,033) | (1,862) | 9.2% | (1,926) | 5.6% | (5,889) | (5,502) | -6.6% |
Selling Expenses | (378) | (531) | -28.7% | (321) | 17.7% | (1,018) | (1,511) | 48.4% |
Administrative Expenses | (206) | (185) | 11.3% | (203) | 1.4% | (581) | (555) | -4.6% |
Financial Expenses | (820) | (921) | -10.9% | (796) | 3.1% | (2,429) | (2,297) | -5.4% |
Other Expenses, Net | (76) | (111) | -31.4% | (94) | -19.0% | (253) | (225) | -11.1% |
Total Costs and Expenses, on a non-GAAP basis, amounted to R$ 3,469 million in the 3Q23, representing a decrease of -2.6% from R$ 3,563 million in the 3Q22.
The decrease is mainly related to:
Cost of Sales and Services reached R$ 2,028 million in the 3Q23, representing an increase of +6.1% year-over-year, mainly due to the TPV growth, leading to higher interchange and card scheme fees, and higher POS depreciation and amortization of intangible assets.
When excluding non-GAAP figures related to LTIP (long-term incentive plan), Cost of Sales and Services, on a GAAP basis, reached R$ 2,033 million, representing an increase of +9.2%, from R$ 1,862 million reported in 3Q22.
Selling Expenses totaled R$ 377 million, representing a decrease of -29.0% from R$ 531 million reported in the same period of 2022, mainly driven by lower losses and optimizations in Marketing expenses.
When excluding non-GAAP figures related to LTIP (long-term incentive plan), Selling Expenses reached R$ 378 million, representing a decrease of -28.7%, from R$ 531 million reported in 3Q22.
Administrative Expenses reached R$ 166 million, representing an increase of +17.4% from R$ 141 million presented in 3Q22, mainly driven by higher expenses in software licenses and cloud services.
When excluding non-GAAP figures related to LTIP Costs and M&A, Administrative Expenses reached R$ 206 million, representing an increase of +11.3%, from R$ 185 million reported in 3Q22.
Financial Expenses totaled R$ 820 million in 3Q23, representing a decrease of -10.9% vs. 3Q22, mainly due to a lower average cost of funding led by deposits growth, which posted a strong figure quarter-over-quarter, increasing its relevance in our funding strategy, and lower expenses related to the Brazilian Basic Interest Rate (SELIC) decrease, partially offset by TPV growth in the period.
Other Expenses, net reached R$ 79 million in 3Q23, representing an increase of +33.3% from expenses of R$ 59 million reported in 3Q22. This increase is mainly driven by POS write-off during the period.
When excluding non-GAAP figures related to the capital gains from the revaluation of assets of 10% of NETPOS in the amount of RS 3 million, Other Expenses, net, on a GAAP basis, reached R$ 76 million, representing an increase of +33.3% from expenses of R$ 59 million reported in 3Q22.
On a GAAP basis, including LTIP, M&A and Other Expenses of R$ 45 million, Total Costs and Expenses amounted to R$ 3,514 million, representing a decrease of -2.7% in comparison to the amount of R$ 3,610 million presented in 3Q22.
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Total Cost and Expenses explained by nature
Transaction Costs
Non-GAAP | R$ Million | 3Q23 | 3Q22 | Var. y/y | 2Q23 | Var. q/q | 9M23 | 9M22 | Var. y/y |
Transactions Costs | (1,508) | (1,424) | 5.9% | (1,414) | 6.7% | (4,311) | (4,141) | 4.1% |
% Total Revenue and Income | 37.5% | 35.3% | 2.2 p.p. | 37.0% | 0.5 p.p. | 37.2% | 36.4% | 1.1 p.p. |
Interchange and Card Scheme Fee | (1,450) | (1,380) | 5.1% | (1,357) | 6.8% | (4,145) | (3,975) | 4.3% |
Others | (59) | (45) | 31.3% | (57) | 2.3% | (166) | (166) | 0.0% |
GAAP | R$ Million | 3Q23 | 3Q22 | Var. y/y | 2Q23 | Var. q/q | 9M23 | 9M22 | Var. y/y |
Transactions Costs | (1,508) | (1,372) | 10.0% | (1,414) | 6.7% | (4,311) | (4,089) | 5.4% |
% Total Revenue and Income | 37.5% | 34.0% | 3.5 p.p. | 37.0% | 0.5 p.p. | 37.2% | 36.0% | 1.5 p.p. |
Interchange and Card Scheme Fee | (1,450) | (1,380) | 5.1% | (1,357) | 6.8% | (4,145) | (3,975) | 4.3% |
Others | (58) | 8 | n.a. | (57) | 2.2% | (166) | (114) | 46.1% |
Transaction Costs, on a non-GAAP basis, totaled R$ 1,508 million, representing an increase of +5.9% from R$ 1,424 million in 3Q22. As a percentage of the Total Revenue and Income, Transaction Costs increased to 37.5% in 3Q23 vs. 35.3% in 3Q22.
Transaction Costs, on a GAAP basis, totaled R$ 1,508 million, representing an increase of +10.0% from R$ 1,372 million in 3Q22. As a percentage of Total Revenue and Income, Transaction Costs represented 37.5% vs. 34.0% in 3Q22, mainly driven by:
Interchange and Card Scheme Fees totaled R$ 1,450 million in 3Q23, representing an increase of +5.1% y/y, mainly driven by TPV growth partially offset by the impact of the regulatory changes on prepaid/debit cards that came into force on April 1, 2023; and
Other Costs increased by +31% vs. 3Q22 mainly due to better trends in merchants' additions leading to higher logistics and maintenance costs. The non-GAAP effect of R$ 53 million is related to the termination of the provision related to the PagPhone supply agreement, which was recorded in 2021 and finalized in 2022 (booked in 3Q22).
Net Take Rate
Net Take Rate totaled R$ 2,452 million in 3Q23, representing a decrease of -6.3% vs. 3Q22, mainly due to:
- Payments: higher share of larger merchants with lower take rates and shorter duration of TPV from Credit Card installments; and
- Financial Services: the impact of the regulatory change on prepaid/debit cards that came into force on April 1, 2023, and the mix change in credit products towards secured products with lower yields and longer duration.
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PagSeguro Digital Ltd. published this content on 16 November 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 November 2023 21:22:59 UTC.