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DATE

Wednesday, November 12, 2025 at 5:00 p.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Alexandre Magnani
  • Chief Financial Officer — Artur Schunck
  • Chairman of the Board and Director — Ricardo Dutra
  • Chief Operating Officer and Incoming Chief Executive Officer — Carlos Malaj

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RISKS

  • The company revised its gross profit growth guidance downward from 7%-11% to 5%-7%, explicitly citing "the impact of elevated financial costs in a high-interest-rate environment."
  • Management described the macroeconomic outlook as "more challenging," referring specifically to "slowing economic activity and sustained high interest rates" for the remainder of 2025.

TAKEAWAYS

  • Total Clients -- 33.7 million at quarter-end, up by 1.6 million year over year, with 17.8 million active clients and a 2% increase in banking-only clients.
  • Cash-In Volume -- BRL 95 billion in 2025, rising 14% year over year, and per-client cash-in of BRL 5,500, up 12% annually.
  • Total Deposits -- BRL 39.4 billion, a 15% year-over-year increase, marking a sixth consecutive quarter of funding cost reduction as a percentage of CDI.
  • Total Funding -- BRL 43.7 billion, up 14% from the prior year, with deposits as the primary source to fund merchant prepayment and loan portfolios.
  • Expanded Credit Portfolio -- Over BRL 49 billion (including merchant prepayment-related operations), up 12% year over year; total credit portfolio (excluding merchant prepayment) reached BRL 4.2 billion, a 30% annual increase.
  • Non-Performing Loans (NPL 90) -- Maintained "below the market average," as stated, with only a slight sequential increase despite greater unsecured loan growth.
  • Total Payment Volume (TPV) -- BRL 130 billion, flat sequentially, and referenced as affected by tough prior-year comparables and weaker macroeconomic activity.
  • Net Revenue (excl. interchange/card-scheme fees) -- BRL 3.4 billion for the quarter, increasing 14% year over year, demonstrating the effectiveness of repricing initiatives.
  • Banking Segment Revenue -- BRL 744 million, up 50% year over year, cited as benefiting from credit expansion, deposit growth, and higher monetization.
  • Gross Profit -- BRL 1.9 billion, up 2% year over year, or 5% when excluding a BRL 64 million negative impact from buybacks and dividends.
  • Banking Gross Profit -- Grew 59% year over year, representing "more than 28%" of total gross profit, with banking gross profit margin at 72%, up from 68% in 2024.
  • Financial Costs -- Increased by 45%, primarily due to over 400 basis points of higher interest rates and capital structure adjustments; partially offset by funding mix diversification and cost of funding reduction.
  • Total Losses -- Fell by 26%, attributed to improved onboarding (KYC) and risk controls, although partially offset by higher ECLs from credit acceleration.
  • Operating Expenses -- Decreased by 3% year over year, with personnel expenses lower due to a leaner structure and cost control; achieved an operating leverage gain of 400 basis points as a share of revenue.
  • Non-GAAP Net Income -- BRL 571 million, stable year over year and up 1% sequentially, reflecting ongoing profitability discipline.
  • Diluted GAAP EPS -- BRL 1.88, increasing 14% year over year, supported by cost control and capital discipline.
  • Return on Average Equity -- Annualized rate rose to 15.1% from 14.8%, a 30 basis point improvement versus Q3 2024.
  • Capital Return to Shareholders -- Over 18.5 million shares repurchased year to date; BRL 617 million in cash dividends paid, with an announced BRL 1.4 billion distribution for 2026.
  • Guidance Update -- Gross profit guidance revised downward to 5%-7% growth (from 7%-11%); nine-month diluted EPS guidance narrowed to 13%-15% (from 11%-15%), with nine-month diluted EPS up 15.7% year over year (normalized for share count).
  • Leadership Changes -- As of January 1, 2026, Carlos Malaj to become CEO and Gustavo Sechin to become CFO; outgoing CEO Alexandre Magnani and CFO Artur Schunck will join the board of directors pending shareholder approval.
  • 2029 Targets -- Strategic ambition includes a BRL 25 billion credit portfolio, above 10% gross profit CAGR, and above 16% EPS CAGR by 2029, with ongoing emphasis on working capital loans and AI-driven solutions.
  • Competitive Environment -- Management affirmed competitive rationality persists due to "15% per year" base interest rates, curbing "irrational" market-share pursuits.
  • Working capital loan originations are currently around BRL 70 million per month, with ongoing clustering and "field test" to potentially increase run rates in coming quarters.
  • Average working capital loan size is roughly BRL 20,000 to BRL 30,000, with average interest rates between 4%-7% depending on risk profile.
  • Chargebacks -- Chargeback levels have normalized, with the risk engine and onboarding controls yielding a "business-as-usual" level expected to persist.

SUMMARY

Management delivered a comprehensive update on both operational and financial metrics, highlighting disciplined cost and capital management amid macroeconomic headwinds. Strategic efforts focused on deposit growth, funding cost reduction, credit portfolio expansion, and repricing tactics collectively drove double-digit revenue and segment profit increases despite stable transaction volumes. Management provided full transparency on leadership succession, reinforcing governance continuity and the path toward ambitious medium-term profit and growth targets.

  • Management stated, "We have delivered positive earnings every single quarter since IPO," emphasizing durable profitability through various macro cycles.
  • The company's loan-to-funding rate stood at 113%, demonstrating robust deployment of sourced funding for credit activities.
  • "As we continue to scale our banking operations, we are opening new paths for growth," management noted, supporting the case for future cross-sell and product expansion.
  • Repricing of acquiring products was identified as key to offsetting higher financial costs and supporting a "more sustainable revenue base."
  • Monthly origination of BRL 70 million in working capital loans was described as the "beginning of this journey," with the company "being very careful to test all kinds of clusters and customer profiles" to optimize net credit margin.
  • On personnel costs, management attributed savings to a "leaner structure," with expectations of stable expense levels moving forward.
  • Banking now accounts for "over 27% of total gross profit," a substantial increase reflecting ongoing product and client mix shifts within the ecosystem.
  • Despite slightly higher NPLs, management expects asset quality to "remains below the market average," acknowledging expected incremental increases due to unsecured credit growth.
  • Leadership succession was described as a "planned succession process started last year," with outgoing executives supporting the transition on the board of directors.

INDUSTRY GLOSSARY

  • CDI: Brazil's interbank deposit rate, serving as the primary floating reference for domestic financial instruments and funding costs.
  • TPV (Total Payment Volume): The total value of transactions processed within the acquiring/payment ecosystem in a given period.
  • NPL 90: Ratio of loans more than 90 days past due, used to assess credit asset quality.
  • KYC: Know-Your-Customer process for validating customer identity and managing risk.
  • ECL: Expected Credit Losses, reflecting anticipated losses from the loan portfolio under current and forecasted conditions.
  • PIX: Brazil's instant payments platform enabling real-time fund transfers between accounts.
  • Basel Index: Regulatory capital adequacy ratio, used to assess financial institution capital strength relative to risk-weighted assets.
  • FGTS: Brazil's employee severance guarantee fund, relevant to payroll-backed lending products.
  • Selic: Brazil's central bank policy rate, a benchmark for interest rates in the local economy.

Full Conference Call Transcript

Ricardo Dutra: Hello, everyone, and thank you for joining our third quarter 2025 earnings call. I will begin with Slide four, which summarizes our key operational and financial highlights. This quarter, we continue to execute our strategy with discipline, navigating a more challenging macroeconomic environment while maintaining our focus on long-term value creation. We ended the quarter with 33.7 million clients, growing 1.6 million clients year over year. In Q3 2025, we continue to demonstrate resilience, protect profitability, and navigate 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.

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. 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 API. 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 flat year over year while diluted EPS on a GAAP basis reached 1.814% higher year over year, supported by consistent cost discipline and capital efficiency. On capital efficiency, we have returned BRL 2 billion to shareholders through dividends and share repurchase. We repurchased 3.3 million shares year to date, 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 five, despite a more cautious economic backdrop, our track record continued 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. 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 balancing 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. 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 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. Move to the next slide. As we have emphasized in recent quarters, there is still meaningful room to grow 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.

As we continue to scale our banking operations, we are opening new paths for growth, whether through 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 will hand it over to Alexandre Magnani who will walk through the operational highlights for the quarter.

Alexandre Magnani: Thank you, Ricardo. Hello, everyone. In this section, we walk through the performance of our business units for 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 twelve 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 2025, cash-in totaled BRL 95 billion, representing a 14% increase compared to the same period last year.

On a per-client basis, the figure advanced to BRL 5,500, marking a 12% annual increase. These results reflect the strength of our platform and the growing intensity of client engagement across our base. In addition, we are witnessing broader uptake of new payments, fixed transactions, investment, and insurance solutions, signaling stronger relationships and monetization as customers increasingly entrust us with 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 sixth consecutive quarter of reduction in 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. When we include other funding sources, 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 is 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 rate, 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 greater transaction activity across both our banking and payment segments. In doing so, we unlock cross-sell and capture the full potential of our ecosystem. In the third quarter, our total credit portfolio reached BRL 4.2 billion, a 30% year-over-year increase. Since 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 two and a half times the volume of working capital loans compared to 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 twelve 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.

With that, I will now hand it over to Artur Schunck who will walk through the financial highlights of 2025.

Artur Schunck: Hello, everyone, and thank you for joining us today. I am following the presentation with our consolidated financial results for 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 2024. These initiatives have been crucial to offsetting higher financial costs and securing a more sustainable revenue base in a more challenging growth environment. Our revenue growth once again outpaced the 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. 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 increased 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 twelve months. 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, an increase of 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 would 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. These results highlight the strength of our platform, the diversification of our revenue streams, and our ability to efficiently offer complementary products and services. On slide 17, we dive into our cost and expenses structure this quarter.

Our disciplined approach to managing expenses continues to be a part 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 KYC and onboarding processes, 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 and cost management. This reduction was driven mainly by lower personnel expenses along with more disciplined marketing investments. As a percentage of total revenue and income, we achieved 400 basis points of operating leverage compared to the same period 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 am 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. 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 shareholder value and our capital structure. 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, 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 BRL 617 million in cash dividends already paid in 2025, we announced in September a BRL 1.4 billion dividend distribution for 2026, to be paid in four installments, further reinforcing our commitment to enhance shareholder value. 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 consistent 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. 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. 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 6.3% year over year.

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 Magnani for the closing remarks.

Alexandre Magnani: Thank you, Artur. Before we conclude, let's move to the next slide for a few final thoughts. Throughout 2025, we have 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. 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. 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 loans and AI-powered solutions like private payroll and fixed finance. 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.

Ricardo Dutra: Before I move to Q&A, I would like to share some leadership updates. Effective January 1, 2026, as part of our planned succession process started last year, Carlos Malaj, our current Chief Operating Officer, will become our new Chief Executive Officer, and 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 Alexandre and Artur 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 Alexandre and Artur to the company's board of directors. Looking ahead, I am confident that Carlos, who joined PagSeguro Digital Ltd. one year ago, will build on this solid foundation and lead the company in this next chapter of growth. 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 services consistent with our long-term strategy.

Gustavo, who also joined PagSeguro Digital Ltd. last year and has more than twenty-five years of experience in the financial sector, brings an extensive background to continue strengthening our financial organization and execution. Finally, I would like to thank all our teams, the people who work hard every day to make PagSeguro Digital Ltd. 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.

Operator: Thank you for the presentation. We will now begin the Q&A session for investors and analysts. 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 through 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. Please wait while we poll for questions.

Operator: Our first question 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 Malaj and Gustavo Sechin as CEO and CFO, and also recognize the work so far of Alexandre Magnani and Artur Schunck during this transition. So, in the middle of the quarter, you announced a strategic update, right? So you put together a bunch of KPIs and guidance for 2029. And you have mentioned on your credit portfolio that 2026 could be more of a transition year before a stronger credit origination cycle, right? So especially in working capital. But looking at your numbers in the third quarter, unsecured lending is already showing meaningful sequential acceleration in the origination.

So probably the portfolio could close this year at BRL 1 billion. So it feels like there is room to grow well above two times next year, particularly considering your expansion right now. So the question is, 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 a steeper curve in your appetite for working capital loans? Thank you.

Carlos Malaj: Hello, Daniel. This is Carlos Malaj. 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 on where we are working in a different set of products. We have the secured products that we already have processes and systems in place. 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 doing in the past few years.

And we have this second work stream that I am calling here a scale-up work stream, where we are talking about products that we already have the platforms in place, but we are still finding the right credit balance to find different levels of credit production. Those products are working capital that you saw the production increasing in the third quarter of this year, the overdraft, which is a quite important product to us, especially due to the reason, which is a very high-yield product, and credit cards that are still a challenge to us here. So again, we already see the working capital producing something around BRL 70 million in terms of credit production on a monthly basis.

And we already have credit clusters in test that can push this production up to BRL 100 million. So this is what we have on a very short time frame. So you can see a little bit where we are in terms of credit production on working capital. And there is a third work stream, which is going to show up in 2026, which is the two main products that are being developed as we speak here, which are the fixed financing and the payroll personal loans that are 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.

So that is a little bit how we are. Yes, we are accelerating. But as you know, taking credit risk is a matter of testing different levels, different credit clusters, different ways to collect to test actual collections products here so we can push up observing the right performance in terms of net credit margin. Hopefully, I answered your question.

Daniel Vaz: Yeah, that is super clear. If I may follow-up on your scale-up portfolio. 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 exciting you for going above this number, or BRL 70 million could be a good estimate for us to work on?

Carlos Malaj: No, no. We are going to push this production. We are just at 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. So probably you are going to see higher numbers as we evolve on the credit strategy.

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

Operator: Our next question comes from Ricardo Buchpiguel from UBS.

Ricardo Buchpiguel: Hi, everyone, and thank you for the opportunity to ask questions. In the quarter, we saw that acquiring TPV was kind of flat quarter over quarter and fell around 5% year over year. 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 is alright, that we can already see some signs of reacceleration in Q4 adjusting for the seasonal effect? Thank you.

Ricardo Dutra: Ricardo, thank you for the question. Yes, you are right. The TPV was flat sequentially. We do understand TPV is one of the metrics that we should follow here. As we have been saying in the past quarters, TPV per se is not the main important metric for us, but, of course, it is part of the volumes that we need to manage here. I am going to talk to you about the past Q2 and Q3 and then looking forward. But look, past Q3, we have first, it is important to remember we have a very, very hard comp from Q3 2024, where we grew 36% versus the previous year.

That was the largest TPV percentage growth in a quarter, I guess, in the past couple of years. So Q3 2024 was a very, very strong quarter, so we have this hard comp. Also, understand the macro and the lower economic activity have impacted our merchants as well, especially those with a lower income profile. 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 then we adjusted a few months ago. And I would say to you that looking on a year-over-year basis, August was the bottom in terms of growth or decrease in August.

September was better than August. October is better than September. So it seems that it reached the bottom in August, with the changes that we did a few months ago when you have these cohorts piling up, we expect to see a better TPV result looking forward. So that is the overall picture here. And remember that we always look at the client as a whole, focusing on increasing the gross profit and EPS. So if you have a TPV that is accretive, we will go for it. So that is pretty much the scenario about TPV.

Ricardo Buchpiguel: That is very clear. And just a quick follow-up. If you could also comment about the competitive environment in the current segment, if you notice any changes during Q3 and the start of Q4, it would be very helpful. Thank you.

Ricardo Dutra: We do not see changes in the competition in terms of irrationality. We see all players being rational. You know, 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. So we do not see companies trying to get market share at any price. Everyone is trying to be rational and preserve profitability. So by having this 15%, of course, we have everyone being more focused on the bottom line and less on the market share. So to go back to your question, no big changes in competition in Q3, not even in Q4.

Ricardo Buchpiguel: Perfect. Thank you.

Operator: Next question comes from Beatriz Abreu from UBS. Microphone is open.

Kaio Prato: Hey. Sorry. It is Kaio Prato here from UBS. So I have two questions, 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, the size, average size of this client? If you can share 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. 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.

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. Thank you.

Carlos Malaj: 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 BRL 20,000 and BRL 30,000. The range of our interest rate here is between 4% and 7% depending on the risk level of this customer. And there 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.

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. So every month here, we pretty much put a field test to make sure that we can create this environment where we can penetrate most of our customers here that are eligible for a credit offer. Second, talking a little bit about risk management under the chargeback perspective, I could tell you that we have, let us say, a business-as-usual level on chargebacks here. There is no concern in front of us.

We are being involved in our, let us say, real-time risk engine to make sure that we can filter the better transactions. And as Artur mentioned here in the first part of the presentation, we have a different level in terms of quality on our onboarding process that also helps filter the bad customers and the bad transactions out of our ecosystem. So looking forward, I could say that this relative level of chargeback that you see in the third quarter, we will see this number across the next few quarters.

Kaio Prato: Okay, perfect. Thank you very much.

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

Thiago Binsfeld: 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, 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. If you have any views on the impact from the income tax exemption for individuals that earn up to BRL 5,000 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.

Carlos Malaj: Well, I am going to 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 is a little tougher than everybody expected, we have been quite, as I mentioned here, diligent in managing OpEx. Of course, that is some of the discipline to prioritize better everything that we are 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 deployed. So again, we are being very diligent on everything that we are doing here. And probably, OpEx is going to keep offering us some room to reinvest in our customers. So that is the first part of the question here.

Ricardo Dutra: Regarding the second part about the taxes for people that have a salary that is lower than BRL 5,000 per month. As we have been saying in the media, that is going to help for the low-income people or for the people that receive this BRL 5,000 or less have more availability of cash to spend. So, of course, that could be beneficial for us. We do not know how big it is going to be, but definitely, it could be slightly positive because there is going to be more liquidity for the low-income people of the country.

Thiago Binsfeld: That is clear. Thank you.

Operator: Our next question comes from Yuri Fernandes from JPMorgan. Mr. Fernandes, your microphone is open.

Yuri Fernandes: Well, thank you all. Good evening. So wish you the best of luck for the current administration and the new management. I have a question regarding expenses here, notably personnel 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. But the drop was pretty important here. Right? It seems to be a BRL 40 million per quarter line, and I think it was, like, BRL 34 million this quarter. So if you can provide a little bit of explanation on what drove lower share-based compensation, what is driving this better personnel expenses line here for you.

That is my first one. And a second one, just on the NPL, pretty stable, like, 10 basis points increase. I think it is totally fair. But your portfolio is growing a lot on the unsecured mix. Right? So just trying to understand what could we expect for the NPLs on this growth outlook you have. Like, should we continue to see NPLs going marginally up every quarter, not really? Like, any color on what should we expect on asset quality given your mix? I think it would be appreciated. Thank you very much.

Artur Schunck: Thank you, Yuri, for the questions. I will answer the first one related to the personnel expenses. Part of the gains that we see in Q3 is related to a leaner structure that we are working on, as Carlos Malaj mentioned, we are so diligent to control expenses here and personnel is so important to us. And part of the decision process that we have, the layoffs that we applied in January, may also have 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 it to increase a little bit, not too much.

So the level will be roughly speaking the same as Q3.

Carlos Malaj: And jumping to the second part of your question. We are going to keep our NPLs lower than the average of the market here. But, of course, due to the high concentration in terms of mix, that we have unsecured loans today, we are going to see NPLs going up quarter over quarter, slightly respecting the new mix that we are deploying here on our credit strategy.

Yuri Fernandes: Super clear. Thank you very much.

Operator: Our next question comes from Hasan Shirazi from Citi. Mr. Shirazi, your microphone is open.

Hasan Shirazi: Hi, all. Thanks for the opportunity to ask questions. I wanted to dive into the deposits. I see it grew 15% year over year, which is something in line with the last twelve months and a 78. Though I want to understand better the underlying trends, if there are inflows, what you have been seeing. Thank you.

Ricardo Dutra: Hasan, can you repeat the metric? We did not get it here. The 15% is the metric? Deposits.

Hasan Shirazi: Yeah. We see a 15% increase in deposits year over year, which is in line with the Selic rate. Right?

Artur Schunck: The average for the past twelve months, maybe around 12-14%.

Hasan Shirazi: So I wanted to understand better the inflows and outflows during this period and expectation from all of this should be growing mostly on. Thank you, Hasan.

Ricardo Dutra: Yes. We grew this from BRL 34 billion to BRL 39.4 billion compared year over year. I do not think there is a relationship with Selic. Of course, we try to make the ecosystem stronger and stronger. So if you look at some of the slides, you see the cash-in of PIX that grew 14%, reaching more than BRL 95 billion. So what we try to do here is to make the ecosystem more engaged for the client so that we have this more, I would say, complete relationship with him, not only the acquiring, but also in terms of deposits, in terms of use of cards, and so on.

It is a very decent growth when you think that it is 34% to 39%, 15% growth in terms of the deposit. So and with our cost of funding going down, that is important to highlight that even they are growing 15% in terms of deposits with the cost of funding as a percent of CDI going down. Thank you.

Hasan Shirazi: Thank you.

Operator: Our next question comes from Neha Agarwala from HSBC. Ms. Agarwala, your microphone is open. It was Ms. Neha. Your microphone is open. This is Neha. You are still on mute. Please rejoin the queue if you want to ask a question. Our next question comes from Pedro Leduc from VPA. Mr. Leduc, your microphone is open.

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 are hurt by the higher rates. But at least, you know, Q4 onwards, they should be more stable with Q3. So if I could maybe get a sense of how that TPV volume mix is recovering, what is driving it? Also for us to have a sense here. And also if you could share your views on how gross profit margins are going to evolve over the next couple of quarters? Thank you.

Carlos Malaj: 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 in the dynamics of the business as long as we pay most of our TPV upfront, and that makes the company more capital intensive. And, of course, when we see the other side of the macro cycle, we also then tend to capture better spreads when we see the basic interest rates going down.

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

Ricardo Dutra: And just to complement here, Pedro, we, of course, we follow TPV, but most importantly, we follow revenues. So if we look at revenues year over year, growing 14%, it is 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. So the idea, of course, is to grow in a sustainable way. But I would say that one of the metrics that show we are doing a successful work here is the growth of revenues, 14%, and also the growth of EPS is related to the expenses control we have been doing throughout this year. Thank you.

Pedro Leduc: Thank you.

Ricardo Dutra: Everyone, thank you very much for your time. See you next call. I would like to take this opportunity to say thank you to Alexandre Magnani and Artur Schunck for the excellent and extraordinary job as executive officers in this company. They are going to join us as board directors to keep supporting the company, and we wish luck and to count on all the support for Carlos Malaj and Gustavo Sechin in their new roles. Thank you very much.

Operator: This concludes PagSeguro Digital Ltd.'s conference call. We thank you for your participation and wish you a very good evening.