Sentiment Analysis of the earnings transcript to help figure out if there are any bullish or bearish sentiments that could be gathered from it. We're doing ML and AI based analysis on the earnings call to get some more insights.
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| Statement |
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| This opportunity remains extremely attractive to us as our development to provide end-to-end digital underwriting allow us to give very competitive price with incremental gross profit contribution, which will continue to open new growth avenues |
| Our additional leverage coming from lower losses and operating expenses led to EBITDA growth of 8% quarter-over-quarter with significant improvement in our EBITDA from payment units which grew 18% versus first quarter, led by lower transactional costs yield and also related to the regulatory change on prepaid and debit cards, neutralizing potential effects in bottom line from lower revenues |
| And we see opportunity to keep growing faster till the end of the year, our TPV and consequently our revenues |
| In terms of payments, we have a positive effect of our TPV growing 4% year-over-year that resulted in BRL141 million of revenues |
| And if you look at the whole MSMBs growing 10% in the second quarter, which is very impressive, if you look at -- if you think that the market is growing like 5% |
| Still, our strategy to combine growth with profitability since day one, led to our solid financial position of BRL7.6 billion in accumulated net income and more than BRL10 billion in net cash balance |
| We kicked off August with S&P Global attributing the highest rating in the local scale brAAA to BancoSeguro, our subsidiary responsible for the issuance of PagBank certificate of deposits, one of our competitive strengths in our funding strategy |
| So we believe a lot that this company is a great company, especially for the future because it's a solid company, solid balance sheet and we are growing this company for the future, not just for one quarter |
| Total revenue and income grew 2% quarter-over-quarter, positively impacted by TPV growth and financial income, partially offsetting the impacts in top line related to the regulatory change in interchange cap on prepaid and debit cards that came in force in April 1 |
| Our cash earnings continued to gain momentum reaching a positive amount of BRL319 million, up 24% versus second quarter 2022 |
| Obviously moving forward as we have all these risk management program in place and better balance as we have went through the repricing cycle and now we see opportunities to further growth in the future as we have been experienced these in the beginning of the third quarter |
| Our strategy to grow in selected verticals resulted in higher margins with adjusted EBITDA reaching BRL849 million, 90 basis points higher than the second quarter of 2022, resulting in net income of BRL415 million in non-GAAP basis |
| Earnings before tax also presented a strong growth of 13% quarter-over-quarter and 7% year-over-year due to the sustained adjusted EBITDA breakeven in Financial Services division |
| I mean it's maybe too early to say, but the signs that are having in Q3 are encouraging with 8.5% growth year-over-year in the first 45 days of Q3 |
| But at the end of the day, we think we have a strong value proposition with a very powerful combination |
| Earnings per share increased again and achieved BRL1.18 in the quarter, 5% better than Q1 '23 |
| Better-than-expected Financial Services results led to a higher tax income rate, which did not imply headwinds for profitability |
| Our merchant acquiring business remains solid and through the combination of our superior value proposition and the broad reach of our sales channels |
| We have been able to grow above the market in the MSMB segment as presented in Slide 5 |
| During the first 45 days of 3Q '23, we noticed an uptrend in TPV growth to 8.5% year-over-year from 4% on the second Q '23 |
| In MSMB, we have improved our sales on the online channel, which we expect to contribute to the TPV growth moving forward |
| HUBs presented further improvements in sales productivity and increased cross-selling of financial service through PagBank business account |
| This has been driving up accounts balanced deposits and improving our understanding about merchants needs resulting higher share of wallet |
| On the other hand, gross profit reached BRL111 million, up 57% year-over-year led by better asset quality in the credit portfolio requiring lower provisions for expected credit losses |
| As a result, gross profit reached BRL1.3 billion, an increase of 11% when compared to the same period of last year with transaction costs and financial expenses performances being the main operating leverage drivers |
| MSMB TPV grew 10%, almost twice as much as the industry growth this quarter |
| Net margin on a non-GAAP basis grew 60 basis points versus second quarter 2022, resulting BRL415 million in net income |
| Our earnings per share market BRL1.18, 7% higher year-over-year |
| I understand when you mentioned that you are moving towards larger merchants and it is positive in terms of EBITDA growth |
| So for the SMBs, they understand the value proposition, we have this advantage, of course |
| Statement |
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| Going over this cycle from last -- at the end of last year into the beginning of this year, these slowed down our growth in the acquiring business in general, affecting longtail and affecting large accounts especially |
| We know we have seen some net add losses in longtail, part of that is churn that happened one year ago, so we're not seeing this TPV for the past 11 months because they stopped working with us one year ago and then we are seeing churn right now |
| In the next slide, Financial Services verticals total revenues reached BRL242 million in second quarter 2023, 27% lower than first quarter, impacted by the regulatory change in prepaid and debit cards interchange fee and settlement term and higher share of secured credit products with lower APYs, but longer duration as payroll loans |
| We saw that Q2 was -- we saw some decrease in card volumes in the overall economy |
| So that's why longtail at the end of the day I would say is losing clients because they're churning or they're going up for the SMBs |
| We do see that the industry is decelerating, but can you give us a little bit more color on why we're seeing the slowdown in growth overall with it? Because card penetration in Brazil is already reaching like a mature level |
| But what we are seeing is that actually your TPV is growing slightly below industry, I think, on a year-over-year basis |
| So it's hard for you -- for us to predict to say to you that 171 will keep going down in Q3 and in Q4 |
| But at this point, we didn't see pressure |
| If you saw debit and prepaid, you're going to see there is going to be some increase there, but probably PIX is cannibalizing the growth of debit |
| And remember that we had this decrease from 13.75% to 13.25% |
| The ongoing downtrend in NPLs over 90 days to 14.4% combined to our tax planning allowed us to write off BRL219 million |
| Questions on the expenses or losses front |
| And more importantly, total revenues excluding transaction costs are declining year-over-year |
| Mix change towards secured credit products which have lower yields and longer durations, however, this short-term negative effect is expected to disappear as the portfolio grows and mixture |
| Total losses decreased 55% year-over-year, accounting BRL122 million, driven by lower provision for expected credit losses of credit portfolio, healthier coverage ratio and credit underwriting mostly on secured products |
| Operating expenses reached BRL589 million, down 5% year-over-year and flattish quarter over quarter |
| So do you see any signs that competition or any other financial aspects to be more broader here, could make PAGS not enjoy the full benefit or the bulk of the benefit of the lower SELIC in its bottom line? And second question is CapEx increased quarter-over-quarter |
| In Financial Services, we lost BRL74 million versus second quarter '22 due to interchange cap on prepaid and debit cards with negligible impact in bottom line given the natural offset in transaction costs and financial expenses |
| It was higher than Q1 '23, but it was lower than Q2 '22 |
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