PagSeguro Digital Stock

Good evening. My name is Sophia, and I will be your conference operator today. Welcome to PagSeguro Digital Earnings Call for the Second Quarter of 2026. 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. [Operator Instructions] Today's conference is being recorded and will be available on the company's IR website after the event is concluded. Now I will turn the call over to Daniel Spencer Pioner, Head of Investor Relations.

Good evening, everyone, and thank you for joining PagBank's Second Quarter 2026 Earnings Conference Call. We appreciate your time and interest in our company. Joining me tonight are Ricardo Dutra, our Principal Executive Officer; Carlos Mauad, our CEO; and Gustavo Sechin, our CFO. [Operator Instructions] I now turn the call over to Ricardo Dutra for this quarter's highlights and key accomplishments. Dutra, please go ahead.

Good evening, everyone, and thank you for joining our earnings call. Let's start on Slide 4 with some key figures. Q2 was another solid quarter for our company. We continue to increase client engagement while expanding our multiproduct ecosystem across payments, banking and credit, driving resilient profitability and reinforcing the strength of our business model. Total payment volume reached BRL 133 billion, up 3% year-over-year, reinforcing the gradual reacceleration trend we have seen over the past quarters. Our expanded credit portfolio reached BRL 52 billion, while total loans increased impressive 31% year-over-year, driven mainly by the expansion of working capital and credit cards offering. Total deposits continue to grow, reaching BRL 43 billion, up 15% year-over-year and provide an important foundation to support future credit growth.

On the financial side, net revenue, excluding interchange fees, reached BRL 3.4 billion, growing 2% year-over-year, mainly driven by acquiring volumes reacceleration in our credit portfolio. Recurring net income, non-GAAP also grew 2%, reaching BRL 576 million, while diluted non-GAAP EPS increased 10%, supported by earnings resilience and capital optimization initiatives and within our guidance range for the year. Overall, we're seeing the strategy play out as expected, stronger engagement, broader monetization and resilient profitability despite a challenging macro environment.

Going to Slide 5. Before moving into the business highlights, it is worth stepping back and looking at the broader value creation journey. Over the last 12 months, PagBank returned approximately BRL 2 billion to shareholders through dividends and share buybacks, represent a last 12 months total yield of around 13.4%. Since our IPO, we have significantly expanded the platform. We started as a payment-led ecosystem and have gradually built a much broader financial service platform around our clients' needs, combining payments, banking, credit, investments, insurance and new digital solutions. This evolution has increased the recurrence of our results, expanded our addressable market and strengthened our ability to monetize client relationships across different products and use cases.

With that, I'll now turn the call over to Carlos Mauad.

Thank you, Dutra, and good evening, everyone. Before going into the business update, I would like to start on Slide 7 with the key messages that frame our performance this quarter and our long-term ambition. Q2 reinforces the consistency of our strategy. We continue to evolve our ecosystem with broader monetization across payments, banking and credit, while deepening our relationship with our active client base. This evolution is reflected in our operational performance with acceleration in all business from TPV to credit portfolio and most importantly, with increasing penetration of our banking products across our active client base.

At the same time, execution and discipline are central to how we manage the business. demonstrating the resilience of our business model. On the second quarter of this year, we protected profitability supported by financial cost efficiency, operating leverage and disciplined capital allocation. Finally, as we move forward, our focus remains on strengthening our competitive position, capturing the opportunities ahead and consistently executing against both our 2026 commitments and our long-term strategic ambition.

With that context, let me move to the business overview and the opportunity ahead of us. Starting with the marketing opportunity, we continue to see significant room for growth across our core verticals. PagBank has built an integrated platform across payments, banking and credit, serving individuals and micro, small and medium-sized business in markets where penetration remains low and growth potential is still meaningful. Our ecosystem give us several avenues for growth. We have opportunities to increase share in PIX, deposits, expanded credit and other financial service. In several of these markets, our current share remains below 1%, which reinforce how much room we have to expand.

Moving to Slide 9. Product innovation continues to support engagement and monetization across the ecosystem. During the quarter, we advanced several initiatives designed to make PagBank more useful in our clients' daily lives. These includes Minizinha Voz, the first terminal in Brazil featuring an AI-powered sales assistant launched in January of this year; IOF cashback on international credit card transactions; private payroll loans; and PIX Finance, an integrated PIX installment solution, both products launched earlier this year and to be rolled out in the next months; zero fee investments; private pensions plans; collections management tools and new insurance products.

What is important here is that these products expand our relationship beyond payments. They strengthen our banking and financial service offering, create additional cross-sell opportunities and support our long-term ambition of building a more complete financial platform for both merchants and individuals. As we have discussed before, the more products the clients use, the more engaged they become with the platform. That drives transaction activity and creates additional monetization opportunities over time.

Turning to banking on Slide 10. Engagement continues to translate into higher transactionality and broader product adoption. Cash-in volumes, excluding acquiring-related inflows reached almost BRL 100 billion in the quarter, increasing 23% year-over-year and 19% quarter-over-quarter. Cash-in per active banking client reached BRL 5,700, up 27% year-over-year. We also continue to see stronger usage of our daily banking features, including bill payments and PIX transactions with increase of 12% year-over-year.

In parallel, product penetration expanded across the active client base. Investment penetration increased from 23% to 28%, while insurance penetration increased from 11% to 16% year-over-year. Credit products penetration, excluding payroll clients also increased from 4% to 6%, a strong 43% expansion that shows not only our capacity to perform, but most important, the growth potential in this avenue. What we are seeing is simple. Clients are bringing more activity into PagBank and using a broader mix of products. This deeper relationship is central to our strategy, and it supports higher engagement, broader monetization and stronger lifetime value.

Moving to Slide 11. Credit remains one of the key growth levers. It deepens client relationships and gives us additional opportunities to monetize the ecosystem. Our total credit portfolio reached BRL 5.1 billion, increasing 31% year-over-year. Growth was mainly driven by working capital and credit cards, both of which are important in the long-term strategy and to the 2029 ambition we have shared with the market. Working capital reached BRL 0.6 billion in credit outstanding, growing 204% year-over-year, while credit cards reached BRL 1.1 billion, up 35% year-over-year. Payroll loans and other credit products totaled BRL 3.4 billion, increasing 18% year-over-year.

This is also worth highlighting the origination trend. While working capital origination was lower on average in Q2 compared to Q1, July already shows a stronger run rate at approximately BRL 80 million in credit production. This is above Q2 average and also above the average levels seen in the prior quarters, which gives us confidence in the continued momentum and scalability of the product. When we include financial operations linked to merchants prepayment, the expanded credit portfolio reached BRL 52.4 billion, up 9% year-over-year and 3% quarter-over-quarter.

Just as important, we are growing the portfolio while maintaining the prudent risk profile. NPL90 stood at 3.4%, remaining well below the Brazilian market average of 6.2%. This reflects the strength of our underwriting, enhanced analytics, risk governance and the proximity we have with our clients through the ecosystem. As expected, the portfolio mix continues to evolve gradually with unsecured products increasing as a share of the total portfolio. This is consistent with our strategy and remains supported by prudent risk management across cycles.

Let me move to funding on Slide 12, which remains one of our key competitive advantage. Total deposits reached almost BRL 43 billion, growing 15% year-over-year, while total funding reached BRL 47 billion, up 10% year-over-year. More than 90% of our total deposits are generated on platform, which reinforce the strength of our ecosystem and the relevance of our digital channels. The growth of our deposit base, combined with a high on-platform concentration and lower funding cost provides a scalable and efficient foundation to support credit expansion.

During the quarter, we continued to optimize the cost of funding. The company has now delivered nine consecutive quarters of funding cost reduction as a percentage of the CDI, reflecting a disciplined liability management and improvements in product pricing and remuneration conditions. This funding structure gives us flexibility to continue to grow credit while maintaining a healthy balance sheet and strengthening client relationship.

Now I will hand it over to Gustavo to cover how these business trends translated into financial performance. Gustavo, please.

Thank you, Mauad. Hello everyone, and thank you for joining us today. I will now cover our consolidated financial performance for the quarter. This slide shows the contribution of business execution and funding efficiency to revenue and gross profit. Total revenue and net income, excluding interchange fee, reached BRL 3.4 billion in the quarter, increasing 2% year-over-year and 1% quarter-over-quarter. Gross profit reached approximately BRL 2 billion, growing 3% year-over-year and 6% over-quarter. This performance reflects business execution, continued contribution from banking and credit, and a sequential improvement in financial costs.

At the same time, it's important to note that interest rates remain high for the year, and the rate cuts have not come in the magnitude initially expected. So we continue to manage pricing, funding and capital allocation with discipline. The banking business is an important driver of our results. Higher transactionality, credit expansion and broader product penetration are contributing to a more diversified gross profit base and reinforcing the value of our integrated ecosystem.

Now on Slide 15, we provide more details on the cost and efficiency drivers behind the quarter. Financial costs declined 5% quarter-over-quarter, primarily reflecting management initiatives to optimize the company's funding cost despite still elevated Selic levels. Total losses increased 9% year-over-year, mainly reflecting the expansion and mix evolution of the credit portfolio. This is consistent with our strategy to scale credit in a disciplined way while maintaining strong asset quality indicators.

Operating expenses represented 25.9% of our total revenue and income, excluding interchange fees in the quarter. On a year-to-date basis, operating expenses improved as a percentage of revenues, reinforcing again our focus on operating leverage, even considering second quarter effects related to the World Cup broadcast sponsorship in Brazil and the annual collective bargain agreement. D&A plus POS write-off also improved as a percentage of revenues in the first quarter of the year, reflecting better allocation and POS management. Looking ahead, we still see room for additional efficiency gains and remain an important part of our value creation.

Next slide, we summarize how these dynamics translate into bottom line performance and returns. Non-GAAP net income reached BRL 576 million, up 2% year-over-year. Diluted non-GAAP EPS reached BRL 2.06, increasing 10% year-over-year, supported by earnings resilience and the reduction in average shares outstanding following the execution of our share buyback program. Annualized non-GAAP ROE reached 15.6%, increasing 30 basis points year-over-year and remaining in line with our solid capital structure and disciplined approach to our profitability. These results shows that we continue to protect profitability while we invest in technology, product innovation and long-term growth of the business.

Moving to the next slide. I would like to reinforce the strength of our capital position and our commitment to discipline shareholder returns. We have continued to advance our capital optimization agenda, pursuing a Basel ratio with our target range of 18% to 22% over time. At the end of this quarter, our adjusted Basel ratio stood at 22.5% compared to 24.1% in the first quarter and 29.6% in the second quarter of a year ago. This movement brings us closer to our target range while preserving all the flexibility and capabilities to support the company growth.

Over the last 12 months, PagBank returned BRL 2 billion to shareholders through dividends and share buybacks. In this first half of 2026, we completed our third repurchase program, authorized for up to $200 million with more than BRL 370 million repurchased during this period. In addition, the second tranche of our 2026 dividend was paid in June and a third tranche of BRL 0.28 per common share will be paid on September 30 with a record date on September 16. We continue to expect total cash dividends paid in 2026 to reach approximately BRL 1.4 billion subject to the relevant approvals, as always, we say, market conditions and the company's financial position. As we said before, we always manage to use dividends and buybacks, and dividends remain the most effective way to optimize capital while continue to support the business growth.

Moving to the next slide, we show where we stand against our 2026 commitment after the first half of the year. At this point, we are maintaining our targets for the year, recognize that year-to-date performance reasonably in line with our strategy. We have been observing a much more challenger year than we were expecting with risks coming both internally and externally. The macroeconomic environment remains clearly uncertain, and it's very important to recognize that current Selic rate levels create additional pressure for the performance of the business. At the same time, we have been focusing on running the business with efficiency and discipline, looking for different initiatives to boost our profitability. For that reason, we continue to expect to deliver a full year performance in line with the guidance range.

Now starting with credit, total credit portfolio growth reached 31% year-over-year in the first half within our expected range for the full year. We expect to keep this growth within the expected range for the year as we further evolve our credit offering with the rollout of new products in the next quarters, such as private payroll and PIX finance. Gross profit grew 2% year-over-year in the first half, highlighted by the positive contribution coming from financial cost efficiency. Again, we managed the business to reduce our financial costs. Diluted non-GAAP EPS increased 11% year-over-year in the first half with the guidance range for 2026. This reflects resilient profitability and the positive effect of capital optimization initiatives. Finally, CapEx reached BRL 1.1 billion in the first half of this year, and we continue to manage investments with discipline aligned with our full year commitment.

With that, I will turn the call back to Mauad for his final announcement.

Thank you, Gustavo. Before we move to Q&A, I would like to share a recent leadership update. We are pleased to welcome Enrique Fragata as PagBank's new COO. Enrique brings a strong experience in the financial sector and his arrival strengthens our focus on execution, efficiency and operational excellence. Enrique comes at an important stage as we continue to expand our ecosystem and advance our long-term strategy.

With that, I thank you all for joining us today. We appreciate your continued trust and partnership.

Thank you all for the presentation. We will now begin the Q&A session for investors and analysts. Our first question comes from Arnon Shirazi with Citi.

My question is related to credit and the 2029 goals. Remember that the expectation was to accelerate the credit portfolio, especially in '27. But for '26, you are testing the product. From the current scenario that we are seeing today with every day surprisingly negative news on the delinquency levels, do you see any change in plans reducing the growth pace or revising the 2029 goals?

This is Mauad. Thank you for your question. No, we are still quite confident on everything that we are doing here. In fact, we see the 31% increase on the credit outstanding as a very good number in terms of volume and performance. There is a long way to go before 2029. Of course, there is going to be different macro cycles that we're going to have to face it. There's going to be regulatory milestones that can change the credit landscape in Brazil, especially on the collateral products. But again, it is our mission here to find out the workarounds, find out the new products and to scale up the credit strategy of the company. So, so far, despite the fact that the macro is tougher than we thought on the beginning of the year, we're still quite confident on everything that we are doing and confident on the long-term guidance that we published last year.

Just to complement, Arnon, just part of the answer here is to remember that looking at Slide 11, we have very low NPLs that give us the comfort to keep growing the credit portfolio in a sustainable way. We are still far below the industry, 3.4% compared to 6.2%. So we do have the comfort to keep growing in a sustainable way, same way we've been doing so far.

Great. If I may, a follow-up on credit. Regarding the private payroll loans, remember that the company was testing internally. How is this advancing and the rollout to other companies have started yet?

Yes, we already start to produce credit outside of the group, the economic group that we have here. We already produced the first few millions in terms of credit outstanding, and we're going to keep pushing up these volumes as we get confident on everything related to the operational risks on the product. We are confident on the first signs that we saw that everything that we designed and implemented, it is solid. But of course, there are some part of the credit cycle that we need to still test. But again, answering straightforward your question, we are already creating credit production outside of the group on the payroll loans.

And how is the quality so far? Sorry for the follow-up.

So far, it's been perfect. But of course, we started with the top tiers in terms of credit quality, so it's coming on what -- on the levels of -- in terms of delinquency on the levels that we expected.

Our next question comes from Daniel Vaz with Safra.

Maybe two questions on my side. I'm looking at your TPV, it improved sequentially, but we didn't see the revenues being budged at the same pace, right? So you have a beat on TPV and miss on revenues, maybe on consensus and also my side. This can mean your take rate that the margin is compressing. Can you give some comments on if that has to do with pricing, maybe a seasonal World Cup volumes with more bet at your mix or more PIX while card are struggling, client mix? So that's my question number one. And the question number two, trying to look at your gross profit guidance for 2026, you're currently at 2% and your guidance is unchanged at between 6% and I guess, it's 11%, 6% and 9%. Any expectations of pickup in the gross profit for the second half of the year to meet guidance?

This is Mauad. I'm going to answer your first question, and then I hand over to Gustavo to give you some light on the gross profit question. So in terms of the TPV, there is a small dilution when we saw the growth of the net revenue and the TPV itself. There is an impact in terms of product mix driven by the World Cup, as you mentioned there, but that is nothing that really worries us. Of course, we are keep pushing TPV. We are being very careful about pricing, and that is, as probably you remember, there is also a base, let's say, a tough comp when you look at the second quarter of last year, where we have a massive repricing of the entire customer base that we have here due to the hike of Selic.

So if you take a look at the evolution of the net revenues from the first quarter of last year to the second quarter, it is quite strong. So we created this step and a little bit harder to push up the net revenue growth on the second quarter. But again, there is a price to be paid on the churn that we had to manage later last year. And here, we are much more confident on this balance that we are creating here between growth and defending the profitability of the company. I will pass the floor here to Gustavo so he can answer your second question.

Daniel, it's Gustavo here. So talking about the guidance, especially the gross profit guidance, we know that we have a lot of moving parts, and we have a lot of headwinds coming from the macro scenario, which give us some level of uncertainty. But at the same point, as we have been talking, we always say that the second part of the year, the second half of the year should be the most important in terms of the guidance achievement. And talking about the gross profit, we can say that we considered some contribution coming from the credit origination, the credit acceleration as we post in this presentation.

Also, as Mauad said, related to the TPV, remember that we have been said that the third quarter -- between the third and fourth quarter of last year were the worst part of the cycle for us. And gradually, we have been posting an increase in terms of the payment activity. Also in terms of financial costs, despite the headwinds of this higher Selic when compared to what we were expecting, we have maybe easy comps in the second half of the year. And I can say that we are always looking for different initiatives that could give us the ability to deliver the guidance. But again, probably not by the top of the range, but probably reaching the bottom of the gross profit guidance as we post.

[Operator Instructions] Our next question comes from Kaio Prato with UBS.

I have one question on costs, please. This quarter -- actually, in the last two quarters, we noted, I would say, better-than-expected POS write-offs. I think those were lower than expected in the first Q, and now I think we had a reversal in the second quarter. Can you give us any color around that? Anything that's happening different than expected on the POS write-offs? And what can we expect going forward as well? And still on this topic, if you are seeing anything related to costs related to POS? We note that some players are claiming about higher costs related to POS. Just wondering if you have anything on your side as well.

Okay. Gustavo here to talk to you. So talking about the write-off of POS or the POS in general, we have implemented a series of different initiatives to organize our logistics and also how we can deploy different initiatives in terms of how we can get the POS that we had in the street and our merchants are not using it anymore and how we can deliver a different approach, a different solution on that, so that's the main reason that you are seeing.

So considering going forward, probably we are going to seek for continuous improving that line. I would say that probably it's not going to be something linear, but the idea is to continuously improve our POS database, and we are looking for -- generate some kind of initiatives. And talking about efficiency or other lines in terms of expense in general, as we said, we are managing the business into getting some operational leverage, so we have implemented some initiatives in terms of how we can redesign some process, how we can implement some automations. We have used the AI to help us not only in the back office, but also in the customer care, in the customer assistance. So we have been deploying different kind of initiatives to give us the opportunity to continue to generate operational leverage, so that's the idea. We are managing the company, trying to seek for different opportunities to improve our profitability through the efficiency gains.

Okay. Anything on the cost related to POS?

This is Mauad. There is nothing major. We do have like a memory shortage on the global market, so that kind of pressure determine those prices a little bit. But in the other hand, FX is helping a little bit. The efficiency that we are building, as Gustavo mentioned, on how to recover the POS that are on the churning customers' hands. So everything that we are putting together here, we are not feeling this impact on the unit perspective. So, so far, so good here on our side when we talk about the POS cost.

Our next question comes from Marcelo Mizrahi.

I have two questions. So the first question is regarding the take rate, so the financial revenues. And looking forward, with this dynamic of -- to have a lower impact of credit cards, so having more peaks, is it possible to see this dynamic going maintained, so stable going forward? This is the first question. And the second question is regarding the expenses side. We saw some expenses related to the World Cup, so it's possible to see a better profitability or even a reduction of the operational expenses on the third quarter looking forward?

Marcelo, it's Gustavo here. I will start from your second question. I wouldn't say that we could expect a reduction in terms of expenses, but the idea is to manage the company to grow the expenses below revenues. That's the main idea or at least below the inflation, so as I said in the previous question, we are looking for opportunities from the operational side. We are looking for opportunities on the customer experience, both trying to gather and to generate operational leverage to the business and also give us, as I said, space to be more -- to improve our profitability in general, so that's the idea.

I don't know if I understood correctly your first question. But when we talk about take rate or the mix between different kind of transactions, we are seeing in general that they are pretty much similar. Of course, what it means that we are observing the increase in terms of PIX that contributes not only on the payment business itself, but also through the banking. And at this point, it's very important to highlight the performance of the cash-in. Remember that we now reached almost BRL 100 billion in terms of cash-in in the quarter. And mainly that cash-in comes from PIX and that gives us the capability to monetize that kind of inflow of money from customers that choose our platform as their main platform through different products.

So when we look at the take rate, it gives us only a portion of the relation of the customers. That's very important to look the transactionality in a whole. So look the inflow of money that comes from the payment side, look at the inflow of money that comes on the bank side and all the opportunities that we have to monetize that kind of inflow of money.

But the question here is that, sorry to do this follow-up, is that looking forward, this dynamic of mix, so we will have to see the gross profit yield, so gross profit comparing to the revenues going up. So that's definitely what we have to see to deliver and to achieve the low end of the guidance, so probably the idea here is that it's accretive in terms of gross profit yield.

Yes, yes. The short answer, yes, not relates to that, but also relates to increase in transactionality in general.

Our next question comes from Neha Agarwala with HSBC.

I have a question on the credit business. Could you expand a bit more and tell us what are the kind of NPLs and cost of credit that you're seeing for your working capital loans at the moment? It's considerably small right now, but just to get a sense of how things are going and where should the NPL and cost of risk normalize as you grow the book? And what gives you comfort regarding accelerating in July? Was the deceleration in 2Q more a conscious effort to kind of control risk given the environment? And if that is the case, why the acceleration in July? Has there been any benefit from the Desenrola program in your customer base?

Neha, thank you for your question. We do not disclose any information regarding individual products here in terms of credit appetite or anything like that, so I'm going to jump the first part of your question, and I'm going straight forward to the second part of it. If you take a look in April, we had a -- I'm sorry, on the second quarter, we had a lower credit production in average due to a new credit model that we deployed on the beginning of the second quarter. So we were waiting the first cohorts here to see if the cohort would come inside the credit appetite and we deliver the performance that we want to before we rolled out for the entire customer database. That's why you see this hike in terms of credit production in July, and you see a more, let's say, conservative approach on the second quarter. That's a little bit what explained the movement between the average of the second quarter and the credit production of July.

Neha, it's Gustavo here. Just to complement Mauad here, I think that's very important to highlight that we are not seeing any kind of deterioration in our asset side, in none of our products that we operate, so it gives us the confidence that we have developed all the capabilities to continue to grow with prudence and with solvency, the credit portfolio. And despite that we do not provide reference in terms of NPLs, you could expect that it will continue growing, but at a sustainable pace and much more related to the change or to the evolution in our product mix than compared to a deterioration itself.

And just to clarify, there's not been any impact from the Desenrola program, and you don't plan to do secured working capital loans? It's going to be secured more from the funding side. You would focus on the unsecured working capital, right?

There is no major impact of this second Desenrola program here for us. The first program was a much bigger program due to the stock in terms of nonperforming assets that we had in the company. So the second one has a much lower impact. And again, working capital is going to still be our priority here because it is where we have a very clear right to win with the kind of customer that we have in our client base.

Our next question comes from Mario Pierry with Bank of America.

Let me ask you a question, what you said about capital distribution, right, that your capital ratio is about 22.5% above your target of 18% to 22%, and you have completed your buyback program. And you mentioned that you'd rather pay dividends than buy back shares. I just wanted to explore that a little bit more why you think paying dividends is better than buying back shares, especially because when we look at your share price, it's back to the levels where it was in September of last year when you announced your strategic plan, so just wondering why you'd rather pay dividends and buy back shares.

Mario, Gustavo here. So the first part of the answer of your question, why we choose dividend at this point is that because dividends give a much more regular and predictable stream to investors. So we can set a target as we said in terms of capital ratio between 18% and 22%, and through dividends, we have been deploying a very clear capital optimization at the same time with -- in a predictable way. It doesn't mean that we cannot use buyback in the future, but we choose to use dividends because of the reason that I said before. At the same time, as you said here, we use the instrument of buybacks in the last 12, 18 months with two programs that we execute in a very short period, but with limited effect and without the predictability, so that's why we are now focused much more in dividends than buybacks. That's the main reason.

Okay. That's clear. So just to be clear, then on your EPS guidance, right, where you talk about EPS growth of 9% to 13% for the year, that does not contemplate any more buybacks this year, correct?

Yes, correct.

Our next question comes from Guilherme Grespan with JPMorgan.

I'll keep my questions to one. It's more looking into 2027 already, a little bit coupling with the guidance for the rest of the year on gross profit, but more looking throughout the year and more 2027. I think there's a growing risk that we start to get into a scenario in which you have -- you mentioned two tailwinds to gross profit, but maybe eventually in 2027, they're going to move in the opposite direction. So it's basically rates moving lower in the second half, we don't know what is going to happen in 2027. And then you have the accretion of the credit, right, as you recognize the credit revenues. But maybe we have been discussing financials, eventual credit cycle and you need to pull back on credit. So with all that said, my question is, assuming that, and considering that you're growing gross profit 2% year-over-year today, if you don't have those benefits next year, what levers can you pull to deliver earnings growth next year?

It's Gustavo here. I think that's too early to discuss 2027. As I said in one previous questions, we have a lot of moving parts right now. We are managing the business to deliver the 2026 guidance. That's our main focus that we are working here, try to mitigate the headwinds, especially coming from the Selic, try to mitigate the uncertainty or the volatility that comes both from internal and external environment. But I think that the current time to discuss 2027 should be a little bit later. And as you said, we have uncertainty, and we are looking, when we start to discuss that alternatives to deliver a continuous growth, especially the continuous growth of the business, not only in terms of PES, but also in terms of top line. So that should be the answer at this point.

Our next question comes from Pedro Leduc with Itaú BBA.

Question on financial costs this quarter, down a little bit. I know you mentioned like working days and such, but you also didn't have an impact of a lower average Selic even though it's slightly, and we saw good dynamics in deposits. So looking at least until the end of this year, how should we think about financial expenses, especially relative to revenues? And what levers you're pulling there?

Pedro, it's Gustavo again. I would say that when we consider the second half of the year, probably we're going to see easy comps in the financial expense. I would say that this is the first quarter, to be clear, that we are seeing a reduction, at least in nominal terms in our financial cost after eight quarters, if I'm not wrong. So I would say that, that trend should remain a reality in the second part of this year. So despite that we are seeing or we can forecast a lower pace in terms of the reduction in rates in Brazil, remember that we assume in our guidance year-end Selic around 12.5% and now we are looking much more close to 14% or 13.75%. We have better comps when compared to the second half of last year.

Our next question comes from Tiago Binsfeld with Goldman Sachs.

Also on the deposit franchise, we see your deposit costs coming down annually to 83% of CDI. So from here, when you look forward, how much more do you think there's space to lower your deposit costs? Would you say it stabilizes around this low 80s, 83%? And what kind of initiatives are you implementing to lower that cost?

Tiago, it's Gustavo here. So I would say that we are seeing our deposits growing 15% year-over-year, should be higher, for sure. We could expect a higher pace. But I think that we have a very healthy pace in terms of deposit, especially when considering that we have implemented, as you said, a bunch of different initiatives to mitigate the increase in rates and also reduce the remuneration that we used to pay in our deposits, both CDs and also our Conta Rendeira. But most important than that and also connect to the deposit is the inflow of money, as I said, connected to the cash in, connect to the banking business, so it combined with the payment inflow give us the ability to continue growing our deposit franchise. That's definitely a clear advantage that we have in the business. And we are always trying to identify different opportunities. We're using different instruments in our funding structure to deliver a continuous reduction in our funding cost and also maintain that advantage that I said.

This concludes the question-and-answer section and today's presentation. You may now disconnect, and have a nice evening.

Good evening. My name is Sophia, and I will be your conference operator today. Welcome to PagSeguro Digital Earnings Call for the First Quarter of 2026. 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. [Operator Instructions] Today's conference is being recorded and will be available on the company's IR website after the event is concluded. Now I turn the call over to Daniel Spencer Pioner, Head of Investor Relations.

Good evening, everyone, and welcome to PagBank's earnings conference call for the first quarter of 2026. I want to thank you for taking the time to join our webcast. Here with me tonight are our Principal Executive Officer, Ricardo Dutra; our CEO, Carlos Mauad; and our CFO, Gustavo Sechin. After the presentation, we will have a live Q&A session. Please note that during Q&A, we will take only one question per analyst. Now I'll turn the call over to Ricardo Dutra for the highlights of the quarter. Please, Dutra.

Good evening, everyone, and thank you for joining our first quarter 2026 earnings call. Starting on Slide 4, we summarize the main highlights of the quarter. This first quarter marks continued progress in the execution of our strategy with banking and credit acceleration and operating leverage translated into earnings expansion, even in a challenging macroeconomic and a high interest rate environment. Total payment volume reached BRL 128 billion, flat year-over-year, confirming a gradual reacceleration versus prior quarters. Our credit portfolio expanded to BRL 51 billion, up 11% year-over-year, driven mainly by a 36% increase in total loans.

Growth was broad-based across all products with particular strength in working capital, which rose 190% year-over-year. Supporting this expansion, deposits reached BRL 42 billion in Q1, a 23% year-over-year increase. On the financial highlights, net revenue, excluding interchange fees, reached BRL 3.3 billion, 6.4% growth year-over-year, reflecting mainly credit acceleration and the overall banking performance. Recurring net income, non-GAAP reached BRL 575 million, a 4% increase, mainly impacted by the increase in financial expenses linked with the base interest rate of Brazil, but with positive impact from the operating leverage we delivered, which we'll see later in the presentation. Most importantly, diluted non-GAAP EPS increased 12% year-over-year, boosted by the capital optimization initiatives deployed.

On the next slide, we highlight our long-term track record of consistent shareholder value creation, supported by a focus on profitability, disciplined growth and capital efficiency. Over the last 12 months, the company returned approximately BRL 2.4 billion to shareholders through dividends and share buybacks, translated into the last 12 months total yield of around 16%. Since our IPO in 2018, we have delivered GAAP diluted EPS growth of nearly 16% CAGR, underscoring a strong and consistent execution track record through multiple cycles, including periods of significant global disruption and macro volatility. Over this period, we have accomplished key strategic milestones that expanded our addressable market, improved the profitability and established a robust platform for sustainable earnings growth. With that, I will now turn it over to Carlos Mauad.

Thank you, Dutra, and good evening, everyone. In this section, we will take a look at the operational and commercial performance of our business units. Let me start on Slide 7, where we highlight our main growth opportunities. Here, we provide an overview of our ecosystem and the growth opportunities ahead. PagBank operates a fully integrated payment, banking and credit platform, serving individuals and micro, small and medium-sized businesses. The breadth of our platform supports strong engagement, cross-selling potential and large addressable market across payments, deposits, credit and financial services. As shown in the slide, there are significant opportunities for expansion as we explore new verticals.

In several segments of our banking operations, our market share is currently below 1%, underscoring our confidence that we are still at the very early stage of our growth trajectory. This progress should be achieved through enhanced cross-selling and developing a broader and more diversified credit portfolio, all overseen with prudent management and a long-term perspective.

On the next slide, we highlight some key metrics of the banking operation and our customer-centric approach, demonstrated by the increasing transactionality and engagement of our ecosystem. Cash-in volumes, excluding acquiring-related inflows reached BRL 81 billion, representing an 11% growth year-over-year with cash-in per active client growing 12% in the same period. This performance reflects stronger client engagement as demonstrated by the increased usage of our platform, higher volumes of bill payments and PIX transactions as well as an important increase in the penetration of our investment and insurance products across the active client base, signaling deeper relationships and improved monetization of our clients' transactionality. Collectively, these trends highlight how robust and complete our ecosystem is and the rising levels of customer engagements that we are achieving throughout our client base.

On the next slide, let me turn to our credit portfolio evolution. Credit is not only our growth frontier, but also a strategic lever of engagement across our ecosystem. Total credit reached BRL 5 billion at the end of the quarter, growing 36% year-over-year, positioning us at the growth pace above the expected guidance for the year. When we include financial operations linked to merchant prepayment, we can see increased penetration of our instant settlement feature. Expanded credit portfolio totaled BRL 51 billion this quarter, 11% growth over the last 12 months despite stable volumes on acquiring.

As it should be, growth remains broad-based across products with an important expansion in every channel, but clearly led by working capital loans, the main driver for credit portfolio this year, which expanded 191% year-over-year. Working capital already accounts for 10% of our total portfolio. Importantly, asset quality remains controlled with NPL indicators well below the Brazil banking system average. The growth trajectory reflects the evolution of our mix from a mostly secured to a more balanced portfolio as we gradually accelerate underwriting for unsecured products.

On the next slide, I show you our funding structure and how we generate efficiency from a financial cost perspective. Total deposits reached BRL 42 billion, a 23% increase compared to last year with more than 90% sourced from our own platform, a clear example of how strong our ecosystem is and the increasing level of engagement that we get from our active client base and the relevance of our digital channels. When including other sources of funding such as related party deposits and borrowings, total funding reached almost BRL 47 billion in the period, 15% increase year-over-year. More importantly, our deposits APY reduced for the eighth straight quarter, a continuous 2-year trajectory of reducing funding cost as a percentage of the CDI.

In the first quarter 2026, deposit APY reached 83.9% with a highlight to the average remuneration of our demand deposit, the checking account balance is below 4% (sic) [ 40% ] at 38.6%, a strong 10 points reduction year-over-year. Finally, as shown on the right side of the slide, our loan-to-fund ratio keeps improving from 114% last year to 109% this quarter as we continue to grow credit with caution and prioritize a well-balanced structure. Now I will hand it over to Gustavo to walk you through the financial highlights of the quarter. Gustavo, please.

Thanks, Mauad. Hello, everyone, and thank you for joining us today. Let's focus now on our consolidated financial results. Starting on the next slide, we take a look at our revenue and gross profit. Total revenue and income, excluding interchange fees, reached BRL 3.3 billion this quarter, as you can see, growing 6.4% year-over-year, driven primarily by the banking and credit business expansion. Banking revenues grew 41% in the same period supported by credit expansion and the higher transactionality from our client base, leading to better fee generation. Gross profit totaled BRL 1.9 billion, up almost 1% year-over-year, with banking representing now approximately 31% of the total gross profit.

As we had anticipated, 2026 has been proving to be a challenging year. In the first quarter, we still face significant pressure from rising financial costs, primarily reflecting the impact of the higher Brazilian basic interest rate. Starting in the second quarter, we expect this effect to be driven by additional cuts in the benchmark interest rate.

Turning to the next slide, we detail our P&L and the cost dynamics for the quarter. As mentioned earlier, financial costs increased year-over-year due to the higher SELIC rate, which rose 1.9 points over the period. This effect was partially mitigated by the initiatives to reduce our funding costs, driving down our APY on deposits by 6.2 points year-over-year. Sequentially, financial costs decreased 2.6%, reflecting those initiatives. Total losses, which includes chargebacks from acquiring and expected credit loss provisions from the credit operation expanded [ 29% ] year-over-year, mainly reflecting the change in our credit portfolio mix and its overall expansion.

Looking specifically at the acquiring side of the ecosystem, chargebacks decreased 15% year-over-year, capturing the improvements in our fraud prevention efforts. But the main highlight this quarter is our consistent ability to generate operational leverage. As you can see, our operational expenses declined as a percentage of revenue, improving by approximately 230 basis points year-over-year, demonstrating not only our cost discipline, but also how we keep exploring opportunities to improve efficiency, operating under a leaner structure and supported by the use of AI in core fronts such as client service. Looking ahead, we expect to keep driving this efficiency as operational leverage is a core pillar of value creation embedded in our full year guidance and long-term ambition.

Moving on to the next slide. Our non-GAAP net income reached BRL 575 million in the quarter, representing 4% growth year-over-year. As a result, our EPS diluted increased 12%, supported by earnings growth, operating leverage and the reduction in the average share outstanding linked to the buyback execution in the quarter. On the right side of the slide, you can see that our return on average equity reached 15.8% this quarter, up roughly 80 basis points year-over-year. This represents another consecutive quarter of improvement driven by higher profitability and the initiatives we have deployed to strengthen capital efficiency as detailed on the next slide.

Now moving on to the next slide. Let's focus on the initiatives that drive shareholder value and improve our capital structure. We keep advancing in our objective to improve our capital structure, pursuing a Basel index level between 18% to 22% in the next coming years. As a result, in the last 12 months, we have returned more than BRL 2.4 billion to shareholders through dividends and buybacks. As mentioned in previous calls, we believe it is important to use both tools to improve our capital structures as dividends offer stability and predictability, while buybacks provide tactical flexibility. In that sense, next June, we shall distribute an additional BRL 400 million in dividends, USD 0.26 per common share, in line with our commitment to distribute at least BRL 1.4 billion in dividend this year. As for our core equity Tier 1, given the initiatives deployed, our managerial base ratio stood at 24.1%, a more than 4-points decrease compared to last quarter, provide ample capacity to support continued credit expansion and shareholder return.

Now moving to the next slide, let me update you on our guidance for 2026. As you know, this year, we aligned on our guidance with our 2029 ambition, reinforcing our commitment to the long-term strategy we are executing. Starting by credit portfolio, we ended the first quarter above the expected range, and we expect to keep delivering consistent growth throughout the year. Looking to the gross profit, the limited expansion we saw in the first quarter reflects the financial cost pressure driven by the higher SELIC rate. As we move into the second quarter and beyond, we expect these headwinds to fade, allowing our revenue growth initiatives and efficiency gains in financial expense to position gross profit growth squarely within our guidance range.

As for shareholder value creation, we delivered a diluted non-GAAP earnings per share 12% higher than last year, positioning it close to the top of the expected range of the year, aligned with our road map of initiatives and operational efficiency we are driving across the company. And finally, while CapEx deployment naturally varies across quarters, the important point is that we are focused on delivering full year CapEx within our commitment.

In summary, even in the face of macro and geopolitical headwinds, we executed effectively and delivered a solid and consistent quarter, positioning us well for our full year guidance. I will now turn the call back to Mauad for his final comments.

Thank you, Gustavo. Before we conclude, let's move to the next slide for a few closing remarks. We keep building momentum across our core growth engines. On top of the acquiring volumes reaccelerating, credit portfolio is scaling as planned at a robust pace, guided by disciplined risk management and prudent underwriting standards. This approach ensures the quality of our assets in a dynamic market environment. Additionally, our ongoing focus on operating efficiencies supported by AI helps us to navigate the macro scenario and maintain resilience in our earnings. Through rigorous cost management and the optimization of our process, we are able to adapt quickly, capture new opportunities and reinforce our financial stability.

Looking ahead, with the gradual easing of the interest rate cycle, we anticipate a more favorable environment that should support increased lending activity and stimulate growth. We are confident to achieve our 2026 guidance, which outlines our commitment for growth, profitability and shareholder value as seen in the previous slide, supported by key strategic initiatives, which have been maturing steadily in the past quarters. Furthermore, as we advance towards the ambitious targets we shared with you for 2029, our focus remains on operational excellence, disciplined expansion and consistent value creation for all stakeholders. Thank you for your trust and partnership as we move forward together.

Our first question comes from Kaio Prato with UBS.

I have 2, please. First, on the payment business. What can we expect in terms of the TPV growth going forward? We saw again better trends sequentially if we look year-on-year, but it is still contracted. So just wondering if we should expect this turning positive in the next quarter? And how do you see the competitive landscape? So this is the first. And then on the guidance, what should be the drivers for this acceleration on the gross profit expected going forward? So if this is mostly related to banking TPV recover or if this is more related to SELIC cuts potentially. So any sense of the relevance of these main KPIs for PAGS would be good going forward.

Hello, Kaio. This is Mauad. Thank you for your question. In terms of trends here for TPV growth, as we have been mentioning since third quarter of last year, the trend is to recover growth year-over-year. So we pretty much had minus 5% on the third quarter last year, something around minus 2% on the fourth quarter. Here, we are virtually flat on the first quarter. So the expectation is to be above the water line on the second quarter of this year and also on the second half with a higher acceleration. So again, this doesn't change the message that we sent to you guys on the call that we made to release the third quarter results of last year. To answer you about the gross profit trends, I'm going to pass the floor here to Gustavo.

Hi, Kaio. How are you? Gustavo here. So try to answer your question related to the gross profit. I think that it's a mix. First, we could expect an expansion in our operation, both in payment and also in banking. It's important to remember that we -- as we have been talking, we are -- we passed the worst part of the cycle in the payment business, and we are just in the beginning of our journey of credit. So both will sustain and help the gross profit trend going forward. And additionally, it's important to highlight that we have harder comps in the first half of the year when we consider the pressure in terms of SELIC and the financial cost. So despite that, we were expecting a better trend in terms of SELIC cuts during the year, but we can expect that the second half of the year will be better than what we are seeing in the first Q and also what we expect in the second Q of the quarter -- the year.

Our next question comes from Guilherme Grespan with JPMorgan.

Two questions on my side as well. One is a follow-up on gross profit. Just on specifically the payments gross profit was a little bit a more sharp decline here. I try to calculate the yield like divided gross profit by TPV. The yield declined almost 60, 70 bps. In other words, gross profit was down minus 15 quarter-over-quarter, TPV minus 10. Just wanted to get a sense what is driving this compression of yield, if it's a pricing strategy? Or what is the moving parts behind this? And then the second question is just the decline in yields of the checking accounts. Very nice to see the average remuneration as a percent of CDI declining. Just want to understand if this is an intentional strategy and what we can expect forward or if it was related to calendar days and other effects?

Hi, Grespan. Good to talk to you. So again, talking about the gross profit. As I said, I think -- and most important, I think that's very important to highlight that we are fully committed to deliver our guidance in terms of gross profit for the full year. And as we said in the beginning, the first half of the year should be more challenging than what we expect for the second half of the year. That's very important. I would say that those metrics that you were talking, I think that's not the best metric to follow the gross profit. Gross profit based on TPV, I would say that doesn't represent the business -- all components of the business that we have. So I would recommend that you use the gross profit and use the guidance as a reference and especially considering that we expect SELIC cuts during this year. And also, it will help to reduce the pressure of the financial costs. That's the main negative portion that are impacting our gross profit.

And talking about the deposits, I would say that we are trying to mitigate the financial cost, again, the SELIC, the high SELIC that we are facing in different ways. As we implement -- last year, we implemented a very disciplined repricing policy. And at the same time, we implement some reduction in terms of the remuneration and yields that we paid in our CDs and in our checking accounts. So that's one of the initiatives that we implemented, and we are still identifying different blocks that we could address the pressures in terms of financial costs. So I don't -- I -- in other words, I don't say any pressures related to the seasonality, but I would say that's much more related to the strategic implementation in terms of remunerations.

And when you think about gross profit -- Grespan, when you think about gross profit, when you see this 1% and the guidance is -- the bottom of the guidance is 6%, I would say we have a kind of hard comp here because in Q1 '25, average SELIC was around 13%, and this year was 15%. So it's kind of a hard comp in terms of financial expenses because interest rates started to increase in Brazil after Q1. So we're having this kind of hard comp from 13% SELIC last year versus 15% this year.

That's clear, Dutra and Gustavo. Just a follow-up on the checking account. Does the quarter already reflect all the movements, meaning should rates be more or less what we see or there is still some carry-on effect to happen going forward?

There are other changes that we plan for the end of the first quarter. So we do -- we're going to have some reflects moving forward. And there are always some optimization under the product perspective that we are planning here and deploying throughout the year. So again, we should see that as a consistent movement over time, not as a point in time action.

Our next question comes from Tito Labarta with Goldman Sachs.

Sorry, not to harp on the point, but just going back on the gross profit guidance, and I understand things should improve from here and some of the drivers of that. But when the year started, I guess, expectations were rates would probably go to 12%, 12.5%. Now we're lucky if we get to 13%. So the outlook has changed a little bit. So do you expect any impact from that rates just coming down at a slower pace than initially expected? Could that have any impact on the guidance?

And the second part is on the loan growth, right? I know it's early stages. You're showing very good growth, but we are seeing some incremental deterioration for the industry overall. So could that also limit your ability if the credit cycle gets worse? And I know your loan portfolio is much smaller than the system, but just to think there are some headwinds from when we initially started the year. So how do you factor in those headwinds to your ability to deliver on that guidance?

Hello, Tito, this is Mauad. Thank you for your question. In terms of the gross profit trend here, that's why when we send the guidance here, we have a range. So we know that in Brazil, there is many moving parts regarding the macro environment. So again, if the curve is not going to close down to 12.50% as we expected in the beginning of the year, we're going to work on the different levers that we have on the P&L to deliver the range of the guidance that we disclosed last call.

Moving to your next question. Again, the credit cycle in Brazil is always -- we have to look forward to make sure that we are making the right movements here. But as you mentioned, we are in the very beginning of our credit outstanding evolution. So this is not a concern at this point. So we are scratching the surface. We are testing deeply the clusters in terms of credit that are more resilient to this macro environment. So again, it's not a concern on the short term. But of course, we have -- and we will have more sophisticated through the cycle variable on our models here to make sure that whenever we have a very relevant credit outstanding here, we can go through the cycles without having a material impact in terms of credit performance.

And Tito, just to complement Mauad here, when we talk about gross profit and also about the loan growth, despite that we are seeing a reduction in terms of rates, much lower than what we were expecting. On the other side, we could see that the unemployment rate has been showing very strong resilience during this period. It helps a lot in terms of consumption and also in terms of transactionality of our customers inside our ecosystem.

Great, that's very helpful. Maybe just one quick follow-up. Also just factoring in a little bit the competitive environment. I mean we saw ABECS numbers come out recently, showing industry growing around 8% or so. We've seen some of your largest competitors growing well north of 20%. How do you -- how is the competitive environment? Is it changing at all? Does that present any risk at all for you guys?

I think that on the SMB landscape, I think that we pretty much have the same competitive environment for the past 24 months, where we have pretty much us, Stone, Mercado Pago and CloudWalk playing at this level. When we see competitors growing like 20%, 25% TPV year-over-year, we are talking about a different cluster of customers here. We're talking about enterprise sub-acquirers. That's a different business than what we are running here. And again, we see the industry growth. We are happy that the industry is growing. And of course, as we have a more stable pricing environment at this point as long as we don't have to input the friction of increasing or repricing the take rates of our customers. So we restart to build vintage after vintage in terms of customer acquisition to make sure that we keep up with the market growth in terms of payments.

And Tito, if I may add, I think that pricing rationale continue to prevail among the players in the industry. That's very important. And it adds when we consider the rationality in terms of pricing and competition and also when we consider that the industry is still growing in a healthy pace with a growth in terms of TPV and also a very important growth in terms of PIX in the industry above high single -- double digits in the industry. That's very important because it sustain the transactionality, it sustained the principality of the customers inside our ecosystem again.

And Tito, just one more point, not related to this question, but the question that you made about credit, just to remember, it's important to highlight here on Slide 9. Even with this credit cycle changes in Brazil, our NPLs are pretty much stable and almost half of the industry. So still, we have the comfort to keep growing our credit portfolio because we have lower NPLs, almost half of the industry. We have excess of capital in our balance sheet. So we don't see any concerns to hurt our credit portfolio at this point.

Our next question comes from Daniel Vaz with Safra.

Congrats on the results. I was looking specifically on your working capital origination in the presentation. You break it down in the quarters, and you have a gray bar for the future, right? Does that imply you're having enough good results and good vintages to increase your origination and working capital? What's the baseline? What's the expected level we should see for the monthly? I guess you were guiding in the past for like BRL 70 million monthly originations in the working capital. Are you comfortable enough to double that? Or any level that you would like to share with us?

Hello, Vaz. This is Mauad. Thank you again for your question. Yes, the gray bar kind of give you a soft guidance on what is coming up on the second quarter. So we're still quite confident on keeping growing the working capital origination quarter-over-quarter. Of course, there are many clusters that we are running tests to see where it's going to land in terms of credit performance before we roll out. And also, there are some product enhancements that we are developing at this point that can push another cycle of growth on our credit products here, especially on the working capital where we have a very strong right to it. So again, you're going to see growth quarter-over-quarter. And whenever we see the limits on it, you guys will have the information.

Good. And if you can share with us maybe the clusters you're having the most success or any types of maturity or any types of duration that this credit is going to have, it will be very, very good to hear as well.

Here, the clusters pretty much as input all the credit products. Here, we work in a range where you have like the best clusters, mainly they do not access credit because they do not have the need and the down part of this credit risk rank doesn't perform. So again, we work in this sweet spot where we have a good conversion, a good yield, and it has the potential to generate credit outstanding. So we are talking -- we are always talking in this range in terms of credit performance in the middle where we can optimize net credit margins.

And also, Daniel, Gustavo here, I think that's very important to consider that we are focusing on our internal customer base at this point.

Our next question comes from Arnon Shirazi with Citi.

My question is also related to the credit. You reaffirmed the 2029 goal related to credit, have a BRL 25 billion portfolio, but we have been seeing some changes in regulation, including caps. I wonder if this impact growth appetite for the next years and also it should impact the overall results expected until '29.

Of course, thank you for your question. So of course, there are many change on regulations, caps, products moving around. But the same way, some opportunities get away, some new opportunities show up so we can build our credit outstanding. So it will be too soon for us to, for example, to anticipate any kind of impact on what was the recent moves on the INSS, the retiree payroll loans. We are also on the very beginning of our pilot here on the private companies' payroll loans that also has a huge potential on our customer database that's going to replace part of the volume that we lost on the FGTS factory receivables. So again, those moving parts is part of the management's problems here to solve it up and to make sure that we can deliver our long-term guidance.

Our next question from Neha Agarwala with HSBC.

Good to see improvement in the trends for the TPV. Can you give us a bit more color regarding segmental information? How is the SMB segment doing, which -- MSMB, which is more of a core segment for you? Has that started to pick up again? And how is the competition in particularly that segment given that some of your competitors are trying to put more emphasis on that, adding more -- improving their customer service. So just some color on SMB would be very helpful. And how sustainable is the OpEx improvement that we have seen this quarter?

This is Mauad. Thank you for your question, Neha. Here on the SMB landscape, we didn't see like any major change on how those customers are behaving. Of course, we are always optimizing our service to this specific kind of customer, our pricing strategy on acquisition, the way we delivered our banking products to those customers to make sure that we have a very strong profitability coming out of these relationships. So again, we do not try to enter in this fight, only looking at price or the commodity products that the entire industry have, we try to bring our bundle offer here to make sure that we can monetize at the right level these SMBs relationships. So again, I think that we have the best product stack for these specific customers, and we are investing a lot in terms of product evolution to make sure that we deliver the best quality in terms of service provider to those customers.

Neha, Gustavo here. Let me talk about the OpEx. I would say that we are just in the beginning in terms of the opportunities that we see in terms to continue generating operating leverage. You know that we have been consistently delivering some gains in terms of operating leverage, but I see that huge opportunities inside of the company. So it remains one of the main tools that we are going to work not only in 2026, but also in the long term. I can say that we are seeing opportunities both on nonoperational side and also in terms of customer experience, the use of AI to help us to gain productivity, to help us to gain a more deeper knowledge about our customer and how we can deploy those initiatives through the year. So I would say that we are just in the beginning of what we can generate in terms of operating leverage.

Our next question comes from William Barranjard with Itaú BBA.

I have 2 quick ones. First, going back to credit, right, especially credit quality. Can you give us any color of how credit quality is doing, especially on the non-secured lines? I understand it's a new line, but if everything is going accordingly to what you were expecting, if things deteriorated a little bit lately or not? Just overall, your views here concentrated on the clean lines. And also, this is a very quick one regarding your other financial income, what drove the quarter-on-quarter growth was about 30%. So I just wanted to understand that.

Thank you for your question. This is Mauad. On our unsecured products, credit performance is coming at the right level in terms of profitability. The working capital product, it's a high-yield product here. So it's not a product that's going to optimize NPLs. It is a product that's going to optimize net credit margin. So again, nothing coming out of the guardrails that we have on the company's governance. The other unsecured product that you see growing that was on our credit outstanding slide. It is credit cards that grew something like 7% quarter-over-quarter. And in this specific product, as it has a longer payback here, we are being more conservative on the cutoffs on the credit performance. So that's a little bit of color on how we are dealing on managing the credit risk between those 2 main products that we have here on the unsecured line.

William, Gustavo here. If you're talking about the other financial income, despite that we are seeing that increase on a quarter -- year-over-year perspective, there is no recurring item. I think that's much more related to the seasonality that we are seeing on the float side and then the SELIC rate than something different than that.

Our next question comes from Antonio Ruette with Bank of America.

So my question goes on the guidance. You are running about -- above or in line with the guidance for 2026. But as you mentioned, you reiterated the guidance -- the long-term guidance. This would imply an acceleration, right, particularly when we're talking about the loan growth. So my question here is, should we expect this acceleration in loan growth already in '27? Are you seeing what you should have been seeing to accelerate the loan growth in '27? And what should be the key lines here? And the same question here goes for the gross profit. Once we are past '26, what should be the main drivers here?

Hello, Ruette. This is Mauad. I'm going to pick the first part of your question here. So you're right. We're going to see a pickup in terms of growth in 2027 in credit, and I explain you why. There are 2 main factors here. First, part of the products that we already have on our portfolio here to offer our customers, it is an unsecured product. So due to the macro environment, the high level of interest rates at this point, we don't see the conditions to accelerate more than what we are showing at this point. And there is also a second factor here, which is the product development. Part of our products are not even in production yet. And part of our products are in pilot, as I mentioned here, the payroll loans that we are rolling out here for the employees of the company.

And probably by the beginning of the second half of this year, we're going to go to the open market offering that to different employees of different companies. So again, those are the 2 main factors that explain why we will not see a growth higher than what we see on the CAGR for 2029, and we should expect on 2027 and on a higher growth in terms of credit outstanding. I'm going to pass here to Gustavo to answer the gross profit part of the question.

Hi, Ruette. Gustavo here. Basically, when we consider our gross profit, our guidance in terms of -- long-term guidance in terms of gross profit, the financial cost and also the impact of the levels of SELIC that we have will, and during this year impact negatively in our numbers. But again, as we foresee that the reduction in rates will continue going forward, not only in 2026, but also '27, '28, it will have a positive effect in our gross profit. Remember that when we were before the beginning in terms of monetary tightening that we start back in October -- September, October 2024, we will run in terms of financial cost almost below the size that we were -- at least half what we were running the financial cost right now.

So again, as we are seeing the reduction in rates, it will positively impact our gross profit. So that's one effect. And also in terms of growth in terms of credit, we are just in the beginning. So it will mature. It will contribute in terms of cross-sell, not only in terms of the banking, but also in terms of the cross-sell in the payment business by itself.

Our next question comes from Marcelo Mizrahi with Bradesco.

Congratulations on the results. My question -- I have 2 questions. So first one is regarding those new initiatives to reduce the cost of the funding of the company. So how big could be or if you can come back to the levels that we are before, reducing the size of the deposits compared to the total funding or now or not? Trying to understand this like a good tailwind to the cost of funding. First question is -- the second question is regarding the expenses. So we saw a very good number, so a reduction of the nominal expenses year-by-year. So my question is if it's possible to see during the year expenses growing less than inflation on the year-end.

Hi, Mizrahi. Gustavo here. I will start for your -- to your second question. So I would say that you must consider that we have in terms of our expense, a mix between variable and fixed expense. So we have a very important component in terms of variable expense. So growing expense below inflation, for sure, that is a target we are always seeking, but it's a little bit hard to set as a reference in the short term. That's one point. But again, as I said in the previous question, we are just in the beginning in terms of how we can capture opportunities to generate operational leverage in different initiatives through the company. Talking about the funding cost, as Mauad said, I think that we are going to see some improvement in terms of the initiatives that we just implemented. But on the other side, I would say that those kind of initiatives has a strategic component that we prefer not to disclose at this point.

Okay. But they are -- sorry to ask a follow-up here. So it's new ways of -- to improve the cost of funding. I mean, another strategy to improve the funding cost. Those are the strategies here.

Yes, sure. Without compromising our deposits, of course, we don't want to decrease the cost and decrease the deposits. We're going to do both, decrease the cost while growing deposits.

Well, guys, this is the end of our call here. I would like to thank you all for your time and for all the questions that we had the opportunity to answer here. See you guys next time. Thank you very much.

This concludes today's conference call. You may now disconnect, and have a nice evening.

Good evening. My name is Sophia, and I will be your conference operator today. Welcome to PagSeguro Digital Earnings Call for the Fourth Quarter of 2025. 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, a reconciliation disclosure in this presentation and in the company's earnings release appendix. [Operator Instructions] Today's conference is being recorded and will be available on the company's IR website after the event is concluded.

Now I will turn the call over to Daniel Spencer Pioner, Head of IR.

Good evening, everyone, and welcome to PagBank's Earnings Conference Call for the Fourth Quarter of 2025. I'm Daniel Spencer Pioner, PagBank's Head of Investor Relations, and I want to thank you for taking the time to join our webcast. I'm here with Ricardo Dutra, our Principal Executive Officer; Carlos Mauad, our CEO; and Gustavo Sechin, our CFO. After the presentation, we'll have a live Q&A session. Please note that during Q&A, we'll take only one question per analyst to ensure the best use of our time.

Now I'd like to hand it over to Dutra. Please, Dutra.

Hello, everyone, and thank you for joining our full year and fourth quarter 2025 earnings call. In Q4, we continued to expand our credit and banking businesses, along with the reacceleration of acquiring volumes. As a result, we are pleased to report a robust performance, demonstrating our resilience sustained by disciplined execution and value creation focused on our long-term ambition.

Going to Slide 4, we can see the key operational and financial highlights for the full year 2025. Compared to last year, our revenues reached BRL 13.4 billion, 16% growth, driven by an impressive 51% growth in banking revenues and 9% in payments revenues. Net income was up 4% and year-over-year.

Later on the presentation, we will see the main impact on net income was due to the increase in financial expenses linked with the basic interest rate of Brazil, SELIC, which grew from an average of around 10.8% per year in 2024 to almost 14.5% per year in 2025. Going to the value creation for shareholders section. Our earnings per share reached BRL 7.99, growing 21% year-over-year. Buybacks and total dividends distributed in 2025 reached BRL 2.1 billion, leading to a 15% total shareholder yield.

On Slide 5, we can see the highlights of the fourth quarter. Our TPV grew 10% quarter-over-quarter, marking an inflection point with sequential improvement in volumes. Our expanded credit portfolio reached BRL 50 billion. It is important to highlight the portion of the credit portfolio composed by loans, credit cards and working capital grew 33% year-over-year, with NPLs 90, approximately half of the industry average.

These trends reinforce the underlying strength of our ecosystem and our ongoing commitment to expanding access to financial services in a responsible and sustainable way. On the funding efficiency initiative, our deposits reached BRL 40 billion, growing 13% year-over-year.

Moving on to financial highlights. Our total net revenue, excluding interchange and card scheme fees increased 12% year-over-year, reaching BRL 3.5 billion. Our non-GAAP net income was BRL 678 million, 7.4% higher year-over-year, leading to annualized return on average equity of 18.4%, improved 100 basis points year-over-year.

On Slide 6, I'm pleased to announce we successfully delivered our 2025 guidance despite strong headwinds such as macro volatility and sharp increase in Brazilian interest rates in 2025. Gross profit grew 6.9% for the year, within our expected range of 5% to 7%. GAAP diluted EPS increased 18.2% in 2025, above the guided range of 13% to 15% using the same share count as of December 2024.

When you consider the benefit of buyback execution, reducing shares outstanding, EPS increased more than 20% year-over-year. Capital expenditures reached BRL 2.3 billion in 2025, landing at the upper end of our BRL 2.2 billion to BRL 2.3 billion range. Overall, the full delivery of 2025 guidance makes us confident about 2026 perspectives and reinforces our strong track record, as shown in the following slide.

I'd like to briefly focus on our consistent track record in creating shareholder value. Since our IPO in 2018, GAAP diluted EPS has grown at a compounded annual rate of nearly 16% despite the global disruptions and macro volatility during this time frame.

Throughout this journey, we have advanced in key strategic milestones, which broaden our addressable market, strengthened profitability and built a solid foundation for sustainable earnings growth. These efforts have increased the visibility and recurrence of our results, enhancing predictability and reinforces the resilience of our business model in generating long-term value.

Now I'll pass the word to Carlos Mauad.

Thank you, Dutra. Good evening. In this section, we will take a look at the operational and commercial performance of our units in this past quarter.

Let me start on Slide 9, where we highlight our main growth opportunities. As we've highlighted in recent quarters, as we tap into new verticals, there is a substantial room for expansion across our platform. in many areas of our banking business, our market share remains below 1%, which reinforces our conviction that we are only at the beginning of what we can build whether through deeper cross-sell or a stronger and more efficient deposit franchise or a broader, more diversified credit portfolio. I will manage with discipline in a long-term view.

On the next slide, we will highlight our customer-centric approach demonstrated by increasing transactionality and engagement of our ecosystem. The evolution of our cash-in metric, which represents inflow not related to acquiring remains one of the most important indicators of our client activity on our platform in the fourth quarter of 2025. Cash-in reached more than BRL 90 billion, an increase of 11% compared to the same period of last year.

On a per client basis, the figure rose to BRL 5,300, up 10% year-over-year. As a reminder, cash-in is mainly composed by PIX transactions received showing how PIX has become an important and profitable component of our business.

We are also seeing an increase in our platform usage as measured through the amount of bill payments, fixed transaction and the penetration of investment and insurance products signing deeper relationships and improved monetization as clients increasingly rely on us for a wider portion of their financial needs. These trends underscore the strength of our ecosystem and the growing intensity of customer engagement across our base.

On Slide 11, let's speak about our credit performance. We can see credit as a strategic driver of engagement across both our banking and payment business enabling deeper transactional activity and unlocking meaningful cross-sell opportunities. In the fourth quarter, our total credit portfolio reached BRL 4.6 billion, a 33% year-over-year increase.

Since the second half of 2024, we have been gradually accelerating underwriting for unsecured products with a particular focus on working capital. This progress reflects ongoing improvements in our risk assessment and collections capabilities increasingly supported by AI.

While originating typically slows in the fourth quarter due to the seasonal pattern. Working capital originations were still 26% higher than in Q3, showing a healthy and consistent traction. When we include financial operations linked to merchant prepayment supported by our instant settlement feature.

Our expanded credit portfolio now approaches BRL 50 billion, up 3% over the last 12 months despite lower volumes. Turning to asset quality, as shown on the bottom right of the slide, our NPL 90 ratio remains well below market average due to our disciplined approach to risk and product mix. The small increase we observe is a natural consequence of the greater mix of unsecured products in the portfolio.

On the next slide, we present the continued strength of our deposit base and the progress we are making in improving our funding efficiency. During the quarter, total deposits reached more than BRL 40 billion, growing 13% year-over-year, a resilient performance despite the macro environment. deposits are the cores of our funding structure.

In this quarter, we saw a meaningful shift towards on-platform deposits which reached 95% of the total, reinforcing strong client engagement and the growing relevance of our digital channels. Importantly, this was the seventh consecutive quarter of reduction in our funding cost as a percentage of the CDI. This range highlights the effectiveness of our strategy to broaden and diversify our funding mix with cost efficiency, and it contributes to the resilience of our liability structure and support the expansion of our credit portfolio.

Finally, as shown on the right-hand side of the slide, our loan to funding rate to improve from 113% last year to 111% this quarter as we continue to grow credit with caution and prioritize a well-balanced structure.

With that, I will hand it over to Gustavo, who will walk you through the financial highlights of the quarter of 2025. Gustavo, please?

Thanks Mauad. Hello, everyone, and thank you for joining us today. Let's focus now on our consolidated financial results. In this first slide as a consequence of the increase in transactionality and engagement, total revenue and income, net of interchange and card scheme fees reached BRL 3.5 billion in the fourth quarter, up 12% year-over-year.

This performance captures the expansion of the banking business and also the repricing measures we began implementing in the payment at the end of 2024, which has been essential to offset higher financial costs and to reinforce the sustainability of our revenue base. It is very important to highlight that revenue growth has once again outpaced TPV, showing that our pricing strategy effectively supported profitability.

Disciplined execution drove resilient results in 2025 position us to sustain solid performance into 2026 despite macro uncertainty. Banking revenue reached BRL 757 million, growing over 7%, year-over-year, driven by the expansion of our credit portfolio, higher engagement and stronger monetization supported by the positive growth and increased fee generation particularly from card usage and account-related services.

As a result, banking gross profit grew 54% year-over-year with a 72% margin of revenues. The combination of stronger banking results and our repricing efforts helped partially offset the impact of higher interest rates throughout the year. Consolidated gross profit reached BRL 2.1 billion for the quarter, an increase of 8.7% year-over-year when we exclude the negative effect of BRL 54 million of buyback and dividend distributions.

Turning to the next slide. Fourth quarter delivered operational leverage, reflecting continued efficient gains across the platform. Our disciplined approach to managing expenses and deliver operational leverage remains a key pillar of our strategy, and it played an important role in helping us navigate the impact of higher financial costs in this period, allowing us to balance sustainable growth with continued profitability.

On the cost side, financial costs increased 39% year-over-year, driven mainly by the higher interest rate environment and the effects of recent capital structure adjustments as highlighted earlier. On the other hand, sequentially, financial costs reduced 1% due to the progress we have made in diversifying our funding structure and reducing our funding costs.

At the same time, total losses declined 8%, reflecting improvements in our loyal customers and onboarding process, which led to fewer chargebacks. This benefit was partially offset by the natural increase in expected credit losses as we continue to accelerate our credit operation. Operating expenses decreased 2% year-over-year, clearly showing our commitment to efficient cost management.

This reduction reflects lower personnel expenses and more disciplined marketing investments. As a result, operating leverage improved significantly by 320 basis points compared to the same period last year. Moving on to the next slide. We reported non-GAAP net income of BRL 678 million in the quarter, represents 7% year-over-year growth and an increase of 16% on our EPS diluted.

On the right side of the slide, you can see our return on average equity improving by 100 basis points year-over-year, reaching 18.4% compared to 17.3% in the fourth quarter of 2024. Even with the conservative capital structure, we have consistently managed to deliver solid returns, and it becomes clear the positive impact in this metric as we progress in improving our capital structure as shown in the next slide.

Now moving on to the next slide. Let's focus on the initiatives that drive shareholder value and improve our capital structure. In order to achieve our Basel index target level of 18% to 22% in the next coming years, we have used not only dividends, but also buyback as an additional tool to enhance shareholder value as it can be adjusted to market conditions and liquidity.

In our point of view, dividends offer stability and predictability while buybacks provide tactical flexibility, and it's important to use both tools to improve our capital structure. Throughout 2025, we maintained a consistent momentum in our buyback program, repurchasing over 27 million shares. In February, 5 million common shares held in treasury were canceled.

Furthermore, we paid BRL 617 million in cash dividends during 2025 and in 2026 last month, roughly BRL 200 million out of the BRL 1.4 billion dividend announced for the year were already paid. The remaining balance will be distributed in 3 tranches over the course of this year. This schedule reinforced the consistency of our capital return framework and our focus on predictable value creation.

Let me address our CET1 and the impacts from the new regulatory tax framework. Due to the tax framework approved last year, a new 10% withholding tax on intra-group dividends is effective in Brazil. Dividends declared by the end of December 2025 will remain exempt from this tax provided they are effectively paid by 2028. This transition rule gave companies the ability to optimize internal capital flows ahead of the new framework, and we are managing this process in a disciplined manner.

As a result, in the fourth quarter of 2025, we declared dividends in certain subsidiaries, reducing the equity component of our regulatory capital at the entity level, while the consolidated capital base remained stable. Our Basel index ratio decreased temporarily this quarter, placing our Basel index below our intended target of 18%, 22%.

It's important to highlight that this effect is purely accounting driven and does not impact on our cash position nor our ability to support growth. The reallocation of excess capital is consistent with our long-term capital efficiency strategy. As we look ahead, the actions we took in 2025 position us well for the next phase of this plan and sustainable growth and strengthens our ability to navigate 2026 with confidence.

Bearing that in mind, let's move to the next slide, where we outline our 2026 guidance and walk through the key drivers that will shape our performance expectations for the year. This includes the operational priorities, credit initiatives and efficiency opportunities that support our trajectory and reinforce the foundations for long-term value creation. Starting this year, we are evolving the way we communicate with the market by aligning our annual guidance with our long-term ambition for 2029. This shift reflects the confidence we have in the structural levers of our business and the visibility we have built into our key growth drivers.

In this context, our full year guidance will focus on 4 pillars: the expansion of our credit portfolio, the acceleration of gross profit, the continued progress toward delivering non-GAAP diluted EPS and also capital expenditure, all in line with our long-term path.

We expect our 2026 credit portfolio growth to be in the range of 25% to 35%, supported by the expansion of underwriting in our core credit products, including working capital. Gross profit growth outlook is expected to be in the range of 6% to 9%, reflecting an increased contribution on our banking segment in a still pressured financial cost scenario.

Diluted non-GAAP EPS is expected to be in the range of 9% to 13%, consistent with our long-term profitability road map and the operational efficiency we are driving across the company. Finally, capital expenditure is expected to be in the range of BRL 1.8 billion and BRL 2.0 billion, reflecting our focus on efficiency and disciplined approach. With that, I will invite Mauad for the closing remarks.

Thank you, Gustavo. Before we conclude, let's move to the next slide for a few final remarks. First, we can see credit growth accelerate, supported by discipline in underwriting and healthy asset quality. The continued momentum in our unsecured working capital solutions, driven primarily by our own active client base reinforces both the relevance of our products and the quality of the risk management approach.

Secondly, acquiring volumes have been recovering steadily since mid-third quarter, marking a clear inflection point. This recovery is now consolidating into a strong foundation for positive trends as we move into 2026, reflecting healthier client activity and the effectiveness of our commercial initiatives.

And finally, improved funding efficiency and consistent cost control have played an important role in protecting margins. These efforts allowed us to sustain net income growth even in a still challenging interest rate environment. Together, these elements demonstrated our ability to execute with discipline, manage macroeconomic pressure and continue advancing our long-term goals.

As a reminder, our 2029 strategic targets include BRL 25 billion in credit portfolio with a balanced mix of secured and unsecured products, emphasizing working capital loans and AI-enabled solutions such as 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 shareholders' returns. These target reflects our confidence in the scalability of our platform and the strength of our execution.

[Operator Instructions] Our first question comes from Mario Pierry with Bank of America.

I wanted to focus on your gross profit guidance of 6% to 9%. Trying to understand because this looks conservative to us because, as you mentioned, right, your TPV growth accelerated quarter-over-quarter to 10%. However, you're guiding for 6% to 9%.

And then when we think about your financial expenses in 2026, they should be coming down as rates come down. So I'm trying to understand, are you expecting a slowdown revenue growth? Or what kind of SELIC rates do you have embedded on your forecast? And maybe that's the reason why gross profit is growing single digits. And again, right, this number is below your medium-term outlook of at least 10% growth.

And trying to understand then what gives you confidence that this growth can accelerate going forward? I understand that you're introducing more banking products and you're accelerating the credit product. But I just wanted to understand a little bit better the single-digit growth in gross profit.

Mario, it's Gustavo here. Thank you for your question. You are right that we are posting for this year lower gross profit when we compare it to our long-term ambition. But you're going to remember that when we release our long-term ambition and also given to the macro uncertainty that we are right now facing and still facing, we should assume that the performance in 2026 should be a little bit below the long-term ambition.

And also, it's important to consider as we ramp up the credit business, it also consumes higher provisions and also reduce the gross profit and also reduce the EPS in the first year of our long-term ambition trend. But we are totally confident that we are on track to deliver the long-term ambition in all lines, credit as we posted, the EPS CAGR and also the gross profit CAGR.

When we talk about the SELIC rate, that's very important when we talk about the financial cost. When we look and what we expect for 2026, despite that we will face cuts in the interest rate along the year, the average SELIC probably is going to be quite close to the 2005 SELIC rate. And at the same time, we also assume that and included that in our 2026 guidance.

Okay. And Gustavo, let me follow up then when we look at your EPS, right, growing faster than gross profit, then you are implying, I think, efficiency gains here. If you can just explore a little bit where these efficiency gains are coming from? And just to be sure, the EPS of 9% to 13% does not imply right a reduction in the share count, correct?

Yes, you are right. We are not assuming the same share base for the EPS guidance. And also, we are considering continue to generate operational leverage through our operation. We understand that we have different initiatives that we are working on. Some of them we put in place. And all of those initiatives will deliver a continuous operation leverage.

Our next question comes from Guilherme Grespan with JPMorgan.

Just one clarification before I jump into my question. The EPS guidance, should I read it as same share count, meaning EPS is the same as earnings growth or should I dilute it with the buyback of the year? This is just a clarification.

And then my question is actually on the TPV recovery. It was a nice quarter. Just want to get your views and update on what is the diagnosis you have on why you're missing clients and potentially having churn and what you sold so far? And looking ahead, if it still has any bottleneck that you feel that you need to fix? And basically, this whole diagnosis with what is happening, what you already did and what's still to be done in early 2026?

Gustavo again. Thank you for your question. Just to make clear, we are not considering the buyback in our EPS. So if we continue and we intend to continue working on our buyback program, it will be dilutive for the EPS.

And thank you for your question here. This is Mauad. Regarding the TPV recovery, we did have some operational enhancements on the second half of last year. We deployed our new logistics operations by August. We are reviewing everything related to the set of terminals that we have with our customers.

The banking platform is gaining quality and a new set of products. So everything that we are doing here under the operational perspective is helping up to keep up with the customer database and to recovery TPV.

Remembering that on the last call that we had with you guys here, we mentioned that the low part of the curve in terms of TPV was in August, and we keep seeing the recovery month after month. And on the beginning of this year here, we keep seeing the same movement that we saw throughout the second half of the year.

And just to complement here, remember, we -- of course, TPV is one of the metrics that we follow here. but TPV per se is not the main metric. We look at the revenues that we've been growing year-over-year.

We reached 16% revenue growth. If you consider the financial services companies in Brazil, including fintechs and banks, is one of the largest growth in the year. So we are trying to do here to optimize the growth of TPV combined with revenues and combined with gross profit.

That's clear. Indeed, the gross profit had a rebound, right? It went from 2% year-over-year to 7%, 8%.

Our next question comes from Arnon Shirazi with Citi.

I have 2 brief questions. The first one is related to the NPL increase compared to 3Q. We saw 30 basis deterioration. What's behind that? And my second one is related to the CapEx guidance for '26. It is expected to be below 25 in BRL 400 million. What's behind that?

Arnon, this is Gustavo. Our CapEx guidance for this year includes a reduction or savings around BRL 4 million when compared to last year.

And basically because we are implementing some initiatives, as I said in the first question of Mario, not related only the OpEx, but also related to the CapEx that we intend to deploy along through the year, and it will reduce both the demand for POS and also the demand for technology investments that we have in plan.

Can you repeat the first part of the question because it cut a little bit of connection here. First part of the question, please.

No, problem at all. We saw a 30 basis deterioration in NPLs in this fourth quarter. What's behind that trend?

Here, it's Mauad. I'm just going to make sure if I understood it right. You were asking about the NPL 30 bps that we saw quarter-over-quarter, right? So I'm getting to that. We have I would say, 2 main effects here. First, it is the new regulation here where we keep accruing interest revenues until 90 days that makes the balances to go up. So that's an artificial movement due to the regulatory milestone and plus there is the unsecured products that we are deploying that pushes the NPL 90 a little bit up. Remembering that we have pretty much half of the industry in terms of NPL that's leaving us a lot of room to keep pushing up our credit outstanding.

Great. If I may, just a follow-up on CapEx. You mentioned that we will reduce demand for POS. What is driving that? Is it going to be tap on phone or anything else? Why would it reduce the demand?

So here, there are many factors that we are working on under the product perspective and under the logistics perspective that help us out to optimize the terminal CapEx. So we are developing here a reverse logistics to make sure that every time we have to replace a terminal, we get the terminal that carries a kind of problem to remanufacture that and to reinclude that on our logistic network.

And on top of it, we also have the tap on phone that helps out, especially on the terminals that are simpler to create this CapEx saving over time. So here, when you see a number which is below what we have on 2025, there is no customer impact. In fact, we are going to keep pushing forward the customer database throughout 2026.

Our next question comes from Kaio Prato with UBS.

If -- First, before my question, if I can just clarify if the -- so the EPS, the non-GAAP growth that you mentioned is basically today considered the same as the net income.

And also, you basically sent us like the guidance on the non-GAAP. Just would like to understand if you are assuming same level of share-based compensation for 2026 or if we can see any acceleration? And then I can follow up with my question, please.

Gustavo, again. Yes, we are considering for the EPS as the base, the net income non-GAAP as the base for calculation for the EPS. And also, as I said, we consider we're going to consider the number of shares that we will find in each period that we are going to calculate.

So that's very important to consider that because in both case, as we have been balancing buybacks and dividend, we understand that it is better to track the EPS trend and also it consider better. It eliminates the long-term investment -- long-term plan that we have here in the company.

So we reduced that variable for the calculation of the EPS. When I said the share-based compensation, okay, just to make it clear. So it eliminates when we use the net income non-GAAP, it eliminates for the EPS calculation, the share-based remuneration.

Yes. But just wondering if there is any potential acceleration on the share base just to understand what would be the gap?

No. We could assume the same levels. We do not have any plan to accelerate that.

Okay. Great. And in terms of like my main question would be on your engagement metrics. I think all of them were quite good this quarter. So encouraging trends across the board. And my question is, especially in the banking, if you can break down this metric between pure individuals and actually pure merchants.

So just wondering about the performance of each of them. And in your strategy, I would like to understand how relevant can be individuals actually only going forward? Any metric that you can share in terms of engagement, especially on pure individuals would be good.

And if you can link that in terms of the expectation on the breakdown of your portfolio by the end of 2026. You already sent the guidance in terms of growth, but it would be interesting to see how could be the breakdown of that in terms of working capital for merchants and also individuals.

Yes. We are not guiding exactly those numbers like between individuals and entrepreneurs here. But I can assure you that both are growing, both are gaining engaging. And remembering that for the kind of customers that we have, especially on the payment side, the individual, the SMB is pretty much the same, let's say, the same set of products or the same set of needs that those customers has.

But again, when we take a look at the product evolution here, we have initiatives on both sides on payments, on credit products for small enterprises and for individuals also as the private payroll loan and that it already started to pilot inside the company. So sorry that I couldn't answer completely your question. But again, it is something that is growing on both sides.

Our next question comes from Thiago Paura with BTG. I believe he left the queue, we are going to go with Tito from -- Tito Labarta with Goldman Sachs.

Just a follow-up, I guess, more on the capital return. Gustavo you mentioned, I guess you're assuming a similar share count. I mean we know you have the dividend, which is around 8% yield and you completed 70% of the buyback.

So if you complete the other 30%, that's maybe another 2% of shares. But should we assume that any additional buyback? Or like how are you thinking about capital return beyond that? Is that it for 2026? And then we should start thinking about further buybacks or dividends more in 2027? Or is there a potential for additional buybacks perhaps in 2026?

Tito it's Gustavo here. I think that as you mentioned, we have been working on the buyback at the same time as we have been working on dividends. And we intend to use both tools and try to balance both tools because that's important to -- they give us some flexibility in terms of when we use buyback and also dividends, they bring some stability in terms of return.

So we have the third buyback program that was launched last May. It remains open. we have been executing since then, approximately 80% of this buyback programs have been executed, and we're probably going to deploy the rest of this problem in the upcoming months.

At the same time, it's very important to remember that we have released the BRL 1.4 billion in terms of dividend that is going to be paid along this year in more 3 tranches. And just remember, last Friday, last February, we paid the first one of BRL 200 million.

Our next question comes from Daniel Vaz with Safra.

I'm looking at your credit portfolio guidance nearly at midpoint of 30% year-over-year. This implies, right? I think we've already covered that in your strategic update that the 2027 to 2029 window would be essentially a regime in changing pace, right? So it would not be a continuation of the current trajectory.

So I wanted to understand further on your confidence and the macro assumptions you embed in that back-end acceleration, right? So what terminal SELIC rate are you using? And maybe how much of that growth is a function of the rate cycle rather than structurally achievable market share gains, right? So that would be my question, and maybe I'll do a follow-up later.

Hello. This is Mauad. Thank you for your question. We are looking pretty much at the same level as focus for the SELIC and at between like 12.5% and 13%. But again, there are many other matters that explain a lower growth on the first year of our long-term guidance here. There are the product evolution that we are deploying as we speak here with you guys. So there is a lot of products that are going to our value prop throughout the year.

So that is some learnings that are the credit strategy to be deployed. And that is the macro environment also that it is a little tougher. So we expect that on 2027, 2028 to be softer and have a better credit environment so we can evolve. So it is a mix between the macro environment, the product evolution and the credit strategy to make sure that we have the right pace and the right credit performance to push the portfolio up to BRL 25 billion.

And just to complement, remember that the credit portfolio is based on different cohorts, and then we start making these cohorts in '25, '26 and there is stack up. So it's not a linear growth. That's why when we gave the update, the strategic update in September '25, we said that '26 would not grow on average the necessary pace to reach the BRL 25 billion.

So that's why we are giving this guidance 25% to 35%. Of course, it could be higher than that. But remember that effect that we have with the cohorts that can stack up. And also, I would like also to remember that today, we are operating with NPLs that are half of the industry average, which gave us comfort and room to grow and to accelerate in a sustainable way, not to one step forward, 2 step back. We're going to do it in a sustainable way.

And again, there's this mathematical or mechanical movement, the cohort is going to stack up and then it's going to grow not in a linear way in '27, '28.

And maybe a follow-up. So -- is the target -- basically, we're saying that the target is contingent on a constructive macro scenario, right? I guess everything you said on your perspective of better models, stronger underwriting, product development, but still contingent on the constructive macro, right?

I mean if anything changes on the fiscal side on the trajectory of the interest rates, we would probably be looking at the revision for this number. Am I correct?

Yes. I think you -- you are right. It includes that mark uncertain. It's Gustavo here, just to clarify. So in our guidance, it includes that kind of market uncertainty that we are facing and that is room for acceleration. So as we -- as the macro brings more opportunities to grow, we are going to do that. So it's included.

No, pretty clear.

But just to complement, it's too far to plan when you think about 2 years ahead. Remember, we were in a scenario last week and last Saturday, we had a new war in the world in Middle East with oil prices going up and down. So there are many variables.

What we're trying to send the message here is that regardless of this macroeconomic movements, we're going to try to grow in a sustainable way. Of course, there's going to be cycles, credit cycles, but we are confident with the guidance for '26, and we are confident with the long-term ambition that BRL 25 billion in 2029.

Our next question comes from Thiago Paura with BTG.

I believe I have accidentally left in the previous call. But just a follow-up on the volumes, maybe a double-click here. on the dynamics that you are seeing. Given the change that you have been kind of releasing recently in the TPV disclosure, just to have -- get a sense from you regarding the mix behind incremental volumes growth.

So basically more recently and what to expect going forward regarding the main drivers for TPV growth? Is it being more driven by nano merchants, more SMBs, larger accounts, just to get a sense on this kind of client profile on the payment side?

Thank you for your question. Just answering straightforward, the focus of the company is still SMBs. So we are talking about small and medium enterprise. The nano merchant, it is part of our strategy on the tap on phone on the organic inflow that we have here in terms of customers.

And we put our efforts, our capabilities, our marketing investment for SMBs, which is still the growth frontier of the company. So nothing different than that. We're going to keep pushing small and medium enterprises.

Thiago, if I can add, I would just -- I would like to highlight, I think that we have a unique combination in terms of product and service, Pro for MSMB. So we have a very seamless digital experience. we have a full digital bank here with all set of products and service. And it gives us -- it generates multiple revenue streams that we will deliver to our customers. And at the same time, we will continue to grow our operation. And right now, on top of that, we have been working on the credit avenue of growth. So those opportunities give us the confidence that we're going to be on track to deliver ourresults.

Great. And if I may, just a follow-up on the EPS guidance because several questions are being -- are coming from clients. Just to double check that.

So given the share count by the end of the year will be lower than mechanically, even if net income grows like 0 or it remains flat, that would imply something like this high single-digit EPS growth that is embedded in the guidance. That's the idea behind just to double check that.

Mathematically speaking, yes, you are right, but you can assume that the net income will still grow.

We will still be growing.

Our next question comes from Neha Agarwala with HSBC.

Just a clarification on the volume growth that you mentioned. So we saw good growth in fourth quarter, but how should we think about the sustainability of this growth? Some of your competitors might also be putting in more effort to retain clients. So how do you see the competition in 2026?

And what efforts would be required for you to ensure that you retain the customers, especially given the fact that you have a lot of operational efficiency focus and you want to control the costs. So if you could talk about that.

And second one is just on the effective tax rate. We had a bit of volatility in fourth quarter, and you explained about the change in tax rate. If you could elaborate a bit on that and tell us how -- what kind of level should we expect going forward in '26, '27, roughly any range that would be very helpful.

Thank you for your question, Neha. Here, in terms of TPV growth, if I understood right, the first part of your question, we're not going to guide volumes throughout the year. But again, I will reinforce the same trend that we saw in the second half of last year, we see on the first quarter of this year here.

So we are very confident on our customer acquisition strategy. And also, we are quite confident on the way that we are engaging our customers to control churn over time. So again, -- of course, the competitiveness arena is quite hot, as you guys know, but we have a very powerful set of products here to keep up growing or recovering TPV over -- throughout the year.

And Neha, just to complement, the competition is the same that we've been seeing in the last years. When you have an interest rate of the country with 15% per year, everyone needs to be rational. We don't see anyone trying to buy market share. Everyone is trying to look for profitability.

And I know you mentioned about the cost control that we are doing, but all the cost control we are looking for and that we are reaching at this time does not affect the customer service, our go-to-market and things like that. We are looking for efficiency.

We are using artificial intelligence in many fronts in such a way that we can have lower cost without any problem or any impact in service for our clients or the way that they go to the market. Just to be clear here, we are going to keep accelerating the way we've been doing in the past years and have more efficient in this go-to-market and all the back office and logistics and so on.

Regarding the tax rate, Gustavo can.

Neha, good to see you. Talking about the tax, I think that the main message is structurally tax rate should increase over time, especially because the increase of the banking revenue pool. But for this year, you should -- we should tax around mid, mid-teens for the full year.

Neha, just to complement, I just want to reinforce here that we have a very powerful ecosystem. We -- I know you already know, but it's worth to mention that we have this digital bank account that we've been working on since 2019 or 2018 that makes the difference when you go to the market.

We see some other players that believe in other synergies and now they are talking about banking, but they are too much behind us, I would say. So we have this powerful combination of the digital account that serves SMBs and all the powerful that we have in the payments that was the origin of the company.

But just to be clear here, we are using all the advantage that we have in this go-to-market. And it's worth to mention in Q4, we grew 10% quarter-over-quarter, while the market grew 5%. So we could double of the market in Q4 compared to Q3.

That's very helpful. Probably I missed and mentioned previously, what is the SELIC assumption you have for 2026 as well as for the long-term guidance that you posted?

For this year, we are including 12.5% for the year-end, which will give us an average SELIC quite similar for -- with the 2025. For the long-term guidance, we assume some reduction. But in this period, they will be above 10% in 2027 and also in 2008.

This concludes today's presentation. You may now disconnect, and have a nice evening.

Good evening. My name is our Oliver, and I'll be your conference operator today. Welcome to PagSeguro Digital's earnings call for the third quarter of 2025. 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.

[Operator Instructions]. Today's conference is being recorded and will be available at the company's IR website after the event is concluded.

Now I'll turn the call over to Gustavo Sechin, IR Director. Please go ahead, sir.

Hello, everyone, and welcome to the PagBank Earnings Conference Call for the third quarter 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. 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?

Hello, everyone, and thank you for joining our third quarter 2025 earnings call. I will begin with Slide 4, 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 '25, we continue to demonstrate resilience and pretax 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 macro 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 -- 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 in our commitment to democratize access to financial services in a responsible and sustainable way.

Moving on to financial highlights. Our total net revenue, excluding their change in 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.

On capital efficiency, we have returned $2 billion to shareholders through dividends and share repurchase. 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 strategic 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 showcased the evolution of our GAAP diluted EPS since going public in 2018. Over the past years, EPS has grown approximately 2.3x, 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 reinforce the 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 friability and supports long-term value creation -- teams from a thoughtful capital allocation strategy balance 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 7, 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 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. As we continue to scale our banking operations, we are opening a new path for growth, whether to deeper cross-sell, a stronger and more efficient deposit base or a broader and more diversified credit portfolio, all handed with discipline.

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

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 3Q '25. We ended the quarter with 33.7 million clients, adding $1.6 million over the past 12 months. Our active client base reached BRL 17.8 million, supported by a 2% year-over-year increase in banking only clients.

On Slide 11, we showcased the evolution of our cash unit, which continues to be one of the most meaningful indicators of transactionally on our platform. In the third quarter of 2025, cash 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 making a 12% annual increase. These results reflect the strength of our ecosystem and the growing intensity of client engagement across our base. In addition, we are witnessing broader uptake of bill 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.

On Slide 12, we present the continued 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 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.

One, we include other funding source total funded 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 lower 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 greater transaction activity across both. our banking and payment segments. In doing so, we will not cross-sell opportunities 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 the second half of 2024, we have been gradually accelerating credit underwriting for unsecured products, particular focus 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 2.5x the volume of working capital loans compared to the second quarter of 2025. If we include financial operations linked to margin 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. With that, I will now hand it over to Artur who will walk through the financial highlights of the third quarter of 2025.

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

Turning to Slide 15. Total revenue and income net of interchange and card scheme fees totaled BRL 3.4 billion in Q3 '25, a 14% increase year-over-year. This performance reflects the pricing strategy we began rolling out for acquiring products in the fourth quarter of 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 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 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 deposits 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. 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'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. 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 a recent capital structure adjustments. As noted earlier, these effects were partially offset by our funding strategy, which focus 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.

Operating expenses decreased 3% year-over-year, reflecting our continued focus on efficiency cost management. This reduction was driven mainly by lower personnel 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. 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. Throughout 2025, we maintained a consistent momentum in our buyback program, repurchasing over 18.5 million shares. In the third quarter, we advanced it into our third repurchase program. which authorizes the company to buyback 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, a BRL 1.4 billion dividend distribution for 2026 to be paid in 4 installments further reinforcing our commitment to enhance shareholder value. Our base index consistently declined from Q3 '24 to Q3 '25 reflecting an improvement of approximately 2 percentage points in capital allocation.

Moving on to the next slide. While our performance has remained consistently throughout the year, we recognized 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% through a revised range of 5% to 7% and reflecting the impact of elevated financial costs in a high interest rate environment.

For reference, our gross profit for the first 9 months of 2025 grew 6.3% year-over-year. Our 9 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. 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.

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. 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.

To that end, as a reminder, our 2029 strategic targets include BRL 25 billion in credit portfolio supported by a balanced peaks of secured and secure products with the emphasis on working capital loan and AI-powered solutions like private payroll and PIC 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 a 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. Effective January 1, 2026, as part of our planned succession process that started last year, Carlos Mauad, our current Chief Operation 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 Schunk, our current CFO, will keep supporting Carlos and Gustavo in their transition to the new roles.

The company expresses gratitude to Alex and Artur for their extraordinary contribution as executive officers. The company sends a notice of a general meeting of shareholders in order to vote to approve the appointment of both Alex and Artur to the company's Board of Directors.

Looking ahead, I'm confident that Carlos who joined PagBank 1 year ago, you build on this solid foundation and leading company, it is next chapter of growth. 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 aligned 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 of 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 years. Thank you for the presentation.

[Operator Instructions]. Our first question comes from Daniel Vaz from Safra.

Hi, everyone. Congrats on the appointments of Carlos Mauad -- and subsequent CEO and CFO and also recognize the work so far of Magnani and Artur during this season. 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. And you've 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 concessions, right, in the origination.

So probably the portfolio could close like this year at BRL 1 billion. So I feel like there's room to grow well above like 2x next year, particularly considering your expansion right. So the question is given this momentum, how should we think about the -- what is your target for 2026? Is it still a transition year? Or does the run rate suggests like a steeper curve in your in your appetite for working capital loans.

This is Carlos Mauad. 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 3 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. And these we have the mission 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. Then 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 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 third quarter of this year.

The overdraft with -- it is a quite important product to us, especially due to the reason which it is a very high-yield product and credit cards, that's 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 in a monthly base. And we already have credit clusters testing in test that can push this production of BRL 200 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 that is a third work stream, which is going to show up on 2026 which is the 2 main products that are being developed as we speak here, which is the big 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. 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 collections products here, so we can push up observing the right performance in terms of net credit margin. Hopefully, I asked answered your question.

Yes, that's super clear if I may follow up on your scale of 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 70% could be like -- sorry, BRL 70 million could be like a good estimate for us to?

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 embed in our database. So probably, you're going to see higher nonquarters I think we evolved on the credit strategy.

Our next question comes from Ricardo Buchpiguel from UBS.

In the quarter, we saw that acquiring TPV was kind of flat quarter-over-quarter and fell around like 5% year-over-year. Could you comment on challenges faced in growing volumes during the quarter? And why initiatives are being taken to enable an eventual receleration in volume growth and also eventually right, that you can already see some signs of reacceleration in Q4 adjusting for the seasonal effect.

Ricardo, thank you for the question. Yes, you're right. The TPV was flat sequentially. We do understand is one of the metrics that we should follow here. As has been said in the past quarter, TPV per se is not the important metric for us. But of course, it's part of the volumes that we need to manage here.

I'm going to talk to you about the best Q3 and then looking forward. But looking at the past Q3, we have -- first, it is important to remember, we have a very, very hard comp from Q3 '24, where you grew 36% versus previous year. 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. So we have this hard comp. We also understand the macro and the lower economic could 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, had some strategy to go to market that we have on -- weighted we adjusted a few months ago. And I would say to you that the -- looking on a year-over-year basis, August towards the bottom in terms of growth or decrease in August. 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 these cohorts climbing up. 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, focused on the increasing the gross profit and EPS. So if you have a TPV that is accretive, we're going to -- we'll go for it. So that's pretty much the scenario about TPV.

That's very clear. And just a quick follow-up. If you could also comment about the competitive environment their current segment, if you notice any changes during Q3 and this tariff Q4 will also be very helpful.

We don't 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. So we don't 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 in the market share. So we'll go back to your answer to your question here. No big changes in competition in Q3, not even in Q4.

Next question comes from Beatriz Abreu from UBS.

It's Sky here for UBS. So I have 2 questions, please. First, a follow-up on working capital allowance. Just wondering if you can share a little bit more about the profile of this client that you are accelerating today or is the size -- average size of this client, if you can share the some numbers on the economy as well, interest rates and level of upfront provisions that should be required. Just to understand when this product should start to contribute mostly your gross profit? This is the first.

And the second, if you can talk a little bit more about the improvements that you are doing on your charge-back process. As you had another solid quarter on the line. Just wondering if you're talking about sustainable levels of chargebacks as a percentage of TPV now or if we can see even a further improvement going forward.

Thank you. Well, thank you very much for your question. Just to give you a 10,000 number here on the working capital, we are talking about some average tickets between BRL 20,000 and BRL 30,000. The average -- not the average, the range of our interest rate here, it is between depending on the risk level of this customer. And that is not a specific size of customers that we are 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.

So 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. So 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 Second question.

Talking a little bit about risk management under the chart perspective, I could -- I can tell you that we have, let's say, a business as usual level back here. There is no concern in front of us. We have been above our, let's say, real-time credit -- not credit or risking here to make sure that we can filter the transactions. And as per 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 future the bank customers and the bad transactions out of our ecosystem.

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 on the next few quarters.

Our next question comes from Thiago Kapulskis from Goldman Sachs.

Good evening, everyone. Two questions from my side as well. First one on efficiency. If you could -- your main initiatives to manage operating expenses into 2026. Is there any big projects and 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 fact from the income tax exemption for individuals that earned up to BRL 5,000 in Brazil, your assessment of potential impact to volumes and to credit. 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.

Well, I'm going to jump up here to try to at least answer a part of your question. 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 -- 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 are 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 depos. 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 on our customers. So that's the first part of the question here.

Regarding the second part, about the taxes for people that have a seller that is lower than BRL 5,000 per month. As we may say in the media, that's going to help to -- for the low-income people for the people that receive these BRL 5,000 or less, we have more variability of cash to expand. So -- of course, that could be beneficial for us. We don't know how this is going to be, but definitely it could be slightly positive because it's going to be more for liquidity for the low-income people of the country.

Our next question comes from Yuri Fernandes from JPMorgan.

So we see the best luck for the previous or 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 fair base to be taken. And I know usually, there is volatility regarding enterprises and all that. But the drop was a pretty important really appear, right? It seems to be a BRL 30 million, BRL 40 million per quarter line and it was like BRL 3 million, 4 million this quarter. So if you can provide a little bit of explanation what drove lower share base in safe and what is -- what's driving this better personnel expense in line a year, too? That's my first one.

And the second one, just on NPL, pretty stable, like NBC -- I think it's totally fair, but your portfolio is growing a lot. So just trying to understand what do we expect for the NPL on this growth outlook you have? Like should we continue to see NPL going marginally up every quarter, not really like any color on what should you expect on asset quality given your mix? I think it would be appreciated.

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 linear suture that we are working, as Mauad mentioned,. We are so diligent to control expenses here and personnel expense is important to us. And part of the division that vision process that we have the layoffs that we applied in may also contributed to this performance now.

In terms of a long-term incentive plan, it is related to the volatility of the share price, U.S. dollars and those things impacted the number. Going forward, I am expecting increase a little bit, it's not too much. So the level will be, roughly speaking, in the same of Q3.

And jumping to the second part of your question. We're 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 on secured loans today, we're going to see NPLs going up quarter-over-quarter is likely respecting the new mix that we are deploying here on our credit strategy.

Our next question comes from Arnon Shirazi from Citi.

On -- in policy, I see a -- 15% year-over-year, which is something in line with last 12 months semi rate, though I want to understand better the underlying brands if there is inflows, what you have been seeing?

Can you repeat the metric? We didn't get it here. The 15%, what is the metric?

Deposits.

Yes, we increasing deposits year-over-year, which is in line with the selling rate, right, the average for the past 12 months, maybe around 12%, 14%. So let's understand inflows and outflows during this period and expectations for a sincere growing mostly our own per...

Yes, we 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. So if you look at some of the slides, you see the cash in peaks 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 clients so that we have these more I would say, complete relationship within not only the acquiring but also in terms of deposits, in terms of the use of cards and so on. But it's a very decent growth when you think that is 33% to 39%, 15% growth in terms of the deposit. And with our cost of funding going down because that is important to highlight that even are growing 15% in terms of deposits with the cost of funding as a percentage of CDI going down.

Our next question comes from 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. And we know year-over-year when I look at your gross profit margins, they're hurt by the higher SELIC rates. But at least 4Q onwards, it should be more stable with -- 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 your views on how gross profit margins are going to evolve over the next couple of quarters.

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 tried to capture a better spreads when we see the basic interest rates going down. 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. So we do not expect to have a different ratio between TPV and the spreads that we see on our customers.

And just to complement here, Leduc, Pedro, we -- of course, we will follow TPV, but most importantly, follow revenues. So if we grow revenue year, we're growing 14%. So it's a very, very decent growth year-over-year because you know that there are low-quality TPV are there that we are not interested on. So the idea, of course, is to grow in a sustainable way. But I would say that one of the metrics that show the -- we are doing a 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.

Everyone, thank you very much for your time. see you next call. I would like to take advantage here to say thank you to Alexandre Magnani for the excellent and extraordinary job as active officers in this company. They are going to join us as Board of Directors to keep supporting the company and wish you luck and to count on all support for Carlos Mauad and Gustavo Sechin in their new roles. Thank you very much.

This does conclude PagSeguro Digital's conference call. We thank you for your participation, and wish you a very good evening.

Good evening. Welcome to PagSeguro Digital Strategic Update 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. [Operator Instructions] Today's conference is being recorded and will be available on the company's IR website after the event is concluded.

I would now like to turn the call over to Gustavo Sechin, Head of IR. Please go ahead.

Hello, everyone. Welcome to our strategic update call. I am Gustavo Sechin, PagBank's Investor Relations Director. Thank you for taking the time to join us today. We will begin our session by sharing a quick recap about our strategic position and growth opportunities ahead. After that, we will update on the initiatives of our capital optimization process and share some long-term views about the company, followed by a live Q&A session.

Tonight, I am joined by Ricardo Dutra, our Principal Executive Officer; Alexandre Magnani, our CEO; Artur Schunck, our CFO; and Carlos Mauad, our COO.

I would like now to turn the call over to Dutra. Please, Dutra.

Hello, everyone, and thank you for joining our call.

I will begin with Slide 4. Innovation is at the heart of everything we do. By continuously investing in cutting-edge technology and fostering a culture of creativity, we are able to deliver solutions that drive growth and enhance customer satisfaction, creating a seamless and integrated financial experience for all our clients. That being said, it is natural that our strategic position is built on foundation of innovation. We are committed to facilitate the financial lives of businesses and individuals through a comprehensive, secure and accessible digital ecosystem. This approach allows us to offer a wide range of services that cater to the diverse need of our customers from payments and banking to credit solutions.

Moving on to the next slide. Over the past 20 years, we have consistently anticipated market trends and deliver results. From pioneering secure online payments to expanding financial inclusion, we have evolved into a true growth partner for individuals and businesses. Our ability to adapt and innovate has been key to our success and will continue to drive our future growth. We have built a strong reputation as a trusted provider of financial services and our commitment to excellence has earned the loyalty of more than 33 million customers. As we look to the future, we will continue to leverage our expertise and resources to create new opportunities and deliver exceptional value to our stakeholders as we will keep advancing on our path from a payments company to a full digital bank that combines payments, banking and credit.

On Slide 6, we show how our business model integrates a full set of payment solutions, complete digital banking services and personalized credit. This integrated approach enables us to generate multiple revenue streams and enhance customer engagement and long-term growth. Our focus on innovation and customer centricity sets us apart in the market and position us for continued success. From our clients' perspective, our ecosystem is built in a way that is simple, secure and complete, a primary financial growth partner for our clients. From an investor perspective, by offering a comprehensive suite of services and using one business to leverage the other, we are able to engage our customers and monetize through an increasing transactionality in our platform, ultimately increasing principality and enhancing customer lifetime value.

On the next slide, Slide 7. Here, I believe it is important to take the opportunity and highlight our proven track record. Our financial performance reflects the strength of our business model and our ability to execute our strategic initiatives effectively, focused on creating shareholder value. Our earnings per share have increased consistently over the past few years with a 15% CAGR since IPO. And we keep strategically advancing in our banking and credit operations to drive future growth. These investments are designed to enhance our capabilities and expand our market reach, positioning us for sustained success. We remain focused on delivering value to our shareholders and are committed to maintain our momentum as we navigate the challenges and opportunities ahead.

Let's jump to Slide 9, where I'll talk about growth opportunities that we have ahead of us. Financial market in Brazil is highly concentrated, and we still have low share in banking and credit metrics. And those are some of the reasons we see significant growth opportunities in every segment we are present. Our focus on the MSMB segment, combined with our complete and expanding digital banking capabilities for both businesses and individual position us well to capture these opportunities. As we carry on with scaling our banking operations, we unlock new growth opportunities, whether by deepening cross-sell or expanding and diversify our portfolio in a disciplined way.

Looking ahead, the clearest opportunities to be explored are on the credit asset side as we scale our credit portfolio to merchants and individuals. We understand this should unlock growth in transactionality, principality and even on the liability side, where we have built a robust franchise of more than BRL 43 billion in deposits. As you can see, in the last four metrics of the slide, which are related to banking and credit, our share is still close to 1%, and we see lots of room to grow.

Moving on the next slide. As we dive into the market and growth opportunities for our business, it is crucial to highlight the significant potential that lies within our underpenetrated credit sector. Brazil's very low per capita consumption illustrates the structural growth potential and untapped demand of our market. We understand this is mainly a reflection of a severely underserved credit-wise market despite all the advances in recent years. When compared to most economies, Brazil still has significant potential. This scenario represents a clear opportunity to expand our footprint and drive substantial growth.

Moving now to Slide 11. As mentioned previously, we are building a way that we can use one business to leverage the other. This way, it is important to highlight our view of the payment sector and the potential we see in it. We are confident in the positive Brazilian payments outlook. Brazil payment sector should still grow low double digits in the next years, mainly led by PIX transactions, an accretive payment method with compounding effect in our financial ecosystem. In this sense, we are focused on securing MSMB leadership and improving profitability by unlocking cross-sell opportunities. Additionally, we see huge opportunities in the online payments, the card-not-present segment, mainly e-commerce and cross-border, a vertical that is growing significantly, and we still have a lot of room before reaching our fair market share. By leveraging our strong presence, comprehensive suite of payment solutions, brand recognition, we are well positioned to capture a larger share of this market and drive growth.

Moving to the next slide. We deep dive into how our broad suite of services differentiate us from digital banks, allowing us to better serve our customers. In addition to our unique payment feature, which is the real-time settlement into our PagBank accounts, we offer investments, insurance and credit products. We believe our ecosystem creates a unique combination of a complete set of products and services similar to an incumbent player products portfolio. However, we do have digital distribution expertise combined with a seamless digital experience. For next years, unlocking the value and full potential of our banking platform will be a key growth and profitability driver as banking should become much more representative of our total performance.

Now let's jump to the next slide. Slide 14 outlines our initiatives to strengthen capital structure and create shareholder value. By the end of 2026, we will have returned more than BRL 5.5 billion to shareholders, out of which BRL 3.8 billion in distributions estimated between '25 and next year. The company has defined a BIS capital ratio target between 18% to 22%. This framework ensures a solid capital base and financial strength, supports disciplined growth and gives us the flexibility to reinvest while still rewarding our shareholders. In line with our commitment to consistently create shareholder value, we are accelerating our dividend payout in 2026.

We plan to pay an extraordinary BRL 1.4 billion dividends over the next coming quarters in addition to the BRL 623 million already committed for this year. This BRL 1.4 billion amount already includes a cash dividend corresponding to 10% of our 2025 net income and will be paid over the next quarter as demonstrated in this slide. With the new extraordinary dividend, together with the open buybacks, we could expect a total yield of close to 20%. This reflects our strong capital position and our commitment to delivering sustainable value creation.

Moving on to the last slide. Before we finish this presentation, we highlight our long-term goals, which reflect both the transformation of our business and our ability to sustain the value creation over time. By 2029, we target a credit portfolio of BRL 25 billion. Our strategy is to accelerate the loan book with a sustainable and balanced mix between secured and unsecured products while focus on activating higher-value clients. This balance should come from a gradual acceleration of credit lines for merchants, mainly working capital, combined with the current credit offering that we provide to our clients. We are also advancing in AI-powered credit solutions, including, among others, private payroll and PIX finance, which will strengthen both risk management and customer experience.

Second, on profitability, we see growth being driven mainly by a higher contribution from banking as we advance on credit and unlock incremental margins through cross-selling. We also expect efficiency gains from fixed cost dilution and AI play a key role in enhanced customer interactions. Over the long term, this should be translated into a gross profit CAGR over 10%. And we are aiming for an EPS CAGR of 16% between '25 and '29 as we continue to transform the business and convert these growth opportunities and operational improvements into consistent value creation for shareholders. These priorities set the path for the next stage of our journey.

With that, I'll now hand it back to the operator so we can begin the Q&A session. Thank you.

[Operator Instructions] Our first question comes from Kaio Prato with UBS.

Thanks for the presentation and the strategic update. Interesting to see here. I have two questions on my side, please. The first, I would say that this is mainly related on the long-term goals of the credit business. So you have something close to BRL 4 billion in portfolio as of today. So this implies more than 5x growth of the portfolio to 2029. How can we think about this path throughout the time until 2029, if this implies an acceleration already for 2026? And what kind of products should we see, I would say, the faster acceleration, I would say, at least in the short to medium term here? And if this includes new products, if you can talk a little bit more about that? And then I can follow up with the second one.

Kaio, this is Dutra. Thank you for the question. Well, I will start just to give an overview about the credit portfolio. Definitely, the credit portfolio will change. The mix that you have today between secured and unsecured will change. We will have more unsecured products in the portfolio looking forward. The growth we'll see how credit products work. You've got to test in some clusters. And then once you find it, you can speed up and accelerate.

So I don't see that 2026 is going to be the acceleration, probably it is going to be in the following years, but we're going to have lots of development in 2026, that's for sure. In terms of products, in addition to the products that we already have and that we are offering to our clients and expanding year-over-year, such as the working capital overdraft and payroll loans that we have today, we're also going to have new products such as the new payroll loan and PIX finance. So those are the products that we already have in the pipeline, and we are going to offer these products for our clients so that we can reach this BRL 25 billion credit portfolio.

Okay. Okay. This is clear. And the second one, if I may. First, if this EPS CAGR that you mentioned here considering the share count as of today or any potential new buybacks? And second, on the gross profit growth, if you can discuss a little bit how would you break down this growth between the banking and the payment business until 2029, if you can talk a little bit about both.

Okay. Thank you, Kaio. I will start with the last one between the -- your question about the mix between the gross profit between banking and payments. As time passes by, we're going to see more and more things getting integrated. But if I had to split these two different businesses, I would say that as we are investing in credit and as you said, we're going to grow our portfolio from BRL 4 billion to BRL 25 billion. It is expected that the bank is going to be -- is going to gain mix in terms of the gross profit. the percentage of the gross profit.

But I would say that even the payments, we don't see payments decreasing in absolute terms. It's the opposite. We do expect payments to grow. We do expect TPV of the industry to keep growing. And we don't see also at least what we have today in the curves for the Selic rate, we don't see interest rates going down too much. So depending on the curves that you look, it's going to be like low double digit, high single digit. So we do expect the industry, the payments industry to keep rationality, keep looking for profitability as we have seen in the last two years. So by using the curves that we have right now, we do expect the payments to keep growing, but banking is going to grow faster and it's going to gain share in the total mix of the gross profit.

Regarding EPS, we cannot guarantee that EPS is going to be the same number today because we are talking about 4 years from now, we do have the buybacks open, but we do expect not too many things to change, I would say. So a little bit here and there, but nothing structural. It would be like we do expect marginal changes. Nothing that is going to change that much, at least with the information that we have at this point, and that's the best assumptions that we have at this point.

Our next question comes from Pedro Leduc with Itau BBA.

Okay. Thank you very much for the question. Trying to get a better sense here of the credit portfolio business economics if I think about it. And I think that's the big change with tonight other than the buyback and the capital discipline, return message is that you seem ready to substantially increase the credit portfolio. So I think that's, correct me if I'm wrong, I think that's the big intention here also tonight. And if we could get a little more detail on how you're thinking what kind of NIMs, cost of risk, efficiency ratios this bank like more branch at least from the credit portfolio, essentially trying to get to how much earnings this thing will contribute with. And if you can help us understand at least the profile when we think about NIMs and the cost of risk and efficiency, that will be already great help.

Pedro. So the intention tonight is to talk about both topics here, the capital structure and also the credit. Please don't underestimate all the change in capital structure that we have been doing since 2022 with BRL 5.5 billion in returns to shareholders, and we are expecting to give this BRL 3.8 billion between '25 and '26. So that is also important just to highlight for the audience of the call.

Regarding the credit and the profile, I'll pass the word to Carlos Mauad, who is our COO. He can give you a little bit more color on these products, of course, based on the assumptions that we have today. And again, as I said to Kaio before, we are planning four years from now. So there are many assumptions and many information that is the best information that we have today.

This is Carlos Mauad. Thank you for your question. Just trying to bring you some color about what we are thinking in terms of the credit evolution inside the company. When we are talking about the mix that we're going to deliver with these new initiatives, we are talking about credits, mostly unsecured credit as long as today, we don't have a high -- a very high exposure under the kind of credit outstanding.

So we will see higher spreads. We're going to enter in a business to optimize net credit margin, not to optimize NPLs. So we're going to add on some ROE to the average of the business. We're going to have more profitable portfolios. Of course, we're going to measure the demand that we have inside our 33 million customer database here to see what's the extent of each of those products in terms of penetration among those customers, and we will optimize this equation in terms of capital deployed to create this credit portfolio over time.

So we don't have the details here in terms of how it's going to be the NIM average over time. We have to test the demand. We have to test the penetration and we have to actually optimize the way we are deploying the credit spread inside the company. So of course, we're going to see this portfolio growing very fast. And as long as we have a very conservative mix today, we're going to see a higher credit spread over time.

That's great. response, great color sort of helps us a bit and trying to then back of the envelope here. It seems to be responsible for a good part of the EPS target there. I mean, maybe a good 1/3, if not more of it, the success of this credit portfolio within the business.

Well, Pedro, I don't know what is the back of the envelope calculation that you've been doing. But of course, bank is going to be an important part of the company looking forward. As you know, today, the portfolio is small compared to the BRL 25 billion, almost 90% today is secured. That's going to change. And once we execute well and we've been doing a very good executor since the IPO.

If you look at one of the slides that we show our EPS, EPS is growing 2.3x, 15% CAGR. So we are a very good executor, paying attention to details so that we are going to make the credit work and look at all the details to have the returns that Mauad just mentioned to you. But again, I don't see the calculation that you have, but bank is going to be more and more important as time passes by, banking and credit, of course.

Our next question comes from Tito Labarta with Goldman Sachs.

Thanks for the call and the presentation. A couple of questions also. I guess, maybe just to understand, Ric, why now in terms of Yes, it sounds like it's still a little bit further away. You said it's probably going to drive a lot of 2026. But so what drove making the strategic announcement sort of today or in this time frame? I mean, did something change? Like what's giving you more comfort to really grow the loan book, I guess, over the next few years?

And within the loan book, it sounds like this is going to be more consumer lending. Will there be some working capital loans also to merchants? Just to think like where you're positioning yourself in terms of other banks that are currently out there. So if you can give a little bit of color on if it's just consumer lending that you're going to focus on or if you do SME lending as well.

And then just to go back in terms of the industry volumes, right, you mentioned they can maybe continue to grow high single digits, low double digits or something on those lines. But you've been growing less than that currently. Just to clarify, and I think it's part of the macro and you have more exposure to micro merchants. But how do you see sort of this current slower growth that you're going through on the TPV potentially impacting it? Or is that maybe the rationale for why making this announcement today, just to think of your market share relative to peers and where -- what's going to drive TPV growth also?

Tito, thank you for the question. Very -- I would say, often, we review our strategic plan. And of course, in this strategic plan, we include our long-term goals, capital structure, return to shareholders, EPS, et cetera. So we review that very often based on the metrics that we have inside the company. I mean, what you're seeing in our P&L, what we are seeing in our take rates in our credit business and also based on the information that we get from the market, macroeconomic variables and so on.

So we've been reviewing the strategic plan. We got this decision to -- we think it's time to grow the credit portfolio and give this view to the market as some of the -- some of you ask us to give more clarity, more transparency. So the idea of the call today is to -- based on the feedback that you have from the market, to give you this view based on the transparency policy that we have. And we decided to do it right now. There is no relationship with any short-term business performance or things like that. And if you may, I would say you that the TPV that we see in this plan, we do plan to grow more TPV looking forward.

I don't want to get into details about the TPV that I have in the short term because that's not the topic of the call, and there are many explanations and many reasons for that, that we can explore in the Q3 call. But I would say you that we -- there is no relationship one thing to the other. That's for sure. And again, we review the strategic plan. We decided to share with the market. We think it is an important message regarding capital structure as well, not only the credit portfolio growth. And we are doing well in our business as we have today. So I don't want to get into detail about TPV because that's not the main topic today. So -- but we are confident in the payments business, banking business and credit business looking forward.

Yes. No, that's helpful, Dutra. It just gives good context. And just on the type of loans, right, it sounds like it's more consumer. Would there be SMEs, working capital loans as well or...

To answer that. I'm sorry. The -- in short term, we're going to see more growth in the merchants. And looking forward, in the medium term, we're going to see more consumers getting into the participation mix in the credit portfolio. And as I mentioned before here, I answered before, we also are going to have the new payroll loan that was launched in Brazil beginning this year. We see symmetrics getting better. We also plan to have PIX Finance.

And it is also important to say, Tito, we have in our base many SMBs and MSMBs that sometimes get confused with consumer. I'll give you an example. We have some -- many clients in our database, they work in a bank from Monday to Friday and then they make cakes in the weekend.

So this is a merchant. This is a consumer. They have a payroll loan, but they are getting the lower to increase their business. So it's the kind of mix what we have in the base, which is very good because we have all this information, proprietary information, and we can use it to have better credit models and so on.

So -- but in short term, merchants in this -- the way that we say merchants here in the medium term, we're going to have consumers getting more participation in the mix.

Our next question comes from Gustavo Schroden with Citi.

Thanks for the call. My question is, two questions, but related to only one topic. So you mentioned about the base ratio target. I'm not sure if this 18% to 22% is for '25 to '26 or it is the long-term base ratio? I mean, up to 29%. So my first question is this.

And the second is related to this. What is the ROE level you are targeting with this EPS growth above 16% CAGR, '25 to '29. And the -- don't you think that it is time to start to talk about ROE rather than to gross profit because you are becoming more a banking or a bank-like company. You are discussing capital, you are discussing dividends. So it's just a food for thought here. If you don't you think that it is time to talk about and to release or to discuss ROE rather than gross profit?

Thank you for your two questions. The first one related to the Basel ratio that we are now guiding to 18% to 22%. It is for midterm to long term. But it's important to mention that we moved it from 33% to 31% and now it's 29%. So we are working a lot to optimize the capital structure of the company, considering that we have already returned via buybacks or dividends since June '24, an amount around BRL 2.1 billion. So now we know that we have an excess capital of from BRL 2 billion to BRL 3 billion. And we are targeting to reduce as time pass by our Basel index.

Regarding to ROE, we don't have any formal guidance for that. We proved the track record in the past years, delivering value to shareholders. Our ROE today is above 15% -- and it is above 15% in the last 12 months. So we have a very solid capital structure to support the growth of the company. And we are confident to deliver in midterm, long term, but not our official guidance again, deliver the same peer level through capital optimization and also profit growth.

All right. So we are talking about -- so you are talking about something around 25% to 30%, right? This is what you're saying.

We are not giving a specific number. We are just not guiding for the ROE at this time. We think that we can -- the products we're going to launch, they're going to have ROE above what we have today. That's what we expect, the credit products. So it's going to be accretive to the ROE, but we'd rather not to give you a specific number at this time.

Regarding the metrics, that's under discussion. If we should change a little bit the metrics that we give disclosure to the market. I can definitely say to you, it is in agenda. Once you have some definition here, we're going to talk to the market in advance as we've been doing. And just like this call, they are giving more clarity to what we have in mind and based on the transparency policy that we have with the market.

Our next question comes from Antonio Ruette with Bank of America.

So, two questions on my side. So first, I would like to focus a little bit on the payment side. I know that you do not want to discuss TPV at this point, short-term TPV. But in general terms, if you could provide some color on your assumptions on the long run and also take rate, okay, for the payments business? And are you assuming stable take rates or going to decline? Just for us to get a better sense on your long-term perspectives between banking and payments, okay?

And my second question is a follow-up to the first question. You mentioned to the first question in the call -- you mentioned that the sharper acceleration in the credit portfolio should be after 2026, more concentrated on 2027, '08, '09. Why not to grow in a stronger pace in 2026? What should prevent a stronger pace in the coming 12 months? That's it on my side.

Antonio, I will start with the last one. Credit is something that you should do in a way that you can have the best confidence or the best information that they have so that you can accelerate and escalate. So we've been working with some products that we have some -- we have more confidence to escalate in the following quarters, and we plan to do so. But of course, it doesn't depend only on us. There is also macroeconomic challenges that we should have in mind. And just remember, next year, we're going to have presidential elections in Brazil. We are having 15% interest rate that didn't decrease.

So, that's all the variables that you should have in mind before I give you any specific guidance about our credit portfolio growth in 2026. But of course, if we can accelerate, we will do it. There is no structural problems inside the company. It's more related to macroeconomic challenges and have the right clusters to test and then after that escalate. And once you have the test, it takes a while. It takes a little -- a few months so that you can see what's going on with this cluster before you can escalate. So that's the reason that you have. But I can assure you, if you have confidence to accelerate, we will do it.

Regarding TPV and the payments, we are not disclosing the TPV growth and MDRs. But I can say you that TPV is one of the metrics today. But as time passes by and even today, it's not the main metric anymore, we have if I'm not wrong here, in Q2, we had BRL 130 billion in TPV for credit cards and BRL 90 billion in cash-in PIX. And we can monetize both of these cash-ins. Of course, PIX, we cannot monetize all of them, but we can get some benefits such as float and so on. So as time passes by, TPV will be less and less important and the take rate for the acquiring will be less and less important as well. So that's why we are not guiding at this point.

What you have in mind is to look at the client as a whole and monetize this client the best way that we can do in offering new products, cross-selling cards and having different revenue streams from the same client as we have this complete digital bank with many, many features and many products. So that's the best way I can answer your question regarding TPV.

All right. And just a follow-up on the first one, if I may. If you could provide your Selic assumptions for the guidance?

It's based on the curve that you have in the market today. I guess, Artur, you can correct me here, right? If you look at the future curve, yes.

It's based on the future curve, the current future curve that, as you know, considers 15% this year and flows to 14%, 13% in the long run.

Our next question comes from Daniel Vaz with Safra.

If you could walk us through how did you arrive at the BRL 25 billion figure for the credit portfolio? I mean, was it a top-down approach? Are you looking at, for example, PIX financing payroll -- private payroll loans and clean credit, for example, at 2030 at BRL 1 trillion and you want to have like 2% share or 2.5% share? Or did you do like a bottom-up approach like projecting a penetration rate of X percent on your future base clients of active clients that you want to reach? It's good for us to have this type of approach, so we can try to redesign by ourselves and try to arrive in something similar for the profitability of the product? And what's our assumption is good to hear.

So, we pretty much designed this long-term program here in terms of credit evolution based on what we see today on our customer database, the level of attachment that we have in terms of the propensity of those customers to consume a nowadays based credit products plus the products that we will develop over the next few quarters. And of course, that is the organic growth of the company that we are factoring into this BRL 25 billion in terms of credit outstanding.

So, of course, we are running here a lot of tests in terms of penetration, in terms of credit offer, in terms of credit eligibility to make sure that we can -- with the growth that we see on our customer database today, perform a very, let's say, steep growth over the next four years. So, we are quite confident on how we can deploy that through, of course, our organic growth plus this product evolution or this product development that we have on our road map.

If I may follow up, I saw that you mentioned an AI-powered credit model, right? So are you planning to develop by yourselves or any inorganic acquisition in that sense? Because we saw no bank, of course, buying Hyperplane, and it was a very common acquisition. So, I want to pick your brains on that as well.

By now, we are developing our AI engines here, not only for credit using the capabilities that are among the group here, including AI, which is our software development company that we have inside the group. So we are quite comfortable with everything that we are doing so far. And when we are talking about AI powering the credit engine, we already see a few examples in-house that can be -- can scale up to the rest of products that we have.

And we are pretty much working on two main, let's say, pillars here to get all the information, the nonstructured information, the TPV information, the social demographic information of our customers to first to take the decision if this customer is going to have or not a credit limit for us and more important than saying yes or no, what kind of level in terms of average ticket, interest rate and tenor that we're going to offer to those customers to optimize and to have a very well-balanced equation over time.

Okay. And lastly, sorry for the third question. I saw that you wrote private payroll and PIX financing. I just want to confirm that this is are not the main priority for you. This is just going to be also products that you may have, but trying to get a sense of what are the avenues or what are the main products here that you want to grow for reaching this guidance?

For the short term, we are working very hard on the working capital to our merchants here. That's something which is the growth frontier of 2026. I think Dutra already mentioned here. That's something that we have a huge potential inside our customer database with a lot of engagement and creates a lot of products as engagement over time on our merchant database.

Of course, when we speak about the private payroll and the PIX financing, we are talking about more our consumer database here, and that is something that we have a lot of customers engaged with our -- on our digital platform here. And we understand that we have a fair share of this market that we should take as long as our digital platform here in terms of relationship carries a lot of principality.

Our next question comes from Marcelo Mizrahi with Bradesco BBI.

So, regarding the strategy on credit side, just trying to understand, so what's the products that you are more convinced to start before? So, which one will be the start of this new strategy if it is already clear that you guys can accelerate the working capital already in this next year?

And another question regarding that is to try to hear from Mauad in terms of the test. So I know you guys that you are doing a lot of tests recently. So you were very -- you were trying to become -- to bring this confidence to the strategy. So which products do you guys already are -- have this confidence to accelerate or to start to offer in a more complete offer to the clients?

Thank you for your question. So here, we already have the products here, which is business as usual for us. There are the secured products that you guys already know, and we are keeping pushing those products because even though the spreads are lower, that creates over time, a lot of engagement, our long-term products, and these products will be important to us today and in the future. But this is business as usual, and there are some features that we deliver to increase conversion, to attract more customers, but there is no news on that, I would say. Second, there are the products that are already in place, and we are working on ways to scale up and to test the credit performance of specific customers, which it is the working capital and the overdraft credit line that we are offering to our customers.

So those two products, they are already gaining volume. We are opening new clusters. We are testing. We are seeing -- checking the early indicators in terms of credit performance and keep pushing up those credit portfolios. Those portfolios, they are unsecured portfolios, and they have a very high yield, of course, if well executed. And again, probably those two products is going to be our growth frontier on 2026. Even the working capital today, we already are producing credit in a different level than the end of last year. So that's something that we are quite confident.

On the overdraft, as long as it is an emergency line and it is a more hot credit line. We are taking more care. We are testing small to make sure that we have the right clusters to have a very well-performing product on 2026. And then there are the products that are under development that probably we're going to see some volumes on the second half of next year, which is the PIX financing and the private sector payroll loan. I hope this answers your question.

Our next question comes from Henrique Navarro with Santander.

Well, my question is on the aggressive target you have for loan growth for 2029. In order to reach such a strong number, you need a flawless execution, you need some market share gain and Brazil has to succeed. So, flawless execution, basically, you need to put your credit machine to work. As far as I know, I mean, your credit machine hasn't been tested for such a big number in such risky lending categories like PIX Finance, we are talking about the market share gain, there's a lot of very strong competitors out there. So from who are you planning to gain market share? And finally, Brazil has to succeed until 2029. And I hope you make it because that's going to be the best outcome for our industry. But how can we address the questions on -- how good is your credit machine and the competition in order to gain market share?

Henrique, this is Dutra. I will start, and then I can send the word to Mauad so that he can give you more details.

To be honest, we think it's very feasible this BRL 25 billion when you look today to some of our other digital players with clients similar to our levels or even less clients than what we have today. They have credit portfolios bigger than that. So I think it's very feasible. As you said, we need to execute well and our track record give us the credit that we are a very good execution company. So I think it's very realistic.

We've been developing capabilities within the company in the past, I would say, two years. Of course, macro matters, but our internal initiatives and our processes were the main catalyst to be honest. And we view the risk return we expect from the credit portfolio is definitely worth it. So that's why we decided to give this disclosure to the market about the BRL 25 billion. I guess Mauad can complement here.

I think the main point that Dutra already mentioned, it is the capabilities to manage credit risk. I joined the company a year ago, and we've been working very hard here to have this capability up to speed to start to get our fair share out of this credit market. That's incredible how the company has a lot of customers that carries our digital platform as the main banking account. So we carry a lot of principality. So when we see the BRL 25 billion, of course, it is a number that is quite bullish because we are talking about to multiply by 5 what we have today pretty much.

But again, we are talking about our fair share of this market. So we will have to execute well. And as Dutra mentioned, we have a very strong track record in terms of quality of the execution. We do have the capability to manage credit risk. We do have the process and systems already. We have our collections up to speed to start to push some unsecured products over our customer database. And we are quite confident that we will find the angle to start growing this portfolio over time and deliver what we are seeing here in terms of long-term view.

Our next question comes from Ricardo Buchpiguel with BTG.

I have two questions here. So, first, you mentioned that you don't believe that TPV is a quite relevant metric for the future of the business. I wanted to know if there is any plan to stop sharing this KPI in future release.

And for my second question, can you provide more color also on your expectations for cost of funding and the size of the deposit franchise in the long run? You mentioned that you're assuming funding cost at the yield curve today, but how relevant would be reducing your funding cost given this funding part of the equation in the 2029 goals that you guys set?

Regarding TPV disclosure, it is under discussion, but there is no definition about it. So once you have some news about it, we're going to share in advance with the market. And regarding the cost of funding, so I'll pass the word to Artur here. Thank you.

Well, in terms of cost of funding, as you may know, we have already worked a lot to diversify the funding sources that we use to run the business. Deposits is the most important one. As you see, the cost of those deposits are pretty low and help us to lower the cost of funding for the company today, and we continue to focus on increasing the number of deposits. There is no official guidance for that in the long run, but we are considering that deposits is an important funding of source to us. And as it comes from our consumers, our merchants, help also to have the engagement of those merchants and consumers in our ecosystem.

So the cost of funding should be something important to the future. And we are considering a lot that we have deposits to help us to reduce this cost of funding.

Thank you. This concludes today's question-and-answer session. I will now turn the floor back to PagSeguro Digital's team for their concluding remarks.

Thank you, everyone, for the participation in the call for investing the time to talk to us. And our IR team is going to be available for future conversations and more details to talk to you. Thank you very much.

Thank you. This concludes today's conference call. You may now disconnect, and have a nice evening.