Q4 2023 Earnings Summary
- Strong Growth in Net Income and Earnings per Share: The company achieved record net income in both GAAP and non-GAAP terms, with GAAP net income reaching BRL 488 million, growing 20% year-over-year. Earnings per share (EPS) reached BRL 1.53, BRL 0.26 better than last quarter, and for the year, EPS reached BRL 5.10, 12% higher than 2022. This demonstrates a solid financial performance and profitability growth.
- Significant Increase in Deposits and Client Engagement: Deposits reached an all-time high of BRL 28 billion, boosted by a 31% year-over-year growth in checking account balances. Cash-in per active client grew 43% year-over-year, reaching BRL 4,000 per client, indicating increased client engagement and usage of PagBank as their main bank.
- Expansion into New Markets and Diversification of Services: The company expanded beyond point-of-sales, ramping up online payments with the integration of MoIP and the revamp of PagSeguro International, leading to 31% growth in TPV from SMBs and 11% from large accounts in Q4 '23. This diversification into new markets and services supports future growth opportunities.
- The company expects net take rates to decline due to a shift in client mix towards SMBs, which could pressure revenue growth.
- The company is investing in new and nonprofitable segments like online payments and cross-border payments, which could negatively impact profitability in the near term.
- The focus on gross profit as a percentage of TPV instead of net take rate may obscure declining net take rates and affect transparency.
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2024 TPV Growth Guidance
Q: What's your 2024 TPV growth outlook?
A: We expect TPV to grow 12–16% in 2024, exceeding industry projections of high single-digit to low double-digit growth. This guidance is based on strong momentum from Q4 2023 and early 2024 performance, with TPV growth of 21% in Q1. We also assume the SELIC rate will end the year at 9%, which should lower funding costs. -
Take Rate and Gross Profit
Q: How will the client mix affect take rates?
A: As we gain more SMB clients, the net take rate may decrease slightly, due to their higher transaction volumes and lower rates. However, the gross profit yield remains stable because financial expenses are offset by efficiencies. We focus on gross profit as a percentage of TPV, which has been stable around 1.5% and is expected to remain so in 2024. -
Credit Quality and NPLs
Q: Are NPLs expected to improve further?
A: Yes, our NPLs have improved from around 20% a year ago to 7% currently. We expect this downward trend to continue in 2024, driven by better risk management and a shift towards secured lending products. -
Credit Growth Strategy
Q: Why is credit card portfolio growth flat?
A: We're transitioning from unsecured to secured credit cards, which affects portfolio growth figures. Additionally, our payroll and FGTS products are growing faster, influencing the overall mix. We're cautiously expanding our unsecured credit offerings when appropriate. -
Dividends and Capital Allocation
Q: Will you pay dividends given strong cash generation?
A: Currently, we're not discussing dividends. Despite generating excess cash, we see many growth opportunities and prefer to invest in ventures that will provide higher future returns. -
Effective Tax Rate Outlook
Q: How will your effective tax rate change?
A: We expect our effective tax rate to remain stable in 2024, at similar levels to 2023 , despite the growing relevance of PagBank. We have efficient tax planning to manage this. -
Competitive Environment
Q: Any changes expected in competition?
A: We observe a rational competitive environment, with no irrational moves from competitors. Even with potential market changes, we believe our integrated model of payments and financial services gives us an advantage. -
SMB Strategy and Sustainability
Q: How sustainable are your SMB market share gains?
A: Our focus on SMBs is yielding sustained growth due to a strong value proposition, excellent service levels, and integrated banking products. We believe this strategy is sustainable and will continue to drive market share gains. -
PIX Impact on TPV
Q: How does PIX contribute to TPV growth?
A: PIX QR code transactions represent a low single-digit percentage of TPV, similar to the industry. We don't expect this to change significantly in 2024. -
Online and Cross-Border Payments
Q: What's your plan for online and cross-border payments?
A: We're integrating our cross-border payment business, rebranded as PagSeguro International, into our core operations. This offers growth opportunities by leveraging our platform to serve foreign companies across Latin America. -
Merchant Base Evolution
Q: What's the outlook for merchant net adds?
A: We expect the number of merchants, especially in the nano segment, to stabilize at some point in 2024. We're more focused on total TPV growth, particularly by expanding in the SMB segment. -
Operating Expenses
Q: Why did administrative expenses decrease?
A: Administrative expenses decreased due to seasonal efficiencies and reversals in our long-term incentive plan accruals. For 2024, operating expenses are expected to grow more than inflation but won't pressure margins.
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