PagSeguro Digital Ltd. 2026 Q2 Earnings Call

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. After the presentation, we will open the call for questions and to allow for broader participation, we ask that each analyst limit themselves to one question only. 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 continued to increase client engagement while expanding our multi-product 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 re-acceleration 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 continued 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 volume re-acceleration 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 are seeing the strategy play out as expected. Stronger engagement, broader monetization and resilient profitability despite a challenging microenvironment. 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 our 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, operational 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 businesses 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, iOS 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 active banking clients reached 5.7 million, up 27% year-over-year. We also continue to see stronger usage of our daily banking features, including bill payments and Pix transactions, which increased 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 importantly, 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 2019 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 advantages. 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 reinforces 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 costs, 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 relationships. Now, I will hand it over to Gustavo to cover how these business trends translated into financial performance. Gustavo, please. Thank you, Mauad.