PagSeguro Digital : 4Q23 Earnings Release

PagSeguro Digital Ltd.

Earnings Release

4Q23

Feb 28, 2023

1

PAGS reports Fourth Quarter 2023 Results

Net Income (Non-GAAP) of R$ 520 million, +26.6% y/y

Net Income (GAAP) of R$ 488 million, +19.7% y/y

São Paulo, February 28, 2024 - PagSeguro Digital Ltd. ("PAGS," "PagBank" or "we") announced today its fourth quarter results for the period ended December 31, 2023. The consolidated financial statements are presented in Reais (R$) and prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").

4Q23 Highlights

	Total Finance Volume (TFV)		Total Payment Volume (TPV)		Total Banking Volume (TBV)
	R$ 281 Billion
			R$ 114 Billion		R$ 167 Billion

Gross Profit		Payments | Gross Profit			Financial Services | Gross Profit
R$ 1.7 Billion				R$ 1.6 Billion				R$ 125 Million

	Net Income | Non-GAAP				Payments | Adj. EBITDA			Financial Services | Adj. EBITDA
	R$ 520 Million				R$ 922 Million				R$ 53 Million

2

To our shareholders

As we post our results for the fourth quarter 2023, we are pleased to announce that 2023 was yet again an important chapter in advancing on our mission to make easier the financial lives of people and businesses in Brazil. In 2022, when my second letter was published here, I mentioned our historic milestone of surpassing R$ 1 trillion in financial transactions processed in 16 years of existence. In 2023, we processed almost R$ 1 trillion in financial transaction in one single year, revealing the strength of our products, the reliability of our IT infrastructure, and the compounding effect in our growth. Also, we were able to add more than 3 million new clients, surpassing 31 million PagBank clients by year-end,almost 15% of Brazilian population.

In Payments, our value proposition expanded beyond micro-merchants and the usage of POS devices. TPV grew +11% y/y in 2023, reaching R$ 394 billion, with the last quarter presenting stronger trends on TPV, growing +21% y/y in 4Q23, with a positive highlight of our performance in SMBs, which TPV grew +31% y/y in 4Q23. This was only possible due to our integrated strategy that combines financial services and payments in a unique way, instant settlement into PagBank account, the word-of- mouth effect, and the strengthening of our HUBs in different geographies across the country. Also, we concluded the integration of MOIP and revamped our cross-border payments unit under PagSeguro International brand, which has been contributing to the TPV growth in large accounts, with brick-and-mortar, online and omnichannel solutions. Our service levels have been consistently improving over the years, reflecting higher scores for our app and NPLs and stronger client engagement. Besides all the good news, micro-merchants, which are our natural call, grew +14% y/y in TPV in 4Q23, and now can count with tap on phone solution in their smartphones.

In banking, we delivered significant developments, such as the collection platform for merchants, which gathers cards payments, PIX and boletos in the same place, helping clients to manage their accounts receivables in the same interface. For SMBs, we launched settlement from different acquirers into PagBank account, approval profile, bank account for multiple users and payroll platform to manage salary transfers up to 2,000, everything fully embedded into our ecosystem, available through the app and through the internet banking interface. For consumers, we improved our investment platform, enhanced the credit card journey, and expanded the credit underwriting of payroll loans and FGTS advance. All these initiatives led to a Cash-in (PIX and wire transfers sent to PagBank account) of R$ 217 billion, which combined to TPV in merchant acquiring, led to the all-time high deposits level of R$ 27.6 billion, +33% y/y.

Consequently, Total Revenue got back to a health and positive level before our expectations, posting +10% y/y in the fourth quarter 2023, despite the holiday season which led to slightly lower take rates, wrapping up the year with almost R$ 16 billion. Our commitment to grow efficiently was supported by our funding strategy backed by deposits, our lower losses on the back of our successful initiatives to improve risk assessment and avoid chargebacks and credit losses, and a flattish OpEx, which led to higher margins quarter after quarter, leading net income (non-GAAP) to almost R$ 1.8 billion, being R$ 520 million only in the fourth quarter 2023, +27% y/y.

Our CapEx per Sales continued its downtrend in 2023, marking 12.5% vs. 30% in 2020, concluding an important milestone in our investment cycle, which should reach similar levels in comparison to the depreciation and amortization, unlocking additional operational leverage in our results and better cash earnings moving forward. Consequently, our net cash balance surpassed R$ 11 billion and our Cash + Financial Investments in our balance sheet grew +112% y/y, surpassing R$ 6 billion.

So, as we close the 2023 cycle, I am excited about 2024 and how our developments should continue to disrupt payments and financial services for every client in every region in Brazil. Our growth drivers for 2024 are:

• Expanding payments penetration in all segments, combining acquiring and banking to reach the optimum balance between growth and profitability.
• Fostering growth in the domestic and cross-border online payments, to fully leverage our omnichannel platform capacity.
• Increasing the penetration of financial services in our 31 million clients (consumers + merchants) to diversify our revenues streams.
• Growing credit underwriting of secured products and our high yield savings accounts to stimulate the consumer segment expansion and diversification.
• Solidifying our fraud prevention and risk management capacities to reduce losses while providing seamless secure experiences to our customers.

Once again, we remain focused on pursuing technological disruptions, enhancing our financial ecosystem and portfolio of services and products, to make the financial lives of our clients easier and support the business success of our merchants.

Alexandre Magnani, Chief Executive Officer

3

Selected Capsule of Income Statement Data1

R$ Million		4Q23		4Q22	Var. y/y	3Q23	Var. q/q		2023		2022	Var. y/y
Total Revenues and Income		4,347		3,962	9.7%	4,026	8.0%		15,948		15,335	4.0%
(-) Other Financial Income		(73)		(43)	68.8%	(66)	11.4%		(268)		(176)	52.5%
(-) Transactions Costs		(1,645)		(1,478)	11.3%	(1,508)	9.0%		(5,956)		(5,620)	6.0%
Net Take Rate		2,629		2,440	7.7%	2,452	7.2%		9,724		9,540	1.9%
(-) Financial Expenses		(841)		(855)	-1.6%	(820)	2.6%		(3,270)		(3,152)	3.7%
(-) Total Losses²		(123)		(192)	-36.0%	(165)	-25.8%		(536)		(984)	-45.6%
(+) FX Expenses		9		15	-36.4%	10	-5.1%		45		49	-8.2%
Gross Profit		1,675		1,409	18.9%	1,477	13.4%		5,964		5,453	9.4%
Payments		1,550		1,245	24.5%	1,376	12.6%		5,449		5,058	7.7%
Financial Services		125		164	-23.9%	101	23.7%		515		395	30.4%
(-) Operating Expenses		(700)		(621)	12.7%	(583)	20.0%		(2,459)		(2,400)	2.5%
Adj. EBITDA³		975		788	23.7%	894	9.1%		3,505		3,053	14.8%
Payments		922		776	18.8%	892	3.4%		3,382		3,247	4.2%
Financial Services		53		12	357.0%	2	2333.8%		123		(194)	n.a.
(-) POS Write-off		(57)		(66)	-13.4%	(64)	-10.9%		(248)		(200)	23.8%
(-) D&A		(349)		(270)	29.0%	(329)	6.0%		(1,290)		(1,080)	19.4%
(+/-) Other Income (Expense), Net		64		29	123.2%	56	14.4%		223		127	76.2%
EBT		633		480	31.8%	557	13.7%		2,190		1,899	15.3%
(-) Income Tax and Social Contribution		(112)		(69)	62.8%	(117)	-3.5%		(422)		(302)	39.8%
Net Income | Non-GAAP		520		411	26.6%	440	18.2%		1,768		1,597	10.7%
EPS | Non-GAAP4	R$	1.63	R$	1.25	30.6%	1.36	20.0%	R$	5.46	R$	4.85	12.5%
(-)Non-GAAP Effects		(32)		(4)	787.1%	(29)	10.3%		(114)		(92)	23.6%
Net Income | GAAP		488		408	19.7%	411	18.8%		1,654		1,505	9.9%
EPS | GAAP 4	R$	1.53	R$	1.24	23.5% R$	1.27	20.6%	R$	5.10	R$	4.57	11.7%
Cash Earnings | Adj. EBITDA (-) CapEx		454		410	10.7%	365	24.3%		1,516		917	65.4%
Capital Expenditures (CapEx)		521		378	37.8%	529	-1.5%		1,988		2,136	-6.9%

1. This selected capsule income statement data is presented only to facilitate a general overview of highlights of our financial performance for the periods indicated for informational purposes. For our complete Income Statement information, see our consolidated financial statements prepared in accordance with IFRS as issued by the IASB, in our Form 6-K related to the Financial Statements, published on the date hereof;
2. Total Losses: Chargebacks and Expected Credit Losses;
3. Adj. EBITDA: EBITDA net of Financial Expenses;
4. Considering the Weighted Average Number of Diluted Common Shares:

4Q23: 319,083,950 shares

3Q23: 323,773,637 shares

4Q22: 327,110,295 shares

2023: 323,955,576 shares;

2022: 329,234,692 shares.

Key Performance Indicators

KPIs		4Q23		4Q22	Var. y/y		3Q23	Var. q/q		2023		2022	Var. y/y
ARPAC¹
Payments	R$	2,191	R$	1,893	15.7%	R$	2,080	5.3%	R$	2,275	R$	1,991	14.3%
Financial Services	R$	66	R$	95	-30.5%	R$	73	-10.2%	R$	66	R$	95	-30.5%
Efficiency Ratio²		15.6%		16.7%	(0.1) p.p.		16.4%	(0.0) p.p.		15.9%		19.3%	(0.2) p.p.
Credit Portfolio | R$ Billion		2.5		2.7	-7%		2.6	-3%		2.5		2.7	-7%
Total Deposits | R$ Billion		27.6		20.7	33%		21.6	28%		27.6		20.7	33%

1. ARPAC: Sum of LTM revenues / Average of active clients over the last 5 quarters;
2. Efficiency Ratio: Selling, Administrative and Other Expenses required for each amount of Total Revenue and Income generated.

4

Selected Capsule of Balance Sheet Data¹

Balance Sheet | R$ Million			4Q23	4Q22	Var. y/y	3Q23	Var. q/q
Total Assets					55,108	45,329	21.6%	47,327	16.4%
Current Assets					48,729	39,767	22.5%	41,165	18.4%
Cash and Financial Investments	2	6,208	2,932	111.7%	3,053	103.3%
Accounts Receivable			41,757	36,249	15.2%	37,521	11.3%
Others	3					764	586	30.4%	591	29.4%
Non-current Assets			6,379	5,562	14.7%	6,162	3.5%
Accounts Receivable			1,144	746	53.4%	1,000	14.4%
PP&E and Intangible Assets	4		5,022	4,652	7.9%	4,962	1.2%
Others	5					213	164	29.8%	200	6.7%
Total Liabilities and Equity			55,108	45,329	21.6%	47,327	16.4%
Current Liabilities				34,432	29,740	15.8%	28,665	20.1%
Accounts Payable	6			9,966	9,321	6.9%	9,052	10.1%
PagBank | Checking Accounts		11,383	8,667	31.3%	9,655	17.9%
PagBank | Savings Accounts and CDs	11,365	10,101	12.5%	8,577	32.5%
Borrowings					189	0	n.a.	193	-1.7%
Others	7					1,529	1,652	-7.4%	1,189	28.6%
Non-current Liabilities			7,435	3,747	98.4%	5,793	28.3%
Accounts Payable	6			186	85	119.3%	159	16.6%
PagBank | Savings Accounts and CDs	4,823	1,895	154.6%	3,337	44.5%
Others	8					2,427	1,767	37.3%	2,297	5.6%
Equity						13,241	11,842	11.8%	12,868	2.9%
Retained Net Income			7,891	6,237	26.5%	7,403	6.6%
Capital						5,350	5,605	-4.6%	5,465	-2.1%
Net Cash Balance	9				11,155	9,836	13.4%	10,573	5.5%

1. This selected capsule balance sheet data is presented only to facilitate a general overview of the highlights of our financial performance for the periods indicated for informational purposes. For our complete Balance Sheet information, see our consolidated financial statements prepared in accordance with IFRS as issued by the IASB, in our Form 6-K related to the Financial Statements, published on the date hereof.

Balance Sheet Reconciliation:

1. Cash & Financial Investments: Cash and Cash Equivalents + Financial Investments;
2. Others: Inventories + Taxes Recoverable + Other Receivables + Receivables from Related Parties;
3. PP&E & Intangible Assets: Property and Equipment + Intangible Assets;
4. Others: Judicial Deposits + Prepaid Expenses + Deferred Income Tax and Social Contribution + Investments + Receivables from Related Parties;
5. Accounts Payable: Payables to third parties (including (i) transactions of sales and services to settle with merchants, net of PagSeguro's revenue, (ii) the balance of client bank accounts that are invested by the client in Certificate of Deposits, and (iii) the balance of merchant payment accounts through which PagSeguro acquires treasury bonds to comply with certain requirements);
6. Others: Trade Payables + Payables to Related Parties + Derivative Financial Instruments + Salaries and Social Charges + Taxes and Contributions + Provision for Contingencies + Deferred Revenue + Other Liabilities;
7. Others: Deferred Income Tax and Social Contribution + Provision for Contingencies + Deferred Revenue + Other Liabilities;
8. Net Cash Balance: Cash and Cash Equivalents + Financial Investments + Current & Non-Current Account Receivables - Current & Non-Current Payables to Third Parties - Borrowings - Derivative Financial Investments - Current & Non-Current Deposits.

Capital Markets¹

Capital Markets		4Q23		4Q22	Var. y/y		3Q23	Var. q/q
Market Cap
In BRL billion	R$	19.4	R$	14.3	35.1%	R$	13.8	40.5%
In USD billion	$	4.0	$	2.7	45.6%	$	2.8	45.3%
Stock Price
In BRL	R$	60.37	R$	44.19	36.6%	R$	43.12	40.0%
In USD	$	12.47	$	8.47	47.2%	$	8.61	44.8%
Book Value per Share
In BRL	R$	41.28	R$	40.83	1.1%	R$	40.25	2.6%
In USD	$	8.53	$	7.83	9.0%	$	8.04	6.1%
1. As of December 31, 2023;
Brazilian Central Bank Currency Exchange Rate (PTAX) BRL/USD:
4Q23: R$ 4.8413
4Q22: R$ 5.2177
3Q23: R$ 5.0076

5

Operational Performance

Total Finance Volume

R$ Million	4Q23	4Q22	Var. y/y	3Q23	Var. q/q	2023	2022	Var. y/y
Total Finance Volume	280,626	209,032	34.3%	243,684	15.2%	950,078	731,447	29.9%
Total Payment Volume1	113,711	94,273	20.6%	99,836	13.9%	394,320	353,849	11.4%
Total Banking Volume2	166,915	114,759	45.4%	143,848	16.0%	555,758	377,598	47.2%

1. Total Payment Volume: includes debit cards, credit cards, prepaid cards, vouchers, boletos and PIX P2M (fee-based product);
2. Total Banking Volume: includes prepaid card top-ups, PagBank card issuing TPV (debit, credit, prepaid), mobile top-ups, wire transfers to third-parties,cash-in through boletos, bill payments, tax collections, P2P transactions, PIX P2P (no fee-based), credit underwriting, super app top-ups and GMV.

Total Finance Volume (TFV), formerly known as PAGS TPV, totaled R$ 280.6 billion, representing an increase of

+34.3% vs. 4Q22 due to the growth in both Total Payment Volume and Total Banking Volume.

Total Payment Volume (TPV), formerly known as PagSeguro TPV, totaled R$ 113.7 billion, representing an increase of +20.6% vs. 4Q22 mainly due to the larger share of wallet driven by the cash conversion into electronic payments, maturation of the existing cohorts, and increasing productivity of our sales channels leading to a better performance in all merchants' segments (micro-merchants, SMBs and large accounts).

Total Banking Volume (TBV), formerly known as PagBank TPV, totaled R$ 166.9 billion, representing an increase of +45.4% vs. 4Q22. This growth is mainly related to the increase in the engagement of our clients with our financial services, such as PIX, bill payments, mobile top-up, cards' spending and credit underwriting.

PagBank Clients

# Million		4Q23	4Q22	Var. y/y	3Q23	Var. q/q
1		31.1	27.7	12.2%	30.2	3.0%
Total Clients
Active Clients	2	16.7	16.2	3.4%	16.7	0.1%
Consumers		10.7	9.7	9.6%	10.6	0.7%
Merchants		6.1	6.5	-5.9%	6.1	-1.0%

1. Total Clients: Number of bank accounts registered at Brazilian Central Bank;
2. Active Clients: Active merchants using one additional digital account feature/service beyond acquiring and consumers with a balance in their digital account on the last day of the month.

PagBank ended the quarter with 31.1 million clients, representing an increase of +12.2% vs. 4Q22, and Active Clients of 16.7 million, an increase of +3.4% vs. 4Q22. This increase is mainly related to higher penetration in the consumers segment which represents 64% of PagBank clients vs. 60% in 4Q22.

Active Merchants

# Million				4Q23	4Q22	Var. y/y	3Q23	Var. q/q	2023	2022	Var. y/y
Active Merchants	1		6.5	7.1	-7.6%	6.7	-1.7%	6.5	7.1	-7.6%
Net Addittions				(0.1)	(0.2)	-51.7%	(0.1)	-2.0%	(0.5)	(0.6)	-11.6%
TPV per Merchant	2	| R$ thousand	17.2	13.1	31.6%	14.9	15.9%	57.9	47.9	20.9%

1. Active Merchants: At least one transaction in the last twelve months;
2. TPV per Merchant: Amount of TPV divided by the average of active merchants during the period.

Active Merchants ended the quarter with 6.5 million, representing a decrease of -7.6% vs. 3Q23. Since early 2022, the company has been adopting a more selective go-to-market strategy focusing on clients with better unit economics, higher activation ratio, and higher engagement in financial services rather than just net adds. Additionally, we have been improving our onboarding and risk assessment procedures since early 2023 to reduce chargebacks and losses, which has been positively reflected in the evolution of our gross profit throughout 2023.

6

Credit Portfolio

R$ Million		4Q23	4Q22	Var. y/y	3Q23	Var. q/q
Credit Portfolio		2,529	2,721	-7.1%	2,462	2.7%
Working Capital		410	743	-44.9%	471	-13.1%
Credit Card		763	1,113	-31.4%	816	-6.4%
Payroll Loan + Others	1	1,356	865	56.7%	1,175	15.3%
Provision for Losses		(585)	(986)	-40.6%	(651)	-10.0%
Working Capital		(362)	(522)	-30.7%	(387)	-6.5%
Credit Card		(185)	(451)	-58.9%	(236)	-21.5%
Payroll Loan + Others	1	(38)	(12)	208.5%	(28)	38.4%
Credit Portfolio, net		1,943	1,735	12.0%	1,811	7.3%

1. Payroll Loan + Others: Refers to loan portfolios, including advance Brazil's Severance Indemnity Fund (FGTS) withdrawals and payroll loans to public sector employees and retirees.

R$ Million	4Q23	4Q22	Var. y/y	3Q23	Var. q/q
Credit Portfolio	2,529	2,721	-7.1%	2,462	2.7%
Secured Products	1,662	1,084	53.4%	1,469	13.1%
% Credit Portfolio	66%	40%	25.9 p.p.	60%	6.0 p.p.
Unsecured Products	867	1,637	-47.0%	993	-12.7%
% Credit Portfolio	34%	60%	(25.9) p.p.	40%	(6.0) p.p.

Credit Portfolio reached R$ 2.5 billion in 4Q23, representing a decrease of -7.1% vs. 4Q22, but an increase of +2.7% vs. 3Q23, mainly driven by our strategy to grow in secured products, which represented 66% of the portfolio, combined with the run-off of working capital loans and the write-offs of the working capital loans and payroll loans in 3Q23 and credit cards in 2Q23, according to the credit models update based on IFRS 9 and our tax planning.

Total Deposits

1. As % of CDI (Brazilian Interbank Rate).

Total Deposits reached R$ 27.6 billion, representing an increase of +33.4% vs. 4Q22. This increase was driven by the +31.3% y/y growth in Checking Accounts, reflecting the higher engagement of our clients with our products, and the seasonality of the holidays season. Banking issuances grew +35.0% vs. 4Q22, led by Certificate of Deposits issued to retail clients and institutional counterparties through our Treasury department during the period.

Brazilian Interest Rates	4Q23	4Q22	Var. y/y	3Q23	Var. q/q	2023	2022	Var. y/y
SELIC	11.75%	13.75%	(2.0) p.p.	12.75%	(1.0) p.p.	11.75%	13.75%	(2.0) p.p.
SELIC | Average	12.33%	13.75%	(1.4) p.p.	13.38%	(1.0) p.p.	13.31%	12.55%	(0.2) p.p.
CDI	11.65%	13.65%	(2.0) p.p.	12.65%	(1.0) p.p.	11.65%	13.65%	(2.0) p.p.
CDI | Average	12.23%	13.65%	(1.4) p.p.	13.28%	(1.0) p.p.	13.21%	12.45%	(0.2) p.p.

7

Financial Performance

Total Revenue and Income

Non-GAAP | R$ Million		4Q23	4Q22	Var. y/y	3Q23	Var. q/q	2023	2022	Var. y/y
Total Revenue and Income	1	4,347	3,962	9.7%	4,026	8.0%	15,948	15,335	4.0%
Payments			4,084	3,654	11.8%	3,771	8.3%	14,879	14,097	5.5%
Financial Services	2		253	362	-30.1%	260	-2.8%	1,087	1,414	-23.1%
Other Financial Income		73	43	68.8%	66	11.4%	268	176	52.5%

1. Including Other Financial Income;
2. Including Float, intercompany revenue from Payments' business unit.

Total Revenue and Income reached R$ 4,347 million in 4Q23, representing an increase of +9.7% vs. 4Q22. The managerial breakdown of Payments, Financial Services and Other Financial Income differs from Total Revenue and Income amount due to the Float from Financial Services unit, which is an intercompany revenue from Merchant Acquiring funding, not accounted for Total Revenue and Income. Before 1Q23, Float from Checking Accounts Balance was partially booked in Payments. Going forward, 100% of Float will be fully booked in Financial Services, similar to other financial institutions. The main differences will be:

1. Total Revenue and Income: The mismatch between Total Revenue and Income and the managerial Total Revenue and Income's breakdown in Payments, Financial Services and Other Financial Income increase given the intercompany
   Float will no longer offset a portion of the Financial Expenses. In 4Q23, intercompany Float amounted to R$ 63 million vs. R$ 97 million in 4Q22 and R$ 71 million in 3Q23.
2. Payments: No change in revenue except for an increase in Financial Expenses, since the share of such expenses offset by the Float usually booked in Payments will no longer occur. Consequently, Gross Profit and Adj. EBITDA will decrease. In 4Q23, revenue from payments amounted to R$ 4,084 million, representing an increase of +11.8% y/y, mainly driven by TPV growth in all merchants' segments.
3. Financial Services: An increase in Revenue since the Float will lead to a higher interest income. Consequently, Gross Profit and Adj. EBITDA will increase. In 4Q23, revenue from financial services amounted to R$ 253 million decreasing -30.1%y/y, mainly driven by the regulatory change that came into force on April 1, 2023, lowering the caps applicable to prepaid and debit cards, negatively impacting our revenue evolution.

For more details about Float accounting reconciliation between Financial Services and Payments, please refer to page 16.

GAAP | R$ Million	4Q23	4Q22	Var. y/y	3Q23	Var. q/q	2023	2022	Var. y/y
Total Revenue and Income	4,347	3,962	9.7%	4,026	8.0%	15,948	15,335	4.0%
Transaction Activities and Other Services	2,441	2,304	5.9%	2,269	7.6%	9,027	8,906	1.4%
Financial Income	1,833	1,615	13.5%	1,691	8.4%	6,653	6,253	6.4%
Other Financial Income	73	43	68.8%	66	11.4%	268	176	52.5%

Total Revenue and Income performance is explained below:

1. Transaction Activities and Other Services in 4Q23 amounted to R$ 2,441 million, representing an increase of +5.9% vs. 4Q22. This performance is mainly due to the TPV growth that was partially offset by the impact of the regulatory change on prepaid/debit cards that came into force on April 1, 2023, and the mix change in credit portfolio towards secured products with lower yields and longer duration in Financial Services.
2. Financial Income, which represents the discount fees we withhold from credit card transactions in installments for the early payment of Accounts Payable to Third Parties (merchants), reached R$ 1,833 million, representing an increase of +13.5% vs R$ 1,615 million in 4Q22, mainly due to the TPV growth.
3. Other Financial Income reached R$ 73 million in 4Q23, an increase of +68.8% vs. 4Q22, mainly due to the increase in interest accrued on a higher position of Cash & Financial Investments, which was +112%, or R$ 3,275 million, higher than 4Q22.

8

Total Costs and Expenses explained by function

Non-GAAP | R$ Million	4Q23	4Q22	Var. y/y	3Q23	Var. q/q	2023	2022	Var. y/y
Total Costs and Expenses	(3,714)	(3,482)	6.7%	(3,469)	7.0%	(13,758)	(13,435)	2.4%
Cost of Sales and Services	(2,240)	(1,974)	13.5%	(2,028)	10.5%	(8,115)	(7,518)	7.9%
Selling Expenses	(411)	(435)	-5.7%	(377)	9.0%	(1,423)	(1,946)	-26.8%
Administrative Expenses	(107)	(115)	-6.5%	(166)	-35.1%	(580)	(544)	6.6%
Financial Expenses	(841)	(855)	-1.6%	(820)	2.6%	(3,270)	(3,152)	3.7%
Other Expenses, Net	(114)	(103)	10.9%	(79)	44.5%	(369)	(276)	34.0%

GAAP | R$ Million	4Q23	4Q22	Var. y/y	3Q23	Var. q/q	2023	2022	Var. y/y
Total Costs and Expenses	(3,763)	(3,487)	7.9%	(3,514)	7.1%	(13,931)	(13,576)	2.6%
Cost of Sales and Services	(2,244)	(1,969)	14.0%	(2,033)	10.4%	(8,133)	(7,471)	8.9%
Selling Expenses	(412)	(435)	-5.3%	(378)	9.0%	(1,430)	(1,946)	-26.5%
Administrative Expenses	(152)	(114)	32.9%	(206)	-26.5%	(733)	(669)	9.6%
Financial Expenses	(841)	(855)	-1.6%	(820)	2.6%	(3,270)	(3,152)	3.7%
Other Expenses, Net	(114)	(114)	0.2%	(76)	49.6%	(367)	(338)	8.4%

Total Costs and Expenses, on a non-GAAP basis, amounted to R$ 3,714 million in the 4Q23, representing an increase of +6.7% from R$ 3,482 million in the 4Q22, mainly related to:

Cost of Sales and Services reached R$ 2,240 million in the 4Q23, representing an increase of +13.5% year-over-year, mainly due to the TPV growth, leading to higher interchange and card scheme fees. We also observed a higher POS depreciation and amortization of intangible assets due to past capital expenditures that were deployed to support our growth.

When excluding non-GAAP figures related to LTIP (long-term incentive plan), Cost of Sales and Services, on a GAAP basis, reached R$ 2,244 million, representing an increase of +14.0%, from R$ 1,969 million reported in 4Q22.

Selling Expenses totaled R$ 411 million, representing a decrease of -5.7% from R$ 435 million reported in the same period of 2022, mainly driven by lower losses (chargebacks and provisions for credit losses).

When excluding non-GAAP figures related to LTIP (long-term incentive plan), Selling Expenses reached R$ 412 million, representing a decrease of -5.3%, from R$ 435 million reported in 4Q22.

Administrative Expenses reached R$ 107 million, representing a decrease of -6.5% from R$ 115 million presented in 4Q22, mainly due to seasonal efficiencies captured in the quarter.

When excluding non-GAAP figures related to LTIP Costs and M&A, Administrative Expenses reached R$ 152 million, representing an increase of +32.9%, from R$ 114 million reported in 4Q22, mainly due to a reversal of R$ 42 million, related to lower share-based compensation in 4Q22.

Financial Expenses totaled R$ 841 million in 4Q23, representing a decrease of -1.6% vs. 4Q22, mainly due to a lower average cost of funding led by deposits growth, which posted a strong figure quarter-over-quarter, increasing its relevance in our funding strategy, and lower expenses related to the Brazilian Basic Interest Rate (SELIC) decrease, partially offset by TPV growth in the period.

Other Expenses, net reached R$ 114 million in 4Q23, representing an increase of +10.9% from expenses of R$ 103 million reported in 4Q22. When excluding non-GAAP figures, Other Expenses remained stable as compared to the prior corresponding period, mainly as a result of R$ 11 million of software impairment from acquired companies registered in the 4Q22.

On a GAAP basis, including LTIP, M&A and Other Expenses of R$ 49 million, Total Costs and Expenses amounted to R$ 3,763 million, representing an increase of +7.9% in comparison to the amount of R$ 3,714 million presented in 4Q22.

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Total Costs and Expenses explained by nature

Transaction Costs

Non-GAAP | R$ Million	4Q23	4Q22	Var. y/y	3Q23	Var. q/q	2023	2022	Var. y/y
Transactions Costs	(1,645)	(1,478)	11.3%	(1,508)	9.0%	(5,956)	(5,620)	6.0%
% Total Revenue and Income	37.8%	37.3%	0.5 p.p.	37.5%	0.4 p.p.	37.3%	36.6%	1.2 p.p.
Interchange and Card Scheme Fee	(1,629)	(1,413)	15.4%	(1,450)	12.4%	(5,775)	(5,388)	7.2%
Others	(15)	(66)	-76.9%	(58)	-74.0%	(181)	(232)	-21.8%

GAAP | R$ Million	4Q23	4Q22	Var. y/y	3Q23	Var. q/q	2023	2022	Var. y/y
Transactions Costs	(1,645)	(1,478)	11.3%	(1,508)	9.0%	(5,956)	(5,567)	7.0%
% Total Revenue and Income	37.8%	37.3%	0.5 p.p.	37.5%	0.4 p.p.	37.3%	36.3%	1.5 p.p.
Interchange and Card Scheme Fee	(1,629)	(1,413)	15.4%	(1,450)	12.4%	(5,775)	(5,388)	7.2%
Others	(15)	(66)	-76.9%	(58)	-74.0%	(181)	(180)	1.1%

Transaction Costs, on a GAAP and a non-GAAP basis, totaled R$ 1,645 million, representing an increase of +11.3% from R$ 1,478 million in 4Q22. As a percentage of the Total Revenue and Income, Transaction Costs increased to 37.8% in

4Q23 vs. 37.3% in 4Q22, mainly driven by:

Interchange and Card Scheme Fees totaled R$ 1,629 million in 4Q23, representing an increase of +15.4% y/y, mainly driven by TPV growth partially offset by the impact of the regulatory changes on prepaid/debit cards that came into force on April 1, 2023; and

Other Costs decreased by -76.9% vs. 4Q22 to R$ 15 million, mainly due to efficiencies captured, mainly in logistics.

Net Take Rate

GAAP | R$ Million	4Q23	4Q22	Var. y/y	3Q23	Var. q/q	2023	2022	Var. y/y
Total Payment Volume	113,711	94,273	20.6%	99,836	13.9%	394,320	353,849	11.4%
Gross Take Rate	4,274	3,919	9.1%	3,961	7.9%	15,680	15,159	3.4%
% Total Payment Volume	3.76%	4.16%	(0.40) p.p.	3.97%	(0.21) p.p.	3.98%	4.28%	(0.53) p.p.
Transaction Activities and Other Services	2,441	2,304	5.9%	2,269	7.6%	9,027	8,906	1.4%
Financial Income	1,833	1,615	13.5%	1,691	8.4%	6,653	6,253	6.4%

Net Take Rate	2,629	2,440	7.7%	2,452	7.2%	9,724	9,592	1.4%
% Total Payment Volume	2.31%	2.59%	(0.28) p.p.	2.46%	(0.14) p.p.	2.47%	2.71%	(0.40) p.p.
Transactions Costs	(1,645)	(1,478)	11.3%	(1,508)	9.0%	(5,956)	(5,567)	7.0%

Net Take Rate totaled R$ 2,629 million in 4Q23, representing an increase of +7.7% vs. 4Q22, mainly due to TPV growth during the quarter, partially offset by the seasonality driving larger shares of debit cards and a change in the merchants' mix with a larger presence of SMBs and Large Accounts.

Financial Expenses

GAAP | R$ Million	4Q23	4Q22	Var. y/y	3Q23	Var. q/q	2023	2022	Var. y/y
Financial Expenses	(841)	(855)	-1.6%	(820)	2.6%	(3,269)	(3,152)	3.7%
% Total Revenue and Income	19.3%	21.6%	(2.2) p.p.	20.4%	(1.0) p.p.	20.5%	20.6%	(0.1) p.p.
Securitization of Receivables	(246)	(216)	13.9%	(249)	-1.1%	(954)	(1,233)	-22.7%
Accrued Interest on Deposits and Others	(595)	(639)	-6.8%	(571)	4.2%	(2,316)	(1,919)	20.7%

Financial Expenses totaled R$ 841 million in 4Q23, representing a decrease of Total Revenue and Income, Financial Expenses decreased to 19.3% in 4Q23 vs. 21.6% in

-1.6% vs. 4Q22. As a percentage of 4Q22, mainly due to:

1. Lower average cost of funding led by the growth in deposits, increasing its relevance in our funding strategy; and
2. Lower expenses related to the Brazilian Basic Interest Rate (SELIC) decrease.

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