Speech Transcript

3Q21 Results

Webcast Transcript

November 11, 2021

OPERATOR

Good evening! My name is Greg and I will be your conference operator today. At this time, I would like to welcome everyone to PagBank PagSeguro's Webcast Results for the third quarter 2021. This event is being recorded and all participants will be in listen-only mode during the company's presentation.

After the speakers remarks there will be a question-and-answer session. At that time, further instructions will be given. Should any participant need assistance during the call please press star zero to reach the operator.

This event is also being broadcast live via webcast and may be accessed through PagBank PagSeguro's website at investors.pagseguro.com, where the presentation is also available. Participants may view the slides in any order they wish. The replay will be available shortly after the event is concluded. Those following the presentation via webcast may pose their questions on PagBank PagSeguro's website.

Before proceeding, let me mention that any forward-statements included in the presentation or mentioned on this conference call are based on currently available information and PagBank PagSeguro's current assumptions, expectations, and projections about future events. While PagBank PagSeguro believes that their assumptions, expectations, and projections are reasonable in view of currently available information, you are cautioned not to place undue reliance on these forward-looking statements. Actual results may differ materially from those included in PagBank PagSeguro's presentation or discussed on this conference call, for a variety of reasons, including those described in the forward-looking statements and risk factor sections of PagBank PagSeguro's Registration Statement on Form 20-F and other filings with the Securities and Exchange Commission, which are available on PagBank PagSeguro's investor relations website.

Finally, I would like to remind you that during this conference call the company may discuss some non-GAAP measures. For more details, the foregoing non-GAAP measures, and the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures are presented in the last page of this webcast presentation.

Now, I will turn the conference over to Ricardo Dutra, Chief Executive Officer.

Mr. Dutra, you may begin your presentation.

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RICARDO DUTRA | CHIEF EXECUTIVE OFFICER

Good evening from São Paulo everyone and thanks for joining our third quarter results conference call. Tonight, I have here with me Artur Schunck, our Chief Financial Officer, Alexandre Magnani, our Chief Operating Officer and Eric Oliveira, our Head of Investor Relations.

Let me start by giving you the highlights of this quarter: Record TPV in both, acquiring and banking, record Revenues and EBITDA, and the second-bestnon-GAAP net income, only behind Q4 last year. We will see more details throughout the presentation.

Quick update about COVD-19 in Brazil: while pandemic is not fully behind us, we have started to see signs of the economy reopening in the back of the vaccination. In Brazil, we have been seeing a higher acceptance of vaccines in comparison to other countries. There is also a campaign to give extra shots to reinforce the immunity of the elderlies and people with high-risk diseases or medical conditions.

However, as a consequence of these almost two years of COVID-19, the Brazilian macroeconomic scenario changed very rapidly. Inflation rate went up above 10%, the unemployment rate continues to be above double digit and the interest rates are increasing faster than the market expects. Regardless of these macro-economic challenges our track record gives us the confidence we can navigate very well during the crisis and grow our businesses.

Our quarterly results, one more time, consolidate our winning strategy to continue to invest in technology to make clients' lives simpler, while guaranteeing a safe ecosystem, driving a profitable growth, and increasing revenue and profits diversification with cross-sell and upsell of PagBank products. Our revenues have accelerated, driven by our new growth initiatives, mainly in serving larger merchants than long tail, and cross-selling PagBank offerings for merchants and consumers, while we attract a more diversified client profile. This quarter, we launched the automatic payment (débito automático), DDA and several new partnerships targeting the gaming community. On top of that, several milestones were achieved in our PagInvest initiative: we now offer 70 investment funds and several CDs to foster our deposits. We also have a Brazilian Treasury bond trading platform and our home broker trading platform for equities started the roll-out this week and we expect it will be available for all clients until the end of November.

On the regulatory front, we continue to see the regulator fostering competition which could create opportunities for PAGS.

Therefore, our investment thesis remains the same: we will continue to combine the best balance between growth and profitability among Brazilian Payments and Fintech space, while we prepare our company for the long term, where we expect to have a larger and more profitable company. It is only the beginning. We also know credit is one of the key drivers to achieve larger revenues and

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profits in the future and we are one of the few players in Latin America that has been building, gradually and consistently, a very diversified credit portfolio with a healthy asset quality. We have a seasoned team, exclusive data, and right credit policies. There is no need to rush. Our main goal is to build up a solid credit business.

One more time, I would like to reinforce that I am very encouraged by the recovery trajectory and pleased with the momentum in both businesses, PagSeguro and PagBank. Finally, nothing of this would have happened without the confidence of our shareholders, the commitment of our suppliers, and the best and most committed team working hard every day to promote our mission: being part of the financial lifecycle of every Brazilian citizen, promoting a massive financial inclusion in our country. Thank you very much PagBank PagSeguro team.

That said, Artur and I will present some slides and we will have Q&A session at the end.

SLIDE 3

So, turning to slide 3, we highlight the achievements of the third quarter.

Record Total Revenue of 2.8 billion reais, up 56%. In the blocks below we can see PagBank Revenues reaching almost 240 million reais and Acquiring Revenues reaching 2.5 billion reais.

All-time high consolidated TPV of 126 billion reais, up 86%, with PagBank TPV reaching an impressive 59 billion reais, growing 158%, vs Q320. Acquiring TPV grew 58%, excluding coronavoucher, reaching 67 billion, with HUBs TPV growing very rapidly and reaching around 15% of the Year-to-Date Acquiring TPV.

Adjusted EBITDA of 742 million, up 40%, with acquiring Adjusted EBITDA reaching 818 million and PagBank Adjusted EBITDA reducing losses as a percentage of PagBank Revenue and increasing its margin, gaining traction to reach the break-even in the coming quarters.

Non-GAAP Net Income of 419 million reais, up 27% year over year.
Capex per sales went down from 33% in Q3 2020 to 15% in Q3 2021.
Moving to PagBank, in September, our Active Clients surpassed 12 million, driven by a	1

million net addition in the quarter, while Active Merchants totaled 7.7 million.

Our Credit Portfolio reached 1.6 billion reais in September with NPL90 under control, with new cohorts, those after August 2020, operating at single digit. Total NPL90 is running at low double digits.

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SLIDE 4

Turning to slide 4, we present PagSeguro's highlights, our acquiring business.

Our Acquiring TPV grew 58%, excluding coronavoucher, driven by our successful execution to serve not only longtail merchants with excellence but also SMBs through our HUBs, increasing our market share that reached between 9.5% and 9.7%, as we can see right below the chart

The chart on the top right, we can see our acquiring TPV growth is accelerating vs. previous years and growing 63% year-to-date, ahead of the 45% guidance we gave last quarter. The positive trends remain, and we are happy to announce that in October, we reached a new all-time high daily TPV, for the third consecutive quarter, processing more than 1 billion reais in Payments in a one single day.

In Q3, our Active Merchants reached 7.7 million. As the chart on the bottom right shows, our gross additions remained healthy in comparison to previous years. However, the net adds were impacted by a higher mortality related to lockdowns and a higher churn related to Wirecard news flow during the second and third quarter of 2020. Besides that, it is worth to remember that there is no impact on Acquiring TPV trends, as for active merchants, we consider at least one transaction in the last twelve months.

SLIDE 5

Moving to slide 5, Acquiring Revenues grew 53% in comparison to the same period in the last year, or 35% on a two-year CAGR basis. The growth was due to the growth of our merchant base and our successful execution to serve SMBs through our HUBs. Despite our SMB´s merchants have lower take rates, their TPV are 5 times larger than longtail, and that´s why our Net Take Rate maintained a flattish trend in comparison to the previous quarters.

Bottom left, as the client mix is changing towards larger merchants, combined with a larger share of wallet, we can see the growth on TPV per merchant, increasing 18% vs. same period last year. Our Adjusted EBITDA reached 818 million reais, a 35% growth year over year. Despite the higher investments to roll out our HUBs and continuous improvements in our payments' services to our merchants, we were able to gain market share, consolidate our position and increase EBITDA.

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