PagSeguro Digital Ltd. Class A Common Shares

This event is being recorded and all participants will be in a listen-only mode during the conference presentation. After Part Ceguro's 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 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 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 PagSeguro's correct assumptions, expectations and projections about future events. While PAG Seguros believes that their assumptions, expectations, and projections are reasonable in view of currently available information, you are cautioned not to place a new reliance on these forward-looking statements. Actual results may differ materially from those included in PAG Seguros' presentation or discussed on this conference call. For a variety of reasons, including those described on the forward-looking statements and risk factor sections of PagSeguro's registration statements on Form 20-F and other fillings with the Securities and Exchange Commission, which are available on PagSeguro's Investor Relations website. Finally, I would like to remind you that during the conference call, the company may discuss non-GAAP measures For more details, the four going 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 Mr. Ricardo Dutra, CEO. Mr. Dutra, you may begin your presentation.

Hello, everyone, and thanks for joining our first quarter results conference call. Tonight, I have here with me Eduardo Alcaro, our Chief Financial Officer, and André Cazoro, our Head of Investor Relations. First of all, I hope you and our families are well and safe. I also would like to say thank you to all PagSeguro PagBank team who have attained their focus in supporting our businesses, our customers and partners, as well each other during the past weeks, while almost 100% of us have been working from home. Thank you very much PagSeguro and PagBank team. I will start with an overview of our results. Then I will pass the word to Eduardo Caro, our CFO. And in the end, we will give you our perspective about COVID-19 and some preliminary data about Q2. Going to slide 3, we compare PEGS performance with our listed peers. PEGS is in a strong momentum. and is the most resilient payments company in Brazil. Despite the health crisis and higher subsidies offered to our clients through this period, PEGS was able to combine growth with profitability. Comparing Q120 with Q419, our revenues grew 1%, despite the strong seasonality in Q4, while our previous revenues decreased 8% and 5%. In year-over-year, Our net income grew 13%, while our peers net income decreased 13% and 65%. These results reinforce the strength of our broad ecosystem, the resilience of our business model, and the caliber of our professionals and their execution capability. On slide four, we highlight the great achievements of the quarter, even with COVID-19 impact in Brazil and in our businesses. As we have seen in the past years, we are proud to announce one more quarter with solid results. We delivered organic growth in top line, both revenues and TPV, with less than 3% of our TPV coming from subacquirers. We also delivered users growth, both merchants and consumers, and net income growth. On the left side of the slide, our total revenues and income reached close to 1.6 billion reais. growing 27% year-over-year and 1% quarter-over-quarter, despite a stronger seasonality in Q4. Our TPV reached R$31.7 billion, up 30% year-over-year. We reached 5.5 million active mergers, up 24% year-over-year. Moving to Peggy Bank, Our non-acquiring TPVs through digital account and wallet reached 8.7 billion reais, growing 190% year-over-year. Our active users, by the end of the quarter, were 3.7 million, meaning we added 1 million new users only in this quarter. Now, moving to our financials on the right side, our take rate ended the quarter at 3.31%. Up 19 basis points year-over-year, which is a result of adding healthy TPV in our ecosystem. Our adjusted revenue and income reached R$1.5 billion, growing 33% year-over-year, and our non-GAAP net income ended at R$367 million, up 13% year-over-year. Now, I will pass the words to Eduardo Alcarro, our CFO, who, by the way, with his previous Walmart experience, has been doing an amazing job in cost controlling and cash preservation as we navigate through this unique time together. Thank you. Thank you for your work, Eduardo.

Thanks, Ricardo, and hello, everyone. On the next slide, we show our total revenue and income that reached almost R$1.6 billion, up 27% year over year, This means an acceleration of our total revenue and income growth of 260 basis points, which grew 24% from the fourth quarter of 2018 to fourth quarter 2019, proving that we are on the right track as far as investments in PAC Bank. On the top right, we show the total net revenue and income growth compared to Q4, up almost 1%. Let me just pause here for a second. This is a remarkable achievement. Despite the COVID-19 pandemic and the strong seasonality in Q4, Pangs was able to grow total revenue and income quarter over quarter. Moving to the chart below, our operational revenue and income that reached 1.5 billion reais grew 33% year over year. Talking about net income, PAGS delivered growth year-over-year. Our non-GAAP net income in the first quarter reached R$367 million, an increase of R$42 million and up 13% year-over-year, despite the COVID-19 pandemic and investments in PAGBank. Moving to the slide six, We present here our operating figures. Our TPV reached 31.7 billion Reais, growing 7.2 billion Reais or 30% when compared to the first quarter of last year. As we show in the next graph, our TPV grew high 30s in January and February and low 40s in the first half of March. Better than Our Expectations for the Year shared with you during our fourth quarter 2019 earnings call, but decelerated sharply in the second half of March. This occurred given social distancing measures implemented in several Brazilian cities resulting in partial shutdowns as a consequence of the pandemic. We estimate an approximate miss of 2 billion Reais in TPV for the quarter due to the COVID-19 outbreak, which means a miss of approximately 40 million Reais in the bottom line for the full quarter. On the chart below, our net take rate, which is the blended take rate net from transaction costs such as interchange, processing and card scheme fees reached 3.31%, 19 basis points year-on-year, and 34 basis points quarter-over-quarter increase. This increase is explained by a better mix of credit versus debit, higher contribution of bank-bank revenues, and the resilience of MDRs in the long tail. About transaction costs, We had a positive impact in scheme fee rebates of 9 BIPs in Q1. Active merchants reached almost 5.5 million, growing 1.1 million year over year and 227,000 sequentially. Also important to say that the pandemic impacted from 25 to 30,000 net ads in the second half of March. Moving to slide number seven, We highlight our strong balance sheet in cash generation despite the pandemic. On the top left chart, we present our solid balance sheet ending the quarter with 8.1 billion reais in cash plus our net position between accounts receivable from card issuers, less payables to merchants. Moving to the top right, We ended the quarter with R$3.5 billion in cash, growing more than R$1 billion when compared to one year ago. This is explained by higher cash generation, higher PagSeguro clients' deposits, as well as higher receivables discounting in volume and duration, resulting in R$22 million of additional interest expenses Class A Common Shares Class A Common Shares Related to non-GAAP admin expenses over total TPV reached 0.2%, down 0.1 percentage points when compared to one year ago, and stable quarter over quarter. Important to highlight that approximately 70% of our costs and expenses are variable. Meaning that the company has the flexibility to do the necessary expense adjustments to deliver healthy margins and solid bottom line growth. Since April, we are revisiting our expenses structure, which should allow the company to maintain the same level of net income margins in Q2 2020, observed in Q1 2020. Now, I'd like to turn the conference over to Ricardo, who will talk about engagement metrics and new products. Stay all healthy and safe. Thank you.