PagSeguro Digital Reports Q2 Revenue and Recurring Income Growth

PagSeguro Digital (NYSE: PAGS ) reported second-quarter financial results on Tuesday. The transcript from the company's second-quarter earnings call has been provided below. This content is powered APIs. For comprehensive financial data and transcripts, visit Access the full call at Summary PagSeguro Digital reported a solid Q2 2026 with increased client engagement, expanding its multiproduct ecosystem, and achieving resilient profitability despite a challenging environment.

Total payment volume (TPV) reached 133 billion reais, a 3% increase year over year, and the credit portfolio expanded to 52 billion reais with a 31% increase in total loans. 4 billion reais, up 2% year over year, while recurring net income grew 2% to 576 million reais. Diluted non-GAAP EPS increased by 10%. 4%.

Operational highlights include the launch of Minizinha Voz and iOS cashback, expansion in banking products, and a focus on credit growth with a strong risk management strategy. Total deposits grew by 15% year over year to 43 billion reais, supporting future credit growth and reducing funding costs. Management emphasized maintaining targets for 2026 despite a challenging macroeconomic environment, with plans to continue expanding its ecosystem and executing against long-term strategic goals. The company’s cost efficiency initiatives led to a 5% decline in financial costs quarter over quarter, contributing to improved gross profit margins.

The introduction of new leadership with Enrique Fragata as COO aims to strengthen execution, efficiency, and operational excellence. Full Transcript Sofia, Conference Operator Good evening. My name is Sofia, and I will be your conference operator today. Welcome to PagSeguro Digital's earnings call for the second quarter of 2026.

com. Please refer to the forward-looking statements and reconciliation disclosure in this presentation and in the company's earnings release appendix. All participants will be in a listen-only mode. To ask a live question after the presentation, please use the Raise Hand button to join the queue.

Once you are announced, a request to activate your microphone will appear on your screen. Today's conference is being recorded and will be available on the company's IR website after the event is concluded. Now I will turn the call over to Spencer Pioner, Head of Investor Relations. Daniel Spencer Pioner, IR, ESG and Market Inteligence Superintendent (Head of IR) Good evening, everyone, and thank you for joining PagSeguro Digital'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 Mawad, our CEO; and Gustavo Sechini, 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. Ricardo Dutra, Principal Executive Officer 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 continue to increase client engagement while expanding our multiproduct ecosystem across payments, banking, and credit, driving resilient profitability and reinforcing the strength of our business model. Total payment volume reached 133 billion reais, up 3% year over year, reinforcing the gradual reacceleration trend we have seen over the past quarters. Our expanded credit portfolio reached 52 billion reais, while total loans increased an impressive 31% year over year, driven mainly by the expansion of working capital and credit cards offering.

Total deposits continue to grow, reaching 43 billion reais, up 15% year over year and providing an important foundation to support future credit growth. 4 billion reais, growing 2% year over year, mainly driven by acquiring volumes reacceleration and our credit portfolio. Recurring net income (non-GAAP) also grew 2%, reaching 576 million reais, 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're seeing this 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. 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 services 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 Mawad. Carlos Mauad, CEO 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 all 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.

In 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 market 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 to small and medium-sized businesses, in markets where penetration remains low and growth potential is still meaningful. Our ecosystem gives us several avenues for growth. We have opportunities to increase share in Pix, deposits, expanded credit, and other financial services. In several of these markets, our current share remains below 1%, which reinforces 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 include 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 installments solution. Both products launched earlier this year and will be rolled out in the next months.

Zero-fee investments, private pension 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 services 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 100 billion reais in the quarter, increasing 23% year over year and 19% quarter over quarter. 7 thousand, up 27% year over year.

We also continue to see stronger usage of our daily banking features, including bill payments and Pix transactions, with an increase of 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 important, 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.

1 billion reais, 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 ambition we have shared with the market. 1 billion reais, up 35% year over year. 4 billion, increasing 18% year over year.

It 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 80 million reais in credit production. This is above Q2 average and also above the average level seen in the prior quarters, which gives us confidence in the continued momentum and scalability of the product. 4 billion reais, up 9% year over year and 3% quarter over quarter.

Just as important, we are growing the portfolio while maintaining a prudent risk profile. 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 43 billion reais, growing 15% year over year, while total funding reached 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 cost, 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 disciplined liability management and improvements in product pricing and remuneration conditions. This funding structure gives us flexibility to continue growing 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. Gustavo Sechini (CFO) Thank you, Mauad. Hello everyone, and thank you for joining us today.

I will now cover our consolidated financial performance for the quarter. This slide shows the contribution of business execution and funding efficiency to revenue and gross profit. 4 billion in the quarter, increasing 2% year over year and 1% quarter over quarter. Gross profit reached approximately 2 billion reais, growing 3% year over year and 6% quarter over quarter.

This performance reflects business execution, continued contribution from banking and credit, and a sequential improvement in financial costs. At the same time, it’s important to note that interest rates remain high for the year, and the rate cuts have not come in the magnitude initially expected. So we continue to manage pricing, funding, and capital allocation with discipline. The banking business is an important driver of our results.

Higher transactionality, credit expansion, and broader product penetration are contributing to a more diversified gross profit base and reinforcing the value of our integrated ecosystem. Now on slide 15, we provide more details on the cost and efficiency drivers behind the quarter. Financial costs declined 5% quarter over quarter, primarily reflecting management initiatives to optimize the company’s funding cost. Despite still elevated levels, total losses increased 9% year over year, mainly reflecting the expansion and mix evolution of the credit portfolio.

This is consistent with our strategy to scale credit in a disciplined way while maintaining strong asset quality indicators. 9% of our total revenue and income excluding interchange fees in the quarter. On a year-to-date basis, operating expenses improved as a percentage of revenues, reinforcing again our focus on operating leverage, even considering second-quarter effects related to the World Cup broadcast sponsorship in Brazil and the annual collective bargaining agreement. D&A plus POS write-off also improved as a percentage of revenues in the first quarter of the year, reflecting better allocation and POS management.

Looking ahead, we still see room for additional efficiency gains, and they remain an important part of our value creation. Next slide, we summarize how these dynamics translate into bottom-line performance and returns. Non-GAAP net income reached 576 million, up 2% year over year. 06 reais, increasing 10% year over year, supported by earnings resilience and a reduction in average shares outstanding following the execution of our share buyback program.

6%, increasing 30 basis points year over year and remaining in line with our solid capital structure and planned approach to our profitability. These results show that we continue to protect profitability while investing in technology, product innovation, and the long-term growth of the business. Moving to the next slide, I would like to reinforce the strength of our capital position and our commitment to disciplined shareholder returns. We have continued to advance our capital optimization agenda, pursuing a Basel ratio within our target range of 18 to 22 over time.

6% in the second quarter of a year ago. This movement brings us closer to our target range while preserving all the flexibility and capabilities to support the company’s growth. Over the last 12 months, PagSeguro Digital returned 2 billion reais to shareholders through dividends and share buybacks. In this first half of 2026, we completed our third repurchase program authorized for up to $200 million, with more than 370 million reais repurchased during this period.

28 per common share will be paid on September 30th, with record date on September 16th. 40 billion reais, subject to the relevant approvals. As always, we see market conditions and the company’s financial position. As we said before, we always manage the use of dividends and buybacks, and dividends remain the most effective way to optimize capital while continuing to support the business growth.

Moving to the next slide, we show where we stand against our 2026 commitment after the first half of the year. At this point, we are maintaining our targets for the year, recognizing that year-to-date performance is reasonably in line with our strategy. We have been observing a much more challenging year than we were expecting, with risks coming both internally and externally. The macroeconomic environment remains clearly uncertain, and it is very important to recognize that Selic rate levels create additional pressure for the performance of the business.