PagSeguro Digital : 4Q2021 Speech Transcript

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4Q21 EARNINGS RESULTS

Webcast Transcript

Operator

Good evening! My name is Nihuge 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 fourth 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. 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, co-Chief Executive Officer.

Mr. Dutra, you may begin your presentation.

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Ricardo Dutra, co-Chief Executive Officer

Hello everyone and thanks for joining our fourth quarter results conference call. Tonight, I have here with me Alexandre Magnani, our co-Chief Executive Officer, Artur Schunck, our Chief Financial Officer and Eric Oliveira, our Head of Investor Relations and ESG.

Before I start, we will break this call in three presentations sections, followed by the Q&A: First, I will share a brief overview about PAGS milestones in the past years. Then, Alexandre will share the 2021 achievements by segment and 2022 outlook. Wrapping up, Artur will comment about our 2021 financial results.

Well, we have been living unprecedented times in Brazil and around the world. After two-years of Covid-19, the global pandemic starts to phase out as the vaccination levels continue to grow. However, the consequences are everywhere. The governments' financial aid programs are being reduced or removed around the world and inflation levels are skyrocketing in many countries, like United States and Brazil, forcing Central Banks to raise interest rates. In addition, in Brazil, the household's indebtedness reached the historical peak raising concerns in credit offerings and delinquency rates. The political turmoil around the world and the Ukraine war raise additional uncertainties for the future.

After more than 20 years working for UOL Group, the last six as PAGS' CEO, I know that an unprecedented crisis like the current one, will be just another one for us. PAGS' track record shows that our performance has not depended primarily on the macroeconomic scenario. Remember that PAGS has been profitable since 2015/2016, the worst years ever for Brazilian economy. Furthermore, we have been fast and flexible to expand and to adapt, exploring opportunities that arise, always prioritizing businesses with the best balance between growth and profitability. We also know that UX and technology combined with efficient execution are the core for tech businesses, especially in a digital world where fintechs are pursuing increases in client's life-time value.

Our last four years revealed how powerful and disruptive PAGS' business model is. Since our IPO, we have grown 4x our revenues, becoming much bigger, profitable, and relevant.

SLIDE 5

Moving to slide 5, I would like to start with our main messages:

• Our profitability remained resilient with unbeatable underlying fundamentals, despite a tough 2021;
• PagSeguro, our acquiring business, captured 45% of Payment's profits, although investing 300 million reais in PagBank in 2021;
• Our ongoing repricing increased our take rates by +15bps in 1Q22 vs. 4Q21 and the price increase that we planned will be fully implemented in April 2022;
• Our bank is much more complete today for merchants and consumers, so that we can addressed the banking profit pool, which is 30 times larger than payments;

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• In 2022, we have a positive outlook, growing volumes and keeping profitability while we pave the road for PagBank monetization.

SLIDE 6

Moving to slide 6. After four years of our IPO, although market has become more competitive, PAGS was able to capture a record lion share of 45% in the Brazilian Payments profit pool, 27% of revenues and 9% of TPV market share.

SLIDE 7

Moving to slide 7, we ended 2021 with 1.8 billion reais in Net Income ex-PagBank.

We are the most profitable company among payments' companies and digital banks and, therefore, we are very well positioned to scale up our banking strategy, diversifying revenues and profits in a banking industry which is still highly concentrated among incumbents and 30 times larger than payments profits.

SLIDE 8

Moving to slide 8, we see that in less than 3 years, we built up a very complete ecosystem that combines payments, day-to-day banking services, a complete card offering, and loans.

SLIDE 9

On the next slide, we can see we have launched additional features to enhance our ecosystem such as investments, insurance, marketplace, and other partnerships. We became a complete bank, offering the best UX for consumers, micro-merchants and SMBs in Brazil.

And to finish this first part of the presentation, I would like to say that I have been working in the past 7 years with the new CEO, Alexandre Magnani. He is the most prepared person to run our day-by- day operations, to motivate our team and to get the best of them. I will dedicate my time to build our vision of the future, to participate in our Board of Directors and our Executive Committee.

Before I pass the word to Alexandre, I would like to thank our clients, suppliers, shareholders, stakeholders and especially, our PagBank PagSeguro team for all the confidence and support.

Alexandre, go ahead please.

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Alexandre Magnani, co-Chief Executive Officer

Thank you, Ricardo! Hello everyone.

Before I start, I would like to share a little bit of my experience and some thoughts.

I have built my career in payments and financial services in Latin America for almost 30 years, seven of them in senior positions at PAGS. Here, I saw things evolved very quickly, transforming our company from a startup to one of the most relevant fintech in Latin America.

Besides the great achievements in Payments, there is a huge opportunity to be captured in Brazil. The banking industry continues to be highly concentrated. The TOP6 financial institutions net income reached more than 105 billion reais in 2021, approximately 90% of the banking industry profits.

I am really excited about this opportunity and count on me on the next steps to come!

SLIDE 11

I would like to start with the 2021 highlights, which is shown on slide 11.

We ended the year with almost half trillion reais in financial transactions, composed by 252 billion in payments and 204 billion in PagBank transactions. Our Total Revenue and Income grew 53% year-over- year, reaching 10.4 billion reais.

Number of bank accounts totaled 22 million, with 13 million active clients, positioning our company as the second largest digital bank in Brazil. Total Deposits accounted for almost 8 billion reais, up 66% year-over-year, book loan increased three times, reaching almost 2 billion reais.

Net income in non-GAAP basis grew 12%, to 1.5 billion reais, resulting in earnings per share of R$ 4.68, while capital expenditures decreased by 15%, reaching 1.8 billion reais.

After the great achievements in Payments, we will focus on our strategy and decision processes according to the following:

• Increase and diversify our revenues and profits by consolidating PagBank.
• Grow above the market in payments with efficiency and profitability.
• Develop our two-sided ecosystem to gain client preference.
• Execute everything with a 360° security approach.
• Invest in our most valuable resource: our people.

SLIDE 12

Moving to slide 12, I want to share some financial and operating highlights of PagSeguro, our Payments vertical.

Total Revenue reached 9.4 billion reais, up 53% year over year, led by a net take rate of 2.19% which much higher than the industry. The accelerated growth in other segments such as SMBs, larger

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