Good evening.
My name is Caio, and I'll be your conference operator today. At this time, I would like to welcome everyone to PagBank PagSeguro's Earnings Conference Call for the Q2 of 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.
This event is also being broadcast live via webcast and may be accessed to 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 post 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 in PagBank PagSeguro's Current assumptions, expectations and projections about future events. While PagBank, PagSeguro believes that their assumptions, expectations and 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 In the forward looking statements and risk factors sections of PagBank PagSeguro registration statement on Form 20F 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 the conference call, the company may discuss some non GAAP measures. For more details, The foregoing non GAAP measures and the reconciliation of those 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.
Please, Mr. Dutra, you may begin your presentation.
Good evening from Sao Paulo, everyone, and thanks for joining our 2nd quarter results conference call. Tonight, I have here with me Artur Shunk, our Chief Financial Officer and Eric Olivera, our Head of Investor Relations. First, we hope you and your families are well and safe. Before we proceed, Let me share a quick update about the current situation related to the pandemic and its impacts in Brazil. Last quarter, We shared our improving confidence that it seemed the worst was over.
Vaccination continues to take place. Currently, approximately 70% of the population took at least 1 shot and around 30% took 2 shots already. The contamination debt ratios have been decreasing, which has been encouraging authorities to ease the social distance measures in several regions of the country. The ongoing secular shift from cash to electronic and digital transactions continues, reinforcing that the consumer behaviors are changing Despite the reopening, and we have seen millions of people being included into the financial system. We also see Across the world, several companies embracing the digital banking strategy to explore this unique opportunity.
For example, in this quarter, we were honored to see PayPal and Square announcing their initiatives to expanding into financial services, which is the move we have done in May 2019 with the launch of TigerBank. In addition, As regulators in Brazil continue to foster competition, players with tech DNA, strong execution and robust balance sheet Have the chance to explore new verticals, cross selling strategies and close existing loop between merchants and consumers while optimizing the gross profit generation per user. Having consistently invested during the last years in our 2 side ecosystem has been paying off. In June 2021, The number of PagBank clients surpassed 11,000,000, and engagement continues to increase as the number of logins Only in our app per workday reaches 10,000,000 or 1 log in per user per workday. Another example is the credit expertise.
After more than 3 years, the combination of sophisticated data analytics, An incredible team, the banking license and unique active merchant base gave us the diligence to decelerate the deriving amid the pandemic, To warm up the Giants for the reopening, we are delighted to announce that our credit performance surpassed the mark of BRL 1,000,000,000 With an increasing origination for the coming months and controlled NPL ratios, in payments, the scenario also looks brighter. Our acquiring TPV continues to grow strongly, giving us the confidence to review upward our payments volumes guidance for 2021. Compared with Q2 2020, PagSeguro was the company in the Brazilian market with the highest acquiring TPV growth Among the top 5 business acquirers, 89% year over year and probably the highest total net revenue growth, 75% year over year. Our strong brand, superior logistics infrastructure and complete thank you to the offer to our merchants, among other strengths, allowed us to keep growing the long tail and to roll out our hubs faster than expected. Our web results have been impressive, reinforcing our thesis that it's easier to go up in the pyramid than to go down Even SMBs are underserved in the country.
With this new TPV mix, as we commented last quarter, Our take rates are stable, and we expect this take rate level for the rest of the year. Finally, We continue to pursue for the optimum capital allocation and the best balance between growth and profitability. We reduced the CapEx per sale ratio From 25% in Q2 2020 to 70% in Q2 2021, a positive surprise Leading to a guidance review for CapEx in 2021, driven by lower POS acquisition since we took the right decision last year To prepare the inventory levels, which reinforced our massive scale and purchasing power, improving the unit economical for our cohorts. Investments in technology has been helping us to maintain our strategy to grow organically, and we are happy to highlight 4 new products. First, cell phone insurance, our 4th insurance product distributed by PAGS.
We also launched an exclusive investment fund, TagBank All Seasons, which gives the options to our clients to diversify their investments. We will also launch Brazilian treasury bonds trade platform. Our PAG Invest vertical already comes with 5 CDs In 50 investment funds with several asset allocation strategies such as equities, corporate bonds, FX, gold, even cryptocurrencies. Finally, we are launching another vaginal loss product initially offering only to our best cohorts, We will expand the credit options for our clients. All the positive impacts we have been producing in our society We'll be sharing next month in our 1st sustainability report, where all the stakeholders will have the opportunity to follow closer Our initiatives to serve better our clients measured by the highest standards available in the market.
Also, We plan to have our 1st Investor Day in November, a brand new initiative to discuss the strategic plans for the company for the coming years, We are Luis Frias, our Founder and Chairman and part of the PAGS senior management team, who will share their thoughts about the trends, The future of finance and how we are preparing the company to keep consolidating its leadership in financial services and payments. I'm very encouraged by the recovery 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 life cycle of every Brazilian citizen, Promoting massive financial inclusion in our country. Thank you very much, PagBank's PagSeguro team. That said, Arthur and I will present some slides, and we have Q and A session at the end.
On Slide 3, we highlight the achievements of the 2nd quarter. Record total revenue of BRL 2,400,000,000, up 75% with Akairo revenue reaching BRL 2,200,000,000 and PagBank revenue of BRL 182,000,000. All time high consolidated TPV of BRL102 billion, up 154 percent With our current TPV growing 89%, with hubs TPV and online TPV maintaining the strong growth trends observed in the past quarters And PagBank TPV growing 3 41%, both in comparison to the same period of last year. Adjusted EBITDA of DKK629,000,000 up 64%, with acquired adjusted EBITDA reaching BRL730,000,000 and PagBank adjusted EBITDA, reducing losses as a percentage by the bank revenue, Gaining traction to reach breakeven in the coming quarters. Non GAAP net income of BRL 245 million, up 12% year over year.
CapEx per sales went down from 25% in Q2 2020 17% in Q2 2021. In June, our PAG Bank active clients surpassed 11,000,000 Driven by an outstanding 2,100,000 net addition in the quarter, while active merchants continue to be healthy net addition pace Above 220,000, reaching 7,600,000 active merchants. Next slide represent PagSeguro's highlights. While in Q2 2021 versus Q2 2020, Total cards industry in Brazil grew 52%. Our advertising revenue grew 89%, Driven by the secular shift to 2020 payments, combined with our successful go to market strategy to serve Not only long tail merchants, but also sellers larger than long tails to our hubs.
Our active merchants reached 7,600,000. Although our metric for active merchants consider at least one transaction in the last 12 months, and it may differ from other players, In chart below, we can see our dominance in number of merchants when compared with other players in the industry. In Q2, we had 226,000 merchants net adds. Although it is a strong number, It wasn't better because we saw a higher churn in April 2021 related to the business mortality from April 2020 During the peak of pandemic and lockdown in Brazil, as for active merchants, we consider at least one transaction in the last 12 months, Businesses that closed in April 2020 and did not generate any TPV since then only affects our churn rates in April 2021. Important to say, we did not observe higher churn in May June, and we had healthy net adds in these 2 months.
Moving to the right side of the slide, TPV trends observed in July 1st day of August are also encouraging. Despite the hard comps due to the corona voucher program distributed last year, volumes grew 55% year over year in July. Additionally, during last week, the Saturday before Father's Day in Brazil, we reached a new all time high daily TPT. Bottom right, we see that in the 1st 7 months of the year, acquiring TPV grew 70%. Moving to Slide 5.
Our current revenues grew 77% in comparison to the same period last year or 35% on a 2 year CAGR basis. The growth was due to a better TPV mix toward credit cards volumes And our successful strategy is to serve larger merchants, which supported the acquiring net take rate of 2.24%, Stable in comparison to the Q1. Bottom right, our adjusted EBITDA reached BRL730 1,000,000, Almost a 60% growth in comparison to Q2 of 2020. Important to mention that last year, there was a tax provision reversal in the amount of BRL 84,000,000, which we excluded for a better comparison. Despite the high investment to roll out our hubs continuous improvements in our payment services to our merchants, we were able to gain market share, consolidate our position and increase EBITDA.
Moving to next slide. Taking the opportunity to explore on the previous slide, I want to share the results of our hubs. Hub's TPV grew 4x year over year, outpacing best estimate of our models due to We are opening an existing execution to serve larger merchants, combined with a powerful competitive advantage, which is PAG Bank. We are the only payments company in the market with a complete digital account and without any conflict of interest with controlling shareholders or partners, We shall always look for the best combination to serve merchants and leverage the gross profits per plant, exploring both molecules, the Cajin Nikesh out. We are targeting merchants on average 4 to 5x larger than our average long tail seller.
By the end of 2021, we are expecting to cover more than 80% of the Brazilian EDP with approximately 300 hubs throughout the country, Backed by a strong sales culture, which mingles young professionals with seasonal sales professionals for other sectors, We are creating a unique relationship model driven not only by client activation but also by client engagement. We are also observing a larger number of software subscribers, which was 801,000 already represent 11% of Tagus' active merchants. Finally, Tagaban continued to be the best strategy to engage merchants and increase cross selling opportunities. In June, we reached 82% of high users, tagged merchants that used payments and digital banking within the last 12 months, A growth of 54 percentage points in comparison to Q2 2019. Moving to Slide 7, we give some intros about our online and omnichannel volumes.
Bottom left, Online TPV grew 104% year over year driven by web checkouts, cross border transactions and link of payments. Omnichannel volumes, which considers volumes from merchants that accept not only POS transactions but also use online payment solutions, Double their share in comparison to Q1 2020, last quarter before the outbreak of COVID-nineteen in Brazil. We continue to take advantage of wide platform, increasing the barriers against competition and potential pressures on yields once its MT fraud system guarantees the best approval rate in the market, and split payment solution is highly customizable for e commerce, marketplaces On the bottom right, although it represents a small portion of our total TPV, Bua Compra Our Subizio focus on providing cross border transactions for merchants is growing steadily. Moving to Slide 8, Another grateful surprise. We had a record net addition of 2,100,000 new PagBank clients, surpassing the mark of 11,000,000 PagBank The users being 45% of these clients composed by consumers.
Combined with the increase in product per user ratio, which went From 2.6 products in Q2 2020 to 3 products in this quarter, accelerated PagBank TPV, which grew 3 41% year over year. Private Bank revenues continue to present healthy trends, Reaching BRL182 1,000,000, up 89% year over year with the better trends in adjusted EBITDA losses, Which had a negative margin of 80% in Q2 2020 versus negative margin of 55% in Q2 2021. Moving to Slide 9, going to share some additional information about the engaging metrics. The number of active cards indexed to 100 included 4x in comparison to Q2 2019, Well, card spends doubled in comparison to Q2 2020. PagBank app logins reached an incredible mark of 7 $183,000,000 3x more than the same period of 2020.
It is similar to say that every PagBank client logged in our app On average, onetime every workday. The number of payroll portability skyrocketed, increased 7 times, Backed by our cash back incentive to clients with formal paychecks to make the profitability to PagBank being able to receive Up to BRL600 or $120 in the next 36 months. Finally, Thai Invest assets under custody almost reached BRL5 1,000,000,000, up 85% year over year, Driven by now increasing number of registered clients with access to CDs investment funds offers. In July, Right since clients were $647,000 and we are offering almost 50 investment funds in our platform, which has been key To deepen our relationship with our clients as well to attract new ones. As I said in my initial remarks, we are happy to launch our Brazilian treasury trades platform in the next week.
Now I would like to turn the conference over to Arthur, our CFO, who will talk about our credit portfolio and our financial results for the quarter. Arthur, please go ahead. Thanks, Ricardo, and good evening, everyone. I also hope All of you and your family are well and in a good health. Following our presentation in the Slide 10, The performance of our credit portfolio is improving every day based on efficient credit models, Our experienced team and several learnings from the last three years of operation.
June ended with our total credit All you are surpassing BRL 1,000,000,000 being 56% of working capital loans, 41% of credit cards and 2% of other credit products. I would like to reinforce that credit underwriting in Brazil It's not a 100 meter sprint race. It is a marathon where learnings from the experience, Patience and preparation make all the difference. We have been preparing the company since day 1, And now we already achieved more than 3 years of credit underwriting to micro merchants. The portfolio is 100% booked in our balance sheet, which provided us the awareness and diligence to decelerate in the past and to speed up now.
Additionally, we see the registry of receivables as an opportunity for tech companies, which provide financial services, Even though markets should not assume the registry as a parachute for poor credit underwriting, On the right side, our cash position remained very strong with a positive balance of BRL8.2 billion, reinforced by the issuance of PagBank CIBIS to fund the credit disbursements. Loans to deposit ratio was 2% guaranteeing stamina to grow our credit portfolio in a healthy and sustainable way. Moving to Slide 11, We present our quarterly financial results. In the top left, our consolidated net debt rate reached 2.42%, Two basis points higher in comparison to Q1 2021 and 13 basis points versus Q4 2020, driven by better TPV mix with more credit, lower debit transactions and helped by a larger In the top right graph, we share our non GAAP total costs and expenses, We reached total BRL1.9 billion in the Q2 of 2021, up 87% year over year. Cost of sales and services represented 67% of total costs and expenses, increasing 63% year over year At the same level of TPV growth, driven by higher interchange and card scheme fees, higher depreciation and amortization Related to our solid active merchants additions during the past quarters and expenses to implement new products and services, Sealing expenses represented 26% of total costs and expenses and increased 155% year over year Due to the headcount, the expansion for hubs and PagBank teams and higher marketing expenses for new campaigns, Financial Services jumped from a share of 2% in Q2 of 2020 to 7% in the Q2 of 20 everyone, mainly due to a TPV mix improvement requiring additional working capital volumes to prepare our merchants.
On top of that, the increase of the Brazilian basic interest rate and the exchange rate devaluation For international transactions for Borkompa, also pushed expenses up versus last year. In the bottom left chart, the adjusted EBITDA went from BRL384 1,000,000 in the Q2 of 2020, Excluding the benefit of BRL 84,000,000 related to a tax provision reversal last year to an adjusted EBITDA of BRL 629,000,000 this year with a growth of 64% versus the same period of 2020. Finally, in the bottom right, we share our capital allocation. During the Q2 of this year, we invested almost BRL407 1,000,000 being 50% in POS Acquisitions and almost another 50% in R and D to develop new products, features and services. As a percentage of revenues, CapEx decreased 8 percentage points, Reaching 17% versus 25% in the Q2 of 2020.
Moving to Slide 12, The last one of this conference call. As Dutra said in his initial remarks, the positive trends of the 1st semester Let us to review our acquiring TPV growth guidance from above 40% to above 45% in 2021. We also project a reduction of capital expenditures in BRL 200,000,000, setting a new level BRL 1,800,000,000 for this year, optimizing the cash flow generation. Now we end our presentation,
Thank you. We'll now begin the question and answer session. Our first question comes from Mariana Tadeo with UBS. Please, Mariana, go ahead.
Hi, good evening, everyone. Thanks for the opportunity of asking a question. My question is related to net adds in the acquiring space. In this quarter, it decelerates. Is there any impact of business mortality from COVID-nineteen 1 year ago, the Q2 last year?
And could you also Talk a bit on the competitive scenario and your expectation for net adds going forward. Do you think that PagSeguro will be able to accelerate The pace of net adds again. Thank you.
Hi, Mariana. This is Ricardo. Good to hear. Thank you for the question. Let's talk first about the net adds in Q2.
We saw an increase in business mortality from merchants in April 2020. So as our active merchants metrics Considered at least one transaction in the last 12 months. So the business that were closed or shut down in April 2020, They generate churn in April 2021. If you remember well, in Brazil, April 2020 was the worst month in terms of the pandemic So that's why we had an impact in churn related to business mortality from 1 year ago. But it's also worth to say that These merchants, they were not transacting since May 2020.
So we didn't see we didn't have any TPV from them Since then, so it's the metric for the churn, they impacted by TPV. We didn't have this TPV since May 2020. So that's why we saw this 226,000, which is a very decent number, but it could be better if you didn't have this more dilution from last year. Regarding the competitive scenario, what you see here, as we've been talking in the past quarters, Some of the acquirers from the incumbents from the banks, they decided not to play in the long tail market anymore. Some of them, they were vocal saying they will not play.
Some of them just increased the price by 5x or things like that. It is a way Not to work in this market, and I mean, you don't say no, but you just increase the prices. It's a way For not to play anymore, we keep seeing some competition from the same players that we had 1 year ago. Everybody everyone knows about The network competitor is Mercado Pago. We keep adding thousands of merchants every month.
We saw some of our competitors increasing prices this week. Some of them increased the prepayment rates. Some of them made different price for different card schemes, mainly the local card schemes such as Elo and the deeper card. So we saw more rationality in pricing, not crazy movements. The scenario is similar to what we had in the past quarters or even better.
We didn't give this year a guidance for net adds, but we keep talking to some of you that we expect To have 1,000,000 net adds in the year, we had more than 5.30 in the 1st semester. So I keep saying it's feasible to have this €1,000,000 or even more. So let's see the following months and then we can give you more color. But mean, the best information could be keep thinking about 1,000,000 net adds in this 2021.
That's good. Thank you.
Thank you.
Our next question comes from Craig Maurer with Autonomous Research. Please Craig, go ahead.
Yes, hi, thanks. The take rate in the quarter held up better than my expectation. Can you talk about You just addressed pricing in general, but can you talk about how we should think about that trend as The S and B hubs continue to grow and that will have a dilutive effect on take rate, I would imagine. Secondly, if you could talk about the progress in lending products specific to Tag Bank and How that will drive take rate there? And just a last modeling question, how we should think about financial expense going forward?
Thanks.
Hi, Craig. This is Ricardo. Also good to hear, and thank you for the question. I'm going to start and then Arthur can help me here. Regarding take rates, we have these different moving parts or so to say, the tailwinds and the headwinds.
So The tailwind would be if we had the consumption coming back. In Brazil, we are having high inflation. Pandemic is So here, we are not 100% back in the office. People are not traveling. So I mean, the consumption is not happening because of COVID and because of also the inflation that is kind of Preventing some consumption.
So that would be the tailwind. What you saw in this quarter, we already saw a Slightly better net take rate in long tail, for instance, because the mix is getting better. And in the headwind, which I would say It's not really a headwind, but I mean in terms of take rate is. It's because we are having better performance in hubs than we expected. So we are Exceeding our expectations.
You know that our merchants from hubs, they have usually 4 to 5 times Larger TPV than long tail, and of course, they had a lower take rate. So if you look at the percentage, it's going to be lower, but in absolute terms should be better because they have a TPV that's 5 times larger than the long tail. So that's why we talked in the Nicole, before here that we expect to be flat or a little bit higher than that looking forward. So a few basis points here and there. Let's see how it's going to be the recovery here, and then we can give more information for you.
But that's the moving parts. Those are the moving parts that you have, Consumption that could be back. And on the other hand, we are increasing and growing faster in our hubs operations to serve SMBs. Regarding the lending process, We've been working in these models for, let's say, 3 years. We learned a lot.
We were supposed to have Increase in disbursement last year, but because of COVID-nineteen, we just decided to stop not to give any credit, the same movement that we saw other banks In Brazil, and then we are giving some credit again in this year. The NPLs are under control. We see some of our merchants having better at TPV Recovery. So it will help our take rate it could help our take rate the lending. It's also worth to say that I guess Arthur can give you more numbers here, but I'm going to finish and Arthur can complement and talk about financial expenses.
Worth to say that we use here IFRS 9. So when you give some credit, we need to make the provision right at the beginning. So to some extent, we are, let's say, making the provision at the beginning and then the results are going to happen in the future. So that's why if we increase the credit, It could be even, let's say, not to help them much in short term because of this IFRS 9 that we follow here. And about financial expenses, I guess, Arthur can also help us.
Thank you. Okay. Craig, thank you for your question. Good talk to you again. So regarding to our financial expenses, the 2 big impacts in this quarter was related The TPV growth that is higher than our expectation and also impacting a larger working capital needs Related to the advances of receivables to our clients and also the increasing of Brazilian basic interest rate That is increasing the cost of PagBank CDs and also the advances of receivables with bank insurers.
Going forward, we expect that the basic interest rate to achieve 7% in the end of this year. Obviously, we will increase our expenses. What I can tell you is that Q3 will be higher than Q2 and Q4 will be higher Thank you, Q3. But we are following very close what the market is doing related to that, because we can adjust the prices For SMB and larger clients that is used to have the prices paid to this relation to this basic interest rate. And also for Ronteo, as Dutra said, some players in the market increased the prices.
We don't have this plan for now, but we are Very close to this movement in the market and we'll take an action if necessary.
Thank you very much guys. Appreciate it.
Thank you, Craig. Take care. You too.
Our next question comes from Mario Pierry with Bank of America. Please Mario, go ahead.
Good afternoon, everybody. Congratulations on your results. Let me ask you two questions as well. The first one is on your credit Portfolio. As you just talked about, right, last year you're being cautious.
Now you're accelerating lending at a time from some of your peers that they're having problems, right, with the credit product because of problems at the chambers of receivables. So what makes you comfortable to start accelerating your credit growth now? And why aren't you having the same problems as some of your peers? And then the second question is related for your it's about your appetite for inorganic growth. About a month ago, there
were some news or some
rumors that you were interested in making an acquisition for BV. So if you could Tell us a little bit about what happened, what is the strategy, how do you look at inorganic opportunities? Thank you.
Hey, Mario, it's Arthur speaking. Thank you for your questions. I will take the first one related to credit portfolio. And after this, Duta will continue with the inorganic question. As Duta said, we last year and you mentioned too, Last year, we stopped our operations related to the pandemic and the crisis that we have in the world.
And This year, what encouraged us to disburse more than last year was related to the IPO cohorts that are improving every time. And now we have 3 years of experience, a more sophisticated credit models And those models does not taking care of the Chamber of Receivables, okay? We are not considering The Chamber of Receivables is helping us to collect. So I would say that our models need to work without the Chamber of Mercedes. Obviously, we know that the Chamber could help us.
Hope could help us in all the credit projects, But we are not considering at this point, okay? Mario, and regarding the rumors that you mentioned, I we made this communication in the same day, and I hear confirmed that there is no Intent to acquire a big bank or busy bank to name here. There are no related finance agreements to do so, and We reinforced that during the call here. We do talk to many players in the market. We need to be aware of what's going on in the market.
It's my duty to be here to understand what's going on in our fintech environment. Of course, we cannot follow everything. But the big deals or the hot deals, They came to us through advice or people just get in contact with us to talk about the prudence, and we need to talk, understand what's being sold, what's the Price and so on. So we did talk to many players and but it was a rumor, nothing more than that. Our mind for inorganic growth is to look for targets that can speed up our initiatives Here, our ecosystem.
So just to give some examples, we bought EME and MoIP in the online payments. We bought Veeva and Bolita Flex for a faster deployment for credit. We bought and NetPOS and Zebra for software features to ecosystem and things like that. So that's why we Usually, we look for I would say you that every week, there is a subacquire coming to us trying to sell volumes. We don't buy volumes.
We know that it's a niche. At some point, the super acquirers need to be, let's say, consolidated or they will consolidate with someone else or with another super acquirer. So We had this opportunity to buy volumes, and we don't have that in mind because at some point, the price is not competitive. And so the main idea here is to speed up our ecosystem to have the same culture because the you know better than the Out of 10 M and As, at least 8 of them don't go well because of the day after. So we need to be very careful what we are acquiring and if the culture does going to be fit It's going to be easy to integrate and have better services for our clients.
So that's what we have in mind here to have, let's say, companies to speed up our ecosystem.
Very clear guys. Thank you.
Thank you, Mario.
Our next question comes from George Courie with Morgan Stanley. Please George, go ahead.
Hi, good afternoon everyone and congrats on the numbers. Great results. I have two questions, please. The first one is on your CapEx guidance that is a tad lower. I know it's not a lot, but it is lower.
And so I'm wondering if What should we read into it? Could we maybe start to think that expense growth is going to Slow down as well, given that you're already have built enough of the infrastructure for the new businesses? Or is this just Related to POSs. And then my second question, sorry to go back to this, but I wanted to understand a little bit better the answer to the receivables chamber. What does it mean that your Underwriting models don't consider that.
I mean, don't you need to make sure that Credit card receivables are not being used as a guarantee elsewhere for you to leverage them. I'm just trying to understand exactly what the comment from Alberto, thank
you. Hi, Jorge. This is Ricardo. Good to hear you. Thank you for the question.
I will start with the Chamber of Receivables and Arturo can come back and talk about the CapEx CapEx. We I guess what Arthur was trying to say is that our models when you look to our models, we consider The behavior we have with our clients with us, the way they behave with us and the transaction history that you have from them, How much they sell if they are growing or not, what is the mix and so on. And today, as the chamber of receivables is not 100% working, It's not even possible for us to go there and look if this merchant is making transactions in another acquiring or if they have some other players that are serving them. So that's why when Arthur said it's just like we are looking for the behavior that you have in our database. There was no chamber of receivables until June, and we keep collecting this line.
So that's why the chamber of receivables is going to be an additional way to collect, But we don't count only on chamber of receivables to, let's say, to collect the money from the lending or for the working capital was that we offer for our clients. I will just take advantage of our question just to give an overview about the chamber of receivables. It's It's a complex project. You know that Central Bank and all the industry is working hard to make it work. Although it's not 100%, we've seen lots of Progress in the past weeks.
It's going to work, let's say, in the next weeks because there is some integration that It's happening between the registers and so on. We do believe that it's going to be very good for credit. We see an opportunity there because today, we have 9% market share in the acquiring business. So there's 90% 91% that is making transactions to other players that you can go there and even offer credit Through a very effective way to collect if the chamber receivers is working 100%. So I guess what Arthur was trying to say that Today, we don't go there to see if the merchant is using another player, and we don't consider that to collect the money.
As today, we are not using the chamber of steel because it's not working 100%. So I don't know if it's not clear, just let me know.
No, that's clear. Thank you. Thanks, Ricardo.
Okay. Thank you for your question related to CapEx, And good to talk to you, Fernando, too. And what we consider for our CapEx is That will support the growth of the company for the future. And there is 2 big points inside the CapEx. One is POS and the other is R and D.
So both we consider to support the growth of the company. We changed the guidance to BRL 1,800,000,000 because now we have a better view of the year Compared to what we projected in the beginning of this year, we have a lower Currency rate right now versus also what we projected Related to mix of clients, so changes are a little bit versus what we projected to. And we are always looking for it to be more Efficient in the investments that we do in the company. So now we can say that BRL 1,800,000,000 is more fair for this year. And also the last point is related to the expenses that we don't have any relevant change for now.
If we have any movement in terms of expenses, depreciation or amortization, so we will communicate to the market.
Great. Thank you, Arthur, and congrats again to everyone. Thank you.
Thank you, Jorge.
Our next question comes from Bryan Keane with Deutsche Bank. Please, Bryan, go ahead.
Hi, guys. Solid results here. Two questions, if I may. Just on the hub strategy, it sounds like it's coming in better Than anticipated. So wondering about the volume trends.
I think last quarter you indicated maybe the top end of the range of 6% to 11%, Given the growth in the hub strategy, does that still hold? Are we now maybe even going to push above that range for 2021 volumes? And then secondly, the net income margin was 14.6%, I think in the quarter. And I know you're making a lot of investments in the business and I'm just trying to figure out going forward, should we be at or a little bit below that margin level or just Any guidance on that? Thanks so much.
Hi, Brian. This is Ricardo. Thank for the question, good to hear. Regarding hubs, you're right. We are exceeding our expectations in terms of volumes, in terms of the performance, Even the production of the people, the salespeople in the street, so I mean it's Getting better than what we had in our assumptions.
And it would be probably higher than 11%. That's something that We surpassed this 11%. It's a combination of the execution we are having here, better efficiency in sales force And probably it will be higher than that. We are in half of the year. It's hard to give you the number right now, but it's going to be It seems going to be higher than the 11%, the top of the range, which is good news.
I mean, we were, let's say, conservative when we thought about the volumes from hubs, and We're going to get more. It's I mean, we saw that even the SMBs in Brazil are underserved. The majority of our SMBs, not to say 100%, they already have another player. So it's different than long tail that we are bringing New versions to the system. In the SMBs, we need to go there to talk and to get clients from competitors.
We use a lot of the strategy to talk about PagBank, The digital bank is 100% free, and they can use for daily tasks, financial daily activities such as paying suppliers and so on. So it's we have been successful there. And going back to your question, it will be probably higher than 11%. Ivan, it's Thiago speaking. Good to talk to you and thank you for your question.
Regarding to net income margin, As we have been sharing in the last calls, we are not obsessed by margin right now. Our focus is continuing to deliver Healthy and positive nominal results. That means nominal positive nominal results for adjusted EBITDA and net income. So our intention is to create a larger company for the future. And 2022, 2023 increased our margins.
Regarding to the next quarters, I can say that we expect a slight improvement versus Q2. Q3 probably will be better than Q2, Q4 better than Q3. And for the full year, we are expecting something above 15%. And also excluding interchange and fees from the schemes, so our Our net income margin should be above 22% or something above 23%. Just to be clear here, Brian, Arthur is saying that the net income margin, as we are reporting, is going to be higher than 15% this year.
It's going to be better in Q3, Q4. When he talks about 23%, when we use the same methodology of other players that they discount interchange in card scheme fees from net revenues. So that's going to be close to 20%, 24% if we exclude interchange in card scheme fees from the revenues.
Yes. Thanks again and congrats.
Thank you.
Our next question comes from Marco Calvi with Itau BBA. Please, Marco, go ahead.
Hi, good evening. Two questions here. The first one on the non On the acquiring stake net rate of 2.24 percent that you guys disclosed during this quarter, We saw a growth, right, quarter over quarter or a flattish quarter over quarter and a growth over the 4th quarter. Can you guys share with us The trends of these acquiring net take rate given that you guys are moving towards a larger client and even so At least comparing to the last two quarters, the net take rate on the acquiring business, either say flattish or increasing. And my second question is on your software business.
You guys mentioned that you guys ended the quarter with roughly 100,000 Clients and Affiliations close to 11% of the active merchants. I was just wondering what sort of Software are you referring to? And if you can share the average click that's typically on the software product. Thank you, guys.
Marco, this is Ricardo. Thank you for the question. Good to hear. Regarding net decrease in the operating business, as you could see in Q4, we had 2.06 Then 2.23 in Q1, 2.24 in Q2. And looking forward, we see at least 2 big moving parts here Or the headwinds or tailwinds?
So in the tailwind, we see the better consumption or Increasing consumption in the country, we are having high inflation, unemployment is still here, pandemic is still here. We're not 100% back to our normal lives. And so that's the tailwinds. The people start consumption more, getting some business trips or even The trips with the family and so on. So that's the tailwind.
And the headwind in terms of take rate is because we're having better Performance in the hubs. So we are changing the mix of our TPV. The hub declines, they have TPV 4x to 5x larger than the long tail. So when you bring this larger merchant, the SMB, The impact net take rate in absolute terms is a good business because, I mean, the volume is much higher than the long tail even with a lower net take rate. But if you look specifically in net debt rate, we have these headwinds.
So that's why we prefer to say there's going to be flattish looking forward, But there are these 2 moving parts. The one is the consumption is going to help the net effect. The headwind is the performance of the hubs is going to, Let's say, decrease the domestic rate. Regarding the software business, we consider here usually The point of sale that people can go there, use for managing their businesses at the end of the day, take some reports, How many coffees did I sell? How much did I sell through cards, through debit cards, credit cards, in cash?
So usually a small, Let's say software that helps people to measure their business better. We also consider here to Tech our reconciliation Business that some of the clients use to make this match between sales and the money that goes to their bank account. So at the end of the day, they can see how much they sold and if the money is coming to their bank account. So those are the 2 Main software, we also have some other software that is smaller merchants using to use Mini V and to make this point of sales to work, The example that I gave about the reports, usually we don't charge for software. They are very simple.
They don't require They require implementation. They don't require someone to go there to install anything. We don't sell licenses. We just need to download the app and Next few clicks, we can use the software. So usually, we don't charge for the software.
We see that as a way To give a better service for the client, increase their loyalty and keep them working with our acquired solutions for a longer time.
Great. Thank you.
Thank you, Marco.
Our next question comes from Eduardo Rosman with BTG. Please, Eduardo, go ahead.
Hi, everyone. Congrats on the numbers. Two questions here. First one, we just saw Sebrai publishing a service Sorry, Servi is saying that they more than 50% of small merchants in Brazil, they're still not accepting cards. So I just want To get your feedback on the ground, what can we expect like an idea For maybe next year, if you think adding 300,000 merchants per quarter is still doable, if you think you can Grow more than 30% PPV in the acquiring segment still for another couple of years.
So it would be interesting to see just have a qualitative view I know about what to expect for the coming years on your segment. And the second one is on PagBank. You mentioned that you That's breakeven to come in the next few quarters, but EBITDA was still kind of BRL100 1,000,000 negative, right, this quarter. So Can you elaborate? Do you have a should we expect that to breakeven 2nd part of next year, 2023?
So that's it. Thanks a lot.
Hi, Rosemarie. Thank you for the question. Good to hear. Regarding the Sebrae survey, you're right. We said many businesses in Brazil or the small businesses don't accept cards yet.
And I would say you there are no other companies in the in our industry more Let's say, to take advantage over that or to serve this wave with all the history that you have, the expertise that you have to serve on various distribution to average DOL audience and all the ecosystem that we have been building all these years, all these quarters. So That's why you keep adding 1,000,000 net adds per year. That's why I expect to keep adding in the following quarters. There's still many opportunities out there, and I would say that we are the company more prepared to serve those That are out of the financial system because we've been doing that since 2006 in the online world and since 2012 with the POS. But you're right, it's a great information.
Just reinforce what we've been saying For many quarters, there is still many business in Brazil don't accept cards. Some of these merchants, they start to accept debit, and then After a while, they started some credit. So we see as an opportunity and the survey from Sabay just reinforce all of you. Regarding PagBank, I'll just introduce and Eduardo can help me here. But you're right, we the margin in absolute terms increased.
But As a percentage of the revenues, we decreased from 80% to 55%. So the business is growing. We need to dilute a cost, but we keep investing in the business. So that's why, to some extent, the absolute terms, the absolute numbers is Yes, I agree. But Arthur, can you just complement here?
Yes. I will say Just more words related to PagBank. PagBank is a long term project to us. We are succeeding Because we are adding millions of clients every month, every quarter, and we are monetizing those clients. It's true that for consumers, normally consumers take more time to start to monetize.
It's true because the cash in is not automatically. This is the biggest advantage that we have in terms of merchants using PagBank because we have As Dutra said, we are at the moment to invest a lot in the ecosystem To have a more complete offer of products in terms of PagBank. And so we are investing people, marketing campaigns, R and D and everything that's necessary to have a big digital bank in the future.
Hey, Osman, this is Eric. Thanks for the question. I just like to highlight here that we don't have 2 CEOs, one for payments, One for banking. We have one CEO, one CFO taking all the decisions here to maximize revenues per client. So there's no conflict of interest and we are traveling here to increase revenues per user and see the profitability better for the coming years.
Great. Thanks a lot.
Thank you, Rodrigo.
Our next question comes from James Friedman with Susquehanna. Please, James, go ahead.
Hi. Let me echo the congratulations. I'm glad to hear everyone's doing well. It's Jamie at Susquehanna. I just wanted to ask a couple of questions upfront.
So the TPV per merchant continued to expand, right? So your TPV grew double merchant growth roughly. Is that the hubs or is that COVID or something else? That's the first one. Historically, you've had some seasonality, Well, the industry has seen seasonality in the Q3, and I wanted to ask about that.
Do you expect Any promotions in the Q3 at an industry level? Because sometimes we see that into Black Friday. That was the second one. And then the
third one is, what are you going
to talk about in Aeron today?
Hi, James. Can you repeat just last one? I'm sorry, because it's here.
What are you going to talk about at the Analyst Day?
Okay. Well, we've already I'll start with the TPV promotion. We saw this Q2, of course, is an easy comp, James, just to be clear here, I guess, around the world. That was The worst quarter in terms of COVID and lockdowns and impact of the economy around the world, and Brazil was no different. So the worst Month for us last year was April 2020, but of course, we had impact from COVID all over.
2nd quarter was the worst one. When we compare, we are growing a lot. And part of this growth is coming from I mean, from every business that we have here from different clients. But the majority of the growth is coming from hubs. We gave some information here.
The hubs TPV Quarter over quarter grew 4x, and the company as a whole grew 89%. So The long tail also grew strongly, steadily, but not the same levels that you saw in the hub. So just Going back to your question to Mikhail here, the TPV promotion increase can be more explained because of the hubs that help it Because those are the guys that with more volumes and improved 4x year over year. Regarding Q3 seasonality, we don't think There's going to be any, let's say, impact from the industry here, no big promotions we have in mind or so on. I'll just take advantage here.
We plan to have a new marketing campaign from PagBank in the following days. We see the opportunity here that PagBank We have this window of opportunity to grow PagBank. We grew 2,100,000 new clients in Q2. We see the opportunity to keep growing It's strong in Q3, and we will start a new marketing campaign in the following days. Regarding the Analyst Day, The idea here is to have a meeting in November.
We don't have student details. We still have this To decide how this specific date, but there's going to be a meeting with Luis Frias, our Chairman and the Founder of the company, And some of the PAGS senior management team to give a more overview about what we have in mind, what we see the future for our industry, what is going on in Brazil in terms of In the financial market, in the fintech arena, I mean, be more close to the investors and, of course, share our ideas and our future plans To many of you. So that's the idea. Great. Thank you.
Our next question comes from Tito Labarta with Goldman Sachs. Please go ahead.
Hi, good evening. Thanks for the call and taking my question as well. Couple of questions also. I guess to go back on your margin, sorry to harp on this point, just want to make sure I understand. If we look at your margin last year, 20%, I remember on the 4Q call, you mentioned if you take out COVID and PagBank, your margin would have been 30%.
So now you're roughly half of that Your PAG Bank margin has improved. So is this mostly because of the growth in the hubs? Just wanted to understand the decline And kind of what's driving that, particularly if PagBank is improving? And then I'll ask the second question.
Tito Estas, Isato speaking. Thanks for your question and good to talk to you. Regarding to margin, it's all things that you mentioned is right. And the impact of what we are seeing today is related to hubs because it's an operation that is not mature and also the investments that we are doing for Pangabank. And so when we have a more stable company in the future, a larger company, we will leverage Those investments that we are doing right now and the expectation that we have today is the margin grow again.
Okay. Thanks.
Go ahead, Tito.
No, I was just going to say, but your Pac Bank margin is So I mean, I guess you're still investing, but I mean, revenues growing faster. So Just to understand, the pressure on the margin wouldn't be coming from PagBank compared to last year, right? Is it more just the hubs?
It's Rovde and Parvendes, as I said.
Remember also, Tito, this is Eric, Higher depreciation amortization given that we had BRL 2,000,000,000 in capital expenditures last year being BRL 1,500,000,000 of debt related to POS's acquisition this year, remember, the previous guidance considered BRL 2,000,000,000 in capital expenditures for 2021. Arthur just reviewed this information to EUR 1,800,000,000, so higher depreciation amortization, also higher financial Given the rising of interest rates, so this is why we saw these impacts. And remember, if you remember in Q1, we had the digital account loss Stu, that impacted for the full year numbers that we already sold this, okay? So basically, these are the reasons why we saw This is impacting the short term.
Okay, perfect. Thank you. That's helpful. And then my second question, you mentioned earlier And growing cross border transaction as well. Is that something that's significant for you?
Do you see a lot of growth potential in that? Just kind of curious on that opportunity for you.
Well, Tito, to be sincere, it's a small part of our TPV. It is growing Very fast, but it's a small part of our TPV. We already had this company, I mean, for a few years now. Some of the clients, the online clients, they asked us to serve them in other countries of Latin America, and then we use Viacomber to serve them. So it's something that we are always looking for the opportunities here.
We know there is some countries that are more developed in terms of Cards industry then others, we keep looking to that, but it's hard to compete with the opportunity that we have in Brazil. We are number 1 in terms of clients here. We have PagBank, we have UOL, but we keep evaluating if there is There are some opportunities in other countries, but to be sincere, it's a small part of our TPV. It helps. It is important to serve some clients.
But at this point, it's not something that, let's say, P and L transformation to be clear here.
Okay, great. That's helpful. Thank you very much and congratulations on the results.
Thank you very much. You too.
Our next question comes from Domingos Salavino with JPMorgan. Please, Domingos, go ahead.
Thank you. Hi, guys. Good evening, everyone. Also thanks for taking the call. I'm just Wanted to bounce off ideas and get your point of view as well as on the debit side of the operation.
Basically, The Abbex, the card association put out the industry wide figures just not too
long ago. And what we saw is basically debit Accelerating. It's really hard to exclude the COVID year, obviously.
But I mean, if we compare versus 2019 and see kind of an average of CAGR in 2019 Over 21 or I should say 21 over 19. April, May June actually accelerated even above Credit card, great 19%, 20% year on year, which even fixed, it came across as
a surprise. When we look
at the market share, we did see obviously I think you guys mentioned that a lot that it hurt you. The market share of credit used To be in 2019 and before 63%, it came down to 59%. And in this year, it's striking around 61% credit and the last being debit and prepaid. My question to you is, what else can you share? Like how are you seeing those debit volumes?
How are you seeing peaks? And do you have any guess on what speaks substituting and what you're seeing in your base?
And congrats on the result as well. Thank you, Domingos. Good to hear. This is Ricardo. Well, let's start with peaks.
We have the option for all our devices. So we have 7,600,000 merchants, active merchants. On average, we have more than one device per merchant. So I mean, we have easily more than 7,600,000 POS in the streets, all of them except PIX, right? We see the penetration of PIX in our acquiring business very, very small.
We know there might be some merchants here and there trying to use peaks to avoid MDRs. But if you think that debit MDR is only 1.99, it's So small that at some point, it's easy for the merchant even to accept debit if they need to pay $1,990,000 They know it's Safe, the money is going to come to PagBank account right after transaction. So we don't see peaks penetrating our base. We don't see peaks Increasing the churn of the company, we do see peaks replacing TAD, Wire transfers for those who are not familiar with the names in Brazil because for obvious reasons, it works 24 hours a day, 7 days a week. It's automatic.
So we see peaks, let's say, replacing wire transfers. In terms of debit, I know the debit growth has been strong during all these years. And I would say that part of that is because also the People getting into the financial system. I my our guess here is that debit is kind of replacing the cash. There is a lot of the economy in Brazil is still based in cash, and people are getting, let's say, digital accounts, getting New cards, we saw this accelerating the pandemic.
People that were could not go to the banks to withdraw money in ATMs. They could not go to Aegis Branches because they were closed, so many millions of people opened their accounts. So there are more, let's say, a larger base of debit cards throughout the country. So that's our guess here. And there is the secular shift here happening in Brazil from cash to cards that It's still happening.
I mean, it's different than other economies that more developed people have this culture to have cards and to use cards. But again, in Brazil, we have lots of the people still using cash. So that's why we have this strong tailwind for the industry as a whole. You consider the whole industry, it grew 52% year over year. I know it's an easy comp from COVID, but anyway, it's 52% is a strong number, And we grew 89%.
So I don't know if I answer your question here. No, you did, especially when
you said you're not seeing big picture penetration.
Just out
of curiosity, when you say this total TPV on the acquirer side, is that including or not including fixed?
It includes, but it's very, very small. I mean, if we exclude, it's going to be probably the same 89%.
I appreciate it, guys. Thank you.
Okay. Thank you.
Our next question comes from Neha Gargoyle with SBC. Please Neha, go ahead.
Hi. Thank you for taking my questions. This is Neha Dervada from HSBC. Congratulations on the results. I wanted to dig a bit on the Parq Bank revenues.
Last quarter was depressed due to the charge backs From the digital account losses. But this quarter, there was a small improvement, not as strong as what we saw in the 4th So could you explain a bit more what was the composition of the ParqBank revenues? How do you see it accelerating in the coming quarters now that you are pumping up the growth of the credit book? Should we an accelerated growth in the Parq Bank revenues. So a bit more color on that.
And my second question is on the charge backs. If you look at the chargeback numbers that you have in the cost, it picked up a lot in the Q1 2020 of 2021, which was due to the digital account losses. It has gone down in the second quarter, but It still seems elevated versus the last quarter. So if I understand, I think it's related to the credit book. So could you talk a bit more about that, why the charge Are still a bit elevated versus same quarter last year?
Thank you so much.
Hi, Nihar, thank you for
the question. Good to hear you. Is Ricardo. I'm going to talk about PagBank revenues and then Arthur can give you more color about chargebacks, but you're right about the creditable skew. So the PipeBank revenues, as we said, it is growing.
Remember, we added 2,100,000 clients This quarter, and the majority of these clients are consumers. What I mean by consumers, they don't have the automatic cash in Just like we have with the merchants because the merchants when they have a sale in the POS, the money goes straight to the digital account and they can make transactions there. They can Use some services in the digital cloud that you can monetize. Consumers take a while to put the money there and takes a while to start generating revenue. So We've been saying that there's some lag between the decline comes to PagBank and starts and generate revenues, But it is increasing, the revenues, that is true.
We also made some promotions for some clients. Just to give an example, we have some withdrawal fees. If people go to ATN to withdraw the money, we have some fees that we charge. For some of the clients, we decided not to charge In exchange to have more engagement from them, we made some research. Some of the clients that we use here, They're also using on their bank because of that.
So we decided to take it out this charge. So that's why we At the end of the day, for some clients, we are exchanging short term revenues for a higher engagement and longer term relationship. So Well, I mean, it's growing. It's fine with us, the level that we have. Acquiring is growing fast as well.
So I mean, we are very happy with what we had in this quarter with the PagBank revenues. But I'll pass the word to Arthur to talk to you about chargebacks. It's Arthur speaking. Thank you for your question. Good to talk to you.
Related to charge back, as we said in the last conference call, it's important to mention that We did not have the same issues of Q1 2021 for digital losses as we presented in the Q1 of this year. And also in the Q2, when we exclude the digital loss when we compare to Q1 excluding digital losses, The chargeback over acquiring TPV grew 6 basis points, okay, due to more online transactions that naturally brings more chargebacks And the growth of credit portfolio, as Dutta said, related to credit portfolio, since we use IFRS 9, The highest accounting standard procedures for the NCC provisions, we booked 12 months For write off in the 1st month of the cohort, that will present a new dynamic for our chargeback as a percentage of acquiring TPZ going forward. And if we compare the credit portfolio that grew 42% quarter over quarter, our TPV grew at 12%. So this is the reason that increased the chargeback as a percentage of the TPV. So it's provisions at the end of the day, we have provisions Following the IFRS 9 rule.
Understood. Thank you so much and congratulations once again.
Thank you very much, Nirav.
Our next question comes from David Togut with Evercore ISI. Please, David, go ahead.
Good evening and thanks for taking my question. This is Spencer Kennedy on for David Togut. So great to see the continued strong momentum in the PodBank ecosystem. I want to better understand the monetization differences Between your consumer and merchant clients, you now have around 82% of your merchants as POG Bank clients, Which implies the future client additions will predominantly come from new merchants sorry, new consumers. Any stark differences between these two groups relating to credit and interchange revenue or product usage?
Thanks a lot.
Hi, David. Thank you for the question. What you see here is just in terms of dynamics It's because when you are a merchant and you use our POS, you already receive the POS in your cash card. So once we start making transactions, the money goes to your digital account and you can have the cards in our hands, you start using, We start buying stuff, we start withdrawing money, we start withdrawing money. So we start generating revenues because It's a, let's say, a closed loop, so to say, because the money goes from the POS to your digital account to have the cards in our hands.
So it's very easy for you To use engineering revenues. When you are a consumer in the U. S. For a card, of course, we need to make some QIC checks here. Although we are probably the fastest company in terms of sending you the card in Brazil, But it takes a while for you to send the money and to start using usually, let's say, if you work in Brazil, you receive twice a month, so the money doesn't go Straight in the day that you received the card.
So you open your app, look at the balance, it's 0. There is nothing to do there, And we cannot generate any revenue. So we need to wait for you to put the money there and then start monetizing. So And usually, the consumers, they have a lower average cash in when compared with merchants because Dimorphos, the cash in is automatic. So what we see here is that's just a lag of Time between the opening the account to start generating revenues.
Today, the main difference is because is that we don't offer Credit products or products with credit risk for consumers, we only offer working capital loans and credit cards For merchants, the consumers that we offer credit cards, we only offer if they have a collateral, If they make the salary portability here or if they invest in ACD because if you get if you don't pay us, we can we have this collateral We have this as a collateral. We have your salary or your CV. So usually, it takes that's the Also another difference between generate revenues between consumer and merchants. We will start to generate some credit products for consumers in the following weeks. We launched yesterday the overdraft loans, which is a very well known product around the world and also in Brazil.
Small tickets, small risk, good interest rate. So we will start offering overdraft for consumers. We will also start making some pilots in credit cards. Once the consumers become more and more important in PagBank, we expect to be able To monetize them accordingly as well. So that's the difference between building this company or building this ecosystem with consumers and merchants in parallel.
But you're right, it takes a little bit more to generate revenues from consumers.
Okay, got it. And as my follow-up, I just want to better understand the 2,100,000 client additions and just I guess thinking through the sustainability Are those additions? Because I guess historically, I guess you guys have talked about 1,000,000 new client adds per quarter is kind of How we should think about that? So I guess is are the factors that drove that this quarter, are those sustainable?
David, it's hard to give you this information as it's going to be 2,000,000 again. We We'd rather say that we keep with our, let's say, soft guidance between €1,000,000 €1,400,000 per quarter. If you see the opportunity that it accelerates some niches that we can make some partnerships, we can find thousands of clients, we will do it. But it was exceptional Q2 for us. We saw some marketing changes working better than we used it to be.
We made some new campaigns that are working very well. Our product also getting more mature. People understood that. So I mean, we are We would rather say there's going to be more than €1,000,000 in Q3. And so let's see.
If you have more color on that, we can update you.
Okay, great. Thanks very much.
Thank you.
Our next question comes from Jeff Cantwell with Guggenheim Securities. Please, Jeff, go ahead.
Hi. Can you hear me?
Yes.
Hey, congrats on the results. Thanks for taking my question. Most of them have been asked. I thought Slide 4 of the presentation has that interesting chart in the upper left corner. There's a clear progression there, which shows that you're clearly gaining market Share and acquiring.
So your shares increased by 200 basis points over the past year and 20 basis points over the past 2 years. Ricardo, can you talk a little more about what's Drew and Matt, can you think back and talk about where those share gains have come from, why they come about, what you're seeing out of the market that's different about PoXigirl? The To correct my question, as you look back at the strategy and the execution of the company, what's really driven those share gains in your opinion? Is it The proxy growth versus distribution is the proxy itself, the strength of the ecosystem. And where do you believe those share gains are coming from, Meaning new businesses, competitive wins, any kind of detail there would be very useful to hear about what you've seen occur as you're being shared over these past 2 years.
Thank you.
Hi, James. Thank you for the question. You're right. We grew from 7.2% to 9.2% in 1 year. Part of the explanation here, of course, is because we started the hubs, And we keep growing in long tail.
As I said before, when we go to a Approach for an SMB, the majority of them, not to say 100% already accept cards with another player. We see many, many SMBs unsatisfied or not satisfied with their current provider, with their current player. We don't we try not to go there and just bid on price because that's not the Smartest way to gain this client, we try to use PagBank as a differentiator, and it is working. Of course, we need to negotiate. That's why we have the hubs because if we were not able to negotiate, we these people could come here and buy our POS through the website.
And we know that SMBs have better take rates than those that we offer in the website. So that's the main idea, to talk to the right person, to the owner of the business and get the deal done. So we try as I said, we try not to compete with price. We use PagBank as a Competitive advantage here. There is no conflict of interest.
We are under the same umbrella, the same parent company with the same targets. I mean, so we are everyone looking for the same direction here. I don't have here in the top of my mind to say you From these two percentage points, how much was from new business that we got in Ontario and how much from the hubs? We can get this information later. And regarding our second question, I would say you hear we are a very Hands on company, we try not to have distractions and to make the best for our clients.
I guess that's our DNA. That's what everyone here is committed to. We have a very committed team looking for the best for the clients. We don't do things just because we think it's cool or because we think that the market will like it. We will do things that really the clients will like it.
We will deepen relationship with PagSeguro, PagBank and so on. We do believe that technology also is a tool that we need to use. Then what brought us since 2006 until today, the technology, the way that we have here to scale the solutions, the Cost to serve going down as time passes by. So that's why we believe so to make the best for the clients using technology and be a hands on taking very attention to details because at the end of the day, these clients, they need to be very well served. Otherwise, They can move to another player.
So that's why we try to do very a lot of focus on execution here. So I would say, I mean, there is no Secret sauce here, just working hard every day and taking attention details using technology and the best for the clients.
Okay. That's great color. And then separately, I want to ask you, Impine Bank, you're touching on this a bit. Can you talk a little more about your efforts right now to get more Piebancards into the hands of your users and get them active? We can see that the 4 times increase in cards on Slide 9, right, over the past 2 years, they're now at 405,000.
So when we think about that 11,200,000 active user base, the obvious question for us is how many of them need cards? How many of them are potentially Customers, right, using 5 Bank Cards. And so how much further expansion should we expect to see from that $405,000 you give us any thoughts there about execution and the strategy and how to continue to bring that number forward within your customer base. Thanks.
Yes, James. Well, when someone comes here to open an account, we don't know if I mean, it's hard that from the beginning, if they're going to be a, let's say, a good client with lots of money coming to the digital account or If they will not put a lot of money here, if they're via a head user or not. So we try to get Some data from the market. We try to get some data from that we have here inside the company to try to offer, Let's say, to make the best offer for these clients. But at the end of the day, I would tell you that the main The most used feature in our account is the wire transfers and second is the cards because those are the 2 Tools, the clients have to move the money.
So that's the what they use more to of course, they pay bills and so on. But the wire transfers to send money from one account to another one and also the cards make purchase and withdraw the money, those are the 2 most used features. If the client asks for a card and they don't use it, we have, let's say, a communication process here To send promotions, to make some incentives for them to activate the card and to use the card. So our goal here is to have 100% of our clients using the cards, Those that received the card. So I mean, it's key for us.
It's key to make the people to use PagBank as the main bank. We are not the main bank for the majority of the clients at this point. But I mean, it's a decent percentage of our clients say they use PagBank as their main bank, It is getting better month after month. So we are developing new features. We are putting new features in the account so that people can use us as the in Main Bank.
But the goal here is to have more and more people using the cards and see these TPV from cards increasing. It is still today linked with the TPV from the acquiring because the majority of the cash in is coming from the acquiring. So if the acquiring comes up, Usually, the TPV phone cards also goes up. When you have these acquiring coming down, what we had in Q1 because of seasonality, We saw also the TPV phone cards with the same trend because the majority of the cash in is from the merchants. But Going back to your question, the idea here is to have, I would say, 100% of our clients using the card, the cash card.
We will start offering credit cards for SimConsumers is a pilot, as I mentioned before, but we will start, so it's hard to see how it's going to be the performance. We can, I can give you more color in the following quarters in the following calls?
Got it. Got it. Appreciate all that Color. Thanks and congrats on the results.
Thank you very much James. Take care.
That concludes our question and answer session for today. I would now like to turn the Over to Mr. Ricardo Dutra for final remarks. Please, Mr. Dutra, go ahead.
Hi, everyone. Thank you very much for the time. Thank you for the questions. Thank you for all the support through all these quarters and hope to talk to you soon in person. And for some of them that we don't meet In person, we can talk in the next conference call next quarter.
Thank you very much.
The PagBank PagSeguro's conference Call is now over. Thank you for your participation. Have a great night and you may now disconnect.