Hello, everyone, and thank you for waiting. Welcome to PagSeguro Pac Bank's 4th Quarter 2020 Results Conference Call. This event is being recorded and all participants will be in a listen only mode during the company's presentation. After PagSeguro Pac Bank's remarks, There will be a question and answer session. At that time, further instructions will be given.
This event is also being broadcast It is live via webcast and may be accessed through PagSeguro PagBank's website at investors. Pagziguro.com, where the presentation is also available. Participants may view the slides in any order they wish. The replay will be available shortly after the event is concluded. Those following the presentation via webcast may pose their questions on PagSeguro Pac Bank's website.
Before proceeding, let me mention that any forward statements included in the presentation or mentioned All these conference calls are based on currently available information and PagSeguro PagBank's current assumptions, expectations and projections about future events. While PagSeguro Pac Bank believes that their assumptions, expectations and projections are reasonable in view of currently available information, you are cautioned not to place undue reliance on those Forward statements. Actual results may differ materially from those included in PagSeguro Pac Bank's presentation or discussed on this conference call for a variety of reasons, including those described in the forward looking statements and Risk Factors sections of PagSeguro Pac Bank's registration statements on Form 20 F and other filings with the Securities and Exchange Commission, which are available on PagSeguro Pac Bank's Investor Relations website. Finally, I would like to remind you that during this conference call, the company may discuss some non JAP measures. For more details, the foregoing non GAAP measures and the reconciliation of these non JAP Financial Measures to the most directly comparable JAP measures are presented in the last page of this webcast presentation.
Now I will turn the conference over to Mr. Ricardo Dutra, CEO. Mr. Dutra, you may begin your presentation.
Good evening from Sao Paulo, everyone, and thanks for joining Our 4th quarter results conference call. Tonight, I have here with me Eduardo Ocado, our Chief Business Development Officer Arthur Schenck, our Chief Financial Officer and Andre Cazotto, our Head of Investor Relations. First of all, we hope you and your families are well and safe. We have been leaving Unprecedented times since the outbreak of COVID-nineteen in Brazil that started in second half of March twenty twenty, Merchants and consumers have changed their behaviors to face these unknown scenario, where people stay in their homes for a while and almost every industry was Our dedicated employees have been doing an extraordinary job to keep serving our clients, both merchants and consumers with excellence, which led us to reach records in several KPIs. Thank you very much PagSeguro PagBank team.
Before presenting our achievements, I am pleased to report that PagSeguro completed the strongest financial performance quarter in our history, Achieving record TPV in both PagSeguro and Pagibank, record net revenues that surpassed BRL2 1,000,000,000 in a single quarter And record non GAAP net income reaching BRL430 1,000,000. These results reinforce our execution capability and our confidence to remain focused on democratizing financial services and promoting massive financial inclusion in Brazil, assuring that everyone has access to the best and most complete financial ecosystem in the country. Therefore, we continue to be the most profitable and leading company in terms of attracting and engaging millions of clients. Looking forward, our opportunities over the next years have never been greater. There will be more online purchasing, More digital banking, a stronger migration from cash to digital transactions and a unique possibility to cross sell a very profitable combination of payments plus banking for millions of customers.
However, to fully capture the growth of those opportunities ahead, We need to keep investing in new initiatives such as PagBank. Important to mention, we are in a very comfortable condition in terms of funding And cash position, and we feel more and more prepared to accelerate important products that will support us to diversify our revenues, increasing the number of products per user and consequently our revenue per client. However, as the pandemic uncertainty remains, We must be cautious and pay attention to the intrinsic opportunities and risks. We are enthusiastic about vaccines. However, The speed of vaccination at scale are still unknown in Brazil, and you know that this will be key to accelerate the economy recovery.
Additionally, the Brazilian government is discussing a potential second round of corona voucher starting in March 2021, which will increase TPV volumes while impacting our take rate due to a volume mix with more debt transactions. In the regulatory landscape, the marketplace of receivables, which can be an opportunity for us, was postponed one more time by the Brazilian Central Bank And the new expected launch date is June 7. On Open Banking, also Another opportunity for us, the first of the 4 phases began. And by regulation, we will be joining only the 3rd phase, We are following this initiative very closely. Regarding PIX, as we predicted, it is replacing wire transfers and various shipments for P2M.
As we have been discussing, we believe PIX is a relevant add on and will foster the cash conversion into electronic transactions, which help us to add new clients on both banking and payments. For companies like PagSeguro that invest in technology, product And have entrepreneurial culture. There is a lot of opportunities out there, and we are prepared to capture them. That said, Artul and I will present some slides, and we will have Q and A session at the end. On Slide 3, we highlight the achievements of the 4th quarter and full year figures.
Talking about PAGS. Record TPV of BRL55 1,000,000,000 in Q4, up 61% year over year. In full year 2020, TPV of BRL 162 1,000,000,000, up 41% year over year, While the whole car industry in Brazil grew only 11%, important to highlight that less than 5% of our volumes conference with Aquarius. Online TPV grew 147% In Q4, year over year. In 2020, online TPV increased 85% year over year.
All time high net merchant adds of 765,000 ending 2020 with 7,000,000 active merchants. Excluding MoIP, net merchant adds of 203,000 in the quarter. In 2020, Record of 1,800,000 net new merchants added, much higher than 2019 net additions. Total revenue and income of BRL2.1 billion in Q4, up 30 2% year over year. In 2020, total revenue income of BRL6.8 billion, up 19 year over year.
Net take rate of 2.3 percent or 2.44 percent excluding Coronavirus volumes. Full year 2020 net take rate of 2.59 percent, highly impacted by pandemic and temporarily TPV exchange. Adjusted EBITDA of BRL726 million, up 24% year over year. In 2020, adjusted EBITDA of BRL2.3 billion, up 8% year over year. Record non GAAP net income of BRL430 1,000,000, reaching a net margin of 21% or 30% net margin, excluding interchange and card scheme fees.
In 2020, non GAAP net income of BRL1.4 billion, reaching a net margin of 21% or 31% net margin excluding interchange and card scheme fees. Adjusted net margin excluding pandemic and impact bank investments effect of 30% in 2020, 2.6 percentage points higher when compared to the same period last year. We also have started to serve SMBs through hubs, and I'll give more info about it in the next slides. Moving to PagBank. Record PagBank TPV of BRL28 1,000,000,000 in Q4, Up 2 56 percent year over year.
In 2020, PagBank TPV of BRL71 1,000,000,000, up 2 45 percent year over year, all time high quarterly app downloads with more than $8,600,000 Bank clients of BRL7,900,000 with net additions of BRL1,200,000 in the quarter full year 'twenty, Net additions of 5,100,000. PAGS Bank consumer clients of 2,700,000, 7x higher in comparison to the same period of 2019, reaching 35% of PagBank active clients. PAGBANK revenues of BRL210 1,000,000 in the quarter, up 146% year over year, representing 10% of total revenues and income. Full year Pacbank revenues of BRL540 1,000,000, up 118% year over year. Credit portfolio of $612,000,000 with working capital lowers originations back to pre COVID levels.
Also, We are launching public payroll loans. Certificates of deposits reached BRL 766,000,000 in December 2020. Launching of 3rd party funds offered by Paginvest, Marketplace and Home Insurance. We also acquired a minority stake of Bolletoflex, a Brazilian company specialized in buy now, pay later service, at this point available only for online transactions. Moving to Slide 4.
In Q4 2020, total payment volume reached BRL55 1,000,000,000, A growth of BRL21 1,000,000,000 or 61 percent when compared to the same period last year. The main drivers of the Polymer's growth were the acceleration in cash High exposure to online channels such as e commerce, cross border, card not present transactions among others. Our online volumes grew 147% year over year, as you can see in the bottom left of the slide. Top right, we show that debit volumes grew significantly in comparison to the Q4 of 2019, but kept a similar mix in comparison to the Q3 2020, which is good news. Remember, Debit has been the mechanism for government financial aid distribution.
And in the Q4, Brazilian workers always receive an additional salary, which also historically increased debt mix in Q4 every year. We continue to believe that higher participation in the mix is a temporary effect of COVID-nineteen that was generated Because of the financial aids from the government, additional credit limited restrictions imposed by banks for their clients, Changes in consumption behavior and so on. Important to mention that according to the Brazilian Internet Association, 75% of credit card users in Brazil purchased in credit card installments. Therefore, once social distance measures start to relax, Credit volume should increase and get back to the similar past levels. Finally, bottom right, Active merchants reached 7,000,000 in the quarter, adding 1,800,000 new sellers year over year and close to 800,000 new ones Only in this Q4 2020.
In November, we finished the acquisition of MoIP, which cooperates with the all time high net merchant's ad figures. Excluding MoIP, net merchant adds were 303,000, a solid quarterly growth. Turning to Page 5, we present our revenue figures. In Q4 2020, total revenue and income grew 33% year over year, reaching BRL2.1 billion in the quarter, accelerating the pace of growth quarter over quarter, another record achieved in this quarter. To be comparable to our peers reports, our net total revenue income, Excluding interchange and card claims fees, reached BRL1.4 billion, up 31% year over year, As you can see in the top right of the slide, bottom left represents our operating revenues.
Transaction activities and other services revenues of BRL1.4 billion, up 43% year over year, also Showing very strong recovery. Financial income of BRL0.6 billion, growing 8% year over year driven by consumer behavior during the pandemic, leading to less credit card transactions installments in our transaction mix. Important to remember that our prepayment model is automatic to our clients, meaning that every credit installment transaction It's automatically prepaid instantly in D plus 14 or D plus 30 days. Bottom right, our net take rate, which is the blended take rate, net from transaction costs Such as interchange, processing and card scheme fees reached 2.3%. Excluding the corona vouchers impact, Our net take rate reached 2.44%.
Moving to Slide 6. We highlight the main operating and financial PPIs for PagBank. In the first chart, PagBank TPV, NOMA has no acquired NPV, reached BRL28 1,000,000,000, up BRL256 1,000,000,000 year over year or 244 percent, excluding the BRL1 1,000,000,000 volumes related to Corona Russia's top up. In top right, we show the graph of PagBank TPV as a percentage of PagSeguro TPV acquiring TPV, which weighted 51% due to high engagement of our merchants into PagBank Products and Services. Bottom left, we moved to PagBank Clients.
We ended the year reaching almost 8,000,000 active users, adding 5,100,000 new clients to 2020. PAG Bank Consumers reached BRL2.7 million, already represents close to 35% of our PAG Bank active client base. PAG Bank revenues of BRL210 1,000,000 in the quarter, up 146% year over year. Full year PacBank revenues surpassed BRL0.5 billion, up 118% year over year, Maintaining a triple digit growth despite our decision to be more cautious on new credit originations between March and September 2020, resuming in Q4 2020. As a percentage of total revenue income, PagBank revenues represented 8% in full year 2020 10% in Q4 2020.
On the right side, we highlight our new initiatives, investments and insurance. PAG Invest Assets Under Castel reached BRL4.7 billion, a combination of client balance, Deposits and Investments. Yesterday, we launched crypto fund and incentivized the debentures fund distribution, Adding more options in our 3rd party investment fund distribution strategy officially launched in January 2021. We expect to roll out in the coming months our own Homebro platform and distribution of Brazilian treasury bonds. In terms of insurance products, we are launching 2 more products, home insurance and personal accident insurance, expanding our portfolio, which already contributed to PagBank Health since 2020.
Finally, Our credit portfolio and transactional accounts products increased their share in PagBank revenues in 2020 in comparison to the same period of last year. We remain confident that card issuance and credit offerings will be the main drivers of PagBank revenues, reinforcing our commitment to reach 30% of total revenue and income being generated by our banking initiatives in 2024. Now We will move to the financial performance slides. I'll now turn the call over to Arthur, our CFO, who, by the way, He has been doing an amazing job as we navigate through this unique time together. Thank you very much.
Artur, please go ahead.
Thanks, Ricardo, and good evening, everyone. It is an honor to be with you today for the first time as PagSeguro, PagBank's CFO. Certainly, the foundations built by Eduardo during the last years were extremely relevant for now and for the coming years, And I am looking forward to lead from here on, hoping to continue the outstanding work done until now. Moving to slide 7, we are presenting our costs and expenses, EBITDA and net income performance. Our non GAAP total costs and expenses ended the quarter totaling BRL1.5 billion, up 48% year over year.
And breaking by category, sales and services costs grew 54% due to the TPV growth of 61% versus last quarter of 2019. Interchange costs up 37% year over year, Impacted by the mix change toward more debit versus credit in the period, the growth of 78% in personnel expenses are related to more tech developers and professionals to support the expansion of PagBank, PagInvest and Hub's initiatives. Our depreciation and amortization has also increased 188% year over year, driven by an unprecedented merchant addition During the whole 2020, boosting POS acquisitions depreciation and higher amortization of product development, marketing allocated in sales and services PIXCD's end marketplace and clients engagement. Q4 2020 selling expenses reduction of 12% are explained mainly by charge backs, decreasing 26% year over year as a percentage of the TPV, reaching 14 basis points in the quarter. Even with higher exposure to online sales, showing an operational improvement The graphs in the middle of the slide present our results for the quarter.
The first is the adjusted EBITDA that reached BRL726 BRL6 1,000,000, up 24% year over year for the quarter. In the graph below, our Q4 'twenty non GAAP net income was BRL430 million, 4% higher in comparison to the same period of 2019, even with the pandemic effects. Net margin for the quarter achieved 21%, improving 250 basis points versus Q3 2020. Moving to Slide 8, we updated our managerial analysis on PagSeguro core business margins, presented last quarter by Andre Kazuto, our Head of Investor Relations. As we discussed with the partial shutdowns in Brazil, TPV growth was negatively impacted, mainly during the second and third quarters.
Additionally, there was a temporary change in consumer behavior, meaning less leverage and with spending more oriented essential goods. The consequence was a change in PV mix with faster growth on debit card transactions, including the corona vouchers and Lower growth on credit installments, extremely correlated to market credit availability with lower appetite of banks in the past months. All these temporary changes drove to lower take rates and margins. We estimate the pandemic impact was BRL420 BRL1000000 decreasing our margins in 6.2 percentage points in 2020. This negative impact is expected to be transitory and should recover over time, not only for PagSeguro, but for the whole payments industry.
Moving to PagBank Investments. We started our initial investments in May 2019. Despite the pandemic, we kept Investing in the most important verticals, PagBank is essential for our business growth strategy, which unlocks a market 17 times larger than acquired. In 2020, the impact was BRL187 1,000,000 of PagBank Investments or 2.7 percentage points negative impact in net margins. We expect PagBank to be accretive in 2022, becoming a bottom line accretive initiative for our company for the coming years, while we cross sell products and diversify revenues.
In comparison to 2019, our net margin would be 2.6 percentage points higher, reaching 30% or close to 40% as our peers report a total revenue excluding interchange and card scheme fees. Our focus right now is growth entering in a market 17 times larger than payments as we discussed in the last Profitability is part of our DNA, and we will continue to deliver solid bottom line results. However, PagBank Investments and new initiatives are the most efficient capital allocation strategy for now. Moving to Slide 9, we want to share a few comments about our investment in the short term. In 20 Our capital expenditures reached BRL2 1,000,000,000, representing 30% of our total revenue and income.
72% of this investment was related to POS acquisition, driven by a record of 1,800,000 net merchant Given a faster adoption of new sales channels such as takeout and delivery. Regarding to intangible assets, the increase is related to our growth in software, platform investments, product development Where the performance is improving every day. We ended 2020 with a total credit portfolio of BRL612 1,000,000. Working capital loans originations are back to pre pandemic levels since November 2020. And nowadays, with all the data collected, Model improvements and seasonality, we could increase our origination by approximately 10 times.
We do have strong demand from merchants. However, we have decided to wait until we have more visibility about vaccines Working capital loans represented 54 percent of the credit portfolio, reaching BRL311 million and an average ticket Although our NPLs are low and under control, we saw a significant decrease in the current NPLs When we compare to pre pandemic cohorts, as we show in the first graph in the right side, Credit cards represented 42% of our total credit portfolio. We already issued more than 500,000 credit cards on our best merchants. We also started offering credit cards for consumers with collateral, meaning clients that invested in PagBank CDs or choosing PagBank to receive their salaries. As you can see in the chart below, trends in the new cohorts for credit cards To the risk assumed, we continue our focus on improving our credit models, teams and processes that are allowing us to show the current performance and driven the company to improve earnings per share accretion in the future.
Finally, Other initiatives such as payroll loans represented just 4% of the credit portfolio. We launched public payroll loans in some cities And we are ready to scale up this product during 2021. Now before I pass the word back to Ricardo, I would like to comment about our cash position and funding strategy. In December 2020, our cash position, considering cash and cash equivalents, Financial investments, account receivables from issuers and credit portfolio reached almost BRL 19,000,000,000. Our credit portfolio represents Only 3% of the current assets, excluding PagBank client balance, PagBank's certificate of deposits and accounts payables To our merchants, we ended the year with a solid net positive cash and working capital position of BRL8 1,000,000,000.
Right graph compares our Paco Bank Citi's balance to our credit portfolio. 100% of our credit operations are funded by 3rd parties, our operation generates cash to support our business growth and we also have BRL16 billion in AAA accounts receivable to be securitized if needed. We are always evaluating other potential alternatives of funding, that PagSeguro is the only Brazilian acquirer with a full banking license that help us to reduce our funding cost. Currently, it is below CDI, the Brazilian interbank rate. Now I pass the word back to Ricardo.
Thanks, Arthur. Moving to Slide 12. I want to comment about our new initiatives to move up marketing payments, A natural and additional business vertical that will be complementary to our acquiring strategy. In the past years, Small and media businesses have been proactively reaching PagSeguro to serve them. We know by fact that to compete in long tail market, PAGS unique strengths such as brand, 1st mover advantage, online reach and banking ecosystem created a natural entry barrier.
Having said that, it is easier to move up in the pyramid than to move down. And after several discussions, we decided to test and rolled out a few hubs in 2020, working on omnichannel model combining physical presence with our online self-service know how. We test our hubs in all geographic regions of Brazil, evaluating the merchant's profile, their needs, paybacks and returns of the existing investments. Since our IPO, we became a more mature company with an even stronger brand than 2 years ago. And now we are prepared to increase our penetration SMBs.
Entag Bank has most complete digital banking offer among acquirers that serve SMB's merchants. SMBs are still badly served on both payments and banking. And in terms of volumes, the TPV addressable market accounted for BRL700 1,000,000,000. Cost discipline, combined with our execution capability and our ability to efficiently scale up our payments platform, Let us to conclude that SMB segment is a profitable market. We know that current acquiring SMBs margins As a percentage, are not as high as on sales.
However, SMB's positive contribution margins will be accretive to our EPS In 4 to 5 quarters, which is an attractive payback period, consider only acquiring and as time passes by and we scale our bank strategy For those clients, we believe EPS equation could be anticipated and more meaningful. In 2020, volumes from hubs, meaning net adds, POS and TPV were not relevant, and we were the unique acquirer to deliver same day POS activation for SMBs. For 2021, we expect to accelerate investments and explore this market, reaching around 250 to 300 of our hubs by December and volumes achieving 6% to 11% of total PAGS CPV. It means that our focus will remain long tail market and hubs will complement our client and product offering. On the next slide, we provide some initial thoughts and initiatives around ESG.
PAGS is committed to put and reinforce DSG guidelines in our business strategy and will present some important achievements so far. On environment, We are working to foster new printless payment solutions such as NFC, QR code, the link of payments. Nowadays, More than 60% of our active POS base does not print receipts. And we also have the goal to implement more efficient and rational processes of water and energy use, and we are preparing our gas emission inventory. On the social side, inclusion is part of our DNA emissions since our foundation.
5 Sigur was created back in 2006 with the purpose of democratizing digital payments on the Internet, And then we moved to in store businesses in 2012. We have included millions of Brazilians in the financial system and offered them the option to accept cards in a simple, easy, non bureaucratic and frictionless process. Today, We have more merchants than our competitors in Brazil, and we have close to 8,000,000 PacBank active users. Still today, almost 80% of our new clients Did not accept cars before joining us. A large percentage of our TPVs comes from individual entrepreneurs, From the younger individuals starting their professional lives to senior clients above 50 years old, higher on services to complement their retirement income.
Worth to highlight, PagSeguro is also one of the few companies in Brazil with 3 women in the Board of Directors, which represent 43% of the board members. Finally, on the governments, Our company continues to improve. Today, 43% of our board members are independent, which helps us to create and strengthen our committees, such as Credit Risk and Liquidity and Data Policy and Protection. PAGS also has a relevant and structured data security department. Our security strategy follows the most relevant pillars of our businesses, that is to keep a safe and protected environment to our clients.
Our company also has a data security master plan, which establishes our guidelines. Master plan established 28 objectives, and its governments follow controls and indicators of the ISO 27,000 family. The guidelines Moving to our slide before the Q and A session. Let me share some trends in January in our 2021 guidance outlook. Volumes in January February 2021 are growing above 50%, in line with the organic growth that we have been observing last month, Excluding corona voucher impact, important to remember, January February 2020 were not affected by COVID-nineteen.
Therefore, Even compared with a higher base from 2020, we are accelerating and growing more than 50%. For 2021, we expect acquiring TPV to grow above 40%, still backed by healthy Net Merchant's adds, which will require a similar level of capital expenditures experienced last year, which is around BRL2 1,000,000,000 or low 20s as a percentage of our total revenues. In 2022, We expect our capital expenditures as a percentage of our total revenues to go back to 2019 levels, meaning low to mid teens. Given the higher investments, we expect depreciation and amortization to be around BRL800 1,000,000,000 to BRL1 1,000,000,000 this year. Important to highlight that our TPV guidance Does not consider potential upside coming from the 2nd round of corona vouchers expected to be distributed from March until June 2021.
Also for 2021, we will focus on our growth, investing in PagBank, Hubs And new initiatives to keep expanding faster our digital banking plus payment ecosystem to millions of clients, boosting our acquiring and acquiring TPV and accelerating our revenue growth through diversification. We are on track to have PagBank revenues reaching 30% of the total revenues of company by 2024. Payments, Banking And financial services industries have become very dynamic in the past years and our company has been moving forward and taking advantage. We are adding millions of users per quarter and experiencing very efficient paybacks and a strong IRRIS in our investments, both for acquiring and banking. Our plan is to keep investing to grow and to build one of the most relevant financial digital ecosystem for both consumers and merchants, including Ontell and SMBs.
Our unique platform combination composed by payments plus banking services will allow us Finally, in terms of profitability, we believe that PagBank can be accretive by 2022 as we expect investments decelerating over time with the banking business getting more mature and posting a stronger monetization. Additionally, banking margins could be similar or even higher than acquiring margins, leading us to a strongly operating leverage after this period of reinvestment. With that, we end our presentation, and we can start the Q and A session. Thank you. Operator, please.
Our first question comes from Jeff Cantwell with Guggenheim Securities.
Hey, thanks guys for taking my questions and congrats on the results. And as always, you're very detailed in your prepared remarks and thanks for that as well. I just want to circle back in the comments and ask a couple of questions. First off, on your merchant base, you added a record 700 and 65,000 merchants this quarter and that was well ahead of where we were. So can you maybe tell us more about what's happening right now?
Can you talk a little more about what's driving that increase? For example, are you seeing merchant demand strengthened due to this one stop shop platform that you build? Is it because of maybe less competition in the long tail? I just Would love to hear more about what you're seeing and help us understand how the merchant base is expanding this quickly. And then as a related question, I guess I'm wondering, since it sounds like you have real momentum here and now there's this new hub strategy with SMBs, which looks like it I was hoping maybe you can give us some thoughts about what you're thinking for total net merchant adds in 2020.
Any color on the outlook there would be great. Thanks.
Hi, Jeff. This is Ricardo, and thank you for the question. Good to hear you. Regarding the merchants, we had this More than 700,000 in Q4, but in this figure, we have MoIP. We have MoIP Merchants that we integrated MoIP after November.
So if you exclude MoIP, we are talking about 300,000 a little bit more for PagSeguro. So what we saw in January at the beginning of the year, we are having The same pace that we had in the past, we had this close to 300,000 per quarter. So that's what we've seen so far. Looking to this year, we don't have the exact number for the hubs for the number of clients of the hubs that you can imagine It's much lower than the long tail clients. So the our models, we already incorporated what we expected for that, and the result is this TPV growing more than 40% in 2021.
Okay, great. And that was my follow-up I was hoping you could talk a little bit about the guidance. You're acquiring CPB guidance is for growth of 40% plus this year and that looks pretty strong, especially when we consider how much TPV increased in 2020. So can you walk us through that guidance, just help us understand where that incremental TPV will come from? Is it Rebound on your existing merchant base, is it new online volumes, is it the move you're planning to make upmarket, is it merchants you're out of here in the 4th quarter?
Any Additional color that can help us unpack the thought process behind your CPB guidance would be great. Thanks.
Hi, Jeff. Well, just going backwards, the hubs TPV, as you saw in the presentation, We expect to be between 6% to 11%. So of course, it's going to help. But the main driver is the base that is growing, the long tail that we are adding. Hub CPV at this point are not relevant, and you could see that we grew already more than 50% in January February.
So It's part of the dynamics, the base, the net adds that we are putting here. You are right in the in your previous question, you asked about the Competition long tail, that is not the same that it used to be in the past. And you're right, some of the players that tried to come to long tail, decided not to compete with us anymore, not to compete in long tail anymore. So we are strengthening our position long tail and also taking advantage of that to go up a little bit in the pyramid to serve these kinds of the hubs. But Going back to your question, Hubs is going to be between 6% to 11%.
The majority of the growth is
going to come from the base that we have, as you could see already In January February, growing more than 50%. Just one additional commentary here, Jeff Zentra speaking. We should expect online volumes to continue to be extremely strong. We just completed the acquisition of VoIP. So now we have the operation up and running.
We continue to see a very strong demand for small and medium businesses to go online for First time, and we're prepared to serve them. So we're also expecting a good contribution from online TPV in our total guidance.
Our next question comes from George Curry with Morgan Stanley.
Hi, and good afternoon, everyone, and congrats on the numbers. Could you please Expand more on the hub strategy. What type of or what type of size Of SMBs are you trying to go after? Is this sort of like an overlap of where Stone operates, Merchants that process BRL 350,000 to BRL 400,000 a year on cards or is it smaller Merchants, is the hub strategy based on boots of the ground? Is this Intensive people strategy, how many people you're going to hire to run the hubs?
And if you can tell us what the Hub, the pilot hubs that you've been operating in 2020, what type of results are you getting in terms of volumes and take rates? Just overall, I guess, this is it's a big announcement and so more details around exactly what Type of business is this and how you're going to run it will be great? That's my first question. Thanks.
Hi, Jorge. This is Ricardo. Thank you for the question and good to hear you. So I'll try to address the points You come up here. So well, the first one is the size of the merchants.
What we have seen so far, they are not as big as the competition at this point. But we I could say it is between 5 to 7 times larger than what we have in long tail as an average. The volumes and take rate, I would say that is very similar to what competition operates. We see the similar take rates. As I said in the presentation, they are smaller than long tails.
However, it is additional to our business plan. And as they have a TPV that is 5 to 7 times larger, it is accretive to our business in 3 to 4 to 5 quarters, as I said before. So the results that we got in the pilot are exactly those: similar takeaways from competition TPV 5 to 7 times larger and paybacks between 4 to 5 quarters. That's what we're seeing. This calculation about payback consider only acquiring.
If we cross sell some banking products, we could anticipate that. It's too early to give some guidance on that. And the way we're going to work is going to be very similar to what competition does, But we are going to try to make a hybrid model or omnichannel that we also try to take advantage of our styles, our online, all the know how to serve these clients in the hubs. We will have some people in the streets that the way that we imagine. It is important to have local presence, But we try to mix the way we get the clients and the way we serve them afterwards is going to be a combination.
And I would say that's type of thing. I'd say it's our Secret sauce. And it's important to say we are today probably the only one serving 2 hubs that Deliver the device in the very same day. So that's something that we try to put in the streets and it is working very well. So That's what I have at this point.
And a follow-up thanks, Ricardo, for that. That was very useful. And a follow-up is, Are these merchants already operating with existing acquirers? Or are you taking market Share from any of the competition or these are still small enough SMBs that you're finding many of them who don't have Terminals or accepted cards before or this is outright, I need to take market share away from the existing players.
Well, Georgios, we just before I answer your question, we decided to go after this market because we've been inquiring from we've been receiving inquiring from This type of SMBs for PagSeguro serve them. So of course, we cannot make a general statement here, but usually, still today, SMBs are badly served. Some of them in acquiring, some of them in banking, some of them in both. So the idea here to put the hubs To up and running is because we got some requirements from these SMBs, inquires from them and then we try to go after them. The majority of them, not to say, I mean, Very close to 100%.
They already have another payments provider. And to answer your question, yes, we are taking market share from office In this, it helps the strategy.
Thank you, Ricardo. And my second question is on the And net take rate, there seems to have been stabilization on the transaction part of the take rate, as You pointed out with debit mix being now more normal. The compression seems to have been mostly on The financial income, is this related to Something temporary, something cyclical or this is just related to more competition and Lower benchmark rates and just difficult to continue charging the same level of prices or what That 10 basis point contraction and then take rate of the financial income.
Well, Jorge, the It is let's say, it is hard for us to say when it's going to have the recovery because we still have a lot of uncertainty here. When we look back to what happened in Q4 is that we saw kind of stabilization, as you said, in terms of mix for of TPV of debit and credit. The point is there are some other variables to that compose the One of them, for instance, is duration. We are not changing the prices. We are not decreasing the prices.
But as I said, people in Brazil receive an additional salary. So they may keep buying through installments, but with a lower duration, that also impacts the financial Income, important to say, if we look to Q4 2019 versus Q3 2019, we decreased 20 basis points Net equity rate from 3.17% to 2.97%. And this year, we had just decreased 5 basis points from Q3 to Q4. When you look at what happened in January, it's interesting because we are growing 50% TPV, as we gave the disclosure, but the revenue growth is similar to what we had in Q4, close to 30%. And in Q4, TPV was growing 60%.
So the revenue yield so far in January, it's healthy. So Let's see. It's too early to celebrate. A lot of uncertainty here. We don't know how it's going to be the vaccination, how it's going to be the deployment of vaccinations For the population, some as people can see through the news, government is talking about 2nd round of corona voucher starting in March.
So I mean, there is still lots of uncertainty, but destabilization is good news. And going straight to your question, we are not decreasing prices. That's not the reason for this decrease in financial income.
Thanks, Ricardo, and congrats again to everyone.
The next question comes from Rayna Kummer with Evercore.
Good evening. Thanks for taking my questions. So starting off with your margins, you gave some very good detail on Really investing in your hub strategy in 2021, how is that going to play out for your net income margin in the Q1 And for 2021 as a whole. And then separately, the March the potential March corona 2nd round of corona vouchers, is that Included in your 40% plus TPV guidance for the year or would that be incremental? Thank you.
Hi, Reina. Thank you for the question. Also starting from the end going backwards here, the guidance that we gave that is above 40% TPV growth expected does not include coronavirus starting March. That would be an add on to our business plan. And also worth to say that On the one hand, we have the TPV will grow, but on the other hand, we have the change in the mix.
So we have this tailwind that is The growth and the headwind that is the change in the mix and may impact take rates. So just to be clear here, the guidance does not include A probable second round of corona vulture. Regarding the impact of hubs in our P and L, What I can say to you at this point is that hubs in 2021 will be slightly negative. So they will impact net income in 2021, slightly negative. But as I gave the payback for you during the presentation between 4 to 5 quarters, we expect to be positive by 2022.
If we don't have let's say, if we don't sell banking services to them very aggressive or better than our assumptions that you have in Not a plan, but just what you have today will be slightly negative in 2021 and positive in 2022.
And would that be is that a net number you're speaking about? Or would operating leverage in your own businesses to offset That potential decline in your margin that you could see from the hub strategy in 2021?
Reina, Important to highlight here and to be clear, the platform that we use for long tail and for SMBs that we will serve through hubs, They are exactly the same. So I just want to be clear here, we are not transforming the company and moving the company around to service and business. Platform is exactly the same. What changed a little bit is some of the features that they may use in the account, some of the features they may require in the acquirement And the way we come to them, the distribution channel, of course, is different than the online that is used for long tail. So the investment we are doing It's in the process some of the process and salesperson.
So this is investment. We are not talking about large investments in platform to serve them. Of course, we also have some Some investments here and there, but the majority of the investments are related to salespeople and some process that we need to have back office to serve them, That's the that's why we are going to impact the P and L this year because we're going to have the salespeople here. They're going to get the client. They start making the transaction, and we're going to have payback between 4 to 5 quarters.
That's why it's going to surpass 2021. It was going to be slightly negative this year and then will be positive by 2022.
Very helpful. Thank you.
Our next question comes from Craig Maurer with Autonomous Research.
Yes. Hi, good evening and thanks for taking the questions. I wanted to ask about the credit opportunity in SMB. We see That competitors that are disremediating incumbents are showing extraordinary growth in credit with Very positive ROAs in the S and B segment. So will entering the S and B segment Significantly accelerate your credit the growth in your credit portfolio?
Thanks.
Hi, Craig. Thank you for the question. Good to hear. What we have in our business plan at this point, the focus for the credit is in long Teo, we started serving hubs. We are having good results in terms of acquire.
I would say it's Too early to say how it's going to be the credit offering for the SMBs at this point in our base. We are for sure We know for sure that we can disintermediate incumbents, that's for sure. There's going to be some dynamics in the industry Starting June with the receivables the chamber of receivables, so it is an add on for our business plan. There is a lot of potential there, But I just don't want to make it here, let's say, the promise or generate expectations that we are going to explore that aggressively because we are still Evaluating, but for sure is a good opportunity. In our business plan, we are considering to serve long tail the way we've been doing since Last year, offering credits for them, charging through Square Capital, through the MDRs and so on.
So That's what we have at this point. There is still a lot of uncertainty back down here in Brazil with the COVID-nineteen and so on. So that's why We are trying to give you the best estimate or the best information that
we have at this point, and we may update you as time passes by. Just one follow-up on what you said. Could you discuss how the receivables marketplace is going to work? If you know, I mean, How you'll be able to pursue receivables within the marketplace? Is it daily?
Is it monthly? Is it batched? I mean, How is that process going to actually work considering merchants in Brazil, I would imagine, are generating 100 of thousands of requests
Yes, Craig. So just to try to explain here Really quick for everyone. In terms of long tail, we see that we don't see risk in our base for the simple reason that Once they started to work with PagSeguro, they need to prepay their sales And they need to receive d plus 0, d plus 14 or d plus 30. They are not price sensitive. They don't have the sophistication to have this type of discussions about chambers of receivables and so on.
What we see that The type of the merchant that is looking for December Receivers are large accounts and large SMBs. They have the sophistication. They have their, let's say, the Financial manager that can try to bargain some basis points here and there. But the at the end of the day, the chamber receives a centralized A hub with information that everyone in the market that once the merchant gave, this receipt was a guarantee for a credit No one else can take it. Today, there is no centralized chamber, so that's why it's kind of inefficient.
We see that a huge opportunity. If you look to our market share, we are close to 8%. So there is 92% of large clients making transactions out of PagSeguro ecosystem that we could go over them. We could go after them and after them So it is a huge opportunity, and the expected launch date is going to be June 7.
So this is about visibility, not necessarily about mechanics. This is showing you where to go, but it's not facilitating you actually making that credit?
I guess, I would say it is both, correct, visibility that you can see the receivables there And also, you can offer then of course, you can offer through your ecosystem. You do not offer the lending through the chamber of receivables. You should do by yourself in your ecosystem, in your app, in your website and so on. But you have visibility in the mechanics. I would say that it helps both because through the receivables, the collecting is more efficient.
So that's why we you have the information, you offer them the lending and then the mechanism to make the collection is efficient, which is not today.
The next question comes from Mario Pierry, Bank of America.
Hi, everybody. Congratulations on the results. I have two questions. First, on your TPV Growth guidance of more than 40%. I just want to understand that this number, 40%, if we take 40% As the bottom of your guidance, it just seems to me too cautious.
Your volumes are already growing over 50% year on year. You have easy comps over the Q2 of last year. You added 1,100,000 clients in the second half of twenty twenty alone, and you're adding the SMB volumes. So just trying to understand then why you didn't say TPV growth of more than 50% rather than 40%. And then my second question is related to your CapEx, right?
You've given guidance here CapEx of BRL2 billion, which is basically Your CapEx in 2020, even though you're doing this hub expansion. So trying to understand if the hubs Costs, they show up as OpEx and there's no CapEx associated with that. And then when we think about your hub strategy, Are you targeting a specific region of the country or you're going to go nationwide right away? Thank you.
Hi, Mario. Thank you for the question and good to hear as well. So we have Three questions here. I'm going to answer the first and the third, and then Arthur can handle the CapEx question. So the Well, again, going backwards, the plan here is to serve all regions of the country.
Of course, we will not be able To cover the 5,500 cities that you have in Brazil, but we'll prioritize those that you see more potential, Less competition and where we can we should that is we're going to have the better performance. So but yes, the idea is to serve all regions of the country. Regarding the guidance, you're right, 40% is the bottom. That's why we put in the slide higher than 40%. It's some people may think that it's conservative, as you mentioned.
But remember, we are still in the middle of the pandemic here in Brazil. So lots of uncertainty here. Just to give an example, the city of Sao Paulo are going to have partial lockdowns. There are some cities in the countryside of Sao Paulo today having full lockdowns. As I said before, vaccination It's happening, maybe not in the speed that we expected, but so there is this uncertainty.
We can update that as time passes by, but Lots of uncertainty at this point. We see many things going on, lockdowns here and there. So that's why we decided to give you the guidance that we do believe is going to be the best information that we have at this time. And you're right, 40% is the bottom. In January, we grew 50% and February 50% as well.
So let's see. We can update you as time passes by.
And then the question on the CapEx?
Yes, Mario, I will follow with the second question.
It's a pleasure to
talk Today, and first of all, in 2020, we had BRL 2,000,000,000 in CapEx. Part of this CapEx is related to The POS is that we purchased to support the growth of the company. We have a record of 1.8 net additions in 2020. So we need to buy to bought POS to support this Addition and also in our CapEx, we include R and D investments. And as we are accelerating our Product roadmaps, so we had a huge amount in R and D investments, in our CapEx.
For related to hubs, we don't consider CapEx for hubs. It's not necessary, just the purchase of POSs for Perhaps, okay. And in 2021, we consider the same amount of 2020 as a guidance because We think we will continue to grow our company and accelerate the net additions for 2021.
Just one additional commentary here, Mario, just like Ricardo said in the guidance for 2022, we expect CapEx as a percentage over total revenues To go back to regular levels that we had in 2019, for instance. So it's like a one off that we had to support the growth that we observed Unprecedented demand for terminals like Arthur explained it, additional terminals for active clients because of takeouts and deliver. So that's part of the growth, right?
Okay. Thank you. Very clear. Thank you.
Thank you.
The next question comes from Bryan Keane with Deutsche Bank.
Hi, guys. I just wanted to follow-up on the net margin question. I get The investment in the hubs and investment in PagBank, what I'm trying to figure out is what should we expect for that Q1 And net margin, and then for the year, what will net margins do because you got some puts and takes with hopefully the pandemic getting behind us, Which will increase margins, but also the investments. So just looking for some thoughts there.
Hi, Ryan. Thank you for the question. Talking about what we saw so far, as I answered to Jorge before, What we saw in January February, although the TPV is growing 50%, revenues are growing the same 30% that is that we saw in Q4 last year. So we are seeing better revenue yield. We always say here that it's maybe it's too early to celebrate.
As I said before, some ups and downs, lockdowns here and there. Coronavos should have might come starting in March. But what you saw in January February, a good revenue yield at this point so far. Talking about the overall margins for the year, I know it may be it seems to be repetitive, but we will keep investing in PagBank. Of course, we have our plan how much we're going to invest, but we have today 8,000,000 active Tag Bank clients, 7,000,000 active merchants, Record number of downloads, acquiring volumes growing 50% only in these 1st 2 months.
So the idea here is not to decelerate. We need to keep investing, take advantage. We said before, the market we are looking for is at least 17 times Bigger than what you have only for the acquiring, but the margins are dependent on the economy recovery. If the economy does not recover and we have the same debit mix, the margins are going to keep at the same level that we've seen in the past quarters. If the credit installments come back and people get back to their lives and start traveling and going to restaurants, buying clothes, going to shopping centers, traveling around, We're going to see a better take rate.
The for sure, we're going to have EPS accretion this year. We're going The plan is to grow and of course grow our profits. We just don't want to make, let's say, any forecast or any guidance on that because we still had Some short term assumptions. So we are confident that we can have the guidance for the 3 items that we gave in the last slide, TPV, CapEx Investments, so as of now, we are the focus is to grow the company, and we Not to give you exactly guidance for the margin and net income because of the uncertainty that we have. But again, if things are getting better, We will give you more color on that.
And important to say here that we Plan that PagBank is going to be profitable by 2022. We are investing here. We are creating a platform, as you can see. We are launching Home Broker. We are launching Treasury Bonds.
We just launched our distribution of crypto funds. So we are in the investment mode for Some of the business units of the company, PagBank, Paginvest, Insurance and so on, we expect that 2022 starts to be profitable. So I mean that's the best answer that I can give you at this point.
No, that's helpful. Those factors are helpful for us to understand on the impact on margins. And then my second question is looking at PagBank revenue was great to see the acceleration in the revenue growth. I think it was Close to 146% growth, something like that. But I noticed for 2020, in general, the card revenue looked like it declined a little bit.
So Will that card revenue, should that pick up in growth as we go into 2021? And can we expect still that Triple digit growth rate in PagBank revenues?
Brian, just the participation in the mix For credit cards or for cards in the PacBank went down, you're right. When you look at the size, you see the participation went down. But the main reason for that is the lockdowns and the all the COVID impact that we had in Brazil last year. So people stay at home, they don't use cards, they don't withdraw money, they don't use cards a lot. That's why we the expansion the spending go down.
So that's why we see the decrease in revenues of cards as a participation of the mix. And part of that, we offset with our credit offer That as you could see, we are not being aggressive either here. We our credit portfolio closed Q4 with EUR 600,000,000. So we are not talking about 1,000,000,000 of EIS here. We went I mean, we were cautious last year from March until August of September, and then we start giving some credits after that.
So I mean, we see a lot of traction. Even being cautious, We grew the company revenues for PagBank and reached more than BRL 500,000,000, so BRL 540,000,000. So Absolute figures are up in all the lines, in credit, in cards, in credit and the transactional.
And should we see a bounce back in especially in the cards portion in 2021? Or is that or is it just still dependent on the economy and the comeback and the recovery?
It depends on the economy, Ryan, because if people stay at home, they don't lose card very often and the economy the money doesn't go Away, I mean, you don't see the money in the economy, so that's why. So we are going to see increase, that's for sure. We are adding 1,000,000 Pac Bank clients each quarter. So It will grow. It's just hard to say how big or how strong is going to be that growth.
Got it. Thanks so much. Congrats on the quarter.
Thank you.
The next question comes from John Coffey with Susquehanna.
Great. Thank you
very much for taking my call. I had one I guess, 2 questions. And the first one is on your projections for the hubs. Now, I guess, if I look at your 20 20 TPV and grow it by the 40%. And then I think you used a high end of the range in which you thought that hubs Could contribute about 11% of your TPV.
If I compare that to the $700,000,000,000 I think you had for the SMBs, It seems like that would be maybe you would be expecting by the end of 2021 to have about a 4% market share in the SMBs. I just wanted to see if my math was right there.
Well, John, let me see if I understood your math. We had 162 this year. If we add 40%, we are talking about EUR 227,000,000 for 20 21 times 11%. We're talking about BRL 25,000,000,000.
So Yes. So BRL 25,000,000,000 over
BRL 700,000,000,000. It seems like it was about 4%. Does that sound right to you?
Yes, it is right. We are starting. As we said, the hubs in 2021 were not relevant. We are just starting. So that's why we have this projection between 6% to 11%.
And you got this 11% that is in top of the, let's say, the guidance, but You're right.
All right. Good. I just want to make sure I was thinking about right. And the other question I had is, what do you expect from MoIP in 2021? I just want to understand your thoughts there a little bit better.
Well, we acquired MoIP back in August Last year, but we only could integrate them in November that we had all the authorizations from the regulators and so on. So since then, We've been working here to integrate MoIP in PagSeguro Ecosystem and Structure. We will have Lots of opportunities for cross selling throughout this year. As I mentioned before, we can offer Moab serves some marketplace, some large clients. We can go after these guys and offer them POSs and solutions for physical stores.
And we also have some clients here that We're looking for online solutions. Some of our clients are looking for online solutions. Our online solution was not that good as MoIP is. So we will also cross sell in our base The MoIP solution. We expect MoIP to grow faster than the whole company because it is online, because we're have these cross selling opportunities, and that's what we have in mind at this point.
We just added there 400,000 merchants. We start to work closely, and we have all the teams already integrated to go after these clients.
Great. Thank you very much.
Thank you.
The next Question comes from Victor Chabell with Badesco BBI.
Thanks guys. Thanks for taking my question. Just a follow-up on the strategy Opening up hubs, more hubs this year, how do you see this strategy impacting Your expenses going forward, do we see any additional pressure on these lines going forward? Or Shouldn't we expect anything much different? Thanks.
Hi, Vitor. Thank you for the question. As we said before, this year, hubs will be slightly negative. So that's going to Pressure expenses, that's for sure because we need to make the setup and hire people and then start selling. There is some time to mature, People to get productive and so on, we have training.
But the long term view and what we see so far with the hubs that we already have, that we are running, We have this payback between 4 to 5 quarters, only talking about acquiring and without banking services. So That's why we think in 2021 is going to be slightly negative. It will be positive in 2022 If we do not anticipate some banking revenues and banking results that we may have, and it is it could be an upside for the plan. So That's what we have so far.
Perfect. Thank you.
Thank you.
The next question comes from Tito Labarta with Goldman Sachs.
Hi, good evening. Thanks for the call. A question following up, I guess, on TagBank. You continue to add clients there at a strong pace. Do you think that 1,000,000 to 1,200,000 clients, is that sustainable for how long?
Can you add How big can you get in terms of the number of PagBank clients? And then thinking about the revenues, right, in the quarter, it was roughly 10% of total revenues. For 2021, is a reasonable assumption maybe something like 15% given the target of getting to 30% in the next 3 to 4 years? Just to get a sense of how quickly PagBank will continue to grow sort of in 2021? Thank you.
Hi, Tito. Thank you for the question. Just quick story here. When people asked us how would be the net adds in 2019, We gave the guidance about EUR 1,000,000. We surpassed the debt.
We were close to EUR 1,200,000. Last year, we didn't have the official guidance, but we We gave the soft guidance about EUR 250,000 per quarter, EUR 1,000,000 in the year and then we have EUR 1,300,000. Just to say you that We have some sense the size of the market, but sometimes you get surprised that it's bigger than what we thought or performance is better than what we thought. So Well, we keep adding €1,000,000 per quarter for PagBank. We didn't see a decrease in the demand in January, so we are having the same pace.
If you look at the downloads, we are probably the number 1 in terms of downloads for bank apps. We had more than EUR 8,600,000 in Q4. So we don't see deceleration. It's hard to say when it's going to be over, but I just told you the story about merchants, and we are Seeing the demand in the past 2 years. Remember, in Brazil, we have 30% of the population that don't have bank account.
We have this digitalization trend, Not only in Brazil, but all over the world. So people get more digital banking. They know it works. They know it's safe. So we don't see deceleration in demand.
In terms of revenues, Tito, to be clear here, I don't have in the top of my mind. We are not giving this guidance. We had this 10% in Q4. It depends how it's going to be the takeover of the cards, how it's going to be the spending and then we can give more information for you in the future. But at this point, we are not giving this exactly number.
I mean, you can do the math and have some assumptions by yourself, and
Hello, everyone. So here we conclude our Q and A session. Thanks for your time. See you next quarter. Thank you.
Bye bye.