PagSeguro Digital Ltd (PAGS) 2018 Q1 法說會逐字稿

Good morning, everyone, and thank you for waiting. Welcome to PagSeguro's first-quarter 2018 results conference call. This event is being recorded, and all participants will be in listen-only mode during the Company's presentation. (Operator Instructions). This event is also being broadcast live, via webcast, and may be accessed through PagSeguro's website at investors. PagSeguro.com, where the presentation is also available. Participants may view the slides in any order they wish. The replay will be available shortly after the event is concluded. Those following the presentation via webcast may pose their questions on PagSeguro's website.

Before proceeding, let me mention that forward-looking statements included in this presentation or mentioned in this conference call are based on currently available information, and PagSeguro's current assumptions, expectations, and projections about future events. While PagSeguro believes that their assumptions, expectations, and projections are reasonable in view of currently available information, you are cautioned not to place undue reliance on these forward-looking statements.

Actual results may differ materially from those included in PagSeguro's presentation are discussed on this conference call for a variety of reasons, including those described on the forward-looking segments and risk factor sections of PagSeguro's registration statement on Form F-1, and other filings with the Securities and Exchange Commission, which are available on PagSeguro's Investor Relations website.

Finally, I would like to remind you that during the course of this conference call, the Company may discuss some non-GAAP measures. For more details, the foregoing non-GAAP measures and the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures are presented in the last page of this webcast presentation.

Now I will turn the conference over to Mr. Ricardo Dutra. Mr. Dutra, you may begin your presentation.

Hello, everyone, and welcome to our first-quarter results conference call. Today I have here with me Eduardo Alcaro, our CFO; and Andre Cazotto, our Head of Investor Relations. Before we go through the main operation and financial highlights, I'd like to comment about our recent pricing strategy.

Last April, we decided to adopt a pricing strategy to respond to competition. We have decided to reduce the price of our POS terminals and promote a seasonal campaign by offering zero credit and debit MDRs limited to new merchants and only valid during the first three months, or up to 1,500 of total payment volume for new merchants. We are confident about our strategy to continue to deliver growth with profitability while creating a higher stickiness with our clients by offering a unique ecosystem through our digital account in a scenario where competition is getting more intense.

Being the first mover, online and mobile first brings a natural advantage to PagSeguro that is difficult to replicate. We already have more than 3 million active merchants in our base. Our unique strengths include a strong brand; non-replicable online reach through UOL; simple, affordable, interest-bearing pricing; low cost of merchant acquisition, being 100% online and not relying on banking channels or proprietary salesforce to distribute our product.

We operate in a massive addressable market with the ability to launch and cross-sell additional services through our digital account. That is a key piece of our long-term strategy.

PagSeguro proved that operating and winning the long tail requires an online and mobile first approach that is totally different from the traditional acquiring business model. We are convinced that following this, strategy we will deliver long-term shareholder value through an increasingly attractive and growing ecosystem. We believe that our market is just being created, and we still have a long way to go; constantly putting into practice our vision to disrupt and democratize financial services through technology and innovation. Once again, thank you all for joining us today. And let's go to the main operational metrics.

On slide 3, we start with our total payment volume that reached BRL14.4 billion in the first quarter, an increase of BRL8.4 billion, up 139% year-over-year. This growth is the result of a greater penetration of our ecosystem in long tail combined with new, innovative products and solutions offered to our clients.

The non-GAAP net take rate, excluding sales of devices, ended the first quarter in 5.1%, a decline of 41 basis points year-over-year, mainly due to the mix of debit and credit. As we anticipated to investors during our IPO roadshow, we expected these rates to stabilize. In Q4 2017, our take rate was 5.1%, and in Q1 2018, it remained in that 5.1%.

On the charts below, we see the number of active merchants. Just to explain the criteria used internally, active merchants are those who made at least one single transaction in the last 12 months. We ended the first quarter with 3.1 million active merchants, adding 1.4 million new merchants in one year. It means that we almost doubled the number of net additions in the period compared to the same metric in Q1 2017. Quarter over quarter, we added 296,000 new merchants or 8% higher comparing to the 274,000 new additions in Q1 2017.

Now I would like to pass the word to our CFO, Eduardo Alcaro.

Thanks, Ricardo, and good morning, everyone. Before I start, I would like to mention that in Q1 2018, we had a total of BRL75.5 million of extraordinary events, mainly related to the IPO. Let me explain these items one by one.

First, stock-based compensation expense and related employer favorable taxes in the total amount of BRL210.6 million. These are expenses for equity awards under our long-term incentive plan. We exclude stock-based compensation expense from our non-GAAP measures because they are a non-cash expense. The related employer related payroll taxes depend on our stock price, timing, and size of exercises, and vesting of equity awards, over which management has limited control. I would like to point out that the largest portion of this expense was recognized at the IPO with the issuance of 1.8 million shares.

Second, financial income related to foreign exchange variation gain in the amount of BRL89.8 million from the conversion and remittance of US dollars to Brazil from January 26, the date of the IPO financial settlement, until February 7, when we did the last remittance. We are excluding this financial income from our non-GAAP measures because it is a one-time and nonrecurring income.

Third, tax related to the remittance of IPO primary proceeds, IOF tax, to Brazil in the amount of BRL13.1 million. We exclude this IOF tax from our non-GAAP measures because it is a one-time and nonrecurring expense.

And fourth, the present value adjustment of notes receivables in installments in the amount of BRL16.8 million. As we discussed during the roadshow, prior to the IPO, one of the sources of cash to fund the prepayment with merchants was the discount of note receivables with issuing banks. After the IPO, the Company stopped the discounting of notes receivables with issuing banks, and repaid BRL1.1 billion already discounted as of December 31, 2017, as you can see in our cash flow statement.

In addition, in Q1 2018, we started to use the IPO proceeds to fund the prepayment feature with merchants. Since note receivables are no longer discounted with issuing banks, the note receivables balance increased in Q1 by BRL1.4 billion; and, consequently, the amount of present value adjustment also increased substantially as a deduction of financial income. The present value adjustment depends on the SELIC rate, which is Brazil's Treasury rate, and it is not a cash outflow. The adjustment of present value was not material for the full year in 2017, with a negative net income impact of BRL1.8 million. In 2018, we expect a negative net income impact of BRL30 million for the full year.

And the last one, income tax on the non-GAAP adjustments in the amount of BRL75.2 million. The most relevant non-GAAP adjustment is our stock-based long-term incentive plan, recognized as non-cash expenses in the amount of BRL130.3 million, and related employer payroll taxes in the amount of BRL80.3 million. Our share-based long-term incentive plan was granted to our executives in July 2015 and triggered by our IPO in the end of January. The long-term plan vests in five equal annual installments starting effectively one year after our IPO anniversary.

For more details, the foregoing non-GAAP measures and the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures are presented in the last page in this webcast presentation.

Now, on the top left of the page, our non-GAAP net revenue reached BRL855 million in the first quarter, up 89% in Q1 2018 compared to Q1 2017. Moving to the top right, let me talk about our main revenue streams, composed by transaction services, or mainly MDR collected from merchants; financial income from the prepayments; and hardware sales. In the first quarter of 2018, transaction and services represented 54%; financial income, 35%; and hardware sales, 11% of total net revenues.

You can see that the terminal sales is becoming less representative in the mix when compared to the previous year, and expected to continue to decrease in relative terms going forward. On the other hand, you can note that our revenues from transaction activities and other services grew 12 percentage points compared to Q1 2017.

On the two charts below, we present our total expense figures. I would like to point out here our lean cost structure that allow us to have a volume-scalable business model. Our non-GAAP total costs and expenses decreased 2.3 percentage points; and, in the first quarter, at 3.8% over total TPV. Related to non-GAAP admin expenses over total TPV, it reached 0.3%, an improvement of 0.2 percentage points. Since we are no longer discounting receivables with issuing banks, our financial expense should trend to zero.

You will note in our cash flow that we settled this quarter BRL1.1 billion in receivables discounted with the issuing banks as of December 31, 2017. We still have BRL600 million in receivables discounted with issuing banks that we will repay until the end of October with the IPO primary proceeds.

On the next slide, we show our non-GAAP net income growth. In the first quarter, we reached BRL224 million, an increase of BRL161 million, and up 256% in Q1 2018 compared to Q1 2017. The non-GAAP net margin reached 26%, an increase of 12 percentage points year-over-year.

Now I'd like to hand over to Ricardo, who will comment on new products recently launched.

On the next slide, we have an important recognition especially in relation to our relentless focus on user experience. Our My Account app rate has reached 4.8 stars on Google Play and Apple Store, which is the highest rate for a digital account and payment app in Brazil. This rate has put us as the best-in-class app in our segment in the Brazilian industry.

On the next slide, we show you the launch of our bill payment solution. With this feature, our merchants will no longer need to cash out to pay bills. Our bill payment feature is free of charge, and includes payment of bank [slips], utilities, consumer, and tax bills. The launch of this feature corroborates our cross-selling strategy through the digital accounts and increases stickiness of our merchants.

On the last slide, we have our new POS terminal, Moderninha Plus. It comes to replace our Moderninha Wi-Fi device, and has the same price of 12 installments of BRL28.92. Besides the new design, Moderninha Plus comes with improvements. The battery lasts up to twice as long as the previous version, a more resistant keyboard, and a much faster processor. Moderninha Plus also has NFC which enables contactless transactions.

Now, we finish our presentation and we start the Q&A session. Operator, please?

(Operator Instructions). Domingos Falavina, JPMorgan.

My question regards your adjustments to earnings. Thanks for that; it made the results more clear. But one of the things that surprised us here was the stock -- the long-term incentive plan. It basically -- I noticed you adjusted BRL210 million of pre-tax, and I would like to know how much of that is recurring or not. So we basically looked at your longer [filing] and we noticed since 1.8 million shares were exercised out of total already granted of 5.3 million and [since the finance] in 2020.

If I'm assuming a similar cost per share, I would get to additional BRL200 million of expenses in 2019 and an additional BRL200 million expenses in 2020, which would drive this to not be a one-off IPO related. So I would just like a better explanation. Out of BRL210 million, how much is IPO-related and how much we should continue to see in 2019 and in 2020?

Okay. Good morning, Domingos, and thanks for your questions. I think, first, the reason why we excluded the long-term incentive plan is for us to be comparable to our comparables. For example, Square and PayPal, they used the same metric that we're using. So our results are 100% comparable to their results.

And second, to your question in terms of recurrence: when we look the expenses by quarter, you should expect BRL20 million, net of taxes, by every quarter. From the BRL20 million, around 60% is non-cash, and 40% is related to the taxes that we need to collect on the share grants.

Super clear. No, that's very, very helpful. That was my only question. Thank you.

So your question for the recurrences, you should assume going forward BRL20 million, net of taxes, expenses in Q2, Q3, and Q4, and going forward.

Yes, no, yes, super clear. And your total maximum shares you can issue, it's 3% out of the [315] million shares you have, right? So basically 3% on your total shares outstanding, including their own share options, right?

Right. You're correct.

Okay, thank you.

Gabriel da Nóbrega, UBS.

Since the start of the year, we have been seeing a faster emergence of some smaller players offering the same business model as you guys. And as a result, we have also seen more aggressiveness on the pricing of the POS and also of MDRs. Could you maybe elaborate if you have calculated any impacts from offering MDRs at 0% for the new merchants? And also what other strategies you are planning to roll out in order to face this [competed] market? And I'll make a second question after that. Thank you.

Okay. Thank you, Gabriel, for the question. As we said, we adopted the new price in last April. The impact of 0 MDRs is linked to new customers. It is added only during the first three months, or up to BRL1,500 per new merchant, so it's a very limited impact.

Regarding the competition, yes, it's true the market is becoming more competitive. The fact that PagSeguro has IPO'd last January brought attention from other competitors, that's true; but the market is still very big. We estimate that the total addressable market is around BRL1.8 trillion. We have only 2% of this market. So there is still a lot of room to grow, and we will respond to competition if necessary.

But we are well positioned. We have a very unique and rich ecosystem. We have a strong brand. We have all the processes in place. We know how to do that. You can see our numbers. So we are confident that by following our strategy, we will persevere in the future.

All right. And as for my second question, we have seen recent news articles stating that you are planning on opening [the in-bank] operation. And I just wanted to understand what is your end goal with this strategy? And moreover as well, when could we begin to see banking products in your digital wallets?

This is a very common discussion at almost every fintech around the world. Yes, it's true, we discussed about that, but there is nothing defined. What we launched last week is the bill payments, and it isn't avoidable that at some point we need to have additional financial services. But we don't know which financial services it will be, and when it will be, and if we need to have a banking license or things like that. So it is still pretty premature to have this kind of conversation and to give you any disclosure about that.

All right. That's very clear. Thank you.

Carlos Macedo, Goldman Sachs.

A couple of questions. First question: obviously with the competition intensifying with Cielo coming out with a bunch of promotions and being on the media a lot, marketing expenses should continue to go up. Could you give us your thinking about not only the promotional side, but also the marketing side of the business, given that you have spent a lot in creating the PagSeguro brand; and how you plan to defend it in the media, and what that implies for marketing spend going forward?

Second, could you talk -- I mean, the promotions that you're putting out, I know it's still very recent. You don't have a very long track record. But given promotions you've put out in the past, what kind of churn do you have on those promotions? I mean, once the three months are done, do you still keep the client? Or is the churn high? Or does the fact that the clients actually buying the POS terminal reduce the churn? Help us think about that a bit. Thank you.

Thank you, Carlos, for the questions. I will start with the first one regarding Cielo. We don't believe that we compete against Cielo or any of the other two incumbents in the market, although we believe the three of them compete, one against the other. We operate in a different market. It's true and it's natural that Cielo tries to enter in this market. But as I said before, we have this unique ecosystem. We have this business model that is different than them. We are 100% online, 100% self-service. We have a simple pricing model that one size fits all. We don't believe that by having different price schemes depending on the type of cards or volumes or things like that, this is not the type of product that the small merchants are looking for.

Yes, it's true; we have some competition from them. They are trying to make some competition in this, market, but we don't believe that we are competing against them in our long tail market that we are creating, actually. We still have a lot of new merchants that didn't accept cards before, joining us, so it's a new market. That's regarding Cielo.

Regarding promotions, as we've said, too early to have any analysis about that. But I would say that the churn, or things like that, they are similar to what we had in the past when we launched the products last year. So we don't see any transformation or difference, or the consumer changing the way they work with us because of the promotion. So it's still too early, but no news about that so far.

Okay, great. Just going back to the first question: so given your views on the potential competitors, does that change anything in your outlook for marketing expenses? Is it still something that you plan to follow the plan that you had before the competitive pressure started? Or have you changed anything in that sense?

So far, we didn't change anything. As you can see in our first quarter, we had higher marketing expense but that's something that we had planned. It's still, even with this competition from Cielo and even from other companies, we had 296,000 new adds, so it's a very great result. But going back to your question, we don't see any big change in our marketing expense so far.

Great, thank you.

Bryan Keane, Deutsche Bank.

Just want to ask, going back to the pricing change for new merchants, just trying to quantify the impact, maybe thinking about the lost revenue opportunity on a quarterly basis from the new pricing change. What typically was done, for example, this quarter; what the revenue was; and then now for new merchants, how much of an impact? Doesn't sound like it's going to be that big of an impact, but I'm just trying to quantify the impact of the different pricing and change.

Hi, Bryan. Thank you for the question. We -- as we said, it is still too early to give a number. But just to give a sense, we are limiting the impact up to BRL1,500. So if you consider the net take rate that we have, you can have an idea how much we are investing to bring this new customer. And that's kind of implied in our cost per acquisition. So it's not a big number, because we limit it only to new customers and up to BRL1,500. So if you get the net take rate, you're going to that impact is pretty small. When we make this calculation, the -- considering the monthly spending per merchant versus the net take rate that we are not charging at the beginning of their relationship with us.

And you guys don't believe you'll have to move this pricing over to the existing merchant base?

So far we didn't have any data that shows that we need to give that. Because again, it's a very limited value. The customers that already work with us, they see other advantage by using the ecosystem, just like the prepaid card. Now they have to the bill payment with no charge. So it's more like effective to get new customers, and we don't see this conflict with the customer base that we already have.

Okay, very helpful. And then my last question, just thinking about the Brazilian economy and the trucking strike, can you talk about any impact you guys have seen? And going forward, what you think that might have on your guys' results in the quarter? Thanks.

Yes, it's true that we had this -- we had some impact. We had a few days of impact. We start to observe a real impact last Thursday. But now we see that the strike is kind of getting diminishing, or even getting over, so there will be a week or a little bit more, a few days, with this impact. But it's going to be limited to this point. As far as we look forward, we don't see a big change. It's going to be limited to this period of time that we had the truck driver strike.

Okay, great. Thanks for taking my questions.

Jason Kupferberg, Bank of America Merrill Lynch.

So, you just grew revenue 89% here in Q1. I know you're not in the habit of providing formal guidance, but is there anything you're seeing in the business that would cause that kind of growth rate to significantly slow over the next couple of quarters? I mean, yes, maybe you'll see a little bit of headwind in Q2 from the trucking strike. But putting that on the side, is there anything that would cause a huge deceleration in your near-term growth rates?

Good morning, Jason. We are not seeing any big moves or big changes in our plan. As far as additions and regardless the truck driver's strike that will have some impact, but we are not seeing any major changes to our current business plan in terms of growth. So we continue with our plans.

And just to complement what Eduardo said, you said, looking to the future. We don't see any big mix change. As we anticipated during the roadshow, if you look at the net take rate, it's kind of flat to stable when you look in Q4 and Q1. So we don't see the pressure or big mix shift change that's going in such a way change our net take rate or affect our net take rate. So it's kind of stable so far and being flat.

Okay. Can you just give us your latest perspective on the regulatory environment? How basically there's been some headlines here and there about possible changes in parts of the prepayment business; but if you can just give us a sense of your latest expectations there, that would be helpful.

Well, first, just to point out, the regulation is fostering competition in Brazil. When you look at the last years, we see that since 2010 new players are getting to the market, and the regulation is trying to foster the competition.

Regarding the prepayment, you are talking about the payment with interest, I guess -- the installment with interest, I guess.

Yes.

This is a product that already exists. Consumers can use it. But it doesn't get any traction because, at the end of the day, first, the seller -- the merchant needs to offer; and then the consumer needs to accept to pay interest in a purchase. And we know that in the Brazilian culture, for the last 24 years or more, people get used to buy with installments and no interest. So we don't think that it's going to be big change regarding this topic. And we don't see any other sign from the regulator that there is going to be a big change in the installments with interest.

Okay. Thank you for the commentary.

James Friedman, SIG.

It's Jamie at Susquehanna. Ricardo, with regard to your comments about the trajectory of the take rate in the slides that you have, slide 3, I was just wondering, what do you contemplate for the debit/credit mix over time and the impact of that to the take rate?

Although we have only 2% to 3% of the market -- depend the way you look -- we already have a mix that is similar to the industry: around 60% credit, 40% debit. And that's the mix that we had in the second half last year, and the same mix that we had in the first quarter this year. So that's why our net take rate has been flat, because the mix between debit and credit are stable and reflects the industry.

Okay. And then with your prepared remarks, you mentioned about the free cash flow impact from replacing the issuer receivables. You were going kind of quick there, but I think you had suggested that there still more to do. So if you could give us an update on that, or revisit what you had said. Replacing the issue -- the issuing bank receivables.

Sure. When you look in our cash flows, you will see a line there showing the BRL1.1 billion. So if you go to the changes in receivables subject to early payment, that means that it's the activity that we do with the issuing banks. You will see that we repaid BRL1.137 billion in Q1. At the end of the year, at the end of December, we had about BRL1.7 billion anticipated and discounted with issuing banks. So that means that in Q2 and Q3, we still have BRL600 million more to settle with the issuing banks.

Got it. Thank you very much.

Lucas Lopes, Credit Suisse.

I have two questions. The first one regards to Moderninha Plus. Is this apply to PAX, P-A-X, and do you have an exclusive agreement with the supplier? And also in this regard, you're considered to work with other hardware suppliers such as Ingenico or VeriFone, or should PAX remain your sole provider?

And if you allow me to ask a second question in regards to accounting, the Company books as revenues the gross MDR, instead of the net MDR. I understood the rationale of having a similar accounting than your peers such as PayPal. But that generates a tax inefficiency, as you end up paying more tax on sales compared to the option of reporting the net MDR as your top line. Do you consider to change that to have a more optimal tax base for VAT taxes?

Hi, Lucas. This is Ricardo. Thank you for the question. I'm going to take the first one; and regarding the tax question, Alcaro is going to answer later on.

Yes, Moderninha Plus is manufactured by PAX. We don't have an exclusive agreement with them, in the same way that they don't have with us. So we are very often looking for new hardware manufacturers, such as Ingenico and VeriFone that you mentioned. But at a point we decided to keep working with PAX, but we are evaluating new models from other suppliers. It depends on the features and the price. And it's not an easy decision, but we are always evaluating new hardware suppliers.

On the question about the sales taxes, basically the PIS and COFINS, what happens is, at the same time that we have a debit on the sales, we also have a credit on the interchange and all the expenses that we have for PIS and COFINS. So at the end of the day, the impact is basically the same if we were recognizing the net revenues as net; because again, we use the expenses as a tax credit as well.

Thanks. Very interesting.

Craig Maurer, Autonomous Research.

In the release, you disclosed that the ISS tax rate came up because of some changes in the rules. If you take that out and you're looking at net take rate, it actually looked like net take rate was almost flat. Could you comment there, if I'm thinking about this correctly?

Just talk about the ISS, with the repeal of the law, we are currently [judicially] depositing the full ISS tax as it were due to the Sao Paulo municipality. It's about 2%; and provisioning the difference, according to the average tax rate charged by other municipalities, which is around 4%. Our preliminary calculations indicate an impact of less than 1% of the total 2018 net income.

Right; but that there was a year-on-year change that will carry forward. So there was a one-time suppression of what you could call the net take rate, if you're just looking at net transaction and services revenue over PPV.

Yes. Going forward, we look at that rate as being stable throughout the year.

Okay, okay. Thank you. Just with all the discussion of competition, it just bears pointing out that that was stable, when you back that out. Okay, thanks.

Eduardo Rosman, Banco BTG Pactual.

My question is on new products for clients in the PagSeguro ecosystem. I mean, interesting to see that you now offer a new payment. So I was wondering what else you believe you need to start offering in the short term in terms of new products. Do you have anything in the pipeline?

And moving to -- still on digital products, when do you think you might start granting new loans? Real loans, not just prepayment. Is this something that you plan to do in the short term? How to do it, do you plan to buy a bank, open a bank? So if you can give us a little bit more color on that, I would appreciate it. Thanks.

Thank you, Eduardo, for the question. As I said before, we -- this is a discussion that we have very often here regarding new financial services. If these financial services will require that we have a banking license, how it's going to be that; and in terms of the structure, taxes, and so on. At this point, we don't have anything defined about that. We are evaluating very carefully. It's clear that we have this ecosystem, with 3 million merchants, that we could offer more services to them. The first one is the new payment. We have some others in pipeline but they are not transformation you are going to see in the next weeks, but it's nothing transformational at this point.

But regarding the financial services, the law and so on, that is something that we are discussing. We don't have anything defined that I could say you when we're going to launch and how it's going to be that, but we are discussing that very often.

Okay, thank you very much.

Felipe Salomao, Citibank.

Just one question about top line and volume growth. The TPV grew sequentially 10%. But the operational top line -- which includes POS sales, revenues, transaction revenues, and the prepayment of receivables -- contracted 2% sequentially. So what explains that difference between the TPV growth and the operation revenues growth?

Hi, Felipe. What we see is, first, we have obviously in Q1 is the weakest quarter of the year, and we have occasions in Brazil. And we are also comparing against Q4, which the strongest year in terms of TPV, volumes, and revenues.

About your question, when you look at -- you're combining those three lines, one thing that you need to consider in our calculation is that hardware sales. Our hardware sales are down 20% when compared to last year because of the change in the mix. And we continue to add new merchants to the base. So, at the end of the day, you need to consider in your analysis, the hardware sales. And also you need to consider that Q4 is the strongest quarter of the year.

Okay, thank you. Thank you very much.

(Operator Instructions). Domingos Falavina, JPMorgan.

My question is just regarding, like, when you guys put out a promotion like the one we're seeing now with the three months of zero MDR, how much of the new -- I'm assuming it's very, very small -- but I'm just curious if you care to share how much of your sales are to existing PAX clients? So like, people changing just the benefit from the lower MDR, or if like it's 100% basically new net additions?

Domingos, I guess to be -- to get the promotion, or to get this offer, you need to buy a new device. So if you make the calculation regarding the benefits that you are going to have by not paying MDRs up to BRL1,500 versus the price of the device, is almost the same price; or even the device is a little bit expensive, depending on the device that you get. So that's not something that they are cannibalizing, and people buy a device just to get the benefit of this promotion.

Yes, makes sense. Super clear, thank you.

This concludes today's question-and-answer session. I would like to invite Mr. Ricardo Dutra to proceed with his closing statements. Please go ahead, sir.

We do like to thank you all for the time you spent with our management team. We do like to reiterate our commitment and focus on delivering solid results, aligned with the governments and best market price. See you all next conference call. Thank you very much.

That does conclude the PagSeguro audio conference for today. Thank you very much for your participation. Have a good day and thank you for using Chorus Call.