Brazil’s PagBank beats expectations with recurring profit up 33%

PAGBANK-RESULTS/ (UPDATE 2):UPDATE 2-Brazil's PagBank beats expectations with recurring profit up 33%

Reuters
First Published24 May 2024
Brazil's PagBank beats expectations with recurring profit up 33%
Brazil’s PagBank beats expectations with recurring profit up 33%

(Recasts paragraph 1, adds quotes from CFO in paragraph 8 and quotes from analysts in paragraphs 7, 12)

By Andre Romani

SAO PAULO, May 23 (Reuters) - Brazilian payment firm PagBank on Thursday beat analysts' expectations with a 33% jump in first-quarter net recurring profit, as the company's investments in hiring and marketing brought in more revenue.

PagBank posted a 522-million-real ($101.31 million) net recurring profit for the quarter ended in March, up from 392 million reais a year earlier, while analysts polled by LSEG had expected 475.2 million reais.

Net revenue rose 15% to 4.3 billion reais, also above estimates of 4 billion reais, with total payment volumes (TPV) up 27%.

Chief Executive Alexandre Magnani told journalists that the increase in payments came in part due to a string of new hires by PagBank in recent quarters for its sales team and wider marketing efforts.

"This investment in marketing and sales staff pushes expenses a little higher," CFO Artur Schunck said. "But the increase in TPV offsets it," he added, stressing the firm's focus on cost discipline.

Operating expenses, which include personnel, marketing and advertising, rose almost 21% in the quarter.

PagBank's results "suggest a positive outlook" for the rest of the year, analysts at Santander wrote in a note to clients, though they expressed "concerns related especially to the increase in sales headcount."

PagBank also maintained its full-year guidance on Thursday, with Schunck saying the company had performed better than expected but that it was too early to make any changes to the outlook.

In its financial services business, PagBank's credit portfolio tallied 2.7 billion reais at the end of March, stable from a year earlier, but rising some 8% from December.

The company now expects to resume offering unsecured credit lines gradually in the second half of the year, according to executives, after it paused the segment to focus on secured products such as payroll loans.

Its delinquency rate declined to 4.5%, from 17.9% a year earlier and 7.5% in the fourth quarter.

Analysts from Citi and Evercore also cited a lower tax rate as contributing to the net profit beat.

($1 = 5.1527 reais) (Reporting by Andre Romani; Editing by Jonathan Oatis, Kylie Madry and Sonali Paul)

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