PagSeguro Digital Ltd. (PAGS) Q4 2022 Earnings Call Transcript

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PagSeguro Digital Ltd. (NYSE:PAGS) Q4 2022 Earnings Conference Call March 2, 2023 5:00 PM ET

Company Participants

Eric Oliveira - Investor Relations and ESG Director

Ricardo Dutra - Chief Executive Officer, UOL Group

Alexandre Magnani - Chief Executive Officer

Artur Schunck - Chief Financial Officer

Conference Call Participants

Mario Pierry - Bank of America

Bryan Keane - Deutsche Bank

Josh Siegler - Cantor Fitzgerald

Pedro Leduc - Itau BBA

Domingos Falavina - JPMorgan

Neha Agarwala - HSBC

Tito Labarta - Goldman Sachs

Sheriq Sumar - Evercore

James Friedman - Susquehanna

Alex Markgraff - KeyBanc

Geoffrey Elliott - Autonomous

Jeff Cantwell - Wells Fargo

Operator

Good evening. My sanction is Nihuge, and I volition beryllium your league relation today. Welcome to PagBank PagSeguro's webcast results for the Third [sic] [Fourth] Quarter 2022. At this time, each lines person been placed connected mute to forestall immoderate inheritance noise. [Operator Instructions] This lawsuit is besides being broadcast unrecorded via webcast and whitethorn beryllium accessed done PagBank PagSeguro’s website astatine investors.pagseguro.com. Participants whitethorn presumption the slides successful immoderate bid they wish. Today's league is being recorded and volition beryllium disposable aft the lawsuit is concluded.

I would present similar to crook the telephone implicit to your host, Eric Oliveira, Investor Relations and ESG Director. Please, spell ahead.

Eric Oliveira

Hi everyone. Thanks for joining our 4th fourth 2022 net call. After the speakers' remarks, determination volition beryllium a question-and-answer session. Before proceeding, fto maine notation that immoderate forward-looking statements included successful the presumption oregon mentioned connected this league telephone are based connected presently disposable accusation and PagBank PagSeguro’s existent assumptions, expectations, and projections astir aboriginal events.

While PagBank PagSeguro believes that the assumptions, expectations, and projections are tenable successful presumption of presently disposable information, you are cautioned not to spot undue reliance connected these forward-looking statements. Actual results whitethorn disagree materially from those included successful PagBank PagSeguro’s presumption oregon discussed connected this league call, for a assortment of reasons, including those described successful the forward-looking statements and hazard origin sections of PagBank PagSeguro’s astir caller Annual Report connected Form 20-F and different filings with the Securities and Exchange Commission, which are disposable connected PagBank PagSeguro’s capitalist relations website.

Finally, I would similar to punctual you that during this league telephone the institution whitethorn sermon immoderate non-GAAP measures, including those disclosed successful the presentation. We contiguous non-GAAP measures erstwhile we judge that the further accusation is utile and meaningful to investors. The presumption of this non-GAAP fiscal information, which is not prepared nether immoderate broad acceptable of accounting rules oregon principles, is not intended to beryllium considered separately from, oregon arsenic a substitute for, our fiscal accusation prepared and presented successful accordance with IFRS arsenic issued by the IASB. For much details, the foregoing non-GAAP measures, and the reconciliation of these non-GAAP fiscal measures to the astir straight comparable IFRS measures, are presented successful the past leafage of this webcast presumption and net release.

With that, fto maine crook the telephone implicit to Ricardo. Thank you.

Ricardo Dutra

Good evening from Sao Paulo, everyone, and acknowledgment for joining our webcast for the 4th fourth 2022 results. Tonight, I person the institution of Alexandre Magnani, our CEO, Artur Schunck, our CFO, and Eric Oliveira, Head of Investor Relations and ESG. Before I crook to Alexandre, I would similar to stock a speedy overview of our journey, arsenic we completed 5 years arsenic a nationalist listed institution past January. After that, I volition stock the main 2022 achievements and remark astir our ESG initiatives.

Going to Slide 3, we stock the 5 years cardinal show indicators for our company, and the 3 years cardinal show indicators for PagBank, our fiscal services and integer slope portion launched successful May 2019. Our institution genuinely experienced an exponential maturation and standard implicit the years, including millions into the fiscal system, initially done payments, and past done integer slope and fiscal services.

We person been successfully unlocking caller addressable markets successful payments and fiscal services, ever balancing maturation and profitability. Starting with PagSeguro data, our TPV grew 9x successful 5 years, reaching BRL354 billion, and we person the largest payment’s web acceptance successful Brazil, accounting for much than 7 cardinal progressive merchants.

PagBank, our fiscal services and integer slope business, has been increasing consistently successful each important metrics, expanding engagement, unlocking cross-selling opportunities, and leveraging our banking licence to trim our outgo of funding. PagBank TPV accrued 19x, with full deposits increasing 10x, surpassing much than BRL20 billion. Our recognition portfolio grew 7x, reaching BRL2.7 billion, inactive precise tiny compared with the accidental we person up of us.

And finally, adjacent with each investments successful our integrated maturation and the macroeconomic challenges specified arsenic involvement complaint increases, inflation, and uncertainty astir user spending, not lone successful Brazil, but astir the world, our profits grew 3x. And our equity presumption accrued from little than BRL1 cardinal successful 2017 to astir 12 cardinal successful the extremity of 2022. On the illustration successful the close of the slide, we tin spot that 52% of the 2022 equity fig is composed by retained earnings, afloat reinvested successful our integrated growth.

Going to Slide 4, we tin spot immoderate of our 2022 achievements. We successfully implemented our repricing to offset fiscal expenses increase. At the aforesaid time, we had beardown deposit growth, which helped to trim our backing costs and helped to diversify our backing sources. We besides person been successfully diversifying our payments concern and 2022 marked the consolidation of our HUBs inaugural to widen our best-in-class services to tiny and mid-sized clients, and PagBank consolidated arsenic the 2nd largest integer slope successful Brazil, with 28 cardinal clients.

In recognition underwriting, we took the close determination successful Q1 2022 to displacement our underwriting from unsecured products to secured products. By doing so, we were capable to unlock caller maturation avenues specified arsenic the payroll loans and recognition cards backed by CDs and relationship equilibrium savings, improving our gross nett successful PagBank.

Finally, our disciplined superior allocation led to a important betterment successful operating and investing currency travel generation, paving our way to further research the opportunities successful Payments and Financial services successful the Brazilian territory successful the coming years.

Moving to Slide 5, our earthy telephone for disruption and worth instauration led america to acceptable a precocious barroom for deliveries successful ESG. In December 2022, we released our 2nd sustainability report, wherever each stakeholder tin travel our main initiatives and affirmative interaction successful society. One constituent to item present is that our fiscal inclusion has been massive, done a harmless and hassle-free platform, empowering clients, employees, and communities.

With that, I decorativeness my presumption and walk the connection to Alexandre Magnani.

Alexandre Magnani

Thank you, Ricardo. Hello, everyone. After Ricardo shared our main achievements for 2022, I would similar to stock our highlights lone for the 4th quarter, opening successful the Slide 6. Our concern doctrine to balancing maturation and profitability portion keeping a disciplined superior allocation led america to study the highest EPS successful PAGS’ history, 36% higher than the aforesaid play of 2021; beardown gross maturation supra 20% versus 4Q21, reaching astir BRL4 billion; currency net of BRL410 million, astir 4x higher than 4Q21; and BRL9.8 cardinal successful nett currency position, further boosted by our efficiencies successful OpEx and CapEx.

In payments, our strategical pillar to turn successful a profitable and businesslike way, portion we proceed to diversify our merchants’ base, resulted successful BRL94 cardinal successful PagSeguro TPV, with 33% coming from HUBs; and 1.3 cardinal successful gross profit, 14% higher than 4Q21. In fiscal service, we person continued diversifying our gross streams done the consolidation of PagBank. Gross nett of BRL131 million, 70% higher than 4Q21 and 3Q22; 28 cardinal clients accounting for BRL21 cardinal successful deposits; and BRL2.7 cardinal successful recognition portfolio, with expanding vulnerability to secured products.

Finally, our two-sided ecosystem, which is conscionable successful the aboriginal stages to afloat research synergies related to little transaction costs and little outgo of backing done our closed loop, led to much than BRL200 cardinal successful TPV, PagBank and PagSeguro; 10% successful marketplace stock of PIX transactions; and caller features to further summation our cross-selling with clients, SMB Payroll Platform and Automatic Savings from relationship balance.

Moving to Slide 7, we contiguous our lawsuit basal and cash-in evolution. Our fig of PagBank clients much than doubled successful examination to 2020, moving up from 13 cardinal to astir 28 cardinal successful 2 years. Active clients accounted for much than 16 million, wherever 60% of consumers, and 50% of merchants considers PagBank their superior account. Our maturation successful cash-in reached BRL38 cardinal versus Q4 2021, led by PagSeguro TPV maturation and PIX transactions.

As a result, Slide 8 reveals our deposits maturation and their respective yearly percent yields. Deep diving, we were capable to scope an important milestone this quarter, particularly successful specified an uncertainty script related to recognition market, fixed the caller events, and the involvement complaint trends successful Brazil successful 2023. The ongoing betterment successful products and work levels, combined to the seasonality, led to a beardown relationship balances growth.

Total deposits reached 21 billion, BRL1.3 cardinal much than 3Q22 and BRL12 cardinal much than 4Q21. The expanding stock of relationship equilibrium successful the 4th allowed america to trim our PagBank CDs organisation done third-party partners, reducing costs related to organisation interest and the APYs successful PagBank CDs, driving down our costs related to deposits without harming our go-to-market strategy to pull caller clients and further prosecute the existent ones.

Account equilibrium APY successful 4Q22 reached 69% of the CDI, the Brazilian interbank rate, an summation successful examination to the erstwhile quarter. This summation was chiefly related to a higher fig of days our clients kept their savings successful PagBank. APY connected full deposits reached 96% of CDI, a little level successful examination to the past 2 quarters, reflecting the higher stock of relationship equilibrium and the downtrend successful APYs for PagBank CDs.

Moving to the adjacent slide, I would similar to stock 2 features that we precocious rolled retired to our clients. Thinking astir the challenges of Brazilian merchants to negociate the nonstop deposits of paychecks for employees, we launched our SMB Payroll Platform afloat integrated successful our PagBank app and successful our iBanking platform. Merchants tin number with this diagnostic to signifier and docket paycheck payments for their employees with a hassle-free solution. This is an important accomplishment for our array of fiscal services, particularly for tiny and mid-sized businesses with aggregate owners and employees.

Another diagnostic is the caller mentation of our automatic savings. Initially, it was launched for merchants, wherever they could specify a percent of their income to beryllium invested successful PagBank CDs. Now, merchants and consumers tin besides docket automatic savings according to their relationship balance, facilitating the investments from different cash-in sources specified arsenic PIX, wage portability and different sources of deposits. With this product, we reenforce our committedness to the fiscal inclusion and education, portion we foster the PagBank relationship engagement.

Moving to Slide 10, we besides would similar to stock a fewer updates astir the ongoing improvements successful our work levels. During the past 2 years, our teams person been moving hard to summation lawsuit satisfaction, portion promoting further outgo savings, done processes, automation and optimization.

On the near side, we tin spot our improvements successful lawsuit care. On the apical left, our interaction complaint decreased 49% successful 2 years, an important metric arsenic it represents a simplification connected clients’ problems with our products. On the bottommost chart, we person besides reduced the mean work clip by 29% successful the aforesaid period.

On the close side, we shared an update astir our logistics operation, a cardinal section for work levels. It is important to item that our cognition is already highly efficient, which poises further challenges, but it did not forestall america to look for adjacent amended work levels. The mean clip for POS transportation went down 10% successful 2 years and the mean clip for POS replacement decreased 25% successful the aforesaid period.

Even though pricing remains 1 of the astir applicable factors for merchants’ decisions astir their acquirer option, we observe that work levels has go much and much applicable successful clients’ decision.

Before I crook implicit to Artur, fto maine speech astir our recognition portfolio. As we person been discussing implicit the past quarters, the institution decided successful aboriginal 2022 to trim the recognition underwriting of unsecured products and equilibrium its portfolio with secured products. This determination opened caller addressable markets for us, particularly successful consumers, with payroll loans to retirees and nationalist assemblage employees.

At the aforesaid time, we accrued our provisions considering the plus prime of unsecured products. As clip passes by, we were capable to scope BRL2.7 cardinal successful outstanding recognition portfolio, wherever secured products accrued its stock from 7% successful 4Q21 to 40% successful 4Q22. The diversification of our recognition portfolio contributed not lone to our concern diversification, but besides to trim the proviso for losses, lowering our vulnerability to high-risk clients.

Additionally, we launched a disruptive recognition paper wherever clients tin necktie their recognition limits to their investments with PagBank, further promoting fiscal education, portion we negociate the risks. We person nary unreserved to turn materially our recognition portfolio successful the short-term, fixed the uncertainties of the macroeconomic outlook, but our ongoing betterment successful recognition models, process, collections, and lawsuit hazard appraisal volition perchance velocity up our appetite successful the future.

Now, I volition walk the connection to Artur, to contiguous our fiscal results.

Artur Schunck

Thanks, Alexandre. Hello everyone and convey you for joining america tonight. I volition proceed the presentation, successful Slide 12, with our Q4 2022 and yearly results. First, talking astir the 4th fourth results, full gross and income reached astir BRL4 billion, increasing 22% year-over-year. This show was somewhat little than past quarter, owed to higher stock of debit paper transactions, little recognition limits disposable successful the marketplace , and Soccer World Cup impact.

Gross profit, neutral of FX, grew 18% year-over-year and was unchangeable versus past quarter. Financial expenses decreased by 7% quarter-over-quarter, owed to 5 moving days little than Q3 and the replacement of costly backing lines to little outgo sources. On apical of that, full losses decreased by 30% connected a quarterly basis, driven by little level of proviso for recognition delinquency requested by secured recognition products.

I besides would similar to item that PagBank gross nett improved 72% versus past quarter. Once again, operating expenses grew little than full gross and income yearly growth, showing 230 ground points of operational leverage. Controlling costs and expenses is simply a recurrent process nether our DNA and a cardinal constituent of our superior execution. Adjusted EBITDA closed astatine BRL788 million, up 29% successful examination to the past 4th of 2021. EBITDA minus CapEx accrued by 53% versus Q3 2022 that represents a currency net of BRL410 million.

Net Income non-GAAP achieved BRL411 cardinal and nett income GAAP accrued 35% year-over-year, reaching the highest nett successful PAGS history, totaling BRL408 million. This represents an net per stock of [BRL1.24] [ph] successful the quarter, [BRL0.33] [ph] oregon 36% amended than Q4 2021. During the past quarter, we repurchased 1.9 cardinal shares nether our buyback program. Our strategy and absorption proceed to amended equilibrium maturation and profitability, targeting to amended shareholders’ return.

On a yearly basis, PAGS closed 2022 with BRL15.3 cardinal successful full gross and income, an summation of 47% versus 2021. Gross nett totaled BRL5.5 billion, an summation of 19% year-over-year, adjacent with a important summation of astir 4x successful fiscal expenses and with full losses increasing 48% implicit the year, owed to further proviso for delinquency connected recognition products.

As a result, non-GAAP nett income reached BRL1.6 billion, portion GAAP nett income amounted to BRL1.5 billion, an summation of 29% erstwhile compared to 2021 and representing an net per stock of BRL4.57 oregon 30% higher than past year.

Moving to Slide 13, PAGS’ TPV grew 19% year-over-year, totaling BRL94.3 cardinal during the quarter, better-than-expected, fixed the antagonistic interaction of the Soccer World Cup connected concern days and recognition limits constraint successful Brazil, but with a bully show connected holidays. Total gross and income grew faster than TPV growth, reaching BRL3.7 cardinal oregon positive 25% year-over-year, owed to the affirmative effect from the monolithic merchant’s repricing done successful 2022. As a result, gross nett reached BRL1.3 billion, an summation of 14% erstwhile compared to the aforesaid play of past year.

In the descent 14, PAGS’ TPV reached BRL115 cardinal successful Q4 2022, [28%]] higher than Q4 2021, reinforcing the customer’s engagement connected PagBank relationship that resulted connected a beardown deposits maturation and summation of cash-out done day-to-day banking services. PagBank’s full gross grew 7% year-over-year, ending the 4th astatine BRL329 million, and somewhat little than Q3 due to the fact that of our absorption connected secured recognition products, which person little APRs and longer duration successful examination to unsecured products.

On the different hand, gross nett reached BRL131 million, an summation of 71% year-over-year, chiefly owed to our diligent recognition underwriting of secured products, that people leads to little proviso for losses.

In the adjacent slide, successful the archetypal illustration connected the near side, operating expenses reached BRL621 cardinal successful Q4 2022, up 7% year-over-year. This magnitude represents 15.7% of PAGS gross versus 18% successful the aforesaid play of past twelvemonth and unchangeable erstwhile compared to past quarter. The improved ratio has travel from Personnel and Marketing expenses leverage, arsenic good arsenic the publication of PagBank and HUBs’ gross growth.

In the close chart, fiscal expenses closed astatine BRL855 cardinal versus BRL403 cardinal successful Q4 2021. Around 90% of this summation is explained by the hike of SELIC complaint and the remaining information was related to higher TPV volume, prepayment of receivables to merchants and recognition paper mix. These effects were partially offset by the little outgo of backing arsenic we leverage our banking licence and summation PagBank deposits combined to little spreads negotiated with superior markets.

We proceed to absorption connected improving our backing processes, diversifying sources, and extending presumption to enactment the company’s growth. Financial expenses was our biggest situation during 2022, arsenic we volition spot successful the adjacent slide. However, the Brazilian Central Bank has been keeping involvement complaint stable. The past involvement complaint summation was successful August, and we expect for 2023 an mean complaint of 13.75% per twelvemonth versus [12.53%] [ph]per twelvemonth successful 2022.

The graphic successful the Slide 16 is to exemplify however PAGS results evolved during 2022. Revenue maturation was strong, chiefly explained by PagSeguro’s TPV maturation and our palmy repricing process. Cost ratio and operational leverage captured besides contributed positively for the yearly performance.

Financial expenses was the large interaction implicit the year, representing an summation of much than BRL2 cardinal into PAGS costs and expenses. D&A and POS write-off besides impacted negatively connected our results, which we expect to alteration arsenic a percent of gross successful the coming years. Another interaction came from full losses, chiefly related to rise connected proviso for recognition losses during the twelvemonth that is expected to trim successful 2023.

All-in, we reported all-time precocious figures, with nett income non-GAAP expanding by 12% erstwhile compared to 2021 and nett income GAAP expanding by 29% versus 2021, totaling BRL1.5 billion.

In the adjacent slide, adjusted EBITDA minus CapEx reached a affirmative magnitude of BRL410 million, much than 3x versus Q4 2021. Cash net represented 10.3% of PAGS revenue, reflecting management’s absorption connected maximizing LTV to CAC ratio by reducing POS subsidies and adding much invaluable merchants into the ecosystem.

In the pursuing chart, CapEx to gross ratio reached 9.5% this 4th versus 16.8% successful Q4 2021 and 12.4% successful Q3 2022. This alteration is driven by little CapEx related to the strategy of being much selective successful merchants’ acquisition to leverage PagBank and the summation of HUBs and PagBank revenue. On the bottommost chart, depreciation and amortization, including POS write-off, totaled BRL336 million, representing 8.5% of PAGS revenue.

On descent 18, PAGS nett currency equilibrium ended the 4th fourth astatine BRL9.8 billion, expanding astir BRL1 cardinal year-over-year. At the aforesaid time, we person been improving our superior structure, and diversifying backing sources to enactment measurement growth, with deposits present representing astir 67% of our third-party backing source.

To reason our presentation, I volition crook backmost to Alexandre for the last comments. Thank you.

Alexandre Magnani

Thanks, Artur. Before we reason our telephone and statesman our Q&A session, I would similar to recap our guidance and results for 2022 and our concern priorities. Last 4th we shared our guidance for Q4 2022 and full-year 2022. When comparing guidance and results, we saw revenues increasing astatine 47% year-over-year, precise adjacent to our guidance. The mismatch was chiefly related to a higher-than-expected stock of debit cards successful Q4 2022, starring to a better-than-expected TPV astatine a little take-rate.

Our nett income was in-line and supra guidance successful non-GAAP and GAAP basis, respectively,

mainly driven by our repricing and operational efficiencies, closing 2022 with the all-time precocious figures for the histrion metrics: Total gross and income, nett income GAAP, and non-GAAP basis.

Important to item that during the pandemic, we decided to supply quarterly guidance to summation investors visibility astir however concern was evolving, during this highly uncertain period. From present on, we decided not to stock guidance to debar short-term oriented presumption that is disconnected from however we negociate the company, focusing connected long-term, and afloat research the opportunities we person up of america successful fiscal services and payments, ever balancing maturation and profitability.

We volition support improving our connection and concern platform to code important topics with analysts and investors astir our equity communicative and clarify imaginable questions astir concern development. It has been proved however resilient our concern is, independently of the economy, industry, oregon regulatory changes. Our concern doctrine of balancing maturation and profitability has not changed, and the opportunities stay highly compelling for our company.

Looking ahead, our main absorption are: turn profitably successful payments and support expanding our marketplace stock successful cardinal segments; foster PagBank engagement to diversify revenues and summation gross per customer; make our two-sided ecosystem, providing a unsocial and superior worth proposition; amended models and processes to trim losses and costs; and execute disciplined superior absorption to amended EPS and currency travel generation.

Now, we person ended our presentation, and we volition unfastened the Q&A session. Operator, please.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our archetypal question archetypal comes from Mario Pierry, Bank of America.

Mario Pierry

Congratulations connected the quarter. Let maine inquire you 2 questions. I cognize you're not providing guidance, and I'm not looking for circumstantial numbers either. But conscionable wanted to get a consciousness from you, however are you seeing the operating situation successful Brazil for this year? Especially recently, I deliberation [indiscernible] reported that they were forecasting measurement maturation of astir 14% successful 2023. I was conscionable wondering if this fig makes consciousness to you, if you deliberation you tin support your marketplace share, summation marketplace stock oregon not?

And also, related to the competitory environment, however are you seeing prices behaving successful Brazil? Do you deliberation you person country to proceed to rise prices oregon are we getting to the constituent wherever clients would endure if you proceed to rise prices and if you're seeing anyone trying to expect a diminution successful involvement rates successful Brazil erstwhile trying to trim prices up of that? Thank you.

Ricardo Dutra

Thank you for the question. Good to perceive you. Let maine commencement with the large representation that you asked, and past we tin spell to the portion of the prices and truthful on. So arsenic you said successful the question, [indiscernible] is expecting request to turn betwixt 14% and 18%. So, we lone had 2 months astatine this point. So, it's hard to accidental that – let's say, okay, it's going to beryllium higher than that oregon little than that due to the fact that we lone had January and February, but we are moving to support increasing payments successful a profitable way.

Market share, to beryllium honest, is simply a consequence. We are looking for increasing our TPV successful circumstantial segments, which is the agelong process micro merchants and the SMBs. So, of course, we are not disconnected from the full economy, from the full cards industry. But truthful far, we saw January and February according to our concern plan. So, that's what we had successful the January positive February according to our concern plan.

Talking astir the prices, we didn't alteration the prices for the longtail successful the past years, and we don't program to bash that due to the fact that we conscionable privation to support simple. And looking forward, though a fewer months ago, we expect the involvement rates to spell down. And past what bash you spot contiguous is the insulated to support stable.

So, we don't spot expanding prices for longtail astatine this point. But if you deliberation astir SMBs and different niches that we person successful our base, determination are immoderate opportunities successful immoderate segments, immoderate niches that we could summation prices, if necessary, successful the short-term. Also, we don't person immoderate program to alteration prices up of imaginable involvement complaint alteration due to the fact that you don't person the visibility astatine this point. Once we person visibility, we tin sermon here. But astatine this point, each the information that we person and present the involvement rates, [indiscernible] future, we spot the involvement rates are astatine the aforesaid level that we person today, which is 13.75% per year.

Mario Pierry

Okay. No, that's clear. Let maine inquire past a follow-up with regards to the wide wellness of the system. We proceed to spot your lawsuit basal decline. I deliberation it's 4 consecutive quarters present that we person seen little lawsuit base. Can you interruption that down betwixt the SMB and the micro merchant segments and speech astir mortality? Because, again, we're starting to spot that connected the recognition side, similar the corporates successful Brazil are starting to person immoderate problems, fiscal problems, due to the fact that of the precocious complaint environment, anemic economy, et cetera. Is that what explains arsenic well, the decline, successful your lawsuit base?

Ricardo Dutra

So Mario, the diminution successful our basal – the bulk of this declining is successful nano merchants. Nano merchants are liable for a very, precise tiny portion of our TPV, little than 3% for TPV. So if you look astatine the fig of merchants, though we are decreasing our TPV is growing, increasing connected a yearly basis, increasing connected TPV promotion. If you look astatine the twelvemonth figure, we are increasing faster than the industry. And of course, the profitability are reaching grounds levels, arsenic you could spot successful the presentation.

So, though the nett adds oregon the progressive merchant basal is simply a metric that everyone follows, the information that we are losing nano merchants, it doesn't correlate with fiscal metrics. So, we are looking for clients successful these cardinal segments, which are micro merchants with immoderate levels of TPV and SMBs wherever we person profitability successful payments, and we person opportunities to cross-sell and to penetrate PagBank.

So, that's wherefore the – if you inquire maine the progressive merchant basal looking forward, determination could beryllium a down trend, but we are not acrophobic with that due to the fact that we're losing clients that they person precise debased TPV, debased probability of PagBank penetration. And that's wherefore adjacent losing this client, we are increasing TPV 40% year-over-year and reaching grounds levels of profitability.

Regarding credit, we took the close determination successful Q1 2022 to displacement our recognition from unsecured products to unafraid products. Today, we person 40% of our recognition portfolio that is secured. We expect that to scope 60% successful the short-term successful the pursuing quarters. And truthful that's wherefore adjacent with this recognition situation we are seeing successful Brazil, adjacent successful the corporate. We are not seeing our NPLs having problems due to the fact that we person the afloat collateral for this portion of our recognition portfolio. So, that's the wide representation that I person successful presumption of credit.

What could person happened successful Brazil successful Q4 is that immoderate banks alteration the limits for the recognition paper holders they have, and that's why, to immoderate extent, could constrain consumption, radical that had immoderate limits successful recognition and present they person a little bounds due to the fact that immoderate banks are decreasing. And if you look astatine the results from banks, the quarterly telephone from immoderate banks, we're seeing immoderate NPLs going up there.

So, that could beryllium the interaction for us. But successful the acquiring business, I'm saying, I mean, radical with little recognition to walk money. But overall, we don't spot this situation successful firm generating immoderate occupation successful our recognition portfolio oregon immoderate different cognition related to PagSeguro PagBank.

Mario Pierry

Okay, perfect. Thank you precise much.

Operator

Our adjacent question comes from Bryan Keane, Deutsche Bank.

Bryan Keane

Wanted to inquire astir the PagBank revenues and the delta to volume. I conscionable privation to marque definite I recognize the delta. And bash you expect – oregon erstwhile bash you expect possibly the delta betwixt the spread betwixt measurement to gross maturation to adjacent successful PagBank?

Ricardo Dutra

Thank you for the question. I conjecture we are talking astir the volumes of PagBank TPV and correlate that with the revenues.

Bryan Keane

Right, right.

Ricardo Dutra

Yes. A ample portion of this TPV successful PagBank, they are not monetized due to the fact that it's based connected radical sending wealth from PagBank and sending wealth to PagBank and oregon from PagBank to idiosyncratic else. So, that's the quality of this wealth travel coming in, coming out, cash-in and cash-out. And we bash not monetize that. It's much similar important for engagement and this benignant of stuff, but the revenues are based connected transactional erstwhile radical wage immoderate bills present oregon spending wealth with our cards, interchange oregon related to credit. Those are the 3 main drivers for revenue.

So, what we had successful Q4 is that arsenic we are having this displacement from unsecured products to secured products, the duration of these loans are higher than what we had successful unsecured products. So, we had a alteration successful revenues related to credit, and that's wherefore the revenues went down BRL10 cardinal successful PagBank successful Q4, compared to Q3. So, we cannot correlate that, Bryan, due to the fact that we are seeing radical utilizing much and much slope account. That's wherefore you spot deposits are increasing truthful [and truthful on] [ph]. So, making this mathematics arsenic a percent of TPV doesn't mean excessively much, to beryllium honest.

Bryan Keane

Got it. Got it. And my 2nd question is conscionable connected the rates and the fiscal expenses. Obviously, that higher rates pressured the profitability each year. Can you speech a small spot astir however overmuch further unit you expect successful the fiscal expenses this twelvemonth that could unit nett income margin? And past secondly, you mentioned the anticipation of cutting rates if rates dropped and not really keeping the payment from a complaint drop. Can you conscionable marque definite you tin explicate however you guys would spell astir doing that? Because I was nether the presumption that you guys would beryllium capable to payment from little rates into the profitability would improve. Thanks.

Ricardo Dutra

Hi, Bryan. This is Ricardo. I volition commencement with the 2nd question, and past Artur tin assistance america with the archetypal portion of the question arsenic it relates to fiscal expenses and the rates. If the involvement rates goes down, our fiscal expenses volition spell down. And we bash not expect to alteration prices automatically. The dynamics oregon the moving parts present volition beryllium the following: In longtail, we had the aforesaid rates since 2016. I mean the past years is precisely the aforesaid rates, the prepayment, MDR and truthful on.

So, if the rates – the involvement complaint goes down, we're going to retrieve margins successful longtail successful the adjacent concern day. In the SMBs, we volition not alteration terms automatically. We'll effort to support vantage of this alteration successful outgo and support the aforesaid levels of MDRs and prepayment truthful that we tin person a amended borderline successful SMBs arsenic well. Of course, determination volition beryllium immoderate clients that volition interaction america asking if they could person a amended information oregon a amended price, and immoderate clients volition not bash that.

So, the aforesaid dynamic that we had erstwhile the involvement rates went up and we weighted a small spot to summation prices, we're going to person the other question astatine this point. The involvement rates spell down, and we volition not alteration the terms automatically for SMBs. So, connected average, we should person immoderate benefits successful the SMBs arsenic good due to the fact that not everyone volition alteration prices successful the adjacent concern day. It's going to instrumentality a while, and immoderate of the clients astir apt volition not adjacent alteration the terms for a agelong time.

So, successful longtail, we're going to person the payment automatically. And successful SMBs, we'll effort to person the benefits arsenic overmuch arsenic we can. Of course, it depends connected competition, depends connected galore variables, but determination could beryllium immoderate advantages. That's for sure. Because erstwhile you person 7 cardinal clients who person everything. You person clients that we telephone successful the adjacent concern time and clients that don't adjacent wage attraction to that successful detail.

And Artur tin assistance america successful the fiscal expenses for 2023.

Artur Schunck

Yes. Bryan, regarding to fiscal expenses, we volition spot successful 2023 the expenses higher than 2022 due to the fact that of 2 reasons: The archetypal 1 is the measurement maturation of our prepayment business. And the 2nd constituent is related to mean involvement complaint for the state that successful 2022 was 12.5%. And successful 2023, we are expecting astatine this constituent that we volition beryllium unchangeable during the twelvemonth astatine 13.75%. So, based connected those 2 things, the expenses that we are expecting for 2022 volition beryllium higher successful nominal presumption versus 2022.

Bryan Keane

That's helpful. Just a speedy one. Is determination inactive repricing payment you volition spot positively successful fiscal twelvemonth 2023 oregon did that payment successful Slide 16, the [668 million] [ph], was that conscionable a fiscal twelvemonth 2022 improvement and you won't spot a payment of repricing successful fiscal twelvemonth 2023?

Ricardo Dutra

Bryan, determination are immoderate moving parts present again, arsenic you tin imagine. We volition person immoderate benefits successful repricing, arsenic I mentioned successful the erstwhile reply to the different analysts. We are looking astatine immoderate issues that we whitethorn reprice successful the adjacent term. But connected the different hand, we person a alteration successful the mix. SMBs are gaining share, and SMBs, they are bully concern due to the fact that they person 5x much measurement than longtail, but they person a little instrumentality rate.

So, if you look successful implicit terms, we should person benefits. If you look arsenic a percentage, our nett instrumentality complaint oregon percent of the revenues, astir apt we're going to person this unit due to the fact that of the mix. So, we person these 2 large moving parts here. We're pricing from 1 manus – from 1 side, and the alteration successful the mix, SMB increasing faster than different clients and past pressuring a small spot instrumentality rate. So, those are the moving parts here. But arsenic we said before, we expect the EPS accretion successful 2023 versus 2022. That's what we are moving for.

Bryan Keane

Great. Thanks for taking the questions.

Operator

Our adjacent question comes from Josh Siegler, Cantor Fitzgerald.

Josh Siegler

I was wondering, truthful acold year-to-date, person you seen immoderate notable changes successful the micro merchant behaviour either successful measurement oregon however they're interacting with the platform? Thanks.

Ricardo Dutra

Thank you for the question. No, we didn't spot immoderate alteration successful the micro merchant's translation change. Of course, we are trying to penetrate PagBank arsenic overmuch arsenic we can. So, we spot immoderate segments oregon immoderate clients that are utilizing PagBank much and more, arsenic you could spot successful the deposits fig that we presented. If you marque the mathematics betwixt the mean relationship equilibrium for a client, you spot that we grew astir 100% year-over-year. So, that's a bully alteration successful behaviour for micro merchants, and that's all. And that's – mean TPV is besides growing, but nary large changes that we could remark for you.

Josh Siegler

Okay. Understood. And past I'd similar to absorption connected the payroll level a small spot due to the fact that it seems similar it represents a important maturation accidental for the company. How are you reasoning astir the wide interaction that this tin person for PagSeguro?

Ricardo Dutra

Well, that's great. I mean we person this payroll level due to the fact that we person immoderate clients that would similar to usage PagBank to wage their employees. And of course, they don't privation to travel present and marque 30 ligament transfers, 50 ligament transfers, 100 ligament transfers. They conscionable privation to person a spreadsheet oregon a record that tin conscionable upload. And past with 1 click, they tin bash that for up to 2,000 employees. So, the thought is to person much clients utilizing america arsenic the superior slope for their businesses. And of course, we're going to effort to marque this cross-sell for their employees arsenic well.

So, the thought is to person companies utilizing america to wage their employees truthful that we tin besides effort to bring their employees to enactment with america and summation the relationship equilibrium that we person present due to the fact that much wealth coming in, the much wealth flowing done our ecosystem, the higher the probability of this wealth to enactment with us. And past we person each the benefits with the deposits and little outgo successful deposits that we gave immoderate disclosure successful the presentation. So, the thought is much related to engagement and to marque businesses to usage PagBank arsenic their superior account.

Josh Siegler

Understood. Appreciate the color. Thank you.

Operator

Our adjacent question comes from Pedro Leduc, Itau BBA.

Pedro Leduc

Thank you for the incremental disclosure. I privation to excavation into the fiscal disbursal enactment a small spot more, but for this quarter, specifically down 7% sequentially. And wrong that, the securitization of receivables enactment was the main contributor, down a batch sequentially 30%. Can you assistance america recognize this possibly a small spot much filling the gaps betwixt – was it a little prepayment stock from moving capital? It seems similar it was a small spot less. And of course, we had little recognition this quarter. Maybe it was a little duration that you securitized oregon overmuch little cost. So, conscionable assistance america capable successful this enactment for the quarter, fiscal expenses, and ticker done the securitization down, that volition beryllium great. Thank you truthful much.

Artur Schunck

Thank you for the question. It's Artur speaking. So, related to the Q4 2022 expenses that we person compared to Q3, truthful the archetypal constituent that helped america successful these expenses successful the 4th was related to the 5 moving days little successful Q4 successful examination to Q3. The 2nd constituent was related to stock of debits successful examination to Q3. Higher premix of debit cards helped america successful this moving superior needs. And also, the astir important constituent to trim the outgo for america was related to deposits.

We accrued the fig of deposits successful Q4, chiefly related to the equilibrium accounts from our clients successful PagBank relationship and besides due to the fact that we person a banking licence successful our group, truthful we tin usage these deposits to money our merchant's prepayment operation. On apical of that, based connected the results that we obtained crossed the twelvemonth and crossed the full twelvemonth since the IPO, that accounted BRL5.2 billion. We besides helped america to alteration immoderate costly lines to amended sources to money the firm operation.

Pedro Leduc

Okay. Super. And a follow-up connected the securitization costs. Of course, you person respective ways to securitize your receivables. How did you spot those costs, I deliberation percent [indiscernible], possibly during the 4th quarter? And however are you seeing it if antithetic present successful the archetypal 4th station the recognition lawsuit that we person successful Brazil? Has it changed wide for you? Thank you.

Artur Schunck

Yes. Related to relationship securitization, we saw during 2022 a simplification successful the dispersed that we are paying for the banks to beforehand these receivables to them. And particularly successful Q4, we besides spot – we besides saw immoderate simplification successful examination to Q3, successful examination to Q2. So, it's amended to america that we person a bully dialog with the banks. And for Q1 2023, we are seeing astir the aforesaid costs that we are paying for Q4. So, determination is nary interest astir the AR securitization that we person with the banks astatine this point.

Pedro Leduc

Great. Thank you precise overmuch again. Congrats.

Operator

Our adjacent question comes from Domingos Falavina, JPMorgan.

Domingos Falavina

Two speedy ones. The first, you had immoderate reversals, right, successful stock-based compensation and was moving 30 cardinal to 40 million. My question is, what's benignant of a normalized level that you guys deliberation makes consciousness for that disbursal enactment into 2023? And if you did notation that successful the quarter, I missed – sorry. I'm sorry, I had immoderate transportation issues. And my 2nd question is slope figures came out, right?

And the full twelvemonth for TPV grew astir 30%. But December year-on-year was increasing astatine 12%. So, we are evidently seeing a large deceleration connected the backmost of what you guys lastly mentioned of little recognition limits to the banks. And I mentioned successful full recognition that was prepaid, but past it has different headwinds, specified arsenic PIX and others. My question is, portion you don't person immoderate guidance for adjacent year, what would beryllium your champion conjecture for manufacture TPV maturation adjacent year? Do you guys deliberation it grows supra 12, [12 to 15, 9 to 12] [ph] length, could supply [indiscernible] conjecture for us, it volition assistance arsenic well.

Artur Schunck

Domingos, convey you for those questions. I volition reply the archetypal 1 related to the non-GAAP adjustments that we person this quarter. So, archetypal of all, it's important to accidental that we person accounting reclassification from non-GAAP to GAAP successful presumption of capitalization of semipermanent inducement program for R&D, specifically for R&D. It's a noncash impact. So, it's important to notation that it's a noncash impact. So, we person classified immoderate expenses related to amortization that was booked successful the incorrect place, that was affected successful the non-GAAP previously. And present successful Q4, we adjusted that reclassifying from non-GAAP to GAAP.

On apical of that, we concluded the year, missing immoderate goals that we had successful the semipermanent inducement plan. And so, we reverted the proviso that we booked before. On apical of that, the stock terms reduced from Q3 2022 to Q4 2022 from $13.22 to $8.74. Based connected that, we besides had a reversion of the provisions that we booked until Q3 2022. Related to 2023, we are expecting to [bag] [ph] to the aforesaid level that we had successful Q3 2022, astir BRL30 million, BRL35 cardinal oregon successful the twelvemonth BRL150 million.

Ricardo Dutra

So Domingos, regarding the maturation of the manufacture successful 2023, the champion information that we person is the [indiscernible] information increasing from 14% to 18%. So, we had a bully January, February. We didn't person [indiscernible] successful 2022. Now, we had [indiscernible] successful 2023, truthful it's not comparable. We cognize that portion of the authorities that they person is trying to summation depletion oregon volition effort to summation consumption.

So, the champion information that they person is to – the [indiscernible] information to turn betwixt 14% to 18%. The manufacture arsenic a full volition turn that. So, that's wherefore we are basing our assumptions, that’s wherever we are moving astatine this point. And if thing changes, we tin travel backmost to you. But the assumptions that we person are those turn betwixt 14% to 18%, the manufacture arsenic a whole.

Domingos Falavina

Super clear. Thank you guys.

Operator

Our adjacent question comes from Neha Agarwala, HSBC.

Neha Agarwala

Congratulations connected the results. And I person 2 questions. First connected PagBank. It seems similar PagBank achieved bully operational efficiency, positive benefited from provisions declining quarter-on-quarter. What different level bash you person for 2023 to amended the profitability astatine PagBank due to the fact that the revenues are going to beryllium deed [2Q onwards] [ph]? And related to PagBank, you – astir of the maturation that you're talking astir for the recognition concern is going to travel from the secured loans portfolio, and you expect it to spell to 60% of full loans, but what astir the unsecured loans? Do you inactive deliberation that the macro is not supporting to turn connected the unsecured indebtedness broadside and you privation to beryllium cautious oregon bash you deliberation that you tin prime up maturation possibly successful the 2nd fractional of the year? Just immoderate colour connected that portion would beryllium precise helpful.

My 2nd question is much longer-term. So, we recognize that successful the abbreviated term, you are focusing connected the much profitable merchants, and you're blessed to suffer immoderate of the [indiscernible] merchants. But successful the longer-term, the longtail conception is, say, astir [a third] [ph] penetrated. Do you deliberation the nano merchants would, astatine immoderate point, go profitable, and it would marque consciousness to work them oregon fixed your acquisition successful the conception now, you judge that this is not a conception that would go profitable capable for you to work them? So, thing astir that from a much mean to semipermanent position would beryllium helpful.

Ricardo Dutra

This Ricardo. I'll start, and past Artur tin assistance america with the provisions and truthful on. So, we commencement from backwards. When you look astatine nano merchants, we spot – arsenic always, determination are galore moving parts here. There are nano merchants that go merchants due to the fact that of the COVID, due to the fact that of unemployment, due to the fact that of pandemic. Some of these means that the mortality of these businesses, determination are immoderate nano merchants that got a ceremonial occupation and determine not to enactment by themselves anymore.

So, determination are galore moving parts. And that's wherefore besides the nano merchants basal immoderate point, we – it's not lone 1 crushed that it's going down. There are galore reasons. Some radical whitethorn unopen down their businesses, they get a occupation and truthful on. Nano merchants, we deliberation they could beryllium profitable, but successful specified a mode that we person PagBank account, they usage the account, we tin get the data, they person a [CD] [ph], we tin person the payment of the interval and truthful on. But if you had to subsidize POS, the level that we person contiguous successful subsidies, the speech complaint betwixt reais and dollars and truthful on, it doesn't marque consciousness for america to put successful nano merchant with this hazard of mortality and churn and truthful connected that I mentioned due to the fact that determination is nary payback. But we tin enactment with these nano merchants successful PagBank.

We are blessed to enactment with them. And to immoderate point, we support moving with them to merchantability devices and truthful on, but we are not subsidizing the aforesaid levels that we had successful the past that we had thousands of nett adds oregon gross adds, and we didn't person payback. So, we were much disciplined successful 2022, arsenic we said successful each the calls. And that's wherefore we've got these grounds levels of nett income.

Talking astir the unsecured products, we person the processes successful place. We've been improving our models. We person a amended squad than we person successful the past. We are investing successful this section successful the company. But definitely, the macroeconomic script doesn't help. We spot adjacent the banks that person a batch of acquisition doing this benignant of recognition successful Brazil. Not struggling, but person hard with NPLs and truthful on. So definitely, it's not the clip to spell to the unsecured products. And by the way, we person a batch of request for secured products.

So, that's wherefore we are increasing 5% successful presumption of recognition portfolio each quarter. The unsecured merchandise utilized to beryllium 35%, present it's 40%. So, we person request for secured products. So, determination is nary crushed for america to spell to unsecured astatine this point. If we volition beryllium capable to bash that oregon if you bash that successful Q2, we've got to hold a small bit. But astatine this point, the champion info that we person is that we don't person a program to spell to unsecured products successful the short-term.

So Artur, tin you assistance with those provisions and truthful on?

Artur Schunck

Yes. In presumption of provision, Neha, we accrued a batch the level of provisions successful Q1, Q2 and Q3. Now, successful Q4, we could trim the level of provisions – the level that we person is capable to enactment the losses that we are expecting for the adjacent 12 months. During the year, we besides worked to set each the recognition models that we have. We adjusted the operation and besides the processes. And connected apical of that, we person 2 different effects that make a bully anticipation for america successful 2023. That is improved successful the IFRS 9 proviso exemplary that we improved this twelvemonth and make immoderate comfortableness to america that we besides person this close level for provisions for the future. And also, the unafraid products that present we are originating petition little provisions for the future. So, we person a bully anticipation for PagBank successful 2023.

Neha Agarwala

Perfect. Thank you truthful much.

Operator

Our adjacent question comes from Tito Labarta, Goldman Sachs.

Tito Labarta

A mates of questions also. First, bully occupation connected expenses. Is determination country to amended further, peculiarly the admin expenses, selling expenses that were down successful the quarter? Is determination country to chopped a spot more? And would that, successful immoderate way, interaction the maturation outlook going forward?

And past my 2nd question, conscionable a small follow-up, I guess, connected the instrumentality rate. I cognize you said your debit was higher and somewhat little maturation connected PagBank from the secured credit, but it was a diminution compared to 3Q – arsenic the premix possibly possibly normalizes and you get much credit, tin that take-rate get backmost to wherever you were past level? Do you spot immoderate different unit connected the take-rate, conscionable to deliberation astir however that tin germinate from here? Thank you.

Ricardo Dutra

I volition commencement with the take-rate, and past we tin spell backmost to the expenses. Yes, successful Q4, we had a higher information successful the premix with debit transactions, debit volumes. So, radical utilizing much of that successful Q4. We besides had shorter duration successful the recognition paper installments erstwhile compared to Q3. So, these 2 things impact take-rate, impact revenues. And also, arsenic we said, the information that we are shifting our recognition portfolio from unsecured to secured, we are benignant of postponing the revenues due to the fact that the duration earlier for unsecured products was astir 1 year, 12 months.

And now, we person thing that is successful secured products 3x longer than that. So, that's wherefore we are postponing the revenues, and that's the interaction that we person successful PagBank successful presumption of revenues.

Looking for 2023, we are not decreasing prices successful longtail. We had the aforesaid prices successful SMBs. It's an ongoing process. Some clients volition summation prices. Some clients volition alteration prices. Some clients volition negotiate. So – but overall, we're seeing a unchangeable take-rate astatine this point. We are not feeling pressured to alteration instrumentality rates astatine all. But what we person present is the alteration successful the mix. More SMBs enactment with us. More volumes travel from SMBs.

So, if you look astatine the weighted nett instrumentality rate, it could spell down, not due to the fact that we're decreasing prices, but due to the fact that SMBs are gaining stock wrong our TPV. And arsenic we mentioned before, it's bully quality due to the fact that SMBs, they person much volumes than the longtail. So, overall, it should marque consciousness successful implicit terms. It should beryllium amended for us.

Artur Schunck

Yes. In presumption of OpEx, what I tin accidental is we are expecting expenses maturation little than gross maturation for 2023. And based connected the layoffs that we applied successful the opening of January, selling optimization and besides leverage from the infrastructure that we developed successful 2020, 2021, 2022 and besides leverage coming from HUBs with much gross much volumes with the aforesaid operation built until 2021.

Tito Labarta

Okay. That’s precise helpful. Thank you.

Operator

Our adjacent question comes from Sheriq Sumar, Evercore.

Sheriq Sumar

Can you perceive me?

Ricardo Dutra

Yes, we tin perceive you.

Sheriq Sumar

Great. So, my question is connected the marketplace stock dynamics. I spot that you haven't provided updated stats for however overmuch was it successful this quarter. So, immoderate colour would beryllium large connected that. And secondly, however is the competitory dynamics evolved implicit the – similar implicit the past year? And wherever does PagSeguro support the edge? And secondly, my 2nd question is connected PIX. Nice to spot the marketplace stock gains, but are determination immoderate further investments that you request to marque connected the income beforehand oregon connected the exertion front? So, if you tin supply immoderate colour connected that would beryllium large arsenic well.

Ricardo Dutra

Hi Sheriq, erstwhile you asked astir marketplace share, I presume you are talking astir the TPV marketplace stock successful the acquiring.

Sheriq Sumar

That's right, yes.

Ricardo Dutra

Okay. Thank you. When you look astatine a yearly basis, erstwhile you comparison 2022 with 2021, we gained 120 bps, 1.2% successful marketplace share. If you look astatine Q4 2022 versus Q4 2021, we are gaining 60 bps. In a quarter-over-quarter, comparison, which is Q4 2022 versus Q3 2022, we are losing astir 30 bps to 40 bps. That's the main – the large representation here. So overall, if you look successful a much longer-term, we are gaining share. Quarter-over-quarter, we are losing this tiny percent of share.

Market stock is simply a effect of what we are doing, but it's not our main target. We could summation our marketplace stock if we wanted to by decreasing prices and truthful on, but we privation to person steadfast levels of margins and enactment with clients that spot the worth proposition that we person successful specified a mode that we person levels of profitability and reaching these grounds levels of nett income that we saw successful Q4.

If you look astatine the marketplace overall, we besides spot immoderate moving parts present that the players who payment from – successful Q4 were those from large banks, 2 of them from large banks from – they are incumbents. And arsenic acold arsenic we know, they got immoderate advantage, immoderate tailwinds related to large concatenation hotels, airlines and these benignant of merchants that we person little oregon debased exposure. So, successful the segments that we work, we are blessed with the stock that we have.

We are moving with these clients, expanding TPV per merchant, expanding our nett income. So, we'll support moving with the clients successful a mode that we deliberation is amended for the company. Market stock is simply a effect of what we're doing, but it's not our main people astatine this point. So, that's the main thought of marketplace share. And related to PIX, we don't request to bash further investments to summation our PIX share.

As we saw successful the presentation, 9.8% of the PIX transactions successful the country. This is precise important for america due to the fact that radical usage PagBank arsenic superior account. People permission the wealth here. People permission the wealth successful their relationship balance, which assistance america to trim outgo of funding. So – but going backmost to your question, consecutive to the point, determination is nary further investments successful exertion to beryllium made successful bid to summation our PIX stock successful the country.

Sheriq Sumar

Thank you truthful much. That’s helpful.

Operator

Our adjacent question comes from James Friedman, Susquehanna.

James Friedman

Good results here. I was wondering if you could stock astatine slightest immoderate high-level thoughts connected the margins. Is there, say, immoderate crushed that the institution structurally can't instrumentality to the teens margins you enjoyed erstwhile rates were much favorable?

Ricardo Dutra

Well, James, it's – definitely, we person this – we had really this headwind related to involvement rates successful the state successful 2022, though we were capable to offset that by repricing our base. So, that's the main picture. We had this headwind, and we repriced our basal successful specified a mode that it could offset this summation successful fiscal expenses. Interest complaint is important for us. It's an important operator for profitability because, of course, it affects our outgo of funding.

So, if this complaint goes down from 13.75% per twelvemonth to a level beneath that, we'd instrumentality advantage. So, however large is going to beryllium this advantage, however large is going to beryllium our oregon benefit, it's hard to accidental to you astatine this point. But definitely, if involvement complaint goes down, we should person amended margins. And retrieve present that, arsenic I mentioned before, SMBs are gaining stock successful TPV successful acquiring.

They person much volumes than compared to long-tail, but they person little instrumentality rates. So, it makes consciousness successful implicit presumption to support moving with these clients, and we volition support investing connected that. We launched the payroll level and truthful on. But if you look arsenic a percent of the revenues, it's a benignant of the headwind. So – and conscionable to decorativeness here, we – borderline is not thing that we are looking for arsenic a main precedence due to the fact that we cognize that we are expanding our SMB's mix. And also, we are the astir profitable institution successful our industry.

So, if you comparison america connected a ground that you disagreement nett income by TPV, you spot that we are 3x to 5x much larger than our competitors. So, we person the highest profitability of the industry. We are growing. We are having records of profitability, arsenic you could spot successful the presentation, the grounds successful Q4, the grounds of the year, 29% higher than what we had successful 2021 connected a GAAP basis.

So, we are blessed with the profitability that we person astatine this constituent due to the fact that we're balancing our maturation with profitability. So – but going backmost to your question, if involvement complaint goes down, it should beryllium a tailwind for us. How large is going to beryllium this tailwind, it's hard to say.

James Friedman

And my follow-up, I deliberation Alex shared immoderate commentary astir the concern successful the HUBs. And I cognize that you had disclosed the HUBs arsenic a percent of the measurement oregon revenue. Where are we successful the HUBs concern journey? Is it present person to the mediate oregon the opening oregon the end?

Ricardo Dutra

James, I'd accidental that we are much person to the extremity due to the fact that we put successful immoderate HUBs, and we are – the HUBs that we mightiness unfastened successful 2023 is going to beryllium much related to tiny places oregon circumstantial places that we spot that you request to person an further HUB, but we volition not turn massively our HUBs the mode that we grew successful 2021 and 2022. So, we are moving to summation productivity of our HUBs salespeople and effort to get much clients successful the HUBs, of course, but we are not readying to turn massively the fig of HUBs, the aforesaid question that we had successful 2021 and the portion of 2022.

Eric Oliveira

James, this is Eric. There is nary metallic bullet, okay. I deliberation the superior worth proposition that we person is based connected income channels, logistics, PagBank afloat integrated to the outgo service. So, HUBs is conscionable a income transmission that we are inactive exploring and expanding productivity, but astatine this time, I deliberation astir of the investments successful HUBs are concluded.

James Friedman

Got it. Thank you both.

Operator

Our adjacent question comes from Alex Markgraff, KeyBanc.

Alex Markgraff

Can you supply conscionable a spot much discourse connected the upsell and cross-sell accidental wrong the merchant basal that you've been speaking around? Just benignant of – conscionable much oregon little what that looks similar and if there's immoderate mode to quantify the accidental there, that would beryllium helpful? And past I person 1 follow-up arsenic well.

Alexandre Magnani

We person a I would say, a precise decent penetration levels successful our merchant abstraction erstwhile you deliberation astir PagBank. But you cognize determination are immoderate clients that are not utilizing america arsenic a superior slope astatine this point. So, fractional of them are utilizing arsenic a superior slope and fractional is not using. So, that's wherefore we support investing successful the PagBank features, the illustration that we gave astir payroll level and truthful on.

We launched debit cards fewer quarters ago. We are inactive moving connected to – for our clients to usage much and more. So, I don't person to quantify to you however large is this opportunity. But I'd archer you that successful the [merchant space] [ph], we person a very, precise immense accidental up of america due to the fact that we spot that the users arsenic – the acquiring, they mightiness usage immoderate features successful our PagBank, but we are not a superior slope yet.

Once we go the superior bank, person many, galore tailwinds similar relationship equilibrium and instrumentality vantage of the [indiscernible] and truthful on. So, I don't person present a fig to springiness to you. But the thought is to summation the penetration of PagBank and the usage of PagBank and immoderate clients that – immoderate of them, we don't person the features yet. Some of them, we request to marque them to use. Some of them, we request to person them to power from their banks to us.

So, erstwhile you person 7 cardinal clients successful that quarter, you tin ideate that you person everything. Some of the clients, they usage the diagnostic – the mode [indiscernible] motorboat immoderate of them, they don't adjacent wage attention. I mean a batch of work, but it's large that we person this immense base, 7 cardinal – 7 cardinal clients explore. As we put much and much successful PagBank would be, I would say, we are going to person much worth to connection to these clients.

Alex Markgraff

Okay. That's helpful. And past my 2nd question was just, benignant of astir PagBank lawsuit adhd expectations. I cognize you're not guiding, but conscionable precise important nett adds successful 2022 arsenic we look astatine immoderate of the charts successful the descent platform here. I conjecture conscionable any, benignant of thoughts arsenic to however PagBank nett adds could look successful 2023 conscionable fixed the truly noticeable uptick successful 2022.

Ricardo Dutra

Okay, Alex. So, it's benignant of related with the erstwhile question. So, we closed 2022 with 28 cardinal clients, 16 cardinal of these clients, progressive clients, and 60% of those are axenic consumers. So, successful little than 4 years, we were the 2nd largest slope – integer slope successful Brazil, and it's benignant of natural, past we person this level of clients oregon the level of concern the maturation mightiness dilatory down a small bit, but we expect to support increasing nett adds PagBank successful 2023.

So, we volition support growing, astir apt not successful the aforesaid levels that we had successful 2022, but we volition support increasing the fig of clients successful PagBank. But the astir important happening is conscionable related to our erstwhile question, which is to penetrate much and much PagBank and making much revenues per lawsuit that – from the clients that we person contiguous and from the clients that are utilizing america possibly arsenic a pass-through, and we request to person them to usage america much and more. So, that's the main idea.

So, the nett adds won't beryllium arsenic large arsenic it was successful 2022, but we besides privation to cross-sell much and much successful the basal that we person and support it increasing nett adds arsenic well.

Alex Markgraff

Okay. Thank you.

Operator

Our adjacent question comes from Geoffrey Elliott, Autonomous.

Geoffrey Elliott

I wondered if you could springiness america an update connected wherever you basal connected charging for PIX. It looks connected the website arsenic if you're present offering 3 PIX connected rather a fewer of your offers. And past secondly, an update connected immoderate displacement from debit into PIX? Thanks precise much.

Ricardo Dutra

Geoff, regarding the PIX, we – the regular terms for longtail is 1.89%. So, it's 10 bps little than debit that we connection for longtail. This benignant of transaction could hap successful online oregon it could hap successful 1 of our devices that we conscionable make the QR codification successful the POS, and the user tin wage with their mobile phones. To beryllium honest, the basal is precise small. So, it is growing, but it's a precise tiny information successful the premix of the transactions successful TPV.

Regarding to PIX and debit, we cognize that PIX is akin to a debit paper transaction due to the fact that it goes consecutive to your balance. We don't spot that cannibalizing the clients that we have, possibly is cannibalizing portion of the debit paper transactions. But successful Q4, for instance, we didn't spot this benignant of question due to the fact that debit paper transactions accrued successful our base. So, radical support utilizing debit cards.

The usage is easy. It's safe. People cognize however to usage it. They cognize if they person our problem, they person chargebacks and truthful on. So, we don't spot that arsenic a large transformational movement, though radical are utilizing PIX to regenerate ligament transfers, regenerate cash, and regenerate slope slips, [indiscernible] successful e-commerce. Those are the main features that radical are utilizing for PIX. And also, important to accidental that, arsenic you amusement successful the presentation, PIX was a precise important headwind for cash-in successful PagBank.

So, we besides [indiscernible] tailwind successful PagBank. As you could see, the cash-in done PIX successful PagBank was monolithic and grew similar from BRL50 billion, BRL59 cardinal successful 2021 to adjacent to BRL150 cardinal successful 2022. So, that's the wide representation astir PIX.

Operator

Our adjacent question comes from Jeff Cantwell, Wells Fargo.

Jeff Cantwell

I wanted to inquire you if you could springiness america immoderate high-level thoughts connected revenue? We could spot your gross and income of astir 4 cardinal implicit the past mates of quarters. 2Q was astir [3.9 billion]. And truthful conscionable funny if you tin benignant of locomotion america done whether 4 cardinal tin grow. Clearly, there's a batch of moving parts to your exemplary close now. So, we're trying to deliberation done progressive users connected the PagBank side, progressive merchants connected the PagSeguro broadside and instrumentality complaint and truthful forth. So, I was hoping you mightiness beryllium capable to springiness america a small spot of colour connected the model of however you're reasoning astir the program going forward? Thanks precise much.

Ricardo Dutra

Jeff, thanks. So, fto maine locomotion done the revenues and the champion betterment that you person astatine this point. But we – of course, we had this tiny alteration successful PagBank revenues due to the fact that of the duration of the recognition products that I mentioned before. So, we had this BRL10 cardinal little successful Q4 versus Q3 successful wide PagBank. We had a alteration astir BRL50 cardinal successful acquiring successful PagSeguro, chiefly due to the fact that of the summation of information of debit and shorter duration for recognition paper with installments. So, those are the main drivers. So, that's wherefore we're benignant of level quarter-over-quarter.

In 2023, arsenic we expect the volumes to grow, gross should turn arsenic well. And this constituent would beryllium – PagBank we expect to turn due to the fact that recognition volition support growing, the secured products. And successful PagSeguro, we should expect – we should not expect take-rate to spell up due to the fact that the information of SMBs successful the premix volition benignant of unit this nett take-rate to spell down. But overall, gross should grow.

Talking astir Q1, usually successful Q1, TPV presents a alteration versus Q4 due to the fact that Q4 is the precocious [seasonality season] [ph] with Christmas and Black Friday and truthful on. So – but we are seeing bully trends successful revenues successful Q1 arsenic well. So, overall, going backmost to your question, arsenic we're going to person an summation successful volumes, adjacent with the higher information of SMBs successful the mix, we should spot summation successful the full revenues of the institution for 2023.

Jeff Cantwell

Thanks precise overmuch for each the color. Much admit it. And if I could inquire a speedy follow-up, likewise reasoning connected the disbursal lines, what was absorbing this 4th was the gross came in, and we noticed that the selling enactment and the admin disbursal enactment were a small amended versus our model. And so, I'm funny if there's a read-through determination for 2023, successful the discourse of your anterior statements wherever 10% nett income borderline seems to beryllium the gating factor. So, I was hoping to get either clarification oregon immoderate further colour astir however you're reasoning astir expenses/operating leverage for [indiscernible] going forward? Thanks precise much.

Artur Schunck

So regarding to selling expenses, what we person successful this – nether this enactment is full losses, chargebacks, and provisions for recognition losses arsenic we reduced 30% successful examination to Q3. So, we spot a large effect connected this line. And going forward, we besides expect a bully show successful the selling expenses line. So, you tin cheque successful the Page 19 successful the net merchandise this reconciliation of selling expenses. And truthful we are expecting for the aboriginal bully show successful this enactment due to the fact that we are moving hard to trim the chargebacks successful the issuing, successful the acquiring and besides the recognition losses due to the fact that of the measurement and the level of secured products that we person successful our recognition operation.

Jeff Cantwell

Okay, great. Thanks precise much. Congrats again.

Operator

The Q&A league is present concluded. I walk the level implicit to Mr. Dutra for his closing statements.

Ricardo Dutra

Hi, everyone. Thank you precise overmuch for the participation. Thank you for the questions, for investing your clip to speech to us. If you person immoderate problems with connections and truthful on, we are going to wage attraction to that and measure what we should bash to get a amended transportation for the adjacent call. Thank you precise much. Take care.

Operator

PagBank league telephone is present concluded. Have a bully evening. Thank you.

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