PagSeguro Digital Ltd (NYSE: PAGS) stock fell over 5.6% on December 3rd, 2018 (Source: Google finance) on lower than expected performance. In the quarter-over-quarter comparison, the non-GAAP net income grew 20%, accelerating when compared to the 14% growth in Q2, while the non-GAAP net margin expanded only 1 percentage points.
The company’s total payment volume that reached BRL16.9 billion in third quarter, an increase of BRL9.6 billion, up 90% year-over-year and BRL3.4 billion or 20% quarter-over-quarter accelerating when compared to the BRL2.5 billion or 17% growth observed in Q2. This growth is the result of a greater penetration of the ecosystem in long-tail combined with the trend of cash to classic switch relatively at the beginning of the merchant base and the company do also have room to grow in Brazil and also new innovative products and solutions offered to the clients. The net take rate excluding sales of devices ended the third quarter at 4.9% representing a small contraction quarter-over-quarter mainly related to the higher penetration of better transactions that went up 110 basis points and a slightly lower penetration of credit card transaction installments in the quarter.
PAGS has ended the third quarter with 3.8 million active merchants, adding almost 1.4 million new merchants in 1 year representing an increase of 56% year-over-year. Quarter-over-quarter, the company added 323,000 new merchants within the range that the company provided in the last conference call. Compared to Q2 2018, the company had a decrease mainly because Q2 was a very strong quarter, where the company had the launch of Minizinha Chip and MDR campaign. In addition, the third quarter usually has a low seasonality than the second quarter given the winter vacations in July.
The company’s non-GAAP total net revenue reached BRL1.12 billion in the third quarter, up 64% year-over-year. Moving to the top right, PAGS have the main revenue streams composed by transaction services or mainly NDR collected from merchants, financial income from the prepayments and hardware sales. In the third quarter of 2018, transaction and services represented 65%; financial income, 36%; and hardware sales, only 9% over total net revenue that continued to trend down and in relative terms going forward should reach low single-digits.
The non-GAAP total costs and expenses decreased 1 percentage point ending the third quarter at 3.4% over the total TPV. Related to non-GAAP admin expenses over total TPV which excludes stock-based compensation expenses reached 0.3%, a decrease of 0.1 percentage points year-over-year.