Hello, everyone, and thank you for waiting. Welcome to PagSeguro's 2Q '18 Results Conference Call. This event is being recorded. [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, and the replay will be available shortly after this event is concluded. Those following the presentation via webcast may pose their questions on PagSeguro's website.

Before proceeding, let me mention that any forward statements included in the presentation or mentioned on 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 or discussed in this conference call for a variety of reasons, including those described in the forward-looking statements and Risk Factors 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 this conference call the Company may discuss some non-GAAP measures. For more details, the foregoing non-GAAP measures and the reconciliation of those 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, CEO of PagSeguro. Mr. Dutra, you may begin your presentation..

Hello, everyone, and welcome to our second quarter results conference call. Today, I have here with me Eduardo Alcaro, our CFO; and André Cazotto, our Head of Investor Relations. Before we go through the operational and financial metrics, we want to reiterate our confidence in our strategy.

Being an independent fintech allow us to think exclusively on our clients' financial needs, delivering growth and profitability while creating a higher stickiness with our clients by offering a unique ecosystem through our digital accounts.

Being the first mover, with an non-replicable online distribution through UOL and mobile-first brings a natural advantage to PagSeguro. We believe that following this strategy, we will be able to deliver long-term shareholder value through an increasingly attractive and growing ecosystem.

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

PagSeguro proves that operating and winning in long-tail requires an online and mobile-first approach that is totally different from the traditional acquiring business model.

We believe our mark has just been 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.

On Slide 3, we start with our total payment volume that reached R$16.9 billion in second quarter, an increase of R$8.8 billion, up 107% year-over-year. This growth is the result of a greater penetration of our ecosystem in long-tail combined and with new innovative products and solutions offered to our clients.

The net take rate excluding sales of devices, ended the second quarter in 5%, and it kept stable when compared to last quarter. On the charts below, we see the number of active merchants. Just remember the criteria used internally, active merchants are those who made at least one single transaction in the last 12 months.

We ended the second quarter with 3.5 million active merchants, adding 1.4 million new merchants in one year, representing an increase of 69% year-over-year.

Quarter-over-quarter, we added 417,000 new merchants which represents the largest number of net additions in one single quarter since we started the business, or 6% higher compared to the 291,000 net additions in Q2 '17, which was our previously strongest quarter when we launched our Minizinha device.

Compared with the 296,000 net adds on Q1 '18, we grew 41% this quarter. Now I'd like to pass the word to our CFO, Eduardo Alcaro..

Thanks, Ricardo, and hello, everyone. Before I start, I'd like to mention that in the second quarter of 2018, we had a total of R$14.5 million of extraordinary events, mainly related to the IPO and the recent follow-on. Let me remind you these items one by one.

First, stock-based compensation expense and related employer payroll taxes in the total amount of R$62.3 million. From this amount, R$40.6 million refers to equity compensation and R$21.7 million refers to payroll taxes.

In addition, R$31.5 million is the quarterly recurrent provision and R$30.7 million is the non-recurrent, and is related mainly to new shares issued due to new hires and additions through the long-term incentive plan.

We exclude stock-based compensation expenses from our non-GAAP measure because they are non-cash expenses and they depend on our stock price in the exchange rate from U.S. dollars into Brazilian real at the time of divesting of the equity awards. The related employer payroll taxes depend on our stock price and the exchange rate from U.S.

dollars into Brazilian real at the time of the exercise and the vesting date of the equity award, over which management has no control, and as such, management does not believe these expenses correlate to the operation of our business.

Second, financial income in the total amount of R$27.3 million related to the impact of exchange rate variation on the conversion from U.S. dollars into Brazilian real of the proceeds from our sale of new shares in our June 2018 follow-on offering.

We exclude this foreign exchange variation from our non-GAAP measures, primarily because it is a non-recurrent income. Third, tax related to the remittance of follow-on primary proceeds, IOF tax, to Brazil in the amount of R$0.7 million; we exclude this IOF tax from our non-GAAP measures because it is a one-time and non-recurring expense.

And the last one, income tax on the non-GAAP adjustments in the amount of R$21.2 million. 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.

Moving to the slides; on the top left of Slide number 4, our non-GAAP total net revenue reached R$975 million in the second quarter, up 75% year-over-year.

Moving to the top right, let me talk about our main revenue streams composed by transaction services or mainly MDR [ph] collected from merchants, financial income from the prepayments and hardware sales. In the second quarter of 2018, transaction and services represented 55%; financial income, 35%; and hardware sales, 10% over total net revenues.

You can see that the terminal sales are becoming less representative in the mix when compared to the previous year, and expected to continue to trend down in relative terms going forward to low single digits.

On the other hand, you can note that our revenues from transaction activities and other services grew 9 percentage points compared to the second quarter of 2017. This demonstrates the strength of our 3.5 million active merchants' base delivering high double-digit net revenue growth rates. On the two charts below, we present our total expense figures.

I would like to point out here our lean cost structure allowing us to have a volume scalable business model. Our non-GAAP total costs and expenses decreased 1.7 percentage points, ending the second quarter at 3.7% over total TPV.

Related to non-GAAP admin expenses over total TPV, which excludes stock-based compensation reached 0.3%, a decrease of 0.1 percentage point year-over-year. Regarding our cash flow, since we no longer discount receivables with issuing banks, our financial expense should trend to zero.

You will note in our cash flow underlying changes in receivables subject through early payments that we repaid in the first half of 2018, approximately R$1.6 billion in receivables, which we obtained early payment with the issuing banks as of December 31, 2017. We still have R$155 million in receivables to be repaid until the end of 2018.

Adding back the impact of the repayment of note receivables for which we received early payment from issuing banks as of December 31, 2017, PAGS had R$278 million in negative operating cash flow driven by the working capital growth, partially offset by PAGS cash generation. On the next slide, we show our non-GAAP net income growth.

In the second quarter, we reached R$242 million, an increase of R$160 million, up 195% year-over-year. The non-GAAP net margin reached 25%, an increase of 10 percentage points year-over-year; this shows the unique profile of PAGS delivering growth and profitability. Here, I'd like to point out the unique PAGS growth profile. Considering all U.S.

listed companies with market cap of $8 billion or more, only 19 companies out of 10,475 listed U.S. companies grew adjusted net income above 195% quarter-over-quarter in the second quarter of 2018. Now, I'd like to hand over back to Ricardo, who will comment on new products recently launched..

Thank you, Eduardo. On the next slide, we show our Mobile top-up app. Prepaid mobile phones are very popular in the Brazilian market, mainly in the long-tail market where we have our core business. We are offering to our merchants the Mobile top-up feature using the balance of PagSeguro's digital account.

It is integrated with the four largest telecom providers in Brazil that represents more than 99% of the market. Through our Mobile top-up app and combined with the bill payment solution launched at earlier this year, we are increasing our customer engagement and encouraging our clients to keep their balance in their PAGS digital accounts.

On the next slide, we show you our in-app boleto or bank slip billing feature. Boletos are also a very popular method of payments in Brazil. Through this app we target B2B and B2C markets where merchants and individuals can issue unlimited boletos through the app as a payment method to their clients.

PAGS received MDR for this transaction through bank slips. Following the presentation, we have our P2P, peer-to-peer solution, also targeted to B2B and B2C segments. Merchants and consumers can transfer their balances between PagSeguro's accounts, free of charge.

Additionally, to increase our network effect, merchants and consumers can send free invitations to other people to create PAGS digital accounts. Digital account is free and it takes only three minutes to sign-up. On Slide 9, we have mapped our portfolio of functionality that are available to our merchants.

PagSeguro has been building a unique and world-class payment ecosystem focused to deliver a frictionless online and physical payment experience. Regarding our QR code payment solution, we already started to gradually rollout into our merchant base and expect to expand it in the second half this year.

We believe QR code payments will be an important complement to our portfolio of products as a new alternative to foster the adoption of electronic transactions in long-tail. Finally, on the last slide, we have our closing remarks. It is important to highlight the size of our total addressable market and the huge opportunity that PAGS has ahead.

Considering our last 12 months of TPV, we have only 3% of our addressable market and we still have a long way to go.

Being the first mover, having a fully verticalized and a lower-cost ecosystem with 3.5 million active merchants, mobile-first, strong brand, lower cost of merchant acquisition, and an unreplicable online distribution through UOL, brings a natural advantage in our market.

In Q3, we'll continue to see a very healthy TPV growth and our additions are still growing the same pace as observed in Q2, while take [ph] rates remained stable sequentially. We are confident our business will continue to deliver long-term shareholder value. Now we finish our presentation, and we start the Q&A session.

Operator, please?.

[Operator Instructions] Our first question comes from Carlos Macedo with Goldman Sachs..

A couple of questions; one, obviously, over the last few months, there has been a lot of talk about competition in the market and many different players launching products. Many of the established players, like Itaú through it's Credicard POP and Cielo; and others talking about entering the market and competing against you in the long-tail.

Could you talk a little bit about what you've seen in terms of competition? Are you feeling the impact of other players coming in? Is it something -- obviously, it hasn't really affected the pace of growth of your merchant base or TPV but is it something that -- is it more because of the efforts that you've made to maintain that growth or is it just because you're not really seeing the competition so far? Second question; very impressive list of products you have here.

We talked in the past about maybe having a lending product come up here as well, it's something that one of your competitors does.

Is there any -- are there any plans to add a lending product so you can lend money to your merchants -- to the merchants in your network outside of the prepayment option?.

Let's talk first about competition. I guess, before we talk about the competitors, it's also worth to say that we have a huge addressable market in front of us. According to our estimates, we only have 3% of the market, so there is a lot of room to grow.

We have our provision, we have strengths, we were built to serve long-tail, the way we distribute our services as well, like using UOL distribution, 100% online, self-services and so on.

So we are well positioned to serve long-tail with the prepaid card, we have a slightly increasing cost of promotion acquired, whether you could see in our growth, more than 400,000 net adds. We cannot say that the competition that we have is decelerating off our growth or decelerating the expansion of our growth.

As the opposite, we are growing in a sustainable and profitable way. Talking about lending; we are trying lending with a small base of our merchants. We know some competitors are already -- have this product in their ecosystem, so we are testing lending with a small part of our merchants. We are very cautious about credit risk.

We have no doubt there is going to be a lot of demand for that, but we should think about it and be cautious the way we are going to execute that because it's very easy to lend the money but it's hard to collect.

So the way we are going to execute, if we are going to work with someone else, as only as a distributor because we're going to lend the money only for the best merchants and the other portion of the merchants are going to sell -- we're going to send to someone else; that's something that we are discussing right now and probably are going to have this project in the future.

But again, the secret sauce here is the execution; we have no doubt there is going to be demand but we're going to be very cautious about the execution in this product because we don't have any credit risk in the balance sheet and we are cautious about bearing credit risk in our balance sheet..

Any timetable on that; is it something for this year, for next year, maybe?.

We are testing. As we said, we are talking to other companies the way we're going to work with them. If they're going to -- if we're going to work as a distributor, there is a lot of discussion about the way we're going to work with them. So we hope to do it this year, but we cannot guarantee because it's a back-and-forth negotiation and so on.

So as soon as we have some new information, we're going to let you know..

The next question comes from Craig Maurer with Autonomous Research..

I just wanted to drill down a little into the commentary you just made; we're two months into third quarter now, focus is on how competition as demonstrated by the last question, is impacting you in the third quarter.

You just commented on net new adds being stable in terms of growth; does that mean another quarter of 400,000-plus net new adds? And regarding TPV, is the momentum stable there as well? Thanks..

Just remember that in the second quarter we had in Brazil, the World Cup, total strike and even with this type of events, we could grew in a very healthy way, in a sustainable way, and being profitable. What we are seeing in the Q3, we're going to be in the same range.

I'm not saying that we're going to have the exact number but we're going to be between this range between 200-and-some 300 and 400 and things like that, because we are at the end of August, we still have September.

So what I'm trying to say here is that Q3 is showing us that it's going to be a strong quarter as well in terms of net adds, and also in terms of total payment volume. Just to give you another information, we had the largest total payment volume captured in one day in last August 11, that was one day before Father's Day in Brazil.

So it was a record of total payment volume that we captured. Before that, the record was May this year, one day before Mother's Day in Brazil. So just to give you some information that not only net adds are growing, but as you could see, total payment volume is growing as well. And the take rate is the same. We don't see pressures in take rate so far..

Our next question comes from Jason Kupferberg with Bank of America..

I wanted to ask about our pre-tax margins. I think the rate of year-over-year improvements there did slow a bit versus the first quarter.

I wasn't clear if some of the expenses related to the offering in June were absorbed in that or any other investments that perhaps you made and maybe just any color on how we should think about pretax margins in the back half of the year would be great..

All right. Jason, just answering your first question. If you look at our -- let's talk about, first, net income margin. If you look through a net income margin perspective, it has been stable. If you look Q1 and Q2, we've reached 28% to 25% of net income margin.

In terms of tax rate, you should expect something for the year on the high 20s and low 30s in terms of percentage, of the total ATR. As far as pressure on margins, you could see that -- I mean, we did not see pressure on MDRs; MDRs, they remain stable.

We decreased the price of the hardware's as well, that could create some pressure in our net income margin but we are able to afford that and deliver a 25% net income margin quarter-over-quarter..

Can you talk a little bit about how the proceeds from the recent primary share offering in terms of putting those into the prepayment business? Talk a little bit about those reinvestments and exactly how those funds are going to be deployed..

So when we talk about the primary proceeds from the IPO, let me explain that. We raised R$3.3 billion in primary proceeds during the IPO. From this R$3.3 billion, R$1.7 billion will be used to liquidate receivables that we anticipated with issuing banks that we discounted with issuing banks as of December 31, 2017.

So we have R$1.6 billion more left for the working capital needs between 2018 and 2019 that we expect to use until the end of 2019. And from 2020 going forward, the Company will be generating enough cash to absorb the working capital needs. The primary proceeds coming from the follow-on will be used to speed up and enhance our digital ecosystem.

You could see that in the first half of this year, we launched several new products. So for example, as Ricardo just said, the Mobile top-up, the QR code, the bill payment; so all these features -- so the cash delivery during the follow-on is for deployment of new features and new products in our platform..

Our next question comes from Josh Beck with KeyBanc..

I wanted to ask a little bit more of a strategy question. So when we look at all of these products, I think you have 11 of them as part of the ecosystem.

What is the ultimate goal? Do you foresee them increasing engagement or do you see them as additional services that you can monetize or is it a combination of both? What do you see as the end benefit?.

It's a mix of both. What we have in mind here is to win the long-tail merchants, that's our main target. We know how to do it, it's a profitable business. We already have 3.5 million merchants, so we have processes in place, it's a profitable business. So the main target here is to win the long-tail merchants.

And we know that by being only a payment solution, only the MDRs and prepayment, at some point, you cannot differentiate from your competitors. So what we have in mind is to have a more robust digital account where the merchants can come to us, they can have payments and they can also use additional services.

Some of the services the we launched is going to be only for stickiness and some of them is going to be to increase our revenues and our bottom line but none of them is going to hurt our profitability or net income.

Even if you think about the bill payment, it is a service that we launched and we make some revenues from that, for every bill that we collect we receive a flat fee. The Mobile top-up is the same. So it's a way to increase the stickiness and at the same time, make some money.

Some of them will not be transformational, but some of them we think is going to be helping the future. When you think about QR code, for instance, it is a transaction that people can use using the PAGS digital balance in the digital accounts, so it's a transaction that is very profitable.

So what we have in mind is, just to give you a summary, to increase the ecosystem so that we can differentiate from our competitors, increase the stickiness, make more money; and at some point it's going to be on a hardware that it should go for consumers because part of our long-tail merchants, they are consumers and merchants at the same point, they are so small that it's the same guy that -- they mix the bills for the company with their personal bills.

So at some point, we can launch additional services focused on the consumers but right now, we're going to increase the stickiness and win the long-tail merchants..

I also wanted to ask a question on regulations.

And I just wanted to understand, how likely do you think it is that the settlement time could shrink? And if it were to shrink, what would be the impact on your financial level?.

So before I answer you, just to put everyone on the same page, the discussion about settlement dates from D30 to D2 does not affect prepayment, right, because prepayment, it is -- we charge 2.99 from the second installment through the 12th installment.

So if you think about changing the settlement, it's going to be only for the first installment and the prepayment does not relate with this first installment, prepayments from the second installment and going forward. If you think about the settlement from D30 to D2, we already have the option to pay the merchants in D+1, we charge more for that.

So the markets are already offering this to the merchants, right? It's not something that merchants don't have options in the market. This is a long discussion, at least that I know since 2006 because it's not easy to change. If you are from -- if you look from outside of the industry, it seems that it's very easy to change.

But let's say, today, the banks with the card fees -- with the card schemes, they have the interchange; they charge the acquirers to pay us in 30 days.

If they need to pay us in one day, we don't know what's going to happen with the interchange if they will increase, if the acquirers will increase the price, and the prices -- the merchants are going to increase the price for the consumer and so on.

So there is a lot of things that could happen, what we see from the regulators is that they are forcing competition. Merchants already have the option to receive in D+1, we are one of these players and charge more for that. But even if that happens, regulator does not talk about regulating prices, right.

They don't regulate price, they leave the market to set the price. So far, we already have this product. We are competitive in prices in D+1, so we don't see the change hurting us so far. So we don't see any high risk by changing it from D30 to D+2..

Our next question comes from Bryan Keane with Deutsche Bank..

Just wanted to ask a couple of clarifications; just on the competition question, if competition uses lower price to get into the micro-merchant market, do you guys believe that you can maintain a stable net take rate? Or is that something you'll have to see how it goes once to see how successful they are as they enter the market?.

We don't see the pressure because -- well, thank you for the question. We don't see the pressure because at end of the day, price is just part of the equation.

What merchants in long-tail markets are looking for, they don't want to have fixed costs; they don't like rents, they don't like to pay rental fees while they are on vacation or while they don't have any sales and things like that.

So when they decide to come to this market, they look for the portfolio devices, the price of the portfolio, the MDRs, of course but they also look if the acquirer requires them to have a bank account because they need to pay every month to have a bank account in Brazil. So it's a mix of things. We don't see pressures in MDRs at this point.

As you could see in Q2, we had the same 5%. And if you think about this, the long-tail that we have nowadays, these guys, they have the spending, a total payment volume per year is R$18,000. If you divide that by12, R$1,500, something like $400.

Even if you did some discount about a few basis points, that's not one big bank that are going to make them to choose one acquirer opposite the other. So price is part of the equation, we also make promotions. If you think that promotions would be good to accelerate our net-adds, we will do it.

But we don't see that the price pressure is going to come to MDRs in such a way or so big that it's going to hurt our net revenue..

Our next question comes from Rafael Frade with Bradesco..

I have two questions. The first one, I was a little surprised with the MDR that came mostly flat Q-on-Q, although you start to give some discounts in the second quarter. I would like to understand if it was not relevant, the base of volume that was impacted by this? Or there were a significant change in mix that explain that.

And my second question is looking for your receivables, I would like to understand, if you are already setting Amex and Ebo [ph] as for acquirer or not? We work two as a different model?.

Regarding MDRs, we didn't see any change in our mix. As we've said in the previous call this year, the promotions we are doing, we are not decreasing the prices. We are just making promotions for new merchants. It is limited for up to 3 months or R$1,500. So as I've said the impact is very limited, that's why we didn't see any impact in our MDRs.

Related to Elo and Amex, we are still working with them; we do not capture these cards. That's why you don't see their volumes in our TPV..

The next question comes from Alexandre Spada with Itaú BBA..

Can you share with us how much of your total revenue is derived from activities that came from known acquiring services this quarter? Also, you already commented about the new services recently introduced, and we all expect further innovations ahead.

So with that in mind, is there a target contribution from those known acquiring services to your total revenues? And if so, when do you expect to reach these targets?.

We've said they are still too small, too small, the services that we launched. The revenues related to these services are very, very small. As we've said, we launched bill payment last quarter, Mobile top-up as well. So too small when you compare with the other revenues that we have.

We don't have here a target in mind to say you about what's going to be the target for these services in the future. What we know is that by having these services, it's going to be beneficial for us in terms of getting new merchants and also to increase the stickiness for these merchants. So they will be marginal to our results so far.

It's going to be additional to business plan, but it's still small. If I give you a number right now, it's very small. Let's see in the next quarter if we have something new that is getting a lot of traction, making a lot of revenues, we'll be able to give you more color on that..

We've been hearing about POS supply difficulties in Brazil, probably given the growing number of players addressing these micro-merchant markets.

So has that been affecting PagSeguro somehow? And how can the Company prepare to environment of more scarce POS supply if that's really the case?.

We didn't see this scarce of POS for our base. If you go to our website, you can see that we didn't change the number of days that we deliver the POS. We have a very well-planned way to work with the POS manufacturers so that we can give them more visibility how many POS we're going to sell in the next month.

So we didn't see any problem with POS manufacturers not giving POS to us, we didn't see that..

Our next question comes from Jorge Kuri with Morgan Stanley..

Two questions, if I may. The first one on your cost of goods sold on your terminals, on your sales revenues were much higher this quarter. I'm assuming that has to do with you providing discounts and prices -- or lower prices of terminals and not being able to negotiate better prices with your suppliers and that cost your gross profits.

And I'm looking at -- sorry, let me take a step back; I'm looking at revenues on the transaction and sales and putting prepayment below the revenue line. So that made your cost of goods -- your gross profit grow only 3% sequentially versus the 13% growth you had in revenues, again, transactions and sales.

So I'm wondering if that is a permanent change in the underlying profitability, gross profitability of the terminals or if there is scope for you to negotiate better terms and we can see an improvement in that. And my second question is about guidance.

I'm guessing that you've got a lot of requests from sell side and buy side analysts to provide guidance for the year which I don't see in your presentation or press release. So I'm wondering -- and again, in the context of you having benchmarked yourself with Square, which provides very little guidance.

I'm just wondering if you can share with us the thinking behind not providing guidance for the year? Thank you..

I'm going to take the first one and Alcaro can complement the first one and also answer the second.

You are right when you talk about the cost of devices, part of this is really difficult to say, you are right, we decreased the prices to accelerate the net-adds to be more competitive at some point, to make some promotions and -- so that's why we -- if you look at these lines, the revenues related to sales and the costs related to sales, you'll see that the loss is higher than what we have in the past.

We try to negotiate with the manufacturer to kind of offset the decrease of the price because, of course, when you decrease the price, you're going to have more volume. At some point, we got some negotiations as part of that, part of that we need to make for ourselves.

So you're right, when you say that we have this loss in terms of devices, if you compare the revenues in the cost of these devices..

And just to complement Ricardo's comments, Jorge; we're able to invest and price and deliver the same net income margin that we had in Q1. In Q1, we delivered a 25% net income margin. In Q2, we also delivered a 25% net income margin.

So we're able to invest in new additions to add more than 400,000 new merchants to our base and still maintain profitability of the company. About your question about not sharing guidance, as you know, we operate in a very competitive market here. We believe to the Company's best interest at this point to not provide guidance.

What we can say is that, as Ricardo said, the business -- the fundamentals of the business remain strong in Q3. We continue to see growth in our merchant base in the same pace of level in Q1 and Q2. And we are also not watching any MDR compression in Q3 as well..

Our next question comes from James Friedman with Susquehanna..

Eduardo, Ricardo, good results here. I guess, I'll just ask my two questions upfront. The first is about Slide 4. It's the one where you showed that increase in transaction activity and other services as a percent of revenues; [indiscernible] that you called out in the text, that number went up 900 basis points.

I'm just wondering, and I know you all give guidance, but I'm wondering in that journey, where do you see that potentially going as a percentage of revenue? That's my first question. And the second question is, interchange is coming down in Brazil, I think, scheduled soon. We've been through this before in Europe, and Spain, and U.K.

and in the U.S., is there any reason to believe it will be any different of a benefit for PagSeguro than it's been in the many other continents that have gone through that? So the first one is on the transaction and the second one is about interchange..

So if you look at the transaction in Slide 4. As you said, last year, it was 46% for transaction services and 31% for financial income; and this year it's 55% and 35%. If you disregard the sales of devices and look at the proportion between these two parts, the transaction services and financial income, you would see they are pretty similar.

So as one thing goes up, the other kind of goes together because the way the Brazilian economy works is based in installments, when people spend more money, installments increase as well. So that's why if you look at the 55% divided by 90% or 46% divided by 77%, it's going to be kind of similarly proportioned between these two parts.

So, we don't see that mix changing because depending on where you look, we already have 3% or 4% of the market. But we already have 5%, that is, we don't have this mix shift substantially occurring nowadays.

So if you look at -- in the future, probably the sales of devices is going to be even lower and the other two parts will increase at the same proportion. So I don't know if I answered your question. If not, let me know. And regarding their change, you're right. The interchange is going to be capped beginning October 1 for debit transactions in Brazil.

The goal is to decrease the interchange for those transactions from 8 basis points to 50 basis points. It doesn't mean that average transaction is going to decrease because what the Central Bank is looking for is the overall, the average. All debit card transactions should go from 8 basis points to 50 basis point in interchange.

For us, it's going to be a decrease in our cost, we will take advantage of that for a while, but we believe that at some point, the market is going to adjust that in the same thing that happened in other markets.

At the beginning, we're going to capture this increase, but at some point, the market is going to adjust and the margin is going to be the same. So in near-term, it's good news. In medium term, the market is going to be adjusted and the prices will go down. That's what we believe..

[Operator Instructions] 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..

Hi, everyone. We'd like to thank you all for the time spent with our management team. We'd like to reiterate our commitment and focus to deliver solid results. And see you all in the next conference call. Thank you very much..

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