PICS Q1 2026 Earnings Call Transcript

Quartr
Provided by Quartr
June 2, 2026

Key Takeaways

  • Positive Sentiment: PicPay beat guidance across every key metric in Q1 2026, with total credit portfolio, revenues, profitability, and adjusted net income all coming in above expectations.
  • Positive Sentiment: The business continued to scale rapidly, with 68.6 million accounts, 44.3 million active clients, and strong growth in TPV, deposits, and insurance policies. Management said the insurance vertical and banking activity remain important growth drivers.
  • Positive Sentiment: Revenue mix is becoming more diversified and lower risk, with 69% of revenues now coming from no or low credit-risk streams. Management emphasized the shift toward secured credit, fees, float, and other capital-light lines as a major structural improvement.
  • Neutral Sentiment: Asset quality is stable by management’s framing: cost of risk held at 3.7%, but executives said NPL ratios will likely keep rising as the portfolio matures and should be judged alongside stage metrics and coverage, not in isolation.
  • Positive Sentiment: Management highlighted strong momentum in private payroll loans, where market share rose quickly and first-payment defaults have stabilized around 9%. They also pointed to AI-driven efficiency, flat headcount, and a second-quarter guide calling for continued sequential growth in credit, revenues, and net income.
AI Generated. May Contain Errors.
Earnings Conference Call
PICS Q1 2026
00:00 / 00:00

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André Cazotto
Strategy, M&A, and Investor Relations Officer at PicPay

Good evening, everyone, welcome to the PicPay earnings conference call for the first quarter of 2026. I am André Cazotto, PicPay's Strategy, M&A, and Investor Relations Officer. Today, I'm joined by Eduardo Chedid, our CEO, Rodrigo Couto, our CFO, Danilo Caffaro, Vice President of Consumer Banking, and our investor relations and strategy teams. We will begin with a short presentation highlighting our quarterly results, followed by a live Q&A with our management team. Please note that this presentation may contain forward-looking statements and non-GAAP measures. Please refer to the disclaimer on screen and in our earnings materials available on our investor relations website for additional information. This call is being recorded and a replay will be available on our website shortly after the call. Before I hand the call over to our CEO, Eduardo Chedid, I would like to briefly highlight the strength of our execution.

André Cazotto
Strategy, M&A, and Investor Relations Officer at PicPay

As you can see on the next slide, we deliver results above the guidance we presented across all key metrics for the first quarter of 2026. Our total credit portfolio reached BRL 28 billion, 5.8% above our guidance of BRL 26.5 billion, driven by a better than expected performance on our private payroll loans, which continued to gain traction during the quarter. Our cost of risk came in at 3.7%, fully aligning with guidance, reflecting stability in our asset quality metrics, underpinned by a more resilient and diversified credit portfolio. On the revenue side, our managerial revenues, which exclude derivative revenues and hedge accounting effects, reached BRL 3.2 billion. Net interest income came in at BRL 1.7 billion, surpassing 20% net interest margin for the quarter, and gross profit reached BRL 1.1 billion, with both delivering slightly above guidance.

André Cazotto
Strategy, M&A, and Investor Relations Officer at PicPay

Looking at our profitability metrics, IFRS earnings before taxes came in at BRL 222 million, 3.1% above the guidance, and the IFRS net income reached BRL 152 million, 8.4% above the guidance of BRL 140 million. On adjusted basis, which excludes stock-based compensation expenses, adjusted EBT reached BRL 248 million, 5.7% above the guidance of BRL 235 million, and our adjusted net income came in at BRL 169 million, 9.3% above the guidance of BRL 155 million. These results reinforce our strong execution and our ability to consistently grow with profitability. With that, I will now turn the call over to Eduardo Chedid.

Eduardo Chedid
CEO at PicPay

Thank you, André. Good evening, everyone, and thank you for joining us for our second earnings call. I'm pleased to report that we delivered another strong quarter, beating our guidance across every single metric we track. Let me walk you through the highlights. We delivered solid results in the operational metrics. Total accounts reached 68.6 million, up 11% year-over-year and 2% quarter-over-quarter, continuing to expand at a steady pace. Quarterly active clients grew to 44.3 million. Consolidated TPV came in at BRL 156 billion, 31% above the prior year. Sequentially, the 1% decline is consistent with typical Q1 seasonality following a strong fourth quarter. Wallet and banking TPV reached BRL 134 billion, a 24% year-over-year expansion. The 5% sequential decline reflects the same seasonal dynamic and is fully expected. Total cash-in was BRL 125.4 billion in the quarter, growing 22% versus a year ago.

Eduardo Chedid
CEO at PicPay

On a sequential basis, the 10% decline mirrors the typical Q1 pattern relative to Q4's elevated activity. Consumer deposits grew to BRL 30.8 billion, up 46% year-over-year and 7% higher than last quarter, reinforcing the trust and principal trends we have been building. Active insurance policies reached 10.2 million, 78% ahead of Q1 last year and 13% above Q4 as our insurance vertical continues to scale at a rapid clip. Turning to financials. Net revenues reached BRL 3.5 billion, a 17% increase year-over-year and 17% higher than last quarter. Excluding derivatives and hedge accounting, managerial revenues were BRL 3.2 billion, up 60% versus the prior year and 9% sequentially. Average revenue per active client grew to BRL 80.7 in the quarter, 55% above where we were a year ago and 14% ahead of Q4.

Eduardo Chedid
CEO at PicPay

Excluding hedge accounting and derivatives, RPAC was BRL 73.3, up 46% year-over-year and 6% quarter-over-quarter. Deeper monetization and a richer product mix are driving this expansion. Gross profit came in at BRL 1.1 billion, representing a 44% year-over-year gain and an 8% step-up from the prior quarter. On efficiency, cost to serve was BRL 20.3 per active client, up 9% from a year ago, but down 1% versus Q4, showing that scale benefits are kicking in. For context, revenue per client expanded 55% year-over-year, while cost to serve grew just 9%. That's the leverage embedded in this model. Adjusted earnings before taxes reached BRL 248 million, more than tripling year-over-year with a 224% increase, and advancing 3% sequentially despite the seasonally lower activity typical of first quarters. This demonstrates the consistency of our earnings trajectory.

Eduardo Chedid
CEO at PicPay

Adjusted net income was BRL 169 million, nearly doubling with 92% year-over-year growth. The 10% sequential decline is entirely attributable to normal Q1 seasonality following a strong fourth quarter. As you can see, our revenue diversification continues to evolve. We now have a significantly more diversified and resilient revenue mix as only 31% is driven by unsecured credit. To put that in perspective, in Q1 2024, secured credit accounted for only 4% of net revenues. Today, secured credit represents 23%, fees and commissions contribute 25%, and float plus hedge accounting accounts for 21%. The key takeaway, 69% of our revenues are now driven by no or low credit risk streams. That's up from 63% just 12 months ago. We're growing net revenues 70% year-over-year while building a fundamentally more resilient business.

Eduardo Chedid
CEO at PicPay

Looking at the three revenue engines individually, secured credit revenues reached BRL 820 million, up 272% compared to a year ago, and 41% higher than Q4, fueled by the rapid ramp-up of our payroll loan portfolio. Unsecured credit revenues came in at BRL 1.1 billion, a 44% year-over-year expansion and 10% above last quarter, growing at a measured pace as we deliberately shift the mix toward collateralized products. Non-credit revenues hit BRL 1.6 billion, 47% ahead of Q1 last year, and 11% higher sequentially. This line includes fees, commissions, float, hedge accounting, insurance, acquiring, and revenues originated by our audiences and ecosystem business unit. Essentially, all revenue streams that carry no credit risk. Quarter after quarter, this capital-light engine continues to compound. On returns, adjusted net income grew 92% year-over-year to BRL 169 million. The 10% sequential decline reflects normal Q1 seasonality.

Eduardo Chedid
CEO at PicPay

Quarterly annualized adjusted ROE was 15.5% compared to 24.4% last quarter. The sequential compression is fully explained by the expanded equity base from our IPO capital raise. As we deploy these proceeds into our high-returning credit portfolio, we expect ROE to trend back above 20% within the next couple of quarters. Now moving to credit. PicPay Card TPV was BRL 17.4 billion, 41% higher year-over-year with a modest 1% sequential decline, reflecting typical first quarter seasonality rather than any change in engagement trends. Consumer loans origination reached BRL 4.5 billion, more than doubling year-over-year at 119% growth and edging up 2% from Q4. Holding essentially flat against a seasonally strong fourth quarter demonstrates the strength of our origination engine. Total credit portfolio reached BRL 28 billion, 116% above the prior year and 17% above last quarter.

Eduardo Chedid
CEO at PicPay

The consumer book represents 93% of the total, with SMBs and others comprising the remaining 7%. Beyond the numbers, we advanced several strategic initiatives in the quarter. On PicPay Card, we launched Skip Purchases, a feature that allows cardholders to pause a monthly payment without penalties, improving their cash flow management and deepening engagement with the product. On small and medium businesses, new business accounts openings grew from 60,000 per month in Q4 to 80,000 in Q1, a 33% sequential increase. We also rolled out supply chain finance, enabling businesses to anticipate receivables and improve their cash cycles. In its first quarter, the product generated BRL 693 million in origination. We also announced a strategic partnership with TIM, one of Brazil's largest telecom operators.

Eduardo Chedid
CEO at PicPay

Structured as a two-way distribution agreement, PicPay will offer TIM's telecom plans within our app, while TIM will offer PicPay accounts and credit products to its large customer base. The partnership is expected to reduce our customer acquisition cost by activating new users through TIM's existing infrastructure while driving higher engagement for both platforms. On the Kovr acquisition, we reached an important milestone. CADE, the Brazilian antitrust agency, approved the transaction on May 28th without restrictions. We are now awaiting final clearance from SUSEP, the insurance regulator, as well as from the Central Bank to close the deal. Finally, on brand. In the quarter, we launched a new brand positioning, PicPay, your next bank.

Eduardo Chedid
CEO at PicPay

It marks PicPay's evolution from a payment platform to a full-service digital bank, building trust and daily relevance while preserving the simplicity and innovation that set us apart. The campaign has already generated 1.2 billion impressions and over 75 million views, achieving 81% brand favorability, nearly double the 44% average in the financial services category. This is a strategic investment in long-term principality, and the initial data confirms it's working. Now I will hand it over to Danilo Caffaro, our Consumer Banking Vice President.

Danilo Caffaro
VP of Consumer Banking at PicPay

Thank you, Eduardo. In this next slide, we can see that we continue to execute on our strategy, gaining market share of major credit products by gaining share of wallet of our clients. As of first quarter 2026, we reached 4.93% market share for private payroll loans, coming from 0.2%, 2.76% market share of personal loans, coming from 2% and 1.53% market share of credit card TPV and 1.08% of credit card portfolio, coming from 1.18% and 0.77% respectively. On the next slide, we have the breakdown of our portfolio growth for the consumer business. We reached BRL 26.1 billion in the first quarter of 2026. It represents a BRL 3.6 billion growth from fourth quarter 2025, already after a one-off public payroll portfolio sale.

Danilo Caffaro
VP of Consumer Banking at PicPay

As you can see, we continue to grow our portfolio, 91% of the total growth on lower risk products and more mature cohorts, meaning clients that already have built credit behavior with us. Last but not least, the following slides take a deeper look at our private payroll loans operation. We continue to believe in the massive opportunity of private payroll loans, and we have seen strong evolution since the product launch in April 2025. From the very beginning, we have been operating this product very tightly, following our prudent underwriting strategy. Early on, as operational issues affected first payment defaults in the initial cohorts, we decided to slow down origination in the following months. As the product matured and we gained more confidence in its performance, we increased origination quarter over quarter. This shows our ability to respond quickly to changing market conditions.

Danilo Caffaro
VP of Consumer Banking at PicPay

As you can see on this slide, first payment defaults, FPDs, have improved significantly from the first cohorts and are now stable at around 9% across recent cohorts. January FPDs are currently tracking broadly flat quarter-over-quarter. Although, we still do not have the quarter fully closed, given the product's 30-day grace period, plus an additional 30 days for payroll processing. Delinquency rates, represented here by the over 30 days metric, have also improved month-after-month. Important to mention that origination, FPDs and over 30 for third quarter 2025 cohorts are reflecting a more conservative underwriting strategy. On the following slide, we continue to see very healthy unit economics in private payroll loans with lifetime NIMs around 30%, lifetime ROEs consistently above 100% and FPDs stable at high single-digit levels.

Danilo Caffaro
VP of Consumer Banking at PicPay

While FPDs remain stable and within a controllable range, our strategy is not centered on minimizing this metric at any cost, but rather on optimizing risk-adjusted returns. We are comfortable and already expanding into new customer segments with higher cost of risk, provided they are properly priced and structured to deliver returns and loss absorption levels in line with or above what we achieve today. In practice, the riskier the segment, the higher the spread, the shorter the duration, and the tighter the leverage to income criteria. Importantly, our current pricing model does not yet incorporate the potential upside from collateral enhancements such as FGTS balances and severance package proceeds, which should become effective throughout the year and help reduce cost of risk, particularly in higher risk segments. I will hand it over to Rodrigo Couto, our CFO. Thank you.

Rodrigo Couto
CFO at PicPay

Now I will walk you through our financial performance. On page 22, we see the familiar pattern of revenue growth several times higher than expense growth, leading to an improvement of 3 percentage points in our efficiency ratio relative to the fourth quarter. This means that our operating leverage continued to deliver impact even in a quarter in which revenues are seasonally weaker. AI is already having an impact as our headcount has been flat since October 2025 and the projected 10% increase during 2026 will not materialize. We expect AI to be a major booster of our operational leverage, which should be even more powerful going forward. On the right-hand side of the page, we see that our ROE for the first quarter was 15.5%, as our average equity increased by more than 40% from the incorporation of the IPO proceeds.

Rodrigo Couto
CFO at PicPay

ROE will go back up towards the 20s in the next couple of quarters as we gradually deploy the IPO proceeds. On the next slide, we present the expansion of our financial margins. Our net interest income, margin from credit products, and margin from credit products after losses all grew between 17% and 19% relative to the fourth quarter, while our Net Interest Margin rose back above 20% to 20.7%. The main driver of the margin expansion was a credit portfolio growth of 17%, which we will detail on the next slide. Net Interest Margin rose to 20.7% due to an increase in the share of credit over total interest earning assets. On the next slide, looking at the credit portfolio, we reached approximately BRL 28 billion in total credit, growing 17% quarter-over-quarter and sustaining a triple-digit growth rate year-over-year.

Rodrigo Couto
CFO at PicPay

The main driver of our credit growth continues to be the private payroll loan product, which has been performing within our expectations, as Danilo explained. We look at the composition of our credit portfolio growth, we see that collateralized products corresponded to 69% of the portfolio expansion, which is similar with the 70% figure observed in the last quarter. As a result, the proportion of the portfolio that is collateralized continued to rapidly increase, reaching 54%. On the next page, number 25, we present a classification of our portfolio by stages and the coverage of each stage. The composition of the portfolio by stages did not change significantly, and the coverages of Stages 2 and 3 rose, resulting in a 1.9 percentage point increase in the coverage of Stages 2 plus 3 of 63.9%.

Rodrigo Couto
CFO at PicPay

Moving on to the next slide, we see that Stage 2 formation rose slightly to 5.8%, which is typical of the first quarter due to seasonality. When compared to the first quarter of 2025, Stage 2 formation was 1.3 percentage points lower. Stage 3 formation normalized to 3.9% after the spike observed in Q4, which was caused by a change in methodology. To finalize the presentation on credit metrics, on the next slide, we see that the ongoing loss absorption ratio rose slightly and that the cost of risk remains stable at 3.7%, while total portfolio coverage increased to 13.9%. For Q2, we expect the cost of risk to be between 3.7% and 3.9%. Moving on to funding on slide 28, you see that our funding base grew 8% quarter-on-quarter, while the cost of funding remained largely flat at around 94% of CDI.

Rodrigo Couto
CFO at PicPay

We continue to execute our diversified funding strategy, notably with the structuring of our second FGTS, through which we raised BRL 1.25 billion last month. We will continue to mobilize different sources of funding as well as to strengthen our own deposit distribution capabilities to finance the rapid growth of our credit portfolio. Finally, we present on the next slide our common equity capital. With incorporation of the IPO proceeds, approximately BRL 2 billion, our Common Equity Tier 1 ratio reached 16.7%, with approximately BRL 500 million corresponding to 2 percentage points of the ratio held at our holding company in the Netherlands. With that, I will turn back the call to Eduardo Chedid for his final remarks.

Eduardo Chedid
CEO at PicPay

Well, we're issuing guidance for the second quarter of 2026, excluding any Kovr contribution. We expect the total credit portfolio to reach approximately BRL 31 billion, 11% growth quarter-over-quarter. Quarterly cost of risk should remain within the 3.7%-3.9% range, consistent with the levels we've delivered this quarter. Managerial revenues are expected at approximately BRL 3.6 billion, a 13% sequential increase. Net interest income should reach approximately BRL 1.9 billion, up 12% from Q1. On profitability, we expect gross profit of approximately BRL 1.15 billion, 5% above this quarter. IFRS earnings before taxes are expected at approximately BRL 265 million, 19% higher sequentially. On an adjusted basis, we expect earnings before taxes of approximately BRL 285 million, a 15% step up from Q1. IFRS net income is expected at approximately BRL 235 million, a 55% sequential increase. Adjusted net income should reach approximately BRL 245 million, 45% above this first quarter.

Eduardo Chedid
CEO at PicPay

As you can see across the board, sequential acceleration in every profitability metric, reinforcing the trajectory we've outlined today. Before we open to Q&A, I would like to reinforce an important point regarding our credit strategy and the recent discussions around asset quality. At PicPay, we do not manage the business with the objective of simply minimizing NPLs at any cost. Our approach has always been centered around risk-adjusted profitability, supported by a very disciplined underwriting framework and a structurally low cost to serve model. Our operating model allows us to selectively participate in higher risk segments as long as those products remain within our risk return matrix, particularly in terms of loss absorption between 40% and 60%, and minimum 30% ROE thresholds. In practice, our playbook is very consistent. The riskier the product, the higher the spread, the shorter the duration, and the lower the leverage relative to income.

Eduardo Chedid
CEO at PicPay

What gives us confidence is that the current stability we're seeing across asset quality metrics is fully consistent with the portfolio mix strategy we intentionally designed over the past quarters. A more diversified credit portfolio combining secure products, mature unsecured cohorts, and transactional-led underwriting. This is where the strength of our ecosystem becomes a key differentiator. Because our digital wallet is deeply transactional, we are able to leverage proprietary behavioral data and real-time engagement signals that provide a much more accurate understanding of customer risk than traditional market benchmarks alone. On top of that, we layer in data obtained through open banking, which is non-proprietary but highly complementary. The combination of proprietary transactional intelligence with open banking insights gives us a uniquely powerful underwriting edge.

Eduardo Chedid
CEO at PicPay

Our market-beating performance in private payroll loans, as reflected in lower FPD metrics, demonstrates our product velocity, our agility in learning and adapting, the strength of our underwriting model, our digital distribution model, and our operational excellence. Finally, although some market credit indicators suggest some deterioration, a closer look at PicPay's portfolio, which is more resilient by design, reassures us about our risk-adjusted return policy and our ability to meet projections for the 2026 unchanged. Now we are ready to move into the Q&A session. Please, operator, take over.

Operator

Thank you. We are going to start the question and answer section for investors and analysts. If you'd like to ask a question, please click on Raise Hand. If your question has already been answered, you can leave the queue by click on Put Hand Down. Our first question is from Gustavo Schroden with Citi.

Gustavo Schroden
Gustavo Schroden
Analyst at Citi

Hi, guys. Hi, Chedid, Cazotto, Couto, and team. Congrats on the numbers, slightly above the guidance for the first Q, decent trends. Congrats. I have two questions. The first one is we saw good trends in the Stage 2 plus 3 formation, but we saw an increase in 90-day NPLs. If you could clarify this mathematical or this mismatch between numerator and denominator, I think that would be great, right? Because usually when we see the strong credit growth, denominator grows faster than the numerator and offsetting this pressure. I think that it would be welcome if you give some color or clarify this increase in 90-day NPLs. My second question is regarding the guidance for the second quarter. Now, you are guiding for BRL 3 billion growth or BRL 3 billion additional loan book, right? Quarter-on-quarter.

Gustavo Schroden
Gustavo Schroden
Analyst at Citi

It is slightly below the growth you present in the first quarter. We know that the first quarter usually we have this seasonal effect, so it was lower loan growth. I was expecting an acceleration in a sequential base in this loan growth. If you could explain as if there are some, let's say, conservative strategy here, or what is behind these numbers? Thank you.

Rodrigo Couto
CFO at PicPay

Thanks, Gustavo. I will pick up the question on NPLs. The ratios are fundamentally different, right? Let's talk about NPL first. It simply days past due, right? First of all, it only takes into account one form of deterioration, and it also is highly sensitive to the write-off policy of each bank. Therefore, the levels are very hard to compare. We've said all along that our NPL ratios would continue to grow as our portfolio matures and would end up somewhere in the low teens, and this is what we expect to see going forward. The way we look at our credit performance and our coverage is in the proportion of stages, which was fairly stable, and also in the coverage of each stage with which we are comfortable.

Rodrigo Couto
CFO at PicPay

While NPLs will continue to rise, they're really not reflecting the dynamics because they're very, again, limited in terms of their risk sensitivity and also highly subject to not only the write-off policies, but also the renegotiation policies of each institution. Therefore, it's very hard to use NPLs as a metric to manage a business. That's why we manage in terms of cost of risk, loss absorption, and proportion information of each of the stages as all other coverage.

Eduardo Chedid
CEO at PicPay

Okay, Gustavo. This is Chedid now. Going back to your second question, I think that we actually remain very positive on credit origination and on credit overall. I'd say that it's much more a conservative guidance than a conservative, let's say, way of doing business. If I could take you through what we believe on the macro credit scenario as well as on PicPay's let's say, ability to navigate there.

Eduardo Chedid
CEO at PicPay

I'd say that talking about the macro, yes, the Central Bank data shows a gradual deterioration on delinquency. At the same time, household debt service ratios remain stable, and the labor market is providing a strong floor. If we take a look at Brazil is at a record low 5.8% unemployment rate, with real aggregate wages growing 6.5% year-over-year, which in total it means that families in Brazil have BRL 22.9 billion of additional real income in circulation, and that acts as a buffer. Also, if you look at job creation, it remains concentrated in the lower income brackets. This segment, which is typically more sensitive to income shocks, right? As long as unemployment holds at the same levels, we don't see a systemic risk of mass delinquency in lower ticket credit.

Eduardo Chedid
CEO at PicPay

In summary, our baseline, any credit quality deterioration is likely to be gradual and not systemic, and this is very consistent with a control accommodation cycle without disruption. Looking at PicPay, it's fully consistent with the guidance we have provided. Looking at our own positioning within this macro environment, we believe that we are really well-positioned for a more challenging backdrop. We have deliberately built a more diversified revenue mix, as we explained in the call. 69% of our revenues now come from no or low credit risk streams, which translates into a more resilient business itself, where only 31% is exposed to unsecured credit. If you look at our credit underwriting strategy, it delivered a total credit portfolio, which is 54% secure and only 46% unsecured.

Eduardo Chedid
CEO at PicPay

Q1 numbers show that 90%, 91% actually, of new volumes are coming from lower risk loans and mature credit card cohorts. This is by design. Over the past several quarters, we have been intentionally rotating the portfolio towards secure products and seasoned and secure vintages with proven performance. On top of that, which gives us an additional layer of protection, I would say that our playbook allows us to adapt quickly to the changing scenarios. The riskier the product, the higher the spread, the shorter the duration, and the lower the leverage relative to income. This is a framework which is not reactive. It's embedded in how we originate every day. To summarize, we've built a diversified revenues model, a deliberately resilient portfolio mix, and we've been very, let's say, strict and disciplined on the origination. I believe we are well-positioned to navigate this cycle.

André Cazotto
Strategy, M&A, and Investor Relations Officer at PicPay

Just one additional comment here, Gustavo, it's André speaking. For the consumer loan book, we're expecting the origination to be pretty much flattish with the fourth quarter. We're expecting to originate close to BRL 3.5 billion, okay. That's our expectation with the consumer banking. We also have some SMB credit portfolio rolling off, so that's probably something that is impacting, let's say, the total credit figure that we share in our guidance.

Gustavo Schroden
Gustavo Schroden
Analyst at Citi

All right, guys. Clear, very clear. Just if I may, just to follow up on my first question regarding NPL. What is the write-off policy? Is that 360 days, 540 days? What is the write-off policy?

Rodrigo Couto
CFO at PicPay

It's 360 days.

Gustavo Schroden
Gustavo Schroden
Analyst at Citi

Yeah. Okay.

André Cazotto
Strategy, M&A, and Investor Relations Officer at PicPay

Both cards and loans.

Gustavo Schroden
Gustavo Schroden
Analyst at Citi

All right. Thank you.

Operator

The next question is from Mario Pierry with Bank of America.

Mario Pierry
Mario Pierry
Analyst at Bank of America

Hey, guys. Good evening. Thanks for taking my question. Let me ask two questions as well. I want to focus on the private payroll loan. I don't know when you said that the NPL should be in low teens, did I understand that correctly?

Rodrigo Couto
CFO at PicPay

Yes. For the whole portfolio.

Eduardo Chedid
CEO at PicPay

Yeah, for the whole portfolio.

Mario Pierry
Mario Pierry
Analyst at Bank of America

For the whole portfolio.

Eduardo Chedid
CEO at PicPay

Go ahead, Mario. We'll wait until you finish, and then we'll answer.

Mario Pierry
Mario Pierry
Analyst at Bank of America

Okay. You show right on slide 17 that your market share in private payroll loans has gone from zero to almost 5% in one year. What do you think is making you so successful in this product? What are you doing different from the other players? Also, you talked about these collateral enhancements, right? Especially related to FGTS. We've been waiting for that, and appears to be delayed. What is delaying that? When do you think those collaterals are going to be effective? What are you seeing in terms of interest rates that you're charging on this product? Clearly, this is not a uniform product. If you are doing a private payroll to someone who works in a small company for a short period of time, you're going to charge a higher rate than for someone who has a longer-term, more mature job.

Mario Pierry
Mario Pierry
Analyst at Bank of America

Can you tell us the direction of rates that you're charging in this product? My second question is unrelated to this. It's related to Kovr. Like you said, you got all the approvals, expecting now SUSEP to approve the transaction. Just remind us again, what is the expectation for net income from Kovr on a full year basis? Thank you.

Eduardo Chedid
CEO at PicPay

Hi, Mario. Going back to the private payroll loans. I think that our performance, as you said, it's been pretty solid, and I think at the end of the day, it's the result of several factors. We were the second company to be accredited in this product, and we entered very early. As we identified operational deficiencies in the system, we adapted quickly and developed some proprietary workarounds on those deficiencies. Our underwriting model has evolved significantly since the beginning. On top of that, I'd say that our digital distribution capabilities also played an important role, with around 70% of our origination being done in-app. From the beginning, I think that we maintained focus and conviction in the product's potential, which gave us a meaningful, let's say, and quicker learning curve, which we're taking into advantage.

Eduardo Chedid
CEO at PicPay

I think it's a mix of many things that we did, and also driven by a lot of focus and the belief that this would unlock a meaningful opportunity for us. When you talked about, we said that FPDs in our case, it's around 9%, and this has been steady throughout quite a few, let's say, vintages now. We're pretty confident on the product, and we're getting more confident as time goes by. At the same time, you asked about, there is a possible upside when the additional guarantees, the FGTS, as well as the severance package access are implemented. You're right, they've been delayed quite a couple of times. We're being conservative, so we're actually, in our view, we expect them to have some impact on our case in the fourth quarter of the year, provided there are no additional delays.

Eduardo Chedid
CEO at PicPay

All in, we remain pretty positive and product is behaving as expected.

Mario Pierry
Mario Pierry
Analyst at Bank of America

Okay. Chedid, when you talked about the low teens NPLs, are you talking specifically for private payroll, or are you talking about for the entire loan book?

Eduardo Chedid
CEO at PicPay

The entire loan book. Well, that's over time when we stabilize the portfolio, right?

Mario Pierry
Mario Pierry
Analyst at Bank of America

Just to be clear, you had an NPL ratio of 8.9% this quarter, 7.2% previous quarter, and you expect this to normalize around low teens.

Eduardo Chedid
CEO at PicPay

That's correct, Mario.

Mario Pierry
Mario Pierry
Analyst at Bank of America

Okay. Then on Kovr?

Eduardo Chedid
CEO at PicPay

The expected net income, that was your question, right?

Mario Pierry
Mario Pierry
Analyst at Bank of America

Correct.

Eduardo Chedid
CEO at PicPay

Yeah. Mario, we could talk about what we expected last year. As we still didn't have full clearance and approval, I don't have access to how they're performing this year. What I can share with you is that with the products that we distribute from them, we're performing pretty well. We should expect that from their total portfolio, but I'm talking mainly from my own perspective. I cannot be precise now, but hopefully in a few weeks, as soon as SUSEP, the insurance regulator, approves and Central Bank also, we'll be able to actually give you much more visibility on what we expect for the full year.

Mario Pierry
Mario Pierry
Analyst at Bank of America

Okay. Thank you very much.

Operator

The next question is from Dan Dolev with Mizuho.

Dan Dolev
Dan Dolev
Analyst at Mizuho

Hey, guys. Can you hear me?

Eduardo Chedid
CEO at PicPay

Yeah.

Dan Dolev
Dan Dolev
Analyst at Mizuho

Great results here. Really strong first quarter. Congrats from our end at Mizuho. I have one question. I caught some of the comments you mentioned about AI and how accretive the initiatives are to margin. Can you maybe elaborate a little bit on what you're doing in AI specifically, and what the opportunities do you see down the road? Congrats again.

Danilo Caffaro
VP of Consumer Banking at PicPay

Hi, it's Danilo here. We've been using AI and LLM models since the beginning of 2023. Our first use case was around customer service. We continue to adopt AI heavily on our entire value chain actually. From customer service to credit, engineering, marketing, and so on. We currently have our own version of OpenClaude running on a multi LLM stack with most of our employees using on a weekly basis. Of course, it's still early days, but we are already seeing significant performance improvements on AI first teams. As we mentioned in the release, this is one of the factors that enables us to continue growth, to grow the business, while keeping the headcount flat since October 2025. We believe that it will be a major boost of our operating leverage for the upcoming quarters.

Dan Dolev
Dan Dolev
Analyst at Mizuho

Great. Thank you, and congrats again.

Operator

The next question is from Ricardo Buchpiguel with BTG Pactual.

Ricardo Buchpiguel
Analyst at BTG Pactual

Hi, everyone, and thank you for the opportunity of making questions. Most of my questions were already answered, so I have just one here. If you could provide an update on the new Desenrola program, giving a bit more color on how origination under the program has been evolving, how important do you feel that this program could be to mitigate any potential delinquency risk, depending on how the macro unfolds? Thank you very much.

Eduardo Chedid
CEO at PicPay

Thanks. Well, we see it positively, and we actually entered early on. We're quick to begin. The program originations are responding well. We already have converted about 10% of the potential that we believe we can do that. Then we have the collateral for 50% of the renegotiated value granted by the federal government fund. I'd say that in terms of final, let's say, impact it's definitely an upside, but I wouldn't say that it's relevant for the full year results. Although we remain positive on it, and we've been originating quite well.

Ricardo Buchpiguel
Analyst at BTG Pactual

No, that's super clear. If I may do a follow-up here. You mentioned that you are seeing that the commitment to that payment has been more or less stable in recent months. There is overall a concern that disposable income could be impacted by decelerating economy, right? It'll be interesting to see how you guys factor this risk in your underwriting. If you expect that we can have an increase in delinquency, not necessarily for PicPay, but the market as a whole towards the second semester of this year or perhaps next year. Thank you.

Eduardo Chedid
CEO at PicPay

I'd say that generally speaking we are expecting some increase in delinquency for the market overall. As I said before, we don't see anything that is sudden, so it's probably a very gradual thing. If you look at our own portfolio and our, let's say, ability to, let's say, navigate those, that backdrop. I'm going back to the diversified revenue mix as well as a more secured credit portfolio. If you look at how we're growing the credit portfolio, we are mainly growing that through low risk loans, mainly collateralized, as well as mature credit card cohorts. We expect a reasonable stability both on credit risk as well as on Stage 3 formation, let's say around 4%.

Ricardo Buchpiguel
Analyst at BTG Pactual

Perfect. Thank you.

Operator

The next question is from Craig Maurer with FT Partners.

Craig Maurer
Analyst at FT Partners

Hi. Thanks for taking the questions. Good to hear from you, Eduardo and André. Wanted to ask again about the private payroll loans. I wanted to understand the positioning you think this product is taking with the consumer. Is this, do you think, muting growth in credit card in any way? Also, do you think that the private payroll loans are a better path to principality versus, say, the credit card? Trying to understand how this changes the relationship with the consumer in terms of ongoing product usage.

Eduardo Chedid
CEO at PicPay

I'd say that, the first half of your question, we see lots of people who are, let's say, out of the credit market taking that product. Somehow it's additional. If you look at the PicPay case specifically, I'd say that it's taken, let's say, share from personal loans instead of credit cards. I think that one of the key aspects in our case is the ability to actually distribute that product digitally. If you compare our distribution with what we've been hearing from the average of the market, we've been able to distribute more in-app than most of the other players, which just shows that the engagement with the app is basically an important tool to distribute. Clients, I'd say that in private payroll loans clients, the trend is to actually increase PicPay usage as well as product adoption.

Eduardo Chedid
CEO at PicPay

We've seen that with the current clients, so it's not only a factor of the direct benefits from the product, but an overall driver of engagement and adoption of other products.

André Cazotto
Strategy, M&A, and Investor Relations Officer at PicPay

Craig, just to complement here, currently around 70%-75% of all private payroll loan origination, it's already done through our app. Basically, this is helping to increase the cross-selling of additional products like insurance, and of course, this is going to be extremely helpful in terms of creating better engagement and faster principality for our customer base.

Craig Maurer
Analyst at FT Partners

Okay. Thank you.

Operator

The next question is come from Dan Perlin with RBC.

Dan Perlin
Dan Perlin
Analyst at RBC

Hey, guys. Good evening. Two quick ones here. The commentary around AI and headcount growth not materializing now because you've got all these efficiency gains. I'm wondering, one, are you planning on leaning in on those cost savings into marketing or kind of higher risk, private payroll opportunities that you talked about? And then secondly, the net interest income growth guidance of 12% versus the 5% gross profit growth. I'm just assuming that that is a function of your kind of mix shift such that your credit loss allowance is just stepping up in that period of time. Thanks.

Eduardo Chedid
CEO at PicPay

Hi, Dan. First part of your question. Definitely, we're leaning in on AI. Besides, Danilo already mentioned that we've been running headcounts flat since October. If you even got only the avoided hiring that we had on the customer service platform. In the last two years, we avoided hiring an additional 3,000 new customer service reps. It's not only about having it flat, but also avoiding some meaningful new hires. On your point of, part of those efficiency gains will be deployed on growth and part will be converted into better margins. Yes, we definitely plan to invest some of that additional productivity.

Dan Perlin
Dan Perlin
Analyst at RBC

That's great. On the net interest income guidance versus gross profit growth guidance, just is that a function of just a step-up in your credit loss allowances that you've got going into the next quarter? Is there something else that I'm just?

Rodrigo Couto
CFO at PicPay

No, that's correct.

Dan Perlin
Dan Perlin
Analyst at RBC

Okay.

Rodrigo Couto
CFO at PicPay

We do expect our credit loss allowances to be a little higher than our Net Interest Income growth, all within the dynamics of the portfolio and within the risk return parameters. Yes, we do expect it to be a little higher.

Dan Perlin
Dan Perlin
Analyst at RBC

Great. Thank you so much.

Operator

The next question is from Neha Agarwala with HSBC.

Neha Agarwala
Neha Agarwala
Analyst at HSBC

Hi. Thank you for taking my question. Just a quick one. You mentioned that the NPLs will be in the low-teen levels. Given that your book is almost 70% secured, why should we continue to see a pickup in NPLs? Maybe a pickup for a quarter or two because of the private payroll, and then an easing as the economy improves and rates decline. If you can split for us how much of the increase in the NPL ratio and the cost of risk is driven by the strong growth in the private payroll, that will help us understand what is the core dynamic for your remaining part of the portfolio. Thank you so much.

Rodrigo Couto
CFO at PicPay

The increase in the NPL ratio is basically a catch-up of things that are already in our Stage 3. If you look at our Stage 3 as a proportion of the portfolio in the first quarter, it was 12.7%, while NPL was 8.9%. The 8.9% will end the year in the low teens. The 12.7% will end the year in the mid teens. If you want to see what's going to happen with NPLs, just look what's happening with the share of Stage 3, which is ultimately a better metric because it captures other forms of increasing risk that are not captured in NPL 90 days. The levels we see of NPLs in the share of Stage 3, again, are highly influenced by our write-off policy, which is our 360 days.

Rodrigo Couto
CFO at PicPay

There are players in the market that do 270, there are players in the market that do 120, and that results in very different levels of NPLs. Ultimately, also, as we find more opportunities to grow in private payrolls, the NPLs for that product will also increase, or that the credit losses will increase, but the revenues will increase by at least double. Ultimately, we're going to make more money, have higher returns. Just taking, let's say, a credit loss metric without looking at what's happening in revenues doesn't tell the whole story. The way we manage is by looking at both things in conjunction.

André Cazotto
Strategy, M&A, and Investor Relations Officer at PicPay

Yeah. Pretty much, let's say, keeping our guidelines in terms of loss absorption ratios, that should be between 40%-60%, and minimum ROEs at 30%.

Neha Agarwala
Neha Agarwala
Analyst at HSBC

Understood. I understand that NIMAL is a more relevant parameter than just looking at what's happening with the cost of risk. What is a bit confusing is that given that majority of your book is secured, when I look at other players who have a similar composition, their NPLs are not at similar levels. I just wanted to understand why is your NPL. I understand that Stage 3 is higher, so the natural progression will be you expect that the NPL for the book will be in low teens by the end of the year. We have a progression throughout the year. I just want to understand why these level of NPLs. Are you seeing a much worse asset quality in the private payroll than what the system is seeing, or is there any other pockets where you're seeing more pressure for your clients?

Rodrigo Couto
CFO at PicPay

Again, comparisons of levels of NPLs are very difficult to make, especially in the Brazilian market where write-off policies are pretty different.

Neha Agarwala
Neha Agarwala
Analyst at HSBC

Okay.

Rodrigo Couto
CFO at PicPay

It's hard to compare the levels. What's driving the increase in the NPL ratio, it is partly a maturation of the private payroll loans, but they're not the big contributors here. It's the secured portfolio that is responsible for the majority of the NPLs and of the share of Stage 3. Again, I think going back to the comment that was made in another question that our gross profit grows by less than our net interest income, you'll see already in the second quarter our NPLs close to where they should be and closer to our Stage 3 proportion, and then they change only slightly throughout the rest of the year.

Eduardo Chedid
CEO at PicPay

Neha, just complementing here. If we look at a product by product and cohort by cohort analysis, we're not seeing any great deterioration on any of those pockets. It's just a compounded effect of many different things. It's the credit portfolio mix. It's also the fact that, yes, the private payroll loan is a secure product, but it's not a no risk product. It's a low risk product. As we keep growing the portfolio, there is going to be some delinquency there as well. In every sense, a much more secure product than the unsecured ones.

Neha Agarwala
Neha Agarwala
Analyst at HSBC

Understood. In terms of loan mix, probably looking at 75% secured by year-end, given the growth that you're having in the private payroll. Make sense?

Eduardo Chedid
CEO at PicPay

No. That shouldn't be the case because we still grow quite well, especially on credit cards, which are not secure. It's definitely going to increase from 54%, but definitely not going to be around 70%.

Neha Agarwala
Neha Agarwala
Analyst at HSBC

Okay. Perfect. Thank you so much.

Operator

The question and answer section is over. We would like to hand the floor back to Mr. Eduardo Chedid for the company's final remarks.

Eduardo Chedid
CEO at PicPay

Guys, thanks a lot for being here with us again. I think that we've delivered a strong first quarter. As you will see, guidance for the second quarter means that we remain positive and I'd say that the main message here is that we hold the high conviction on delivering full year results. That said, I'd just like to thank you guys and we'll see you guys in the next earnings call.

Analysts
    • André Cazotto
      Strategy, M&A, and Investor Relations Officer at PicPay
    • Craig Maurer
      Analyst at FT Partners
    • Dan Dolev
      Analyst at Mizuho
    • Dan Perlin
      Analyst at RBC
    • Danilo Caffaro
      VP of Consumer Banking at PicPay
    • Eduardo Chedid
      CEO at PicPay
    • Gustavo Schroden
      Analyst at Citi
    • Mario Pierry
      Analyst at Bank of America
    • Neha Agarwala
      Analyst at HSBC
    • Ricardo Buchpiguel
      Analyst at BTG Pactual
    • Rodrigo Couto
      CFO at PicPay
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