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SEC filingRevenue momentum from TPV expansion and banking growth was offset by elevated financial expenses due to increased working capital needs for merchant advances, maintaining stable profitability through operational efficiencies.
The growth in PagSeguro Digital Ltd.'s core activities during 2025 was propelled by higher total payment volume (TPV) and a shift in payment mix toward more installment credit card transactions compared to 2024. This dynamic, combined with recognition of early payment arrangements within our FIDC funds, drove increased activity across revenue lines. These factors explain the expansion in processing volumes, as detailed in Item 7 of Management's Discussion and Analysis.
Financial expenses rose primarily due to the rapid growth of our banking segment and TPV, which heightened working capital requirements for advances on merchants' receivables. To support this merchant financing feature—where we offer early payment of receivables—we incur charges to obtain early payment of note receivables from card issuers and acquirers. Additionally, interest costs related to client deposits and bank accounts contributed to this line item. This increase aligns with the overall TPV growth and is elaborated in the revenue and income discussions below, reflecting the interconnected nature of our payment processing and banking operations.
Other services, including one-time non-refundable membership fees for inventory control and POS device acquisitions by clients, as well as revenues from credit operations, supplemented our income streams. Marketing and advertising expenses are allocated between cost of sales and services and selling expenses, while other expenses are distributed across cost of sales and services, selling expenses, and administrative expenses. These allocations support our operational scale as we expand.
Looking ahead, while administrative expenses are expected to rise in the short term due to growth investments and public company compliance costs, they are projected to decline as a percentage of total revenue and income over the medium term as the business scales. This outlook underscores our focus on efficiency gains to support sustained profitability.
Overall, these drivers illustrate how TPV-led expansion and banking scale create both opportunities and cost pressures, with working capital demands from merchant advances being the defining tension. Investors should note the qualitative linkage between volume growth and expense dynamics, positioning PagSeguro for medium-term margin improvement as efficiencies embed.