PagSeguro Digital Ltd
NYSE:PAGS
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PagSeguro Digital Ltd
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Hello, everyone, and thank you for waiting. Welcome to PagSeguro's Fourth Quarter '18 and Full-Year 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. The replay will be available shortly after the event is concluded. Those following the presentation via webcast may post their questions on PagSeguro's website.
Before proceeding, let me mention that any forward-looking statements included in the presentation or mentioned in 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 recorded in PagSeguro's presentation or discussed on this conference call. For a variety of reasons, including those described in the forward-looking statements and Risk Factors section 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 these non-GAAP financial measures to the most directly comparable GAAP measures are presented in the last page of this webcast presentation.
Now, I'll turn the conference over to Mr. Ricardo Dutra, CEO. Mr. Dutra, you may begin your presentation.
Hello, everyone, and welcome to our fourth quarter and full year 2018 results conference call. Today, I have here with me Eduardo Alcaro, our CFO; and André Cazotto, our Head of Investor Relations.
Before we move to the operation and financial metrics, we start the presentation highlighting the great achievements of the year. It was a year of intense competition with our competitors belatedly trying to copy our business model. When we did our IPO, potential investors were so surprised with our stall in growth that some were skeptical about our ability to deliver the numbers that we are committing. Having said that, I'd like to remind you that 2018 IPO projections that we shared with sell-side research analysts in September 2017 before the IPO and the actual numbers we delivered in 2018. Net income and net revenues 17% higher than the projected shared with sell-side research analysts. TPV 19% higher than the projected shared with sell-side research analysts.
Moving to the next slide, these are the main highlights of 2018. Our full year GAAP net income reached BRL 910 million, up 90% year-over-year. And non-GAAP net income BRL 1.068 billion, a 122% growth year-over-year. Our non-GAAP net revenue reached BRL 4.2 billion, up 67% year-over-year. Our TPV reached BRL 76 billion, growing BRL 38 billion or 98% year-over-year, the largest growth among listed payment [ bills ] in Brazil. We also ended 2018 with 4.1 million active merchants, adding 1.3 million new clients throughout the year. These figures reinforce we are on the right path with a broad ecosystem and also our execution capabilities.
Non-GAAP net margin of 25.4%, an increase of 6.4 percentage points compared to previous year, showing our strong commitment to growing in a sustainable way and with [ earner's ] accretion. Engagement is a key metric for the company, given that almost 80% of our merchants never accepted a card before. Our goal is to be the merchants [ line of modern destination.] In December 2018, more than 20% of our active merchants were already using at least 1 additional product beside the product services. We also ended 2018 with the best rated app, 4.8 stars on Google and Apple stores according to more than 300,000 reviews, reinforcing our commitment in delivering top class user experience.
Talking about our vendor [combination], PagSeguro had the strongest brand in Brazilian payment [indiscernible] with 7.5x more searches than second player according to Google Trends financial category. Being the first mover in mobile-first with an new applicable line distribution through UOL that holds 84% of the Brazilian [indiscernible] brings the natural advantage to PagSeguro. Talking about our ecosystem, we ended the year with more than 130 [dates in our ] app and 15 new main products launched such as due payments, Mobile top up, lending, QR Code and instant transfers, among others that help to increase customer engagement. We also launched 3 new POS devices, Minizinha Chip, Moderninha Plus and Smart POS. PAGS offers the most complete range of terminals in the Brazilian market, which also helps us to reach more clients.
Our net cash used in operating activities was BRL 25.7 million negative close to breakeven after adding back the repayment of BRL 1.7 billion in early payment receivables from issued banks. We continued to observe a higher adoption of our ecosystem being translated in more transactions. We ended Q4 with an average spending per merchant of BRL 6.2 thousand up 19% year-over-year. We believe the adoption of additional functionalities through the additional account will be translated in higher [indiscernible] and more transactions.
Finally, PagSeguro has proven that operating and winning in the longtail requires an online and mobile approach that is totally different from the traditional required business model, any competitor that were attracted to the market after our IPO. We operate in a brand-new market that we 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 5, we have our total payment volume that reached BRL 24.6 billion in the fourth quarter, an increase of BRL 11 billion, up 81% year-over-year and BRL 4.4 billion or 22% quarter-over-quarter, accelerating when compared to the BRL 3.4 billion or 20% growth observed in Q3. This growth is the result of a greater penetration of our ecosystem in longtail combined with the trend of cash to plastic conversion that it is still in the beginning of our merchant base, with lots of room to grow in Brazil with the upside of cross selling products and services to our clients. The net take rate which is the blended take rate net from transaction's cost such as interchange, processing and card fees reached 3% in Q4 2018 or 25 basis points down when compared to previous quarter. Important to highlight that take rate is the result of all payment methods and may change according to the payment mix of credit and debit. The 25 basis points decrease does not mean there is MDR price pressure as you can see on top right of the slide. Our prices are public and transparent and anyone can check we are not taking our MDRs down. Most of the contraction is related to product mix. In Q4, due to seasonality with the [indiscernible] salary and consumer behavior, in related terms, there was an increase in debit card volume, and a decrease in credit card volume with installments that generates the prepayment income. That's the reason why take rate for our financial income was impacted even with no changes in the price of the discounted rate of 2.99% per month. Due to this effect, changing the mix, we can see there was a 21 basis points decrease in financial income take rate from 1.981% to 1.70% from Q3 to Q4.
On the chart below, we see the number of active merchants. Just remember the criteria used internally, active merchants are those who made at least 1 single transaction in the last 12 months. We ended in fourth quarter with 4.1 million active merchants adding almost 1.3 million new merchants in 1 year, which represented an increase of 48% year-over-year. Quarter-over-quarter, we added 308,000 new merchants in line with the number that we commented in last conference call. Important to mention that in Q4, we intensified promotional campaigns given the Black Friday and holiday seasonality. We will continue evaluating the best way to win the merchants, considered a lifetime value.
Next chart, we have the evolution of our average spending per merchant that reached BRL 6.2 thousand in Q4, a growth of 19% year-over-year and 12% quarter-over-quarter. Also, accelerating when compared to the growth observed in Q3. This is explained by the higher adoption curve of the electronic payments in our merchant base, which is an expected trend, higher engagement in our ecosystem being converted in more transactions in TPV. Just reminding what I said in my initial remarks, most of our merchants did not accept cards before joining PagSeguro.
On the next slide, we show the evolution of our TPV growth compared to other [ lease ] acquirers in Brazil. It shows we are growing faster than acquirers that are working in the traditional SME, in corporate markets and it proves we are on the right track and executing our strategy accordingly. Now I would like to pass the floor to our CFO, Eduardo Alcaro.
Thanks, Ricardo, and hello, everyone. Before I start on Slide #7, I'd like to revisit the guidance shared in our previous conference call.
Our Q4 GAAP net income and non-GAAP net income reached BRL 303 million and BRL 323 million, respectively. For the full year, our GAAP net income and non-GAAP net income reached BRL 910 million and BRL 1,061,000,000, respectively. Delivering numbers above the top of the guidance shows our focus in strong results and EPS accretion.
Now before I go through the financial metrics, I'd like to mention that in the fourth quarter of 2018, we had a total of BRL 20.6 million of non-GAAP items, mainly related to our stock-based long-term incentive plan in line with the guidance that we provided you in our last conference call in November. For more details, before going 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 of this webcast presentation.
On the top left of Slide #8, our non-GAAP total net revenue reached BRL 1,267,000,000 in the fourth quarter, up 53% year-over-year. Moving to the top right, we have our main revenue stream composed by transaction services or mainly MDR collected from merchants, financial income from the prepayment and hardware sales.
In the fourth quarter of 2018, transaction and services represented 58%; financial income 34%; and hardware sales only 8% over total net revenue that continued to trend down, especially because we intensified the promotional campaigns during the Q4 given the holiday seasonality and in related terms going forward, should reach low single digits. On the other hand, for the full year, we know that our revenue from transaction activities and other services grew 7 percentage points compared to 2017.
On the chart below, we present our non-GAAP total cost and expenses decreased 0.8 percentage points year-over-year, and the fourth quarter at 3.3% over total TPV. Related to non-GAAP admin expenses over total TPV reached 0.3%, a decrease of 0.1 percentage point year-over-year. For the full year, total cost and expenses reached 3.5% over total TPV, a decrease of 1.3 percentage points year-over-year. Related to non-GAAP admin expenses over total TPV reached 0.3%, a decrease of 0.1 percentage point year-over-year.
On the next slide, we show our non-GAAP net income growth. In the fourth quarter, we reached BRL 323 million, an increase of BRL 135 million and up 72% year-over-year. The non-GAAP net margin reached 26%, an increase of 2.8 percentage points year-over-year. For the full year, PAGS reached BRL 1,068,000,000, an increase of BRL 589 million and up 123% year-over-year. The non-GAAP margin reached 25%, an increase of 6.4 percentage points year-over-year. This showed the unique profile of PAGS in delivering growth and profitability.
On Slide 10, regarding our cash flow. Our net cash used in operating activities in the year ended December 31, 2018 totaled BRL 1,763,000,000. It is important to mention that adding back BRL 1,737,000,000 from notes receivables for which we received early payment from issuing banks as of December 31, 2017 that were repaid during 2018 with our IPO primary share proceeds. Our net cash used in operating activities would have been negative BRL 25.7 million, very close to a breakeven level after all the investments in working capital throughout the year.
PAGS ended the year with receivables from credit card issuers that are very liquid in the amount of BRL 8.1 billion and payables to merchants of BRL 4.3 billion, a net working capital of BRL 3.8 billion plus almost BRL 2.8 billion in cash.
Finally, on the next slide, we highlight the license issued by the Central Bank. On December 2014, PAGS applied to the Central Bank authorizations to operate as a payment institution, both as an acquirer and as a digital payments account service provider, an issuer of prepaid electronic money. In October 2018, the Brazilian Central Bank granted all licenses applied in December 2014. More recently, in January 2019, PAGS announced after the approval from the Central Bank [ in Cade ] the Brazilian Antitrust entity, the acquisition of [indiscernible] a Brazilian almost nonoperating bank that holds a banking license. The object of this banking license is day-to-day business to simplify the offering of financial product and services to our customers.
Now, I would like to hand over back to Ricardo.
Thank you, Eduardo. On Slide 12, we highlight our road map of products delivered through 2018. It was an intense and hard-working year and we are glad to say that we have now the most complete ecosystem for longtail [marks], and we are just starting. Being an independent company allows us to think exclusively on our clients financial needs by delivering growth and profitability simultaneously and offering unique ecosystem through our digital accounts. We expect to deliver in 2019 some critical new enhancements to take over ecosystem to the next level. Before you ask, we cannot disclose detail at this point due to competition that is systematically trying to copy us. However, we will provide you more color in the coming quarterly calls.
On Slide 13, we introduced TILIX. On January, PAGS acquired 100% of TILIX, an app that helps managing new payments. From utility to text deals, TILIX offers a simple and user-friendly interface to manage new payments and will be fully integrated in our additional account app in the following month.
On the next slide, we have mapped our portfolio of functionality already available to our merchants. PagSeguro has been building a unique and world-class payment ecosystem focused to delivery a frictionless NOI and physical payment experience. Recently, we launched our lending project, PAGS Capital. We just started and we are still testing our model with very small pool of clients, eligible according to some [criteria] such as accounts [ history ], TPV, payment frequency, and so on. On average, PAGS charges rates almost 3x lower than traditional banks. We are still in baby steps and for now, this product is marginal for our financial results. And we expect it to increase the stickiness and loyalty for our clients. In November, we also complemented our cash in and cash out process with additional accounts, allowing [links] and transfers from and to a Brazilian bank.
On the next slide, you can see the strengths of our bank. PAGS is the first mover in this market, and in fact, it can access [UOL], the third largest online audience in Brazil, only behind Google and Facebook, with more than 84% Internet reach as of October 2018 to promote our products and solutions in longtail market, to help PAGS to reach a unique vendor combination. In the past 12 months, according to Google Trends, featuring the financials category, we have an average of approximately 7.5x higher searches than the second player. PAGS reached a level of brand awareness where the business has a word of mouth effect. And consequently, we have lower acquisition cost when compared to our competitors. Being the first mover, having a full liberty [indiscernible] and low-cost ecosystem, with 4.1 million active merchants, mobile-first, strong brand, focus and user experience, the best rated financial services app in Google and Apple stores and now an applicable online distribution through UOL, brings a natural advantage and leadership in longtail market.
Finally, on last slide, we show our guidance for the full year 2019 with no changes compared to what we presented last November. We expect to deliver a GAAP net income in the range of BRL 1.182 billion to BRL 1.36 billion and a non-GAAP net income between BRL 1.322 billion to BRL 1.5 billion. Management is committed to the top of the guidance, which means 40% growth over 2018. And the managerial bonus is tied to the top of the guidance.
Now we finish our presentation, and we start the Q&A session.
[Operator Instructions] Our first question comes from Craig Maurer, Autonomous.
I wanted to understand the impact of the cost [ and does it have a ] change on your numbers and how that showed up in the quarter?
This is Ricardo. Thank you for the question. We are passing this decrease in price, the cost so to say for the new merchants. But for the merchants that we already had in the base, we are charging the same prices that we had before the [ capital ] change. So the full price is 2.39% for the old customers and 1.99% for new customers. So going back to your question, for the new customers, we are having this promotion for the first 12 months of these customers with PagSeguro.
Our next question comes from Bryan Keane, Deutsche Bank.
Yes. I wanted to ask, there was lots of promotions in the fourth quarter. So just curious on what happened to activation rates due to some of the discounting? And then secondly, what are you guys thinking now for net new merchant adds going forward in 2019?
Bryan, thank you for the question. So we didn't see a decrease in activation when compared with Q3 and Q2. We know that part of the devices that people bought, they will activate in January, because probably they will receive in January or because they decided not to do in December. But as we did not decrease to a very low price to a very low price where people just buy and leave it without using the device, we didn't see the decrease in activation rates.
Okay. And then, any thoughts on going forward on the new merchant adds, what you guys are planning to do for the quarter?
Yes. We -- according to our business plan, we plan to end 2019 with 5.1 million active merchants. So it's going to be a growth of 1 million this year. If you have any change you would like to know in the following calls, but so far, we are sticking with this plan and we will be expecting to deliver 5.1 million active merchants by the end of 2019.
And Bryan, as a matter of fact, this 5.1 million active merchants is exactly the same number that we shared with you when we did the IPO for 2019.
Okay. And this is my last question on net take rate. It sounds like it was mostly mix and not anything you guys are doing with price. But just could you maybe help us understand that to make sure that's correct?
Yes Bryan, most of the contractions related to product mix. If you look at the chart that we presented, chart #5, you can see that from the 25 basis points decrease, 21 basis points came from the financial income. So most of the impact comes from the mix change. If you look at our website, you can see that we didn't change the price at all. Also worth to say that we did not change the financial income rate that we charged, the prepayment rate, 2.99%, it was really -- the big impact was because of the change in the mix. I guess, it is also worth to say that our net take rate is still very high when compared to other players in the market and shows that we are in a totally different type of merchants. We're talking about 3%, while others are talking about lower than 2% or even lower than 1%. So just to highlight that we're in a very different market, we are focused on the longtail and going back to the question, yes, we changed mainly due to change in the mix.
Next question from Rafael Frade, Bradesco.
My question still relates to the mix, but not necessarily the [mix] but I understand that the interchange on that went down this quarter. I would expect to see a stronger reduction in transaction costs, just to understand why -- if there is any other thing here that was impacted in the transactional costs in the quarter? And second thing would be related to the guidance for 2019. So you reiterated the guidance, but given the strong results that you have been delivered so far, it seems that the guidance implies a big deceleration over the year. I just, if you could share some thoughts about what you're seeing in the guidance in terms of maybe are there more pressure in price or in costs or anything that could help us on the guidance for 2019?
Thank you for the question. I'll talk about the net interchange [ egg basket ] and Eduardo is going to answer about the guidance. As I said before, part of the advantage that we're having with lower -- that interchange that we are passing through the new per margins as a promotion. But for our clients that we already had in the base before, we are [changing ] the full price. When you look at this chart in the Slide #5, if we had more installments transactions, we would see a higher take rate in the financial income portion, but also in the net revenue from transaction because the MDR is higher there. So when you have more transactions than debit, what happens is if in the absolute numbers, we see a decrease in the net transactions from -- net transaction services. So let me go back to your question and answer it in a different way. We are passing part of these debit interchange to new merchants and not for the old ones. And part of the change in Q4 was because the financial income and the change in the mix. So we are not changing prices. We're not taking MDRs down, not even the MDR for the transaction or for the financial income.
Frade, about the guidance like we said during the presentation, the company is committed with top of the range of the guidance and the management annual bonus is linked to the top of the range of the guidance. The top of the guidance means that 40% net income growth for 2019 and it's 13% above our projections that we shared with sell-side research analysts during the IPO. We believe that this is remarkable after all the noise and players in the market that were constantly trying to copy us. And just to complement, Frade, as you could see in our numbers, we can identify subsidies on the terminals and we are also investing in new products and solutions. So at the end of the day, our primary focus is EPS accretion and we want to keep winning our merchants, thinking about their lifetime value. And launching new products and functionalities, we expect higher engagement and adoption of our ecosystem, benefiting from the migration from cash to plastic. And this is a real opportunity for us to cross-sell additional financial services such as lending, QR code payments and you can name it, all the products that we launched throughout the year.
Next question comes from Felipe Salomao, Citibank.
I also have a question on the net take rate coming from financial income. So you mentioned that the contraction was driven by, I guess, a seasonal reduction on the number of installment transactions. And that price had remained unchanged and as we can easily check on the website. But my question is, why do you think that we had this change on transaction mix during 4Q 18? What are the qualitative reasons for the average customer being paying less with credit card or installment transaction and more with debit cards? And if you think that we should see a migration to let's say, to the historical average in the next quarter, then should we see the installment transactions then becoming more relevant as a percentage of the total mix of the first Q of 19? That's my first question.
Okay. In Brazil, it's very usual that in Q4 people use more debit than credit because of the seasonality and also because the consumer behavior. In Brazil usually, people receive the 13th salary in December. So they have money to use debit cards instead of credit cards. So it's a very seasonal movement that we see in the industry in the Q4, so more debit transactions than compared to Q3 and Q2 and Q1. To give you more color on looking forward, in January we are seeing better take rates, higher than the 2%. It is not the same of the Q3 because it's still having debit card transactions, but it is between the Q3 and Q4. So that is not a trend that is going down month after month. So that's what we see so far.
Okay, perfect. The second question that I had is actually regarding the banking lock. There has been a lot of debate about what's going to happen if the banking locks, the central bank published a piece of regulation, I mean, pretty much regulating that kind of contract, but the industry has been discussing about it, the central bank has decided to postpone the presentation of the new banking lock regulations. Could you please share the first, I guess, an update or what are your views on what should be the final outcome of this regulatory change for PAGs and for the industry as a whole?
For PAGS at the end of the day, it's a neutral impact first because many of our merchants they are let's say, or under-banked or under-served by the traditional financial institutions. So let's say, that these are not the kind of merchant that has let's say, a loan higher from a traditional bank. And once that bank remembered that 100% of our merchants they own our digital accounts. So 100% of the transactions are paid directly through the bank digital accounts. So if this merchant has another banking account, he can transfer from our digital account directly to a traditional bank. So given that we have this vertical closed book, let's say these discussions around the banking lockup has been neutral for the company, okay?
And just to complement, it's important to emphasize that our business model only allows merchants to settle the installment team D+1, D+14, or D+30, so the prepayment is already automatic, and we do not offer the options to receive any installments. And also think about the longtail [ merchant facilities ]. They are not sophisticated and last-price [sensitive] in their prepayments, so their priority is really to receive as fast as possible. So remember that for a merchant that makes BRL 50 per day or BRL 20,000 per year is not even efficient for them, from a cost standpoint, to be at only BRL 50 receivables.
Next question comes from Josh Beck with KeyBanc.
I wanted to ask about, I think you said a net add number of 1 million for 2019 which would imply about 250,000 per quarter. It's certainly a little bit less than what we've seen in 2018. Is that explained by the fact that you are based with merchants who are larger and it's simply harder to produce net adds or are there other factors at work there?
Thank you for the question. We're not seeing deceleration. We cannot disregard there is more competition for longtail, but by far, we are the leader in this type of market in longtail portion, longtail market. So yes, we have more players in the markets and part of the net adds for sure, they will capture, but we still are the leader talking about $300,000 or 250,000 per quarter is still a good number and when compared with others it's much higher than what they are predicting and reporting. So it's not because we are going up in the pyramid and getting larger merchants. It is natural that you have more players into the market and we are kind of dividing these new net adds with other players in the market.
If you just allow me 1 additional commentary, Josh, it's very important to mention that we are not stealing clients from other players or any other players stealing clients from PAGS. Our churn rate remains pretty much stable, okay. I think that yes we have more competition in terms adding new merchants to the system and like we always discussed before, it is still a big blue ocean in this market according to public data, we should have in Brazil around 11 million, 12 million market merchants combined with more than 20 -- 25 million individuals. And for sure, I think that it's not a markets for one winner takes all. I think that we can have competition, but likely Ricardo mentioned, at the end of the day PAGS will continue to be the leader in this market.
And Josh, just a final comment. When we did our IPO, we had a business plan of 5.1 million active merchants by the end of 2019 and we continue to be comfortable with this number by the end of 2019.
Towards the back of your slide presentation, you walk through a number of different features, things like dual payment, Mobile top up, peer-to-peer payments, a number of others. I'm just wondering can you give us an update on maybe how many of your merchants have updated -- sorry, have adopted one of these services and really what's the interest level if you could share any update there, that would be great.
Yes, Josh. When you look at December figures, more than 20% of our merchants are using at least one of these features, some of them are using more than 1, but it's a little bit more than 20%. It is increasing every month. Part of this features may help us in terms of financial variety, it's better to be relevant for the business. We see it as a way to increase the loyalty, increase the stickiness, and have a more completely consistent for the longtail, because at the end of the day that's what makes us different than other players into the market. We don't have any constraints in launching products to compete with parent companies and things like that. So going back to your question, 20% use it in December and it is growing month after month.
Next question comes from Domingos Falavina with JPMorgan.
It's actually 2 questions. One is a follow-up to Frade's question. [ If I heard you correctly he ] basically was bringing the point that interchange was capped starting in October, and you mentioned that the reason we didn't see it in the income statement is because you passed on the balances to clients. But what my problem here with [compiling ] that is you book the interchange as a cost. So we should see the operating expenses, specifically cost of sales coming down and not one being netted out of debit money revenues. So my first question is, why didn't we see this cost line coming down and am I understanding wrongly how you basically book this accounting on your income statement, and if you could add [indiscernible] mention that costs were pressured by marketing campaigns and et cetera. So which line exactly in the book, within the line, which part of the marketing expenses is there?
This is Ricardo speaking. When you look at the cost of transactions, we don't have only [see the change] interchange feeds there, we have also processing costs and we have card scheme fees. So it's only that -- the interchange is the biggest part of the equation, but is not the only part of the equation. And about marketing expense, marketing expenses they are booked in the marketing expenses line. There is nothing to do with the cost of transaction. So cost of transactions is processing, is interchanged and is also cards scheme fees.
So I guess, my question is, I'm correct in understanding that the discounts are passed on to clients, does not explain why the costs and service -- cost of service did not come down with the lower interchange.
As Ricardo said, we're passing part of the savings that we're having to new customers, by charging 1.99% per month, and we are not changing the 2.39% that we have for the existing base. And you can see by our website since our prices are public.
Okay. The second question is that if while I understand the players in different segments, I just wanted to hear you talk about the competitive landscape, you're obviously on the street, you have a very large footprint. I'm sure, you do have somewhat large [quarter]. My question is more of the qualitative side. Are you seeing -- did you see competition worsen since September to December and December to now February, how would you comment if you were to separate the competitive of working in large merchant and SME versus smaller merchants.
We are seeing the competition similar to what we had last year with some players decreasing the price of devices. We are well positioned in terms of the features and also in terms of pricing. We are not leading pricings down in terms of devices, but we follow some prices to the point we think it's going to be accretive when we compare the cost of acquisition versus the lifetime value. Competition I would say similar to what we had last year. We don't see that growing. As the opposite some of the brands are not in both categories and things like that. So we didn't see any big changes. We are following -- sticking to the plan as we said, 1 million new merchants this year and similar to what we had in 2018.
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.
Let us conclude the PagSeguro audio conference call for today. Thank you very much for participation. Have a good night, and thank you for using chorus call. Thank you very much, everyone.