FORM 20-F...Av. Brigadeiro Faria Lima, 1384, 4º andar, parte A São Paulo, SP, 01451-001, Brazil...

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

for the fiscal year ended December 31, 2018

Commission File Number 1-38353

PAGSEGURO DIGITAL LTD.(Exactnameofregistrantasspecifiedinitscharter)

The Cayman Islands(Jurisdictionofincorporationororganization)

Av. Brigadeiro Faria Lima, 1384, 4º andar, parte ASão Paulo, SP, 01451-001, Brazil

(Addressofprincipalexecutiveoffices)

Eduardo Alcaro+55 11 3038 8123 – [email protected]

Av. Brigadeiro Faria Lima, 1384, 4º andar, parte ASão Paulo, SP, 01451-001, Brazil

(Name,telephone,e-mailand/orfacsimilenumberandaddressofcompanycontactperson)

SecuritiesregisteredortoberegisteredpursuanttoSection12(b)oftheAct:Title of each class: Name of each exchange on which registered:ClassAcommonshares,parvalueUS$0.000025 NewYorkStockExchange

SecuritiesregisteredortoberegisteredpursuanttoSection12(g)oftheAct:None

SecuritiesforwhichthereisareportingobligationpursuanttoSection15(d)oftheAct:None

As of December 31, 2018, there were 162,168,013 Class A common shares (including treasury shares), par value of US$0.000025 per share, and 165,620,861 Class Bcommon shares, par value of US$0.000025 per share, outstanding.

Indicatebycheckmarkiftheregistrantisawell-knownseasonedissuer,asdefinedinRule405oftheSecuritiesAct.

Yes☐ No☒

Ifthisreportisanannualortransitionreport,indicatebycheckmarkiftheregistrantisnotrequiredtofilereportspursuanttoSection13or15(d)oftheSecuritiesExchangeActof1934.

Yes☐ No☒

Indicatebycheckmarkwhethertheregistrant(1)hasfiledallreportsrequiredtobefiledbySection13or15(d)oftheSecuritiesExchangeActof1934duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtofilesuchreports),and(2)hasbeensubjecttosuchfilingrequirementsforthepast90days.

Yes☒ No☐

IndicatebycheckmarkwhethertheregistranthassubmittedelectronicallyeveryInteractiveDataFilerequiredtobesubmittedpursuanttoRule405ofRegulationS-T(§232.405ofthischapter)duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtosubmitsuchfiles).

Yes☒ No☐

Indicatebycheckmarkwhethertheregistrantisalargeacceleratedfiler,anacceleratedfiler,oranon-acceleratedfiler,oranemerginggrowthcompany.Seedefinitionof“largeacceleratedfiler,”“acceleratedfiler,”and“emerginggrowthcompany”inRule12b-2oftheExchangeAct:

LargeAcceleratedFiler☐ AcceleratedFiler☐ Non-acceleratedFiler☒ Emerginggrowthcompany☒

IfanemerginggrowthcompanythatpreparesitsfinancialstatementsinaccordancewithU.S.GAAP,indicatebycheckmarkiftheregistranthaselectednottousetheextendedtransitionperiodforcomplyingwithanyneworrevisedfinancialaccountingstandards†providedpursuanttoSection13(a)oftheExchangeAct.☐

†Theterm“neworrevisedfinancialaccountingstandard”referstoanyupdateissuedbytheFinancialAccountingStandardsBoardtoitsAccountingStandardsCodificationafterApril5,2012.

Indicatebycheckmarkwhichbasisofaccountingtheregistranthasusedtopreparethefinancialstatementsincludedinthisfiling:

U.S.GAAP☐ IFRS☒ Other☐

If“Other”hasbeencheckedinresponsetothepreviousquestion,indicatebycheckmarkwhichfinancialstatementitemtheregistranthaselectedtofollow.

Item17☐ Item18☐

Ifthisisanannualreport,indicatebycheckmarkwhethertheregistrantisashellcompany(asdefinedinRule12b-2oftheExchangeAct).

Yes☐ No☒

Table of Contents

Table of Contents PageFORWARD-LOOKINGSTATEMENTS 1CERTAINTERMSANDCONVENTIONS 2PRESENTATIONOFFINANCIALANDOTHERINFORMATION 2ITEM1. IDENTITYOFDIRECTORS,SENIORMANAGEMENTANDADVISERS 3ITEM2. OFFERSTATISTICSANDEXPECTEDTIMETABLE 3ITEM3. KEYINFORMATION 3ITEM4. INFORMATIONONTHECOMPANY 32ITEM4A. UNRESOLVEDSTAFFCOMMENTS 65ITEM5. OPERATINGANDFINANCIALREVIEWANDPROSPECTS 65ITEM6. DIRECTORS,SENIORMANAGEMENTANDEMPLOYEES 86ITEM7. MAJORSHAREHOLDERSANDRELATEDPARTYTRANSACTIONS 92ITEM8. FINANCIALINFORMATION 96ITEM9. THEOFFERANDLISTING 98ITEM10. ADDITIONALINFORMATION 98ITEM11. QUANTITATIVEANDQUALITATIVEDISCLOSURESABOUTMARKETRISK 120ITEM12. DESCRIPTIONOFSECURITIESOTHERTHANEQUITYSECURITIES 121ITEM13. DEFAULTS,DIVIDENDARREARAGESANDDELINQUENCIES 121ITEM14. MATERIALMODIFICATIONSTOTHERIGHTSOFSECURITYHOLDERSANDUSEOFPROCEEDS 121ITEM15. CONTROLSANDPROCEDURES 122ITEM16. [RESERVED] 123ITEM16A. AUDITCOMMITTEEFINANCIALEXPERT 123ITEM16B. CODEOFETHICS 123ITEM16C. PRINCIPALACCOUNTANTFEESANDSERVICES 123ITEM16D. EXEMPTIONSFROMTHELISTINGSTANDARDSFORAUDITCOMMITTEES 124ITEM16E. PURCHASESOFEQUITYSECURITIESBYTHEISSUERANDAFFILIATEDPURCHASERS 124ITEM16F. CHANGEINREGISTRANT’SCERTIFYINGACCOUNTANT 124ITEM16G. CORPORATEGOVERNANCE 125ITEM16H. MINESAFETYDISCLOSURE 126ITEM17. FINANCIALSTATEMENTS 126ITEM18. FINANCIALSTATEMENTS 126ITEM19. EXHIBITS 126GLOSSARYOFTERMS 128SIGNATURES 131

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FORWARD-LOOKING STATEMENTS

Thisannualreportcontainsinformationthatconstitutesforward-lookingstatementswithinthemeaningoftheU.S.PrivateSecuritiesLitigationReformActof1995,principallyunderthecaptions“Item3.KeyInformation—RiskFactors,“Item4.InformationontheCompany,”and“Item5.OperatingandFinancialReviewandProspects.”

Theseestimatesandforward-lookingstatementsarebasedmainlyonourcurrentexpectationsandestimatesoffutureeventsandtrendsthataffectormayaffectourbusiness,financialcondition,resultsofoperations,cashflow,liquidity,prospectsandthetradingpriceofourClassAcommonshares.Althoughwebelievethattheseestimatesandforward-lookingstatementsarebaseduponreasonableassumptions,theyaresubjecttomanysignificantrisks,uncertaintiesandassumptionsandaremadeinlightofinformationcurrentlyavailabletous.

Thesestatementsappearthroughoutthisannualreportandincludestatementsregardingourintent,belieforcurrentexpectationsinconnectionwith:

• theinherentrisksrelatedtothedigitalpaymentsmarket,suchastheinterruptionorfailureofourcomputerorinformationtechnologysystems;

• ourabilitytoinnovateandrespondtotechnologicaladvancesandchangingcustomerdemands;

• themaintenanceoftaxincentives;

• ourabilitytoattractandretainqualifiedpersonnel;

• generaleconomic,politicalandbusinessconditionsinBrazil,particularlyinthegeographicmarketsweserveaswellasanyothercountrieswemayserveinthefutureandtheirimpactonourbusiness,notablywithrespecttoinflation;

• labordisputes,employeestrikesandotherlabor-relateddisruptions,includinginconnectionwithnegotiationswithunions;

• management’sexpectationsandestimatesconcerningourfuturefinancialperformanceandfinancingplansandprograms;

• ourinterestratesandourlevelofdebtandotherfixedobligations;

• inflation,appreciation,depreciationanddevaluationofthereal ;

• expenses,abilitytogeneratecashflow,andabilitytoachieve,andmaintain,futureprofitability;

• ourabilitytoanticipatemarketneedsanddevelopandintroducenewandenhancedproductsandservicefunctionalitytoadapttochangesinourindustry;

• ouranticipatedgrowthandgrowthstrategiesandourabilitytoeffectivelymanagethatgrowth;

• theimpactofincreasedcompetitioninourmarket,innovationbyourcompetitors,andourabilitytocompeteeffectively;

• ourabilitytosuccessfullyenternewmarketsandmanageourexpansion;

• ourabilitytofurtherpenetrateourexistingclientbasetogrowourecosystem;

• ourexpectationsconcerningrelationshipswiththirdpartiesandkeysuppliers;

• ourabilitytomaintain,protectandenhanceourbrandandintellectualproperty;

• thesufficiencyofourcashandcashequivalentsandcashgeneratedfromoperationstomeetourworkingcapitalandcapitalexpenditurerequirements;

• ourcompliancewithapplicableregulatoryandlegislativedevelopmentsandregulationsandlegislationthatcurrentlyapplyorbecomeapplicabletoourbusiness;

• otherfactorsthatmayaffectourfinancialcondition,liquidityandresultsofoperations;and

• otherriskfactorsdiscussedunder“Item3.KeyInformation—RiskFactors.”

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Thewords“believe,”“understand,”“may,”“will,”“aim,”“estimate,”“continue,”“anticipate,”“seek,”“intend,”“expect,”“should,”“could,”“forecast”andsimilarwordsareintendedtoidentifyforward-lookingstatements.Youshouldnotplaceunduerelianceonsuchstatements,whichspeakonlyasofthedatetheyweremade.Wedonotundertakeanyobligationtoupdatepubliclyortoreviseanyforward-lookingstatementsafterwefilethisannualreportbecauseofnewinformation,futureeventsorotherfactors.Ourindependentpublicauditorshaveneitherexaminednorcompiledtheforward-lookingstatementsand,accordingly,donotprovideanyassurancewithrespecttosuchstatements.Inlightoftherisksanduncertaintiesdescribedabove,thefutureeventsandcircumstancesdiscussedinthisannualreportmightnotoccurandarenotguaranteesoffutureperformance.Becauseoftheseuncertainties,youshouldnotmakeanyinvestmentdecisionbasedupontheseestimatesandforward-lookingstatements.

CERTAIN TERMS AND CONVENTIONS

Aglossaryofindustryandotherdefinedtermsisincludedinthisannualreport,beginningonpage133.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Thefollowingreferencesinthisannualreporthavethemeaningsshownbelow:

• “PagSeguroDigital”orthe“Company”meanPagSeguroDigitalLtd.PagSeguroDigitalLtd.isanexemptedcompanywithlimitedliabilityincorporatedunderthelawsoftheCaymanIslands.

• “PagSeguroBrazil”meansPagseguroInternetS.A.,ouroperatingcompany,asociedade anônima incorporatedinBrazil.PagseguroInternetS.A.issubstantiallywholly-ownedbyPagSeguroDigitalLtd.

• “We,”“us”and“our”meanPagSeguroDigital,PagSeguroBrazilandPagSeguroBrazil’ssubsidiariesonaconsolidatedbasis.

• “PagSeguro”meansourdigitalpaymentsbusiness,whichisoperatedbyPagSeguroBrazil.

• “UOL”meansUniversoOnlineS.A.,thecontrollingshareholder,ofPagSeguroDigital.FormoreinformationregardingUOL,see“Item7.MajorShareholdersandRelatedPartyTransactions.”

Theterm“Brazil”referstotheFederativeRepublicofBrazilandthephrase“Braziliangovernment”referstothefederalgovernmentofBrazil.“CentralBank”referstoBancoCentraldoBrasil.Referencesinthisannualreportto“real ,”“reais ”or“R$”refertotheBrazilianreal ,theofficialcurrencyofBrazilandreferencesto“U.S.dollar,”“U.S.dollars”or“US$”refertoU.S.dollars,theofficialcurrencyoftheUnitedStates.

Thisannualreportcontainsvariousillustrationsofourproductsandservices.Forconvenience,wehavetranslatedthetextinthoseillustrationsintoEnglish.TheactualproductsandservicesaregenerallypresentedtoourcustomersinPortugueseonly.

Effect of Rounding

Certainamountsandpercentagesincludedinthisannualreport,includinginthesectionofthisannualreportentitled“Item5.OperatingandFinancialReviewandProspects”havebeenroundedforeaseofpresentation.Percentagefiguresincludedinthisannualreporthavenotbeencalculatedinallcasesonthebasisoftheroundedfiguresbutonthebasisoftheoriginalamountspriortorounding.Forthisreason,certainpercentageamountsinthisannualreportmayvaryfromthoseobtainedbyperformingthesamecalculationsusingthefiguresinourauditedconsolidatedfinancialstatements.Certainotheramountsthatappearinthisannualreportmaynotsumduetorounding.

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Market and Industry Data

Thisannualreportcontainsdatarelatedtoeconomicconditionsinthemarketinwhichweoperate.Theinformationcontainedinthisannualreportconcerningeconomicconditionsisbasedonpubliclyavailableinformationfromthird-partysourcesthatwebelievetobereasonable.DataandstatisticsregardingtheBrazilianInternet,paymentsolutionsande-commercemarketsarebasedonpubliclyavailabledatapublishedbytheBrazilianAssociationofCreditCardandServicesCompanies(Associação Brasileirade Empresas de Cartões de Crédito e Serviços ,orABECS);comScore,across-platformmeasurementcompanythatmeasuresaudiences,brandsandconsumerbehavior,andprovidesmarketandanalyticaldatatoclients;Datafolha,aresearchinstituteandaffiliateofUOLcreatedbyGrupoFolha,whichconductsstatisticalsurveys,electionpollingandopinionandmarketsurveysforthemarketatlarge;theBrazilianInstituteofGeographyandStatistics(Instituto Brasileiro de Geografia e Estat í stica ,orIBGE);theWorldBank;SEBRAE;NeowayBusinessSolutions;Webshoppers;andeMarketer;amongothers.WealsomakestatementsinthisannualreportaboutourcompetitivepositionandthesizeoftheBraziliandigitalpaymentsande-commercemarkets.

Althoughwehavenoreasontobelieveanyofthisinformationorthesereportsareinaccurateinanymaterialrespectandbelieveandactasiftheyarereliable,neitherwenorouragentshaveindependentlyverifiedit.Governmentalpublicationsandothermarketsources,includingthosereferredtoabove,generallystatethattheirinformationwasobtainedfromrecognizedandreliablesources,buttheaccuracyandcompletenessofthatinformationisnotguaranteed.Inaddition,thedatathatwecompileinternallyandourestimateshavenotbeenverifiedbyanindependentsource.Exceptasdisclosedinthisannualreport,noneofthepublications,reportsorotherpublishedindustrysourcesreferredtointhisannualreportwerecommissionedbyusorpreparedatourrequest.Exceptasdisclosedinthisannualreport,wehavenotsoughtorobtainedtheconsentofanyofthesesourcestoincludesuchmarketdatainthisannualreport.

Emerging Growth Company Status

Wearean“emerginggrowthcompany,”asdefinedinSection2(a)oftheSecuritiesActof1933,asamended,ortheSecuritiesAct,asmodifiedbytheJumpstartOurBusinessStartupsActof2012,ortheJOBSAct.Wewillremainanemerginggrowthcompanyuntiltheearlierof(1)thelastdayofthefiscalyear(a)followingthefifthanniversaryofthecompletionofourIPO,(b)inwhichwehavetotalannualrevenuesofatleastUS$1.07billionor(c)inwhichwearedeemedtobealargeacceleratedfilerand(2)thedateonwhichwehaveissuedmorethanUS$1.0billioninnon-convertibledebtduringthepriorthree-yearperiod.Asanemerginggrowthcompany,weareeligibletotakeadvantageofcertainexemptionsfromvariousreportingrequirementsthatareapplicabletootherpubliccompaniesthatarenotemerginggrowthcompaniesincluding,butnotlimitedto,exemptionsfromtheauditorattestationrequirementsofSection404oftheSarbanes-OxleyActof2002,ortheSarbanes-OxleyAct,andanyPublicCompanyAccountingOversightBoard,orPCAOB,rules,includinganyfutureauditrulepromulgatedbythePCAOB(unlesstheSecuritiesandExchangeCommission,orSEC,determinesotherwise).Accordingly,theinformationaboutusavailabletoyouwillnotbethesameas,andmaybemorelimitedthan,theinformationavailabletoshareholdersofanon-emerginggrowthcompany.

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Notapplicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Notapplicable.

ITEM 3. KEY INFORMATION

Selected Financial and Operating Data

PagSeguroDigitalLtd.,ourCaymanIslandscompany,wasincorporatedonJuly19,2017foranindefiniteterm.PriortothecontributionofPagseguroInternetS.A.toitonJanuary4,2018,PagSeguroDigitalLtd.hadnotcommencedoperationsandhadonlynominalassetsandliabilities.

FollowingourIPOonJanuary23,2018,PagSeguroDigitalbeganreportingconsolidatedfinancialinformationtoshareholders,andPagSeguroBrazilnolongerpresentsconsolidatedfinancialstatements.PagSeguroBrazilpreparesandpresentsindividualfinancialstatementsinaccordancewithBrazilianGAAP,asapplicabletopaymentinstitutionsauthorizedbytheCentralBank.

ThefollowingtablessummarizefinancialdataforPagSeguroDigitalatandforeachoftheyearsendedDecember31,2018,2017,2016,2015and2014,derivedfromourauditedconsolidatedfinancialstatements.TheselectedconsolidatedfinancialdataasofandfortheyearendedDecember31,2018,2017,2016,2015and2014derivefromouryear-endfinancialstatementsauditedbyPricewaterhouseCoopersAuditoresIndependentes,withofficesatAv.FranciscoMatarazzo1400,TorreTorino,SãoPaulo,SP,Brazil05001-903,CaixaPostal61005.TheseauditedconsolidatedfinancialstatementswerepreparedinaccordancewithIFRS,asissuedbytheIASB.PagSeguroDigitalmaintainsitsbooksandrecordsinreais .

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Youshouldreadthisinformationinconjunctionwiththefollowingotherinformationincludedelsewhereinthisannualreport:

• ourauditedconsolidatedfinancialstatementsandrelatednotes;and

• theinformationunder“Item5.OperatingandFinancialReviewandProspects.”

Thefollowingtablespresentourselectedfinancialandoperatingdataasofandforeachoftheperiodsindicated.

STATEMENT OF OPERATIONS DATA For the Years Ended December 31, 2018 2018 2017 2016 2015 2014 (US$) (1) (R$) (R$) (R$) (R$) (R$) (in millions, except amounts per share and %) Netrevenuefromtransactionactivitiesandotherservices 585.1 2,267.1 1,224.3 480.0 268.2 160.1Netrevenuefromsales 96.7 374.6 471.9 260.6 176.5 48.2Financialincome 365.1 1,414.5 818.6 392.4 219.5 115.8Otherfinancialincome 71.9 278.5 8.6 5.3 10.7 1.8

Total revenue and income 1,118.7 4,334.7 2,523.4 1,138.4 674.9 325.8

Costofsalesandservices (553.5) (2,144.7) (1,324.4) (623.7) (382.5) (142.5)Sellingexpenses (90.7) (351.4) (245.8) (199.9) (162.6) (81.4)Administrativeexpenses (150.1) (581.7) (153.2) (84.5) (61.1) (51.3)Financialexpenses (8.1) (31.2) (104.5) (68.3) (29.7) (11.1)Other(expenses)income,net (2.1) (8.1) (12.0) (6.7) 1.3 (3.3)

Profit before Income Taxes 314.2 1,217.6 683.5 155.4 40.3 36.2

Currentincometaxandsocialcontribution (46.7) (180.9) (215.0) (7.4) (2.6) (9.9)Deferredincometaxandsocialcontribution (32.6) (126.3) 10.3 (20.1) (2.2) 1.0

Income Tax and Social Contribution (79.3) (307.2) (204.7) (27.6) (4.8) (8.9)

Net Income for the Year 235.0 910.4 478.8 127.8 35.5 27.2

Attributableto: OwnersofPagSeguroDigital 234.7 909.3 478.8 127.2 35.1 26.0Non-controllinginterests 0.3 1.1 — 0.6 0.4 1.3

Basic earnings per common share – R$ 0.7388 2.8625 1.8254 0.4849 0.1338 0.0990

Diluted earnings per common share – R$ 0.7376 2.8582 1.8254 0.4849 0.1338 0.0990

(1) Forconveniencepurposesonly,amountsinreais fortheyearendedDecember31,2018havebeentranslatedtoU.S.dollarsusingarateofR$3.8748toUS$1.00,thecommercialsellingrateforU.S.

dollarsatDecember31,2018asreportedbytheCentralBank.Thesetranslationsshouldnotbeconsideredrepresentationsthatanysuchamountshavebeen,couldhavebeenorcouldbeconvertedintoU.S.dollarsatthatoratanyotherexchangerate.See“—ExchangeRates”belowforfurtherinformationaboutrecentfluctuationsinexchangerates.

OPERATING DATA At and For the Years Ended December 31, 2018 (1) 2018 2017 2016 2015 2014 Operating Statistics: Activemerchantsatyear-end(inmillions) — 4.1 2.8 1.4 0.9 0.5TPV(inbillions) US$19.7 R$76.1 R$38.5 R$14.1 R$7.4 R$3.7Averagespendingperactivemerchant US$5,675 R$21,988 R$18,013 R$12,401 R$11,046 R$10,449(1) Forconveniencepurposesonly,amountsinreais fortheyearendedDecember31,2018havebeentranslatedtoU.S.dollarsusingarateofR$3.8748toUS$1.00,thecommercialsellingrateforU.S.


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BALANCE SHEET DATA

ThefollowingtablepresentskeylineitemsfromPagSeguroDigital’sconsolidatedbalancesheetdata: At December 31, 2018 2018 2017 2016 2015 2014 (US$) (1) (R$) (R$) (R$) (R$) (R$) (in millions) Current Assets

Cashandcashequivalents 713.1 2,763.1 66.8 80.0 6.9 1.2Financialinvestments — — 210.1 131.2 — —Notereceivables 2,091.6 8,104.7 3,522.3 1,715.5 1,110.0 665.9Receivablesfromrelatedparties — — 124.7 300.8 55.9 84.3Inventories 22.9 88.6 61.6 21.0 41.2 16.1Taxesrecoverable 16.9 65.7 14.4 17.7 5.8 6.7Otherreceivables 5.2 20.1 28.0 4.5 21.0 4.3

Total Current Assets 2,849.7 11,042.1 4,028.0 2,270.8 1,240.8 778.6

Non-Current Assets Judicialdeposits 0.4 1.5 0.9 0.5 0.4 0.5Prepaidexpenses 0.2 1.0 0.1 0.1 0.4 —Deferredincometaxandsocialcontribution — — 37.0 8.3 6.7 8.1Propertyandequipment 17.3 67.1 10.9 4.6 3.8 1.9Intangibleassets 78.9 305.6 158.9 86.1 48.6 28.5

Total Non-Current Assets 96.8 375.2 207.8 99.7 59.9 39.0

TOTAL ASSETS 2,946.5 11,417.3 4,235.8 2,370.4 1,300.7 817.6

At December 31, 2018 2018 2017 2016 2015 2014 (US$) (1) (R$) (R$) (R$) (R$) (R$) (in millions) Current Liabilities

Payablestothirdparties 1,116.0 4,324.2 3,080.6 1,304.0 683.1 369.9Tradepayables 42.6 165.2 92.4 61.7 35.3 3.5Payablestorelatedparties 7.9 30.8 39.1 76.2 92.4 —Derivativefinancialinstruments — — — 6.6 — —Borrowings — — — 205.2 — —Salariesandsocialcharges 19.1 73.9 34.3 20.3 13.7 0.4Taxesandcontributions 20.7 80.1 52.1 6.9 3.0 2.8Provisionforcontingencies 1.8 7.0 4.6 0.7 — 1.6Dividendspayableandinterestonowncapital — — — 22.2 3.2 3.1Otherpayables 7.6 29.5 15.9 15.2 1.8 4.0

Total Current Liabilities 1,215.7 4,710.8 3,319.0 1,719.2 832.5 385.3

Non-Current Liabilities Deferredincometaxandsocialcontribution 34.1 132.1 42.8 24.4 6.3 5.4Provisionforcontingencies — — 3.6 — — 0.3

Total Non-Current Liabilities 34.1 132.1 46.4 24.4 6.3 5.7

TOTAL LIABILITIES 1,249.8 4,842.9 3,365.4 1,743.5 838.8 391.0

TOTAL EQUITY 1,696.7 6,574.4 870.4 626.9 461.9 426.6

TOTAL LIABILITIES AND EQUITY 2,946.5 11,417.3 4,235.8 2,370.4 1,300.7 817.6

(1) Forconveniencepurposesonly,amountsinreais fortheyearendedDecember31,2018havebeentranslatedtoU.S.dollarsusingarateofR$3.8748toUS$1.00,thecommercialsellingrateforU.S.


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NON-GAAP FINANCIAL MEASURES

Wepresentnon-GAAPfinancialmeasureswhenwebelievethattheadditionalinformationisusefulandmeaningfultoinvestors.Thesenon-GAAPfinancialmeasuresareprovidedtoenhanceinvestors’overallunderstandingofourcurrentfinancialperformanceanditsprospectsforthefuture.Specifically,webelievethenon-GAAPfinancialmeasuresprovideusefulinformationtobothmanagementandinvestorsbyexcludingcertainexpenses,gainsandlosses,asthecasemaybe,thatmaynotbeindicativeofourcoreoperatingresultsandbusinessoutlook.

Thesemeasuresmaybedifferentfromnon-GAAPfinancialmeasuresusedbyothercompanies.Thepresentationofthisnon-GAAPfinancialinformation,whichisnotpreparedunderanycomprehensivesetofaccountingrulesorprinciples,isnotintendedtobeconsideredseparatelyfrom,orasasubstitutefor,ourfinancialinformationpreparedandpresentedinaccordancewithIFRS.Non-GAAPfinancialmeasureshavelimitationsinthattheydonotreflectalloftheamountsassociatedwithourresultsofoperationsasdeterminedinaccordancewithIFRS.ThesemeasuresshouldonlybeusedtoevaluateourresultsofoperationsinconjunctionwiththecorrespondingGAAPfinancialmeasures.

Reconciliation of Non-GAAP Financial Measures

Thefollowingtablepresentsareconciliationofournon-GAAPfinancialmeasurestothemostdirectlycomparableGAAPmeasuresfortheyearendedDecember31,2018:

For the Twelve Months EndedDecember 31,

2018

(in millions of reais , except

for amounts per share) Total revenue and income 4,334.7

Less:ForeignexchangegainonIPOandfollow-onofferingprimaryshareproceeds (131.3)

Non-GAAP total revenue and income (1) 4,203.4

Total expenses (3,117.1) Less:Share-basedlong-termincentiveplan(LTIP) 419.3Less:TaxrelatedtoremittanceofIPOandfollow-onprimaryshareproceeds(IOFtax) 18.0

Non-GAAP total expenses (2) (2,679.8)

Profit before taxes 1,217.6 Plus:Totalnon-GAAPAdjustments 306.0

Non-GAAP profit before taxes (3) 1,523.6

Income tax and social contribution (307.2) Less:Incometaxandsocialcontributiononnon-GAAPadjustments (148.7)

Non-GAAP deferred income tax (4) (455.9)

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For the Twelve Months Ended

December 31, 2018

(in millions of reais , except

for amounts per share) Net income 910.4

Plus:Totalnon-GAAPadjustments 157.3

Non-GAAP net income (5) 1,067.7

Basicearningspercommonshare—R$ 2.8625Dilutedearningspercommonshare—R$ 2.8582

Non-GAAPbasicearningspercommonshare—R$(6) 3.3578Non-GAAPdilutedearningspercommonshare—R$(6) 3.3527

(1) Non-GAAPtotalrevenueandincomeexcludesaforeignexchangegainonourJanuary2018IPOproceedsandJune2018follow-onofferingproceedsintheamountofR$131.3 millionintheyear

endedDecember31,2018,whichrelatestotheimpactofexchangeratevariationontheconversionfromU.S.dollarsintoBrazilianreais oftheproceedsfromourIPOandourJune2018follow-onoffering.Weexcludethisforeignexchangevariationfromournon-GAAPmeasuresprimarilybecauseitisunusualincome.TheforeignexchangegainonourJanuary2018IPOproceedsandJune2018follow-onofferingproceedsisincludedwithinOtherfinancialincome.OtherfinancialincomeintheamountofR$278.4 millionisthereforeadjustedbyexcludingtheforeignexchangegainonourJanuary2018IPOproceedsandJune2018follow-onofferingproceeds,resultinginnon-GAAPOtherfinancialincomeintheamountofR$147.2 million.

(2) Non-GAAPtotalexpensesexcludes:

(a) Stock-basedcompensationexpensesinthetotalamountofR$419.3 million,consistingofexpensesforequityawardsundertheLTIP.Weexcludestock-basedcompensationexpensesfromournon-GAAPfinancialmeasuresprimarilybecausetheyarenon-cashexpensesandtheydependonourstockpriceandtheexchangeratefromU.S.dollarsintoBrazilianreais atthetimeofthevestingoftheequityawards.TherelatedemployerpayrolltaxesdependonourstockpriceandtheexchangeratefromU.S.dollarsintoBrazilianreais atthetimeoftheexercisesandthevestingdateoftheequityawards,overwhichmanagementhaslimitedtonocontrol,andassuchmanagementdoesnotbelievetheseexpensescorrelatetotheoperationofourbusiness.Thetotalofstock-basedcompensationexpensesisallocatedbetweenCostofsalesandservices,AdministrativeexpensesandSellingexpenses.Excludingthestock-basedcompensationexpenses,CostofsalesandservicesintheamountofR$2,144.7 millionisadjustedbyR$58.8 millionresultinginnon-GAAPCostofsalesandservicesofR$2,084.9 million;AdministrativeExpensesintheamountofR$581.7 millionisadjustedbyR$359.2 millionresultinginnon-GAAPAdministrativeexpensesofR$222.5 million;andSellingexpensesintheamountofR$351.4 millionisadjustedbyR$0.3 millionresultinginnon-GAAPSellingexpenseofR$351.1 million.

(b) TaxrelatedtoremittanceofJanuary2018IPOproceedsandJune2018follow-onofferingproceeds(IOFtax)intheamountofR$18.0 millionintheyearendedDecember31,2018,whichrepresentstheimpactofBrazilianIOFtax(currencyremittancetax)payablewhenweremittedtheproceedsfromoursaleofnewsharesinourIPOandourJune2018follow-onofferingfromtheCaymanIslandstoBrazil.WeexcludethisIOFtaxontheremittanceofJanuary2018IPOproceedsandJune2018follow-onofferingproceedsfromournon-GAAPmeasuresprimarilybecauseitisanunusualexpense.TheIOFtaxisfullyallocatedtoFinancialexpenses.FinancialexpensesintheamountofR$31.2 millionisthereforeadjustedbyexcludingtheIOFtax,resultinginnon-GAAPFinancialexpensesintheamountofR$13.2 million.

(3) Non-GAAPProfitbeforetaxesisequaltothesumoftheadjustmentsdescribedinfootnotes(1)and(2)above.(4) Non-GAAPIncometaxandsocialcontributionconsistsofincometaxattherateof34%calculatedonthenon-GAAPadjustmentsdescribedinfootnotes(1)and(2)above,otherthantheforeign

exchangegainonourJanuary2018IPOproceedsandJune2018follow-onofferingproceedsofR$131.3 million,whichisnottaxable,andthetaxbenefitsrelatedtoothernon-GAAPadjustments.(5) Non-GAAPNetincomeisequaltothesumoftheadjustmentsdescribedinfootnotes(1),(2)and(4)above.(6) Non-GAAPBasicearningspercommonshareandnon-GAAPDilutedearningspercommonsharereflecttheadjustmentstonon-GAAPNetincome,whichisallocatedinfulltoOwnersofthe

Company.

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Financial Information U.S. Dollars

Wehavetranslatedsomeofthereal amountsincludedinthisannualreportintoU.S.dollars.YoushouldnotconstruethesetranslationsasrepresentationsbyusthattheamountsactuallyrepresenttheseU.S.dollaramountsorcouldbeconvertedintoU.S.dollarsattheratesindicated.Unlessotherwiseindicated,wehavetranslatedreal amountsintoU.S.dollarsusingarateofR$3.8748toUS$1.00,thecommercialsellingrateforU.S.dollarsatDecember31,2018asreportedbytheCentralBank.See“—ExchangeRates”belowformoreinformationregardingthereal /U.S.dollarexchangerate.

RISK FACTORS

Risks Relating to Our Business and Industry

If we cannot keep pace with rapid technological developments to provide new and innovative products and services, and address the rapidly evolving market fortransactions on mobile devices, the use of our products and services and, consequently, our revenues could decline.

Rapid,significantanddisruptivetechnologicalchangescontinuetoimpacttheindustriesinwhichweoperate,includingdevelopmentsinpaymentcardtokenization,mobilepayments,socialcommerce(i.e.,e-commercethroughsocialnetworks),authentication,virtualcurrencies,distributedledgerorblockchaintechnologies,nearfieldcommunicationandotherproximityorcontactlesspaymentmethods,virtualreality,machinelearningandartificialintelligence.

Forinstance,mobiledevicesareincreasinglyusedfore-commercetransactionsandpayments.Asignificantandgrowingportionofourcustomersaccessourplatformsthroughmobiledevices,includingforregularonlineshoppingaswellasforin-persontransactions.IntheyearendedDecember31,2018,61%ofourcustomersaccessedourplatformsthroughmobiledevices,comparedwith44%intheyearendedDecember31,2017.Wemaylosecustomersifwearenotabletocontinuetomeetourcustomers’mobileandmulti-screenexperienceexpectations.Differentmobiledevicesandplatformsuseawidevarietyoftechnicalandotherconfigurations,whichincreasethechallengesinvolvedinprovidingpaymentsinthemobileenvironment.Inaddition,anumberofothercompanieswithsignificantresourcesandanumberofinnovativestartupshaveintroducedproductsandservicesfocusingonmobilemarkets.Wecannotguaranteethatwewillbeabletocontinuetomeetcustomerexpectationsinthemobileenvironmentorincreaseourvolumeofmobiletransactions.

Wecannotpredicttheeffectsoftechnologicalchangesonourbusiness.Inadditiontoourowninitiativesandinnovations,werelyinpartonthirdpartiesforthedevelopmentofandaccesstonewtechnologies.Weexpectthatnewservicesandtechnologiesapplicabletotheindustriesinwhichweoperatewillcontinuetoemergeandmaybesuperiorto,orrenderobsolete,thetechnologieswecurrentlyuseinourproductsandservices.Developingandincorporatingnewtechnologiesintoourproductsandservicesmayrequiresubstantialexpenditures,takeconsiderabletime,andultimatelymaynotbesuccessful.Inaddition,ourabilitytoadoptnewproductsandservicesanddevelopnewtechnologiesmaybeinhibitedbyindustry-widestandards,paymentnetworks,changestolawsandregulations,resistancetochangefromconsumersormerchants,third-partyintellectualpropertyrights,orotherfactors.Oursuccesswilldependonourabilitytodevelopandincorporatenewtechnologies,addressthechallengesposedbytherapidlyevolvingmarketformobiletransactionsthroughourplatformsandadapttotechnologicalchangesandevolvingindustrystandards;ifweareunabletodosoinatimelyorcost-effectivemanner,ourbusinesscouldbeharmed.

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Substantial and increasingly intense competition, both within our industry and from other payment methods, may harm our business.

Wecompeteinmarketscharacterizedbyvigorouscompetition,changingtechnology,changingcustomerneeds,evolvingindustrystandardsandfrequentintroductionsofnewproductsandservices.Wecompetewithexistingprovidersofdigitalpaymentsolutions,in-personpaymentsviaPOS,freedigitalaccounts,prepaidcardsandacquisitionactivities.Intheonlinedigitalpaymentsmarket,wecompeteprimarilywithinternationalonlinepaymentservices,suchasPayPal,andregionalplayers,suchasMercadoPagofromMercadoLibreandMoIP/Wirecard.InthePOSpaymentsmarket,wecompeteprimarilywithinternationalplayers,suchasSumUp/Payleven,andregionalplayers,suchasMercadoPagofromMercadoLibre.Asisthecasewiththedigitalpaymentsindustryingeneral,wealsocompetewithothermeansofpayment,bothdigitalandtraditional,includingcash,checks,moneyordersandelectronicbankdeposits.

Weexpectcompetitiontointensifyinthefutureasexistingandnewcompetitorsintroducenewservicesorenhanceexistingservices.Wecompeteagainstmanycompaniestoattractcustomers,andsomeofthesecompanieshavegreaterfinancialresourcesandsubstantiallylargerbasesofcustomersthanwedo,whichmayprovidethemwithsignificantcompetitiveadvantages.Thesecompaniesmaydevotegreaterresourcesthanwedotothedevelopment,promotionandsaleofproductsandservices,andtheymaybemoreeffectiveinintroducinginnovativeproductsandservicesthathinderourgrowth.CompetingservicestiedtoestablishedbanksandotherfinancialinstitutionsmayoffergreaterliquidityandcreategreaterconsumerconfidenceinthesafetyandefficiencyoftheirservicesthanPagSeguro.Mergersandacquisitionsbyoramongthesecompaniesmayleadtoevenlargercompetitorswithmoreresources.Wealsoexpectnewentrantstooffercompetitiveproductsandservices.Forexample,establishedbanksandotherfinancialinstitutionscurrentlyofferonlinepaymentsandthosewhichdonotyetprovidesuchservicescouldquicklyandeasilydevelopthem.Certainmerchantshavelongstandingexclusive,ornearlyexclusive,relationshipswithourcompetitorstoacceptpaymentcardsandotherservicesthatweoffer.Theserelationshipsmaymakeitdifficultorcostprohibitiveforustoconductmaterialamountsofbusinesswiththem.Ifweareunabletodifferentiateourselvesfromandsuccessfullycompetewithourcompetitors,ourbusinesswillsufferseriousharm.

Wemayalsofacepricingpressuresfromcompetitors.Certaincompetitorsareabletoofferlowerpricestomerchantsforsimilarservicesbycross-subsidizingtheirdigitalpaymentsservicesusingotherservicestheyoffer.Thiscompetitionmaymeanweneedtoreduceourpricing,whichcouldreduceourprofits.Astheygrow,merchantsmaydemandmorecustomizedandfavorablepricingfromus,andcompetitivepressuresmayrequireustoagreetothis,furtherreducingourprofits.Ifmarketconditionsrequireustoincreasethediscountsorincentivesweprovide,ourbusinesscouldsufferseriousharm.

Interruption or failure of our information technology and communications systems could impair our operations, which could damage our reputation and harm our resultsof operations.

Oursuccessandabilitytoprocesspaymentsandprovidehighqualitycustomerservicedependontheefficientanduninterruptedoperationofourcomputerandinformationtechnologysystems.Anyfailureofourcomputersystemsandinformationtechnologytooperateeffectivelyortointegratewithothersystems,performanceinadequacyorbreachinsecuritymaycauseinterruptionsintheavailabilityofoursites,delaysinproductfulfilmentandreducedefficiencyofouroperations.Anyfailures,problemsorsecuritybreachesmaymeanthatfewercustomersarewillingtopurchasetheproductsweofferinthefuture.Factorsthatcouldoccurandsignificantlydisruptouroperationsinclude:systemfailuresandoutagescausedbyfire,floods,earthquakes,powerloss,telecommunicationsfailures,sabotage,vandalism,terroristattacksandsimilarevents,softwareerrors,computerviruses,worms,physicalorelectronicbreak-insandsimilardisruptionsfromunauthorizedtamperingwithourcomputersystemsanddatacenters;inaddition,securitybreachesrelatedtothestorageandtransmissionofproprietaryinformationorcustomerinformation,suchascreditcardnumbersorotherpersonalinformation.Also,iftoomanycustomersaccessoursiteswithinashortperiodoftimeduetoanyreason,wehaveexperiencedinthepastandmayinthefutureexperiencesysteminterruptionsthatmakeoursitesunavailableorpreventusfromefficientlycompletingpaymenttransactions,whichmayreducetheattractivenessofourproductsandservices.Wecannotassureyouthatsucheventswillnotoccur.Whilewehavebackupsystemsandcontingencyplansforcertainaspectsofouroperationsandbusinessprocesses,ourplanningdoesnotaccountforallpossiblescenarios.

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Specifically,wehavecontractedwithoneparty,UOLDiveo,toprovideuswithInternetdatacenterstohostoursitesandkeepthemoperational,andwerelyonitanditsoperational,privacyandsecurityproceduresandcontrolsanditsabilitytokeepoursitesoperational.UOLDiveoiscontrolledbyourparentcompanyUOLandisthereforeanaffiliateofourcompany.FailurebyUOLDiveotoadequatelykeepoursitesoperational,includinganyprolongedorunscheduledservicedisruptionthataffectsourcustomers’abilitytoutilizeoursites,couldresultinthelossofsalesandcustomersand/orincreasedcosts,whichcouldmateriallyaffectourreputationorresultsofoperations.Inaddition,werelyinpartonUOLDiveotoadviseusofanysecuritybreaches.IfUOLDiveodoesnotprovidenoticeonatimelybasis,ourreputationandresultsofoperationsmaybeharmed.WemaynotbeabletotimelyreplaceUOLDiveo,orfindareplacementonacost-efficientbasis,intheeventofdisruptions,failurestoprovideservicesorotherissueswithitthatmayharmourbusiness.FormoreinformationonouragreementwithUOLDiveo,see“Item7.MajorShareholdersandRelatedPartyTransactions—RelatedPartyTransactions.”

Anydisruptionsorserviceinterruptionsthataffectoursitescoulddamageourreputation,requireustospendsignificantcapitalandotherresourcesandexposeustoariskoflossorlitigationandpossibleliability.Someofouragreementswiththird-partyserviceprovidersdonotrequirethoseproviderstoindemnifyusforlossesresultingfromanydisruptioninservice.Anyoftheabovedisruptionscouldseriouslyharmourresultsofoperations.

Our business is subject to cyberattacks and security and privacy breaches.

Ourbusinessinvolvesthecollection,storage,processingandtransmissionofcustomers’personaldata,includingfinancialinformation.Inaddition,asignificantnumberofourcustomersauthorizeustobilltheirpaymentcardorbankaccountsdirectlyforalltransactionandotherfeeschargedbyus.Wehavebuiltourreputationonthepremisethatourplatformofferscustomersasecurewaytomakepayments.Anincreasingnumberoforganizations,includinglargemerchantsandbusinesses,otherlargetechnologycompanies,financialinstitutionsandgovernmentinstitutions,havedisclosedbreachesoftheirinformationsecuritysystems,someofwhichhaveinvolvedsophisticatedandhighlytargetedattacks,includingonportionsoftheirwebsitesorinfrastructure.

Thetechniquesusedtoobtainunauthorized,improperorillegalaccesstooursystems,ourdataorourcustomers’data,todisableordegradeservice,ortosabotagesystemsareconstantlyevolving,maybedifficulttodetectquicklyandoftenarenotrecognizeduntillaunchedagainstatarget.Unauthorizedpartiesmayattempttogainaccesstooursystemsorfacilitiesthroughvariousmeans,including,amongothers,hackingintooursystemsorthoseofourcustomers,partnersorvendors,orattemptingtofraudulentlyinduceouremployees,customers,partners,vendorsorotherusersofoursystemsintodisclosingusernames,passwords,paymentcardinformationorothersensitiveinformation,whichmayinturnbeusedtoaccessourinformationtechnologysystems.Certaineffortsmaybesupportedbysignificantfinancialandtechnologicalresources,makingthemevenmoresophisticatedanddifficulttodetect.Althoughwehavedevelopedsystemsandprocessesthataredesignedtoprotectourdataandcustomerdataandtopreventdatalossandothersecuritybreaches,andexpecttocontinuetoexpendsignificantadditionalresourcestobolstertheseprotections,thesesecuritymeasurescannotprovideabsolutesecurity.Ourinformationtechnologyandinfrastructuremaybevulnerabletocyberattacksorsecuritybreaches,andthirdpartiesmaybeabletoaccessourcustomers’personalorproprietaryinformationandcarddatathatarestoredonoraccessiblethroughthosesystems.Oursecuritymeasuresmayalsobebreachedduetohumanerror,malfeasance,systemerrorsorvulnerabilities,orotherirregularities.Anyactualorperceivedbreachofoursecuritycouldinterruptouroperations,resultinoursystemsorservicesbeingunavailable,resultinimproperdisclosureofdata,materiallyharmourreputationandbrand,resultinsignificantlegalandfinancialexposure,leadtolossofcustomerconfidencein,ordecreaseduseof,ourproductsandservices,andadverselyaffectourbusinessandresultsofoperations.Inaddition,anybreachesofnetworkordatasecurityatourcustomers,partnersorvendors(includingdatacenterandcloudcomputingproviders)couldhavesimilarnegativeeffects.Actualorperceivedvulnerabilitiesordatabreachesmayleadtoclaimsagainstus.

Inaddition,undercardrulesandourcontractswithourcardprocessors,ifthereisabreachofcardinformationthatwestore,wecouldbeliabletothepaymentcardissuersfortheircostofissuingnewcardsandrelatedexpenses.Wealsoexpecttospendsignificantadditionalresourcestoprotectagainstsecurityorprivacybreaches,andmayberequiredtoaddressproblemscausedbybreaches.Additionally,whilewemaintaininsurancepolicies,wedonotmaintaininsurancepoliciesspecificallyforcyber-attacksandourcurrentinsurancepoliciesmaynotbeadequatetoreimburseusforlossescausedbysecuritybreaches,andwemaynotbeabletocollectfully,ifatall,undertheseinsurancepolicies.

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Currently,severalrules,suchastheFederalConstitution,theConsumerProtectionCodeandtheInternetCivilRegistryregulatepersonaldataprocessinginBrazil.Effortstoprotectpersonaldatacreatedand/ormadeavailableinoursystemsmaynotguaranteethattheseprotectionsarefullyadequateandthattheyfullycomplywiththerulesestablishedbythecurrentlegislation.Failuretocomplywithcertainprovisionsofapplicablelaw,especiallyasregards(i)providingclearinformationonthedataprocessingoperationsweperform,(ii)respectforthepurposeoftheoriginaldatacollection;(iii)legaldeadlinesforthestorageandexclusionofuserdata,and(iv)theadoptionoflegallyrequiredsecuritystandardsforthepreservationandinviolabilityoftheprocessedpersonaldata,cangiverisetopenalties,suchasfinesandeventemporaryorpermanentsuspensionofourpersonaldataprocessingactivities.

DataprotectionandprivacylawsinBrazilarechangingtotakeintoaccountculturalandlocalconsumerattitudestowardspersonaldataprotection.Therecanbenoguaranteethatwewillhavesufficientfinancialresourcestocomplywithanynewregulationsorsuccessfullycompeteinthecontextofashiftingregulatoryenvironment.

In2017,LawNo.13,709/2018,theGeneralDataProtectionAct(Lei Geral de Proteção de Dados ),orGDPA,wassigned,whichwillcomeintoforceinAugust2020andwillchangepersonaldataprotectioninBrazil.TheGDPAestablishesanewlegalframeworkcoveringpersonaldataprocessing,includingclient,supplierandemployeedata.TheGDPAestablishes,amongothers,personaldataowners’rights,thelegalbasisforpersonaldataprotection,requirementsforobtainingconsentfromdataowners,obligationsandrequirementsrelatedtosecurityincidents,dataleaksanddatatransfers,aswellasthecreationoftheNationalDataProtectionAuthority.WehavebeguninitialpreparationstocomplywiththeGDPAaheadofitsAugust2020effectivedate,howeverwemayhavedifficultyadaptingoursystemsandprocessestothenewlegislationduetothelegislation’scomplexity.Intheeventofnon-compliancewiththeGDPA,wemaybesubjecttopenaltiesincludinginformationdisclosuretoauthorities,eliminationofpersonaldataandafine,perinfraction,ofupto2%(subjecttoanupperlimitofR$50,000,000)ofourbillingsinBrazilduringthelastfiscalyear,excludingtaxes.

TheGDPAandotherlawsandregulationsthatmaybepassedinthefuturemaybeinterpretedandapplieddifferentlyovertimeandfromjurisdictiontojurisdiction.Itispossibletheywillbeinterpretedandappliedinwaysthatwillmateriallyandadverselyaffectourbusiness.Anyfailuretocomplywith(i)ourprivacypolicies,(ii)anyregulatoryrequirementsororders,(iii)orotherlocal,state,federal,orinternationalprivacyorconsumerprotection-relatedlawsandregulationscouldmateriallyandadverselyaffectourbusiness.

Our services must integrate with a variety of operating systems and networks, and the hardware that enables merchants to accept payment cards must interoperate withmobile networks offered by telecom operators and third-party mobile devices utilizing those operating systems. If we are unable to ensure that our services or hardwareinteroperate with such networks, operating systems and devices, our business may be seriously harmed.

Wearedependentontheabilityofourproductsandservicestointegratewithavarietyofoperatingsystemsandnetworks,aswellaswebbrowsersthatwedonotcontrol.Anychangesinthesesystemsornetworksthatdegradethefunctionalityofourproductsandservices,imposeadditionalcostsorrequirementsonus,orgivepreferentialtreatmenttocompetitiveservices,includingtheirownservices,couldseriouslyharmthelevelsofusageofourproductsandservices.Wealsorelyonbankplatformstoprocesssomeofourtransactions.Ifthereareanyissueswithorserviceinterruptionsinthesebankplatforms,usersmaybeunabletohavetheirtransactionscompleted,whichwouldseriouslyharmourbusiness.

Inaddition,ourhardwareinteroperateswithmobilenetworksofferedbytelecomoperatorsandmobiledevicesdevelopedbythirdparties.Changesinthesenetworksorinthedesignofthesemobiledevicesmaylimittheinteroperabilityofourhardwarewithsuchnetworksanddevicesandrequiremodificationstoourhardware.Ifweareunabletoensurethatourhardwarecontinuestointeroperateeffectivelywithsuchnetworksanddevices,orifdoingsoiscostly,ourbusinessmaybeseriouslyharmed.

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Our business depends on a strong and trusted brand, and any failure to maintain, protect and enhance our brand would harm our business.

Wehavedevelopedastrongandtrustedbrand,highlylinkedtothereputationandpublicimageofUOL,ourcontrollingshareholder,whichhascontributedsignificantlytothesuccessofourbusiness.Ourbrandispredicatedontheideathatsellersandbuyerswilltrustusandfindvalueinbuildingandgrowingtheirbusinesseswithourproductsandservices.Maintaining,protectingandenhancingourbrandarecriticaltoexpandingourbaseofsellers,buyersandotherthird-partypartners,aswellasincreasingengagementwithourproductsandservices.Thiswilldependlargelyonourabilitytomaintaintrust,beatechnologyleader,andcontinuetoprovidehigh-qualityandsecureproductsandservices.Anynegativepublicityaboutourindustry,ourcompanyorUOL,ourcontrollingshareholder,thequalityandreliabilityofourproductsandservices,ourriskmanagementprocesses,changestoourproductsandservices,ourabilitytoeffectivelymanageandresolvesellerandbuyercomplaints,ourprivacyandsecuritypractices,litigation,regulatoryactivity,theexperienceofsellersandbuyerswithourproductsorservices,andchangesinthepublicopinionofUOL,couldharmourreputationandtheconfidenceinanduseofourproductsandservices.Harmtoourbrandcanarisefrommanysources,includingfailurebyusorourpartnerstosatisfyexpectationsofserviceandquality;inadequateprotectionofsensitiveinformation;compliancefailuresandclaims;litigationandotherclaims;employeemisconduct;andmisconductbyourpartners,serviceprovidersorothercounterparties.Ifwedonotsuccessfullymaintainastrongandtrustedbrand,ourbusinesscouldbeseriouslyharmed.

Our business is subject to extensive government regulation and oversight and our status under these regulations may change. Violation of or compliance with present orfuture regulation could be costly, expose us to substantial liability and force us to change our business practices, any of which could seriously harm our business andresults of operations.

InDecember2014,PagSeguroBrazilappliedforauthorizationsfromtheCentralBankrelatingtothreeofourdigitalpaymentsactivities,andthoseauthorizationswereformallyapprovedonOctober17,2018.TheactivitiesinvolvedarethePagSegurodigitalaccount,ourissuanceofPagSeguroprepaidcards,andouractivitiesasanacquirer.WeappliedfortheseauthorizationsbecausethosebusinessesbegantoberegulatedbyBrazilianFederalLawNo.12,865/2013.PagSeguroBrazilalsoappliedinFebruary2019totheCentralBankforauthorizationtoconductactivitiesasapayment institution inordertoactasanissuerofpost-paid cards withinthird-partypaymentschemes.ThisauthorizationwasformallyapprovedonMarch16,2019.

Inaddition,theearlypaymentofreceivablesfeaturethatweoffermerchantsmakesupasignificantportionofouractivities.LawNo.12,865/2013prohibitspaymentinstitutionssuchasPagSeguroBrazilfromperformingactivitiesthatarerestrictedtofinancialinstitutions.ThereissomedebateunderBrazilianlawastowhetherprovidingearlypaymentofreceivablestomerchantscouldbecharacterizedas“lending,”whichisanactivitythatisrestrictedtofinancialinstitutions.Similarly,thereissomedebateastowhetherthediscountratesapplicabletothisearlypaymentfeatureshouldbeconsideredas“interest,”inwhichcasethelimitssetbytheBrazilianUsuryLawwouldapplytotheserates.Ifnewlawsareenactedorthecourts’interpretationofthisactivitychanges,eitherpreventingusfromprovidingthisfeatureorlimitingthefeesweusuallycharge,ourfinancialperformancecouldbenegativelyaffected.Forfurtherinformationregardingtheseregulatorymatters,see“Item4.InformationontheCompany—Regulation—RegulationofthedigitalpaymentsindustryinBrazil.”

Furthermore,ifwearefoundtobeinviolationofanycurrentorfutureregulations,wecouldbe(i)requiredtopaysubstantialfines(includingpertransactionfines)anddisgorgementofourprofits,(ii)requiredtochangeourbusinesspracticesor(iii)subjectedtoinsolvencyproceduressuchasaninterventionbytheCentralBankandtheout-of-courtliquidationofPagSeguroBrazil.Wecouldalsobesubjecttoprivatelawsuits.Anyoftheseconsequencescouldseriouslyharmourbusinessandresultsofoperations.

We are subject to costs and risks associated with increased or changing laws and regulations affecting our business, including those relating to the sale of consumerproducts. Specifically, developments in data protection and privacy laws could harm our business, financial condition or results or operations.

Weoperateinacomplexregulatoryandlegalenvironmentthatexposesustocomplianceandlitigationrisksandthatcouldmateriallyaffectourresultsofoperations.Theselawsmaychange,sometimessignificantly,asaresultofpolitical,economicorsocialevents.Someofthefederal,stateorlocallawsandregulationsthataffectusinclude:thoserelatingtoconsumerproducts,productliabilityorconsumerprotection;thoserelatingtothemannerinwhichweadvertise,marketorsellproducts;laborandemploymentlaws,includingwageandhourlaws;taxlawsorinterpretationsthereof;dataprotectionandprivacylawsandregulations;andsecuritiesandexchangelawsandregulations.Forinstance,dataprotectionandprivacylawsaredevelopingtotakeintoaccountthechangesinculturalandconsumerattitudestowardstheprotectionofpersonaldata.Therecanbenoguaranteethatwewillhavesufficientfinancialresourcestocomplywithanynewregulationsorsuccessfullycompeteinthecontextofashiftingregulatoryenvironment.Anyadditionalprivacylawsorregulationscouldseriouslyharmourbusiness,financialconditionorresultsofoperations.

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Changes in tax laws, tax incentives, benefits or differing interpretations of tax laws may harm our results of operations.

Changesintaxlaws,regulations,relatedinterpretationsandtaxaccountingstandardsinBrazil,theCaymanIslandsortheUnitedStatesmayresultinahighertaxrateonourearnings,whichmaysignificantlyreduceourprofitsandcashflowsfromoperations.Forexample,in2015theBraziliangovernmentincreasedtherateofPIS/COFINStax(whichisasocialcontributionongrossrevenues)from0%to4.65%onfinancialincomerealizedbyBraziliancompaniesthataretaxedunderthenon-cumulativeregime(whichisthetaxregimethatappliestous).Inaddition,ourresultsofoperationsandfinancialconditionmaydeclineifcertaintaxincentivesarenotretainedorrenewed.Forexample,BrazilianLawNo.11,196currentlygrantstaxbenefitstocompaniesthatinvestinresearchanddevelopment,whichsignificantlyreducesourannualincometaxexpense.Ifthetaxesapplicabletoourbusinessincreaseoranytaxbenefitsarerevokedandwecannotalterourcoststructuretopassourtaxincreasesontocustomers,ourfinancialcondition,resultsofoperationsandcashflowscouldbeseriouslyharmed.OurpaymentprocessingactivitiesarealsosubjecttoaMunicipalTaxonServices(Imposto Sobre Serviços ,orISS).AnyincreasesinISSrateswouldalsoharmourprofitability.

Inaddition,Braziliangovernmentauthoritiesatthefederal,stateandlocallevelsareconsideringchangesintaxlawsinordertocoverbudgetaryshortfallsresultingfromtherecenteconomicdownturninBrazil.Iftheseproposalsareenactedtheymayharmourprofitabilitybyincreasingourtaxburden,increasingourtaxcompliancecosts,orotherwiseaffectingourfinancialcondition,resultsofoperationsandcashflows.TaxrulesinBrazil,particularlyatthelocallevel,changeregularly,anditiscommonfortaxpayerstochallengesuchchanges,whichmayresultinadditionaltaxassessmentsandpenaltiesforourcompany.

Inthissense,weareinvolvedintaxproceedingsbasedondifferencesofinterpretationbetweenusandtheBraziliantaxauthoritiesregardingtaxlawsandregulations.Forfurtherinformation,see“Item8.FinancialInformation—TaxandSocialSecurityProceedings.”

Our financial success is sensitive to the method consumers choose to make payments, since these methods differ in profitability. Our profitability could be harmed if theproportion of our business funded using less profitable methods goes up.

Wepaytransactionfeestocardschemes,banksandotherintermediariesthatvaryaccordingtothemethodchosenbyconsumerstofundpaymenttransactions.Thesetransactionfeesarehigherwhenconsumersfundpaymentsusingcreditcards,andlowerwhenconsumersfundpaymentswithdebitcards.Transactionfeesarenominalwhencustomersfundpaymenttransactionsbydigitaltransferoffundsfrombankaccounts,andwepaynofeeswhencustomersfundpaymenttransactionsfromanexistingPagSeguroaccountbalance.Ourfinancialsuccessisthereforesensitivetochangesintheproportionofourbusinessfundedbyconsumersusingcreditanddebitcards,whichwouldincreaseourcostsifwewereunabletoadjusttherateswechargeourcustomersaccordingly.Consumersmayresistfundingpaymentsbydigitaltransferfrombankaccountsbecauseoftheincentivesofferedbycreditcards,forexample,orgeneralconcernsaboutprovidingbankaccountinformationtoathirdparty.

Failure to deal effectively with fraud, fictitious transactions, bad transactions or negative customer experiences would increase our loss rate and harm our business, andcould severely diminish merchant and consumer confidence in and use of our services.

Weincurlossesandexpensesduetoclaimsfromconsumersthatmerchantshavenotperformedorthattheirgoodsorservicesdonotmatchthemerchant’sdescription.Weseektorecovertheselossesandexpensesfromthemerchant,butmaynotbeabletorecovertheminfullwhenthemerchantisunwillingorunabletopay.Wealsoincurlossesandexpensesfromclaimsthattheconsumerdidnotauthorizethepurchase,fromconsumerfraudandfromerroneoustransmissions.Inaddition,ifthelossesweincurrelatedtocardtransactionsbecomeexcessive,theycouldpotentiallyresultinalossofourrighttoacceptcardsforpayment.Intheeventthatwewereunabletoacceptcards,thenumberoftransactionsprocessedthroughourplatformwoulddecreasesubstantiallyandourbusinesswouldbeharmed.Wearealsosubjecttotheriskoffraudulentactivitybymerchants,consumersofproductspurchasedthroughourplatform,orthirdpartieshandlingouruserinformation.Wetakemeasurestodetectandreducetheriskoffraud,butthesemeasuresneedtobecontinuallyimprovedandmaynotbeeffectiveagainstnewandcontinuallyevolvingformsoffraudorinconnectionwithnewproductofferings.Ifthesemeasuresdonotsucceed,ourbusinesscouldbeharmed.

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We rely on third parties in many aspects of our business, which creates additional risk.

Werelyonthirdpartiesinmanyaspectsofourbusiness,including,amongothers:

• networks,banks,paymentprocessors,andpaymentgatewaysthatlinkustothepaymentcardandbankclearingnetworkstoprocesstransactions;

• thirdpartiesthatprovidecertainoutsourcedcustomersupportandproductdevelopmentfunctions,whicharecriticaltoouroperations;and

• thirdpartiesthatprovidefacilities,infrastructure,componentsandservices,includingdatacenterfacilitiesandcloudcomputing.

Thethirdpartiesthatwerelyontoprocesstransactionsmayfailorrefusetoprocesstransactionsadequately.Anyofthethirdpartiesweusemaybreachtheiragreementswithus,refusetorenewtheseagreementsoncommerciallyreasonableterms,takeactionsthatdegradethefunctionalityofourservices,imposeadditionalcostsorrequirementsonus,orgivepreferentialtreatmenttocompetingservices.Financialorregulatoryissues,laborissues,orotherproblemsthatpreventthesethirdpartiesfromprovidingservicestousorourcustomerscouldharmourbusiness.Ifourserviceprovidersdonotperformsatisfactorily,ouroperationscouldbedisrupted,whichcouldresultincustomerdissatisfaction,damageourreputation,andharmourbusiness.

Inparticular,werelyonUOL,ourlargestshareholder,anditssubsidiariesforanumberofbusinessservices,particularly:datastorageservices;telecommunicationsservices;internetsecurityservices;softwaredevelopment,maintenanceandmanagement;andcallcenter,marketing,corporate,litigationandback-officeservices.UOLanditssubsidiariesalsoprovideuswithadvertisingandmediaspaceandresellcloudservicestous.Forfurtherdetailsoftheseservices,see“Item7.MajorShareholdersandRelatedPartyTransactions—RelatedPartyTransactions.”

Our failure to manage the assets underlying our customer funds properly could harm our business.

Ourabilitytomanageandaccountaccuratelyfortheassetsunderlyingourcustomerfundsrequiresahighlevelofinternalcontrols.Asourbusinesscontinuestogrowandweexpandourproductofferings,wemustcontinuetostrengthenourinternalcontrolsaccordingly.Oursuccessrequiressignificantpublicconfidenceinourabilitytohandlelargeandgrowingtransactionvolumesandamountsofcustomerfunds.Anyfailuretomaintainthenecessarycontrolsortomanagetheassetsunderlyingourcustomerfundsaccuratelycouldseverelydiminishcustomeruseofourproductsand/orresultinpenaltiesandfines,whichcouldharmourbusiness.

The e-commerce market in Brazil is developing, and the expansion of our business depends on the continued growth of e-commerce, as well as increased availability,quality and usage of the Internet in Brazil.

Ourfuturerevenuesfromdigitalpaymentsdependsubstantiallyonconsumers’widespreadacceptanceanduseoftheInternetasawaytoconductcommerce.RapidgrowthintheuseoftheInternet(particularlyasawaytoprovideandpurchaseproductsandservices)isarelativelyrecentphenomenoninBrazilandwecannotassureyouthatthisacceptanceandusagewillcontinueorincrease.Furthermore,ifthepenetrationofInternetaccessinBrazildoesnotincreasequickly,itmaylimitourpotentialgrowth,particularlyinregionswithlowlevelsofInternetqualityandaccessand/orlowlevelsofincome.

InternetpenetrationinBrazilmayneverreachthelevelsseeninmoredevelopedcountriesforreasonsthatarebeyondourcontrol,includingthelackofnecessarynetworkinfrastructureordelayeddevelopmentofenablingtechnologies,performanceimprovementsandsecuritymeasures.TheinfrastructurefortheInternetinBrazilmaynotbeabletosupportcontinuedgrowthinthenumberofusers,theirfrequencyofuseortheirbandwidthrequirements.DelaysintelecommunicationandinfrastructuredevelopmentorothertechnologyshortfallsmayimpedeimprovementsinInternetreliabilityinBrazil.IftelecommunicationsservicesarenotsufficientlyavailabletosupportthegrowthoftheInternetinBrazil,responsetimescouldbeslower,whichwouldreduceInternetusageandharmourservices.Inaddition,evenifInternetpenetrationinBrazilincreases,thismaynotleadtogrowthine-commerceduetoanumberoffactors,includinglackofconfidencebyusersinonlinesecurity.

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Furthermore,thepriceofInternetaccessandInternet-connecteddevices,suchaspersonalcomputers,tablets,mobilephonesandotherportabledevices,maylimitourgrowth,particularlyinpartsofBrazilwithlowlevelsofincome.IncomelevelsinBrazilaresignificantlylowerthanintheUnitedStatesandothermoredevelopedcountries,whilepricesofbothportabledevicesandInternetaccessinBrazilarehigherthaninthosecountries.IncomelevelsinBrazilmaydeclineanddeviceandaccesspricesmayincreaseinthefuture.

Anyofthesefactorscouldlimitourabilitytogeneraterevenuesinfuture.

Our quarterly results of operations and operating metrics may fluctuate and are unpredictable and subject to seasonality, which could result in the price of our Class Acommon shares being unpredictable or declining.

Ourquarterlyresultsofoperationsmayvarysignificantlyandarenotnecessarilyanindicationoffutureperformance.Thesefluctuationsmaybeduetoavarietyoffactors,someofwhichareoutsideofourcontrolandmaynotfullyreflecttheunderlyingperformanceofourbusiness.Inaddition,weoperateinasomewhatseasonalindustry,whichtendstoexperiencerelativelyfewertransactionsinthefirstquartersoftheyear,increasedactivityastheyear-endholidayshoppingseasoninitiates,andfewertransactionsaftertheyear-endholidays.Inaddition,businessesoperatinginBrazil,suchasours,tendtoexperiencerelativelyfewertransactionsduringcertaininternationalsportingevents,suchasthesoccerWorldCup.

Factorsthatmaycausefluctuationsinourquarterlyresultsofoperationsincludeourabilitytoattractandretaincustomers;thetiming,effectivenessandcostsofexpansionandupgradesofoursystemsandinfrastructure,aswellasthesuccessofthoseexpansionsandupgrades;theoutcomesoflegalproceedingsandclaims;ourabilitytomaintainorincreaserevenue,grossmarginsandoperatingmargins;ourabilitytocontinueintroducingnewservicesandtocontinueconvincingcustomerstoadoptadditionalofferings;increasesinandtimingofexpensesthatwemayincurtogrowandexpandouroperationsandtoremaincompetitive;period-to-periodvolatilityrelatedtofraudandrisklosses;systemfailuresresultingintheinaccessibilityofourproductsandservices;changesintheregulatoryenvironment,includingwithrespecttosecurity,privacyorenforcementoflawsandregulationsbyregulators,includingfines,orders,orconsentdecrees;changesinglobalbusinessormacroeconomicenforcementoflawsandregulationsbyregulators,includingfines,orders,orconsentdecrees;changesinglobalbusinessconditions;generalretailbuyingpatterns;andtheotherrisksdescribedinthisannualreport.FuturefluctuationsinquarterlyresultsmaymeanthatourbusinessislesspredictableandmayharmthetradingpriceofourClassAcommonshares.

Our business could be harmed if we are unable to forecast demand for our products accurately or to manage our product inventory adequately.

WiththegoalofincreasingourtransactionbusinessandPOSdevicesales,weinvestbroadlyinourPOSunittechnology.Ourproducts,suchastheModerninhaandtheMinizinha,oftenrequireinvestmentswithlongleadtimes.Aninabilitytoforecastthesuccessofaparticularproductcorrectlycouldharmourbusiness.Wemustforecastinventoryneedsandexpensesandplaceorderssufficientlyinadvancewithourthird-partysuppliersandcontractmanufacturersbasedonourestimatesoffuturedemandforparticularproducts.Ourabilitytoforecastdemandforourproductsaccuratelycouldbeaffectedbymanyfactors,includinganincreaseordecreaseindemandforourproductsorforourcompetitors’products,unanticipatedchangesingeneralmarketconditions,andthechangeineconomicconditions.

Ifweunderestimatedemandforaparticularproduct,ourcontractmanufacturersandsuppliersmaynotbeabletodeliversufficientquantitiesofthatproducttomeetourrequirements,andwemayexperienceashortageofthatproductavailableforsaleordistribution.Theshortageofapopularproductcouldseriouslyharmourbrand,oursellerrelationships,theacquisitionofadditionalsellersandourtotaltransactionbusiness.Ifweoverestimatedemandforaparticularproduct,wemayhaveexcessinventoryforthatproductandtheexcessinventorymaybecomeobsoleteoroutofdate.Inventorylevelsinexcessofdemandmayleadustowritedownorwriteofftheinventoryorsellexcessinventoryatfurtherdiscountedprices,whichcouldharmourprofitandourbusiness.

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Some of the key components of our POS devices are sourced from a limited number of suppliers. We are therefore at risk of shortage, price increases, changes, delay ordiscontinuation of key components, which could disrupt and harm our business.

SomeofthekeycomponentsusedtomanufactureourPOSdevices,suchasthechipandpinreader,comefromlimitedsourcesofsupply.Inaddition,wecurrentlyrelyononemanufacturertomanufacture,testandassembleasignificantamountofourPOSdevices.TheagreementsforthecomponentsusedtomanufactureourPOSdevicesareenteredintodirectlybythemanufacturerofourPOSdevicesandwedonothaveagreementswiththesesuppliers.

DuetorelianceofourPOSmanufacturersonthesecomponents,wearesubjecttotheriskofshortagesandlongleadtimesinthesupplyofcertainproducts.Ifourmanufacturerscannotfindalternativesourcesofsupply,wecouldbesubjecttocomponentsshortagesordelaysorotherproblemsinproductassembly.Inaddition,varioussourcesofsupply-chainrisk,includingstrikesorshutdowns,orlossofordamagetoourproductswhiletheyareintransitorstorage,couldlimitthesupplyofourPOSdevices.Anyinterruptionordelayincomponentsupply,anyincreasesincomponentcosts,theinabilityofourmanufacturerstoobtainthesepartsorcomponentsfromalternatesourcesatacceptablepricesandwithinareasonableamountoftime,and/ordifficultiesinfulfillingobligationsinconnectionwiththewarrantiesweprovideforourPOSdevices,wouldharmourabilitytoprovideourPOSdevicesorotherservicestoourmerchantsonatimelybasis.Thiscouldhurtourrelationshipswithourcustomers,preventusfromacquiringnewcustomers,andseriouslyharmourbusiness.

We are subject to anticorruption, anti-bribery and anti-money laundering laws and regulations.

Wearesubjecttovariousanticorruption,anti-briberyandanti-moneylaunderinglawsandregulationsthatprohibit,amongotherthings,ourinvolvementinimproperpaymentstocertainpublicofficialsforthepurposeofobtainingadvantagesorintransferringtheproceedsofcriminalactivities.Wehaveprogramsdesignedtocomplywithnewandexistinglegalandregulatoryrequirements.However,anyerrors,failures,ordelaysincomplyingwithanticorruption,anti-briberyandanti-moneylaunderinglawsandregulationscouldresultinsignificantcriminalandcivillawsuits,penalties,forfeitureofsignificantassets,orotherenforcementactions,aswellasreputationalharm.

Regulatorsmayincreaseenforcementoftheseobligations,whichmayrequireustofurtherreviseorexpandourcomplianceprogram,includingtheproceduresweusetoverifytheidentityofourcustomersandtomonitorourtransactions.Regulatorsregularlyre-examinethetransactionvolumethresholdsatwhichwemustobtainandkeepapplicablerecordsorverifyidentitiesofcustomersandanychangeinsuchthresholdscouldresultingreatercostsforcompliance.Costsassociatedwithfinesorenforcementactions,changesincompliancerequirements,orlimitationsonourabilitytogrowcouldharmourbusinessandanynewrequirementsorchangestoexistingrequirementscouldimposesignificantcosts,resultindelaystoplannedproductimprovements,makeitmoredifficultfornewcustomerstojoinournetworkandreducetheattractivenessofourproductsandservices.

The loss of any member of our management team and our inability to make up for such loss with a qualified replacement, could harm our business.

Ourbusinessdependsupontheeffortsandskillofourseniormanagement,whohasplayedanimportantroleinshapingourcompanyculture.Ourfuturesuccessdependstoasignificantextentonthecontinuedserviceofourseniormanagementteam,whoarecriticaltothedevelopmentandtheexecutionofourbusinessstrategies.Anymemberofourseniormanagementteammayleaveustosetuporworkinbusinessesthatcompetewithours.Thereisnoguaranteethatthecompensationarrangementsandnoncompetitionagreementswehaveenteredintowithourseniormanagementteamaresufficientlybroadoreffectivetopreventthemfromresigninginordertosetuporjoinacompetitor,orthatthenoncompetitionagreementswouldbeupheldinacourtoflaw.Intheeventthatanumberofourseniormanagementmembersleaveourcompany,wemayhavedifficultyfindingsuitablereplacements,whichcouldseriouslyharmus.

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Ourfuturesuccessalsodependsonourabilitytoidentify,attract,hire,train,retain,motivateandmanageotherhighlyskilledtechnical,managerial,informationtechnology,marketing,product,riskmanagementandcustomerservicepersonnel.Competitionforthesepersonnelisintense,andwemaynotbeabletosuccessfullyattract,hire,train,retain,motivateandmanagesufficientlyqualifiedpersonnel.

We partially rely on card issuers or card schemes to process our transactions. Changes to credit card scheme fees, rules or practices may harm our business.

Wepartiallyrelyoncardissuersorcardschemestoprocessourtransactions,andmustpayafeeforthisservice.Fromtimetotime,cardschemessuchasMasterCardandVisamayincreasetheinterchangefeesthattheychargeforeachtransactionusingoneoftheircards.Creditcardprocessorshavetherighttopassanyincreasesininterchangefeesontousaswellasincreasetheirownfeesforprocessing.Inaddition,cardschemeshaveimposedandmayagainimposespecialassessmentsfortransactionsthatareexecutedthrougha“digitalwallet,”andthesefeescouldparticularlyaffectusandsignificantlyincreaseourcosts.Theseincreasedfeesincreaseouroperatingcostsandreduceourprofitmargins.

Wearealsorequiredbycreditcardschemestocomplywiththeiroperatingrules.Thecreditcardschemesandtheirmemberbankssetandinterprettheserules.Thebankaccountsofferedbythosememberbankscompetewithourdigitalaccountservices.Visa,MasterCard,AmericanExpressorothercreditcardcompaniescouldadoptnewoperatingrulesorreinterpretexistingrulesthatweorourprocessorsmightfinddifficultorevenimpossibletofollow.Asaresult,wecouldloseourabilitytoprovideourcustomerstheoptionofusingcreditcardstofundtheirpaymentsandouruserstheoptiontopaytheirfeesusingacreditcard.Ifwewereunabletoacceptcreditcards,ourbusinesswouldbeseriouslyharmed.

WecouldlosetherighttoacceptcreditcardsorcouldberequiredtopayfinesifcreditcardschemessuchasMasterCardorVisadeterminethatusersareusingourplatformtoengageinillegalor“highrisk”activities,orifusersgeneratealargevolumeofchargebacksrelatedtofraudulenttransactions.Additionally,wemaybeunabletoaccessfinancinginthecreditandcapitalmarketsatreasonableratestofundouroperationsandforthatreasonourprofitabilityandtotaltransactionbusinesscoulddeclinesignificantly.

We might not successfully implement strategies to increase adoption of our digital payment methods, which would limit our growth.

Ourfutureprofitabilitywilldepend,inpart,onourabilitytosuccessfullyimplementourstrategytoincreaseadoptionofourdigitalpaymentmethods.Wecannotassureyouthatthemarketfordigitalpaymentswillcontinuetogroworwillremainviable.Weexpecttoinvestsubstantialamountsto:

• driveconsumerandmerchantawarenessofdigitalpayments;

• encourageconsumersandmerchantstosignupforanduseourdigitalpaymentproducts;

• enhanceourinfrastructuretohandleseamlessprocessingoftransactions;

• continuetodevelopstateoftheart,easy-to-usetechnology;

• expandouroperations;

• increasethenumberofuserswhocollectandpaydigitally;and

• growanddiversifyourcustomerbase.

Despitetheseinvestments,wemayfailtoimplementtheseprogramssuccessfullyortoincreasesubstantiallythenumberofcustomerswhopayforourdigitalpaymentmethods.Thiswouldholdbackanygrowthinourrevenuesandharmourbusiness.

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If we fail to establish and maintain proper and effective internal controls over financial reporting, our results of operations and our ability to operate our business may beharmed.

WearesubjecttotheSarbanes-OxleyAct,whichrequires,amongotherthings,thatweestablishandmaintaineffectiveinternalcontrolsoverfinancialreportinganddisclosurecontrolsandprocedures.UndertheSEC’scurrentrules,since2018wehavebeenrequiredtoperformsystemandprocessevaluationandtestingofourinternalcontrolsoverfinancialreportingtoallowmanagementtoassesstheeffectivenessofourinternalcontrols.Ourtestingmayrevealdeficienciesinourinternalcontrolsthataredeemedtobematerialweaknessesorsignificantdeficienciesandrenderourinternalcontrolsoverfinancialreportingineffective.Ifwearenotabletocomplywiththeserequirementsinatimelymanner,orifweorourmanagementidentifiesmaterialweaknessesorsignificantdeficienciesinourinternalcontrolsoverfinancialreportingthataredeemedtobematerialweaknesses,themarketpriceofourClassAcommonsharesmaydeclineandwemaybesubjecttoinvestigationsorsanctionsbytheSEC,theFinancialIndustryRegulatoryAuthority,Inc.,orFINRA,orotherregulatoryauthorities.Inaddition,wemayberequiredtoexpendsignificantmanagementtimeandfinancialresourcestocorrectanymaterialweaknessesthatmaybeidentifiedortorespondtoanyregulatoryinvestigationsorproceedings.

Our operating results are affected by decreases in consumer discretionary spending. Changes in macroeconomic conditions may reduce the volume and prices oftransactions on our payments platforms and harm our growth strategies and business prospects.

Ouroperatingresultsareaffectedbytheconditionoftheeconomy.Ourbusinessandfinancialperformancemaybeharmedbycurrentandfutureeconomicconditionsthatcauseadeclineinbusinessandconsumerspending,includingareductionintheavailabilityofcredit,increasedunemploymentlevels,higherenergyandfuelcosts,risinginterestrates,financialmarketvolatilityandrecession.Additionally,wemayexperiencedifficultiesinoperatingandgrowingouroperationsasaresultofeconomicpressures.

Asabusinessthatdependsonconsumerdiscretionaryspending,wemaysufferharmifourmerchants’customersreducetheirpurchasesduetocontinuedjoblosses,foreclosures,bankruptcies,higherconsumerdebtandinterestrates,reducedaccesstocredit,lowerconsumerconfidence,uncertaintyorchangesintaxpoliciesandtaxrates.Decreasesincustomertrafficoraveragevaluepertransactionnegativelyaffectourfinancialperformance,andaprolongedperiodofdepressedconsumerspendingcouldseriouslyharmourbusiness.Promotionalactivitiesanddecreaseddemandforconsumerproducts,particularlyhigher-endproducts,couldaffectourprofitability.ThepotentialeffectsoftheongoingeconomiccrisisinBrazilaredifficulttoforecastandmitigate.Anyoftheforegoingcouldseriouslyharmourbusiness,resultsofoperationsandfinancialconditionandcouldcausethetradingpriceofourClassAcommonsharestodecline.

Increases in interest rates may harm our business.

Processingconsumertransactionsmadeusingcreditcards,aswellasprovidingearlypaymentofreceivablestomerchantswhenconsumersmakecreditcardpurchasesininstallments,bothmakeupasignificantportionofouractivities.IfBrazilianinterestratesincrease,consumersmaychoosetomakefewerpurchasesusingcreditcards;andfewermerchantsmaydecidetouseourearlypaymentofreceivablesfeatureifouroverallfinancingcostsrequireustoincreasethediscountratewechargeforthisfeature.Eitherofthesefactorscouldcauseourbusinessactivitylevelstodecrease.

Customer complaints or negative publicity about our customer service could reduce usage of our products and, as a result, our business could suffer.

Customercomplaintsornegativepublicityaboutourcustomerservicecouldseverelydiminishconsumerconfidenceinanduseofourproduct.Breachesofourcustomers’privacyandoursecuritymeasurescouldhavethesameeffect.Measureswesometimestaketocombatrisksoffraudandbreachesofprivacyandsecurity,suchasfreezingcustomerfunds,candamagerelationswithourcustomers.Thesemeasuresheightentheneedforpromptandaccuratecustomerservicetoresolveirregularities.Effectivecustomerservicerequiressignificantexpenses,which,ifnotmanagedproperly,couldimpactourprofitabilitysignificantly.Anyinabilitybyustomanageortrainourcustomerservicerepresentativesproperlycouldcompromiseourabilitytohandlecustomercomplaintseffectively.Ifwedonothandlecustomercomplaintseffectively,ourreputationmaysufferandwemayloseourcustomers’confidence.

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We are susceptible to illegal or improper uses of our platform, which could expose us to additional liability and harm our business.

We,likeourplatforms,aresusceptibletopotentiallyillegalorimproperuses.Thesemayincludeillegalonlinegambling,fraudulentsalesofgoodsorservices,illicitsalesofprescriptionmedicationsorcontrolledsubstances,softwareandotherintellectualpropertypiracy,moneylaundering,bankfraud,childpornographytrafficking,terroristfinancing,prohibitedsalesofalcoholicbeveragesandtobaccoproductsandonlinesecuritiesfraud.Theownersofintellectualpropertyrightsorgovernmentauthoritiesmayseektobringlegalactionagainstusifourplatformisusedforthesaleofinfringingitems.Theseclaimscouldresultinreputationalharmandanyresultingliabilities,lossoftransactionvolumeorincreasedcostscouldharmourbusiness.

Inaddition,ourservicescouldbesubjecttounauthorizedcreditcarduse,identitytheft,employeefraudorotherinternalsecuritybreaches.Wemayincursignificantcoststoprotectagainstthethreatofinformationsecuritybreachesortorespondtooralleviateproblemscausedbyanybreaches.Lawsmayrequireustonotifyregulators,customersoremployeesofsecuritybreachesandwemayberequiredtoreimbursecustomersorbanksforanyfundsstolenasaresultofanybreachesortoprovidecreditmonitoringoridentitytheftprotectionintheeventofaprivacybreach.Theserequirements,aswellasanyadditionalrestrictionsthatmaybeimposedbycreditcardcompanies,couldraiseourcostssignificantlyandreduceourattractiveness.

Inadditiontothedirectcostsofsuchlosses,iftheyarerelatedtocreditcardtransactionsandbecomeexcessivetheycouldresultinuslosingtherighttoacceptcreditcardsforpayment.Sincecreditcardsarethemostwidelyusedmethodforourcustomerstopayfortheproductswesell,ourbusinesswillbeharmedifweareunabletoacceptcreditcards.

Unauthorized disclosure of sensitive or confidential customer information or our failure or the perception by our customers that we failed to comply with privacy laws orproperly address privacy concerns could harm our business and standing with our customers.

Wecollect,store,process,andusecertainpersonalinformationandotheruserdatainourbusiness.Asignificantriskassociatedwithe-commerceandcommunicationsisthesecuretransmissionofconfidentialinformationoverpublicnetworks.Theperceptionofprivacyconcerns,whetherornotvalid,mayharmourbusinessandresultsofoperations.Wemustensurethatallprocessing,collection,use,storage,dissemination,transferanddisposalofdataforwhichweareresponsiblecomplywithrelevantdataprotectionandprivacylaws.Theprotectionofourcustomer,employeeandcompanydataiscriticaltous.Currently,anumberofourusersauthorizeustobilltheircreditcardaccountsdirectly.Werelyoncommerciallyavailablesystems,software,toolsandmonitoringtoprovidesecureprocessing,transmissionandstorageofconfidentialcustomerinformation,suchascreditcardandotherpersonalinformation.Despitethesecuritymeasureswehaveinplace,ourfacilitiesandsystems,andthoseofourthird-partyserviceproviders,maybevulnerabletosecuritybreaches,actsofvandalism,computerviruses,misplacedorlostdata,programmingorhumanerrors,orothersimilarevents.Anysecuritybreach,oranyperceivedfailureinvolvingthemisappropriation,lossorotherunauthorizeddisclosureofconfidentialinformation,aswellasanyfailureorperceivedfailuretocomplywithlaws,policies,legalobligationsorindustrystandardsregardingdataprivacyandprotection,whetherbyusorourvendors,coulddamageourreputation,exposeustolitigationriskandliability,subjectustonegativepublicity,disruptouroperationsandharmourbusiness.Oursecuritymeasuresmayfailtopreventsecuritybreaches,whichcouldharmourbusiness.

We have only a limited ability to protect our intellectual property rights, which are important to our success.

Webelievetheprotectionofourintellectualproperty,includingourtrademarks,patents,copyrights,domainnames,tradedress,andtradesecrets,iscriticaltooursuccess.Weseektoprotectourintellectualpropertyrightsbyrelyingonapplicablelawsandregulations,aswellasavarietyofadministrativeprocedures.Wealsorelyoncontractualrestrictionstoprotectourproprietaryrightswhenofferingorprocuringproductsandservices,includingconfidentialityagreementswithpartieswithwhomweconductbusiness.

However,contractualarrangementsandotherstepswehavetakentoprotectourintellectualpropertymaynotpreventthirdpartiesfrominfringingormisappropriatingourintellectualpropertyordeterindependentdevelopmentofequivalentorsuperiorintellectualpropertyrightsbyothers.Trademark,copyright,patent,domainname,tradedressandtradesecretprotectionisexpensivetomaintainandmayrequirelitigation.Protectingourintellectualpropertyrightsandotherproprietaryrightsisexpensiveandtime-consumingandmaynotbesuccessfulineveryjurisdiction.Also,wemaynotbeabletodiscoverordeterminetheextentofanyunauthorizeduseofourproprietaryrights.Wehavelicensedcertainofourproprietaryrights,suchastrademarksorcopyrightedmaterial,toothersinthepast,andexpecttodosointhefuture.Theselicenseesmaytakeactionsthatdiminishthevalueofourproprietaryrightsorharmourreputation.Anyfailuretoprotectorenforceourintellectualpropertyrightsadequately,orsignificantcostsincurredindoingso,couldmateriallyharmourbusiness.

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Asthenumberofproductsinthesoftwareindustryincreasesandthefunctionalitiesoftheseproductsfurtheroverlap,andasweacquiretechnologythroughacquisitionsorlicenses,wemaybecomeincreasinglysubjecttoinfringementclaims,includingpatent,copyright,andtrademarkinfringementclaims.Wemayberequiredtoenterintolitigationtodeterminethevalidityandscopeofthepatentsorotherintellectualpropertyrightsofothers.Theultimateoutcomeofanyallegationisuncertainand,regardlessoftheoutcome,anysuchclaim,withorwithoutmerit,maybetime-consuming,resultincostlylitigation,divertmanagement’stimeandattentionfromourbusiness,requireustostopselling,delayshipping,orredesignourproducts,orrequireustopaysubstantialamountstosatisfyjudgmentsorsettleclaimsorlawsuitsortopaysubstantialroyaltyorlicensingfees,ortosatisfyindemnificationobligationsthatwehavewithsomeofourcustomers.Ourfailuretoobtainnecessarylicenseorotherrights,orlitigationorclaimsarisingoutofintellectualpropertymatters,mayharmourbusiness.

If we continue to grow, we may not be able to appropriately manage the increased size of our business.

Wearecurrentlyexperiencingaperiodofsignificantexpansionandanticipatethatfurtherexpansionwillberequiredtoaddresspotentialgrowthinourcustomerbaseandmarketopportunities.

Wemustconstantlyaddnewhardware,updatesoftware,enhanceandimproveourbillingandtransactionsystems,andaddandtrainnewengineersandotherpersonneltoaccommodatetheincreaseduseofourplatformsandthenewproductsandfeaturesweregularlyintroduce.Thisupgradeprocessisexpensive,andtheincreasingcomplexityandenhancementofourwebsiteresultsinhighercosts.Failuretoupgradeourtechnology,features,transactionprocessingsystems,securityinfrastructure,ornetworkinfrastructuretoaccommodateincreasedtrafficortransactionvolumecouldharmourbusiness.Adverseconsequencescouldincludeunanticipatedsystemdisruptions,slowerresponsetimes,degradationinlevelsofcustomersupport,impairedqualityofusers’experiencesofourservicesanddelaysinreportingaccuratefinancialinformation.

Ourrevenuesdependonpromptandaccuratetransactionprocesses.Ourfailuretogrowourtransaction-processingcapabilitiestoaccommodatetheincreasingnumberoftransactionsthatmustbebilledonourwebsitewouldharmourbusinessandourabilitytocollectrevenue.Furthermore,wemayneedtoenterintorelationshipswithvariousstrategicpartners,websitesandotheronlineserviceprovidersandotherthirdpartiesnecessarytoourbusiness.Theincreasedcomplexityofmanagingmultiplecommercialrelationshipscouldleadtoexecutionproblemsthatcanaffectcurrentandfuturerevenues,andoperatingmargins.

Wecannotassureyouthatourcurrentandplannedsystems,proceduresandcontrols,personnelandthird-partyrelationshipswillbeadequatetosupportourfutureoperations.Inaddition,ourcurrentexpansionhasplacedasignificantstrainonmanagementandonouroperationalandfinancialresources,andthisstrainisexpectedtocontinue.Ourfailuretomanagegrowtheffectivelycouldseriouslyharmourbusiness,resultsofoperationsandfinancialcondition.

Failure to maintain sufficient working capital could limit our growth and harm our business, financial condition and results of operations.

Wehavesignificantworkingcapitalrequirements,primarilydrivenbypaymenttermsagreedwithourmerchantclientsandtheextendedpaymenttermsthattheyoffertheircustomers.Differencesbetweenthedatewhenwepayourmerchantclientsandthedatewhenwereceivepaymentsfromfinancialinstitutionsmayharmourliquidityandourcashflows.Weexpectourworkingcapitalneedstoincreaseasourtotaltransactionbusinessincreases.Inordertofinanceourworkingcapitalneeds,wehaverecentlybeenenteringintofinancingarrangementsthatdecreasetheamountoftimeittakesforustocollectouraccountsreceivable,andtoincreasetheamountoftimewehavetopayouraccountspayable.Webelievethesefinancingarrangementsallowustogainaccesstocapitalfasterandmorecheaplythanwewouldotherwisebeableto.Therecanbenoassurancethatthesetypesoffinancingarrangementswillcontinuetobeavailabletousonacceptableterms,oratall.Ifwedonothavesufficientworkingcapital,wemaynotbeabletopursueourgrowthstrategy,respondtocompetitivepressuresorfundkeystrategicinitiatives,suchasthedevelopmentofoursites,whichmayharmourbusiness,financialconditionandresultsofoperations.

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We may face restrictions and penalties under the Brazilian Consumer Protection Code in the future.

Brazilhasaseriesofstrictconsumerprotectionlaws,referredtotogetherastheConsumerProtectionCode(Código de Defesa do Consumidor ).TheselawsapplytoallcompaniesinBrazilthatsupplyproductsorservicestoBrazilianconsumers.Theyincludeprotectionagainstmisleadinganddeceptiveadvertising,protectionagainstcoerciveorunfairbusinesspracticesandprotectionintheformationandinterpretationofcontracts,usuallyintheformofcivilliabilitiesandadministrativepenaltiesforviolations.ThesepenaltiesareoftenleviedbytheBrazilianConsumerProtectionAgencies(Fundação de Proteção e Defesa do Consumidor ,orPROCONs),whichoverseeconsumerissuesonadistrict-by-districtbasis.CompaniesthatoperateacrossBrazilmayfacepenaltiesfrommultiplePROCONs,aswellasfromtheNationalSecretariatforConsumers(Secretaria Nacional do Consumidor ,orSENACON).CompaniesmaysettleclaimsmadebyconsumersviaPROCONsbypayingcompensationforviolationsdirectlytoconsumersandthroughamechanismthatallowsthemtoadjusttheirconduct,calledaconductadjustmentagreement(Termo de Ajustamento de Conduta ,orTAC).BrazilianPublicProsecutorsmayalsocommenceinvestigationsofallegedviolationsofconsumerrights,andtheTACmechanismisalsoavailableasasanctioninthoseproceedings.CompaniesthatviolateTACsfacepotentialautomaticfines.BrazilianPublicProsecutorsmayalsofilepubliccivilactionsagainstcompanieswhoviolateconsumerrights,seekingstrictobservationoftheconsumerprotectionlawsandcompensationforanydamagestoconsumers.

AtDecember31,2018,wehadapproximately3,500activejudicialproceedingsandproceedingswithPROCONsandsmallclaimscourtsrelatingtoconsumerrights.Mostoftheseproceedingsarerelatedtoconsumerallegationsofnon-deliveryofproductsbymerchantsandrequestsforwithdrawalofdigitalaccountbalancesthatwereblockedbyPagSegurobecausetheywereunderinvestigationforfraudorundergoingclaimresolution.Totheextentconsumersfilesuchclaimsagainstusinthefuture,wemayberequiredtopayfinesfornoncompliancethatcouldharmourresultsofoperations.

We are subject to regulatory activity and antitrust litigation under competition laws.

Wereceivescrutinyfromvariousgovernmentalagenciesundercompetitionlaws.Othercompaniesorgovernmentalagenciesmayallegethatouractionsviolateantitrustorcompetitionlaws,orotherwiseconstituteunfaircompetition.Contractualagreementswithbuyers,sellers,orothercompaniescouldgiverisetoregulatoryactionorantitrustinvestigationsorlitigation.Also,ourunilateralbusinesspracticescouldgiverisetoregulatoryactionorantitrustinvestigationsorlitigation.Anysuchclaimsandinvestigations,eveniftheyareunfounded,areusuallyveryexpensivetodefend,involvenegativepublicityandsubstantialdiversionofmanagementtimeandeffort,andcouldresultinsignificantjudgmentsagainstus.

Unfavorable outcomes in litigation or our inability to post judicial collateral or provide guarantees in pending legal or administrative proceedings could have a materialadverse effect on our business, financial condition and results of operations.

Wearedefendantsinasignificantnumberofjudicialproceedings,includingindemnity,laborandtaxproceedings.AtDecember31,2018,wehadrecordedR$7.2millioninprovisionsforcurrentcivilandlaborproceedingsandnoprovisionsfornon-currentproceedings.Wehavenotrecordedanyprovisionswithrespecttoourproceedingsinwhichourchanceoflosshasbeendeemedpossible.Wecannotguaranteethatsuchproceedingswillhavefavorableoutcomesforusorthattheprovisionsmadewillbesufficienttopayanyamountsdue.Anyproceedingsthatrequireustomakesubstantialpayments,affectourreputationorotherwiseinterferewithourbusinessoperationscouldhaveamaterialadverseeffectonourbusiness,financialconditionandoperatingresults.

Additionally,wemaynothavesufficientfundstopostcollateralorprovideguaranteesinjudicialoradministrativeproceedingsthatclaimsubstantialamounts.Evenifwedonotpostsuchcollateralorprovideguarantees,wewillbeliableforpayinganyamountsduepursuanttoanyunfavorableoutcomesinlegalproceedings.Wecannotassureyouthat,ifwecannotmakesuchpayments,ourassets,includingfinancialassets,willnotbeattached,orthatwewillbeabletoobtaintaxgoodstandingcertificates,allofwhichmayhaveamaterialadverseeffectonourbusiness,financialconditionandresultsofoperations.

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We may pursue strategic acquisitions or investments. The failure of an acquisition or investment to produce the anticipated results, or the inability to integrate an acquiredcompany fully, could harm our business.

Wemayfromtimetotimeacquireorinvestincomplementarycompaniesorbusinesses.Thesuccessofanacquisitionorinvestmentwilldependonourabilitytomakeaccurateassumptionsregardingthevaluation,operations,growthpotential,integrationandotherfactorsrelatedtothatbusiness.Wecannotassureyouthatouracquisitionsorinvestmentswillproducetheresultsthatweexpectatthetimeweenterintoorcompleteagiventransaction.Furthermore,acquisitionsmayresultindifficultiesintegratingtheacquiredcompanies,andmayresultinthediversionofourcapitalandourmanagement’sattentionfromotherbusinessissuesandopportunities.Wemaynotbeabletointegratesuccessfullytheoperationsthatweacquire,includingtheirpersonnel,financialsystems,distributionoroperatingprocedures.Ifwefailtointegrateacquisitionssuccessfully,ourbusinesscouldsuffer.Inaddition,theexpenseofintegratinganyacquiredbusinessandtheirresultsofoperationsmayharmouroperatingresults.

Our developer platforms, which are open to merchants and third-party developers, subject us to additional risks.

Weprovidethird-partydeveloperswithaccesstoapplicationprogramminginterfaces,softwaredevelopmentkitsandothertoolsdesignedtoallowthemtoproduceapplicationsforuse,withaparticularfocusonmobileapplications.Therecanbenoassurancethatmerchantsorthird-partydeveloperswilldevelopandmaintainapplicationsandservicesonouropenplatformsonatimelybasisoratall.Anumberoffactorscouldcausethemtocurtailorstopdevelopmentforourplatforms.Inaddition,ourbusinessissubjecttomanyregulatoryrestrictions.Itispossiblethatmerchantsandthird-partydeveloperswhoutilizeourdevelopmentplatformsortoolscouldviolatetheseregulatoryrestrictionsandwemaybeheldresponsibleforsuchviolations,whichcouldharmourbusiness.

We are a holding company and do not have any material assets other than the shares of our subsidiaries.

WeareaCaymanIslandsexemptedcompanywithlimitedliability.Ourmaterialassetsareourdirectandindirectequityinterestsinoursubsidiaries,particularlyPagseguroInternetS.A.,ourBrazilianoperatingcompany,whichwerefertoasPagSeguroBrazil.Weare,therefore,dependentuponpayments,dividendsanddistributionsfromoursubsidiariesforfundstopayouroperatingandotherexpensesandtopayfuturecashdividendsordistributions,ifany,toholdersofourClassAcommonsharesorClassBcommonshares,andwemayhavetaxcostsinconnectionwithanydividendordistribution.Furthermore,exchangeratefluctuationswillaffecttheU.S.dollarvalueofanydistributionsoursubsidiariesmakewithrespecttoourequityinterestsinthosesubsidiaries.See“—RisksRelatingtoBrazil—TheBrazilianfederalgovernmenthasexercised,andcontinuestoexercise,significantinfluenceovertheBrazilianeconomy.ThisinvolvementaswellasBrazil’spoliticalandeconomicconditionscouldharmusandthepriceofourClassAcommonshares,”“—RisksRelatingtoOurClassACommonShares—Wehavenotadoptedadividendpolicywithrespecttofuturedividends.Ifwedonotdeclareanydividendsinthefuture,youwillhavetorelyonpriceappreciationofourClassAcommonsharesinordertoachieveareturnonyourinvestment.”and“Item10.AdditionalInformation—MemorandumandArticlesofAssociation—DividendsandCapitalizationofProfits.”

An occurrence of a natural disaster, widespread health epidemic or other outbreaks could seriously harm our business, financial condition and results of operations.

Naturaldisasters,suchasfiresorfloods,theoutbreakofawidespreadhealthepidemic,orotherevents,suchaswars,actsofterrorism,politicalevents,environmentalaccidents,powershortagesorcommunicationinterruptionscouldseriouslyharmourbusiness.Theoccurrenceofadisasterorsimilareventcouldmateriallydisruptourbusinessandoperations.Theseeventscouldalsocauseustocloseouroperatingfacilitiestemporarily,whichwouldseverelydisruptouroperationsandseriouslyharmourbusiness,financialconditionandresultsofoperations.Inaddition,ournetsalescouldbesignificantlyreducedtotheextentthatanaturaldisaster,healthepidemicorothermajoreventharmstheeconomyofBraziloranyotherjurisdictionswherewemayoperate.Ouroperationscouldalsobeseverelydisruptedifourcustomers,merchantsorotherparticipantswereaffectedbynaturaldisasters,healthepidemicsorothermajorevents.

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Risks Relating to Brazil

The Brazilian federal government has exercised, and continues to exercise, significant influence over the Brazilian economy. This involvement as well as Brazil’s politicaland economic conditions could harm us and the price of our Class A common shares.

TheBrazilianfederalgovernmentfrequentlyexercisessignificantinfluenceovertheBrazilianeconomyandoccasionallymakessignificantchangesinpolicyandregulations.TheBraziliangovernment’sactionstocontrolinflationandotherpoliciesandregulationshaveofteninvolved,amongothermeasures,increasesininterestrates,changesintaxpolicies,pricecontrols,foreignexchangeratecontrols,currencydevaluations,capitalcontrolsandlimitsonimports.WehavenocontroloverandcannotpredictwhatmeasuresorpoliciestheBraziliangovernmentmaytakeinthefuture.WeandthemarketpriceofoursecuritiesmaybeharmedbychangesinBraziliangovernmentpolicies,aswellasgeneraleconomicfactors,including,withoutlimitation:

• growthordownturnoftheBrazilianeconomy;

• interestratesandmonetarypolicies;

• exchangeratesandcurrencyfluctuations;

• inflation;

• liquidityofthedomesticcapitalandlendingmarkets;

• importandexportcontrols;

• exchangecontrolsandrestrictionsonremittancesabroad;

• modificationstolawsandregulationsaccordingtopolitical,socialandeconomicinterests;

• fiscalpolicyandchangesintaxlaws;

• economic,politicalandsocialinstability;

• laborandsocialsecurityregulations;

• energyandwatershortagesandrationing;and

• otherpolitical,socialandeconomicdevelopmentsinoraffectingBrazil.

Inaddition,Braziliscurrentlyexperiencingarecessionandweakmacroeconomicconditionsareexpectedtocontinuethroughthefirstsixmonthsof2019,whilethesocialsecurityreformproposalremainspending,see“Item5.OperatingandFinancialReviewandProspects—PrincipalFactorsAffectingOurFinancialConditionandResultsofOperations.”WecannotpredictwhatmeasurestheBrazilianfederalgovernmentwilltakeinthefaceofmountingmacroeconomicpressuresorotherwise.

UncertaintyoverwhethertheBrazilianfederalgovernmentwillimplementchangesinpolicyorregulationaffectingtheseorotherfactorsinthefuturemayaffecteconomicperformanceandcontributetoeconomicuncertaintyinBrazil,whichmayhaveanadverseeffectonusandourClassAcommonshares.RecenteconomicandpoliticalinstabilityhasledtoanegativeperceptionoftheBrazilianeconomyandhighervolatilityintheBraziliansecuritiesmarkets,whichalsomayadverselyaffectusandourClassAcommonshares.See“Item5.OperatingandFinancialReviewandProspects—PrincipalFactorsAffectingOurFinancialConditionandResultsofOperations—Brazilianpoliticalenvironmentandmacroeconomicconditions,interestrates,consumercreditandconsumerspending.”

Ongoing political instability may adversely affect our business, results of operations and the trading price of our Class A common shares.

TherecenteconomicinstabilityinBrazilhascontributedtoadeclineinmarketconfidenceintheBrazilianeconomyaswellastoadeterioratingpoliticalenvironment.Despitethesloweconomicrecoveryandthestillhighfiscalvulnerability,severalBrazilianmacroeconomicfundamentalsimprovedduring2017-18.Themainhighlightwasthedecelerationofinflationandtheachievementofhistoricallylowinterestrates.

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Theeconomicoutlookfor2019continuestofacesignificantuncertainties.TheBrazilianeconomyisexpectedtocontinuerecoveringatamoderatepace.ThemedianmarketforecastcurrentlypredictsthattheGDPgrowthratewillacceleratefrom1.1%in2018toaround2.5%in2019(accordingtoFocusReportonJanuary4,2019).

Inaddition,variousongoinginvestigationsintoallegationsofmoneylaunderingandcorruptionbeingconductedbytheOfficeoftheBrazilianFederalProsecutor,includingthelargestsuchinvestigation,knownas“OperaçãoLavaJato,”havenegativelyimpactedtheBrazilianeconomyandpoliticalenvironment.

Under“OperaçãoLavaJato”membersoftheBrazilianfederalgovernmentandofthelegislativebranch,aswellasseniorofficersoflargestate-ownedandprivatecompanies,havefacedallegationsand,incertaincases,convictions,or,also,enteringintopleabargains,relatedtocrimesofpoliticalcorruption,involvingallegedbribesbymeansofkickbacksoncontractsgrantedbythegovernmenttoseveralinfrastructure,oilandgasandconstructioncompanies.Theprofitsofthesekickbacksallegedlyfinancedthepoliticalcampaignsofpoliticalpartiesofthegovernmentthatwereunaccountedforornotpubliclydisclosed,inadditiontoallegedpersonalenrichmentoftherecipientsofthebribesandthefavoringofcompaniesincontractswiththeBraziliangovernment.Furthermore,certainofthesecompanieshaveorarealsofacinginvestigations,and,incertaincases,beingconvictedbythecompetentauthorities,suchastheBrazilianSecuritiesCommission(ComissãodeValoresMobiliários),theSECandtheUnitedStatesDepartmentofJustice.Certainofthesecompanieshavechosentoenterintoleniencyagreementswiththecompetentauthorities,whenpossible.Thepotentialoutcomeoftheseinvestigations,convictions,pleabargainingandleniencyagreementsisstilluncertain,buttheyhavealreadyhadanadverseimpactontheimageandreputationoftheimplicatedcompanies,politicalpartiesandonthegeneralmarketperceptionoftheBrazilianeconomyandpoliticalenvironment.Wecannotpredictwhethersuchinvestigationswillleadtofurtherpoliticalandeconomicinstabilityorwhethernewallegationsagainstgovernmentofficials,officersand/orcompanieswillariseinthefuture.Inaddition,wecannotpredicttheoutcomeofanysuchinvestigationsorallegationsnortheireffectontheBrazilianeconomy.

We also cannot predict which policies the current President of Brazil, Jair Bolsonaro, may adopt or change during his mandate or the effect that any such policies mighthave on our business and on the Brazilian economy. During his presidential campaign in 2018 and at the start of his four-year term beginning in January 2019,Bolsonaro reportedly favored the privatization of state-owned companies, economic liberalization, new pension legislation and tax reforms. However, there is noguarantee that Bolsonaro will be successful in executing his campaign promises or passing certain favored reforms fully or at all, particularly when confronting afractured congress. Moreover, Bolsonaro was generally a polarizing figure during his campaign for presidency, particularly in relation to certain social views, and wecannot predict the ways in which a divided electorate may continue to impact his presidency and ability to implement policies and reforms. Any such new policies orchanges to current policies may have a material adverse effect on us or the price of our Class A common shares. Furthermore, uncertainty over whether the currentBrazilian government will implement changes in policy or regulation in the future may contribute to economic uncertainty in Brazil and to heightened volatility in thesecurities issued abroad by Brazilian companies.Inflation and certain measures by the Brazilian government to curb inflation have historically harmed the Brazilianeconomy and Brazilian capital markets, and high levels of inflation in the future would harm our business and the price of our Class A common shares.

Inthepast,Brazilhasexperiencedextremelyhighratesofinflation.InflationandsomeofthemeasurestakenbytheBraziliangovernmentinanattempttocurbinflationhavehadsignificantnegativeeffectsontheBrazilianeconomygenerally.Inflation,policiesadoptedtocurbinflationarypressuresanduncertaintiesregardingpossiblefuturegovernmentalinterventionhavecontributedtoeconomicuncertaintyandheightenedvolatilityintheBraziliancapitalmarkets.

AccordingtotheNationalConsumerPriceIndex(Í ndice Nacional de Pre ç os ao Consumidor Amplo ),orIPCA,Brazilianinflationrateswere3.75%,2.95%and6.29%in2018,2017and2016,respectively.BrazilmayexperiencehighlevelsofinflationinthefutureandinflationarypressuresmayleadtotheBraziliangovernment’sinterveningintheeconomyandintroducingpoliciesthatcouldharmourbusinessandthepriceofourClassAcommonshares.Inthepast,theBraziliangovernment’sinterventionsincludedthemaintenanceofarestrictivemonetarypolicywithhighinterestratesthatrestrictedcreditavailabilityandreducedeconomicgrowth,causingvolatilityininterestrates.Forexample,theSELIC(Sistema Especial de Liquida ç ã o e de Cust ó dia ),theCentralBank’sovernightrate,asestablishedbytheMonetaryPolicyCommittee(Comit ê dePol í tica Monet á ria do Banco Central do Brasil ),orCOPOM,increasedfrom10.00%atthebeginningof2014toahighpointof14.25%in2016beforeaseriesofratereductionsin2017,bringingtheSELICratedownto7.00%asofDecember7,2017,whereitremainedatyear-end2017.TheCOPOMreducedtheSELICrateto6.75%onFebruary7,2018,andfurtherreduceditto6.50%onMarch21,2018,whereitcurrentlyremains.Conversely,morelenientgovernmentandCentralBankpoliciesandinterestratedecreaseshavetriggeredandmaycontinuetotriggerincreasesininflation,and,consequently,growthvolatilityandtheneedforsuddenandsignificantinterestrateincreases,whichcouldnegativelyaffectusandincreaseourindebtedness.

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Exchange rate instability may have adverse effects on the Brazilian economy, us and the price of our Class A common shares.

TheBraziliancurrencyhasbeenhistoricallyvolatileandhasbeendevaluedfrequentlyoverthepastthreedecades.Throughoutthisperiod,theBraziliangovernmenthasimplementedvariouseconomicplansandusedvariousexchangeratepolicies,includingsuddendevaluations,periodicmini-devaluations(duringwhichthefrequencyofadjustmentshasrangedfromdailytomonthly),exchangecontrols,dualexchangeratemarketsandafloatingexchangeratesystem.Althoughlong-termdepreciationofthereal isgenerallylinkedtotherateofinflationinBrazil,depreciationofthereal occurringovershorterperiodsoftimehasresultedinsignificantvariationsintheexchangerate,betweenthereal ,theU.S.dollarandothercurrencies.Thereal depreciatedagainsttheU.S.dollarby32.0%atyear-end2015ascomparedtoyear-end2014,andby11.8%atyear-end2014ascomparedtoyear-end2013.Thereal /U.S.dollarexchangeratereportedbytheCentralBankwasR$3.9048perU.S.dollaronDecember31,2015andR$3.2591perU.S.dollaronDecember31,2016,whichreflecteda19.8%appreciationofthereal againsttheU.S.dollarduring2016.Betweenyear-end2016andyear-end2017,thereal remainedrelativelystable,depreciating1.5%againsttheU.S.dollar.Betweenyear-end2017and2018,thereal depreciatedgreatly,by16.9%,againsttheU.S.dollar,primarilyasaresultoflowerinterestratesinBrazil,whichreducedthevolumeofforeigncurrencydepositedinBrazilinthe“carrytrade,”aswellasuncertaintyregardingtheresultsoftheBrazilianpresidentialelectionsheldinOctober2018.Thereal /U.S.dollarexchangeratereportedbytheCentralBankwasR$3.8748perU.S.dollaronDecember31,2018.Therecanbenoassurancethatthereal willnotagainappreciateordepreciateagainsttheU.S.dollarorothercurrenciesinthefuture.

Adevaluationofthereal relativetotheU.S.dollarcouldcreateinflationarypressuresinBrazilandcausetheBraziliangovernmentto,amongothermeasures,increaseinterestrates.Anydepreciationofthereal maygenerallyrestrictaccesstotheinternationalcapitalmarkets.ItwouldalsoreducetheU.S.dollarvalueofourresults.RestrictivemacroeconomicpoliciescouldreducethestabilityoftheBrazilianeconomyandharmourresultsofoperationsandprofitability.Inaddition,domesticandinternationalreactionstorestrictiveeconomicpoliciescouldhaveanegativeimpactontheBrazilianeconomy.Thesepoliciesandanyreactionstothemmayharmusbycurtailingaccesstoforeignfinancialmarketsandpromptingfurthergovernmentintervention.Adevaluationofthereal relativetotheU.S.dollarmayalso,asinthecontextofthecurrenteconomicslowdown,decreaseconsumerspending,increasedeflationarypressuresandreduceeconomicgrowth.

Ontheotherhand,anappreciationofthereal relativetotheU.S.dollarandotherforeigncurrenciesmaydeterioratetheBrazilianforeignexchangecurrentaccounts.WeandcertainofoursupplierspurchasegoodsandservicesfromcountriesoutsideBrazil,andthuschangesinthevalueoftheU.S.dollarcomparedtoothercurrenciesmayaffectthecostsofgoodsandservicesthatwepurchase.Dependingonthecircumstances,eitherdevaluationorappreciationofthereal relativetotheU.S.dollarandotherforeigncurrenciescouldrestrictthegrowthoftheBrazilianeconomy,aswellasourbusiness,resultsofoperationsandprofitability.

Infrastructure and workforce deficiency in Brazil may impact economic growth and have a material adverse effect on us.

OurperformancedependsontheoverallhealthandgrowthoftheBrazilianeconomy.BrazilianGDPgrowthhasfluctuatedoverthepastfewyears,withgrowthof3.0%in2013butdecreasingto0.5%in2014,acontractionof3.5%in2015,acontractionof3.3%in2016,growthof1.1%inboth2017and2018.Growthislimitedbyinadequateinfrastructure,includingpotentialenergyshortagesanddeficienttransportation,logisticsandtelecommunicationsectors,thelackofaqualifiedlaborforce,andthelackofprivateandpublicinvestmentsintheseareas,whichlimitproductivityandefficiency.Anyofthesefactorscouldleadtolabormarketvolatilityandgenerallyimpactincome,purchasingpowerandconsumptionlevels,whichcouldlimitgrowthandultimatelyhaveamaterialadverseeffectonus.

Developments and the perceptions of risks in other countries, including other emerging markets, the United States and Europe, may harm the Brazilian economy and theprice of Brazilian securities, including the price of our Class A common shares.

ThemarketforsecuritiesissuedbyBraziliancompaniesisinfluencedbyeconomicandmarketconditionsinBraziland,tovaryingdegrees,marketconditionsinotherLatinAmericanandemergingmarkets,aswellastheUnitedStates,Europeandothercountries.Totheextenttheconditionsoftheglobalmarketsoreconomydeteriorate,thebusinessofBraziliancompaniesmaybeharmed.Theweaknessintheglobaleconomyhasbeenmarkedby,amongotheradversefactors,lowerlevelsofconsumerandcorporateconfidence,decreasedbusinessinvestmentandconsumerspending,increasedunemployment,reducedincomeandassetvaluesinmanyareas,reductionofChina’sgrowthrate,currencyvolatilityandlimitedavailabilityofcreditandaccesstocapital.DevelopmentsoreconomicconditionsinotheremergingmarketcountrieshaveattimessignificantlyaffectedtheavailabilityofcredittoBraziliancompaniesandresultedinconsiderableoutflowsoffundsfromBrazil,decreasingtheamountofforeigninvestmentsinBrazil.

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Crisesandpoliticalinstabilityinotheremergingmarketcountries,theUnitedStates,EuropeorothercountriescoulddecreaseinvestordemandforBraziliansecurities,suchasourClassAcommonshares.InJune2016,theUnitedKingdomhadareferenduminwhichthemajorityvotedtoleavetheEuropeanUnion.WehavenocontroloverandcannotpredicttheeffectoftheUnitedKingdom’sexitfromtheEuropeanUnionnoroverwhetherandtowhicheffectanyothermemberstatewilldecidetoexittheEuropeanUnioninthefuture.OnJanuary20,2017,DonaldTrumpbecamethePresidentoftheUnitedStates.WehavenocontroloverandcannotpredicttheeffectofDonaldTrump’sadministrationorpolicies.Thesedevelopments,aswellaspotentialcrisesandformsofpoliticalinstabilityarisingtherefromoranyotherasofyetunforeseendevelopment,mayharmourbusinessandthepriceofourClassAcommonshares.

Any further downgrading of Brazil’s credit rating could reduce the trading price of our Class A common shares.

Wemaybeharmedbyinvestors’perceptionsofrisksrelatedtoBrazil’ssovereigndebtcreditrating.RatingagenciesregularlyevaluateBrazilanditssovereignratings,whicharebasedonanumberoffactorsincludingmacroeconomictrends,fiscalandbudgetaryconditions,indebtednessmetricsandtheperspectiveofchangesinanyofthesefactors.

BrazilhaslostitsinvestmentgradesovereigndebtcreditratingwiththethreemainU.S.basedcreditratingagencies,Standard&Poor’s,Moody’sandFitch.Standard&Poor’sdowngradedBrazil’ssovereigndebtcreditratingfromBBB+toBBinFebruary2016andfurtherreducedittoBB-inJanuary2018withastableoutlook.InDecember2015,Moody’splacedBrazil’sBaa3sovereigndebtcreditratingonreviewanddowngradedBrazil’ssovereigncreditratinginFebruary2016toBa2withanegativeoutlook,citingtheprospectforfurtherdeteriorationinBrazil’sindebtednessfiguresamidarecessionandchallengingpoliticalenvironment.InApril2018,Moody’sreaffirmedtheBa2rating,butraisedtheoutlookfromnegativetostable,citingexpectationsthatthewinneroftheOctober2018presidentialelectionswillpassfiscalreforms.FitchdowngradedBrazil’ssovereigncreditratingtoBBwithanegativeoutlookinFebruary2016,citingthecountry’srapidlyexpandingbudgetdeficitandworse-than-expectedrecession,andfurtherdowngradedBrazil’ssovereigndebtcreditratinginMay2017toBB-withanegativeoutlook.AsBrazil’screditratingsarecloselylinkedtotheproposedsocialsecurityreform,expectedtooccurin2019,Brazil’screditratingsmaysufferifthisproposalisnotapproved.

Brazil’ssovereigncreditratingiscurrentlyratedbelowinvestmentgradebythethreemaincreditratingagencies.ConsequentlythepricesofsecuritiesissuedbyBraziliancompanieshavebeennegativelyaffected.AprolongationorworseningofthecurrentBrazilianrecessionandcontinuedpoliticaluncertainty,amongotherfactors,couldleadtofurtherratingsdowngrades.AnyfurtherdowngradeofBrazil’ssovereigncreditratingscouldheighteninvestors’perceptionofriskand,asaresult,causethetradingpriceofourClassAcommonsharestodecline.

Internet regulation in Brazil is recent and still limited and several legal issues related to the Internet are uncertain.

In2014,Brazilenactedalaw,whichwerefertoastheInternetAct,settingforthprinciples,guarantees,rightsanddutiesfortheuseoftheInternetinBrazil,includingprovisionsaboutInternetserviceproviderliability,InternetuserprivacyandInternetneutrality.InMay2016,furtherregulationswerepassedinconnectionwiththeInternetAct.However,unlikeintheUnitedStates,littlecaselawexistsaroundtheInternetActandexistingjurisprudencehasnotbeenconsistent.Legaluncertaintyarisingfromthelimitedguidanceprovidedbycurrentlawsinforceallowsfordifferentjudgesorcourtstodecideverysimilarclaimsindifferentwaysandestablishcontradictoryjurisprudence.Thislegaluncertaintyallowsforrulingsagainstusandcouldsetadverseprecedents,whichindividuallyorintheaggregatecouldseriouslyharmourbusiness,resultsofoperationsandfinancialcondition.Inaddition,legaluncertaintymayharmourcustomers’perceptionanduseofourservice.

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Risks Relating to Our Class A Common Shares

UOL, our largest shareholder, owns 100% of our outstanding Class B common shares, which represent approximately 91.1% of the voting power of our issued sharecapital, and controls all matters requiring shareholder approval. This concentration of ownership and voting power limits your ability to influence corporate matters.

OurClassBcommonsharesareentitledto10votespershareandourClassAcommonsharesareentitledtoonevotepershare.OurClassBcommonsharesareconvertibleintoanequivalentnumberofClassAcommonsharesandgenerallyconvertintoClassAcommonsharesupontransfersubjecttolimitedexceptions.UOLcontrolsourcompanyandholdsallofouroutstandingClassBcommonshares,representing50.5%ofourissuedsharecapital.Becauseoftheten-to-onevotingratiobetweenourClassBcommonsharesandClassAcommonshares,theseClassBcommonsharesgiveUOLapproximately91.1%ofthevotingpowerofourissuedsharecapital.UOLthereforecontrolstheoutcomeofalldecisionsatourshareholders’meetings,andisabletoelectamajorityofthemembersofourboardofdirectors.Itisalsoabletodirectouractionsinareassuchasbusinessstrategy,financing,distributions,acquisitionsanddispositionsofassetsorbusinesses.UOL’sdecisionsonthesemattersmaybecontrarytoyourexpectationsorpreferences,anditmaytakeactionsthatcouldbecontrarytoyourinterests.Itwillbeabletopreventanyothershareholders,includingyou,fromblockingtheseactions.Forfurtherinformationregardingshareholdingsinourcompany,see“Item7.MajorShareholdersandRelatedPartyTransactions—MajorShareholders.”

IfUOLsellsortransfersanyofitsClassBcommonshares,theywillgenerallyconvertautomaticallyintoClassAcommonshares,subjecttolimitedexceptions,suchastransferstoaffiliates,totrusteesfortheholderoritsaffiliatesandcertaintransferstoU.S.taxexemptorganizations.ThefactthatanyClassBcommonsharesconvertintoClassAcommonsharesifUOLsellsortransfersthemmeansthatUOLwillinmanysituationscontinuetocontrolamajorityofthecombinedvotingpowerofouroutstandingsharecapital,duetothevotingrightsofanyClassBcommonsharesthatitretains.IfourClassBcommonsharesatanytimerepresentlessthan10%ofthecombinedvotingpowerofourClassAcommonsharesandClassBcommonsharestogether,however,theClassBcommonsharesthenoutstandingwillautomaticallyconvertintoClassAcommonshares.Foradescriptionofthedualclassstructure,see“Item10.AdditionalInformation—MemorandumandArticlesofAssociation.”

Class A common shares eligible for future sale may cause the market price of our Class A common shares to drop significantly.

ThemarketpriceofourClassAcommonsharesmaydeclineasaresultofsalesofalargenumberofourClassAcommonsharesinthemarket(includingClassAcommonsharesissuableuponconversionofClassBcommonshares)ortheperceptionthatthesesalesmayoccur.Thesesales,orthepossibilitythatthesesalesmayoccur,alsomightmakeitmoredifficultforustosellequitysecuritiesinthefutureatatimeandatapricethatwedeemappropriate.

AsofMarch31,2019,wehadoutstanding162,267,064ClassAcommonshares(includingtreasuryshares)and165,620,861ClassBcommonshares.AllClassBcommonsharesarebeneficiallyownedbyUOL.Subjecttothelock-upagreementsdescribedbelow,theClassAcommonsharessoldinourJune2018follow-onofferingarefreelytradablewithoutrestrictionorfurtherregistrationundertheSecuritiesActbypersonsotherthanouraffiliateswithinthemeaningofRule144oftheSecuritiesAct.

Ourshareholdersorentitiescontrolledbythemortheirpermittedtransfereesare,subjecttothelock-upagreementsdescribedbelow,abletoselltheirsharesinthepublicmarketfromtimetotimewithoutregisteringthem,subjecttocertainlimitationsonthetiming,amountandmethodofthosesalesimposedbyregulationspromulgatedbytheSEC.Ifanyofourshareholders,theaffiliatedentitiescontrolledbythemortheirrespectivepermittedtransfereesweretosellalargenumberoftheirClassAcommonshares,themarketpriceofourClassAcommonsharesmaydeclinesignificantly.Inaddition,theperceptioninthepublicmarketsthatsalesbythemmightoccurmayalsocausethetradingpriceofourClassAcommonsharestodecline.

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PagSeguroDigitalhasagreedwiththeunderwriterstoitsJune2018follow-onoffering,subjecttocertainexceptions,nottooffer,sellordisposeofanysharesinitssharecapitalorsecuritiesconvertibleintoorexchangeableorexercisableforanysharesinitssharecapitalduringthe12monthperiodfollowingJune21,2018,thedateofourfollow-onoffering.UOLhasalsoagreedtolock-uprestrictionsfor12monthsfollowingtheJune21,2018,thedateofourfollow-onoffering,insubstantiallysimilarterms,exceptthatthelock-uprestrictionsapplicabletoUOLarenotsubjecttoanyexceptions.Thelock-uprestrictionsapplicabletoPagSeguroDigitalandUOLarenotsubjecttowaiverbytheunderwritersoftheJune2018follow-onoffering.Thelock-upagreemententeredintobyPagSeguroDigitalissubjecttotheexceptionsdescribedin“Item10.AdditionalInformation—CommonSharesEligibleforFutureSale,”includingtherightforourcompanytoissuenewsharesifwecarryoutanacquisitionorenterintoamerger,jointventureorstrategicparticipation.

Salesofasubstantialnumberofourcommonsharesuponexpirationofthelock-upagreements,theperceptionthatsuchsalesmayoccur,orearlyreleaseoftheselock-upperiods,couldcauseourmarketpricetofallormakeitmoredifficultforyoutosellyourClassAcommonsharesatatimeandpricethatyoudeemappropriate.

We have not adopted a dividend policy with respect to future dividends. If we do not declare any dividends in the future, you will have to rely on price appreciation of ourClass A common shares in order to achieve a return on your investment.

Wehavenotadoptedadividendpolicywithrespecttofuturedividends.Theamountofanydistributionswilldependonmanyfactorssuchasourresultsofoperations,financialcondition,cashrequirements,prospectsandotherfactorsdeemedrelevantbyourboardofdirectorsor,whereapplicable,ourshareholders.Accordingly,ifwedonotdeclaredividendsinthefuture,investorswillmostlikelyhavetorelyonsalesoftheirClassAcommonshares,whichmayincreaseordecreaseinvalue,astheonlywaytorealizecashfromtheirinvestment.ThereisnoguaranteethatthepriceofourClassAcommonshareswilleverexceedthepricethatyoupay.

We may raise additional capital in the future by issuing equity securities, which may result in a potential dilution of your equity interest.

Wemayissueadditionalequitysecuritiestoraisecapital,makeacquisitions,orforavarietyofotherpurposes.Additionalissuancesofoursharesmaybemadepursuanttotheexerciseorconversionofconvertibledebtsecurities,warrants,stockoptionsorotherequityincentiveawardssuchastheLTIPandLTIP-Goals.Anystrategicpartnership,issuanceorplacementofsharesand/orsecuritiesconvertibleintoorexchangeableforsharesmayaffectthemarketpriceofoursharesandcouldresultindilutionofyourequityinterest.

If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, the market price and tradingvolume of our Class A common shares could decline.

ThetradingmarketforourClassAcommonsharesdependsinpartontheresearchandreportsthatsecuritiesorindustryanalystspublishaboutusorourbusiness.Ifoneormoreoftheanalystswhocoverusdowngradeourstockorpublishinaccurateorunfavorableresearchaboutourbusiness,ourstockpricewouldlikelydecline.Ifoneormoreoftheseanalystsceasecoverageofourcompanyorfailtopublishreportsonusregularly,demandforourClassAcommonsharescoulddecline,whichmightcausethemarketpriceandtradingvolumeofourClassAcommonsharestodecline.

Our dual class capital structure means our stock will not be included in certain indices. We cannot predict the impact this may have on our stock price.

InJuly2017,S&PDowJones,aproviderofwidelyfollowedstockindices,announcedthatcompanieswithmultipleshareclasses,suchasours,willnotbeeligibleforinclusionincertainoftheirindices.Asaresult,ourClassAcommonsharesarenoteligibleforthesestockindices.Additionally,sinceSeptember2017,FTSERussell,anotherproviderofwidelyfollowedstockindices,requiresnewconstituentsofitsindicestohaveatleastfivepercentoftheirvotingrightsinthehandsofpublicstockholders.UOLcontrolsapproximately91.1%ofthevotingpowerofouroutstandingsharecapital.Manyinvestmentfundsareprecludedfrominvestingincompaniesthatarenotincludedinsuchindices,andthesefundswouldbeunabletopurchaseourClassAcommonsharesifwewerenotincludedinsuchindices.WecannotassureyouthatotherstockindiceswillnottakeasimilarapproachtoS&PDowJonesandFTSERussellinthefuture.ExclusionfromindicescouldmakeourClassAcommonshareslessattractivetoinvestorsand,asaresult,themarketpriceofourClassAcommonsharescouldbeadverselyaffected.

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We are a Cayman Islands exempted company with limited liability. The rights of our shareholders may be different from the rights of shareholders governed by the laws ofU.S. jurisdictions.

WeareaCaymanIslandsexemptedcompanywithlimitedliability.OurcorporateaffairsaregovernedbyourMemorandumandArticlesofAssociationandbythelawsoftheCaymanIslands.TherightsofshareholdersandtheresponsibilitiesofmembersofourboardofdirectorsmaybedifferentfromtherightsofshareholdersandresponsibilitiesofdirectorsincompaniesgovernedbythelawsofU.S.jurisdictions.Intheperformanceofitsduties,theboardofdirectorsofasolventCaymanIslandsexemptedcompanyisrequiredtoconsiderthecompany’sinterests,whichisgenerallydefinedwithreferencetotheinterestsofitsshareholders(bothpresentandfuture)asawhole,whichmaydifferfromtheinterestsofoneormoreofitsindividualshareholders.See“Item10.AdditionalInformation—MemorandumandArticlesofAssociation—PrincipalDifferencesbetweenCaymanIslandsandU.S.CorporateLaw.”

Our shareholders may face difficulties in protecting their interests because we are a Cayman Islands exempted company.

OurcorporateaffairsaregovernedbyourMemorandumandArticlesofAssociation,bytheCompaniesLawoftheCaymanIslands(asamended),ortheCompaniesLaw,andthecommonlawoftheCaymanIslands.TherightsofourshareholdersandthefiduciaryresponsibilitiesofourdirectorsunderthelawsoftheCaymanIslandsarenotasclearlydefinedasunderstatutesorjudicialprecedentinexistenceinjurisdictionsintheUnitedStates.Therefore,youmayhavemoredifficultyprotectingyourintereststhanwouldshareholdersofacorporationincorporatedinajurisdictionintheUnitedStates,duetothecomparativelylessformalnatureofCaymanIslandslawinthisarea.

WhileCaymanIslandslawallowsadissentingshareholdertoexpressashareholder’sviewthatacourtsanctionedreorganizationofaCaymanIslandscompanywouldnotprovidefairvaluefortheshareholder’sshares,CaymanIslandsstatutorylawinrespectofschemesofarrangementdoesnotspecificallyprovideforshareholderappraisalrightsinconnectionwithamergerorconsolidationeffectedbyaschemeofarrangementofacompany.Thismaymakeitmoredifficultforyoutoassessthevalueofanyconsiderationyoumayreceiveinamergerorconsolidationortorequirethattheacquirergivesyouadditionalconsiderationifyoubelievetheconsiderationofferedisinsufficient.However,CaymanIslandsstatutorylaw,whichpermitsamerger/consolidationwithoutacourtorder,providesamechanismforadissentingshareholderinamergerorconsolidationtorequireustoapplytotheGrandCourtforadeterminationofthefairvalueofthedissenter’ssharesifitisnotpossibleforthecompanyandthedissentertoagreeonafairpricewithinthetimelimitsprescribed.

ShareholdersofCaymanIslandsexemptedcompanies(suchasus)havenogeneralrightsunderCaymanIslandslawtoinspectcorporaterecordsandaccountsortoobtaincopiesoflistsofshareholders.OurdirectorshavediscretionunderourArticlesofAssociationtodeterminewhetherornot,andunderwhatconditions,ourcorporaterecordsmaybeinspectedbyourshareholders,butarenotobligedtomakethemavailabletoourshareholders.Thismaymakeitmoredifficultforyoutoobtaininformationneededtoestablishanyfactsnecessaryforashareholdermotionortosolicitproxiesfromothershareholdersinconnectionwithaproxycontest.

Subjecttolimitedexceptions,underCaymanIslandslaw,aminorityshareholdermaynotbringaderivativeactionagainsttheboardofdirectors.ClassactionsarenotrecognizedintheCaymanIslands,butgroupsofshareholderswithidenticalinterestsmaybringrepresentativeproceedings,whicharesimilar.

Our Memorandum and Articles of Association contain anti-takeover provisions that may discourage a third party from acquiring us and reduce the rights of holders ofour Class A common shares.

OurMemorandumandArticlesofAssociationcontaincertainprovisionsthatcouldlimittheabilityofotherstoacquireourcontrol,includingaprovisionthatgrantsauthoritytoourboardofdirectorstoissuenewsharesinourcompanyfromtimetotime(includingcommonsharesandpreferredshares)withoutactionbyourshareholders.TheseprovisionscouldhavetheeffectofdeprivingourshareholdersoftheopportunitytoselltheirClassAcommonsharesatapremiumovertheprevailingmarketpricebydiscouragingthirdpartiesfromseekingtoobtainourcontrolinatenderofferorsimilartransactions.See“Item10.AdditionalInformation—MemorandumandArticlesofAssociation—Anti-TakeoverProvisionsinourMemorandumandArticlesofAssociation.”

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United States civil liabilities and certain judgments obtained against us by our shareholders may not be enforceable.

PagSeguroDigitalisaCaymanIslandsexemptedcompanyandsubstantiallyallofourassetsarelocatedoutsideoftheUnitedStates.Inaddition,allofourcurrentdirectorsandofficersareresidentsofBrazil,andasubstantialportionoftheirassetsislocatedoutsideoftheUnitedStates.Asaresult,itmaybedifficulttoeffectserviceofprocesswithintheUnitedStatesuponthesepersons.ItmayalsobedifficulttoenforceinU.S.courtsjudgmentsobtainedinU.S.courtsbasedonthecivilliabilityprovisionsoftheU.S.federalsecuritieslawsagainstusandthoseofficersanddirectors.

Further,itisuncleariforiginalactionspredicatedoncivilliabilitiesbasedsolelyuponU.S.federalsecuritieslawsareenforceableincourtsoutsidetheUnitedStates,includingintheCaymanIslandsandBrazil.CourtsoftheCaymanIslandsmaynot,inanoriginalactionintheCaymanIslands,recognizeorenforcejudgmentsofU.S.courtspredicateduponthecivilliabilityprovisionsofthesecuritieslawsoftheUnitedStatesoranystateoftheUnitedStatesonthegroundsthatsuchprovisionsarepenalinnature.AlthoughthereisnostatutoryenforcementintheCaymanIslandsofjudgmentsobtainedintheUnitedStates,courtsoftheCaymanIslandswillrecognizeaforeignjudgmentin personam ofacourtofcompetentjurisdictionandgiveajudgmentbasedthereonifsuchjudgmentisfinal,foraliquidatedsum,provideditisnotinrespectoftaxesorafineorpenalty,isnotinconsistentwithaCaymanIslands’judgmentinrespectofthesamematters,andwasnotobtainedinamannerwhichiscontrarytothepublicpolicyoftheCaymanIslands.Inaddition,aCaymanIslandscourtmaystayproceedingsifconcurrentproceedingsarebeingbroughtelsewhere.

Judgments of Brazilian courts to enforce our obligations with respect to our Class A common shares may be payable only in reais.

MostofourassetsarelocatedinBrazil.IfproceedingsarebroughtinthecourtsofBrazilseekingtoenforceourobligationsinrespectofourClassAcommonshares,wemaynotberequiredtodischargeourobligationsinacurrencyotherthanthereal .UnderBrazilianexchangecontrollaws,anobligationinBraziltopayamountsdenominatedinacurrencyotherthanthereal mayonlybesatisfiedinBraziliancurrencyattheexchangerateineffectonthedatethejudgmentisobtainedasdeterminedbytheCentralBank.Theseamountsarethenadjustedtoreflectexchangeratevariationsthroughtheeffectivepaymentdate.Theexchangerateatthattimemaynotaffordnon-BrazilianinvestorswithfullcompensationforanyclaimarisingoutoforrelatedtoourobligationsundertheClassAcommonshares.

As a foreign private issuer and an “emerging growth company” (as defined in the JOBS Act), the disclosure requirements that we must comply with and otherrequirements are different from those applicable to U.S. domestic registrants and non-emerging growth companies.

Asaforeignprivateissuerandemerginggrowthcompany,thedisclosurerequirementsthatwemustcomplywithandotherrequirementsaredifferentfromthoseapplicabletoU.S.domesticregistrantsandnon-emerginggrowthcompanies.Forexample,asaforeignprivateissuerforU.S.purposes,wearenotsubjecttothesamedisclosurerequirementsasadomesticU.S.registrantundertheSecuritiesExchangeActof1934,asamended,ortheExchangeAct,includingtherequirementstoprepareandissuequarterlyreportsonForm10-QortofilecurrentreportsonForm8-Kupontheoccurrenceofspecifiedsignificantevents,theproxyrulesapplicabletodomesticU.S.registrantsunderSection14oftheExchangeActortheinsiderreportingandshort-swingprofitrulesapplicabletodomesticU.S.registrantsunderSection16oftheExchangeAct.Inaddition,werelyonexemptionsfromcertainU.S.ruleswhichpermitustofollowCaymanIslandslegalrequirementsratherthancertainoftherequirementsthatareapplicabletoU.S.domesticregistrants.

WefollowtheCaymanIslandslawsandregulationsthatareapplicabletoCaymanIslandscompanies.However,theselawsandregulationsdonotcontainanyprovisionscomparabletotheU.S.proxyrules,theU.S.rulesrelatingtothefilingofreportsonForm10-Qor8-KortheU.S.rulesrelatingtoliabilityforinsiderswhoprofitfromtradesmadeinashortperiodoftime,asreferredtoabove.

Furthermore,foreignprivateissuersarerequiredtofiletheirannualreportonForm20-Fwithin120daysaftertheendofeachfiscalyear,whileU.S.domesticissuersthatareacceleratedfilersarerequiredtofiletheirannualreportonForm10-Kwithin75daysaftertheendofeachfiscalyear.ForeignprivateissuersarealsoexemptfromRegulationFairDisclosure,aimedatpreventingissuersfrommakingselectivedisclosuresofmaterialinformation.Asaresultoftheabove,eventhoughwearerequiredtofilereportsonForm6-KdisclosingthelimitedinformationthatismaterialtousandwhichwemakepublicpursuanttoCaymanIslandslaw,orarerequiredtodistributetoshareholdersgenerally,youmaynotreceiveinformationofthesametypeoramountthatisrequiredtobedisclosedtoshareholdersofaU.S.company.

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TheJOBSActcontainsprovisionsthat,amongotherthings,relaxcertainreportingrequirementsforemerginggrowthcompanies.Underthisact,asanemerginggrowthcompany,wearenotsubjecttothesamedisclosureandfinancialreportingrequirementsasnon-emerginggrowthcompanies.Forexample,asanemerginggrowthcompanywearepermittedto,andtakeadvantageofcertainexemptionsfromvariousreportingrequirementsthatareapplicabletootherpubliccompaniesthatarenotemerginggrowthcompanies.Also,ourauditorsdonothavetocomplywithanynewauditingstandardspromulgatedbythePCAOB(unlesstheSECdeterminesotherwise)orattesttoourinternalcontrolsunderSection404(b)oftheSarbanes-OxleyAct.Wemayfollowthesereportingexemptionsuntilwearenolongeranemerginggrowthcompany.Asaresult,ourshareholdersmaynothaveaccesstocertaininformationthattheydeemimportant.Wewillremainanemerginggrowthcompanyuntiltheearlierof(1)thelastdayofthefiscalyear(a)followingthefifthanniversaryofthecompletionofourIPO,(b)inwhichwehavetotalannualrevenuesofatleastUS$1.07billionor(c)inwhichwearedeemedtobealargeacceleratedfilerand(2)thedateonwhichwehaveissuedmorethanUS$1.00billioninnonconvertibledebtduringthepriorthree-yearperiod.Accordingly,theinformationaboutusavailabletoyouwillnotbethesameas,andmaybemorelimitedthan,theinformationavailabletoshareholdersofacompanythatisnotanemerginggrowthcompany.

WecannotpredictifinvestorswillfindourClassAcommonshareslessattractivebecausewewillrelyontheseexemptions.IfsomeinvestorsfindourClassAcommonshareslessattractiveasaresult,theremaybealessactivetradingmarketforourClassAcommonsharesandoursharepricemaybemorevolatile.

PagSeguro Digital is a foreign private issuer and, as a result, in accordance with the listing requirements of the NYSE we rely on certain home country governancepractices from the Cayman Islands, rather than the corporate governance requirements of the NYSE.

WereportundertheExchangeActasanon-U.S.companywithforeignprivateissuerstatus.TheNYSErulesprovidethatforeignprivateissuersarepermittedtofollowhomecountrypracticeinlieuofcertainNYSEcorporategovernancestandards.ThestandardsapplicabletousareconsiderablydifferentfromthestandardsappliedtoU.S.domesticissuers.Forinstance,wearenotrequiredto:

• haveamajorityofindependentmembersonourboardofdirectors(otherthanasmayresultfromtherequirementsfortheauditcommitteememberindependenceundertheExchangeAct);

• haveaminimumofthreemembersonourauditcommittee;

• haveacompensationcommitteeoranominatingandcorporategovernancecommittee;

• haveregularlyscheduledexecutivesessionsofourboardthatconsistofindependentdirectorsonly;or

• adoptanddiscloseacodeofbusinessconductandethicsfordirectors,officersandemployees.

Asaforeignprivateissuer,wemayfollowhomecountrypracticefromtheCaymanIslandsinlieuoftheaboverequirements.Therefore,theapproachtogovernanceadoptedbyourboardofdirectorsmaybedifferentfromthatofaboardofdirectorsconsistingofamajorityofindependentdirectors,and,asaresult,ourmanagementoversightmaybemorelimitedthanifweweresubjecttoalloftheNYSEcorporategovernancestandards.Accordingly,youmaynothavethesameprotectionsaffordedtoshareholdersofcompaniesthatarenotforeignprivateissuers.

Although we do not expect to be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes, there can be no assurance that we will not be aPFIC for any taxable year, which could subject United States investors in our shares to significant adverse U.S. federal income tax consequences.

WedonotexpecttobeaPFICforthecurrenttaxableyearoranyfutureyear,basedonourcurrentbusinessplans.However,whetherweareaPFICwillbedeterminedannuallybaseduponthecompositionandnatureofourincomeandthecomposition,natureandvaluationofourassets(includinggoodwill),allofwhicharesubjecttochange,andwhichmaybedeterminedinlargepartbyreferencetothemarketvalueofourshares,whichmaybevolatile.ThedeterminationofwhetherweareaPFICwillalsodependupontheapplicationofcomplexU.S.federalincometaxrulesconcerningtheclassificationofourassets(includinggoodwill)andincomeforthispurpose,andtheapplicationoftheserulesisuncertaininsomerespects.OurstatusasaPFICmayalsodepend,inpart,onhowweutilizethecashproceedsfromourJanuary2018IPOandJune2018follow-onoffering,inourbusiness.Accordingly,therecanbenoassurancethattheIRSwillnotchallengeanydeterminationbyusthatwearenotaPFIC.

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IfwewereclassifiedasaPFIC,specialadverseU.S.federaltaxruleswouldgenerallyapplytoaUnitedStatesHolder(asdefinedin“Item10.AdditionalInformation—Taxation—U.S.FederalIncomeTaxConsiderations”)thatholdsourClassAcommonshares.UnitedStatesHoldersareurgedtoconsulttheirowntaxadvisorswithrespecttothepotentialtaxconsequencesofthePFICrulestotheirparticularcircumstances.

Althoughweconsiderourselvestobeactivelyengagedinanactivebusinesswithrespecttoanumberofbusinesslines,andtobeengagedinanactivefinancingactivitywithrespecttotheearlypaymentofreceivablesfeaturethatweoffermerchantsregardingcreditcardtransactionsininstallmentsinparticular,andwebelievethatincomefromsuchbusinessesandfeaturesislikelynottreatedaspassiveincomeforpurposesofthePFICrules,itisnotentirelyclearhowsuchincomewillbetreatedforthesepurposes.Inparticular,certainofourincomemaybetreatedaspassiveincomeunlesssuchincomeiseligibleforanexceptionforcertainincomederivedintheactiveconductofafinancingbusinessunderSection954(h)oftheCode(the“activefinancingexception”),andrelatedassetsmaybeconsideredpassiveassetsunlesstheactivefinancingexceptionapplies.Webelievethattheactivefinancingexceptionwilllikelyapplytotreatsuchincomeasactive,butifitisdetermined,contrarytoourview,thattheincomefromthesebusinessesandfeaturesispassiveforsuchpurposes,thatwouldalterthecompositionofourincomeandassetsforpurposesoftestingourPFICstatus,andmaycauseustobetreatedasaPFIC.FormoreinformationontheapplicationofthePFICrulestous,see“Item10.AdditionalInformation—Taxation—U.S.FederalIncomeTaxConsiderations—PassiveForeignInvestmentCompany.”

Our Class A common shares may not be a suitable investment for all investors, as investment in our Class A common shares presents risks and the possibility of financiallosses.

TheinvestmentinourClassAcommonsharesissubjecttorisks.InvestorswhowishtoinvestinourClassAcommonsharesarethussubjecttoassetlosses,includinglossoftheentirevalueoftheirinvestment,aswellasotherrisks,includingthoserelatedtoourClassAcommonshares,thecompany,thesectorinwhichweoperate,ourshareholdersandthegeneralmacroeconomicenvironmentinBrazil,amongotherrisks.

EachpotentialinvestorinourClassAcommonsharesmustthereforedeterminethesuitabilityofthatinvestmentinlightofitsowncircumstances.Inparticular,eachpotentialinvestorshould:

• havesufficientknowledgeandexperiencetomakeameaningfulevaluationofourClassAcommonshares,themeritsandrisksofinvestinginourClassAcommonsharesandtheinformationcontainedinthisannualreport;

• haveaccessto,andknowledgeof,appropriateanalyticaltoolstoevaluate,inthecontextofitsparticularfinancialsituation,aninvestmentinourClassAcommonsharesandtheimpactourClassAcommonshareswillhaveonitsoverallinvestmentportfolio;

• havesufficientfinancialresourcesandliquiditytobearalloftherisksofaninvestmentinourClassAcommonshares;

• understandthoroughlythetermsofourClassAcommonsharesandbefamiliarwiththebehaviorofanyrelevantindicesandfinancialmarkets;and

• beabletoevaluate(eitheraloneorwiththehelpofafinancialadviser)possiblescenariosforeconomic,interestrateandotherfactorsthatmayaffectitsinvestmentanditsabilitytobeartheapplicablerisks.

ITEM 4. INFORMATION ON THE COMPANY

Overview

WeareadisruptiveprovideroffinancialtechnologysolutionsfocusedprimarilyonMicro-Merchants,SmallCompaniesandMedium-SizedCompanies,orSMEs,inBrazil.Amongourpeers,wearetheonlyfinancialtechnologyproviderinBrazilwhosebusinessmodelcoversallofthefollowingfivepillars:

• Multipledigitalpaymentsolutions;

• In-personpaymentsviaPOSdevicesthatweselltoclients;

• Freedigitalaccounts;

• Issuerofprepaidcardstoclientsforspendingorwithdrawingaccountbalances;and

• Operatingasanacquirer.

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Ourend-to-enddigitalecosystemenablesourcustomersnotonlytoacceptpayments,butalsotogrowandmanagetheirbusinesses.BeforePagSeguro,manyoftheseMicro-MerchantsandSMEswereoverlookedorunderservedbyincumbentpaymentprovidersandlargefinancialinstitutionsinBrazil.Forexample,accordingtoasurveyconductedbyusinJune2017,75 %ofmerchantswhoownourentry-levelmPOSdevice,theMinizinha,didnotacceptcardpaymentspriortosigningupwithPagSeguro.Weoffersafe,affordable,simple,mobile-firstsolutionsformerchantstoacceptpaymentsandmanagetheircashthroughtheirPagSegurodigitalaccounts,withouttheneedforabankaccount.Ourdigitalaccountoffersmorethan35cash-inmethodsandeightcash-outoptionsincludingourPagSeguroprepaidcard,allusingourproprietarytechnologyplatformandbackedbythetrustedPagSeguroandUOLbrands.Ourdigitalecosystemalsofeaturesotherdigitalfinancialservices,businessmanagementtoolsandfunctionalitiesforourclients.

AtDecember31,2018,thePagSeguronetworkconsistedofactiveclientsinall26statesandtheFederalDistrictinBrazil.Ourbusinesshascontinuedtogrowrapidly,despitethemajormacroeconomicslow-downinBrazilsince2014:

• AtDecember31,2018,ouractivemerchantstotaled4.1million,representinganincreaseof48.2%comparedwithR$2.8millionatyear-end2017.Ouractivemerchantsatyear-end2017representedanincreaseof92.9%comparedwithR$1.4millionatyear-end2016.

• In2018,ourTPVtotaledR$76.1billion,representinganincreaseof97.9%comparedwithR$38.5billionin2017.OurTPVin2017representedanincreaseof173.0%comparedwithR$14.1billionin2016.

• In2018,ouraveragespendingperactivemerchanttotaledR$21,988,representinganincreaseof20%comparedwithR$18,374,in2017.Ouraveragespendingperactivemerchantin2017representedanincreaseof48.1%comparedwithR$12,404in2016.

• In2018,ourTotalrevenueandincometotaledR$4,334.7million,representinganincreaseof71.8%comparedwithR$2,523.4millionin2017.OurTotal

revenueandincomein2017representedanincreaseof121.7%comparedwithR$1,138.4millionin2016.TheprincipalcomponentsofourTotalrevenueandincomepostedthefollowinggrowth:

• Ourtwonetrevenueitems(NetrevenuefromtransactionactivitiesandotherservicesandNetrevenuefromsales)togethertotaledR$2,641.7millionin

2018,anincreaseof55.7%comparedwithR$1,696.2millionin2017.Thetotalofthesenetrevenueitemsin2017representedanincreaseof129.0%comparedwithR$740.6millionin2016.

• OurFinancialincometotaledR$1,414.5millionin2018,anincreaseof72.8%comparedwithR$818.6millionin2017.Financialincomein2017representedanincreaseof108.6%comparedwithR$392.4millionin2016.

• In2018,ourNetincomefortheyeartotaledR$910.4million,representinganincreaseof90.1%comparedwithR$478.8millionin2017.Netincomefortheyearin2017representedanincreaseof274.6%comparedwithR$127.8millionin2016.

Brazilhasapproximately7.9millionIndividualMicroEntrepreneurs,4.5millionMicroCompanies,0.5millionSMEsand0.04millionLargeCompaniesaccordingtoSEBRAE(PortaldoEmpreendedor)andIBGE.MicroEntrepreneursandMicroCompaniesrepresentamajormarketopportunity,asmostofthemremainunbankedandseekdigitalpaymentssolutions.Inaddition,accordingtoSEBRAE,thenumberofIndividualMicroEntrepreneursinBrazilincreasedbyapproximatelyonemillioneachyearfrom2010to2017,from780thousandto7.9million(whichamountremainedstablein2018).WebelievethatbycontinuingtomigratetheseIndividualMicroEntrepreneursandMicroCompaniesintoourecosystem,wecancontinuetodrivesignificantadditionalrevenuegrowthinthecomingyears.Atthesametime,wewillcontinuetointroducemorevalue-addedproductsandservicestargetedatlargerclients.Forexample,inFebruary2018,weannouncedanewfunctionalityforourMonderninhaWi-FiandModerninhaPro,enablingmultiplemerchantstoshareasinglePOSdevice;inMarch2018,welaunchedourMinizinhaChip,aPOSdevicethatcombineshigh-endfunctionalities,suchasWi-FiandGPRSconnection(chip)incompacthardwarethatcanfitinamerchant’spocketandcomeswithitsownSIMcardandafreedataplan,thusnolongerrequiringsmartphonepairingliketraditionalmPOSdevices;inMay2018,welaunchedourModerninhaPlus,thenext-generationsubstituteforourhighlysuccessfulModerninhaWi-Fi,nowwithanimprovedphysicalkeyboard,afasterprocessoranddoublethebatterylife;andinSeptember2018,welaunchedourModerninhaSmart,amodern,portableandfullyintegratedAndroidbasedPOSdevicethatoffersafullintegrationofhardware,ourappsandafastandsecurepaymentsnetwork.

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The 2015 Reorganization of PagSeguro Brazil

PagSeguroBrazilwasincorporatedasalegalentityin2006,althoughitdidnotoperatethePagSegurobusinesspriortoAugust1,2015sincemostofthePagSegurobusinessactivitieswereoperatedbyotherUOLgroupmemberspriortothatdate.OnAugust1,2015,UOLcarriedoutacorporatereorganizationinwhichitsegregatedsomeofthePagSeguroactivitiesfromitsotheractivitiesandcontributedthemtoPagSeguroBrazil.

PriortothecontributionofthesePagSeguroactivitiestoPagSeguroBrazil,theirresultsofoperationswererecordedinUOL’sfinancialstatements.Asaresult,thefinancialinformationofPagSeguroDigitalreflectsacarve-outofthePagSeguroactivitiesforperiodspriortoAugust1,2015.Thatcarve-outfinancialinformationisderivedfromUOL’saccountingrecordsanddoesnotnecessarilyreflectthefinancialposition,resultsofoperationsorcashflowsthatwouldhavebeenrecordedhadPagSeguroBrazilbeenoperatingasaseparateentityinthoseperiodsoratthosedates.

FromJanuary1,2014throughJuly31,2015,certainoftheassetsandliabilities,revenues,costsandexpensesdirectlyrelatedtothePagSegurobusinesswerealreadycontrolledseparatelyfromUOL’sotheractivities.Ontheotherhand,certainothercorporatebalancesandtransactionsrelatingtothePagSegurooperationswerenotaccountedforseparatelywithinUOL;thesehavebeenallocatedtoourauditedconsolidatedfinancialstatementsfortheperiodfromJanuary1,2014throughJuly31,2015basedonassumptionssimilartothoseusedafterAugust1,2015,whenthePagSegurobusinesswastransferredtoPagSeguroBrazil.

PriortothecompletionofourIPO,PagSegurousedcentralizedcashmanagementwithUOL.Consequently,allamountsreceivedorpaidinconnectionwiththePagSegurobusinesswererecognizedasbalancesbetweenrelatedpartiesinourauditedconsolidatedfinancialstatements.ThisapproachisconsistentwiththetreatmentofourauditedconsolidatedfinancialstatementspriortoAugust1,2015,whichwerepreparedonacarve-outbasis.PagSeguro’scashmanagementwasseparatedfromUOL’scashmanagementstartingfromthedateofcompletionofourIPO.Anyremainingbalancesthatrelatedtopriorcashmanagementactivitiesbeganaccruinginterestonarms’lengthtermsfromthedateofcompletionofourIPO,andallsuchbalanceswererepaidbyUOLfollowingcompletionofourIPO.

Inaddition,during2016,UOLtransferredits100%interestinNet+Phoneandits75%interestinBoaCompratoPagSeguroBrazilasacapitalcontribution,andPagSeguroBrazilpurchasedtheremaining25%non-controllinginterestsinBoaComprafromitsminorityshareholders.

Our History

UOLlaunchedPagSeguroin2006,acquiringaBraziliandigitalpaymentsstartupandcombiningitwithUOL’sownknow-howinInternetservices.Initiallylaunchedasanonlinepaymentplatform,PagSeguroaimedtoprovidethedigitalpaymentinfrastructurenecessarytosupportthegrowthofe-commerceinBrazilandby2016wewereconsideredthelargestBrazilianonlinepaymentcompanyintermsofTPV,accordingtodatacompiledbyEbit.UOL’scredibilityintheBrazilianInternetsectorwaskeytothissuccessfullaunch,andremainssotoday.Foundedin1996,UOLisBrazil’slargestInternetcontent,digitalproductsandservicescompany.AccordingtocomScore,90.4millionuniquevisitors(approximately75%ofBrazilianinternetusers)accessedaUOLwebsiteinApril2018.ThePagSeguroandUOLbrandstogethergaveBrazilianonlineconsumerstheconfidencetousetheirsensitivepersonalandfinancialdataonourpaymentsplatform,inordertoshoponlineeasilyandsafely.Asanexampleofourcommercialinitiativestoinstilltrustandsafetyinonlineshopping,weintroducedourescrowservicewhereweholdtheconsumer’spaymentforasetperiodoftimefollowingthepurchase,asaprecautionincaseofacommercialclaim.

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In2008,PagSegurowasnamed“PreferredE-commerceCompany”byInfo Exame magazine.Customernumberscontinuedtogrow,with20,000storesandapproximately600,000consumerscarryingouttransactionsthroughthePagSeguroplatformduringtheyear.

In2009,westrengthenedourpresenceindigitalpaymentsbyacquiringBoldcronTechnologies,agatewaypaymentcompanylinkedtothemainacquisitionprovidersinBrazil,whichofferedpaymentprogramsandnetworks.Inthesameyear,Exame magazinenamedUOLintheDigitalIndustrycategoryasoneofthe1000Melhores eMaiores (“biggestandbest”)companiesinBrazil,whenmanyofthePagSegurobusinessactivitieswerestilloperatedbyUOL.In2009,approximately100,000onlinestorescarriedouttransactionsthroughthePagSeguroplatform.

In2010,approximately5,000,000consumerscarriedouttransactionsthroughthePagSeguroplatform.

In2011,weacquiredBoaCompra,acompanyfocusedononlinegaminglicensesanddigitalpaymentsolutionsinvariouscountries.Inthesameyear,approximately311,000onlinestoresandapproximately6.5millionconsumerscarriedouttransactionsthroughthePagSeguroplatformusingoneofthe14paymentmethodsweacceptedatthetime.

In2013,theCentralBankamendedregulationstoterminatetheexclusivebankingarrangementsbetweenbanksandsomecardandmealvoucherschemes,endingtheeffectiveduopolyintheacquirerindustryinBrazil.ThismovewaspartofaconcertedfocusbytheCentralBankonconcentrationinthemarket,followingareportissuedbyitin2010ontheeffectiveduopolybetweentwoacquirers,bothofwhichwereownedbysomeofthelargestbanksinBrazil:RedeCard(nowknownasRede,whichhadexclusiveaccreditationwithMasterCard)andVisanet(nowknownasCielo,whichhadexclusiveaccreditationwithVisa).

Alsoin2013,weexpandedfromonlinepaymentsintopointofsale,orPOS,payments,whichenablemerchantstoreceivein-personpaymentsfrompaymentcards,becomingthefirstpaymentproviderinBraziltosellPOSdevices(asopposedtoofferingrentals).OurfirstPOS,amagneticstripcardreaderthatpluggedintoasmartphoneheadphonejackcombinedwithanapp,wasreleasedinApril2013.Inthesameyear,webecameaccreditedwithSorocred,alocalcardscheme,asanacquirer,andwealsoreceivedPCI-DSSCertificate-DataSecurityStandardCertification.In2013,approximately7.8millionconsumerscarriedouttransactionsthroughthePagSeguroplatform.

In2014,weappliedtotheCentralBanktobecomeanauthorizedpaymentinstitutionunderBrazilianFederalLawNo.12,865/2013.SincewewerealreadyaccreditedbySorocredasanacquirer,theCentralBankregulationspermitustocontinuecarryingoutouractivitiesuntiltheauthorizationisgranted,asfurtherdescribedin“—Regulation—RegulationofthedigitalpaymentsindustryinBrazil.”

InMarch2014,welaunchedourfirstPOSdevice,whichwascompatiblewithiOSandAndroid,thatallowedmerchantstoprocessdebitandcreditcardsusingchips.Inthesameyear,weaccepted25paymentmethods.

In2015,welaunchedtheModerninha,ourfirststandalonePOSdevicebrandedwithitsownnickname,andourPagSeguroprepaidcardundertheMasterCardscheme.WealsoestablishedapartnershipwithTicket,amajormealvoucherscheme.WiththelaunchofourPagSeguroprepaidcard,webecamethefirstpaymentproviderinBraziltooperateasaclosedloopwhereclientsareabletoreceiveandspendfundsallwithinourend-to-enddigitalecosystem.

In2016,webecamethefirstpaymentsproviderinBrazil,otherthantheincumbentacquirersassociatedwithbanks,toobtainaccreditationasanacquirerwithMasterCardandVisa.WehadalreadybeenoperatingasalocalacquirerforSorocredsince2014,andwebeganoperatingasanacquireronalarge-scalebasisinthesecondhalfof2016,oncewehadcompletedtheintegrationofourplatformwithVisaandMasterCard.Inthesameyear,weestablishedpartnershipswithElo,acardscheme,andSodexo,amajormealvouchercardscheme.WealsolaunchedourModerninhaWi-FiandModerninhaProstandalonePOSdevices;beganacceptingin-appcheckout;andlaunchedourfreePOSappPagSeguro Vendas .In2016,webecamelargerthanourparentcompanyUOLforthefirstyearintermsofourTotalrevenueandincomeascomparedwithUOL’snetrevenue(withoutincludingitsconsolidatedsubsidiaries).

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In2017,welaunchedPlugPag,ourPOSdeviceMinizinha,EFTPOS,ouri-BankingappPagSeguro Minha Conta andPag.aeandothernewservicessuchasourFacebookchatbot,reconciliationservicesandone-dayapprovalformerchantswhowishtoobtainearlypaymentoftheirinstallmentreceivables.ThelaunchofourEFTPOSintegrationsolutionmadeusthefirstpaymentproviderinBraziltoconnectPOSdevicestoamerchant’ssalessystem.WealsoobtainedaccreditationasanissuerwithVisa,establishedpartnershipswithmajormealvoucherschemesVRandAlelo,andobtainedaccreditationasanacquirerwithHipercard.Furthermore,inOctober2017,weacquiredacontrollinginterestinBivacoHoldingS.A.,orBIVA,anonlineplatformthatfacilitatespeer-to-peerlending.BetweenNovember2017andApril2018,weacquiredanadditionalinterestinBIVA,bringingourtotalinterestto77.4%ofBIVA’ssharecapital.ThetotalamountwepaidforourshareholdinginBIVAwasR$23.9million.

InJanuary2018,wecarriedoutourIPO,inwhichweandUOLofferedandsoldatotalof121,193,388ofourClassAcommonshares.OurClassAcommonsharesarelistedontheNYSE.InFebruary2018,weannouncedanewfunctionalityforourModerninhaWi-FiandModerninhaPro,enablingmultiplemerchantstoshareasinglePOSdevice,andinMarch2018,welaunchedourMinizinhaChip,aPOSdevicethatcombineshigh-endfunctionalities,suchasWi-FiandGPRSconnection(chip)incompacthardwarethatcanfitinamerchant’spocketandcomeswithitsownSIMcardandafreedataplan,thusnolongerrequiringsmartphonepairingliketraditionalmPOSdevices.InMay2018,welaunchedourModerninhaPlus,thenext-generationsubstituteforourhighlysuccessfulModerninhaWi-Fi,nowwithanimprovedphysicalkeyboard,afasterprocessoranddoublethebatterylife.InJune2018,wecarriedoutafollow-onoffering,inwhichweandUOLofferedandsoldatotalof35,950,000ofourClassAcommonshares.InSeptember2018,welaunchedourModerninhaSmart,amodern,portableandfullyintegratedAndroidbasedPOSdevicethatoffersafullintegrationofhardware,ourappsandafastandsecurepaymentsnetwork.InOctober2018,ourboardofdirectorsauthorizedasharerepurchaseprogramunderwhichourmanagementisresponsiblefordeterminingthetimingandnumberofsharestobeacquired,withinthelimitsestablishedbytheboardofdirectors.Formoreinformationonoursharerepurchaseprogram,see“Item16E.PurchasesofEquitySecuritiesbytheIssuerandAffiliatedPurchasers.”InDecember2018,weacquiredTilixDigitalS.A.,orTilix.Tilixprovidessoftwaredevelopmentformanagingpaymentsolutionsforbusiness-to-customer,orB2C,andbusiness-to-business,orB2B.

InJanuary2019,weacquiredBBNBancoBrasileirodeNegóciosS.A.(renamedBancoseguroS.A.inFebruary2019),orBancoseguro,throughBSHoldingFinanceiraLtda.,orBSHolding,aholdingcompanyincorporatedunderPagSeguroDigital.Bancoseguroholdsamulti-banklicensetoprovidefinancialservices.Weexpectthatthisacquisitionwillallowustoexpandourproductsandservicesoffering.Asafinancialinstitution,BancoseguroissubjecttoLaw4,595/64andtherulesoftheCMNandtheCentralBank.

Our Products and Services

Weprovideawiderangeofaffordablesolutionsandtoolstohelpourmerchantsmanageandgrowtheirbusinesses.Theseincludeavarietyofcash-inandcash-outoptionswithfeaturesdesignedtoattractandretainclients,providethemwithaccesstoworkingcapitalandhelpthemmanagetheircashflow.

Wehaveanin-depthunderstandingofourclients,theissuestheyfaceandthemarketsinwhichtheyoperate.AsapioneerintheBraziliandigitalpaymentsmarket,weareabletoanticipatetrendsandtranslatethemintonewproductsandsolutionsthatmeetourclients’needsmoreefficientlythanforeigncompetitorsoperatinginBrazil.Forexample,theBrazilianmarketexpectsdigitalpaymentsproviderstoofferanumberofcountry-specificfeatures,suchasinstallmentpaymentsoncreditcards,earlypaymentofinstallmentreceivablesandpaymentsviaboletos ,allofwhicharecentraltoBrazilianfinancialculture.Webuiltourend-to-enddigitalecosystemandourdigitalfinancialservicesofferingaroundtheselocalspecificities.

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Withtheincreasedadoptionofmobiledevicesbymerchantsandconsumersasaformofpayment,wedesignalloursolutionsonamobile-firstbasissothatourmerchantscanbeself-sufficientatalltimesandofferpaymentoptionstoconsumersusingmobiledevices.

Ourindustryischaracterizedbyrapidlychangingtechnology,changingcustomerneeds,evolvingindustrystandardsandfrequentintroductionsofnewproductsandservices.Forexample,inadditiontotheproductsandservicesthatwecurrentlyoffer,WeChatPayandAlipay,playersintheChinesedigitalpaymentsindustry,alreadyofferpromotionsandcashbackfeaturesaswellason-platformthird-partybillpayments.Westrivetocontinuetodevelopandreleasenewproductsandservicestomatchtheneedsandexpectationsofourclients.

The PagSeguro Ecosystem

Ourend-to-enddigitalecosystemoperatesasaclosedloopwhereourclientsareabletoaddresstheirmaindaytodayfinancialneeds,includingreceivingandspendingfundsandmanagingandgrowingtheirbusinesses.ClientsdonotneedtopurchaseaPOSdeviceinordertogainaccesstoourend-to-enddigitalecosystem.Ourmainproductsandservicesfallintothefollowingcategories,describedinfurtherdetailbelow:

• thefreePagSegurodigitalaccount,aroundwhichallourfunctionalitiesandservicesaredesigned

• morethan35cash-insolutions

• earlypaymentofmerchants’installmentreceivables

• advancedbuilt-infunctionalitiesaswellasvalue-addedservicesandfeatures

• avarietyofcash-outmethods

Thediagrambelowshowsourmaincash-inandcash-outsolutions:

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The Free PagSeguro Digital Account

ThefreePagSegurodigitalaccount,whichisthecoreofourclientofferingforbothmerchantsandconsumers,centralizesallcash-inoptions,functionalities,servicesandcash-outoptionsinasingleecosystemsothatourclientscangrowtheirbusinessinasafe,affordable,scalableandsimpleway,allwithoutneedingabankaccount.Asa“closed-loopdomestic”paymentschemeforBrazilianregulatorypurposes,thePagSegurodigitalaccountdoesnotprovidecreditfacilitiesorenableholderstoincurnegativebalances,however.

MerchantscansignupforafreePagSegurodigitalaccount,gainingaccesstoalloftheofferingsinourecosystem,throughasingleonlinecontractthatcanbecompletedinminuteswithoutpaperwork.Ouronlinecontractistypicallyforanindefiniteterm,butforcertainclientswhogeneratehigherTPV,wemayoffercontractswithtermsbetween12and24months.Bysigningupwithus,merchantscanautomaticallystartacceptingmorethan35cash-inmethods,allwithantifraudprotection,andcanbeginaccessingourbusinessmanagementtools.Formerchantswhorequiremorecomplexfunctionalities,weoffervalue-addedservicesandfeaturessuchastheearlypaymentofinstallmentreceivablesformerchants,accountingreconciliationandshippingsolutions.WithourfreePagSegurodigitalaccount,merchantsmayrequestthetransferoftheiraccountbalancetoabankaccountandalsouseourproductsandservicestospendtheiraccountbalanceorotherfundsdirectlyonourplatformby(i)buyingonline,(ii)makingpeer-to-peertransfersor(iii)transferringtheirbalancetothePagSeguroprepaidcard,allowingthemtobuygoodsandservicesin-personandonlineorwithdrawcashatmorethanonemillionCirrusnetworkATMsinBrazilandabroad.

Forconsumers,thefreePagSegurodigitalaccountoffersnotonlynumeroussimpleandsafeoptionstopaymerchants,butalsotheoptiontosavetheircarddetailsonoureWalletsolutionandtomakeandreceivepaymentsonapeer-to-peerbasis.

Webelievethattheseproductsandservicescreatea“networkgrowtheffect.”Theadvantagesofourdigitalpaymentsolutionsformerchantsdrivegrowthintheirbusinesses,andtheadvantagesofourdigitalpaymentsolutionsforconsumersleadthemtoprefermerchantswhoofferthesesolutions,resultingintheacquisitionofnewclientsthroughword-of-mouthrecommendationsbybothmerchantsandconsumers.

• Cash-In Solutions

Ourcash-inmethodscanbeacceptedthroughwebcheckout,in-appcheckoutorin-personusingourPOSdevices.Theyincludecreditanddebitcards,mealvouchers,boletos ,banktransfers,bankdebits,transfersbetweenPagSegurodigitalaccountsandcashdeposits.

• Online and In-Person Payment Tools

Ourmerchantscanchoosetoacceptpaymentsfromconsumersthroughvariousonlineandin-personpaymenttools.Forourmerchantsconductingbusinessonline,weofferwebcheckoutsolutionsandin-apppaymentoptions.Formerchantsconductingin-persontransactions,weofferarangeofPOSdevices.

• Online Payment Tools

Weofferavarietyofonlinepaymenttoolsthatenablemerchantstointegratesophisticatedcheckoutandpaymentprocessesintotheironlinebusiness.Theseinclude(i)threewebcheckoutoptionsformerchantsconductingbusinessoverbrowsers(whetherdesktopormobile),(ii)anin-apppaymenttoolformerchantsconductingbusinessusingmobileappsand(iii)P2Pandsocialpaymenttools.

Web Checkout: Ourwebcheckoutoptionsoffertokenization,advancedhandlingofshippinginformation,managementofsubscriptionsandautomaticbillingandordertracking.Weofferthreedifferentlevelsofwebcheckoutintegration:“Redirect,”“Lightbox”and“Transparent,”allofwhichareeasytosetupandcustomize.Wesupplyourcodeanddocumentationtothemerchantfreeofcharge,allowingthemerchanttoselectandimplementthewebcheckoutsolutionthatbestmeetshisorherneeds.

Redirect :WithRedirect,uponclickingonthepaymentoption,theconsumerisredirectedawayfromthemerchant’swebsitetothePagSegurosecuredomain,wherethepaymentisprocessed.Afterpayment,theconsumerisredirectedtothemerchant’swebsite.

Lightbox :WithLightbox,thepaymentisprocessedonthemerchant’sownwebsitebutusingthePagSegurosecuredomain.Theconsumerseesbothinterfacesduringtheonlinecheckoutprocess,withaPagSeguropop-upoverlayingthemerchant’swebsite.Aftercompletingthepurchase,thepop-upwillcloseandtheconsumercancontinuenavigatingonthemerchant’swebsite.

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Transparent :TheTransparentcheckoutsolutionallowsthemerchanttocreateafullycustomizedconsumerexperience.Paymentsareprocessedbyusunderthemerchant’sdomainwhilestillbenefitingfromthefeaturesandfunctionalitiesofthePagSeguroecosystem,suchasantifraudandconsumerdataprotection.

In-App Checkout: Ourin-appcheckoutisapaymenttooldevelopedtobeintegratedinourmerchants’mobileappswhichallowspaymentprocessingviathePagSegurosecuredomain,whileofferingsingle-clickcheckoutwithinthemerchant’smobileapp.

P2P and Social Payment Tools (Pag.ae): OurinnovativeP2Pand“socialpayment”toolsallowourclientstorequestpaymentsbysendingaweblinkviasocialmediastraighttothepersonpaying,creatingafastandeasywayforanyonetosendandreceivemoneyelectronically.Userscanrequestpaymentseveniftheydonothaveawebsite,andthepersonpayingdoesnotneedtoregisterwithPagSeguroandmaypaythroughavarietyofoptions,includingcreditcard,boleto orbankdeposit.WithourPag.aesocialpaymenttool,ourcustomercanrequestpaymentsusingalinkandcansendthislinktooneormorepayer(s)viae-mail,socialnetworkormessagingservicesuchasWhatsApp,usingtherecipient’sphonenumberore-mailaddress.Thepayerclicksonthelinkandcanmakethepaymenteasilyinvariousways(creditcard,boletoorbankdeposit).Pag.aeallowstherecipienttopayinupto12installments.

WebelievetheseP2Pandsocialpaymenttoolsdriveorganicgrowthinourcustomerbase,establishingrelationshipswithpotentialPagSegurocustomersandencouragingthemtojoinourplatformwhentheymakeapayment.

• In-Person Payment Tools

OurrangeofaffordablePOSdevicesallowsmerchantstoacceptcredit,debitandmealvouchercardpaymentsonanin-personbasis.OurPOSdevicescanbesetupinlessthanfiveminutes.Theyaredesignedtobeeasytouseandhavehighlevelsofsystemavailability,efficientback-upsolutions,value-addedfunctionalitiesandafive-yearwarranty.

WithPagSeguro,merchantscanpurchasetheirowndevicewithaflexiblepaymentplanandnomonthlyrentalorotherrecurringfees.Fortheequivalentofthreetosixmonths’rentalpaymentstoanincumbent,merchantscanbuyacomparableorbetterdevicefromPagSeguro,freeingthemfromtheincumbents’continuousmonthlyrentalfees.Nocreditchecksonthemerchantarerequired.AllofourPOSdevicescomewithafreePagSeguroprepaidcardtogivethemerchantanimmediatecash-outoptionwithoutneedingabankaccount.

WeofferacomprehensivesuiteofPOSdevices,fromourentry-levelMinizinhatotheModerninhaSmart.ThesePOSdevicesareofferedseparatelyfromourtransactionservices.

• TheMinizinhamPOSdeviceconnectsviaBluetoothtoourfreePOSappPagSeguro Vendas installedonthemerchant’ssmartphoneandprovidesasimpleyet

securemeanstoacceptpaymentcards.TheMinizinhaprovidesreceiptsviaSMSfortheconsumer.WeoffertheMinizinhaforapurchasepriceof12monthlyinstallmentsofonlyR$4.90(orUS$1.26),appealingtotheMicro-MerchantsandSMEswhoplantheirownbusinessexpensesonamonthlybasis.

• TheMinizinhaChipmPOSdevicecombineshigh-endfunctionalities,suchasWi-FiandGPRSconnection(chip)incompacthardwarethatcanfitinamerchant’spocket.ThismPOSdevicethatcomeswithitsownSIMcardandafreedataplan,improvingthemerchantexperiencebynolongerrequiringsmartphonepairingliketraditionalmPOSdevices.ThesefeaturesmaketheMinizinhaChipappealingtoMicro-MerchantsandSMEsseekingmobilityandconvenience.WeoffertheMinizinhaChipappealingtoMicro-MerchantsandSMEsseekingmobilityandconvenience.WeoffertheMinizinhaChipforapurchasepriceof12monthlyinstallmentsofonlyR$9.90(orUS$2.55).

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• Forbusinesseswithgreaterneedsweofferthreemoresophisticatedunits,theModerninhaPlus(pricedat12monthlyinstallmentsofR$19.90(orUS$5.14)),theModerninhaPro(pricedat12monthlyinstallmentsofR$35.90(orUS$9.26))andtheModerninhaSmart(pricedat12monthlyinstallmentsofR$39.90(orUS$10.30)).TheModerninhaPlus,whichprovidesconsumerreceiptsviaSMS,isaimedatmerchantswhogeneratelowertransactionvolumes;whiletheModerninhaPro,whichprovidesconsumerreceiptsviaSMSorinpaperform,isaimedatmerchantswhogeneratehighertransactionvolumes.TheModerninhaProisthefirstsingleunittoofferGPRS/2G/3Gchipconnection,NFC,plug-and-playWi-FiandBluetoothconnections(forcommercialautomationandconnectiontootherdevices)onthesamedevice,makingitthePOSdevicewiththemostconnectivityfeaturesinBrazil.Thedeviceswitchesautomaticallybetweenthevariousconnectionformats.InFebruary2018,welaunchedanewfunctionalityfortheModerninhaProandModerninhaWi-Fi(substitutedfortheModerninhaPlusinMay2018),enablingseveralmerchantstoshareasinglePOSdevice(eachterminalcanserveuptosixdigitalaccounts,handlingsalestransactionsforeachaccountseparately).TheModerninhaSmarthasallthefeaturesoftheModerninhaPro,plustheintegrationofaproductcatalogueandinventorymanagementsoftware,aninstallmentpaymentcalculator,boleto issuanceandpaymentlinks.Theintegrationofsoftwareandhardwarehelpsmerchantsbemoreproductiveandbetterservetheirclients.

WealsoofferavirtualPOSterminalviaourfreeAndroidandiOSappthatenablesthemerchant’ssmartphonetobeusedasaPOSdeviceforcreditcardpaymentswithnoexternalhardware.Themerchanttypestheconsumer’scardnumberintotheapp,withsecurityprovidedvianetworkencryption.

WegeneraterevenuesfromoursalesofPOSdevicestomerchants,inadditiontothecommissionsgeneratedonthecredit,debitandmealvouchercardtransactionsprocessedthroughthedevice.AllPOSdevicesaresetuptoofferupto12monthlyinstallmentsoncreditcardpaymentsatthepointofpurchaseiftheconsumerchooses.

Wecurrentlyrelyononemanufacturertomanufacture,testandassembleasignificantamountofourPOSdevices.TheAgreementfortheSupplyofEquipment,datedasofJune26,2014,asamendedfromtimetotime,byandamongPAXBRComérciodeEquipamentosdeInformáticaLtda.,orPAX,TransireFabricaçãodeComponentesEletrônicosLtda.,orTransire,andNet+PhoneTelecomunicaçõesLtda,orNet+Phone,setsforththetypesofPOSdevicestobesoldbyPAXandTransiretoNet+PhoneandthestandardtermsandconditionsgoverningthissupplyofPOSdevices.PAXandTransiretogetherserveasourmainsupplierofPOSdevices.ConsiderationpayabletoPAXandTransireunderthisagreementisdeterminedbythenumberofPOSdevicesorderedbyNet+Phone.Formoreinformation,seeItem3.KeyInformation—RiskFactors—SomeofthekeycomponentsofourPOSdevicesaresourcedfromalimitednumberofsuppliers.Wearethereforeatriskofshortage,priceincreases,changes,delayordiscontinuationofkeycomponents,whichcoulddisruptandharmourbusiness.

• Payment Methods

ThefreePagSegurodigitalaccountprovidesmorethan35cash-inmethods,includingtheitemslistedbelow.Ourcash-inmethodscanbeacceptedthroughwebcheckout,in-appcheckout,orin-personusingourPOSdevices.Fordebitcardtransactions,cardissuersinBrazilpayusasacquireronthefirstbusinessdayfollowingtheconsumertransaction;andforcreditcardtransactions,cardissuersinBrazilpayusasacquireronthe30thbusinessdayfollowingtheconsumertransaction.Webelieveourpricingmodelissimple,transparentandeasytounderstand,whencomparedwiththatofincumbentpaymentprocessingproviders,whichistypicallydeterminedbasedonamixofvolume,cardschemeandpaymentmethod.Webelievethattheseincumbentprovidershavelittleincentivetomakeaggressivepricechangesastheymayruntheriskofcannibalizingtheirownmerchantbaseasaresult.

• Credit cards

Weacceptcardpayments,throughouronlineandin-personPOSpaymenttools,fromallthemajorcreditcardschemesactiveinBrazil,includingVisa,MasterCard,Elo,AmericanExpress,Hiperandregionalschemes.Thecreditcardschemesacceptedonourplatformtogetherrepresent99%ofthetotalpaymentvolumecarriedoutusingcreditcardsinBrazilin2016,accordingtotheCentralBank.Wegeneraterevenuefromcreditcardtransactionsbychargingamerchantdiscountrate,orMDR,acommissionwithheldbyusfromthetransactionvaluepaidtothemerchant.Thetransactionamount,lesstheMDR,iscreditedtothemerchant’sPagSegurodigitalaccount.OurMDRpricingmodelisstandardized,easytounderstandandtransparent.WealsooffercustomizedMDRpricingforcertainmerchantswhoprocesslargepaymentvolumes.WerecognizetheMDRfeesinourfinancialstatementsasrevenue.

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InthestandardpaymentcycleinBrazil,merchantsreceivesalesrevenuesfromcreditcardtransactions30businessdaysaftertheconsumertransaction.Weofferourmerchantstheoptiontoreceivetheircreditcardrevenuesfromusearlier,oneitherthefirstorthe14thbusinessdayfollowingtheconsumertransaction.Werefertothisoptionasthemerchant’s“paymentdateelection”service(regime de recebimento ).Ifthemerchantselectstheone-dayor14-daypaymentdateelection,thefeesforthisserviceareincludedinthemerchant’soverallMDRfee.Thisserviceisseparatefromtheearlypaymentofreceivablesfeaturethatweoffermerchants,whichisdescribedinthefollowingparagraph.

Exceptwhenmerchantschoosetoreceiveearlypaymentoftheirreceivablesrelatedtocreditcardtransactionstobepaidininstallments,asdescribedinthefollowingparagraph,and/orwhenmerchantsselectthe14-dayorone-daypaymentdateelectionservice,wereleasetheamountoftheconsumertransaction(lessourcommission)tothemerchant’sPagSegurodigitalaccountthreedaysafterwereceivetheunderlyingpaymentfromthecreditcardissuer.

Inaddition,Brazilianconsumersexpectmerchantstoallowthemtochooseatthepointofpurchasetohavethepurchasepriceeither(i)chargedtotheircreditcardaccountsinasinglepayment,asinothermarkets,or(ii)splitintoseveralpaymentsandonlychargedtotheircreditcardaccountsinmonthlyinstallments.Inthiscase,themerchantonlyreceivestherevenuesaftertherespectivemonthlyinstallmenthasbeencharged,ratherthan30businessdaysaftertheoriginaltransaction.Tohelpourmerchantsoffertheinstallmentpaymentoptiontoconsumers,weoffertopaythemonthlyinstallmentreceivablestoourmerchantsup-frontinalumpsumwhentheconsumerchosestopayininstallments.Micro-MerchantsandSMEshavehistoricallyfaceddifficultiesobtainingthisservicefromtheincumbentpaymentprocessingproviders,andtheyoftenrequiremerchantstorequestearlypaymentonatransaction-by-transactionbasis.Weofferasolutiontothesebottlenecksthroughsimpleronboardingandpreapprovalofamerchant’searlypayments.Theunderlyingreceivablesrelatingtothesepaymentsareowedtousbythecreditcardissuers,whichareownedprimarilybyBrazil’slargeretailbanks.

Whenmerchantschoosetomakeuseofthisearlypaymentofreceivablesfeaturewechargethemafinancefeeintheformofadiscountfromthelumpsumofthereceivable.ThisdiscountisadditionaltotheMDRfeewithheldfromthemerchant.ThefinancefeeisdeductedfromtheamountspayabletothemerchantatthesametimeasMDR,butisrecognizedinourfinancialstatementsasfinancialincomeratherthanrevenues.ThediscountthatgeneratesourFinancialincomerelatesonlytotheearlypaymentofthesecondandsuccessiveinstallmentsofthepurchase;thefirstinstallmentisnotpaidearlyasitisdisbursedtothemerchantwithinthenormalbillingcycle,soitdoesnotgenerateremunerationintheformofFinancialincome(althoughitdoesgenerateMDR,whichisrecognizedasGrossrevenuefromtransactionactivitiesandotherservices).(Thelumpsumreceivable,lessthefinancefeediscountandtheMDRortheintermediationtransaction,iscreditedtothemerchantonthe30th,14thor1stbusinessdayafterthetransaction,accordingtothemerchant’s“paymentdateelection”describedintheparagraphabove.)

Merchantswhochoosenottomakeuseofourearlypaymentofreceivablesfeatureonlyreceivetheamountpayabletothemundertheconsumertransaction(afterdeductionoftheMDRfee)afterthemonthlyinstallmentsarechargedtotheconsumer’screditcardandthecardissuerhaspaidus.

• Debit cards

WeacceptdebitcardsfromallthemajorcardschemesactiveinBrazil,includingMaestro(MasterCard),VisaElectronandElo,forin-personpayments.Thedebitcardschemesacceptedonourplatformtogetherrepresent98%ofthetotalpaymentvolumecarriedoutusingdebitcardsinBrazilin2016,accordingtotheCentralBank.WegeneraterevenuesintheformofMDRcommissionsusingastandardized,easytounderstandandtransparentpricingmodel.Unlikecreditcards,Braziliandebitcardsdonotofferaninstallmentpaymentoption.

Fordebitcardtransactions,wereceivetheunderlyingpaymentfromthedebitcardissueronebusinessdayaftertheconsumertransaction,andwepaytheamountoftheconsumertransaction(lessourcommission)tothemerchantonthesamedayaswereceiveit.

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• Meal voucher cards

MealvouchercardsarealaborbenefitincludedinBrazilianemploymentcontracts.Theemployersimplycreditstheemployee’scardonaprepaidbasis,andtheemployeecanusetheprepaidbalanceonthecardtomakepurchasesinrestaurantsandgrocerystores.Weacceptin-personcardpaymentsfromtheprincipalmealvouchercardissuersactiveinBrazil,generatingrevenuesintheformofavalueaddednetwork,orVAN,commission,whichiscurrentlychargedataflatratepertransaction.Mealvouchercardsdonotofferaninstallmentpaymentoption.

• Boletos

Boletos arepaymentslipdocumentsissuedbyBrazilianbusinessesandutilitiesthroughbankstoenableconsumerstopaytheirbills.Boletos canbeusedforproductsorservices,utilitiesortaxes.Eachboleto referstoaspecificmerchantandcustomertransaction,andincludesthemerchant’sname,customerinformation,expirationdateandtotalamountdue,plusaserialnumberthatidentifiestheaccounttobecreditedandabarcodesothattheentiredocumentcanbereadandprocessed.Theconsumercanpaytheboleto throughhisorherbankeitheronline,overthephone,atabranchoratanATM.Merchantscanreceivecreditsfromboletos directlyintotheirPagSegurodigitalaccount.WegenerateMDRcommissionsoncash-inpaymentsmadeviaboletos toamerchant’sPagSegurodigitalaccount.

• Bank transfers and bank debits

Consumerscanmaketransfersfrombankaccounts,eithertotheirownPagSegurodigitalaccountinordertoaddfundstotheiraccountbalancethatcanthenbeusedanywhereonourecosystem,ortoamerchant’sdigitalaccounttopayforaproductorservice.Thesepaymentscanbemadeviaanybanktransferor,inthecaseofpaymentstomerchants,viaanonlinebankdebittool.WegenerateMDRcommissionsonpaymentsmadeviabanktransferorbankdebittoamerchant’sPagSegurodigitalaccount.ThereisnoMDRoranyothercommissionchargedbyuswhenconsumersaddfundstotheirownPagSegurodigitalaccount.

• Cash deposits

Similartobanktransfers,consumerscanmakecashdepositsatabankbranchorATMdirectlytoPagSegurodigitalaccounts–eithertoamerchant’sdigitalaccounttopayforaproductorservice,ortotheconsumer’sowndigitalaccount.WegenerateMDRcommissionsonpaymentsmadeviacashdeposittoamerchant’sPagSegurodigitalaccount.ThereisnoMDRoranyothercommissionchargedbyuswhenconsumersaddfundstotheirownPagSegurodigitalaccount.

• Early payment of installment receivables

Asdescribedunder“—Cash-inSolutions—CreditCards”above,ourearlypaymentofinstallmentreceivablesfeaturehelpsourmerchantsoffertheinstallmentpaymentoptiontotheirconsumerspayingbycreditcard,withoutsacrificingtheirowncashflow.Inadditiontogeneratingfinancialincomeforus,thisearlypaymentfeatureisanimportantsourceofworkingcapitalformerchants,inparticularforourMicro-MerchantsandSMEs,whomaynototherwisehaveefficientaccesstocapitalfrombanksortraditionalfinancialinstitutions.Webelievethatbyofferingthisfeature,wecanstrengthenourbusinesspartnershipswithourmerchantsbyprovidingthiscapitaltohelpthemgrowtheirbusinesses.

Wegeneratefinancialincomethroughthisearlypaymentfeaturebychargingafinancefeeintheformofadiscountfromthesecondandsuccessiveinstallmentsthatarepaidearlyinthelumpsum,inadditiontotheMDRfeeontheintermediationtransaction.Thefinancefeeisdeductedfromtheamountspayabletothemerchant,butisrecognizedinourfinancialstatementsasfinancialincomeratherthanrevenues.

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PriortoourIPO,wefundedtheworkingcapitalforthisearlypaymentserviceusingdebtincurredbyus.Inaddition,inNovember2017wesetupaBrazilianinvestmentfundtopurchaseandholdreceivablesknownasaFIDCthroughwhichwemayraisedebttofinancetheearlypaymentofreceivablesfeature.TheFIDCiscontrolledbyourBrazilianoperatingcompany(byvirtueofsubscribingforitssubordinatedquotas)butraisescapitalbyissuingseniorquotasinthefundtooutsideinvestors,whoreceiveinterestontheseinvestmentsfromtheFIDC.TheFIDCusesthecapitalitraisestofinancethegrowthofthisearlypaymentofreceivablesfeature.OurremunerationfromtheearlypaymentofreceivablesfeaturecontinuestobereflectedasFinancialincomeinourconsolidatedfinancialstatements.WedonotexpecttheestablishmentoftheFIDCtoimpactthediscountratewechargeinconnectiontotheearlypaymentofreceivablesfeatureortheexpensesweincurtoobtainearlypaymentofnotereceivablesfromcardissuersandacquirers.ForfurtherinformationregardingtheFIDC,see“—OrganizationalStructure.”

• Advanced Built-In Functionalities and Value-Added Services and Features

OurPagSegurodigitalaccountcomeswithanumberofadvancedbuilt-infunctionalities,providedfreeofcharge,aswellasvalue-addedservicesandfeaturesthataredesignedtoprotectbothmerchantsandconsumersandhelpourmerchantsbettermanagetheirbusinesses.Thesefunctionalitiesandvalue-addedservicesandfeaturesincludepurchaseprotectionmechanisms,antifraudplatform,accountandbusinessmanagementtools,eWalletandourPOSApp.OurplatformalsoprovidessolutionssuchasPlugPag,afreetoolcompatiblewithiOS,AndroidandWindows,aimedatourmedium-sizedandlargermerchants,enablingthemtoconnecttheirPOSdevicedirectlytotheirenterpriseresourceplanning,orERP,softwareorsalesautomationsystemviaBluetooth;cartrecoverysolutionstoimprovesalesconversionratesone-commercewebsites;anddeveloperplatformsallowingmerchantstogivethird-partydevelopersaccesstotheirPagSegurodigitalaccountsonasecurebasisusingapplicationprogramminginterfaces,orAPIs;amongotherfunctionalities.

✓ Purchase Protection

OurPurchaseProtectionsolutionaddsmultiplelayersofsecurityforonlinepurchasesmadeonourplatform.Asapaymentcardindustry,orPCI,compliantcompany,wedonotshareconsumercreditcarddataorsensitiveinformationwithmerchants,helpingtopreventfraudanddatamisuse.Foraddedprotectiontoonlineconsumers,ourecosystemholdsconsumerpaymentsinescrowforasetperiodafterpurchase.Ifthereisnoconsumercomplaint,thefundsaretypicallyreleasedtothemerchantintwoweeksfromthepurchasedate.IfaproblemoccurswiththepurchaseandthetransactioniseligibleforPurchaseProtection,theconsumercanfileaclaimand,ifrequested,wewillactasmediatortohelpresolvetheissuewiththemerchant.Iftheissueisnotresolved,wereimbursetheconsumerforthefullpurchasepriceplusshippingcosts.IntheyearendedDecember31,2018,only0.13%ofouronlinetransactionsrequiredclaimmediationandforthosethatdid,theaveragetimeforclaimmediationsettlementwas16days.81%ofthedisagreementsrelatedtonon-receiptofapurchase,and33 %wereresolvedinfavorofthemerchant.

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✓ Antifraud platform

Inaddition,ourITbackgroundcombinedwiththe11yearsofhistoricaltransactiondatawehaveamassedsinceourlaunchallowustodevelopproprietarytechnologyandgainexpertiseagainstonlinefraudandchargebacksrelatedtofraudulenttransactionsinBrazil.Ourantifraudplatformcombinesproprietaryfeatures,suchasinternalriskmodelingandscoringthroughartificialintelligenceandriskassessmenttoolsthatcollectpublicandprivatemarketinformation,aswellasfront-linethird-partysolutionssuchasFeedzai,EmailageandThreatmetrix.Theantifraudplatformisfullyintegratedintoourecosystem,andfeaturesprocessesdesignedtomonitorpotentialfraudinrealtime,trackingtransactionapprovalsanddenials,enablingustomaintainhightransactionapprovalratesandlowincidencesoffraud.

Whenaclientrequestsachargebackfromthecardissuer,weverifywhetherthesaleoccurredandwhethertheproductorservicewasdeliveredbythemerchant.Ifthechargebackclaimwasfraudulent,wepaytheamountduetothemerchantandwecontesttheattemptedchargebackwiththecardissuerbyprovidingthesupportingdocumentation.Ifthechargebackclaimwasjustified,wepassonthecosttothemerchant.Forinformationonclaimmediationrequestsfiledbyourclientsonourplatform,see“—ProtectingOurClients—TransactionSecurity.”

✓ Account management tools

WeaimtohelpourmerchantsexpandtheirbusinessesbyofferingfreetoolssuchasaccountstatementsfortheirPagSegurodigitalaccount,customizeddigitalinvoicing,salesdatareports,simulationsofearlypaymentofmerchants’receivables,andrevenuemanagement.

✓ Business management tools

Formerchantswhogeneratelargertransactionvolumesandrequiremorecomplexcontrols,weofferservicessuchasflexiblecreditingdates,paymentintoseparatebankaccountsforeachcardscheme,andasplitpaymentsolutionthatautomaticallysegregatescreditsbetweentwodifferentcompanies.Oursplitpaymentsolutionallowsmerchantstogeneratepayments,integrateemployees,managereceivablesandreceivecommissionsinrealtime.Weoffertheseservicesbyprovidingourmerchantswiththecodeanddocumentationtoimplementthesetools.

✓ eWallet

WithoureWallet,userscansavetheircreditcardinformationdirectlytoourecosystem,allowingthemtomakeonlinepaymentstomerchantswithouthavingtotypeinthecreditcarddetailsforeachpurchase.Thisimprovesuserexperienceandmakesthepaymentprocessfaster,easierandmoresecure.OureWalletallowsuserstosavemultiplecreditcards.CreditcardtransactionsmadeusingcreditcardsstoredineWalletgenerateMDRfees.

OurrelatedeWalletapp,currentlyavailableintheGooglePlaystore,offersanin-appcardscannerandallowsclientstousethecreditcardinformationsavedintheireWallettopayanyPagSeguromerchantviatheirsmartphone.Inaddition,usingaQRcodefeaturethatiscurrentlyinthepilotphase,consumerswillbeabletomakepurchaseswithoureWalletappbysimplyscanningtheQRcode(createdusingourproprietaryQRcodetechnology)generatedbythemerchant’sPagSeguro Vendas app,ModerninhaPro,ModerninhaSmartorModerninhaWifi.AfterscanningtheQRcode,theconsumer’seWalletappwillauthenticateandfinalizethetransactionbyscanningtheconsumer’sfingerprintonhisorhersmartphone.

✓ POS App (PagSeguro Vendas)

OurfreesalesappPagSeguro Vendas isaPOSsoftwareappavailableforsmartphonesandtabletsrunningiOSorAndroidthatintegratesseamlesslywithourpaymentprocessingsolutionbutcanalsobeusedonastand-alonebasis.ThetabletversionoftheappallowsmerchantsusingPOSdevicestoimprovetheirbusinessoperationsbyregisteringanditemizingtheirservicesandproducts,sellingmerchandiseoncustomizableterms,trackingbusinessdataandallowingforfasterin-appcheckout.Itemscanbegrouped,categorized,sorted,andlinkedtoinventorymanagement.PagSeguro Vendas isuser-friendlyandsecure,andfullyintegratedwithourmerchants’freePagSegurodigitalaccountsandtheModerninhaPro,ModerninhaSmart,ModerninhaandMinizinhaPOSdevices.AsofMarch31,2019,PagSeguro Vendaswasratedanaverageof4.8starsby85thousandreviewersinApple’sBrazilianappstoreand4.4starsby86thousandreviewersintheAndroidappstore.

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✓ PagSeguro Minha Conta (i-Banking App)

Ourfreedigitalaccountapp,PagSeguro Minha Conta ,isatransactionanddigitalaccountmanagementappavailableforsmartphonesandtabletsrunningiOSorAndroidwhichprovidesourclientswithaneasyandpracticalwaytomanagetheirtransactionsandaccountbalances.ThroughPagSeguro Minha Conta ,ourclientscanpaytheirbillsandtransfertheiraccountbalancesdirectlytotheirPagSeguroprepaidcardsorthird-partyfinancialinstitutions.PagSeguro Minha Conta alsoprovidesreal-timestatementsofauser’shistoricalaccountandPagSeguroprepaidcardactivity.AsofMarch31,2019,PagSeguro Minha Conta wasratedanaverageof4.8starsby219thousandreviewersinApple’sBrazilianappstoreandanaverageof4.8starsby316thousandreviewersintheAndroidappstore.Inaddition,beginninginJune2018,usersofouri-BankingappPagSeguro Minha Conta willhavetheoptiontotopupcreditsontheirprepaidmobilephones.

✓ PlugPag

PlugPagisafreetool,aimedatourmedium-sizedandlargermerchants,enablingthemtoconnecttheirPOSdevicedirectlytotheirenterpriseresourceplanning(ERP)softwareorsalesautomationsystemviaBluetooth.ThePlugPagfeatureoffersvariousadvantagessuchasadirectconnectionbetweenthemerchant’ssoftwareandthePOSdevice,whichautomatestheflowofinformation,avoidinghumaninterventionsoastominimizepotentialmistakesandfraud.Bysendingtheconfirmationorrejectionofeachsaledirectlytothemerchant’ssoftware,thistoolfacilitatesautomaticreconciliationofsalesrecords,acommonrequirementoflargermerchants.

✓ Accounting reconciliation

Weoffermerchantsaplatformforreconcilingtheirdigitaltransactionrevenuesandtherelatedfeeswiththeirbankaccountbalanceandaccountingrecords.ThisserviceofferingrampedupsignificantlywithouracquisitionofR2TechInformáticaS.A.,orR2Tech,acompanyspecializedinreconciliation,andisbackedbyourexpertiseinmiddlewareandback-officesolutionsprocessing.Wegeneraterevenuesfromthisserviceintheformofaflatcommissionpertransactionreconciledfortheclient.

✓ Peer-to-Peer Lending

Throughour77.4%controllinginterestinBIVA,whichweacquiredbetweenOctober2017andApril2018,wefacilitatepeer-to-peerlendingservices.Thisactivityconsistsofconnectingaborrowertoalenderorgroupoflenders.Wegeneraterevenuesfromthisserviceintheformofacommissionpertransaction,plusaperformancefeeifthelenders’returnontheirportfolioofloansexceedscertaintargets.Thelenderstakethefullcreditriskontheloans;asintermediarybetweenlenderandborrower,wearenotexposedtothiscreditrisk.

✓ Cart recovery

Ourcartrecoverysolutionaimstoimprovesalesconversionratesone-commercewebsites.Iftheconsumeraccessesamerchantwebsite,placesitemsinthewebsite’svirtualcart,continuestoourwebcheckoutbutthenleavesthewebsitebeforefinalizingthepurchase,thistoolkeepstheitemsinthecart,savingtheconsumertimeifheorshelaterreturnstothemerchant’swebsitetocompletethepurchase.Italsofeaturese-mailremindersandremarketingtodirecttheconsumerbacktothemerchant’swebcheckout.

✓ Subscription service and automatic billing

OurMerchantscanprovidesubscriptionservicesandautomaticbillingfortheirconsumers.Thistoolenablesthemerchanttomanage,cancelorrenewsubscriptionsandmanageandcancelautomaticbillings,allthroughthefreePagSegurodigitalaccount.

✓ Smart Supply

OurModerninhaSmartandModerninhaProhavebuilt-intechnologythatmeasurestheconsumptionofPOSreceiptpaper.Thistechnology,combinedwithanadvancedlogisticssystem,allowsustodeliverreplacementpaperrollstothemerchantautomaticallyinadvance.Webelievethistoolincreasesmerchantsatisfactionwhilereducinginquiriesandtherelatedcustomerservicecosts.Weconsiderthisservicealoyaltyinitiativeandprovideitfreeofcharge.

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✓ POS Assistance

AllofourPOSdeviceshaveafive-yearwarranty.InordertoreducetheinconvenienceofwaitingforrepairtoorreplacementofaPOSdevice,weoffereligiblemerchantsthreelevelsofassistance:(i)standardservice,wherethereplacementdeviceisdeliveredviamail,(ii)expressservice,wherethereplacementdeviceisdeliveredviacourierservice,and(iii)quarterlypreventiveassistanceforlargerclients,whereourfieldtechniciansvisitthemerchantperiodicallytocarryoutmaintenanceonapreventivebasis.

✓ Developer platform

Weenablemerchantstogivethird-partydevelopersaccesstotheirPagSegurodigitalaccountsonasecurebasisusingapplicationprogramminginterfaces,orAPIs.OurAPIsaredesignedtoallowdevelopersaplug-and-playservicetocreateintegratedwebsitesandsoftwareapplicationsthatconnecttothePagSeguroplatform,allowingmerchantstobenefitfullyfromthefeaturesandvalue-addedservicesandfeaturesavailableonourecosystem,whilekeepingourcustomers’financialinformationconfidential.Ourdeveloperplatformoffersintegrationtestsandguides(includingmodulesandavirtuallibrary)andcommunityandGitHubforums.

✓ Shipping solutions

ThroughapartnershipwiththeBrazilianPostOffice,weofferintegratedshippingsolutionsenablingonlinemerchantstosend,insureandtracktheirpackagesatloweroverallshippingratesthantheBrazilianPostOffice’sstandardprices.Deliveryfeescanbeincludedintheonlinesalestransactionorpaidseparatelybythepurchaser.Usingourshippingcostcalculator,merchantscanchoosetooffer(i)afixedfreightratebasedonthenumberofitemsshipped,(ii)aweight-basedrateor(iii)acustomizedratebasedonafixedamountplusanincrementalrateforeachadditionalitem.Merchantscanalsotrackallshipmentsandinsuretheirproductsagainstloss.WemonitorandreviewtheBrazilianPostOffice’sperformanceandcompliancewithourcontractualterms.

✓ EFTPOS Integration Solution

OurEFTPOSintegrationsolution,whichwelaunchedinAugust2017,offerssolutionsthatintegrateEFTPOStechnologywithmerchantsoftware,securedviaPINpad.ThisserviceallowsmerchantstoprocessoflargetransactionvolumesandissuetaxreceiptsmoreeasilythanwithtraditionalPOSdevices.

✓ Single-Click

OurSingle-Clickserviceisafunctionalityofferedacrossoure-commerceplatformsthatenablesmerchantstorequestcustomerapprovaltosavetheirpaymentinformation,simplifyingfuturepurchases.Onceapproved,e-commercemerchantscanprovideaseamlesscheckoutoption,allowingcustomerstomakepurchaseswithasingleclick.

✓ Promotional engine

Ourpromotionalengineisamarketingtoolthatallowsmerchantstoadvertiseacrossourclientbase.Forexample,amerchantcanofferpromotionaldiscountstootherPagSegurocustomersinspecificsectors.

✓ Multiple merchant feature

InFebruary2018,welaunchedaninnovativefunctionalityforbothourModerninhaWi-FiandModerninhaProwhichenablesmultiplemerchantstoshareasinglePOSdevice.OurModerninhaSmart(whichwelaunchedinOctober2018)alsohasthisfunctionality.Withthisnewfunctionality,eachofthesePOSdevicescanserveuptosixdigitalaccounts,handlingsalestransactionsforeachaccountseparatelyandallowingentrepreneursandmerchantstomanagemultiplebusinessesusingasinglePOSdevice.Thelaunchofthisnewfunctionality,innovativeintheBrazilianmarket,furthersourcontinuousprocessofdemocratizationandgreaterpenetrationofourpaymentterminalsforentrepreneursandmerchantsacrossalltypesofbusinesses.

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✓ Cash-Out Solutions

Ourcash-outsolutionsenableourclientstotransferorspendthebalanceontheirPagSegurodigitalaccountsecurelybyavarietyofmeansincludingonlinepurchasesviaeWallet,in-personandonlinepurchasesorcashwithdrawalsusingourPagSeguroprepaidcard,on-platformpeer-to-peertransfers,transferstobankaccountsandcross-borderremittances.

✓ Online purchases via eWallet

UserscansaveinformationformultiplecreditcardsdirectlytoourecosystemusingoureWalletsolution,allowingthemtomakeonlinepaymentstomerchantsonasecurebasiswithouthavingtotypeinthecreditcarddetailsforeachpurchase.Thisimprovesuserexperienceandmakesthepaymentprocessfasterandeasier.ForfurtherinformationregardingoureWalletsolution,see“—OurProductsandServices—TheFreePagSeguroDigitalAccount—AdvancedBuilt-InFunctionalitiesandValue-AddedServicesandFeatures—eWallet.”

✓ PagSeguro prepaid cards

OurPagSeguroMasterCardprepaidcardsallowmerchantsorconsumerstousethebalancefromtheirfreePagSegurodigitalaccounttobuygoodsandservicesin-personandonlineorwithdrawcashatmorethanonemillionCirrusnetworkATMsinBrazilandabroad.MerchantscanthereforereceivepaymentsfromsalestransactionsintotheirPagSegurodigitalaccountandspendthatmoneydirectlyusingthePagSeguroprepaidcard,withoutneedingabankaccount.Withamodestinitialpurchasecost,thecardcomeswithnoannualfeesorinterestrates–andweprovideitfreetomerchantswhopurchaseaPagSeguroPOSormPOSdevice.ThePagSeguroprepaidcarddoesnotrequirecreditchecksonthemerchantorpreapprovalforissuance.AtDecember31,2018,morethan1.4millionPagSeguroprepaidcardshadbeenissued.

Wegeneraterevenuesfrom(i)theissuancefeesforPagSeguroprepaidcards,(ii)interchangefeeswereceive,asacardissuer,fromeachtransactionmadethroughPagSeguroprepaidcards,and(iii)aflatfeeforcashwithdrawalsatATMsusingPagSeguroprepaidcards.Aftertheinitialissuancefee,thecardholderdoesnotpayanannualfeeorotherfeesforusingthecard.

✓ On-platform peer-to-peer transfers

OurclientscanusethebalanceontheirPagSegurodigitalaccounttotransferfundstootherPagSegurodigitalaccountsonourplatform.Wechargeacommissionpaidbytherecipientofthepayment.

✓ Bank transfers

ClientscanmaketransfersfromtheirPagSegurodigitalaccountdirectlytoabankaccount.Webelieve,however,thatournumerousdirectcash-outoptionsareincreasinglyreducingtheneedforourmerchantstotransferbalancesoutofourdigitalplatform.Wedonotreceiverevenuesfromcash-outbanktransfers.

✓ Bill payment

Clientscanpayawidevarietyofbills,suchasutilities,consumer,taxandotherboletos ,throughouri-bankingappPagSeguro Minha Conta usingthecashbalanceintheirPagSegurodigitalaccount.Thereisnocosttoourclientsforusingthisfeature.Wereceiverevenuesintheformofaflatfeefromtheissuerofthebillforeachbillpaymentprocessed.

✓ Cross-border remittance

Our“BoaCompra”platformallowsourclientstooperatecross-bordertransactionswhenconsumersarelocatedindifferentcountriesacrossLatinAmerica,Spain,PortugalandTurkey(forexample,forforeignmerchantssellingtoBrazilianconsumers,orforBrazilianmerchantssellingtoforeignconsumers–althoughtheplatformisalsousedfortransactionswhereneitherpartyisBrazilian).BoaCompraoriginallyoperatedintheonlinegamingindustryandhasbeenparticularlyattractivetoclientsinthatindustry.Sinceitslaunch,however,BoaComprahasnowexpandedtoserveotherindustries.

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UsingBoaCompra,internationalonlinemerchants,suchasValve(Steam),ElectronicArtsandRiotGames,canprovidetheirend-userswithlocalpaymentmethods,leveragingconversionratesandunlockingthemarketpotentialofcross-bordere-commerce.TheBoaCompraplatformfeaturesanintegratedweb-checkoutsolutionwhichallowsclientstosavetheircreditcardinformationforfuturetransactionsandenablesinternationalcheckoutbyofferingusersmorethan140paymentmethodsinmultiplecurrencies,includingourproprietarydigitalcurrencyCréditos Gold .Créditos Gold canbepurchasedonlinethroughBoaCompra’sonlinedigitalgamingportalGo4GoldinBrazil,Chile,Peru,Mexico,PortugalandTurkey.Oncepurchased,Créditos Gold canbeusedimmediatelytomakein-apppurchases.WhenBrazilianconsumers,forinstance,makeapurchaseabroadusingBoaCompra,weorganizetheremittanceofthefundsoutsideBrazilonbehalfofeachcustomerinaccordancewithCentralBankregulationsusingtheconsumer’sBraziliantaxpayeridentificationnumber.

Our Customers

Weofferourclientsfreedigitalaccountswhichtheycanusetosellproductsasmerchants,ortobuyproductsasconsumers.Thereisnodivisionbetweenthetwocategories,sincethesamedigitalaccountservesbothtypesofclients–indeed,ourmerchantsarealsoconsumerswhentheyspendtheirdigitalaccountbalanceusingourcash-outfeatures,andourconsumerclientscanalsobemerchants.

Weofferthefollowingmajorbenefitsforbothmerchantsandconsumers:

• Customersdonotneedabankaccounttojoinourecosystem.Witha100%onlineonboardingprocess(ascomparedwiththeofflineonboardingprocessofincumbentproviders,whichtypicallyrequiresatechniciantoinstallthePOSdevice),withoutpaperwork,quickturnaroundandahighacceptancerate,weofferaccesstoouradvanceddigitalpaymentprocessingandreceivablesearlypaymentfeatures.Weacceptmerchantswhoareeitherindividualsorcompanies.Theincumbentproviders,ontheotherhand,generallyrequiretheirclientstohavebankaccountsanddonotofferonlineonboarding,whichwebelievereducestheirabilitytoreachlowervolumeclients,evenwithlowerpricing.

• Weofferafullsuiteofmorethan35cash-inoptionsunderasinglecontract,withsecurityandreliability,pluseightcash-outoptionsincludingbanktransfers,onlinepurchasing,andspendingbothin-personandonlineaswellascashwithdrawalsusingourPagSeguroprepaidcard.

• Ourpricingmodelforallofourservicesandfeatures–whethertransactionfees,earlypaymentofinstallmentreceivablesorsalesofPOSdevices–issimple,transparentandeasytounderstand.Forexample,weoffertheMinizinhamPOSdeviceforapurchasepriceof12monthlyinstallmentsofonlyR$4.90(orUS$1.26),theMinizinhaChipmPOSdeviceforapurchasepriceof12monthlyinstallmentsofonlyR$9.90(orUS$2.55),theModerninhaPlusforapurchasepriceof12monthlyinstallmentsofR$19.90(orUS$5.14),theModerninhaProforapurchasepriceof12monthlyinstallmentsofR$35.90(orUS$9.26)andtheModerninhaSmart(whichwelaunchedinOctober2018)forapurchasepriceof12monthlyinstallmentsofR$39.90(orUS$10.30).WealsoofferpromotionsonourMDRpricing,suchasourApril2018promotionofferingnewmerchantclientsareducedMDRrateof0.99%oncreditanddebitcardtransactionswithoutinstallmentsuptoR$10,000invalue.InMayandJune2018,ourpromotionalcampaignofferednewmerchantclientsaMDRrateof0%oncreditanddebitcardtransactionswithoutinstallmentsuptoR$1,500invalue.

• Oursocialpaymentsolutions,suchasPag.ae,allowbothconsumersandmerchantstousetheirPagSeguroaccounttorequestpaymentsviaweblinkssentthroughe-mail,socialnetworksormessagingservicessuchasWhatsApp.

• WeofferacomprehensivesuiteofaffordablePOSdevices,withuser-friendlyfeaturesandfunctionalities,reliableconnectivityandafive-yearwarranty.Ourdevicesrangefromtheentry-levelMinizinhatotheModerninhaSmart.Ourmerchantspurchasetheirowndevicethroughaflexiblepaymentplan.Fortheequivalentofthreetosixmonths’rentalpaymentswithincumbents,merchantscanbuyacomparabledevicefromPagSeguroandavoidcontinuousmonthlyrentalfees.

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• Dataprotectionandconfidentialityforconsumers,withmerchantverificationandtransactionprotectionmechanisms,includingescrowperiodsandclaimmediationservices.

• OurpaymentsolutionsreducetheneedforconsumerstocarrycashsincemoreMicro-MerchantsandSMEsareabletoacceptdigitalpaymentsin-person.

Sinceweonlyprovidethepaymentserviceandtheacquiringservice,theconsumerintheunderlyingcommercialtransactionisnotourclient,andwearenotresponsibleforprovidingthegoodsorservicesorfulfillingtheconsumerorder.Asproviderofthepaymentservice,wefacilitatethepaymenttransactiononbehalfofthemerchant;whileasacquirer,weenablemerchantstoacceptpaymentcardsbycompletingtheprocessingofthepaymenttransaction.

Ourmerchantbaseishighlydiversified,whichshieldsusfromdependenceonasmallnumberofbusinesssectorsormajoraccounts.In2018,restaurants/foodandbeveragemerchants,ourlargestvolumesector,anddepartment/generalretailstores,oursecondlargestvolumesector,accountedfor13%and12%,respectively,ofouroveralltransactionbusiness.Noothermajorbusinesssector(clothingstores(6%),beautyparlors(5%),autosparesandrepairshops(3%)orsupermarkets/grocerystores(2%))accountedformorethan10%ofouroverallTPV.Wearenotdependentonanyindividualmerchants.In2018,ourtop10clientsrepresentedlessthan3%ofourTPVandourtop100clientsrepresentedlessthan5%ofourTPV.

WeprincipallytargetMicro-MerchantsandSMEs,manyofwhomwereignoredorunderservedbytheincumbentpaymentprovidersandfinancialinstitutionsinBrazilbeforePagSegurowaslaunched.TheseincumbentsgenerallychargeMicro-MerchantsandSMEshigheroverallfeesandcommissionsbecausetheygeneratelowertransactionvolumes.Ourplatformenablesustokeepoverallper-transactionfeeslowerformerchantswhogeneratelowertransactionvolumes.Webelieveourclientdatasupportsthismodel:AccordingtoasurveyconductedbyusinOctober2016,81%ofourmerchantsusedPagSeguroastheirsoleelectronicpaymentsservice(while2%ofourmerchantsalsousedGetNet,4%alsousedMercadoPago,6%alsousedRedeand11%alsousedCielo,accordingtothesamesurvey)andaccordingtoasurveyconductedbyusinJanuary2019,85%ofMinizinhaownersdidnotacceptcardsbeforesigningupwithus.

Westrivetoproviderelevantproducts,efficientcustomerservice,accountsupportandprotectionfromfraudandloss.Wehavedevelopedanumberofsecurityprocedurestoprovideprotectiontoconsumersbyofferingescrowperiodsandclaimmediation,coveringissuessuchasnon-deliveryorfailuretomatchthemerchant’sdescriptionoftheproductsold.See,“—ProtectingOurClients”and“—OurProductsandServices—TheFreePagSeguroDigitalAccount—ThePagSeguroEcosystem—AdvancedBuilt-InFunctionalitiesandValue-AddedServicesandFeatures—PurchaseProtection.”

Product Development and Technology

Wedevelopmostofthesoftwaretechnologyusedbyourdigitalpaymentsplatformin-house,althoughwealsooutsourcecertainprojectstooutsidedevelopersinordertoexpeditethedeliveryofsoftwareandkeepourtime-to-marketadvantage.Throughthiscombinationoftechnology,developedbothin-houseandbyoutsourceddevelopers,wehavedevelopedastable,reliable,proprietaryandhighlyscalableplatformwithintuitiveuserinterfaces,managementtools,transactionprocessing,APIs,anddatabaseandnetworkapplicationsthathelpourcustomersutilizeoursuiteofproductsandservices,whilekeepingtheirfinancialinformationconfidential.

Ourplatformallowsconsumerstomakepurchasesusingabroadrangeofpaymentmethods,regardlessofwhereamerchantislocated.ForpurchasesmadeoutsideBrazil,wepartnerwithlocalpaymentserviceproviders.

Wemanagelargevolumesofsystemaccessdataandtransactions,withmorethan99.9%availabilityin2018,usingInternetdatacentersprovidedbyUOLDiveo,aUOLgroupcompanythatfocusesonIToutsourcing,datacenters,cloudcomputingandothermanagedITservices.Thisallowsustohavemultipleredundanciesand,tothebenefitofourmerchants,automaticallyswitchtothenetworksofotheracquirersinthecaseofconnectionfailure.BackedbyUOLDiveo,weareabletoscaleupourserviceswhileretaininghighavailabilityforpeak–volumeoccasionssuchasChristmas,Mother’sDayandBlackFriday.Thishigh-availabilityandcontinuouslydeployedplatformensuresthatallofourclientsareabletooperatewiththelatestfeaturesandthenewestinnovationswithoutanyneedtopatchorupgradetheirsoftware.OurscaleasaUOLgroupcompanyallowsustoestablishfavorablepartnershipswithseveralsuppliers,includingsoftwaredevelopersandhardwaremanufacturers.WeworkwiththesesupplierstocontinuouslytailoroursolutionsandPOSdevicestofittheneedsofourmaintargetmerchants.

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AtDecember31,2018,65%ofthetotalheadcountofPagSegurowasengagedinproductsandengineering.Withourspecializedteamof1,168peoplefocusedondevelopingreliable,scalableandproprietarysystemsandnewproductsandfeatures,weregularlyrolloutinnovativeanddisruptivesolutionsthataretailoredtotheBrazilianmarket.Ourexpenditureonsoftwareandtechnology(includingsalaries)amountedtoR$218.9millionintheyearendedDecember31,2018,R$95.0millionin2017andR$68.6millionin2016.

Westrivetooffernewfeaturesandformatstoimproveourusers’experienceonourplatform.Thisprocessstartsbylisteningtosuggestionsfromourclients.Weholdfocusgroupmeetingsandconductsurveysperiodicallywithregularandhighlyactivecustomerstoobtainfeedbackregardingourproductsandservices,aswellassuggestionsandideasfornewfeatures.

Wetestallnewproductsandfeaturesrigorouslyin-houseandwithpilotgroupsofmerchantsbeforerollingthemout.Onceourinternalteamhasensuredtheyareworkingproperly,wetypicallyrollthemoutfirsttoaselectgroupofcustomersonatrialbasis,listeningtofeedbackandsuggestionsandenhancingthefinaldetailsoftheproductorfeaturebeforerollingouttoallcustomers.Wefrequentlyupdateoursoftwareproductsandfollowaregularsoftwarereleaseschedulewithimprovementsdeployedperiodically,ensuringourmerchantsgetimmediateaccesstothelatestfeatures.

Managingourplatform’ssoftwarearchitectureandhardwareisasimportantasofferingnewproductsandfeatures.Wefocusonoptimizingourprocessesandequipmenttohelpensurethatoursystemsarecapableofhandlingourrapidgrowthinanefficientandcost-effectiveway.

Ourtechnologyinfrastructuresimplifiesthestorageandprocessingoflargeamountsofdata,automatesmanyadministrativetasks,andenablesustodeployandoperateproductsandservicesonawidescale.Ourtechnologyinfrastructureisdesignedtoreducedowntimeintheeventofsystemoutagesorcatastrophicevents,withcontinuityfeatures,systemredundancyandprotectionagainstcyber-securitythreats.Forfurtherinformationonthemeasureswetaketoprotectagainstcyber-securitythreats,see“—ProtectingOurClients.”Westrivetoimproveourtechnologyinfrastructureandplatformcontinuouslyinordertoenhancethecustomerexperienceandtoincreasesecurity,efficiencyandscalability.

Ourresearchanddevelopmentteamfocusesonourongoingpipelineofreliable,scalableandproprietarysystemsandnewproductsandfeaturestailoredtothecurrentBrazilianmarket.Usingourqualifiedproductandservicedesignteamsandresearchanddevelopmentteam,weintendtorolloutaportfolioofnewsolutions,forbothmerchantsandconsumers,basedonmobileapps,furtherstrengtheningourmobile-firstcommitmentandsimplifyingourclients’lives.Weanticipatethatwewillcontinuetodevoteconsiderableresourcestoresearchanddevelopmentinthefutureasweaddnewfeaturesandfunctionalitytoourproductsandservices.Ourmarketischaracterizedbyrapidlychanginganddisruptivetechnologies,aswellasevolvingindustryandregulatorystandards,andweseektoremaininthefrontlineofthesechanges.Webelieveourabilitytoadapttorapidlychangingtechnologies,productsandservicesinanevolvingindustryisthecornerstoneofourfuturesuccess.Forfurtherinformationonthetechnologicalchallengesinourindustry,see“Item3.KeyInformation—RiskFactors—RisksRelatingtoourBusinessandIndustry—Substantialandincreasinglyintensecompetition,bothwithinourindustryandfromotherpaymentmethods,mayharmourbusiness.”

Protecting Our Clients

Trustandsecurityareessentialtosuccessinthedigitalpaymentsmarket.Fraudisaconstantthreat,involvingitemssuchasaccounttakeover,identitytheftandmaliciouscounterpartyactivities.Theabilitytoprotectourclientsfromfinanciallossanddatathefthasbeenkeytoourcompetingsuccessfullyandgrowingourbusinesssustainably,andwebelievesecuritywillcontinuetobeamajorcompetitivefactorinthefuture.Weinvestinprovidingcomprehensiveprotectionforourclientsonourecosystem,focusingonthreemainareas:transactionsecurity;platformsecurity;andcustomerservice.Ourinvestmentsinthisareahavebeenrecognizedbyourcustomersandtheindustry.Forexample,wewererecognizedasthe“Best Company for Consumers ”forelectronicpaymentsinboth2017and2016andforonlinepaymentsin2015byÉpoca magazineandReclame Aqui ,aconsumerprotectionserviceandwererecognizedforclientserviceexcellenceinthefinancialservicescategoryin2015and2017byConsumidor Moderno .

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Transaction Security

Wehavefocusedsinceourlaunchonensuringthesecurityofpaymenttransactionscarriedoutonourecosystem.WebelievewehavebeenapioneerindevelopingtechnologyandexpertiseagainstonlinefraudandchargebacksrelatedtofraudulenttransactionsinBrazil,backedbythereputationofthePagSeguroandUOLbrands.Ourtransactionapprovalratecontinuestoincrease,withratesintheyearendedDecember31,2018beinghigherthanthoseachievedin2017andearlieryears.In2016,wewerenamedtheBrazilianacquirerwiththelowestchargeback-to-salesratiobyVisa.Ournetchargebackratesfortransactionsofsixmonthsoldaveraged0.15%in2018,adeclineof0.3percentagepointsfrom0.18%in2017.Thesenetchargebackratescomparehighlyfavorablywiththe1.0%limitestablishedbythecardschemes.Weachievetransactionsecuritythroughacombinationofantifraudtechnology,thedesignofourplatform,andprotectionprogramsforourclients.

Asisthecasewithanydigitaltransaction,thosethattakeplaceonourdigitalplatformaresusceptibletopotentiallyfraudulentorimpropersales.Weusetwomainprocessestocontrolthisfraudrisk.Thefirstprocessconsistsofmonitoringcreditcard,debitcardandboleto transactionsonarealtimebasis,throughsystemsthatidentifypotentialfraud.Thisprocessapprovesorrejectssuspicioustransactionsatthetimeoftheauthorization,basedonstatisticalmodelsthatarerevisedonanongoingbasis.Thesecondprocess,whichoccursafterapprovalofthetransaction,consistsofareconciliationprocessinwhichPagSeguroBrazilfollowsuponallchargebackswiththecardissuersand,whereappropriate,opensaclaimprocesstoseekreversalofthechargeback.Thisisacomplementaryprocessandincreasesourabilitytoavoidandmanagechargebacks.

Ourantifraudplatformcombinesproprietaryfeatures,suchasinternalriskmodelingandscoringthroughartificialintelligenceandriskassessmenttoolsthatcollectpublicandprivatemarketinformation,aswellasfront-linethird-partysolutionssuchasFeedzai,EmailageandThreatmetrics.Formoreinformation,see“—OurProductsandServices—TheFreePagSeguroDigitalAccount—ThePagSeguroEcosystem—AdvancedBuilt-InFunctionalitiesandValue-AddedServicesandFeatures—AntifraudPlatform.”

Thedesignofourplatformalsoassistsinpreservingdataconfidentiality.ConsumerscanmakepaymentsthroughPagSegurowithoutsharingsensitivefinancialinformationsuchascreditcardordebitcarddetailswiththemerchant.TransactionsonPagSeguroaretokenizedandpaymentauthorizationcredentialsarekeptseparatedfromaccountholder’sinformation,helpingustobetterdetectandpreventfraudwhenfundsenter,flowthroughandexitourecosystem.Inaddition,theabilitytomakeandacceptdigitalpaymentsincreasespersonalsecurityinin-persontransactionsbyreducingtheneedforbothconsumersandmerchantstocarrycash.

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Ourprotectionprogramsguardourclientsfromlossthroughfraudandcounterpartynon-performance.WebelievethehistoryandcriticalmassofourconsumerdatabaseallowsustoprovidequickerandmorereliabletransactionapprovalwhencomparedwithsmallerormorerecentlyestablisheddigitalpaymentsprovidersinBrazil.Ourprotectionprograms,whichapplytoonlinepurchasetransactionscompletedthroughourecosystem,aimtoreassureconsumerstheconfidencethattheywillonlyberequiredtopayiftheyreceivetheproductintheconditionasdescribed,andmerchantstheconfidencethattheywillreceivepaymentfortheproductthattheyaredeliveringtothecustomer.

Ourmerchantprogramprotectsagainstlossesforchargebacksrelatedtofraudulenttransactionsandsimilarclaimsonsubstantiallyallofouronlinetransactions.Achargebacksituationmayalsooccurifthecardusedwasunauthorizedorifthereisanon-fraudulentcardholderclaim.Ifachargebackclaimisvalid,thecardissuersendsthetransactionbacktothemerchantandchargesthemerchanttheamountofthequestionedsale.Ifthemerchantcannotremedythechargeback,itisthemerchant’sloss.Iftherearenotsufficientfundsinthemerchant’saccount,thechargebackamountischargedtotheacquirer.

Forconsumers,weprovideprotectionagainstlossesunderwhichtheycansubmitaclaimifthereisaproblemwithapurchase.TheconsumercanfileaclaimthroughourPagSegurowebsite,inwhichcasetheconsumerandthemerchantcanseektoresolvetheclaimtogether.Iftheycannotresolvetheclaimwithinsevendaysaftertheclaimisfiled,theconsumerhasupto20daysafterfilingtheclaimtorequestourassistance,inwhichcaseweactasmediatortohelpresolvetheissuewiththemerchant.Ifaconsumerdoesnotrequestmediationwithin20daysafterfilingaclaim,theclaimwillberesolvedinfavorofthemerchant.

Platform Security

Thearchitectureofourproprietaryend-to-endpaymentsplatformcoupledwiththird-partyfront-linesolutionsarekeytoourabilitytoprovideconsumersandmerchantswithcontinuityandsecurityintheirtransactions.Throughournumerouscash-inandcash-outoptionsweareabletocollectdatafromourclients,whichallowsustosaveimportantinformationoncustomersforpurposesoftheapprovaloffuturetransactions.Themultiplelayersofprotectionincludedinourplatformhelpensurecontinuityaswellasaddressingthecybersecurityrisksdiscussedin“—TransactionSecurity”above.

Wehavedevelopedintuitiveuserinterfaces,customertoolsandtransactionprocessinganddatabaseandnetworkapplicationsthathelpouruserscompletetransactionsreliablyandsecurely,bothonourplatformandonmerchantsitesintegratedwithPagSeguro.Ourtechnologyinfrastructuresimplifiesthestorageandprocessingoflargeamountsofdata,facilitatesthedeploymentandoperationoflarge-scaleglobalproductsandservices,andautomatesadministrativetasks.Thistechnologyinfrastructurehasbeendesignedaroundindustry-standardarchitecturestoreducedowntimeintheeventofoutagesorcatastrophicoccurrences.Weworkhardtoimproveourtechnologyinfrastructurecontinuouslyinordertoenhancecustomerexperienceandincreaseefficiency,scalabilityandsecurity.Wealsomakeuseofwell-knownsecurityprotocolsandsolutionstosecureuserdata,including,amongothers:EV-SSLcertificate,multipledataencryptiontechniques,intrusiondetection(IPS/IDS),applicationfirewalls(WAF),Anti-DistributedDenial-of-Service(Anti-DDos),DataLossPrevention(DLP),2-factorauthenticationandencryptedcommunications.Wealsoholdthefollowingcertifications:PINsecurity;MasterCardandVisamerchantacquiringhost;MasterCardterminalintegrationprocess,orM-TIP;Visaacquirerdevicevalidationtoolkit,orADVT;MasterCardend-to-enddemonstrationservices,orETED;PCIDataSecurityStandard,orPCI-DSS;andEuropay,MasterCard,andVisa,orEMV,Levels1and2.OurdatacentersarealsocertifiedundertheInternationalOrganizationofSecuritization,orISO,standards9001,20000and27001.Wealsoperformsecuritypenetrationtestsonaregularbasisandapplytop-mostsecuritysolutionsforcodeandapplicationscanning(SAST/DAST).Forinformationonnewdataprotectionregulations,see“Item3A.KeyInformation—RiskFactors—RisksRelatingtoOurBusinessandIndustry—Ourbusinessissubjecttocyberattacksandsecurityandprivacybreaches.”

Ourplatform’sarchitectureenablesustoconnectallpartiesregardlessofwhetherthetransactionisoccurringatatraditionalphysicallocation(suchasinsideastore),anon-traditionalphysicallocation(suchasinapark),oronline,andwhetherthroughamobileorfixed-linedevice.Webelievethatmobiledevices,inadditiontobeingthefutureofe-commerce,createopportunitiestomakedigitalpaymentssafer.Forexample,weareabletouselocationdatafrommobiledevicestoreduceriskforourclients.

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Customer Service

Webelieveinexcellenceincustomerservice.Byhelpingourclientsnavigateourapplicationsandansweringtheirquestionsquickly,wehavebeenabletogrowrapidlyandtobuildtrustwithourclients,whichhasincreasedtheirloyaltyandenhancedourreputation.

Weprovideourcustomerswithanarrayofdigitalself-servicefeaturesincludingreal-timeonlinechat,chatbots,customerservicee-mailandacustomerservicehotline.OurcustomerserviceoperationsareprovidedbyacombinationofPagSeguroemployeesandoutsourcedproviders,whichtogethermakeupapproximately1,700full-timeequivalent,orFTE,positions.

Wemaintainservicequalitybyplacingemphasisoncarefulselectionofourcustomerservicepersonnelandregularmonitoringofemployeeperformance.Ouremployeesaretrainedtohavein-depthproductandserviceknowledge,professionalserviceattitudesandcommunicationskillstobestaddresscustomerneedsandinquiries.

Sales and Marketing

OurmarketingstrategyisdesignedtogrowourplatformbybuildingandmaintainingthebrandrecognitionandtrustofthePagSeguroandUOLbrands,attractingnewusersandgeneratingmorefrequentactivitybyourexistingusers.OurmarketinginitiativesaimingtorecruitmerchantstoourecosystemcurrentlyfocusonourPOSdevices,webcheckoutsolutionsandotheronlinepaymentsolutions.Webelievethatintroducingourdigitalpaymentsolutionstomerchantswhoarenotyetourclientsisthemostefficientandcost-effectivestrategytosustainourgrowthamongbothmerchantsandconsumers,creatinga“networkgrowtheffect.”Theadvantagesofourdigitalpaymentsolutionsformerchantsdrivegrowthintheirbusinesses,andtheadvantagesofourdigitalpaymentsolutionsforconsumersleadthemtoprefermerchantswhoofferthesesolutions,resultingintheacquisitionofnewclientsthroughword-of-mouthrecommendationsbybothmerchantsandconsumers.

Ourexistingclients,manyofwhomusePagSeguroasanexclusivepaymentmethod,enableustogrowourmerchantbaserapidlyandorganically.EachtimeaconsumerwhohasnotyetregisteredwithPagSegurovisitsourwebsiteorpaysamerchantusingoneofouronlineorin-appcheckoutsolutions,theconsumerisinvitedtoopenafreePagSegurodigitalaccounttomakehisorhernextpurchasewithPagSeguroeasyandseamless.

WestrivetopositionPagSeguroproductsandservicesintopofmindandpresentthemasadesirable,easyandsecuremeanstoacceptandmakepaymentsinBrazil,whileaccompanyingtheconsumerthroughoutthepurchasingprocess,fromgeneralbrandawarenessthroughtoactualpurchaseoraccountregistration.Asadigitalcompany,andwiththesupportofUOL’saudience,wecontinuetobuildandmaintainbrandrecognitionandawareness,whilegeneratingdemandforourproductsandservicesthroughavarietyofmarketingcampaigns,including:

• traditionalofflinemedia:televisionadvertisementsandmerchandising(broadcastandcable),radio,movietheaters,theprintedpress,festivalsandevents,anddisplaymediasuchasbillboards,urbandigitaltimeandweatherdisplays,andairportandbusstationdisplays;

• traditionalonlineadvertising:displaymedia(includingbanners,richmedia,interstitials,videosandnativeads)onavarietyofonlineplatforms,suchaspremium

websites,portals,videoplatformssuchasYouTube,socialmediaplatformssuchasFacebookandInstagram,mobileapps,e-mailmarketingandaffiliatesprograms;and

• search:wehaveexpertiseinpositioningourproductsinpreferentialplacementsonsearchplatformsdisplayedondesktops,tabletsandsmartphones,using

specificinitiativessuchaspaidsearch(SearchEngineMarketing,orSEM,whichincludesbidmanagementtoolsandkeywordsanalysis)andnaturalororganicsearch(SearchEngineOptimization,orSEO,whichincludeswebsiteoptimization).

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Ourmarketingdepartmentdevelopsalltheseonlineandofflinemarketingstrategiesusingsingleintegratedconcepts,sothatourcampaignsincludekeyvisualcharacteristicsandconsistentmessagesacrossallchannels.Inlinewithourgrowthstrategy,mostofourcampaignsfocusonMicro-MerchantsandSMEs,withmessagesthathighlightoureasy,safeandhassle-freewayofacceptingpayments,suchas“asingleonlinecontractthatallowsyoutoacceptmorethan35cash-inmethods”and“freeyourselffromPOSrentalfees.”Weregularlycompareourpricingtoourcompetitors’andpointouttheadvantagesofourproductsandservicesforneworgrowingbusinesses.Atthesametime,wealsoadvertisevalue-addedproductsandservicestargetedatlargermerchantsandconsumersfromhigherincomesectors,includingourbusinessmanagementtoolsandcommercialautomationsolutions.

WebelievethatourassociationwiththeUOLgroupbringsexperienceandcompetitiveadvantagesindesigning,negotiatingandpurchasingadvertisingspace.

Throughourongoingfocusonexpandingourpaymentsolutionsandincreasingourbrandrecognition,thestrengthofourbrand,productsandserviceshasbeenrecognizedinanumberofawards,including:

• Recognizedasthe8thMostInnovativeCompanyinLatinAmericabyFast Company in2019;

• RecognizedforconductingtheInitialPublicOfferingoftheYearbyLatinFinance andDealoftheYearinLatinAmericabyIFR in2018;

• RecognizedasBestFintechinCapitalMarketsbyLatinFinance in2018;

• RecognizedashavingthemosteasilymemorizablecommercialinApril2017andthecommercialthatattractedthemostattentionin2018byForebrain,aconsumeropinionsresearchcompany;

• Namedasthe“Best Company for Consumers ”forelectronicpaymentsin2018,2017and2016andforonlinepaymentsin2015byÉpoca magazineandReclame Aqui ,aconsumerprotectionservice;

• Recognizedfor“Best Payment Processing ”in2015byAfiliados Brasil ,amarketingcompany;

• RecognizedasthebestcompanyinitsindustryintermsofclientserviceexcellencebyConsumidor Moderno Awardin2015and2017;and

• RecognizedforleadingperformanceinBrazilianretailbyPrêmio BR Week in2016.

Asfurthersupportoftheincreasingstrengthofourbrand,accordingtoGoogleTrends,andasillustratedbythebelowchart,asofDecember2018,“PagSeguro”and“Moderninha”haveexperiencedrapidgrowthinsearchvolumeoverthepastsixyears(orsincetheMarch2015launch,inthecaseofModerninha)whencomparedtotheotherdigitalpaymentsolutionsinBrazil(theverticalaxisinthebelowchartrepresentstherelativenumberofGooglesearchesforeachname).AccordingtoGoogleTrends,inFebruary2019,forevery95Googlesearchesfortheterms“Pagseguro,”therewere33fortheterm“MercadoPago”and18fortheterm“PayPal.”

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Weuseourproprietarytoolsandmarketmeasurementsystemsdevelopedbythirdparties,suchasAdobeandGoogle,todeepenourknowledgeaboutconsumerbehaviorand,consequently,optimizeourmarketingeffortsandexpendituresbycustomizingoursalesmessagestomakeiteasierforuserstounderstand,findandbuyourproductsandservices.

Ourmarketingstrategyiscustomizedandwemanageourdesktopsites,mobilewebsitesandmobileapplicationsdifferently,eachoptimizedforthescreenstheyfitandthewayourcustomersusethem.

Inadditiontoouronlineandofflineadvertisingeffortsdescribedabove,wedevelopedabroadrangeofmarketingandsaleschannelstoaccesspotentialclients,including:

• ourownsalesteam,mainlyfocusedonsalesofourPOSdevicesandonlineproductsandsolutionstolargerclients,aswellasonprovidingongoingsupporttothoseclients;

• partnercompaniesthatdistributePagSegurodevicesandsolutionstotheircustomerbase(mostlypointofsalesolutions’companies);

• thirdpartieshiredasindependentsaleorganizationstodistributeourPOSdevicesacrossBrazil;

• onlinestoreplatformsandwebdevelopmentcompanies,whichintegratePagSeguroasanexclusiveorpreferredpaymentmethodtotheirclients;and

• third-partycallcenterserviceproviderhiredtoanswercalls,e-mailsandchatinquiriesfromourclientsandprospects,andtosellourdevicesandsolutions.

Organizational Structure

WeareanexemptedcompanywithlimitedliabilityincorporatedunderthelawsoftheCaymanIslandswiththelegalnamePagSeguroDigitalLtd.andareasubsidiaryofUniversoOnlineS.A.,orUOL.OurprincipalexecutiveofficeislocatedatAvenidaBrigadeiroFariaLima,1384,01452-002SãoPaulo–SP,Brazilandourtelephonenumberis+55(11)3038-8127.Ourinvestorrelationsofficecanalsobereachedat+55(11)3038-8127andourwebsiteaddressiswww.pagseguro.uol.com.br.Informationprovidedonourwebsiteisnotpartofthisannualreportandisnotincorporatedbyreferenceherein.

UOLisaBraziliansociedade por ações thatwasfoundedin1996.UOLisBrazil’slargestInternetcontent,digitalproductsandservicescompany.ItsmajorityshareholderisGrupoFolha,oneofthelargestmediagroupsinBrazilandtheowneroftheSãoPaulodailynewspaperFolha de S. Paulo ,Brazil’smost-readnewspaperaccordingtotheCirculationVerifierInstitute(Instituto Verificador de Circulação, orIVC).GrupoFolhaalsoincludesTransfolha,oneofthethreetopeCommercelogisticscompaniesinBrazilintermsofordersduring2017,basedondatafromEbit;Plural,thelargestprintingcompanyinLatinAmericanintermsofrotateoffsetprintersduring2015,accordingtoABRO;UOLHost,thesecondlargestBrazilianwebhostingcompanyintermsof“br”domainnamesinMay2017,accordingtoHostmapperBrasil;andUOLDiveo,thelargestcloudandITinfrastructureservicescompanycontrolledbyBrazilianshareholdersintermsofdatacenterareaasofDecember11,2017,accordingtopubliclyavailableinformation.

WecarryoutouroperationsprincipallythroughourBrazilianoperatingcompany,PagSeguroInternetS.A.,aBraziliansociedade por a ç õ es .

PagseguroInternetS.A.carriesoutmostoperationsdirectly,andalsohassevensubsidiaries.Thefollowingsubsidiariesarewholly-owned:(i)R2Tech,organizedinBrazil,whichmanagesourreconciliationproductand(ii)Tilix,organizedinBrazil,whichprovidessoftwaredevelopmentformanagingpaymentsolutionsforB2CandB2B.Weacquired51%ofR2Techin2017andtheremaining49%inFebruary2019.WeacquiredTilixin2018.Thefollowingsubsidiariesaresubstantiallywholly-owned:(i)BoaCompraTecnologiaLtda.,organizedinBrazil,whichoperatesouronlinegamingandcross-borderdigitalservicesinLatinAmerica,Portugal,SpainandTurkey;(ii)NET+PhoneTelecomunicaçõesLtda.,organizedinBrazil,whichhandlespurchasesandsalesofourPOSdevices;(iii)BCPSOnlineServices,Lda,orBCPS,organizedinPortugal,whichservesasBoaCompra’shubinPortugalandhandlespartofitsaccountmanagement;and(iv)BIVA,organizedinBrazil,whichisanonlineplatformthatfacilitatespeer-to-peerlending.WeacquiredBCPSin2017.

InadditiontoouroperationscarriedoutbyPagSeguroInternetS.A.,onJanuary4,2019,weacquired100%ofBancoseguro,organizedinBrazil,throughourwholly-owneddirectsubsidiaryBSHolding.Bancoseguroholdsalicensetoprovidefinancialservices.Weexpectthatthisacquisitionwillallowustoexpandourproductandservicesoffering.

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InNovember2017wesetupaFIDCthroughwhichwemayraisedebttofinancethegrowthofourbusiness.TheFIDCiscontrolledbyPagSeguroBrazilandraisescapitalbyissuingseniorquotasinthefundtooutsideinvestors,whoreceiveinterestontheseinvestmentsfromtheFIDC.Asofthedateofthisannualreport,theFIDCisratedAA+byFitchRatings.InaccordancewithBrazilianlaw,theFIDCmayusebetween50%and100%ofitscapitaltopurchasemerchantreceivables.TheFIDCusesthecapitalitraisestofinancetheearlypaymentofreceivablesfeature.OurremunerationfromtheearlypaymentofreceivablesfeaturecontinuestobereflectedasFinancialincomeinourconsolidatedfinancialstatements.WedonotexpecttheestablishmentoftheFIDCtoimpactthediscountratewechargeinconnectionwiththeearlypaymentofreceivablesfeatureortheexpensesweincurtoobtainearlypaymentofnotereceivablesfromcardissuersandacquirers.TheFIDCisacommonstructureforBrazilianpaymentproviderswhoofferearlypaymentofmerchants’receivables.Inadditiontobroadeningourfinancingoptionsforthisfeaturegenerally,itreducescertainregulatoryconstraintssincetheFIDCstructureisspecificallydesignedforthisfinancingactivityunderBrazilianlaw,andwealsoexpectitwillallowustodefercertaintaxobligations.Forfurtherinformationregardingourearlypaymentofreceivablesfeature,see“—OurProductsandServices—TheFreePagSeguroDigitalAccount—ThePagSeguroEcosystem—Earlypaymentofinstallmentreceivables.”

Thechartbelowshowsourcorporatestructure,includingourwholly-ownedandmajorityownedsubsidiaries,asofthedateofthisannualreport:

(*) Including0.15%consistingoftreasurysharesandsharesissuedundertheLTIP,representinglessthan1%oftheoutstandingshares.

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Competition

TheBrazilianpaymentsindustryishighlycompetitiveandfast-changing.WecompeteintheonlinedigitalpaymentsmarketandinthePOSpaymentsmarket.

Intheonlinedigitalpaymentsmarket,wecompeteprimarilywithinternationalonlinepaymentservices,suchasPayPal,andregionalplayers,suchasMercadoPagofromMercadoLibreandMoIP/Wirecard.InthePOSpaymentsmarket,wecompeteprimarilywithinternationalplayers,suchasSumUp/Payleven,andregionalplayers,suchasMercadoPagofromMercadoLibre.OurbusinessmodeldiffersfromthemodelusedbytheincumbentBrazilianproviders,suchasCielo,Rede,GetNetandStone,whogenerallyoffertheirPOSdevicesunderlong-termmonthlyrentalcontractswithpricingthatworksouttobemoreexpensivethanthemonthlyinstallmentsforthepurchaseofourPOSdevices.Theseincumbentprovidersalsotargetlargerclients,sincetheirbusinessmodelresultsinmoreexpensiveproductsandservices,whileourprimarytargetcustomersarecurrentlyMicro-MerchantsandSMEs,whoareunderservedbyincumbentpaymentprovidersandlargefinancialinstitutionsinBrazil.

Likethedigitalpaymentsindustryingeneral,wealsocompetewithothermeansofpayment,bothdigitalandtraditional,includingcash,checks,moneyordersandelectronicbankdeposits.

Amongourpeers,wearetheonlyfinancialtechnologyproviderinBrazil,however,whosebusinessmodelcoversallofthefollowingfivepillars:

• Multipledigitalpaymentsolutions

• In-personpaymentsviaPOSdevicesthatweselltoclients

• Freedigitalaccounts

• Issuerofprepaidcardstoclientsforspendingorwithdrawingaccountbalances

• Operatingasanacquirer

Weseektodifferentiateourselvesfromourcompetitorsprimarilyonthebasisofthisend-to-endcoverageaswellasourfocusontransactionsecurity,oneaseofuse,andonthemobileenvironment.Whilecompetitivefactorsandtheirrelativeimportancevarybasedonthesize,industryandfocusofeachmerchant,webelievethefollowingfactorsarekeytocompetitioninthedigitalpaymentsmarketinBrazil:

• anecosystemthatattracts,retainsandengagesmerchantsandconsumers;

• speedandsimplicityofthecustomeronboardingprocess;

• consumerconfidenceintransactionsecurity,includingtheabilityforconsumerstomakepaymentswithoutsharingtheirfinancialinformationwiththemerchantorcounterparty;

• POSdeviceswithaffordablepricesandnorentalfees;

• qualityofcustomerservice;

• breadthanddepthoffeaturesandfunctionality;and

• brandrecognitionandreputation.

Forinformationonrisksrelatingtoincreasedcompetitioninourindustry,see“Item3.KeyInformation—RiskFactors—RisksRelatingtoourBusinessandIndustry—Substantialandincreasinglyintensecompetition,bothwithinourindustryandfromotherpaymentmethods,mayharmourbusiness.”

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Insurance

Wehaveinsurancepolicieswithreputableinsurersinamountsthatourmanagementconsiderstobesufficienttocoverpotentiallossesarisingfromeventsthatmayaffectourassets,aswellasforanydamagesthatwemayhavetopaytothirdpartiesduetoourbusinessactivities.Weseekcoverageagainstrisksthatareappropriateforourbusinessactivitiesandourscale,takingintoaccountthenatureofourbusiness,therisksweareexposedto,marketpracticesinourindustry,andadvicefromourinsuranceconsultants.Wecurrentlyhavethefollowinginsurancepolicies,whichwerecontractedbyourcontrollingshareholder,UOL,andlistourcompanyand/oroursubsidiariesasco-beneficiaries,asapplicable:

• insurancepolicyforcoverageofdamagestoproperty,businessinterruptionandlostprofits,whichexpiresonDecember10,2019andhasacoveragelimitofR$1,819.0million;

• D&Oinsurance,contractedforbyUOL,whichexpiresonMarch1,2020andhasacoveragelimitofUS$15million;

• warehouseandstoragefacilityinsurancepolicy,whichexpiresonNovember17,2019andhasacoveragelimitofR$105million;and

• generalliabilityinsurance,whichcoversdamageawardspaidbyusinconnectionwithtortclaims.ThispolicyexpiresonDecember31,2019andhasacoveragelimitofR$15million.

Wereviewourcoveragelimitseveryyearwhenthepoliciesarerenewed,toensurethattheyremainconsistentwiththevalueofourassetsandtheliabilitieslinkedtoourbusiness.Wedonotcurrentlyanticipateanydifficultiesinrenewinganyofourinsurancepolicies.

Whilewebelieveourinsurancecontractsreflectstandardmarketpractices,therearecertaintypesofrisksthatmaynotbecoveredbyourpolicies(suchaswar,terrorism,actsofGodandforcemajeure,liabilityforcertainharmorinterruptionofcertainbusinessactivities).Therefore,ifanyoftheseuncoveredeventsoccur,wemayberequiredtoincuradditionalcoststoremedythesituation,reconstituteourassetsorindemnifyourcustomers,whichmayadverselyaffectus.Inaddition,evenifariskiscoveredbyourpolicies,wecannotassureyouthatanypaymentfromourinsurerswillbesufficienttocovertheloss.

Seasonality

Weoperateinasomewhatseasonalindustry,whichtendstoexperiencerelativelyfewertransactionsinthefirstquarteroftheyear,increasedactivityastheyear-endholidayshoppingseasoninitiates,andfewertransactionsaftertheyear-endholidays.Whilewehavenotexperiencedsignificantseasonalityinourresultsatthedateofthisannualreportduetoourongoinggrowth,thiscouldchangeinthefuture.Foradditionalinformation,see“Item3.KeyInformation—RiskFactors—RisksRelatingtoOurBusinessandIndustry—Ourquarterlyresultsofoperationsandoperatingmetricsmayfluctuateandareunpredictableandsubjecttoseasonality,whichcouldresultinthepriceofourClassAcommonsharesbeingunpredictableordeclining.”

Regulation

Regulation of the digital payments industry in Brazil

OuractivitiesinBrazilaresubjecttoBrazilianlawsandregulationsrelatingtodigitalpayments.LawNo.12,865/2013,whichtookeffectonOctober9,2013,establishesthefirstsetofrulesregulatingthedigitalpaymentsindustrywithintheoverallBrazilianPaymentSystem(theSistema de Pagamentos Brasileiro, orSPB),whichreferstoalltheentities,systemsandproceduresrelatedtotheclearingandsettlementoffundstransfer,foreigncurrencyoperations,financialassets,andsecuritiestransactionsinBrazil).Thislawcreatedtheconceptsofpaymentschemes(arranjos de pagamento ),paymentschemeowners(instituidores de arranjos de pagamento )andpaymentinstitutions(instituições de pagamento ).

LawNo.12,865/2013gavetheCentralBankandtheNationalMonetaryCouncil(theConselho Monetário Nacional ,orCMN)powerstoregulateentitiesinvolvedinthedigitalpaymentsindustry.Thesepowerscovermatterssuchastheincorporationandoperationoftheseentities,riskmanagement,theopeningofpaymentaccounts,andthetransferoffundstoandfrompaymentaccounts.AfterenactmentofLawNo.12,865/2013,theCMNandtheCentralBankcreatedaregulatoryframeworkregulatingtheoperationofpaymentschemesandpaymentinstitutions.Originally,theframeworkconsistedofResolutionsNo.4,282and4,283andCircularsNo.3,680,3,681,3,682and3,683,allofwhichwerepublishedonNovember4,2013andbecameeffectiveonMay5,2014,andoCircularNo.3,685,publishedonMarch26,2018,asamendedsincethatdate.

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Payment Schemes

Apaymentscheme,forBrazilianregulatorypurposes,isabodyofrulesandtechnicalstandardsfortheexecutionofpaymenttransactionsthroughapaymentsystem.Theregulationsapplicabletopaymentschemesdependoncertainfeatures,suchasthenumberofusersandtheannualcashvalueoftransactionshandledbythepaymentscheme:

• PaymentschemesthatexceedcertainthresholdsareconsideredtoformpartoftheSPBandrequireauthorizationbytheCentralBank.

• PaymentschemesthatoperatebelowthesethresholdsarenotconsideredtoformpartoftheSPBandarethereforenotrequiredtoobtainauthorizationfromthe

CentralBank,althoughtheyarerequiredtoreportcertainoperationalinformationtotheCentralBankonanannualbasisandtheCentralBankcanissueanorderrequiringthesepaymentschemestoapplyforauthorizationtobepartoftheSPBonacase-by-casebasis.

• CertaintypesofpaymentschemeshavespecificexemptionsfromtherequirementtoobtainauthorizationfromtheCentralBank.Thisapplies,forexample,to

limited-purposepaymentschemes,paymentschemessetupbygovernmentalauthoritiesandpaymentschemesrelatedtoemployeebenefitsestablishedbylaw,suchasmealvouchercards.

Payment Scheme Owners

Paymentschemeowners,forBrazilianregulatorypurposes,arethelegalentitiesresponsibleformanagingtherules,proceduresandtheuseofthebrandassociatedwithapaymentscheme.CentralBankregulationsrequirethatpaymentschemeownersmustbeincorporatedinBrazil,musthaveacorporatepurposecompatiblewithpaymentsactivities,andmusthavethetechnical,operational,organizational,administrativeandfinancialcapacitytomeettheirobligations.Theymustalsohaveclearandeffectivecorporategovernancemechanismsthatareappropriatefortheneedsofpaymentinstitutionsandtheusersofpaymentschemes.

Payment Institutions

PaymentinstitutionsareclassifiedintothefollowingtypesunderBrazilianregulations,asperCircularNo.3,885,whichreplacedformerCircularNo.3,683:

• Issuersofelectroniccurrency(i.e.,e-money,generallyintheformofprepaiddeposits):thesepaymentinstitutionsmanageprepaidpaymentaccountsfor

cardholdersorend-users.Theycarryoutpaymenttransactionsusingelectroniccurrencydepositedintothesepre-paidsuchaccounts,andconvertthedepositsintophysicalorbook-entrycurrencyorviceversa.

• Issuersofpost-paidpaymentinstruments(principallycreditcards):thesepaymentinstitutionsmanagepaymentaccountswherethecardholderorend-userintendstomakepaymentonapost-paidbasis.Theycarryoutpaymenttransactionsusingthesepost-paidaccounts.

• Acquirers:thesepaymentinstitutionsdonotmanagepaymentaccounts,butenablemerchantstoacceptpaymentinstrumentsissuedbyapaymentinstitutionor

byafinancialinstitutionthatparticipatesinapaymentscheme.Theyparticipateinthesettlementprocessforpaymenttransactionsbyreceivingthepaymentfromtheissueroftheprepaidorpost-paidinstrument,andsettlingwiththemerchant.

ApaymentinstitutionmustbeincorporatedinBrazilandmusthaveacorporatepurposethatiscompatiblewithpaymentsactivities.OnlypaymentinstitutionsthatoperateabovecertainthresholdsarerequiredtoobtainauthorizationfromtheCentralBankinordertooperate.TheCMNandCentralBankregulationsapplicabletopaymentinstitutionscoverawidevarietyofissues,includingpenaltiesfornoncompliance;thepromotionoffinancialinclusion;thereductionofsystemic,operationalandcreditrisks;reportingobligations;andgovernance.

Theregulationsapplicabletopaymentinstitutionsalsocover“paymentaccounts”(contas de pagamento ),whicharetheend-useraccounts,inregistered(i.e.,book-entry)form,whichareopenedwithpaymentinstitutionsthatareissuersofprepaidorpost-paidinstrumentsandusedforcarryingouteachpaymenttransaction.CircularNo.3,860/2013classifiespaymentaccountsintotwotypes:

• Prepaidpaymentaccounts:wherethefundshavebeendepositedintothepaymentaccountinadvanceoftheintendedpaymenttransaction.

• Post-paidpaymentaccounts:wherethepaymenttransactionisintendedtobeperformedregardlessofwhetherornotfundshavebeendepositedintothepaymentaccountinadvance.

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Inordertoprovideprotectionfrombankruptcy,LawNo.12,865/2013requirespaymentinstitutionsthatareissuersofprepaidelectroniccurrencytosegregatethefundsdepositedinprepaidpaymentaccountsfromtheirownassets.Inaddition,withrespecttoprepaidelectroniccurrency,thepaymentinstitutionmustholdaportionofthefundsdepositedintheprepaidpaymentaccountincertainspecifiedinstruments:either(i)inaspecificaccountwiththeCentralBankthatdoesnotpayinterest;or(ii)infederalgovernmentbondsregisteredwiththeSELIC.Theportionoftheprepaidelectroniccurrencythatmustbeheldinthisformiscurrently100%.

PagSeguro Brazil’s Regulatory Position

InDecember2014,PagSeguroBrazilappliedtotheCentralBankforthefollowingauthorizations:

1. Authorizationasapayment scheme owner ofa“closed-loopdomestic”paymentscheme,formingpartoftheSPB.ThisapplicationrelatestothePagSegurodigitalaccount,whichisaprepaidaccountavailabletoourcustomers.TheapplicationrelatestoourrulesapplyingtothePagSegurodigitalaccountandourbrand.

2. Authorizationasapayment institution ,asanissuer of prepaid electronic money .ThisapplicationrelatestothePagSegurodigitalaccountandtoourissuanceofPagSeguroelectroniccurrencyandprepaidcards.TheapplicationregardingthePagSegurodigitalaccountrelatestoourrulesandourbrand,andtheapplicationregardingourprepaidcardsrelatestothethird-partypaymentschemeswithinwhichthecardsareissued.

3. Authorizationasapayment institution ,asanacquirer .

TheseauthorizationswereformallyapprovedonOctober17,2018.

PagSeguroBrazilisalsoapayment scheme owner ofa“closed-loopdomestic”paymentschemenotformingpartoftheSPB,whichrelatestopeer-to-peertransfersbetweenaccountsopenedbyourclientswithinthePagSegurodigitalaccount,usingourrulesapplyingtothePagSegurodigitalaccountandourbrand.SincethispaymentschemedoesnotformpartoftheSPBitdoesnotcurrentlyrequireCentralBankauthorization;however,wearerequiredtoreportcertainoperationalinformationregardingthisschemetotheCentralBankonanannualbasis,suchasthenumberofusersandtheannualcashvalueofourpeer-to-peertransfertransactions.IfthesenumbersorcertainotheroperationaldataexceedtherelevantCentralBankthresholdsinthefuture,wewillalsoberequiredtoapplyforCentralBankauthorizationforthispaymentscheme.

PagSeguroBrazilalsoappliedtotheCentralBankinFebruary2019forauthorizationtoconductactivitiesasapayment institution inordertoactasanissuerofpost-paid cards withinthird-partypaymentscheme.ThisauthorizationwasformallyapprovedonMarch16,2019.

LawNo.12,865/2013prohibitspaymentinstitutionsfromperformingactivitiesthatarerestrictedtofinancialinstitutions,whichareregulatedbyLawNo.4,595/1964.ThereissomedebateunderBrazilianlawastowhetherprovidingearlypaymentofreceivablestomerchantscouldbecharacterizedas“lending,”whichisanactivitythatisrestrictedtofinancialinstitutions.Similarly,thereissomedebateastowhetherthediscountratesapplicabletothisearlypaymentfeatureshouldbeconsideredas“interest,”inwhichcasethelimitssetbytheBrazilianUsuryLawwouldapplytotheserates.

FortransactionsthatformpartoftheBrazilianfinancialsystem,financialinstitutionsmaysetinterestratesfreely,providedthattheyarenotexcessiveforconsumers.FortransactionsthatdonotformpartoftheBrazilianfinancialsystem,historically,theBrazilianUsuryLaw(Decree-LawNo.22,623/1933)cappedinterestratesat12%peryear.Subsequently,theBrazilianCivilCode,whichreplacedtheUsuryLaw,cappedinterestratesattwotimestheinterestratesapplicabletotheNationalTreasury(FazendaNacional ),whichiscurrentlytheSELICrate(althoughthereissomelegaldebateastowhethertheBrazilianCivilCodehaseffectivelyreplacedtheoriginalBrazilianUsuryLaw).Asaresult,ifthediscountratethatwechargemerchantsforearlypaymentoftheirreceivablesisconsideredtobe“interest,”itwouldbecappedattwotimestheSELICrate.ThislimitationismitigatedbytheFIDCthatweusetofinanceourearlypaymentofreceivablesfeature.

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IfwefailtocomplywiththerequirementsoftheBrazilianlegalandregulatoryframeworks,wecouldbepreventedfromcarryingoutourregulatedactivities,wecouldbe(i)requiredtopaysubstantialfines(includingpertransactionfines)anddisgorgementofourprofits,(ii)requiredtochangeourbusinesspracticesor(iii)subjectedtoinsolvencyproceduressuchasaninterventionbytheCentralBankandtheout-of-courtliquidationofPagSeguroBrazil.Wecouldalsobesubjecttoprivatelawsuits.Foradditionalinformation,see“Item3.KeyInformation—RiskFactors—RisksRelatingtoOurBusinessandIndustry—Ourbusinessissubjecttoextensivegovernmentregulationandoversightandourstatusundertheseregulationsmaychange.Violationoforcompliancewithpresentorfutureregulationcouldbecostly,exposeustosubstantialliabilityandforceustochangeourbusinesspractices,anyofwhichcouldseriouslyharmourbusinessandresultsofoperations.”

TheCentralBankalsoregulatesourinternationaltransfersoffundsunderforeignexchangeregulations.Compliancewiththeserulesismandatoryandanyfailuretocomplymayresultinpenaltiesagainstus.

TheCentralBank’sregulationsalsoallowpaymentschemestosetadditionalrulesforentitiesthatusetheirbrands.Sinceweparticipateinthesethird-partypaymentschemes,wemustcomplywiththeirrulesinordertocontinueacceptingpaymentsfrompaymentinstrumentsbearingtheirbrands.

Anti-Money Laundering Rules

Wecomplywithallanti-moneylaundering,orAML,rulesapplicabletousandhaveimplementedpoliciesandprocedurestoreportsuspiciousactivitiestotheauthorities,includinganysuspectedterrorismfinancingandotherpotentiallyillegalactivities.

OuractivitiesinBrazilaresubjecttoBrazilianlawsandregulationsrelatingtoanti-moneylaundering,orAML,terrorismfinancingandotherpotentiallyillegalactivities.Theserulesrequireustoimplementpoliciesandinternalprocedurestomonitorandidentifysuspicioustransactions,whichmustbedulyreportedtotherelevantauthorities.Wehaveimplementedalltherequiredpoliciesandinternalprocedurestoensurefullcompliancewiththeserulesandregulations,includingstructuringariskandfrauddivisionledbyariskofficer.Ouremployeesaretrainedandinformedofourpoliciesandinternalproceduresandtheircomplianceismandatoryandsupervised.

TheBraziliananti-moneylaunderinglawestablishesthebasicframeworktopreventandpunishmoneylaunderingasacrime.Itprohibitstheconcealmentordissimulationoforigin,location,availability,handlingorownershipofassets,rightsorfinancialresourcesdirectlyorindirectlyoriginatedfromcrimes,subjectingtheagentsoftheseillegalpracticestoimprisonment,temporarydisqualificationfrommanagingenterprisesupto10yearsandmonetaryfines.

TheBraziliananti-moneylaunderinglawalsocreatedtheFinancialActivitiesControlCouncil,orCOAF,whichistheBrazilianfinancialintelligenceunitthatoperatesunderthejurisdictionoftheMinistryofFinance.COAFperformsakeyroleintheBraziliananti-moneylaunderingandcounter-terrorismfinancingsystem,anditslegalresponsibilityistocoordinatethemechanismsforinternationalcooperationandinformationexchange.

IncompliancewiththeBraziliananti-moneylaunderinglaw,paymentinstitutionsinBrazilmustestablishinternalcontrolandproceduresaimingat:

• identifyingandknowingtheirclients;

• checkingthecompatibilitybetweenthemovementoffundsofaclientandsuchclient’seconomicandfinancialcapacity;

• checkingtheoriginoffunds;

• carryingoutaprioranalysisofnewproductsandservices,undertheperspectiveofmoneylaunderingprevention;

• controls,resourcesandmonitoringsystemsfortherapiddetectionandreportingofsuspiciousactivity;

• compliancewithallapplicableregulatoryrequirementsforrecordkeepingandreporting;

• keepingrecordsofalltransactions;

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• applyingspecialattentionto(i)unusualtransactionsorproposedtransactionswithnoapparenteconomicorlegalbasis;(ii)clientandtransactionsforwhichtheUBOcannotbeidentified;and(iii)situationsinwhichitisnotpossibletokeeptheclients’identificationrecordsdulyupdated;

• offeringanti-moneylaunderingtrainingforemployees;

• monitoringtransactionsandsituationswhichcouldbeconsideredsuspiciousforanti-moneylaunderingpurposes;

• reportingtoCOAFtheoccurrenceofsuspicioustransactions,asrequiredunderapplicableregulations,andalso,atleastonceayear,whetherornotsuspicioustransactionsareverified,inordertocertifythenon-occurrenceoftransactionssubjecttoreportingtoCOAF(negativereport);and

• ensuringthatpolicies,proceduresandinternalcontrolsarecommensuratewiththesizeandvolumeoftransactions.

E-Commerce, Data Protection, Consumer Protection and Taxes

Inadditiontoregulationsaffectingdigitalpaymentschemes,wearealsosubjecttolawsrelatingtoInternetactivitiesande-commerce,aswellasconsumerprotectionlaws,taxlawsandotherregulationsapplicabletoBraziliancompaniesgenerally.InternetactivitiesinBrazilareregulatedbyLawNo.12,965/2014,knownastheBrazilianCivilRightsFrameworkfortheInternet,whichembodiesasubstantialsetofrightsandobligationsrelatingtoInternetserviceproviders.ThislawexemptsintermediaryplatformssuchasPagSegurofromliabilityforactivitiescarriedoutbytheirusers.Sincetherearenosettledcourtdecisionsinthisarea,however,itisstillpossiblethatwemaybesubjecttojointcivilliabilityforactivitiescarriedoutbyourusers.

LawNo.8,078/1990,knownastheConsumerProtectionCode,regulatesconsumerrelationsinBrazil,includingmatterssuchas:commercialpractices;productandserviceliability;areaswheresuppliersofproductsorservicesaresubjecttostrictliability;thereversaloftheburdenofproofsoastobenefitconsumers;thejointandseveralliabilityofallcompanieswithinasupplychain;unfaircontractterms;advertising;andinformationonproductsandservicesthatareofferedtothepublic.Consumershavetherighttoreceiveclearandaccurateinformationregardingretailproductsandservices,withcorrectspecificationofcharacteristics,structure,quality,price,risks,andconsumers’rightstoaccessandamendpersonalinformationcollectedaboutthemandstoredinprivatedatabases.

CustomeraccountsonourdigitalplatformaresubjecttodataprotectionundertheBrazilianCivilRightsFrameworkfortheInternetandArticle17oftheCMN’sResolutionNo.4,282/13.Wearealsosubjecttotrademarkprotectionrules,andtotaxlawsandrelatedobligationssuchastherulesgoverningthesharingofcustomerinformationwithtaxandfinancialauthorities.Itisunclearwhetherthetaxandregulatoryauthoritieswouldseektoobtaininformationregardingourcustomers.Anysuchrequestcouldcomeintoconflictwiththedataprotectionrules,whichcouldcreaterisksforourbusiness.

ThelawsandregulationsapplicabletotheBraziliandigitalpaymentsindustryaresubjecttoongoinginterpretationandchange,andourdigitalpaymentsbusinessmaybecomesubjecttoregulationbyotherauthorities.Forfurtherinformationontherisksrelatingtoregulationofbusiness,pleasesee“Item3.KeyInformation—RiskFactors—RisksRelatingtoourBusinessandIndustry.”

Property, Plant and Equipment

Our Facilities

Wedonotownanyrealestate.OurheadofficeandoperationscenterinSãoPauloareprovidedbyUOLonacost-sharingbasisunderanagreementforapportionmentofexpensessignedbetweenusandUOL.Formoreinformationonthisagreement,see“Item7.MajorShareholdersandRelatedPartyTransactions—RelatedPartyTransactions—AgreementswithUOLandUOLSubsidiaries—Cost-SharingAgreements.”Wealsoleaseofficespaceforoursubsidiaries.

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Other Equipment

Themajorityofourequipmentconsistsofdataprocessingequipment,whichmadeup23.1%ofourequipmentcostsin2018.Therestofourequipmentconsistsofmachinery,facilitiesandfurnitureandfittings.

Intellectual Property

Weregardtheprotectionofourtrademarks,copyrights,logos,servicemarks,tradedress,domainnames,patentsandtradesecretsascriticaltoourfuturesuccess.Toestablishandprotectourproprietaryrightsinourproductsandservices,werelyonacombinationoftrademark,copyright,servicemark,patentandtradesecretlaws,administrativeproceduresandcontractualrestrictions.Wehaveenteredintoconfidentialityandinventionassignmentagreementswithouremployeesandcertainoutsidecontractors.Wehavealsoestablishednon-disclosureagreementswithouremployees,strategicpartnersandsomesuppliersinordertolimitaccesstoanddisclosureofourproprietaryinformationandtechnology.

Weactivelypursueregistrationofourtrademarks,copyrights,logos,servicemarks,tradedressanddomainnames.WehaveregisteredorappliedforregistrationoftrademarkswiththeBrazilianPatentandTrademarkOffice(Instituto Nacional da Propriedade Industrial ,orINPI)including,amongothers,thetrademarksandlogosof“PagSeguro,”“Moderninha,”“Minizinha”and“PlugPag.”WehavealsoregisteredseveraldomainnameswithNIC.br,Brazil’sInternetdomainnameregistry,anddomainregistrarsintheUnitedStatesandelsewhere,including“pagseguro.com.br,”“pagseguro.com,”“moderninha.com.br,”“moderninhapro.com.br,”“minizinha.com.br,”“boacompra.com.br”and“moderninhasmart.com.br.”Weownorhavetherighttouseallofthematerialintellectualpropertythatweuse.

WehavematerialcontractswithVisa,MasterCardandEloinconnectionwithouractivitiesasanacquirerforthesecardschemes.OurVisaPaymentArrangementsParticipationandTrademarkLicenseAgreement,datedasofAugust24,2015andamendedonJuly3,2017,betweenVisadoBrasilEmpreendimentosLtda.andPagSeguroBrazil,setsforththegeneraltermsandconditionsunderwhichPagSeguroBrazilactsasamerchantacquiringprincipalparticipantforVisainBrazilandprovidesPagSeguroBrazilwithanon-exclusiveandnon-transferablelicensetousecertaintrademarksownedbyVisainconnectionwithitsactivitiesasanacquirerinBrazil.Underthisagreement,PagSeguroBrazilisexclusivelyresponsibleforallthecostsandrisksassociatedwithitsparticipationasamerchantacquiringprincipal,andfeespayabletoVisaunderthisagreementisdeterminedbythestandardpaymenttermssetforthintheVisaCoreRulesandVisaProductandServiceRules,availableonVisa’swebsite.OurLicenseAgreement,datedasofJune18,2015andasamendedfromtimetotime,betweenMasterCardInternationalIncorporatedandPagSeguroBrazilsetsforththegeneraltermsandconditionsunderwhichMasterCardgrantsPagSeguroBrazilanon-exclusivelicensetousecertaintradenames,trademarks,servicemarksandlogotypes(includingMasterCard,CirrusandMaestrobrandedmarks)inBrazilinconnectionwithPagSeguroBrazil’sissuingandacquiringactivities.NoconsiderationisduetoMasterCardunderthisagreement.OurAgreementforAccreditorParticipationinELOPaymentArrangements,datedasofFebruary13,2019,betweenEloServiçosS.A.andPagSeguroBrazil,setsforththegeneraltermsandconditionsunderwhichPagSeguroBrazilactsasamerchantacquiringprincipalparticipantforEloandprovidesPagSeguroBrazilwithanon-exclusiveandnon-transferablelicensetousecertaintrademarksownedbyEloinconnectionwithitsactivitiesasanacquirer.Underthisagreement,PagSeguroBrazilisexclusivelyresponsibleforallthecostsandrisksassociatedwithitsparticipationasamerchantacquiringprincipal,andfeespayabletoElounderthisagreementisdeterminedbythestandardpaymenttermssetforthintheEloArrangementsManual,availableonElo’swebsite.

Weoperatesoftwareproductsunderlicenses,includingcertainopensourcelicenses,fromourvendors,including,amongothers,Verifone,Oracle,FeedzaiandCisco.Evenifanysuchthird-partytechnologydidnotcontinuetobeavailabletousoncommerciallyreasonableterms,webelievethatalternativetechnologieswouldbeavailableasneededineverycase.

ThestandardonlinecontractenteredintobetweenusandourmerchantswhentheyopenaPagSegurodigitalaccountprovidesalimited,non-transferablelicensetocertainofourproprietaryrights,suchasournameandlogo,forusebyourmerchantsforcommercialpurposes.Weexpecttocontinuethispracticeinthefutureaspartofourmarketingstrategy.WhileweattempttoensurethatourlicenseesmaintainthequalityofthePagSegurobrand,theymaytakeactionsthatcouldmateriallyadverselyaffectthevalueofourproprietaryrightsorreputation.

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Forinformationaboutrisksaffectingourintellectualproperty,see“Item3.KeyInformation—RiskFactors—RisksRelatingtoourBusinessandIndustry—Wehaveonlyalimitedabilitytoprotectourintellectualpropertyrights,whichareimportanttooursuccess.”

Our Industry

Micro-Merchants and Small and Medium Businesses Drive the Brazilian Economy

AccordingtoSEBRAE(Portal do Empreendedor )andIBGE,in2017,Micro-MerchantsandSMEsaccountedfor99.7%ofBrazil’s12.7millionbusinesses.AccordingtodatacompiledbyNeowayBusinessSolutionsin2017,Micro-MerchantsandSMEsrepresented35.4%,orR$1.8trillion,oftheR$5.1trilliontotalannualTPVfrombusinessesinthefollowingsectors:wholesale,retail,othercommercial,electronics,pharmaceutical,hotelsandfoodservice,education,healthcare,professionalandtechnicalservices,textilesandtransportation.

Significant Room for Growth of Alternative and Digital Payment Methods

Businessandconsumersindevelopedeconomiesaremovingawayfromcashandpaperpaymentsataslowbutsteadyrateandmigratingtoelectronicpaymentmechanisms.SincethistrendhasnotyetfullyimpactedtheBrazilianeconomy,theopportunityforexpansionofdigitalpaymentsinBrazilremainssignificant.Themigrationawayfromchecks,inparticular,createsefficienciesforbusinesses,whocanreducecostandacceleratecashflowiftheiraccountspayableandaccountsreceivablefunctionsareautomatedthroughelectronicpaymentsandreconciliation.Similaropportunitiesexistforconsumerbillpayment,directdeposit,andperson-to-personpayments.

Ine-commerce,transactionvolumesinBrazilgrewtoR$47.7billionin2017fromR$18.7billionin2011accordingtoebit,representingaveragegrowthof16.9%peryearfortheperiod.Inaddition,thegrowthofe-commerceovermobiledevices,which,accordingtoeMarketer,in2017represented26.4%ofe-commercetransactionsinBrazil,comparedto34.5%intheUnitedStatesand43.3%intheUnitedKingdom,createsnewpaymentsoptionsforbothsellersandbuyers,bringingbusinessopportunitiesforacquirersanddigitalpaymentsproviders.

The Structure of the Brazilian Financial Market Creates Significant Opportunities for Disruption

ThestructureoftheBrazilianfinancialmarketcreatessignificantopportunitiesfortechnology-drivendisruption,particularlywhencomparedtomoredevelopedmarkets.Thebankingmarketisrelativelyconcentratedforglobalstandards.Forexample,aWorldBankreportusing2015dataratedprincipalbankingmarketsusingtheHerfindahl-HirschmanIndex,orHHI,whichexpressesmarketconcentrationofgrossloans,where10,000representsaperfectmonopolyand1representsperfectcompetition.Accordingtothisreport,BrazilhadHHIconcentrationof1,248in2015,makingitthe18thmostconcentratedmarketintheworldonthismeasure.InthesameyeartheUnitedStateshadHHIconcentrationof714,makingitthe36thmostconcentratedmarket;andtheUnitedKingdomhadHHIconcentrationof432,makingitthe42ndmostconcentratedmarket.ThesamereportshowedthatbankingpenetrationinBrazillagsmoredevelopedmarketsintermsofthepercentageofthepopulationthathadabankaccount,hadacreditcard,orhadmadeorreceivedadigitalpayment.Brazil’srelativelackofpenetrationwasevengreaterwithrespecttoe-commerceandmobilepayments.TheselowerpenetrationmeasuresareamplifiedamongthelowerincomeclassesinBrazil.

PaymentcardusealsoremainsrelativelylowinBrazilcomparedtomoredevelopedmarkets.AccordingtoaSeptember2018reportbytheBankofInternationalSettlements,orBIS,withdatafromtheWorldBankandABECS,debitandcreditcardpaymentsaccountedfor34.0%ofBrazilianhouseholdconsumptionbetweenJanuaryandSeptember2018,comparedwith46.0%intheUnitedStatesand68.6%intheUnitedKingdom,representingsignificantgrowthpotentialforacquirersinBrazil.Creditcardpenetrationlevelsareafundamentaldriverforthedigitalpaymentsindustry.

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Commerce Is Increasingly Digital and Mobile Worldwide

AccordingtotheInternationalTelecommunicationsUnion,anestimated343billionpeople,or45.5%ofthetotalglobalpopulation,usedtheInternetin2016,comparedwith2.2billionpeople,or31.1%ofthetotalglobalpopulation,in2011.Ofthisuserbase,58.3%carriedoute-commercetransactionsin2016,comparedwith37.2%in2011,showingsignificantgrowthine-commerce.Thisgrowthissupportedbytheglobalincreaseinmobiledevicepenetration,reductionsinthecostofInternetaccessinvariousmarkets,andimprovingtelecommunicationsnetworkinfrastructure.

Theincreasingnumberofbusinessesofferingonlineshoppingisfuelingconsumerdemandforfasterandmorereliablepaymentmethods.Webelievethesetrendscreateanenvironmentwheremerchantsfeelcompelledtointeractmorecloselywithabroaderrangeofcustomers,throughtheuseofonlinestores,mobile-friendlytechnologiesandextensivecompatibilitywithdigitalpaymentmethods,suchascardsande-wallets.Webelievethatthereisasignificantmarketopportunityforgrowthine-commerceinBrazil.

Businesses Are Shifting Towards Increasingly Non-Bureaucratic, Friendly and All-in-One Services

Astechnologyandtheregulatoryenvironmentevolve,sellersofalltypesandsizesfaceacontinuousneedfornewsolutions.AsignificantnumberofbusinessesinBrazilremainunservedorunderservedintermsofonlinepayments,POSandmPOSservicesaswellasvalue-addedfinancialservicestoolsforanumberofreasons,includinglackofaccess,lackofall-in-oneofferings,time-consuming,limitedaccesstoconventionalfundsandlackoftransparency.

ITEM 4A. UNRESOLVED STAFF COMMENTS

None.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Thefollowingdiscussionshouldbereadinconjunctionwithourauditedconsolidatedfinancialstatementsandthenotestheretoincludedelsewhereinthisannualreport,aswellasthedatasetforthin“Item3.KeyInformation—SelectedFinancialandOperatingData.”Thefollowingdiscussioncontainsforward-lookingstatementsthatreflectourplans,estimatesandbeliefs.Ouractualresultscoulddiffermateriallyfromthosediscussedintheforward-lookingstatements.Factorsthatcouldcauseorcontributetothesedifferencesincludethosediscussedbelowandelsewhereinthisannualreport,particularlyin“Item3.KeyInformation—RiskFactors.”

Operating and Financial Review and Prospects

Overview

WeareadisruptiveprovideroffinancialtechnologysolutionsfocusedprimarilyonMicro-Merchants,SmallCompaniesandMedium-SizedCompanies,orSMEs,inBrazil.WearetheonlyfinancialtechnologyproviderinBrazilwhosebusinessmodelcoversallofthefollowingfivepillars:

• Multipledigitalpaymentsolutions

• In-personpaymentsviaPOSdevicesthatweselltoclients

• Freedigitalaccounts

• Issuerofprepaidcardstoclientsforspendingorwithdrawingaccountbalances

• Operatingasanacquirer.

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Ourend-to-enddigitalecosystemenablesourcustomersnotonlytoacceptpayments,butalsotogrowandmanagetheirbusinesses.BeforePagSeguro,manyoftheseMicro-MerchantsandSMEswereoverlookedorunderservedbyincumbentpaymentprovidersandlargefinancialinstitutionsinBrazil.Forexample,accordingtoasurveyconductedbyusinJanuary2019,85%ofmerchantswhoownourentry-levelmPOSdevice,theMinizinha,didnotacceptcardpaymentspriortosigningupwithPagSeguro.Weoffersafe,affordable,simple,mobile-firstsolutionsformerchantstoacceptpaymentsandmanagetheircashthroughtheirPagSegurodigitalaccounts,withouttheneedforabankaccount.Ourdigitalaccountoffersmorethan35paymentmethodsandeightcash-outoptionsincludingourPagSeguroprepaidcard,allusingourproprietarytechnologyplatformandbackedbythetrustedPagSeguroandUOLbrands.Ourdigitalecosystemalsofeaturesotherdigitalfinancialservices,businessmanagementtoolsandfunctionalitiesforourclients.

Financial Presentation and Accounting Practices

Forinformationonourconsolidatedfinancialstatements,see“PresentationofFinancialandOtherInformation.”

Principal Factors Affecting Our Financial Condition and Results of Operations

WebelieveouroperatingandbusinessperformanceisdrivenbyvariousfactorsthataffecttheglobalandBrazilianeconomy,theBraziliandigitalpaymentsmarket,trendsaffectingthebroaderBrazilianfinancialtechnologysolutionsindustry,andtrendsaffectingthespecificmarketsandcustomerbasethatwetarget,particularlyMicro-MerchantsandSMEsinBrazil.Thefollowingkeyfactorsmayaffectourfutureperformance.

Adoption of our digital payment services and POS devices, and usage of our early payment of receivables feature

Webelieveourdigitalplatform,digitalpaymentservicesandPOSdevicesarethefoundationofourrelationshipwithourclients.Wegeneraterevenuethroughthecommissionsandotherfeesthatwechargeforelectronicpaymentintermediation,aswellasfeesforotherservicesandrevenuesfromsalesofPOSdevicesandrelateditems,andwegeneratefinancialincomethroughtheearlypaymentofreceivablesfeaturethatweofferourmerchantclients.Weintendtocontinuetodrivegrowthinourdigitalpaymentservices,POSdevicesandearlypaymentofreceivablesfeaturebyscalingoursolutionstomeettheneedsofourclients.

OurdigitalpaymentsolutionsandPOSdevicesaretheprincipalwayinwhichourclientsbecomefamiliarwithourfullrangeofproductsandservices.Weseektoleveragethefamiliaritygeneratedbytheseservices,featuresanddevicestoencouragemerchantstosignupforourotherservices,whichcanhelpthemincreasetheirsalesand,inturn,generateincrementalrevenueforus.Asaresult,thenumberofnewmerchantswhoadoptourdigitalpaymentservicesandpurchaseourPOSdeviceswillaffectourgrowth.

Furthermore,ourcustomerbaseconsistsprimarilyofMicro-MerchantsandSMEs,whotendtogeneraterelativelyhighlevelsofearlypaymentofreceivablesfrominstallmenttransactionsinordertofulfilltheirworkingcapitalneeds.TheseMicro-MerchantsandSMEsareatthecoreofourstrategy.Inthefuture,however,aswesignupagreaterproportionoflargermerchants,weexpectearlypaymenttorepresentasmallerrelativeproportionofouroverallresults,sincelargermerchantstendtorequestsignificantlylowervolumesofearlypayment,giventheireasieraccesstoalternativefunding.Hence,webelievethatwhileourFinancialincomewillcontinuetoincreaseinabsolutetermsasourclientbasegrows,itmaydecreaseasaproportionofourTotalrevenuesandincomeinthemediumandlongerterm.

Increased use of credit and debit cards and expanded card payments network

TheresultsofouroperationsdependtoasignificantdegreeontheuseofcreditanddebitcardstomakedigitalpaymentsinBrazil.In2014,accordingtoABECSandtheCentralBank,thetransactionvolumeforpaymentcardsovertookthetransactionvolumeforchecksforthefirsttime.CreditanddebitcardtransactionvolumeinBrazilhasincreasedatacompoundannualgrowthrateof13.8%from2010to2017accordingtoABECS.Asafurtherindicationofthisgrowth,MasterCardstatedinitsannualreportthattheBrazilianreal wasoneofitsthreeprimaryrevenuebillingcurrenciesin2017,surpassingtheBritishpoundandonlybehindtheU.S.dollarandtheEuro.

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Growth of e-Commerce

Ourresultsofoperationsdependinpartonconsumers’widespreadacceptanceanduseoftheInternetasawaytoconductcommerceandfinancialtransactions.E-commerceisalsounderpenetratedcomparedtoe-commercelevelsinmoredevelopedeconomies.InBrazil,e-commerceaccountedforonly4.8%ofretailsalesin2018,comparedto11.9%worldwide,accordingtoeMarketer.Accordingtoa2018reportcommissionedbyABECSandcarriedoutbyDatafolha,onlinepurchasesmadeuponly22.8%ofthetotalcreditcardtransactionvolumeinBrazilin2017,anincreaseof4.2percentagepointsfrom18.6%in2015.Sinceweviewcommerceviamobiledevicesasakeydriverofgrowthgoingforward,wefocusonmaintainingamobile-firstdigitalplatform,andwedesignoursolutionsonamobile-firstbasissothatourmerchantscanbeself-sufficientatalltimes.

Launch of new products and services and cross-selling to our clients

Westrivetostayonthecuttingedgeofthefinancialtechnologysolutionsindustrybydevelopingandlaunchingnewproductsandservicestooffertobothnewandexistingclientsandintendtocontinuetoinvestinproductdevelopmenttobuildnewproductsandservicesandtobringthemtomarket.Thisallowsustocontinuetomeettheneedsofourclients,astheseneedsgrowandchangeovertime.Whileweexpectourtotalexpensestoincreaseintheshorttermasweplanforgrowth,weexpectourexpensestodeclineasapercentageofourTotalrevenueandincomeoverthemediumtermastheseinvestmentsbenefitourbusinessandourbusinessgrows.

Ourexistingclientsrepresentasizableopportunitytocross-sellproductsandserviceswithrelativelylowincrementalmarketingandadvertisingexpensesforus.Webelievethatourrangeofservices,manyofwhichcanbeusedforbothbusinessandpersonalneeds,representsanopportunitytofurtherincreaseengagementwithourexistingclients.Weplantocontinuallyinvestinproductdevelopmentsoastomaintainandincreasetheattractivenessofourproductsandservices.Totheextentthatweareabletocross-selltheseproductsandservicesanddevelopandintroducenewproductsandservicestoourexistingclientsandattractnewclients,weexpectourrevenuesandfinancialincometocontinuetogrowandourmarginstoincrease.

Marketing and advertising

Forinformationregardingourmarketingandadvertising,see“Item4.InformationontheCompany—SalesandMarketing.”

Merchant size

WebenefitfromourprimaryfocusonMicro-MerchantsandSMEs,whowebelievewereoverlookedorunderservedbyincumbentpaymentprovidersandlargefinancialinstitutionsinBrazilbeforePagSeguro.AsourexistingmerchantsgrowandasweserveincreasinglylargermerchantsweexpectourTPVtogrowaccordingly,whilewewillremainfocusedonMicro-MerchantsandSMEs.Servinganincreasingnumberoflargermerchantsalsopresentsanopportunitytocross-sellvalue-addedservicesandfeaturessuchasaccountingreconciliation,whichgenerateincrementalrevenuesandmarginwithlowornocustomeracquisitioncosts.Overtime,weexpectanincreasingportionofourgrowthtocomefromacombinationofincreasednumbersofactivemerchantsandincreasedaveragespendingperactivemerchant.

Consumer adoption of our products and services

Manyofourproductsandservicesreachconsumersdirectly.Ourescrowperiodserviceforconsumerprotectionandmediationservicesmakee-commercesaferforconsumers,andwebelieveourdigitalaccountandPagSeguroprepaidcardsprovideeasy,attractivealternativesforconsumerswhodonothavebankaccounts.Inaddition,oursocialpaymentsolutions,suchasPag.ae,allowourclientstousetheirPagSeguroaccountforeitherbusinessorpersonalneeds.Wehavemadesignificantinvestmentsinthedevelopmentoftheseconsumer-facingproductsandservices,andourabilitytogrowourconsumernetworkgoingforwardwillbeimportantforstrengtheningourecosystemanddrivingourgrowth.

Currency fluctuations

Wedonotgeneratematerialrevenuesinforeigncurrenciesthatcouldsubstantiallyaffectourresultsofoperations.Certainofourexpensesaresubjecttocurrencyfluctuation,asthepricesofthePOSdeviceswepurchasearesetinU.S.dollars(bothforthedevicesweimportedfromoutsideBrazilpriortomid-2015,andforthelocally-madedeviceswehavebeenpurchasingsincethen).

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Inflation

Inflation,governmentpoliciesadoptedtocurbinflationarypressuresanduncertaintiesregardingpossiblefuturegovernmentalinterventionhavecontributedtoeconomicuncertaintyinBrazil.AccordingtotheIPCA,Brazilianinflationrateswere3.75%,2.95%and6.29%in2018,2017and2016,respectively,whiletheSELICrate,theCentralBank’sovernightrate,increasedfrom10.00%atthebeginningof2014toahighpointof14.25%in2016,beforeaseriesofratereductionsin2017,bringingtheSELICratedownto7.00%asofDecember7,2017,whereitremainedatyear-end2017.TheCOPOMreducedtheSELICrateto6.75%onFebruary7,2018,andfurtherreduceditto6.50%onMarch21,2018,whereitcurrentlyremains.Formoreinformation,see“—Brazilianpoliticalenvironmentandmacroeconomicconditions,interestrates,consumercreditandconsumerspending”and“Item3.KeyInformation—RiskFactors—RisksRelatingtoBrazil—InflationandcertainmeasuresbytheBraziliangovernmenttocurbinflationhavehistoricallyharmedtheBrazilianeconomyandBraziliancapitalmarket,andhighlevelsofinflationinthefuturewouldharmourbusinessandthepriceofourClassAcommonshares.”

Inflationhasadirecteffectonourcontractswithcertainsuppliers,suchastelecommunicationsoperators,whosecostsareindexedtotheIPCA,anddataprocessors,whoselaborcostsareadjustedaccordingtoinflation.Whileinflationmaycauseoursupplierstoincreasetheirprices,wearegenerallyabletooffsetthiseffectbyincreasingthepriceswechargeforourproductsandservices.

Whenmerchantsadjusttheirpricesforinflation,thepurchasingpowerofconsumersmaybereduced,whichmayadverselyaffectourrevenueifitresultsinareductioninthenumberandvolumeoftransactions.However,ifourmerchantsraisetheirpricesduetoinflation,theamountwereceiveoneachtransactionalsoincreases.

Pricing and revenue mix in our payment processing services

Wegeneraterevenueintheformofcommissionsandfeesonthecapture,transmission,processingandsettlementoftransactionscarriedoutusingcredit,debitandmealvouchercards,aswellasfeesforotherservices.Creditanddebitcardsgeneratecommissionsintheformofthemerchantdiscountrate,orMDR,whichisacommissionwithheldbyusfromthetransactionvaluepaidtothemerchant.TheMDRwechargemayvaryovertimeandwemaymakedifferentcommercialoffersfordifferentservicesorforlargerclients.However,overall,theMDRfordebitcardsislowerthanthatforcreditcards.OurcurrentstandardMDRratesare1.99%forPOSdebitcardtransactions,3.19%forPOScreditcardtransactionsnotpaidininstallments,3.79%forPOScreditcardtransactionspaidininstallmentsand3.99%foronlinetransactions,irrespectiveofwhethersuchonlinetransactionwaspaidininstallments.OnlinetransactionsarealsochargedafixedamountofR$0.40persaleinadditiontotheseMDRrates.Paymentsmadeusingmealvouchercardsandotherpaymentmethodsgenerateper-transactionand/orpercentagecommissionsatvariousrates.TheMDRratesforcreditcardtransactionsvaryaccordingtowhetherthemerchanthasoptedforthe14-dayorone-daypaymentserviceunderourpaymentdateelectionservice.Formerchantswhoselecttheone-daypaymentdateelection,thestandardMDRis4.99%forPOScreditcardtransactionsnotpaidininstallmentsand5.59%forPOScreditcardtransactionspaidininstallments.Formerchantswhoselectthe14-daypaymentdateelection,thestandardMDRis3.99%forPOScreditcardtransactionsnotpaidininstallmentsand4.59%forPOScreditcardtransactionspaidininstallments.Ourrevenuesarethereforeimpactedbythemixofthesetypesofservicesthatwesell,aswellasanychangesinthepricingforeachservice.

WefacecompetitioninallofourpaymentservicesandsalesofPOSdevices,andweexpectthiscompetitiontointensifyinthefuture.Forfurtherinformation,see“Item3.KeyInformation—RiskFactors—Substantialandincreasinglyintensecompetition,bothwithinourindustryandfromotherpaymentmethods,mayharmourbusiness.”Inaddition,wecurrentlyofferlowerpricingtocertainofourclientswhogeneratehigherTPV,andwemayberequiredtoextendthispricingtootherclientsasourmerchantbaseexpandstoincludeagreaterproportionoflargermerchants.

Financing of our early payment of merchants’ receivables feature

Wereceivesignificantfinancialincomefromofferingourmerchantstheoptiontoobtainearlypaymentoftheirreceivablesfromcreditcardinstallments.Wealsoincursignificantfinancialexpensesinordertofundthisoptionalfeature.ThroughthedateofourIPO,wefundedthisfeature(i)principallybyobtainingearlypaymentofnotereceivablesduetousfromthecardissuersandacquirers,enablingustoprovidetherelatedearlypaymenttomerchants,aswellas(ii)throughourgeneralthirdpartyborrowingsandowncapital.Ourabilitytomaintainadequatefundingfortheearlypaymentfeatureisimportantforouroperationsandfutureincomegeneration.Forfurtherinformation,see“—PrincipalComponentsofOurResultsofOperations—FinancialExpenses.”

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Interchange fees

Werelyoncardissuersandcardschemestoprocessourtransactions,andwearerequiredtopayfeesforthisservice.Inaddition,althoughweareaccreditedasanacquirer,wealsousethird-partyacquirers.Fromtimetotime,cardschemessuchasMasterCardandVisamayincreasetheinterchangefeesthattheychargeforeachtransactionusingoneoftheircards.Creditcardschemeshavetherighttopassanyincreasesininterchangefeesontousaswellasincreasetheirownfeesforprocessing.Inaddition,cardschemeshaveimposedandmayagainimposespecialassessmentsfortransactionsthatareexecutedthrougha“digitalwallet,”andthesefeescouldparticularlyaffectusandsignificantlyincreaseourcosts.Althoughourstandardcontractwithourmerchantclientsallowsustoadjustourratesandtariffsatourdiscretionbynoticetothemerchant,ourabilitytovaryourpricingremainssubjecttoavarietyoffactors,includingcompetitionfromotherpaymentproviders,marketconditionsand,incertaincases,directpricenegotiationswiththemerchant.Asaresult,wemaynotnecessarilybeabletopassthroughallinterchangeandprocessingfeestoourmerchantclientsandincreasesinthesefeesmaythereforeincreaseourCostofsalesandservicesandreduceourmargins.

Theinterchangefee,whichwerecordasTransactioncostswithinCostofsalesandservices,hasthepotentialtoaffectourmargins.AnincreaseininterchangefeeswillresultinanincreaseinourCostofsalesandservicesandifwecannotpasstheinterchangefeesontocustomersviaacorrespondingincreaseinMDR,ourmarginwillalsobeaffected.Currently,thedifferencebetweeninterchangefeesandtheMDRwechargeislessfordebitcardtransactionsthanforcreditcardtransactions,soourmarginsoncreditcardtransactionsaregreater.Wecannotpredictiforwhenthecardschemeswillincreasetheirinterchangefees,orwhattheamountofanysuchincreasesmaybe.Forfurtherinformation,see“Item3.KeyInformation—RiskFactors—RisksRelatingtoOurBusinessandIndustry—Wepartiallyrelyoncardissuersorcardschemestoprocessourtransactions.Changestocreditcardschemefees,rulesorpracticesmayharmourbusiness.”

Brazilian political environment and macroeconomic conditions, interest rates, consumer credit and consumer spending

SubstantiallyallofouroperationsarelocatedinBrazil.Asaresult,ourrevenues,financialincomeandprofitabilityareaffectedbypoliticalandeconomicdevelopmentsinBrazilandtheeffectthatthesefactorshaveontheavailabilityofcredit,disposableincome,employmentratesandaveragewagesinBrazil.Ouroperations,andthefinancialtechnologysolutionsindustryingeneral,areparticularlysensitivetochangesineconomicconditions.

OurTotalrevenueandincomeareaffectedbylevelsofconsumerspending,interestratesandtheexpansionorretractionofconsumercreditinBrazil,eachofwhichimpactthenumberandoverallvalueofpaymenttransactions.Theinterestrateschargedonconsumercredittransactionshaveanindirecteffectonustotheextentthatlowerinterestratescanleadtoincreasesinprivateconsumption,andthereforeincreasesinthenumberofcreditanddebitcardtransactionsordecreasesinthenumberofinstallmentsconsumerselectwhenmakingapurchase.Increasesininterestrates,ontheotherhand,mayleadtoadecreaseinprivateconsumptionoranincreaseinthenumberofinstallmentsconsumerselectwhenmakingapurchase.Increasesininterestratesmayalsocausefewermerchantstodecidetouseourearlypaymentofreceivablesfeatureifouroverallfinancingcostsrequireustoincreasethediscountratewechargeforthisfeature.

TherecenteconomicinstabilityinBrazilhascontributedtoadeclineinmarketconfidenceintheBrazilianeconomyaswellastoadeterioratingpoliticalenvironment,andweakmacroeconomicconditionsareexpectedtocontinuethroughthefirstsixmonthsof2019,whilethesocialsecurityreformproposalremainspending.Formoreinformation,see“Item3.KeyInformation—RiskFactors—RisksRelatingtoBrazil—TheongoingeconomicuncertaintyandpoliticalinstabilityinBrazilmayharmusandthepriceofourClassAcommonshares.”

BrazilisthelargesteconomyinLatinAmerica,asmeasuredbygrossdomesticproduct,orGDP,yetdigitalpaymentpenetrationremainslowcomparedtomoredevelopedeconomies.AccordingtoaSeptember2018reportbyABECSanddatafromtheBureauofEconomicAnalysis,orBEA,cardusageasapaymentmethodinBrazilrepresentedonlyapproximately34%ofprivateconsumptionin2018,comparedtoapproximately46%intheUnitedStates.Accordingtoa2018reportbySEBRAE,46%ofentrepreneursinBrazilownPOSdevices,ofwhichPagSegurohastheleadingmarketshareat35%ofsuchPOSdevices.Accordingtothesamereport,thispercentageisevenhigherforIndividualMicroEntrepreneurs,with54%usingPagSeguro’sPOSdevices.Furthermore,accordingtothesamereport,72%ofentrepreneursareservedbyonlyoneacquiringcompany.Thisillustratesthepotentialfortheprovisionofadditionalfinancialservicesbyusinthissegment,whichisinsufficientlyservedbythebankingsector.Webelievethatasignificantportionofthisunderpenetrationisduetothenumberofunbankedindividuals,whomakeupamajortargetsectorforus.AccordingtodatafromtheWorldBank,asof2017,30.0%oftheBrazilianpopulationabove15yearsold,or65.2millionindividuals,didnothaveabankaccount.

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ThefollowingtableshowsdataforrealGDP,inflationandinterestratesinBrazilandtheU.S.dollar/real exchangerateatthedatesandfortheperiodsindicated.

For the Years Ended December 31,

2018 2017 2016 Realgrowth(contraction)ingrossdomesticproduct 1.1% 1.1% (3.3)%Inflation(IGP-M)(1) 7.55% (0.5)% 7.2%Inflation(IPCA)(2) 3.8% 3.0% 6.3%Long-terminterestrates–TJLP(average)(3) 6.7% 7.1% 7.5%CDIinterestrate(average)(4) 6.4% 10.1% 14.1%LIBOR(5) 2.8% 1.3% 0.7%Period-endexchangerate—reais perUS$1.00 3.87 3.31 3.26Averageexchangerate—reais perUS$1.00(6) 3.66 3.19 3.48Changeinaverageexchangerateoftherealvs.US$ (14.7)% 8.3% (4.2)%Averageunemploymentrate(7) 12.3% 12.7% 11.5%Source :FGV,IBGE,CentralBankandBloomberg(1) Inflation(IGP-M)isthegeneralmarketpriceindexmeasuredbytheFGV.(2) Inflation(IPCA)isabroadconsumerpriceindexmeasuredbytheIBGE.(3) TJLPistheBrazilianlong-terminterestrate(averageofmonthlyratesfortheperiod).(4) TheCDIinterestrateisanaverageofinterbankovernightratesinBrazil(dailyaveragefortheperiod).(5) AverageUSdollarthree-monthLondonInterbankOfferRate.(6) Averageoftheexchangerateoneachbusinessdayoftheperiod.(7) AverageunemploymentrateforyearasmeasuredbytheIBGE.

TheBrazilianpoliticalandeconomicenvironmenthasrecentlybeencharacterizedbyhighlevelsofuncertaintyandinstability,includingacontractionofeconomicgrowth,despitearecentappreciation,anoverallsharpdepreciationofthereal againsttheU.S.dollar,increasedlevelsofunemploymentanddepressedlevelsofconsumerconfidenceandspending.Brazilenteredarecessionin2014dueinparttoadecreaseinglobalcommoditiespricesaswellaswide-scalecorruptionprobesfocusedoncertainstate-ownedandprivatecompanies.Forfurtherinformation,see“Item3.KeyInformation—RiskFactors—TheongoingeconomicuncertaintyandpoliticalinstabilityinBrazilmayharmusandthepriceofourClassAcommonshares.”

Ourbusinesshasgrownrapidly,drivenbynewclientsandincreasedTPV,withourTotalrevenueandincomeincreasingtoR$4,334.7millionin2018fromR$2,523.4millionin2017.Inadditiontocontinuingtogrowourclientbase,webelievethatourbusinessmodelwillallowustobenefitfromBrazil’seconomicgrowthpotential,particularlyamongMicro-Merchants,SMEsandindividualswithoutbankaccounts.

Seasonality

Forinformationregardingourseasonality,see“Item4.InformationontheCompany—Seasonality.”

Trend Information

Webelievethatdemandforourproductsandserviceswillremainstrongincomingyears,sinceouraddressablemarketremainssignificant.Webelievethatthismarketopportunitywillcontinuetofuelvolumegrowthinourbusiness,supportedbyincreasinglevelsofpenetrationandusageofcreditcardsamongtheBrazilianpopulationandtheintroductionofnewproductsandservices.

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New IFRS standards that may affect our future results of operations

CertainIFRSstandardsandinterpretationsthathavebeenissuedbutarenotyetineffectcouldimpactthepresentationofourfinancialpositionorperformanceoncetheybecomeeffective.Forfurtherinformation,seeNote2.19toourauditedconsolidatedfinancialstatements.

Principal Components of Our Results of Operations

Thefollowingisasummaryoftheitemscomprisingourstatementsofincome:

Total revenue and income

OurTotalrevenueandincomeconsistsofthetotalofourNetrevenuefromtransactionactivitiesandotherservices,Netrevenuefromsales,FinancialincomeandOtherfinancialincome.

Net revenues

Wegeneraterevenuesfromtransactionactivitiesandotherservices,andfromsales.Ineachcase,ournetrevenuesconsistofgrossrevenueslessdeductionsfromthoserevenues.

Net revenue from transaction activities and other services

OurNetrevenuefromtransactionactivitiesandotherservicesconsistsofGrossrevenuefromtransactionactivitiesandotherservices,lessdeductionsfromthosegrossrevenues.

OurmainsourceofGrossrevenuefromtransactionactivitiesandotherservicesiscommissionsandfeesonthecapture,transmission,processingandsettlementoftransactionscarriedoutusingcredit,debitandmealvouchercardsandfeesforotherservices.Wehavetheprimaryresponsibilityforprovidingtheservicestoourclientsandwealsodirectlysetthepricesforsuchservices,independentlyfromtherelatedtransactioncostsagreedbetweenusandthecardschemesorcardissuers.Sincewehaveprimaryresponsibilityforprovidingourmerchantclientswiththeintermediationservice,andwehavepricediscretiontoadjusttheratesandtariffswechargemerchants,wearetheprincipalintheintermediationtransaction.Wethereforerecognizeourtransactionfeesasrevenueonagrossbasis,andwerecognizethetransactioncostsseparatelyasdiscussedbelow.Dependingonthetypeofcash-inpaymentortransaction,thesecommissionsandfeesconsistoftheMDR,whichisacommissionwithheldbyusfromthetransactionvaluepaidtothemerchant,and/orothercommissionsorper-transactionfees.Thislineitemalsoincludesthefeeswechargeforotherservices.Werecognizerevenuesfromthesecommissionsandfeeswhenthepurchaseisapprovedbythecardissuer,inthecaseofcash-inpaymentsmadeviapaymentcards;whenthetransactioniscarriedout,inthecaseofpaymentsmadeviaothercash-inpaymentmethods;orinthecaseofservices,whentheservice,isrendered.

TheamountsdeductedfromourGrossrevenuefromtransactionactivitiesandotherservicesconsistprincipallyoftheapplicableBraziliansalestaxesandsocialsecuritycontributions:servicetax(Imposto sobre Serviços ,orISS);contributionstotheBraziliangovernment’sSocialIntegrationProgram(Programa Integração Social ,orPIS);andcontributionstotheBraziliangovernment’ssocialsecurityprogram(Contribuição para o Financiamento da Seguridade Social ,orCOFINS).Wearerequiredtocollecteachoftheseonourtransactionactivitiesandotherservices.

Net revenue from sales

OurNetrevenuefromsalesconsistsofGrossrevenuefromsales,lessdeductionsfromthosegrossrevenues.

WeearnrevenuefromthesaletomerchantsofourPOSdevices.WecurrentlyoffertheMinizinhaforapurchasepriceof12monthlyinstallmentsofR$4.90,theMinizinhaChip(whichwelaunchedinMarch2018)forapurchasepriceof12monthlyinstallmentsofR$9.90,theModerninhaPlusforapurchasepriceof12monthlyinstallmentsofR$19.90,theModerninhaProfor12monthlyinstallmentsofR$35.90andtheModerninhaSmart(whichwelaunchedinOctober2018)for12monthlyinstallmentsofR$39.90.ThislineitemalsoincludesrevenuesfromsalesofPOSdeviceperipheralssuchaschargingbasesandprotectivecovers.Werecognizetheserevenuesupondeliveryoftheequipmenttothemerchant.

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TheamountsdeductedfromourGrossrevenuesfromsalesconsistof(i)PISandCOFINS,aswellastheImposto sobre Circulação de Mercadorias e Serviços tax,orICMS,thatwearerequiredtocollectonsalesofdevicesandperipherals,and(ii)amountscorrespondingtodefectivePOSdevicesthatarereturnedtousandpurchasesthatarecancelledbymerchants.

TheapplicabletaxesandcontributionsvaryaccordingtowhetherthedeviceandperipheralwasmanufacturedinBrazilorimported.Forlocally-madedevices,whenwepurchasethedevicewepaythetaxesandcontributionstothesupplieratstandardrates;andwhenwesellthedevicetoourclients,wecollectthesetaxesatthesameratesonthesellingprice,recordthetaxonthesaleinthislineitemasadeduction,andremitthedifferencebetweenthetaxesonorinputcostandoursellingpricetothetaxingauthorities.Forimporteddevices,wepayalowerrateoftaxinplaceofICMSonthepurchase,andarenotrequiredtochargeICMSwhenwesellthedevicetoourclients,meaningthattheamountrecordedinthisdeductionslineitemisrelativelylowerforimporteddevices.Priortomid-2015wepurchasedsignificantnumbersofimportedPOSdevices,butsincemid-2015substantiallyallofthePOSdeviceswesellhavebeenmanufacturedinBrazil.

Financial Income

Asdescribedunder“Item4.InformationontheCompany—OurProductsandServices—Cash-inSolutions—CreditCards,”ourearlypaymentofreceivablesfeatureconsistsofpayingourmerchantstheirinstallmentreceivablesupfrontwhenconsumerspayingbycreditcardchoosetopaythemerchantininstallments.WeaccountfortheremunerationfromthisfeatureasFinancialincome.ThisFinancialincomemakesupasignificantportionofouroverallTotalrevenueandincome.

Ourremunerationfromtheearlypaymentofreceivablesfeatureconsistsofadiscountthatwewithholdfromthetransactionvalueofthereceivablesthatwepaytomerchantsinadvance.WerecognizethisdiscountasFinancialincome(separatefromandinadditiontotheMDRfeeforthepaymentprocessingtransaction,whichwerecognizeasGrossrevenuefromtransactionactivitiesandotherservices).WerecognizethediscountamountasFinancialincomeatthetimeasaletransactionisapprovedinvolvingamerchantwhohasoptedtoreceiveearlypaymentsofthereceivablesfromtheircreditcardinstallmentsales.ThediscountthatgeneratesourFinancialincomerelatesonlytotheearlypaymentofthesecondandsuccessiveinstallmentsofthepurchase;thefirstinstallmentisnotpaidearlyasitisdisbursedtothemerchantwithinthenormalbillingcycle,soitdoesnotgenerateremunerationintheformofFinancialincome(althoughitdoesgenerateMDR,whichisrecognizedasGrossrevenuefromtransactionactivitiesandotherservices).

Inaddition,theFinancialincomelineitemdoesnotincludethefeeswechargeforthemerchant’spaymentdateelectionwithinthemonthlybillingcycle,whicharepartoftheMDRandareaccountedforinGrossrevenuefromtransactionactivitiesandotherservices.

OurFinancialincomerelatestoearlypaymentstomerchantsofamountsrelatedtoreceivablesfrompurchasetransactionsthathavebeenapprovedbythecardissuerandthecardscheme.

ThefinancialexpensesweincurinfundingthisearlypaymentofreceivablesfeatureareaccountedforinourFinancialexpenses,discussedbelow.

FormoreinformationregardingourearlypaymentofreceivablesfeatureandtheFIDCthatweestablishedinthefourthquarterof2017tofinanceaportionofourrelatedFinancialexpenses,see“Item4.InformationontheCompany—OurProductsandServices—AdvancedIntegratedFunctionalitiesandValue-AddedServicesandFeatures—EarlyPaymentofReceivables.”

Other Financial Income

OurOtherfinancialincomeconsistsprincipallyofinterestgeneratedbybanksavingsaccountsandbydepositswemakewithBraziliancourts,knownasjudicialdeposits,whichguaranteeanycompensationwemayberequiredtopayinlitigationmatters.

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OurOtherfinancialincomealsoincludesournetforeignexchangevariations,i.e.,thenetgainorlossonourassetsandliabilitiesrelatedtotheappreciationordepreciationofthereal againstforeigncurrencies,whichhaslimitedimpactonourcashposition.Wehadswapsinplacetoprotectusagainstexposuretocurrencyfluctuationsonallofourborrowingsinforeigncurrencies.

Cost of Sales and Services

OurCostofsalesandservicesrepresentstheamountsthatmakeupthecostoftheservicesanddeviceswesell.TheseamountsaredividedintoTransactioncosts,Costofgoodssold,Marketingandadvertising,Personnelexpenses,DepreciationandamortizationandOthercosts.Forfurtherinformationonthesecosts,seeNote21toourauditedconsolidatedfinancialstatements.

• OurTransactioncostsconsistofinterchangefeessetbycardschemesthatarepaidtothefinancialinstitutionthatistheissuerofthecard;assessmentfeespaidtocardschemes;feespaidtothird-partypaymentprocessors;feespaidtoacquirers;andbanksettlementfees.AllofourTransactioncostsareaccountedforwithinourCostofsalesandservices.Sincewearetheprincipalintheintermediationtransaction,werecognizethetransactioncoststhatwepaytothirdparties,suchascardschemesandcardissuerswhoprocessthesetransactions,withinourCostofsalesandservicesseparatelyfromthetransactionfeeswereceive,whichwerecognizeonagrossbasis.Thetransactioncostsareagreedbetweenthecardschemesorcardissuersandus,independentlyfromthefeeswechargeourmerchantclients.

• CostofgoodssoldconsistsoftheamountswespendinpurchasingPOSdevicesandperipheralsfromoursuppliers,togetherwiththerelatedshippingchargesandapplicablepurchasetax.AllofourCostofgoodssoldisaccountedforwithinourCostofsalesandservices.

• OurMarketingandadvertisingexpensesaredividedbetweenourCostofsalesandservicesaswellasourSellingexpenses.Ofthistotal,theportionofMarketingandadvertisingthatisaccountedforwithinourCostofsalesandservicesrelatestocustomersupport.

• OurPersonnelexpensesconsistofwages,overtime,benefits(suchasmealvouchers,transportationvouchersandmedicalinsurance,amongothers),profitsharing,andsocialcontributionandpayrolltaxes.InBrazil,socialcontributionandpayrolltaxesconsistoftheBrazilianSocialSecurityInstitute(InstitutoNacional de Seguridade Social – INSS )contributionandtheBrazilianUnemploymentCompensationFund(Fundo de Garantia por Tempo de Serviço – FGTS )contribution.OurPersonnelexpensesaredividedbetweenourCostofsalesandservicesaswellasourSellingexpensesandourAdministrativeexpenses.Ofthistotal,theportionofourPersonnelexpensesthatisaccountedforwithinourCostofsalesandservicesreferstoemployeesengagedinactivitiesrelatedtothecostofgoodsandservicesthatwesell,suchastechnology,customersupport,logistics,antifraudactivitiesandmediationservices.

• OurDepreciationandamortizationexpensesaredividedbetweenourCostofsalesandservicesaswellasourSellingexpensesandourAdministrativeexpenses.Ofthistotal,theportionofourDepreciationandamortizationexpensesthatisincludedinourCostofsalesandservicesconsistsmainlyof(i)thedepreciationofequipment,furniture,technologyandinstallationsthatformpartofthecostofthegoodsandservicesthatwesell,and(ii)theamortizationofsoftwarethatwedevelopinternallyforuseinouroperations.

• OurOtherexpensesaredividedbetweenourCostofsalesandservicesaswellasourSellingexpensesandourAdministrativeexpenses.Ofthistotal,theportion

ofourOtherexpensesthatisincludedinourCostofsalesandservicesconsistsmainlyofitemssuchastravelexpensesandofficesuppliesthatformpartofthecostofthegoodsandservicesthatwesell.

Selling Expenses

OurSellingexpensesrepresenttheamountsthatwespendonpublicity,marketing,qualitycontrolanddirectorindirectrelationswithourclients.TheseamountsaredividedintoMarketingandadvertising,Personnelexpenses,Chargebacks,DepreciationandamortizationexpensesandOtherexpenses.Forfurtherinformationontheseexpenses,seeNote21toourauditedconsolidatedfinancialstatements.

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• TheportionofMarketingandadvertisingexpensesincludedinourSellingexpensesrelatestotheproductionanddistributionofourmarketingandadvertisingcampaignsontraditionalofflinemedia,traditionalonlineadvertising,thepositioningofourproductsinsearchplatforms,telemarketingrelatedtoPOSdevicesales,commissionstoourthirdpartysalesforceandpartnerssuchasplatforms,bloggersanddevelopers,expensesincurredinrelationtotrademarketingatevents,andamountsthatwespendonconsultingservicesandcallcentersforourtelemarketingcampaigns.

• TheportionofourPersonnelexpensesincludedinourSellingexpensesrelatestoemployeesengagedinmarketingandadvertisingofourservices,POSdevicesandfeatures.

• Chargebacksconsistoftransactionlossesarisingfromchargebacksrelatedtofraudulenttransactions,whichoccurs,principallyinonlinetransactions,whena

consumermakesapurchaseviacreditcardandthenrequestsachargebackfromtheissuingbankafterreceivingthegoodsorservicespurchased.AllofourChargebackexpensesareaccountedforwithinourSellingexpenses.

• TheportionofourDepreciationandamortizationexpenseincludedinourSellingexpensesconsistsofthedepreciationofequipmentusedforclientrelationships.

• TheportionofourOthercostsincludedinourSellingexpensesconsistofexpensesrelatedtotravel,lodgingandinsurance,facilities,rent,consultancyfeesandofficesuppliesrelatingtomarketingandadvertisingofourservices,POSdevicesandfeatures.

Administrative Expenses

OurAdministrativeexpensesrepresenttheamountsthatwespendonbackofficeandoverheadexpenses.TheseamountsaredividedintoPersonnelexpenses,DepreciationandamortizationexpensesandOthercosts.WhileweexpectourAdministrativeexpensestoincreaseintheshorttermasweplanforgrowthandasweincurcostsofcomplianceassociatedwithbeingapubliccompany,weexpecttheseexpensestodeclineasapercentageofourTotalrevenueandincomeoverthemediumtermasourbusinessgrows.

• TheportionofourPersonnelexpensesthatformpartofourAdministrativeexpensesrelatestoourfinance,legal,humanresources,andadministrativepersonnel,aswellasfeespaidforprofessionalservices,includinglegal,taxandaccountingservices.

• TheportionofourDepreciationandamortizationexpensesthatformpartofourAdministrativeexpensesrelatesto(i)thedepreciationoftheequipment,

furniture,toolsandtechnologyusedinourheadofficeandback-officeoperationsand(ii)theamortizationofsoftwaredevelopedinternallytosupportourheadofficeandback-officeneeds,whichisshowninNote12toourauditedconsolidatedfinancialstatements.

• TheportionofourOthercoststhatformpartofourAdministrativeexpensesincludesitemssuchasbankcharges,travel,reimbursementofstaffexpensesandofficesupplies.

Financial Expenses

Ourfinancialexpensesinclude(i)thechargesweincurtoobtainearlypaymentofnotereceivablesowedtousbycardissuersandacquirersinordertofinancetheearlypaymentofreceivablesfeaturethatweoffermerchants,(ii)interestexpenseonourotherborrowingsand(iii)thecostofswapsrelatingtoourforeigncurrencyborrowings.VariationsinourFinancialexpenseswhenexpressedasapercentageofFinancialincomearedrivenbyBrazilianinterestrates,whichdeterminethecostofmostofourfinancing,togetherwithchangesinthemixofthefinancingweuseforourearlypaymentofreceivablesfeature.

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ThroughthedateofourIPO,wefundedtheearlypaymentofreceivablesfeature(i)principallybyobtainingearlypaymentofreceivablesowedtousbycardissuersandacquirers,aswellas(ii)throughourgeneralthirdpartyborrowingsandowncapital.Inaddition,inNovember2017wesetupaBrazilianinvestmentfundtopurchaseandholdreceivablesknownasaFundo de Investimento em Direitos Creditórios (aFundforInvestmentinCreditRights,orFIDC)throughwhichwemayraisedebttofinancetheearlypaymentofreceivablesfeature.TheFIDCiscontrolledbyourBrazilianoperatingcompany(byvirtueofsubscribingforitssubordinatedquotas)butraisescapitalbyissuingseniorquotasinthefundtooutsideinvestors,whoreceiveinterestontheseinvestmentsfromtheFIDC.TheFIDCusesthecapitalitraisestofinancethegrowthofourearlypaymentofreceivablesfeature.OurremunerationfromtheearlypaymentofreceivablesfeaturecontinuestobereflectedasFinancialincomeinourconsolidatedfinancialstatements.WedonotexpecttheestablishmentoftheFIDCtoimpactthediscountratewechargeinconnectionwiththeearlypaymentofreceivablesfeatureortheexpensesweincurtoobtainearlypaymentofnotereceivablesfromcardissuersandacquirers.ForfurtherinformationregardingtheFIDC,see“Item4.InformationontheCompany—OrganizationalStructure.”

WedidnothaveanyoutstandingborrowingsatDecember31,2018and2017.Allofourthird-partyborrowingsatDecember31,2016weredenominatedinU.S.dollarsandthereforeexposedtocurrencyfluctuationswhenwecontractedderivativefinancialinstrumentsknownasswapsinordertoprotectusagainstthisexposure.Forfurtherinformationonourborrowings,see“—LoansandFinancing.”

Other (Expenses) Income, Net

OurOther(expenses)income,netlineitemconsistsmainlyofcontingencies,chargesandmiscellaneousincomeand/orexpenseitems.

Current Income Tax and Social Contribution

Currentincometaxandsocialcontributionconsistsoftaxassetsandliabilitiesforthecurrentyear.OurliabilitytoincometaxprincipallyreflectsthelevelofourProfitbeforeincometaxes;thislineitemalsovaries,however,totheextentthatweareentitledtodefertaxoncertaininvestmentsintechnologicalinnovation,inwhichcaseourtaxbaseforincometaxfortheyearisreducedandtherelateddeferredtaxliabilityisaccountedforintheDeferredincometaxandsocialcontributionlineitembelow.

Ourtaxassetsforthecurrentyeararecalculatedbasedontheexpectedrecoverableamount,andtaxliabilitiesforthecurrentyeararecalculatedbasedontheamountpayabletotheapplicabletaxauthorities.Thetaxratesandtaxlawsusedtocalculatethisamountarethoseenactedorsubstantiallyenactedatthebalancesheetdate.Currentincometaxandsocialcontributionrelatedtoitemsrecognizeddirectlyinequityisalsorecognizedinequity.Weperiodicallyevaluateourtaxpositionswithrespecttointerpretingtaxregulationsand,whenappropriate,establishprovisions.

Deferred Income Tax and Social Contribution

Deferredincometaxandsocialcontributionconsistsoftemporarydifferencesbetweenthetaxbasisofassetsandliabilitiesandtheircarryingamountsatthebalancesheetdate.ThislineitemrefersprincipallytodeferralsoftaxliabilitythatweareentitledtotakeoncapitalinvestmentsthatwemakeintechnologicalinnovationunderBrazilianLawNo.11,196/2005,knownastheTechnologicalInnovationLawor“Lei do Bem.” Weareabletousethistaxdeferrallawprincipallyfortheinvestmentswemakeindevelopingsoftwareinternally,wherewecapitalizethelaborandothercostsinvolvedasanintangibleassetratherthanaccountingfortheseamountsasexpenses,andwedepreciatetheaccountingvalueoftheintangibleassetoveritsusefullife.TheLei do Bem allowsustodeferourtaxliabilityontheseinvestments.OtherBraziliantaxrulesalsoallowustodefertaxoncertainitems,forexampleonunpaidamountsduefromcreditors.TheDeferredincometaxandsocialcontributionlineitemconsistsofourliabilitytofuturetaxundertheLei do Bem andtheseothertaxlaws,lessthedepreciationandamortizationthatwetakeduringtheyearontherespectivecapitalizedassets,andlessthetaxlossescarriedforwardfromprioryearsthatweareabletooffsetagainstourtaxliabilityduringtheyear.Forfurtherinformationonthislineitem,seeNote17toourauditedconsolidatedfinancialstatements.

Deferredtaxliabilitiesarerecognizedforalltaxabletemporarydifferences,exceptincertainsituationsexplainedinNote2.14ofourauditedconsolidatedfinancialstatements.Thecarryingamountofdeferredtaxassetsisreviewedateachbalancesheetdateandimpairmentisrecognizedtotheextentthatitisnolongerprobablethatsufficienttaxableprofitwillbeavailabletoallowallorpartofthedeferredtaxassetstobeutilized.Unrecognizeddeferredtaxassetsarereviewed,ateachbalancesheetdate,andrecognizedtotheextentthatitisprobablethatfuturetaxableprofitwillbeavailabletoallowfortheirutilization.

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ThereisnoCaymanIslandstaxationontheincomeearnedbyPagSeguroDigitalandassuch,wedonothaveanytaximpactsatthePagSeguroDigitallevel.

Withrespecttooursubsidiaries,deferredtaxassetsandliabilitiesaremeasuredusingtheprevailingtaxratesintheyearinwhichtheassetswillberealizedandtheliabilitieswillbesettled.Thecurrentlydefinedtaxratesof25%forincometaxand9%forsocialcontributionareusedtocalculatedeferredtaxes.Deferredtaxassetsandliabilitiesarepresentedonanetbasiswhenthereisalegallyorcontractuallyenforceablerighttooffsetthetaxassetagainstthetaxliability,andthedeferredtaxesarerelatedtothesametaxableentityandsubjecttothesametaxauthority.

Results of Operations

Thefollowingdiscussionofourresultsofoperationsisbasedonthefinancialinformationderivedfromourauditedconsolidatedfinancialstatementsincludedelsewhereinthisannualreport.

Results of Operations in 2018, 2017 and 2016 For the Years Ended December 31,

2018 Percent Change 2017

Percent Change 2016

(in millions of reais , with the exception of percentages and

per-share amounts) Netrevenuefromtransactionactivitiesandotherservices 2,267.1 85.2% 1,224.3 155.1% 480.0Netrevenuefromsales 374.6 (20.6)% 471.9 81.1% 260.6Financialincome 1,414.5 72.8% 818.6 108.6% 392.4Otherfinancialincome 278.5 3,138.4% 8.6 62.3% 5.3

Total revenue and income 4,334.7 71.8% 2,523.4 121.7% 1,138.4

Costofsalesandservices (2,144.7) 61.9% (1,324.4) 112.3% (623.7)Sellingexpenses (351.4) 43.0% (245.8) 23.0% (199.9)Administrativeexpenses (581.7) 279.7% (153.2) 81.3% (84.5)Financialexpenses (31.2) (70.1)% (104.5) 53.0% (68.3)Other(expenses)income,net (8.1) (32.5)% (12.0) 79.1% (6.7)

Profit before Income Taxes 1,217.6 78.1% 683.5 339.8% 155.4

Currentincometaxandsocialcontribution (180.9) (15.9)% (215.0) 2,805.4% (7.4)Deferredincometaxandsocialcontribution (126.3) (1,326.2)% 10.3 (151.2)% (20.1)

Income Tax and Social Contribution (307.2) 50.1% (204.7) 641.7% (27.6)

Net Income for the Year 910.4 90.1% 478.8 274.6% 127.8

Attributableto: OwnersofPagSeguroDigital 909.3 89.9% 478.8 276.4% 127.2Non-controllinginterests 1.1 100.0% — (100.0)% 0.6Basic earnings per common share – R$ 2.8625 56.8% 1.8254 276.4% 0.4849Diluted earnings per common share – R$ 2.8582 56.6% 1.8254 276.4% 0.4849

Total revenue and income

OurTotalrevenueandincomeamountedtoR$4,334.7millionin2018,anincreaseof71.8%fromR$2,523.4millionin2017.OurTotalrevenueandincomein2017representedanincreaseof121.7%fromR$1,138.4millionin2016.

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Net revenue from transaction activities and other services

OurGrossrevenuefromtransactionactivitiesandotherservicesin2018amountedtoR$2,638.1million,anincreaseofR$1,246.7million,or89.6%,fromR$1,391.4millionin2017.Grossrevenuefromtransactionactivitiesandotherservicesin2017representedanincreaseofR$847.6million,or155.9%,fromR$543.8millionin2016.

TheincreaseinGrossrevenuefromtransactionactivitiesandotherservicesduring2018comparedto2017wasprincipallyduetoacontinuedincreaseinouractivemerchantbaseandTPV.OurGrossrevenuefromtransactionactivitiesandotherservicesincreasedbyalesserpercentagethanourTPV,whichincreasedtoR$76.1billionfromR$38.5billionin2017.Thisdifferenceinthegrowthratewasdrivenbythemixofdebitandcreditcardpaymentsprocessedcontainingahigherpercentageofdebitcardpaymentsandwithinthecreditcardpaymentsprocessed,alowerpercentageofcreditcardtransactionsmadeininstallments.

TheincreaseinGrossrevenuefromtransactionactivitiesandotherservicesduring2017comparedto2016wasprincipallyduetoacontinuedincreaseinourcustomerbaseandTPV.OurGrossrevenuefromtransactionactivitiesandotherservicesduring2017increasedbyalesserpercentagethanourTPV,whichincreasedtoR$38.5billionfromR$14.1billionin2016.ThisdifferenceintherateofgrowthwasprincipallyduetothehigherproportionofdebitcardtransactionsinourTPVin2017ascomparedtoin2016,drivenbythefactthatinDecember2016weestablishedanewpartnershipwithElo,aBraziliancardschemewhosebusinessisheavilyweightedtowarddebitcards.OurTPVfor2017thereforeincludedthisadditionaldebitcardTPVthatwedidnothaveformostof2016;anddebitcardsgeneratelowerMDRthancreditcardtransactions.

Theincreaseingrossrevenuefromtransactionactivitiesandotherservicesin2016wasprincipallyduetoanincreaseinTPVduringtheperiod.Thisincreasewaspartiallyoffsetbyachangeinmixin2016ascash-inpaymentsfromdebitcards,whichgeneratelowerMDRfees,increasedinproportiontocash-inpaymentsfromcreditcards,whichgeneratehigherMDRfees.

OurDeductionsfromgrossrevenuefromtransactionactivitiesandotherservices,whichconsistprincipallyofsalestaxes,amountedtoR$371.0millionin2018,or14.1%ofourGrossrevenuefromtransactionactivitiesandotherservicesfortheyear.In2017,DeductionsfromgrossrevenuefromtransactionactivitiesandotherservicestotaledR$167.1million,or12.0%ofourGrossrevenuefromtransactionactivitiesandotherservicesfortheyear.In2016,DeductionsfromgrossrevenuefromtransactionactivitiesandotherservicestotaledR$63.8million,or11.7%ofGrossrevenuefromtransactionactivitiesandotherservicesfortheyear.TheincreaseintheDeductionsfromgrossrevenue,asapercentageofourGrossrevenuesfromtransactionactivitiesandotherservices,in2018whencomparedto2017wasprincipallyduetotherepealofthelawthatchargesISSbasedonthemunicipalitywherethePOSdeviceisused.Sincetherepealofthislawisbeingcontested,wearecurrentlymakingjudicialdepositsforthefulltaxrateregardingsalesmadewithintheSãoPaulomunicipalityandrecognizingaprovisionforthedifferencechargedbyothermunicipalities.TheincreaseintheDeductionsfromgrossrevenuein2017whencomparedto2016wasprincipallyduetosalestaxesrelatedtothetransactionservicesprovidedbyR2Tech.

Asaresultoftheabove,ourNetrevenuefromtransactionactivitiesandotherservicesin2018amountedtoR$2,267.1million,anincreaseofR$1,042.8million,or85.2%,fromR$1,224.3millionin2017.Netrevenuefromtransactionactivitiesandotherservicesin2017representedanincreaseofR$744.3million,or155.1%,fromR$480.0millionin2016.

Net revenue from sales

OurGrossrevenuefromsalesin2018amountedtoR$513.8million,adecreaseofR$141.4million,or21.6%,fromR$655.2millionin2017.Grossrevenuefromsalesin2017representedanincreaseofR$283.7million,or76.4%,fromR$371.5millionin2016.ThedecreaseinGrossrevenuefromsalesin2018comparedto2017isduetoareductionofourPOSdevices’salespriceandpromotionalactivityduringtheyear.Thesignificantgrowthinthisitemin2017comparedto2016wasduetoanincreaseinthevolumeofPOSdevicessoldandtherapidramp-upofourPOSdevicesales,andourrolloutofanincreasinglybroadrangeofPOSdevices.

OurDeductionsfromgrossrevenuefromsalesin2018amountedtoR$139.2million,or27.1%ofourGrossrevenuefromsalesfortheyear.In2017,theseDeductionstotaledR$183.2million,or28.0%ofourGrossrevenuefromsalesfortheyear.In2016,theseDeductionstotaledR$110.9million,or29.9%ofourGrossrevenuefromsalesfortheyear.

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ThesmalldecreaseintheseDeductionsasapercentageofourGrossrevenuefromsalesin2018comparedwith2017and2017comparedwith2016isduetochangesinthemixofBrazilianstatesinwhichwesoldPOSdevices,sinceICMSisleviedbyeachstateatadifferentrate.Asaresultoftheabove,ourNetrevenuefromsalesin2018amountedtoR$374.6million,adecreaseofR$97.3million,or20.6%fromR$471.9millionin2017.Netrevenuefromsalesin2017representedanincreaseofR$211.3million,or81.1%,fromR$260.6millionin2016.

Financial income

OurFinancialincome,whichrepresentsthevolumeofthediscountfeeswewithholdfromTPVintheearlypaymentofreceivablesfeaturethatweoffermerchants,amountedtoR$1,414.5millionin2018,anincreaseofR$595.9million,or72.8%fromR$818.6millionin2017.In2017thisitemrepresentedanincreaseofR$426.2million,or108.6%,fromR$392.4millionin2016.Theyear-on-yearincreaseinthisactivitywasdrivenbygrowthinourTPV.

Other financial income

OurOtherfinancialincomeamountedtoR$278.5millionin2018,anincreaseofR$269.9million,or3,138.4%fromR$8.6millionin2017.OurOtherfinancialincomein2017representedanincreaseofR$3.3million,or62.3%,fromwithR$5.3millionin2016.

OurOtherfinancialincomein2018includedapositivenetforeignexchangevariationofR$138.1million,anincreaseofR$136.3millioncomparedtoapositivenetforeignexchangevariationofR$1.8millionin2017.OftheR$138.1millioninnetforeignexchangevariationin2018,R$131.3millionwasrelatedtotheforeignexchangegainonourJanuary2018IPOproceedsandJune2018follow-onofferingproceeds,andtheremainingincreaseofR$6.8millionwasduetoincomefromshort-terminvestments,whichincreasedsignificantlyduetoourJanuary2018IPOproceedsandJune2018follow-onofferingproceeds.OurOtherfinancialincomein2017includedapositivenetforeignexchangevariationfromR$1.8million,adecreaseofR$0.5millionfromR$2.3millionin2016.ThesevariationsreflecttheeffectofexchangeratefluctuationsinourforeigncurrencyaccountslocatedoutsideofBrazil.In2016and2017,ournetforeignexchangevariationrelatedtoBoaCompra’sinternationaloperationsaswellascash-outpaymentsusingPagSeguroprepaidcardsoutsideofBrazilandcash-inpaymentsviainternationalcardsinBrazil,bothofwhicharesettledinforeigncurrency.

Expenses

OurtotalexpensesamountedtoR$3,117.1millionin2018,anincreaseofR$1,277.2million,or69.4%fromR$1,839.9millionin2017.AsapercentageofourTotalrevenueandincome,ourtotalexpensesin2018decreasedby1.0percentagepoint,to71.9%in2018from72.9%in2017.OurtotalexpensesamountedtoR$1,839.9millionin2017,anincreaseofR$856.9million,or87.2%,fromR$983.0millionin2016.AsapercentageofourTotalrevenueandincome,ourtotalexpensesin2017decreasedby13.5percentagepoints,to72.9%in2017from86.4%in2016.

Cost of sales and services

OurCostofsalesandservicesamountedtoR$2,144.7millionin2018,anincreaseofR$820.3million,or61.9%fromR$1,324.4millionin2017.AsapercentageofthetotalofourNetrevenuefromtransactionactivitiesandotherservicesandourNetrevenuefromsales,ourCostofsalesandservicesdecreasedby13.6percentagepoints,to94.6%from108.2%in2017.

WithinourCostofsalesandserviceslineitem,ourCostofservices,expressedasapercentageofourNetrevenuefromtransactionactivitiesandotherservices,decreasedto66.6%from67.8%in2017.Thisdecreaseisduetothemixofdebitandcreditcardpaymentsprocessedcontainingahigherpercentageofdebitcardpaymentsandlowerinterchangefeeexpenses.OurCostofsales,expressedasapercentageofourNetrevenuefromsales,increasedto169.2%in2018from104.8%in2017,duetoareductionofourPOSdevicessalespriceandpromotionalactivityduringtheyear.

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OurCostofsalesandservicesamountedtoR$1,324.4millionin2017,anincreaseofR$700.7million,or112.3%fromR$623.7millionin2016.AsapercentageofthetotalofourNetrevenuefromtransactionactivitiesandotherservicesandourNetrevenuefromsales,ourCostofsalesandservicesremainedrelativelystable,postingadecreaseof6.1percentagepoints,to78.1%from84.2%in2016.

WithinourCostofsalesandserviceslineitem,ourCostofservices,expressedasapercentageofourNetrevenuefromtransactionactivitiesandotherservices,decreasedto67.8%from74.5%in2016.ThisdecreasereflectedareductioninthefeeswepaidtothirdpartyacquirersaswellasongoingeconomiesofscaleduetogrowthinourTPV.OurCostofsales,expressedasapercentageofourNetrevenuefromsales,increasedto104.8%in2017from102.0%in2016,duetothechangeinourdeviceproductmix:thelaunchofthehigher-valueModerninhaWifiinJune2016andModerninhaProinOctober2016ledtoincreasedexpensesthroughout2017thatlargelydidnotimpactthemixin2016.

Selling expenses

OurSellingexpensesamountedtoR$351.4millionin2018,anincreaseofR$105.6million,or43.0%fromR$245.8millionin2017.AsapercentageofourTotalrevenueandincome,ourSellingexpensesdecreasedby1.6percentagepoints,to8.1%in2018from9.7%in2017.ThisdecreaseinourSellingexpensesasapercentageofourTotalrevenueandincomewasdrivenbyourgrowth,aswecontinuetoleverageoursellingexpensesbaseasourTPVincreases.

OurSellingexpensesamountedtoR$245.8millionin2017,anincreaseofR$45.9million,or23.0%fromR$199.9millionin2016.AsapercentageofourTotalrevenueandincome,ourSellingexpensesdecreasedby7.9percentagepoints,to9.7%in2017from17.6%in2016.OurMarketingandadvertisingcostsinparticular,whileincreasinginabsoluteterms,decreasedsignificantlyasapercentageofTotalrevenueandincomeduetogrowthinourrevenuevolumesandthereturnonourinvestmentsinmarketingandadvertisinginpriorperiods,aswellasadecisiontofocusouronlineadvertisingonrelativelycheaperspacesratherthanheadlinebanners.

Administrative expenses

OurAdministrativeexpensesamountedtoR$581.7millionin2018,anincreaseofR$428.5million,or279.7%,fromR$153.2millionin2017.ThisincreasewasmainlyduetoourSharebasedlong-termincentiveplan(LTIP)expenses,whichamountedtoR$359.2million.AsapercentageofourTotalrevenueandincomeourAdministrativeexpensesincreasedby7.3percentagepoints,to13.4%in2018from6.1%in2017.

In2017,ourAdministrativeexpensesincreasedbyR$68.7million,or81.3%,comparedwithR$84.5millionin2016.Thisincreasewasmainlyduetoanincreaseinemployeecosts,bankchargesandconsultingfees.AsapercentageofourTotalrevenueandincome,however,ourAdministrativeexpensesdecreasedby1.3percentagepoints,to6.1%in2017from7.4%in2016.

Financial expenses

OurFinancialexpensesamountedtoR$31.2millionin2018,adecreaseofR$73.3million,or70.1%,fromexpensesofR$104.5millionin2017.Thesameitemin2017reflectedanincreaseinexpenseofR$36.2million,or53.0%,fromexpensesofR$68.3millionin2016.ExpressedasapercentageofourFinancialincome,ourFinancialexpensesrepresented2.2%in2018,12.8%in2017and17.4%in2016.

ThevariationinourFinancialexpenseswhenexpressedasapercentageofFinancialincomeisdrivenbyBrazilianinterestrates,whichdeterminethecostofmostofourfinancing,togetherwithchangesinthemixofthefinancingweuseforourearlypaymentofreceivablesfeature,sincewehavedecreasedourexternalfinancingduetoourJanuary2018IPOproceedsandJune2018follow-onofferingproceeds.TheSELICratewasheldat14.25%forthefirstninemonthsof2016,beingreducedto14.00%inOctober2016and13.75%inDecember2016.TheSELICratewasfurtherreducedto8.25%atSeptember30,2017andto7.00%atDecember7,2017,whereitremainedatyear-end2017.TheCOPOMreducedtheSELICrateto6.75%onFebruary7,2018,andfurtherreduceditto6.50%onMarch21,2018,whereitcurrentlyremains.Ourfinancialexpensealsoreflectedchangesinourmixoffinancing:in2016,inadditiontoourexistingfinancingsources,wefurtherincreasedourlevelsofexternalfinancing,withearlypaymentofthereceivablesduetousfromcardissuersaswellasacquirers,andweincurredthirdpartyborrowings.In2017,werepaidourthirdpartyborrowingsandthereafterfinancedtheearlypaymentfeaturebyobtainingearlypaymentofnotereceivablesduetousfromthecardissuersandacquirers.In2018,wefinancedtheearlypaymentfeatureusingourIPOprimaryshareproceedingsFormoreinformation,see“—Financingofourearlypaymentofmerchants’receivablesfeature.”

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Other (expenses) income, net

OurOther(expenses)income,net,recordedexpensesofR$8.1millionin2018.Thisnetamountprincipallyreflectedexpensesrelatedtocivillitigationproceedingsduringtheyear.

In2017,ourOther(expenses)income,net,recordedexpensesofR$12.0million.Thisnetamountprincipallyreflectedexpensesrelatedtocivillitigationproceedingsduringtheyear.

In2016,ourOther(expenses)income,net,recordedexpensesofR$6.7million.Thisnetamountprincipallyreflectedexpensesrelatedtocivillitigationproceedingsduringtheyear.

Profit before income taxes

OurProfitbeforeincometaxesamountedtoR$1,217.6millionin2018,anincreaseofR$534.1million,or78.1%,fromR$683.5millionin2017.TheincreasewasduetosignificantcontinuedgrowthinourTotalrevenueandincome,reflectingvolumegrowthinbothournetrevenueitemsaswellgrowthinincomefromourearlypaymentofreceivablesfeature.

In2017,ourProfitbeforeincometaxamountedtoR$683.5million,anincreaseofR$528.1million,or339.8%,fromR$155.4millionin2016.TheincreasewasduetosignificantgrowthinourTotalrevenueandincome,reflectingvolumegrowthinbothournetrevenueitemsaswellgrowthinincomefromourearlypaymentofreceivablesfeature.

Income tax and social contribution

IncometaxandsocialcontributionamountedtoexpensesofR$307.2millionin2018,anincreaseofR$102.5million,or50.1%,fromexpensesofR$204.7millionin2017.In2017,ourincometaxandsocialcontributionexpensesincreasedbyR$177.1million,or641.7%,fromexpensesofR$27.6millionin2016.ThistotalitemconsistsofCurrentincometaxandsocialcontributionanddeferredincometaxandsocialcontribution,whichrelatesprincipallytothetaxbenefitundertheLei do Bem ,whichreducesincometaxchargesbasedoninvestmentsmadeininnovationandtechnology,suchasthosemadebyPagSeguroBrazil,ourBrazilianoperatingsubsidiary.

Ourtotaleffectivetaxratewas25.2%in2018,comparedwith29.9%in2017.Thedecreasein2018wasmainlyduetoincreaseinourLei do Bem taxbenefitsandincomegeneratedbyPagSeguroDigitalontheexchangevariationfromU.S.dollarstoreaiswhichisnottaxableundertheCompaniesLaw.

Ourtotaleffectivetaxratewas29.9%in2017,comparedwith17.8%in2016.Theincreasein2017wasduetotheincreaseinourProfitbeforeincometaxeswhiletheamountofourLei do Bem taxbenefitsremainedstable.

Net income for the year

OurNetincomefortheyearin2018amountedtoR$910.4million,anincreaseofR$431.6million,or90.1%,fromR$478.8millionin2017.AsapercentageofourTotalrevenueandincome,ourNetincomefortheyearincreasedby2.0percentagepoints,to21.0%in2018comparedwith19.0%in2017.Thisincreasewasprincipallydrivenbythevolumegrowthinbothournetrevenueitemsaswellgrowthinincomefromourearlypaymentofreceivablesfeature,asdiscussedabove.

OurNetincomefortheyearin2017amountedtoR$478.8million,anincreaseofR$351.0million,or274.6%,fromR$127.8millionin2016.AsapercentageofourTotalrevenueandincome,ourNetincomefortheyearincreasedby7.8percentagepoints,to19.0%in2017comparedwith11.2%in2016.Thisincreasewasprincipallydrivenbythevolumegrowthinbothournetrevenueitemsaswellgrowthinincomefromourearlypaymentofreceivablesfeature,asdiscussedabove.

Liquidity and Capital Resources

Thefollowingdiscussionofourliquidityandcapitalresourcesisbasedonthefinancialinformationderivedfromourauditedconsolidatedfinancialstatementsincludedelsewhereinthisannualreport.

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General

Ourprincipalliquidityrequirementsrelatetotheearlypaymentofreceivablesfeaturethatweoffermerchants.Webelieveourcurrentworkingcapitalissufficientforpresentrequirements.Throughthedateofthisannualreport,wehavesatisfiedourfundingandworkingcapitalrequirements(i)throughthecashgeneratedbyourbusinessesand(ii)byobtainingearlypaymentofnotereceivablesduetousfromthecardissuersandacquirers.

Thetablebelowpresentsourcashpositionatthebeginningofeachperiod,andournetcashprovidedbyoperatingactivities,netcashusedininvestingactivitiesandnetcashprovidedbyfinancingactivitiesduringtheperiodsindicated:

At and for the Year Ended December 31,

(in millions of reais ) 2018 2017 2016 Liquidity and Capital Resources Cashandcashequivalents 2,763.0 66.8 80.0Netcashprovidedby(usedin)operatingactivities (1,763.2) 453.6 77.0Netcash(usedin)investingactivities (44.3) (207.3) (203.3)Netcashprovidedby(usedin)financingactivities 4,503.8 (259.5) 199.4

Ourcashandcashequivalentsincludecashonhand,depositswithbanksandothershort-termhighlyliquidinvestmentswithoriginalmaturitiesofthreemonthsorless,andwithimmaterialriskofchangeinvalue.Formoreinformation,seeNote6toourauditedconsolidatedfinancialstatements.

Cash Flows

OurNetCashprovidedbyoperatingactivitiesconsistsof(i)ourProfitbeforeincometaxesfortheyear,(ii)amountsthatarerecordedasexpensesorrevenuesinourstatementofincomebutwhichdonotaffectcash,(iii)amountsrepresentingchangesinouroperatingassetsandliabilities,(iv)thecashamountsofincometaxesandsocialcontributionsthatwepayduringtheperiod,(v)thecashamountsofinterestincomereceivedand(vi)interestpaidonoutstandingborrowings.

OurCashflowsusedininvestingactivitiesconsistofamountspaidonacquisitions,ourpurchasesofpropertyandequipment,ourpurchasesofintangibleassets,andournewfinancialinvestmentslessthepaymentswemaketoredeemexistingfinancialinvestments.

OurCashflowsfromfinancingactivitiesconsistoftheproceedsfromourJanuary2018IPOandJune2018follow-onofferingandrespectivetransactioncosts.In2018,wealsorepurchasedsharesinaccordancewithoursharerepurchaseprogram,whichwasapprovedbyourboardofdirectorsinOctober2018.Formoreinformationonoursharerepurchases,see“Item16E.PurchasesofEquitySecuritiesbytheIssuerandAffiliatedPurchasers.”

Cash Flows in 2018

Ourcashandcashequivalentsatthebeginningof2018amountedtoR$66.8million.

OurProfitbeforeincometaxesin2018,asdiscussedabove,wasR$1,217.6million.

Theadjustmentsforrevenue,incomeandexpensesrecordedinourstatementofincomein2018butwhichdidnotaffectourcashflowstotaledthepositiveamountofR$454.8million,mainlyduetoR$264.2millionofShare-basedlong-termincentiveplan(LTIP)expenses,R$71.5millioninChargebacksandR$95.4millionofDepreciationandamortizationrecordedinourstatementofincome.Sharebasedlong-termincentiveplan(LTIP)relatestoexpensesforequityawardsundertheLTIP.Chargebacksrelatetoamountsthatweinitiallyrecordedasrevenuesbutforwhichwedidnotreceivetherelatedcashpaymentduetofraud.

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Theadjustmentsforchangesinouroperatingassetsandliabilitiesin2018amountedtonegativecashflowsofR$1,954.2million:

• OurNotereceivablesitem,whichispresentednetoftransactioncostsandfinancialexpensesweincurwhenweelecttoreceiveearlypaymentofthenotereceivablesowedtousbycardissuers,consistsofthedifferencebetweentheopeningandclosingbalancesoftheNotereceivablesitemofCurrentAssetsonourbalancesheet(R$8,104.7millionatyear-end2018versusR$3,522.3millionatyear-end2017)excludinginterestincomereceivedincashandchargebacks,whicharepresentedseparatelyinthestatementofcashflows.NotereceivablesrepresentednegativecashflowofR$5,048.5millionintheyearendedDecember31,2018.FromtheR$5,048.5millionofnegativecashflow,R$1,737.5millionwasfromnotereceivablesforwhichwereceivedearlypaymentfromissuingbanksasofDecember31,2017andwhichweresubsequentlyrepaidduring2018withourIPOprimaryshareproceeds.Wedonotexpectthislineitemtohaveanyfurtherimpactonourcashflowin2019.TheremainingR$3,310.9millionnegativecashflowisrelatedtoTPVgrowthintheyearendedDecember31,2018.

• OurPayablestothirdpartiesitem,whichispresentednetofrevenuefromtransactionactivitiesandfinancialincomewereceivewhenmerchantselecttoreceiveearlypayments,consistsofthedifferencebetweentheopeningandclosingbalancesofthePayablestothirdpartiesitemofCurrentLiabilitiesonourbalancesheet(R$4,324.2millionatyear-end2018versusR$3,080.6millionatyear-end2017).PayablestothirdpartiesrepresentedpositivecashflowofR$1,243.7millionin2018.

• OurReceivablesfrom(payablesto)relatedpartiesitemconsistsofthedifferencebetweentheopeningandclosingbalancesoftheReceivablesfromrelatedpartiesitem(i.e.,UOL)ofCurrentAssetsonourbalancesheet(nobalanceatyear-end2018versusR$124.7millionatyear-end2017)offsetbythedifferencebetweentheopeningandclosingbalancesofthePayablestorelatedpartiesitem(i.e.,UOL)ofCurrentLiabilitiesonourbalancesheet(R$30.8millionatyear-end2018versusR$39.1millionatyear-end2017),whichrepresentedmovementsinourtreasurycashpositionwithUOLpriortothecompletionofourIPO.Receivablesfrom(payablesto)relatedpartiesrepresentedpositivecashflowofR$112.8millionintheyearendedDecember31,2018.FormoreinformationonourtreasurycashpositionwithUOL,seeNote9toourauditedconsolidatedfinancialstatements.OurcashmanagementhasbeenseparatefromUOL’scashmanagementstartingfromthedateofcompletionofourIPO,andallsuchbalanceswererepaidbyUOL.

• OurInventoriesitemrepresentschangesinthecarryingvalueoftheInventoriesitemofCurrentAssetsonourbalancesheet.ThisitemrepresentednegativecashflowofR$47.0millionin2018.

• OurSalariesandsocialchargesitemrepresentsamountsthatwererecordedonourstatementofincome,butwhichremainedunpaidatyear-end,principallybecausetheyrelatedtothefinalmonthoftheyear.ThisitemrepresentedpositivecashflowofR$39.3millionin2018.

• OurTaxesandcontributionsitemrepresentssalestaxes(ISS,ICMS,PISandCOFINS).ThisitemrepresentedpositivecashflowofR$31.8millionin2018.

SinceourstatementofcashflowsbeginswithourProfitbeforeincometaxes,italsoadjustsforcashamountspaidinrespectofourincometaxandsocialcontribution,whichtotaledR$203.6millionduringtheyearendedDecember31,2018.Ourstatementofcashflowsalsoadjustsforinterestincomereceived,whichrepresentedapositivecashflowofR$394.6millionin2018.

Asaresultoftheabove,ourNetCashusedinoperatingactivitiesin2018totaledR$1,763.2million,ofwhichR$1,737.5millionwasfromnotereceivablesforwhichwereceivedearlypaymentfromissuingbanksasofDecember31,2017andwhichweresubsequentlyrepaidduring2018withourIPOprimaryshareproceeds.

OurCashflowsusedininvestingactivitiesin2018totaledR$44.3million.ThisamountconsistedofR$211.1millioninredemptionsoffinancialinvestments,representingtotalcashthatwewithdrewduringtheyear.WealsoinvestedR$192.0millioninpurchasesanddevelopmentofintangibleassets,whichrepresentpurchasesofthird-partysoftwareandsalariesandotheramountsthatwepaidtodevelopinternallysoftwareandtechnology,whichwecapitalizeasintangibleassets.Formoreinformationonourintangibleassets,seeNote12toourauditedconsolidatedfinancialstatements.

OurCashflowsprovidedbyfinancingactivitiesin2018totaledR$4,503.8million,consistingofR$4,717.9millionrepresentingourJanuary2018IPOproceedsandJune2018follow-onofferingproceeds,lessR$189.9millionrepresentingtransactioncosts,bothofwhichrelatedtoourJanuary2018IPOandJune2018follow-onoffering.During2018wealsorepurchasedR$39.5millioninClassAcommonsharesaccordingtooursharerepurchaseprogram.ForfurtherinformationseeNotes1and18toourauditedcondensedconsolidatedfinancialstatementsand“Item16E.PurchasesofEquitySecuritiesbytheIssuerandAffiliatedPurchasers.”

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AfteraccountingforthetotalincreaseinCashandcashequivalentsofR$2,696.3milliondiscussedabove,ourCashandcashequivalentsatthecloseof2018amountedtoR$2,763.0million.

Cash Flows in 2017


OurProfitbeforeincometaxesin2017,asdiscussedabove,wasR$683.5million.

Theadjustmentsforrevenue,incomeandexpensesrecordedinourstatementofincomein2017butwhichdidnotaffectourcashflowstotaledthepositiveamountofR$103.7million,principallyreflectingR$47.9millionofChargebacksandR$51.6millionofDepreciationandamortizationrecordedinourstatementofincome,whicharedetailedinNote21toourauditedconsolidatedfinancialstatements.Chargebacksrelatetoamountsthatweinitiallyrecordedasrevenuesbutforwhichwedidnotreceivetherelatedcashpaymentduetofraud.

Theadjustmentsforchangesinouroperatingassetsandliabilitiesin2017amountedtonegativecashflowsofR$366.7million.OurNotereceivablesitem,whichispresentednetoftransactioncostsandfinancialexpensesweincurwhenweelecttoreceiveearlypaymentofthenotereceivablesowedtousbycardissuers,representedreductionofcashflowofR$2,060.9million(NotereceivablesonourbalancesheetwereR$3,522.3millionatyear-end2017versusR$1,715.5millionatyear-end2016)excludinginterestincomereceivedincashandchargebacks,whicharepresentedseparatelyinthestatementofcashflows.OurPayablestothirdpartiesitem,whichispresentednetofrevenuefromtransactionactivitiesandfinancialincomewereceivewhenmerchantselecttoreceiveearlypayments,representedpositivecashflowofR$1,776.5million(PayablestothirdpartiesonourbalancesheetwereR$3,080.6millionatyear-end2017versusR$1,304.0millionatyear-end2016).OurReceivablesfrom(payablesto)relatedpartiesitemrepresentednegativecashflowofR$64.4million(Receivablesfromrelatedpartiesitem,i.e.,UOL,ofCurrentAssetsonourbalancesheetwereR$124.7millionatyear-end2017versusR$300.8millionatyear-end2016;andPayablestorelatedpartiesitem,i.e.,UOL,ofCurrentLiabilitiesonourbalancesheetwereR$39.1millionatyear-end2017versusR$76.2millionatyear-end2016).InventoriesrepresentednegativecashflowofR$40.6million;andSalariesandsocialchargesrepresentedpositivecashflowofR$13.3million.

WepaidincometaxesandsocialcontributionsincashtotalingR$166.4millionandwerecordedapositivecashflowofR$208.6millionandanegativecashflowofR$9.2millionrelatedtointerestincomereceivedincashandinterestpaid,respectively,duringtheyear.

Asaresultoftheabove,ourNetCashprovidedbyoperatingactivitiesin2017totaledR$453.6million.

OurCashflowsusedininvestingactivitiesin2017totaledR$207.2million.ThisamountconsistedofR$77.5millioninacquisitionsoffinancialinvestmentsnetofredemptionsoffinancialinvestments,representingtotalcashthatwewithdrewduringtheyear,lesstheR$22.2millionwepaidforouracquisitionsofR2Tech,BCPSandBIVA.WealsoinvestedR$99.7millioninpurchasesanddevelopmentofintangibleassets,whichrepresentpurchasesofthirdpartysoftwareandthesalariesandotheramountsthatwepaidtodevelopinternallyoursoftwareandtechnology,whichwecapitalizeasintangibleassets.Formoreinformationonourintangibleassets,seeNote12toourauditedconsolidatedfinancialstatements.

OurCashflowsusedinfinancingactivitiesin2017totaledR$259.6million,consistinginpartofR$199.5millionrepresentingtherepaymentofourtwooutstandingborrowingsandR$5.8millionrepresentingtheliquidationofderivativefinancialinstruments(swaps)relatingtothoseborrowingsduringtheyear.Forfurtherinformationonourborrowings,see“—LoansandFinancing.”Furthermore,onSeptember29,2017,PagSeguroBrazil’sshareholdersapprovedadistributionofR$238.8millionindividends.Thisamountconsistedof(i)R$142.8millionofdividendsrelatedtothesix-monthperiodendedJune30,2017and(ii)R$96.0millionindividendsrelatedtotheyearendedDecember31,2016.Formoreinformationregardingthe2016dividend,seeNote18toourauditedconsolidatedfinancialstatements.

TheR$238.8millionindividendsweredistributedonSeptember29,2017inthefollowingmanner:(i)R$54.3millionpaidincashand(ii)R$184.5millionoffsetagainstamountsthenduetoPagSeguroBrazilandBoaCompraunderourcentralizedcashmanagementwithUOL.ForfurtherinformationonourcentralizedcashmanagementwithUOL,see“PresentationofFinancialandOtherInformation—CorporateEvents—The2015Reorganization.”

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Inaddition,subjecttocertainlimitations,Braziliancompaniesgenerallyalsodistributeamountsinrespectofinterestonowncapital,whichiscalculatedbasedonagovernmentinterestrate.Inits2016financialstatementsPagSeguroBrazilrecordedanamountofR$22.2millionininterestonowncapitalpayabletoUOL.ThisamountwaspaidtoUOLonApril30,2017,althoughthepaymentwasoffsetinfullagainstamountsthenduetoPagSeguroBrazilandBoaCompraunderourcentralizedcashmanagementwithUOL,ratherthanbeingpaidincash.

AfteraccountingforthetotaldecreaseinCashandcashequivalentsofR$13.2milliondiscussedabove,ourCashandcashequivalentsatthecloseof2017amountedtoR$66.8million.

Cash Flows in 2016


OurProfitbeforeincometaxesin2016,asdiscussedabove,wasR$155.4million.

Theadjustmentsforrevenue,incomeandexpensesrecordedinourstatementofincomein2016butwhichdidnotaffectourcashflowstotaledthepositiveamountofR$75.6million,principallyreflectingthepositiveamountofR$31.6millionofChargebacksandthepositiveamountofR$31.2millionofDepreciationandamortizationrecordedinourstatementofincome,whicharedetailedinNote21toourauditedconsolidatedfinancialstatements.Alsoin2016,werecordedanunrealizedlossofR$6.6milliononderivativeinstruments(swaps).

Theadjustmentsforchangesinouroperatingassetsandliabilitiesfor2016amountedtonegativecashflowsofR$282.2million.OurNotereceivablesitem,whichispresentednetoftransactioncostsandfinancialexpensesweincurwhenweelecttoreceiveearlypaymentofthenotereceivablesowedtousbycardissuers,representednegativecashflowofR$784.0million(NotereceivablesonourbalancesheetwereR$1,715.5millionatyear-end2016versusR$1,110.0millionatyear-end2015)excludinginterestincomereceivedincashandchargebacks,whicharepresentedseparatelyinthestatementofcashflows.OurPayablestothirdpartiesitem,whichispresentednetofrevenuefromtransactionactivitiesandfinancialincomewereceivewhenmerchantselecttoreceiveearlypayments,representedpositivecashflowofR$620.9million(PayablestothirdpartiesonourbalancesheetwereR$1,304.0millionatyear-end2016versusR$683.1millionatyear-end2015).OurReceivablesfrom(payablesto)relatedpartiesitemrepresentednegativecashflowofR$214.5million(Receivablesfromrelatedparties,i.e.,UOL,wereR$300.8millionatyear-end2016versusR$55.9millionatyear-end2015;andpayablestorelatedparties,i.e.,UOL,wereR$76.2millionatyear-end2016versusR$92.4millionatyear-end2015).InventoriesrepresentedpositivecashflowofR$20.2million;andSalariesandsocialchargesrepresentedpositivecashflowofR$6.6million.TaxesandcontributionsrepresentedpositivecashflowofR$3.9million.

WepaidincometaxesandsocialcontributionsincashtotalingR$18.1millionandwerecordedapositivecashflowofR$146.3millionrelatedtointerestincomereceivedduringtheyear.

Asaresultoftheabove,ourNetCashprovidedbyoperatingactivitiesin2016totaledR$77.0million.

OurCashflowsusedininvestingactivitiesin2016totaledR$203.3million.ThisamountconsistedofacquisitionoffinancialinvestmentsofR$337.1million,representingtotalcashthatweinvestedinshort-termdepositsduringtheyear,lessR$206.2millioninredemptionsoffinancialinvestments,representingtotalcashthatwewithdrewfromtheseshort-termdepositsduringtheyear.WealsoinvestedR$70.4millioninpurchasesanddevelopmentofintangibleassets,whichrepresentpurchasesofthirdpartysoftwareandthesalariesandotheramountsthatwepaidtodevelopinternallythesoftwareandtechnology,whichwecapitalizeasintangibleassets.Formoreinformationonourintangibleassets,seeNote12toourauditedconsolidatedfinancialstatements.

OurCashflowsfromfinancingactivitiesin2016providedtotalcashflowsofR$199.4million,whichwereceivedastheproceedsoftheborrowingsweincurredduringtheyear.

AfteraccountingforthetotalincreaseinCashandcashequivalentsofR$73.1milliondiscussedabove,ourCashandcashequivalentsatthecloseof2016amountedtoR$80.0million.

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Loans and Financings

Wehadnothird-partyborrowingsatDecember31,2018,sincewesatisfiedourfundingandworkingcapitalrequirementsduringthisyearthroughourJanuary2018IPOproceedsandJune2018follow-onofferingproceeds.WehadnothirdpartyborrowingsatDecember31,2017,sincewesatisfiedourfundingandworkingcapitalrequirementsinthisyear(i)throughthecashgeneratedbyourbusinesses,(ii)byobtainingearlypaymentofnotereceivablesduetousfromthecardissuersandacquirers,aswellas(iii)throughourowncapital.Ourtotalthird-partyborrowingsamountedtoR$205.2millionatDecember31,2016.

InJuly2016,weobtainedaloanintheamountofUS$40.0million(approximatelyR$129.4millionapplyingexchangeratesineffectatthetime),whichmaturedinJanuary2017.InSeptember2016,weobtainedafurtherloanintheamountofUS$21.8million(approximatelyR$70.0millionapplyingexchangeratesineffectatthetime),whichmaturedinMarch2017.Wepurchasedswapstoprovideprotectionagainstexchangeratefluctuationsforbothloans.Neitherofthesecreditagreementscontainsanyprovisionsrequiringustoprovidecollateralorcomplywithanyfinancialcovenants.

Theseloanswererepaidonscheduleinthefirsthalfof2017andwehaveincurrednonewborrowingssincethen.Asdiscussedabove,weareincreasinglyfinancingourservicesandfeaturesbyobtainingearlypaymentofreceivablesowedtousfromacquirersandcardissuers,inordertofinancetheearlypaymentofreceivablesfeaturethatweoffertoourmerchantclients.

Forfurtherinformationonourfinancingactivities,seeNote24toourauditedconsolidatedfinancialstatements.

Capital Expenditures

Thenettotalofourcapitalexpenditures(purchasesofpropertyandequipmentandpurchasesanddevelopmentofintangibleassets),foreachoftheyearsendedDecember31,2018,2017and2016wereR$253.6million,R$107.6millionandR$72.4million,respectively,mostofwhichrelatedtodataprocessingequipment,facilities,machineryandequipment,furnitureandfittings,leaseholdimprovements,vehicles,softwareandtechnology,allinBrazil.

Forfurtherinformationonourcapitalexpenditures,seeNotes11and12toourauditedconsolidatedfinancialstatements.

Commitments and Contractual Obligations

OurcontractualobligationsatDecember31,2018consistedofobligationstopurchasePOSdevicesandplatformtechnologyforouracquireroperationsasfollows: At December 31, 2018

Less than

1 year 1 to 3years

3 to 5years

More than5 years Total

(R$ millions) POSdevicepurchases 409.6 — — — 409.6 Acquirerplatformtechnology 3.4 2.0 — — 5.4

Total 413.0 2.0 — — 415.0

Off-Balance Sheet Arrangements

Otherthanthecontractualobligationsshownabove,wedonothaveanyoff-balancesheetarrangementsanddidnothaveanysucharrangementsfortheyearsendedDecember31,2018,2017or2016.

Critical Accounting Estimates and Judgments

Thepreparationoffinancialstatementsrequirestheuseofcertaincriticalaccountingestimates.Italsorequiresmanagementtoexerciseitsjudgmentintheprocessofapplyingouraccountingpolicies.Theareasinvolvingahigherdegreeofjudgmentorcomplexity,orareaswhereassumptionsandestimatesaresignificanttothefinancialstatements,aredescribedbelowandinNote3toourauditedconsolidatedfinancialstatements.

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Accountingestimatesandjudgmentsarecontinuallyevaluatedandarebasedonhistoricalexperienceandotherfactors,includingexpectationsoffutureeventsthatarebelievedtobereasonableunderthecircumstances.Basedonassumptions,PagSeguroDigitalmakesestimatesconcerningthefuture.Theresultingaccountingestimateswill,bydefinition,seldomequaltherelatedactualresults.Theestimatesandassumptionsthathaveasignificantriskofcausingamaterialadjustmenttothecarryingamountsofassetsandliabilitieswithinthenextfinancialyearareaddressedbelow:

Estimated useful life of intangible assets

PagSeguroDigitalusesanestimatedusefullifetocalculateandrecordtheamortizationappliedtoitsintangibleassetswhichmaydifferfromtheactualtermoverwhichtheintangibleassetsareexpectedtogeneratebenefitsforPagSeguroDigital.

Theamortizationofsoftwareusagerightsisdefinedbasedontheeffectiveperiodofthelicensecontracted.

Theamortizationofinternallydevelopedsoftwareisdefinedbasedontheperiodoverwhichthesoftwarewillgeneratefutureeconomicbenefits.

Deferred income tax and social contribution

PagSeguroDigitalrecognizesdeferredincometaxandsocialcontributionbasedonfuturetaxableprofitestimatesforthenexttenyears.Theseprojectionsareperiodicallyreviewedandapprovedbymanagement.

Provision for contingencies

PagSeguroDigitalrecognizesprovisionsforcivilandlaborsuits.Werecognizeprovisionsforlegalproceedingsinourfinancialstatementswhenweareadvisedbyindependentoutsidecounselthat(i)itisprobablethatanoutflowofresourceswillberequiredtosettletheobligation,and(ii)areliableestimatecanbemadeoftheamountoftheobligation.Theassessmentofprobabilityoflossincludesassessingtheavailableevidenceandjurisprudence,thehierarchyoflawsandmostrecentcourtdecisions.Provisionsarereviewedandadjustedtotakeintoaccountchangesincircumstancessuchastheapplicablelimitationperiod,findingsoftaxinspectionsandadditionalexposuresidentifiedbasedonnewissuesordecisionsofcourts.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Directors and Senior Management

Board of Directors

Ourboardofdirectorsisresponsiblefor,amongotherthings,establishingouroverallstrategyandgeneralbusinesspolicies,supervisingmanagement,electingandremovingourexecutiveofficers,andappointingourindependentauditors.

Ourboardofdirectorsiscomposedofsevenmembers.Eachdirectorholdsofficefortheterm,ifany,fixedbytheshareholders’resolutionthatappointedhimorheror,ifnotermisfixedontheappointmentofthedirector,untiltheearlierofhisorherdeath,resignationorremoval.Directorsappointedbytheboardofdirectorsholdofficeuntilthenextannualgeneralmeeting.OurdirectorsdonothavearetirementagerequirementunderourArticlesofAssociation.MariaJudithdeBritowasappointedtoourboardofdirectorsonJuly19,2017,LuizFrias,EduardoAlcaroandRicardoDutradaSilvawereappointedonDecember18,2017,NoemiaGushikenwasappointedonJanuary23,2018,MarcosdeBarrosLisboawasappointedonApril13,2018,andClevelandPratesTeixeirawasappointedonDecember18,2018,effectiveJanuary1,2019.Allcurrentmembersofourboardofdirectorshavebeenappointedtoserveforanindefiniteperiod.

Wedonothaveanyservicecontractswithourexecutivedirectorsthatprovidebenefitsuponterminationofemployment.

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Thetablebelowsetsforthcertaininformationofthecurrentmembersofourboardofdirectors:Name Title Date of BirthLuizFrias Chairman April6,1963EduardoAlcaro Director April26,1972MariaJudithdeBrito Director April30,1958RicardoDutradaSilva Director December1,1975NoemiaGushiken* Director November3,1972MarcosdeBarrosLisboa* Director August2,1964ClevelandPratesTeixeira* Director August15,1966* IndependentaccordingtoSECandNYSErules.

Thefollowingisabriefsummaryofthebusinessexperienceofourcurrentdirectors.Unlessotherwiseindicated,thecurrentbusinessaddressforourdirectorsisAv.BrigadeiroFariaLima,1384,4ºandar,parteA,SãoPaulo,SP,01451-001,Brazil.

Luiz Frias. Mr.FriashasbeentheChairmanofourboardofdirectorsandourPrincipalExecutiveOfficersinceDecember18,2017.HejoinedGrupoFolhain1981andhasbeenitsprincipalexecutiveofficersince1989.InthatcapacityheledGrupoFolha’sexpansionintovariousnewmarkets,suchascommercialprinting(throughPlural,apartnershipwithQuadGraphics)ande-commercelogistics(throughTransfolha).In1996,hefoundedUOL,apioneeringBrazilianInternetcompany.AsPrincipalExecutiveOfficerandChairmanoftheBoardofDirectorsofUOL,hehasexpandedUOL’sbusiness,throughorganicgrowthandmorethan20acquisitions,tocoverdigitalcontentandproducts,e-learningandcloud/ITservices,aswellasthePagSegurofinancialtechnologybusiness.Heholdsabachelor’sdegreeineconomicsfromtheUniversityofSãoPaulo(Universidade de São Paulo – USP ).

Eduardo Alcaro. Mr.AlcarohasbeenamemberofourboardofdirectorsandourChiefFinancialandInvestorRelationsOfficerandChiefAccountingOfficersinceDecember18,2017.HehasbeentheChiefFinancialOfficeroftheUOLgroupandExecutiveOfficeroftheFolhaGroupsince2011.Heholdsabachelor’sdegreeinbusinessadministrationfromtheGetulioVargasFoundation(Fundação Getulio Vargas – FGV-SP )inSãoPaulo.Beforejoiningourgroup,Mr.Alcaroheldseveralpositions,includingFinanceVicePresidentatWalmartBrazilfrom2008to2011,FinancialPlanningandInvestorsRelationsDirectoratWalmartUSAfrom2006to2008,Mergers&AcquisitionsDirectoratWalmartInternationalfrom2003to2006,FinanceManageratWalmartBrazilfrom1997to2003andAuditoratPricewaterhouseCoopersfrom1992to1997.

Maria Judith de Brito. Mrs.deBritohasbeenamemberofourboardofdirectorssinceJuly19,2017.Shehasalsobeenheadofhumanresources,legalmattersandinstitutionalrelationsoftheUOLgroupsinceitscreationin1996,andhasbeentheViceChairmanofUOL’sboardofdirectorssince2005.ShehasworkedforGrupoFolhasince1990,andisthecurrentSuperintendentofGrupoFolha.Sheholdsabachelor’sdegreeinpublicadministrationfromtheGetulioVargasFoundation(Fundação GetulioVargas – FGV-SP )inSãoPauloandamaster’sdegreeinpoliticalsciencefromthePontificalCatholicUniversityofSãoPaulo(Pontifícia Universidade Católica de SãoPaulo – PUC-SP ).Mrs.deBritowasaprofessoroftheundergraduatecourseinBusinessAdministrationattheGetulioVargasFoundationfrom1986to1990,andprofessorofthegraduateprograminjournalismatESPM(Escola Superior de Propaganda e Marketing )from2011to2013.ShewaspresidentoftheNationalNewspaperAssociation(Associação Nacional de Jornais )from2008to2012,andiscurrentlyamemberoftheboardofABECS.

Ricardo Dutra da Silva .Mr.DutrahasbeenamemberofourboardofdirectorsandourExecutiveOfficersinceDecember18,2017.HehasbeenChiefExecutiveOfficerofPagSeguroBrazilandChiefExecutiveOfficerofUOLDigitalContentandProductssince2016.Mr.DutraworkedfortheUOLgroupfrom1997to2005,holdingmanagementpositionsinoperations,marketingandsales,andrejoinedthegroupin2009asCountryManageratUOLArgentinainBuenosAires,whereheserveduntil2010.Heholdsabachelor’sdegreeinelectrical/industrialengineeringfromtheIndustrialEngineeringUniversity(Centro Universitário da Faculdade de Engenharia Industrial –FEI ),apost-graduatedegreeinbusinessfromtheGetulioVargasFoundation(Fundação Getulio Vargas –FGV )inSãoPaulo,andafull-timeMBAfromDardenGraduateSchoolofBusinessAdministrationattheUniversityofVirginia.PriortorejoiningUOL,hewasamanagementconsultantatBain&Companyfrom2007to2009.

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Noemia Gushiken .Ms.GushikenhasbeenamemberofourboardofdirectorssinceJanuary23,2018.Shehasmorethan20yearsofexperienceinthetechnologyandconsumerindustries.SheadvisesandassistscompaniesinBrazilinoperations,management,andlegal,corporategovernanceandcompliancematters.SheisalsoapartneratEsper,GushikenAdvogados.Ms.Gushikenservedasstrategicadvisorforfamilyofficesandstart-upsinBrazil,aswellastheoperationsdirectoratCervejaProibidafrom2013to2017,legalcounselatMicrosoftfrom2007to2013,andastheheadoflegalatUOLfrom2000to2007.ShehasalsorepresentedthesecompaniesinindustryassociationsandcorporateaffairsinitiativesinBrazil.Sheholdsalawdegreeandapost-graduatedegreeinCommercialandCorporateLaw,bothfromthePontificalCatholicUniversityofSãoPaulo(Pontifícia Universidade Católica de São Paulo – PUC ).Ms.GushikenalsostudiedJapaneseConstitutionalLawattheUniversityofShizuoka–Japanfrom1993to1994.SheisadmittedtotheBrazilianBarinSãoPaulo.

Marcos de Barros Lisboa .Mr.LisboahasbeenamemberofourboardofdirectorssinceApril13,2018.Mr.Lisboaholdsabachelor’sdegreeandamaster’sdegree,bothineconomics,fromtheFederalUniversityofRiodeJaneiro(Universidade Federal do Rio de Janeiro ).HealsohasaPh.D.ineconomicsfromtheUniversityofPennsylvania.HewasanassistantprofessorintheeconomicsdepartmentatStanfordUniversityfrom1996to1998andanassistantprofessorattheSchoolofEconomicsofGetulioVargasFoundation(Fundação Getulio Vargas )from1998to2002.Since2013,hehasworkedatInsper,abusiness,economicsandengineeringschool,initiallyasvice-presidentand,since2015,aspresident.From2003to2005,Mr.LisboaservedasSecretaryofEconomicPolicyfortheBrazilianFederalMinistryofFinance.HealsoservedaspresidentoftheInstitutodeRessegurosdoBrasilfrom2005to2006and,from2006to2013,heworkedatItaú-Unibanco,whereheservedasvice-presidentfrom2009to2013.

Cleveland Prates Teixeira .Mr.Teixeiraholdsamaster’sdegreeinEconomicsfromGetulioVargasFoundation(Fundação Getulio Vargas – FGV-SP )inSãoPauloandabachelor’sdegreeineconomicsfromtheUniversityofSãoPaulo(Universidade de São Paulo – USP ).From2002to2004,heservedasaCommissioneroftheAdministrativeCounselforEconomicDefense(Conselho Administrativo de Defesa Econômica – CADE ),theBrazilianantitrustagency,andfrom1999to2002,heservedasDeputySecretaryforEconomicMonitoring(Secretaria de Acompanhamento Econômico – SEAE )oftheBrazilianMinistryofFinance,andasCoordinatorGeneralofTradeandServicesandCartelProsecutionforthesamedepartment.In2002,hewasamemberoftheFederalFundfortheDefenseofCollectiveRightsoftheBrazilianMinistryofJustice,andfrom2006to2008,hewasCounciloftheBrazilianInstituteofEconomics(Instituto Brasileiro de Economia – IBRE )atGetulioVargasFoundation(FundaçãoGetulio Vargas – FGV ).Since2007,hehastaughtcoursesonMicroeconomics,EconomicAnalysisofLaw,AntitrustandRegulationattheGVLawgraduateprogramatthelawschoolofGetulioVargasFoundation(Fundação Getulio Vargas – FGV-SP )inSãoPaulo,andhascoordinatedacourseinMarketRegulationattheFoundationInstituteofEconomicResearch(Fundação Instituto de Pesquisas Econômicas – FIPE ).HeisalsotheManagingPartnerofMicroanalysisConsultoriaEconômica,havingworkedoneconomicissuesandcoordinatedprojectsinfinancial,regulatoryandcompetitionaffairsinvarioussectorsoftheeconomy,includingconsultancytobothnationalandinternationalgovernmentagencies,suchastheAppliedEconomicResearchInstitute(Instituto de Pesquisa Econômica Aplicada – IPEA ),theUnitedNationsConferenceonTradeandDeveloment(UNCTAD)andtheWorldBank.

Executive Officers

Ourexecutiveofficersareprimarilyresponsiblefortheday-to-daymanagementofourbusinessandforimplementingthegeneralpoliciesanddirectivesestablishedbyourboardofdirectors.Ourboardofdirectorsisresponsibleforestablishingtherolesofeachexecutiveofficer.Ourexecutiveofficerswereappointedbyourboardofdirectorsforanindefiniteterm.

Thetablebelowshowsourcurrentexecutiveofficers:Name Title Date of BirthLuizFrias PrincipalExecutiveOfficer April6,1963

EduardoAlcaro ChiefFinancialandInvestorRelationsOfficerandChiefAccountingOfficer April26,1972

RicardoDutradaSilva ExecutiveOfficer December1,1975

ThebusinessaddressofeachofourexecutiveofficersisAvenidaBrigadeiroFariaLima,1384,01452-002SãoPaulo–SP,Brazil.

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Audit Committee

Ourboardofdirectorshasestablishedanauditcommittee.Memberswillserveonthiscommitteeuntiltheearliestof(1)themomenttheyceasetobeadirector,(2)theirresignationor(3)asotherwisedeterminedbyourboardofdirectors.Ourauditcommitteecurrentlyconsistsofthreemembers,includingMarcosdeBarrosLisboa,NoemiaGushikenandClevelandPratesTeixeira.Allofourauditcommitteememberssatisfythe“independence”requirementsoftheNYSErulesandmeettheindependencestandardsunderRule10A-3undertheExchangeAct.NoemiaGushikensatisfiesthecriteriaofanauditcommitteefinancialexpertassetforthundertheapplicablerulesoftheSEC.

Theauditcommitteeoverseesouraccountingandfinancialreportingprocessesandtheauditsofourfinancialstatements.Ourauditcommitteeisresponsiblefor,amongotherthings:

• selectingourindependentauditor,approvingrelatedfeesandterminatingourrelationshipwithourindependentauditorinthecommittee’sdiscretion;

• pre-approvingauditandnon-auditservicespermittedtobeperformedbytheindependentauditor;

• annuallyreviewingtheindependentauditor’sreportdescribingtheauditingfirm’sinternalqualitycontrolprocedures,anymaterialissuesraisedbythemostrecentinternalqualitycontrolreview,orpeerreview,oftheindependentauditorsandallrelationshipsbetweentheindependentauditorandourcompany;

• reviewingwiththeindependentauditoranyauditproblemsordifficultiesandmanagement’sresponse,aswellasresolvinganydisagreementsbetweenmanagementandtheindependentauditorregardingfinancialreporting;

• reviewinganddiscussingtheannualauditedfinancialstatementswithmanagement,internalauditteam(orthird-serviceproviderperformingthisfunction)andtheindependentauditor,aswellasquarterlyunauditedfinancialstatements;

• reviewinganddiscussingwithmanagementandtheindependentauditorsmajorissuesregardingaccountingprinciplesandfinancialstatementpresentations;

• discussingearningspressreleaseswithmanagement,aswellasfinancialinformationandearningsguidanceprovidedtoanalystsandratingagencies;

• reviewingtheeffectofregulatoryandaccountinginitiatives,aswellasoff-balancesheetstructures,onourfinancialstatements;

• overseeingourdisclosurecontrolsandproceduresandinternalcontroloverfinancialreporting;

• assessingandmonitoringourriskexposures,aswellasthepoliciesandguidelineswithrespecttoriskmanagement;

• timelyreviewingreportsfromtheindependentauditorregardingallcriticalaccountingpoliciesandpracticestobeusedbyourcompany,allalternative

treatmentsoffinancialinformationwithinIFRSthathavebeendiscussedwithmanagementandallothermaterialwrittencommunicationsbetweentheindependentauditorandmanagement;

• establishingproceduresforthereceipt,retentionandtreatmentofcomplaintsreceivedbyourcompanyregardingaccounting,internalaccountingcontrolsorauditingmatters,andtheconfidential,anonymoussubmissionbyouremployeesofconcernsregardingquestionableaccountingorauditingmatters;

• analyzingourrelated-partytransactionsbasedonourpolicyforthesetransactions;

• periodicallyreviewingandreassessingtheadequacyofourauditcommitteecharter;

• anyothermattersthatarespecificallydelegatedtoourauditcommitteebyourboardofdirectorsfromtimetotime;

• periodicallymeetingwithmanagement,internalauditteam(orthird-partyserviceprovidersperformingthisfunction)andtheindependentauditors,separately;and

• reportingregularlytothefullboardofdirectors.

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Duties of Directors

Directorsareresponsibletothecompanyandnot,intheabsenceofspecialcircumstances,totheshareholdersasindividuals.Forthepurposesofdescribingdirectors’duties,thecompanyisgenerallydefinedwithreferencetotheinterestsofbothpresentandfutureshareholdersofthecompanyasawhole.UnderCaymanIslandslaw,adirectorowestwotypesofdutiestothecompany:fiduciarydutiesanddutiesofskillandcare.Infulfillingtheirdutyofcaretous,ourdirectorsmustensurecompliancewithourMemorandumandArticlesofAssociation,asamendedandrestatedfromtimetotime.Youshouldreferto“Item10.AdditionalInformation—MemorandumandArticlesofAssociation—PrincipalDifferencesbetweenCaymanIslandsandU.S.CorporateLaw”foradditionalinformationonourstandardofcorporategovernanceunderCaymanIslandslaw.

Compensation

Management Compensation

Ourexecutiveofficers,directorsandmanagementreceivefixedandvariablecompensation.TheyalsoreceivebenefitsinlinewithmarketpracticeinBrazil.Thefixedcomponentoftheircompensationissetonmarkettermsandadjustedannually.

Thevariablecomponentconsistsofcashbonusesandawardsofrestrictedshares(orthecashequivalent)undertheLTIP,asdiscussedbelow.Cashbonusesarepaidtoexecutiveofficersandmembersofourmanagementbasedonthepreviouslyagreedcorporateresults-sharingplan(plano de participações nos resultados )andoveralltargetsforthebusiness.

CertainofourdirectorsandofficersreceivecompensationfromUOLforservicesrenderedtoPagSeguro.TherelatedcostisapportionedbetweenUOLandPagSeguroinaccordancewiththeservicesthatarerendered.

TheaggregatecompensationpaidtotheexecutiveofficersofPagSeguroBrazilin2018wasR$99.3million.Thisincludesbenefitspaidinkindandvariablecompensation.

Long-Term Incentive Plan – Goals

LTIP-GoalswasestablishedatPagSeguroBrazilonDecember18,2018,asapprovedbyourboardofdirectors.Currently,nobeneficiariesofLTIP-Goalshavebeennamedandassuch,nonewClassAcommonshareshavebeenissuedundertheLTIP-Goals.WebelievetheLTIP-Goalswillhelpusattractandretainindividualswhohaveahighpotentialtocontributetooursuccess,andfurtheraligntheirinterestswithours.BeneficiariesundertheLTIP-GoalswillbeselectedbytheLTIP-GoalsCommittee,whichconsistsofourChairmanofourboardofdirectorsandtwoofficersofUOL.

BeneficiariesundertheLTIP-Goalswillbegrantedawards,whichmaybepayableincash,ClassAcommonsharesoracombinationofthetwo,atthediscretionoftheLTIP-GoalsCommitteebasedonthegoalsestablishedinourcorporateresults-sharingplanforanygivenyear.IfanyportionofanawardispayableinClassAcommonshares,therelevantvaluewillbeconvertedintoClassAcommonsharesonthelastbusinessdayofJanuaryfollowingtheyearforwhichsuchamountwasawarded.

WeexpectthatallofthedirectorsofPagSeguroDigitalLtd.,exceptforNoemiaGushiken,MarcosdeBarrosLisboaandClevelandPratesTeixeira,willbenamedbeneficiariesundertheLTIP-Goals.

Ifabeneficiaryisdismissedbyus,resigns,retiresordiesbeforeofanygivenyear,thebeneficiarywillnotbeentitledtoanyawardsundertheLTIP-Goalsforthatyear.Ifabeneficiaryisdismissedbyus,resigns,retiresordiesaftertheendofanygivenyear,butbeforethedateonwhichthevalueofsuchbeneficiary’sawardisconvertedintoourClassAcommonshares,thebeneficiarywillbeentitledtohisorherawardundertheLTIP-Goals,providedthatthegoalsforthepreviousyearhavebeenmet.

ThemaximumnumberofClassAcommonsharesthatcanbedeliveredtobeneficiariesundertheLTIP-Goalsmaynotexceed1%ofourtotalissuedandoutstandingsharecapitalatanytime.

Long-Term Incentive Plan

MembersofourmanagementparticipatedintheLTIP(replacedbytheLTIP-GoalsonDecember18,2018),whichwasestablishedbyUOLforitsgroupcompaniesonJuly29,2015andwasadoptedbyPagSeguroDigitalLtd.BeneficiariesundertheLTIPwereselectedbyUOL’sLTIPCommittee,whichconsistsofourChairmanandtwoofficersofUOL.SincetheestablishmentofLTIP-GoalsonDecember18,2018,nonewrightshavebeen,norwillbe,grantedundertheLTIP.

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BeneficiariesundertheLTIPweregrantedrightsintheformofnotionalcashamountswithoutcashconsideration.Theserightsvestinfiveequalannualinstallmentsstartingoneyearafterthebeneficiary’sgrantdate.UnderthetermsoftheLTIP,uponcompletionofourIPO,thevestedportionofeachbeneficiary’sLTIPrightswasconvertedintoClassAcommonsharesofourcompanyatourIPOprice.ThenumberofClassAcommonsharesissuedwithrespecttothevestedLTIPrightswascalculated,pursuanttoeachbeneficiary’sindividualLTIPagreement,basedonourIPOpriceofUS$21.50perClassAcommonshare.Theunvestedportionsofeachbeneficiary’sLTIPrightswillbesettledoneachfutureannualvestingdate,atthediscretionoftheLTIPCommittee,byeither(i)deliveryofafixednumberofClassAcommonsharesofPagSeguroDigitalor(ii)theequivalentincashofthefixednumberofsharesatthecurrentfairvalue.ThevestingconditionsoftheLTIPawardsincludethecompletionofourIPOandtheattainmentofcertainserviceconditions.UponcompletionofourIPOinJanuary2018,paymentoffutureLTIPrightsbecameprobable,resultinginuscommencingtorecognizecompensationexpensesrelatedtoeachbeneficiary’sLTIPrights.

AtMarch31,2019,atotalof3,123,676newClassAcommonshareswereissuedwithoutcashconsiderationtocertainmembersofourmanagementwhoarebeneficiariesundertheLTIP,uponclosingofourIPOandinthefollowingmonths.

AllofthedirectorsofPagSeguroDigitalLtd.,exceptforNoemiaGushiken,MarcosdeBarrosLisboaandClevelandPratesTeixeira,arebeneficiariesundertheLTIP.

Ifabeneficiaryisdismissedbyus,resigns,retiresordies,theportionofhisorherrightsundertheLTIPthathasvestedatthatdatewillbedelivered,butthenon-vestedportionwillbecancelled.Ifabeneficiaryisterminatedforcause,allofhisorherrightsundertheLTIPwillbecancelled.

ThesharesissuedundertheLTIPuponcompletionofourIPOweresubjecttoaone-yearlock-upperiodunderthetermsoftheLTIP.AnysharesthatwereissuedonasubsequentvestingdateduringthefirstyearafterourIPOweresubjecttotheremainderofthatsamelock-upperiod,expiringoneyearaftertheclosingofourIPO.Afterthecloseofthatone-yearperiod,sharesissuedortobeissuedundertheLTIParenolongerbesubjecttoalock-up.Assuch,sharesissuedundertheLTIParenowfreelytradablewithoutrestrictionorfurtherregistrationundertheSecuritiesActbypersonsotherthanouraffiliateswithinthemeaningofRule144oftheSecuritiesAct.Forfurtherinformation,see“Item3.KeyInformation—RiskFactors—RisksRelatingtoourBusinessandIndustry—ClassAcommonshareseligibleforfuturesalemaycausethemarketpriceofourClassAcommonsharestodropsignificantly.”

ThemaximumnumberofClassAcommonsharesthatcanbedeliveredtobeneficiariesundertheLTIPmaynotexceed3%ofourissuedsharecapitalatanytime.

Share Ownership

ThetotalnumberofcommonsharesownedbyourmanagementasofMarch31,2019was162,267,064ClassAcommonshares(includingtreasuryshares)and165,620,861ClassBcommonshares.Nomemberofourmanagementbeneficiallyownsonepercentormoreofourcommonshares.

Our Team

WebelievethatourteamisoneofPagSeguro’smostimportantassets.OurculturereflectsUOL’steamworkandinnovation-drivenfocus,instillinginourprofessionalsapassionforourcustomersandmerchants.AtDecember31,2018,ourtotalteamconsistedof1,807people,including653employeesplusoutsourcedstaff,alllocatedinBrazil.AtDecember31,2018,ouremployeeshadanaverageageof33,84%ofwhomheldabachelor’sdegreeorhigherand40%ofwhomwerewomen,with65%ofouremployeesspecializinginproductsandengineering.Thefollowingtablesetsforththenumberofouremployeesandabreakdownofemployeesbycategoryofactivityasofthedatesindicatedineachareaofouroperations. As of December 31, 2018 2017 2016 ProductsandEngineering 515 327 229CommercialandMarketing 245 137 85Operations 254 165 82Administrative 140 87 50

Total 1,154 716 446

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Together,ourmanagementteamandemployeesrepresentexperienceinallareasoftheBrazilianpaymentsmarket,within-depthknowledgeofonlinepayments,retailandfinancialservices,technology,paymentprocessing,in-personelectronicpayments,acquiringandcardissuance.Theythereforerepresentacompletepictureofallofourcustomers’needsandcanpreparethefutureofourorganization.

Weseektoattractandtrainthebestprofessionalsinthemarket.Weseektomotivateouremployeestoprovidenext-generationpaymentcapabilitiesthroughacorporateresults-sharingplanforallemployeesandalong-termmotivationplanforkeyprofessionals.Ourcorporateresults-sharingplanincludessalarymultiplesoftwoforcoordinators,threeformanagers,3.5forgeneralmanagers,4.1ormorefordirectorsandoneforotheremployeesandisbasedonannualtargetsformetricssuchasfreecashflow,netincome,revenues,workingcapitalandTPV.ThroughtheLTIP-Goals,partorallofabeneficiary’sawardunderourcorporateresults-sharingplanmaybepaidinClassAcommonshares.See“—Long-TermIncentivePlan-Goals”and“—Long-TermIncentivePlan.”Webelievethatweoffercompetitivecompensationpackagesandadynamicculture,andhavethereforebeenabletoattractandretainqualifiedpersonnelandastablemanagementteam.Wealsoofferouremployeesmedicalanddentalinsurance,lifeinsurance,mealvouchercardsandaretirementsavingsplan,amongotherbenefits.Ina2017surveycarriedoutbythewebsiteLinkedIn,UOLwasnamedasthesecondbestplacetoworkinBrazil.Weareaware,however,thatourcontinuedsuccesswilldependonourabilitytocontinuetoattractandretainthesequalifiedprofessionals.See“Item3.KeyInformation—RiskFactors—RisksRelatingtoourBusinessandIndustry—Thelossofanymemberofourmanagementteamandourinabilitytomakeupforsuchlosswithaqualifiedreplacement,couldharmourbusiness.”

WetrainourteamsintheuseofmodernmanagementtoolssuchasAgile,Lean,KanbanandManagement3.0.

OuremployeesarerepresentedbytheUnionofEmployeesofInformationTechnologyBusinessesandCourseProvidersoftheStateofSãoPaulo(Sindicato dosTrabalhadores nas Empresas e Cursos de Informática do Estado de São Paulo—SINDIESP ).Weconsiderourrelationswithouremployeestobegood.Wehavenotexperiencedanysignificantlabordisputes.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Major Shareholders

ThetablebelowcontainsinformationregardingthebeneficialownershipofPagSeguroDigital’sClassAcommonsharesandClassBcommonsharesbyUOL(ourcontrollingshareholderandparentcompany),ourmajorshareholdersandmembersofourmanagement,asasinglegroup,asofMarch31,2019.

Beneficialownership,whichisdeterminedunderSECrules,generallyincludesvotingorinvestmentpoweroversecuritiesortherighttoreceivetheeconomicbenefitofownershipofthesecurities.WebelievethateachshareholderidentifiedinthetablebelowpossessessolevotingandinvestmentpoweroveralltheClassAcommonsharesorClassBcommonsharesshownasbeneficiallyownedbytheshareholderinthetable.Commonsharessubjecttooptions,warrantsorrightsthatareexercisableatthedateofthisannualreport,orthatwillbeexercisablewithin60daysthereafter(whichinthecaseoftheCompany,onlyconsistofClassAcommonshares),areconsideredtobeoutstandingandbeneficiallyownedbythepersonwhoholdssuchoptions,warrantsorrightsforpurposesofcomputingthatperson’scommonshareownership,butarenottreatedasoutstandingforthepurposeofcomputingthepercentageownershipofanyotherperson.

Thepercentagesofbeneficialownershipinthetablebelowarebasedon162,267,064outstandingClassAcommonshares(includingtreasuryshares)and165,620,861outstandingClassBcommonshares.AsofMarch31,2019,approximately83.3%ofourClassAcommonshares(includingtreasuryshares)wereheldofrecordby151recordholdersintheUnitedStates,and0%ofourClassBcommonshareswereheldofrecordintheUnitedStates.

TheholdersofourClassAcommonsharesandClassBcommonshareshaveidenticalrights,exceptthatUOLasholderofClassBcommonshares(i)isentitledto10votespershare,whereasholdersofourClassAcommonsharesareentitledtoonevotepershare(ii)hascertainconversionrightsand(iii)isentitledtomaintainaproportionalownershipinterestintheeventthatadditionalClassAcommonsharesareissued.Formoreinformation,see“Item10.AdditionalInformation—MemorandumandArticlesofAssociation—PreemptiveorSimilarRights”and“Item10.AdditionalInformation—MemorandumandArticlesofAssociation—Conversion.”EachClassBcommonshareisconvertibleintooneClassAcommonshare.

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Shares Beneficially Owned

% of Total Voting Power

(1) Class A Class B Name Shares % Share % UniversoOnlineS.A.(2) — — 165,620,861 100.0% 91.1%CapitalWorldInvestors(3) 43,985,860 27.1% — — 2.4%AmeripriseFinancialInc.(4) 9,666,089 6.0% — — 0.5%ArtisanPartnersLP(5) 9,173,839 5.7% — — 0.5%MelvinCapitalManagementL.P.(6) 8,241,440 5.1% — — 0.5%Treasury 503,642 0.3% — — 0.0%Others 90,696,194 55.9% — — 5.0%

Total 162,267,064 100% 100% 100% 100%

(1) PercentageoftotalvotingpowerrepresentsvotingpowerwithrespecttoallofourClassAcommonsharesandClassBcommonshares,asasingleclass.UOLasholderofourClassBcommonshares

isentitledto10votespershare,whereasholdersofourClassAcommonsharesareentitledtoonevotepershare.FormoreinformationaboutthevotingrightsofourClassAcommonsharesandClassBcommonshares,see“Item10.AdditionalInformation—MemorandumandArticlesofAssociation—VotingRights.”

(2) Thefollowingpersonsarebeneficialownersof5%ormoreofPagSeguroDigital’sClassAcommonsharesandClassBcommonsharesindirectlythroughtheirownershipinterestsinUOL,consideringUOL’ssharecapitalonafullydilutedbasis(excludingUOL’streasuryshares):((i)FolhaparS.A.,whichholdsa64.46%ownershipinterestinUOLonafullydilutedbasis(notconsideringtreasuryshares),(ii)JoãoAlvesdeQueirozFilho,whoholdsa14.90%ownershipinterestinUOLonafullydilutedbasis(notconsideringtreasuryshares),(iii)NegotioMagni,S.A.deC.V.,whichholdsa10.81%ownershipinterestinUOLonafullydilutedbasis(notconsideringtreasuryshares),and(iv)BTGPactualPrincipalInvestmentsFundodeInvestimentoemParticipações,whichholdsa6.46%ownershipinterestinUOLonafullydilutedbasis(notconsideringtreasuryshares).ThefollowingpersonsholdownershipinterestsinFolhaparS.A.:(i)EmpresaFolhadaManhãS.A.,whichholdsa33.23%non-votingdirectownershipinterestinFolhaparS.A.,and(ii)LuizFrias,whoholdsa66.27%votingdirectownershipinterestanda8.76%non-votingindirectownershipinterestinFolhaparS.A.LuizFriasalsoholdsa2.04%directownershipinterestinUOL.TheprincipalbusinessaddressofUniversoOnlineS.A.andLuizFriasisAvenidaBrigadeiroFariaLima,1384,01452-002SãoPaulo–SP,Brazil.TheprincipalbusinessaddressofFolhaparS.A.isAvenidaBrigadeiroFariaLima,1384,Andar11,SalaF,01452-002SãoPaulo—SP,Brazil.TheprincipalbusinessaddressofJoãoAlvesdeQueirozFilhoisAv.BrigadeiroFariaLima,2277,6thfloor,SãoPaulo–SP,Brazil,01452-000.TheprincipalbusinessaddressofNegotioMagni,S.A.deC.V.isAv.Chapultepec,218,Col.RomaNorte,MexicoCity,DF06700–Mexico.TheprincipalbusinessaddressofBTGPactualPrincipalInvestmentsFundodeInvestimentoemParticipaçõesisAv.BrigadeiroFariaLima,3729,SãoPaulo–SP,Brazil,04538-133.

(3) ConsistsofsharesbeneficiallyownedbyCapitalWorldInvestors,adivisionofCapitalResearchandManagementCompany,orCRMC.CapitalWorldInvestorsdivisionsofCRMCandCapitalInternationalLimitedcollectivelyprovideinvestmentmanagementservicesunderthenameCapitalWorldInvestors.AsofJanuary31,2018,NewWorldFund,Inc.,aclientofCapitalWorldInvestorshastherighttoreceiveorthepowertodirectthereceiptofdividendsfrom,ortheproceedsfromthesaleof,ourClassAcommonshares.TheaddressforCapitalWorldInvestorsis333SouthHopeStreet,LosAngeles,CA,USA90071.

(4) ConsistsofsharesbeneficiallyownedbyAmeripriseFinancial,Inc.ThesesharesareheldofrecordbyAmeripriseFinancial,Inc.anditssubsidiaryColumbiaManagementInvestmentAdvisers,LLC.TheaddressofColumbiaManagementInvestmentAdvisers,LLCis225FranklinSt.,Boston,MA02110.TheaddressofAmeripriseFinancial,Inc.is145AmeripriseFinancialCenter,Minneapolis,MN55474.

( 5) ConsistsofsharesbeneficiallyownedbyArtisanPartnersLP.TheaddressofArtisanPartnersLPis875EastWisconsinAvenue,Suite800,Milwaukee,WI53202.( 6) ConsistsofsharesbeneficiallyownedbyMelvinCapitalManagementLP.TheaddressofMelvinCapitalManagementLPis537MadisonAvenue,25thFloor,NewYork,NY10022.

PriortoourIPO,UOLheld100%ofouroutstandingcommonshares,totaling262,288,607ClassBcommonshares.InourIPO,UOLconverted70,267,746ClassBcommonsharestoClassAcommonshares.SuchconvertedsharesweresubsequentlysoldinourIPO,bringingUOL’stotalnumberofClassBcommonsharesheldto192,020,861.InourJune2018follow-onoffering,UOLconverted26,400,000ClassBcommonsharestoClassAcommonshares.SuchconvertedsharesweresubsequentlysoldinourJune2018follow-onofferingbringingUOL’stotalnumberofClassBcommonsharesheldto165,620,861.

Thereiscurrentlynoshareholders’agreementinplace.

Related Party Transactions

Allofourrelatedpartytransactionsareconductedatarms’length,basedontermsthatreflectthosethatwouldapplytotransactionswiththirdparties,otherthanourcentralizedcashmanagementwithUOL,describedbelow.ThetotalamountofcostsandexpensesincurredbyPagSeguroDigitalforsharedservicesandsalesofservicesprovidedbyUOLandotheraffiliatedcompaniesintheyearendedDecember31,2018undersuchoftheseagreementsaswereinforceduringtheyearendedDecember31,2018wasR$204.0million,representing6.5%ofourtotalexpensesfortheyear.OfthetotalamountofcostsandexpensesincurredbyPagSeguroDigitalforsharedservicesandsalesofservicesprovidedbyaffiliatedcompaniesduringtheyear,77.2%wereprovidedbyUOL,13.5%wereprovidedbyUOLDiveoand9.3%wereprovidedbyTransfolha.PagSeguroalsoprovidedservicestoUOLandcertainUOLaffiliatesduringtheyearendedDecember31,2018foranamountofR$3.2million.Formoreinformation,seeNote9toourauditedconsolidatedfinancialstatements.

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PriortoourIPO,PagSeguro’scashmanagementwascentralizedwithUOL,leadingtopositiveornegativebalanceswithUOLfromtimetotimeasreferredtoinNote9toourauditedconsolidatedfinancialstatements.WhenPagSeguroprovidedcashtoUOLorUOLprovidedcashtoPagSeguro,thesetransactionswerenotcarriedoutatarms’lengthbecausenointerestwasrecordedineithercompany’sincomestatement.OurcashmanagementwasseparatedfromUOL’scashmanagementstartingfromthedateofcompletionofourIPO.Anyremainingbalancesthatrelatetopriorcashmanagementactivitiesbeganaccruinginterestonarms’lengthtermsfromthedateofcompletionofourIPO,andanysuchbalanceswererepaidbyUOLfollowingcompletionofourIPO.

Agreements with Our Management and Directors

CertainofourdirectorsandofficersreceivecompensationfromUOLforservicestheyprovidetoPagSeguro.ThecostisapportionedbetweenUOLandPagSeguroinaccordancewiththeservicesprovided.Inaddition,wehaveenteredintoindemnificationagreementswithourdirectorsandofficers,asdescribedbelow.

Indemnification Agreements

Wehaveenteredintoorwillenterintoindemnificationagreementswitheachofourdirectorsandofficers.Pursuanttotheseagreements,wehaveagreedtoindemnifyandholdharmlesseachdirectorandofficertothefullextentpermittedbyapplicablelawintheeventofanyclaimmadeagainsthimorherinanyproceedingduetothefactthatheorsheisorwasadirectororofficerofourcompanyorservedatourrequestasadirector,officer,employeeoragentofanothercorporation,partnership,jointventure,trustorotherenterprise.

Inaddition,underthetermsoftheseagreementswehaveagreedtocoverallexpensesactuallyandreasonablyincurredbyeachdirectorandofficerinconnectionwithanysuchproceeding,withcertainlimitedexceptions.

Theindemnificationextendstothebeneficiary’sservicesasadirectororofficerpriortothedateoftheindemnificationagreementaswellasafterward.Itcontinuesafterthebeneficiaryceasestobeadirectororofficer.

Agreements with UOL and UOL Subsidiaries

PagSeguroBrazilwasincorporatedasalegalentityin2006,althoughitdidnotoperatethePagSegurobusinesspriortoAugust1,2015sincemostofthePagSegurobusinessactivitieswereoperatedbyotherUOLgroupmemberspriortothatdate.OnAugust1,2015,UOLcarriedoutacorporatereorganizationinwhichitsegregatedsomeofthePagSeguroBrazilactivitiesfromitsotheractivitiesandcontributedthemtoPagSeguroBrazil.Followingthisreorganization,PagSeguroBrazilenteredintothecontractssummarizedbelowgoverningitsrelationshipwithUOLanditssubsidiaries.

Advertising Space Assignment Agreement

Underthisagreement,UOLmayassigntoPagSeguroBrazilcertainadvertisingandmediaspaceonUOL’sownwebsite,aswellasotherspacethatUOLobtainsfromunrelatedthirdparties.WepayUOLmonthlyfeesforthisspace,basedontheactualamountofadvertisingandmediaspaceweuse.ForadvertisingandmediaspaceonUOL’sownwebsite,UOLchargesusapricethatitdeterminesonmarketterms.ForspacethatUOLobtainsfromunrelatedthirdparties,UOLchargesusthesamepriceasitpaysforthespace.

Cost-Sharing Agreements

PagSeguroBrazilispartytotwoagreementswithUOLunderwhichUOLapportionstoPagSeguroBraziltheexpensesofcertainservicesandpersonnelhiredbyUOLforthebenefitofPagSeguroBrazilandexpensesrelatedtoourheadofficeandoperationscenterinSãoPaulo,whichareprovidedbyUOL.Underoneagreement,UOLapportionstoPagSeguroBrazilexpensesrelatingtocallcenterservices,marketingactivities,certainordinarycoursecorporateservices,andcertaincontingencyexpensesrelatedtolitigation.Allinsurancepolicieslistedunder“Business–Insurance”arecontractedbyUOLunderthisagreement.Undertheotheragreement,UOLapportionstoPagSeguroBrazilexpensesrelatingtocertainback-officepersonnelwhoareemployedbyUOLbutallocatedtoworkonmattersrelatedtoourbusiness.

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ThetwoagreementsapportionthecostsandexpensesfortheseservicesasbetweenPagSeguroBrazilandUOL.TheamountsPagSeguroBrazilpaystoUOLarebasedondifferentcriteriadependingonthetypeofservice:

• formarketing,financialandlegalservices,theamountpayableisbasedonthenumberofhoursactuallyworkedbyUOLpersonnelonPagSeguroBrazil’sbehalf;

• forhumanresourcesservices,theamountpayableisbasedonthenumberofhoursactuallyworkedbyUOLpersonnelonPagSeguroBrazil’sbehalfandonthenumberofUOLpersonneldedicatedtoPagSeguroBrazilmatters;

• forcallcenterservices,theamountpayableisbasedonthenumberofUOLpersonneldedicatedtoPagSeguroBrazilmatters;

• fortechnologyservices,theamountpayableisbasedontheexpensesincurredbyUOLonPagSeguroBrazil’sbehalf.

Platform Licensing Agreements

PagSeguroBrazilandUOLarepartytoanagreementunderwhichUOLprovidesservicesrelatedtothedevelopment,maintenanceandmanagementofthesoftwareusedtoconductPagSeguroBrazil’sbusiness.Theservicesincludethedevelopmentofnewsoftware,analysisandimprovementoftheefficiencyofexistingsoftwareandresolutionoftechnicalissues.TheservicesareprovidedinaccordancewithparameterssetbyPagSeguroBrazil.TheamountpayableunderthisagreementisbasedonthenumberofhoursactuallyworkedbyUOLpersonnel.

BoaCompraandUOLarepartytoanagreementunderwhichUOLprovidesservicesrelatedtosoftwareforBoaCompra’sbusinessonsubstantiallythesameterms.

UOL Diveo Agreements

Cloud Services Agreement

PagSeguroBrazilispartytotwoagreementswithUOLDiveounderwhichUOLresellscloudservicesprovidedbyAmazonWebServices,Inc.,orAWS,andMicrosoftIrelandOperationsLimited,orMicrosoft,toPagSeguroBrazil.ThesecloudservicesincludethestorageofPagSeguroBrazildataonthecloudmanagedbytherespectiveservicesprovidersandrelatedtechnicalsupport.PagSeguroBrazilmaymanageitsdatathroughonlineaccessorspecificsoftwareprovidedbyAWSandMicrosoft.UOLDiveo,asareselleroftheservices,isnotresponsibleforthequality,warranty,technicalsupport,efficiencyorresultsoftheservicesorforanylossesincurredbyPagSeguroBrazilderivingfromtheseservices.

Hosting and Colocation Agreements

PagSeguroBrazilandUOLDiveoarepartytoahostingagreementandacolocationagreementunderwhichUOLDiveoprovidesdatastorageservicestoPagSeguroBrazil.Theseservicesincludetheleaseofequipment,softwarelicenses,assignmentofinformationtechnologyinfrastructureandprovisionofspaceandinternetaccesstoPagSeguroBrazil’sdatacenter.Inaddition,undertechnicalproposalOPT-17-21638relatedtothehostingagreement,UOLDiveoalsoprovidesPagSeguroBrazilwithpaymentmethodsmonitoringandinvoiceissuingservices.

Telecommunication Services Agreement

PagSeguroBrazilandUOLDiveoarepartytoanagreementunderwhichUOLDiveoprovidestelecommunicationservicesthatallowPagSeguroBraziltooffernationalandinternationaltransmissioncapacity(voice,dataandimages)andthesubmissionandreceptionofmultimediainformationtoitscustomersthroughoutthetelecommunicationsnetworkofUOLDiveoorthirdparties.

Internet Security Agreements

PagSeguroBrazilispartytothreeagreementswithUOLDiveounderwhichUOLDiveoprovidesinternetsecurityservicestoPagSeguroBrazil.Thepaymentsundertheseagreementsaremadeonamonthlybasisinfixedamountspreviouslyagreedbetweentheparties.

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Underthefirstagreement,UOLDiveoprovidesbrandprotectionservicesregardingthemanagementofthreatsandtheimproperuseofPagSeguroBrazil’sbrandontheinternet,includingonsocialnetworks,domainnames,maliciousemails,suchasphishingandspam,piracyandotherthreatsinvolvingPagSeguroBrazil’sintellectualproperty.

Underthesecondagreement,UOLDiveoprovidesinternetsecurityservicesagainstdenial-of-servicesattacks(DoSattacks)thatmayimpactPagSeguroBrazil’stechnologicalinfrastructureoronlineservices.ThisserviceusestechnologytopreventandmitigatesuchattacksthoroughthebehavioralanalysisofthedataflowingthroughPagSeguroBrazil’sdatacenterandnetwork.

Underthethirdagreement,UOLDiveoprovidesapplicationfirewallagainstthreatsoffraud,unavailabilityandtheftofinformationonPagSeguroBrazilnetwork,aswellastheprotectionofPagSeguroBrazil’ssecurityoperationanddatacenters.

ITEM 8. FINANCIAL INFORMATION

Consolidated Statements and Other Financial Information

SeeItem18.FinancialStatements.

Legal Proceedings

Fromtimetotime,weareinvolvedinproceedingsthatariseintheordinarycourseofourbusiness.Anyclaimsagainstus,whetherornottheyhavemerit,canbetimeconsuming,resultincostlylitigation,andrequiresignificantmanagementtimeandoperationalresources.

WearesubjecttoanumberofproceedingsintheBrazilianjudicialandadministrativecourtsystems,relatingtocivil,taxandlaborlawclaims.WebelievetheseproceedingsarenormalandincidentaltotheoperationofabusinessinBrazil.Werecognizeprovisionsforlegalproceedingsinourfinancialstatementswhenweareadvisedbyindependentoutsidecounselthat(i)itisprobablethatanoutflowofresourceswillberequiredtosettletheobligation,and(ii)areliableestimatecanbemadeoftheamountoftheobligation.Theassessmentofthelikelihoodoflossincludesanalysisbyoutsidecounselofavailableevidence,thehierarchyoflaws,availablecaselaw,recentcourtrulingsandtheirrelevanceinthelegalsystem.Ourprovisionsforprobablelossesarisingfromthesemattersareestimatedandperiodicallyadjustedbymanagement.Inmakingtheseadjustmentsourmanagementreliesontheopinionsofourexternallegaladvisors.

TheamountswehadaccruedinourfinancialstatementsasatDecember31,2018foralltypesoflegalproceedingsforwhichwebelievealossisprobablewereR$7.0million.However,legalproceedingsareinherentlyunpredictableandsubjecttosignificantuncertainties.Ifoneormorecasesweretoresultinajudgmentagainstusinanyreportingperiodforamountsthatexceededourmanagement’sexpectations,theimpactonouroperatingresultsorfinancialconditionforthatreportingperiodcouldbematerial.See“Item3.KeyInformation—RiskFactors—RisksRelatingtoourBusinessandIndustry—Unfavorableoutcomesinlitigationorourinabilitytopostjudicialcollateralorprovideguaranteesinpendinglegaloradministrativeproceedingscouldhaveamaterialadverseeffectonourbusiness,financialconditionandResultsofOperationsofPagSeguroDigital.”

Wemakejudicialdeposits,whicharecourt-ordereddepositsthatserveascollateraluntilthefinalsettlementofthedisputestowhichtheyarerelated,inconnectionwithcertainofthesecivilproceedings.AtDecember31,2018,wehadjudicialdepositsinanaggregateamountofR$0.9million.

Civil Proceedings

Thecivilclaimstowhichwearepartygenerallyrelatetocustomerclaims,includingthoserelatedtonon-deliveryofproductsbymerchants,denialsbyPagSeguroofrequestsforwithdrawalofdigitalaccountbalancesandallegationsofPOSdevicedefects.

AtDecember31,2018,wewerepartytoapproximately3,500proceedingsofacivilnature(consistingofproceedingswithPROCONsandsmallclaimscourtsrelatingtoconsumerrights).PagSegurodoesnotappearintherankingsofcompanieswithlargenumbersofconsumerclaimspublishedbythePROCON.AtDecember31,2018,wehadrecordedR$6.6millioninprovisionsforcurrentcivilproceedingsandnoprovisionsfornon-currentcivilproceedings.Mostoftheseproceedingsarerelatedtoconsumerallegationsofnon-deliveryofproductsbymerchantsandrequestsforthewithdrawalofdigitalaccountbalancesthatwereblockedbyPagSegurobecausetheywereunderinvestigationforfraudorundergoingclaimresolution.

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AtDecember31,2018,wewerenotapartytoanycivillawsuitsinvolvingrisksclassifiedbymanagementaspossiblelosses.Formoreinformation,seeNote16ofourauditedconsolidatedfinancialstatements.

Wemakejudicialdeposits,whicharecourt-ordereddepositsthatserveascollateraluntilthefinalsettlementofthedisputestowhichtheyarerelated,inconnectionwithcertainofthesecivilproceedings.AtDecember31,2018,wehadjudicialdepositsforcivilproceedingsinanaggregateamountofR$0.9million.

Labor Proceedings

AtDecember31,2018,wewerepartytoapproximately30labor-relatedjudicialandadministrativeproceedingsforwhichwerecordedaprovisionofR$0.3million.Ingeneral,thelaborclaimstowhichweareapartywerefiledbyformeremployeesofthird-partyserviceprovidershiredbyusaspartoftheoutsourcingofcertainofournon-coreactivities.

Wearenotapartytoanylaborlawsuitsinvolvingrisksclassifiedbymanagementaspossiblelosses.Formoreinformation,seeNote16ofourauditedconsolidatedfinancialstatements.

Tax and Social Security Proceedings

AtDecember31,2018,wehadmadejudicialdepositsofR$17.1millionrelatedtotheBraziliangovernment’sSocialIntegrationProgram(Programa IntegraçãoSocial ,orPIS),R$105.2millionrelatedtoBraziliansocialsecurity(Contribuição para o Financiamento da Seguridade Social ,orCOFINS)relatingtoourfinancialincome,R$52.2millionrelatedtoISSandR$19.5millionrelatedtoICMStaxes.OurPISandCOFINSjudicialdepositsrelatetoataxproceedingfiledbyustochallengecertainBrazilianregulationsthatchangedthePIS/COFINStaxationregime.Laws10,637/2002and10,833/2003increasedthePISandCOFINScalculationbasis,whichwaspreviouslyassessedonoperatingrevenuesandexpandedtocoveralltypesofrevenue,includingrevenuesgeneratedbyfinancialinvestments,withafewexceptions.SincetheissuanceofDecreeNo.5,164/2004,taxpayerssubjecttothenon-cumulativePIS/COFINSmethodology,likeourcompany,weresubjecttoPISandCOFINSata0%taxrateonfinancialincome.OnApril1,2015,theBrazilianfederalgovernmentpublishedDecreeNo.8,426/2015,whichincreasedthePISandCOFINSratesleviedonfinancialincomebylegalentitiessubjecttothenon-cumulativemethodologyto0.65%and4%,respectively.InDecember2015,wefiledataxproceedingallegingtheunconstitutionalityofthePIS/COFINSincreaseonfinancialincomebyDecreeNo.8,426/2015,basedonviolationoftheconstitutionalprincipleoflegality,whichprovidesthatanincreaseinexistingtaxescanonlybeimplementedbyfederallaw.Asanalternativerequest,weaskedthecourttorecognizeourrighttodiscountPIS/COFINStaxcreditsfromfinancialexpensesincurredbyus.Aswewerenotgrantedinjunctiverelief,wehaveobtainedacourtdecisionallowingustodeposittheamountrelatedtothesePIS/COFINSpaymentsinescrowwhilethispaymentobligationisdiscussedincourt.Formoreinformation,seeNote15toourauditedconsolidatedfinancialstatementsand“Item3.KeyInformation—RiskFactors—RisksRelatingtoourBusinessandIndustry—Changesintaxlaws,taxincentives,benefitsordifferinginterpretationsoftaxlawsmayharmourResultsofOperations.”

OurISSjudicialdepositsrelatetoataxproceedingfiledbyusagainsttheSãoPaulomunicipalitytochallengecertainregulationsrecentlyenactedthatchangedthemunicipalitytowhichtheISSisduefromthemunicipalitywheretheserviceproviderislocated(PagSeguro)tothemunicipalitywheretheclientsarelocated(whichinourcasemeansthemunicipalitywherethePOSdeviceisused).GiventhatthisnewISScollectionruleisbeingchallenged,wearecurrentlymakingjudicialdepositsoftheamountssupposedlyduetotheSãoPaulomunicipalityandrecognizingaprovisionfordifferenceswiththeISSchargedbyothermunicipalities.Formoreinformation,seeNote15toourauditedconsolidatedfinancialstatements.

OurICMSjudicialdepositsrelatetoataxproceedingfiledbyNet+PhoneagainstseveralBrazilianstatestochallengethelegalityofcertainconstitutionalamendmentswhichrequirethatICMStaxesbecollectedbythosewhoshipgoodstofinalcustomersininterstateoperations,atataxdifferentialcorrespondingtothedifferencebetweentherateofthedestinationstateandtheinterstaterate.Aswewerenotgrantedinjunctiverelief,wehaveobtainedacourtdecisionallowingustodeposittheamountrelatedtotheseICMSpaymentsinescrowwhilethispaymentobligationisdiscussedincourt.Formoreinformation,seeNote15toourauditedconsolidatedfinancialstatements.

AsDecember31,2018,wewerepartytotaxlawsuitsclassifiedbylegaladvisorsaspossiblelosseswhichinvolvedanaggregateamountofR$47.2millionandforwhichnoprovisionhasbeenmade.

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Dividend Policy

Forourpolicyondividenddistributions,see“Item10.AdditionalInformation—MemorandumandArticlesofAssociation—DividendsandCapitalizationofProfits.”

ITEM 9. THE OFFER AND LISTING

Plan of Distribution

Notapplicable.

Trading Markets

OurClassAcommonsharesarelistedontheNYSEunderthesymbol“PAGS.”OurClassAcommonsharesarelistedinregisteredformandarenotcertificated.TheClassAcommonsharescommencedtradingontheNYSEonJanuary24,2018.AtMarch31,2019,theClassAcommonsharesrepresented49.5%ofoursharesand100%ofourcurrentglobalpublicfloat.

IfyoursharesareregisteredinthenameofTheDepositoryTrustCompany,orDTC,youarenotbeashareholderormemberofthecompany.EachpersonowningClassAcommonsharesheldthroughDTCmustrelyontheproceduresthereofandoninstitutionsthathaveaccountstherewithtoexerciseanyrightsofaholderoftheClassAcommonshares.

Selling Shareholders

Notapplicable.

Dilution

Notapplicable.

Expenses of the Issue

Notapplicable.

ITEM 10. ADDITIONAL INFORMATION

Share Capital

Notapplicable.

Memorandum and Articles of Association

Corporate Purpose

ThecorporateobjectsofPagSeguroDigital,asstatedintheMemorandumofAssociation,areunrestrictedandPagSeguroDigitalhastheauthoritytocarryoutanyobjectnotprohibitedbyanylaw,asprovidedbySection7(4)oftheCompaniesLaw.

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Issuance of Shares

ExceptasexpresslyprovidedinPagSeguroDigital’sMemorandumandArticlesofAssociation,PagSeguroDigital’sboardofdirectorshasgeneralandunconditionalauthoritytoallot,grantoptionsover,offerorotherwisedealwithordisposeofanyunissuedsharesinthecompany’scapitalwithouttheapprovalofourshareholders(whetherformingpartoftheoriginaloranyincreasedsharecapital),eitheratapremiumoratpar,withorwithoutpreferred,deferredorotherspecialrightsorrestrictions,whetherinregardtodividend,voting,returnofcapitalorotherwiseandtosuchpersons,onsuchtermsandconditions,andatsuchtimesasthedirectorsmaydecide,butsothatnoshareshallbeissuedatadiscount,exceptinaccordancewiththeprovisionsoftheCompaniesLaw.PagSeguroDigitalwillnotissuebearershares.

PagSeguroDigital’sArticlesofAssociationprovidethatatanytimethatthereareClassAcommonsharesinissueadditionalClassBcommonsharesmayonlybeissuedpursuantto(1)asharesplit,subdivisionofsharesorsimilartransactionorwhereadividendorotherdistributionispaidbytheissueofsharesorrightstoacquiresharesorfollowingcapitalizationofprofit,(2)amerger,consolidation,orotherbusinesscombinationinvolvingtheissuanceofClassBcommonsharesasfullorpartialconsideration,or(3)anissuanceofClassAcommonshares,wherebyholdersoftheClassBcommonsharesareentitledtoreceiveanumberofClassBcommonsharesthatwouldallowthemtomaintaintheirproportionalownershipinterestsinPagSeguroDigital.Formoreinformationsee“—PreemptiveorSimilarRights.”

PagSeguroDigital’sArticlesofAssociationalsoprovidethattheissuanceofnon-votingcommonsharesrequirestheaffirmativevoteofamajorityoftheofthenoutstandingClassAcommonshares.

Fiscal Year

PagSeguroDigital’sfiscalyearbeginsonJanuary1ofeachyearandendsonDecember31ofthesameyear.

Voting Rights

TheholdersoftheClassAcommonsharesandClassBcommonshareshaveidenticalrights,exceptthat(i)theholderofClassBcommonsharesisentitledto10votespershare,whereasholdersofClassAcommonsharesareentitledtoonevotepershare,(ii)ClassBcommonshareshavecertainconversionrightsand(iii)theholderofClassBcommonsharesisentitledtomaintainaproportionalownershipinterestintheeventthatadditionalClassAcommonsharesareissued.Formoreinformationsee“—PreemptiveorSimilarRights”and“—Conversion.”TheholdersofClassAcommonsharesandClassBcommonsharesvotetogetherasasingleclassonallmatters(includingtheelectionofdirectors)submittedtoavoteofshareholders,exceptasprovidedbelowandasotherwiserequiredbylaw.

PagSeguroDigital’sArticlesofAssociationprovideasfollowsregardingtherespectiverightsofholdersofClassAcommonsharesandClassBcommonshares:

(i) ClassconsentsfromtheholdersofClassAcommonsharesorClassBcommonshares,asapplicable,shallberequiredforanyvariationtotherightsattachedtotheirrespectiveclassofshares,however,theDirectorsmaytreatanytwoormoreclassesofsharesasformingoneclassiftheyconsiderthatallsuchclasseswouldbeaffectedinthesamewaybytheproposal;

(ii) therightsconferredonholdersofClassAcommonsharesshallnotbedeemedtobevariedbythecreationorissueoffurtherClassBcommonsharesandviceversa;and

(iii) therightsattachingtotheClassAcommonsharesandtheClassBcommonsharesshallnotbedeemedtobevariedbythecreationorissueofshareswithpreferredorotherrights,including,withoutlimitation,shareswithenhancedorweightedvotingrights.

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AssetforthintheArticlesofAssociation,theholdersofClassAcommonsharesandClassBcommonshares,respectively,donothavetherighttovoteseparatelyifthenumberofauthorizedsharesofsuchclassisincreasedordecreased.Rather,thenumberofauthorizedClassAcommonsharesandClassBcommonsharesmaybeincreasedordecreased(butnotbelowthenumberofsharesofsuchclassthenoutstanding)bytheaffirmativevoteoftheholdersofamajorityofthevotingpoweroftheissuedandoutstandingClassAcommonsharesandClassBcommonshares,votingtogetherinageneralmeeting.

Preemptive or Similar Rights

TheClassAcommonsharesandClassBcommonsharesarenotentitledtopreemptiverightsupontransferandarenotsubjecttoconversion(exceptasdescribedbelowunder“—Conversion”),redemptionorsinkingfundprovisions.

TheClassBcommonsharesareentitledtomaintainaproportionalownershipinterestintheeventthatadditionalClassAcommonsharesareissued.Assuch,exceptforcertainexceptions,ifPagSeguroDigitalissuesClassAcommonshares,itmustfirstmakeanoffertoeachholderofClassBcommonsharestoissuetosuchholderonthesameeconomictermssuchnumberofClassBcommonsharesaswouldensuresuchholdermaymaintainaproportionalownershipinterestinPagSeguroDigital.ThisrighttomaintainaproportionalownershipinterestmaybewaivedbyamajorityoftheholdersofClassBcommonshares.

Conversion

TheoutstandingClassBcommonsharesareconvertibleatanytimeasfollows:(1)attheoptionoftheholder,aClassBcommonsharemaybeconvertedatanytimeintooneClassAcommonshareor(2)upontheelectionoftheholdersofamajorityofthethenoutstandingClassBcommonshares,alloutstandingClassBcommonsharesmaybeconvertedintoalikenumberofClassAcommonshares.Inaddition,eachClassBcommonsharewillconvertautomaticallyintooneClassAcommonshareuponanytransfer,whetherornotforvalue,exceptforcertaintransfersdescribedintheArticlesofAssociation,includingtransferstoaffiliates,trustssolelyforthebenefitoftheshareholderortheiraffiliates,andpartnerships,corporationsandotherentitiesexclusivelyownedbytheshareholderortheiraffiliatesandcertaintransferstoorganizationsthatareexemptfromtaxationunderSection501(c)(3)oftheInternalRevenueCodeof1986,asamended.Furthermore,eachClassBcommonsharewillconvertautomaticallyintooneClassAcommonshareandnoClassBcommonshareswillbeissuedthereafterif,atanytime,thevotingpoweroftheoutstandingClassBcommonsharesrepresentslessthan10%ofthecombinedvotingpoweroftheClassAcommonsharesandClassBcommonsharesthenoutstanding.

NoclassofPagSeguroDigital’scommonsharesmaybesubdividedorcombinedunlesstheotherclassofcommonsharesisconcurrentlysubdividedorcombinedinthesameproportionandinthesamemanner.

Equal Status

ExceptasexpresslyprovidedinPagSeguroDigital’sMemorandumandArticlesofAssociation,ClassAcommonsharesandClassBcommonshareshavethesamerightsandprivilegesandrankequally,shareratablyandareidenticalinallrespectsastoallmatters.Intheeventofanymerger,consolidation,scheme,arrangementorotherbusinesscombinationrequiringtheapprovalofourshareholdersentitledtovotethereon(whetherornotPagSeguroDigitalisthesurvivingentity),theholdersofClassAcommonsharesshallhavetherighttoreceive,ortherighttoelecttoreceive,thesameformofconsiderationastheholdersofClassBcommonshares,andtheholdersofClassAcommonsharesshallhavetherighttoreceive,ortherighttoelecttoreceive,atleastthesameamountofconsiderationonapersharebasisastheholdersofClassBcommonshares.Intheeventofany(1)tenderorexchangeoffertoacquireanyClassAcommonsharesorClassBcommonsharesbyanythirdpartypursuanttoanagreementtowhichPagSeguroDigitalisaparty,or(2)anytenderorexchangeofferbyPagSeguroDigitaltoacquireanyClassAcommonsharesorClassBcommonshares,theholdersofClassAcommonsharesshallhavetherighttoreceive,ortherighttoelecttoreceive,thesameformofconsiderationastheholdersofClassBcommonshares,andtheholdersofClassAcommonsharesshallhavetherighttoreceive,ortherighttoelecttoreceive,atleastthesameamountofconsiderationonapersharebasisastheholdersofClassBcommonshares.

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Record Dates

Forthepurposeofdeterminingshareholdersentitledtonoticeof,ortovoteatanygeneralmeetingofshareholdersoranyadjournmentthereof,orshareholdersentitledtoreceivedividendorotherdistributionpayments,orinordertomakeadeterminationofshareholdersforanyotherpurpose,PagSeguroDigital’sboardofdirectorsmaysetarecorddatewhichshallnotexceedforty(40)cleardayspriortothedatewherethedeterminationwillbemade.

General Meetings of Shareholders

Asaconditionofadmissiontoashareholders’meeting,ashareholdermustbedulyregisteredasashareholderofPagSeguroDigitalattheapplicablerecorddateforthatmeetingand,inordertovote,allcallsorinstallmentsthenpayablebysuchshareholdertoPagSeguroDigitalinrespectofthesharesthatsuchshareholderholdsmusthavebeenpaid.

Subjecttoanyspecialrightsorrestrictionsastovotingthenattachedtoanyshares,atanygeneralmeetingeveryshareholderwhoispresentinpersonorbyproxy(or,inthecaseofashareholderbeingacorporation,byitsdulyauthorizedrepresentativenotbeinghimselforherselfashareholderentitledtovote)shallhaveonevoteperClassAcommonshareand10votesperClassBcommonshare.

AsaCaymanIslandsexemptedcompany,PagSeguroDigitalisnotobligedbytheCompaniesLawtocallannualgeneralmeetings;however,theArticlesofAssociationprovidethatineachyearthecompanywillholdanannualgeneralmeetingofshareholders,atatimedeterminedbytheboardofdirectors.Fortheannualgeneralmeetingofshareholderstheagendawillinclude,amongotherthings,thepresentationoftheannualaccountsandthereportofthedirectors.Inaddition,theagendaforanannualgeneralmeetingofshareholderswillonlyincludesuchitemsashavebeenincludedthereinbytheboardofdirectors.

Also,PagSeguroDigitalmay,butisnotrequired(unlessrequiredbythelawsoftheCaymanIslands),toholdotherextraordinarygeneralmeetingsduringtheyear.GeneralmeetingsofshareholdersaregenerallyexpectedtotakeplaceinSãoPaulo,Brazil,butmaybeheldelsewhereifthedirectorssodecide.

TheCompaniesLawprovidesshareholdersalimitedrighttorequestageneralmeeting,anddoesnotprovideshareholderswithanyrighttoputanyproposalbeforeageneralmeetingindefaultofacompany’sarticlesofassociation.However,theserightsmaybeprovidedinacompany’sarticlesofassociation.PagSeguroDigital’sArticlesofAssociationprovidethatupontherequisitionofoneormoreshareholdersrepresentingnotlessthanone-thirdofthevotingrightsentitledtovoteatgeneralmeetings,theboardwillconveneanextraordinarygeneralmeetingandputtheresolutionssorequisitionedtoavoteatsuchmeeting.TheArticlesofAssociationprovidenootherrighttoputanyproposalsbeforeannualgeneralmeetingsorextraordinarygeneralmeetings.

Subjecttoregulatoryrequirements,theannualgeneralmeetingandanyextraordinarygeneralmeetingsmustbecalledbynotlessthanten(10)cleardays’noticepriortotherelevantshareholdersmeetingandconvenedbyanoticediscussedbelow.Alternatively,uponthepriorconsentofallholdersentitledtoreceivenotice,withregardstotheannualgeneralmeeting,andtheholdersof95%inparvalueofthesharesentitledtoattendandvoteatanextraordinarygeneralmeeting,thatmeetingmaybeconvenedbyashorternoticeandinamannerdeemedappropriatebythoseholders.

PagSeguroDigitalwillgivenoticeofeachgeneralmeetingofshareholdersbypublicationonitswebsiteandinanyothermannerthatitmayberequiredtofollowinordertocomplywithCaymanIslandslaw,NYSEandSECrequirements.Theholdersofregisteredsharesmaybegivennoticeofashareholders’meetingbymeansofletterssenttotheaddressesofthoseshareholdersasregisteredinourshareholders’register,or,subjecttocertainstatutoryrequirements,byelectronicmeans.

Holders whose shares are registered in the name of DTC or its nominee, which is currently the case for all holders of Class A common shares, will not be ashareholder or member of the company and must rely on the procedures of DTC regarding notice of shareholders’ meetings and the exercise of rights of a holder of theClass A common shares.

Aquorumforageneralmeetingconsistsofanyoneormorepersonsholdingorrepresentingbyproxynotlessthanone-thirdoftheaggregatevotingpowerofallsharesinissueandentitledtovoteuponthebusinesstobetransacted.

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Aresolutionputtoavoteatageneralmeetingshallbedecidedonapoll.Anordinaryresolutiontobepassedbytheshareholdersatageneralmeetingrequirestheaffirmativevoteofasimplemajorityofthevotescastby,oronbehalfof,theshareholdersentitledtovote,presentinpersonorbyproxyandvotingatthemeeting.Aspecialresolutionrequirestheaffirmativevoteonapollofnolessthantwo-thirdsofthevotescastbytheshareholdersentitledtovotewhoarepresentinpersonorbyproxyatageneralmeeting.BothordinaryresolutionsandspecialresolutionsmayalsobepassedbyaunanimouswrittenresolutionsignedbyalltheshareholdersofourCompany,aspermittedbytheCompaniesLawandourArticlesofAssociation.

PursuanttoPagSeguroDigital’sArticlesofAssociation,generalmeetingsofshareholdersaretobechairedbythechairmanofourboardofdirectors.Ifthechairmanofourboardofdirectorsisabsent,thedirectorspresentatthemeetingshallappointoneofthemtobechairmanofthegeneralmeeting.Ifneitherthechairmannoranotherdirectorispresentatthegeneralmeetingwithinfifteenminutesafterthetimeappointedforholdingthemeeting,theshareholderspresentinpersonorbyproxyandentitledtovotemayelectanyoneoftheshareholderstobechairman.Theorderofbusinessateachmeetingshallbedeterminedbythechairmanofthemeeting,andheorsheshallhavetherightandauthoritytoprescribesuchrules,regulationsandproceduresandtodoallsuchactsandthingsasarenecessaryordesirablefortheproperconductofthemeeting,including,withoutlimitation,theestablishmentofproceduresforthemaintenanceoforderandsafety,limitationsonthetimeallottedtoquestionsorcommentsontheaffairsoftheCompany,restrictionsonentrytosuchmeetingafterthetimeprescribedforthecommencementthereof,andtheopeningandclosingofthepolls.

Liquidation Rights

IfPagSeguroDigitalisvoluntarilywoundup,theliquidator,aftertakingintoaccountandgivingeffecttotherightsofpreferredandsecuredcreditorsandtoanyagreementbetweenPagSeguroDigitalandanycreditorsthattheclaimsofsuchcreditorsshallbesubordinatedorotherwisedeferredtotheclaimsofanyothercreditorsandtoanycontractualrightsofset-offornettingofclaimsbetweenPagSeguroDigitalandanypersonorpersons(includingwithoutlimitationanybilateraloranymulti-lateralset-offornettingarrangementsbetweenthecompanyandanypersonorpersons)andsubjecttoanyagreementbetweenPagSeguroDigitalandanypersonorpersonstowaiveorlimitthesame,shallapplyPagSeguroDigital’spropertyinsatisfactionofitsliabilitiespari passu andsubjecttheretoshalldistributethepropertyamongsttheshareholdersaccordingtotheirrightsandinterestsinPagSeguroDigital.

Changes to Capital

PursuanttotheArticlesofAssociation,PagSeguroDigitalmayfromtimetotimebyordinaryresolution:

• increaseitssharecapitalbysuchsum,tobedividedintosharesofsuchamount,astheresolutionshallprescribe;

• consolidateanddividealloranyofitssharecapitalintosharesofalargeramountthanitsexistingshares;

• convertalloranyofitspaid-upsharesintostockandreconvertthatstockintopaidupsharesofanydenomination;

• subdivideitsexistingsharesoranyofthemintosharesofasmalleramount,providedthatinthesubdivisiontheproportionbetweentheamountpaidandtheamount,ifany,unpaidoneachreducedshareshallbethesameasitwasinthecaseofthesharefromwhichthereducedshareisderived;or

• cancelanyshareswhich,atthedateofthepassingoftheresolution,havenotbeentakenoragreedtobetakenbyanypersonanddiminishtheamountofitssharecapitalbytheamountofthesharessocancelled.

PagSeguroDigital’sshareholdersmaybyspecialresolution,subjecttoconfirmationbytheGrandCourtoftheCaymanIslandsonanapplicationbytheCompanyforanorderconfirmingsuchreduction,reduceitssharecapitaloranycapitalredemptionreserveinanymannerpermittedbylaw.

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Inaddition,subjecttotheprovisionsoftheCompaniesLawandourArticlesofAssociation,PagSeguroDigitalmay:

• issuesharesontermsthattheyaretoberedeemedorareliabletoberedeemed;

• purchaseitsownshares(includinganyredeemableshares);and

• makeapaymentinrespectoftheredemptionorpurchaseofitsownsharesinanymannerauthorizedbytheCompaniesLaw,includingoutofitsowncapital.

Transfer of Shares

SubjecttoanyapplicablerestrictionssetforthintheArticlesofAssociation,anyshareholderofPagSeguroDigitalmaytransferalloranyofhisorhercommonsharesbyaninstrumentoftransferintheusualorcommonformorintheformprescribedbytheNYSEoranyotherformapprovedbytheCompany’sboardofdirectors.

OurClassAcommonsharesaretradedontheNYSEinbook-entryformandmaybetransferredinaccordancewithPagSeguroDigital’sArticlesofAssociationandNYSE’srulesandregulations.

However,PagSeguroDigital’sboardofdirectorsmay,initsabsolutediscretion,declinetoregisteranytransferofanycommonsharewhichiseithernotfullypaiduptoapersonofwhomitdoesnotapproveorisissuedunderanyshareincentiveschemeforemployeeswhichcontainsatransferrestrictionthatisstillapplicabletosuchcommonshare.Theboardofdirectorsmayalsodeclinetoregisteranytransferofanyordinaryshareunless:

• afeeofsuchmaximumsumastheNYSEmaydeterminetobepayableorsuchlessersumastheboardofdirectorsmayfromtimetotimerequireispaidtoPagSeguroDigitalinrespectthereof;

• theinstrumentoftransferislodgedwithPagSeguroDigital,accompaniedbythecertificate(ifany)forthecommonsharestowhichitrelatesandsuchotherevidenceasourboardofdirectorsmayreasonablyrequiretoshowtherightofthetransferortomakethetransfer;

• theinstrumentoftransferisinrespectofonlyoneclassofshares;

• theinstrumentoftransferisproperlystamped,ifrequired;

• thecommonsharestransferredarefreeofanylieninfavorofPagSeguroDigital;and

• inthecaseofatransfertojointholders,thetransferisnottomorethanfourjointholders.

Ifthedirectorsrefusetoregisteratransfertheyarerequired,withintwomonthsafterthedateonwhichtheinstrumentoftransferwaslodged,tosendtothetransfereenoticeofsuchrefusal.

Share Repurchase

TheCompaniesLawandtheArticlesofAssociationpermitPagSeguroDigitaltopurchaseitsownshares,subjecttocertainrestrictions.TheboardofdirectorsmayonlyexercisethispoweronbehalfofPagSeguroDigital,subjecttotheCompaniesLaw,theArticlesofAssociationandtoanyapplicablerequirementsimposedfromtimetotimebytheSEC,theNYSE,orbyanyrecognizedstockexchangeonwhichoursecuritiesarelisted.

Dividends and Capitalization of Profits

WehavenotadoptedadividendpolicywithrespecttopaymentsofanyfuturedividendsbyPagSeguroDigital.SubjecttotheCompaniesLaw,PagSeguroDigital’sshareholdersmay,byresolutionpassedbyasimplemajorityofthevotingrightsentitledtovoteatageneralmeeting,declaredividends(includinginterimdividends)tobepaidtoshareholdersbutnodividendshallbedeclaredinexcessoftheamountrecommendedbytheboardofdirectors.Theboardofdirectorsmayalsodeclaredividends.DividendsmaybedeclaredandpaidoutoffundslawfullyavailabletoPagSeguroDigital.ExceptasotherwiseprovidedbytherightsattachedtosharesandtheArticlesofAssociationofPagSeguroDigital,alldividendsshallbepaidinproportiontothenumberofClassAcommonsharesorClassBcommonsharesashareholderholdsatthedatethedividendisdeclared(orsuchotherdateasmaybesetasarecorddate);but,(i)ifanyshareisissuedontermsprovidingthatitshallrankfordividendasfromaparticulardate,thatshareshallrankfordividendaccordingly,and(ii)wherewehavesharesinissuewhicharenotfullypaidup(astoparvalue)wemaypaydividendsinproportiontotheamountspaiduponeachshare.

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TheholdersofClassAcommonsharesandClassBcommonsharesshallbeentitledtoshareequallyinanydividendsthatmaybedeclaredinrespectofPagSeguroDigital’scommonsharesfromtimetotime.IntheeventthatadividendispaidintheformofClassAcommonsharesorClassBcommonshares,orrightstoacquireClassAcommonsharesorClassBcommonshares,(1)theholdersofClassAcommonsharesshallreceiveClassAcommonshares,orrightstoacquireClassAcommonshares,asthecasemaybe;and(2)theholdersofClassBcommonsharesshallreceiveClassBcommonshares,orrightstoacquireClassBcommonshares,asthecasemaybe.

OnSeptember29,2017,PagSeguroBrazil’sshareholdersapprovedadistributionofR$238.8millionindividends.Thisamountconsistedof(i)R$142.8millionofdividendsrelatedtothesix-monthperiodendedJune30,2017and(ii)R$96.0millionindividendsrelatedtotheyearendedDecember31,2016.Formoreinformationregardingthe2016dividend,seeNote18toourauditedconsolidatedfinancialstatements.Nodividendsweredeclaredorpaidin2018.

TheR$238.8millionindividendsweredistributedonSeptember29,2017inthefollowingmanner:(i)R$54.3millionpaidincashand(ii)R$184.5millionoffsetagainstamountsthenduetoPagSeguroBrazilandBoaCompraunderourcentralizedcashmanagementwithUOL.ForfurtherinformationonourcentralizedcashmanagementwithUOL,see“PresentationofFinancialandOtherInformation—CorporateEvents—The2015Reorganization.”

Inaddition,subjecttocertainlimitations,Braziliancompaniesgenerallyalsodistributeamountsinrespectofinterestonowncapital,whichiscalculatedbasedonagovernmentinterestrate.Inits2016financialstatementsPagSeguroDigitalrecordedanamountofR$22.2millionininterestonowncapitalpayabletoUOL.ThisamountwaspaidtoUOLonApril30,2017,althoughthepaymentwasoffsetinfullagainstamountsthenduetoPagSeguroBrazilandBoaCompraunderourcentralizedcashmanagementwithUOL,ratherthanbeingpaidincash.Nointerestonowncapitalwasdeclaredorpaidin2018.

Appointment, Disqualification and Removal of Directors

PagSeguroDigitalismanagedbyitsboardofdirectors.TheArticlesofAssociationprovidethat,unlessotherwisedeterminedbyaspecialresolutionofshareholders,theboardofdirectorswillbecomposedoffourto11directors,withthenumberbeingdeterminedbyamajorityofthedirectorstheninoffice.Therearenoprovisionsrelatingtoretirementofdirectorsuponreachinganyagelimit.TheArticlesofAssociationalsoprovidethat,whilePagSeguroDigital’ssharesareadmittedtotradingonNYSE,theboardofdirectorsmustalwayscomplywiththeresidencyandcitizenshiprequirementsoftheU.S.securitieslawsapplicabletoforeignprivateissuers.

TheArticlesofAssociationprovidethatdirectorsshallbeelectedbyanordinaryresolutionofourshareholders,whichrequirestheaffirmativevoteofasimplemajorityofthevotescastontheresolutionbytheshareholdersentitledtovotewhoarepresent,inpersonorbyproxy,atthemeeting.Eachdirectorshallbeappointedandelectedforsuchtermastheresolutionappointinghimorhermaydetermineoruntilhisorherdeath,resignationorremoval.

OurdirectorsareLuizFrias,EduardoAlcaro,MariaJudithdeBrito,RicardoDutradaSilva,NoemiaGushiken,MarcosdeBarrosLisboaandClevelandPratesTeixeira.Ms.Gushiken,Mr.LisboaandMr.Teixeiraare“independent”asthattermisdefinedundertheapplicablerulesandregulationsoftheSECandthelistingstandardsoftheNYSE.

Anyvacanciesontheboardofdirectorsthatariseotherthanupontheremovalofadirectorbyresolutionpassedatageneralmeetingcanbefilledbytheremainingdirectors(notwithstandingthattheymayconstitutelessthanaquorum).Anysuchappointmentshallbeasaninterimdirectortofillsuchvacancyuntilthenextannualgeneralmeetingofshareholders.

Additionstotheexistingboard(withinthelimitssetpursuanttotheArticlesofAssociation)maybemadebyordinaryresolutionoftheshareholders.

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UponthecompletionofourIPO,theboardofdirectorsputinplaceanauditcommittee.See“Item6.Directors,SeniorManagementandEmployees—AuditCommittee.”

Grounds for Removing a Director

Adirectormayberemovedwithorwithoutcausebyordinaryresolution.Thenoticeofgeneralmeetingmustcontainastatementoftheintentiontoremovethedirectorandmustbeservedonthedirectornotlessthantencalendardaysbeforethemeeting.Thedirectorisentitledtoattendthemeetingandbeheardonthemotionforhisremoval.

Theofficeofadirectorwillbevacatedautomaticallyifheorshe(1)becomesprohibitedbylawfrombeingadirector,(2)becomesbankruptormakesanarrangementorcompositionwithhiscreditors,(3)diesorisintheopinionofallhisco-directors,incapablebyreasonofmentaldisorderofdischarginghisdutiesasdirector,(4)resignshisofficebynoticetousor(5)hasformorethansixmonthsbeenabsentwithoutpermissionofthedirectorsfrommeetingsoftheboardofdirectorsheldduringthatperiod,andtheremainingdirectorsresolvethathisorherofficebevacated.

Proceedings of the Board of Directors

TheArticlesofAssociationprovidethatPagSeguroDigital’sbusinessistobemanagedandconductedbytheboardofdirectors.Thequorumnecessaryfortheboardmeetingshallbeasimplemajorityofthedirectorstheninoffice(subjecttotherebeingaminimumoftwodirectorspresent)andbusinessatanymeetingshallbedecidedbyamajorityofvotes.Inthecaseofanequalityofvotes,thechairmanshallhaveacastingvote.

SubjecttotheprovisionsoftheArticlesofAssociation,theboardofdirectorsmayregulateitsproceedingsastheydetermineisappropriate.BoardmeetingsshallbeheldatleastonceeverycalendarquarterandshalltakeplaceeitherinSãoPaulo,Braziloratsuchotherplaceasthedirectorsmaydetermine.

SubjecttotheprovisionsoftheMemorandumandArticlesofAssociation,toanydirectionsgivenbyordinaryresolutionoftheshareholdersandthelistingrulesoftheNYSE,theboardofdirectorsmayfromtimetotimeatitsdiscretionexerciseallpowersofPagSeguroDigital,including,subjecttotheCompaniesLaw,thepowertoissuedebentures,bondsandothersecuritiesofthecompany,whetheroutrightorascollateralsecurityforanydebt,liabilityorobligationofourcompanyorofanythirdparty.

Inspection of Books and Records

HoldersofPagSeguroDigitalshareswillhavenogeneralrightunderCaymanIslandslawtoinspectorobtaincopiesofthelistofshareholdersorcorporaterecordsoftheCompany.However,theboardofdirectorsmaydeterminefromtimetotimewhetherandtowhatextentPagSeguroDigital’saccountingrecordsandbooksshallbeopentoinspectionbyshareholderswhoarenotmembersoftheboardofdirectors.Notwithstandingtheabove,theArticlesofAssociationprovideshareholderswiththerighttoreceiveannualfinancialstatements.Suchrighttoreceiveannualfinancialstatementsmaybesatisfiedbypublishingthesameonthecompany’swebsiteorfilingsuchannualreportsaswearerequiredtofilewiththeSEC.

Register of Shareholders

OurregisteredClassAcommonsharesareheldthroughDTC,andDTCorCede&Co.,asnomineeforDTC,isrecordedintheshareholders’registerastheholderofourClassAcommonshares.

UnderCaymanIslandslaw,PagSeguroDigitalmustkeeparegisterofshareholdersthatincludes:

• thenamesandaddressesoftheshareholders,astatementofthesharesheldbyeachmember,andoftheamountpaidoragreedtobeconsideredaspaid,onthesharesofeachmember;

• thedateonwhichthenameofanypersonwasenteredontheregisterasamember;and

• thedateonwhichanypersonceasedtobeamember.

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UnderCaymanIslandslaw,theregisterofshareholdersofPagSeguroDigitalisprima facie evidenceofthematterssetouttherein(i.e.,theregisterofshareholderswillraiseapresumptionoffactonthemattersreferredtoaboveunlessrebutted)andashareholderregisteredintheregisterofshareholdersisdeemedasamatterofCaymanIslandslawtohaveprima facie legaltitletothesharesassetagainsthisorhernameintheregisterofshareholders.Theshareholdersrecordedintheregisterofshareholdersshouldbedeemedtohavelegaltitletothesharessetagainsttheirname.

Ifthenameofanypersonisincorrectlyenteredinoromittedfromtheregisterofshareholders,orifthereisanydefaultorunnecessarydelayinenteringontheregisterthefactofanypersonhavingceasedtobeashareholderofPagSeguroDigital,thepersonormemberaggrieved(oranyshareholderofPagSeguroDigital,orPagSeguroDigitalitself)mayapplytotheCaymanIslandsGrandCourtforanorderthattheregisterberectified,andtheCourtmayeitherrefusesuchapplicationoritmay,ifsatisfiedofthejusticeofthecase,makeanorderfortherectificationoftheregister.

Exempted Company

PagSeguroDigitalisanexemptedcompanywithlimitedliabilityundertheCompaniesLaw.TheCompaniesLawdistinguishesbetweenordinaryresidentcompaniesandexemptedcompanies.AnycompanythatisregisteredintheCaymanIslandsbutconductsbusinessmainlyoutsideoftheCaymanIslandsmayapplytoberegisteredasanexemptedcompany.Therequirementsforanexemptedcompanyareessentiallythesameasforanordinarycompanyexceptfortheexemptionsandprivilegeslistedbelow:

• anexemptedcompanydoesnothavetofileanannualreturnofitsshareholderswiththeRegistrarofCompanies;

• anexemptedcompany’sregisterofshareholdersisnotopentoinspection;

• anexemptedcompanydoesnothavetoholdanannualgeneralmeeting;

• anexemptedcompanymayobtainanundertakingagainsttheimpositionofanyfuturetaxation(suchundertakingsareusuallygivenfor20yearsinthefirstinstance);

• anexemptedcompanymayregisterbywayofcontinuationinanotherjurisdictionandbederegisteredintheCaymanIslands;

• anexemptedcompanymayregisterasalimiteddurationcompany;and

• anexemptedcompanymayregisterasasegregatedportfoliocompany.

“Limitedliability”meansthattheliabilityofeachshareholderislimitedtotheamountunpaidbytheshareholderonthesharesofthecompany(exceptinexceptionalcircumstances,suchasinvolvingfraud,theestablishmentofanagencyrelationshiporanillegalorimproperpurposeorothercircumstancesinwhichacourtmaybepreparedtopierceorliftthecorporateveil).

PagSeguroDigitalissubjecttoreportingandotherinformationalrequirementsoftheExchangeAct,asapplicabletoforeignprivateissuers.Exceptasotherwisedisclosedinthisannualreport,PagSeguroDigitalcomplieswiththeNYSErulesinlieuoffollowinghomecountrypractice.

Anti-Takeover Provisions in our Memorandum and Articles of Association

SomeprovisionsoftheMemorandumandArticlesofAssociationmaydiscourage,delayorpreventachangeincontrolofPagSeguroDigitalormanagementthatshareholdersmayconsiderfavorable.Inparticular,thecapitalstructureofPagSeguroDigitalconcentratesownershipofvotingrightsinthehandsofUOL.Theseprovisions,whicharesummarizedbelow,areexpectedtodiscouragecoercivetakeoverpracticesandinadequatetakeoverbids.TheseprovisionsarealsodesignedtoencouragepersonsseekingtoacquirecontrolofPagSeguroDigitaltofirstnegotiatewiththeboardofdirectors.However,theseprovisionscouldalsohavetheeffectofdiscouragingothersfromattemptinghostiletakeoversand,asaconsequence,theymayalsoinhibittemporaryfluctuationsinthemarketpriceoftheClassAcommonsharesthatoftenresultfromactualorrumoredhostiletakeoverattempts.TheseprovisionsmayalsohavetheeffectofpreventingchangesinthemanagementofPagSeguroDigital.Itispossiblethattheseprovisionscouldmakeitmoredifficulttoaccomplishtransactionsthatshareholdersmayotherwisedeemtobeintheirbestinterests.

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Two Classes of Common Shares

TheClassBcommonsharesofPagSeguroDigitalareentitledto10votespershare,whiletheClassAcommonsharesareentitledtoonevotepershare.SinceitownsofalloftheClassBcommonsharesofPagSeguroDigital,UOLcurrentlyhastheabilitytoelectalldirectorsandtodeterminetheoutcomeofmostmatterssubmittedforavoteofshareholders.Thisconcentratedvotingcontrolcoulddiscourageothersfrominitiatinganypotentialmerger,takeover,orotherchangeofcontroltransactionthatothershareholdersmayviewasbeneficial.

SolongasUOLhastheabilitytodeterminetheoutcomeofmostmatterssubmittedtoavoteofshareholdersaswellastheoverallmanagementanddirectionofPagSeguroDigital,thirdpartiesmaybedeterredintheirwillingnesstomakeanunsolicitedmerger,takeover,orotherchangeofcontrolproposal,ortoengageinaproxycontestfortheelectionofdirectors.Asaresult,thefactthatPagSeguroDigitalhastwoclassesofcommonsharesmayhavetheeffectofdeprivingyouasaholderofClassAcommonsharesofanopportunitytosellyourClassAcommonsharesatapremiumoverprevailingmarketpricesandmakeitmoredifficulttoreplacethedirectorsandmanagementofPagSeguroDigital.

Preferred Shares

PagSeguroDigital’sboardofdirectorsisgivenwidepowerstoissueoneormoreclassesorseriesofshareswithpreferredrights.Suchpreferencesmayinclude,forexample,dividendrights,conversionrights,redemptionprivileges,enhancedvotingpowersandliquidationpreferences.

Despitetheanti-takeoverprovisionsdescribedabove,underCaymanIslandslaw,PagSeguroDigital’sboardofdirectorsmayonlyexercisetherightsandpowersgrantedtothemundertheMemorandumandArticlesofAssociation,forwhattheybelieveingoodfaithtobeinthebestinterestsofPagSeguroDigital.

Protection of Non-Controlling Shareholders

TheGrandCourtoftheCaymanIslandsmay,ontheapplicationofshareholdersholdingnotlessthanonefifthofthesharesofPagSeguroDigitalinissue,appointaninspectortoexaminetheCompany’saffairsandreportthereoninamannerastheGrandCourtshalldirect.

SubjecttotheprovisionsoftheCompaniesLaw,anyshareholdermaypetitiontheGrandCourtoftheCaymanIslandswhichmaymakeawindinguporder,ifthecourtisoftheopinionthatthiswindingupisjustandequitable.

NotwithstandingtheU.S.securitieslawsandregulationsthatareapplicabletoPagSeguroDigital,generalcorporateclaimsagainstPagSeguroDigitalbyitsshareholdersmust,asageneralrule,bebasedonthegenerallawsofcontractortortapplicableintheCaymanIslandsortheirindividualrightsasshareholdersasestablishedbyPagSeguroDigital’sMemorandumandArticlesofAssociation.

TheCaymanIslandscourtsordinarilywouldbeexpectedtofollowEnglishcaselawprecedents,whichpermitaminorityshareholdertocommencearepresentativeactionagainstPagSeguroDigital,orderivativeactionsinPagSeguroDigital’sname,tochallenge(1)anactwhichisultra vires orillegal,(2)anactwhichconstitutesafraudagainsttheminorityandthewrongdoersthemselvescontrolPagSeguroDigital,and(3)anirregularityinthepassingofaresolutionthatrequiresaqualified(orspecial)majority.

Registration Rights and Restricted Shares

AlthoughnoshareholdersofPagSeguroDigitalhaveformalregistrationrights,theyorentitiescontrolledbythemortheirpermittedtransfereeswillbeabletoselltheirsharesinthepublicmarketfromtimetotimewithoutregisteringthem,subjecttocertainlimitationsonthetiming,amountandmethodofthosesalesimposedbyregulationspromulgatedbytheSEC.PagSeguroDigitalhasagreedtolock-upprovisionsthatrestrictus,subjecttospecifiedexceptions,includingtherightforPagSeguroDigitaltoissuenewsharesifwecarryoutanacquisitionorenterintoamerger,jointventureorstrategicparticipation,fromsellingorotherwisedisposingofanysharesforaperiodof12monthsafterthedateofourJune2018follow-onoffering.UOLhasalsoagreedtolock-uprestrictionsfor12monthsfollowingthedateofourJune2018follow-onofferinginsubstantiallysimilarterms,exceptthatthelock-uprestrictionsapplicabletoUOLarenotsubjecttoanyexceptions.Thelock-uprestrictionsapplicabletoPagSeguroDigitalandUOLarenotsubjecttowaiverbytheunderwritersofourJune2018follow-onoffering.Formoreinformation,see“Item10.AdditionalInformation—Lock-upAgreements.”

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Principal Differences between Cayman Islands and U.S. Corporate Law

TheCompaniesLawwasmodelledoriginallyaftersimilarlawsinEnglandandWalesbutdoesnotfollowsubsequentstatutoryenactmentsinEnglandandWales.Inaddition,theCompaniesLawdiffersfromlawsapplicabletoU.S.corporationsandtheirshareholders.SetforthbelowisasummaryofthesignificantdifferencesbetweentheprovisionsoftheCompaniesLawapplicabletoPagSeguroDigitalandthelawsapplicabletocompaniesincorporatedintheUnitedStatesandtheirshareholders.

Mergers and Similar Arrangements

TheCompaniesLawpermitsmergersandconsolidationsbetweenCaymanIslandscompaniesandbetweenCaymanIslandscompaniesandnon-CaymanIslandscompanies.

Forthesepurposes,(a)“merger”meansthemergingoftwoormoreconstituentcompaniesandthevestingoftheirundertaking,propertyandliabilitiesinoneofsuchcompaniesasthesurvivingcompanyand(b)a“consolidation”meansthecombinationoftwoormoreconstituentcompaniesintoaconsolidatedcompanyandthevestingoftheundertaking,propertyandliabilitiesofsuchcompaniesintheconsolidatedcompany.Inordertoeffectsuchamergerorconsolidation,thedirectorsofeachconstituentcompanymustapproveawrittenplanofmergerorconsolidation,whichmustthenbeauthorizedby(a)aspecialresolutionoftheshareholdersofeachconstituentcompany;and(b)suchotherauthorization,ifany,asmaybespecifiedinsuchconstituentcompany’sarticlesofassociation.TheplanmustbeapprovedbythedirectorsofeachconstituentcompanyandfiledwiththeRegistrarofCompaniestogetherwithadeclarationasto:(1)thesolvencyoftheconsolidatedorsurvivingcompany,(2)themergerorconsolidationisbonafideandnotintendedtodefraudunsecuredcreditorsoftheconstituentcompanies;(3)nopetitionorothersimilarproceedinghasbeenfiledandremainsoutstandingandnoorderorresolutiontowindupthecompanyinanyjurisdiction,(4)noreceiver,trustee,administratororsimilarpersonhasbeenappointedinanyjurisdictionandisactinginrespectoftheconstituentcompany,itsaffairsorproperty,(5)noscheme,order,compromiseorsimilararrangementhasbeenenteredintoormadeinanyjurisdictionwithcreditors;(6)alistoftheassetsandliabilitiesofeachconstituentcompany;(7)thenon-survivingconstituentcompanyhasretiredfromanyfiduciaryofficeheldorwilldoso;(8)thattheconstituentcompanyhascompliedwithanyrequirementsundertheregulatorylaws,whererelevant;and(9)anundertakingthatacopyofthecertificateofmergerorconsolidationwillbegiventothemembersandcreditorsofeachconstituentcompanyandpublishedintheCaymanIslandsGazette.

Dissentingshareholdershavetherighttobepaidthefairvalueoftheirshares(which,ifnotagreedbetweentheparties,maybedeterminedbytheCaymanIslands’court)iftheyfollowtherequiredprocedures,subjecttocertainexceptions.Courtapprovalisnotrequiredforamergerorconsolidationwhichiseffectedincompliancewiththesestatutoryprocedures.

Inaddition,therearestatutoryprovisionsthatfacilitatethereconstructionandamalgamationofcompanies,providedthatthearrangementinquestionisapprovedbyamajorityinnumberofeachclassofshareholdersandcreditorswithwhomthearrangementistobemade,andwhomustinadditionrepresentthree-fourthsinvalueofeachsuchclassofshareholdersorcreditors,asthecasemaybe,thatarepresentandvotingeitherinpersonorbyproxyatameeting,ormeetingsconvenedforthatpurpose.TheconveningofthemeetingsandsubsequentlythearrangementmustbesanctionedbytheGrandCourtoftheCaymanIslands.Whileadissentingshareholderwouldhavetherighttoexpresstothecourttheviewthatthetransactionshouldnotbeapproved,thecourtcanbeexpectedtoapprovethearrangementifitsatisfiesitselfthat:

• PagSeguroDigitalisnotproposingtoactillegallyorultraviresandthestatutoryprovisionsastomajorityvotehavebeencompliedwith;

• theshareholdershavebeenfairlyrepresentedatthemeetinginquestion;

• thearrangementissuchthatmaybereasonablyapprovedbyanintelligentandhonestmanofthatclassactinginrespectofhisinterest;and

• thearrangementisnotonethatwouldmoreproperlybesanctionedundersomeotherprovisionoftheCompaniesLaworthatwouldamounttoa“fraudontheminority.”

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Whenatakeoverofferismadeandacceptedbyholdersof90.0%invalueofthesharesaffectedwithinfourmonths,theofferormay,withinatwo-monthperiod,requiretheholdersoftheremainingsharestotransfersuchsharesonthetermsoftheoffer.AnobjectionmaybemadetotheGrandCourtoftheCaymanIslandsbutisunlikelytosucceedunlessthereisevidenceoffraud,badfaithorcollusion.

Ifthearrangementandreconstructionarethusapproved,anydissentingshareholderswouldhavenorightscomparabletoappraisalrights,whichmightotherwiseordinarilybeavailabletodissentingshareholdersofU.S.corporationsandallowsuchdissentingshareholderstoreceivepaymentincashforthejudiciallydeterminedvalueoftheirshares.

Shareholders’ Suits

ClassactionsarenotrecognizedintheCaymanIslands,butgroupsofshareholderswithidenticalinterestsmaybringrepresentativeproceedings,whicharesimilar.However,aclassactionsuitcouldnonethelessbebroughtinaU.S.courtpursuanttoanallegedviolationofU.S.securitieslawsandregulations.

Inprinciple,PagSeguroDigitalitselfwouldnormallybetheproperplaintiffandasageneralrule,whilstaderivativeactionmaybeinitiatedbyaminorityshareholderonbehalfofPagSeguroDigitalinaCaymanIslandscourt,suchshareholderwillnotbeabletocontinuethoseproceedingswithoutthepermissionofaGrandCourtjudge,whowillonlyallowtheactiontocontinueiftheshareholdercandemonstratethatPagSeguroDigitalhasagoodcaseagainsttheDefendant,andthatitisproperfortheshareholdertocontinuetheactionratherthantheCompany’sboardofdirectors.Examplesofcircumstancesinwhichderivativeactionswouldbepermittedtocontinuearewhere:

• acompanyisactingorproposingtoactillegallyorbeyondthescopeofitsauthority;

• theactcomplainedof,althoughnotbeyondthescopeofitsauthority,couldbeeffecteddulyifauthorizedbymorethanasimplemajorityvotethathasnotbeenobtained;and

• thosewhocontrolthecompanyareperpetratinga“fraudontheminority.”

Corporate Governance

CaymanIslandslawrestrictstransactionsbetweenacompanyanditsdirectorsunlessthereareprovisionsintheMemorandumandArticlesofAssociationwhichprovideamechanismtoalleviatepossibleconflictsofinterest.Additionally,CaymanIslandslawimposesondirectors’dutiesofcareandskillandfiduciarydutiestothecompanieswhichtheyserve.UnderPagSeguroDigital’sArticlesofAssociation,adirectormustdisclosethenatureandextentofhisinterestinanycontractorarrangement,andfollowingsuchdisclosureandsubjecttoanyseparaterequirementunderapplicablelaworthelistingrulesoftheNYSE,andunlessdisqualifiedbythechairmanoftherelevantmeeting,theinteresteddirectormayvoteinrespectofanytransactionorarrangementinwhichheorsheisinterested.Theinteresteddirectorshallbecountedinthequorumatsuchmeetingandtheresolutionmaybepassedbyamajorityofthedirectorspresentatthemeeting.

Indemnification of Directors and Executive Officers and Limitation of Liability

TheCompaniesLawdoesnotlimittheextenttowhichacompany’sarticlesofassociationmayprovideforindemnificationofdirectorsandofficers,excepttotheextentthatitmaybeheldbytheCaymanIslandscourtstobecontrarytopublicpolicy,suchastoprovideindemnificationagainstcivilfraudortheconsequencesofcommittingacrime.PagSeguroDigital’sArticlesofAssociationprovidethatweshallindemnifyandholdharmlessourdirectorsandofficersagainstallactions,proceedings,costs,charges,expenses,losses,damages,liabilities,judgments,fines,settlementsandotheramountsincurredorsustainedbysuchdirectorsorofficers,otherthanbyreasonofsuchperson’sdishonesty,willfuldefaultorfraud,inorabouttheconductofourcompany’sbusinessoraffairs(includingasaresultofanymistakeofjudgment)orintheexecutionordischargeofhisduties,powers,authoritiesordiscretions,includingwithoutprejudicetothegeneralityoftheforegoing,anycosts,expenses,lossesorliabilitiesincurredbysuchdirectororofficerindefending(whethersuccessfullyorotherwise)anycivil,criminalorotherproceedingsconcerningPagSeguroDigitalorouraffairsinanycourtwhetherintheCaymanIslandsorelsewhere.ThisstandardofconductisgenerallythesameaspermittedundertheDelawareGeneralCorporationLawforaDelawarecorporation.

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InsofarasindemnificationforliabilitiesarisingundertheSecuritiesActmaybepermittedtoPagSeguroDigital’sdirectors,officersorpersonscontrollingtheCompanyundertheforegoingprovisions,wehavebeeninformedthat,intheopinionoftheSEC,thisindemnificationisagainstpublicpolicyasexpressedintheSecuritiesActandisthereforeunenforceable.

Directors’ Fiduciary Duties

AsamatterofCaymanIslandslaw,adirectorofaCaymanIslandscompanyisinthepositionofafiduciarywithrespecttothecompany.Accordingly,directorsowefiduciarydutiestotheircompaniestoactbonafideinwhattheyconsidertobethebestinterestsofthecompany,toexercisetheirpowersforthepurposesforwhichtheyareconferredandnottoplacethemselvesinapositionwherethereisaconflictbetweentheirpersonalinterestsandtheirdutytothecompany.Accordingly,adirectorowesacompanyadutynottomakeaprofitbasedonhisorherpositionasdirector(unlessthecompanypermitshimorhertodoso)andadutynottoputhimselforherselfinapositionwheretheinterestsofthecompanyconflictwithhisorherpersonalinterestorhisorherdutytoathirdparty.However,thisobligationmaybevariedbythecompany’sarticlesofassociation,whichmaypermitadirectortovoteonamatterinwhichhehasapersonalinterestprovidedthathehasdisclosedthatnatureofhisinteresttotheboardofdirectors.PagSeguroDigital’sArticlesofAssociationprovidesthatadirectormustdisclosethenatureandextentofhisorherinterestinanycontractorarrangement,andfollowingsuchdisclosureandsubjecttoanyseparaterequirementunderapplicablelaworthelistingrulesoftheNYSE,andunlessdisqualifiedbythechairmanoftherelevantmeeting,suchdirectormayvoteinrespectofanytransactionorarrangementinwhichheorsheisinterestedandmaybecountedinthequorumatthemeeting.

AdirectorofaCaymanIslandscompanyalsoowestothecompanydutiestoexerciseindependentjudgmentincarryingouthisfunctionsandtoexercisereasonableskill,careanddiligence,whichhasbothobjectiveandsubjectiveelements.RecentCaymanIslandscaselawconfirmedthatdirectorsmustexercisethecare,skillanddiligencethatwouldbeexercisedbyareasonablydiligentpersonhavingthegeneralknowledge,skillandexperiencereasonablytobeexpectedofapersonactingasadirector.Additionally,adirectormustexercisetheknowledge,skillandexperiencewhichheorsheactuallypossesses.

Ageneralnoticemaybegiventotheboardofdirectorstotheeffectthat(1)thedirectorisamemberorofficerofaspecifiedcompanyorfirmandistoberegardedasinterestedinanycontractorarrangementwhichmayafterthedateofthenoticebemadewiththatcompanyorfirm;or(2)heorsheistoberegardedasinterestedinanycontractorarrangementwhichmayafterthedateofthenoticetotheboardofdirectorsbemadewithaspecifiedpersonwhoisconnectedwithhimorher,willbedeemedsufficientdeclarationofinterest.Thisnoticeshallspecifythenatureoftheinterestinquestion.FollowingthedisclosurebeingmadepursuanttoPagSeguroDigital’sArticlesofAssociationandsubjecttoanyseparaterequirementunderapplicablelaworthelistingrulesoftheNYSE,andunlessdisqualifiedbythechairmanoftherelevantmeeting,adirectormayvoteinrespectofanytransactionorarrangementinwhichheorsheisinterestedandmaybecountedinthequorumatthemeeting.

Incomparison,underDelawarecorporatelaw,adirectorofaDelawarecorporationhasafiduciarydutytothecorporationanditsshareholders.Thisdutyhastwocomponents:thedutyofcareandthedutyofloyalty.Thedutyofcarerequiresthatadirectoractingoodfaith,withthecarethatanordinarilyprudentpersonwouldexerciseundersimilarcircumstances.Underthisduty,adirectormustinformhimselforherselfof,anddisclosetoshareholders,allmaterialinformationreasonablyavailableregardingasignificanttransaction.Thedutyofloyaltyrequiresthatadirectoractinamannerheorshereasonablybelievestobeinthebestinterestsofthecorporation.Heorshemustnotusehisorhercorporatepositionforpersonalgainoradvantage.Thisdutyprohibitsself-dealingbyadirectorandmandatesthatthebestinterestofthecorporationanditsshareholderstakeprecedenceoveranyinterestpossessedbyadirector,officerorcontrollingshareholderandnotsharedbytheshareholdersgenerally.Ingeneral,actionsofadirectorarepresumedtohavebeenmadeonaninformedbasis,ingoodfaithandinthehonestbeliefthattheactiontakenwasinthebestinterestsofthecorporation.However,thispresumptionmayberebuttedbyevidenceofabreachofoneofthefiduciaryduties.Shouldsuchevidencebepresentedconcerningatransactionbyadirector,adirectormustprovetheproceduralfairnessofthetransaction,andthatthetransactionwasoffairvaluetothecorporation.

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Shareholder Proposals

UndertheDelawareGeneralCorporationLaw,ashareholderhastherighttoputanyproposalbeforetheannualmeetingofshareholders,provideditcomplieswiththenoticeprovisionsinthegoverningdocuments.TheDelawareGeneralCorporationLawdoesnotprovideshareholdersanexpressrighttoputanyproposalbeforetheannualmeetingofshareholders,butDelawarecorporationsgenerallyaffordshareholdersanopportunitytomakeproposalsandnominationsprovidedthattheycomplywiththenoticeprovisionsinthecertificateofincorporationorbylaws.Aspecialmeetingmaybecalledbytheboardofdirectorsoranyotherpersonauthorizedtodosointhegoverningdocuments,butshareholdersmaybeprecludedfromcallingspecialmeetings.

TheCompaniesLawprovidesshareholderswithonlylimitedrightstorequisitionageneralmeeting,anddoesnotprovideshareholderswithanyrighttoputanyproposalbeforeageneralmeeting.However,theserightsmaybeprovidedinacompany’sarticlesofassociation.PagSeguroDigital’sArticlesofAssociationprovidethatupontherequisitionofoneormoreshareholdersrepresentingnotlessthanone-thirdofthevotingrightsentitledtovoteatgeneralmeetings,theboardwillconveneanextraordinarygeneralmeetingandputtheresolutionssorequisitionedtoavoteatsuchmeeting.TheMemorandumandArticlesofAssociationprovidenootherrighttoputanyproposalsbeforeannualgeneralmeetingsorextraordinarygeneralmeetings.

Cumulative Voting

UndertheDelawareGeneralCorporationLaw,cumulativevotingforelectionsofdirectorsisnotpermittedunlessthecorporation’scertificateofincorporationspecificallyprovidesforit.Cumulativevotingpotentiallyfacilitatestherepresentationofminorityshareholdersonaboardofdirectorssinceitpermitstheminorityshareholdertocastallthevotestowhichtheshareholderisentitledonasingledirector,whichincreasestheshareholder’svotingpowerwithrespecttoelectingsuchdirector.AspermittedunderCaymanIslandslaw,PagSeguroDigital’sArticlesofAssociationdonotprovideforcumulativevoting.Asaresult,theshareholdersofPagSeguroDigitalarenotaffordedanylessprotectionsorrightsonthisissuethanshareholdersofaDelawarecorporation.

Removal of Directors

Theofficeofadirectorshallbevacatedautomaticallyif,amongotherthings,heorshe(1)becomesprohibitedbylawfrombeingadirector,(2)becomesbankruptormakesanarrangementorcompositionwithhiscreditors,(3)diesorisintheopinionofallhisco-directors,incapablebyreasonofmentaldisorderofdischarginghisdutiesasdirector(4)resignshisofficebynoticetousor(5)hasformorethansixmonthsbeenabsentwithoutpermissionofthedirectorsfrommeetingsoftheboardofdirectorsheldduringthatperiod,andtheremainingdirectorsresolvethathis/herofficebevacated.

Transaction with Interested Shareholders

TheDelawareGeneralCorporationLawprovidesthat;unlessthecorporationhasspecificallyelectednottobegovernedbythisstatute,itisprohibitedfromengagingincertainbusinesscombinationswithan“interestedshareholder”forthreeyearsfollowingthedatethatthispersonbecomesaninterestedshareholder.Aninterestedshareholdergenerallyisapersonoragroupwhoorwhichownsorowned15%ormoreofthetarget’soutstandingvotingsharesorwhoorwhichisanaffiliateorassociateofthecorporationandowned15%ormoreofthecorporation’soutstandingvotingshareswithinthepastthreeyears.Thishastheeffectoflimitingtheabilityofapotentialacquirertomakeatwo-tieredbidforthetargetinwhichallshareholderswouldnotbetreatedequally.Thestatutedoesnotapplyif,amongotherthings,priortothedateonwhichtheshareholderbecomesaninterestedshareholder,theboardofdirectorsapproveseitherthebusinesscombinationorthetransactionwhichresultedinthepersonbecominganinterestedshareholder.ThisencouragesanypotentialacquirerofaDelawarecorporationtonegotiatethetermsofanyacquisitiontransactionwiththetarget’sboardofdirectors.

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CaymanIslandslawhasnocomparablestatute.Asaresult,PagSeguroDigitalcannotavailitselfofthetypesofprotectionsaffordedbytheDelawarebusinesscombinationstatute.However,althoughCaymanIslandslawdoesnotregulatetransactionsbetweenacompanyanditssignificantshareholders,itdoesprovidethattheboardofdirectorsowedutiestoensurethatthesetransactionsareenteredintobonafideinthebestinterestsofthecompanyandforapropercorporatepurposeand,asnotedabove,atransactionmaybesubjecttochallengeifithastheeffectofconstitutingafraudontheminorityshareholders.

Dissolution; Winding Up

UndertheDelawareGeneralCorporationLaw,unlesstheboardofdirectorsapprovestheproposaltodissolve,dissolutionmustbeapprovedbyshareholdersholding100%ofthetotalvotingpowerofthecorporation.Ifthedissolutionisinitiatedbytheboardofdirectorsitmaybeapprovedbyasimplemajorityofthecorporation’soutstandingshares.DelawarelawallowsaDelawarecorporationtoincludeinitscertificateofincorporationasupermajorityvotingrequirementinconnectionwithdissolutionsinitiatedbytheboard.UnderCaymanIslandslaw,acompanymaybewoundupbyeitheranorderofthecourtsoftheCaymanIslandsorbyaspecialresolutionofitsmembersor,ifthecompanyresolvesbyordinaryresolutionthatitbewoundupbecauseitisunabletopayitsdebtsastheyfalldue.Thecourthasauthoritytoorderwindingupinanumberofspecifiedcircumstancesincludingwhereitis,intheopinionofthecourt,justandequitabletodoso.

UndertheCompaniesLaw,PagSeguroDigitalmaybedissolved,liquidatedorwoundupbyaspecialresolutionofshareholders(requiringatwo-thirdsmajorityvote).PagSeguroDigital’sArticlesofAssociationalsogiveitsboardofdirectorsauthoritytopetitiontheCaymanIslandsCourttowindupPagSeguroDigital.

Variation of Rights of Shares

UndertheDelawareGeneralCorporationLaw,acorporationmayvarytherightsofaclassofshareswiththeapprovalofamajorityoftheoutstandingsharesofthatclass,unlessthecertificateofincorporationprovidesotherwise.UnderPagSeguroDigital’sArticlesofAssociation,ifthesharecapitalisdividedintomorethanoneclassofshares,therightsattachedtoanyclassmayonlybevariedwiththewrittenconsentoftheholdersoftwo-thirdsofthesharesofthatclassorthesanctionofaspecialresolutionpassedataseparatemeetingoftheholdersofthesharesofthatclass.

Also,exceptwithrespecttosharecapital(asdescribedabove),alterationstoPagSeguroDigital’sMemorandumandArticlesofAssociationmayonlybemadebyspecialresolutionofshareholders(requiringatwo-thirdsmajorityvote).

Amendment of Governing Documents

UndertheDelawareGeneralCorporationLaw,acorporation’scertificateofincorporationmaybeamendedonlyifadoptedanddeclaredadvisablebytheboardofdirectorsandapprovedbyamajorityoftheoutstandingsharesentitledtovote,andthebylawsmaybeamendedwiththeapprovalofamajorityoftheoutstandingsharesentitledtovoteandmay,ifsoprovidedinthecertificateofincorporation,alsobeamendedbytheboardofdirectors.UnderCaymanIslandslaw,PagSeguroDigital’sMemorandumandArticlesofAssociationgenerally(andsaveforcertainamendmentstosharecapitaldescribedinthissection)mayonlybeamendedbyspecialresolutionofshareholders(requiringatwo-thirdsmajorityvote).

Rights of Non-Resident or Foreign Shareholders

TherearenolimitationsimposedbyPagSeguroDigital’sMemorandumandArticlesofAssociationontherightsofnon-residentorforeignshareholderstoholdorexercisevotingrightsonPagSeguroDigital’sshares.Inaddition,therearenoprovisionsintheMemorandumandArticlesofAssociationgoverningtheownershipthresholdabovewhichshareholderownershipmustbedisclosed.

Transfer Agent and Registrar

AmericanStockTransfer&TrustCompany,LLCmaintainsourshareholders’registerandactsasourtransferagent,registrarandpayingagentfortheClassAcommonshares.TheClassAcommonsharesaretradedontheNYSEinbook-entryform.Thetransferagent,registrarandpayingagent’saddressis620115thAvenue,Brooklyn,NY,11219,anditstelephonenumberis+1(800)937-5449or+1(718)921-8124.

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Material Contracts

Forinformationconcerningourmaterialcontracts,see“Item4.InformationontheCompany,”“Item5.OperatingandFinancialReviewandProspects,”“Item6.Directors,SeniorManagementandEmployees—Compensation”andItem7.MajorShareholdersandRelatedPartyTransactions—RelatedPartyTransactions.”

Exchange Controls and Other Limitations Affecting Security Holders

TheCaymanIslandscurrentlyhasnoexchangecontrolrestrictions.

Taxation

ThefollowingsummarycontainsadescriptionofcertainCaymanIslandsandU.S.federalincometaxconsequencesoftheacquisition,ownershipanddispositionofourClassAcommonsharesbutitdoesnotpurporttobeacomprehensivedescriptionofallthetaxconsiderationsthatmayberelevanttoadecisiontopurchase,ownordisposeofClassAcommonshares.ThesummaryisbaseduponthetaxlawsoftheCaymanIslandsandregulationsthereunderandonthetaxlawsoftheUnitedStatesandregulationsthereunderatthedatehereof,whicharesubjecttochange.Holders of our Class A common shares should consult their own tax advisors as to the tax consequences ofthe acquisition, ownership and disposition of Class A common shares.

Cayman Islands Tax Considerations

TheCaymanIslandslawscurrentlylevynotaxesonindividualsorcorporationsbaseduponprofits,income,gainsorappreciationandthereisnotaxationinthenatureofinheritancetaxorestatedutyorwithholdingtaxapplicabletousortoanyholderofClassAcommonshares.TherearenoothertaxeslikelytobematerialtousleviedbythegovernmentoftheCaymanIslandsexceptforstampdutieswhichmaybeapplicableoninstrumentsexecutedin,orafterexecutionbroughtwithinthejurisdictionoftheCaymanIslands.NostampdutyispayableintheCaymanIslandsontransfersofsharesofCaymanIslandscompaniesexceptthosewhichholdinterestsinlandintheCaymanIslands.TheCaymanIslandsisnotpartytoanydoubletaxtreatieswhichareapplicabletoanypaymentsmadebyortoourcompany.TherearenoexchangecontrolregulationsorcurrencyrestrictionsintheCaymanIslands.

AsaCaymanIslandsexemptedcompanywithlimitedliability,wehavereceivedanundertakingfromtheCabinetOfficeoftheCaymanIslands,datedAugust10,2017,astotaxconcessionspursuanttoSection6oftheTaxConcessionsLaw(1999Revision).Thisundertakingprovidesthat,foraperiodof20yearsfromthedateofissueoftheundertaking,nolawthereafterenactedintheCaymanIslandsimposinganytaxestobeleviedonprofits,income,gainsorappreciationwillapplytousorouroperationsand,inaddition,nosuchtaxshallbepayable:

(a) onorinrespectofourshares(includingourClassAcommonshares),debenturesorotherobligations;or

(b) bywayofwithholdinginwholeorinpartofanypaymentofdividendorotherdistributionofincomeorcapitaltoanyholderofourshares(includingourClassAcommonshares)oranypaymentofinterestorothersumsdueunderourdebenturesorotherobligations.

ThereisnoincometaxtreatyorconventioncurrentlyineffectbetweentheUnitedStatesandtheCaymanIslands.

U.S. Federal Income Tax Considerations

ThefollowingdiscussiondescribescertainU.S.federalincometaxconsequencesofthepurchase,ownershipanddispositionofourClassAcommonshares.ThisdiscussiondealsonlywithClassAcommonsharesthatareheldascapitalassetsbyaUnitedStatesHolder(generallypropertyheldforinvestment).

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Asusedherein,theterm“UnitedStatesHolder”meansabeneficialownerofourClassAcommonsharesthatis,forU.S.federalincometaxpurposes,anyofthefollowing:

• anindividualwhoisacitizenorresidentoftheUnitedStates;

• acorporation(orotherentitytreatedasacorporationforU.S.federalincometaxpurposes)createdororganizedinorunderthelawsoftheUnitedStates,anystatethereofortheDistrictofColumbia;

• anestatetheincomeofwhichissubjecttoU.S.federalincometaxationregardlessofitssource;or

• atrustifit(1)issubjecttotheprimarysupervisionofacourtwithintheUnitedStatesandoneormoreUnitedStatespersonshavetheauthoritytocontrolallsubstantialdecisionsofthetrustor(2)hasavalidelectionineffectunderapplicableUnitedStatesTreasuryregulationstobetreatedasaUnitedStatesperson.

ThisdiscussionisbaseduponprovisionsoftheInternalRevenueCodeof1986,asamended,ortheCode,andregulations,rulingsandjudicialdecisionsthereunderatthedatehereof.Thoseauthoritiesmaybechanged,perhapsretroactively,soastoresultinU.S.federalincometaxconsequencesdifferentfromthosesummarizedbelow.

ThisdiscussiondoesnotrepresentadetaileddescriptionoftheU.S.federalincometaxconsequencesapplicabletoyouifyouaresubjecttospecialtreatmentundertheU.S.federalincometaxlaws,includingifyouare:

• adealerinsecuritiesorcurrencies;

• afinancialinstitution;

• aregulatedinvestmentcompany;

• arealestateinvestmenttrust;

• aninsurancecompany;

• apersonholdingourClassAcommonsharesinaretirementaccountorothertax-deferredaccount;

• atax-exemptorganization;

• apersonholdingourClassAcommonsharesaspartofahedging,integratedorconversiontransaction,aconstructivesaleorastraddle;

• atraderinsecuritiesthathaselectedthemark-to-marketmethodofaccountingforyoursecurities;

• apersonliableforalternativeminimumtax;

• apersonwhoownsorisdeemedtoown10%ormoreofourstockbyvoteorvalue;

• apartnershiporotherpass-throughentityforU.S.federalincometaxpurposes;or

• apersonwhose“functionalcurrency”isnottheUnitedStatesdollar.

Ifapartnership(orotherentityorarrangementtreatedasapartnershipforU.S.federalincometaxpurposes)holdsourClassAcommonshares,thetaxtreatmentofapartnergenerallywilldependuponthestatusofthepartnerandtheactivitiesofthepartnership.IfyouareapartnerofapartnershipholdingourClassAcommonshares,youshouldconsultyourtaxadvisors.

Exceptwherespecificallydescribedbelow,thisdiscussionassumesthatwearenotapassiveforeigninvestmentcompany,orPFIC,forU.S.federalincometaxpurposes.Seethediscussionunder“—PassiveForeignInvestmentCompany”below.

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ThisdiscussiondoesnotcontainadetaileddescriptionofalltheU.S.federalincometaxconsequencestoyouinlightofyourparticularcircumstancesanddoesnotaddresstheMedicaretaxonnetinvestmentincomeortheeffectsofanystate,localornon-UnitedStatestaxlaws.IfyouareconsideringthepurchaseofourClassAcommonshares,youshouldconsultyourowntaxadvisorsconcerningtheparticularU.S.federalincometaxconsequencestoyouofthepurchase,ownershipanddispositionofourClassAcommonshares,aswellastheconsequencestoyouarisingunderotherU.S.federaltaxlawsandthelawsofanyothertaxingjurisdiction.

TaxationofDividends

Subjecttothediscussionunder“—PassiveForeignInvestmentCompany”below,thegrossamountofdistributionsontheClassAcommonshareswillbetaxableasdividendstotheextentpaidoutofourcurrentoraccumulatedearningsandprofits,asdeterminedunderU.S.federalincometaxprinciples.Totheextentthattheamountofanydistributionexceedsourcurrentandaccumulatedearningsandprofitsforataxableyear,thedistributionwillfirstbetreatedasatax-freereturnofcapital,causingareductioninthetaxbasisoftheClassAcommonshares,andtotheextenttheamountofthedistributionexceedsyourtaxbasis,theexcesswillbetaxedascapitalgainrecognizedonasaleorexchange.Wedonot,however,expecttodetermineearningsandprofitsinaccordancewithU.S.federalincometaxprinciples.Therefore,youshouldexpectthatadistributiongenerallywillbereportedasadividend.

Withrespecttonon-corporateUnitedStatesHolders,certaindividendsreceivedfromaqualifiedforeigncorporationmaybesubjecttoreducedratesoftaxationsolongascertainholdingperiodandotherrequirementsaremet.Aforeigncorporationistreatedasaqualifiedforeigncorporationprovidedthat(i)thecorporationwasnot,intheyearpriortotheyearinwhichthedividendwaspaid,andisnot,intheyearinwhichthedividendispaid,aPFIC(asdiscussedbelow),and(ii)either(A)thecorporationiseligibleforthebenefitsofacomprehensiveincometaxtreatywiththeUnitedStatesthattheIRShasapprovedforpurposesofthequalifieddividendrulesor(B)thestockwithrespecttodividendspaidbythatcorporationisreadilytradableonanestablishedsecuritiesmarketintheUnitedStates,suchastheNYSE.OurClassAcommonsharesarelistedontheNYSE.

WebelievethatdividendswepayonourClassAcommonshareswillmeettheconditionsrequiredforthereducedtaxrate.Therecanbenoassurance,however,thatourClassAcommonshareswillbeconsideredreadilytradableonanestablishedsecuritiesmarketinlateryears.Non-corporateUnitedStatesHoldersthatdonotmeetaminimumholdingperiodrequirementduringwhichtheyarenotprotectedfromtheriskoflossorthatelecttotreatthedividendincomeas“investmentincome”pursuanttoSection163(d)(4)oftheCodewillnotbeeligibleforthereducedratesoftaxationregardlessofourstatusasaqualifiedforeigncorporation.Inaddition,theratereductionwillnotapplytodividendsiftherecipientofadividendisobligatedtomakerelatedpaymentswithrespecttopositionsinsubstantiallysimilarorrelatedproperty.Thisdisallowanceapplieseveniftheminimumholdingperiodhasbeenmet.Youshouldconsultyourowntaxadvisorsregardingtheapplicationoftheserulestoyourparticularcircumstances.

Anydividendsthatyoureceivewillbeincludableinyourgrossincomeasordinaryincomeonthedayactuallyorconstructivelyreceivedbyyou.SuchdividendswillnotbeeligibleforthedividendsreceiveddeductionallowedtocorporationsundertheCode.

PassiveForeignInvestmentCompany

WedonotexpecttobeaPFICforthecurrenttaxableyearoranyfutureyear,basedonourcurrentbusinessplans.However,whetherweareaPFICwillbedeterminedannuallybaseduponthecompositionandnatureofourincomeandthecomposition,natureandvaluationofourassets(includinggoodwill),allofwhicharesubjecttochange,andwhichmaybedeterminedinlargepartbyreferencetothemarketvalueofourshares,whichmaybevolatile.ThedeterminationofwhetherweareaPFICwillalsodependupontheapplicationofcomplexU.S.federalincometaxrulesconcerningtheclassificationofourassets(includinggoodwill)andincomeforthispurpose,andtheapplicationoftheserulesisuncertaininsomerespects.OurstatusasaPFICmayalsodepend,inpart,onhowweutilizethecashproceedsfromourJanuary2018IPOandJune2018follow-onoffering,inourbusiness.Accordingly,therecanbenoassurancethattheIRSwillnotchallengeanydeterminationbyusthatwearenotaPFIC.

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UndertheCode,wewillbeaPFICforanytaxableyearinwhich,aftertheapplicationofcertain“look-through”ruleswithrespecttosubsidiaries,either(i)50%ormoreoftheaveragequarterlyvalueofourassetsconsistofassetsthatproduce,orareheldfortheproductionof,passiveincome(the“assettest”)or(ii)75%ormoreofourgrossincomeconsistsofpassiveincome(the“incometest”).Forpurposesoftheassettest,anycash,includingproceedsfromthepublicoffering,willgenerallybetreatedasapassiveassetandtheamountofcashheldbyusinanyyearwilldepend,inpart,onwhenwespendthecashraisedfromthepublicofferingandgeneratedinouroperations.Furthermore,totheextentanyofourreceivablesareconsideredtogiverisetopassiveincome,suchreceivableswillbeconsideredpassiveassetsforpurposesoftheassettest.Inaddition,thedeterminationofourPFICstatuswilldependuponthenatureoftheassetsacquiredbyus.Moreover,thedeterminationofthevalueofourassetsmaydependonourmarketcapitalization,andthatmarketcapitalizationmayfluctuate.Accordingly,therecanbenoassurancethatwewillsatisfytheassettestinthecurrentoranyfutureyear.

Forpurposesoftheincometest,passiveincomegenerallyincludesdividends,interest(includingcertaintypesofincomethatareequivalenttointerest),royaltiesandrents(otherthanroyaltiesandrentsderivedintheactiveconductofatradeorbusinessandnotderivedfromarelatedperson),aswellasgainsfromthesaleofassets(suchasstock)thatproducepassiveincome,foreigncurrencygains,andcertainothercategoriesofincome.Ifweownatleast25%(byvalue)ofthestockofanothercorporation,wewillbetreated,forpurposesofdeterminingwhetherweareaPFIC,asowningourproportionateshareoftheothercorporation’sassetsandreceivingourproportionateshareoftheothercorporation’sincome.

Althoughweconsiderourselvestobeactivelyengagedinanactivebusinesswithrespecttoanumberofbusinesslinesandtobeengagedinanactivefinancingactivitywithrespecttotheearlypaymentofreceivablesfeaturethatweoffermerchantsregardingcreditcardtransactionsininstallmentsinparticular,andwebelievethatincomefromsuchbusinessesandfeaturesislikelynottreatedaspassiveincomeforpurposesofthePFICrules,itisnotentirelyclearhowsuchincomewillbetreatedforthesepurposes.Inparticular,certainofourincomemaybetreatedaspassiveincomeunlesssuchincomeiseligibleforanexceptionforcertainincomederivedintheactiveconductofafinancingbusinessunderSection954(h)oftheCode(the“activefinancingexception”),andrelatedassetsmaybeconsideredpassiveassetsunlesstheactivefinancingexceptionapplies.Webelievethattheactivefinancingexceptionwilllikelyapplytotreatsuchincomeasactive,butifitisdetermined,contrarytoourview,thattheincomefromthesebusinessesandfeaturesispassiveforU.S.federalincometaxpurposes,thatwouldalterthecompositionofourincomeandassetsforpurposesoftestingourPFICstatus,andmaycauseustobetreatedasaPFIC.

IfweareaPFICforanytaxableyearduringwhichyouholdourClassAcommonsharesandyoudonotmakeatimelymark-to-marketelection,asdescribedbelow,youwillbesubjecttospecialtaxruleswithrespecttoany“excessdistribution”receivedandanygainrealizedfromasaleorotherdisposition,includingapledge,ofClassAcommonshares.Distributionsreceivedinataxableyearwillbetreatedasexcessdistributionstotheextentthattheyaregreaterthan125%oftheaverageannualdistributionsreceivedduringtheshorterofthethreeprecedingtaxableyearsoryourholdingperiodfortheClassAcommonshares.Underthesespecialtaxrules:

• theexcessdistributionorgainwillbeallocatedratablyoveryourholdingperiodfortheClassAcommonshares,

• theamountallocatedtothecurrenttaxableyear,andanytaxableyearpriortothefirsttaxableyearinwhichwewereaPFIC,willbetreatedasordinaryincome,and

• theamountallocatedtoeachotheryearwillbesubjecttotaxatthehighesttaxrateineffectforthatyearforindividualsorcorporations,asapplicable,andtheinterestchargegenerallyapplicabletounderpaymentsoftaxwillbeimposedontheresultingtaxattributabletoeachsuchyear.

AlthoughthedeterminationofwhetherweareaPFICismadeannually,ifweareaPFICforanytaxableyearinwhichyouholdourClassAcommonshares,yougenerallywillbesubjecttothespecialtaxrulesdescribedaboveforthatyearandforeachsubsequentyearinwhichyouholdtheClassAcommonshares(evenifwedonotqualifyasaPFICinsuchsubsequentyears).However,ifweceasetobeaPFIC,youcanavoidthecontinuingimpactofthePFICrulesbymakingaspecialelectiontorecognizegainasifyouhadsoldourClassAcommonsharesonthelastdayofthelasttaxableyearduringwhichwewereaPFIC.Youareurgedtoconsultyourowntaxadvisoraboutthiselection.

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Inlieuofbeingsubjecttothespecialtaxrulesdiscussedabove,youmaymakeamark-to-marketelectionwithrespecttoourClassAcommonsharesprovidedsuchClassAcommonsharesaretreatedas“marketablestock.”TheClassAcommonsharesgenerallywillbetreatedasmarketablestockiftheyare“regularlytraded”ona“qualifiedexchangeorothermarket”(withinthemeaningoftheapplicableTreasuryregulations),suchastheNYSE.

Ifyoumakeaneffectivemark-to-marketelection,foreachtaxableyearthatweareaPFICyouwillincludeasordinaryincometheexcessofthefairmarketvalueofourClassAcommonsharesattheendoftheyearoveryouradjustedtaxbasisintheClassAcommonshares.YouwillbeentitledtodeductasanordinarylossineachsuchyeartheexcessofyouradjustedtaxbasisintheClassAcommonsharesovertheirfairmarketvalueattheendoftheyear,butonlytotheextentofthenetamountpreviouslyincludedinincomeasaresultofthemark-to-marketelection.YouradjustedtaxbasisintheClassAcommonshareswillbeincreasedbytheamountofanyincomeinclusionanddecreasedbytheamountofanydeductionsunderthemark-to-marketrules.Inaddition,uponthesaleorotherdispositionofourClassAcommonsharesinayearthatweareaPFIC,anygainwillbetreatedasordinaryincomeandanylosswillbetreatedasordinaryloss,butonlytotheextentofthenetamountofpreviouslyincludedincomeasaresultofthemark-to-marketelection.Ifyoumakeamark-to-marketelection,thetaxrulesthatapplytodistributionsbycorporationsthatarenotPFICswouldapplytodistributionsbyus,exceptthatthereducedratediscussedaboveunder“—TaxationofDividends”wouldnotapply.

Ifyoumakeamark-to-marketelection,itwillbeeffectiveforthetaxableyearforwhichtheelectionismadeandallsubsequenttaxableyearsunlesstheClassAcommonsharesarenolongerregularlytradedonaqualifiedexchangeorothermarket,ortheInternalRevenueServiceconsentstotherevocationoftheelection.Youareurgedtoconsultyourtaxadvisorabouttheavailabilityofthemark-to-marketelection,andwhethermakingtheelectionwouldbeadvisableinyourparticularcircumstances.

Alternatively,youcansometimesavoidthespecialtaxrulesdescribedabovebyelectingtotreataPFICasa“qualifiedelectingfund”underSection1295oftheCode.However,thisoptionisnotavailabletoyoubecausewedonotintendtocomplywiththerequirementsnecessarytopermityoutomakethiselection.

IfweareaPFICforanytaxableyearduringwhichyouholdourClassAcommonsharesandanyofournon-UnitedStatessubsidiariesisalsoaPFIC,youwillbetreatedasowningaproportionateamount(byvalue)ofthesharesofthelower-tierPFICforpurposesoftheapplicationofthePFICrules.

YouareurgedtoconsultyourtaxadvisorsabouttheapplicationofthePFICrulestoanyofoursubsidiaries.

YougenerallywillberequiredtofileInternalRevenueServiceForm8621ifyouholdourClassAcommonsharesinanyyearinwhichweareclassifiedasaPFIC.YouareurgedtoconsultyourtaxadvisorsconcerningtheU.S.federalincometaxconsequencesofholdingClassAcommonsharesifweareconsideredaPFICinanytaxableyear.

TaxationofCapitalGains

ForU.S.federalincometaxpurposes,youwillrecognizetaxablegainorlossonanysaleorexchangeoftheClassAcommonsharesinanamountequaltothedifferencebetweentheamountrealizedfortheClassAcommonsharesandyourtaxbasisintheClassAcommonshares.YourinitialtaxbasisintheClassAcommonshareswillbetheU.S.dollarvalueofthepurchasepricedeterminedonthedateofpurchase.Subjecttothediscussionunder“—PassiveForeignInvestmentCompany”above,suchgainorlossgenerallywillbecapitalgainorlossandgenerallywillbelong-termcapitalgainorlossifyouhaveheldtheClassAcommonsharesformorethanoneyear.Long-termcapitalgainsofnoncorporateUnitedStatesHolders(includingindividuals)areeligibleforreducedratesoftaxation.Thedeductibilityofcapitallossesissubjecttolimitations.AnygainorlossrecognizedbyyougenerallywillbetreatedasUnitedStatessourcegainorloss.

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InformationReportingandBackupWithholding

Ingeneral,informationreportingwillapplytodividendsinrespectofourClassAcommonsharesandtheproceedsfromthesale,exchangeorotherdispositionofourClassAcommonsharesthatarepaidtoyouwithintheUnitedStates(andincertaincases,outsidetheUnitedStates),unlessyouareanexemptrecipient.Backupwithholdingmayapplytosuchpaymentsifyoufailtoprovideataxpayeridentificationnumberorcertificationofexemptstatusorfailtoreportinfulldividendandinterestincome.BackupwithholdingisnotanadditionaltaxandanyamountswithheldunderthebackupwithholdingruleswillbeallowedasarefundoracreditagainstyourU.S.federalincometaxliabilityprovidedtherequiredinformationistimelyfurnishedtotheIRS.

Inaddition,youshouldbeawarethatadditionalreportingrequirementsapply(includingarequirementtofileIRSForm8938,StatementofSpecifiedForeignAssets)withrespecttotheholdingofcertainforeignfinancialassets,includingstockofforeignissuerswhichisnotheldinanaccountmaintainedbycertainfinancialinstitutions,iftheaggregatevalueofallofsuchassetsexceedsUS$50,000attheendofthetaxableyearorUS$75,000atanytimeduringthetaxableyear.ThethresholdsarehigherforindividualslivingoutsideoftheUnitedStatesandmarriedcouplesfilingjointly.YouareencouragedtoconsultyourowntaxadvisorsregardingtheapplicationoftheinformationreportingrulestotheClassAcommonsharesandtheapplicationoftheseadditionalreportingrequirementsforforeignfinancialassetstoyourparticularsituation.

YOU ARE ENCOURAGED TO CONSULT YOUR OWN INDEPENDENT TAX ADVISORS TO DETERMINE THE U.S. FEDERAL, STATE, LOCAL,AND FOREIGN TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF CLASS A COMMON SHARES.

Dividends and Payments Agents

Notapplicable.

Statements by Experts

Notapplicable.

Documents on Display

Statementscontainedinthisannualreportregardingthecontentsofanycontractorotherdocumentarenotnecessarilycomplete,and,wherethecontractorotherdocumentisanexhibittotheannualreport,eachofthesestatementsisqualifiedinallrespectsbytheprovisionsoftheactualcontractorotherdocuments.

WearesubjecttotheinformationalrequirementsoftheExchangeActthatareapplicabletoforeignprivateissuers.Accordingly,wearerequiredtofilereportsandotherinformationwiththeSEC,includingannualreportsonForm20-FandreportsonForm6-K.YoumayinspectandcopythereportsandotherinformationtobefiledwiththeSECatthepublicreferencefacilitiesmaintainedbytheSECat100FStreet,N.E.,WashingtonD.C.20549.CopiesofthematerialsmaybeobtainedfromthePublicReferenceRoomoftheSECat100FStreet,N.E.,Washington,D.C.20549atprescribedrates.ThepublicmayobtaininformationontheoperationoftheSEC’sPublicReferenceRoombycallingtheSECintheUnitedStatesat1-800-SEC-0330.Inaddition,theSECmaintainsanInternetwebsiteathttp://www.sec.gov,fromwhichyoucanelectronicallyaccesstheregistrationstatementanditsmaterials.

Asaforeignprivateissuer,weareexemptundertheExchangeActfrom,amongotherthings,therulesprescribingthefurnishingandcontentofproxystatementsandourexecutiveofficers,directorsandprincipalshareholdersareexemptfromreportingandshortswingprofitrecoveryprovisionscontainedinSection16oftheExchangeAct.InadditionwearenotrequiredundertheExchangeActtofileperiodicreportsandfinancialstatementswiththeSECasfrequentlyoraspromptlyasU.S.companieswhosesecuritiesareregisteredundertheExchangeAct.

YoumayrequestacopyofourSECfilings,atnocost,bycontactingusatourheadquartersatAv.BrigadeiroFariaLima,1384,4ºandar,parteA,SãoPaulo,SP,01451-001,Brazil.Ourinvestorrelationsofficecanbereachedat+55113038-8127.

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Subsidiary Information

Notapplicable.

Common Shares Eligible for Future Sale

AsofMarch31,2019,PagSeguroDigitalhad162,267,064ClassAcommonshares(includingtreasuryshares)issuedandoutstanding,and165,620,861ClassBcommonsharesissuedandoutstanding.

Lock-up Agreements

Lock-up Agreement of PagSeguro Digital

InconnectionwithourJune2018follow-onoffering,PagSeguroDigitalhasagreednottocarryoutanyofthefollowingactionsregardingourClassAcommonsharesofPagSeguroDigitalfor12monthsafterJune21,2018,thedateofourfollow-onoffering:

• offer,pledge,sellorcontracttosellanyClassAcommonshares;

• sellanyoptionorcontracttopurchaseanyClassAcommonshares;

• purchaseanyoptionorcontracttosellanyClassAcommonshares;

• grantanyoption,rightorwarranttopurchase,lendorotherwisetransferordisposeofanyClassAcommonsharesoranyothersecuritiessoownedconvertibleintoorexercisableorexchangeableforClassAcommonshares;

• enterintoanyswaporotheragreementthattransferstoanother,inwholeorinpart,anyoftheeconomicconsequencesofownershipofClassAcommonshares

(whetheranyofthetransactionsdescribedabovearetobesettledbydeliveryofClassAcommonsharesorothersecuritiesofourcompany,incash,orotherwise),orfilearegistrationstatementwiththeSECrelatedtoanyofourClassAcommonshares.

Theselock-uprestrictionsapplytoClassAcommonsharesofPagSeguroDigitalandtosecuritiesconvertibleintoorexercisableorexchangeableforClassAcommonsharesofPagSeguroDigital.

Theselock-uprestrictionsare,however,subjecttocertainexceptions,includinganyissuanceofClassAcommonsharesbyPagSeguroDigitalinconnectionwithamerger,acquisition,jointventureorstrategicparticipationenteredintobyus,providedthat(i)theaggregatenumberofClassAcommonsharesissuedorissuablethereundershallnotexceed10%ofthetotalnumberofClassAcommonsharesissuedandoutstandingasofthedateofsuchmerger,acquisition,jointventureorstrategicparticipation,and(ii)therecipientofsuchClassAcommonsharesshallhaveagreedwiththerepresentativesoftheunderwritersnottocarryoutanyoftheactionsdescribedaboveregardingsuchClassAcommonshares.

Thelock-uprestrictionsapplicabletoPagSeguroDigitalarenotsubjecttowaiverbytheunderwritersofourJune2018follow-onoffering.

Lock-up Agreement of UOL

InconnectionwithourJune2018follow-onoffering,UOLhasagreednottocarryoutanyofthefollowingactionsregardingClassAcommonsharesofPagSeguroDigitalfor12monthsafterJune21,2018,thedateofourfollow-onoffering:

• offer,pledge,sellorcontracttosellanyClassAcommonshares;

• sellanyoptionorcontracttopurchaseanyClassAcommonshares;

• purchaseanyoptionorcontracttosellanyClassAcommonshares;

• grantanyoption,rightorwarranttopurchase,lendorotherwisetransferordisposeofanyClassAcommonsharesoranyothersecuritiessoownedconvertibleintoorexercisableorexchangeableforClassAcommonshares;

• enterintoanyswaporotheragreementthattransferstoanother,inwholeorinpart,anyoftheeconomicconsequencesofownershipofClassAcommonshares

(whetheranyofthetransactionsdescribedabovearetobesettledbydeliveryofClassAcommonsharesorothersecuritiesofourcompany,incash,orotherwise),orrequestthatPagSeguroDigitalfilearegistrationstatementwiththeSECrelatedtothesalebyUOLofanyClassAcommonshares.

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Theselock-uprestrictionsapplytoClassAcommonsharesofPagSeguroDigitalandtosecuritiesconvertibleintoorexercisableorexchangeableforClassAcommonsharesofPagSeguroDigital.

Thelock-uprestrictionsapplicabletoUOLarenotsubjecttowaiverbytheunderwritersofourJune2018follow-onofferingortoanyexceptions.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

General

Ouractivitiesexposeustoavarietyoffinancialrisks:foreignexchangerisk,fraudrisk(chargebacks),creditriskandliquidityrisk.Ouroverallriskmanagementprogramfocusesontheunpredictabilityoffinancialmarketsandseekstominimizepotentialadverseeffectsonourfinancialperformance.Weusederivativefinancialinstrumentstohedgecertainriskexposures,whenapplicable.See,Note11toourauditedconsolidatedfinancialstatements.

AmongthemainmarketriskfactorsthatmayaffectthePagSegurobusinessarethefollowing:

Foreign Exchange Risk

Foreignexchangeriskariseswhenfuturecommercialtransactionsorrecognizedassetsorliabilitiesaredenominatedinacurrencythatisnottheentity’sfunctionalcurrency.AtDecember31,2018and2017,wedidnothaveanyborrowings.AtDecember31,2016,wehadborrowingsdenominatedinforeigncurrencythatwerelinkedtoderivatives(swaps).

Fraud Risk (Chargebacks)

Oursalestransactionsaresusceptibletopotentiallyfraudulentorimpropersales.Weusethefollowingtwomainprocedurestocontrolfraudrisk:

Thefirstprocedureconsistsofmonitoring,onarealtimebasis,transactionscarriedoutusingcreditanddebitcardsandboletos throughananti-fraudsystem.Thisprocessapprovesorrejectssuspicioustransactionsatthetimeoftheauthorization,basedonstatisticalmodelsthatarerevisedonanongoingbasis.

Thesecondproceduredetectschargebacksanddisputesnotidentifiedbythefirstprocedure.Thisisacomplementaryprocedureandincreasesourabilitytoavoidandmanagechargebacks.

Credit Risk

Creditriskismanagedonagroupbasis.Thisriskislimitedtothepossibilityofdefaultby(a)cardissuers,whoarerequiredtotransferthefeeschargedfortransactionscarriedoutbytheircardholderstothecreditanddebitcardschemes,and/or(b)acquirers,whichweusetoapprovetransactionswithcardissuers.

Inordertomitigatethisrisk,PagSeguroBrazilhasestablishedaCreditandLiquidityRiskCommittee,whoseresponsibilityistoassessthelevelofriskofeachcardissuerservedbyus,classifyingthemintothreegroups:

(i) cardissuerspresentingalowlevelofrisk,whohavecreditratingsassignedbyFitch,S&PorMoody’sandwhodonotrequireadditionalmonitoring;

(ii) cardissuerspresentingamediumlevelofrisk,whoaremonitoredinaccordancewithBaselrequirementsandproperty,plantsandequipmentratios;and

(iii) cardissuerspresentingahighlevelofrisk,whoareassessedbytheCreditandLiquidityRiskCommitteeatmonthlymeetings.

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Nocreditlimitswereexceededin2018,2017or2016.Managementdoesnotexpectanylossesfromnon-performancebythesecounterpartiesinadditiontotheamountsalreadyrecognizedaschargebacks,presentedasfraudrisk.

Liquidity Risk

Wemanageliquidityriskbymaintainingreserves,bankandcreditlinestoobtainborrowingswhendeemedappropriate.Wecontinuouslymonitoractualandprojectedcashflows,andmatchthematurityprofileofourfinancialassetsandliabilitiesinordertoensurewehavesufficientfundstohonorourobligationstothirdpartiesandmeetouroperationalneeds.

Weinvestsurpluscashininterest-bearingfinancialinvestments,choosinginstrumentswithappropriatematurityorsufficientliquiditytoprovideadequatemarginsasdeterminedbytheforecasts.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

None.

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

OnJanuary23,2018,wecommencedourIPO.OnJanuary26,2018,weclosedourIPO,pursuanttowhichweissuedandsold50,925,642ClassAcommonsharesandUOLsold70,267,746ClassAcommonshares.GoldmanSachs&Co.LLCandMorganStanley&Co.LLCactedastherepresentativesoftheunderwritersinourIPO.The121,193,388registeredClassAcommonsharesweresoldtothepublicatapriceofUS$21.50perClassAcommonshare,foranaggregatepriceofUS$2,265,789,433.WeincurredapproximatelyUS$5.3millioninexpensesrelatedtoourIPOandpaidapproximatelyUS$91.2millioninunderwritingdiscountsandcommissions.

OnJune18,2018,wecommencedourfollow-onoffering.OnJune26,2018,weclosedourfollow-onoffering,pursuanttowhichweissuedandsold11,550,000ClassAcommonsharesandUOLsold24,400,000ClassAcommonshares.GoldmanSachs&Co.LLCandMorganStanley&Co.LLCactedastheunderwritersinourJune2018follow-onoffering.The35,950,000registeredClassAcommonsharesweresoldtothepublicatapriceofUS$29.25perClassAcommonshare,foranaggregatepriceofUS$1,110,037,500.WeincurredapproximatelyUS$1.8millioninexpensesrelatedtoourJune2018follow-onofferingandpaidapproximatleyUS$7.9millioninunderwritingdiscountsandcommissions.

ThenetproceedstoPagSeguroDigitalfromthesaleofClassAcommonsharesinourJanuary2018IPOandJune2018follow-onofferingwereapproximatelyUS$1,045.8millionandUS$328.1million,respectively,afterdeductingunderwritingdiscountsandcommissionsandestimatedexpensespayablebyus.

Todate,wehaveusedournetproceedsfromourJanuary2018IPOandJune2018follow-onofferingtofinanceworkingcapital,particularlytheearlypaymentofreceivablesfeaturethatweoffermerchants,andtofundfutureselectiveacquisitionsandinvestmentsinbusinesses,technologiesorproductsthatarecomplementarytoourbusiness.WecurrentlyplantocontinueusingournetproceedsfromourJanuary2018IPOandJune2018follow-onofferingforthesamepurposes.Anyremainingnetproceedswillbeusedforothergeneralcorporatepurposes.OurmanagementwillhavebroaddiscretioninallocatingthenetproceedsfromourJanuary2018IPOandJune2018follow-onoffering.

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WedidnotreceiveanyproceedsfromthesaleofcommonsharesbyUOLinourJanuary2018IPOandJune2018follow-onoffering.

ITEM 15. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Wehaveevaluated,withtheparticipationofourchiefexecutiveofficerandchieffinancialofficer,theeffectivenessofourdisclosurecontrolsandproceduresasofDecember31,2018.Thereareinherentlimitationstotheeffectivenessofanysystemofdisclosurecontrolsandprocedures,includingthepossibilityofhumanerrorandthecircumventionoroverridingofthecontrolsandprocedures.Accordingly,eveneffectivedisclosurecontrolsandprocedurescanonlyprovidereasonableassuranceofachievingtheircontrolobjectives.Baseduponourevaluation,ourchiefexecutiveofficerandchieffinancialofficerconcludedthatourdisclosurecontrolsandprocedureswereeffectiveasofDecember31,2018toprovidereasonableassurancethatinformationrequiredtobedisclosedbyusinthereportsthatwefileorsubmitundertheExchangeActisrecorded,processed,summarizedandreported,withinthetimeperiodsspecifiedintheapplicablerulesandforms,andthatitisaccumulatedandcommunicatedtoourManagement,includingourchiefexecutiveofficerandchieffinancialofficer,asappropriatetoallowtimelydecisionsregardingrequireddisclosure.

Management’s Report on Internal Control over Financial Reporting

Ourmanagementisresponsibleforestablishingandmaintainingadequateinternalcontroloverfinancialreportingandforassessingtheeffectivenessofinternalcontroloverfinancialreporting.

Ourinternalcontroloverfinancialreportingisaprocessdesignedby,orunderthesupervisionof,ourPrincipalExecutiveOfficerandourChiefFinancialandInvestorRelationsOfficerandChiefAccountingOfficer,andeffectedbyourboardofdirectors,managementandotheremployees,andisdesignedtoprovidereasonableassuranceregardingthereliabilityoffinancialreportingandofthepreparationofourconsolidatedfinancialstatementsforexternalpurposes,inaccordancewithIFRSasissuedbytheIASB.

Duetoitsinherentlimitations,internalcontroloverfinancialreportingmaynotpreventordetectmisstatements.Also,projectionsofanyevaluationofeffectivenessofinternalcontroloverfinancialreportingtofutureperiodsaresubjecttotheriskthatcontrolsmaybecomeinadequatebecauseofchangesinconditions,orthatthedegreeofcompliancewithourpoliciesorproceduresmaydeteriorate.

OurmanagementhasassessedtheeffectivenessofourinternalcontroloverfinancialreportingasofDecember31,2018,baseduponthecriteriaestablishedinInternalControls—IntegratedFramework(2013),issuedbytheCommitteeofSponsoringOrganizationsofTreadwayCommission(COSO).Basedonthisassessmentandcriteria,ourmanagementhasconcludedthatourinternalcontroloverfinancialreportingwaseffectiveasofDecember31,2018.

Attestation Report of the Registered Public Accounting Firm

Thisannualreportdoesnotincludeanattestationreportofourindependentregisteredpublicaccountingfirmonourinternalcontroloverfinancialreporting.

Changes in internal control over financial reporting

Notapplicable.

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ITEM 16. [RESERVED]

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

AtourboardmeetingheldonJanuary8,2018,weestablishedanauditcommittee,asdefinedundersection3(a)(58)oftheExchangeAct.OurboardofdirectorshasdeterminedthatNoemiaGushikenqualifiesasan“auditcommitteefinancialexpert”asdefinedforthepurposesofthisItem16AinItem16ofForm20F.NoemiaGushikenisan“independentdirector”withinthemeaningoftheSECrules.Formoreinformation,see“Item6.Directors,SeniorManagementandEmployees—AuditCommittee.”

ITEM 16B. CODE OF ETHICS

Weconsiderethicstobeanessentialvalueforourreputationandlongevity.PagSeguroDigital,includingallofouremployees,issubjecttoUOL’sCodeofEthicsandConduct,ortheCodeofEthics.WewillreporteachyearunderItem16BofourannualreportonForm20-FanywaiversoftheCodeofEthics,infavorofourprincipalexecutiveofficer,chieffinancialofficer,principalaccountingofficerandpersonsperformingsimilarfunctions.TheCodeofEthicsgovernsallrelationsbetweencompaniesintheUOLgroupandtheirstakeholders(shareholders,clients,employees,suppliers,serviceproviders,governments,communitiesandsociety).AcopyoftheCodeofEthicsisavailableonourwebsiteathttp://investors.pagseguro.com/Cache/1500109327.PDF?O=PDF&T=&Y=&D=&FID=1500109327&iid=9282297(ThisURLisintendedtobeaninactivetextualreferenceonly.Itisnotintendedtobeanactivehyperlinktoourwebsite.Theinformationonourwebsite,whichmightbeaccessiblethroughahyperlinkresultingfromthisURL,isnotandshallnotbedeemedtobe,incorporatedintothisannualreport).

ITEM 16C. Principal Accountant Fees and Services

Audit and Non-Audit Fees

ThefollowingtablesetsforththefeesbilledtousbyourindependentregisteredandpublicaccountingfirmduringtheyearsendedDecember31,2018and2017.OurindependentaccountingfirmwasPricewaterhouseCoopersAuditoresIndependentesfortheyearsendedDecember31,2018and2017.

Year ended December 31,

2018 2017

(in thousands of

reais ) Auditfees(1) 2,687.6 4,211.6Audit-relatedfees — —Taxfees — —Allotherfees(2) — 196.0

Total 2,687.6 4,407.6

(1) “AuditFees”includefeesfor(i)theauditofourannualconsolidatedfinancialstatementsfortheyearsendedDecember31,2018,2017and2016,preparedinaccordancewithIFRS,asissuedbythe

IASB,(ii)thereviewofourinterimfinancialstatementsforthethree-monthperiodsendedMarch31,2018and2017,forthesix-monthperiodsendedJune30,2018and2017andforthenine-monthperiodsSeptember30,2018and2017and(iii)thepreparationandissuanceofcomfortlettersinconnectionwithourJanuary2018IPOandJune2018follow-onoffering.

(2) “Allotherfees”includefeesforservicesrelatedtothereconciliationoftransactionsandamountswithcreditcardissuers.

Audit Committee Pre-Approval Policies and Procedures

InaccordancewiththerequirementsoftheUSSarbanes-OxleyActof2002andrulesissuedbytheSEC,inconnectionwiththeestablishmentofourauditcommittee(whichwasundertakenasaresultofourIPOinJanuary2018),weintroducedaprocedureforthereviewandpre-approvalofanyservicesperformedbyPricewaterhouseCoopersAuditoresIndependentes,includingauditservices,auditrelatedservices,taxservicesandotherservices.TheprocedurerequiresthatallproposedengagementsofPricewaterhouseCoopersAuditoresIndependentesforauditandpermittednon-auditservicesaresubmittedtotheauditcommitteeforapprovalpriortothebeginningofanysuchservices.

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ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Notapplicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

OnOctober30,2018,weannouncedtheadoptionofoursharerepurchaseprograminanaggregateamountofuptoUS$250million.Oursharerepurchaseprogramwentintoeffectinthefourthquarterof2018anddoesnothaveafixedexpirationdate.TheprogrammaybeexecutedincompliancewithRule10b-18undertheExchangeAct.

Thetablebelowsummarizestherepurchaseswemadeintheperiodsindicated.

Month

Total Number of Class A Common Shares Purchased

Average PricePaid Per Class A

Common Share (R$)

Total Number of Class A Common

Shares Purchased as Part of Share

Repurchase Program

Approximate DollarValue of Class A Common Shares that May Yet Be Purchased Under Share Repurchase

Program (1) (US$, in millions)

January2018 — — — —February2018 — — — —March2018 — — — —April2018 — — — —May2018 — — — —June2018 — — — —July2018 — — — —August2018 — — — —September2018 — — — —October2018 — — — —November2018 3,400 91.87095 3,400 249.9December2018 500,242 77.97326 500,242 239.9(1) Oursharerepurchaseprogram,whichwasadoptedinOctober2018authorizedtherepurchaseinanaggregateamountofuptoUS$250millionwithnofixedexpirationdate.

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

PricewaterhouseCoopersAuditoresIndependenteswasappointedtoactasourindependentpublicaccountingfirmtoauditourconsolidatedfinancialstatementsforthefiscalyearsendedDecember31,2017and2018,untilthefilingofthisForm20-FwiththeSEC.OnMarch14,2019,wedismissedPricewaterhouseCoopersAuditoresIndependentesasourindependentpublicaccountingfirm,effectiveuponthefilingofthisannualreport.OnMarch2,2019ourauditcommitteeapprovedtheappointmentofErnst&YoungAuditoresIndependentesS.S.toactasourindependentpublicaccountingfirmbeginningwithareviewofourquarterlyinformationforthefirstquarterof2019.

ThereportsofPricewaterhouseCoopersAuditoresIndependentesonourfinancialstatementsforeachofthefiscalyearsendedonDecember31,2017and2018containednoadverseopinionordisclaimerofopinionandwerenotqualifiedormodifiedastouncertainty,auditscopeoraccountingprinciples.DuringthefiscalyearsendedDecember31,2017and2018andthesubsequentinterimperiodthroughMarch14,2019,therehavebeennodisagreementswithPricewaterhouseCoopersAuditoresIndependentesonanymatterofaccountingprinciplesorpractices,financialstatementdisclosure,orauditingscopeorprocedures,whichdisagreement,ifnotresolvedtothesatisfactionofPricewaterhouseCoopersAuditoresIndependentes,wouldhavecausedPricewaterhouseCoopersAuditoresIndependentestomakeareferencetothesubjectmatterofthedisagreementinconnectionwithitsauditreportsforsuchfiscalyears,andtherewereno“reportableevents”asthattermisdefinedinItem16F(a)(1)(v)ofForm20-F.

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WehaveprovidedPricewaterhouseCoopersAuditoresIndependenteswithacopyoftheforegoingdisclosure,andhaverequestedthatitfurnishuswithaletteraddressedtotheSECstatingwhetherornotitagreeswithsuchdisclosure.AcopyofthisletterisfiledasExhibit15.1tothisForm20F.

DuringthefiscalyearsendedDecember31,2017and2018andthesubsequentinterimperiodthroughMarch14,2019,wedidnotconsultErnst&YoungAuditoresIndependentesS.S.astotheapplicationofaccountingprinciplestoaspecifiedtransaction,eithercompletedorproposed,thetypeofauditopinionthatmightberenderedonourfinancialstatementsoranymatterthatwaseitherthesubjectofadisagreement(asdefinedinItem16F(a)(1)(iv)ofForm20F)ora“reportableevent”(asdescribedinItem16F(a)(1)(v)ofForm20F).

ITEM 16G. CORPORATE GOVERNANCE

Significant Differences between our Current Corporate Governance Practices and the U.S. Corporate Governance Standards

WearesubjecttotheNYSEcorporategovernancelistingstandards.Asaforeignprivateissuer,however,thestandardsapplicabletousareconsiderablydifferentfromthestandardsthatapplytoU.S.listedcompanies.UndertheNYSErules,asaforeignprivateissuer,wemayfollowthe“homecountry”practiceoftheCaymanIslands,exceptthatwearerequired(a)tohaveanauditcommitteeorauditboardthatmeetscertainrequirements,pursuanttoanexemptionavailabletoforeignprivateissuers(subjecttothephase-inrulesdescribedaboveunder“Item6.Directors,SeniorManagementandEmployees—AuditCommittee”)(b)toprovidepromptcertificationbyourchiefexecutiveofficerofanymaterialnon-compliancewithanycorporategovernancerules;and(c)toprovideabriefdescriptionofthesignificantdifferencesbetweenourcorporategovernancepracticesandtheNYSEcorporategovernancepracticerequiredtobefollowedbyU.S.listedcompanies.

AsummaryofthesignificantdifferencesbetweenourcorporategovernancepracticesandthoserequiredofU.S.listedcompaniesisincludedbelow.

Majority of Independent Directors

TheNYSErulesapplicabletoU.S.companiesrequireamajorityoftheboardofdirectorstobecomprisedofIndependentDirectors.Independenceisdefinedbyvariouscriteria,includingtheabsenceofamaterialrelationshipbetweenthedirectorandthelistedcompany.ThisisnotrequiredbythelawsoftheCaymanIslands.WhileourdirectorsmeetthequalificationrequirementsofCaymancorporatelaw,wedonotbelievethatamajorityofourdirectorswouldbeconsideredindependentundertheNYSEtestfordirectorindependence.Currently,threeofourdirectors,NoemiaGushiken,MarcosdeBarrosLisboaandClevelandPratesTeixeira,areindependent.

Compensation committee

TheNYSErulesapplicabletoU.S.companiesrequirethecompanytohave,andtocertifythatithasandwillcontinuetohave,acompensationcommitteecomposedentirelyofindependentdirectorsandgovernedbyawrittencharteraddressingthecommittee’srequiredpurposeanddetailingitsrequiredresponsibilities.ThisisnotrequiredbythelawsoftheCaymanIslands.Ourboardofdirectorsisresponsiblefordeterminingtheindividualcompensationofeachexecutiveofficer,aswellasthecompensationofourboardandcommitteemembers.Inmakingsuchdeterminations,theboardwillreviewtheperformanceofourexecutiveofficers,includingtheperformanceofourprincipalexecutiveofficer,whowillberequiredtoexcusehim-orherselffromdiscussionsregardinghisorherperformanceandcompensation.

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ITEM 16H. MINE SAFETY DISCLOSURE

Notapplicable.

ITEM 17. FINANCIAL STATEMENTS

Notapplicable.

ITEM 18. FINANCIAL STATEMENTS

SeepagesF-1throughF-47,incorporatedhereinbyreference.

Item 19. EXHIBITSNo. Description1.1

MemorandumandArticlesofAssociationoftheRegistrant(incorporatedbyreferencetoExhibit3.1ofFormF-1/AfiledonJanuary10,2018).

4.1†

EnglishtranslationoftheAgreementfortheSupplyofEquipment–PINpadTerminals,datedasofJune26,2014,amongPAXBRComerciodeEquipamentosdeInformáticaLtda.,CISEletrônicaIndústriaeComércioLtda.,andNet+PhoneTelecomunicaçõesLtda.,including1stAddendumtotheAgreementfortheSupplyofEquipment,datedasofOctober21,2014,amongPAXBRComerciodeEquipamentosdeInformáticaLtda.,CISEletrônicaIndústriaeComércioLtda.,DensamdaAmazôniaIndustriaEletrônicaLtda.,andNet+PhoneTelecomunicaçõesLtda.;2ndAddendumtotheAgreementfortheSupplyofEquipment,datedasofJuly3,2015,amongPAXBRComerciodeEquipamentosdeInformáticaLtda.,CISEletrônicaIndústriaeComércioLtda.,DensamdaAmazôniaIndustriaEletrônicaLtda.,TransireFabricaçãodeComponentesEletrônicosLtda.,andNet+PhoneTelecomunicaçõesLtda.;3rdAddendumtotheAgreementfortheSupplyofEquipment,datedasofOctober8,2015,amongPAXBRComerciodeEquipamentosdeInformáticaLtda.,TransireFabricaçãodeComponentesEletrônicosLtda.,andNet+PhoneTelecomunicaçõesLtda.;StatementofLiabilityfortheApplicationSigner’sUseonPAXTerminals,datedasofMarch9,2016,amongPAXBRComerciodeEquipamentosdeInformáticaLtda.andNet+PhoneTelecomunicaçõesLtda.;4thAddendumtotheAgreementfortheSupplyofEquipment,datedasofMay20,2016,amongPAXBRComerciodeEquipamentosdeInformáticaLtda.,TransireFabricaçãodeComponentesEletrônicosLtda.,andNet+PhoneTelecomunicaçõesLtda.;5thAddendumtotheAgreementfortheSupplyofEquipment,datedasofDecember9,2016,amongPAXBRComerciodeEquipamentosdeInformáticaLtda.,TransireFabricaçãodeComponentesEletrônicosLtda.,andNet+PhoneTelecomunicaçõesLtda.;6thAddendumtotheAgreementfortheSupplyofEquipment,datedasofFebruary6,2017,amongPAXBRComerciodeEquipamentosdeInformáticaLtda.,TransireFabricaçãodeComponentesEletrônicosLtda.,andNet+PhoneTelecomunicaçõesLtda.(incorporatedbyreferencetoExhibit10.1ofFormF-1filedonDecember26,2017).

4.2†

Englishtranslationof7thAddendumtotheAgreementfortheSupplyofEquipment,datedasofAugust25,2017,amongNet+PhoneTelecomunicaçõesLtda.,PAXBRComércioeServiçosdeEquipamentosdeInformáticaLtda.andTransireFabricaçãodeComponentesEletrônicosLtda.

4.3†

EnglishtranslationoftheColocationAgreement,datedasofJanuary1,2017,betweenPagseguroInternetS.A.andUOLDiveoTecnologiaLtda.,includingCommercialProposal–ColocationCenter–OPT-17/21630,datedasofJanuary1,2017,fromUOLDiveoTecnologiaLtda.toPagseguroInternetLtda.;TechnicalProposal–GleteColocationDatacenter,datedasofJanuary1,2017,fromUOLDiveoTecnologiaLtda.toPagseguroInternetLtda.;CommercialProposal–TamboréColocationCenter–OPT-17-17/21632,datedasofJanuary1,2017,fromUOLDiveoTecnologiaLtda.toPagseguroInternetLtda.;andTechnicalProposal–TamboréColocationDatacenter,datedasofJanuary1,2017,fromUOLDiveoTecnologiaLtda.toPagseguroInternetLtda.(incorporatedbyreferencetoExhibit10.2ofFormF-1filedonDecember26,2017).

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https://content.edgar-online.com/ExternalLink/EDGAR/0001193125-18-007476.html?hash=617a4b84d1f51375854d9c7b92a69a303dbe69b19f054eaf18af7d51a1978ea5&dest=D417437DEX31_HTM

https://content.edgar-online.com/ExternalLink/EDGAR/0001193125-17-378788.html?hash=3ac6f41b622b0b46017ec1b0448c84f35fea778476a6656695e9be870f420d14&dest=D417437DEX101_HTM





















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No. Description4.4†

EnglishtranslationoftheHostingAgreement,datedasofJanuary1,2017,betweenPagseguroInternetS.A.andUOLDiveoTecnologiaLtda.,includingCommercialProposal–Hosting/APM–OPT-17/21629,datedasofJanuary1,2017,fromUOLDiveoTecnologiaLtda.toPagseguroInternetLtda.;TechnicalProposal–Hosting–TamboréDTC&LicensingServiceandDynatraceSupport–RUXIT,datedasofJanuary1,2017,fromUOLDiveoTecnologiaLtda.toPagseguroInternetLtda.;CommercialProposal–DDosProtection–OPT-17/21631,datedasofJanuary1,2017,fromUOLDiveoTecnologiaLtda.toPagseguroInternetLtda.;TechnicalProposal–DDoSProtection,datedasofJanuary1,2017,fromUOLDiveoTecnologiaLtda.toPagseguroInternetLtda.;CommercialProposal–WAF–WebApplicationFirewall–OPT-17/21635,datedasofJanuary1,2017,fromUOLDiveoTecnologiaLtda.toPagseguroInternetLtda.;TechnicalProposal–WAF–WebApplicationFirewall,datedasofJanuary1,2017,fromUOLDiveoTecnologiaLtda.toPagseguroInternetLtda.;CommercialProposal–BrandProtection–OPT-17/21636,datedasofJanuary1,2017,fromUOLDiveoTecnologiaLtda.toPagseguroInternetLtda.;TechnicalProposal–BrandProtection,datedasofJanuary1,2017,fromUOLDiveoTecnologiaLtda.toPagseguroInternetLtda.;CommercialProposal–BPAG&NOTANET–OPT-17/21638,datedasofJanuary1,2017,fromUOLDiveoTecnologiaLtda.toPagseguroInternetLtda.;andTechnicalProposal–PaymentMeansManagementServices,datedasofJanuary1,2017,fromUOLDiveoTecnologiaLtda.toPagseguroInternetLtda.(incorporatedbyreferencetoExhibit10.3ofFormF-1filedonDecember26,2017).

4.5†

EnglishtranslationoftheServiceAgreement,datedasofJanuary1,2017,betweenPagseguroInternetS.A.andUOLDiveoTecnologiaLtda.,includingCommercialProposal–AllocationofResources–OPT-17/21087,datedasofJanuary1,2017,fromUOLDiveoTecnologiaLtda.toPagseguroInternetLtda.;andTechnicalProposal–AllocationofResources,datedasofJanuary1,2017,fromUOLDiveoTecnologiaLtda.toPagseguroInternetLtda.(incorporatedbyreferencetoExhibit10.4ofFormF-1filedonDecember26,2017).

4.6†

EnglishtranslationoftheTelecommunicationsServiceAgreement,datedasofJanuary1,2017,betweenPagseguroInternetS.A.andUOLDiveoTecnologiaLtda.,includingCommercialProposal–TELECOMServices,datedasofJanuary1,2017,fromUOLDiveoTecnologiaLtda.toPagseguroInternetLtda.;andTechnicalProposal–Lan-to-LanbetweenDataCenters–Lan-to-Lan,datedasofJanuary1,2017,fromUOLDiveoTecnologiaLtda.toPagseguroInternetLtda.(incorporatedbyreferencetoExhibit10.5ofFormF-1filedonDecember26,2017).

4.7†

LicenseAgreement,datedasofJune18,2015,betweenMasterCardInternationalIncorporatedandPagseguroInternetLtda.,includingtheAcceptanceLetter,datedasofJune18,2015,fromMasterCardInternationalIncorporatedtoPagseguroInternetLtda.;theSummaryofLicensesGranted,datedasofJune18,2015;andSupplementtoMasterCardLicenseAgreement,effectiveasofMarch11,2015,betweenMasterCardInternationalIncorporatedandPagseguroS.A.(incorporatedbyreferencetoExhibit10.6ofFormF-1filedonDecember26,2017).

4.8†

EnglishtranslationoftheServiceAgreement,datedasofJanuary1,2017,betweenPagseguroInternetS.A.andUOLDiveoTecnologiaLtda.,includingCommercialProposal–ManagedServices–OPT-17/21628,datedasofJanuary1,2017,fromUOLDiveoTecnologiaLtda.toPagseguroInternetLtda.;andTechnicalProposal–ITAssetManagementandMonitoring,datedasofJanuary1,2017,fromUOLDiveoTecnologiaLtda.toPagseguroInternetLtda.(incorporatedbyreferencetoExhibit10.7ofFormF-1filedonDecember26,2017).

4.9

VisaPaymentArrangementsParticipationandTrademarkLicenseAgreement,datedasofAugust24,2015,betweenVisadoBrasilEmpreendimentosLtda.andPagseguroInternetLtda.(incorporatedbyreferencetoExhibit10.8ofFormF-1filedonDecember26,2017).

4.10

FirstAmendmenttotheVisaPaymentArrangementsParticipationandTrademarkLicenseAgreement,datedasofJuly3,2017,betweenVisadoBrasilEmpreendimentosLtda.andPagseguroInternetLtda.

4.11

AdvertisingSpaceAssignmentAgreementforInsertionofAdvertisements,datedasofAugust1,2015,byandbetweenUniversoOnlineS.A.andPagseguroInternetLtda.,including1stAddendumtotheAdvertisingSpaceAssignmentAgreementforInsertionofAdvertisements,datedasofJanuary1,2017andUOL–TableofPrices–August2016.(incorporatedbyreferencetoExhibit10.9ofFormF-1filedonDecember26,2017).

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No. Description4.12

EnglishtranslationoftheLong-TermIncentivePlan(LTIP)RestrictedSharesPlan–UniversoOnlineS.A.,datedasofJuly29,2015.(incorporatedbyreferencetoExhibit10.10ofFormF-1filedonDecember26,2017).

4.13

FormofIndemnificationAgreement(incorporatedbyreferencetoExhibit10.11ofFormF-1filedonDecember26,2017).

4.14

EnglishtranslationoftheLong-TermIncentivePlan–Goals(LTIP-Goals)–PagseguroInternetS.A.,datedasofDecember18,2018.

4.15

EnglishtranslationoftheAgreementforAccreditorParticipationinELOPaymentArrangements,datedasofFebruary13,2019,betweenEloServiçosS.A.andPagSeguroInternetS.A.

8.1

SubsidiariesoftheRegistrant.

11.1

EnglishtranslationoftheUOLCodeofEthicsandConduct(incorporatedbyreferencetoExhibit11.1ofForm20-FfiledonApril6,2018).

12.1

CertificationofLuizFrias,PrincipalExecutiveOfficer,PursuanttoSection302oftheSarbanes-OxleyActof2002.

12.2

CertificationofEduardoAlcaro,ChiefFinancialandInvestorRelationsOfficerandChiefAccountingOfficer,PursuanttoSection302oftheSarbanes-OxleyActof2002.

13.1

CertificationofLuizFrias,PrincipalExecutiveOfficer,PursuanttoSection906oftheSarbanes-OxleyActof2002.

13.2

CertificationofEduardoAlcaro,ChiefFinancialandInvestorRelationsOfficerandChiefAccountingOfficer,PursuanttoSection906oftheSarbanes-OxleyActof2002.

15.1

LetterfromPricewaterhouseCoopersAuditoresIndependentestotheSEC,datedApril15,2019,regardingthechangeinindependentaccountingfirm.

99.1

ConsentofDatafolha(incorporatedbyreferencetoExhibit99.1ofFormF-1filedonDecember26,2017).

101.INS

XBRLInstanceDocument

101.SCH

XBRLTaxonomyExtensionSchemaDocument

101.CAL

XBRLTaxonomyExtensionCalculationLinkbaseDocument

101.DEF

XBRLTaxonomyExtensionDefinitionLinkbaseDocument

101.LAB

XBRLTaxonomyExtensionLabelLinkbaseDocument

101.PRE

XBRLTaxonomyExtensionPresentationLinkbaseDocument

(†) Certainidentifiedconfidentialinformationhasbeenredactedfromthisexhibitbecauseitisboth(i)notmaterialand(ii)wouldbecompetitivelyharmfulifpubliclydisclosed.

GLOSSARY OF TERMS

“ABECS”meanstheBrazilianAssociationofCreditCardandServicesCompanies(Associação Brasileira de Empresas de Cartões de Crédito e Serviços ).

“ABRANET”meanstheBrazilianInternetAssociation(Associação Brasileira de Internet ).

“acquirer”meansapaymentinstitutionthatdoesnotmanagepaymentaccounts,butenablesmerchantstoacceptpaymentcardsissuedbyapaymentinstitutionorbyafinancialinstitutionthatparticipatesinacardscheme.Theacquirerreceivesthecardtransactiondetailsfromthemerchant’sterminal,passesthemtothecardissuerviathecardschemeforauthorization,andcompletestheprocessingofthetransaction.Theacquirerarrangessettlementofthecardtransactionandcreditsthemerchant’sbankaccountwiththefundsinaccordancewithitsserviceagreementwiththemerchant.Theacquireralsodealswithanychargebacksthatmaybereceivedviathecardissuerregardingconsumertransactionswithmerchants.

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“activemerchant”meansamerchantthathascompletedatleastonetransactionduringthe12monthspriortoaspecifieddate.

“averagespendingperactivemerchant”iscalculatedbydividingourtotalTPVforaspecifiedperiodbythenumberofactivemerchantsinsuchperiod.

“boleto ”meansaprintabledocumentissuedbymerchantsthatisusedtomakepaymentsinBrazil.Boletos canbeusedtopaybillsforproductsorservices,utilitiesortaxes.Eachboleto referstoaspecificmerchantandcustomertransaction,andincludesthemerchant’sname,customerinformation,expirationdateandtotalamountdue,plusaserialnumberthatidentifiestheaccounttobecreditedandabarcodesotheentiredocumentcanbereadandprocessedbyaBrazilianATM.Aboleto canbepaidincashatabankteller,atanATM,orbybanktransfer.PagSeguro’spaymentplatformandmerchantaccountcanbeusedtopayboletos .

“BrazilianPaymentsSystem”(Sistema de Pagamentos Brasileiro, orSPB)referstoalltheentities,systemsandproceduresrelatedtotheclearingandsettlementoffundstransfer,foreigncurrencyoperations,financialassets,andsecuritiestransactionsinBrazil.TheSPBincludessystemsinchargeofcheckclearing;theclearingandsettlementofelectronicdebitandcreditorders,fundstransfer,andotherfinancialassets;theclearingandsettlementofsecuritiestransactions;theclearingandsettlementofcommoditiesandfuturestransactions;and,sincetheintroductionofLawNo.12,865/13ofMay17,2013,paymentschemesandpaymentinstitutions.

“cardscheme”meansapaymentnetworkusingpaymentcards,suchasdebitorcreditcards.Anybankoranyothereligibleinstitutioncanbecomeamemberofacardscheme,allowingittoissuepaymentcardsoperatingonthecardscheme.Thecardschemepassescardtransactiondetailsfromtheacquirertotheissuerandpassespaymentsbacktotheacquirer,whichinturnpaysthemerchant.MasterCardandVisaaremajorcardschemes.

“Chargeback”referstoaclaimwheretheconsumermakesapurchaseusingapaymentcardandsubsequentlyrequestsareversalofthetransactionamountfromthecardissueronthebasisofacommercialclaim(forexample,ifthegoodsarenotdelivered,oraredelivereddamaged).Chargebacksoccurmorefrequentlyinonlinetransactionsthaninin-persontransactions,andmorefrequentlyforgoodsthanforservices.

“Chargebacksrelatedtofraudulenttransactions”referstochargebackswheretheconsumer’srequestforareversalofthetransactionamountisrelatedtoanillegitimatetransaction.

“eWallet”isadigitalwalletthatofferscustomerstheabilitytomakepaymentsonlineusingavarietyofpaymentmethods,includingcards,withouthavingtotypeinthecarddetailseachtime.

“FIDC”meansFundo de Investimento em Direitos Creditórios (FundforInvestmentinReceivables),atypeofinvestmentfundestablishedunderBrazilianlawcomposedofreceivables.

“GPRS”means“GeneralPacketRadioService,”apacket-basedwirelesscommunicationserviceonthe2Gand3GcellularcommunicationsystemsthatprovidescontinuousconnectiontotheInternetformobilephoneandcomputerusers.

“GrupoFolha”meansthegroupofcompaniesofwhichPagSeguroisapart.GrupoFolhaalsoincludesthenewspaperFolhadeS.Paulo;theeCommercelogisticscompaniesTransfolhaandSPDL;theresearchcompanyDatafolha;theprintingcompanyPlural;thedigitalcontentandproductscompaniesUOL,UOLHostandUOLAd_Lab;thee-learningcompanyUOLEdtech;andthecloudandinformationtechnology,orIT,infrastructureservicescompanyUOLDiveo.

“IndividualMicroEntrepreneurs”referstobusinessesthatareclassifiedassuchinaccordancewiththestandardsegmentationofBrazilianbusinessesbysizeunderBrazilianLawNo.123/2006,knownastheGeneralLawonMicroandSmallEnterprises,asamended,andtheBraziliantaxcode.ThisclassificationreferstobusinesseswithannualgrossrevenuesofuptoR$81,000forperiodsthroughDecember31,2018.

“LargeCompanies”referstolegalentitieswithannualgrossrevenuesinexcessofR$78million.Thiscommonly-useddefinitioninBrazilreferstocompaniesthatarenoteligibleforthedeemedprofit(lucro presumido )taxationregimeunderBrazilianLawNo.9,718/1998,asamended.

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“MDR”meansmerchantdiscountrate,acommissionthatwewithholdfromthetransactionvaluepaidtothemerchant.

“mealvouchercard”referstoalaborbenefitincludedinBrazilianemploymentcontracts,whereemployersprovidecashforemployeemealsonatax-efficientbasis.Theemployerdepositsthebenefittoaprepaidcardheldbytheemployee,andtheemployeecanusethebalanceonthecardtomakepurchasesinrestaurantsandgrocerystores.

“Medium-SizedCompanies”referstolegalentitieswithannualgrossrevenuesofbetweenR$3.6millionandR$78million.Thiscommonly-useddefinitioninBrazilreferstocompaniesthatareeligibleforthedeemedprofit(lucro presumido )taxationregimeunderBrazilianLawNo.9,718/1998,asamended.

“MicroCompanies”referstolegalentitieswithannualgrossrevenuesofuptoR$360,000,asdeterminedinaccordancewiththestandardsegmentationofBrazilianbusinessesbysizeunderBrazilianLawNo.123/2006,knownastheGeneralLawonMicroandSmallEnterprises,asamended,andtheBraziliantaxcode.

“Micro-Merchant”meansMicroCompaniesandIndividualMicroEntrepreneurs.

“MobilePayments”referstothepaymentmethodwhereamobilephoneisusedtocompletepayment(withpaymentinformationbeingtransmittedinreal-time),insteadofsimplyasanalternativechanneltosendpaymentinstructions.

“mPOS”meansmobilePOS.mPOSdevicesaresimilartoPOSdevices,buttheyrequirethemerchant’scellphoneinordertofunctionandacceptpayments.mPOSdevicesconnecttoamerchant’scellphonenetworkbyBluetooth.Asanexample,theMinizinhaisanmPOSdevice.

“NFC”meansnear-fieldcommunication.

“PortaldoEmpreendedor”meanstheEntrepreneur’sPortal–IndividualMicroEntrepreneur(Portal do Empreendedor – Microempreendedor Individual ),aBraziliangovernmentwebportalforIndividualMicroEntrepreneurs.

“POS”meanspointofsale.POSdevicesallowmerchantstoacceptpaymentswhereasaleismade,whetherinsideanestablishmentoroutsideonthestreet.POSincludesmPOS,althoughvariousfeaturesdifferentiatethetwosystems.Asanexample,theModerninhaProisaPOSdevice.

“SDK”meanssoftwaredevelopmentkit,whichistypicallyasetofsoftwaredevelopmenttoolsthatallowsforthecreationofapplicationsforsoftwarepackagesorframeworks,hardwareplatforms,computeroroperatingsystemsorsimilardevelopmentplatforms.

“SEBRAE”meanstheBrazilianMicroandSmallBusinessesSupportService(Serviço Brasileiro de Apoio às Micro e Pequenas Empresas ).

“SmallCompanies”referstolegalentitiesthatareclassifiedassuchinaccordancewiththestandardsegmentationofBrazilianbusinessesbysizeunderBrazilianLawNo.123/2006,knownastheGeneralLawonMicroandSmallEnterprises,asamended,andtheBraziliantaxcode.ThisclassificationreferstobusinesseswithannualgrossrevenuesofbetweenR$360,000andR$4.8millionforperiodsthroughDecember31,2018.

“SMEs”referstoSmallCompaniesandMedium-SizedCompanies.

“TPV”meanstotalpaymentvolume,beingthevalueofpaymentssuccessfullyprocessedthroughourend-to-enddigitalecosystem,netofpaymentreversals.

“uniquevisitor”referstoapersonwhovisitsawebsiteatleastonceinapredeterminedtimeperiod,typically30days.Eachvisitortothewebsiteisonlycountedonceduringtherelevantperiod(i.e.,ifthesameIPaddressaccessesthewebsiteseveraltimes,itonlycountsasonevisitor).

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SIGNATURES

PursuanttotherequirementsofSection12oftheSecuritiesExchangeActof1934,theregistrant,PagSeguroDigitalLtd.,herebycertifiesthatitmeetsalloftherequirementsforfilingonForm20-Fandthatithasdulycausedthisannualreporttobesignedonitsbehalfbytheundersigned,thereuntodulyauthorized,inthecityofSãoPaulo,Brazil,onApril15,2019.

PagSeguro Digital Ltd.

By: /s/EduardoAlcaroName: EduardoAlcaroTitle:

ChiefFinancialandInvestorRelationsOfficer,ChiefAccountingOfficerandDirector

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PagSeguro Digital Ltd.Consolidated Financial Statements atDecember 31, 2018 and 2017and Report of Independent RegisteredPublic Accounting Firm

F-1

Table of Contents

PagSeguro Digital Ltd.Consolidated financial statementsat December 31, 2018 and 2017

ContentsManagement’sReportonInternalControloverFinancialReporting

F-3

Reportofindependentregisteredpublicaccountingfirm

F-4

Consolidatedfinancialstatements Consolidatedbalancesheets

F-6

Consolidatedstatementsofincome

F-7

Consolidatedstatementsofcomprehensiveincome

F-8

Consolidatedstatementsofchangesinequity

F-9

Consolidatedstatementsofcashflows

F-10

Notestotheconsolidatedfinancialstatements

F-11

F-2

Table of Contents

Management’s Report on Internal Control over Financial Reporting

Ourmanagementisresponsibleforestablishingandmaintainingadequateinternalcontroloverfinancialreportingandforassessingtheeffectivenessofinternalcontroloverfinancialreporting.

Ourinternalcontroloverfinancialreportingisaprocessdesignedby,orunderthesupervisionof,ourPrincipalExecutiveOfficerandourChiefFinancialandInvestorRelationsOfficerandChiefAccountingOfficer,andeffectedbyourboardofdirectors,managementandotheremployees,andisdesignedtoprovidereasonableassuranceregardingthereliabilityoffinancialreportingandofthepreparationofourconsolidatedfinancialstatementsforexternalpurposes,inaccordancewithInternationalFinancialReportingStandards(“IFRS”)asissuedbytheInternationalAccountingStandardsBoard(“IASB”).

Duetoitsinherentlimitations,internalcontroloverfinancialreportingmaynotpreventordetectmisstatements.Also,projectionsofanyevaluationofeffectivenessofinternalcontroloverfinancialreportingtofutureperiodsaresubjecttotheriskthatcontrolsmaybecomeinadequatebecauseofchangesinconditions,orthatthedegreeofcompliancewithourpoliciesorproceduresmaydeteriorate.

OurmanagementhasassessedtheeffectivenessofourinternalcontroloverfinancialreportingasofDecember31,2018,baseduponthecriteriaestablishedinInternalControls—IntegratedFramework(2013),issuedbytheCommitteeofSponsoringOrganizationsofTreadwayCommission(COSO).Basedonthisassessmentandcriteria,ourmanagementhasconcludedthatourinternalcontroloverfinancialreportingwaseffectiveasofDecember31,2018.

Thismanagement’sreportwasnotsubjecttoattestationbyourregisteredpublicaccountingfirmpursuanttorulesoftheSecuritiesandExchangeCommissionthatpermitustoprovideonlymanagement’sreportthisyear.

February18,2019

/s/EduardoAlcaroEduardoAlcaroChiefFinancialandInvestorRelationsOfficer,ChiefAccountingOfficerandDirector

F-3

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Report of independent registeredpublic accounting firm

TotheBoardofDirectorsandStockholdersPagSeguroDigitalLtd.

Opinion on the financial statements

WehaveauditedtheaccompanyingconsolidatedbalancesheetsofPagSeguroDigitalLtd.anditssubsidiaries(the“Company”)asofDecember31,2018and2017,andtherelatedconsolidatedstatementsofincome,ofcomprehensiveincome,ofchangesinequityandofcashflowsforeachofthethreeyearsintheperiodendedDecember31,2018,includingtherelatednotes(collectivelyreferredtoasthe“consolidatedfinancialstatements”).Inouropinion,theconsolidatedfinancialstatementspresentfairly,inallmaterialrespects,thefinancialpositionoftheCompanyasofDecember31,2018and2017,andtheresultsoftheiroperationsandtheircashflowsforeachofthethreeyearsintheperiodendedDecember31,2018inconformitywithInternationalFinancialReportingStandardsasissuedbytheInternationalAccountingStandardsBoard.

Basis for opinion

TheseconsolidatedfinancialstatementsaretheresponsibilityoftheCompany’smanagement.OurresponsibilityistoexpressanopinionontheCompany’sconsolidatedfinancialstatementsbasedonouraudits.WeareapublicaccountingfirmregisteredwiththePublicCompanyAccountingOversightBoard(UnitedStates)(“PCAOB”)andarerequiredtobeindependentwithrespecttotheCompanyinaccordancewiththeU.S.federalsecuritieslawsandtheapplicablerulesandregulationsoftheSecuritiesandExchangeCommissionandthePCAOB.

WeconductedourauditsoftheseconsolidatedfinancialstatementsinaccordancewiththestandardsofthePCAOB.Thosestandardsrequirethatweplanandperformtheaudittoobtainreasonableassuranceaboutwhethertheconsolidatedfinancialstatementsarefreeofmaterialmisstatement,whetherduetoerrororfraud.TheCompanyisnotrequiredtohave,norwereweengagedtoperform,anauditofitsinternalcontroloverfinancialreporting.AspartofourauditswearerequiredtoobtainanunderstandingofinternalcontroloverfinancialreportingbutnotforthepurposeofexpressinganopinionontheeffectivenessoftheCompany’sinternalcontroloverfinancialreporting.Accordingly,weexpressnosuchopinion.

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Table of Contents

PagSeguroDigitalLtd.

Ourauditsincludedperformingprocedurestoassesstherisksofmaterialmisstatementoftheconsolidatedfinancialstatements,whetherduetoerrororfraud,andperformingproceduresthatrespondtothoserisks.Suchproceduresincludedexamining,onatestbasis,evidenceregardingtheamountsanddisclosuresintheconsolidatedfinancialstatements.Ourauditsalsoincludedevaluatingtheaccountingprinciplesusedandsignificantestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationoftheconsolidatedfinancialstatements.Webelievethatourauditsprovideareasonablebasisforouropinion.

SãoPaulo,Brazil,February19,2019/s/PricewaterhouseCoopersAuditoresIndependentes

WehaveservedastheCompany’sauditorsince2015.

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PagSeguro Digital Ltd.Consolidated balance sheetsAt December 31(All amounts in thousands of reais )CURRENT ASSETS Cashandcashequivalents 6 2,763,050 66,767Financialinvestments 7 — 210,103Notereceivables 8 8,104,679 3,522,349Receivablesfromrelatedparties 9 — 124,723Inventories 88,551 61,609Taxesrecoverable 65,653 14,446Otherreceivables 20,148 27,956

Total current assets 11,042,081 4,027,953

NON-CURRENT ASSETS Judicialdeposits 1,511 872Prepaidexpenses 968 160Deferredincometaxandsocialcontribution 17 — 37,015Propertyandequipment 11 67,104 10,889Intangibleassets 12 305,614 158,868

Total non-current assets 375,197 207,804

TOTAL ASSETS 11,417,278 4,235,757

CURRENT LIABILITIES Payablestothirdparties 13 4,324,198 3,080,569Tradepayables 165,246 92,444Payablestorelatedparties 9 30,797 39,101Salariesandsocialcharges 14 73,936 34,269Taxesandcontributions 15 80,093 52,064Provisionforcontingencies 16 7,004 4,648Otherpayables 29,501 15,872

Total current liabilities 4,710,775 3,318,967

NON-CURRENT LIABILITIES Deferredincometaxandsocialcontribution 17 132,125 42,809Otherpayables — 3,590

Total non-current liabilities 132,125 46,399

TOTAL LIABILITIES 4,842,900 3,365,366

EQUITY Sharecapital 18 26 524,577Legalreserve 18 — 30,216Capitalreserve 18 5,688,134 —Equityvaluationadjustments 18 (7,325) 55Profitretentionreserve 18 909,267 312,047Treasuryshares 18 (39,532) —

6,550,570 866,895

Non-controlling interests 23,806 3,496

TOTAL EQUITY 6,574,376 870,391

TOTAL LIABILITIES AND EQUITY 11,417,278 4,235,757

Theaccompanyingnotesareanintegralpartoftheseconsolidatedfinancialstatements.

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PagSeguro Digital Ltd.Consolidated statements of incomeYear ended December 31(All amounts in thousands of reais unless otherwise stated) Note

December 31,2018

December 31,2017

December 31,2016

Netrevenuefromtransactionactivitiesandotherservices 20 2,267,103 1,224,261 480,025Netrevenuefromsales 20 374,612 471,924 260,594Financialincome 20 1,414,532 818,624 392,429Otherfinancialincome 20 278,445 8,576 5,337

Totalrevenueandincome 4,334,692 2,523,385 1,138,385 Costofsalesandservices 21 (2,144,699) (1,324,380) (623,667)Sellingexpenses 21 (351,439) (245,759) (199,937)Administrativeexpenses 21 (581,668) (153,177) (84,461)Financialexpenses 21 (31,209) (104,544) (68,301)Otherexpenses,net 21 (8,054) (12,021) (6,660)

PROFIT BEFORE INCOME TAXES 1,217,623 683,504 155,359 Currentincometaxandsocialcontribution 17 (180,884) (214,988) (7,431)Deferredincometaxandsocialcontribution 17 (126,331) 10,278 (20,149)

INCOME TAX AND SOCIAL CONTRIBUTION (307,215) (204,710) (27,580)

NET INCOME FOR THE YEAR 910,408 478,794 127,779

Attributableto: OwnersoftheCompany 909,267 478,781 127,186Non-controllinginterests 1,141 13 593

Basicearningspercommonshare—R$ 19 2.8625 1.8254 0.4849Dilutedearningspercommonshare—R$ 19 2.8582 1.8254 0.4849


F-7

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Consolidated statements of comprehensive incomeYears ended December 31(All amounts in thousands of reais ) 2018 2017 2016 NET INCOME FOR THE YEAR 910,408 478,794 127,779Currencytranslationadjustment 208 55 —

Totalcomprehensiveincomefortheyear 910,616 478,849 127,779

Attributable to OwnersoftheCompany 909,475 478,836 127,186

Non-controllinginterests 1,141 13 593

Totalcomprehensiveincomefortheyear 910,616 478,849 127,779


F-8

Table of Contents


Consolidated statements of changes in equity(All amounts in thousands of reais ) Capital reserve Profit reserve

NoteShare capital

Net parentInvestment

Treasuryshares

Capital reserve

Share-based long-term incentive

plan (LTIP) Legal reserve

Profit retentionreserve

Retainedearnings

Equity valuationadjustments Total

Non-controlling interests

Total equity

At December 31, 2015 441,616 9,730 — — — 757 7,588 — — 459,691 2,186 461,877

Netincomefortheperiod 18 — — — — — — — 127,186 — 127,186 593 127,779Non-controllingacquisition 18 — — — — — — — 2,779 — 2,779 (2,779) —Capitalincrease 18 26,610 36,654 — — — — — — — 63,264 — 63,264Payoutcapitalization 56,351 (46,384) — — — (267) 4,539 (14,239) — — — —Constitutionoflegalreserve 18 — — — — — 5,787 — (5,787) — — — —

Distributionofinterestonowncapital — — — — — — — (26,059) — (26,059) — (26,059)

Profitretentionreserve 18 — — — — — — 83,881 (83,881) — — — —

At December 31, 2016 524,577 — — — — 6,277 96,008 — — 626,862 — 626,862

Netincomefortheperiod 18 — — — — — — — 478,781 — 478,781 13 478,794Currencytranslationadjustment 18 — — — — — — — — 55 55 — 55

Non-controllingacquisition 18 — — — — — — — — — — 3,483 3,483Constitutionoflegalreserve 18 — — — — — 23,939 — (23,939) — — — —

Equityvaluationadjustments 18 — — — — — — — — — — — —

Distributionofdividends 18 — — — — — — (96,008)(142,795) — (238,803) — (238,803)Profitretentionreserve 18 — — — — — — 312,047 (312,047) — — — —

At December 31, 2017 524,577 — — — 30,216 312,047 — 55 866,895 3,496 870,391

Conversionofprofitreservetocommonshares 1.1 (524,556) — — 866,819 — (30,216) (312,047) — — — — —

Netincomefortheperiod 18 — — — — — — — 909,267 — 909,267 1,141 910,408Currencytranslationadjustment 18 — — — — — — — — 208 208 — 208

Non-controllingacquisition 18 — — — — — — — — (7,588) (7,588) 19,169 11,581Issuranceofcommonsharesininitialpublicoffering,netofofferingcosts 18 5 — — 4,522,278 — — — — — 4,522,283 — 4,522,283

Sharesissued—Sharebasedlongtermincentiveplan(LTIP) 18 — — — 258,166 (258,166) — — — — — — —

Sharebasedlongtermincentiveplan(LTIP) 18 — — — — 299,037 — — — — 299,037 — 299,037

Acquisitionoftreasuryshares 18 — — (39,532) — — — — — — (39,532) — (39,532)

At December 31, 2018 26 — (39,532) 5,647,263 40,871 — — 909,267 (7,325) 6,550,570 23,806 6,574,376


F-9

Table of Contents


Consolidated statements of cash flowsYears ended December 31(All amounts in thousands of reais )

December 31,2018

December 31,2017

December 31,2016

CASH FLOWS FROM OPERATING ACTIVITIES Profit before income taxes 1,217,623 683,504 155,359

Expenses (revenues) not affecting cash: Depreciationandamortization 95,363 51,571 31,246Lossonsaleofproperty — 49 —Chargebacks 71,491 47,854 31,557Accrualofprovisionforcontingencies 3,745 3,538 603Sharebasedlongtermincentiveplan(LTIP) 264,179 — —Unrealizesonderivativeinstruments — — 6,613Inventoryprovisions 20,070 — —Otherfinancialcost,net 1 660 5,549

Changes in operating assets and liabilities Notereceivables (5,048,464) (2,066,867) (783,954)

Changesinreceivablessubjecttoearlypayment (1,737,545) 1,161,430 406,159Changesinreceivablesnotsubjecttoearlypayment (3,310,919) (3,228,297) (1,190,113)

Inventories (47,012) (40,586) 20,181Taxesrecoverable (22,936) 8,055 8,579Otherreceivables 773 (23,495) 17,214Otherpayables (7,330) (2,046) 13,491Payablestothirdparties 1,243,629 1,776,538 620,940Tradepayables 72,579 29,531 25,430Receivablesfrom(payablesto)relatedparties 112,790 (64,400) (214,549)Salariesandsocialcharges 39,312 13,341 6,618Taxesandcontributions 31,764 (3,109) 3,867Provisionforcontingencies (1,792) 486 (42)

(1,954,212) 414,624 (51,298)

Incometaxandsocialcontributionpaid (203,631) (166,389) (18,059)Interestincomereceived 394,643 214,555 146,346Interestpaid — (9,175) —

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (1,763,200) 453,615 76,989

CASH FLOWS FROM INVESTING ACTIVITIES Amountpaidonacquisitions,netofcashacquired (1,813) (22,225) —Purchasesofpropertyandequipment (61,560) (7,873) (1,996)Purchasesanddevelopmentofintangibleassets (192,048) (99,673) (70,394)Acquisitionoffinancialinvestments — (209,569) (337,098)Redemptionoffinancialinvestments 211,116 132,107 206,190

NET CASH USED IN INVESTING ACTIVITIES (44,305) (207,233) (203,298)

CASH FLOWS FROM FINANCING ACTIVITIES Paymentofborrowings — (199,480) —Proceedsfromborrowings — — 199,390Paymentofderivativefinancialinstruments — (5,831) —Distributionofdividends — (54,273) —Proceedsfromofferingofshares 4,717,875 — —Transactioncosts (189,852) — —Acquisitionoftreasuryshares (39,532) — —Transactionwithnon-controllinginterest (5,389) — —Capitalincreasebynon-controllingshareholders 20,686 — —

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 4,503,788 (259,584) 199,390

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,696,283 (13,202) 73,081

Cashandcashequivalentsatthebeginningoftheyear 66,767 79,969 6,888Cashandcashequivalentsattheendoftheyear 2,763,050 66,767 79,969


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Notes to the consolidated financialstatements at December 31, 2018(All amounts in thousands of reais unless otherwise stated)1. General information

PagSeguroDigitalLtd.(“PagSeguroDigital”orthe“Company”)isaholdingcompany,subsidiaryofUniversoOnlineS.A.(“UOL”),referredtotogetherwithitssubsidiariesasthe“PagSeguroGroup”,wasincorporatedonJuly19,201799.99%ofthesharesofPagseguroInternetS.A.(“PagSeguroBrazil”)werecontributedtoPagSeguroDigitalonJanuary4,2018and,PagSeguroDigitalmaintainscontrolofPagSeguroBrazil.

PagSeguroBrazilisaprivately-heldcorporationestablishedonJanuary20,2006,headquarteredinthecityofSãoPaulo,Brazil,andengagedinprovidingfinancialtechnologysolutionsandservicesandcorrespondingrelatedactivities,focusedprincipallyonmicro-merchantsandsmallandmedium-sizedbusinesses(“SMEs”).

PagSeguroBrazil’ssubsidiariesareNet+PhoneTelecomunicaçõesLtda.(“Net+Phone”),BoaCompraLtda.(“BoaCompra”),BCPSOnlineServicesLDA.(“BCPS”),R2TECHInformáticaS.A.(“R2TECH”),BIVACOHoldingS.A(“BIVA”),FundodeInvestimentoemDireitosCreditórios—PagSeguro(“FIDC”)andTilixDigitalS.A.(“TILIX”).

TheseconsolidatedfinancialstatementsincludePagSeguroBrazilanditssubsidiariesNet+Phone,BoaCompra,BCPS,R2TECH,BIVA,FIDCandTILIX.

1.1 Initial Public Offering (“IPO”)

OnJanuary26,2018,PagSeguroDigitalcompleteditsInitialPublicOffering(“IPO”).50,925,642newshareswereofferedbyPagSeguroDigitaland70,267,746shareswereofferedbythecontrollingshareholderUOL.

TheinitialofferingpricewasUS$21,50percommonshare,forgrossproceedsofUS$1,095.2million(orR$3,444.2million).TheCompanyreceivednetproceedsofUS$1,046.0million(orR$3,289.8million),afterdeductingUS$43.8million(orR$137.8million)inunderwritingdiscountsandcommissionsandUS$5.2million(orR$16.7million)ofotherofferingexpenses.

ThesharesofferedandsoldintheIPOwereregisteredundertheSecuritiesActof1933,asamended,pursuanttotheCompany’sRegistrationStatementonFormF-1(RegistrationNo333-222292)whichwasdeclaredeffectivebytheSecuritiesandExchangeCommissiononJanuary26,2018.ThecommonstockhasbeentradedontheNewYorkStockExchange(NYSE)sinceJanuary26,2018,underthesymbol“PAGS”.

1.2 Follow-on public offering

OnJune26,2018,PagSeguroDigitalcompleteditsfollow-onpublicoffering.11,550,000newshareswereofferedbyPagSeguroDigitaland26,400,000shareswereofferedbythecontrollingshareholderUOL.

TheofferingpricewasUS$29,25percommonshare,forgrossproceedsofUS$337.8million(orR$1,274.4million).TheCompanyreceivednetproceedsofUS$326.8million(orR$1,232.6million),afterdeductingUS$7.9million(orR$29.9million)inunderwritingdiscountsandcommissionsandUS$3.1million(orR$11.9million)ofotherofferingexpenses.

1.3 Long-Term Incentive Plan (“LTIP”)

MembersofmanagementparticipateinaLong-TermIncentivePlan,orLTIP,whichwasestablishedbyUOLforitsgroupcompaniesonJuly29,2015andhasbeenadoptedbyPagSeguroDigital.BeneficiariesundertheLTIPareselectedbyUOL’sLTIPCommittee,whichconsistsoftheChairmanandtwoofficersofUOL,andaresubmittedtoourBoardofDirectorsforadoption.

Thepolicyforrecognizingandmeasuringshare-basedpaymentsintheinterimperiodisdescribedinNote18.

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Notes to the consolidated financialstatements at December 31, 2018(All amounts in thousands of reais unless otherwise stated)2. Preparation of the consolidated financial statements and significant accounting policies

2.1 Basis of financial statements

TheseconsolidatedfinancialstatementshavebeenpreparedinaccordancewiththeInternationalFinancialReportingStandards(“IFRS”),asissuedbytheInternationalAccountingStandardsBoard(“IASB”).TheconsolidatedfinancialstatementsarepresentedinthousandsofBrazilianreais,unlessotherwiseindicated,whichisthefunctionalcurrencyofPagSeguroDigitalanditssubsidiaries.

Theconsolidatedfinancialstatementshavebeenpreparedunderthehistoricalcostconvention,whichismodifiedforcertainfinancialassetsandliabilities(includingderivativeinstruments)measuredatfairvalue.

Thepreparationoffinancialstatementsrequirestheuseofcertaincriticalaccountingestimates.ItalsorequiresmanagementtoexerciseitsjudgmentintheprocessofapplyingPagSeguroGroup’saccountingpolicies.Theareasinvolvingahigherdegreeofjudgmentorcomplexity,orareaswhereassumptionsandestimatesaresignificanttothefinancialstatements,aredisclosedinNote3.

PagSeguroGrouphasadoptedallpronouncementsandinterpretationsissuedbyIASBthatwereineffectatDecember31,2018.

TheseconsolidatedfinancialstatementsfortheyearsendedDecember31,2018,2017and2016wereapprovedbyPagSeguroDigital’sBoardofDirectorsatameetingheldonFebruary15,2019.

2.2 Basis of consolidation

Consolidatedfinancialstatements

PagSeguroGroupconsolidatesallentitiesoverwhichPagSeguroDigitalhascontrol,whenitisexposedorhasrightstovariablereturnsonitsinterestintheinvestee,andhastheabilitytogoverntheinvestee’srelevantactivities.

ThesubsidiariesincludedintheconsolidationaredescribedinNote4.

Subsidiaries

SubsidiariesareallentitiesoverwhichPagSeguroDigitalhascontrol.SubsidiariesarefullyconsolidatedfromthedateonwhichcontrolistransferredtoPagSeguroDigital.Theyaredeconsolidatedfromthedatethatcontrolceases.

Identifiableassetsacquiredandliabilitiesandcontingentliabilitiesassumedfortheacquisitionofsubsidiariesinabusinesscombinationaremeasuredinitiallyattheirfairvaluesattheacquisitiondate.PagSeguroGrouprecognizesanynon-controllinginterestintheacquireeeitheratfairvalueoratthenon-controllinginterest’sproportionateshareofthefairvalueoftheacquiree’sidentifiablenetassets.Non-controllinginterestsaredetermineduponeachacquisition.Acquisition-relatedcostsareaccountedforinthestatementofincomeasincurred.Theseaccountingpracticesdonotapplytotransactionsundercommoncontrol.

Transactions,balancesandunrealizedgainsonintercompanytransactionsareeliminated.Unrealizedlossesarealsoeliminated,unlessthetransactionprovidesevidenceofimpairmentoftheassettransferred.Theaccountingpoliciesofthesubsidiariesarechanged,wherenecessary,toensureconsistencywiththepoliciesadoptedbyPagSeguroGroup.

2.3 Foreign currency translation

Foreigncurrencytransactionsaretranslatedintothefunctionalcurrencyusingtheexchangeratesprevailingatthedatesofthetransactionsorthedatesofvaluationwhereitemsareremeasured.Foreignexchangegainsandlossesresultingfromthesettlementofthesetransactionsandfromthetranslationatyear-endexchangeratesofmonetaryassetsandliabilitiesdenominatedinforeigncurrenciesarerecognizedinthestatementofincome.

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Notes to the consolidated financialstatements at December 31, 2018(All amounts in thousands of reais unless otherwise stated)2.4 Cash and cash equivalents

Cashandcashequivalentsareheldforthepurposeofmeetingshort-termcashneedsandnotforinvestmentoranyotherpurposes.PagSeguroGroupclassifiesascashequivalentsafinancialinvestmentthatcanbeimmediatelyconvertedintoaknownamountofcashandissubjecttoimmaterialriskofchangeinvalue.PagSeguroGroupclassifiesfinancialinstrumentswithoriginalmaturitiesofthreemonthsorlessascashequivalents.

2.5 Financial instruments—initial recognition and subsequent measurement

i)Financialassets

Initial recognition and measurement

Financialassetsareclassifiedinthefollowingcategories:financialassetsatfairvaluethroughprofitoramortizedcost.Theclassificationdependsonthepurposeforwhichthefinancialassetswereacquired.PagSeguroGroupdoesnotclassifyitsfinancialassetsatfairvaluethroughcomprehensiveincome.

Financialassetscarriedatfairvaluethroughprofitorlossareinitiallyrecognizedatfairvalue,andtransactioncostsareexpensedinthestatementofincome.Financialassetsincludecashandcashequivalents,currentfinancialinvestments,notereceivables,receivablesfromrelatedparties,andotherreceivables.

Subsequent measurement

Thesubsequentmeasurementoffinancialassetsdependsontheirclassification,whichmaybeasfollows:

Loansandreceivables

Loansandreceivablesarecarriedatamortizedcostusingtheeffectiveinterestratemethod.

Financialassetsatfairvaluethroughprofitorloss

ThiscategoryincludesderivativefinancialinstrumentswhichdonotmeetthehedgeaccountingcriteriadefinedbyIFRS9–FinancialInstruments.

Financialassetsatfairvaluethroughprofitorlossarepresentedatfairvalueinthebalancesheet,withthecorrespondinggainsorlossesrecognizedinthestatementofincome.

PagSeguroGroupvaluesitsfinancialassetsatfairvaluethroughprofitorloss,asitintendstotradethemwithinashortperiodoftime.Reclassificationtoloansandreceivablesdependsonthenatureoftheasset.Thisvaluationdoesnotaffectanyfinancialassetsdesignatedatfairvaluethroughprofitorlossatinitialrecognition,whichcannotbesubsequentlyreclassified.

Derecognition

Afinancialassetor,whereapplicable,apartofafinancialassetorpartofagroupofsimilarfinancialassets,isderecognizedwhen:

• Therightstoreceivecashflowsfromtheassetexpire;

• PagSeguroGrouptransfersitsrightstoreceivecashflowsfromtheasset,orassumesanobligationtopaythereceivedcashflowsinfulltoathirdpartyundera

“pass-through”arrangement;and(a)transfersvirtuallyalltherisksandbenefitsoftheasset,or(b)neithertransfersnorretainsvirtuallyalltherisksandbenefitsoftheasset,buttransferscontroloftheasset.

WhenPagSeguroGrouphastransferreditsrightstoreceivecashflowsfromanassetandhasnottransferredorretainedsubstantiallyalltherisksandbenefitsoftheasset,thisassetisrecognizedtotheextentofPagSeguroGroup’scontinuinginvolvementintheasset.Insuchcase,PagSeguroGroupalsorecognizesanassociatedliability.

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Notes to the consolidated financialstatements at December 31, 2018(All amounts in thousands of reais unless otherwise stated)

ThetransferredassetandtheassociatedliabilityaremeasuredonabasisthatreflectstherightsandobligationsthatPagSeguroGrouphasretained.

ContinuinginvolvementthattakestheformofaguaranteeoverthetransferredassetismeasuredattheloweroftheoriginalcarryingamountoftheassetandthemaximumamountoftheconsiderationthatPagSeguroGroupmayberequiredtorepay.

ii)Impairmentoffinancialassets

PagSeguroGroupassesses,atthebalancesheetdate,ifthereisobjectiveevidencethatafinancialassetoragroupoffinancialassetsisimpaired.

Afinancialassetoragroupoffinancialassetsisimpairedandimpairmentlossesareincurredonlyifthereisobjectiveevidenceofimpairmentasaresultofoneormoreeventsthatoccurredaftertheinitialrecognitionoftheasset(a“lossevent”)andthatlossevent(orevents)hasanimpactontheestimatedfuturecashflowsofthefinancialassetorgroupoffinancialassetsthatcanbereliablyestimated.

Evidenceofimpairmentmayincludeanindicationthatthedebtorsareexperiencingsignificantfinancialdifficulty,probabilitythatthedebtorwillenterbankruptcyorotherfinancialreorganization,defaultordelinquencyininterestorprincipalpayments,andanindicationofasubstantialdeclineintheestimatedfuturecashflows,suchaschangesinmaturitydatesoreconomicconditionsrelatedtodefault.

iii)Financialliabilities

Initial recognition and measurement

Financialliabilitiesareclassifiedasfinancialliabilitiesatfairvaluethroughprofitorloss,otherfinancialliabilities,orasderivativesdesignatedusedforhedge,whenappropriate.PagSeguroGroupdeterminestheclassificationofitsfinancialliabilitiesatinitialrecognition.

Financialliabilitiesareinitiallyrecognizedatfairvalueplus,inthecaseofotherfinancialliabilities,directlyrelatedtransactioncosts.

Financialliabilitiesincludepayablestothirdparties,payablestothirdpartiesofrelatedparties,tradepayables,tradepayablesofrelatedparties,borrowings,andotherpayables.

Subsequent measurement

Thesubsequentmeasurementoffinancialliabilitiesdependsontheirclassification,whichmaybeasfollows:

Financialliabilitiesatfairvaluethroughprofitorloss

Financialliabilitiesatfairvaluethroughprofitorlossincludeheld-for-tradingfinancialliabilitiesandfinancialliabilitiesdesignatedatfairvaluethroughprofitorlossatinitialrecognition.

Financialliabilitiesareclassifiedasheld-for-tradingifacquiredforsaleintheshortterm.ThiscategoryincludesderivativefinancialinstrumentswhichdonotmeetthehedgeaccountingcriteriadefinedbyIFRS9–FinancialInstruments.

Gainsandlossesonheld-for-tradingliabilitiesarerecognizedinthestatementofincome.

Otherfinancialliabilities

Afterinitialrecognition,interest-bearingborrowingsaresubsequentlymeasuredatamortizedcost,usingtheeffectiveinterestratemethod,andarerecognizedinthestatementofincome.

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Amortizedcostiscalculatedbytakingintoaccountanydiscountorpremiumonacquisitionandfeesorcoststhatareanintegralpartoftheeffectiveinterestrate.Theeffectiveinterestrateamortizationisincludedin“Financialexpenses”inthestatementofincome.

Derecognition

Afinancialliabilityisderecognizedwhentheobligationisdischarged,canceledorexpires.

Whenanexistingfinancialliabilityisreplacedbyanotherfromthesamelenderonsubstantiallydifferentterms,orthetermsofanexistingliabilityaresubstantiallymodified,suchanexchangeormodificationistreatedasaderecognitionoftheoriginalliabilityandrecognitionofanewliability,andthedifferenceintherespectivecarryingamountsisrecognizedinthestatementofincome.

iv)Financialinstruments—offsetting

Financialassetsandliabilitiesarepresentednetinthebalancesheetif,andonlyif,thereisanexistingandenforceablelegalrighttooffsettheamountsrecognizedandanintentiontooffsetortorealizetheassetandsettletheliabilitysimultaneously.

v)Fairvalueoffinancialinstruments

Thefairvalueoffinancialinstrumentsactivelytradedinorganizedmarketsisdeterminedbasedonquotedmarketpricesatthebalancesheetdate,withoutadeductionoftransactioncosts.

Thefairvalueoffinancialinstrumentsthatarenottradedinanactivemarketisdeterminedbyusingvaluationtechniques.Thesetechniquesincludetheuseofrecentarm’slengthtransactions,referencetoothersimilarinstruments,discountedcashflowanalysisorothervaluationmethods.

2.6 Note receivables

Theamountsaremainlyrelatedtoreceivablesfromcredit/debitcardissuersandacquirersoriginatedfromtransactionsthroughPagSeguroGroupplatform,andfromsalesofcredit/debitcardreaders.Ifcollectionisexpectedinoneyearorless,theyareclassifiedascurrentassets.Otherwise,theyarepresentedasnon-currentassets.

Howevertheprovisionforimpairmentofnotereceivables,basedonPagSeguroBrazil’sriskassessment,isimmaterialbecausethenotereceivablesaremainlycomprisedoftransactionsapprovedbylargefinancialinstitutionsthathavealowrisklevelbasedonratingsreceivedfrommajorcreditratingagencies.Additionally,thesefinancialinstitutionsarethelegalobligorstothenotereceivables.SeeNote23.

Notereceivablesareinitiallyrecordedatthepresentvalueofexpectedfuturecashflows.Thenotereceivablesfrominstallmenttransactionsareestimatedbasedonthepresentvalueofthefuturecashflows,usingaverageappropriatetermsandrates,whichareinaccordancewiththetermsofthesetransactions.

PagSeguroGroupincursfinancialexpenseswhenanelectiontoreceiveearlypaymentofnotereceivablesfromfinancialinstitutionsismade.Thisfinancialexpenseisrecognizedatthetimethefinancialinstitutionagreestoliquidateanotereceivabledueininstallmentsonaprepaidbasis,anditisrecordedasFinancialexpensesinthestatementofincome.

2.7 Inventories

Inventoriesconsistofdebitandcreditcardreaders.Inventoriesarestatedatthelowerofcostandnetrealizablevalue.Thecostmethodusedforinventoriesistheweightedmovingaveragemethod.Netrealizablevalueistheestimatedsellingpriceintheordinarycourseofbusiness,lesstheestimatedcostsnecessarytomakethesale.

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Notes to the consolidated financialstatements at December 31, 2018(All amounts in thousands of reais unless otherwise stated)2.8 Property and equipment

Propertyandequipmentarestatedathistoricalcostlessaccumulateddepreciation.Historicalcostincludesexpendituresthataredirectlyattributabletotheacquisitionoftheitemsandmayalsoincludefinancecostsrelatedtotheacquisitionofqualifyingassets.

Subsequentcostsareincludedintheasset’scarryingamountorrecognizedasaseparateasset,asappropriate,onlywhenitisprobablethatfutureeconomicbenefitsassociatedwiththesecostswillflowtoPagSeguroGroupandthatsuchbenefitscanbereliablymeasured.Thecarryingamountofreplaceditemsorpartsisderecognized.Allotherrepairsandmaintenanceexpensesarechargedtothestatementofincomeduringtheyearinwhichtheyareincurred.

Theassets’residualvaluesandusefullivesarereviewedattheendofeachreportingperiod,andadjustedonaprospectivebasis,ifappropriate.Depreciationiscalculatedunderthestraight-linemethod,basedontheestimatedusefullives,asshownbelow(inyears):

Dataprocessingequipment 2.5to5yearsFurnitureandfittings 10yearsFacilities 10yearsBuildingimprovements 10yearsMachineryandequipment 5to10yearsVehicles 5years

Anasset’scarryingamountisimmediatelywrittendowntoitsrecoverableamountwhentheasset’scarryingamountisgreaterthanitsestimatedrecoverableamount.

Gainsandlossesondisposalsaredeterminedbycomparingtheproceedswiththecarryingamounts,andarerecognizedwithin“Other(expenses)income,net”inthestatementofincome.

2.9 Intangible assets

Softwarelicensesarecapitalizedonthebasisofthecostsincurredtoacquirethesoftwareandbringittouse.Thesecostsareamortizedonthestraight-linebasisovertheestimatedusefullifeofthesoftware(threetofiveyears).

Costsassociatedwithmaintainingcomputersoftwareprogramsarerecognizedasanexpenseasincurred.DevelopmentcoststhataredirectlyattributabletothedesignandtestingofidentifiableanduniquesoftwareproductscontrolledbyPagSeguroGrouparerecognizedasintangibleassets.

Directlyattributablecosts,whicharecapitalizedaspartofthesoftwareproduct,includecostsincurredwithemployeesandexpensesallocatedtosoftwaredevelopment.Borrowingcostsincurredduringthesoftwaredevelopmentperiodmayalsobecapitalized.

Otherdevelopmentexpendituresthatdonotmeetthecapitalizationcriteriaareexpensedasincurred.Developmentcostspreviouslyrecordedasanexpensearenotrecognizedasanassetinasubsequentperiod,andarepresentedwithin“Advisoryandconsultingservices”.

Computersoftwaredevelopmentcostsrecognizedasassetsareamortizedovertheestimatedusefullife,whichdoesnotexceedfiveyearsfromthedatethattechnologicalfeasibilityismet.

2.10 Impairment of non-financial assets

Non-financialassetsareatleastannuallyreviewedforimpairmenttodeterminewhetherthereareanyeventsorchangesineconomicandtechnologicalconditionsorinoperationsthatmayindicatethatanassetisimpaired.Whenapplicable,suchevidenceisidentifiedthroughtheannualimpairmenttest.Inordertoassessanon-financialasset,itisnecessarytoestimateitsrecoverableamount.Therecoverableamountofanassetorcashgeneratingunitisthegreaterofitsvalueinuseanditsfairvaluelesscoststosell.Whenthecarryingamountofanassetorcashgeneratingunitexceedsitsrecoverableamount,aprovisionforimpairmentisestablished.

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Whenestimatingthevalueinuseofanasset,thefutureestimatedcashflowsarediscountedtotheirpresentvalueusingapre-taxdiscountratethatreflectstheweightedaveragecostofcapitalforthecashgeneratingunit.Thenetsalespriceisdetermined,wheneverpossible,basedonafirmsalescontractenteredintoonanarm’slengthbasis,betweenwell-informedandwillingparties,adjustedbyexpensesattributabletotheassetsale,or,whenthereisnofirmsalescontract,basedonthepriceinanactivemarket,orthemostrecenttransactionpriceforsimilarassets.

PagSeguroGroupannuallyassesseswhetherthereisanyindicationthatapreviouslyrecognizedimpairmentlossnolongerexistsorhasdecreased.Ifthereissuchindication,theasset’srecoverableamountisestimated.Apreviouslyrecognizedimpairmentlossisreversedonlyiftherehasbeenachangeintheassumptionsusedtodeterminetheasset’srecoverableamountsincethelastimpairmentlosswasrecognized.Thereversalislimitedsothattheasset’scarryingamountdoesnotexceeditsrecoverableamount,norexceedsthecarryingamountthatwouldhavebeendetermined,netofdepreciationoramortization,hadnoimpairmentlossbeenrecognizedfortheassetinprioryears.

2.11 Payables to third parties

PayablestothirdpartiesrefertofundspayableandamountsduetomerchantsthatusePagSeguroBrazilplatform.PagSeguroGrouprecognizesthefairvalueofthetransactionwhichisthetransactionamount,netofthetransactioncost.

2.12 Provisions

ProvisionsarerecognizedwhenPagSeguroGrouphasapresentlegalorconstructiveobligationasaresultofpastevents,itisprobablethatanoutflowofresourceswillberequiredtosettletheobligationandtheamountcanbereliablyestimated.WhenPagSeguroGroupexpectsthevalueofaprovisiontobereimbursed,inwholeorinpart(forexample,duetoaninsurancecontract)thereimbursementisrecognizedasaseparateasset,butonlywhenthereimbursementisvirtuallycertain.Expensesassociatedwithanyprovisionsarepresentedinthestatementofincome,netofanyreimbursements.

PagSeguroGroupisapartytolegalandadministrativeproceedings.Provisionsareestablishedforallcontingenciesrelatedtolawsuitsforwhichitisprobablethatanoutflowoffundswillbenecessarytosettlethecontingency/obligationandareasonableestimatecanbemade.Theassessmentofthelikelihoodoflossincludestheevaluationofavailableevidence,thehierarchyoflaws,availablecaselaw,recentcourtdecisionsandtheirimportanceinthelegalsystem,aswellastheopinionofoutsidelegalcounsel.Theprovisionsarereviewedandadjustedtoreflectchangesincircumstances.

2.13 Revenue recognition

RevenuecomprisesthefairvalueoftheconsiderationreceivedorreceivablefortransferringgoodsorservicestoacustomerintheordinarycourseofPagSeguroGroup’sactivities.Revenueispresentednetofsalesandexcisetaxesandreturns.

PagSeguroGroup’srevenuesubstantiallycomprises:

• Revenuefromtransactionactivitiesandotherservices:Revenuefromfeeschargedforintermediationofelectronicpayments,andotherservicessuchasprepaidcards,whicharerecognizedatthetimethepurchaseisapprovedbythefinancialinstitution.RevenuesfromfeeschargedforintermediationofelectronicpaymentsarerecognizedonagrossbasisandrelatedtransactioncostsarerecognizedasCostofsalesandservices,sincePagSeguroGroupisconsideredtobetheprincipalintheintermediationtransaction.PagSeguroGrouphasprimaryresponsibilityforprovidingtheservicestocustomersandalsodirectlysetsthepricesforsuchservices,independentlyfromtherelatedtransactioncostsagreedbetweenPagSeguroGroupandthecardschemesorcardissuers;

• Revenuefromsales:Revenuefromsalesofcreditanddebitcardreadersandsimilaritems,whichisrecognizedwhencontrolofagoodistransferredtothe

customers,i.e.,ondeliveryoftheequipment.UnderBrazilianconsumerlaw,clientshavesevendaysafterorderingPointofSaleequipment(“POSdevices”)tocancelthepurchase.Returnsofdevicesareaccountedforasdeductionsfromrevenuefromsalesatthetimetheequipmentisreturned;

• Financialincome:RecognizedasaresultofthediscountratechargedontheearlypaymentsofPayablestothirdparties(merchants).Theincomeisrecognizedatthetimethemerchantagreestoreceiveasaleininstallmentsonanearlypaymentbasis,anditisrecordedasFinancialincomeinthestatementofincome.

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Notes to the consolidated financialstatements at December 31, 2018(All amounts in thousands of reais unless otherwise stated)2.14 Current and deferred income tax and social contribution

Currentincometaxandsocialcontribution

Taxassetsandliabilitiesforthecurrentyeararecalculatedbasedontheexpectedrecoverableamountortheamountpayabletothetaxauthorities.ThetaxratesandtaxlawsusedtocalculatetheamountarethoseenactedorsubstantivelyenactedatthebalancesheetdateinthecountrieswherePagSeguroGroupoperatesandgeneratestaxableincome.

Currentincometaxandsocialcontributionrelatedtoitemsrecognizeddirectlyinequityarerecognizedinequity.PagSeguroGroupperiodicallyevaluatesthetaxpositionsinvolvinginterpretationoftaxregulationsandestablishesprovisionswhenappropriate.

Deferredtaxes

Deferredtaxesarisefromtemporarydifferencesbetweenthetaxbasesofassetsandliabilitiesandtheircarryingamountsatthebalancesheetdate.

Deferredtaxliabilitiesarerecognizedforalltemporarytaxabledifferences,exceptinthefollowingsituations:

• Whenthedeferredtaxliabilityarisesfromtheinitialrecognitionofanassetorliabilityinatransactionotherthanabusinesscombinationthat,atthetimeofthetransaction,affectsneitheraccountingnortaxableprofit;and

• Ontemporarytaxdifferencesrelatedtoinvestmentsinsubsidiaries,whenthetimingofthereversalofthetemporarydifferencescanbecontrolledanditisprobablethatthetemporarydifferenceswillnotreverseintheforeseeablefuture.

Deferredtaxassetsarerecognizedonalldeductibletemporarydifferencesandtaxlosscarryforwards,totheextentthatitisprobablethattaxableprofitwillbeavailableagainstwhichtheycanbeoffset,except:

• Whenthedeferredtaxassetrelatedtothedeductibletemporarydifferencearisesfromtheinitialrecognitionofanassetorliabilityinatransactionotherthanabusinesscombinationthat,atthetimeofthetransaction,affectsneitheraccountingnortaxableprofitorloss;and

• Onthedeductibletemporarydifferencesassociatedwithinvestmentsinsubsidiaries.Deferredtaxassetsarerecognizedonlytotheextentthatitisprobablethatthetemporarydifferenceswillreverseintheforeseeablefutureandthattaxableprofitwillbeavailableagainstwhichthetemporarydifferencescanbeutilized.

Thecarryingamountofdeferredtaxassetsisreviewedateachreportingdateandadeferredtaxassetisrecognizedtotheextentthatitisprobablethatsufficienttaxableprofitwillbeavailabletoallowallorpartofthedeferredtaxassetstobeutilized.Unrecognizeddeferredtaxassetsarere-assessed,ateachreportingdateandarerecognizedtotheextentthatithasbecomeprobablethatfuturetaxableprofitswillbeavailabletoallowtheirutilization.

BasedonthelocallawoftheCaymanIslands(specifically,theCompaniesLawof1960),thereisnotaxationontheincomeearnedbycompaniesorganizedinthisjurisdiction.Therefore,PagSeguroDigitalhasnoincometaximpactsintheCaymanIslands.

ForthesubsidiariesofPagSeguroDigital,deferredtaxassetsandliabilitiesaremeasuredusingtheprevailingtaxratesintheyearinwhichtheassetswillberealizedandtheliabilitieswillbesettled.Thecurrentlydefinedtaxratesof25%forincometaxand9%forsocialcontributionareusedtocalculatedeferredtaxes.

Deferredtaxassetsandliabilitiesarepresentedonanetbasiswhenthereislegallyorcontractuallyenforceablerighttooffsetthetaxassetagainstthetaxliability,andthedeferredtaxesarerelatedtothesametaxableentityandsubjecttothesametaxauthority.

2.15 Employee benefits – Profit sharing

PagSeguroGrouprecognizesaliabilityandanexpenseforprofitsharingsubjecttoachievementofoperationaltargetsandperformanceestablishedandapprovedatthebeginningofeachfiscalyear.PagSeguroGrouprecognizesaprovisionwhencontractuallyobligedorwhenthereisapastpracticethathascreatedaconstructiveobligation.

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Notes to the consolidated financialstatements at December 31, 2018(All amounts in thousands of reais unless otherwise stated)2.16 Business combination and goodwill

PagSeguroGroupaccountsforbusinesscombinationsusingtheacquisitionmethod.Thecostofanacquisitionismeasuredasthesumoftheconsiderationtransferred,basedonitsfairvalueontheacquisitiondate.Costsdirectlyattributabletotheacquisitionareexpensedasincurred.Theassetsacquired,andliabilitiesassumedaremeasuredatfairvalue,classifiedandallocatedaccordingtothecontractualterms,economiccircumstancesandrelevantconditionsontheacquisitiondate.Goodwillismeasuredastheexcessoftheconsiderationtransferredoverthefairvalueofnetassetsacquired.Iftheconsiderationtransferredissmallerthanthefairvalueofnetassetsacquired,thedifferenceisrecognizedasagainonbargainpurchaseinthestatementofincome.Afterinitialrecognition,goodwillismeasuredatcostlessanyaccumulatedimpairmentlosses.

2.17 Treasury shares

Ownequityinstrumentsthatarereacquired(treasuryshares)arerecognisedatcostanddeductedfromequity.Nogainorlossisrecognisedinprofitorlossonthepurchase,sale,issueorcancellationofthePagSeguroGroup’sownequityinstruments.Anydifferencebetweenthecarryingamountandtheconsideration,ifreissued,isrecognisedinequity.

2.18 Distribution of dividends and interest on own capital

DistributionsofdividendsandinterestonowncapitaltoPagSeguroBrazil’sshareholdersarerecognizedasaliabilityinthefinancialstatementsatyear-end,basedonthePagSeguroBrazil’sbylaws,whichrequirethedistributionofaminimumof1%oftheprofitfortheyearasdividends.AnyamountthatexceedstheminimumrequiredisonlyaccruedonthedatesuchdistributionisapprovedbytheshareholdersataGeneralMedeting.However,theseprovisionsdonotexistunderPagSeguroDigitalMemorandumofAssociation.

Thetaxbenefitofinterestonowncapitalisrecognizedinthestatementofincome.

2.19 New standards and interpretations

(i) Effective for periods beginning on or after January 1, 2018

IFRS9–FinancialInstruments

IFRS9addressestheclassification,measurementandrecognitionoffinancialassetsandliabilities.ThecompleteversionofIFRS9wasissuedinJuly2014andiseffectiveasoffJanuary1,2018.ItreplacestheguidanceincludedinIAS39relatedtotheclassificationandmeasurementoffinancialinstruments.ThemainamendmentsbroughtbyIFRS9are:(i)newcriteriafortheclassificationoffinancialassets;(ii)newimpairmentmodelforfinancialassetsbasedonexpectedlosses,replacingthecurrentmodelbasedonincurredlosses;and(iii)relaxationoftherequirementsfortheadoptionofhedgeaccounting.

BeginningJanuary1,2018,managementimplementedthenewguidelinesintroducedbyIFRS9andthereisnorelevantimpactforthePagSeguroGroup.

IFRS15—RevenuefromContractswithCustomers

IFRS15,effectiveasofJanuary1,2018,supersedesIAS11ConstructionContracts,IAS18RevenueandrelatedInterpretationsanditapplies,withlimitedexceptions,toallrevenuearisingfromcontractswithcustomers.Thestandardestablishesafive-stepmodeltoaccountforrevenuearisingfromcontractswithcustomersandrequiresthatrevenueberecognisedatanamountthatreflectstheconsiderationtowhichanentityexpectstobeentitledinexchangefortransferringgoodsorservicestoacustomer.

ManagementevaluatedthenewguidelinesintroducedbyIFRS15andappliedthefive-stepmodelinordertoreassessitsrevenuerecognitioncriteria.BegginingJanuary1,2018,managementimplementedthenewguidelinesintroducedbyIFRS15andthereisnorelevantimpactforthePagSeguroGroup.

TherearenoothernewstandardsorinterpretationsthatcouldhaveamaterialimpactonthePagSeguroGroup’sfinancialstatements.

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Notes to the consolidated financialstatements at December 31, 2018(All amounts in thousands of reais unless otherwise stated) (ii) Standards issued but not yet effective

IFRS16—Leases

IFRS16wasissuedinJanuary2016andiseffectiveasofJanuary1,2019,replaceingIAS17Leases,IFRIC4DeterminingwhetheranArrangementcontainsaLease,SIC-15OperatingLeases-IncentivesandSIC-27EvaluatingtheSubstanceofTransactionsInvolvingtheLegalFormofaLease.IFRS16setsouttheprinciplesfortherecognition,measurement,presentationanddisclosureofleasesandrequireslesseestoaccountforallleasesunderasingleon-balancesheetmodelsimilartotheaccountingforfinanceleasesunderIAS17.Thestandardincludestworecognitionexemptionsforlessees–leasesof‘low-value’assets(e.g.,personalcomputers)andshort-termleases(i.e.,leaseswithaleasetermof12monthsorless).Atthecommencementdateofalease,alesseewillrecognisealiabilitytomakeleasepayments(i.e.,theleaseliability)andanassetrepresentingtherighttousetheunderlyingassetduringtheleaseterm(i.e.,theright-of-useasset).Lesseeswillberequiredtoseparatelyrecognizetheinterestexpenseontheleaseliabilityandthedepreciationexpenseontheright-of-useasset.

ManagementevaluatedthenewguidelinesintroducedbyIFRS16anddidnotidentifyanymaterialimpactforthePagSeguroGroup.

TherearenootherstandardsorinterpretationsnotyeteffectivethatcouldhaveamaterialimpactonthePagSeguroGroup’sfinancialstatements.

3. Critical accounting estimates and judgments

Accountingestimatesandjudgmentsarecontinuallyevaluatedandarebasedonhistoricalexperienceandotherfactors,includingexpectationsoffutureeventsthatarebelievedtobereasonableunderthecircumstances.

Basedonassumptions,PagSeguroGroupmakesestimatesconcerningthefuture.Theresultingaccountingestimateswill,bydefinition,seldomequaltherelatedactualresults.Theestimatesandassumptionsthathaveasignificantriskofcausingamaterialadjustmenttothecarryingamountsofassetsandliabilitieswithinthenextfinancialyearareaddressedbelow:

3.1 Estimated useful life of intangible assets

PagSeguroGroupusesanestimatedusefullifetocalculateandrecordtheamortizationappliedtoitsintangibleassetswhichmaydifferfromtheactualtermoverwhichtheintangibleassetsareexpectedtogeneratebenefitsforPagSeguroGroup.

Theamortizationofsoftwareusagerightsisdefinedbasedontheeffectiveperiodofthelicensecontracted.

TheamortizationofinternallydevelopedsoftwareisdefinedbasedontheperiodoverwhichthesoftwarewillgeneratefutureeconomicbenefitsforPagSeguroGroup.

3.2 Deferred income tax and social contribution

PagSeguroGrouprecognizesdeferredincometaxandsocialcontributionbasedonfuturetaxableprofitestimatesforthenexttenyears.Theseprojectionsareperiodicallyreviewedandapprovedbymanagement.

3.3 Provision for contingencies

PagSeguroGrouprecognizesprovisionsforcivil,taxandlaborlawsuits.Theassessmentofprobabilityoflossincludesassessingtheavailableevidenceandjurisprudence,thehierarchyoflawsandmostrecentcourtdecisions.Provisionsarereviewedandadjustedtotakeintoaccountchangesincircumstancessuchastheapplicablelimitationperiod,findingsoftaxinspectionsandadditionalexposuresidentifiedbasedonnewissuesorcourtdecisions.

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Notes to the consolidated financialstatements at December 31, 2018(All amounts in thousands of reais unless otherwise stated)4. Consolidation of subsidiaries

At December 31, 2018

Company Assets Liabilities Equity

Net income (loss) for the

year Ownership

—% Level PagseguroBrazil 12,060,765 5,790,122 6,270,643 776,889 99.99 Direct Net+Phone 1,440,534 1,411,587 28,948 (15,010) 99.99 IndirectBoaCompra 980,529 953,979 26,549 6,588 99.99 IndirectBCPS 2,447 373 2,074 911 99.50 IndirectR2TECH 5,813 1,944 3,868 2,691 51.00 IndirectBIVA 1,882 5,349 (3,468) (4,394) 77.35 IndirectFIDC 745,236 212,760 532,476 331,179 100.00 IndirectTILIX 4,410 3,975 435 — 100.00 Indirect

Operationsofthesubsidiaries

• PagSeguroBrazil:isengagedinprovidingfinancialtechnologysolutionsandservicesandthecorrespondingrelatedactivities.PagSeguroBrazilhasinvestmentsinthefollowingcompanies:

• Net+Phone:IsmainlyengagedinacquisitionandsellingPOSdevicesandsimilaritems.OnJuly29,2016,UOLtransferreditsinvestmentinNet+PhonetoPagSeguroBrazil,asacapitalcontribution,intheamountofR$44,317.

• BoaCompra:Allowsitsclientstooperateincross-bordertransactionswherethemerchantandconsumerarelocatedindifferentcountriesacrossLatinAmerica,Spain,PortugalandTurkey.OnApril5,2011,UBNInternetLtda.(“UBN”),asubsidiaryofUOL,acquireda51%equityinterestinBoaCompra.OnJuly26,2013,UBNacquiredanadditional24%equityinterest,increasingitstotalownershipinBoaComprato75%.InMay2016,UBNacquiredtheremaining25%equityinterest,becomingtheownerof100%ofBoaCompra.OnJuly29,2016,UBN’sequityinterestinBoaComprawasspunofftoitsparentcompanyUOL.Subsequently,UOLtransferredits99.9%equityinterestinBoaCompratoPagSeguroBrazilasacapitalcontribution,inthetotalamountofR$12,034.

• BCPS:OnJanuary1,2017,PagSeguroBrazilacquired99.5%ofthesharecapitalandobtainedthecontrolofBCPS.BCPS’smainactivityistoserveasBoaCompra’shubinPortugalandhandlespartofitsaccountmanagement.

• R2TECH:OnMay2,2017,PagSeguroBrazilacquired51.0%ofthesharecapitalandobtainedthecontrolofR2TECH.R2TECH’smainactivityisin

theinformationtechnologyindustry,focusedontheprocessingofback-officesolutions,includingsalesreconciliation,gatewaysolutionsandservicesandthecaptureofcreditcardswithacquirersandsubacquirers.

• BIVA:OnOctober3,2017,PagSeguroBrazilacquiredacontrollinginterestof51.4%inBIVACOHoldingsS.A.,whosemainobjectiveistoacquireparticipationsinothercompanies,commercialorcivil,aspartner,shareholderorquotaholder,aswellasthemanagementoftheseholdings.

InNovember2017,PagSeguroBrazilacquiredanadditionalinterestinBIVA,bringingourtotalinterestto59.3%ofBIVA’stotalsharecapital.

InJanuary15,March12andApril27,2018,PagSeguroBrazilacquiredadditionalinterestsinBIVA(15.1%,0.5%and2.4%,respectively),bringingitstotalinterestto77.35%ofBIVA’stotalsharecapital(59.3%asofDecember31,2017).

BIVAhasinvestmentsinthefollowingsubsidiaries:

• BivaServiçosFinanceirosS.A:whosemainobjectiveistheintermediationamonginvestors,financialinstitutionsandcreditborrowersviaanelectronicplatform;

• BivaCorrespondenteBancárioLtda:whosemainobjectiveistostructurepeer-to-peerfinancingforsmallandmediumenterprisesfollowingthecrowdfundingmodel.

• BivaSecuritizadoradeCréditosS.A.:whosemainobjectiveistoacquireandsecuritizefinancialcredits.

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• FIDC:OnOctober4,2017,FIDCisaninvestmentfundwichwasformedtofinancethegrowthofPagSeguroBrazil’searlypaymentofreceivablesfeaturebyacquiringpayablestothirdpartiesheldbyPagSeguroBrazil(“Assignor”).PagSeguroBrazilconsolidatesthefinancialstatementsofFIDC.TheconsolidationisjustifiedbythefactthattherisksofdefaultandtheresponsibilityforexpensesandadministrationrelatedtotheFIDCarelinkedtosubordinatedquotasheldbythePagSeguroBrazil.

InMarch29,2018,twoinvestorscontributedcapitalintheamountofR$20millioninFIDC,acquiringonlyseniorandmezzaninequotasoftheFIDC.Theseniorandmezzaninequotespay107%oftheInterbankDepositCertificate(CDI)withannualamortizationofinterest.

AtDecember31,2018,thesharecapitalofFIDCiscomposedofsubordinatedquotas,seniorquotasandmezzaninequotas.PagSeguroBrasilowns100%ofthesubordinatedquotas.

• TILIX:OnDecember5,2018,PagSeguroBrazilacquired100%ofthesharecapitalandobtainedthecontrolofTILIX.ThecompanyprovidessoftwaredevelopmentformanagingpaymentsolutionsforB2CandB2B.

5. Segment reporting

OperatingsegmentsarereportedconsistentlytotheBoardofDirectors,whichisresponsibleforallocatingresourcesandassessingtheperformanceoftheoperatingsegmentsandtotakePagSeguroGroup’sstrategicdecisions.

Consideringthatalldecisionsarebasedonconsolidatedreports,andthatalldecisionsrelatedtostrategicandfinancialplanning,purchases,investmentsandtheallocationoffundsaremadeonaconsolidatedbasis,thePagSeguroGroupoperateinasinglesegment,aspaymentarrangementagents.

PagSeguroGrouphasrevenuearisingfromBraziliandomesticcustomersandcustomerslocatedabroad.ThemainrevenueisrelatedtosalesfromtheBraziliandomesticmarket.Theinternationalmarketrepresents1%,2%and5%fortheyears2018,2017and2016,respectively.

6. Cash and cash equivalents

December 31, 2018 December 31, 2017Short-termbankdeposits 405,227 66,767Short-terminvestments 2,357,823 —

2,763,050 66,767

Cashandcashequivalentsareheldforthepurposeofmeetingshort-termcashneedsandincludecashonhand,depositswithbanksandothershort-termhighlyliquidinvestmentswithoriginalmaturitiesofthree-monthorless,andwithimmaterialriskofchangeinvalue.ThebalanceasatDecember31,2018isrelatatedtoanexcessofcashandcashequivalentsproceedsoriginatedfromtheIPOandthefollow-onofferingmentionedinNotes1.1and1.2,respectively.

7. Financial investments

December 31, 2018 December 31, 2017Short-terminvestments — 210,103

— 210,103

Short-terminvestmentsconsistedoftworepurchaseagreements,withanaveragereturnof96.0%oftheInterbankDepositCertificate(CDI).Thisfinancialassetwasclassifiedasfairvaluethroughprofitandloss.

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Notes to the consolidated financialstatements at December 31, 2018(All amounts in thousands of reais unless otherwise stated)8. Note receivables December 31, 2018 December 31, 2017 Legal obligors Visa Master Hipercard Total Visa Master Hipercard Total Itaú 570,463 1,979,994 514,627 3,065,084 237,335 751,542 250,817 1,239,694Bradesco 735,784 170,497 — 906,281 333,108 83,160 — 416,268BancodoBrasil 566,537 153,633 — 720,170 287,334 84,504 — 371,838CEF 133,882 173,208 — 307,090 69,974 83,684 — 153,658Santander 247,950 871,976 — 1,119,926 122,614 310,946 — 433,560Other(*) 386,808 1,069,323 — 1,456,131 141,802 393,999 — 535,801Totalcardissuers(i) 2,641,424 4,418,631 514,627 7,574,682 1,192,167 1,707,835 250,817 3,150,819

Cielo—Elo — — — 366,619 — — — 151,851Cielo — — — 91,402 — — — 80,464Redecard — — — 5,502 — — — 45,289Amex — — — 1,188 — — — 39,608Vero — — — 4,396 — — — 21,463Other — — — 34,367 — — — 31,864Totalacquirers(ii) — — — 503,474 — — — 370,539

Other — — — 26,523 — — — 991Totalother — — — 26,523 — — — 991

Total note receivables 2,641,424 4,418,631 514,627 8,104,679 1,192,167 1,707,835 250,817 3,522,349

(*) Referstootherpulverizedreceivablesfromlegalobligors.(i) Cardissuers:receivablesderivedfromtransactionswherePagSeguroBrazilactsasthefinancialintermediaryinoperationswiththeissuingbanks,relatedtotheintermediationagreementsbetween

PagSeguroBrazilandVisa,MastercardorHipercard.However,PagSeguroBrazil’scontractualnotereceivablesarewiththefinancialinstitutions,whicharethelegalobligorsofthenotereceivables.Additionally,amountsduewithin27daysoftheoriginaltransactiondate,includingthosethatfallduewiththefirstinstallmentofinstallmentreceivables,areguaranteedbyVisa,MastercardorHipercard,asapplicable,intheeventthatthelegalobligorsdonotmakepayment.PagSeguroBrazilstartedoperatingdirectlyasafinancialintermediaryin2016.

(ii) Acquirers:referstocardprocessingtransactionstobereceivedfromtheacquirers,whicharethirdpartiesactingasfinancialintermediariesbetweentheissuingbankandPagSeguroBrazil.Thisbalancealsoincludesthereceivablesfromsalesofdebitandcreditcardreaders.

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Thematurityanalysisofnotereceivablesisasfollows:

December 31, 2018 December 31, 2017Duewithin30days 4,323,893 2,213,929Duewithin31to120days 3,135,358 1,045,825Duewithin121to180days 468,913 114,953Duewithin181to360days 176,515 147,642

8,104,679 3,522,349

9. Related-party balances and transactions

PagSeguroGroupiscontrolledbyUOL(incorporatedinBrazil).

i. Balancesandtransactionswithrelatedparties:

December 31,2018 December 31, 2017 Payables Receivables PayablesImmediateparent

UOL—cashmanagement(a) — 124,721 —UOL—salesofservices(b) 9,822 — 32,286UOL—sharedservicecosts 10,234 — —

Affiliatedcompanies UOLDiveo—cashmanagement(a) — 2 —UOLDiveo—salesofservices(b) 3,290 — 621UOLDiveo—sharedservicecosts 126 — —ConcursoVirtualS.A. — — 1,522TransfolhaTransportadoraeDistribuiçãoLtda. 4,336 — 745LivrariadaFolhaLtda. 32 — 1,078EmpresaFolhadaManhãS/A 2,073 — 2,320Others 884 — 529

30,797 124,723 39,101

(a) Thereceivablestransactionswithrelatedpartiesarisingfromcashmanagement.TheremainingbalancewasfullypaidinApril2018. (b) Salesofservicesrefersmainlytothepurchaseof(i)advertisingservicesfromUOLand(ii)servicesrelatedtotechnicalsupportinhostingfromUOLDiveoTecnologiaLtda.(“UOLDiveo”).

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Notes to the consolidated financialstatements at December 31, 2018(All amounts in thousands of reais unless otherwise stated) December 31, 2018 December 31, 2017 December 31, 2016 Revenue Expense Revenue Expense Revenue Expense Immediateparent

UOL—sharedservicecosts(a) — 105,433 — 58,375 — 31,498UOL—salesofservices(b) 2,233 52,115 689 46,976 — 81,007

Affiliatedcompanies UOLDiveo—sharedservicecosts(c) — 534 — 24 — 1,710UOLDiveo—salesofservices(d) — 26,943 — 28,953 — 18,069TransfolhaTransportadoraeDistribuiçãoLtda. 374 18,889 39 15,405 — 5,500LivrariadaFolhaLtda. 160 — 319 — 349 —Others 401 54 433 130 395 101

3,168 203,967 1,480 149,863 744 137,885

(a) Sharedservicescostsmainlyrelatedto(i)payroll,(ii)ITstructure/softwareand(iii)propertyrentalwhichareincurredbytheparentcompanyUOLandarechargedtoPagSeguroBrazilpursuantto

costsharingcontractualagreements.Suchcostsareincludedinadministrativeexpenses.TheincreaseinthebalancereferstopayrolltaxesrelatedtoLTIPpaymentsmadeintheyearendedDecember31,2018whichamountedtoR$61,713,andwhicharepaidbytheparentcompanyUOLandreimbursedbythePagSeguroGroup.

(b) SalesofadvertisingservicesareincurredbytheparentcompanyUOLandarechargedtoPagSeguroBrazilpursuanttocontractualagreements.(c) SharedservicescostsareincurredbytheaffiliatedcompanyUOLDiveoandarechargedtoPagSeguroBrazilpursuanttocontractualagreements.ThemaincostsarerelatedtoITstructure/software.(d) SalesofservicesfromtheaffiliatedcompanyUOLDiveorelatedtotechnicalsupportinhostingservices(startedin2016)andarechargedtoPagSeguroBrazilpursuanttocontractualagreements.

i. Keymanagementcompensation

KeymanagementcompensationincludesshortandlongtermbenefitsofPagSeguroBrazil’sexecutiveofficers.Theshortandlongtermcompensationrelatedtotheexecutiveofficersin2018amountedtoR$99,331(R$3,487andR$2,658in2017and2016,respectively,includesonlyshort-termbenefits).

10. Business combinations

Acquisitions for the year ended December 31, 2017

Amount ofpurchased

books Evaluationadjustment

Fair value ofassets and liabilities acquired

Theassetsandliabilitiesarisingfromtheacquisitions Cashandcashequivalents 51 — 51Liquidworkingcapital, Assetsacquired 2,598 — 2,598Liabilitiesassumed (1,312) — (1,312)Property,plantandequipmentandintangibleassets 643 2,498 3,141

Valueofnetassets 1,980 2,498 4,478

Goodwill 26,184 (2,498) 23,686

Bargainpurchasegain (87) — (87)

Purchasecost 28,077 — 28,077

Considerationforthepurchasesettledincash 22,276

Cashandcashequivalentsatthesubsidiaryacquired (51)

Amountpaidonacquisitionslesscashandcashequivalentsacquired 22,225

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Acquisition for the year ended December 31, 2018

Amount ofpurchased

books

Evaluationadjustment

(*)

Fair value ofassets and liabilities acquired

Theassetsandliabilitiesarisingfromtheacquisition Cashandcashequivalents 1,996 — 1,996Liquidworkingcapital, Assetsacquired 130 — 130Liabilitiesassumed (3,975) — (3,975)Property,plantandequipmentandintangibleassets 2,284 — 2,284

Valueofnetassets 435 — 435

Goodwill 19,175 — 19,175

Purchasecost 19,610 — 19,610

Considerationforthepurchasesettledincash 3,810

Cashandcashequivalentsatthesubsidiaryacquired (1,996)

Amountpaidonacquisitionslesscashandcashequivalentsacquired 1,813

(*) ThepurchasepriceallocationmaybesubjecttochangesinthemeasurementperiodasdefinedinIFRS.

TheacquisitionsdescribedbelowareinaccordancewithPagSeguroGroup’sbusinessstrategies,aswellastheproductsofferedbythemandtheirclientportfolio.

a)BCPS

OnJanuary1,2017,PagSeguroBrazilacquired99.5%ofthesharecapitalandobtainedcontrolofBCPS.

TheamountpaidintheacquisitionwasR$407,whichwassettledincashonthatdate.Thefairvalueoftheacquiredassets,amountingR$568,andtheassumedliabilitiesamountingtoR$75attheacquisitiondatearesubstantiallysimilartotheirbookvalue.AbargainpurchasegainofR$87arosefromtheacquisitionofBCPS.TheimpactsoftheacquisitionwerenotconsideredmaterialtoPagSeguroBrazil.

b)R2TECH

OnMay2,2017,PagSeguroBrazilacquired51.0%ofthesharecapitalandobtainedcontrolofR2TECH.TheconsiderationforthepurchasewasR$9,200,ofwhichR$3,500isavariableinstallment,subjecttotheattainmentofspecifictargetsfortheyear2018,establishedintheacquisitionagreement,aftertheconclusionoftheCompany’sauditedfinancialstatements.Basedoncurrentmanagementexpectations,thisperformancegoalwillbeachieved.

c)BIVA

InOctober,2017,PagSeguroBrazilacquiredcontrolofBIVAwiththeacquisitionofa51.4%interest.

ThetotalconsiderationpaidfortheinitialpurchasewasR$18,470,whichwassettledincashontheacquisitiondate.Thefairvalueoftheassetsacquired,intheamountofR$2,350andtheliabilitiesassumed,intheamountofR$997,ontheacquisitiondate,aresubstantiallysimilartotheirbookvalue.

ThegoodwillofR$17,117arisingfromtheacquisitionisattributabletothefutureprofitabilityofthebusinessinsynergywiththeproductsofferedbythePagSeguroGroup.

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OnNovember30,2017,PagSeguroBrazilacquiredanadditionalinterestof7.9%oftheissuedsharesforapurchaseconsiderationofR$2,394,increasingPagSeguroBrazil’sinterestto59.3%.OnJanuary15,March12andApril27,2018,PagSeguroBrazilacquiredadditionalinterestsofBIVA(15.12%,0.5%and2.42%,respectively),bringingitstotalinterestto77.3%ofBIVA’stotalsharecapital(59.3%asofDecember31,2017).ThetotalamountpaidfortheseacquisitionswasR$5,389.

d)TILIX

OnDecember5,2018,PagSeguroBrazilacquired100.0%ofthesharecapitalandobtainedthecontrolofTILIX.ThetotalconsiderationforthepurchasewasR$19,610,ofwhichR$3,810wassettledincashandR$15,800invariableinstallments,subjecttotheattainmentofspecifictargetsin2020(R$4,100)and2021(R$11,700),establishedintheacquisitionagreementThefairvalueoftheassetsacquiredandtheliabilitiesassumedontheacquisitiondate,aresubstantiallysimilartotheirbookvalue.Basedoncurrentmanagementexpectations,thisperformancegoalwillbeachieved.

ThepurchasepriceallocationmaybesubjecttochangesinthemeasurementperiodasdefinedinIFRS.ThegoodwillofR$19,175arisingfromtheacquisitionisattributabletothefutureprofitabilityofthebusinessinsynergywiththeproductsofferedbythePagSeguroGroup.

11. Property and equipment

(a) Propertyandequipmentiscomposedasfollows:

December 31, 2018

Cost Accumulateddepreciation Net

Dataprocessingequipment 23,334 (7,815) 15,519Facilities 38 (27) 11Machineryandequipment 44,757 (3,096) 41,661Furnitureandfittings 2,153 (148) 2,005Buildingimprovements 6,954 (195) 6,759Vehicles 1,371 (222) 1,149

78,607 (11,503) 67,104

December 31, 2017

Cost Accumulateddepreciation Net

Dataprocessingequipment 11,024 (5,114) 5,910Facilities 53 (23) 30Machineryandequipment 4,738 (444) 4,294Furnitureandfittings 397 (66) 331Buildingimprovements 263 (29) 234Vehicles 132 (42) 90

16,607 (5,718) 10,889

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Notes to the consolidated financialstatements at December 31, 2018(All amounts in thousands of reais unless otherwise stated)(b) Thechangesincostandaccumulateddepreciationwereasfollows:

Data processingequipment Facilities

Machineryand

equipment

Furnitureand

fittings Building

improvements Vehicles Total AtDecember31,2017 Cost 11,024 53 4,738 397 263 132 16,607Accumulateddepreciation (5,114) (23) (444) (66) (29) (42) (5,718)

Netbookvalue 5,910 30 4,294 331 234 90 10,889

AtDecember31,2018 Cost

Purchases 12,310 — 40,019 1,667 6,341 1,238 61,575Disposals — (15) — — — — (15)Acquisitionofsubsidiary — — — 89 351 — 440Depreciation (2,701) (4) (2,652) (82) (166) (180) (5,785)

Netbookvalue 15,519 11 41,661 2,005 6,759 1,149 67,104

AtDecember31,2018 Cost 23,334 38 44,757 2,153 6,954 1,371 78,607Accumulateddepreciation (7,815) (27) (3,096) (148) (195) (222) (11,503)

Netbookvalue 15,519 11 41,661 2,005 6,759 1,149 67,104

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Notes to the consolidated financialstatements at December 31, 2018(All amounts in thousands of reais unless otherwise stated)12. Intangible assets

(a) Intangibleassetsarecomposedasfollows:

December 31, 2018

Cost Accumulatedamortization Net

Expendituresrelatedtosoftwareandtechnology(i) 462,282 (211,929) 250,353Softwarelicenses 17,227 (4,073) 13,154Customerrelationships 1,981 (448) 1,533Goodwill(ii) 40,574 — 40,574

522,064 (216,450) 305,614

December 31, 2017

Cost Accumulatedamortization Net

Expendituresrelatedtosoftwareandtechnology(i) 241,490 (115,665) 125,825Softwarelicenses 9,510 (2,043) 7,467Customerrelationships 1,981 (91) 1,890Goodwill(ii) 23,686 — 23,686

276,667 (117,799) 158,868

(i) PagSeguroGroupcapitalizestheexpensesincurredwiththedevelopmentofplatforms,whichareamortizedovertheirusefullives,withinarangefromthreetofiveyears. (ii) GoodwillprovidedontheacquisitionofthecompaniesR2TECH,BIVAandTILIX.

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Notes to the consolidated financialstatements at December 31, 2018(All amounts in thousands of reais unless otherwise stated)(b) Thechangesincostandaccumulatedamortizationwereasfollows:

Expenditureswith

software andtechnology

Softwarelicenses

Customer relationships Goodwill Total

AtDecember31,2017 Cost 241,490 9,510 1,981 23,686 276,667Accumulatedamortization (115,665) (2,043) (91) — (117,799)

Netbookvalue 125,825 7,467 1,890 23,686 158,868

AtDecember31,2018 Cost

Additions 218,947 7,717 — — 226,665Acquisitionofsubsidiary 1,845 — — 16,888 18,733Amortization (96,264) (2,030) (357) — (98,651)

Netbookvalue 250,353 13,154 1,533 40,574 305,614

AtDecember31,2018 Cost 462,282 17,227 1,981 40,574 522,065Accumulatedamortization (211,929) (4,073) (448) — (216,450)

Netbookvalue 250,353 13,154 1,533 40,574 305,614

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Notes to the consolidated financialstatements at December 31, 2018(All amounts in thousands of reais unless otherwise stated)13. Payables to third parties

December 31,

2018 December 31,

2017 Payablestothirdparties 4,324,198 3,080,569

4,324,198 3,080,569

Payablestothirdpartiescorrespondtoamountstobepaidtocommercialestablishmentswithrespecttotransactionscarriedoutbytheircardholders,netoftheintermediationfeesanddiscountsapplied.PagSeguroBrazil’saveragesettlementtermsagreeduponwithcommercialestablishmentsisupto30days.

14. Salaries and social charges

December 31,

2018 December 31,

2017 Profitsharing 20,653 15,237Salariespayable 4,378 2,758Socialcharges 8,421 5,102Payrollaccruals 14,601 9,807Payrolltaxes(LTIP) 23,816 —Other 2,067 1,365

73,936 34,269

15. Taxes and contributions

December 31,

2018 December 31,

2017 Taxes

Servicestax(i) 122,241 14,837Value-addedtaxonsalesandservices(ii) 23,796 3,830Socialintegrationprogram(iii) 17,530 9,918Socialcontributiononrevenues(iii) 107,872 59,358Incometaxandsocialcontribution(iv) 685 35,474Other 1,919 1,264

274,043 124,681

Judicial deposits (v) Servicestax(i) (52,226) (11,375)Value-addedtaxonsalesandservices(ii) (19,476) (2,665)Socialintegrationprogram(iii) (17,088) (8,188)Socialcontributiononrevenues(iii) (105,160) (50,389)

(193,950) (72,617)

80,093 52,064

(i) Referstotaxesonrevenuefromtransactionactivities. (ii) ReferstotheValue-addedTaxonSalesandServices(ICMS)amountsduebyNet+Phone,relatedtotaxsubstitutionandtaxratedifferential,appliedonsalesofcreditanddebitcardreaders. (iii) RefersmainlytoSocialIntegrationProgram(PIS)andSocialContributiononRevenues(COFINS)chargedonfinancialincome. (iv) Referstotheincometaxandsocialcontributionpayableoncurrentincometaxesandcontribution. (v) PagSeguroGroupobtainedcourtdecisionstodeposittheamountrelatedtothepaymentsinescrowformattersdiscussedinitems“i”,“ii”and“iii”above.

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Notes to the consolidated financialstatements at December 31, 2018(All amounts in thousands of reais unless otherwise stated)16. Provision for contingencies

SomecompaniesofPagSeguroGrouparepartytolaborandcivillitigationinprogressandarediscussingsuchmattersattheadministrativeandjudiciallevels,which,whenapplicable,aresupportedbyjudicialdeposits.Theprovisionsforprobablelossesarisingfromthesemattersareestimatedandperiodicallyadjustedbymanagement,supportedbytheopinionofitsexternallegaladvisors.

December 31,2018

December 31,2017

Civil 6,680 4,326Labor 324 322

Current 7,004 4,648

SomecompaniesofPagSeguroGrouparepartytotaxlawsuitsinvolvingrisksclassifiedbylegaladvisorsaspossiblelosses,forwhich\noprovisionwasrecognizedatDecember31,2018,totalingapproximatelyR$50,978(December31,2017-R$25,800).PagSeguroGroupcompaniesarenotpartytocivilandlaborlawsuitsinvolvingrisksclassifiedbymanagementaspossiblelosses.

17. Income tax and social contribution

(a) Reconciliationofthedeferredincometaxandsocialcontribution:

Tax losses

Tax credit

Technologicalinovation (i)

Other temporarydifferences-ASSETS

Other temporary differences -LIABILITY Total

Deferred tax AtDecember31,2016 1,051 3,606 (24,378) 3,648 — (16,074)Includedinthestatementofincome 436 (721) (16,814) 28,995 (1,616) 10,280

AtDecember31,2017 1,487 2,885 (41,192) 32,642 (1,616) (5,794)

Includedinthestatementofincome 1,424 (712) (41,987) 32,073 (117,129) (126,331)

AtDecember31,2018 2,911 2,173 (83,179) 64,715 (118,745) (132,125)

(i) ThemaintemporarydifferencesrepresentingthebalanceofthedeferredtaxliabilityreferstothebenefitgrantedbytheTechnologicalInnovationLaw(Lei do Bem) .

Taxlosscarry-forwardsarerecognizedasdeferredtaxassetstotheextentthattherealizationoftherelatedtaxbenefitthroughfuturetaxableprofitsisprobable.Taxlossesdonothaveanexpirationdate.

Theestimatedrealizationofdeferredtaxassetsinnon-currentassetsandliabilitiesisasfollows:

December 31, 2018 December 31,2017 Liability Assets Liability 2018 (8,508) 8,895 (20,728)2019 (13,659) 4,040 (18,008)2020 (15,420) 2,111 (2,454)2021 10,556 982 (1,434)2022 (105,094) 20,987 (185)

(132,125) 37,015 (42,809)

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Notes to the consolidated financialstatements at December 31, 2018(All amounts in thousands of reais unless otherwise stated)(b) Reconciliationoftheincometaxandsocialcontributionexpense:

PagSeguroGroupcomputedincometaxandsocialcontributionunderthetaxableincomemethod.ThefollowingisareconciliationofthedifferencebetweentheactualincometaxandsocialcontributionexpenseandtheexpensecomputedbyapplyingtheBrazilianfederalstatutoryratefortheyearsendedDecember31,2018,2017and2016:

December 31,2018

December 31,2017

December 31,2016

Profitfortheyearbeforetaxes 1,217,623 683,504 155,359Statutoryrate 34% 34% 34%

Expectedincometaxandsocialcontribution (413,992) (232,391) (52,822)Income tax and social contribution effect on: Permanentadditions(exclusions)

Gifts (352) (375) —R&Dandtechnologicalinnovationbenefit—Law11.196/05(i) 58,893 24,987 15,898Interestonowncapital — — 8,860

Taxationofincomeabroad(ii) 45,008 — —Otheradditions 3,309 3,069 485

Incometaxandsocialcontributionexpense (307,134) (204,711) (27,580)

Effectiverate 25% 30% 18%Incometaxandsocialcontribution—current (180,884) (214,988) (7,431)Incometaxandsocialcontribution—deferred (126,331) 10,278 (20,149)

(i) ReferstothebenefitgrantedbytheTechnologicalInnovationLaw(Lei do Bem ),whichreducestheincometaxcharges,basedontheamountinvestedbyPagSeguroGrouponspecific

intangibleassets,seeNote11. (ii) ReferstothebenefitbasedonthelocallawoftheCaymanIslands(specifically,theCompaniesLawof1960).Thereisnotaxationontheincomeearnedinthecompaniesbasedinthis

jurisdiction.Asaresultofthelocaltaxregulations,alltheexchangevariantionsfromU.S.dollarstoreaiswhichgenerateincomehavenotaximpactsforPagSeguroDigital.

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Notes to the consolidated financialstatements at December 31, 2018(All amounts in thousands of reais unless otherwise stated)18. Equity

a)Sharecapital

AtDecember31,2018,sharecapitalisrepresentedby327,285,232commonshares,parvalueofUS$0.000025.SharecapitaliscomposedofthefollowingsharesfortheyearsendedDecember31,2018and2017:

December31,2017sharesoutstanding 262,288,607

PrimarysharesofferedintheIPO 50,925,642Primarysharesofferedinthefollow-onoffering 11,550,000Long-TermIncentivePlan 3,024,625Repurchaseofcommonshares(Note18(f)) (503,642)

December31,2018sharesoutstanding 327,285,232

DuringtheyearendedDecember31,2018,sharesofPagSeguroDigitalwereissuedasaresultoftheIPO,follow-onofferingandlong-termincentiveplan,seedetailsinNotes1.1,1.2,1.3and18(c).

Incrementalcostsdirectlyattributabletotheissuanceofnewsharesoroptionsareshowninequityasadeduction,netoftax,fromtheIPOandfollow-onofferinggrossproceeds.

b)Capitalreserve

Thecapitalreservecanonlybeusedtoincreasecapital,offsetlosses,redeem,reimburseorpurchasesharesorpaycumulativedividendsonpreferredshares.

OnJanuary26,2018,50,925,642newshareswereissuedatapriceofUS$21.50persharerepresentingnetproceedsofUS$1,046.0million(orR$3,289.8million).RefertoNote1.1forfurtherdetails.

OnJune26,2018,11,550,000newshareswereissuedatapriceofUS$29.25persharerepresentingnetproceedsofUS$326.8million(orR$1,232.6million).RefertoNote1.2forfurtherdetails.

c)Sharebasedlongtermincentiveplan(LTIP)

MembersofmanagementparticipateintheLTIP,whichwasestablishedbyUOLforitsgroupcompaniesonJuly29,2015andhasbeenadoptedbyPagSeguroDigital.BeneficiariesundertheLTIPareselectedbyUOL’sLTIPCommittee,whichconsistsoftheChairmanandtwoofficersofUOL,andaresubmittedtoourBoardofDirectorsforadoption.

OnJanuary26,2018,beneficiariesundertheLTIPweregrantedrightsintheformofnotionalcashamountswithoutcashconsideration.TheserightsvestinfiveequalannualinstallmentsstartingontheearlierofJuly29,2015andthebeneficiary’semploymentstartdate.UnderthetermsoftheLTIP,uponcompletionoftheIPO,thevestedportionofeachbeneficiary’sLTIPrightswasconvertedintoClassAcommonsharesofPagSeguroDigitalattheIPOprice(US$21.50)whichistheassessedfairvalueatthegrantdate.Asaresult,thebeneficiariesofthetheLTIPreceivedatotalof1,823,727newClassAcommonsharesuponcompletionoftheIPO.

Theunvestedportionsofeachbeneficiary’sLTIPrightswillbesettledoneachfutureannualvestingdate.

ThesharesgrantedundertheLTIPweresubjecttoaone-yearlock-upperiod,expiringonthefirstanniversaryoftheIPO.AnysharesthatareissuedonasubsequentvestingdateduringthefirstyearaftertheIPOwillbesubjecttotheremainderofthatsamelock-upperiod.Afterthecloseofthatone-yearperiod,sharestobegrantedundertheLTIParenolongerbesubjecttoalock-up.

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Thisarrangementisclassifiedasequity-settled.FortheyearendedDecember31,2018,theCompanyrecognizedcompensationexpensesrelatedtotheLTIPinthetotalamountofR$299,036.

ThemaximumnumberofcommonsharesthatcanbedeliveredtobeneficiariesundertheLTIPmaynotexceed3%ofourissuedsharecapitalatanytime.AtDecember31,2018,totalsharesgrantedwere5,896,861,andthetotalsharesissuedwere3,024,625.TherewerenoforfeituresorexpirationsintheyearendedDecember31,2018.

d)Dividends

AttheExtraordinaryGeneralShareholdersMeetingheldonSeptember29,2017,PagSeguroBrazil’sshareholdersapprovedthedistributionof(i)R$142,797ofdividendsrelatedtothesix-monthperiodendedJune30,2017and(ii)R$96,008inadditionaldividendsrelatedtotheyearendedDecember31,2016.ThetotaldividendsdistributedamountedtoR$238,803,ofwhichR$184,530wasoffsetagainstreceivablesunderthecentralizedcashmanagementwithUOLandthebalanceofR$54,272waspaidincashbyPagSeguroBraziltoUOL.

e)Equityvaluationadjustments

TheCompanyrecognizesinthisaccounttheaccumulatedeffectoftheforeignexchangevariationresultingfromtheconversionofthefinancialstatementsoftheforeignsubsidiaryBCPS,representedbytheaccumulatedamountofR$263asofDecember31,2018(R$55asofDecember31,2017).Thisaccumulatedeffectwillberevertedtotheresultoftheyearasgainorlossonlyincaseofdisposalorwrite-offoftheinvestment.

TheCompanyalsorecognizedthedifferencebetweenthebookvalueandtheamountspaidintheacquisitionsofadditionalinterestsofthenon-controllingshareholdersofthesubsidiaryBIVA,intheamountofR$7,588,inthisaccount.

f)Treasuryshares

OnOctober30,2018,PagSeguroDigital’sboardofdirectorsauthorizedasharerepurchaseprogram,underwhichtheCompanymayrepurchaseuptoUS$250millioninoutstandingClassAcommonsharestradedontheNewYorkStockExchange(NYSE).TheCompany’smanagementisresponsiblefordefiningthetimingandthenumberofsharestobeacquired,withinauthorizedlimits.

DuringtheyearendedDecember31,2018anumberof503,642shareswererepurchasedforatotalofUS$10,119,425(averageofUS$20.09pershare)whichcorrespondstoR$39,532.

19. Earnings per share

a)Basic

BasicearningspersharearecalculatedbydividingtheprofitattributabletoshareholdersofPagSeguroDigitalbytheweightedaveragenumberofcommonsharesissuedandoutstandingduringtheyearsendedDecember31,2018,2017and2016:

December 31, 2018

December 31, 2017

December 31, 2016

ProfitattributabletoshareholdersoftheCompany 909,267 478,781 127,186Weightedaveragenumberofoutstandingcommonshares 317,647,562 262,288,607 262,288,607

Basicearningspershare—R$ 2.8625 1.8254 0.4849

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b)Diluted

Dilutedearningspershareiscalculatedbyadjustingtheweightedaveragenumberofcommonsharesoutstandingtoassumetheconversionofallpotentialcommonshareswithdilutiveeffects.ThesharebasedLTIPistheCompany’sonlycategoryofpotentialcommonshareswithdilutiveeffects.Inthiscase,acalculationisdonetodeterminethenumberofsharesthatcouldhavebeenacquiredatfairvalue.

December 31, 2018

December 31, 2017

December 31, 2016

Profitusedtodeterminedilutedearningspershare 909,267 478,781 127,186

Weightedaveragenumberofoutstandingcommonshares 317,647,562 262,288,607 262,288,607Weightedaveragenumberofsharesunderoptions 2,581,716 — —Weightedaveragenumberofsharesthatwouldhavebeenissuedataveragemarketprice (2,102,607) — —

Adjustednumberofshares 318,126,671 262,288,607 262,288,607

Dilutedearningspershare—R$ 2.8582 1.8254 0.4849

20. Total revenue and income

December 31,

2018 December 31,

2017 December 31,

2016 Grossrevenuefromtransactionactivitiesandotherservices 2,638,103 1,391,381 543,818

Grossrevenuefromsales 513,795 655,153 371,517Grossfinancialincome(i) 1,464,877 858,410 411,413Otherfinancialincome(ii) 278,445 8,576 5,337

Totalgrossrevenueandincome 4,895,220 2,913,520 1,332,085

Deductionsfromgrossrevenuefromtransactionsactivitiesandotherservices(iii) (371,000) (167,120) (63,793)Deductionsfromgrossrevenuefromsales(iv) (139,183) (183,229) (110,923)Deductionsfromgrossfinancialincome(v) (50,345) (39,786) (18,984)

Totaldeductionsfromgrossrevenueandincome (560,528) (390,135) (193,700)

Totalrevenueandincome 4,334,692 2,523,385 1,138,385

(i) Includes(a)interestincomefromearlypaymentofnotespayabletothirdpartiesand(b)interestonnotereceivablesdueininstallments.

(ii) TheincreaseintheperiodreferstoforeignexchangegainonthecurrencyconversionoftheIPOandfollow-onofferingproceedsfortheyearendedDecember31,2018intheamountofR$

131,212andfinancialincomeonfinancialinvestmentsclassifiedascashandcashequivalentsfortheyearendedonDecember31,2018intheamountofR$138,027(December31,2017-R$6,722)

(iii) Deductionsconsistofsalestaxes. (iv) Deductionsarecomposedofsalestaxesandreturns. (v) Deductionsconsistoftaxesonfinancialincome.

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Notes to the consolidated financialstatements at December 31, 2018(All amounts in thousands of reais unless otherwise stated)21. Expenses by nature

December 31,

2018 December 31,

2017 December 31,

2016 Transactionscosts (1,246,480) (661,067) (283,630)Costofgoodssold (567,807) (451,635) (233,419)Marketingandadvertising (375,519) (275,394) (204,857)Personnelexpenses(i) (546,826) (105,794) (63,280)Financialexpenses(ii) (31,209) (104,544) (68,301)Chargebacks(iii) (71,491) (47,854) (31,557)Depreciationandamortization(iv) (95,362) (51,571) (31,246)Other (182,375) (142,022) (66,737)

(3,117,069) (1,839,881) (983,027)

Classifiedas: Costofservices (1,510,770) (829,661) (357,811)Costofsales (633,929) (494,719) (265,856)Sellingexpenses (351,439) (245,759) (199,937)Administrativeexpenses (581,668) (153,177) (84,461)Financialexpenses (31,209) (104,544) (68,301)Other(expenses)income,net (8,054) (12,021) (6,660)

(3,117,069) (1,839,881) (983,027)

(i) TheincreasereferstocompensationexpensesrelatedtotheLTIPfortheyearendedDecember31,2018intheamountofR$264,179,andtherespectivepayrolltaxesintheamountofR$

154,843.

(ii) Ourfinancialexpensesinclude(a)FinancialOperationsTax(IOF)relatedtotheremittanceofcashfromtheCaymanIslandstoBrazilintheamountofR$17,975fortheyearended

December31,2018(December31,2017-R$0),(b)chargestoobtainearlypaymentofreceivablesowedtousbycardissuerstofinanceourearlypaymentofreceivablesfeatureintheamountofR$1,476fortheyearendedDecember31,2018(December31,2017-R$95,878).

(iii) Chargebacksrefertolossesrecognizedintheperiodreflectingtherisksoffraudassociatedwithcardprocessingoperations,asdetailedinNote23(ii). (iv) Thedepreciationandamortizationamountsincurredintheperiodaresegregatedbetweencostsandexpensesaspresentedbelow:

December 31,

2018 December 31,

2017 December 31,

2016 Depreciation Costofsalesandservices (4,012) (1,088) (895)Sellingexpenses (13) (10) (11)Administrativeexpenses (1,760) (714) (371)

(5,785) (1,812) (1,277)

Amortization Costofsalesandservices (97,856) (54,151) (32,846)Administrativeexpenses (795) (375) (59)

(98,651) (54,526) (32,905)

PISandCOFINScredits(*) 9,073 4,767 2,936

Depreciationandamortizationexpense,net (95,362) (51,571) (31,246)

(*) PagSeguroBrazilhasataxbenefitonPISandCOFINSthatallowsittoreducedepreciationandamortizationexpenseswhenincurred.Thistaxbenefitisrecognizeddirectlyasareductionof

depreciationandamortizationexpense.

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Notes to the consolidated financialstatements at December 31, 2018(All amounts in thousands of reais unless otherwise stated)22. Financial instruments by category

PagSeguroGroupestimatesthefairvalueofitsfinancialinstrumentsusingavailablemarketinformationandappropriatevaluationmethodologiesforeachsituation.

Theinterpretationofmarketdata,asregardsthechoiceofmethodologies,requiresconsiderablejudgmentandtheestablishmentofestimatestoreachanamountconsideredappropriateforeachsituation.Therefore,theestimatespresentedmaynotnecessarilyindicatetheamountsthatcouldbeobtainedinthecurrentmarket.Theuseofdifferenthypothesestocalculatemarketvalueorfairvaluemayhaveamaterialimpactontheamountsobtained.TheassetsandliabilitiespresentedinthisNotewereselectedbasedontheirrelevance.

PagSeguroGroupbelievesthatthefinancialinstrumentsrecognizedintheseconsolidatedfinancialstatementsattheircarryingamountaresubstantiallysimilartotheirfairvalue.However,sincetheydonothaveanactivemarket,variationscouldoccurintheeventPagSeguroGroupweretodecidetosettleorrealizetheminadvance.

PagSeguroGroupclassifiesitsfinancialinstrumentsintothefollowingcategories:

December 31,

2018 December 31,

2017 Financial assets Measuredatfairvaluethroughprofitorloss:

Financialinvestments — 210,103Loansandreceivables:

Cashandcashequivalents 2,763,050 66,767Notereceivables 8,104,679 3,522,349Receivablesfromrelatedparties — 124,723Otherreceivables 20,148 27,956

10,887,877 3,951,898

December 31,2018

December 31,2017

Financial liabilities Amortizedcost:

Payablestothirdparties 4,324,198 3,080,569Tradepayables 165,246 92,444Tradepayablestorelatedparties 30,797 39,101Otherpayables 29,501 19,462

4,549,742 3,231,576

23. Financial risk management

PagSeguroGroup’sactivitiesexposeittoavarietyoffinancialrisks:marketrisk(includingcurrencyriskandcashfloworfairvalueinterestraterisk),fraudrisk(chargebacks),creditriskandliquidityrisk.PagSeguroGroup’soverallriskmanagementprogramfocusesontheunpredictabilityoffinancialmarketsandseekstominimizepotentialadverseeffectsonPagSeguroGroup’sfinancialperformance.PagSeguroGroupusesderivativefinancialinstrumentstohedgecertainriskexposures,whenapplicable.

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AmongthemainmarketriskfactorsthatmayaffectPagSeguroGroup’sbusinessarethefollowing:

(i) Foreignexchangerisk

Foreignexchangeriskariseswhenfuturecommercialtransactionsorrecognizedassetsorliabilitiesaredenominatedinacurrencythatisnottheentity’sfunctionalcurrency.AsofDecember31,2018andDecember31,2017,PagSeguroGroupisnotmateriallyexposedtoforeignexchangerisk.

(ii) FraudRisk(chargeback)

PagSeguroGroup’ssalestransactionsaresusceptibletopotentiallyfraudulentorimpropersalesanditusesthefollowingtwoprocessestocontrolfraudrisk:

Thefirstprocessconsistsofmonitoring,onarealtimebasis,thetransactionscarriedoutwithcreditanddebitcardsandpaymentslips,throughananti-fraudecosystem.Thisprocessapprovesorrejectssuspicioustransactionsatthetimeoftheauthorization,basedonstatisticalmodelsthatarerevisedonaperiodicbasis.

Thesecondprocessdetectschargebacksanddisputesnotidentifiedbythefirstprocess.ThisisacomplementaryprocessandincreasesPagSeguroGroup’sabilitytoavoidnewinstancesoffraud.

(iii) Creditrisk

Creditriskismanagedonagroupbasisandislimitedtothepossibilityofdefaultby:(a)thecardissuers,whichhavetheobligationoftransferringtothecreditanddebitcardlabelsthefeeschargedforthetransactionscarriedoutbytheircardholders,and/or(b)theacquirers,whichareusedbyPagSeguroGrouptoapprovetransactionswiththeissuers.

Inordertomitigatethisrisk,PagSeguroBrazilhasestablishedaCreditandLiquidityRiskCommittee,whoseresponsibilityistoassessthelevelofriskofeachofthecardissuersservedbyPagSeguroGroup,classifyingthemintothreegroups:

(i) cardissuerswithalowlevelofrisk,withcreditratingsassignedbyFITCH,S&PandMoody’s,whichdonotrequireadditionalmonitoring;

(ii) cardissuerswithamediumlevelofrisk,whicharealsomonitoredinaccordancewiththeBaselandproperty,plantandequipmentratios;and

(iii) cardissuerswithahighlevelofrisk,whichareassessedbythecommitteeatmonthlymeetings.

Nocreditlimitswereexceededduringthereportingperiod,andmanagementdoesnotexpectanylossesfromnon-performancebythesecounterpartiesinadditiontotheamountsalreadyrecognizedaschargebacks,presentedunderfraudrisk.

(iv) Liquidityrisk

PagSeguroGroupmanagesliquidityriskbymaintainingreserves,bankandcreditlinesfortheobtainingborrowings,whendeemedappropriate.PagSeguroGroupcontinuouslymonitorsactualandprojectedcashflows,andmatchesthematurityprofileofitsfinancialassetsandliabilitiesinordertoensurethatPagSeguroGrouphassufficientfundstohonoritsobligationstothirdpartiesandmeetitsoperationalneeds.

PagSeguroGroupinvestssurpluscashininterestbearingsfinancialinvestments,choosinginstrumentswithappropriatematurityorsufficientliquiditytoprovideadequatemarginasdeterminedbytheforecasts.

AtDecember31,2018,PagSeguroGroupheldcashandcashequivalentsofR$2,763,050(R$66,767atDecember31,2017).

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ThetablebelowshowsPagSeguroGroup’snon-derivativefinancialliabilitiesdividedintotherelevantmaturitygroupbasedontheremainingperiodfromthebalancesheetdateandthecontractualmaturitydate.Theamountsdisclosedinthetablearethecontractualundiscountedcashflows.

Due within

30 days

Due within31 to 120

days

Due within121 to 180

days

Due within181 to 360

days

Due to 361days or

more days At December 31, 2018

Payablestothirdparties 3,968,125 233,694 66,967 55,412 —Tradepayables 141,958 18,744 1,358 3,186 —Tradepayablestorelatedparties — 28,869 — — —Otherpayables — — — 29,501 —

At December 31, 2017 Payablestothirdparties 2,890,080 133,070 31,081 26,338 —Tradepayables 81,152 6,032 1,740 1,083 2,437Tradepayablestorelatedparties — — — 39,101 —Otherpayables — — — 15,872 —

24. Capital management

PagSeguroGroupmonitorscapitalonthebasisofthegearingratiowhichcorrespondstonetdebtdividedbytotalcapital.Netdebtiscalculatedastotalborrowings(includingcurrentandnon-currentborrowingsasshownintheconsolidatedbalancesheet)lesscashandbanks.Totalcapitaliscalculatedasequityasshownintheconsolidatedbalancesheetplusnetdebt.

PagSeguroGrouphadnoloansatDecember31,2018,andDecember31,2017.Thereforenogearingratioispresented.

25. Fair value measurement

Fairvalueisthepricethatwouldbereceivedtosellanassetorpaidtotransferaliability(exitprice)intheprincipalormostadvantageousmarketfortheassetorliability,inanorderlytransactionbetweenmarketparticipantsatthemeasurementdate.Athree-levelhierarchyisusedtomeasurefairvalue,asshownbelow:

• Level1—Quotedprices(unadjusted)inactivemarketsforidenticalassetsandliabilities.

• Level2—InputsotherthanquotedpricesincludedwithinLevel1thatareobservablefortheassetorliability,eitherdirectly(thatis,asprices)orindirectly(thatis,derivedfromprices).

• Level3—Inputsfortheassetsandliabilitiesthatarenotbasedonobservablemarketdata(thatis,unobservableinputs).

AtDecember31,2017,PagSeguroGrouphadfinancialinvestmentswhosefairvalueadjustmentsisclassifiedasLevel1.PagSeguroGroupdidnothaveanyotherassetsmeasuredatfairvaluein2017.

TherewerenotransfersbetweenLevels1,2and3duringtheyearendedDecember31,2018.

26. Events after the reporting period

OnJanuary4,2019,PagseguroGroupacquired100%ofthesharecapitalandobtainedcontrolofBBNBancodeNegociosS.A.TotalconsiderationpaidamountedtoR$58,820andthetotalnetassetsacquiredamounttoR$44,162.ThisacquisitionisinaccordancewithPagSeguroGroup’sbusinessstrategies,rampingupinvestmentsonnewtechnologies,productsandservicesforourdigitalecosystem.

***

F-40

Exhibit 4.2

REDACTED COPYCertain identified confidential information has been redacted from this exhibit becauseit is both (i) not material and (ii) would be competitively harmful if publicly disclosed.

Confidential portions of this Exhibit are designated by [*****].

Agreement No. ADT:02767/17

7th AMENDMENT TO THE EQUIPMENT SUPPLY AGREEMENTEntered Into on June 26, 2014.

NET+PHONE TELECOMUNICAÇÕES LTDA., alimitedliabilitybusinesssociety,withheadquartersatAvenidaBrigadeiroFariaLima,no.1.384,7thfloor,PartA,inthecityofSãoPaulo,StateofSãoPaulo,enrolledattheCorporateTaxpayerRegistryoftheMinistryofFinance(CNPJ/MF)underno.06.066.832/0001-97,hereinrepresentedasprovidedforinitsBy-Laws,hereinafterreferredtoas“CLIENT”;

PAX BR COMÉRCIO E SERVIÇOS DE EQUIPAMENTOS DE INFORMÁTICA LTDA., alimitedliabilitybusinesssociety,withheadquartersatRuaSantaMônica,no.1.391,Lot03,BlockAH,IndustrialParkSanJose,intheCityofCotia,StateofSãoPaulo,ZipCode(CEP)06.715-865,enrolledatCNPJ/MFunderno.11.603.135/0001-68,hereinrepresentedasprovidedforinitsArticlesofIncorporation,hereinafterreferredtosimplyas“PAX”;and

TRANSIRE FABRICAÇÃO DE COMPONENTES ELETRÔNICOS LTDA., alimitedliabilitybusinesssociety,withitscurrentheadquartersinthecityofManaus,StateofAmazonas,atAvenidadosOitis,no.2.449,DistrictArmandoMendes,CEP69.089-035,enrolledatCNPJ/MFunderno.21.785.364/0001-02,hereinrepresentedasprovidedforinitsArticlesofIncorporation,hereinafterreferredtosimplyas“TRANSIRE”.

WHEREAS:

(i)ThePartiesenteredintotheEquipmentSupplyAgreement(“Agreement”)onJune26,2014,dulyamendedonOctober21,2014,July3,2015,October8,2015,May20,2016,May20,2016,December9,2016,February6,2017;and

(ii)ThePartieswishtoincludethecompanyPAGSEGURO INTERNET S.A. aspartoftheAgreement.

ThePartieshavemutuallyadjustedandagreedtoenterintothepresent7thAmendmenttotheEquipmentSupplyAgreement(“AmendmentTerm”),underthefollowingtermsandconditions:

1. AMENDMENT

1.1. ThePartiesresolve,bymutualagreement,toincludethecompanyPAGSEGURO INTERNET S.A. asacontractingpartyintheAgreement,withthepreambleoftheAgreementbeingfromnowoninforcewiththefollowingwording:

“NET+PHONE TELECOMUNICAÇÕES LTDA., a limited liability business society, with headquarters at Avenida Brigadeiro Faria Lima, no. 1.384, 7 th floor, PartA, in the city of São Paulo, State of São Paulo, enrolled at the Corporate Taxpayer Registry of the Ministry of Finance (CNPJ/MF) under no. 06.066.832/0001-97,herein represented as provided for in its By-Laws, hereinafter referred to as “CLIENT 1”;

PAGSEGURO INTERNET S.A., a corporation with headquarters at Avenida Brigadeiro Faria Lima, 1384, 4 th floor, Part A, in the City of São Paulo, State of SãoPaulo, enrolled at CNPJ/MF under no. 08.561.701/0001-01, herein represented as provided for in its By-Laws, hereinafter referred to simply as “CLIENT 2”, being,CLIENT 1 and CLIENT 2, jointly, also referred to simply as “CLIENTS”;

PAX BR COMÉRCIO E SERVIÇOS DE EQUIPAMENTOS DE INFORMÁTICA LTDA., alimited liability business society, with headquarters at Rua SantaMônica, no. 1.391, Lot 03, Block AH, Industrial Park San Jose, in the City of Cotia, State of São Paulo, Zip Code (CEP) 06.715-865, enrolled at CNPJ/MF under no.11.603.135/0001-68, herein represented as provided for in its Articles of Incorporation, hereinafter referred to simply as “PAX” and

TRANSIRE FABRICAÇÃO DE COMPONENTES ELETRÔNICOS LTDA., a limited liability business society, with its current headquarters in the city of Manaus,State of Amazonas, at Avenida dos Oitis, no. 2.449, District Armando Mendes, CEP 69.089-035, enrolled at CNPJ/MF under no. 21.785.364/0001-02, hereinrepresented as provided for in its Articles of Incorporation, hereinafter referred to simply as “TRANSIRE”.

BeingCLIENT1,CLIENT2,PAXandTRANSIREhereinafteralsoreferredto,separately,“Party”and,jointly,as“Parties”.

1.2. Inviewoftheaboveinclusion,thePartiesresolvetoadjustclause10.2oftheAgreement,whichshallbeinforcewiththefollowingwording:

“10.2. The PRICE of the orders carried out shall be paid by the respective purchasing CLIENT(S), within [*****], upon the issuance of an individualized FiscalDocument/Invoice against the purchasing CLIENT(S), where the CLIENT information shown in the preamble of the Agreement must be observed.”

1.3. Finally,wherethereisreferenceonlytotheCLIENTNET+PHONETELECOMUNICAÇÕESLTDA.intheAgreement,inwhateverisnotspecific,asintheabovepaymentclause,itshouldbeunderstoodasbeingareferencealsototheCLIENTSNET+PHONETELECOMUNICAÇÕESLTDA.andPAGSEGUROINTERNETS.A.

2. RATIFICATION

2.1. ThePartieshaveratifiedalltheothertermsandconditionsoftheAgreement,beingclearthatthetermsandconditionswhichhavenotexpresslybeenamendedbythepresentInstrumentremainunchangedandinfullforce.

Andinwitnesswhereof,thePartiessignthepresentinstrument,in3(three)counterpartsofsamecontent,inthepresenceoftwowitnesses.

/s/ Marcelo Ivaldo da Silva/s/ Siomar de Almeida Torres

/s/ Marcelo Ivaldo da Silva/s/ Siomar de Almeida Torres

NET+PHONE TELECOMUNICAÇÕES LTDA. PAGSEGURO INTERNET S.A.

Marcelo Ivaldo da SilvaControllership Director

RG: 30.034.79CPF: 497.058.224.69

Siomar de Almeida TorresFinance DirectorRG: 19.713.792

CPF: 125.591.238-55

Marcelo Ivaldo da SilvaControllership Director

RG: 30.034.79CPF: 497.058.224.69

Siomar de Almeida TorresFinance DirectorRG: 19.713.792

CPF: 125.591.238-55

/s/ Rejane Novaes /s/ Rejane Novaes

PAX BR COMÉRCIO E SERVIÇOS DE EQUIPAMENTOS DE INFORMÁTICA LTDA.

TRANSIRE FABRICAÇÃO DE COMPONENTES ELETRÔNICOS LTDA.

Rejane NovaesRG: 21.213.546-6

CPF: 129.306.928-04

Rejane NovaesRG: 21.213.546-6

CPF: 129.306.928-04

Witnesses:

1. /s/LuizCarlosM.deJesus 2. /s/FabianaA.AlgavesName: LuizCarlosM.deJesus Name: FabianaA.AlgavesCPF: 0l0.320.138-69 CPF: 369.450.098-74RG: 10.614.703-1 RG: 41.880.120-4[*****]Confidentialinformationredacted.

Exhibit 4.10

PRIMEIRO ADITIVO AO CONTRATO DE PARTICIPAÇÃO NOSARRANJOS DE PAGAMENTO DA VISA DO BRASIL E LICENCIAMENTO

DE MARCA REGISTRADA

ESTEPRIMEIROADITIVOAOCONTRATODEPARTICIPAÇÃONOSARRANJOSDEPAGAMENTODAVISADOBRASILELICENCIAMENTODEMARCAREGISTRADA(“Contrato ”)écelebradoentreaVISA DO BRASILEMPREENDIMENTOS LTDA. ,sociedadeconstituídaeemfuncionamentosobasleisdoBrasil,comsedenacidadedeSãoPaulo,estadodeSãoPaulo,naAv.PresidenteJuscelinoKubitschek,1909,TorreNorte/3ºandar,Brasil,inscritanoCadastroNacionaldaPessoaJurídica,doMinistériodaFazenda(CNPJ/MF)sobonº31.551.765/0001-43(“VISA DO BRASIL ”),VISA INTERNATIONAL SERVICEASSOCIATION, sociedadeconstituídaeemfuncionamentosobasleisdosEstadosUnidosdaAméricaedoestadodeDelawarecomsedenaMetroCenterBoulevard,900,FosterCity,Califórnia94404(VISA INTERNATIONAL ”)(VISADOBRASILEVISAINTERNATIONALdesignadasconjuntamentecomo“VISA ”),e

FIRST AMENDMENT TO THE VISA PAYMENT ARRANGEMENTS

PARTICIPATION AND TRADEMARK LICENSE AGREEMENT

THISFIRSTTOTHEVISAPAYMENTARRANGEMENTPARTICIPATIONANDTRADEMARKLICENSEAGREEMENT(“Agreement ”)isenteredintobyandbetweenVISA DO BRASIL EMPREENDIMENTOS LTDA. ,acorporationorganizedandexistingunderthelawsofBrazil,withitsheadofficesintheCityofSãoPaulo,EstateofSãoPauloatAv.PresidenteJuscelinoKubitschek,1909,NorthTower/3ºfloor,Brazil,enrolledwiththeBrazilianTaxpayerRegistryoftheMinistryofFinance(“CNPJ/MF”)underNº31.551.765/0001-43(VISA DO BRASIL ”),VISA INTERNATIONALSERVICE ASSOCIATIO N,acompanyorganizedandexistingunderthelawsoftheUnitedStatesandthestateofDelawarewithitsheadofficesat900MetroCenterBoulevard,FosterCity,California94404(“VISA INTERNATIONAL ”)(“VISADOBRASILANDVISAINTERNATIONALcollectivelyreferredtoas“VISA ”),and

Nomedoparticipante(doravantedenominado“PARTICIPANTE ”)/Nameofparticipant(hereinaftercalled“Participant”):PAGSEGUROINTERNETS.A.

Endereço(sedeprincipal)/Streetaddress(principleplaceofbusiness):AV.BRIGADEIROFARIALIMA,1.384

Cidade/City:SÃOPAULO

Estado/StateSP

País/Country:BRASIL

Códigopostal/PostalCode:01452-002

Endereçopostal(sefordiferente)/Mailingaddress(ifdifferent):

Cidade/City:

Estado/State:

País/Country:BRASIL

Códigopostal/PostalCode:

Telefone/Telephone:

Códigodopaís/CountryCode:55

Códigodecidade/CityCode:11

Número/Number:30388260

Fax:

Códigodopaís/CountryCode:55

Códigodecidade/CityCode:

Número/Number:

Descriçãojurídica/LegalDescription:INST.DEPGTOEMISSORADEINTRUMENTOPÓS-PAGO

Constituídaeemfuncionamentosobasleisde(estadooupaísdaconstituição)/Organizedandexistingunderthelawsof(stateorcountryofincorporation):BRASIL

CONSIDERANDOqueaVISADOBRASILéinstituidoradearranjosdepagamentocontroladapelaVISAINTERNATIONAL,esededicaaogerenciamentodearranjosdepagamentonoBrasil(“Arranjos de Pagamento da Visa” ),pormeiodosEstatutos,dasRegrasBásicasdaVisaedasRegrassobreProdutoseServiçosVisa,incluindomanuaiseguiastécnicosequaisqueroutrosrequisitoscomplementaresdaVISAINTERNATIONAL(osestatutos,asregras,guiasemanuais,conjuntamentecomtodosequaisqueroutrasregrasaplicáveisparaaparticipaçãonosArranjosdePagamentodaVisa,as“RegrasdaVisa”);CONSIDERANDOQUEAVISAINTERNATIONALéaproprietáriadecertasmarcasregistradasquepodemserusadasnaoperaçãodeArranjosdePagamentodaVisaequesãodescritasnasRegrasVisa(as“Marcas de Propriedade da Visa ”);CONSIDERANDOQUEAVISADOBRASILélicenciadaesublicenciadoraautorizadadasMarcasdePropriedadedaVisaemrelaçãoaseuusonoBrasilemconexãocomosArranjosdePagamentodaVisa;CONSIDERANDOQUEAVISAINTERNATIONALoperaarranjosdepagamentoforadoBrasileprestacertosserviçosinternacionaisrelacionadosaprogramasdeserviçofinanceiro,comoprevistonasRegrasdaVisa;CONSIDERANDOqueaVISAeoPARTICIPANTEcelebraramoContratodeParticipaçãonosArranjosdePagamentodaVisadoBrasileLicenciamentodeMarcaRegistrada(o“Contrato”)datadoem24deAgostode2015pormeiodoqualregularamostermosecondiçõesparaaparticipaçãodoPARTICIPANTEnosArranjosdePagamentoAprovados;CONSIDERANDOqueoPARTICIPANTEdeseja,tambémsomentenoBrasil(o“País Aprovado ”):(i)estenderalistadeArranjosdePagamentodaVisaAprovados,conformeselecionadosaseguir;(ii)usarasMarcasdePropriedadedaVisaautorizadasparausonasRegrasdaVisaparaessesArranjosdePagamentoAprovados(“MarcasLicenciadas ”);e(iii)obterserviçosrelacionadosdaVISADOBRASILedaVISAINTERNATIONALemconexãocomessaparticipaçãonosArranjosdePagamentoAprovados,conformeprevistosnoContrato;

EM ASSIM SENDO ,combasenoscompromissosmútuosassumidosnestedocumento,VISAeoPARTICIPANTE,naintençãodeestaremlegalmentevinculados,nesteatoacordamoquantosegue:

1. TermosDefinidos.SalvosedefinidosdeoutraformanesteAditivo,ostermosiniciadoscomletramaiúsculaterãoosignificadoquelhesfoiatribuídonoContrato.

2. Confidencialidade.AsPartespermanecerãovinculadasàsobrigaçõesdeconfidencialidadeprevistasnoContrato,edeverãomanterconfidenciaistodasequaisquerinformaçõesrelacionadasaoContrato,aesteAditivo,eoutrosdocumentosaquetenhamacessoemvirtudedoContrato,deacordocomasRegrasecomoContrato.

WHEREAS,VISADOBRASILisaBrazilianpaymentarrangementsettlorcontrolledbyVISAINTERNATIONALandisengagedinthebusinessofmanagingpaymentarrangementsinBrazil(“VisaPaymentArrangements”),byvirtueoftheBy-Laws,VisaCoreRulesandVisaProductandServiceRules,includingmanualandtechnicalguidesandanyotheradditionalrequirementsofVISAINTERNATIONAL(theby-laws,rules,guidesandmanuals,collectivelywithallandanyapplicablerulefortheparticipationontheVisaPaymentArrangements,the“VisaRules”);WHEREASVISAINTERNATIONAListheownerofcertaintrademarksthatmaybeusedintheoperationoftheVisaPaymentArrangementsandthataredescribedintheVisaRules(the“Visa-OwnedMarks”);WHEREAS,VISADOBRASILislicensedandauthorizedsublicensoroftheVisa-OwnedMarksregardingitsuseinBrazilinconnectiontotheVisaPaymentArrangements;WHEREASVISAINTERNATIONALoperatespaymentarrangementsoutsideofBrazilandprovidescertaininternationalfinancialservices,asprovidedforintheVisaRules;WHEREASVISAandthePARTICIPANThaveexecutedVisaPaymentArrangementsParticipationandTrademarkLicenseAgreement(the“Agreement”)datedAugust24,2015,wherebythePartieshaveregulatedthetermsandconditionsfortheparticipationofthePARTICIPANTintheApprovedPaymentArrangement;WHEREASTHEPARTICIPANTwishes,alsoonlyinBrazil(the“ApprovedCountry ”)to:(i)extendthelistofApprovedPaymentArrangements,asselectedbelow;(ii)usetheVisa-OwnedMarksauthorizedforuseintheVisaRulesfortheseApprovedPaymentArrangements(“Licensed Marks ”);and(iii)obtainrelatedservicesfromVISADOBRASILandVISAINTERNATIONALinconnectionwiththisparticipationintheApprovedPaymentArrangements,assetforthintheAgreement:

NOW, THEREFORE, basedonthemutualpromisesmadeherein,VISAandthePARTICIPANT,intendingtobelegallybound,herebyagreeasfollows:

1. DefinedTerms.Unlessotherwisedefinedherein,allcapitalizedtermsshallhavethemeaningsascribedtothemintheAgreement.

2. Confidentiality.ThePartiesshallremainboundtotheconfidentialityobligationssetforthintheAgreement,andshallkeepconfidentialanyandallinformationrelatedtotheAgreement,thisAmendment,andotherdocumentstowhichtheyhaveaccessbyvirtueoftheAgreement,pursuanttotheRulesandtotheAgreement

3. AutorizaçãoparaparticipardosArranjosdePagamentosAprovados.AVISADOBRASILautorizaaparticipaçãodoPARTICIPANTE,deformanãoexclusiva,nosArranjosdePagamentoAprovadosnoPaísAprovado,sujeitoaostermosecondiçõesdesteContratoedasRegrasdaVisa,incluindotaxaseencargosdefinidosnaCláusula5doContrato.OPARTICIPANTEterádireitoatodososdireitoseprivilégiosaplicáveisàsuaparticipaçãonosArranjosdePagamentoAprovados,comodispostonasRegrasdaVisa,observadoqueoPARTICIPANTEseráresponsável,deformaexclusiva,portodososcustoseriscosassociadosasuaparticipaçãonosArranjosdePagamentoAprovados.NocasodeoPARTICIPANTEdesejarparticipardeumArranjodePagamentoquenãosejaumArranjodePagamentoAprovado,oPARTICIPANTEdevepreviamentenotificaraVISADOBRASIL,porescrito,eoPARTICIPANTEnãopoderádarinícioàsuaparticipaçãoemoutroArranjodePagamentonemusarquaisquerMarcasdePropriedadedaVisanãoincluídasnasMarcasLicenciadasatéquetenharecebidoconsentimentoprévioporescritodaVISADOBRASIL.OPARTICIPANTEdeclaraegarantequeobtevetodasasautorizaçõesepermissõesnecessáriassobasleiseosregulamentosdoPaísAprovadoparaparticipardosArranjosdePagamentoAprovados.SeasRegrasdaVisaexigiremumpatrocinadorparaaparticipaçãodoPARTICIPANTEemdeterminadosArranjosdePagamentodaVisa,oPARTICIPANTEdeverá(i)terenviadoàVISADOBRASILumcontratodepatrocínioplenamentecumpridoquetragaaassinaturadeumrepresentantelegaldopatrocinador;(ii)tercelebradoumcontratodeprestaçãodeserviçoscomaquelepatrocinadorparaprestarosserviçosnecessáriosaessesArranjosdePagamentoAprovados;e(iii)quenotificaráaVISADOBRASILimediatamente,porescrito,sobrearescisãoouqualquermodificaçãomaterialdosreferidoscontratos.OPARTICIPANTEtambémdeclaraqueenviouàVISADOBRASILumacópiadeseuúltimodemonstrativofinanceiro,cujosconteúdodeclaraserverdadeiro,corretoecompleto.

3. AuthorizationtoParticipateintheApprovedPaymentArrangements.SubjecttothetermsandconditionsofthisAgreementandofVisaRules,includingfeesandchargesdefinedinSection5oftheAgreement,VISADOBRASILauthorizesthePARTICIPANT’snon-exclusiveparticipationintheApprovedPaymentArrangementsintheApprovedCountry.PARTICIPANTwillhaverighttoalltherightsandprivilegesapplicabletoitsparticipationintheApprovedPaymentArrangement,assetforthintheVisRules,andPARTICIPANTwillbeexclusivelyresponsibleforallthecostsandrisksassociatedtoitsparticipationintheApprovedPaymentArrangements.IntheeventthePARTICIPANTwishestoparticipateinaPaymentArrangementthatisnotanApprovedPaymentArrangement,PARTICIPANTshallnotifyVISADOBRASILinadvance,inwriting,andPARTICIPANTwillnotbeabletoinitiateitsparticipationinotherPaymentArrangementoruseanyVisa-OwnedMarksnotincludedintheLicensedMarksuntilithasreceivedpriorwrittenconsentfromVISADOBRASIL.PARTICIPANTdeclaresandwarrantsthatithasobtainedallauthorizationsandpermissionsthatarerequiredunderthelawsandregulationsoftheApprovedCountrytoparticipateintheApprovedPaymentArrangements.IftheVisaRulesrequireasponsorforthePARTICIPANT’sparticipationincertainVisaPaymentArrangements,PARTICIPANTmust(i)havesentsoVISADOBRASILasponsorshipagreementdullyfulfilledwiththesignatureofalegalrepresentativeofthesponsor;(ii)haveenteredintoaservicecontractwiththatsponsortoprovidetheservicesneededtotheseApprovedPaymentArrangements;and(iii)notifyVISADOBRASILimmediately,inwriting,ofanymaterialmodificationorterminationofsuchagreements.PARTICIPANTalsodeclaresthatithassenttoVISADOBRASILacopyofitslatestfinancialstatement,whichcontentitclaimstobetrue,correctandcomplete.

Instruções:SelecionarcomumXosArranjosdePagamentoAprovados.Instructions:SelectwithanXtheApprovedPaymentArrangements. PARTICIPAÇÃO/PARTICIPATION1.Participante Principal Emissor / Principal Issuing Participant☒ ArranjodePagamentoVisaCrédito(DomésticoeInternacional)/VisaCredit(DomesticandInternational)PaymentArrangement☐ ArranjodePagamentoVisaElectroneVisaDébito(DomésticoeInternacional)/VisaElectronandVisaDebit(DomesticandInternational)PaymentArrangement☐ ArranjodePagamentoVisaPré-Pagos(DomésticoeInternacional)VisaPrepaid(DomesticandInternational)PaymentArrangement

2. Participante Associado Emissor / Associate Issuing Participant☐ ArranjodePagamentoVisaCrédito(DomésticoeInternacional)/VisaCredit(DomesticandInternational)PaymentArrangement☐ ArranjodePagamentoVisaElectroneVisaDébito(DomésticoeInternacional)/VisaElectronandVisaDebit(DomesticandInternational)PaymentArrangement☐ ArranjodePagamentoVisaPré-Pagos(DomésticoeInternacional)/VisaPrepaid(DomesticandInternational)PaymentArrangement

3. Participante Principal Credenciador de Estabelecimento Comercial / Merchant Acquiring Principal Participant

☐ArranjosdePagamentoVisaCrédito,ElectroneDébito,Pré-Pagos(DomésticoeInternacional)/VisaCredit,DebitandElectronandPrepaid(DomesticandInternational)PaymentArrangement.

4. Participante Associado Credenciador de Estabelecimento Comercial / Merchant Acquiring Associate Participant

☐ArranjosdePagamentoVisaCrédito,ElectroneDébito,Pré-Pagos(DomésticoeInternacional)/VisaCredit,ElectronandDebitandPrepaid(DomesticandInternational)PaymentArrangement.

Programascomplementares/SupplementaryPrograms:5. Programa Plus / Plus Program

Patrocinado(somenteumaopçãodeProgramapodeserselecionada)/Sponsored(onlyoneProgramoptionmaybeselected):

☐

EmissoreCredenciadorPlus/PlusIssuerandAcquirer

☐ SomenteEmissorPlus/OnlyPlusIssuer

☐

SomenteCredenciadorPlus/OnlyPlusAcquirer.

OPARTICIPANTEreconhecequeseaplicamàsuaparticipaçãoaosArranjosdePagamentoAprovadostodasasdisposiçõesprevistasnoContrato,inclusive,massemselimitaraodispostoemsuasCláusulas2,3,4,5,6,7,8,9,12,14e19.4. LeieForo. EsteAditivoseráregidoporeinterpretadodeacordocomasleisdo

Brasil.AspartesdesignamajurisdiçãodoforodacomarcadacidadedeSãoPaulo,estadodeSãoPaulo,Brasil,pararesolveredirimirqualquercontrovérsiadecorrentedopresenteAditivo.

5. Prazos.OprazodesteAditivoteráinícionadataemqueforassinadoportodasas

Partes(“DatadeVigência”)econtinuaráporumprazode5(cinco)anos(“Prazo”),depoisdoqualserárenovadoautomaticamenteporperíodosadicionaisde5(cinco)anos,salvose,nomínimo180(centoeoitenta)diasantesdofimdoPrazo(ouqualquerrenovaçãodeste),oPARTICIPANTEnotifiqueaVISADOBRASIL,porescrito,desuaintençãoderescindi-loporocasiãodofinaldoPrazo(oudequalquerrenovaçãodeste).

PARTICIPANTacknowledgesthatallprovisionssetforthintheAgreementareapplicabletoitsparticipationintheApprovedPaymentArrangements,includingbutnotlimitedtoitsSections2,3,4,5,6,7,8,9,12,14and19.4. Choiceoflaw.ThisAmendmentshallbegovernedbyandinterpreted

accordingtointernallawsofBrazil,withoutregardtoitsconflictoflawprovisions.ThepartiesdesignatetheForumofthecityofSãoPaulo,StateofSãoPaulo,asthevenuetosolveandsettleanydisputesthatmayarisefromthisAgreement.

5. Term.ThisAmendmentshallbecomeeffectiveasofthedateitissignedby

allParties(the“EffectiveDate”)andshallcontinueforatermoffiveyearsfromtheEffectiveDate,afterwhichthisAgreementshallautomaticallyrenewforanadditionalfiveyearperiodunless,atleast180dayspriortotheendoftheterm(oranyrenewalterm),PARTICIPANTshallhavenotifiedVISADOBRASILinwritingofitsintenttoterminatethisAgreementattheendoftheTerm(oranyrenewalterm).

6. Aditamentos;DivisibilidadeDasDisposiçõesContratuais.Estedocumentonãopoderáseraditadooumodificado,enenhumdeseustermosecondiçõespodeserrenunciado,salvopormeiodeinstrumentoporescritoassinadoportodasasPartes,ou,emcasoderenúncia,pelaParterenunciandocumprimento;desdeque,contudo,odispostoacimanãopossaserinterpretadocomoumalimitaçãodacapacidadedaVISADOBRASILoudaVISAINTERNATIONALdeaditar,suplementar,ou,deoutraforma,modificardetemposemtemposquaisquerdasRegrasdaVisasemoconsentimentodoPARTICIPANTE.Sequalquerprazo,disposição,acordo,pactoourestriçãodestedocumentoouincorporadosporreferênciaaesteContratoforemconsideradosporumtribunaldajurisdiçãocompetenteououtraautoridadecomoinválidos,nulosouinexequíveis,oremanescentedosprazos,disposições,contratos,pactoserestriçõesdestedocumentocontinuarãoemplenovigorevalidadee,denenhumaformaserãoafetados,prejudicadosouinvalidados,desdequeasubstânciaeconômicaoulegaldorelacionamentodoPARTICIPANTEsobestedocumentonãosejaafetadadequalquermaneiramaterialmenteadversaàsPartes.Nestecaso,seenamedidaemqueaposiçãonãopossaserremediadapormeiodeumaalteraçãodasRegrasdaVisadeformageraloudeformaespecíficaaoPaísAprovado,asPartesnegociarãoemboa-féparamodificarestedocumento,paraassimdarefeitoàintençãooriginaldasPartesomaisfielmentepossível,deformaaqueorelacionamentodoPARTICIPANTEsobestedocumentopossacontinuarcomocontempladooriginalmentenamedidadopossível.

7. SemInterpretaçãoRestritiva.Casohajaambiguidadeouquestionamentodas

intençõesouinterpretação,esteAditivoseráinterpretadocomosetivessesidoredigidoconjuntamentepelasPartes,enãohaverápresunçãoouônusdaprovafavorecendooudesfavorecendoqualquerparteemvirtudedaautoriadequalquerdisposiçãodesteAditivo.

8. ÍntegradoContrato.EsteAditivo,incluindoseusdocumentosreferenciados,

passaafazerparteintegrantedoContratoe,juntos,representamaíntegradoacordadoentreasPartesemrelaçãoaseuobjeto.Nãoháoutroscontratos,representações,garantiasouentendimentosentreasPartesemrelaçãoàparticipaçãodoPARTICIPANTEnosArranjosdePagamentoAprovados.EsteContratosubstituiqualqueroutrocontratoentreasPartes,escritoouverbal,emrelaçãoàparticipaçãodoPARTICIPANTEnosArranjosdePagamentoAprovados.Parafinsdeesclarecimento,esteContratoprevaleceesubstituiqualquercontratoanteriorrelacionadoàafiliaçãodoPARTICIPANTE,àsuaparticipaçãonosArranjosdePagamentodaVisaeàautorizaçãoparausodequaisquerMarcasdePropriedadedaVisa.

9. Idioma.EstedocumentoécelebradoeassinadonosidiomasInglêsePortuguês,

sendoqueemcasodedivergênciasdeinterpretação,asPartesacordamqueaversãoemPortuguêsdeveprevalecer.

EMTESTEMUNHODOQUE,asPartesassinamopresenteContratoem3(três)vias,nasdatasindicadasabaixodesuasrespectivasassinaturas.

6. Amendments;Severability.Thisdocumentmaynotbeamendedormodified,andnoneofitstermsorconditionsmaybewaived,exceptpursuanttoaninstrumentinwritingsignedbyallofthepartiesheretoor,inthecaseofawaiver,bythepartywaivingcompliance;provided,however,that,theforegoingshallnotbeconstruedasalimitationontheabilityofVISADOBRASILtoamend,supplementorotherwisemodifyanyoftheVisaRulesfromtimetotimewithouttheconsentofPARTICIPANT.Ifanyterm,provision,agreement,covenantorrestrictionofthisdocumentorincorporatedbyreferenceintothisAgreementisheldbyacourtofcompetentjurisdictionorotherauthoritytobeinvalid,voidorunenforceable,theremainderoftheterms,provisions,agreements,covenantsandrestrictionsofthisdocumentshallremaininfullforceandeffectandshallinnowaybeaffected,impairedorinvalidatedsolongastheeconomicorlegalsubstanceofthePARTICIPANTrelationshipcontemplatedherebyisnotaffectedinanymannermateriallyadversetothepartiestothisdocument.Uponsuchadetermination,ifandtotheextentthepositioncannotberemediedbyanamendmenttotheVisaRuleseithergenerallyorinrelationtotheApprovedCountry(s),thepartiesshallnegotiateingoodfaithtomodifythisdocumentsoastogiveeffecttotheoriginalintentofthepartiesascloselyaspossibleinareasonablyacceptablemannerinorderthatthePARTICIPANTrelationshipcontemplatedbythisdocumentmaycontinueasoriginallycontemplatedtothefullestextentpossible.

7. NoStrictConstruction.Intheeventanyambiguityorquestionofintentor

interpretationarises,thisAmendmentshallbeconstruedasifdraftedjointlybythepartiestothisAgreement,andnopresumptionorburdenofproofshallarisefavoringordisfavoringanypartybyvirtueoftheauthorshipofanyprovisionofthisAmendment.

8. Entireagreement.ThisAmendment,includingthereferreddocuments,is

partoftheAgreementand,together,theyconstitutetheentireagreementandunderstandingbetweenthePartiesregardingitsscope.Therearenootheragreements,representations,warranties,orunderstandingsbetweenthePartieswithrespecttothePARTICIPANT’sparticipationintheApprovedPaymentArrangements.Totheextentthatanyotheragreement,writtenorverbal,appearstoexistbetweenthePartieswithrespecttothesubjectmatterhereof,theAgreementsupersedesanysuchagreement.Forclarificationpurposes,thisAgreementprevailsandsupersedesanyprioragreementrelatedtothePARTICIPANT’saffiliationtotheVisaSystems(eitherwithVisaInternationalorVisadoBrasil)andtothetrademarklicenseofVisaOwnedMarks.

9. Language.ThisdocumentshallbeexecutedandsignedintheEnglishand

Portugueselanguages.IncaseofdiscrepanciesofinterpretationthePartiesagreethatthePortugueseversionshallprevail.

INWITNESSWHEREOF,thepartiesheretohavecausedthisAgreementtobedulyexecuted.

VISA DO BRASIL EMPREENDIMENTOS LTDA

Assinatura/Signature: /S/FERNANDOTELESNome/Name: FernandoTelesCargo/Title: GeneralOfficerData/Date:

PAGSEGURO INTERNET S.A.

Assinatura/Signature: /S/JUANFUENTESNome/Name: JuanFuentesCargo/Title: Data/Date: June2,2017

VISA INTERNATIONAL SERVICE ASSOCIATION

Assinatura/Signature: /S/EDUARDOCOELLONome/Name: EduardoCoelloCargo/Title: GroupExecutive—LACData/Date: July3,2017

Testemunhas/Witnesses:

1. /S/ILLEGIBLE 2. /S/ILLEGIBLE RG RG CPF/MF CPF/MF

Exhibit 4.14

LONG-TERM INCENTIVE PLAN – Goals (LTIP – Goals)PAGSEGURO INTERNET S.A.

1. Long-Term Incentive Plan – Goals

1.1. TheBoardofDirectorsofPagSeguroDigitalLtd.,whichhasbeenlistedontheNewYorkStockExchange(NYSE)sinceJanuary26,2018,incorporatedasanexemptedcompanywithlimitedliabilityintheCaymanIslands(“Company ”),parentcompanyoftheoperatingcompanyPagSeguroInternetS.A.,headquarteredintheCityofSãoPaulo,StateofSãoPaulo,atAvenidaBrigadeiroFariaLima,1,384,4thfloor,A,ZipCode01451-001,registeredwithCNPJ/MFunderNo.08.561.701/0001-01(“PagSeguro Brasil ”),hasapprovedthisLong-TermIncentivePlan–Goals(hereinafterreferredtoas“LTIP-Goals”),throughwhichPagSeguroBrasilmaygrantsharesoftheCompanytocertainemployees(hereinafterreferredtoas“Beneficiaries ”),providedthattheyarepreviouslyselectedandapprovedbytheLTIP-GoalsCommittee,asdefinedbelow,withinthelimitsandconditionsestablishedherein.

1.2. ThepurposeoftheLTIP-GoalsistoreinforcethealignmentofinterestsbetweentheBeneficiariesandtheCompany,givingthemtheopportunitytobecome

partnersoftheCompany,thusdeepeningtheircommitment.PagSeguroBrasilhopestoencouragetheexpansion,successandachievementofitscorporatepurposes,attractingandhiringhighly-committedprofessionalswhowishtosucceed.

1.3. ThemanagementoftheLTIP-Goals,includingtheselectionofBeneficiariesandthedeterminationoftherelevantparticipationconditions,willbeconductedbytheLTIP-Goalscommittee(“LTIP-Goals Committee ”),anadministrativebodyoftheCompanycomprisedoftheCompany’sChairmanoftheboardofdirectorsandtwo(2)otherofficersofUniversoOnlineS.A.appointedbytheCEO.PagSeguroBrasilmayonlyenterintoagreementsoramendmentswiththeBeneficiariesoftheLTIP–GoalsaspreviouslyresolvedbytheLTIP-GoalsCommittee.

1.4. ThesharesprovidedforintheLTIP-GoalsarethoseissuedbytheCompany.

1.5. TheLTIP-GoalsCommitteewillentitleeachBeneficiarytherighttoreceiveannually,aspaymentofpartofthePagSeguroBrasilCorporateResults-Sharing

Plan(“PPR-PSB ”),aGrossValue(“GV ”)inBrazilianReais,providedthatthegoalsestablishedinthePPR-PSBweremetinthepreviousyear.IfthePPR-PSBgoalswerenotmetinthepreviousyear,theBeneficiarywillnotreceiveGVforthatyear.

1.6. Iftheabovementionedconditionsaremet,theGV,netoftaxes,shallbepaidtotheBeneficiary.ThepaymentshallbemadeincashorinsharesissuedbytheCompany,atthediscretionoftheLTIP-GoalsCommittee.IfthepaymentismadeintheformofsharesissuedbytheCompany,theGV,netoftaxes,shallbeconvertedintosharesissuedbytheCompanyonthelastbusinessdayofJanuaryfollowingtheendoftherelevantyear(“Conversion Date ”),pursuanttotheconditionssetforthinSection2,below.TheshareswillbeissuedbytheCompanywithin10(ten)businessdaysfromtheConversionDate.

1.7. IftheLTIP-GoalsCommitteedecidestoincludeanewBeneficiarybytheendofOctoberofanygivenyear,andprovidedthatthegoalsofthePPR-PSBhave

beenmet,theBeneficiaryshallreceivetheGVonapro-ratatemporisbasis.IftheLTIP-GoalsCommitteedecidestoincludeanewBeneficiaryduringNovemberorDecemberofanygivenyear,thentheBeneficiaryshallreceivetheGVasiftheBeneficiaryhadbeenincludedinJanuaryofthefollowingyear.

2. GV – Conversion into Shares

2.1. GVresultingfromtheachievementofgoalsofthePPR-PSBinthepreviousyearshallbeconverted,ontheConversionDate,intosharesoftheCompany,taking

intoaccounttheGV,netoflegalchargesandtaxesleviedonsuchpayment,dividedbytheaveragevalueoftheCompany’ssharesinthelastthirty(30)tradingsessionsbeforetheConversionDate.

3. Delivery of Shares and Lockup

3.1. OncetheGVisconvertedintosharesoftheCompany,(pursuanttoSection2above),suchsharesshallbetransferredtotheBeneficiarywithin10(ten)businessdaysfromtheConversionDate.

3.2. OncetherelevantsharesoftheCompanyhavebeendelivered,theBeneficiaryshallcomplywithalllock-uprulesand/ortransferrestrictionsestablishedbytheSEC(UnitedStatesSecuritiesandExchangeCommission),bytheCompany,byPagSeguroBrasilorintheLTIP-Goalsconcerningthesaleofshares.

3.3. OncetheownershipoftheshareshasbeeneffectivelytransferredfromtheCompanytotheBeneficiary,thelattershallbesolelyresponsibleformanagingtheshares,exceptasprovidedforinSection3.2.

3.4. AsresolvedbytheLTIP-GoalsCommittee,thedeliveryoftherelevantsharesoftheCompanyshalloccurthroughsaleoftreasuryshares,issuanceofnewsharesorpaymentincashtotheBeneficiarytoacquirethesharesoftheCompanyinthemarket.

4. Events of Termination of Employment of the Beneficiary of PagSeguro or affiliated companies

4.1. Ifterminationoccursbeforetheendoftheyear:theBeneficiarywillnotbeentitledtoGV.

4.2. IfterminationoccursaftertheendoftheyearandbeforetheConversionDate:theBeneficiaryshallreceivetheGV,providedthatthePPR-PSBgoalsforthepreviousyearweremet.

5. Legal Charges and Taxes – Shares and Settlement in Cash

5.1. Theamountsdiscussedherein–paidinsharesoftheCompanyorsettledincash–arerelatedtothedevelopmentgoalsofPagSeguroBrasil,establishedineachannualPPR-PSB.Thus,theydonotresultinpaymentoflabor(FGTS,13thsalaryandholidays)orsocialsecuritycharges.

5.2. PagSeguroBrasil,aspartofacorporateresults-sharingplan,asprovidedbyLawNo.10.101/00,shallperformtheduediscountsandpaymentsprovidedbyapplicablelaw,consideringthepaymentdateasthebasisforcalculation.

6. LTIP-Goals Effectiveness

6.1. TheLTIP-GoalswasapprovedbytheCompany’sBoardofDirectorsandtheLTIP-GoalsCommitteeisauthorizedtotakeallnecessarymeasuresfortheCompanytoimplementtheLTIP-Goals.

6.2. TheLTIP-GoalsshallbeeffectiveuntiltheCompany’sBoardofDirectorsortheLTIP-GoalsCommitteedecidestoterminateit.

6.3. WithoutprejudicetotheeffectivenessandtermofthePPR-PSB,theLTIP-Goalsandtheindividualagreementsmaybeamendedorterminated,atanytime,bydecisionoftheCompany’sBoardofDirectorsortheLTIP-GoalsCommittee,intheeventofforcemajeureoradrasticfluctuationinthegeneraleconomicconditionsthatindicatesunpredictabilityorinstability,orintheeventofchangesinthelawsorregulationsapplicabletotheCompanyortoPagSeguroBrasilthatmayresultinmaterialchangestotheprovisionsoftheLTIP-Goalsandtheindividualagreement.

6.4. IntheeventofacorporaterestructuringoftheCompanyand/orPagSeguroBrasil,includingtheinvolvementofthird-parties,orintheeventofaspin-off,

merger,consolidation,orintheeventofanIPObyoneoftheirsubsidiaries,LTIP-Goalsandtheindividualagreementmaybeadjustedtosuchnewcorporatestructureandmaybeamended,asexclusivelyresolvedbytheBoardofDirectorsortheLTIP-GoalsCommittee.

7. Final Provisions

7.1. TheprovisionsoftheindividualagreementandoftheLTIP-GoalsdonotconferanyrightstotheBeneficiarythatensurehisorhercontinuedemploymentat

PagSeguroBrasiloratanyothercompanywithinPagSeguroBrasil’scorporategroup,andtheydonotinterfereinanywayinPagSeguroBrasil’srightto,atanytimeandpursuanttoapplicablelaw,removetheBeneficiaryfromhisorherdutiesandterminatethelegalrelationshipwiththeBeneficiary.

7.2. AnycircumstancesnotprovidedforinthisinstrumentshallberesolvedbytheLTIP-GoalsCommitteeorbytheCompany’sBoardofDirectors.

7.3. AlltheprovisionsofPPR-PSB,whichareavailableontheintranetoftheUOLGroup,areapplicabletotheLTIP-Goals.

ApprovedonDecember18th,2018

Exhibit 4.15

AGREEMENT FOR ACCREDITOR PARTICIPATIONIN ELO PAYMENT ARRANGEMENTS

ThepresentAgreementforAccreditorParticipationinEloPaymentArrangements(“Agreement”)isenteredintobyandbetween:

I. ELO SERVIÇOS S.A. ,abusinesscorporationdulyincorporatedandoperatingunderthelawsoftheFederativeRepublicofBrazil,withheadquartersatAlamedaXingu,no.512,5thfloor,Alphaville,intheCityofBarueri,StateofSãoPaulo,ZIPCODE(CEP):06455-030andenrolledattheCorporateTaxpayerRegistryoftheMinistryofFinance(“CNPJ/MF”)underno.09.227.084/0001-75(“Elo”);and

II. PAGSEGURO INTERNET S.A., acorporationdulyincorporatedandvalidlyoperatingunderthelawsoftheFederativeRepublicofBrazil,withheadquartersatAvenidaBrigadeiroFariaLima,no.1.384,4thfloor(PartA),intheCityofSãoPaulo,StateofSãoPaulo,CEP01451-001andenrolledatCNPJ/MFunderno.08.561.701/0001-01(“Participant”),

EloandtheParticipant,hereinrepresentedbytheirlegalrepresentative(s)identifiedinthepageofsignaturesofthepresentinstrument,arehereinafterjointlyreferredtoas“Parties”and,individually,as“Party”.

WHEREAS:

(i) Eloisaninstitutorofpaymentarrangements,asdefinedinLaw12.865/2013andintheCircular3.682/2013,currentlyintheprocessofauthorizationwiththeCentralBankofBrazil(“CentralBank”)toperformtheactivityofinstitutorofEloPaymentArrangements;

(ii) TheParticipantisapaymentinstitution,asdefinedinLaw12.865/2013andinCircular3.885/2018;

(iii) ElowishestheParticipanttobepartofEloPaymentArrangements,inthequalityofAccreditor;

(iv) TheParticipantwishestoparticipateinEloPaymentArrangements,inthequalityofAccreditor,observingthetermsoftheRegulations.

THAT SAID ,thePartiesresolvetoenterintothepresentAgreement,tobegovernedbythefollowingclausesandconditions:

CLAUSE IDefinitions and Rules of Interpretation

1.1.ForallthepurposesandeffectsoftheAgreement,theexpressionsandtermsdefined,startingwithcapitallettersshallhavethemeaningsindicatedintheGlossaryandintheRegulations.1.2. TheAgreementshallbegovernedandinterpretedinaccordancewiththefollowingprinciples:

1.2.1.TheheadingsandtitlesoftheAgreementonlyserveforreferenceconvenienceandshallnotlimitoraffectthemeaningoftheclausesoritemswhichtheyapplyto.

1.2.2.Theterms“inclusive”,“including”andothersimilartermsshallbeinterpretedasiftheywereaccompaniedbythesentence“merelyasanexample”and“withoutlimitation”.

1.2.3.Wheneverrequiredbythecontext,thedefinitionscontainedintheAgreementandintheGlossaryshallbeappliedbothinthesingularandinthepluralandthemasculinegendershallincludethefeminineandviceversa,withoutchangingtheirmeaning.

1.2.4.ReferencestoanydocumentorLawincludealltheiramendments,substitutionsandconsolidationsandrespectivecomplements,exceptwhenotherwiseexpresslyprovidedfor.

1.2.5.ExceptifotherwiseexpresslyprovidedforinthepresentAgreement,referencestoitemsorattachmentsapplytoitemsandattachmentsoftheAgreement.

1.2.6.AllthereferencestoanyPartiesincludetheirsuccessors,representativesandassigneesauthorizedbyLaworcontractualinstrument,asapplicable.

1.2.7.AllthedeadlinesprovidedforinthepresentAgreementshallbecountedasforeseeninarticle132oftheCivilCode,disregardingthestartingdayandincludingthefinalday.

CLAUSE IIObject of the Agreement

2.1.SubjecttotheclausesandconditionsofthepresentAgreement,theParticipanthereinagreestoparticipateoftheEloPaymentArrangements,intheconditionofAccreditor,beingresponsiblefor,withoutmanagingthePaymentAccount,providingservicesofaccreditationandmaintenanceofECsandparticipatingintheprocessingandliquidationoftransactionscarriedoutwiththePaymentInstruments,inconformitywiththetechnicalspecificationswhicharepartoftheArrangementManuals,andsubjecttothetermsandconditionsoftheRegulations(“Services”).

2.1.1.InadditiontotheprovisionsunderthepresentAgreement,theParticipantrepresentstohaveunderstoodthatalltheprovisionsoftheRegulationsapplytothedocumentofadhesiondeliveredtoitonthedateofsignatureofthepresentAgreement.IncaseinthefutureanyconflictbetweentheprovisionsintheRegulationsandtheParticipantbusinessmodeloccurs,thelattercanterminatetheAgreementunderthetermsofclauses5.4,10.1and10.4.

CLAUSE IIIParticipant Remuneration Fee

3.1.TheParticipantshallbeentitledtoreceiveremunerationapplicableinaccordancewiththeArrangementManuals,specifications,bulletinsandotherdocumentsonthematter.

3.2.TheremunerationsduebytheParticipanttoEloareprovidedforintheManualofTariffs.

CLAUSE IVRights/Obligations

4.1.WithoutprejudicetotheotherrightsprovidedforinthepresentAgreement,intheRegulationsandintheArrangementManuals,theParticipantrightsare:

(i) tocollecttariffsfortheservicesprovidedtoECs,respectingtheregulationsapplicable;

(ii) participateoftheEloPaymentArrangements,pursuanttothenon-discriminatorygeneralrulescontainedintheRegulations,respectingthefreedomofthebusinessmodelsandtheapplicablelawsandregulations;

(iii) toreceivefromtheECsthecontractuallyagreedamountsrelativetothePurchasePaymentTransactionscarriedout;

(iv) exercisetherulesandrightsprovidedforinChapter VII—Reasons for Rejection and Return of the Payment Transactions oftheRegulations;and

(v) conduct,atitsexpenses,bymeansofathirdpartycontractedanddulyqualified,annualaudits,betweenthemonthsofSeptemberandNovember,forverificationofthecompliance,byElo,withtheobligationsofsegregationandprotectionofitstechnologicalinfrastructure,inthehypothesisofoutsourcingoftheprocessingservicesunderElo’sresponsibility.

4.1.1.Toexercisetherightmentionedinitem(v)above,theParticipantmustinformitsintentiontoElo,uponpreviousnoticewithinaminimumof30(thirty)daysinadvance.

4.2.WithoutprejudicetotheotherobligationsprovidedforinthepresentAgreement,theParticipantbindsitselftoobserveandcomplywiththetermsandconditionsoftheRegulationsandoftheArrangementManuals,including,butnotlimitedtotheobligationof:

(i) beingaPaymentInstitution,asdefinedinLawno.12.865ofOctober09,2013andinCircularno.3.885ofMarch26,2018;

(ii) respecttherights,dutiesandresponsibilitiessetforthinChapter IX—Responsibilities within the Framework of the Arrangement; Section II—Among Participants ofElo Payment Arrangements oftheRegulations;

(iii) meettheminimumrequirementssetforthinChapter XI—Modality of Participants of the Regulations, Section II—Requirements to become a Participant, Section III—Criteria and General Participation Requirements for Issuers and Participants, Section IV—Criteria and Requirements for each Modality of Participant, Sub-sectionIV—Participants ,oftheRegulations;

(iv) adoptanadequatestructuretomanagetherisksincurredwithintheframeworkoftheEloPaymentArrangements,underthetermsofChapter XII—Risks Incurred bythe Participants oftheRegulationsandunderthetermsoftheregulationsinforce;

(v) respecttheresponsibilitiesprovidedforinChapter VII—Reasons for Rejection and Return of Payment Transactions, oftheRegulations;

(vi) sendinformationonthePurchasePaymentTransaction,asprovidedforinChapter XIII—Operating Aspects within the Framework of Elo Payment Arrangements,Section IV—Conciliation of information between the Participants, oftheRegulations;

(vii) adoptandmaintainastructurededicatedtothedetection,investigation,monitoringandreportingoftransactionsinvolvingfraud,foreignexchangefrauds,moneylaunderingandfinancingtoterrorismorotherillegalactivitiesrelatedtotheprovisionofitsservices,subjecttotheguidelinessetforthinthePolicyofPreventionagainstMoneyLaunderingandAnti-Terrorism,underthetermsdoChapter XIII—Operating Aspects within the Framework of Elo Payment Arrangements, Section V—Prevention to foreign exchange fraud, money laundering and combat to the financing of terrorism ,oftheRegulations;

(viii) notifythecompetentauthorities,underthetermsofthelegislationandregulationsapplicable,withrespecttothemeasurestobetakenasaresultofsuspectsofforeignexchangefraud,moneylaunderingandfinancingtoterrorismoranyothersuspectactivitiesrelatedtotheprovisionofitsservices,aswellastocooperatewithEloandgovernmentalorregulatoryauthority,totheextentofthelegalrequirementsapplicable,intheinvestigationofanysuspectorconfirmedactivityofmoneylaundering,financingtoterrorism,fraudoranyothersuspectactivitiesrelatedtotheprovisionofitsservices.UponElo’srequest,immediatelyinvestigateanysuspectorconfirmedactivity,includingofanyECwhichElosuspectstobeinvolvedinactivitiesofsuchnature;

(ix) reporttoEloandincludingtotheauthorities,theresultsofanyinvestigationrequestedandadoptimmediatecorrectivemeasuresincaseitbecomesaware,inanyway,thatafraudisimminent,probableorongoing;

(x) uponElo’srequest,tomakesurethatanyECassociatedtotheactivitiesforbiddenbytheRegulations,ManualsandEloPolicieshasitsagreementimmediatelyterminated;

(xi) notifyElo,inwriting,withinupto10(ten)days,preferablybye-mail,aboutthereceiptofnotificationorjudgmentwhichdealsaboutthepastorfutureperformanceofanyoftheaccreditedECs,inrelationtoanyoftheirobligationsordutiesprovidedforinthepresentAgreementorintheArrangementManuals,forviolation,oractwhichcanreasonablybecharacterizedasviolationtoanylegalrequirement,includingtoregulatoryapproval,specifically,incaseitbecomesawareof,whenthisinterfereswithorpreventstheperformanceofEloorofanyofitscommercialpartners;

(xii) beresponsible,beforetheregulatory,administrativeandlegalbodies,eithernationalandinternational,underthetermsofthelegislationandregulationsinforce,forcompliancewithitsobligationsrelativetopreventionandcombattomoneylaunderingandFinancingtoTerrorismand“knowyourclient—KYC”policies,oftheECsaccreditedbyit;

(xiii) toadoptmechanismscapableofensuringthesecurityoftheinformationrelatedtoPaymentTransactions,underthetermsofthelegislationinforceandinlinewithChapter XIII—Operating Aspects within the Framework of Elo Payment Arrangements, Section VII—Information Security, oftheRegulations,accordingtoPCIcertificationandrespectingthestateoftheartofthetechnology;

(xiv) toadoptastructurecapableofassuringbusinessmanagementandcontinuitywithintheframeworkoftheEloPaymentArrangements,underthetermsofChapter XIII—Operating Aspects within the Framework of Elo Payment Arrangements, Section VI—Management of Business Continuity, oftheRegulations;

(xv) tocomplywiththeobligationsrelatedtotheuseofEloBrand,underthetermsoftheManualofOperatingRulesandofChapter XIV—Rules on the Use of the Brand,oftheRegulations;

(xvi) toensureinteroperabilitywiththeotherParticipantsandpaymentarrangementseitherintegratingornottheBrazilianPaymentSystem,wheneverapplicable,underthetermsofChapter XV—Interoperability Mechanisms, Section I—Interoperability among Participants ,oftheRegulations;

(xvii) carryouttheaccreditationoftheECs,providestructurefortheprocessingofPurchasePaymentTransactions;

(xviii) maintainacommercialrelationshipwiththeECs,beingresponsibleforobtainingalltheECs’recordinformation,aswellasfortheobligationtokeepthemuptodate,basedontheregulationsinforceandinlinewiththepoliciesofverificationofrecordinformation,validatingthebankingdomiciledatawiththeDomicileInstitutions,makingavailablethenecessaryinformationsothatallprocessingandsettlement,withtheeffectivepaymenttotheECs,isproperlycarriedoutwithintheframeworkoftheEloPaymentArrangements;

(xix) sendtheinformationforsettlementtotheClearingandSettlementClearingHouseaccordingtothepaymentscheduleoftheestablishments,rulesandlayoutsdefinedbytheClearingandSettlementClearingHouse;

(xx) meetthepaymentpositionattheClearingandSettlementClearingHouse,todebitortocredit;

(xxi) imposetoECsandSub-accreditorsobservancetotheRegulationsandtheArrangementManualsinwhateverapplicabletothem,includingwithreferencetoinformationsecurity;

(xxii) carryoutthepaymenttotheEC,bymeansoftheClearingandSettlementClearingHouseand/orLiquidationBetweenArrangements(incaseofinteroperability,thisshalltakeplaceunderthetermsdefinedintheregulationinforce),respectingthedeadlineandthetermssetforthintheRegulationsandintheArrangementManuals;

(xxiii) presentthesupportingdocumentationtotheIssuerwithinthedeadlinerequiredbyElo,inaccordancewiththerulesapplicabletocancellations,chargebacks andreturnsofPurchasePaymentTransactions;

(xxiv) definitelycreditordebitthepaymentofthePurchasePaymentTransactiontotheEC,oncetheChargeback issolved;

(xxv) providenetworkserviceswithintheframeworkofEloPaymentArrangements;

(xxvi) refrainfrompracticinganynon-competitiveordiscriminatoryactinrelationtoElotowardsotherflags,aswellasanyactthatunderminesElo’srelationshipwiththeECandtherelationshipbetweentheParticipantsofEloPaymentArrangements,assuringsecurity,protectionoftheeconomicinterests,privacyandprotectionofECs’data;

(xxvii) adheretotheClearingandSettlementsystem,underthetermsofChapterVoftheRegulations;

(xxviii) provideElowithallandanyinformationforthegoodandfaithfulcompliancewithitsobligations,sendingthenecessaryfilesforexecutionofElo’sactivities,intheformandwithintheperiodicityinformedbyElo;

(xxix) informandmakeavailabletoElo,intheformandwithintheperiodicityshownintheRegulationsandArrangementManuals,thestatus ofthesettlementsmadeandnotcarriedoutintheaccountsoftheECs.Forunrealizedsettlements,identifytheinconsistencythatgeneratesthefailureinsettlement,providethecorrectionandresendtheinformationforsettlement;

(xxx) sendtheanalyticalinformationtotheDomicileInstitutionstomakethesettlementoperational,throughandaccordingtotheguidelinesoftheClearingandSettlementClearingHouse,withpaymentinformationtotheECs,whichshallbeusedbytheDomicileInstitutionsexclusivelyforcredittotheECs,underthetermsoftheapplicablelegislationand,whenapplicable,oftheAgreementofDomicileInstitutionParticipationinEloPaymentArrangements;

(xxxi) participateintheprocessforsettlementofthePurchasePaymentTransactionsascreditorbeforetheIssuer,inaccordancewiththerulesofEloPaymentArrangements;

(xxxii) complywithalltheaccessoryobligationssetforthintheregulationsandinthelegislationinforce;and

(xxxiii) nottodiscriminatetheEloBrandandanyofitsproducts,preventingselectiveauthorization,aswellasensuringthatnobrandshallhavemoreprominenceandvisibilitythantheEloBrandinsignalingrelativetoacceptance,exceptinpromotionalcampaignsspecificforthepromotionofanybrand,ensuringnon-discriminatoryaccesstotheservicesandtotheinfrastructuresnecessaryforthefunctioningofEloPaymentArrangements.

4.3WithoutprejudicetotheotherobligationsforeseeninthepresentAgreement,thePartiesbindthemselves,forallandanypurposes,nottogive,offer,pay,promise,orauthorizethepaymentof,directlyorindirectly,anymoneyoranyvaluablethingtoanygovernmentalauthority,consultants,representatives,partnersoranythirdparties,forthepurposeofhavinginfluenceonanyactordecisionofthepublicagentorofthegovernment,ortoensureanyundueadvantage,orpracticeanyactwhichviolatestherulesoftheanti-corruptionlegislations(Law12.846/2013).

4.4.ToensurecompliancewiththeobligationsreferredtointhepresentAgreementaswellasthoseattributedtotheSub-AccreditorParticipant,theAccreditorbindsitselftoprovide,tothebenefitofElo,irrevocableandirreversibleguaranteeswithinthetimingandintheformrequestedbyElo,pursuanttotheproceduresapprovedbyElo’sCreditRiskCommittee.

4.5Eloshallnotpracticeanynon-competitiveordiscriminatoryactinrelationtotheParticipant,relativetootheraccreditors,oranyactwhichharmstherelationshipbetweentheParticipantwiththeECandtheisonomybetweentheParticipantsofEloPaymentArrangements,ensuringthesecurity,protectionofeconomicinterests,privacyandprotectiontoParticipant’sdata.

4.6ElobindsitselftoimmediatelyinformtheParticipant,aboutanychangetotheRegulationsandkeeptheupdatedversionoftheRegulationsinforceavailableforconsultationatthefollowingaddressoftheworldwidenetworkofcomputerswww.eloportal.com.br/.

CLAUSE VAdditional Obligations of the Participant

5.1.FurthertotheotherconditionsandobligationsprovidedforinthepresentAgreement,intheRegulations,ArrangementManuals,Policies,specifications,bulletinsandotherdocumentsissuedbyElo,includingbymeansofitswebsite,theParticipantrecognizestheneedtocomplywiththefollowingobligationsasaconditiontoreceiveandmaintaintheauthorizationforparticipationobjectofthepresentAgreement:

(i) ComplywithalltheobligationsassumedinthepresentAgreement,aswellasrespecttheconsumerprotectionanddefenseofcompetitionnorms,aswellasthelawsandregulationsapplicabletotheactivitiesperformedbytheParticipantswithintheframeworkoftheEloPaymentArrangements;

(ii) makeavailablealltheinformationnecessarytocomplywiththeapplicableregulations,normssetforthbyElo,ArrangementManuals,specifications,bulletinsandotherdocumentsissuedbyElo,includingbymeansofitswebsite;

(iii) intermediatedisputeswiththeECsandIssuers,incasethePaymentTransactionspresentanyirregularity,underthetermsoftheRegulations;

(iv) receiveandanalyzethedisputessentbytheIssuers,aswellasthepre-arbitrationrequest,ifnecessary,withthedueargumentsorprovingdocumentationandmeettheregulatorydeadlinesetbyEloandunderthetermsoftheArrangementManuals;

(v) ensurethatthetrafficandstorageoftheEloPaymentInstrumentdata,inwhateverunderitscompetence,complywiththeapplicableinformationsecuritystandards;

(vi) observeandimplementmeasurestomitigatetheoperational,creditandliquidityrisks,asrequiredundertheregulationsinforce;

(vii) endeavoritsbesteffortstopromoteandencouragetheuseofEloPaymentInstrumentswiththeECs;

(viii) directlyprovidealltheequipment,facilitiesandinputs,includingthoseofatechnologicalnature,necessaryforthecapture,authorizationandsettlementofthePurchasePaymentTransactions,thusassuringtheintegrityofthesystemsofcapture,authorization,processing,liquidation,rejectionandreturnofthePurchasePaymentTransactions,refrainingfromgrantingorallowingtheuseofsecuritymechanismsoftheEloPaymentArrangementstothirdpartieswithoutthedueauthorizationofElo;

(ix) providetheinformationand/ormaterialsanddocumentsrequestedbyEloandwithinthedeadlinerequiredbyElo,subjecttotheobligations,thecriteriaofreasonabilityandproportionalityandobservingthetermsofthepresentAgreement;

(x) participateintheprocedureforliquidationunderthetermssetforthandagreedinthepresentAgreementandintheRegulations;

(xi) remainboundtopaymentofthePurchasePaymentTransactionsbeforetheECs,assetforthintheRegulationsandinthepresentAgreement;

(xii) forwardtoElo,wheneveroperationallypossible,alltheinformationreceivedfromtheECs,relativetojudicialdecisions,notifications,noticeswhichcanberelevantforand/orwhichimpacttheliquidationprocedure;

(xiii) previouslyinformtoEloanychangesinitsheadquartersand/oranysubstantialchangestoitscorporatestructure,ortoitsdirectorindirectcontroland/orcorporatereorganization;

(xiv) tokeepperiodicalscreeningsoftheECsinordertoverifytheirinclusionintheOfficeofForeignAssetsControl(OFAC)lists,immediatelyinformingEloabouttheexistenceofECsthatintegratesuchlistsorthatmightcometointegratethem;

(xv) proceedtotheimmediateterminationofagreementswithECsthatareorcanbeincludedintheOfficeofForeignAssetsControl(OFAC)lists;

(xvi) constitutethefollowingprocesses,susceptibletoaudit:(a)fraudcontrolprocess,(b)preventiontomoneylaunderingandcombattoterrorism,(c)contingencyanddisasterrecoveryplan,(d)contingencyplan;(e)informationsecurity;and(f)anti-corruptionpolicies;

(xvii) makeitevidentthecompliancewithCentralBanknorms,includingthoserelatedtotheprovisionofguarantee,wheneverrequestedbyElo,inordertopreventand/ormitigatetherisksrelatedtothepossibilityofdefaultofthePurchasePaymentTransactionsasdescribedintheArrangementManualsandintheRegulations;

(xviii) refundEloforalltheexpensesincurred,includinglawyers’fees,costsandpossibleconvictions,duetotheneedtodefendtheinterestsofElo,injudicialand/orextrajudicialactionsdirectlyfiledbyanythirdpartyduetotheprovisionoftheParticipant’sservicesobjectofthepresentAgreement,providedthatpreviouslyagreedbytheParticipant.AnymodificationtotheconditionsagreedontheguaranteeshallresultinterminationofthepresentAgreement,withoutprejudicetothevalidityoftheobligationtoprovideservicesanditsrespectivepayment;

(xix) ensuretheintegrityofthesystemsofcapture,authorization,processing,liquidation,rejectionandreturnofEloPaymentArrangementtransactions;and

(xx) ensurethesecurity,protectionofeconomicinterests,non-discriminatorytreatment,privacyandprotectionofthedataofCommercialEstablishments.

5.2.TheParticipantisforbiddentoprovidetheservicesobjectofthepresentAgreementonamisleading,falseformorotherwisetoreflectnegativelyonthereputationofElo’sbrandandimage,aswellasthatofanyoftheParticipantsofEloPaymentArrangementsandofElo’stradingpartners.

5.3Elobindsitself,beforetheParticipant,fortheexerciseofitsactivities,tocomplywiththeprovisionsunderthenormsandintheRegulationsinforce,inspecial:(i)theprovisionsunderChapter IX—Responsibilities within the Framework of the Arrangement, section I—Between the Institutor of the Arrangement and its Participants; (ii) inChapter XII—Risks Incurred by the Participants; (iii) Chapter XV—Interoperability Mechanisms and(iv)toinformtheParticipant,wheneverallowedbythelegislationandregulationsinforce,thecarryingout/occurrenceoffraudsbytheholdersand/orCommercialEstablishments.

CLAUSE VIRepresentations, Rights and Warranties

6.1TheParticipantherebyrepresents:(i)tohavereceivedafullcopyoftheRegulationsandtheArrangementManuals,withwhichitexpresslyagrees,assuringthatitshallalwaysobserveandcomplywiththeirterms,obligations,conditionsandrequirements,and(ii)beingawarethattheArrangementManualsaresubjecttoconstantchanges,whichshallbeavailableatElo’swebsite,bindingtheParticipantsincethecommunicationbyEloofitsavailability.

6.2.EachPartyisacompanydulyconstitutedandvalidlyoperatingunderthelawsofBrazilandhasfullcapacity,legalpowersandauthorizationstoholditsownassets,conductthebusinessinwhichitisinvolvedandcomplywiththeobligationssetforthinthepresentAgreement.

6.3.EachPartyauthorizedthesignature,havingthetechnicalandoperationalcapacity,powersandauthorizationnecessarytodeliverandcomplywiththepresentAgreement.Noothercorporatemeasure,includingapprovalfromtheshareholdersorfromthemanagement,byanyofthePartiesshallberequiredtoauthorizethesignatureandcompliancewiththepresentAgreement.

6.4.ThepresentAgreementconstitutesavalid,bindingandenforceableobligationbetweenthePartiesinaccordancewithitsterms.

6.5.ThesignatureandcompliancewiththeobligationsbytheParties,asprovidedforinthepresentAgreementdoesnotrequireobtaininganyadditionalauthorizationfromanythirdpartyoranyGovernmentalAuthority.

6.6.ThesignatureofthepresentAgreementshallnot:(i)resultinconflictorviolationtoanyLawapplicabletoanyoftheParties;(ii)relyuponanyconsent,approvalorauthorizationby,notificationto,orfilingorregistrationwith,anyPerson,entity,court,GovernmentalorRegulatoryAuthority,otherthanasexpresslyprovidedforinthepresentAgreement;(iii)resultinviolation,non-compliance,conflictnorshallitotherwiseconstitute,enableorresultintheearlyexpirationofanyobligation,terminationofanyagreementoradjustmententeredintobytheParties;(vi)resultinanyAdverseMaterialEffectinrelationtoanyoftheParties.

6.6.1.Withoutprejudicetotheaboveprovisions,Elorepresentsandwarrantsthat(i)thepresentAgreementisandshallremain,fullyinaccordancewiththeprovisionsforeseenintheRegulations,subjecttoapprovaloftheCentralBank,underthetermsoftheregulationapplicableand(ii)anychangepromotedbytheCentralBank,totheRegulationsshallbemadeongood-faith,consideringthereasonabilityintheperformanceofthebusinesses.

6.7.Theexercise,bytheParticipantandbyElo,oftheServicesprovidedforinthepresentAgreementshallbeconductedbytheWorkTeamoftheParticipantorElo’s,asapplicable,whosefiscal,socialsecurityandlaborresponsibilitiesshallbeundertheexclusiveresponsibilityofthese,includingallandanyexpenses,eitherarisingfromtransportation(byairand/orland),stayand/ormeals.By“WorkTeam”itshouldbeunderstoodtheemployees,agents,subcontractedpersonnel,directors,partnersandanyotheremployeeoftheParticipantorElo’s,involved,directlyorindirectly,intheexerciseofsuchfunction.

6.8.ThePartiesherebyrepresent,foralllegalpurposesandunderthelaw,tobethesoleemployersand/orentitiesresponsiblefortheirrespectiveworkersassignedtoperformtheservicesprovidedforwithintheframeworkofthepresentAgreementand,insuchquality,theyassumetheresponsibilityforcompliancewiththeentirelabor,socialsecurity,taxandcivillegislations,aswellasofanyothernature,includingforpaymentofallfederal,state,municipalandautarchictaxesandforcompliancewiththecollectivelabornormsalreadyexistingorwhichcometobecreatedduringthevalidityofthepresentAgreement,relativetotheperformanceofthefunctionsobjectofthepresentAgreement,exemptingtheotherPartyfromsuchresponsibility,evenifbyjudicialdecisionitcomestobedeclaredthejointandseveraland/orsubsidiaryresponsibilityofthelatter.

6.9.ThePartiesherebyrepresentandwarranttooneanotherthattheyholdthepropertyortherighttouseallandanypatents,applicationsforpatent,trademarks,eitherregisteredornot,applicationsfortrademarkregistration,copyrights,author’srights,includingcopyrightsonsoftware,industrialdrawings,utilitymodels,businessorindustrysecretsandnon-patentedknow-how ortechnologywhichconstitutebusinessorindustrysecretstobeusedunderthetermsofthepresentAgreementforthecarryingoutoftheServices(“IntellectualProperty”).TheIntellectualPropertytobeusedand/orprovidedbyeitherPartiesunderthetermsofthepresentAgreement,aswellasitsuseorutilizationforthecarryingoutoftheServices,doesnotconstitutenorshallitcharacterizeviolationtoorundueappropriationofanypatent,copyrightoranyotherIntellectualPropertyofanythirdparties.

6.10.ThepresentAgreementdoesnotgenerateanytypeofexclusivitybetweentheParties.

CLAUSE VIISecrecy and Confidentiality

7.1.GiventhenatureoftheParties’activities,theobjectofthepresentAgreementandbecauseitissoagreed,thePartiesacknowledgethat,intheexerciseoftheirattributions,theymightvoluntarilyorinvoluntarilyhaveaccess(“ReceivingParty“)toexclusiveorconfidentialinformationoftheotherParty,oftheirclientsorofthirdparties(“DisclosingParty”)and,therefore,theybindthemselvesandthepersonsrelatedtothemtomaintainthemostabsolutesecrecy,refrainingfromcopying,reproducing,selling,assigning,licensing,commercializing,alienating,transferringordisposingofallandanyConfidentialInformation,underthepenaltyofbearinganylossesanddamagesitcausesduetoviolationtotheprovisionsofthisClause,withoutprejudicetothepossibleapplicationoffine.

7.1.2ConsideringthatintheprocessingofthetransactionscarriedoutwithintheframeworkoftheEloPaymentArrangementthereshallbesharedwithEloinformationwhichisormightcometobeconsideredsensitiveintermsofcompetition,EloshallensuretotheParticipantthatitsinformationconsideredcompetitivelysensitiveshallnotbeaccessedbythirdparties,includingbyinstitutionswhichoperateinthesamesegmentastheParticipant,includingtothoseaffiliateswhichholdashareholdingrelationwithElo(“EloGroup”and“InformationBarrier”,respectively).

7.1.3ThepurposeoftheInformationBarrieristoensureadequatetreatmentoftheinformationsharedbytheParticipantwithElo,undertheguaranteethat(i)theinformationshallbeaccessedonlybypersonsauthorizedforthepurposeofprocessingthepurchasetransactionscaptured,eitherdirectlyorindirectly,bytheParticipant,beingforbiddentheutilizationforanypurposeotherthanthoseprovidedforinEloPaymentArrangements,eitherbyEloorbyanycompanyoftheEloGroup;(ii)theintegrityoftheinformationprovidedshallbemaintained;(iii)themethodsusedintheinformationprocessingshallbesecured;and(iv)theinformationshallbestoredinanenvironmentsegregatedfromEloPaymentArrangements,beingthattheaccesstotheinformationcompetitivelysensitiveshallonlybeallowedtoElo.

7.1.4.ThecompliancewiththeprovisionsinClause7.1.3.aboveshallbeensuredupontheadoptionofinformationsegregationmechanismswhichshallpreventaccessbynon-authorizedpersons,withoutprejudicetotherightattributedtotheParticipant,underthetermsofclause4.1,item(v)and4.1.1.

7.2.ThePartiesshallneitherhavenorshalltheyclaimanyrightinrelationtotheConfidentialInformationoftheotherParty.NoConfidentialInformationoftheotherPartyshallbedisclosedorassigned,atanytitle,tothirdparties,soconsideredincludingthosebelongingtothesameeconomicgroupoftheParties,eitherbyactsoromissionsofthePartywhichreceivedit,orofitsadministrators,employeesorcontractedpersonnel.Elo’sandtheParticipant’sConfidentialInformationshallnotbeusedbytheotherPartyforanypurposeotherthanforthedirectexecutionoftheServices,andforparticipationoftheParticipantinEloPaymentArrangements.ThedisclosurerestrictionprovidedforinthisClauseVIIisextendedtotheemployeesandtheParty’scontractedpersonnelwhichreceivedtheConfidentialInformation.

7.3.ThePartiesshalluseallthenecessarycaretopreventthedisclosuretothirdpartiesofanyConfidentialInformationoftheotherParty.IncaseofanydisclosureormisleadingofanyConfidentialInformationoftheDisclosingParty,theReceivingPartyshallimmediatelyinformtheDisclosingPartyassoonasitbecomesawareofsuchfact.

7.4.ThedutyofsecrecyandconfidentialityprovidedforinthisClauseshallremaininforceevenafterterminationorextinctionofthisAgreementforaperiodof60(sixty)monthsfromthedateofitsterminationorextinction,exceptforthedataandinformationoftheParticipantsofEloPaymentArrangementsand/ortheirClientsorothersprotectedbybanksecrecy,whichfortheirnaturemusthavethesecrecypreservedonapermanentbasis.

7.5.UponextinctionorterminationofthepresentAgreement,eachofthePartiesshallreturnordestroy,asinstructedbytheotherParty,allthematerialinanymediathatcontains,referstoorisrelatedtotheConfidentialInformationoftheotherParty,andcanretaincopiesonly(i)ofwhatislegallyrequiredornecessarytoprovethecompliancewiththepresentAgreement;or(ii)inaccordancewithElo’sortheParticipant’sinternalpoliciesofdocumentretention,inwhichcasetheobligationsofconfidentialityhereinprovidedforshallcontinueinforce.

7.6.ThedutyofsecrecysetforthinthisClauseshallnotapplytoanyinformationthattheReceivingPartycanprovethat(i)atthetimeofitsdisclosure,wasofpublicdomain;(ii)afteritsdisclosure,ispublishedorotherwisebecomesofpublicdomainwithoutbeingbyfaultoftheParties;(iii)hasbeenreceivedafterdisclosurebythirdpartieswithlegalrighttodisclosesuchinformationwithoutanyobligationtorestrictitsuseoradditionaldisclosure;(v)hasbeenindependentlydevelopedbytheReceivingPartywithoutreferencetoConfidentialInformationoftheDisclosingParty;or(vi)mustbedisclosedbytheReceivingPartybyforceofarequestissuedbyanyGovernmentalAuthority.

7.7.IncaseanyofthePartiesisforcedtodiscloseanyConfidentialInformationasrequiredbyanyLaworuponrequestofanyGovernmentalAuthority,theReceivingPartymust,immediatelyuponreceiptofsuchrequestandbeforedisclosingit,informsuchfacttotheDisclosingPartyandcooperate,ifrequested,topreventthedisclosureofsuchConfidentialInformationandadoptthelegalmeasuresrequestedbytheDisclosingPartywhicharenecessarytoprotecttheinformation.Incasethereferredtolegalmeasuresarenotapplicable,possibleorhavenoeffect,theReceivingPartymustinformonlywhathasbeenlegallyrequestedandshallendeavoritsbesteffortstoobtainthenecessaryprotectionoranyotherreliableguaranteethatthedisclosedinformationshallreceivethesameconfidentialtreatmentgiventotheConfidentialInformation.

7.8.WithoutprejudicetotheprovisionsofthisClausewithrespecttotheConfidentialInformationonthePurchasePaymentTransactionscarriedoutbytheUsersand/orbytheECsaccreditedbytheParticipant,thelattershallbefullyresponsibleforthesecrecyofsuchConfidentialInformationandshallhandleandstoreitinsuchawaythatalwaysprotectsit,throughtheadoptionandconstantreviewofitsinternalproceduresandthetechnologyusedandEloshallbeequallyresponsibleforthesecrecyofalltheinformationwhichithasaccessto,asprovidedforundertheregulationsinforce.

7.9.ThePartiesrepresenttobeawareofandbindthemselvestocomplywithalltheprovisionsofthedocument“SecurityAssessmentRequirementsandProcedures”issuedbythecompanyPCI Security Standards Council, LLC,irrevocablyandirreversiblyassumingfullandentireliabilityforanypersonal,moralormaterialdamagesandlossesthatmightbesufferedbytheotherPartyorbythirdpartiesasaresultofnon-observanceofthe“Securityassessmentrequirementsandprocedures”onthepartoftheParticipantorElo,theiremployeesorcontractedpersonnel.

CLAUSE VIIIElo Rights

8.1.ElomightrequiretheParticipanttoannuallycontracttheaudititindicates,attheParticipant’sexpense,providedthatatreasonablepricespracticedinthemarket,forverificationofthefullcompliancewiththerulescontainedintheArrangementManualsandRegulations.Theauditshallbecarriedoutwithinamaximumof30(thirty)workingdaysafterformalizationofElo’srequesttotheParticipant,andtheresultofsuchwork,dulyvalidatedbytheoneresponsible,shallbedeliveredtoElo,withcopytotheParticipant.

8.2.WithoutprejudicetotheprovisionsinthepreviousClause,Eloreservesitselftherighttocarryoutadditionalaudits,attheexpensesoftheParticipant,providedthatonajustifiedform,tobeconductedbyitselforbythirdpartiescontractedbyit,and/ordemandinformationandadditionaldocumentsfromtheParticipant,provenlynecessaryfortheexecutionoftheaudit.

8.3.InadditiontotheobligationscontainedinthepreviousClauses,theParticipantshallbesubjecttoanannualevaluationtobeconductedbyElo,orbythirdpartiesappointedbyit,attheParticipant’sexpense,withanaimatconfirmingthecompliancewiththetermsofthepresentAgreement.

8.4.ItisherebyassuredtoElotheright,atanytimeanduponpriornoticeaddressedtotheParticipantwithinatleast30(thirty)daysinadvance,toconduct,attheParticipant’sexpense,localassessments,duediligences,andothercertificationprocedures,includingaudits,strictlynecessarytoprovethecompliancewiththecurrentregulationsandlegislationsinforce,underthetermsofthepresentAgreement,especiallytheobligationsrelatedto(i)fraudcontrolprocess,(ii)preventiontomoneylaundering,combattoterrorismandanti-corruptionlaws,(iii)contingencyanddisasterrecoveryplan,(iv)contingencyplan;(v)informationsecurity;and(vi)periodicscreeningoftheCommercialEstablishmentstoverifytheirinclusionintheOfficeofForeignAssetsControl(OFAC)lists.

8.5.Elocan,atitssolediscretion,disaccredittheParticipantwhichmisrepresentsthepurposeofusingEloPaymentInstruments,asprovidedforinthepresentAgreement,intheRegulationsandintherulesapplicabletotheuseandcommercializationofEloPaymentInstruments,aswellastorequiretheParticipanttodisaccreditECsthatactinthatsameway.

8.5.1.IncaseofoccurrenceofanysituationwhichsupposedlycausedthedisaccreditationoftheParticipant,Eloshouldnotifyittopresentinformationandverifythegroundsofthesituationbasedontheprinciplesofthecontradictoryandoftheduelegalproceedings.

8.6.TheParticipantwhichomitsrelevantinformationorpracticesanynon-competitiveordiscriminatoryactthatimpairstheproperfunctioningoftheEloPaymentArrangementsshallbesubjecttowarning,suspension,fineand/orexclusionfromtheEloPaymentArrangements,atElo’sdiscretion,andbasedontherecurrenceandseverityofthenon-compliance.

CLAUSE IX

USE OF THE BRANDS

9.1.ThePartiesagreethat,withintheframeworkofthepresentAgreement,theirrespectiveBrandscanbeused,recognizingandagreeingthat:

(i) AllandanyformofutilizationoftheotherParty’sBrandsmustbepreviouslyapprovedbythePartywhichtherespectiveBrandbelongsto;

(ii) ItisforbiddentoonePartytoassign,license,sell,negotiateorotherwisetransfertheutilizationoftheotherParty’sBrandtoanythirdparties;

(iii) MustensurethegooduseoftheotherParty’sBrandandbindthemselvestopreventtheutilizationoftheotherParty’sBrandinoperationsorservices:(i)offensiveorinjurioustoethics,moralityandgoodmanners;and/or(ii)thatcoulddenigratetheintegrityandreputationoftheBrand;and/or(iii)thatinanywayresultinviolationtotheprovisionsoftheBrazilianlaw,especiallythosedealingwithconsumerprotectionand/orwhichinanywaydiscriminatestheBrandinanyofitsproducts;and

(iv) TheyshallnotusetheotherParty’sBranddifferentlyfromwhathasbeenapprovedbythePartywhichtherespectiveBrandbelongsto.

9.2.Withoutprejudicetowhatisdescribedabove,theParticipantbindsitselftouseElo’snameandBrandsonlyandexclusivelytopromotetheacceptanceofthePaymentInstrumentsissuedbyit,respectingthecharacteristicsoftheBrands,Elo’sintellectualpropertyrightsandtheapplicablelegislation.

CLAUSE XValidity and Rescission

10.1.ThepresentAgreemententersintoeffectonthedateofitssignatureandshallremaininforceforundeterminedtime,butcanbeterminatedatanytime,byeitherPartyandwithouttheincidenceofanychargeorpenalty,upon90(ninety)-daypreviousnotice.

10.2.ThepresentAgreementcanbeterminatedwithimmediateeffects,atanytime,byeitherParty,orwheneverrequiredunderthelaw,intheoccurrenceofanyofthefollowingcircumstances:

(i) failuretopayorlatepaymentbyElo,whichexceedsthedeadlineof30(thirty)daysfromitsrespectiveduedate;

(ii) non-compliancewithanyoftheobligationsagreedbetweenthePartiesunderthetermsofthepresentAgreement,whichisnotdulycorrectedwithin15(fifteen)daysafternotificationinwritingfromtheotherParty;

(iii) non-compliancewiththeobligationsrelativetotheuseoftheEloBrand;

(iv) violationorinaccuracyofanyrepresentationorwarrantyprovidedinthepresentAgreementnotsolvedwithin15(fifteen)daysafterwrittennotificationfromtheotherParty;

(v) actofGodormajorforcewhichpersistsforover30(thirty)days,makingtheexecutionofthepresentAgreementimpossible;

(vi) decreeofbankruptcy,(judicialorextrajudicial)recuperation,liquidationprocess,interventionorsubmissiontotheRegimeofTemporaryAdministration–RAEToranysimilarproceedinginvolvingtheotherParty;

(vii) non-compliancebytheAccreditorwithitsobligationsrelativetotheprocedureforprocessingandliquidationofECsoperations;

(viii) iftheAccreditorundergoesasignificantchangeofcontrol,mergerorconsolidationwithanyotherPartyresultinginthetransferofcontroltoacompetitorofElo;

(ix) exclusionoftheAccreditorfromtheEloPaymentArrangements,underthetermsofChapter VIII—Penalties Applied, oftheRegulations;or

(x) iftheAccreditordiscriminatestheEloBrandinanyform.ItshallnotbeconsideredasdiscriminationoftheEloBrandthecarryingoutoftradeand/orincentiveactionswiththirdparties;

10.3.TheterminationofthepresentAgreementdoesnotreleasethePartiesfromcomplyingwithanyobligationswhich,duetotheirnature,extendbeyondtheexpirationorterminationoftheAgreement,whichshallremaininforceuntiltheyarefulfilled.

10.4WithoutprejudicetothetermsandconditionsforterminationofparticipationprovidedforintheRegulationsandinthepresentAgreement,EloshallensuretotheParticipanttherighttosetaplantoconcludeitsactivitiesincaseofcontractrescission(run-off),thedeadlinesandconditionsofwhichshallbenegotiatedongood-faithbetweenEloandtheParticipant,exceptfortheapplicationofthedisaccreditationpenalty.

CLAUSE XIIndemnification

11.1.WithoutprejudicetothepenaltieswhicharepartoftheManualofTariffsofEloPaymentArrangements,applicabletothecasesofnon-compliancewiththeobligationswhicharepartoftheRegulations,oftheArrangementManualsandofthepresentAgreement,eachofthepartiesagreestoindemnifyandkeeptheotherPartyreleasedfromallandanydirectlossesanddamagesordirectlosseswhich,provenlyandexclusively,theycausetotheotherPartyasaresultoftheirparticipationintheEloPaymentArrangementsandtheserviceprovisionobjectofthepresentAgreement,includingthoseresultingfromnon-compliancewiththeobligationsrelativetotheuseoftheEloBrands.TheliabilityassumedbyeachofthePartiesbeforetheotherPartyforthelosses,damagesanddirectlossesthattheybindthemselvestoindemnifyincludestheamountsdemandedbythirdparties,anddoesnotinclude,inanyway,lossofprofitsandindirectlossesordamages,atanytitle.

11.2.TheindemnificationprovidedforinClause11.1additionallyappliestoeventsthathavespecificpenaltiesandindemnitiesprovidedforintheRegulations,suchasthepenaltiesprovidedforinChapterVIII—Penalties Applied ,oftheRegulations.

CLAUSE XIIGeneral Provisions

12.1.ThePartiesagreeandrepresentthatallthetermsandconditionsunderthepresentAgreementarevalidandbindingsincethedateofsignatureofthisAgreement,beingthePartiesboundasestablishedherein.

12.2.Thecommunicationsand/ornotificationsbetweenthePartiesarisingfromthisAgreementshallbemadebyregisteredletterorelectronicmail(e-mail)withacknowledgmentofreceipt,totheaddressesindicatedbelow.EitherPartycanchangetheaddresstowhichthecommunications/notificationsaretobeforwardedandinformtheotherPartyofthenewaddress.

IftoELO:Elo Serviços S.A.AlamedaXingu,no.512,5thfloor,Alphaville,BarueriE-mail:[email protected].:Mr.MarceloMarques

IftotheParticipant:Pagseguro Internet S.A.AvenidaBrigadeiroFariaLima,no.1384,10thfloor.CEP:01451-001E-mail:[email protected].:AlexandreMagnani

12.3.ThepresentinstrumentshallbegovernedandinterpretedundertheLawsoftheFederativeRepublicofBrazil.

12.4.Nomodification,waiverorchangetoanyterms,conditionsorprovisionsnowagreedinthepresentAgreementshallenterintoeffectexceptanduntilformalizedbyanamendmentdulysignedbythePartiesorbytheirlegalrepresentatives.

12.5.Eloisallowedtoassignortransfer,fullyorpartially,therightsandobligationsarisingfromthepresentAgreement,uponpreviouscommunicationinwritingtotheParticipant.TheassignmentoftherightsandobligationsarisingfromthepresentAgreementshallbeallowedtotheParticipanttoaRelatedPersonwithoutpreviousandexpressauthorizationinwritingbyElo.Inthiscase,Eloshallbenotifiedwithin60(sixty)daysinadvanceandtheRelatedPersonmustnecessarilybelongtoPagSeguroGroupandmeetthetechnical-operationalrequirementsstipulatedintheregulationsinforce,inthepresentAgreementandinEloManuals.Forthepurposeofthisclause,RelatedPersonshallbeconsideredcolligated,controlled,controllingcompaniesorthoseunderthesameshareholdingcontrolastheParticipant.

12.6.AnytoleranceoromissionbyanyofthePartiesshallnotimplywaiver,pardon,novationorchangetowhatisadjustedinthepresentAgreement,aswellaswaivertodemandcompliancewiththeprovisionscontainedhereinoroftherighttorequestinthefuturethecompleteexecutionofeachoftheobligationssetforthinthepresentAgreement.

12.7.NoprovisionunderthepresentinstrumentshallbeinterpretedsoastoplacethePartiesinarelationshipofpartners,associated,membersofanyconsortium,holdersofcommodatum,jointventuremembersorholdersofjointandseveralorsubsidiaryliability,aswellasneitherPartyshallbeentitledtoprovideguaranteeormakeanyrepresentationonbehalfoftheother,forcingorbindingit,exceptinrelationtowhatisagreeduponinthepresentAgreement.

12.8.IfanyprovisioninthisAgreementisdeclaredorconsideredtobeunlawful,unenforceableorvoid,underthetermsoftheapplicablelegislation,bothPartiesshallbereleasedfromcomplyingwiththeobligationssetforthinthereferredtoprovision,butonlytotheextentthatsuchprovisionisunlawful,unenforceableorvoid.Intheeventoftheforegoing,theParties,bymutualagreement,shallamendthepresentAgreement,modifyingthatprovision,totheextentnecessarytorenderitlegalandenforceable,whilepreservingitspurposeor,ifthisisnotpossible,replacingitbyanotherprovisionthatislegalandenforceable,andwhichreachesthesameobjective.

12.9.IfanyprovisioncontainedinthepresentAgreementissubsequentlyconsideredvoid,unlawfulorunenforceable,theenforceabilityoftheremainingprovisionsshallnotbeaffectedorimpaired.

12.10.ThepresentAgreement,togetherwithallitsAttachments,constitutestheentireagreementbetweenthePartieswithrespecttoitsobjectandsupersedesallpreviousproposals,negotiations,discussionsandunderstandingsbetweenthePartieswithrespecttotheobjectofthepresentAgreement.

12.11.AnylitigationarisingfromthepresentAgreementorrelatedtoitshallberesolvedbyarbitration,managedbytheCenterofArbitrationandMediationoftheChamberofCommerceBrazil-Canada,inaccordancewithitsregulations,withthearbitrationcourtbeingformedbythreearbitrators.ThearbitrationshallbeheadquarteredinSãoPaulo/SPandconductedinthePortugueselanguage,observingtheconfidentialityoftheproceeding.

12.1.1Alltheexpensesandfeesrelatedtothearbitration,aswellasarbitrators’andexperts’feesshallbebornebythedefeatedParty.

12.11.2Fortheexclusivepurposesofanycoerciveorurgentmeasure,aslongasthearbitrationtribunalisnotconstituted,thePartieselectthecourtofthedistrictofSãoPaulo/SPastheoneexclusivelycompetentforthat.

12.12TheconditionsofthepresentAgreementarealsovalidforthesuccessorsoftheParties.

Page of Signatures of the Agreement for Accreditor Participation in Elo Payment Arrangements, entered into by Elo Serviços S.A. and PagSeguro Internet S.A. on February13, 2019.

ANDINWITNESSWHEREOF,thePartiessignedthepresentAgreementin2(two)counterparts,inthepresenceoftheundersignedwitnesses.

Barueri,February13,2019.

ELO SERVIÇOS S.A.

1. /S/CARLOSALBERTOC.MOREIRAJR. 2. /S/EDUARDOCHEDIDName: Carlos Alberto C. Moreira Jr. Name: Eduardo ChedidPosition: ExecutiveDirectorofBusinessandProductDevelopment Position: President

PAGSEGURO INTERNET S.A.

1. /S/CARLOSALBERTOC.MOREIRAJR. 2. /S/RENATOBERTOZZODUARTEName: Carlos Alberto C. Moreira Jr. Name: Renato Bertozzo DuarteCPF: 289.059.258-80 CPF: 212.549.598-82

3. /S/RICARDODUTRA Name: Ricardo Dutra CPF: 194.681.388-52

Witnesses:

1. /S/NATHALIAC.R.DEFARIA 2. /S/LEANDRO[ILLEGIBLE]Name: Nathalia C. R. de Faria Name: Leandro [illegible]RG: 30533696-4 RG: 21.334.302-4

Exhibit 8.1

Subsidiaries of PagSeguro Digital Ltd.1. PagseguroInternetS.A.(Brazil)2. BoaCompraTecnologiaLtda.(SubsidiaryofPagseguroInternetS.A.)(Brazil)3. NET+PhoneTelecomunicaçõesLtda.(SubsidiaryofPagseguroInternetS.A.)(Brazil)4. BCPSOnlineServices,Lda(SubsidiaryofPagseguroInternetS.A.)(Portugal)5. R2TechInformáticaS.A.(SubsidiaryofPagseguroInternetS.A.)(Brazil)6. NetposServiçosdeInformáticaS.A.(SubsidiaryofPagseguroInternetS.A.)(Brazil)7. TilixDigitalS.A.(SubsidiaryofPagseguroInternetS.A.)(Brazil)8. BIVACOHoldingS.A.(SubsidiaryofPagseguroInternetS.A.)(Brazil)9. BivaServiçosFinanceirosS.A.(SubsidiaryofBIVACOHoldingS.A.)(Brazil)10. BivaSecuritizadoradeCréditosFinanceirosS.A.(SubsidiaryofBIVACOHoldingS.A.)(Brazil)11. BivaCorrespondenteBancárioLtda.(SubsidiaryofBIVACOHoldingS.A.)(Brazil)12. BSHoldingFinanceiraLtda.(Brazil)13. BancoseguroS.A.(SubsidiaryofBSHoldingFinanceiraLtda.)(Brazil)

Exhibit 12.1

CERTIFICATION PURSUANT TO RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED

I,LuizFrias,certifythat:

1. IhavereviewedthisannualreportonForm20-FofPagSeguroDigitalLtd.;

2. Basedonmyknowledge,thisreportdoesnotcontainanyuntruestatementofamaterialfactoromittostateamaterialfactnecessarytomakethestatementsmade,inlightofthecircumstancesunderwhichsuchstatementsweremade,notmisleadingwithrespecttotheperiodcoveredbythisreport;

3. Basedonmyknowledge,thefinancialstatements,andotherfinancialinformationincludedinthisreport,fairlypresentinallmaterialrespectsthefinancialcondition,resultsofoperationsandcashflowsofthecompanyasof,andfor,theperiodspresentedinthisreport;

4. Thecompany’sothercertifyingofficer(s)andIareresponsibleforestablishingandmaintainingdisclosurecontrolsandprocedures(asdefinedinExchangeActRules13a-15(e)and15d-15(e))andinternalcontroloverfinancialreporting(asdefinedinExchangeActRules13a-15(f)and15d-15(f))forthecompanyandhave:

a. Designedsuchdisclosurecontrolsandprocedures,orcausedsuchdisclosurecontrolsandprocedurestobedesignedunderoursupervision,toensurethat

materialinformationrelatingtothecompany,includingitsconsolidatedsubsidiaries,ismadeknowntousbyotherswithinthoseentities,particularlyduringtheperiodinwhichthisreportisbeingprepared;

b. Designedsuchinternalcontroloverfinancialreporting,orcausedsuchinternalcontroloverfinancialreportingtobedesignedunderoursupervision,toprovide

reasonableassuranceregardingthereliabilityoffinancialreportingandthepreparationoffinancialstatementsforexternalpurposesinaccordancewithgenerallyacceptedaccountingprinciples;

c. Evaluatedtheeffectivenessofthecompany’sdisclosurecontrolsandproceduresandpresentedinthisreportourconclusionsabouttheeffectivenessofthedisclosurecontrolsandprocedures,asoftheendoftheperiodcoveredbythisreportbasedonsuchevaluation;and

d. Disclosedinthisreportanychangeinthecompany’sinternalcontroloverfinancialreportingthatoccurredduringtheperiodcoveredbytheannualreportthathasmateriallyaffected,orisreasonablylikelytomateriallyaffect,thecompany’sinternalcontroloverfinancialreporting;and

5. Thecompany’sothercertifyingofficer(s)andIhavedisclosed,basedonourmostrecentevaluationofinternalcontroloverfinancialreporting,tothecompany’sauditorsandtheauditcommitteeofthecompany’sboardofdirectors(orpersonsperformingtheequivalentfunctions):

a. Allsignificantdeficienciesandmaterialweaknessesinthedesignoroperationofinternalcontroloverfinancialreportingwhicharereasonablylikelytoadverselyaffectthecompany’sabilitytorecord,process,summarizeandreportfinancialinformation;and

b. Anyfraud,whetherornotmaterial,thatinvolvesmanagementorotheremployeeswhohaveasignificantroleinthecompany’sinternalcontroloverfinancialreporting.

Date:April15,2019

By: /s/LuizFrias

Name:LuizFriasTitle:PrincipalExecutiveOfficer

Exhibit 12.2

CERTIFICATION PURSUANT TO RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED

I,EduardoAlcaro,certifythat:

1. IhavereviewedthisannualreportonForm20-FofPagSeguroDigitalLtd.;

2. Basedonmyknowledge,thisreportdoesnotcontainanyuntruestatementofamaterialfactoromittostateamaterialfactnecessarytomakethestatementsmade,inlightofthecircumstancesunderwhichsuchstatementsweremade,notmisleadingwithrespecttotheperiodcoveredbythisreport;

3. Basedonmyknowledge,thefinancialstatements,andotherfinancialinformationincludedinthisreport,fairlypresentinallmaterialrespectsthefinancialcondition,resultsofoperationsandcashflowsofthecompanyasof,andfor,theperiodspresentedinthisreport;

4. Thecompany’sothercertifyingofficer(s)andIareresponsibleforestablishingandmaintainingdisclosurecontrolsandprocedures(asdefinedinExchangeActRules13a-15(e)and15d-15(e))andinternalcontroloverfinancialreporting(asdefinedinExchangeActRules13a-15(f)and15d-15(f))forthecompanyandhave:

a. Designedsuchdisclosurecontrolsandprocedures,orcausedsuchdisclosurecontrolsandprocedurestobedesignedunderoursupervision,toensurethat

materialinformationrelatingtothecompany,includingitsconsolidatedsubsidiaries,ismadeknowntousbyotherswithinthoseentities,particularlyduringtheperiodinwhichthisreportisbeingprepared;

b. Designedsuchinternalcontroloverfinancialreporting,orcausedsuchinternalcontroloverfinancialreportingtobedesignedunderoursupervision,toprovide

reasonableassuranceregardingthereliabilityoffinancialreportingandthepreparationoffinancialstatementsforexternalpurposesinaccordancewithgenerallyacceptedaccountingprinciples;

c. Evaluatedtheeffectivenessofthecompany’sdisclosurecontrolsandproceduresandpresentedinthisreportourconclusionsabouttheeffectivenessofthedisclosurecontrolsandprocedures,asoftheendoftheperiodcoveredbythisreportbasedonsuchevaluation;and

d. Disclosedinthisreportanychangeinthecompany’sinternalcontroloverfinancialreportingthatoccurredduringtheperiodcoveredbytheannualreportthathasmateriallyaffected,orisreasonablylikelytomateriallyaffect,thecompany’sinternalcontroloverfinancialreporting;and

5. Thecompany’sothercertifyingofficer(s)andIhavedisclosed,basedonourmostrecentevaluationofinternalcontroloverfinancialreporting,tothecompany’sauditorsandtheauditcommitteeofthecompany’sboardofdirectors(orpersonsperformingtheequivalentfunctions):

a. Allsignificantdeficienciesandmaterialweaknessesinthedesignoroperationofinternalcontroloverfinancialreportingwhicharereasonablylikelytoadverselyaffectthecompany’sabilitytorecord,process,summarizeandreportfinancialinformation;and

b. Anyfraud,whetherornotmaterial,thatinvolvesmanagementorotheremployeeswhohaveasignificantroleinthecompany’sinternalcontroloverfinancialreporting.

Date:April15,2019

By: /s/EduardoAlcaro

Name:EduardoAlcaroTitle:ChiefFinancialandInvestorRelationsOfficerandChiefAccountingOfficer

Exhibit 13.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350UNDER THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED

Pursuanttosection906oftheSarbanes-OxleyActof2002(subsections(a)and(b)ofSection1350,Chapter63ofTitle18,UnitedStatesCode),theundersignedofficerofPagSeguroDigitalLtd.(the“Company ”)doesherebycertify,tosuchofficer’sknowledge,that:

TheAnnualReportonForm20-FfortheyearendedDecember31,2018oftheCompanyfullycomplieswiththerequirementsofSection13(a)or15(d)oftheSecuritiesExchangeActof1934andinformationcontainedintheForm20-Ffairlypresents,inallmaterialrespects,thefinancialconditionandresultsofoperationsoftheCompany.

Date:April15,2019

By: /s/LuizFrias

Name:LuizFriasTitle:PrincipalExecutiveOfficer

Exhibit 13.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350UNDER THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED

Pursuanttosection906oftheSarbanes-OxleyActof2002(subsections(a)and(b)ofSection1350,Chapter63ofTitle18,UnitedStatesCode),theundersignedofficerofPagSeguroDigitalLtd.(the“Company ”)doesherebycertify,tosuchofficer’sknowledge,that:

TheAnnualReportonForm20-FfortheyearendedDecember31,2018oftheCompanyfullycomplieswiththerequirementsofSection13(a)or15(d)oftheSecuritiesExchangeActof1934andinformationcontainedintheForm20-Ffairlypresents,inallmaterialrespects,thefinancialconditionandresultsofoperationsoftheCompany.

Date:April15,2019

By: /s/EduardoAlcaro

Name:EduardoAlcaroTitle:ChiefFinancialandInvestorRelationsOfficerandChiefAccountingOfficer

Exhibit 15.1

April 15, 2019

SecuritiesandExchangeCommission100FStreet,N.E.Washington,DC20549

Commissioners:

WehavereadthestatementsmadebyPAGSEGURODIGITALLTD.,whichweunderstandwillbefiledwiththeSecuritiesandExchangeCommission,pursuanttoItem16FofForm20-F,aspartoftheForm20-FofPAGSEGURODIGITALLTD.datedApril15,2019.WeagreewiththestatementsconcerningourFirminsuchForm20-F.

Verytrulyyours,

/s/PricewaterhouseCoopersAuditoresIndependentesSaoPaulo,Brazil

FORM 20-F...Av. Brigadeiro Faria Lima, 1384, 4º andar, parte A São Paulo, SP, 01451-001, Brazil...

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