PAGS PagSeguro Digital Ltd

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Unaudited Condensed Consolidated
Interim Financial Statements

PagSeguro Digital Ltd.

As of March 31, 2021 and for the three-month periods ended
March 31, 2021 and 2020

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PagSeguro Digital Ltd.

Unaudited condensed consolidated interim financial statements

As of March 31, 2021 and for the three-month periods ended March 31, 2021 and 2020

Contents

Unaudited condensed consolidated interim financial statements
Unaudited condensed consolidated interim balance sheet			1
Unaudited condensed consolidated interim statement of income			3
Unaudited condensed consolidated interim statement of comprehensive income			4
Unaudited condensed consolidated interim statement of changes in equity			5
Unaudited condensed consolidated interim statement of cash flows			6
Notes to the unaudited condensed consolidated interim financial statements			7

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PagSeguro Digital Ltd.

Unaudited condensed consolidated interim balance sheet
As of March 31, 2021 and December 31, 2020
(All amounts in thousands of reais)

			Note						March 31, 2021						December 31, 2020
Assets
Current assets
Cash and cash equivalents			5						1,260,278						1,640,065
Financial investments			6						965,112						979,837
Accounts receivable			7						15,824,050						16,042,970
Inventories									53,046						30,429
Taxes recoverable			8						383,231						388,975
Other receivables									157,546						164,805
Total current assets									18,643,263						19,247,081
Non-current assets
Accounts receivable			7						44,451						33,570
Judicial deposits									37,699						7,449
Deferred income tax and social contribution			18						77,226						83,296
Prepaid expenses									9,326						10,293
Investment									16,400						16,400
Property and equipment			11						1,944,095						1,802,613
Intangible assets			12						1,204,039						1,123,620
Total non-current assets									3,333,236						3,077,241
Total assets									21,976,499						22,324,322

1

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PagSeguro Digital Ltd.

Unaudited condensed consolidated interim balance sheet
As of March 31, 2021 and December 31, 2020
(All amounts in thousands of reais)

			Note						March 31, 2021						December 31, 2020
Liabilities and equity
Current Liabilities
Payables to third parties			13						8,747,571						10,101,510
Trade payables									305,707						335,539
Payables to related parties			9						79,653						58,336
Deposits			14						1,157,905						571,996
Salaries and social security charges			15						152,870						175,198
Taxes and contributions			16						30,450						26,042
Provision for contingencies			17						19,782						17,063
Deferred revenue									193,770						186,219
Other liabilities									26,430						102,572
Total current liabilities									10,714,138						11,574,475
Non-current liabilities
Deferred income tax and social contribution			18						1,183,838						1,132,595
Deposits			14						288,876						194,090
Provision for contingencies			17						12,633						11,741
Deferred revenue									25,485						27,336
Other liabilities									71,233						56,626
Total non-current liabilities									1,582,065						1,422,388
Total liabilities									12,296,203						12,996,863
Equity
Share capital			19						26						26
Treasury shares			19						(886)						(13,609)
Capital reserve			19						5,852,840						5,784,288
Retained earnings			19						3,837,789						3,566,522
Equity valuation adjustments			19						(22,372)						(22,372)
Other comprehensive income			19						726						491
									9,668,123						9,315,346
Non-controlling interests									12,173						12,113
Total equity									9,680,296						9,327,459
Total liabilities and equity									21,976,499						22,324,322

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PagSeguro Digital Ltd.

Unaudited condensed consolidated interim statement of income
For the three-month periods ended March 31, 2021 and 2020
(All amounts in thousands of reais unless otherwise stated)

			Note						March 31, 2021						March 31, 2020
Revenue from transaction activities and other services			21						1,384,970						966,804
Financial income			21						656,983						562,268
Other financial income			21						25,248						58,223
Total revenue and income									2,067,201						1,587,295
Cost of services			22						(1,146,085)						(768,636)
Selling expenses			22						(368,112)						(189,022)
Administrative expenses			22						(189,070)						(85,785)
Financial expenses			22						(44,388)						(45,562)
Other income (expenses), net			22						40,806						(2,136)
Profit before income taxes									360,352						496,154
Current income tax and social contribution			18						(19,966)						(3,801)
Deferred income tax and social contribution			18						(69,059)						(135,439)
Income tax and social contribution									(89,025)						(139,240)
Net income for the period									271,327						356,914
Attributable to:
Equity holders of the parent									271,267						356,671
Non-controlling interests									60						243
Basic earnings per common share - R$			20						0.8221						1.0841
Diluted earnings per common share - R$			20						0.8213						1.0806

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PagSeguro Digital Ltd.

Unaudited condensed consolidated interim statement of comprehensive income
For the three-month periods ended March 31, 2021 and 2020
(All amounts in thousands of reais unless otherwise stated)

						March 31, 2021						March 31, 2020
Net income for the period						271,327						356,914
Other comprehensive income that may be reclassified to the statement of income in subsequent periods
Currency translation adjustment						78						455
Loss on investments designated at fair value through OCI						238						94
Income tax and social contribution						(81)						(32)
Other comprehensive income for the period						271,562						357,431
Attributable to
Equity holders of the parent						271,502						357,188
Non-controlling interests						60						243
Net income for the period						271,562						357,431

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PagSeguro Digital Ltd.

Unaudited condensed consolidated interim statement of changes in equity
For the three-month periods ended March 31, 2021 and 2020
(All amounts in thousands of reais)

																					Capital reserve												Profit reserve
			Note						Share capital						Treasury shares						Capital reserve						Share-based long-term incentive plan (LTIP)						Retained earnings						Equity valuation adjustments						Other comprehensive income						Total						Non-controlling interests						Total equity
On December 31, 2019									26						(41,267)						5,686,255						95,248						2,274,864						(22,372)						(190)						7,992,564						22,384						8,014,948
Net income for the period									—						—						—						—						356,671						—						—						356,671						243						356,914
Currency translation adjustment									—						—						—						—						—						—						455						455						—						455
Gain on financial assets through OCI									—						—						—						—						—						—						62						62						—						62
Non-controlling acquisition									—						—						—						—						—						—						—						—						(339)						(339)
Shares issued									—						—						3,628						(3,628)						—						—						—						—						—						—
Share based long term incentive plan (LTIP)									—						—						—						26,381						—						—						—						26,381						—						26,381
Acquisition of treasury shares									—						(44,775)						—						—						—						—						—						(44,775)						—						(44,775)
On March 31, 2020									26						(86,042)						5,689,883						118,001						2,631,535						(22,372)						327						8,331,358						22,288						8,353,646
Net income for the period									—						—						—						—						934,987						—						—						934,987						399						935,386
Currency translation adjustment									—						—						—						—						—						—						504						504						—						504
Loss on financial assets through OCI									—						—						—						—						—						—						(340)						(340)						—						(340)
Non-controlling quotas									—						—						—						—						—						—						—						—						(10,574)						(10,574)
Shares issued									—						—						206						(206)						—						—						—						—						—						—
Share based long term incentive plan (LTIP)									—						—						—						48,837						—						—						—						48,837						—						48,837
Distribution of LTIP with treasury shares									—						72,433						—						(72,433)						—						—						—						—						—						—
On December 31, 2020									26						(13,609)						5,690,089						94,199						3,566,522						(22,372)						491						9,315,346						12,113						9,327,459
Net income for the period			19						—						—						—						—						271,267						—						—						271,267						60						271,327
Currency translation adjustment			19						—						—						—						—						—						—						78						78						—						78
Gain on financial assets through OCI			19						—						—						—						—						—						—						157						157						—						157
Share based long term incentive plan (LTIP)			19						—						—						—						81,275						—						—						—						81,275						—						81,275
Distribution of LTIP with treasury shares			19						—						12,723						—						(12,723)						—						—						—						—						—						—
On March 31, 2021									26						(886)						5,690,089						162,751						3,837,789						(22,372)						726						9,668,123						12,173						9,680,296

5

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PagSeguro Digital Ltd.

Unaudited condensed consolidated interim statement of cash flows
For the three-month periods ended March 31, 2021 and 2020
(All amounts in thousands of reais)

			March 31, 2021						March 31, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before income taxes			360,352						496,154
Expenses (revenues) not affecting cash:
Depreciation and amortization			158,302						59,593
Chargebacks			173,133						70,171
Accrual of provision for contingencies			5,357						4,384
Share based long term incentive plan (LTIP)			79,671						11,953
Reversal of taxes and contributions			(29,114)						—
Loss on disposal of property, equipment and intangible assets			4,645						—
Other (income) cost, net			8,841						(3,108)
Changes in operating assets and liabilities
Accounts receivable			(78,300)						1,047,383
Financial investments (mandatory guarantee)			(20,592)						(120,787)
Inventories			(22,617)						(8,275)
Taxes recoverable			25,277						(18,137)
Other receivables			(21,985)						11,680
Deferred revenue			5,699						34,091
Other liabilities			(58,358)						7,902
Payables to third parties			(1,363,442)						(643,837)
Trade payables			(29,835)						21,602
Receivables from (payables to) related parties			21,318						13,580
Deposits			672,919						—
Salaries and social charges			(20,725)						(21,149)
Taxes and contributions			25,803						(4,764)
Provision for contingencies			(1,907)						(1,655)
			(105,559)						956,782
Income tax and social contribution paid			(25,418)						(2,190)
Interest income received			113,206						97,267
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES			(17,771)						1,051,859
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment			(249,847)						(231,938)
Purchases and development of intangible assets			(148,987)						(118,993)
Redemption of financial investments			40,144						983,160
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES			(358,690)						632,229
CASH FLOWS FROM FINANCING ACTIVITIES
Acquisition of treasury shares			—						(44,775)
Payment of leases			(3,386)						—
Capital increase by non-controlling shareholders			60						(115)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES			(3,326)						(44,890)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(379,786)						1,639,198
Cash and cash equivalents at the beginning of the period			1,640,065						1,403,955
Cash and cash equivalents at the end of the period			1,260,278						3,043,153

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PagSeguro Digital Ltd.

Notes to the unaudited condensed consolidated interim financial statements (Continued)
As of March 31, 2021 and for the three-month periods ended March 31, 2021
(All amounts in thousands of reais unless otherwise stated)

3.    Consolidation of subsidiaries

On March 31, 2021
Company						Assets						Liabilities						Equity						Net income (loss) for the period						Ownership - %						Level
Pagseguro Brazil						20,367,254						11,680,810						8,686,444						258,445						99.99						Direct
BS Holding						471,531						—						471,531						16,670						99.99						Direct
Pagseg Participações						22,668						—						22,668						—						99.99						Direct
Pagbank Participações						17,250						—						17,250						—						99.99						Indirect
Net+Phone						348,105						16,369						331,735						24,006						99.99						Indirect
Boa Compra						307,431						136,243						171,188						8,295						99.99						Indirect
BCPS						2,338						160						2,178						167						99.99						Indirect
R2TECH						15,755						1,311						14,444						3,572						99.99						Indirect
BIVA						570,823						569,090						1,733						1,361						99.99						Indirect
BIVACO						20,657						4,429						16,228						1,074						99.99						Indirect
FIDC						4,179,667						506,836						3,672,831						577,695						100.00						Indirect
TILIX						8,274						1,088						7,186						(196)						99.99						Indirect
BancoSeguro						5,385,182						4,929,063						456,119						16,678						100.00						Indirect
Yamí						1,270						521						749						(215)						99.99						Indirect
Registra Seguro						5,000						—						5,000						—						99.99						Indirect
CDS						8,002						6,166						1,837						(794)						99.99						Indirect
Zygo						2,689						4,498						(1,809)						(2,041)						99.99						Indirect
Moip						712,523						527,999						184,524						3,371						100.00						Indirect

On December 31, 2020 (except for net income, that is presented to three months period ended March 31, 2020)
Company						Assets						Liabilities						Equity						Net income (loss) for the period						Ownership - %						Level
Pagseguro Brazil						20,089,735						11,716,120						8,373,615						350,983						99.99						Direct
BS Holding						488,173						—						488,173						3,586						99.99						Direct
Pagseg Participações						2						—						2						—						99.99						Direct
Pagbank Participações						15,001						15,000						1						—						99.99						Indirect
Net+Phone						340,829						33,100						307,729						(45,787)						99.99						Indirect
Boa Compra						431,624						268,731						162,893						3,619						99.99						Indirect
BCPS						2,410						476						1,934						79						99.50						Indirect
R2TECH						12,511						1,639						10,872						1,774						99.99						Indirect
BSEC						488,988						488,616						372						—						99.99						Indirect
BIVA						38,320						2,575						35,745						(472)						99.99						Indirect
FIDC						3,422,207						327,070						3,095,137						466,300						100.00						Indirect
TILIX						8,361						979						7,382						(971)						99.99						Indirect
BancoSeguro						5,364,406						4,891,653						472,753						4,441						100.00						Indirect
Yamí						1,453						489						964						(113)						99.99						Indirect
Registra Seguro						5,000						—						5,000						—						99.99						Indirect
CDS						4,724						1,073						3,651						—						99.99						Indirect
Zygo						2,310						2,078						232						—						99.99						Indirect
Moip						741,689						560,536						181,153						—						100.00						Indirect

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						March 31, 2021						December 31, 2020
Short-term bank deposits						143,995						415,388
Short-term investment						1,116,283						1,224,678
						1,260,278						1,640,065

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PagSeguro Digital Ltd.

Notes to the unaudited condensed consolidated interim financial statements (Continued)
As of March 31, 2021 and for the three-month periods ended March 31, 2021
(All amounts in thousands of reais unless otherwise stated)

7.    Accounts receivable

						March 31, 2021																														December 31, 2020
						Visa						Master						Hipercard						Elo						Total						Visa						Master						Hipercard						Elo						Total
Legal obligors
Itaú						662,015						2,230,073						644,788						—						3,536,876						774,445						2,100,129						627,463						—						3,502,037
Bradesco						1,557,561						284,813						—						434,020						2,276,394						1,759,911						294,631						—						409,384						2,463,926
Santander						427,744						1,758,752						—						—						2,186,496						448,592						2,043,676						—						—						2,492,268
Nubank						—						1,679,738						—						—						1,679,738						—						1,421,074						—						—						1,421,074
Banco do Brasil						823,175						215,821						—						260,151						1,299,147						988,772						251,808						—						250,849						1,491,429
Banco Carrefour						98,597						617,544						—						—						716,140						107,927						543,513						—						—						651,440
CEF						131,583						191,536						—						188,914						512,033						158,879						238,196						—						223,354						620,429
Porto Seguro						403,310						97,435						—						—						500,745						407,688						87,882						—						—						495,570
Other (iv)						667,945						1,338,000						—						114,160						2,120,106						702,021						1,213,335						—						98,074						2,013,430
Total card issuers(i)						4,771,930						8,413,712						644,788						997,245						14,827,675						5,348,235						8,194,244						627,463						981,661						15,151,603
Cielo – Elo																														205,155						—						—						—						—						209,318
Getnet																														104,390						—						—						—						—						56,799
Other acquirers																														27,345						—						—						—						—						29,031
Total acquirers (ii)						—						—						—						—						336,890						—						—						—						—						295,148
Other current																														659,485																														596,220
Other non-current																														44,451																														33,570
Total other (iii)						—						—						—						—						703,936						—						—						—						—						629,790
Total accounts receivable						4,771,930						8,413,712						644,788						997,245						15,868,501						5,348,235						8,194,244						627,463						981,661						16,076,540

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PagSeguro Digital Ltd.

Notes to the unaudited condensed consolidated interim financial statements (Continued)
As of March 31, 2021 and for the three-month periods ended March 31, 2021
(All amounts in thousands of reais unless otherwise stated)

7.    Accounts receivable (Continued)

The maturity analysis of accounts receivable is as follows:

						March 31, 2021						December 31, 2020
Due within 30 days						5,351,978						6,951,316
Due within 31 to 120 days						6,801,004						6,129,039
Due within 121 to 180 days						1,829,026						1,509,449
Due within 181 to 360 days						1,842,042						1,453,167
Due after 360 days						44,451						33,570
						15,868,501						16,076,540

8.    Taxes Recoverable

						March 31, 2021						December 31, 2020
Income tax and Social contribution (i)						189,554						223,057
Social integration program (ii)						173,012						151,165
Value-added tax on sales and services (iii)						19,257						14,646
Other						1,408						107
						383,231						388,975

i)Balances and transactions with related parties

			March 31, 2021						December 31, 2020
			Payables						Payables
Immediate parent
UOL - sales of services (a)			17,806						15,720
UOL - shared service costs (b)			13,804						12,539
UOL - deposits (c)			29,049						11,391
Affiliated companies
UOL Diveo - sales of services (d)			102						10,218
Transfolha Transportadora e Distribuição Ltda,			1,931						1,933
Compasso Informática S.A.(d)			7,692						—
Others			9,269						6,535
			79,653						58,336

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PagSeguro Digital Ltd.

Notes to the unaudited condensed consolidated interim financial statements (Continued)
As of March 31, 2021 and for the three-month periods ended March 31, 2021
(All amounts in thousands of reais unless otherwise stated)

9.    Related-party balances and transactions (continued)

ii)Balances and transactions with related parties

			March 31, 2021												March 31, 2020
			Revenue						Expense						Revenue						Expense
Immediate parent
UOL - shared service costs (a)			—						34,810						—						31,209
UOL - sales of services (b)			775						5,205						631						12,231
UOL - deposits (c)			—						106						—						—
Affiliated companies
UOL Diveo - sales of services (d)			—						1,017						—						12,479
Compasso Informática S.A. (d)			—						20,306						—						—
Transfolha Transportadora e Distribuição Ltda.			—						5,573						—						4,221
Others			249						169						—						2,553
			1,024						67,186						631						62,693

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			March 31, 2021
			Cost						Accumulated depreciation						Net
Data processing equipment			78,774						(39,513)						39,261
Machinery and equipment (i)			2,125,051						(300,656)						1,824,395
Buildings Leasing			79,032						(15,114)						63,918
Other			22,399						(5,878)						16,521
			2,305,256						(361,161)						1,944,095
			December 31, 2020
			Cost						Accumulated depreciation						Net
Data processing equipment			77,413						(35,572)						41,841
Machinery and equipment (i)			1,881,556						(204,154)						1,677,402
Buildings Leasing			79,889						(12,623)						67,266
Other			22,116						(6,012)						16,104
			2,060,974						(258,361)						1,802,613

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PagSeguro Digital Ltd.

Notes to the unaudited condensed consolidated interim financial statements (Continued)
As of March 31, 2021 and for the three-month periods ended March 31, 2021
(All amounts in thousands of reais unless otherwise stated)

11.     Property and equipment (continued)

b)The changes in cost and accumulated depreciation were as follows:

			Data processing equipment						Machinery and equipment (i)						Buildings Leasing						Other						Total
On December 31, 2020
Opening balance			46,538						343,229						—						10,223						399,990
Cost			12,297						1,509,815						79,889						9,609						1,611,610
Purchases			10,820						1,519,280						79,715						3,789						1,613,604
Disposals			(1,509)						(9,838)						(684)						(74)						(12,105)
Acquisition of subsidiary			2,986						374						857						5,894						10,111
Depreciation			(16,994)						(175,641)						(12,623)						(3,729)						(208,987)
Depreciation			(15,596)						(175,805)						(12,227)						(1,000)						(204,628)
Disposals			21						264						—						17						302
Acquisition of subsidiary			(1,419)						(100)						(396)						(2,746)						(4,662)
Net book value			41,841						1,677,403						67,266						16,103						1,802,613
On December 31, 2020
Cost			77,413						1,881,556						79,889						22,116						2,060,974
Accumulated depreciation			(35,572)						(204,153)						(12,623)						(6,013)						(258,361)
Net book value			41,841						1,677,403						67,266						16,103						1,802,613
On March 31, 2021
Opening balance			41,841						1,677,403						67,266						16,103						1,802,613
Cost			1,361						243,495						(857)						283						244,282
Purchases			1,604						246,274						—						1,969						249,847
Disposals			(243)						(2,779)						(857)						(1,686)						(5,565)
Depreciation			(3,941)						(96,502)						(2,491)						134						(102,800)
Depreciation			(4,072)						(96,868)						(2,985)						(807)						(104,732)
Disposals			131						366						494						941						1,932
Net book value			39,261						1,824,396						63,918						16,520						1,944,095
On March 31, 2021
Cost			78,774						2,125,051						79,032						22,399						2,305,256
Accumulated depreciation			(39,513)						(300,655)						(15,114)						(5,879)						(361,161)
Net book value			39,261						1,824,396						63,918						16,520						1,944,095

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PagSeguro Digital Ltd.

Notes to the unaudited condensed consolidated interim financial statements (Continued)
As of March 31, 2021 and for the three-month periods ended March 31, 2021
(All amounts in thousands of reais unless otherwise stated)

12.     Intangible assets

a)    Intangible assets are composed as follows

			March 31, 2021
			Cost						Accumulated amortization						Net
Expenditures related to software and technology (i)			1,460,782						(558,470)						902,312
Software licenses			109,417						(34,463)						74,954
Goodwill (ii)			169,667						—						169,667
Other			62,785						(5,679)						57,106
			1,802,651						(598,612)						1,204,039
			December 31, 2020
			Cost						Accumulated amortization						Net
Expenditures related to software and technology (i)			1,319,061						(501,319)						817,742
Software licenses			103,256						(29,060)						74,196
Goodwill (ii)			169,667						—						169,667
Other			62,786						(771)						62,015
			1,654,770						(531,150)						1,123,620

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PagSeguro Digital Ltd.

Notes to the unaudited condensed consolidated interim financial statements (Continued)
As of March 31, 2021 and for the three-month periods ended March 31, 2021
(All amounts in thousands of reais unless otherwise stated)

12.     Intangible assets (continued)

b)    The changes in cost and accumulated amortization were as follows:

			Expenditures with software and technology						Software licenses						Goodwill						Other						Total
On December 31, 2020 Opening balance			485,939						44,755						54,858						4,001						589,553
Cost			531,092						45,010						114,809						58,199						749,110
Additions (i)			485,608						42,138						134,274						58,633						720,653
Disposals (ii)			(6,308)						—						(19,465)						(447)						(26,220)
Acquisition of subsidiary (iii)			51,791						2,871						—						13						54,675
Amortization			(199,289)						(15,569)						—						(185)						(215,043)
Amortization			(164,319)						(15,153)						—						(180)						(179,652)
Disposals			2,667						—						—						—						2,667
Acquisition of subsidiary (iii)			(37,636)						(416)						—						(5)						(38,057)
Net book value			817,742						74,196						169,667						62,015						1,123,620
On December 31, 2020
Cost			1,319,061						103,256						169,667						62,786						1,654,770
Accumulated amortization			(501,319)						(29,060)						—						(771)						(531,150)
Net book value			817,742						74,196						169,667						62,015						1,123,620
On March 31, 2021
Opening balance			817,742						74,196						169,667						62,015						1,123,620
Cost			141,721						6,160						—						—						147,881
Additions (iv)			142,819						6,168						—						—						148,987
Disposals			(1,098)						(8)						—						—						(1,106)
Amortization			(57,150)						(5,403)						—						(4,909)						(67,462)
Amortization			(57,241)						(5,406)						—						(4,909)						(67,556)
Disposals			91						3						—						—						94
Net book value			902,312						74,954						169,667						57,106						1,204,039
On March 31, 2021
Cost			1,460,782						109,417						169,667						62,785						1,802,651
Accumulated amortization			(558,470)						(34,463)						—						(5,679)						(598,612)
Net book value			902,312						74,954						169,667						57,106						1,204,039

---

			Interest rate (p.a.)						March 31, 2021						December 31, 2020
Certificate of Deposit (i)			150% of CDI						1,191,057						604,916
Corporate securities (ii)			140% of CDI						255,724						161,170
									1,446,781						766,086
Current									1,157,905						571,996
Non - Current									288,876						194,090

						March 31, 2021						December 31, 2020
Due within 30 days						124,634						5,231
Due within 31 to 120 days						149,890						77,812
Due within 121 to 180 days						53,645						53,000
Due within 181 to 360 days						829,736						435,952
Due to 361 days or more days						288,876						194,091
						1,446,781						766,086

On December 31,2020			766,086
Additions			807,763
Withdraws			(136,175)
Interest			9,107
On March 31,2021			1,446,781

19

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PagSeguro Digital Ltd.

Notes to the unaudited condensed consolidated interim financial statements (Continued)
As of March 31, 2021 and for the three-month periods ended March 31, 2021
(All amounts in thousands of reais unless otherwise stated)

15.    Salaries and social security charges

			March 31, 2021						December 31, 2020
Profit sharing			16,151						75,192
Social charges			23,559						24,776
Payroll accruals			65,675						53,264
Payroll taxes (LTIP) (i)			41,580						16,502
Other			5,905						5,464
			152,870						175,198

(i)			Refers to social charges and income tax over LTIP balances.

16.    Taxes and contributions

			March 31, 2021						December 31, 2020
Taxes
Services tax and other (i)			163,171						157,066
Value-added tax on sales and services (ii)			350						29,678
Social integration program (iii)			25,521						24,984
Social contribution on revenues (iii)			156,863						153,626
Income tax and social contribution (iv)			8,174						6,336
Other taxes			7,277						8,841
			361,356						380,531
			March 31, 2021						December 31, 2020
Judicial deposits (v)
Services tax (i)			(152,388)						(150,121)
Value-added tax on sales and services (ii)			—						(29,114)
Social integration program (iii)			(24,954)						(24,498)
Social contribution on revenues (iii)			(153,564)						(150,756)
			(330,906)						(354,489)
			30,450						26,042

(i)			Refers to tax on revenues.
(ii)			In March 2021, there was a decision taken by Brazilian Supreme Court related to Value-added Tax on Sales and Services (ICMS), that beneficiated the Company. For this reason, the Company reversed the provision in the amount of R$29,114. Consequently, as the Company does not have this amount recorded in liability to make the offset with judicial deposits, the deposit is now being presented in the non-current assets as Judicial Deposits, until the withdrawal of these amounts.
(iii)			Refers mainly to Social Integration Program (PIS) and Social Contribution on Revenues (COFINS) charged on financial income.
(iv)			Refers to the income tax and social contribution payable.
(v)			The PagSeguro Group obtained court decisions to deposit the amount related to the payments in escrow for matters discussed in items “i”, “ii” and “iii” above.

20

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PagSeguro Digital Ltd.

Notes to the unaudited condensed consolidated interim financial statements (Continued)
As of March 31, 2021 and for the three-month periods ended March 31, 2021
(All amounts in thousands of reais unless otherwise stated)

17.    Provision for contingencies

PagSeguro Group is party to labor and civil litigation in progress and are discussing such matters at the administrative and judicial levels, which in some cases the PagSeguro Group has made corresponding judicial deposits. The likelihood of a negative outcome is assessed periodically and adjusted by management, when appropriate. Such assessment includes the opinion of its external legal advisors.

			March 31, 2021						December 31, 2020
Civil			25,589						23,238
Labor			6,826						5,566
			32,415						28,804
Current			19,782						17,063
Non-Current			12,633						11,741

The PagSeguro Group is party on tax and civil lawsuits involving risks classified by management, with the assistance of its legal advisors, as possible losses, for which no provision was recognized on March 31, 2021, totaling approximately R$163,974 (December 31, 2020 - R$165,862). The PagSeguro Group is not a party to labor lawsuits involving risks classified by management as possible losses. Below we demonstrate the movements of the provision for contingencies in the three-month period ended March 31, 2021:

On December 31,2019			11,849
Accrual			6,409
Acquisition of subsidiary			11,446
Settlement			(1,127)
Interest			227
On December 31,2020			28,804
Accrual			5,357
Settlement			(1,907)
Interest			161
On March 31,2021			32,415

21

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PagSeguro Digital Ltd.

Notes to the unaudited condensed consolidated interim financial statements (Continued)
As of March 31, 2021 and for the three-month periods ended March 31, 2021
(All amounts in thousands of reais unless otherwise stated)

18.    Income tax and social contribution

a)Reconciliation of the deferred income tax and social contribution

			Tax losses						Tax credit						Technological innovation (i)						Other temporary differences assets						Other temporary differences liabilities (ii)						Total
Deferred tax
On December 31, 2019			50,134						5,618						(161,211)						153,632						(679,123)						(630,950)
Included in the statement of income			36,165						(180)						(24,527)						20,989						(167,885)						(135,438)
Other			—						—						—						—						—						—
On March 31,2020			86,299						5,438						(185,738)						174,621						(847,008)						(766,388)
Included in the statement of income			(17,460)						(541)						(92,233)						(14,020)						(180,875)						(305,129)
Other			—						—						—						22,218						—						22,218
On December 31, 2020			68,839						4,897						(277,971)						182,819						(1,027,883)						(1,049,299)
Included in the statement of income			125,527						(190)						(32,039)						29,144						(191,502)						(69,060)
Other			4,468						—						7,372						(93)						—						11,747
On March 31, 2021			198,834						4,707						(302,639)						211,870						(1,219,385)						(1,106,612)
Deferred tax asset																																	77,226
Deferred tax liability																																	(1,183,838)

(i)			Refers to the benefit granted by the Technological Innovation Law (Lei do Bem), which reduces the tax charges on the capitalized amount of intangible assets.
(ii)			The main other liability temporary difference refers to gain on the ownership of FIDC quotas, that will be realized only in the redemption of such quotas.

Deferred tax assets are recognized for tax loss carry-forward to the extent that the realization of the related tax benefit through future taxable profits is probable. As of March 31, 2021, the Company did not have any unrecognized tax assets. Tax losses do not have expiration date.

b)    Reconciliation of the income tax and social contribution expense

PagSeguro Group computed income tax and social contribution under the taxable income method. The following is a reconciliation of the difference between the actual income tax and social contribution expense and the expense computed by applying the Brazilian federal statutory rate for the three-month periods ended March 31, 2021 and 2020:

			March 31, 2021						March 31, 2020
Profit before income taxes			360,352						496,154
Statutory rate			34%						34%
Expected income tax and social contribution			(122,520)						(168,692)
Income tax and social contribution effect on:
Permanent additions (exclusions)
Gifts and Donations			(401)						(97)
R&D and technological innovation benefit - Law 11.196/05 (i)			36,488						28,395
Taxation of income abroad			(682)						742
Other additions			(1,910)						414
Income tax and social contribution expense			(89,025)						(139,240)
Effective rate			25%						28%
Income tax and social contribution - current			(19,966)						(3,801)
Income tax and social contribution - deferred			(69,059)						(135,439)

(i)			Refers to the benefit granted by the Technological Innovation Law (Lei do Bem), which reduces the income tax charges, based on the amount invested by the PagSeguro Group on specific intangible assets, see Note 12.

22

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PagSeguro Digital Ltd.

Notes to the unaudited condensed consolidated interim financial statements (Continued)
As of March 31, 2021 and for the three-month periods ended March 31, 2021
(All amounts in thousands of reais unless otherwise stated)

19.    Equity

a)    Share capital

On March 31, 2021, share capital is represented by 329,016,372 common shares, per value of US$0,000025, Share capital is composed of the following shares for the three-month period ended March 31, 2021:

December 31, 2019 shares outstanding						328,855,412
Treasury shares						(350,006)
Long-Term Incentive Plan						1,058,509
Repurchase of common shares						(547,543)
December 31, 2020 shares outstanding						329,016,372
Treasury shares						(157,653)
Long-Term Incentive Plan						157,653
March 31, 2021 shares outstanding						329,016,372

b)    Capital reserve

The capital reserve can only be used to increase capital, offset losses, redeem, reimburse, or purchase shares or pay cumulative dividends on preferred shares. For the three-month period ended March 31, 2021, the Company did not recognize LTIP capital movement by issuing new shares (R$3,628 in the three-month period ended March 31, 2020).

c)    Share based long-term incentive plan (LTIP and LTIP goals)

Members of the Company’s management participate in a Long-Term Incentive Plan, or LTIP, which was established by UOL for its group companies on July 29, 2015 and has been adopted by PagSeguro Digital. Beneficiaries under the LTIP are selected by UOL’s LTIP Committee, which consists of the Chairman and two officers of UOL and are submitted to our Board of Directors for adoption. In this plan, employees (including senior executives) of the Group receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (equity-settled transactions). The cost of equity-settled transactions is determined by the fair value at the date when the grant is made.

That cost is recognized in personnel expenses (Note 22), together with a corresponding increase in equity over the period in which the service is fulfilled (the vesting period). The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The expense in the statement of profit or loss represents the movement in cumulative expense recognized as at the beginning and end of the year. No expense is recognized for awards that do not ultimately vest because service conditions have not been met.

23

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PagSeguro Digital Ltd.

Notes to the unaudited condensed consolidated interim financial statements (Continued)
As of March 31, 2021 and for the three-month periods ended March 31, 2021
(All amounts in thousands of reais unless otherwise stated)

19.    Equity (continued)

Under the terms of the LTIP, upon completion of the IPO, the vested portion of each beneficiary’s LTIP rights was converted into Class A common shares of PagSeguro Digital at the IPO price (US$21,50) which is the assessed fair value at the grant date. As a result, the beneficiaries of the LTIP received a total of 1,823,727 new Class A common shares upon completion of the IPO. The unvested portions of each beneficiary’s LTIP rights will be settled on each future annual vesting date in shares.

The LTIP-Goals plan was established at PagSeguro Brazil on December 18, 2018, as approved by the Company's board of directors, and last amended by the Company's board of directors on January 19, 2021. Beneficiaries under the LTIP-Goals plan are granted awards, which may be payable in cash, Class A common shares or a combination of the two, at the discretion of the LTIP-Goals Committee based on the goals established in the Company's corporate results-sharing plan for any given year. If any portion of an award is payable in cash, the relevant amount in Brazilian Reais was determined on the last business day of January for awards related to 2020.

For awards related to 2021 and beyond, the LTIP-Goals Committee will set a determination date that falls no later than on the last business day of March following the year for which such amount was awarded. Under the LTIP-Goals plan, the relevant payment shall be made in cash and/or Class A common shares delivered within 10 business days of that determination date.

This arrangement is classified as equity settled. For the three-month period ended March 31, 2021, the Company recognized in equity, costs related to the LTIP and LTIP Goals in the total amount of R$81,275 (R$26,381 in the three-month period ended March 31, 2020). As of March 31, 2021, the amount of R$41,580 was accounted for LTIP social charges (Note 15) and the expected amount of cash disbursement with withholding income tax in 2021 is R$103,704.

The maximum number of common shares that can be delivered to beneficiaries under the LTIP may not exceed 3% of our issued share capital at any time, On March 31, 2021 total shares granted were 6,943,030, and the total shares issued were 5,307,325.

d)    OCI, equity valuation adjustments and non-controlling

The Company recognizes in this account the accumulated effect of the foreign exchange variation resulting from the conversion of the financial statements of the foreign subsidiary BCPS, which amounted to R$78 in the three months ended on March 31, 2021 (positive value in R$959 as of December 31, 2020). This accumulated effect will be reverted to the result of the year as gain or loss only in case of disposal or write-off of the investment.

24

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PagSeguro Digital Ltd.

Notes to the unaudited condensed consolidated interim financial statements (Continued)
As of March 31, 2021 and for the three-month periods ended March 31, 2021
(All amounts in thousands of reais unless otherwise stated)

19. Equity (continued)

The Financial investments mentioned in Note 6 was classified at fair value through other comprehensive income. Unrealized gain on LFTs in the three-month period ended March 31, 2020 totaled R$157 (R$306 accumulated loss in December 31, 2020).

The Company also recognized in this account the difference between the book value and the amounts paid in the acquisitions of additional interests from the non-controlling shareholders of the subsidiary represented by the accumulated amount of R$22,372 as of March 31, 2021 related to R2TECH, in the amount of R$11,663 (R$11,663 as of December 31, 2020) and BIVA, in the amount of 10,709 (R$10,709 as of December 31, 2020).

On November 3, 2020, third party withdraw their capital in the amount of R$ 10 million related to the senior quotas of FIDC. Therefore, as of March 31, 2021, FIDC was composed by third party mezzanine quotes in the amount of R$ 10 million, which pay 107% of the Brazilian Interbank Deposit Certificate (CDI) with annual amortization of interest. On March 31, 2021, the share capital of FIDC is comprised of subordinated quotas and mezzanine quotas. PagSeguro Brazil owns 100% of the subordinated quotas.

e)    Treasury shares

On October 30, 2018, PagSeguro Digital’s board of directors authorized a share repurchase program, under which the PagSeguro Group may repurchase up to US$250 million in outstanding Class A common shares traded on the New York Stock Exchange (NYSE). The Company's management is responsible for defining the timing and the number of shares to be acquired, within authorized limits. Treasury shares are composed of the following shares for the three-month period ended March 31, 2020:

						Shares						Amount						Average price per share
Repurchased shares
2018						503,642						39,532						US$20.09
2019						15,000						1,735						US$28.14
2020						547,543						44,775						US$16.13
Distributed shares to LTIP
2020						(897,549)						(72,433)						—
2021						(157,653)						(12,723)						—
Treasury Shares						10,983						886						—

25

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PagSeguro Digital Ltd.

Notes to the unaudited condensed consolidated interim financial statements (Continued)
As of March 31, 2021 and for the three-month periods ended March 31, 2021
(All amounts in thousands of reais unless otherwise stated)

20.    Earnings per share

a)    Basic

Basic earnings per share is calculated by dividing the profit attributable to equity holders of PagSeguro Digital by the weighted average number of common shares issued and outstanding during the three-month periods ended March 31, 2021 and 2020:

			March 31,2021						March 31,2020
Profit attributable to equity holders of the Company			271,267						356,671
Weighted average number of outstanding common shares (thousands)			329,972,659						328,999,613
Basic earnings per share - R$			0.8221						1.0841

b)    Diluted

Diluted earnings per share is calculated by dividing the profit attributable to equity holders of PagSeguro Digital by the weighted average number of common shares outstanding during the period plus the weighted average number of common shares that would be issued on conversion of all dilutive potential common shares into common shares. The share in the LTIP are the only shares with potential dilutive effect. In this case, a calculation is done to determine the number of shares that could have been acquired at fair value.

			March 31,2021						March 31,2020
Profit attributable to equity holders of the Company			271,267						356,671
Weighted average number of outstanding common shares (thousands)			329,972,659						328,999,613
Weighted average number of shares that would have been issued at average market price			302,916						1,057,274
Weighted average number of common shares for diluted earnings per share (thousands)			330,349,729						330,056,887
Diluted earnings per share - R$			0.8213						1.0806

21.    Total revenue and income

			March 31, 2021						March 31, 2020
Gross revenue from transaction activities and other services (i)			1,555,410						1,085,796
Gross financial income (ii)			662,415						567,234
Other financial income (iii)			25,248						58,223
Total gross revenue and income			2,243,073						1,711,253
Deductions from gross revenue from transactions activities and other services (iv)			(170,440)						(118,992)
Deductions from gross financial income (v)			(5,432)						(4,966)
Total deductions from gross revenue and income			(175,872)						(123,958)
Total revenue and income			2,067,201						1,587,295

(i)			In the three-month period ended March 31, 2021, R$64,327 (R$15,130 in the three-month period ended March 31, 2020) corresponds to membership fee.
(ii)			Includes (a) interest income from early payment of notes payable to third parties and (b) interest on accounts receivable due in installments. Both are recorded net to the estimated present value of future cash flows, loss in the amount of R$23,899 in the three-month period ended March 31, 2021 (gain of R$21,737 in the three-month period ended March 31, 2020).
(iii)			Includes (a) interest of financial investments and (b) gain on exchange variation.
(iv)			Deductions consist of transactions taxes. Additionally, in the three-month period ended March 31, 2021, R$5,950 (R$1,482 in the three-month period ended March 31, 2020) corresponds to membership fee taxes.
(v)			Deductions consist of taxes on financial income.

26

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PagSeguro Digital Ltd.

Notes to the unaudited condensed consolidated interim financial statements (Continued)
As of March 31, 2021 and for the three-month periods ended March 31, 2021
(All amounts in thousands of reais unless otherwise stated)

22.    Expenses by nature

			March 31, 2021						March 31, 2020
Transactions costs (i)			(845,892)						(556,434)
Marketing and advertising			(190,153)						(156,209)
Personnel expenses (ii)			(231,662)						(105,028)
Financial expenses (iii)			(44,388)						(45,562)
Chargebacks (iv)			(173,133)						(70,171)
Depreciation and amortization (vi)			(158,302)						(59,594)
Other (v)			(63,319)						(98,143)
			(1,706,849)						(1,091,141)
Classified as:
Cost of services			(1,146,085)						(768,636)
Selling expenses			(368,112)						(189,022)
Administrative expenses			(189,070)						(85,785)
Financial expenses			(44,388)						(45,562)
Other income (expenses), net			40,806						(2,136)
			(1,706,849)						(1,091,141)

(i)			In the three-month period ended March 31, 2021, the increase is mainly represented by costs related to freight, maintenance of POS and storage costs in the amount of R$67,200 (R$31,955 in the three-month period ended March 31, 2020). Additionally, costs in the amount of R$566,724 (R$341,317 in the three-month period ended March 31, 2020) are related to interchange fees of card issuers and card scheme fees in the amount of R$139,002 (R$91,352 in the three-month period ended March 31, 2020).
(ii)			Includes R$79,671 and R$15,295 of compensation expenses related to the LTIP and LTIP goals for the three-month period ended March 31, 2021 and 2020, respectively. The increase in personnel expenses is mainly related to the LTIP expenses and Hubs’ workforce expansion.
(iii)			Relates mainly to the early collection of receivables, which amounted to R$23,336 in the three-month period ended March 31, 2021 (R$32,822 in the three-month period ended March 31, 2020).
(iv)			Chargebacks refer to losses recognized during the period related to card processing operations (acquiring and issuing), losses on digital accounts and provision for delinquency rate of credit portfolio, as detailed in Note 24. In the three-month period ended March 31, 2021, the increase in the amount of R$73,356 is mainly represented by inappropriate performance of functionality implemented in the past, allowing inadequate transactions by digital accounts customers and unexpected chargebacks on digital account losses for specific group of customers for a new product. For all these facts, the corresponding root cause was identified and appropriately addressed by Pagseguro management.
(v)			In the three-month period ended March 31, 2021, the decrease is mainly represented by reversal of R$29,114 in the tax payable as detailed in Note 16.
(vi)			Depreciation and amortization amounts incurred in the period are segregated between costs and expenses as presented below:

						March 31, 2021						March 31, 2020
Depreciation
Cost of services (i)						(99,527)						(23,139)
Selling expenses						(11)						(6)
Administrative expenses						(5,194)						(1,549)
						(104,732)						(24,694)
Amortization
Cost of services						(60,773)						(36,260)
Administrative expenses						(6,783)						(636)
						(67,556)						(36,896)
PIS and COFINS credits (ii)						13,986						1,996
Depreciation and amortization expense, net						(158,302)						(59,594)

(i)			The depreciation of POS in the three-month period ended March 31, 2021, amounted to R$95,696 (R$19,834 in the three-month period ended March 31, 2020).
(ii)			PagSeguro Brazil has a tax benefit on PIS and COFINS that allows it to reduce the depreciation and amortization expenses when incurred. This tax benefit is recognized directly as a reduction of depreciation and amortization expense.

27

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PagSeguro Digital Ltd.

Notes to the unaudited condensed consolidated interim financial statements (Continued)
As of March 31, 2021 and for the three-month periods ended March 31, 2021
(All amounts in thousands of reais unless otherwise stated)

23. Financial instruments by category

The PagSeguro Group estimates the fair value of its financial instruments using available market information and appropriate valuation methodologies for each situation.

The interpretation of market data, as regards the choice of methodologies, requires considerable judgment and the establishment of estimates to reach an amount considered appropriate for each situation. Therefore, the estimates presented may not necessarily indicate the amounts that could be obtained in the current market. The use of different hypotheses to calculate market value or fair value may have a material impact on the amounts obtained. The assets and liabilities presented in this Note were selected based on their relevance. The PagSeguro Group believes that the financial instruments recognized in these consolidated financial statements at their carrying amount are substantially similar to their fair value. However, since they do not have an active market (except for the LFT included in financial investments, which is actively traded in the market), variations could occur in the event the PagSeguro Group were to decide to settle or realize them in advance.

The PagSeguro Group classifies its financial instruments into the following categories:

			March 31, 2021						December 31, 2020
Financial assets
Amortized cost:
Cash and cash equivalents			1,260,278						1,640,065
Accounts receivable			15,868,501						16,076,540
Other receivables			157,546						164,805
Judicial deposits			37,699						7,450
Investment			16,400						16,400
Fair value through other comprehensive income
Financial investments			965,112						979,837
			18,305,536						18,885,097
			March 31, 2021						December 31, 2020
Financial liabilities
Amortized cost:
Payables to third parties			8,747,571						10,101,510
Trade payables			305,707						335,539
Trade payables to related parties			79,653						58,336
Other liabilities			97,663						159,198
Deferred revenue			219,255						213,555
Deposits			1,446,781						766,086
			10,896,630						11,634,224

28

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PagSeguro Digital Ltd.

Notes to the unaudited condensed consolidated interim financial statements (Continued)
As of March 31, 2021 and for the three-month periods ended March 31, 2021
(All amounts in thousands of reais unless otherwise stated)

24. Financial risk management

The PagSeguro Group’s activities expose it to a variety of financial risks: market risk, fraud risk (chargebacks), credit risk and liquidity risk. The PagSeguro Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the PagSeguro Group's financial performance.

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. In the Group, market risk comprises interest rate risk and foreign currency risk and other price risk, such as equity price risk.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group's exposure to the risk of changes in market interest rates arises primarily from financial investments and deposits, both subject to variable interest rates, principally the CDI rate. The Group conducted a sensitivity analysis of the interest rate risks to which the financial instruments are exposed as of March 31, 2021. For this analysis, the Group adopted as a probable scenario for the future interest rates of 5.0% for the CDI (increase of 80%). As a result, financial income (with respect to financial investments) and financial expense (with respect to certificate of deposit and corporate securities) would be impacted as follows:

Transaction						Interest rate risk						Book Value						Scenario with maintaining of CDI (2.75%)						Probable scenario with increase of 80% (to 5.0%)
Financial investments						100% of CDI						965,112						26,541						48,256
Certificate of Deposit						150% of CDI						1,191,057						(49,131)						(89,329)
Corporate securities						140% of CDI						255,724						(9,845)						(17,901)
																		(32,435)						(58,974)

Foreign exchange risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not the entity's functional currency. Our risk is mainly related to Boa Compra and BCPS that have revenues in other currencies and cash and cash equivalents maintained in other countries. As of March 31, 2021, and December 31, 2020, the PagSeguro Group is not materially exposed to foreign exchange risk.

Equity price risk

The Group’s non-listed equity investments are susceptible to market price risk arising from uncertainties about future values of the investment. As of March 31, 2021, and December 31, 2020, the exposure to equity price from such investments was not material.

29

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PagSeguro Digital Ltd.

Notes to the unaudited condensed consolidated interim financial statements (Continued)
As of March 31, 2021 and for the three-month periods ended March 31, 2021
(All amounts in thousands of reais unless otherwise stated)

24.    Financial risk management (continued)

Fraud risk (chargeback)

The PagSeguro Group's sales transactions are susceptible to potentially fraudulent or improper sales and it uses the following two processes to control the fraud risk:

The first process consists of monitoring, on a real time basis, the transactions carried out with credit and debit cards and payment slips, through an anti-fraud system. This process approves or rejects suspicious transactions at the time of the authorization, based on statistical models that are revised on a periodic basis.

The second process detects chargebacks and disputes not identified by the first process. This is a supplemental process and increases the PagSeguro Group's ability to avoid new frauds. PagSeguro’s expenses with chargeback, which was impacted by specific events in the three month period ended March 31, 2021, are disclosed in Note 22.

Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily accounts receivable) and from its financing activities, including deposits with banks and financial institutions, and other financial instruments such as loans and credit card receivables with our customers.

Credit risk is managed on a group basis and for its accounts receivable is limited to the possibility of default by: (a) the card issuers, which have the obligation of transferring to the credit and debit card labels the fees charged for the transactions carried out by their card holders, (b) the acquirers, which are used by the PagSeguro Group to approve transactions

with the issuers and (c) analyses for our customers background to provide access to credit portfolio.

In order to mitigate this risk, PagSeguro Brazil has established a Credit and Liquidity Risk Committee, whose responsibility is to assess the level of risk of each of the card issuers served by PagSeguro Group, classifying them into three groups:

(i)Card issuers with a low level of risk, with credit ratings assigned by FITCH, S&P and Moody's, which do not require additional monitoring;

(ii)Card issuers with a medium level of risk, which are also monitored in accordance with the financial metrics and ratios; and

(iii) Card issuers with a high level of risk, which are assessed by the committee at monthly meetings.

24. Financial risk management (Continued)

PagSeguro has a rating process for loans and credit, based on statistical application models (in the early stages of customer relationships) and behavior scoring (used for customers who already have a relationship history). A process for designing, calibrating and implementing policies and guidelines for granting credit and calibrating collection rules.

A process for monitoring the portfolio's risk profile, with a prospective view, which generates early warning feedbacks to the credit granting policies and risk classification models in a timely manner.

Liquidity risk

The PagSeguro Group manages liquidity risk by maintaining reserves, bank and credit lines for the obtaining borrowings, when deemed appropriate. The PagSeguro Group continuously monitors actual and projected cash flows and matches the maturity profile of its financial assets and liabilities in order to ensure that the PagSeguro Group has enough funds to honor its obligations to third parties and meet its operational needs.

30

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PagSeguro Digital Ltd.

Notes to the unaudited condensed consolidated interim financial statements (Continued)
As of March 31, 2021 and for the three-month periods ended March 31, 2021
(All amounts in thousands of reais unless otherwise stated)

The PagSeguro Group invests surplus cash in interest bearings financial investments, choosing instruments with appropriate maturity or enough liquidity to provide adequate margin as determined by the forecasts. On March 31, 2021, PagSeguro Group held cash and cash equivalents of R$1,260,278 (R$1,640,065 on December 31, 2020).

The table below shows the PagSeguro Group's non-derivative financial liabilities divided into the relevant maturity group based on the remaining period from the balance sheet date and the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

			Due within 30 days						Due within 31 to 120 days						Due within 121 to 180 days						Due within 181 to 360 days						Due to 361 days or more days
On March 31, 2021
Payables to third parties			6,854,048						1,208,503						343,720						341,300						—
Trade payables			187,276						118,431						—						—						—
Trade payables to related parties			—						55,697						—						23,956						—
Deposits			124,634						149,890						53,645						829,736						288,876
On December 31, 2020
Payables to third parties			8,348,127						1,146,136						300,058						299,645						7,544
Trade payables			332,733						2,806						—						—						—
Trade payables to related parties			—						46,945						5,063						6,328						—
Deposits			5,231						77,812						53,000						435,952						194,091

25. Capital management

The PagSeguro Group monitors capital based on the gearing ratio which corresponds to net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowings as shown in the consolidated balance sheet) less cash and cash equivalents. Total capital is calculated as equity as shown in the consolidated balance sheet plus net debt.

The PagSeguro Group had no loans on March 31, 2021, and December 31, 2020, Therefore, no gearing ratio is presented.

26. Non-cash Transactions

			March 31, 2021						March 31, 2020
Non-cash operation activities
Distribution of LTIP with treasury shares			12,723						—
Non-cash investing activities
MTM of financial investments			157						62

31

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PagSeguro Digital Ltd.

Notes to the unaudited condensed consolidated interim financial statements (Continued)
As of March 31, 2021 and for the three-month periods ended March 31, 2021
(All amounts in thousands of reais unless otherwise stated)

27. Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. A three-level hierarchy is used to measure fair value, as shown below:

•Level 1 - Quoted prices (unadjusted) in active markets for identical assets and liabilities.

•Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

•Level 3 - Inputs for the assets and liabilities that are not based on observable market data (that is, unobservable inputs).

27. Fair value measurement (continued)

The following table provides the fair value measurement hierarchy of PagSeguro Group’s financial assets and financial liabilities as of March 31, 2021:

			March 31, 2021
			Quoted prices in active markets (Level 1)						Significant observable inputs (Level 2)						Significant unobservable inputs (Level 3)
Financial assets
Cash and cash equivalents			345,111						915,167						—
Financial investments			965,112						—						—
Accounts receivable			—						15,868,501						—
Other receivables			—						157,546						—
Judicial deposits			—						37,699						—
Investment			—						—						16,400
Financial liabilities
Payables to third parties			—						8,747,571						—
Trade payables			—						305,707						—
Trade payables to related parties			—						79,653						—
Deposits			—						1,446,781						—
Deferred revenue			—						219,255						—
Other liabilities			—						97,663						—

32

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PagSeguro Digital Ltd.

Notes to the unaudited condensed consolidated interim financial statements (Continued)
As of March 31, 2021 and for the three-month periods ended March 31, 2021
(All amounts in thousands of reais unless otherwise stated)

			December 31, 2020
			Quoted prices in active markets (Level 1)						Significant observable inputs (Level 2)						Significant unobservable inputs (Level 3)
Financial assets
Cash and cash equivalents			321,674						1,318,391						—
Financial investments			979,837						—						—
Accounts receivable			—						16,076,540						—
Other receivables			—						164,805						—
Judicial deposits			—						7,449						—
Investment			—						—						16,400
Financial liabilities
Payables to third parties			—						10,101,510						—
Trade payables			—						335,539						—
Trade payables to related parties			—						58,336						—
Deposits			—						766,086						—
Deferred revenue			—						213,555						—
Other liabilities			—						159,198						—

The PagSeguro Group believes that the financial instruments recognized in these consolidated financial statements at their carrying amount are substantially similar to their fair value. For the financial assets that is basically due to the nature of the receivables that are due from top tier financial institutions subject to low credit risk and are mostly receivable in a short-term period and are measured based on the consideration that the Group expects to receive as part of the transaction processing services.

Financial assets also include the financial investments represented by government bonds with quoted prices in an active market and recognized in the balance sheet based on its fair value.

Financial liabilities are mostly represented by deposits and short-term payables to merchants which are paid in accordance with the contract set out with the merchant and other short-term payables to service providers in the normal course of business and, as such, also approximate from their fair values. There were no transfers between Levels 1, 2 and 3 during the three-month period ended March 31, 2021.

33

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: June 2, 2021

			PagSeguro Digital Ltd.
			By:			/s/ Artur Schunck
			Name:			Artur Schunck
			Title:			Chief Financial and Investor Relations Officer, Chief Accounting Officer

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