Earnings call transcript Q2 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good evening, ladies and gentlemen, thank you for standing by. Welcome to the StoneCo Second Quarter 2023 Earnings Conference Call. By now, everyone should have access to our earnings release. The company also posted a presentation to go along with its call. All material can be found online at investors.stone.co.

the net be cash. income call, information, non-IFRS conference adjusted including and this company presenting will financial Throughout adjusted net are by for financial measures important but These not are the measures IFRS. company defined as financial Reconciliations financial press appear IFRS to information company's of in non-IFRS the information the financial release. today's

not remarks, therefore, begin guarantees and undue These to forward-looking to put expectations. are would not remind you include everyone These Finally, before subject differ cause company's I might from statements. we that materially future uncertainties actual forward-looking and performance, of should our formal them. the are on like today's discussion could reliance to that statements results statements risks numerous

XX-F of addition, and the is at Commission, Securities risks available many which company's Exchange disclosed recorded. Please is In being Form event with note, filed this www.sec.gov. business the the are regarding in the

Chief Pedro now at StoneCo. would your to I host, proceed. to over like Executive Officer conference the Zinner, turn Please

Pedro Zinner

evening, good and operator, everyone. you, Thank

on Joining Head of Chief our Lia our and the Officer, Financial Matos; Chief Roberta Strategy me Noronha. Scherer; Relations Investor call IR, Mateus today and Officer, Officer our is

was then I to will call prioritize. will you and giving of growth turn continuing thoughts to results to by I start in the on the walk quarter, second commercial it strong by my over through generated we second our want to Overall, the pleased detail. performance a the more win with we quarter. team Externally, some perspective, from areas in our today's I in

produced and more services progress our efficient. and and continue expectations initiatives company, range make the And results our accumulated of profitability as our more made ramp we we broad better firepower. a above to within cash Internally, financially, we across operations to

priorities quarter, the the outlined at the of we I how evaluated to I the also year. performed beginning at relative we looked As

significant the met strong improvement our line growth efficiency. I objectives to a priority second with with top profitability. In first Our generating by was quarter, in grow our think we

Our Coupled reached R$XXX billion, highest quarterly increase adjusted R$X for by adjusted of by and million, an the X%. XX% line with guidance revenue improvement, in year-over-year history. guidance our reaching mark surpassed total top XX%, the exceeding our EBT EBT

adjusted and net year-over-year, XX.X% grew X.Xx result, yielding the a net a quarter. million in margin R$XXX reaching As of income

Our of R$X.X year-over-year to Adjusted second billion. generate R$XXX priority was cash. invest consistent cash mostly net and the the growth R$X.X to product we was while driven increase to business quarter-over-quarter development. continued and flow increased in technology by generation reach This cash billion million and client

focusing Financial year-over-year on Financial from card the period and presented of expansion business. and rates, showed limits. TPV TPV to billion MSMB delinquency consisted the priority macroeconomic declining R$XX.X consumer improvements reach increased headwinds client XX% Services clients. in third despite monetization The interest higher growth healthy our in Our and industry the higher from Services base segment credit

the growth X.Xx growth. was Our quarter in the industry

MSMB X highlight It's important also sequentially rate to X.XX%. basis during our adds. to reach net points take quarter, MSMB we base grew client with consistently increased the XXX,XXX that

for the credit very results with And with and in debit launch banking piloting of we with much also have We solutions our line are product early Stone to expanded continue now cards credit our our expectations. cards, test we clients.

R$XXX of the strategic a EBITDA while fit we're point margin and our see on results. to adjusted improvement we XX% segment I'm was able were a priority basis. fourth expectations, improve reached business. quarter to gains. Our XXX are also evolving this a short-term million we Revenue evolve below a for with software After business, software to happy capturing basis software delivering our efficiency first that our quarter-over-quarter

build also this step right towards in important having all place we it's least, to highlighting quarter, resources not the fit-for-purpose another that but Last worth took organization. a

to with like Investor welcome and be would and working in our formally the I'm company. to Roberta stage Head Roberta Relations. our Scherer announced of excited and May, as Mateus the Noronha very Mateus growth for I IRO as as CFO As set of next we

I StoneCo hosting contributions like work thank Brazilian in building business proposition our to November. to I'm the and for would announce they've commerce York COO] first we on value that in pleased Day this to are excited all New the I made for end-to-end all the the they how [offline done to also future. to views an share also Stone. am valuable our we're and

approach we we the further event, share As you. will with details

the over on second to a quarter Lia Now Lia? for and it I'd performance updates. to XXXX discussion strategic like pass

Lia Machado de Matos

Pedro, Thank you, and good evening, everyone.

start the In XX% client 'XX, mainly to of increased Financial of to the segment revenue performance second going on year-over-year with Services X. in quarter billion, the attributed R$X.X MSMB in to segment. segment our the highlights our I'm Page

in leverage resulted TPV realized basis and MSMB improvement million rates cost combined in margin, of higher our client sequential above-industry increase EBT performance was expenses, our XX.X% growth, take by mostly This, base. XXX influenced adjusted R$XXX of and points. and a in a operational EBT with representing an

X, the more in let's performance review Slide MSMB detail. On bit a little

clients. robust payments active approximately this X million Our experienced Quarter-over-quarter, XX.X%. growth, merchants, net of represented increase of additions reaching XXX,XXX base an client annual active

TON of strategic deceleration the 'XX MSMB Stone campaign optimization expansion additions sequential by of base all Through quarter was the across our sales tiers successfully within in our marketing conclusion the the period. efforts client within driven from segment. of sustained across channels, offerings we and net our The targeted first the

Despite by 'XX value of X. guidance result, to happy illustrates and was with our R$XX.X in relative line Slide very offerings. this industry and above-industry overall second performance quarter strong impacted proposition TPV increased our we're to growth, MSMB which power XX.X% and and with growth a billion, slower year-over-year growth. X.Xx the Moving a being our

we this performance the that market to relative continue that confident we're in continue will ahead, gain share Looking and segment. will

improvements presented yearly Our MSMB take rates notable also and a quarterly on basis.

to basis interchange our in which XXXX, stronger banking and have small clients commercial revenues. X changes and quarter-over-quarter can annual fixed points X.XX%, effect and XX mainly continued basis higher regulation, the increasing be and adjustments prepaid went solutions, The and year-over-year. floating our April policy, cap our rate reached card which effect debit micro from growth This quarter, into points contribution take of in attributed take rates, of as improvement in

Slide due X, sub On update volumes. with of year-over-year, I give low-margin expectations decreased our TPV quick XX.X% key in our deemphasis acquired accounts TPV. a on line to

shift of year-over-year. result within policy our and take a segment, basis As increased the points in XX mix rates account key adjustments commercial

move to let's performance Now on Slide XX. the banking

our was This solution base 'XX TON XX.X% of clients. client banking and result X.Xx continued Our to million strong reach the launch acquiring Conta a the of first the and year-over-year growth banking Stone quarter combined quarter-over-quarter X.X in Super active of for active increased merchants. activation with of

Total slightly billion, reached deposits quarter-over-quarter. up R$X.X

cancellation result quarter, as in and This had we onetime TON the impact the process R$XXX of with a chargeback a of in P&L. to no million shift for decrease client collection deposits our

overall increased this significant driven deposits growth illustrates would X.X% in TPV, have Excluding to sequentially clients in banking the with solutions. which increase MSMB our compared onetime Due the our X.X% our engagement to effect, of banking and to client by in ARPAC accounts, to generate quarter R$XX of in 'XX clients, comparison 'XX. in R$XX second the primarily first contribution the micro growth from lower decreased revenue quarter in R$XX which SMB increasing

clients. of offerings to our acquiring the banking power We strongly combining in MSMB believe and

develop launch we're banking features working hard existing such, to As and new products. and enhance

within offer example, different We're well an cards already our banking quarter, TRPs as cards as features software to this clients. client debit we select As we credit have started working to that for and the enhance launched piloting portfolio. integration Stone our related the of also experience to

I'd around underwriting an overview credit enhanced with million. balance On of XXX guarantees vintages and lien July, clients is R$XX with our personal executed to of outstanding in XX, of Slide the a R$XX.X receivables to provide of like early line as quick with end offering. million disbursed had standards on being The credit we expected. performance our our Through

As take full market depending cohort growing towards the will solution, expansion the this performances. taking necessary approach we time and have discussed, disciplined of a the observe portfolio to conservative and conditions on we

in XX reach to organic million. growth of to the was software In of active continued and revenue move expansion in our by driven segment in mainly 'XX, the software our base segment. sequentially X.X% shift business, let's R$XXX to core Now mostly grew second core line the ERP setup due increased client Top revenues This the quarter to year-over-year and SMB Slide highlights business. store our increase X.X% in POS related an to growth.

share-based R&D in levels lower XX.X% were and R$XX.X and which services, The cost cost million, severance capitalization million the well mainly an XX.X% projects. amount of marketing adjusted a improvement to effects cost margin operating to and expansion which team as investments and sales continuous equates a partially basis of organizational included EBITDA and by structure. the higher and points. of increased R$X.X to offset to Software revenue adjustment a in expenses, made our expenses These as result margin is in in a our XXX due related EBITDA sequential of to reduction margin year-over-year of period leverage reach increased our compensation of

efforts headcount within reduced ongoing additional our In should benefits 'XX, integration going forward. of second quarter StoneCo, with associated which the we drive

the short-term are while capturing within Pedro of on fit mentioned, we As we software strategic gains, advancing on evolve efficiency StoneCo.

cross-sell while verticals important different also on and advanced initiatives. for two testing Services prioritizing go-to-market have We Financial software driving

process building the end-to-end our but our in multiyear enhance we steps are sustain to our is and mentioned, As journey, future. clients to taking we platform of believe proposition right the have a we the value

further details We to provide our expect StoneCo in Day November. during

Mateus pass to to want to metrics. I our it Now Mateus? discuss of financial over some key

Mateus Scherer Schwening

Thank you, Lia.

Stone to to role the the within team of forward with take future this StoneCo building on in excited together. look new I'm working and

a let's costs increasing revenue XXX adjusted to of X% points it XX, and basis basis of year-on-year reached Compared Cost Slide million, XXX the reach X% previous basis. expenses to of and points Moving our revenue. decreased percentage a percentage R$XXX on as XX.X%. quarter, services and to as discuss an decreasing

services gained expenses by: services. excluded XXX This and compared effect expenses, be R$XX the that of reduced of our variable million driven cost benefit I sequential the to which positive points of have technology and R&D compensation to leverage basis like costs the allocation would in still between we to our if reassessments changing higher that of the from R$XX explained unusual we results, led to cost quarter, by quarter. previous capitalization million a even nonrecurring of would projects operating highlight improvement can in lower and allocation

with X.X% increased our are the which X% first zero-based associated basis of Important in below quarter the for points expenses quarter. a the previous quarter Administrative 'XX efficiency second to of expenses sequentially, process. result percentage the a of administrative of as a to budgeting XX 'XX, levels highlight as that revenue compared of the resulted reduction mainly initiatives

expectation Our to a and the decreasing onwards, investments is This is inflation, XX Selling leverage. from XX.X% basis points sequentially, broadly as expenses quarter-on-quarter that improvement due further operating in percentage grow expenses line administrative sequentially, should lower to point basis. slight sequential in year-on-year with this a marketing period. on leading revenue of grew X.X%

expenses our conservative a decision to and of Financial XXX three of increase as percentage duration in a and driven was XX.X%. in balance the increase by receivables a to decreased reach in hold sold. points cash XX.X% volumes, factors: basis growth higher The the revenue quarter, slight quarter-on-quarter prepaid

in expenses, sequentially revenue. to tax in million can percentage and a of a expenses XX.X% points XXX positive decreased expenses attributed of compensation other to other as our lower basis provision. net due mainly variation R$XX.X primarily effect be share-based The Lastly,

strong CapEx inventory. sequential talk our Slide our for R$X.X POS by to was reach drove adjusted The I first marketing from campaign cash R$XXX cash this to this On flow to main generation. Adjusted year-on-year increased increased that quarter operations in a would as billion. decrease cash about due driver a the billion. than in basis, a in net it 'XX, to net as the cash a as well quarter Moving period usual specific higher like was XX, R$X.X by million additional

Now quarter 'XX third Page to on moving outlook XX. our

the representing in quarter year-on-year and expect of million growth third revenue above total of growth We XX.X%. income 'XX, R$X,XXX

representing expect and billion, between in XXXX R$XX in compared For between growth quarter third XX.X%. the year-on-year billion volumes billion we of and the third 'XX, with XX.X% TPV, R$XX.X MSMB R$XX quarter

expect we million. of Finally, BRLXXX more EBT adjusted than

our providing would this longer-term highlight we into results begin our we I is of to I to in jump are the as provide StoneCo like Day quarter, Before that November. last quarterly guidance a during outlook Q&A,

said, operator, can questions? With call open you up please that the to

Operator

first Please [Operator question Sumar Instructions] is The Evercore Sheriq from with go ISI. ahead.

Sheriq Sumar

the payment on increased U.S. is competitive And like how far? in for from Brazil? are now, dynamics outside that within Brazil is, lot increasing question Are you gains countries as My is a to or mainly and seen my market any side. the well questions. Thanks traction the Hi. taking the on competitive as coming you right competition you. other the where share within Brazil biggest any or so Thank seeing landscape

Lia Machado de Matos

thank here. And Sheriq, Lia for you question. Hi, the

big I no seen saw similar think regarding we news, dynamics, this we quarter very had that past quarters. what the to the competitive dynamics is in

look if the share the at at share difficulty] shifting and amongst they they lose we market suggests look volumes, larger evolution the have towards [technical a each share pace, pyramid, at more they it do. this at to clients. top group, slower So continue market When we a as of that the but been other

we that able a in market operations our in dynamic local granular and that And to react specific the very what data and of that the through we view we can hub given very have each can have all of locally. seen dynamics capture react is we're region,

really that we're going that's to seen, same news, we And this no we continue continue able have going So, that seeing. segment quarter. that's to believe forward. the big gain to as dynamic in MSMB been strongly share trends a And have you

Sheriq Sumar

any follow-up be could long-term Thank you margins do you is think EBITDA this stabilize? like increase could segment? do around, looks it much more you the how for what fluctuating have My mean one color I it think so the runway much. but you margins. margin this the sustainable I and do that keeps where to mean on, software on

Mateus Scherer Schwening

Hi, Sheriq, Mateus here.

revenues the So about first, improvement an new while sales EBITDA on control. setup for we from X% the had of maintain top-line division the in the software talking fueled and quarter, we expenses in quarter, costs under by

R&D a look is So in mostly effect the and about result expenses the slightly this costs of higher on firstly, was when of we quarter. expenses, capitalization

was most integration also reduction a in But this the which was associated the with by of StoneCo. within some headcount, of functions] process offset of severance [cost costs by driven

negative So quarter R$XX in one-time savings impact this of drive our this should reduction million in around headcount EBITDA per a going million, but had forward. of R$X.X

expectation grow, associated should while savings. is discipline that to our have next quarter the topline the continue we for with So cost

So, about we're optimistic software, going up. in margins

Sheriq Sumar

Thank much. it. you so Appreciate

Operator

question is go Juan Please Recalde next The from with Scotiabank. ahead.

Juan Recalde

My the thank of And results. for leverage you my question to on is operational strong the related on taking cost question. services. congratulations Hi, improving the

to of I So of mentioned XXX driven see, this that the R&D that And is sequential this basis points. part you improvement when like capitalization. is led of reassessment by higher the projects

of is my in how of improvement change R&D? by the - driven XXX So this was question much this basis points

Mateus Scherer Schwening

Hi Juan, Mateus here.

effects cost assets right, to the we intangible to you're services. of had impacted in capitalization So two quarter that related

features our reviewed our were capitalized firstly, previously. that mirror we in team, tech And So new few software the more projects to identify capitalization standardized being to projects within units. process practice we and the financial secondly, also segment's related the services the ongoing all not

a as But cost adjustments in our excluded leverage basis positive have services on we the positive around release, in we highlighted the even compared of previous and R$XX XXX of of points effect effect resulted one-time quarter. unusual our quarterly services. cost gained still results, we if million would of So from these to operating earnings this

line, corporation out our to we may core expand provisions the leverage But in when have leverage we offering. that by begin as to operational to itself, be operating continue cost gains this we look we the So in in ahead, in services. should anticipate balanced credit

Juan Recalde

small implied improvement follow-up one it I the be guidance, in think at And I is going look I there to EBITDA may. - that quarter When a is margin. adjusted that helpful. if third That's the

- than think positive we up of? if third margins in the if of the we What So terms there being expected, drivers can what better do you the end surprises that have the in can be be margins quarter? that can

Mateus Scherer Schwening

Yes.

quarters. similar So, the I to should the be dynamics previous margin think

continued in on focus hand, And efficiency, center. our and on budgeting growing we savings the in to whole MSMB. company shared other driving So, with TPV services terms the have big to our also keep focus expect of of we implementation a a zero-based and a process,

effects, have any line to you top-line, as So two terms when of I in the bottom this these combine flow if outperformance we should think well.

Juan Recalde

you helpful. very Understood. That's Thank much.

Operator

question go Labarta next Goldman The Please Sachs. ahead. Tito with is from

Tito Labarta

Hi, revolving and some good credit of evening. installments. reducing my Thanks elimination interest-free the questions. question is of for regulatory about the talks the and on front call taking about there Actually, lot one noise cards, a

Just curious, from - what interest no end, business can could is on impact color Thank on you [reducing] what any the that, on here? but just thoughts installments heard, decision I final happen, provide you know your what any there happened, that you.

Pedro Zinner

the Pedro you Hi, Thank here. Tito, questions. for

- you think the I gave in some ways. flavor

a I tell. to think early bit it's too

you closely away and debate. the that always impact and private following the definitely would a offering changes would we're right? from as aware, regulatory merchants, support think competition And I I have change we consumption, are and the as consumers benefit transactions think of consequently possibility all overall takes significantly done, we that economy. would the merchants installment cause

I impact think, would, how this us.

the consumption possible economics Brazil so and industry But in involve to decrease concrete ways. rate that a modification comment in P&L are the in the transactions in since that premature it's balance installments, is a might discussed, the say done potential being bit outcomes a overall industry. nothing significantly affect think foreseeable specific of free we these I interest is what structure majority impacts, installment any to credit private given can is on through repricing some there would

Tito Labarta

with And leverage reminds come just interest financial Okay, the in just there the or just pricing expenses on your as come the But any know reduction any from impact helpful. I given rates it's some prepayments, just down us have you risk but coming for benefit on competitive mean, great. take rates there the still the plan as down. question, the you. Thanks Thank bps color. down, rate. XXX to rate isn't And environment, just well? second I reduce potential Pedro, as

Mateus Scherer Schwening

here. Mateus so Yes,

costs impact part the remind of on should P&L. financial is the our XXX but funding points net by first the the other around the also So Important to equal, cut of on question million. results basis being to impact to positively this All income. cut else related that impact basis R$XXX XXX of revenue and floating our effect our

[technical times in told our price, difficulty] the We pricing a a about but dynamic process. past is react. few talking in view Now

continue We we will target way in sales, doing have the returns which for having is pricing base. that hurdles the in to manage new our minimal contribution margin in client pursuing our previous been quarters,

We also We XX rates an has and noticed a to previous case rationally the for change the new players the to to their offerings continues interest that adjust behave industry acquiring all to that had been reality. believe deal months. had as with in abrupt it

So any market nowadays, don't with ourselves. we by nonprofitable see offers, share [technical including difficulty]

that will long through as Nonetheless, to pass short cut side. market internal don't response our as impact anticipate of initiative in actively adjust the from said, meets our the we'll on monitor benefits to effective market's continue it any the depend the the and necessary as the So dynamics overall hurdles. pricing we but our term declining given of rates

Tito Labarta

if maybe I can. on Thanks one that. follow-up Great. that, Mateus just for And

bigger did see financial expenses a to financial compared Just quarter, the increase income. we the in in the

the there financial little spike in bit the a stable. why expenses So relatively quarter just is this to understand

Mateus Scherer Schwening

Yes, sure.

mix as debt our spreads. to funding this between relevant changes mentioned well, receivables expenses of difficulty] [technical even already previously there sale but are and funding changes due our in without we in So

the second the decision be that in duration mainly with in the conservative first factors: increase factor the and by is slightly also, hold we said, increase explained slight receivables this quarter. of MSMB is growth a TPV; in to cash factor the the sold quarter; in a in higher three had can also So balance quarter

already Over that curve. by said times primarily term, are TPV a few the we these medium influenced expenses

more is a effect general and of forward. not this So quarter the going an trends

Tito Labarta

you, Thank Mateus. Perfect. Great.

Operator

line Gusan Citibank. Mr. Gabriel next go with is question ahead. mute Please perhaps? is your from The Gusan,

Gabriel Gusan

even guys. a TPV MSMB a see entire slowdown Yes, for could affect, you. feel gain do sorry see you this you TPV also elaborate we seeing Good could Could you growth on for especially a the Thank the slowdown for to And your you're you share, if that. slowdown evening, overall bit there? market? continue but how TPV, do

Lia Machado de Matos

you you, for Thank question. Thank here. Gabriel. the Lia

reached beginning sales So TPV by I the and a presented trends our same-store Especially think we May, the we dynamics, was initial regarding noticed is indeed TPV than little focusing as lower the with our the on in we in deceleration of for and softer forecast market reported the quarter. bit TPV our growth growth, healthy MSMB even guidance the clients, of overall which in consistent ABAC. though

reviewed growth, line average. ABAC the that we the that more behavior said, TPV almost on in unchanged. a keeping relative growth discipline basis, think range we year, than base. market saw industry our the the on Mateus with pricing Xx so in Despite of the the still like that, within of We But that's saw we grew

we're have difficulty] And that grow us TPV and share of that and we we July comfortable So our which industry compared segment. the to makes performance gain provided continuing happy guidance shows early within with with pretty really the above data [technical signs improvement the saw.

to our by been base, growth so initial growth has in important in PIX very PIX, PIX thing dynamics growth another we trends we have very look looking Gabriel, at mainly PXP, within of If of to within the similar that think was at what driven PIX PXM overall mention, has PIX regarding more a but seen a strong I happened there growth PXM. is base. it's market, strong the recently,

PXM MDRs. the monetize everyone POS, debit to we dynamic very line enable much net a we our through with method clients and a QR in payment that accept reminding which in card Just is PIX that code

growth look PIX TPV, TPV above credit grew And PXM, growth we at quarter, a we card when card yearly cards we looked a -- the sorry, And considering PIX would plus at XXX% if they see to consolidated year-over-year. of were in XX%. PXM volumes

of the base So we be volumes we that but the definitely think se, within PIX of cannibalization seems when per volumes. debit is a growth debit about there taking not, PIX away think from to

for because very we we it's important with highlight. it And So in And that because and this is it us, benefits think really is for much monetize it to a settlement -- instantaneous. debit cheaper line us trend it benefits naturally clients them, that is cards.

yes, So what say regarding we overall that's I trends. think TPV can

Gabriel Gusan

lot. Perfect. Thanks a

Operator

from next question of Antonio is The from Bank Ruette America. Please go ahead.

Antonio Ruette

Hi time. team. thank for Congrats on and the results, you your

So two questions on my side.

I going strategy. So increase just on we you to first the wondering on could the more capitalization major this also, CapEx. in expenses, for and of bit question should the a see of a And if explain was trend drivers terms little continue forward broader expenses, in if

at this, be could when at challenges just product. If you on Linx wondering execution. and I'm execution a do banking And competitive little your have elaborate today's to challenges, Thank also looking very a look consider to today? your all you what bit you if you. main acquiring business, you integrate challenges

Mateus Scherer Schwening

Yes.

I'll with question it the start So to over the comment integration. pass Lia and then and to CapEx capitalization on

in So all projects firstly, capitalization segment's Financial process we regarding resulted equalize repeat more factors of standardized to not in quarterly and two new cost our these which tech services, the we movements: we ongoing dynamics and identified these should projects the of R$XX those a This a so were positive features had the Services effect reviewed influencing software previously. onetime related primary secondly, the in capitalized team in not our million future. to within the few that unit; being capitalization, basically

Now previous quarter quarter R$XXX highlight sequentially talking quarters. the for we decreased R$XXX quarter. we this the slightly to to coming a about CapEx in previously, that indicated And the in first million CapEx, CapEx our it's from also in as lower -- million expect important

general So trend. a it's not

Pedro Zinner

Pedro here. speaking

jump Let me in.

the year, our I throughout of strong the and software we incentives on think portfolio. to streamlining the in I of alignment cost discipline, integration, the want strategy think focus the side, put team a rest

I think term. the the drivers this key short would be for

However, same in we're at P&L attacking line sides so in we our place the top several regarding of have ways. time, some both priorities growth

not are in goal it. improvements that to the business, In unified short-term have the I'm to are challenge. time, take worth though make business really work We an software software become strategic actually the is really of path and of integral we is the integrated merchants. but a of our they build that confident services excited end-to-end lot part believe long really reality, commerce provider and vision. to a The the It for have we on Brazilian for clients, really financial rewards solution in ahead will term, software our us, a only our our we're

that strategic more we'll on we key it But our our you think our up Day KPIs the initiatives. Lia she color be maybe long-term this view providing with more Investor provide flavor on until how so and on I can by mid-November, set XXXX. I'll pass over to

Lia Machado de Matos

Thank Pedro. Sure, you.

bit Antonio. elaborate on more So a to challenges, just those little

banking that we with on the I evolution think the side, have we very seen. happy are

our our seen clients with banking have engagement we increased of So solution.

banking, a then In acquiring for that engagement as which to provides our cash-in, we to as points. more main can powerful we and big Of course, we the see combine acquiring clients clients. further our offer a solve offering their features drive business value fact pain

we We really work a clients' regarding take steps initial more software into steps really journey. important and so we incentives, have banking I started some put have side, do terms think, that address year that to providing I right on right this the said, like on important what this feel work prioritizing more setup is have, we are a lot very of features having side, the in to And multiyear lot of needs. the the the But organization, of having think to most of Pedro take. of being a our

go-to-market see on verticals we regarding of for we initiatives product undertaking product that And what just a to to us color as are those as integration, the initiatives services have So address key initiatives. software the around to clients. verticals for bit little we're that, give prioritized opportunities cross-selling financial bundles,

we When today, see and up we of very software XX% we're year. services. from use traction, some about early XX% the It's to clients the our That's initial taking. beginning started financial look about of stages we're but the at the that with direction cross-sell at our very confident

So more little evolution bit to those on just a color give points.

Antonio Ruette

great. and Pedro. Lia you, That's Thank

Operator

is Siegler The Josh Cantor from Fitzgerald. next ahead. with go Please question

Josh Siegler

thanks execution the taking what and my little question I on guys, guys the quarter. were to software about, talking dive bit for on Hi which side. you wanted just deeper is a congratulations into this

help revenue you So there was really software. and software between achieved in active a the number spinning you strong quarter. you services Can such us some improvement to in cross-selling financial got and that this of locations start understand noticeable flywheel how improvement the how

Lia Machado de Matos

Yes. question, Thank for Josh. you the

we're we in the Linx more pyramid, inbound. focusing growth channels, the to less the terms -- and growing of kind in segments, the strong So large investments putting of the around client business and clients. our namely, of enterprise the our address software inbound has more that what a remember call in middle is mature they of Those So and mid- franchises right? so presence within middle really pyramid channels, really in segment

the drove what really growth that's in So locations.

our combine very invest is it offer stronger to where a strategic will a when proposition financial think opportunity -- that's to And forward going area about us to to clients. value and the an continue you for more we because software services

said. what have cross-sell, say the to already regarding I more think I much not So than

really the -- in financial this product, kind a have we've that a we around team software cross-sell team very around making way. organizing front services go-to-market structured that more we're and having objective of a around think and on lot and year around this sure offering, achieve to aligned initiatives I

are several There within Linx. opportunities. verticals of address for lot to a us There's

see within our for the opportunity within to So really started us we the want for a a client where largest the today ones a the we and client have large focusing us overall, there's and on TAM to base that software tackle. have market relevant software market that So verticals in address base right? big we and

is pretty we're on. where this much So focused

Stone we Day on provide in We'll right Pedro color like November. And able the more at color that yes, to that's this, be give said, can now.

Josh Siegler

And to new to What's have about And forward? to banking I cards believe Great. card the the fully on of the timing rollout market? you, additional a significant also forward getting want mix ask your you actually will Thank credit the Lia. looking impact segment on do moving of product. color. credit that that

Lia Machado de Matos

Yes.

So year. you and a said, Yes, we able credit be add this the are Pedro, don't the little point. know, more like piloting to card not this bit products, we of end we to scale color. say at more want if hope to I towards to much

Pedro Zinner

Yes.

call, that and and highlighted being last the to I think that in some taking a taking a actually we of full conservative quickly that conservative the approach performing the mindful ways, credit current environment necessary we're credit our the the in book, the you were disciplined not approach cohort might right? observe remember expand expansion best the ones also to conditions toward macroeconomic time book,

And semester. performance, scale-up So to we're I premature the keeping the over regarding definitive conclusions. it's I but think a bit see more portfolio approach you next draw conservative think ways, our some in

I think I models, better much this pretty are we that expected at results think and point. by bit have to a our that's than say initial

Josh Siegler

you color, it. guys, thank I appreciate for Great, very much the

Operator

go with is HSBC. Please The Neha from question Agarwala next ahead.

Neha Agarwala

you thank the segment. My first taking question. Hi, question is on my MSMB for

share what's been whom market share, to on that -- keenly particular the seem right? gain allowing You segment. gaining segment. competitive, in you which so that is focusing market but very to player you any share? to are currently, And is there especially segment, which continue all are that from gain SMB in has market always players And particular Is

clients. is the segment. to My There the it's long-tail the presume a tail. on I decline active question long due was in second

are that. do you tail? also And in to continue bit could you you aggressive the in a elaborate hear that segment. probably we long-tail If on share how And Is gaining that right? price long the more expect

Neha Agarwala

you much. so Thank

Lia Machado de Matos

-- Neha, there question. Lia Thank for you I the think were here.

the segment, distribution and then created here, a logistics. with within share and really know it so let if -- our I question, if there's gains think there in fundamentals me answering owning all, from best were providing regarding going think to to the back and just model I service the a around clients touch your start So MSMB market service let okay? I covered few points we centered questions me

hubs Brazil to in Regarding to in in to across our where micro we continue capital have room distribution, grow see segment. to also we allocate white and grow marketing further spaces the

think important highlight point segments. I growth in to both to that's an So invest that we continue SMB micro in and

ability is think And strengthens sustain different offering both to and gave our we channels, the assertiveness to we value layer the service customer have point and to in which a is invested product segments that part our and past TON proposition, Stone of an distribution the our at and question, same gain third attractive with to ability really and best important optimize did maximize unit another factor, client economics. share is market. expand across continued That's clients. and our multiple SMB years, our this time, for us while footprint, second in to the A allowed we us that your I optimize in expanding offerings micro economics tiers important over

think that's strong our that mentioned that clients value attractive times, point, with an but the We've many continue the this I day In creates and growth to the these spectrum for right? very it's profitability. So a us every of ability profiles combination end, important sustains this client said important win to proposition I of balance to it's that, with economics. across factors

our take think that's evolution, I share Neha. market So on

Neha Agarwala

active Perfect. the terms decline in the of And clients? in

Lia Machado de Matos

Yes, sure.

a a almost campaign had you the we net had targeted So like to in marketing stronger that a around -- marketing quarter impact show these big Brazil had in the the that's because first adds due campaigns within subsided in in Big quarter. it's Brother first first that quarter, reality Brazil,

color why So Mateus, saw add? that's the evolution. this Any reason we you want to

Mateus Scherer Schwening

I base itself want to active complement, still the growing. client is

grew quarter. was campaign said, Lia million of in quarter was in up first million the net like first this the 'XX the addition clients quarter. to in roughly active that ran and from X.X marketing we decelerated What the we second X clients So related to the

Neha Agarwala

perfect. and Okay, thank so much, quarter. you on the congratulations That's great,

Lia Machado de Matos

Thank you, Neha.

Operator

question Barclays. from next Please Coffey John The ahead. go with is

John Coffey

taking was for MSMB question and of wondering very on Neha's could a thank follow-up is regarding was my growth growth just a strokes. question, I much it maybe broad The if that TPV some paint in bit question. the have Hi, I of coming been XX%. from you you about this we the incumbents the like of fintechs? Or is Brazil some acquirers this, think share coming from market of newer lot the this like of a some maybe time? from away space? for Is of is green in have more it taking -- any some When

last it that Just as an again, idea especially And trying then to quadrupled market growth. coming accounts, sequential overall get you is, like of key TPV down this key my on a the here it nearing from, to said X%. almost only is we follow-up That's some where looks where TPV? known sorry, accounts or the bottom it. their in -- account basis, was growth we see can about Are just start

Lia Machado de Matos

here. Lia again John,

dynamics, question So -- think right? I TPV sorry, your around of part was first the

John Coffey

coming that's and Yes, incumbents, fellow greenfields, for from, where fintechs? MSMBs old

Lia Machado de Matos

mix. a really it's Yes,

competitors, is market So day first taken message we've of one right, our share existence. since from always

as dynamics share. relationships also sales growth. to clients by strong a those drive to win a gain TPV growth impacted that over the allow long growth we very and our us continue continue lifetime, new is as to But TPV will So healthy market that's within sustain same-store base. always can that

question same-store don't behind there of terms by It really continuous client any significant I the been of And really think recently. don't it by changes who I difference growth, the wins. a players think market main has varies but but there's explained region, really just this of hasn't sales in changed that it's in combination reasons are terms recently. much see that the share I competitive new competitors. dynamics I varies client gain, segment, on Neha's

John Coffey

declines Okay. over And quarter-over-quarter as is key as accounts the you. Thank for far pain TPV? in

Lia Machado de Matos

expect segment we can Like an think now we dynamics opportunistic these said, see to us. from is this on. I TPV stable for

not to yes, much say So there.

behavior. expect think I TPV we can stable

John Coffey

Perfect. very Thank much. you

Lia Machado de Matos

Thank you, John.

Operator

is question next with Grespan ahead. JPMorgan. from go Guilherme The Please

Guilherme Grespan

everyone, you, Two on for the call. Hello, questions thank side. my

related to is one long first tail. The the

We healthy. seems marketing talked that was a more some this You on SMB bit little on the bit competition on There still saw a flow aggressive on player one focusing specific segment. long the did little some news the about campaigns also quarter. tail

I segment in think they going forward. to targeting the are grow

one the still dynamics? to here just cross-check. separating you the from same just is the has So the economics, been SMB long see how second if the competitive tail, And

impact chargeback the banking mentioned the You on deposits.

this bit you. XXX% to a is can us. little clear you just impact. clarify what If Wasn't Thank

Lia Machado de Matos

then of Mateus. to pass to going Okay. take I'm it part Guilherme, first and question over thank the you. the

micro economics to to TON really our strategically optimize point with here regarding our offering market So segment, is maximize I key client the share one and highlight to think MSMB ability segment. within attractive Stone gains

within micro micro Regarding structure -- in we segment really economic that our the target how about we segment. attract clients offerings is the within the healthy a way

hurdles profile TPV. before, for clients' we And higher of profile return So client a client micro said times many is we like do, within average our and all segments products.

the to bring. optimize through we really we're So the that clients able offerings

micro of dynamics the can question the segments. on Maybe regarding say Mateus can take So that part we banking. second

Mateus Scherer Schwening

sure. Yes, for

negative of one-off like a the mentioned, P&L in process. you So R$XXX with impact. million any chargeback without our quarter but we shift with indeed collection this in a was associated impact in impact And had and deposits a cancellation

you same more a the little associated use to to receive we Just outstanding of collection. bit to color, cancellation TON whenever from we the chargeback a the amount with or give deposits block it merchant's merchant, the guarantee

important on impact that TON, deposit TON's reserving that are which continued P&L adjusted we base settled the increase deposits within only illustrates a think which but engagement would our In the migration the sequential no had seen merchant growth, them, to banking -- of we outpaces growth TPV, Super negative which this old Conta process client a have MSMB onetime we seeing whatsoever. X.X% amount instead to in highlight X.X% Also in our products. of from impact accounts

Guilherme Grespan

Super clear.

on may, I the one follow-up, Just presentation. also the I side. banking if looking at was

this in loan? the loss working You not is type you that what What is mentioned early of a product like do you credit performance been us line with basis? Can the at this credit the standards. expected vintages share believe now has that the for maturity, working loss on you to underwriting the in necessarily capital were but ratio sustainable of with

Mateus Scherer Schwening

sure. for Yes,

early it's definitive that is conclusions XX%. loss still regarding our too we predicts below to model talk portfolio can about share an slightly But currently, expected performance. So what the

nearly due and We our XX% limited provisioning market benchmarks. of are conservatively records prevailing models also track to the

been also conclusions than you what But early disclosure portfolio forecasts. the time, credit we too any this, the our performance will to better the on big itself track has performance Again, progress. the but can so over the cohorts draw improve of the it's model on as grows

Guilherme Grespan

you. Thank Perfect.

Operator

The Banco next Prato go is with UBS. from ahead. Please Kaio question

Kaio Prato

Thanks Hello, the opportunity. in to I for the industry related the question the everyone. evening. today. commercial dynamics Good competitive have teams a on

while in saw and about sales some force. behavior terms have talking been of about other So we price, in rational players still the increase seeing we an you players talking

are Or sales seeing industry your get in the you So sense today the if front given head than higher in your could sales would some we that actually your to opposite, concerns, about way is higher front, this and think if any force not, count expect I competition if on about peers. like do view the expansion? or indeed force, current you that what

So would be just a you. few thoughts here good. Thank

Lia Machado de Matos

again. Lia Kaio, Yes.

the not about sales in of process have only agents factors. combination on the clients. dynamics our what saying of been regarding regarding It's in highlight about hiring our our it's that investors the calls we It's the think actually distribution, right? to street. about So people, lifecycle but only model remind is putting sales not role this on competitors that to a only not also like perhaps our process I the several Our have salespeople in about

the results efficiency the of service the copy our serve much intelligence as have the to gain the TON see kind aspect that products. which operation, we and enables of customer is these model, is provide that this that and really that satisfaction clients in an think we technology, us, that way to Stone mile have fact have logistics, us with last than efforts more of to that. both and through model we about the really this We distribution as that with level And integrated of we The clients. combined technology is

Now level regarding a granular technology the enables the the data see, of fact at us to we white very us we local where identify that that spaces that level supports this have operation very are. that our gives a opportunities

specific exactly So specific whether what sales a we and we that can -- that see hub, take more a city, city. vision hub to of competitive route, the a not teams or to allocate

of So when see we still vast we Brazil, the of look perspective, a white spaces at it from lot about where that broad thinking we geography can grow.

going the So regarding forward. headcount that's dynamics and think sales I message

Kaio Prato

Okay. what Thank much understand Platform like of TPV still key to quick accounts competition TPV. the on it related just And key you would sub-acquiring this of this the company to a so focus We forward has Services, Thank here? quarter, follow-up on or the if a very much. may, not? you. and increasing your I just more And been XX% on how business. if the if saw contracting the is is perspective is going accounts than

Lia Machado de Matos

I I no big like there. said, Kaio. Yes, mean, news

say dynamics. different much We here. stable very not TPV more we have can provide contributions more Services as expect and sidelines more volumes Platform opposed More but forward. the expect to going I a on from don't think but sub-acquirers, we -- dynamics different more to

Kaio Prato

Okay, Lia. Thank you very much.

Operator

with Barranjard William from Itaú BBA. is question Please ahead. next go The

William Barranjard

Good Thanks question. night, for everyone. the

to here like clients. the new pick your of cohorts I brains on So would

like of segment. rates, understand the would in especially MSMB to new pace terms they how take in your cohorts, current compare these I So to

rates volume guess So improvement maintaining to assume ahead. pace? versus much in is smaller current clients, And of if the we average the that only mix those words, new see should other how in it's clients an by I current added of fair take the

Lia Machado de Matos

sorry, the first it pricing Thank I first to you a to little Mateus on for talk -- about take But the side. pass of you Can the question think again? was your over to your question, part part going the what bit part then William. and first maybe I'm repeat?

William Barranjard

Yes, sure.

Just...

Lia Machado de Matos

Sorry, average TPV, yes.

can operation on and trends forward, So focusing more SMBs. that expect hub going our more I we there's think we're larger

are clients. the than more, within TPV onboarding we're that more average So SMB base of TPVs average and the larger

average when basis, a shift you SMB. on from in look course, comes mix TPV micro Of the at that MSMB a consolidated effect is there versus big

is to strategic more strategies I more say within But and we're within regarding the evolution SMBs our on that important focusing SMB segment. our think larger the

when the are So within SMB trend that's show that average to hub itself. number, we strategy segment client look TPV the not that's the seeing and a going in overall but we up

Mateus Scherer Schwening

this regarding we at faster rates take of in complementing effect take the for and we X Yes. SMB since mix in some rates, the have in one, the bps than this micro growing between increasing shift mix terms the evolution of rate. quarter take look do is the segment the previous And If accounted rates. take still just segment,

William Barranjard

clear. Okay. That's Thank very you.

Operator

is question Jamie Friedman Please from with next The Susquehanna. ahead. go

Jamie Friedman

ask this me you realize investor And I the wanted saying that the but And Hi. understand I new compliment years. well. Thank it's journey, and software presentation. XXXX, are let you. first multiple on is so announced you're I XX, August others I Lia, like about was multiyear the deal format. the a to as

think gone And what was Pedro, I than to to growth. you the wrong? dilutive time actually that either less you has it's what's perspective don't that, gone Linx merger. or was right right aspire what the I but is of So on growth share hoping X% could at your or okay, now,

forward, because So, and you it. to I I'm said what try just understand do gone wrong. think what's I going curious you're going

Pedro Zinner

by think you I in it's company a to Hi. question. was decision Thank the Jamie, that past. be speaking. for the honest, Well, the Pedro made

are you think ways. I right in some

the actually credit happened lot right? company was in a years, I some think situation ago. two two had look you back, think years past acquisition whole I ways. happened think the there when I within the the over But

on went the new the to rates I deal interest that pass-through with rate all and company was Interest these way that prices. believe well-prepared not and up, dynamics

view, decision was the right Services one. Financial the focus the really on So, on In business. that into at my point in the to was time company it putting track

was time. the point and leave a for itself, decision by later stand-alone to business, our Linx integrate in think was the was decision I to running

the months is And focus, the what I right? question of think at I everything same as I the this time. even back you we're look doing you of exactly cannot is think when And right? part today, And there I also think do XX, focus more this downplayed couple ago, terms big same is we're XX a think at over to company initiatives the We the in still XXX time. But had of a providing company. number. which or within run being the

to in right want. how really So the that some terms the that. to going we focus. Again, set example wait to long-term. the stage and good what you we the a presentation, moving of stage we a invite I on Investor And until of I the think and Day to are would the we're we're set do verticals Lia flavor because prioritizing. plan up gave for the picture direction provide full you we

Jamie Friedman

could just Mateus, then of And you, level Okay, Pedro. if at XX.X% the that's what of of midpoint I the in guidance? QX a contemplated Thank provisions ask, operating good answer. the is margin

Mateus Scherer Schwening

nowadays, The provisioning same are XX%. level that we which is

Jamie Friedman

did originations And would be? the what you say Okay.

Mateus Scherer Schwening

No, no.

the next are We quarter. portfolio for disclosing the not outstanding

Jamie Friedman

all. Okay. Thank you. Thank you

Operator

Street question Datta Soomit with Please ahead. next Research. New is The go from

Soomit Datta

Yes. enough. Hi there. Thanks. Fair

put PXM the acquirers, BCP entirety actually, of that if sector to please. around you because it, double following with your but data narrative when growing in in it we together, Stone just all, [ABAC] industry monetized I level debit gave briefly a contribution PXM pretty on them kind include the those idea great because and at an what healthier to misleading, go volumes being look the check is you debit. Just The I in discussion the think are the just then don't soft PIX volumes of a would the at current and around as is quick indication card And one, those in number. and volumes look for sense at isn't wanted for TPV, in to I to is we And be the really, line can volumes get XX%. of just to check, - a first PIX PXM. on back

relevant, gross very if for again, was the for with finally, just forward PXM that. wanted much. if current to this super track continues gross see I supportive Thanks be isn't So on margins I and maybe And to margins? right going then supportive already

Lia Machado de Matos

Hi.

I regarding So the think, numbers given PIX PXM overall I've evolution.

volumes. trend consider growth within overall stronger and TPV over you we've the of That base if in the PIX seen to that's trend including slightly - XX% of the have XX% PIX, PXM the market. seen growth that XX% So, would similar is we growth, because much increase to

Some players TPV disclose including do PIX.

We have not that forward decision TPV a it stay. disclose made to including is trend going the PIX, here is but to

We then adoption PIX saw adoption of of and early more seen more a now very quick recently, PXM. PIX PXP, we've

that many settlement And I characteristics, associated a and accepting it economics transactions. we many incentivize, - will that these because with that may that want yes, decide consumers solution the see of the So, is point going to think a merchants method that's payment forward. use a and is to

this we I evolution. So more to how say, going going PIX were around of would to usability we color is on is but - play are see right? the still, a there's more, this out, is give still level to an We have going not to naturally, But this. that cards, at and

Soomit Datta

check, moment, higher as a business - at it's if level currently at is the to debit, much And just it's the right? priced double gross profit being it same

Lia Machado de Matos

Go ahead, Yes. Mateus.

Mateus Scherer Schwening

EBIT, When net MDRs EBIT. of the we the we to similar see mean the on price

rates, take but not margins. that to gross contributes it to So accretive it's

Lia Machado de Matos

Yes similar.

Soomit Datta

Okay. Correct. Thanks.

Operator

is And go our final Nicolas with from America. Please question of ahead. Bank Riva today

Nicolas Riva

to that continue I to see balance questions. chance ask debt. Thanks the I to for in quarter the million. to decline of outstanding your the wanted R$XXX the on FIDC ask

in the wanted billion some And your despite the to local quarter. the you fund increase started XX% general, debt And I total reference talk, and quarter rates, funding Labarta this the profitability not one Brazil debt your market that How you your financial funding cost, wonder to changes in driving increasing the now is in Brazil? general, then Thanks. has in forward? mix mentioned that and prepayment about I in more expected overall bit should expenses. about asked ability thing think cut we business which in the this in going ask So expenses, of and could to increased FIDC, if your was Tito R$X.X a access in costs regard. Central financial second, Bank to about in the about

Mateus Scherer Schwening

Yes.

the for Thanks here. Mateus questions. So

think expenses one compared the increased mentioned financial versus because total receivables about we balance our debt when to debt financial of when And debt quarter. receivable, in that's the I but reasons of that financial of sale you we of at mix the increasing. did we expenses look of more more see sale sheet, talked decreasing than about one talking the - was, why So why MSMB reasons TPV expenses you

should overall the was of economic trend. at or yield spreads for trend long-term also when This quarter. decision, because that curves an trend with receivables the decision so Brazil, was made mostly, financial trends in for Like were better expenses, because this growth we we with is think we the it the longer-term this better sale look past, But this TPV. a and not in line mentioned the in in

as to expenses effect yield financial in decreasing, future. in Brazil have some So is curve from the positive expect we that the

Nicolas Riva

Okay. Thanks Mateus.

Operator

Thank Pedro session. for to you. now Zinner This our will question-and-answer final I over concludes the turn call considerations.

Pedro Zinner

all. you quarter. Have good next a again you. you, call, for hope to and on I the Thank in And all see participating thank you the Thank night.

Operator

concluded. Thank for now presentation. has conference today's you attending The

now You may disconnect.

StoneCo (STNE) 16 Aug 232023 Q2 Earnings call transcript