StoneCo Ltd. Q1 FY2025 earnings call

• Reaffirmed annual goals and expressed satisfaction with first quarter performance, focusing on profitability and price adjustments in response to yield curve changes.
• Gross profits grew 19% year-over-year, outpacing the 14% annual guidance. EPS accelerated 36% year-over-year above the 18% outlook.
• Repurchased R$843 million or 15.1 million shares during the quarter, with a new share repurchase program of up to R$2 billion announced.
• MSMB TPV grew 17% year-over-year, with card transaction volumes up 10% and PIX volumes up 95% as PIX monetization aligns with debit and drives deposits.
• Retail deposits at R$8.3 billion, 38% higher YOY, with focus on converting retail deposits to on-platform time deposits via cash sweep strategy.
• Credit portfolio reached R$1.4 billion, with NPLs at 2.61% for 15-90 days and 4.57% over 90 days.

Financial Services Segment: Revenues grew 20%, adjusted EBT grew 21% year-over-year to R$637 million, with ROE for Financial Services at 27% in Q1 2025. MSMB payments active client base increased 17% year-over-year and 4% quarter-over-quarter to 4.3 million clients. Retail deposits reached R$8.3 billion, 38% higher year-over-year and 5% down sequentially. Credit portfolio grew to R$1.4 billion. Software Segment: Revenues grew 11% year-over-year, driven by higher software recurring revenues. Software adjusted EBITDA grew 12% year-over-year with margin expansion, and Software CapEx improved from 71% of EBITDA in Q1 2024 to 51% this quarter.

• First quarter gross profit growth of 19% YOY outpaced the 14% annual guidance. EPS growth of 36% YOY was above the 18% full-year outlook.
• Long-term guidance implies a 14% CAGR in TPV until 2027.
• Announced a new share repurchase program of up to R$2 billion, replacing the previous program.

Q: On the outlook for TPV growth, especially card TPV growth and PIX TPV growth, and color on the Linx negotiation.

A: Lia Matos discussed TPV trends noting long-term guidance implies TPV deceleration, repricing efforts impact TPV, and PIX cannibalizes debit volumes. Pedro Zinner mentioned negotiations with Totvs for Linx are progressing positively but no specific timeline or valuation details.

Q: About price increases, yield curve changes, and percentage of clients repriced.

A: Mateus Scherer stated no immediate plan to change pricing policy as yield curve movements don't significantly impact short run, and the vast majority of clients were already repriced.

Q: On market share, competition, and credit activity.

A: Lia Matos said market share is stable and aligns with long-term plan, competitive dynamics monitored with focus on differentiated service and distribution. Mateus Scherer noted credit portfolio growth with focus on SMB niche and differentiated underwriting model.

Q: On net cash, take rates, and deposit strategy.

A: Mateus Scherer explained net cash decline due to share repurchases and variable compensation, and focus on gross profit vs TPV. Lia Matos discussed deposit strategy shift to time deposits via cash sweep and minimal P&L impact in Q1 with benefits expected in subsequent quarters.

Q: On credit portfolio growth and competitive advantage.

A: Lia Matos elaborated on credit strategy, differentiating through product experience, distribution approach, and focus on SMB clients with longer duration working capital loans and shorter-duration credit solutions.