StoneCo Ltd. Q3 FY2025 earnings call

• Key performance metrics: Adjusted gross profit grew 15.2% year-to-date, adjusted basic EPS reached BRL 6.9 per share, up 37% year-to-date. ROE expanded, consolidated ROE 24%, Financial Services ROE 33%. - Capital allocation: Returned BRL 2.8 billion to shareholders in last 12 months, 74% of excess capital identified last year returned by end of October. - Continuing operations: Total revenue and income grew 16% year-over-year to BRL 3.6 billion, adjusted gross profit from continuing operations BRL 1.6 billion, up 12% year-over-year. - Credit operation: Portfolio growth, NPLs, coverage ratio, cost of risk, and pricing changes discussed.

Payments business for MSMBs: Active client base grew 17% year-over-year to 4.7 million clients, with 38% classified as heavy users. MSMB TPV grew 11% year-over-year to BRL 126 billion, driven by 49% growth in PIX QR code volumes and 6% growth in card volumes. Banking operation: Active client base grew 22% year-over-year to 3.5 million clients. Client deposits grew 32% year-over-year to BRL 9 billion, with 84% of deposits being time deposits. Credit operation: Total credit portfolio grew 27% sequentially to BRL 2.3 billion. NPLs 15 to 90 days were 3.12%, and over 90 days were 5.03%. Coverage ratio was 265%, cost of risk 16.8%.

• Adjusted basic EPS on track to meet full year target. - Capital allocation strategy focused on returning excess capital via share buybacks. - Expect credit to contribute more to profitability and growth in 2026.

• Macro environment challenges affecting clients. - Volatility in credit stages due to credit restrictions. - Sensitivity to interest rate changes affecting funding costs and pricing.

Q: On prepayment business spreads and sustainability, how do you see it going forward?

A: Mateus Schwening noted spreads are higher than earlier but not all-time highs, and credit is expected to drive earnings growth in 2026.

Q: How is the competitive environment in the payments base and pricing trends?

A: Lia de Matos said market share stable, TPV growth decelerating due to industry and macro factors, with profitability priority. Mateus Schwening added new players are normal, and spreads are at healthy levels.

Q: Explain credit stage changes, especially Stage 2 to 1?

A: Mateus Schwening said Stage 3 relates to over 90-day overdue, Stage 2 affected by portfolio maturation and credit restrictions in the market.

Q: How sensitive are clients to credit pricing adjustments?

A: Mateus Schwening said credit is a newer product, testing pricing sensitivity, with clients showing some elasticity but it's early days.

Q: How sensitive is Stone's funding costs to interest rate changes?

A: Mateus Schwening said Stone responds to interest rate changes, with a 100 basis point rate cut positively impacting pretax earnings by BRL 200-250 million on average.