Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- StoneCo Ltd (STNE, Financial) reported a 30% year-over-year growth in its client base in the MSMB market.
- Total Payment Volume (TPV) grew by 25% year-over-year, with current TPV increasing over 17%.
- The company's banking client base grew 62% year-over-year, with client deposits increasing by 65%.
- StoneCo Ltd (STNE) achieved a 13% year-over-year reduction in administrative expenses.
- Adjusted net income increased by 54% year-over-year, with adjusted basic EPS reaching R$1.61.
Negative Points
- The company experienced a slight increase in Non-Performing Loans (NPLs) over 90 days, reaching 2.6%.
- Software segment revenues remained flat year-over-year, with adjusted EBITDA decreasing by 4%.
- Selling expenses increased by 27% year-over-year, indicating higher costs for client acquisition.
- The company faces challenges in maintaining its MSMB Card TPV growth due to higher PIX QR Code penetration.
- Financial expenses are expected to increase in the second half of the year due to rising interest rates.
Q & A Highlights
Q: Have you seen any changes in the competitive environment over the last three months, especially from incumbent banks? Why are you investing in your sales team?
A: Pedro Zinner (Managing Director): We continuously evaluate the profitability of our cohorts and adjust prices accordingly. We prioritize profitability and price based on returns. The market has evolved, and other players behave similarly. We have more levers to price client relationships through bundles of payments, banking, credit, and software. Lia Matos (Chief Strategy Officer, Chief Marketing Officer): We have seen a reduction in selling expenses as a percentage of revenue due to a decrease in marketing expenses. We continue to invest in scaling our specialist distribution to onboard larger SMBs. Mateus Scherer (Chief Financial Officer, Investor Relations Officer): The investments in hiring specialists are not a reaction to the competitive environment but are based on the opportunity to go upmarket within SMBs.
Q: Why not consider divesting from at least part of the software division? Do you see room for M&A in the sector?
A: Pedro Zinner (Managing Director): We remain focused on executing our strategy. We continually evaluate all options to maximize value from our assets but are not selling the asset. Lia Matos (Chief Strategy Officer, Chief Marketing Officer): We see fewer new players entering the market recently. The competitive landscape is stable, and we don't see significant changes in the number of players.
Q: Is there upside to your guidance given the strong OpEx delivery? Can you provide more color on the credit book?
A: Mateus Scherer (Chief Financial Officer, Investor Relations Officer): We had a good performance in the first half, especially in administrative expenses. We anticipate operational leverage in the next quarters. Regarding credit, we are happy with the portfolio's performance. The growth in disbursement is not linear; we are testing new criteria and rolling out new offerings. We are above our initial plan and see opportunities to improve conversion and penetration.
Q: How do you see the evolution of the PIX agenda and its impact on TPV?
A: Lia Matos (Chief Strategy Officer, Chief Marketing Officer): We see strong growth from increased penetration of PIX QR codes. PIX is incremental to our overall volumes and monetized in line with net MDRs for debits. We anticipate regulatory evolution to improve client experience and product development. We expect PIX NFC to accelerate the cannibalization of debit volumes, which is positive for us.
Q: What are the main KPIs to track for software performance?
A: Lia Matos (Chief Strategy Officer, Chief Marketing Officer): The two main metrics are the evolution in cross-selling financial services to software clients and margin evolution. We are focused on improving recurring revenue and efficiency within the software segment.
Q: Should we expect the usage of own cash for the tender offer of your bond? What are the next steps for cash usage?
A: Mateus Scherer (Chief Financial Officer, Investor Relations Officer): We are swapping the bonds with other debt instruments at much lower spreads. We see relevant savings and a positive impact on the P&L. We continuously evaluate the best use of capital, including potential share buybacks and deploying capital in the business itself.
Q: Why are you keeping the R$1.9 billion guidance as a minimum?
A: Pedro Zinner (Managing Director): We provide annual guidance and do not anticipate revisiting it mid-year unless there is a material change. We expect to exceed our targets, but the guidance sets the floor for our key indicators. The only challenging metric may be Card TPV due to higher PIX transactions.
Q: What was the impact of the Rio Grande do Sul situation?
A: Pedro Zinner (Managing Director): The impact was smaller than anticipated, with a negative impact of approximately R$150 million on TPV and around R$10 million on overall results. This was due to the swift recovery of TPV and actions taken to support our clients.
Q: Can you provide more color on the remuneration of deposits strategy?
A: Mateus Scherer (Chief Financial Officer, Investor Relations Officer): We are still testing and gradually extending the pilots. It should start to make a difference in the balance sheet and results next year, not in 2024.
Q: What went well with the credit portfolio, and what are the growth expectations?
A: Mateus Scherer (Chief Financial Officer, Investor Relations Officer): We are increasingly confident in the profitability of the credit product. The main challenge is improving distribution to increase conversion and penetration. Lia Matos (Chief Strategy Officer, Chief Marketing Officer): We see a big opportunity in expanding the product offering and are confident in our long-term guidance.
Q: Are you seeing any pressure on PIX P2M pricing?
A: Lia Matos (Chief Strategy Officer, Chief Marketing Officer): We price PIX P2M in line with debit net MDRs. There is no pressure on pricing, and it is accretive to our banking engagement.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
