StoneCo Ltd.

Good evening ladies and gentlemen and thank you for standing by. Welcome to the StoneCo first quarter 2021 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 at www.stoneco.co on the investor relations tab. Throughout the conference call the company will be presenting non-IFRS financial information including adjusted net income, and adjusted free cash flow. These are important financial measures for the company, but not all financial measures are defined as IFRS. Reconciliations of the company's non-IFRS financial information to the IFRS financial information appear in today's press release. Finally, before we begin our formal remarks, I would like to remind everyone that today's discussion might include forward-looking statements. These statements These forward-looking statements are not guarantees of future performance, and therefore you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from the company's expectations. Besides, we would like to remind you that the links acquisition is pending regulatory approval by the Brazilian Antitrust Authority, and management comments are based only on publicly available information. Please refer to the forward-looking statements disclosure on the company's earnings press release. In addition, many of these risks are regarding business and disclosing the company's Form 20-F filed with the Securities and Exchange Commission, which is available at www.sec.gov. Please note this event is being recorded. I would now like to turn the conference over to your host, Rafael Martins, Vice President of Finance and Investor Relations Officer at StoneCo. Please proceed, sir.

Thank you, Operator, and good evening, everyone. Joining us here today, we have Tiago Piau, our CEO, Lia Matos, our COO and Chief Strategy Officer, and Marcelo Baldin, our CFO. Today, we will present our operational and financial metrics for the first quarter 2021 results and discuss some trends that we are observing in the second quarter. I will pass it over to Tiago so he can share with you the key messages regarding the quarter and future outlook. Tiago?

Thank you, Rafa, and good evening, everyone. While Brazil faced a challenging situation with the second wave of COVID in the first quarter, we continued to work hard to stay close to our clients and bring to them the best service and solutions we envisioned. We monitored our clients' activity closely, as well as how vaccinations and economic activity evolved in Brazil and in other countries. And based on our experience with lockdowns last year, recent client transactional data, and learnings from the dynamics of countries where vaccines are widespread, we expect that once vaccinations scale, which we expect in the second half of 2021, the economic recovery will be fast. And although delayed, looks like Brazil is moving in the right direction. In order to be the fastest player when our economy comes back to normal levels, in the first quarter, we decided to increase investments in our operations. We have a high-quality and solid core business in terms of growth, profitability, and cash flow generation that continues to scale both in client base and CPV, while also increasing engagement of clients with new solutions. Our core SMB business presented strong growth metrics in the quarter and to date. As Leah will detail shortly, our active payment clients in SMBs grew 67% in the quarter versus last year, achieving 857.8 thousand active clients. 257 thousand clients are active in our digital accounts, and of those, 188 thousand use it as their banking domicile, selling all their transactions in the stone accounts. Overall SMB CPV grew 45% in the first quarter versus last year, with strong acceleration in the second quarter to date. CPV grew 121.6% in April and 111.2% in May up to May 20th. While April and May compared to weaker comps due to lockdowns in the second quarter of 2020, we still see strong growth acceleration when looking at a two-year CAGR of 42.5% and 50.2% annual growth, respectively in April and May to date. In terms of revenue and profitability in our core SMB operation, our take rates decreased from 2.2% in the first quarter of 2020 to 1.9% in the first quarter of 2021 due to additional provisions on our credit products caused by commerce restrictions. Excluding these effects, we believed our take rates would have been 2.22%. Even though we have experienced 116 million impact in revenue reduction, our credit portfolio grew and remains healthy. reaching a risk-adjusted return net of funding costs between 1.5% and 1.9% on a monthly basis, despite the short-term impact from COVID. We continue to evolve in our strategy to fund our product with third-party capital and thus limit our exposure to credit risk. We have recently concluded another issuance of FDIC, raising additionally $340 million in third-party capital, In total, we have now available 833 million in third-party funding to be disbursed in our credit operation. Regarding our vision and product evolution, we are building a complete financial operating system for SMBs. In the past, we took the approach of building separate solutions as it was the best way to grow fast, learn about the market, and gather client feedback. We have now decided to integrate our solution set and we have already migrated approximately 70% of Stone SMB client base to our new platform. Regarding our software strategy, we will continue to invest in and acquire brick-and-mortar POS and ERP solutions built by great people and focused on strategic verticals where we have great chance of integrating our financial operating system and executing on the digitization of commerce in order to help our clients to sell online. The acquisition of Lynx, which is still pending antitrust approval, is a big step towards our vision and will broaden our vertical coverage as well as expand our set of digital solutions. With this acquisition, we will reach 1.1 billion annualized pro forma revenue in software. By executing both on the stone SMB core business and our software strategy, We believe that we will be in a much stronger position to capture the evolution of the approximately 4.7 trillion reais GMV of household consumption. We seek to be the player that best help our merchants to do business and reach consumers. To that extent, our investment in Banco Inter and the commercial partnerships we are building will be very accretive in terms of learning and new experiences. We are very confident in the growth of our car business and excited with the opportunities ahead. We will work hard as protagonists in the financial and commerce revolution of our country, finding the best people we can and serving our client with maximum care and devotion. With that said, I will pass it over to Lia. Lia?