StoneCo Ltd.

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. Throughout this conference call, the company will be presenting non-IFRS financial information including adjusted net income and adjusted net cash. These are important financial measures for the company, but are not financial measures as defined by 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 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. In addition, many of the risks regarding the business are disclosed in the company's Form 20F 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, Pedro Zinner, Chief Executive Officer at StoneCo. Please proceed.

Thank you, Operator, and good evening, everyone. Joining me today on the call is our Chief Financial Officer and Investor Relations Officer, Matheus Scherer, our Chief Strategy Officer, Lia Matos, and our Head of IR, Roberta Noronha. I will start today's call by giving you some of my thoughts on the second quarter, and then I will turn it over to the team to walk through our results in more detail. Overall, I was pleased with our performance in the second quarter. Externally, from a commercial perspective, we generated strong growth by continuing to win in the areas we want to prioritize. Internally, within the company, We made progress across a broad range of initiatives to make our services and operations better and more efficient. And financially, we produced results above our expectations as we continued to ramp our profitability and accumulated more cash via power. As I evaluated the quarter, I also looked at how we performed relative to the priorities we outlined at the beginning of the year. Our first priority was to grow with efficiency. In the second quarter, I think we met our objectives by generating strong top-line growth with a significant improvement in our profitability. Our total revenue reached R$3 billion, an increase of 28% year-over-year and exceeding our guidance by 3%. Coupled with the top-line improvement, adjusted EBT surpassed guidance by 19%, reaching R$447 million, the highest mark for quarterly adjusted EBT in our history. As a result, adjusted net income grew 5.8 times year-over-year, reaching R$322 million and yielding a net margin of 10.9% in the quarter. Our second priority was to generate cash. Adjusted net cash increased 1.6 billion reais year over year and 338 quarter over quarter to reach 4.3 billion reais. This increase was mostly driven by the consistent cash flow generation of the business, while we continue to invest in client growth and product and technology development. Our third priority consisted on focusing the expansion of our financial services business. The financial services segment presented healthy TPV and client-based growth and showed improvements in monetization from clients. MSMB TPV increased 19% year over year to reach 83.3 billion reais despite macroeconomic headwinds in the period from higher interest rates, higher industry delinquency, and declining consumer credit card limits. Our growth in the quarter was 3.7 times the industry growth. It's also important to highlight that during the quarter, we consistently grew our MSNB client base with 204,000 net ads. MSNB take rate increased nine basis points sequentially. to reach 2.48%. We have also expanded our banking solutions with the launch of debit cards, and we are now piloting credit cards for storm clients. And we continue to test our credit product with early results very much in line with our expectations. Our fourth priority was to evolve our software business. After delivering a first quarter below expectations, we were able to improve our software results. Revenue for this segment reached 383 million highs with a 17% adjusted EBITDA margin and a 620 basis point improvement on a quarter-over-quarter basis. I'm happy to see that while we're evolving the strategic feed of our software business, we are also capturing short-term efficiency gains. Last but not least, It's also worth highlighting that this quarter, we took another important step towards having all the right resources in place to build a fit-for-purpose organization. As announced in May, I'd like to formally welcome Matheus Scherer as our CFO and IRO, and Roberta Noronha as our Head of Investor Relations. I'm very excited to be working with Matheus and Roberta as we set the next stage of growth for the company. I would also like to thank Rafa and Silvio for all the work they've done and to all the invaluable contributions they made to Stone. I'm also pleased to announce that we're hosting our first Stone Cold Day in New York this November. I am excited to share our views on the business and how we are building an end-to-end value proposition for Brazilian commerce in the future. As we approach the event, we will share further details with you. Now, I'd like to pass it over to Lia for a discussion on the second quarter 2023 performance and strategic updates. Lia?

Thank you, Pedro, and good evening, everyone. I'm going to start with the highlights of our financial services segment on page six. In the second quarter of 23, revenue in the segment increased 32% year over year to 2.6 billion reais. mainly attributed to the performance in our MS&B client segment. MS&B performance was mostly influenced by above-industry TPV growth, higher take rates, and an increase in our client base. This, combined with operational leverage realized in our costs and expenses, resulted in adjusted EBT of 398 million reais and a 15.6% EBT margin, representing a sequential improvement of 250 basis points. On slide seven, let's review the MS&B performance in a little bit more detail. Our payments client base experienced robust growth, reaching approximately 3 million active merchants, an annual increase of 43.3%. Quarter over quarter, this represented net additions of 204,000 active clients. the sequential deceleration in net additions from the first quarter 23 was driven by the conclusion of targeted marketing campaign efforts within the period. Through strategic optimization of our tone and stone offerings across our sales channels, we successfully sustained the expansion of our client base across all tiers within the MS&B segment. Moving to slide eight, MS&B CPV increased to 83.3 billion reais, a 19.3% year-over-year growth and a 3.7 times above industry growth. Despite being impacted by slower overall industry growth, we're very happy with this result, which was in line with our second quarter 23 guidance and illustrates our strong relative performance and the power of our value proposition and offerings. Looking ahead, we're confident that this relative performance will continue and that we will continue to gain market share in the segment. Our MS&B take rate also presented notable improvements on a quarterly and yearly basis. This quarter, take rate reached 2.48%, increasing nine basis points quarter over quarter and 38 basis points year over year. The annual improvement can be attributed to continued adjustment in our commercial policy Stronger growth in our micro and small clients, which have higher take rates. The effects of changes in debit and prepaid card interchange cap regulation, which went into effect as of April 2023. And contribution from our banking solutions, mainly floating and fixed revenues. On slide nine, I give a quick update on key accounts TPV. TPV decreased 32.5% year over year. in line with our expectations due to our de-emphasis of low margin subacquired volumes. As a result of adjustments in our commercial policy and mixed shift within the segment, key account take rates increased 28 basis points year over year. Now let's move to the banking performance on slide 10. Our banking active client base increased 3.2 times year over year and 33.4% quarter over quarter. to reach 1.7 million active merchants. This strong growth was a result of the launch of Super Contatom in the first quarter of 23, and the continued activation of banking combined with our acquiring solutions for Stone clients. Total deposits reached 3.9 billion reais, slightly up quarter over quarter. This quarter, we had a one-time decrease in client deposits of 286 million reais, as a result of the shift in the chargeback and cancellation collection process for TON, with no impact to our P&L. Excluding this one-time effect, our overall deposits would have increased 7.8% sequentially, compared to 5.6% growth in our MSNB TPV, which illustrates the increasing engagement with our banking solutions. Due to the significant increase in banking clients driven primarily by growth in micro-client accounts, which generate lower revenue contribution in comparison to SMB clients, our PAC decreased to R$25 from R$37 in the first quarter of 2023 and R$39 in the second quarter of 2022. We strongly believe in the power of combining our banking and acquiring offerings to MSMB clients. As such, we're working hard to enhance existing features and develop and launch new banking products. As an example, this quarter we launched debit cards and have already started piloting credit cards for Stone clients. We're also working to enhance client experience related to the different features that we offer, as well as the integration of our banking to select TRPs within our software portfolio. On slide 11, I'd like to provide a quick overview of our credit offering. Through the end of July, we had disbursed 26 million reais to around 850 clients, with an outstanding balance of 23.5 million reais. The early performance of our vintages is in line with our enhanced credit underwriting standards, with personal guarantees and lien on receivables being executed as expected. As we have discussed, we will take a conservative and disciplined approach towards the expansion of this solution, growing the portfolio depending on market conditions and taking the necessary time to observe full cohort performances. Now let's move to slide 12 and shift to the highlights of our software business. In the second quarter of 23, software revenue increased 9.2% year over year to reach 383 million reais. This growth was driven by continued organic active store expansion in our core POS and ERP business, mainly in the SMB segment. Top line grew 6.9% sequentially, mostly due to an increase in setup revenues in our core segment related to the client base growth. Software adjusted EBITDA increased 25.1% year over year. to reach 66.5 million reais, which equates to a 17.4% margin and a sequential margin improvement of 620 basis points. The EBITDA margin expansion is a result of higher revenue in the period and operating leverage in costs and expenses, which included a reduction in share-based compensation expenses and lower levels of cost of services. mainly due to increased capitalization of R&D projects. These effects were partially offset by our continuous investments in our sales team and marketing, as well as severance costs in the amount of 6.5 million reais related to an adjustment made to our organizational structure. In the second quarter of 23, we reduced headcount associated with our ongoing integration efforts within Stone Cold. which should drive additional benefits going forward. As Pedro mentioned, while we evolve on capturing short-term efficiency gains, we are advancing on the strategic fit of software within StoneCo. We have advanced on prioritizing two important verticals for driving financial services and software cross-sell while also testing different go-to-market initiatives. As we have mentioned, The process of building our end-to-end platform is a multi-year journey, but we believe we are taking the right steps to enhance and sustain our value proposition to our clients in the future. We expect to provide further details during our Stone Cold Day in November. Now, I want to pass it over to Mateus to discuss some of our key financial metrics. Mateus?