StoneCo Ltd.

Good evening, everyone. Thank you for standing by. Welcome to StoneCo's first quarter 2025 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 present certain non-IFRS financial information, including adjusted net income, adjusted gross profit, adjusted net cash, adjusted basic EPS and ROE. These are important financial measures for the company, but are not financial measures as defined by IFRS. Reconciliations of the company non-IFRS financial information to the IFRS financial information appears in today's press release. Finally, before we begin our formal remarks, I would like to remind everyone that today's discussion may include forward-looking statements. These forward-looking statements are an occurrence 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. Please refer to the forward-looking statement's disclosure in the company's earnings press release. In addition, many of the risks regarding the business are disclosed in the company's Form 20-F filed with the Securities and Exchange Commission, which is available at www.sec.gov. In hindsight, I would like to highlight that the company is restricting the number of questions to two per analyst. Joining the call today is Stone's CEO, Pedro Zinner, the CFO and IRO, Matheus Schereth, the Strategy and Marketing Officer, Lia Matos, and the Head of IR, Roberta Noronha. I would now like to turn the conference over to your host, Pedro Zinner. Please proceed.

Thank you, operator, and good evening, everyone. I'd like to begin by reaffirming our annual goals and expressing how pleased I am with our first quarter performance. It was another successful chapter in our journey, marked by disciplined execution and continued progress toward our long-term objectives. This quarter, we focused on profitability. executing a new cycle of price adjustments across our client base in response to the yield curve increase observed in the second half of last year. At the same time, we continue to develop solutions and features that truly make a difference in our clients' lives. I believe our results reflect the strength of our client-centric approach, disciplined execution, and a rational competitive environment. When we take a step back and look at our performance in the context of our 2025 guidance, it becomes clear that we are on the right path. In the first quarter of 2025, we grew gross profits by 19% year over year, driven by effective repricing execution and a reduction in our average funding spreads. This result outpaces the 14% annual gross profit growth outlined in our guidance. On the EPS front, we accelerated year-over-year growth to 36%, significantly above the 18% growth implied in our four-year outlook. This acceleration was primarily driven by strong adjusted gross profit growth, improved efficiency in administrative expenses, and a more balanced distribution of marketing spans throughout the year. In addition, we repurchased 843 million reais, or 15.1 million shares during the quarter, including 5.7 million shares repurchased in March, which were not included in the share count used in our guidance. Over the past 12 months, our distribution yield reached 12%, underscoring our strong conviction in our strategy, our business, and our ability to execute. As a reminder, in our last earnings call, we laid out a disciplined capital allocation strategy based on three restrictive pillars, above which we would return excess capital to shareholders. With the close of 2024, we reached R$ 3 billion in excess capital. Of that, approximately R$ 1 billion has already been returned through share repurchases year to date. Today, we are announcing a new share repurchase program of up to R$ 2 billion, replacing the previous program. This move reaffirms our commitment to the framework and distribution policy we shared with you just a few months ago. With that, I believe we are well positioned to continue executing our strategy, achieving our goals, and generating long-term value for our shareholders. Now I'll turn it over to Lia, who will take you through our first quarter results in more detail. Lia.

Thank you Pedro and good evening everyone. Diving into our first quarter 25 results, we're very excited with the milestones we have achieved. Such results reflect our execution in a less favorable macroeconomic environment with interest rates trending higher and we believe we have been successfully navigating this challenging scenario. On slide four, we highlight our main financial metrics on a consolidated basis. As you can see, we have shown good traction in revenues, gross profit, and bottom line. Our revenues grew 19% year over year and 2% quarter over quarter, despite seasonality in 4Q, resulting in revenues usually reducing sequentially in first quarters. This trend shows that we are on the right path. Our repricing initiatives have started to yield positive results, despite the fact that it impacted in the quarter only partially. Adjusted gross profit also grew 19% year-over-year and decreased 3% on a sequential basis, mostly on lower quarter-over-quarter TPV, timing mismatch between the increase in prices and cost of funding, and on higher cost of services. Finally, our adjusted net income grew 23% year-over-year and decreased 17% quarter-over-quarter. This sequential reduction was mainly a result of our lower adjusted gross profit combined with higher investments in our distribution channels and higher effective tax rates. Looking on a per share basis, adjusted basic EPS was 1.97 reais per share, 36% higher year over year and 13% lower sequentially. The better per share performance compared to nominal net income is a result of our commitment to returning excess capital to our shareholders with 2.4 billion reais returned in share buybacks over the last 12 months and 843 million in this quarter. On slide five, we dive deeper into our financial services segment performance, starting with our payments business for MSNBs. Our MSNB payments active client base increased 17% year over year and 4% quarter over quarter to 4.3 million clients. We also continue to see increased engagement of this client base with our different financial services solutions, with our heavy user metric reaching 38% in the first quarter compared to 37% in the previous quarter. This trend is a natural result of our execution with regards to bundling financial services solutions and offering new features that address our clients' specific needs. MS&B TPV grew 17% year-over-year, even with the repricing efforts throughout the quarter. Going forward, we expect some deceleration in volume growth as a natural outcome of changes in our repricing policy, which should impact volumes throughout the remainder of the year, as we prioritize profitability over pure volume growth in this scenario. Breaking down by types of transactions, MSNB card transaction volumes grew 10%, while MSNB PIX volumes grew 95% over the same period, as PIX continues to cannibalize debit volumes. We believe this shift to be accretive to our results as we monetize PIX in line with debit and we see increased flow generating higher deposits with the usage of PIX. Moving on to slide six, we dig deeper into our banking performance. On the left side of the slide, we show the retail deposits evolution and breakdown. Our total client deposits reached 8.3 billion reais, 38% higher year over year, and 5% down sequentially due to seasonality. Deposits continue to outpace MSNB TPV growth, reaching 6.9% of MSNB TPV in the first quarter. As payments and banking bundles already have a high penetration within our base, the focus shifts increasingly towards driving further engagement with our solutions, where we expect to see steady evolution going forward. I would also like to recall that in our last earnings report, we have highlighted the changes in the mix of our time deposits going forward, aligned with what we call our cash sweep strategy. As we noted, we expect to convert a significant portion of our reptile deposits into on-platform time deposits by issuing certificate of deposits. This will allow us to utilize such amounts to fund our operations and thus reduce our funding costs in line with a reduction also in our floating revenues. Such strategy is accretive to our bottom line and also optimizes our capital structure. In line with this strategy, we have already started to ramp up time deposits, and by the end of the first quarter, R$ 6.3 billion of our total R$ 8.3 billion in retail deposits were already accounted as time deposits. The majority of such time deposits are a result of the cash sweep strategy, and the remaining is related to investment product offerings to our clients. We expect this movement to finalize in the coming months, contributing to the diversification of our funding sources. Moving on to slide seven, we give some color on our credit product evolution. Our total credit portfolio keeps growing consistently, reaching 1.4 billion reais by the end of the quarter. Out of the total, R$ 1.3 billion relates to our merchant solutions, mainly comprised of working capital offerings to our SMB clients, and R$ 161 million amounts to credit card offerings with a special focus on micro-merchants. This steady portfolio growth continues to be supported by the good quality of our cohorts with 15 to 90 days NPLs at 2.61% and NPLs over 90 days of 4.57%, increasing as a natural outcome of our portfolio maturation process. In terms of provisions, we have stabilized at a 12% provision level relative to our portfolio, as we outlined in our last earnings call. And as a result, we will now transition to a cost of risk view, which was 10% in the quarter. Finally, our coverage ratio was 256% in the period, converging to more meaningful levels versus the previous quarters. To wrap up, on slides 8 and 9, we bring our segmented view between financial services and software. Our financial services segment revenues grew 20%, accelerating from 11% in the fourth quarter of 24, as a direct effect of our repricing initiatives throughout the quarter, which led to a sequential increase in revenues despite strong seasonal effects. Our adjusted EBT for the segment grew 21% year-over-year, reaching R$637 million and a flat margin despite macro headwinds. The improved year-over-year results, combined with the repurchase of R$2.4 billion in shares in the last 12 months, also led to an enhanced ROE of 27% for financial services in the first quarter of 25, compared with 23% in the same quarter of last year. Lastly, on the software segment, we saw revenues growing 11% year over year, mainly driven by higher software recurring revenues, led by an increase in our software active client base, combined with a higher average ticket. Stronger revenues combined with gains in costs and expenses led to software-adjusted EBITDA growing 12% year over year, and posting a slight EBITDA margin expansion compared to the first quarter of 24. We're also starting to share our software CapEx, which has shown improvement compared to software-adjusted EBITDA, having reduced from 71% of EBITDA in the first quarter of 24 to 51% this quarter, contributing to stronger cash conversion in our software business. To sum it up, this quarter's results present one more step towards achieving our short- and long-term targets. We believe we're on the right track to continue to help our clients by providing superior service and solutions and further generate value to our shareholders. Now, I want to pass it over to Matheus to discuss in more detail our overall financial performance. Matheus?