StoneCo Ltd.

Good evening, everyone. Thank you for standing by. Welcome to StoneCo's third 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. Before we begin the call, I advise you to review the disclaimer included in the press release and presentation, which outlines important information about forward-looking statements and non-IFRS financial measures. 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.scc.gov. In hindsight, I would like to highlight that the company is restricting the number of questions to one per analyst. Joining the call today is Stone's CEO, Pedro Zinner, the CFO and IRO, Matheus Scherer, 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 start with a brief update on our key performance metrics and our capital allocation strategy. In the third quarter, we continue to make solid progress toward our 2025 objectives, even in a more challenging macro environment. Our adjusted gross profit grew 15.2% year to date, despite our ongoing share buyback program, which has had some impact on this metric. Meanwhile, for the first nine months of 2025, our adjusted basic EPS reached 6.9 reais per share, up 37% year to date, keeping us well on track to meet our full year target. Despite external headwinds, our team is performing with discipline and focus, delivering consistent value to our clients and shareholders. Turning to capital location, we have maintained a disciplined approach to returning capital to shareholders through our share buybacks. In the last 12 months, we have returned 2.8 billion reais to shareholders, about 10% yield for the period. Building on the 3 billion in excess capital we identified last year, I'm pleased to report that by the end of October, we had already returned 74% of that amount to investors. This underscores our commitment to return excess capital through buybacks or dividends when we don't have immediate value accretive investment opportunities. Our goal remains the same, exercise financial prudence while maximizing long-term value creation for our clients and shareholders. With that, I'll now hand it over to Lia for a closer look at our quarterly numbers. Lia, please go ahead.

Thank you, Pedro, and good evening, everyone. Starting on slide four, we dive into our consolidated bottom line and return on equity results. We are pleased to see another quarter of consistent performance towards our goals, despite a continued challenging macro environment. Our adjusted net income grew 18% year over year, with a 13% increase in continuing operations. This performance was driven by three key factors. The first one relates to the successful adjustment to our pricing policy implemented earlier this year, which helped offset the impact of higher interest rates in the country. Second, the strategic use of client deposits as a funding source helped improve efficiency by lowering our average funding spreads. And third, a lower effective tax rate compared to the same period last year also contributed to the result. These effects were partially offset by our decision to more evenly distribute marketing expenses this year, which negatively affected the year-over-year comparison. Our adjusted basic EPS reached 2.57 reais per share, growing 31% year over year. The above net income growth was supported by continued execution in our share buyback program. Regarding returns, our ROE continued to expand sequentially. Consolidated ROE expanded eight percentage points year over year to 24%, while financial services ROE from continuing operations increased four percentage points over the same period to reach 33% in the quarter. Now let's detail our continuing operations top line performance on slide five. Total revenue and income grew 16% year-over-year, reaching 3.6 billion reais, driven by continued solid execution in our core business. Importantly, this growth was achieved despite slower floating revenues as we began deploying client deposits as a funding alternative in our operations, starting earlier this year. While the strategy naturally reduces floating revenues, it generates savings and financial expenses, reinforcing the strength of our funding model. Our adjusted gross profit from continuing operations was 1.6 billion reais in the quarter, growing 12% year over year. This growth was largely aligned with TPV as higher revenues were partially offset by increased financial expenses driven by the higher CDI rates. On slide six, we highlight our operating metrics, beginning with our payments business for MSNBs. Our active client base grew 17% year over year, reaching 4.7 million clients with 38% classified as heavy users, leveraging more than three of the solutions we offer. This demonstrates not only growth in the scale, but also the engagement across our product ecosystem. MSNB TPV grew 11% year-over-year in the third quarter, reaching R$ 126 billion. Such growth comes from a combination of a 49% growth in PIX QR code volumes, which continues to outpace card TPV and capture share from debit transactions, and a 6% growth in card volumes. Compared to the previous quarter, the yearly growth showed a slight deceleration, reflecting the more challenging macro environment and softer same-store sales among our clients, trends that are persisting in the fourth quarter and we're monitoring carefully. On slide 7, we highlight the performance of our banking operation. We're pleased to report continued growth in our active client base, which increased 22% year over year, reaching 3.5 million clients. This sustained expansion reflects both strong client acquisition and the evolution of our payments and banking bundle offers. Client deposits grew 32% year-over-year and 2% quarter-over-quarter, reaching 9 billion reais during the period. While we observed a slight decline in our deposit base relative to MSNB TPV, from 7.2% in the second quarter to 7.1% in the third quarter, this primarily reflects daily seasonality driven by clients' cash-out obligations. and we saw a quick rebound on the days that followed. Viewed from another perspective, the average daily deposit base increased 40% year-over-year and 6% quarter-over-quarter, expanding relative to TPV. The composition of deposits in the quarter moved slightly towards more time deposits, which now account for 84% of total deposits, slightly up from 83% in the previous quarter. This growth underscores increased adoption of our investment solution, leading to a higher engagement with our banking features. Now, turning to slide eight, we review the evolution of our credit operation. In the quarter, we observed an acceleration in portfolio growth combined with disciplined asset quality and in strict alignment with our risk appetite statement parameters. The total credit portfolio grew 27% sequentially, accelerating compared to the previous quarter and reaching 2.3 billion reais. Of this, 2.1 billion reais is attributable to our merchant solutions, primarily working capital financing for MSNBs, which grew 28% quarter over quarter. Additionally, just over 200 million reais relates to credit cards, which increased 18% over the same period. Despite the acceleration in portfolio growth, our credit quality remains strong. NPLs 15 to 90 days reached 3.12%, while NPLs over 90 days stood at 5.03%. The rise in NPLs over 90 days reflects the natural maturation of the portfolio, whereas increase in NPLs 15 to 90 days was primarily due to specific client payment delay, which has already normalized in the fourth quarter. As you may recall, in the second quarter, we made a deliberate decision to increase coverage ratio levels in response to the weaker macro outlook. With no additional adjustments required this quarter, the coverage ratio declined slightly to 265%, yet remaining at a conservative level. Similarly, our cost of risk, which reflects provisions recorded during the quarter, decreased from 20.2% to 16.8% sequentially, staying within the expected mid-teens range and reflecting disciplined risk management. Following the provision adjustments in Q2, we implemented corresponding pricing changes. This ensures a disciplined balance between risk and return while supporting sustainable growth. As you can see in this slide, the average monthly credit rate was 2.9% in Q3, up from 2.7% in Q2. The metric is calculated by dividing the credit revenues by the average credit portfolio. However, the result is significantly impacted by product mix as the inclusion of non finance credit card portfolio and higher growth in specialized desk disbursements can dilute the rates. In summary, I'm pleased with how our company has evolved and remained resilient despite ongoing macroeconomic headwinds. We continue to execute with focus on our clients, confident that there are multiple opportunities to help them grow further and manage their business in a more seamless and effective way. Now, I want to pass it over to Mateus, who will discuss our financial performance in more detail. Mateus?

Thank you, Lia, and good evening, everyone. Let's discuss our adjusted consolidated P&L for continuing operations, which is shown on slide 9. Our cost of services increased 12% year over year, decreasing 90 basis points as a percentage of revenues. This reduction reflects the combination of efficiency gains in logistics, lowering transaction and technology costs, and lower provision for acquiring losses, which were partially offset by higher loan loss provisions in the period. Administrative expenses increased 7% year over year, resulting in a reduction of 50 basis points as a percentage of revenues, driven by continued operating leverage across our support functions. Selling expenses increased 21% year over year, increasing 50 basis points relative to revenues. This reflects a more evenly distributed marketing spend in 2025 compared to last year, when they were skewed towards the first half of the year given the strong investments in sponsoring a specific reality show. Financial expenses increased 28% year over year, representing a 280 basis points increases the percentage of revenues. This was largely due to a higher average CDI rate year over year, which was partially mitigated by increased use of client deposits as a lower cost funding source, which intensified since the end of the first quarter. Lastly, I would just like to remind that the execution of our capital distribution strategy negatively affects our financial expenses. Other expenses increased at 2% year-over-year and reduced at 40 basis points relative to revenues, which was mainly due to an increase in gains related to the sale of POS. Our effective tax rate was 15.3% in the quarter, down from 18.6% in the third quarter of 24. The year-over-year decrease was primarily driven by an intra-group interest on equity operation and higher benefits from lead domain. Moving to slide 10, our adjusted net cash position ended the quarter at 3.5 billion reais, decreasing 140 million reais sequentially despite a 465 million reais in share buybacks executed in the quarter. Excluding these buybacks, adjusted net cash would have increased by 325 million reais. Once again, I want to thank you all for your time and continued support. Our focus remains on executing our strategy effectively and in a value-accreted manner, while listening closely to our clients, meeting their needs, and ultimately creating long-term value for our shareholders. With that said, we are now ready to open the call to questions.

Thank you. We are now going to start the question and answer session of our call. If you would like to ask a question, please click on the raise hand button. If your question has already been answered, you can leave the queue by clicking on put hand down. Please limit your question to two to one per analyst. Our first question comes from Caio Prato with UBS.

Hi, everyone. Good evening. Thanks for the opportunity to ask questions here. I have two on my side, please. First, on your prepayment business, would you say that you are at the all-time high level of spreads in the business post the pricing adjustments now? And how do you see the sustainability of this level going forward, given the current competitive scenario and the potential beginning of the easy cycle? So this is the first. And then my second, which is also linked, looking forward, what do you think are the main drivers for earnings growth of the company, apart from the policy rates, that should be a clear support. So what do you think should be the main source of growth? Is this an acceleration in credit growth? Is this efficiency or any other initiative? You can help us understand what should be the drivers for 2026, given this slowdown, also on TPV that we are seeing, except from the policy rates would be good. Thank you.

to overall gross profit. But in terms of pricing specifically, I think what we did successfully was to pass through the increase in interest rates. But I don't think we are at the all-time high spreads. The second question around earnings growth levers.

Caio, can you hear us?

Now I can hear you, but I think we missed the answer.

Oh, okay. Sorry. We just got noticed that you weren't hearing. I think maybe, Matheus, can you hear me well?

Yes. Now I can hear you. If you can repeat, please.

Sorry. Sorry for that. Let me replay the answer. So the first one around prepayments and pricing. I wouldn't agree with you that we are at the all-time high spreads. I think when we look at the gross profit yield, so gross profit as a percentage of TPV, it is higher than it was in the past at 1.26% for the third Q25 versus, for example, 1.21% in the beginning of 24. But that increase has been mostly due to the increased penetration of banking and credit over time. and not a result of prices on prepayments on a standalone basis. And I think this is consistent with the overall strategy. I think what we did quite well was indeed to pass through the increase in interest rates that we saw in the country, but I wouldn't say it's all time high. I think when we look at spreads, we think that they are at a healthy level. And then in terms of earnings growth levers for next year, I think we've been growing, especially the credit portfolio. in a pretty good pace according to the plan. But when you look at the contribution for credit in the P&L now in 25, it is still quite small because whenever we grow the portfolio, we up front the provisions. Now, as we go into 2026, I think probably credit is going to be of a larger contribution to the overall P&L simply as a result of maturing the offering and having a much higher base to start with. And other than that, I think OPEX in general is something that we are paying special attention, given the weaker macro environment. So we feel that there may be some levers in terms of OPEX management to boost earnings growth in 2026 as well.

Okay, that's clear. Thanks, Matheus. Thanks, Lia. Thank you.

Thanks. Our next question comes from Guilherme Grespin with JP Morgan. You can open your microphone.

Hi, hello everyone. Thank you for the call. My question is going to be on the payments, TPV and environment. I know this is basically a common question in every call, but we have been seeing a deceleration on part of the volumes and we see some players starting to come up more Hitting the tape, to mention a few, we have iFood going after, I think, a very important part of their base, which is restaurants. We have BTG launching, acquiring. We have smaller players such as Cloudwalk also appear a little bit more. So my question to you is how you're sensing the competitive environment in your base? If you're feeling, is there any specific player being an aggressor here? And how do you see the pricing trends going forward? Because the rate that Caio mentioned, I think it's been postponed a little bit, the potential tailwind coming from the funding cost. So I wanted just to check if you see any environment for the spreads in the business to stay where they are or even increase in the next six months. Thank you.

Thank you, Guilherme. Let me start maybe elaborating a little bit on market share and TPV dynamics, and then pass it over to Matheus to talk a little bit about thoughts on pricing. We still have to wait for the official ABEX numbers, right? But in our view, the third quarter should be roughly stable in terms of market share. In the second quarter, we did see a bigger market share loss as a result of our decision to reprice, as we've said before. This was sort of a one-time effect as we see it in the quarter. We expect this to stabilize somewhat in the third quarter, and we reinstate that this decision was accretive overall for the business. That said, when we look ahead in terms of TPV growth, we continue to see gradual deceleration, and this is primarily a reflection of industry dynamics. meaning industry itself decelerating, but also a weaker macro environment, which we expect to impact more the smaller clients within our base, right? So I think that's the message regarding market share and TPV dynamics. But looking ahead, we remain confident in our ability to continue to evolve in our plan consistently. Like Matheus mentioned, more and more we expect credit to be a driver of profitability and growth looking forward. And we're not with the sole purpose of pursuing market share at any cost. So profitability remains our priority. And the path forward is not simply through pricing adjustments, right? It should be through enhancing our value proposition to clients, evolving on our product offerings, scaling credits, evolving on our bundling strategy, and really making sure that we can consistently win clients within the segment overall in line with our strategic priority.

And if I may add and then talk also about pricing, I think you mentioned other new players or new entrants in the market. I think we've seen these kinds of movements before, players bringing new offerings or expanding their sales footprints. They tend to come in waves. At any given point in time, there's always someone trying something new in the market, and I think this is normal. That said, when you look at the actual economics behind these new players or new initiatives, it seems that overall players remain rational, and I don't see anyone pursuing growth at any cost. That said, when we talk about rate cuts, I think we've been vocal about this a couple of times, which is short term, for sure there is a positive impact to us. Every 100 basis points cut to 250 million in EBT. But in terms of overall spreads, I don't think it's reasonable to assume that we're going to keep the benefit from interest rates long term. I think it's a matter of timing, how long we can keep these prices until we pass it through. So I think the message here is, yes, there's going to be a positive impact 2026 if rates goes down. I don't think we should assume that we're going to be able to keep those spreads longer the level of spreads are healthy in our view.

That's clear. Thank you.

Thank you, Guilherme. Our next question comes from Renato Meloni with Autonomous Research. You can open your microphone.

Renato, we can't hear you.

I believe we're having some technical issues with Renato. I'm going to go with Eduardo Rosman with BTG. You can open your microphone.

Hi, hi, everyone. My question I think would be to Pedro, right? Where do you believe the company stands in the organizational redesign, right? I think you've been highlighting over the last few quarters that the goal is to build like a stronger unified brand and product offering with a more kind of a team-oriented culture and trying to build like a truly kind of a customer-centric mindset. How do you feel about the progress so far on that front? Thanks. Thanks.

Hi, Osman. Thank you for the question. I think we evolved a lot. I think, as you mentioned, we made a big shift from a kind of a a BU organization, very much silo-centric in some ways to a fully functional organization as we have as of today. I think this is really helping us in terms of setting the strategy from a bundle perspective and how we actually put this bundle offering into our clients in the best way for them and for the company. So I think in a nutshell, I think we are almost there. I think there's some pain points that we have to adjust over time. But in a nutshell, I think we are in the right direction.

Great. Thanks a lot.

Our next question comes from Antonio with Bank of America. You can open your microphone.

Hey, thank you for your time. So I have two questions on my side. So first on credit, you mentioned that now your present product is more mature and it should start to represent more on your P&L. So if you look at your portfolio today, do you have a better estimate on what should be your cost of risk, your NPL and your ideal coverage ratio now that you have a better sense of what your portfolio should be? Also, I have a second question on your revenue composition. If you look at your accounting statement, you can see revenues for transactions declining over 20% and revenues for the financial income growing more than 30%. I understand here that there is an allocation that you can do between these two revenues in terms of prepayment and MDR. And the ideal answer here would be, would look at both together. But if you were to split, what would explain these movements? If you could go through them, it would be great. Thank you.

Thanks for the question, Antonio. So let's just start with credit first. In terms of cost of risk, I think the expectation is that they should remain in the mid-teens going forward. I think we've mentioned this before, but part of the impact that we saw in second Q25 was retroactive, a movement that we did due to macro. And now it's normalized in third Q25. That said, when we look ahead, we do expect cost of risk to stay above the levels we had in the first quarter of 25 due to these macro-driven updates we did in our credit models. So that's the expectation on that end. In terms of NPLs, I think the answer is actually dependent on the rate of growth for the portfolio. When you look at the expected credit losses that we had for the product, they should be in the very high singles or either very low double digits. When you look at the NPL metric, it now stands at around 5%. But the main reason for that is because we have still a lot of vintages that are not fully mature, right? The portfolio is still growing. So as we mature, NPL over 90s, they should continue to grow probably towards that very high single digit mark. But in terms of targets, I think we're not really targeting a level of cost of risk or a level of NPL metrics. I think what we're trying to maximize here is the NPV of the cohorts and especially the NPV of the client relationships. And I think a good point around that is that when you look at the interest rates that we charge for the product, we had an increase in the cost of risk in the past two quarters, but that increase was also followed by an increase in the interest rates that we're charging to our clients. And as long as we see this opportunity to make these kinds of trade-offs, we're happy to do as long as it increases the NPV for our client relationships. So that's on the credit piece. On the revenue side, I think you touched on the answer, which is these movements between transaction revenue and financial income is mostly a result of rebalancing between the two lines. Now that we have most of the volume from the company flowing through a single platform, we have a lot more flexibility in how we set up these bundles and how we allocate revenues internally. So I know you asked us to try to segregate these lines, but when you look at the bundles that we're offering nowadays, there's no such thing. So the client usually pays a single fee and embedded in that fee, we have the prepayment revenues and the transactional revenues. So honestly, I think the best way to look at it is looking at both lines combined.

Okay. All right. Thank you.

Our next question comes from Marcelo Mizarri with Bradesco BBI. You can open your microphone.

Hello, everyone. Thanks for the opportunity. I have a question regarding the changes on the stages of the credit. We saw in the last quarters, especially in this last one, the cure of stage two, stage two, a higher amount. So can you guys please explain a little bit the concept of what's the kind of the credit that is classified at stage two that that are the ones that come back to stage one. So why we were seeing such a lot of changes on the stages in the last two quarters? And probably it's because of the type of the credit. So just to understand, how do you guys classify this credit? We know that looking forward, the company will grow a lot. So it's very important to understand. Thank you.

Yeah, for sure. Thanks for the question, Misa. So around stage two and three, especially, I think when you look at stage three, it's much simpler. So most of the increase that we had in stage three. amounts from the balances overdue over 90 days. So that's pretty much the maturation of the portfolio. When it comes to stage two, I think we have two different factors here. The first is actually the maturation of the portfolio as well, but we also have the entry of some credit restrictions affecting in the market. So for example, if a merchant defaults somewhere else, even if that merchant is not defaulting our portfolio, we move that client to stage two. And this can create a lot of volatility between these stages because as you know, credit restrictions in Brazil are quite volatile. So that's the main explanation.

Our next question comes from Daniel Vaz with Safra. You can open your microphone.

Hi guys. Hi Pedro, Lia, Mateus. Just to go back to Lia's comment on the credit side, I think it was something about increasing the pricing, right? I just wanted to touch base on that and elaborate a bit more on what exactly this scenario refers to. I mean, should we interpret this repricing or upward pricing as a reflection of a somewhat riskier environment? And just to double click on that, how sensitive have the clients been to these adjustments, right? So I think when we see, for example, on the retail end, not a good comparison, but Nubank has been like testing a lot, pricing upwards, and we don't see too much elasticity on that. So it will be good to hear on the elasticity of your product and how sensitive clients have been to these adjustments. Thank you.

Daniel, Matheus here. Thanks for the question. So I think that's actually a great point, which is, I think credit is probably the product that we started the latest. So naturally, when we think around pricing credits, it started as a cost plus model. And we're now starting to test real sensitivity from our clients and test the right pricing points. So I think what we did in second queue and third queue, if you look at slide eight from the earnings presentation, the average yield of the portfolio increased from 2.6% in the first queue to 2.9% in the third queue. Even though we have a higher mix of credit cards in the portfolio, which have no interest rate for the part that is undue, And I think that happens at the same time that the macro environment is becoming more complex, but it's not a response from the micro environment. I think the reason why we've been able to price upwards is mostly because we are maturing on the overall pricing process for the product. And I think, like you mentioned, other players were successful in terms of increasing pricing without too many sensitivity from the customers. And I think we're figuring out the same thing on our side.

If I may follow up, have you just tested like way higher yields on the credit and to some group of clients, to control group of clients? How have these tests performed so far? If you could comment on that, it would be great as well.

Yeah, I think we are early beginnings on the testing side. We avoided to do like huge spikes in prices because of selection bias on the cohorts. So I think what we had here were gradual increases. But again, I think it's early beginnings in terms of actually figuring out how much the clients are willing to pay in the product. And I think there's more opportunity to come.

All right. Thank you. Thank you.

Our next question comes from Renato Meloni with Autonomous Research. You can open your microphone.

Hey, everyone. Can you guys hear me now? Yes. Thanks. Sorry, I had an issue with my mic earlier. I want to ask on the COGS reduction. And you mentioned about the efficiency gains on logistics or transaction technology costs. So I wonder if you could expand a little bit on those gains. And I'm trying to understand here if this is a one-off or you can still keep doing this and maybe what's the normalized level that you could see. Thank you.

Thanks for the question, Renato. So in terms of cost to serve, I think broadly speaking, when we look at the metric excluding the credit provisions, we're starting to see signs of operational leverage, particularly in customer service, where the adoption of AI has been driving a lot of efficiency gains, and in logistics, where scale is generating also meaningful cost benefits. In the quarter specifically, we also benefited from lower transactional costs in tech and lower provisions for acquiring losses, which were partially offset by higher amortization of intangible as we are completing a lot of projects that were started in previous years. Now, in terms of what is one-off or recurring, I think the only portion of cost to serve that is not recurring is the level of provisions for acquiring losses because they were positively impacted by a specific collection initiative in the quarter. And when we look ahead, we do expect more amortization of technological projects to come because we are more and more completing a lot of projects that were started a couple quarters ago. So this trend of elevated DNA should continue throughout the next year. So I think the message in terms of cost of service overall, we are indeed seeing a lot of efficiency and operational leverage coming, but I wouldn't take the third quarter levels as a new normal.

Understood. Thank you.

Our next question comes from Neha Agarwala with HSBC. You can open your microphone.

Hi, team. Congratulations on the results, and thank you for taking my question. A quick one on asset quality. I think in your opening remarks you mentioned there was one particular case regarding nonpayment or delay in payments. Could you elaborate on that, what happened? And my second question is on the volumes. I think Leah mentioned that we expect deceleration and volume growth in the coming quarters. For the MSMB segment, we are already at 11% year-on-year for this quarter. What do you mean by deceleration in the coming years? Should we expect something like 8%, 9% or it could go lower than that? Any color about the level in the next two, three quarters would be very helpful. Thank you so much.

Thanks for the question. I will start with the asset quality and then Lia can add on the TPV side. So on the asset quality, I think it's quite simple. We have a specific issue with a client in the specialized desk, which delayed a couple of days, but it's already normalized. This was not a big case. So we're talking around 40 basis points of the NPL 15 to 90 days. So if you do the math, it's around between 2 and 4 million reais, so a very small one. But again, I think the main message here is that it affected the NPL 1590 days in the quarter, but it has already been addressed.

Good. Niha, just complementing on the question regarding TPV dynamics and what to say looking ahead, right? It's hard to pinpoint a number, but the general trend and what we've been monitoring and what we've been saying is growth, which is slightly above the industry growth. The general trend of deceleration is mostly driven by the industry, right? We are seeing this year more specific macro impact to our client base, but we expect that to soften throughout next year. But in general, I think what we can say is industry deceleration, as we've been vocal about for several quarters already, and our growth sustaining above the industry with slight market share gain in the long run. So I think that's the overall trend that we can talk about. Pinpointing whether it's 11, whether it's more or less, I think it's It's a little bit more difficult. Our perspectives on industry growth for next year is on high single digits, low double digits, but hard to pinpoint specific figures. We prefer to wait and see how the year will close out.

Our next question comes from Gustavo Schroding with Citi. You can open your microphone.

Hi, thanks for taking my question. Sorry to insist about the interest rates topic, but I think that we've seen changes regarding the expectations for interest rates next year. So maybe days in cycle should be less pronounced than before expected, right? So especially assuming yesterday's minutes from the central bank. So my question here is that you are – I mean, I think that everybody here is – is modeling and thinking on stone, assuming these low interest rates next year. But if you take into consideration that the average interest rates next year should be also even slightly above this year. So my question is, How sensitive is the stone funding cost to this average interest rates for next year? So, again, we've seen new increasing prices. Leah mentioned about these higher interest rates for... for SMEs and so my point here is a in this scenario of a higher average interest rates how should we think these funding costs and prices next year thanks for the question Gustavo

So first of all, in terms of the actual environment, I don't think we have a strong view. So we set up the operation in a way that we respond to the changes that we have in interest rates. We don't spend a lot of time trying to forecast the scenario. But indeed, if you were to look at the scenario now, there is a small decline embedded in the yield curve. And our sensitivity to that decline is that for every 100 basis points reduction in interest rates, all else being equal, so meaning no price reductions, we have a positive impact in our pre-tax earnings of around 200 and 250 million reais. Now, in terms of what's actually going to happen, I think our intention and our desire is to keep our time. So we tend to pass it through to clients. But there is kind of a lag every time interest rates decline. But like I said a couple of answers ago, long term, when you look at the actual gross profit yield that we're having on the payment side, we think it's in a very healthy level. So I don't think it's reasonable to assume that we're going to keep it long-term. As for the trend for financial expenses, again, I think it's very dependent on the level of interest rates. So we're going to see the scenario and adjust accordingly.

Great, Matheus. Just let me do a follow-up here because You said the sensitive that you mentioned for each 100 basis point decrease, it is for, I mean, end of period interest rates or average interest rates?

It is for average. So whenever we have an average decline of 100 basis points, then we will have the impact for the full year.

Okay, great. Thank you, guys. Thank you.

Our next question comes from Tito Labarta with Goldman Sachs. You can open your microphone.

Hi, good evening. Thank you for the call. I'm taking my question. My question is on your gross profit, right? I mean, you're still on track to deliver your guidance for the year, but it has been decelerating. You know, given some of the questions on slower TPV growth, rates are stable, you're mostly done repricing. Should we expect the gross profit to continue to decelerate? A bit from here, at least all else equal, just given the trends in the industry, should we expect any positive seasonality in 4Q? And we did see a bit of a jump in your loan book this quarter. At what point do you think you could get to where the loan book is enough that it starts to boost that gross profit? I think it's growing fast, but from a low base. So just to think about the evolution of gross profit given where we are today and when that can maybe inflect and maybe grow faster from here. Thank you.

Hey, Tito. Thanks for the question. So I think when you look at the gross profit yield, usually for FQ is seasonally lower because we have more debits and fixed transactions in the mix, which tend to have a lower take rates on a payment side. But I think in general, when we look long-term, I think the expectation is that payments spreads, they are at a healthy place. So we don't see a lot of pressure, but also not a lot of upsides in that part of the business. I think what's going to be the defining factor for 26 on that end is actually the interest rates movements that we just discussed. But other than that, I think the expectation is indeed that banking and credit will continue to grow at a faster pace than the TPV growth. And then over time, that should be accretive to gross profit yields. In terms of the credit that you asked, I think we are already starting to see the signs of a bigger contribution in the P&L. So if you look at the revenue jump versus the delta in provisions that we had between the second Q and the third Q, it was already significant. Of course, when you look at gross profit as a whole, it is still a very small factor. But I think it has already started, and I think it gets more significant throughout 2026.

Thanks, Mateo. That's helpful. And yeah, I understand the negative seasonality on the gross profit yield, but you should also have some positive seasonality on volume. So net, I mean, not asking for guidance, but just a little bit how that could potentially impact gross profit for Q2.

Yeah, I think when you look at gross profit on a nominal basis, then the seasonality in the fourth Q is positive for sure. I think when you look at the yields, then you have a negative seasonality because of the mix. But overall, I think if you're thinking about nominal terms, then the seasonality for fourth Q is positive.

Okay, perfect. That's very clear. Thanks, Matheus.

Our next question comes from Pedro Leduc with Itaú.

Thanks, guys. Good evening, everybody. Congrats on the results. Two quick questions. I know you guys had lifted the 2027 guidance once you did the links deal. I know it's not in the presentation here, but wondering if you plan on reinstating it at some point, maybe with the 4Q release, if it's a 27, maybe it's something, another period of time. It seems like you're tracking for this year extremely well. And for most of the 2027 figures as well, we're just trying to get a sense if you guys plan on restating it, if it's in the same time period, same infos. And then the second question kind of tied up to this one as well. In that previous 27 slide, you talked about a 20% effective tax rate. You're running at 15%. In the meanwhile, we're having changes in taxation for several of the Brazilian entities. Just trying to get a sense from you of how we can think about this income tax rate maybe next year, and then thinking whenever you guys plan on releasing a longer-term guidance. Thank you.

Hi, Pedro. Pedro here. I'll address the first part of the question, then I'll turn it over to Mateus. I think it's true that TPV performance has been more challenging than we initially anticipated back in 2023. And I think as Leah mentioned, partly I think it's due to the macro environment, which is worse than we initially expected. But we want to see how the year will close out first before we can talk more concretely about 2027 guidance revision, right? So in fact, we plan to adjust gross profit indicator to reflect only continue operations. And we may take the opportunity for a more comprehensive review of 2027 guidance when we do that. But that said, I think it's important to note that when we look at the long-term plan as a whole, our execution remains broadly on track. With the credit book, deposit base, and the overall profitability, I think we're on the right track since we established back in 2023. I'll hand it over to Matheus.

Thank you, Pedro. Absolutely. On the effective tax rates, I think two messages here. So yes, we are indeed operating below the 20% mark that we provided at the long-term guidance. And if you look at the fourth Q, usually fourth Q tends to be lower than third Q because of seasonality. And also we have more lead domain in the last quarter. But longer term, if we're thinking about the effective tax rate for 2026 and onwards, I think it's still too early to provide a precise view, as there are too many moving pieces. I think you have all seen the number of proposed changes that are being discussed through provisional measures and draft bills. But that said, when we take everything into account, we continue to believe that the effective tax rate should land in mid to high teens over time. More specific than that, I think we still need more visibility on how the proposed changes will ultimately unfold. But that's the perspective we have at this moment.

Okay, Matos, thank you. So mid-high teens without seeing if there's any changes, right?

Yeah, I think mid to high things broadly, then whether it's going to be mid or high, I think it's dependent on the changes.

That's great. Thank you so much.

Thank you. The question and answer session is now closed. We would like to hand the floor back to Pedro Zinner for closing remarks.

Well, thank you all for participating in the call and for the questions made. And I'm looking forward with the team to see you in our results in March next year. OK, thank you.

Stone's conference call is now closed. We thank you for your participation and wish you a good evening.