StoneCo Ltd.

Good evening, everyone. Thank you for standing by. Welcome to StoneCo's fourth quarter and fiscal year 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.sec.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 StoneCo's former CEO, Pedro Zinner, the incoming CEO, Mateus Scherer, the CFO and IRO, Diego Salgado, and the head of IR, Roberta Noronha. I would now like to turn the conference over to Pedro Zinner.

Thank you, operator, and good evening, everyone. This call marks the conclusion of my journey as CEO of Stone, and the beginning of a new chapter as I transitioned leadership to Matheus. During my tenure, we chose to fight complexity directly, simplifying the business, sharpening our focus on payments, banking and credit, and building a more resilient and scalable platform for long-term growth. In 2025, that meant selling our software assets, Lynx, to TOTUS for more than 3 billion reais. not because it was a bad business but because it set outside the intersection where our competitive advantages live it also meant expanding our credit book prudently launching products like tapstone and payments links with the zero settlement unifying our technology stack and deploying ai where it reduces cost and improves quality adjusted eps grew 34 percent year over year Return on equity expanded 26% in the fourth quarter of 25, and we closed the year with a robust net cash position. I'm deeply proud of the team and what we have built together. I would also like to sincerely thank our investors for their continued trust, partnership, and support throughout this journey. From a new future role as non-executive chairman of the board, I remain fully committed to supporting Storm's continued evolution and long-term vision. Thinking like an owner, protecting what we have built and contributing to what comes next. I have complete confidence in Matteo's leadership. He has been one of the architects of Storm's transformation, helping restore discipline, simplify the business and focus the organization on what truly matters. He brings clarity of direction, analytical rigor, and the right sense of urgency to accelerate execution and continue elevating what matters most, delivering value to our clients and building intrinsic value per share. With that, I'll hand it over to Matheus, your new CEO, who will walk you through our fourth quarter and full year 2025 results.

Thank you Pedro and good evening everyone. Before getting into the results, I want to thank Pedro for his leadership and commitment to Stone over the past years. It has been a privilege to work alongside him and I'm honored to step into this role as we continue building Stone as the financial partner for entrepreneurs across Brazil. Now, turning to slide 3, we highlight our full year performance relative to the guidance we provided at the beginning of the year. Despite a challenging macroeconomic environment, we delivered solid results while remaining fully committed to our capital allocation framework and to returning excess capital to shareholders. Our adjusted gross profit reached 6.319 billion, an increase of 13.5% year over year. Importantly, when factoring in the 1.8 billion reais in share repurchases executed in the second half of the year, which had an estimated 60 million reais impact on gross profit, our adjusted gross profit would have reached 6.379 billion, slightly above our guidance of 6.375 billion adjusted basic tps came in at 9.71 reais per share representing a 34 year-over-year growth and exceeding the 9.60 reais per share guidance reflecting discipline operational execution and a consistent focus on capital efficiency On capital allocation, one year ago we identified a position of R$ 3 billion in excess capital. Through to our commitment, we distributed the full R$ 3 billion over the course of the year, representing a 15% yield. We remain disciplined in our capital allocation strategy and will continue returning capital to shareholders whenever we do not identify immediate value accretive opportunities. Moving to slide 4, we will now examine our consolidated profitability and return on equity. Our fourth quarter adjusted net income increased 10% year over year, driven by 12% growth in continuing operations. These results demonstrate the resilience of our model in a macro environment that continues to weigh more meaningfully on smaller versions, alongside a competitive and dynamic market. Adjusted basic EPS was R$ 2.87, up 27% year-over-year, benefiting from both the income growth and the impact of share repurchases. On returns, our consolidated ROE continued to expand, increasing by 6 percentage points year-over-year to 26%, reflecting ongoing improvements in profitability and capital efficiency. Moving to slide 5, we highlight the top-line performance of our continuing operations. Total revenue and income increased 13% year-over-year to 3.7 billion reais, reflecting mid-single-digit TPV growth combined with discipline pricing. Credit continues to scale and is becoming a more meaningful contributor to revenue. further strengthening our position as the financial partner of choice for MS&B clients. In the fourth quarter, adjusted gross profit from continuing operations grew 9% year-over-year to R$1.7 billion. Revenue growth was the primary driver, partially offset by higher credit provisions as we continued to scale our loan portfolio. We see this as a natural step in expanding our credit business and further diversifying our revenue streams to build a more resilient earnings profile. We will discuss portfolio performance and credit dynamics in more detail later in the presentation. Turning to slide 6, we present our key operating metrics, starting with MS&B payments. Our client base increased 15% year-over-year, reaching 4.7 million clients at year-end. Out of those, 41% are classified as heavy users, up from 38% in the previous quarter. This trend reinforces our strategy of deepening client engagement beyond payments, as we seek to build a more comprehensive and long-lasting financial relationship with our clients. MSMD TPV growth decelerated to 5.3% year-over-year, driven by three factors. First, the macro environment continues to weigh on smaller clients. Second, digital native merchants are performing better than brick-and-mortar businesses, a segment where we have greater exposure. And third, our operational performance in the fourth quarter fell short of our internal expectations. with slightly higher churn and softer gross client additions than planned. We're not standing still. We are implementing a series of commercial initiatives and gross additions have already shown a clear improvement. Our focus is now shifting toward churn management by deepening client relationships and ramping up bundled offerings to increase share of wallet and improve retention over time. Turning to slide 7, we highlight the performance of our banking operations. Our banking active client base increased 21% year-over-year, reaching 3.7 million clients, reflecting continued progress in bundling payments and banking into a more integrated value proposition. Client deposits grew 27% year-over-year and 23% quarter-over-quarter. totaling R$11.1 billion at year-end. Notably, deposits expanded significantly faster than MSNBTPV, with penetration over MSNBTPV increasing from 6.8% in the fourth quarter of 2024 and 7.1% last quarter to 8.2% in the fourth quarter of 2025. This outperformance reinforces that we are on the right track with our banking strategy. deepening engagement and capturing a larger share of our clients' financial flows within our ecosystem. Of the 11.1 billion in deposits, 86% were time deposits in the quarter, compared to 84% in the previous quarter. This shift reflects higher adoption of our investment products and increases in the portion of deposits eligible for our cash-trip strategy, contributing to lower funding costs and supporting profitability. Turning to slide 8, we review the evolution of our credit operations. Our portfolio reached R$2.8 billion in the quarter, growing 23% sequentially. Of this total, R$2.5 billion relates to merchant solutions, primarily our MS&B working capital offering, which also expanded 23% quarter over quarter. The remaining 300 million reais corresponds to our credit card portfolio, which grew 30% sequentially from a smaller base. Credit continues to be irrelevant in our results. In the fourth quarter of 25, credit revenues reached 238 million reais, up 33% sequentially, while provisions totaled 110 million reais, increasing 27%. As provisions are recognized upfront and revenues are accrued over time, continued portfolio growth should translate into a stronger earnings contribution going forward. Since relaunching our credit operations, we have prioritized disciplined scaling and tight portfolio oversight. Within MS&B Working Capital, we operate two distinct models, a fully digital approach for smaller merchants, resulting in granular and diversified exposures, and a more analytical, desk-based approach for large SMBs, with higher average ticket sizes and a more concentrated position. In terms of asset quality, we remain aligned with our risk appetite. NPL 15 to 90 days increased to 4.43%. primarily reflecting payment delays from a limited number of higher ticket clients within the specialized desk. NPLs above 90 days stood at 5.21% compared to 5.03% in the prior quarter, consistent with normal portfolio seasoning. Our coverage ratio remained stable at 264% and cost of risk was approximately 17% in the quarter. We have also continued refining our pricing framework, balancing client sensitivity with risk-adjusted returns. This has allowed us to improve spreads while maintaining disciplined and sustainable growth. As a result, our average monthly credit yield, calculated as credit revenue over the average portfolio, reached 3.1%, compared to 2.9% in the third quarter of 2025. despite mixed effects from the specialized desk and long interest-bearing credit card balances. To wrap up, and before I hand over to Diego, I want to thank the team for their resilience and dedication in delivering a solid performance despite a challenging year. I'm truly honored to lead the company into its next chapter, continuing to execute our strategy with energy and passion as we strive to be the leading financial services provider for entrepreneurs in Brazil. With that, I'll hand it over to Diego, our new CFO, who will take you through our financial performance in more detail, along with updates on capital allocation and guidance. Diego?

Thank you, Matheus, and good evening, everyone. It's a pleasure to speak with you today for the first time as CFO. I'm honored to take this responsibility. You have my commitment to keep elevating our financial discipline and to hold a high bar on execution. Now, I'll begin by reviewing our adjusted consolidated P&L for continuing operations for the fourth quarter as shown on slide nine. Our cost of services increased 23%, rising 200 pips as a percentage of revenues. This increase was driven by higher low and loss provisions during the quarter, mostly driven by the growth of our credit portfolio. Financial expenses increased 12%, a reduction of 30 basis points as percentage of revenues. This was primarily driven by the use of low-cost demand deposits as funding source, which helped offset the impact of higher average CDI rate compared to the prior year period. Admin expenses also increased at 12%, a small decrease as percentage of revenues, reflecting ongoing efforts to gain leverage across our support functions. Selling expenses increased at 16%. a 40 bps increase as percentage of revenues. This reflects a more evenly distributed market spending in 2025 compared with 2024, when expenses were weighted towards the first half of the year due to a significant investment in a specific reality show. Other expenses decreased 27% year-over-year, or 100 basis points as percentage of revenues, a result of lower shared base compensation expenses in the quarter. Our effective tax rate was 10.3% in the quarter, down from 13.7% in the fourth quarter of 2024. The year-over-year decrease was driven primarily by higher benefits from lay-to-bank. Moving to slide 10, our adjusted net cash position closed the quarter at 2.6 billion reais, down 930 million reais sequentially. This reduction stems primarily from the 1.3 billion in share repurchases during the fourth quarter. Excluding these buybacks, adjusted net cash would have increased by nearly 350 million reais. now let's review our capital location in more details distinguishing between recurring operational generation and the extraordinary proceeds from the links transaction starting with operation access on slide 11 as you may recall from last year's all our framework is guided by three strict hurdles that define excess capital maintaining a minimal or equity ratio for the consolidated entity the maintenance of certain global ratings, and maintaining an adjusted net cash position above zero. This year, we have refined our core equity ratio hurdle. First, we have enhanced our methodology to better align it with the Brazilian central bank standards for the treatment of all the deferred tax assets that we have, regardless of which legal entity holds it. Consequently, we felt more comfortable to reduce the capital hurdle from 20% to 17%. These adjustments mostly offset each other. Our policy is very straightforward. Upon the approval of our annual budget and financial statements, in the absence of additional immediate value accretive opportunities, excess capital is returned to shareholders. following our 2025 performance we have generated excess capital of just over 2 billion reais which the board approved for distribution via share repurchases during 2026. as a reminder we already have an open repurchase program of the same amount announced on december 22nd which will be used for distribution now turn to slide 12 we detailed the extraordinary distribution from the link sale. On February 27th, we received the proceeds from the sale and closed the deal. This divestment releases likely over 3 billion reais in capital, which will be returned to shareholders in 2026. However, given the recent closing, we expect to approve this specific distribution during a board meeting in April with a market announcement to follow. Finally, let's move to slide 13, where we present our guidance for 2026 and 2027 for continuing operations. Starting with 2026, we expect adjusted gross profit to range between 6.6 and 7 billion reais. Adjusted basic EPS is expected to be between 10.8 and 11.4 reais per share. The guidance for both KPIs considers the capital distribution that we have already announced of 2 billion reais to be fully returned through buybacks during 2026, but doesn't include the proceeds from LINCS. Regarding 2027, we are no longer providing operational KPI guidances and keeping it consistent to 2026s. Therefore, we expect adjusted gross profit to range between 7.2 and 8.3 billion reais. Adjusted basic APS is projected between 11.8 and 13.4 reais. In those numbers, we are not considering yet any additional capital distribution. We will adjust this in the beginning of 2027 when we disclose 2026 full-year earnings. Also important to keep in mind that for the guidance, we assume an effective tax rate in the mid-teens range. To close, we started this journey with the simple belief that Brazilian merchants deserve a better financial partner, and that conviction hasn't changed. For 2026 and 2027, our priorities are clear. continued earnings expansion, a credit business that scales on our terms, and capital returned to shareholders, including the Extraordinary Links distribution. Operator, we're ready for questions.

Now we'll begin the Q&A session with Matheus Schroeder, CEO, Diego Salgado, CFO, and Roberta Noronha, Head of Investor Relations. If you would like to ask a question, please press the Q&A button at the bottom of the screen. Or, to ask a question on audio, click on Raise Hand. You will then receive a request to activate your microphone. Our first question comes from Guilherme Grespin with JP Morgan.

Hello, good evening everyone. Thank you for opening for questions. Just one on the guidance itself, clarification plus a follow-up. Share count, if understood correctly, I should work with 248 million by the end of 25, right, which is the end share count. Then if I assume that you're going to buy back 2 billion in the year and you're going to meet your expectation, assuming current screen price, it means that I should work with roughly 225 million for 2026. then I should work with a flat share count for 27. I just want to confirm that the rationale makes sense here, because then my question is, if that's true, your earnings in 2027, it's growing 8% year-over-year, which is almost half of gross profit of 14%. Just wanted to confirm what is driving this delta between gross profit growth and earnings growth. Thank you so much.

Hey, Griezmann. Thanks for the question. Mateus here. So, I'll first clarify a few things on the capital distributions, because there are indeed a lot of moving pieces, and then I'll hand it over to Diego to clarify the 2026 question. So, just to clarify, when we look at the guidance for 2026 and 2027, the guidance does not include any impact from a potential distribution of links, neither on the P&L nor on the share counts. So, just to make it clear, if links were to be distributed via dividends, there would be no impact on our EPS guidance, but if we were to distribute that value through share repurchase instead, there would be potential upside to the EPS, due to the reduction in share counts. Now, regarding the ordinary capital distributions, which I think were your question, for 2026 we have decided to execute distributions through buyback, like Diego has said, and this impact is already embedded in the APS guidance, which means that the guidance assumes that shares are repurchased throughout the year at an estimated average price. For 2017, since we have not yet defined the mechanism for capital distribution, the guidance was constructed under the assumption that capital is retained and reinvested in the business. So, depending on the eventual allocation decision, particularly if we opt for buybacks, there could be incremental upside to EPS relative to the current guidance. So, that's the general overview. I'll hand it over to Diego to address the 2026 part.

So, Guilherme, let me walk you through a bit of the growth numbers for 2026. So, basically, we're guiding to a growth on gross profit between 4% and 11%. That has to do with a softer growth of TPV of mid-single digits throughout the year, being compensated in terms of margin expansions and impact on P&L by both banking and credit. But naturally, that comes with a cost from the credit business, which is charted up front, as you know. Then on EPS, what you're looking at is a growth between 17% and 24%, which, as Matheus mentioned, has to do basically with the fact that we're considering only the 2 billion reais buybacks. If we were to use the links distribution to buybacks, that number would have grown significantly on one hand. If not, then EPS grows between 17% and 24%, as we mentioned, but total shareholders' return would be massively impacted.

That's clear. But just the second point of the question, like if we assume all else equal, no 40 distributions, earnings would be growing much less than gross profit, right? In 27 specifically. Just want to get your view on why this happens, if there is any headwind that I'm missing here.

I don't think it's massively below. So, like Diego said, gross profit would grow between 4% and 11% on the guidance. When you do the assumptions that close to the current market prices for the buybacks throughout the year, what you get is that adjusted net income would grow between 3% and 9%. So, it's slightly below. And the reason for that embedded in the guidance is because we continue to invest in selling expenses, which are partly offset by G&A expenses in general. But it's not a massive gap. I think it's a very small gap.

That's clear. Yeah, the gap widens a little bit in 27. That's why I asked. But it's clear. Thank you so much.

Yeah, naturally, when building a 2027 guidance, we tend to look for a little bit more of a leeway, especially on the bottom of the range, Guilherme.

Our next question comes from Ricardo Bushpiga with BTG.

Hi everyone, thank you for the opportunity of making questions. I understand that one of the priorities for Stone today is to accelerate the banking and credit initiatives. However, although Stone has been advancing on this front, many of the merchants still see the company more as a payment provider, as a POS machine, than necessarily as a bank. In this regard, I want you to understand how do you plan to change this perception among your merchants and with the possibility of obtaining a banking license and being able to have a bank in your name would help on this direction. Thank you.

Thanks for the question. So, on the license front, I don't think having the license is actually a big constraint on our plans. We already have a full product roadmap, and we are evolving on the banking credit features with the license that we have in place. That said, I think you hit the nail on the question, which is when we look back at 2025, I think we had a massive improvement in terms of how many products we have and what we launched. I think there's still a huge effort in terms of how we bundle those products and also, like you mentioned, in how the clients perceive our offering. And when we look into 2026, part of the selling expenses and the marketing investments that we're doing throughout the year is on how we reposition the company to be perceived for the clients as not only a POS provider, but much more than that. And I think we have a plan in place to address that point.

Thank you, very clear.

Our next question comes from Antonio Huet with Bank of America.

Hey everyone, thank you for your time. So two quick things on my side. So first on the guidance, if you could just explore which silly crate did you use for that. And the second one on credit, if you could dig a little bit deeper, On your operating numbers for the fourth quarter, we saw an increase in write-offs for both working capital and also credit cards, that same on NPLs, while maintaining an elevated cost of risk. So what you're seeing there and what are expectations going forward, if you could give a little bit of color, since you no longer have the guidance for operating metrics. Thank you.

Hey, Antonio. Good evening. This is Diego. So, basically, we're assuming SALIC at low 12% by the end of 2026 and high 11% for 2027. That's what's behind the guidance number. On the credit side, basically what you have is the result of a portfolio that keeps growing into different publics and different products, but also getting more mature, especially on the core product for the digital credit offerings that we have. So let me try to walk you through a bit of some of those moving parts. As we expand the public to which we are offering credit, naturally we tend to extend credit to a little bit more riskier clients. We charge proportionally to that higher risk. but that comes with a cost on the risk side, which is what you see in terms of cost of risk on the balance sheet and naturally provisions up front. Also, as we deploy other short-term capital offerings to those clients, you also have a similar effect. On the other hand, as the core business gets a little bit more mature, we keep on learning with the products. You're going to see additional write-offs. You're going to see growing NPLs just as the natural process of a credit portfolio.

Yeah, if I may add, Diego, two points in the NPLs as well that you mentioned. I think when you look at the trends in NPLs, we have two factors in place. So the NPLs 15 to 90 days were impacted by a few cases on the specialized BASC, which tends to add some volatility to that number in the short run. And the NPLs 90 days are basically just the process of maturation of the portfolio. So as the growth rate for the portfolio is declining on a percentage basis, it's natural that the NPLs over 90 days will increase over time. And that's something that we already had anticipated in the past. The only point that I would emphasize that Diego mentioned is, again, even though we look closely to the cost of risk metrics and the NPL metrics, it's important to analyze that metric alongside the rates that we're charging. And when you look at the movements of the portfolio over the past quarters, you have pretty consistent trends of increasing the average yield of the portfolio at the same time where the cost of risk remains in the mid-teens. So that, in the long run, should increase the contribution of credit to the company, and it's something important to keep in mind.

All right. Thank you.

Our next question comes from Neha Agarwala with HSBC.

Hi, thank you for taking my question. If we can touch a bit upon the volume growth. I think you mentioned during the remarks you expect about single digit TPV growth. And I understand your focus on profitability. But could you break down a bit in terms of what kind of volumes are you giving up? What is behind this expected growth? And is competition playing a role? Because we see some players among the incumbents like CLO ramping up their operations, which might make it more competitive. And also at the bottom of the pyramid, you have players like Pago who are being more active. So how do you see competition playing out in the volume growth expectations that you have? Thank you so much.

Yeah, thanks for the question. So around first competitive environments, I think overall the message has not changed. So when you look at the players, the market in general has remained rational from a pricing standpoint. We're not observing behavior that suggests competitors using growth at any cost or engaging in structurally unsustainable pricing. What we did see throughout the second half of last year was some players expanding their offerings and strengthening their sales footprint, but this is a natural movement in the industry. It tends to come in waves. Now, in terms of the TPV growth itself, when we look back at our performance, there are clearly three trends playing at the same time. The first one is that since the third deal of last year, we've been operating in a more challenging macro environment, which has put pressure on TPV growth. The second one, which we mentioned in the call, is that within the market itself we saw digital merchants performing better than brick and mortar recently and this mix shifts creates a temporary headwind for our tpd given our focus on brick and mortar and smbs and the third one is that in the fourth queue we experience higher than expected churn and software new client acquisition which waited on tpv growth as we head into this year These factors, they are more internal than external. It's less about competition and more about execution. And to that end, on the commercial side, we've already made meaningful progress in addressing the onboarding dynamics. And when we look at the new sales productivity recently, it has improved significantly. And now what we're doing is basically turning our attention to deepening engagement with our existing base, both in terms of share of wallets and in terms of retention, where we see clear room to improve and have specific initiatives underway. So when we put that all together, for the first few of the year, this factor should result in the TPV growth roughly flattish year over year. And then as we move through the year, we expect a stronger second half as our bundle and these cross-sell initiatives gain traction. And that's what's composed into the guidance of mid single-digit TPV growth for the year.

If I may ask on that, do you see any reason to believe why going forward the brick-and-mortar sales are going to pick up? I mean, it could pick up more with the overall economy, but not much more than that. Is there any way that you could participate in a profitable manner on the online side or anything that you could do, any optionalities that you see to improve the volume growth as the macro improves?

That's a good question, Neha. So on the second part of the question on how we can participate, The digital volume tends to be more concentrated on marketplace, where the economics are smaller than the overall economics for MSNBs. That said, we did launch the new PaymentsLink product late last year, and it's fairly common for MSNBs in Brazil to sell through WhatsApp, and then they can use our PaymentsLink, which improved a lot. So that's one of the initiatives behind the plan. The second question, sorry, if you could repeat.

No, I mean, I was just asking how in the long term, like, you could increase your volume growth more than just mid-single-digit. Because, I mean, one thing you mentioned is participating in digital volumes. So I wanted to understand, without losing focus on profitability, how can you continue to gain volume growth? Or is this a business that we should think should grow at mid-single-digit?

I think a lot is related to execution. So like we said when we talked about the TPV on the second half of last year, the trends that we're seeing now are still weighted by a relatively rough macroeconomic environment, plus a number of initiatives from the operational side that could improve. So I think what we are embedded in this mid-single-digit growth for the year is us solving the operational needs. But I think if the macro improves, it can be a tailwind for PV growth in the future as well. The only other thing that I would say is that even though there is space to re-accelerate the PV growth medium term, I think it's also important to keep in mind that the biggest jackpot or the biggest price is also in terms of how we engage in banking and credit within the ecosystem. So, on one hand, we have this drag from digital transactions and from the macro. On the other hand, I think when you look at the execution of banking and credit, we're trending well, but the opportunity is very, very big. So, that's where the focus is.

Anderson, thank you so much.

Thank you.

Our next question comes from Caio Prato with UBS.

Hi everyone. Good evening. Thanks for the opportunity. I have two on my side, please. First, on the credit business, just to double check if you are discontinuing your guidance on portfolio for 2027 or not. And if so, what has changed? And second, if I may follow up on your expenses and overall operating leverage, if you can walk us through your investment plans towards 2026 and 2027. What kind of investments are we talking about? What should we expect in terms of but also 27. Not sure on why we shouldn't see some leverage for 27, especially in a momentum where when we are discussing a lot about potential efficient gains to come from AI and other tech developments. So it would be interesting to hear from you, especially as probably in this guidance, we are not considering any relevant pickup in TPV for 2027. Thank you.

Hi, Kai. Good evening. So, let's start with your question on operational guidance for credit. Yes, we discontinued the operational guidance metrics that we had, basically because it made sense back in 2023 when we launched the 2027 guidance. At the time, you may remember We had virtually no credit portfolio, a much smaller balance of deposits, and we wanted to build that bridge between 2023 and 2027. Truth is, if you look today at the numbers that we have, we are probably ahead of the plan in terms of credit portfolio and deposits behind the plan in terms of TPV. Naturally, we feel comfortable based on the guidance that we're delivering, that we will deliver the plan ultimately, but with a different mix. And that's why it didn't make sense any longer to continue providing specific guidance on the operational KPIs. That said, if we switch to expenses, you should expect expenses, selling expenses, selling and marketing expenses still growing in 2026 as percentage of total revenues. A lot of it has to do with this new positioning that we've been talking about and other growth initiatives that we've been putting in place. So the dedicated desk in credit, it's naturally one of the things that it's new in the company, it's bringing portfolio, it's bringing top line and has an impact on 2026. For 2027, what you have on the guidance, it's still a similar trend. That said, I wouldn't be surprised As the overall market develops, and especially as AI has been developed, as you just mentioned, that the mix could be potentially different in 2027. There is a lot of new initiatives going on on the company in terms of gaining efficiency. you should not expect large one-offs actions it should be more of a long-term practice that we will emphasize not only in 2026 but 2027 onwards and those things are naturally still not reflected in that guidance number because it's everything is too new and we're all learning with it yeah Diego if I may complement on one point

I think Caio mentioned AI in the question. And it's really true that over the past six months, we've seen a meaningful acceleration in practical application of AI, not only in the company, but I think in the world as a whole. When I think long-term, we do believe that AI agents will meaningfully improve productivity of several processes, including processes that historically in the company required large operational structures. But I think it's too soon to estimate those impacts. So, when you look at the guidance for 2027, we're not including huge benefits from AI, even though we're doing all the effort to capture them over time.

Okay, great. That's clear. Thank you, Diego and Matheus.

Our next question comes from Tito Labarta with Goldman Sachs.

Hi, good evening. Thanks for the call and taking my question. I guess just going back on the 2027 guidance, kind of just backing into a net income number, assuming that roughly 225 million shares, it's 2.7 to 3 billion. And, you know, when you initially issued the guidance, and I know it was a different environment then, The net income was above 4.3, and I know you sold links, but links didn't necessarily contribute that much to earnings. But just, I guess the question is, what is the big difference today, aside from slower TPV, I mean, which obviously we can see that, but I think there was always some implied expectation that take rate for payments would come down with maybe the uplift coming from credit. I mean, you just said TPV. that credit you can potentially still deliver on that, and we saw very good growth over the last year. But what do you think is the biggest difference from when you initially gave the guidance to what you're seeing now and why it's so much lower? And I guess along those lines, Mateos, and congrats on moving to CEO, what would you say is your biggest priority now as you step into that role? Thank you.

Hi, Chito. Good evening. So let me try to help you reconcile the numbers. So there are three big movements affecting the 2027 guidance. The first two effects are links divestments and the repurchases executed in 2025 and expected for 2026. These two movements combined have an effect of a little bit over 2 billion reais in gross profit and 1.3 billion reais in nominal net income. So, these two effects would adjust our guidance from 15 reais per share to 13 reais per share. Therefore, at the top of the range of our new guidance, we are within the previous plan and guidance. On the lower range of the guidance, what you have is the inclusion of a number that reflects the short-term headwinds that we are currently facing. The execution on the newer verticals, particularly in credit and banking, continue to evolve positively, as we've mentioned, but TPV performance has been softer than we initially anticipated. So that's a bit of the dynamic that you see. So the revision is primarily driven by the portfolio changes and the capital allocation decisions, along with a more conservative view on near-term TPV trends, rather than a deterioration in the core strategic initiatives.

And going to the second part of the question, Tito, around priorities. Let me start by saying the following. So I've been in the company for a while now, what is now 11 years. And while a lot has evolved over that period, in terms of strategic direction, I think we've always had a pretty clear target, which is we built these very strong distribution channels. We serve our clients with passion. And we want to leverage that relationship to become the primary financial services platform for MSNBs in Brazil. So I think in terms of vision, it remains unchanged. What we're doing now is really sharpening our execution to become more agile. And we're doing that by focusing on three priorities. The first one around payments. I think we've mentioned this a couple times throughout the Q&A. But we're now at a stage where we've reached a leadership position in our core segments. And at this scale, the game evolves. So while onboarding new clients remains important, developing the capability to deepen the relationship with them through better engagement, through cross-sell and retention is now as important. And that's priority number one. Second, when we think about banking and credit, we've built a solid foundation over the past three years. We're seeing encouraging results when we look at the portfolio and the deposits evolution, but we are very early relative to the opportunity ahead of us. So acceleration this execution on credit and banking while preserving the risk discipline that has defined the approach is priority number two. And the third one, I think Diego has touched on this topic as well. But when we look at what is happening in the world recently with the transformation underway in AI, we see substantial room to drive further productivity gains across the organization and to be more efficient in general. So efficiency is priority number three. So when we put that all together, Again, I think it's much more about raising the bar on execution and trying to become a more agile organization than it is about shifting the direction of the company.

Okay. No, that's very helpful. Thanks, Diego and Mateus. And maybe just to touch on that second point, Mateus, with AI, and this isn't completely comparable, right, but we saw one of the payment peers in the U.S. reduce their employee base almost in half. How do you think about your position in terms of, I'm not asking if you're going to cut employees or not, but just in terms of the employee base that you have, is it like sort of the right level? Is there more productivity there? I mean, do you need to grow more? How do you think about your position and given these potential efficiencies in AI and sort of, you know, what you have today? Thank you.

Yeah, that's a good question, Chito. So in terms of AI, over the past six months, we've seen meaningful acceleration in the application of AI across the company. We touched upon that in the earnings release as well. But when we think about our approach in the topic, it has been very deliberate. So we're really intentionally avoiding the temptation to launch dozens of disconnected pilots with no clear path to scale. or without measurable economic impact. And instead what we're doing is twofold. So, first, we're focused on the core, Within the core, we have dedicated teams redesigning how we operate in key areas, like customer service, the sales process, the hubs, or even in risk. And I think we had a first successful example of this application within customer service, where we implemented AI agents to handle the first-level interactions, and we had huge efficiencies there. the second front is really around ai enablement which is making sure that everyone in the company has the modern ai tools available and to use within their day-to-day and when we democratize the access we allow the teams to experiment and improve their workflows and on the other hand we centrally monitor the usage and then we establish the best practices to capture the capture the efficiencies later now It's hard to talk about actual impacts or estimates at this time. I think the one thing that we're certain is that over time, we can massively improve productivity in the company by embedding AI. I think the how and the how much is still too early to talk. But for sure, we're going to pursue those gains over the medium term.

Okay, that's great. Thanks, Matheus.

Our next question comes from Renato Meloni with Autonomous Research.

Hey, everyone. Hey, Matheus, Diego. Thanks for the question. I would like to explore the guidance a bit more. And going back to your comments, Matheus, in the last call, you said that you still expected to see some expansion in the gross profit field. And thinking back in light of lower rates, I was assuming that would be some price maintenance at the same time you're getting lower funding costs. But during the call today, I'm left with the impression that you're assuming the entire expansion is going to come from credit. So I'm curious, what are your expectations here for the year, given this scenario of low TPV growth and more churn, if you expect to pass through lower funding costs and monetize on the credit side. And then also with ending this, if you could just mention a little bit of the trajectory here of gross profit throughout 2026. Thank you.

Yeah, so Renato, nothing really changed in terms of the pricing dynamics in payments. We still believe The price levels that we've been putting on the market are healthy. And as Matheus mentioned before, we don't see anything being crazy, being done or executed by competitors. That said, what we've always told is that once interest rates start coming down, we should benefit. in the short term from tailwinds associated with the reduction on financial expenses, and that in time those reductions should be passed on not only to new sales but also to the client base. So that's what we currently have in our model, and we don't see that changing in the short term. When talking about the mix between TPV yield, TPV growth, and gross profit margins, what I've been telling for quite some time now is really that gross profit margins should continue to expand based on the expansion of the other two main products, credit and banking, and that the ROE from payments on a standalone basis in the long term should continue to decline, spread should continue to decline on the long term, but are still super healthy.

Perfect. So then in terms of trajectory, assuming that we get the first cuts around the second half, you get one quarter of expansion there on the payment side. And how long does it take to pass through the benefit to clients?

Yeah, well, that's a tricky question, Renato, and naturally that has to do with pace of sales, but also with churn levels. We monitor those two things on a daily basis, and based on the performance of those KPIs, we try to hold those spreads for as long as possible, but naturally tend to pass it through as competition enhances.

Thanks for that.

Our next question comes from Daniel Vaz with Safra.

Good night, and thank you for the question.

I'll go back to the operating consensus.

Sorry, can you hear me? Sorry. Yeah, yeah. Okay. Thank you. And I'm trying to connect your higher OPEX or selling expenses to your main strategy to develop a more complete bundle and a more competitive environment in terms of rates or your competitors being more aggressive on taking benefits. market shares. So, am I looking for your higher OPEX as a defensive strategy? I mean, are you trying to maintain your market share or maybe you're looking at increased growth on OPEX and selling expenses for any way to your attacking attacking strategy, maybe we're looking at here trying to get a sense of are you defending, trying to create a bundle are you attacking trying to look at different opportunities here, trying to figure it out, what's the main goal for your 26, 27 I know you already talked about in the past that market share is a consequence but I'm looking at your is it more defensive or attack it's good to hear from you, thank you

Thanks for the question Daniel. I think we have two different dynamics when we look at the short term versus when we look ahead. So short term, when we look at the selling expenses for the fourth quarter, what happened was that we had higher turnover in the third Q and therefore we have higher more in the fourth Q to replace that turnover and that's why selling expenses increased primarily. Now when we look ahead, I think the reason why we're not being vocal about seeking too much efficiency in the short run in selling expenses is because we still think we need to invest heavily in terms of repositioning the company not only as a payment provider but as a provider of financial services as a whole. That will require capital, of course, but on the other hand, I think those investments should yield continued growth on the credit and banking operations as we move ahead. So, again, I think we have two different dynamics. Short term is about hiring salespeople. Longer term, I think it's about this repositioning of the company to offer more bundles.

Thank you. And maybe a follow-up. On these bundles, I guess in the past we have tried to see the payment segment as more linked to the US or any developed market software model, kind of trying to upsell products for a service kind of revenue. But, I don't know, maybe correct me if I'm wrong, but the Brazilian pay point here is working capital and I think credit is the way how you monetize and how you maybe increase loyalty through your client base. Are you looking again into the service model? Has it changed any way the clients require or any specific needs from them you see?

That's a very good question. So, I think we're rolling out a lot of features within our banking that we call workflow tools. So it's basically helping our clients to manage their businesses on their day-to-day operations. But I don't think the goal here is really to monetize those tools through service fees, but rather to have more lifetime value because clients become more stickier. In terms of monetization, The reality is that when we look at the country and the markets, most of the theme is around holding deposits and underwriting credits. What I would only complement that you said, you talked about working capital loans. I think there are one specific part of the credit value proposition. There are plenty of other products within credits. which we have launched and that we are developing. They are still very small, but they can be a lot bigger than they currently are, like overdrafts, like the credit card operation itself, and so on and so forth. So, again, we're not giving up in terms of developing those workflow tools, but in terms of monetization, it's around financial services. All right.

Nope. Pretty complete. Thank you.

Our next question comes from Jamie Friedman.

Hi. Good evening. Thank you for the opportunity. Matthias, in your prepared remarks, you had referenced improving execution, especially on the boarding and the inputs that would go into volume. I was hoping you could elaborate on what some of those execution initiatives may be apropos volume.

Yeah, for sure, Jamie. So I think we have two different dynamics, one related to new onboardings and the other ones related to churn. In terms of new onboardings, it's basically a full review that we did of our offerings and the go-to-market approach of each distribution channel. I think those initiatives have already been implemented and we're starting to see the results. In terms of churn, what I would say is that historically, our focus as a company was heavily skewed towards optimizing the sales engine with a lot less emphasis on deepening engagements and systematically nurturing our existing client base. As we have scaled and the competitive landscape has evolved as well, excellence in terms of retention and client relationship has become pretty important so what we're doing now broadly speaking is basically basically implementing a new company-wide initiative focused on delivering highly customized bundles at a much more granular level so again it's basically about segmentation and personalization of offerings which has become a lot more important now

Okay, perfect. And then a question about credit. So in terms of slide eight, the one that shows the NPL and coverage ratios, and you may have alluded to this or it may be in the footnotes, but can you unpack what you're seeing in terms of credit between the working capital portfolio and the other dimensions of And I apologize if it's in these footnotes. But that would be my question, what you're observing about overall credit performance by product line. Thank you.

So, Jamie, the more mature product, which is the working capital solution, it's converging well towards expected losses, margins, so forth. That said, we've been seeing the possibility to increase margins on that product, and it's something that we're executing on a monthly basis. On the short-dated products, especially on credit cards, you probably notice an uptick on the volumes in the fourth quarter. That said, it's probably one of the products in which we probably have a bigger opportunity in 2026 when compared to 2025. There is still a lot to learn in terms of the credit and the writing of that product and also in other short-term facilities to risk your clients. But it is a focus of the firm for 2026. And then on the longer-dated products, we haven't launched anything yet. It's also something that is within our expectations for 2026, and that should provide a bigger support for the dedicated desk. We currently have a medium term product for the dedicated desk. As you know, the dedicated task is focused on slightly larger clients, not necessarily credit card businesses. And that's a bit of the portfolio that it's slightly more volatile. because of the concentration on the portfolio. And as we scale the three products and launch these additional features for that client base, you should see the portfolio maturing slowly going forward.

Okay. Thank you, Diego. Thank you, Matheus.

There are no more questions at this time. This concludes the question and answer session. I would like to pass the word back to Matheus Scherer for final considerations.

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