1Q24 Earnings Release

May 13, 2024 investors.stone.co

StoneCo Reports First Quarter 2024 Results

Adjusted EBT reaching R$568 million, up 75% year over year, on MSMB TPV growth including PIX P2M

of 24%, resulting in Adjusted Net income of R$450 million, up 90% year over year

George Town, Grand Cayman, May 13, 2024 - StoneCo Ltd. (Nasdaq: STNE, B3: STOC31) ("Stone" or the "Company") today reports its financial results for its first quarter ended March 31, 2024.

Business Overview

1Q24 represented continuous business growth, delivering on our strategic priorities. In financial services, Stone performed well in all client offerings. Starting with payments, we posted strong continued TPV growth (including PIX) with an almost flat sequential growth rate. The quarter highlight was the launch of instant settlement to Ton clients - fulfilling a key request from our micro merchant clients. In banking, we continued to show progress in onboarding new and existing clients to our bundled banking and payments solution, and today, approximately 80% of our payments active client base has our bundled offering. And finally, our credit solution continues to grow according to plan. We maintain our conservative approach but are testing different client profiles to grow while balancing our credit models. We have set up a specialized desk to offer credit to larger clients, which is just getting underway.

Regarding the software business, its performance showed progress. Revenue growth was modest, with verticals software (priority verticals + other verticals) revenues growing two digits purely organic, mitigated by enterprise software - which remained a revenue detractor. Our efficiency efforts continue to increase profitability in the segment. As discussed in our investor day, the strategic focus continues to be cross-selling financial solutions to our priority verticals' clients and evolving on financial services and software bundles. In 2024, we are focusing on retail and gas station verticals - the latter being a highlight in the quarter.

Operating and Financial Highlights for 1Q24

MAIN CONSOLIDATED FINANCIAL METRICS

Table 1: Main Consolidated Financial Metrics

Main Consolidated Financial Metrics (R$mn)

1Q24

4Q23

Δ q/q %

1Q23

Δ y/y %

Total Revenue and Income

3,084.9

3,248.7

(5.0%)

2,711.7

13.8%

Adjusted EBITDA

1,512.0

1,618.3

(6.6%)

1,251.4

20.8%

Adjusted EBITDA margin (%)

49.0%

49.8%

(0.8 p.p.)

46.1%

2.9 p.p.

Adjusted EBT

567.6

638.2

(11.1%)

324.0

75.2%

Adjusted EBT margin (%)

18.4%

19.6%

(1.2 p.p.)

11.9%

6.5 p.p.

Adjusted Net Income

450.4

563.8

(20.1%)

236.6

90.4%

Adjusted Net income margin (%)

14.6%

17.4%

(2.8 p.p.)

8.7%

5.9 p.p.

Adjusted Net Cash

5,139.8

5,053.3

1.7%

3,988.8

28.9%

  • Total Revenue and Income reached R$3,084.9 million in the quarter, growing 13.8% year over year. This was primarily driven by a 16.0% increase in financial services revenues, mainly as a result of active client base growth and higher monetization from clients in our MSMB segment.

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  • Adjusted EBITDA in 1Q24 was R$1,512.0 million, an increase of 20.8% year over year and a decrease of 6.6% quarter over quarter. Adjusted EBITDA Margin decreased sequentially from 49.8% to 49.0%, mainly due to lower seasonal revenues and to the change in our internal accounting methodology related to membership fees, combined with higher selling expenses as percentage of revenues. These effects were partially compensated by lower other operating expenses and administrative expenses as percentage of revenues.
  • Adjusted EBT in 1Q24 was R$567.6 million, up 75.2% year over year, with adjusted EBT margin increasing 6.5 percentage points, to 18.4%. Quarter over quarter, Adjusted EBT was down 11.1% with adjusted EBT margin decreasing 1.2 percentage points. The sequential margin decrease is attributed to the same factors abovementioned for Adjusted EBITDA margin.
  • Adjusted Net Income in 1Q24 was R$450.4 million, 90.4% higher year over year, with adjusted net margin of 14.6%. This compares with R$563.8 million and a margin of 17.4% in 4Q23. The quarter over quarter margin decrease was driven by the same factors that impacted Adjusted EBT margin combined with a more normalized effective tax rate.
  • Adjusted Net Cash position was R$5,139.8 million in 1Q24, increasing 28.9% year over year or 1.7% quarter over quarter. The sequential increase of R$86.5 million was mainly driven by cash generation from our operations with the main outflows being from capex and loans.

OUTLOOK

We continue to believe that StoneCo is uniquely positioned to drive strong return to shareholders. With that in mind and the results posted in the 1Q24, we remain committed to the guidance for 2024 and 2027 provided in our Investor Day held in November 2023.

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MAIN OPERATING METRICS

Table 2: Main Operating Metrics12345678910

Main Operating Metrics

1Q24

4Q23

Δ q/q %

1Q23

Δ y/y %

TOTAL TPV + PIX P2M1 (R$bn)

114.3

121.0

(5.6%)

96.9

17.9%

MSMB TPV + PIX P2M (R$bn)

101.9

106.1

(3.9%)

82.3

23.8%

MSMB TPV (R$bn)

93.4

98.5

(5.1%)

78.9

18.4%

PIX P2M TPV (R$bn)

8.5

7.6

12.1%

3.4

147.7%

Key Accounts TPV

12.3

15.0

(17.8%)

14.6

(15.5%)

Monthly Average TPV MSMB ('000)

8.3

9.2

(10.4%)

9.5

(12.7%)

TPV Overlap2

5.1

5.8

(13.5%)

n.a.

n.a.

Active Payments Client Base ('000)3

3,720.6

3,522.1

5.6%

2,818.1

32.0%

MSMB4

3,676.2

3,471.3

5.9%

2,758.1

33.3%

Key Accounts

51.9

58.3

(11.0%)

67.6

(23.2%)

Net Adds ('000)

198.5

191.2

3.8%

234.0

(15.2%)

MSMB

204.9

192.2

6.6%

231.9

(11.7%)

Key Accounts

(6.4)

(1.0)

566.3%

2.6

n.m

Take Rate

MSMB

2.54%

2.43%

0.11 p.p.

2.39%

0.15 p.p.

Key Accounts

1.29%

1.28%

0.01 p.p.

1.15%

0.14 p.p.

Banking5

MSMB Active Banking Client Base ('000)

2,379.7

2,096.5

13.5%

1,253.0

89.9%

Client Deposits (R$mn)

5,985.0

6,119.5

(2.2%)

3,902.2

53.4%

MSMB Banking ARPAC6

29.3

28.4

3.3%

36.7

(20.1%)

Credit7

Credit Clients8

18,754

10,752

74.4%

36

n.m.

Working Capital Portfolio (R$mn)9

531.7

309.4

71.8%

1.2

n.m.

Disbursements - EOP (R$mn)

648.5

353.6

83.4%

1.2

n.m.

Disbursements - Quarter (R$mn)

294.9

231.7

27.3%

1.2

n.m.

Provision for expected working capital losses (R$mn)

(44.4)

(39.2)

13.4%

n.a.

n.m.

Accumulated provision for expected working capital losses (R$mn)

(106.3)

(61.9)

71.8%

n.a.

n.m.

Loan loss provision/Portfolio

(20.0%)

(20.0%)

0.01 p.p.

n.a.

n.m.

NPL10 15-90 days

2.2%

2.0%

0.24 p.p.

n.a.

n.a.

NPL10 > 90 days

1.5%

0.3%

1.17 p.p.

n.a.

n.a.

  • Consolidated TPV including PIX P2M transactions grew 17.9% year over year to R$114.3 billion in 1Q24, mostly attributed to growth in the MSMB segment's TPV, with an 18.4% year over year growth in TPV and a 147.7% increase in PIX P2M volumes. These effects were partially offset by a 15.5% decrease in Key Accounts' TPV.
  • Total Payments Active Client base surpassed 3.7 million, representing a total quarterly net addition of 198,500 active clients.

MSMB (Micro and SMB clients)

  1. Includes the volume of MSMB PIX P2M (Person to Merchant), transactions from dynamic POS QR Code and static QR Code from Stone and Ton merchants, unless otherwise noted.
  2. MSMB TPV Overlap in Software installed base within the priority verticals - Gas Station, Retail, Drugstores, Food and horizontal software.
  3. Refers to MSMBs and Key Accounts. Considers clients that have transacted at least once over the preceding 90 days, except for Ton product active clients which consider clients that have transacted once in the preceding 12 months. As from 3Q22, does not consider clients that use only TapTon.
  4. MSMB is composed of TON, Stone and Pagar.me products. Does not include clients that use only TapTon.
  5. Except for Total Accounts Balance, banking metrics do not include clients of Pagar.me and those Ton clients who do not have the full banking solution "Super Conta Ton".
  6. ARPAC means Average Revenue Per Active Client. Banking ARPAC considers banking revenues, such as card interchange fees, floating, insurance and transactional fees, as well as PIX P2M revenues.
  7. Credit metrics refer to our working capital loan only, not considering credit cards, which are still not representative.
  8. Credit clients consider merchants who have an active working capital loan contract with Stone on March 31st, 2024.
  9. The working capital portfolio is gross of provisions for losses, but net of amortizations.
  10. NPL (Non-Performing Loans) is the total outstanding of the contract whenever the clients default on an installment. More information on the total overdue by aging considering only the individual installments can be found in Note 5.4.1 of the Financial Statements.

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  1. MSMB Active Payment Clients reached 3,676,200, representing a 33.3% year over year growth and a net addition of 204,900 in 1Q24. The 6.6% quarter over quarter increase in net additions can predominantly be attributed to the success of our marketing campaigns, as well as lower churn both in Stone and Ton.
  1. MSMB TPV including PIX P2M was R$101.9 billion in 1Q24, increasing 23.8% year over year and decreasing 3.9% quarter over quarter.
  1. MSMB TPV was R$93.4 billion, up 18.4% year over year mainly driven by an increase in our active client base in the segment. Quarter over quarter, MSMB TPV decreased 5.1% as a result of fourth- quarter seasonality.
  1. MSMB PIX P2M TPV was R$8.5 billion in the quarter, increasing 12.1% compared with 4Q23, as the adoption of such means of payment continues to increase.
  1. TPV Overlap is measured by the MSMB TPV overlap between financial services and the priority verticals, being a key metric to measure our cross sell performance. In 1Q24, TPV Overlap was R$5.1 billion, decreasing 13.5% quarter over quarter due to seasonality, given the relevance of the retail vertical which is more impacted by seasonal effects.
  1. MSMB Average Monthly TPV per client decreased 12.7% year over year explained by an increase in the representativeness of Ton in the client mix, boosted by marketing efforts focused on the micro segment in the quarter.
  1. MSMB Take Rate was 2.54%, 11bps higher quarter over quarter and 15bps on a year over year basis. The quarter over quarter variation is mainly attributed to (i) growth in micro and smaller clients, which have higher take rates, (ii) an increase in credit over debit volumes compared with the fourth quarter, and (iii) a higher contribution from our banking and credit solutions.
  1. Banking solutions
  1. Banking active client base in 1Q24 reached 2.4 million active clients, increasing 13.5% quarter over quarter. This result was driven by an (i) increase in our payments active client base and (ii) the continued activation of new banking accounts within our existing Stone payments client base, in line with the execution of our strategy of selling integrated solutions.
  1. Total deposits were R$5,985.0 million in the quarter, increasing 53.4% year over year and decreasing only 2.2% quarter over quarter despite seasonal effects in 4Q23.
  1. Banking ARPAC (average revenue per active client) was R$29.3 per client per month, decreasing 20.1% year over year and up 3.3% on a quarter over quarter basis. The quarter over quarter evolution was mainly attributed to (i) higher floating revenues, despite lower average CDI, as a result of higher average deposits per client due to the successful bundling sales approach and higher client engagement, and (ii) revenues from the processing of PIX QR Code transactions.
  1. Working Capital (Credit) Solutions:
  1. Until March 31, 2024, we disbursed a total of R$648.5 million of loans reaching 18,754 contracts, with a working capital portfolio of R$531.7 million at month-end.Specifically in 1Q24, we disbursed R$294.9 million. Our focus remains on disbursing credit to SMB clients.
  1. Provision for expected working capital losses totaled R$44.4 million in the quarter, compared with R$39.2 million in 4Q23. The ratio of accumulated loan loss provision expenses over the working capital portfolio was 20% in the period.

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  1. In the quarter, NPL 15-90 days was 2.2% and NPLover 90 days was 1.5%.

Income Statement

Table 3: Statement of Profit or Loss (IFRS, as Reported) 11

Statement of Profit or Loss (R$mn)

1Q24

% Rev.

4Q23

% Rev.

Δ q/q %

1Q23

% Rev.

Δ y/y%

Net revenue from transaction activities and other services

749.8

24.3%

868.1

26.7%

(13.6%)

733.1

27.0%

2.3%

Net revenue from subscription services and equipment rental

456.7

14.8%

459.1

14.1%

(0.5%)

445.1

16.4%

2.6%

Financial income

1,741.1

56.4%

1,770.8

54.5%

(1.7%)

1,375.0

50.7%

26.6%

Other financial income

137.3

4.4%

150.7

4.6%

(8.9%)

158.4

5.8%

(13.4%)

Total revenue and income

3,084.9

100.0%

3,248.7

100.0%

(5.0%)

2,711.7

100.0%

13.8%

Cost of services

(809.9)

(26.3%)

(802.7)

(24.7%)

0.9%

(721.3)

(26.6%)

12.3%

Provision for expected working capital losses

11

(44.4)

(1.4%)

(39.2)

(1.2%)

13.4%

0.0

0.0%

n.a.

Administrative expenses

(257.0)

(8.3%)

(308.6)

(9.5%)

(16.7%)

(298.0)

(11.0%)

(13.8%)

Selling expenses

(529.7)

(17.2%)

(454.0)

(14.0%)

16.7%

(389.9)

(14.4%)

35.8%

Financial expenses, net

(896.5)

(29.1%)

(943.1)

(29.0%)

(4.9%)

(923.6)

(34.1%)

(2.9%)

Mark-to-market on equity securities designated at FVPL

0.0

0.0%

0.0

0.0%

n.a.

30.6

1.1%

(100.0%)

Other income (expenses), net

(108.1)

(3.5%)

(0.3)

(0.0%)

31130.1%

(101.5)

(3.7%)

6.5%

Loss on investment in associates

0.3

0.0%

(1.7)

(0.1%)

n.m.

(1.0)

(0.0%)

n.m.

Profit (loss) before income taxes

484.0

15.7%

738.2

22.7%

(34.4%)

306.8

11.3%

57.8%

Income tax and social contribution

(110.4)

(3.6%)

(82.0)

(2.5%)

34.6%

(81.1)

(3.0%)

36.1%

Net income (loss) for the period

373.6

12.1%

656.2

20.2%

(43.1%)

225.7

8.3%

65.5%

Total Revenue and Income

Net Revenue from Transaction Activities and Other Services

Net Revenue from Transaction Activities and Other Services was R$749.8 million in 1Q24, a 2.3% year-over- year growth. This increase can be primarily attributed to a 17.9% year over year consolidated TPV growth including Pix. These effects were partially offset by a change in our internal accounting methodology in membership fees, which from this quarter onwards will be deferred through the expected lifetime of the client, and were before entirely recognized at the time it was acquired. In 1Q24, considering our new internal accounting methodology, we recognized R$10.3 million of membership fees in our transaction activities and other services revenue. Considering our previous methodology, membership fees would have been R$79.0 million. Revenues from TAG, our registry business, contributed with R$9.0 million to our transaction activities and other services revenue in the quarter, compared with R$19.2 million in 1Q2312.

For more details about our new internal accounting methodology for membership fee revenues, refer to our Press Release announced on April 16th, 2024.

Net Revenue from Subscription Services and Equipment Rental

Net Revenue from Subscription Services and Equipment Rental increased 2.6% year over year to R$456.7 million. This can be primarily attributed to (i) higher software revenues in the period, being partially offset by

  1. lower revenues from our non-allocated business segment, due to the divestment of CreditInfo in December 2023 and PinPag in February 2024. The slight decrease quarter over quarter, can be attributed to item (ii) abovementioned for the year over year comparison.
  1. In 2Q23, credit revenues were recognized net of provision for expected credit losses in Financial Income. From 3Q23 onwards, provision for expected losses is allocated in Cost of services.
  2. Revenues from TAG were adjusted to exclude the effect from revenues generated within the group. This does not have any impact on reported total revenue and income for the company.

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Financial Income

Financial Income in 1Q24 was R$1,741.1 million, up 26.6% year over year, explained by higher (i) prepaid volumes, (ii) credit revenue and (iii) floating revenue from our banking solution.

Other Financial Income

Other Financial Income was R$137.3 million in 1Q24 compared with R$158.4 million in 1Q23 mainly due to a reduction in the base rate in Brazil in the period, combined with a lower average cash balance. On a quarter over quarter basis, Other Financial Income decreased 8.9% due to the same factors aforementioned for the year over year comparison.

Costs and Expenses

Cost of Services

Cost of Services were R$809.9 million in 1Q24, up 12.3% year over year. This increase is mainly attributed to (i) provisions for loan losses from our new credit product, which totaled R$44.4 million in our cost of services in the quarter and were null in 1Q23; (ii) higher logistics costs; and (iii) higher D&A as we continue to expand our client base. Excluding provisions from loan losses, cost of services would have increased 6.1% year over year. As a percentage of revenues, Cost of Services decreased slightly from 26.6% in 1Q23 to 26.3% in 1Q24.

Compared with 4Q23, Cost of Services was flattish. Provisions for loan losses contributed with R$44.4 million to our cost of services in the quarter, compared with R$39.2 million in 4Q23. As a percentage of revenues, Cost of Services increased from 24.7% in 4Q23 to 26.3% in 1Q24.

Administrative Expenses

Administrative Expenses were R$257.0 million, down 13.8% year over year. This decrease is mostly explained by lower third party services, combined with lower amortization from fair value adjustments. As a percentage of Total Revenue and Income, Administrative Expenses decreased from 11.0% in 1Q23 to 8.3% in 1Q24.

Administrative Expenses in 1Q24 were 16.7% lower than in 4Q23, primarily due to seasonally higher personnel expenses in the fourth quarter, which no longer repeated this quarter and lower third party services. As a percentage of revenues, Administrative Expenses decreased from 9.5% in 4Q23 to 8.3% in 1Q24.

Selling Expenses

Selling Expenses were R$529.7 million in the quarter, a 35.8% increase year over year, primarily attributed to higher investments in (i) our salespeople, (ii) marketing and (iii) partner commissions. As a percentage of revenues, Selling Expenses increased from 14.4% in 1Q23 to 17.2% in 1Q24.

Compared with 4Q23, Selling Expenses increased by 16.7%, due to higher marketing expenses, as a result of the sponsorship of a reality television show. As a percentage of revenues, Selling Expenses increased sequentially from 14.0% in 4Q23 to 17.2% in 1Q24.

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Financial Expenses, Net

Financial Expenses, Net were R$896.5 million in the quarter, 2.9% lower compared with 1Q23 mainly due to (i) a reduction in average CDI, from 13.65% in 1Q23 to 11.29% in 1Q24, combined with (ii) our decision to reinvest our cash generation towards the funding of our operation. These effects were partially offset by higher prepaid volumes in the period. As a percentage of revenues, Financial Expenses, Net was 29.1% in 1Q24 compared with 34.1% in 1Q23.

Compared with 4Q23, Financial Expenses, Net were 4.9% lower. This decrease was mainly driven by item (i) from the aforementioned year over year comparison, being partially offset by higher funding needs in our prepayment and credit operations.

Mark-to-market on equity securities designated at FVPL

In 1Q23, we divested our stake in Banco Inter. As a result, from 2Q23 onwards, our profit & loss statement no longer includes mark-to-market gains or losses associated with this investment. This compares with a R$30.6 million profit in 1Q23.

Other Income (Expenses), Net

Other Expenses, Net were R$108.1 million in 1Q24, representing an increase of R$6.6 million year over year. This increase is mainly related to (i) the net effect from the PinPag divestment in the amount of R$52.9 million, partially offset by (ii) lower share based compensation expenses, which includes a non-recurring positive impact of R$40.5 million from the net effect of the cancellation and new grants of incentive plans.

Compared with 4Q23, Other Expenses, net were R$107.7 million higher mostly attributed to the reversal of earnout provisions in the previous quarter, which did not repeat in 1Q24.

Income Tax and Social Contribution

During 1Q24, the Company recognized income tax and social contribution expenses of R$110.4 million over a profit before income taxes of R$484.0 million, implying an effective tax rate of 22.8%. The difference to the statutory rate is mainly explained by (i) gains from subsidiaries abroad subject to different statutory tax rates and (ii) benefits from "Lei do Bem" (Law 11,196/05). These effects were partially offset by unutilized tax loss carryforwards generated in the sale of PinPag.

Net Income (Loss) and EPS

Net Income in 1Q24 was R$373.6 million compared with R$225.7 million in 1Q23, mostly as a result of higher total revenue and income combined with lower administrative expenses. These effects were partially offset by higher selling expenses and cost of services. IFRS basic EPS was R$1.21 per share in 1Q24, compared with R$0.72 in the prior-year period.

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Adjustments to Net Income by P&L Line

Table 4: Adjustments to Net Income by P&L Line

Adjustments to Net Income by P&L line (R$mn)

1Q24

% Rev.

4Q23

% Rev.

Δ q/q %

1Q23

% Rev.

Δ y/y%

Cost of services

0.0

0.0%

0.0

0.0%

n.a.

0.0

0.0%

n.a.

Administrative expenses

25.0

0.8%

31.3

1.0%

(20.2%)

35.6

1.3%

(29.9%)

Selling expenses

0.0

0.0%

0.0

0.0%

n.a.

0.0

0.0%

n.a.

Financial expenses, net

7.3

0.2%

2.0

0.1%

256.8%

14.8

0.5%

(50.5%)

Mark-to-market on equity securities designated at FVPL

0.0

0.0%

0.0

0.0%

n.a.

(30.6)

(1.1%)

(100.0%)

Other operating income (expense), net

51.3

1.7%

(133.3)

(4.1%)

n.m

(2.6)

(0.1%)

n.m

Gain (loss) on investment in associates

0.0

0.0%

0.0

0.0%

n.a.

0.0

0.0%

n.a.

Profit (loss) before income taxes

83.6

2.7%

(100.0)

(3.1%)

n.m

17.2

0.6%

385.9%

Income tax and social contribution

(6.8)

(0.2%)

7.6

0.2%

n.m

(6.3)

(0.2%)

7.5%

Net income (loss) for the period

76.8

2.5%

(92.4)

(2.8%)

n.m

10.9

0.4%

604.4%

Below we comment the adjustments in our P&L in the quarter:

  • Administrative Expenses include R$25.0 million related to amortization of fair value adjustments on acquisitions, mostly related to the Linx and other software companies' acquisitions.
  • Financial Expenses include R$7.3 million of expenses related to effects from (i) earn out interests on business combinations, and (ii) financial expenses from fair value adjustments on acquisitions.
  • Other Expenses, net include R$51.3 million from fair value of call options related to acquisitions, earn- out interests, divestment of assets and fair value adjustments on acquisitions.
  • Income Tax and Social Contribution includes -R$6.8 million related to taxes from the adjusted items. Adjusting for those effects, our Income Tax and Social Contribution was R$117.2 million with an effective tax rate in 1Q24 of 20.6%.

Considering the adjustments to net income abovementioned, our Adjusted Profit and Loss Statement is presented below:

Table 5: Statement of Profit or Loss (Adjusted)

Adjusted Statement of Profit or Loss (R$mn)

1Q24

% Rev.

4Q23

% Rev.

Δ q/q %

1Q23

% Rev.

Δ y/y%

Net revenue from transaction activities and other services

749.8

24.3%

868.1

26.7%

(13.6%)

733.1

27.0%

2.3%

Net revenue from subscription services and equipment rental

456.7

14.8%

459.1

14.1%

(0.5%)

445.1

16.4%

2.6%

Financial income

1,741.1

56.4%

1,770.8

54.5%

(1.7%)

1,375.0

50.7%

26.6%

Other financial income

137.3

4.4%

150.7

4.6%

(8.9%)

158.4

5.8%

(13.4%)

Total revenue and income

3,084.9

100.0%

3,248.7

100.0%

(5.0%)

2,711.7

100.0%

13.8%

Cost of services

(809.9)

(26.3%)

(802.7)

(24.7%)

0.9%

(721.3)

(26.6%)

12.3%

Provision for expected working capital losses 11

(44.4)

(1.4%)

(39.2)

(1.2%)

13.4%

0.0%

0.0%

n.a.

Administrative expenses

(232.0)

(7.5%)

(277.3)

(8.5%)

(16.3%)

(262.5)

(9.7%)

(11.6%)

Selling expenses

(529.7)

(17.2%)

(454.0)

(14.0%)

16.7%

(389.9)

(14.4%)

35.8%

Financial expenses, net

(889.2)

(28.8%)

(941.1)

(29.0%)

(5.5%)

(908.9)

(33.5%)

(2.2%)

Other income (expenses), net

(56.7)

(1.8%)

(133.7)

(4.1%)

(57.6%)

(104.1)

(3.8%)

(45.5%)

Loss on investment in associates

0.3

0.0%

(1.7)

(0.1%)

n.m

(1.0)

(0.0%)

n.m

Adj. Profit before income taxes

567.6

18.4%

638.2

19.6%

(11.1%)

324.0

11.9%

75.2%

Income tax and social contribution

(117.2)

(3.8%)

(74.4)

(2.3%)

57.5%

(87.4)

(3.2%)

34.1%

Adjusted Net Income

450.4

14.6%

563.8

17.4%

(20.1%)

236.6

8.7%

90.4%

For the P&L lines that are adjusted, the variations can be explained by the same factors as in the IFRS statement apart from the ones mentioned below.

Adjusted Administrative expenses decreased 11.6% year over year, mainly due to lower third party services and travel expenses. The quarter over quarter variation can be explained by the same factors as in the IFRS statement.

Adjusted other expenses, net decreased 45.5% year over year. This decrease can be mainly explained by lower share based compensation expenses, which include a non-recurring positive net impact of R$40.0 million from the net effect of the cancellation and new grants of incentive plans. Please refer to note 18.1.4 from our

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Financial Statements for more details. Quarter over quarter, other expenses, net decreased 57.6% as a result of the same factor aforementioned for the year over year comparison, combined with lower contingencies.

Adjusted Net Income (Loss) and EPS

Table 6: Adjusted Net Income Reconciliation

Net Income Bridge (R$mn)

1Q24

% Rev.

4Q23

% Rev.

Δ q/q%

1Q23

% Rev.

Δ y/y%

Net income (loss) for the period

373.6

12.1%

656.2

20.2%

(43.1%)

225.7

8.3%

65.5%

Amortization of fair value adjustment (a)

12.3

0.4%

(15.8)

(0.5%)

n.m

33.7

1.2%

(63.5%)

Mark-to-market from the investment in Banco Inter (b)

0.0

0.0%

0.0

0.0%

n.a.

(30.6)

(1.1%)

(100.0%)

Other expenses (c)

71.3

2.3%

(84.2)

(2.6%)

n.m

14.1

0.5%

405.6%

Tax effect on adjustments

(6.8)

(0.2%)

7.6

0.2%

n.m

(6.3)

(0.2%)

7.4%

Adjusted net income (as reported)

450.4

14.6%

563.8

17.4%

(20.1%)

236.6

8.7%

90.4%

IFRS basic EPS (R$) (d)

1.21

n.a.

2.10

n.a.

(42.4%)

0.72

n.a.

66.5%

Adjusted diluted EPS (R$) (e)

1.42

n.a.

1.76

n.a.

(18.9%)

0.75

n.a.

89.1%

Basic Number of shares

309.1

n.a.

310.7

n.a.

(0.5%)

312.7

n.a.

(1.2%)

Diluted Number of shares

316.1

n.a.

318.4

n.a.

(0.7%)

316.1

n.a.

(0.0%)

  1. Related to acquisitions. Consists of expenses resulting from the changes of the fair value adjustments as a result of the application of the acquisition method.
  2. In 1Q23, we have sold our stake in Banco Inter.
  3. Consists of the fair value adjustment related to associates call option, earn-out and earn-out interests related to acquisitions, reversal of litigation at Linx and divestment of assets.
  4. Calculated as Net income attributable to owners of the parent (Net Income reduced by Net Income attributable to Non-Controlling interest) divided by basic number of shares. For more details on calculation, please refer to Note 14 of our Consolidated Financial Statements, March 31, 2024.
  5. Calculated as Adjusted Net income attributable to owners of the parent (Adjusted Net Income reduced by Adjusted Net Income attributable to Non-Controlling interest) divided by diluted number of shares.

Adjusted Net Income was R$450.4 million in 1Q24 with a margin of 14.6%, compared with R$236.6 million reported in 1Q23 and a margin of 8.7%. This increase in Adjusted Net Income margin is mainly explained by (i) a 21.8% year over year growth in total revenue and income net of adjusted financial expenses, combined with

  1. lower adjusted other expenses, net (down 45.5% year over year), (iii) lower adjusted administrative expenses (down 11.6% year over year), and (iv) being partially offset by higher selling expenses (up 35.8% year over year).

Adjusted Net Income was 20.1% lower quarter over quarter, with Adjusted Net Margin decreasing 2.8 percentage points from 17.4% in 4Q23 to 14.6% in 1Q24, mainly due to (i) lower seasonal revenues and due to the change in our internal accounting methodology related to membership fees, combined with (ii) higher selling expenses as percentage of revenues and (iii) a more normalized effective tax rate. These effects were partially compensated by items (ii) and (iii) from the aforementioned explanation from the year over year comparison.

Adjusted diluted EPS was R$1.42 per share in 1Q24 compared with R$0.75 per share in 1Q23 and R$1.76 per share in 4Q23, on a comparable basis.

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StoneCo Ltd. published this content on 13 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 May 2024 20:07:41 UTC.