StoneCo Ltd. (STNE) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The company shows strong financial metrics, with significant EPS growth and upward revisions in net income guidance. Despite some concerns about TPV deceleration and NPL growth, management's focus on client value and profitability is reassuring. The strategic divestitures and shareholder returns through buybacks further bolster investor confidence. The market cap suggests moderate stock reaction, aligning with a positive outlook.
Key Financial Performance
Adjusted Gross Profit Grew 15.2% year-to-date despite the ongoing share buyback program, which has had some impact on this metric.
Adjusted Basic EPS Reached BRL 6.9 per share, up 37% year-to-date, supported by consistent performance and share buyback program.
Capital Returned to Shareholders BRL 2.8 billion returned in the last 12 months, about 10% yield for the period, reflecting disciplined capital allocation strategy.
Adjusted Net Income Grew 18% year-over-year with a 13% increase in continuing operations, driven by pricing policy adjustments, strategic use of client deposits, and a lower effective tax rate. Partially offset by evenly distributed marketing expenses.
Adjusted Basic EPS (Quarterly) Reached BRL 2.57 per share, growing 31% year-over-year, supported by net income growth and share buyback program.
Return on Equity (ROE) Consolidated ROE expanded 8 percentage points year-over-year to 24%, while Financial Services ROE from continuing operations increased 4 percentage points to 33%.
Total Revenue and Income Grew 16% year-over-year, reaching BRL 3.6 billion, driven by solid execution in core business despite lower floating revenues due to the use of client deposits as a funding alternative.
Adjusted Gross Profit (Quarterly) BRL 1.6 billion, growing 12% year-over-year, aligned with TPV growth but partially offset by increased financial expenses due to higher CDI rates.
Active Client Base (Payments Business for MSMBs) Grew 17% year-over-year to 4.7 million clients, with 38% classified as heavy users leveraging more than 3 solutions.
MSMB TPV Grew 11% year-over-year to BRL 126 billion, driven by 49% growth in PIX QR code volumes and 6% growth in card volumes. Growth decelerated due to challenging macro environment and softer same-store sales.
Active Client Base (Banking Operation) Increased 22% year-over-year to 3.5 million clients, reflecting strong client acquisition and evolution of payments and banking bundle offers.
Client Deposits Grew 32% year-over-year and 2% quarter-over-quarter to BRL 9 billion, with a shift towards more time deposits (84% of total deposits).
Total Credit Portfolio Grew 27% sequentially to BRL 2.3 billion, with BRL 2.1 billion in merchant solutions and BRL 200 million in credit cards. NPLs 15-90 days at 3.12% and NPLs over 90 days at 5.03%.
Cost of Services Increased 12% year-over-year, decreasing 90 basis points as a percentage of revenues due to efficiency gains and lower transaction costs.
Administrative Expenses Increased 7% year-over-year, reducing 50 basis points as a percentage of revenues due to operating leverage.
Selling Expenses Increased 21% year-over-year, increasing 50 basis points relative to revenues due to evenly distributed marketing spend.
Financial Expenses Increased 28% year-over-year, representing a 280 basis points increase as a percentage of revenues, driven by higher CDI rates and partially mitigated by client deposits as a funding source.
Effective Tax Rate 15.3% in the quarter, down from 18.6% in the third quarter of '24, due to intragroup interest on equity operation and higher benefits from Lei do Bem.
Adjusted Net Cash Position Ended the quarter at BRL 3.5 billion, decreasing BRL 140 million sequentially due to BRL 465 million in share buybacks. Excluding buybacks, it would have increased by BRL 325 million.
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Operating Highlights
Active client base growth: Active client base grew 17% year-over-year, reaching 4.7 million clients, with 38% classified as heavy users leveraging more than 3 solutions.
PIX QR code volumes: PIX QR code volumes grew 49% year-over-year, outpacing card TPV and capturing share from debit transactions.
Credit portfolio growth: Total credit portfolio grew 27% sequentially, reaching BRL 2.3 billion, with BRL 2.1 billion in merchant solutions and BRL 200 million in credit cards.
Banking client base expansion: Active banking client base increased 22% year-over-year, reaching 3.5 million clients.
Client deposits growth: Client deposits grew 32% year-over-year, reaching BRL 9 billion, with increased adoption of investment solutions.
Adjusted net income growth: Adjusted net income grew 18% year-over-year, supported by pricing policy adjustments, efficient use of client deposits, and lower tax rates.
Cost efficiency improvements: Cost of services increased 12% year-over-year but decreased as a percentage of revenues due to efficiency gains in logistics, technology, and lower transaction costs.
Capital allocation strategy: Returned BRL 2.8 billion to shareholders in the last 12 months through share buybacks, representing a 10% yield.
Risk management in credit operations: Implemented pricing changes and maintained disciplined risk management, with NPLs over 90 days at 5.03% and a coverage ratio of 265%.
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Risk or Challenges
Challenging macro environment: The company is operating in a challenging macroeconomic environment, which has led to softer same-store sales among clients and a slight deceleration in yearly growth.
Higher interest rates: Higher interest rates in the country have impacted financial expenses and required adjustments to pricing policies to offset the effects.
Increased financial expenses: Financial expenses increased 28% year-over-year, driven by higher average CDI rates, which negatively impacted the company's cost structure.
Marketing expense distribution: The decision to more evenly distribute marketing expenses throughout the year negatively affected year-over-year comparisons.
NPLs (Non-Performing Loans) increase: NPLs over 90 days rose to 5.03%, reflecting the natural maturation of the credit portfolio, while NPLs 15 to 90 days increased due to specific client payment delays.
Loan loss provisions: Higher loan loss provisions were recorded, reflecting the company's response to a weaker macroeconomic outlook.
Floating revenue reduction: The use of client deposits as a funding alternative reduced floating revenues, although it generated savings in financial expenses.
Deposit base seasonality: A slight decline in the deposit base relative to MSMB TPV was observed, driven by daily seasonality and clients' cash-out obligations.
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Guidance & Outlook
Revenue Growth: Total revenue and income are projected to grow, supported by solid execution in the core business. However, growth may be tempered by a challenging macroeconomic environment and softer same-store sales among clients.
Market Trends: PIX QR code volumes are expected to continue outpacing card TPV, capturing share from debit transactions. However, the macroeconomic environment and client sales trends are being monitored closely.
Banking Operations: Client deposits are expected to grow, with increased adoption of investment solutions and higher engagement with banking features. The composition of deposits is shifting slightly towards more time deposits.
Credit Portfolio: The credit portfolio is expected to grow sustainably, with disciplined risk management and pricing adjustments to balance risk and return. NPLs are expected to remain within manageable levels, supported by conservative coverage ratios.
Capital Allocation: The company plans to continue its disciplined capital allocation strategy, focusing on share buybacks and returning excess capital to shareholders when immediate value-accretive investment opportunities are unavailable.
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Shareholder Return Plan
Dividend Program: The company has expressed a commitment to return excess capital to shareholders through dividends when there are no immediate value-accretive investment opportunities. However, no specific dividend payouts or schedules were mentioned in the transcript.
Share Buyback Program: The company has an ongoing share buyback program. Over the last 12 months, BRL 2.8 billion has been returned to shareholders, representing about a 10% yield for the period. By the end of October, 74% of the BRL 3 billion in excess capital identified last year had already been returned to investors through buybacks.
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Key Q&A
Q:Are you at the all-time high level of spreads in the prepayment business post pricing adjustments? How sustainable is this level given the competitive scenario and potential cycle changes?
A:The company does not believe they are at all-time high spreads. Gross profit yield increased to 1.26% in Q3 '25 from 1.21% in early '24, mainly due to increased penetration of banking and credit, not prepayment pricing. Spreads are considered healthy, and the company successfully passed through interest rate increases.
Q:What are the main drivers for earnings growth apart from policy rates?
A:Earnings growth drivers include the maturing credit portfolio, which will contribute more to the P&L in 2026, and operational expense (OpEx) management to boost growth in a weaker macro environment.
Q:How is the competitive environment in the payments TPV and pricing trends?
A:The competitive environment is stable, with no players pursuing growth at any cost. TPV growth is decelerating due to industry and macroeconomic factors. The company prioritizes profitability over market share and focuses on enhancing client value propositions and scaling credit. Pricing trends are healthy, but long-term spreads may not retain benefits from interest rate cuts.
Q:What is the progress on the organizational redesign to create a unified brand and customer-centric culture?
A:The company has made significant progress, transitioning from a siloed BU organization to a fully functional one. This shift supports a bundled strategy and client-focused offerings. Some adjustments are still needed, but the company is on the right track.
Q:What are the expectations for cost of risk, NPL, and coverage ratio for the credit portfolio?
A:Cost of risk is expected to remain in the mid-teens. NPLs are around 5% but may grow to high single digits as the portfolio matures. The company focuses on maximizing client relationship NPV rather than targeting specific cost of risk or NPL levels.
Q:Why are transaction revenues declining while financial income is growing?
A:The decline in transaction revenues and growth in financial income is due to revenue rebalancing between the two lines. Clients pay a single fee that includes both prepayment and transactional revenues, making it best to view these lines combined.
Q:What explains the changes in credit stages, particularly Stage 2 and Stage 3?
A:Stage 3 increases are due to balances overdue over 90 days. Stage 2 changes are influenced by portfolio maturation and external credit restrictions affecting clients, causing volatility between stages.
Q:What is the impact of increasing credit pricing, and how sensitive are clients to these adjustments?
A:Credit pricing increases are due to maturing pricing processes rather than macroeconomic factors. Clients have shown low sensitivity to these adjustments, and gradual increases are being tested to optimize pricing.
Q:What are the efficiency gains in logistics and transaction technology costs, and are they sustainable?
A:Efficiency gains in logistics and transaction technology costs are driven by AI adoption and scale benefits. Some cost reductions are one-off, such as lower provisions for acquiring losses, while others, like amortization of technological projects, will continue.
Q:What caused the asset quality issue mentioned in the opening remarks?
A:A specific client in the specialized desk delayed payments, impacting NPL 15-90 days by 40 basis points. The issue, amounting to BRL 2-4 million, has been resolved.
Q:What is the expected deceleration in TPV growth for the MSMB segment?
A:TPV growth is expected to decelerate slightly above industry growth, driven by macroeconomic impacts and industry trends. The company anticipates high single-digit to low double-digit growth for the industry next year.
Q:How sensitive is the company's funding cost to changes in average interest rates?
A:For every 100 basis point reduction in average interest rates, pretax earnings increase by BRL 200-250 million. The company adjusts pricing to clients with a lag but does not expect to retain long-term benefits from rate cuts.
Q:What is the outlook for gross profit growth given slower TPV growth and stable rates?
A:Gross profit yield may face negative seasonality in Q4 due to a higher mix of debit and PIX transactions. Banking and credit growth will contribute more significantly to gross profit in 2026 as the credit portfolio matures.
Q:Will the company reinstate its 2027 guidance, and what is the expected effective tax rate?
A:The company plans to review its 2027 guidance after year-end, adjusting for continuing operations. The effective tax rate is expected to land in the mid- to high-teens over time, depending on proposed tax changes.
Q:Review of Unclear Management Responses
A:Management avoided providing specific figures for TPV deceleration, stating it is hard to pinpoint exact numbers. They also did not provide precise targets for cost of risk or NPL levels, focusing instead on maximizing client relationship NPV. Additionally, they refrained from giving a detailed outlook on the effective tax rate, citing uncertainty due to proposed tax changes.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
BRL TPV
BRL combination
BRL period
BRL relates
BRL share
BRL yield
Consolidated ROE
Instructions today
Lia Chief
Lia number
MSMBs BRL
MSMBs client
Mateus detail
NPLs day
Officer evening
QR code
ROE Consolidated
ROE percentage
Services ROE
Slide income
TPV composition
acceleration portfolio
acquisition evolution
adjustment coverage
adjustment pricing
adoption investment
alignment risk
allocation approach
allocation progress
alternative revenue
amount investor
appetite statement
balance risk
banking operation
buyback program
client deposit
deposit base
headwind
month BRL
percentage point
ratio level
risk provision
STNE Transcript
StoneCo Ltd. (STNE) Q1 2026 Earnings Call Transcript
Unknown5-19
The earnings call summary presents a mixed picture. Financial performance shows improvements in some areas but challenges in others, such as increased costs and credit risks. The Q&A reveals management's confidence in addressing these issues, yet lacks clarity on certain points, particularly regarding ARPAC and credit model performance. The market cap suggests moderate sensitivity to news, and with no strong catalysts for significant price movement, a neutral sentiment is appropriate.
StoneCo Ltd. (STNE) Q4 2025 Earnings Call Transcript
Positive3-3
The earnings call reveals strong financial performance with a 15% revenue increase and 20% net income growth. Gross margin improved by 5%, and free cash flow rose by 25%. Despite leadership transition risks, the solid financial results and strategic focus on core business growth suggest a positive stock price movement. However, the absence of shareholder return plans and potential challenges with the new CEO keep the rating at 'Positive' rather than 'Strong positive.'
StoneCo Ltd. (STNE) Q3 2025 Earnings Call Transcript
Positive11-7
The company shows strong financial metrics, with significant EPS growth and upward revisions in net income guidance. Despite some concerns about TPV deceleration and NPL growth, management's focus on client value and profitability is reassuring. The strategic divestitures and shareholder returns through buybacks further bolster investor confidence. The market cap suggests moderate stock reaction, aligning with a positive outlook.
StoneCo Ltd. (STNE) Q2 2025 Earnings Call Transcript
Positive8-8
The earnings call summary highlights strong financial performance with significant growth in gross profit and EPS, a new share repurchase program, and a solid credit portfolio. The Q&A section shows management's confidence in achieving long-term targets despite macroeconomic challenges. The upward revision of net income guidance and sustainable financial income growth further support a positive sentiment. The market cap indicates a moderate reaction, leading to a prediction of a 2% to 8% stock price increase over the next two weeks.
STNE Report
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