Q1 2020 Earnings Call

Good afternoon, ladies and gentlemen, thank you for standing by welcome to the stone Cold first quarter 2020, <unk> earnings Conference call.

By now everyone should have access to our earnings release. The company also puts and takes you to go along with its call all material can be found at www Dot dot dot coal on the Investor Relations section.

Throughout this conference call the company will be presenting non.

Financial information.

Adjusted net income and adjusted free cash flow. These are important financial measures for the companies that are not financial measures as defined by I am sorry.

Reconciliation of the company's non <unk> or <unk> financial information to the <unk>.

Annual information appear in today's press release.

Finally, before we began our formal remarks I would like to remind everyone that today's discussion might include forward looking statement.

These forward looking statements are not guarantees of future performance and therefore, you should not put undue reliance on.

These statements are subject to numerous risks and uncertainties that could cause actual results could differ materially from the company's expectation. Please refer to forward looking statements disclosure in the Companys earnings press release.

In addition, many of the risks regarding the business are disclosed in the company's form 20-F filed with the Securities and Exchange Commission, which is available at Www Dot FCC Dot Gov I would now like to turn the conference over to your host Rafael marketing Investor Relations Executive Officer.

Dallas. Please proceed with even the everyone. Thank you for participating on the call and hope all of you were safe.

We have today in our coal geography, our CEO <unk> Chief strategy officer in Marcellus <unk> CFO.

On this call will present, our operational and financial results for the first quarter 2020, as well as 10 updates regarding operating metrics a bar business in the beginning of the second quarter.

Pass it over at the job with so he can share with you the main highlights Oh, Barbara <unk> geography.

<unk> and good evening, everyone. Thank you for joining us today.

As we are facing unprecedented find just be outbreak of coffee 19 globally.

That all of you your loved ones are safe and healthy.

Before we start.

I would like to highlight that we continue to be extremely confident in our business as it remain financially very strong and continues to grow double digits year over year Weve healthy profitability.

We believe that's cool and strategic steps, we've taken the right directions to generate long term bad.

In mid March when the severity of the core we'd like to crisis became clear.

We actually is to protect the health and safety approaching an appliance.

Help smbs mesquite this crisis and continue come due to their business, but providing financial release in additional tools to help them sell online.

Tribute to our community by funding public health initiatives and developing tools to support local businesses.

And keep our business financially strong.

Operational efficiency and allocating kept to widen.

Despite some short term impact the north BNL, we believe we did the right thing support or clients and community in tough times, which is consistent with <unk> culture and belief in the news stream for our relationship with them over the long term.

We're speaking these actions doing could be 19, Wyoming, dania or management decisions to make sure that this crisis real not compromised investments to support their future growth and long term strategy.

No moving to the presentation I would like to start on slide three by provide you some highlighting four main area.

Growth levels and financial position.

Measures, we've taken to help our planes and community.

Important advancements in our financial platform in softer strategy and finally somewhat the dates on the second quarter trends.

The first quarter had to Peter faces before the crisis, which hasn't despite into Brazil over the course of March.

Second phase after the outbreak if its worst they in the second half of March which social decency installed reluctant policy has significantly impacted retail activity and consequently, our transactional volumes followed by a gradual but you can cause recovery in the mobile APRU and me.

Before the outbreak we're investing heavily in arbitration and our investments where you would be great results, which an acceleration in CPV grow.

TV in the first quarter two March 15 was growing 52% year over year higher than fourth quarter levels with the first couple of March accelerating to 63% rule.

In the worst moment of economic activity, which happened over the course of March we see our shop. This generational for volumes, we put 36% dropped in the second half of March compared to the first half of the most in the decline of 4% compared to last year.

Even though the situation has caused many of our clients to interrupt their operation.

Either partially a completely as I said before we already see a gradual recovery with PPV APRU growing 9% year over year and up to me 23rd These has improved to 22% year over year Grill.

Overall, the first water, we had a TPV growth of 42% year over year and take rates remain stable at one point, 81%, even weve approximately six basis points of impacts related to cope with 19.

Impact from could be in our take rate I related to effect for a conservative approach to our credit product provision, which we will talk in more detail and to find they should really provided to our clients in the form of temporary subscription exemption and lower prepayment pricing.

Regarding additional new client.

Right the pace of growth being also significantly impacted in March by the locked on dynamic we do have a very healthy client base growth in the quarter, adding over 50000 clients, excluding micro merchants, reaching our client base of more than 530000.

It's important to note that thrown out won't report separately the number off quite that's both in.

Our brand of micro merchant.

Although we ended up the quarter with 50000. Net addition of quite bright could be outbreak. We were on track to grow net adds quarter over quarter as we have said before.

Our adjusted net income reached 162 million or re ice we have been adjusted net margin of 22.6%.

This resumed already incorporate approximately 61 million reais <unk>, one off impact associated with covered 90 about which will give you more color during this call.

We will keep reporting our adjusted net income in the same way as previous quarters. So we have not adjusted our results for the one effect mentioned above.

Give you color on one off effect separately as we think this is useful information.

Given the uncertain scenario during the first quarter, we decided to strengthen our balance sheet, which affected for an issue expenses.

Our current liquidity ratio has improved 1.7 in the first quarter, we for cash position, we greedy 43% year over year, you know lead over 20 billion the ice compared to less water reached almost 4 billion Reais <unk> at the end of March.

This has enabled us to maintain our working capital solutions for clients and become a liquidity safe harbor to them.

Unfortunately, we have also made the very tough decision to reduce our workforce by 20% in early may.

We've conducted the difficult process with the same transparency meritocracy and empathy to our team as always.

We not only provides a generous package to those who left but with dedicated a team of human resource to help them find another good job for partnerships with other companies we admire.

We will always street, we scared those who dedicate their lives to the proposal servier appliance with excellent.

No I want to highlight the measures taken to help our clients in our cumulative.

As I said before support your client team and overall commute are among our main priorities.

End of March more than 90% of our team has been working from home.

Also we provided 30 meter be ice financial incentives to our merchants, who needed 100 immediate realizing micro lending Reprioritized, our project pipeline launch and marketing social cornerstones to help clients cellulite.

We created a national campaign in a platform to encourage the public to buy locally and help small and medium businesses.

Became pain called capital account, which means by local in Portuguese reaches over 29 million views on to your too.

We don't eight 8000 test will probably cost burdensome Paul.

Finally, we do need 5 million to be ice to finance the construction of a temporary foster Wheeler giannetto, which is the TD, where stone was founded eight years ago is among the hardest hit locations in Brazil.

Why is supporting your communities in clients during his unprecedented times, we've made significant advancements we far integrated financial platform and the equities the not solutions to merchant.

In this moment of crisis due to social discussing all I'd has become an important lever for business continued to operate.

We were born as an online payments company and we have many years of experience in the corner space in previous companies before even forming stone.

Since the beginning we have developed a complete set of online solutions from between PSPC to process. He in acquiring focused on improving speed of transactions availability coopervision rate as well was providing settlement flexibility to adapt to different digital business models such as marketplaces.

As a result of for continued efforts in the online space, we estimate based on it be data that during the beginning of Corbin 19 outbreak in Brazil. So mid March to end of April approximately 50% off all transaction E Commerce in Brazil went through our platforms either for all on a financially.

<unk> or through our Ignasi gateway in PSP solutions.

Regarding digital banking in April we had a record number of accounts be open with 35000, new accounts in the mob, reaching close to 160000 accounts as we always increasing level of transactional activity for appliance.

Moving to our credit product, we've reached more than 386 million total outstanding balance in the end of April present. Your return on assets of 2.7 per cent per month, even after a conservative increasing provision for what they should cause it impact.

In fact, we are seen or APRU cohorts performed very well, which demonstrates our ability to adapt our credit policy to a new riskier environment.

Talking about our softer initiatives.

Top off the organic growth was presented we've made for new investments to help smbs manage and grow their business.

Im labs elite social media platform for Smbs in Brazil.

Delivery much if would believe read marketplace focus on the small and middle cities.

Before he Healthplan management and electronic Medical Records software company.

And then brought on this when you'd be in Pos softer for foodservice, its which was strong presence in the northeast of Brazil.

These inorganic investments combined it before organic client base growth in softer we make the number of subscribers claims jumped significantly.

We will discuss a little more about those investments later in the presentation.

Given the unprecedented levels of uncertainty societies basin. This time, we decided to exceptionally bring you the latest update on trends in our business and also share our view about the second quarter adjusted pre tax margin.

Regarding transactional volumes are TPV growth in the second quarter until May 23rd was up 15% year over year.

When we double click in May alone.

The 23rd we were up 23% year over year.

Additionally, we were able to improve service levels in the second quarter why working from home.

Two factors are helping our grow one is the strength of our all in businesses, which grew TPV, 42% in April when compared to January levels with strong growth in our online SMB client base.

The second is the geographic diversification offer hubs with two thirds of hub volume being spread TV is outside the 27 state capitals, where 50% of course cases in Brazil are concentrated.

Regarding margin despite the second quarter being the most affected by Cobiz 19, we expect an adjusted pretax margin between 20 and 24% in the quarter already including one off items, such as severance costs related to our workforce reduction and incentives provided to.

Clients among other factors.

So to be clear as we said well keep reporting on numbers the same way as always we all cost and expenses included.

I'll give you color on one off effect in the second quarter separately as we see this is useful information.

Before I pass it over to file I would like to summarize as shown in slide four.

The first quarter, we continue to invest heavily in arbitration, producing strong topline growth and evolving passed to become the partner of choice of Brazil SMB, both in BRCA Martin in online operations.

When Corbin 19 became a reality in Brazil, we took decisive actions to protect or a team claims and community.

We have increased operational efficiency, where we've done a process. This infrastructure rapidly reinforced our balance sheet and continue to widely allocate capital in our strategic priority.

Looking ahead, we keep focused on consolidating or presently SMB market as well is in the online space you continue to invest heavily to become the main financial platform for a client integrated with great solutions to help SMB better manage their business grow and cellulite.

Manage our company for the long term Amy at a much bigger future in every day more stone becomes a technological buddy wood furniture, so embedded into its roots.

We all that said Oh pass it over to how file.

Hoffa.

Thank you Chuck I wanted to start on page five by reinforcing what shop with sad that we started all the you're seeing very strong growth in our core operation as well as initiating a new cycle of our company to solidify our position as a partner of choice to SMB.

Okay to mid March we were accelerating growth and investing heavily on the evolution of our platform with record investments in our technology team. When Coveas 19 caused on March 11 for the first local commerce locked down in Brazil.

On page six we highlight some of the initiatives towards our clients team and community I would like to give emphasis to our actions into health front in which we provided a 24 seven telemedicine support to our team as well as protective equipment and instructions to those few that are still working on the street Mamie logistic greedy.

<unk>.

Additionally, we put emphasis through our campaign, which is the became an aggressive to provide tools for clients to better navigate this crisis environment, such as end labs and delivery much SGR. Good just mentioned.

Moving onto page seven I want to these deals some aspects about how we maintained a strong financial position through the onset of this crisis.

We implemented different measures to manage cost and expenses and did a technical recycling of the organization, so better balanced revenue and investments through a redesign of processes.

Since the crisis started we maintain costs have access to liquidity line and kept our prepayment operations at full speed prepaying Ari clients around 11 billion right through the month as of March and April while increasing our cash position by 43% year over year to almost 4 billion right at the end of the quarter.

Our adjusted net cash position increased to 5.1 billion reais, demonstrating the strong financial profile of the business.

We take cash flow management very seriously and we were impressed to see the hard work of our treasury team reflected in our strong financial position in our earnings release, we provide further details of our cash flow dynamics.

On slide eight we show the performance of our TPV so far into year, we were accelerating our TPV growth until mid March when covered 19 hit Brazil. However in April we already started to see TPV resuming growth on a yearly basis and in May of two the 20 Threerd this growth rate jumped to nearly 23.

Percent.

The right chart shows the evolution of our TPV for each beard 15 days starting in the first half of March which is indexed to 100.

As you can see we have been able to consistently recovery, our TPV and we're seeing volumes in the first half of may be an equivalent to 87% of the volumes in the first half of March.

As seen on slide nine there two main factors, which contribute to the positive evolution of TBD. The first is our geographic footprint in the hubs where more than 60% of our hub volumes are in areas less impacted by luck downs.

Additionally, approximately 41% of our volume comes from digital and integrated partners with more than 180 clients transacting at least one delivery eyes and TPV on a monthly basis as of April.

On the graphs on the right. We showed a strong growth of our all in volumes, which grew 42% in April compared to January as well as a strong increase in the number of online SMB clients, which grew 29% in the same period and is a very profitable segments.

Now moving to slide 10 on the left we want to show you the evolution of the productivity levels of our salespeople in the hubs up to May 15 indexed to 100, when the crisis hit as we could not being the streets, our productivity dropped by around 40%.

Loss, we better understood that demand dynamics, we decided to put irrelevant part of our team on vacation and we redesigned our lead generation and closing processes. So we could better work through the phone and chat with that we brought our team back from vacation tested the new processes and right sized our sales operation after.

Those improvements we started to see the productivity of our team back on track.

Also as shown on the charts on the right we were able to increase our main KP ice in our customer service and be the crisis, reaching a record 72 NPF in April our logistic operation was also able to keep it service standards.

With that I'll pass it over to Leah. So she can talk about strategic initiatives and the performance of our solutions beyond paint.

Yeah.

Thanks half <unk> and good evening, everyone I hope, you're all safe and healthy I want to start on page 11 by highlighting the strategic Differentiators of our digital business starting from our foundation in 2012, we started to build our proprietary payments platform first with the needs of digital businesses.

In mind, we just shared the best conversion rate availability and speed.

Our end to end payments platform attend businesses of all sizes from Smbs to large enterprises as well as different business models, such as marketplaces recurring businesses ecommerce and digital at.

Alco simple apiay integration. So in summary, we're able to offer enterprise level solutions to SMB.

Our multi party gateway, so if someone brazil's largest ecommerce merchants improving conversion rates, which translates into more sales providing data analytics, we party unaudited capability.

Our PST platform subsequent of all sizes, including social sellers, Smbs and large marketplaces being a unique player in the segment with very distinct functionality such as split payment.

Demonstrate our relevant to digital we highlight on the right side of the page our market share in Brazil in E commerce as some from EBIT numbers, when we consider only our base or the commerce clients, we saw that more than 50% of ecommerce market transacted through our platforms. During the initial phase of the pandemic.

In the FICO vid, 19th scenario, we were already experiencing to study in powerful consumer trends that are now intensified in the new reality.

First and increasing volume in digital channels and second the growing use of omni channel commerce with more brick and mortar merchants, establishing digital channels as part of their growth strategies.

Given the differentiating factors outlined above we will continue to work hard to drive this evolution and be the platform of choice two businesses looking to accelerate their path to becoming more digital.

Moving onto slide 12 in March we just completed one year from the first credit given to our merchants and we can see the resilience in huge potential of that product and how it positively impact our relationship with our clients.

We ended the first quarter with nearly 31000 clients and announced ending balance of 332 million handbags in April we reached more than 34000 clients and the portfolio grew to an outstanding balance over 386 million Hanks, mainly due to our decision to.

Provide 100 million horizon micro lending to help our clients navigate through the crisis.

We've evolved our product within the quarter with the launch of a revolving credit feature, giving more flexibility and allowing clients to roll their outstanding balances as they mature.

Due to the current economic scenario in short term perspective, we expect higher delinquency rates in our credit portfolio, especially from older cohorts have clients.

However, we have four key elements that help us keep healthy returns in that situation.

First we're very rigorous with select compliant avoiding both high risk or higher impacted sectors.

Second we're investing heavily in our proprietary credit scoring model, which results in daily enhancements to our algorithms.

Our merchant cash advance system provides a protection for us as we received immediately when they engage in electronic transactions, regardless of their payment providers.

Finally, the fourth element our pricing management provides a significant protection against delinquency.

Those elements combined have helped the return on assets of our portfolio to be at a healthy level of 2.7 per cent per month.

Even after we conducted a revision unexpected delinquency levels in March to account for the current crisis.

As you can see on the graph on the right side of the page optimize 14, all cohorts have already paid us more than we anticipated in our model with the only exception being the March cohort from which we have received 83% to be expected amount.

In total we have received.

Hundred an 8% to be expected amounts within our consolidated credit portfolio with the April cohort, we presenting down payments, 50% above our expected levels.

On slide 13, we bring an update on our banking and integrated platform in our digital banking solution launched in October of last year. The number of accounts jumped from 62002 122000 in just one quarter.

In April we posted our record high number of new clients in banking in a single month, reaching almost 160000 open accounts at the end of ankle.

Important to mention that we continue to see strong traction in the level of activity in our digital account with a substantial increase in the number wise transfers bulletins paint an average balance per account as Jack mentioned, becoming the primary financial platform for our client is among our strategic priorities and these.

Numbers indicate to us that we earned the right track.

I just discussed before we bought me to become an integrated platform that brings together acquiring banking in credit as of April BBC platform counted with nearly 45000 clients in its pilot program as a client centric company, we keep focused on working directly with merchants to develop the best product for them. This call.

Order, we launched some new features including a cash alternative with the bullet to issuance and started piloting our QR code thing. We also launched two initiatives to help merchant sold online and digital either businesses the payments link and the stone virtual shop, which are both in pilot vote.

In slide 14, we're bringing an update on the evolution of our ecosystem of software solutions.

I've already explained in previous calls our strategy on software is two fold on one hand, we have some solutions that can be deployed through our distribution and service model integrating those offering to our core SMB operation.

We also invest and acquire software companies with great people and scalable technology, applying a management system to support them and their growth strategies and help them expand their offerings into financial services by integrating to our platform.

We usually provide incentives related to the penetration of financial services to their client base to completely aligned interest over the long run.

In the graph, we present the evolution of the number of subscriber clients in our software solutions. We ended the year with 135000 clients most of them being distributed by stone in 2020, we were able to add over 40000 clients until mid may organically.

We're very happy to invest in such great teams of interpret nurse and bring to our ecosystem for great solutions.

Labs are leading social media management platform that helps SMB digitalized their businesses and has the potential to evolve we social commerce platform in the future.

Delivery much a full delivery platform present already more than 230, small and midsize cities with a similar and synergistic expansion approach to stones.

You bet, a health plan management and him our software solution, which has a 15000 bucks or network and manages 100000 lives and can become an important provider of health plans for SMB.

And finally anybody on this a Pos an ERP software for food service with a strong regional presence in the northeast of Brazil in an expanding operations throughout the country.

We see a massive opportunity in the software space, creating a comprehensive ecosystem of solutions to our clients and we will continue to work on our two fold strategy for that.

We believe that the combination of great software solutions integrated with a complete financial platform direct distribution and an excellent service level in a single technology company like stone can transform the Brazilian SMB environment.

We did find ourselves by the clients we serve not by the products. We offer that is one reason why our vision is to become more and more a software company that Embeds financial solutions and the financial services company that provides software and services to help merchants better manage their businesses and so more.

With this I will pass it over to have file who will discuss our financial results for the first quarter in detail.

Thank you live as it can see on slide 15, we added more than 50000 clients, reaching a total of 531000 active clients and payments with the year over year growth of 72%.

Starting on the first quarter 2020, we are reporting clients under the tone brand separately in order to provide more transparency about the dynamics in our core SMB market and in the micro merchants space.

Additionally, we have started reporting thong active clients, considering those who have transacted over the past 12 month, which is in line with the methodology adopted bites years.

The rest of stones active client base, including SMB continues to refer to clients that have transacted at least once in the preceding 90 days.

Having said that don't reported more than 23000 active clients in the first quarter, which are not included in the chart on page 15 inline with Brigus disclosures best quarters includes starting my clients, which is our discontinued micro merchant brand.

NPV, we grew 42% into first quarter compared to the first quarter 19, reaching 37.6 billion realize this represents an addition of 11.2 billion of TPV year over year, our highest historical figures for first quarter.

See I will mention before we have seen some recovery in TPV during April and May compare to the second half of March levels and this recovery can be seen both investing these from our hubs as well as in digital and integrated partner clients.

Our total revenue and income was 717 million realizing the first quarter, an increase of 34% year over year, which was mostly a result of our operational revenue lines.

Excluding other financial income mostly related to you don't cash our total revenue and income grew 38% interference.

Also total revenue and income was negatively impacted in the amount of 25.2 million rights related to the combined effect of coffee related incentives given to clients and higher provisions for delinquency in our credit solutions those effects had a negative impact of approximately six basis points in our take rate.

During the quarter, which despite this was stable at one point, 81%.

Now slide 16 shows our consolidated Biennale for the quarter going through our cost and expenses line, we see that cost of services with nearly 150 million realized in the first quarter, 75% higher than into first quarter of 94 or five percentage points higher as a percentage of revenue.

This increase was mainly due to higher depreciation and amortization costs higher provisions and losses as a percentage of total revenue and you can investments in our customer service and less my logistics operations as well as investments in our technology team.

Administrative expenses were nearly 74 million rise into first quarter or 10.3% of store revenue and income showing mainly the dilution of our personnel expenses.

Selling expenses were close to 112 million rise in the quarter, an increase of 78% year over year, mainly due to higher personnel and marketing expenses inline with our growth strategy.

Financial expenses jumped 123% in the year to more than 148 million realized.

This is the result of a few factors first we saw higher prepayment volumes during the quarter.

Second we decided to improve the company's liquidity, given the uncertain scenario, which translated into selling longer duration receivables and increasing the liquidity pool. In addition to incurring higher cost of funding for spotlights.

Finally, we had mark to market losses from some short term investments in bonds as a result of stronger market volatility amid the crisis.

We estimate that those items related to koby 19 environment had at 35.8 million Reais negative impact in our financial expense.

Combined with a 25.2 million realize impact on revenue that I just mentioned this impact in finance expenses lead to an estimated 61 million reais.

Pretax impact for coffee 19 in our results this quarter.

This does not include impact from lower TPV, given the lower retail activity.

As a result of the factors above our adjusted net income for the quarter was 162 million Reais.

With the margin of 22.6%, which includes the copied related impacts just mentioned.

As you can see on slide 17, our operating costs and expenses were 46.8% of revenue in the first quarter compared to nearly 40% last quarter.

Our adjusted net margin was 22.6% in the quarter compared to 35% in previous quarter and also last year.

In our fourth quarter 2019 earned its coal price to covered 19 out Rick we have mentioned, we would continue to invest heavily in our operations and the strategic initiatives, especially in the first half of 2020. Besides the effect related to the crisis such investments are one of the reasons why we have seen higher operating costs and.

Expenses this quarter.

Moving to slide 18, we show the main driver thread the decrease in our pre tax margins year over year.

Lead over 50% of the margin declined 7.1 percentage point.

Is related to paying them make effect.

As I have mentioned previously and we do not incorporate here the effect from less operating leverage coming from lower TPV volumes.

We also had a three percentage points margin reduction related to selling investments, especially hiring of new salespeople to support future growth and marketing as well as a 1.7 percentage point reduction related to investments in new product such as banking software and thought.

We also had 2.7 percentage point reduction related to the optimization of skeptics stricter using more third party captive to support growth of our prepayment operation, which tends to provide us high return on equity.

As Chuck said before for the second quarter, we expect an adjusted pre tax margin between 20% and 24% already including one off items.

So the only adjustments that we are including in this outlook compared to I afras metric of profit before income taxes margin is the share based compensation and amortization of fair value adjustments related to acquisitions, just the same way we have been reporting.

Finally on July 19, we show our adjusted free cash flow, which was negative 122 million Reais ice in the first quarter two way twin.

Excluding two items that we believe our exceptional our adjusted free cash flow was positive 30.7 million rice.

The three main items that have affected our free cash flow this quarter, where the following first 100 million re ice in prepaid marketing expenses from totaled two global in connection with a specific attracted me to negotiation, which they speak of it and in which we have three years to use that amount. The amount was fully funded by the upfront cash.

Contribution from group of global installed, which is not accounted for in our free cash flow calculation and appears only in our cash from financing activities.

The second component affecting our free cash flow west and they they own do temporary tax withholding of 53 military ice which was released in the first week of April.

Besides those two exceptional items, our free cash flow was also affected by higher capex inline with our strategy to grow our bayes difficult buckets.

With that set up to Raider. Please open the call up two questions.

We will now begin to question answer session.

The question you can press Star then one on your Touchtone phone if hearing isn't speakerphone. Please pick up your hands that before passing Nicky.

To withdraw your question. Please press Star then too.

At this time, a pause for a moment to a similar.

Our first question today comes from Tito Labarta with Goldman Sachs.

Hi, good evening.

Thanks, Laura fail in EMEA for the call a couple of questions.

Thanks will information on the presentation.

First I mean, you gave some good color in terms of your online exposure and how much it volumes are going to you, but as you get.

As a reminder, what percentage of your TV is online and is there.

What is the take rate on the online TV compared to the offline. If it does not to be exact numbers, but if you can give some color on that would be helpful. And then the second question also on the take rate today, you mentioned it was up six basis point impact because its cobot 19, but I guess to understand excluding the Coca 19 impact.

What drove the increase in the take rate is that because of you were doing more credit or just to understand before kobin 18, what was driving that the take rate higher because who knows you had been pretty stable on the take rate. So interesting that you had been able to increase it of the political the 19th of you can give some more color on that would be very helpful. Thank you.

Hi Tour Chicago here speaking, thank you very much for your question I fail, we want to go ahead and pick this first question.

Oh.

<unk>.

Hi, everyone I'm going to tear has Atlantic the question because it seems like half as having a hard time connecting so regarding.

Digital volume's too so.

What we've mentioned before as we consider our integrated partner.

And digital part of the business together, we we haven't disclosed exactly that chair TPV, what we can say that that's part of the business has been growing significantly.

And with a larger growth even after the onset of the coded crisis.

We expect this to continue to happen moving forward regarding take rates, what we can say that within digital those take rates are pretty much equivalent to.

To our take rates in the hubs and regarding integrated partners given the larger mix of large clients that they create tends to be a little smaller but within digital it's pretty much equivalent to our take rates in the hubs.

Yeah, Okay, let me add to Chicago here speaking so we have we tried to provide more color in our numbers.

This in this release in this presentation. So I will start seeing that we continue the same level of TPV spread between hubs and digital integrator partners, it's difficult for us to separate sometimes digital integrator partners, because sometimes you have transactions from marketplaces.

From wallets for ecommerce is so we decided to put all together.

Into the same.

Bundle TPV, but what I can tell him give you more color about this is that when you add or digit though integrator partners clients.

We have around 40000 clients, which more than 180 80 clients transact more than 1 million Paramount.

And we are seeing a strong growth.

In terms of for SMB online operation as well as some.

Platform that integrates a tour platform through our integrated platform channels.

Regarding take rates when you compare take rates in oil and clients in the SMB on clients, they're pretty much the same we charge.

In the in the in our hubs. So take rates are much more a it effect of size of clients than if they are connecting through.

Our hubbard creation or through our online gateway in Orlando strategy and regarding take rates actually or decreases stable, mainly because we keep the same strategy regarding pricing, we were actually expecting higher take rates for this quarter as we said before but as we decided to be concern.

Of achieve and put higher provisions into our credit product, we reduced or revenue from crowded thus impacting the take rates that stayed at one point everyone. If would if wasn't the effect of this higher provisions in our in our credit products and some relief that we have given tour.

Clients, then take rich would be bigger so I think that we've always said that.

We can manage take rates between different products in the way that's the best feet for clients and we tried to provide some color in terms of our return on assets in our credit product. So we're always trying to provide more color in the way that you can charge or additional solutions such as software the banking.

So we will keepers strategy of providing an integrated set of solutions to our clients. We have a level of price that can be much better for them. When you see all the products combined with health profitability tore firms. So I'm very happy with the pricing strategy that we have we think there's a good bye.

Close between the valid that regenerates tore clients and how the perceived these in the price that they pay for products.

Great. Thanks gathering in the very helpful against they're looking to take rate was increasing except for the higher provisions, which impacted in the quarter.

You saw it showed some good loan growth there like 386 billion mainly in already in April I, how large do you think that their loan portfolio can get by year end and continuing the additional risk as well.

It's very difficult to provide provide an outlook about this too, but we still expect.

Huge room to grow.

This year I see that in the next three or four quarters, we can double the amount of outstanding.

That is balance and using a conservative approach mainly because.

I think that as a business evolves and the way that we created this products.

We know a pretty much the transactional behavioral for clients. We are very conservative in the way that we have built our scoring process and we invest a lot.

To keep evolving the intelligence behind the algorithms.

On a daily basis, and now I think that if the regulation being the right place regarding the lack of receivables. We can skew used to weaken already use credits, sometimes as a first relationship with for clients. Because now we have the ability to lock receivables or the other payment providers. So.

Those receivables they are mainly back it by future sales. So the risk that you think is that.

The clients will be able or not to transact in the future any type of different payment Matt. So once you select the clients that are in activities that continue to operate even though the who view.

Scenario and they have ability to grow their volumes once you understand their pattern in terms of transactional data it becomes.

I'm a very good project that you on a conservative way can generate good profits.

Great. Thank you and just one clarification going back to the online volumes you said, mostly comes from the digital and integrated partners and in the past you had said that digital and integrate partners were roughly between can be 30% to 40% the volumes is that correct.

Yes, if you add it up digital integrator partners, we still have 40% of for volumes coming from both channels, but you're seeing.

An increasing growth green coffee scenario in those channels either because of ecommerce. This clients are SMB clients that are setting up ecommerce of preparations are the platform and marketplaces that we attend.

Are getting better volumes, but in average I think that we keep the same trend that our profitability comes through our SMB, all and partners, but we have scale within some large clients that we have decided to show this new number of 180 CLI.

Since that was ex more than 1 million realize monthly to show that this business.

Actually has some diversification in terms of clients.

That maintain it there on a very healthy level.

Alright. Thank you very much Peter just to clarify there's data on on this breakdown on page nine of the presentation.

Okay. Thank you Leo.

Our next question comes from Philippe Alamo with Citibank.

Hi job and Yasir al. Thanks to his question I have two questions.

One is also about take rates.

I know that there are lot of blogs here I mean change of volume mix.

Oh, it's different line clients being different different prices. There's also they backed off credit.

Of provisions for future credit losses that would it be possible to share your thoughts about.

How take rates would look like in the second Q.

This year.

Given the distance dimension to you.

And the second question.

It is.

Question from a statement on the press release.

You mentioned that.

They decided to negotiate or that's going to meet a package up 100 million wise.

For John.

Very attractive with a deal.

The next three years, so just one or two to two to clarify.

100 million whereby.

The expected margin budget for John.

To use the next two.

We usually this is just one specific let's say.

Marketing, she said that he decided to do well, but investments could be above that lateral. So these are my two questions. Thank you.

Hi, Philippe can you hear me now.

Yes, that's out the hero.

Sorry.

My connection was bad in the first question so regarding the take rate.

As we have mentioned, we see our take rates over the medium to long term going up we have many initiatives that.

And also answer and little bit of People's questions before.

Regarding the credit the banking software solutions, when you bundle everything together, our position becomes more and more attractive to clients, even though we we're seeing less than the competitors in each one of those segments that we see this that does is accretive to our take rates. So regarding the second quarter is due.

Difficult for us to to make them more precise comment.

Because I mean, there's a lot of.

Moving bar, there, especially in June right. So.

It's too early for us to two to talk about this.

We do see a healthy take rates are evolving so if you look at our take rates.

Excluding six basis points impact and we would have increased take rates year over year as we did have quarter over quarter. So I think that our strategy to monetize the client and look at as a whole not in each line. This has been.

Moving the right thing because we provided choice for clients to it we charged and that the way that fits better each one.

And regarding told a question.

Does the 100 million realize it's not the whole marketing budget. This is just a part of what will be marketed through global so we have two parts there.

Marketing in global that go beyond that 100 million and also marketing through other media like social media. For example that is not in budgets. So at this is a package that that does this common in the marketing industry you negotiate a certain package and when you pay upfront you have.

An attractive discount so business not the whole a budget is only a part of it.

How far can add some comments.

Hello, more chagall he was speaking.

It's very difficult to say about they creates and second third quarter. If think that we are living on very certain scenario here, but what I can tell is the I believe you know strategy of providing more solutions to our clients over the long run that's why you have invested to keep.

He irrelevant.

Client base, and we are investing heavily to grow our client base.

As we have said before and I believe in our ability to have better take rates next year than this year. So when you look to more difficult just to say about the next quarter, but when we think about 2021.

I believe in our stress to have better take rates than 20 to 20.

Mainly because of the penetration of the new products and we decided to provide this color on the return on assets of credit as an example.

Where we can move pricing strategy with different project. So when you see banking software.

Credit and payments you will see or a strategy of always trying to report. This in on monthly subscription you see part on the transaction activity, we will see part on our financial.

Revenue lines. So I think that we have the ability to grow take rates overtime and regarding tone. We think that is exactly what what how fail said. This is just the first negotiation that we did we know that the industry.

Negotiates.

With discounts.

When you have better volumes to negotiate so we actually.

Could have access to a better discounts than than regular prices because we did this prepayments right before kind of it and we have to use to use it. So I think that was a great negotiation. This was funded by the upfront amounts of global sexually was not any real impact to our cash position and we are here.

Good to have just three years to use it.

Okay. Thank you very much for dancers.

Thank you Philippe Thank you very much.

Our next question comes from Craig Molla with autonomy three Sir.

Yes, hi, thanks for taking the questions and good pure ways voices.

Wanted to dig in on the volume acceleration that we saw.

In may.

Could you comment on how much of this was driven by processing for Mercado Libra.

And if mercado leave Ray was an increased portion of volume during second quarter, if that's going to weigh on take rates.

In the second quarter, and then secondly.

With the decision to slow investment in Taiwan, right now while you.

While you experiment with different channels and find optimal LTV to CAC.

Does this present a missed opportunity considering the way the government and others are trying to.

Accelerate benefits through the likes of packs a girl and therefore, driving new account acquisition right now thanks.

Hi, Craig Chicago here speaking, thank you very much for your question, it's great question actually.

So let me start with the first question. So it's it's a.

We don't want to we don't like very much to talk about volumes of water companies, but what it can tell you that we're not seeing a relevant changes in terms of volumes through.

On these a specific client that we have and keep in mind that the majority of volumes that we process of this clients is from the brick and mortar appreciation their machines right.

So the majority of their online volume do not passes through our platform. So.

This is mainly be this recovery has mainly being driven by our hubs and our SMB digital operation as well as or the integrator partners platform that has a online transactions to you.

And our hubs have presented consistent recovery through April and me talking about all actually what we saw was that creating a brand in a new business in an environment. As this can be challenging I don't think that it's the best more moment.

For you to allocate a lot of capital in terms of creating a band Brent in a moment that you already have many different messages going on so we decided to be conservative keep our with our cash position strong undertone and continue to use different channels to death or LTV.

Two CAC ratio to make sure that once we accelerate or our investments on tone. We would do this in a cost and where LTV to CAC ratio that we will prove will provide the growth in the margins that we expected. So we decided this this beginning of the business because of could be so beautiful.

More conservative.

And once we think that we have the right environments, we will invest more but we keep developing the best platform, we keep developing or channels and we used borrow for money to test disconnect to LTV ratios and once the scenario was a little bit better. We we've asked just.

This business.

Thank you.

Sure Tonight.

Continuing on the answer regarding the government incentives. So what we want to say about that is that.

We are ready and we will enable acceptance.

Corona vouchers as.

Payment.

Methods within our network of.

Terminal a stone terminals as well as online so we will be technically ready to talk that to our terminals within a couple of weeks and we are already as we speak within digital transactions. So just to complement Chad was answer.

Thank you I'm just one follow up should we expect.

What degree of severance costs should we expect to impact second quarter. Thank you.

Hi, Craig.

Profile here, so I think what we're not making comments hears about a severance package. It's a couple of million realized right. So that's why we decided to provide our our pretax might already including those costs and then you you can you can see there's two components of the sovereign costs. One is there like legal mandatory.

Cost that we have in the other one is the the discretionary package that we have provided to help with the those people.

Yeah thanking them for for participating in everything that they have built so there'll be those two components.

We'll provide more details when we disclosed.

The effect of pets that reduction in our workforce next quarter.

Thank you very much clear crack Chicago here again, so in the adjusted pre tax margins that we have disclose it does an outlook for second quarter.

We already have this number is incorporated so does outlook incorporates all the cost and expenses as our previous reporting and in second quarter will give detail about retention one off that we will disclose separately SVC is in this first quarter release.

Okay appreciate that thank you.

Thank you very much Craig.

Our next question comes from Jorge Kuri with Morgan Stanley.

Hi, good afternoon, everyone a good to hear everyone.

Two questions for the first one is on a.

Your.

TPV you mentioned you are not 87%.

In the first half of me versus the first half marks mostly driven by new clients.

Could you said it will cause.

It would be.

Same percent.

Look at it on a same store basis, just to understand what has been doing really impactful.

Closures on on your existing business.

And second question is on or not.

So everything is going very strong as the first quarter.

50000 on the driver of that can be punchy, 87% numbers that I talk about could you tell us now while the net out looking like.

Plus called say April or May.

Relative to that 50000 run rate that you had in the first quarter ended the fourth quarter. Thank you.

Thank you Jorge for further question how file here. So to your first question. When you look at the index number of 87% the and the first half of me.

Most of the effect here of the recoveries from the base right.

And not from new clients, especially because when you add new clients. It takes a while until those new clients generates.

They are TPV, so basically the biggest the vast majority of the impact here is really from the bays recovery.

And also all the channels that regarding online sales that geography, just mentioned so I think we have seen new clients also contributing to this but I think the main part is regarding the base and then that job.

Juggle can you. Please answer the second part of the question. Thank you.

Yes, Hi, Jorge. Thank you very much grew question very good to hear your voice. So let me try to provide some color regarding that adds.

I will start seeing that once we first half wasn't content with disclose it situation, we decided to more net ads on a seven days basis as a leading indicator off what would happen.

In our in order management's view of 90 days as we disclose it so when we see this leading indicator of nine today SNET has seven days that adds im sorry, what we can see was a decrease in terms of net adds in the beginning of March.

That became negative in the second half through March 15, two March 30.

It became negative but then in the beginning of April it turned positive again and stay parts positive every day since them until now.

It's very difficult to say about net adds going forward, but in maley regarding second quarter, because we still have.

Many moving parts here in the impacts of the locked down on March will be mainly presented on the number of or June right. Because of this 90 days effect that we disclose but we expect that in third quarter our levels off net ads in terms of 90 days you that when schools, we already we've already be above our first quarter.

Level and we will continue to increase after that as we said before so summary.

We put in front of us a lead indicators, which is.

Net adds in seven days, we saw a decrease in the beginning of March it became negative through March 15, two March 31, APRU first it turned positive again in stayed positive.

Since that until now and when we see the 90 days that we disclosed to you very difficult to talk about second quarter, because the impact on March will be presented in the June numbers, but if we expect third quarter of net additional clients higher than first quarter already and then increasing.

Net ads through all the other quarters, a speed that said before.

That's great. Thanks, a lot that go on congrats on the numbers.

Thank you Jorge Thank you very much for a question.

Our next question comes from Victor Sabal with Bradesco.

Good evening, everyone. Thanks for taking my question, so sorry, if I'm missing something but did to own a few guys have been generally constructive during this call. So you were talking about receiving take rates growing loan portfolio recovering volumes as you show.

In your presentation right view with volumes for May already recovering in growing on a year over year basis. So why have you guys decided to lay off 20% of the company in mid May when you have the numbers already recovering.

And all these let's say more constructive tone.

Being conveyed now so what is what is the reason behind it to lay off what are you guys seem that is different now that may be justified firing 20% of they staff would this.

Via risk for you you know wave that it could well.

Such risks being the environment. The work environment. A few guys that is known for being very good and pretty strong.

So.

I just wanted to understand more properly what were the reasons for that lay off given these somewhat constructive films a tone that you are right now can be thank you.

Hi veto.

Chicago here speaking thank you very much for your question.

It's an excellent question.

When we when we took this very very difficult decision, we decided to talk openly about this and we ppas we.

Would it be release.

Into our web sites talk about this and Weve right I wrote down a ladder that I provided to offer team and some of the clients that sort this publicly.

We are living on a very certain two scenarios.

And our assessment was that we had the mismatch between revenues and level of investments as you know.

We have to boost investments the phones.

We have a kind of vertical.

Business strategy in reach all of our sales team our customer service our logistics, they're all in house and we always best more than we need for the moment because of future growth that we expect in order for everybody to be train.

And to be ready once the coffee 19 happens and we saw the sharp decrease that happened in March and some partial recovery. We started the level of for certainty require required to us to be.

A little bit more work with a little bit more austerity in terms of how we manage their business models. So we decided to improve or level of productivity many offer or front. So for a company and we did the technical recycling of our operation. So we were we look at for efficiency in our back off seeing many.

Different areas of our firm.

Just to give you. An example, as we cannot being the streets at this moment to sell as we do regular through the hubs, we decided to consolidate some some of our routes and now we can be action much more productive because we don't have to movers sale between different clients. So through the phone we can be.

You much more productive in terms of selling so we decided to keep oh, our team in the level of productivity that we seek that fits best for this moment and we can open opportunities to tore people when the economy.

He is back on track and I think than in two or maybe three months. We can establish the size of for say you're seeing a in the same level that we had before and we have the optionality higher Becker. It seems so it was very very difficult decision.

We always take care and give a lot of attention and we think properly about this because we're talking about our team like they are difficult, but we also have to manage when a diligent way with discipline or business. So with all that said you be uncertainty. So now that we have had that.

We expect that this trends of recovery continue but there are some of the things that we don't we do not have under control, we decided to look for the better balance between our investments and our revenue so.

I think that we could take care of the people that unfortunately are not part of the our company now and we just have to say they began one thank you to them, we expect to generate this opportunities in a few months and maybe higher maximal for our people, but at this moment to think that it was the right decision to bell.

Investments there is results that you're seeing so you can see some impact in our profits in first quarter, we know that second quarter.

We provided our outlook, but it's a quarter that we have challenges in the way that we.

We have relationship for clients and everything that you're doing in many different fronts. Our company has a financial component, which is important so we want to keep a strong balance sheet and level of profitability.

To make sure that we will have all are funding lines working in the way that we need so given all that said I think that it was a very difficult, but the right movement with the level of information that we had.

Thank you and just to make sure I got it so given the high levels uncertainty that are we still have both their questions about the recovery in June July.

This is why you basically took the tough decision of laying off a 20% off your staff in May right.

Yes.

Okay. Thanks for question and congratulation on the transparency when deciding to take this stuff decision in may.

Thank you very much for you to reconcile that it was one or one of the.

Most difficult decisions that we have to made we took this company from scratch. So we should the commitment to each and everyone that works within stone in support of our culture. So.

It was very very very difficult to everyone here, but it was for a better good the for a company in our clients and in a short period of time machine I know that you have the optionality to and the ability to provide the opportunities for everyone back and we hope that we will recover as a society from this quarter.

Experience and we will become stronger after this.

Our next question comes from Mario Pierry with Bank of America.

Hello, everybody.

Thank you for for your presentation, let me ask your two questions.

First one is related to the cost savings you expected to get right, you're laying off 20% of your workforce.

How much does this represent of your total cost base.

And then the second question is more related to your business model right your business model.

You keep one of your key differences from your competitors was your face to face interaction with your clients.

Well the white glove treatments that you provided how do you adapt youre your business model to this coal coal good environment doesn't mean.

We see a continuation of this trends that we saw this quarter that you have more volumes coming online from hubs.

Our doesn't mean that you need to close.

Some of your hubs.

I'd like to understand them, how how are you thinking about adapting youre your business plan. Thank you.

Hi, My to Chicago here speaking taken very much for your question. So in the beginning as we said we will provide more color and the second quarter on the initiatives that appears to be in terms of Austin and expenses management.

We are basically trying to renegotiate third party contracts to be do have we are improving efficiency in many different areas of ore from.

In terms of recycling I think that we did everything that we had to do so we're not targeting any other movement of that that's done now you're targeting 30 party contracts.

Facilities.

We can improve and there's there's many items in our cost and expenses.

That we can work to find better efficiency in terms of cost and expense management regarding the business model actually and I have received this question through or the invested about hub model best utilization trend.

And the comparison, we don't have to choose actually we execute both keep in mind that we were the ones.

Let's start at the strength of digitalization of brick and mortar Smbs. If you may remember on the second quarter 19 earnings presentation action on page six we've presented our vision regarding our strategy of helping merchants to sell more through many different digital channels in that prison.

In addition, I talked about the importance of the Pos in the softer in how we integrate with social media in marketplaces to help our merchants to manage their inventory combined.

And our investments on M. labs that even in much 100% aligned with this vision. So we already we always executed.

The digital in the brick and mortar part of their businesses in the same.

Intensity I think that we have now.

A level of technology in our preparation that provides us the ability to continue to silver clients for a home office with the same level of efficiency as you see.

NPS and there's one thing that I think it will not change our clients like to have was in the calendar of their stores. So once we are we will have the ability to be the streets again, our clients can count on us we will be at the doorsteps with offer solutions and our business.

Has the cost of acquisition in lifetime value.

Racial that give us the ability to have this direct distribution throughout Brazil, and I think that this is a powerful.

Depreciation that we do have so we will keep our distribution. There's no change in terms of the loss trends offer hubs, we will keep investing heavily in additional solutions that help our merchants to sell more either at their store or online as we had already set before and.

Our long term vision of integrating the online the brick and mortar.

Remain.

As a focused was and that's why we decided on the second quarter and 19 start talking about this vision that we have been executing executed through that time. So I believed that our company is very well position to the strength of these intelligence that we will only accelerate it was already present.

We were the ones investing heavily on that strong we will it we will accelerate a little bit better and I think that that we have the right business model to to pursue these trends and provide great results for clients and for our shareholders.

Oh no. Thank you Thats clear, let me ask you then.

Related to.

20% of people what does that mean in terms of her closures because again like youre coming through a heavy investment phase growing your hubs quite aggressively hiring people.

Now once you lay off people does that mean that you close some of these recent hubs and if you do how do you make the decision of closing regions of the country.

Big cities small cities, if he can give us some color on that there will be helpful. Thank you.

Of course modest juggler here again, so just to make sure.

Don't make the assumption that the majority of.

The people that unfortunately has to two to not be reversed now is so our hubs right. There is a part that but we have other fronts of our company and reaction, we didn't and we do not close any for hubs actually what we did this that we improved the little bit or efficient.

In all of our hubs. So we keep the same level of hubs that we had in all the regions. We didn't close any of our operations. We operated through the phone and chat to provide services to our clients and to sell more we are using digital channel to generate demand we are asking clients.

To make recommendations to clients that are operating delivery or or in cities that they can be sometimes use their stores open because this locked down.

Dynamics, if there's a different dynamics between different cities, that's why I decided to show you.

The level of TPV that we have in main cities. There are most impacted by locked down but didn't have majority of our volume out of the main cities. So we have clients that are open. So we keep the same number of hubs.

We we keep was the same routes, we just improved efficiencies in the way that we operate mainly because we don't have to invest so much time to move for one clients of the ordering in the end of the day to go to the often then go back to our home. So we have more time to be more productive. So we can take care for our clients as.

I said, we are we are we had an impact in March.

But we are best in our growth in terms of net ads and not just a matter of improving productivity and once we have the ability to be industries, we will keep growing our hub says with deep.

Prior to coffee and actually Im very happy to see the level of engagement offer team when describing it seems to be ability uplisting to adapt to challenging times, keeping there's a strong culture.

The level of dedication improvement in terms of efficiency in crowded we're very happy in grateful to see the efforts of everyone or from towards the proposal serving the smbs, which are the ones that really needs the attention in or care. Because we are now the men of we know the many of our clients are facing challenge.

During times.

No very clear thank you congratulations.

Thank you very much my.

Our next question comes from Jeff Cantwell with Guggenheim Securities.

Hey, Thanks cost for taking my questions I just wanted to ask you. Another one on your ecommerce TPP, maybe just drill down a little bit more there for second so you have to 51% totally cut volume on your platform in late March and April Nachum pressure. So.

You are also talking about a huge online opportunity looking ahead and.

Mentioned ecommerce is showing about it like a mid single digit percentage of total retail sales in Brazil.

So maybe we could just drill down because we can see bigger you're acquiring or might you be increased by 42%.

Which again is quite good so.

As we think about your ecommerce volumes and what they might look like in two to three years just on some rough math should we maybe expect to see that GPP doubled.

Over two to three years, because that would seem to be the growth trajectory that arlon and obviously, what you're saying theres a huge opportunity you're seeing in ecommerce going forward I would you slippage or any thoughts there and help us think true your growth trajectory and you can thanks.

Yes so.

Hi, Thanks for that question I'm going to start answer and then maybe African complement like channel has already mentioned.

We believe that is digitization trend will continue so overall penetration.

Digital in Brazil is still relatively small right if you compare to U.S.

Okay any other.

Country, which is more developed on that front. So we expect this penetration to continue and we believe we're very well positioned because the two factors first of all we really were.

Pioneers within the digital payments.

Space in Brazil, So from our foundation, we started to develop our platform thinking about the needs of the digital digital clients and mindful. Our platform is very well prepared we have an enterprise level solution that works from.

Anywhere from Fnbs, all the way, it's very large clients and when we combine the power of our payments platform with our software solutions. We believe that we can drive we can really help drive this continued utilization of brick and mortar in Brazil. So we expect this as a trend to continue of course as a consequence of the coal scenario.

This has intensified and I think the big message here is.

We think that we're very well positioned to continue to drive this evolution. So all the data regarding our digital volume breakdowns and growth are in the presentation I don't know that there is much more.

To say about those but we really believe that.

This trend will continue and that we're very well positioned to help both helped drive the foundation of our clients and be a part of this evolution.

Hi, there can add to common hi, Jeff shall hear back again, just two comments about this so first we never talked about are gateway volumes before.

And we decided to disclose this at this time to give clarity to everyone because online is a very.

Important part of her business.

We were born actually as the online payments company, writing beginning the beginning for businesses and we had few experience even before building stone is interpret nurse with good order gateways in Super requires companies. So we understand is pretty much how the online space works, we decided to create.

Moons pod thrown the scratch.

As a gateway to increase to improve conversion rates and have a faster transaction speeds.

As well as we invest for the Army and then maybe acquisition because we saw a level of technology credible in terms of the ability to provide solutions for small clients and for beak. Once the way that for the army has its functionality in terms of sleep payments for marketplaces. So we decided to invest in growth this business.

So I think that we have a very strong.

Digital business when you see the volumes of catering I see that this as an opportunity to further penetrate payments into that space of clients. So we expect to continue to grow our online businesses as we have done in the past and yes I expect.

Good level of growth for the next years on that one additional comment that we would like to CHF. Two in two everyone. I would just apologize that we already have one hour in 25 minutes of questions and we we have some other questions. We understand that this is a moment of uncertainty. So we want to take the question.

Everyone. So I would like to to ask for us to continue a little bit more and take more questions because it's important to to give transparency in the formation to everyone.

Our next question comes from Anyhow, I Agarwalla with eight.

Okay. Thank you for taking my question really appreciate applying the depending.

Okay.

Okay.

Okay.

Right.

Our comments.

Well, one coupon platform, how they do come back to the PV quarter, Robert who.

Uh huh.

How should we think about going forward like.

My second question is I'm OK Google now.

That will cover book has more than double.

Yes.

Should we expect kind of Occidental closing nicknamed business.

More temporary due to the petrochemical wanted to do not more crowded.

That will be helpful on unlocked.

Yes.

I will not grow mobile phone cobalt chromium banking back home portable how much they will comply where possible.

And what kind of people, who don't want to warm up quite a whopping Abu Dhabi model for the Walker, who.

Thank you can give us any color on whoa, Whoa community, who wanted grinding that'd be helpful.

[music].

Thank you. Thank you Neha geography speaking I would try to address all questions. So first regarding digital was always so difficult to compared or volumes in our market share because it's difficult to see when when the reference number.

It's include the airlines are not wallets are not so this time, we saw the number of will it be.

And by the the activities that a bit listed in this 8.4 billion in ecommerce we could take the exactly same type of transactions in our ecommerce part of the business and we could disclose this market should to you I think there's pretty consistent before market share in this space by.

Because the relevant gateway and.

Yes. The program is growing a lot in that segment. So we expect to help to keep with irrelevant presence in digital as we overheads.

Regarding credits, we expect to keep the trend of growth in our credit we have to change a little bit segments in which we operate.

Incorporates new type of information regarding trends are for clients, but given that we had.

But georgia for clients that few transact or we have new clients coming in.

We have the ability to lock the receivables ER and to have this way that our clients pay as they sell which is very aligned with their business model I think the bit. This is a very protected business model for credit we will not rush to increase our outstanding balances were thinking.

Keep the same pace of growth that you have seen the previous two quarters and we're very confident in our ability to align intrusive for clients and help them grow by investing in their businesses and provide little bit more liquidity combined with prepayments that we did so.

Our expectations to keep birth trends in terms of grow credits that we as we had no two previous quarters.

Hello can you help me with the other parts of the questions. Please.

Hi, Chuck Hi, Nia. Thanks for the question. He has so regarding your third question about the new solutions I think over time, we see the the contribution from new solutions, becoming bigger and bigger in our result, I mean does do is small right. We're still in the early beginnings often use.

Solutions or if you look for example that credit which is the one that contributes more more tool to do that BNL right now.

We have a transactional model in which we receive as the our client cells. So in a way or in other it is related to the to the volumes that we have with them right. So it's despite being credit the product self is designed in a way that.

Follows the TPV that our clients have with us. So I think as we grow those solutions will provide more and more disclosures, but we are already seen the contribution for our new solutions.

In our results and we think and we were very confident that this will increase over time. So the percentage off of contribution printing from those new solutions. We expect this two to increase overtime.

Thank you so much.

Thank you Neil activities.

So the one question.

Next question.

Linger Fellows, Nina with JP Morgan.

Hey, good evening, everyone. Thank you all support for taking the question then and you know at least was here.

Surprisingly good members lighter work will be below my question I think strategy wise, so no everybody seems to be no.

Refraining from having their workforce.

Deployed all the screen you know given the risks, but your business model plus we can expect relies on that right. So my question is what's kind of I know you measure will you could you have strategists.

For the short medium and long term. So my question is no October November some of those will.

Restrictions the belief that entities.

Hi, guys thinking about going back to business like what's what's the game plan whats the timeframe, what's going to be the same strategy.

Just somebody in the little bit more how you want.

Vision the company.

Operating.

That's my question.

Hi, Domingos juggle here speaking thank very much for your question.

Excellent point.

As I said.

This moment, we earned the right sizing for the scenario that we haven't throne of us and we have different perspective regarding Lucknow measures in the health.

Overall health situation in different cities.

So the series that we can be better working because we don't have.

A lot of we don't have big numbers off infections Cds, there are more challenging ones, but we decided to to have more than 90% of our team working for home and the level of technologies that we have in the brand that we created give us the ability to proper work from home either because we are much better in terms of allocated.

The market to generate demand either because our clients.

Provides recommendation to order a larger clients to to be part of our ecosystem and I think that everything that we did there was a four actions towards society and the level of investments to ask society to buy at local businesses help and resonate before a brand. So that's why.

Keith we have strong demand.

In this scenario as we said.

Do you have to be back 20%.

You don't have like a 20% workforce by September 50% by October November like you don't have Oh.

Nova May now be blend for coming back to me was unfortunately, I don't and I'll tell you why it's based on healthy situation here in Brazil. So, it's really really difficult to properly say what will be our ability to be back in the streets. We hope that on a shortened Rick will be back there, but it's.

Hi, good too to tell this what it can tell you is that once we have the ability to be safe in the streets, we will be very fast to two routes again and be a door step to for clients and bio that we're upgrading through the phone and shuts very well so.

We have the ability to increase a workforce fast because we have an investment that bds in our HR Department, we have a machine terms of our human resource strategy here in terms of hi, finding the right people training them. The onboarding process. So once we have the ability.

To expand the streets, we will be the first movers, but we have to see that are people will be safe in protected.

We had we have at this moment, our green Angels, working but with the proper equipment instructions to make sure that they are safe. So we have to absorb we have to see what the dynamics will be Oh, we have been positive in terms of the recovery.

Mainly because of the volumes that you are seeing for clients and small cities and how small Cds are behaving to this so we are trying to be on a positive side of this but we have to be rationale and division in terms of taking care of four people, but once we have the ability to be for.

Streets, and we were before we will give this information into from two to everyone, but now I think that it's a moment to to watch and understand exactly what the helps situation that will be.

Very clear thank you very much.

Thank you very much to me.

Our next question and sell Jamie Feldman.

Hi, it's Jamie such great I just wanted to ask.

Brief, but the in terms of the Q2 guidance does that contemplate a continuation of the may levels Leer that you had articulated does it assume some improvement as it soon we stay here I'm just trying to understand better the Q2 guidance inputs. Thank you very.

Much.

Hi, Jamie Thanks for the question a rough Io here. So Oh, we do see the improvement right as we have mentioned that during this call. So what we have decided to do and I think that we have to be responsible also with the guidance. So we do.

I assume that the that trend is continue and when you look at the 87 index that we provided the two may 15, if you look a few days. After we continue to see this number go up lightly. So I I think we are we are providing the that outlook with information that we have in the present and with very.

[noise] granular data that we take every single day or on the ground and we were comfortable to provide the outlook for four for the second quarter. So we have many CPI is that we track every single day very detailed manner. So.

We saw that given the scenario, we could be comfortable to provide that outlook for the second quarter.

Perfect.

Thank you.

Just to add James I think that what we decided to do here exceptionally because this this situation is an expense exceptions situation is to provide everyone in order for our shareholders. The same level of information that we have an hour in our fourth now so.

Thats why we updated some topline trends until may 23rd and we'll provide more color about the nets behavioral mortuaries fill in some of the may. So it's this could actually two to assure what will happen trona will sell oracle uncertainty in the table, but in terms of what.

We control and level of met investments that we do for the future in how we manage our cost and expenses were very confident with the with the adjusted pre tax margin that we we gave a to the market and they think that as we see our business more there was a strong business model.

And we have made up the parts of our cost and expenses under our control and we decided to proactively.

Pick that if decision that we sat and it's done we're not making any movements on that front just to be clear, we're confident with the adjusted pre tax March that we have disclosed and by second quarter. As we did in the first quarter. We will provide one offs in FX on on topline and cost and expenses as we did in the first one.

In order for our investors to understand the behaviors in the trends in our business.

Thank you.

Our next question from Marco.

Okay.

Hi.

Thank you thanks for taking my question.

My question is actually regarding the financial expenses, you guys highlighted two effects that combine it.

Joel to then at 36 million, increasing the financial expenses the first one.

The first of all related with the sale off receivables in the second one related with higher cost so funny.

My question is are you expecting that to happen during the second quarter and those effects continue to happen and if so is it does.

Included in your in formal guidance for the second quarter TBT PBT margin margin. Thank you.

Hi, Michael Thank very much for question Chuck or he was speaking so our starts to say that yes, everything that we'll be in our PNM. It's included in the outlook that we.

Have provided to you. So there will be no one off items outside that margin. So when we say the adjusted pretax March or in that level. It's already it already accounts for everything that we think that will happen here. That's the first thing and then we will give you one.

Off effect.

Separately, but.

That outlook has everything inside okay. That's the first thing.

We got to furnish expense, let me try to explain little bit about the dynamic. So we will read already we will always very conservative in the way that we met or Treasury. That's why we decided to have more cash than sometimes needed for our company.

And what we saw was the red beginning of this when we had this that.

Level of Silkwood breaks that you may remember in the beginning of March from the beginning that we saw how capital markets will behave in the credit marks were behaving we decided to manage our cash position every single day and our Treasury team was credible in terms of working around all the credit line.

Is that we had a sector did our team to create jobs. So we decided to sell more receivables than normal in order to improve liquidity and we decided to sell with longer duration.

We have a conservative approach of of improving our liquidity.

We saw some pressure in terms of spotlights during the the secret break scenario and we decided to balance these with little bit of our own cash.

To put the negotiations on the right places and with that.

We change it some of the lines that we have here with the nor from so we put an extensive cash flow disclosure in our release with all the movements that we beat throughout that period. So you will see that when the shirt them period, we de minimums in terms of strategy to make sure that people.

We would be financially strong because our clients see stone as a liquidity safe harbor, so keep in mind that during this.

Secret bricks scenarios and all the the challenging and volatile scenario that we saw in capital markets and the credit markets of could beat we were the ones prepayment prepays more than 11 billion realized where clients and extending credit to them.

In a safe operation so to be this.

This liquidity Safe Harbor tour client some very important it's a brand creation for the future that we didn't we worked hard to make sure that people were managing our treasury team in the best way possible. So those are basically the effect.

Despite this this decrease in overall rates in base rates that we see the combination of the additional sale receivable the longer duration and there's some spot lines coming aided in that negative impact that we had disclose it and we decided to absorb these one off effects and keep the stream offer offer business.

Smarter so.

We already have an in me a stable funding prices I think that.

Or in May the situation is much better than we saw in the beginning of March and April so.

The scenario in terms of funding lines price are much more stable than than before and if we keep a strong cash position in liquidity ratio to our firm because it's important to provide all the prepayments in the credit situation that we give to our clients.

Thank you very much very clear.

Thank you very much Marco.

I think we don't have.

We have an hour or their questions.

Oh, we have now my question.

Okay. Thank you very much a prayer I would just say as final remarks, I would like to thank you very much everyone here in the call. Thank you for the amazing questions. Thank you our long term shareholder that that have supported us throughout this challenging times, we have received many emails by our shareholders.

Support in us and I think that the most important message is that we are very grateful to all focused on team members.

Because of the extraordinary efforts during this crisis.

And as I said in the letters that we wrote for shareholders. We believe the together business in society will find new and innovative ways to conquer covered 90 and its effects using technology care humanity as par for a lies in our SMB clients in all of our clients can count on us for efforts to.

Improves.

Their lives and find new ways to win the situation.

We keep strong we think that our business very strong we keep excited with the opportunities to grow our business over the long grant we have tremendous opportunity ahead of us.

We will keep the spleen working hard to help smbs stripe in their interpersonal roads. So thank you all and see you next quarter.

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